Pinnacle Financial Partners (PNFP) 17 Jan 242023 Q4 Earnings call transcript

Good morning, everyone, and welcome to the Pinnacle Financial Partners Fourth Quarter 2023 Earnings Call. Hosting the call today from Pinnacle Financial Partners is Mr. Terry Turner, Chief Executive Officer, and Mr. Harold Carpenter, Chief Financial Officer.

Please note, Pinnacle's earnings release and this morning's presentation are available on the Investor Relations page of their website at www.pnfp.com. recorded website be days. for being on for is Financial's Pinnacle the call and available will replay Today's next XX Instructions] During may forward-looking we the which [Operator constitute may make statements. comments presentation, to by All forward-looking may actual such any to forward-looking performance results, results uncertainties Financial other achievements Pinnacle materially facts statements. cause of risks, or differ statements that and expressed subject are from or implied

to XX-K and in new of information, not more subsequently or as to ability such Form put XXXX, update of the to reports. Pinnacle control [indiscernible] this factors are XX, a in any result any and predict, detailed other of on December cautioned Many reliance and filed statements forward-looking presentation, report contained obligation on Financial's listeners revise its otherwise. whether to The contained undue Financial's such these are year Pinnacle for or future statements. annual Pinnacle ended risks beyond quarterly forward-looking Financial and or events disclaims description

In financial available comparable website SEC measures measures comparable www.pnfp.com. reconciliation the addition, non-GAAP financial of will presentation measures measures as certain Financial's most GAAP the of non-GAAP include G. A by and Regulation to defined on a remarks Pinnacle GAAP be may these at directly

With Turner, that, over Pinnacle's I'm presentation now Terry going to President Mr. to turn the and CEO.

on of morning Good Thank which focus for the fourth in are the for very this for XXXX quarter Thank XXXX, quarter our you, good. Call. of us I outlook both morning. we'll performance Matthew. joining 'XX fourth Earnings Obviously, you think and

on operating any were impact of environments I rate and few XXXX. the to doubt expect presented on banks earnings if Recession. environment, trying in able then completely as There's firm. on dashboard what to We And manage banks its adjusted, basis. I shareholder the the revenue growth always really for start the value the XXXX GAAP with which since outrun one in is focus Great a difficult no most

a shareholder grew XX.X% difficult total XX% tangible despite the and book we operating value environment, return. But our produce in XXXX

of our nearly of to in primary grow sheet is terms approach unusual our for share revenue been new continue X.X to growth and one of even accounted investing in difficult now. Our talent, business, times able which, earnings, of volumes believe for total and take course, the reasons during particularly we've which a decades is shareholder balance in rapid we over return extraordinary and counts reliable acquiring

a very operate said it's metrics that at time time the over for of during bit fourth were We that problem little the to quarter. loans we've points. and that over quarter that expectation remain our low classified the credit impossible It's X-year net our charge-offs But the assets median, of have in X basis low. still some very And saw level to which NPAs We've XX normalize. just itself years. is below last enjoyed

excellent So for point shareholder fourth that was metrics particularly those on of creation. value 'XX quarter future us, an to quarter

to it in more at for a look that so And quarter. let with in-depth turn the over mind, me Harold

everybody. morning, Good Terry. Thanks,

in balances start return rates We that reporting balances end-of-year some see quarter, annualized believe smallest to only basis did quarter this real again the X.X% deposits, outflows up with a year-end. X driven bit fourth deposit so our our depositors the with like at several fourth mix for rate expensive rates growth quarter, us. are fluctuations those will more as overall quarter. We for increase of quite We was linked in lowered points, we're we deposit positive we somewhat see entered rates were hopeful where EOP the increase average larger, which and build quite deposit [indiscernible] shift some we in ended was down Deposit with pleased time. slow up. balances the by as profit felt of EOP a

between We the and of deposits. remain growth relationship pricing as disciplined to

deposits on for continue pace more without leaning deliberate heavily We the a our rate at will gathering growth. component for

As for as average a quarter fourth reporting loan loan are quarter to growth for us fourth was XX.X% linked quarter growth we another loans, strong the quarter. annualized the

As several we new yields X.XX%. results loan we've fixed are our quarter which on pleased mentioned originations with over fixed-rate rate last the of loan pricing, average the ended on quarters, with rate

Xs source D.C., into strong into Atlanta, about on entry franchise. maintenance coupons Spread rate variable Xs and these -- Jacksonville. understand our be floating in was the based high why loan This source loan and everyone continues to bankers to segments the give several experienced We on the our them growth slide XXXX. expansion resources local we're large markets That's in et our growth new cetera, with excited better and to net our announced of tools new hire our a on loans and Birmingham, build of loans. of much a so categories help in low

applies decades managers This as with loan -- well not Charleston to our Jacksonville. and new each Atlanta, other. is cases, is Much borrowers idea a relationship with in Pinnacle not Nashville, of of our Charlotte, up of is pitch, extended other markets, and true a for have borrow legacy showing working borrowers new with new growth to but as Bank D.C., over not new many at just relationships that Birmingham

we our modest NIM As opportunity to expansion a top NIM and XXXX. was in believe to reflects see increase flat chart quarter-over-quarter. We hope have see great continue the to

have. felt the that entered fairly margin we to our As we some confidence quarter, fourth like have modeled -- were we close we and

see a we importantly, into should move feel stronger XXXX. we as income More net interest we

most forecast, with believe, is Our forecasts consistent interest great out rate we there.

then of Fed we that decreases begin in more the future see and assumption May, planning rate Our year. is end three before the

be our shift less Importantly, that will inverted year-end. curve by it yield is

presenting As for perform credit the our loan again continued Pinnacle's to in very metrics. traditional quarter. portfolio credit, we're well fourth

was we large move XXXX. last into a from our year a realized nonperforming the well that night. couple We portfolio. good in credit losses of perform as to XXXX as belief in is credit to mentioned press one Our XXXX, should all Absent continue release not about XX basis or given the charge-offs quarter, out of is it [indiscernible] respectable from is for call to that very in we the as But to decided quarters. one credit. NPAs whether talk change on prior points, which prior our to comparison Debated

dues. particular past also in that accounted change all the dues. feel in road incidence an classified credit well classified no being the for We've to quarter was the expect one down substantially and and late downgraded We is loss and Similarly, fourth challenge isolated rehabilitated in of credit there currently. net credit both past the of

did we interest before but we so. granting current were or to in the next pay week on credit, few renewal, that which bar waiting a year-end, maturity past the the anticipate before For settle matters and borrower the

Concerning commercial estate, again, real select information. some

to As to have the reason a where strategic top left projects we chart, and for are very construction reserved selective participate. originations

For concentration quarter. ratios, our those that the follow ratio regulatory as XX% the at was prior XXX% roughly at same year-end,

Our of goal limited construction at approximately of appetite reduce to XX% for [indiscernible] the lending this ratio that is time. will remain

which discussion on fixed about of rate loans, top the is the renewals objective Secondly, the of right. real chart commercial estate much

where rate X we will these million is on around commercial next the loans currently repricing have quarters, average up fixed for the real in rate $XXX X.X%. estate coming Over approximately

fixed we Thus, will the these Our repricing loans years for loans weighted of a have current the X.X% loans. little see yield yield billion Altogether, from of maturing $X target X% opportunity average next be X.X%. perspective range. with renewal about rate in for to at these X over a we

always, I'll and fees, the in few speak as on a minutes. Now to BHG

to linked Excluding BHG non-recurring other revenues quarter. X% are X% various and [indiscernible], up fee

We will units we expect continue strong wealth into XXXX. report very had to the pleased professionals our wealth of fully that effort are management our management XXXX, a and

tax a in all X.X% BOLI approximate result million in the various around press cash the restructuring compares release, XXXX the is in we In to in sought This the million will yields the yield significant a on of XXXX. like last during We yield approximately on approximately on increase currently. payback quarter this noted X.X about we quarter as [indiscernible] BOLI As X.X% with charges contracts the end, believe years. period entire accomplished in incurred to as portfolio and $XX we carriers. during we feel we program our anticipated BOLI X.X% equivalent a $XXX

Fourth expenses. about in came expenses quarter we Now where thought.

assessment As will quarters in recorded we noted the FDIC we June $XX an the in in beginning the in over was from we X million fourth FDIC the A quarter. [indiscernible] of quarter, expect third which pay to assessment quarter, special the FDIC XXXX. fourth

more in payout for Our include total over to quarter our for slightly incentive the required XXXX plan for bonus were our have the costs XXXX $XX comparison target final million The fourth awards. $XX would about million. In cost calculations cost. cash

XXXX supposed of which for we the don't, our If aren't. XXXX exactly minutes. is work. I to target our then eligible for a in about is we savings, how outlook are few $XX more include So our expenses we million hit earnings If speak awards. plan will targets, in participants incentive

Capital.

increased year-over-year. book quarter XX.X% share per value Our up common tangible at $XX.XX to end,

portfolio. a for has top perhaps last risk tangible tangible firm has has not we value by value significant meaningfully. willing our believe, and investment management book book large decisioning [indiscernible] dilution Our Growing benefited value the firm big a been generation several of has over to been leadership positive mind been as our building impacted has, and years to book

we press that were If tangible matters we night. risk. the have capital several Impacting discussed quarter could put in at release we last had, in generation value book fourth [ratio] the

although with at of peers and the the several [indiscernible] forma end impact special results anticipate charge to on of other changes to last significant this our earnings will how to was [indiscernible] this of XXXX, and our The assessment, our pro slide capital In our chart banks compare and addition not the rules, bottom left to don't year to $XX efforts are on or which restructuring Again, for and we but capital did compare capital September, consistent pleased to ratios did effectively. the impact tangible on fourth incurred believe they these end of FDIC book to details the these of manage expectations for amount of BHG's a quarter and the October as million the ratios. favelas we X, capital adoption speaks so. we ratios capital value BOLI continue the we with CECL

BHG. Now to

we mentioned the less today. not at As XXXX shrink their BHG to estimates of and to half third and they that origination that caught borrowers volumes originations, a was box, as credit loan XX% last continue fourth first like look their quarter the point. of we quarter BHG quarter, XXXX I'd as fourth in were and than emphasize quarter offer

supportive credit our discipline efforts very of client are the by to We respect with and partners selection. BHG

sales less into the original fourth third bank with that quarter. see are credit. the appetite strong We to the network to banks also the nice basically a in runway consistent its a buyers into about quarter than sales pleased batch continue quarter. were very The for BHG quarter the which With on were during fourth fourth have placements held-for-sale to $XXX quarter, [indiscernible] BHG inventories institutional did provides million $XXX million going XXXX. increase by third

platform of not to lot here last liquidity strong. remains exceptionally a As from change liquidity, time. BHG's

as second also whole fourth the of million loans XXXX. $XX fourth ABS again, a and the BHG million their in a end about we ] mentioned [ of during During quarter. place BHG negotiated for at the private loans third the as $XXX quarter, transaction successfully quarter, result

of transactions sale these well. on private BHG recourse in many and as planning BHG routinely, Importantly, are being coming executed to clients XXXX with with no back back these of

As we've in since this trends spread detailing first spreads, shown the information usual to the is quarter the [indiscernible]. past

for result continue Again, years increase. coupons balance spreads loans expanded have quarters, buildup begin on-balance Not placements that the [indiscernible] loan for for Fed for spreads as platforms. mentioned to balance and sheet On to a bank midyear the the ago more the pay for all sheet bottom for represents the coupon institutional rates BHG few move loans believe the a the for should we've the years. several originated credit. chart both X XXXX, as reduce such off sheet the you on X book lower chart, than the last of would in borrower on These to BHG over the

has over last respect noticed credit lower we've to quarters, its quarters, As base. with several BHG we've its borrowing previous of noted -- tranches box as the particularly in tightened

to lines XXXX. loss to in XX% XXXX The details the to Average FICA for XXXX improved XXXX in reflect XX% [indiscernible] has X% XX%, XXX the right through began lowing on the with from performance rates level vintages in XXXX to of improved XXX out whereas out chart after range. originations cumulative within

on off on reserves for reserves, sheet both trends and On loss balance loans. usual the again, the

reserves. for sheet CECL losses loans October to XX-month a in the X.X% point adoption about for XXX-basis quarter. balance resulting the X fourth of in amounted As sheet the on expected, Trailing in increase on-balance on

just BHG losses credit loans. fourth on-balance If quarter, after has trend look begin quarter. have will at quarter much the losses XXXX. losses greater first to quarter great you fourth a sheet reduced the anticipating by with X.X% reduced losses now, credit in for believes that they were down Right been second BHG confidence a at shot degree of and of for the the seeing

that add $XXX production and BHG year post-COVID work flattish institutional Impacting fourth BHG's comparing production million, anticipated it the platform a has With about the we and BHG. said, earnings the better 'XX BHG for yield this curve, end and in million both $X That expenses at to of recorded impacting ready a XXXX. Also, production. results the XXXX. of background, fourth as was for earnings by network to and severance quarter, in get million onetime liquid are with up last BHG third along been potentially much quarter BHG loan A remain that paid in could bank our also, credit issues lot accommodating tighter Now box, very all $XXX to costs. and Last came more credit of several XXXX $XX quarter, range. make as [indiscernible] time, in for approximate to the high approximated mentioned other nonrecurring approximately million anticipates at 'XX. quarter into we done a

to Terry. With over that, back I'll turn it

been performance, Florida. Harold team Thank earlier discussing our XXXX. the mentioned Jacksonville, our you, was I of the Earlier, extension leadership Well, to market for when All fourth XXXX We right. in Harold. fact quarter hired in the in my shareholder to which, return I continue extraordinary to total business judgment, to the we that highlighted even produce. during invest has the times, difficult our the continue we key

trying things number in good us value position impact this the more are guardrails may a XXXX put business to it the to stay course which about provides enterprise-wide when that management earnings with a devastating any on their restructure [have] of to stumbled, risk long-term necessary which One but protect have while initiatives, expense many short-term was showcased importantly, system, shareholder creation. major the our model a but

to been liquidity The Our we lapped interest management investing to a our and conservative know to credit to me is build catalyst we the has decided markets to extend capital put in do. market you rates Southeast, but great time, which period this, large in an protected we intend availability us when $X for that us a any has base heard which a and the over what Florida we risk in been of about not board. approach position of continue markets. of is some as are the can grow, in advantaged billion when this urban long of a that Most again, X-year where we the new Most of ability business. bank only believe for a leadership all principal our talk target those market large you continue time our system a have to

having that And start-ups market. and de relatively including we started deposit as by Nashville, than recent the we basis did market used actually the this measure, out the in built in in Atlanta FDIC dominate like novo XXXX Washington, back in almost running faster we're things Atlanta share. we D.C. slide the on I to on any fact quarter, Nashville build Last a now

see other can with and here, our competitive on large of markets, the you ideally Florida rapidly growing. Jacksonville, high-growth And is it's healthy perspective the par suited extraordinarily from As landscape. us

really the growth same the off facing always to you and whom market the from exact growth size people now would It's of in. been to years, The understand landscape. But we've dynamics the we've dominated take that XX and I important be with competitors this. are can more It's been terms by success in try important the competitors that in share. help than size have important for markets competitive dynamics

controls said, what availability talent timing. is I've As the already

As that there. to uniquely a bank our is Jacksonville market. will can in is prepared market build for you XX-year see, run a Scott who team big leadership Keith, us that in veteran

also by was that market XXX,XXX clients was prior the North SunTrust. Buckland, has And who local He experience are North Truist that Florida. He in Regional and the X,XXX-employee joined group, an by market. middle the well. experience led all former former has He's for President years president joined and the Truist led Truist. BB&T to North XX years' franchise of serving Florida at most who in he Debbie Taylor, Jacksonville and they in as market through And XX Florida, at efforts Brian recently of

evident Jacksonville you I'll over So XXXX and So I now? think and the with I that, we'll walk it Harold, through it's turn why to outlook. why think

the Thanks, information go convince I'd through all slide on the Terry. Quickly, we'll like is financial key do points. to outlook. down the to XXXX What five

First deposits. is

headway. makes reasonable reliable believe book We deposit in critical. maintain gather in a just to have growth I That's at initiatives we've new so of that deposits to a invested all we've price. what made the great our

I great have place. think we in got tools

leading I think professionals we've gathering initiatives. these experienced hired deposit promote and

low to reasonable. So high growth single seems double-digit

We We do Secondly, to modest have BHG don't digit. year. mid-single great BHG. expect anticipate growth, a

that believe firm, basically businesses. growth and with a strong that focus core had great to intense as an one BHG, partnership partnership ability is comes sustainable new as with the on achieve we ever. growing We've think from a the I that has

Loans pipe. usual its to pushing the not leadership the back credit can BHG well We've get great on on this pricing, loans widgets In well, comparison fixed and a through focused get run be have better. can franchise we and to rate loan pricing year. fixed-rate of to more pricing. believe by could the to at half quite year, rate the second we loan The current We do but levels. BHG peers, primarily done their is

continue double that to XXXX. net be focus will as I income, to absolutely to that to single interest our think low We in ability critical on digits will high grow

of to incentive rates expenses. Now a topic I'd EPS million our discussion. results our great out harvested our growth $XX we are of for seems about support talk like plan to help 'XX, always at like It least XXXX. expense

to order in to XXXX, need have $XX of million that million people In support to $XX upwards we our accommodates a incentive in additional plan expense.

absolutely here we always, we numbers. have at years to numbers, hit about targeted won't don't hit my in averaged of pay. XX We've XX% If we Pinnacle. payout As

We the help bashful results. earnings are about support pool incentive using not to our

million I and do reasonable point between of a think million. expense probably target $XXX a is XXXX, $XXX this at for range

your So you're as range putting models, today. for together seems fair that

up, We a $X understands management XXXX to share [indiscernible] Lastly, was earnings. believe the grow got This get core group to price EPS. year. you've moving

aiming projections rate stack-ranked have that. for XXXX. and earnings peers growth So We've we're looked at of north

Our plan will be comfortably earnings in the top quartile growth. of

have outpace reflects that they've It's time all planning of achieve the grow To hard we some such work reflect our successful, be associates all earnings expense XXXX, while revenues. share growth price the in that simple. We let can't incentive assumptions so Hopefully, that. their our our targets earn accomplished. to we can

turn I'll for over Matt, Q&A. to back it that, with And you

Instructions] [Operator

Citi. Gerlinger from Ben coming from Your first question is

we just good of on kind touch base just second if it's a the expenses, Curious Harold, ago. clarity

majority double-digit it PPNR or entirely getting office to or be there back So kind that some going think to expenses is is on done? of is it of put technology XXXX. needs going this when legacy to to just Or good, -- lenders? low a overall, growth back seems spending about just but could over pressure mean, Pinnacle Pinnacle some I you like

might Just that kind of expense clarity on where be going.

we're start I'll this Ben, let as kind add his of on whole Terry I'll topic. and Yes, comments

year base next expense fairly is for reasonable. nonproportional Our

range. release I the think our rate probably that the low double-digit press growth incentives, talked about -- in you exclude last night, in we is if

kind pretty think with, of of I conservative I with for incentives. a to it, kind -- high we're an think grower excluding call XXX of target year, this that's single-digit XXX respect more to

stop they on think team do that to a got we've We IT a plan and they're XXXX. overboard technology got has good to can time lot kind the information Terry need extra and finish. believe year. operational expenses time, expense going plan. gone accomplish same we've on what of the Our spend We not With and burden. of expenses a think at We I'll through kind of this let they that, for

I to invest. point, your continue think, Yes, Ben, to we

would progression, it things. think technology. not all invest sorts of AI, be you got I foolhardy digital those the in to mean, all I

So we're not a do-nothing company.

invest to continue current. in technology We stay and

not you new to our trying think innovate different. We're I to anything. know do particularly not about we're trying and something firm,

Our follower. to a be idea fast is

And we so to that, to stay have do current.

expenditures participate So expenditures. type XXX% employees annual plan company, clarity for us and -- question incentive asset other to hitting in of incentive certainly, targets, than of and targets our get strong. our But cash growth on are our it that keeping lenders? this earnings I earn incentive revenue our salaried growth going this quality is based XXX% in phrased all in there one offer would things around, I So was guess the company, of your

X,XXX gets paid. are aimed So and people at that outcome that

year, and only therefore, expect associates earnings level revenue our having we to and growth make shareholder paid of produce most fast satisfy desire get returns, you to this XXX% think but at have I that. so enough we And would our associates can enough to the to XX% a do paid, run

color. good Sure. That's

and I commission philosophically your hitting good targets hit targets. think you means payouts upside bonus is thing just a really

a through parse just little If here could you bit. of kind

kind get adding a little the more rapid well they are structuring repricing you sure on on of end all of bit how incentivized? -- deposits book you might them deposits? are lenders revenue that incentive slack producers, I'm that. do kind than just are pace and when I of flexibility rate environment? their giving this more they have? much guys them in that's the about on kind year. specific pretty lender put give revenue a Do think deposits Because gathering your [conventionally] Or and growth, given just you together any So do additional how by back on the I'm margin gathering margin just of I how as on the lid the higher a overall? flexibility of scorecard will and curious you produce mean

me let people on lenders, where to a the this not Most include the Ben, hard Yes. relationship reinforce managers understanding systems is to paid made advisers, used a incentive just basis people its incentive time managers of get which its have I here. every earlier. leaders, tied on plans salary-based point salary Most category one and what That's our might here company at different and and hitting basis earnings are of associates, paid office would targets. revenue XXX% person, so happens Pinnacle. branch structure financial forth. their be

that connection. that that's a a thing I really direct lot important get people think so And of don't

done, forth, And volumes, And to you an about lenders, growth earnings get have which so the that deposit the have ask the to that so deposits to satisfactory is targets. to when you volumes. hit to will, for revenue and get gather we're got to done, incentive, going and produce low the have we've if we to produce they incentives

for an company, based that hitting and individually not And so that's for earnings company are target target -- individual the it's plan. the inside company, revenue incentive the at mindset the aimed people this X,XXX

are single asking. quarter, you, associates years on of the every do. far too I go want to our with talked I But to things is that firm, performance impacts don't you're all and person. to the mind really need where we to it we crystallize easy meet the -- we is incentives. are say to earnings them And But how and really and [indiscernible] what to on we afield from don't revenue are these get we on where important. about that Every idea for

in we're not not satisfactory example, rate if here's we're if hitting target loans can okay, an you fixed every here say, is. at As -- margin, repricing the look, and stand quarter, what Matt, a

did. we what Here's

and to and that can exactly happen to clearly what of happened Here's to hit order has needs revenue terms cost everybody what man, the and earnings what in target. see in us through

So on I too about to go I helpful. much don't mean that's it. hope

it flexibility are how gather is. just more curious much those so order them you in on to deposits? I Yes, giving was like

The -- getting down experience philosophy of know, experienced we're try here. what people as way average we've into our make -- years. to we people, the again, to we Fundamentally, But the that is do you XX hire hired the what the is and our flexibility freedom sure the what the they are price Generally, has know them for targets give and loans. the deposits then for to plenty what of manager relationship execute. to is decide the price the

needs They're this have on tight -- so deposits system for to have overpay to to those with performance of loans management down this? come we key idea, price what's performance forth. about things. a of through And hit not inclined you What happens underpaid or this? everybody's Why they targets. are going the we every of all where month, we're kinds indicators, on in fact, down, This because get the talking know and is, course, doing reason

So it to a that without be client-facing generally, takes lot are client an in active needs empowering handle to our management, but bureaucracy. of able we and arrears handling people

from Your coming from Rabatin Hovde next question Brett Group. is

you walk losses out sounds thinking the Wanted and it it's could perhaps better better year, reduced Can process play through -- by but to the little thought be guidance is on for start certain confidence BHG if and like try things and XQ. just it fairly in growth obviously, a you're a BHG the us contribution this your with credit on minimal lot growth? just with understand right and

a Yes, great that's question.

of with quite first that conversations lot of fairly given first call half will were the For And originating losses substantially XXXX-'XX won't to [ [indiscernible], within, kind and -- see their knowledge XXXX loans origination. a us, frequently. that of And they outsized the still losses the believe good they of BHG inflation, those we XX loans -- it's not all have these quickly. they months are be the loans they're ] it, have come great where

they pig have they XXXX So XXXX the are through a the, of that it, where that lot this already believe through the proverbial today the python. call at credits of gone end

And but bulk some believe of substantially through at the looking and of those, so the 'XX credits the they're they're watching that problems. still they

then And fintech Terry? in -- Okay. about

their largest migration think Brett, I said I'm months. analysis -- occurring the to say, XX part first losses the just simply, of they're the the to in watching -- point losses going Harold's

So look really just those that completed months before the XX-month when migrations, where more they to at occurred. cycle that have for have few go inflation will grade they a you period

I And the originated more rather Harold out so isolate think so and forth FICA scores recently credits. ongoing again,

on that literally is And just said, matter, so a as just it's which several months through away. he python, getting pig the

helpful. That's potential market you then to last BHG a Okay. be And of IPO. for have at about one to portion IPO fintech minimal increased and Is here? BHG's for been sell through year, how capital ratios? conceptually, Or from potentially obviously walk a was you the BHG ownership thinking could from maybe around would guys it just better? an point Can ownership how they this maybe fairly where of here? it do about just year appear your you to ownership think And them there

and think I own as to with some love fabulous really so partnership of a I've would Yes, this. gain doesn't that Brett, tried -- say, that enjoy a say [I XXX% reinforcement, on just we BHG we still way. BHG. hope], think business I've work it what if transactions, for continue sale said would own time XXX% want I I focus on I but It's Pinnacle, I to I to of

come the And conclusion so I think we've the understand worth bank difficulty the that volatility investors point, to the it's and getting to at battle. model not some the just in continuing

whenever time whole a guy. ownership I'm right to to sell-high of And more our so interest but at buy-low, we not would reduce the be we like is or dry, in in decided that BHG have part,

provides a great we're our income -- So source position an comfortable it's to It of ideal us. liquidate time not with with. to

arrangement. we we'll to all so could willing some of the get in to And enjoy markets in BHG. you continue sell higher our a where point position be But or the would whenever price, current

[Operator Instructions]

Your next Braziler coming from is question Fargo. Timur Wells from

outlook the it cadence rate given you throughout NIM through your then for the flat the kind margin NIM year upside. cuts, year much with like Maybe expectation wondering and X net your throughout the interest for -- that what isn't of the with expectation I'm just can NII cadence guidance. relatively for there talk maybe it first the quarter seems talk through course broader is in of for maybe be expectation to

lending. what's Timur, Yes, this see is will we in in for year our rate plan our fixed increases continued that

provide somewhat yields. in of So asset a here tailwind that for earning will XXXX it, call

very will if to we rate aggressive think a be have there I is cut.

Now keep I book in of basically head mind my some have deposit than others. indexed do probably start, that more XX% is so maybe that so --

with with deposit in of that probably we're of too, or money this touch for we're we're to go and to book. that, other rate going been and going portion to But test be contact not rates. XXXX, into maintain that to constant But clients a [indiscernible] do our we'll our their do from punch so our play we it's taking managers systems will very going to and some them, away course is banks respect us, for over in what have because what respond that do can basically. their We the be quickly appreciate button I can deposit cuts. depositors to with can lower relationship have and

And XXXX just for were loans compared -- and Got at talk and wondering prior real today estate just just credits originated XXXX the are how those can the pre-pandemic? I'm how just Okay. looking you is years different then vintages, through to commercial the maturities, world different what those it. given

fixed probably most I real commercial a on X- of rate. loans kind on Most X-year our Well, a nonowner-occupied to estate and both term. owner-occupied loans think of of are are the

think, large, most by for are and So ready [indiscernible] I increases.

increase the to last to was the seen years. I in last rentals saw think X over that I XX% some XX% X number they've

cash So interest the we they've feel like flow rates. to support got increased the

coming from JPMorgan. Your is Steven from next question Alexopoulos

following that. start -- on Just up

commercial estate guys with same these And regionals real the painted investors excited brush, that the regional banks, look same your the renewal your I So coming particularly rates markets are you are XX, portfolio. Slide higher all keeping out at the banks. where about in of many pretty is really matter on much of But when phenomenon no are.

large and renew 'XX those, seeing including material So don't what's any with has they're credit. without look I share you able of you extend have that commercial know is reset the community, guys impact office to a with not and happening? what's office extending to just on the -- were these estate fourth including credit. these on us turn And portfolio. changed? mentality ability just you XQ investor at (sic) office, How you just these negative the This you for loans loans? Could XQ Can as I are have two impact value pretend in share happening Are that One without questions. you the with quarter, a 'XX, real 'XX, the much

start let from or me time Terry the here. hearing accomplished particularly sacrifice I'll respect having onerous booked. to to having up loans officers. to renewals with Yes, any or getting these concessions They're get not I'm clean kind whatever of new credit and

any what of great you increases. -- it, do we're not kind rent enjoy We're and and think that markets, in seeing in is I rates. missed of you kind occupancy mentioned we are reductions we seeing

of best by our think segments commercial of performing portfolio. is probably large, the and estate book, We real our one

managers So Pinnacle a their have borrowers relationship for we're lot these builders, a pleased time, with long long time. with been where with is. of for it A developers,

have been we processes strongly our selection So good. pretty feel that client

-- feel here. Terry, be are need rocks didn't And having credit said, let to we they're necessarily overly from and concerned. so something I'll we everything don't with that Should looking expect, under clients go conversations to the That up prepared. accordingly. come you officers our they be can

Yes.

in three relates to estate think commercial things to it real it two, hit relates as office I I would whole, portfolio. and particularly the as

amazes if credits. people, I largest think you difficult loans that that our work that XX people Steve, special handled by thing, being are people through go assets one

think top related. CRE loans XX there that two in be would are I that

say I just And that. so again,

to phrase, certainly it performance, up so You was the performance a but well, far. the doesn't me know that, future so past indicator held strong that ensure portfolio is

what of it loans with X% the on mortgage take we those then construction And I the books underwritten reasons rope think a phase the the as I would went always permanent out assuming we begin in the and cost has X.X% that or been range. would of underwrite projects on you forth, under they when a to constant one that have books constant is the future two the at. on the loans so most with say things. would and One, mortgage

So might below rates, rates, it that the granted a tick below be it's renewal that perform the substantially renewal but was underwritten level. at not to

the years going these I up math, other be southeastern the got really But on or we most like I've been X the use mean markets, disaster important over like you. forth. on to we but X, about think want thing, growth markets east the aspect, in stories has extraordinary. growth so rent I those last and the see markets, the in I it, talked from this Francisco might CNBC San I

that so absorb fixed the And and obviously, rent those rates enables us a to puts borrowers elevated in what growth, is good position.

people they rightsize then it. have we of to whatever every need we're now just we they renew, if I as mean they idea have takes the rolling pretend, the their for the on to credit. it extend rightsize and open it to and have rightsize to to best, not it, and do think the I rightsize credit. we that do have But

it want to I thing I as say, comforting is to a me. don't but anyway, So overemphasize past performance,

to to helpful I That's margin. color. pivot Yes. the want

said I the you're Harold, you that cuts assuming right? in X Is think guidance. So

right. That's

Okay.

in yield So to this if From at normal back which you over X before X.X or view, think to starting take eventually we'll even If above more a I the is looks range. are rates, now. look know number normal is to a any like, right, rate there into renewals that the rate guys margin reason that we're pandemic, way routinely what with which are think where curve at structural X the will of range, see curve we about cuts at pretty margin these I your deposit you reason play cut go Is steepen. X.X but a time, range? out, any costs. cuts, you somewhere level but as won't your is time, there it back not

think net bit that's to what XXX debate think great interest somewhere we long-term we a there to think get as depositors I rate to will question, in relation floating on need And what and that a our we by quite credits is. current what and on and range, our based our the Fed to it's margin spread pay we funds. believe XXX we then our in

in we market provided curve. less sheet steepening the margin some, what is take hinting in can to year. that this advantage year believe present we call We good in But at do of we we'll our to time, shape. we're I'm get same the see think We will XXX. can think is our that balance great at we at think definitely right XXX the this us yield not now. So shape it,

coming Casey question Jefferies. Haire next is Your from from

Wanted to up follow just expenses. on again

it's low percentage the the versus get high end range, X that, So off just ], and to factors what [ the end? the about then includes which the some that's are a the of factors just to clarify, the the to FDIC that low? of range XXX is some that between Like assuming points high of base, are wide given what -- what I'm you assessment,

you said So Casey, be XXX [ what just ]. a to clear,

your expenses whatever 'XX? correct? assessment, in FDIC Yes. guide your includes which on sorry, the sorry, expenses, GAAP Basically, -- 'XX whatever based were is

special slide, the on What's Yes. not assessment. insurance include it FDIC the would

with the assessment. double you need special out that the, to high mid- So digit, to take

end some then to right. -- factors what low versus you. the you And get the All Got are Okay. of that the just high end? the

back. our that I our our expense think costs up will if drive think and way can, we and revenue we targets drive we will the that I hit can incentive think

our also strong year our a hiring, have in that we if think up. expenses I will trend

does guidance Jacksonville. expense include Our

aspirations So hired we for we've -- And we've we've in well that can believe embedded accomplish. what -- leader that the in as market there. got high got

coming is Raymond question Rose next from Your from James. Michael

of press mentioned the in release what and that origination those kind they just businesses. exited to impact we the BHG on was what guidance some are of follow-up kind a you Can about think their XXXX? the you Just discuss as

had that that later franchise developing. were pay They [indiscernible] Yes. they

like originated that. in million think something year, $XX I like they production, last

franchise. lending So that, that. they this They've patient were winging always experimented with off

decided are those to with not discussions also that I'm where I abandon think in of. that sure they've a couple they There's are units. the people with work that list I'm others on the that as aware well. of

I'm think just not had Michael. embedded sure, for they've guidance in is them. discussions this I production year. with But that they the have

just follow-up, then And helpful. as my back the That's to Okay. margin.

for rate implies I'm quarter cut. I think we a ramp doing right, pretty kind my your NIM as in fourth even move it math the progression if of expectations steep against beyond

on or point asset you just Just a could. if kind to growth, earning wanted of progression put finer that

Yes.

be have but think of might down -- going I kind up, gradual. it the fast don't We think NIM I had going it is how know fairly what to quarter be increases challenging quarter. we a a do -- will first you I this see year.

to I see think see be after that, obviously you ought all we NIM with. -- we that happy progression

Your from Brandon Truist Securities. coming is next from King question

for that I average the noticed So the spot of was I the lower at end for year compared so quarter. the deposits -- to noticed rate the

it peaked? to fair have is deposit costs So say already that

Well, until there we get formally, at but in cut creep, the we be pace won't of I nearly some XXXX. it rate be think saw deposit all a will

Okay.

that things, side year on -- how of shift assumptions will trend into on deposit kind the mix about your of thinking does this costs? how mix and you And the flow are Okay. how

question. Yes, that's a great

see again, not as shift noninterest-bearing like But do the out products, believe again, interest-bearing the out that. there plan DDA of some saw XXXX, will at attrition more earlier products, pace. higher-yielding more not but we mix into of some into far same we deposit we but to be As of still in

Olney Your next coming is Matt from from question Stephens.

there and feels 'XX Just PPNR outlook and revisit but go It the will for back any guidance, trying you PPNR -- be clarification growth, year-over-year wanted with year-over-year the to what you're do around even like expense to for look say higher the growth? that? modest that this implies

Yes.

we our will. planning that assumption is I think

think we be look for will to to next a with, outperform -- what the peer XXXX, same won't see in at year, group. probably expect fully but PPNR you best It the prior. time, be kind XXXX. at if it's consistent But at the for earnings years at year intend modest we are it peers I looking it, fully and call net of accretion

you guess appreciate you BHG positive Okay. the It see for And there. Appreciate there. cutting cost do to just on I -- modest out you need to that us positive the then How follow-up parts? decline? how year-over-year? you Any we to growth kind a put there, clarification. fee guidance much BHG. do I revenues hit of gave And much a will sounds expenses more moving then on the decline of like how much guidance be -- driver color the expect

That the have think Yes, the a in But in they'll quarter year. the will in don't quarter. fourth that the significant contributor XXXX. They comparison to they primary some from they see to had more exercise that. in here it, in had I third much next quarter. decrease pretty expenses the cost-cutting XXXX call reduction fourth will be -- a

up I maybe to year. flattish, think should shape next revenues their be

more respect a to think rightsize there. the going focused and get XXXX. the into rate franchise kind growth it with growth But products then into their on -- core of they're idea sustainable get is whole optimistic and to I

Your from Sandler. question from next is Piper Scouten coming Stephen

map to $X my construct that's question also is can first with or Louisville that's the then be on but asset and wondering Jacksonville if I'm have noted around guess billion intentional? you $X this have just may the the the I belief missed map, of that if the is this, and bank just the I -- expansion. billion in

or started something help de in Two like I ago X guess, Louisville, a quarters case things. X have I think Harold, we Stephen, of there, me that. or the novo operation

stage effort using model at In career a of an we it's have build leading long there. leadership of market same Wells that's the Fargo early that our case with So out billion. billion Jacksonboo, target you period I to the number I time. $X our $X a X-year $X believe is of Generally, a yes, we in think used bank do, the billion --

in trajectory what in for But you rapid resemble cross upon buildouts, from the may expecting pretty steep likely we've is breakeven a would there. depending we're what that As how quarters, build-out D.C. to generally, know, these X done X we Jacksonville anywhere or

then Great. charge-off around my Okay. is expectations. just net And follow-up

we year, that. of it should be of I think within you said this XXXX was are overall mean, in XX consistent those I embedded scenario? basis terms kind points expectations economic and What's with a of that strength of soft landing? book? get overall, as Or you could worse all book And worse well? if your a just itself about the function be internal thinking is things that and

Yes, Steve Go -- yes. ahead, Terry.

ahead. No, go

to all of think that. I I'll say yes

before book think they I the conversations sits some -- have special credit asset with have today. with where conversations the release officers earnings, we we feel we about good the people, pretty

how with pretty feel they're of under what might good considerations. and are those us some special be about doing that for cooperating kind borrowers They

in we sense -- order is large. presenting don't sense huge that we I So the for challenges mean at portfolio

landing, Stephen. this nearly is It anyway, I of as XXXX. healthy that uncertain. last if into around time soft you of -- really items could that were of about, believe we have kind where in also we landing. many talked a uncertainties a charge-offs we kind landing. here could time a the think a get Who scenario. believe be our under happens [indiscernible] this not would hard are XXXX But I And will we Appreciate no-recession to So as all a And assertion that we was going recession. that be what think the to yes soft year knows say into

to most the performance is [indiscernible]. ought Steve, are portfolio But perhaps that current and yes, soft landing, health I we in likely hold is think the modest that to And strength a up. of guidance assumption our recession. have a given

point, Harold's basis you to have great XX net we're have you don't all recession, assume if going I to charge-offs. think points think a I in

next question coming Your Catherine is from from KBW. Mealor

revenue A follow-up next on to BHG the how BHG for year. and just thinking model about

on of look grew back at balance this on balance they of throughout 'XX, think environment. in that stayed basically sheet size about or we just sheet loans transaction. and given out How balance think how sheet. strategy banking a on-sales you kind much on lot from goal BHG, the -- off of in versus as how into shifting sheet the through 'XX, rate private of looks, more the how do balance network that XXXX sheet the course, we go [indiscernible] balance flat the and the originations much gain-on-sale you If about just stay of to move and was And as that that move as kind year 'XX are the the

Yes.

into should you more headed see happen year CFO, to is, based last believe, I I've going what's bank on network think had year I our year. with this the conversations than this

I even think it split XXXX. in an was close fairly to

lean try a network year they'll think than to the bank this more I into last. little

in which them. more able X network I to issuances will in we are fourth use the think think XXXX. the think they quarter, were news with X intensity planning ABS was They XXXX. get one accomplished or here still for yes, in But great little a bank I

is the just for comp ways. versus [ XXX maybe what the Great. incentive ] on this mean, then your know of different answered And about picture I I question EPS 'XX? in think year. full is of 'XX last you've big thinking -- 'XX kind just I it kind But outlook growth. target year out Okay. the started and X in

then this of the off that full maybe going what like curious payout, that XXXX. it, a that, within year, to kind number looks assuming a, with payout. assuming even of call I'm a you're assuming in full year-over-year, let's for $X grow So EPS And is that

growth pace EPS a where and And two full ultimately, kind in have of kind have have 'XX a. decline isn't to how just you're And you to pair those so going clarify incentive mid-single-digit to growth revenue appropriate what want thinking have you're how a comp rate I or just mid want is to get to EPS expense think this together. growth. there of again, double-digit in scenario reiterate, And an about

Yes.

to we've and in this earnings the earnings it's kind this As do we I of probably to low number, do mid-single-digit the We're of growth past, put it. talking for think together kind but beneficial headed year. to

think will at, we'll have that, call zero, And as at earnings number right, their we be We're to build do so our the upwards where XXX% with tier the XXX, year, as target. far And down incentive. needs then our year. that we we a it, will get to to starting is where for it way all it started what plan go XX. we associates you're at ended And payout. Last of to

what from basically cut we our of it half. So year work beginning last at looking the to were in basically, at, but associates

$XXX show and that but $XXX -- the if afford somewhere up. For fairly earnings with, begins million in payout, if range, less, this to The it, they for don't million to -- we get that XXXX, we're you're XXX% And can is it. -- have the show up right, call like, starting number quickly.

to earnings it never set you time, jump might I know some the that this. add questions get than be but top know understand I don't target make me believe people this, We've and Harold's over to in that quartile. gets and But said there. which comments, Catherine, less I

that the quartile it top this that growth will high. payout we're not plan. of that contemplates earnings know, cash But quartile. annual we year, And all are again, projecting projecting earnings you top full growth As be is incentive the here

the that incentive earnings to And level, pay expense. that the materialize targeted in at the the you revenues don't the produce way you is trim for event the

all it we And not is there the it out. the earnings earnings all that projection mean, companies fuel way they The when incentive pay I then for us. stuff. retrieve I this the shareholders. lot that make don't, kinds or In up, pay know are works incentive show some, we of the other I so earnings again, think into built to the where plans to they that's harvest they a of that have event out

I explanation or that's So helpful if don't but... a know not,

we a peers in what a the -- certainly of is. saw No, are it just in to And general, it's year. past year your It's EPS tough year-over-year. in where rest point, this forecasting decline

flat may growth. And you kind EPS so quartile, may be of you be look good, top but a still quartile top really but may

about about with that kind full think I EPS of So an just target and sure you're was thinking EPS thinking payout to trying about to appropriately. growth how we're the marry make

Yes.

to I it didn't think gave you, Harold he?

I'm good. he Yeah, did.

Your is UBS. next Brody from Preston question from coming

wanted beat horse a on put but dead I'm it. pretty sorry just expenses, a fine to to point I on

kind So of expenses range. million If for look the I year. of surcharge, $XXX.X to at XX% mid- the XX% excluding the high kind to- I at guidance FDIC you're teens slide, to take of imply

$XXX.X So about $XXX $XXX.X the versus to you midpoint of versus of that would your gave million imply $XXX a $X million billion million million. number off the

driving was on the delta the in night. just X% deck what there. implied you difference versus last what's said about a the And it's wondering I So call, between what's

Thanks, Yes. Brody. great question. a That's

to number I more first. XX like think is XX, our

we is delta versus to the call -- [half]. around XXX% that The So XXX% mid- payout think I payout.

some I cushion. other I'm our aware think have And things plan in that where some of we

me talked got the to about earlier. [today], $XXX what $XXX that's So to million number I

to here. I color. cut. and Got Harold, the questions it. you in couple ask first appreciate And on then did for think, very helpful a it. just May, NII said want That's I one I

are? it about XX-plus within growth then when the I just at NII cuts growth. when of could your you have average guidance compare guidance, First part an And is, implies X you occurring the basis, percent question secondly, other it loan average the on loan look clarify

there wondering, where opportunity throughout outperform I'm you've guess year? even given could end the the guys kind I average low the you you're the of significant so double-digit pretty growth expecting that repricing rate of with And given, just high range combined loan the is fixed guidance

Yes.

first -- to cuts yesterday. all, I question some on this, don't that had people here hold for and me the rate I think of on but

and -- that. we've September July, don't got to I think think November. I embedded it me Maybe was -- hold

decrease. those just I steady go block. think dock with of are kind that. I'll the a in split It's But anyway,

assume a along with you beta that, high think I should costs. on our deposit

beta going think we'll up. had We beta a down. high a high going We have

will of or to So can. book can rate close as recoup deposit as as much try we as we to those XXX% decreases from our try we get to

-- or over the growth think we've been at last that need outlook can quarter, as We we the in we We think just far extended. do to But In healthy. that. we think let were that I'll I We on loan deposit related to As X. deposits accreting related time, we push guardrails We capital the on are absolutely loans outgrow client same to slide. to steadily capital Terry as target talk growth year the growth, the something fourth that. like this well, we loan to $XXX and will also million that's growth. can't up million, like continue deposit let to loans -- the and have $XXX beat

interest-bearing spot I below on quick I rate follow-up. Could Brandon's average to for had the question deposits just the being up the one quarter. on it. you on just that the Got follow ask wanted

you guys think rate at further spot any just raising to up don't if below see you if the know I expect what aren't trying this average -- to mathematically, drives was if I'm is point, it said for So creep, rates quarter? we the where the but fourth

Yes.

deposit think somebody money rates I move contribute from street trying increased what to at just accounts, could the across new clients to new else.

I be think of contributors. would primary the one that

have but mix Most believe public balances could balances. deposits. fund built see -- fund occur around accounts their bulk think depositors of We public some we their could we the of our those up, Additionally, already increase shift primarily our the in indexed. are

finds to as collect way consequently, money so that whatnot And taxes and they property bank. its our

Martin Brian coming question Montgomery. Janney is Your next from from

just the of Terry, hiring Just things. outlook. a easy couple

being with kind maybe are quarter, still I Is think how talked your bit 'XX. that in just about than last especially 'XX? you it Or in thinking 'XX of you about hiring Jacksonville a better expectation? little

of had pace XXXX. the in hiring we a bit think 'XX I a reduction little from in

migrate we're closer to point, will XXXX I level contributor the likely to big think to that Jacksonville be a your hiring. somewhere to back hiring of and

you. Got

slide talked Okay. I And -- deposit some think initiatives. slides guys in the about you

your loan past? the talked there growth. the Harold, the you is you the Just deposit Are need last new about place? Or to getting growth any ones have initiatives about point, you in just for in

why ones... of the Yes. it? Terry, It's rest don't take the you

I of would over X X probably the we'll the X in course say is more talked towards about expectation more X that we've introduce and tail the XXXX. my past, enumerated XXXX, or or of introduced we

helpful probably is the that those one that the all on all holds advantaged three I of and We be mortgage matter us have think most an advantaged we've that three software attorney introduced. agent some firms, whether are escrow biggest accounts, capability believe there we software escrow on for the we've to for for money. most product look people of specialties exchanges, recent But running kinds that's think be as focused XXXX these we got specialties, that things. those of additional escrows opportunity it that

size important of One, it, And the two Brian, is huge. things. is the what's think I about so market

We let which or important either thing no money advantaged really is most is it low-cost penetrate well. the an [all] money. product, that's us of second that have cost But

And a powerful we so that have. that's specialty

Got you.

And Harold, first drivers helpful. biggest from stable That's me, guys. just back is one margin. flattish just was throughout last like I Okay. The cadence there. or and have the It up the increased of year. the on then for sounds that quarter

the quarter. that bit outside guess liquidity of this it? key I had know you something fixed driver? repricing? there? Is else a the that's Is rate there drop I it Is in little

going the there benefits understand to trying just So forward.

deposit our That Yes. the do to the not necessarily interest on income. over costs. will net We primarily, reducing do contributor have to the very we But aggressive be a some margin liquidity be year. shrinkage intend course of

talking we happened pretty rates. on crisis liquidity our there. the lot a that believe that during determined we're rates I we trying I Well, last And up already on much what think of got -- we've aggressively to still we're deposit here. large caps fact and that year the so think they're raised ability we've about the the based and that catch [indiscernible] to that

of we rate growth. to deposit the intend advantage take So our fully way cuts on

That completes our Q&A session. Everyone, this concludes today's event.

for wonderful this have at time, disconnect may Thank You participation. your day. and you a