Pinnacle Financial Partners, Inc. Q2 FY2025 earnings call

• Focus on shareholder value dashboard with emphasis on revenue growth, EPS growth, and tangible book value per share growth as highly correlated with share price performance.
• Hiring of experienced revenue producers with a 12% CAGR, utilizing a market share takeaway strategy by targeting large market share leaders in their footprint.
• Loan growth driven by new markets and relationship managers, with pipelines remaining strong. Deposit growth influenced by second quarter tax payments and expected stronger growth in the second half of the year.
• BHG had strong second quarter performance, with revised earnings estimate for 2025 from 20% growth to ~40% growth over 2024.

In 2Q '25, revenue was up 15.1% over the same quarter last year. Adjusted EPS was up 22.7% over the same quarter last year, and tangible book value per share was up 10.9% over the same quarter last year. End-of-period loans increased by 10.7% linked quarter annualized. Deposit growth came in at a 4.7% linked quarter annualized growth rate. Net interest margin finished up 2 basis points at 3.23%. BHG had a strong second quarter, providing fee revenues to Pinnacle of over $26 million.

• Loan growth outlook adjusted to 9% to 11% growth for 2025.
• Total deposits growth estimate maintained at 7% to 10% for 2025.
• Net interest income growth outlook revised to a range of 12% to 13% for 2025.
• BHG earnings estimate revised to approximately 40% growth over 2024 results.
• Fees guidance revised to 12% to 15% growth for 2025.
• Expenses outlook adjusted to a range of $1.145 billion to $1.155 billion for 2025.

• Risks related to the rate environment, including potential impact on loan and deposit pricing.
• Economic conditions that could materially deteriorate and affect reserve levels.
• Integration risk associated with potential M&A activity, though Pinnacle views itself primarily as an organic grower.
• Regulatory changes and competition in the hiring and market expansion landscape.

Q: Ben Gerlinger from Citi asked about the growth potential from 5-year cohort of hires and appetite for M&A.

A: Michael Terry Turner responded that the cohort's growth is based on organic hires, and Pinnacle views itself primarily as an organic grower, with M&A considered only for succession planning or extreme circumstances.

Q: Jared Shaw from Barclays Capital inquired about CRE appetite and BHG business mix.

A: Harold Carpenter responded on CRE start to write new credits and BHG having a 70-30 consumer-commercial business mix.

Q: Catherine Mealor from KBW asked about BHG's second half outlook and deposit costs.

A: Harold Carpenter responded on BHG's drivers being production and credit, and deposit costs around 350-360 basis points for new deposits.

Q: Stephen Scouten from Piper Sandler asked about BHG business mix and incentive payout.

A: Harold Carpenter responded on BHG mix and incentive payout needing to be on the better side of estimated ranges for 125% payout.

Q: Casey Haire from Autonomous Research asked about NIM drivers and beta expectations.

A: Harold Carpenter responded on NIM drivers and beta expecting little change in next 3 months but room for improvement with rate cuts.

Q: Samuel Varga from UBS asked about fixed rate loan renewals and regulatory developments.

A: Harold Carpenter responded on loan spreads and Michael Terry Turner on positive regulatory tone.

Q: Tim Mitchell from Raymond James asked about BHG monetization and loan growth acceleration.

A: Michael Terry Turner on BHG monetization timeline uncertainty and loan growth acceleration on top of current projections with loan demand.

Q: Timur Braziler from Wells Fargo asked about deposit beta and BHG monetization.

A: Harold Carpenter on deposit beta and Michael Terry Turner on BHG monetization being dependent on market conditions.

Q: Brian Martin from KKR asked about BHG quarterly performance and hiring in new markets.

A: Harold Carpenter on BHG flat performance and Michael Terry Turner on hiring in new markets being both new people and market deepening.

Q: Anthony Elian from JPMorgan asked about C&I growth drivers and talent pool.

A: Harold Carpenter on C&I growth being broad-based and Michael Terry Turner on robust talent pool with unique hiring model.