Fourth Quarter 2011 Investor Call Terry Turner, President and CEO - - PowerPoint PPT Presentation

Fourth Quarter 2011 Investor Call

Terry Turner, President and CEO Harold Carpenter, EVP and CFO January 18, 2012

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

• ther factors that may cause the actual results, performance or achievements of Pinnacle Financial to differ materially from any results expressed
• r 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 development of any new market

• ther 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 ability to attract additional financial advisors or to attract customers from other financial institutions; (xiv) the impact of governmental restrictions on and discretionary regulatory authority over entities participating in the Capital Purchase Program, of the U.S. Department of the Treasury (the “Treasury”); (xv) further deterioration in the valuation of other real estate owned; (xvi) inability to comply with regulatory capital requirements or to secure any required regulatory approvals for capital actions, including redemption

• f the remaining TARP preferred shares that are outstanding; 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

• ther 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 reports on Form 10-Q filed with the Securities and Exchange commission on May 5, 2011, July 29, 2011 and October 31, 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 release, whether as a result of new information, future events or otherwise.

Safe Harbor Statements

2

• Build core earnings capacity
• Aggressively deal with credit issues

Two Primary Priorities

3

Linked Qtr Change Quarterly Year over Year Change Total loans 1.6% 2.5% C&I and owner occupied CRE loans 4.7% 11.9%

• Avg. Noninterest bearing deposits

5.0% 22.6% Net interest margin 1.4% 9.2% Noninterest income excl. securities gains (1.1%) 10.7% Gain on mortgage loan sales, net 12.8% 1.7% Total revenue excl. securities gains 1.7% 9.3% Pre-tax pre-provision income 14.8% 77.1% Adjusted PTPP Income (*) 6.0% 14.6%

Priority: Build the Core Earnings Capacity of the Firm

4

Fourth Quarter 2011 Highlights

(*) Adjusted Pre-tax pre-provision income, excludes impact of net gains on investment security sales and other real estate owned expenses – see slide #11

Linked Qtr Decrease Year over Year Decrease Consecutive

• Qtrs. of

Progress Credit losses (NCO’s + ORE expense) (2.6%) (29.9%) 6 NPLs (12.4%) (40.8%) 7 NPAs (12.6%) (37.7%) 6 Classified Loans (1.5%) (38.5%) 6 Potential problem loans (0.5%) (42.9%) 6 C&D exposure (1.6%) (17.2%) 11

Priority: Aggressively Deal with Credit Issues

5

Fourth Quarter 2011 Highlights

6

Building Core Earnings Capacity

Net Interest Margin Continues Significant Expansion

$36.6 $35.7 $36.1 $36.1 $36.0 $38.4 $39.3

$34 $36 $38 $40

Net Interest Income

(in millions)

$37.8 3.25% 3.23% 3.23% 3.29% 3.40% 3.55% 3.60% 3.65%

3.10% 3.20% 3.30% 3.40% 3.50% 3.60% 3.70%

Net Interest Margin Trend

Key Margin Drivers:

• NPA resolutions
• Higher loan volumes reduced excess cash
• Higher % of core deposit volumes

and repricing existing accounts

7

Building Core Earnings Capacity

Reduction in Cost of Deposits is Driving Margin Expansion

3.25% 3.23% 3.23% 3.29% 3.40% 3.55% 3.60% 3.65%

1.43% 0.62%

2.80% 2.90% 3.00% 3.10% 3.20% 3.30% 3.40% 3.50% 3.60% 3.70%

0.60% 0.70% 0.80% 0.90% 1.00% 1.10% 1.20% 1.30% 1.40% 1.50%

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

1.50% 2.00% 2.50% 3.00% 3.50% 4.00% 4.50% 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11

Treasury Margin Customer Margin Net Interest Margin

8

• Continued progress on

reducing cost of funds and maximizing loan yields

• Treasury yields

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

Margin Improvement is Built on Success with Clients

Building Core Earnings Capacity

• CD repricing opportunities - $175mm in Client CD’s maturing over next

three months. Goal at renewal should be near average fourth quarter renewal rate (0.65%).

9

Average Renewal Rates Client CD’s – Avg. Rate (%) 3rd Quarter 2010 1.69% 4th Quarter 2010 1.18% 1st Quarter 2011 1.08% 2nd Quarter 2011 1.02% 3rd Quarter 2011 0.73% 4th Quarter 2011 0.65% 1st Quarter 2012 Avg Maturing CD Rates 1.30%

Building Core Earnings Capacity

COF Reduction Opportunities Remain in Maturing CDs

• MMDA pricing opportunities - $335mm in MMDA accounts with current

rates above 1.00%. Target rate should approximate 0.60%.

10

Avg Quarterly MMDA Rates Quarterly Reduction 3rd Quarter 2010 1.36% 0.06% 4th Quarter 2010 1.21% 0.15% 1st Quarter 2011 1.04% 0.17% 2nd Quarter 2011 0.95% 0.09% 3rd Quarter 2011 0.81% 0.14% 4th Quarter 2011 0.65% 0.16%

Continuing MMDA Rate Reduction Opportunity

5 – 10bp

Building Core Earnings Capacity

COF Reduction Opportunities Remain in MMDAs

Building Core Earnings Capacity

Adjusted PTPP Expands 7.1% in 4Q11

(000’s) 4Q11 3Q11 2Q11 1Q11 4Q10 Net interest income $39,293 $38,356 $37,795 $36,020 $36,056 Total noninterest income 9,727 10,080 9,809 8,324 8,666 Total revenue 49,020 48,436 47,604 44,344 44,722 Total noninterest expense 34,374 35,676 34,357 34,701 36,452 Pre-tax, pre-provision income 14,646 12,761 13,247 9,643 8,270 Adjustments to PTPP: (Gains) losses on sale of securities (133) (377) (610) 159

• Other real estate expenses

4,193 5,079 3,826 4,334 7,874 Adjusted PTPP $18,706 $17,462 $16,463 $14,136 $16,145

11

12

Past Due Loans are Low and Continue to Decline

Aggressively Dealing with Credit Issues

(*) > 30 days past due

(000’s)

• Dec. 31,

2011 As a %

• f

total loans

• Sept. 30,

2011 As a % of total loans

• Dec. 31,

2010 As a % of total loans Past Due Loans (*) Managed by special assets: Nonaccrual loans $22,339 0.68% $29,158 0.90% $47,662 1.48% Accruing loans 7,437 0.23% 4,792 0.14% 5,442 0.17% Managed by relationship managers: Accruing loans 4,505 0.14% 4,321 0.13% 4,148 0.13% Total past due $34,281 1.05% $38,271 1.17% $57,252 1.78%

$7,346 $7,146 $9,726 $8,605 $5,732 $6,335 $8,522 $7,874 $4,334 $3,826 $5,079 $4,193

$0 $2,000 $4,000 $6,000 $8,000 $10,000 $12,000 $14,000 $16,000 $18,000

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

ORE Expense Net Charge Offs 13

Aggressively Dealing with Credit Issues

Credit Losses Continue to Decline

$131,381 $118,331 $103,127 $80,863 $76,368 $59,727 $54,640 $47,855

68.5% 154.6%

0% 20% 40% 60% 80% 100% 120% 140% 160%

$0 $20,000 $40,000 $60,000 $80,000 $100,000 $120,000 $140,000

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

Allowance to NPL’s

Total Nonperforming Loans (000’s)

Allowance Coverage Increases as NPLs Decline

14

Aggressively Dealing with Credit Issues

$43,096 $37,251 $33,461 $38,693 $29,517 $32,256 $151,837 $87,569

$0 $20,000 $40,000 $60,000 $80,000 $100,000 $120,000 $140,000 $160,000 $0 $10,000 $20,000 $30,000 $40,000 $50,000 $60,000 $70,000 $80,000

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

NPA Average Balances

NPA Dispositions (000’s)

Despite Shrinking NPAs, NPA Dispositions Have Achieved Target

15

Aggressively Dealing with Credit Issues

(*) ORE dispositions > $250,000 from 1/1/11 thru 12/31/11 16

ORE Dispositions (*) thru

• Dec. 31, 2011

ORE Balance at

• Dec. 31, 2011

Loan balances prior to charge

• ffs

100.0% 100.0% Charge off’s prior to foreclosure 21.8% 22.2% Balance @ foreclosure 78.2% 77.8% Valuation losses while in ORE 10.4% 19.3% Balance in ORE 67.8% 58.5% Loss on disposition 4.3% Net realized 63.5%

Aggressively Dealing with Credit Issues

OREO Valuations are More Conservative than Actual Results

(1) Market indications are that property will liquidate within 6 months (2) Various properties with reasonable activity or anticipated absorption such that liquidation should be realized within 24 months (3) Other properties likely requiring a speculative investor with longer-term workout potential

17

Aggressively Dealing with Credit Issues

OREO Disposition Plans Suggest Limited Unresolved Issues

(dollars in thousands) Balances

• Dec. 31, 2011

Near-term liquidation (1) Active Projects (2) Other Properties (3)

ORE categories: New home construction/condo’s $ 2,733 $ 1,895 $ 838 $ - Developed lots 7,091 1,511 3,660 1,920 Undeveloped land 22,655 997 17,055 4,603 Other 7,435 7,219 216

• Total ORE

$ 39,714 $ 11,622 $ 21,769 $ 6,523

Expanding the margin

19

Longer Term Potential Margin Expansion Opportunities Exist

4Q 2011 Net Interest Margin 3.65% Opportunities:

• 1. NPA resolution

0.02% to 0.04%

• 2. Continued reduction in COF

0.03% to 0.07%

• 3. Balance sheet expansion

0.02% to 0.04% Potential Margin Range 3.72% to 3.80%

Notes:

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

ORE at spread of 2.50% to 4.00% on performing assets.

• 2. Considers a COF to a range of 0.60% to 0.65%.
• 3. Projects expansion of loan volumes $200M - $300M.

20

Growing Balance Sheet Volumes

Positive DDA Trends Reflect an Ability to Gain Clients

$496 $504 $534 $576 $595 $629 $672 $706

$300 $350 $400 $450 $500 $550 $600 $650 $700 $750

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

DDA Average Balances (in millions)

21

Growing Balance Sheet Volumes

Momentum Continues to Build in Net Loan Volumes

• $200
• $150
• $100
• $50

$0 $50 $100

Net Quarterly Loan Growth (in millions)

Total Loans C&I and O/O CRE Loans

Enhancing our Capacity for Growth

• Existing advisors should

consolidate owners and employees

• f current business clients totaling

$100 million in loans and $150 million in deposits.

• Existing advisors are now in a

position to continue the consolidation of previous clients approximating $800 million in loans and $550 million in deposits.

• Recent hires should:

– Consolidate previous clients totaling $100 million in loans and $100 million in deposits. – Build an indirect lending portfolio totaling $100 million in loans.

• Projected new hires should

consolidate previous clients totaling $175 million in loans and $100 million in deposits.

22

# of Advisors Loans Deposits Current Advisors 109 $900 million $700 million Recent Hires 6 $200 million $100 million Projected New Hires 5 $175 million $100 million Total 120 $1.275 billion $900 million

Existing and New Advisors Have Capacity to Take Share

• USA job recovery of jobs lost since

peak in early 2008 has amounted to almost 27%.

• Nashville and Knoxville have

recovered approximately twice as fast as the nation

Improving Economic Factors

23

Source: BERC – MTSU & Bureau of Labor Statistics

Nashville’s and Knoxville’s Job Recovery Outpaces the Nation

Strong Capital Should Eliminate or Limit Common Dilution

24

Redeeming the Remainder of TARP

• Dec. 31,

2011

• Sept. 30,

2011

• Dec. 31,

2010

Tangible common equity 8.4% 8.2% 7.1% Tangible common to risk weighted assets 10.3% 10.3% 9.1% Tier 1 leverage 11.4% 11.9% 10.7% Tier 1 risk based capital 13.9% 14.4% 13.8% Total risk based capital 15.3% 15.9% 15.4% Tangible Common Book Value per Common Share $11.33 $11.08 $9.80

• Small quarterly decrease in

risk based capital ratio is due primarily to 25% TARP redemption

• PNFP maintains $36 million

in cash at bank holding company as of year end

• The Bank’s dividend

capacity based on the last two years of results is $20.8 million

• The Bank’s dividend

capacity in order to maintain 8% leverage and 12% total risk based capital is $75 million

Redeeming the Remainder of TARP

25 At December 31 Tier 1 Capital $’s Tier 1 Leverage % Total Risk Based-Capital $’s Total RBC % PNFP capital $ 523,277 11.4% $ 579,876 15.3% Less: TARP (71,250) (1.6%) (71,250) (1.8%) Pro Forma capital 452,027 9.8% 508,626 13.5% Add: Future earnings and/or

• ther capital alternatives

25,000 25,000 Pro Forma capital $ 477,027 10.4% $ 533,626 14.1%

(#) Per SNL, TARP redeemers reporting leverage and/or total RBC ratio as of September 30, 2011 includes SBLF refinance transactions

Strong Capital Should Eliminate or Limit Common Dilution

Peer Comparisons (as of September 30, 2011) (#) Leverage Ratio Total RBC Median of approx. 146 TARP redeemers 10.2% 15.8% PNFP pro forma ratio per above 10.4% 14.1%

• PNFP pro forma rank in peer group

53rd Percentile 23rd Percentile

Looking Forward

26

Management’s Expectations for 1Q12 (*)

(*) As of January 18, 2012

• Increasing lending opportunities, particularly C & I
• Continued emphasis on core funding and funding costs
• Continued expansion of margin and net interest income
• Continued improvement in asset quality metrics

Q&A –

Fourth Quarter 2011 Investor Call

Terry Turner, President and CEO Harold Carpenter, EVP and CFO January 18, 2012

27

Supplemental Information

Fourth Quarter 2011 Investor Call

Terry Turner, President and CEO Harold Carpenter, EVP and CFO January 18, 2012

28

Supplemental Information

29

Chart

• Asset Quality

30

• Balance Sheet

44

• Income Statement

49

• Economic Conditions

54

Supplemental Information

Asset Quality

30

Comparison of 4Q11 to 3Q11, 4Q10 and 4Q09

• Continued reduction in C&D exposure

Loan Categories

31 Amts. 4Q11 %’s 4Q11 Amts. 3Q11 %’s 3Q11 Amts. 4Q10 %’s 4Q10 Amts. 4Q09 %’s 4Q09 C&D and Land $274.2 8.3% $278.7 8.6% $331.3 10.3% $ 525.3 14.7% Consumer RE 695.8 21.1% 712.0 22.0% 705.5 22.0% 756.0 21.2% CRE – Owner Occ. 582.0 17.7% 555.7 17.1% 531.9 16.6% 535.1 15.0% CRE – Investment 481.2 14.6% 490.3 15.1% 519.8 16.2% 543.5 15.3% Other RE loans 47.8 1.5% 41.3 1.3% 42.9 1.3% 39.5 1.1% Total real estate 2,081.0 63.2% 2,078.0 64.1% 2,131.4 66.4% 2,399.4 67.3% C&I 1,145.7 34.8% 1,095.0 33.8% 1,012.1 31.5% 1,071.4 30.1% Other loans 64.7 2.0% 68.1 2.1% 68.9 2.1% 92.6 2.6% Total loans $3,291.4 100.0% $3,241.1 100.0% $3,212.4 100.0% $3,563.4 100.0%

(*) as a percentage of total loans

Construction and Land Categories

32

Comparison of 4Q11 to 3Q11, 4Q10 and 4Q09

• PNFP continues to reduce exposure to residential construction and development

Amts. 4Q11 %’s(*) 4Q11 Amts. 3Q11 %’s(*) 3Q11 Amts. 4Q10 %’s(*) 4Q10 Amts. 4Q09 %’s(*) 4Q09 Residential – Spec $ 12.4 0.4% $ 12.1 0.4% $ 19.9 0.6% $ 44.2 1.2% Residential – Custom 8.5 0.3% 10.0 0.3% 9.9 0.3% 18.6 0.5% Residential – Condo 5.8 0.2% 10.5 0.3% 20.7 0.6% 38.1 1.1% Commercial Construct. 74.6 2.3% 63.3 1.9% 50.2 1.6% 84.5 2.4% Land Dev– Residential 71.1 2.1% 77.1 2.4% 111.6 3.5% 184.0 5.2% Land Dev – Commercial 83.5 2.5% 89.5 2.8% 105.3 3.3% 117.2 3.3% Land – Unspecified 18.3 0.5% 16.2 0.5% 13.7 0.4% 38.6 1.1% Total C&D $ 274.2 8.3% $ 278.7 8.6% $ 331.3 10.3% $ 525.3 14.7%

Construction and Land Categories

33

• Almost 25.3% of C&D book managed by Special Asset Group personnel.
• Almost 38.2% of land categories managed by SAG.

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

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

Residential – Spec $ 12.4 $ 12.1 $ 19.9 $ 0.0 $ 0.6 $ 0.8 $2.3 $ 2.4 $ 6.2 Residential – Custom 8.5 10.0 9.9 0.0 0.0 0.0 0.0 0.0 0.4 Residential – Condo 5.8 10.5 20.7 0.0 0.0 8.2 0.5 0.5 6.6 Commercial Construct. 74.6 53.3 50.2 0.6 0.6 0.0 0.0 0.0 8.5 Land Dev– Residential 71.1 77.1 111.6 8.9 9.9 17.5 20.3 21.9 39.9 Land Dev – Commercial 83.5 89.5 105.3 3.0 9.8 16.7 31.6 24.2 35.5 Land – Unspecified 18.3 16.2 13.7 0.5 0.5 0.4 1.8 2.1 2.1 Total C&D $ 274.2 $ 278.7 $ 331.3 $ 13.0 $ 21.4 $ 43.6 $ 56.5 $ 51.1 $ 99.2 As a percentage of total C&D loans 4.7% 7.7% 13.2% 20.6% 18.3% 30.0%

Construction and Land Categories

Analysis of Pass-rated AC&D loans

• Pass rated credits have minimal past dues. Avg. ticket size of about $443,000.

34

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

Residential – Spec $ 10.0 $ 9.1 $ 12.8 $ - $ 0.4 $ 0.2 $ - $ - $ 0.4 Residential – Custom 8.5 10.0 9.5

• Residential –

Condo 5.3 10.0 5.9

• Commercial

Construct. 74.1 62.8 41.7

• Land Dev–

Residential 42.0 45.3 54.2

• 0.2
• 1.8

Land Dev – Commercial 49.0 55.5 53.1

• 7.6
• 0.6

Land – Unspecified 16.1 13.7 11.3

• 0.2
• Total C&D

$205.0 $206.4 $188.5 $ - $0.4 $0.4 $ 7.8 $ - $2.8

8.63% 9.30% 8.23% 6.95% 5.31% 4.62% 4.04% 3.96%

0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% 8.0% 9.0% 10.0% 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11

Potential Problem loans/Total loans

Potential Problem Loans Continue to Decline

35

Aggressively Dealing with Credit Issues

Note: Classified loans (or loans with a credit weakness) that continue to accrue interest are considered potential problem loans.

36

Aggressively Dealing with Credit Issues

Reduced Classified Assets in 4Q11

Balances

• Dec. 31, 2011

(dollars in thousands) Balances

• Sept. 30, 2011

(dollars in thousands) Balances

• Dec. 31, 2010

(dollars in thousands) Balances

• Dec. 31, 2009

(dollars in thousands) Classified loans and ORE:

• Substandard commercial

loans $ 197,581 $ 199,053 $ 319,046 $ 394,149

• Doubtful commercial loans

1,193 2,826 4,242 8,883

• Other impaired loans

2,875 1,972 3,211

• 90 days past due and

accruing (*) 858 1,066 100

• Other real estate

39,714 45,500 59,608 29,603

• Other repossessed assets

26 481 775 100 Total $ 242,247 $ 250,899 $ 386,982 $ 432,735

(*) Includes loans 90 days past due and accruing not included elsewhere

As of December 31, 2011

Asset Quality Metrics

37

Nonaccrual Loans

$47.9 MM nonaccruing loans 1.45% of loan balances

Land Develop 26.9% 1-4 Family 26.1% CRE 20.8% C&I 24.9% Resid Const 0.2% Other 1.1%

(*) Uniform Bank Performance Report (Insured Commercial Banks with assets above $3 billion)

NPLs Continue to Decline Ahead of Peers

38

Nonperforming Loan Trends

NPLs Expressed as a % of Total Loans within Category

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

• Const. and land

development

4.73% 7.68% 13.15% 9.53%

CRE – Owner Occupied

1.16% 1.36% 1.89% 2.45%

CRE – Investment

0.55% 0.23% 0.43% 2.47%

Total real estate

1.71% 2.06% 3.06% 3.37%

C&I

1.09% 1.20% 1.47% 1.45%

Total loans

1.48% 1.74% 2.52% 2.49%

• Largest NPLs
• #1 - $3.4 million consumer real estate
• #2 - $2.9 million commercial land development
• #3 - $2.5 million residential land development
• #4 - $2.2 million consumer real estate
• #5 - $1.8 million C&I
• Approximately 110 accounts make up remaining NPLs
• Represents 27% of NPL balances

Nonperforming Loans

39

• Average age of ORE remains low at 10 months
• Largest ORE balance - $ 4.1 M
• $2.5 million in contracts at January 18, 2012

* Excludes costs to sell 40

Aggressively Dealing with Credit Issues

ORE is 45.4% of NPAs with Resolution in Bank’s Control

Balances

• Dec. 31, 2011

(dollars in thousands) Fair value as a %

• f book value*

Average Appraisal Age in Months

ORE categories: New home construction/condo’s $ 2,733 101.7% 3.90 Developed lots 7,091 132.5% 5.84 Undeveloped land 22,655 121.3% 4.64 Other 7,435 118.6% 3.95 Total ORE $ 39,714 121.4% 4.53

• Largest OREO Properties:
• #1 - $4.2 million mixed-use development
• #2 - $4.1 million industrial park
• #3 - $3.6 million mixed-use development
• #4 - $3.2 million residential development
• #5 - $3.0 million residential developments
• These balances make up 45% of the total OREO book at

December 31, 2011

OREO Properties

41

Land Loan and Land-related ORE locations

> $250,000 properties, approx. $180.6 mm balances

42

85.6% 10.1% 4.3% Middle TN East TN Other

• Largest Charge-offs During 4Q11
• #1 - $1.3 million C&I
• #2 - $1.2 million construction & land development
• #3 - $0.7 million construction & land development
• #4 - $0.6 million construction & land development
• #5 - $0.6 million C&I
• These credits make up 68% of net charge offs for 4Q11

Net Charge-off’s

43

Balance Sheet Supplemental Information

44

Building Core Earnings Capacity

45

Funding is Almost Exclusively Relationship Based

Core Funding: Noninterest-bearing deposit accounts 717,379 17.46% 586,517 14.0% Interest-bearing demand accounts 637,203 15.51% 573,670 13.7% Savings and money market accounts 1,585,260 38.58% 1,596,306 38.0% Time deposit accounts less than $250,000 501,705 12.21% 669,078 15.9% Total core funding 3,441,547 83.75% 3,425,571 81.6% Non-core funding: Relationship based non-core funding: Time deposit accounts greater than $250,000 Reciprocating time deposits 108,507 2.6% 188,510 4.5% Other time deposits 104,284 2.5% 204,747 4.9% Securities sold under agreements to repurchase 131,591 3.2% 146,294 3.5% Total relationship based non-core funding 344,382 8.4% 539,551 12.9% Wholesale funding: Time deposit accounts greater than $250,000 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 226,069 5.5% 121,393 2.9% Subordinated debt 97,476 2.4% 97,476 2.3% Total wholesale funding 323,545 8.0% 233,098 5.6% Total non-core funding 667,927 16.3% 772,649 18.4% Totals 4,109,474 100.0% 4,198,220 100.0% 12/31/2011 Percent 12/31/2010 Percent

46

76% 82% 82% 84% 83% 84% 17% 13% 13% 11% 9% 8% 7% 6% 5% 5% 8% 8%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11

Core Funding Relationship Based Non-Core Funding Wholesale Funding

Building Core Earnings Capacity

Core Funding Remains Primary Funding Source

Conservative bond portfolio

Investment Portfolio

As of December 31, 2011

47

MBS pass thrus 63.2% Agency CMOs 8.8%

Agency Notes 5.0%

Municipals 21.8% Corporates 1.2% Treasuries 0.0%

Average yield on bond portfolio = 3.2% (TEY)

Average life = 4.25 years Effective Duration = 2.45%

(millions) QTD Purchases $ 16.0 Sales ($ 8.0) Mat/Calls ($ 6.5) Pre-pays ($ 47.8)

Municipal portfolio

Investment Portfolio

48

Credit ratings # of Issuances Balances % “A” or better 321 $198,321 100.0% Baa3/BBB- to Baa1/BBB+

• Noninvestment

grade

• Unrated
• Totals

321 $198,321 100.0% Location # of Issuances Balances % Tennessee 87 $45,748 23.1% Florida

• 0.0%

California 4 1,553 0.8% Nevada

• 0.0%

Michigan 14 6,270 3.2% Illinois 18 14,479 7.2% Other – 30 states 198 130,271 65.7% Totals 321 $198,321 100.0%

Other information:

• Avg. life of municipal book – 6.1 years
• Percentage of municipal book related to

state agencies – 4.8%

• Avg. tax equivalent yield – 5.8%
• FMV as a percentage of cost – 107.5%

As of Dec. 31, 2011

Income Statement Supplemental Information

49

50

Building Core Earnings Capacity

Noninterest Income

4Q11 3Q11 2Q11 1Q11 4Q10 Service charges $ 2,291 $ 2,362 $ 2,330 $ 2,261 $ 2,353 Investment services 1,402 1,699 1,637 1,508 $ 1,264 Insurance commissions 944 1,002 1,004 1,049 $ 907 Net gains on mortgage loan sales 1,461 1,295 789 610 $ 1,352 Trust fees 746 754 770 730 $ 495 Other: Securities gains (losses) 133 377 610 (159)

• Other

2,750 2,591 2,668 2,325 $ 2,295 Total noninterest income 9,727 $10,080 $9,809 $8,324 $ 8,666 Less: Securities (gains) losses (133) (377) (610) 159

• Less: Ins contingency fees
• (87)
• Core noninterest income

$ 9,594 $9,703 $9,199 $8,396 $ 8,666

51

Building Core Earnings Capacity

Expense Down 5.7% from 4Q10

4Q11 3Q11 2Q11 1Q11 4Q10 Salaries and benefits $16,230 $15,951 $15,870 $16,985 $15,708 Incentive expense 2,733 3,065 2,654 938

• Equipment and occupancy

4,977 4,943 5,060 5,007 4,988 Other real estate owned 4,193 5,079 3,826 4,334 7,874 Marketing and BD 1,032 751 766 754 937 Supplies and postage 576 509 545 490 467 Intangible amortization 716 715 716 716 744 Other expenses 3,917 4,663 4,921 5,477 5,733 Total noninterest expense $34,374 $35,675 $34,357 $34,701 $36,451 Efficiency ratio 70.1% 73.7% 72.2% 78.3% 81.5%

Total noninterest expense – excluding other real estate $30,181 $30,597 $30,532 $30,367 $28,578 Efficiency ratio, excl. ORE and securities gains 61.6% 63.2% 64.1% 68.5% 63.9%

Non-GAAP Financial Measures – Net Interest Margin

52

4Q11 3Q11 2Q11 1Q11 4Q10

• Avg. net earning assets

$4,347,352 $4,308,710 $4,347,552 $4,387,331 $4,441,671 Net interest income $39,293 $38,356 $37,795 $36,020 $36,056 Impact of tax exempt instruments 0.06% 0.07% 0.06% 0.07% 0.07% Net interest margin 3.65% 3.60% 3.55% 3.40% 3.29% Impact from reduced NPL’s ** $591 $814 $850 $1,031 $601 Quarterly interest reversals from new NPLs ** $271 $279 $225 $481 $387 Net interest margin with negative impact of NPL’s $40,155 $39,449 $38,869 $37,533 $37,044 NIM excluding NPL Impact 3.73% 3.70% 3.65% 3.54% 3.37%

** 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 interest reversals for loans placed on nonaccrual during quarter are reversed.

Non-GAAP Financial Measures – Efficiency Ratio

53

4Q11 3Q11 2Q11 1Q11 4Q10 Net interest income $39,293 $38,356 $37,795 $36,020 $36,056 Total non-interest income $9,727 $10,080 $9,809 $8,324 $8,666 Less: Securities (gains) losses (133) (377) (610) 159

• Non-interest income, excluding securities

gains $9,594 $9,703 $9,199 $8,483 $8,666 Total non-interest expense $34,374 $35,676 $34,357 $34,701 $36,452 Less: ORE expenses (4,193) (5,079) (3,826) (4,334) (7,874) Non-Interest expense, excluding ORE $30,181 $30,597 $30,532 $30,367 $28,578 Adjusted pre-tax pre-provision income $18,706 $17,462 $16,463 $14,136 $16,145 Efficiency ratio, excl. ORE and securities gains 61.6% 63.2% 64.1% 68.5% 63.9%

Economic Conditions Supplemental Information

54

Market Opportunities

55

Nashville and Knoxville are Poised for Expansion

Source: Greater Nashville Area Chamber of Commerce; Forbes

Forbes: Next Big Boom Towns (July, 2011) 1. Austin 2. Raleigh

3. Nashville

4. San Antonio 5. Houston 6. Washington, DC 7. Dallas 8. Charlotte 9. Phoenix 10. Orlando

2010 – 2011 Year to Date (Jan – Aug) Percentage Change in Employment

• Knoxville continues to
• utperform at < 7%,

Nashville at approx. 7.5% currently.

• Tennessee

unemployment at approximate historical norms of > USA results by approximately 0.4% to 0.6%

Unemployment Trends

56

Source: BERC – Middle Tennessee State University & Bureau of Labor Statistics

Nashville Residential Real Estate Market

57

Source: GNAR.org – Residential home activity through 12/11 (*) Months of Inventory calculated by dividing month end inventory by monthly closings

Nashville’s Real Estate Market Continues to Improve

4Q 2011 4Q 2010 % Change

• Avg. Qtrly.

Median Home Price $166.0 $171.0 (2.9)% Quarterly Closings 4,268 3,629 17.6% Year end Inventory 10,574 12,146 (12.9)% Months of Inventory (*) 7.04 9.82 (28.3)%

• Zillow.com Home Value

Index (i.e., “Zestimate”) trends 12/1996 thru 11/2011 for single family homes

• Chart compares

volatility in home prices in Nashville and Knoxville to select other US markets

• As we have mentioned

numerous times, similar to many other smaller markets, Nashville and Knoxville did not experience the volatility in home prices that

• ther markets

experienced

Residential Real Estate Trends

58

Source: Zillow.com – Zestimate - a calculation from Zillow.com representing median home prices for various markets.

Nashville Knoxville

Vacancy Rates

*Costar **REIS *** Projected

Commercial Real Estate

59 Nashville CRE Vacancy Rates National CRE Vacancy Rates Q4 2011 (*) Q3 2011 (*) YE 2010 (*) YE 2009 (**) YE 2008 (**) YE 2007 (**) Q4 2011 (*) Industrial / Warehouse 9.7% 9.6% 10.2% 10.6% 9.6% 8.9% 9.5% Multifamily 7.2%(***) 7.0%(***) 6.7% 9.6% 7.6% 5.2% 6.6% (**) Retail 7.1% 6.4% 6.7% 8.1% 6.3% 7.0% 6.9% Office 9.6% 9.8% 10.6% 12.7% 10.5% 10.5% 12.3%

Retail 15.9% Office 8.6%

Warehouse

8.4% Own/Occ 52.4% Other 14.7%

PNFP CRE Portfolio

Fourth Quarter 2011 Investor Call

Terry Turner, President and CEO Harold Carpenter, EVP and CFO January 18, 2012