Pinnacle Financial Partners, Inc. · NYSE:PNFP
Pinnacle Financial Partners — Q1 2019 Earnings Presentation
49 slides from Pinnacle Financial Partners's earnings presentation, Apr 16, 2019
Slide 1: Investor Call First Quarter 2019
Investor Call FIRST QUARTER 2019 APRIL 16, 2019 Time: 8:30 AM CDT 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: 1Q19 Summary Results of Key GAAP Measures
1Q19 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: 1Q19 Summary Results of Key Non-GAAP Measures
1Q19 Summary Results of Key Non-GAAP Measures Total Revenues FD EPS* $1.24 Tangible Book Value per Share** $238,309 $1.13 $28.61 $218,624 CAGR 30.6% CAGR 20.3% $0.83 CAGR 14.7% $23.25 $24.24 $119,148 $99,758 $0.71 $18.75 $69,755 $0.62 $16.12 $58,640 $0.47 $13.93 Total Loans Total Core Deposits ROTCE
Slide 6: Overarching Thesis on PNFP
Overarching Thesis on PNFP 1. “Culture eats strategy for lunch” and differentiates PNFP 2. PNFP’s distinctive hiring model produces rapid, sound growth and operating leverage 3. PNFP has long targeted top quartile profitability and consistently delivered 4. PNFP’s primary target is outsized EPS and
Slide 7: PNFP Primarily Focuses on Top and Bottom Line Growth
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 $13.00 20.0% $12.42 $12.12 $12.00 15.0% $11.73 Y/Y Revenue per Share Growth System Conversion $11.42 11.7% 11.4% 10.9% Revenue
Slide 8: Loan & Deposit Growth are Keys to Top and Bottom Line Growth: Average Loans
Loan & Deposit Growth are Keys to Top and Bottom Line Growth Loan growth remained strong in 1Q19 $18,000 5.50% 5.28% Annual Organic Loan Growth $17,938 $17,630 $17,259 $16,000 5.00% (excludes Day 1 merger impact) $16,730 $15,957 20.0% $15,520 $15,017 $14,000 4.30% 4.50% 18.7% 17.7% 16.0% BNCN Averag
Slide 9: Loan growth continues to outperform peers
Loan & Deposit Growth are Keys to Top and Bottom Line Growth PNFP’s loan growth continues to outperform peers Average Acct Balances - Loans Net Interest Income Quarterly Trends March 31, 2015 vs March 31, 2019 1,600,000 Purchase Accounting Accretion $200.0 14.00% 30% 1,400,000 1,200,000 1,000,000 $1
Slide 10: 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 C&I CRE Construction All Loans At March 31, 2019 (*) LIBOR 24.5% Prime 32.9% 37.9% 0.0% 38.1% 35.7% 41.9% T-Bill 45.1% 51.4% 0.9% Fixed Rate <1Y 32.7% Fixed Rate >1Y 1.2% 20.7% 7.5% 18
Slide 11: Granularity in the loan book should have positive effect in a credit cycle turn
Granularity in the loan book should have positive effect in the event of a turn in the credit cycle Real Estate Portfolio Concentrations aggregated by real estate category and common borrower - Multifamily, CRE Investment and Construction Granularity of Real Estate Portfolio Largest CRE Projects by
Slide 12: Balance sheet management contributes to deposit reduction in 1Q19
Loan & Deposit Growth are Keys to Top and Bottom Line Growth Balance sheet management contributes to deposit reduction in 1Q19 Deposit Rate Mar. 31, 2019 Mar. 31, 2019 Dec. 31, 2018 Tranches % of Totals Rate Rate Noninterest bearing 23.3% --- --- $20,000 3.00% Annual Organic Deposit Growth Rate shee
Slide 13: Changes to funding profile strengthen balance sheet and earnings profile
Loan & Deposit Growth are Keys to Top and Bottom Line Growth Changes to funding profile strengthen both balance sheet and earnings profile Quarterly Avg. FFS and Cash $700 3.00% Net Change in Deposits during 1Q19 $600 $18,849 2.50% Average balances ($ in millions) Client Growth $500 ($250) 4% Annual
Slide 14: Fee Income Growth Supports Ongoing Top and Bottom Line Growth
Fee Income Growth Supports Ongoing Top and Bottom Line Growth Fees/ Avg. Assets continues to be strong in 1Q19 Deposit-Related Fees 1.00% (Service Charges, Interchange) Income from Equity Method Investment Yr/Yr Growth 0.95% (BHG) 12% $16,000 Yr/Yr Growth 0.90% $16,000 42% $12,000 0.85% $12,000 0.80
Slide 15: Expenses are Leveraged to Produce Top and Bottom Line Growth
Expenses are Leveraged to Produce Top and Bottom Line Growth Leveraging our associate base is the key to efficiency $450.0 Employee Retention^ $400.0 100% $427.5 $424.9 $419.9 $412.8 $415.9 $350.0 $393.1 $390.8 3Q17 to 1Q19 $300.0 $250.0 (increase of $17,500/ associate) $200.0 $228.8 $206.2 $205.0 $
Slide 16: Overarching Thesis on PNFP
Overarching Thesis on PNFP 1. “Culture eats strategy for lunch” and differentiates PNFP 2. PNFP’s distinctive hiring model produces rapid, sound growth and operating leverage 3. PNFP has long targeted top quartile profitability and consistently delivered 4. PNFP’s primary target is outsized EPS and
Slide 17: Culture eats strategy for lunch and differentiates PNFP
“Culture eats strategy for lunch” and differentiates PNFP Aligned culture and incentives have produced a differentiated franchise with reliable growth Engaged Associates Produce Better Outcomes • No. 27 100 Best Companies to Work For, FORTUNE • No. 40 Best Workplaces for Parents, FORTUNE • No. 2 Bes
Slide 18: Culture eats strategy for lunch: BNC merger integration
“Culture eats strategy for lunch” and differentiates PNFP Based on internal surveys, we have successfully managed the change and integrated the BNC merger from a cultural standpoint. August August August August 2017 2018 2017 2018 69% 94% 75% 94% Agree that our Agree that our Agree that this is a Ag
Slide 19: Fortune Best Place to Work in Finance and Insurance
“Culture eats strategy for lunch” and differentiates PNFP Largely based on associate feedback, while integrating the BNC merger, FORTUNE and The Great Place to Work Institute named Pinnacle Financial Partners: 2017 NO. 7 2018 NO. 3 2019 NO. 2 Best Place to Work Best Place to Work Best Place to Work
Slide 20: Distinctive hiring model produces rapid, sound growth and operating leverage
PNFP’s distinctive hiring model produces rapid, sound growth and operating leverage 1Q19 Year-over-year Growth 1Q19 Asset Quality 1Q19 Operating Leverage Loans 11.3% NCOs 0.08% Core Deposits 10.8% NPAs 0.61% YoY Change in Adjusted (0.21%) Efficiency Ratio* Fee Income 15.6% Classified Assets 13.0% No
Slide 21: PNFP engaged BNC associates, exceeded hiring plan
PNFP’s distinctive hiring model produces rapid, sound growth and operating leverage 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,
Slide 22: Long-targeted top quartile profitability consistently delivered
PNFP’s has long-targeted top quartile profitability and consistently delivered PNFP is within or better than targeted range for ROAA and each component ROAA* 1.60% PINNACLE 1.40% TARGETED 1Q 2019 1Q 2019 1.41% OPERATING GAAP Non-GAAP RANGE ACTUALS ACTUALS 1.20% 1.56% 1.54% 1.35% 1.35% 1.18% Return o
Slide 23: PNFP prioritizes EPS and TBV
PNFP prioritizes EPS and TBV Many measures demonstrate how the model works, but we hold fast to the correlation between EPS, TBV growth and share price. FD EPS* Tangible Book Value per Share** $28.61 $1.24 $1.13 $24.24 CAGR 20.3% CAGR 14.7% $23.25 $0.83 $18.75 $0.71 $16.12 $0.62 $13.93 $0.47 *: excl
Slide 24: 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 25: Outlook for 2019
Outlook for 2019 We remain committed to long-term shareholder value through top and bottom line growth 2019 Focus Items 1Q19 • Low-to-mid double-digit annualized loan growth 11.3% (YoY) • Heavy emphasis on core deposit growth 10.8% (YoY) • Target Result: EPS growth in top quartile of peer group 9.7%
Slide 26: Q&A First Quarter 2019
Q&A FIRST QUARTER 2019 -“innacle FINANCIAL PARTNERS
Slide 27: Supplemental Information
Supplemental Information Chart • Balance Sheet 28 • Asset Quality 39 • Income Statement 40 • Peer Group 48 27
Slide 28: Balance Sheet – Loan Portfolio
Balance Sheet – Loan Portfolio Amts. % Amts. % Amts. % Amts. % 1Q19 1Q19 4Q18 4Q18 1Q18 1Q18 1Q17 1Q17 C&I $5,419.5 29.8% $5,271.4 29.8% $4,490.9 27.5% $2,980.8 34.5% CRE – Owner Occ. 2,617.5 14.4% 2,653.4 15.0% 2,427.9 14.9% 1,399.5 16.2% Total C&I & O/O CRE $8,037.0 44.2% $7,924.8 44.8% $6,918.8 4
Slide 29: 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. 1Q19 1Q18 1Q19 1Q18 1Q19 1Q18 1Q19 1Q18 C&I $5,419.5 $4,490.9 $4,196.3 $3,502.4 $781.6 $553.9 $441.6 $434.6 CRE – Owner Occ. 2,617.5 2,427.9 1,541.6 1,4
Slide 30: 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. 1Q19 1Q18 1Q19 1Q18 1Q19 1Q18 1Q19 1Q18 Nashville $6,071.4 $5,703.1 $3,010.0 $2,688.5 $2,179.9 $2,151.9 $881.5 $862.8 Knoxville 1,558.2 1,389.1 938.6 825.2 465.
Slide 31: Balance Sheet – Loan Portfolio
Balance Sheet – Loan Portfolio Amts. % Amts. % Amts. % Amts. % 1Q19 1Q19 4Q18 4Q18 1Q18 1Q18 1Q17 1Q17 Residential – Spec $355.2 2.0% $352.3 2.0% $288.0 1.8% $200.7 2.3% Residential – Custom 131.0 0.7% 134.2 0.8% 123.0 0.7% 96.9 1.1% Residential – Condo 0.2 0.0% - 0.0% 0.6 0.0% 5.6 0.1% Commercial C
Slide 32: 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. 1Q19 1Q18 1Q19 1Q18 1Q19 1Q18 1Q19 1Q18 Residential – Spec $355.2 $288.0 $253.8 $206.3 $99.7 $81.4 $1.7 $0.3 Residential – Custom 131.0 123.0 82.4 77.0 48
Slide 33: 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. 1Q19 4Q18 1Q18 1Q19 4Q18 1Q18 1Q19 4Q18 1Q18 Multifamily $693.1 $655.9 $644.8 $357.8 $390.3 $375.4 $1,063.8 $1,046.2 $1,020.2 Hospitality 769.5
Slide 34: Balance Sheet – Loan Portfolio
Balance Sheet – Loan Portfolio Balance Sheet – Loan Portfolio Net Commercial loan charge offs by loan type Net Consumer loan charge offs by loan type 0.30% 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% -0.40% -1.00% CRE Construction C&I Net commercial c
Slide 35: Balance Sheet – Loan Portfolio
Balance Sheet – Loan Portfolio Description 3/31/2019 12/31/2018 9/30/2018 6/30/2018 3/31/2018 12/31/2017 Loans secured by real estate: Construction, land development, and other loans: 1-4 family residential construction loans $575,753 $541,253 $523,300 $488,893 $475,979 $445,077 Other construction l
Slide 36: 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 1Q19 1Q18 1Q19 1Q18 1Q19 1Q18 1Q19 1Q18 Nashville $7,137.5 $5,854.3 $6,377.0 $5,678.0 $511.1 $406.9 $249.4 $219.4 Knoxville 1,639.2 1,266.3 1,528.5
Slide 37: Balance Sheet – Bond Portfolio
Balance Sheet – Bond Portfolio 4.00 40.00 Bond Portfolio Pricing 3.50 35.00 71% 3.00 30.00 65% 60% 2.50 25.00 % of Total Assets Bond Yields 2.00 20.00 40% 1.50 15.00 35% 29% 1.00 10.00 0.50 5.00 - - Sept. 2018 Dec. 2018 Mar. 2019 Axis Title Fixed Rate Variable Rate PNFP - Bond Yields Peer Median - B
Slide 38: Balance Sheet – Bond Portfolio
Balance Sheet – Bond Portfolio Conservative bond portfolio Portfolio: March 31, 2019 Total Investments $3.444 billion 2% Net Unrealized Gain (Loss) $(10.8) million 2% Quarter Duration Avg. Yield- TE 1Q19 3.7% 3.4% 4Q18 3.6% 3.2% 29% 3Q18 4.4% 3.1% 46% 2Q18 3.9% 2.9% 1Q18 3.5% 2.9% 8% 4Q17 3.5% 2.7%
Slide 39: Asset Quality
Asset Quality AS A % OF TOTAL AS A % OF TOTAL AS A % OF TOTAL (000S) MAR. 31, 2019 DEC. 31, 2018 MAR. 31, 2018 LOANS LOANS LOANS Past Due Loans (*) Nonaccrual loans $48,739 0.27% $35,306 0.20% $13,875 0.08% Accruing loans 40,556 0.22% 60,537 0.34% $39,666 0.24% Total past due $89,295 0.49% $95,843 0
Slide 40: Operating Leverage
Operating Leverage 1Q19 4Q18 3Q18 2Q18 1Q18 4Q17 3Q17 2Q17 1Q17 Service charges $8,542 $9,754 $9,972 $8,456 $7,905 $8,799 $8,695 $7,612 $6,394 Investment services 5,404 6,135 5,423 5,074 5,245 4,828 3,758 3,196 2,888 Insurance commissions 2,928 2,038 2,126 2,048 3,119 1,961 2,124 1,461 1,859 Gain on
Slide 41: Operating Leverage
Operating Leverage 1Q19 4Q18 3Q18 2Q18 1Q18 4Q17 3Q17 2Q17 1Q17 Salaries and employee benefits: Salaries $45,056 $41,965 $41,024 $39,136 $39,104 $39,950 $41,252 $26,312 $23,414 Commissions 3,140 3,456 3,011 3,148 3,029 2,045 2,026 1,831 1,631 Cash and equity incentives 11,163 18,082 14,505 11,224 10
Slide 42: Income Statement – Discount Accretion and Income Tax Rate Trends
Income Statement – Discount Accretion and Income Tax Rate Trends Core Income Tax Effective Tax Rate Trends Share Repurchase Program Actual/Anticipated Discount Accretion Through Dec 2019 (in thousands) 45.00% $25,000 40.00% 1Q19 4Q18 $20,000 # of shares repurchased 543,585 405,200 35.00% Value of sh
Slide 43: 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 43
Slide 44: Income Statement – Reconciliation of Non-GAAP Financial Measures
Income Statement – Reconciliation of Non-GAAP Financial Measures 44
Slide 45: Income Statement – Reconciliation of Non-GAAP Financial Measures
Income Statement – Reconciliation of Non-GAAP Financial Measures 45
Slide 46: Income Statement – Reconciliation of Non-GAAP Financial Measures
Income Statement – Reconciliation of Non-GAAP Financial Measures 46
Slide 47: Income Statement – Reconciliation of Non-GAAP Financial Measures
Income Statement – Reconciliation of Non-GAAP Financial Measures 47
Slide 48: 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 49: Investor Call
Investor Call FIRST QUARTER 2019 M. TERRY TURNER, PRESIDENT AND CEO HAROLD R. CARPENTER, EVP AND CFO
Pinnacle Financial Partners — Q1 2019 Earnings Presentation on 6ix