Pinnacle Financial Partners, Inc. · NYSE:PNFP
Pinnacle Financial Partners — Q4 2016 Earnings Presentation
53 slides from Pinnacle Financial Partners's earnings presentation, Jan 18, 2017
Slide 1: Fourth Quarter 2016 Investor Call
Fourth Quarter 2016 Investor Call M. Terry Turner, President and CEO Harold R. Carpenter, EVP and CFO January 18, 2017
Slide 2: Safe Harbor Statements
Safe Harbor Statements Forward Looking Statements This presentation includes forward‐looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including those identified by the words “may,” “will,” “should,” “could,” “anticipate,” “believe,” “continue,” “estimate
Slide 3: Safe Harbor Statements: Non-GAAP Financial Matters
Safe Harbor Statements Non‐GAAP Financial Matters This presentation also contains certain non‐GAAP financial measures, including, without limitation, revenues, net income, earnings per diluted share, efficiency ratio, core net interest margin, noninterest expense and the ratio of noninterest expense
Slide 4: 4Q16 Summary GAAP Results
4Q16 Summary GAAP Results Execution of fundamentals fueled exceptional growth in key valuation drivers Total Revenues FD EPS ROTCE Earnings Growth $0.78 $120,156 $0.65 15.49% $98,083 14.97% $0.53 $64,697 $0.44 13.52% $57,456 12.81% Balance Sheet Growth Total Loans Total Deposits Book Value per Share
Slide 5: 4Q16 Summary Non-GAAP Results
4Q16 Summary Non‐GAAP Results Execution of fundamentals fueled exceptional growth in key valuation drivers Total Revenues FD EPS* ROTCE* Earnings Growth $0.83 $120,156 16.34% $0.69 15.81% Up 22.5% yr/yr $98,083 Up 20.3% yr/yr $0.53 $64,697 13.52% $57,456 $0.44 12.79% Balance Sheet Growth Total Loans
Slide 6: 4Q16 Summary GAAP Results
4Q16 Summary GAAP Results Pinnacle “plans its work and works its plan” – GAAP metrics ROAA Net Interest Margin Noninterest Income / Average Assets 1.60% 4.00% 1.40% 3.90% 1.30% 1.40% 3.80% 1.20% 3.70% 1.10% 3.60% 1.00% 1.20% 3.50% 0.90% 3.40% 0.80% 1.00% 3.30% 0.70% 0.80% Noninterest Expense / Avera
Slide 7: 4Q16 Summary Non-GAAP Results
4Q16 Summary Non‐GAAP Results Pinnacle “plans its work and works its plan” ROAA Net Interest Margin Noninterest Income / Average Assets (1) 1.60% 4.00% 1.40% 3.90% 1.30% 3.80% 1.23% 1.37% 3.80% 3.76% 1.40% 3.73% 3.72% 1.20% 1.31% 3.70% 1.11% 1.27% 3.70% 1.10% 0.97% 3.60% 1.00% 0.92% 1.20% 1.13% 0.89
Slide 8: 4Q16 Summary Results
4Q16 Summary Results Previously outlined growth initiatives provide further operating leverage 1. Aggressive hiring plan– 81 revenue producers in 2016 inclusive of 30 attributable to the Avenue acquisition, compared to 36 in 2015. 2. CapitalMark, Magna and Avenue mergers – Highly successful integrat
Slide 9: 4Q16 Summary Results: Business model nationally recognized
4Q16 Summary Results PNFP’s business model is nationally recognized Source: Greenwich Associates 9
Slide 10: Loan, Deposit and Fee Growth Produce Operating Leverage: Revenues
Loan, Deposit and Fee Growth Produce Operating Leverage Steady growth continues in both total revenues and revenues per share $2.61 $120 $2.50 Revenues per diluted WAVG share $100 $2.00 Total Revenues $80 (000's) $1.31 $1.50 $60 $1.00 $40 $0.50 $20 $‐ $‐ Fee income NII Total revenue per share 10
Slide 11: Linked quarter loan volume growth remains strong
Loan, Deposit and Fee Growth Produce Operating Leverage Linked quarter loan volume growth remains strong 4.88% $10,000 5.00% 4.60% $8,000 4.00% Average Loans Loan Yields $6,000 3.00% (millions) $4,000 2.00% $2,000 1.00% $‐ 0.00% Avg. Loans Loan Yields 11
Slide 12: Average deposit balances grew 4.0% organically
Loan, Deposit and Fee Growth Produce Operating Leverage Average deposit balances grew 4.0% organically $9,000 1.20% $8,791 1.01% $8,454 $8,000 1.00% $7,000 $7,093 $7,037 0.80% Avg. Deposits $6,787 $6,000 (millions) $5,898 0.60% $5,000 $4,885 $4,792 $4,758 0.40% $4,655 $4,519 $4,510 $4,408 $4,000 $4,
Slide 13: Balance sheet well positioned for rising rates
Loan, Deposit and Fee Growth Produce Operating Leverage Balance sheet well positioned for rising rates Net Interest Margin 4.00% 3.80% 3.60% 3.40% 3.20% 3.00% 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 Net Interest Margin C
Slide 14: Fee businesses produce another strong quarter
Loan, Deposit and Fee Growth Produce Operating Leverage Fee businesses produce another strong quarter 4Q16 3Q16 2Q16 1Q16 4Q15 Service charges $3,850* $3,778 $3,430 $3,443 $3,500 Investment services 3,320* 2,592 2,500 2,346 2,787 Insurance commissions 1,178 1,233 1,193 1,705 1,103 Gain on mortgage l
Slide 15: Operating leverage improves quarter over quarter
Loan, Deposit and Fee Growth Produce Operating Leverage Operating leverage improves quarter over quarter 4Q16 3Q16 2Q16 1Q16 4Q15 Salaries and benefits $37,994 $36,053 $34,254 $32,517 $30,878 Equipment and occupancy 9,228 9,401 8,312 8,130 8,385 Other real estate owned 44 17 222 112 99 Marketing and
Slide 16: PNFP Remains Focused on Long-term Shareholder Value
PNFP Remains Focused on Long‐term Shareholder Value High growth urban markets across the Southeast provide further opportunity 16
Slide 17: Getting great traction in recent market extensions
PNFP Remains Focused on Long‐term Shareholder Value PNFP is getting great traction in recent market extensions Market At 12/31/16 At 12/31/15 Net % change Loans (000’s) Memphis $736 $458 26.6%* Chattanooga $800 $708 13.0% Core Deposits (000’s) Memphis $661 $385 71.6% Chattanooga $559 $505 10.7% Reve
Slide 18: Opportunities for de novo or merger related expansion
PNFP Remains Focused on Long‐term Shareholder Value Opportunities likely exist for de novo or merger related expansion M&A Criteria De novo Sizing • At least $1 billion in assets • Nashville, Knoxville experience • Commercial thrust – Approximately $2.0 million in cumulative losses prior to break‐ev
Slide 19: Focused on Tennessee and the Southeast
PNFP Remains Focused on Long‐term Shareholder Value PNFP is focused on Tennessee and the Southeast 1. Continuation of current high growth, high profit plan 2. Explore expansion to other high growth southern markets 19
Slide 20: Q&A – Fourth Quarter 2016 Investor Call
Q&A – Fourth Quarter 2016 Investor Call
Slide 21: Supplemental Information
Supplemental Information Chart • Balance Sheet • Asset Quality • Income Statement • Pinnacle Financial Partners profile • Economic and Market Conditions 21
Slide 22: Supplemental Information: Balance Sheet
Supplemental Information Balance Sheet 22
Slide 23: Loan portfolio is well diversified
Balance Sheet Loan portfolio is well diversified Amts. %’s(*) Amts. %’s(*) Amts. %’s(*) Amts. %’s 4Q16 4Q16 3Q16 3Q16 4Q15 4Q15 4Q14 4Q14 C&D and Land $912.7 10.8% $930.2 11.3% $747.7 11.4% $322.5 7.0% Consumer RE 1,185.9 14.0% 1,186.0 14.4% 1,046.5 16.0% 721.2 15.7% CRE – Owner Occ. 1,354.9 16.0% 1
Slide 24: Construction portfolio reflects discipline
Balance Sheet Construction portfolio reflects discipline Amts. %’s(*) Amts. %’s(*) Amts. %’s(*) Amts. %’s(*) 4Q16 4Q16 3Q16 3Q16 4Q15 4Q15 4Q14 4Q14 Residential – Spec $195.7 2.3% $182.2 2.2% $126.1 1.9% $39.8 0.9% Residential – Custom 81.9 1.0% 99.4 1.2% 54.1 0.8% 34.4 0.8% Residential – Condo 5.2
Slide 25: The C&I loan portfolio is highly diversified
Balance Sheet The C&I loan portfolio is highly diversified NAICS Sector Description 4Q16 3Q16 4Q15 Accommodation and Food Services 4.11% 4.05% 4.53% Admin. and Support and Waste Mgmt & Remediation 2.97% 2.84% 2.45% Agriculture, Forestry, Fishing and Hunting 0.09% 0.10% 0.15% Arts, Entertainment, and
Slide 26: Focused on relationship funding
Balance Sheet PNFP remains focused on relationship funding 12/31/2016 Percent 12/31/2015 Percent Core Funding: Non‐interest bearing deposits $2,399,191 24.99% $1,889,865 25.22% Interest‐bearing deposits 1,737,996 18.10% 1,355,404 18.09% Money Market accounts 3,185,186 33.17% 2,683,045 35.81% Time de
Slide 27: Unfunded line commitments hold potential for loan growth
Balance Sheet Unfunded line commitments hold potential for significant loan growth Note: Excludes HELOCS and credit cards 27
Slide 28: Securities book 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% 2.00% 2.26% 20.00% 1.50% 15.00% 1.00% 10.00% 11.46% 0.50% 5.00% 0.00% 0.00% Bond Yields % of Avg. Assets 28
Slide 29: Conservative bond portfolio
Balance Sheet Conservative bond portfolio Portfolio: December 31, 2016 17.6% 0.1% 0.7% Total Investments $1.324 billion Unrealized Gain (Loss) $ (11.5) million QTD Purchases $ 210.4 million 16.0% QTD Sales $ 43.4 million 58.0% Duration Avg Yield – TE 7.7% 4Q16 3.16% 2.42% Agency Corporates MBS 3Q16
Slide 30: Municipal portfolio contains minimal risk
Balance Sheet The municipal portfolio contains minimal risk Municipal Bond Portfolio Statistics Muni Allocation % 4Q16 4Q15 Weighted Average Life 5.0 years 3.5 years 18.5% Tax equivalent yield 4.16% 4.69% FMV as % of Cost 100.7% 103.9% 81.5% Location # of Issuances Market Value % (in ‘000s) As of De
Slide 31: Supplemental Information: Asset Quality
Supplemental Information Asset Quality 31
Slide 32: Past due loans remain very low
Asset Quality Past due loans remain very low Dec. 31, As a % of Sept. 30, As a % of Dec. 31, As a % 2016 total 2016 total 2015 of total (000’s) loans loans loans Past Due Loans (*) Nonaccrual loans** $10,873 0.13% $8,822 0.11% $10,362 0.16% Accruing loans 22,331 0.26% 19,929 0.24% 19,977 0.31% Total
Slide 33: NPLs and loans >90 days past due remain very low
Asset Quality NPLs and loans >90 days past due & accruing remain very low PNFP NPLs and >90 days Dec. 31, As a % of Sept. 30, As a % of Dec. 31, As a % of (000’s) 2016 total loans 2016 total loans 2015 total loans Const. and land development $6,613 0.08% $6,355 0.08% $7,608 0.12% Consumer RE 8,127 0
Slide 34: Classified assets remain low
Asset Quality Classified assets remain low (in thousands) Balances Balances Balances Dec. 31, 2016 Sept. 30, 2016 Dec. 31, 2015 Classified loans and ORE: ‐ Substandard commercial loans $148,460 $123,952 $116,088 ‐ Doubtful commercial loans 1 87 18 ‐ Other impaired loans 9,820 9,933 19,402 ‐ 90 days
Slide 35: Supplemental Information: Income Statement
Supplemental Information Income Statement 35
Slide 36: Mortgage volumes increased
Income Statement Mortgage volumes increased commensurate with higher pull‐thru rates 250,000 3.50% 200,000 3.00% 150,000 2.50% 100,000 2.00% 50,000 1.50% 0 1.00% Purchase Money Refinance Gross fees as a % of loans originated 36
Slide 37: Reconciliation of Non-GAAP measures
Income Statement Reconciliation of Non‐GAAP measures 4Q16 3Q16 2Q16 1Q16 4Q15 Net interest income $89,413 $86,635 $75,044 $73,902 $71,475 Total noninterest income $30,743 $31,692 $32,713 $25,856 $26,608 Less: Securities (gains) losses (395) ‐ ‐ ‐ 10 Noninterest income, excluding the impact of net ga
Slide 38: Reconciliation of Non-GAAP measures
Income Statement Reconciliation of Non‐GAAP measures 4Q16 3Q16 2Q16 1Q16 4Q15 Total non‐interest income $30,743 $31,692 $32,713 $25,856 $26,608 Less: Securities (gains) losses (395) ‐ ‐ ‐ 10 Noninterest income, excluding the impact of net gains and losses on sale of investment securities $30,347 $31
Slide 39: Reconciliation of Non-GAAP measures
Income Statement Reconciliation of Non‐GAAP measures 4Q16 3Q16 2Q16 1Q16 4Q15 Net income $36,097 $32,376 $30,787 $27,965 $26,854 Merger‐related charges 3,264 5,672 980 1,830 2,489 Tax effect on merger‐related charges (1,281) (2,225) (385) (718) (977) Net income less merger‐related charges $38,080 $3
Slide 40: Reconciliation of Non-GAAP measures
Income Statement Reconciliation of Non‐GAAP measures 4Q16 3Q16 2Q16 1Q16 4Q15 Net income $36,097 $32,376 $30,787 $27,965 $26,854 Merger‐related charges 3,264 5,672 980 1,830 2,489 Tax effect on merger‐related charges (1,281) (2,225) (385) (718) (977) Net income less merger‐related charges $38,080 $3
Slide 41: Supplemental Information: Pinnacle Financial Partners Profile
Supplemental Information Pinnacle Financial Partners Profile 41
Slide 42: PNFP Profile
PNFP Profile Recently completed acquisitions will position firm in four great banking markets Headquarters: Nashville, TN Offices: 28 in 8 Middle‐TN counties 10 in 5 East‐TN counties Founded: 2000 5 in West‐TN Total assets: $11.194 Billion Avg. daily trading volume **: 224,445 shares (12/31/16) % In
Slide 43: Extraordinarily experienced team of entrepreneurs
PNFP Profile PNFP has an extraordinarily experienced team of entrepreneurs Name Title Age Years in Years at Banking Pinnacle Industry M. Terry Turner President and Chief Executive Officer 61 38 16 Robert A. McCabe, Jr. Chairman of the Board 66 39 16 Hugh M. Queener Chief Administrative Officer 60 41
Slide 44: 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 Change Top 10 Holding Market Market Change Market Company Share Share in Market Company Share Share in Share Share 6/30/16 6/30/00 (1) Share Share 6/3
Slide 45: 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 Change Top 11 Holding Market Market Change Market Company Share Share in Share Market Company Share Share in Share Share 6/30/16 6/30/15(1) Share 6/30/16
Slide 46: Supplemental Information: Economic & Market Conditions
Supplemental Information Economic & Market Conditions 46
Slide 47: PNFP operates in advantaged markets
PNFP operates in advantaged markets Total Population Median Per Capita Population Change HH Income Income 2017 2010 ‐ 2017 2017 2017 MSA Total Deposits ($000) (actual) (%) ($) ($) Nashville‐Davidson‐‐Murfreesboro‐‐Franklin, TN 51,900,622 1,881,524 12.61 57,222 31,399 Memphis, TN‐MS‐AR 28,030,646 1,3
Slide 48: Pinnacle operates in advantaged markets: Tennessee, Nashville
Pinnacle operates in advantaged markets TENNESSEE • Tennessee ranks No. 5 in state business climate rankings Site Selection • Tennessee continued to add jobs at more than twice the U.S. rate last year U.S. Department of Labor • Tennessee’s Spring Hill General Motors’ expansion named the Silver recip
Slide 49: Pinnacle operates in advantaged markets: Memphis, Chattanooga
Pinnacle 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 ranks No
Slide 50: Job growth is occurring in all four markets
PNFP operates in advantaged markets Job growth is occurring in all four markets Nashville MSA Knoxville MSA Nonfarm Payrolls‐ SA (thru November 2016) Nonfarm Payrolls‐ SA (thru November 2016) 410,000 1,000,000 400,000 950,000 390,000 900,000 380,000 850,000 370,000 800,000 360,000 750,000 350,000 70
Slide 51: 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 November 2016) 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 % Chang
Slide 52: 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 % Change % Change % Change % Change 4Q16 4Q16 4Q16 4Q16 from PY from PY from PY from PY Industrial / Warehouse 4.0% (22.4%) 3.4% (46.7%) 6.3% (
Slide 53: Fourth Quarter 2016 Investor Call
Fourth Quarter 2016 Investor Call M. Terry Turner, President and CEO Harold R. Carpenter, EVP and CFO January 18, 2017
Pinnacle Financial Partners — Q4 2016 Earnings Presentation on 6ix