Pinnacle Financial Partners, Inc. · NYSE:PNFP
Pinnacle Financial Partners — Q1 2017 Earnings Presentation
54 slides from Pinnacle Financial Partners's earnings presentation, Apr 18, 2017
Slide 1: First Quarter 2017 Investor Call
First Quarter 2017 Investor Call M. Terry Turner, President and CEO Harold R. Carpenter, EVP and CFO April 18, 2017
Slide 2: Safe Harbor 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 and Section 21E of t
Slide 3: Safe Harbor Statements – Non-GAAP Financial Matters
Safe Harbor Statements Non-GAAP Financial Matters This release contains certain non-GAAP financial measures, including, without limitation, net income, earnings per diluted share, efficiency ratio, core net interest margin, noninterest expense and the ratio of noninterest expense to average assets a
Slide 4: 1Q17 Summary Results – GAAP Measures
1Q17 Summary Results – GAAP Measures Execution of fundamentals fueled exceptional growth in key valuation drivers Total Revenues FD EPS $0.82 ROTCE Earnings Growth 15.56% $119,148 $0.68 15.04% 14.74% $99,758 $0.62 $69,755 13.47% $0.47 $58,640 12.41% $0.39 $54,661 Balance Sheet Growth Total Loans Tot
Slide 5: 1Q17 Summary Results – Non-GAAP Measures
1Q17 Summary Results – Non-GAAP Measures Execution of fundamentals fueled exceptional growth in key valuation drivers Total Revenues FD EPS* ROTCE* Earnings Growth $0.83 $119,148 15.56% 15.64% $0.71 14.89% Up 19.4% yr/yr $99,758 Up 16.9% yr/yr $0.62 $69,755 13.45% $58,640 $0.47 12.41% $54,661 $0.39
Slide 6: 1Q17 Summary Results – GAAP Measures
1Q17 Summary Results – GAAP Measures Pinnacle delivers against lofty strategic targets ROAA Net Interest Margin Noninterest Income / Average Assets 1.60% 4.00% 1.50% 3.80% 1.30% 1.40% 3.60% 1.10% 3.40% 0.90% 1.20% 3.20% 0.70% 1.00% 3.00% 0.50% 0.80% Noninterest Expense / Average Assets Net Chargeoff
Slide 7: 1Q17 Summary Results – Non-GAAP Measures
1Q17 Summary Results – Non-GAAP Measures Pinnacle delivers against lofty strategic targets ROAA Net Interest Margin Noninterest Income / Average Assets (1) 1.60% 4.00% 1.50% 3.90% 1.45% 3.76% 3.78% 3.78% 1.23% 1.42% 3.80% 3.74% 3.60% 1.30% 1.17% 1.40% 1.08% 1.32% 3.60% 1.10% 0.97% 0.94% 1.20% 0.90%
Slide 8: 1Q17 Summary Results
1Q17 Summary Results Pinnacle’s long held philosophy continues to deliver #7 #20 #34 Companies That Care Excited Associates Engaged Clients #25 Enriched Shareholders 8
Slide 9: 1Q17 Summary Results
1Q17 Summary Results PNFP continued the infrastructure build to support future rapid growth 1. Pinnacle / BNC merger update • Jan. 22 – Announcement of transaction • Apr. 6 – Regulatory approvals obtained • Mid to Late June – Shareholder meetings anticipated • Mid June to Early July – Merger close •
Slide 10: Loan and Deposit Growth are Keys to Earnings Growth
Loan and Deposit Growth are Keys to Earnings Growth Strong performance continues in both total revenues and revenues per share Rev/Share - $2.58 $120 exclusive of 1Q17 $3.00 capital raise Revenues per diluted WAVG share $100 $2.50 Total Revenues $80 $2.00 (000's) $60 $1.50 $40 $1.00 $20 $0.50 $- $-
Slide 11: Linked-quarter loan volume growth remains strong
Loan and Deposit Growth are Keys to Earnings Growth Linked-quarter loan volume growth remains strong 4.88% $10,000 5.00% 4.49% $8,558 $8,000 4.00% $8,357 $8,233 Loan Yields approx. 4.26% exclusive of $6,998 Average Loans $6,742 purchase $6,000 3.00% $6,458 Loan Yields accounting $5,690 (millions) $4
Slide 12: Average deposit balances grew $300+ million in 1Q17
Loan and Deposit Growth are Keys to Earnings Growth Average deposit balances grew $300+ million in 1Q17 $10,000 2.00% $9,000 1.80% $9,099 $8,791 $8,000 1.60% $8,454 Avg. Deposits $7,000 1.40% $7,093 $7,037 $6,787 (millions) $6,000 1.20% 1.01% $5,898 1.00% $5,000 1.00% $4,885 $4,792 $4,758 $4,655 $4,
Slide 13: Core Net Interest Margin Trends Stabilizing
Loan and Deposit Growth are Keys to Earnings Growth Core Net Interest Margin Trends Stabilizing Net Interest Margin – Reported & Core Core Margin (*) appears to be stabilizing 4.00% after moving 40 bps since early 2015 3.80% (*) Core excludes impact of discount accretion income; amounts 3.60% prior
Slide 14: Balance sheet is well-positioned for rising rates
Loan and Deposit Growth are Keys to Earnings Growth Balance sheet is well-positioned for rising rates Volumes @ March 31, 2017 (in billions) Prime Rate Loans $1.8 30-day Libor 2.4 Overnight cash 0.1 Less: Libor funding (0.3) Less: Fed funds funding (0.5) Net volumes* $3.5 Ramped Asset Sensitivity **
Slide 15: PNFP and BNCN balance sheets combined should produce asset sensitivity
Loan and Deposit Growth are Keys to Earnings Growth PNFP and BNCN balance sheets combined should produce asset sensitivity Earning Asset Composition Variable rate assets 44% 33% Assets with floors 45% Fixed rate assets 51% 53% 61% 6% 3% 4% Funding Composition DDAs Interest Checking 20% 17% 19% 25% 2
Slide 16: Fee Businesses also Contribute to Earnings Growth
Fee Businesses also Contribute to Earnings Growth Fee businesses produce another strong quarter – Up 17.5% year-over-year 1Q17 4Q16 3Q16 2Q16 1Q16 Service charges $3,856 $3,850 $3,778 $3,430 $3,443 Investment services 2,822 3,320 2,592 2,500 2,346 Insurance commissions 1,859 1,178 1,233 1,193 1,706
Slide 17: PNFP Focuses on Strategic Expense Management
PNFP Focuses on Strategic Expense Management 1Q17 expenses remain inside strategic targets 1Q17 4Q16 3Q16 2Q16 1Q16 Salaries and benefits $38,352 $37,994 $36,053 $34,254 $32,517 Equipment and occupancy 9,675 9,228 9,401 8,312 8,130 Other real estate owned 252 44 17 222 112 Marketing and business dev
Slide 18: High growth urban markets across the Southeast provide further opportunity
PNFP Remains Focused on Long-term Shareholder Value High growth urban markets across the Southeast provide further opportunity BNC BNC BNC BNC BNC BNC BNC BNC BNC 18
Slide 19: PNFP is getting great traction in recent market extensions
PNFP Remains Focused on Long-term Shareholder Value PNFP is getting great traction in recent market extensions Market At 3/31/17 At 12/31/16 At 12/31/15 1Q17 Net % change Loans (000’s) Memphis 763 736 458 3.7% Chattanooga 853 800 708 6.6% Core Deposits (000’s) Memphis 716 661 385 8.3% Chattanooga 67
Slide 20: Opportunities likely exist for de novo or merger related expansion
PNFP Remains Focused on Long-term Shareholder Value Opportunities likely exist for de novo or merger related expansion M&A Criteria De novo Sizing • At least $1 billion in assets • Nashville, Knoxville experience • Commercial thrust – Approximately $2.0 million in cumulative losses prior to break-ev
Slide 21: PNFP is focused on Tennessee and the Southeast
PNFP Remains Focused on Long-term Shareholder Value PNFP is focused on Tennessee and the Southeast 1. Continuation of current high growth, high profit plan 2. Explore expansion to other high growth southeastern markets 21
Slide 22: Q&A – First Quarter 2017 Investor Call
Q&A – First Quarter 2017 Investor Call
Slide 23: Supplemental Information
Supplemental Information Chart • Balance Sheet • Asset Quality • Income Statement • Pinnacle Financial Partners profile • Economic and Market Conditions 23
Slide 24: Supplemental Information: Balance Sheet
Supplemental Information Balance Sheet 24
Slide 25: Loan portfolio is well diversified
Balance Sheet Loan portfolio is well diversified Amts. %’s(*) Amts. %’s(*) Amts. %’s(*) Amts. %’s 1Q17 1Q17 4Q16 4Q16 1Q16 1Q16 1Q15 1Q15 C&D and Land $1,015.1 11.8% $912.7 10.8% $764.1 11.2% $324.5 7.0% Consumer RE 1,196.4 13.8% 1,185.9 14.0% 1,042.3 15.3% 723.9 15.6% CRE – Owner Occ. 1,399.5 16.2%
Slide 26: Construction portfolio reflects discipline
Balance Sheet Construction portfolio reflects discipline Amts. %’s(*) Amts. %’s(*) Amts. %’s(*) Amts. %’s(*) 1Q17 1Q17 4Q16 4Q16 1Q16 1Q16 1Q15 1Q15 Residential – Spec $200.7 2.3% $195.7 2.3% $120.9 1.9% $39.0 0.8% Residential – Custom 96.9 1.1% 81.9 1.0% 97.1 1.4% 36.0 0.8% Residential – Condo 5.6
Slide 27: The C&I loan portfolio is highly diversified
Balance Sheet The C&I loan portfolio is highly diversified NAICS Sector Description 1Q17 4Q16 1Q16 Accommodation and Food Services 3.90% 4.11% 3.93% Admin. and Support and Waste Mgmt & Remediation 2.69% 2.97% 2.57% Agriculture, Forestry, Fishing and Hunting 0.12% 0.09% 0.16% Arts, Entertainment, and
Slide 28: PNFP remains focused on relationship funding
Balance Sheet PNFP remains focused on relationship funding 3/31/2017 Percent 12/31/2016 Percent Core Funding: Non-interest bearing deposits $2,508,680 25.25% $2,399,191 24.99% Interest-bearing deposits 1,869,570 18.82% 1,737,996 18.10% Money Market accounts 3,345,727 33.68% 3,185,186 33.17% Time dep
Slide 29: Total Commitments
Total Commitments (millions) $- $1,000 $2,000 $3,000 $4,000 $5,000 $6,000 $7,000 $959 $715 57.30% $1,000 $685 $975 $779 $1,009 $808 Note: Excludes HELOCS and credit cards $1,054 $787 Balance Sheet $1,055 $815 $1,138 $865 $1,105 $941 Net active balance $1,166 $926 $1,190 $989 $1,216 $1,024 $1,247 $1,
Slide 30: The securities book yields increase in 1Q17
Balance Sheet The securities book yields increase in 1Q17 4.00% 40.00% 3.58% 3.50% 35.00% 3.00% 30.00% 2.50% 25.00% 20.75% 2.00% 2.44% 20.00% 1.50% 15.00% 1.00% 10.00% 12.62% 0.50% 5.00% 0.00% 0.00% Bond Yields % of Avg. Assets 30
Slide 31: Conservative bond portfolio
Balance Sheet Conservative bond portfolio Portfolio: March 31, 2017 0.0% 0.3% 16.7% Total Investments $1.605 billion Unrealized Gain (Loss) $ (12.7) million QTD Purchases $ 336.3 million 18.3% QTD Sales $ 1.4 million 59.0% Duration Avg Yield – TE 5.7% 1Q17 3.4% 2.4% Agency Corporates MBS 4Q16 3.2% 2
Slide 32: Supplemental Information: Asset Quality
Supplemental Information Asset Quality 32
Slide 33: Past due loans remain very low
Asset Quality Past due loans remain very low Mar. 31, As a % of Dec. 31, As a % of Mar. 31, As a % 2017 total 2016 total 2016 of total (000’s) loans loans loans Past Due Loans (*) Nonaccrual loans** $10,011 0.12% $10,873 0.13% $9,592 0.14% Accruing loans 14,684 0.17% 22,331 0.26% 22,064 0.32% Total
Slide 34: NPLs and loans >90 days past due & accruing remain very low
Asset Quality NPLs and loans >90 days past due & accruing remain very low PNFP NPLs and >90 days Mar. 31, As a % of Dec. 31, As a % of Mar. 31, As a % of (000’s) 2017 total loans 2016 total loans 2016 total loans Const. and land development $4,112 0.05% $6,613 0.08% $7,963 0.12% Consumer RE 8,857 0.
Slide 35: Classified assets remain low
Asset Quality Classified assets remain low (in thousands) Balances Balances Balances Mar. 31, 2017 Dec. 31, 2016 Mar. 31, 2016 Classified loans and ORE: - Substandard commercial loans $138,720 $148,460 $155,125 - Doubtful commercial loans 1 1 - - Other impaired loans 11,262 9,820 17,639 - 90 days pa
Slide 36: Supplemental Information: Income Statement
Supplemental Information Income Statement 36
Slide 37: Mortgage volumes strong in 1Q17
Income Statement Mortgage volumes strong in 1Q17 250,000 5.00% 200,000 4.00% 150,000 3.00% 100,000 2.00% 50,000 0 1.00% Purchase Money Refinance Gross fees as a % of loans originated 37
Slide 38: Reconciliation of Non-GAAP measures
Income Statement Reconciliation of Non-GAAP measures 1Q17 4Q16 3Q16 2Q16 1Q16 Net interest income $88,767 $89,413 $86,635 $75,044 $73,902 Total noninterest income $30,382 $30,743 $31,692 $32,713 $25,856 Less: Securities (gains) losses - (395) - - - Noninterest income, excluding investment (gains) an
Slide 39: Reconciliation of Non-GAAP measures
Income Statement Reconciliation of Non-GAAP measures 1Q17 4Q16 3Q16 2Q16 1Q16 Total non-interest income $30,382 $30,743 $31,692 $32,713 $25,856 Less: Securities (gains) losses - (395) - - - Noninterest income, excluding the impact of net gains and losses on sale of investment securities $30,382 $30,
Slide 40: Reconciliation of Non-GAAP measures
Income Statement Reconciliation of Non-GAAP measures 1Q17 4Q16 3Q16 2Q16 1Q16 Net income $39,653 $36,097 $32,376 $30,787 $27,965 Merger-related charges 672 3,264 5,672 980 1,830 Tax effect on merger-related charges (264) (1,281) (2,225) (385) (718) Net income less merger-related charges $40,061 $38,
Slide 41: Reconciliation of Non-GAAP measures
Income Statement Reconciliation of Non-GAAP measures 1Q17 4Q16 3Q16 2Q16 1Q16 Net income $39,653 $36,097 $32,376 $30,787 $27,965 Merger-related charges 672 3,264 5,672 980 1,830 Tax effect on merger-related charges (264) (1,281) (2,225) (385) (718) Net income less merger-related charges $40,061 $38,
Slide 42: Reconciliation of Non-GAAP measures
Income Statement Reconciliation of Non-GAAP measures 1Q17 4Q16 3Q16 2Q16 1Q16 4Q15 3Q15 2Q15 1Q15 4Q14 3Q14 2Q14 1Q14 Client Margin 4.13% 4.24% 4.08% 4.19% 4.19% 4.15% 4.05% 4.04% 4.12% 4.10% 4.10% 4.07% 4.10% Margin adjustments due to: Nonprime Auto Loans 0.02% 0.04% 0.12% 0.16% 0.13% 0.13% 0.13% 0
Slide 43: Supplemental Information: Pinnacle Financial Partners Profile
Supplemental Information Pinnacle Financial Partners Profile 43
Slide 44: PNFP Profile
PNFP Profile Recently completed acquisitions positions firm in four great banking markets Headquarters: Nashville, TN Offices: 30 in 8 Middle-TN counties 9 in 5 East-TN counties Founded: 2000 5 in West-TN Total assets: $11.725 Billion Avg. daily trading volume **: 315,511 shares (3/31/17) % Institut
Slide 45: PNFP has an extraordinarily experienced team of entrepreneurs
PNFP Profile PNFP has an extraordinarily experienced team of entrepreneurs Name Title Age Years in Years at Banking Pinnacle Industry M. Terry Turner President and Chief Executive Officer 61 38 16 Robert A. McCabe, Jr. Chairman of the Board 66 39 16 Hugh M. Queener Chief Administrative Officer 60 41
Slide 46: PNFP has a 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 Share 6/30/16 6/30/00 (1) Share Share 6/3
Slide 47: PNFP has a track record for best-in-market share movement
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 Change Top 11 Holding Market Market Change Market Company Share Share in Share Market Company Share Share in Share Share 6/30/16 6/30/15(1) Share 6/30/16
Slide 48: Supplemental Information: Economic & Market Conditions
Supplemental Information Economic & Market Conditions 48
Slide 49: PNFP operates in advantaged markets
PNFP operates in advantaged markets Total Population Median Per Capita Population Change HH Income Income 2017 2010 - 2017 2017 2017 MSA Total Deposits ($000) (actual) (%) ($) ($) Nashville-Davidson--Murfreesboro--Franklin, TN 51,900,622 1,881,524 12.61 57,222 31,399 Memphis, TN-MS-AR 28,030,646 1,3
Slide 50: Pinnacle operates in advantaged markets
Pinnacle operates in advantaged markets TENNESSEE • Tennessee is fourth overall and in the top 10 of every category in “Top States for Doing Business” Area Development • Tennessee ranked No. 1 in the nation for job creation from foreign direct investment IBM Global Location Trends • Tennessee ranked
Slide 51: Pinnacle operates in advantaged markets
Pinnacle 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 ranks No
Slide 52: Job growth is occurring in all four markets
PNFP operates in advantaged markets Job growth is occurring in all four markets Nashville MSA Knoxville MSA Nonfarm Payrolls- SA (thru January 2017) Nonfarm Payrolls- SA (thru January 2017) 1,000,000 410,000 950,000 400,000 900,000 390,000 380,000 850,000 370,000 800,000 360,000 750,000 350,000 700,
Slide 53: Nashville's commercial vacancy rates indicate a healthy market
PNFP Operates in Advantaged Markets Nashville’s commercial vacancy rates indicate a healthy market CRE Vacancy Rates Nashville Knoxville Chattanooga Memphis % Change % Change % Change % Change 4Q16 4Q16 4Q16 4Q16 from PY from PY from PY from PY Industrial / Warehouse 4.0% (22.4%) 3.4% (46.7%) 6.3% (
Slide 54: First Quarter 2017 Investor Call
First Quarter 2017 Investor Call M. Terry Turner, President and CEO Harold R. Carpenter, EVP and CFO April 18, 2017
Pinnacle Financial Partners — Q1 2017 Earnings Presentation on 6ix