Third Quarter 2010 Investor Call Investor Call Terry Turner, President and CEO Harold Carpenter, EVP and CFO Harvey White Chief Credit Officer Harvey White, Chief Credit Officer October 20, 2010
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 to differ materially from any results expressed or implied by such forward-looking statements. Such factors 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 continued 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 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) increased competition with other financial institutions; (vi) 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; (vii) rapid fluctuations or unanticipated changes in interest rates; (viii) the results of regulatory examinations; (ix) the development of any new market other than Nashville or Knoxville; (x) a merger or acquisition; (xi) any matter that would cause Pinnacle Financial to conclude that there was impairment of any asset, including intangible assets; (xii) the impact of governmental restrictions on entities participating in the p y , g g ; ( ) p g p p g Capital Purchase Program, of the U.S. Department of the Treasury (the “Treasury”); (xiii) further deterioration in the valuation of other real estate owned; (xiv) inability to comply with regulatory capital requirements and to secure any required regulatory approvals for capital actions; and (xv) 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 (xvi) 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 26, 2010 and most recent quarterly report on Form 10-Q filed with the Securities and S iti d E h C i i F b 26 2010 d t t t l t F 10 Q fil d ith th S iti d Exchange Commission on July 21, 2010. 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
Opening Comments • Aggressively dealing with credit issues Aggressively dealing with credit issues • Building the core earnings capacity of the firm • Stabilizing market trends St bili i k t t d • Continuing to seize on competitive vulnerabilities 3
Third Quarter 2010 Highlights Aggressively dealing with Building Core Credit Issues Credit Issues Earnings Capacity Earnings Capacity • NCOs • Net Interest Income • NPAs • DDAs • NPA inflows • Core Deposits Core Deposits • NPLs • EPS • Potential Problem Loans • Past Dues • C&D Exposure C&D Exposure 4
Third Quarter 2010 Highlights • Significant quarter to quarter reduction in NCOs from $33 5 $33.5mm to $7.3 mm $7 3 • 5.7% decrease in NPA’s in 3Q • Allowance at 2.60% at Sept. 30 compared to 2.61% at June 30 Continued rapid reduction in C&D book • • Core deposit growth of 20.7% • Growth in DDA’s up 9.7% linked quarter, 15.2% y/y p % q , % y/y • Net interest margin of 3.23% • • $0 02 fully diluted EPS $0.02 fully diluted EPS 5
Aggressively Dealing with Credit Issues • Routine regulatory exam completed • Construction book down $165.5 million since year end ’09 $ y • Including restructured loans, total NPA’s decreased from 5.05% to 5.01% between year end and September 30, 2010 • NPLs and ORE decreased by $9.1 million • Approximately $43.1 million in NPA resolutions during Approximately $43.1 million in NPA resolutions during 3Q10 • 13 new hires since Jan 2009 focused on Special Assets, Loan p , Review, and Compliance 6
Asset Quality Metrics – Risk Rating Trends Risk rating trends reflect continued improvement 7
Asset Quality Metrics Decline in potential problem loans and criticized and classified assets 10.5% $700 $625 sets oans $614 $587 9 5% 9.5% $600 $600 Classified Ass loans/Total lo $518 $515 9.30% 8.5% $500 8.63% 8.23% $364 7.5% $400 ticized and C ntial Problem 7.24% 7.18% 6.5% $300 5.5% $200 4 5% 4.5% $100 $100 Poten Total Crit 4.03% 3.5% $0 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 8
Asset Quality Metrics Past Dues and NPLs Expressed as a % of Total Loans within Category PNFP Peer PNFP Peer 30-90 days NPLs and 30-90 days NPLs and past due > 90 days past due p > 90 days y 3Q10 (*) 3Q10 (*) Const. and land 2.03% 1.65% 15.28% 15.37% development CRE – Own Occupied CRE Own Occupied 0 19% 0.19% 0 72% 0.72% 2.33% 2 33% 3 05% 3.05% CRE – Investment 0.00% 0.84% 1.01% 3.89% Total real estate 0.57% 1.17% 4.01% 5.58% C&I 0.54% 0.76% 1.72% 2.31% Total loans 0.55% 1.16% 3.28% 4.25% (*) Uniform Bank Performance Report – 6/10 9
Asset Quality Metrics Past Dues > 30 Days Sept. 30, As a % of June 30, As a % of 2010 2010 total loans l l 2010 2010 total loans l l Nonaccrual loans past due $ 65,426 2.01% $ 90,424 2.72% Managed by Special Assets: > 90 days $ 3,100 0.10% $ 2,752 0.08% 30 to 89 days 12,712 0.39% 14,115 0.42% $ 15,812 $ , 0.49% $ 16,867 $ , 0.52% Managed by Relationship Managers: > 90 days $ 539 0.02% $ 364 0.01% 30 to 89 days 5,316 0.16% 4,924 0.15% $ 5 855 $ 5,855 0 18% 0.18% $ 5 288 $ 5,288 0 16% 0.16% 10
Asset Quality Metrics (dollars in thousands) $50,000 $44,579 $45,000 $40,000 –off’s $35,000 $33,463 $30 000 $30,000 t Charge – $25,000 $20,000 Net $15,123 $15,000 $10,000 $7,346 $6,789 $5,228 $4,760 $5 000 $5,000 $0 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 11
Asset Quality Metrics ORE Categories Balances Fair value as a % Average of book value Appraisal Age in September 30, 2010 (dollars in thousands) Months (dollars in thousands) ORE categories: New home construction $2,811 103% 6.6 Developed lots 13,497 120% 6.6 Undeveloped land Undeveloped land 13 029 13,029 119% 119% 4 9 4.9 Other 19,373 118% 4.7 Total ORE $48,710 118% 5.7 � 12 properties with values > $1m � 2 properties > 1 year old � Largest balance ‐ $ 12.4M � All properties in Middle TN except one property totaling $207 000 � All properties in Middle TN except one property totaling $207,000 � $12.1 million under contract � Average age of portfolio is 143 days 12
NPA Disposition Activity ( dollars in thousands ) $80,000 $68,847 $70 000 $70,000 $60,000 $50 000 $50,000 $43,096 $42,022 $40,000 $33,566 $30,000 $30 000 $26 102 $26,102 $24,026 $20,000 $10,000 $10 000 $6 777 $6,777 $0 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 13
Balance Sheet Strength Strong capital base Dec. 31, , Sept 30 Sept. 30, June 30 June 30, March 31, March 31 Sept. 30, Sept 30 2010 2010 2010 2009 2009 Tangible common equity 7.2% 7.1% 7.4% 7.3% 7.5% Tangible common to Tangible common to risk weighted assets 9.3% 9.0% 9.1% 8.9% 9.1% Tier 1 leverage 10.5% 10.4% 10.7% 10.7% 10.9% Tier 1 risk based capital 13.5% 13.1% 13.4% 13.1% 13.1% Total risk based capital 15.1% 14.8% 15.0% 14.8% 14.7% Tangible Common Book Value per Common Share $10.12 $10.04 $10.60 $10.71 $10.99 14
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