Pinnacle Financial Partners, Inc. · NYSE:PNFP
Pinnacle Financial Partners — Q2 2017 Earnings Presentation
50 slides from Pinnacle Financial Partners's earnings presentation, Jul 19, 2017
Slide 1: Second Quarter 2017 Investor Call
Second Quarter 2017 Investor Call M. Terry Turner, President and CEO Harold R. Carpenter, EVP and CFO July 19, 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: 2Q17 Summary Results – GAAP Measures
2Q17 Summary Results – GAAP Measures Execution of fundamentals fueled exceptional growth in key valuation drivers Total Revenues FD EPS $0.80 ROTCE 15.34% Earnings Growth 15.39% $141,684 $0.73 $107,756 $0.64 $71,293 13.50% 13.58% $0.49 $59,820 $0.42 12.75% $54,949 Balance Sheet Growth Total Loans To
Slide 5: 2Q17 Summary Results – Non-GAAP Measures
2Q17 Summary Results – Non‐GAAP Measures Execution of fundamentals fueled exceptional growth in key valuation drivers Total Revenues FD EPS* $0.84 ROTCE* Earnings Growth $141,684 $0.75 15.44% 15.64% $107,756 $0.64 $71,293 14.19% $59,820 $0.49 13.50% $0.42 12.72% $54,949 Balance Sheet Growth Total Lo
Slide 6: 2Q17 Summary Results – GAAP Measures
2Q17 Summary Results – GAAP Measures Pinnacle delivers against lofty strategic targets ROAA Net Interest Margin Noninterest Income / Average Assets 1.60% 4.00% 1.40% 3.90% 1.30% 1.40% 3.80% 1.20% 3.70% 1.10% 3.60% 1.00% 1.20% 3.50% 0.90% 3.40% 0.80% 1.00% 3.30% 0.70% 0.80% Noninterest Expense / Aver
Slide 7: 2Q17 Summary Results – Non-GAAP Measures
2Q17 Summary Results – Non‐GAAP Measures Pinnacle delivers against lofty strategic targets ROAA Net Interest Margin Noninterest Income / Average Assets (1) 1.60% 4.00% 1.41% 1.40% 1.44% 3.90% 1.30% 1.24% 3.76% 3.77% 1.40% 1.36% 3.80% 3.72% 1.20% 1.35% 3.71% 3.68% 3.70% 3.65% 1.10% 1.05% 1.21% 3.60%
Slide 8: 2Q17 Summary Results
2Q17 Summary Results PNFP continued the infrastructure build in 2Q17 to support future rapid growth 1. Pinnacle / BNC merger update • Jan. 22 – Announcement of transaction • Apr. 6 – Regulatory approvals obtained • June 12 – Shareholder meetings anticipated • June 16 – Merger close • September – BNC
Slide 9: 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 $150 $3.00 $2.64 Revenues per diluted WAVG share $125 $2.50 Total Revenues $100 $2.00 (000's) $75 $1.50 $1.31 $50 $1.00 $25 $0.50 $‐ $‐ Fee income NII Total revenue per shar
Slide 10: Loan and Deposit Growth are Keys to Earnings Growth: Average Loans
Loan and Deposit Growth are Keys to Earnings Growth Linked‐quarter loan growth remains strong as yields increase 4.88% $10,000 5.00% $9,817 4.66% $8,558 $8,000 4.00% $8,357 $8,233 $6,998 Average Loans $6,742 $6,000 3.00% $6,458 Loan Yields $5,690 (millions) $4,737 $4,625 $4,000 2.00% $4,436 $4,358 $
Slide 11: Loan and Deposit Growth are Keys to Earnings Growth: Average Deposits
Loan and Deposit Growth are Keys to Earnings Growth Average deposit balances grew $1.3 billion in 2Q17 $11,000 2.00% $10,000 1.80% $10,394 $9,000 1.60% $9,099 $8,791 Avg. Deposits $8,000 $8,454 1.40% $7,000 1.25% (millions) 1.20% $7,093 $7,037 $6,787 $6,000 1.01% 1.00% $5,898 $5,000 0.80% $4,885 $4,
Slide 12: Fee Businesses also Contribute to Earnings Growth
Fee Businesses also Contribute to Earnings Growth Fee businesses produce another strong quarter – Up 20.5% year‐over‐year 2Q17 1Q17 4Q16 3Q16 2Q16 Service charges $4,179 $3,856 $3,850 $3,778 $3,430 Investment services 3,110 2,822 3,320 2,592 2,500 Insurance commissions 1,461 1,859 1,178 1,233 1,193
Slide 13: PNFP Focuses on Strategic Expense Management
PNFP Focuses on Strategic Expense Management 2Q17 expenses remain inside strategic targets 2Q17 1Q17 4Q16 3Q16 2Q16 Salaries and benefits $43,676 $38,352 $37,994 $36,053 $34,254 Equipment and occupancy 10,713 9,675 9,228 9,401 8,312 Other real estate owned 63 252 44 17 222 Marketing and business dev
Slide 14: BNC Tangible Book Value Accretion Exceeds Target
BNC Tangible Book Value Accretion Exceeds Target GAAP ‐ Book Value per Share Non‐GAAP – TBV per Share $46.56 $22.58 $29.92 $19.58 $23.39 $16.56 $21.47 $14.53 $19.86 $12.78 Total equity Intangibles Tangible equity Shares issued TE/Shares Dec 2016 equity $ 1,496,696 $ (566,698) $ 929,998 46,359 $ 20.0
Slide 15: BNC Tangible Book Value Accretion Exceeds Target
BNC Tangible Book Value Accretion Exceeds Target Key Transaction Impacts to PNFP(1) 2018E EPS Accretion ~ 10% On Track IRR ~ 20% Initial Tangible Book Value Accretion ~ 5% Tangible Book Value Earnback Period n/a As of December 31, 2016 Pro Forma PNFP BNCN @ 7/1/2017(1) Updated Capital Ratios 6/30/17
Slide 16: The Path Forward
The Path Forward “What’s past is prologue.” 16
Slide 17: Extraordinary Growth Potential on the Path Forward
Extraordinary Growth Potential on the Path Forward PNFP has a competitive advantage to take share from large regionals Nashville Knoxville 30% 30% Pinnacle Regional C 20% 20% Penetration Regional A Penetration Regional A Client Client Regional B Regional C Pinnacle 10% National A 10% Regional B Nati
Slide 18: Extraordinary Growth Potential on the Path Forward
Extraordinary Growth Potential on the Path Forward PNFP is getting great traction in recent market extensions Market At 6/30/17 At 12/31/16 At 12/31/15 YTD Annualized Growth Loans (000’s) Memphis 875 736 458 37.8% Chattanooga 922 800 708 30.5% Core Deposits 716 661 385 16.6% Memphis (000’s) Chattano
Slide 19: Extraordinary Growth Potential on the Path Forward
Extraordinary Growth Potential on the Path Forward BNC is the perfect platform for Pinnacle – the cream of the crop 40% Large Regional A National A Penetration Client National B Large Regional B Bank of North Carolina Small Regional B Small Regional A 0% 45% 75% Excellent Client Satisfaction Note: C
Slide 20: Extraordinary Growth Potential on the Path Forward
Extraordinary Growth Potential on the Path Forward North Carolina’s competitive landscape is tailor made for PNFP’s strategy Bank of North Carolina Performance Top Drivers of Overall Satisfaction Large Large National National Bank of Regional Regional Bank A Bank B North Bank A Bank B Full Year 2016
Slide 21: Extraordinary Growth Potential on the Path Forward
Extraordinary Growth Potential on the Path Forward Associate engagement at BNC is “job 1” • 234 former BNC Associates have attended as of 6/30 • Over 80% of all retained associates will attend by year end • 85% of participants gave the Pinnacle orientation a top box rating! 21
Slide 22: Extraordinary Growth Potential on the Path Forward
Extraordinary Growth Potential on the Path Forward BNC associate engagement is in fact occurring “The whole orientation made me excited about being an employee and making this firm successful!” “Fantastic! Definitely has aided with BNC converting to the Pinnacle culture.” “Rick did an excellent job
Slide 23: Extraordinary Growth Potential on the Path Forward
Extraordinary Growth Potential on the Path Forward The BNC integration overall is on‐track and highly accretive • Cultural integration is well underway • The system integration schedule has been expedited • ~ $40 million in cost take‐outs in 2018 are still on track • Potential revenue synergies are
Slide 24: Extraordinary Growth Potential on the Path Forward
Extraordinary Growth Potential on the Path Forward High growth urban markets across the Southeast provide further opportunity 24
Slide 25: Extraordinary Growth Potential on the Path Forward
Extraordinary Growth Potential on the Path Forward 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‐eve
Slide 26: Long-Term Shareholder Value
Long‐Term Shareholder Value PNFP is focused on rapid growth across the Southeast 1. Continuation of current high growth, high profit plan 2. Explore expansion to other high growth southeastern markets 26
Slide 27: Q&A – Second Quarter 2017 Investor Call
Q&A – Second Quarter 2017 Investor Call
Slide 28: Supplemental Information
Supplemental Information Chart • Balance Sheet 29 • Asset Quality 36 • Income Statement 40 • Pinnacle Financial Partners profile 47 28
Slide 29: Supplemental Information: Balance Sheet
Supplemental Information Balance Sheet 29
Slide 30: Balance Sheet: Loan portfolio is well diversified
Balance Sheet Loan portfolio is well diversified Amts. %’s(*) Amts. %’s(*) Amts. %’s(*) Amts. %’s(*) 2Q17 2Q17 1Q17 1Q17 2Q16 2Q16 2Q15 2Q15 C&D and Land $1,772.8 12.0% $1,015.1 11.8% $816.7 11.5% $372.0 7.7% Consumer RE 2,552.9 17.3% 1,196.4 13.8% 1,068.6 15.1% 740.6 15.3% CRE – Owner Occ. 2,368.7
Slide 31: Balance Sheet: Construction portfolio reflects discipline
Balance Sheet Construction portfolio reflects discipline Amounts %’s(*) Amts. %’s(*) Amts. %’s(*) Amts. %’s(*) 2Q17 2Q17 1Q17 1Q17 2Q16 2Q16 2Q15 2Q15 Residential – Spec $243.0 1.6% $200.7 2.3% $128.9 1.8% $48.4 1.0% Residential – Custom 153.3 1.0% 96.9 1.1% 92.6 1.3% 44.9 0.9% Residential – Condo 1
Slide 32: Balance Sheet: C&I loan portfolio is highly diversified
Balance Sheet The C&I loan portfolio is highly diversified NAICS Sector Description 2Q17 1Q17 2Q16 Accommodation and Food Services 3.75% 3.90% 3.91% Admin. and Support and Waste Mgmt & Remediation 2.54% 2.69% 2.83% Agriculture, Forestry, Fishing and Hunting 0.18% 0.12% 0.11% Arts, Entertainment, and
Slide 33: Balance Sheet: Relationship funding
Balance Sheet PNFP remains focused on relationship funding 6/30/2017 Percent 12/31/2016 Percent Core Funding: Non‐interest bearing deposits $3,893,603 22.70% $2,399,191 24.99% Interest‐bearing deposits 2,480,791 14.46% 1,737,996 18.10% Money Market accounts 5,891,973 34.35% 3,185,186 33.17% Time dep
Slide 34: Balance Sheet: Securities book yields increase in 2Q17
Balance Sheet The securities book yields increase in 2Q17 4.00% 40.00% 3.58% 3.50% 35.00% 3.00% 30.00% 2.50% 25.00% 20.75% 2.51% 2.00% 20.00% 1.50% 15.00% 1.00% 13.49% 10.00% 0.50% 5.00% 0.00% 0.00% Bond Yields % of Avg. Assets 34
Slide 35: Balance Sheet: Conservative bond portfolio
Balance Sheet Conservative bond portfolio Portfolio: June 30, 2017 0.0% 2.7% Total Investments $2.448 billion 22.6% Unrealized Gain (Loss) $ (9.7) million QTD Purchases $ 275.0 million 7.8% QTD Sales $ 2.1 million 59.1% 7.8% Duration Avg Yield – TE 2Q17 3.3% 2.5% Agency Corporates MBS 1Q17 3.4% 2.4%
Slide 36: Supplemental Information: Asset Quality
Supplemental Information Asset Quality 36
Slide 37: Asset Quality: 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 % 2017 total 2017 total 2016 of total (000’s) loans loans loans Past Due Loans (*) Nonaccrual loans** $17,602 0.12% $10,011 0.12% $9,689 0.14% Accruing loans 28,893 0.20% 14,684 0.17% 23,731 0.33% Total
Slide 38: Asset Quality: NPLs remain very low
Asset Quality NPLs and loans >90 days past due & accruing remain very low PNFP NPLs and >90 days June 30, As a % of Mar. 31, As a % of June 30, As a % of (000’s) 2017 total loans 2017 total loans 2016 total loans Const. and land development $3,873 0.03% $4,112 0.05% $7,112 0.10% Consumer RE 18,564 0
Slide 39: Asset Quality: Classified assets remain low
Asset Quality Classified assets remain low (in thousands) Balances Balances Balances June 30, 2017 Dec. 31, 2016 June 30, 2016 Classified loans and ORE: ‐ Substandard commercial loans $230,216 $148,460 $132,579 ‐ Doubtful commercial loans 832 1 87 ‐ Other impaired loans 19,854 9,820 11,398 ‐ 90 days
Slide 40: Supplemental Information: Income Statement
Supplemental Information Income Statement 40
Slide 41: Income Statement: Mortgage volumes strong in 2Q17
Income Statement Mortgage volumes strong in 2Q17 6.00% 250,000 5.00% 200,000 4.00% 150,000 3.00% 100,000 2.00% 50,000 1.00% 0 0.00% Purchase Money Refinance Gross fees as a % of loans originated 41
Slide 42: Reconciliation of Non-GAAP measures
Income Statement Reconciliation of Non‐GAAP measures 2Q17 1Q17 4Q16 3Q16 2Q16 Net interest income $106,627 $88,767 $89,413 $86,635 $75,044 Total noninterest income $35,057 $30,382 $30,743 $31,692 $32,713 Less: Securities gains ‐ ‐ (395) ‐ ‐ Noninterest income, excluding investment gains on sales of
Slide 43: Reconciliation of Non-GAAP measures
Income Statement Reconciliation of Non‐GAAP measures 2Q17 1Q17 4Q16 3Q16 2Q16 Total non‐interest income $35,057 $30,382 $30,743 $31,692 $32,713 Less: Securities gains ‐ ‐ (395) ‐ ‐ Noninterest income, excluding the impact of net gains on sale of investment securities $35,057 $30,382 $30,347 $31,692
Slide 44: Reconciliation of Non-GAAP measures
Income Statement Reconciliation of Non‐GAAP measures 2Q17 1Q17 4Q16 3Q16 2Q16 Net income $43,086 $39,653 $36,097 $32,376 $30,787 Merger‐related charges 3,221 672 3,264 5,672 980 Tax effect on merger‐related charges (1,264) (264) (1,281) (2,225) (385) Net income less merger‐related charges $45,043 $4
Slide 45: Reconciliation of Non-GAAP measures
Income Statement Reconciliation of Non‐GAAP measures 2Q17 1Q17 4Q16 3Q16 2Q16 Net income $43,086 $39,653 $36,097 $32,376 $30,787 Merger‐related charges 3,221 672 3,264 5,672 980 Tax effect on merger‐related charges (1,264) (264) (1,281) (2,225) (385) Net income less merger‐related charges $45,043 $4
Slide 46: Reconciliation of Non-GAAP measures
Income Statement Reconciliation of Non‐GAAP measures 2Q17 1Q17 4Q16 3Q16 2Q16 Net income $43,086 $39,653 $36,097 $32,376 $30,787 Merger‐related charges 3,221 672 3,264 5,672 980 Tax effect on merger‐related charges (1,264) (264) (1,281) (2,225) (385) Net income less merger‐related charges $45,043 $4
Slide 47: Supplemental Information: Pinnacle Financial Partners Profile
Supplemental Information Pinnacle Financial Partners Profile 47
Slide 48: PNFP Profile: 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 49: PNFP Profile: 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 50: Second Quarter 2017 Investor Call
Second Quarter 2017 Investor Call M. Terry Turner, President and CEO Harold R. Carpenter, EVP and CFO July 19, 2017
Pinnacle Financial Partners — Q2 2017 Earnings Presentation on 6ix