Pinnacle Financial Partners, Inc. · NYSE:PNFP
Pinnacle Financial Partners — Q4 2013 Earnings Presentation
50 slides from Pinnacle Financial Partners's earnings presentation, Jan 22, 2014
Slide 1: Fourth Quarter 2013 Investor Call
Fourth Quarter 2013 Investor Call Terry Turner, President and CEO Harold Carpenter, EVP and CFO January 22, 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: 4Q13 Summary Results
4Q13 Summary Results Organic growth fuels exceptional quarterly and year‐over‐year results et Growth Total Loans Avg DDA Volumes Avg Trans Accts (millions) (millions) (millions) $4,144 $1,179 $2,038 Up 11.6% yr/yr Up 20.6% yr/yr $1,101 Up 16.7% yr/yr Balance Shee $3,925 $3 969 $3,969 $1 903 $1,903 $
Slide 4: 4Q13 Summary Results
4Q13 Summary Results PNFP is now operating within its long‐term return on asset target range Net Interest Margin Noninterest Income / Average Assets (1) ROAA 3.95% 1.00% 0.97% 0.96% 3.90% 1.40% 1 40% 3.90% 0.95% 0 93% 0.93% 0.92% 0.89% 0.90% 3.85% 0.86% 1.30% 3.80% 0.85% 0.83% 3.80% 3.78% 0.81% 3.76
Slide 5: Loan growth is on target
4Q13 Summary Results Loan growth is on target 2012 ‐ 2014 Anticipated Net Loan Growth 12.2% CAGR (1/1/2012‐12/31/2013) 11.6% AGR (Last 4 Quarters) Previously reported growth $853.0 million net growth thru Current quarter growth Thru 4Q2013 4Q2013 Financial Advisor capacity p y 11.5% CAGR FA Capacity
Slide 6: Loan originations outrun significant loan payoffs/paydowns
Loan, Deposit and Fee Growth Yield Operating Leverage Loan originations outrun significant loan payoffs/paydowns $500 $450 $400 $350 Loaan Volumes $300 ($ thousands) $250 $200 $150 $100 $50 $0 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 New loan originations Pay offs/ Pay downs Source: Pinnacle internal
Slide 7: Net interest income grew despite margin contraction
Loan, Deposit and Fee Growth Yield Operating Leverage Net interest income grew despite margin contraction $46 4.00% 3.90% $45.0 3.90% $44.6 $44 3.80% $43.6 3.80% 3.76% 3.78% 3 78% $42.8 $42 3.70% Net Interesst Income 3.74% $42.2 Net Interestt Margin 3.72% 3.70% 3.65% 3.77% $40.9 3.60% $40 3.60% ons)
Slide 8: Yields contracted yet NII expanded as average loans grew
Loan, Deposit and Fee Growth Yield Operating Leverage Yields contracted yet NII expanded as avg. loans grew 11.2% from last year $4,000 $ , 6.00% $3,981 $3,900 $3,932 $3,845 $3,800 5.50% $3,700 $3 700 Averaage Loans $3,682 Loan Yields $3,600 4.88% 5.00% ((millions) $3,580 $3,500 89 $3,48 $3,400 4.50
Slide 9: Lower deposit costs lessened the impact of decreasing loan yields
Loan, Deposit and Fee Growth Yield Operating Leverage Lower deposit costs lessened the impact of decreasing loan yields $4,500 1.20% $4,400 1.01% 1.10% $4,408 $4,300 1.00% $4,200 0.90% 99 $4,19 $4,100 0.80% osit Costs Avg. Deposits $4,000 0.70% millions) (%) $3,963 $3,900 0.60% 3,950 83 Depo (m $3 $
Slide 10: Core noninterest income is up 12.3% year over year
Loan, Deposit and Fee Growth Yield Operating Leverage Core noninterest income is up 12.3% year over year 4Q13 3Q13 2Q13 1Q13 4Q12 Service charges $2,739 $2,797 $2,541 $2,480 $2,623 Investment services 2,394 1,956 1,895 1,793 2,051 Insurance commissions 1,015 1,021 1,108 1,393 1,045 Gain on mortgage
Slide 11: The core efficiency ratio at 4Q13 stands at 56.3%
Loan, Deposit and Fee Growth Yield Operating Leverage The core efficiency ratio at 4Q13 stands at 56.3% 4Q13 3Q13 2Q13 1Q13 4Q12 Salaries and benefits $21,494 $21,010 $20,570 $19,572 $19,556 E i Equipment t and d occupancy 5 543 5,543 5 413 5,413 5 204 5,204 5 113 5,113 5 202 5,202 Other real estate
Slide 12: PNFP Valuation
PNFP Valuation 2013 Results Future Earnings Stream • Set aggressive targets • Targets are aggressive • Executed with precision • Earnings are based on revenue growth • Grew balance sheet and earnings at a • Revenue growth is primarily organic double‐digit pace in 2013 • Organic growth is due to vibr
Slide 13: Q&A – Fourth Quarter 2013 Investor Call
Q&A – Fourth Quarter 2013 Investor Call 13
Slide 14: Supplemental Information
Supplemental Information Fourth Quarter 2013 Investor Call 14
Slide 15: Supplemental Information
Supplemental Information Chart • Balance Sheet 16 • Asset Quality 28 • Income Statement 34 • Economic Conditions & Other 39 • Pinnacle Financial Partners profile 43 15
Slide 16: Supplemental Information: Balance Sheet
Supplemental Information Balance Sheet 16
Slide 17: Loan portfolio components are within targeted ranges
Balance Sheet Loan portfolio components are within targeted ranges Amts. %’s Amts. %’s Amts. %’s Amts. %’s 4Q13 4Q13 3Q13 3Q13 2Q13 2Q13 4Q12 4Q12 C&D and Land $316.2 7.6% $320.0 8.1% $298.5 7.6% $313.6 8.5% Consumer RE 695.6 16.8% 687.3 17.3% 697.5 17.7% 679.9 18.3% CRE – Owner Occ. 679.3 16.4% 638
Slide 18: Exposure to residential land development is limited
Balance Sheet Exposure to residential land development is limited Amts. %’s(*) Amts. %’s(*) Amts. %’s(*) Amts. %’s(*) 4Q13 4Q13 3Q13 3Q13 2Q13 2Q13 4Q12 4Q12 Residential – Spec $28 2 $28.2 0 7% 0.7% $24 3 $24.3 0 6% 0.6% $21 1 $21.1 0 5% 0.5% $ 17 17.5 5 0 5% 0.5% Residential – Custom 29.3 0.7% 29.7
Slide 19: The C&I loan portfolio is highly diversified
Balance Sheet The C&I loan portfolio is highly diversified Transportation & Utilities, 0.1% Accomodation and Food Services, 3.9% Administrative & Support & Warehousing, 6.4% Waste Management & Remediation Services, 4.5% Retail Trade, Arts, Entertainment & Real Estate & Rental & 5.5% Construction, 5.
Slide 20: 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 2013 New clients, Existing 45.3% clients, 54.7% Source: Internal loan records, new loans to new clients based on review of new tax ID’s recorded during 2013. Al
Slide 21: Line commitments are up 18.4% over 4Q12
Balance Sheet Line commitments are up 18.4% over 4Q12 60% 56.15% $2,500 54.81% 55% 024 89 mmitmentss $1,0 $2 000 $2,000 $98 $926 $941 $865 50% $787 nded % $808 $815 $779 $747 $685 $715 $1,500 (miillions) 45% Total Com Fun $1,000 40% $1,216 $1,190 $1,166 1,138 1,105 $1,055 $1,054 $1,,009 $1,000 975 $
Slide 22: Bond volumes and yields have stabilized
Balance Sheet Bond volumes and yields have stabilized $1,050 3.70% $1,000 $1,010 3.50% $950 $973 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 $746 $743 $732 720 $700 2.30% $714 $650 $7 2.10% Avg Investments Bond Yie
Slide 23: PNFP maintains a conservative bond portfolio
Balance Sheet PNFP maintains a conservative bond portfolio 16.2% 1.5% Portfolio: Dec. 31, 2013 24 6% 24.6% Total Investments $732 million Unrealized Loss $8.0 million 5.7% QTD Purchases $56.6 million 49.6% 2.4% QTD sales, maturities, calls $22.0 million Duration Avg Yield ‐ TE Agency Corporates MBS
Slide 24: The municipal portfolio contains minimal risk
Balance Sheet The municipal portfolio contains minimal risk Municipal Bond Portfolio Statistics Muni Allocation % 4Q13 4Q12 Weighted Average Life 4.4 years 4.3 years % State Agency Holdings 4.95% 5.03% 23% Tax equivalent yield 4.53% 5.71% FMV as % of Cost 104.1% 109.3% 77% All municipals are “A” rat
Slide 25: 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% 40% $400,000 80% $300,000 75% 30% $ $200,000 70% 20% $100,000 65
Slide 26: PNFP has limited dependence on non-relationship funding
Balance Sheet PNFP has limited dependence on non‐relationship funding 12/31/2013 Percent 12/31/2012 Percent Core Funding: Transaction accounts 2,038,425 42.51% 1,746,476 41.47% Money Market accounts 1,655,087 34.52% 1,461,173 34.70% Time deposits less than $250,000 408,520 8.52% 467,013 11.09% Total
Slide 27: 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% 5% 7% 5% 6% 12.72% % 12.71% % 12.80% % 8.73% % 8.77% % 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 4Q13 1Q12 2Q12
Slide 28: Supplemental Information: Asset Quality
Supplemental Information Asset Quality 28
Slide 29: Past due loans remain very low
Asset Quality Past due loans remain very low Dec. 31,, As a % Dec. 31,, As a % 2013 of total 2012 of total (000’s) loans loans Past Due Loans (*) Managed by special assets: Nonaccrual loans $7,336 0.18% $13,455 0.36% Accruingg loans 10,505 , 0.25% 7,944 , 0.21% Accruing loans $5,784 0.14% 2,932 0.08
Slide 30: Percentage of potential problem loans continued to decline
Asset Quality Percentage of potential problem loans continued to decline 10.0% 9.30% oblem loanss/Total loanss 9 0% 9.0% 8.63% 8 63% 8.64% 8 64% 7.24% 8.0% 7.65% 7.18% 7.0% 5 78% 5.78% 6.0% 5.04% 5.0% 4.12% 4.09% 3.78% 4.0% 3.49% 3.13% Potential Pro 2.84% 3.0% 2.57% 2.11% 1.80% 2.0% 1.51% 1.0% P 0.0
Slide 31: NPLs remain very low
Asset Quality NPLs remain very low NPLs Expressed as a % of Total Loans within each Category PNFP NPLs PNFP NPLs PNFP NPLs PNFP NPLs PNFP NPLs and > 90 and > 90 and > 90 and > 90 and > 90 days days days days days 4Q13 3Q13 2Q13 1Q13 4Q12 Const. and land development 0.34% 0.41% 0.61% 0.57% 1.44% CRE
Slide 32: Classified assets continued to decline
Asset Quality Classified assets continued to decline (in thousands) Balances Balances Balances Dec. 31, 2013 Sept. 30, 2013 Dec. 31, 2012 Classified loans and ORE: ‐ Substandard commercial loans $91,445 $102,169 $ 144,684 ‐ Doubtful commercial loans ‐ ‐ 33 ‐ Other impaired loans 4,659 4,730 2,083 ‐
Slide 33: Current OREO valuations are below historical disposition results
Asset Quality Current OREO valuations are below historical disposition results ORE Dispositions Fair (*) thru ORE Balance at value as Average Dec 31,, 2013 Dec 31,, 2013 Balances a % of Appraisal Dec. 31, book Age in (dollars in thousands) 2013 value* Months Loan balances prior to charge offs 100.00
Slide 34: Supplemental Information: Income Statement
Supplemental Information Income Statement 34
Slide 35: Pinnacle's 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% 2.50% 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
Slide 36: 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 36 36
Slide 37: PNFP continues to improve operating leverage
Income Statement PNFP continues to improve operating leverage 4Q13 3Q13 2Q13 1Q13 4Q12 Net interest income $44,969 $44,573 $43,599 $42,758 $42,243 Total non‐interest income $12,488 $11,387 $11,326 $11,902 $13,108 Less: Securities (gains) losses ‐ 1,441 25 ‐ (1,988) Less: Net noncredit related loan l
Slide 38: Growth in Core Earnings Capacity
Growth in Core Earnings Capacity Adjusted PTPP expanded 14.4% in 4Q13 over the same period prior year * Includes a $2.0 million reversal of a previously recorded allowance for off‐balance liabilities 38
Slide 39: Supplemental Information: Economic Conditions & Other
Supplemental Information EEconomic i Conditions C di i & Other 39
Slide 40: PNFP operates in advantaged markets
Economic Conditions PNFP operates in advantaged markets Nashville Home Sales 4Q2013 4Q2012 % Change Avg. Qtrly. Median $197.9 $181.0 9.4% Home Price Quarterly Closings 6,017 5,506 9.3% Quarter end Inventory 8,228 9,115 (9.7%) Months of Inventory 4.05 5.1 (21.2%) 40 Source: BERC – Middle Tennessee St
Slide 41: Nashville and Knoxville are healthy business markets
Economic Conditions Nashville TENNESSEE and Knoxville are healthy business markets Tennessee ranks No. 7 in a new list of the top U.S. states for doing business Area Development NASHVILLE Nashville has achieved “it city” status, landing on several major national publications’ lists of hot spots. Nas
Slide 42: Nashville's commercial vacancy rates indicate a healthy market
Economic Conditions Nashville’s commercial vacancy rates indicate a healthy market Nashville CRE National CRE Vacancy Rates Vacancy Rates 4Q YE 2012(*) YE 2011 (*) YE 2010 YE 2009 YE 2008 4Q 2013(*) (*) (**) (**) 2013 (*) Industrial / 8.7% 9.1% 10.1% 10.2% 10.6% 9.6% 8.0% Warehouse Multifamily** y 7
Slide 43: Supplemental Information: Pinnacle Financial Partners Profile
Supplemental Information Pi Pinnacle l Financial Fi i l Partners P Profile P fil 43
Slide 44: 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 **:: 133,036 shares Total assets: $ 5.565 Billion (12/31/13) % Institutional ownership: 70.1% (9/30/13) Shareholders’ equit
Slide 45: 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 35 13 Robert A. McCabe,, Jr. Chairman of the Board 62 37 13 Hugh M. Queener Chief Administrative Officer 57 26 13 H
Slide 46: Peer Group
PNFP Profile Peer Group • 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) • CVB Financial Corp. (CVBF) • Texas Capi
Slide 47: Engaged associates drive market-best client satisfaction
PNFP Profile 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 47
Slide 48: PNFP has proven experience in market share take-away
PNFP Profile PNFP has proven experience in market share take‐away 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 Share Ran
Slide 49: Market and demographic data by MSA
PNFP Profile j d Projected di Median Projected j d Company Deposit Total Population Population HH HH Income Number Deposits Market Percent of Population Change Change Income Change Market of in Market Share Franchise 2012 2010‐2012 2012‐2017 2012 2012‐2017 MSA Rank Branches ($000) (%) (%) (Actual) (
Slide 50: Fourth Quarter 2013 Investor Call
Fourth Quarter 2013 Investor Call Terry Turner, President and CEO Harold Carpenter, EVP and CFO January 22, 2014
Pinnacle Financial Partners — Q4 2013 Earnings Presentation on 6ix