Pinnacle Financial Partners, Inc. Q4 FY2023 earnings call

• Hiring and Investment: Investing in talent even during difficult times has enabled share take and balance sheet growth, contributing to revenue and earnings growth.
• Deposit and Loan Strategies: Disciplined approach to deposit pricing and growth, strong loan growth with focus on fixed-rate loan pricing.
• Credit Metrics: Credit metrics normalizing, though still below five-year median, with one non-performing credit in the process of rehabilitation.
• BHG: Supportive of BHG's credit discipline, origination volumes down but sales into bank network consistent, liquidity strong.
• Expenses: Q4 expenses in line, with a $29 million FDIC special assessment recorded, and $46 million in 2023 incentive costs, $30 million of which was incentive savings.
• Capital: Tangible book value per share at $51.38, up 14.8% YOY, with favorable capital ratios.
• Jacksonville Expansion: Hired leadership team for Jacksonville, expecting rapid build-out to a $3 billion bank in 5 years.

Deposits: Linked-quarter annualized average growth of 4.6% in Q4 2023, with EOP deposit rates up seven basis points. Disciplined approach to deposit pricing and growth, with end-of-year deposit outflows noted but hopeful for return. Loans: Q4 was a strong loan growth quarter with 10.7% linked-quarter annualized average loan growth. Fixed-rate loan yields on newer originations ended at 7.33%, and spread maintenance on floating/variable rate loans remained strong. NIM: Flat quarter-over-quarter, but expectation of NIM expansion in 2024. Credit: NPAs and classified assets below five-year median, net charge-offs in Q4 at 17 basis points, with one non-performing credit being rehabilitated. BHG: Q4 origination volumes less than Q3, 25% of BHG borrowers from 2021-2022 would not qualify now, sales into bank network consistent, held-for-sale inventories up $170 million, liquidity strong.

• Deposits: High-single to low double-digit growth expected.
• BHG: Modest growth, mid-single, focus on core businesses.
• Loans and Loan Pricing: Focus on fixed-rate loan pricing to grow net interest income high-single to low-double digits.
• Expenses: Expense range $960 million to $985 million, with incentive payout dependent on earnings.
• Earnings: Aim for top quartile earnings growth, with EPS growth projected at low to mid-single digit.

• Rate Environment: Difficult operating environment affecting revenue and earnings.
• Credit Risks: Potential for credit losses if economic conditions worsen.
• BHG Risks: Volatility in BHG's performance, challenges in IPO market for fintech.
• Deposit Outflows: End-of-year deposit outflows, with need for deposits to return.

Q: Curious if we just kind of touch base on the expenses.

A: Discussion on expense components, non-personnel expense base, and IT spending.

Q: Curious on BHG and reduced losses.

A: BHG's credit loss cycle, with losses occurring in the first 30 months.

Q: On margin and rate cuts.

A: Expectations on NIM cadence, and response to rate cuts on deposits.

Q: On Jacksonville expansion and net charge-offs.

A: Expectations on Jacksonville build-out, net charge-off expectations based on economic scenario.