Pinnacle Financial Partners, Inc. · NYSE:PNFP
Pinnacle Financial Partners — Q4 2020 Earnings Presentation
62 slides from Pinnacle Financial Partners's earnings presentation, Jan 20, 2021
Slide 1: Investor Call Fourth Quarter 2020
Investor Call FOURTH QUARTER 2020 January 20, 2021 Time: 8:30 AM CST Webcast: www.pnfp.com (investor relations) Audio only: 877-602-7944 M. TERRY TURNER, PRESIDENT AND CEO HAROLD R. CARPENTER, EVP AND CFO TIM HUESTIS, EVP AND CHIEF CREDIT OFFICER
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 press 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 Se
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, earnings per diluted common share, efficiency ratio, adjusted PPNR and the ratio of noninterest expense to average assets, excluding in certain instances t
Slide 4: 4Q20 Financial Information
4Q20 Financial Information Despite the difficult operating environment, the key success measures of asset quality, core deposit growth, fee income growth, pre-provision net revenue growth and tangible book value accretion remained very strong this quarter.
Slide 5: 4Q20 Summary Results of Key GAAP Measures
4Q20 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) (millions) Classified Asset Ratio NPA/ Loans & OREO NCOs 5
Slide 6: 4Q20 Summary Results of Key Non-GAAP Measures
4Q20 Summary Results of Key Non-GAAP Measures Adjusted Pre-Tax Pre-Provision Total Revenues FD EPS* $1.58 $304,429 Net Income* CAGR 20.5% $253,566 CAGR 13.7% $1.27 CAGR 21.0% $157,561 $249,780 $1.26 (millions) $219,484 $123,900 $0.97 $115,866 $131,002 $0.83 $119,761 $60,743 Total Core Deposits Tangi
Slide 7: PNFP Had Annualized Loan Growth of 8% in 4Q20
PNFP Had Annualized Loan Growth of 8% in 4Q20 Loan growth was up in 4Q20 and we remain optimistic regarding future loan growth from recent hires Average Loan Growth $24,000 5.40% Annual Organic Loan Growth $22,000 5.20% 20.0% (excludes Day 1 merger impact) $22,525 $22,493 $22,257 $20,000 5.00% 18.7%
Slide 8: PPP Program is a Differentiator for Pinnacle
PPP Program is a Differentiator for Pinnacle Pinnacle hopes to replicate its previous success on PPP • In support of our client base • Approximately 15,000 applications and $2.5B in funding from 2020 PPP program • Fees from PPP programs amortized over the life of the loan • Unamortized fees of $40.7
Slide 9: Balance Sheet Growth was Driven by Outsized Deposit Inflows
Balance Sheet Growth was Driven by Outsized Deposit Inflows Deposit growth continues to outperform expectations $28,000 Average Deposit Growth 2.70% $26,000 Annual Organic Deposit Growth $27,193 2.40% $26,352 $24,000 (excludes Day 1 merger impact) $24,807 40.0% Average Deposits $22,000 2.10% Deposit
Slide 10: Our Liquidity Ramp has Impacted NIM
Our Liquidity Ramp has Impacted NIM Wholesale funding changes and rebound in loan demand should reduce elevated liquidity Quarterly Avg. FFS and IB Cash Projected Wholesale Funding Changes $4,000 2.50% $1,200 2.25% 2.07% $1,047 $998 2.00% $3,500 $1,000 2.00% Average Balances ($ in millions) 1.75% $3
Slide 11: PNFP Grew Fees at a Double-Digit Percentages Pace YOY
PNFP Grew Fees at a Double-Digit Percentages Pace YOY Mortgage, BHG and other fee areas provided for substantial growth Year-over-Year 4Q20 3Q20 4Q19 Change Rate 4Q20 vs. 4Q19 Service charges $8,486 $9,854 $9,094 (6.7%) • Service charge income decreased in 4Q20 due to a decrease Investment services
Slide 12: Expenses Were In-line with Expectation for 4Q and YTD 2020
Expenses Were In-line with Expectation for 4Q and YTD 2020 Growth in expenses was largely the result of balance sheet restructuring charges Year-over-Year 4Q20 3Q20 4Q19 Growth % 4Q20 vs. 4Q19 Salaries and employee benefits: Salaries $54,390 $54,331 $48,795 11.5% • 4Q20 headcount up 147 FTEs compare
Slide 13: Several Capital Initiatives are Planned to Return in 2021
Several Capital Initiatives are Planned to Return in 2021 Tangible book value per share growth remains our focus, but other capital initiatives will be considered • Share Buy Back Program – • Last transaction on March 19, 2020 Tangible Book Value per Common Share** • Previous plan expired Dec. 31, 2
Slide 14: PNFP is Gaining Optimism about 2021
PNFP is Gaining Optimism about 2021 The results of the pandemic are not completely known, but we are confident in our model 2021 Outlook – as of January 19, 2021 • Hiring successes over last two years provide a reasonable basis for our high-single digit loan growth outlook in 2021, excluding impact
Slide 15: Bankers' Healthcare Group
Bankers’ Healthcare Group BHG’s differentiated model has proven very resilient with continued strong originations, loan sales and yield/spread premium. The gain on sale model continues to provide meaningful pre-provision net revenue to BHG and to Pinnacle. Capital and reserve levels support a very s
Slide 16: The Pandemic Served to Validate the PNFP/BHG Model
The Pandemic Served to Validate the PNFP/BHG Model BHG continues to originate loans at record levels while maintaining yields $600 18.0% Gain on Sale Model Drives Outperformance 15.8% 15.8% • 4Q20 was the highest origination quarter 14.2% 14.4% 14.6% 14.6% 14.5% 14.4% 14.4% in the history of BHG. 13
Slide 17: BHG Credit Quality Continues to Impress
BHG Credit Quality The Pandemic ServedContinues to Impress to Validate the PNFP/BHG Model Vintage analysis demonstrates Sophisticated continuous credit scoring improvement models in portfolio produce performance impressive results • Historical credit results indicate that 70% of losses occur Histori
Slide 18: BHG Credit Quality Continues to Impress
BHGPandemic The Credit Quality Continues Served to to PNFP/BHG Validate the Impress Model Sophisticated Recourse creditbuild obligation reserve scoring models was maintained produce impressive results in 4Q20 8.00% 7.64% $4,000 • Recourse obligation reserves increased to Historical Charge Offs and R
Slide 19: The Pandemic Served to Validate the PNFP/BHG Model
The Pandemic Served to Validate the PNFP/BHG Model BHG believes its unique model is outperforming other online lenders by a wide margin Big Year at BHG BHG On-Balance Sheet Volumes • Balance sheet continues to grow in a sound $1,200,000 manner $1,000,000 • Closed a $160mm securitization in 3Q20. $80
Slide 20: COVID-19 and our Borrowers
COVID-19 and our Borrowers All borrowers have been impacted by COVID-19 to some extent. It seems apparent that segments like hotels, restaurants, retail and entertainment have been most impacted by the loss of revenue from the national and local attempts to contain its spread. But it appears the sti
Slide 21: Asset Quality Has Continued to Hold Up
Asset Quality Has Continued to Hold Up Asset quality metrics remain stable going into the first quarter of 2021 Classified Asset Ratio NPA/ Loans & OREO Past Dues as a % of Total Loans 0.38% 0.34% 0.58% 0.55% 16.4% 0.26% 0.46% 12.9% 13.4% 0.40% 0.19% 12.4% 0.38% 0.18% 8.1% 21
Slide 22: Asset Quality Has Continued to Hold Up
Asset Quality Has Continued to Hold Up Loan modifications under Section 4013 of the CARES Act primarily relate to Hotel portfolio Total $ Volume of % of Total Loans in Modifications* at Category Dec. 31, 2020 Hotels $527,139 52.0% Retail 94,382 3.8% Restaurant 26,554 3.8% Entertainment 58,680 7.2% A
Slide 23: Asset Quality Has Continued to Hold Up
Asset Quality Has Continued to Hold Up COVID impacted categories continue to outperform expectations Outstanding Balances % Nonperforming Loans % Classified Loans % Past Due > 30 days 4Q20 4Q19 4Q20 4Q19 4Q20 4Q19 4Q20 4Q19 Hotels NOO CRE & Construction 974,263 918,883 0.16% 0.34% 0.87% 0.59% 0.70%
Slide 24: Asset Quality Has Continued to Hold Up
Asset Quality Has Continued to Hold Up PNFP invested significant resources to manage credit risk Comprehensive Credit defense work completed during the 4th quarter included a review of • Extensive review of Hotel loans $1MM and greater. • All non-pass grade exposures > $500,000 • Comprehensive revie
Slide 25: Moving Forward in this Pandemic
Moving Forward in this Pandemic The impacts of the COVID-19 pandemic are not fully known. Duration and severity now appear to be a function of the length of time before a vaccine is broadly administered. At this juncture, we intend to continue our aggressive focus on protecting our associates, clien
Slide 26: 4Q20 Summary
4Q20 Summary • Asset Quality metrics remained excellent • EPS, PPNR and revenues are strong • BHG’s asset quality, originations, placements and spreads remained very strong • Well positioned for future growth 26
Slide 27: Q1 Guidance: Continue the Initiatives that Began in 2020
Q1 Guidance: Continue the Initiatives that Began in 2020 • Continue active monitoring of borrowers • Continue reductions in excess liquidity through mid 2021 • Continue focus on EPS and PPNR initiatives that were started in 2020 • Position for once in a generation market share gain opportunity • Con
Slide 28: Q&A Fourth Quarter 2020
Q&A FOURTH QUARTER 2020 einnacle FINANCIAL PARTNERS
Slide 29: Supplemental Information
Supplemental Information Slide # • Balance Sheet 31 • Income Statement 51 • Peer Group 62 29
Slide 30: Balance Sheet – Loan Portfolio
Balance Sheet – Loan Portfolio ($ in millions) Amts. % Amts. % Amts. %s Amts. %s 4Q20 4Q20 3Q20 3Q20 4Q19 4Q19 4Q18 4Q18 C&I $6,239.6 27.8% $6,144.9 27.4% $6,290.3 31.8% $5,271.4 29.8% C&I – Paycheck Protection Program 1,798.9 8.0% 2,251.0 10.0% - 0.0% - 0.0% CRE – Owner Occ. 2,802.2 12.5% 2,748.1 1
Slide 31: Balance Sheet – Loan Portfolio
Balance Sheet – Loan Portfolio ($ in millions) TOTAL PINNACLE TENNESSEE LOANS CAROLINAS/ VA LOANS ATLANTA OTHER UNIT LOANS* Amts. Amts. Amts. Amts. Amts. Amts. Amts. Amts. Amts. Amts. 4Q20 4Q19 4Q20 4Q19 4Q20 4Q19 4Q20 4Q19 4Q20 4Q19 C&I $6,239.6 $6,290.3 $4,401.3 $4,635.5 $871.4 $906.1 $28.9 $- $93
Slide 32: Balance Sheet – Loan Portfolio
Balance Sheet – Loan Portfolio ($ in millions) TOTAL PINNACLE C&I & O/O CRE CRE & CONSTRUCTION OTHER LOANS* Amts. Amts. Amts. Amts. Amts. Amts. Amts. Amts. 4Q20 4Q19 4Q20 4Q19 4Q20 4Q19 4Q20 4Q19 Nashville $6,457.9 $6,393.4 $2,721.2 $3,055.4 $2,620.4 $2,275.4 $1,116.3 $1,062.6 Knoxville 1,865.8 1,76
Slide 33: Balance Sheet – Loan Portfolio
Balance Sheet – Loan Portfolio ($ in millions) Amts. % Amts. % Amts. % Amts. % 4Q20 4Q20 3Q20 3Q20 4Q19 4Q19 4Q18 4Q18 Residential – Spec $230.3 1.0% $251.9 1.1% $367.9 1.9% $352.3 2.0% Residential – Custom 168.4 0.8% 164.3 0.7% 124.1 0.6% 134.2 0.8% Residential – Condo 0.4 0.0% 0.4 0.0% 1.2 0.0% -
Slide 34: Balance Sheet – Loan Portfolio
Balance Sheet – Loan Portfolio ($ in millions) TOTAL PINNACLE TENNESSEE LOANS CAROLINAS/VA ATLANTA LOANS OTHER UNIT LOANS LOANS Amts. Amts. Amts. Amts. Amts. Amts. Amts. Amts. Amts. Amts. 4Q20 4Q19 4Q20 4Q19 4Q20 4Q19 4Q20 4Q19 4Q20 4Q19 Residential – Spec $230.3 $367.9 $156.9 $258.5 $73.2 $108.0 $-
Slide 35: Balance Sheet – Loan Portfolio
Balance Sheet – Loan Portfolio ($ in millions) Total NOO and Multifamily Total Construction Total NOO and Construction Amts. Amts. Amts. Amts. Amts. Amts. Amts. Amts. Amts. 4Q20 3Q20 4Q19 4Q20 3Q20 4Q19 4Q20 3Q20 4Q19 Multifamily $618.3 $571.6 $620.8 $750.9 $651.0 $471.3 $1,369.2 $1,222.6 $1,092.1 H
Slide 36: Hotel Portfolio
Hotel Portfolio Amounts as of 12.31.20 Hotel Property Types Hotel Flags ADR, RevPAR & Occupancy Trendlines 36
Slide 37: Top 10 Hotel Borrowers
Hotel Portfolio Amounts as of 12.31.20 Hotel Construction Type, Delivery Dates, Volumes Hotel Type (Construction) Hotel Flag (Construction) PNFP Hotel Property Type Descriptions are as follows: Economy – The economy sector often is used to categorize the smaller, older, low-rise buildings. Exposure
Slide 38: Restaurant Portfolio
Restaurant Portfolio Amounts as of 12.31.20 C&I and Owner-Occupied CRE Restaurant Borrowers with Exposure Greater than $10mm Restaurants by Type Exposure at 12.31.20 LTV at CARES Act Section Location ('000s) 12.31.20 Food Service Type 4013 Modification Nashville, TN $ 39,750 37% Fine Dining No Leban
Slide 39: Retail Portfolio
Retail Portfolio Amounts as of 12.31.20 CRE- NOO by Tenant Type 10 Largest Exposure Loan CARES Act Tenant Type Descriptions are as follows: Retail at 12.31.20 Tenant Type Section 4013 • Grocery Anchored Shopping Center is otherwise known as the “Neighborhood Center”, this is a Type Top 10 Retail NOO
Slide 40: Entertainment Portfolio
Entertainment Portfolio Amounts as of 12.31.20 Entertainment by Type 10 Largest Entertainment Exposure at CARES Act Relationships 12.31.20 Entertainment Section 4013 ('000) ('000s) Loan Type Type Modification Needham Heights, MA $ 50,000 C&I Recording Industry No United Kingdom 43,844 C&I Recording
Slide 41: Balance Sheet – Loan Portfolio Lines of Credit
Balance Sheet – Loan Portfolio Lines of Credit ($'s in millions) Linked Qtr. 9/30/2019 12/31/2019 3/31/2020 6/30/2020 9/30/2020 12/31/2020 Change CRE – Investment & Construction Net Active Balance $ 3,814.50 $ 3,870.10 $ 3,929.10 $ 4,090.80 $4,067.10 $4,106.82 $39.72 Net Available Credit 2,894.50 3,
Slide 42: Current Expected Credit Losses
Current Expected Credit Losses Total Allowance for Credit Losses for loans = $285.1 mm or 1.27% of loans at December 31, 2020, or 1.38% excluding PPP loans Off-Balance ACL % of Loans Total ACL Sheet December 31, 2019 $94,777 0.48% (1) $2,364 $97,141 Forecasted economic metrics(1) Base Case Outlook a
Slide 43: Current Expected Credit Losses
Current Expected Credit Losses December 31, 2019 Probable Incurred January 1, 2020 March 31, 2020 June 30, 2020 September 30, 2020 December 31, 2020 Losses CECL Adoption CECL CECL CECL CECL Allowance for Credit Losses Amount % of Loans Amount % of Loans Amount % of Loans Amount % of Loans Amount % o
Slide 44: Asset Quality
Asset Quality AS A % OF AS A % OF AS A % OF ($ in millions) December 31, 2020 September 30, 2020 December 31, 2019 TOTAL LOANS TOTAL LOANS TOTAL LOANS NPLs and > 90 days Const. and land development $1,954 0.01% $3,152 0.01% $2,278 0.01% Consumer RE 22,463 0.10% 22,176 0.10% 24,835 0.13% CRE – Owner
Slide 45: Balance Sheet – Loan Portfolio
Balance Sheet – Loan Portfolio Net Commercial Loan Charge Offs by Loan Type Net Consumer Loan Charge Offs by Loan Type 0.50% 8.00% 7.00% 0.40% 6.00% 0.30% 5.00% 0.20% 4.00% 0.10% 3.00% 2.00% 0.00% 1.00% -0.10% 0.00% -0.20% -1.00% CRE Construction C&I Net commercial charge offs Consumer RE Consumer a
Slide 46: Balance Sheet – Loan Portfolio
Balance Sheet – Loan Portfolio ($ in thousands) Description 4Q20 3Q20 2Q20 1Q20 4Q19 3Q19 Loans secured by real estate: Construction, land development, and other loans: 1-4 family residential construction loans $514,819 $527,743 $580,193 $582,106 $578,443 $575,975 Other construction loans and all la
Slide 47: Balance Sheet – Deposit Portfolio
Balance Sheet – Deposit Portfolio ($ in millions) TOTAL DEPOSITS CORE DEPOSITS NONCORE DEPOSITS TOTAL PINNACLE TRANSACTION AND MMDA CDs PUBLIC FUNDS and OTHER DEPOSITS 4Q20 4Q19 4Q20 4Q19 4Q20 4Q19 4Q20 4Q19 Nashville $10,556.1 $7,844.6 $9,856.2 $6,990.3 $469.5 $561.4 $230.4 $292.9 Knoxville 2,295.2
Slide 48: Balance Sheet – Bond Portfolio
Balance Sheet – Bond Portfolio Conservative bond portfolio Portfolio: December 31, 2020 Total Investments $4.6 billion Net Unrealized Gain $124.6 million 3.3% 2.6% Quarter Duration Avg. Yield- TE 4Q20 4.35% 2.3% 3Q20 4.7% 2.4% 2Q20 4.6% 2.6% 32.0% 1Q20 4.3% 2.8% 53.4% 4Q19 4.8% 2.9% 3Q19 4.4% 3.0% 4
Slide 49: Balance Sheet – Bond Portfolio
Balance Sheet – Bond Portfolio 4.00 40.0 Effective Bond Portfolio Composition End of Period 3.50 35.0 3.00 30.0 79% 80% 77% 76% 76% % of Total Assets 2.50 25.0 2.27 Bond Yields 2.00 20.0 1.50 13.2 15.0 1.00 10.0 24% 24% 0.50 5.0 23% 21% 20% - - 2015Q3 2015Q4 2016Q1 2016Q2 2016Q3 2016Q4 2017Q1 2017Q2
Slide 50: Interest Rate Sensitivity
Interest Rate Sensitivity IRR analysis indicates neutral balance sheet positioning; 100bp +/- ramps and shocks generate <1% NII moves Rate Shock Scenarios Rate Ramp Scenarios 3.0% 6.0% 2.1% 4.1% 2.0% 4.0% Net Interest Income % D 2.2% Net Interest Income % D 1.0% 0.9% 1.0% 0.7% 2.0% 0.6% 1.0% 0.3% 0.
Slide 51: NIM Adjusted for PPP and Liquidity Impact
NIM Adjusted for PPP and Liquidity Impact Estimate PPP and Liquidity Build negatively impacted 4Q20 NIM by 0.29% Adjusted Avg Adjusted ProForma Adj. Yield/ Actual Avg Balances ProForma Balances after PF ProForma Interest after Yield/ Rate Rates after 4Q20 Adjustments Entries Interest Adjustments PF
Slide 52: NIM Adjusted for PPP and Liquidity Impact
NIM Adjusted for PPP and Liquidity Impact Estimate PPP and Liquidity Build negatively impacted 3Q20 NIM by 0.40% Adjusted Avg Adjusted ProForma Adj. Yield/ Actual Avg Balances ProForma Balances after PF ProForma Interest after Yield/ Rate Rates after 3Q20 Adjustments Entries Interest Adjustments PF
Slide 53: NIM Adjusted for PPP and Liquidity Impact
NIM Adjusted for PPP and Liquidity Impact Estimate PPP and Liquidity Build negatively impacted 2Q20 NIM by 0.32% Adjusted Avg Adjusted ProForma Adj. Yield/ Actual Avg Balances ProForma Balances after PF ProForma Interest after Yield/ Rate Rates after 2Q20 Adjustments Entries Interest Adjustments PF
Slide 54: Income Statement – Revenue per Common Share
Income Statement – Revenue per Common Share LTM Revenue Per Share Growth vs. Peers $15.50 14.5% 15.0% $15.07 $15.00 13.0% 13.0% 13.0% 11.9% 11.9% $14.50 11.6% $14.35 11.3% 11.6% 11.4% 12.0% $14.05 $14.00 $13.87 Y/Y Revenue per Share Growth $13.54 $13.44 $13.50 8.7% 7.3% 8.8% 9.0% Revenue per Share $
Slide 55: Income Statement – Mortgage Volumes
Income Statement – Mortgage Volumes $625,000 5.00% $550,000 4.50% $475,000 4.00% $400,000 3.50% $325,000 3.00% $250,000 2.50% $175,000 2.00% $100,000 1.50% $25,000 1.00% Purchase Money Refinance Gross fees as a % of loans originated 55
Slide 56: PPNR Growth Now in Focus by Pinnacle Management
PPNR Growth Now in Focus by Pinnacle Management Despite the operating environment, PPNR grows meaningfully in 2020 We believe key to success in 2021 will be our focus on growing PPNR in 2020 ($'s in thousands) 2017 2018 2019 2020 Annual Adjusted PPNR $600 PPNR Trends Net interest income $543,306 $ 7
Slide 57: BHG Financials
BHG Financials Strong equity to support business model • Strong performance in 4Q20 • Strong cash position to provide increased liquidity and, thus, better withstand any Pandemic losses At Dec 31, At Sep 30, At Dec 31, 2020 2020 2019 4Q 2020 3Q 2020 4Q 2019 Cash and Cash Equivalents $ 226,021,806 $
Slide 58: Income Statement: Reconciliation of Non-GAAP Financial Measures
Income Statement Reconciliation of Non-GAAP Financial Measures 58
Slide 59: Income Statement: Reconciliation of Non-GAAP Financial Measures
Income Statement Reconciliation of Non-GAAP Financial Measures 59
Slide 60: Income Statement: Reconciliation of Non-GAAP Financial Measures
Income Statement Reconciliation of Non-GAAP Financial Measures 60
Slide 61: Peer Group
Peer Group Institution Name Ticker City, State Pinnacle Financial Partners PNFP Nashville, TN Valley National Bancorp VLY Wayne, NJ BancorpSouth, Inc. BXS Tupelo, MS Bank of the Ozarks, Inc. OZK Little Rock, AR Simmons First National Corp. SFNC Pine Bluff, AR F.N.B. Corporation FNB Pittsburgh, PA Cu
Slide 62: Investor Call Fourth Quarter 2020
Investor Call FOURTH QUARTER 2020 M. TERRY TURNER, PRESIDENT AND CEO HAROLD R. CARPENTER, EVP AND CFO TIM HUESTIS, EVP AND CHIEF CREDIT OFFICER
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