Pinnacle Financial Partners(US:PNFP)2024-04-23 18:58Financial 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]