Pinnacle Financial Partners, Inc. Q3 FY2024 earnings call

• The company has seen strong balance sheet growth with loans, earning assets, and core deposits all increasing. - It has been taking market share in various markets in the Southeast, with successful execution of a playbook in Tennessee, Carolinas, Virginia, etc. - Culture is a key driver, with the company being recognized as a top place to work, attracting and retaining top talent. - Hiring of revenue producers has been strong, with 37 new revenue producers in the third quarter. - BHG operations saw originations pick up in the third quarter, with placements and inventory building for future. - The company has a focus on growing fee revenues, with guidance raised for 2024 fee revenues excluding DSG.

Loans increased by $539 million during the quarter, a 6.4% linked quarter annualized growth. When considering C&I and owner-occupied commercial real estate, loan growth was approximately $706 million, a 17% linked quarter annualized growth. Earning assets were up 12% linked quarter annualized, and core deposits up 9% annualized. The company has strong market share in various markets like Nashville, where it has a lead share position in deposits and commercial market share. Revenue growth, EPS growth, and tangible book value accretion were all up nicely. Deposits excluding brokered increased by $887 million in the third quarter, with noninterest-bearing deposits showing volume growth for DDA accounts.

• Loan growth expectation revised to a range of 7% to 8% for 2024. - Deposit growth forecast maintained with a 7% to 9% growth estimate. - NIM outlook is flattish for the fourth quarter, but net interest income is expected to see growth. - Fee revenues excluding DSG guidance raised to a range of 23% to 26% growth over last year. - Incentive target increased to a 90% target payout for fiscal year 2024. - Expectations for BHG in 2025 are mid-single to high single-digit revenue growth, but more work needed on expense base.

• Uncertainty related to the yield curve and its impact on net interest margin and income. - Credit risks associated with off-balance sheet loans, with some lag in loss recognition compared to on-balance sheet loans. - Market uncertainties, including the impact of elections and potential downgrade cycles on business confidence and borrowing. - Dependence on continued ability to attract and retain top talent to maintain growth and culture.

Q: Brett Rabatin from Hovde Group asked about flattish margin expectations for 4Q and beta performance of loans and deposits.

A: Harold Carpenter said margin will be flattish, with need for balance sheet hedges to kick in, and net interest income expected to grow next quarter.

Q: Russell Gunther from Stephens asked about M&A strategy.

A: Terry Turner said unlikely to acquire banks due to strong organic growth and lower risk profile.

Q: John Rau on behalf of Jared Shaw asked about BHG reserves.

A: Harold Carpenter explained lag in loss recognition for off-balance sheet loans and difference in reserve calculations.

Q: Stephen Scouten from Paper Sandler asked about moving deposits to index and culture.

A: Harold Carpenter and Terry Turner said it's through relationship management with no significant attrition risk, and culture continues to propel growth.

Q: Ben Gerlinger from Citi asked about loan and deposit mix from hired personnel.

A: Harold Carpenter said it depends on market, with general mix including C&I and private bankers, and average self-funded book of $65 million.

Q: Anthony Elian from JPMorgan asked about yield curve impact on 2025 revenue.

A: Harold Carpenter said neutral balance sheet helps manage through inverted curve, with hope for better slope in 2025.

Q: Catherine Mealor from KBW asked about NII growth outlook.

A: Harold Carpenter said strong correlation with loan growth, optimistic for better than 2024.

Q: Samuel Varga from UBS asked about fees and private banker hires.

A: Harold Carpenter and Terry Turner said fees impacted by hiring, with strong growth in investment services from hired private bankers.

Q: Brian Martin from Janney Montgomery asked about loan repricing and deposit growth.

A: Harold Carpenter explained loan repricing of prime rate credit, and deposit growth driven by verticals and industry experts.

Q: Tim Mitchell from Raymond James asked about deposit maturity and loan renewal targets.

A: Harold Carpenter discussed deposit maturity schedule and revised loan renewal targets for better competitiveness.