Second Quarter 2013 Investor Call Terry Turner, President and CEO Harold Carpenter, EVP and CFO July 17, 2013
Safe Harbor Statements Forward-looking statements Certain of the statements in this release 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" 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 Financial 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 inability of Pinnacle Financial to 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 adverse conditions 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 ability to retain large, uninsured deposits with the expiration of the FDIC’s transaction account guarantee program (xi) the development of any new market other than Nashville or Knoxville; (xii) a merger or acquisition; (xiii) any matter that would cause Pinnacle Financial to conclude that there was impairment of any asset, including intangible assets; (xiv) the ability to attract additional financial advisors or to attract customers from other financial institutions; (xv) further deterioration in the valuation of other real estate owned and increased expenses associated therewith; (xvi) inability to comply with regulatory capital requirements, including those resulting from recently adopted changes to capital calculation methodologies and required capital maintenance levels; and, (xvii) 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. 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 22, 2013 and Pinnacle Financial’s most recent quarterly report on Form 10-Q filed with the Securities and Exchange Commission on May 3, 2013. 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 release, whether as a result of new information, future events or otherwise. 2
2Q13 Profitability, Earnings and Quarterly Progress PNFP reached the low end of its long-term profitability targets in 2Q13 Ratio PNFP PNFP PNFP PNFP PNFP PNFP PNFP 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 Long-term Targets NIM 3.74% 3.76% 3.78% 3.80% 3.90% 3.77% 3.70%-3.90% Net Charge-offs 0.44% 0.28% 0.22% 0.24% 0.24% 0.36% 0.20%-0.35% Noninterest Income / 0.83% (1) 0.81% (1) 0.86% (1) 0.89% (1) 0.97% (1) 0.93% (1) 0.70%-0.90% Total Average Assets Noninterest Expense / 2.60% (2) 2.56% (2) 2.55% (2) 2.52% (2) 2.51% (2) 2.27% (2) 2.10%-2.30% Total Average Assets ROAA 0.60% 0.65% 0.93% 0.94% 1.09% 1.10% 1.10%-1.30% (1)- Calculation excludes net gains and losses on the sale of investment securities and noncredit related loan losses (2) - Calculation excludes OREO expense and FHLB prepayment charges 3
2Q13 Profitability, Earnings and Quarterly Progress PNFP continued to “hit on all cylinders” in 2Q13 Net Interest Income Growing NPL Coverage 2.50% 400% $45,000 2.00% 320% $40,000 NPL % (thousands) 1.50% 240% $35,000 ALL % $30,000 1.00% 160% $25,000 0.50% 80% $20,000 0.00% 0% Core Non-interest income Core Non-interest Expense/ Average Assets $13,000 2.70% $12,000 2.60% $11,000 (thousands) 2.50% $10,000 2.40% $9,000 2.30% $8,000 2.20% $7,000 2.10% $6,000 4
2Q13 Profitability, Earnings and Quarterly Progress Adjusted PTPP expanded 36.8% in 2Q13 over the same period prior year 5
2Q13 Profitability, Earnings and Quarterly Progress Net interest income grew despite margin contraction Net Interest Income Key Revenue Drivers $46 Loan growth Reducing cost of deposits Continued growth in low-cost funding sources $43.6 $44 $42.8 $42.2 Net Interest Margin $42 4.00% $40.9 (millions) 3.90% $40.2 3.90% $40 3.80% $39.5 $39.3 3.78% 3.80% 3.74% 3.76% $38.4 3.77% 3.70% $37.8 3.65% $38 3.60% 3.60% 3.55% $36.0 3.50% $36 3.40% 3.40% 3.30% $34 6
2Q13 Profitability, Earnings and Quarterly Progress Loan volumes grew meaningfully with expected yield contraction $3,900 6.00% $3,845 $3,800 5.60% $3,700 $3,682 Average Loans $3,600 5.20% Loan Yields $3,580 4.88% $3,500 (millions) $3,489 4.80% $3,400 $3,403 $3,300 4.40% $3,280 $3,262 4.41% $3,200 $3,212 $3,207 $3,191 4.00% $3,100 $3,000 3.60% 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 Avg Loans Loan Yields 7
2Q13 Profitability, Earnings and Quarterly Progress Lower deposit costs lessened the impact of decreasing loan yields 1.25% $3,950 $3,963 $3,950 1.10% 1.01% $3,883 $3,850 0.95% Deposit Costs $3,772 $3,750 Avg. Deposits $3,723 $3,706 $3,700 0.80% (millions) $3,650 (%) $3,642 $3,636 $3,597 0.65% $3,550 0.50% $3,450 0.35% $3,350 0.30% $3,250 0.20% 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 Avg Deposits Cost of Deposits 8
2Q13 Profitability, Earnings and Quarterly Progress Pinnacle’s net interest margin is built on success with clients 4.50% 4.00% Treasury 3.50% Margin Customer Margin 3.00% Net Interest Margin 2.50% 2.00% 1.50% 9
2Q13 Profitability, Earnings and Quarterly Progress Core fees progressed to the highest level in firm history 2Q13 1Q13 4Q12 3Q12 2Q12 Service charges $2,541 $2,480 $2,623 $ 2,532 $ 2,439 Investment services 1,895 1,793 2,051 1,677 1,611 Insurance commissions 1,108 1,393 1,045 987 1,141 Gain on mortgage loans sold, net 1,949 1,814 1,768 1,979 1,457 Trust fees 880 944 863 767 770 Other: Securities gains (losses) (25) - 1,988 (50) 99 Other 2,978 3,478 2,770 2,538 2,392 Total noninterest income 11,326 $11,902 $13,108 $ 10,430 $ 9,909 Less: Securities gains (losses) (25) - 1,988 (50) 99 Noncredit related loan losses (771) - - - - Core noninterest income $12,122 $11,902 $11,120 $ 10,480 $ 9,810 Total Assets (Quarterly Average) $5,210,600 $4,992,018 $4,964,521 $4,860,394 $4,847,583 Noninterest income/Average Assets 0.87% 0.97% 1.05% 0.85% 0.82% Noninterest income/Average Assets* 0.93% 0.97% 0.89% 0.86% 0.81% * Excludes the impact of securities sales and other non-recurring items described above 10
Loan, Deposit and Fee Growth Yield Operating Leverage Existing lenders are leveraging capacity to take share and grow loans 2012 - 2014 Anticipated Net Loan Growth 12.5% CAGR (1/1/2012-6/30/2013) 14.0% AGR (Last 4 Quarters) Previously reported growth $634.0 million net Current quarter growth Thru 2Q2013 growth thru 2Q2013 FA capacity 11.5% CAGR $1.27 Billion Capacity FA Capacity $1.27 Billion Target 11
Loan, Deposit and Fee Growth Yield Operating Leverage Loan growth is a function of improving demand and market share movement New Loans 1H13 Existing New clients, clients, 48.2% 51.8% Source: Internal loan records, new loans to new clients based on review of new tax ID’s recorded during the first six months of 2013. All accounts > $250,000 reviewed by relationship managers to determine new client vs existing clients. Excludes net change in lines of credit. 12
Loan, Deposit and Fee Growth Yield Operating Leverage Line commitments are growing; may provide future growth in outstandings 70% $926 $2,000 65% $941 $865 $815 $787 $808 60% $779 Total Commitments $747 $685 $715 55.75% $1,500 55% Funded % 56.15% 54.00% (millions) 50% $1,000 45% $1,166 $1,138 $1,105 $1,055 $1,054 $1,009 $1,000 $975 $957 $959 40% $500 35% $0 30% 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 Net active balance Unfunded Commitments Funded % Note: Excludes HELOCS and credit cards 13
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