Q3 2025 Pinnacle Financial Partners Inc Earnings Call
Thank you for holding. We look forward to talking with you soon. Please hold the line, and we'll be right back with you.
[Company Representative]: Thanks for holding. We appreciate your time and patience. Please stay on the line and we'll be back in just a moment.
Thanks for holding; we appreciate your time and patience. Please stay on the line, and we'll be back in just a moment.
[Company Representative]: Thank you for holding. We sincerely appreciate your patience. Please stay on the line and we'll be back in a moment.
Thank you for holding we sincerely. Appreciate your patience please. Stay on the line and we'll be back in a moment.
[Company Representative]: Thank you for holding. We look forward to talking with you soon. Please hold the line and we'll be right back with you.
Thank you for holding. We look forward to talking with you soon. Please hold the line, and we'll be right back with you.
[Company Representative]: Thank you for holding. We look forward to talking with you soon. Please hold the line, and we'll be right back with you.
Thank you for holding. We look forward to talking with you soon. Please hold the line, and we'll be right back with you.
Operator: Good morning, everyone, and welcome to the Pinnacle Financial Partners Inc. third quarter 2025 earnings conference call! Hosting the call today from Pinnacle Financial Partners Inc. is M. Terry Turner, Chief Executive Officer, and Harold R. Carpenter, Chief Financial Officer. Please note Pinnacle Financial Partners Inc.'s earnings release and this morning's presentation are available on the Investor Relations page of their website at www.pinnfp.com. Today's call is being recorded and will be available for replay on Pinnacle Financial Partners Inc.'s website for the next 90 days. At this time, all participants have been placed on a listen-only mode. The floor will be open for your questions following the presentation. If you'd like to ask a question at that time, please press star one on your touch-tone phone. Analysts will be given preference during the Q&A. We ask that you please pick up your headset to allow optimal sound quality.
Good morning, everyone, and welcome to the Pinnacle Financial Partners third quarter 2025 earnings conference call.
Hosting the call today from Pinnacle. Financial Partners is Mr. Terry Turner, chief, executive officer and Mr. Harold Carpenter Chief Financial Officer.
Please note pinnacle's earnings release. And this morning's presentation are available on the investor relations page of their website at www.pnfp.com.
Today's call is being recorded and will be available for replay on Pinnacle Financial's website for the next 90 days.
At this time, all participants have been placed on a listen-only mode.
The floor will be open for your questions following the presentation.
If you'd like to ask a question at that time, please press star 1 on your touchtone phone.
Analysts will be given preference during the Q&A.
Operator: During this presentation, we may make comments which may constitute forward-looking statements. All forward-looking statements are subject to risks, uncertainties, and other factors that may cause the actual results, performance, or achievements of Pinnacle Financial Partners Inc. to differ materially from any results expressed or implied by such forward-looking statements. Many of such factors are beyond Pinnacle Financial Partners Inc.'s ability to control or predict, and listeners are cautioned not to put undue reliance on such forward-looking statements. A more detailed description of these and other risks is contained in Pinnacle Financial Partners Inc.'s annual report on Form 10-K for the year ended December 31, 2024, and its subsequently filed quarterly reports. Pinnacle Financial Partners Inc. disclaims any obligation to update or revise any forward-looking statements contained in this presentation, whether as a result of new information, future events, or otherwise.
We ask that you, please pick up your handset to allow optimal sound quality. During this presentation, we may make comments which may constitute forward-looking statements.
All 4 looking statements are subject to risks uncertainties and other facts that may cause the actual results performance or achievements of Pinnacle Financial to differ, materially from any results expressed or implied by such forward-looking statements.
Many of such factors are Beyond Pinnacle, financial's ability to control, or predict and listeners are cautioned, not to put undue Reliance on such forward-looking statements.
A more detailed description of these and other risks is contained in Pinnacle Financial's financials and a report on Form 10-K for the year ended December 31, 2024, and its subsequently filed quarterly reports.
Operator: In addition, these remarks may include certain non-GAAP financial measures as defined by SEC Regulation G. A presentation of the most directly comparable GAAP financial measures and a reconciliation of the non-GAAP measures to the comparable GAAP measures will be made available on Pinnacle Financial Partners Inc.'s website at www.pinnfp.com. With that, I'm now going to turn the presentation over to M. Terry Turner, Pinnacle Financial Partners Inc.'s President and CEO.
Pinnacle Financial disclaims any obligation to update or revise any forward-looking statements contained in this presentation, whether as a result of new information, future events, or otherwise.
In addition, these remarks may include certain non-gaap Financial measures as defined by SEC. Regulation, G.
A presentation of the most directly comparable, gaap Financial measures, and a Reconciliation of the non-gaap measures to the comparable. Gaap measures will be made available on Pinnacle financials website at www.pnfp.com.
With that, I’m now going to turn the presentation over to Mr. Terry Turner, Pinnacle's President and CEO.
M. Terry Turner: Thank you, Matthew, and thanks for joining us. I'm sure no one's keeping track, but next week will be Pinnacle Financial Partners Inc.'s 25th anniversary, which makes this the 100th quarterly close for Harold and me. Happily, this is one of the best in a long history of beat-and-raised quarters. It has been our custom for a very long time. We begin every quarterly call with the same shareholder value dashboard, GAAP measures first, followed by the non-GAAP measures, which are the ones that I focus on to manage the firm. As you can see across the bottom row, our asset quality metrics remain well below pre-COVID median levels, with all problem loan metrics continuing to operate at or near historical lows. On the middle row, of course, everything's up and to the right.
Thank you, Matthew, and thanks for joining us.
I'm sure no one's keeping track, but next week will be Pinnacle's 25th anniversary, which makes this the 100th quarterly close for Harold and me.
Happily, this is one of the best in a long history of beating raised quarters, as has been our custom for a very long time. We begin every quarterly call with the same shareholder value dashboard Gap measures first.
Followed by the non-gaap measures which are the ones that I focus on to manage the firm. As you can see, across the bottom row, our asset quality metrics, uh, remain well below, preco median levels with all problem, loan, metrics continuing to operate at or near historical lows.
M. Terry Turner: You can see the balance sheet continues to reliably build quarter after quarter with double-digit CAGRs for loans and core deposits over nearly a five-year period of time. That's largely attributable to our ability to recruit and retain proven revenue producers and consolidate their relationships. We expect balance sheet growth to continue based on the revenue producers that are currently on our payroll, but have not yet completed consolidating their books to us. We've continued hiring at a similar pace in 2025, which should help to continue to further produce balance sheet growth. More on future balance sheet growth expectations and hiring in a minute.
On the middle row, of course, everything's up and to the right. You can see the balance sheet continues to reliably build quarter after quarter with double digit, kager for loans and core deposits over nearly a 5-year period of time.
That's largely attributable to our ability to recruit and retain proven Revenue producers and consolidate their relationships.
M. Terry Turner: Moving on to the top row, you can see that the sustainable and reliable balance sheet growth has resulted in rapid revenue and EPS and the double-digit CAGR for tangible book value per share growth, which we believe are the three metrics most highly correlated with total shareholder return. That's been our relentless pursuit over the last 25 years and has resulted in the second highest total shareholder return among all the publicly traded banks in the country since our NASDAQ listing in 2002. A number of times over the years, I've used the flywheel concept, which was developed by Jim Collins in Good to Great, to help crystallize for investors the sustainable momentum that we built in this firm.
We expect balance sheet growth to continue based on the revenue producers that are currently on our payroll but have not yet completed consolidating their books to us. And we've continued hiring at a similar pace in 2025, which should help to further produce balance sheet growth. More on future balance sheet growth expectations and hiring in a minute.
And then moving on to the top row, you can see that the sustainable and reliable balance sheet, growth has resulted in Rapid revenue and eps.
And the double digit Kerr for tangible book, value per share growth, which we believe is a 3 metrics. Most highly correlated with total shareholder return. That's been our Relentless Pursuit over the last 25 years and has resulted in the second. Highest total shareholder return among all the publicly traded banks in the country since our NASDAQ listing in 2002.
M. Terry Turner: I think I last used it in 2022, and it's hard to imagine that many are unfamiliar with the concept, but the idea is that through a series of disciplined, consistent efforts in the right direction, you eventually produce accelerated and sustained growth. I don't think that could be a better descriptor of Pinnacle Financial Partners Inc. over time than accelerated and sustained growth. For us, that hedgehog strategy, that disciplined and consistent effort in the right direction, is our continuous recruitment and retention of market-leading revenue producers. I've developed in previous quarterly investor calls how that hiring translates into the kind of sustainable balance sheet growth you saw on the previous slide.
The number of times, over the years, I've used the flywheel concept developed by Jim Collins in "Good to Great" to help crystallize for investors the sustainable momentum that we've built in this firm. I think we last used it in 2022, and it's hard to imagine that many are unfamiliar with the concept. The idea is that through a series of disciplined, consistent efforts in the right direction, you eventually produce accelerated and sustained growth. I don't think there could be a better descriptor of Pinnacle over time than accelerated and sustained growth.
M. Terry Turner: In last quarter's earnings call, I demonstrated how our hiring to date could yield approximately $19 billion in loan growth that would materialize over the next five years, again with no further hiring and irrespective of tariffs, Fed rate moves, general economic conditions, and so forth, simply based on the continued consolidation of relationships by the relationship managers on our payroll at that time. Third quarter 2025 is just another quarter on that march, with third quarter linked quarter annualized growth rates of 14.5% for non-interest-bearing deposits, 10.6% for core deposits, 8.9% for loans, 31.5% for revenue, and 54% for adjusted EPS. For those who wondered whether we could sustain momentum post-merger, I hope we've at least put that question to bed.
Action is our continuous recruitment and retention of market-leading revenue producers. I've developed, in previous quarterly investor calls, how that hiring translates into the kind of sustainable balance sheet growth you saw on the previous slide. In last quarter's earnings call, I demonstrated that higher hiring today could yield approximately $19 billion in loan growth that would materialize over the next five years, again with no further hiring and irrespective of Federal Reserve rate moves, general economic conditions, and so forth. This is simply based on the continued consolidation of relationships by the relationship managers on our payroll at that time.
M. Terry Turner: Annual FDIC data were released in the third quarter, which made clear not only the success that we've enjoyed over the last decade, but why we were so optimistic about the future. We've long targeted the market share leaders in our markets. Here you can see the magnitude of their vulnerability given up over the last decade, as noted in the red circles: 10.3% in Nashville, 15.1% in Chattanooga, 13.9% in Knoxville, and 16.7% in Memphis. That is major vulnerability. Across the bottom in the blue circles, you see the incredible effectiveness of the Pinnacle model in the same time period, picking up another 3% in Nashville, where we enjoy the number one rank and not by a little, but by a lot, 8.4% in Chattanooga, 7.8% in Knoxville, and 5.1% in Memphis.
And third quarter, 25 is just another quarter on that march. With third quarter length, quarter annualized growth rates of 14 and a half percent for non-interest bearing, deposits. 10.6 for core deposits, 8.9% for loans, 31 and a half percent for revenue and 54% for adjusted EPS. So for those who wondered, whether we could sustain momentum post merger, I hope we've at least put that question to bed.
Annual FDIC data were released in the third quarter, which makes clear not only the success that we've enjoyed over the last decade, but also while we were so optimistic about the future. We've long targeted the market share leaders in our markets here. You can see the magnitude of their vulnerability, giving up over the last decade, as noted in the red circle: 10.3 in Nashville.
15.1% Chattanooga 13.9% in Knoxville and 16.7% in Memphis that is Major vulnerability. And then across the bottom in the blue circle, you see the incredible effectiveness of the Pinnacle model in the same time period.
M. Terry Turner: Hopefully, this illustrates our excitement about the ongoing matchup, our ability to continue rapid balance sheet growth, and ultimately to produce outsized revenue and EPS growth. Here you're looking at the same data across other Southeastern markets, where you can see fundamentally the same competitive vulnerabilities. Along the bottom row, you see the magnitude of the vulnerability we're attempting to seize from those share leaders that we target. Look at these markets like 11.9% share loss in Greensboro, North Carolina, 11.9% share loss in Raleigh, North Carolina, 10.8% share loss in Greenville, South Carolina, 9.1% share loss in Charleston, South Carolina, 12.1% share loss in Atlanta, Georgia, where post-merger we'll have the number four market share position. Honestly, that is one of the things that excites me most about our combination with Synovus.
Picking up another 3% in Nashville where we enjoy the number 1 ranked and not by a little, but by a lot, 8.4% Chattanooga 7.8% in Knoxville and 5.1% in Memphis. Hopefully, this illustrates our excitement about the ongoing matchup, our ability to continue to Rapid, to continue rapid balance sheet growth and ultimately to produce outsized revenue and EPS growth.
M. Terry Turner: When you combine that FDIC data with the Greenwich data demonstrating the differentiated service level that Pinnacle provides when combined with Synovus, you can see why we believe that we'll be the fastest growing, most dynamic large regional bank in the country. Here you're looking at Greenwich data for businesses with sales from $1 million to $500 million in the legacy Pinnacle footprint. North and South, we're plotting market share. East and West, we're plotting net promoter scores. Obviously, the goal is to get to the top right quadrant. The first observation is that with this merger, we will have arrived. Combining Pinnacle's share with Synovus's share and our existing footprint puts us on the heels of the three market share leaders, which are in the top left box. That's an 8% share position, lead share position. That leads to the second, even more important observation.
And here, you're looking at the same data across other Southeastern markets, where you can see fundamentally the same competitive vulnerabilities along the bottom row. You see, the magnitude of the vulnerability. We're attempting to seize from those cheerleaders that we target. Look at these markets, like 11.9% share loss in Greensboro North Carolina, 11, n. Share loss in Raleigh, North Carolina 10.8% share loss in Greenville South Carolina, 9.1% share loss in Charleston. South Carolina 121 share loss in Atlanta Georgia where post merger will have the number for market share position. Honestly, that is 1 of the things that excites me most about our combination with sovas.
M. Terry Turner: Combining Pinnacle's net promoter scores with Synovus's net promoter scores in our footprint, we retain the highest net promoter score. All of that leads to the third and single most important observation. This merger is unique in its ability to run a differentiated service model, literally the best, with a combined net promoter score near 80. We'll be competing against banks who amassed great share in previous decades, but who have lost engagement of their clients, some with net promoter scores in the 20s, making them likely to continue giving up share, particularly to a bank like ours with similar mass in the market, but with a meaningfully differentiated service level. In my career, I have never seen a more advantaged competitive position than the one we'll enjoy post-merger. I recognize some have been concerned about a loss of momentum post-merger announcement.
When you combine that FDIC data, with the Greenwich data demonstrating, the differentiated service levels of Pinnacle provides. When combined with Synovus, you can see why we believe that. We'll be the fastest growing most dynamic large Regional Bank in the country here you're looking at Greenwich data for businesses with sales from 1 to 500 million in the Legacy Pinnacle footprint. North and South were plotting market. Share East and West were plotting net promoter scores. Obviously, the goal is to get to the top, right quadrant. So, the first option is that with this merger, we will have arrived, combining Pinnacle share with sonova share. And our existing footprint, puts us on the hills of the 3 Marketing in the top left box. That's a 8% uh share position lead, share position, and that leads to the second even more important observation combining Pinnacles net promoter scores with Soviets. Net promoter scores in our footprint. We retain the highest net promoter score,
And all of that leads to the third and single most important object: observation. This merger is unique in its ability to run a differentiated service model. Literally the best, with a combined net promoter score near 80. We'll be competing against banks that amassed great share in previous decades but have lost engagement with their clients. Some of the net promoter scores are in the 20s, making them likely to continue giving up share, particularly to a bank like ours with similar mass.
Market, but with a meaningfully differentiated service level.
In my career, I have never seen a more advantageous competitive position than the one I will enjoy post-merger.
M. Terry Turner: As you saw earlier, there was certainly no loss of momentum in terms of financial performance in Q3. Here you can see there was no loss of hiring momentum in Q3, hiring almost exactly the number of revenue producers as we hired on average in the first two quarters of 2025, pre-announcement, and consistent with the quarterly run rate over the previous four quarters. Interestingly, the kill rate on job offers, meaning turning job offers into hires, remained unchanged post-announcement, hiring 91.5% of those that were offered jobs in the first two quarters pre-announcement and 91.6% in the third quarter. From 30,000 feet, drawing on Mark Twain, rumors of our untimely demise were greatly exaggerated. Our flywheel continues to spin. When you overlay this model on the Synovus Financial Corp. franchise, the growth of revenue producers and therefore the growth in revenue should be extraordinary.
Revenue producers, as we hired on average in the first 2 quarters of 2025, pre-announcement, and consistent with the quarterly run rate over the previous 4. Quarters, interesting. Interestingly the kill rate on job offers, meaning the Turning uh, job offers into hires it remained unchanged post announcement hiring 91.5% of those that were offered jobs in the first 2 quarters, pre-announcement and 91.6% in the third quarter. And so from 30,000 ft drawn on Mark Twain, rumors of our untimely demise were greatly exaggerated our flywheel continues to uh to spin
M. Terry Turner: With that, let me turn it over to Harold for a detailed look at the quarter. Thanks, Terry. I guess Mark Twain as well. There you go. Good morning, everybody. We will again start with loans. End-of-period loans increased 8.9% linked quarter annualized, a little less than we anticipated, but still a strong effort by our relationship managers, one that does not cause us to think any less about the fourth quarter. As our fourth quarter pipelines and quarter-to-date results are in great shape, we will continue to lean on our new markets and new revenue producers to provide the punch for our loan growth. Given third quarter results and fourth quarter pipelines, we've adjusted our end-of-period loan outlook range to consider 9% to 10% growth this year. We're also pleased with how our loan yields performed during the third quarter.
And when you overlay this model on the Sonova franchise, the growth, the revenue producers, and therefore the growth in revenue should be extraordinary. So with that, let me turn it over to Harold for a detailed look at the quarter.
Thanks, Terry, and I guess Mark Twain as well. There you go. Good morning, everybody. We will again start with loans. End-of-period loans increased 8.9% linked quarter annualized, but a little less than we anticipated. Still, it was a strong effort by our relationship managers. That does not cause us to think any less about the fourth quarter, as our fourth quarter pipelines and quarter-to-date results are in great shape. We will continue to lean on our new markets and new revenue producers to provide the punch for our low growth.
Given third quarter results and fourth quarter pipelines, we've adjusted our end-of-period loan outlook range to consider 9% to 10% growth this year.
M. Terry Turner: Although the lift from fixed-rate repricing is not as opportunistic as it once was, we will anticipate continued lift in fixed-rate loan rates. Loan yields should decrease in the fourth quarter, consistent with Fed funds rate decreases, but these decreases we believe will be at consistent betas, and obviously we will offset these decreases with corresponding decreases in deposit rates. End-of-period deposit growth came in at 6.4% linked quarter annualized. Over the years, we typically experience more deposit growth in the second half of the year than the first half. As a result, we're increasing the low end of our estimated growth rate for total end-of-period deposits to 8% and maintaining the high end at 10% in deposit growth for 2025. As we highlighted in the press release last night, we are very excited about the performance of our non-interest-bearing deposits and the growth we have seen this year.
We're also pleased with how our loan yields performed during the third quarter.
Although the lift from fixed-rate repricing is not as opportunistic as it once was, we anticipate continued lift, and fixed-rate loan yields should decrease in the fourth quarter consistent with Fed funds rate decreases. However, we believe these decreases will be at a consistent basis, and obviously, we will offset these decreases with correspondent decreases in deposit rates.
EOP deposit growth came in at 6.4%, length quarter annualized over the years. We typically experience more deposit growth in the second half of the year than the first half.
As a result, we're increasing the low end of our estimated growth rate. For total end of period, deposits to 8% and maintaining the high-end at 10% in deposit growth for 2025.
M. Terry Turner: To see the rebound in those dollars this year is very much a tailwind in our spread income as we head into the fourth quarter and 2026. Many thanks to our revenue producers, treasury professionals, and specialty deposit units for all the hard work getting these very valuable operating accounts. We're also very pleased with how deposit pricing has performed thus far and how both of our loan and deposit betas have performed through the current rate cycle. We anticipate our betas will remain consistent given we anticipate incremental rate cuts in the fourth quarter. We anticipated a modest increase in NIM in the third quarter, so we're pleased that our NIM finished up three basis points at 3.26%. Our outlook for the fourth quarter of 2025 is more bullish, as our NIMs should continue to increase with the anticipated two additional rate cuts.
As we highlighted in the press release last night, we are very excited about the performance of our non-interest bearing deposits and the growth we have seen this year.
To see the rebound in those dollars. This year is very much a tailwind in our spread income as we head into the fourth quarter and 2026.
Many thanks to our Revenue. Producers treasury professionals. And specially deposit units. For all the hard work, getting these very valuable operating accounts.
We're also very pleased with how deposit pricing has performed thus far, and how both of our loan and deposit betas have performed through the current rate cycle. We anticipate our betas will remain consistent, given we anticipate incremental rate cuts in the fourth quarter.
We anticipated a modest increase in NIM in the third quarter, so we're pleased that our NIM finished up 3 basis points at 3.26%.
M. Terry Turner: As for our 2025 outlook for net interest income, we have increased our estimated growth range for net interest income and now believe our growth outlook will approximate a range of 13% to 14% over 2024 results. Obviously, any surprise Fed funds rate decisions and the slope of the yield curve will have influence on how all of this plays out for the remainder of this year. As to rate cut, we've modeled out many scenarios and again feel we're in pretty good shape to manage through most rate forecasts that are talked about in the markets today. Our current Fed funds rate forecast contemplates a rate cut in October and another in December. At this time, we do believe more rate cuts are helpful, but given the timing, we believe whatever might happen otherwise will not have a substantial impact on our anticipated 2025 results.
Our outlook for the fourth quarter of 2025 is more bullish as our NIMs should continue to increase with the anticipated two additional rate cuts.
As to our 2025 outlook for net interest income, we have increased our estimated growth range for net income to 10%. We now believe our growth outlook will approximate the range of 13% to 14%.
Over 2024 results. Obviously, any surprise Fed funds rate decisions and the slope of the yield curve will have influence on how all of this plays out for the remainder of this year.
Aster rate. Cut. We've modeled out many scenarios, and again, still, we're in pretty good shape to manage through most freight forecasts that are talked about in the markets today. Our current Fed funds rate forecast contemplates a rate cut in October and another in December. At this time, we do believe more rate cuts are helpful, but given the timing, we believe whatever might happen otherwise will not have a substantial impact on our anticipated results.
M. Terry Turner: As to credit, our net charge-offs decreased 18 basis points in the third quarter from 20 basis points in the second quarter. For the full year 2025, our net charge-off outlook is unchanged as we estimate net charge-offs for 2025 coming in at approximately 18 to 20 basis points. We've increased our estimated 2025 outlook for our provision to average loans to 26 to 27 basis points. This increase is partially attributable to the increase in our reserve for unfunded commitments. That increase is very much volume-related and consistent with increased outstanding unfunded lines of credit issued to our borrowers in the third quarter. A quick word about BHG. BHG had an exceptional third quarter, providing fee revenues to us of over $40 million. Production was again strong in the third quarter. Credit losses also were improved third quarter compared to second quarter.
2025 results.
As the credit, our net charge offs decreased 18 basis points in the third quarter from 20 basis points in the second quarter for the full year 2025. Our net charge off Outlook is unchanged. As we as we estimate net charge offs for 2025 coming in at approximately 18 to 20 basis points.
We've increased our estimated 2025 outlook for our provision. The average loans are now 26 to 27 basis points. This increase is partially attributable to the rise in our reserve for unfunded commitments.
That increase is very much volume-related and consistent with increased outstanding unfunded lines of credit. Credit issued to our borrowers in the third quarter.
A quick word about bhg.
Exceptional third quarter, providing fee revenues to us of over 40 million.
M. Terry Turner: Off balance sheet loan sales were at spreads in excess of 10%, while margins for owned balance sheet loans are now in excess of 11%. Now that said, we're anticipating BHG's fourth quarter results to be less in earnings than the third quarter. For the fourth quarter, we're estimating BHG's results should contribute approximately $30 million to our non-interest income. Given these matters, we and BHG are both comfortable in raising our earnings estimate for BHG earnings growth in 2025 to approximate 85% to 90% growth over the results reported in 2024. Several factors are contributing to this decision: stronger production lead flow, great spreads, better credit performance, and better operating margins, all of which should point to what should be a very strong year for BHG. Lastly, to our outlook for 2025, I mentioned much of the information on the slide.
Production was again strong in the third quarter. Credit losses also improved in the third quarter compared to the second quarter, off-balance sheet loan sales were at spreads in excess of 10%. While margins for on-balance sheet loans are now in excess of 11%.
Now that said, we're anticipating BHD's fourth quarter results to be less than earnings from the third quarter. For the fourth quarter, we are estimating BHD's results should contribute approximately $30 million to our non-interest income.
Given these matters, we and BHG are both comfortable in our earnings estimate for BHG earnings growth in 2025 to approximate 85% to 90% growth over the results reported in 2024. Several factors are contributing to this decision: stronger production, lead flow, great spreads, better credit performance, and better operating margins. All of which should point to what should be a very strong year for BHG.
M. Terry Turner: Again, the investments we've made in our new markets and our hiring success are the building blocks we will lean into in order to position us for top quartile growth in EPS and tangible book value per share amongst our peers. As to non-interest income, banking fees and wealth management are performing well. Along with BHG's estimated growth this year, we're comfortable increasing our guidance for non-interest income from 12% to 15% growth to now 20% to 22% growth this year. As I mentioned previously, BHG will likely approximate $30 million in the fourth quarter and make up most of the overall variance between our third quarter and fourth quarter anticipated results. As to expenses, our prior outlook reflected 115% of target award for our associates, which now, given our more positive outlook for the year, we are increasing to an anticipated 125% target as of September 30.
Lastly, to our outlook for 2025, I mentioned much of the information on the slide. Again, the investments we've made in our new markets and our hiring success are the building blocks we will lean into in order to position us for top quartile growth in EPS and tangible book value per share amongst our peers.
Asked about non-interest income, banking fees, and wealth management are performing well, along with BHGS's estimated growth this year. We're comfortable in our guidance for non-interest income, now projecting growth from 12% to 15% to 20% to 22% this year.
As I mentioned, previously BHG will likely approximate $30 million in the fourth quarter and make up most of the overall variance between our third quarter and fourth quarter anticipated results.
As to expenses our prior Outlook reflected 115% of Target award for our Associates which now, given our more positive outlook for the year, we are increasing to an anticipated 125% Target as of September, the 30th.
M. Terry Turner: Through all of that, we are modifying our total expense outlook to a range of $1.15 billion to $1.155 billion for estimated expenses for this year. As the slide indicates above, we are projecting an effective tax rate for 2025 in the low 18% range, which will basically be consistent with last year. Now, as to PP&R and summing all of that up, we look at our fourth quarter PP&R, excluding BHG and merger costs. We think the fourth quarter will be flat to up from the third quarter. As to year-over-year PP&R, we think we'll be in the 7% to 8% range in growth.
Through all of that, we are modifying our total expense outlook to a range of $1.15 billion to $1.155 billion for estimated expenses for this year.
As a slide indicates above, we are projecting an effective tax rate for 2025 in the low 18% range, which will basically be consistent with last year. Now, as to PPNR and SUM, all of that is up.
We look at our fourth quarter. PPNR, excluding BHG and merger costs, we think fourth quarter will be flat to up from the third quarter. And as the year-over-year PPNR, we think will be in the 7% to 8% range in growth.
M. Terry Turner: Even as all the uncertainties around rates and tariffs play out, we are confident that 2025 will shape up to be one of the best years we've experienced in our 25-year history and provides a great deal of momentum as we prepare to head into 2026 with our new partners at Synovus Financial Corp. If there's anything investors know about us, it is that we are very competitive and we love to prove things to the doubters. All of our associates are in for a lot of work next year, but also, in my opinion, all of these associates will have a lot of fun as we continue to hire more people, grow revenues, and grow earnings as we work to build the Southeast growth champion. With that, I will hand it back over to Terry. Okay. Thanks, Harold.
Even as all the uncertainties around rates and tariffs play out, we are confident that 2025 will shape up to be one of the best years we've experienced in our 25-year history and provides a great deal of momentum as we prepare to head into 2026 with our new partners at Snow.
if there's anything investors know about us, it is that we are very competitive and we love to prove things to the doubters
All of our associates are in for a lot of work next year, but in my opinion, all of these associates will have a lot of fun. As we continue to hire more people, grow revenues, and grow earnings, we are working to build the Southeast growth champion.
With that, I will hand it back over to Terry.
M. Terry Turner: Speaking of building the Southeast growth champion, when we announced the deal, we disclosed the compelling financial and client-centric metrics for this transaction, literally peer-leading growth and profitability. We also talked about the stark contrast between this deal and others as a result of doing the hard work to hash out critical decisions pre-merger. For any of you who've been through this kind of thing before, you know that to have decided on exactly what the ongoing go-to-market strategy would be, the specific model that we'll run, to have selected the ongoing brand pre-merger, to have made and clarified for the whole organization one ongoing long-term CEO, to have already determined the core processor, those pre-merger decisions have indeed been powerful in terms of propelling the integration of these two great firms. We were able to move quickly.
Okay, thanks, Harold. Speaking of the building in the Southeast Growth Champion, when we announced the deal, we disclosed the compelling financial and client-centric metrics for this transaction—literally peer-leading growth and profitability. We also talked about the stark contrast between this deal and others as a result of doing the hard work, hashing out critical decisions pre-merger.
M. Terry Turner: We finalized all the key leadership positions, having now pushed it down three levels into the organization. We were able to evaluate and make most key system decisions, though not all have been finalized and announced as we complete negotiations with various systems providers, mail the proxy materials, and undergo pre-merger exams by the Fed. We are rapidly progressing through the final milestones toward an anticipated first quarter close, including holding the special shareholder meeting on November 6, completing the entire org chart literally down to each individual by November 10, and ultimately closing sometime in the first quarter. I suspect that I have yet to convince everyone of the power of the merger with Synovus Financial Corp., but I expect you'll recall when we announced the deal, we showcased our projections for ongoing revenue and EPS growth, profitability, and so forth.
For any of you who've been through this kind of thing before, you know that to have decided on exactly what the ongoing go to market strategy, would be the specific model that will run to a selected. The ongoing brand pre merger to the maiden clarified for the whole organization, 1 ongoing long-term, CEO to have already determined the core processor. Those pre merger decisions have indeed been powerful in terms of propelling, the integration of these 2 great firms. We were able to move quickly.
We finalized all the key leadership positions, having now pushed it down three levels into the organization.
Uh, we were able to evaluate and make most key system decisions, though not all have been finalized and announced as we complete negotiations with various systems providers, finalize the proxy materials, and undergo pre-merger exams by the Fed. We are rapidly progressing through the final milestones toward an anticipated first-quarter close, including holding the special shareholder meeting on November 6, completing the entire org chart literally down to each individual by November 10, and ultimately closing sometime in the first quarter.
M. Terry Turner: Virtually all key metrics were peer-leading or number one. It seems to me the only reason you wouldn't want to own shares in that company is that you need to see it to believe it. It's my hope that our third quarter performance and continuing hiring momentum has delivered the first proof. With that, we'll stop and take questions.
Have yet to convince everyone of the power of the merger with some others but I expect you'll recall, when we announced the deal, we showcased our projections for ongoing revenue and EPS growth profitability, and so forth. Virtually all key metrics were peer leading or number 1. It seems to me. The only reason you wouldn't want to own shares in that company is that you need to see it to believe it. And so, it's my hope that our, uh, third quarter performance and continuing hiring momentum has delivered the first prove it operated with apple will stop and take questions.
Operator: Thank you, Mr. Turner. Everyone, the floor is now open for your questions. If you'd like to ask a question at this time, please press star one on your touch-tone phone. Analysts will be given preference during the Q&A. Again, we do ask that when you ask your question, please pick up your headset to provide optimal sound quality. Your first question is coming from Jared Shaw from Barclays Capital. Your line is live.
Thank you, Mr. Turner. Everyone on the floor is now open for your questions. If you'd like to ask a question at this time, please press star 1 on your touchtone phone.
Analysts will be given preference during the Q&A.
Again, we do ask that when you ask your question, please pick up your handset to provide optimal sound quality.
Your first question is coming from Jared, Shaw from Barclays Capital, your line is live.
[Analyst]: Hey, guys. Good morning. Thanks for the question. I'm just looking at slide 11 and the pace of hiring by revenue producers and the success rate of the offer acceptance rate. As we go forward and we look at the company as a pro forma company, you reference the ability to add 300 RMs. I guess, are there 300 RMs that fit the Pinnacle model out in that market? What type of increase in the pay should we expect as we look at 2026 and 2027?
You guys? Good morning. Thanks for the question.
um,
Hey you know, so I'm just looking at slide 11 and the the the pace of of hiring by Revenue producers and you know the success rate of of the offer acceptance rate. Um you know as we as we go forward and and we look at the company as a pro for a company. You reference, you know, the ability to add 300 RMS. You know, I guess are there 300 RMS that fit the the Pinnacle model out in that market?
And uh you know what, what type of increase in the patient? We expect, you know, as we as we look at at at
26 and 27.
M. Terry Turner: Yeah. I think, on the question of, are there 300 in the market, there may not be 300 in the market right this minute, but there'll be 300 in the market over time. All I mean by that is when we hire people, it has not been uncommon in our history to hire somebody from another bank, have that bank backfill with somebody else, and we go back three or four years later and hire the person that they backfilled with. I don't, I'm not concerned about will there be enough talent to hire. I think, Jared, if I could say this, you didn't exactly ask this, but I know a lot of people have questions about the competitive landscape. Are you going to be able to keep hiring people and so forth? Jared, I think you've heard me answer that question.
M. Terry Turner: I've been asked that question since 2002 when we first were listed on the NASDAQ. I get asked that question all the time. Every year we keep hiring at record paces in terms of the people that we hire. The point of that is the more people that you do hire, the more people that you can hire. That's a really important idea. I'll use the, having grown up in Georgia, I'll use the standard phrase, we got the carpetbaggers coming to the Southeast who don't know, don't have people, use traditional hiring models, all that sort of stuff. Our approach of using the people that we've hired to lead us to others to hire is, I think, time-tested in a competitive landscape there.
Yeah, I think, uh, on the question of are there, 300 in the market there, there may not be 300 in the market, right? This minute, but there'll be 300 in the market over time. And all I mean by, that is when we hire people, it has not been uncommon in our history to hire somebody from another bank, have that bank back filled with somebody else and we go back, 3 or 4 years later and hire the person that they backfilled with. And so, again, I don't I'm not concerned about, will there be enough talent to hire? I, I, I think Jared, if I can say this, you didn't exactly ask this. But I, I, I know, a lot of people have questions about the competitive landscape or you going to be able to keep hiring, uh, people and so forth. Uh, Jared. I think you've heard me answer that question. I've been asked that question since 2002. When we, uh, uh, first were listed on NASDAQ, I get asked that question all the time. Every year we keep hiring at record Paces in terms of the
M. Terry Turner: In terms of the incremental hiring, the biggest partner and one of the great excitements to me in this transaction is to overlay this model, which I think is running, hitting on all eight, overlay this model on the Synovus Financial Corp. footprint. I know Kevin is fired up for the same reason. They've done an extraordinary job compounding EPS growth, the movements toward revenue producers. I think they had a commitment to hire, roughly, 45 relationship managers a year, was the previous commitment they had had. We think that'll accelerate by 35 to call it 80 a year in that footprint. That's the magic, to put this model on that footprint, gin up the revenue growth to match what happens in the Pinnacle Financial Partners Inc. footprint. Not only ought that to grow the earnings, but it ought to grow the multiple as well. That's the game plan.
People that we hire and the point of that is the more people that you do hire. The more people that you can hire. And that's a really important idea. We got, um, I'll I'll use the having grown up in Georgia. I'll use the standard phrase, We Got The Carpet Baggers coming, to the southeast who don't know, don't have people use traditional hiring models, all that sort of stuff, our approach of using the people that we've hired to lead us to others to higher. Uh, is I think time-tested in a competitive, uh, landscape there? In terms of the incremental hiring, you know, the biggest part of the and 1 of the great excitements to me in this transaction is to Overlay. This model which I think is running hitting on all a overlay. This model on the sonova footprint and I know Kevin is fired up for the same reason. Um they've done an extraordinary job compounding. EPS growth, the movements toward
Revenue. Producers, I think they had a commitment to higher, uh, roughly 45 relationship managers. A year was the previous commitment they had, and so we think that'll accelerate by 35 to call it 80 a year in that footprint. And so, again, that's the magic: to put this model on that footprint, ramp up the revenue growth to match what happens in the Pinnacle footprint, and not only ought that to grow.
[Analyst]: Okay. Thanks for that, Carl. Just shifting over to BHG, obviously, it was a great quarter there, and guidance for still a strong quarter in the fourth quarter. I guess, how does the bigger pro forma balance sheet, or does the bigger pro forma Pinnacle balance sheet change the thought process on what the best use case of BHG is? Do you expect the pro forma balance sheet to maybe hold more BHG loans?
The earnings, but it ought to grow the multiple as well. So that's the game plan.
Okay, thanks. Uh, thanks for that color. And then uh you know, just shifting over to bhg. Obviously it was a a great quarter there and and you know, guidance for for still a strong quarter and fourth quarter, I guess how does the the bigger ProForm of balance sheet or does the bigger proforma, Pinnacle balance sheet, change the the thought process on on, you know what? The
Best use case of BHG is... and do you expect the pro forma balance sheet to maybe hold more BHC loans?
M. Terry Turner: Yeah, Jared, this is Harold. I'll take the first question. I'll take that question and let Terry talk about what might happen in the future. I think BHG's growth is going to be consistent going into next year. Their quarterly run rates right now have improved meaningfully over the last four quarters. I think there's a great deal of opportunity available to the new Pinnacle as it goes into 2026. I don't think, Kevin, I'll say it better this way, Kevin, Jamie, and the leadership that'll be at the new Pinnacle has any different approach towards BHG than we do currently. I think there's a lot of options available to us with respect to BHG. Right now, they seem to be all positive. Yeah, Jared, I would just say I think the optionality is as high today as it's been in a number of years.
I'll take that question. Let Terry uh, talk about what might happen in the future. I I think bhg is growth is going to be consistent going into next year. Uh, they're quarterly run rates right now have improved meaningfully over the last 4 quarters. So I think there's a great deal of opportunity available to the new Pinnacle as it goes into 2026. Um, I don't think uh sovas or Kevin, I'll say it better this way. Kevin Jamie and the leadership that'll be at the new Pinnacle has any different approach towards BHD than we do currently.
So, um, I think there are a lot of options available to us with respect to BHG. Right now, they seem to be all positive.
M. Terry Turner: To Harold's point, you got rapid growth, which is good if you hold it, but it also increases its attractiveness to potential acquirers. I don't think there's been any noticeable change in our partners. I think we've said for some time we expect them and see them more interested in a liquidity event today than what they have expressed in years gone by. At any rate, I think we're just exactly at the same spot we've been at.
Yeah, Jared. I, I would just say, I think the optionality is is high today as it's been in a number of years, uh, to Harold's point, you got a rapid growth, which is good if you hold it. Uh, but it also increases its attractiveness to potential acquirers and I don't think there's been any uh noticeable change in our partners. Um, I think we've said for some time we expect them and see them more interested in a liquidity event today than what, what they have expressed in Years Gone by. So, uh, anyway, I I think we're, we're just exactly the same spot. We've been at
[Analyst]: Great. Thank you.
Great. Thank you.
Operator: Thank you. Your next question is coming from Catherine Mealor from Raymond James. Your line is live.
Thank you. Your next question is coming from Katherine Neer from ABW. Your line is live.
[Analyst]: Hey, good morning.
Hey, good morning.
M. Terry Turner: Hey, good morning.
Hey, good morning.
[Analyst]: Hey, just one follow-up on the BHG question. Is there any reason to assume that, I mean, that was amazing growth this quarter, and we got another one coming this quarter for BHG earnings. Is it fair to still assume growth in BHG into 2026 relative to kind of the record levels we're seeing in 2026? Clearly, not the 80 to 90% growth rate, right? That'll moderate. Is there any reason to not assume that we shouldn't still grow BHG next year off of these levels?
I just want to follow up on the bhg question is, is there any reason to assume that? I mean, that was amazing growth, this quarter and we got another 1 coming, this quarter for bhg. Earnings is there is I mean is this fair to still assumed growth in bhg into 26 relative to kind of the record levels we're seeing in in 26 clearly not the 80 to 90% growth rate, right? But that'll moderate, but just is there any reason to assume to to not assume that we shouldn't still grow the HC? Next year off of these levels?
M. Terry Turner: No, it'll grow. I think the quarterly run rates will be consistent going into next year as far as, call it, the third and fourth quarter. I think there'll be a more reasonable growth path once you annualize, call it, the third and fourth quarter going into 2026. It'll still be an outsized year-over-year number. They're real excited about the way the production flows are coming in. They're real excited about the appetite for their volumes, and they think they can continue to kind of move this franchise forward.
No, it'll grow. I think the quarterly run rates uh, will be consistent going into next year as far as call as the third and fourth quarter. Uh and I think there will be a more reasonable growth path once you annualize
Call it the third and fourth quarter going into 2026. I mean, it'll still be an outsized year-over-year number. Uh, but um,
They're real excited about the way the production flows are coming in. Uh they're real excited about the appetite for their volumes uh and they think they can they can, you know, continue to kind of move this franchise forward.
[Analyst]: Okay. Great. Then fee income, just even separately from BHG, was really strong at both Pinnacle and Synovus this quarter. Is that, would you say that is encapsulated, if we think about the merger slide deck and, you know, kind of looking towards that, $1,160 kind of pro forma 2027 P, is this kind of strength in fee income reflected in that, or is this even coming in better than you would have expected as you think about that pro forma run rate?
Okay, great. And then be income, just even separately from dhg was really strong at both Pinnacle. And so this quarter uh is that would you would you say that that that is encapsulated as we think about the mergers slide deck and you know, kind of looking towards that. Um
1160 kind of pro forma. 2070 like he was. Is this kind of strength and fee income reflected in that? Or is this even coming in better than you would have expected if you think about that pro forma run rate.
M. Terry Turner: Yeah. I think, and we got to listen to most of the Synovus call this morning. I think Jamie described it well. The areas where we complement each other are really good and strong. I think when you merge these two companies together, you get the strength at Synovus in these various fee areas, and you match it with the strength in Pinnacle in our various fee areas. I think there's going to be a lot of opportunity to put some real tailwind into some of this fee revenue going forward, whether it be around wealth management or capital markets or wherever. We think we're going to be able to approach the market with a lot of strength, once we kind of push these two companies together. Let me add to Harold's comments. I echo his thoughts on the potential revenue synergies.
Yeah, I think, uh, and we got to listen to most of the SOVA's call this morning. I think Jamie described it well.
uh,
The the, the cop with the areas, where we complement each other are really good and strong. And I think, when you merge these 2 questions, there's 2, 2 2, uh, companies together, you get, uh, the strength of some of us and these various key areas, and you match it with the strength and Pinnacle in our, various the areas. I think that there's going to be a lot of opportunity to put some real Tailwind into some of this fee. Revenue going forward, whether it be around wealth management or Capital markets or where,
Wherever we think we're going to be able to approach the market with a lot of strength, once we kind of
you know, push these 2 companies together
M. Terry Turner: We'll get in a position soon to sort of quantify those for the marketplace. Again, my belief is we've got very strong revenue synergies. More to your question about what's the current run rate, how does that impact what the original case that we discussed when we announced the deal? I think you know that merger model is just built on what consensus estimates were. I can't say I've always 100% of the time beat the consensus estimates, but I don't think there's ever a time I didn't think I was going to or intended not to beat the consensus estimate. My only point about that is that, yeah, our expectation, my expectation is to run faster than consensus estimates. I think this growth rate that you're seeing right now would be still higher than the plan that we had laid, which would be higher than consensus.
Katherine, let me add Harold's comments. I I Echo, uh, his thoughts on the potential revenues energies. Uh, we'll get in a position, uh, soon to sort of quantify those for the marketplace. But, uh, again, my belief is, we've got very strong Revenue synergies but more to your question about. So, what's the current run rate? How does that impact what the original? Uh,
M. Terry Turner: At any rate, I do think there's a lot of momentum in the fee income as it relates to the original projected growth.
I believe the consensus estimate, but I don't think there's ever time. I didn't think I was going through or intended not to basically consent to assessment. So my only point about that is that, yeah, our expectation—my expectation is to run faster than consensus estimates. I think this growth rate that you're seeing right now would still be higher than the plan that we had laid, which would be higher than consensus. At any rate, I do think there's a lot of momentum in the fee income as it relates to the original projected growth.
[Analyst]: Yeah, perfect. That's what I was hoping and assumed you would say. Yeah, you do have a history of beating consensus, Terry. All right, great. Thank you so much.
Yeah, perfect. That's what I had.
I was hoping, and I assumed you would say, and yeah, you do have a history of beating consensus theory.
Operator: Thank you. Your next question is coming from Anthony Ehlien from JP Morgan. Your line is live.
Thank you. Your next question is coming from Anthony Elien from JP Morgan. Your line is live.
[Analyst]: Hi, Terry. On hiring, I'm wondering if anything will change on legacy Pinnacle's hiring strategy post-deal close, given the organization will be doubling its assets, right? I know on slide 11, you're forecasting another strong year for hiring next year and in 2027. What gives you confidence that the existing strategy you've had in place for two decades now will continue to be successful after you close the deal?
Hiring. I'm wondering if anything will change on Legacy Pinnacle's hiring strategy and postal close, given the organization will be doubling its assets, right? So I know on slide 11 you're forecasting another strong year for hiring next year and in 2027. But what gives you confidence that the existing strategy you've had in place for 2 decades now will continue to be successful after you close the deal?
um,
M. Terry Turner: Tommy, I think I'd turn it around the other way if I could. I mean, what would keep it from being successful, I guess, is really a better question. What you know, what we do, we hire people. When we hire those people, we poll them on who else do you know that's really good where you work and who would fit in in this company. Will you help us recruit them because they fall in love with this company? I cannot imagine what would interrupt that cycle. As I said earlier, the more people that we do hire, the more people that we can hire because of the way we go at it. It is a wildly different, starkly different model than what all of our competitors do for recruiting. Most of those people will rely on headhunters.
Tell me, I think I turned it around the other way if I could. I mean, what would keep it from being successful, I guess is really a better question. What you know what we do? We hire people. When we hire those people, we pull them on. Who else do you know that's really good where you work? And who would fit in in this company? Will you help us recruit them? Because they fall in love with this company?
I cannot imagine what would interrupt that cycle. As I said earlier, the more people that we do hire, the more people that we can hire because of the way we go at it. It is a wildly different, starkly different model than what all of our competitors do for recruiting.
M. Terry Turner: Most of those people will have a big recruiting function as part of their HR operation. Most of them resort to the stack of resumes that have been sent in by unhappy, unsuccessful people. Most of them are hiring out of a pool of applications of folks that came in to apply because they were unhappy, unsuccessful somewhere else. It's just a different model altogether. I'll just have to be honest, I cannot see what would interrupt it. You know, I think you've seen the slide that we put out in the 8K at the time we filed the registration statement, but we talked about the skepticism when we did the BNC transaction. These numbers won't be exactly right, but they're close. I would say we were probably an $11 billion bank or something on that order. BNC was a $7.5 billion bank when we made the acquisition.
Most of those people will rely on head hunters. Most of those people will have a big recruiting function as a part of their HR, uh, operation. Most of them resort to the stack of resumes that have been sent by have been sent in, by unhappy unsuccessful. People, most of them are hiring out of a pool. Applications of folks that came into to apply because they were unhappy unsuccessful somewhere else. And so, it's just a different model altogether. But it's, I, I'll just have to be honest. I cannot see what would interrupt it, uh, you know, um, you I think you've seen the slides that we put out in the 8K at the time.
M. Terry Turner: There was near universal skepticism about our ability to continue the model on this bigger footprint, bigger asset base, and so forth. You've seen the numbers. We hired the heck out of people. We compounded the balance sheet at a double-digit rate, and we outperformed the KRX two times from the date of that announcement. I get the question because it's the same question I have faced so many times. I would just turn it around and say, "Hey, I don't see what would interrupt it.
Can we file the registration statement? But we talked about the skepticism when we did the BNC transaction and these numbers won't be exactly right? But they're closed. Um, I would say we were probably an 11 billion dollar bank or something on that order. Uh, BNC was a 7 and a half billion dollar Bank when we made the acquisition. And, uh, there was near Universal skepticism about our ability, to continue the model on this bigger footprint, bigger asset base and so forth. And so you've seen the numbers, we hired the heck out of people, we compounded the balance sheet at a double digit rate and we outperformed the krx 2 times from the date of that announcement. And so again, I I I get the question because it's the same question. I have faced so many times, but again, I would just turn around and say, hey, I don't see what would interrupt it.
[Analyst]: Thank you, Terry. My follow-up on Bankers Healthcare Group, what specifically drove the growth in originations in the third quarter? Given the strong results on both originations and credit in Q3, what's driving the expected decline in Bankers Healthcare Group income in Q4 to $30 million? Thank you.
Thank you, Terry. And then my follow up on bhg. What specifically drove the growth and originations in the third quarter. And given the strong results on both, the originations and Credit in 3Q, what's driving? The expected decline in bhg income in 4 q to 30 million. Thank you.
M. Terry Turner: Yeah, Tony. As far as the third quarter growth rate, it was just merely about production. They do business with several credit aggregators. They run them through the BHG filter. That's what the primary of the growth rate came from. There was also some holdover inventory from the previous quarter that facilitated that. Their demand for their product is extremely high right now, not only from the community bank network, but from institutional buyers. As to the fourth quarter, I think that's a little bit of caution for us. We believe that as they head into the fourth quarter, they're a private company. I'm sure there's going to be some year-end kind of things that they're going to want to do, but they believe their production will be as strong going into the fourth quarter.
Yeah, Tony, I'll as far as
The third quarter growth rate, it was just merely about production and the their they do business with several credit aggregators. They run them through the bhg filter. And so that's that's what the primary. The growth rate came from. Um, there was also some holdover inventory, uh, from the previous quarter, um, that facilitated that their demand for their product, is extremely high. Right now. Not only from the Community Bank network but from institutional buyers
M. Terry Turner: We're kind of putting a caution flag up for the fourth quarter because we just believe that there might be some, call it personnel costs and other things that come in in the fourth quarter, to cause us to be a little more cautious.
Going into the fourth quarter. So we're we're kind of putting a caution flag up for the fourth quarter because we just believe that there might be some um
Call IT personnel costs and other things that come in in the fourth quarter, uh, to cause us to uh, be a little more cautious.
[Analyst]: Thank you.
Thank you.
Operator: Thank you. Your next question is coming from Steven Scoutin from Piper Sandler. Your line is live.
Thank you. Your next question is coming from Steven Scouten from Piper Sandler. Your line is live.
[Analyst]: Hey, good morning, everyone. I appreciate the time. I wanted to go back to slide nine. This feels like the whole story to me. I love this slide. I feel like it proves a great point. Is that the right way to think about it? The right side of this slide, in particular, the expansion markets, and who knows, we might see some of these banks in here go away as well, which could even only increase the opportunity. You guys have this now established stability over the next at least handful of years, whereas there's still dislocation and the opportunity for you to take a bunch of market share. Can you kind of confirm that for me, maybe if that is as I see it, the whole story, and really how you think about that opportunity set?
Hey good morning everyone um appreciate the time. So wanted to go back to to slide 9 UM this feels like the whole story to me um I love this slide. I feel like it proves a great point. I mean she is that the right way to think about it like the right side of this slide in particular the expansion markets and who knows like we might see
Some of these banks in here, go away as well which could even only increase the opportunity but but you guys have this now, established stability over the next at least handful of years. Whereas there's still dislocation in the opportunity for you to take a bunch of market share. Can you kind of confirm that for me? Maybe if that is as I see it, the whole story and and really how you think about that opportunity set.
M. Terry Turner: Yeah. Steven, thanks for the question. I have said for a long time, anytime I'm trying to orient a new investor to our company, I'll talk about the markets that we're in, the size and growth dynamics, and so forth. As you know, all these markets up here, if you go look at the household income growth or the population growth or whatnot, they're the best markets in the United States in terms of size and growth dynamics. You're on the right point. What is more important and what drives the revenue engine of this company is the market share takeaway opportunity that exists. The people that dominate the market are giving up share at a dramatic pace. Yes, that's exactly what we're trying to do, seize that vulnerability. If you think about getting up there into the top right quadrant, man, that's a dream of a lifetime for me.
Yeah, uh Stephen, thanks for the question. Uh, I have said for a long time, anytime I'm trying to uh Orient, a new investor to our company. I'll talk about the markets that we're in the size, and growth Dynamics and so forth. Because, as, you know, all these markets up here, if you, you know, you go look at the household income growth or the population growth or whatnot. I mean, they're the best markets in the United States in terms of size and growth Dynamics. But you're on the right Point, what is more important and what drives the revenue engine of this company, is the market share, takeaway opportunity that exists. The people that dominate the market are giving up shared a dramatic pace. And so, yes, that that's exactly what we're trying to do is seize that vulnerability, if you, um,
M. Terry Turner: I've been fighting 25 years to get into that top quadrant, and we're here. When you look at the share position, the mass that we have in the Southeast, man, we're in the hunt. Two of the market leaders are at 9%, we're at 8%, and our net promoter score combined with Synovus Financial Corp. is near 80%, and theirs is near 20%. Man, you probably wish you hadn't asked the question. You can tell I get wound up about that. That is the opportunity that this company has.
Um, think about getting up there into the top right quadrant, man. That's a dream of a lifetime for me. I've been fighting twenty-five years to get into that top quadrant, and we're here. When you look at the share position, the mass that we have in the Southeast, man, we're in the hunt. Two of the market leaders are at 9%; we're at 8%, and our net promoter score, combined with Cenovus, is near 80, while theirs is near 20. Uh, man, you probably wish you hadn't asked the question. You can tell I get wound up about that. That is the opportunity that this company has.
[Analyst]: I'm just wondering if Kevin's going to be able to get you to step back at all in two or four years at all. That's really the question. It feels like that excitement is real and opportunity is real. That's a great answer. I appreciate it.
I'm just wondering if Kevin's gonna be able to get you to step back at all in 2 or 4 years at all. That is, that's really the question, feels like that that excitement is real and opportunity is real. So that's that's a great answer. I appreciate it.
M. Terry Turner: I would say that that'll scare him to death.
I would say that’ll scare him to death.
[Analyst]: That's a good fear. I like it. Maybe on the flip side of this, everything sounds like it's going great. The deal sounds like it's on schedule. This is maybe a stupid question because I don't hear it, but is there anything that is an incremental risk at all? Is there anything that you're worried about as you've gotten into this or anything you're like, "If something were to crack, this is where my energy is focused," or is it really just, "Hey, man, we're on the offense and we're just full steam ahead"?
It's a good fear, I like it. Um and maybe like on the flip side of this, I mean, everything. Sounds like it's going great. You know, the deal sounds like it's on schedule.
This is maybe a stupid question because I don't hear it, but is, is there anything that that is an incremental risk at all? Is there anything that you're worried about as you've gotten into this or anything? You're like if if something were to crack this is this is where my my energy is focused. Or is it really just hey man, we're on, we're on the we're on the offense and
Um, and we’re just full steam ahead.
M. Terry Turner: Steven, that's a great question. I think in terms of broad risk categories, like is there something that we're discovering on the balance sheet or is something happening from a competitive or a regulatory standpoint that would cause us to feel different in any way? I don't think there's anything there. Everything we've encountered thus far is really on the positive side of the ledger. I wouldn't want you to walk away and say, "Hey, man, it's just all roses there." You know, this is hard work. I wouldn't want anybody to think it's not. We are working extraordinarily hard to get these companies put together to protect our people, the existing revenue producers that we have. I think you saw there, we still run a 93% associate retention rate, which I'm proud of. It's hard work for sure.
No, that that's a, a great question. I think, in terms of broad risk categories, like, is there something that we're discovering on the balance sheet, or is something happening from a competitive or a regulatory standpoint that would cause us to feel different in any way. Uh, I don't think there's anything there. Everything we've encountered thus far is, uh, really on the positive side of The Ledger? I wouldn't want you to walk away and say, hey man, it's just uh, it's all uh, roses there. You know, man, this is hard work. I wouldn't want anybody to think. It's not we we we are working uh extraordinarily hard to get these companies, put together to protect our people, the existing Revenue producers that we have. And, um,
M. Terry Turner: In terms of the financial outcomes and the client-centric outcomes that we believed in when we announced the transaction, I'd say I'm more convicted as opposed to less.
I think you saw there where you, uh, still running a 93% associate retention rate, uh, which I'm proud of, but, uh, it's hard work for sure. But in terms of the financial outcomes and the client-centric outcomes that we believed in when we announced the transaction, I'd say I'm more convicted as opposed to less.
[Analyst]: That's great. Maybe just one last follow-up on what you just said, Terry. Forgive me for not looking this up. I know you used to put it at the bottom of the press release, but that employee retention, like as memory serves me, it's always kind of floated in this 91% to 96% range for years and years. That's pretty consistent with what you guys have delivered on over the long term, correct?
That's great and and maybe just 1 last follow up on what you just said Terry and and forgive me for not looking this up. I know you used to put it at the bottom of the of the press release but that employee retention like as memory serves me, it's always kind of floated in this 91 to 96% range for years and years. So that's pretty consistent. What with what you guys have delivered on over the long term? Correct?
M. Terry Turner: Yeah. I would say if somebody just said, "Terry, give me a band to where it's been over a decade," I'd say 93% to 96%, sort of where it operates. The associate retention rate over the last 12 months was 93%. The associate retention rate in the first two quarters of this deal prior to the announcement was 93%. Third quarter is 93%. It's solid.
That gate, I'd say 93% to 96% sort of where it operates. Uh, and so, yeah, the associate retention rate over the last 12 months was 93%.
Uh, the associate retention rate in the first two quarters of this deal, prior to the announcement, was 93%. The third quarter is also 93%. So yeah, it's solid.
[Analyst]: Fantastic. Thanks for all the time and congrats on all the progress.
Fantastic. Thanks for all the time and congrats on all the progress.
M. Terry Turner: All right. Thank you, Steven.
All right, thank you. Stephen.
Operator: Thank you. Your next question is coming from Brett Rabatin from Hovde Group. Your line is live.
Thank you. Your next question is coming from Brett Rabbitin from Host Group. Your line is live.
[Analyst]: Hey, guys. Good morning. Thanks for the question. Wanted to first go back to the margin. In the slide deck, you referenced margin tailwinds. I think, Harold, you said you think the 4Q margin will be a little stronger. Can you just talk about the tailwinds as you see them? Is that primarily on the deposit beta side, and is there anything else you would say about the dynamic with the margin as we go into 4Q?
Hey guys, good morning. Uh, thanks for the question. Um, I wanted to first go back to the margin, and in the slide deck, you reference margin tail ends. And I think, um, Harold, you said you think the Q4 margin will be a little stronger. Can you just talk about the tailwind as you see them? Is that primarily on the deposit data side, and just anything else you would say about kind of the dynamic with the margin as we go into Q4?
M. Terry Turner: Yeah, Brad. I think the three things that we look to as far as a tailwind for the margin, obviously, is the beta on the deposit side. We consistently believe we've got significant room yet to go as the Fed lowers rates. The growth in these non-interest-bearing deposit accounts, we think, is very impactful. Also, how we reprice these fixed-rate credits. We're still seeing a meaningful lift in that book. As a matter of fact, I think we have a negative beta in our fixed-rate loans right now and anticipate that to continue. Those three things are the primary things. I know a lot of people believe that it's what's that movie Field of Dreams where you just build it, they'll come. There's a lot of work going on to maintain these margins and to increase these margins.
yeah, Brad I I think the the 3 things that we look to
As far as the Tailwind for the margin, obviously.
is um,
The bait on the deposit side and we we consistently, we've got significant room yet to go as the Fed rate as the FED lowers rates.
Uh, the growth in these non-interest-bearing deposit accounts, we think is very impactful, and also how we reprise these fixed-rate credits. So, we're still seeing a meaningful lift in that book. As a matter of fact, I think we have a negative beta in our fixed-rate loans right now, and I anticipate that to continue. So, those three things are the primary considerations. I know a lot of people believe that it's, uh, what's that movie, Field of Dreams, where you just build it, they will come.
M. Terry Turner: A lot of relationship managers are out there working to make that happen. It just doesn't happen automatically is what I'm trying to say.
There's a lot of work going on to maintain these margins and to increase these margins. A lot of relationship managers are out there working to make that happen. So, it just doesn't happen automatically, which is what I'm trying to say.
[Analyst]: Okay. That's helpful. The other question I had was around the strong DDA growth in the quarter. I think obviously some of that was related to specialty deposits. Can you talk about that dynamic, how much of that was maybe specialty deposits? As we think about those specialty businesses, what kind of share you're at in those businesses? Is that something you can continue to grow at the pace you have?
Okay.
That's helpful. And then, the other question I had was around the strong DDA growth in the quarter, and I think, obviously, some of that was related to Specialty, deposits. Can you talk about, um, that Dynamic, how much of that was, maybe, specialty deposits. And then, as we think about, you know, those specialty businesses, you know, what kind of share you're you're at at those in those businesses and is that something you can continue to grow at the pace? You have
M. Terry Turner: Yeah. You know, it's like, I guess it goes into leadership and management. For years, we've been aimed at operating accounts. Over the last, call it 12 months, 9 to 12 months, we've put particular emphasis on the sales side about that, and particularly around small business. We've seen some great results there in the last few months that have really kind of been, again, not to overuse a word, but the tailwind for that growth.
Yeah, you know. It's like um,
I, I guess it goes into leadership and management. Uh, for years, we've been aimed at operating accounts, but over the last call at 12 months 9 to 12 months, we've put particular emphasis on the sales side about that and particularly around small business.
uh, we've seen some great results there here in the last few months, um, that have really kind of been, uh, again not to overuse a word, but the Tailwind for that growth,
[Analyst]: Okay. Harold, is it fair that that kind of pace can continue or any thoughts on,
Okay, but it um, is it fair that that kind of pace can continue or any thoughts on?
M. Terry Turner: We don't have any reason to believe we won't see continued growth in that. We typically see some seasonality going into the last quarter of the year as people build cash balances for incentives, taxes, and whatnot. I think we'll also see absolute sales growth with respect to those operating accounts.
[Analyst]: Okay.
Um we don't have any reason to believe. We won't see continued growth in that we typically see some seasonality going into the last quarter of the year as people build cash balances and for incentives and taxes and whatnot. But uh, I think we'll also see absolute sales growth with respect to those operating accounts.
M. Terry Turner: Brad, you know the numbers as well as I do, you got a 14.5% annualized, third quarter annualized growth rate. I think the year-to-date number is 12.8%, near the 13%. It's a pretty rock-solid growth.
Okay. You you know the numbers as well as I do but, uh, you know, so you got a 14 and a half percent, uh,
Annualized, uh, third quarter annualized growth rate, but I think the year-to-date number is 12.8%, nearly 13%. So it's a pretty, uh, rock solid growth.
[Analyst]: That's a great point. Thanks, Terry. Appreciate it.
That's a great point. Um, thanks, Terry, appreciate it.
Operator: Thank you. Your next question is coming from Michael Rose from Raymond James. Your line is live.
Thank you. Your next question is coming from Michael Rose from Raymond James. Your line is live.
[Analyst]: Hey, good morning, everyone. Thanks for taking my questions. I was just looking at slide 28 where you have the loan growth kind of by expansion markets versus legacy markets. It looks like you've had some headwinds in the legacy markets over the past couple of quarters. Can you just address that? Separately, once you guys combine, I know your C&D and construction, or CRE, concentrations are below where you've wanted to get them. Is that an opportunity for growth on a combined basis once the deal is closed as we move forward? Thanks.
Hey, good morning everyone. Thanks for uh taking my questions. Um hey I was just looking at slide 28, where you have the the the loan growth kind of by expansion markets versus Legacy markets and looks like you, you've had some headwinds in the Legacy markets over the the past couple quarters. Can can you just address that and then separately? Um, once you guys combined, yeah. I know you're seeing D and, and construction, uh, or, uh,
CRA concentrations are below where you've wanted to get them. But is is, is that an opportunity, you know, for growth on a combined basis, you know, once the deal is closed as we move forward, thanks.
M. Terry Turner: Yeah. I'll hit a couple of things, Michael. If you look at that slide you're talking about there, we have several components to it, right? You got a category that's called legacy. What that really means is not the legacy market. It is the legacy bankers in a legacy market. It's people that probably have been here on average 20 years, and they have big books of business. When you go through periods of slack loan demand, which we've certainly been through over the last couple of years, you get limited growth. In fact, it's hard for those guys to cover their amortization when there's no loan demand. If you get loan demand, then that becomes the increment in that category. The way we produce the growth is through hiring, both in the legacy footprint.
Yeah. Uh, I'll hit a couple of things. Michael, um,
M. Terry Turner: A lot of our new hires are in legacy footprints, and that's where the growth comes from. It's the continued market share play there. The specialty businesses have provided a great growth engine for us over the last, I would say, three years or something like that. I think as it relates to the go-forward, yeah, we would expect to continue similar growth trends going forward for the foreseeable future. If we get elevated loan demand, that would be an increment to what we intend to produce. You're on the right track on CRE. I didn't spend any time on that. We grew 8.9% in total volume. The drag, you had big growth in C&I, nearly 18% or something like that. We had $560 million, I think, in early payoffs in the CRE book.
We have several components to it, right? You guys, um, the category that's called Legacy and what that really means is not the Legacy Market. It is the Legacy Bankers in a legacy market. So it's people that probably been here on average 20 years and they have big books of business and so when you go through periods of slack loan demand, which we certainly been through over the last couple of years. Uh, you get limited growth. In fact, it's hard for those guys to cover their advertising. Uh, when there's no loan demand, if you get loan demand, then that becomes the increment in that category, but the way we produce the growth is through hiring, both in the Legacy footprint. So, you know, again a lot of our new hires are in Legacy Footprints. And so that's where the growth comes from is the continued market share play there. And then of course the specialty businesses um have provided a great growth engine for us over the last I would say 3 years or so.
Something like that. I think as it relates to the go forward. Yeah, we would expect uh, to continue similar growth Trends uh going forward for the foreseeable future. If we get elevated loan demand, that would be an increment uh to um to what we intend to produce. And you're on the right track on CRA. I didn't spend any time on that. We, you know, we grew 8.9% and total volume but the drag, you know, you had big.
M. Terry Turner: As you know, some time ago, we decided to lower our concentration limits in CRE, and we have been about that. We've now hit those targets, and we have waded back into the market. As you know, the payoffs continue, but it takes a while for the loans that you're making today to get burned through the equity that's in front of you and get to a fund-up period. To get down to the bottom of the stack here, yes, I believe CRE will be a meaningful increment to us in terms of loan volume going forward.
Growth in saying, I, you know, nearly 18% or something like that, but we had 500 and something million dollar 560 million dollars, I think in uh, early payoffs in the CRA book. As, you know, sometime ago, we decided to lower our concentration limits uh in CRA and so we have been about that. We've now hit those targets and we have waited back into the market. But as you know,
The payoffs continue, but it takes a while for the loans that you're making today to get burned through the equity that's in front of you and get to a fund-up period. And so, to get down to the bottom of the stack here, yes, I believe CRA will be a meaningful increment to us in terms of loan volume going forward.
[Analyst]: Very helpful, Terry. Maybe just one follow-up, and I know it's minor. Credit's been very good, but on slide 15, you did have a little bit of pickup in classified potential problems, things like that. Anything that you guys are more broadly looking at? I know there's a lot of concern around some of these structured credits, NDFI stuff. Another bank showed up in a lost position last night in another credit. Anything that you guys are just broadly keeping a closer eye on or a little bit concerned about? Thanks.
Very helpful Terry and maybe just 1 follow up and I know it's it's minor credit, it's been very good, but on 515 you, you did have a little bit of pickup and classified potential problems, things like that. Um, anything that you guys are are more broadly looking at. I know there's a lot of concern around, you know, some of these uh you know, structured credits, and DFI stuff uh you know another bank uh showed up in a a loss position last night in another credit but yeah, anything that you guys are just broadly keeping a closer eye on or um a little bit concerned about thanks.
M. Terry Turner: Yeah, Michael. So far, we feel pretty good about where that NDFI book sits. It's a pretty granular book. I think our average outstanding to that is about $4 million per account, so there's a lot of accounts in it. We feel like we've got our arms around it and are being more diligent with respect to all the loans that we're not the lead bank on for sure. As to the increase in potential problems, that's primarily attributed to OneCredit. It's a healthcare client that we've had our eyes on for a while. They only recently put a new manager into the CEO slot there, somebody that's a seasoned turnaround specialist and not a physician. We think we're in pretty good shape in that OneCredit.
Yeah, Michael um so far we feel pretty good about where that ndf book sits. Um
It's a pretty granular book. I think our average outstanding amount is about $4 million per account. So, there's a lot of accounts in it. Um, we
Uh, I feel like that, uh, we've got our arms around it, and we're being more diligent with respect to all the loans that we've, uh, we're not the lead bank on for sure.
Um, as to the increase in potential problems, uh, that's primarily attributed to 1Credit.
Uh it's a healthcare client that we've had our eyes on for a while. They only recently put a new manager into the CEO slot there, uh somebody that they uh, a seasoned turnaround specialist and not a physician. And so um,
We think we, we think we're in pretty good shape in that 1 Credit.
[Analyst]: All right. Thanks for taking my questions.
Thank you for taking my questions.
M. Terry Turner: Thank you.
Thank you.
Operator: Thank you. Your next question is coming from Casey Hare from Autonomous Research. Your line is live.
Thank you. Your next question is coming from Casey hair, from autonomous research. Your line is live.
[Analyst]: Thanks. Good morning, everyone. Earlier today, Kevin and Jamie talked about capital and that you don't have capital ratio targets post-deal. I just wanted to touch on, I know you guys have tended to run with more capital to make your clients feel better. I'm just wondering if that dynamic will hold or does it mitigate somewhat given you're now, you know, over $100 billion in assets?
Thanks, good morning everyone. Um, so earlier today, we, uh, Kevin and Jamie talked about, uh, capital, and they don't have capital ratio targets, uh, post-deal. But I just wanted to touch on, I know you guys have tended to run with more, uh, capital to make your clients feel better. Um, and I'm just wondering if that dynamic, um, will hold, or does it mitigate somewhat given your now, uh, you know, over $100 billion in assets?
M. Terry Turner: Yeah, obviously, Kevin and Jamie will direct traffic on that once the transaction closes, but we're not planning on any kind of additional capital strategies.
Yeah, um well obviously Kevin and Jamie will direct traffic on that once the transaction closes.
Operator: than what we've traditionally deployed. We need capital to support this loan growth engine, and we think that'll continue. I think one of the things that was, I believe, put forth in the merger deck is the dividend. I think ours will go up and theirs will come down. Other than that, I don't know of any significant other changes. I know Jamie has mentioned several times about the capital accretion that'll occur post-merger. If, you know, for some reason we don't hit our growth targets, then there's a lot of opportunities to get into some buyback programs.
Uh, Capital strategies um, than what we traditionally deployed, uh, we need Capital to support this loan growth engine and we think that'll continue. Um I think uh 1 of the things that that was I believe put forth in the murder deck.
Is, uh, the dividend, I think. Ours will go up and theirs will come down. But, uh, other than that, I don't know of any significant other changes. I know Jamie, uh, has mentioned several times about the capital accretion that will occur post-merger. And if, you know, for some reason we don't hit our growth targets, uh, then there's a lot of opportunities to get into some buyback programs.
[Company Representative]: Okay. Great. Another follow-up on slide 11, the recruiting strategy, a bit of a two-parter. One, have the terms of your hires, have they been similar, or have you had to maybe sweeten the economics a little bit? Then two, you guys have talked about Texas in the past, and expanding there. A lot of M&A activity there, could be a market that would, where your guys' recruiting strategy would resonate well. Just some thoughts there.
Okay, great. And just uh, another follow-up on on slide 11. The recruiting strategy uh, bit of a 2-part. So 1 have the the terms of your um hires that have they been similar or have you had to to uh maybe sweeten the economics a little bit. Um and then 2, you guys have talked about Texas in the past um and expanding their a lot of m&a activity there. Um could be a market that would um where you guys? Um, recruiting strategy would resonate well. Uh, just just some thoughts there.
Operator: I think, on the current recruitment conditions, terms and conditions, and so forth, I don't think there's any doubt that it is probably a more competitive hiring landscape today than it would have been 10 years ago or something like that. There is elevated competition, and sometimes that'll bear on pricing. Casey, I think one of the things that people forget, at least in terms of the way we look at it, the profit leverage on a commercial relationship manager is so wide. I would say even mediocre commercial relationship managers, you probably make something on the order of $2 million a year on. You got some you make $12 million a year in contribution. If you have to bid up $50,000 on the comp expense, it's just not a roadblock to making the hire. The profit leverage is so strong in those experienced relationship managers.
Yeah, I think, uh, on uh, the recruitment, Uh, current recruitment conditions, uh, terms and conditions and so forth. Uh, I don't think there's any doubt that it is a, uh, it's probably a more competitive hiring landscape today than it. Would have been 10 years ago or uh, something like that. So there's elevated competition and sometimes that'll bear on, uh, pricing. But um, Casey, I think 1 of the things that uh that people forget um at least in terms of the way we look at it the prophet leverage on a commercial relationship manager is so wide. You know, I would say even even mediocre, uh, commercial relationship managers, you know, you probably make something on the order of 2, 8. 7 0,
Operator: You can waste your money. You can hire trainees that don't bring a book, don't have revenue, and all that sort of stuff. Using the model that you're hiring people that on average have 18 years' experience and consolidate a book pretty rapidly, the profit leverage is so strong. I'm not fearful about the impacts of competitive pricing. You're on the right point. It is a competitive environment out there to hire people. I think as it relates to Texas, what I've always tried to say is we're focused on the Southeast because of some of the things we've talked about on this call. Of course, if you're just looking at size and growth dynamics, those Texas markets are unmatched. They're fabulous, and you're right. Consolidation will change the landscape.
Bucks on the cop expense. It's just not, uh, a roadblock to making the higher. Again, the prophet leverages so strong in those, uh, experienced relationship managers and again, you can waste your money. You can hire, trainees, and don't bring a book and don't have revenue and all that sort of stuff. But again, using the model that you're hiring, people that on average have 18 years experience and consolidate a book, pretty rapidly. Uh the the prophet Leverage is so strong.
I'm not fearful about the impacts of competitive pricing, but you're on the right path. It is a competitive environment out there to hire people.
Operator: The Southeast has been more attractive to me than Texas because of that phenomenon where the market share leaders are vulnerable and giving up share at a rapid pace. To date, that hadn't been the case in Texas. You're right. As the consolidation picks up speed there, there probably will be incremental opportunities.
I think, as it relates to Texas, um, you know, what I've always tried to say is we're focused on the Southeast, uh, because of some of the things we've talked about on this call. Uh, you know, of course, if you're just looking at size and growth dynamics of Texas markets, they are unmatched; they're fabulous. Uh, and you're right, consolidation will change the landscape, but the Southeast has been more attractive to me than Texas because of that phenomenon, where the market share leaders are vulnerable and giving up share at a rapid pace. And to date, that hasn't been the case in Texas. But you're right, as the consolidation picks up speed there, there probably will be incremental opportunities.
[Analyst]: Thank you. Your next question is coming from Brian Martin from Janney. Your line is live.
Thank you.
Your next question is coming from Brian Martin from Janie. Your line is live.
[Company Representative]: Hey, good morning, guys.
Hey, good morning, guys.
Operator: Hi, Brian.
[Company Representative]: Just one question back to you, Harold, to the CRE concentration. In terms of kind of picking up a little bit of steam there, is your expectation, it sounds like, to still stay below those targeted guidelines, even with the growth you're expecting as you get through the combination of the two companies? The pro forma company will still be below that 70, 225, even with the meaningful incremental growth you expect, Terry?
Hi Brian, most of mine were answered, but I just have one question regarding bacteria, Harold, and the CRA concentration. I'm just trying to pick up a little bit of steam there.
Is your expectation, it sounds like, to stay still below those targeted guidelines? You know, even with the growth you're expecting, as you get through the combination of the two companies, the ProForm company will still be below that $70 million to $225 million, even with the meaningful incremental growth in the expected area.
Operator: I think that's generally the case. I think you may have a temporary blip, Brian, measured against capital, with some tangible book value dilution and so forth, at the start of the transaction. It's a quick earn back. Yeah, fundamentally, the idea is to continue to operate at those more pure median-like numbers.
Continue to operate at those.
Uh, more peer median, like, uh, numbers.
[Company Representative]: Gotcha. Okay. That's helpful. Just on the rate environment, you guys expecting a couple of cuts here in the fourth quarter. The outlook in terms of where you're putting on new loans and kind of where you expect those, can you just talk a little bit about where the new origination yields are today and what you expect over the next couple of quarters?
Gotcha. Okay, that's helpful. And then just on the, uh, you know, with the rate environment, you guys expecting a couple of cuts here in the fourth quarter? Just the, uh, the outlook in terms of, uh, the, you know, where you're putting on new loans and kind of where you expect those, uh, can you just talk a little bit about where the new origination yields are today and what you expect, you know, over the next couple of quarters?
Operator: I think the best thing to do, Brian, is see the trends over the last couple of quarters on those loan originations. I think that'll be fairly consistent in applying the same betas. On deposits, we fully intend to kind of keep our beta numbers where they are, if not grow them over the next, you know, two, three, four rate cuts.
Yeah, I think the best thing to do, Brian, is to see the trends over the last couple of quarters on those loan originations.
Um,
I think that'll be fairly consistent and applying the same betas.
Um, and on deposits.
Are we fully intend to to kind of keep our beta numbers where they are? If not if not grow them over the next you know, 2 3 4, rate cuts,
[Company Representative]: Gotcha. Okay. All right. That's all I had, guys. Thanks very much.
Got you, okay.
Operator: Thanks, Brian.
[Company Representative]: Thank you, Brian.
Thank you. Thank
[Analyst]: Thank you. That completes our Q&A session. Everyone, this concludes today's event. You may disconnect at this time and have a wonderful day. Thank you for your participation.
That completes our Q&A session, everyone. This concludes today's event. You may disconnect at this time and have a wonderful day. Thank you for your participation.
[Company Representative]: Goodbye.