Pinnacle Financial Partners, Inc. Q1 FY2025 earnings call

• Hedgehog Strategy: Continuously attract top bankers, allowing them to consolidate clients to Pinnacle. This recruitment model is key to reliable growth, with revenue producers taking ~4 years to consolidate clients.
• Loan and Deposit Growth: Loan growth not dependent on economic tailwinds; driven by new hires and client consolidation. Deposit growth strong in Q1, with 7% to 10% growth expected in 2025.
• BHG Performance: BHG had strong fee revenues, closed tenth ABS issuance, and credit performance better than anticipated.
• Expenses and Fees: Fees from banking and wealth management performing well. Restructured $189 million of investment securities with expected payback in 3 years, adding ~$1 million in spread revenues per quarter.

Loans: End-of-period loans increased 7.3% linked quarter annualized. Loan growth is driven by new markets and recruits, not economic tailwinds, with expected growth for 2025 at 8% to 11%. Deposits: First quarter saw $1.6 billion deposit growth, following a $1.9 billion increase last quarter. Total deposits estimated to grow 7% to 10% in 2025, with second quarter deposit growth likely slower due to tax-related run-up in March. NIM: Flattish at 3.21% in Q1. Expected to remain flattish with upward bias in Q2. Net interest income estimated to have a welcome lift in Q2 and growth outlook for 2025 is 11% to 13%. BHG: Had a strong quarter with fee revenues over $20 million. Closed tenth ABS issuance in Q1. Raising earnings estimates for 2025 from 10% to 20% growth over 2024.

• Loan Growth: Estimated 8% to 11% growth in 2025.
• Deposit Growth: Total deposits expected to grow 7% to 10% in 2025, with Q2 likely slower.
• NIM: Flattish in Q1, expected to remain flattish with upward bias in Q2. Net interest income growth outlook 11% to 13% in 2025.
• BHG: Raising earnings estimates to 20% growth in 2025.

• Economic Uncertainty: Volatility in the broader economy and uncertainty around tariffs, trade wars, and their impact on portfolios like trucking, multi-family, and leverage lending.
• Deposit Growth: Second quarter may be the toughest deposit growth quarter due to tax-related run-up in March.
• Yield Curve Impact: Uncertainty around yield curve movements and potential impact on loan pricing and prepayments.

Q: Did you change the baseline assumption under CECL for calculating reserves?

A: We kept it unchanged, but used the adverse scenario to influence qualitative assumptions.

Q: Concerns about deposit growth in Q2?

A: Traditionally April is tough for deposit growth; we're hedging, but have deposit pricing advantage from prior growth.

Q: Impact of tariffs on portfolios?

A: Credit officers focused on trucking, multi-family, leverage lending; truckers most stressed so far.

Q: BHG demand for paper?

A: Deal flow strong, banks and institutional buyers eager to buy BHG paper.

Q: CET1 ratio and growth outlook?

A: CET1 ratio bled down 10 basis points, but growth of ~$900 million in loans should keep risk-based capital ratios flat.