SEC Form 425 filed by Pinnacle Financial Partners Inc.

 

I might add to that, Brett, I think it is important to know that the model has produced 95% associate retention rate over 25 years. And so, it’s not like this is some having your teeth extracted, I mean, it’s a good thing that people enjoy and stay with. And so, I think our belief is broadly that the whole of the company will enjoy how the business is run and so forth.

 

I think the thing that’s most important is because it is a true thing, just what form you have to fill out, who you send it to, all those kinds of things have to get worked out and those are changes. And so, the change management approach here is to take literally every change that’s going to impact a revenue producer and Kevin Blair is going to have to say that’s okay before we make those changes. And so that’s about the most thoughtful approach to change management that I’ve ever seen.

 

 

 

Are you asking in margin terms? Is that kind of the line of question?

 

 

 

Yeah, I mean, it’s hard because here are a few things on that, we have the synergies, we have those coming in 50% year one, 75% year two, and then 100% by year three. So that’s just going to come in over time. You will get the boost on NII, coming out of the gates because of the rate marks. And so, you’ll see that revenue tailwind, but you’re not in the second half of 2026 if you assume a Q1 close, you’ll still be kind of coming through the synergies at that pace I just described.

 

I will go back to the margin a little bit, because I think it’s a pretty important piece of this. When you think about the margin of the combined institutions like if you bring these institutions together and you reset rates to market, which obviously happens at close on the Synovus side. You would get to in a margin that’s in the ballpark of a 3.60 margin.

 

Now, things will have to happen on the balance sheet as we become a cap for bank, we have to grow the securities portfolio, we might have to rebalance some assets and securities. So there’s some things that will come off of that 3.60 and might drop it back down to say a 3.50 area. But that’s how you should think about the margin is we have a lot of pent up value in NII. But as we remark the Synovus book, as the Pinnacle book creeps up, you’re going to see a nice reset in the margin. But there will be some headwinds there when you bring into account the LFI considerations.

 

 

 

Yeah.

 

 

Your next question comes from Jon Arfstrom with RBC Capital Markets. Please proceed.

 

 

 

Thanks, Jon.

 

 

 

So, I think the most important thing is to agree on what is the go to market strategy? How are we going to do this? What’s the competitive differentiation? What’s the brand going to be? All those sorts of things. And you, like I have seen lots of deals come to market. And, you can take a J.P. Morgan example, man, they knew what they were doing. They specified who the leader was. They marched down through a plan that was determined on the front end. It was an extraordinary outcome. There are others where we’re not sure, we’re going to go to the left a while, go to the right a while, things like that.

 

And so, again, it is picking and making these choices. When you look at deals like this, so many of them get hung up on, all right, what’s the brand going to be? Where’s the headquarters going to be? Who’s going to be the CEO? All these, why are we going to pay people? How are we going to retain people? All that stuff. We’ve been through every one of those decisions, and have declared exactly what it is.

 

And so, again, we still have tons of work to do underneath that to change systems and align policies and all those sorts of things. But all these cultural things that people stumble over have been decided. They’re clear. There’s no debate and complete alignment. So that’s, I think, the key.

 

 

 

Yeah. I think the whole game here, our whole major success, again, back to alignment is total shareholder return. That’s what we’re trying to produce. And our belief is that we do that with outsized revenue growth, outsized EPS growth, and outsized tangible book value accretion. And so, those are the fundamental things.

 

There’s a thousand metrics that we’ll study. There’s a thousand metrics we care about. We’ll be pushing and shoving on all of them, but those are the real tell of the tale.

 

 

 

Up next, we have Casey Haire with Autonomous Research. Please proceed.

 

 

 

Yeah, the reason to do this deal right here is because there’s not a better combination. I’ll just direct you back to the slides, Casey. I mean, you tell me, who is it that’s going to grow revenue at the pace we’re going to grow it at? Who’s going to grow EPS at the pace we’re going to grow it at? Who’s going to produce a better ROTCE than we’re going to produce? I mean, there are not Category 4 banks that perform at the level this company’s going to perform at.

 

And so in my judgment, Warren Buffett had it right. We got a few people voting. We got a few people speculating. But what we’re going to have is a weighing machine here. And when we compound at the rate we’re going to compound, it will produce long-term value. I don’t mind to say to you, Casey, I’ve had people for 25 years say, man, this growth thing, your expense growth is too high. It’s too high, man, it won’t work. It does work. It produces compound revenue growth, EPS growth, and tangible book value growth, and those translate into a share price as they compound. So anyway, that’s the reason to do this deal.

 

 

 

When we look at the capital ratios, first, what we are most focused on is CET1, including AOCI, and we’re right at the peer medium when you look at Cat 4 banks. And so, we feel that that’s very appropriate. Now, what we’ll have to do is look at how that progresses over time, how that sensitivity to interest rates. But when you look at the earnings, Terry just said it, like the compounding growth of this bank, growing earnings each quarter, that gives us a lot of flexibility in capital.

 

And so, when we look forward, post-close, we believe that that capital generation will be really strong and will position us well. Would I expect to increase from the closing ratios? Sure, I would. I would expect to increase for a period of time. But we’ll see how that plays out. We’ll see what the environment is. We’ll see what the regulatory environment is. We’ll see what peers are doing. All of that will play into our decision as we think about how do we manage capital ratios. But what I would just say is we feel comfortable about them. We feel that the earnings accretion and the power of the earnings stream will allow us to have a lot of flexibility in how we deploy capital beyond the close.

 

 

Okay. Our next question comes from Nick Holowko with UBS. Please proceed.

 

 

 

Well, look, I’ll start with just the simple answers, hold limits. When you have the ability to have a bigger balance sheet, you can hold more credit on your balance sheet. We still both have capabilities to be able to syndicate those loans, but it allows you to do more business with your existing clients first and foremost.

 

Second, we’re both more commercially focused and the thing that we know that we can generate increased wallet share is through additional cash management treasury solutions, whether that’s on the payment side, through cards and payment portals, or whether it’s just through fraud protection or other receivables and payment vehicles. We are investing a lot of money in improving not only the functionality, but the capabilities that we offer those clients. And so that not only allows us to provide those solutions, it allows us to deepen the wallet share of existing clients.

 

Things like capital markets. Both teams have different capital market platforms, whether it’s advisory on the Pinnacle side, on our side debt capital markets. When you start adding up all the capabilities and you look at the franchise and the new clients that we can prospect within the capability front, it’s going to add a tremendous amount of revenue as we talked about earlier with synergies, although we’ve not put any of that in the model.

 

 

 

On the loan book, I would say that I don’t believe that we have the right to win in consumer lending outside of those core products like mortgage, home equity, and some consumer credit card. You look at the data, it would suggest that the large banks are taking share in consumer lending along with fintech. So, we’re going to continue to provide those consumer solutions that support our clients, but you won’t see us doing outsized investments in consumer lending nationally.

 

 

 

The next question comes from Christopher Marinac with Janney Montgomery Scott. Please proceed.

 

 

 

Yeah, simple answer is yes, Chris. I mean, you look at some of the talent that Terry and his team have attracted to be able to take some of the product capabilities that we’re investing in and be able to turn those guys loose on that opportunity. It’s going to be very attractive for them across the footprint, also some of the specialty businesses that Terry and his team have also created. So, yes, the simple answer is absolutely. And you should know, even in our verticals, we focus primarily on financial institutions, tech media, communications, and healthcare.

 

We’ve talked about expanding that into new verticals, I know Terry has some. We’ll sit down and look at what the marketplace is giving us, and it potentially gives us the opportunity to expand those verticals as well.

 

 

 

Thank you so much, Chris.

 

 

The next question comes from John Pancari with Evercore. Please proceed.

 

 

 

Yes. John, there is a break-up fee of $425 million.

 

 

 

John, this is Harold. On the Pinnacle side, I think we got about 5% of the commercial real estate book reviewed. Didn’t see anything. We didn’t expect to see anything there, but we got about 5%.

 

 

It’s a similar amount on our side, John.

 

 

 

And our next question comes from Michael Rose with Raymond James. Please proceed.

 

 

 

Yeah, Michael, we have about 23 branches, I think, within a 2-mile radius. So it’s not a lot of overlap at all. I think we put a handful of branch savings in here just based on geographic location, but it’s an immaterial amount to the overall cost savings.

 

 

 

Yeah, I think I would have an expectation. We would be reinvesting. Michael, I think the franchise pretty well. We run more of a branch light sort of strategy, you got to have reasonable distribution. And, I think, I’m telling you right, Harold, are you correct me, I think we had added 13 locations in the last 24 months.

 

 

So there’s 11, 13 something like that.

 

 

So that sort of pace, I think, is a sustainable pace for us.

 

 

 

Thank you, Michael.

 

 

Thank you, ladies and gentlemen. This does conclude today’s conference call and you may disconnect your lines at this time. Thank you for participation.

 

Forward-Looking Statements

 

This communication contains statements that constitute “forward-looking statements” within the meaning of, and subject to the protections of, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements other than statements of historical fact are forward-looking statements. These forward-looking statements include, but are not limited to, statements about the benefits of the proposed transaction between Synovus Financial Corp. (“Synovus”) and Pinnacle Financial Partners, Inc. (“Pinnacle”), including future financial and operating results (including the anticipated impact of the proposed transaction on Synovus’ and Pinnacle’s respective earnings and tangible book value), statements related to the expected timing of the completion of the proposed transaction, the combined company’s plans, objectives, expectations and intentions, and other statements that are not historical facts. You can identify these forward-looking statements through the use of words such as “believes,” “anticipates,” “expects,” “may,” “will,” “assumes,” “should,” “predicts,” “could,” “would,” “intends,” “targets,” “estimates,” “projects,” “plans,” “potential” and other similar words and expressions of the future or otherwise regarding the outlook for Synovus’, Pinnacle’s or combined company’s future businesses and financial performance and/or the performance of the banking industry and economy in general.

 

Prospective investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve known and unknown risks and uncertainties which may cause the actual results, performance or achievements of Synovus, Pinnacle or the combined company to be materially different from the future results, performance or achievements expressed or implied by such forward-looking statements. Forward-looking statements are based on the information known to, and current beliefs and expectations of, Synovus or Pinnacle and are subject to significant risks and uncertainties. Actual results may differ materially from those contemplated by such forward-looking statements. A number of factors could cause actual results to differ materially from those contemplated by the forward-looking statements in this communication. Many of these factors are beyond Synovus’, Pinnacle’s or the combined company’s ability to control or predict. These factors include, among others, (1) the risk that the cost savings and synergies from the proposed transaction may not be fully realized or may take longer than anticipated to be realized, (2) disruption to Synovus’ business and to Pinnacle’s business as a result of the announcement and pendency of the proposed transaction, (3) the risk that the integration of Pinnacle’s and Synovus’ respective businesses and operations will be materially delayed or will be more costly or difficult than expected, including as a result of unexpected factors or events, (4) the failure to obtain the necessary approvals by the shareholders of Synovus or Pinnacle, (5) the amount of the costs, fees, expenses and charges related to the transaction, (6) the ability by each of Synovus and Pinnacle to obtain required governmental approvals of the proposed transaction on the timeline expected, or at all, and the risk that such approvals may result in the imposition of conditions that could adversely affect the combined company after the closing of the proposed transaction or adversely affect the expected benefits of the proposed transaction, (7) reputational risk and the reaction of each company’s customers, suppliers, employees or other business partners to the proposed, (8) the failure of the closing conditions in the merger agreement to be satisfied, or any unexpected delay in closing the proposed transaction or the occurrence of any event, change or other circumstances that could give rise to the termination of the merger agreement, (9) the dilution caused by the issuance of shares of the combined company’s common stock in the transaction, (10) the possibility that the proposed transaction may be more expensive to complete than anticipated, including as a result of unexpected factors or events, (11) risks related to management and oversight of the expanded business and operations of the combined company following the closing of the proposed transaction, (12) the possibility the combined company is subject to additional regulatory requirements as a result of the proposed transaction or expansion of the combined company’s business operations following the proposed transaction, (13) the outcome of any legal or regulatory proceedings or governmental inquiries or investigations that may be currently pending or later instituted against Synovus, Pinnacle or the combined company and (14) general competitive, economic, political and market conditions and other factors that may affect future results of Synovus and Pinnacle including changes in asset quality and credit risk; the inability to sustain revenue and earnings growth; changes in interest rates and capital markets; inflation; customer borrowing, repayment, investment and deposit practices; the impact, extent and timing of technological changes; and capital management activities. Additional factors which could affect future results of Synovus and Pinnacle can be found in Synovus’ or Pinnacle’s filings with the Securities and Exchange Commission (the “SEC”), including in Synovus’ Annual Report on Form 10-K for the year ended December 31, 2024, under the captions “Forward-Looking Statements” and “Risk Factors,” and Synovus’ Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, and Pinnacle’s Annual Report on Form 10-K for the year ended December 31, 2024, under the captions “Forward-Looking Statements” and “Risk Factors,” and in Pinnacle’s Quarterly Reports on Form 10-Q and Current Reports on Form 8-K. Undue reliance should not be placed on any forward-looking statements, which are based on current expectations and speak only as of the date that they are made. Synovus and Pinnacle do not assume any obligation to update any forward-looking statements as a result of new information, future developments or otherwise, except as otherwise may be required by law.

 

Important Information About the Merger and Where to Find It

 

Steel Newco Inc. (“Newco”) intends to file a registration statement on Form S-4 with the SEC to register the shares of Newco common stock that will be issued to Pinnacle shareholders and Synovus shareholders in connection with the proposed transaction. The registration statement will include a joint proxy statement of Synovus and Pinnacle that also constitutes a prospectus of Newco. The definitive joint proxy statement/prospectus will be sent to the shareholders of each of Synovus and Pinnacle in connection with the proposed transaction. INVESTORS AND SECURITY HOLDERS ARE URGED TO READ THE REGISTRATION STATEMENT AND JOINT PROXY STATEMENT/PROSPECTUS WHEN THEY BECOME AVAILABLE (AND ANY OTHER DOCUMENTS FILED WITH THE SEC IN CONNECTION WITH THE TRANSACTION OR INCORPORATED BY REFERENCE INTO THE JOINT PROXY STATEMENT/PROSPECTUS) BECAUSE SUCH DOCUMENTS WILL CONTAIN IMPORTANT INFORMATION REGARDING THE PROPOSED TRANSACTION AND RELATED MATTERS. Investors and security holders may obtain free copies of these documents and other documents filed with the SEC by Synovus, Pinnacle or Newco through the website maintained by the SEC at http://www.sec.gov or by contacting the investor relations department of Synovus or Pinnacle at:

 

Before making any voting or investment decision, investors and security holders of Synovus and Pinnacle are urged to read carefully the entire registration statement and joint proxy statement/prospectus when they become available, including any amendments thereto, because they will contain important information about the proposed transaction. Free copies of these documents may be obtained as described above.

 

Participants in Solicitation

 

Synovus and Pinnacle and their respective directors and executive officers and other members of management and employees may be deemed to be participants in the solicitation of proxies from Synovus’ shareholders and Pinnacle’s shareholders in respect of the proposed transaction under the rules of the SEC. Information regarding Synovus’ directors and executive officers is available in Synovus’ proxy statement for its 2025 annual meeting of shareholders, filed with the SEC on March 12, 2025 (and available at https://www.sec.gov/ix?doc=/Archives/edgar/data/0000018349/000001834925000057/syn-20250312.htm) (the “Synovus 2025 Proxy”), under the headings “Corporate Governance and Board Matters,” “Director Compensation,” “Proposal 1 Election of Directors,” “Executive Officers,” “Stock Ownership of Directors and Named Executive Officers,” “Executive Compensation,” “Compensation and Human Capital Committee Report,” “Summary Compensation Table,” and “Certain Relationships and Related Transactions,” and in Synovus’ Annual Report on Form 10-K for the year ended December 31, 2024, filed with the SEC on February 21, 2025 (and available at https://www.sec.gov/ix?doc=/Archives/edgar/data/0000018349/000001834925000049/syn-20241231.htm), and in other documents subsequently filed by Synovus with the SEC, which can be obtained free of charge through the website maintained by the SEC at http://www.sec.gov. Any changes in the holdings of Synovus’ securities by Synovus’ directors or executive officers from the amounts described in the Synovus 2025 Proxy have been or will be reflected on Initial Statements of Beneficial Ownership of Securities on Form 3 or on Statements of Change in Ownership on Form 4 filed with the SEC subsequent to the filing date of the Synovus 2025 Proxy and are available at the SEC’s website at www.sec.gov. Information regarding Pinnacle’s directors and executive officers is available in Pinnacle’s proxy statement for its 2025 annual meeting of shareholders, filed with the SEC on March 3, 2025 (and available at https://www.sec.gov/ix?doc=/Archives/edgar/data/1115055/000111505525000063/pnfp-20250303.htm) (the “Pinnacle 2025 Proxy”), under the headings “Environmental, Social and Corporate Governance,” “Proposal 1 Election of Directors,” “Information About Our Executive Officers,” “Executive Compensation,” “Security Ownership of Certain Beneficial Owners and Management,” and “Certain Relationships and Related Transactions,” and in Pinnacle’s Annual Report on Form 10-K for the year ended December 31, 2024, filed with the SEC on February 25, 2025 (and available at https://www.sec.gov/ix?doc=/Archives/edgar/data/1115055/000111505525000042/pnfp-20241231.htm), and in other documents subsequently filed by Pinnacle with the SEC, which can be obtained free of charge through the website maintained by the SEC at http://www.sec.gov. Any changes in the holdings of Pinnacle’s securities by Pinnacle’s directors or executive officers from the amounts described in the Pinnacle 2025 Proxy have been or will be reflected on Initial Statements of Beneficial Ownership of Securities on Form 3 or on Statements of Change in Ownership on Form 4 filed with the SEC subsequent to the filing date of the Pinnacle 2025 Proxy and are available at the SEC’s website at www.sec.gov. Additional information regarding the interests of such participants will be included in the joint proxy statement/prospectus and other relevant materials to be filed with the SEC.

 

No Offer or Solicitation

 

This communication does not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any vote or approval, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. No offer of securities shall be made except by means of a prospectus meeting the requirements of Section 10 of the Securities Act of 1933, as amended.

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