Pinnacle Financial Partners, Inc. · NYSE:PNFP
Pinnacle Financial Partners — Q2 2019 Earnings Presentation
47 slides from Pinnacle Financial Partners's earnings presentation, Jul 17, 2019
Slide 1: Investor Call Second Quarter 2019
Investor Call SECOND QUARTER 2019 JULY 17, 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
Slide 3: Safe Harbor Statements: Non-GAAP Financial Matters
Safe Harbor Statements Non-GAAP Financial Matters This release 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 relat
Slide 4: 2Q19 Summary Results of Key GAAP Measures
2Q19 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: 2Q19 Summary Results of Key Non-GAAP Measures
2Q19 Summary Results of Key Non-GAAP Measures Total Revenues FD EPS* $1.42 Tangible Book Value per Share** $259,600 $30.26 $229,633 $1.15 CAGR 31.1% $141,684 CAGR 22.3% $0.84 CAGR 15.1% $25.28 $22.58 $107,756 $0.75 $19.58 $71,293 $0.64 $16.56 $59,820 $0.49 $14.53 Total Loans $18,814 Total Core Depos
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. 40 Best Workplaces for Parents, FORTUNE • No. 2 Best Workplaces in Financial Services and
Slide 7: PNFP's Hiring and Engagement Model Effectively Transformed BNC
PNFP’s Hiring and Engagement Model Effectively Transformed BNC PNFP engaged BNC associates, exceeded its hiring plan and transformed the growth model Plan: Continue High Growth CRE and Bolt- Execution: Lever PNFP’s Ongoing Result: Continued High Growth in CRE and on C&I Franchise Recruitment Compete
Slide 8: BHG has Proven to be an Outstanding Investment
BHG has Proven to be an Outstanding Investment PNFP / BHG partnership continues to provide meaningful shareholder value Bankers’ Healthcare Group reports record results in 2Q19 Strengthened business model that has performed extremely well over time - Sophisticated analytics contribute to growth and
Slide 9: 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 vs. Peers $13.50 14.0% 13.0% 13.0% 13.0% 11.9% 11.9% $13.00 11.3% $12.92 12.0% BNCN Deal Announced $12.42 Y/Y Revenue per Share Growth $12.50 1
Slide 10: Loan & Deposit Growth are Keys: Average Loans
Loan & Deposit Growth are Keys to Top and Bottom Line Growth Loan growth remained strong in 2Q19 $20,000 5.50% 5.22% Annual Organic Loan Growth $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 18.0% $15,017 $14,000 1
Slide 11: 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 30% $200.0 Purchase Accounting Accretion 14.00% $190.0 12.00% 25% Quarterly Loan Growth % - Annualized 24.34% $180.0 10.00% Net Intere
Slide 12: Funding loan growth as efficiently as possible
Loan & Deposit Growth are Keys to Top and Bottom Line Growth Funding loan growth as efficiently as possible is the key to our growth June 30, June 30, Mar 31, Dec. 31, Deposit Rate 2019 2019 2019 2018 Annual Organic Deposit Growth Tranches % of Rates Rates Rates (excludes Day 1 merger impact) Totals
Slide 13: Net Interest Margin: Loan yields continue to hold
Net Interest Margin Influences Top and Bottom Line Growth Loan yields continue to hold during this volatile rate environment C&I CRE Construction All Loans At June 30, 2019 (*) LIBOR 24.1% Prime 32.3% 34.0% 0.0% 38.8% 35.6% T-Bill 46.3% 57.7% 1.4% 44.6% Fixed Rate <1Y 4.4% 29.8% Fixed Rate >1Y 1.1%
Slide 14: PNFP has taken actions to better position for declining rates
Net Interest Margin Influences Top and Bottom Line Growth PNFP has taken actions to better position for declining rates Actions taken in 2Q19 to lessen interest rate risk exposure during 2019: Unwound $900mm of fixed-to-floating loan interest rate swaps Purchased $1.3B of interest rate floors
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 Growth
Fee Income Growth Supports Ongoing Top and Bottom Line Growth PNFP continues to grow strategic fee businesses Deposit-Related Fees 1.20% (Service Charges, Interchange) $18,000 Yr/Yr Growth Income from Equity Method Investment (BHG) 16.4% $16,000 1.10% $30,000 Yr/Yr Growth $14,000 >200% $12,000 1.00%
Slide 17: BHG Continues to Outperform: Loan Originations
BHG Continues to Outperform Continuous improvements have resulted in increased loan originations Increased sophistication through enhanced analytics BHG Annual Loan Volume Originations results in greater demand for BHG’s products: Model Description Functionality Enhanced Credit Predicts probability
Slide 18: BHG Continues to Outperform: Loan Quality
BHG Continues to Outperform Continuous improvements have enhanced loan quality BHG Credit Segmentation 2001 Improved credit analytics resulting in 2002 2003 healthier borrower base 2004 2005 2006 2007 2008 2009 2010 BHG Credit Experience & Recourse Accrual 2011 2012 6.00% 5.00% 2013 2014 4.50% 2015
Slide 19: BHG Continues to Outperform: Auction Platform
BHG Continues to Outperform Strong demand among bank buyers on BHG’s proprietary auction platform Avg. Loan Rate for On-balance sheet loans As originations have increased: A. Auction placements have increased resulting in growing gain on sale (GOS) revenues B. BHG balance sheet has grown with higher
Slide 20: BHG Continues to Outperform: Auction Platform
BHG Continues to Outperform Strong demand among bank buyers on BHG’s proprietary auction platform YTD 2018 2019 # of individual Bank buyers 398 460 Gross yield to borrower 14.61% 14.66% BHG realized spread 9.23% 9.34% Source: BHG presentation to PNFP board of directors – June 2019 20
Slide 21: BHG Ongoing initiatives expected to fuel growth
BHG Continues to Outperform Ongoing initiatives are expected to continue to fuel growth More products, leverage platform for more opportunities: Products Description Customized score cards are providing opportunities to do business with Credit Expansion various other professions (lawyers, accountant
Slide 22: Expenses are Leveraged to Produce 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% $441.0 $400.0 $427.5 $424.9 $419.9 $412.8 $415.9 3Q17 to 2Q19 $393.1 $390.8 $300.0 (increase of $35,400/ associate) $200.0 $228.8 95% $216.9 3Q17 to 2Q1
Slide 23: Long-targeted top quartile profitability
PNFP’s has long-targeted top quartile profitability and consistently delivered Future targets adjusted to focus on critical return metrics ROAA* 1.60% 2Q19 1.50% Operating 2Q19 ACTUALS 1.40% 1.41% range ACTUALS (Non GAAP)* 1.30% 1.35% 1.20% 1.55% 1.54% 1.56% Return on Average 1.45% to 1.10% 1.35% 1.
Slide 24: 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** $1.42 $30.26 $1.15 CAGR 22.3% CAGR 15.1% $25.28 $0.84 $22.58 $0.75 $19.58 $0.64 $16.56 $0.49 $14.53 *: excluding merg
Slide 25: Outlook for 2019
Outlook for 2019 We remain committed to long-term shareholder value creation through top and bottom line growth 2019 Focus Items Low double-digit annualized loan growth Heavy emphasis on core deposit growth EPS growth in top quartile of peer group Long-term Shareholder Value Creation Thesis Hiring r
Slide 26: Supplemental Information
Supplemental Information Chart • Balance Sheet 27 • Asset Quality 38 • Income Statement 39 • Peer Group 46 26
Slide 27: Balance Sheet – Loan Portfolio
Balance Sheet – Loan Portfolio Amts. % Amts. % Amts. % Amts. % 2Q19 2Q19 1Q19 1Q19 2Q18 2Q18 2Q17 2Q17 C&I $5,795.1 30.8% $5,419.5 29.8% $4,821.3 28.3% $3,688.4 25.0% CRE – Owner Occ. 2,624.2 13.9% 2,617.5 14.4% 2,504.9 14.7% 2,368.7 16.0% Total C&I & O/O CRE $8,419.3 44.7% $8,037.0 44.2% $7,326.2 4
Slide 28: 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. 2Q19 2Q18 2Q19 2Q18 2Q19 2Q18 2Q19 2Q18 C&I $5,795.1 $4,821.3 $4,407.8 $3,829.8 $881.6 $616.7 $505.7 $374.8 CRE – Owner Occ. 2,624.2 2,504.9 1,517.8 1,5
Slide 29: 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. 2Q19 2Q18 2Q19 2Q18 2Q19 2Q18 2Q19 2Q18 Nashville $6,130.0 $6,030.1 $3,062.6 $2,924.0 $2,139.4 $2,253.1 $928.0 $853.0 Knoxville 1,641.6 1,483.5 996.2 887.1 473.
Slide 30: Balance Sheet – Loan Portfolio
Balance Sheet – Loan Portfolio Amts. % Amts. % Amts. % Amts. % 2Q19 2Q19 1Q19 1Q19 2Q18 2Q18 2Q17 2Q17 Residential – Spec $350.4 1.9% $355.2 2.0% $294.9 1.7% $243.0 1.6% Residential – Custom 129.5 0.7% 131.0 0.7% 137.6 0.8% 153.3 1.0% Residential – Condo 0.7 0.0% 0.2 0.0% 0.6 0.0% 11.8 0.1% Commerci
Slide 31: 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. 2Q19 2Q18 2Q19 2Q18 2Q19 2Q18 2Q19 2Q18 Residential – Spec $350.4 $294.9 $247.4 $218.8 $101.1 $75.7 $1.9 $0.4 Residential – Custom 129.5 137.6 79.7 88.8 4
Slide 32: 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. 2Q19 1Q19 2Q18 2Q19 1Q19 2Q18 2Q19 1Q19 2Q18 Multifamily $709.1 $693.7 $738.6 $319.2 $357.8 $405.0 $1,028.3 $1,051.5 $1,143.6 Hospitality 783.0
Slide 33: 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% 0.20% 7.00% 0.10% 6.00% 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 34: Balance Sheet – Loan Portfolio
Balance Sheet – Loan Portfolio Description 2Q19 1Q19 4Q18 3Q18 2Q18 1Q18 Loans secured by real estate: Construction, land development, and other loans: 1-4 family residential construction loans $564,339 $575,753 $541,253 $523,300 $488,893 $475,979 Other construction loans and all land development an
Slide 35: 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 2Q19 2Q18 2Q19 2Q18 2Q19 2Q18 2Q19 2Q18 Nashville $7,203.4 $6,641.1 $6,381.4 $5,961.2 $537.4 $433.5 $284.6 $246.4 Knoxville 1,670.6 1,361.7 1,550.0
Slide 36: Balance Sheet – Bond Portfolio
Balance Sheet – Bond Portfolio 4.00 40.00 Bond Portfolio Pricing 3.50 35.00 70% 3.00 30.00 65% 60% 2.50 25.00 % of Total Assets Bond Yields 2.00 20.00 40% 1.50 15.00 35% 30% 1.00 10.00 0.50 5.00 - - Dec. 2018 Mar. 2019 Jun. 2019 PNFP - Bond Yields Peer Median - Bond Yields Fixed Rate Variable Rate P
Slide 37: Balance Sheet – Bond Portfolio
Balance Sheet – Bond Portfolio Conservative bond portfolio Portfolio: June 30, 2019 Total Investments $3.447 billion Net Unrealized Gain (Loss) $18.1 million 2% 2% Quarter Duration Avg. Yield- TE 2Q19 4.1% 3.2% 1Q19 3.7% 3.4% 29% 4Q18 3.6% 3.2% 3Q18 4.4% 3.1% 52% 2Q18 3.9% 2.9% 5% 1Q18 3.5% 2.9% 10%
Slide 38: Asset Quality
Asset Quality AS A % OF TOTAL AS A % OF TOTAL AS A % OF TOTAL (000S) June 30, 2019 MAR. 31, 2019 June 30, 2018 LOANS LOANS LOANS Past Due Loans (*) Nonaccrual loans $41,282 0.22% $48,739 0.27% $16,438 0.10% Accruing loans 40,199 0.21% 40,556 0.22% 38,382 0.23% Total past due $81,481 0.43% $89,295 0.
Slide 39: Operating Leverage
Operating Leverage 2Q19 1Q19 4Q18 3Q18 2Q18 1Q18 4Q17 3Q17 2Q17 Service charges $8,940 $8,542 $9,754 $9,972 $8,456 $7,905 $8,799 $8,695 $7,612 Investment services 5,803 5,404 6,135 5,423 5,074 5,245 4,828 3,758 3,196 Insurance commissions 2,147 2,928 2,038 2,126 2,048 3,119 1,961 2,124 1,461 Gain on
Slide 40: Operating Leverage
Operating Leverage 2Q19 1Q19 4Q18 3Q18 2Q18 1Q18 4Q17 3Q17 2Q17 Salaries and employee benefits: Salaries $44,625 $45,056 $41,965 $41,024 $39,136 $39,104 $39,950 $41,252 $26,312 Commissions 3,224 3,140 3,456 3,011 3,148 3,029 2,045 2,026 1,831 Cash and equity incentives 16,159 11,163 18,082 14,505 11
Slide 41: Income Statement – Discount Accretion and Income Tax Rate Trends
Income Statement – Discount Accretion and Income Tax Rate Trends Core Income Tax Effective Tax Rate Trends Share Repurchase Program Actual/Anticipated Discount Accretion Through Dec 2019 (in thousands) 45.00% $25,000 40.00% 2Q19 1Q19 4Q18 $20,000 # of shares repurchased 130,888 543,585 405,200 35.00
Slide 42: 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 42
Slide 43: Income Statement – Reconciliation of Non-GAAP Financial Measures
Income Statement – Reconciliation of Non-GAAP Financial Measures 43
Slide 44: Income Statement – Reconciliation of Non-GAAP Financial Measures
Income Statement – Reconciliation of Non-GAAP Financial Measures 44
Slide 45: Income Statement – Reconciliation of Non-GAAP Financial Measures
Income Statement – Reconciliation of Non-GAAP Financial Measures 45
Slide 46: 2018 Peer Group
2018 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
Slide 47: Investor Call Second Quarter 2019
Investor Call SECOND QUARTER 2019 M. TERRY TURNER, PRESIDENT AND CEO HAROLD R. CARPENTER, EVP AND CFO
Pinnacle Financial Partners — Q2 2019 Earnings Presentation on 6ix