Earnings Call Transcript - PNFP Q4 2025

Operator, Operator

Good morning, and welcome to the Pinnacle Financial Partners fourth quarter 2025 earnings call. All participants will be in a listen-only mode. Should you need assistance, signal a conference specialist by pressing 0. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then 1 on your tone phone. To withdraw your question, please press star then 2. Please note this event is being recorded. We'd like to limit this call to approximately one hour. I'll now turn the call over to Jennifer Demba, senior director, investor relations. Please go ahead.

Jennifer Demba, Senior Director, Investor Relations

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' standalone 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, 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.

Kevin Blair, President and CEO

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 Crystal Coalition Greenwich and J.D. Power. At the same time, we aim to be the employer of choice in the region 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 number one Net Promoter Score ranking in its footprint and Legacy Synovus' number three Net Promoter Score ranking in its footprint among 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 one hundred and sixty days after announcement, demonstrating the strengths of both companies and our resolve for swift and effective integration. Over the past two 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 money morning sales and service meeting series, an anchor of the Pinnacle operating rhythm, led by Chief Banking Officer Rob McCabe. This long-standing 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 a soul. And now, Jamie will review both Pinnacle and Synovus' standalone fourth quarter 2025 financial results. Jamie? Thank you, Kevin.

Jamie Gregory, Chief Financial Officer

Even in the midst of a merger integration, both Pinnacle and Synovus continued to demonstrate strong financial performance over the past two 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 one basis point to 3.27%. Meanwhile, adjusted noninterest revenue declined 6% from the third quarter but jumped 25% year over year. Year over year growth was largely a result of higher service charges, wealth management revenue, and income from BHG. As expected, BHG contributed $31,000,000 in fee revenue to Pinnacle. Adjusted noninterest 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 $27,000,000 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 noninterest revenue growth. Net interest income increased 2% quarter over quarter and 7% year over year. Period end loan growth was a healthy $872,000,000 or up 2% from the prior quarter and 5% from the previous year, driven by broad-based C and I lending. Core deposits grew a solid $895,000,000 or up 2% quarter over quarter. The net interest margin continued to expand, up four 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 $144,000,000. The drivers were broad-based, and I would highlight $16,000,000 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 noninterest 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 $24,000,000 or 22 basis points in the fourth quarter. Our common equity Tier one ratio ended the year at an all-time high of 11.28% as we prepared for the merger closing. Also, we retired $200,000,000 of subordinated tier two notes in October before issuing $500,000,000 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 $225,000,000 to $250,000,000 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 $4,400,000,000 and purchased roughly $4,400,000,000 of new securities with an average yield of 4.7% and estimated duration of 4.25 years. These transactions helped us support our level one 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.

Kevin Blair, President and CEO

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 have 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 $91,000,000,000 to $93,000,000,000 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 three years as they build their book. Another 35% will come from specialty verticals and the remainder from the legacy market growth. Our loan growth assumptions do not assume any change in line utilization rates or recent pay down or pay off levels. On the funding front, we expect total deposits to grow to $106,500,000,000 to $108,500,000,000 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 $5,000,000,000 to $5,500,000,000 for 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 225 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 noninterest revenue of approximately $1,100,000,000 this year. Growth should be primarily attributable to continued execution in areas such as treasury management, capital markets, and wealth management, as well as $125,000,000 to $135,000,000 in BHG investment income. Adjusted noninterest expense is expected to be $2,700,000,000 to $2,800,000,000 in 2026. We expect to realize 40% or $100,000,000 of our annualized merger related expense savings in 2026. Underlying expense growth should be driven by revenue producer hiring from 2025 and continued hiring in 2026. Additionally, real estate expansion to support market growth as well as normal inflationary expenses. Excluding legacy Pinnacle equity acceleration costs, an estimated $450,000,000 to $500,000,000 of the $720,000,000 in nonrecurring merger-related and LFI expenses should be incurred this year versus $64,000,000 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 one 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 $400,000,000 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 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.

Terry Turner, Chairman

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 twenty-six 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 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 suggest 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 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 was 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 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 twenty-five 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 three 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 twenty-five years, we were the fastest revenue grower among banks greater than $10,000,000,000 in assets and the second 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 shape 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 twenty-five 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 twenty-five 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, Operator

Certainly. We will now begin the question and answer session. To ask a question, you may press star then 1 on your touch tone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then 2. In the interest of time, please limit yourself to one question and one follow-up. Your first question is coming from Ebrahim Poonawala from Bank of America. Your line is live.

Ebrahim Poonawala, Analyst

Hey. Good morning. Good morning. Guess maybe just starting at the top, Kevin and Terry, around with the module conversion systems conversion next year. Just talk to us about 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. Thank you.

Kevin Blair, President and CEO

Yeah. Ebrahim, this is Kevin. Obviously, as we move to conversion in '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. When we move to the new platform, there'll be new capabilities, new functionality, and 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 new clients that are more complex, and we onboard them in '26, we're gonna 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 Salesforce that has two sets of products and two 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 Synovus products and use those systems. But again, we have lots of workarounds that we can leverage, so it's not gonna create a bad client experience when we go to that migration. The other thing I would just mention, Terry mentioned it in prepared remarks, the number one thing we're focused on is the Net Promoter Scores, 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.

Ebrahim Poonawala, Analyst

Got it. And I guess maybe just another follow-up on I think you mentioned the board approved a $400,000,000 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?

Jamie Gregory, Chief Financial Officer

Ibrahim, it's Jamie. Great question. First, I would say we would love to be buying back stock at these prices. We think it's quite attractive, but as we look at capital ratios and consider our expectations, we anticipate closing the deal at a CET1 ratio of 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 four peers. If you include AOCI at 9.8, we would screen higher than median compared to category four peers. But I kind of give that background as just the fundamentals of how we think about it. We do not want to screen as the lowest of a peer group, and 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 twenty twenty-six 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, etc. will lead to not a lot of capital accretion this quarter. So you should not expect to see share repurchases this quarter, and it's unlikely you would see them in the second quarter. But then we will reassess as we get into later into the year.

Ebrahim Poonawala, Analyst

Helpful. Thank you both.

John Pancari, Analyst

Morning. I'm done. On the loan growth front, the loan growth projection implies a 9% or 11% range on a pro forma basis. Can you just kind of walk us through your degree of confidence in achieving this given the, you know, 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 the underlying organic and the hiring perspective, can you help us just kind of walk through your confidence in achieving that target?

Kevin Blair, President and CEO

You know, John, it starts with, you know, 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 gonna come from existing team members that are already in the market, the recent hires that we made in the last three 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 economic growth pick up. And when we queried those clients, they expect their business activity to pick up over the next twelve 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 are still headwinds, but there has 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. Last year, Jamie mentioned 217 new revenue producers. And although that number needs to rise 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. 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 three 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. It will come from being able to hire folks. You've seen this; 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. The fourth quarter was no exception to that. We saw elevated pay down activities. But for the first time, we actually saw a little bit of line utilization help to offset that. So our production goals are not predicated on economic growth; they're 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%.

John Pancari, Analyst

Got it. Alright. Thanks, Kevin. That's helpful. And then separately on expenses, I know in December, I think, 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? Is there a risk of future delay in the recognition of the cost saves as you work through the integration?

Jamie Gregory, Chief Financial Officer

Hey, John. It's Jamie. As we work through this merger, our prioritization first was let's get to close. And we were very successful having a Jan one close on the deal. 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. That delay 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 two things really drove the 50% down to 40% on the year one cost saves. But you will note that we didn't change year two. We didn't change the total phase. So it's really a timing difference. We feel really good about all of the merger math from there, and I feel good about our ability to achieve those synergies. But it's really in year one; we just dropped it from 50% to 40%.

John Pancari, Analyst

Got it. Alright. Thanks, Jamie. Appreciate it.

Jared Shaw, Analyst

Thanks. Good morning, guys. 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?

Jamie Gregory, Chief Financial Officer

Yeah. 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's been a great success, and we've had over 15% growth in swaps and swap fees. 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 market fees in 2026, consistent with what you've seen in the past. Double-digit growth.

Jared Shaw, Analyst

Okay. Thanks. 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 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?

Kevin Blair, President and CEO

That's correct. Yeah, 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. 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 gonna communicate that so that we’ll be able to generate incremental loan growth as a result of that starting this quarter and moving into the future. I consider that we included that in the bucket for revenue synergies along with just 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 gonna be, as Jamie said, in the lead arranger business. We're gonna be syndicating deals, but there will be some incremental growth there that will allow us to grow loans. But you know, 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.

Ben Gurlinger, Analyst

Hi. Good morning. Good morning, Ben. 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 one of you two, or is there an 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.

Kevin Blair, President and CEO

Look, we've said we try not to highlight specific markets to let your competition know where you're coming to play. But I think you should think about any metro market in any of our nine state footprint providing us with an opportunity. 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. When bankers evaluate opportunities to hone their craft, they wanna work for an institution that removes bureaucracy. They wanna work for an institution that allows them to do what they do best, which is serve their clients. 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. 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 nine 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. We're identifying who the best bankers are in each market and continuing to call on those bankers. This really emboldens us and shows 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. 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 I've been impressed with, I told Terry this, the rigors of their model and the success factor is not by happenstance. 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 onto the platform.

David Chiaverini, Analyst

Hi. Thanks for taking the question. So you mentioned that loan growth should accelerate through the year. Is it reasonable to think kind of mid to high single digits in the first half of the year? And kind of high single to low double digits in the second half of the year? Any color there would be helpful.

Jamie Gregory, Chief Financial Officer

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 in the first half and then accelerating to double digit in the second half.

Catherine Mealor, Analyst

Thanks. Good morning. 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 builds 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. Thanks.

Jamie Gregory, Chief Financial Officer

Yep. It's a great question, Catherine. First, I'll give a little bit of color on the trade. So I mentioned it on the call, but we did a $4,400,000,000 swap in the securities portfolio, and 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. The repositioning did multiple things. First, we shortened duration. Second, improved liquidity and HQLA. 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 for us. We're trying to reduce AOCI volatility, and 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 shortened duration, reduced the Legacy Synovus security yield to about 4.35%. So when you bring those together, you get a securities portfolio that has a nominal yield of around 4%, a tax-equivalent yield of around 4.15%. As we proceed through 2026, we do have debt issuances in the forecast; you know, we're contemplating a couple debt issuances that could be a billion dollars this calendar year, likely two different issuances: one in the first half and one in the second half of the year. That's embedded in there. Now, consistent with previous 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.

Kevin Blair, President and CEO

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 have 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 $91,000,000,000 to $93,000,000,000 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 three years as they build their book. Another 35% will come from specialty verticals and the remainder from the legacy market growth. Our loan growth assumptions do not assume any change in line utilization rates or recent pay down or pay off levels. On the funding front, we expect total deposits to grow to $106,500,000,000 to $108,500,000,000 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 $5,000,000,000 to $5,500,000,000 for 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 225 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 noninterest revenue of approximately $1,100,000,000 this year. Growth should be primarily attributable to continued execution in areas such as treasury management, capital markets, and wealth management, as well as $125,000,000 to $135,000,000 in BHG investment income. Adjusted noninterest expense is expected to be $2,700,000,000 to $2,800,000,000 in 2026. We expect to realize 40% or $100,000,000 of our annualized merger related expense savings in 2026. Underlying expense growth should be driven by revenue producer hiring from 2025 and continued hiring in 2026. Additionally, real estate expansion to support market growth as well as normal inflationary expenses. Excluding legacy Pinnacle equity acceleration costs, an estimated $450,000,000 to $500,000,000 of the $720,000,000 in nonrecurring merger-related and LFI expenses should be incurred this year versus $64,000,000 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 one 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 $400,000,000 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 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.

Operator, Operator

Thank you. Your next question is coming from David Chiaverini from Jefferies. Your line is live.

David Chiaverini, Analyst

Hi, thanks for taking the question. Given the changes you laid out, could you just provide updates there?

Kevin Blair, President and CEO

Thank you, David. As we talk about loan growth expectations and give you an outlook for the market individually, I appreciate your focus. We've laid it out, what the plans are and what we anticipate in the net interest margin. So that high level outlook is important, and we are gaining the confidence needed.

Jamie Gregory, Chief Financial Officer

Certainly. If you look at what we've incorporated, the margin assumptions and loan growth expectations, we remain optimistic about our projections overall for the upcoming year. Given the factors at play. Thank you.

Kevin Blair, President and CEO

Once again, I appreciate the questions. Thank you all for your participation today.

Operator, Operator

That concludes the Pinnacle Financial Partners fourth quarter 2025 earnings call. Have a good day.