KBRA Affirms Ratings for Pinnacle Financial Partners, Inc.

KBRA affirms the senior unsecured debt rating of A-, the subordinated debt rating of BBB+, the preferred stock rating of BBB, and the short-term debt rating of K2 for Pinnacle Financial Partners, Inc. (NASDAQ: PNFP) (“Pinnacle” or “the company”). In addition, KBRA affirms the deposit and senior unsecured debt ratings of A, the subordinated debt rating of A-, and the short-term deposit and debt ratings of K1 for the subsidiary, Pinnacle Bank. The Outlook for all long-term ratings is Stable.

Key Credit Considerations

PNFP’s ratings are supported by an intentional and thoughtful business model that we believe inherently leads to high quality growth. In this regard, we think the company’s growth model focused on lift-outs of talented and experienced in-market bankers with decades of experience and long-standing client relationships from larger peers is an intelligent and risk-averse one, especially compared to a more M&A fueled strategy. Intuitively, we believe that PNFP’s growth strategy leads to a degree of positive client selection in that more recently recruited bankers are typically less likely to pursue their respective higher risk borrower relationships, particularly after becoming familiar with PNFP’s conservative credit risk parameters. Rather, it seems more likely to us that these newer bankers seek to migrate over their better clients while leaving any potentially more challenged borrowers at legacy institutions or other lenders. Such a dynamic could prove to be beneficial to PNFP’s credit quality if or when an economic recession occurs. Though PNFP’s greater-than-peer loan growth in recent times would typically give us pause, the qualitative aspects of its growth model described above give us a degree of comfort. Additionally, in fairness, PNFP’s above peer loan growth has coincided with near-lockstep growth in deposits, resulting in a loan-to-deposit ratio that is little changed from YE20.

KBRA maintains its generally favorable assessment of PNFP’s earnings profile, noting the company’s track record of above-peer returns (as measured by ROA) in contemporary periods. PNFP believes its growth strategy results in loan growth almost irrespective of the macro-economic environment (i.e., growth is tied more to taking market share from peers as opposed to GDP growth/loan demand), and the company’s chosen strategy has been seemingly executed well to date, with net interest income growing at a 14% CAGR since 2020 – a level well above that of peers. PNFP also benefits from reasonably diverse fee income, including relatively stable contributions from its wealth management and insurance divisions. Constraints to the ratings continue to include risk-weighted core capital ratios that trail peers, with PNFP’s 1Q25 CET1 ratio of 10.7% comparing to the rating category average of 12.0%. Given the company’s commercial focus, we also recognize certain risks related to large dollar relationships in its loan portfolio and deposit base.

Rating Sensitivities

We do not currently anticipate positive rating momentum over the medium-term. Ratings assume continued build of CET1 capital toward management’s 11% target as well as benign credit quality trends. Alternatively, significant deterioration in earnings or asset quality, or inability to build core capital in line with targets could pressure ratings. Negative shifts in funding composition or liquidity measures could also adversely impact ratings.

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Methodologies