Pinnacle Financial Partners, Inc. Q1 FY2024 earnings call

• Shareholder Value Dashboard: Focus on GAAP and adjusted metrics showing revenue and balance sheet growth, aiming for tangible book value compounding. - Deposits: Competitive deposit rates, preemptive strikes to reduce expensive accounts, core deposit growth expected. - Loans: Loan growth target 9%-11%, fixed rate loan repricing key, expect margin expansion in Q2. - Credit: Allowance for credit losses increased due to problem borrower, net charge-off rate expected 20-25 basis points, CRE portfolio performing well. - Fees: Fee revenues up, BOLI contributing, wealth management strong. - BHG: Origination trends down, placements strong, reserves increased, credit improvement expected.

Deposits: Strong growth with noninterest bearing deposits performing well. Target to grow deposits in high single to low double digits. Loans: Slightly less than anticipated due to large put payoffs, but still expect 9%-11% growth. Fee Revenues: Up 11.4% linked quarter, raising guidance for 10%-14% growth driven by primary fee businesses. BHG: Origination trends down in Q1, placements strong, reserves increased, but believes credit may be turning the corner. Revenue contribution details: Deposits, loans, and fee revenues are key segments with deposit growth being a significant driver.

• Deposit growth: Target high single to low double digits. - Loan growth: 9%-11% expected. - Fee revenues: Raised guidance to 10%-14%. - NIM: Expect expansion in Q2, modified interest rate forecast from 4 cuts to 2, with cuts in September and November or possibly none.

• Interest rate volatility: Impact on NIM and loan growth. - Credit risk: Potential deterioration in problem borrowers, commercial real estate market uncertainties. - Deposit cost volatility: Dependence on core deposit growth to avoid expensive wholesale funding.

Q: Quick question on the NIM outlook. You guys mentioned expecting it up in the second quarter. Just trying to get a sense of what's going on the yield side.

A: Harold Carpenter: I think the muni bond yields, there's a volume issue there. But I think we should see some of that recover here in the second quarter. The deposit rate forecast, I think, will be just a small creep. What's really dependent on our NIM forecast is how well we do on fixed rate loan repricing and whether our DDA accounts hang in there like we think they'll hang in there. So if those two things happen, we think our NIM forecast is solid. Obviously, loan growth is an important element to all that. And so we still feel pretty good about the 9% to 11% loan growth for the year.

Q: Question on the BHG outlook. The guide implies a pretty steep ramp in the remaining quarters here. Just wondering what does that -- how do you get BHG run rate up to that sort of mid $20 million level to hit that guide?

A: Harold Carpenter: We think originations are going to be probably a little better here for the rest of the year. What impacted the first quarter a lot was that ABS placement. I don't think they're going to spend as much time working on balance sheet kind of growth and they'll spend more time on the gain on sale part. But you're right, the credit is the issue. We're all optimistic to see those bars turn south and they feel pretty good about where they are right now.