Second Quarter 2011 Investor Call Terry Turner, President and CEO Harold Carpenter, EVP and CFO Harvey White, Chief Credit Officer July 20, 2011
Safe Harbor Statements Forward-looking statements Certain of the statements in this presentation may constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The words "expect," "anticipate," “goal,” “objective,” "intend," "plan," "believe," ”should,” "seek," ”estimate,“ “suggest” and similar expressions are intended to identify such forward-looking statements, but other statements not based on historical information may also be considered forward-looking. All forward-looking statements are subject to risks, uncertainties and other factors that may cause the actual results, performance or achievements of Pinnacle to differ materially from any results expressed or implied by such forward-looking statements. Such risks include, without limitation, (i) deterioration in the financial condition of borrowers resulting in significant increases in loan losses and provisions for those losses; (ii) continuation of the historically low short-term interest rate environment; (iii) the reduction of Pinnacle Financial’s loan balances, and conversely, the inability of Pinnacle Financial to ultimately grow its loan portfolio in the Nashville-Davidson-Murfreesboro-Franklin MSA and the Knoxville MSA; (iv) changes in loan underwriting, credit review or loss reserve policies associated with economic conditions, examination conclusions, or regulatory developments; (v) effectiveness of Pinnacle Financial’s asset management activities in improving, resolving or liquidating lower-quality assets; (vi) increased competition with other financial institutions; (vii) greater than anticipated deterioration or lack of sustained growth in the national or local economies including the Nashville-Davidson-Murfreesboro-Franklin MSA and the Knoxville MSA, particularly in commercial and residential real estate markets; (viii) rapid fluctuations or unanticipated changes in interest rates; (ix) the results of regulatory examinations; (x) the development of any new market other than Nashville or Knoxville; (xi) a merger or acquisition; (xii) any matter that would cause Pinnacle Financial to conclude that there was impairment of any asset, including intangible assets; (xiii) the impact of governmental requirements on entities participating in capital programs of the U.S. Department of the Treasury (the “Treasury”); (xiv) further deterioration in the valuation of other real estate owned; (xv) inability to comply with regulatory capital requirements and to secure any required regulatory approvals for capital actions; and (xvi) changes in state and federal legislation, regulations or policies applicable to banks and other financial service providers, including regulatory or legislative developments arising out of current unsettled conditions in the economy, including implementation of the Dodd-Frank Wall Street Reform and Consumer Protection Act; and (xvii) Pinnacle Financial recording a further valuation allowance related to its deferred tax asset. A more detailed description of these and other risks is contained in Pinnacle Financial's most recent annual report on Form 10-K filed with the Securities and Exchange Commission on February 23, 2011 and most recent quarterly report on Form 10-Q filed with the Securities and Exc. Many of such factors are beyond Pinnacle Financial's ability to control or predict, and readers are cautioned not to put undue reliance on such forward-looking statements. Pinnacle Financial disclaims any obligation to update or revise any forward-looking statements contained in this presentation, whether as a result of new information, future events or otherwise. 2
Two Primary Priorities • Aggressively dealing with credit issues • Building core earnings capacity 3
Second Quarter 2011 Highlights Aggressively Dealing with Credit Issues Linked Qtr Year over Year Decrease Decrease Credit Losses (NCO’s + ORE expense) (11.6%) (48.4%) NPLs (21.8%) (49.5%) NPAs (15.3%) (30.3%) NPL inflows (27.3%) (52.0%) Classified Loans (17.3%) (51.7%) Potential Problem Loans (13.0%) (53.3%) C&D Exposure (6.2%) (31.4%) 4
Second Quarter 2011 Highlights Building the Core Earnings Capacity of the Firm Linked Qtr Year over Year Change Change C&I Loans 1.0% 4.6% Total loans (0.3%) (3.8%) Noninterest Bearing Deposits 8.8% 24.9% Net Interest Margin 4.4% 9.9% Noninterest income excl. securities gains 8.4% 10.7% Wealth management revenues 3.8% 14.7% Total revenue excl. securities gains 5.6% 6.8% Noninterest expense (0.9%) (5.8%) 5
Aggressively Dealing with Credit Issues Credit Losses Continue to Decline $60,000 ORE Expense $50,000 Net Charge Offs $3,914 $40,000 $7,411 $30,000 $44,579 $20,000 $5,402 $33,463 $8,522 $7,874 $4,334 $3,826 $8,393 $10,000 $15,123 $1,250 $7,346 $7,146 $9,726 $8,605 $5,228 $6,789 $0 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 6
Aggressively Dealing with Credit Issues Past Dues Indicate Limited New Problems are Surfacing June 30, As a % of March 31, As a % of 2011 total loans 2011 total loans Nonaccrual loans past due * $ 35,148 1.10% $ 46,825 1.46% Accruing loans managed by Special Assets: > 90 days $ 1,151 0.04% $ - 0.00% 30 to 89 days 8,540 0.27% 7,704 0.24% $ 8,540 0.27% $ 8,855 0.28% Accruing loans managed by Relationship Managers: > 90 days $ 481 0.01% $ - 0.00% 30 to 89 days 3,795 0.12% 2,785 0.09% $ 4,276 0.13% $ 2,785 0.09% 7 (*) > 30 days past due
Aggressively Dealing with Credit Issues Risk Rating Trends Reflect Decreasing Problem Loan Inflows 250,000 200,000 150,000 P/F 100,000 F/P Net Chg 50,000 - Q209 Q309 Q409 Q110 Q210 Q310 Q410 Q111 Q211 (50,000) 8
Aggressively Dealing with Credit Issues Potential Problem Loans Continue to Decline 10.0% 9.30% 8.63% 9.0% Potential Problem loans/Total loans 8.23% 8.0% 7.24% 7.18% 6.95% 7.0% 6.0% 5.31% 4.62% 5.0% 4.03% 4.0% 3.0% 2.0% 1.0% 0.0% 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 9
Aggressively Dealing with Credit Issues NPLs Continue to Decline Ahead of Peers NPLs Expressed as a % of Total Loans within Category Peer PNFP PNFP PNFP NPLs NPLs NPLs NPLs and > 90 and > 90 and > 90 and > 90 days days days days (*) 2Q11 1Q11 4Q10 1Q11 Const. and land 10.46% 12.30% 13.15% 14.38% development CRE – Owner 1.37% 1.76% 1.89% 2.88% Occupied CRE – Investment 0.09% 0.04% 0.43% 3.57% Total real estate 2.35% 2.90% 3.06% 4.93% C&I 1.00% 1.51% 1.47% 1.78% Total loans 1.88% 2.41% 2.52% 3.72% (*) Uniform Bank Performance Report 10
Aggressively Dealing with Credit Issues Decline in NPLs Yields Increased Allowance Coverage 140% $140,000 $131,381 128.9% $124,709 $121,726 $118,331 120% $120,000 Total Nonperforming Loans $103,127 $100,328 Allowance to NPL’s 100% $100,000 $80,863$76,368 80% $80,000 $59,727 60% $60,000 65.9% 40% $40,000 20% $20,000 0% $0 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 11
Aggressively Dealing with Credit Issues NPA Dispositions Suggest $30m - $45m Quarterly Run Rate $80,000 $68,847 $70,000 $60,000 $50,000 $43,096 $42,022 $38,693 $40,000 $37,251 $33,461 $33,566 $30,000 $26,102 $24,026 $20,000 $10,000 $0 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 Note: Excludes Restructured Loans 12
Aggressively Dealing with Credit Issues ORE Disposition Strategy • Manage NPLs aggressively • For NPLs where foreclosure is required, proceed with haste • Mark ORE portfolio with current appraisals of < 9 months • Keep average age of ORE portfolio in check 13
Aggressively Dealing with Credit Issues ORE is 47% of NPAs with Resolution in Bank’s Control Balances Fair value as a % Average of book value* Appraisal Age in June 30, 2011 Months (dollars in thousands) ORE categories: New home construction/condo’s $ 7,511 119.0 3.2 Developed lots $ 9,612 121.0 4.8 Undeveloped land $ 24,100 127.2 3.5 Other $ 11,172 117.3 5.6 Total ORE $ 52,395 122.8 4.5 15 properties > 1 year old Largest balance - $ 4.1M $5.4 million under contract at above par in total * Excludes costs to sell 14
Aggressively Dealing with Credit Issues OREO “Marks” are Consistent with Actual Experience ORE Dispositions (*) thru ORE Balance at June 30, 2011 June 30, 2011 Loan balances prior to charge offs 100.0% 100.0% Charge off’s prior to foreclosure 25.4% 21.5% Balance @ foreclosure 74.6% 78.5% Valuation losses while in ORE 10.1% 16.2% Balance in ORE 64.5% 62.3% Loss on disposition 1.7% Net realized 62.8% (*) ORE dispositions > $250,000 from 1/1/11 thru 6/30/11 15
Building Core Earnings Capacity 2Q11 Provides Volume and Margin Expansion • Net interest margin rises 15bp in 2Q11 to end at 3.55% • C&I loans up $11 million in 2Q11, approximately 1.0% • Avg. DDA balances up $34 million in 2Q11, approximately 5.8% • Cost of funds decreased from 1.09% in 1Q11 to 0.98% in 2Q11 • Wealth management revenues up 3.8% linked quarter and 14.7% year over year • Noninterest expense in line with expectations 16
Recommend
More recommend
