Pinnacle Financial Partners, Inc. (PNFP) Q4 FY2025 Earnings Call Transcript & Summary

Good morning, and welcome to the Pinnacle Financial Partners Fourth Quarter 2025 Earnings Call. [Operator Instructions] Please note this event is being recorded. [Operator Instructions]. I will now turn the call over to Jennifer Demba, Senior Director, Investor Relations. Please go ahead.

Thank you, and good morning. During today's call, we will reference the presentation and press release that are available within the Investor Relations section of our website, pnfp.com. President and Chief Executive Officer, Kevin Blair, will discuss our newly combined company's future and outline our 2026 financial outlook. Chief Financial Officer, Jamie Gregory, will review Pinnacle and Synovus stand-alone fourth quarter 2025 results. Finally, Chairman, Terry Turner, will make some closing remarks, and then our team will be available to answer your questions. Our comments include forward-looking statements. These statements are subject to risks and uncertainties, and the actual results could vary materially. We list these factors that might cause results to differ materially in our press release and in our SEC filings, which are available on our website. We do not assume any obligation to update any forward-looking statements because of new information, early developments or otherwise, except as may be required by law. During the call, we will reference non-GAAP financial measures related to the company's performance. You may see the reconciliation of these measures in the appendix to our presentation. And now President and CEO, Kevin Blair, will open the call.

Thank you, Jennifer. Good morning, and welcome to our fourth quarter 2025 earnings call. As Pinnacle Financial Partners enters its next chapter, we do so with the belief that true success comes from staying grounded in who we are, inspired by where we're headed and united by a relentless commitment to outperformance. As we do so, we reaffirm our commitment to the investment community with renewed energy, clarity and confidence in the path ahead. Pinnacle's focus is producing strong above peer revenue, earnings per share and tangible book value growth. Our strategies and plans for execution are clear. We are committed to delivering exceptional client service and industry-leading loyalty as verified by external sources such as CRISIL Coalition Greenwich and J.D. Power. At the same time, we aim to be the employer of choice in regional banking by fostering a uniquely collaborative, empowered and rewarding culture. These priorities enable us to attract and retain revenue producers at an outsized pace, fueling our continued growth. By pursuing these goals with passion and purpose across the entire franchise, we strive to continue to create exceptional value for our shareholders and set the standard for growth and profitability in the industry. Our strong performance in 2025 demonstrates the focus of our teams during more volatile economic times in the midst of a pending merger. Legacy Pinnacle grew adjusted diluted earnings per share by 22% in 2025, while legacy Synovus grew adjusted diluted earnings per share by 28%. The commitment and focus of both firms on creating a differentiated client experience resulted in legacy Pinnacle's #1 Net Promoter Score ranking in its footprint and legacy Synovus' #3 Net Promoter Score ranking in its footprint amongst top market share banks. These results underscore that our team is fully engaged, focused on our clients and delivering meaningful value for our shareholders. We are a competitive team committed to sustaining top quartile growth and profitability. The merger between Pinnacle and Synovus was completed on January 1, just 160 days after announcement, demonstrating the strengths of both companies and our resolve to swift and effective integration. Over the past 2 quarters, both organizations have successfully completed key milestones. These achievements highlight our strategic focus and reinforce a solid foundation for continued growth and operational excellence. The team has hit the ground running in January, already executing across all elements of the proven Pinnacle operating model. For example, the firm has brought legacy Synovus team members into the Monday morning sales and service meeting series, an anchor of the Pinnacle operating rhythm, led by Chief Banking Officer, Rob McCabe. This long-standing successful practice helps teams align around core priorities, promotes cross-team collaboration and establishes shared ambitions and goals around growth, hiring, pipeline activities and service expectations. We are thoughtfully combining the strengths of Synovus and Pinnacle, building on similar legacies and shared values and remaining true to what really sets us apart. Pinnacle's exceptional operating model is our foundation and the engine of our growth, guiding us through every opportunity and challenge. We're not just building another big bank, we're scaling with the soul. And now Jamie will review both Pinnacle and Synovus' stand-alone fourth quarter 2025 financial results. Jamie?

Thank you, Kevin. Even in the midst of a merger integration, both Pinnacle and Synovus continued to demonstrate strong financial performance over the past 2 quarters. Pinnacle reported fourth quarter adjusted EPS of $2.24, which was stable quarter-over-quarter and up 18% from the prior year. Net interest income increased 3% from the third quarter and 12% year-over-year. Balance sheet growth remained well above peers. Period-end loans grew at a strong 3% from the prior quarter and 10% year-over-year, driven by recruiting, particularly in our expansion geographic markets. Core deposit growth was also quite healthy at 3% quarter-over-quarter and 10% year-over-year. The net interest margin increased 1 basis point to 3.27%. Meanwhile, adjusted non-interest revenue declined 6% from the third quarter, but jumped 25% year-over-year. Year-over-year growth was largely as a result of higher service charges, wealth management revenue and income from BHG. As expected, BHG contributed $31 million in fee revenue to Pinnacle. Adjusted non-interest expense was stable quarter-over-quarter and up 13% year-over-year. Pinnacle's fourth quarter credit metrics remained healthy and capital levels continue to build. Net charge-offs were contained at $27 million or 28 basis points, 63% of which was from a single non-owner-occupied CRE loan. The CET1 ratio ended the quarter at 10.88%. Meanwhile, Synovus reported strong fourth quarter adjusted diluted EPS of $1.45, which was stable quarter-over-quarter and increased 16% year-over-year. Results were highlighted by healthy loan, core deposit and non-interest revenue growth. Net interest income increased 2% quarter-over-quarter and 7% year-over-year. Period-end loan growth was a healthy $872 million or 2% from the prior quarter and 5% from the previous year, driven by broad-based C&I lending. Core deposits grew a solid $895 million or up 2% quarter-over-quarter. The net interest margin continued to expand, up 4 basis points sequentially to 3.45%. NIM was supported by various factors, including continued fixed rate asset repricing and the funding cost benefits of the core deposit growth. Synovus also continued to generate healthy, consistent growth in adjusted non-interest revenue, which grew 6% from the prior quarter and 16% year-over-year to $144 million. The drivers were broad-based, and I would highlight $16 million in capital markets fees, up 30% year-over-year. This performance highlights the team's focus on delivering for our clients while also focusing on the merger integration. Adjusted non-interest expense increased 2% from the third quarter and was up 5% year-over-year. The linked quarter increase included higher incentive payments and charitable donations. Credit metrics remained healthy. Net charge-offs were $24 million or 22 basis points in the fourth quarter. Our common equity Tier 1 ratio ended the year at an all-time high of 11.28% as we prepared for the merger closing. Also, we retired $200 million of the subordinated Tier 2 notes in October before issuing $500 million in December. Both Pinnacle and Synovus continue to be successful in hiring new team members in the fourth quarter with 41 new revenue producers. This brings the total to 217 for both firms together in 2025. We continue our work to finalize the valuation marks on the Synovus book, which we expect to be completed later in the first quarter. Our current estimated mark on the balance sheet is generally in line with the original merger expectations. We expect this valuation impact as well as other considerations to result in a CET1 ratio of approximately 10% at the end of the first quarter. This estimate includes the realization of $225 million to $250 million of first quarter merger-related expense and excludes legacy Pinnacle equity acceleration costs, which are capital neutral. Since the transaction closed, we have undertaken a meaningful repositioning within the legacy Synovus securities portfolio. As part of that effort, we sold approximately $4.4 billion and purchased roughly $4.4 billion of new securities with an average yield of 4.7% and estimated duration of 4.25 years. These transactions helped to support our Level 1 HQLA position, reduce risk-weighted assets and also serve to eliminate approximately 98% of the PAA associated with the securities portfolio. I will now hand it back to Kevin to review our 2026 financial outlook.

Thank you, Jamie. Pinnacle's proven revenue producer hiring model allows our balance sheet growth to be more resilient and sustainable regardless of economic growth, interest rate levels and the like. Loan and core deposit growth in 2026 should be supported by revenue producers who have not yet completed the consolidation of their portfolio to us. We also expect to continue hiring revenue producers at an accelerated pace this year, especially as the former Synovus team embraces the rigors of the Pinnacle hiring process. Our goal is to hire 250 total revenue producers in 2026. As we look to our first year as a combined company, we expect our period-end loans to grow to $91 billion to $93 billion or up 9% to 11% versus our combined loans at year-end 2025. We expect 35% of this growth to come from financial advisers who have been hired in the past 3 years as they build their book, another 35% to come from specialty verticals and the remainder to come from the legacy market growth. Our loan growth assumptions do not assume any change in line utilization rates or recent paydown or payoff levels. On the funding front, we expect total deposits to grow to $106.5 billion to $108.5 billion or up 8% to 10% this year, driven by the previously mentioned recruiting, core commercial client growth and momentum from our specialty deposit verticals that support our markets. Our adjusted revenue outlook is $5 billion to $5.2 billion in 2026. The net interest margin is estimated in the 3.45% to 3.55% range, which assumes the immediate benefit of purchase accounting balance sheet marks and more near- to medium-term fixed rate asset repricing of the legacy Pinnacle loan portfolio. Those benefits are somewhat offset by an increase in balance sheet liquidity over the next several quarters and marginal headwinds from two 25 basis point interest rate cuts as implied by the recent market expectations. We expect our initial balance sheet profile to be modestly asset sensitive, split between short rate and long rate exposures. We anticipate adjusted non-interest revenue of approximately $1.1 billion this year. Growth should be primarily attributable to continued execution in areas such as treasury management, capital markets and wealth management as well as approximately $125 million to $135 million in BHG investment income. Adjusted non-interest expense is expected to be approximately $2.7 billion to $2.8 billion in 2026. We expect to realize 40% or $100 million of our annualized merger-related expense savings in 2026. Underlying expense growth should be driven by revenue producer hiring from the second half of 2025 and continued hiring in 2026. Also real estate expansion to support market growth as well as normal inflationary expenses. Excluding legacy Pinnacle equity acceleration cost an estimated $450 million to $500 million of the $720 million in nonrecurring merger-related and LFI expense should be incurred this year versus $64 million recognized in 2025. We continue to operate in a constructive credit environment. We estimate that net charge-offs should be in the range of 20 to 25 basis points for the year, which is consistent with 2025 performance for the combined company. Moving to capital. We will target a common equity Tier 1 ratio of 10.25% to 10.75%. Beginning in the first quarter, our quarterly common equity dividend will be $0.50 per share. Our priority on capital deployment remains client loan growth. The Board recently authorized a $400 million common share repurchase program that gives us flexibility to manage capital in multiple growth scenarios. Finally, we anticipate the tax rate should be approximately 20% to 21% in 2026. It is a privilege to lead this team at such a defining moment. With our above-peer revenue trajectory and the growing benefits of merger-related efficiencies, we expect strong earnings performance in 2026. I am more excited than ever about the road ahead. Together, we lay the foundation to build the best financial services firm in the country. We fully recognize that 2026 will bring its own challenges, especially as we prepare for conversion in the first quarter of 2027, but we are more than ready for the task. Our momentum, unity and shared ambition give me tremendous confidence in what we will achieve. And now I will turn it over to Terry for some closing remarks before we open the call for questions. Terry?

Thanks, guys. Let me start here. As you listen to Kevin and Jamie, I hope you can see why I'm so fired up about what we've created with this merger. Next month will be 26 years since we put our original founder group together to form a bank specifically to take advantage of the rapidly declining service levels at the large regional banks that dominated the Southeast at that time. All we had were some deeply held convictions about how you produce long-term sustainable shareholder value. First of all, we intended to differentiate ourselves from the competitors based on distinctive service and effective advice. Of course, distinctive service and effective advice sounded like blah, blah, blah back then and still does to many even today. I know as investors, you've never had anybody say they intended to give poor service and bad advice, but truthfully, many do. According to Greenwich, with an 84% Net Promoter Score, we've created the single best client engagement, not just in the Southeast, but in the country. And their data also suggests we've amassed the best relationship managers, the best treasury management capabilities and the best credit processes in the Southeast. And that talent attraction model, which has proven to be the best in the Southeast based both on the quantity of talent we've been able to attract and the quality of talent we've been able to attract, goes forward in the combined firm under Kevin's leadership, led by my long-term friend and partner, Rob McCabe, as the Chief Banking Officer. Those proven credit processes that have provided best-in-class service from our clients' perspective and such strong asset quality over decades continue forward in the combined firm under Kevin's leadership, led by Carissa Summerlin as Chief Credit Officer going forward, who is the Chief Credit Officer for legacy Pinnacle. Secondly, we intended not only to attract the best talent, but to excite and engage them in such a way so as to get their best effort, their discretionary effort, which will always be better than the stereotypical scorecard management approach used by all of our peers. As a matter of employee engagement, Fortune Magazine ranks us as the third best financial services firm to work for in the country behind only American Express and Synchrony. Things like granting equity to every single employee so they feel like owners and including every salary-based employee in the annual cash incentive plan are critical to the reliability of our outsized growth that we produced for 25 years. And of course, all of that goes forward in the combined firm under Kevin's leadership. Thirdly, one of our most important principles was alignment, aligning shareholders with management and employees. I believe there's overwhelming evidence that shareholder returns are primarily correlated to only 3 metrics: revenue per share growth, earnings per share growth and tangible book value accretion. And so at legacy Pinnacle, all annual management and employee incentives were linked to revenue per share growth and earnings per share growth. Think about that all 3,500 employees incented to grow revenue and earnings. Over our first 25 years, we were the fastest revenue grower among banks greater than $10 billion in assets and the second fastest compounder of earnings per share in the country. And of course, that same incentive methodology now aligns our almost 9,000 employees under Kevin's leadership, all around revenue and earnings growth going forward. And finally, we've always relied on the principle that expectations shake behavior. It wasn't just that we incented all our employees based on revenue and EPS growth rates. We always set our targets for revenue and EPS growth rates to be at least top quartile performance. Think about that, to have targeted top quartile revenue and EPS growth for 25 years in a row led to this extraordinary compounding of the metrics that matter most in terms of shareholder return, which again explains the fact that over our 25-year history, we had the second highest total shareholder return of all the publicly traded banks in the country. And that same target-setting methodology is continuing forward in the combined firm under Kevin's leadership. Frankly, we both have been asked if Kevin can run the Pinnacle model. I want to make sure you understand that I know he can. He is my handpicked successor, and it's my expectation that executing this now proven model with his proven leadership capabilities will propel this firm to levels we would never have achieved on our own. Operator, we'll stop there and take questions.

[Operator Instructions] Your first question is coming from Ebrahim Poonawala from Bank of America.

I guess maybe just starting at the top, Kevin and Terry, around with the merger conversion, systems conversion next year, just talk to us two things. One, what can the combined bank not do today that it will be able to do a year from now post conversion? And secondly, as we think about the new banker hiring, new sort of client onboarding, how are you handling that in terms of? Are they coming on the new systems, old systems? Just color around all of that would be helpful.

Yes, Ebrahim, this is Kevin. Obviously, as we move to conversion in first quarter of '27, both companies will be operating on their existing legacy platforms. And so that doesn't encumber our ability to originate new business. It doesn't encumber our ability to be able to expand the share of wallet. We have been successful in both companies being able to use our existing systems. So there's nothing that's missing. What will change is that we'll move to an end-state platform that takes the best of both organizations. And so there will be capabilities that arise on both sides where we move to the new platform. There'll be new capabilities, new functionality, new products that we'll be able to offer. So there's revenue synergies that come with that. In the interim, when we bring on, we know which systems we are moving to. When we have a client that's a more complex client and we onboard them in '26, we're going to onboard that client onto the end-state platform and start to service that relationship there versus having to do another conversion in '27. So the real challenge is you're just having to manage a workforce, a sales force that has 2 sets of products and 2 systems, but it's not stopping our ability to grow the business. As it relates to hiring, again, same situation. As we bring on new team members, if it's in the legacy Pinnacle market, they would be onboarded onto the Pinnacle platform. If it's on a legacy Synovus market, they would start to sell the Synovus products and use those systems. But again, we have lots of workarounds that we can leverage that it's not going to create a bad client experience when we go to that migration. The other thing I would just mention, Terry mentioned it in the prepared remarks, the #1 thing we're focused on is the Net Promoter Scores and ensuring that our clients continue to receive that distinctive service and effective advice. And that all comes down to the people. So we can talk about the products and the technology, but the people are staying the same, and that's what builds the strong relationships.

And I guess maybe just another follow-up around -- I think you mentioned the Board approved a $400 million buyback authorization. Give us a sense of when you think you would actually initiate buybacks? Is it more to do with if there's a pullback in the stock, you step in? Or should we expect some level of buybacks to resume starting as early as this quarter?

Ebrahim, it's Jamie. Great question. First thing I would say is we would love to be buying back stock at these prices. We think it's pretty attractive. But as we look at capital ratios and look at -- our expectation is that we close the deal and at 3/31, our CET1 ratio is 10%. If you include AOCI, it's 9.8%. Looking at that ratio, we are fine with regards to internal stress tests. We're fine with how we expect CCAR or SCB or any of that to play out. We feel like we do have excess capital. From a headline number, we would screen low relative to Category 4 peers. If you include AOCI at 9.8%, we would screen higher than median compared to Category 4 peers. But I kind of give that background is just the fundamental of how we think about it. We do not want to screen the lowest of a peer group. We don't want to be at the low end. So it's likely that we will accrete capital for a time period and just allow earnings to drop to our capital ratios as we go through early 2026 and then reassess. That's why we put that range of 10.25% to 10.75% out there. The one thing I will note is in the first quarter, you can see the capital waterfall, the earnings impact of merger expenses, et cetera, will lead to not a lot of capital accretion this quarter. So you should not expect to see share repurchases of this quarter. It's unlikely you would see them in the second quarter, but then we will reassess as we get into -- later into the year.

Your next question is coming from John Pancari from Evercore.

On the loan growth front, the loan growth projection implies that 9% to 11% range on a pro forma basis. Can you just kind of walk us through your degree of confidence in achieving this given the -- we're hearing the backdrop is getting a bit more competitive. There's a little bit of uncertainty around CapEx-related demand. So I guess from a demand perspective as well as from an underlying organic and the hiring perspective, can you help us just kind of walk through your confidence in attaining that target?

John, it starts with not just talking qualitatively, but when you look at the fourth quarter for the pro forma company, we generated 10% loan growth already. And so to your point, our growth, as we shared in the slide deck, is going to come from existing team members that are already in the market, the recent hires that we've made in the last 3 years as well as our specialty growth businesses. And for me, you asked the question about just general client sentiment. We do a quarterly survey in legacy Synovus. The clients continue to remain relatively constructive. The backdrop continues to have some uncertainty. It's not lost on anyone that tariffs still play a risk factor for our clients, but we've seen the economic growth pick up. And when we query those clients, they expect their business activity to pick up over the next 12 months. So part of that is being in the Southeast. We know we're in a great footprint. So I think our client sentiment is positive. There's still headwinds, but there's been this appetite for capital that I think was delayed resulting from the uncertainty that happened in '25 that we expect to get. But look, we said this in the prepared remarks, unlike other banks, we're not waiting for the economy to grow to be able to generate growth. It will come from being able to hire folks. You've seen this past year, Jamie mentioned 217 new revenue producers and although that number needs to go to 250 on the Synovus side, I was pleased that our growth picked up about 20% year-over-year. And as Terry said, the real opportunity is for Synovus to start hiring at the same pace that legacy Pinnacle was hiring. And that will generate some growth this year, but the real growth has come from the people that we've hired over the last 3 years and the embedded growth that will come from those individuals continuing to build out their book. So I think it's a constructive environment. I think we have all the tools and resources to be able to generate the growth. As we've talked about in the past, the biggest headwinds have been unexpected payoff activities. And we've kind of built that into our forecast this year. Fourth quarter was no exception to that. We saw elevated paydown activities. But for the first time, we actually saw a little bit of line utilization helped to offset that. So our production goals are not predicated based on economic growth. It's based on going from a bottoms-up forecasting perspective, looking at what each individual can bring to the table, and that gives us great confidence in being able to deliver that 9% to 11%.

And then separately on expenses, I know in December, I think, at a conference disclosure, you pushed back your timing of your cost save recognition from 50% in '26 to 40%. Can you just remind us what that related to? And is there a risk of future delay in the recognition of the cost saves as you work through the integration?

John, it's Jamie. As we work through this merger, our prioritization first was let's get to close. And we were very successful in having a Jan 1 close on the deal. And when you -- because that moved as quickly as it did, it basically pushed back some of the systems because they weren't as fast as the close. And so that delay in there pushed back a little bit of the cost synergies. I would also say that we've been leaning in on some of the benefits associated with the deal and how we've decided to take best-in-class benefits on both sides. But those 2 things really drove the 50% down to 40% on the year 1 cost saves. But you'll note that we didn't change year 2. We didn't change the total saves. So it's really a timing difference. We feel really good about all of the merger math from there. I feel good about our ability to achieve those synergies. But it's really in year 1, we just dropped it from the 50% to the 40%.

Your next question is coming from Jared Shaw from Barclays Capital.

Maybe looking at the fee income side, what's embedded in the fee income guidance for the Capital Markets business? And maybe just some color on how long you think it takes to integrate some of those fee income lines?

Yes, Jared, it's a great question. I mean I love that you're focusing in on capital markets because we view that as a big area of opportunity for us. Just in general, both Pinnacle and Synovus have had great success in growing fee revenue. If you look at 2025 and you combine the companies, you have over 10% growth in account analysis fees. You have over 10% growth in overall core banking fees. You have over 10% growth in wealth management fees, but in capital markets that you mentioned, that's been a great success. And we've had over 15% growth in swap fees. But the capital markets platforms are a great area to show what are the opportunities for revenue synergies because we have the effectiveness of the swap delivery. We also have lead arranger fees and syndications that we can actually grow on both sides. But then on the Pinnacle side, they're bringing to the table the ability for M&A advisory, and that's something that's new to the Synovus side. So we see strong growth in capital markets fees in 2026, consistent with kind of what you've seen in the past, double-digit growth.

And I guess maybe shifting to the loan growth side or back to the loan growth side. You called out the ability to hold higher balances as a result of the bigger balance sheet. How quickly do those higher hold limits flow through? And if we look at sort of the Slide 25 drivers of loan growth, do you think of that as more part of the contribution from the existing legacy markets?

That's correct. Yes. So Jared, when you -- it can happen immediately. I mean we have new hold limits today. But as you can imagine, not every client needs additional capital above where they are today. But what we've done with our bankers is cross-tabulate the current hold limits versus where our appetite is, and it shows where we have the ability to give more capacity to our clients, and we're going to communicate that so that we're -- we'll be able to generate incremental loan growth as a result of that starting this quarter and moving into the future. And I consider that we included that in the bucket for revenue synergies along, which is hiring because I think that's just blocking and tackling. That's allowing us to fully use the capacity of our balance sheet to meet our clients' needs. We're still going to be, as Jamie said, in the lead arranger business, we're going to be syndicating deals, but there will be some incremental growth there that will allow us to grow loans. But it's not big enough to call out an individual number. I think between hold limits and utilization, which we would expect, although we didn't build it into our forecast given lower interest rates, we would think both of those areas would just serve as tailwinds to growth for '26 and beyond.

Your next question is coming from Ben Gerlinger from Citi.

Pretty clear that you guys are now clearly focused on the outlook and you have a pretty high degree of confidence in the continued legacy Pinnacle hiring trends. When you look at kind of what you see today in the market disruption, it's not necessarily the legacy footprint of either 1 or 2? Or is there opportunity to kind of expand hires or even LPOs? Or is it something that's still in footprint only focused? I'm just trying to figure out where the additional or incremental revenue producer might come from geographically?

Well, look, we've said we try not to highlight specific markets. It kind of lets your competition know where you're coming to play. But I think you should think about any metro market in any of our 9-state footprint provides us with an opportunity. And it's I would tell you that disruption is our friend, but the biggest opportunity we have is what Terry said earlier, is continuing to make this a great place to work. And when bankers evaluate opportunities to hone their craft, they want to work for an institution that removes bureaucracy. They want to work for an institution that allows them to do what they do best, which is serve their clients. And so the best tool we have is continuing to create a team member base that is actively engaged and becomes our biggest recruiters because when they join our company, everyone hears from their peers. And when they say what a great company it is, it just gives us the opportunity to continue to hire. So we'll hire across the 9-state footprint. The biggest opportunity, as you've seen on the slides, Pinnacle has been adding at an outsized pace and doing a wonderful job. Rob McCabe and his team have worked with our Synovus geographic leaders to install that hiring model, which is not an overnight model. As Terry said in the past, we're not hiring headhunters. We're not taking applications on LinkedIn. It's identifying who the best bankers are in each market and continuing to call on those bankers and really emboldening ourselves and showing why this is the best platform for them. So I don't think there's a big risk in generating 250 new hires this year. I don't think there's a big risk in generating 275 the year after that. I think there's adequate opportunity across the market. And that doesn't include where we could continue to expand some of our specialty offerings where you could bring on new teams and continue to add more arrows to our quiver to support that geographic banking model. So I'm very confident and what I've been impressed with, told Terry this, the rigors of their model and the success factor is not by half and chance. It is because they are very good at what they do in identifying those prospects and continuing to follow up and ensuring that they bring them on to the platform.

So I mean, pretty confidence in the net loan growth outlook via those hires over the next 2 or 3 or 4 years. So I was kind of curious, in terms of just kind of growth, you generally lead with the credit and you get the whole relationship quickly thereafter. But Jamie, if we're thinking about like if loan growth starts to get overly accelerated, is there an area or an avenue that you might gravitate towards rate dependent on kind of backfilling the funding side of that before the deposits arrive?

Well, if loan growth happens before deposit growth, which actually is somewhat consistent with the forecast because deposit growth is more back-end loaded, yes, we would use some higher cost sources to fund that growth. But all of that is embedded in our guidance. Everything that we're saying about our margin outlook, et cetera, includes seasonality of deposit growth relative to loan growth and our expectations of these bankers that we've hired over years bringing their books over. So it all holds together when you see the loan forecast, the deposit forecast and then the underlying quarterly impacts. But yes, if loans come in before deposits, yes, we will use wholesale funding to bridge the gap.

I might just jump in and add for clarity. I think on the hiring, the hiring is what gives us confidence in the long-term sustainability of the growth. And if you look at the pace at which we're accelerating the growth in hiring, it's a really modest increase in 2026 and not -- I wouldn't say a huge increase in 2027. So those are pretty reasonable targets. And what that has to do with is the long-term sustainability of the balance sheet growth and therefore, the earnings of the company. What gives us confidence in the short-term ability to grow loans is the people that we have onboarded over the last 3 or 4 years. Those people are in the process of consolidating their books of business from where they used to work to us. And we're not looking for anything special. We're simply looking for those people to produce at the average rates they have produced for 25 years. And so again, the confidence on the loan growth comes from the people that we have already onboarded.

Your next question is coming from Bernard Von Gizycki from Deutsche Bank.

Just on the NIM, in your '26 outlook, you assume a range of 3.45% to 3.55%, inclusive of the purchase accounting accretion. I know back in mid-December, you laid out and sized the contributions from the accretion, from the fixed rate asset repricing and offset by some of the debt and the adding of the securities, the liquidity measures you're doing. Given the changes you laid out, could you just provide updates there?

Yes. As you look at the margin, the way I would think about it is, clearly, in the fourth quarter, you had -- Pinnacle had a 3.27% tax equivalent margin. For the Synovus side, when you mark the book, when you mark all of our assets, you should expect to get to a margin in the 3.75%, 3.80% area. When you combine those 2, you get to 3.50%, low 3.50%. And so that's generally how we think about these coming together. The yields on the Synovus book are a little bit lower than we originally modeled with the merger because interest rates have declined a little bit when you look at the belly of the curve. And so that's generally the math. That's why the CET1 ratio at close will be a little bit higher than we originally modeled. It's why the PAA will be a little bit lower than we originally modeled.

And then just on the revenue synergies on Slide 28, the $100 million to $130 million. I know it's supposed to be realized over the next 2 to 3 years. Does that start in 2027 post the completion of the integration process? Any color you can share?

It starts today. I mean we're already working on it. So our guidance that we provided for '26 would incorporate some of those revenue synergies as they materialize, things like we talked about earlier, like hold limits, being able to hire new folks. There are certain capabilities on the capital market side that we don't have to be on the same platforms, syndication fees, FX. Those are being cross-pollinated across our organization. And then when you add on some of these specialty verticals I've mentioned in the past, like equipment finance, the Pinnacle legacy team is already calling in the legacy Synovus footprint. So instead of trying to give you a line item reconciliation of all those, we'll start to incorporate those into our annual guidance. And as we sit here today, I think we're as excited about the $100 million to $130 million, and we think we can exceed that target over the next 3 years. But yes, the '26 guidance would incorporate the benefits that we see in these early stages.

Your next question is coming from Michael Rose from Raymond James.

Maybe just going back to the comment in the slide deck just around higher hold limits. I assume that's just a step function of a larger balance sheet. But if you can kind of expand upon that, I mean, do you plan to kind of move upstream? Or is this just, hey, we're going to do the same types of loans that we've always done on both sides and then maybe just syndicate out less? Just trying to get some better color around that. And then secondarily, if you can just comment on the outlook for some of the specialty businesses. I know that's been a big focus, at least at legacy Synovus over the past couple of years. What does that look like as we kind of move through this integration?

Yes, Michael, I think it's the latter of your question. I don't think that it's allowing us to pursue new opportunities upmarket. We -- both companies have been moving upmarket with middle market banking, some of our corporate banking initiatives that we've had in some of the specialty areas. What it really does is just increase that ability to have slightly larger hold limits on those clients. And so as I said earlier, we're not talking about major step functions. It's not doubling the size of the hold limit, but it gives us a little more capacity. And so what you should see from that is slightly higher loan size that we would keep on balance sheet. But again, we've built a strong syndicated platform to be able to manage our risk overall. And so we'll continue to participate out some of the larger loans, but it just gives us a little extra capacity. As it relates to the specialty units, as I've said in the past, both sides bring some unique businesses to the table. I get really excited about the equipment finance area, the auto dealer business that Pinnacle has been building. On the Synovus side, we have things like asset-based lending, structured lending. We have a family office on the wealth management side. Those organizations are working across the broader organization to make sure that their capabilities are well known. And when we have an opportunity to introduce a client, we're going to make those introductions. And so we haven't gone through and shared what the individual growth of each of those businesses will be. But I can tell you, a large portion, as you saw in the pie chart, of our loan growth will come from those specialty businesses, and it's just from the introduction to the other sides of footprint and a client base that we haven't called on in the past. So again, excited about it. We've been having sales meetings on Mondays where those individuals have been working to share their products and capabilities, and there's already been joint calling efforts. So we're well underway there. And again, it's going to generate a large percentage of our growth as we look both on the loan side as well as the deposit side. We have some deposit verticals that we've been focused on that we'll be able to introduce to the other legacy bankers.

And then maybe just as a follow-up. I know there's some debate about if the asset thresholds get lifted here at some point. I know you guys have some onetime costs built in for that. But if those rules do get changed, I assume you'll still use some of that, but I assume some of it that you probably wouldn't or you could slow that pace. What would you do with those extra dollars? Would it be kind of further acceleration on the hiring front? Is there other projects or systems that you'd like? I know we're not talking a huge number, but certainly it would be helpful for any color.

Yes, Michael, those costs, as we look at it, if $100 billion was raised and it was not in our near-term horizon with strong organic growth, we would still do the data work we're doing now, which is a large portion of that expense. And so we will still incur a good bit of that expense that we've modeled out, even if that's increased, we would surely save on some headcount in our back-office functions, but we would still continue to work on the data side. But when you think about what will we do with those expense dollars, I guess I would just reframe that and say that we will spend for good hires with or without those savings from LFI changing. And so we're going to lean into hiring the right talent because we see the value to long-term sustainable growth, long-term sustainable growth in assets and tangible book value, and that's our strategy. So I just would disassociate the savings from LFI or really anything else with the hiring because we are leaning into that really in all scenarios.

Your next question is coming from Catherine Mealor from KBW.

Jamie, you talked in your prepared remarks about some restructuring that you've already done to the bond portfolio. Can you talk to us a little bit about what you're expecting in terms of the timing for further build in liquidity as we move through '26? Just trying to frame -- you give us loan growth expectations, but trying to think about what the size of the bond book could look like over the course of the year and how average earning asset growth will build through the year.

Yes. It's a great question, Catherine. And first, I'll give a little bit of color on the trade. So I mentioned it on the call, but we did $4.4 billion swap in the securities portfolio. The way I would think about the securities portfolio from legacy Synovus is our book yield was about 3.50% coming at the end of the year. When you marked it to market, you got to about a 4.40% yield on the securities portfolio. And then we did the repositioning. And the repositioning did multiple things. First, we shortened duration. Second, it improved liquidity, HQLA improved. Third, it reduced risk-weighted assets. Fourth, it eliminated 98% of the PAA associated with the securities portfolio. So it achieved a lot of objectives to us. I mean we're trying to reduce AOCI volatility. We're trying to reduce PAA. All those things played out with this repositioning. So we're very pleased with how that happened. Those trades, because we did shorten duration, reduced the legacy Synovus security yield to about 4.35% and so when you bring those together, you get a security portfolio that has a nominal yield of around 4%, a tax equivalent yield of around 4.15%. And so that's kind of where we are in the securities portfolio. As we proceed through 2026, we do have debt issuances in the forecast. We're contemplating a couple of debt issuances that could be $1 billion this calendar year, likely two different issuances, one in the first half, one in the second half of the year, and that's embedded in there. Now consistent with the prior conversations, the impact to average earning assets just depends on the growth of loans and deposits and how all that plays out. But that's at a high level how we're thinking about 2026.

So still put that $1 billion of debt into the '26 number, it feels like.

That's right.

And then maybe within that on deposits, I mean both on a legacy basis, Pinnacle and Synovus had a nice reduction in deposit costs. Those came in better than I was expecting. So that was great to see. And so maybe can you help us think about as you see this accelerated growth into next year, and I know rates are moving, but let's just kind of on a static basis, where are kind of new deposit costs coming in today? And where should we expect maybe on a pro forma basis, deposit costs to kind of settle in outside of any kind of big move in rates on a pro forma basis?

So if you look at just like the going on rates this quarter, Catherine, on the Synovus side, it was around 3.14%, a little higher on the Pinnacle side. But we expect those to continue to come down. Obviously, we built in 2 rate cuts. Just quarter-on-quarter, our rate paid was off about 30 basis points. So it's still a rational pricing market where you're seeing continued competitive tension is when you're going after high rate CDs. And I think both sides have really rationalized our demand for those. But as we go forward, as Jamie said earlier, part of our growth story is relying on these bankers to bring over their relationships when they get the loan. So we're not having to go out and rely on promotional deposits to have to generate the $8 billion in deposit growth this year. So I think you would continue to see those going on rates come down as rates come down, and we'll be very thoughtful. As we've said in the past, we can grow deposits as much as we would like. It's just at what rate. And we're trying to grow them at a marginal rate. I always like to give you this from a Synovus standpoint. When you look at loan rates for the quarter, we were at 6.23% deposits, as I said, at 3.14%. So you're still getting almost a 310 basis point spread on your new production, which, again, we monitor that just to make sure that we're balanced in how we think about the going on yields for loans and what we're having to pay for deposits.

Your next question is coming from Casey Haire from Autonomous.

I wanted to circle back on the recruiting strategy. So the -- I think you guys mentioned 41 hires in the fourth quarter. Just wondering what the success rate was on that. I think it was 90% historically. And then just looking forward, what is the pipeline looking like as you guys target 250 this year? How many offers do you have outstanding?

Yes. I would say on the success rates or the kill rates for hiring, it remained roughly the same as it was all year. The average number hired resembled the average for the year. The kill rate was similar for the year. I wouldn't detect any particular difference in our success at closing the recruitment cycle and turning them into hires. I think as we go forward, you heard what Kevin said, this methodology is just -- it's just that. It's a routine methodology that we have run for an extended period of time, and it feels like it will produce, I would say, at least what we've committed in our guidance there. Again, if you look at the relative increase for 2026 over 2025, it's a pretty modest increase. At least for me, I don't feel like we run ourselves out on some big lift here. But anyway, that's my thought. I don't know, Kevin, you want to...

Yes, you're spot on. And look, again, you don't have to go to the legacy Pinnacle leaders and ask them about their pipelines. They work them 3 times a week. What's changing is our legacy Synovus team is starting to exercise that same process, and they're building their pipeline. So it won't -- that's why we said over time that Synovus from '26 would still lag the hiring that happens at Pinnacle. But by '27, we would expect both sides to be adding at a similar rate just based on that building of the pipelines. And I've had the opportunity to be on a lot of recruiting calls in the last 30 days, and I can tell you that they're not slowing down. People want to be part of this company. And ultimately, they have validation from the people that have already joined that this is a great place to work. I joke with Terry all the time when I talk with the folks at Pinnacle that have just joined, I said, how is it going?" They said, "I wish I had joined 10 years ago. That's the #1 answer I get from those folks.

And then just -- so you guys restructured the Synovus bond book. Just anything else that you guys are kind of entertaining as you look at the pro forma balance sheet. And maybe some updated thoughts on the BHG liquidity event, given what's a pretty favorable backdrop for them?

We have a lot of different things that we are working on the background on the balance sheet, but it's really too early to think about whether or not they're viable or attractive to us, none of which are that material to the earnings outlook. And so we will continue to look at options to either improve liquidity of the securities portfolio or reduce risk-weighted assets or anything similar to what we've done in the past. With regards to BHG, that the team down there just continues to deliver. You can see that with their performance in 2025. You can see it with the outlook we have in 2026. If you look at the fourth quarter of fee revenue from BHG, we had $30 million in the fourth quarter, including a true-up of $5 million from the third quarter BHG earnings. And so if you use the baseline $25 million in the fourth quarter, that's really strong growth as you play it out through 2026. I mean we're talking 25% to 35% growth for the company. So they continue to perform. And I go through all that because it just shows that they are focused on their core business. They're focused on growing it, adding value. And I think whatever they do with liquidity event or how they approach that, all I would just say is that they are positioning themselves well for choosing their own destiny with regards to that.

Your next question is coming from Anthony Elian from JPMorgan.

Jamie, on Slide 23, could you provide us with the updated assumptions specifically on the loan marks for 2026? You have a comment in the footnote that says you shifted the mark to longer duration loans, but I'm curious if you could give us some sensitivities to NII if you shift the loan mark back to a shorter duration.

Yes. As we look at our current expectation for the loan marks, we believe that approximately 2/3 of the PAA is going to come from residential mortgages, which are clearly long duration. And so that's the shift that we're referring to there. I would not expect these marks to move materially between products between now and finalization, but that's something that the team continues to work on. And that's what basically reduces that PAA benefit, that plus the rate decline in 2026.

And then my follow-up, I'm curious, could you give us updated thoughts on deposit beta going forward for the combined company, assuming the forward curve plays out this year?

Yes. If you look at the blended deposit beta in this easing cycle to now for both companies combined, you get to about a 48% deposit beta. And when we look forward at the next 2 cuts, which is our current expectation, we think that a 45% to 50% deposit beta is appropriate for the rest of this year. And clearly, there's a lot of uncertainties that go into that with deposit mix and pricing and what the Fed actually does. But we think that that's a reasonable assumption, and that's what we're working towards in '26.

Your next question is coming from John McDonald from Truist Securities.

Lots of good thoughts on the '26 outlook. As we pull up a bit and think about the long-term promise of the merger and the case for the stock, could you share some thoughts on the long-term earnings power of the company? At announcement, you showed an illustrative EPS of $11.63 using consensus '27 as a base. So maybe just any updated thoughts on that or broadly any puts and takes against that or how we might think about the run rate EPS as we exit '27?

John, I will start on this one. The first thing I'll say is both companies ended 2025 on a really strong note, and that positions us for success in 2026. And when I sit and I look at the guidance we put out this morning and you see it, it's strong guidance. I mean it's higher than consensus. We have a lot of confidence in our ability to drive towards this performance that we're laying out today, and we feel really good about that. The merger math is actually a little bit of a headwind to us because rates are lower. And so the PAA is lower and the mark on the Synovus book is lower. But the offset to that is you're seeing growth being better than what the original consensus was when we laid out the merger math. And so you have the offsetting positive of increased loan growth beating expectations with the headwind of interest rates being lower. And so that's generally how we're thinking about it. I didn't mention expenses and all that because we haven't changed our expectations there on synergies.

And let me just add one thing. So Jamie talked about the forecast. Terry has mentioned it. Look, if we continue to provide the type of distinctive service that we provide, we're going to create an environment. You saw the slide in there. The market share opportunity that is in front of us are with these banks that have very low loyalty scores. And so our ability to grow and meet those targets are all predicated on continuing to wow our clients, hiring talent and growing the balance sheet. And everything we've seen since the announcement; we haven't lost one bit of traction and momentum on being able to do those things. So I know it feels like we're early in this process and people would say that. But everything that we've seen over the last 5 to 6 months has further proven to me that by installing this model and delivering and executing, I feel like those numbers are not only attainable, but we can actually deliver something that, as we've said in the beginning, the most profitable regional bank, the most efficient regional bank and the bank that has the highest level of client service. That's what gets me excited.

Kevin, it feels sustainable over time to me, which is an important idea. I talked about it a minute ago, but the fact that we've already hired people that produce the growth that's immediately in front of us is important. The fact that we can continue to hire people sustains the growth over an extended period of time. And when you put that on top of the footprint, which is the most advantaged footprint in the United States and then look at the market share vulnerability chart, it's just hard to keep me from being excited about what the long-term earnings opportunity are for this company.

John, we're passionate about that question.

Maybe one follow-up just to clean up some credit questions that have come in. Jamie, just in the world where there's no CECL double count, how does the mark kind of affect provisioning going forward? Does taking that mark pre-provide for some losses and let you provide a little less? And maybe just where the loan loss ratio is starting? And how should we think about provision relative to charge-offs going through '26?

Yes, John, just think about it as you would normally think about it, where the allowance we have today, we expect to kind of stay in this same area given our outlook of allowance to loan ratio. The only areas where I would say it kind of prefunds charge-offs is if it's for something that we see in the near term, if you have a specific reserve on a loan. And so I would just think of it as normal going through 2026.

And then flattish charge-offs in the first quarter, you both had some individual kind of one-offs in the fourth quarter. Are there still some cleanups that happened in the first quarter? Maybe just comment on that.

Yes. I mean, look, I think if you step back and look at this quarter, we noted a couple of items, not because they're discrete, but we just wanted to provide some attribution for what drove the charge-off levels. I think it's important to note, if you look at pro forma charge-offs, it would have been roughly 25% or 25 basis points for the combined company. And as you saw, our full year guidance is still 20 to 25, but we're working through a couple of credits to your point, that we've already reserved for and likely taking charge-offs in the first quarter. So we just expect the levels to stay stable versus where they were this quarter. But we are not seeing anything that's indicative of any systemic change, any asset classes. It's really kind of a status quo for charge-offs. But the first quarter will kind of be stable with where we working for.

Your next question is coming from David Chiaverini from Jefferies.

So you mentioned that loan growth should accelerate through the year. Is it reasonable to think kind of mid- to high single-digit in the first half of the year and kind of high single-digit to low double-digit in the second half of the year? Any color there would be helpful.

Yes, I think that's reasonable. And it's reasonable just based on, as Terry said earlier, as the portfolios continue to be moved over from new hires, it will build throughout the year, and it will accelerate. So I think mid-single-digit to high single-digit to high single-digit in the first half and then accelerating to double-digit in the second half.

And then in terms of loan pricing, can you talk about any changes in spreads that you've observed in recent months?

This quarter, we saw about a 10 basis point decline in spreads versus our internal transfer pricing. So just think about a 190 basis point spread on production. That compares to about a 200 basis point spread that we had seen for the first 3 quarters. So some of that has to do with mix and the size of -- we moved upmarket with our production this quarter. I think maybe that's what's lost, and hopefully, I can highlight that now is our production for the combined companies was up 63% versus the same quarter last year. So back to hitting on all cylinders, the team is producing. Some of those loans were in kind of our upper market businesses that generally carry lower spreads, but about a 10 basis point decline, we've said that, that's been a trend that we've been monitoring. I think it's within our expectations, and our guidance for next year would include spreads in that general range.

Our next question comes from Christopher Marinac from Janney Montgomery Scott.

Just real quick on deposit incentives. Are these any different for the combined company as it would have been separate at Pinnacle and Synovus? Just curious on how deposit incentives are comparing across the new company.

It's what Terry said earlier, Chris, our company is going to be -- everyone will be incented on the same measurements, which is revenue growth and EPS growth. And it's our job as the leadership team to ensure that deposit growth is a key component of that and being able to manage our margin. So everyone is incented on the company making its top-of-house goals. There are no individual incentives for production any longer and people won't be focused on filling buckets or meeting a scorecard. It's all going to be based on top of house. And it's our job to make sure, as I said earlier, that $8 billion to $9 billion in deposit growth that we're able to develop a clear plan for how to execute on it. And it would give us risk, obviously, if we don't generate that because it would put a lot of pressure on the margin. So no individual incentive plans, but everyone will understand the composition of what it takes to achieve those EPS and revenue targets.

This concludes our question-and-answer session. I would now like to turn the conference back over to Kevin Blair for any closing remarks.

Thank you, Matthew, and thank you all again for your questions and your continued engagement and support. As you've heard throughout today's call, we enter 2026 from a position of strength commercially, financially, culturally and strategically. The merger of Pinnacle and Synovus is more than a combination of 2 high-performing franchises. It's the beginning of something bigger, something that I think will reshape into the premier financial services firm across the industry. What energizes me most is not where we stand today, but what we're building together. We have a proven model, a unified team, a deep bench of talent and a clear path forward, and we're executing with focus, speed and discipline. Our commitments are transparent and our expectations are high. And our responsibility now is pretty simple, deliver, deliver for our shareholders, deliver for our clients, deliver for our communities and deliver for our team. We fully recognize that '26 will come with its own set of challenges. They always do in periods of transformation and growth. But if there's one thing that both companies have demonstrated over the years, it's that we thrive when expectations are highest. Our momentum is real. Our integration is on schedule, and our culture is strong and aligned. And we've never been more unified around this ambition to become the best financial services firm in the country. So as we look ahead, know this, we are confident, we are committed, and we are absolutely determined to execute on every promise we've made. Thanks again for your partnership and your belief in the future we're building. We look forward to continuing these conversations with many of you at upcoming industry conferences. Before I close, I want to express my deep gratitude to Terry and Harold for their extraordinary contributions, their passion and for entrusting us to carry forward this torch. They've left their fingerprints on so much of what makes this firm so special. And I know they will continue to serve as champions for this organization and support our path forward. For both of you, truly a job exceptionally well done. With that, operator, I'd like to conclude today's call.

Thank you for joining us today. That concludes the Pinnacle Financial Partners Fourth Quarter 2025 Earnings Call. Have a good day.