Pinnacle Financial Partners, Inc. · NYSE:PNFP
Pinnacle Financial Partners — Q4 2021 Earnings Presentation
59 slides from Pinnacle Financial Partners's earnings presentation, Jan 19, 2022
Slide 1: Investor Call Fourth Quarter 2021
Investor Call FOURTH QUARTER 2021 JAN. 19, 2022 Time: 8:30 AM CT Webcast: www.pnfp.com (investor relations) Audio only: 877-602-7944 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, the ratio of noninterest income to average assets, efficiency ratio and the ratio of noninterest expense to averag
Slide 4: 4Q21 Financial Dashboard
4Q21 Financial Dashboard Key success measures including core loan growth, core deposit growth, net interest income growth, fee income growth, pre-provision net revenue growth, asset quality and tangible book value per share accretion were very strong again this quarter. 4
Slide 5: 4Q21 Summary Results of Key GAAP Measures
4Q21 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 NPA/ Loans & ORE NCOs PNFP’s Median Quarterly Performance of 12.6% PNFP’s Median Quarterly P
Slide 6: 4Q21 Summary Results of Key Non-GAAP Measures
4Q21 Summary Results of Key Non-GAAP Measures Adjusted Pre-Tax Pre-Provision Total Revenues* FD EPS* Net Income* CAGR 23.3% CAGR 15.4% CAGR 23.7% Total Core Deposits Total Loans Tangible Book Value per CAGR 22.1% (millions) (millions) CAGR 28.7% Common Share** CAGR 12.8% Classified Asset Ratio NPA/
Slide 7: 4Q21 Financial Information
4Q21 Financial Information Excluding the impact of PPP loans, loan growth was substantial in the fourth quarter. Along with continued growth in core deposits, net interest income, and fees, 4Q21 was a strong core growth quarter for the franchise. 7
Slide 8: Linked-Quarter Annualized Average Loan Growth was 4.2% in 4Q21
PNFP Linked-Quarter Annualized Average Loan Growth was 4.2% in 4Q21 Linked-quarter annualized average loan growth ex-PPP was 12.6% Average Loan Growth $24,000 5.40% Annual Organic EOP Loan Growth^ $22,000 5.20% $23,226 $23,180 20.0% $22,986 $22,848 $22,525 $22,493 $22,257 $20,000 5.00% 18.7% $20,009
Slide 9: Balance Sheet Growth was Driven by Outsized Core Deposit Inflows
Balance Sheet Growth was Driven by Outsized Core Deposit Inflows Core deposit growth continues to outperform expectations Average Deposit Growth Annual Core Deposit Growth^ $32,000 2.70% Core Deposit Growth Rates $30,000 40.0% 2.40% $30,034 $28,000 35.0% $28,740 $28,014 $26,000 $27,621 2.10% $27,193
Slide 10: Excess Liquidity Continues to Impact NIM
Excess Liquidity Continues to Impact NIM Rebound in loan demand should serve to reduce elevated liquidity levels in 2022 Reported NIM vs. Adjusted NIM Quarterly Avg. Securities $6,000 3.50% 3.40% 3.35% $5,500 Average Blalances ($ in millions) 3.28% 3.27% 3.29% 3.25% 3.30% 3.25% Average Quarterly Yie
Slide 11: PNFP's Asset Quality Has Continued to Hold Up
PNFP’s Asset Quality Has Continued to Hold Up Asset quality metrics continue to remain strong as we enter 2022 Net Charge-offs NPA/ Loans & ORE 4Q21 Credit Highlights 0.19% 0.55% 0.58% • Several credit measurements at 0.14% 0.46% all time records and top 0.13% 0.38% 0.11% quartile of peers. 0.07% 0.
Slide 12: PNFP Grew Fees more than 20% YOY
PNFP Grew Fees more than 20% YOY Business lines had an extremely good year Linked-Quarter Year-over-Year Annualized • Wealth management fees are up due to broader 4Q21 3Q21 4Q20 Growth % Growth % market appreciation as well as the addition of 17 Service charges $12,663 $11,435 $8,486 43.0% 49.2% wea
Slide 13: Expenses in line with Expectations for 4Q21
Expenses in line with Expectations for 4Q21 Incentive expenses fluctuations positively correlate with earnings Linked-Quarter Year-over-Year 4Q21 3Q21 4Q20 Annualized Growth % Growth % • Salary costs reflect increased personnel as total FTEs in Salaries and employee benefits: Salaries $64,182 $61,38
Slide 14: Capital Update for Fourth Quarter 2021
Capital Update for Fourth Quarter 2021 Sub Debt redemption completed in 4Q21, increase to common dividend as we enter 2022 • Dividends – Tangible Book Value per Tangible book value per share growth remains our focus, but other capital initiatives will be Common • Dividends per common share to increa
Slide 15: PNFP Optimistic about 2022
PNFP Optimistic about 2022 We remain confident in our model and look forward to the coming year 2022 Outlook – as of January 18, 2022 (Note) Y/Y End of Period Loan Growth • Estimate 10 to 15 percentage end-of-year loan growth for FY22 over 2021 year-end levels. • Client funding should continue to ri
Slide 16: 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 further increases the mix toward balance sheet spr
Slide 17: Record Year at BHG in 2021
Record Year at BHG in 2021 BHG continues to originate loans at record levels while maintaining strong yields $800 BHG Business Model Drives Outperformance Loan Originations and Placements $700 • 4Q21 was the 6th consecutive record highest origination $739 $727 $714 $600 quarter in the history of BHG
Slide 18: BHG Credit Sheet Quality
BHG CreditSheet On Balance Quality Continues Reserves Remain to Strong Impress Sophisticated Additional credit COVID-related scoring reserves models released in 2021 produce impressive results Recourse Obligation Reserves (Note) • Recourse obligation reserves decreased to 5.00% of total (Green Bars
Slide 19: Improved Credit Quality
BHG Credit Improved Quality Credit Continues to Impress Quality Vintage analysiscredit Sophisticated demonstrates scoring continuous improvement models produce in asset impressive quality results • Historical credit results indicate that 70% of losses occur Historical FICO Scores 2001 within first 3
Slide 20: The Pandemic Served to Validate the BHG Model
The Pandemic Served to Validate the BHG Model BHG believes its unique model is outperforming other online lenders by a wide margin BHG Future Growth opportunities • Deeper penetration for Core Product < 1% of market BHG Pre-Tax Profitability share currently • Expansion of credit card platform to med
Slide 21: The Past, the Present, and the Future
The Past, the Present, and the Future We believe our advantaged markets, our long-standing model for attracting talent and demonstrable ability to “wow” our clients should yield top-quartile growth and has positioned us for the continued share grab that should be available given the stressed client
Slide 22: The Past: PNFP is an Employer of Choice
The Past PNFP is an Employer of Choice as Key Competitors Remain Vulnerable 2021 Revenue Producers By Competitor First Citizens Bank Revenue Regions Fifth Third Producers Hired First Horizon 2017 77 BBVA 2018 109 Other 2019 89 Wells Fargo 2020 87 2021 119 Truist 22
Slide 23: The Past: Differentiated Model Has Yielded Consistent Growth
The Past PNFP’s Differentiated Model has Yielded Consistent, Sustainable Growth North Carolina and Virginia serve as a great example Excited Associates Engaged Clients Enriched Shareholders 2021 Workplace Awards Greenwich Net Promoter Scores Carolinas & Virginia NPS Rank 2021 Loan Growth • No. 1 Bes
Slide 24: The Past: 2021 Summary
The Past 2021 Summary • Associate engagement advanced even during COVID • Client net promoter scores advanced even during COVID • PNFP produced top quartile total shareholder return in 2021, with: • core loan growth 11.7% • core deposit growth 24.7% • fee income growth 24.5% • EPS growth 67.5% • TBV
Slide 25: The Present: 2022 Priorities
The Present 2022 Priorities 1. Engage every single associate 2. Get paid for our premium service level 3. Seize market share opportunities around the Southeast 4. Meet all of our clients’ needs 5. Maintain strong asset quality 25
Slide 26: The Future
The Future How do we achieve our goal? • Continuity of senior management while keeping an eye on the next generation of leaders • Seize the opportunity to possess the dominant Southeastern banking franchise 26
Slide 27: Q&A Fourth Quarter 2021
Q&A FOURTH QUARTER 2021 einnacle FINANCIAL PARTNERS
Slide 28: Supplemental Information
Supplemental Information Slide # • Balance Sheet 29 • Income Statement 52 • Peer Group 58 28
Slide 29: Balance Sheet – Loan Portfolio Segments
Balance Sheet – Loan Portfolio Segments ($ in millions) Amts. % Amts. % Amts. % Amts. %s 4Q21 4Q21 3Q21 3Q21 4Q20 4Q20 4Q19 4Q19 C&I $7,703.5 32.9% $7,079.4 30.7% $6,239.6 27.8% $6,290.3 31.8% C&I – Paycheck Protection Program 371.1 1.6% 708.7 3.1% 1,798.9 8.0% - 0.0% CRE – Owner Occ. 3,048.8 13.0%
Slide 30: Balance Sheet – Loan Portfolio – Market Segmentation
Balance Sheet – Loan Portfolio – Market Segmentation ($ in millions) TOTAL PINNACLE TN/AL LOANS CAROLINAS/ VA LOANS GEORGIA OTHER UNIT LOANS* Amts. Amts. Amts. Amts. Amts. Amts. Amts. Amts. Amts. Amts. 4Q21 4Q20 4Q21 4Q20 4Q21 4Q20 4Q21 4Q20 4Q21 4Q20 C&I $7,703.5 $6,239.6 $5,139.7 $4,401.3 $1,187.3
Slide 31: Balance Sheet – Loan Portfolio – CRE Segmentation
Balance Sheet – Loan Portfolio – CRE Segmentation ($ in millions) Total NOO and Multifamily Total Construction Total NOO and Construction Amts. Amts. Amts. Amts. Amts. Amts. Amts. Amts. Amts. 4Q21 3Q21 4Q20 4Q21 3Q21 4Q20 4Q21 3Q21 4Q20 Multifamily $602.0 $609.2 $618.3 $705.7 $761.2 $750.9 $1,307.7
Slide 32: Balance Sheet – Loan Pricing Information
Balance Sheet – Loan Pricing Information Rate Index End-of-Period Weighted Average Coupon New Loans Originated At Dec. 31, At Sep. 30, At Dec. 31, As a % of Origination YOY Change 4Q20 3Q21 4Q21 2020 2021 2021 Total Portfolio Mix 4Q21 LIBOR/SOFR 2.87% 2.78% 2.75% (0.12)% 34.8% 3.07% 2.62% 2.67% 39.6
Slide 33: 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 • $371.1 million in PPP balances remain on balance sheet at ($000’s) 2020 PPP 2021 PPP Totals Total PPP fundings through Dec. 31, 2021 $ 2,483,177 $ 933,872 $ 3,417,049 Dec. 31, 202
Slide 34: Asset Quality Has Continued to Hold Up
Asset Quality Has Continued to Hold Up COVID-impacted categories continue to outperform initial expectations Outstanding Balances % Nonperforming Loans % Classified Loans % Past Due > 30 days 4Q21 4Q20 4Q21 4Q20 4Q21 4Q20 4Q21 4Q20 Hotels NOO CRE & Construction $890,535 $974,263 - 0.16% 0.25% 0.87%
Slide 35: Balance Sheet – Loan Portfolio Lines of Credit
Balance Sheet – Loan Portfolio Lines of Credit ($'s in millions) Linked Qtr. 6/30/2020 9/30/2020 12/31/2020 3/31/2021 6/30/2021 9/30/2021 12/31/2021 Change CRE – Investment & Construction Net Active Balance $4,090.80 $4,067.10 $4,106.82 $4,051.74 $3,921.54 $4,040.73 $3,727.20 ($313.53) Net Available
Slide 36: Current Expected Credit Losses
Current Expected Credit Losses Total Allowance for Credit Losses for loans = $263.2 mm or 1.12% of loans at December 31, 2021, or 1.14% excluding PPP loans Allowance for Off-Balance % of Loans Total Forecasted economic metrics(1) Credit Losses Sheet Base Case Outlook at: 1Q22 2Q22 3Q22 4Q22 At Decem
Slide 37: Current Expected Credit Losses
Current Expected Credit Losses December 31, 2020 March 31, 2021 June 30, 2021 September 30, 2021 December 31, 2021 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 $ 98,423 1.58% *
Slide 38: Asset Quality
Asset Quality AS A % OF AS A % OF AS A % OF ($ in millions) December 31, 2021 September 30, 2021 December 31, 2020 TOTAL LOANS TOTAL LOANS TOTAL LOANS NPLs and > 90 days Const. and land development $356 0.00% $1,645 0.01% $1,954 0.01% Consumer RE 10,408 0.04% 19,357 0.08% 22,463 0.10% CRE – Owner Oc
Slide 39: Balance Sheet – Loan Portfolio
Balance Sheet – Loan Portfolio Net Commercial Loan Charge Offs by Loan Type Net Consumer Loan Charge Offs by Loan Type 0.60% 3.00% 0.50% 2.50% 0.40% 2.00% 0.30% 1.50% 0.20% 1.00% 0.10% 0.50% 0.00% -0.10% 0.00% -0.20% -0.50% CRE Construction C&I Net commercial charge Consumer RE Consumer and other Ne
Slide 40: Balance Sheet – Loan Portfolio – 100/300 Test
Balance Sheet – Loan Portfolio – 100/300 Test ($ in thousands) Description 4Q21 3Q21 2Q21 1Q21 4Q20 3Q20 Loans secured by real estate: Construction, land development, and other loans: 1-4 family residential construction loans $625,862 $635,470 $556,052 $548,614 $514,819 $527,743 Other construction l
Slide 41: Balance Sheet – Deposit Portfolio – Market Segmentation
Balance Sheet – Deposit Portfolio – Market Segmentation ($ in millions) TOTAL DEPOSITS CORE DEPOSITS NONCORE DEPOSITS TOTAL PINNACLE TRANSACTION AND MMDA CDs PUBLIC FUNDS and OTHER DEPOSITS 4Q21 4Q20 4Q21 4Q20 4Q21 4Q20 4Q21 4Q20 Nashville $13,165.5 $10,550.3 $12,650.8 $9,850.4 $351.8 $469.5 $162.9
Slide 42: Balance Sheet – Bond Portfolio Statistics
Balance Sheet – Bond Portfolio Statistics Portfolio: December 31, 2021 Investment Securities Segmentation Total Investments $6.1 billion Net Unrealized Gain $81.0 million Quarter Duration Avg. Yield- TE 2.5% 13.3% 4Q21 4.1% 2.1% 3Q21 4.5% 2.0% 2Q21 4.3% 2.3% 46.4% 1Q21 4.8% 2.3% 4Q20 4.4% 2.3% 30.9%
Slide 43: Balance Sheet – Bond Portfolio
Balance Sheet – Bond Portfolio 4.00 40.0 Effective Bond Portfolio Composition End of Period 3.50 35.0 Bond Yield Trends 78% 3.00 30.0 76% 76% 76% 75% % of Total Assets 2.50 25.0 Bond Yields 2.08 2.00 20.0 1.50 15.0 15.8 1.00 %age of Total Asset Trends 10.0 24% 25% 24% 24% 22% 0.50 5.0 - - 2016Q4 201
Slide 44: Interest Rate Sensitivity
Interest Rate Sensitivity ▪ The balance sheet is asset sensitive, and we are likely to experience only a modest benefit during the first 50bp of hikes with increasing benefit from asset sensitivity thereafter due to impact of loan floors. ▪ Asset sensitivity in a +100bp scenarios is impacted by in-t
Slide 45: 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 46: 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 47: 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 48: 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 49: 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 50: 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 51: 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 52: Income Statement – Revenue per Common Share
Income Statement – Revenue per Common Share LTM Revenue Per Share Growth* vs. Peers $18.00 20.0% $17.50 $17.50 $17.07 $17.00 18.0% $16.51 19.0% 16.2% $16.50 17.5% 16.0% $16.00 $15.78 14.5% Y/Y Revenue per Share Growth $15.50 13.8% 13.0% 13.0% $15.07 14.0% $15.00 11.9% 11.9% Revenue per Share $14.50
Slide 53: 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% $25,000 1.00% Purchase Money Refinance Gross fees as a % of loans originated 53
Slide 54: Income Statement – PPNR
Income Statement – PPNR ($'s in thousands) 2017 2018 2019 2020 2021 PPNR Trends Adjusted PPNR $700 Net interest income $543,306 $ 736,342 $ 766,142 $821,788 $932,401 Noninterest income 144,904 200,850 263,826 317,840 395,734 $600 Noninterest expense (366,560) (452,867) (505,148) (564,455) (660,104)
Slide 55: BHG Financials
BHG Financials Strong equity to support business model • Consistent quarterly performance throughout 2021 • Strong cash position, providing increased liquidity At Dec 31, At Sep 30, At Dec 31, ($'s in thousands) ($'s in thousands) 4Q 2021 3Q 2021 4Q 2020 2021 2021 2020 Cash and Cash Equivalents 373,
Slide 56: Income Statement: Reconciliation of Non-GAAP Financial Measures
Income Statement Reconciliation of Non-GAAP Financial Measures 56
Slide 57: Income Statement: Reconciliation of Non-GAAP Financial Measures
Income Statement Reconciliation of Non-GAAP Financial Measures 57
Slide 58: 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 59: Investor Call Fourth Quarter 2021
Investor Call FOURTH QUARTER 2021 M. TERRY TURNER, PRESIDENT AND CEO HAROLD R. CARPENTER, EVP AND CFO
Pinnacle Financial Partners — Q4 2021 Earnings Presentation on 6ix