Pinnacle Financial Partners, Inc. · NYSE:PNFP
Pinnacle Financial Partners — Q1 2014 Earnings Presentation
52 slides from Pinnacle Financial Partners's earnings presentation, Apr 15, 2014
Slide 1: First Quarter 2014 Investor Call
First Quarter 2014 Investor Call Terry Turner, President and CEO Harold Carpenter, EVP and CFO April 15, 2014
Slide 2: Safe Harbor Statements
Safe Harbor Statements Forward‐looking statements Certain of the statements in this presentation 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 "expec
Slide 3: 1Q14 Summary Results
1Q14 Summary Results Execution of fundamentals fuels exceptional growth in key valuation drivers Balance Sheet Growth Total Loans Avg Trans Accts Tangible Book Value $13.93 Up 10.9% yr/yr (millions) $4,144 $4,182 (millions) per Share $13.52 Up 18.7% yr/yr $2,050 $ , $13.22 $3,925 $3,969 $3 969 $ $1,
Slide 4: 1Q14 Summary Results
1Q14 Summary Results PNFP is now at the mid‐point of its long‐term return on asset target range Net Interest Margin Noninterest Income/ Average Assets (1) 3.95% 1.00% g Assets Return on Average 3.90% 0 95% 0.95% 0.97% 0.93% 0 93% 0.96% % 0.94% 0.92% 0 94% 3.90% 1.40% 0.89% 3.85% 0.90% 0.86% 3.78% 3.
Slide 5: 1Q14 Summary Results
1Q14 Summary Results Net loan growth rate approximates the three year growth target 2012 ‐ 2014 Anticipated Net Loan Growth 11.2% CAGR (1/1/2012‐3/31/2014) 10.9% AGR (Last 4 Quarters) Previously reported growth $891.0 million net growth thru Current quarter growth Thru 1Q2014 1Q2014 Financial Adviso
Slide 6: Annual loan growth is reliable despite wide quarterly variation
Loan, Deposit and Fee Growth Yield Operating Leverage Annual loan growth is reliable despite wide quarterly variation Annual Net Loan Growth Quarterly Net Loan Growth $500 $200 Loan Volumes Loan Volumes ($ millions) ($ millions) $150 $425 $434 $100 $400 $411 $50 $300 $0 *: $411 is the required produ
Slide 7: Net interest income grew as volumes and margin expanded in 1Q14
Loan, Deposit and Fee Growth Yield Operating Leverage Net interest income grew as volumes and margin expanded in 1Q14 $46 4.00% $45.9 9 3.90% 3.90% $45.0 $44.6 $44 3.80% 3.76% 3.80% $43.6 $ 3.76% 3.78% 3 78% $42.8 $42 3.70% Net Interesst Income 3.77% Net Interest Margin 3.74% $42.2 3.72% 3.70% 3.65%
Slide 8: Average loans grew while loan yields flattened in 1Q14
Loan, Deposit and Fee Growth Yield Operating Leverage Average loans grew meaningfully while loan yields flattened in 1Q14 $4,200 $ , 6.00% $4,100 $4,130 $4,000 5.50% $3,981 $3,900 932 $3,9 $ $3,800 Averaage Loans $3,845 Loan Yields $3,700 4.88% 5.00% ((millions) $3,682 $3,600 80 $3,58 $ $3,500 4.50%
Slide 9: Deposits grew meaningfully yet cost of funds remained low
Loan, Deposit and Fee Growth Yield Operating Leverage Deposits grew meaningfully yet cost of funds remained low in 1Q14 $4,600 1.20% $4,500 1.01% 1.10% $4,509 $4,400 1.00% $4,408 $4,300 0.90% $4 200 $4,200 0.80% osit Costs $4,199 Avg. Deposits $4,100 0.70% $4,000 millions) (%) 0.60% 963 $3,900 950 D
Slide 10: Noninterest income to asset ratio remains well above target range
Loan, Deposit and Fee Growth Yield Operating Leverage The noninterest income to asset ratio continues well above the target range 1Q14 4Q13 3Q13 2Q13 1Q13 Service charges $2,791 $2,739 $2,797 $2,541 $2,480 Investment services 2,128 2,394 1,956 1,895 1,793 Insurance commissions 1,385 1,015 1,021 1,10
Slide 11: Core efficiency ratio stands at 56.3%
Loan, Deposit and Fee Growth Yield Operating Leverage Despite seasonal expense increases the core efficiency ratio stands at 56.3% 1Q14 4Q13 3Q13 2Q13 1Q13 Salaries and benefits $21,750 $21,494 $21,010 $20,570 $19,572 E i Equipment t and d occupancy 5 709 5,709 5 543 5,543 5 413 5,413 5 204 5,204 5
Slide 12: Growth in Core Earnings Capacity
Growth in Core Earnings Capacity Adjusted PTPP expanded at 8.3% annualized rate in 1Q14 (000’s) 1Q14 4Q13 3Q13 2Q13 1Q13 Net interest income $45,908 $44,969 $44,573 $43,599 $42,758 Total noninterest income 12,736 12,488 11,387 11,326 11,902 Total revenue 58,644 57,457 55,960 54,925 54,660 Total noni
Slide 13: PNFP Valuation Drivers
PNFP Valuation Drivers 1Q14 Execution Future Earnings Stream • 10.9% average loan growth • Revenue growth is primarily organic Revenue • 18.7% 18 7% transaction t ti accountt growth th • Organic growth is due to vibrant markets and competitive Growth • 7.3% year‐over‐year revenue growth distinction
Slide 14: Q&A – First Quarter 2014 Investor Call
Q&A – First Quarter 2014 Investor Call 14
Slide 15: Supplemental Information
Supplemental Information First Quarter 2014 Investor Call 15
Slide 16: Supplemental Information
Supplemental Information Chart • Balance Sheet 17 • Asset Quality 30 • Income Statement 36 • Pinnacle Financial Partners p profile f 40 • Economic and Market Conditions 46 16
Slide 17: Supplemental Information: Balance Sheet
Supplemental Information Balance Sheet 17
Slide 18: Loan portfolio components are within targeted ranges
Balance Sheet Loan portfolio components are within targeted ranges Amts. %’s Amts. %’s Amts. %’s Amts. %’s 1Q14 1Q14 4Q13 4Q13 1Q13 1Q13 1Q12 1Q12 C&D and Land $294.1 7.0% $316.2 7.6% $306.4 8.1% $281.6 8.4% Consumer RE 703.6 16.8% 695.6 16.8% 675.6 17.9% 688.8 20.6% CRE – Owner Occ. 701.3 16.8% 679
Slide 19: Exposure to residential land development is limited
Balance Sheet Exposure to residential land development is limited Amts. %’s(*) Amts. %’s(*) Amts. %’s(*) Amts. %’s(*) 1Q14 1Q14 4Q13 4Q13 1Q13 1Q13 1Q12 1Q12 Residential – Spec $34 0 $34.0 0 8% 0.8% $28 2 $28.2 0 7% 0.7% $ 18 18.6 6 0 5% 0.5% $ 13 13.5 5 0 4% 0.4% Residential – Custom 31.7 0.8% 29.3
Slide 20: The C&I loan portfolio is highly diversified
Balance Sheet The C&I loan portfolio is highly diversified Transportation & Accomodation and Food Utilities, 0.1% Administrative & Support & Warehousing, 7.1% Services, 3.8% W Waste Management M & Remediation Services, 3.6% Retail Trade, 4.7% Arts, Entertainment & Recreation, 1.9% Real Estate & Rent
Slide 21: Loan growth is a function of improving demand and market share movement
Loan, Deposit and Fee Growth Yield Operating Leverage Loan growth is a function of improving demand and market share movement N Loans New L Q1 2014 New clients clients, 36.2% Existing li clients, 63.8% Source: Internal loan records, new loans to new clients based on review of new tax ID’s recorded d
Slide 22: Loan growth is primarily funded by growth in low cost deposits
Balance Sheet Loan growth is primarily funded by growth in low cost deposits % of Deposits by Type to Total Deposits Avg. Loan & Trans, Savings and MMA Account Growth 70% 800,000 100% 700,000 95% 60% 600,000 90% 50% 500,000 85% 400,000 80% 40% 300,000 75% 30% 200,000 70% 100,000 65% 20% ‐ 60% 10% (1
Slide 23: PNFP has limited dependence on non-relationship funding
Balance Sheet PNFP has limited dependence on non‐relationship funding 23
Slide 24: Line commitments are up 11.2% over 1Q13
Balance Sheet Line commitments are up 11.2% over 1Q13 but utilization remains low 60% 56.15% $2,500 54.80% 55% $1,028 $1,024 $989 $2,000 ommitmentts $926 41 $ $ $865 5 50% $94 $787 unded % $815 $808 $779 $747 $685 $715 $1,500 millions) 45% (m Fu Total Co $1,000 40% $1,247 $1,216 $1,190 $1,166 $1,138
Slide 25: Bond volumes and yields have stabilized
Balance Sheet Bond volumes and yields have stabilized $1,050 3.70% $1,000 $1,010 3.50% $973 $950 3.30% 940 $9 $924 Average Securities $900 3.10% nd Yields $876 $850 2.90% 00’s) (%) (00 $819 Bon $800 2 70% 2.70% $750 2.50% $767 $749 $746 $743 $732 720 $700 2.30% $714 $7 $650 2.10% Avg Investments Bon
Slide 26: Conservative bond portfolio
Balance Sheet Conservative bond portfolio Portfolio: March 31, 2014 1.4% 23.3% 15.5% Total Investments $773 million Unrealized Gain $ 0.8 million 6.0% QTD Purchases $57.8 million 2.2% 51.6% QTD Sales $ 0.0 million Duration Avg Yield ‐ TE Mar 2014 3.5% 3.0% Agency Corporates MBS Dec 2013 4.6 % 3.2% A
Slide 27: The municipal portfolio contains minimal risk
Balance Sheet The municipal portfolio contains minimal risk Municipal Bond Portfolio Statistics Muni Allocation % 1Q14 1Q13 Weighted Average Life 4.0 years 4.2 years % State Agency Holdings 4.92% 5.40% 23% Tax equivalent yield 4.54% 4.76% FMV as % of Cost 103.3% 105.9% 77% All municipals are “A” rat
Slide 28: Elevated tangible common is available for deployment
Balance Sheet Elevated tangible common is available for deployment Tangible Common Ratio Return on Tangible Common Equity 03% 18% 9.27% 7% 5% 7% 5% 6% 12.72% % 12.71% % 12.80% % 8.73% % 8.77% % 13.47 9.15 12.41% % 8.97 9.0 8.75 9.1 8.96 10.83% 10.76% 7.58% 13% 6.1 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13
Slide 29: Ability to sustain a long-term dividend program
Balance Sheet Current modeling indicates ability to sustain a long‐term dividend program Tier 1 Common Tangible Tier 1 Risk Based Capital Risk Based Capital Equity q y 12.40% 12 40% 13.60% 13 60% 10.80% 12.30% 13.50% 10.60% 12.20% 13.40% 12.10% 10.40% 12.00% 13.30% 10.20% 11.90% 13.20% 11.80% 13.10%
Slide 30: Supplemental Information: Asset Quality
Supplemental Information Asset Quality 30
Slide 31: Past due loans remain very low
Asset Quality Past due loans remain very low Mar. 31, As a % Dec. 31, As a % 2014 of total 2013 of total (000’s) loans loans Past Due Loans (*) Managed by special assets: Nonaccrual loans $4,847 0.12% $7,336 0.18% Accruing loans 11,917 0.28% 10,505 0.25% Managed by relationship managers: Accruing lo
Slide 32: Percentage of potential problem loans remain low
Asset Quality Percentage of potential problem loans remain low Potential Problem Loans Mar. 31, As a % Dec. 31, As a % Mar. 31, As a % of 2014 of total 2013 of total 2013 total ((000’s)) loans loans loans PNFP 83,859 2.01% 65,028 1.57% 96,218 2.55% Peer Median* ‐ ‐ 79,537 1.92% 107,548 3.10% *: Subs
Slide 33: NPLs remain very low
Asset Quality NPLs 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) 2014 total loans 2013 total loans 2013 total loans Const. and land development $ 1,137 1.53% $ 1,070 0.34% $ 1,
Slide 34: Classified assets are contained
Asset Quality Classified assets are contained (in thousands) Balances Balances Balances March 31, 2014 Dec. 31, 2013 March 31, 2013 Classified loans and ORE: ‐ Substandard commercial loans $110,768 $91,445 $ 132,750 ‐ Doubtful commercial loans ‐ ‐ 4 ‐ Other impaired loans 4,848 4,659 2,091 ‐ 90 d da
Slide 35: Current OREO valuations are reasonable
Asset Quality Current OREO valuations are reasonable Average Appraisal Balances Fair value as a % of Age (dollars in thousands) Mar. 31, 2014 book value* in Months ORE categories: Developed lots $ 847 138.2% 6.16 Undeveloped land 11,303 ,303 164.9% 64.9% 5.08 Other 2,888 121.0% 4.91 Total ORE $ 15,0
Slide 36: Supplemental Information: Income Statement
Supplemental Information Income Statement 36
Slide 37: Net interest margin has been built on success with clients
Income Statement Pinnacle’s net interest margin has been built on success with clients 4.50% 4.00% 3.50% 3.00% 2.50% 2.00% 1.50% Treasury Margin Client Margin Net Interest Margin Client Margin – Measures Meas res the ratio of interest earnings of the loan portfolio as supported s pported by b non‐co
Slide 38: Mortgage refinance trends reflect increased interest rates
Income Statement Mortgage refinance trends reflect increased interest rates $2,500 $150,000 Gain on mortgages ssold, net $2,000 $120,000 Gross Loans Sold $1,500 $90,000 (000’s) (000s’) $1,000 $60,000 $500 $30,000 $‐ $‐ Gross Loans Sold, net Gain on Mortgage Loans Sold, net 38 38
Slide 39: PNFP is highly efficient
Income Statement PNFP is highly efficient 1Q14 4Q13 3Q13 2Q13 1Q13 Net interest income $45,908 $44,969 $44,573 $43,599 $42,758 Total non‐interest income $12,736 $12,488 $11,387 $11,326 $11,902 Less: Securities (gains) losses ‐ ‐ 1,441 25 ‐ Less: Net noncredit related loan losses ‐ ‐ ‐ 771 ‐ Non‐inte
Slide 40: Pinnacle Financial Partners Profile
Supplemental Information Pi Pinnacle l Financial Fi i l Partners P Profile P fil 40
Slide 41: PNFP operates in two great banking markets
PNFP Profile PNFP operates in two great banking markets Headquarters: Nashville, TN Offices: 29 in 8 Middle‐TN counties 4 in Knox County Founded: 2000 Avg. daily trading volume **:: 184,570 shares Total assets: $ 5.601 Billion (3/31/14) % Institutional ownership: 70.6% (12/31/13) Shareholders’ equit
Slide 42: 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 63 38 14 Hugh M. Queener Chief Administrative Officer 58 27 14 H
Slide 43: PNFP compares favorably to high performing peers
PNFP Profile PNFP compares favorably to high performing peers • Pinnacle Financial Partners (PNFP) • PacWest Bancorp (PACW) • 1st Source Corporation (SRCE) • Sandy Springs Bancorp, Inc. (SASR) • Columbia Banking System, Inc. • SCBT Financial Corp (SCBT) (COLB) • Taylor Capital Group, Inc. (TAYC) • C
Slide 44: Engaged associates drive market-best client satisfaction
PNFP Profile Highly engaged associates drive market‐best client satisfaction 5.00 100% on Scores nt Scores 4.00 90% Associate EEngagemen Customerr Satisfactio 3.00 80% 2.00 70% 1 00 1.00 60% Customer Satisfaction Scores Associate engagement survey positive responses Source: Annual Associate Survey 4
Slide 45: 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 Chang Top 10 Holding Market Market Change Market Company Share Share e Market Company Share Share in Share 6/30/13 6/30/00 in Share 6/30/13 6/30/07 Sh
Slide 46: Supplemental Information: Economic & Market Conditions
Supplemental Information E Economic i & Market M k Conditions C di i 46
Slide 47: 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 1Q2014 1Q2013 % Change Avg. Qtrly. Median $193,000 $170,333 13.31% Home Price Quarterly Closings 4,992 4,914 1.59% Quarter end Inventory 9,439 9,923 (4.88%) Months of Inventory 4.6 4.8 (2.
Slide 48: Future Outlook: Nashville MSA
Future Outlook Nashville MSA Projected Population Growth (2012-2017)* 7.64% Median HHI Change (2012-2017)* 11.20% Cost of Living Index** 88.7 In Market Deposits* $40.8 B Market Share* 8.9% * Retail office locations Sources: *SNL ** c2er-ACCRA Cost of Living Index
Slide 49: Future Outlook: Knoxville MSA
Future Outlook‐Knoxville Knoxville MSA Projected Population Growth* (2012-2017) 4.33% Median HHI Change* (2012-2017) 18.9% g Index** Cost of Living 89.0 In Market Deposits* $14.6 B Market Share* 3.1% * Retail office locations Sources: *SNL ** c2er-ACCRA Cost of Living Index
Slide 50: Nashville and Knoxville are healthy business markets
PNFP Operates in Advantaged Markets Nashville and Knoxville are healthy business markets TENNESSEE Tennessee e essee named a ed ’2013 0 3 State o of tthe e Year’ ea for o eco economic o c de development e op e t Business us ess Facilities ac t es magazine aga e NASHVILLE Nashville has achieved “it c
Slide 51: 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 2013 YE 2012 YE 2011 YE 2010 YE 2009 YE 2008 1Q 2014(**) (**) (**) (**) (**) (***) (***) 2014 (**) Industrial / 8.6% 8.7% 9.1% 10.1% 10.2% 1
Slide 52: First Quarter 2014 Investor Call
First Quarter 2014 Investor Call Terry Turner, President and CEO Harold Carpenter, EVP and CFO April 15, 2014
Pinnacle Financial Partners — Q1 2014 Earnings Presentation on 6ix