Pinnacle Financial Partners, Inc. · NYSE:PNFP
Pinnacle Financial Partners — Q2 2022 Earnings Presentation
63 slides from Pinnacle Financial Partners's earnings presentation, Jul 20, 2022
Slide 1: Investor Call Second Quarter 2022
Investor Call SECOND QUARTER 2022 July 20, 2022 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 presentation contains certain non-GAAP financial measures, including, without limitation, earnings per diluted common share, PPNR, efficiency ratio and the ratio of noninterest expense to average assets, excluding in certain instances the impact
Slide 4: 2Q22 Financial Dashboard
2Q22 Financial Dashboard Key success measures including core loan growth, net interest income growth, fee income growth, and asset quality all continue to be strong. 4
Slide 5: Shareholder Value Dashboard: Key GAAP Measures
Shareholder Value Dashboard 2Q22 Summary Results of Key GAAP Measures Total Revenues FD EPS Net Income* Total Loans Total Deposits Book Value per Common Share (millions) (millions) NPA/ Loans & ORE Classified Asset Ratio NCOs PNFP’s Median Quarterly Performance of 11.6% PNFP’s Median Quarterly Perfo
Slide 6: Shareholder Value Dashboard: Key Non-GAAP Measures
Shareholder Value Dashboard 2Q22 Summary Results of Key Non-GAAP Measures Adjusted Pre-Tax Pre-Provision Total Revenues* FD EPS* CAGR 11.7% Net Income* CAGR 13.7% Qtd AGR 50.9% CAGR 12.4% Qtd AGR 54.9% Qtd AGR 83.9% Total Core Deposits CAGR 11.2% Total Loans (millions) Tangible Book Value per Share*
Slide 7: Cumulative NII Per Share Growth & Deposit Beta
Keeping the Main Thing the Main Thing Pinnacle’s goal is rapidly growing revenue and EPS, not a low deposit cost beta Cumulative NII Per Share Growth* vs. Cumulative Deposit Beta – Last cycle 1Q16 through 2Q219 60% Cumulative NII Per Share Growth* & Deposit Beta 55% 50% 49.4% 45% 44.6% 40% 35% 30.6%
Slide 8: The Flywheel Effect: Almost Unstoppable Momentum
The Flywheel Effect: “Almost Unstoppable PNFP’s Approach to M&A is Strategic and Disciplined Momentum” Pinnacle’s Flywheel is Spinning 8
Slide 9: The Flywheel Effect: High-Performance Culture
The Flywheel Effect: “Almost Unstoppable Momentum” Pinnacle’s performance is driven by its high-performance culture 9
Slide 10: The Flywheel Effect: Reliable Outsized Returns
The Flywheel Effect: “Almost Unstoppable Momentum” Pinnacle’s high-performance culture has delivered reliable outsized returns EXCITED ASSOCIATES ENGAGED CLIENTS ENRICHED SHARHOLDERS Recent Workplace Awards* Greenwich Net Promoter Scores Share Price Performance • No. 28 100 Best Companies to Work fo
Slide 11: The Flywheel Effect: Incentive Structure
The Flywheel Effect: “Almost Unstoppable Momentum” Management creates desired outcomes in part due to its incentive structure Annual Cash Incentives Classified Asset Ratio Adjusted Pre-Tax Pre-Provision FD EPS* Total Revenues* Net Income* Long-term Equity Based Incentives Tangible Book Value per Sha
Slide 12: What's Important Now for PNFP
What’s Important Now for PNFP Our focus remains constant • Asset Quality is Job #1 • Impacts incentive program meaningfully • Continued investment in our culture • Direct linkage between associate engagement and shareholder value creation • Maintain our “Best Place to Work” brand • Magnet for talent
Slide 13: 2Q22 Financial Information
2Q22 Financial Information 2Q22 financial results reflect PNFP’s continued success in seizing the opportunity to gather valuable talent and clients from vulnerable competitors. In spite of the current rising rate environment, loan growth was substantial in the second quarter, as was net interest inc
Slide 14: Linked-Quarter Annualized Average Loan Growth was 26.0%
PNFP Linked-Quarter Annualized Average Loan Growth was 26.0% in 2Q22 Linked-quarter annualized average loan growth ex-PPP was 29.2%* $26,000 Average Loan Growth and Loan Yields 5.40% Organic EOP Loan Growth^ $24,000 $25,397 5.20% 30.0% $23,849 $22,000 $23,226 $23,180 5.00% $22,986 $22,848 $22,525 $2
Slide 15: Client Acquisition Strategies Are Yielding Results
Client Acquisition Strategies Are Yielding Results Loan growth is a result of successful execution of several growth strategies Loan Growth in 1H22 Result of Strategic Decisions: • Asset Generators - $165 million • BHG, JBB and Advocate Capital • Strategic Expansion - $900 million • ATL, DC, B’ham,
Slide 16: Deposit Growth Slowed in Second Quarter
Deposit Growth Slowed in Second Quarter We believe an outsized tax season negatively impacted core deposits in 2Q Average Deposit Growth Annual Core Deposit Growth $34,000 1.50% 35.0% Core Deposit Growth Rates $30,000 $31,539 $31,484 1.25% 30.0% 33.5% $30,034 $28,740 Average Deposits $28,014 $26,000
Slide 17: Excess Liquidity Remains Available to Fund Loan Growth
Excess Liquidity Remains Available to Fund Loan Growth A meaningful step towards normalization in 2Q provided a boost to NIM Reported NIM vs. Adjusted NIM Quarterly Avg. FFS, IB Cash & Repos $5,000 1.50% 3.40% $4,500 3.29% 3.29% Average Balances ($ in millions) 3.28% 3.27% 1.25% Average Quarterly Yi
Slide 18: PNFP's Asset Quality Has Continued to Hold Up
PNFP’s Asset Quality Has Continued to Hold Up Asset quality metrics continue to break records Net Charge-offs NPA/ Loans & ORE 2Q22 Asset Quality Highlights 0.55% • Several measurements improve to 0.53% 0.17% all time records and remain in top- 0.38% 0.10% 0.10% quartile performance when 0.09% 0.27%
Slide 19: PNFP Increased Focus with Respect to our CRE Credit Appetite
PNFP Increased Focus with Respect to our CRE Credit Appetite CRE Credit Appetite “Catch don’t Cast” strategy in effect for current environment Land / Spec A&D • Opportunities substantially limited to current clients with Malls, Big Box Retail excellent PNFP track records High Rise Apartments & Condo
Slide 20: PNFP Grows Fees 27.8% YOY
PNFP Grows Fees 27.8% YOY PNFP continues focus on gathering more share of wallet from client base Linked-Quarter Year-over-Year Annualized • Wealth management groups are producing 2Q22 1Q22 2Q21 Growth % Growth % significant growth primarily due to an increased Service charges $11,616 $11,030 $8,906
Slide 21: New Markets and New Talent Drive Expense Growth
New Markets and New Talent Drive Expense Growth Incentive expenses fluctuations positively correlate with earnings Linked-Quarter Year-over-Year 2Q22 1Q22 2Q21 Annualized Growth % Growth % • Salary and benefit costs increases from the same Salaries and employee benefits: Salaries $70,405 $69,142 $58
Slide 22: Preservation and Growth in Tangible Book Value
Preservation and Growth in Tangible Book Value Remains a Critical Focus Second quarter reflects growth in TBV/Share • Dividends – Tangible Book Value per • Dividends per common share is $0.22 in 2Q22. Common Share** $42.08 $39.77 • Share Buy Back Program – $34.43 • Board authorized a $125.0 million
Slide 23: PNFP Remains Optimistic about 2022
PNFP Remains Optimistic about 2022 We remain confident in our model to produce outsized revenue and earnings growth 2022 Outlook – as of July 19, 2022 (Note) Y/Y End of Period Loan Growth • We anticipate high-teens to low 20% loan growth for 2022 end of year balances over 2021 year-end levels. • We
Slide 24: 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 25: BHG has had a Record Start in 2022
BHG has had a Record Start in 2022 BHG continues to originate loans at record levels while maintaining strong yields $1,200 BHG Business Model Drives Outperformance Loan Originations and Placements $1,000 • 2Q22 was the 8th consecutive record highest origination $1,011 $800 quarter in the history of
Slide 26: BHG Credit Quality Continues to Impress
BHG Credit BHG’s Quality On Balance Continues Sheet Reservesto Impress Remain Strong Sophisticated BHG increased theircredit recoursescoring models produce impressive results accrual in 2Q22 Recourse Obligation Reserves (Note) (Green Bars – Balance of loans in bank network, $s in millions) • Recours
Slide 27: BHG Credit Quality Remains Differentiator
BHG’sCredit BHG StrongQuality Continues Credit Quality to Impress Remains 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 occur
Slide 28: BHG Anticipates 15% Growth in 2022
BHG Anticipates 15% Growth in 2022 Alternative revenue channels remain in 2022 launch pipeline Other 2Q22 Highlights • Closed $300mm BHG 2022-B securitization in June. BHG Pre-Tax Earnings ($ millions) • Fitch/KBRA rated AAA on Class A (45%), all classes IG $400 BHG estimates pre-tax earnings • Borr
Slide 29: Q&A Second Quarter 2022
Q&A SECOND QUARTER 2022 einnacle FINANCIAL PARTNERS
Slide 30: Supplemental Information
Supplemental Information Slide # • Balance Sheet 31 • Income Statement 55 • Peer Group 62 30
Slide 31: Balance Sheet – Loan Portfolio Segments
Balance Sheet – Loan Portfolio Segments ($ in millions) Amts. % Amts. % Amts. % Amts. % 2Q22 2Q22 1Q22 1Q22 2Q21 2Q21 2Q20 2Q20 C&I $9,244.7 35.1% $8,213.1 33.5% $6,771.3 29.6% $6,293.7 27.9% C&I – Paycheck Protection Program 51.1 0.2% 157.2 0.6% 1,372.9 6.0% 2,222.6 9.9% CRE – Owner Occ. 3,243.0 12
Slide 32: Balance Sheet – Loan Portfolio – Market Segmentation
Balance Sheet – Loan Portfolio – Market Segmentation ($ in millions) TOTAL PINNACLE C&I & O/O CRE CRE & CONSTRUCTION OTHER LOANS* Amts. Amts. Amts. Amts. Amts. Amts. Amts. Amts. 2Q22 2Q21 2Q22 2Q21 2Q22 2Q21 2Q22 2Q21 Nashville $7,741.1 $6,635.0 $3,420.5 $2,913.5 $2,793.7 $2,487.9 $1,526.9 $1,233.6
Slide 33: Balance Sheet – Loan Portfolio – CRE Segmentation
Balance Sheet – Loan Portfolio – CRE Segmentation ($ in millions) Total NOO and Multifamily Total Construction Total NOO and Construction Amts. Amts. Amts. Amts. Amts. Amts. Amts. Amts. Amts. 2Q22 1Q22 2Q21 2Q22 1Q22 2Q21 2Q22 1Q22 2Q21 Multifamily $996.4 $709.9 $713.5 $819.4 $886.6 $696.8 $1,815.8
Slide 34: Balance Sheet – Loan Pricing Information
Balance Sheet – Loan Pricing Information Rate Index Portfolio Snapshot: End-of-Period Weighted Average Coupon Loan Originations: Quarterly Average Rate At Jun. 30, At Mar. 31, At Jun. 30, As a % of Origination YOY Change 2Q21 1Q22 2Q22 2021 2022 2022 Total Portfolio Mix 2Q22 LIBOR/SOFR 2.80% 2.87% 3
Slide 35: PPP Program was a Differentiator for Pinnacle
PPP Program was a Differentiator for Pinnacle Pinnacle provided needed stimulus to smaller businesses in 2020 and 2021 • $51.1 million in PPP balances remain on balance sheet at June ($000’s) 2020 PPP 2021 PPP Totals Total PPP fundings $ 2,483,177 $ 933,872 $ 3,417,049 30, 2022 • Unamortized fees of
Slide 36: Balance Sheet – Loan Portfolio Lines of Credit
Balance Sheet – Loan Portfolio Lines of Credit ($'s in millions) Linked Qtr. 12/31/2020 3/31/2021 6/30/2021 9/30/2021 12/31/2021 3/31/2022 6/30/2022 Change CRE – Investment & Construction Net Active Balance $4,106.82 $4,051.74 $3,921.54 $4,040.73 $3,727.20 $4,096.40 $4,389.62 $293.22 Net Available C
Slide 37: Current Expected Credit Losses
Current Expected Credit Losses Total Allowance for Credit Losses for loans = $272.5 mm or 1.03% of loans at June 30, 2022 Allowance for Off-Balance % of Loans Total Forecasted economic metrics(1) Credit Losses Sheet Base Case Outlook at: 3Q22 4Q22 1Q23 2Q23 At June 30, 2021 $273,747 1.20% (1) $23,21
Slide 38: Current Expected Credit Losses
Current Expected Credit Losses June 30, 2021 September 30, 2021 December 31, 2021 March 31, 2022 June 30, 2022 CECL CECL CECL CECL CECL Allowance for Credit Losses Amount % of Loans Amount % of Loans Amount % of Loans Amount % of Loans Amount % of Loans Commercial and Industrial $102,101 1.51%* $101
Slide 39: Asset Quality
Asset Quality AS A % OF AS A % OF AS A % OF ($ in millions) June 30, 2022 March 31, 2022 June 30, 2021 TOTAL LOANS TOTAL LOANS TOTAL LOANS NPLs and > 90 days Const. and land development $403 0.00% $350 0.00% $1,082 0.00% Consumer RE 9,754 0.04% 8,277 0.03% 17,472 0.08% CRE – Owner Occupied 2,756 0.0
Slide 40: Balance Sheet – Loan Portfolio
Balance Sheet – Loan Portfolio Net Loan Charge Offs by Loan Type 1.00% 0.90% 0.80% 0.70% 0.60% 0.50% 0.40% 0.30% 0.20% 0.10% 0.00% -0.10% CRE Construction C&I Consumer RE Consumer and Total net charge other off rates 2019 2020 2021 2022 40
Slide 41: Balance Sheet – Loan Portfolio – 100/300 Test
Balance Sheet – Loan Portfolio – 100/300 Test ($ in thousands) Description 2Q22 1Q22 4Q21 3Q21 2Q21 1Q21 Loans secured by real estate: Construction, land development, and other loans: 1-4 family residential construction loans $754,325 $701,029 $625,862 $635,470 $556,052 $548,614 Other construction l
Slide 42: Balance Sheet – Deposit Portfolio – Market Segmentation
Balance Sheet – Deposit Portfolio – Market Segmentation ($ in millions) TOTAL DEPOSITS CORE DEPOSITS NONCORE DEPOSITS TOTAL PINNACLE TRANSACTION AND MMDA CDs PUBLIC FUNDS and OTHER DEPOSITS 2Q22 2Q21 2Q22 2Q21 2Q22 2Q21 2Q22 2Q21 Nashville $12,899.8 $11,643.5 $12,355.1 $11,023.2 $358.8 $425.0 $185.9
Slide 43: Balance Sheet – Bond Portfolio Statistics
Balance Sheet – Bond Portfolio Statistics Investment Securities Segmentation Portfolio: June 30, 2022 Total Investments $6.6 billion Net Unrealized Gain (Loss) ($155.1) million 16.4% 1.9% Quarter Duration Avg. Yield- TE 2Q22 4.6% 2.3% 1Q22 4.4% 2.1% 48.3% 4Q21 4.1% 2.1% 26.6% 3Q21 4.5% 2.0% 2Q21 4.3
Slide 44: Balance Sheet – Bond Portfolio
Balance Sheet – Bond Portfolio 4.00 40.0 Effective Bond Portfolio Composition End of Period 3.50 35.0 3.00 30.0 77% 75% 76% 76% 72% % of Total Assets 2.50 2.29 25.0 Bond Yields 2.00 20.0 1.50 16.3 15.0 1.00 10.0 28% 25% 24% 24% 23% 0.50 5.0 - - 2022Q1 2017Q1 2017Q2 2017Q3 2017Q4 2018Q1 2018Q2 2018Q3
Slide 45: Interest Rate Sensitivity
Interest Rate Sensitivity ▪ With substantially all floating rate loans above floors as of 6/30, the asset side of the balance sheet is positioned to react more favorably to additional Fed rate hikes. ▪ The IRR sensitivity analysis assumes deposit betas based on the prior tightening cycle, which equa
Slide 46: NIM Adjusted for PPP and Liquidity Impact – 2Q22
NIM Adjusted for PPP and Liquidity Impact – 2Q22 Estimate PPP and Liquidity Build negatively impacted 2Q22 NIM by 0.12% Adjusted Avg Adjusted ProForma Adj. Yield/ Actual Avg Balances ProForma Balances after PF ProForma Interest after Yield/ Rate Rates after 2Q22 Adjustments Entries Interest Adjustme
Slide 47: NIM Adjusted for PPP and Liquidity Impact – 1Q22
NIM Adjusted for PPP and Liquidity Impact – 1Q22 Estimate PPP and Liquidity Build negatively impacted 1Q22 NIM by 0.29% Adjusted Avg Adjusted ProForma Adj. Yield/ Actual Avg Balances ProForma Balances after PF ProForma Interest after Yield/ Rate Rates after 1Q22 Adjustments Entries Interest Adjustme
Slide 48: NIM Adjusted for PPP and Liquidity Impact – 4Q21
NIM Adjusted for PPP and Liquidity Impact – 4Q21 Estimate PPP and Liquidity Build negatively impacted 4Q21 NIM by 0.25% Adjusted Avg Adjusted ProForma Adj. Yield/ Actual Avg Balances ProForma Balances after PF ProForma Interest after Yield/ Rate Rates after 4Q21 Adjustments Entries Interest Adjustme
Slide 49: NIM Adjusted for PPP and Liquidity Impact – 3Q21
NIM Adjusted for PPP and Liquidity Impact – 3Q21 Estimate PPP and Liquidity Build negatively impacted 3Q21 NIM by 0.17% Adjusted Avg Adjusted ProForma Adj. Yield/ Actual Avg Balances ProForma Balances after PF ProForma Interest after Yield/ Rate Rates after 3Q21 Adjustments Entries Interest Adjustme
Slide 50: NIM Adjusted for PPP and Liquidity Impact – 2Q21
NIM Adjusted for PPP and Liquidity Impact – 2Q21 Estimate PPP and Liquidity Build negatively impacted 2Q21 NIM by 0.17% Adjusted Avg Adjusted ProForma Adj. Yield/ Actual Avg Balances ProForma Balances after PF ProForma Interest after Yield/ Rate Rates after 2Q21 Adjustments Entries Interest Adjustme
Slide 51: NIM Adjusted for PPP and Liquidity Impact – 1Q21
NIM Adjusted for PPP and Liquidity Impact – 1Q21 Estimate PPP and Liquidity Build negatively impacted 1Q21 NIM by 0.27% Adjusted Avg Adjusted ProForma Adj. Yield/ Actual Avg Balances ProForma Balances after PF ProForma Interest after Yield/ Rate Rates after 1Q21 Adjustments Entries Interest Adjustme
Slide 52: NIM Adjusted for PPP and Liquidity Impact – 4Q20
NIM Adjusted for PPP and Liquidity Impact – 4Q20 Estimate PPP and Liquidity Build negatively impacted 4Q20 NIM by 0.29% Adjusted Avg Adjusted ProForma Adj. Yield/ Actual Avg Balances ProForma Balances after PF ProForma Interest after Yield/ Rate Rates after 4Q20 Adjustments Entries Interest Adjustme
Slide 53: NIM Adjusted for PPP and Liquidity Impact – 3Q20
NIM Adjusted for PPP and Liquidity Impact – 3Q20 Estimate PPP and Liquidity Build negatively impacted 3Q20 NIM by 0.40% Adjusted Avg Adjusted ProForma Adj. Yield/ Actual Avg Balances ProForma Balances after PF ProForma Interest after Yield/ Rate Rates after 3Q20 Adjustments Entries Interest Adjustme
Slide 54: NIM Adjusted for PPP and Liquidity Impact – 2Q20
NIM Adjusted for PPP and Liquidity Impact – 2Q20 Estimate PPP and Liquidity Build negatively impacted 2Q20 NIM by 0.32% Adjusted Avg Adjusted ProForma Adj. Yield/ Actual Avg Balances ProForma Balances after PF ProForma Interest after Yield/ Rate Rates after 2Q20 Adjustments Entries Interest Adjustme
Slide 55: Income Statement – Mortgage Volumes
Income Statement – Mortgage Volumes $625,000 5.00% $550,000 4.50% $475,000 4.00% $400,000 3.50% $325,000 3.00% $250,000 2.50% $175,000 2.00% $100,000 1.50% $25,000 1.00% Purchase Money Refinance Gross fees as a % of loans originated 55
Slide 56: Income Statement – Revenue Per Share
Income Statement – Revenue Per Share LTM Revenue Per Share Growth* vs. Peers $20.00 20.0% 19.0% 17.5% 18.0% $19.00 16.2% $18.62 13.8% $17.85 16.0% $18.00 $17.50 14.5% 13.0% $17.07 13.1% 13.0% 12.8% 14.0% Y/Y Revenue per Share Growth $17.00 11.3% 11.9% 11.9% 11.6% $16.51 11.3% 11.6% 12.0% $16.00 $15.
Slide 57: Income Statement – PPNR
Income Statement – PPNR ($'s in thousands) 2018 2019 2020 2021 YTD 2Q22 PPNR Trends Adjusted PPNR Net interest income $ 736,342 $ 766,142 $821,788 $932,401 $504,049 $700 Noninterest income 200,850 263,826 317,840 395,734 228,998 Noninterest expense (452,867) (505,148) (564,455) (660,104) (378,699) $
Slide 58: BHG Financials
BHG Financials Strong equity to support business model • Record earnings in second consecutive quarter (2Q22) • Strong cash position provides increased liquidity At Jun 30, At Mar 31, At Jun 30, ($'s in thousands) ($'s in thousands) 2Q 2022 1Q 2022 2Q 2021 2022 2022 2021 Cash and Cash Equivalents 45
Slide 59: Income Statement: Reconciliation of Non-GAAP Financial Measures
Income Statement Reconciliation of Non-GAAP Financial Measures 59
Slide 60: Income Statement: Reconciliation of Non-GAAP Financial Measures
Income Statement Reconciliation of Non-GAAP Financial Measures 60
Slide 61: Income Statement: Reconciliation of Non-GAAP Financial Measures
Income Statement Reconciliation of Non-GAAP Financial Measures 61
Slide 62: 2022 Peer Group
2022 Peer Group Institution Name Ticker City, State Pinnacle Financial Partners, Inc. PNFP Nashville, TN Comerica Inc. CMA Dallas, TX First Horizon Corp. FHN Memphis, TN Zions Bancorp. NA ZION Salt Lake City, UT Synovus Financial Corp. SNV Columbus, GA Cullen/Frost Bankers, Inc. CFR San Antonio, TX
Slide 63: Investor Call Second Quarter 2022
Investor Call SECOND QUARTER 2022 M. TERRY TURNER, PRESIDENT AND CEO HAROLD R. CARPENTER, EVP AND CFO
Pinnacle Financial Partners — Q2 2022 Earnings Presentation on 6ix