Pinnacle Financial Partners, Inc. · NYSE:PNFP
Pinnacle Financial Partners — Q3 2018 Earnings Presentation
44 slides from Pinnacle Financial Partners's earnings presentation, Oct 17, 2018
Slide 1: Third Quarter 2018 Investor Call
Third Quarter 2018 Investor Call M. Terry Turner, President and CEO Harold R. Carpenter, EVP and CFO October 17, 2018
Slide 2: Safe Harbor 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 presenation contains certain non-GAAP financial measures, including, without limitation, revenues per diluted share, earnings per diluted share, efficiency ratio and the ratio of noninterest expense to average assets, in each case excluding the
Slide 4: 3Q18 Summary Results of Key GAAP Measures
3Q18 Summary Results of Key GAAP Measures Total Revenues FD EPS Book Value per Share Total Loans Total Deposits ROTCE (millions) (millions) Classified Asset Ratio NCOs NPA/ Loans & OREO 4
Slide 5: 3Q18 Summary Results of Key Non-GAAP Measures
3Q18 Summary Results of Key Non-GAAP Measures Total Revenues* FD EPS* $1.21 Tangible Book Value per Share**$26.21 $240,887 $0.90 $23.32 $216,159 CAGR 22.0% CAGR 14.2% $118,327 $0.78 $19.69 $83,469 $17.09 $0.66 $62,396 $14.98 $0.52 Total Loans Total Core Deposits ROTCE* $17,464 $16,077 (millions) (mi
Slide 6: Today's Agenda
Today’s Agenda 1. Review 3Q18 financial performance 2. Highlight our continued success with the BNC integration 3. Address several important questions that distinguish PNFP from peers 1. Can we continue to organically grow loans at a low-to-mid-double digit pace? 2. Can we gather relationship-based
Slide 7: Total Revenues
Loan and Deposit Growth are Keys to Top and Bottom Line Growth Strong performance continues in both total revenues and revenues per share* $250 $3.15 Revenues per diluted share* $200 $2.75 Total Revenues* (millions) $150 $2.35 $100 $1.95 $50 $1.55 $- $1.15 Fee income NII Total revenue per share *: E
Slide 8: LTM Revenue per Share and Y/Y Growth vs. Peers
Loan and Deposit Growth are Keys to 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 $12.00 20% $11.73 System Conversion $11.42 $11.14 Y/Y Revenue per Share Growth $11.00 $10.85 15% BNCN Deal BNCN Deal
Slide 9: Average Loans
Average Loans (millions) $16,000 $20,000 $12,000 $- $4,000 $8,000 $3,191 $3,212 4.88% $3,207 $3,262 $3,280 $3,403 $3,489 $3,580 $3,682 $3,845 $3,932 $3,981 $4,130 Avg. Loans $4,251 $4,358 $4,436 Loan growth remains strong as yields increase $4,625 $4,737 $5,690 CPMK / Magna $6,458 $6,742 $6,998 AVNU
Slide 10: Quarterly Loan Growth % - Annualized
Loan and Deposit Growth are Keys to Top and Bottom Line Growth PNFP’s loan growth continues to significantly outperform peers 30% 25% 24.3% Quarterly Loan Growth % - Annualized 20% 20.1% 17.7% 17.3% 17.2% 16.3% 15% 14.1% 11.7% 11.5% 10% 10.0% 9.8% 9.8% 9.8% 5% 0% 2015Q3 2015Q4 2016Q1 2016Q2 2016Q3 2
Slide 11: PNFP continues to transition to more variable rate assets
Loan and Deposit Growth are Keys to Top and Bottom Line Growth PNFP continues to transition to more variable rate assets Sept 30, 2018 Loan Pricing Allocation o $900mm Fixed to Floating Forward Swaps • $300mm tranches layer in 4Q18, 1Q19 and 2Q19 • Moves approx. 5% of loans from fixed to floating LI
Slide 12: Cost of Deposits and Average Deposits
Loan and Deposit Growth are Keys to Top and Bottom Line Growth Average deposit balances grew at an annualized double-digit pace in 3Q18 $20,000 Deposit Rate Sept. 30, 2018 Sept. 30, 2018 June 30, 2018 2.50% Tranches % of Totals Rate Rate 2.25% $18,000 Noninterest bearing 24.4% --- --- 2.25% $18,113
Slide 13: Loan/Deposit Ratio
Loan and Deposit Growth are Keys to Top and Bottom Line Growth PNFP funded loan growth with core deposits in 3Q18. L/D ratio approximates peer median 35.00% 120.00% 32.8% 115.00% 30.00% Quarterly Deposit Growth % - Annualized 110.00% 25.00% 23.8% 105.00% Loan/Deposit Ratio 22.5% 22.5% 20.00% 100.00%
Slide 14: Fee Businesses also Contribute to Earnings Growth
Fee Businesses also Contribute to Earnings Growth Fee businesses produce another strong quarter 3Q18 2Q18 1Q18 4Q17 3Q17 Service charges $6,404 $6,065 $5,820 $6,078 $5,921 Investment services 5,237 4,906 5,107 4,723 3,660 Insurance commissions 2,126 2,048 3,119 1,961 2,123 Gain on mortgage loans sol
Slide 15: PNFP Focuses on Strategic Expense Management, not Reductions
PNFP Focuses on Strategic Expense Management, not Reductions 3Q18 core expense results reflect enviable operating leverage 3Q18 2Q18 1Q18 4Q17 3Q17 Salaries and employee benefits: Salaries $41,024 $39,136 $39,104 $39,950 $41,252 Commissions 3,011 3,148 3,029 2,062 2,042 Cash and equity incentives 14
Slide 16: Strategic Outlook Going Forward
Strategic Outlook Going Forward Pinnacle continues to set and deliver against lofty strategic profitability targets Pinnacle Targeted 3Q18 Actuals Operating Range Return on Average Assets 1.50% to 1.70% 1.54% Net Interest Margin 3.55% to 3.75% 3.65% Noninterest Income to Avg. Assets 0.80% to 1.00% 0
Slide 17: BNCN Integration has been Highly Successful
BNCN Integration has been Highly Successful Thesis: Accelerate double-digit growth by building a C&I platform 17
Slide 18: BNCN Integration has been Highly Successful
BNCN Integration has been Highly Successful Our C&I and Private Banking hiring is well ahead of plan Actual-to-date Planned-to-date Planned Planned Planned-to-date Actual-to-date 18
Slide 19: BNCN Integration has been Highly Successful
BNCN Integration has been Highly Successful “BNC has a high-growth CRE lending practice that we expect to continue at its previous pace. However, the key to realizing our potential in the Carolinas and Virginia is to build out a large C&I platform – the thing we do best.” PNFP 2017 Annual Report Car
Slide 20: Can PNFP Continue to Grow Loans at a Double-Digit Pace?
Can PNFP Continue to Grow Loans at a Double-Digit Pace? PNFP has consistently grown at or near a double-digit-pace throughout the BNCN integration Total Loans ($ in millions) $17,464 $17,500 System Conversion $17,042 $17,000 Brand Change $16,500 $16,326 Merger announcement $16,000 $15,633 $15,500 $1
Slide 21: Can PNFP Gather Relationship Funding for Loan Growth?
Can PNFP Gather Relationship Funding for Loan Growth? 9/30/2018 Percent 6/30/2018 Percent 3/31/2018 Percent 12/31/2017 Percent 9/30/2017 Percent Core Funding: Non-interest bearing deposits 4,476,925 21.81% 4,361,414 21.77% 4,274,213 22.40% 4,381,386 23.85% 4,099,086 22.76% Interest-bearing deposits
Slide 22: Cost of Total Deposits - Y/Y Change
Can rapid balance sheet growth produce rapid NII and EPS growth? Funding strong growth is not free but it can produce double-digit NII and EPS growth NII Per Share Growth vs. Deposit Cost Increase (2Q18) 0.40% 0.35% Cost of Total Deposits - Y/Y Change PNFP 0.30% 0.25% 0.20% 0.15% 0.10% 0.05% 0.0% 2.
Slide 23: 3Q18 Summary
3Q18 Summary We remain committed to long-term shareholder value. 3Q18 Financial Results • Low-to-mid double-digit annualized loan growth • >17% annualized core deposit growth • Approximately 35% annualized EPS growth Long-term Value • Hiring revenue producers • Building revenues • Growing tangible b
Slide 24: Q&A - Third Quarter 2018 Investor Call
Q&A – Third Quarter 2018 Investor Call
Slide 25: Supplemental Information
Supplemental Information Chart • Balance Sheet 26 • Asset Quality 37 • Income Statement 38 • Peer Group 43 25
Slide 26: Balance Sheet - Loan Portfolio
Balance Sheet – Loan Portfolio Amts. %s(*) Amts. %s(*) Amts. %s(*) Amts. %s(*) 3Q18 3Q18 2Q18 2Q18 3Q17 3Q17 3Q16 3Q16 C&I $5,006.2 28.7% $4,821.3 28.3% $3,971.3 26.0% $2,873.6 34.9% CRE – Owner Occ. 2,688.2 15.4% 2,504.9 14.7% 2,433.8 15.9% 1,256.2 15.2% Total C&I & O/O CRE 7,694.4 44.1% 7,326.2 43
Slide 27: 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. 3Q18 4Q17 3Q18 4Q17 3Q18 4Q17 3Q18 4Q17 C&I $5,006.2 $4,141.3 $3,929.8 $3,312.4 $679.4 $475.9 $397.0 $353.0 CRE – Owner Occ. 2,688.2 2,460.0 1,547.8 1,46
Slide 28: 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. 3Q18 4Q17 3Q18 4Q17 3Q18 4Q17 3Q18 4Q17 Nashville $6,317.7 $5,633.5 $3,158.9 $2,682.8 $2,212.5 $1,719.1 $946.3 $1,231.6 Knoxville 1,530.8 1,448.0 915.8 889.1 457
Slide 29: Balance Sheet - Loan Portfolio
Balance Sheet – Loan Portfolio Amts. %s(*) Amts. %s(*) Amts. %s(*) Amts. %s(*) 3Q18 3Q18 2Q18 2Q18 3Q17 3Q17 3Q16 3Q16 Residential – Spec $321.6 1.8% $294.9 1.7% $253.3 1.7% $182.2 2.2% Residential – Custom 146.0 0.8% 137.6 0.8% 157.4 1.0% 99.4 1.2% Residential – Condo - 0.0% 0.6 0.0% 13.3 0.1% 2.8
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. 3Q18 4Q17 3Q18 4Q17 3Q18 4Q17 3Q18 4Q17 Residential – Spec $321.6 $278.7 $232.2 $206.7 $89.4 $71.1 $ - $0.9 Residential – Custom 146.0 95.9 96.9 59.6 49.1
Slide 31: 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. 3Q18 2Q18 1Q18 3Q18 2Q18 1Q18 3Q18 2Q18 1Q18 Multifamily $708.8 $738.6 $644.8 $412.2 $405.0 $375.4 $1,121.0 $1,143.6 $1,020.2 Hospitality 651.1
Slide 32: Balance Sheet - Loan Portfolio
Balance Sheet – Loan Portfolio Net Commercial loan charge-offs by loan type 0.20% 0.15% 0.10% 0.05% 0.00% -0.05% -0.10% -0.15% -0.20% -0.25% -0.30% -0.35% CRE Construction C&I Net commercial charge off's 2014 2015 2016 2017 YTD18 Net Consumer loan charge-offs by loan type 8.00% 7.00% 6.00% 5.00% 4.0
Slide 33: Balance Sheet - Loan Portfolio
Balance Sheet – Loan Portfolio Description 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 $523,300 $488,893 $475,979 $445,077 $423,988 Other construction loans and all land de
Slide 34: Balance Sheet - Deposit Portfolio
Balance Sheet – Deposit Portfolio Public Funds and Total Pinnacle Transaction and MMDA CDs Other Noncore Deposits 3Q18 4Q17 3Q18 4Q17 3Q18 4Q17 3Q18 4Q17 Nashville $7,350.3 $6,488.4 6,595.7 $5,906.9 $479.9 $375.6 $274.7 $205.9 Knoxville 1,407.0 1,260.3 1,324.4 1,217.5 50.3 24.6 32.3 18.2 Memphis 987
Slide 35: Balance Sheet - Bond Portfolio
Balance Sheet – Bond Portfolio 4.00% 40.00% 3.50% 3.11% 35.00% 3.00% 3.58% 30.00% 2.50% 25.00% 2.00% 20.00% 1.50% 20.75% 15.00% 1.00% 10.00% 13.03% 0.50% 5.00% 0.00% 0.00% Bond Yields % of Total Assets Bond Portfolio Pricing 78% 71% 66% 34% 29% 22% Sept. 2017 Sept. 2018 Proforma Dec. 2018* Fixed Rat
Slide 36: Balance Sheet - Bond Portfolio
Balance Sheet – Bond Portfolio Portfolio: September 30, 2018 2% Total Investments $3.200 billion 1% Unrealized Gain (Loss) $(67.7) million 30% 44% Quarter Duration Avg. Yield- TE 3Q18 4.4% 3.1% 10% 13% 2Q18 3.9% 2.9% 1Q18 3.5% 2.9% 4Q17 3.5% 2.7% 3Q17 3.5% 2.6% Agency/Treasury Corporates MBS 2Q17 3.
Slide 37: Asset Quality
Asset Quality (000s) Sept. 30, 2018 As a % of total loans Dec. 31, 2017 As a % of total loans Sept. 30, 2017 As a % of total loans Past Due Loans (*) Nonaccrual loans $23,268 0.13% $11,691 0.07% $20,210 0.13% Accruing loans 43,991 0.25% 60,159 0.38% 39,081 0.26% Total past due $67,259 0.38% $71,850
Slide 38: Income Statement - Discount Accretion and Income Tax Rate Trends
Income Statement – Discount Accretion and Income Tax Rate Trends Actual/Anticipated Discount Accretion Through Dec 2019 Life to date accretion $25,000,000 approximates original projections. Anticipate $20,000,000 continued reduction in accretion income in $15,000,000 future periods. $10,000,000 $5,0
Slide 39: 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 39
Slide 40: Income Statement - Reconciliation of Non-GAAP financial measures
Income Statement -Reconciliation of Non-GAAP financial measures 40
Slide 41: Income Statement - Reconciliation of Non-GAAP financial measures
Income Statement -Reconciliation of Non-GAAP financial measures 41
Slide 42: Income Statement - Reconciliation of Non-GAAP financial measures
Income Statement -Reconciliation of Non-GAAP financial measures 42
Slide 43: 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 44: Third Quarter 2018 Investor Call
Third Quarter 2018 Investor Call M. Terry Turner, President and CEO Harold R. Carpenter, EVP and CFO October 17, 2018
Pinnacle Financial Partners — Q3 2018 Earnings Presentation on 6ix