Pinnacle Financial Partners, Inc. · NYSE:PNFP
Pinnacle Financial Partners — Q1 2023 Earnings Presentation
48 slides from Pinnacle Financial Partners's earnings presentation, Apr 18, 2023
Slide 1: Investor Call First Quarter 2023
Investor Call FIRST QUARTER 2023 April 18, 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 release 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 expe
Slide 4: Shareholder Value Dashboard: 1Q23 GAAP Measures
Shareholder Value Dashboard 1Q23 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 NCOs NPA/ Loans & ORE PNFP’s Median Annual Performance of 9.9% P
Slide 5: Shareholder Value Dashboard: 1Q23 Non-GAAP Measures
Shareholder Value Dashboard 1Q23 Summary Results of Key Non-GAAP Measures Total Revenues* FD EPS* Adjusted Pre-Tax Pre-Provision CAGR 8.6% Net Income* CAGR 12.9% CAGR 10.1% Total Core Deposits Tangible Book Value per Total Loans (millions) (millions) Common Share** CAGR 12.8% CAGR 17.2% CAGR 12.2% C
Slide 6: 1Q23 Financial Information
1Q23 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 its 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 13% linked-quarter annualized average growth in Q1 Average Deposit Growth 100% $38,000 2.25% March 31, 2023 Rate Hike Beta Trends for Total Deposits 2.03% 89% Average Deposits (millions) 46% 84% $34,000 2.0
Slide 8: Deposit Portfolio Proves Resilient
Deposit Portfolio Proves Resilient Strength of Deposit Portfolio Ratio of EOP Uninsured and/or Uncollateralized Deposits Estimated Liquidity Available for Uninsured Deposits Balances at ($’s in millions) Mar. 31, to Total Deposits 2023 50.00% Total Deposits $ 36,178 43% 39% Less: Insured and/or Coll
Slide 9: PNFP Linked-Quarter Annualized Loan Growth was 17.3%
PNFP Linked-Quarter Annualized Loan Growth was 17.3% Recent growth rates likely to moderate over remainder of the year Average Loan Growth and Yields $30,000 6.00% 6.25% EOP Loan Growth $29,634 30.0% $28,402 (excluding PPP loans) $27,021 $24,000 5.00% $25,397 25.0% $23,849 26.0% $23,226 $23,180 $22,
Slide 10: Longstanding Ability to Attract Talent Produces Reliable Growth
Longstanding Ability to Attract Talent Produces Reliable Growth Loan growth is a result of well executed growth strategies Net Loan Growth – 1Q23 – Strategic Decisions: • Asset Generators - $4 million • BHG, JBB and Advocate Capital • Strategic Expansion - $577 million • Atlanta, DC, Alabama, Kentuc
Slide 11: 1Q23 Market Conditions Impact Net Interest Margin and Balance Sheet Liquidity
1Q23 Market Conditions Impact Net Interest Margin and Balance Sheet Liquidity Deposit competition, rate hike slowdown and yield curve inversion combine to pressure NIM Net Interest Margin Quarterly Avg. FFS, IB Cash & Repos $5,000 5.00% 4.00% Average Balances ($ in millions) 3.60% Average Quarterly
Slide 12: PNFP's Asset Quality Has Continued to Hold Up
PNFP’s Asset Quality Has Continued to Hold Up Problem loan metrics remain at or near historically low levels Net Charge Offs NPA/ Loans & ORE 1Q23 Asset Quality Highlights 0.61% • Credit metrics continue to reflect a high- 0.20% 0.20% 0.48% performing loan portfolio • PNFP hiring model aimed at expe
Slide 13: 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 1Q22 through 1Q23 ($ millions) $200 2Q23 to 1Q25 ($ millions) 8.00% $1,600 $1,400 $150 6.00% $1,200 $1,000 $100 4.00% $800 $6
Slide 14: 1Q23 Fees Were Up 8.76% Linked Quarter
1Q23 Fees Were Up 8.76% Linked Quarter PNFP continues focus on gathering more share of wallet from client base Linked-Quarter Select Comments Annualized Year-over-Year • Wealth Management revenues up led by trust and insurance 1Q23 4Q22 1Q22 Growth % Growth % • Trust revenues up primarily due to gro
Slide 15: Investments in New Markets / Talent Drive Expense Growth
Investments in New Markets / Talent Drive Expense Growth Incentive expense fluctuations correlate with earnings and other performance metrics Linked-Quarter Year-over-Year 1Q23 4Q22 1Q22 Annualized Growth % Growth % Select Comments: Salaries and employee benefits: Salaries $82,851 $78,844 $69,142 20
Slide 16: Preservation and Growth in Tangible Book Value Remains a Critical Focus
Preservation and Growth in Tangible Book Value Remains a Critical Focus First quarter reflects growth in TBV/Common Share year-over-year • Dividends – • Dividends per common share of $0.22 in 1Q23. Tangible Book Value per • Tangible Book Value per Common Share Growth – Common Share** $46.75 $41.65 •
Slide 17: 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 and to Pinnacle even as BHG has increased the mix toward balance sheet spread
Slide 18: BHG Business Model Drives Outperformance
BHG focusing on quality origination in 2023 $1,400 BHG Business Model Drives Outperformance Loan Originations and Bank Placements $1,200 • Originated $1.04bn in Q1 2023 with increased credit quality $1,165 $1,000 and borrower coupon despite macroeconomic headwinds $1,071 $1,054 $1,014 $800 and conse
Slide 19: BHG Continues to Build Reserves
BHG Continues BHG Credit Quality Continues to Build Reserves to Impress Sophisticated BHG creditforscoring increased its estimate modelsandproduce loan substitutions prepays toimpressive results 5.81%, up 1% since 1Q22 Estimated loan subs and prepayments (Note) • Estimate for loan substitutions and
Slide 20: BHG's On Balance Sheet Strategy Continues to Grow
BHG Credit BHG’s Quality On Balance Continues Sheet Strategy to Impressto Grow Continues Sophisticated BHG increased theircredit estimatescoring models for their ALL to 5.19%produce impressive results 6.00% $4,200 Loans Held for Investment Trends 5.19% • Allowance for loan losses increased to ~5.19%
Slide 21: BHG Strong Credit Quality Remains a Differentiator
BHG’sCredit BHG StrongQuality Continues Credit Quality to Impress Remains a Differentiator Vintage analysiscredit Sophisticated demonstrates scoring continued strengthimpressive models produce in asset quality results Historical FICO Scores • Historical credit results indicate that 70% of losses occ
Slide 22: Like Most, the Operating Environment for BHG for 2023 is Challenging
Like Most, the Operating Environment for BHG for 2023 is Challenging Lower but positive earnings forecasted in ‘23 supported by proactive management Other 1Q23 Highlights BHG Pre-Tax Earnings • Funding capacity at March 31, 2023 approximates $1.4 billion through ($ millions) existing warehouse facil
Slide 23: PNFP Cautiously Optimistic about 2023
PNFP Cautiously Optimistic about 2023 We remain confident in our model’s ability to produce strong revenue and earnings growth 2023 Outlook – as of April 17, 2023 (Note) 2022 Actual Results Y/Y EOP • We estimate low to mid-teens percentage EOP loan growth for 2023 over 2022 year-end Y/Y growth of 24
Slide 24: Summary: The Environment is Uncertain, But…
Summary: The Environment is Uncertain, But… PNFP continued to: • Turn clients into raving fans • Attract talent at impressive volumes • Produce outsized asset growth with strong asset quality metrics • Attract and retain outsized core funding • Maintain strong capital levels even with pro forma mark
Slide 25: Q&A First Quarter 2023
Q&A FIRST QUARTER 2023 einnacle FINANCIAL PARTNERS
Slide 26: Supplemental Information
Supplemental Information Slide # • Balance Sheet 27 • Income Statement 41 • Peer Group 47 26
Slide 27: Balance Sheet – Loan Portfolio Segments
Balance Sheet – Loan Portfolio Segments ($ in millions) Amts. % Amts. % Amts. % Amts. % 1Q23 1Q23 4Q22 4Q22 1Q22 1Q22 1Q21 1Q21 C&I $10,716.9 35.4% $10,233.3 35.2% $8,213.1 33.5% $6,355.1 27.5% C&I – Paycheck Protection Program 6.4 0.0% 8.0 0.0% 157.2 0.6% 2,221.4 9.6% CRE – Owner Occ. 3,686.8 12.2%
Slide 28: Balance Sheet – Loan Portfolio – Market Segmentation
Balance Sheet – Loan Portfolio – Market Segmentation ($ in millions) TOTAL PINNACLE C&I & O/O CRE CRE & CONSTRUCTION OTHER LOANS* Amts. Amts. Amts. Amts. Amts. Amts. Amts. Amts. 1Q23 1Q22 1Q23 1Q22 1Q23 1Q22 1Q23 1Q22 Nashville $8,295.3 $8,117.6 $3,495.5 $3,870.8 $3,089.5 $2,654.5 $1,710.3 $1,592.3
Slide 29: Balance Sheet – Loan Portfolio – CRE Segmentation
Balance Sheet – Loan Portfolio – CRE Segmentation ($ in millions) Total NOO and Multifamily Total Construction Total NOO and Construction Amts. Amts. Amts. Amts. Amts. Amts. Amts. Amts. Amts. 1Q23 4Q22 1Q22 1Q23 4Q22 1Q22 1Q23 4Q22 1Q22 Multifamily $1,352.5 $1,291.8 $709.9 $1,116.6 $910.9 $886.6 $2,
Slide 30: Balance Sheet – Loan Portfolio Lines of Credit
Balance Sheet – Loan Portfolio Lines of Credit ($'s in millions) Linked Qtr. 9/30/2021 12/31/2021 3/31/2022 6/30/2022 9/30/2022 12/31/2022 3/31/2023 Change CRE – Investment & Construction Net Active Balance $4,040.73 $3,727.20 $4,096.40 $4,389.62 $4,743.41 $5,225.32 $5,726.97 $501.66 Net Available C
Slide 31: Current Expected Credit Losses
Current Expected Credit Losses Total Allowance for Credit Losses for loans = $313.8 mm or 1.04% of loans at March 31, 2023 Allowance for Off-Balance Forecasted economic metrics(1) % of Loans Total Credit Losses Sheet Base Case Outlook at: 2Q23 3Q23 4Q23 1Q24 At March 31, 2022 $261,618 1.07% (1) $22,
Slide 32: Current Expected Credit Losses
Current Expected Credit Losses March 31, June 30, September 30, December 31, March 31, 2022 2022 2022 2022 2023 % of % of % of % of % of Allowance for Credit Losses Amount Loans Amount Loans Amount Loans Amount Loans Amount Loans Commercial and Industrial $112,412 1.37%* $125,772 1.36%* $140,285 1.4
Slide 33: Asset Quality
Asset Quality AS A % OF AS A % OF AS A % OF ($ in millions) March 31, 2023 December 31, 2022 March 31, 2022 TOTAL LOANS TOTAL LOANS TOTAL LOANS NPLs and > 90 days Const. and land development $130 0.00% $232 0.00% $350 0.00% Consumer RE 16,907 0.06% 17,329 0.06% 8,277 0.03% CRE – Owner Occupied 2,306
Slide 34: Balance Sheet – Loan Portfolio
Balance Sheet – Loan Portfolio Net Loan Charge Offs by Loan Type 0.60% 0.50% 0.40% 0.30% 0.20% 0.10% 0.00% -0.10% CRE Construction C&I Consumer RE Consumer and other Total Net Charge Off 2020 2021 2022 2023 Rates 34
Slide 35: Balance Sheet – Loan Portfolio – 100/300 Test
Balance Sheet – Loan Portfolio – 100/300 Test ($ in thousands) Description 1Q23 4Q22 3Q22 2Q22 1Q22 4Q21 Loans secured by real estate: Construction, land development, and other loans: 1-4 family residential construction loans $737,692 $772,653 $792,046 $754,325 $701,029 $625,862 Other construction l
Slide 36: CRE Recession Sensitive Sectors
CRE Recession Sensitive Sectors Recession Sensitive Loan Segments Balance: $1.1Bn Balance: $528MM Professional Office 3.6% of Total Loans Senior Housing 1.7% of Total Loans Loans > $20MM: High growth markets For cash-out bridge 18th Smallest portfolio among 22-bank peer group 14 - 51.5% Average LTV
Slide 37: Balance Sheet – Deposit Portfolio – Market Segmentation
Balance Sheet – Deposit Portfolio – Market Segmentation ($ in millions) TOTAL DEPOSITS CORE DEPOSITS NONCORE DEPOSITS TOTAL PINNACLE TRANSACTION AND MMDA CDs PUBLIC FUNDS and OTHER DEPOSITS 1Q23 1Q22 1Q23 1Q22 1Q23 1Q22 1Q23 1Q22 Nashville $13,386 $13,494 $12,336 $13,006 $620 $336 $430 $152 Knoxvill
Slide 38: Balance Sheet – Bond Portfolio Statistics
Balance Sheet – Bond Portfolio Statistics Investment Securities Segmentation Portfolio: March 31, 2023 Total Investments $6.9 billion Net Unrealized Gain (Loss) ($176.0) million 1.7% 15.9% Quarter Duration Avg. Yield- TE 1Q23 4.4% 3.5% 4Q22 4.4% 3.2% 49.1% 3Q22 4.9% 2.7% 26.0% 2Q22 4.6% 2.3% 1Q22 4.
Slide 39: Balance Sheet – Bond Portfolio
Balance Sheet – Bond Portfolio 4.00 30.0 Effective Bond Portfolio Composition 3.47 End of Period 3.50 3.00 25.0 77% 72% 71% 70% % of Total Assets 2.50 66% Bond Yields 2.00 20.0 1.50 1.00 15.0 34% 15.2 28% 30% 29% 0.50 23% 0.00 10.0 2018Q1 2021Q3 2018Q2 2018Q3 2018Q4 2019Q1 2019Q2 2019Q3 2019Q4 2020Q
Slide 40: Interest Rate Sensitivity
Interest Rate Sensitivity Rate Ramp Scenarios Rate Shock Scenarios 8.0% 8.0% 6.0% 6.0% 3.7% 4.0% 4.0% 2.9% Net Interest Income % D 2.8% Net Interest Income % D 2.2% 2.1% 2.0% 1.6% 1.9% 2.0% 1.2% 1.0% 1.1% 2.0% 0.4% 0.7% 0.6% 0.2% 0.3% 0.0% 0.0% -0.2% -0.7% -0.8% -0.6% -0.6% -0.8% -2.0% -1.2% -1.1% -
Slide 41: Income Statement – Revenue Per Share
Income Statement – Revenue Per Share LTM Revenue Per Share Growth* vs. Peers $22.00 20.0% 19.0% $21.09 $21.00 17.5% 18.0% 16.2% $20.33 18.2% $20.00 $19.51 16.0% 13.8% 13.1% 14.5% 16.2% $19.00 13.0% $18.62 14.0% Y/Y Revenue per Share Growth 11.3% 11.9% $17.85 14.3% $18.00 11.6% $17.50 11.8% 11.6% 12.
Slide 42: Income Statement – PPNR
Income Statement – PPNR ($'s in thousands) 2019 2020 2021 2022 1Q 2023 PPNR Trends Adjusted PPNR Net interest income $ 766,142 $821,788 $932,401 $1,129,293 $312,231 Noninterest income 263,826 317,840 395,734 416,124 89,529 $800 Noninterest expense (505,148) (564,455) (660,104) (779,999) 211,727 $700
Slide 43: BHG Financials
BHG Financials At Mar 31, At Dec 30, At Mar 31, ($'s in thousands) ($'s in thousands) 1Q 2023 4Q 2022 1Q 2022 2023 2022 2022 Cash and Cash Equivalents 591,246 683,143 440,594 Interest Income $ 142,514 $ 134,193 $ 83,244 Loans Held for Investment 3,429,382 3,204,290 2,338,317 Allowance for Loan Losse
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: Income Statement: Reconciliation of Non-GAAP Financial Measures
Income Statement Reconciliation of Non-GAAP Financial Measures 46
Slide 47: 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 48: Investor Call First Quarter 2023
Investor Call FIRST QUARTER 2023 M. TERRY TURNER, PRESIDENT AND CEO HAROLD R. CARPENTER, EVP AND CFO
Pinnacle Financial Partners — Q1 2023 Earnings Presentation on 6ix