Pinnacle Financial Partners, Inc. (NASDAQ:PNFP) Q3 2023 Earnings Call Transcript October 18, 2023 9:30 AM ET Company Participants Terry Turner - Chief Executive Officer Harold Carpenter - Chief Financial Officer Conference Call Participants Steven Alexopoulos - JPMorgan Brett Rabatin - Hovde Group Timur Braziler - Wells Fargo Stephen Scouten - Piper Sandler Brandon King - Truist Securities Matt Olney - Stephens Catherine Mealor - KBW Brody Preston - UBS Brian Martin - Jonnie Montgomery Operator Good morning ...

[Part I – Financial Information](index=4&type=section&id=PART%20I%20%E2%80%93%20Financial%20Information) This part presents the company's unaudited consolidated financial statements and management's discussion and analysis for the period [Item 1. Consolidated Financial Statements (Unaudited)](index=4&type=section&id=Item%201.%20Consolidated%20Financial%20Statements%20(Unaudited)) Presents the unaudited consolidated balance sheets, income statements, and cash flows as of and for the period ended June 30, 2023 [Consolidated Balance Sheets](index=4&type=section&id=Consolidated%20Balance%20Sheets) Total assets grew to $46.9 billion, driven by increases in loans, cash, deposits, and FHLB advances Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $3,833,131 | $1,177,382 | | Loans, net | $30,815,831 | $28,740,940 | | Total assets | $46,875,982 | $41,970,021 | | **Liabilities & Equity** | | | | Total deposits | $37,722,661 | $34,961,238 | | Federal Home Loan Bank advances | $2,200,917 | $464,436 | | Total liabilities | $41,032,223 | $36,450,629 | | Total shareholders' equity | $5,843,759 | $5,519,392 | [Consolidated Statements of Income](index=5&type=section&id=Consolidated%20Statements%20of%20Income) Net income rose significantly, boosted by higher net interest income and a large one-time gain on an asset sale Income Statement Summary (in thousands, except per share data) | Metric | Q2 2023 | Q2 2022 | YTD 2023 | YTD 2022 | | :--- | :--- | :--- | :--- | :--- | | Net Interest Income | $315,393 | $264,574 | $627,624 | $504,049 | | Provision for Credit Losses | $31,689 | $12,907 | $50,456 | $15,627 | | Noninterest Income | $173,839 | $125,502 | $263,368 | $228,998 | | Noninterest Expense | $211,641 | $196,038 | $423,368 | $378,699 | | Net Income to Common Shareholders | $193,501 | $141,329 | $326,974 | $266,641 | | Diluted EPS | $2.54 | $1.86 | $4.30 | $3.51 | - A significant contributor to noninterest income in Q2 2023 was an **$85.7 million gain on the sale of fixed assets**, related to a sale-leaseback transaction[12](index=12&type=chunk) [Notes to Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) Provides detailed disclosures on accounting policies, credit losses, securities, leases, and other financial statement components [Note 1. Summary of Significant Accounting Policies](index=10&type=section&id=Note%201.%20Summary%20of%20Significant%20Accounting%20Policies) Outlines key accounting policies, including the CECL methodology for credit losses and the company's investment in BHG - Pinnacle Bank holds a **49% interest in Bankers Healthcare Group, LLC (BHG)**, a provider of commercial and consumer loans to healthcare and other professionals[23](index=23&type=chunk) - During Q2 2023, the company implemented **updated CECL models** to better capture portfolio risk in the uncertain economy, with no material effect on the total allowance for credit losses[29](index=29&type=chunk) - The company adopted ASU 2022-02 on January 1, 2023, which **eliminated troubled debt restructuring accounting** and enhanced disclosure requirements for loan modifications to borrowers experiencing financial difficulties[44](index=44&type=chunk) [Note 2. Equity method investment](index=15&type=section&id=Note%202.%20Equity%20method%20investment) Income from the 49% investment in Bankers Healthcare Group (BHG) declined significantly compared to the prior year BHG Financial Summary (in thousands) | Metric | H1 2023 | H1 2022 | | :--- | :--- | :--- | | Revenues | $613,284 | $536,559 | | Net Income | $104,038 | $177,033 | - Pinnacle Bank received **dividends of $27.6 million from BHG** in the first six months of 2023, compared to $40.8 million in the same period of 2022[50](index=50&type=chunk) - At June 30, 2023, Pinnacle Bank held **$305.2 million of BHG joint venture program loans**, down from $350.6 million at year-end 2022[50](index=50&type=chunk) [Note 3. Securities](index=16&type=section&id=Note%203.%20Securities) The company held $3.6 billion in AFS and $3.0 billion in HTM securities, with significant unrealized losses due to interest rates Securities Portfolio Summary (in thousands) | Category | Amortized Cost | Fair Value | Gross Unrealized Losses | | :--- | :--- | :--- | :--- | | **Available-for-sale** | $3,854,009 | $3,591,280 | $(288,192) | | **Held-to-maturity** | $3,033,885 | $2,746,055 | $(292,104) | - At June 30, 2023, the company had approximately **$288.2 million in unrealized losses on its AFS securities**, which management attributes to interest rate changes, not credit quality deterioration[54](index=54&type=chunk) - The allowance for credit losses on held-to-maturity securities was **$1.7 million** at June 30, 2023, with all debt securities in this category rated A or higher[56](index=56&type=chunk)[57](index=57&type=chunk) [Note 4. Loans and Allowance for Credit Losses](index=18&type=section&id=Note%204.%20Loans%20and%20Allowance%20for%20Credit%20Losses) Total loans grew to $31.2 billion, with the allowance for credit losses increasing to 1.08% of total loans Loan Portfolio Composition (in thousands) | Loan Category | June 30, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | Commercial real estate: Owner occupied | $3,845,359 | $3,587,257 | | Commercial real estate: Non-owner occupied | $7,170,888 | $6,542,619 | | Consumer real estate – mortgage | $4,692,673 | $4,435,046 | | Construction and land development | $3,904,774 | $3,679,498 | | Commercial and industrial | $10,983,911 | $10,241,362 | | Consumer and other | $555,685 | $555,823 | | **Total Loans** | **$31,153,290** | **$29,041,605** | Allowance for Credit Losses (ACL) Activity - H1 2023 (in thousands) | | Amount | | :--- | :--- | | ACL at Dec 31, 2022 | $300,665 | | Charged-off loans | $(32,907) | | Recoveries | $15,845 | | Provision for credit losses | $53,856 | | **ACL at June 30, 2023** | **$337,459** | - **Nonaccrual loans totaled $44.3 million** at June 30, 2023, up from $38.1 million at December 31, 2022[69](index=69&type=chunk)[83](index=83&type=chunk) - The company has significant credit exposure to **Lessors of Nonresidential Buildings ($6.4 billion)** and **Lessors of Residential Buildings ($3.1 billion)** as of June 30, 2023[85](index=85&type=chunk) [Note 5. Premises and Equipment and Lease Commitments](index=26&type=section&id=Note%205.%20Premises%20and%20Equipment%20and%20Lease%20Commitments) A major sale-leaseback transaction resulted in an $85.7 million gain and significantly increased lease assets and liabilities - In Q2 2023, Pinnacle Bank completed a **sale-leaseback of 49 properties** for an aggregate price of $198.2 million, resulting in a **pre-tax net gain of $85.7 million**[93](index=93&type=chunk) - The sale-leaseback transaction involves an initial lease term of 14.5 years with an aggregate **annual lease expense of approximately $17.0 million** for the first year[93](index=93&type=chunk) Lease Balances (in thousands) | Account | June 30, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | Operating lease right-of-use assets | $236,689 | $126,767 | | Operating lease liabilities | $243,906 | $133,108 | [Note 6. Income Taxes](index=28&type=section&id=Note%206.%20Income%20Taxes) The effective tax rate for H1 2023 was 19.8%, with unrecognized tax benefits decreasing to $9.4 million - The **effective tax rate** for the six months ended June 30, 2023 was **19.8%**[99](index=99&type=chunk) - **Unrecognized tax benefits** related to uncertain state tax positions were **$9.4 million** at June 30, 2023, a decrease from $15.8 million at December 31, 2022[97](index=97&type=chunk) [Note 7. Commitments and Contingent Liabilities](index=28&type=section&id=Note%207.%20Commitments%20and%20Contingent%20Liabilities) The company had $16.0 billion in commitments to extend credit and $333.0 million in standby letters of credit - **Commitments to extend credit**, including unfunded lines of credit, totaled **$16.0 billion** at June 30, 2023[102](index=102&type=chunk) - **Standby letters of credit** amounted to **$333.0 million** at June 30, 2023[103](index=103&type=chunk) - A **reserve of $21.5 million** was held for risks associated with off-balance sheet commitments as of June 30, 2023, down from $25.0 million at year-end 2022[105](index=105&type=chunk) [Note 8. Stock Options and Restricted Shares](index=29&type=section&id=Note%208.%20Stock%20Options%20and%20Restricted%20Shares) Stock compensation expense was $19.5 million for H1 2023, with $82.2 million in unrecognized cost for unvested awards Unvested Restricted Share & Unit Activity - H1 2023 | Award Type | Unvested at 12/31/22 | Awarded | Lapsed/Released | Forfeited | Unvested at 6/30/23 | | :--- | :--- | :--- | :--- | :--- | :--- | | Restricted Shares | 675,611 | 213,773 | (163,044) | (13,724) | 712,616 | | Restricted Stock Units | 73,983 | 70,716 | (31,392) | (7,060) | 106,247 | - Total **stock compensation expense** for the six months ended June 30, 2023, was **$19.5 million**[119](index=119&type=chunk) - As of June 30, 2023, there was **$82.2 million in total unrecognized compensation cost** related to unvested awards, to be recognized over a weighted-average period of 2.01 years[119](index=119&type=chunk) [Note 9. Derivative Instruments](index=32&type=section&id=Note%209.%20Derivative%20Instruments) The company utilizes various derivative instruments with a total notional value over $7.7 billion to manage interest rate risk Derivative Notional Amounts at June 30, 2023 (in thousands) | Derivative Type | Notional Amount | Purpose | | :--- | :--- | :--- | | Non-hedge Swaps | $3,766,486 | Customer Facilitation | | Cash Flow Hedges (Floors/Collars) | $1,750,000 | Hedge variable rate loans | | Fair Value Hedges (Swaps) | $2,270,724 | Hedge fixed rate securities/borrowings | - In March and May 2023, the company entered into **fair value hedges with aggregate notional amounts of $850 million** to mitigate interest rate risk on FHLB advances[125](index=125&type=chunk) [Note 10. Fair Value of Financial Instruments](index=35&type=section&id=Note%2010.%20Fair%20Value%20of%20Financial%20Instruments) Details the fair value hierarchy for assets and liabilities, with most recurring fair value assets classified as Level 2 Assets at Fair Value (Recurring Basis) - June 30, 2023 (in thousands) | Category | Level 1 | Level 2 | Level 3 | Total | | :--- | :--- | :--- | :--- | :--- | | AFS Securities | $— | $3,590,801 | $479 | $3,591,280 | | Other investments | $— | $22,019 | $151,762 | $173,781 | | Other assets (Derivatives) | $— | $227,850 | $— | $227,850 | | **Total Assets** | **$—** | **$3,840,670** | **$152,241** | **$3,992,911** | Assets at Fair Value (Nonrecurring Basis) - June 30, 2023 (in thousands) | Category | Level 1 | Level 2 | Level 3 | Total | | :--- | :--- | :--- | :--- | :--- | | Other real estate owned | $— | $— | $2,555 | $2,555 | | Collateral dependent loans | $— | $— | $40,241 | $40,241 | | **Total** | **$—** | **$—** | **$42,796** | **$42,796** | [Note 11. Regulatory Matters](index=39&type=section&id=Note%2011.%20Regulatory%20Matters) The company and its bank subsidiary remain well-capitalized, exceeding all minimum regulatory capital requirements Pinnacle Financial Partners, Inc. Capital Ratios - June 30, 2023 | Ratio | Actual | Minimum Requirement | | :--- | :--- | :--- | | Common equity Tier 1 capital | 10.2% | 4.5% | | Tier 1 capital | 10.8% | 6.0% | | Total capital | 12.7% | 8.0% | | Tier 1 leverage | 9.5% | 4.0% | - The company has elected to phase in the regulatory capital impact of **CECL adoption** over a three-year period ending December 31, 2024[150](index=150&type=chunk) - Pinnacle Bank paid **$52.8 million in dividends** to the parent holding company during the first six months of 2023[146](index=146&type=chunk) [Note 12. Other Borrowings](index=41&type=section&id=Note%2012.%20Other%20Borrowings) The company had $424.5 million in subordinated debt and other borrowings, including trust preferred securities and notes Subordinated Debt and Other Borrowings (in thousands) | Instrument | Outstanding Amount | Interest Rate/Structure | | :--- | :--- | :--- | | Trust preferred securities (12 trusts) | $132,995 | Variable (3-mo LIBOR/SOFR + spread) | | Pinnacle Financial Subordinated Notes | $300,000 | 4.13% Fixed until 9/15/2024 | | Debt issuance costs and fair value adjustments | $(8,498) | N/A | | **Total** | **$424,497** | | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=42&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses financial performance, balance sheet changes, credit quality, and risk management strategies for H1 2023 [Overview](index=42&type=section&id=Overview) The company reported strong H1 2023 performance driven by robust revenue growth, though provisions for credit losses also rose Key Performance Indicators | Metric | H1 2023 | H1 2022 | | :--- | :--- | :--- | | Diluted EPS | $4.30 | $3.51 | | Net Interest Income | $627.6M | $504.0M | | Provision for Credit Losses | $50.5M | $15.6M | | Noninterest Income | $263.4M | $229.0M | - The company has intentionally **tightened underwriting standards** for construction and CRE investment properties for the remainder of 2023, expecting loan growth rates to moderate[165](index=165&type=chunk) [Results of Operations](index=44&type=section&id=Results%20of%20Operations) Details operating results, including growth in net interest income, a large one-time gain, and rising noninterest expenses [Net Interest Income](index=44&type=section&id=Net%20Interest%20Income) Net interest income and margin grew year-over-year, but higher liquidity levels are expected to pressure the NIM going forward Net Interest Margin Analysis | Period | Net Interest Margin | Earning Asset Yield | Total Funding Rate | | :--- | :--- | :--- | :--- | | Q2 2023 | 3.20% | 5.74% | 2.65% | | Q2 2022 | 3.17% | 3.49% | 0.34% | | H1 2023 | 3.30% | 5.60% | 2.40% | | H1 2022 | 3.03% | 3.30% | 0.29% | - The company intentionally **increased on-balance sheet liquidity** in H1 2023 in response to macroeconomic uncertainty, which is expected to negatively impact NIM for the remainder of the year[181](index=181&type=chunk) [Provision for Credit Losses](index=47&type=section&id=Provision%20for%20Credit%20Losses) The provision for credit losses increased substantially due to loan growth, higher net charge-offs, and a weaker economic outlook - The **provision for credit losses increased to $50.5 million** for the six months ended June 30, 2023, from $15.6 million in the prior-year period[183](index=183&type=chunk) - Key drivers for the increased provision were **loan growth, deterioration in projected macroeconomic factors, and an increase in net charge-offs** to $17.1 million in H1 2023[183](index=183&type=chunk) [Noninterest Income](index=47&type=section&id=Noninterest%20Income) Noninterest income was significantly boosted by an $85.7 million gain on a sale-leaseback, offsetting a decline in BHG income Noninterest Income Components - H1 2023 vs H1 2022 (in thousands) | Component | H1 2023 | H1 2022 | Change (%) | | :--- | :--- | :--- | :--- | | Gain on sale of fixed assets | $85,859 | $198 | >100% | | Income from equity method investment (BHG) | $46,003 | $83,120 | (44.7)% | | Investment services & Trust fees | $38,825 | $35,934 | 8.0% | | Investment losses on sales, net | $(9,961) | $(61) | >(100%) | | Gains on mortgage loans sold, net | $3,620 | $6,216 | (41.8)% | - The decrease in income from BHG was largely due to BHG **increasing its liability for estimated future loan losses** and its allowance for loan losses because of the uncertain economic environment[194](index=194&type=chunk) - BHG's liability for future inherent losses on its sold loan portfolio increased to **$369.0 million (5.9% of outstanding core loans)** at June 30, 2023, up from $234.9 million (5.0%) a year prior[197](index=197&type=chunk) [Noninterest Expense](index=51&type=section&id=Noninterest%20Expense) Noninterest expense grew 11.8% in H1 2023, driven by higher salary, benefit, and occupancy costs from business expansion Noninterest Expense Components - H1 2023 vs H1 2022 (in thousands) | Component | H1 2023 | H1 2022 | Change (%) | | :--- | :--- | :--- | :--- | | Salaries and employee benefits | $268,151 | $248,463 | 7.9% | | Equipment and occupancy | $64,059 | $52,457 | 22.1% | | Other noninterest expense | $70,139 | $60,439 | 16.0% | | **Total Noninterest Expense** | **$423,368** | **$378,699** | **11.8%** | - The associate base grew to **3,309 full-time equivalents** at June 30, 2023, from 3,074 a year prior, contributing to higher salary costs[201](index=201&type=chunk) - **Cash incentive expense decreased to $46.4 million** in H1 2023 from $57.7 million in H1 2022, based on the assumption of a lower payout percentage for 2023[203](index=203&type=chunk) [Income Taxes](index=53&type=section&id=Income%20Taxes) The effective tax rate for H1 2023 was 19.8%, slightly higher than the 19.0% rate in the prior-year period - The **effective tax rate** for the six months ended June 30, 2023, was **19.8%**, compared to 19.0% for the same period in 2022[212](index=212&type=chunk) [Financial Condition](index=53&type=section&id=Financial%20Condition) Details the company's strong balance sheet, with significant growth in loans and deposits and robust capital levels [Loans](index=53&type=section&id=Loans) The loan portfolio grew 7.3% to $31.2 billion in H1 2023, with a slight increase in potential problem loans Loan Composition (in thousands) | Category | June 30, 2023 | % of Total | | :--- | :--- | :--- | | Commercial and industrial | $10,983,911 | 35.3% | | Non-owner occupied CRE | $7,170,888 | 23.0% | | Consumer real estate – mortgage | $4,692,673 | 15.1% | | Construction and land development | $3,904,774 | 12.5% | | Owner occupied CRE | $3,845,359 | 12.3% | | Consumer and other | $555,685 | 1.8% | | **Total Loans** | **$31,153,290** | **100.0%** | - **Potential problem loans increased to $98.9 million** (0.3% of total loans) at June 30, 2023, from $53.8 million (0.2%) at year-end 2022, mainly due to downgrades in the C&I and non-owner occupied CRE portfolios[219](index=219&type=chunk) - **Nonperforming assets were $47.4 million** at June 30, 2023, compared to $46.1 million at December 31, 2022[220](index=220&type=chunk) [Allowance for Credit Losses (ACL)](index=55&type=section&id=Allowance%20for%20Credit%20Losses%20(ACL)) The ACL increased to 1.08% of total loans, reflecting loan growth and a more uncertain macroeconomic outlook ACL Allocation by Loan Category - June 30, 2023 (in thousands) | Loan Category | ACL Allocated | % of Category's Loans | | :--- | :--- | :--- | | Commercial and industrial | $148,418 | 1.35% | | Consumer real estate - mortgage | $59,374 | 1.27% | | Non-owner occupied CRE | $55,108 | 0.77% | | Construction and land development | $38,855 | 1.00% | | Owner occupied CRE | $26,497 | 0.69% | | Consumer and other | $9,207 | 1.66% | | **Total** | **$337,459** | **1.08%** | - **Net charge-offs** for the first six months of 2023 were **$17.1 million**, equivalent to an annualized rate of 0.11% of average loans[226](index=226&type=chunk) [Investments](index=57&type=section&id=Investments) The $6.6 billion investment portfolio remained stable in size while its tax-equivalent yield increased to 3.66% Investment Portfolio Metrics | Metric | June 30, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | Total Portfolio Size | ~$6.6B | ~$6.6B | | Weighted average life | 9.64 years | 11.62 years | | Effective duration (net of hedges) | 4.55% | 4.39% | | Tax equivalent yield | 3.66% | 3.19% | [Deposits and Other Borrowings](index=57&type=section&id=Deposits%20and%20Other%20Borrowings) Total deposits grew by $2.8 billion, with a strategic shift toward more wholesale funding to increase liquidity Funding Composition (in thousands) | Funding Type | June 30, 2023 | % of Total | Dec 31, 2022 | % of Total | | :--- | :--- | :--- | :--- | :--- | | Core funding | $32,780,767 | 80.9% | $31,301,077 | 86.8% | | Noncore funding | $7,731,082 | 19.1% | $4,743,562 | 13.2% | | **Total Funding** | **$40,511,849** | **100.0%** | **$36,044,639** | **100.0%** | - **FHLB advances increased to $2.2 billion** at June 30, 2023, from $464.4 million at year-end 2022, to bolster on-balance sheet liquidity[233](index=233&type=chunk) - Estimated **uninsured deposits were $13.1 billion** at June 30, 2023, down from $15.7 billion at year-end 2022[232](index=232&type=chunk) [Capital Resources](index=60&type=section&id=Capital%20Resources) Shareholders' equity grew to $5.8 billion, capital ratios remained strong, and a new $125 million share repurchase plan was authorized - A new **share repurchase program for up to $125.0 million** was authorized on January 17, 2023, effective through March 31, 2024; no shares were repurchased under this or the prior program in 2023[237](index=237&type=chunk) - The company declared a quarterly cash dividend of **$0.22 per common share** and a dividend of **$16.88 per share on its Series B Preferred Stock**[239](index=239&type=chunk) [Market and Liquidity Risk Management](index=60&type=section&id=Market%20and%20Liquidity%20Risk%20Management) The company actively manages interest rate and liquidity risk, maintaining an asset-sensitive position and adequate liquidity sources [Interest Rate Sensitivity](index=61&type=section&id=Interest%20Rate%20Sensitivity) Simulation models show the company is asset-sensitive, with a 100 bps rate increase projected to boost NII by 3.0% Estimated % Change in Net Interest Income (Next 12 Months) | Instantaneous Rate Change | June 30, 2023 | June 30, 2022 | | :--- | :--- | :--- | | +300 bps | 7.60% | 7.80% | | +100 bps | 3.00% | 2.90% | | -100 bps | (2.90)% | (7.70)% | Estimated % Change in Economic Value of Equity (EVE) | Instantaneous Rate Change | June 30, 2023 | June 30, 2022 | | :--- | :--- | :--- | | +300 bps | (18.90)% | (17.20)% | | +100 bps | (6.90)% | (5.70)% | | -100 bps | 5.60% | 4.30% | - The company's interest rate risk profile has been actively managed through the addition of **$1.75 billion in interest rate floors/collars** on loans and **$850 million in receive-fixed swaps** on wholesale funding since June 2022[243](index=243&type=chunk) [Liquidity Risk Management](index=63&type=section&id=Liquidity%20Risk%20Management) The company maintains adequate liquidity through core deposits and significant available borrowing capacity from the FHLB and Federal Reserve - At June 30, 2023, Pinnacle Bank had an estimated **$2.9 billion in additional borrowing capacity with the FHLB**[263](index=263&type=chunk) - The bank also had approximately **$5.9 billion in available lines of credit** from the Federal Reserve discount window and the Bank Term Funding Program (BTFP)[264](index=264&type=chunk) [Off-Balance Sheet Arrangements](index=64&type=section&id=Of%20-Balance%20Sheet%20Arrangements) Off-balance sheet arrangements consist of $16.0 billion in unfunded loan commitments and $333.0 million in standby letters of credit - Off-balance sheet arrangements at June 30, 2023, included **$16.0 billion in unfunded loan commitments** and **$333.0 million in standby letters of credit**[270](index=270&type=chunk) - The company held a **reserve of $21.5 million** for expected credit losses on these off-balance sheet commitments[272](index=272&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=66&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) Refers to the MD&A section for quantitative and qualitative disclosures about market risk - Information regarding market risk is included on pages 60 through 63 within the **Management's Discussion and Analysis section**[240](index=240&type=chunk)[275](index=275&type=chunk) [Item 4. Controls and Procedures](index=66&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective, with no material changes to internal controls - The CEO and CFO concluded that the company's **disclosure controls and procedures were effective** as of the end of the reporting period[275](index=275&type=chunk) - **No material changes** were made to the internal control over financial reporting during the quarter ended June 30, 2023[276](index=276&type=chunk) [Part II – Other Information](index=67&type=section&id=PART%20II%20%E2%80%93%20Other%20Information) This part covers legal proceedings, risk factors, share repurchases, and other required disclosures [Item 1. Legal Proceedings](index=67&type=section&id=Item%201.%20Legal%20Proceedings) The company is not a party to any material pending legal proceedings - There are **no material pending legal proceedings** to which Pinnacle Financial or its subsidiaries are a party[279](index=279&type=chunk) [Item 1A. Risk Factors](index=67&type=section&id=Item%201A.%20Risk%20Factors) No material changes to risk factors have occurred since the 2022 Annual Report on Form 10-K - **No material changes to risk factors** have occurred since the filing of the 2022 Annual Report on Form 10-K[280](index=280&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=67&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company repurchased 5,820 shares to satisfy employee tax obligations, separate from its public repurchase program Share Repurchases - Q2 2023 | Period | Total Shares Repurchased | Average Price Paid | | :--- | :--- | :--- | | April 2023 | 5,578 | $54.24 | | May 2023 | 25 | $50.34 | | June 2023 | 217 | $54.83 | | **Total** | **5,820** | **$54.25** | - The repurchased shares were withheld to **satisfy tax withholding requirements** for vested equity awards and were not part of the public repurchase program[282](index=282&type=chunk) - The company has a share repurchase program authorizing up to **$125.0 million in repurchases**, which is effective through March 31, 2024; no shares were repurchased under this program during the quarter[283](index=283&type=chunk) [Item 5. Other Information](index=67&type=section&id=Item%205.%20Other%20Information) No director or officer adopted or terminated a Rule 10b5-1 trading arrangement during the quarter - **No director or officer adopted or terminated a Rule 10b5-1 trading arrangement** during the second quarter of 2023[284](index=284&type=chunk) [Item 6. Exhibits](index=68&type=section&id=Item%206.%20Exhibits) Lists the exhibits filed with the report, including required certifications and Inline XBRL data files - Exhibits filed include **certifications pursuant to the Sarbanes-Oxley Act** and Inline XBRL documents[285](index=285&type=chunk)

Pinnacle Financial Partners, Inc. (NASDAQ:PNFP) Q2 2023 Earnings Conference Call July 19, 2023 9:30 AM ET Company Participants Terry Turner – Chief Executive Officer Harold Carpenter – Chief Financial Officer Conference Call Participants Jared Shaw - Wells Fargo Stephen Scouten - Piper Sandler Steven Alexopoulos - JPMorgan Brandon King - Truist Securities Catherine Mealor - KBW Matt Olney - Stephens Rudy Preston - UBS Brian Martin - Jonnie Montgomery Operator Good morning, everyone, and welcome to the Pinna ...

| --- | --- | --- | |-----------------------------------------------------------------------------|-------|-------| | | | | | | | | | Investor Call | | | | | | | | SECOND QUARTER 2023 | | | | JULY 19, 2023 Time: 8:30 AM CT Webcast: www.pnfp.com (investor relations) | | | | M. TERRY TURNER, PRESIDENT AND CEO HAROLD R. CARPENTER, EVP AND CFO | | | | | | | All statements, other than statements of historical fact, included in this presentation, are forward-looking statements within the meaning of the Private Se ...

PART I – Financial Information [Item 1. Consolidated Financial Statements (Unaudited)](index=4&type=section&id=Item%201.%20Consolidated%20Financial%20Statements%20%28Unaudited%29) This section presents the unaudited consolidated financial statements for Q1 2023, detailing financial position, performance, and accounting policies [Consolidated Balance Sheets](index=4&type=section&id=Consolidated%20Balance%20Sheets) Total assets increased to **$45.1 billion** by Q1 2023, driven by growth in loans and cash, with deposits and FHLB advances also rising Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | **Total Assets** | **$45,119,587** | **$41,970,021** | | Cash and cash equivalents | $2,819,476 | $1,177,382 | | Loans, net | $29,984,030 | $28,740,940 | | Total deposits | $36,178,553 | $34,961,238 | | Federal Home Loan Bank advances | $2,166,508 | $464,436 | | **Total Liabilities** | **$39,435,459** | **$36,450,629** | | **Total Shareholders' Equity** | **$5,684,128** | **$5,519,392** | [Consolidated Statements of Income](index=5&type=section&id=Consolidated%20Statements%20of%20Income) Net income available to common shareholders rose to **$133.5 million** in Q1 2023, driven by a **30.4%** increase in net interest income Consolidated Income Statement Highlights (in thousands, except per share data) | Account | Three months ended March 31, 2023 | Three months ended March 31, 2022 | | :--- | :--- | :--- | | Net Interest Income | $312,231 | $239,475 | | Provision for credit losses | $18,767 | $2,720 | | Noninterest Income | $89,529 | $103,496 | | Noninterest Expense | $211,727 | $182,661 | | Net Income | $137,271 | $129,110 | | **Net Income Available to Common Shareholders** | **$133,473** | **$125,312** | | **Diluted Net Income per Common Share** | **$1.76** | **$1.65** | [Notes to Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) Detailed notes disclose accounting policies, BHG investment performance, portfolio credit quality, allowance for credit losses, and capital adequacy - Subsequent to quarter-end, the company completed a sale-leaseback of 36 properties for **$127.5 million**, expecting a pre-tax net gain of approximately **$55.4 million** in Q2 2023, with an additional 15 properties under agreement for sale for **$90.5 million**[34](index=34&type=chunk)[35](index=35&type=chunk)[36](index=36&type=chunk) - Following the sale-leaseback, the company restructured its bond portfolio, selling **$166.0 million** in available-for-sale securities for a net loss of **$9.2 million** to partially offset the property sale gain[37](index=37&type=chunk) - Income from the **49%** equity method investment in Bankers Healthcare Group (BHG) was **$19.1 million** for Q1 2023, a significant decrease from **$33.7 million** in Q1 2022[20](index=20&type=chunk)[179](index=179&type=chunk)[180](index=180&type=chunk) - As of March 31, 2023, the company had approximately **$280.1 million** in unrealized losses on its available-for-sale securities portfolio, primarily due to interest rate changes[45](index=45&type=chunk) - The allowance for credit losses on loans stood at **$313.8 million**, or **1.04%** of total loans, with a provision for credit losses of **$18.8 million** for the quarter[62](index=62&type=chunk)[209](index=209&type=chunk) - Both Pinnacle Financial and Pinnacle Bank met all capital adequacy requirements to be considered **well-capitalized** under regulatory standards as of March 31, 2023[140](index=140&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=37&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management analyzes Q1 2023 financial performance, covering net interest income, credit losses, noninterest income/expense, loan/deposit growth, and liquidity management [Overview](index=37&type=section&id=MD%26A_Overview) Q1 2023 diluted EPS rose to **$1.76**, driven by **30.4%** net interest income growth, despite higher credit provisions and lower noninterest income Q1 2023 Key Performance Metrics (in millions) | Metric | Q1 2023 | Q1 2022 | | :--- | :--- | :--- | | Diluted EPS | $1.76 | $1.65 | | Net Interest Income | $312.2M | $239.5M | | Provision for Credit Losses | $18.8M | $2.7M | | Noninterest Income | $89.5M | $103.5M | | Noninterest Expense | $211.7M | $182.7M | - Subsequent to the quarter, the company executed a sale-leaseback of 36 properties for **$127.5 million**, expecting a pre-tax gain of **$55.4 million** in Q2 2023, and sold **$166 million** of AFS securities for a **$9.2 million** loss to partially offset the gain[159](index=159&type=chunk)[160](index=160&type=chunk)[162](index=162&type=chunk) [Results of Operations](index=39&type=section&id=MD%26A_Results_of_Operations) Q1 2023 net interest income increased **30.4%** to **$312.2 million**, with NIM at **3.40%**, while credit provisions and noninterest expenses rose - Net interest margin was **3.40%** for Q1 2023, compared to **2.89%** for Q1 2022 and **3.60%** for Q4 2022, reflecting the rising short-term interest rate environment[169](index=169&type=chunk) - The provision for credit losses increased to **$18.8 million** in Q1 2023 from **$2.7 million** in Q1 2022, primarily due to loan growth and a weaker economic forecast[172](index=172&type=chunk) - Income from the equity-method investment in BHG decreased **43.3%** to **$19.1 million** in Q1 2023 from **$33.7 million** in Q1 2022[174](index=174&type=chunk)[180](index=180&type=chunk) - Salaries and employee benefits expense increased by **$13.9 million** YoY, driven by an increase in full-time equivalent associates to **3,281.5** from **2,988.0** and annual merit increases[187](index=187&type=chunk)[188](index=188&type=chunk) [Financial Condition](index=46&type=section&id=MD%26A_Financial_Condition) Total assets reached **$45.1 billion**, with loans at **$30.3 billion** and deposits at **$36.2 billion**, while credit quality remained stable Loan Portfolio Composition (in thousands) | Loan Category | March 31, 2023 | % of Total | | :--- | :--- | :--- | | Commercial and industrial | $10,723,327 | 35.4% | | Non-owner occupied CRE | $6,887,733 | 22.7% | | Consumer real estate – mortgage | $4,531,285 | 15.0% | | Construction and land development | $3,909,024 | 12.9% | | Owner occupied CRE | $3,686,796 | 12.2% | | Consumer and other | $559,706 | 1.8% | | **Total Loans** | **$30,297,871** | **100.0%** | - Total deposits grew to **$36.2 billion**, with uninsured deposits estimated at **$14.2 billion**, of which **$2.2 billion** were collateralized[219](index=219&type=chunk) - Federal Home Loan Bank (FHLB) advances increased significantly to **$2.2 billion** from **$464.4 million** at year-end 2022 to bolster on-balance sheet liquidity[219](index=219&type=chunk) - Nonperforming assets were **$44.8 million** (**0.10%** of total assets) at March 31, 2023, down from **$46.1 million** at December 31, 2022[208](index=208&type=chunk) [Market and Liquidity Risk Management](index=53&type=section&id=MD%26A_Market%20and%20Liquidity%20Risk%20Management) The company manages interest rate and liquidity risk, showing asset sensitivity with a **2.5%** NII increase in a **+100 bps** rate shock Estimated % Change in Net Interest Income Over 12 Months (Instantaneous Rate Change) | Rate Change | March 31, 2023 | | :--- | :--- | | +300 bps | 6.50% | | +200 bps | 4.90% | | +100 bps | 2.50% | | -100 bps | (2.00)% | | -200 bps | (3.60)% | - The company's percentage of deposits that were both uninsured and uncollateralized was approximately **33%** as of March 31, 2023, which management believes is below peer average[254](index=254&type=chunk) - Available liquidity sources at March 31, 2023, included an estimated **$2.2 billion** in additional FHLB borrowing capacity, **$155.0 million** in correspondent bank lines, and **$5.1 billion** in Federal Reserve discount window and BTFP availability[251](index=251&type=chunk)[252](index=252&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=59&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) This section cross-references market risk disclosures to the detailed analysis provided in Management's Discussion and Analysis - The report directs readers to the Management's Discussion and Analysis (MD&A) section for quantitative and qualitative disclosures about market risk[263](index=263&type=chunk) [Item 4. Controls and Procedures](index=59&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls and procedures were effective, with no material changes to internal control over financial reporting in Q1 2023 - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of the end of the reporting period[263](index=263&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, internal controls[264](index=264&type=chunk) PART II – Other Information [Item 1. Legal Proceedings](index=60&type=section&id=Item%201.%20Legal%20Proceedings) The company reports no material pending legal proceedings against it or its subsidiaries - There are no material pending legal proceedings to which Pinnacle Financial or its subsidiaries are a party[267](index=267&type=chunk) [Item 1A. Risk Factors](index=60&type=section&id=Item%201A.%20Risk%20Factors) No material changes to the company's risk factors were reported since the 2022 Form 10-K filing - No material changes to the company's risk factors were reported since the filing of the 2022 Form 10-K[268](index=268&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=60&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) No share repurchases occurred in Q1 2023, but a new **$125 million** share repurchase program was authorized effective April 1, 2023 - No shares were repurchased under the company's publicly announced plan during the three months ended March 31, 2023[271](index=271&type=chunk) - A new **$125.0 million** share repurchase program was authorized, effective from April 1, 2023, through March 31, 2024[271](index=271&type=chunk) [Item 6. Exhibits](index=61&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including award agreements, incentive plans, and certifications

Pinnacle Financial Partners, Inc. (NASDAQ:PNFP) Q1 2023 Earnings Conference Call April 18, 2023 9:30 AM ET Company Participants Terry Turner – Chief Executive Officer Harold Carpenter – Chief Financial Officer Conference Call Participants Steven Alexopoulos – JPMorgan Jared Shaw – Wells Fargo Securities Catherine Mealor – KBW Casey Haire – Jefferies Brandon King – Truist Securities Michael Rose – Raymond James Stephen Scouten – Piper Sandler Brett Rabatin – Hovde Group Brody Preston – UBS Brian Martin – Jan ...

Estimated loan subs and prepayments (Note) • Estimate for loan substitutions and prepayments increased to ~5.81% of total loans (loans sold to other banks) driven primarily by a weaker macroeconomic outlook and conservative loss provisioning. • Collectively, a record $528M in on-balance sheet allowance and reserves for estimated substitutions and prepays. Actual loan substitutions and prepay reserves as % of Outstanding Balances 3.79% 2.94% 2.95% 1.83% 2.68% 3.25%2.72% 2.47% 2.87% 2.51% 2.12% 2.52% 0.25% 0. ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2022 OR o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________ to ________ Commission File Number: 000-31225 Pinnacle Financial Partners Inc. , Inc. (Exact name of registrant as specified in charter) Tennessee 62-1812853 (State ...

Pinnacle Financial Partners, Inc. (NASDAQ:PNFP) Q4 2022 Earnings Conference Call January 18, 2023 9:30 AM ET Company Participants Terry Turner - Chief Executive Officer Harold Carpenter - Chief Financial Officer Conference Call Participants Jared Shaw - Wells Fargo Securities Stephen Scouten - Piper Sandler Steven Alexopoulos - JPMorgan Michael Rose - Raymond James Casey Haire - Jefferies Matt Olney - Stephens Inc. Catherine Mealor - KBW Jennifer Demba - Truist Securities Brian Martin - Janney Montgomery Op ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (mark one) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2022 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OF 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934 For the transition period from ____ to ____ Commission File Number: 000-31225 Pinnacle Financial Partners Inc. , Inc. | (Exact name of registrant as specified in i ...