Get started. We have obviously saved the best for the last. For my last bank fireside of the conference, we have with us Pinnacle Financial. From Pinnacle, I'm delighted to welcome Kevin Blair, President and CEO, and Jamie Gregory, Chief Financial Officer. Thank you both for being here.
Thank you.
And obviously, I mean, I think everything about Pinnacle over the last 6-9 months has been the merger announcement, getting the merger closed, and just how investors have digested what the transaction means. But maybe, Kevin, just like, you spent a lot of time talking to Pinnacle employees, being in town halls, and I think the one thing that you hear I hear often is, can they keep the Pinnacle model intact? When we think about growth outlook, like, can these, cultures come together? Just talk to us what the messaging has been, what the feedback's been.
Yeah. You know, it's an interesting place to start, and we released the press release this morning that talked about the Greenwich Awards. So 50 Greenwich Awards for the combined organization, 32 for Legacy Pinnacle, 18 for Legacy Synovus, which puts us at number 1 and number 6 in the country for client satisfaction. And so I think when people talk about running the Pinnacle model and two cultures coming together, we're obviously different in ways. But I would submit to you that we're way more similar than we are different. If you look at our competitive positioning, both companies talk about creating a great place to work, i.e., team member engagement. Pinnacle has a 93% team member engagement, Legacy Synovus an 89%. Both places rate very high on Glassdoor amongst regional banks. Synovus number 1, Pinnacle number 2.
Then we talk about client satisfaction, client loyalty, Net Promoter scores . I think Greenwich is a great example just out this morning where you get a full year of results where we rank 1 and 6, number 1 when you aggregate it, in a year where we've announced a merger. So there is uncertainty. There are team members wondering what's going to change. So I would submit to you, Ebrahim, that our companies are way more similar than they are dissimilar, and we've spent those six months talking about those similarities. Now, I think everyone buys into that. So what we've really spent our time on are the areas where we're different. And when I talk with the Pinnacle, legacy team members, what they would say is that they want to maintain this Pinnacle model.
Pinnacle model, so for everyone, just to break it down in layman's terms, is a geographically based model that allows for local decision making. There's an incentive plan structure that's based on everyone getting paid based on the company attaining its top line revenue and EPS target. So there's no individual incentive plans. They're very adamant that they want to maintain that, and we committed in this merger to maintain it. Our team members on the Synovus side wanted to understand what that meant. It was very clear to us that they embraced the geographic model. Synovus for many years was geographically based. The question for us was not that local autonomy and the war on bureaucracy that Pinnacle builds its model upon. Our team loves that.
It was getting them comfortable with the incentive plan, which was much more of an incentive plan that is based on company performance versus individual. And when we sat down with our bankers in the fourth quarter and calibrated their compensation to the new incentive plan, they realized that that compensation would be calibrated to having more money in base pay, less money at risk, but knowing if they had an exceptional year, there was upside for their compensation. And so getting through those discussions, I think it was kind of the final stage of having both sides acknowledge that we're keeping the things that both sides want. We're scaling the things that made both sides successful, but the things that we're changing are the things that I think our bankers generally will like.
Included on the Pinnacle side, one of the things that they wanted was some enhanced technology and capabilities. I think that's where Synovus has some things we'll bring to the table that will enable their team members to have a better toolset to be able to serve their clients. So look, we've spent a lot of time on the culture and meshing our two companies, and I would give ourselves an A+ in sitting here today in doing that. That's not just my feeling, but when you look at the fact that we've been able to continue to hire new team members and we haven't had any increase in attrition, it tells me that the data supports that assessment.
You mentioned the incentive structure. Just remind us, is the plan to have all bankers on the same sort of incentive structure? So the Synovus bankers would also have it? Is it?
Absolutely. So.
How long will it take to sort of fully get there?
Well, we're there. So we spent the fourth quarter getting everybody calibrated, and their new compensation plans were given to them in the fourth quarter. So as they entered 2026, they already knew what their new incentive structure would look like. We rolled out our internal plans that shows their internal team members what the EPS target will be for the year and what the revenue target will be for the year. The one thing that Jamie can talk about on cost synergies, we didn't know, Ebrahim, when we would actually close this deal. 160 days from announcement to closing it was, you know, a great outcome. But that happened on January 1st. And when we built in the model math, we didn't assume that we would move to the entire Pinnacle incentive plan in 2026. And what do I mean by that?
Part of the Pinnacle incentive plan is that every team member in our company will now receive equity every year, every team member, all 8,500. Number two, every team member in our company will be on an incentive plan that is re those individuals will be rewarded if we achieve our EPS and revenue target. That translated into an incremental $30 million of expense accelerating into 2026 when we had planned it for 2027, where now Jamie came out and said, "Look, we're still committed to our cost synergies.
Just know that in 2026, it's only going to be 40% versus 50% because we accelerated some of those dis-synergies." And we felt like that was important because what Pinnacle has proven is when you can get your entire 8,500 team member base in the boat, rowing in the same direction, focused on the things that they can contribute to help the company achieve those goals, it's powerful. So you can imagine when I had the privilege of announcing to all of our Legacy Synovus team members that they were going to receive equity and that everybody was on a bonus plan, that was a substantial uplift in morale for our team. So we enter the year thinking about these Synovus folks having to move over to this model, and most of them are elated because they've just been given an opportunity monetarily that's significant.
I want to come up to come back to the business, but Jamie, since the deal closed on January 1st, and I think just the history of sort of putting mergers together from and again, from outside in looking for investors, folks in my seat, there's always some nervousness around how these balance sheets are going to come together, the interest rate marks, etc. Just give us a sense of obviously you gave us an update with results last month. Just how smooth has that process been? Wherever differences relative to when you announced the deal, like what we should be sort of thinking about as we get closer to first quarter results?
Yeah. Thanks, Ebrahim. You know, as we think about the merger math and the PAA and the marks of the balance sheet, obviously, securities was easy. We did that, you know, at the beginning of the year. We can talk about the restructuring that we did right after that as well. But nothing has really changed. On the loan marks outside of the rate environment is lower. If you look at where rates were, you know, in the belly of the curve, we announced the deal to year-end. It's about a 25-30 basis point drop. Now, our loan yields are down, you know, maybe or I, I would say fixed rate asset yields are down maybe 15-20 basis points. We haven't finalized all the valuation on the loan side yet. We're still working through that.
But everything's consistent with what we laid out in our earnings deck. And what you saw there is the valuation; the price is a little bit higher than what we originally said because those rates are a little bit lower. So you get a little less PAA. There was one nuance in, you know, kind of our estimate as of the earnings deck is that the unrealized loss or the mark in the securities I mean in the loan book has shifted more to mortgages. And so they're a little bit longer duration. And so, you know, if you look at the PAA change from what we said at announcement to what we said in January, you know, some of that's rate and some of it is a shift in kind of where we're seeing the mark on the loan book.
But everything, you know, is consistent with what we said, you know, at earnings. But it's proceeding. Feel good about it. That's all embedded in our guidance. It's what, you know, nothing's really changed as we kind of work through this.
Got it. I think the other thing that's been sort of a point of discussion has been around just the timeline for systems conversion, which obviously falls into 2027. Just maybe help us understand, Kevin, what cannot be achieved between now and then that will be easier to do post-conversion, or does it not? Is it not a major factor?
So, you know, one of the questions, Ebrahim, that we receive when you compare our transaction to some of the others that are out there is that our conversion window's a little longer. And that was intentional. Number one, we wanted to make sure that as we brought both companies together I, I want to get rid of this MOE concept, merger of equals, because that's talking about us internally. We call it an MOC. It's a merger of clients, right? It's not a merger of equals. And when you think about putting your clients in the center of the room, stop worrying about how fast you can get systems conversions done so that Jamie can get cost savings. You start thinking about what's best for our clients. And so what we said is we're going to start by doing an assessment of both companies, technology, products, capabilities.
Based on that assessment, we were going to choose which system and solutions that we would offer post-conversion. That's different than other banks because we from day one said we were going to be going to our core platform with FIS. Most banks, once you choose the core, are just going to choose those platforms that are already hardwired into the core, are already API'd in. But we didn't do that. We went through and did an assessment. That assessment will actually not conclude fully until March because we want to make sure that we understand what our clients like about the solutions, what are the gaps. Now, when we've made selections and we've already decisioned 222 of the technology selections, we haven't gone public with that because we're in the process of negotiating with those vendors.
If we told you who they were, we would lose a little bit of leverage. We haven't done that. What we've also done is if we're moving to one platform and we look at the other platform and it had two capabilities that the new platform doesn't have, we're using this 14-month window to ensure that when our clients migrate to the new platform, those capabilities will be there. Because the last thing we want to have happen is to sell to our clients how scale matters and you're going to get better solutions and better capabilities. The day one when they log in, they're like, "Where's my ABC functionality?" We've identified some of those gaps and we'll ensure that the target state that we're moving to has most of those capabilities. There may be one or two that doesn't make it.
So that's number 1. Number 2, our biggest conversion are with our complex commercial clients because these individuals have fully integrated their payables, their receivables, their ERPs. Everything is integrated into the commercial platform. Between now and conversion in March of 2027, our more complex clients will take the opportunity to go ahead and move them over and take our time in doing sort of a full concierge white glove service migration because there's nothing preventing us from doing that. So much so, what we've said is that as we onboard new clients, if they're not destined to go on the end state platform, we'll go ahead and onboard them on the end state platform. And we've set up an internal workforce that will allow us to service that client, even though they would have been under the other platform previously.
So we've done a lot of things that will allow us in the interim to onboard new clients on the end state. We're building an end state platform that I think will meet and exceed people's expectations. We're trying to ensure that when we do conversion, that it's white glove, lots of training both for bankers and for clients before we migrate. And then I would just say lastly, any system that's not hardwired into FIS will convert beforehand, things like our mortgage platform or things that aren't necessarily tied to the core platform. So we'll get all of that done. That'll get us to CD1. And then we talk about, you know, that's integration. Then we talk about optimization. So now that we have the new systems, how do we optimize to make sure the other side is using the capabilities?
And then we get to the third phase, which is progression. And one of the things that we want to do, as we call scaling with a soul, is put out our three-year roadmap for our bankers to see, "Here are the capabilities that are going to come online over the next three years that our size and our scale enables us to invest in to show them that this will create new solutions and new sources of revenue for our company and ultimately new services to provide their clients." And so that's kind of the roadmap and how we're thinking about it.
Got it. Excellent. I guess maybe just thinking about the near-term outlook or the 2026, I think your loan growth guidance, 9%-11% growth, I, I think a big part of like how investors in the streets measuring this is, "Can we keep the growth momentum going?" So are there sort of, disclaimers to that loan growth, whether it's back half heavy versus, 1Q , or we often tend to think about distractions when mergers are closing that derail some of the organic growth momentum. So how should we think about the 9%-11% and what gets you to 11 versus 9? Yeah.
I'll start. And Jamie, please add in. I, I actually think there's obviously a natural ramp for loan growth as we go throughout the year. Just when you look at what the growth is predicated upon, it's from adding bankers. Most of the growth, 99% of the growth that'll come in 2026 is based on bankers we've already hired. So I don't want you to think that we've built in our plan hiring a bunch of bankers in 2027 hoping that that generates growth. As you know, there's a lag effect there. But, you know, as we brought on bankers in 2026, as they get more familiar with the systems, as they continue to bring over relationships from their prior bank, that's going to continue to generate loan growth.
But what gives us confidence in that 9%-11% is solely when you look at what we delivered in the fourth quarter. The combined company delivered 10% loan and deposit growth. When you look at the loan side of it, that was Pinnacle, Legacy Pinnacle, delivering 12%, and Legacy Synovus delivering 8%. I think that's been one of the questions, Ebrahim, is that, you know, Pinnacle over a long period of time has proven they can generate double-digit loan growth predicated on hiring those bankers. Synovus has run a little lower, and I think our long-term average is 4%-5%. But in the fourth quarter, we generated 8% annualized growth. And that was with commercial real estate, you know, so, you know, down 5%.
So it really comes down to the momentum that the Legacy Synovus franchise had built. It comes down to what Pinnacle has continued to do over the last 25 years, which is generating growth from new hires. And so at Synovus, our production in the fourth quarter was up 117% versus the same period last year, fourth quarter. It was actually up 50% third quarter to fourth quarter. So that flywheel, that level of production from our bankers, having pipelines in that similar range, entering the first quarter of 2026 gives us great confidence. You know, as we've talked about in the past, some of the puts and takes on loan growth has been elevated payoff and paydown activities. Well, that's just kind of core run rate now. It's normalized.
I mean, it's higher for CRE, but we've gotten that in our run rate. It's where it is. We're not anticipating a bunch of line utilization increases, but what we know is that as interest rates decline, line utilization generally ticks up. So for many reasons, I think that gives us confidence that the loan growth will build throughout the year, but it's not like we're entering first quarter with a lack of momentum. I think you're going to see good loan growth in the first quarter.
That's good to hear.
And then, Jamie, I don't know if you want to talk about the puts and takes on high-end, low-end.
Yeah. I mean, first, as Kevin said, it's sustained performance. When we think about how we get to the high end of loan growth, I mean, a lot of it can come down to CRE. You know, we believe that we have a lot of opportunities in commercial real estate. We think that 2026 could be a good year there, a pivot. And you haven't seen a ton of growth in that historically. And so, that could be a good inflection. Line utilization could be, you know, go either way on you. But that could be, you know, a tailwind to 2026 as well. And we continue to see strength in our specialty businesses. Our specialty teams are firing on all cylinders. Those are some of our highest ROE businesses. So it's really accretive to the shareholder. Feel really good about those as well.
I think to Jamie's point, you know, Ebrahim, when you look at what both sides brings to the table, you know, the equipment finance arm at Pinnacle, our team's super excited to have in-house equipment finance, sales force, and they've already hit the ground running. So, you know, when you build out, you know, the other question that we've gotten today is, you know, just revenue synergies. And, you know, when we, when we showed our slide for revenue synergies of $100-$130 million over the next 3 years, you know, we, we did it based on an analysis that went through our both books. And we made certain assumptions. Like if one group is producing, you know, $10 in derivatives for every $100 in production and one group's doing 5, you would say over time, we can get both groups at 10. But that takes time.
It's human behavior. It requires that. But there are certain things that we looked at, even though in 2026, and we said this earlier, that the amount of revenue synergies we built in our guidance was minuscule, less than half of 1%. So very small. But there are certain things that are turnkey. And some of those things are on the lending side. Equipment finance is a great example. Some of our specialty areas where we get a new footprint to be able to call in those specialty areas. Those sort of things will generate loan growth pretty quickly. And then lastly, you know, I do believe I said that our growth this year is not predicated on new hires.
But some of the people that I've talked with and that we've recruited and that have already signed up this year, I think those guys are going to hit the ground running. And it's going to generate loan growth. And I know when Jamie and I sat down and we built the budget with Harold and Terry, we didn't make a big assumption that this year's hires would make a lot of movement on the balance sheet. And I think getting people earlier in the year will allow us to generate some loan growth. Now, again, that's where it starts to ramp up.
All right. That's good. I guess the other side of it is intense deposit pricing landscape, right? It's always competitive in Southeast, more so than most of the parts of the country. Just talk to us in terms of your confidence level in getting deposits and deposits, like core deposits at a certain price point to sort of be consistent with your margin outlook and NII growth.
Do you want me to start?
Sure. Well, look, again, I, I go back to our deposit growth is going to be built off bringing in new bankers that are bringing over relationships. And when you have those bankers that are generating growth, not by trying to squeeze more juice out of the, the orange, but actually bringing over new relationships, it gives you a balanced growth profile because you're bringing over their loans. And in many cases, when you bring over a client, sometimes deposits will come first. The loan may have a prepayment penalty. They may be locked in and, and they don't want to refinance. And so generally, the easier thing to move is the deposits in the treasury first. And a loan may come thereafter.
So because a lot of our growth comes from those bankers bringing over relationships, as long as we're hiring the bankers and they're being successful, you get the deposit growth with it. Number two is we have a lot of deposit specialties. And I know both sides have spent a lot of resources and energy in the last couple of years ensuring that we continue to invest in those to generate just deposits from a vertical standpoint. And those have to continue to deliver. We get excited on the Legacy Synovus side to bring over the HOA business that Pinnacle has. We didn't have that product. And imagine in some of our markets in Florida and other places, there's a fruitful market to be able to sell that.
And then the third thing for me in deposits, and Jamie talks about this a lot internally, we can turn on the spigot for deposits, to your point, at what cost. So we have capabilities to add deposits. And so we'll have balanced growth. Our goal is to have, you know, somewhat correlated growth with our business side so that you can manage not only the deposit growth, but actually the NIM that comes with it.
Got it. Generally, I think as we think about the outlook for the margin, just talk to us, rate cuts, how meaningful are those? Or do you think otherwise, is the franchise at a steady state level that you would consider normalized for this balance sheet that you have?
Yeah. Yeah. First, you know, our philosophy on managing interest rate risk has not changed. I mean, we still will target neutrality to the front end of the curve, and we'll allow a little bit of asset sensitivity to the belly of the curve. And that's, that's kind of where we are right now. I would say we are about 1% asset sensitive to the front end and about 1.5% to the belly of the curve. Over time, I would expect for us to neutralize the front end exposure, but we're working through beta assumptions, et cetera, and modeling right now to make sure we're dialed in on what that looks like. So rate cuts are not particularly impactful to us. There'll be a little bit of a headwind.
There's a little bit of the lead lag impact that we've discussed in the past with loan repricing before, deposits. Our assumptions, our guidance, had two rate cuts this year. You know, I know with this morning's report, maybe if you shift those back a little bit, the timing is less important to the full-year guide than how many that there are in the course of the year. You know, just a little bit asset sensitive at the moment. And that's something that we're constantly kind of reviewing and working on.
Got it. On the expense front, so obviously there's a lot of focus on the expense synergies tied to the transaction. But just when we think about even BAU for both banks, like just talk to us, are there other productivity opportunities that are coming through, which is, which should lead to a more efficient, more profitable franchise ex the immediate synergies that we are focused on?
Yeah. You know, as we look at the expense synergies, as Kevin mentioned at the outset, first and foremost, we're focused on our team, how the team is treated, our clients, how the clients are treated. Those are our priorities before you get to, you know, how fast can we achieve the $250 million net synergies. And that's why we went from 50%-40% in year one, as Kevin said earlier. And we feel really good about all those decisions. We're not, we haven't changed our assumption of total net synergies. And, and just to be clear, those are net synergies. We have dis-synergies that are included in that. Like cost of LTI is included in that. The cost of pay normalization across the companies is included in that. And so we feel really good about all those assumptions.
But one thing we've noticed is, there are a lot of opportunities in the process to be more efficient in how we, how we go to market, you know, how we operate in the back office. Those are not necessarily in that 250. I mean, there's clearly, there's some, there's redundant systems, there's excess there. But, you know, as you look further out post-conversion day, you get into 2027, 2028, I think there are a lot of opportunities for us to get more efficient. And we, we often get the question of, well, hold on, you know, you're saying you have an efficiency ratio in the 40s. And, you know, there are no other Category 4 banks at that efficiency ratio. Like how, how do you say you can get more efficient from there? Well, I would say we're 100% not satisfied with the efficiency at that level.
And why I say that is because if you decompose efficiency ratios across Category 4 banks and you look at consumer, commercial, and wealth, we're actually kind of about median with where everybody is for the segments. And I think there are ways we can be more efficient. Our, our efficiency ratio is really a result of business mix and the fact that commercial business is the lowest efficiency of those three segments. And so, you know, we feel good about where we are. We feel good about delivering on our commitments that we made at announcement. But we're, we're never going to be satisfied with that. There are a lot of ways we can get more efficient and deliver a better team experience and deliver a better client experience beyond kind of what we've been talking about as far as the merger math.
Got it. I guess outside of level of growth, I think banker retention is sort of a big, focus for investors. Correct me if you don't think that's the right metric to look at, but just talk to us in terms of retention of bankers. You have, when you have large deals, you worry about like, are some of the good people going to leave? Competitors going to come and poach? So how is that playing out? And then also talk about just banker hiring. Has the attractiveness of the franchise increased or decreased due to the deal?
Yeah. Look, to your point, banker retention is the earliest warning signal that you as an investor should be looking at because I can get up here and wax poetically and tell you what a wonderful company this is and how great we are, but people vote with their feet. They decide whether they want to be part of that. And so I think what you've seen, Ebrahim, is that we've had a few people leave. But our voluntary turnover numbers for the year, we, we set a goal for our company at 7%. Now, you could ask other banks what their voluntary turnover is in their company. It's much higher than 7%. That would put us in the top decile of, of companies. And we're doing that in a year where we're doing a merger.
The places that we've seen a little bit of turnover are the places we expected them, quite frankly. It's where we had overlapping markets. And I've shared with this group in the past, if you look at other M&As, MOEs, which again, we call MOCs, is where you have, banks that have tremendous overlap. There is a tremendous amount of discernment and dissension that happens because those people are competing for jobs. And the mergers that have had the most overlap are the ones that have performed the poorest. And so we have very little overlap. We, we talked about this from the onset. We had 6 markets, 6% of the pro forma deposits that were in relatively similar size, portfolios. So where we've had overlap, we've had team members that said, look, we can't have two market executives. So one's going to be market executive.
The other one may leave. They have in some cases. But we have not seen any unexpected attrition. Bankers, I think, are generally they work at our company, as I said earlier, because we have a great team member experience. What we hear from the Pinnacle side is they love the war on bureaucracy. They love the accountability and the autonomy to be able to do their jobs. And none of that's changing. We're running the Pinnacle model. On our side, our team wanted to understand their incentive plans. We've explained that. Then they want to understand what the Pinnacle model means to them. And generally, that's been well received. More autonomy, more authority, and lack of bureaucracy. Who doesn't like that? So it hasn't resulted in a lot of turnover. But I would say knock on wood.
I mean, every day, as you see and you talk to other banks, they're trying to attract talent. I can't worry about what they're doing. We have to make this the best place to work and the best place to serve their clients and make it fun. When we're doing that, which we have, there's no impetus for anyone to leave. As it relates to hiring new bankers, Jamie knows last night we were recruiting a banker here in South Florida. We've been recruiting for four years. He signed on the bottom line to come over. He'll bring his team. He'll be a needle mover. The questions that he asked, we were recruiting from Legacy Synovus, was, you know, well, I like the team. I've been talking to them for some time.
Tell me how this merger is going to change. As long as I deal with these people, I'm, I'm willing to work here. So they want to know, is there going to be personnel changes? What is the strategy changing? Are we going to serve our clients? When you sit down with folks and have that discussion, explain to them that nothing's really changing. They buy in. Conversely, I was talking with a prospect up in one of the Legacy Pinnacle markets. He wanted to know. He said, look, I've been wanting to come for some time. I think it's time now. But everybody that I've worked with in the past tells me it's such a great environment. It's easy to do business. Is that changing? So they want to hear from the new CEO. When they hear our commitment to this Pinnacle model, they're bought in.
So I would tell you that there's been no loss of momentum in the first quarter. People continue to come over. And it's all predicated on the fact that they want to work in this environment predominantly because they have friends, families, and colleagues that have worked with them who are telling them, like, this is an awesome place to work. And that's what I hear more often than not, really on both sides. People that we recruit to our companies will say, God, I wish I would have come years earlier because it is a great place to work. So that's our focus. And so having that focus on the retention portion actually really helps us on the attraction because those individuals serve as our referral source to bring in these new bankers.
But there, that's what, to me, if you're looking at the biggest success to this point, it's been that. Lack of turnover and continue to hire new bankers who believe this is going to be the best financial services firm in the United States.
You mentioned, Kevin, the banker hiring done last year kind of, it felt like has locked in all else equal, the growth for this year. I'm wondering, does the scale, like the doubling of the balance sheet, does it create more capacity for the bankers who've been around for a long time to bring in sort of, more loans or bring back some of the loans that were syndicated away?
I think, you know, but look, I would tell you that syndications are just a part of risk management, not so much just hold limit. I think it's, it's a prudent strategy when you get to some size of credit to participate that out and share in the risk and to generate fee income off that. But yes, we've gone through and we've looked at all of our clients who are at, at threshold levels, at hold limits, those that are over threshold limit. And what you can imagine is, you know, that's less than 100 clients. But the reality is some of those clients don't need extra capital, right? So we can go do a formula that says, hey, we got $10 million of extra capacity, $12 million, $20 million. We can do that math.
But the reality is what we're doing is we're talking to the clients, telling them that there's extra capacity. And as there's a need, we would address it. So it's not as immediate as you would think. It's that hold limits go up and suddenly you start to see loan growth. It will happen over time. And I think more important than the actual outstandings, it's the confidence that it gives the bankers to call on some of their larger clients to say, now we have a bigger balance sheet because who you're banking with today hasn't syndicated out that loan. They want a single borrower. And now we have capacity to do that. So I think you'll see the benefit with some of these existing clients over the next year or two.
But it'll also help us with bringing over some of the large clients that were in their previous book that they maybe wouldn't have brought over because it needed to be syndicated.
Got it. I think the other sort of differentiated business within Pinnacle is BHG. I think, Jamie, you were talking about maybe spending some time with them yesterday. Just talk to us when you think about that business inside of the bank today, like what your sort of expectations are for that business. How do you think that sort of evolves from here?
You know, first off, it's a great team over there. We've really enjoyed getting to know them better. I mean, as you're aware, Legacy Synovus had a relationship with BHG as well, before the merger. They are firing on all cylinders, simply put. If you look at the fourth quarter to Pinnacle, we had $30 million in revenue from BHG. You should normalize that. So there's about $5 million, which is a true up from the third quarter. So it's really about $25 million. And when you look at our guidance for 2026, I mean, it's like a 25%-35% increase in revenue as they continue to grow their production, grow their business. So it's firing on all cylinders. We're really pleased with, you know, their plans.
You know, our meetings, you know, while we're here down here in Florida, were just really around, you know, what's the best path forward as far as valuation? Like, how do we make this the most valuable company possible working together as we can? If you look at a two-year horizon, a three-year horizon, what does that look like? So that was the nature of the conversation. I think that the Legacy Synovus history with GreenSky and other partnerships is really additive. I think we can bring some thoughts and ideas to the table to help them win. It's something that we're pretty excited about. You know, we, we're glad to be along for the ride. I hope we can help them be more successful, because we win alongside them.
Got it. I guess just one thing. I mean, it's become a theme over the last two days. It's about AI. And we, when we think about AI in banks in terms of productivity, there's obviously this new emerging piece of like disruption risk. So one, talk to us in terms of from a productivity standpoint, use cases, how further along, like just are you super bullish on what it could mean for Synovus? And then when you think about credit quality and underwriting, how do you think about just the disruption risk to your borrowers because of AI?
So look, we've talked about AI for some time. We have a nine-person staff at Legacy Synovus that we've deployed mainly into the back office functions, trying to find ways to capacitize our bankers to remove manual tasks. And we've had some pretty good success stories. The one that I would highlight is we took all of our policies and procedures and we built out something called PFP, which I chuckle about, policies, forms, and procedures. That was before the Pinnacle Financial Partners deal. So we had an internal tool with AI called PFP. But our front line says it's been a game changer. So if you're a retail team member and you were looking for something obscure in a policy, you may be able to do a search function, but largely you had to read the policy.
We built AI capabilities that provide prompt functions where now it's more queryable and it's going to come back with not just a policy, it's going to give you the solution. And so it has really, I think, capacitated many of our frontline bankers. We had a project called Operation Excel, which was on the manual task side, looking at all the repetitive tasks that we do, whether it's in deposit operations or loan closing, how you deploy our AI tools to be able to do those tasks. And so, we have a requisition right now for 15 additional FTEs to add into our AI group. And that's to deploy as we move towards conversion, as we build out the next-gen process for everything we're doing.
Instead of coming in behind the reengineering and applying AI, we're trying to use AI as we rewrite those processes to build in a more scalable solution. But, you know, we're not at a place where we feel like it's going to result in a bunch of headcount reduction. It's just going to capacitize our bankers, reduce errors, which are important from an audit standpoint. And ultimately, as those groups move on, we're going to continue to do it. We have certain AI tools that we deploy today on the front office, things like fraud identification. It greatly reduced our fraud. We were able to catch on the front end of all digital account opening. That's been great. Our fraud was down 40% last year in Legacy Synovus. I think a large piece of that was some of the tools.
We've also deployed it on our consumer platform through a couple insight-driven products that provide insights to our clients and our bankers based on their transactions. AI is behind the scenes, evaluating the transactions, then providing insights. So we do believe it's a, it's a great opportunity. As it relates to credit, we only have about $200 million of exposure to software. So very small, nothing there. I think any industry that has the risk of being impacted by AI, we're evaluating it. I mean, it's a very manual process in underwriting. And I would tell you that our credit officers try to understand that. And it's not just AI. Any sort of business, we have to understand what are the risks to their model and how do you underwrite given that. So look, I, I feel like AI is way more of an opportunity for us.
I think if you're thinking about banks, Ebrahim, we were talking about this with Pankaj and others. The biggest risk to banks are less about AI. It's really about payments. It's about, you know, all the payment companies that are trying to get their pipes tied into moving money. They're, at some point, and this has been the problem for 20 years. We've talked about this as a bank. If you get in and start processing payments, then likely you could come in and start taking deposits and you can start to disintermediate banks. I think that's the biggest risk that continues to exist in banks, less about somebody using AI to change how we do business. And I go back to how I started. We won all those awards in Greenwich because we build trusted relationships.
I don't think that an AI tool can replace the human interaction that we provide on a daily basis with our clients because we're providing distinctive service and effective advice person-to-person. I'd love for the AI to capacitate all of our financial advisors so they can be even more effective at that. But I don't think you can disintermediate what we're doing in terms of building those relationships.
Anything on credit quality outside, just generally speaking, like any soft spots?
No, you know, we got some questions. Last quarter said that we, we were going to be stable in the first quarter versus fourth quarter, which was kind of the high end of our stated annual range of 20-25. I mean, credit losses are going to be a little episodic where you're going to have onesie, twosies, but we feel like it's a fairly constructive, benign credit environment. We've generally seen improvements in credit metrics across the board. We haven't seen anything systemic. So we feel like 2026 should be, the credit story should be a fairly muted story. But as we saw the 1, couple large credits in CRE that some of our peers had in the fourth quarter, it got people's anxiety up again. But no, we're not seeing anything internally that would lead us down that path.
And I think, Jamie, you mentioned this when talking about loan growth, like CRE. Other banks have talked about maybe things bottoming out on the CRE side. Maybe you see more production coming through. Like, when do you, like, do you think things are about to stabilize? Like, do you are you seeing sort of light at the end of the tunnel in terms of new production coming on and driving growth?
I mean, you know, as we go through this year, we expect that. We expect to see some growth as we go through the year. But I mean, again, kind of like what we said at the beginning, we expect to be a little more backend loaded. But, you know, I've, I feel like all the right, you know, recipes for success are there, especially if you get a rate cut or two .
Just last question around capital. So it means you have a $400 million authorization in place, but you're building capital through the first half of the year. And, what after that?
Yeah, if you know, our current estimate of CET1 when we close will be about 10%. You know, when you include AOCI, it's about 20 basis points lower. I think that's the right way to look at it. Including AOCI, we're above median in CET1. So we feel really good about where we'll be. The way to think about capital for us in 2026 is we will, you know, the first quarter has some merit expenses , so there won't be a lot of capital creation in that. We did the waterfall on the earnings deck, but generate about 35 basis points of capital each quarter post-dividends that you kind of deploy towards growth. At a 10% kind of growth rate using the midpoint of our guide, you'd consume about 25 basis points. So we expect to accrete about 10 basis points of capital a quarter.
You know, we're, we do want to accrete into our range of 10.25-10.75, and then we'll just reassess. We'll look at the economic outlook. We'll look at what peers are doing and reassess. But, you know, we're not, you know, we don't feel compelled to be at the middle or the high end of the range. You know, just get into the range and then we'll kind of take a look at it and see what we think.
Right.
The $400 million is really in case, you know, there's a situation where, you know, industry-wide loan growth is much slower, things like that. We want to be nimble, be able to step into the market if we need to manage that way.
Sounds. Jamie, Kevin, thank you so much.
Thank you.
Thank you.
Thank you.