Pinnacle Financial Partners, Inc. · NYSE:PNFP
Pinnacle Financial Partners — Q1 2015 Earnings Presentation
56 slides from Pinnacle Financial Partners's earnings presentation, Apr 21, 2015
Slide 1: First Quarter 2015 Investor Call
First Quarter 2015 Investor Call M. Terry Turner, President and CEO Harold R. Carpenter, EVP and CFO April 21, 2015
Slide 2: Safe Harbor Statements
Safe Harbor Statements Forward‐looking statements Certain of the statements in this release may constitute forward‐looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The words "expect," "
Slide 3: Safe Harbor Statements
Safe Harbor Statements Forward‐looking statements Additional Information and Where to Find It In connection with the proposed merger, Pinnacle intends to file a registration statement on Form S-4 with the SEC to register the shares of Pinnacle common stock that will be issued to CapitalMark’s shareh
Slide 4: The Big Picture
The Big Picture PNFP is working its long‐term plan 5‐Year Horizon Q1’ 15 Progress Q g 1. Expand CRE asset class All four critical hires currently onboard 2 2. EExpand d to Tennessee’s T ’ other h urban b markets k a) Chattanooga Negotiated acquisition of CapitalMark b) Memphis 3 3. Increase
Slide 5: 1Q15 Summary Results
1Q15 Summary Results Execution of fundamentals fuels exceptional growth in key valuation drivers Total Revenues (1) FD EPS ROTCE Earnings Grrowth $0.62 15.56% (millions) $69,755 Up 19.6% yr/yr Up 31.9% yr/yr 13.45% $0.47 $ 12.41% $58,640 $0.39 $54,661 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 1Q1
Slide 6: 1Q15 Summary Results
1Q15 Summary Results PNFP exceeds 1Q15 return on asset target range Net Interest Margin Noninterest Income/ Average Assets (1) 3.95% 1.40% ROAA 1.23% 1.50% 3.90% 1.20% 1.45% 0.97% 0 97% 3.85% 1.00% 0.89% 0.92% 1.40% 3.80% 3.78% 3.80% 0.80% 3.76% 1.30% 1.27% 3.75% 0.60% 3.70% 3.70% 0.40% 1.20% 3.65%
Slide 7: Net Interest Income
Loan, Deposit and Fee Growth Yield Operating Leverage Net interest income rises primarily due to volume growth in 1Q15 $52 $51.3 $50 $50.3 $49.5 $48 $47.2 2 $46 Net Interesst Income $45.9 $45.0 $44 $44.6 43.6 ons) $4 $42.8 8 $42 (millio $42.2 $40.9 $40 $40.2 $39.5 $39.3 $38 $ N $38.4 $ $37.8 $36 $36
Slide 8: Average Loans and Loan Yields
Loan, Deposit and Fee Growth Yield Operating Leverage Average loans grew 12.0% compared to 1Q14; yields remain stable $4,800 $ , 6.00% $4,625 $4,500 5.50% 4,436 58 $4,35 $4 $4,200 4.88% 5.00% Averaage Loans $4,251 Loan Yields $4,130 millions) $3,981 $3,900 4.50% $3,,932 (m $3,845 5 $ 4.35% $3,682 $3
Slide 9: Average Deposits and Cost of Deposits
Loan, Deposit and Fee Growth Yield Operating Leverage Deposits continued to grow while cost of deposits remain stable $5,000 1.20% 1.01% $4,800 1.05% $4,792 $4,758 $4,600 0.90% $4,655 $ $4,519 9 $4,509 posit Costs $4,400 0.75% Avg. Deposits $4,408 (millions) $4,200 0.60% (%) $4,199 Dep $4 000 $4,000
Slide 10: Record fee revenues in 1Q15
Loan, Deposit and Fee Growth Yield Operating Leverage Expansion of fee businesses produces record fee revenues in 1Q15 1Q15 4Q14 3Q14 2Q14 1Q14 Service charges $2 913 $2,913 $3 038 $3,038 $2 913 $2,913 $2 966 $2,966 $2 791 $2,791 Investment services 2,259 2,737 2,353 2,164 2,128 Insurance commission
Slide 11: BHG – Sophisticated and Successful Business Model Aimed at Niche Markets
Loan, Deposit and Fee Growth Yield Operating Leverage BHG – Sophisticated and Successful Business Model Aimed at Niche Markets History Founded in 2001 2001, three founders remain with firm – 70% interest retained $1.4B in loans originated since founding ‐ $657 mm outstanding on bank balance sheets 8
Slide 12: BHG Partnership Will Provide Opportunities to Both Firms Over Time
Loan, Deposit and Fee Growth Yield Operating Leverage BHG Partnership Will Provide Opportunities to Both Firms Over Time Transaction i Summary S • Effective February 1, 2015 83rd percentile • 30% interest for $75 million cash • 7%‐9% accretive to PNFP FDEPS in 2015 • Founders under contract to remai
Slide 13: Efficiency is at an all time best for PNFP
Loan, Deposit and Fee Growth Yield Operating Leverage Efficiency is at an all time best for PNFP 1Q15 4Q14 3Q14 2Q14 1Q14 Salaries and benefits $23,531 $23,075 $21,722 $21,772 $21,750 Equipment and occupancy 6,046 5,984 6,477 5,917 5,709 Other real estate owned 395 (630) 417 226 651 Marketing and bu
Slide 14: Floors on loans and liability sensitivity
Balance Sheet Interest Rate Sensitivity Floors on loans provided meaningful earnings during low rate environment but resulted in a liability sensitive balance sheet that has now been repositioned $1,400 6.00% Est. Floor Volumes of $1,300 $850mm to $950mm 5.00% $1 200 $1,200 1 33% 1.33% 0.96% 0.93% 0
Slide 15: Rate shock balance sheet positioned well for rising rates
Balance Sheet Interest Rate Sensitivity Rate shock balance sheet positioned well for rising rate scenarios Traditional IRR Shock Analysis 5.00% • Shock analysis indicates we have 4.00% migrated to an asset sensitive 3.00% position in both the up 100 & 200 bp 2.00% scenarios over the previous two 1.0
Slide 16: Balance sheet prepared for rising rates
Balance Sheet Interest Rate Sensitivity Further evidence that our balance sheet is prepared for rising rates 30‐Day Rate Change Analysis $2 000 $2,000 Over the course of the last six quarters, $1,750 we’ve migrated from a negative 30‐day rate Millions of dollars change gap of approximately $650 mill
Slide 17: M & A Strategy
M & A Strategy M & A strategy remains unchanged from previously stated intentions Role of M&A Goal of M&A M&A Targets 1. Market extension to target markets Platform for market share take away from • Successful franchises that add new vulnerable regional competitors source(s) of revenue to PNFP • Cul
Slide 18: CapitalMark Transaction
CapitalMark Transaction CapitalMark is an Ideal Merger Partner for PNFP • High Growth, Service Oriented Culture − Largest local bank in Chattanooga MSA − 5‐year Loan and Deposit CAGRs of 18% • CapitalMark CapitalMark’ss market share positions Pinnacle to attack the same vulnerable regional banks − F
Slide 19: CapitalMark is an Ideal Partner for PNFP
CapitalMark is an Ideal Partner for PNFP Since its founding in 2007, CapitalMark has produced Pinnacle‐like organic growth Assets Loans $930 $968 $1,000 $1,000 $828 $780 $765 $718 $750 $662 $750 $584 $464 $459 $500 $391 $500 $363 $315 $328 $250 $250 $0 $0 2009 2010 2011 2012 2013 2014 Q1'15 2009 201
Slide 20: CapitalMark is an Ideal Partner for PNFP
CapitalMark is an Ideal Partner for PNFP CapitalMark has matured to the point of rapid operating leverage, much like Pinnacle Net Income to Common ROAA $10,000 $9,042 1.20% 1.00% $8,000 1.00% 0.91% $7,185 0.83% $6,448 0.75% 0.80% 0.72% 0.73% $6,000 $5,629 0.65% 0.60% $4 913 $4,913 0 61% 0.61% $4,000
Slide 21: Summary and Future Outlook
Summary and Future Outlook PNFP is working its long‐term plan 5‐Year Horizon 1. Expand CRE asset class 2. Expand to Tennessee’s other urban markets a) Chattanooga b) Memphis 3. Increase assets to > $10B 4. Increased capital allocation to fee businesses that can drive shareholder value 5. Conti
Slide 22: Q&A – First Quarter 2015 Investor Call
Q&A – First Quarter 2015 Investor Call 22
Slide 23: Supplemental Information
Supplemental Information First Quarter 2015 Investor Call 23
Slide 24: Supplemental Information
Supplemental Information Chart • Balance Sheet 25 • Asset Quality 35 • Income Statement 40 • Pinnacle Financial Partners p profile f 43 • Economic and Market Conditions 51 24
Slide 25: Supplemental Information: Balance Sheet
Supplemental Information Balance Sheet 25
Slide 26: Loan portfolio is diversified and managed within targeted ranges
Balance Sheet Loan portfolio is diversified and managed within targeted ranges Amts. %’s Amts. %’s Amts. %’s Amts. %’s 1Q15 1Q15 4Q14 4Q14 1Q14 1Q14 1Q13 1Q13 C&D and Land $324.5 7.0% $322.5 7.0% $294.1 7.0% $306.4 8.1% Consumer RE 723.9 15.6% 721.2 15.7% 703.6 16.8% 675.6 17.9% CRE – Owner Occ. 767
Slide 27: Exposure to residential land development is limited
Balance Sheet Exposure to residential land development is limited Amts. %’s(*) Amts. %’s(*) Amts. %’s(*) Amts. %’s(*) 1Q15 1Q15 4Q14 4Q14 1Q14 1Q14 1Q13 1Q13 Residential – Spec $39 0 $39.0 0 8% 0.8% $39 8 $39.8 0 9% 0.9% $34 0 $34.0 0 8% 0.8% $ 18 18.6 6 0 5% 0.5% Residential – Custom 36.0 0.8% 34.4
Slide 28: The C&I loan portfolio is highly diversified
Balance Sheet The C&I loan portfolio is highly diversified Transportation & Utilities, 0.9% Accomodation and Food Warehousing, 7.1% Services, 4.4% Administrative & Support & W Waste Management M & Remediation Services, 3.0% Arts, Entertainment & Recreation, 1.1% Retail Trade, 7.0% Construction, 5.4%
Slide 29: Limited dependence on non-relationship funding
Balance Sheet PNFP maintains limited dependence on non‐relationship funding 29
Slide 30: Line commitments up over 1Q14 but utilization remains low
Balance Sheet Line commitments are up 15.0% over 1Q14 but utilization remains low 60% 56 15% 56.15% $1,221 $2,500 $1,177 $1,131 55% $1,046 $1,028 $1,024 $989 54.10% $2,000 nts $926 941 65 50% ommitmen $86 $9 $787 FFunded % $815 $808 $779 $747 $685 $715 $1,500 (millions) 45% Total Co $1,000 40% $1,44
Slide 31: The securities book is maintained at a minimal level
Balance Sheet The securities book is maintained at a minimal level 4.00% 40.00% 3 58% 3.58% 3.50% 35.00% 3.00% 30.00% 2.50% 20.75% 2.79% 25.00% 2.00% 20.00% 1.50% 15.00% 1.00% 12.92% 10.00% 0 50% 0.50% 5 00% 5.00% 0.00% 0.00% B d Yi Bond Yields ld % off Avg. A Assets A 31
Slide 32: Investment Portfolio
Investment Portfolio Conservative bond portfolio Portfolio: March 31, 2015 1.3% 20.8% 15.5% Total Investments $808 million Unrealized Gain ((Loss)) $16.9 million $ 8.5% QTD Purchases $65.9 million 48.4% QTD Sales $ 0.2 million 5.5% Duration Avg Yield ‐ TE Q 1Q15 2.9% 2.8% Agency Corporates MBS 4Q14
Slide 33: The municipal portfolio contains minimal risk
Balance Sheet The municipal portfolio contains minimal risk Municipal Bond Portfolio Statistics Muni Allocation % 1Q15 1Q14 Weighted Average Life 3.4 years 4.0 years % State Agency Holdings 5.25% 4.92% 25% Tax equivalent yield 4.51% 4.54% 75% FMV as % of Cost 105.1% 103.3% L ti Location # off Issuan
Slide 34: Elevated tangible common is available for deployment
Balance Sheet Elevated tangible common is available for deployment 10.00% 18.00% 15.56% ble Common Equity 9.64% 16.00% Common Ratio o 9 00% 9.00% 9.18% 9 27% 9.27% 9.52% 9.53% 14.00% 9.03% 8.96% 9.31% 8.75% 12.00% 8.00% 12.41% 10.00% 8 00% 8.00% Retturn on Tangib Tangible C 7.00% 6.00% 6.00% 4.00% 2
Slide 35: Supplemental Information: Asset Quality
Supplemental Information Asset Quality 35
Slide 36: 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 % 2015 total 2014 total 2014 of total (000’s) loans loans loans Past Due Loans (*) Nonaccrual loans $ 3,394 3 394 0 07% 0.07% $7 058 $7,058 0 15% 0.15% $ 4,847 4 847 0 12% 0.12% Accruing loans 15,745 0.3
Slide 37: NPLs and >90 days past due remain very low
Asset Quality NPLs and >90 days past due & accruing remain very low NPLs Expressed as a % of Total Loans within each Category PNFP NPLs NPL and d >90 days d Mar. 31, As a % of Dec. 31, As a % of Mar. 31, As a % of (000’s) 2015 total loans 2014 total loans 2014 total loans Const. and land development
Slide 38: Classified assets remain very low
Asset Quality Classified assets remain very low (in thousands) Balances Balances Balances Mar. 31, 2015 Dec. 31, 2014 Mar. 31, 2014 Classified loans and ORE: ‐ Substandard commercial loans $110,005 $102,077 $110,768 ‐ Doubtful commercial loans ‐ ‐ ‐ ‐ Other impaired loans 5,563 5,162 4,848 ‐ 90 d da
Slide 39: Current OREO valuations appear reasonable
Asset Quality Current OREO valuations appear reasonable Average Appraisal Balances Fair value as a % of Age (dollars in thousands) Mar. 31, 2015 book value* value in Months ORE categories: Developed lots $ ‐ ‐ ‐ Undeveloped land 7,484 118% 3.58 Other 957 136% 3.64 Total ORE $8,441 134% 3.63 Larges
Slide 40: Supplemental Information: Income Statement
Supplemental Information Income Statement 40
Slide 41: Mortgage volumes increase growth in refinancing transactions
Income Statement Mortgage volumes increase growth in “refinancing” transactions 140,000 , 3.50% 120,000 3.00% 100 000 100,000 2.73% 2 50% 2.50% 80,000 2.00% 1.59% 60 000 60,000 1 50% 1.50% 40,000 1.00% 20,000 0.50% 0 0.00% Purchase Money Refinance Gross fees as a % of loans originated 41 41
Slide 42: PNFP efficiency ratio reflects excellent operating leverage
Income Statement PNFP efficiency ratio reflect excellent operating leverage 1Q15 4Q14 3Q14 2Q14 1Q14 Net interest income $51,269 $50,313 $49,537 $47,226 $45,908 Total non‐interest income $18,493 $14,384 $12,888 $12,598 $12,732 Less: Securities (gains) losses (6) ‐ (29) ‐ ‐ Non interest income, Non‐i
Slide 43: Pinnacle Financial Partners Profile
Supplemental Information Pi Pinnacle l Financial Fi i l Partners P Profile P fil 43
Slide 44: PNFP currently operates in two great banking markets
PNFP Profile PNFP currently operates in two great banking markets Headquarters: Nashville, TN Offices: 29 in 8 Middle‐TN counties 5 in Knox County Founded: 2000 Avg. daily trading volume **: 120,456 shares Total assets: $ 6.314 Billion (3/31/15) % Institutional ownership: 70.65% (12/31/14) Sharehold
Slide 45: CapitalMark provides expansion to Chattanooga/Cleveland/Oak Ridge
PNFP Profile CapitalMark provides expansion to Chattanooga/Cleveland/Oak Ridge Q1'15 Results PNFP Assets $968 CapitalMark Bank & Trust Loans 765 Deposits 840 TCE 80 ROAA 1.00 % ROAE 9.53 NIM 3.85 Efficiency Ratio 59.8 NPAs / Assets 1.0 % TCE / TA 8.3 8 3 % Leverage 10.5 Total RBC 11.9 • Founded in 2
Slide 46: CapitalMark Transaction Structure
PNFP Profile CapitalMark Transaction Structure • Fixed exchange ratio of 0.5000x C id ti Consideration • 90% SStockk / 10% 0% C Cash h consideration id i • Options rolled‐over into similar PNFP options • $ $22.31 3 per pe share; s a e; $187.0 $ 8 0 million o in tthe e agg aggregate egate Transaction
Slide 47: CapitalMark 5-year Financial Summary
PNFP Profile CapitalMark 5‐year Financial Summary For the Year Ended December 31, For the Quarter Ended, Dollars in Thousands 2010 2011 2012 2013 2014 3/31/2015 Balance Sheet Total Assets $464,038 $662,071 $780,139 $828,163 $930,377 $968,268 Gross Loans (Incl. HFS) 328,447 363,211 459,083 583,563 71
Slide 48: PNFP has an extraordinarily experienced management team
PNFP Profile PNFP has an extraordinarily experienced management team Name Title Age Years in Years at Banking Pinnacle Industry M. Terry Turner President and Chief Executive Officer 59 36 14 Robert A. McCabe,, Jr. Chairman of the Board 64 38 14 Hugh M. Queener Chief Administrative Officer 59 39 14 H
Slide 49: PNFP compares favorably to high performing peers
PNFP Profile PNFP compares favorably to high performing peers • Pinnacle Financial Partners (PNFP) • Sandy Springs Bancorp, Inc. (SASR) • 1st Source Corporation (SRCE) • SCBT Financial Corp (SCBT) • Brookline Bancorp, Inc. (BRKL) • Sterling Bancorp (STL) • Columbia Banking System, Inc. • TowneBank (
Slide 50: PNFP has a track record for best-in-market share movement
PNFP Profile PNFP has a track record for “best‐in‐market” share movement Nashville‐Davidson‐Rutherford MSA Knoxville MSA Top 10 Holding Market Market Change Top 10 Holding Market Market Change Market Company Share Share in Market Company Share Share in Share 6/30/14 6/30/00 Share Share 6/30/14 6/30/
Slide 51: Supplemental Information: Economic & Market Conditions
Supplemental Information E Economic i & Market M k Conditions C di i 51
Slide 52: PNFP operates in advantaged markets
PNFP operates in advantaged markets Tennessee Market Demographics Total Current 2014 ‐ 2019E Current 2014 ‐ 2019E Deposits Population Pop. Growth Median HHI Median HHI Growth Top 20 MSAs ($Ms) (000s) (%) ($) (%) Nashville, TN $44,071 1,766 7.15 % $50,439 4.84 % Memphis, TN‐MS‐AR 23,722 1,353 2.63 45
Slide 53: PNFP operates in advantaged markets
PNFP operates in advantaged markets TENNESSEE • Tennessee named Economic Development ‘State of the Year’ for second consecutive year Business Facilities • More than 7,000 new businesses were formed in Tennessee during the final quarter of 2014 Tennessee Secretary of State • UT economists predict 201
Slide 54: Rapid job growth leads to rapid real estate absorption
PNFP operates in advantaged markets Rapid job growth leads to rapid real estate absorption Nashville Home Sales 1Q15 Q 4Q14 Q 1Q14 Q % Change g Avg. Qtrly. Median Home $214.5 $211.5 $193.0 11.1% Price Quarterly Closings 5,599 6,924 4,992 12.2% Quarter end 8,235 7,623 9.439 (12.8%) Inventory Months o
Slide 55: Nashville's commercial vacancy rates indicate a healthy market
PNFP Operates in Advantaged Markets Nashville’s commercial vacancy rates indicate a healthy market Nashville CRE National Vacancy Rates CRE Vacancy Rates 1Q YE 2014 YE 2013 YE 2012 YE 2011 YE 2010 YE 2009 YE 2008 1Q 2015(**) (**) (**) (**) (**) (**) (***) (***) 2015 (**) Industrial / 6.6% 7.1% 8.7%
Slide 56: First Quarter 2015 Investor Call
First Quarter 2015 Investor Call M. Terry Turner, President and CEO Harold R. Carpenter, EVP and CFO April 21, 2015
Pinnacle Financial Partners — Q1 2015 Earnings Presentation on 6ix