What Management Said
Read the full Q2 2025 transcript ↗I believe that our relentless focus on these three simple metrics accounts for the extraordinary total shareholder return we've produced over more than two decades now. Other metrics like net interest margin, cost of funds, deposit betas, efficiency ratios are all interesting, but in my opinion, they're not highly correlated with total shareholder returns. And so that's why we're so dogging in our pursuit of revenue, EPS, and tangible book value per share growth. In 2Q twenty five, revenue was up 15.1% over the same quarter last year.
And as you can see on the leftmost chart, peers have been unable to grow net interest income while we grew 7%. It's been a time of slow economic growth leading to very limited loan growth over the last couple of years. And so you can see in the center chart, peers have been unable to grow their earning assets while our model produced double digit earning asset growth. Remember those two double digit balance sheet growth metrics, 10% earning asset growth and 13% core deposit growth even in a difficult operating environment when peers struggle to grow.
Now, I'm always cautious when I'm telling the story about our ability to produce such rapid and reliable balance sheet growth. In my opinion, we've become the employer of choice for many of those revenue producers at our largest competitors. So if you think through that idea right there, generally we're hiring revenue producers with nearly two decades of experience. And what that means is they can move their book quickly, which produces both rapid and reliable growth, and they intentionally leave their bad credits behind, which in my view produces outstanding asset quality.
What went well
- Second quarter revenue was up 15.1% over the same quarter last year, adjusted EPS was up 22.7%, and tangible book value per share was up 10.9%, extending double-digit CAGRs over the last decade on all three metrics.
- End-of-period loans increased 10.7% linked-quarter annualized, better than the firm expected at the start of the quarter, led by roughly 22% annualized C&I growth that was broad-based across the franchise.
- The net interest margin finished up two basis points at 3.23%, ahead of the flat-to-slightly-up expectation, and net interest income grew better than 16% linked-quarter annualized.
- BHG delivered a strong quarter with over $26 million of fee revenue and community-bank-network loan sales at the largest spread since 2022, prompting the firm to raise BHG's 2025 earnings growth estimate from 20% to approximately 40% over 2024.
- The firm raised its 2025 non-interest income growth guidance from 8%-10% to 12%-15% on strength in banking fees, wealth management, and BHG.
- The associate incentive payout accrual was raised to 115% of target as of June 30, reflecting a more positive full-year outlook.
- The firm hired 71 revenue producers year to date (38 in the second quarter) and had 59 job offers outstanding at quarter end, with recruiting momentum described as strong as it has ever been.
- The 2020-2024 relationship manager hires are projected to yield approximately $19 billion in organic asset growth through 2029, largely independent of economic or rate cycles.
- Pinnacle's differentiated service model was validated by an 83 Net Promoter Score and number-one Greenwich rankings across metrics such as ease of doing business, trust, and treasury management.
- Since the second quarter of 2023, Pinnacle grew net interest income 7% and core deposits 13% while peers struggled in a difficult rate environment.
What went wrong
- Deposit growth of 4.7% linked-quarter annualized was less than the firm anticipated, partly due to the impact of second quarter tax payments.
- Net charge-offs increased to 20 basis points in the second quarter from 16 basis points in the first quarter, with almost $7 million arising from relationships reserved for in prior quarters.
- The client base is in a cautious state, unwilling to take on much additional risk amid tariff and macro uncertainty, keeping loan demand muted.
- The lift from fixed-rate loan repricing is less opportunistic than before, with renewal rates now coming in at roughly 5% handles versus 4.5% several quarters ago.
- Deposit costs on new interest-bearing accounts were coming on about 50 basis points over the book (roughly 3.50%-3.60%), reflecting continued competitive tension for funding.
Guidance Changes
| Metric | Period | Current guidance |
|---|---|---|
| End-of-period loan growth | FY2025 | 9%-11% (low end adjusted) |
| Total deposit growth | FY2025 | 7%-10% (maintained) |
| Net interest income growth | FY2025 | 12%-13% (tightened lower end) |
| Net interest margin | FY2025 | flattish with some upward bias |
| Net charge-offs | FY2025 | 18-20 basis points (low end up two basis points) |
| Provision to average loans | FY2025 | 24-25 basis points (upper end lowered) |
| Non-interest income growth | FY2025 | 12%-15% |
| BHG earnings growth | FY2025 | approximately 40% over 2024 |
| Total expenses | FY2025 | $1.145 billion-$1.155 billion |
| Associate incentive payout | FY2025 | 115% of target (as of June 30) |
| Effective tax rate | FY2025 | not restated |
| Fed funds rate assumption | FY2025 | one rate cut forecast in October |
Performance Breakdown
| Metric | YoY | Note |
|---|---|---|
| Revenue | +15.1% | Sustained balance sheet growth from recruiting revenue producers and consolidating their books |
| Adjusted EPS | +22.7% | Operating leverage on outsized revenue growth |
| Tangible book value per share | +10.9% | Reliable balance sheet and earnings compounding |
| Net interest income (since 2Q23) | +7% while peers were unable to grow | Double-digit earning asset growth through the inverted-yield-curve cycle |
| Core deposits (since 2Q23) | +13%, roughly five times the peer median | Market-share takeaway model producing deposit growth despite a shrinking money supply |
| C&I loans | +22% annualized | Broad-based growth across the franchise with no single industry concentration |
| BHG fee revenue | over $26 million in the quarter | Strong production and community-bank-network loan sales at the largest spread since 2022 |
Earnings Call Themes & Trends
| Topic | Previous mention | Current period | Trend |
|---|---|---|---|
| Organic hiring model | 12% CAGR in revenue producer hiring | 71 producers hired year to date with 59 offers outstanding; 2020-2024 cohort projected to add ~$19 billion in assets through 2029 | — |
| Market-share takeaway strategy | Long-standing targeting of vulnerable share leaders | Reinforced as the safest growth path, capitalizing on competitors' poor client and associate experience | — |
| BHG | 20% 2025 growth estimate | Raised to ~40% on better credit (described as pivoted), lower operating costs, and strong lead flow; roughly 70/30 consumer/commercial mix; monetization possible as the market improves | — |
| Client sentiment and loan demand | Expected pickup earlier in the year | Cautious clients keeping the clutch in on tariff and macro uncertainty; upside to loan growth if broader demand returns | — |
| CRE re-entry | Lowered concentration limits | Re-entered the market three to four months ago in multifamily and industrial; targeting ~70% of capital for construction and 225% for total CRE | — |
| Regulatory environment | — | More positive tone from regulators, including FDIC easing on M&A and dialogue on the $100 billion threshold | — |
Q&A Summary
Is the 2020-2024 cohort expected to peak at roughly $19 billion, and given that hiring scale, is there any appetite for M&A if rules changed?
Terry Turner confirmed the ~$19 billion figure reflects relationship managers building to roughly a $65 million book on each side of the balance sheet, and reaffirmed the organic model, viewing M&A only in the context of board succession planning rather than for growth.
What are existing customers and RMs saying about appetite for growth?
Harold Carpenter said a survey of over 1,100 clients (~$13 billion in commitments) showed a cautious client base unwilling to take much additional risk, with Terry Turner noting underlying optimism but clients waiting for tariff clarity.
What is driving the stronger second-half BHG outlook and the decline in the equity method investment?
Harold Carpenter attributed the outlook to both stronger production and improved credit, which had pivoted, and said the investment declined due to a sizable dividend paid by BHG's CEO.
Where are incremental deposit costs today as growth improves?
Harold Carpenter said new interest-bearing accounts were coming on about 50 basis points over the book, roughly 3.50%-3.60%, while current loan yields were still in the high sixes.
What would it take to reach the 125% maximum incentive payout?
Harold Carpenter said the internal forecast provides a path but the firm would need to land on the better side of the loan, deposit, and fee growth ranges.
If industry loan growth accelerated, could Pinnacle exceed its 2025 range?
Terry Turner agreed, noting essentially 100% of recent loan growth has come from new hires, so a return of broader loan demand would be additive to current projections.
Is the pool of experienced talent in the Southeast still robust given other banks now hiring?
Terry Turner said success and hire quality remain as strong as ever due to the differentiated referral-based recruiting model, backed by number-one Greenwich service rankings that aid recruiting.
More on Pinnacle Financial Partners, Inc.
Reported 2025-07-16 · figures from the Pinnacle Financial Partners, Inc. Q2 2025 earnings call.
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