Pinnacle Financial Partners Prices New Preferred

Tennessee banker Pinnacle Financial Partners (PNFP) has priced the previously announced preferred stock issue.

The non-cumulative issue comes to market at a coupon of 6.75%. They have sold 4.8 million shares and there are another 720,000 available for over allotment.

For what it is worth the shares are rated BBB+ by Egan Jones and BBB- by Kroll Bond Rating Agency. I am not overly familiar with these rating agencies–and I know that many investors eye their ratings with a bit of suspicion.

This issue will trade on the OTC grey market right away under ticker PNFPB.

It is my intention to try to buy some of this issue under $25–will let it trade a bit and see how it trades. It is NOT my intention to hold it long term.

The pricing term sheet can be found here.

36 thoughts on “Pinnacle Financial Partners Prices New Preferred”

  1. LOL I’m heavy in most all the banks! Have traded out of most of the top names and am long most mid tiers and a few of these 2-5 billion market cap issues. But you have to be careful, when the bid/ask spread is wider than 50 cents you have trouble moving 1000 share lots.

  2. I’m kind of leery of the smaller banks that are floating new issues, building a capital cushion for adverse loan development, prolonged low-interest loan environment, etc. Looking at the large drop in quarterly earnings shown in the March 31 results on this one, signaling who knows what kind of trend, is there enough cushion left to provide an adequate safety margin? I did bite on Wintrust.

  3. PNFPB is trading pretty strong out of the gate

    I picked up some at par – but only half my usual amount and alas after changing my mind and trying to add the other half for a full position, the price has run away from me right now. Not going to chase it

    1. I already flipped it for $1/share.

      Bought twice as much as I wanted to hold at $25.35 and sold half of it at $26.35 overnight. Probably should have sold it all but didn’t expect it to zoom up so quickly. By the time I checked today it was back down to $25.50 and my order had executed on the sell.

      Wish it was always that easy.

      1. Ahhh, congrats. You were the lucky one who got that $26.35 trade. Seems to be just the one trade at that price. It has remained in the $25.50 +/- .20 range today otherwise. If you sold it overnight, the buyer got an expensive lesson. Congrats

        1. Thanks guys.

          I am usually left holding the bag so it is nice to come out ahead for a change.

  4. I suggest caution on buying “flips.” They worked great for over a year until the music stopped in February. It was an “easy” trade to buy them on the gray market, wait till they trade on NYSE/NASDAQ then pocket $.50 to $1.00 a share. It did not make any difference how junky the issue was, it still popped up when it went to the major exchange and the masses spotted it. Unfortunately many of these flips were crushed in the downtown and have yet to recover. Motto of the story: “only buy issues you would be comfortable holding long term.”

    1. Im just in “veteran stock” flipping mode for now. It is amazing how many times I can buy CNTHP between $57 and $57.40 laying there for the taking and then offer them at $58 to 58.50 and people buy them. Just started 4th cycle today since it paid out its last dividend. PUK- was there for the taking in 25.30s last week and I sopped them up and its over $26 now. Even EP-C is up almost $2 since reentering a few days ago. I will dance as long as the music keeps playing.

  5. Tim and others – while I know that REITs and some other Utility companies sell preferred stock because the nature of their business is very capital intensive and they can probably provide decent returns on those funds, I’m always curious why certain banks raise capital at rates close to 7%. Car and mortgage rates are pretty low right now, so I often wonder what some of these banks do with the proceeds – unless they need funding because some of their loans are going bad. Just my thoughts, as I will have no position in this issue.

    1. Since bank prefs are non-cumulative, theoretically it can become (almost) free funding for the issuer. Well, now few people believe that banks can suspend their dividends, but it does not matter. Just like in last February, when no one would have believed that in a month the S&P would fall to 2200… a black swan usually flies to where no one is waiting for.

      1. Since banks haven’t been welching on their dividend (yet) that doesn’t explain it. Modern banking is complex, part of the answer is fractional reserve banking. If they use your investment to make 5 or 10 loans then 7% is a bargain for them. Or they run it through the market with insider info and make more than 7%.

        1. They can issue more common stock for Tier 1 capital instead of preferreds. But they want to make their return on equity look better hiding costs in preferreds.

        2. Exactly, this is what happens in good times. In bad times, they will simply suspend divies and get free funding. And the investor gets all the risks with 0 reward.
          Banks rare play 100% fair, so personally I don’t have any their prefs in my portfolio. Only notes and a few trust prefs, which practically are notes too.

    2. Lou, I dont get it either. And Im not a player here either. I only have 2 bank preferreds out of about 30 I have. A ute could in theory issue a 50% yield preferred if the regulators pass it off on and allow it as a cost. As utes get to bake cost of preferreds into their rate filing recovery mechanisms.

      1. Gridbird, I would like to buy more ute preferreds, but there are not that many available to buy at an interest rate that protects an investor from inflation (if and when that occurs). Thus good to moderate banks paying six and a half or more have done well for me for the last eight years investing in preferred stocks especially in taxable accounts. Qualified dividends provide a 15% tax rate or even zero rate for 105K of income when my wife and I retire. Many of these banks profit by paying their depositors one tenth of one percent, levy bank charges that have huge margins, minimize staff, make minimal risk loans with solid collateral, sell loans and pocket origination fees, can do fairly well.. What other industry can a son of a poor pig farmer, who started as a repo agent for a small Minnesota bank, with very low grades in school per Wikipedia, wind up with over 50 million dollars in net worth (i.e John Stumpf, Wells Fargo ex CEO). Not a bad business compared to many businesses in this country.

        1. Follow, its just down to ones comfort zone. It isnt a Im right right and everybody else is wrong thing. I dont want that specific risk, dont need the extra bps, and dont trust the economy near term.
          And personal bias too. I have quite a bit of PCG preferreds recently teed up for a net 7% QDI when they start repaying. Despite all the problems inherent there I trust it more than smaller banks, so that kind of shows my distrust in current economy and banks in general, ha. As far as banks go, the ability to earn profit is massive leverage on top of leverage. I just need to let economy play out before I reenter bank preferreds. But, I certainly dont think I have any special insight. Im about plus 7% and heading to make my annual plus 10% goal in preferreds since 2013. So Im reigning back and should have no problem running out the clock from here in mostly utes.

            1. Follow, just remember half my “insight” if it can even be construed as such is emotional discourse, not intellectual. As Scott mentioned below we can just invest in what we are comfortable with inside our comfort zone. And emotions is part of the process. If you dont trust what you own, it can lead to buying high and sellIng low. As much of the time investing price movements is just noise not any impending sign. My rambles shouldnt not scare you on investing in bank preferreds.
              Risk is individual and personal. Many people would rightly say holding a past call issue that is 25% above redemption price as way too risky. I cant refute yet, but I do own one such exact issue and lose no sleep holding it…Call me crazy, ha… But seriously I have an exit plan if needed and feel pretty certain about it, if needed.

              1. Well, if you pair it with enough UEPEN @ ~87, you should not get hurt much at all if Ameren makes a sweeping call. lol

                In essence, that’s my exit plan on the illiquids I’m now holding. No more super lopsided amounts of AILLL and associated call risk for me.


                1. Trouble is that is from the other subsidiary and history doesnt show that to play out often. Look at IPL preferreds still hanging out there as AES wiped out the DayPo preferreds… My BP is still strong, I can afford a bit of high wire call loss stress fun, lol…

                  1. Hmmm. But AES is not Ameren, is it? Or even CL&P.

                    Are you now having doubts about Ameren being a ‘call one, call them all’ ute?

                    That’s how I’m betting, but it’s really academic for me at this point. I’m so diversified in the sector now that whatever they call or don’t call isn’t going to bother me at all.

                    Of course, I would much prefer that they leave them alone and just keep paying me. 😉


                    1. If was wanting to play that angle as a mitigator I would be buying one of the lower yielding Ameren Illinois preferreds such as an AILLP than a Union Electric issue which is Ameren Missouri a totally separate subsidiary and different BOD. Your cross pollinating there. 🙂

                    2. Ah. So Ameren doesn’t make the call decision? It’s the subsidiaries? Well, isn’t that special, as the church lady used to say.

                      Thanks. Glad I wasn’t leaning heavily on that piece of misinformation in my head.


                    3. Yes, and no…. Havent you ever been invited to a Ameren Illinois annual shareholders meeting? I have many a year… See you as a preferred shareholder get to vote on Ameren Illinois board of directors (not Ameren Hold Co). Its a very inviting letter…They give you time and date and location…And then promptly tell you Ameren Hold Co owns 100% of the common stock and about 70% of the preferreds…So they basically say dont bother because your vote aint gonna change nothing. Dont let the door hit you on your arse as they toss you out, lol.
                      My guess is each subsidiary would redeem them all if there was a redemption notice. But not necessarily both subsidiaries at same time though.

          1. Grid, talking about smaller regional banks, I had a surprise fill on 100 shares of FIISO @ $144.50 this morning. Totally unexpected, but quite pleased!

            I had sold to Camroc some time back at $150, so it sure is nice to buy them back.

            Love the non-callable, cumulative feature of this one! And at 5.7% yield is good.

              1. I still have 100 FIISO inside my ROTH IRA. You will recall when both of us were trying to get them, and Vanguard was the only broker willing to go hunt them down on our behalf.

                Today’s trade occurred in my Taxable account, so that is great. I’m now thinking of moving the ROTH shares to consolidate, after all, it is QDI

      2. Grid, I’ve always been confused too by some of the bank issuances. Like you mention, the Utes can recover their costs so it makes sense for them. My REITs can issue preferreds at 6% and then buy real estate with a Cap Rate of 7% – and then increase rents in the future, so these work too. I know the banking preferreds normally count toward Tier 1 capital, but my local bank is now doing a 10 year home equity loan for 2.86% and a 5 year car loan for 4.55%. So if a bank has to pay 7% and then loan money out for 3-5%, this does not make financial sense to me.

        Of course, some of these banks may have some “bad” loans on the books and may have to shore up their Tier 1 capital ratios and don’t want to issue more common stock.

        1. Lou, Im just suspicious in general of things I dont understand. And I certainly dont understand specifics of bank loan books, and accounting behind it. Im sure these “optional deferrals” given by banks are not being directly recorded in loan loss provisions, and thus could be a current legal accounting gimmick.
          Despite the “opening up” enthusiasm banks such as BAC still are calling for double digit unemployment at year end, which is at a pace that caused great banking stress in last crisis . And many Fed Governors have been openly saying banks shouldnt be paying dividends now. I have a thimble full of knowledge compared to any of those people. I just dont feel comfortable babysitting a full grown tiger in my living room.

          1. All different sectors of the market people play in, some higher risk than others. I agree I don’t understand banks either and only owned their common to do flips in but a longer time horizon than 2 weeks. Too risky for that now.
            Oil and the different aspects of it I have held and flipped both since 2012. One thing I learned on trips to Reno and Tahoe is you have to play (pay) to learn the game.
            One I currently own is KNOP I was playing the game earlier this year when I got blindsided by this shut down then the collapse in oil prices. But lucky this has happened before to this stock ( oil price collapse from 120’s to the 20’s ) so I held on and took my beating and collected the dividend and waited. When I thought the bottom was in, I doubled down at 12.65 I don’t know what is going to happen next, my tea leaves are a bit cloudy, but my guess its not going to hit the highs of the past 2 yrs so all I can hope for is it to come back to the price I paid for the first lot and sell it to make a small profit with dividends and either hold the second lot or sell it for a nice profit.

          2. If I only invested in things I fully understand I would never invest!

            I am only being a little facetious. Certainly you try to understand what you are investing in, but I have owned several small businesses in the past and even being that intimately involved in the finances and running of a business there was never a time I could tell you with complete certainty what the next year would bring.

            We diversify and do the best we can to limit risk in line with our risk tolerance. That is about the best we can do.

          3. The best advice, everybody should take NOTE of your wisdom Gridbird..if you don’t understand stay a way…far a way. You really are a smart kid !! I am learning a lot from you .
            Thank you for all the acknowledgement that you bring to all of us here!
            Let’s GO CARD’S !!

            1. Hey Danny…I had me a nice homer season bet on Cards 86.5 over. Looks like refund time as there isnt going to be a full season is there. My GF and I are doing a Cardinals 500 piece puzzle. Its taking us a while and may not be done before season starts, ha.

              1. Good luck kiddo ! You are a smart one so just do it ..I miss the Cards..I hope they start soon..I enjoy/love/learn from you all the time. Maybe one day never know?
                Banks or utilities?
                Thank you again for all the help
                Let’s go Card’s!!

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