Release Date: April 23, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Q & A Highlights
Q: Quick question on the NIM outlook. You guys mentioned that it's -- you expect it up in the second quarter. And the spot deposit costs are down relative to the first quarter, but some of the yields -- the loan yield, spot yields are lower than where they were in the first quarter and then the muni bond yields were also lower. Just trying to get a sense of what's going on the yield side?
A: Harold R. Carpenter - Pinnacle Financial Partners, Inc. - Executive VP, CFO, Corporate Secretary & Principal Accounting Officer: Well, Casey, this is Harold. 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 2 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: Okay. Very good. And then I guess just switching to the BHG outlook. The guide implies a pretty steep ramp in the remaining quarters here. Harold, you mentioned credit as a pretty significant wild card. 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? Is it credit? Or is it more originations? Just some color there.
A: Harold R. Carpenter - Pinnacle Financial Partners, Inc. - Executive VP, CFO, Corporate Secretary & Principal Accounting Officer: 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.
Q: Harold, maybe to start to go back to the question Casey just asked. When I look at the margin is pretty flat. Earnings asset yields were pretty flat. Positive costs pretty flat this quarter. it's not really clear to me what's driving the expectation for NIM expansion in the second quarter?
A: Harold R. Carpenter - Pinnacle Financial Partners, Inc. - Executive VP, CFO, Corporate Secretary & Principal Accounting Officer: Well, like I said, we've got a lot more fixed rate loans to reprice this quarter. We think also the work we did at the end of the quarter on some deposit -- preemptive strikes into the deposit book should also be helpful. So those are that and DDA balance is hanging in there are the primary kind of tailwind to the margin uplift.
Q: Got it. Okay. So you're expecting earning asset yield to pick up a bit in 2Q and deposit costs to come down a bit, is that what you're saying?
A: Harold R. Carpenter - Pinnacle Financial Partners, Inc. - Executive VP, CFO, Corporate Secretary & Principal Accounting Officer: That's right. I think next year in the strong assets, so yes.
Q: Got it. Okay. And then on the expense side, we know you guys took the incentive comp down to 80% of target, but kept the full year expense outlook intact. Could you just run through a little more detail what's expected to fill that bucket up while we're still the same expense outlook?
A: Harold R. Carpenter - Pinnacle Financial Partners, Inc. - Executive VP, CFO, Corporate Secretary & Principal Accounting Officer: All right. So what we elected to do is not take it down. So we're going to keep it the same. We felt like as that played into our overall outlook for 2024, that was the fair thing to do. If the incentive accrual gets reapplied, so we add back to, call it, the $30 million into the incentive accrual for the year, that will (inaudible) obviously, with revenue increases. But we have other opportunities to kind of manage our expense outlook to kind of keep that still within that $950 million to $975 million if that makes sense.
Q: Yes. Yes, that makes sense. I guess the one last part, the new hiring was really solid as far to 37 new hires. What is embedded in the expense outlook? Like is this going to be a much stronger year than typical for hiring, just given the pipeline?
A: Harold R. Carpenter - Pinnacle Financial Partners, Inc. - Executive VP, CFO, Corporate Secretary & Principal Accounting Officer: Yes. I think we put in the -- as far as the plan for this year, basically the same hiring profile for 2024 as 2023. I'll have to go back and look at my numbers. But I think overall headcount was up 100 people or so last year, something like that. So that includes revenue producers in every bond. It was 115, something like that. So if you dissect, the revenue producer plan was basically the same this year as it was what we did last year.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
