Pinnacle Financial Partners, Inc. · NYSE:PNFP
Pinnacle Financial Partners — Q4 2019 Earnings Presentation
47 slides from Pinnacle Financial Partners's earnings presentation, Jan 22, 2020
Slide 1: Investor Call Fourth Quarter 2019
Investor Call FOURTH QUARTER 2019 January 22, 2020 Time: 8:30 AM CDT Webcast: www.pnfp.com (investor relations) Audio only: 877‐602‐7944 M. TERRY TURNER, PRESIDENT AND CEO HAROLD R. CARPENTER, EVP AND CFO
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 of 1933 and Section
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 share, efficiency ratio and the ratio of noninterest expense to average assets, excluding in certain instances the impact of expenses
Slide 4: 4Q19 Summary Results of Key GAAP Measures
4Q19 Summary Results of Key GAAP Measures Total Revenues FD EPS Book Value per Share Total Loans Total Deposits ROTCE (millions) (millions) Classified Asset Ratio NPA/ Loans & OREO NCOs 4
Slide 5: 4Q19 Summary Results of Key Non-GAAP Measures
4Q19 Summary Results of Key Non‐GAAP Measures Total Revenues FD EPS* Tangible Book Value per Share** $249,780 $253,566 $1.26 $1.27 $32.45 $219,484 CAGR 19.1% CAGR 31.4% $0.97 CAGR 15.8% $27.27 $119,761 $0.83 $23.71 $98,083 $0.69 $20.06 $17.46 Total Loans Total Core Deposits ROTCE** $17,617 (millions
Slide 6: PNFP's Hiring and Engagement Model Well Received in NC, SC, and VA
PNFP’s Hiring and Engagement Model has been Well Received in NC, SC, and VA PNFP engaged BNC associates and substantially exceeded its hiring plan Actual‐to‐date 72 Planned‐to‐date 29 Planned 65 Planned Planned‐to‐date Actual‐to‐date 6
Slide 7: PNFP is Particularly Advantaged Given the Competitive Landscape
PNFP is Particularly Advantaged Given the Competitive Landscape 91% of PNFP’s offices are within 2 miles of a Truist Office 2-Mile Overlap with Truist vs. Peers (%) 100.0% 91.5% 88.0% 90.0% 77.9% 79.1% 79.9% 80.0% 75.4% 77.3% 70.0% 65.6% 67.0% 60.1% 61.8% 60.0% 50.2% 50.0% 43.5% 40.0% 34.5% 31.5% 30
Slide 8: PNFP Primarily Focuses on Top and Bottom Line Growth
PNFP Primarily Focuses on Top and Bottom Line Growth PNFP continues to grow revenue/share at a double‐digit pace and faster than peers LTM Revenue Per Share Growth* vs. Peers $15.00 14.5% 15.0% 13.0% 13.0% 13.0% 11.9% 11.9% 11.6% $14.00 11.3% 12.0% $13.54 Y/Y Revenue per Share Growth $13.44 8.8% $12
Slide 9: Loan & Deposit Growth are Keys to Growth: Loans
Loan & Deposit Growth are Keys to Top and Bottom Line Growth Loan growth remained strong in 4Q19 $20,000 5.50% $19,600 $19,217 $18,000 Annual Organic Loan Growth $18,611 $17,938 (excludes Day 1 merger impact) $17,630 $17,259 $16,000 5.00% $16,730 20.0% $15,957 5.00% $15,520 $15,017 18.7% $14,000 Ave
Slide 10: Net Interest Margin Influences Top and Bottom Line Growth: Loan Yields
Net Interest Margin Influences Top and Bottom Line Growth Loan yields continue to hold during this volatile rate environment All Loans C&I CRE Construction At December 31, 2019 (*) LIBOR Prime 23.2% 38.4% 33.3% 35.1% T‐Bill 36.3% 44.9% 56.2% 1.5% Fixed Rate <1Y 47.3% Fixed Rate >1Y 27.9% 0.9% 20.7%
Slide 11: Loan & Deposit Growth are Keys to Growth: Deposits
Loan & Deposit Growth are Keys to Top and Bottom Line Growth Funding loan growth as efficiently as possible is the key to our growth $22,000 3.00% Annual Organic Deposit 2.75% Growth $20,000 20.0% (excludes Day 1 merger impact) $20,079 $19,778 2.50% $18,865 $18,000 $18,368 $18,358 $18,113 Avg. Depos
Slide 12: Net Interest Margin Influences Top and Bottom Line Growth
Net Interest Margin Influences Top and Bottom Line Growth PNFP moved quickly on deposit costs when the Fed moved • Deposit rates peaked in July, the same month that Fed cut rates for the first time • Due to client outreach beginning early in 2019, the salesforce was proactively positioned to respond
Slide 13: Credit Discipline Impacts Bottom Line
Credit Discipline Impacts Bottom Line Concentration discipline and granularity offer great protection to bottom line Real Estate Portfolio Concentrations aggregated by real estate category and common borrower Granularity of Real Estate Portfolio Largest CRE Projects by Category ‐ Aggregate portfolio
Slide 14: Fee Income Growth Supports Ongoing Top and Bottom Line Growth
Fee Income Growth Supports Ongoing Top and Bottom Line Growth PNFP continues to grow strategic fee businesses • BHG experienced 76% growth in noninterest income in 2019Y 2018Y 2017Y 2019 compared to 2018, expect 8% ‐ 12% growth in Service charges $36,769 $36,088 $31,499 2020 Investment services 24,1
Slide 15: BHG Continues to Outperform
BHG Continues to Outperform Continuous improvements have provided significant opportunity for growth BHG Total Loans and Borrowings Total BHG Loan Originations At Year End $1,800,000 $1,442,000 $1,200,000 $1,500,000 Thousands $1,200,000 $1,000,000 $872,000 $900,000 $662,764 $711,000 Thousands $800,0
Slide 16: BHG Continues to Outperform: Net Earnings Growth
BHG Continues to Outperform Continuous improvements have provided significant opportunity for growth BHG Net Earnings Growth $250,000 Proj. 8‐ 12% 2‐3 year $200,000 Revenue Sources 2018 2019 $182,461 growth Horizon Loan Placements and Thousands $150,000 81.5% 77.3% 60% Originations $121,194 $100,000
Slide 17: Expense Containment Growth Supports Ongoing Top and Bottom Line Growth
Expense Containment Growth Supports Ongoing Top and Bottom Line Growth PNFP continues to grow strategic fee businesses 2019Y 2018Y 2017Y Salaries and employee benefits: Salaries $185,845 $161,229 $130,929 • Salary increase largely attributable to increased Commissions 13,798 12,644 7,573 personnel.
Slide 18: Top Quartile Profitability Targets Adjusted in Q3 2019
PNFP has long‐targeted top quartile profitability and consistently delivered Targets adjusted in Q3 2019 to focus on critical return metrics 1.70% ROAA 1.69% 1.60% 1.62% 1.62% 4Q19 1.50% 1.56% 1.55% 1.54% 1.53% 1.52% Operating 4Q19 1.40% 0.13% ACTUALS 1.41% range ACTUALS 1.39% 1.38% 1.30% 1.39% 1.35
Slide 19: PNFP's Entry into Atlanta
PNFP’s Entry into Atlanta – The Southeast’s Economic Center Atlanta offers great opportunities for PNFP and its Shareholders Current Market Target Market New Market 19
Slide 20: PNFP's Entry into Atlanta
PNFP’s Entry into Atlanta – The Southeast’s Economic Center Atlanta offers great opportunities for PNFP and its Shareholders 20
Slide 21: Atlanta: Competitive Landscape Ripe for Pinnacle's Model
PNFP’s Entry into Atlanta – The Southeast’s Economic Center The competitive landscape is ripe for Pinnacle’s distinctive model 60% of the top 20 banks in 2009 are no longer in market Atlanta Deposit Market Share: 2009 Current Atlanta Deposit Market Share Deposits in Market Deposits in Market Numbe
Slide 22: Pinnacle's Execution in Nashville Provides the Roadmap
PNFP’s Entry into Atlanta – The Southeast’s Economic Center Pinnacle’s execution in Nashville provides the roadmap FDIC Deposits Greenwich 2Q19 Market Report 0% 5% 10% 15% 20% 30% Lead Relationships as % of Market 25% Pinnacle Bank Pinnacle 20% Bank of America 15% Suntrust Bank B 10% Bank C Bank A R
Slide 23: 5 Year Build-out Targets
PNFP’s Entry into Atlanta – The Southeast’s Economic Center Pinnacle intends to invest in order to seize this “once‐in‐a‐generation” opportunity 5 Year Build‐out Targets • 50 relationship managers • 5 business focused offices • Full product offering • Treasury management • Wealth management • Mortga
Slide 24: Outlook for 2020
Outlook for 2020 We remain committed to long‐term shareholder value creation through top and bottom line growth 2020 Focus Items High single‐digit to low double‐digit annualized loan growth Grow core deposits while managing funding costs Low double‐digit fee growth EPS growth in top quartile of peer
Slide 25: Q&A Fourth Quarter 2019
FINANCIAL PARTNERS FOURTH QUARTER 2019
Slide 26: Supplemental Information
Supplemental Information Chart • Balance Sheet 27 • Asset Quality 38 • Income Statement 39 • Peer Group 46 26
Slide 27: Balance Sheet – Loan Portfolio
Balance Sheet – Loan Portfolio Amts. % Amts. % Amts. %s Amts. %s 4Q19 4Q19 3Q19 3Q19 4Q18 4Q18 4Q17 4Q17 C&I $6,290.3 31.8% $6,002.3 30.5% $5,271.4 29.8% $4,141.3 26.5% CRE – Owner Occ. 2,669.8 13.5% 2,595.8 13.4% 2,653.4 15.0% 2,460.0 15.7% Total C&I & O/O CRE $8,960.1 45.3% $8,598.1 43.9% 7,924.8
Slide 28: Balance Sheet – Loan Portfolio
Balance Sheet – Loan Portfolio TOTAL PINNACLE TENNESSEE LOANS CAROLINAS/ VA LOANS OTHER UNIT LOANS* Amts. Amts. Amts. Amts. Amts. Amts. Amts. Amts. 4Q19 4Q18 4Q19 4Q18 4Q19 4Q18 4Q19 4Q18 C&I $6,290.3 $5,271.4 $4,635.5 $4,147.8 $906.1 $731.9 $748.7 $391.7 CRE – Owner Occ. 2,669.8 2,653.4 1,562.2 1,5
Slide 29: Balance Sheet – Loan Portfolio
Balance Sheet – Loan Portfolio TOTAL PINNACLE C&I & O/O CRE CRE & CONSTRUCTION OTHER LOANS* Amts. Amts. Amts. Amts. Amts. Amts. Amts. Amts. 4Q19 4Q18 4Q19 4Q18 4Q19 4Q18 4Q19 4Q18 Nashville $6,393.4 $5,972.7 $3,055.4 $3,004.1 $2,275.4 $2,101.1 $1,062.6 $867.5 Knoxville 1,766.6 1,549.8 1,075.7 944.4
Slide 30: Balance Sheet – Loan Portfolio
Balance Sheet – Loan Portfolio Amts. % Amts. % Amts. % Amts. % 4Q19 4Q19 3Q19 3Q19 4Q18 4Q18 4Q17 4Q17 Residential – Spec $367.9 1.9% $360.0 1.9% $352.3 2.0% $278.7 1.8% Residential – Custom 124.1 0.6% 129.1 0.7% 134.2 0.8% 95.9 0.6% Residential – Condo 1.2 0.0% 1.0 0.0% ‐ 0.0% 0.6 0.0% Commercial C
Slide 31: Balance Sheet – Loan Portfolio
Balance Sheet – Loan Portfolio TOTAL PINNACLE TENNESSEE LOANS CAROLINAS/VA LOANS OTHER UNIT LOANS Amts. Amts. Amts. Amts. Amts. Amts. Amts. Amts. 4Q19 4Q18 4Q19 4Q18 4Q19 4Q18 4Q19 4Q18 Residential – Spec $367.9 $352.3 $258.5 $255.8 $108.0 $96.5 $1.5 $ ‐ Residential – Custom 124.1 134.2 72.5 88.6 50
Slide 32: Balance Sheet – Loan Portfolio
Balance Sheet – Loan Portfolio Total NOO and Multifamily Total Construction Total NOO and Construction Amts. Amts. Amts. Amts. Amts. Amts. Amts. Amts. Amts. 4Q19 3Q19 4Q18 4Q19 3Q19 4Q18 4Q19 3Q19 4Q18 Multifamily $620.8 $669.7 $655.9 $471.3 $430.0 $390.3 $1,092.1 $1,099.7 $1,046.2 Hospitality 771.6
Slide 33: Balance Sheet – Loan Portfolio: Net Charge Offs
This image cannot currently be display ed. Balance Sheet – Loan Portfolio Balance Sheet – Loan Portfolio Net Commercial Loan Charge Offs by Loan Type Net Consumer Loan Charge Offs by Loan Type 0.25% 3.00% 0.20% 2.50% 0.15% 2.00% 0.10% 1.50% 0.05% 1.00% 0.00% 0.50% ‐0.05% 0.00% ‐0.10% ‐0.50% CRE Cons
Slide 34: Balance Sheet – Loan Portfolio
Balance Sheet – Loan Portfolio Description 4Q19 3Q19 2Q19 1Q19 4Q18 3Q18 Loans secured by real estate: Construction, land development, and other loans: 1‐4 family residential construction loans $578,443 $575,975 $564,339 $575,753 $541,253 $523,300 Other construction loans and all land development an
Slide 35: Balance Sheet – Deposit Portfolio
Balance Sheet – Deposit Portfolio TOTAL DEPOSITS CORE DEPOSITS NONCORE DEPOSITS PUBLIC FUNDS and OTHER TOTAL PINNACLE TRANSACTION AND MMDA CDs DEPOSITS 4Q19 4Q18 4Q19 4Q18 4Q19 4Q18 4Q19 4Q18 Nashville $7,844.6 $7,161.9 $6,990.3 $6,368.6 $561.4 $502.1 $292.9 $291.2 Knoxville 1,640.7 1,485.4 1,459.2
Slide 36: Balance Sheet – Bond Portfolio
Balance Sheet – Bond Portfolio Conservative bond portfolio Portfolio: December 31, 2019 Total Investments $3.729 billion Net Unrealized Gain (Loss) $37.6 million 2.7% 2.0% Quarter Duration Avg. Yield‐ TE 4Q19 4.8% 2.9% 3Q19 4.4% 3.0% 2Q19 4.1% 3.2% 50.2% 36.0% 1Q19 3.7% 3.4% 4Q18 3.6% 3.2% 3Q18 4.4%
Slide 37: Balance Sheet – Bond Portfolio
Balance Sheet – Bond Portfolio 4.00 40.0 Quarterly Avg. FFS and Cash Effective Bond Portfolio Composition $850 3.00% 3.50 35.0 End of Period 2.85 Average Balances ($ in millions) 3.00 30.0 77% $750 2.50% 74% 70% 65% % of Total Assets 2.50 25.0 60% $650 2.00% Bond Yields Average Yield 2.00 20.0 13.41
Slide 38: Asset Quality
Asset Quality AS A % OF TOTAL AS A % OF TOTAL AS A % OF TOTAL (000S) Dec. 31, 2019 Sept. 30, 2019 DEC. 31, 2018 LOANS LOANS LOANS Past Due Loans (*) Nonaccrual loans $25,841 0.13% $39,548 0.20% $35,306 0.20% Accruing loans 35,963 0.18% 45,591 0.24% 60,537 0.34% Total past due $61,804 0.31% $85,139 0
Slide 39: Fee Income Growth Supports Ongoing Top and Bottom Line Growth
Fee Income Growth Supports Ongoing Top and Bottom Line Growth PNFP continues to grow strategic fee businesses Deposit‐Related Fees 1.30% (Service Charges, Interchange) $20,000 Yr/Yr Growth Income from Equity Method Investment 6.5% (BHG) $18,000 1.20% $30,000 Yr/Yr Growth $16,000 75.9% $14,000 1.10%
Slide 40: Expenses are Leveraged to Produce Top and Bottom Line Growth
Expenses are Leveraged to Produce Top and Bottom Line Growth Leveraging our associate base is the key to efficiency $500.0 Employee Retention^ 94% $449.8 $441.0 $400.0 $427.5 $424.9 $419.9 $412.8 $415.9 4Q17 to 4Q19 $404.6 $393.1 $300.0 (decrease of $20,700/ associate) $200.0 $228.8 92% $216.9 $214.
Slide 41: Income Statement – Discount Accretion, Income Tax Rate and Share Repurchase Program
Income Statement – Discount Accretion, Income Tax Rate and Share Repurchase Program Actual/Anticipated Discount Accretion Core Income Tax Effective Tax Rate Trends Share Repurchase Program Through Dec 2020 (in thousands) 45.00% $18,000 40.00% 4Q19 3Q19 2Q19 1Q19 4Q18 $16,000 $14,000 # of shares 228,
Slide 42: Income Statement – Mortgage Volumes
Income Statement – Mortgage Volumes $325,000 6.00% $275,000 5.00% $225,000 4.00% $175,000 3.00% $125,000 2.00% $75,000 1.00% $25,000 0.00% Purchase Money Refinance Gross fees as a % of loans originated 42
Slide 43: Income Statement – Reconciliation of Non-GAAP Financial Measures
Income Statement – Reconciliation of Non‐GAAP Financial Measures 43
Slide 44: Income Statement – Reconciliation of Non-GAAP Financial Measures
Income Statement – Reconciliation of Non‐GAAP Financial Measures 44
Slide 45: Income Statement – Reconciliation of Non-GAAP Financial Measures
Income Statement – Reconciliation of Non‐GAAP Financial Measures 45
Slide 46: Peer Group
Peer Group Institution Name Ticker City, State Pinnacle Financial Partners PNFP Nashville, TN Associated Banc‐Corp ASB Green Bay, WI BancorpSouth, Inc. BXS Tupelo, MS Bank of the Ozarks, Inc. OZRK Little Rock, AR Chemical Financial Corporation CHFC Midland, MI Cullen/Frost Bankers, Inc. CFR San Anto
Slide 47: Investor Call
Investor Call FOURTH QUARTER 2019 M. TERRY TURNER, PRESIDENT AND CEO HAROLD R. CARPENTER, EVP AND CFO
Pinnacle Financial Partners — Q4 2019 Earnings Presentation on 6ix