Pinnacle Financial Partners, Inc. · NYSE:PNFP
Pinnacle Financial Partners — Q3 2022 Earnings Presentation
61 slides from Pinnacle Financial Partners's earnings presentation, Oct 19, 2022
Slide 1: Investor Call Third Quarter 2022
Investor Call THIRD QUARTER 2022 October 19, 2022 Time: 8:30 AM CT Webcast: www.pnfp.com (investor relations) M. TERRY TURNER, PRESIDENT AND CEO HAROLD R. CARPENTER, EVP AND CFO
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 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: 3Q22 Financial Dashboard
3Q22 Financial Dashboard Key success measures including earnings per share growth, revenue growth, tangible book value accretion, core loan growth, net interest income growth, and asset quality all continue to be strong. 4
Slide 5: Shareholder Value Dashboard: GAAP Measures
Shareholder Value Dashboard 3Q22 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) NPA/ Loans & ORE Classified Asset Ratio NCOs PNFP’s Median Quarterly Performance of 11.
Slide 6: Shareholder Value Dashboard: Non-GAAP Measures
Shareholder Value Dashboard 3Q22 Summary Results of Key Non-GAAP Measures Adjusted Pre-Tax Pre-Provision Total Revenues* FD EPS* CAGR 14.2% CAGR 13.7% Net Income* CAGR 11.7% 3Q22 AGR 21.0% 3Q22 AGR 34.8% 3Q22 AGR 10.8% Total Core Deposits CAGR 11.8% Total Loans Tangible Book Value per Share** CAGR 1
Slide 7: Client Acquisition Strategies Are Yielding Results
Client Acquisition Strategies Are Yielding Results Loan growth is a result of successful execution of several growth strategies Net Loan Growth – YTD 2022 – Strategic Decisions: • Asset Generators - $224 million • BHG, JBB and Advocate Capital • Strategic Expansion - $1.39 billion • ATL, DC, B’ham,
Slide 8: Balance Sheet Momentum Should Persist
Balance Sheet Momentum Should Persist We are able to capitalize on disruption in our markets to attract associates and clients As of 9/30/2022 Market Months Headcount Revenue Loan Loan Deposits since Launch Producers Commitments Outstandings (in millions) (in millions) (in millions) Georgia 34 46 27
Slide 9: Ability to Take Deposit Share Bodes Well for Funding Growth
Ability to Take Deposit Share Bodes Well for Funding Growth Assuming M2 contracts, the only mechanism for growth is market share take away Deposit Market Share State Overall State Pinnacle Y-Y Y-Y Growth % Growth % Tennessee 4.2% 13.9% North Carolina 9.4% 12.9% South Carolina 8.7% 11.1% Virginia 10.
Slide 10: Culture and Talent Attraction Create Raving Fans
Culture and Talent Attraction Create Raving Fans Raving fans fuel meaningful growth in share Small Business Net Promoter Score ($1-10MM in sales) Net Promoter Large Regional A Q2 2022 44% 33% 24% 20 National A Q2 2022 44% 32% 24% 20 National B Q2 2022 32% 32% 36% -4 Large Regional B Q2 2022 72% 20%
Slide 11: Culture and Talent Attraction Create Raving Fans
Culture and Talent Attraction Create Raving Fans Raving fans fuel meaningful growth in share Small Business Momentum ($1-10MM in Sales) Net Q2 2022 Large Regional A -18% 24% 6% Q2 2022 National A -19% 27% 8% -7% Q2 2022 National B -22% 15% Q2 2022 Large Regional B -16% 28% 12% Large Regional C -16%
Slide 12: 3Q22 Financial Information
3Q22 Financial Information 3Q22 financial results reflect PNFP’s continued success in seizing the opportunity to gather valuable talent and clients from vulnerable competitors. In spite of the current rising rate environment, loan and client deposit growth were substantial in the third quarter, as w
Slide 13: Average Loan Growth 25.6% in 3Q22
PNFP Linked-Quarter Annualized Average Loan Growth was 25.6% in 3Q22 Linked-quarter annualized average loan growth ex-PPP was 26.6%* $28,000 Average Loan Growth and Loan Yields 5.40% EOP Loan Growth^ $26,000 5.20% $27,021 30.0% $24,000 $25,397 5.00% $23,849 $22,000 $23,226 $23,180 $22,986 25.0% $22,
Slide 14: Deposit Growth Rebounded in Third Quarter
Deposit Growth Rebounded in Third Quarter Seasonal tailwinds and new hire momentum drove 9.8% linked-quarter annualized core deposit growth Average Deposit Growth 75% $34,000 1.50% Individual Rate Hike Beta Trends for Total Deposits Average Deposits (millions) $33,108 $30,000 $31,539 $31,484 1.25% $
Slide 15: Excess Liquidity Remains Available to Fund Loan Growth
Excess Liquidity Remains Available to Fund Loan Growth Asset mix normalization was a NIM tailwind in 3Q Reported NIM vs. Adjusted NIM Quarterly Avg. FFS, IB Cash & Repos $5,000 2.50% 3.70% 3.56% $4,500 2.25% Average Balances ($ in millions) 3.60% Average Quarterly Yield 3.47% $4,000 2.00% 3.50% 3.40
Slide 16: PNFP's Asset Quality Has Continued to Hold Up
PNFP’s Asset Quality Has Continued to Hold Up Asset quality metrics remain at historically low levels Net Charge-offs NPA/ Loans & ORE 3Q22 Asset Quality Highlights 0.23% • Client selection remains our most valuable 0.55% 0.53% credit attribute 0.16% 0.16% 0.40% • ACL to total loans increased to 1.0
Slide 17: PNFP Fees Decline After Substantial Fee Results Last Quarter
PNFP Fees Decline After Substantial Fee Results Last Quarter PNFP continues focus on gathering more share of wallet from client base Linked-Quarter Year-over-Year Annualized • Service charges impacted by change in overdraft 3Q22 2Q22 3Q21 Growth % Growth % / NSF fee assessment policies. Service char
Slide 18: Investing in New Markets / Talent Drive Expense Growth
Investing in New Markets / Talent Drive Expense Growth Incentive expenses fluctuations positively correlate with earnings Linked-Quarter Year-over-Year 3Q22 2Q22 3Q21 Annualized Growth % Growth % • Salary and benefit costs increase from the same Salaries and employee benefits: Salaries $74,776 $70,4
Slide 19: Preservation and Growth in Tangible Book Value Remains a Critical Focus
Preservation and Growth in Tangible Book Value Remains a Critical Focus Third quarter reflects growth in TBV/Share year-over-year • Dividends – • Dividends per common share of $0.22 in 3Q22. Tangible Book Value per • Share Buy Back Program – Common Share** $40.98 $42.44 • Board authorized a $125.0 m
Slide 20: 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 has increased the mix toward balance sheet spread
Slide 21: BHG Loan Originations and Placements
BHG remains on pace for another record year of originations in 2022 BHG continues to originate loans at record levels while maintaining strong yields $1,400 BHG Business Model Drives Outperformance Loan Originations and Placements $1,200 • 3Q22 was the 9th consecutive record origination quarter in $
Slide 22: BHG Credit Quality Continues to Impress
BHG Credit BHG’s Quality On Balance Continues Sheet Reservesto Impress Remain Strong Sophisticated BHG increased theircredit scoring accrual for modelsinproduce loan substitutions impressive 2Q22 and again in 3Q22 results Accrual for loan subs and prepayments (Note) (Green Bars – Balance of loans in
Slide 23: BHG Credit Quality Remains a Differentiator
BHG’sCredit BHG StrongQuality Continues Credit Quality to Impress Remains a Differentiator Vintage analysiscredit Sophisticated demonstrates scoring continued strengthimpressive models produce in asset quality results Historical FICO Scores • Historical credit results indicate that 70% of losses occ
Slide 24: BHG Revises YOY Growth to >25% in 2022
BHG Revises YOY Growth to >25% in 2022 Alternative revenue channels remain in pipeline Other 3Q22 Highlights • Closed $412mm BHG 2022-C securitization in September. BHG Pre-Tax Earnings ($ millions) • Fitch/KBRA rated AAA on Class A (39%), all classes IG $400 • Borrowers - WAR 15.02%. Avg. Balance $
Slide 25: PNFP Remains Optimistic about 2022
PNFP Remains Optimistic about 2022 We remain confident in our model to produce outsized revenue and earnings growth 2022 Outlook – as of October 18, 2022 (Note) Y/Y End of Period Loan Growth • We anticipate low 20s percentage loan growth for 2022 end-of-year balances over 2021 year-end levels. Y/Y E
Slide 26: Q&A Third Quarter 2022
Q&A THIRD QUARTER 2022 einnacle FINANCIAL PARTNERS
Slide 27: Supplemental Information
Supplemental Information Slide # • Balance Sheet 28 • Income Statement 53 • Peer Group 60 27
Slide 28: Balance Sheet – Loan Portfolio Segments
Balance Sheet – Loan Portfolio Segments ($ in millions) Amts. % Amts. % Amts. % Amts. % 3Q22 3Q22 2Q22 2Q22 3Q21 3Q21 3Q20 3Q20 C&I $9,738.3 35.1% $9,244.7 35.1% $7,079.4 30.7% $6,144.9 27.4% C&I – Paycheck Protection Program 10.7 0.0% 51.1 0.2% 708.7 3.1% 2,251.0 10.0% CRE – Owner Occ. 3,426.3 12.4
Slide 29: Balance Sheet – Loan Portfolio – Market Segmentation
Balance Sheet – Loan Portfolio – Market Segmentation ($ in millions) TOTAL PINNACLE C&I & O/O CRE CRE & CONSTRUCTION OTHER LOANS* Amts. Amts. Amts. Amts. Amts. Amts. Amts. Amts. 3Q22 3Q21 3Q22 3Q21 3Q22 3Q21 3Q22 3Q21 Nashville $7,998.3 $6,846.4 $3,551.9 $3,022.4 $2,829.2 $2,510.2 $1,617.2 $1,313.8
Slide 30: Balance Sheet – Loan Portfolio – CRE Segmentation
Balance Sheet – Loan Portfolio – CRE Segmentation ($ in millions) Total NOO and Multifamily Total Construction Total NOO and Construction Amts. Amts. Amts. Amts. Amts. Amts. Amts. Amts. Amts. 3Q22 2Q22 3Q21 3Q22 2Q22 3Q21 3Q22 2Q22 3Q21 Multifamily $1,071.3 $996.4 $609.2 $848.4 $819.4 $761.2 $1,919.
Slide 31: 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 Sep. 30, At Jun. 30, At Sep. 30, As a % of Origination YOY Change 3Q21 2Q22 3Q22 2021 2022 2022 Total Portfolio Mix 3Q22 LIBOR/SOFR 2.78% 3.61% 4
Slide 32: 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 • $10.7 million in PPP balances remain on balance sheet at Sept. ($000’s) 2020 PPP 2021 PPP Totals Total PPP fundings $ 2,483,177 $ 933,872 $ 3,417,049 30, 2022 • Unamortized fees o
Slide 33: Balance Sheet – Loan Portfolio Lines of Credit
Balance Sheet – Loan Portfolio Lines of Credit ($'s in millions) Linked Qtr. 3/31/2021 6/30/2021 9/30/2021 12/31/2021 3/31/2022 6/30/2022 9/30/2022 Change CRE – Investment & Construction Net Active Balance $4,051.74 $3,921.54 $4,040.73 $3,727.20 $4,096.40 $4,389.62 $4,743.41 $353.79 Net Available Cr
Slide 34: Current Expected Credit Losses
Current Expected Credit Losses Total Allowance for Credit Losses for loans = $288.1 mm or 1.04% of loans at September 30, 2022 Allowance for Off-Balance % of Loans Total Forecasted economic metrics(1) Credit Losses Sheet Base Case Outlook at: 4Q22 1Q23 2Q23 3Q23 At September 30, 2021 $268,635 1.17%
Slide 35: Current Expected Credit Losses
Current Expected Credit Losses September 30, 2021 December 31, 2021 March 31, 2022 June 30, 2022 September 30, 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 $101,146 1.43%*
Slide 36: Asset Quality
Asset Quality AS A % OF AS A % OF AS A % OF ($ in millions) September 30, 2022 June 30, 2022 September 30, 2021 TOTAL LOANS TOTAL LOANS TOTAL LOANS NPLs and > 90 days Const. and land development $103 0.00% $403 0.00% $1,645 0.01% Consumer RE 14,690 0.05% 9,754 0.04% 19,357 0.08% CRE – Owner Occupied
Slide 37: Balance Sheet – Loan Portfolio
Balance Sheet – Loan Portfolio Net Loan Charge Offs by Loan Type 1.00% 0.90% 0.80% 0.70% 0.60% 0.50% 0.40% 0.30% 0.20% 0.10% 0.00% -0.10% CRE Construction C&I Consumer RE Consumer and Total net charge other off rates 2019 2020 2021 2022 37
Slide 38: Balance Sheet – Loan Portfolio – 100/300 Test
Balance Sheet – Loan Portfolio – 100/300 Test ($ in thousands) Description 3Q22 2Q22 1Q22 4Q21 3Q21 2Q21 Loans secured by real estate: Construction, land development, and other loans: 1-4 family residential construction loans $792,046 $754,325 $701,029 $625,862 $635,470 $556,052 Other construction l
Slide 39: Balance Sheet – Deposit Portfolio – Market Segmentation
Balance Sheet – Deposit Portfolio – Market Segmentation ($ in millions) TOTAL DEPOSITS CORE DEPOSITS NONCORE DEPOSITS TOTAL PINNACLE TRANSACTION AND MMDA CDs PUBLIC FUNDS and OTHER DEPOSITS 3Q22 3Q21 3Q22 3Q21 3Q22 3Q21 3Q22 3Q21 Nashville $ 13,372.2 $ 12,207.1 $ 12,685.9 $ 11,649.4 $ 419.7 $ 376.2
Slide 40: Balance Sheet – Bond Portfolio Statistics
Balance Sheet – Bond Portfolio Statistics Investment Securities Segmentation Portfolio: September 30, 2022 Total Investments $6.5 billion Net Unrealized Gain (Loss) ($263.9) million 16.3% 1.8% Quarter Duration Avg. Yield- TE 3Q22 4.9% 2.7% 2Q22 4.6% 2.3% 48.4% 1Q22 4.4% 2.1% 25.9% 4Q21 4.1% 2.1% 3Q2
Slide 41: 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 77% 76% 76% 2.66 72% 70% % of Total Assets 2.50 25.0 Bond Yields 2.00 20.0 1.50 15.8 15.0 1.00 10.0 30% 28% 24% 24% 23% 0.50 5.0 0.00 - 2017Q4 2017Q1 2017Q2 2017Q3 2018Q1 2018Q2 2018Q3 201
Slide 42: Interest Rate Sensitivity
Interest Rate Sensitivity ▪ The IRR sensitivity analysis assumes deposit betas based on the prior tightening cycle, which equates to approximately 55% for interest-bearing deposits and 40% for total deposits. Given current industry liquidity levels, we are optimistic we can outperform historical lev
Slide 43: NIM Adjusted for PPP and Liquidity Impact – 3Q22
NIM Adjusted for PPP and Liquidity Impact – 3Q22 Estimate PPP and Liquidity Build negatively impacted 3Q22 NIM by 0.09% Adjusted Avg Adjusted ProForma Adj. Yield/ Actual Avg Balances ProForma Balances after PF ProForma Interest after Yield/ Rate Rates after 3Q22 Adjustments Entries Interest Adjustme
Slide 44: NIM Adjusted for PPP and Liquidity Impact – 2Q22
NIM Adjusted for PPP and Liquidity Impact – 2Q22 Estimate PPP and Liquidity Build negatively impacted 2Q22 NIM by 0.12% Adjusted Avg Adjusted ProForma Adj. Yield/ Actual Avg Balances ProForma Balances after PF ProForma Interest after Yield/ Rate Rates after 2Q22 Adjustments Entries Interest Adjustme
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 – Revenue Per Share
Income Statement – Revenue Per Share LTM Revenue Per Share Growth* vs. Peers $20.00 $19.51 20.0% 19.0% 17.5% 18.0% $19.00 16.2% $18.62 13.8% $17.85 16.0% $18.00 $17.50 14.5% 14.3% $17.07 13.1% 13.0% 13.0% 12.8% 14.0% Y/Y Revenue per Share Growth $17.00 11.3% 11.9% 11.9% 11.6% $16.51 11.3% 11.6% 12.0
Slide 55: Income Statement – PPNR
Income Statement – PPNR ($'s in thousands) 2018 2019 2020 2021 YTD 2Q22 PPNR Trends Adjusted PPNR Net interest income $ 736,342 $ 766,142 $821,788 $932,401 $809,833 $800 Noninterest income 200,850 263,826 317,840 395,734 333,803 $700 Noninterest expense (452,867) (505,148) (564,455) (660,104) (577,9
Slide 56: BHG Financials
BHG Financials Consistency through turbulent markets / Strong revenue and record equity at 3Q • Beat earnings estimate posting second highest income quarter • Maintains strong cash position and ample liquidity through numerous funding facilities At Sep 30, At Jun 30, At Sep 30, ($'s in thousands) ($
Slide 57: Income Statement: Reconciliation of Non-GAAP Financial Measures
Income Statement Reconciliation of Non-GAAP Financial Measures 57
Slide 58: Income Statement: Reconciliation of Non-GAAP Financial Measures
Income Statement Reconciliation of Non-GAAP Financial Measures 58
Slide 59: Income Statement: Reconciliation of Non-GAAP Financial Measures
Income Statement Reconciliation of Non-GAAP Financial Measures 59
Slide 60: 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 61: Investor Call Third Quarter 2022
Investor Call THIRD QUARTER 2022 M. TERRY TURNER, PRESIDENT AND CEO HAROLD R. CARPENTER, EVP AND CFO
Pinnacle Financial Partners — Q3 2022 Earnings Presentation on 6ix