Pinnacle Financial Partners, Inc. · NYSE:PNFP
Pinnacle Financial Partners — Q4 2018 Earnings Presentation
50 slides from Pinnacle Financial Partners's earnings presentation, Jan 16, 2019
Slide 1: Investor Call Fourth Quarter 2018
Investor Call FOURTH QUARTER 2018 JANUARY 16, 2019 Time: 8:30 AM CST 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 share, efficiency ratio, revenues per share, the ratio of noninterest income to average assets and the ratio of noninterest expense to
Slide 4: 4Q18 Summary Results of Key GAAP Measures
4Q18 Summary Results of Key GAAP Measures Total Revenues FD EPS Book Value per Share Total Loans Total Deposits ROTCE (millions) (millions) NPA/ Loans & OREO Classified Asset Ratio NCOs 4
Slide 5: 4Q18 Summary Results of Key Non-GAAP Measures
4Q18 Summary Results of Key Non-GAAP Measures Total Revenues* FD EPS* Tangible Book Value per Share** $1.25 $27.27 $249,780 $219,484 $0.97 $23.71 CAGR 33.4% CAGR 21.6% CAGR 14.4% $20.06 $120,156 $0.83 $98,083 $0.69 $17.46 $64,697 $15.60 $0.53 Total Loans Total Core Deposits ROTCE* $17,708 $16,489 (m
Slide 6: Today's Agenda
Today’s Agenda 1. Review 4Q18 financial performance 2. Put 2018 in perspective 3. Provide outlook for 2019 6
Slide 7: PNFP Primarily Focuses on Top and Bottom Line Growth
PNFP Primarily Focuses on Top and Bottom Line Growth Strong growth continues in 4Q18 for both total revenues and revenues per share* $250 $3.50 CAGR REVENUE PER SHARE 13.9% $3.22 $200 $3.00 Total Revenues*(millions) Revenue per share* $150 $2.50 $100 $2.00 $1.68 $50 $1.50 $- $1.00 Total Revenues* To
Slide 8: PNFP Primarily Focuses on Top and Bottom Line Growth: Revenue per Share
PNFP Primarily Focuses on Top and Bottom Line Growth PNFP continues to grow revenue/share at a double-digit pace and faster than peers LTM Revenue Per Share Growth vs. Peers $12.50 20.0% $12.10 $11.73 System Conversion $11.42 $11.50 15.0% $11.14 Y/Y Revenue per Share Growth $10.85 11.2% 11.6% BNCN D
Slide 9: Loan & Deposit Growth are Keys to Top and Bottom Line Growth
Loan & Deposit Growth are Keys to Top and Bottom Line Growth Loan growth remains strong as yields increase 5.22% $18,000 5.25% Annual Organic Loan Growth $17,630 $17,259 (excludes Day 1 merger impact) $16,730 $16,000 5.00% $15,957 20.0% $15,520 $15,017 $14,000 4.75% 18.7% 16.0% BNCN Average Loans $1
Slide 10: Loan Growth Outperforms Peers
Loan & Deposit Growth are Keys to Top and Bottom Line Growth PNFP’s loan growth continues to significantly outperform peers $200.0 13.4% 14.0% 30% $190.0 12.0% Accretion/ Net Interest Income Net Interest Income (millions) 25% $180.0 10.0% Quarterly Loan Growth % - Annualized 24.34% $170.0 8.0% 20% 7
Slide 11: Net Interest Margin Influences Top and Bottom Line Growth
Net Interest Margin Influences Top and Bottom Line Growth PNFP continues to transition to more variable rate assets CRE Construction All Loans C&I At December 31, 2018 (*) LIBOR 33.1% 24.5% 38.2% 34.1% 34.2% Prime 0.0% 42.5% 56.5% 0.9% 43.6% Treasury bill Fixed < 1 yr 23.1% 1.3% 6.5% 31.1% Fixed > 1
Slide 12: Average deposit balances grew at a double-digit pace in 2018
Loan & Deposit Growth are Keys to Top and Bottom Line Growth Average deposit balances grew at a double-digit pace in 2018 Deposit Rate Dec. 31, 2018 Dec. 31, 2018 Sept. 30, 2018 Tranches % of Totals Rate Rate Noninterest bearing 22.9% --- --- Rate sheet 15.7% 0.21% 0.29% Annual Organic Deposit Growt
Slide 13: Loan/Deposit Ratio and Core Deposit Growth
Loan & Deposit Growth are Keys to Top and Bottom Line Growth PNFP funded loan growth with core deposits in 4Q18; L/D ratio approximates peer median 35.00% 110.00% EOP core deposits increased 10.2% annualized in 4Q18 32.8% 30.00% 105.00% Quarterly EOP Deposit Growth % - Annualized 25.00% 100.00% 23.8
Slide 14: PNFP CRE Portfolio Includes Healthy Diversification
PNFP CRE Portfolio Includes Healthy Diversification Diversified borrower and projects exist within real estate portfolio Real Estate Portfolio Concentrations aggregated by real estate category and common borrower - Multifamily, CRE Investment and Construction Granularity of Real Estate Portfolio Lar
Slide 15: Fee Income Growth Supports Ongoing Top and Bottom Line Growth
Fee Income Growth Supports Ongoing Top and Bottom Line Growth Fees/ Avg. Assets accelerated throughout 2018 and peaked in 4Q18 Deposit-Related Fees 1.00% (Service Charges, Interchange) $20,000 Income from Equity Method Investment Yr/Yr Growth $18,000 0.95% (BHG) $16,000 23% $20,000 $14,000 Yr/Yr Gro
Slide 16: Expense are Leveraged to Produce Top and Bottom Line Growth
Expense are Leveraged to Produce Top and Bottom Line Growth Leveraging our associate base is the key to efficiency $500.0 Employee Retention^ 100% $400.0 $431.4 $424.8 $419.9 $412.8 $408.4 $390.8 (in millions) $300.0 3Q17 to 4Q18 (increase of $23,700/ associate) $200.0 3Q17 to 4Q18 95% $205.2 $200.9
Slide 17: PNFP is Tightly Focused on EPS Growth
PNFP is Tightly Focused on EPS Growth PNFP recognizes the value proposition of our current share price • Announced $100 million share repurchase program on Nov. 13, 2018 • Announcement contemplated a buy-back strategy evenly over the life of the approved plan thru Dec. 31, 2019 • Purchased just over
Slide 18: 2018 In Review
2018 In Review “My centre is giving way, my right is retreating, situation excellent, I am attacking.” Ferdinand Jean Marie Foch Supreme Allied Commander (WWI) 18
Slide 19: 2018 was Disastrous for SMID Cap Bank Stocks
2018 was Disastrous for SMID Cap Bank Stocks PNFP contracted more than peers 2018 share price depreciation has been dramatic even though 2018 earnings were strong while 2019 consensus estimates show modest growth and appear to promote unique opportunity for investors 40.0% 24.0x 30.0% 32.8% 22.0x 31
Slide 20: Investors Generally Punished Acquirers in 2018
Investors Generally Punished Acquirers in 2018 PNFP engaged BNC associates, exceeded its hiring plan and transformed the growth model Plan: Continue High Growth CRE and Bolt-on C&I Execution: Lever PNFP’s Ongoing Recruitment Result: Continued High Growth in CRE, accelerated Franchise Competence as t
Slide 21: CRE Concentrations were a Concern for Investors throughout 2018
CRE Concentrations were a Concern for Investors throughout 2018 As planned, PNFP reduced it’s CRE concentration while delivering asset quality and double-digit loan growth CRE 300 Net Charge-offs to Average Real Estate Loans 330% 310% 0.25% 297% 290% 0.20% 278% 270% 250% 0.15% 4Q17 1Q18 2Q18 3Q18 4Q
Slide 22: Deposit Betas & Funding Loan Growth were Much Discussed Investor Concerns
Deposit Betas & Funding Loan Growth were Much Discussed Investor Concerns in 2018 PNFP relied on gathering new associates and clients to deliver outsized growth in NII Many questioned PNFP’s ability to gather core funding at a reasonable price to fund loan growth. PNFP’s “client-centric” model deliv
Slide 23: Expectations for SMID Cap Bank Stocks Got Worse throughout 2018
Expectations for SMID Cap Bank Stocks Got Worse throughout 2018 PNFP continued to hit long established profitability targets and “original” consensus estimates PINNACLE TARGETED 2018 Results $4.80 OPERATING 4Q18 2018 RANGE ACTUALS ACTUALS Return on Average 1.50% to 1.70% 1.54% 1.53% PNFP Adjusted EP
Slide 24: Balance Sheet Growth Slowed for the Industry in 2018
Balance Sheet Growth Slowed for the Industry in 2018 PNFP leveraged a differentiated franchise to take market share Best in Class/ 30% Closest Competitor Client Score Change*** Score Q3 ’17 R4Q Q3 ’18 R4Q Q3 ’18 R4Q Q3 ’18 R4Q Pinnacle 25% Overall Satisfaction 81% 88% (+) 82% Ease of Doing Business
Slide 25: PNFP Continued its Track Record for Rapid Reliable Growth
PNFP Continued its Track Record for Rapid Reliable Growth Aligned culture and incentives have produced a differentiated franchise with reliable growth Engaged Associates Produce Better Outcomes PNFP is consistently growing share in its major markets • No. 22 100 Best Companies to Work For, FORTUNE 2
Slide 26: Outlook for 2019
Outlook for 2019 We remain committed to long-term shareholder value through top and bottom line growth 2019 Focus Items • Low-to-mid double-digit annualized loan growth • Heavy emphasis on core deposit growth • Target Result: EPS growth in top quartile of peer group Long-term Shareholder Value Creat
Slide 27: Q&A Fourth Quarter 2018
Q&A FOURTH QUARTER 2018 ~innacle FINANCIAL PARTNERS
Slide 28: Supplemental Information
Supplemental Information Chart • Balance Sheet 29 • Asset Quality 40 • Income Statement 41 • Peer Group 49 28
Slide 29: Balance Sheet – Loan Portfolio
Balance Sheet – Loan Portfolio Amts. %s Amts. %s Amts. %s Amts. %s 4Q18 4Q18 3Q18 3Q18 4Q17 4Q17 4Q16 4Q16 C&I $5,271.4 29.8% $5,006.2 28.7% $4,141.3 26.5% $2,891.7 34.2% CRE – Owner Occ. 2,653.4 15.0% 2,688.2 15.4% 2,460.0 15.7% 1,354.9 16.0% Total C&I & O/O CRE 7,924.8 44.8% 7,694.4 44.1% 6,601.3
Slide 30: Balance Sheet – Loan Portfolio
Balance Sheet – Loan Portfolio TOTAL PINNACLE TENNESSEE LOANS CAROLINAS/ VA LOANS OTHER UNIT LOANS Amts. Amts. Amts. Amts. Amts. Amts. Amts. Amts. 4Q18 4Q17 4Q18 4Q17 4Q18 4Q17 4Q18 4Q17 C&I $5,271.4 $4,141.3 $4,147.8 $3,312.4 $731.9 $475.9 $391.7 $353.0 CRE – Owner Occ. 2,653.4 2,460.0 1,533.4 1,46
Slide 31: Balance Sheet – Loan Portfolio
Balance Sheet – Loan Portfolio TOTAL PINNACLE C&I & O/O CRE CRE & CONSTRUCTION OTHER LOANS Amts. Amts. Amts. Amts. Amts. Amts. Amts. Amts. 4Q18 4Q17 4Q18 4Q17 4Q18 4Q17 4Q18 4Q17 Nashville $6,267.1 $5,633.5 $3,191.2 $2,682.8 $2,123.6 $1,719.1 $952.3 $1,231.6 Knoxville 1,549.8 1,448.0 944.4 889.1 450
Slide 32: Balance Sheet – Loan Portfolio
Balance Sheet – Loan Portfolio Amts. %s Amts. %s Amts. %s Amts. %s 4Q18 4Q18 3Q18 3Q18 4Q17 4Q17 4Q16 4Q16 Residential – Spec $352.3 2.0% $321.6 1.8% $278.7 1.8% $195.7 2.3% Residential – Custom 134.2 0.8% 146.0 0.8% 95.9 0.6% 81.9 1.0% Residential – Condo - 0.0% - 0.0% 0.6 0.0% 5.2 0.1% Commercial
Slide 33: Balance Sheet – Loan Portfolio
Balance Sheet – Loan Portfolio TOTAL PINNACLE TENNESSEE LOANS CAROLINAS/VA LOANS OTHER UNIT LOANS Amts. Amts. Amts. Amts. Amts. Amts. Amts. Amts. 4Q18 4Q17 4Q18 4Q17 4Q18 4Q17 4Q18 4Q17 Residential – Spec $352.3 $278.7 $255.8 $206.7 $96.5 $71.1 $ - $0.9 Residential – Custom 134.2 95.9 88.6 59.6 45.6
Slide 34: Balance Sheet – Loan Portfolio
Balance Sheet – Loan Portfolio Total NOO and Multifamily Total Construction Total NOO and Construction Amts. Amts. Amts. Amts. Amts. Amts. Amts. Amts. Amts. Amts. Amts. Amts. 4Q18 3Q18 2Q18 1Q18 4Q18 3Q18 2Q18 1Q18 4Q18 3Q18 2Q18 1Q18 Multifamily $655.9 $708.8 $738.6 $644.8 $390.3 $412.2 $405.0 $375
Slide 35: Balance Sheet – Loan Portfolio
Balance Sheet – Loan Portfolio Balance Sheet – Loan Portfolio Net Commercial loan charge off's by loan type Net Consumer loan charge off's by loan type & Total net charge-offs 0.30% 8.00% 0.20% 7.00% 0.10% 6.00% 5.00% 0.00% 4.00% -0.10% 3.00% 2.00% -0.20% 1.00% -0.30% 0.00% Consumer RE Consumer and
Slide 36: Balance Sheet – Loan Portfolio
Balance Sheet – Loan Portfolio Description 12/31/2018 9/30/2018 6/30/2018 3/31/2018 12/31/2017 9/30/2017 Loans secured by real estate: Construction, land development, and other loans: 1-4 family residential construction loans $541,253 $523,300 $488,893 $475,979 $445,077 $423,988 Other construction l
Slide 37: Balance Sheet – Deposit Portfolio
Balance Sheet – Deposit Portfolio TOTAL DEPOSITS CORE DEPOSITS NONCORE DEPOSITS PUBLIC FUNDS and OTHER TOTAL PINNACLE TRANSACTION AND MMDA CDs DEPOSITS 4Q18 4Q17 4Q18 4Q17 4Q18 4Q17 4Q18 4Q17 Nashville $7,465.2 $6,488.4 $6,668.7 $5,906.9 $503.7 $375.6 $292.8 $205.9 Knoxville 1,485.4 1,260.3 1,396.1
Slide 38: Balance Sheet – Bond Portfolio
Balance Sheet – Bond Portfolio 4.00% 40.00% Bond Portfolio Pricing 3.22% 3.50% 35.00% 78% 3.00% 30.00% 71% 3.58% 60% 2.50% 25.00% 2.00% 20.00% 40% 1.50% 20.75% 15.00% 29% 1.00% 10.00% 22% 13.10% 0.50% 5.00% 0.00% 0.00% Sept. 2017 Sept. 2018 Dec. 2018 Bond Yields % of Total Assets Fixed Rate Variable
Slide 39: Balance Sheet – Bond Portfolio
Balance Sheet – Bond Portfolio Conservative bond portfolio Portfolio: December 31, 2018 Total Investments $3.277 billion 1% Net Unrealized Gain (Loss) $(48.7) million 1% Quarter Duration Avg. Yield- TE 4Q18 3.6% 3.2% 30% 3Q18 4.4% 3.1% 2Q18 3.9% 2.9% 43% 1Q18 3.5% 2.9% 4Q17 3.5% 2.7% 12% 3Q17 3.5% 2
Slide 40: Asset Quality
Asset Quality AS A % OF TOTAL AS A % OF TOTAL AS A % OF TOTAL (000S) DEC. 31, 2018 DEC. 31, 2017 DEC. 31, 2016 LOANS LOANS LOANS Past Due Loans (*) Nonaccrual loans $35,306 0.20% $11,691 0.07% $10,873 0.13% Accruing loans 60,537 0.34% 60,159 0.38% 22,331 0.26% Total past due $95,843 0.54% $71,850 0.
Slide 41: Fee Businesses also Contribute to Earnings Growth
Fee Businesses also Contribute to Earnings Growth Fee businesses produce another strong quarter 4Q18 3Q18 2Q18 1Q18 4Q17 Service charges $6,617 $6,404 $6,065 $5,820 $6,078 Investment services 5,925 5,237 4,906 5,107 4,723 Insurance commissions 2,038 2,126 2,048 3,119 1,961 Gain on mortgage loans sol
Slide 42: Fee Businesses also Contribute to Earnings Growth
Fee Businesses also Contribute to Earnings Growth 4Q18 core expense results continue to reflect enviable operating leverage 4Q18 3Q18 2Q18 1Q18 4Q17 Salaries and employee benefits: Salaries $41,965 $41,024 $39,136 $39,104 $39,950 Commissions 3,456 3,011 3,148 3,029 2,062 Cash and equity incentives 1
Slide 43: Income Statement – Discount Accretion and Income Tax Rate Trends
Income Statement – Discount Accretion and Income Tax Rate Trends Actual/Anticipated Discount Accretion Income Tax Effective Tax Rate Trends 45.00% Through Dec 2019 $25,000,000 40.00% $20,000,000 35.00% 30.00% $15,000,000 25.00% $10,000,000 20.00% $5,000,000 $62 mm $38 mm 15.00% $0 Income tax as % of
Slide 44: Income Statement – Mortgage Volumes
Income Statement – Mortgage Volumes $325,000 6.00% $275,000 5.00% $225,000 4.00% $175,000 3.00% $125,000 2.00% $75,000 1.00% $25,000 0.00% Purchase Money Refinance Gross fees as a % of loans originated 44
Slide 45: Income Statement – Reconciliation of Non-GAAP Financial Measures
Income Statement – Reconciliation of Non-GAAP Financial Measures 4Q18 3Q18 2Q18 1Q18 4Q17 3Q17 2Q17 1Q17 4Q16 3Q16 2Q16 1Q16 4Q15 3Q15 2Q15 1Q15 4Q14 3Q14 2Q14 1Q14 Net income $ 95,318 93,747 86,865 83,510 26,798 64,442 43,086 39,653 36,097 32,377 30,787 27,965 26,855 24,149 22,665 21,843 18,737 18,
Slide 46: Income Statement – Reconciliation of Non-GAAP Financial Measures
Income Statement – Reconciliation of Non-GAAP Financial Measures 4Q18 3Q18 2Q18 1Q18 4Q17 3Q17 2Q17 1Q17 4Q16 3Q16 2Q16 1Q16 4Q15 3Q15 2Q15 1Q15 4Q14 3Q14 2Q14 1Q14 Net income $ 95,318 93,747 86,865 83,510 26,798 64,442 43,086 39,653 36,097 32,377 30,787 27,965 26,855 24,149 22,665 21,843 18,737 18,
Slide 47: Income Statement – Reconciliation of Non-GAAP Financial Measures
Income Statement – Reconciliation of Non-GAAP Financial Measures 4Q18 3Q18 2Q18 1Q18 4Q17 3Q17 Net interest income $ 190,215 189,420 182,236 174,471 175,017 172,910 Total noninterest income 57,270 51,478 47,939 44,183 36,202 43,248 Total revenues 247,485 240,898 230,175 218,654 211,219 216,158 Less:
Slide 48: Income Statement – Reconciliation of Non-GAAP Financial Measures
Income Statement – Reconciliation of Non-GAAP Financial Measures 4Q18 3Q18 2Q18 1Q18 4Q17 3Q17 Net interest income $ 190,215 189,420 182,236 174,471 175,017 172,910 Total noninterest income 57,270 51,478 47,939 44,183 36,202 43,248 Total revenues 247,485 240,898 230,175 218,654 211,219 216,158 Less:
Slide 49: 2018 Peer Group
2018 Peer Group Institution Name Ticker City, State Pinnacle Financial Partners PNFP Nashville, TN Associated Banc-Corp ASB Green Bay, WI BancorpSouth, Inc. BXS Tupelo, MS Bank of the Ozarks, Inc. OZRK Little Rock, AR Chemical Financial Corporation CHFC Midland, MI Cullen/Frost Bankers, Inc. CFR San
Slide 50: Investor Call Fourth Quarter 2018
Investor Call FOURTH QUARTER 2018 M. TERRY TURNER, PRESIDENT AND CEO HAROLD R. CARPENTER, EVP AND CFO
Pinnacle Financial Partners — Q4 2018 Earnings Presentation on 6ix