Second Quarter 2012 Investor Call Terry Turner, President and CEO - - PowerPoint PPT Presentation

Second Quarter 2012 Investor Call

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

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” and similar expressions are intended to identify such forward‐looking

• bjective, 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 (“the Nashville MSA”) and the Knoxville MSA; (iv) changes in loan portfolio in the Nashville‐Davidson‐Murfreesboro‐Franklin MSA ( the Nashville 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 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 th th N h ill K ill ( i) i iti ( ii) tt th t ld Pi l Fi i l t l d th t th

• 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 and conversely, the inability to realize the economic benefits of newly hired financial advisors; (xiv) further deterioration in the valuation of other real estate owned and increased expenses associated therewith; (xv) inability to comply with regulatory capital requirements, including those resulting from recently proposed changes to capital calculation methodologies and required capital maintenance levels; 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 (the “Dodd‐Frank Act”). A more detailed description of these and other risks is contained in “Item 1A. Risk Factors” of the Company’s Annual Report on Form 10‐K filed with the Securities and Exchange Commission on March 2, 2012. 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 quarterly report, whether as a result of new information, future events or otherwise.

2

2Q Results Match Previous Guidance

• Increasing lending opportunities

Management’s focus for 2Q12 Increasing lending opportunities

• Core funding growth and reduced funding costs
• Continued expansion of margin and net interest

income

• Continued improvement in asset quality metrics

Continued improvement in asset quality metrics

3

Other Significant 2Q Events

There were two significant events during 2Q12

• TARP redemption
• Charter conversion application
• Charter conversion application

4

TARP Redemption

PNFP fully redeemed TARP with no common dilution

Key Facts Key Facts

• 1. Principle and accrued dividends of $71.6 million on 6/20/12
• 2. Source of Funds
• $21.6 million holding company cash
• $25 million bank dividend to holding company
• $25 million senior holding company indebtedness
• 3. Terms of Indebtedness
• Unsecured
• 5‐year maturity
• 10 year amortization
• 10‐year amortization
• 4. $1.7 million accretion of preferred stock discount
• 5. $755,000 warrant repurchase anticipated on 7/18/12

5

Charter Conversion Application

Pinnacle National Bank applied for a state banking charter

Key Facts Key Facts

• 1. Application is to become a state “non‐member” bank
• 2. Federal Reserve continues to regulate the holding company
• 3. FDIC becomes primary federal regulator for the bank
• 4. Approval anticipated in 90‐120 days

Rationale 1 Environment of fast paced regulatory changes 1. Environment of fast‐paced regulatory changes 2. FDIC supervision most differentiates between large and community banks 3. TDFI focuses on soundness and economy

6

Primary Priorities

2010‐2012 Pinnacle has consistently executed against its priorities 2010‐2012

• Aggressively deal with credit issues
• Build core earnings capacity

2012 2012

• Growing the balance sheet

7

Second Quarter 2012 Highlights

Li k d Qt Y C ti

Asset quality continued to improve

Linked Qtr Change Year over Year Change Consecutive

• Qtrs. of

Progress Credit losses (NCO’s + ORE expense) (33 7%) (55 7%) 8 Credit losses (NCO s + ORE expense) (33.7%) (55.7%) 8 NPLs (4.7%) (31.7%) 9 NPAs (13.8%) (40.9%) 8 Classified loans (2.6%) (20.2%) 8 Potential problem loans (5.6%) (25.5%) 8 C&D Exposure 2.6% 2.5% Residential (5.5%) (31.8%) 13 Commercial 6 7% 31 4% Commercial 6.7% 31.4%

8

Second Quarter 2012 Highlights

Linked Qtr Change Quarterly Year

• ver Year

Core earnings capacity continued to expand

g Change Total loans 3.2% 7.4% Total loans 3.2% 7.4% C&I and owner occupied CRE loans 3.3% 14.3%

• Avg. Noninterest bearing deposits

7.7% 20.1%

• Avg. Noninterest bearing deposits

7.7% 20.1% Net interest income 1.7% 6.3% Net interest margin 0 5% 5 9% Net interest margin 0.5% 5.9% Noninterest income excl. securities gains (0.3%) 6.7% Total revenue excl securities gains 1 3% 6 4% Total revenue excl. securities gains 1.3% 6.4%

9

Building Core Earnings Capacity

Net interest income and margin continued to expand

Net Interest Margin Trend

Key Revenue Drivers:

3.65% 3.74% 3.76%

3.70% 3.80%

Net Interest Margin Trend

Key Revenue Drivers:

• Higher loan volumes
• Reduced funding costs
• NPA resolutions

$42

Net Interest Income

(in millions)

3.55% 3.60% 3.65%

3.50% 3.60%

$37.8 $38.4 $39.3 $39.5 $40.2

$38 $40 $42

3.23% 3.40%

3.30% 3.40%

$34 $36 $38

3.23% 3.23% 3.29%

3.10% 3.20%

10

$ 2Q11 3Q11 4Q11 1Q12 2Q12

Building Core Earnings Capacity

Reduction in cost of deposits drove margin expansion

3 74% 3.76%

3.80% 1.45%

3.55% 3.60% 3.65% 3.74% 1.36%

3.60% 1.25%

%)

3.23% 3.23% 3.29% 3.40%

3.40% 1.05%

st Margin (% t of Funds

3.00% 3.20% 0.65% 0.85%

Net Interes Cost

0.47%

2.80% 0.45%

2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12

N

11

NIM Deposit COF

Building Core Earnings Capacity

• CD repricing opportunities ‐ $135mm in Client CD’s maturing over next

COF reduction opportunities remain in maturing CDs

CD repricing opportunities $135mm in Client CD s maturing over next three months. Goal at renewal should be below or near average second quarter renewal rate (0.61%).

Client CD’s – Avg Rate Average Renewal Rates Client CD s – Avg. Rate (%) 1st Quarter 2011 1.08% 2nd Q t 2011 1 02% 2nd Quarter 2011 1.02% 3rd Quarter 2011 0.73% 4th Quarter 2011 0.65% 1st Quarter 2012 0.57% 2nd Quarter 2012 0.61%

12

3rd Quarter 2012 Avg Maturing CD Rates 0.82%

Building Core Earnings Capacity

• MMDA pricing opportunities ‐ $215mm in MMDA accounts with current

COF reduction opportunities remain in MMDAs

MMDA pricing opportunities $215mm in MMDA accounts with current rates above 1.00%. Target rate should approximate 0.40% ‐ 0.60%.

Avg Quarterly Quarterly MMDA Rates Reduction 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% 1st Quarter 2012 0.53% 0.12% 2nd Quarter 2012 0.51% 0.02%

13

Continuing MMDA Rate Reduction Opportunity

5 – 10bp

Building Core Earnings Capacity

Loan growth accelerates, but yield compresses in 2Q

5.00% $3,500

$3,403

4.88% 4.87% 4.78% 4.74% 4.74% 4.65%

4.80% $3,400

$3 191 $3,212 $3,207 $3,262 $3,280

4.65%

4.60% $3,300

n Yields age Loans

(millions) $3,191

4.20% 4.40% $3,100 $3,200

Loa Avera

(

4.00% $3,000

1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 14

Avg Loans Loan Yields

Building Core Earnings Capacity

Margin outlook contains opportunities and threats

2Q 2012 Net Interest Margin 3.76% Opportunities:

• 1. Loan growth

0.01% to 0.03%

• 2. Continued reduction in COF

0.02% to 0.06%

• 2. Continued reduction in COF

0.02% to 0.06%

• 3. NPA resolution

0.00% to 0.02% Threats:

• 4. Declining loan yields

(0.04% ) to (0.05%)

• 5. Declining bond yields

(0.02%) to (0.03%) Potential Margin Range 3 73% to 3 79% Potential Margin Range 3.73% to 3.79%

Notes: 1. Projects expansion of loan volumes $200M - $300M. 2. Considers a COF to a range of 0.45% to 0.50%. 3. 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% f i t

15

4.00% on performing assets. 4. Considers further reduction of 5 – 10 bp based upon recent trends and market pressure surrounding new loan yields 5. Projects further decline of 10 – 15 bp in future bond yields as higher prepayment speeds continue.

Building Core Earnings Capacity

$16,000

Credit losses continue to decline

$4 334

$12,000 $14,000 $16,000

ORE Expense Net Charge‐Offs

$4,334 $3,826 $5,079 $4,193

$8 000 $10,000 $12,000

$9,726 $8,605 $4,676 $3 104

$4 000 $6,000 $8,000

$5,732 $6,335 $3,630 $2,399 $3,104

$0 $2,000 $4,000 $0

1Q11 2Q11 3Q11 4Q11 1Q12 2Q12

16

Building Core Earnings Capacity

Adjusted PTPP expands 16.5% in 2Q12 over the same period prior year

(000’s) 2Q12 1Q12 4Q11 3Q11 2Q11 1Q11 Net interest income $40,185 $39,504 $39,293 $38,356 $37,795 $36,020 Total noninterest income 9,910 9,949 9,727 10,080 9,809 8,324 Total revenue 50,095 49,453 49,020 48,436 47,604 44,344 Total noninterest expense 33,915 35,820 34,374 35,676 34,357 34,701 Pre-tax, pre-provision income 16,180 13,633 14,646 12,761 13,247 9,643 Adjustments to PTPP: (Gains) losses on sale of securities (99) (114) (133) (377) (610) 159 securities Other real estate expenses 3,104 4,676 4,193 5,079 3,826 4,334 Adjusted PTPP $19,185 $18,195 $18,706 $17,462 $16,463 $14,136 PTPP/Average Assets 1.59% 1.53% 1.53% 1.45% 1.37% 1.18%

17

Outlook for the Future

Beginning the next phase – growth and discipline

18

Company Profile – Phase 1 (2000‐2008)

PNFP successfully moved quality share from large regionals

Loans & Deposits

$4,000 BI Merger $1,500 $2,000 $2,500 $3,000 $3,500 Total Deposits (EOP) Total Loans (EOP) Cavalry Merger MB $0 $500 $1,000 ( )

Net Charge‐off’s

0.20% 0.25% 0.30%

Net Charge Offs

Average quarterly net charge‐off rate of 0.05%

0.00% 0.05% 0.10% 0.15% 0.20%

Net Charge Offs

‐0.05%

19

Company Profile – Phase 1 (2000‐2008)

Acquisitions significantly altered loan mix toward C&D

7% 6% 70% 59.7 59.6 54.8% 50% 60%

Commercial Mortgage and C&I

40% 50%

and C&I Construction and Development

4% 16.9% 21.2% 20% 30% 10. 0% 10% 0% 2005 2006 2007

20

Company Profile – Phase 2 (2008 – 2012)

Pinnacle’s loan portfolio outperformed during the recession

Net Charge offs to Total Loans

Nonperforming Assets + 90 days delinquent as a percentage of loans and ORE

12.48% 12.59% 11 19%

12.00 14.00

Net Charge‐offs to Total Loans 2008‐Q1 2012

8.00 9.00

as a percentage of loans and ORE

11.19% 9.26%

8.00 10.00 5.00 6.00 7.00

5.11%

4.00 6.00 2.00 3.00 4.00 Pinnacle National A Regional A 0.00 2.00 0.00 1.00 Regional B Regional C

21

Source: SNL Data for most significant competitors in our markets. Nonperforming assets includes nonperforming loans, troubled debt restructurings, 90+ days past due and OREO. The denominator is both loans held for sale and held for investment and OREO.

Company Profile – Phase 3 (2012 and beyond)

Ratio PNFP PNFP PNFP PNFP

Pinnacle is progressing toward its long‐term profitability targets

FY2011 1Q12 2Q12 Long‐term Targets

ROAA 1.12%* 1.00%* 0.90%* 1.10%‐1.30% NIM 3.55% 3.74% 3.76% 3.70%‐3.90% NIM 3.55% 3.74% 3.76% 3.70% 3.90% Net Charge‐offs 0.69% 0.45% 0.28% 0.20%‐0.35% Noninterest Fees/Total 0.78% 0.83% 0.82% 0.70%‐0.90% Noninterest Fees/Total Average Assets 0.78% 0.83% 0.82% 0.70% 0.90% Expense/Total Average Assets 2.50%* 2.60%* 2.56%* 2.10%‐2.30%

22

*: Calculation excludes OREO expense

Achieving Long‐term Targets

Nashville’s and Knoxville’s job recovery outpaces the nation

• USA recovery of jobs lost since peak

employment in 2008 has amounted to employment in 2008 has amounted to 43.9%

• Nashville has replaced 86% while

Knoxville has replaced 100%

23

Source: BERC – MTSU & Bureau of Labor Statistics

Achieving Long Term Targets

Nashville and Knoxville are healthy business markets

“Music City” is a city on the move with its diverse economy, thriving cultural base, entertainment offerings and strong business community. Nashville’s central location in the U.S. makes it an unmatched distribution

• location. Fifty percent of the U.S. population and 24 states are located

within a 600‐mile radius. Accolades in 2012 include:

• Tennessee 4th best state for business

Chief Executive Magazine

• Nashville one of top 8 cities for projected job growth

Kiplinger

• Nashville 10th best city for business and careers of 200 largest MSA’ s

Forbes K ill j h l h d di i h ll Knoxville enjoys a very healthy and diverse economy with an excellent transportation and technology infrastructure. Its population is projected to grow 4.5 percent in the next five years, faster than the nation’s. Among Knoxville’s rankings in 2012:

• Knoxville 6th best mid‐sized city for jobs

24 Knoxville 6 best mid sized city for jobs Forbes

Achieving Long‐term Targets

Historical DDA trends reflect an ability to gain clients

$800

• Year‐over‐year DDA

$672 $706 $702 $756 $700 $750 $800

lions)

Year over year DDA account balances up 21.3%.

• Year‐over‐year

$534 $576 $595 $629 $550 $600 $650

nces (in mil

Year over year number of accounts up 18.7%. $504 $534 $450 $500 $550

erage Balan

$300 $350 $400

DDA Ave

25

$300 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12

Achieving Long‐term Targets

Quarterly net loan growth is expanding

$100 $150

th (000’s)

$50 $0 $50

• an Growt

‐$150 ‐$100 ‐$50

Quarterly L

‐$200 $

Net Q

26

Achieving Long‐term Targets

Pinnacle has established a market leadership position

19%

24%

Customers as a % of the Total Market Customers as a % of the Total Market Lead Relationships as a % of the Total Market Lead Relationships as a % of the Total Market

19% 14% 12%

Pinnacle Financial R i l A

24% 22% 17%

Q2 2011 Q1 2012

12% 19%

Regional A Regional B

22% 27%

Q2 2011‐Q1 2012 Q2 2010‐Q1 2011

6% 15% 9%

g Regional C

10% 23% 14%

6% 8%

National A

12% 14% 20%

Source: Greenwich and Associates: Businesses with annual sales between $1 million and $500 million in the Nashville MSA 27

Achieving Long‐term Targets

Client Score Change from Q2 2011-Q1 2012 Q2 2010-Q1 2011** Brand Image

Pinnacle’s reputation supports continued share movement

Brand Image Values Long‐Term Relationships 99 (+) Broad Range of Products and Services 99 (+) Customer Service 99 (+) Business Banker Understanding of Your Industry 90 (+)

Ranks 1‐3 Ranks 4‐5 Ranks 6‐8

Top Management Support 85 (+) Knowledge of Cash Management Services 100 (+) Effectively Coordinating Product Specialists 88 (+) Pro‐actively Provides Advice and Solutions 88 (+) Branch Experience Ability to Resolve Problems 100 (+) Ability to Resolve Problems 100 ( ) Access to Decision Makers 97 (+) Knowledgeable Staff 100 (+) Financial Stability 98 (+) Treasury Management Product Capabilities 98 (+) Accuracy of Operations 100 (+) Credit Process Offer Competitive Pricing 96 Demonstrates a Willingness to Extend Credit 95 Speed in Responding to Loan Requests 86 (-) Flexible Terms and Conditions 94 (-) Flexible Terms and Conditions 94 ( ) Functionality and Range of Online Services 99 (+)

28

*Net Performance equals excellent/above‐average minus below‐average/poor. **+/‐ indicates increase or decrease of 2 or more from Q2 2010‐Q1 2011. Source: 2010‐2012 Greenwich Associates Market Tracking Program (Pinnacle Financial ‐ Nashville ‐ $1‐500 Million ‐ Q2 2011‐Q1 2012). Represents eight largest financial institutions in Nashville MSA

Achieving Long‐term Targets

Recent hires and existing advisors have incremental capacity to take share

2012 2014 2012 ‐ 2014 Anticipated Net Loan Growth

YTD 2012

Previously Reported Growth

$153 Million YTD

$1 27 Billi T t

FA Capacity

Current Quarter Growth

$1.27 Billion Capacity

$1.27 Billion Target

FA Capacity

$1.27 Billion Capacity

29

Achieving Long‐Term Targets

Pinnacle is currently positioned for achieving targets

• Strong, healthy markets

C d hi i l f d

• Current and historical performance trends
• Track record and reputation for taking share
• Track record and reputation for taking share
• Existing expenses support meaningful asset growth

g p pp g g

30

Achieving Long‐Term Targets

Additional opportunities exist – but are not required

• Denovo market extensions
• Memphis

Ch tt

• Chattanooga
• In‐market acquisitions

q

• “Line‐of‐Business” acquisitions
• Trust
• Asset Management
• P&C Insurance Agencies

g

31

Looking to the Near‐term

Management’s focus for 3Q12

• Continued improvement in asset quality metrics
• Increasing lending opportunities
• Core funding growth and reduced funding costs
• Core funding growth and reduced funding costs
• Continued expansion of net interest income

p

32

Q&A Q&A –

Second Quarter 2012 Investor Call

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

33

Supplemental Information

Second Quarter 2012 Investor Call Second Quarter 2012 Investor Call

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

34

Supplemental Information Chart

• Asset Quality

36

• Balance Sheet

49

• Income Statement

58

• Economic Conditions

64 Economic Conditions 64

35

Supplemental Information

Asset Quality

36

Aggressively Dealing with Credit Issues

8 63% 9.30%

9 0% 10.0%

• ans

Potential problem loans continue to decline

7.24%7.18% 8.63% 8.23% 6.95%

6 0% 7.0% 8.0% 9.0%

• ans/Total lo

4.30% 5.31% 4.62% 4.04%3.96%3.78% 3.21%

3 0% 4.0% 5.0% 6.0%

al Problem lo

0 0% 1.0% 2.0% 3.0%

Potentia

0.0%

37

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

Aggressively Dealing with Credit Issues

Classified assets decrease in 2Q12

Balances Balances Balances Balances June 30, 2012 (dollars in thousands)

• Dec. 31, 2011

(dollars in thousands) June 30, 2011 (dollars in thousands) June 30, 2010 (dollars in thousands) Cl ifi d l d ORE Classified loans and ORE: ‐ Substandard commercial loans $ 174,500 $ 197,581 $ 215,848 $ 429,297 ‐ Doubtful commercial loans 398 1,193 3,389 16,728 ‐ Other impaired loans 3,114 2,875 1,969 1,033 ‐ 90 days past due and accruing (*) ‐ 858 481 734 ‐ Other real estate 25,450 39,714 52,395 42,616 ‐ Other repossessed assets 9 26 806 35 Total $ 203,471 $ 242,247 $ 274,888 $ 490,443

38

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

Nonperforming Loan Trends

NPLs continue to decline ahead of peers

NPLs Expressed as a % of Total Loans within Category

PNFP PNFP PNFP Peer NPLs and PNFP NPLs and > 90 days 2Q12 PNFP NPLs and > 90 days 1Q12 PNFP NPLs and > 90 days 4Q11 NPLs and > 90 days (*) 1Q12

• Const. and land development

2.09% 2.48% 4.73% 11.11%

CRE – Owner Occupied

1.84% 2.02% 1.16% 2.68%

CRE – Investment

0.75% 1.04% 0.55% 3.01%

Total real estate

1 63% 1 72% 1 71% 4 05%

Total real estate

1.63% 1.72% 1.71% 4.05%

C&I

0.44% 0.61% 1.09% 1.47%

Total loans

1.19% 1.31% 1.48% 2.98%

(*) Uniform Bank Performance Report (Insured Commercial Banks with assets above $3 billion) 39

Nonperforming Loans

• Largest NPLs
• #1 ‐ $3.9 million consumer real estate
• #2 ‐ $3.8 million owner occupied commercial real estate
• #3 ‐ $3.4 million consumer real estate

#3 $3.4 million consumer real estate

• #4 ‐ $2.8 million commercial land development
• #5 ‐ $2 2 million consumer real estate
• #5 ‐ $2.2 million consumer real estate
• Top five represent 39.1% of NPL balances at June 30, 2012
• Approximately 80 accounts make up remaining NPLs

pp y p g

40

Aggressively Dealing with Credit Issues

ORE is 38.4% of NPAs with resolution in bank’s control

Balances Fair value as a % Average June 30, 2012 (dollars in thousands)

• f book value*

Appraisal Age in Months

ORE categories: New home construction/condo’s $ 3 100.0% 5.08 Developed lots 4,136 207.8% 4.09 Undeveloped land 16 761 137 2% 10 30 Undeveloped land 16,761 137.2% 10.30 Other 4,550 151.9% 5.37 Total ORE $ 25,450 151.3% 5.05

Average age of ORE remains low at 14.2 months Largest ORE balance ‐ $4.1M $4.1 million in contracts at July 18, 2012

* Excludes costs to sell 41

Aggressively Dealing with Credit Issues

170 53%

Allowance coverage increases as NPLs decline

$118,331 $103 127

170.53% 140% 160% $120,000 $140,000

’s ans

$103,127 $80,863 $76,368 $54 640

100% 120% $80,000 $100,000

ance to NPL’ rforming Loa 00’s)

$59,727 $54,640 $47,855 $42,852 $40,821

73.60% 40% 60% 80% $40,000 $60,000

Allowa Total Nonper (00

0% 20% $0 $20,000

T

Nonperforming Loans Allowance to NPL's

42

Aggressively Dealing with Credit Issues

$160 000 $80 000

NPA inflows decrease consistent with NPAs

$132,368

$120,000 $140,000 $160,000 $60,000 $70,000 $80,000

es

tions

$33,461 $38,693 $ $32 256 $66,272

$80,000 $100,000 $ , $40,000 $50,000 $ ,

ctual Balance

s and Disposit (000’s)

$29,517 $32,256 $25,320 $22,537 $25,358 447 35 685

$40,000 $60,000 $20,000 $30,000

NPA Ac

NPA Inflows (

$ $18,4 $17,53 $19,6 $14,274 $11,939

$0 $20,000 $0 $10,000

1Q11 2Q11 3Q11 4Q11 1Q12 2Q12

NPA Dispositions NPA inflows NPA Actual Balances

43

OREO Properties

• Largest OREO Properties:

$

• #1 ‐ $4.1 million mixed‐use development
• #2 ‐ $2.8 million residential development
• #3 ‐ $1.8 million commercial development
• #4 ‐ $1.4 million mixed‐use development
• #5 ‐ $1.0 million residential developments
• These balances make up 43% of the total OREO book at June

These balances make up 43% of the total OREO book at June 30, 2012

44

Land Loan and Land‐related ORE locations

11.0% 4.5% Middle TN East TN Other 84.5% > $250,000 properties, approx. $181.1 mm balances

45

Aggressively Dealing with Credit Issues

ORE Dispositions (*) thru ORE Balance at

OREO valuations remain below actual results

(*) thru June 30, 2012 ORE Balance at June 30, 2012 Loan balances prior to charge p g

• ffs

100.0% 100.0% Charge off’s prior to foreclosure 21.0% 21.0% Balance @ foreclosure 79.0% 79.0% Valuation losses while in ORE 10.7% 27.4% Balance in ORE 68.3% 51.6% L di iti 3 1% Loss on disposition 3.1% Net realized 65.2%

(*) ORE dispositions > $250,000 from 7/1/11 thru 6/30/12 excluding partial sales 46

Aggressively Dealing with Credit Issues

OREO disposition plans suggest limited unresolved issues

(dollars in thousands) Balances Near‐term Active Other June 30, 2012 liquidation (1) Projects (2) Properties (3)

ORE categories: New home construction/condo’s $ 3 $ 3 $ ‐ $ ‐ Developed lots 4,136 551 3,057 528 Undeveloped land 16 761 792 13 284 2 685 Undeveloped land 16,761 792 13,284 2,685 Other 4,550 3,404 1,082 64 Total ORE $ 25,450 $ 4,750 $ 17,423 $ 3,277

(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 should be realized within 24 months (3) Other properties likely requiring a speculative investor with longer‐term workout potential

47

Net Charge‐off’s

• Largest Charge‐offs During 2Q12
• #1 ‐ $1.4 million consumer real estate
• #2 ‐ $0.7 million consumer real estate
• #3 ‐ $0.7 million consumer real estate
• #4 ‐ $0.5 million C&I

$

• #5 ‐ $0.5 million consumer real estate
• These credits make up 70 6% of net charge offs for 2Q12
• These credits make up 70.6% of net charge offs for 2Q12

48

Supplemental Information Balance Sheet

49

Loan Categories

Comparison of 2Q12 to 1Q12, 4Q11 and 4Q10

Amts. 2Q12 %’s 2Q12 Amts. 1Q12 %’s 1Q12 Amts. 4Q11 %’s 4Q11 Amts. 4Q10 %’s 4Q10 C&D and Land $289.1 8.4% $281.6 8.4% $274.2 8.3% $331.3 10.3% Consumer RE 687.0 19.9% 688.8 20.6% 695.8 21.1% 705.5 22.0% CRE – Owner Occ. 601.5 17.5% 590.4 17.7% 582.0 17.7% 531.9 16.6% CRE Investment 525 4 15 2% 491 7 14 7% 481 2 14 6% 519 8 16 2% CRE – Investment 525.4 15.2% 491.7 14.7% 481.2 14.6% 519.8 16.2% Other RE loans 40.1 1.2% 41.6 1.3% 47.8 1.5% 42.9 1.3% Total real estate 2,143.1 62.2% 2,094.1 62.7% 2,081.0 63.2% 2,131.4 66.4% C&I 1,227.3 35.6% 1,180.6 35.4% 1,145.7 34.8% 1,012.1 31.5% Other loans 74.3 2.2% 63.2 1.9% 64.7 2.0% 68.9 2.1% Total loans $3,444.7 100.0% $3,337.9 100.0% $3,291.4 100.0% $3,212.4 100.0% 50 $ , $ , $ , $ ,

Construction and Land Categories

Comparison of 2Q12 to 1Q12, 4Q11 and 4Q10

Amts. 2Q12 %’s(*) 2Q12 Amts. 1Q12 %’s(*) 1Q12 Amts. 4Q11 %’s(*) 4Q11 Amts. 4Q10 %’s(*) 4Q10 Residential Spec $ 12 4 0 4% $ 13 5 0 4% $ 12 4 0 4% $ 19 9 0 6% Residential – Spec $ 12.4 0.4% $ 13.5 0.4% $ 12.4 0.4% $ 19.9 0.6% Residential – Custom 11.8 0.3% 9.7 0.3% 8.5 0.3% 9.9 0.3% Residential – Condo 5.2 0.1% 5.9 0.2% 5.8 0.2% 20.7 0.6% Commercial Constr ct 98 6 2 9% 85 7 2 6% 74 6 2 3% 50 2 1 6% Commercial Construct. 98.6 2.9% 85.7 2.6% 74.6 2.3% 50.2 1.6% Land Dev– Residential 58.6 1.7% 64.0 1.9% 71.1 2.1% 111.6 3.5% Land Dev – Commercial 78.5 2.3% 83.1 2.5% 83.5 2.5% 105.3 3.3% L d U ifi d 24 0 0 7% 19 7 0 5% 18 3 0 5% 13 7 0 4% Land – Unspecified 24.0 0.7% 19.7 0.5% 18.3 0.5% 13.7 0.4% Total C&D $ 289.1 8.4% $ 281.6 8.4% $ 274.2 8.3% $ 331.3 10.3%

(*) as a percentage of total loans

51

Construction and Land Categories

• At June 30, 2012, 20.8% of C&D book managed by Special Asset Group personnel, compared to 33.5% at

June 30, 2011.

• 36.0% and 39.0% at June 30, 2012 and 2011, respectively, of land categories managed by SAG.

Total Portfolio 2Q12 Total Portfolio 1Q12 Total Portfolio 4Q11 NPLs 2Q12 NPLs 1Q12 NPLs 4Q11 Performing Criticized 2Q12 Performing Criticized 1Q12 Performing Criticized 4Q11 Residential $ 12 4 $ 13 5 $ 12 4 $ 0 0 $ 0 0 $ 0 0 $1 9 $1 7 $2 3 Residential – Spec $ 12.4 $ 13.5 $ 12.4 $ 0.0 $ 0.0 $ 0.0 $1.9 $1.7 $2.3 Residential – Custom 11.8 9.7 8.5 0.0 0.0 0.0 0.0 0.0 0.0 Residential – 5.2 5.9 5.8 0.0 0.0 0.0 0.2 0.5 0.5 Condo Commercial Construct. 98.6 85.7 74.6 0.0 0.0 0.6 0.0 0.0 0.0 Land Dev– Residential 58.6 64.0 71.1 1.5 2.2 8.9 18.8 22.4 20.3 Residential Land Dev – Commercial 78.5 83.1 83.5 3.2 3.4 3.0 31.5 30.9 31.6 Land – Unspecified 24.0 19.7 18.3 1.3 1.4 0.5 1.8 0.7 1.8

52

Total C&D $ 289.1 $ 281.6 $ 274.2 $ 6.0 $ 7.0 $ 13.0 $ 54.2 $ 56.2 $ 56.5 As a percentage of total C&D loans 2.1% 2.5% 4.7% 18.7% 19.9% 20.6%

Construction and Land Categories

Analysis of pass‐rated AC&D loans

• Pass rated credits have minimal past dues. Avg. ticket size of about $474,000.

Pass rated 2Q12 Pass rated 1Q12 Pass rated 4Q11 Past due 2Q12 Past due 1Q12 Past due 4Q11 Pass to Fail During 2Q12 Pass to Fail During 1Q12 Pass to Fail During 4Q11

Residential – Spec $ 10.5 84.70% $ 11.8 87.41% $ 10.0 80.65% $ - $ - $ - $ 0.2 $ - $ - Residential – Custom 11.8 100.00% 9.7 100.00% 8.5 100.00%

• Residential –

Condo 5.0 95.59% 5.4 91.53% 5.3 91.38%

• Commercial

Construct. 98.7 100.00% 85.7 100.00% 74.1 99.33%

• L

d D 38 3 39 4 42 0 0 2 Land Dev– Residential 38.3 65.34% 39.4 61.56% 42.0 59.07%

• 0.2

Land Dev – Commercial 43.9 55.88% 48.9 58.84% 49.0 58.68%

• 0.1
• 7.6

Land – Unspecified 20 9 17 7 16 1 0 1 0 1

• 53

Land Unspecified 20.9 87.11% 17.7 89.85% 16.1 87.98% 0.1 0.1

• Total C&D

$229.1 $218.6 $205.0 $ 0.1 $ 0.1 $ - $ 0.3 $ - $ 7.8

Core Deposits vs Non‐Core Deposits

6/30/2012 Percent 12/31/2011 Percent Core Funding: Transaction accounts 1,504,450 35.56% 1,354,582 32.96% Money Market accounts 1,557,607 36.81% 1,585,260 38.58% Time deposits less than $250,000 461,600 10.91% 501,705 12.21% Total Core Funding 3,523,657 83.28% 3,441,547 83.75% Non‐core funding: Relationship based non‐core funding: Time deposits greater than $250,000 Reciprocating time deposits 94,307 2.23% 108,507 2.64% Other time deposits 91,856 2.17% 104,284 2.54% Securities sold under agreements to repurchase 127,623 3.02% 131,591 3.20% Total relationship based non‐core funding 313,786 7.42% 344,382 8.38% Wholesale funding: Time deposits greater than $250,000 Public funds ‐ 0.00% ‐ 0.00% Brokered deposits ‐ 0.00% ‐ 0.00% FHLB advances 270,995 6.41% 226,069 5.50% Federal funds purchased ‐ 0.00% ‐ 0.00% Holding Company Loan 25,000 0.59% ‐ 0.00% Subordinated debt 97,476 2.30% 97,476 2.37% Total wholesale funding 393,471 9.30% 323,545 7.87% Total non‐core funding 707,257 16.72% 667,927 16.25%

54

Totals 4,230,914 100.00% 4,109,474 100.00%

Investment Portfolio

Conservative bond portfolio

Corporates Treasuries

Average yield on bond

Agency Notes Municipals Corporates 1.3% Treasuries 0.0%

Average yield on bond portfolio = 3.27% (TEY)

Average life = 3.45 years Effective Duration 2 25%

MBS pass Notes 2.5% Municipals 23.2%

Effective Duration = 2.25%

( ll )

QTD

MBS pass thrus 63.8% Agency CMOs

(millions)

QTD Purchases $ 19.3 Sales ($ 18.3) Mat/Calls ($ 4.9) Pre‐pays ($ 45.6)

9.2%

p y ($ )

As of June 30, 2012

55

Investment Portfolio

Municipal portfolio

Municipal Bond Portfolio Statistics 2Q12 2Q11 2Q12 2Q11 Weighted Average Life 4.4 years 7.4 years % State Agency Holdings 5.20% 4.70% Tax equivalent yield 4.83% 5.04% All municipals are “A” rated or better. Location # of Issuances Balances % Tennessee 78 $42 982 22 4%

As of June 30, 2012

Tax equivalent yield 4.83% 5.04% FMV as % of Cost 108.30% 104.9% Tennessee 78 $42,982 22.4% Florida ‐ ‐ 0.0% California 2 810 0.4% Nevada ‐ ‐ 0.0% Michigan 12 5,594 2.9% Illinois 18 14,603 7.5% Other – 30 states 192 129,753 67.0%

56

Totals 304 $193,742 100.0%

Diversified C&I and Owner‐occupied CRE portfolio

Manufacturing, 8 1% Accommodation and Transportation and Warehousing, 6.0% Construction, 5.7% 8.1% Finance and Insurance, 9.7% Consumer, 3.9% Accommodation and Food Services, 4.8% Professional, Scientific, and Technical Services, 5.3% Multiples Sectors, each less than 1% individually, 2.4% Retail Trade, 7.0% Wholesale Trade, 10.6% Health Care and Social Assistance, 11.6% Arts, Entertainment, and Recreation, 4.2% Administrative and Support and Waste Management and Remediation Services, Real Estate and Rental and Leasing, 8.0% Other Services (except Public Remediation Services, 2.7% Information, 2.2% Public Administration), 7.6%

Basis: Classification based on NAIC sector as of June 30, 2012

Supplemental Information Income Statement

58

Building Core Earnings Capacity

Noninterest Income

2Q12 1Q12 4Q11 3Q11 2Q11 Service charges $ 2,439 $ 2,324 $ 2,291 $ 2,362 $ 2,330 Investment services 1,611 1,581 1,402 1,699 1,637 Insurance commissions 1 141 1 288 944 1 002 1 004 Insurance commissions 1,141 1,288 944 1,002 1,004 Gain on mortgage loans sold, net 1,457 1,494 1,461 1,295 789 Trust fees 770 767 746 754 770 Other: Other: Securities gains 99 114 133 377 610 Other 2,392 2,323 2,750 2,591 2,668 Total noninterest income $ 9,909 $ 9,890 $ 9,727 $10,080 $ 9,809

Less: Securities gains

(99) (113) (133) (377) (610) Core noninterest income $ 9,810 $ 9,777 $ 9,594 $ 9,703 $ 9,199

59

Building Core Earnings Capacity

Second quarter expenses in line with expectations

2Q12 1Q12 4Q11 3Q11 2Q11 Salaries and benefits $17,214 $17,762 $16,230 $15,951 $15,870 Salaries and benefits $17,214 $17,762 $16,230 $15,951 $15,870 Incentive expense 2,023 2,031 2,733 3,065 2,654 Equipment and occupancy 5,053 4,374 4,977 4,943 5,060 Other real estate owned 3,104 4,676 4,193 5,079 3,826 Marketing and BD 740 785 1,032 751 766 Supplies and postage 616 563 576 509 545 Intangible amortization 686 686 716 715 716 Other expenses 4,479 4,943 3,917 4,663 4,921 Total noninterest expense $33,915 $35,820 $34,374 $35,675 $34,357 Efficiency ratio 67.7% 72.4% 70.1% 73.7% 72.2%

Total noninterest expense – excluding other real estate $30,811 $31,144 $30,181 $30,597 $30,532 Efficiency ratio, excl. ORE and securities gains 61.5% 63.0% 61.6% 63.2% 64.1% 60 securities gains

Non‐GAAP Financial Measures – Efficiency Ratio

2Q12 1Q12 4Q11 3Q11 2Q11 Net interest income $40,185 $39,504 $39,293 $38,356 $37,795 Total non‐interest income $9,909 $9,949 $9,727 $10,080 $9,809 Less: Securities gains (99) (113) (133) (377) (610) Non‐interest income, excluding securities gains $9,810 $9,836 $9,594 $9,703 $9,199 Total non‐interest expense $33,915 $35,820 $34,374 $35,676 $34,357 Total non interest expense $33,915 $35,820 $34,374 $35,676 $34,357 Less: ORE expenses (3,104) (4,676) (4,193) (5,079) (3,826) Non‐Interest expense, excluding ORE $30,811 $31,144 $30,181 $30,597 $30,532 Adjusted pre‐tax pre‐provision income $19,185 $18,197 $18,706 $17,462 $16,463 Efficiency ratio, excl. ORE and securities

61

gains 61.5% 63.0% 61.6% 63.2% 64.1%

Non‐GAAP Financial Measures – ROAA Excluding OREO

2Q12 1Q12 FY 2011 4Q11 3Q11 2Q11 Net Income available to common stockholders $ 7,785 $ 7,206 $37,073 $ 5,681 $ 24,537 $ 4,843 Other real estate owned expense 3,104 4,676 17,432 4,193 5,079 3,826 Net Income excluding OREO $ 10,889 $ 11,882 $54,505 $ 9,874 $ 29,616 $ 8,669 Total Assets (Quarterly Average) $4,847,583 $4,820,951 $4,833,435 $4,852,311 $4,786,485 $4,826,731 ROAA 0.65% 0.60% 0.77% 0.46% 2.06% 0.40% Adjusted ROAA* 0.90% 1.00% 1.12% 0.81% 2.46% 0.72% * Calculation excludes OREO expense 62

Non‐GAAP Financial Measures – Expense/Total Average Assets

2Q12 1Q12 FY 2011 4Q11 3Q11 2Q11 1Q11 Total non‐interest expense $33,915 $35,820 $139,107 $34,374 $35,676 $34,357 $34,701 Less: ORE expenses 3 104 4 676 17 432 4 193 5 079 3 826 4 334 Less: ORE expenses 3,104 4,676 17,432 4,193 5,079 3,826 4,334 Non‐Interest expense, excluding ORE $30,811 $31,144 $121,675 $30,181 $30,597 $30,532 $30,367 Total Assets (Quarterly Average) $4 847 583 $4 820 951 $4 833 435 $4 852 311 $4 786 485 $4 826 731 $4 868 745 Total Assets (Quarterly Average) $4,847,583 $4,820,951 $4,833,435 $4,852,311 $4,786,485 $4,826,731 $4,868,745 Expense*/Total Average Assets 2.56% 2.60% 2.52% 2.50% 2.57% 2.54% 2.51% * Calculation excludes OREO expense 63

Supplemental Information Economic Conditions

64

Unemployment Trends

• Both Nashville and

Knoxville continue to

• utperform at 6 8%

11.00 12.00

• utperform at 6.8%

and 6.4%, respectively.

9.00 10.00 11.00

• State of Tennessee

unemployment approximates USA unemployment

7.00 8.00 9.00

unemployment

5.00 6.00 Knoxville MSA Nashville MSA Tennessee US 4.00 US

65

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

Nashville Residential Real Estate Market

Nashville’s Real Estate Market Continues to Improve

2Q 2012 2Q 2011 % Change Q Q % g

• Avg. Qtrly.

Median Home Price $175,500 $176,300 (0.5%) Quarterly Closings 5,955 4,725 26.0% Quarter end 11 812 13 988 (15 6%) Inventory 11,812 13,988 (15.6%) Months of Inventory (*) 5.7 8.2 (30.5%)

66

Source: GNAR.org – Residential home activity through 6/12 (*) Months of Inventory calculated by dividing month end inventory by monthly closings

Commercial Real Estate

Vacancy Rates

Nashville CRE Vacancy Rates National CRE Vacancy Rates Q2 2012(*) YE 2011 (*) YE 2010 (*) YE 2009 (**) YE 2008 (**) YE 2007 (**) Q2 2012 (*) Industrial / Warehouse 10.3% 10.1% 10.2% 10.6% 9.6% 8.9% 9.2% Multifamily** 4 6% 6 6% 6 7% 9 6% 7 6% 5 2% 4 7% *C Multifamily** 4.6% 6.6% 6.7% 9.6% 7.6% 5.2% 4.7% Retail 7.2% 7.3% 6.7% 8.1% 6.3% 7.0% 6.9% Office 8.3% 9.7% 10.6% 12.7% 10.5% 10.5% 12.1% *Costar **REIS

Retail 15.8% Office Other 16.4%

PNFP CRE Portfolio

Office 8.2%

Warehouse

8.0% Own/Occ

67

Own/Occ 51.6%

Second Quarter 2012 Investor Call Investor Call

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