Pinnacle Financial Partners Inc. reported its first quarter to fully include the BNC Bancorp acquisition, and management said the momentum of the pro forma company seemed promising, during the bank's third-quarter earnings call Oct. 18.
Third-quarter net income climbed to $64.4 million, or 83 cents per share, from net income of $32.4 million, or 71 cents per share, a year earlier. Excluding the recent quarter's pretax merger-related charges of $8.8 million, the company calculated EPS of 90 cents. The S&P Capital IQ consensus mean estimate for third-quarter normalized EPS was 89 cents. The quarter was noisier compared to prior ones, given the addition of BNC Bancorp's balance sheet.
Aggregate funding costs increased 5 basis points from the prior quarter, hitting 66 basis points at the end of September. CFO Harold Carpenter Jr. said two items during the quarter basically cancelled each other out, creating a deposit beta of about 20% when compared to the Federal Reserve's interest rate increases over the same time. He added that future deposit costs could increase at a "measured" pace due to general demand for higher deposit rates and a need to fund "a significant" loan pipeline.
The bank became subject to the Durbin amendment, reducing debit interchange fees, at the start of July. Its impact to fees was $1.8 million to $2 million for the quarter. Carpenter said increases in other consumer fees, attributable to the Virginia and Carolinas footprint, offset the interchange reduction.
Even with the added personnel and footprint of BNC Bancorp, Pinnacle management is casting an eye toward future organic growth and expansion, said CEO M. Terry Turner. The pro forma bank should begin making progress toward its $40 million synergy case starting in early 2018, a plan that management articulated when the deal was announced. The bank has also hired 54 additional revenue producers, including the 19 that BNC had added, and there could be more opportunistic hiring because of personnel dislocation following mergers in North Carolina.
Going forward, Pinnacle intends to build out its commercial and industrial lending capabilities. To that end, Turner said the bank will hire at least 64 C&I and private banking relationship managers over the next five years.
Another potential marketplace for Pinnacle's expansion could be in Atlanta, a city that Turner has long viewed as attractive because of its size, growth dynamics and "grand commercial market." Pinnacle has considered both the opportunities of buying or building a footprint, but Turner said there are few targets in the state. Although he has been open about his desire to expand there, he said it was not the right time for a southern push. For now, the bank is focused on integrating and capitalizing on the completed BNC Bancorp deal, and he said there are enough opportunities to grow in the bank's existing footprint that "it doesn't concern me if I never make it to Atlanta."