Pinnacle Financial Partners Earnings Call Insights: Loan Growth and Late Quarter Activity

Pinnacle Financial Partners, Inc. (NASDAQ:PNFP) recently reported its fourth quarter earnings and discussed the following topics in its earnings conference call.

Loan Growth

Jefferson Harralson – KBW: I want to ask you a question about the content of your loan growth. What types of companies are borrowing more money and are you seeing any themes in this late quarter loan quarter that we’re seeing?

Harold R. Carpenter – CFO: We’ve looked at that from a variety of perspective. Most of it was C&I, substantially all of it was C&I actually. We were really pleased that you get in there and you start digging around and trying to figure out was it a few big loans or whatever. We did have one meaningful loan that we think is going to pay off here in the first quarter, but generally we were pleased that ticket sizes were in the $5 million to $8 million range. We had a handful of those that are nice commercial accounts here in Nashville and Knoxville that we’re real pleased with. The other thing that we’re pleased with about those new loans, were the rights we were getting. We were anticipating if you had asked me this question last year, I would have been real nervous about where loan yields are heading but we are real pleased with these yields that are kind of starting to stabilize and maybe even hold up a little bit going into the first quarter.

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Jefferson Harralson – KBW: My follow-up is with the loan yields going up it seems that a 464 new loan or an average of new loan that must have been higher than 462 is higher than what the marketplace allows. I guess can you comment on the ability – or what’s driving the ability to put on loans at these kinds of rates?

Harold R. Carpenter – CFO: Yes. The new loans are coming in not quite as good as our average book but not significantly all. We are getting renewals that are within 5 to 10 basis points either way on what’s in the current book. Now what does impact the quarter-to-quarter loan yield are prepayments because some of those have unamortized fees and some of them are significant and so when that loans pays off we recognize that entire fee. So that could have some impact on why you are seeing some volatility in the loan yields.

Late Quarter Activity

Kevin Fitzsimmons – Sandler O’Neill: I just want to go back to the loan growth question, kind of dovetailing on Jefferson’s. It seems like what you’re saying is the pace of loan growth this quarter was a little more than you otherwise would have expected, you had some late quarter activity going on that you might not to see next quarter in terms of originations and also your payoffs while high this quarter you are saying it could be a new high next quarter. So could we expect this double-digit pace of growth maybe to be more of a single digit – mid-single digit type of annualized pace for first quarter?

Harold R. Carpenter – CFO: Kevin, I think the thing I would say is, again, I just go back, and we’ve tried to hit this number of times. We’ve sort of given a long-term capacity or growth target that we believe we can achieve that’s just short of $1.3 billion. To do that, you got to grow a little bit better than $400 million a year. We believe that was a good assumption for 2012. I believe that’s a good assumption for 2013, but as you know and as you watched our quarterly production through 2012, it was all over the place. It ranged from $46 million to $187 million and the $47 million growth was in the first quarter, and in our Company because of the C&I content, first quarter typically is a relatively slow loan growth quarter. So, maybe people are focused on getting transactions done to close out their year that the pace slows down in the first quarter. So I believe you ought to assume we’re going to grow at a double digit pace in 2013, but I do believe it will easily be a single-digit growth rate in the first quarter.

Kevin Fitzsimmons – Sandler O’Neill: Just one quick follow-up. You mentioned about how the yield, you are pleased with the loan yields, just curious how, what you are seeing in terms of competition. I know earlier in the month, the Wall Street Journal did an article where they were talking about loan competition and that you singled out Nashville and talked about JPMorgan getting more active there and what are you – you’re seeing that having an effect or is that something that may have an effect more over the course of the year?

M. Terry Turner – President and CEO: I think that it is a true thing that over the course of the last 24 months, that we’ve had either new entrance or increased emphasis by existing large out-of-market players in the marketplace. I would say generally where we encounter them is way up in the sales range, in other words, upper middle market or even large companies. Kevin, as you know, that’s not really the main stay of this Company, we would be more of a true middle market lender and certainly operate in the middle to lower end of what folks typically refer to as middle market. So, I (ramble) to say that it’s a fact that many who have come to town it is a fact that they use price, and frankly terms, as a basis for competition, but it’s also a fact that it’s not our bread and butter, and consequently, we don’t encounter them with great frequency. I think, I would go on to say that as it relates to price competition the same things that were true through most of 2012 are true today, and I think will be true for most of 2013 and that is that the industries are washed with liquidity, and loan demand is fairly limited and that creates a fiercely competitive loan pricing market. But honestly where we’re encountering that would be more with our traditional competitors than with some of those large out-of-market competitors that are anxious to get here or who have been here in a limited presence and want to grow their presence here.