Pinnacle Financial Partners, Inc. · NYSE:PNFP
Pinnacle Financial Partners — Q2 2024 Earnings Presentation
56 slides from Pinnacle Financial Partners's earnings presentation, Jul 17, 2024
Slide 1: Investor Call Second Quarter 2024
Investor Call SECOND QUARTER 2024 JULY 17, 2024 Time: 8:30 AM CT Webcast: www.pnfp.com (investor relations) 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 presentation contains certain non-GAAP financial measures, including, without limitation, total revenues, net income to common shareholders, earnings per diluted common share, revenue per diluted common share, PPNR, efficiency ratio, noninterest
Slide 4: Shareholder Value Dashboard: 2Q24 GAAP Results
Shareholder Value Dashboard 2Q24 Summary Results of Key GAAP Measures Total Revenues FD EPS Net Income Available to Common Shareholders Total Loans Total Deposits Book Value per Common Share (millions) (in millions) Classified Asset Ratio NPA/ Loans & ORE NCOs PNFP’s Median Quarterly Performance of
Slide 5: Shareholder Value Dashboard: 2Q24 Non-GAAP Measures
Shareholder Value Dashboard 2Q24 Summary Results of Key Non-GAAP Measures Adjusted Pre-Tax Pre-Provision Total Revenues* FD EPS* Net Income* CAGR 12.0% CAGR 37.4% CAGR 9.8% Total Loans Total Core Deposits Tangible Book Value per Share** (millions) (millions) CAGR 15.0% CAGR 11.4% CAGR 10.9% Classifi
Slide 6: 2Q24 Financial Information
2Q24 Financial Information Our advantaged markets, vulnerable competitors, ability to attract talent and our relentless focus on a differentiated client experience lead to resilience even in challenging periods like 2024. 6
Slide 7: Loan Volume Growth and Yield Improvement Bolster 2Q NII
Loan Volume Growth and Yield Improvement Bolster 2Q NII Linked-quarter annualized growth in average loans was 5.7% in Q2 Average Loan Growth and Yields Fixed Rate Loan Maturities / Cash flow $35,000 6.71% 7.00% $1,200 4.80% 6.50% $33,517 4.78% $33,042 $32,372 $30,000 4.75% $31,530 $1,000 $30,882 6.0
Slide 8: Deposit Growth Continued With No Elevation of Cost
Deposit Growth Continued With No Elevation of Cost Average deposit rates remain constant at 3.10%, equaling first quarter results Average Deposit Growth Quarterly Avg Deposit Rates and Cumulative Beta 3.10% $40,000 3.25% 3.50% 60.0% 56% 56% 56% 53% $39,454 3.00% Average Deposits (millions) $38,996 C
Slide 9: Net Interest Income and NIM Inflected in 2Q24
Our Ability to Grow Through the Challenging Operating Environment is Compelling Both NII and NIM appear to have “inflected” in 2Q24 Net Interest Income & NIM Quarterly Avg. FFS, IB Cash & Repos $350 3.75% $5,000 5.50% $4,500 5.00% Net Interest Inncome ($ in mil.) Average Balances ($ in mil.) $325 Av
Slide 10: Problem Loan Formation Remains Low
Problem Loan Formation Remains Low Problem loan metrics such as NPAs and classified assets remain near historically low long-term levels Net Charge Offs NPA/ Loans & ORE Highlights 0.33% 0.61% 0.58% • Most credit metrics continue to outperform 0.55% 0.27% 0.53% long-term historical averages in 2Q24
Slide 11: NOOCRE Portfolio Predominantly in High-Growth Southeastern Markets
NOOCRE Portfolio is Predominantly in High-Growth Southeastern US Markets Appetite for new NOOCRE remains limited and essentially unchanged from prior quarters Highlights 2Q 24 NOOCRE & Construction Balances / Total Loans • Over 84% of NOOCRE Portfolio is in 12.0% 11.2% Pinnacle’s attractive Southeas
Slide 12: Core Fee Income Continues Strong Growth in 2Q24
Core Fee Income Continues Strong Growth in 2Q24 PNFP continues emphasis on gathering more share of wallet from client base • Core fee categories of wealth management, service charges, Linked- Year-over- Quarter interchange, etc. reflect consistent revenue growth in 2Q24 over Annualized Year prior qu
Slide 13: Excluding Non-Recurring Expenses, 2Q24 Expense Results As Projected
Excluding Non-Recurring Expenses, 2Q24 Expense Results Were As Projected Second quarter expense includes $28.4 million in incremental charges for termination and other fees • Salaries and commissions reflect the impact of increased headcount Linked-Quarter Yr-over-Yr Annualized and merit raises whic
Slide 14: Tangible Book Value Growth Continued
Tangible Book Value Growth Continued One of PNFP’s fundamental operating principles is that TBV compounding creates long-term shareholder value Tangible Book Value per Focused on preserving and growing Common Share** TBV per common share – YTD growth $52.92 $48.85 2024* 6.0% $42.08 $39.77 $34.43 202
Slide 15: Bankers Healthcare Group
Bankers Healthcare Group BHG’s differentiated model has proven resilient with continued high-quality originations, loan sales and yield/spread premium. The gain on sale model continues to provide meaningful earnings to Pinnacle and is complemented by balance sheet spread income. Capital and reserve
Slide 16: BHG Credit Quality and Origination Volumes
BHG Credit Quality BHG Continues Continues to Leverage to its & Grow Impress Distribution Network Sophisticated BHG loans remain incredit scoring high demand models produce impressive results in 2Q24 • BHG’s origination volumes increased in Q2, while past Quarterly Origination & Placements ($mm) due
Slide 17: BHG Bank Auction Spreads and Buy Rates
BHG Bank BHG Credit Quality Auction Continues Spreads to Impress Widened to 8.7% Bank Buy Rates Havecredit Sophisticated Declinedscoring to 8.6% from Peak ofproduce models 8.9% in Q1 impressive results Bank Auction Platform Rates Borrower Coupon and Bank Buy Rates • Bank buy rates declined for the f
Slide 18: BHG Reserves Compare Favorably to Actual Losses
BHG Reserves Compare Favorably to Actual Losses Reserves Strengthened for Off B/S Loans while CECL Reserves lowered for On B/S Loans • Trailing 12-month losses for off-balance sheet loans total 4.7%. The Q2 Reserves vs. Actual Losses for Off B/S Loans (TTM) reserve for estimated loan substitutions a
Slide 19: BHG Financial Overview
BHG Financial Overview BHG continues to deliver positive earnings, with Q2 income to PNFP of $18.7 mm, above Q1 2024 • BHG provides loans in as little as 3 days from application Origination Volume ($bn) to funding. $6.0 • A truly diversified funding strategy creates ample liquidity to fund loan orig
Slide 20: Shareholder Value for Bulls and Bears
Shareholder Value for Bulls and Bears Economic fears and uncertainties have made it difficult for investors to own bank stocks. But PNFP’s obsession with workplace culture has led to a remarkably consistent ability to attract talent and, therefore, clients. PNFP’s demonstrably differentiated service
Slide 21: We Have Built a Sustainable Competitive Advantage: Revenue Hires
We Have Built a Sustainable Competitive Advantage Our ability to attract and retain “market best” RMs is unparalleled 2020 - #14 Revenue Hires 200 2021 - #26 180* 150 2022 - #28 147 2023 - #24 120 100 107 2024 - #11 90 89 50 0 2020 2021 2022 2023 2024 *: Forecast of 180 revenue producers for the ful
Slide 22: Sustainable Competitive Advantage: Client Experience and NPS
We Have Experience The Client Built a Sustainable Competitive has been Built Advantage on the Associate Experience The workplace Pinnacle has theadvantage has resulted best NPS among in a distinctive consumers client of all the top experience 50 banks in the country J.D. Power Net Promoter Score (NP
Slide 23: Sustainable Competitive Advantage: Dominant Client Experience
We Have Built a Sustainable Competitive Advantage The thoroughness of PNFP’s dominant client experience would be hard to unseat Level of Trust Digital Channels 791 780 800 743 733 800 747 742 750 712 704 725 722 720 713 712 694 685 680 679 750 711 710 707 706 706 705 700 699 698 697 694 692 689 687
Slide 24: Markets + Competitive Advantage = Compounded EPS, TBV
We Have Built a Sustainable Competitive Advantage Markets + Competitive Advantage = Compounded EPS, TBV Despite P/E contraction, compounding EPS lead to top quartile TSR Total Shareholder Return (10 years) 160.0% 140.0% 120.0% 100.0% 80.0% 60.0% 40.0% 20.0% 0.0% WTFC CBSH PNFP SNV ZION WBS FULT FHN
Slide 25: 2Q24 Results Keep Us Optimistic About 2024
All in, 2Q24 Results Keep Us Optimistic About 2024 PNFP adjusting outlook for several line items Previous 2024 Current 2024 Outlook (as of July 17, 2024) Outlook (as of 2023 Actual Results April 23, 2024) Y/Y EOP Loan Y/Y growth of 9% to Our current estimate is that EOP loan growth for 2024 will be
Slide 26: Q&A
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Slide 27: Supplemental Information
Supplemental Information Slide # • Balance Sheet 28 • Income Statement 48 • BHG 50 • Non-GAAP Reconciliation 53 • Peer Group 55 27
Slide 28: Balance Sheet – Loan Portfolio
Balance Sheet – Loan Portfolio Net Loan Growth – YTD 2Q24 – Strategic Decisions: • Strategic Expansion - $972 million • Jacksonville, Atlanta, DC, Alabama, Kentucky, Franchise Finance, Equipment Finance • Recruiting Impact - $265 million • New RMs hired in past 3.0 years other than in our strategic
Slide 29: Balance Sheet – Loan Portfolio Segments
Balance Sheet – Loan Portfolio Segments ($ in millions) Amts. % Amts. % Amts. % Amts. % 2Q24 2Q24 1Q24 1Q24 2Q23 2Q23 2Q22 2Q22 C&I $12,328.6 36.5% $11,893.2 35.9% $10,983.8 35.3% $9,295.8 35.3% CRE – Owner Occ. 4,217.4 12.5% 4,045.0 12.2% 3,845.4 12.3% 3,243.0 12.3% Total C&I & O/O CRE $16,546.0 49
Slide 30: Loan Portfolio – Market Segmentation
Balance Sheet – Loan Portfolio – Market Segmentation ($ in millions) TOTAL PINNACLE C&I & O/O CRE CRE & CONSTRUCTION OTHER LOANS* Amts. Amts. Amts. Amts. Amts. Amts. Amts. Amts. 2Q24 2Q23 2Q24 2Q23 2Q24 2Q23 2Q24 2Q23 Nashville $8,596.5 $8,429.5 $3,802.7 $3,586.4 $2,942.1 $3,071.8 $1,851.7 $1,771.3
Slide 31: Loan Portfolio – CRE Segmentation
Balance Sheet – Loan Portfolio – CRE Segmentation ($ in millions) Total NOO and Multifamily Total Construction Total NOO and Construction Amts. Amts. Amts. Amts. Amts. Amts. Amts. Amts. Amts. 2Q24 1Q24 2Q23 2Q24 1Q24 2Q23 2Q24 1Q24 2Q23 Multifamily $2,187.3 $1,890.1 $1,538.8 $1,592.1 $1,573.9 $1,106
Slide 32: Loan Portfolio Lines of Credit
Balance Sheet – Loan Portfolio Lines of Credit ($s in millions) Linked Qtr. 12/31/2022 3/31/2023 6/30/2023 9/30/2023 12/31/2023 03/31/2024 06/30/2024 Change CRE – Investment & Construction Net Active Balance $5,225.32 $5,726.97 $6,060.77 $6,294.22 $6,517.57 $6,836.18 $6,540.20 ($295.98) Net Availabl
Slide 33: Asset Quality Metrics for NOOCRE and Construction Portfolio
Asset Quality Metrics for NOOCRE and Construction Portfolio Continue to Perform Well • Continued strong asset quality with minimal past PNFP NOOCRE & Construction Accruing PD, Classified, and Non-Accruals due accruing loans and 99% of portfolio graded pass 0.23% 0.22% 0.22% • Reduced appetite for NO
Slide 34: Multifamily – Loan Portfolio
Balance Sheet Highlights Multifamily – Loan Portfolio (DRAFT) Multifamily Highlights • 93.9% is located within the PNFP footprint 2Q 24 Multifamily Balances by Property Location • 56.5% are MF Construction loans (by commitment): 12.0% 11.2% 11.0% 11.0% o Average number of units 280 ($20MM+ Construct
Slide 35: Warehouse Highlights
Balance Sheet Highlights Multifamily – Loan Portfolio (DRAFT) Warehouse Highlights • Industrial production primarily focuses on construction 2Q 24 Warehouse Balances by Property Location 9.0% opportunities with top-tier development platforms 7.7% 8.0% • Conservative loan basis exhibiting an average
Slide 36: Professional Office Highlights
Balance Sheet Highlights Multifamily – Loan Portfolio (DRAFT) Professional Office Highlights • 92.9% of Professional Office CRE properties are in PNFP markets 2Q 24 Professional Office Balances by Property Location • The concentration in Nashville is primarily due to the participation in the Nashvil
Slide 37: Professional Office Single and Multi-Tenant LTVs
Balance Sheet Highlights Multifamily – Loan Portfolio (DRAFT) Professional Office Highlights 2Q 24 Professional Office Single Tenant Office LTVs 60.0% Portfolio by Type 54.5% 50.0% 6% 40.0% 36.5% 8% Avg Bal: 30.0% $3.9MM Avg Bal: 20.0% Avg Bal: $1.3MM Avg Bal: $6.7MM 8.1% $0.8MM 10.0% 0.9% 0.0% LTV
Slide 38: Current Expected Credit Losses
Current Expected Credit Losses Total Allowance for Credit Losses for loans = $381.6mm or, 1.13% of loans, at June 30, 2024 $ in thousands Allowance for Off-Balance % of Loans Total Credit Losses Sheet At June 30, 2023 $337,459 1.08% (1) $21,469 $358,928 Net Charge Offs ($18,093) 0.23% (2) ($18,093)
Slide 39: Current Expected Credit Losses by Loan Type
Current Expected Credit Losses ($ in thousands) June 30, September 30, December 31, March 31, June 30, 2023 2023 2023 2024 2024 % of % of % of % of % of Allowance for Credit Losses Amount Loans Amount Loans Amount Loans Amount Loans Amount Loans Commercial and Industrial $148,418 1.35% $144,302 1.28
Slide 40: Asset Quality
Asset Quality AS A % OF AS A % OF AS A % OF ($ in thousands) June 30, 2024 March 31, 2024 June 30, 2023 TOTAL LOANS TOTAL LOANS TOTAL LOANS NPLs and > 90 days Const. and land development $853 0.00% $701 0.00% $130 0.00% Consumer RE 35,355 0.11% 23,630 0.07% 18,764 0.06% CRE – Owner Occupied 4,605 0.
Slide 41: Annualized Net Loan Charge Offs by Loan Type
Balance Sheet – Loan Portfolio Annualized Net Loan Charge Offs by Loan Type 0.90% 0.80% 0.70% 0.60% 0.50% 0.40% 0.30% 0.20% 0.10% 0.00% -0.10% CRE Construction C&I Consumer RE Consumer and other Total 2021 2022 2023 2024 Net Charge Off Rates 41
Slide 42: Loan Portfolio – 100/300 Test
Balance Sheet – Loan Portfolio – 100/300 Test ($ in thousands) Description 2Q24 1Q24 4Q23 3Q23 2Q23 1Q23 Loans secured by real estate: Construction, land development, and other loans: 1-4 family residential construction loans $678,836 $672,284 $693,128 $684,366 $676,742 $737,692 Other construction l
Slide 43: Balance Sheet – Deposit Portfolio
Balance Sheet – Deposit Portfolio Net Deposit Growth – YTD 2Q24 – Strategic Decisions: • Strategic Expansion - $450 million • Jacksonville, Atlanta, DC, Alabama, Kentucky, Franchise Finance, Equipment Finance • Recruiting Impact – No growth, reduction of $94 million • New RMs hired in past 3.0 years
Slide 44: Deposit Portfolio – Market Segmentation
Balance Sheet – Deposit Portfolio – Market Segmentation ($ in millions) TOTAL DEPOSITS CORE DEPOSITS NONCORE DEPOSITS TOTAL PINNACLE TRANSACTION AND MMDA CDs PUBLIC FUNDS and OTHER DEPOSITS 2Q24 2Q23 2Q24 2Q23 2Q24 2Q23 2Q24 2Q23 Nashville $14,638.1 $14,274.7 $12,980.0 $12,639.5 $724.8 $733.9 $933.3
Slide 45: Deposit Portfolio and Liquidity for Uninsured Deposits
Balance Sheet - Deposit Portfolio Ratio of EOP Uninsured and/or Uncollateralized Deposits Estimated Liquidity Available for Uninsured Deposits Balances at to Total Deposits ($s in millions) Jun. 30, 2024 50.00% 42.9% Total Deposits $39,770 38.9% 40.00% Less: Insured and/or Collateralized Deposits 27
Slide 46: Balance Sheet – Bond Portfolio
Balance Sheet – Bond Portfolio 6/30/24 % of 3/31/24 % of 12/31/23 % of 9/30/23 % of Duration Net of Unhedged Security Type Quarter Avg. Yield - TE Balance Portfolio Balance Portfolio Balance Portfolio Balance Portfolio Hedging Duration Treasuries 1,548,161 18.9% 996,793 12.9% 985,766 13.0% 902,335 1
Slide 47: Interest Rate Sensitivity
Interest Rate Sensitivity Rate Ramp Scenarios Rate Shock Scenarios 5.0% 5.0% 3.0% 3.0% 3.0% 2.5% 2.4% Net Interest Income % D Net Interest Income % D 1.5% 1.6% 1.4% 1.4% 1.2% 1.0% 0.6% 0.7% 1.0% 0.1% 0.2% -0.1% -0.2% -1.0% -0.6% -0.7% -1.0% -1.2% -1.2% -1.6% -1.4% -1.4% -2.0% -3.0% -3.0% -2.4% -2.9%
Slide 48: Income Statement – Revenue Per Share
Income Statement – Revenue Per Share LTM Revenue Per Share Growth* vs. Peers $23.00 20.0% 19.0% 18.2% $21.89 $22.00 17.5% $21.39 $21.48 $21.45 $21.60 18.0% 16.2% 16.2% $21.09 $21.00 16.0% 16.0% 13.8% 13.1% 14.3% $20.33 15.2% 14.5% $20.00 12.8% $19.51 13.0% 14.0% 13.0% Y/Y Revenue per Share Growth 11
Slide 49: Income Statement – PPNR
Income Statement – PPNR ($s in thousands) 2020 2021 2022 2023 2024 YTD PPNR Trends Net interest income $821,788 $932,401 $1,129,293 $1,262,118 $650,296 Adjusted PPNR Noninterest income 317,840 395,734 416,124 433,253 144,391 $800 Noninterest expense (564,455) (660,104) (779,999) (887,769) (513,754)
Slide 50: Increased Focus on Higher FICO Originations
Increased Focus on Higher FICO Originations 86.5% of YTD 2024 Originations were originated to FICO scores of 700 Originations • BHG continues to refine and FICO Mix ($ mm) Cumulative Net Loss Curves tighten its credit underwriting: 2014 $260 • Losses in certain risk classes, particularly the lower c
Slide 51: BHG Diverse, Growing Funding Channels
BHGHas BHG Credit Quality Diverse, Continues Growing FundingtoChannels Impress Sophisticated Proactive credit management scoringchannels of placement models produce provides impressive flexibility results to BHG’s platform Loan Sale Auction Over 1,600 banks in network. 664 unique banks have acquired
Slide 52: BHG Financials
BHG Financials At Jun 30, At Mar 31, At Jun 30, ($'s in thousands) ($'s in thousands) 2Q 2024 1Q 2024 2Q 2023 2024 2024 2023 Cash and Cash Equivalents 598,585 671,722 590,930 Interest Income $ 124,903 $ 140,564 $ 144,142 Loans Held for Investment 2,745,676 2,988,136 3,268,535 Allowance for Loan Loss
Slide 53: Reconciliation of Non-GAAP Financial Measures
Reconciliation of Non-GAAP Financial Measures 53
Slide 54: Reconciliation of Non-GAAP Financial Measures
Reconciliation of Non-GAAP Financial Measures 54
Slide 55: 2024 Peer Group
2024 Peer Group Institution Name Ticker City, State Pinnacle Financial Partners, Inc. PNFP Nashville, TN Associated Banc-corp ASB Green Bay, WI Bank OZK OZK Little Rock, AR Bank United Inc. BKU Houston, TX Cadence Bank CADE Tupelo, MS Comerica Inc. CMA Dallas, TX Commerce Bancshares, Inc. CBSH Kansa
Slide 56: Investor Call Second Quarter 2024
Investor Call SECOND QUARTER 2024 M. TERRY TURNER, PRESIDENT AND CEO HAROLD R. CARPENTER, EVP AND CFO
Pinnacle Financial Partners — Q2 2024 Earnings Presentation on 6ix