Pinnacle Financial Partners (PNFP)

Regional banking company Pinnacle Financial Partners (NASDAQ:PNFP) missed Wall Street’s revenue expectations in Q4 CY2025, but sales rose 11.3% year on year to $542.2 million. Its non-GAAP profit of $2.24 per share was 1.1% below analysts’ consensus estimates.

Company Overview

Founded in 2000 with a focus on delivering big-bank capabilities with community bank personalization, Pinnacle Financial Partners (NASDAQ:PNFP) is a Tennessee-based financial holding company that provides banking, investment, trust, mortgage, and insurance services to businesses and individuals.

Regional banks, financial institutions operating within specific geographic areas, serve as intermediaries between local depositors and borrowers. They benefit from rising interest rates that improve net interest margins (the difference between loan yields and deposit costs), digital transformation reducing operational expenses, and local economic growth driving loan demand. However, these banks face headwinds from fintech competition, deposit outflows to higher-yielding alternatives, credit deterioration (increasing loan defaults) during economic slowdowns, and regulatory compliance costs. Recent concerns about regional bank stability following high-profile failures and significant commercial real estate exposure present additional challenges.

Pinnacle Financial Partners competes with regional banks like First Horizon (NYSE:FHN), Regions Financial (NYSE:RF), and Truist Financial (NYSE:TFC) in the Southeast, as well as national banks including Bank of America (NYSE:BAC) and JPMorgan Chase (NYSE:JPM) that operate in its markets.

From lending activities to service fees, most banks build their revenue model around two income sources. Interest rate spreads between loans and deposits create the first stream, with the second coming from charges on everything from basic bank accounts to complex investment banking transactions. Over the last five years, Pinnacle Financial Partners grew its revenue at a solid 12.5% compounded annual growth rate. Its growth beat the average banking company and shows its offerings resonate with customers.

We at StockStory place the most emphasis on long-term growth, but within financials, a half-decade historical view may miss recent interest rate changes, market returns, and industry trends. Pinnacle Financial Partners’s annualized revenue growth of 11.6% over the last two years aligns with its five-year trend, suggesting its demand was stable. Note: Quarters not shown were determined to be outliers, impacted by outsized investment gains/losses that are not indicative of the recurring fundamentals of the business.

This quarter, Pinnacle Financial Partners’s revenue grew by 11.3% year on year to $542.2 million but fell short of Wall Street’s estimates.

Net interest income made up 72.3% of the company’s total revenue during the last five years, meaning lending operations are Pinnacle Financial Partners’s largest source of revenue.

Our experience and research show the market cares primarily about a bank’s net interest income growth as non-interest income is considered a lower-quality and non-recurring revenue source.

Topline growth alone doesn't tell the complete story - the profitability of that growth shapes actual earnings impact. Banks track this dynamic through efficiency ratios, which compare non-interest expenses such as personnel, rent, IT, and marketing costs to total revenue streams.

Investors place greater emphasis on efficiency ratio movements than absolute values, understanding that expense structures reflect revenue mix variations. Lower ratios represent better operational performance since they show banks generating more revenue per dollar of expense.

Over the last four years, Pinnacle Financial Partners’s efficiency ratio has increased by 7.4 percentage points, going from 49.5% to 56.9%. Said differently, the company’s expenses have increased at a faster rate than revenue, which usually raises questions unless the company is in high-growth mode and reinvesting its profits into attractive ventures.

Pinnacle Financial Partners’s efficiency ratio came in at 55.8% this quarter, falling short of analysts’ expectations by 191.6 basis points (100 basis points = 1 percentage point).

For the next 12 months, Wall Street expects Pinnacle Financial Partners to rein in some of its expenses as it anticipates an efficiency ratio of 54.3%.

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Pinnacle Financial Partners’s remarkable 14.3% annual EPS growth over the last five years aligns with its revenue performance. This tells us its incremental sales were profitable.

Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.

Pinnacle Financial Partners’s two-year annual EPS growth of 9.5% was subpar and lower than its 11.6% two-year revenue growth.

We can take a deeper look into Pinnacle Financial Partners’s earnings to better understand the drivers of its performance. A two-year view shows Pinnacle Financial Partners has diluted its shareholders, growing its share count by 1.2%. This has led to lower per share earnings. Taxes can also affect EPS but don’t tell us as much about a company’s fundamentals.

In Q4, Pinnacle Financial Partners reported adjusted EPS of $2.24, up from $1.90 in the same quarter last year. Despite growing year on year, this print slightly missed analysts’ estimates, but we care more about long-term adjusted EPS growth than short-term movements. Over the next 12 months, Wall Street expects Pinnacle Financial Partners’s full-year EPS of $8.41 to grow 21.5%.

Banks operate as balance sheet businesses, with profits generated through borrowing and lending activities. Valuations reflect this reality, emphasizing balance sheet strength and long-term book value compounding ability.

Because of this, tangible book value per share (TBVPS) emerges as the critical performance benchmark. By excluding intangible assets with uncertain liquidation values, this metric captures real, liquid net worth per share. Other (and more commonly known) per-share metrics like EPS can sometimes be murky due to M&A or accounting rules allowing for loan losses to be spread out.

Pinnacle Financial Partners’s TBVPS grew at an incredible 11.3% annual clip over the last five years. The last two years show a similar trajectory as TBVPS grew by 11% annually from $51.71 to $63.71 per share.

Over the next 12 months, Consensus estimates call for Pinnacle Financial Partners’s TBVPS to grow by 3.3% to $65.81, lousy growth rate.

Leverage is core to a financial firm’s business model (loans funded by deposits). To ensure economic stability and avoid a repeat of the 2008 GFC, regulators require certain levels of capital and liquidity, focusing on the Tier 1 capital ratio.

Tier 1 capital is the highest-quality capital that a firm holds, consisting primarily of common stock and retained earnings, but also physical gold. It serves as the primary cushion against losses and is the first line of defense in times of financial distress.

This capital is divided by risk-weighted assets to derive the Tier 1 capital ratio. Risk-weighted means that cash and US treasury securities are assigned little risk while unsecured consumer loans and equity investments get much higher risk weights, for example.

New regulation after the 2008 financial crisis requires that all firms must maintain a Tier 1 capital ratio greater than 4.5%. On top of this, there are additional buffers based on scale, risk profile, and other regulatory classifications, so that at the end of the day, firms generally must maintain a 7-10% ratio at minimum.

Over the last two years, Pinnacle Financial Partners has averaged a Tier 1 capital ratio of 10.7%, which is considered safe and well capitalized in the event that macro or market conditions suddenly deteriorate.

Return on equity (ROE) reveals the profit generated per dollar of shareholder equity, which represents a key source of bank funding. Banks maintaining elevated ROE levels tend to accelerate wealth creation for shareholders via earnings retention, buybacks, and distributions.

Over the last five years, Pinnacle Financial Partners has averaged an ROE of 9.7%, uninspiring for a company operating in a sector where the average shakes out around 7.5%.

We struggled to find many positives in these results. Its revenue missed and its EPS fell a bit short of Wall Street’s estimates. Overall, this was a weaker quarter. The stock traded down 1.4% to $100.39 immediately following the results.

Updated: January 21, 2026 at 5:07 PM EST

A common mistake we notice when investors are deciding whether to buy a stock or not is that they simply look at the latest earnings results. Business quality and valuation matter more, so we urge you to understand these dynamics as well.

Pinnacle Financial Partners isn’t a terrible business, but it doesn’t pass our quality test. Although its revenue growth was solid over the last five years and is expected to accelerate over the next 12 months, its estimated sales for the next 12 months are weak. And while the company’s estimated net interest income growth for the next 12 months is great, the downside is its worsening efficiency ratio shows the business has become less productive.

Pinnacle Financial Partners’s P/B ratio based on the next 12 months is 1x. This valuation is reasonable, but the company’s shakier fundamentals present too much downside risk. We're fairly confident there are better investments elsewhere.

Wall Street analysts have a consensus one-year price target of $114.92 on the company (compared to the current share price of $100.39).