Pinnacle Financial Partners, Inc. · NYSE:PNFP
Pinnacle Financial Partners — Q4 2012 Earnings Presentation
59 slides from Pinnacle Financial Partners's earnings presentation, Jan 16, 2013
Slide 1: Fourth Quarter 2012 Investor Call
Fourth Quarter 2012 Investor Call Terry Turner, President and CEO Harold Carpenter, EVP and CFO January 16, 2013
Slide 2: Safe Harbor Statements
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 “expec
Slide 3: Delivering Results
Delivering Results 4Q results matched previous guidance • Continued progress on asset quality metrics • Continued loan growth 3
Slide 4: Delivering Results: Asset quality continued to improve
Delivering Results Asset quality continued to improve Linked Li k d Qt Qtr Year over Y Consecutive C ti Change Year Change Qtrs. of Progress Credit losses (NCO (NCO’ss + ORE expense) (28 8%) (28.8%) (66 5%) (66.5%) 10 NPLs (37.6%) (52.3%) 11 NPAs (29.1%) (52.7%) 10 Classified loans (8.3%) (27.2%) 10
Slide 5: Reduction of NPAs and increased reserve coverage continued
Delivering Results Reduction of NPA’s and increased reserve coverage continued $70.0 $ $140.0 $ $90 $ 333% $132.4 304.2% $80 300% Total Nonperfforming loans (in millions) $60.0 $120.0 267% nflows and Dispositions (in milllions) $70 $50.0 $100.0 233% $60 owance to NPL’s NPA Balances 200% $40.0 $80.0
Slide 6: Core earnings capacity continued to expand
Delivering Results Core earnings capacity continued to expand Linked Qtr Quarterly Year Change g over Year Change Total loans 5.3% 12.8% C&I & and d owner occupied i d CRE loans l 8.5% % 18.1% % Avg. noninterest‐bearing deposits 22.4% 38.7% Net interest income 3.2% 7.5% Net interest margin 0.5% 4.1%
Slide 7: Net interest income and margin continued to expand
Fourth Quarter 2012 Highlights Net interest income and margin continued to expand Key Revenue Drivers: • Higher loan volumes N t Interest Net I t t Margin M i • Reduced funding costs with improving 3.90% 3.80% deposit mix 3.76% 3.78% 3.80% • FHLB restructuring 3.74% 3.70% (in millions) Net Interest
Slide 8: Loan volumes grew meaningfully; yields held up
Fourth Quarter 2012 Highlights Loan volumes grew meaningfully; yields held up $3,580 $3,600 $ , 6.00% $3,489 $3,500 5.60% $3 403 $3,403 $3,400 5.20% Averaage Loans Loan Yields 4.88% 4.87% ((millions) 4.78% 4.74% 4.74% 4.65% $3,300 4.64% 4.80% 4.62% $3,212 $3,262 $3,280 $3,207 $3,191 $3,200 4.40% $3,
Slide 9: Reduction in cost of deposits drove margin expansion
Fourth Quarter 2012 Highlights Reduction in cost of deposits drove margin expansion 1.25% $3 $3,750 0 $3,746 $3,650 1.10% 1.01% posits (milliions) $3,550 %) osit costs (% 0.95% 34 $3,53 $3,450 $3,459 $3,397 $3,350 0.80% $3,386 $3,250 Depo 0 65% 0.65% 6 $3,236 Avgg. Core Dep $3,150 $3,141 $3,113 $3,0
Slide 10: Cost of deposits was enhanced by DDA growth
Fourth Quarter 2012 Highlights Cost of deposits was enhanced by DDA growth $1,200 $ , 60,000 , 47,253 millions) $1,000 50,000 unts er of Accou $800 40 000 40,000 DDA Balaances (in m 36,781 $600 30,000 Numbe $400 20,000 $200 10,000 $0 ‐ Business Consumer Total Accounts 10
Slide 11: Credit costs continued to decline
Fourth Quarter 2012 Highlights Credit costs continued to decline in concert with NPA reductions $16 $16.0 0 $14.0 $12 0 $12.0 $4 3 $4.3 Credit Losses (in millions) $3.8 $10.0 $8 0 $8.0 $5.1 $5. $4.2 $6.0 $4.7 $9.7 $4 0 $4.0 $8.6 $ $3 1 $3.1 $5.7 $6.3 $2.4 $1.4 $2.0 $3.6 $2.4 $1.9 $2.2 $‐ 1Q11 2Q11 3
Slide 12: Core fees progressed to highest level in firm history
Fourth Quarter 2012 Highlights Core fees progressed to highest level in firm history $4,500 $ , Year‐over‐year Year over year Increases • Deposit & Interchange‐ $4,000 7.9% $3,500 •Wealth Management‐ $3,000 10 5% 10.5% $ millions) $2,500 •Mortgage, net of commission – 62.1% $2,000 ($ $1,500 $1,000 $
Slide 13: Operating leverage continued to expand
Fourth Quarter 2012 Highlights Operating leverage continued to expand 4Q12 3Q12 2Q12 1Q12 4Q11 Salaries and benefits $19,556 $19,470 $19,237 $19,793 $18,963 Equipment and occupancy 5,202 5,156 5,053 4,374 4,977 Other real estate owned 1,365 2,399 3,104 4,676 4,193 Marketing and Bus. Dev. 1,276 835 7
Slide 14: Adjusted PTPP expanded 17.5% over prior year
Fourth Quarter 2012 Highlights Adjusted PTPP expanded 17.5% in 4Q12 over the same period prior year (000’ ) (000’s) 4Q12 3Q12 2Q12 1Q12 4Q11 Net interest income $42,243 $40,932 $40,185 $39,504 $39,293 Total noninterest income 13,108 10,430 9,910 9,949 9,727 Total revenue 55 351 55,351 51 362 51,362
Slide 15: Progressing toward long-term profitability targets
Compelling Business Case Pinnacle is progressing toward its long‐term profitability targets Asset growth is the key Ratio PNFP PNFP PNFP PNFP PNFP 1Q12 2Q12 3Q12 4Q12 Long‐term Targets NIM 3.74% 3.76% 3.78% 3.80% 3.70%‐3.90% Net Charge‐offs 0.44% 0.28% 0.22% 0.24% 0.20%‐0.35% Noninterest Income / 0.
Slide 16: Existing lenders have incremental capacity to grow loans
Compelling Business Case Existing lenders have incremental capacity to take share and grow loans 2012 ‐ 2014 Anticipated Net Loan Growth 12.8% AGR Previously Reported Growth YTD 2012 $420.8 Million 2012 Current Quarter Growth 11.5% CAGR FA Capacity $1.27 Billion Capacity $1 27 Billi $1.27 Billion TT
Slide 17: Record loan originations outpaced pay downs
Compelling Business Case Record loan originations outpaced substantial pay downs $300,000 $250,000 es Loaan Volume $200 000 $200,000 (($ thousands) $150,000 $100,000 $50,000 $0 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 New loans Pay offs 17
Slide 18: Margin outlook for 2013
Compelling Business Case Margin outlook for 2013 contains opportunities and threats 4Q 2012 Net Interest Margin 3.80% Opportunities: 1. Loan growth 0.01% to 0.04% 2. Continued reduction in COF 0.02 to 0.05% 3. FHLB restructuring 0.01% to 0.04% Threats: 4. Market pressures on earnings asset yields (0
Slide 19: Elevated Tangible Common Requires Deployment
Compelling Business Case Elevated Tangible Common Requires Deployment Tangible Common Ratio 8.70% 9.20% 8.97% 8.80% 8.40% Return on Tangible Common Equity 4Q11 1Q12 2Q12 3Q12 4Q12 10.76% 10.85% 7 58% 7.58% 6.13% 4.93% 4Q11 1Q12 2Q12 3Q12 4Q12 19
Slide 20: Management's Focus for 2013
Compelling Business Case Management’s Focus for 2013 • Continued progress toward achievement of long‐ term financial metrics • Continued loan growth • Continued progress on asset quality metrics 20
Slide 21: Q&A – Fourth Quarter 2012 Investor Call
Q&A – Fourth Quarter 2012 Investor Call Terry Turner, President and CEO Harold Carpenter, EVP and CFO January 16, 2013 21
Slide 22: Supplemental Information
Supplemental Information Fourth Quarter 2012 Investor Call Terry Turner, President and CEO Harold Carpenter, EVP and CFO January 16, 2013 22
Slide 23: Supplemental Information Contents
Supplemental Information Chart • Balance Sheet 24 • Asset Quality 34 • Income Statement 42 • Economic Conditions & Other 47 • Pinnacle Financial Partners profile 54 23
Slide 24: Balance Sheet
Supplemental Information Balance Sheet 24
Slide 25: Knoxville provides disproportionate percentage of loan growth
Balance Sheet Knoxville provides disproportionate percentage of loan growth $3,500 $ 3,071 3 071 $ 2,745 $3,000 $2,500 Nashville loans up 12.1% in last twelve months ousands) $2,000 $1,500 (in tho Knoxville loans up 16.4% in last twelve months $1,000 $ 642 $ 472 $500 $0 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12
Slide 26: Unfunded commitments are growing
Balance Sheet Unfunded commitments are growing, represent volume opportunity $2,500 $ , 60.00% 59.4% 57.3% 56.8% $2,000 56.4% 58.00% 57.3% $865 55.6% 55.5% 56.2% $815 5 $ mmitmentss $787 7 $808 $779 $747 $685 $715 $1,500 56.00% (miillions) Total Com $1,000 54.00% $1,138 $1,055 $1,054 $1,009 $1,000 $
Slide 27: Loan portfolio components are within targeted ranges
Balance Sheet Loan portfolio components are within targeted ranges Amts. %’s Amts. %’s Amts. %’s Amts. %’s 4Q12 4Q12 3Q12 3Q12 4Q11 4Q11 4Q10 4Q10 C&D and Land $313.6 8.5% $312.8 8.9% $274.2 8.3% $331.3 10.3% Consumer RE 679.9 18.3% 680.9 19.3% 695.8 21.1% 705.5 22.0% CRE – Owner Occ. 594.4 16.0% 60
Slide 28: Experiencing growth in commercial C&D lending
Balance Sheet Experiencing growth in commercial C&D lending Amts. %’s(*) Amts. %’s(*) Amts. %’s(*) Amts. %’s(*) 4Q12 4Q12 3Q12 3Q12 4Q11 4Q11 4Q10 4Q10 Residential – Spec $ 17 17.5 5 0 5% 0.5% $ 13 13.6 6 0 4% 0.4% $ 12 12.4 4 0 4% 0.4% $ 19 19.9 9 0 6% 0.6% Residential – Custom 16.6 0.4% 14.5 0.4%
Slide 29: The C&I loan portfolio is highly diversified
Balance Sheet The C&I loan portfolio is highly diversified Accomodation and Food Services, 1.3% Administrative & Support & Utilities, Utilities Waste Management & 0.1% Remediation Services, 2.0% Transportation & Wholesale Warehousing, 2.6% Trade, 3.5% Arts, Entertainment & Recreation, 0.6% Construct
Slide 30: Cash flows from bonds used to fund higher yielding loans
Balance Sheet Cash flows from bonds were used to help fund higher yielding loans 3.67% $1,050 3.70% 3.58% 3.54% $1,000 3.50% $1,010 3.31% $973 3.26% 3.27% $950 3 19% 3.19% 3.30% $ 3.16% $940 Average Securities $924 $900 3.10% elds (%) $876 $850 2.90% 0’s) (000 Bond Yie $819 $800 2.70% $750 2.50% $76
Slide 31: Conservative portfolio well positioned for rising rates
Balance Sheet Conservative portfolio is well positioned for eventual rising rates Asset‐ Corporates, backed 1.5% Securities, 2.7% QTD Bond Activity (millions) QTD AVG rate Purchases $ 179.2 2.11% Municipals, Sales ($ 153.2) 1.43% 26.5% MBS pass Mat/Calls ($ 6.6) 2.95% thru, 47.3% Pre‐pays ($ 41.8) 2
Slide 32: The municipal portfolio contains minimal risk
Balance Sheet The municipal portfolio contains minimal risk Municipal Bond Portfolio Statistics Muni Allocation % 4Q12 4Q11 Weighted Average Life 4.3 years 6.1 years % State Agency Holdings 5.03% 4.84% 18% Tax equivalent yield 5.71% 5.75% 82% FMV as % of Cost 109.3% 109.1% All municipals are “A” rat
Slide 33: Limited dependence on non-relationship funding
Balance Sheet PNFP has limited dependence on non‐relationship funding 12/31/2012 Percent 12/31/2011 Percent Core Funding: Transaction accounts 1,746,476 40.50% 1,354,582 32.96% Money Market accounts 1,662,256 38.55% 1,585,260 38.58% Time deposits less than $250,000 467,013 10.83% 501,705 12.21% Tota
Slide 34: Asset Quality
Supplemental Information Asset Quality 34
Slide 35: Past due loans remain very low
Asset Quality Past due loans remain very low December 31,, As a % December 31,, As a % 2012 of total 2011 of total (000’s) loans loans Past Due Loans (*) Managed by special assets: Nonaccrual loans $13,455 0.36% $22,339 0.68% Accruingg loans 7,944 , 0.21% 7,437 , 0.23% Managed by relationship manage
Slide 36: Potential problem loans continued to decline
Asset Quality Percentage of potential problem loans continued to decline 10.0% oans 9.30% oans/Total lo 9 0% 9.0% 8.63% 8 64% 8.64% 8.0% 7.24% 7.65% 7.18% 7.0% 5 78% 5.78% 6 0% 6.0% Potential Problem lo 5.04% 5.0% 4.12% 4.09% 3.78% 4.0% 3.13% 3.49% 3.05% 3 0% 3.0% 2.0% 1.0% 0.0% 0 0% Note: Classifie
Slide 37: Classified assets decreased in 4Q12
Asset Quality Classified assets decreased in 4Q12 (in thousands) Balances Balances Balances Dec. 31, 2012 Sept. 30, 2012 Dec. 31, 2011 Classified loans and ORE: ‐ Substandard commercial loans $ 144,684 $ 157,483 $ 197,581 ‐ Doubtful commercial loans 33 384 1,193 ‐ Other impaired loans 2,083 3,579 2,
Slide 38: NPLs continued to decline ahead of peers
Asset Quality NPLs continued to decline ahead of peers NPLs Expressed as a % of Total Loans within each Category Peer PNFP PNFP PNFP PNFP PNFP NPLs and NPLs and NPLs and NPLs and NPLs and NPLs and > 90 days > 90 days > 90 days > 90 days > 90 days > 90 days (*) 4Q12 3Q12 2Q12 1Q12 4Q11 3Q12 Const. an
Slide 39: ORE is 44.9% of NPAs
Asset Quality ORE is 44.9% of NPAs with resolution in bank’s control Balances Fair value as a % Average Dec. 31, 2012 of book value* Appraisal Age in (dollars in thousands) Months ORE categories: Developed lots $ 1,835 217.0% 7.05 Undeveloped land 13,285 143.1% 4.73 Other 3 460 3,460 167 0% 167.0% 1
Slide 40: OREO valuations remain below actual results
Asset Quality OREO valuations remain below actual results ORE Dispositions (*) thru ORE Balance at December 31, 2012 September 30, 2012 Loan balances prior to charge offs 100 0% 100.0% 100 0% 100.0% Charge off’s prior to foreclosure 18.2% 25.6% Balance @ foreclosure 81.8% 74.4% Valuation losses whil
Slide 41: OREO disposition plans suggest limited unresolved issues
Asset Quality OREO disposition plans suggest limited unresolved issues (dollars in thousands) Balances Near‐term Active Other Dec. 31, 2012 liquidation Projects Properties (1) (2) (3) ORE categories: Developed lots $ 1,835 $ 315 $ 1,520 $ ‐ Undeveloped land 13,285 543 10,606 2,136 Other 3 460 3,460
Slide 42: Income Statement
Supplemental Information Income Statement 42
Slide 43: Core fees progressed to highest level in firm history
Income Statement Core fees progressed to highest level in firm history 4Q12 3Q12 2Q12 1Q12 4Q11 Service charges $2,623 $ 2,532 $ 2,439 $ 2,324 $ 2,291 Investment services 2 051 2,051 1 677 1,677 1 611 1,611 1 581 1,581 1 402 1,402 Insurance commissions 1,045 987 1,141 1,288 944 Gain on mortgage loan
Slide 44: Mortgage originations continued to grow
Income Statement Mortgage originations continued to grow $2,500 $150,000 Gain on mortgages ssold, net $2,000 $120,000 000s’) Grosss Loans Sold (0 $1,500 $90,000 (000’s) $1,000 $60,000 $500 $30,000 $‐ $‐ Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Gross Loans Sold, net Gain on Mor
Slide 45: PNFP continues to improve operating leverage
Income Statement PNFP continues to improve operating leverage 4Q12 3Q12 2Q12 1Q12 4Q11 Net interest income $42,243 $40,932 $40,185 $39,504 $39,293 Total non‐interest income $13,108 $10,430 $9,909 $9,949 $9,727 Less: Securities (gains) losses (1,988) 50 (99) (113) (133) Non‐interest income, excluding
Slide 46: Expense to total average assets
Income Statement 4Q12 3Q12 2Q12 1Q12 FY 2011 4Q11 Total non non‐interest interest expense $34 851 $34,851 $33 578 $33,578 $33 915 $33,915 $35 820 $35,820 $139 107 $139,107 $34 374 $34,374 Less: ORE expenses 1,365 2,399 3,104 4,676 17,432 4,193 Less: FHLB prepayment charges 2,092 ‐ ‐ ‐ ‐ ‐ p Non‐Inte
Slide 47: Economic Conditions & Other
Supplemental Information EEconomic i Conditions C di i & Other 47
Slide 48: Job recovery outpaces the nation
Economic Conditions Nashville’s and Knoxville’s job recovery outpaces the nation • USA recovery of jobs lost since peak employment in 2008 has amounted to 51.0% • Nashville has replaced 81% while Knoxville has replaced 98% Source: BERC – MTSU & Bureau of Labor Statistics 48
Slide 49: Unemployment rate improving
Economic Conditions Nashville’s and Knoxville’s unemployment rate improving Unemployment Rates Seasonally Adjusted • Both Nashville and 12.0 Knoxville continue to outperform the nation 10.0 at 6.7% and 6.6%, respectively. 8.0 • State of Tennessee unemployment 6.0 continues i to National Tennessee ap
Slide 50: Nashville's Real Estate Market Continues to Improve
Economic Conditions Nashville’s Real Estate Market Continues to Improve 4Q Q 2012 4Q Q 2011 % Change g Avg. Qtrly. Median Home $181.0 $166.0 9.0% Price Quarterly 5,506 4,268 29.0% Closings Quarter end 9 115 9,115 10 574 10,574 (13 8%) (13.8%) Inventory Months of 5.1 7.0 (27.1%) Inventory (*) Source:
Slide 51: PNFP serves large, high-growth markets
Economic Conditions PNFP serves large, high‐growth markets Area Total Population Projected Median HH Projected Population Change Population HH Income Income HH Income 2011 2000‐2011 Change 2011 Actual Change Change Actual (%) 2011‐2016 ($) 2000‐2010 2011‐2016 (%) (%) (%) Davidson County 634,152 11.2
Slide 52: Nashville's commercial vacancy rates indicate healthy market
Economic Conditions Nashville’s commercial vacancy rates indicate a healthy market Nashville CRE National CRE Vacancy Rates Vacancy Rates Q4 YE 2011 (*) YE 2010 (*) YE 2009 YE 2008 YE 2007 Q4 2012(*) (**) (**) (**) 2012 (*) Industrial / 9.1% 10.1% 10.2% 10.6% 9.6% 8.9% 9.1% Warehouse Multifamily** 7
Slide 53: Nashville and Knoxville are healthy business markets
Economic Conditions Nashville and Knoxville are healthy business markets NASHVILLE “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 l
Slide 54: Pinnacle Financial Partners Profile
Supplemental Information Pi Pinnacle l Financial Fi i l Partners P Profile P fil 54
Slide 55: Associate engagement drives customer satisfaction
PNFP Profile Associate engagement drives customer satisfaction 5 00 5.00 100% er Satisfactiion Scores ent Scores 4.50 98% 4.00 96% e Engageme 3.50 94% 3.00 92% 2.50 90% Custome Associate 2.00 88% 1.50 86% 1.00 84% Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 C t Cu
Slide 56: Proven experience in market share take-away
PNFP Profile PNFP has proven experience in market share take‐away Nashville‐Davidson‐Rutherford MSA Knoxville MSA Rank Holding Market Market Change Holding Market Market Change Company Share Share in Company Share Share in 6/30/12 6/30/00 Share 6/30/12 6/30/07 Share 1 Regions 18.1% 30.5% ‐12.4% Firs
Slide 57: PNFP operates in two great banking markets
PNFP Profile PNFP operates in two great banking markets Headquarters: Nashville, TN Offices: 29 in 8 Middle‐TN counties/3 in Knoxville Founded: 2000 Avg. daily trading vol.: 143,349 shares Total assets: $ 5.042 Billion (12/31/12) % Institutional ownership: 65.3% Shareholders’ equity: $ 679.1 Million
Slide 58: Extraordinarily experienced management team
PNFP Profile PNFP has an extraordinarily experienced management team Name Title Age Years in Years at Banking Pinnacle Industry M. Terry Turner President and Chief Executive Officer 58 33 12 Robert A. McCabe,, Jr. Chairman of the Board 62 36 12 Hugh M. Queener Chief Administrative Officer 57 25 12 H
Slide 59: Fourth Quarter 2012 Investor Call
Fourth Quarter 2012 Investor Call Terry Turner, President and CEO Harold Carpenter, EVP and CFO January 16, 2013
Pinnacle Financial Partners — Q4 2012 Earnings Presentation on 6ix