Pinnacle Financial Partners, Inc. · NYSE:PNFP
Pinnacle Financial Partners — Q3 2014 Earnings Presentation
49 slides from Pinnacle Financial Partners's earnings presentation, Oct 22, 2014
Slide 1: Third Quarter 2014 Investor Call
Third Quarter 2014 Investor Call M. Terry Turner, President and CEO Harold R. Carpenter, EVP and CFO October 22, 2014
Slide 2: Safe Harbor Statements
Safe Harbor Statements Forward-looking statements Certain of the statements in this quarterly report on Form 10-Q 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.
Slide 3: 3Q14 Summary Results
3Q14 Summary Results Execution of fundamentals fuels exceptional growth in key valuation drivers Total Revenues (1) FD EPS ROTCE Earnings Growth $0.52 13.69% (millions) Up 8.7% yr/yr $62,396 Up 23.8% yr/yr 12.71% $0.42 $57,401 $0.34 10.83% $53,363 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q12 1Q13 2Q
Slide 4: 3Q14 Summary Results: on pace to achieve 3-year loan targets
3Q14 Summary Results PNFP is “on pace” to achieve 3-year loan targets 2012-2014 Previously Reported Growth Anticipated Net Loan Growth Current Quarter Growth 11.3% CAGR Financial Advisor Capacity (1/1/2012- 9/30/2014) Thru 3Q2014 $1.14 billion net growth thru 3Q14 11.5% CAGR FA Capacity $1.27 Billio
Slide 5: Loan growth: on pace to achieve 3-year loan targets
Loan, Deposit and Fee Growth Yield Operating Leverage PNFP is “on pace” to achieve 3-year loan targets Annual Net Loan Growth Quarterly Net Loan Growth $500 $425 $434 $411 $200 $400 Loan Volumes Loan Volumes ($ millions) $175 $132 ($ millions) $150 $300 $186 $100 $200 $239 $259 $50 $100 $279 $- $0 A
Slide 6: Net Interest Margin and Net Interest Income
Loan, Deposit and Fee Growth Yield Operating Leverage Net interest income rises on volume growth and higher loan yields in 3Q14 $50 4.00% $49.5 $48 3.90% 3.79% 3.80% $47.2 $46 $45.9 3.70% Net Interest Income $45.0 Net Interest Margin $44 $44.6 3.60% $43.6 $42 $42.8 (millions) $42.2 3.50% $40.9 $40 $
Slide 7: Average Loans
Loan, Deposit and Fee Growth Yield Operating Leverage Average loans grew 10.8% compared to 3Q13 $4,400 6.00% $4,358 $4,200 $4,251 5.50% $4,130 $4,000 $3,981 Average Loans $3,932 Loan Yields 4.88% 5.00% $3,800 $3,845 (millions) $3,682 $3,600 4.34% 4.50% $3,580 $3,400 $3,489 $3,403 4.00% $3,280 $3,200
Slide 8: Average Deposits
Loan, Deposit and Fee Growth Yield Operating Leverage Deposits continued to grow while cost of funds continue to decrease $4,700 1.20% $4,600 1.10% $4,655 1.01% $4,500 1.00% $4,519 $4,509 $4,400 0.90% $4,408 $4,300 0.80% Deposit Costs Avg. Deposits $4,200 0.70% $4,199 $4,100 (millions) (%) 0.60% $4,
Slide 9: Interest rate floors on loans
Loan, Deposit and Fee Growth Yield Operating Leverage Floors have provided meaningful earnings and are manageable going forward $1,360 6.00% $1,340 4.99% 5.00% $1,320 4.27% $1,300 4.00% Loan Volumes 3.54% ($ millions) $1,280 3.66% 3.00% $1,260 $1,240 2.00% $1,220 1.00% $1,200 $1,180 0.00% Dec 2010 D
Slide 10: Structural Positives – Promoting Asset Sensitivity
Loan, Deposit and Fee Growth Yield Operating Leverage Structural Positives – Promoting Asset Sensitivity 1. Non-interest bearing DDAs to total deposits ratio increased to 29.1%. 2. Securities portfolio has a 3% effective duration and decreased to 12.1% of total assets. 3. Fixed rate loans amount to
Slide 11: Total core noninterest income at record level
Loan, Deposit and Fee Growth Yield Operating Leverage Total core noninterest income at record level 3Q14 2Q14 1Q14 4Q13 3Q13 Service charges $2,913 $2,966 $2,791 $2,739 $2,797 Investment services 2,353 2,164 2,128 2,394 1,956 Insurance commissions 1,037 1,145 1,385 1,015 1,021 Gain on mortgage loans
Slide 12: The core noninterest expense ratio approaches target
Loan, Deposit and Fee Growth Yield Operating Leverage The core noninterest expense ratio approaches target 3Q14 2Q14 1Q14 4Q13 3Q13 Salaries and benefits $21,722 $21,772 $21,750 $21,494 $21,010 Equipment and occupancy 6,477 5,917 5,709 5,543 5,413 Other real estate owned 417 226 651 302 699 Marketin
Slide 13: Future Outlook: Total Shareholder Return
Future Outlook PNFP targets and has consistently delivered top quartile performance Total Shareholder Return - 1 yr. Total Shareholder Return - 5 yr. Total Shareholder Return - 3 yr. 200.0% 200.0% 200.0% 84th percentile 150.0% 150.0% 150.0% 89th percentile 100.0% 100.0% 100.0% 50.0% 50.0% 50.0% 89th
Slide 14: Future Outlook: 2014-2016 targets
Future Outlook PNFP’s momentum has 3Q performance trending towards revised 2014-2016 targets ROAA Net Interest Margin Noninterest Income/ Average Assets (1) 1.50% 3.95% 1.05% 3.90% 0.97% 3.90% 1.00% 0.94% 0.95% 0.92% 1.40% 3.85% 0.89% 0.87% 0.89% 0.89% 3.80% 0.90% 0.86% 3.78% 3.79% 0.85% 3.80% 3.76%
Slide 15: 3Q14 Conclusion
3Q14 Conclusion 1. Increasing operating leverage 2. Double-digit growth in EPS, loans, DDAs and tangible book value per share 3. On track to hit 3-year growth and profitability targets by 4Q14 4. Moving toward interest rate neutrality 5. Continue targeting and delivering top quartile performance • A
Slide 16: Q&A – Third Quarter 2014 Investor Call
Q&A – Third Quarter 2014 Investor Call 16
Slide 17: Supplemental Information
Supplemental Information Third Quarter 2014 Investor Call 17
Slide 18: Supplemental Information contents
Supplemental Information Chart • Balance Sheet 19 • Asset Quality 31 • Income Statement 37 • Pinnacle Financial Partners profile 40 • Economic and Market Conditions 45 18
Slide 19: Balance Sheet
Supplemental Information Balance Sheet 19
Slide 20: Loan portfolio is diversified and managed within targeted ranges
Balance Sheet Loan portfolio is diversified and managed within targeted ranges Amts. %’s Amts. %’s Amts. %’s Amts. %’s 3Q14 3Q14 2Q14 2Q14 3Q13 3Q13 3Q12 3Q12 C&D and Land $322.1 7.3% $292.9 6.8% $320.0 8.1% $312.8 8.9% Consumer RE 706.8 16.0% 698.5 16.2% 687.3 17.3% 680.9 19.3% CRE – Owner Occ. 728
Slide 21: Exposure to residential land development is limited
Balance Sheet Exposure to residential land development is limited Amts. %’s(*) Amts. %’s(*) Amts. %’s(*) Amts. %’s(*) 3Q14 3Q14 2Q14 2Q14 3Q13 3Q13 3Q12 3Q12 Residential – Spec $39.3 0.9% $35.6 0.8% $24.3 0.6% $13.6 0.4% Residential – Custom 31.5 0.7% 36.2 0.8% 29.7 0.8% 14.5 0.4% Residential – Cond
Slide 22: The C&I loan portfolio is highly diversified
Balance Sheet The C&I loan portfolio is highly diversified Utilities, 0.1%Accomodation and Food Wholesale Trade, 3.5% Administrative & Support & Services, 3.4% Transportation & Waste Management & Warehousing, 7.3% Remediation Services, 3.5% Arts, Entertainment & Retail Recreation, 0.9% Trade, 6.2% C
Slide 23: Loan growth from improving demand and market share movement
Balance Sheet Loan growth is a function of improving demand and market share movement New Loans YTD Q314 New clients, 39.4% Existing clients, 60.6% Source: Internal loan records, new loans to new clients based on review of new tax ID’s recorded during 2014. All accounts > $250,000 reviewed by relati
Slide 24: Loan growth funded by growth in low cost deposits
Balance Sheet Loan growth is primarily funded by growth in low cost deposits % of Deposits by Type to Total Deposits Avg. Loan & Trans, Savings and MMA Account Growth 800 100.00% 70.0% 700 95.00% 60.0% 600 90.00% 500 50.0% 85.00% 400 80.00% 40.0% 300 75.00% 200 30.0% 70.00% 100 65.00% 20.0% 0 -100 6
Slide 25: Limited dependence on non-relationship funding
Balance Sheet PNFP has limited dependence on non-relationship funding 25
Slide 26: Line commitments up 14.3% but utilization remains low
Balance Sheet Line commitments are up 14.3% over 3Q13 but utilization remains low 60% 56.15% 54.87% $2,500 $1,131 55% $1,046 $1,028 $1,024 $989 $2,000 $926 Total Commitments $941 50% $865 $787 Funded % $815 $808 $779 $747 $685 $715 $1,500 45% (millions) $1,000 40% $1,375 $1,349 $1,247 $1,216 $1,190
Slide 27: The securities book is maintained at a minimal level
Balance Sheet The securities book is maintained at a minimal level $1,050 25.00% 20.75% 22.50% $1,000 $1,010 20.00% $973 $950 17.50% $940 Average Securities $900 $924 15.00% $850 $876 12.50% (000’s) 13.35% $800 $819 10.00% 7.50% $782 $750 $768 $767 3.58% 5.00% $749 $746 $739 $732 $700 $720 $714 2.50
Slide 28: The bond portfolio contains very limited risk
Balance Sheet The bond portfolio contains very limited risk Portfolio: September 30, 2014 1.4% 23.1% 16.1% Total Investments $753 million Unrealized Gain (Loss) $ 8.9 million 7.5% QTD Purchases $ 1.3 million 50.0% QTD Sales $ 0.8 million 1.9% Duration Avg Yield - TE Sep 2014 3.0% 2.9% Agency Corpora
Slide 29: The municipal portfolio contains minimal risk
Balance Sheet The municipal portfolio contains minimal risk Municipal Bond Portfolio Statistics Muni Allocation % 3Q14 3Q13 Weighted Average Life 3.6 years 4.6 years % State Agency Holdings 5.15% 4.95% 24% Tax equivalent yield 4.57% 4.70% 76% FMV as % of Cost 104.7% 102.4% Location # of Issuances Ma
Slide 30: Elevated tangible common is available for deployment
Balance Sheet Elevated tangible common is available for deployment 10.00% 14.00% 13.69% Return on Tangible Common Equity 9.31% 9.52% 9.00% 9.27% 13.50% Tangible Common Ratio 9.18% 9.03% 8.96% 8.75% 8.00% 13.00% 7.00% 12.50% 12.41% 6.00% 12.00% 5.00% 11.50% 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 30
Slide 31: Asset Quality
Supplemental Information Asset Quality 31
Slide 32: Past due loans remain very low
Asset Quality Past due loans remain very low Sept. 30, As a % of June 30, As a % of Sept. 30, As a % 2014 total 2014 total 2013 of total (000’s) loans loans loans Past Due Loans (*) Nonaccrual loans $6,069 0.14% $4,958 0.11% $11,306 0.28% Accruing loans 14,099 0.32% 19,211 0.45% 13,032 0.33% Total p
Slide 33: Percentage of potential problem loans remain low
Asset Quality Percentage of potential problem loans remain low Potential Problem Loans Sept. 30, As a % June 30, As a % Sept. 30, As a % of 2014 of total 2014 of total 2013 total (000’s) loans loans loans PNFP 87,503 1.98% 77,066 1.79% 71,078 1.80% Peer Median* 77,066 1.94% 73,609 2.40% *: Substanda
Slide 34: NPLs remain very low
Asset Quality NPLs remain very low NPLs Expressed as a % of Total Loans within each Category PNFP NPLs and >90 days Sept. 30, As a % of June 30, As a % of Sept. 30, As a % of (000’s) 2014 total loans 2014 total loans 2013 total loans Const. and land development $5,475 0.12% $978 0.02% $1,307 0.03% C
Slide 35: Classified assets remain very low
Asset Quality Classified assets remain very low (in thousands) Balances Balances Balances Sept. 30, 2014 June 30, 2014 Sept. 30, 2013 Classified loans and ORE: - Substandard commercial loans $110,389 $95,007 $102,169 - Doubtful commercial loans - - - - Other impaired loans 5,660 5,723 4,730 - 90 day
Slide 36: Current OREO valuations are reasonable
Asset Quality Current OREO valuations are reasonable Average Appraisal Balances Fair value as a % of Age (dollars in thousands) Sept. 30, 2014 book value* in Months ORE categories: Developed lots $ 508 178.2% 3.89 Undeveloped land 10,621 158.4% 4.38 Other 1,200 131.8% 5.10 Total ORE $12,329 156.7% 4
Slide 37: Income Statement
Supplemental Information Income Statement 37
Slide 38: Mortgage volumes rise due to growth in purchase money transactions
Income Statement Mortgage volumes rise due to growth in “purchase money” transactions 140,000 3.50% 120,000 3.00% 2.82% 100,000 2.50% 80,000 2.00% 1.59% 60,000 1.50% 40,000 1.00% 20,000 0.50% 0 0.00% Purchase Money Refinance Gross fees as a % of loans originated 38 38
Slide 39: PNFP efficiency ratio reflects excellent operating leverage
Income Statement PNFP efficiency ratio reflect excellent operating leverage 3Q14 2Q14 1Q14 4Q13 3Q13 Net interest income $49,537 $47,226 $45,908 $44,969 $44,573 Total non-interest income $12,888 $12,598 $12,732 $12,488 $11,387 Less: Securities (gains) losses (29) - - - 1,441 Non-interest income, exc
Slide 40: Pinnacle Financial Partners Profile
Supplemental Information Pinnacle Financial Partners Profile 40
Slide 41: 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 4 in Knox County Founded: 2000 1 under construction in Knox County Total assets: $ 5.866 Billion Avg. daily trading volume **: 148,094 shares (9/30/14) % Institutional ownership: 6
Slide 42: PNFP has an 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 59 36 14 Robert A. McCabe, Jr. Chairman of the Board 64 38 14 Hugh M. Queener Chief Administrative Officer 58 39 14 Ha
Slide 43: PNFP compares favorably to high performing peers
PNFP Profile PNFP compares favorably to high performing peers • Pinnacle Financial Partners (PNFP) • Sandy Springs Bancorp, Inc. (SASR) • 1st Source Corporation (SRCE) • SCBT Financial Corp (SCBT) • Brookline Bancorp, Inc. (BRKL) • Sterling Bancorp (STL) • Columbia Banking System, Inc. • TowneBank (
Slide 44: Track record for best-in-market share movement
PNFP Profile PNFP has a track record for “best-in-market” share movement Nashville-Davidson-Rutherford MSA Knoxville MSA Top 10 Holding Market Market Change Top 10 Holding Market Market Change Market Company Share Share in Market Company Share Share in Share 6/30/14 6/30/00 Share Share 6/30/14 6/30/
Slide 45: Economic & Market Conditions
Supplemental Information Economic & Market Conditions 45
Slide 46: Nashville and Knoxville are healthy business markets
PNFP operates in advantaged markets Nashville and Knoxville are healthy business markets TENNESSEE • Tennessee ranks No. 4 in report on states’ business climates Business Facilities • Tennessee is No. 5 “top state for doing business in 2014” Area Development NASHVILLE Nashville has achieved “it city
Slide 47: Rapid job growth leads to rapid real estate absorption
PNFP operates in advantaged markets Rapid job growth leads to rapid real estate absorption Nashville Home Sales 3Q2014 2Q2014 3Q2013 % Change Avg. Qtrly. Median Home $217,133 $212,268 197,887 9.7% Price Quarterly Closings 7,945 7,541 7,331 8.4% Quarter end 9,924 10,553 10,183 (2.5%) Inventory Months
Slide 48: Nashville's commercial vacancy rates indicate a healthy market
PNFP Operates in Advantaged Markets Nashville’s commercial vacancy rates indicate a healthy market Nashville CRE National Vacancy Rates CRE Vacancy Rates 3Q YE 2013 YE 2012 YE 2011 YE 2010 YE 2009 YE 2008 3Q 2014(**) (**) (**) (**) (**) (***) (***) 2014 (**) Industrial / 8.3% 8.7% 9.1% 10.1% 10.2% 1
Slide 49: Third Quarter 2014 Investor Call
Third Quarter 2014 Investor Call M. Terry Turner, President and CEO Harold R. Carpenter, EVP and CFO October 22, 2014
Pinnacle Financial Partners — Q3 2014 Earnings Presentation on 6ix