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PINNACLE FINANCIAL PARTNERS INC (PNFP)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 delivered strong top-line and earnings momentum: total revenues rose 19.9% year over year to $475.3M, net interest income increased 14.7% year over year to $363.8M, and diluted EPS was $1.91, up 60.5% year over year, with net interest margin holding at 3.22% .
  • Balance sheet growth was outsized: end-of-period loans grew 13.7% linked-quarter annualized to $35.49B and deposits grew 18.4% linked-quarter annualized to $42.84B; core deposits reached 83.9% of total funding .
  • 2025 outlook introduced: loan growth 8–11% (EOP), deposits growth 7–10%, net interest income growth 11–13%, NIM flattish in Q1 with expected expansion over the year, fee growth 8–10%, expenses guided to $1.13–$1.15B, and net charge-offs guided to 16–20 bps .
  • Dividend raised: quarterly common dividend increased to $0.24 per share (from $0.22), offering incremental capital return and signaling confidence in earnings durability .

What Went Well and What Went Wrong

What Went Well

  • “Fourth quarter was a whale of a quarter for us… adjusted revenue growth was strong, adjusted fully diluted EPS growth was strong and tangible book value per share growth was strong” .
  • Exceptional balance sheet momentum: Q4 deposits +$1.9B and loans +$1.2B; core deposits up 13% year over year while noncore deposits were flat .
  • NIM held at 3.22% as deposit cost reductions (–34 bps QoQ) offset decline in loan yields (–33 bps QoQ), driving net interest income higher by $12.3M QoQ .

What Went Wrong

  • BHG contribution moderated: Q4 income from BHG declined to $12.1M (from $16.4M in Q3), with off-balance substitution loss accrual increased to 7.1% and substitution loss rate rising to 4.9% .
  • Incentive accruals lifted expenses: Q4 cash incentive costs were ~$3.1M higher QoQ to reach ~98% target payout, pressuring noninterest expense .
  • Loan yields compressed amid competition and rate volatility; management indicated new fixed-rate origination yields were below targets in prior periods, requiring renewed pricing discipline .

Financial Results

MetricQ2 2024Q3 2024Q4 2024
Total Revenues ($000s)$366,550 $466,746 $475,335
Net Interest Income ($000s)$332,262 $351,504 $363,790
Noninterest Income ($000s)$34,288 $115,242 $111,545
Diluted EPS ($)$0.64 $1.86 $1.91
Net Interest Margin (%)3.14% 3.22% 3.22%
Efficiency Ratio (%)74.04% 55.56% 55.10%

Segment/Noninterest Income Components (YoY/Sequential context):

Component ($000s)Q4 2023Q3 2024Q4 2024
Investment Services$13,410 $17,868 $19,233
Trust Fees$6,987 $8,383 $9,098
BHG Income$14,432 $16,379 $12,070
Gains on Mortgage Loans Sold$879 $2,643 $2,344
Other Noninterest Income$27,532 $48,629 $50,438

Balance Sheet and Pricing KPIs:

KPIQ2 2024Q3 2024Q4 2024
Loans EOP ($000s)$33,769,150 $34,308,310 $35,485,776
Total Deposits EOP ($000s)$39,770,380 $40,954,888 $42,842,992
Noninterest-Bearing Deposits EOP ($000s)$7,932,882 $8,229,394 $8,170,448
Loan Yield (%)6.71% 6.75% 6.42%
Deposits & Interest-Bearing Liabilities Rate (%)3.20% 3.19% 2.88%

Asset Quality:

MetricQ2 2024Q3 2024Q4 2024
Annualized Net Loan Charge-offs to Avg Loans (%)0.27% 0.21% 0.24%
NPAs / Loans+ORE+Other NPAs (%)0.30% 0.35% 0.42%
ACL / Total Loans (%)1.13% 1.14% 1.17%

BHG Operating Indicators:

MetricQ3 2024Q4 2024
Originations ($000s)$989,000 $1,160,000
Loans Sold to Bank Network ($000s)$521,000 $505,000
Off-Balance Substitution Loss Rate (%)4.2% 4.9%
Accrual for Substitution/Prepayment (% of unpaid balances)6.2% 7.1%
On-Balance Sheet Loan Losses (%)7.2% 7.3%
CECL Reserve (% loans HFI)9.1% 9.3%

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net Interest Income Growth (YoY)FY20258–10% (FY2024 guide) 11–13% Raised vs last year’s growth outlook
Net Interest MarginQ1 2025 / FY2025FY2024: flat-to-slightly up Q1 flattish; expand through FY2025 Maintained/clarified (expansion expected through FY)
Loan Growth (EOP)FY20257.5% (FY2024) 8–11% Raised vs prior-year guide
Deposit Growth (Total)FY2025Mid-to-high single digits (FY2024) 7–10% Maintained to slightly raised
Fee Income GrowthFY202514–17% (core fees, FY2024) 8–10% Lowered (more conservative)
Noninterest ExpenseFY2025$960–$990M (FY2024) $1.13–$1.15B Raised (growth/incentives)
Net Charge-offsFY202520–25 bps (FY2024) 16–20 bps Lowered
Common DividendNext quarter$0.22 (Q3 2024) $0.24 Raised

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 2024)Previous Mentions (Q3 2024)Current Period (Q4 2024)Trend
Deposit pricing/betasElevated deposit beta; moved ~40% of deposits to index Fed funds; managing down-rate cycle positioning Deposit pricing contained; NIB stable; margin expansion underway Deposit beta ~58% outpacing loan beta ~45%; ongoing initiatives to lower outsized rates and improve mix Improving funding cost trajectory
NIM outlookRepositioned bond book; expected NIM up in 2H24 NIM 3.22%; flat-to-slightly up for FY2024 NIM held 3.22%; Q1 flattish; FY2025 expansion expected with steeper curve Stable to rising
Loan growth/hiringSlightly lowered 2024 loan growth; strong recruiting (52 new producers in Q2) Loan growth accelerating; core C&I strength; CRE exposure targeted down EOP loan growth 13.7% linked-qtr annualized; 161 revenue producers in 2024; 35 in Q4; 2025 guide 8–11% Strengthening pipelines
BHG strategy/creditExited SBA business; building inventory; spreads resilient; off-BS losses modest uptick BHG income pressured; reserves increased; demand strong but credit tightening Originations up; spreads improved; off-BS loss accrual raised; ABS issuance planned in 1H25 Mixed: improving volume/spreads, elevated losses
CRE concentrationTargeted reductions to 70% (construction) and 225% (total CRE) of capital Progress toward targets; exposure reduced Ratios at 70.5% (construction) and 242.2% (non-owner/multifamily) of capital; trending lower vs 2023 De-risking continues
Capital actionsBond book repositioning completed in Q2 Capital ratios improved; TBV expansion Dividend raised; capital remains solid (CET1 10.8%) Supportive to shareholder returns

Management Commentary

  • “Adjusted revenue growth… EPS growth… tangible book value per share growth was strong… Asset quality remains strong and balance sheet growth was extraordinarily strong” .
  • “End-of-period loans increased by 13.7% linked quarter annualized… Deposit growth was again a real bright spot… increased deposits by $1.9B… core deposits up year-over-year by 13%” .
  • “We believe our net interest income growth will approximate a range of 11% to 13%… call us optimistic” .
  • “Introducing our 2025 expense guide at a low of $1.13B to a high of $1.15B… merit raise ~4%; hiring consistent” .
  • “Net charge-offs… around 23 bps for the year… for 2025 should come in between 16 and 20 basis points” .
  • “We successfully lowered our average cost of deposits by 34 bps during the fourth quarter, offsetting the 33 bps decline in average loan yields… maintained our NIM” .

Q&A Highlights

  • Expense/incentives: Variable expense levers mainly in incentive accruals; limited non-personnel flexibility; expense guidance assumes target payout; ~midpoint revenue assumptions for full payout .
  • Funding cost actions: Initiatives to lower outsized deposit rates underway irrespective of Fed moves; push to grow operating (DDA) accounts back to pre-COVID mix .
  • NII upside drivers: Higher-end loan growth, pricing/margin holding, potential bond book tactics (not in guide), and stronger economic loan demand could lift above guided range .
  • BHG focus: Strengthening balance sheet, exiting non-core (e.g., SBA, BNPL ~200 headcount reductions), building production platforms; off-BS reserves are a priority .
  • M&A posture: Prefers organic growth via recruiting and market share movement; M&A only if unusually attractive; current strategy continues ].

Estimates Context

  • S&P Global Wall Street consensus for EPS and revenue was unavailable at the time of writing; therefore, estimate comparisons cannot be provided. Values would be retrieved from S&P Global if accessible.
  • Management indicated internal plan EPS was better than anticipated by ~$0.06–$0.07 due to strong Q4 performance necessitating higher incentive accruals; this reflects internal benchmarks, not Street estimates .

Key Takeaways for Investors

  • PNFP’s Q4 validated its growth model: strong organic loan and deposit expansion with NIM management via deposit beta discipline and fixed-rate loan repricing, positioning for double-digit NII growth in 2025 .
  • Funding costs are trending down (2.88% vs 3.19% in Q3), supporting NIM stability/expansion; ongoing initiatives to lower outsized deposit rates and improve mix offer incremental tailwinds .
  • Expense guide reflects growth investments and incentive alignment; near-term operating leverage may be muted, but management prioritizes revenue/EPS compounding and TBV accretion .
  • BHG is improving volumes and spreads; credit costs remain elevated off-balance sheet but are provisioned; ABS issuance planned in 1H25 supports liquidity and placement strategy .
  • Risk-managed CRE exposures continue to decline toward internal targets, de-risking the balance sheet while preserving capacity to reengage selectively post-normalization .
  • Dividend increase to $0.24 signals confidence in durable earnings and provides incremental yield support for the stock .
  • Near-term trade: positive bias on NIM/NII trajectory with potential upside if loan demand outpaces plan; medium-term thesis centers on sustained market share gains from recruiting and advantaged markets, balanced by watch items at BHG credit and expense intensity .