Pinnacle Financial Partners, Inc. · NYSE:PNFP
Pinnacle Financial Partners — Q2 2023 Earnings Presentation
56 slides from Pinnacle Financial Partners's earnings presentation, Jul 19, 2023
Slide 1: Investor Call Second Quarter 2023
Investor Call SECOND QUARTER 2023 JULY 19, 2023 Time: 8:30 AM CT Webcast: www.pnfp.com (investor relations) M. TERRY TURNER, PRESIDENT AND CEO HAROLD R. CARPENTER, EVP AND CFO
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 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, total revenues, net income to common shareholders, earnings per diluted common share, revenue per diluted common share, PPNR, efficiency ratio, noninterest
Slide 4: Shareholder Value Dashboard: Key GAAP Measures
Shareholder Value Dashboard 2Q23 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 & ORE NCOs PNFP’s Median Quarterly Performance of 9.0
Slide 5: Shareholder Value Dashboard: Key Non-GAAP Measures
Shareholder Value Dashboard 2Q23 Summary Results of Key Non-GAAP Measures Total Revenues* Adjusted Pre-Tax Pre-Provision FD EPS* CAGR 8.5% Net Income* CAGR 12.8% CAGR 11.0% Total Core Deposits Total Loans Tangible Book Value per Share** CAGR 12.7% (millions) (millions) CAGR 16.7% CAGR 12.6% Classifi
Slide 6: 2Q23 Financial Information
2Q23 Financial Information Pinnacle continues to demonstrate extraordinary momentum during current volatile economic conditions. Our consistent focus on relationship banking and serving clients with distinctive service and effective advice increases our resilience in times such as these. 6
Slide 7: Favorable Deposit Growth In Difficult Environment
Favorable Deposit Growth In Difficult Environment Strong focus on growing deposits results in 12% linked-quarter annualized average growth in Q2 Average Deposit Growth Quarterly Avg Deposit Rates and Cumulative Beta $38,000 2.52% 2.75% 3.00% 60.00% Average Deposits (millions) 2.50% $36,356 Cost of T
Slide 8: Linked-Quarter Annualized Loan Growth was 11%
PNFP Linked-Quarter Annualized Loan Growth was 11% Low to mid-teen percentage growth anticipated for 2023 over end of period 2022 Average Loan Growth and Yields EOP Loan Growth $35,000 6.50% 6.30% 30.0% (excluding PPP loans) $30,000 5.90% 25.0% $30,882 26.0% $29,634 Average Loans $28,402 20.0% Loan
Slide 9: Operating Environment Continued to Impact Net Interest Margin
Operating Environment Continued to Impact Net Interest Margin Deposit rate competition, and inverted yield curve pressure 2Q NIM Net Interest Income & NIM Quarterly Avg. FFS, IB Cash & Repos $325 3.75% $5,000 5.00% Net Interest Income ($ in mil.) $4,500 4.50% Average Balances ($ in mil.) $300 3.50%
Slide 10: PNFP's Asset Quality Has Continued to Hold Up
PNFP’s Asset Quality Has Continued to Hold Up Problem loan metrics remain near historically low levels Net Charge Offs NPA/ Loans & ORE 2Q23 Highlights • Credit metrics show some deterioration but 0.55% continue to reflect a high-performing loan 0.17% 0.38% portfolio 0.13% 0.10% 0.27% • PNFP hiring
Slide 11: CRE Portfolio Continues to Perform
CRE Portfolio Continues to Perform Strength of CRE Portfolio Provides Confidence Should Conditions Weaken Construction Originations Fixed Rate CRE and Construction Maturities 2Q22 through 2Q23 ($ millions) $160 June 30, 2023 unpaid principle maturities - 3Q23 to 2Q25 ($ millions) 8.00% $1,600 $140 $
Slide 12: Second Quarter Fees Were Up 38.3% Linked Quarter
Second Quarter Fees Were Up 38.3% Linked Quarter** PNFP continues emphasis on gathering more share of wallet from client base Linked-Quarter Select Comments Annualized Year-over-Year • Wealth Management revenues experienced increases (dollars in thousands) 2Q23 1Q23 2Q22 Growth % Growth % primarily
Slide 13: 2Q23 Expense results consistent with prior quarter outlook
2Q23 Expense results consistent with prior quarter outlook Incentive expense fluctuations correlate with earnings and other performance metrics Linked-Quarter Yr-over-Yr (dollars in thousands) 2Q23 1Q23 2Q22 Annualized Growth % Growth % Select Comments: Salaries and commissions $88,403 $89,320 $76,7
Slide 14: Preservation and Growth in Tangible Book Value Remains a Critical Focus
Preservation and Growth in Tangible Book Value Remains a Critical Focus Second quarter again reflects focus on growth in TBV/Common Share year-over-year • Dividends – Tangible Book Value per • Dividends per common share of $0.22 in 2Q23. Common Share** • Tangible Book Value per Common Share Growth –
Slide 15: Bankers Healthcare Group
Bankers Healthcare Group BHG’s differentiated model has proven very resilient with continued strong originations, loan sales and yield/spread premium. The gain on sale model continues to provide meaningful earnings to BHG. Additionally, BHG has diversified its funding to several new channels over th
Slide 16: BHG Continues to Leverage & Grow its Bank Network
BHG Credit ContinuesQuality Continues to Leverage to Impress & Grow its Bank Network Sophisticated YTD credit bank placements scoring see a 23% models produce impressive results YOY increase Quarterly Origination & Placements ($mm)* • Quarterly origination and placements continue to be robust even w
Slide 17: BHG Has Diverse, Growing Funding Channels
BHGHas BHG Credit Quality Diverse, Continues Growing FundingtoChannels Impress Sophisticated BHG credit further diversified scoring its funding models channels throughproduce impressive private whole results loan sales in Q2 Approx. 1,600 Banks in the BHG bank network. 740 unique banks have Loan Sal
Slide 18: BHG Spreads Consistent with Pre-COVID Results
BHGSpreads BHG Credit Consistent Quality Continues to Impress with Pre-COVID Results BHG proactively increased Sophisticated borrowermodels credit scoring couponsproduce to offset higher borrowing impressive rates results Borrower Coupon and Bank Buy Rates Bank platform rates • Borrower loans sold t
Slide 19: Increased Focus on Higher FICO Originations
Increased Focus on Higher FICO Originations Over 40% of BHG lending YTD has been to FICO scores 750+, their highest ever FICO Chart Mix Originations ($ mm) • BHG continues to refine and 2013 Cumulative Net Loss Curves (18 months) $260 tighten its credit underwriting • Losses in certain risk classes,
Slide 20: BHG Reserves Have Adequate Cushion Relative to Actual Losses
BHG Reserves Have Adequate Cushion Relative to Actual Losses Continue to increase both on and off-balance sheet reserves • Reserves for off-balance sheet exposure created to support loans Reserves vs. Actual Losses for Off B/S Loans (TTM) sold to bank network partners. Reserves have been steadily 7.
Slide 21: BHG Financial Overview
BHG Financial Overview 2H23 Earnings Expected to be Consistent with Previous Outlook • BHG provides loans in as little as 3 days from application Origination Volume ($bn) Anticipate 2023 to funding $6.0 fundings of $3.8 B to $4.3 $4.0 B • Ample liquidity to fund loan originations via a proprietary $
Slide 22: PNFP Remains Excited about 2023
PNFP Remains Excited about 2023 Optimism as we look to 2024 is gaining traction for PNFP 2023 Outlook – as of July 19, 2023 (Note) 2022 Actual Results Y/Y EOP • We estimate low to mid-teens percentage EOP loan growth for 2023 over 2022 year-end balances. Y/Y growth of 24% Loan Growth Y/Y EOP • We es
Slide 23: PNFP is Engineered to Maximize Total Shareholder Return Over Time
PNFP is Engineered to Maximize Total Shareholder Return Over Time Total shareholder return performance outpaces peers over the last ten years Total Shareholder Return Performance 144.2% (Last 10 years through June 30, 2023) 136.0% 116.3% 115.2% 113.6% 93.7% 70.8% 68.2% 65.6% 59.2% 46.5% 44.4% 40.6%
Slide 24: Metrics Correlated to TSR Over Time
PNFP is Engineered to Maximize Total Shareholder Return Over Time Since inception, Pinnacle has focused on what we believe matters most Highly Correlated to TSR Over Time Not Highly Correlated to TSR Over Time • Revenue growth • Net interest margin percentage • Reported EPS growth • Cost of funds •
Slide 25: Compensation Structure Focuses on What Matters Most
PNFP is Engineered to Maximize Total Shareholder Return Over Time Pinnacle’s unique compensation structure focuses management and associates on what matters most PNFP Annual Cash Incentive Plan PNFP Long Term Incentive Plan* • Classified assets • NPA ratio • Revenue growth • Tangible book value per
Slide 26: Relationship-Based Model Yields Strong TSR with Manageable Risk
PNFP is Engineered to Maximize Total Shareholder Return Over Time Pinnacle’s relationship-based model yields strong TSR with historically manageable risk Extreme Volatility Over the Last 5 Years 175% Cumulative 5Y EPS Growth • Covid pandemic 150% 18.8% • Quantitative easing 125% CAGR • Extraordinary
Slide 27: Pinnacle's Markets Are Highly Advantaged Markets
PNFP is Engineered to Maximize Total Shareholder Return Over Time Pinnacle’s markets are highly advantaged markets U.S. Net Domestic Migration April 1, 2020 to July 1, 2022 Net Domestic Migration April 1, 2020 to July 1, 2022 Tennessee 146,403 North Carolina 211,867 South Carolina 165,948 Washington
Slide 28: Sustainable Competitive Advantage: Touch and Tech Model
PNFP is Engineered to Maximize Total Shareholder Return Over Time Pinnacle’s ability to continue compounding earnings is primarily tied to its sustainable competitive advantage Pinnacle’s high “touch and tech” model dominates all of its major competitors 28
Slide 29: Net Promoter Score Dominates Top Competitors
PNFP is Engineered to Maximize Total Shareholder Return Over Time Through up and down cycles, Pinnacle continues to invest in creating raving fans (net promoters) Pinnacle’s net promoter score dominates all of the top 6 competitors across all its markets Distribution of Evaluations Net Distribution
Slide 30: Touch and Tech Model Attracts More and Attrites Less Clients
PNFP is Engineered to Maximize Total Shareholder Return Over Time As a result of its differentiated service, Pinnacle maintains momentum with clients – historically the key to sustainable revenue growth Pinnacle’s high “touch and tech” model attracts more and attrites less clients $1-10MM Net $10-50
Slide 31: PNFP is Engineered to Maximize Total Shareholder Return Over Time
PNFP is Engineered to Maximize Total Shareholder Return Over Time • Revenue growth, reported EPS growth and tangible book value accretion have historically been most highly correlated to TSR over time. • Pinnacle associates and leadership are incented to produce revenue growth, EPS growth and tangib
Slide 32: Q&A Second Quarter 2023
Q&A SECOND QUARTER 2023 einnacle FINANCIAL PARTNERS
Slide 33: Supplemental Information
Supplemental Information Slide # • Balance Sheet 34 • Income Statement 50 • Peer Group 55 33
Slide 34: Balance Sheet – Loan Portfolio Segments
Balance Sheet – Loan Portfolio Segments ($ in millions) Amts. % Amts. % Amts. % Amts. % 2Q23 2Q23 1Q23 1Q23 2Q22 2Q22 2Q21 2Q21 C&I $10,979.2 35.3% $10,716.9 35.4% $9,244.7 35.1% $6,771.3 29.6% C&I – Paycheck Protection Program 4.6 0.0% 6.4 0.0% 51.1 0.2% 1,372.9 6.0% CRE – Owner Occ. 3,845.4 12.3%
Slide 35: Loan Portfolio – Market Segmentation
Balance Sheet – Loan Portfolio – Market Segmentation ($ in millions) TOTAL PINNACLE C&I & O/O CRE CRE & CONSTRUCTION OTHER LOANS* Amts. Amts. Amts. Amts. Amts. Amts. Amts. Amts. 2Q23 2Q22 2Q23 2Q22 2Q23 2Q22 2Q23 2Q22 Nashville $8,429.5 $7,741.1 $3,586.4 $3,420.5 $3,071.8 $2,793.7 $1,771.3 $1,526.9
Slide 36: Balance Sheet – Loan Portfolio
Balance Sheet – Loan Portfolio Net Loan Growth – 2Q23 YTD – Strategic Decisions: • Asset Generators – No growth; reduction of $25 million • BHG, JBB and Advocate Capital • Strategic Expansion - $1.0 billion • Atlanta, DC, Alabama, Kentucky, Franchise Finance, Equipment Finance • Recruiting Impact -
Slide 37: Loan Portfolio – CRE Segmentation
Balance Sheet – Loan Portfolio – CRE Segmentation ($ in millions) Total NOO and Multifamily Total Construction Total NOO and Construction Amts. Amts. Amts. Amts. Amts. Amts. Amts. Amts. Amts. 2Q23 1Q23 2Q22 2Q23 1Q23 2Q22 2Q23 1Q23 2Q22 Multifamily $1,538.8 $1,352.5 $996.4 $1,106.3 $1,116.6 $819.4 $
Slide 38: Loan Portfolio Lines of Credit
Balance Sheet – Loan Portfolio Lines of Credit ($'s in millions) Linked Qtr. 12/31/2021 3/31/2022 6/30/2022 9/30/2022 12/31/2022 3/31/2023 6/30/2023 Change CRE – Investment & Construction Net Active Balance $3,727.20 $4,096.40 $4,389.62 $4,743.41 $5,225.32 $5,726.97 $6,060.77 $333.80 Net Available C
Slide 39: Current Expected Credit Losses
Current Expected Credit Losses Total Allowance for Credit Losses for loans = $337.5 mm or 1.08% of loans at June 30, 2023 Allowance for Off-Balance % of Loans Total Credit Losses Sheet At June 30, 2022 $272,483 1.03% (1) $23,969 $296,452 Net Charge Offs ($10,983) 0.16% (2) ($10,983) 3Q Provision $26
Slide 40: Current Expected Credit Losses by Loan Type
Current Expected Credit Losses June 30, September 30, December 31, March 31, June 30, 2022 2022 2022 2023 2023 % of % of % of % of % of Allowance for Credit Losses Amount Loans Amount Loans Amount Loans Amount Loans Amount Loans Commercial and Industrial $125,772 1.36%* $140,285 1.44%* $144,353 1.41
Slide 41: Asset Quality
Asset Quality AS A % OF AS A % OF AS A % OF ($ in thousands) June 30, 2023 March 31, 2023 June 30, 2022 TOTAL LOANS TOTAL LOANS TOTAL LOANS NPLs and > 90 days Const. and land development $130 0.00% $130 0.00% $403 0.00% Consumer RE $18,764 0.06% 16,907 0.06% 9,754 0.04% CRE – Owner Occupied 3,059 0.
Slide 42: Net Loan Charge Offs by Loan Type
Balance Sheet – Loan Portfolio Net Loan Charge Offs by Loan Type 0.70% 0.60% 0.50% 0.40% 0.30% 0.20% 0.10% 0.00% -0.10% CRE Construction C&I Consumer RE Consumer and other Total 2020 2021 2022 2023 Net Charge Off Rates 42
Slide 43: Loan Portfolio – 100/300 Test
Balance Sheet – Loan Portfolio – 100/300 Test ($ in thousands) Description 2Q23 1Q23 4Q22 3Q22 2Q22 1Q22 Loans secured by real estate: Construction, land development, and other loans: 1-4 family residential construction loans $676,742 $737,692 $772,653 $792,046 $754,325 $701,029 Other construction l
Slide 44: CRE Recession Sensitive
CRE Recession Sensitive Key CRE Asset Classes Sectors Balance: $1.1Bn Balance: $528MM Professional Office 3.6% of Total Loans Senior Housing 1.7% of Total Loans Loans > $20MM: High growth markets For cash-out bridge 18th Smallest portfolio among 22-bank peer group 14 - 51.5% Average LTV - 73.4% Aver
Slide 45: Deposit Portfolio – Market Segmentation
Balance Sheet – Deposit Portfolio – Market Segmentation ($ in millions) TOTAL DEPOSITS CORE DEPOSITS NONCORE DEPOSITS TOTAL PINNACLE TRANSACTION AND MMDA CDs PUBLIC FUNDS and OTHER DEPOSITS 2Q23 2Q22 2Q23 2Q22 2Q23 2Q22 2Q23 2Q22 Nashville $14,251.9 $12,899.8 $12,618.1 $12,355.1 $733.0 $358.8 $900.8
Slide 46: Balance Sheet - Deposit Portfolio
Balance Sheet - Deposit Portfolio Ratio of EOP Uninsured and/or Uncollateralized Deposits Estimated Liquidity Available for Uninsured Deposits Balances at to Total Deposits ($’s in millions) Jun. 30, 2023 50.00% 43% Total Deposits $ 37,723 39% 40.00% 36% 34% 33% Less: Insured and/or Collateralized D
Slide 47: Bond Portfolio Statistics
Balance Sheet – Bond Portfolio Statistics Investment Securities Segmentation Portfolio: June 30, 2023 Total Investments $6.6 billion Net Unrealized Gain (Loss) ($176.0) million 1.7% 14.4% Quarter Duration Avg. Yield- TE 2Q23 4.5% 3.7% 1Q23 4.4% 3.5% 50.5% 26.2% 4Q22 4.4% 3.2% 3Q22 4.9% 2.7% 2Q22 4.6
Slide 48: Balance Sheet – Bond Portfolio
Balance Sheet – Bond Portfolio 4.00 30.0 3.66 Effective Bond Portfolio Composition End of Period 3.50 72% 71% 72% 3.00 25.0 70% 66% % of Total Assets 2.50 Bond Yields 2.00 20.0 1.50 34% 1.00 15.0 30% 29% 28% 28% 14.1 0.50 0.00 10.0 2022Q3 2018Q1 2018Q2 2018Q3 2018Q4 2019Q1 2019Q2 2019Q3 2019Q4 2020Q
Slide 49: Interest Rate Sensitivity
Interest Rate Sensitivity Rate Ramp Scenarios Rate Shock Scenarios 5.0% 10.0% 8.0% 3.0% 6.0% 1.8% 3.7% Net Interest Income % D Net Interest Income % D 1.6% 1.5% 4.0% 3.0% 1.2% 2.8% 2.9% 2.5% 1.0% 1.9% 2.2% 2.1% 1.0% 0.7% 2.0% 0.4% 0.3% 0.2% 0.6% 0.0% -0.2% -1.0% -0.7% -0.6% -0.6% -2.0% -1.0% -1.0% -
Slide 50: Income Statement – Revenue Per Share
Income Statement – Revenue Per Share LTM Revenue Per Share Growth* vs. Peers $22.00 20.0% 19.0% $21.39 $21.09 $21.00 17.5% 18.0% 16.2% $20.33 $20.00 $19.51 18.2% 14.9% 13.8% 16.0% 14.5% 13.1% 16.2% $19.00 $18.62 14.7% 13.0% 13.0% 14.0% Y/Y Revenue per Share Growth 11.3% 11.9% 11.9% $17.85 14.3% $18.
Slide 51: Income Statement – PPNR
Income Statement – PPNR ($'s in thousands) 2019 2020 2021 2022 YTD 2023 PPNR Trends Net interest income $ 766,142 $821,788 $932,401 $1,129,293 $627,624 Adjusted PPNR Noninterest income 263,826 317,840 395,734 416,124 263,368 $800 Noninterest expense (505,148) (564,455) (660,104) (779,999) (423,368)
Slide 52: BHG Financials
BHG Financials At Jun 30, At Mar 31, At Jun 30, ($'s in thousands) ($'s in thousands) 2Q 2023 1Q 2023 2Q 2022 2023 2023 2022 Cash and Cash Equivalents 590,930 591,246 454,982 Interest Income $ 144,142 $ 142,514 $ 98,089 Loans Held for Investment 3,268,535 3,429,382 2,533,138 Allowance for Loan Losse
Slide 53: Income Statement: Reconciliation of Non-GAAP Financial Measures
Income Statement Reconciliation of Non-GAAP Financial Measures 53
Slide 54: Income Statement: Reconciliation of Non-GAAP Financial Measures
Income Statement Reconciliation of Non-GAAP Financial Measures 54
Slide 55: 2023 Peer Group
2023 Peer Group Institution Name Ticker City, State Pinnacle Financial Partners, Inc. PNFP Nashville, TN Associated Banc-corp ASB Green Bay, WI Bank OZK OZK Little Rock, AR Bank United Inc. BKU Houston, TX Cadence Bank CADE Tupelo, MS Comerica Inc. CMA Dallas, TX Commerce Bancshares, Inc. CBSH Kansa
Slide 56: Investor Call Second Quarter 2023
Investor Call SECOND QUARTER 2023 M. TERRY TURNER, PRESIDENT AND CEO HAROLD R. CARPENTER, EVP AND CFO
Pinnacle Financial Partners — Q2 2023 Earnings Presentation on 6ix