First Quarter 2011 Investor Call Investor Call Terry Turner, - - PowerPoint PPT Presentation

First Quarter 2011 Investor Call Investor Call

Terry Turner, President and CEO Harold Carpenter, EVP and CFO Harvey White, Chief Credit Officer April 19, 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

• f 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 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 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

• f any new market other than Nashville or Knoxville; (xi) a merger or acquisition; (xii) any matter that would cause Pinnacle Financial to conclude

y ; ( ) g q ; ( ) y 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 d i ti f th d th i k i t i d i Pi l Fi i l' t t l t F 10 K fil d ith th S iti d 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. 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

Opening Comments A i l d li i h di i

• Aggressively dealing with credit issues
• Building core earnings capacity
• Building core earnings capacity

3

First Quarter 2011 Highlights

Li k d Qt

Aggressively Dealing with Credit Issues

Linked Qtr Decrease

Credit Losses (NCO’s + ORE expense)

(6.4%)

NPLs

(5.6%)

NPAs

(5.8%)

NPA inflows

(2.0%)

Crit/Class Loans

(9.0%)

P i l P bl L Potential Problem Loans

(23.5%)

Restructured Loans

(25.3%)

C&D Exposure

(9 2%)

C&D Exposure

(9.2%)

4

First Quarter 2011 Highlights

Li k d Qt

Building the Core Earnings Capacity of the Firm

Linked Qtr Increase

Total Loans

0.2%

C&I and O/O CRE Loans

3.2%

Noninterest Bearing Deposits

3.7%

Net Interest Margin

3.3%

Income Before Income Taxes

13.1%

5

Aggressively Dealing with Credit Issues

$60 000

Credit Losses Decline Slightly

$3,914

$50,000 $60,000

ORE Expense Net Charge Offs $ , $7,411

$30 000 $40,000

$44,579 $33,463 $5,402

$20,000 $30,000

$4,760 $5,228 $6,789 $15,123 $ , $7,346 $7,146 $9,726 $701 $1,250 $8,393 $8,522 $7,874 $4,334

$0 $10,000 $0

1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11

6

Aggressively Dealing with Credit Issues

Past Dues Indicate Limited New Problems are Surfacing

March 31, 2011 As a % of l l

• Dec. 31,

2010 As a % of l l 2011 total loans 2010 total loans Nonaccrual loans past due * $ 46,825 1.46% $ 47,662 1.48% Accruing loans managed by Special Assets: Special Assets: > 90 days $ 1,151 0.04% $ 113 0.00% 30 to 89 days 7,704 0.24% 5,329 0.17% $ 8,855 0.28% $ 5,442 0.17% Accruing loans managed by R l i hi M Relationship Managers: > 90 days $ ‐ 0.00% $ 24 0.00% 30 to 89 days 2,785 0.08% 4,124 0.13%

7

$ 2,785 0.08% $ 4,148 0.13%

(*) > 30 days past due

Aggressively Dealing with Credit Issues

Risk Rating Trends Reflect Decreasing Problem Loan Inflows

8

Aggressively Dealing with Credit Issues

Potential Problem Loans and Total Criticized and Classified Assets Continue to Decline

8 63% $598 $627 $614 $524

$600 $700 8 0% 9.0% 10.0%

sets ans

7 24% 7.18% 8.63% 9.30% 8.23% 6.95% $364 $515 $ $485 $443

$400 $500 6.0% 7.0% 8.0%

Classified Ass ns/Total loa

4.03% 7.24% 5.31%

$200 $300 3.0% 4.0% 5.0%

ticized and C Problem loan

$0 $100 0.0% 1.0% 2.0%

Total Crit Potential P

2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11

9

Aggressively Dealing with Credit Issues

NPLs Continue to Decline Ahead of Peers

NPLs Expressed as a % of Total Loans within Category

PNFP NPLs and PNFP NPLs and PNFP NPLs and Peer NPLs and > 90 days > 90 days 1Q11 > 90 days 4Q10 > 90 days 3Q10 y (*) 4Q10

• Const. and land

development

12.30% 13.15% 15.28% 14.55%

CRE – Owner Occupied

1.76% 1.89% 2.33% 2.86%

CRE – Investment

0.04% 0.43% 1.01% 3.54%

Total real estate

2 90% 3 06% 4 01% 5 16%

Total real estate

2.90% 3.06% 4.01% 5.16%

C&I

1.51% 1.47% 1.72% 1.91%

Total loans

2.41% 2.52% 3.28% 3.87%

(*) Uniform Bank Performance Report

10

Aggressively Dealing with Credit Issues

Decline in NPLs Yields Increased Allowance Coverage

$100 328 $121,726 $124,709 $131,381 $118,331 $103,127 102.1% 103.4%

100% 120%

$120,000 $140,000 s

ans

$100,328 $80,863 $76,368 65 9% 68.2% 73.7% 68.5% 73.6% 82.0%

60% 80%

$80,000 $100,000 ance to NPL’s

performing Loa

65.9%

20% 40%

$40,000 $60,000 Allowa

Total Nonp

0% 20%

$0 $20,000

2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11

11

Aggressively Dealing with Credit Issues

$80,000

NPA Dispositions Suggest $30m ‐ $45m Quarterly Run Rate

$68,847

$60,000 $70,000

$42,022 $33,566 $43,096 $37,251 $33,461

$40,000 $50,000

$26,102 $24,026 $33,461

$20,000 $30,000

$6,777

$0 $10,000 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11

12

Note: Excludes Restructured Loans

Aggressively Dealing with Credit Issues

ORE is 42% of NPAs with Resolution in Bank’s Control

Balances Fair value as a % Average March 31, 2011 (dollars in thousands)

• f book value*

Appraisal Age in Months

ORE categories: New home construction/condo’s 9,433 109.4 4.3 Developed lots 12,944 131.2 4.1 Undeveloped land 18 336 115 6 4 0 Undeveloped land 18,336 115.6 4.0 Other 15,287 127.3 4.9 Total ORE 56,000 121.4 4.4

13 properties > 1 year old Largest balance ‐ $ 4.1M All properties in Middle TN $8.5 million under contract at par or better $8.5 million under contract at par or better

* Excludes costs to sell 13

Aggressively Dealing with Credit Issues

ORE Dispositions (*) thru ORE Balance at

ORE Marks at 44.6% of Original Loan Balances

(*) thru March 31, 2011 ORE Balance at March 31, 2011

As a % ‐ original loan

Original loan amount 100 0% 100 0% Original loan amount 100.0% 100.0% Customer payments 10.5% 26.8% Charge off’s prior to foreclosure 20.0% 17.1% Balance @ foreclosure 69.5% 56.1% Valuation losses while in ORE 13.8% 11.5% Balance in ORE 55.7% 44.6% Loss on disposition 5.2% Net realized 50.5%

(*) ORE dispositions > $250,000 from 1/1/10 thru 3/31/11 14

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

15

Building Core Earnings Capacity

1Q11 Provides Volume and Margin Expansion

• C&I loans up $36 million in 1Q11
• CRE Owner/occupied loans up $14 million in 1Q11
• Cost of funds decreased from 1.22% in 4Q10 to 1.09% in 1Q11
• Net interest margin for 1Q11 of 3.40%

Net interest margin for 1Q11 of 3.40%

• Noninterest expense in line with expectations

16

Building Core Earnings Capacity

Momentum Continues to Build in Net Loan Volumes

$100 $0 $50 $100 ‐$50 $0 Total Loans C&I d O/O CRE ‐$150 ‐$100 C&I and O/O CRE Loans ‐$200

1Q10 Net Change 2Q10 Net Change 3Q10 Net Change 4Q10 Net Change 1Q11 Net Change

17

Building Core Earnings Capacity

$3,117,969 $3,109,972

$3,200,000

1 65%

Core Deposits Hold with Concurrent Reduction in Deposit COF

$2,781,748 $2,925,673

1.60%

$2 800 000 $3,000,000

1.55% 1.65%

$2,586,685 $2,676,016

$2,600,000 $2,800,000

1.35% 1.45%

$2,242,245

$2,200,000 $2,400,000

1.15% 1.25%

1.01%

$1 800 000 $2,000,000

0 95% 1.05%

$1,800,000

0.95%

3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 18

Building Core Earnings Capacity

$650

Positive DDA Trends Reflect Ability to Grow Client Base

$576 $595

$600 $650

es

$456 $463 $517 $496 $504 $534

$500 $550

ge Balance

$418 $456 $463

$400 $450

DA Averag

$300 $350

DD

19

$300

1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11

Building Core Earnings Capacity

• Lower cost of funds helping to advance margin

Net Interest Margin Trend

Net Interest Margin Has Expanded Significantly

• Slower pre-payment speeds driving up bond yields
• Higher core deposit volumes and repricing existing

accounts drive down cost of funds

• Interest rates are projected to remain flat for extended

period of time

3 40%

3.4% 3.5%

Net Interest Margin Trend

period of time.

• The reduction of excess liquidity should positively

impact the margin in future periods.

3.29% 3.40%

3.3% 3.3% 3.4%

$16 1

16

Interest Expense

(in millions)

3.19% 3.25% 3.23% 3.23%

3 1% 3.2% 3.2%

$16.1 $15.2 $14.6 $13.0 $11.2

12 14

3.05%

3.0% 3.1% 3.1%

20

$

10 1Q10 2Q10 3Q10 4Q10 1Q11

3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11

Building Core Earnings Capacity

4.00%

Margin Improvement is Built on Success with Clients

3.50%

• Continued progress on

reducing cost of funds and maximizing loan yields

2.50% 3.00%

• Treasury yields

influenced heavily by rapid pay downs and repricing of bond portfolio as well as

2.00%

Treasury Margin portfolio as well as maintenance of excess liquidity

1.50% 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11

Customer Margin Net Interest Margin

21

Building Core Earnings Capacity

• CD repricing opportunities ‐ $233mm in Client CD’s maturing over next

COF Reduction Opportunities Remain

CD repricing opportunities $233mm in Client CD s maturing over next three months. Goal at renewal should be approx. 0.75% to 1.25% for client CD’s or transfer borrowers to money market accounts.

Average Renewal Rates Client CD’s – Avg. Rate (%) 1st Quarter 2010 2.03% 2nd Quarter 2010 1.84% 3rd Quarter 2010 1.69%

th

4th Quarter 2010 1.18% 1st Quarter 2011 1.08%

22

2nd Quarter 2011 Average Maturing CD Rates 1.81%

Building Core Earnings Capacity

SBLF Provides Opportunity to Refinance TARP with No Dilutive Impact

• SBLF continues to be interesting to us in spite of recent

political activity

• SBLF would provide additional incentive to focus on

middle market/small business commercial and industrial middle market/small business commercial and industrial and CRE owner/occupied in our local markets

• As a result we will continue to review impact of SBLF for
• As a result, we will continue to review impact of SBLF for
• ur firm

23

Looking Forward

• Balance Sheet Growth Opportunities
• Margin Expansion

24

Looking Forward

P f d b k f b i

Balance Sheet Growth Requires Market Share Movement

• Preferred bank for businesses
• Track Record for Market Share Movement
• 66% of Mid‐sized Businesses Will Consider Switching Banks (*)
• Reputation as “most reliable lender” (*)

25 (*) Greenwich Research

Looking Forward

Longer Term Margin Expansion Opportunities Exist

1Q 2011 Net Interest Margin 3 40% 1Q 2011 Net Interest Margin 3.40% Opportunities:

• 1. NPA Resolution

0.03% to 0.08%

• 2. Continued reduction in COF

0.14% to 0.19%

• 3. Liquidity reductions

0.03% to 0.06%

Potential Margin Range 3.60% to 3.73%

Notes:

• 1. Excluding impact of reversed interest, considers reduction in NPA levels to 1.50% of loans and

ORE at new spread of 2.50% to 4.00% on performing asset.

• 2. Considers a COF reduction from 1.09% to a range of 0.90% to 0.95%.
• 3. Assumes spread increase on $100mm in liquid assets from 1.10% avg. yield to a yield of 2.00% to

4.00% in investments. 26

Looking Forward

Management’s Expectations for 2Q11 (*)

& di i i b i i

• C&I Lending opportunities appear to be increasing
• Continued emphasis on core funding and funding costs
• Still room to expand margin

p g

• Optimistic that asset quality metrics will continue to

improve for remainder of year

• Fee income will require more emphasis in 2011
• Fee income will require more emphasis in 2011
• Excluding ORE expense, expense run rates should be

consistent throughout 2011 T h ld h i i l i i

• Tax expense should have minimal impact on operating

results until reversal of DTA allowance

27

(*) As of April 19, 2011

Final Thoughts

• Aggressively addressing problem credits
• Pursue meaningful NPA resolution

g

• Continued reductions in exposure to C&D
• Attractive markets
• Attractive markets
• Economic stabilization and recovery
• Ability to seize competitive opportunities
• Responsibly growing core earnings capacity
• Return to net loan growth
• Continued core funding growth
• Continued margin expansion

28

Q&A Q&A –

First Quarter 2011 Investor Call

Terry Turner, President and CEO Harold Carpenter, EVP and CFO Harvey White Chief Credit Officer Harvey White, Chief Credit Officer April 19, 2011

29

Supplemental Information

First Quarter 2011 Investor Call First Quarter 2011 Investor Call

Terry Turner, President and CEO Harold Carpenter, EVP and CFO Harvey White Chief Credit Officer Harvey White, Chief Credit Officer April 19, 2011

30

Aggressively Dealing with Credit Issues

• Total NPLs and ORE decreased from $140.5 million to $132.4

illi b b d h million between December 31, 2010 and March 31, 2011

• ORE constitutes approximately 42% of NPAs
• Approximately $33.5 million in NPA resolutions during

1Q11 (*)

• Four consecutive quarters of net NPL and

criticized/classified asset reductions C i b k d $225 illi 43% i

• Construction book down $225 million, or 43%, since year

end ’09

(*) Does not include TDR Resolutions of $5.2 million

31

Loan Categories

Comparison of 1Q11 to year end 2010, 2009 and 2008

• Continued reduction in C&D exposure

Amts. 1Q11 %’s 1Q11 Amts. 4Q10 %’s 4Q10 Amts. 4Q09 %’s 4Q09 Amts. 4Q08 %’s 4Q08 C&D and Land $300.7 9.3% $331.3 10.3% $ 525.3 14.7% $ 645.4 19.2% Consumer RE 698.7 21.7% 705.5 22.0% 756.0 21.2% 675.6 20.1% CRE – Owner Occ. 546.4 17.0% 531.9 16.6% 535.1 15.0% 371.6 11.1% CRE Investment 509 7 15 8% 519 8 16 2% 543 5 15 3% 554 9 16 6% CRE – Investment 509.7 15.8% 519.8 16.2% 543.5 15.3% 554.9 16.6% Other RE loans 46.4 1.5% 42.9 1.3% 39.5 1.1% 50.4 1.5% Total real estate 2,101.9 65.3% 2,131.4 66.4% 2,399.4 67.3% 2,297.9 68.5% C&I 1,047.7 32.6% 1,012.1 31.5% 1,071.4 30.1% 965.1 28.8% Other loans 67.8 2.1% 68.9 2.1% 92.6 2.6% 91.9 2.7% Total loans $3,217.4 100.0% $3,212.4 100.0% $3,563.4 100.0% $3,354.9 100.0% 32 $ , $ , $ , $ ,

Construction and Land Categories

Comparison of 1Q11 to year end 2010, 2009 and 2008

• PNFP continues to reduce exposure to residential construction and development

Amts. 1Q11 %’s(*) 1Q11 Amts. 4Q10 %’s(*) 4Q10 Amts. 4Q09 %’s(*) 4Q09 Amts. 4Q08 %’s (*) 4Q08 Residential Spec $ 17 0 0 5% $ 19 9 0 6% $ 44 2 1 2% $ 96 9 2 9% Residential – Spec $ 17.0 0.5% $ 19.9 0.6% $ 44.2 1.2% $ 96.9 2.9% Residential – Custom 11.0 0.4% 9.9 0.3% 18.6 0.5% 29.0 0.9% Residential – Condo 19.9 0.6% 20.7 0.6% 38.1 1.1% 48.5 1.4% Commercial Constr ct 39 7 1 2% 50 2 1 6% 84 5 2 4% 77 1 2 3% Commercial Construct. 39.7 1.2% 50.2 1.6% 84.5 2.4% 77.1 2.3% Land Dev– Residential 97.5 3.0% 111.6 3.5% 184.0 5.2% 243.2 7.2% Land Dev – Commercial 99.8 3.1% 105.3 3.3% 117.2 3.3% 114.2 3.4% L d U ifi d 15 8 0 5% 13 7 0 4% 38 6 1 1% 36 5 1 1% Land – Unspecified 15.8 0.5% 13.7 0.4% 38.6 1.1% 36.5 1.1% Total C&D $ 300.7 9.3% $ 331.3 10.3% $ 525.3 14.7% $ 645.4 19.2%

(*) as a percentage of total loans

33

Construction and Land Categories

• Almost 40.0% of C&D book managed by Special Asset Group personnel.
• Almost 44.8% of land categories managed by SAG.

Total Portfolio 1Q11 Total Portfolio 4Q10 Total Portfolio 3Q10 NPLs 1Q11 NPLs 4Q10 NPLs 3Q10

Performing Criticized 1Q11 Performing Criticized 4Q10 Performing Criticized 3Q10

Residential – Spec $ 17.0 $ 19.9 $ 22.2 $ 0.7 $ 0.8 $ 1.4 $ 6.6 $ 6.2 $ 6.4 p Residential – Custom 11.0 9.9 9.4 0.0 0.0 0.0 0.2 0.4 0.5 Residential – Condo 19.9 20.7 26.1 7.7 8.2 13.7 1.2 6.6 6.8 Commercial Construct. 39.7 50.2 54.0 0.0 0.0 0.0 8.4 8.5 8.2 Land Dev– Residential 97.5 111.6 125.2 14.5 17.5 23.2 34.2 39.9 47.8 Land Dev – 99.8 105.3 99.4 13.7 16.7 16.2 30.5 35.5 32.3 Commercial Land – Unspecified 15.8 13.7 23.4 0.4 0.4 0.4 2.1 2.1 12.5 Total C&D $ 300.7 $ 331.3 $ 359.7 $ 37.0 $ 43.6 $ 55.0 $ 83.2 $ 99.2 $ 114.6

34

As a percentage of total C&D loans 12.3% 13.2% 15.3% 27.7% 30.0% 31.9%

Construction and Land Categories

Analysis of Pass‐rated AC&D loans

• Pass rated credits have minimal past dues with downgrades slowing. Avg. ticket size of about

$413 000 $413,000.

Pass rated 1Q11 Pass rated 4Q10 Pass rated 3Q10 Past due 1Q11 Past due 4Q10 Past due 3Q10 Pass to Fail During 1Q11 Pass to Fail During 4Q10 Pass to Fail During 3Q10

Residential – Spec $ 9.6 $ 12.8 $ 14.3 $ - $ 0.2 $ - $ - $ 0.4 $ - Residential – Custom 10.9 9.5 8.8

• Residential –

11 0 5 9 5 6

• Residential

Condo 11.0 5.9 5.6 Commercial Construct. 31.3 41.7 45.8

• 7.8

Land Dev– Residential 48.9 54.2 54.3 0.3

• 1.1

0.8 1.8 0.5 Residential Land Dev – Commercial 55.6 53.1 50.9 0.1

• 0.9

0.6 2.5 Land – Unspecified 13.3 11.3 10.5 0.1 0.2

• 35

Total C&D $180.6 $188.5 $190.2 $0.5 $0.4 $1.1 $1.7 $2.8 $10.8

Land Loan and Land‐related ORE locations

5.4% 4.9% 3.7% R th f d 24.0% 6.8% Rutherford Williamson Davidson 7.6% Wilson Other TN Other US 23.1% 9.0% Other US Knox Sumner 15.5% Maury

> $250,000 properties, approx. $218.6 mm balances

36

Commercial Real Estate

Vacancy Rates

Nashville CRE Vacancy Rates National CRE Vacancy Rates Q1 2011 (*) YE 2010 (*) YE 2009 (**) YE 2008 (**) YE 2007 (**) YE 2006 (**) Q1 2011 (*) Industrial / Warehouse 10.7% 10.2% 10.6% 9.6% 8.9% 8.6% 9.9% *C Warehouse Multifamily 6.4% 6.7% 9.6% 7.6% 5.2% 5.5% 6.2% (**) Retail 6.6% 6.7% 8.1% 6.3% 7.0% 6.3% 7.1% Office 10.2% 10.6% 12.7% 10.5% 10.5% 11.1% 12.6% *Costar **REIS

Retail 17.0% Other 15.3%

PNFP CRE Portfolio

Office 10.2% Warehous Own/Occ

37

Warehous e 7.9% Own/Occ 49.6%

Asset Quality Metrics

Nonaccrual Loans

$76.4 MM nonaccruing loans

Other 0 9%

2.37% of loan balances

Resid Const 0.9% Nonaccrual loans $ 76.4 ORE 56.0 Total NPAs $ 132.4 Land Develop 37.3% C&I 11.0% NPAs as a % of Total loans + ORE 4.04% C&I 20.4% 1‐4 Family 16.7% CRE 13.7%

As of March 31, 2011

38

Aggressively Dealing with Credit Issues

Past Dues Expressed as a % of Total Loans within Category

Past Due Levels Indicate Limited New Problems Surfacing

Past Dues Expressed as a % of Total Loans within Category

PNFP 30-90 days past PNFP 30-90 days past PNFP 30-90 days past Peer 30-90 days past days past due 1Q11 days past due 4Q10 days past due 3Q10 days past due (*) 4Q11

• Const. and land

development

0.61% 0.65% 2.03% 1.45%

CRE – Own Occupied

0.30% 0.30% 0.19% 0.71%

CRE – Investment

0.13% 0.00% 0.00% 0.80%

T t l l t t

% % % %

Total real estate

0.41% 0.36% 0.57% 1.16%

C&I

0.16% 0.16% 0.54% 0.62%

Total loans

0.32% 0.30% 0.55% 1.08% (*) Uniform Bank Performance Report

39

Net Charge‐off’s

• Largest Charge‐offs During 1Q11
• #1 ‐ $6.1 million
• #2 ‐ $770,000
• #3 ‐ $700,000
• #4 ‐ $583,000

$ ,

• #5 ‐ $508,000
• These credits make up 85% of net charge offs for 1Q11
• These credits make up 85% of net charge offs for 1Q11

40

Nonperforming Loans

• Largest NPLs
• #1 ‐ $7.5 million condo loan
• #2 ‐ $4.2 million commercial land development
• #3 ‐ $3.8 million commercial land development
• #4 ‐ $3.2 million commercial land development
• #5 ‐ $2.6 million residential development
• Approximately 160 accounts make up remaining NPLs
• Approximately 160 accounts make up remaining NPLs
• Represents 27% of NPL balances

41

OREO Properties

• Largest OREO Properties:

$

• #1 ‐ $4.1 million condo property
• #2 ‐ $3.8 million residential development
• #3 ‐ $3.6 million condo property
• #4 ‐ $3.0 million commercial development
• #5 ‐ $2.5 million multi‐use development
• These balances make up 30.4% of the total OREO book at

These balances make up 30.4% of the total OREO book at March 31, 2011

42

Aggressively Dealing with Credit Issues

Reduced Classified Assets in 1Q11

Balances M h 31 2011 Balances D 31 2010 March 31, 2011 (dollars in thousands)

• Dec. 31, 2010

(dollars in thousands)

Classified loans and ORE: ‐ Substandard accruing loans (*) $ 164,936 $ 222,992 ‐ Substandard impaired loans 60,854 68,809 Doubtful impaired loans 2 099 1 987 ‐ Doubtful impaired loans 2,099 1,987 ‐ Consumer impaired loans 13,415 10,067 ‐ Other consumer classified (#) 20,971 23,807 ‐ Other real estate 56,000 59,608 Total $ 318,275 $ 387,261

43

(*) Includes $15.3 million of restructured loans at March 31, 2011 and $20.5 million at December 31, 2010 (#) Consumer credit which exhibits risk characteristics of a substandard commercial loan

Investment Portfolio

Conservative bond portfolio

Corporates Treasuries

Average yield on bond

Municipals 21 6% Corporates 1.1% Treasuries 0.0%

Average yield on bond portfolio = 3.69% (TEY)

Average life = 5.56 years Effective Duration 3 93%

Agency Notes 21.6%

Effective Duration = 3.93%

(millions)

MTD QTD

MBS pass thrus 64.9% Agency CMOs

Notes 8.5% Purchases $20.8 $49.1 Sales ($19.3) ($19.3) Mat/Calls ($11.0) ($15.4) Pre‐pays ($12.5) ($47.7)

CMOs 3.9% FNMA, FHLMC and GNMA

As of March 31, 2011

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Investment Portfolio

Municipal portfolio

Credit ratings # of Issuances Balances % “A” or better 348 $199,904 96.0% Baa3/BBB‐ to Baa3/BBB to Baa1/BBB+ 23 8,332 4.0% Noninvestment grade ‐ ‐ ‐ Unrated Unrated ‐ ‐ ‐ Totals 371 $208,236 100.0% Location # of Issuances Balances % Other information:

As of March 31, 2011

Tennessee 103 $ 49,179 23.6% Florida 0.0% California 4 1,484 0.7%

• Avg. life of municipal book –

7.7 years

• Percentage of municipal book

related to state agencies – Nevada 1 300 0.19% Michigan 18 7,413 3.6% Illinois 20 16,169 7.8% related to state agencies – 5.8%

• Avg. tax equivalent yield –

4.7%

• FMV as a percentage of cost –

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Other – 30 states 225 133,691 64.2% Totals 371 $ 208,236 100.0% 102.3%

Building Core Earnings Capacity

Funding is Almost Exclusively Relationship Based

Core Funding: Noninterest‐bearing deposit accounts 608,428 14.8% 586,517 14.0% Interest‐bearing demand accounts 614,172 15.0% 573,670 13.7% Savings and money market accounts 1,549,354 37.7% 1,596,306 38.0% 3/31/2011 Percent 12/31/2010 Percent Time deposit accounts less than $100,000 338,018 8.2% 361,476 8.6% Total core funding 3,109,972 75.7% 3,117,969 74.3% Non‐core funding: Relationship based non‐core funding: Time deposit accounts greater than $100,000 Reciprocating time deposits 173 204 4 2% 188 510 4 5% Reciprocating time deposits 173,204 4.2% 188,510 4.5% Other time deposits 448,707 10.9% 512,349 12.2% Securities sold under agreements to repurchase 165,132 4.0% 146,294 3.5% Total relationship based non‐core funding 787,043 19.2% 847,153 20.2% Wholesale funding: Time deposit accounts greater than $100,000 p g $ , Public funds ‐ 0.0% ‐ 0.0% Brokered deposits ‐ 0.0% 14,229 0.3% Federal Home Loan Bank advances, Federal funds purchased and other borrowings 111,351 2.7% 121,393 2.9% Subordinated debt 97,476 2.4% 97,476 2.3% l h l l f di 208 82 3% 233 098 6%

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Total wholesale funding 208,827 5.3% 233,098 5.6% Total non‐core funding 995,870 24.3% 1,080,251 25.7% Totals 4,105,842 100.0% 4,198,220 100.0%

Building Core Earnings Capacity

Core Funding Relationship Based Non‐Core Funding Wholesale Funding

Positive Trends in Core Funding Enhance NII Long‐Term

24% 24% 20% 19% 16% 12% 10% 7% 6% 5%

80% 90% 100%

26% 26% 24% 24%

50% 60% 70% 80%

59% 62% 66% 69% 74% 76%

20% 30% 40% 50% 0% 10% 20%

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4Q09 1Q10 2Q10 3Q10 4Q10 1Q11

Building Core Earnings Capacity

• Reduced Time Deposit mix from 31% in 1Q10 to 17% in 1Q11
• Increased Core Deposits 7% year over year

1Q10

Average Deposits $4.1B

1Q11

Average Deposits $3.7B

Increased Core Deposits 7% year over year

Time Deposits

1Q10

Time Deposits $0 6 B

1Q11

Low Cost Core Deposits $ Deposits $1.2 B 31% Low Cost Core Deposits $ $0.6 B 17% $2.9 B 69% $3.1 B 83%

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Building Core Earnings Capacity

Capital

March 31

• Dec. 31,

Sept 30 June 30 March 31 March 31, 2011 , 2010

• Sept. 30,

2010 June 30, 2010 March 31, 2010

Tangible common equity 7.4% 7.1% 7.2% 7.1% 7.4% Tangible common to risk i ht d t 9 1% 9 1% 9 3% 9 0% 9 1% weighted assets 9.1% 9.1% 9.3% 9.0% 9.1% Tier 1 leverage 10.9% 10.7% 10.5% 10.4% 10.7% Tier 1 risk based capital 13.6% 13.8% 13.5% 13.1% 13.4% Total risk based capital 15.2% 15.4% 15.1% 14.8% 15.0% Tangible Common Book Value per Common Share $9.85 $9.80 $10.12 $10.04 $10.60

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Building Core Earnings Capacity

Noninterest Income – Run Rates Stabilizing

1Q11 4Q10 3Q10 2Q10 1Q10 Service charges $2,261 $2,353 $2,444 $2,429 $2,365 Investment services 1 508 1 264 1 234 1 315 1 236 Investment services 1,508 1,264 1,234 1,315 1,236 Insurance commissions 1,049 907 954 904 1,099 Gains on loan sales 610 1,352 1,310 921 563 Trust fees 730 495 726 755 897 Trust fees 730 495 726 755 897 Other: Securities gains (losses) (159)

• 2,259

365 Other 2,325 2,295 1,925 1,986 1,961 Total noninterest income $8,324 $8,666 $8,593 $10,569 $8,486

Less: Securities (gains) losses

159

• (2,259)

(365) Less: Insurance contingency fees (87)

• (325)

Core noninterest income $8,396 $8,666 $8,593 $8,310 $7,796

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Building Core Earnings Capacity

Expense Run Rates Stabilizing

1Q11 4Q10 3Q10 2Q10 1Q10 Salaries and benefits $16,985 $15,708 $16,069 $16,191 $16,659 Incentive Expense 938

• (345)

345 Equipment and occupancy 5,007 4,988 5,231 5,493 5,366 Other real estate owned 4,334 7,874 8,522 7,411 5,402 Marketing and BD 754 937 748 794 754 Supplies and Postage 490 467 636 701 734 Intangible amortization 716 744 744 746 746 Other expenses 5,477 5,733 5,822 5,500 6,161 Total noninterest expense $34 701 $36 451 $37 772 $36 491 $36 167 Total noninterest expense $34,701 $36,451 $37,772 $36,491 $36,167 Efficiency ratio 78.3% 81.5% 84.6% 78.9% 80.3%

Total noninterest expense – 51 Total noninterest expense excluding other real estate $30,367 $28,577 $29,250 $29,080 $30,765 Efficiency ratio, excl. ORE and securities gains 68.2% 63.9% 65.5% 66.10% 68.9%

Deferred Taxes

(in thousands, rounded) Balances as of

• Dec. 31, 2010

Net change during 1Q11 Balances as of March 31, 2011

Deferred tax items impacting operations: Deferred tax items impacting operations: Deferred tax assets: Allowance for loan losses $ 32.3 $ (1.4) $ 30.9 Other assets 11.3 1.4 12.7 Total deferred tax assets 43.6 (0.0) 43.6 Deferred tax liabilities: (14.0) (0.2) (14.2) Net DTAs impacting operations 29.6 (0.2) 29.4 Deferred tax items impacting other e e ed ta te s pact g ot e comprehensive income (loss): Unrealized gain on AFS securities (7.1) (0.1) (7.0) Net DTAs before valuation allowance 22.5 (0.1) 22.4 Valuation allowance 22.5 (0.1) 22.4 Net DTA’s after valuation allowance $ 0.0 $ (0.1) $ 0.0 The valuation allowance will continue to be impacted by net changes in our deferred tax assets and

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p y g liabilities and any current income taxes payable until the ultimate reversal of the valuation allowance.

Non‐GAAP Financial Measures – Net Interest Margin

1Q11 4Q10 3Q10 2Q10 1Q10

A g net earning assets $4 387 331 $4 441 671 $4 519 955 $4 527 471 $4 651 695

• Avg. net earning assets

$4,387,331 $4,441,671 $4,519,955 $4,527,471 $4,651,695 Net interest income $36,020 $36,056 $36,060 $35,697 $36,560 Impact of tax exempt instruments 0.07% 0.07% 0.06% 0.07% 0.06% Net interest margin 3.40% 3.29% 3.23% 3.23% 3.25% Impact from reduced NPL’s ** $1,031 $601 $1,461 $1,272 $1,187 Quarterly interest reversals from new NPLs ** $481 $387 $582 $1,153 $475 Net interest margin with negative impact of NPL’s $37,533 $37,044 $38,103 $38,122 $38,222 ** Assumes a 1.50% limitation for NPL’s and ORE to Total loans and ORE, that resulting earning assets earn at the average earning asset yield for each quarter and considers aggregate amount of p NIM excluding NPL Impact 3.54% 3.37% 3.41% 3.45% 3.40% g g y q gg g interest reversals for loans placed on nonaccrual during quarter are reversed. 53

Non‐GAAP Financial Measures – Efficiency Ratio

1Q11 4Q10 3Q10 2Q10 1Q10 $ $ $ $ $ Total non‐interest expense $34,701 $36,451 $37,774 $36,491 $36,167 Less: ORE expenses (4,334) (7,874) (8,522) (7,411) (5,402) Non‐Interest expense, excluding ORE $30,367 $28,577 $29,252 $29,080 $30,765 Total non‐interest income $8,324 $8,666 $8,594 $10,569 $8,486 Less: Securities (gains) losses 159 ‐ ‐ (2,259) (365) Non‐interest income, excluding securities gains $8,483 $8,666 $8,594 $8,310 $8,121 , g g $ , $ , $ , $ , $ , Net interest income $36,020 $36,056 $36,060 $35,697 $36,560 Total Revenues, excluding securities gains $44,503 $44,722 $44,654 $44,007 $44,681 Efficiency ratio, excl. ORE and securities gains 68.2% 63.9% 65.5% 66.10% 68.9%

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Looking Forward

Balance Sheet Growth Opportunities

Pinnacle Has Leveraged Client Satisfaction to Take Share

55

Question: Using a 5-point scale, from “1” poor to “5” excellent, how do you rate your overall satisfaction with the bank? Note: Evaluations are based on a 5-point scale, "5" excellent to "1" poor. An Excellent rating is a "5" on a 5-point scale. Cross-hairs are set at the top 10 mean for market penetration (Y-axis) and excellent client satisfaction (X-axis). Source: 2010 Greenwich Associates Market Tracking Program (Pinnacle Financial $1-500 Million - Nashville - Q1-Q3 2010).

Looking Forward

Balance Sheet Growth Opportunities

Pinnacle Has Established Market Leadership Position

Pinnacle Financial Customers Lead Relationships as % of Total Market Lead Relationships as % of Total Customers

17% 17%

23% 22% 75% 78%

Regional A

2009 2010

16% 15%

28% 26% 57% 60%

Regional B

2009

15% 8% 20%

26% 13% 28% 59% 61% 73%

Regional C Regional D

8% 7% 8%

13% 20% 13% 61% 35% 63%

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10%

23% 46%

Question: Which bank or non‐bank do you consider to be your company’s single most important or lead provider for banking services? Which bank(s) or non‐bank(s) does your company currently use for any product? Source: 2010 Greenwich Associates Market Tracking Program (Pinnacle Financial $1‐500 Million – all 4 Qtrs 2010)

Market Stabilization

Unemployment Information

11.00% 9.00% 10.00% 6 00% 7.00% 8.00% Nashville MSA Knoxville MSA 4.00% 5.00% 6.00% US 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10* 1Q11*

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Source: US Bureau of Labor Statistics “Not seasonally adjusted”

* preliminary

Market Stabilization

Nashville Residential Real Estate Trends

• Median home prices in March

2011 up more than 3.6% last March 2010

• Residential inventories down 9 2%

Residential inventories down 9.2% in March 2011 from March 2010

• April 2011 – Kiplinger noted

Nashville as one of 11 “Comeback Cities for 2011” stating Nashville Cities for 2011 stating Nashville should see 2.8% job growth in 2011.

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Source: GNAR