Pinnacle Financial Partners, Inc. · NYSE:PNFP
Pinnacle Financial Partners — Q3 2019 Earnings Presentation
44 slides from Pinnacle Financial Partners's earnings presentation, Oct 16, 2019
Slide 1: Investor Call Third Quarter 2019
Investor Call THIRD QUARTER 2019 October 16, 2019 Time: 8:30 AM CDT Webcast: www.pnfp.com (investor relations) Audio only: 877-602-7944 M. TERRY TURNER, PRESIDENT AND CEO HAROLD R. CARPENTER, EVP AND CFO
Slide 2: Safe Harbor Statements: Forward Looking Statements
Safe Harbor Statements Forward Looking Statements All statements, other than statements of historical fact, included in this presentation are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 2
Slide 3: Safe Harbor Statements: Non-GAAP Financial Matters
Safe Harbor Statements Non-GAAP Financial Matters This presentation contains certain non-GAAP financial measures, including, without limitation, earnings per diluted share, efficiency ratio and the ratio of noninterest expense to average assets, excluding in certain instances the impact of expenses
Slide 4: 3Q19 Summary Results of Key GAAP Measures
3Q19 Summary Results of Key GAAP Measures Total Revenues FD EPS Book Value per Share Total Loans Total Deposits ROTCE (millions) (millions) NPA/ Loans & OREO Classified Asset Ratio NCOs 4
Slide 5: 3Q19 Summary Results of Key Non-GAAP Measures
3Q19 Summary Results of Key Non-GAAP Measures Total Revenues FD EPS* $1.45 Tangible Book Value per Share** $31.60 $278,008 $1.22 $240,887 $26.21 CAGR 34.8% $216,159 CAGR 22.8% $0.90 CAGR 16.1% $23.32 $0.78 $118,327 $19.69 $83,469 $0.66 $0.52 $17.09 $62,396 $14.98 Total Loans Total Core Deposits ROTC
Slide 6: Culture eats strategy for lunch - Peter Drucker
“Culture eats strategy for lunch” - Peter Drucker Emphasis on associate engagement yields rapid, reliable growth Engaged Associates Produce Better Outcomes • No. 27 100 Best Companies to Work For, FORTUNE • No. 2 Best Workplaces in Financial Services and Insurance, FORTUNE • No. 12 Best Workplaces f
Slide 7: Hiring and Engagement Model Well Received in NC, SC, and VA
PNFP’s Hiring and Engagement Model has been Well Received in NC, SC, and VA PNFP engaged BNC associates and substantially exceeded its hiring plan Actual-to-date 66 Planned-to-date 29 Planned 65 Planned Planned-to-date Actual-to-date 7
Slide 8: PNFP Primarily Focuses on Top and Bottom Line Growth
PNFP Primarily Focuses on Top and Bottom Line Growth PNFP continues to grow revenue/share at a double-digit pace and faster than peers LTM Revenue Per Share Growth vs. Peers $14.00 14.5% 15.0% 13.0% 13.0% 13.0% $13.44 $13.50 11.9% 11.9% 12.5% 11.3% $13.00 $12.92 Y/Y Revenue per Share Growth 10.0% $1
Slide 9: Loan & Deposit Growth are Keys to Top and Bottom Line Growth: Loans
Loan & Deposit Growth are Keys to Top and Bottom Line Growth Loan growth remained strong in 3Q19 $20,000 5.21% 5.50% Annual Organic Loan Growth $19,217 $18,000 $18,611 5.00% (excludes Day 1 merger impact) $17,938 $17,630 20.0% $17,259 $16,000 $16,730 4.30% 4.50% $15,957 18.7% $15,520 $15,017 $14,000
Slide 10: Loan growth outpaces peers and declining PAA
Loan & Deposit Growth are Keys to Top and Bottom Line Growth PNFP’s rapid, reliable loan growth outpaces peers and declining PAA Net Interest Income Quarterly Trends Purchase Accounting Accretion 30% $200.0 14.00% $190.0 12.00% 25% Quarterly Loan Growth % - Annualized 24.34% $180.0 10.00% Net Intere
Slide 11: Net Interest Margin Influences Top and Bottom Line Growth
Net Interest Margin Influences Top and Bottom Line Growth Loan yields continue to hold during this volatile rate environment All Loans CRE Construction C&I At September 30, 2019 (*) LIBOR Prime 24.3% 38.9% 35.8% 33.0% 34.4% T-Bill 0.0% 44.3% 57.2% 1.4% 45.5% Fixed Rate <1Y Fixed Rate >1Y 28.8% 1.1%
Slide 12: Wholesale Bank Assets
Wholesale Bank Assets Active management should support long-term performance 4.00 40.00 Quarterly Avg. FFS and Cash Bond Portfolio Pricing $900 3.00% 3.50 35.00 End of Period 3.00 $800 2.67% Average balances ($ in millions) 3.00 30.00 74% 70% $700 2.33% Average quarterly yield % of Total Assets 2.50
Slide 13: Loan & Deposit Growth: Funding Loan Growth Efficiently
Loan & Deposit Growth are Keys to Top and Bottom Line Growth Funding loan growth as efficiently as possible is the key to our growth Dec. 31, June 30, Sept. 30, Sept. 30, Deposit Rate 2018 2019 EOP 2019 2019 Annual Organic Deposit Growth Tranches EOP Rates Rates EOP Rates % of (excludes Day 1 merger
Slide 14: Net Interest Margin: PNFP moved quickly on deposit costs
Net Interest Margin Influences Top and Bottom Line Growth PNFP moved quickly on deposit costs when the Fed moved Deposit rates peaked in July, the same month that Fed cut rates for the first time Due to client outreach beginning early in 2019, the salesforce was proactively positioned to respond
Slide 15: Credit Discipline Impacts Bottom Line
Credit Discipline Impacts Bottom Line Concentration discipline and granularity offer great protection to bottom line Real Estate Portfolio Concentrations aggregated by real estate category and common borrower Granularity of Real Estate Portfolio Largest CRE Projects by Category - Aggregate portfolio
Slide 16: Fee Income Growth Supports Ongoing Top and Bottom Line Growth
Fee Income Growth Supports Ongoing Top and Bottom Line Growth PNFP continues to grow strategic fee businesses Deposit-Related Fees 1.30% (Service Charges, Interchange) $20,000 Yr/Yr Growth Income from Equity Method Investment 15.8% (BHG) $18,000 1.20% $30,000 Yr/Yr Growth $16,000 126.5% $14,000 1.10
Slide 17: BHG Continues to Outperform: Credit Experience
BHG Continues to Outperform Continuous improvements have enhanced loan quality while increasing volumes BHG Credit Experience & Recourse Accrual BHG Annual Loan Volume Originations 6.00% 5.00% 4.50% Recourse accrual to Outstanding Loans 5.00% Credit and Prepayment Loss Rates 4.00% 3.50% 4.00% 3.00%
Slide 18: BHG Continues to Outperform: Auction Platform
BHG Continues to Outperform Strong demand among bank buyers on BHG’s proprietary auction platform 16% BHG Balance Sheet Going Forward: 14.60% 14.20% 500M 13.80% A. BHG anticipates finalizing a loan structure 13.70% 13.20% 14% whereby it can retain loans on its balance sheet 396.4M 12.20% rather than
Slide 19: Expenses are Leveraged to Produce Top and Bottom Line Growth
Expenses are Leveraged to Produce Top and Bottom Line Growth Leveraging our associate base is the key to efficiency $500.0 Employee Retention^ 100% $449.8 $441.0 $400.0 $427.5 $424.9 $419.9 $412.8 $415.9 3Q17 to 3Q19 $393.1 $390.8 $300.0 (increase of $33,300/ associate) $200.0 $228.8 95% $216.9 $214
Slide 20: Long-targeted top quartile profitability; targets adjusted
PNFP’s has long-targeted top quartile profitability and consistently delivered Future targets adjusted to focus on critical return metrics 1.70% ROAA 1.69% 1.60% 1.62% 1.62% 3Q19 1.50% 1.56% 1.55% 1.54% 1.53% 1.52% Operating 3Q19 1.40% ACTUALS 1.41% range ACTUALS 1.30% 1.39% 1.35% (Non GAAP)* 1.34%
Slide 21: PNFP prioritizes long-term EPS and TBV creation
PNFP prioritizes long-term EPS and TBV creation We hold fast to the correlation between EPS, TBV growth and long-term share price appreciation FD EPS* Tangible Book Value per Share** $1.45 $31.60 $26.21 CAGR 22.8% $1.22 $23.32 $0.90 $19.69 $0.78 $17.09 $0.66 $14.98 $0.52 *: excluding merger-related
Slide 22: Outlook for 2019
Outlook for 2019 We remain committed to long-term shareholder value creation through top and bottom line growth 2019 Focus Items Grow core deposits while managing funding costs Low double-digit annualized loan growth EPS growth in top quartile of peer group Long-term Shareholder Value Creation Thesi
Slide 23: Q&A Third Quarter 2019
Q&A THIRD QUARTER 2019 -~innacle FINANCIAL PARTNERS
Slide 24: Supplemental Information
Supplemental Information Chart • Balance Sheet 25 • Asset Quality 35 • Income Statement 36 • Peer Group 43 24
Slide 25: Balance Sheet – Loan Portfolio
Balance Sheet – Loan Portfolio Amts. % Amts. % Amts. % Amts. % 3Q19 3Q19 2Q19 2Q19 3Q18 3Q18 3Q17 3Q17 C&I $5,891.0 30.5% $5,795.1 30.8% $5,006.2 28.7% $3,971.3 26.0% CRE – Owner Occ. 2,595.8 13.4% 2,624.2 13.9% 2,688.2 15.4% 2,433.8 15.9% Total C&I & O/O CRE $8,486.8 43.9% $8,419.3 44.7% $7,694.4 4
Slide 26: Balance Sheet – Loan Portfolio
Balance Sheet – Loan Portfolio TOTAL PINNACLE TENNESSEE LOANS CAROLINAS/ VA LOANS OTHER UNIT LOANS* Amts. Amts. Amts. Amts. Amts. Amts. Amts. Amts. 3Q19 3Q18 3Q19 3Q18 3Q19 3Q18 3Q19 3Q18 C&I $5,891.0 $5,006.2 $4,381.2 $3,929.8 $834.1 $679.4 $675.7 $397.0 CRE – Owner Occ. 2,595.8 2,688.2 1,477.5 1,5
Slide 27: Balance Sheet – Loan Portfolio
Balance Sheet – Loan Portfolio TOTAL PINNACLE C&I & O/O CRE CRE & CONSTRUCTION OTHER LOANS* Amts. Amts. Amts. Amts. Amts. Amts. Amts. Amts. 3Q19 3Q18 3Q19 3Q18 3Q19 3Q18 3Q19 3Q18 Nashville $6,237.8 $6,054.9 $2,901.2 $2,992.9 $2,246.6 $2,193.0 $1,089.9 $869.0 Knoxville 1,696.4 1,530.8 1,031.1 915.8
Slide 28: Balance Sheet – Loan Portfolio
Balance Sheet – Loan Portfolio Amts. % Amts. % Amts. % Amts. % 3Q19 3Q19 2Q19 2Q19 3Q18 3Q18 3Q17 3Q17 Residential – Spec $360.0 1.9% $350.4 1.9% $321.6 1.8% $253.3 1.7% Residential – Custom 129.1 0.7% 129.5 0.7% 146.0 0.8% 157.4 1.0% Residential – Condo 1.0 0.0% 0.7 0.0% - 0.0% 13.3 0.1% Commercial
Slide 29: Balance Sheet – Loan Portfolio
Balance Sheet – Loan Portfolio TOTAL PINNACLE TENNESSEE LOANS CAROLINAS/VA LOANS OTHER UNIT LOANS Amts. Amts. Amts. Amts. Amts. Amts. Amts. Amts. 3Q19 3Q18 3Q19 3Q18 3Q19 3Q18 3Q19 3Q18 Residential – Spec $360.0 $321.6 $251.0 $232.2 $107.6 $89.4 $1.5 $0.0 Residential – Custom 129.1 146.0 76.6 96.9 5
Slide 30: Balance Sheet – Loan Portfolio
Balance Sheet – Loan Portfolio Total NOO and Multifamily Total Construction Total NOO and Construction Amts. Amts. Amts. Amts. Amts. Amts. Amts. Amts. Amts. 3Q19 2Q19 3Q18 3Q19 2Q19 3Q18 3Q19 2Q19 3Q18 Multifamily $669.7 $709.1 $708.8 $430.0 $319.2 $412.2 $1,099.7 $1,028.3 $1,121.0 Hospitality 782.1
Slide 31: Balance Sheet – Loan Portfolio
Balance Sheet – Loan Portfolio Balance Sheet – Loan Portfolio Net Commercial Loan Charge Offs by Loan Type Net Consumer Loan Charge Offs by Loan Type 0.30% 8.00% 7.00% 0.20% 6.00% 0.10% 5.00% 0.00% 4.00% -0.10% 3.00% 2.00% -0.20% 1.00% -0.30% 0.00% -0.40% -1.00% CRE Construction C&I Net commercial c
Slide 32: Balance Sheet – Loan Portfolio
Balance Sheet – Loan Portfolio Description 3Q19 2Q19 1Q19 4Q18 3Q18 2Q18 Loans secured by real estate: Construction, land development, and other loans: 1-4 family residential construction loans $575,975 $564,339 $575,753 $541,253 $523,300 $488,893 Other construction loans and all land development an
Slide 33: Balance Sheet – Deposit Portfolio
Balance Sheet – Deposit Portfolio TOTAL DEPOSITS CORE DEPOSITS NONCORE DEPOSITS PUBLIC FUNDS and OTHER TOTAL PINNACLE TRANSACTION AND MMDA CDs DEPOSITS 3Q19 3Q18 3Q19 3Q18 3Q19 3Q18 3Q19 3Q18 Nashville $7,716.1 $7,108.8 $6,855.3 $6,357.3 $561.6 $478.5 $299.2 $273.0 Knoxville 1,647.0 1,407.0 1,485.6
Slide 34: Balance Sheet – Bond Portfolio
Balance Sheet – Bond Portfolio Conservative bond portfolio Portfolio: September 30, 2019 Total Investments $3.583 billion Net Unrealized Gain (Loss) $43.1 million 3% 2% Quarter Duration Avg. Yield- TE 3Q19 4.4% 3.0% 2Q19 4.1% 3.2% 33% 1Q19 3.7% 3.4% 4Q18 3.6% 3.2% 52% 3Q18 4.4% 3.1% 2Q18 3.9% 2.9% 5
Slide 35: Asset Quality
Asset Quality AS A % OF TOTAL AS A % OF TOTAL AS A % OF TOTAL (000S) September 30, 2019 June 30, 2019 September 30, 2018 LOANS LOANS LOANS Past Due Loans (*) Nonaccrual loans $39,548 0.20% $41,282 0.22% $23,268 0.13% Accruing loans 45,591 0.24% 40,199 0.21% 43,991 0.25% Total past due $85,139 0.44%
Slide 36: Operating Leverage
Operating Leverage 3Q19 2Q19 1Q19 4Q18 3Q18 2Q18 1Q18 4Q17 3Q17 Service charges $10,193 $8,940 $8,542 $9,754 $9,972 $8,456 $7,905 $8,799 $8,695 Investment services 6,270 5,868 5,468 6,168 5,450 5,112 5,255 4,858 4,194 Insurance commissions 2,252 2,147 2,928 2,038 2,126 2,048 3,119 1,961 2,124 Gain o
Slide 37: Operating Leverage
Operating Leverage 3Q19 2Q19 1Q19 4Q18 3Q18 2Q18 1Q18 4Q17 3Q17 Salaries and employee benefits: Salaries $47,369 $44,625 $45,056 $41,965 $41,024 $39,136 $39,104 $39,950 $41,252 Commissions 3,637 3,224 3,140 3,456 3,011 3,148 3,029 2,045 2,026 Cash and equity incentives 23,631 16,159 11,163 18,082 14
Slide 38: Income Statement – Discount Accretion, Income Tax Rate and Share Repurchase Program
Income Statement – Discount Accretion, Income Tax Rate and Share Repurchase Program Actual/Anticipated Discount Accretion Through Dec 2019 (in thousands) Core Income Tax Effective Tax Rate Trends Share Repurchase Program $25,000 45.00% 40.00% 3Q19 2Q19 1Q19 4Q18 $20,000 # of shares 199,032 130,888 5
Slide 39: Income Statement – Mortgage Volumes
Income Statement – Mortgage Volumes $325,000 6.00% $275,000 5.00% $225,000 4.00% $175,000 3.00% $125,000 2.00% $75,000 1.00% $25,000 0.00% Purchase Money Refinance Gross fees as a % of loans originated 39
Slide 40: Income Statement – Reconciliation of Non-GAAP Financial Measures
Income Statement – Reconciliation of Non-GAAP Financial Measures 40
Slide 41: Income Statement – Reconciliation of Non-GAAP Financial Measures
Income Statement – Reconciliation of Non-GAAP Financial Measures 41
Slide 42: Income Statement – Reconciliation of Non-GAAP Financial Measures
Income Statement – Reconciliation of Non-GAAP Financial Measures 42
Slide 43: Peer Group
Peer Group Institution Name Ticker City, State Pinnacle Financial Partners PNFP Nashville, TN Associated Banc-Corp ASB Green Bay, WI BancorpSouth, Inc. BXS Tupelo, MS Bank of the Ozarks, Inc. OZRK Little Rock, AR Chemical Financial Corporation CHFC Midland, MI Cullen/Frost Bankers, Inc. CFR San Anto
Slide 44: Investor Call Third Quarter 2019
Investor Call THIRD QUARTER 2019 M. TERRY TURNER, PRESIDENT AND CEO HAROLD R. CARPENTER, EVP AND CFO
Pinnacle Financial Partners — Q3 2019 Earnings Presentation on 6ix