Second Quarter 2014 Investor Call Terry Turner, President and CEO Harold Carpenter, EVP and CFO July 16, 2014
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 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; (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 on loans or deposits; (ix) the results of regulatory examinations; (x) the ability to retain large, uninsured deposits; (xi) the development of any new market other than Nashville or Knoxville; (xii) a merger or acquisition; (xiii) any matter that would cause Pinnacle Financial to conclude that there was impairment of any asset, including intangible assets; (xiv) the ability to attract additional financial advisors or to attract customers from other financial institutions; (xv) further deterioration in the valuation of other real estate owned and increased expenses associated therewith; (xvi) inability to comply with regulatory capital requirements, including those resulting from changes to capital calculation methodologies and required capital maintenance levels; (xvii) risks associated with litigation, including the applicability of insurance coverage; (xviii) approval of the declaration of any dividend by Pinnacle Financial’s board of directors and (xix) changes in state and federal legislation, regulations or policies applicable to banks and other financial service providers, including regulatory or legislative developments arising out of current unsettled conditions in the economy, including implementation of the Dodd-Frank Wall Street Reform and Consumer Protection Act. A more detailed description of these and other risks is contained in Pinnacle Financial's most recent annual report on Form 10-K filed with the Securities and Exchange Commission on February 25, 2014. 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 2 as a result of new information, future events or otherwise.
2Q14 Summary Results Execution of fundamentals fuels exceptional growth in key valuation drivers Balance Sheet Growth Total Loans Avg Trans Accts Tangible Book Value per Share $14.53 $2,115 Up 9.9% yr/yr (millions) (millions) $2,050 $4,182 $4,316 Up 17.3% yr/yr Up 13.7% yr/yr $13.93 $4,144 $13.22 $13.52 $3,925 $3,969 $1,991 $3,772 $1,883 $12.64 $12.78 $3,712 $1,803 $1,727 $12.39 $1,666 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 Total Revenues (1) FD EPS ROTCE Earnings Growth 13.45% 13.50% Up 16.7% yr/yr (millions) $59,820 $0.47 $0.49 12.79% Up 8.9% yr/yr $57,456 $58,640 $0.42 $0.42 $0.44 12.72% 12.73% 12.41% $57,401 $0.39 $54,949 $0.34 $54,661 10.83% $53,363 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 (1) Ex: net gains and losses on sale of investment securities NPA % Classified Asset Ratio ALL % 29.4% 26.4% 23.3% 20.6% 1.11% 1.87% 1.84% 1.75% 1.70% 1.64% 1.61% 1.55% Asset Quality 1.02% 0.93% 18.5% 21.2% 18.1% 0.89% 0.80% 0.73% 0.66% 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14
2Q14 Summary Results 11.5% actual net loan CAGR equals the stated three year growth target 2012-2014 Previously Reported Growth Anticipated Net Loan Growth Current Quarter Growth 11.5% CAGR Financial Advisor Capacity (1/1/2012- 6/30/2014) $1.02 billion net growth thru 2Q14 Thru 2Q2014 11.5% CAGR FA Capacity $1.27 Billion Capacity (billions of dollars) 4
Loan, Deposit and Fee Growth Yield Operating Leverage Annual loan growth is reliable despite wide quarterly variation Annual Net Loan Growth Quarterly Net Loan Growth $500 $425 $434 $411 $200 Loan Volumes $400 Loan Volumes ($ millions) ($ millions) $221 $150 $272 $300 $243 $100 $200 $50 $153 $213 $100 $168 $0 $- Actual net loan growth 1/1 - 6/30 Actual net loan growth 7/1 - 12/31 Required net loan growth 7/1/14 - 12/31/14 in order to meet the 2012-2014 target Quarterly New Loan Originations Quarterly Pay Offs/ Pay Downs $500 $500 Loan Volumes ($ millions) Loan Volumes ($ millions) $400 $400 $300 $300 $200 $200 $100 $100 $0 $0 Source: Pinnacle internal records. New loans include new fundings to new and existing clients as well as net changes in lines of credit. Pay offs and pay downs include amortization and pay offs of existing loans. 5
Loan, Deposit and Fee Growth Yield Operating Leverage Net interest income grew as loan and deposit volumes increased in 2Q14 $48 4.00% $47.2 3.90% $46 $45.9 3.80% $45.0 $44.6 $44 Net Interest Income 3.70% Net Interest Margin $43.6 3.71% $42.8 $42 3.60% $42.2 (millions) $40.9 3.50% $40 $40.2 $39.5 $39.3 3.40% 3.40% $38 $38.4 $37.8 3.30% $36 3.20% $36.0 $34 3.10% Net Interest Income Net Interest Margin 6
Loan, Deposit and Fee Growth Yield Operating Leverage Average loans grew meaningfully; loan yields contracted slightly 6.00% $4,200 $4,251 $4,130 5.50% $4,000 $3,981 Average Loans $3,932 Loan Yields $3,800 $3,845 4 .88% 5.00% (millions) $3,682 $3,600 $3,580 4.50% $3,489 $3,400 $3,403 4.27% 4.00% $3,280 $3,262 $3,200 $3,212 $3,207 $3,191 $3,000 3.50% Avg Loans Loan Yields 7
Loan, Deposit and Fee Growth Yield Operating Leverage Floors have provided meaningful earnings and are manageable going forward $1,360 6.00% $1,340 5.00% $1,320 1.33% 0.96% 0.93% 0.84% 0.81% 0.72% 4.00% $1,300 Loan Volumes ($ millions) $1,280 3.00% $1,260 2.00% $1,240 1.00% $1,220 $1,200 0.00% Dec 2010 Dec 2011 Dec 2012 Dec 2013 Mar 2014 June 2014 Floor volumes Weighted Average Rate Weighted Average Contract Rate 8
Loan, Deposit and Fee Growth Yield Operating Leverage Deposits continued to grow while cost of funds declined in 2Q14 $4,600 1.20% $4,500 1.10% $4,519 1.01% $4,509 $4,400 1.00% $4,408 $4,300 0.90% $4,200 Deposit Costs $4,199 0.80% Avg. Deposits $4,100 0.70% (millions) $4,000 (%) 0.60% $3,963 $3,950 $3,900 $3,883 0.50% $3,800 $3,772 0.40% $3,700 $3,723 $3,706 $3,700 0.30% $3,642 $3,600 $3,636 $3,597 0.20% $3,500 0.22% 0.10% $3,400 $3,300 0.00% Avg Deposits Cost of Deposits 9
Loan, Deposit and Fee Growth Yield Operating Leverage The ‘noninterest income to asset’ ratio remains in the high end of the target range 2Q14 1Q14 4Q13 3Q13 2Q13 Service charges $2,966 $2,791 $2,739 $2,797 $2,541 Investment services 2,164 2,128 2,394 1,956 1,895 Insurance commissions 1,145 1,385 1,015 1,021 1,108 Gain on mortgage loans sold, net 1,668 1,235 1,113 1,326 1,949 Trust fees 1,072 1,146 991 932 880 Other: Securities (losses) - - - (1,441) (25) Other 3,582 4,048 4,236 4,796 2,978 Total noninterest income $12,597 $12,732 $12,488 $11,387 $11,326 Less: Securities losses - - - 1,441 25 Noncredit related loan losses - - - - 771 Core noninterest income $12,597 $12,732 $12,488 $12,828 $12,122 Total Assets (Quarterly Average) $5,673,615 $5,514,031 $5,388,371 $5,313,003 $5,210,600 Noninterest income/Average Assets 0.89% 0.94% 0.92% 0.85% 0.87% Noninterest income/Average Assets* 0.89% 0.94% 0.92% 0.96% 0.93% 10 * Excludes the impact of securities sales and noncredit related loan losses
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