Pinnacle points to new hires as proof that merger is working

• Key insight: Pinnacle Financial Partners hired a net 50 new revenue-generating bankers during the first quarter, plus a few dozen more during the early weeks of the second quarter.
  
• What's at stake: The Southeast-focused company, which was formed Jan. 1 by a merger of equals, is relying heavily on recruiting to drive its revenue growth. 
  
• Expert quote: "Others have said this merger would be a huge opportunity to poach Pinnacle team members. That just hasn't happened." — CEO Kevin Blair

Pinnacle Financial Partners' hiring engine didn't miss a beat during the first full three-month period since the company completed its merger of equals with Synovus Financial.

The parent company of Pinnacle Bank recruited a net 50 new bankers during the first quarter, it said Thursday. And the momentum seemed to extend into the second quarter, with 37 bankers either accepting employment offers or already coming on board as of April 17, the company said.

The success of Pinnacle's hiring strategy, amid the disruption that often accompanies mergers and acquisitions, is proof that the company has a winning formula, CEO Kevin Blair said. The company continues to expect to hire a total of 225 to 250 revenue-producing bankers this year, plus another 250 to 275 next year.

"Many people were questioning whether we could continue to hire with a merger weighing on some of these [acceptance] decisions, where bankers may be waiting, watching and taking a pause," Blair told analysts during the company's first-quarter earnings call. "I think [the] first quarter shows that the model itself is the attraction point, and the merger has not changed that."

Investors appeared to be mostly pleased with Pinnacle's performance, as well as the fact that it maintained the financial guidance it released in January. Late Wednesday, the company's stock price rose by about 3%. As of midafternoon Thursday, it was up by nearly 2%.

Pinnacle Financial Partners, which has $122.8 billion of assets, is based in Atlanta and employs about 8,500 people. Pinnacle Bank is based in Nashville. Pinnacle Financial Partners and Synovus, which had been based in Columbus, Georgia, faced skepticism last year from bank analysts and investors who were wary of mergers of equals. Both companies' stock prices declined after the deal was announced in July.

The merger was completed on Jan. 1, and the combined company's hiring story has been a topic of interest, especially on Thursday's call. The old Pinnacle was an aggressive recruiter of in-market, experienced bankers who would bring over their books of business.

That model, which underpinned legacy Pinnacle's rapid growth over the years, is now being deployed across the legacy Synovus franchise. About 40% of the bankers hired were located in the legacy Synovus footprint,  according to Blair, who was previously Synovus' CEO.

The combined company operates in nine states — Tennessee, North Carolina, South Carolina, Georgia, Alabama, Florida, Virginia, Kentucky and Maryland — many of which offer attractive growth prospects. Hiring took place in every part of the franchise, led by Florida, Blair said.

Pinnacle has set a goal to limit voluntary turnover across the company to no more than 7%, Blair said. For the first 90 days following the merger, it was "right on that target," he said.

Some revenue-producing bankers did exit, though almost 20% of those departures were due to retirement, Blair said. Some bankers also left after bonuses were paid out earlier this year.

"Others have said this merger would be a huge opportunity to poach Pinnacle team members," Blair said. "That just hasn't happened. ... It has everything to do with the model and the fact that these team members are deeply engaged in our company, they are successful, and they're not searching out another opportunity, and I think that's what's different from … other mergers."

Analysts were positive on the hiring results, tying Pinnacle's growth trajectory to its ability to hire. 

"The pace of talent acquisition seems to be accelerating, and we view this as the single most important leading indicator of future revenue growth for the Pinnacle franchise," Stephen Scouten, an analyst at Piper Sandler, wrote in a research note. "We believe the market continues to underappreciate the compounding revenue power of Pinnacle's hiring engine." 

Overall, Pinnacle's first quarter as a combined franchise was solid, analysts agreed. Net income was $134.7 million. After excluding merger-related expenses of $275.4 million, and accounting for certain other factors, adjusted net income totaled $362.7 million, the bank said.

Earnings per share were 89 cents, missing the consensus estimate of analysts by nine cents, according to S&P Capital IQ.

Pinnacle, which has consistently ranked as one of American Banker's Best Banks to Work For, maintained its full-year 2026 guidance, including loan growth of 9% to 11% and deposit growth of 8% to 10%.

It expects to realize about 40%, or $100 million, of the merger-related savings this year. In total, the company expects to derive about $250 million in net cost savings from the merger.

Its systems conversion is still slated to take place in March of 2027, the company said.

In light of the current macroeconomic uncertainty, which is being driven by inflation and the Iran war, the bank's hiring strategy is a bright light, Blair said. 

"Our growth is more predicated on … hiring than anything else," Blair said on the call. "We see a lot of growth just from bankers, bringing over books of business, building their books, and it's more about that than it is the general volatility of the economy."