• Loan Growth: Increased by $539 million during the quarter, a 6.4% linked quarter annualized.
• C&I and Owner-Occupied Real Estate Loan Growth: Approximately $706 million or 17% linked quarter annualized.
• Deposit Growth: Increased by $887 million in the third quarter, excluding brokered deposits.
• Net Interest Margin (NIM): Expanded to 3.22% for the quarter.
• Net Interest Income Growth Outlook: Modified to 7% to 8% growth for 2024.
• Charge-Offs: Guidance narrowed to a range of 21 to 23 basis points for 2024.
• Provisioning Guidance: Narrowed to a range of 32 to 35 basis points in relation to average loans.
• Fee Revenue Growth Outlook: Raised to a range of 23% to 26% growth over last year, excluding BHG.
• BHG Fees: Approximately $16.4 million in the third quarter.
• New Revenue Producers: 37 new hires in the third quarter.

• Warning! GuruFocus has detected 5 Warning Sign with PNFP.

Release Date: October 16, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Pinnacle Financial Partners Inc (NASDAQ:PNFP) reported strong growth in key financial metrics, with loans up 6% linked quarter annualized, earning assets up 12%, and core deposits up 9%.
• The company has maintained a strong asset quality, which is highly correlated with long-term shareholder returns, and reported double-digit five-year CAGRs for revenue growth, EPS growth, and tangible book value accretion.
• Pinnacle Financial Partners Inc (NASDAQ:PNFP) has successfully expanded its market share in major Southeastern markets, leveraging its competitive advantage against vulnerable competitors.
• The company has been recognized as a top place to work, which aids in attracting and retaining top talent, contributing to its growth strategy.
• Pinnacle Financial Partners Inc (NASDAQ:PNFP) has demonstrated a consistent and repeatable growth model, not heavily reliant on key individuals or economic conditions, ensuring persistent growth even in challenging times.

Negative Points

• There is uncertainty in the economic environment, particularly with the upcoming election and potential rate cuts, which could impact loan growth and financial performance.
• The company faces challenges in managing the impact of a lower rate environment on its net interest margin and net interest income.
• Pinnacle Financial Partners Inc (NASDAQ:PNFP) has a significant portion of its loan portfolio that is variable rate, which may be sensitive to rate cuts, potentially affecting margins.
• The company has a high non-interest expense growth rate, which could be a concern if revenue growth does not keep pace.
• There is a risk of attrition as the company moves clients from negotiated to indexed deposit products, which requires careful management of client relationships.

Q & A Highlights

Q: Can you explain the flattish margin expectations for Q4 despite the beta performance seen with loans and deposits and the repricing of fixed-rate loans? A: We expect the margin to be flattish as we anticipate deeper rate cuts. Balance sheet hedges will come into play after significant rate cuts, but until then, we need to work on depositors to manage the impact. We still expect net interest income growth next quarter, but the net interest margin (NIM) will likely remain flat for the year. - Harold Carpenter, CFO

Q: Given the success in M&A and organic growth in the Carolinas and Memphis, is M&A still a strategy for Pinnacle? A: It's unlikely we'll acquire banks due to our ability to hire and grow rapidly with lower risk through market extensions. Our focus is on organic growth, leveraging our model of hiring top bankers and consolidating their business. - M. Terry Turner, CEO

Q: Regarding BHG, with lower rates expected to improve volume and rate perspectives, can we expect revenue growth in 2025? A: While we are not providing specific 2025 numbers yet, we anticipate mid-single to high single-digit revenue growth for BHG next year, contingent on further analysis of their expense base. - Harold Carpenter, CFO

Q: How do you manage the risk of attrition when moving customers from negotiated to index deposits, especially as rates decline? A: We rely on strong relationships with clients, ensuring they understand our approach to rate changes. We don't anticipate significant attrition as these are one-off negotiations handled by our relationship managers. - M. Terry Turner, CEO

Q: With the potential for a more favorable yield curve, how would an unchanged curve impact your 2025 revenue outlook? A: An inverted curve makes managing spreads challenging, but we believe our neutral balance sheet can handle it. A traditional slope would be beneficial, but we remain hopeful for improvements in 2025. - Harold Carpenter, CFO

For the complete transcript of the earnings call, please refer to the full earnings call transcript.