Pinnacle Financial Partners, Inc. · NYSE:PNFP
Pinnacle Financial Partners — Q3 2015 Earnings Presentation
54 slides from Pinnacle Financial Partners's earnings presentation, Oct 21, 2015
Slide 1: Third Quarter 2015 Investor Call
Third Quarter 2015 Investor Call M. Terry Turner, President and CEO Harold R. Carpenter, EVP and CFO October 21, 2015
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: 3Q15 Summary Results: Earnings Growth
3Q15 Summary Results Execution of fundamentals fueled exceptional growth in key valuation drivers Total Revenues Net Income* FD EPS* Earnings Growth Up 40.2% yr/yr $83,469 $25,515 Up 33.7% yr/yr Up 26.9% yr/yr $0.66 $0.52 $18,197 $57,401 $62,396 $0.42 $14,647 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14
Slide 4: 3Q15 Summary Results: Future Growth Initiatives
3Q15 Summary Results Future Growth Initiatives are Moving Forward 1. CapitalMark and Magna mergers • Legal mergers – Closings for both banks completed in 3Q15 • Financial case – Results for 3Q15 ahead of schedule • Technology conversions – Magna conversion on target for November 2015; CapitalMark co
Slide 5: Net Interest Income and Margin
Loan, Deposit and Fee Growth Yield Operating Leverage Organic growth and acquisitions fuel significant growth in net interest income $65 4.00% $60 $62.1 3.75% 3.66% Net Interest Margin $55 3.50% Net Interest Income 3.40% $50 3.25% $51.8 $50.3 $51.3 $49.5 (millions) $47.2 $45 3.00% $45.9 $45.0 $44.6
Slide 6: Average Loans
Loan, Deposit and Fee Growth Yield Operating Leverage Legacy PNFP loans grew 13.9% compared to 3Q14; yields up linked quarter $6,000 6.00% $5,500 5.50% $727 4.88% $5,000 5.00% $4,963 Average Loans $4,737 $4,500 4.50% Loan Yields $4,625 $4,436 $4,358 (millions) $4,251 $4,000 4.33% 4.00% $4,130 $3,981
Slide 7: Post merger balance sheet in line with stated objectives
Loan, Deposit and Fee Growth Yield Operating Leverage Post merger balance sheet in line with stated objectives $1,400 5.00% $1,300 4.50% 1.17% 0.93% $1,200 0.84% 4.00% 0.73% 0.64% $1,100 3.50% $1,000 3.00% $900 2.50% $800 2.00% $700 1.50% $600 1.00% Dec 2011 Dec 2012 Dec 2013 Dec 2014 September 2015
Slide 8: Average Deposits
Loan, Deposit and Fee Growth Yield Operating Leverage Deposits continued to grow while cost of deposits remained low $6,000 1.20% $757 1.01% $5,500 1.00% $5,000 0.80% $5,141 Avg. Deposits $4,885 $4,792 $4,758 $4,500 0.60% (millions) $4,655 $4,519 $4,509 $4,408 $4,199 $4,000 0.40% $3,963 $3,950 0.24%
Slide 9: Record fee revenues in 3Q15
Loan, Deposit and Fee Growth Yield Operating Leverage Expansion of fee businesses produced record fee revenues in 3Q15 3Q15 2Q15 1Q15 4Q14 3Q14 Service charges $3,258 $3,076 $2,913 $3,038 $2,913 Investment services 2,526 2,399 2,259 2,737 2,353 Insurance commissions 1,103 1,106 1,513 1,046 1,037 Gai
Slide 10: Operating leverage and core expense to average assets
Loan, Deposit and Fee Growth Yield Operating Leverage Operating leverage led to an all time best core expense to average assets 3Q15 2Q15 1Q15 4Q14 3Q14 Salaries and benefits $27,746 $23,775 $23,531 $23,075 $21,722 Equipment and occupancy 6,933 5,878 6,046 5,984 6,477 Other real estate owned (686) (
Slide 11: Industry Concerns
Industry Concerns Source: Wall Street Journal 10/2/2015
Slide 12: Pinnacle Building for the Future
Pinnacle Building for the Future “Banks may serve up more scares than treats for investors when they announce earnings later this month.” WSJ 10/2/15 3Q15 Bank Industry Trends 3Q15 Pinnacle Trends Lower, longer rate forecast Robust banking markets Credit leverage slows Organic growth creates operati
Slide 13: Changes to long-term targets
Pinnacle Building for the Future Changes to long-term targets reflect PNFP operating environment Net Interest Margin Noninterest Income / Average Assets (1) ROA (2) 3.95% 1.30% 1.60% 3.90% 1.35% 1.20% 1.13% 3.85% 3.80% 3.80% 1.10% 1.40% 3.76% 3.75% 0.97% 3.70% 1.00% 1.27% 3.70% 3.66% 0.89% 0.92% 3.6
Slide 14: Mergers on Track to Hit Targets
Pinnacle Building for the Future Mergers on Track to Hit Targets CapitalMark Magna As of announcement date As of announcement date April 7, 2015 Updated as of Sept. 30, 2015 April 28, 2015 Updated as of Sept. 30, 2015 Aggregate Amounts Closing Late 3Q/Early 4Q 2015 31-Jul-15 Late 3Q 2015 1-Sep-15 Co
Slide 15: Revenue growth provides capacity to accelerate hiring
Pinnacle Building for the Future Revenue growth provides capacity to accelerate hiring FTE's Dec. 31, Trans / Retire / Acquired Synergy case FTE's Sept. 30, 2014 New hires Terms franchises impact 2015 Client advisory units Nashville 112.0 13.0 (3.5) - - 121.5 Knoxville 26.0 6.0 (1.0) - - 31.0 Chatta
Slide 16: Expanding our CRE Capacity
Pinnacle Building for the Future Future Growth Initiatives are Moving Forward CRE Investment Portfolio Expanding our CRE Capacity $2,500,000,000 Target Markets A. Top-tier owners and developers in Tennessee B. FHLMC Small Balance Loan program $2,000,000,000 Product Offering A. Traditional bank balan
Slide 17: Entering Capital Markets Segment
Pinnacle Building for the Future Future Growth Initiatives are Moving Forward Entering Capital Markets Segment Pinnacle Subsidiary PNFP Capital Markets - SEC registration completed on October 6, 2015. - FINRA registration completed on October 6, 2015. - State of TN authorization on October 13, 2015
Slide 18: Positioned for growth in Tennessee's Urban Markets
Pinnacle Building for the Future PNFP is positioned for meaningful growth in Tennessee’s Urban Markets Memphis Nashville Chattanooga Knoxville Loans – 3Q15 $450.8 mm $4.116 billion $671.5 mm $1.098 billion Deposits and customer $466.2 mm $4.826 billion $640.7 mm $736.2 mm repurchase accounts – 3Q15
Slide 19: Q&A
Q&A – Third Quarter 2015 Investor Call 19
Slide 20: Supplemental Information
Supplemental Information Third Quarter 2015 Investor Call 20
Slide 21: Supplemental Information contents
Supplemental Information Chart • Balance Sheet 22 • Asset Quality 32 • Income Statement 36 • Pinnacle Financial Partners profile 41 • Economic and Market Conditions 47 21
Slide 22: Balance Sheet
Supplemental Information Balance Sheet 22
Slide 23: Loan portfolio well diversified
Balance Sheet Loan portfolio well diversified Amts. %’s(*) Amts. %’s(*) Amts. %’s Amts. %’s 3Q15 3Q15 2Q15 2Q15 3Q14 3Q14 3Q13 3Q13 C&D and Land $674.9 10.7% $372.0 7.7% $322.1 7.3% $320.0 8.1% Consumer RE 1,044.3 16.5% 740.6 15.3% 706.8 16.0% 687.3 17.3% CRE – Owner Occ. 1,124.9 17.8% 807.0 16.7% 7
Slide 24: Construction portfolio reflects quality growth
Balance Sheet Construction portfolio reflects quality growth Amts. %’s(*) Amts. %’s(*) Amts. %’s(*) Amts. %’s(*) 3Q15 3Q15 2Q15 2Q15 3Q14 3Q14 3Q13 3Q13 Residential – Spec $102.1 1.6% $48.4 1.0% $39.3 0.9% $24.3 0.6% Residential – Custom 44.5 0.7% 44.9 0.9% 31.5 0.7% 29.7 0.8% Residential – Condo 3.
Slide 25: The C&I loan portfolio is highly diversified
Balance Sheet The C&I loan portfolio is highly diversified NAICS Sector Description 3Q15 3Q14 Health Care and Social Assistance 13.74% 14.26% Finance and Insurance 10.28% 11.11% Real Estate and Rental and Leasing 9.87% 8.74% Manufacturing 8.67% 7.20% Consumer 7.68% 7.21% Transportation and Warehousi
Slide 26: Consistent annual loan growth
Balance Sheet Consistent annual loan growth despite significant payoffs in legacy PNFP Annual Net Loan Growth Quarterly Net Loan Growth $500 $200 $400 $434 $446 Loan Volumes Loan Volumes $421 $414 ($ millions) ($ millions) $150 $300 $100 $200 $50 $100 $0 $- Quarterly New Loan Originations Quarterly
Slide 27: Limited dependence on non-relationship funding
Balance Sheet PNFP maintains limited dependence on non-relationship funding 9/30/2015 Percent 9/30/2014 Percent Core Funding: Non-interest bearing deposits 1,876,910 25.51% 1,357,934 26.95% Interest-bearing deposits 1,275,496 17.34% 847,629 16.82% Money Market accounts 2,320,094 31.54% 1,712,430 33.
Slide 28: Line utilization drops with acquisitions
Total Commitments (millions) $0 $1,000 $2,000 $3,000 $957 $747 $5,000 $4,000 56.15% $959 $715 $1,000 $685 Note: Excludes HELOCS and credit cards $975 $779 Balance Sheet $1,009 $808 $1,054 $787 Net active balance $1,055 $815 $1,138 $865 $1,105 $941 $1,166 $926 Line utilization drops with acquisitions
Slide 29: The securities book is maintained at a minimal level
Balance Sheet The securities book is maintained at a minimal level 4.00% 40.00% 3.58% 3.50% 35.00% 3.00% 30.00% 2.50% 25.00% 20.75% 2.51% 2.00% 20.00% 1.50% 15.00% 1.00% 12.32% 10.00% 0.50% 5.00% 0.00% 0.00% Bond Yields % of Avg. Assets 29
Slide 30: Conservative bond portfolio
Balance Sheet Conservative bond portfolio 13.8% 1.2% Portfolio: September 30, 2015 7.4% 18.8% Total Investments $1.004 billion Unrealized Gain (Loss) $ 12.0 million QTD Purchases $ 82.8 million 51.2% QTD Sales $ 91.7 million 7.6% Duration Avg Yield – TE 3Q15 2.8% 2.6% Agency Corporates MBS 2Q15 2.9%
Slide 31: The municipal portfolio contains minimal risk
Balance Sheet The municipal portfolio contains minimal risk Municipal Bond Portfolio Statistics Muni Allocation % 3Q15 3Q14 Weighted Average Life 3.7 years 3.6 years Tax equivalent yield 4.68% 4.57% 23% FMV as % of Cost 103.7% 104.7% 77% As of September 30, 2015 Location # of Issuances Market Value
Slide 32: Asset Quality
Supplemental Information Asset Quality 32
Slide 33: Past due loans remain very low
Asset Quality Past due loans remain very low Sept. 30, As a % of June 30, As a % of Sept. 30, As a % 2015 total 2015 total 2014 of total (000’s) loans loans loans Past Due Loans (*) Nonaccrual loans $8,349 0.13% $ 5,991 0.12% $6,069 0.14% Accruing loans 21,830 0.34% 18,117 0.38% 14,099 0.32% Total p
Slide 34: NPLs and loans >90 days past due remain very low
Asset Quality NPLs and loans >90 days past due & accruing remain very low NPLs Expressed as a % of Total Loans within each Category PNFP NPLs and >90 days Sept. 30, As a % of June 30, As a % of Sept. 30, As a % of (000’s) 2015 total loans 2015 total loans 2014 total loans Const. and land development
Slide 35: Classified assets remain low
Asset Quality Classified assets remain low (in thousands) Balances Balances Balances Sept. 30, 2015 June 30, 2015 Sept. 30, 2014 Classified loans and ORE: - Substandard commercial loans $94,801 $107,359 $110,389 - Doubtful commercial loans - - - - Other impaired loans 22,490 7,428 5,660 - 90 days pa
Slide 36: Income Statement
Supplemental Information Income Statement 36
Slide 37: Mortgage volumes experience growth in purchase money transactions
Income Statement Mortgage volumes experience growth in “purchase money” transactions 160,000 3.00% 140,000 2.75% 2.19% 120,000 2.50% 100,000 2.25% 80,000 2.00% 60,000 1.75% 40,000 1.59% 20,000 1.50% 0 1.25% Purchase Money Refinance Gross fees as a % of loans originated 37
Slide 38: Efficiency ratio reflects excellent operating leverage
Income Statement PNFP efficiency ratio reflects excellent operating leverage 3Q15 2Q15 1Q15 4Q14 3Q14 Net interest income $62,059 $51,831 $51,269 $50,313 $49,537 Total non-interest income $21,410 $20,128 $18,493 $14,384 $12,888 Less: Securities (gains) losses - (556) (6) - (29) Non-interest income,
Slide 39: Reconciliation of Non-GAAP measures
Income Statement Reconciliation of Non-GAAP measures 3Q15 2Q15 1Q15 4Q14 3Q14 Total non-interest income $21,410 $20,128 $18,493 $14,384 $12,888 Less: Securities (gains) losses - (556) (6) - (29) Non-interest income, excluding the impact of net gains $21,410 $19,572 $18,487 $14,384 $12,859 (losses) o
Slide 40: Reconciliation of Non-GAAP measures
Income Statement Reconciliation of Non-GAAP measures 3Q15 2Q15 1Q15 4Q14 3Q14 Net income $24,149 $22,664 $21,843 $18,737 $18,197 Merger related expenses 2,249 59 - - - Tax effect on merger related expenses (882) (23) - - - Net income less merger related expenses $25,515 $22,746 $21,843 $18,737 $18,1
Slide 41: Pinnacle Financial Partners Profile
Supplemental Information Pinnacle Financial Partners Profile 41
Slide 42: Recently completed acquisitions position firm in four markets
PNFP Profile Recently completed acquisitions will position firm in four great banking markets PNFP CapitalMark Magna Headquarters: Nashville, TN Offices: 29 in 8 Middle-TN counties 10 in 5 East-TN counties Founded: 2000 5 in West-TN Total assets: $ 8.545 Billion Avg. daily trading volume **: 162,931
Slide 43: 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 60 36 15 Robert A. McCabe, Jr. Chairman of the Board 65 38 15 Hugh M. Queener Chief Administrative Officer 59 39 15 Ha
Slide 44: PNFP compares favorably to high performing peers
PNFP Profile PNFP compares favorably to high performing peers • Pinnacle Financial Partners (PNFP) • MB Financial (MBFI) • Bank of the Ozarks (OZRK) • National Penn Bancshares, Inc. • Brookline Bancorp, Inc. (BRKL) (NPBC) • Columbia Banking System, Inc. • Renasant Corporation (RNST) (COLB) • South S
Slide 45: Track record for best-in-market share movement
PNFP Profile PNFP has a track record for “best-in-market” share movement Nashville-Davidson-Rutherford MSA Knoxville MSA Top 10 Holding Market Market % Top 10 Holding Market Market Change Market Company Share Share Change Market Company Share Share in Share 6/30/15 6/30/00 in Share 6/30/15 6/30/07 S
Slide 46: Track record for best-in-market share movement
PNFP Profile PNFP has a track record for “best-in-market” share movement Chattanooga TN-GA MSA Memphis, TN-MS-AR MSA Top 10 Holding Market Market % Top 10 Holding Market Market % Market Company Share Share Change Market Company Share Share Change Share 6/30/15 6/30/14 in Share Share 6/30/15 6/30/14
Slide 47: Economic & Market Conditions
Supplemental Information Economic & Market Conditions 47
Slide 48: PNFP operates in advantaged markets
PNFP operates in advantaged markets Tennessee Market Demographics 2016 -2021E 2016 -2021E Current Population Population Growth Current Median Median HHI Growth Top 20 MSAs Total Deposits ($Ms) (000s) (%) HHI ($) (%) Nashville-Davidson-Murfreesboro-Franklin TN 48,022 1,840 6.87% 55,922 9.41% Memphis
Slide 49: PNFP operates in advantaged markets
PNFP operates in advantaged markets TENNESSEE • Tennessee named top state in the U.S. for economic development for second consecutive year Business Facilities • Tennessee ranked top state in the nation for auto manufacturing Business Facilities • Tennessee named No. 8 most fiscally healthy state in
Slide 50: PNFP operates in advantaged markets
PNFP operates in advantaged markets MEMPHIS Memphis offers a diverse, metropolitan workforce. Over the past three decades, the presence of companies like FedEx and the region’s superior distribution infrastructure have earned Memphis the title, “America’s Distribution Center.” • Memphis named the 7t
Slide 51: Consistent job growth in all four markets
PNFP operates in advantaged markets Consistent job growth occurring in all four markets Nashville MSA Knoxville MSA Nonfarm Payrolls- SA (thru August 2015) Nonfarm Payrolls- SA (thru August 2015) 950,000 400,000 908,100 386,800 900,000 390,000 380,000 850,000 374,900 800,000 370,000 800,000 360,000
Slide 52: Rapid job growth leads to rapid real estate absorption
PNFP operates in advantaged markets Rapid job growth leads to rapid real estate absorption Unemployment Rates Seasonally Adjusted (thru August 2015) 12.00 10.00 8.00 6.00 4.00 2.00 0.00 Nashville Knoxville Chattanooga Memphis US Home Sales Nashville Knoxville Memphis Chattanooga % Change % Change %
Slide 53: Nashville's commercial vacancy rates indicate a healthy market
PNFP Operates in Advantaged Markets Nashville’s commercial vacancy rates indicate a healthy market CRE Vacancy Rates Nashville Knoxville Chattanooga Memphis National 3Q15 % Change 3Q15 % Change 3Q15 % Change 3Q15 % Change 3Q15 % Change from PY from PY from PY from PY from PY Industrial / 6.1% (15.3%
Slide 54: Third Quarter 2015 Investor Call
Third Quarter 2015 Investor Call M. Terry Turner, President and CEO Harold R. Carpenter, EVP and CFO October 21, 2015
Pinnacle Financial Partners — Q3 2015 Earnings Presentation on 6ix