Pinnacle Financial Partners, Inc. (PNFP) November 5, 2026 Conference Transcript

I think we are all set to begin. Good afternoon, everyone. I am here to introduce Pinnacle Financial, a $16 billion market cap, $130 billion asset bank that operates out of Nashville and Atlanta. Today's Pinnacle is the product of transformative merger of vehicles that closed early this year, beginning of this year, but Pinnacle, unquestionably, the most successful startup in banking history over the past 50-plus years. And storied synovus. I have heard there are troubles of more than one kind. Some come from ahead, and some come from behind. But I've bought a big bat. I'm already, you see, now my troubles are going to have troubles with me. So, this rhyme I thought of in thinking of Dr. Seuss' rhyme. It's fitting because since announcing and closing the merger, investors have worried about culture, retention, hiring, growth, disruption, loan spreads, deposit costs, banker pay plans, enhanced liquidity requirements, provisioning levels, ability to repurchase shares, amongst others. And almost one year into the merger, Pinnacle has defied the skeptics. Thank you, Pinnacle, for joining us at BAB. Here with us this afternoon are President and CEO, Kevin Blair, and EVP and CFO, Jamie Gregory. A note, again, that we will have plenty of time for questions, but thanks for being here. Thank you for having me, John. I don't know if you want any introductory remarks.

Well, I was not expecting a Dr. Seuss quote to start off, but that just makes it a little more levity for this. Look, what John said is spot on. Look, I get it. We've looked at a lot of mergers over time, and there is a level of skepticism, and it's earned because there have been challenges in bringing companies together. I think what we've done differently, as we've said from day one, is we made a lot of the tough decisions up front. We went through, made the organizational decisions, made the operating decisions, and we aligned our teams around those decisions. The longer you kick the can, the more anxiety builds, and ultimately that drives a wedge between your vision and your execution. We have delivered 11% loan growth in these first three quarters. We have delivered 9% core deposit growth excluding public funds in these first three quarters. We have delivered 94% retention of team members below where it was last year. We have delivered 222 new revenue producers this year. The third quarter alone was up 57% over what we did last year. To your point, people are worried about growth, they're worried about Talent, and we've been able to answer those questions. Our clients. Our clients gave us a net promoter score in the second quarter of 68. That's off one percentage point from where we started at 69. And guess what? 69 is number one in the southeast. And that tells us what we're doing inside the four walls of the firm is translating into our clients. They still say we provide the best client experience, and they're ultimately very loyal. The final point on that is when we look at turnover. People say, we heard this morning, Kira Knows This report came out that says mergers produce 2x the amount of attrition as non-mergers. Through this last quarter, our turnover amongst accounts and dollars are down 10% versus where they were last year. So John, I would tell you that we are delivering on our promises, but Jamie and I are here today to talk less about that and to talk about the fact that we're not at a finish line. We have to keep producing a quarter at a time, a banker at a time. And that's why we talk about building a pattern, a pattern of success that will continue. And yes, we recognize there's a conversion in front of us. We're going to get through that conversion in March 12th through 15th of next year. And I hope that's the last level of de-risking we're going to have to talk about so we can stop talking about the merger and we can continue to talk about the competitive advantage that we have at Pinnacle Financial Partners.

All right. Early returns suggest legacy Synovus markets are adopting the hiring model with more than 50% of new hires coming from those markets. What is driving that success?

I'll start with Rob McCabe, our chief banking officer. He's not with us today, but Rob has been Herculean in taking that Pinnacle hiring model and getting it adopted across both the legacy Pinnacle franchise, which he's run that for some time, but now the legacy Synovus franchise. And I would tell you, it's not just as simple as saying, go out and hire. You've got to start running a process where you start building the pipeline of talent that you're trying to attract. And then you have to constantly go and recruit that talent, not just one call, but multiple calls. It's courting the talent. Our team members took that to heart post the announcement back in July. They started to plan on running the Pinnacle model. We didn't wait until January 1st. In the last 309 days, we started once the deal announced. announcement occurred, starting to get our team members prepared to do it, and then they started to build their pipelines, and they started to be able to see some success. We've been fortunate that there's been some things happening in our marketplace with other mergers and with other banks changing operating models that it's made that opportunity greater, but ultimately it's a model that everybody wants to run. We want to grow. It's fun to grow, and so once the team members got a hold of it, they executed well on it.

What are you doing to ensure that these are quality hires, given it's a new muscle at this scale?

Well, we've maintained the Pinnacle Hiring Model, which means you have to have 10 years' worth of experience to qualify for being a revenue producer at the bank. And we validate every new hire with someone that has worked with them in the past who currently works at the firm. We will not hire you unless we have a validation that somebody else has worked with you, and they can say that this person will be a cultural fit, And ultimately, they will be able to bring over their book of business when they come. So that was a non-negotiable from day one. And I think that's what ensures that you get a high-quality team member joining. Number two, John, as you know, the model, once you hire one person from that firm, the goal is for that person to give you a list of names of people that need to join. And that's what's helped both on the Pinnacle side and the Synova side. We've been able to hire some wonderful people this year that have identified other individuals that needed to be part of the firm, and they've come with. Thank you.

I guess everyone's now focused, I mean, it is one measure on hiring, and eyeballs squirrelly It's part of the growth strategy. How important is it to bring on new hires?

It's super important. It's super important for the growth because, look, what you're going to invest in our stock for is the growth with strong profitability. So when you hire top talent, not only are you getting the growth, you're getting full share of wallet when you bring over the client. So that's why we can produce double-digit growth and still put up an 18% return on tangible capital, because we're not transactional. We're bringing over full relationships. That is the model. If you stop hiring, you lose the growth, and you lose what makes us different. We've gotten so many questions over the last several days about the election, about what the economy suggests for our pipelines, and I'm not telling you we're completely insulated from that, but our model is predicated on generating growth from hiring talent. So if the market's growing 3%, we're not sitting there telling you we're going to grow 3.5%, we're growing 9%, 10%, 11% because our hires that we've had over the last couple of years are producing growth because it takes time to consolidate their books. So, you know, for me, we're not going to stop the hiring, and we're going to continue to focus on finding high-quality folks. The challenge, John, and I'm sure you'll ask me the question, is making sure that when you bring over that talent, you're not just focused on generating new loan growth, but you're getting liquidity that comes with. And that's the importance of hiring the right quality of banker that brings over their entire book, which helps to self-fund the growth that they're bringing with them. All right.

And has anything, I mean, interest rates have obviously moved. Has anything changed with respect to the speed of new hires bringing over their books?

Now, we've seen in totality, we think that the pace is roughly the same. And in some cases, maybe it's been slower to bring over accounts, but we brought over bankers that have brought on bigger loans. They've moved up market and middle market. So when you look at it in aggregate, I don't think anything's changed. Most of the commercial loans we're bringing over are variable rate anyway. We're not doing a lot of fixed rate. So the refinancing risk of higher rates generally is not a cause not to move it over. The one thing for the hiring model that has changed over the years, most of the bankers are on non-solicitation, so they cannot directly contact their clients or other team members, and I would submit to you that over time that probably slows down some of the consolidation because the client has to contact us, and we're very clear with all the people that we hire that they follow by the letter of the law the contract that they signed at their previous institution.

This migration of customers with their books, is the customer behavior similar, Legacy, Synovus versus Pinnacle?

Well, again, we weren't hiring at the same pace. What we saw at Legacy, Synovus was the average book per banker was a little larger that we were able to acquire because we were focused more in the specialty and middle market area, where Pinnacle had a broader set of hiring across small business and community banking. But there's nothing we've seen, John. In the third quarter earnings call, I talked a little bit about a piece of work that our finance team worked on with our banking team. We looked at the different cohorts of hires into the bank, both in Synovus and Pinnacle, over the last really 10 years. That cohort less than one year today is earning about 0.88%. 20% PPNR to total cash compensation. So they're almost break-even within the first year. Those cohorts between one and three years are now earning four times the PPNR of their cash compensation. And those people that are three to five years in that cohort, they are nine times their cash compensation. That's the fact that we want to continue to monitor not just what's happening in year one, but we've got to watch what's happening in year two and three and to ensure that we're getting that leverage of four times plus on those new Hires.

This one, I guess, the question kind of surprised me because Pinnacle was known to be a high-growth company, and when you look at generic things like compensation to employees, they weren't on the low end. And I guess people have been, you know, questioning... Thank you. Migrating the incentive plan over to Legacy Synovus. I guess, how are they different? Can you talk about pushback and how do you get buy-in?

Yeah. So the big difference is Legacy Synovus had more of a traditional incentive plan structure. They were individual incentive plans. You were paid based on your production, your contribution to the firm. Legacy Pinnacle had an incentive plan that we win together, we lose together. 94% of all team members in the firm are on the exact same incentive plan. That is, if the company achieves certain risk management parameters, which are gating criteria, we then focus on our revenue goal for the year and our EPS goal for the year. If we achieve those goals, we all get paid at the same percent of target. And we moved to that model, John. We moved to that model because we believed it was incredibly, incredibly important to have all of our team members collaborative in nature, working together for a common shared ambition, especially during a merger. But can you imagine we had a town hall earlier this week, and Jamie said it earlier, I get to get up on stage and tell everybody where we stand, where the company stands relative to its revenue goal and its EPS goal and how that translates into how every one of us are going to get paid in a similar fashion. That's incredibly enabling for our teams. Now, you'd say, Kevin, you didn't run that model at Synovus. No, we ran an individual incentive plan. So the question was, can you take bankers who have been on an individual incentive plan and move them to this new incentive plan? Well, the answer is yes. You've seen our turnover numbers. People have not left. And what you said is it's not that Pinnacle pays their people less. What they do is they pay their people more in base compensation, and they put less of their compensation at risk. So at the end of the day, we took our Synovus bankers and we said, move over to this incentive plan. We're going to put more in your base pay, less at risk, but your total compensation doesn't change. And in many cases, it may even go up. And so what that does for that banker is it gives them a little bit of an insulation for a down year. Because if they're on the other incentive plan, they are likely to see a bigger reduction. Number two, it made us play nicer in the sandbox. No one cares who gets credit for a deal. We've all worked, I've worked at Big Bank, Jamie's worked at Big Bank, we've seen how people fight over who gets credit, and everybody gets referral credit, and everybody gets their hand in the cookie jar. Doesn't happen at Pinnacle, because we win together, we lose together. And so, the last part of the question is meritocracy. If you have somebody that performs really, really well, and the bank doesn't make its target, what do you do? Well, we go back to that person, we say, hey, we're going to increase your base pay, we may change your target percentage, we may give you additional equity. We still run a meritocracy within our firm, but ultimately, we love the concept of us winning together so that we can celebrate together. And when we're not performing well, we all circle the wagons and say, how do we work together to get the numbers closer to what we set for our targets?

I think back to Signature Bank, which was also a growth company, and as a shareholder at the time, when their small medallion portfolio started imploding and impacting provisioning and EPS. Most of the employees are still getting paid and shareholders are the ones losing.

That's a fair point, yeah. Our interests are fully aligned with shareholders, not just in that incentive plan, but our long-term comp, Jamie's talked about this, we set our targets at the 75th percentile. So the equity that I'm granted, my performance shares, won't even pay out at 100% if we don't achieve the 75th percentile of performance. I don't know that you'll find many banks that set targets for themselves that target at 75th percentile. That's generally giving them maximum payouts. We set our targets to align with yours, John.

Okay. I don't know if this is a question for Jamie, but how are other revenue synergies progressing today?

You know, revenue synergies have been a success for this year. I mean, we're around $20 million year to date. It's a lot of capital market success. If you think about our fees, like syndication fees, Arranger fees, swaps, those have all been positives. There's been a little bit of a tailwind from ability to do larger deals, but that's really not as material as what you see in capital markets. When you look forward, we're expecting, you know, 2027 to be even more material impact of revenue synergies, but in all candor, what we get excited about is. Getting past conversion, having the Legacy Pinnacle team have the new capabilities on the commercial treasury platform that they'll have starting at conversion, and we think that that's going to be the long-term tailwind of getting, you know, more treasury fees from the Legacy Pinnacle side, but that's not going to be immediate because we have to get through conversion, we have to get stabilized, and we want the clients to see the value of all the new capabilities they'll have on the system.

Okay.

And talking about your bankers, the hiring clip has been nice. What about protecting the ones you already have? How is that playing up?

So when we talk about revenue producer retention, we're at 95%. When we talk about the overall bank, we're at 94%. And I think, again, another misnomer, myth, is that we went and gave out so much retention to these bankers, And we talked about this two-year cliff vesting of RSUs that as soon as that vest, all these bankers are going to leave. On average, on average, these bankers have about $30,000 of retention. That's it. So it's not the retention that's kept people here. It's the fact that the culture is aligning with what people want. The Legacy Pinnacle side told us one thing. We want this to continue to be a great place to work. We want it to be an easy place to serve our clients. We want a war on bureaucracy where it doesn't feel like administrative burdens take over. And what they said they'd like to have is some better technology and better capabilities. So this merger is providing just that. We've kept what they love, and we're adding some new things that they wanted. On the legacy Synovus side, I've said this, for 120 of the 138 years we've been in existence, we ran the Pinnacle Model, a decentralized model that was predicated on geographic leadership. In many cases, our bankers are returning to their roots. John, I was at an orientation a couple weeks ago. We do orientation where we take team members through a two-day exercise talking about strategy and culture, and we do team-building activities. We made the decision to take all 5,000 Synovus team members through orientation. And that's a commitment for all of us to do it. But a lady came up to me as she was getting ready to be thrown over this 12-foot wall, which is symbolic as we end the orientation, and she was crying. She said, I feel like I'm back home again. This was the Synovus I signed up for years ago. So I tell you that when you create an environment that is constructive for what people want, both from a cultural standpoint and also to serve their clients, people want to talk about money and other things. That's not the most important thing. I think it was Hertzberg, Theory of Motivation, that said money's like oxygen. If you have enough of it, you don't even think about it. And that's how I think about it. We've got to pay people well, so it's like oxygen, and we make the work design, the work environment, so great that that's not the purpose for them wanting to stay.

What about switching to culture? Client-employee scores have held up so far. What's the risk between now and conversion in March and beyond?

The risk is the amount of effort that's going into change management. When I say change management, it means that every team member, all 8,700 team members at Pinnacle Financial Partners will have something that changes. An internal system that they use, a process, a procedure, and then ultimately our clients' products will change for half of our client set. The amount of work that goes into getting prepared for that is meaningful, and so we want to make sure that we're giving people the proper training, the work guides to be able to be prepared for when we get to conversion, and it takes sometimes, it makes people work extra hours because you're having to do your day job and train for the new system, the new work environment. And so once we get through that, it's less about the conversion itself, the technical movement of accounts. It's going to be more so making sure that our bankers and our team members feel prepared to be able to execute on those.

And then, thinking about scale and culture, I mean, is there a tipping point where the company has too many employees where this model doesn't work or you can't be as connected to the ... To the new hires, to the existing employees?

You know, John, I'm going to say no, because I do think the essence of your question is spot on. As banks get larger, you start to rationalize the things you've done, because you convince yourself you're too big to do that. Let me give you an example. Every Monday in our firm, if you join our firm, you show up in Nashville, Tennessee, and you attend Welcome Aboard for a day and a half. Every team member. Whether you're a call center agent, whether you're a financial specialist, whether you're a market executive, you show up there. And every Monday at 2 o'clock, I greet those new team members. Now, when Terry and Rob started that, I'm sure 26 years ago, they had four or five people in that room. This last week, we had 50 people. The week before that, it was 70 people, almost 70 folks. And we're going to maintain that. We're going to keep doing that. Within the first six months, those same individuals will go through a two-day, three-day orientation. We're going to maintain that because it's part of our culture. That's when we talk about this concept of scale with the soul. Our soul can't change. Those are the things that drive the connectivity with the firm. What has to change as you get bigger is the scale portion. Let's leverage a bigger balance sheet. Let's leverage better capabilities, but don't change who you are. And unfortunately, whether it's in the banking industry or others, as people get larger, they rationalize the things that they can no longer do. And that's when you hear team members say, this isn't the company I once worked for. We're going to avoid that by keeping those things that are so important. And yes, it creates a lot of energy from leaders to have to do those things and a lot of resources and dollars. Last week, we spent four days doing anniversary parties, John. And I know this will surprise you, but Jamie and I were on a stage dancing and lip syncing on these things. And those are the type of things. I know. You're in the audience. You're laughing, too. You can't believe it. We can show you the video. It's important because we celebrated both firms' anniversaries are during the same week. One 26 years ago, the other 138 years ago. But together, we celebrated in four cities, celebrating the anniversary of both firms with a lot of fun. And that's important to Pinnacle. They started the anniversary parties, and I think our Cenobus team members rallied around it.

Do you know that since the merger closed, George hasn't played Tennessee in football. They weren't on the schedule this year. Yes. So I guess post-conversion, who do you root for, public?

I plead the fifth right there, John.

I plead the fifth. There are deep roots there. Deep roots. But we can open it up for questions. We've got 18 minutes left. I don't know if we want to go to Timor just first. Hey, guys, it's Morbazellar, EBS.

So for legacy pinnacle, I think the number had been like 50% of all growth. The remainder coming more so from the macro. The pace of hires now, is that still the appropriate ratio? Roughly half comes from the flywheel and half kind of from the macro. And I'm just wondering where we are with rates, the capacity to maintain a similar level of loan growth in this environment, A, is that the objective at Pinnacle, and B, just the Thank you.

Yeah, we actually included a little algorithm in our earnings deck about this. I mean, we have the hiring as a little more than the macro economy at the moment, as far as the impact. So the flywheel is the greater contributor to our growth. When you think about where we are right now, 11% loan growth year-to-date, I mean, that is higher than what we were saying in January and April. And it's been a strong year. And what I would say on that is, even if you look at the production spreads, so Q2 spreads were wider than Q1 and Q3 were wider than Q2 on production. And so, you know, what is causing that is these hires bringing their books over, growing their books of business. And it's not us just leaning in on price and trying to grow for growth's sake. Like, it's not that at all. You know, as we look forward, you know, medium term, you think one years, two years, three years, what we need to see is we want to see that core deposit growth and loan growth kind of in line with each other. And so we have strong core deposit growth. I mean, this year we're at 9% core deposit growth when you back out public funds. We think, you know, seeing those grow in line over the long term is kind of what we expect to see. And the, you know, we talk a lot about loan growth in the context of the hiring, but the beauty of this model is, you know, having these hires be out in the geography, they bring deposits, too, because they're bringing the full relationship. So it's more balanced than what you would see at some other places, like they may grow via specialty lending verticals. So we feel good about our plan. We think that it is sustainable, you know, and we'll just keep, you know, keep the flywheel going. All right, we've got a back.

Hi, everyone.

Tony on J.P. Morgan.

As you guys look at the hiring pipeline now and into 2027, can you comment, Kevin, Jamie, just on how it's shaping up as we go into next year? And are any potential recruits waiting for the conversion to occur before they give their commitment to Pinnacle?

Thank you. Yeah, thanks, Tony. I said on the third quarter earnings call that out of the 222 revenue producers that we brought in this year, they've come from over 100 financial institutions. So similar to our loan growth story, it's fairly diversified in where we've been able to recruit. But if you isolate the top 10 resources for where we've been able to recruit talent, that represents about 50% of the hires, so around 110 of the hires. The great news about our pipelines, as John asked earlier, the legacy Synovus team members were just starting to build their pipelines, and they continue to do so. And so they haven't dropped off. They've actually increased in some of those markets where we've had less history in building out the pipelines. Number two, to your question, I do think there are some folks, Tony, that are waiting for the conversion. I don't know that it's a big number, but we've heard that. It's like, let's have it get through that, and then I'll feel better about bringing it over. So I think what you'll see is when we go to next year's targets, I think we said originally, Jamie, $250 to $275. Based on this year's success, it's going to be higher than this year, and we'll have to maybe reset that target for 2027 because we're pretty bullish on the talent that we'll be able to bring in. And look, John, you didn't ask this question, but maybe with the changes in what occurred in Congress, I think you'll find some banks are a little more anxious to do M&A in the next year or two. And as Terry's talked about and as we've seen, when you do transactions, it creates more disruption, which generally means more opportunity for Pinnacle to bring on additional revenue producers. So I'm very bullish.

Alright, I think we have a question right here.

Hi, Ryan Kenney with Morgan Stanley. I wonder if you could walk through some of the deposit gathering initiatives that will enable you to . . . How do you grow deposits in line with loan growth? When you make a hire and the revenue producer comes on board, how do you make sure that they're bringing deposits with them and not just loans from their prior relationships?

Do you want me to take that? So it's a great question because Jamie said it earlier, when we bring over a new banker, here's how we do it. We sit down and we say, look, we want you to commit to us what you think you can consolidate to Pinnacle. So if that's $100 million in loans and $80 million in deposits, we build that individual plan for that revenue producer, and we set the target for them, and we monitor their progress to that goal. That allows us from day one when we bring on these folks to basically forecast what we think we're getting from a core deposit and a core revenue growth just from those new hires. That's pretty accurate, and as I said earlier, we've been able to exceed that in many situations, And the importance there is making sure that you're not just out attracting asset generators to join the firm, that you're getting folks that have very core portfolios of operating accounts. So that's healthy, and I think it helps us to figure out what we're going to get from that. The second part of that is we have a bunch of specialty lending teams that don't fund at the same level as our core banking area. So we offset that or we supplement that with some of our deposit vertical specialties. That includes associations, community associations. We have HSA. We have legal verticals. We have escrow accounts. We have captive insurance. There are a lot of specific deposit initiatives that we've rolled out, and the key there is not unlike what we see on the traditional side, hiring more people that come into those verticals that have relationships, whether it's on the legal side and they can bring over their deposits. It's the same model. It's just focused primarily on the deposit side. And so when Jamie and I sit down and we'll go through the 2027 numbers, we can go through and say, this is what we think we'll get from the new hires based on historical levels. This is what the specialty groups will grow. This is what we need from the deposit specialty teams to get to that balanced growth story that he was referencing.

And Ryan, I would just say that the third quarter is a good example, right? We had, if you back out public funds, we grew core deposits $2.6 billion. And that's kind of the context of like, I mean, that's a strong loan growth quarter for us. And I think that's kind of an indicative of the model delivering that core deposit growth to fund the loan growth.

Great, thank you.

Just a reminder also that the snacks are in back.

Have you guys had to pay up more to get producers relative to what Legacy Pinnacle used to pay up for people, either because the environment's gotten more competitive or because there's some kind of, you know, reticence to come due to the merger?

Yeah, a little bit, and I can't tell you, if I could attribute it to one thing, I don't know that I have that specificity. I think it's a couple things. You know, the competitive environment's picked up. Number two, I think we are fishing more upmarket. We're bringing in middle market bankers and specialty bankers that typically have a higher cash compensation. But again, I don't know that compensation is an inhibitor in our ability to hire folks. I was just on the phone the other day with someone that we hired out of New York in one of our specialty areas, and I was onboarding her. She had surgery, so she couldn't be in Nashville, and I said, well, why'd you choose us? You have a really strong resume. She goes, Kevin, I had much bigger offers, but I chose to join your firm because I love your team, your specialty team. I want to work with those folks. And so on average, our cash compensation per banker is about $300,000. That's for the commercial side. I like to just isolate that. That number's up a little bit over where it would have been last year, but not by a lot.

And does some of them, are they attracted to the idea of having a higher base salary, and does having less pay at risk dent animal spirits at all?

It absolutely plays. Yeah, I don't know many bankers that won't bet on themselves, but I think it's a nice thing to have that when you get that paycheck every two weeks that you're getting more in your paycheck up front. It's moving up the cash flow, but I think more importantly, they also know that the total compensation, even at a target payout. So that's how we show it to them. So if the company achieves its revenue target and its EPS target, that they know their total compensation will yield about what they've made elsewhere or more, right, if we're having to attract someone. So it just takes less of their compensation at risk. So it's not even as much as what's in their base pay, it's there's just less at risk on that variable portion.

You know, John, just one example. We hired somebody from a competitor, and one of the senior execs of the competitor called me up and said, you know, I can't believe what you're paying this lady. And I said, well, let me research it. He's like, you're paying her a lot more than what we paid her. And what I found is exactly what Kevin's describing. Like, yeah, her salary increase was like 30 or 40 percent versus what she was making at his institution, but total comp was actually lower than what they were paying her. And so I do think there's a little bit of a misnomer because the structure of our comp is different.

Yeah, good afternoon. Steven Scout with Piper Sandler. I'm curious on the recent Dallas announcement, if you could talk a little bit about that team, what you see as the opportunity for Dallas, the state of Texas as a whole, and if we should think about that, maybe similar to the build-out we've seen in maybe the D.C. market.

Scott, spot on, Stephen, and we've talked about this in the past. You won't find us sitting in the boardroom putting around or putting a map on the screen saying, here's the next market we want to go to. What we do is we find talent that fits within our model, and they've worked with other individuals that currently work at Pinnacle, and we say, if those people fit and we think they can bring over a lot of business and a lot of talent, we're going to go to that market, whether that's a new market, So, Mark Emig is our regional president for expansionary markets. So, his job is to do just like we do with others. He goes and builds talent pipelines in expansionary markets that are in contiguous states or outside of our traditional physical footprint. And when we find the right talent, we start having the discussions. We start talking about what they see success, why they're looking at it. to leave what they see their vision and what they can create and in this situation Worry and Todd were two individuals that we felt fit the pinnacle model we believe that it can build something very similar to what we've done in the national capital region to your to your point of having three to five billion dollars a balance sheet in the next five years and we think it will break even within two but it's not predicated solely on being in Dallas it was predicated on hiring two exceptional leaders that we think are They're gonna attract a lot of talent and bring over a lot of business, and those two individuals have proven that out because they just did the same thing at their previous institution.

Hi, Janet Leigh from TD Cowan. Shifting gears to BHG, just given how well that segment of the business has been performing, how are you thinking about the long-term strategic options for the business going forward?

Look, first and foremost, BHG has had a heck of a year. If you look at their production numbers, their profitability, their credit performance, they are firing on all cylinders, and we're very pleased with the partnership. You know, when we did a strategic review back in January with them and looked at the plan, we decided that it'd be better for them to reduce the distribution to the commercial bank platform as a percent of the loan sold, because it's just that makes their model a little more complex to the outside, because that's where they, you know, they have the option to buy loans back if they go bad, etc. There's just a lot more clean if you sell to asset managers, securization, etc. And they've done that. And if you look at the third quarter, production was less than 20% into that commercial bank platform. That's kind of where we want to see it in 15 to 20%. My point of going through Well, that is You have accelerating profitability or strong profitability. You have the distribution that's changing. And so the performance positions them well to consider all strategic alternatives. Now... We haven't, the transition to the commercial bank, to less commercial bank reliance is relatively recent, so that back book is still there, and it'll take time for that to come down, but I feel like they're doing everything they can to either make them, A, more attractive as is by being more profitable to them and us, or B, pursue strategic alternatives. And so, I think that they... They're doing the right things to have flexibility in whatever it is they want to do. I don't see anything imminent. We talk to them pretty frequently, but we just see them doing the right thing so that there's optionality.

Great.

I mean, just sitting with VHC, you know, they went through a change to the underwriting coverage station model a few years ago.

Yeah, you know, it's interesting. So one of the decisions they made this year was they're looking at their distribution, and they actually decided to tighten spreads on their production, and it led to a little bit of the volume increase this year. And the reason they made that was not because they wanted to produce more loans, but as more, they were worried that if they were a higher cost, they may get adverse credit selection. So I just share that. Their mentality is, look, let's don't lean in on credit. We'd rather get a tighter spread and better credit. And so, you know, when I look at their forecasts and kind of where they are, I just think about it as, Kind of strong but steady growth from here. You know, no hockey sticks, like nothing. Q1 to Q2 was a pretty big shift up, so I wouldn't expect to see movements like that, but just steady growth from here. You know, their platform and their pipelines and their algorithms are strong. They have adjusted, like you said, some of their partnerships, and it's led to what they would say is just really strong production. You know, I would just expect to see a steady increase from here, not anything like what you saw earlier this year.

John Armstrong, RBC. Can you guys talk about the conversion? Are you nervous about it at all? I know it comes up in every meeting, and what are maybe the top two or three things you're trying to avoid in this?

John, if I weren't nervous, you would think I'm crazy, but of course we're nervous. I think it's being overplayed, though, John. I'll be honest with you. I think that when you look at other banks that have gone through conversions, it's not the technical conversion that's caused problems. It's the organizational hierarchy on the other side of the conversion or the lack of liking the culture on the other side of the conversion. I mean, you've seen some of the mergers that have happened this year. There were problems where clients were locked out of their accounts for hours after the merger or after the conversion. But it hasn't impaired those companies long term. We've gone through a lot of work. We've spent 15 months preparing for this conversion. Some of the others you've seen this year went four months, five months. So we spent a lot of time. We'll run two mocks. We'll have a sandbox to be able to test. We've already done data conversions this past weekend. We've already migrated our mortgage system, our call center, our HSA account systems. Our people day one will happen on January 1st. So, what will happen on that March 12th through 15th will be our core conversion from Jack Henry to FIS and our digital conversion onto the Candescent and the Q2 platforms. And I feel like we're 100% ready for those. The areas that concern you are the things that impact the client the greatest. Things like ACH for payroll accounts, things like that. We're going through and putting extra belt and suspenders on those. We've run contingency planning exercises to know how we deal with it if there's a problem. And so I would tell you that we're doing everything we can to be prepared for that weekend, and I think it's going to go exceptionally well. And I'll just remind you, we have the best net promoter score in the Southeast. Our clients are going to give us the benefit of the doubt if something goes bump in the night, if a little thing breaks, and we'll recover from that. But we're not going to plan for that. And we've even added 140 call center agents today so that if they do call in, they're not being put on hold for eight hours or being sent to a physical location that they'll get their call answered immediately. So we're prepared for it, and I think it's going to result in taking the last risk off of the table that people are concerned about.

We are out of time, and thanks again for coming up here.