Pinnacle Financial Partners, Inc. (NASDAQ:PNFP) Q2 2024 Earnings Conference Call July 17, 2024 9:30 AM ET Company Participants Terry Turner - Chief Executive Officer Harold Carpenter - Chief Financial Officer Conference Call Participants Brett Rabatin - Hovde Group Steven Alexopoulos - JPMorgan Jared Shaw - Barclays Capital Brandon King - Truist Catherine Mealor - KBW Timur Braziler - Wells Fargo Stephen Scouten - Piper Sandler Russell Gunther - Stephens Zach Westerlind - UBS Brian Martin - Janney Operat ...

The reported revenue compares to the Zacks Consensus Estimate of $426.4 million, representing a surprise of -14.04%. The company delivered an EPS surprise of +1.87%, with the consensus EPS estimate being $1.60. Shares of Pinnacle Financial have returned +16.3% over the past month versus the Zacks S&P 500 composite's +3.8% change. The stock currently has a Zacks Rank #3 (Hold), indicating that it could perform in line with the broader market in the near term. For the quarter ended June 2024, Pinnacle Financi ...

This quarterly report represents an earnings surprise of 1.87%. A quarter ago, it was expected that this regional bank operator would post earnings of $1.52 per share when it actually produced earnings of $1.53, delivering a surprise of 0.66%. Pinnacle Financial, which belongs to the Zacks Banks - Southeast industry, posted revenues of $366.55 million for the quarter ended June 2024, missing the Zacks Consensus Estimate by 14.04%. This compares to year-ago revenues of $489.23 million. The company has topped ...

FOR IMMEDIATE RELEASE MEDIA CONTACT: Joe Bass, 615-743-8219 WEBSITE: www.pnfp.com FINANCIAL CONTACT: Harold Carpenter, 615-744-3742 PNFP REPORTS 2Q24 DILUTED EPS OF $0.64 AND NET INTEREST MARGIN OF 3.14 PERCENT Excluding impacts of capital optimization and balance sheet repositioning initiatives, diluted EPS of $1.63 NASHVILLE, TN, July 16, 2024 - Pinnacle Financial Partners, Inc. (Nasdaq/NGS: PNFP) reported net income per diluted common share of $0.64 for the quarter ended June 30, 2024, compared to net in ...

Shares of Pinnacle Financial rallied for the fourth consecutive trading session. With the Federal Reserve keeping an eye on employment reports and cooling inflation numbers, market participants are projecting interest rate cuts as early as September. Thus, for banks reeling under aggressive monetary tightening, this is a positive development. As the rates come down, so will banks' funding costs. Moreover, given the soft landing of the U.S. economy, the lending scenario is expected to improve further. These ...

Wall Street analysts forecast that Pinnacle Financial (PNFP) will report quarterly earnings of $1.60 per share in its upcoming release, pointing to a year-over-year decline of 10.6%. It is anticipated that revenues will amount to $426.4 million, exhibiting a decline of 12.8% compared to the year-ago quarter. The consensus EPS estimate for the quarter has remained unchanged over the last 30 days. This represents how the covering analysts, as a whole, have reassessed their initial estimates during this timefr ...

Core Viewpoint - Pinnacle Financial is expected to report quarterly earnings of $1.60 per share, reflecting a year-over-year decline of 10.6%, with revenues anticipated to be $426.4 million, down 12.8% from the previous year [2][11]. Earnings Estimates and Predictions - The Zacks Earnings ESP indicates that the Most Accurate Estimate for Pinnacle Financial is lower than the Zacks Consensus Estimate, resulting in an Earnings ESP of -7.31%, suggesting a bearish outlook from analysts [5]. - The consensus EPS estimate has remained unchanged over the last 30 days, indicating a reassessment of initial estimates by covering analysts [12]. - A positive Earnings ESP is a strong predictor of an earnings beat, especially when combined with a Zacks Rank of 1 (Strong Buy), 2 (Buy), or 3 (Hold) [4]. Historical Performance - Over the last four quarters, Pinnacle Financial has beaten consensus EPS estimates four times, indicating a potential for positive surprises in earnings [24]. Market Expectations - Wall Street anticipates a year-over-year decline in earnings due to lower revenues, making the comparison of actual results to estimates a significant factor for stock price movement [9]. - The stock currently holds a Zacks Rank of 3, which does not strongly indicate an earnings beat [19]. Additional Considerations - Management's discussion during the earnings call will be crucial in determining the sustainability of any immediate price changes and future earnings expectations [10]. - Investors should consider other factors beyond earnings surprises when making decisions about the stock, as many stocks may react differently to earnings beats or misses due to various influencing factors [21].

PART I – Financial Information [Item 1. Consolidated Financial Statements (Unaudited)](index=4&type=section&id=Item%201.%20Consolidated%20Financial%20Statements%20(Unaudited)) This section presents Pinnacle Financial Partners' unaudited consolidated financial statements for Q1 2024, including balance sheets, income statements, and cash flows, with detailed notes [Consolidated Balance Sheets](index=4&type=section&id=Consolidated%20Balance%20Sheets) Total assets increased to **$48.9 billion** at March 31, 2024, from **$48.0 billion** at December 31, 2023, driven by loan and cash growth, funded by a rise in total deposits to **$39.4 billion** Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2024 | December 31, 2023 | | :--- | :--- | :--- | | **Total Assets** | **$48,894,196** | **$47,959,883** | | Cash and cash equivalents | $2,706,361 | $2,230,349 | | Loans, net | $32,791,536 | $32,323,036 | | **Total Liabilities** | **$42,790,345** | **$41,924,095** | | Total deposits | $39,402,025 | $38,539,810 | | **Total Shareholders' Equity** | **$6,103,851** | **$6,035,788** | [Consolidated Statements of Income](index=5&type=section&id=Consolidated%20Statements%20of%20Income) Net income available to common shareholders for Q1 2024 was **$120.1 million**, or **$1.57 per diluted share**, a decrease from **$133.5 million**, or **$1.76 per diluted share**, in Q1 2023, primarily due to higher provision for credit losses and noninterest expenses Consolidated Income Statement Highlights (in thousands, except per share data) | Metric | Three months ended March 31, 2024 | Three months ended March 31, 2023 | | :--- | :--- | :--- | | Net Interest Income | $318,034 | $312,231 | | Provision for credit losses | $34,497 | $18,767 | | Noninterest Income | $110,103 | $89,529 | | Noninterest Expense | $242,365 | $211,727 | | Net Income | $123,944 | $137,271 | | **Net Income Available to Common Shareholders** | **$120,146** | **$133,473** | | **Diluted EPS** | **$1.57** | **$1.76** | [Consolidated Statements of Cash Flows](index=8&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Net cash provided by operating activities was **$197.3 million** in Q1 2024, while investing activities used **$535.7 million** for loan growth, and financing activities provided **$814.4 million** from increased deposits, resulting in a **$476.0 million** net increase in cash Cash Flow Summary (in thousands) | Activity | Three months ended March 31, 2024 | Three months ended March 31, 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $197,283 | $359,870 | | Net cash used in investing activities | ($535,700) | ($1,563,161) | | Net cash provided by financing activities | $814,429 | $2,845,385 | | **Net increase in cash, cash equivalents, and restricted cash** | **$476,012** | **$1,642,094** | [Notes to Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) This section details accounting policies and financial data, covering equity investments, securities and loan portfolios, allowance for credit losses, derivatives, fair value measurements, and regulatory capital - Pinnacle Financial's primary business is conducted by its wholly-owned subsidiary, Pinnacle Bank, and the company also holds a **49% interest** in Bankers Healthcare Group, LLC (BHG)[21](index=21&type=chunk) - The preparation of financial statements requires management to make material estimates, particularly for the allowance for credit losses and potential impairment of goodwill or intangible assets, which are susceptible to change due to macroeconomic conditions[24](index=24&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=38&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Q1 2024 financial performance, highlighting decreased diluted EPS, net interest margin compression, increased provision for credit losses and noninterest expenses, growth in noninterest income, and details on loan and deposit portfolios, capital adequacy, and risk management [Overview](index=38&type=section&id=Overview) In Q1 2024, diluted EPS decreased to **$1.57** from **$1.76** year-over-year, despite loan growth to **$33.2 billion** and total deposits increasing to **$39.4 billion**, reflecting pressure from higher credit loss provisions and operating expenses - Diluted net income per common share for Q1 2024 was **$1.57**, compared to **$1.76** for the same period in 2023[134](index=134&type=chunk) - Total loans increased to **$33.2 billion** and total deposits grew to **$39.4 billion** as of March 31, 2024[134](index=134&type=chunk) [Results of Operations](index=38&type=section&id=Results%20of%20Operations) Net interest income grew **1.9%** to **$318.0 million**, but net interest margin compressed to **3.04%**; provision for credit losses significantly increased to **$34.5 million**; noninterest income rose **23.0%** to **$110.1 million**; and noninterest expense increased **14.5%** to **$242.4 million** Key Performance Metrics (Q1 2024 vs Q1 2023) | Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Net Interest Income | $318.0M | $312.2M | | Net Interest Margin | 3.04% | 3.40% | | Provision for Credit Losses | $34.5M | $18.8M | | Noninterest Income | $110.1M | $89.5M | | Noninterest Expense | $242.4M | $211.7M | | Efficiency Ratio | 56.6% | 52.7% | - Income from the equity method investment in BHG declined **16.0%** to **$16.0 million** in Q1 2024 from **$19.1 million** in Q1 2023[137](index=137&type=chunk)[163](index=163&type=chunk) [Financial Condition](index=48&type=section&id=Financial%20Condition) Total assets reached **$48.9 billion** with a loan portfolio of **$33.2 billion** and total deposits of **$39.4 billion**; the allowance for credit losses rose to **$371.3 million** (**1.12%** of total loans), reflecting increased reserves and a cautious economic outlook Loan Portfolio Composition (in thousands) | Loan Category | March 31, 2024 | % of Total | | :--- | :--- | :--- | | Commercial real estate | $12,108,615 | 36.5% | | Commercial and industrial | $11,893,198 | 35.9% | | Consumer real estate – mortgage | $4,828,416 | 14.5% | | Construction and land development | $3,818,334 | 11.5% | | Consumer and other | $514,310 | 1.6% | | **Total loans** | **$33,162,873** | **100.0%** | - The allowance for credit losses on loans (ACL) increased to **$371.3 million** (**1.12%** of total loans) at March 31, 2024, from **$353.1 million** (**1.08%** of total loans) at December 31, 2023[189](index=189&type=chunk) - Nonperforming assets increased to **$111.1 million** at March 31, 2024, from **$86.6 million** at December 31, 2023, mainly due to the downgrading of two loans[188](index=188&type=chunk) [Market and Liquidity Risk Management](index=56&type=section&id=Market%20and%20Liquidity%20Risk%20Management) The company manages interest rate risk using earnings simulation and EVE models, showing asset sensitivity with a **1.41%** projected net interest income boost from a **100 bps** rate increase, and maintains liquidity through stress testing and diverse funding sources, including **$3.3 billion** in FHLB borrowing capacity Net Interest Income Sensitivity (as of March 31, 2024) | Instantaneous Rate Change | Estimated % Change in NII Over 12 Months | | :--- | :--- | | +300 bps | 2.76% | | +200 bps | 2.31% | | +100 bps | 1.41% | | -100 bps | (1.42)% | | -200 bps | (2.01)% | | -300 bps | (3.00)% | - At March 31, 2024, the company had an estimated **$3.3 billion** in additional borrowing capacity with the FHLB and **$105.0 million** in unsecured lines with correspondent banks[227](index=227&type=chunk)[228](index=228&type=chunk) - Management's 'most likely' rate scenario assumes two **25 basis point** decreases in the Federal Funds Rate during 2024, with the first occurring in the third quarter[220](index=220&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=61&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) This section cross-references market risk disclosures provided within Item 2, Management's Discussion and Analysis of Financial Condition and Results of Operations, specifically on pages 37 through 58 - The information required for this item is included in the 'Market and Liquidity Risk Management' section of the Management's Discussion and Analysis[238](index=238&type=chunk) [Item 4. Controls and Procedures](index=61&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of March 31, 2024, with no material changes to internal control over financial reporting during the quarter - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of the end of the reporting period[239](index=239&type=chunk) - There were no changes in internal control over financial reporting during the quarter that materially affected, or are reasonably likely to materially affect, these controls[240](index=240&type=chunk) PART II – Other Information [Item 1. Legal Proceedings](index=62&type=section&id=Item%201.%20Legal%20Proceedings) The company reports no material pending legal proceedings outside the normal course of business - There are no material pending legal proceedings to which Pinnacle Financial or its subsidiaries are a party[243](index=243&type=chunk) [Item 1A. Risk Factors](index=62&type=section&id=Item%201A.%20Risk%20Factors) No material changes have occurred to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2023 - No material changes have occurred in the company's risk factors since the filing of the 2023 Form 10-K[244](index=244&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=62&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) During Q1 2024, the company did not repurchase shares under its program, but withheld **176,172** shares for tax related to equity awards, and authorized a new **$125 million** share repurchase program effective through March 31, 2025 - Pinnacle Financial did not repurchase any shares under its share repurchase program during the three months ended March 31, 2024[246](index=246&type=chunk) - A total of **176,172** shares were repurchased (withheld) to satisfy tax withholding requirements for employees upon the vesting of equity awards[246](index=246&type=chunk) - A new share repurchase program for up to **$125.0 million** was authorized, effective from April 1, 2024, through March 31, 2025[246](index=246&type=chunk) [Item 5. Other Information](index=63&type=section&id=Item%205.%20Other%20Information) On March 12, 2024, President and CEO M. Terry Turner and Chairman Robert A. McCabe, Jr. terminated their Rule 10b5-1 trading plans adopted in December 2023, with no shares sold under either plan prior to termination - On March 12, 2024, CEO M. Terry Turner and Chairman Robert A. McCabe, Jr. terminated their Rule 10b5-1 trading plans adopted in December 2023, with no shares having been sold under these plans[248](index=248&type=chunk)[249](index=249&type=chunk) [Item 6. Exhibits](index=63&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including award agreements, the 2024 Annual Cash Incentive Plan, the amended 2018 Omnibus Equity Incentive Plan, officer certifications, and XBRL data files

Financial Data and Key Metrics Changes - The company reported a slight contraction in net interest margin (NIM) to 3.04% from 3.06% over the previous two quarters, but expects margin expansion in the second quarter of 2024 [59][61] - The allowance for credit losses on loans increased from 1.08% to 1.12%, primarily due to the deterioration of a previously disclosed problem borrower [56][62] - The company anticipates loan growth in the range of 9% to 11% for the year, despite some large payoffs impacting end-of-period balances [58][46] Business Line Data and Key Metrics Changes - Fixed rate loans originated in the first quarter averaged around 7.35%, with a target range of 7.5% to 8% [58][27] - The company expects about $3 billion in cash flows from its fixed rate loan books over the remainder of 2024, with an average yield of around 4.65% [58][59] - Fee revenues, excluding nonrecurring items, increased by 11.4% linked quarter, with strong performance from the wealth management unit [67][69] Market Data and Key Metrics Changes - The company has seen a significant reduction in the percentage of money market accounts with rates less than 2%, down from 100% two years ago to only 15% today [61] - 65% of the company's money markets are now at rates greater than 4%, indicating competitive pricing in the deposit market [61][69] Company Strategy and Development Direction - The company is focusing on compounding tangible book value and has a differentiated model that attracts top talent in the industry, leading to persistent growth in clients, loans, deposits, and net interest income [56][74] - The company is strategically limiting new commitments in construction loans and focusing on high-quality real estate, primarily warehouse and select multifamily projects [64][65] Management's Comments on Operating Environment and Future Outlook - Management expressed that the operating environment for banks is challenging and volatile, with inflation proving difficult to control, leading to expectations of higher rates for a longer period [74] - The company believes that its reliable growth model positions it as an attractive alternative for investors amid market uncertainties [74] Other Important Information - The company has lowered its incentive target from a 100% to 120% payout for fiscal year 2024 to now 80% at the end of the first quarter, aiming to align incentives with financial performance [69] - The company anticipates a net charge-off rate of 20 to 25 basis points for 2024, with no expected increase in allowance counts for the rest of the year [63][64] Q&A Session Summary Question: What are the expectations for loan yields moving forward? - Management indicated that loan yields increased slightly this quarter and expect benefits from fixed rate repricing to build throughout the year [24][25] Question: How is the company managing deposit growth and rates? - Management noted that deposit growth is expected to remain in the high single to low double digits, with competitive pricing strategies in place [61][69] Question: What is the outlook for credit quality and reserves? - Management confirmed that reserves are expected to remain flattish for the rest of 2024, with a focus on managing credit quality effectively [63][64]

FOR IMMEDIATE RELEASE WEBSITE: www.pnfp.com MEDIA CONTACT: Joe Bass, 615-743-8219 FINANCIAL CONTACT: Harold Carpenter, 615-744-3742 PNFP REPORTS 1Q24 DILUTED EPS OF $1.57 Total revenues increased 32.1 percent linked-quarter annualized and 6.6 percent year-over-year NASHVILLE, TN, April 22, 2024 - Pinnacle Financial Partners, Inc. (Nasdaq/NGS: PNFP) reported net income per diluted common share of $1.57 for the quarter ended March 31, 2024, compared to net income per diluted common share of $1.76 for the quar ...