Pinnacle Financial Partners Third Quarter 2026 Earnings Conference Call - SYNOVUS FINANCIAL CORP

Financial Performance:

• Diluted EPS was $2.40; adjusted diluted EPS was $1.69 (excluding $56M in pre-tax items), with year-to-date adjusted EPS up 23%.
• Net Interest Income (NII) increased 3% sequentially; NIM was 3.4% (down 4 bps QoQ) but expected to expand slightly in Q4.
• Adjusted non-interest revenue grew 19% QoQ, driven by a record BHG quarter and a $23M gain in equipment leasing.
• Adjusted tangible efficiency ratio improved to 48.9% (95 bps improvement QoQ), demonstrating positive operating leverage.
• Loans grew $1.7B QoQ; deposits grew $2.1B QoQ (excluding public funds, core deposits up ~3%).
• Credit quality remains strong with net charge-offs at 23 bps (within the 20-25 bps target) and non-performing assets flat at 50 bps.
• CET1 ratio increased 8 bps to 10.01%, continuing to build toward a 10.25% target.
• Merger-related expenses totaled $382M YTD, tracking within the $400M-$450M full-year guidance.

Guidance and Future Outlook:

• Full-year 2026 loan growth guidance remains 9%–11% (top end); deposit growth expected to reach mid-range (8%–10%, approx. $9B).
• Full-year NIM guidance adjusted to 3.44%–3.46%, with Q4 expected in the low-to-mid 340s.
• BHG income guidance raised to $150M–$160M for the year (up from $110M–$120M).
• Adjusted non-interest expense expected to land just above the midpoint of the $2.675B–$2.775B range.
• 2027 outlook (including financials and hiring targets) to be provided in December; current momentum suggests continued high single to double-digit growth.
• System and brand conversion scheduled for March 2027, with AI supporting testing to reduce timeline by ~70%.

Business Segments and Product Lines:

• Commercial & Industrial (CNI) led loan growth; all geographies and specialty units showed positive growth.
• Fee income: Core banking (+10% YoY), Wealth Management (+11% YoY), and Capital Markets (+23% YoY).
• BHG (Home Buyers Guide) production reached record levels, driving investment income to $48M (up from $24M in Q2).
• Equipment leasing business contributed significant gains, including a specific gain in the quarter.
• Systems migrations completed for client care, mortgage origination, and HSAs; card reissuance and branding expansion ongoing.

Market and Competitive Landscape:

• FDIC data shows Pinnacle growing deposits at nearly 3x the pace of its MSA footprint; market share ranks improved in 5 states and 17 MSAs.
• Net Promoter Score (NPS) rose 2 points, ranking Pinnacle #1 against larger peers in the footprint.
• Client attrition for non-CD accounts is down in 2026 vs. 2025, indicating strong retention despite merger activity.
• Management emphasizes competing on service and relationships rather than price, maintaining pricing discipline with loan spreads ~14 bps wider than indices.

Risks and Challenges:

• Commercial Real Estate (CRE) production expected to remain under pressure due to higher rates and developer caution.
• Margin pressure anticipated in 2027 due to HQLA build, wholesale funding costs, and tighter spreads on incremental growth, though not expected to drop immediately to 330%.
• Potential regulatory changes regarding Category 4 bank thresholds could impact liquidity build timelines but are not altering near-term plans.
• Macroeconomic uncertainty requires conservative reserve modeling with a 45% weighting to below-consensus scenarios.

Management Commentary and Tone:

• Tone is highly confident, emphasizing a "same pattern" of execution across growth, talent, and credit quality.
• Management dismissed fears regarding talent retention, citing 95% revenue producer retention and aggressive hiring of top bankers from competitor institutions.
• CEO Blair framed the merger integration as "winning" with reduced risks as each quarter passes.
• AI is highlighted as a key differentiator in testing and operational efficiency, handling ~80% of test scripting.

Analyst Questions and Answers:

• Hiring & Retention: Confirmed 222 hires YTD with 96 in Q3; new hires cover ~88% of cash comp in Year 1 and 2-3x in Years 2-3. Retention is 95%, exceeding historical averages during a merger.
• Margin Drivers: Q4 margin expected to expand slightly due to reversal of PAA/fee headwinds and Fed rate impact, offset by HQLA growth.
• BHG Performance: Success attributed to pricing discipline and strong originations, not expense cuts; credit quality remains robust.
• Capital Deployment: Priority remains achieving 10.25% CET1; buyback restart contingent on exceeding this target.
• Credit Outlook: No significant credit stress observed; NDFI and leveraged loans monitored closely but portfolio remains high-quality.

Other Key Points:

• Synovus integration is on schedule for March 2027; operational conversion will prioritize client experience over accelerated cost synergies.
• The "Pinnacle Model" (hiring best bankers, protecting culture, credit discipline) is validated by 23% YTD adjusted EPS growth and market share gains.
• Revenue synergies stand at ~$20M YTD, with the majority expected to ramp post-conversion as platforms unify.
• The company has raised its full-year revenue producer hiring target to over 250, with October trends strong.