Pinnacle Financial Partners executives have set aside just under $100 million to cover potential problem loans resulting from the slowdown caused by the spread of COVID-19 and are taking several steps to reduce spending while preparing for a recovery expected in 2021.
Downtown-based Pinnacle reported first-quarter profits of $28.4 million, up from nearly $94 million in the same period last year and due almost entirely to the provision for losses on loans. Chairman and CEO Terry Turner said Pinnacle’s performance for much of the quarter showed it ahead of growth projections before the effects of COVID-19 took hold on the business. economy. A push to expand low-cost deposits is paying off, he said, and commission revenue rose thanks to increases in several categories. Pinnacle’s loan book ended the quarter above $20 billion for the first time, up about $600 million from Dec. 31, while total assets neared $30 billion .
But those measures matter less now that managing the effects of COVID-19 is paramount. Turner and his team have scaled back their aggressive hiring plans — they will continue to recruit people for critical positions and bolster their fledgling Atlanta team — until they get a feel for how severe and how long of the economic slowdown. They also suspended Pinnacle’s stock buyback program and do not at this stage plan to pay down $130 million in debt that they will have the option to buy back this summer. The company will continue to pay its dividend for the time being.
While Pinnacle’s $100 million retainer is a big number by any measure — it’s more than 13 times the average set by the company over the previous five quarters — it’s in line with its larger peers. important. Fifth Third Bancorp, which is more than five times the size of Pinnacle, announced Wednesday that it has taken a provision of $518 million. Meanwhile, the country’s four largest bank holding companies – JPMorgan Chase, Bank of America, Wells Fargo and Citi – said last week they were setting aside a combined $24 billion to cover losses. potential on loans.
Chief Financial Officer Harold Carpenter said in the bank’s report Press release that factoring in potential loan losses related to the pandemic led the Pinnacle team to accumulate reserves of approximately $86 million during the quarter. Prompted by an analyst on a Tuesday conference call about whether that reserve would be sufficient, Carpenter said Pinnacle’s modeling and some of the reserves peer banks are building made his team’s figure “reasonable.”
Pinnacle shares (symbol: PNFP) were down 8% at around $35.20 on Tuesday afternoon. They have fallen around 45% since the start of the year and last month hit a low of around $28.