Pinnacle Financial Partners(US:PNFP)2024-01-17 19:30Financial Data and Key Metrics Changes - The company achieved a 14.8% increase in tangible book value year-over-year and a 20% total shareholder return in 2023 despite a challenging operating environment [3][104] - The end-of-period (EOP) deposit rates increased by only seven basis points, marking the smallest increase in some time [5] - The net interest margin (NIM) remained flat quarter-over-quarter, with expectations for modest increases in 2024 [7][61] Business Line Data and Key Metrics Changes - The company reported a 10.7% linked-quarter annualized average loan growth for the fourth quarter, with average fixed-rate loan yields on new originations at 7.33% [6][19] - Fee revenues, excluding BHG and nonrecurring items, increased by 1% to 2% linked-quarter, with strong performance in wealth management [10] - Fourth quarter expenses included a $29 million FDIC special assessment, which will be paid over eight quarters starting June 2024 [11][12] Market Data and Key Metrics Changes - The company’s loan portfolio continued to perform well, with net charge-offs during the quarter at just 17 basis points [113] - The average FICO score for BHG improved to 745 in 2023 from 732 in 2022, indicating better credit quality [14] - The company anticipates a gradual increase in net interest margin throughout 2024, with expectations of four rate cuts [161][171] Company Strategy and Development Direction - The company aims to maintain consistent, reliable growth in its deposit book at a reasonable price, targeting high-single to low-double digit growth [44] - The focus remains on growing net interest income in the high-single to low-double digits for 2024, with an emphasis on fixed-rate loan pricing [19][39] - The company is strategically selective in commercial real estate lending, focusing on projects with strategic reasons for participation [96] Management's Comments on Operating Environment and Future Outlook - Management acknowledged 2023 as one of the most difficult operating environments for banks since the Great Recession but expressed confidence in future performance [3] - The company expects credit metrics to normalize, with a belief that credit will continue to perform well moving into 2024 [8][113] - Management emphasized the importance of maintaining a strong capital base and effective risk management to support growth [148] Other Important Information - The company has a strong liquidity position, with BHG's liquidity platform remaining exceptionally strong [13] - The tangible book value per common share increased to $51.38 at quarter-end, reflecting effective management of tangible book value [104] - The company plans to continue investing in technology and talent to support growth, even during challenging times [135] Q&A Session Summary Question: Can you discuss the confidence on reduced losses by Q2? - Management indicated that BHG believes most losses will occur within the first 30 months of origination, with expectations for reduced losses by Q2 2024 [26][160] Question: What are the expectations for commercial real estate maturities? - Management discussed the differences in credits from 2019 and prior vintages, noting that most commercial real estate loans are on three to five-year terms and are ready for rate increases [30][57] Question: What is the outlook for net interest margin throughout the year? - Management expects NIM to be relatively flat in Q1, with gradual increases anticipated as rate cuts occur [161][171]