Good morning, everyone, and welcome to the Pinnacle Financial Partners Third Quarter 2020 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. [Operator Instructions] During this presentation, we may make comments which may constitute forward-looking statements. All forward-looking statements are subject to risks and uncertainties and other facts that may cause the actual results, performance or achievements of Pinnacle Financial to differ materially from any results expressed or implied by such forward-looking statements. Many of such factors are beyond Pinnacle Financial'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's annual report on Form 10-K for the year ended December 31, 2019 and subsequently filed quarterly report. Pinnacle Financial 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'm now going to turn the presentation over to Mr. Terry Turner, Pinnacle's President and CEO.

Thank you operator and thank you for joining us. As we get started here I think third quarter was an outstanding quarter for us with key success measures like asset quality, core deposit growth, fee growth, pre-provision net revenue growth and tangible book value accretion were all very strong during the quarter. We begin every quarterly call with this dashboard reflecting our GAAP measures but honestly there are so many adjustments required in order to focus on the variables that we're truly managing here at Pinnacle that I want to move quickly to the chart reflecting the adjusted non-GAAP measures. As you can see here total revenues fully diluted EPS and adjusted PPNR are all up meaningfully on a late quarter basis. Revenues are up roughly 7% year-over-year at a time when many have been predicting banks cannot earn in ‘21 what they earned in ’19, we're proud that fully diluted EPS is already back to the 2019 level for the third quarter of 2020. And most importantly since PPNR has become our primary focus during this pandemic and for the remainder of 2020. Adjusted PPNR is up nearly 7.5% over the same quarter last year and roughly 23% on a link quarter annualized basis. Loans are up 16.2% year-over-year for the third quarter. They were flattish. Average loans were up, PPP loans were down a tick on the link quarterbacks. Harold will review that in greater detail shortly and talk about our expectations going forward but generally we continue to believe we'll produce loan growth primarily based on our ability to take market share. Due to our prolific hiring we have 73 relationship managers with 10 years less than two years that's 22% of our [REMs] and that represents enormous market share movement potential. Core deposits continue to accelerate…

Thanks Terry. Good morning everybody. I'm going to get through these next few slides quickly. Many of them we've shown for quite some time and third quarter results are basically consistent with what we anticipated from last time. So I don't believe there are any shocking revelations. As anticipated loan growth for the third quarter was essentially flat. Loan growth dropped again to 49% at quarter end which is the lowest that I can ever remember. One positive note was that during the quarter new loan bookings increased consistently each month after bottoming in July. We're not going to declare that trend [indiscernible] just yet but it is a positive signal. Our annual loan growth forecast excluding PPP remains in the low to mid single digits and I'll cover both loan yields and PPP in just a second. Loan deposits. We had another big deposit quarter with lower rates we get more deposits. We've experienced significant growth in non-interest bearing deposits ending at $7.1 billion at quarter-end of 47% since year end. The number of checking accounts is up almost 9% since year end. So if I could do a cartwheel I'd be doing one right now. We're estimating that the PPP program provided about $1.5 billion of our deposit growth year-to-date. That's a rough estimate because it's basically impossible to determine a precise number that number is simply the net growth in PPP borrowers deposits between March 31 and September 30. Last quarter we mentioned that we expected those funds to evaporate over the next few quarters. My thoughts now are that we could be holding all of that money for an extended period of time. More on deposit rates in just a second. Next is our usual update to our loan price and giving the circumstances. This is…

People to ramp into 2021. Briefly concerning [indiscernible] eventually this slide will lose its prominence and be permanently relocated to the supplemental part of the slide deck. Our reserve without PPP loans increased only two basis points to 1.43%. We also increased our off balance sheet reserves slightly. As the slide notes our unemployment forecast improved slightly this quarter. So that plus flattish loan growth contributed to the modest reserve bill. The PPP program is back in the news not going to go through the entire slide but we've split out the smaller loan balances in the top right table. We're unsure as to how the [indiscernible] will manage the simplified approval process or the timing for reimbursement but suffice to say they've carved out the smaller loans to make it easier to get repaid. We won't characterize the rigor of the forgiveness process as similar to the initial funding process but we are not optimistic that the larger loans are likely will likely be a choppier process at least that's what we think for now. So we're expecting some [indiscernible] income left in the fourth quarter due to PPP forgiveness but expect first quarter of 2021 we'll see the greater list. This is a new slide. As I've discussed on the expense live regarding incentives this serves as a foundation for what we're trying to do as we ramp into 2021 with increased momentum. It was a great quarter for us as PPNR per share increased above $2 for the quarter to $2.08 per share. Our goal is to try to ramp into 2021 with a mid to high single digit PPNR per share growth which we believe will compare very favorably to peers. Aiding our PPNR growth this year is reduced incentives so increasing our expense load for…

Thank you Harold. Good morning everyone. From a traditional credit metrics and past dues net charge offs, NPAs and classified assets Pinnacle's loan portfolio continues to hold up well. That said we understand we may not yet have experienced COVID full impact on our loan portfolio. Before I discuss our credit slides first a few comments about our defensive credit work completed during prior quarters. During the second quarter we regraded all loans greater than a million that had a payment deferral. We also regraded all hotel loans and all pre-retail loans greater than a million regardless of the deferral status. During the third quarter our focus broadened to include the remaining sections of our portfolio that we did not regrade during the second quarter. This extensive underwriting effort included our past grade loans with exposures greater than 2 million. The only risk rates we did not re-underwrite were our top two grades for our very best loans generally loans secured by cash for marketable securities. For our watch list criticized classified loans, our review threshold was much lower at just 500,000. Our regrading exercise was a tremendous amount of work for our lenders and credit staff but we believe the benefit of quickly identifying any credits materially impacted by COVID will help us in the long run. During the third quarter we reviewed about 2,500 loans totaling approximately 10 billion in exposures. Our work during the third quarter consisted of collecting current borrower monthly financial statements conducting a survey questionnaire of our C&I clients, collecting data points in our [indiscernible] loans. The results of our third quarter credit work is encouraging. At the completion of regrading work, the newly identified classified loans in the quarter was only $33.6 million but even more positive is that the net change in…

Okay. Tim, I will take it from here. As part of our Q1 earnings call I talked to you about moving our firm from an offensive to a defensive posture. That included things like building a huge liquidity position on our balance sheet, adding a quarter of a billion dollars in tier one capital, nearly tripling our loan loss allowance since year-end and scouring our loan book aggressively gathering financial information from borrowers to ascertain risk and respond appropriately. It also included things like de-emphasizing our continuous recruitment of revenue producers, never mind that the previous momentum in our recruitment pipelines resulted in bringing on 56 revenue producers year-to-date. So all that defensive work has been completed and I'm not telling you that there is no further need to be defensive but I am telling you that the human resources that were utilized on those defensive efforts that grew and borrowed by borrower assessment as an example we can now take that resource and use it on more offensive sorts of initiatives. So as we move forward number one of course is that we'll continue to the enacted dialogue with our existing borrowers to aggressively respond to changing risk profiles. Number two, Harold's already discussed the upcoming maturities in our wholesale deposit book that will facilitate the unwinding of our excess liquidity as the pandemics subside. Thirdly during the course of this year we have specifically launched four broad initiatives intended to accelerate our PPNR. They include, one, proactively and aggressively lowering the cost of our existing deposit book. We intend to drive it below 25 basis points by year end. Two, gathering additional low cost deposits. We have built and launched a number of deposit products with enormous potential. The structure they alter our deposit mix over time. These…

Thank you Mr. Turner. The floor is now open for your questions. [Operator Instructions] Our first question comes from Stephen Scouten of Piper Sandler. Your line is now open.

Hey good morning everyone.

Good morning.

So Terry you gave a lot of good color though about the market share takeaway opportunity and obviously you guys have a great track record there. I'm wondering specifically when you think that really ramps up from a talent acquisition standpoint again and is that the primary medium for which you think that will occur or do you start thinking more about M&A in some of these markets as well to kind of capitalize on all that opportunity?

I think Steve we have always and we continue to view ourselves to be primarily organic growers. You can look at those historical charts and say we have mixed in acquisition and I think done it successfully. I wouldn't be surprised if we did that but I just want to be clear we primarily think about organic growth. Your question is a great one the market share movement to be honest with you, I wouldn't be for just launching out here and going out trying to meet a bunch of people have some aggressive calling program off of done in brad list, run an ad campaign, sales promotions all that. We don't do any of that stuff. It's all dependent on getting relationship managers, experienced relationship managers from other banks having them move those books of business to us and so that would continue to be the approach. I think there are two things that are important about that phenomenon there. Number one, I think I indicated early on that 22% of our existing [indiscernible] have been here for less than two years. That's enormous market share taking capacity. We as I mentioned I'm switching terms on you here but I'll go back to revenue producers instead of relationship managers which is a broader term including mortgage originators and brokers and other sorts of revenue producers but among those revenue producers even trying to shut down or tamp down the hiring we've added 56 revenue producers this year and so all of that hiring that has already occurred it is still in relatively early stage maturation represents enormous share-taking opportunity. The second aspect of that idea here is we are finding much more vulnerability today in the market than we would have over the last several quarters particularly at some of these larger banks that continue to struggle with regulatory issues, merchant integration issues and so forth and so we feel like we've got a number of folks that we had at some stage of recruitment. As I mentioned we did tamp it down slow it down but a lot of those folks are beginning to contact us and so they want to reconsider and so I don't mean to go on and on but you get the idea. It's primarily about organic growth. It's primarily about market share movement by relationship managers and we've got a big queue of folks that are in early stage maturation already on the books and we're optimistic about our ability to hire more.

Perfect. Very helpful. And then can you maybe talk a little bit about what you're seeing on the market demand side? There seems to be a view that metro areas are going to be in a bad spot for the years to come but you guys are in kind of nine metro MSAs that are maybe smaller, mid-sized metronome stays where I think we'd still see growth in the southeast. So can you really touch on what you're seeing there and maybe especially in Nashville where there always seems to be this view that the Nashville is just music and tourism?

Yes. Well, thank you for that question. I think let's talk about loan demand. Current loan demand, I do think loan demand is near zero, I mean it's a little better than that but not much. it's pretty tight here right now but if you think about it the reason I think for that is obvious one you got a lot of people are saying well right now, I don't feel like taking a big risk. Number two I got tons of liquidity on my balance sheet. I just got a bunch of PPP money. I mean there are a lot of reasons why loan demand would be just a little soft and likely to be that over a few quarters which is the criticality for us of this market share takeaway. That's the case for why we think we'll grow but if you're asking about the view over any extended period of time for a market like Nashville. I think we had an analyst that actually conducted sort of an investor day if you will or investor call with the chamber of commerce and I think they came away. I don't put words in their mouth but I think they came away very encouraged and excited about the potential what's in the business development pipeline. As you know what drives growth in this market has been corporate relocations and what drives corporate relocations is primarily tax rates and so my belief is that phenomenon's going to continue for an extended period of time. Steve I know travel is no doubt limited. Tourism is definitely down but I'll tell you this if you could make it to Nashville you would still see a large number of cranes that scare some people but it doesn't particularly scare me because it we believe that this market is going to continue to grow at an outside space I'll spare you the chamber of commerce speech but I promise you the tax rate and tax implications are likely to expand that benefit to markets like Nashville not the track.

Perfect. And maybe one last real quick one for me. On the loan loss reserve percentage I'm wondering obviously this isn't probably a near-term event but as net charge-offs probably flow through a little bit from the pandemic and we see credit normalized over the next who knows three, four, five quarters where can we see that loan losses reserve kind of normalized in a post [indiscernible] world? Is the kind of 109 level we saw at 1Q, 20 is that the right way to think about it as things normalized?

Yes Steve I'm not sure where that where it's going to end up what we're doing is trying to keep it where it is right now. we don't think it's a good time to try to see it go down but eventually we think as charge-offs materialize and I got to hand it off to Tim's group I going to hand it off to the centralized underwriting groups, they're digging up under all kinds of rocks trying to find out where what the quality and the loss content this book is and so we anticipate that we'll see some charge off materialize not that we've identified any of them yet we haven't but we just think that's coming and then towards the end of next year we likely will see this reserve kind of need to get some relief. Now a lot of that's dependent on what unemployment forecasts look like but we're not seeing the loss content materialized in the loan book like we would have otherwise thought it was going to materialize back in March.

Got it. Perfect. Thanks so much for the help guys and congrats on a really good quarter.

Thank you.

Thank you. And our next question comes from Jennifer Demba of Truist Securities. Your line is now open.

Thank you. Good morning.

Hey Jennifer, good morning.

Congratulations on your almost 20-year anniversary. I can't believe it.

We're getting old, yes.

Older.

You mentioned the market share gain opportunity Terry. Do you think one of those opportunities would be specific to first citizens in North Carolina as they are distracted with the CIT partnership over the next two or three years? That's my first question. My second question is can you give us an update on what you're seeing in your Atlanta de novo? Thanks.

Yes. That's a great question. I do think there is likely to be some opportunity in that transaction. At this point I'm not, I guess maybe I'd characterize it this way my excitement about that opportunity would be less than the excitement I have about the turmoil in companies like Wells and Truvis and those sorts of companies that the vulnerability there is seems larger and seems more timely and those kinds of things. This invariably when you get involved in integration work there will be an internal focus they'll create some vulnerability and we'll certainly try to seize on it but I view those other opportunities to be still better I guess is maybe the way to characterize that. I believe in the Atlanta market that we're doing well. I don't mind to sort of give you some round numbers, I don't have exactly the numbers in front of me but my guess is today there's about $70 million in outstanding there is probably north of $100 million in commitments that are out. Some of those are I think construction kinds of things that might fund up over time. So it's not all immediate stuff but that pipeline of commitments that exist that will have fundings is pretty large and I think if Rob [indiscernible] we're talking to you about the rest of his pipeline in other words deals that he has in the pipe that he believes he's going to close that he doesn't yet have he would say that that momentum is building as well. And of course the real measure or the real catalyst I guess might be a better word for our success has to do with hiring and so I think Rob again would tell you that his hiring pipeline is full. Again don't owe me exactly. This will be about right. He's got about 17 associates down there today. I think about four which might be classified as retail branch-based associates. The others would be either financial advisors or credit analysts or something that's supporting a revenue stream there and again it looks like to me that pipeline is really swell. We're likely to have an announcement or two in the next week or two that I think will be really I'd put in a high profile higher category. So again I think we're very encouraged and continue to think Rob's doing a great job. I think the results are materializing.

If I could follow up one question on BHG. So that performance obviously has been really terrific. Who are the most stressed borrowers in the BHG sub segment? They are still [indiscernible] or what are you seeing among their group of borrowers? Thanks.

Yes. I think [indiscernible] are still probably the most stressed but as it sits today, I'm not sure of any market where they've got loans that are not permitting elective surgery. So I think all the dentists are open. I think all the surgeons are open. The optometrists were a little stressed in the second quarter but I think by and large their business flows are coming back. I can dig on that some more for you Jennifer but right now I'm not sure that I can discern any particular segment based on the reports I get from BHG that there is one that's more stressed than another.

Thanks so much.

I will say that non-medical book, they're call it the engineers and the architects and those folks that they've branched into over the last two or three years that book is performing better than the call it the medical book. So that's been a real pleasing thing.

Thank you.

Thank you. And our next question comes from Jared Shaw of Wells Fargo Securities. Your line is now open.

Hey guys good morning.

Hey Jared, good morning. How are you doing?

Good, thanks. Congratulations on a strong quarter. Hey just following up Terry you said this could be a once in a generation opportunity to take market share and just given the success you've had hiring people and using Atlanta as an example. Should we really expect to think maybe you go on the offensive now and target some additional geographies obviously some of the bigger competitors you mentioned do business and more than just Atlanta? Are there opportunities for you to expand into new geographies and really take that that hiring model and accelerate it a little faster and would that turn into potentially a different expense level for 2021 in the near term while that's building out?

Jared that's a fabulous question and honestly I guess I might characterize it this way we might be tempted by that and we can be opportunistic in that regard but the truth is the play that we most want to make is to harvest the opportunity in markets like Charlotte, North Carolina, Raleigh, North Carolina. I think Raleigh, North Carolina was just highlighted as the hottest real estate market in the United States it's a fabulous market whatever metric you want to look at. I think you can see we're in a 13 share position but we're the fastest growing bank and so my objective is to gin up what's happening in Charlotte, what's happening in Raleigh, what's happening in Charleston in particular those three markets that's where we really want to invest, that's where we want to grow and so forth. And so I don't mean to say I can't do anything else if I'm doing that but I do want to say that that's the most important thing for us to do is seize that opportunity. That is a grand growth opportunity and again I know sometimes people are not as interested in things like the distinctive service experience but that's a powerful and important point we spent time getting that service equation right and it's now time to harvest that in those high growth markets.

Okay. And that sort of goes back to the 22% of hires that have been there less than two years give a lot in those markets so you feel that they can start to really make some [heck]?

I do believe that. I also think as I mentioned if I again just trying to be candid about where the opportunity is I think the hiring opportunities are particularly strong at wells and to maybe a slightly lesser degree but I think picking up at [indiscernible] and so again South Carolina markets of course are filled with wells and some form of [indiscernible] into your SunTrust bankers.

Okay. Great. So then shifting a little bit to BHG and looking at the growth that they've had in recourse. Are they subject to CECIL? Do they need to build that recourse or the same way that you're building out an allowance or is that not necessarily reflective of what their expectations for full losses are at this point in time? They have maybe a little more flexibility?

Yes. There is no doubt that this is helping them get towards a CECIL number at some point. CECIL for them I think is a 2024 issue and they're going down the path now trying to analyze and quantify and build the models to get to a CECIL compliant credit loss reserved but I'm not sure where that number is going to actually end up.

Okay. But we shouldn't necessarily look at the at the recourse being significantly higher than the losses at this point as a direct tie into where they think the total loss content is today.

Yes Jared I think if I understand your question right I think you're right. We should not [indiscernible].

Okay. Got it and then on BHG with the success of having that securitization do you think that 2021 you'll see that strategy shift back more towards beginning to emphasize securitization and maybe some on balance sheet opportunities more so than straight gain on sale or will it be a continue to be a good mix?

Yes, I think they will continue a good mix. I think they believe that they will be back at the securitization game early next year. So they're ramping up to probably do another issuance call it January, February.

Great. Thanks a lot.

All right, thanks Jared.

Thank you. And our next question comes from Brock Vandervliet of UBS. Your line is not open.

Thanks. Just following on the questions on BHG in terms of the revenue profile you've somewhat longer term guidance about BHG in the past and as we kind of emerge from COVID it seems like BHG is going very strongly. The mix of securitization versus traditional placements is kind of what it is. What should we be thinking about in terms of the revenue or earnings profile there?

Yes. I think what we're looking at for next year is probably a high single digit, low double digit kind of number for them next year. We believe they've got the momentum to deliver that. So that would be what our current thinking is Brock.

Okay and Harold I heard the guide on funding costs. I guess on the opposite side where do you see securities yields trending over time and within that securities book we've seen a number of other banks really look to ramp that up whether it's now or possibly waiting until after the election and hoping for a steeper curve but should we look for really sharply higher balance there given that loan growth is muted right now.

Yes. I don't think I don't think we're going to be focused on building the loan book or executing on any kind of leverage strategy to take some of this liquidity.

Building the securities book.

I'm sorry building the securities book. That's what I mean I just said the wrong word. Building the securities book to execute on a leverage strategy. Bond yields right now look to be pretty good. We've done a lot of municipal acquisitions. We think a lot of that will hang with us but to say that we're going to develop a strategy to kind of ramp up the bond book by 20% or even 10% I just don't see that.

Okay and those yields you have a sense of where they could drift assuming rates stick where they are?

Where they are right now I think our municipal book will help us hold yields but I can't help believe that we're going to see some deterioration and bond yields probably over the next several quarters but I don't think it's going to be that significant.

Okay. Thank you.

Thank you. And our next question comes from Steven Alexopoulos of JPMorgan. Your line is now open.

Hey good morning.

Hi Steve.

To start on the new incentive can you give more color on exactly what the new incentive is? Is it a 4Q, 20 incentive or is it a full year 20 in terms of results?

Yes. It's for the whole year. We implemented it and I think the [indiscernible] approved it late July. So what we tried to do was determine what a reasonable growth rate and PPNR would be for 2020 over 2019 and then try to figure out how to hit that number and so it gives us some consistent messaging with not only revenue producers but the whole all 2,500 people and it keeps people in the game because obviously with the first quarter reserve bill and then again in the second quarter 80% of our incentive was tied to EPS growth and so that effectively knocked us out of the game for any kind of cash bonus this year. So we were trying to create something although not get them all the way back to the start line just try to get us at least to a 50% target level, develop some plan that will help us not only this year but more importantly 2021.

And Harold what growth rate do you need to maximize that incentive?

What we did and we'll talk about it in the proxy what we did is we looked at where our peers were and tried to consider the anomalies within the peer group and said okay what does it take to get into the top quartile of that peer group.

Got it. Okay. Got it. That's helpful. And then just following up on all the commentaries around the market share gain. Terry I think I've asked you this before but what exactly was it that the larger banks had done with the PPP program to upset so many customers? Did they just turn down people for the loans they weren't available? Can you give more color what's created this opportunity?

Yes. Again I want to cite what I hear from Greenwich and then I'll give you my own personal commentary which may be less valuable. I don't know but great would say that the big banks were unresponsive. Many of them were slow to get their systems up. There was very little communication between the bank and the borrowers. All that led to mass confusion. As the money ran out it led to mass frustration and I think just sort of the impersonal nature of how that process worked at the big companies versus the more personalized approach that smaller banks typically used where as an example for us, I can't recite now how many webinars we held but we had thousands of borrowers attending our webinars many of whom weren't even our customers because that became the place you go to get information about how do you apply for this, how does the application work, what are the issues to think through. What kind of documentation do I need and so if you're not supplying that information you're creating lots of apprehension among your borrowers and they're feeling underserved and so again I think this phenomenon of the PPP process, the deferral process is Steven's we've talked before if you go to two ends of the spectrum on how to handle the deferral and I promise you I'm not acting like either one of them is really bad or really good I'll just tell you what we did and why we did it and why I think it benefits us on one end of the spectrum you could say look this world's gone the heck of a handbasket you want to defer you come down here and bring me a bunch of financial information and give me some more guarantee and put up the cash reserve and so forth. And I'm going to give you a deferral and that's not an irresponsible thing to do. I mean if you're a credit person you're thinking about improving your borrowing base, trying to minimize losses and so forth that would be a take you could take. Our view was to give somebody a deferral for 90 days in the middle of a time where nobody knew what it was didn't substantially increase our credit risk and it made our borrowers love us and so that was the reason that we went in that direction and so again I'm just sort of rambling about two or three things that are sort of different in the approach but if you had to get it down to a word on one side it's a more personalized service that puts borrowers at ease and makes them feel like you're looking after them and a less personalized kind of service that creates apprehension among borrowers which leads to frustration, irritation and so forth. And so that'd be my characterization of it.

Okay. Yes. That's helpful color. Maybe just one final one on BHG given the deferral trends I was surprised that the recourse reserve ratio increased I mean it was modest but the reserve's up 200 million in the quarter. The ratio is up why would that have gone higher given these really impressive deferral trends? Thanks.

Alright. So keep in mind they're still a private company and there is a lot more qualitative assessments going on than with perhaps a CECIL model like we have to develop and have to roll out that's more or less subjective. So I think being what BHG is doing is they're just anticipating probably doing some conservative analyzing and building a reserve.

Okay. That's helpful. Thanks for all the color.

That's all I can give you.

Thank you. And our next question comes from Catherine Mealor of KBW. Your line is now open.

Thanks. Good morning.

Hi, Catherine. Good morning.

I just wanted to follow up on your PPNR commentary and outlook. So Harold you talked about wanting to grow the PPNR, I think well I don't know if you can mention that you wanted to kind of stick in this mid single digit growth rate in 2021 off of 2020 but you're at least looking to grow PPNR as we move into next year and so how should we think about that as we think about PPP rolling off and mortgage kind of normalizing? Do you think even with those two headwinds PPNR can still grow next year or is it more PPNR per share can grow because of symmetric buyback activity?

Yes. First of all let's make sure we understand that for what I talked about during the slide was that we've excluded PPP and BHG and the liquidity bill. So we're kind of quantifying that of those numbers and excluding that from the calculation of PPNR growth. So you're right, how does one anticipate what PPP is going to do to our numbers this year or next year and so we didn't think it was fair to put that into an incentive target and then all of a sudden something happened with the SBA. They make it more onerous which we think they will and the PPP revenue is not materialized. So we go through a process to eliminate that. So what we're trying to do is get down to blocking and tackling and that's how we come up with our anticipated PPNR growth rate. Now when we shoot for top quartile performance it's a lot more difficult to get that out of the peers. So it's not exactly apples and apples when we start comparing to the peers but we would believe that the revenue contribution that we're getting from PPP is greater from than a lot of our peers are going to get. So that's probably a little bit of a headwind when you start talking about peer rankings for us. Does that make sense?

It does but so I'm just making sure your commentary on a single digit growth PPNR was more around the incentive plan for this year not as much an outlook for what you can do in ‘21.

Well, that is true single to high, mid to high single digit growth and looking at what the peers are doing next year it's likely to be a similar number for next year.

Great and if that includes PPP, BHG and liquidity?

That excludes PPP, BHG and liquidity for us.

Great. Okay. That makes sense. And then also on the expense side, so you've got it for expenses to be flat to down is that inclusive of the incentive comp catch up this quarter? So just look at bottom line expenses and that's the number that's kind of flattening down next quarter.

Yes. The third quarter incentive had to catch us up to 75% of the whole year. So we don't have as far to go in the fourth quarter with the incentive growth.

Got it okay but still you're so in what scenario are expenses flat in 4Q and another 90 million? I'm sorry I'm looking at these excuse me another 144 million?

Yes. I think well, I think what's going to drive it primarily is that incentive accrual because the PPNR incentive is call it $15 million and I had to get 75% of that into the third quarter number and I'll only have to get 25% of that into the fourth quarter.

Got it. Okay. Got it. So the really expensive should be down next quarter.

Yes.

Thinking that okay. It was the flat that was what was throwing me off okay. All right. Great. And then we just one last question on just do you have the updated criticized metrics? I mean you gave classified in the press release. Do you have what criticized did [indiscernible] quarter?

It went up Catherine 70 million from last quarter. I don't have that number right in front of me as a percentage.

Okay. But up 70. And what drove that increase? What kind of credits are you seeing?

Catherine it was mostly hotels. We had a further account of hotels in July that went into a risk rate 70.

Great. Okay. Great. Thank you. Great quarter.

Thank you.

Thank you. And this does conclude our question-and-answer session. Ladies and gentlemen this includes today's conference call. Thank you for participating and you may now disconnect.