On Wednesday, Pinnacle Financial Partners (NASDAQ:PNFP) maintained its Buy rating and $113.00 price target from Truist Securities after reporting third-quarter earnings. The regional bank's earnings per share (EPS) of $1.86 for the third quarter of 2024 exceeded both the firm's and Wall Street's expectations by 3.5% and 5.0%, respectively.
The adjusted pre-provision net revenue (PPNR) of $207 million was largely in line with forecasts, thanks to higher net interest income (NII) and core fee income, which surpassed expectations by 0.8% and 10% compared to Truist Securities, and by 2.4% and 11% compared to the Street's estimates.
Pinnacle Financial's NII saw a boost due to an 8 basis points (bps) net interest margin (NIM) expansion, attributed to a 2 bps decrease in total deposit costs quarter-over-quarter and an increase in securities yields following the prior quarter's restructuring. The bank also experienced a robust loan growth of 6.4% on a last quarter annualized (LQA) basis. Management noted that since the end of August through October 11th, the decline in deposit costs has been 4 bps greater than the decrease in loan yields.
Credit quality presented a mixed picture, with provisioning falling below both Truist Securities and Street estimates. Net charge-offs (NCOs) were reported at 21 bps, lower than the 24 bps anticipated by the firm. This was driven by a partial charge-off of an approximately $9 million commercial and industrial (C&I) loan. However, non-performing assets (NPAs) increased to 35 bps, up from 30 bps in the previous quarter.
Looking ahead, Pinnacle Financial's updated full-year 2024 guidance suggests a fourth-quarter PPNR of approximately $208 million at the midpoint, which is slightly below the consensus estimate of $212 million. The guidance reflects the company's performance trajectory and market expectations for the upcoming quarter.
In other recent news, Pinnacle Financial Partners reported a robust performance in its second quarter of 2024, marked by growth in client deposits, a decrease in construction loans, and a repositioning of its securities book. This strategic move led to a one-time loss but subsequently improved the company's revenue and earnings. Despite a slight dip in the loan growth outlook, the company remains optimistic about its competitive position.
Pinnacle Financial Partners has raised its core fee revenue guidance following a 6.8% increase quarter-over-quarter while maintaining its guidance for charge-offs and provisioning for the year. The company also aims for a 70% total risk-based capital ratio by the end of 2024. As part of its recent developments, Pinnacle Financial Partners has a positive outlook for 2025, with goals set for top quartile revenue and earnings growth.
The company has also acknowledged increased credit losses from off-balance sheet auction platform loans and a softer than expected loan growth in the second quarter. However, it plans to reengage with the market to improve fixed-rate loan yields. With a high associate retention rate, Pinnacle Financial Partners is poised to capitalize on opportunities and overcome challenges as it moves towards 2025.
InvestingPro Insights
Pinnacle Financial Partners' recent performance aligns with several key metrics and insights from InvestingPro. The company's P/E ratio of 19.84 suggests a reasonable valuation relative to its earnings, especially considering its recent earnings beat. InvestingPro data shows that Pinnacle Financial has been profitable over the last twelve months, with a revenue of $1.49 billion and an operating income margin of 34.87%, indicating strong operational efficiency.
Two particularly relevant InvestingPro Tips highlight that Pinnacle Financial "has maintained dividend payments for 12 consecutive years" and is "trading near its 52-week high." These factors may contribute to investor confidence, especially in light of the bank's recent earnings report exceeding expectations. The dividend consistency aligns with the company's stable financial position, while the stock's proximity to its 52-week high reflects positive market sentiment.
It's worth noting that InvestingPro offers 7 additional tips for Pinnacle Financial, providing a more comprehensive analysis for investors seeking deeper insights into the company's performance and outlook.
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