Strong performance in loan and fee income helped Pinnacle Financial Partners Inc. post a higher profit in the second quarter, even with a more than four-fold increase in its provision for loan losses.
The Nashville, Tennessee-based bank on Tuesday reported a 10.4% increase in second-quarter net profit to $141.3 million from a year ago. Second-quarter net income also rose 12.8% from $125.3 million in the fourth quarter.
Diluted earnings were $1.86 per share, compared to $1.65 in the first quarter and $1.69 a year ago.
The average first-quarter earnings forecast was $1.68 by six analysts polled by Zacks Investment Research.
Pinnacle completed its $1.9 billion purchase of BNC Bancorp of High Point in June 2017. It gained $7.4 billion in assets and 76 branches, including three in Forsyth County and 20 total in the Triad.
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As has been the case with the COVID-19 pandemic to date, Pinnacle’s loan loss provision was a key driver in the second quarter.
The layout provides insight into how a bank expects its loan portfolio and revenue stream to perform as customers struggle to make monthly payments. It has a net effect on a bank’s profitability.
Pinnacle reported a provision of $12.9 million for the second quarter, compared to a provision of $2.7 million for the first quarter and $2.8 million for the second quarter of 2021.
Loan revenue was up 9% to $251.7 million from a year ago, even taking into account the provision. It also increased by 6.3% compared to the first quarter.
Royalty revenue reached a record $125.5 million, up 27.8% from a year ago and 21.3% from the first quarter. The largest revenue segment was investment under the equity method at $49.5 million, followed by the non-interest category at $40.4 million.
Terry Turner, President and CEO of Pinnacle, expressed concern in the press release about a “growing likelihood of a recession.”
“Even though we enter the second half of the year fully expecting a tougher economic landscape, we believe our second quarter results demonstrate why we believe we can outperform even in a tougher operating environment.”
Janney Montgomery Scott analyst Brian Martin said Pinnacle delivered “outsized organic loan growth, the strongest quarter in company history with record base fee revenue that was 32% revenues”.
Turner continued to credit the bank’s ability to recruit market-specific revenue producers from larger competitors for its growth spurt.
Pinnacle hired 37 revenue producers during the second quarter. It has added at least 404 since the start of 2019.
“During the second quarter, we experienced outsized loan growth due to our recent market extensions and continued focus on recruiting experienced relationship managers,” Turner said.
“Our new markets contributed nearly 25% of our loan growth this quarter, and our relationship managers who have been in our legacy markets for less than 2.5 years contributed 21% of this quarter’s growth. trimester.”
The bank reported a net gain of 186 full-time equivalent employees in the second quarter for a total of 3,074. Pinnacle had added 453 people to its workforce over the past year.
Meanwhile, the number of branches remained unchanged at 119.
Non-performing loans were $23.7 million as of June 30, compared to $35.1 million as of March 31 and $62.7 million a year ago.
Net write-offs were $877,000 in the second quarter, down from $3 million in the first quarter and $10 million a year ago.
The board declared a quarterly cash dividend of 22 cents per share on Tuesday. The dividend is payable on August 26 to shareholders of record on August 5.