Exclusive: An Interview With Pinnacle Financial Partners’ CEO and Chairman

Pinnacle Financial Partners has had an enviable growth story. A startup in 2000, the bank commands the largest deposit market share in the Nashville, Tennessee MSA, beating bigger banks such as Bank of America Corp. and Regions Financial Corp., according to the Federal Deposit Insurance Corp. The Nashville-based banking company has assets of $50.7 billion, mostly through organic growth, and about 128 offices in Tennessee, North Carolina, Kentucky, Alabama, Georgia, Virginia, Florida, South Carolina and Maryland. The following interview is an edited, condensed version of an on-stage conversation at Bank Director’s Bank Board Training Forum in September, when Editor-in-Chief Naomi Snyder interviewed CEO M. Terry Turner and Chairman Robert McCabe Jr.

BD: How did this relationship start? You first met in 1979.
Turner: Rob was working at a small bank, Park National Bank, in Knoxville Tennessee. I was in the consulting business with Arthur Andersen, and we had a small engagement there. I met Rob the first week or so I was there. We became fast friends, and we’ve sort of lived our lives together from then until now.

BD: In those days, the government basically told you what you could give to your customers as the deposit rate and what you could make in loans. It wasn’t very exciting, in a lot of ways.
Turner: It was exciting if you wanted to make money, because it was easier to make money. The spread they dictated was wide enough you could make a big profit.

BD: What did you do to make Park National Bank special?
McCabe: As a result of that environment, bankers were complacent, and they were happy with their client base. Growing the profitability seemed to be less of a concern. So, we put a lot of outbound energy into adding clients, at whatever the spread was, to growing the bank and hiring experienced people.

Turner: Rob and I, every time we’d get frustrated, we’d say, ‘We’re going to quit the banking business and go do something ourselves.’ We were seriously handicapped because we had no capital, so we didn’t ever make it very far. We’d go out and visit with clients, businesspeople we respected, talk to them about what our opportunities were. The company we were working for, Park National Bank, was sold to a company called First American National Bank, and the trading symbol was FANB. And I’ll never forget one of those guys, after we talked to him for a while about what we wanted to do, he said, ‘Guys, I don’t think you’re well suited to be entrepreneurs. You need to be FAN bankers.’”

McCabe: We became generalists at that point in time; we got a lot of general experience in all areas of the bank. Now, everybody you deal with is a specialist.

BD: What happened to push you into starting up this bank?
Turner: First American made a flawed acquisition in 1998. In fact, there was a sell-side analyst named Sean Ryan from Bear Stearns; he was quoted calling that transaction ‘the worst transaction in the history of banking.’ Ultimately, it cost us the company. The CEO came up with a plan to market the company, and AmSouth acquired First American in 1999. Rob and I were technically employees of AmSouth until year-end 1999. I was deselected [from the leadership team]. That’s what put us in play. We had different opportunities, maybe to run other banks or do different things. But for me, the appeal was to start a bank from scratch. Most of the time you take over some organization, and you’re trying to bend it, shape it and move it. Most of those people are looking at you, like, ‘Listen, pal, I was here when you rode up, and I’ll be here when you’re gone. I don’t have to do what you say.’ It was fun to start with a clean sheet of paper. That was a big motivation for me.

BD: What kind of challenges did you face along the way?
Turner: To get into the banking business, you’ve got to have a license, a bank charter, and to get that, you have got to put together an incredibly in-depth plan, a 10-year pro forma, which always struck me as ludicrous. We didn’t have one employee or one client or any idea what interest rates would do, but we were going to give them a 10-year pro forma on what the bank would do. But we did that. We submitted this package of paper, and this 26-year-old lady who was working for the Office of the Comptroller of the Currency in Atlanta had 26 penetrating questions about our application. And the first question was, ‘We believe monsieurs Turner and McCabe are country club bankers and not likely to know how to run a small bank.’ That was the first challenge. It’s a terribly bureaucratic process. We needed a bank charter and a holding company charter at the Federal Reserve. I remember talking to a [regulator], and I said, ‘Look, when are we going to get the answer?’ And he said, ‘It’s been approved all the way up to here, but it’s got to get through this desk over there.’ He said, ‘You sound like you’re in a hurry.’ I said, ‘Well, we’re burning $7,000 a day here.’

BD: I remember you telling me years ago that you didn’t want to hire anyone who was unemployed. Can you explain that a little bit?
Turner: Our thesis was, if we could hire experienced people who had proven track records, had strong client followings and so forth, then we could win the service and advice equation. We said, ‘No, 1, we won’t hire anybody that has less than 10 years’ experience.’ I think over the years, we’ve modified that for a few jobs down to five years, but everybody has experience. We don’t teach anybody how to pay and receive, how to spread a financial statement, how to protect collateral. The average experience of people that we have hired in this company is 23 years. It’s a pretty dramatic difference in terms of their ability to take care of clients as well as their competence. We’ve been one of the fastest growing banks in the United States. If you hire somebody who’s been handling a book of business for two and a half decades, two things happen. You get rapid growth, because they can move that book of business quickly, and you get strong asset quality because they know those credits. We don’t take applications. We don’t hire people who are circulating resumes. Our view has generally been, if they’re coming in to fill out an application or they’re circulating a resume, they’re likely unhappy or unsuccessful where they are, and if that’s the case, we’d appreciate it if they stay there.

BD: You and Rob have been friends for a long time. Is that a benefit, or is that a drawback? And how do you disagree?
Turner: The relationship between us is more akin to brothers. I had an older brother in my life. Nobody would have had nearly as many fights with my brother as I did. None of them would have been as fierce as with my brother. But at the end, I have a high respect and a great rapport with him. Rob and I would be the same. We can argue about things and see completely differently on one topic and be thrilled with each other on the next. It’s just that sort of relationship.

BD: What do you want your legacy to be?
Turner: In a leadership team retreat early on in the company, we decided, ‘How cool would it be if we could get 1,000 families to live out of this business?’ And of course, today, there’s 3,500 families that live out of it. I’m talking about employees, associates that make their living out of this company. We give shares to everybody in the company, both when they come and on an annual basis. I take great pride in what’s been built, but I do want to make a difference in people’s lives and feel like I did something that helped other people.