Good morning, everyone, and welcome to the Pinnacle Financial Partners third quarter 2022 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's website for the next 90 days. At this time, all participants have been placed in a listen-only mode. The floor will be open for your questions following the presentation. If you would like to ask a question at that time, please press star one on your touchtone phone. Analysts will be given preference during the Q&A, and we do ask that you please pick up your handset to allow for optimum sound quality. During this presentation, we may make comments which may constitute forward-looking statements. All forward-looking statements are subject to risks, uncertainties, and other facts that may cause the actual results, performance, or achievements of Pinnacle Financial Partners to differ materially from any results expressed or implied by such forward-looking statements. Many of such factors are beyond Pinnacle Financial Partners'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's annual report on Form 10-K for the year ended December 31, 2021, and its subsequently filed quarterly reports. Pinnacle Financial Partners 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 available on Pinnacle Financial's website at www.pnfp.com. With that, I am now going to turn the presentation over to Mr. Terry Turner, Pinnacle's President and CEO. Thank you, Paul, and thank you for joining us this morning for the third quarter earnings call. As I'm confident you've already seen, third quarter was another fabulous quarter for us. Last quarter, in my introductory comments, I tried to list a number of themes that I believe are critical in order to not only understand the financial performance for the quarter, but really to better ascertain how the firm should perform going forward despite the varying operating environments we might encounter. As a quick reminder, those overarching themes that I mentioned last quarter, and which I think you'll see are interwoven again in this quarter's numbers. Number one, management's motivated and incented to alter outcomes given various market conditions. As an example, we don't just accept the current asset sensitivity, or we don't just accept what the current overall market growth rates. We set about to alter outcomes based on our actions and initiatives. A lot of people are chasing all kinds of interesting metrics like deposit cost betas, and I get it, but specifically, the outcomes that we're motivated and incented to optimize at Pinnacle are the level of classified assets, PPNR growth, and EPS growth in the case of the annual cash incentive plan, and tangible book value accretion and ROTCE in the case of the long-term equity incentive plan. Understanding that will likely help you understand things like why we've accreted tangible book value in a year when many have not. Number two, we enjoy a reputation for having a great culture, but our culture isn't just fun and soft stuff. Any number of studies have demonstrated statistically valid correlations between associate engagement and important outcomes like reduced associate turnover, improved productivity, improved profitability, better sales outcome, and total shareholder returns. Nothing is more important in the war for talent, and so I think that helps explain things like why we continue to hire record numbers of the best bankers and financial services professionals at a time many are short-staffed and suffering low associate engagement and high turnover. Number three, our hiring success over the last several years is the single largest contributor to our balance sheet growth and ongoing momentum. It explains where so much of our loan and deposit growth comes from. Not only that, because of the level of the experience of our new hires is equal to or greater than 20 years, we believe we can grow assets without sacrificing our commitment to credit quality. It's much different than those that are trying to grow by increasing the frequency of their call program. In fact, in Greenwich research, we're at or near the top on virtually every sales and service metric that they typically view as important, with one notable exception, and that's prospect calling, where we are dead last. That's just not how we get our business as opposed to forcing RMs to make prospect calls. In our case, long-experienced bankers typically move long-standing relationships, which we believe over the long haul results in a meaningfully different credit profile. Number four, BHG is not your typical fintech. Its ability to attract loans from high-quality borrowers with very high yields and get them funded through their proprietary bank auction platform, or alternately, securitizing them in the secondary market when many cannot, continues to result in the kind of income that lets us significantly invest in people to seize all the market opportunities that exist for us while continuing to put up top quartile profitability. I'm not aware of anyone who's been able to invest in their business model to the extent that we have while remaining extremely profitable. As I've already alluded, we believe metrics like asset quality, revenue growth, earnings per share, and tangible book value create, accretion result in long-term shareholder returns. That's why our incentives are linked to them, and that's why we show this dashboard quarter in and quarter out, where you can see the relentless upward slope of things like revenues, earnings per share, and the balance sheet volumes that produce that growth. On asset quality, we've been living in literally the best of times. We fully expect asset quality metrics to more normalize going forward, but you can see that NPAs and classified assets continue to operate at extraordinary lows, as do charge-offs at just 16 basis points. In fact, we've been in the top quartile in terms of NPAs to Tier 1 capital and classified assets to Tier 1 capital for some time. Given the continued reductions on those metrics this quarter, I'd be shocked if we aren't there again when we're able to construct the peer metrics for the third quarter. As most of you know, given the very commercial nature of our loan book, charge-offs are generally lumpy. We had one of those this quarter, which Harold will talk more about in a moment. Again, credit metrics continue to be extraordinary. I won't spend much time on the non-GAAP measures, at least not as much time as I usually do, 'cause the idea is that virtually all the important growth and earnings metrics are up and to the right, generally well exceeding market expectations and painting a picture of what's been a beat and raise story for quite some time. As I just mentioned, the talent that we've added over the last several years results in extraordinary balance sheet momentum. As we did last quarter, we're again dissecting net loan growth based on the categories noted on the slide to help everyone better understand the source of our growth. We've again categorized our growth into four broader segments. Number one, our pure asset generation plays like BHG, Advocate Capital, JB&B Capital. B, our strategic market expansions, which are not only the geographies like Atlanta, D.C., Birmingham, and so forth, but also expansions into specialty lending groups like franchise and equipment lending. C, growth from our recruiting over the last two and a half years. This is the growth of our newer RMs that have been with us for only two and a half years or less and that are not included in our strategic expansion markets. Finally, D, our legacy markets and what they contributed from RMs that have been with us more than 2.5 years. Thus far, through the first 9 months, we've experienced 24.5% EOP loan growth annualized between December 31, 2021 and September 30, 2022, which is inclusive of PPP paydowns, which are denoted in red on the slide. Almost 46% of our $4.3 billion in net loan growth is from our legacy markets, while the rest is primarily from new markets, new initiatives, and new people. We've said that, we've said this countless times, we think we're in many of the best banking markets in the Southeast. Many of you know that for lenders to come to work for us, they have to have at least 10 years of experience in our markets, and on average, it's more like 20 years. To characterize all this loan growth as new loans is a little bit of a stretch, as these borrowers have been working with our 10-year-plus experienced lenders for years. The loans are just new to PNFP. We get asked frequently about how the new markets and specialties are performing. I simply want to get you this information where you can see that we're having extraordinary success moving talent and clients to the Pinnacle platform. For those that struggle with the value of the emphasis we place on culture, here's just one of the examples of where it pays off. Putting associates in a position where they can serve their clients well is what enables us to attract the best associates as well as their clients. I know everyone is aware that the annual FDIC deposit market share information was released in the third quarter. Here you can see, first of all, we're in great markets, as evidenced by the rate of deposit growth in the market, and that'll be an important success variable going forward. More importantly, we've been able to grow our deposits faster than the market, which is just another way of saying we've had great success moving market share. Many are concerned with the shrinking M2 and the impact that could have on funding, and so, I would say I don't think we could grow anywhere near the pace that we currently grow if we were unable to take deposit share from these larger, more vulnerable banks in our markets. Harold will comment further on our deposit growth in a minute. A couple of slides we've used from time to time. What you're looking at here is data from Greenwich Associates, the foremost provider of commercial market research to large banks in the United States. Virtually all the top 50 banks in the country purchase this same data, so I would say it's universally accepted by all our primary competitors. It's based on client responses across our entire footprint, meaning businesses with annual sales from $1 million-$500 million in Tennessee, North Carolina, South Carolina, Atlanta, and Roanoke. Let's focus on the Pinnacle line at the bottom of the small business Net Promoter chart, which is on the top left of the slide. You see in the navy blue portion of the bar that 76% of the Pinnacle clients surveyed rated us a 9 or a 10 on the question, how likely are you to recommend your lead provider to a friend or colleague using a scale of 0 to 10, where 0 means not likely at all and 10 means extremely likely? In other words, 76% of our clients are highly engaged, active promoters. Trust me, that's an extremely unusual level of engagement. Another 22% rated us a 7 or 8. That's not bad. Combining the two, 98% of our clients rated a 7 or better on a 10-point scale. That 22%, that gold portion of the bar, scoring us a 7 or 8, are referred to as passive because while they generally rate you well, they're not really so fired up as to be vocal advocates for you in the market. Then the last 2%, the red portion of the bar, are detractors, meaning they rated you somewhere between 0 and 6. Out beside the bar, you see a 74. That's the Net Promoter Score, the number of promoters less the number of detractors. As you can see, that score is wildly differentiated from all our major competitors in our footprint. Not only is that a fabulous Net Promoter Score in the Southeast, according to Greenwich, it's one of the best in the country. The story is the same, only better, among middle-market businesses on the lower right of the slide, where you can see our Net Promoter Score is 81. Now, you might look at the percentage of detractors for each of our major competitors, that red portion on each of their bars. Keep in mind, the banks are generally listed in market share order. As you can see, all the top three banks in our footprint have enormous volumes of detractors. That's the opportunity we have been seizing for some time and expect to continue seizing. If you think about the speed and reliability of our growth, which is largely dependent on taking share as opposed to economic loan demand, this explains why we've been so successful taking share over the last 20 years, why we grew loans 20.9% on an annualized basis this quarter, why we grew core deposits 9.8% on an annualized basis this quarter, and why I believe we'll continue to produce outsized growth for the foreseeable future. Excuse me. It's not just that many of the banks with whom we compete have upset a great number of their clients. A large percentage of their clients expressly intend to move some or all of their business away from them in the next 12 months. That group, the percentage of their clients who have expressly indicated their intent to move, is represented by the blue bar. Happily, more than to any of the major banks with whom we compete, a large percentage of clients intend to increase their relationship with us meaningfully more. My purpose in walking through this is really to tighten the linkage for you between our distinctive culture and the revenue, and the EPS growth, so you don't have to just take a leap of faith that the distinctive culture we've been building here over the last 22 years will mysteriously result in something good. You can actually connect the dots with Greenwich data reflecting the actual client feedback to better understand the quality and sustainability of our market share and revenue growth. That's the 30,000-foot view. With that, I'll turn it over to Harold for a more in-depth review of the quarter. Thanks, Terry. Good morning, everybody. As usual, we will start with loans. The third quarter was another strong loan growth quarter for us with almost 22% linked quarter EOP annualized growth. Our current pipelines support low double-digit loan growth going into the fourth quarter, which would yield low 20% growth for this year. Loan yields were up in the third quarter due primarily to rate hikes. We anticipate further escalation in loan yields with rate increases in November and December. Our current planning assumption is for 75 basis points in November and 50 basis points in December. Since there were 150 basis point hikes during the third quarter, we've not gotten the full effect of the third quarter average rates noted on the slide. Given that, and more increases in fourth quarter, we anticipate fourth quarter yields will be up 75-90 basis points or so. As we sit here at the end of September, our loan yields are around 5%. We've also talked about loan floors over the last several quarters, but we're essentially through those, so we should capture a larger share of rate increases moving forward. The bottom left chart summarizes our loan betas for 2022. We've tracked each rate hike and what the beta results were for each hike. The green bars are estimates as we don't have the full effect of the September rate hike yet, and we won't until we get to the November FOMC meeting when we will put a stake in the ground and remeasure the September hike. Of course, November and December are based on our current planning assumptions, but we feel somewhere around 60% loan beta is a reasonable target for us. Now on to deposits. Really pleased to report, call it 10% linked quarter annualized growth in deposits for the third quarter. At present, our relationship managers are active deposit book protectors as well as outbound deposit seekers. It's like we've always said, it's about shoe leather at Pinnacle. It's about being in the community and finding the funding at a reasonable price. We, like others, did experience some mix shift during the quarter as EOP DDA balances are down from prior quarter, but average DDA balances were actually up for the quarter. We will keep our fingers crossed that this will hold. We are actively building out deposit gathering franchises around HSA, community homeowners associations, nonprofits, and others, where we target specific types of organizations that are net providers of funding, and we believe we are making strong headway with these special deposit initiatives. More to come as these initiatives continue to grow. Everybody wants to know about deposit betas. The top right chart attempts to show what we're currently thinking. This chart is constructed similar to the loan chart shown previously. Our planning assumption is that we think we can hold with a 40% total deposit beta that we've been talking about since earlier in the year. For the first 20+ years of our existence, our number one objective was developing strategies and tactics around funding our growth. We continue to like our chances given the significant investment we've made in both relationship managers and new markets over the last few years. We believe many other banks around the country are reassessing their beta assumption as liquidity has gotten more difficult. As to Pinnacle, we have been steadily investing in our deposit book all year long and believe that our clients appreciate a pricing discipline that is more fair in an upright environment in comparison to what we hear from others. Hopefully, you'll not hear this bank leadership ever talk about having too many deposits. Depositors are just as, if not significantly more important than borrowers. Our belief is that we can and will fund our growth effectively and prudently, maintaining the appropriate balance between profitability and growth, something we believe we have a track record of accomplishing. Now to liquidity. Our liquid assets decreased slightly this quarter, but we continue to believe we have ample liquidity to fund our near-term growth. As to investment securities, our allocation to bonds is anticipated to be flattish in the fourth quarter. As the top left chart reflects, with the rate up cycle, our GAAP NIM increased by 30 basis points compared to 28 basis points last quarter. We're pleased with this going into the fourth quarter. Our planning assumption is that our NIM will likely top off in the first half of next year, assuming rate hikes stall or are minimal in the first half of next year. In summary, our belief is that we should see another quarter of NIM expansion, along with increased net interest income in the fourth quarter. Accordingly, we are upping our guidance for net interest income growth to low 20% growth for the full year 2022 over last year. As to credit, we are again presenting our traditional credit metrics. Pinnacle's loan portfolio continues to perform very well. As Terry mentioned earlier, late in the quarter and into October, we had one previously classified C&I credit weaken due primarily to an alleged failure of a supplier's defective part that had been installed in the homes of our client's customers. We don't believe this was the result of all the economic headwinds that we are all paying so much attention to. We recorded a partial charge-off effective September 30, placed the loan on nonaccrual, pending more credit work. In spite of this one credit, we're pleased with where classified assets ended, as evidenced by the almost 3-year downward trend in our classified loan totals, as well as our past dues, which are again at very conservative levels at quarter end. Our current ACL is 1.04%, which again compares to a pre-CECL, pre-COVID reserve of 48 basis points at the end of 2019. We previously thought our ACL for the quarter would have been less than 1.04, but given the events over the last month or so, we believe keeping the ACL flattish for us is appropriate right now. All of this culminates in a larger provision expense than we anticipated at $27.5 million. We continue to have conversations with borrowers about supply chains, labor inflation, and how it's impacting their businesses. We have been and are all about sustainable credit diligence effort with the intent to actively identify any weaknesses in our borrowing base. We get many questions about what changes we are implementing as a result of the inflationary economy. A few things worth mentioning here. We have substantially limited our appetite for new construction, whether it be residential or commercial. We believe our book is very healthy with strong sponsors, but the macro environment gives us a pause as to increasing our asset allocations to this segment. Our credit officers have increased our due diligence in stress testing, particularly around supply chain impact, rates, and profitability. We're also increasing our diligence around the traditional metrics of loan-to-value, debt coverage, so on and so forth. Now on to fees and expenses. I won't spend a lot of time on fees or expenses, and as always, I will speak to BHG in a few minutes. Third quarter fees are coming off of a record second quarter, so the optics are difficult. As a reminder, we did note last quarter that we thought we would see decreases in fees in the third quarter. All that said, we are pleased with the effort our fee-generating units are putting forward. Service charges are impacted by a change in how we charge NSFs and overdraft fees, which we announced in early July. We have some reason to believe we will see a rebound in wealth management in the fourth quarter as a result of recent hires. Excluding BHG and barring any additional downdraft from our other equity investments, we're believing that we are near floor on fees this quarter and that we should see a stronger fourth quarter fee result. Excluding BHG and the impact of these other equity investments, we continue to believe that high single-digit growth for 2022 over 2021 is still in play. As to expenses, we're increasing our overall total expense run rate to a high teens% growth in 2022. This increase is attributable to headcount growth in the new markets, market disruption across our markets which has led to strong recruiting opportunities, and the addition of JB&B. In addition, we continue to believe that we should achieve maximum payouts of 125% of target awards for our annual cash incentive plan. It's all about recruiting and our success in attracting the best bankers to our franchise, which seems to be operating at peak capacity. Our third quarter non-compensation expense was fairly flat with the second quarter, and we believe that the fourth quarter won't be that different from the prior two quarters. In conclusion, we had a strong hiring quarter in the third quarter, which was the reason for the increased salary expense. We're anticipating another strong quarter of hiring in fourth quarter, although we don't anticipate the increase will be as great in the fourth quarter as it was in the third quarter. As to capital tangible book value increased to $42.44 at quarter end, up slightly from last quarter. Our capital ratios remain above well-capitalized levels. We like our tangible common equity ratio that stands at 8.3% currently. We are mindful of our Tier 2 capital levels, particularly at Pinnacle Bank, in light of our exceptional growth, and we'll be monitoring these levels and the debt markets as we head into the fourth quarter and into 2023. Aside from that, we believe the action we've taken to preserve tangible book value and our tangible capital ratio have served us well and have no plans to alter our Tier 1 capital stack via any sort of common or preferred offering. Now, a few comments about BHG before we look at the outlook for the rest of the year. BHG had a great quarter, in our opinion, slightly better than we had anticipated. We're booking more than $41 million in fee revenues this quarter and have increased our outlook for 2022 growth over 2021 to more than 25% from a projection of 15% last quarter. As the slide indicates, BHG had another record quarter on originations. Spreads had come in slightly lower than last quarter, from 9.8% to 9.7%, as the chart on the bottom left indicates. That's more than the amounts BHG anticipated at the beginning of the quarter. BHG does anticipate that auction platform spreads will come in slightly as rates on the short end continue to rise. They anticipate that borrower rates should be approaching 17% by the end of the year, with bank buy rates moving into the 7% range. As a result, we anticipate that spreads will fluctuate within the historical ranges of 9%-10% or so. That said, we're really pleased with BHG's third quarter, as the third quarter again highlights their flexibility as to how they can pivot between the bank network and securitizations to fund their loan growth. Formerly titled as the Recourse Obligation Accrual, this slide now titled The Accrual for Loan Substitutions and Prepayments, which stood at 5.28% of BHG's sold loan portfolio at September 30, which is more than the accrual at June quarter end, as BHG increased this accrual from $235 million to $270 million at September 30. As the blue bars in the bottom right chart show, the credit loss portion of recourse losses for the second quarter remain at some of the lowest levels in the past 10 years. Additionally, given the macro environment, BHG also increased its on-balance sheet reserve for loan losses to $101 million or 3.53% of on-balance sheet loans from 3% last quarter. Given the macro environment, we believe BHG will likely increase reserves again going into the fourth quarter and into 2023. The quality of BHG's borrowing base, in our opinion, remains impressive, and we believe one of their strongest attributes. BHG refreshes its credit score monthly, always looking for weaknesses in its borrowing base. Credit scores were at the consistent levels with previous quarters, so their borrowers have remained resilient through the cycle thus far. As to past due trends, past dues greater than 30 days were at 1.52% at September 30 compared to 1.37 at June 30 and 1.39 from a year ago. Past dues were at 1.77 at the end of December 2020. BHG's consistent monitoring of its portfolio allows it to adjust its origination approvals quickly. They have, over the past few months, adjusted their commercial allocations away from non-medical practices and on consumer, which is about 20% of their business, they have adjusted their risk tolerance to the higher credit score borrowers. National and regional unemployment forecasts give BHG more confidence that their borrowers should be able to withstand forecasted inflationary increases in a way that allows BHG to better weather this environment than others in their space. In comparison to other consumers, we believe BHG's borrowers are well-paid, with average borrower earnings being approximately $287,000 annually. We are comfortable in their credit models, and their credit experience bears this out. Lastly, BHG had another great operating quarter in the third quarter. As I mentioned during two previous earnings calls this year, we believe earnings in the first half of 2022 would likely be stronger than the second half as they sent more loans to the bank auction platform in the first half of the year rather than hold loans on their balance sheet. As you know, the bank auction platform delivers immediate gain on sale income, while their securitization network delivers interest income over the life of the loans. BHG did accomplish during September a $412 million securitization at an acceptable rate of 7%, when, as it appears to us, other fintech lenders were having to reevaluate their business models given the operating environment. BHG was very pleased to be able to get this securitization done. Just a side note, Kroll has now rerated BHG's first two issuances such that all tranches for all six prior securitizations are now investment grade and the senior Class A tranche in all issuances is triple-A rated. We do want to highlight BHG's flexibility as to funding. Securitization platform spreads have compressed in 2022 with the weighted average rate for the most recent issuance at 7%, compared to 5.5% in June and 2.5% in the first quarter. This compression motivates BHG to reconsider selling more loans through its auction platform as its spreads have held up better this year than anticipated. The key point is that they have the flexibility to do it. In the end, overall profitability and balance sheet soundness are the key drivers for BHG. As I mentioned earlier, BHG has updated their 2022 earnings guidance and now estimates about 25% earnings growth over 2021. Again, looking forward, some key points I'd like to reemphasize. Credit remains consistent with previous quarters, but BHG is and will be increasing reserves based on macroeconomic data at least over the next few quarters. BHG has been modifying their credit models towards originating less risky assets. Spread shrinkage may occur with more historical levels as we head into the fourth quarter and 2023. Production volumes are very strong, and we believe they will continue to have strong production going into the fourth quarter and 2023. Of note is that BHG anticipates at least 2-4 new funding alternatives to open up in the near term as they seek to broaden their already strong liquidity platform, which we also believe is one of their strongest attributes. Quickly, here's an outlook for the remainder of 2022. For loans, we've increased our outlook to low 20% growth for 2022. We have adjusted our rate forecast to now consider a 4.5% Fed funds rate by year-end. We, like you, will continue to monitor and modify as necessary, but we don't believe any reasonable changes to our current planning assumption will impact our current outlook for 2022 materially. Given that, we believe we should see continued improvement in net interest income this year, which should result in net interest income growth in the low 20% range. We still believe increases in hires and other factors should result in expense growth being in the high teens. All of this is about 2022. We'll provide more information as to our 2023 outlook next quarter. Last year at this time, our concerns were trying to figure out how to put together a 2022 plan just to grow earnings. We were looking at low single-digit earnings growth rates for 2022, and it got no better by the end of the year. Based on sell side research at the time, 80% of our peer group was anticipating negative EPS growth in 2022. We're pleased with our 2022 financial performance thus far, as we believe we will soundly beat our loan deposit revenue, PPNR, and earnings targets for this year. Trust us, as I'm primarily speaking to my Pinnacle teammates who are listening in, we have started building plans for next year, and our goal remains the same, top quartile earnings performance, no matter what gets thrown at us. Paul, with that, I'll stop and see if there are any questions. Thank you, Mr. Turner. 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 when you ask your question that you pick your handset up to provide optimum sound quality. We did have some questions in queue. The first question is coming from Steven Alexopoulos from JPMorgan. Steven, your line is live. Hi, good morning, everyone. Good morning. Hi, Steven. I wanted to start, Harold, first on the non-interest-bearing deposits, right? These went from 24% of total before the pandemic, which is before QE, to 33% today. Do you think you can hold that mix at about that level, or do you see it migrating back? Right, we're in QT now. Do you see it migrating back as you continue to fund strong loan growth? Well, no, we don't think it's going to go back to pre-COVID levels. We've had a lot of initiatives around operating accounts, and we've gathered a lot of clients. We don't think we'll get back down there. We did see the mix shift that we noted previously. So far in October, now granted, we're only 18 days in, we're feeling pretty good about where this deposit book is hanging in there on particularly on non-interest bearing. There's enough sources when you look at sources of funding that maybe we could hold the mix about where it is. Yeah, I think so. We may drift down a couple of notches, but I don't think it's going to be that dramatic. Got you. Okay. As we think about expenses, I appreciate next quarter it'll give us 2023, but when we think about the ramp in hiring through 2022, can you just give us some framework about 2023? I mean, should we at least be at a similar level of expense growth next year, just given the hiring that took place through 2022? Well, I'll give you some data points, and then I'll let Terry talk about momentum. I think we should see at least high-teens, mid- to high-teens kind of expense growth next year. That's what we're kind of looking at currently. Terry? Yeah, Steven, I think on hiring momentum, as you saw, third quarter was a record quarter for us. You know, I don't look for it to stay at you know, 53 revenue producers a quarter, but I expect it to remain high going forward. I think your idea is correct that you know, the hiring more or less occurs on a straight line, and I would expect it to continue for the foreseeable future. How that bears on the expense growth is just exactly what you said. I mean, it'll be elevated because we have hired throughout the year, and frankly, we intend to continue hiring at a similar rate in 2023. Okay, that's helpful. Finally, you know, there are many investors on the sidelines that are nervous to own your stock here, not because of Pinnacle's credit quality, but they're concerned on the credit outlook for most of the fintech lenders out there, including BHG, particularly given that BHG expanded these newer verticals. Can you just share with people on the sidelines, how worried are you on the credit outlook at BHG given the macro environment? Environment. Just any additional color you could provide would be really helpful. Thanks. Harold, you want to go first, and maybe I'll add some color after. Yeah. Sure. We've had a lot of conversations with the leadership at Bankers Healthcare Group over the last several quarters about their confidence with their book, their confidence in their credit models. They think or they believe currently that their models are sound. If there is a significant kind of uptick in inflationary pressure, no doubt, their charge-offs could tick up. They are very confident with respect to their ability to find the best borrowers in this environment and continue to monitor their book for call it cracks or weaknesses. I think, Steven, you know, I might add just a couple of other things, obviously, you know, for us as an investor, I'm always have been since we started and continue to, you know, try to understand really what all that credit risk is. I think some things that give me great comfort are number one, they've got a huge group of people in analytics. They work on all kinds of variables. You've heard us talk about that in the past. The main variable, the foremost variable, obviously is their credit scoring mechanism. We provide information to you on the FICO scores because that's a common thing that you and I and others can all understand. It's a way to level set. They don't underwrite their credit off that FICO score. They're using their own proprietary model, which they can demonstrate is 17% more predictive than the FICO score. You know, again, these are not credit novices. They've been through it through a number of cycles. They went through the Great Recession without sustaining any losses, which not many of the banks they sell credit to could say that. Again, I think they started as a credit scorecard analytical group. It's broadened out, but it still is their strength. I love the capability that they have, the fact that their model is a little more rich than a FICO score, which is sort of the industry standard. I think that's one thing that gives me a lot of confidence. As I mentioned, I think the second thing I would say is, again, these guys have been through recessions in the past, and their performance was extraordinarily good. It was better than our bank's performance and better than most banks' performance. That's another item that gives me a great deal of confidence. I think the third thing is when, you know, so much of it is consumer credit, some of, you know, even the business credit has a consumer underwriting orientation to it. I guess the idea for me here is that the average borrower has income of $287,000. When I think about various other fintechs, and I won't go through the name of all and what their credit products are and so forth, I don't know any of them that are underwriting borrowers with $287,000 in annual income. It's a different class borrower. These are not people that are borrowing money for a washing machine or you know a small home improvement or something. I mean you know these are substantial people. Again, I think the mix of their borrower is different than what most of their fintech providers, other fintech providers are doing for their borrowers. Anyway, I just rambled through those three things. Okay. That's great color. Thanks for taking my questions. Yep. Thank you. The next question is coming from Stephen Scouten from Piper Sandler. Stephen, your line is live. Thank you. Good morning, everyone. I guess I wanted to dig down into the beta expectations you have that you laid out in the presentation, both on the loan and then especially on the deposit side. You know, in 2021 growth and kind of historical growth is maybe- Hello? Steve, are you there? Spread and where you've been today. Yeah, can you guys hear me? Yeah, you just kind of blanked out on me. Okay. I guess I'm just trying to think about where loan growth what kind of loan growth expectations you have in 2023 relative to those deposit beta expectations, because it would seem with your expense guidance, if it's going to be high teens again, that we might be looking for high teens growth again. Steve, I think I got the gist of the question. You kind of blanked out on me. I'm not sure if the others on the call experienced the same thing or not. I think going into next year just looking at the net interest margin, historically, if it responds the way it has done in the past, we're anticipating that as the Fed stops raising rates, that the left side of the balance sheets yields and rates will likely start topping off, and that the deposit lag will likely be in effect through that time. I was looking at our net interest margin performance over the last two years. It stayed fairly consistent at around a 2.95%-3.05% range for the last two years during a fairly flat rate environment. We'd anticipate that kind of performance with respect to our, at least our margins, once the Fed settles down on their rate increases. Is that helpful? Yeah, that's helpful. It sounds like I might be having technology issues, so I'll let somebody else hop on. Thanks a lot. Thanks, Steven. Thank you. The next question is coming from Michael Rose, from Raymond James. Michael, your line is live. Hey, good morning. Just, you gave us a lot of color as usual on BHG, very much appreciated. You know, on the one hand, you know, you continue to grow, you feel comfortable with that growth, but on the other hand, the recourse reserves, or the new terminology for it is, you know, expected to grow kind of as well. I know it's really hard to kind of forecast, but you had, you know, really good growth through the year in BHG, better than expected. Can you give us a stab at kind of the puts and takes of how we should think about 2023 and the growth of that business just going into a slowdown? Thanks. Yeah. I mean, Michael. We've had some preliminary conversations with BHG about their next year's outlook. They do believe their production platform will continue to deliver at a reasonable pace next year. They think they have opportunities to continue to kinda pivot between the securitization platform and the gain on sale and the bank auction platform. You know, I don't think it would be unreasonable to assume that next year's growth rate might be somewhere around a 15% number, something like that. I'm hesitant to get into too much detail because we need to have some more conversations with Bankers Healthcare Group. Certainly understood. Thanks for that. Maybe just more broadly speaking, you guys have been obviously very active on the hiring front, and you've talked about dislocations maybe getting, you know, even more advantageous for you into next year, just given the market dislocations. You know, it's been a while, I think, since you've kind of entertained the thoughts of maybe doing a whole bank transaction. Just wanted to see, given the dislocations, that some banks are gonna have and some of the credit issues that I think we're gonna see. You know, is that an avenue that you could potentially open up again as we think about, you know, the next couple of years? Thanks. Michael, I think on that front, you've heard my answer before, and it's really no different. Our position, I don't think has changed. I'm never gonna say never, you know, that we just absolutely won't do it. I don't wanna say that. I do think it's fair to say you can see the hiring momentum that we have. I expect it to continue as long as we can, you know, sort of continue that market share play for the foreseeable future, which I think we can. You'd have to have a really compelling transaction to wanna do it. If we find one of those, certainly we would consider it. Again, I just think the bias is more toward organic growth and continuing our market share play. We're really in a, I think, a luxurious position to have built a preferred bank standing for large bank employees who wanna exit their large bank. Again, I expect that'll be our principal lever. Appreciate it. Maybe just one final quick one, just putting together some of the expectations you talked about initially for next year. Is the expectation that just given, you know, the rate outlook and beta assumptions and what you said on BHG and expenses, that you could generate positive operating leverage next year? Or is that gonna be more challenging? Thanks. Harold, you wanna take that? Sure. Yeah, I don't think it's unreasonable. We're a, I believe, at our core, a sub 50% efficiency ratio kind of franchise, and I believe that we've got all the opportunities in the world to increase that or better that here in the near term. Helpful. Thanks for taking my questions. Thank you. The next question is coming from Jared Shaw from Wells Fargo Securities. Jared, your line is live. Please check your mute button. You may go ahead with your question. Hi, sorry about that. Thanks for taking the question. I guess going back to BHG, could you give an update, Harold, on maybe some of the steps that they're taking to utilize more CECL-friendly disposition avenues and what a day one potential estimate for BHG could look like right now? Yeah, sure. There's currently several different options, maybe a couple that I'll talk about. One is, within the guidance, you can sell more of the cash flows and then avoid CECL. So call it similar to what they do with the gain on sale platform with the banks, they can do that with institutional investors. They can also sell part of the residual cash flows, maybe carve out some of those future cash flows and sell those, and then take those credits out of the CECL kind of domain. So there's a variety of different tactics they can deploy to try to avoid CECL. Right now they're thinking their reserves, which are currently at 3.5%, could get into the 9%-10% range with day one CECL impacts. Okay I don't know if that gets you all the way there, Jared, but that's what we've been talking about thus far. Okay. Any update on how you're thinking about your ownership stake in that? You know, in the past, you said that you would. I think you said you travel with the founders, and then over the last few quarters, it sounded like maybe you could forge your own path. How should we be thinking about BHG as a percentage of, you know, the Pinnacle balance sheet or earnings stream going forward? Terry, I'll start and then let you finish. I don't think we've got any really strong change with our, you know, perspective on our ownership of BHG. We're definitely not interested in owning or buying a majority stake in the franchise. I think both Pinnacle and the two founders of the franchise, we're all on the same page. I think if there were a liquidity event, an opportunity for one, I think the founders and ourselves, we'd entertain it and see where it goes from there. The market right now is not really supportive of any kind of transaction. I believe that, like I said, we're all on the same page if there were, you know, something to come down the pipe. Jared, I think, you know, I might add to Harold's comments. I mean, what he said is accurate. I think the case is that, as you know, the valuation, whatever it is, it bounces around and has moved rapidly. You know, if you look at what I would say the value of that company is or what it has been, you know, 12 months ago, 9 months ago, 6 months ago, 3 months ago, it's pretty dramatically different over that time period. All those things influence what can in fact be done. When you talk about, you know, a liquidity event, obviously, what you gotta get down to is a willing buyer and a willing seller. Again, those. There are people that are always circling and looking for valuations and so forth. I think we, as Harold said, we and the other two owners are, at this point, at a really similar spot. We'd be willing to, at the right valuations, reduce our stakes or sell the company. Again, it's just about, you know, how the market moves and where you know, find that willing buyer and a willing seller. I think I've indicated that if nobody had to be happy but me, I think some reduction in our stake in BHG, you know, to the extent people want a minority interest in the company, is a good idea. I love the income that it generates. It's provided extraordinary flexibility. It's been a tremendous strategic advantage in terms of funding, extraordinary growth, here and allowing us to maintain, very high profitability. I don't wanna completely give that away, to be candid, but if it became a lesser% of our income, that would probably, I think, add to investor perception, PE multiples, all those kinds of things. Anyway, it's impossible to say exactly what is gonna happen, but we'd be willing to consider a reduction or a sale of the company. If that comes about, that'll be fine. We're very comfortable to continue in the current situation as well. Okay. All right. Thanks. I guess, you know, shifting over to loan growth and the outlook as we go into next year, you know, it certainly sounds like you have good momentum with all the hiring. You know, if we're looking at a weaker, maybe economic backdrop, and I look at slide 7 and the different avenues of where that growth has come from, do you think that you could see a shift with a bigger dependence on the expansion markets or having a bigger relative impact from the hiring, or do you think that, you know, we'll see sort of a broad-based, equally diversified platform of growth going into 2023? Yeah. My own sense of it is that it ought to remain relatively similar. You know, I think as the new markets take hold, you know, their growth will be faster than in the legacy markets. I think generally that idea is that allocation of the growth is probably a pretty similar thing when you look at it 12 months from now. Great. Thanks a lot. Thank you. The next question is coming from Catherine Mealor from KBW. Catherine, your line is live. Thanks. Good morning. Hi, Catherine. Wanted to go back up to the margin and the cumulative betas through 2022, I thought, was really helpful with the 60% loan beta and then the 40% cumulative deposit beta. How do you think as we move into next year, I know you're not giving next year guidance yet, but just kinda generally and directly between the two, how do you think those two trend next year? And is that 60% cumulative loan beta, is that a good number for next year? Are there dynamics with kind of pricing of new loans and all of that that may kinda change that as we look at it full cycle? Yeah. I think. Well, first of all, I want to make sure that we emphasize more about where the margin is versus where the betas go. We provide the beta information to kind of help people get through it, but we're more interested in what we think the margin's going to do, given where the rate cycle is. Like I was mentioning earlier, we think the margin will probably flatten out once the Fed begins to kind of stop or ease or just stall. With deposit competition, we'd probably see some more, you know, increases in our deposit rates. As far as a beta question itself, in all likelihood, the loan beta would probably, once it stalls, come down as with competitive pressure, but we think the lag on deposits would probably be the more influential on the longer-term margin. Got it. On that, how are you thinking, I mean, the margin saw substantial extension this quarter. I expect we'll see it again next quarter. Any kind of, I mean, near-term thoughts on where you think the margin may shake out next quarter and then. Yeah, we're not currently planning for another 30 basis point uptick, but it ought to be, you know, somewhere half, maybe a little more than half, going into the fourth quarter. Half of the increase we saw this quarter? That's right. Got it. Okay. You probably peak early 2023 and then start to flatten out to come down as you move through the rest of the year. Yeah. Our planning assumption is next year that we ought to see 2 25 basis points rate decreases in the last half of the year, and so the margin pretty much flattens out in the second quarter. Got it. Okay. On the composition of deposit growth, just the balance growth was great to see. Just big picture, how are you strategically thinking about the composition of where that growth will come? I know you mentioned you still expect to grow standard deposits, but then how much do you think comes from non-core versus core? Also, you talked about some different specialty deposit strategies that you've got. If you could kind of talk about how you think that factors into the deposit growth outlook as well. Terry, I'll start and let you go from there. Traditionally, our client base will provide 80%-90% of the core funding that we need to fund our loan growth. We've always had to go to the wholesale markets, call it brokered or Federal Home Loan Bank, to try to fund the gap, with respect, you know. Here over the last couple of years, we've not had that problem. We've not had to go to the wholesale markets much at all to get our liquidity to fund loan growth. We do have capacity internally to go to the wholesale markets to fund loan growth, but there will be a stopgap. Before we had kind of a 20% wholesale funding kind of limitation. I don't see us getting anywhere near that. You know, we will do it to fund some loan growth. Our, like I said earlier, our belief is that our franchise, a lot of value of our franchise is built in our deposit book. We've got to make sure that we're looking under rocks for deposits. I think our relationship managers are doing just that today. I think where this new deposit growth is going to come from is from our new hires and our new markets. Terry? Yeah. I think I would add to that. Harold commented, I think when he went over the slide, we have over the last year or two been building some specialty deposit funding around HSAs, around community associations, which is you know inclusive of homeowners associations and property managers, some nonprofit specialties and so forth. Those have been built. They're all through breakeven. They are having success, and we believe will be a meaningful part of the funding as we get out through here as well. In addition to new people and new markets, I think the new product specialties are important to us in terms of low-cost funding. Great. Thank you so much. That's all I got. All right. Thank you. The next question is coming from Brian Martin from Janney Montgomery. Brian, your line is live. Hey, good morning, guys. Thanks for taking the question. Just maybe circling back, Harold, just one clarification on the comments or just the questions on expense growth earlier. I know you're not giving the guidance, but just when you were talking about kind of that, you know, the high teens expense growth, was that more from the people you've already hired? Was that really talking about the salary line, or are you talking about total expenses there? Just for clarity. Yeah, mid- to high teens% would be for total expenses. Again, we're going through all of our planning for 2023 currently. We're pretty much maybe at the first few steps of a multi-step journey. That's probably where it's gonna shake out at the end of the day. That said, as Terry alluded to earlier in the call, our hiring plan, when you put it in effect or you start executing it, what we're gonna do is we're gonna hire the people whenever we get an opportunity. We're gonna be opportunistic hirers. We may put in the plan that we're gonna, you know, maybe hire 125 revenue producers next year or 130 or whatever the number might be, but if we have a chance to double that, we might just go after it. Gotcha. Okay. No, it makes sense. How about just shifting gears to the BHG? I think, I guess, third quarter, obviously down but strong, Harold. I guess fourth quarter, as it shapes up right now, is the expectation that it should drift a bit lower at BHG today? I don't know if I caught all your, Brian. Say that. Go back through that one more time. Yeah, just the outlook for BHG in four Q, I mean, relative to third quarter. Third quarter was strong but down, but fourth quarter is also expected to be a bit lower, you know, given kind of your comments about the performance. Yeah. Yeah, I think so. What could change our current perspective is if they send more loans to the auction platform, which is what they did this quarter. Gotcha. Right now, they believe they're gonna warehouse more loans on their balance sheet, which could tamp down earnings in the fourth quarter. Gotcha. Okay. Just the, maybe just looking at one line item on fee income, and that was just the, you know, I guess, the gain or loss on sale of other equity investments, kind of, you know, I guess, significant drop this quarter, which you guys have talked about, kind of that volatility there. You know, just as we think about that number going forward, you know, I guess, just kind of take an average of the past quarters or just what's the best way to think about that given this quarter's mark relative to last quarter's? Yeah. We're not anticipating much movement in that year-to-date number here today. We'll get more information through the quarter on all those investments and see where it shakes out. Right now, we're not planning on any kind of up or down movement with respect to anything in the fourth quarter. Gotcha. Okay. New loan yields, Harold, where are they coming on today? You know, I guess, you know, whether it be the month of September or just kind of whatever most recent data you have, where are you putting on new loans today? Well, I could flip down to the back into the supplemental information and look at that number. At the end of September, we were at 5% so, you know, that would imply that we're- I can grab it. Yeah, we're getting bigger. If it's in the slide, Terry, I'll grab it. I missed that if I did, so no problem on that. All right. Okay. Thanks for taking the questions, guys. Thanks, Brian. Thank you. The next question is coming from Jennifer Demba from Truist Securities. Jennifer, your line is live. Thank you. Good morning. Hey, Jennifer. Hey, Jennifer. Terry, I wonder if you could just give us your thoughts on the performance of your expansion markets and especially commercial lending. Just looking at slide 8, just if you could just talk about how things have gone in each market versus your expectations. Thank you. Yeah. I'll try to just throw out thoughts. If I'm not addressing what you're interested in, just redirect me and I'll hit at it. I would say that the Atlanta market is almost exactly on target for what we would have hoped. We're probably a little ahead on hiring. I think volumes are generally right where we would expect them to be. We're excited about what's going on here in Atlanta. I think in the case of Alabama, both Huntsville and Birmingham, I would say they have outperformed what our expectations were, both in terms of hiring and in terms of the balance sheet volumes that they generated early on both sides of the balance sheet. Loan and deposit volumes have been really attractive, and so I think we're gonna do better in those markets than what we had said. In the case of D.C., I would say just for me personally, that's probably the market I am most excited about. As you can see by the months in existence, we're still in the early stages, but their pipelines are building pretty dramatically. You can see they've had great success hiring people. Again, both sides of the balance sheet for them, what's in the pipeline and what we expect to happen over the next two quarters, you know, they'll do better than what our original pro forma was, as well. Anyway, that's how I look at those big markets. If I've not addressed what you're interested in, please redirect me. No, that's great, Cullen. Thank you so much. Just a question, a lot of analysts and investors have asked about normalizing credit, and I just wonder what you think normal is. Is normal somewhere between where we have been at these historically low losses and problem asset levels, and the historical median, or is, you know, is it the historical median? What do you think normal is? Well, you know, I think when you start using a term like normal, you know, that obviously has to apply over, you know, over a period of time to me. Sort of through the cycle, you get ups and downs. I don't think there's any thesis under which I would expect to operate our company at, you know, the levels of classified assets, non-performing assets, and so forth, that we are currently at, through an entire cycle. At any rate, I think those median numbers are, you know, they're a reasonable way to think about what ought to happen through a whole cycle. Again, I personally think we're a ways away from that. Again, I think for me to say we expect things to normalize, I just want people to understand, I don't think we're gonna be operating at the level of classified assets and non-performing assets that we've been at over the last handful of quarters, you know, for the foreseeable future. Surely, it'll have to go up to some extent. Now, you know, again, maybe the median number is a good planning assumption. Thanks, Terry. Thank you. We had Catherine Mealor from KBW come in with a follow-up. Catherine, your line is live. Thanks. I just had a follow-up on expenses. It feels like your stock has started to underperform since the call started when you mentioned a high teens expense growth rate. I just wanted to circle back to that comment and maybe provide you the opportunity to remind us how nimble you can be on the expense side if the revenue growth is not gonna come in as expected. If we see loan growth slow or the margin come in lower than expected, you know, how nimble can you be on pulling back that high teen expense guidance you gave? Thanks. Harold, you wanna go first? Yeah, I'll go first. Thanks, Katherine, for the follow-up. Yeah, I mean, we've always got, you know, the ability to take money out of the expense book. The big thing that we always do around here is our incentive plans are all tied to earnings growth. If the earnings growth doesn't, you know, come around, then we've got opportunities to take quite a large sum of money out of our incentive plan to kind of fortify our P&L and make sure our earnings growth is reasonable, you know, under the circumstances. The other thing we did this back during the financial crisis is we can always pull back on hiring that will impact our longer-term growth. We're not really anxious to do that, but there's a lot of variability in our expense book that we can go after when it's absolutely necessary. Terry, I'll stop there. Yeah. Katherine, I guess I had to hit two things. I mean, Harold said it, but just in case there are people who don't get it. The incentive, we have sacrificed 100% of our incentives if we don't produce our earnings targets, and earnings targets are set to be top quartile performance. That's the biggest expense lever that you have. We don't get paid unless shareholders do get paid, and I don't think there's a company that I'm familiar with that will do that and protect shareholders to that extent. I think the second thing is, and I pound away on this for a reason, but I don't feel successful at getting people to understand it. The hiring that we do, you know, the... Because we do it on a straight line, it's a huge part of the expense base, and so we're paying expenses today for revenues that are yet to come. My only message in that is there's an immense amount of profitability that comes when we quit hiring people. You know, all the revenue continues to roll in and the expenses cease to grow. There's huge profit leverage in just that single idea right there when you think about having you know, hired 53 revenue producers this quarter. You know, that revenue will come in. If we have difficulties, we quit hiring people, and so the expenses stop growing, but the revenue continues to grow. Anyway, that's my own view of it. That's the way we've operated over an extended period of time. I'm not sure everybody understands, you know, how that works. You can quit hiring, and it does produce earnings growth, even though it impacts the longer term balance sheet and earnings growth. In the short run, it accelerates earnings growth. Got it. That's helpful. Thanks for the follow-up. I mean, if you're gonna put a high-teens expense growth rate out there, then it's just fair to assume that the revenue growth rate is gonna be above that, just given your business model, correct? No doubt. No doubt. Awesome. Thank you. All good. All right. Thanks, Catherine. Thank you, ladies and gentlemen. This does conclude today's conference. You may disconnect your lines at this time, and have a wonderful day.