Pinnacle Financial Partners’ Earnings Call Highlights Growth

Pinnacle Financial Partners ((PNFP)) has held its Q4 earnings call. Read on for the main highlights of the call.

Pinnacle Financial Partners Balances Strong Growth With Merger Costs in Earnest Earnings Call

Management struck an upbeat but realistic tone during Pinnacle Financial Partners’ latest earnings call, emphasizing strong legacy performance, solid loan and deposit growth, and an ambitious merger integration plan, while openly acknowledging the heavy, largely one-time cost and capital pressures that will weigh on 2026 results. Executives framed the combined company as a long-term growth platform powered by hiring, fee expansion, and merger synergies, arguing that the structural positives outweigh a year of elevated expenses, a temporarily lower capital ratio, and some margin and credit noise.

Capital Actions and Shareholder Return Framework

Pinnacle laid out a clear, medium-term capital and shareholder return framework for the newly combined bank. The board has authorized a $400 million common share repurchase program and set a quarterly common dividend of $0.50 per share beginning in the first quarter of 2026. At the same time, management acknowledged that capital will be tight near term, setting a CET1 ratio target range of 10.25% to 10.75% for the combined company and warning that CET1 will dip to around 10% at the end of the first quarter after merger-related valuation marks and expenses. The strategy signals confidence in long-run earnings power, but with a disciplined focus on rebuilding capital before fully executing on buybacks.

Recurring Revenue Strength and BHG’s Growing Role

Noninterest revenue was a key focus, with management highlighting multiple engines of recurring fee growth, including treasury services, capital markets, and wealth management. A central contributor is BHG, which delivered about $31 million of fee revenue to Pinnacle in the fourth quarter alone. For 2026, BHG is expected to generate $125 million to $135 million of investment income, and management is guiding to 25% to 35% growth for the unit. This positions BHG as an increasingly important earnings driver that can diversify revenues away from pure spread income and help offset margin volatility.

Hiring Engine Fuels Salesforce Expansion

The call underscored Pinnacle’s long-standing “people-first” growth model. In the fourth quarter, the legacy Pinnacle and Synovus franchises together added 41 new revenue producers, bringing the combined total to roughly 217 going into 2025. Management’s target is to reach 250 revenue producers in 2026, supported by continued accelerated hiring across markets. Executives argued that this disciplined build-out of relationship bankers is the core driver behind the company’s consistent loan and deposit growth, and a key lever for unlocking revenue synergies from the merger over the next several years.

Near-Term Capital Pressure From Merger Marks and Expenses

While the long-term capital strategy is clear, the near-term picture is constrained by merger-related impacts. Pinnacle expects its CET1 ratio to be roughly 10% at the end of the first quarter of 2026 after incorporating purchase accounting marks. In addition, management anticipates $225 million to $250 million of merger-related expenses in that quarter alone. These factors, combined with a heavy slate of one-time items throughout the year, will temporarily limit capital accretion and tilt management’s priorities toward balance sheet strength rather than aggressive capital return in the first half of 2026.

Delayed Realization of Cost Synergies

Cost synergies remain a major component of the deal thesis, but the timing has shifted modestly. Because the transaction closed quickly and systems conversion work is still in progress, year-one cost savings recognition has been revised from 50% to 40%. Management stressed that this is purely a timing issue, not a reduction in the overall synergy target, but it does mean expense ratios will look heavier in 2026 than initially hoped. Investors will need to wait longer to see the full efficiency benefits flow through, even as integration work advances.

Heavy One-Time and Nonrecurring Costs in 2026

The earnings call repeatedly emphasized the unusually high nonrecurring cost burden expected this year. Of a total $720 million in merger- and large financial institution-related expense tied to the combination, management expects $450 million to $500 million to be incurred in 2026. These one-time charges will weigh on reported earnings and slow capital build in the near term, making it important for investors to distinguish between underlying operating performance and the accounting noise from integration and regulatory upscaling.

Credit Profile: Concentrated Q4 Charge-Offs but Stable Outlook

Credit metrics were generally manageable, but the quarter included notable concentration. Pinnacle posted $27 million of net charge-offs in the fourth quarter, equivalent to 28 basis points of average loans, with roughly 63% tied to a single non-owner-occupied commercial real estate loan. Synovus recorded $24 million in net charge-offs, or 22 basis points. Management expects net charge-offs in the 20 to 25 basis point range for 2026, while cautioning that some “cleanup” charge-offs are likely in the first quarter. Overall, the guidance points to a normalized but controllable credit environment, with the outsized Q4 item framed as idiosyncratic rather than systemic.

Noninterest Revenue Shows Growth but Quarterly Volatility

Beyond BHG, Pinnacle’s fee-based businesses exhibited both strength and lumpiness. Adjusted noninterest revenue fell 6% sequentially in the fourth quarter, even though it was up a robust 25% from a year earlier. Management acknowledged the near-term variability in certain fee lines, but highlighted the broader momentum in treasury, capital markets, and wealth. For investors, the story is one of structurally rising fee income over time, albeit with quarter-to-quarter swings that can obscure the underlying trend.

Margin Headwinds From Rate Cuts and Elevated Liquidity

Net interest margin remains a focal point as the rate cycle potentially turns. The combined company’s 2026 NIM guidance of 3.45% to 3.55% reflects the benefit of purchase accounting accretion and asset repricing, but is partially offset by higher balance sheet liquidity and the market’s implied expectation of about 25 basis points of Federal Reserve rate cuts. Management highlighted this as a source of uncertainty: more aggressive easing or additional liquidity build could pressure margins, while a steadier rate path would support NIM performance closer to the high end of the range.

Spread and Pricing Pressure on New Production

Within the core lending franchise, pricing pressures are starting to emerge. During the fourth quarter, production spreads declined by about 10 basis points relative to internal transfer pricing benchmarks. Management attributed part of this to business mix and “up-market” production, but acknowledged that spread compression is an important trend to monitor. In a competitive loan market, maintaining discipline on pricing while still capturing growth is likely to remain a balancing act throughout 2026.

Share Repurchase Timing Remains Cautious

Although the board has authorized a $400 million share repurchase program, management signaled that execution will be back-end loaded. With CET1 expected to hit roughly 10% after merger marks and significant expenses running through 2026, buybacks are unlikely in the first quarter and probably not in the second quarter either. Instead, executives plan to reassess repurchases later in the year once capital levels rebuild toward the 10.25% to 10.75% target range and the bulk of nonrecurring costs have been absorbed.

Strong Legacy EPS Growth and Core Performance

Against the backdrop of merger noise, the underlying performance of the legacy franchises was a key point of pride. In 2025, legacy Pinnacle reported adjusted diluted EPS growth of 22%, while legacy Synovus delivered 28% growth. On a standalone fourth-quarter basis, Pinnacle’s adjusted EPS was $2.24, stable sequentially and up 18% year over year, and Synovus posted $1.45, also flat quarter over quarter and up 16% year over year. These numbers underpin management’s confidence that the combined bank can generate attractive earnings once integration-related drag recedes.

Robust Loan and Deposit Growth Across the Franchise

Organic growth remained a bright spot, with both legacy institutions producing healthy expansions in loans and deposits. Pinnacle’s period-end loans rose 3% quarter over quarter and 10% year over year, with core deposits growing at the same 3% and 10% rates. Synovus showed similar resilience, with loans up 2% quarter over quarter (an $872 million increase) and 5% year over year, while core deposits climbed 2% quarter over quarter (up $895 million). For the combined company, 2026 guidance calls for period-end loans of $91 billion to $93 billion, an increase of 9% to 11% over pro forma year-end 2025, and total deposits of $106.5 billion to $108.5 billion, up 8% to 10%. These targets reinforce the narrative of a growth-oriented franchise even as integration progresses.

Net Interest Income and Margin Momentum Pre-Merger

Both legacy banks entered the merger with solid net interest income momentum. Pinnacle’s NII increased 3% quarter over quarter and 12% year over year, while Synovus posted 2% sequential and 7% annual growth. Fourth-quarter NIMs were 3.27% for Pinnacle, up 1 basis point, and 3.45% for Synovus, up 4 basis points. For the combined company, the 2026 NIM range of 3.45% to 3.55% builds on this base and assumes continued benefit from purchase accounting accretion and asset repricing, partially offset by higher liquidity needs and potential rate cuts.

Rapid Merger Close and Accelerated Integration

Management highlighted the speed and early success of the merger execution as a key achievement. The transaction closed on January 1, just 160 days after announcement, allowing the combined team to move quickly on integration. Early milestones include aligning operating rhythms, holding joint sales and service meetings, and kicking off revenue synergy initiatives. Over the next two to three years, the company expects to generate $100 million to $130 million in revenue synergies, with some benefits beginning in 2026. This integration pace is central to realizing the merger’s strategic rationale, particularly around cross-selling and deepening client relationships.

Securities Repositioning Strengthens Liquidity and Capital Efficiency

To support the balance sheet and capital efficiency, Pinnacle executed a substantial securities repositioning. The company sold approximately $4.4 billion of securities and purchased a similar amount with an average yield of about 4.7% and a duration of roughly 4.25 years. This move enhanced high-quality liquid assets, reduced risk-weighted assets, and effectively eliminated about 98% of the purchase accounting adjustment associated with the securities portfolio. Management framed this as a proactive step to improve liquidity and simplify future margin and capital dynamics.

Outlook: Growth Targets, Profitability, and Capital Rebuild

Looking ahead, management’s 2026 guidance paints a picture of strong underlying growth partially masked by one-time costs. The company is targeting period-end loans of $91.0 billion to $93.0 billion (up 9% to 11% year over year) and total deposits of $106.5 billion to $108.5 billion (up 8% to 10%). Adjusted revenue is expected to be around $5.0 billion, underpinned by a 3.45% to 3.55% net interest margin. Adjusted noninterest revenue should approximate $1.1 billion, including $125 million to $135 million of income from BHG, while adjusted noninterest expense is guided to $2.7 billion to $2.8 billion, reflecting about 40% (roughly $100 million) of annualized merger cost savings realized in 2026. Nonrecurring merger and LFI expenses are projected at $450 million to $500 million this year, with credit costs expected to normalize at 20 to 25 basis points of net charge-offs. The company is targeting a CET1 ratio of 10.25% to 10.75% over time, with a temporary dip to around 10% after first-quarter merger expenses, alongside a $0.50 quarterly dividend, the $400 million share repurchase authorization, a tax rate of roughly 20% to 21%, and a recruiting goal of 250 revenue producers. Securities repositioning remains an ongoing tool to optimize risk-weighted assets and reduce the noise from purchase accounting adjustments.

In summary, Pinnacle Financial Partners delivered an earnings call that blended strong legacy performance and ambitious growth plans with clear acknowledgment of a costly, capital-intensive integration year ahead. Solid loan and deposit growth, expanding fee streams, and a powerful hiring engine support management’s confidence in the combined bank’s long-term earnings power. At the same time, elevated one-time expenses, a temporarily lower CET1 ratio, and margin and pricing pressures mean 2026 will be a transition year. For investors willing to look through the integration noise, the call framed Pinnacle as a structurally stronger, more diversified franchise poised to benefit once the heavy lifting of the merger is complete.