Pinnacle Finl Partners Q3 2026 Earnings Call Transcript

Pinnacle Finl Partners (NASDAQ:PNFP) reported third-quarter financial results on Thursday. The transcript from the company’s third-quarter earnings call has been provided below.

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Summary

Pinnacle Financial Partners reported a diluted EPS of $2.40 and an adjusted diluted EPS of $2.69 for Q3 2026, with adjusted EPS up 23% year-to-date compared to the previous year.

The company experienced strong balance sheet growth, with loans increasing by $1.7 billion and deposits by $2.1 billion, driving a 3% increase in net interest income linked quarter.

Fee income saw significant growth, with adjusted non-interest revenue up 19% linked quarter, driven by strong performance in core banking, wealth management, and capital markets.

Pinnacle Financial Partners added 96 experienced revenue producers in Q3, with a year-to-date total of 222, and expects to surpass its hiring target for the year.

The company’s CET1 capital ratio increased by 8 basis points, and credit metrics remained strong, with net charge-offs within the expected range and stable non-performing assets.

The integration of the merger is on schedule, with operational and brand conversion set for March 2027, leveraging AI to streamline testing processes.

Management reaffirmed its guidance for 2026, expecting strong loan and deposit growth and a slight expansion of net interest margin in Q4.

Pinnacle Financial Partners achieved a net promoter score that led among larger banks in its footprint, indicating strong client retention and satisfaction.

Full Transcript

OPERATOR

Good morning and welcome to the Pinnacle Financial Partners third quarter 2026 earnings call. All participants will be in a listen only mode. Should you need assistance, please signal a conference specialist by pressing Star zero. After today’s presentation, there will be an opportunity to ask questions. To ask a question, you may press Star then one on your touchtone phone. To withdraw your question, press Star then two. Please note this event is being recorded.

I will now turn the call over to Sam Tiagi, Senior Director in Investor Relations. Please go ahead.

Sam Tiagi (Senior Director, Investor Relations)

Thank you and good morning. During today’s quarterly earnings call, we will reference the slides and press release that are available within the Investor Relations section of our website. President and CEO Kevin Blair will begin the call. He will be followed by our Chief Financial Officer Jamie Gregory and they will be available to answer your questions at the end of the call. Our comments include forward looking statements. These statements are subject to risks and uncertainties and the actual results could vary materially. We will list these factors that might cause results to differ materially from in our press release and in our SEC filings which are available on our website. We do not assume any obligation to update any forward looking statements because of new information, early developments or otherwise, except as may be required by law.

During the call we will reference non GAAP financial measures related to the Company’s performance. You may see the reconciliation of these measures in the appendix to our presentation. And now Kevin Blair will provide an overview of the quarter.

Kevin Blair (President and CEO)

Thank you Sam and good morning everyone. Three quarters in we are executing on the things we said mattered for our team. That meant protecting the culture, hiring the best bankers in our markets and removing the distractions that get between them and their clients. For our clients it has meant more visibility, more proactive advice in continuing to exceed what they expect from us even as our bankers adapt to one unified model and for all of it while preparing for a conversion that will unite our platform seamlessly and give clients functionality and capabilities they did not have before.

That is what moves a merger past the question of whether it will work and onto why it is working so well. Every quarter since close has added to the evidence. This one continues that trend. It’s why we remain convinced on the significant shareholder value in this deal. For the third quarter of 2026 we reported diluted EPS of $2.40 and adjusted diluted EPS of $2.69 excluding $56 million of pre tax adjusted items year to date, adjusted EPS is up 23% over the same period last year. Let me start with growth on the balance sheet. The Third quarter is one more proof point that this model is built to deliver. Outsized growth. Loans grew $1.7 billion linked quarter led again by CNI. Deposits grew $2.1 billion well ahead of what the combined firm has historically produced in the third quarter.

Together that drove net interest income up 3% linked quarter and we have now grown NII more than 2% in every quarter since close. Three quarters in a row is a pattern and the pattern is the point. Fee income was a standout. Adjusted non interest revenue grew 19% linked quarter helped by a record production quarter at BHG and a gain in our equipment leasing business. What I want you to hear is what sits underneath these two items. Core banking, wealth management and capital markets are up double digits year to date on a combined basis. Different line item on the income statement, same pattern.

Expenses are aligned with the strategy. The dollars are going where we said they would go into bankers and into technology. The discipline shows up in positive operating leverage which we delivered again this quarter and drove the 95 basis point improvement in our adjusted tangible efficiency ratio from the second quarter. Investing for growth and improving efficiency at the same time is exactly the point of this combination. Same pattern. Credit remains a strength. Net charge offs landed inside our 20 to 25 basis point range for the third straight quarter and the non performing assets ratio was flat at 50 basis points. The loans we are putting on the books are high quality and we are not seeing broad based stress anywhere in the portfolio. Growth at this pace with credit this clean is what the Pinnacle Finl Partners model has consistently delivered. Again same pattern.

We also built capital again this quarter. Preliminary CET1 increased 8 basis points while we funded $1.7 billion of loan growth. That is the earnings power of this franchise showing up in the capital ratios. The recurring question about a merger is talent. Do the bankers stay and can you still recruit? Recruiting has not slowed and it is not flatlined. It is running well ahead of what the two companies produced combined in 2025. We added 96 experienced revenue producers this quarter, 222 year to date and October is running strong enough that we expect to clear the top end of our original 225 to 250 target. More than half of this year’s hires came into core Synovus markets.

That was the revenue synergy we underwrote in this deal and it is showing up in the numbers today. Net growth in revenue producers is also running ahead of our expectations because retention is holding up alongside recruiting. Producer retention excluding merger related synergies is 95% year to date that is better than our historical years and we posted it in the middle of a merger. It says a lot about the underlying model. Synovus bankers see what it offers and want to be part of it and the Pinnacle Finl Partners bankers see that nothing about how they serve clients has changed.

Clients keep the bankers they choose, which is why they tell us they value us most and the clients are staying with them. Coalition Greenwich fielded its latest survey six months after closing, which is about the hardest moment you could pick to ask clients how they feel about their bank. They ranked Pinnacle Finl Partners number one in our net Promoter score amongst the larger banks in our footprint against an expanded peer set and our score rose two points from the first quarter. The same study shows Pinnacle Finl Partners leading in clients expecting to do more business with us over the next six to 12 months at a level much higher than our peers.

The attrition data tells the same story. Non CD deposit account closures are down in 2026 versus 2025 in both dollars and number of accounts. When a bank of our size goes through a combination, you expect some clients to head for the door. Fewer are leaving this year than last. Market share closes the loop the latest FDIC data shows Pinnacle Finl Partners growing deposits at almost three times the pace of our MSA footprint. On a combined basis we moved up in rank in five states and 17 MSAs.

We held number one in Nashville, Tennessee and Columbus, Georgia and grew share in Atlanta by almost 50 basis points to strengthen our number four ranking growth talent clients. Same pattern across all three. That is the point. Lastly, integration remains on schedule for operational and brand conversion in March 2027. This quarter we completed systems migrations across client care, mortgage origination, our health savings account, business and select capital market capabilities and we continued expanding the Pinnacle Finl Partners brand through card reissuance and new signage. The work ahead is end to end testing and preparing our frontline to deliver a seamless day one.

One thing that is different about this conversion is how we are testing it. AI now supports the full testing life cycle. It reviews requirements, drafts test cases, builds the automation and repairs the test when screens change with a person approving every step. Across the 838 test scripts completed to date, we estimate AI handled close to 80% of the scripting and cut the time required by roughly 70%. The tools are not perfect and it still takes our people to code, build, validate and test and deploy them into the production environment.

But it’s getting faster as we go. We said from the start that we would protect the client experience through conversion with a timeline built for great execution rather than pulling cost synergies forward. Nothing we have seen changes that. We are confident in March and we will get there the same way we have gotten here quarter after quarter. Same pattern. With that I’ll turn it over to Jamie for more detail on the quarter.

Jamie Gregory (Chief Financial Officer)

Jamie, thank you. Kevin, adjusted diluted EPS increased 8% versus the prior quarter and 19% versus the third quarter of 2025. Profitability is tracking right in line with merger assumptions with third quarter adjusted return on average tangible common equity of 18.3%. Earning assets grew 3%, or 12% annualized, reflecting growth in both loans and investment securities. Period-end loans increased $1.7 billion, or 8% annualized, from the second quarter.

CNI again accounted for the majority of growth with contributions across our geographic markets and specialty lending platforms. On a year-to-date combined basis, period-end loans increased 8%, or 11% annualized, excluding the purchase accounting loan mark. Total period-end deposits grew $2.1 billion on a linked-quarter basis, with broad-based growth across geographies and specialty banking units. Excluding third quarter headwinds from public funds, core deposits were up approximately 3% quarter-on-quarter, or 13% annualized.

Looking to the fourth quarter, we expect core growth, along with positive seasonals in both public funds and other commercial deposits, to help us deliver a strong end to 2026. Net interest income was $986 million, an increase of $30 million from the second quarter, as earning asset growth more than offset margin contraction. The NIM was 3.4%, down 4 basis points from the second quarter. Earning asset yields were up modestly across most categories, to some degree supported by the FOMC’s rate hike late in the quarter. Loan yields were up 1 basis point to 6.12% and experienced some marginal headwinds in the quarter, notably from lower loan fees and PAA.

Both were at the lower end of the expected quarterly range we modeled for the merger. Our total deposit cost increased 4 basis points, our cost of interest-bearing deposits increased 5 basis points, and our aggregate effective cost of funds also increased 5 basis points. Rate movements to date should benefit us modestly from here, and we expect the margin to slightly expand in the fourth quarter. Adjusted non-interest revenue increased $53 million from the second quarter. Performance was aided by a $23 million gain in our leasing business and record production at BHG, which lifted our investment income to $48 million from $24 million in the second quarter. We expect BHG’s production momentum to carry into the fourth quarter. These wins should not overshadow what has been a double-digit year-to-date organic growth in our core fee line items and strong momentum from merger-related revenue synergies.

Our adjusted tangible efficiency ratio improved to 48.9%, reflecting both revenue growth and continued expense discipline. We incurred $56 million of non-recurring merger expenses during the quarter, bringing the year-to-date total to $382 million and tracking right in line with the previous full-year guidance of $400 to $450 million. Adjusted non-interest expense was $690 million, up 4%. The change was driven by a higher incentive accrual, which is a direct result of our strong performance year to date.

Headcount was up modestly from the second quarter, reflecting growth in both our geographic markets and specialty units such as Treasury Management. Credit metrics were stable to improving. Net charge-offs were $50 million, or 23 basis points for the quarter, consistent with expectations and within our full-year range. The non-performing asset ratio was flat at 0.5%, consistent with prior quarters. The ACL ratio ended the third quarter at 1.19%. This includes the impact of current macroeconomic forecasts on our models, which had an increased weighting to slower-growth scenarios. Higher qualitative reserves and reserve build associated with loan growth also contributed, offset by a reduction in reserves for individually analyzed loans.

During the quarter, we completed the sale of our Qualpay investment. The transaction resulted in a pre-tax gain of $4 million and will have an immaterial impact on go-forward earnings. Capital ratios continued to build in the third quarter, with core earnings generating excess capital beyond that needed to meet our 12% annualized earning asset growth for the quarter. Our preliminary Common Equity Tier 1 ratio ended the quarter at 10.01%, up 8 basis points from the second quarter. Client-driven growth remains the first use of capital we generate, and we continue to build steadily towards our 10.25% CET1 target. I’ll now hand it back to Kevin for our 2026 financial outlook.

Kevin Blair (President and CEO)

Thank you, Jamie. With one quarter left in 2026, our guidance ranges remain unchanged and our confidence in meeting them remains high. We continue to expect full-year loan growth at the top end of our 9% to 11% range. Deposit growth is tracking toward the mid-range of 8% to 10%, or roughly $9 billion for the year. With the fourth-quarter seasonal inflows still ahead of us, we expect full-year NIM in the 3.44% to 3.46% range, with the fourth quarter in the low to mid-3.40s range that Jamie described earlier.

Combining that NII growth with the strength that we are seeing in core client fees and at BHG, we expect full-year adjusted revenue just over the midpoint of our stated range. Within that, we now expect BHG income of $150 to $160 million for the year, above the $110 to $120 million range we provided in July. Adjusted non-interest expenses should land just above the middle of our $2.675 and $2.775 billion guidance, with the fourth quarter reflecting continued investment in revenue, producer hiring, and incentive compensation reflecting our strong adjusted revenue and EPS growth. We continue to expect the adjusted effective tax rate in the middle of the 20% to 21% range and charge-offs within the 20 to 25 basis point range. Taken together, this keeps us on track to ahead of the EPS accretion path we laid out last summer.

We will provide our 2027 outlook in December as we build that plan. The starting point is strong: a full year of synergies, building a team well prepared for a successful conversion in March, and a 2026 recruiting class moving towards full productivity. As I close, I want to come back to a simple idea: the things that compound are the things you do consistently. We said we would grow, recruit the best bankers, protect credit, price with discipline, and never trade our culture for speed.

Nine months in, the scoreboard is lighting up. Adjusted EPS is up 23% year to date. Our net promoter scores are holding at levels that tell us our clients feel the difference, and we are taking deposit market share in the places we compete, one relationship at a time. Every quarter we put behind us does two things: it adds to the pattern and it retires risk. The things that go wrong in a merger this size—losing bankers, losing clients, losing credit discipline—have each had three quarters to show up. None of them has. The work is not finished, but the risk that was an open question in January is a smaller question today. And it gets smaller with every quarter that looks like this one. This is a foundation, and the quarters that matter most are the ones still ahead of us.

We are building towards them with the same intensity that got us here. Quarter after quarter, same pattern. And with that, operator, let’s transition to the Q&A portion of today’s call.

OPERATOR

Certainly. We will now begin the question-and-answer session. To ask a question, you may press star, then one on your touchtone phone. If you’re using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two. In the interest of time, please limit yourself to one question and one follow-up. And once again, if you have any questions or comments, please press star then one on your phone.

Our first question comes from Casey Hare from Autonomous. Your line is live.

Casey Hare (Analyst at Autonomous Research)

Great, thanks. Good morning, everyone. I wanted to focus on Slide 21, the NIM waterfall chart, specifically the CAT4 liquidity build. So it lays out $3 billion over the next three years of debt issuance. Does that 3 to 5 bps—is that the way to think about it over the next couple of years? And then the other one, the fixed-rate asset repricing—how much longer is that a tailwind? And is that also a 2 to 4 bps tailwind each year? Thank you.

Jamie Gregory (Chief Financial Officer)

Yeah, Casey, good morning. On the HQLA, our plans remain the same right now. We obviously pay very close attention to the regulatory environment and everything that’s happening there, but we don’t have a change in our plan on liquidity—those remain accurate. If you think about debt issuances as we go through the year, every billion dollars of debt issuance is a couple basis point impact to cost of funds. We will continue to grow the securities portfolio.

If you think about the growth in the securities portfolio, that growth comes at a spread of about 1% between the securities you put on the book and the wholesale funding that you use to fund them. And so those will be the headwinds, and yes, that will continue. The fixed-rate asset repricing will continue through ’27 and into ’28. And what I would say about that is with the increase in rates, that impact does get bigger. We talk a lot about the PAA of the loan portfolio from the marks on January 1st. Well, that only increases the impact of fixed-rate asset repricing going forward, because we marked the loan book at 6.3%. If you look at month-of-September loan production, the yield on that was 6.6%.

And so basically what you’re seeing there is that asset sensitivity, and you should see that play out as you go through the next couple years as you get the benefit specifically of the commercial loans that we marked in January maturing and being replaced with loans at higher yield, assuming the current rate environment sticks.

Casey Hare (Analyst at Autonomous Research)

Okay, great. All right. And then just switching to BHG—you know, dramatic improvement in performance there. I know the originations were up, but is there something on the expense side that has also helped? Just trying to get some color on what is a pretty dramatic step-up in profitability contribution from that business.

Kevin Blair (President and CEO)

Look, that business continues to perform, and it’s not an expense story. The production was up. It was a record quarter for production for BHG. You can see the diversity in their funding mix. Their partnerships remain strong. So it’s really a revenue story and a mix story that led to the record quarter here and in the third quarter.

Casey Hare (Analyst at Autonomous Research)

Great. Thank you.

Kevin Blair (President and CEO)

Thanks, Casey.

OPERATOR

Thank you. Our next question comes from John Pancary from Evercore. Your line is live.

John Pancary (Analyst at Evercore ISI)

I know you kind of nudged the top end of the ’26 margin guide down by about a bp. What are you seeing in terms of some of the underlying components of the margin? Was that a bit of the loan-yield pressure that you flagged? And then also maybe on the outlook tied to deposit and loan pricing—on the deposit side, what are you seeing in terms of deposit pricing competition, and what’s your expected trend in deposit costs and beta as you’re looking out?

And I guess similar on the loan pricing side just given your comments in your prepared remarks.

Jamie Gregory (Chief Financial Officer)

Thanks, John. As we look to the fourth quarter, there are a few moving parts and we mentioned this in the prepared remarks, but in the third quarter we had a negative impact versus expectations of PAA being a little lower than we expected as well as loan fees being a little lower than expected. We expect both of those to reverse in the fourth quarter, which is a little bit of a tailwind to the margin and we still have a little bit of benefit to the fourth quarter margin from the Fed hike in September, a little bit of a benefit from fixed rate asset repricing, and there should be a little bit of a benefit from core deposit growth outpacing loan growth.

The offset or partial offset to that would be that, you know, continued HQLA build in the fourth quarter will be a little bit of a headwind. But our base case for the fourth quarter is that the margin slightly expands for the fourth quarter compared to the third quarter. When you look beyond that, when you look out into 2027 and we’ll give a more thorough update on this in December. But when you look into 2027, we do see the benefit of fixed rate asset repricing. We do expect further rate increases which should be a little bit of a tailwind in 2027 and then the story will remain the same that there’ll be a little bit of a headwind because of HQLA growth and the tighter margin on some of that incremental growth that’s wholesale funded.

So, you know, that’s our outlook for the near term and then for 2027, I mean probably the net effect of that will be, you know, slight pressure on the margin as you look through 2027.

Kevin Blair (President and CEO)

And John, let me, let me hit the part of it that you asked about the front line and competition. You know, I’m extremely pleased with the pricing discipline that our bankers are exhibiting. When you look at the new loan production this third quarter, it came in about 6.5%. New deposits came in right around 2.7%. So call it 375 to 380 basis points spread on that new business. That’s about 10 basis points wider than what we saw last quarter. And so when you look at loan spreads relative to the index, those were also up 14 basis points.

So I don’t think it’s a competition or pricing story. As Jamie talked about all the puts and takes on the margin. And I’ve been somewhat vocal on this. You know, I don’t know that competition’s the news. I think it’s like the weather. It’s here today, it’s here tomorrow. It’s not what the weather is, it’s how you compete in that weather. And there are 4,300 banks competing every day for the same clients that we have. And how we compete is not on price.

We compete and win market share and grow balances based on trust, based on bankers and not on the last basis point. So it doesn’t make us immune to the pricing pressure, but it means we’re not chasing that marginal dollar just based on rate.

John Pancary (Analyst at Evercore ISI)

Makes sense. Thanks, Kevin. And then on the loan growth front, it sounds like you’re confident still in the high end of the 9–11 for this year. You cited that growth is certainly heavily tied to your hiring and your recruiting efforts. And you’re confident, you sound confident on the hiring front. So I guess what’s that mean for 2027 as you take a look at the pace of growth? I know you’re not guiding it till December, but any way to characterize how we can think about this follow through of this 9 to 11% range as you look at 2027 and the hiring?

Kevin Blair (President and CEO)

Without giving you a number, John, I think as I said multiple times on the prepared remarks, it’s a pattern and I think you would continue to see that momentum. And it goes back to this quarter and where we saw growth. It was so broad based. Every geography and every specialty unit grew this quarter. Not a single one declined. And so it shows you the diversity of our ability to grow across the board. It was led by C&I and our production was up about 11% year over year.

And when you look at where we grew this quarter, specialty finance, specialty CRE, financial institutions, all were up about $200 to $300 million. And then on the geography side to your point, where we saw the greatest growth is where we’re seeing the fastest hiring: the Carolinas, Florida and Georgia. And so when you look at the broad based growth, you look at where it’s coming from, you look at the 222 hires we’ve made to date, I would just point to there’s nothing within the current pipelines, within our production and with what we expect to happen next year that you should see a change in our ability to grow assets.

John Pancary (Analyst at Evercore ISI)

Great. Thanks, Kevin.

OPERATOR

Thank you. Your next question is coming from Ebrahim Poonawala from Bank of America. Your line is live.

Ebrahim Poonawala (Analyst at Bank of America)

Hey, good morning. I guess, sorry for following up again on the margin. Just when we think about, Jamie, what you said, so some expansion and then we have the HQLA and the wholesale-funded part of the loan growth to think about as headwinds. But I think there was a sense coming out of last quarter that the margin about 340 is sort of directionally headed towards something in the 330 or sub-330 range. And just hearing you this morning, it feels like that may be overdoing that a little bit.

So just either respond to when we think about the incremental growth, what’s the incremental margin? Is that more, is that in the 350s net-net when you add the wholesale and the core deposit funded growth, how should we think about that incremental blended growth and what the margin…

Jamie Gregory (Chief Financial Officer)

Ebrahim, our story remains the same on the margin on incremental growth. When we think about that, we think about the margin at 330 context on the incremental growth. So just to use round numbers for 2027, if you said we’re going to grow 10%, then that would be, you know, if you look at it as like, you know, what are we 10 basis points below? Like that would be a 1 basis point headwind to the margin in 2027 just based on the growth. So that when I say a slight headwind, that’s what I’m referring to.

So you’d have one basis point headwind on the growth, but then you would add on top of that the impact of the debt issuances and growing the securities portfolio and cash. And so that when I speak to pressure on the margin that’s the general context. It’s not a scenario where we expect to go down to 330 immediately in 2027. It’s more that, well, that incremental growth comes in a little bit tighter than where we are today. So there will be slight pressure on the margin because of it.

Ebrahim Poonawala (Analyst at Bank of America)

That’s helpful and I guess maybe, Kevin, back to your comments. Strong results. Every quarter that goes by, you’re sort of at least disproving the risk of this deal not playing itself out. I think the one concern I hear from investors is if you think about some of the legacy Pinnacle leadership leaving the company maybe towards the end of next year, and the risk of some of the more tenured bankers leaving, saying you could see this stumble a little bit maybe 12 to 18 months from now.

I’m assuming you don’t agree with that characterization, but just give us a framework of why that’s not the right way to think about it. That would be helpful.

Kevin Blair (President and CEO)

Well, look, I think that somebody trying to fear-monger, Ebrahim, quite frankly. It’s, you know, Rob McCabe, who’s our chief banking officer, has agreed to stay on for another year as chief banking officer. We announced that earlier this year. But he’s also going to stay on as an advisor to me for two years post that arrangement. So the people that are running the Pinnacle model aren’t going anywhere. And yes, there’ll be some retirements. There’ll be people that are leaving the firm and they’ve earned that because they’ve been here a while.

But as you saw this morning, we’ve added 222 revenue producers. And I would point to that as the best case because people are going to come and go. We have 95% retention of our revenue producers, which is below what we’ve done in previous years. We brought in those 222 bankers. And let me give you a little context on that. They’ve come from over 100 financial institutions. And when you look at the top 10 sources of those 222, those 10 banks comprise about 45% of our hires.

And when I look at those 10 banks, I’m not going to name them. Those are some of the largest banks in our footprint and they carry significant share. And so those bankers, their best bankers, are choosing to join us and they’re bringing their clients with them. And so I would submit to you that going forward, if people retire, that’s okay. And our leadership that may retire have great succession plans in place and there’s nothing that’s going to change what drives growth in this model. I think if there’s one thing you can see, the consistency in growth at Pinnacle for 26 years as people have come and gone. So we have built a foundation and we are running a model that’s producing growth this year and will produce growth next year.

The people that talk about that, whether it’s investors or competitors, they’re just trying to look for an angle because they said they would take talent from us. To this point, they haven’t. So now they’re trying to look for another inflection point to be able to put your attention to that.

Ebrahim Poonawala (Analyst at Bank of America)

So, Kevin, thank you.

OPERATOR

Thank you. Your next question is coming from Jared Shaw from Barclays. Your line is live.

Jared Shaw (Analyst at Barclays)

Thanks. Good morning. Maybe just shifting over to the fee income side. You talked about having some success with synergies so far. How should we think about the longer term ability for fees to grow sort of after the conversion? And do you think that some of those synergy opportunities will accelerate after that, or are you starting to see that full benefit now?

Kevin Blair (President and CEO)

Jared, you’re right. And Jamie said this in the prepared remarks. When you look at core banking fees, they’re up about 10% year over year. You look at wealth, it’s up 11% to date, driven by both brokerage and trust. Capital markets are up 23%. And there’s some big numbers in there. Lead arranger fees are up 50%, derivatives up 26%. Big, big numbers. The way I think about fee income over a longer period of time is very similar to how I think about loan growth.

We focus on that double-digit loan growth because as these bankers join, they’re bringing their loans with them, they’re bringing deposits with them. But those all create new fee opportunities, whether that’s operating accounts through our treasury area, whether that’s new wealth relationships. So I’d like to think that we could continue to grow those core fee income lines by high single-digit, double-digit numbers. As it relates to revenue synergies, we’re at about $20 million year to date and I think that’s largely on track with where we thought we would be. Most of those synergies have come out of capital markets, whether it’s an expanded syndication platform, whether it’s derivatives, whether it’s our FX and our government-guaranteed lending area. So still scratching the surface at $20 million. As you know, we’ve committed to over $100 million in revenue synergies.

And so to your point, that will ramp up when we get to the other side of conversion in March of next year. Because the full company will be on one platform as it relates to treasury, and ultimately there will be greater synergies in some of the other line items that we talked about.

Jared Shaw (Analyst at Barclays)

Okay, thanks a lot. And then on BHG, obviously a strong quarter of origination. As we look at a potentially higher or likely higher rate environment, what’s the expectation around the credit impact from that at BHG? I know that there’s been a, if you look back over the past few years, refocus on the underwriting. Should we expect that charge-offs stay in the similar range going forward?

Kevin Blair (President and CEO)

Well, first off, you can see the trend where charge-offs and delinquencies are declining over a long period of time, and so the performance there has been strong. We look at origination standards, looking at credit scores, looking at the quality of the borrowers, and they remain strong as well. BHG made a strategic pivot a few quarters ago where they realized that if they were not as aggressive on price, they ran the risk of being adversely selected on credit, and so they adjusted their pricing accordingly because they chose a little bit of a tighter spread so that they wouldn’t be sacrificing at all on credit.

And we firmly support that strategy, and you’re seeing that play through. So, I mean, it is a consumer product, so I don’t think they’re immune from anything from the world if the world changes out there for the consumer. But the quality of their borrowers is strong, their performance has been strong, and we’re not seeing anything that would change that.

OPERATOR

Thank you. Your next question is coming from John McDonald from Truist. Your line is live.

John McDonald (Analyst at Truist)

Thank you. Good morning. Maybe just one more on BHG. Guys, can you talk a little bit more about what’s driving that increased production? Is it good macro or some increased marketing or awareness of the product? And then longer term, how you’re thinking about your relationship with the company. We saw another large Southeast bank announce some consumer exits this quarter. Just a reminder of how you look at your optionality around this business would be helpful.

Kevin Blair (President and CEO)

Yeah, John, as I mentioned just a minute ago, their pricing is driving some of the volume. They have a pipeline through various third parties that help source deals for them, and so they are very strategic and thoughtful in how they source deals. And that’s what’s driven their success, is their model, and so it’s been very strong. You can see that in the sustained high level of originations. With regards to their strategic optionality, quarters like this only make them more attractive to everybody. It makes them more attractive to us. It makes them more attractive to potential buyers. It’s a positive all around. And so for us the partnership is very strong. We are very supportive of the leadership team over there and we just want to see this continue and for them to continue making the right decisions. And by that, you know, it’s decisions that sometimes reduce near-term earnings, like the decision to change how they distribute their loans that they did here in 2027.

It’s also when they make a decision to accept a tighter spread in order to improve the credit performance. All of these things are making the right long-term decision even if it may reduce upfront earnings, and I think that that just makes it a more attractive franchise for everybody. From our perspective, we enjoy being owners of BHG and we will be supportive whatever path they choose. But they own the majority of the company, and so we ride alongside with them.

John McDonald (Analyst at Truist)

Thanks. And then just a follow-up, maybe a modeling question on reserve build. The Street was underestimating the provision a bit this quarter just on the reserve build piece. Credit obviously looks good. Can you speak to how we should think about your current reserve ratios and how you’ll think about adding for growth going forward?

Jamie Gregory (Chief Financial Officer)

Yeah, I mean if you look at the reserve build this quarter, it’s all the economy and it’s all because of growth. And so, you know, the loan portfolio continues to deliver. We continue to have strong performance on the quality of our loan book. So what you should expect to see from us from here is, assuming the economic outlook doesn’t change, you should expect to be funding at a similar rate for growth. But I just, I would point out that 45% of our weighting of scenarios is to below-consensus scenarios.

And so, you know, we remain optimistic that the outlook improves and we get to a spot where consensus is consensus, where that’s the baseline and you have an equal weight of scenarios above and below the consensus. But we’re not there today. And so hopefully that day comes, and when that day comes, the allowance-to-loan ratio should decline.

John McDonald (Analyst at Truist)

Got it. Thank you.

OPERATOR

Thank you. Our next question is coming from Bernard Von Kaziki from Deutsche Bank. Your line is live.

Bernard Von Kaziki (Analyst at Deutsche Bank)

Hey guys, good morning. My first question just on commercial real estate. It grew nicely the $485 million during the quarter. Just thoughts on how it should trend, what you’re hearing from clients on demand, and just at what rate levels would potentially impact loan demand?

Kevin Blair (President and CEO)

Well, look, this quarter most of our CRE was our specialty CRE area. So I would submit to you that we’re coming off very low levels of production. To your point, based on where interest rates are, I would assume in this environment with rates being a little higher that you’re going to still see some pressure on production. We’ve had some construction loans on multifamily that are starting to fund up, and those were obviously originated in the past.

But I don’t see the current environment as being overly constructive to see a ramp-up in CRE production. I actually think that with some real estate developers this past week, and they’re finding it harder and harder to find deals that pencil. And so I think there are a lot of people that are sitting around, even on the multifamily side, watching the absorption of the new deliveries. And so I think it’s going to be a tough market for growth. And we’re not expecting a lot of growth in CRE.

We’re expecting more of it to continue to come in on the C&I front.

Bernard Von Kaziki (Analyst at Deutsche Bank)

Okay, just as a follow-up, I think on slide 14 you show the normalized deposit growth, which shows trends stronger than prior years. Just can you talk to the ability to fund the strong loan growth with core deposits and just expectations on deposit beta for maybe the first hike and through the cycle?

Jamie Gregory (Chief Financial Officer)

Yeah, you know, as you look at the third quarter, we grew core deposits, excluding public funds, $2.6 billion. You know, as it says on the slide, that is strong growth and that is basically what we are expecting in the fourth quarter before you take into account the seasonal tailwind of the fourth quarter. And so that’s what leads to our deposit guide. That’s what leads to getting to the midpoint of that range is if you repeat what we did in the third quarter on core deposits, then you get a seasonal benefit.

And the seasonal benefit comes from both public funds as well as commercial clients that typically fund up at the end of the year. And then there’ll be some broker deposit growth on top of that, and that’s what solves for the midpoint of the guide. When you think about the deposit beta of the first hike, the way I contextualize it is that right before the Fed hiked in September, our total deposit cost was 2.17. You can kind of get close to that with our monthly numbers. We are expecting to end the year in the 2.30 area. And so you think about that as an approximate 13 basis point increase in the fourth quarter due to the Fed, not assuming any further rate hikes, and that’s what gets you to that kind of 50 area or low-50s beta on the first hike.

And that’s what we’re expecting for the first hike, and that’s what we are expecting for further hikes. And in that there still is a little bit of asset sensitivity to the front end.

Bernard Von Kaziki (Analyst at Deutsche Bank)

Great. Thanks for taking my questions.

OPERATOR

Thank you. Your next question is coming from Ryan Kenny from Morgan Stanley. Your line is live.

Ryan Kenny (Analyst at Morgan Stanley)

Hi, good morning. Thanks for taking my questions. So first on buybacks on pause through 2026, you are delivering strong capital generation. OCI seems like less of an issue for you guys. So just wondering how the board is thinking about the timing of when to restart the buyback authorization, and is there a scenario where that happens in 2027?

Jamie Gregory (Chief Financial Officer)

Our priority right now is getting to that 10.25 CET1. And, you know, we accreted 8 basis points of capital in the third quarter. We think we will continue accreting capital towards our target here over the next couple of quarters, and so that’s our priority. And when we get to our target area, then we will determine what is the right strategy. Our number one priority remains client growth. That’s where capital and liquidity is deployed first and foremost.

But if we do believe we have excess capital, that’s when share repurchases will come into play.

Ryan Kenny (Analyst at Morgan Stanley)

Got it. And then another one on the HQLA and debt build. Just want to clarify, you mentioned that you are looking at regulatory changes, and so if the Fed raises the thresholds for category four, understand that you’re still growing and you’re progressing towards whatever the new threshold will be. But could it change, maybe give you more time on the liquidity build? And any thoughts on what the current pace and level of build is and maybe how that might change?

Jamie Gregory (Chief Financial Officer)

Yeah, it could change the timing. Right now our plan is for the liquidity build to remain as we described. As you recall, in May we issued $750 million of debt, which put us ahead of schedule, and so now we’re here in the fourth quarter considering further debt issuances in line with our billion of debt issuance per year for the first three years of this deal. The regulatory changes could delay, but, you know, it has not changed our near-term plans.

We just continue to watch it, continue to build cash and securities assets. That’s our priority here in the near term. But you’re right to think that, you know, over the longer term it could change the strategy, but I don’t see it changing in the near term.

Ryan Kenny (Analyst at Morgan Stanley)

Thank you.

OPERATOR

Thank you. Your next question is coming from Michael Rose, from Raymond James. Your line is live.

Michael Rose (Analyst at Raymond James)

Hey, good morning guys. Thanks for taking my questions. Good to see the hiring continue. Just as we move forward, are there any areas or geographies that you’re maybe a little bit more focused on as you look to meet or exceed the numbers here in the next couple quarters?

Kevin Blair (President and CEO)

Thanks. You know, Michael, I would submit to you that we don’t think about it that way, where we go into a geography and say, let’s fill it. We actually start with the leaders, and we try to find leaders that want to join the firm and bring teams of individuals with them. So we have a lot of opportunity to add density in the 60 MSAs that we serve today, and we’re constantly recruiting, as we’ve talked about in the past. And so we’re trying to bring over the best talent, and we have the ability and the capacity to bring them in in most of those markets.

Even in Nashville, Tennessee, where we control number one market share, we’re still adding revenue producers. And so I would not say that we’re targeting an area; we’re targeting the best talent across our entire footprint. And the pipelines, as we talked about, are very robust, and so that’s why we said on the prepared remarks we would expect to come in above the 250 that we had originally targeted for this year.

Michael Rose (Analyst at Raymond James)

Helpful color. Thanks, Kevin. Maybe just one follow up. I know it’s a little ticky tacky, but looks like criticized ticked a little higher. Just as we think about the prospect of higher rates, any areas that you’re maybe a little bit more critical on or maybe from a loan growth perspective, maybe a little bit more cautious on.

Kevin Blair (President and CEO)

Thanks, Michael. Look, on the rate scenario, obviously higher rates could drive valuation declines on the CRE side, so we’ll watch that. But, you know, the question about what keeps me up at night on credit, I would say not a lot, and we’ve tried really hard to look into that. Charge-offs were 23 basis points, as we said, net. The NPAs were flat for the quarter. As Jamie talked about, the reserve really ticked up mainly because of a higher weighting towards the slow growth scenario.

And so the things we look for are the same areas where the industry has seen some degradation, whether that’s NDFI, leveraged loans, franchise lending. And we’ve dug in there and we’ve Been through those books. We continue to use things like our cash flow monitoring tool proactively and we feel good about all of them and the portfolio as a whole. So I would tell you that we’re always trying to assess where the next issue is. We’re not seeing it in our book. From a production standpoint, we’re not altering any of our credit policies to change where we’re doing business. We look at what’s coming on the books and it is very high credit quality business.

And so we’ll keep monitoring it and keep answering the questions. But I think on this question it would be hard for me to not answer it without talking a little bit about our model. As you know, we hire bankers differently. You ask that question and that means client selection is different. When we bring these bankers over, they’re generally bringing clients that they’ve done business with for many years through cycles. And so our model holds up well relative to our competition. And I think it will continue to do that in this environment or if rates were to go higher or if we were to see some sort of credit downturn.

OPERATOR

Thank you. Our next question is coming from Tamer from UBS. Your line is live.

Tamer (Analyst at UBS)

Hi, good morning. Maybe starting on the balance sheet, I guess I was a little bit surprised by the level of cash and FHLBs that remained on the balance sheet in 3Q given maybe some of the commentary following the second quarter. Just help us frame kind of thoughts around wholesale funding into 4Q into a period that’s going to be seasonally better on the deposit front.

Jamie Gregory (Chief Financial Officer)

Yeah, Tamer, when you look at cash, it has run a little higher than what we said in July, averaging around $5 billion. And that’s something that we actually expect to continue here in the fourth quarter. So you should expect to see that continue. And so I would expect to see that level, not necessarily what you’ve seen at some of the quarter ends, but around $5 billion in cash for the rest of this year. When you think about wholesale funding, I’d circle back to what we said earlier about deposit growth in the fourth quarter. Our objective is achieving the midpoint of our guide on deposits and doing that would lead to deposit growth outpacing loan growth. And so that gives us flexibility on the marginal funding when you have that funding coming in through core deposit growth plus some brokered growth. And so that’s our general expectation. We do expect to have some broker growth this quarter and we’ll see how it all plays out from there.

Tamer (Analyst at UBS)

Great. And then one more on BHG if I can. So the mix in the revenue base I think is impressive here given that loan sales and transactions through the bank were actually down quite a bit. I’m just wondering, with more of the revenue coming from, I guess, the on-balance-sheet loans, the sustainability of this run rate and the volatility going forward. Maybe talk to both of those components.

Jamie Gregory (Chief Financial Officer)

Yeah, we’re expecting this investment income to continue into the fourth quarter at a similar level. We believe that their production and their distribution in the fourth quarter will be similar to what you saw in the third quarter. And so we expect the profitability to remain. I don’t have, you know, have really official outlook for 2027 at this point, but we do expect to see it continue into the fourth quarter.

Tamer (Analyst at UBS)

Thank you.

OPERATOR

Thank you. Your next question is coming from Chris McGrady from KBW. Your line is live.

Chris McGrady (Analyst at KBW)

Great. Good morning. Thank you. How important on a capital discussion is the tangible common equity ratio for you all, given the moving rates and obviously what you’re doing with the debt issuance?

Jamie Gregory (Chief Financial Officer)

We pay attention to it because other people pay attention to it, but it’s not a key priority for us. What I would point to is the CET1 ratio, including AOCI, as a more important metric for us as we prepare for the Basel III Fed proposal to go through. And so we spend a lot more time looking at that, and we think that’s a lot more relevant and more impactful ratio. And so we manage based on that ratio more than TCE.

Chris McGrady (Analyst at KBW)

Okay, great. And then on the credit, the 20 to 25 basis points for the year here on the reserve and the conservative weighting. If we think and step back on just the two companies that have come together, how should we over a normal—I guess normal is a tough challenge—but normalized charge-offs for the combined company is the question. Thank you.

Kevin Blair (President and CEO)

I don’t know what normal is, Chris, but I’d say this 20 to 25 is a good level for us for the foreseeable future. It feels like we’re in a benign credit environment. Obviously, getting to a normalized level would mean that you go through some cycle. We haven’t been in a recession in quite some time. So I don’t want to proffer a guess on what that would be, but I think this 20 to 25 is a range that you could see us operating in for the foreseeable future.

Chris McGrady (Analyst at KBW)

All right, great.

OPERATOR

Thank you. Your next question is coming from Anthony from JP Morgan. Your line is live.

Anthony (Analyst at JP Morgan)

Thank you. On capital, Jamie, could you put a finer point on when you expect to achieve the CET1 target of 10.25%? If I look, your CET1 has increased about 10 basis points in each of the past two quarters, but you’re still expecting really strong loan growth going forward.

Jamie Gregory (Chief Financial Officer)

Look, I think the third quarter and the second quarter capital accretion are good numbers to use when looking forward. And so, you know, if it’s 8 basis points this quarter or 10 before that, I think that that makes a lot of sense. And so you could look at that and run it forward and project getting to a 10.25% in a few quarters. I think that’s very reasonable.

Anthony (Analyst at JP Morgan)

Thank you. And then on the hires, so you brought on 96 revenue producers in 3Q. October is running strong and you upped the range you expect this year to 250 plus. But you left the 2027 range unchanged at 250 to 275. I’m curious why that range for next year is left unchanged. And if you could just talk about what you’re seeing in the hiring pipeline as we enter 2027. Thank you.

Kevin Blair (President and CEO)

I think that, Tony, it’s more about we’re just not providing 2027 updates at this point. And you’ll get an updated number, as Jamie said, in December, for both the financials as well as the hiring plan. But don’t read into that that we think the pipelines are drying up so that we wouldn’t expect to see this momentum continue.

Anthony (Analyst at JP Morgan)

Thank you.

OPERATOR

Thank you. Our next question is coming from Christopher Marinac from Breen Capital. Your line is live.

Christopher Marinac (Analyst at Breen Capital)

Thanks. Good morning. I wanted to go back to the deposit growth and kind of cost of deposits. And I’m curious, Jamie or Kevin, how often are you seeing exception requests on deposits or is the growth and the pricing more a function of just the sheer movement from new producers?

Kevin Blair (President and CEO)

A couple things there, Chris. What’s interesting, I was going back and looking at the people that have joined the firm in the last year and taking that segment of new commercial FAs and looking at what they’re bringing to the firm. We get the question all the time about are those people paying for themselves? The competition is great. And yeah, we’ve seen a little bit of a tick up in just the cost of bringing on new talent. But what was interesting is when I looked at that cohort, we’ve actually had those bankers in the first year bring in more deposits than they brought in loans, which shows me that we’re getting a good cross-section of bankers that are not just focusing on generating loans, but they’re bringing over deposits.

I give you that because that’s the story behind our deposit growth. We’re seeing growth across the geographies. We’re seeing growth across all of our specialty areas. We do have some specialty deposit areas. And so if I look at just this past quarter, new deposits came on production rate at 2.70%. That’s actually 5 basis points below where it was a year ago and fairly flat with where we’ve been this year. So we’re not having to go out, as I said earlier, and compete on every basis point for price.

We do have to be market-based. And to your point on exceptions, a lot of our deposits on the commercial side are indexed so we don’t have to provide exceptions. Those are