Pinnacle Financial Partners, Inc. · NYSE:PNFP
Pinnacle Financial Partners — Q1 2013 Earnings Presentation
60 slides from Pinnacle Financial Partners's earnings presentation, Apr 16, 2013
Slide 1: First Quarter 2013 Investor Call
First Quarter 2013 Investor Call Terry Turner, President and CEO Harold Carpenter, EVP and CFO April 16, 2013
Slide 2: Safe Harbor Statements
Safe Harbor Statements Forward‐looking statements Certain of the statements in this presentation may constitute forward‐looking 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.
Slide 3: Delivering Results
Delivering Results PNFP has executed its recurring priorities • Reduce the risk in the loan portfolio • Build the core earnings capacity 3
Slide 4: Delivering Results: Asset quality continued to improve
Delivering Results Asset quality continued to improve in 1Q13 Linked Li k d Qt Qtr Year over Y Consecutive C ti Change Year Change Qtrs. of Progress Credit losses (NCO (NCO’ss + ORE expense) (17 8%) (17.8%) (65 1%) (65.1%) 11 NPLs (4.3%) (49.0%) 12 NPAs (6.7%) (49.7%) 11 Classified loans (8.3%) (26.
Slide 5: Delivering Results: Core earnings capacity continued to expand
Delivering Results Core earnings capacity continued to expand in 1Q13 Linked Qtr Quarterly Year Change g over Year Change Total loans 1.6% 13.0% Avg. noninterest‐bearing deposits (2.6%) 35.8% Net interest income 1.2% 8.2% Net interest margin 2.6% 4.3% Cost of funds (8.7%) (33.3%) Noninterest income
Slide 6: Delivering Results
Millions $ Million ns $ $0 $500 $1 500 $1,500 $1,000 $2,000 $2,500 $3,000 $3,500 $4,000 $0 $2,000 $4,000 $6,000 $8,000 $10,000 $12,000 $14,000 Dec‐00 Dec‐00 Mar‐01 Mar‐01 Jun‐01 Ju un‐01 Sep‐01 Seep‐01 Dec‐01 Dec‐01 Mar‐02 Mar‐02 Jun‐02 Ju un‐02 Sep‐02 Seep‐02 Dec‐02 Dec‐02 Mar‐03 Mar‐03 Jun‐03 Ju u
Slide 7: Loan volumes grew with modest yield compression
First Quarter 2013 Highlights Loan volumes grew meaningfully with modest yield compression 6.00% $3,700 $3,682 $3,580 5.60% $3,600 $3,489 $3,500 5.20% Averaage Loans Loan Yields 4.88% 4.87% $3,403 ((millions) $3,400 4.78% 4.74% 4.74% 4.65% 4.64% 4.80% 4.62% 4.58% $3,300 $3,212 $3,207 4.40% $3,191 $3
Slide 8: Loan originations outpaced substantial pay offs
First Quarter 2013 Highlights Loan originations outpaced substantial pay offs $300,000 $250,000 Loaan Volumes $200,000 $ , ($ thousands) $150,000 $100 000 $100,000 $50,000 $0 1Q12 2Q12 3Q12 4Q12 1Q13 New loans Pay offs Source: New loans consider only those balances at quarter end with new tax identi
Slide 9: Net interest income and margin continued to expand
First Quarter 2013 Highlights Net interest income and margin continued to expand Key Revenue Drivers: • Higher loan volumes N t Interest Net I t t Margin M i • Reduced funding costs with improving 4.00% deposit mix 3.90% 3.90% • FHLB advance restructuring 3.78% 3.80% 3.80% 3.76% 3.74% (in millions)
Slide 10: Reduction in cost of deposits contributed to margin expansion
First Quarter 2013 Highlights Reduction in cost of deposits contributed to margin expansion $3,850 1.25% $3,814 $3,750 $3,746 1.10% $3,650 1.01% posits (milliions) %) $3,550 osit costs (% 0.95% $3,534 $3,450 $3,459 0.80% $3,350 $3,397 $3,386 $3,250 Depo 0 65% 0.65% Avgg. Core Dep $3,236 $3,150 $3,14
Slide 11: Core fees progressed to highest level in firm history
First Quarter 2013 Highlights Core fees progressed to highest level in firm history $11,500 Total Fees (excl. securites gains and losses) Year‐over‐year Increases $11,000 $11 120 $11,120 • Deposit & Interchange ‐ 13.2% $10,500 ( thousands) $10,480 • Wealth Management ‐ 23.1% $10,000 $9,835 $9,811 •
Slide 12: Reduction of NPAs and increased reserve coverage continued
First Quarter 2013 Highlights Reduction of NPA’s and increased reserve coverage continued $70 0 $70.0 $140 0 $140.0 $90 367% $132.4 317.9% 333% Total Nonperfforming loans (in millions) $80 Dispositions (in millions) $60.0 $120.0 300% $70 $50.0 $100.0 $ 00.0 267% owance to NPL’s $60 233% PA Balances
Slide 13: Credit costs continued to decline
First Quarter 2013 Highlights Credit costs continued to decline in concert with NPA reductions $16 $16.0 0 $14.0 $12 0 $12.0 $4 3 $4.3 Credit Losses (in millions) $3.8 $10.0 $5.1 $ $4.2 $8 0 $8.0 $6.0 $4.7 $9.7 $4 0 $4.0 $8.6 $3 1 $3.1 $5.7 $6.3 $2.4 $1.4 $0.7 $2.0 $3.6 $2.4 $1.9 $2.2 $2.2 $‐ 1Q11 2
Slide 14: Operating leverage continued to expand
First Quarter 2013 Highlights Operating leverage continued to expand 1Q13 4Q12 3Q12 2Q12 1Q12 Salaries and benefits $19,572 $19,556 $19,470 $19,237 $19,793 Equipment and occupancy 5,113 5,202 5,156 5,053 4,374 Other real estate owned 721 1,365 2,399 3,104 4,676 Marketingg and Bus. Dev. 791 1,276 835
Slide 15: Adjusted PTPP expanded 30.9% over prior year
First Quarter 2013 Highlights Adjusted PTPP expanded 30.9% in 1Q13 over the same period prior year (000’s) 1Q13 4Q12 3Q12 2Q12 1Q12 Net interest income $42,758 $42,243 $40,932 $40,185 $39,504 Total noninterest income 11,902 13,108 10,430 9,910 9,949 Total revenue 54,660 55,351 51,362 50,095 49,453 T
Slide 16: Pinnacle is progressing toward long-term profitability targets
Compelling Business Case Pinnacle is progressing toward its long‐term profitability targets Asset growth is the key Ratio PNFP PNFP PNFP PNFP PNFP PNFP 1Q12 2Q12 3Q12 4Q12 1Q13 Long‐term Targets NIM 3.74% 3.76% 3.78% 3.80% 3.90% 3.70%‐3.90% Net Charge‐offs 0.44% 0.28% 0.22% 0.24% 0.24% 0.20%‐0.35% N
Slide 17: Pinnacle continued to leverage existing infrastructure
Compelling Business Case Pinnacle continued to leverage existing infrastructure 330,000 $7,200,000 310,000 $7,050,000 290,000 Revenue per FTE Associate $6,900,000 nue Per FTE Associate per FTE Associate 270,000 $6,750,000 250,000 $6,600,000 230,000 Assets p Reven Assets Per FTE Associate $6,450,000
Slide 18: Existing lenders are leveraging capacity to grow loans
Compelling Business Case Existing lenders are leveraging capacity to take share and grow loans 2012 ‐ 2014 Anticipated Net Loan Growth 11.5% CAGR (1/1/2012‐3/31/2013) 13 0% AGR 13.0% (Last 4 Quarters) Previously reported growth $481.0 million net Thru 1Q2013 growth thru 1Q2013 Current quarter growth
Slide 19: Best in Class sales and client satisfaction
Compelling Business Case “Best in Class” sales and client satisfaction support growth outlook 1st Place Sales Performance 1st Place Client Satisfaction Performance Noncustomer response Brand Image • Would add provider • Values long‐term relationships • Broad range of products / services Solicitation
Slide 20: Market share and client loyalty trends
Compelling Business Case Market share and client loyalty trends support growth outlook Nashville Knoxville 20% 20% 18% 18% Lead Relationshipss as a % Lead Relationshipss as a % Regional B 16% 16% Pinnacle Regional A of total Markket of total Markket 14% 14% 12% 12% Regional A Regional C 10% 10% Nati
Slide 21: Margin outlook for 2013
Compelling Business Case Margin outlook for 2013 is consistent with the targeted range Opportunities: 1. Loan growth 2. Continued reduction in cost of funds 3 FHLB restructuring 3. t t i accomplished li h d over last l t two t quarters t Threats: 4. Loan yields will continue to re‐price below curren
Slide 22: Management's Focus for 2Q 2013
Compelling Business Case Management’s Focus for 2Q 2013 • Continued progress toward achievement of long‐ term financial metrics • Continued loan growth • Contain expenses 22
Slide 23: Q&A – First Quarter 2013 Investor Call
Q&A – First Quarter 2013 Investor Call Terry Turner, President and CEO Harold Carpenter, EVP and CFO April 16, 2013 23
Slide 24: Supplemental Information
Supplemental Information First Quarter 2013 Investor Call Terry Turner, President and CEO Harold Carpenter, EVP and CFO April 16, 2013 24
Slide 25: Supplemental Information
Supplemental Information Chart • Balance Sheet 26 • Asset Quality 36 • Income Statement 44 • Economic Conditions & Other 49 • Pinnacle Financial Partners profile 55 25
Slide 26: Balance Sheet
Supplemental Information Balance Sheet 26
Slide 27: Loan portfolio components are within targeted ranges
Balance Sheet Loan portfolio components are within targeted ranges Amts. %’s Amts. %’s Amts. %’s Amts. %’s 1Q13 1Q13 4Q12 4Q12 1Q12 1Q12 1Q11 1Q11 C&D and Land $306.4 8.1% $313.6 8.5% $281.6 8.4% $300.7 9.3% Consumer RE 675.6 17.9% 679.9 18.3% 688.8 20.6% 698.7 21.7% CRE – Owner Occ. 618.3 16.4% 594
Slide 28: Exposure to residential land development is limited
Balance Sheet Exposure to residential land development is limited Amts. %’s(*) Amts. %’s(*) Amts. %’s(*) Amts. %’s(*) 1Q13 1Q13 4Q12 4Q12 1Q12 1Q12 1Q11 1Q11 Residential – Spec $ 18 18.6 6 0 5% 0.5% $ 17 17.5 5 0 5% 0.5% $ 13 13.5 5 0 4% 0.4% $ 17 17.0 0 0 5% 0.5% Residential – Custom 16.5 0.4% 16.6
Slide 29: The C&I loan portfolio is highly diversified
Balance Sheet The C&I loan portfolio is highly diversified Accommodation and Food Services, 1.3% Administrative & Support & Utilities, Waste Management & 0.1% Remediation Services, 2.0% Transportation & Wholesale Warehousing, 2.6% Trade, 3.5% Arts, Entertainment & Recreation, 0.6% Construction, 2.3%
Slide 30: Unfunded commitments are growing
Balance Sheet Unfunded commitments are growing, represent potential for funding growth $2 500 $2,500 59.37% 60 00% 60.00% 56.82% $2,000 57.26% 58.00% $941 57.30% 865 $815 $8 $ mmitmentss $787 $808 $779 $747 $685 $715 nded % $1,500 56.42% 56.00% (miillions) 56.15% 55.58% 55.53% Total Com Fun $1,000 5
Slide 31: Bond volumes now stable as yields rise
Balance Sheet Bond volumes now stable as yields rise due to slowing pre‐pay speeds 3.67% $1,050 3.70% 3.58% 3.54% $1,000 3.50% $1,010 3.31% 3.34% $973 3.26% 3.27% $950 3.19% 3.30% $ 3.16% $940 Average Securities $924 $900 3.10% elds (%) $876 $850 2.90% 0’s) (000 Bond Yie $819 $800 2.70% $750 2.50% $
Slide 32: Conservative portfolio positioned for rising rates
Balance Sheet Conservative portfolio is well positioned for eventual rising rates Asset‐ Corporates, backed 1.4% Securities, 2.6% QTD Bond Activity (millions) QTD AVG rate Purchases $ 60.1 1.65% Municipals, M nicipals Sales ‐ ‐ 24.9% Mat/Calls ($ 8.5) 1.89% MBS pass Pre‐pays ($ 30.0) 2.95% thru, 45.
Slide 33: The municipal portfolio contains minimal risk
Balance Sheet The municipal portfolio contains minimal risk Municipal Bond Portfolio Statistics Muni Allocation % 1Q13 1Q12 Weighted Average Life 4.2 years 5.9 years % State Agency Holdings 5.4% 4.80% 19% Tax equivalent yield 4.76% 4.90% 81% FMV as % of Cost 105.90% 107.10% L ti Location # off IIssu
Slide 34: Limited dependence on non-relationship funding
Balance Sheet PNFP has limited dependence on non‐relationship funding 3/31/2013 Percent 3/31/2012 Percent Core Funding: C F di Transaction accounts 1,766,127 40.71% 1,451,664 35.87% Money Market accounts 1,564,517 36.06% 1,497,843 37.01% Time deposits less than $250,000 436,789 10.07% 464,994 11.49%
Slide 35: Elevated tangible common is available for deployment
Balance Sheet Elevated tangible common is available for deployment Tangible Common Ratio Return on Tangible Common Equity 8.70% 9.20% 8.97% 9.18% 8.80% 12.32% 8.40% 10.76% 10.85% 7.58% 6.13% 4.93% 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 35
Slide 36: Asset Quality
Supplemental Information Asset Quality 36
Slide 37: Past due loans remain very low
Asset Quality Past due loans remain very low March 31,, As a % December 31,, As a % 2013 of total 2012 of total (000’s) loans loans Past Due Loans (*) Managed by special assets: Nonaccrual loans $15,851 0.42% $13,455 0.36% Accruingg loans 3,396 , 0.09% 7,944 , 0.21% Managed by relationship managers:
Slide 38: Potential problem loans continued to decline
Asset Quality Percentage of potential problem loans continued to decline 10.0% 9.30% oblem loanss/Total loanss 9 0% 9.0% 8.63% 8 63% 8.64% 8 64% 8.0% 7.24% 7.18% 7.65% 7.0% 5 78% 5.78% 6.0% 5.04% 5.0% 4.12% 4.09% 3.78% 4.0% 3.49% 3.13% Potential Pro 2.84%2.57% 3.0% 2.0% 1.0% P 0.0% Note: Classified
Slide 39: Classified assets decreased in 1Q13
Asset Quality Classified assets decreased in 1Q13 (in thousands) Balances Balances Balances March 31, 2013 Dec. 31, 2012 March 31, 2012 Classified loans and ORE: ‐ Substandard commercial loans $ 132,750 $ 144,684 $ 179,040 ‐ Doubtful commercial loans 4 33 587 ‐ Other impaired loans 2,091 2,083 3,185
Slide 40: NPLs continued to decline
Asset Quality NPLs continued to decline NPLs Expressed as a % of Total Loans within each Category PNFP NPLs PNFP NPLs PNFP NPLs PNFP NPLs PNFP NPLs and > 90 and > 90 and > 90 and > 90 and > 90 days days days days days 1Q13 4Q12 3Q12 2Q12 1Q12 Const. and land development 0.57% 1.44% 1.92% 2.09% 2.48%
Slide 41: ORE is 43.5% of NPAs
Asset Quality ORE is 43.5% of NPAs with resolution in bank’s control Balances Fair value as a % Average March 31, 2013 of book value* Appraisal Age in (dollars in thousands) Months ORE categories: Developed lots $ 1,690 207.8% 8.15 Undeveloped land 12,222 125.4% 5.69 Other 2 890 2,890 135 3% 135.3%
Slide 42: Current OREO valuations below historical disposition results
Asset Quality Current OREO valuations are below historical disposition results ORE Dispositions (*) thru ORE Balance at March 31, 2013 March 31, 2013 Loan balances prior to charge offs 100 0% 100.0% 100 0% 100.0% Charge off’s prior to foreclosure 17.5% 26.2% Balance @ foreclosure 82.5% 73.8% Valuati
Slide 43: OREO disposition plans suggest limited unresolved issues
Asset Quality OREO disposition plans suggest limited unresolved issues (dollars in thousands) Balances Near‐term Active Other March 31, liquidation Projects Properties 2013 (1) (2) (3) ORE categories: Developed lots $ 1,690 $ 175 $ 1,515 $ ‐ Undeveloped land 12,222 543 9,543 2,136 Other 2 890 2,890
Slide 44: Income Statement
Supplemental Information Income Statement 44
Slide 45: Core fees progressed to highest level in firm history
Income Statement Core fees progressed to highest level in firm history 1Q13 4Q12 3Q12 2Q12 1Q12 Service charges $2,480 $2,623 $ 2,532 $ 2,439 $ 2,324 Investment services 1 793 1,793 2 051 2,051 1 677 1,677 1 611 1,611 1 646 1,646 Insurance commissions 1,393 1,045 987 1,141 1,288 Gain on mortgage loa
Slide 46: Mortgage originations continued to be elevated
Income Statement Mortgage originations continued to be elevated $2,500 $150,000 Gain on mortgages ssold, net $2,000 $120,000 Gross Loans Sold $1,500 $90,000 (000’s) (000’s) $1,000 $60,000 $500 $30,000 $‐ $‐ 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 Gross Loans Sold, net Gain on Mortgage Loans Sol
Slide 47: PNFP continues to improve operating leverage
Income Statement PNFP continues to improve operating leverage 1Q13 4Q12 3Q12 2Q12 1Q12 Net interest income $42 758 $42,758 $42 243 $42,243 $40 932 $40,932 $40 185 $40,185 $39 504 $39,504 Total non‐interest income $11,902 $13,108 $10,430 $9,909 $9,949 Less: Securities (gains) losses ‐ (1,988) 50 (99)
Slide 48: Progressing toward strategic expense/average asset target
Income Statement PNFP is progressing toward strategic expense/ average asset target 1Q13 4Q12 3Q12 2Q12 1Q12 Total non‐interest expense $32,440 $34,851 $33,578 $33,915 $35,820 Less: ORE expenses (721) (1,365) (2,399) (3,104) (4,676) Less: FHLB prepayment charges (877) (2,092) ‐ ‐ ‐ Non‐Interest expe
Slide 49: Economic Conditions & Other
Supplemental Information EEconomic i Conditions C di i & Other 49
Slide 50: Nashville's and Knoxville's job recovery outpaces the nation
Economic Conditions Nashville’s and Knoxville’s job recovery outpaces the nation • USA recovery of jobs lost since peak employment in 2008 has amounted to 68.0% • Nashville has replaced greater than 100% while Knoxville has replaced 90% Source: BERC – MTSU & Bureau of Labor Statistics 50
Slide 51: Unemployment rate outperforms the state and nation
Economic Conditions Nashville’s and Knoxville’s unemployment rate out performs the state and nation • Both Nashville and Knoxville continue to outperform the nation at 6.7% and 6.6%, respectively. • State of Tennessee unemployment continues i to approximate USA unemployment 51 Source: BERC – Middle
Slide 52: Nashville's Real Estate Market Continues to Improve
Economic Conditions Nashville’s Real Estate Market Continues to Improve 1Q2013 Q 1Q2012 Q % Change g Avg. Qtrly. Median Home $170,333 $161,967 5.2% Price Quarterly 4,314 3,959 9.0% Closings Quarter end 9 923 9,923 11 787 11,787 (15 8%) (15.8%) Inventory Months of 4.8 7.4 (35.1%) Inventory (*) Source
Slide 53: Nashville's commercial vacancy rates indicate a healthy market
Economic Conditions Nashville’s commercial vacancy rates indicate a healthy market Nashville CRE National CRE Vacancy Rates Vacancy Rates 1Q YE 2012(*) YE 2011 (*) YE 2010 YE 2009 YE 2008 1Q 2013(*) (*) (**) (**) 2013 (*) Industrial / 9.1% 9.1% 10.1% 10.2% 10.6% 9.6% 8.8% Warehouse Multifamily** 6.8
Slide 54: Nashville and Knoxville are healthy business markets
Economic Conditions Nashville and Knoxville are healthy business markets NASHVILLE Nashville achieved “it city” status in 2012, landing on several major national publications’ lists of hot spots. Nashville’s diverse economy, thriving cultural base and strong business community are major attractions
Slide 55: Pinnacle Financial Partners Profile
Supplemental Information Pi Pinnacle l Fi Financial i lPPartners P Profile fil 55
Slide 56: Proven experience in market share take-away
PNFP Profile PNFP has proven experience in market share take‐away Nashville‐Davidson‐Rutherford MSA Knoxville MSA Rank Holding Market Market Change Holding Market Market Change Company Share Share in Company Share Share in 6/30/12 6/30/00 Share 6/30/12 6/30/07 Share 4 Pinnacle Financial 8.4% 1.7% Br
Slide 57: PNFP operates in two great banking markets
PNFP Profile PNFP operates in two great banking markets Headquarters: Nashville, TN Offices: 29 in 8 Middle‐TN counties/3 in Knoxville Founded: 2000 Avg. daily trading vol.: 127,776 shares Total assets: $ 5.068 Billion (3/31/13) (3/31/13) % Institutional ownership: 66.2% Shareholders’ equity: $ 691.
Slide 58: 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 58 34 13 Robert A. McCabe,, Jr. Chairman of the Board 62 37 13 Hugh M. Queener Chief Administrative Officer 57 26 13 H
Slide 59: Associate engagement drives customer satisfaction
PNFP Profile Associate engagement drives customer satisfaction 5.00 100% on Scores nt Scores 4.00 90% Associate Engagemen Customerr Satisfactio 3.00 80% 2.00 70% 1 00 1.00 60% Customer Satisfaction Scores Associate engagement survey positive responses 59
Slide 60: First Quarter 2013 Investor Call
First Quarter 2013 Investor Call Terry Turner, President and CEO Harold Carpenter, EVP and CFO April 16, 2013
Pinnacle Financial Partners — Q1 2013 Earnings Presentation on 6ix