Pinnacle Financial Partners, Inc. · NYSE:PNFP
Pinnacle Financial Partners — Q2 2015 Earnings Presentation
51 slides from Pinnacle Financial Partners's earnings presentation, Jul 22, 2015
Slide 1: Second Quarter 2015 Investor Call
Second Quarter 2015 Investor Call M. Terry Turner, President and CEO Harold R. Carpenter, EVP and CFO July 22, 2015
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: Safe Harbor Statements: Non-GAAP Measures
Safe Harbor Statements Non-GAAP Measures This presentation contains certain non-GAAP financial measures, including, without limitation, noninterest expense and the ratio of noninterest expense to average assets and noninterest expense to the sum of net interest income and noninterest income, in each
Slide 4: Safe Harbor Statements: Additional Information and Where to Find It
Safe Harbor Statements Additional Information and Where to Find It In connection with the proposed mergers of CapitalMark Bank & Trust ("CapitalMark") and Magna Bank ("Magna") with and into Pinnacle Bank, Pinnacle Financial Partners, Inc. ("Pinnacle") has filed registration statements on Form S-4 an
Slide 5: 2Q15 Summary Results
2Q15 Summary Results Execution of fundamentals fueled exceptional growth in key valuation drivers Total Revenues (1) FD EPS ROTCE Earnings Growth 15.39% (millions) Up 19.2% yr/yr Up 30.6% yr/yr 13.50% $0.64 $71,293 12.72% $0.49 $59,820 $0.42 $54,949 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15
Slide 6: 2Q15 Summary Results
2Q15 Summary Results PNFP exceeded the return on asset target range again in 2Q15 Net Interest Margin Noninterest Income / Average Assets (1) ROA 3.95% 1.30% 1.24% 1.60% 3.90% 1.20% 1.44% 3.85% 1.10% 3.80% 1.40% 3.80% 0.97% 1.27% 3.76% 1.00% 3.75% 0.92% 0.89% 3.70% 0.90% 1.20% 3.70% 1.13% 3.65% 0.80
Slide 7: Net Interest Margin and Net Interest Income
Loan, Deposit and Fee Growth Yield Operating Leverage Net interest income rose primarily due to volume growth in 2Q15 $53 4.00% $51 3.80% $51.8 $51.3 $50.3 $49 3.60% 3.65% $49.5 Net Interest Margin $47 3.40% $47.2 Net Interest Income 3.40% $45 3.20% $45.9 $45.0 $44.6 $43 3.00% $43.6 (millions) $42.8
Slide 8: Average Loans
Loan, Deposit and Fee Growth Yield Operating Leverage Average loans grew 11.4% compared to 2Q14; yields contracted 0.11% $4,800 7.00% $4,737 $4,600 6.50% $4,625 $4,400 6.00% $4,436 $4,358 $4,200 5.50% $4,251 Average Loans 4.88% $4,130 Loan Yields $4,000 5.00% $3,981 (millions) $3,932 $3,800 4.50% $3
Slide 9: Loan Floors and Repositioned Balance Sheet
Loan, Deposit and Fee Growth Yield Operating Leverage Floors on loans provided meaningful earnings during low rate environment but resulted in a liability sensitive balance sheet that has now been repositioned $1,400 5.00% $1,300 4.50% 1.17% 0.93% $1,200 0.84% 4.00% 0.73% 0.64% $1,100 3.50% $1,000 3
Slide 10: Average Deposits
Loan, Deposit and Fee Growth Yield Operating Leverage Deposits continued to grow while cost of deposits remained stable $5,000 1.20% 1.01% $4,800 1.05% $4,885 $4,792 $4,758 $4,600 0.90% $4,655 $4,519 $4,509 $4,400 0.75% Deposit Costs Avg. Deposits $4,408 $4,200 0.60% (millions) (%) $4,199 $4,000 0.4
Slide 11: Balance Sheet Prepared for Rising Rates
Loan, Deposit and Fee Growth Yield Operating Leverage Further evidence that our balance sheet is prepared for rising rates 30 Day Rate Change Analysis $2,250 Over the course of the last seven quarters, $2,000 we’ve migrated from a negative 30-day rate Millions of dollars $1,750 change gap of approxi
Slide 12: Record Fee Revenues in 2Q15
Loan, Deposit and Fee Growth Yield Operating Leverage Expansion of fee businesses produced record fee revenues in 2Q15 2Q15 1Q15 4Q14 3Q14 2Q14 Service charges $3,076 $2,913 $3,038 $2,913 $2,966 Investment services 2,399 2,259 2,737 2,353 2,164 Insurance commissions 1,106 1,513 1,046 1,037 1,145 Gai
Slide 13: Operating Leverage and Efficiency Ratio
Loan, Deposit and Fee Growth Yield Operating Leverage Operating leverage led to an all time best efficiency ratio 2Q15 1Q15 4Q14 3Q14 2Q14 Salaries and benefits $23,775 $23,531 $23,075 $21,722 $21,772 Equipment and occupancy 5,878 6,046 5,984 6,477 5,917 Other real estate owned (115) 395 (630) 417 2
Slide 14: The Big Picture
The Big Picture PNFP is executing its long-term growth plan 5-Year Horizon Q2’ 15 Progress 1. Expand CRE asset class Built critical infrastructure for commercial real estate, with four critical hires onboard Refocused residential construction lending unit with three critical hires Volumes an
Slide 15: Customer Penetration
The Big Picture “The main thing is to keep the main thing the main thing” – Stephen Covey 30% Pinnacle Financial 25% Customer Penetration Regional A Regional B (%) 20% Regional C National A 15% 10% 35% 40% 45% 50% 55% 60% 65% 70% 75% 80% Excellent Client Satisfaction (%) Note: Cross-hairs are set at
Slide 16: Q&A – Second Quarter 2015 Investor Call
Q&A – Second Quarter 2015 Investor Call 16
Slide 17: Supplemental Information
Supplemental Information Second Quarter 2015 Investor Call 17
Slide 18: Supplemental Information Contents
Supplemental Information Chart • Balance Sheet 18 • Asset Quality 29 • Income Statement 34 • Pinnacle Financial Partners profile 37 • Economic and Market Conditions 43 18
Slide 19: Supplemental Information: Balance Sheet
Supplemental Information Balance Sheet 19
Slide 20: Loan Portfolio Well Diversified
Balance Sheet Loan portfolio well diversified Amts. %’s(*) Amts. %’s(*) Amts. %’s(*) Amts. %’s(*) 2Q15 2Q15 1Q15 1Q15 2Q14 2Q14 2Q13 2Q13 C&D and Land $372.0 7.7% $324.5 7.0% $292.9 6.8% $298.5 7.6% Consumer RE 740.6 15.3% 723.9 15.6% 698.5 16.2% 697.5 17.7% CRE – Owner Occ. 807.0 16.7% 767.3 16.5%
Slide 21: Construction Portfolio Reflects Quality Growth
Balance Sheet Construction portfolio reflects quality growth Amts. %’s(*) Amts. %’s(*) Amts. %’s(*) Amts. %’s(*) 2Q15 2Q15 1Q15 1Q15 2Q14 2Q14 2Q13 2Q13 Residential – Spec $48.4 1.0% $39.0 0.8% $35.6 0.8% $21.1 0.5% Residential – Custom 44.9 0.9% 36.0 0.8% 36.2 0.8% 22.2 0.6% Residential – Condo 3.3
Slide 22: The C&I Loan Portfolio Is Highly Diversified
Balance Sheet The C&I loan portfolio is highly diversified Accomodation and Food Services, 5.1% Administrative & Support & Utilities, 0.09% Waste Management & Remediation Services, 3.3% Transportation & Wholesale Warehousing, 7.6% Trade, 6.6% Arts, Entertainment & Recreation, 1.2% Construction, 4.9%
Slide 23: Consistent Loan Growth Despite Payoff Headwinds
Balance Sheet Consistent loan growth despite significant payoff headwinds Annual Net Loan Growth Quarterly Net Loan Growth $500 $200 $400 $434 $446 Loan Volumes Loan Volumes $421 ($ millions) ($ millions) $150 $300 $100 $200 $242 $50 $100 $0 $- Quarterly New Loan Originations Quarterly Pay Offs/ Pay
Slide 24: Limited Dependence on Non-Relationship Funding
Balance Sheet PNFP maintains limited dependence on non-relationship funding 6/30/2015 Percent 6/30/2014 Percent Core Funding: Non-interest bearing deposits 1,473,086 26.14% 1,324,358 26.58% Interest-bearing deposits 1,051,908 18.67% 887,319 17.81% Money Market accounts 1,784,004 31.66% 1,671,108 33.
Slide 25: Line Commitments Up, Utilization Low
Balance Sheet Line commitments are up 31.2% over 2Q14 but utilization remains low $3,000 60% 56.15% $1,372 $2,500 55% $1,221 $1,177 $1,131 52.85% $1,046 $1,028 Total Commitments $1,024 $989 $2,000 50% $926 $941 $865 Funded % $815 $787 $808 $747 $779 $685 $715 $1,500 45% (millions) $1,000 40% $1,538
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% 2.56% 2.00% 20.00% 1.50% 15.00% 1.00% 13.24% 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 Portfolio: June 30, 2015 1.3% 20.8% 15.5% Total Investments $840.0 million Unrealized Gain (Loss) $8.3 million 8.5% QTD Purchases $116.8 million 48.4% QTD Sales $33.8 million 5.5% Duration Avg Yield - TE 2Q15 2.9% 2.6% Agency Corporates MBS 1Q15 2.9% 2.8% As
Slide 28: Municipal Portfolio Contains Minimal Risk
Balance Sheet The municipal portfolio contains minimal risk Municipal Bond Portfolio Statistics Muni Allocation % 2Q15 2Q14 Weighted Average Life 3.6 years 3.4 years Tax equivalent yield 4.63% 4.61% 25% FMV as % of Cost 104.7% 104.9% 75% Location # of Issuances Market Value % As of June 30, 2015 Ten
Slide 29: Elevated Tangible Common Available for Deployment
Balance Sheet Elevated tangible common is available for deployment 10.00% 18.00% Return on Tangible Common Equity 15.39% 9.64% 16.00% 9.00% 9.52% Tangible Common Ratio 9.27% 9.18% 9.53% 9.50% 14.00% 9.03% 8.96% 9.31% 8.75% 12.00% 8.00% 12.41% 10.00% 8.00% 7.00% 6.00% 6.00% 4.00% 2.00% 5.00% 0.00% 1Q
Slide 30: Supplemental Information: Asset Quality
Supplemental Information Asset Quality 30
Slide 31: Past Due Loans Remain Very Low
Asset Quality Past due loans remain very low June 30, As a % of Mar. 31, As a % of June 30, As a % 2015 total 2015 total 2014 of total (000’s) loans loans loans Past Due Loans (*) Nonaccrual loans $ 5,991 0.12% $ 3,394 0.07% $4,958 0.11% Accruing loans 18,117 0.38% 15,745 0.34% 19,211 0.45% Total pa
Slide 32: NPLs and Loans Over 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 June 30, As a % of Mar. 31, As a % of June 30, 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 June 30, 2015 Mar. 31, 2015 June 30, 2014 Classified loans and ORE: - Substandard commercial loans $107,359 $110,005 $95,007 - Doubtful commercial loans - - - - Other impaired loans 7,428 5,563 5,723 - 90 days past
Slide 34: Current OREO Valuations Appear Reasonable
Asset Quality Current OREO valuations appear reasonable Average Appraisal Balances Fair value as a % of Age (dollars in thousands) June 30, 2015 book value* in Months ORE categories: Developed lots $ - - - Undeveloped land 414 130.1% 4.52 Other 6,378 140.8% 6.77 Total ORE $6,792 140.1% 6.45 Larges
Slide 35: Supplemental Information: Income Statement
Supplemental Information Income Statement 35
Slide 36: Mortgage Volumes Experience Growth in Refinancing
Income Statement Mortgage volumes experience growth in “refinancing” transactions 140,000 3.00% 120,000 2.72% 2.75% 100,000 2.50% 80,000 2.25% 60,000 2.00% 40,000 1.75% 1.59% 20,000 1.50% 0 1.25% Purchase Money Refinance Gross fees as a % of loans originated 36
Slide 37: Efficiency Ratio Reflects Excellent Operating Leverage
Income Statement PNFP efficiency ratio reflects excellent operating leverage 2Q15 1Q15 4Q14 3Q14 2Q14 Net interest income $51,831 $51,269 $50,313 $49,537 $47,226 Total non-interest income $20,128 $18,493 $14,384 $12,888 $12,598 Less: Securities (gains) losses (556) (6) - (29) - Non-interest income,
Slide 38: Supplemental Information: Pinnacle Financial Partners Profile
Supplemental Information Pinnacle Financial Partners Profile 38
Slide 39: Acquisitions Position Firm in Four Great Banking Markets
PNFP Profile Recently announced acquisitions will position firm in four great banking markets PNFP CapitalMark Magna Headquarters: Nashville, TN Offices: 29 in 8 Middle-TN counties 5 in Knox County Founded: 2000 Avg. daily trading volume **: 160,564 shares Total assets: $ 6.516 Billion (6/30/15) % I
Slide 40: Transactions Provide Expansion to New Markets
PNFP Profile Transactions provide expansion to Chattanooga/Cleveland/Oak Ridge/ Memphis PNFP CapitalMark Magna CapitalMark Magna • Founded in 2007 • Founded in 1999 • 4 branches strategically located in key TN markets • 5 branches located in the final strategic Tennessee market untapped by PNFP • Se
Slide 41: 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 60 36 15 Robert A. McCabe, Jr. Chairman of the Board 65 38 15 Hugh M. Queener Chief Administrative Officer 59 39 15 Ha
Slide 42: 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) • South State Bank (SSB) • Brookline Bancorp, Inc. (BRKL) • Sterling Bancorp (STL) • Columbia Banking System, Inc. • TowneBank (TOWN
Slide 43: 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 44: Supplemental Information: Economic & Market Conditions
Supplemental Information Economic & Market Conditions 44
Slide 45: PNFP Operates in Advantaged Markets
PNFP operates in advantaged markets Tennessee Market Demographics 2014-2020E 2014-2020E Total Deposits Current Population Population Growth Current Median Median HHI Growth Top 20 MSAs ($Ms) (000s) (%) HHI ($) (%) Nashville-Davidson-Murfreesboro-Franklin 44,071 1,801 8.70% 53,022 12.60% Memphis 23,7
Slide 46: PNFP Operates in Advantaged Markets: Tennessee and Nashville
PNFP operates in advantaged markets TENNESSEE • Report puts Tennessee at No. 8 in the top 10 states for fiscal health in the nation Mercatus Center, George Mason University • Tennessee receives Golden Shovel Award; named one of best states for economic development Area Development • America’s CEOs r
Slide 47: PNFP Operates in Advantaged Markets: Memphis and Chattanooga
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 named the 7t
Slide 48: Rapid Job Growth in All Four Markets
PNFP operates in advantaged markets Rapid job growth occurring in all four markets Nashville MSA Knoxville MSA Nonfarm Payrolls- SA (thru May 2015) Nonfarm Payrolls- SA (thru May 2015) 387,200 950,000 390,000 900,500 900,000 380,000 375,100 850,000 370,000 800,000 800,000 360,000 750,000 350,000 353
Slide 49: Rapid Job Growth Leads to Rapid Real Estate Absorption
PNFP operates in advantaged markets Rapid job growth leads to rapid real estate absorption Unemployment Rates Seasonally Adjusted (thru May 2015) 12.00 10.00 8.00 6.00 4.00 2.00 0.00 Nashville Knoxville Chattanooga Memphis US Nashville Home Sales Knoxville Chattanooga Memphis (April/May) 2Q15 1Q15 2
Slide 50: Nashville's Commercial Vacancy Rates Indicate Healthy Market
PNFP Operates in Advantaged Markets Nashville’s commercial vacancy rates indicate a healthy market Nashville CRE National Vacancy Rates CRE Vacancy Rates 2Q YE 2014 YE 2013 YE 2012 YE 2011 YE 2010 YE 2009 YE 2008 2Q 2015(**) (**) (**) (**) (**) (**) (***) (***) 2015 (**) Industrial / 6.3% 7.1% 8.7%
Slide 51: Second Quarter 2015 Investor Call
Second Quarter 2015 Investor Call M. Terry Turner, President and CEO Harold R. Carpenter, EVP and CFO July 22, 2015
Pinnacle Financial Partners — Q2 2015 Earnings Presentation on 6ix