Pinnacle Financial Partners, Inc. · NYSE:PNFP
Pinnacle Financial Partners — Q3 2023 Earnings Presentation
55 slides from Pinnacle Financial Partners's earnings presentation, Oct 18, 2023
Slide 1: Investor Call Third Quarter 2023
Investor Call THIRD QUARTER 2023 October 18, 2023 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, total revenues, net income to common shareholders, earnings per diluted common share, revenue per diluted common share, PPNR, efficiency ratio, noninterest
Slide 4: Shareholder Value Dashboard: GAAP Measures
Shareholder Value Dashboard 3Q23 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) (in millions) NPA/ Loans & ORE Classified Asset Ratio NCOs PNFP’s Median Quarterly Performance of
Slide 5: Shareholder Value Dashboard: Non-GAAP Measures
Shareholder Value Dashboard 3Q23 Summary Results of Key Non-GAAP Measures Adjusted Pre-Tax Pre-Provision Total Revenues* FD EPS* CAGR 8.0% Net Income* CAGR 12.4% CAGR 10.7% Total Core Deposits Tangible Book Value per Share** Total Loans (millions) (millions) CAGR 16.4% CAGR 12.6% CAGR 11.9% Classifi
Slide 6: 3Q23 Financial Information
3Q23 Financial Information Pinnacle continues to demonstrate extraordinary momentum during current volatile economic conditions. Our consistent focus on relationship banking and serving clients with distinctive service and effective advice increases our resilience in times such as these. 6
Slide 7: Favorable Deposit Growth In Difficult Environment
Favorable Deposit Growth In Difficult Environment Strong focus on growing deposits results in 18.9% linked-quarter annualized average growth in Q3 Average Deposit Growth Quarterly Avg Deposit Rates and Cumulative Beta 2.92% 3.00% 3.50% 60.0% $40,000 53% Cost of Total Deposits - Average Rate 2.75% 48
Slide 8: Organic Growth Model Yields Consistent Loan Growth
Organic Growth Model Yields Consistent Loan Growth Linked quarter annualized average loan growth of 8.4% in 3Q23 Average Loan Growth and Yields 6.50% EOP Loan Growth 30.0% $31,530 $30,000 7.00% (excluding PPP loans) $30,882 $29,634 Average Loans (millions) 25.0% $28,402 26.0% $26,000 6.00% $27,021 2
Slide 9: Operating Environment Continues to Impact Firm Liquidity
Operating Environment Continues to Impact Firm Liquidity Net interest margin headwinds peaked early in 3Q23 followed by long awaited stability Net Interest Income & NIM Quarterly Avg. FFS, IB Cash & Repos $325 3.75% $5,000 5.50% $4,500 5.00% Net Interest Inncome ($ in mil.) Average Balances ($ in mi
Slide 10: PNFP's Asset Quality Has Continued to Hold Up
PNFP’s Asset Quality Has Continued to Hold Up Problem loan metrics such as NPAs and classified assets remain near historically low levels Net Charge Offs NPA/ Loans & ORE 3Q23 Highlights 0.23% 0.23% • Credit metrics experienced a move towards 0.53% normalization in 3Q23 but continue to reflect 0.16%
Slide 11: CRE Portfolio Continues to Perform
CRE Portfolio Continues to Perform Strength of CRE Portfolio Provides Confidence Should Conditions Weaken Construction Commitment Originations Fixed Rate CRE and Construction Maturities 3Q22 through 3Q23 ($ millions) 3Q23 to 3Q25 ($ millions) $1,400 $160 8.00% $140 $1,200 $120 6.00% $1,000 $100 $800
Slide 12: Third Quarter Core Fees Up Slightly From Prior Quarter
Third Quarter Core Fees Up Slightly From Prior Quarter* PNFP continues emphasis on gathering more share of wallet from client base Linked-Quarter Select Comments Annualized Year-over-Year • Insurance commissions decrease in 3Q23 due to carrier (dollars in thousands) 3Q23 2Q23 3Q22 Growth % Growth %
Slide 13: 3Q23 Expense results consistent with prior quarter outlook
3Q23 Expense results consistent with prior quarter outlook Incentive expense fluctuations correlate with earnings and other performance metrics Linked-Quarter Yr-over-Yr (dollars in thousands) 3Q23 2Q23 3Q22 Annualized Growth % Growth % Select Comments: Salaries and commissions $91,421 $88,403 $80,9
Slide 14: Preservation and Growth in Tangible Book Value
Preservation and Growth in Tangible Book Value Remains a Critical Focus Third quarter again reflects focus on growth in TBV/Common Share year-over-year • Dividends – Tangible Book Value per Common Share** • Dividends per common share of $0.22 in 3Q23. $48.78 • Tangible Book Value per Common Share Gr
Slide 15: 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 16: BHG Continues to Leverage & Grow its Bank Network
BHG Credit ContinuesQuality Continues to Leverage to Impress & Grow its Bank Network Sophisticated Pro-active credit management scoringchannels of placement models produce provides impressive flexibility results to BHG’s platform • Quarterly origination and placements continue to be Quarterly Origin
Slide 17: BHG Diverse, Growing Funding Channels
BHGHas BHG Credit Quality Diverse, Continues Growing FundingtoChannels Impress Sophisticated BHG credit$400M committed to another scoring models in private produce whole loan sales in impressive Q3 ($950M YTD)results Approx. 1,600 Banks in Network. 722 unique banks have acquired BHG loans over Loan
Slide 18: BHG Spreads Consistent with Pre-COVID Results
BHG Spreads BHG Credit Quality Continues Consistent to Impress with Pre-COVID Results Sophisticated Bank credit and balance sheet scoring spreads models approximate produce 8.1% and 9.2%,impressive respectively forresults 3Q23 Bank platform rates Borrower Coupon and Bank Buy Rates • Bank buy rates h
Slide 19: Increased Focus on Higher FICO Originations
Increased Focus on Higher FICO Originations Over 40% of BHG lending YTD has been to FICO scores 750+, their highest ever FICO Chart Mix Originations • BHG continues to refine and ($ mm) Cumulative Net Loss Curves (21 months) tighten its credit underwriting 2013 $260 • Losses in certain risk classes,
Slide 20: BHG Reserves Have Adequate Cushion Relative to Actual Losses
BHG Reserves Have Adequate Cushion Relative to Actual Losses Reserves continue to be above trailing losses for on and off balance sheet loans • Reserves for off-balance sheet exposure created to support loans Reserves vs. Actual Losses for Off B/S Loans (TTM) sold to bank network partners. BHG’s res
Slide 21: BHG Financial Overview
BHG Financial Overview BHG narrowing outlook for 2023 earnings against a challenging environment Anticipate 2023 • Ample liquidity to fund loan originations via a proprietary Origination Volume ($bn) fundings of $3.8B to unique online auction platform encompassing over 1,600 $6.0 $4.3 $4.0B financia
Slide 22: PNFP Remains Excited about Financial Outlook for 2023
PNFP Remains Excited about Financial Outlook for 2023 Outlook largely the same as prior quarter 2023 Outlook – as of October 17, 2023 (Note) 2022 Actual Results Y/Y EOP • We estimate low to mid-teens percentage EOP loan growth for 2023 over 2022 year-end balances. Y/Y growth of 24% Loan Growth Y/Y E
Slide 23: An Incredibly Valuable Deposit Franchise
An Incredibly Valuable Deposit Franchise The liquidity crisis leading up to the recent bank failures has caused investors to think differently about the value of a deposit franchise. Many are looking to the cost of deposit beta, average account size, consumer versus commercial deposit mix and rural
Slide 24: A Relentless Focus on Clients Has Resulted in Outsized Deposit Growth
A Relentless Focus on Clients Has Resulted in Outsized Deposit Growth It all begins with attracting talent with strong client loyalty, then providing a differentiated experience EXCITED ASSOCIATES ENGAGED CLIENTS ENRICHED SHAREHOLDERS Deposit Growth 4.00% JD Power Net Promoter Score 3.50% Revenue Pr
Slide 25: Outsized Deposit Growth: Nashville Market Share
A Relentless Focus on Clients Has Resulted in Outsized Deposit Growth Pinnacle’s differentiated model results in outsized growth by taking share FDIC Summary Deposit Market Share Nashville MSA June 30, 2000 June 30, 2022 June 30, 2023 Bank Deposit Market Bank Deposit Market Bank Deposit Market Share
Slide 26: Outsized Deposit Growth: Market Share Gains by Market
A Relentless Focus on Clients Has Resulted in Outsized Deposit Growth Pinnacle’s differentiated model produced market share gains in virtually all major markets last year FDIC Summary of Deposits PNFP Market Share Growth Markets as of June 30, 2023 Nashville Bowling Green Winston-Salem Memphis Atlan
Slide 27: Outsized Deposit Growth: New Markets vs Nashville Start Up
A Relentless Focus on Clients Has Resulted in Outsized Deposit Growth Pinnacle’s proven model is now producing extraordinary results in new markets compared to Nashville start up $1,400 $1,200 $1,000 Deposits (in millions) $800 $600 $400 $200 $- Nashville Atlanta Washington D.C. 27
Slide 28: Outsized Deposit Growth: Top 200 Deposit Clients
A Relentless Focus on Clients Results in Outsized Deposit Growth Sometimes, the best offense is a good defense Pinnacle’s large client balances proved extraordinarily sticky during the industry’s recent liquidity scare Top 200 Deposit Clients 3/10/2023 4/13/2023 Amount of Deposits (including recipro
Slide 29: Outsized Deposit Growth: Business Momentum
A Relentless Focus on Clients Has Resulted in Outsized Deposit Growth Current business momentum validates outsized growth going forward Pinnacle is the most likely bank in its footprint to “earn new business” Pinnacle is the least likely bank in its footprint to “lose business” Market Share Rank Exp
Slide 30: Outsized Deposit Growth: Total Shareholder Return and EPS vs Peers
A Relentless Focus on Clients Has Resulted in Outsized Deposit Growth Pinnacle’s compound earnings growth has relied on its proven ability to attract and retain deposits Total Shareholder Return (10 years) 200.0% 150.0% 100.0% 50.0% 0.0% -50.0% -100.0% PNFP CBSH WTFC OZK CFR SNV ZION HWC ASB SSB FUL
Slide 31: Q&A Third Quarter 2023
Q&A THIRD QUARTER 2023 einnacle FINANCIAL PARTNERS
Slide 32: Supplemental Information
Supplemental Information Slide # • Balance Sheet 33 • Income Statement 49 • Peer Group 54 32
Slide 33: Balance Sheet – Loan Portfolio Segments
Balance Sheet – Loan Portfolio Segments ($ in millions) Amts. % Amts. % Amts. % Amts. % 3Q23 3Q23 2Q23 2Q23 3Q22 3Q22 3Q21 3Q21 C&I $11,303.6 35.4% $10,979.2 35.3% $9,738.3 35.1% $7,079.4 30.7% C&I – Paycheck Protection Program 4.0 0.0% 4.6 0.0% 10.7 0.0% 708.7 3.1% CRE – Owner Occ. 3,944.6 12.3% 3,
Slide 34: Balance Sheet – Loan Portfolio – Market Segmentation
Balance Sheet – Loan Portfolio – Market Segmentation ($ in millions) TOTAL PINNACLE C&I & O/O CRE CRE & CONSTRUCTION OTHER LOANS* Amts. Amts. Amts. Amts. Amts. Amts. Amts. Amts. 3Q23 3Q22 3Q23 3Q22 3Q23 3Q22 3Q23 3Q22 Nashville $8,591.5 $7,998.3 $3,731.0 $3,551.9 $3,043.5 $2,829.2 $1,817.0 $1,617.2
Slide 35: Balance Sheet – Loan Portfolio
Balance Sheet – Loan Portfolio Net Loan Growth – 3Q23 YTD – Strategic Decisions: • Asset Generators – No growth; reduction of $54 million • BHG, JBB and Advocate Capital • Strategic Expansion - $1.49 billion • Atlanta, DC, Alabama, Kentucky, Franchise Finance, Equipment Finance • Recruiting Impact -
Slide 36: Balance Sheet – Loan Portfolio – CRE Segmentation
Balance Sheet – Loan Portfolio – CRE Segmentation ($ in millions) Total NOO and Multifamily Total Construction Total NOO and Construction Amts. Amts. Amts. Amts. Amts. Amts. Amts. Amts. Amts. 3Q23 2Q23 3Q22 3Q23 2Q23 3Q22 3Q23 2Q23 3Q22 Multifamily $1,490.6 $1,538.8 $1,071.3 $1,319.5 $1,106.3 $848.4
Slide 37: Balance Sheet – Loan Portfolio Lines of Credit
Balance Sheet – Loan Portfolio Lines of Credit ($'s in millions) Linked Qtr. 3/31/2022 6/30/2022 9/30/2022 12/31/2022 3/31/2023 6/30/2023 9/30/2023 Change CRE – Investment & Construction Net Active Balance $4,096.40 $4,389.62 $4,743.41 $5,225.32 $5,726.97 $6,060.77 $6,294.22 $233.44 Net Available Cr
Slide 38: Current Expected Credit Losses
Current Expected Credit Losses Total Allowance for Credit Losses for loans = $346.2 mm or 1.08% of loans at September 30, 2023 Allowance for Off-Balance % of Loans Total Credit Losses Sheet At September 30, 2022 $288,088 1.04% (1) $24,469 $312,557 Net Charge Offs ($11,729) 0.17% (2) ($11,729) 4Q Pro
Slide 39: Current Expected Credit Losses by Loan Type
Current Expected Credit Losses September 30, December 31, March 31, June 30, September 30, 2022 2022 2023 2023 2023 % of % of % of % of % of Allowance for Credit Losses Amount Loans Amount Loans Amount Loans Amount Loans Amount Loans Commercial and Industrial $140,285 1.44% $144,353 1.41% $153,629 1
Slide 40: Asset Quality
Asset Quality AS A % OF AS A % OF AS A % OF ($ in thousands) September 30, 2023 June 30, 2023 September 30, 2022 TOTAL LOANS TOTAL LOANS TOTAL LOANS NPLs and > 90 days Const. and land development - 0.00% $130 0.00% $103 0.00% Consumer RE 19,655 0.06% 18,764 0.06% 14,690 0.05% CRE – Owner Occupied 5,
Slide 41: Balance Sheet – Loan Portfolio: Net Charge Offs by Loan Type
Balance Sheet – Loan Portfolio 0.80% Net Loan Charge Offs by Loan Type 0.70% 0.60% 0.50% 0.40% 0.30% 0.20% 0.10% 0.00% -0.10% CRE Construction C&I Consumer RE Consumer and Total other Net Charge Off 2020 2021 2022 2023 Rates 41
Slide 42: Balance Sheet – Loan Portfolio – 100/300 Test
Balance Sheet – Loan Portfolio – 100/300 Test ($ in thousands) Description 3Q23 2Q23 1Q23 4Q22 3Q22 2Q22 Loans secured by real estate: Construction, land development, and other loans: 1-4 family residential construction loans $684,366 $676,742 $737,692 $772,653 $792,046 $754,325 Other construction l
Slide 43: CRE Recession Sensitive
CRE Recession Sensitive Key CRE Asset Classes Sectors Balance: $1.1Bn Balance: $528MM Professional Office 3.6% of Total Loans Senior Housing 1.7% of Total Loans Loans > $20MM: High growth markets For cash-out bridge Smallest portfolio among 22-bank peer group 14 - 51.5% Average LTV - 73.4% Average L
Slide 44: Balance Sheet – Deposit Portfolio – Market Segmentation
Balance Sheet – Deposit Portfolio – Market Segmentation ($ in millions) TOTAL DEPOSITS CORE DEPOSITS NONCORE DEPOSITS TOTAL PINNACLE TRANSACTION AND MMDA CDs PUBLIC FUNDS and OTHER DEPOSITS 3Q23 3Q22 3Q23 3Q22 3Q23 3Q22 3Q23 3Q22 Nashville $14,048.0 $13,372.2 $12,639.4 $12,685.9 $762.6 $419.7 $646.0
Slide 45: Balance Sheet - Deposit Portfolio
Balance Sheet - Deposit Portfolio Ratio of EOP Uninsured and/or Uncollateralized Deposits Estimated Liquidity Available for Uninsured Deposits Balances at to Total Deposits ($’s in millions) Sep. 30, 2023 50.00% 42.9% Total Deposits $38,296 38.9% 40.00% 35.6% Less: Insured and/or Collateralized Depo
Slide 46: Balance Sheet – Bond Portfolio Statistics
Balance Sheet – Bond Portfolio Statistics Investment Securities Segmentation Portfolio: Sept. 30, 2023 9/30 /23 Percentage 6/30 /23 Percentage Security Type 9/30/23 Balance 6/30/23 Balance Total Investments $6.9 billion of Portfolio of Portfolio Treasuries 902,335 12.1% 328,059 4.7% Net Unrealized G
Slide 47: Balance Sheet – Bond Portfolio
Balance Sheet – Bond Portfolio 4.00 30.0 Effective Bond Portfolio Composition 3.81 End of Period 3.50 71% 72% 3.00 25.0 70% 66% 65% 2.56 % of Total Assets 2.50 Bond Yields 2.00 20.0 18.8 1.50 34% 35% 1.00 15.0 30% 29% 28% 14.5 0.50 0.00 10.0 2018Q4 2020Q1 2018Q1 2018Q2 2018Q3 2019Q1 2019Q2 2019Q3 20
Slide 48: Interest Rate Sensitivity
Interest Rate Sensitivity Rate Ramp Scenarios Rate Shock Scenarios 5.0% 10.0% 8.0% 3.0% 6.0% 3.7% Net Interest Income % D 4.0% Net Interest Income % D 1.6% 1.5% 1.6% 1.5% 2.9% 3.0% 3.0% 1.2% 2.8% 2.5% 1.0% 1.9% 2.2% 2.1% 1.0% 0.7% 2.0% 0.4% 0.3% 0.6% 0.2% 0.0% -1.0% -0.7% -0.6% -0.6% -2.0% -1.0% -0.
Slide 49: Income Statement – Revenue Per Share
Income Statement – Revenue Per Share LTM Revenue Per Share Growth* vs. Peers $22.00 20.0% 19.0% $21.39 $21.48 $21.09 $21.00 17.5% 18.0% 16.2% $20.33 16.9% $20.00 $19.51 18.2% 16.0% 13.8% 13.1% 14.5% 16.2% 14.9% $19.00 $18.62 14.7% 13.0% 13.0% 14.0% Y/Y Revenue per Share Growth 11.3% 11.9% 11.9% $17.
Slide 50: Income Statement – PPNR
Income Statement – PPNR ($'s in thousands) 2019 2020 2021 2022 YTD 2023 PPNR Trends Net interest income $ 766,142 $821,788 $932,401 $1,129,293 $944,866 Adjusted PPNR Noninterest income 263,826 317,840 395,734 416,124 354,165 $800 Noninterest expense (505,148) (564,455) (660,104) (779,999) (636,601)
Slide 51: BHG Financials
BHG Financials At Sept 30, At Jun 30, At Sept 31, ($'s in thousands) ($'s in thousands) 3Q 2023 2Q 2023 3Q 2022 2023 2023 2022 Cash and Cash Equivalents 642,519 590,930 584,525 Interest Income $ 142,237 $ 144,142 $ 116,315 Loans Held for Investment 3,315,173 3,268,535 2,871,277 Allowance for Loan Lo
Slide 52: Income Statement: Reconciliation of Non-GAAP Financial Measures
Income Statement Reconciliation of Non-GAAP Financial Measures 52
Slide 53: Income Statement: Reconciliation of Non-GAAP Financial Measures
Income Statement Reconciliation of Non-GAAP Financial Measures 53
Slide 54: 2023 Peer Group
2023 Peer Group Institution Name Ticker City, State Pinnacle Financial Partners, Inc. PNFP Nashville, TN Associated Banc-corp ASB Green Bay, WI Bank OZK OZK Little Rock, AR Bank United Inc. BKU Houston, TX Cadence Bank CADE Tupelo, MS Comerica Inc. CMA Dallas, TX Commerce Bancshares, Inc. CBSH Kansa
Slide 55: Investor Call Third Quarter 2023
Investor Call THIRD QUARTER 2023 M. TERRY TURNER, PRESIDENT AND CEO HAROLD R. CARPENTER, EVP AND CFO
Pinnacle Financial Partners — Q3 2023 Earnings Presentation on 6ix