Pinnacle Financial Partners, Inc. · NYSE:PNFP
Pinnacle Financial Partners — Q4 2015 Earnings Presentation
53 slides from Pinnacle Financial Partners's earnings presentation, Jan 20, 2016
Slide 1: Fourth Quarter 2015 Investor Call
Fourth Quarter 2015 Investor Call M. Terry Turner, President and CEO Harold R. Carpenter, EVP and CFO January 20, 2016
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: 4Q15 Summary Results
4Q15 Summary Results Execution of fundamentals fueled exceptional growth in key valuation drivers Total Revenues Net Income* FD EPS* Earnings Growth $28,367 Up 51.4% yr/yr $0.69 Up 51.6% yr/yr $98,083 $18,737 $64,697 $0.53 $15,321 $57,456 $0.44 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15
Slide 4: 4Q15 Summary Results: Growth Initiatives
4Q15 Summary Results Previously outlined growth initiatives are moving forward 1. CapitalMark and Magna mergers • Legal mergers – Accomplished in 3Q15 • Financial case – Results for 2015 better than planned ($0.06- $0.08 FDEPS) • Technology conversions – Magna conversion completed in November 2015;
Slide 5: Net Interest Income and Net Interest Margin
Loan, Deposit and Fee Growth Yield Operating Leverage Organic growth and acquisitions fuel significant growth in net interest income $75 4.25% $70 4.00% $71.5 $65 3.75% Net Interest Margin Net Interest Income 3.73% $60 3.50% $62.1 3.40% 3.66% $55 3.25% (millions) $50 3.00% $51.8 $50.3 $51.3 $49.5 $4
Slide 6: Average Loans
Loan, Deposit and Fee Growth Yield Operating Leverage Linked quarter loan volumes and yields rose dramatically in 4Q15 $7,000 6.00% $6,458 4.88% $6,000 5.00% 4.46% $5,690 Average Loans Loan Yields $5,000 4.33% 4.00% (millions) $4,737 $4,625 $4,436 $4,358 $4,000 3.00% $4,251 $4,130 $3,981 $3,932 $3,8
Slide 7: Average Deposits
Loan, Deposit and Fee Growth Yield Operating Leverage Deposits grew rapidly and deposit rated moved more slower than loan yields $7,000 1.25% $6,787 1.01% $6,000 1.00% $5,898 $5,000 0.75% Avg. Deposits $4,885 $4,792 (millions) $4,758 $4,655 $4,519 $4,509 $4,408 $4,000 0.50% $4,199 $3,963 $3,950 $3,8
Slide 8: Balance sheet positioned for rising rates
Loan, Deposit and Fee Growth Yield Operating Leverage Balance sheet positioned for rising rates 8.00% Loans w/ Floors IRR Sensitivity $1.50 (Immediate shock) 6.00% 6.22% $1.25 (billions of dollars) $1.00 4.00% Up 100 Up 200 2.00% 3.03% $0.50 $0.64 1.43% 0.00% -1.35% 38.5% - As a % of loans - 9.8% -2
Slide 9: Record fee revenues in 4Q15
Loan, Deposit and Fee Growth Yield Operating Leverage Expansion of fee businesses produced record fee revenues in 4Q15 4Q15 3Q15 2Q15 1Q15 4Q14 Service charges $3,500 $3,258 $3,076 $2,913 $3,038 Investment services 2,787 2,526 2,399 2,259 2,737 Insurance commissions 1,103 1,103 1,106 1,513 1,046 Gai
Slide 10: Operating leverage and core efficiency ratio
Loan, Deposit and Fee Growth Yield Operating Leverage Operating leverage led to an all time best core efficiency ratio 4Q15 3Q15 2Q15 1Q15 4Q14 Salaries and benefits $30,878 $27,746 $23,775 $23,531 $23,075 Equipment and occupancy 8,385 6,933 5,878 6,046 5,984 Other real estate owned 99 (686) (115) 3
Slide 11: Changes to long-term targets
Pinnacle Building for the Future Changes to long-term targets reflect PNFP operating leverage Net Interest Margin Noninterest Income / Average Assets (1) ROA (2) 3.95% 1.60% 1.30% 3.90% 1.23% 3.85% 1.20% 3.80% 1.31% 3.80% 3.76% 1.40% 1.10% 3.70% 3.73% 3.75% 0.97% 1.00% 1.27% 3.70% 0.92% 0.89% 1.20%
Slide 12: Expanded BHG Partnership
Pinnacle Building for the Future Expanded BHG Partnership Will Provide Opportunities to Both Firms Feb 2015 investment Feb 2016 investment(1) Consideration $75mm for 30% interest $114mm for 19% interest, aggregate 49% interest 83rd percentile Financing Debt and on-balance sheet cash 912,000 shares o
Slide 13: BHG posts accelerating growth
Pinnacle Building for the Future BHG posts accelerating and impressive growth Loans by healthcare 2015 specialty originations $450 Physicians & Surgeons $248.9 $400 2015 Growth - 56.3% Dentists $ 83.0 2015 Growth – 57.9% $350 Physical (millions of dollars) $300 Therapists $ 22.3 2015 Growth – 71.4%
Slide 14: BHG specialized focus results
Pinnacle Building for the Future BHG specialized focus results in significant returns Rates Original # of loans Avg. term Avg. Rate Avg. FICO Current % of balances (months) Balance portfolio < 12% $360.3 3,324 76 10.02% 756 $273.1 32.0% 2015 Growth - 56.3% 12% to < 15% 278.7 2,958 80 13.84% 720 185.
Slide 15: 2015 Goals, Results and 5-Year Horizon
Pinnacle Building for the Future 2015 Goals and Objectives 2015 Results 5-Year Horizon Dogged execution that produces FDEPS growth, excluding merger • Develop market and sustains increased results related charges, of 29.9% leadership in four Tennessee markets Continue to grow loans and core Growth a
Slide 16: Bank Industry Trends vs Pinnacle Trends
Pinnacle Building for the Future 4Q15 Bank Industry Trends 4Q15 Pinnacle Trends Lower, longer rate forecast Robust banking markets Credit leverage slows Organic growth creates operating Margin compression continues leverage despite aggressive hiring to sustain growth capacity Cost cutting jeopardize
Slide 17: Q&A
Q&A – Fourth Quarter 2015 Investor Call
Slide 18: Supplemental Information
Supplemental Information Fourth Quarter 2015 Investor Call
Slide 19: Supplemental Information Contents
Supplemental Information Chart • Balance Sheet 20 • Asset Quality 30 • Income Statement 34 • Pinnacle Financial Partners profile 40 • Economic and Market Conditions 46 19
Slide 20: Balance Sheet
Supplemental Information Balance Sheet 20
Slide 21: Loan portfolio well diversified
Balance Sheet Loan portfolio well diversified Amts. %’s(*) Amts. %’s(*) Amts. %’s Amts. %’s 4Q15 4Q15 3Q15 3Q15 4Q14 4Q14 4Q13 4Q13 C&D and Land $747.7 11.4% $674.9 10.7% $322.5 7.0% $316.2 7.6% Consumer RE 1,046.5 16.0% 1,044.3 16.5% 721.2 15.7% 695.6 16.8% CRE – Owner Occ. 1,083.5 16.6% 1,124.9 17
Slide 22: Construction portfolio reflects quality growth
Balance Sheet Construction portfolio reflects quality growth Amts. %’s(*) Amts. %’s(*) Amts. %’s(*) Amts. %’s(*) 4Q15 4Q15 3Q15 3Q15 4Q14 4Q14 4Q13 4Q13 Residential – Spec $126.1 1.9% $102.1 1.6% $39.8 0.9% $28.2 0.7% Residential – Custom 54.1 0.8% 44.5 0.7% 34.4 0.8% 29.3 0.7% Residential – Condo 7
Slide 23: C&I loan portfolio is highly diversified
Balance Sheet The C&I loan portfolio is highly diversified NAICS Sector Description 4Q15 4Q14 Health Care and Social Assistance 4.53% 3.42% Finance and Insurance 2.45% 2.94% Real Estate and Rental and Leasing 0.15% 0.02% Manufacturing 1.50% 1.02% Consumer 5.37% 6.20% Transportation and Warehousing 8
Slide 24: Limited dependence on non-relationship funding
Balance Sheet PNFP maintains limited dependence on non-relationship funding 12/31/2015 Percent 12/31/2014 Percent Core Funding: Non-interest bearing deposits 1,889,865 25.22% 1,321,053 25.56% Interest-bearing deposits 1,355,405 18.09% 989,915 Money Market accounts 2,683,046 35.81% 1,751,698 33.89% T
Slide 25: Total Commitments
Total Commitments (millions) $0 $1,000 $2,000 $3,000 $957 $747 $5,000 $4,000 56.15% $959 $715 $1,000 $685 Note: Excludes HELOCS and credit cards $975 $779 Balance Sheet $1,009 $808 $1,054 $787 Net active balance $1,055 $815 $1,138 $865 $1,105 $941 $1,166 $926 $1,190 $989 $1,216 $1,024 $1,247 $1,028
Slide 26: Securities book maintained at minimal level
Balance Sheet The securities book is maintained at a minimal level 4.00% 40.00% 3.58% 3.50% 35.00% 3.00% 30.00% 2.50% 25.00% 20.75% 2.45% 2.00% 20.00% 1.50% 15.00% 1.00% 11.70% 10.00% 0.50% 5.00% 0.00% 0.00% Bond Yields % of Avg. Assets 26
Slide 27: Conservative bond portfolio
Balance Sheet Conservative bond portfolio 11.6% 1.0% Portfolio: December 31, 2015 6.1% 18.3% Total Investments $ 967 million Unrealized Gain (Loss) $ 4.6 million QTD Purchases $ 78.2 million 7.6% 54.1% QTD Sales $ 64.0 million Duration Avg Yield – TE 4Q15 3.0% 2.5% Agency Corporates MBS 3Q15 2.8% 2.
Slide 28: Municipal portfolio contains minimal risk
Balance Sheet The municipal portfolio contains minimal risk Municipal Bond Portfolio Statistics Muni Allocation % 4Q15 4Q14 Weighted Average Life 3.5 years 3.6 years Tax equivalent yield 4.69% 4.57% 23% FMV as % of Cost 103.9% 104.7% 77% As of September 30, 2015 Location # of Issuances Market Value
Slide 29: Mergers on Track to Hit Targets
Balance Sheet Mergers on Track to Hit Targets CapitalMark Magna As of announcement date Updated as of As of announcement date Updated as of Aggregate April 7, 2015 Dec. 31, 2015 April 28, 2015 Dec. 31, 2015 Amounts Closing Late 3Q/Early 4Q 2015 31-Jul-15 Late 3Q 2015 1-Sep-15 Consideration 90% Stock
Slide 30: Asset Quality
Supplemental Information Asset Quality 30
Slide 31: Past due loans remain very low
Asset Quality Past due loans remain very low Dec. 31, As a % of Sept. 30, As a % of Dec. 31, As a % 2015 total 2015 total 2014 of total (000’s) loans loans loans Past Due Loans (*) Nonaccrual loans** $10,362 0.16% $8,349 0.13% $7,058 0.15% Accruing loans 19,977 0.31% 21,830 0.34% $18,330 0.40% Total
Slide 32: NPLs and loans >90 days past due remain low
Asset Quality NPLs and loans >90 days past due & accruing remain very low NPLs Expressed as a % of Total Loans within each Category PNFP NPLs and >90 days Dec. 31, As a % of Sept. 30, As a % of Dec. 31, As a % of (000’s) 2015 total loans 2015 total loans 2014 total loans Const. and land development
Slide 33: Classified assets remain low
Asset Quality Classified assets remain low (in thousands) Balances Balances Balances Dec. 31, 2015 Sept. 30, 2015 Dec. 31, 2014 Classified loans and ORE: - Substandard commercial loans $116,088 $94,801 $102,077 - Doubtful commercial loans 18 - - - Other impaired loans 19,402 22,490 5,162 - 90 days p
Slide 34: Income Statement
Supplemental Information Income Statement 34
Slide 35: Diversified fee structure
Income Statement Diversified fee structure Noninterest Income by Source Service charges 15% 2015 Growth - 56.3% Other 29% Investment services 12% Insurance 5% Gains on mortgage loan sales BHG income 9% 24% Trust fees 6% 35 Source: Company information
Slide 36: Mortgage volumes grow in purchase money transactions
Income Statement Mortgage volumes experience growth in “purchase money” transactions 180,000 3.00% 160,000 140,000 2.19% 120,000 2.00% 1.59% 100,000 80,000 60,000 1.00% 40,000 20,000 0 0.00% Purchase Money Refinance Gross fees as a % of loans originated 36
Slide 37: Reconciliation of Non-GAAP measures
Income Statement Reconciliation of Non-GAAP measures 4Q15 3Q15 2Q15 1Q15 4Q14 Net interest income $71,475 $62,059 $51,831 $51,269 $50,313 Total non-interest income $26,608 $21,410 $20,019 $18,493 $14,384 Less: Securities (gains) losses 10 - (556) (6) - Non-interest income, excluding the impact of ne
Slide 38: Reconciliation of Non-GAAP measures
Income Statement Reconciliation of Non-GAAP measures 4Q15 3Q15 2Q15 1Q15 4Q14 Total non-interest income $26,608 $21,410 $20,019 $18,493 $14,384 Less: Securities (gains) losses 10 - (556) (6) - Non-interest income, excluding the impact of net gains $26,618 $21,410 $19,463 $18,487 $14,384 (losses) on
Slide 39: Reconciliation of Non-GAAP measures
Income Statement Reconciliation of Non-GAAP measures 4Q15 3Q15 2Q15 1Q15 4Q14 Net income $26,854 $24,149 $22,664 $21,843 $18,737 Merger related expenses 2,489 2,249 59 - - Tax effect on merger related expenses (977) (882) (23) - - Net income less merger related expenses $28,366 $25,516 $22,701 $21,8
Slide 40: Pinnacle Financial Partners Profile
Supplemental Information Pinnacle Financial Partners Profile 40
Slide 41: PNFP Profile: four banking markets
PNFP Profile Recently completed acquisitions will position firm in four great banking markets PNFP CapitalMark Magna Headquarters: Nashville, TN Offices: 29 in 8 Middle-TN counties 10 in 5 East-TN counties Founded: 2000 5 in West-TN Total assets: $ 8.709 Billion Avg. daily trading volume **: 192,541
Slide 42: 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 60 37 15 Robert A. McCabe, Jr. Chairman of the Board 65 39 15 Hugh M. Queener Chief Administrative Officer 60 40 15 Ha
Slide 43: PNFP compares favorably to high performing peers
PNFP Profile PNFP compares favorably to high performing peers • Pinnacle Financial Partners (PNFP) • MB Financial (MBFI) • Bank of the Ozarks (OZRK) • National Penn Bancshares, Inc. • Brookline Bancorp, Inc. (BRKL) (NPBC) • Columbia Banking System, Inc. • Renasant Corporation (RNST) (COLB) • South S
Slide 44: Best-in-market share movement: Nashville and Knoxville
PNFP Profile PNFP has a track record for “best-in-market” share movement Nashville-Davidson-Rutherford MSA Knoxville MSA Top 10 Holding Market Market % Top 10 Holding Market Market Change Market Company Share Share Change Market Company Share Share in Share 6/30/15 6/30/00 in Share 6/30/15 6/30/07 S
Slide 45: Best-in-market share movement: Chattanooga and Memphis
PNFP Profile PNFP has a track record for “best-in-market” share movement Chattanooga TN-GA MSA Memphis, TN-MS-AR MSA Top 10 Holding Market Market % Top 11 Holding Market Market % Market Company Share Share Change Market Company Share Share Change Share 6/30/15 6/30/14 in Share Share 6/30/15 6/30/14
Slide 46: Economic & Market Conditions
Supplemental Information Economic & Market Conditions 46
Slide 47: Tennessee Market Demographics
PNFP operates in advantaged markets Tennessee Market Demographics 2016 -2021E 2016 -2021E Current Population Population Growth Current Median Median HHI Growth Top 20 MSAs Total Deposits ($Ms) (000s) (%) HHI ($) (%) Nashville-Davidson-Murfreesboro-Franklin TN 48,022 1,840 6.87% 55,922 9.41% Memphis
Slide 48: Tennessee and Nashville economy
PNFP operates in advantaged markets TENNESSEE • Tennessee ranked No. 7 among the 50 states for the quality of its transportation and trade; U.S. Chamber of Commerce Foundation stood out for high-tech job growth • Tennessee recorded 8,289 new business filings in the third quarter, indicating gains in
Slide 49: Memphis and Chattanooga economy
PNFP operates in advantaged markets MEMPHIS Memphis offers a diverse, metropolitan workforce. Over the past three decades, the presence of companies like FedEx and the region’s superior distribution infrastructure have earned Memphis the title, “America’s Distribution Center.” • Memphis called the “
Slide 50: Job growth in all four markets
PNFP operates in advantaged markets Job growth occurring in all four markets Nashville MSA Knoxville MSA Nonfarm Payrolls- SA (thru November 2015) Nonfarm Payrolls- SA (thru November 2015) 950,000 400,000 900,000 390,000 380,000 850,000 370,000 800,000 360,000 750,000 350,000 700,000 340,000 650,000
Slide 51: Rapid job growth leads to real estate absorption
PNFP operates in advantaged markets Rapid job growth leads to rapid real estate absorption Unemployment Rates Seasonally Adjusted (thru Nov 2015) 15.00 10.00 5.00 0.00 Nashville Knoxville Chattanooga Memphis US Home Sales Nashville Knoxville Memphis Chattanooga % Change % Change % Change % Change 4Q
Slide 52: Nashville commercial vacancy rates
PNFP Operates in Advantaged Markets Nashville’s commercial vacancy rates indicate a healthy market CRE Vacancy Rates Nashville Knoxville Chattanooga Memphis National 4Q15 % Change 4Q15 % Change 4Q15 % Change 4Q15 % Change 4Q15 % Change from PY from PY from PY from PY from PY Industrial / 5.90% (15.7
Slide 53: Fourth Quarter 2015 Investor Call
Fourth Quarter 2015 Investor Call M. Terry Turner, President and CEO Harold R. Carpenter, EVP and CFO January 20, 2016
Pinnacle Financial Partners — Q4 2015 Earnings Presentation on 6ix