PNFP Reports 4Q23 Diluted EPS of $1.19, Diluted EPS of $1.68 Excluding FDIC Special Assessment and BOLI Restructuring Charges

NASHVILLE, Tenn.--(BUSINESS WIRE)--January 16, 2024--

Pinnacle Financial Partners, Inc. (Nasdaq/NGS: PNFP) reported net income per diluted common share of $1.19 for the quarter ended Dec. 31, 2023, compared to net income per diluted common share of $1.76 for the quarter ended Dec. 31, 2022, a decrease of 32.4 percent. Net income per diluted common share was $7.14 for the year ended Dec. 31, 2023, compared to $7.17 for the year ended Dec. 31, 2022, a decrease of 0.4 percent.

After considering the adjustments noted in the table below for the three months ended Dec. 31, 2023 and 2022, net income per diluted common share was $1.68, compared to $1.76 for the three months ended Dec. 31, 2022. Net income per diluted common share adjusted for the items noted in the table below was $6.99 for the year ended Dec. 31, 2023, compared to $7.17 for the year ended Dec. 31, 2022.

Adjustments include tax effect calculated using a blended statutory rate of 25.00 percent for 2023. (2): Loss on BOLI restructuring is not tax effected. (3): Impact of net investment gains in the fourth quarter of 2023 and ORE expense in all periods presented were minimal.

During the fourth quarter of 2023, the firm restructured and surrendered approximately $740.0 million of bank owned life insurance contracts (BOLI) held by various insurance carriers. The restructuring is expected to increase the future yields of the underlying insurance contracts. Pursuant to the restructuring, the firm incurred approximately $7.2 million in restructuring charges and surrender penalties and $9.1 million in income taxes and penalties. The increased yield is expected to be fully phased in by mid-year 2024 and should result in an increase in non-taxable noninterest income of approximately $10.5 million in 2024.

Additionally, the firm accrued approximately $29.0 million for future payments to the FDIC pursuant to a special insurance assessment to recover losses incurred by the Deposit Insurance Fund associated with two bank failures which occurred in the spring of 2023. The firm expects to remit the amount in eight quarterly installments beginning in June of 2024. The FDIC has announced that the special assessment amount and payment periods could change if actual losses to the Deposit Insurance Fund from these failures are different from estimated losses.

"There is no doubt that 2023 presented a very difficult operating environment for banks," said M. Terry Turner, Pinnacle's president and chief executive officer. "But 2023 was actually a great year for our firm resulting in year-over-year tangible book value growth of 14.8 percent and a total shareholder return of 20 percent. The challenging environment allowed us to showcase two critical drivers of our unique ability to create long-term shareholder value. First, our extraordinary ability to attract experienced bankers from the larger regional and national competitors, coupled with a differentiated service model, enabled us to reliably take market share and grow our balance sheet volumes even when market conditions would have otherwise limited growth opportunities. Second, our risk management systems, though generally unseen by most investors, provide critical discipline that contributed to very strong growth in a year when many of our peers failed to grow. These two drivers, in particular, enabled us to stay on course as opposed to deploying an extensive cost reduction plan which risks both revenue generation momentum as well as the cultural foundation of the firm.

"With that in mind, we successfully recruited several experienced bankers in Jacksonville, Florida during the fourth quarter of 2023 building on the success we are experiencing in other market extensions like Atlanta and Washington, D.C. These bankers will provide the core leadership for what we believe will be a strong franchise in one of Florida's finest banking markets. Due to the relative strength of our southeastern markets and the competitive advantage we possess over the large regional and national competitors, I remain excited about the ongoing opportunities that exist for our firm as we enter 2024."

BALANCE SHEET GROWTH AND LIQUIDITY:

Total assets at Dec. 31, 2023 were $48.0 billion, an increase of approximately $6.0 billion from Dec. 31, 2022 and $436.1 million from Sept. 30, 2023, reflecting a year-over-year increase of 14.3 percent and a linked-quarter annualized increase of 3.7 percent. A further analysis of select balance sheet trends follows:

(1): Interest-bearing core deposits are interest-bearing deposits, money market accounts, time deposits less than $250,000 including reciprocating time and money market deposits. (2): Noncore deposits and other funding consists of time deposits greater than $250,000, securities sold under agreements to repurchase, public funds, brokered deposits, FHLB advances and subordinated debt. -- Approximately 63 percent of fourth quarter 2023 loan growth was related to commercial and industrial and owner-occupied commercial real estate categories, two segments the firm intends to continue emphasizing for the foreseeable future. -- On-balance sheet liquidity, defined as cash and cash equivalents plus unpledged securities, remained strong, totaling $6.9 billion as of Dec. 31, 2023, representing a $448 million decrease from the on-balance sheet liquidity level of $7.4 billion as of Sept. 30, 2023. -- Available-for-sale investment securities increased by $454 million during the fourth quarter of 2023 which is primarily due to a $301 million increase in the fair value of the underlying securities.

"We grew loans 12.5 percent, core deposits 7.8 percent, and we hired 107 new revenue producers, showcasing our ability to reliably and responsibly grow during 2023," Turner said. "With no further decline in the net interest margin in the fourth quarter, it appears we may be at or near the bottom for net interest margin. Consequently, the combination of our balance sheet growth and our ongoing pricing emphasis should enable us to reliably grow net interest income in 2024."