Pinnacle Financial Partners, Inc. · NYSE:PNFP
Pinnacle Financial Partners — Q1 2022 Earnings Presentation
59 slides from Pinnacle Financial Partners's earnings presentation, Apr 19, 2022
Slide 1: Investor Call First Quarter 2022
Investor Call FIRST QUARTER 2022 April 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, efficiency ratio and the ratio of noninterest expense to average assets, excluding in certain instances the impact
Slide 4: 1Q22 Financial Dashboard
1Q22 Financial Dashboard Key success measures including core loan growth, core deposit growth, net interest income growth, fee income growth, and asset quality all continue to be strong. 4
Slide 5: 1Q22 Summary Results of Key GAAP Measures
1Q22 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 12.0% PNFP’s Median Quarterly P
Slide 6: 1Q22 Summary Results of Key Non-GAAP Measures
1Q22 Summary Results of Key Non-GAAP Measures Adjusted Pre-Tax Pre-Provision Total Revenues* FD EPS* CAGR 9.3% Net Income* CAGR 11.2% CAGR 8.2% Total Loans Total Core Deposits CAGR 10.0% (millions) Tangible Book Value per Share** (millions) CAGR 18.5% CAGR 13.6% Classified Asset Ratio NPA/ Loans & O
Slide 7: 1Q22 Financial Information
1Q22 Financial Information 1Q22 financial results reflect PNFP’s success in seizing the “once-in-a-generation” opportunity to gather valuable talent and clients from vulnerable competitors. In spite of declining PPP loan balances, loan growth was substantial in the first quarter, as was core deposit
Slide 8: Average Loan Growth and Loan Yields
PNFP Linked-Quarter Annualized Average Loan Growth was 10.7% in 1Q22 Linked-quarter annualized average loan growth ex-PPP was 15.8% Average Loan Growth and Loan Yields Organic EOP Loan Growth^ $24,000 5.40% $23,849 $22,000 5.20% $23,226 $23,180 25.0% $22,986 $22,848 $22,525 $22,493 $22,257 $20,000 5
Slide 9: Core Deposit Inflows Continued to Drive Balance Sheet Growth
Core Deposit Inflows Continued to Drive Balance Sheet Growth Core deposit growth continues to outperform expectations at 14.7% linked-quarter annualized Average Deposit Growth and Costs Annual Core Deposit Growth $34,000 1.50% 40.0% Core Deposit Growth Rates $30,000 35.0% $31,539 1.25% $30,034 $28,7
Slide 10: Excess Liquidity Continues to Impact NIM
Excess Liquidity Continues to Impact NIM Rapid loan demand should serve to reduce elevated liquidity levels in 2022 Reported NIM vs. Adjusted NIM $5,000 Quarterly Avg. FFS, IB Cash & Repos 2.50% 3.40% $4,500 3.28% 3.27% 3.29% 3.30% 3.25% $4,000 2.00% Average Quarterly Yield 3.22% 3.21% 3.20% 3.19% 3
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 break records Net Charge-offs NPA/ Loans & ORE 1Q22 Credit Highlights 0.20% 0.20% 0.58% 0.61% • Several credit measurements 0.48% continue to improve to all time 0.10% 0.36% records and remain in top-quartile 0.08% perfo
Slide 12: PNFP Grows Fees 11.7% YOY
PNFP Grows Fees 11.7% YOY PNFP continues focus on gathering more share of wallet from client base Linked-Quarter Year-over-Year Annualized • Wealth management groups are producing 1Q22 4Q21 1Q21 Growth % Growth % outsized growth primarily due to an increased Service charges $11,030 $12,663 $8,307 (5
Slide 13: Our Ability to Attract Talent and Extend Markets Drives Expense Increases
Our Ability to Attract Talent and Extend Markets Drives Expense Increases Incentive expenses fluctuations positively correlate with earnings Linked-Quarter Year-over-Year 1Q22 4Q21 1Q21 Annualized Growth % Growth % • Salary and benefit costs increases from the same Salaries and employee benefits: Sa
Slide 14: Growth in Tangible Book Value Remains a Critical Focus
Growth in Tangible Book Value Remains a Critical Focus PNFP increases common dividend in first quarter 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 increased to $0.22 in 1Q
Slide 15: PNFP Optimistic about 2022
PNFP Optimistic about 2022 We remain confident in our model to produce outsized revenue and earnings growth 2022 Outlook – as of April 18, 2022 (Note) Y/Y End of Period Loan Growth • We anticipate at least mid-teen percentage loan growth or more for 2022 end of year balances over 2021 year-end level
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 Start at BHG in 2022
Record Start at BHG in 2022 BHG continues to originate loans at record levels while maintaining strong yields $900 BHG Business Model Drives Outperformance Loan Originations and Placements $800 $855 $700 • 1Q22 was the 7th consecutive record highest origination $739 $727 quarter in the history of BH
Slide 18: BHG Credit Quality Continues to Impress
BHG BHG’sCredit Quality On Balance Continues Sheet Reservesto Impress Remain Strong Sophisticated credit scoring models produce impressive results Recourse Obligation Reserves (Note) • Recourse obligation reserves decreased to 4.82% of total (Green Bars – Balance of loans in bank network, $s in mill
Slide 19: BHG Credit Quality Continues to Improve
BHG’sCredit BHG StrongQuality Continues Credit Quality to Impress Continues to Improve 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 Sco
Slide 20: BHG is on track for 20% Growth in 2022
BHG is on track for 20% Growth in 2022 Alternative revenue channels remain in 2022 launch pipeline Other 1Q22 Highlights • Closed $492mm BHG 2022-A securitization in January. BHG Pre-Tax Earnings ($ millions) • Borrowers - WAR 14.1%. Avg. Balance $82K. WA Fico $400 BHG estimates pre-tax earnings 736
Slide 21: A "Once-in-a-Generation Opportunity"
A “Once-in-a-Generation Opportunity” Despite an uncertain economic environment, rarely has there been an opportunity of this magnitude to build substantial long-term shareholder value. Our differentiated culture is attracting large numbers of experienced bankers and their clients that are frustrated
Slide 22: Bank integrations provide unusual share take-away opportunity
Pinnacle is Uniquely Positioned to Seize “Once-in-a-Generation” Opportunity Bank integrations provide unusual share take-away opportunity 22
Slide 23: $324.6B of Pinnacle's markets exhibit unusual market share vulnerability
Pinnacle is Uniquely Positioned to Seize “Once-in-a-Generation” Opportunity $324.6B of Pinnacle’s markets exhibit unusual market share vulnerability Nashville, TN Knoxville, TN Chattanooga, TN Memphis, TN Greensboro/High Point, NC Raleigh, NC Pinnacle 16.43% Truist 19.32% First Horizon 22.20% First
Slide 24: Pinnacle's size and culture are attracting talent in newer markets
Pinnacle is Uniquely Positioned to Seize “Once-in-a-Generation” Opportunity Pinnacle’s size and culture are attracting talent in newer markets ($ in millions) Atlanta, GA Huntsville, AL Birmingham, AL Washington, D.C. Specialty Lending Announcement Date December 2019 June 2021 June 2021 November 202
Slide 25: Proven ability to consolidate client relationships provides outsized growth
Pinnacle is Uniquely Positioned to Seize “Once-in-a-Generation” Opportunity Pinnacle proven ability to consolidate client relationships provides outsized growth Loan Balance Expectations by Year Deposit Balance Expectations by Year $60.00 $56.00 $45.00 Based on internal $38.30 $40.00 $36.60 (Million
Slide 26: Focus on EPS growth through revenue per share growth
Pinnacle is Uniquely Positioned to Seize “Once-in-a-Generation” Opportunity Given the franchise building opportunities, we focus on EPS growth through RPS growth, not expense cutting LTM Revenue Per Share Growth* vs. Peers $19.00 20.0% 19.0% 16.2% 17.5% $17.85 18.0% $18.00 $17.50 $17.07 16.0% $17.00
Slide 27: Outlook for 2022
Outlook for 2022 “My right is driven in, my center is giving way, the situation is excellent, I attack.” Ferdinand Foch 27
Slide 28: Q&A First Quarter 2022
Q&A FIRST QUARTER 2022 28
Slide 29: Supplemental Information
Supplemental Information Slide # • Balance Sheet 30 • Income Statement 53 • Peer Group 58 29
Slide 30: Balance Sheet – Loan Portfolio Segments
Balance Sheet – Loan Portfolio Segments ($ in millions) Amts. % Amts. % Amts. % Amts. % 1Q22 1Q22 4Q21 4Q21 1Q21 1Q21 1Q20 1Q20 C&I $8,213.1 33.5% $7,703.5 32.9% $6,355.1 27.5% $6,752.3 33.1% C&I – Paycheck Protection Program 157.2 0.6% 371.1 1.6% 2,221.4 9.6% - 0.0% CRE – Owner Occ. 3,124.3 12.8% 3
Slide 31: Balance Sheet – Loan Portfolio – Market Segmentation
Balance Sheet – Loan Portfolio – Market Segmentation ($ in millions) TOTAL PINNACLE C&I & O/O CRE CRE & CONSTRUCTION OTHER LOANS* Amts. Amts. Amts. Amts. Amts. Amts. Amts. Amts. 1Q22 1Q21 1Q22 1Q21 1Q22 1Q21 1Q22 1Q21 Nashville $8,117.6 $7,172.1 $3,870.8 $3,402.9 $2,654.5 $2,541.1 $1,592.3 $1,228.1
Slide 32: Balance Sheet – Loan Portfolio – CRE Segmentation
Balance Sheet – Loan Portfolio – CRE Segmentation ($ in millions) Total NOO and Multifamily Total Construction Total NOO and Construction Amts. Amts. Amts. Amts. Amts. Amts. Amts. Amts. Amts. 1Q22 4Q21 1Q21 1Q22 4Q21 1Q21 1Q22 4Q21 1Q21 Multifamily $709.9 $602.0 $785.9 $886.6 $705.7 $602.1 $1,596.5
Slide 33: Balance Sheet – Loan Pricing Information
Balance Sheet – Loan Pricing Information Rate Index Portfolio Snapshot: End-of-Period Weighted Average Coupon Loan Originations: Quarterly Average Rate At Mar. 31, At Dec. 31, At Mar. 31, As a % of Origination YOY Change 1Q21 4Q21 1Q22 2021 2021 2022 Total Portfolio Mix 1Q22 LIBOR/SOFR 2.83% 2.75% 2
Slide 34: 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 • $157.2 million in PPP balances remain on balance sheet at ($000’s) 2020 PPP 2021 PPP Totals Total PPP fundings $ 2,483,177 $ 933,872 $ 3,417,049 March 31, 2022 • Unamortized fees
Slide 35: Balance Sheet – Loan Portfolio Lines of Credit
Balance Sheet – Loan Portfolio Lines of Credit ($'s in millions) Linked Qtr. 9/30/2020 12/31/2020 3/31/2021 6/30/2021 9/30/2021 12/31/2021 3/31/2022 Change CRE – Investment & Construction Net Active Balance $4,067.10 $4,106.82 $4,051.74 $3,921.54 $4,040.73 $3,727.20 $4,096.40 $369.21 Net Available C
Slide 36: Current Expected Credit Losses
Current Expected Credit Losses Total Allowance for Credit Losses for loans = $261.6 mm or 1.07% of loans at March 31, 2022 Allowance for Off-Balance % of Loans Total Forecasted economic metrics(1) Credit Losses Sheet Base Case Outlook at: 2Q22 3Q22 4Q22 1Q23 At March 31, 2021 $280,881 1.22% (1) $23,
Slide 37: Current Expected Credit Losses
Current Expected Credit Losses March 31, 2021 June 30, 2021 September 30, 2021 December 31, 2021 March 31, 2022 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 $ 101,076 1.59% * $
Slide 38: Asset Quality
Asset Quality AS A % OF AS A % OF AS A % OF ($ in millions) March 31, 2022 December 31, 2021 March 31, 2021 TOTAL LOANS TOTAL LOANS TOTAL LOANS NPLs and > 90 days Const. and land development $350 0.00% $356 0.00% $1,558 0.01% Consumer RE 8,277 0.03% 10,408 0.04% 19,778 0.09% CRE – Owner Occupied 3,1
Slide 39: Balance Sheet – Loan Portfolio
Balance Sheet – Loan Portfolio Net Loan Charge Offs by Loan Type 1.00% 0.90% 0.80% 0.70% 0.60% 0.50% 0.40% 0.30% 0.20% 0.10% 0.00% -0.10% CRE Construction C&I Consumer RE Consumer and Total net charge other off rates 2019 2020 2021 2022 39
Slide 40: Balance Sheet – Loan Portfolio – 100/300 Test
Balance Sheet – Loan Portfolio – 100/300 Test ($ in thousands) Description 1Q22 4Q21 3Q21 2Q21 1Q21 4Q20 Loans secured by real estate: Construction, land development, and other loans: 1-4 family residential construction loans $701,029 $625,862 $635,470 $556,052 $548,614 $514,819 Other construction l
Slide 41: Balance Sheet – Deposit Portfolio – Market Segmentation
Balance Sheet – Deposit Portfolio – Market Segmentation ($ in millions) TOTAL DEPOSITS CORE DEPOSITS NONCORE DEPOSITS TOTAL PINNACLE TRANSACTION AND MMDA CDs PUBLIC FUNDS and OTHER DEPOSITS 1Q22 1Q21 1Q22 1Q21 1Q22 1Q21 1Q22 1Q21 Nashville $13,494.1 $11,219.3 $13,006.1 $10,552.6 $335.7 $456.3 $152.3
Slide 42: Balance Sheet – Bond Portfolio Statistics
Balance Sheet – Bond Portfolio Statistics Portfolio: March 31, 2022 Investment Securities Segmentation Total Investments $6.1 billion Net Unrealized Gain (Loss) ($51.9) million Quarter Duration Avg. Yield- TE 2.0% 13.3% 1Q22 4.4% 2.1% 4Q21 4.1% 2.1% 3Q21 4.5% 2.0% 47.5% 2Q21 4.3% 2.3% 29.7% 1Q21 4.8
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 3.00 30.0 78% 77% 75% 76% 76% % of Total Assets 2.50 25.0 2.12 Bond Yields 2.00 20.0 1.50 15.0 15.6 1.00 10.0 25% 24% 24% 23% 0.50 5.0 22% - - 2017Q1 2018Q4 2017Q2 2017Q3 2017Q4 2018Q1 2018Q2 2018Q3
Slide 44: Interest Rate Sensitivity
Interest Rate Sensitivity ▪ The balance sheet is asset sensitive, although the benefit from the first 50bp of hikes is likely to be modest with increasing benefit thereafter due to impact of loan floors. ▪ $3.6b of variable rate loans with in-the-money floors remain after the first 25bp hike. An add
Slide 45: NIM Adjusted for PPP and Liquidity Impact – 1Q22
NIM Adjusted for PPP and Liquidity Impact – 1Q22 Estimate PPP and Liquidity Build negatively impacted 1Q22 NIM by 0.29% Adjusted Avg Adjusted ProForma Adj. Yield/ Actual Avg Balances ProForma Balances after PF ProForma Interest after Yield/ Rate Rates after 1Q22 Adjustments Entries Interest Adjustme
Slide 46: 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 47: 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 48: 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 49: 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 50: 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 51: 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 52: 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 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) 2018 2019 2020 2021 1Q22 PPNR Trends Adjusted PPNR $700 Net interest income $ 736,342 $ 766,142 $821,788 $932,401 $239,475 Noninterest income 200,850 263,826 317,840 395,734 103,496 $600 Noninterest expense (452,867) (505,148) (564,455) (660,104) (182,661)
Slide 55: BHG Financials
BHG Financials Increasing equity position supports strong business model • Record earnings performance in 1Q22 • Loan sales continue to reflect high premiums, despite rate increases At Mar 31, At Dec 31, At Mar 31, ($'s in thousands) ($'s in thousands) 1Q 2022 4Q 2021 1Q 2021 2022 2021 2021 Cash and
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
Investor Call FIRST QUARTER 2022 M. TERRY TURNER, PRESIDENT AND CEO HAROLD R. CARPENTER, EVP AND CFO
Pinnacle Financial Partners — Q1 2022 Earnings Presentation on 6ix