Q2 2026 Pinnacle Financial Partners Inc Earnings Call

July 23, 2026

Speaker #1: Assistance, please signal a conference specialist by pressing *0. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press * then 1 on your touch-tone phone.

Speaker #1: To withdraw your question, please press * then 2. Please note this event is being recorded. I will now turn the call over to Sam Tiagi, Senior Director and Vestor Relations.

Speaker #1: Good morning, and welcome to the Pinnacle Financial Partners Q2 2026 earnings call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing *0.

Speaker #1: Please go ahead.

Speaker #2: Thank you, and good morning. During today's quarterly earnings call, we will reference the slides and press release that are available within the investor relations section of our website.

Speaker #1: After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press * then 1 on your touchtone phone.

Speaker #2: PNFP.com. President and CEO Kevin Blair will begin the call. He will be followed by our Chief Financial Officer Jamie Gregory. And they will be available to answer your questions at the end of the call.

Speaker #1: To withdraw your question, please press * then 2. Please note this event is being recorded. I will now turn the call over to Sam Tiagi, Senior Director and Investor Relations.

Speaker #2: Our comments include forward-looking statements. These statements are subject to risks and uncertainties in the actual results could vary materially. We will list these factors that might cause results to differ materially in our press release and in our SEC filings, which are available on our website.

Speaker #1: Please go ahead.

Speaker #2: Thank you, and good morning. During today's quarterly earnings call, we will reference the slides and press release that are available within the Investor Relations section of our website.

Speaker #2: We do not assume any obligation to update any forward-looking statements because of new information, early developments, or otherwise, except as may be required by law.

Speaker #2: PNFP.com. President and CEO Kevin Blair will begin the call. He will be followed by our Chief Financial Officer, Jamie Gregory. And they will be available to answer your questions at the end of the call.

Speaker #2: During the call, we will reference non-GAAP financial measures related to the company's performance. You may see the reconciliation of these measures in the appendix to our presentation.

Speaker #2: And now, Kevin Blair will provide an overview of the quarter.

Speaker #1: Thank you, Sam, and good morning, everyone. We have remained focused on the leverage points that help us deliver on our commitments in continue a long and proud heritage of growth and success.

Speaker #2: We do not assume any obligation to update any forward-looking statements because of new information, early developments, or otherwise, except as may be required by law.

Speaker #1: This quarter is another proof point of that focus. For the second quarter of 2026, we reported diluted EPS of $2.07. An adjusted diluted EPS of $2.50.

Speaker #1: Excluding $82 million of pre-tax adjusted items. Year-to-date, adjusted EPS is up 26% versus the same period last year. We are maintaining our 2026 guidance with our year-to-date performance giving us added conviction in the ranges we set.

Speaker #2: And now, Kevin Blair will provide an overview of the quarter.

Speaker #3: Thank you, Sam, and good morning, everyone. We have remained focused on the leverage points that help us deliver on our commitments in continue a long and proud heritage of growth and success.

Speaker #1: Starting with the balance sheet, loans grew 2.9 billion dollars late quarter, ahead of our expectations. Deposits were up 795 million dollars, stronger than the combined firm's historical second quarter performance, which is typically our seasonally lightest given municipal outflows and tax-related payments.

Speaker #3: This quarter is another proof point of that focus. For the second quarter of 2026, we reported diluted EPS of $2.07, an adjusted diluted EPS of $2.50, excluding $82 million of pre-tax adjusted items.

Speaker #1: This strong growth in earning assets, up 4% quarter over quarter, led to 2% growth in net interest income. This is the broad-based high-quality growth that has long been the hallmark of this firm, and the combination is making it even more powerful.

Speaker #3: Year-to-date, adjusted EPS is up 26% versus the same period last year. We are maintaining our 2026 guidance with our year-to-date performance giving us added.

Speaker #1: Fee income is another area where our differentiation shows up, with double-digit year-to-date growth on a combined firm basis. Core banking, wealth management, and capital markets all posted strong year-over-year growth, as we have seen most firms lose a step during integration, yet we are gaining share and deepening client relationships in the middle of a merger.

Speaker #1: On the expenses, we stayed disciplined while continuing to invest in the areas where we see the greatest opportunity to accelerate long-term growth. Those are not competing priorities at Pinnacle; they are the same priority.

Speaker #1: Credit performance continues to be a real strength. As expected, charge-offs remain low and NPAs decline this quarter to 50 basis points. The quality of what we are putting on the books stands out.

Speaker #1: As we have seen, most firms lose a step during integration, yet we are gaining share in deepening client relationships in the middle of a merger.

Speaker #1: The reserve on new production is coming in lower than the portfolio as a whole, which is one reason our ACL ratio moved down this quarter.

Speaker #1: Regarding expenses, we stayed disciplined while continuing to invest in the areas where we see the greatest opportunity to accelerate long-term growth. Those are not competing priorities at Pinnacle; they are the same priority.

Speaker #1: Growth, credit discipline, and yields holding firm on new production. That is three things working at the same time. And none of it happens without two things that come first: top talent and disciplined client selection.

Speaker #1: Credit performance continues to be a real strength. As expected, charge-offs remain low, and NPAs declined this quarter to 50 basis points. The quality of what we are putting on the books stands out.

Speaker #1: Moving to capital, preliminary CET-1 increased 12 basis points this quarter. Reflecting the strength of our core earnings profile and the ability to generate capital, inclusive of roughly 14% annualized loan growth we experienced in Q2.

Speaker #1: The reserve on new production is coming in lower than the portfolio as a whole, which is one reason our ACL ratio moved down this quarter.

Speaker #1: We added 74 experienced revenue producers this quarter, up 48% from first quarter, and up 14% versus the combined second quarter of 2025. Momentum has carried into the third quarter with another 34 producers who have already started or accepted offers in the first half of July.

Speaker #1: Moving to capital, preliminary CET-1 increased 12 basis points this quarter, reflecting the strength of our core earnings profile and the ability to generate capital, inclusive of roughly 14% annualized loan growth we experienced in Q2.

Speaker #1: Of the 124 producers added year-to-date, approximately 50% are from what we consider core synovus markets. That number matters as it says the model is working across the full franchise.

Speaker #1: Also, we have not lowered our standards to get there. Recruiting at Pinnacle is a consistent operating rhythm, built through deep pipelines and clarity on our value proposition.

Speaker #1: That is what turns hiring into durable, compounding growth. We are also holding onto the bankers we already have. Retention excluding merger-related synergies is 94% year-to-date.

Speaker #1: Of the 124 producers added year-to-date, approximately 50% are from what we consider core Synovis markets. That number matters as it says the model is working across the full franchise.

Speaker #1: Client satisfaction and loyalty scores remain best-in-class, and it goes without saying when bankers stay, clients stay. Now let me tell you why the best is still in front of us.

Speaker #1: Also, we have not lowered our standards to get there. Recruiting at Pinnacle is a consistent operating rhythm, built through deep pipelines and clarity on our value proposition.

Speaker #1: Three advantages compound from here. First, our markets. The Southeast footprint continues to grow at roughly twice the national average. Combine that backdrop with the scale of this franchise and the power of the Pinnacle model, and the long-term growth opportunity in front of us is as compelling as any in the industry.

Speaker #1: That is what turns hiring into durable, compounding growth. We are also holding onto the bankers we already have. Retention, excluding merger-related synergies, is 94% year to date.

Speaker #1: Second, the competitive environment is moving in our direction. Larger competitors are dealing with bureaucracy, disruption, and slower decision-making, and it shows in their net promoter scores.

Speaker #1: Client satisfaction and loyalty scores remain best-in-class, and it goes without saying when bankers stay, clients stay. Now let me tell you why the best is still in front of us: three advantages compound from here.

Speaker #1: In fact, coalition grenades' first quarter report placed Pinnacle first amongst peers in business momentum. The net percentage of clients who plan to do more with a bank versus those who plan to do less.

Speaker #1: First, our markets. The Southeast footprint continues to grow at roughly twice the national average. Combine that backdrop with the scale of this franchise and the power of the Pinnacle model, and the long-term growth opportunity in front of us is as compelling as any in the industry.

Speaker #1: And by a wide margin. That is exactly the backdrop that lets us keep taking share and growing. Third, talent dislocation is elevated, and it does not slowing down.

Speaker #1: Second, the competitive environment is moving in our direction. Larger competitors are dealing with bureaucracy, disruption, and slower decision-making—and it shows in their net promoter scores.

Speaker #1: The best bankers want an environment where they are empowered, supported, and able to win. That is exactly what Pinnacle offers, and it is why we continue to be a destination of choice across every market and specialty we operate in.

Speaker #1: In fact, Coalition's first-quarter report placed Pinnacle first among peers in business momentum—the net percentage of clients who plan to do more with a bank versus those who plan to do less.

Speaker #1: Strategies of plan, execution is a result. We are six months in, and the results are doing the talking. Balance sheet growing, core client fee income up significantly, credit strong, capital ratios increasing, bankers joining, retention of team members high, clients responding with loyalty.

Speaker #1: And by a wide margin. That is exactly the backdrop that lets us keep taking share and growing. Third, talent dislocation is elevated and it does not slow down.

Speaker #1: I am proud of what this team has delivered, and even more excited about where we're headed from here. With that, I'll turn it over to Jamie to walk through the second quarter results in more detail.

Speaker #1: Jamie?

Speaker #1: Strategies of plan, execution is a result. We are 6 months in, and the results are doing the talking. Balance sheet growing, core client fee income up significantly, credit strong, capital ratios increasing, bankers joining, retention of team members high, clients responding with loyalty.

Speaker #2: Thank you, Kevin. Before turning to the drivers, let me anchor to the bottom line. Adjusted diluted EPS increased 5% versus the prior quarter, and 25% versus second quarter 2025 results.

Speaker #2: Included in this accretion is the revenue increase from the loan mark and first quarter securities restructuring, which was completely offset by increased intangible amortization.

Speaker #2: Resulting in zero net impact from merger accounting. Relative to standalone consensus earnings estimates at the time of announcement, this represents approximately 19% of adjusted diluted EPS accretion year-to-date.

Speaker #1: Jamie?

Speaker #2: Thank you, Kevin. Before turning to the drivers, let me anchor to the bottom line. Adjusted diluted EPS increased 5% versus the prior quarter and 25% versus second quarter 2025 results.

Speaker #2: A clear proof point that the combination is delivering the earnings power we underwrote. That is also translating into strong profitability. With year-to-date adjusted return on average tangible common equity of 17.7%.

Speaker #2: Included in this accretion is the revenue increase from the loan mark and first quarter securities restructuring, which was completely offset by increased intangible amortization.

Speaker #2: In the second quarter, earning assets were up 4% or 15% annualized due to the combination of strong loan and securities growth. Period in loans increased 2.9 billion dollars or 14% annualized from the first quarter.

Speaker #2: The majority of growth came from CNI lending and was broad-based across our geographic markets and further supported by continued strength in our specialty lending platforms.

Speaker #2: On a year-to-date combined basis, period in loans increased 6% or 12% annualized, excluding the purchase accounting loan mark, exceeding prior guidance. Period in deposits grew 795 million dollars on a linked quarter basis.

Speaker #2: In the second quarter, earning assets were up 4% or 15% annualized due to the combination of strong loan and securities growth. Period N loans increased 2.9 billion dollars or 14% annualized from the first quarter.

Speaker #2: This growth included normal headwinds such as tax season and seasonality in public funds, which generally reverse in the second half of the year and promote what is normally outsized growth in the fourth quarter.

Speaker #2: The majority of growth came from CNI lending and was broad-based across our geographic markets and further supported by continued strength in our specialty lending platforms.

Speaker #2: Excluding the decline in public funds, core deposits grew 963 million dollars or 1% in the second quarter. On a year-to-date combined basis, period in deposits increased 2%, which, along with the more positive seasonal trends, should keep us on pace for full year deposit growth of 8 to 10%.

Speaker #2: On a year-to-date combined basis, period N loans increased 6% or 12% annualized, excluding the purchase accounting loan mark exceeding prior guidance. Period N deposits grew 795 million dollars on a linked quarter basis.

Speaker #2: This growth included normal headwinds such as tax season and seasonality in public funds, which generally reversed in the second half of the year and promote what is normally outsized growth in the fourth quarter.

Speaker #2: During the quarter, we executed transactions in line with the liquidity strategies we outlined at the merger announcement last year. We repositioned approximately 1 billion dollars of municipal securities into more liquid investments, improving both portfolio duration and our level of high-quality liquid assets.

Speaker #2: Excluding the decline in public funds, core deposits grew 963 million dollars or 1% in the second quarter. On a year-to-date combined basis, period N deposits increased 2%, which, along with the more positive seasonal trends, should keep us on pace for full year deposit growth of 8 to 10%.

Speaker #2: While having no material impact on net interest income or CET-1. In addition, we issued 750 million dollars of senior debt, which served as strengthened and diversify our liquidity and funding profile, and is consistent with the issuance path communicated last year.

Speaker #2: This balance sheet growth carried into net interest income, which was 956 million dollars, up 2% or 10% annualized from the first quarter. Net interest margin came in at 3.44%, down 9 basis points versus the first quarter, or roughly 6 basis points excluding the first quarter non-recurring items.

Speaker #2: While having no material impact on net interest income or CET1. In addition, we issued 750 million dollars of senior debt, which served as strengthened and diversify our liquidity and funding profile, and is consistent with the issuance path communicated last year.

Speaker #2: Other factors that proved headwinds during the quarter included a modest decline in loan yields, which were impacted by a roughly 3 to 4 basis point average decline in SOFRA rates, and an increase in higher cost funding, as seasonality in deposits pressed our loan-to-deposit ratio higher.

Speaker #2: We expect this dynamic to reverse as we go through the back half of the year. For further context, our loan yield was 6.11% in the second quarter, versus 6.14% in the first quarter.

Speaker #2: Our cost of core deposits was stable quarter over quarter at approximately 1.95%. Total deposit cost increased 1 basis point, and our aggregate effective cost of funds increased 2 basis points.

Speaker #2: Other factors that proved headwinds during the quarter included a modest decline in loan yields, which were impacted by a roughly 3 to 4 basis point average decline in SOFR rates, and an increase in higher-cost funding, as seasonality and deposits pressed our loan-to-deposit ratio higher.

Speaker #2: Adjusted non-interest revenue declined 12 million dollars from the first quarter. Driven largely by lower BHG income. Income from our equity method investment in BHG totaled 24 million dollars in the second quarter.

Speaker #2: We expect this dynamic to reverse as we go through the back half of the year. For further context, our loan yield was 6.11% in the second quarter versus 6.14% in the first quarter. Our cost of core deposits was stable quarter-over-quarter at approximately 1.95%. Total deposit cost increased 1 basis point, and our aggregate effective cost of funds increased 2 basis points.

Speaker #2: Performing in line with our expectations as BHG shifts its loan placement strategy. Core client income streams, including core banking, wealth management, and capital markets, all delivered linked quarter and robust year-over-year growth.

Speaker #2: Core banking and capital markets fees both increased 3% from the first quarter. Strong loan production and revenue synergies drove another quarter of capital markets execution and has further evidenced that integration of key products and services is accelerating.

Speaker #2: Adjusted non-interest revenue declined $12 million from the first quarter, driven largely by lower BHG income. Income from our equity method investment in BHG totaled $24 million in the second quarter.

Speaker #2: We maintained disciplined expense management while continuing to invest strategically for long-term growth. Our adjusted tangible efficiency ratio was 49.8%, as expected at this stage of the merger integration.

Speaker #2: Performance is in line with our expectations as BHG shifts its loan placement strategy. Core client income streams—including core banking, wealth management, and capital markets—all delivered linked-quarter and robust year-over-year growth.

Speaker #2: We encouraged 51 million dollars of non-recurring merger expenses during the quarter, primarily related to personnel and technology-related integration costs. On a linked quarter basis, adjusted non-interest expense was down 2%, as realized merger synergies and seasonally lower personnel costs more than offset continued investments in revenue producers and technology.

Speaker #2: Core banking and capital markets fees both increased 3% from the first quarter. Strong loan production and revenue synergies drove another quarter of capital markets execution and have further evidenced that integration of key products and services is accelerating.

Speaker #2: Headcount was relatively flat from the first quarter, reflecting ongoing integration and progress netted by growth-related hiring. Credit quality remains a clear point of strength.

Speaker #2: We incurred 51 million dollars of non-recurring merger expenses during the quarter, primarily related to personnel and technology-related integration costs. On a linked quarter basis, adjusted non-interest expense was down 2%, as realized merger synergies and seasonally lower personnel costs more than offset continued investments in revenue producers and technology.

Speaker #2: Net charge-offs were 48 million dollars or 22 basis points for the quarter, consistent with expectations. The non-performing asset ratio improved to 0.5%, down from 0.58% in the first quarter, demonstrating continued stability and disciplined underwriting.

Speaker #2: The allowance for credit losses into the second quarter at 1.17%, compared to 1.19% at the end of March. Our preliminary common equity tier one ratio ended the quarter at 9.93%, up 12 basis points from the first quarter.

Speaker #2: Headcount was relatively flat from the first quarter, reflecting ongoing integration progress netted by growth-related hiring. Credit quality remains a clear point of strength. Net charge-offs were 48 million dollars or 22 basis points for the quarter, consistent with expectations.

Speaker #2: Our priority is clear: we will deploy the capital we generate into high-return, client-driven growth, while steadily building CET-1 towards our 10.25% target. With that, I'll turn it back to Kevin to review our 2026 financial outlook.

Speaker #2: The non-performing asset ratio improved to 0.5%, down from 0.58% in the first quarter, demonstrating continued stability and disciplined underwriting. The allowance for credit losses into the second quarter at 1.17%, compared to 1.19% at the end of March.

Speaker #3: Thanks, Jamie. Our broad guidance ranges are unchanged for 2026, and importantly, our performance to date reinforces that view. Let me be specific about where we're landing inside those ranges.

Speaker #2: Our preliminary common equity Tier 1 ratio ended the quarter at 9.93%, up 12 basis points from the first quarter. Our priority is clear: we will deploy the capital we generate into high-return, client-driven growth while steadily building CET1 toward our 10.25% target.

Speaker #3: Loan growth is tracking at the top end of our 9 to 11 percent range in deposits in the middle of our 8 to 10 percent range.

Speaker #3: That earning asset growth is the engine of this outlook. It drives strong, continuous growth in NII as we progress through the second half of 2026, even as margin compresses modestly.

Speaker #2: With that, I'll turn it back to Kevin to review our 2026 financial outlook.

Speaker #3: We are now expecting full-year NIM in the 344 to 347 range. Importantly, when combining the robust NII growth with the continued strength in fee income across our core client businesses that we have seen to date, we continue to expect to be well within our revenue outlook and trending more specifically to 5.05 to 5.1 billion dollars.

Speaker #1: Thanks, Jamie. Our broad guidance ranges are unchanged for 2026, and importantly, our performance to date reinforces that view. Let me be specific about where we're landing inside those ranges.

Speaker #1: Loan growth is tracking at the top end of our 9 to 11 percent range and deposits in the middle of our 8 to 10 percent range.

Speaker #1: That earning asset growth is the engine of this outlook. It drives strong, continuous growth in NII as we progress through the second half of 2026, even as margin compresses modestly.

Speaker #3: On the balance of ranges, we expect adjusted expenses in the middle of our 2.675 to 2.775 billion dollar guidance. We anticipate an increase versus the first half of the year driven by revenue producer hiring, market expansion, incremental expenses associated with third-party partnership revenue, and normal inflationary and growth-related cost.

Speaker #1: We are now expecting full-year NIM in the 3.44 to 3.47 range. Importantly, when combining the robust NII growth with the continued strength in fee income across our core client businesses that we have seen to date, we continue to expect to be well within our revenue outlook and trending more specifically to $5.05 to $5.1 billion.

Speaker #3: These are deliberate investments tied directly to future growth. Our adjusted effective tax rate is expected to land in the middle of the 20 to 21 percent range, inclusive of the second quarter municipal repositioning Jamie noted earlier.

Speaker #1: On the balance of ranges, we expect adjusted expenses in the middle of our 2.675 to 2.775 billion dollar guidance. We anticipate an increase versus the first half of the year driven by revenue producer hiring, market expansion, incremental expenses associated with third-party partnership revenue, and normal inflationary and growth-related cost.

Speaker #3: Credit remains within our 20 to 25 basis point charge-off range, and our profitability outlook remains strong as we continue to drive the EPS accretion we laid out last summer.

Speaker #3: Stepping back, the closing message is the same one I opened with. We are focused on the leverage points that have always driven this firm, and this quarter is another proof point that they are working.

Speaker #1: These are deliberate investments tied directly to future growth. Our adjusted effective tax rate is expected to land in the middle of the 20 to 21 percent range, inclusive of the second quarter municipal repositioning Jamie noted earlier.

Speaker #3: Growth, recruiting, credit, pricing, culture, synergy realization, every one of them is moving in the direction we said it would. We are not declaring victory.

Speaker #1: Credit remains within our 20 to 25 basis point charge-off range, and our profitability outlook remains strong as we continue to drive the EPS accretion we laid out last summer.

Speaker #3: We are six months in, and there is more to execute. The 26% adjusted EPS growth year to date is a real measure of success and a reflection of this team's hard work.

Speaker #1: Stepping back, the closing message is the same one I opened with. We are focused on the leverage points that have always driven this firm, and this quarter is another proof point that they are working.

Speaker #3: But we're not done. We are going to keep on pushing and getting better from here. This is scale with a soul. The model, the culture, and the people.

Speaker #1: Growth, recruiting, credit, pricing, culture, synergy realization—every one of them is moving in the direction we said it would. We are not declaring victory.

Speaker #3: To the team members across the franchise, thank you. You are the reason this is working. And to those who have questioned what this combination could be, I understand the skepticism, and we intend to keep answering it the only way we know how: one quarter, one client, one banker at a time.

Speaker #1: We are six months in, and there is more to execute. The 26% adjusted EPS growth year to date is a real measure of success and a reflection of this team's hard work.

Speaker #3: That is the work, and you have my personal commitment that we will keep doing it. The future is bright, and the best of what we can do together is still ahead.

Speaker #1: But we're not done. We are going to keep on pushing and getting better from here. This is scale with a soul: the model, the culture, and the people.

Speaker #3: With that operator, let's transition to the Q&A portion of today's call.

Speaker #1: To the team members across the franchise, thank you. You are the reason this is working. And to those who have questioned what this combination could be, I understand the skepticism, and we intend to keep answering it the only way we know how.

Speaker #1: Thank you. We will now begin the question and answer session. To ask a question, you may press star then one on your touch tone phone.

Speaker #1: If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two. In the interest of time, please limit yourself to one question and one follow-up.

Speaker #1: One quarter, one client, one banker at a time. That is the work, and you have my personal commitment that we will keep doing it.

Speaker #1: The future is bright, and the best of what we can do together is still ahead. With that, Operator, let's transition to the Q&A portion of today's call.

Speaker #1: Your first question is coming from Steven Scouten from Piper Sandler. Your line is live.

Speaker #3: Thank you. We will now begin the question and answer session. To ask a question, you may press star, then one, on your touch-tone phone.

Speaker #4: Yeah. Hey, good morning. Thank you. I wanted to ask maybe first starting off about the quarter was really good, of course, but curious what changed from the mid-quarter update that you gave around the margin versus the nine basis points of decline that we saw in was it primarily this higher growth that led to more higher cost funds needed in the interim?

Speaker #3: If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two. In the interest of time, please limit yourself to one question and one follow-up.

Speaker #3: Your first question comes from Steven Scouten with Piper Sandler. Your line is live.

Speaker #4: And maybe how does that play into what you guys disclosed for every 1% higher growth? There may be some NIM compression, but still NII upside, just a little color around that would be great.

Speaker #1: Yeah. Hey, good morning. Thank you. I wanted to ask—maybe first, starting off about the quarter—it was really good, of course, but I'm curious what changed from the mid-quarter update that you gave around the margin versus the 9 basis points of decline that we saw? And was it primarily this higher growth that led to needing more higher-cost funds in the interim?

Speaker #5: Yeah, Steven, Jamie. Thanks for the question. The change from our guide that we gave in early June is really on the asset side. And so you think about the decline in SOFR rates as well as PAA coming in a little lighter than expected.

Speaker #5: Those impacts are definitely different than what we said in early June. And you think about the PAA, that's really just due to slower prepayments in our CNI book largely.

Speaker #1: And maybe how does that play into what you guys disclosed for every 1% higher growth? There may be some NIM compression, but still NII upside.

Speaker #1: Just a little color around that would be great.

Speaker #5: And then the SOFR rate is largely recovered here in the month of July. So we think that that's going to be a little tailwind to the third quarter.

Speaker #4: Yeah, Steven and Jamie, thanks for the question. The change from our guide that we gave in early June is really on the asset side.

Speaker #5: As you can tell when you compare average balances to ending balances, you can also see that we grew the balance sheet a decent bit.

Speaker #4: And so you think about the decline in SOFR rates as well as PAA coming in a little lighter than expected. Those impacts are definitely different than what we said in early June.

Speaker #5: In the month of June with cash and securities to assets, coming up higher as we approach quarter end. So I would attribute the change to those three things largely.

Speaker #4: And when you think about the PAA, that's really just due to slower prepayments in our CNI book, largely. And then the SOFR rate has largely recovered here in the month of July.

Speaker #5: In the second quarter, and then when we speak to growth, the growth impact of the margin, we laid out the impact and how it is margin diluted, but what I want to say about that is if you look at our NII guide progressing through 2026, what you see there is a steady two percent-ish increase quarter on quarter as you go through the year.

Speaker #4: So we think that that's going to be a little tailwind to the third quarter. As you can tell when you compare average balances to ending balances, you can also see that we grew the balance sheet a decent bit.

Speaker #4: In the month of June, with cash and securities to assets coming up higher as we approach quarter end, I would attribute the change to those three things, largely.

Speaker #5: And that growth is built on banker hires that we made in prior years. And so it's a steady sustainable growth in NII. And the beauty of that growth in NII is that there's not a lot of marginal expense associated with it.

Speaker #4: In the second quarter, and then when we speak to growth, the growth impact of the margin, we laid out the impact and how it is margin-diluted. But what I want to say about that is, if you look at our NII guide progressing through 2026, what you see there is a steady 2%-ish increase quarter-on-quarter as you go through the year.

Speaker #5: And so when you think about profitability and how that drops to the bottom line, what we're doing here is we're producing loans at the same rates so we're not competing on price when you look at production rates.

Speaker #4: And that growth is built on banker hires that we made in prior years. So it's a steady, sustainable growth in NII. The beauty of that growth in NII is that there's not a lot of marginal expense associated with it.

Speaker #5: We're growing the balance sheet, growing quarter deposits at a similar rate over time as loans. But even in that marginal growth where we're funding it with wholesale funding, basically it's accretive to the shareholder because we're able to maintain return on tangible common equity because expense growth is happening at a much slower rate.

Speaker #4: And so, when you think about profitability and how that drops to the bottom line, what we're doing here is we're producing loans at the same rates.

Speaker #5: And so that's why we believe in it. We believe in the steady growth in NII. Having a lower than 50% adjusted tangible efficiency ratio we believe that that'll drive sustained double-digit PP&R growth, double-digit EPS growth, and doing it the right way.

Speaker #4: So, we're not competing on price when you look at production rates. We're growing the balance sheet and growing core deposits at a similar rate over time as loans.

Speaker #4: But even in that marginal growth where we're funding it with wholesale funding, basically it's accretive to the shareholder because we're able to maintain return on tangible common equity because expense growth is happening at a much slower rate.

Speaker #3: Yeah, that's great color. And a lot of great new detail on the slide deck. Appreciate all of that. One other my follow-up would be around maybe slide 13 where you guys disclosed this funded production and loan spreads.

Speaker #4: And so that's why we believe in it. We believe in the steady growth in NII. Having a lower than 50% adjusted tangible efficiency ratio we believe that that'll drive sustained double-digit PP&R growth, double-digit EPS growth, and doing it the right way.

Speaker #3: Just kind of curious how you're thinking about that within all of your forward expectations. If that's something that you would think would compress slightly given all the competition headwinds we're kind of hearing, industry-wide, and if, again, that dynamic would kind of be similar to this spreads might compress as growth is higher, but NII still moves higher regardless.

Speaker #1: Yeah, that's great color—and a lot of great new detail on the slide deck. Appreciate all of that. One other follow-up of mine would be around maybe slide 13, where you guys disclosed the funding, production, and loan spreads.

Speaker #5: I think the second quarter is a great data point on that. And so if you look at our spreads on production, right, we were wider quarter on quarter.

Speaker #1: I'm just kind of curious how you're thinking about that within all of your forward expectations. Is that something that you would expect to compress slightly, given all the competitive headwinds we're hearing about industry-wide? And if, again, that dynamic would be similar to where spreads might compress as growth is higher, but NII still moves higher regardless?

Speaker #5: But it's not just a mixed story on that. Basically, six of our eight geographies had wider spreads in the second quarter than the first quarter.

Speaker #5: Nine of 11 of our specialty groups had wider spreads in the second quarter than the first quarter. And so the point I want you to know is that this is happening across our businesses.

Speaker #4: I think the second quarter is a great data point on that. And so if you look at our spreads on production, right, we were wider quarter on quarter.

Speaker #5: We're not out there driving in lower spreads to try to accelerate growth. This is our bankers out there delivering on the promises we've made in a steady, sustainable way.

Speaker #4: But it's not just a mixed story on that. Basically, six of our eight geographies had wider spreads in the second quarter than the first quarter.

Speaker #5: So our outlook does not have material spread tightening. We're assuming similar spreads. And we believe that that's justified given what we've seen. Obviously, the environment can change and competition can go even higher, but we're not seeing that spread tightening that we're hearing for some of the others.

Speaker #4: Nine of eleven of our specialty groups had wider spreads in the second quarter than the first quarter. And so the point I want you to know is that this is happening across our businesses.

Speaker #4: We're not out there driving in lower spreads to try to accelerate growth. This is our bankers out there delivering on the promises we've made in a steady, sustainable way.

Speaker #3: Fantastic. Great detail. Thank you very much.

Speaker #4: Thank you. Your next

Speaker #1: xt question is coming from John McDonald from Truist Securities. Your line is live.

Speaker #4: So our outlook does not have material spread tightening. We're assuming similar spreads. And we believe that that's justified given what we've seen. Obviously, the environment can change and competition can go even higher, but we're not seeing that spread tightening that we're hearing for some of the others.

Speaker #6: Thanks. Good morning, guys. I was wondering if you could unpack the deposit outlook for the rest of the year. Including kind of what you see in terms of mix, both the non-interest bearing and what you call the core deposits inside your outlook.

Speaker #6: Thank you.

Speaker #5: Yeah, John, great question. And we are forecasting strong growth in deposits in the second half of the year. Obviously, we're pleased with the core deposit growth when you back out public funds in the second quarter.

Speaker #1: Fantastic. Great detail. Thank you very much.

Speaker #2: Thank you. Your next

Speaker #3: question is coming from John McDonald from Truist Securities. Your line is live.

Speaker #5: Thanks. Good morning, guys. I was wondering if you could unpack the deposit outlook for the rest of the year, including what you see in terms of mix—both the non-interest bearing and what you call the core deposits—inside your outlook.

Speaker #5: We believe that that shows the momentum in what is typically a challenging quarter due to tax payments. But as we look forward into the second half of the year, we believe that seasonal impacts will contribute a billion and a half to two billion to growth in the second half of the year.

Speaker #5: Thank you.

Speaker #4: Yeah. John, great question. And we are forecasting strong growth in deposits in the second half of the year. Obviously, we're pleased with the core deposit growth when you back out public funds in the second quarter.

Speaker #5: Just like our loan forecast, prior year hires will also contribute to growth. As they build their books of business, as they grow and bring in the deposits of their clients.

Speaker #4: We believe that that shows the momentum in what is typically a challenging quarter due to tax payments. But as we look forward into the second half of the year, we believe that seasonal impacts will contribute a billion and a half to two billion to growth in the second half of the year.

Speaker #5: And so we believe that that's why we'll continue to see strong production. Deposit production has been over a billion dollars every month this year.

Speaker #5: We expect that to continue. In the second half of the year, you will see growth in brokered deposits. So brokered deposits have been relatively stable year to date.

Speaker #4: Just like our loan forecast, prior year hires will also contribute to growth. As they build their books of business, as they grow and bring in the deposits of their clients.

Speaker #5: We are expecting some growth in brokered deposits in the second half of the year. And what gives us confidence in that growth? I would point you to the chart that compares core deposit growth in seasonals, year to date, and our earnings deck.

Speaker #4: And so, we believe that that's why we'll continue to see strong production. Deposit production has been over $1 billion every month this year.

Speaker #5: If you were just to run that outperformance forward to the end of the year, it would point to four and a half to five billion of core deposit growth from here.

Speaker #4: We expect that to continue. In the second half of the year, you will see growth in brokered deposits. So brokered deposits have been relatively stable year to date.

Speaker #5: But one thing that's underneath the covers of that is that that includes underperformance or less growth in public funds year to date. We have strategically allowed public funds to attract this year.

Speaker #4: We are expecting some growth in brokered deposits in the second half of the year. And what gives us confidence in that growth? I would point you to the chart that compares core deposit growth and seasonals, year to date, in our earnings deck.

Speaker #5: We're about 700 million dollars behind the seasonal average in growth on public funds year to date. And we expect getting back to that average growth and with the second half seasonals in public funds, that's more than a billion dollars in growth in that book of business.

Speaker #4: If you were just to run that outperformance forward to the end of the year, it would point to $4.5 to $5 billion of core deposit growth from here.

Speaker #4: But one thing that's underneath the covers of that is that includes underperformance, or less growth, in public funds year to date. We have strategically allowed public funds to attrite this year.

Speaker #5: And so as you look forward through the rest of the year, I would just say we do expect to see that seasonal growth in core deposits we do expect to see some growth in public funds.

Speaker #5: And then I would say that we expect brokered deposits for the full year to grow at a similar rate as core deposits.

Speaker #4: We're about $700 million behind the seasonal average in growth on public funds year to date. And we expect to get back to that average growth with the second-half seasonals in public funds. That's more than a billion dollars in growth in that book of business.

Speaker #6: Thanks, Jamie. And just as a follow-up to that, obviously, we all hear a lot of talk about how competitive the pricing of deposits is in your markets.

Speaker #6: You did really enable the deposit pricing was very stable this quarter. What enabled that to be pretty stable amid all the competition?

Speaker #4: And so, as you look forward through the rest of the year, I would just say we do expect to see that seasonal growth in core deposits. We do expect to see some growth in public funds.

Speaker #3: Sure, John, I'll take that. Look, we don't compete on price. I mean, look, we're a relationship bank. And clients value more than just the rate on deposits.

Speaker #4: And then I would say that we expect brokered deposits for the full year to grow at a similar rate as core deposits.

Speaker #3: Now, we pay a fair rate. As you know, the deposit market place is very efficient. And so when you're adding new deposits, you're having to pay a market rate.

Speaker #5: Thanks, Jamie. And just as a follow-up to that, obviously, we all hear a lot of talk about how competitive the pricing of deposits is in your markets.

Speaker #3: But as Jamie said earlier, the real core to our model is hiring new revenue producers. And those new revenue producers come over and bring their clients with them.

Speaker #5: You did really enable the deposit pricing was very stable this quarter. What enabled that to be pretty stable amid all the competition?

Speaker #3: Ultimately, that allows us to produce at a higher level and use a market rate to do it. So we're not having to go out and do promotional rates.

Speaker #1: John, I'll take that. Look, we don't compete on price. I mean, we're a relationship bank, and clients value more than just the rate on deposits.

Speaker #3: And so as Jamie mentioned earlier, our forecast for NIM would assume that that would continue. And so if you look at that going on rate for new loans minus the going on rate for new deposits, that was roughly stable at a 3.72 spread this quarter.

Speaker #1: Now, we pay a fair rate. As you know, the deposit marketplace is very efficient, and so when you're adding new deposits, you have to pay a market rate.

Speaker #1: But as Jamie said earlier, the real core to our model is hiring new revenue producers. And those new revenue producers come over and bring their clients with them.

Speaker #3: Which was very similar to last quarter. And that should continue. So it's our model. It's hiring talent. It's allowing us to compete on things other than just rate.

Speaker #1: Ultimately, that allows us to produce at a higher level and use a market rate to do it, so we're not having to go out and do promotional rates.

Speaker #6: Okay. Got it. Thanks, guys.

Speaker #1: Thank you. Your next question is coming from Ibram Poonawala from Bank of America. Your line is live.

Speaker #1: And so, as Jamie mentioned earlier, our forecast for NIM would assume that that would continue. And so, if you look at that going-on rate for new loans minus the going-on rate for new deposits, that was roughly stable at a 3.72% spread this quarter.

Speaker #7: Hey, good morning.

Speaker #5: Good morning.

Speaker #7: So I guess maybe, Jamie, if you could go to slide 22. So great detail there on the margin outlook. And appreciate your point about all of this growth is as profitable or more profitable than the backbone.

Speaker #1: Which was very similar to last quarter, and that should continue. So it's our model: it's hiring talent, it's allowing us to compete on things other than just rate.

Speaker #5: Okay. Got it. Thanks, guys.

Speaker #7: But maybe just looking at the pieces that you lay out there, as we incrementally think about and as all of us figure out where this margin lands over the next 12, 18, 24 months, my assumption is we are headed lower somewhere into the 330s by this time next year.

Speaker #3: Thank you. Your next question is coming from Ibram Punawala from Bank of America. Your line is live.

Speaker #6: Hey, good morning.

Speaker #4: Good morning.

Speaker #6: So I guess maybe, Jamie, if you could go to slide 22. So great detail there on the margin outlook. And appreciate your point about all of this growth is as profitable or more profitable than the back work.

Speaker #7: So one, and I know you've not given 2027 guidance, but is there any reason why that assumption that we could be closer to 330 versus 340 this time next year?

Speaker #6: But maybe just looking at the pieces that you lay out there, as we incrementally think about—and as all of us figure out—where this margin lands over the next 12, 18, 24 months, my assumption is we are headed lower, somewhere into the 330s by this time next year.

Speaker #7: Why that may not be the right assumption. And then in terms of the build-out for the catfall liquidity, should we expect additional impact on the margin as you continue through that process over the coming quarters?

Speaker #7: Thanks.

Speaker #5: Yeah. Ibrahim, look, let's just talk first, I'll talk about the rest of this year. We have I think specifically about the margin. They're headwinds due to what you just mentioned about the cat for assets.

Speaker #6: So, one—and I know you've not given 2027 guidance—but is there any reason why we should assume that we could be closer to 330 versus 340 this time next year?

Speaker #6: Why might that not be the right assumption? And then, in terms of the build-out for the capital liquidity, should we expect additional impact on the margin as you continue through that process over the coming quarters?

Speaker #5: There's the headwind due to debt issuance. And then a little bit of a nuance to the margin. There's a headwind just one basis point due to day count.

Speaker #5: But there are also tailwinds. So we will continue to see a benefit through fixed rate asset repricing. And the second half of the year, we are forecasting core deposit growth to outpace loan growth.

Speaker #6: Thanks.

Speaker #4: Yeah. Ibram, look, let's just talk first. I'll talk about the rest of this year. We have I think specifically about the margin. They're headwinds due to what you just mentioned about the cat for liquidity.

Speaker #5: That'll be a tailwind. As I mentioned earlier, so far is firming. And so that'll be a tailwind. And then we do this will be very marginal, but we do expect PAA to normalize.

Speaker #4: Growing cash and securities to assets. There's the headwind due to debt issuance, and then a little bit of a nuance to the margin. There's a headwind—just one basis point—due to day count.

Speaker #5: And so those are the tailwinds that go along with it. And that's really how we are thinking about the second half of the second half of the year.

Speaker #4: But there are also tailwinds, so we will continue to see a benefit through fixed-rate asset repricing. In the second half of the year, we are forecasting core deposit growth to outpace loan growth.

Speaker #5: Obviously, it's early for us to give 2027 guidance, but you're right to think about the liquidity impacts in 2027 being a further headwind. And I guess the way I would characterize it is a billion dollars of long-term debt is about a one to one and a half basis point of margin per billion.

Speaker #4: That'll be a tailwind. As I mentioned earlier, SOFR is firming, and so that'll be a tailwind. And then, this will be very marginal, but we do expect PAA to normalize.

Speaker #4: And so, those are the tailwinds that go along with it. And that's really how we are thinking about the second half of the year.

Speaker #5: On cash and securities to assets, increasing cash and securities to assets about 1%, I would argue that we're 2 to 3 percent below where we expect to be over the next few years.

Speaker #4: Obviously, it's early for us to give 2027 guidance. But you're right to think about the liquidity impacts in 2027 being a further headwind. And I guess the way I would characterize it is $1 billion of long-term debt is about a one to one and a half basis points of margin per billion.

Speaker #5: So that'll be a slow process. That's about 2 to 3 basis points per 1%. And then the impact of growth as you get further along actually the relative impact diminishes because when you're starting point of the margin is closer to 330, which we say is the incremental margin of the growth, then that impact of the future growth is less on the margin.

Speaker #4: On cash and securities to assets, increasing cash and securities to assets about 1%, I would argue that we're 2 to 3 percent below where we expect to be over the next few years.

Speaker #5: So I guess that's how I would think about the margin going forward. And that will point to a little bit of incremental pressure. But I do want to circle back to the first answer we gave in the Q&A is we still expect high single-digit NII growth.

Speaker #4: So, that'll be a slow process. That's about 2 to 3 basis points per 1%. And then, the impact of growth as you get further along—actually, the relative impact diminishes, because when your starting point of the margin is closer to 330, which we say is the incremental margin of the growth, then that impact of the future growth is less on the margin.

Speaker #5: And because of that, that'll give that should lead to and I'm assuming the economy and rates and everything are consistent with what we see today.

Speaker #5: That should lead to double-digit PP&R growth, double-digit EPS growth, while maintaining return on tangible common equity. And so that's how we view it. And we think that it's very sustainable.

Speaker #4: So I guess that's how I would think about the margin going forward. And that will point to a little bit of incremental pressure. But I do want to circle back to the first answer we gave in the Q&A is we still expect high single-digit NII growth.

Speaker #5: And that's how when we look further out, that's our current outlook.

Speaker #7: Got it. And I guess maybe quickly, this keeps coming up as we think about BHG. Just if you don't mind revisiting the outlook there.

Speaker #4: And because of that, that'll give that should lead to and I'm assuming the economy and rates and everything are consistent with what we double-digit PP&R growth, double-digit EPS growth, while maintaining return on tangible common equity.

Speaker #7: And also in terms of strategically, how do you think about the business? There's constant questions around whether you might think about taking some strategic actions there.

Speaker #4: And so that's how we view it. And we think that it's very sustainable. And that's how when we look further out, that's our current outlook.

Speaker #7: So I would appreciate any color. Thanks.

Speaker #5: Yeah. Before I answer your question, I want to get into a little bit of the income statement impact because sometimes I think that it's a little bit misunderstood.

Speaker #6: Got it. And I guess, maybe quickly—this keeps coming up—as you think about BHG, just if you don't mind revisiting the outlook there.

Speaker #5: But indicative of the depth of our relationship with BHG, we have multiple ways the partnership hits the income statement. We often speak to the impact of the equity investment because that is the largest driver of profitability.

Speaker #6: And also in terms of strategically, how do you think about the business, this constant questions around whether you might think about taking some strategic actions there.

Speaker #5: However, there is significant revenue and expense outside of the investment income. We expect to have approximately $40 million in revenue and $20 million in expense in 2026 due to these.

Speaker #6: So I would appreciate any color. Thanks.

Speaker #4: Yeah, before I answer your question, I want to get into a little bit of the income statement impact, because sometimes I think that it's a little bit misunderstood.

Speaker #5: That's outside of the investment income. And the second quarter, we paused one of the distribution channels as we repapered some of our operating agreements.

Speaker #4: But indicative of the depth of our relationship with BHG, we have multiple ways the partnership hits the income statement. We often speak to the impact of the equity investment because that is the largest driver of profitability.

Speaker #5: These have since resumed and will result in a resumption of typical quarterly fees and revenues. The pause resulted in a couple of things that impacted the second quarter.

Speaker #5: First, our fee revenue as well as the associated NIE were lower than the prior quarter. These flows have already resumed in the third quarter, and we expect they will result in just under $10 million in revenue.

Speaker #4: However, there is significant revenue and expense outside of the investment income. We expect to have approximately $40 million in revenue and $20 million in expenses in 2026 due to these.

Speaker #5: And a similar amount of expense in the third quarter. Second, it impacted the investment income, the production remained on balance sheet, which led to an increase in provision at BHG as they account for the life of loan and loss estimate.

Speaker #4: That's outside of the investment income. In the second quarter, we paused one of the distribution channels as we repapered some of our operating agreements.

Speaker #4: These have since resumed. And we'll result in a resumption of typical quarterly fees and revenues. The pause resulted in a couple of things that impacted the second quarter.

Speaker #5: This, along with the distribution change, we've previously discussed, led to a $7 million decline in investment income. So I hit that to start just because there are a lot of moving parts on the pinnacle income statement due to BHG this quarter just wanted to hit that.

Speaker #4: First, our fee revenue as well as the associated NIE were lower than the prior quarter. These flows have already resumed in the third quarter.

Speaker #4: And we expect they will result in just under $10 million in revenue, and a similar amount of expense in the third quarter. Second, it impacted the investment income; the production remained on the balance sheet, which led to an increase in provision at BHG, as they account for the life of loan and loss estimates.

Speaker #5: But the performance at BHG just could not be stronger. If you look at production this quarter, it's up almost a billion dollars from the prior quarter.

Speaker #5: It's up 900 million dollars. And we are very pleased with the partnership. It's delivering on everything that we expect. Their credit performance remains strong.

Speaker #4: This along with the distribution change we've previously discussed led to a $7 million decline in investment income. So I hit that to start just because there are a lot of moving parts on the pinnacle income statement due to BHG this quarter just wanted to hit that.

Speaker #5: And so the outlook is exactly what we've discussed in prior quarters, but stronger. And so as we look forward, we raised our revenue guide on the investment side.

Speaker #4: But the performance at BHG just could not be stronger. If you look at production this quarter, it's up almost a billion dollars from the prior quarter.

Speaker #5: For 2026, we believe that momentum there is very strong and positions us well for the rest of this year as well as 2027. And so we're very pleased with the partnership.

Speaker #4: It's up $900 million, and we are very pleased with the partnership. It's delivering on everything that we expect. The credit performance remains strong.

Speaker #5: There's no update to give on their strategic options. We think that the best path is just continuing to execute, continuing to drive business growth, continuing with the business, the distribution shift.

Speaker #4: And so the outlook is exactly what we've discussed in prior quarters. But stronger. And so as we look forward, we raised our revenue guide on the investment side.

Speaker #5: We think that will deliver the most value over time. And so there's no real update there.

Speaker #4: For 2026, we believe that momentum there is very strong and positions us well for the rest of this year, as well as 2027. And so, we're very pleased with the partnership.

Speaker #7: Good. Thank you.

Speaker #1: Thank you. Your next question is coming from Casey Haire from Autonomous. Your line is live.

Speaker #2: Great. Thanks. Good morning, everyone.

Speaker #4: There's no update to give on their strategic options. We think that the best path is just continuing to execute, continuing to drive business growth, continuing with the business the distribution shift we think that will deliver the most value over time.

Speaker #5: Good morning, Casey.

Speaker #2: I wanted to touch on the loan growth very strong here in the second quarter. I'm wondering if there is upside. I know you guys are guiding to the higher end of the range.

Speaker #2: Wondering if there is upside to that guidance.

Speaker #4: And so, there's no real update there.

Speaker #5: Casey, yeah. Look, we're pleased with the loan growth as well. And I think it's primarily because it's broad-based and it's diversified. When you look at the first half of the year, we've had roughly 50% of the growth coming from our geographic banking units and 50% coming from our specialty areas.

Speaker #6: Good. Thank you.

Speaker #1: Thank you. Your next question is coming from Casey Hare from Autonomous. Your line is live.

Speaker #5: Great, thanks. Good morning, everyone. I wanted to touch on the loan growth—very strong here in the second quarter. I'm wondering if there is upside.

Speaker #5: And it's, as you can see, it's primarily being driven from CNI. What's interesting is CRE has not been a growth engine. You know that story.

Speaker #5: I know you guys are guiding to the higher end of the range. Wondering if there is upside to that guidance.

Speaker #5: Elevated payoffs. At current rates, we're not seeing a great deal of production although that is picking up. And that's what allows us to show that quarter over quarter increase in production, overall, 20% increase.

Speaker #7: Casey, yeah. Look, we're pleased with the loan growth as well, and I think it's primarily because it's broad-based and diversified. When you look at the first half of the year, we've had roughly 50% of the growth coming from our geographic banking units and 50% coming from our specialty areas.

Speaker #5: Yeah, there's upside. Maybe some of the things that kept us at the 9 to 11 percent, the high end of the range. This quarter, we had 127 basis points of improvement in utilization.

Speaker #7: And as you can see, it's primarily being driven from CNI. What's interesting is that CRE has not been a growth engine. You know that story.

Speaker #5: That was roughly a half a billion dollars of growth. As you know, we customarily do not include changes in utilization in our forecast. So we have not included any future changes in utilization.

Speaker #7: Elevated payoffs. At current rates, we're not seeing a great deal of production although that is picking up. And that's what allows us to show that quarter over quarter increase in production overall 20% increase.

Speaker #5: We do expect to see some ongoing churn in the CRE book just with payoff activity. And we did have some specialty areas that had some outsized growth in the first half of the year.

Speaker #7: Yeah, there's upside. Maybe some of the things that kept us at the 9 to 11 percent, the high end of the range. This quarter, we had 127 basis points of improvement in utilization.

Speaker #5: That were not expecting to see in the second half. So we said the high end of the range, but look, this model is robust.

Speaker #5: And our pipelines are strong. And I would expect to continue to see strong loan growth across both the specialties and the geographic areas. The one thing I do want to point out because you hear lots of conversation our competitors are out there saying that we're giving it away on rate.

Speaker #7: That was roughly a half a billion dollars of growth. As you know, we customarily do not include changes in utilization in our forecast. So we have not included any future changes in utilization.

Speaker #7: We do expect to see some ongoing churn in the CRE book just with payoff activity. And we did have some specialty areas that had some outsized growth in the first half of the year.

Speaker #5: And that's how we're winning. As Jamie talked about earlier, our spreads and our production rates actually went up quarter on quarter. So I'm optimistic that we'll continue to see strong loan growth.

Speaker #7: That was not something we were expecting to see in the second half. So we said the high end of the range. But look, this model is robust.

Speaker #5: It's not rate-driven. And it's broad-based, so it gives me a lot of confidence that we could see some upside from here.

Speaker #7: And our pipelines are strong, and I would expect to continue to see strong loan growth across both the specialties and the geographic areas. The one thing I do want to point out, because you hear lots of conversation—our competitors are out there saying that we're giving it away on rate.

Speaker #2: Got it. Thanks. And then as my follow-up, wanted to touch on the loan and deposit ratio. The deposit outlook sounds very positive and upbeat.

Speaker #2: But the loan and deposit ratio is a little bit above where the pinnacle legacy pinnacle lived as well as CAT 4 peers. Just wondering is there a governor?

Speaker #7: And that's how we're winning. As Jamie talked about earlier, our spreads and our production rates actually went up quarter on quarter. So I'm optimistic that we'll continue to see strong loan growth.

Speaker #7: It's not rate-driven. And it's broad-based. So it gives me a lot of confidence that we could see some upside from here.

Speaker #2: Is there a ceiling on that ratio? And where would you like to see that land longer term?

Speaker #5: Got it. Thanks. And then as my follow-up, wanted to touch on the loan and deposit ratio. The deposit outlook sounds very positive. And upbeat.

Speaker #5: You know, loan to deposit ratio is not a metric that we really manage to. But I'll speak to it since that's your question. We do expect it to decline as we progress through the second half of the year, as we previously discussed.

Speaker #5: But the loan and deposit ratio is a little bit above where the legacy Pinnacle lived, as well as CAT 4 peers. Just wondering, is there a governor?

Speaker #5: We expect core deposits to growth to outpace loan growth in the second half of the year. And so we expect it to decline but what we look at the most when we think about liquidity and access to liquidity is more how we on cash and securities to assets.

Speaker #5: Is there a ceiling on that ratio? And where would you like to see that land longer term?

Speaker #4: You know, loan to deposit ratio is not a metric that we really manage to. But I'll speak to it since that's your question. We do expect it to decline as we progress through the second half of the year.

Speaker #5: And so said another way, that's the metric that we look at to make sure that we have adequate liquidity. It's loan to deposit ratio.

Speaker #5: We don't believe is a key driver of where we need to be on the liquidity side.

Speaker #4: As we previously discussed, we expect core deposits to growth to outpace loan growth in the second half of the year. And so we expect it to decline but what we look at the most when we think about liquidity and access to liquidity is more how we on cash and securities to assets.

Speaker #2: Great. Thank you.

Speaker #1: Thank you. Your next question is coming from John Pancari from Evercore. Your line is live.

Speaker #2: Good morning.

Speaker #5: Morning, John.

Speaker #4: And so said another way, that's the metric that we look at to make sure that we have adequate liquidity. It's loan to deposit ratio.

Speaker #2: Just on the back to the loan spread comment, it's encouraging to hear that you did the spreads increase across most of your verticals and most of your geographies.

Speaker #4: We don't believe it is a key driver of where we need to be on the liquidity side.

Speaker #5: All right. Thank you.

Speaker #2: We are seeing spread compression, across many of your peers. Even some of the larger banks. And curious, what do you think the difference, the driver of that difference is?

Speaker #1: Thank you. Your next question is coming from John Pancarry from Evercore. Your line is live.

Speaker #5: Good morning.

Speaker #7: Good morning, John.

Speaker #2: Why are you not seeing that spread compression? Is it a function of these relationships that are coming over and the hiring that's bringing it over and you're not competing as aggressively for it?

Speaker #5: Just on the back to the loan spread comment, it's encouraging to hear that you did the spreads increase across most of your verticals and most of your geographies.

Speaker #2: Why do you see that that's not showing up in terms of these numbers?

Speaker #5: We are seeing spread compression. Across many of your peers, even some of the larger banks. And curious, what do you think the difference the driver of that difference is?

Speaker #5: Yeah, John, it's a great question. I said it earlier. I think we compete on a different value proposition. We're winning business based on providing distinctive service and effective advice.

Speaker #5: Why are you not seeing that spread compression? Is it a function of these relationships that are coming over and the hiring that's bringing them over, and you're not competing as aggressively for it?

Speaker #5: And that's built through trusted relationships. Our bankers aren't doing the same level of prospecting that you may see at other institutions because we have an opportunity to consolidate the portfolios of the bankers that they bring over when they join the firm.

Speaker #5: Why do you see that that's not showing up in terms of these numbers?

Speaker #5: And so they've already built a relationship. So they're not having to go and win a new relationship based on leading with a low price.

Speaker #4: You know, John, it's a great question. I said it earlier—I think we compete on a different value proposition. We're winning business based on providing distinctive service and effective advice.

Speaker #5: They're leading with that value that they've often provided in the historical relationship. So I think that's a big part of it. And it can't be underestimated.

Speaker #4: And that's built through trusted relationships. Our bankers aren't doing the same level of prospecting that you may see at other institutions because we have an opportunity to consolidate the portfolios of the bankers that they bring over when they join the firm.

Speaker #5: Number two, I think our team has a good pricing rigor. We all are owners of this company. Everyone has equity. Everyone is on the same incentive plan.

Speaker #5: And they understand how pricing loans and pricing deposits have an impact on the bottom line and helping us to achieve our big, hairy, audacious goals.

Speaker #4: And so they've already built a relationship. So they're not having to go and win a new relationship based on leading with a low price.

Speaker #5: So I think people are motivated to pricing loans fairly and not just relying on rate to win a new piece of business.

Speaker #4: They're leading with that value that they've often provided in the historical relationship, so I think that's a big part of it. And it can't be underestimated.

Speaker #2: Okay. Thanks, Kevin. I appreciate it. And then part of and speaking with investors, part of your discount multiple versus the peers is mainly around concerns around how you're going to fund the loan growth to meet your or how you're going to drive deposits to meet the funding of the loan growth and what it means for your net interest income.

Speaker #4: Number two, I think our team has a good pricing rigor. We all are owners of this company. Everyone has equity. Everyone is on the same incentive plan.

Speaker #4: And they understand how pricing loans and pricing deposits have an impact on the bottom line and helping us to achieve our big, hairy, audacious goals.

Speaker #4: So I think people are motivated to pricing loans fairly and not just relying on rate to win a new piece of business.

Speaker #2: This quarter, you did temper your margin guide your total revenue guide. It's unchanged despite bumping up the fee guide. So some could say that there's a modest downside bit of pressure on the NII growth expectation.

Speaker #5: Okay. Thanks, Kevin. I appreciate it. And then part of and speaking with investors, part of your discount multiple versus the peers is mainly around concerns around how you're going to fund the loan growth to meet your or how you're going to drive deposits to meet the funding of the loan growth and what it means for your net interest income.

Speaker #2: Can you just discuss your confidence that in your outlook here on NII, on and that this modest adjustment that we see this quarter is a de-risking or could there how do you dispel any of the concerns out there that there could be more revisions to come as you look at this outlook?

Speaker #5: This quarter, you did temper your margin guide your total revenue guide. It's unchanged despite bumping up the fee guide. So some could say that there's a modest downside bit of pressure on the NII growth expectation.

Speaker #5: You know, John, I guess what I would say is just look at the performance. We are doing what we need to do for today.

Speaker #5: By maintaining pricing discipline, both on loans and deposits. We're delivering on the growth. We're delivering on the hiring great bankers across the footprint that'll deliver tomorrow's growth.

Speaker #5: Can you just discuss your confidence that in your outlook here on NII, on and that this modest adjustment that we see this quarter is a de-risking or could there how do you dispel any of the concerns out there that there could be more revision to come as you look at this outlook?

Speaker #5: And so it's just if you were whatever KPI you want to look at as far as is this sustainable? Is this repeatable? I believe we're delivering you proof points.

Speaker #4: You know, John, I guess what I would say is just look at the performance. We are doing what we need to do for today.

Speaker #5: Now, to be clear, we are two quarters in on this merger. And so they're not but so many proof points we can deliver. But we intend to continue driving this performance is why we laid out more specifics.

Speaker #4: By maintaining pricing discipline, both on loans and deposits. We're delivering on the growth. We're delivering on the hiring great bankers across the footprint that'll deliver tomorrow's growth.

Speaker #5: This quarter, than we have in the past, and we will continue to be as transparent as we can to give confidence in that outlook.

Speaker #4: And so, it's just, whatever KPI you want to look at as far as, is this sustainable, is this repeatable, I believe we're delivering you proof points.

Speaker #5: We believe that this does de-risk external perceptions of our outlook going forward. We believe that the enhanced disclosures are useful and hopefully helps you all see what we see internally.

Speaker #4: Now, to be clear, we are two quarters in on this merger. And so they're not but so many proof points we can deliver. But we intend to continue driving this performance is why we laid out more specifics.

Speaker #5: But for us, what we're going to do, we're going to leave here today and go back to the team and keep doing what we have been doing.

Speaker #4: This quarter, then, we have in the past, and we will continue to be as transparent as we can to give confidence in that outlook.

Speaker #5: We're going to grow the business by doing the same thing we did yesterday, the same thing we're going to do tomorrow at the right spread, at the right deposit cost.

Speaker #4: We believe that this does de-risk external perceptions of our outlook going forward. We believe that the enhanced disclosures are useful and hopefully helps you all see what we see internally.

Speaker #5: And it is sustainable. Now, to be clear, that growth, that incremental growth when you're growing where we are in 2026, the incremental growth does come with higher cost funding.

Speaker #5: But again, it comes with very little expense. And so in the one line of the income statement of NII, it is less incremental NII.

Speaker #4: But for us, what we're going to do, we're going to leave here today and go back to the team and keep doing what we have been doing.

Speaker #4: We're going to grow the business by doing the same thing we did yesterday, the same thing we're going to do tomorrow at the right spread, at the right deposit cost.

Speaker #5: But when you look at PP&R, you get it back through lower expense. And so for the shareholder, you're getting these earnings back in PP&R.

Speaker #4: And it is sustainable. Now, to be clear, that growth, that incremental growth when you're growing where we are in 2026, the incremental growth does come with higher cost funding.

Speaker #5: And so I think that's the message. We're going to keep delivering. We're going to keep each quarter coming to you and sharing that. But that's how we look at the world.

Speaker #4: But again, it comes with very little expense. And so in the one line of the income statement of NII, it is less incremental NII.

Speaker #5: We think that's where the shareholder value is. And so that's our plan is just to keep doing that.

Speaker #3: And John, to Jamie's point, go back and look at the waterfall and what Jamie said earlier. What drove the NIM compression this quarter was not the growth model.

Speaker #4: But when you look at PP&R, you get it back through lower expense. And so for the shareholder, you're getting these earnings back in PP&R.

Speaker #3: It was deposits were up one basis point. And that's total cost of deposits. And so as Jamie said, there's modest headwinds when you grow.

Speaker #4: And so I think that's the message. We're going to keep delivering. We're going to keep each quarter coming to you and sharing that. But that's how we look at the world.

Speaker #3: That's not the main factor here. We are acclimating into being a Cat 4 bank. So you see debt issuance. You see building cash and securities.

Speaker #4: We think that's where the shareholder value is. And so that's our plan is just to keep doing that.

Speaker #3: That at some point is going to be done. I also would arc to what Jamie's been saying all year, which is there's a floor here of 330.

Speaker #2: And John, to Jamie's point, go back and look at the waterfall and what Jamie said earlier. What drove the NIM compression this quarter was not the growth model.

Speaker #3: Because that's what the going on rates would be over time. And so we're not talking about a NIM that's in free fall. We're talking about a NIM that's moderating and as Jamie mentioned earlier, that's still still contributing high single digit NIIs.

Speaker #2: It was deposits were up one basis point. And that's total cost of deposits. And so as Jamie said, there's modest headwinds when you grow, that's not the main factor here.

Speaker #3: And I know everyone has to focus on different components. But I look at NII as a component of an outcome. And the outcome is growth and revenue and growth and NII.

Speaker #2: We are acclimating into being a Cat 4 bank. So you see debt issuance, you see building cash and securities. That at some point is going to be done.

Speaker #3: And that's what we're focused on.

Speaker #2: I also would echo what Jamie's been saying all year, which is there's a floor here of 3.30, because that's what the going-on rates would be over time.

Speaker #2: Great. Thank you for all the detail.

Speaker #1: Thank you. Your next question is coming from Michael Rose from Raymond James. Your line is live.

Speaker #2: And so we're not talking about a NIM that's in free fall. We're talking about a NIM that's moderating and as Jamie mentioned earlier, that still contributing high single digit NIIs.

Speaker #4: Hey, good morning, guys. Thanks for taking my questions. Kevin, obviously, the hiring continues at a pretty rapid clip. I think one of the things that I hear from investors is is there that many good lenders to hire year in, year out?

Speaker #2: And I know everyone has to focus on different components, but I look at NII as a component of an outcome. And the outcome is growth and revenue and growth and NII.

Speaker #2: And that's what we're focused on.

Speaker #4: Obviously, Pinnacle has done that for a long period of time. But there is kind of the law of large numbers. And there's a lot more hiring activity in and around your markets than there has been in many years.

Speaker #5: Great. Thank you for all the detail.

Speaker #1: Thank you. Your next question is coming from Michael Rose from Raymond James. Your line is live.

Speaker #4: So what would you say to some of the skeptics out there? Thanks.

Speaker #3: Hey, good morning, guys. Thanks for taking my questions. Kevin, obviously the hiring continues at a pretty rapid clip. I think one of the things that I hear from investors is is there that many good lenders to hire year in, year out?

Speaker #3: Yeah, the same thing that Terry has said for years. And I'll reiterate is it's a cycle that builds on itself, Michael. When you hire a revenue producer, they bring a Rolodex with them.

Speaker #3: And they talk to our team about which team members need to join, with them. And so what you see when we hire is it's not one individual.

Speaker #3: Obviously, Pinnacle has done that for a long period of time, but there is kind of the law of large numbers and there's a lot more hiring activity in and around your markets than there has been in many years.

Speaker #3: It generally comes with two and three and four. And the best marketing tool we can have is when they come over here and they're able to call the folks back at their previous employer and say that it is exactly what they were promised.

Speaker #3: So, what would you say to some of the skeptics out there? Thanks.

Speaker #2: Yeah, the same thing that Terry has said for years, and I'll reiterate, is it's a cycle that builds on itself, Michael. When you hire a revenue producer, they bring a Rolodex with them, and they talk to our team about which team members need to join with them.

Speaker #3: It's a great environment. It offers them the autonomy and the ability and empowerment to serve their clients the way they want to do it.

Speaker #3: And so absolutely, there are enough bankers to continue to add. You just listen to our prepared remarks today. We had 34 individuals that have already signed on in July.

Speaker #2: And so what you see when we hire is it's not one individual. It generally comes with two and three and four. And the best marketing tool we can have is when they come over here and they're able to call the folks back at their previous employer and say that it is exactly what they were promised.

Speaker #3: So it's not slowing down. It's picking up. And when you add more people, we're up about 13% year over year on a combined basis.

Speaker #3: It just gives us a better pipeline of talent to be able to continue to hire.

Speaker #2: It's a great environment. It offers them the autonomy and the ability and empowerment to serve their clients the way they want to do it.

Speaker #4: Very helpful. Appreciate the call. And then maybe just one quick one on loan growth. Looks like the snake balance is we're up fairly meaningfully this quarter, about 12 and a half percent of the book.

Speaker #2: And so absolutely, there are enough bankers to continue to add. You just listen to our prepared remarks today. We had 34 individuals that have already signed on in July.

Speaker #4: What's the comfort level there? And it did look like the amount that the percentage of the agent went up as well. So I think that's important.

Speaker #2: So it's not slowing down—it's picking up. And when you add more people, we're up about 13% year over year on a combined basis.

Speaker #4: But what's the comfort level in terms of size or percentage of the book as we think about the next couple of years? Thanks.

Speaker #2: It just gives us a better pipeline of talent to be able to continue to hire.

Speaker #3: Yeah, it's not an area of growth for us. There are a couple of things happened there to your point. We did have some lead arranger fees this quarter.

Speaker #3: Very helpful. Appreciate the caller. And then maybe just one quick one on loan growth. Looks like the snake balance is we're up fairly meaningfully this quarter, about 12 and a half percent of the book.

Speaker #3: As we go up market and we're playing in that space, you're going to see more deals there where we're leading. Our lead arranger fees were up significantly over historical levels.

Speaker #3: What's the comfort level there? And it did look like the amount—the percentage that the agent went up as well. So I think that's important.

Speaker #3: And quarter on quarter. So that's what you're seeing there. We also have some large payoffs coming in the second half of the year. And we pre-funded some of those with some other snakes.

Speaker #3: But what's the comfort level in terms of size or percentage of the book as we think about the next couple of years? Thanks.

Speaker #3: So just I would look at second quarter more as an anomaly. And we've always said the debt portfolio would represent less than 10% of the total loans.

Speaker #2: Yeah, it's not an area of growth for us. There are a couple of things happened there to your point. We did have some lead arranger fees this quarter.

Speaker #3: And that's not something that you would see us change.

Speaker #2: As we go up market and we're playing in that space, you're going to see more deals there where we're leading. Our lead arranger fees were up significantly over historical levels in quarter on quarter.

Speaker #4: All right. I'll step back. Thanks for taking my questions.

Speaker #3: Thank you.

Speaker #1: Thank you. Your next question is coming from Bernard von Gizycky from Deutsche Bank. Your line is live.

Speaker #2: So that's what you're seeing there. We also have some large payoffs coming in the second half of the year. And we pre-funded some of those with some other strategies.

Speaker #5: Hey, guys. Good morning. On credit, it was stable. And Kevin, you mentioned the reserve and reproduction is coming in lower than the portfolio as a whole.

Speaker #2: So just I would look at second quarter more as an anomaly. And we've always said the debt portfolio would represent less than 10% of the total loans.

Speaker #5: Which drove the ACL ratio lower. Are you targeting higher quality assets? What's driving the change? And just thoughts on reserve growth through the rest of the year?

Speaker #2: And that's not something that you would see us change.

Speaker #6: You know, I don't know if we're targeting higher quality assets. I just think that where our production has been has resulted in production in asset classes that just are carrying a lower lifetime loss.

Speaker #3: All right. I'll step back. Thanks for taking my questions.

Speaker #2: Thank you.

Speaker #1: Thank you. Your next question is coming from Bernard von Gezeki from Deutsche Bank. Your line is live.

Speaker #6: But it's really just right down the middle of the fairway. As I mentioned earlier, some of our geographies just doing core CNI lending. It's our specialty areas.

Speaker #4: Hey, guys. Good morning. On credit, it was stable. And Kevin, you mentioned the reserve and you production is coming in lower than the portfolio as a whole.

Speaker #6: We had great growth in our structured lending division this quarter, which carries low-risk weightings. So it's more of just doing what we do best.

Speaker #4: Which drove the ACL ratio lower. Are you targeting higher quality assets? What's driving the change? And just thoughts on reserve growth through the rest of the year?

Speaker #6: It's going down the middle and not having to stretch on either price or credit to generate growth.

Speaker #2: You know, if we're targeting higher quality assets, I just think that where our production has been has resulted in production in asset classes that are just carrying a lower lifetime loss.

Speaker #5: And then maybe just a follow-up. On the 130 million of revenue synergies can you just give some updates on how that's progressing and any update on how much expected in 2026?

Speaker #2: But it's really just right down the middle of the fairway. As I mentioned earlier, some of our geographies are just doing core C&I lending—it's our specialty areas.

Speaker #6: Yeah. So we've said in the past, we felt like given that we're on separate systems, this year we had targeted roughly 20 million dollars of revenue recognition from those synergies.

Speaker #2: We had great growth in our structured lending division this quarter, which carries low-risk weightings. So it's more of just doing what we do best.

Speaker #6: Through June, we're right at 50%. And most of the revenue synergies have come in through our capital markets platform. I mentioned earlier with Michael's question, we've expanded our syndication capabilities and that's resulted in more joint lead arranger fees.

Speaker #2: It's going down the middle and not having to stretch on either price or credit to generate growth.

Speaker #4: And then maybe just a follow-up. On the $130 million of revenue synergies, can you just give some updates on how that's progressing and any update on how much is expected in 2026?

Speaker #6: We've also expanded on the FX side. We've seen expansions on hedging, which has driven some of the growth. We've used a little bit of our hold limits.

Speaker #2: Yeah. So we've said in the past, we felt like given that we're on separate systems this year, we had targeted roughly 20 million dollars of revenue recognition from those synergies.

Speaker #6: I think that's generated almost a million dollars of incremental revenue. And some of our new specialties, like equipment finance, are generating synergies. So we're right around 10 million dollars year to date.

Speaker #2: Through June, we're right at 50%. And most of the revenue synergies have come in through our capital markets platform. I mentioned earlier with Michael's question, we've expanded our syndication capabilities and that's resulted in more joint lead arranger fees.

Speaker #6: We're on track to deliver the 20. The real value will come once we're all on the same platform. And that will come in conversion in March of '27.

Speaker #6: But no, we're right on track. And there's nothing we're seeing there that makes us feel as if that original 130 million dollars is not attainable.

Speaker #2: We've also expanded on the FX side. We've seen expansions on hedging, which has driven some of the growth. We've used a little bit of our hold limits.

Speaker #5: Great. Thanks for taking my questions.

Speaker #2: I think that's generated almost a million dollars of incremental revenue. And some of our new specialties, like equipment finance, are generating synergies. So we're right around 10 million dollars year to date.

Speaker #6: Yes.

Speaker #1: Thank you. Your next question is coming from Jared Shaw from Barclays. Your line is live.

Speaker #7: Hey, good morning. Thanks. Hey, I guess just sticking on that prior topic. After the systems conversion, which I know is the main focus now, has there been any thoughts of new tech initiatives or investments that you've started thinking about over the last quarter or so just given some of the potential benefits from AI out there?

Speaker #2: We're on track to deliver the 20. The real value will come once we're all on the same platform. And that will come in conversion in March of '27.

Speaker #2: But no, we're right on track. And there's nothing we're seeing there that makes us feel as if that original 130 million dollars is not attainable.

Speaker #4: Great. Thanks for taking my questions.

Speaker #2: Yes.

Speaker #6: You know, Jared, number one, we're leveraging AI internally. We have almost 20 AI engineers that we employ. We rolled out technology and capabilities to 40 power users across the franchise.

Speaker #1: Thank you. Your next question is coming from Jared Shaw from Barclays. Your line is live.

Speaker #5: Hey, good morning. Thanks. Hey, I guess just sticking on that prior topic. After the systems conversion, which I know is the main focus now, has there been any thoughts of new tech initiatives or investments that you've started thinking about over the last quarter or so just given some of the potential benefits from AI out there?

Speaker #6: And those individuals are using the tools to become more efficient, to add capacity, and to generate I think new sources of revenue down the road.

Speaker #6: I would also tell you that we're relying a lot on our strategic business partners, the people that provide our technology solutions. They are generating new sources of revenue for us from AI.

Speaker #2: You know, Jared, number one, we're leveraging AI internally. We have almost 20 AI engineers that we employ we rolled out technology and capabilities to 40 power users across the franchise.

Speaker #6: We deployed something two years ago on our consumer platform where we have AI insights that go both to our clients and to our advisors, where they're given insights on clients' behaviors and that generally leads to opportunities for a conversation.

Speaker #2: And those individuals are using the tools to become more efficient, to add capacity, and to generate I think new sources of revenue down the road.

Speaker #6: In some situations, a sale. So if you ask me today, we've always talked about we've got to convert, then we'll innovate. The innovation lens that we'll have, you'll see us spend a lot on the commercial treasury side.

Speaker #2: I would also tell you that we're relying a lot on our strategic business partners, the people that provide our technology solutions. They are generating new sources of revenue for us from AI.

Speaker #6: I think there's a lot to do with payments, payment portals, we're working on things that will make our clients' life easier including ERP integration, we're looking at things that will add to our client efficiency initiatives, whether that's back office efficiencies, receivables, payables, things like that.

Speaker #2: We deployed something two years ago on our consumer platform where we have AI insights that go both to our clients and to our advisors, where they're given insights on clients' behaviors and that generally leads to opportunities for a conversation.

Speaker #2: In some situations, a sale. So if you ask me today, we've always talked about we've got to convert, then we'll innovate. The innovation lens that we'll have, you'll see us spend a lot on the commercial treasury side.

Speaker #6: But to me, the key is continuing to focus on the things our clients want. So we're asking what are the capabilities, what are the functionalities that you desire.

Speaker #2: I think there's a lot to do with payments, payment portals, we're working on things that will make our clients' life easier including ERP integration, we're looking at things that will add to our client efficiency initiatives, whether that's back office efficiencies, receivables, payables, things like that.

Speaker #6: That's what's going to show up on our roadmap. I don't think you're going to see us go out there and create new business units, but I think you'll see us focus on how do we deepen relationships with adding technology in and capabilities.

Speaker #6: And AI is going to be a big component of that.

Speaker #7: Okay. Thanks. And maybe shifting back to the growth and the loan growth and the revenue producer growth. You all have hired so many people over the last few years.

Speaker #2: But to me, the key is continuing to focus on the things our clients want. So we're asking what are the capabilities, what are the functionalities that you desire.

Speaker #7: I mean, are you starting to see the donor banks change their behavior doing anything to try to more actively retain those employees or those clients?

Speaker #2: That's what's going to show up on our roadmap. I don't think you're going to see us go out there and create new business units, but I think you'll see us focus on how do we deepen relationships with adding technology and capabilities.

Speaker #7: I hear you're not competing on price, but are you seeing any other ways that other banks are trying to react to what you're doing?

Speaker #2: And AI is going to be a big component of that.

Speaker #5: Okay. Thanks. And maybe shifting back to the growth and the loan growth and the revenue producer growth. You all have hired so many people over the last few years.

Speaker #6: I mean, I think it's always been competitive. And I think the banks are responding maybe in ways they always have. Maybe it's just the magnitude of how they do it, whether it's offering pay-to-stays or giving equity.

Speaker #5: I mean, are you starting to see the donor banks change their behavior doing anything to try to more actively retain those employees or those clients?

Speaker #6: I think with clients, I've always said that the challenge with moving clients over to the bank, especially on the commercial side, is how tied in people's cash management systems are to their ERPs, to their payroll system.

Speaker #5: I hear you're not competing on price, but are you seeing any other ways that other banks are trying to react to what you're doing?

Speaker #6: And so the biggest impediment for moving clients isn't really I think the bank doing something differently. It's how tied in technology has made the relationship.

Speaker #2: I mean, I think it's always been competitive. And I think the banks are responding maybe in ways they always have. Maybe it's just the magnitude of how they do it, whether it's offering pay-to-stays or giving equity.

Speaker #6: So it just means we have to work harder to be able to convince someone that it's worth making that switch and converting their systems.

Speaker #6: But I mean, it's the traditional defensive mechanisms. They're offering their bankers more money to stay. And the argument there is they didn't offer to you before.

Speaker #2: I think with clients, I've always said that the challenge with moving clients over to the bank, especially on the commercial side, is how tied in people's cash management systems are to their ERPs, to their payroll system.

Speaker #6: They only offered to you after you were leaving. So in many cases, the team member is going to go ahead and leave. But yes, we've had situations where people have accepted and then reneged on the offer just based on things like that.

Speaker #2: And so the biggest impediment for moving clients isn't really I think the bank doing something differently. It's how tied in technology has made the relationship.

Speaker #6: But again, look at the numbers. I mean, we're up 13% year over year, 124 revenue producers were on track to do 250, which will be a record level so it hasn't slowed us down.

Speaker #2: So it just means we have to work harder to be able to convince someone that it's worth making that switch and converting their systems.

Speaker #2: But I mean, it's the traditional defensive mechanisms. They're offering their bankers more money to stay. And the argument there is they didn't offer to you before.

Speaker #7: Great. Thanks.

Speaker #1: Thank you. Your next question is coming from Anthony Elian from JP Morgan. Your line is live.

Speaker #2: They only offered to you after you were leaving. So, in many cases, the team member is going to go ahead and leave. But yes, we've had situations where people have accepted and then reneged on the offer just based on things like that.

Speaker #8: Hi, everyone. Jamie, I'm seeing come you listed the outlook. Can you talk to us about where you expect to step up in fees to occur in the second half outside of BHG?

Speaker #2: But again, look at the numbers. I mean, we're up 13% year over year, 124 revenue producers were on track to do 250, which will be a record level so it hasn't slowed us down.

Speaker #6: Yeah. Great question, Tony. As we look at the second half, we do see continued growth across the board. What I would point to as far as a step up, I would largely point to our wealth business.

Speaker #5: Great. Thanks.

Speaker #1: Thank you. Your next question is coming from Anthony Elian from JP Morgan. Your line is live.

Speaker #6: We expect to see that increase in revenue fairly strongly as we look into the second half of the year. Beyond that, core banking fees should have steady increases as we go quarter by quarter.

Speaker #6: Hi everyone. Jamie, I'm seeing come you listed the outlook. Can you talk to us about where you expect to step up in fees to occur in the second half outside of BHG?

Speaker #6: Capital markets has very, very strong momentum. We expect to see that continue so we have the inflection with BHG that I described earlier, but I would say the bigger quarter on quarter increases will largely come from core banking fees, wealth management, and wealth management.

Speaker #2: Yeah. Great question, Tony. As we look at the second half, we do see continued growth across the board. What I would point to as far as a step up, I would largely point to our wealth business.

Speaker #2: We expect to see that increase in revenue fairly strongly as we look into the second half of the year. Beyond that, core banking fees should have steady increases as we go quarter by quarter.

Speaker #8: Thank you. And then on capital, do you still expect to get to the 10/25 CT1 target by the end of this year, or what's the timing on that?

Speaker #8: Thank you.

Speaker #2: Capital markets has very, very strong momentum. We expect to see that continue so we have the inflection with BHG that I described earlier, but I would say the bigger quarter on quarter increases will largely come from core banking fees, wealth management and wealth management.

Speaker #6: It's a great question. It's hard to know exactly where we will land on that, but here's how I would think about it. Each quarter, we generate about 30 basis points of capital before risk-weighted asset increases.

Speaker #6: And so it really depends on how our growth comes through in the second half of the year. If we grow a couple billion dollars in loans each quarter in the second half of the year, that's going to consume 15 to 20 basis points of that 30.

Speaker #6: Thank you. And then on capital, do you still expect to get to the 1025 CT1 target by the end of this year, or what's the timing on that?

Speaker #6: Thank you.

Speaker #2: That's a great question. It's hard to know exactly where we will land on that, but here's how I would think about it. Each quarter, we generate about 30 basis points of capital before risk-weighted asset increases.

Speaker #6: And the rest will drop to capital accretion. So do we get to 10/25 in the second half of the year? I don't know if we get there by 12/31, but we should be trending the right direction.

Speaker #6: Now, that being said, if growth comes in faster, the right growth is there again, we're not competing on price or structure, then that will slow that accretion down.

Speaker #2: And so it really depends on how our growth comes through in the second half of the year. If we grow a couple of billion dollars in loans each quarter in the second half of the year, that's going to consume 15 to 20 basis points of that 30.

Speaker #6: But we do expect to see material accretion in the second half of the year. And I'll remind you that the Fed NPR is out there as well.

Speaker #2: And the rest will drop to capital accretion. So do we get to 1025 in the second half of the year? I don't know if we get there by 1231, but we should be trending the right direction.

Speaker #6: And that should give us another 40 basis points of capital on top of that. And we expect that in 2027. And when you think about capital targets, in the world of the new Fed NPR, that changes how you can look at it because in our opinion, AOCI is countercyclical.

Speaker #2: Now, that being said, if growth comes in faster, the right growth is there again, we're not competing on price or structure. Then that will slow that accretion down.

Speaker #6: So you have to revisit your targets and think about where you want capital ratios to be post-implementation of the Fed NPR. So there are a lot of moving parts, but I would say we expect continued strong capital accretion getting to our getting to our target.

Speaker #2: But we do expect to see material accretion in the second half of the year. And I'll remind you that the Fed NPR is out there as well.

Speaker #2: And that should give us another 40 basis points of capital on top of that. And we expect that in 2027. And when you think about capital targets, NPR, that changes how you can look at it because in our opinion, AOCI is countercyclical.

Speaker #6: The Fed NPR will be a positive. We're looking forward to implementation of that. And then we'll be where we expect to be.

Speaker #8: Thank you.

Speaker #1: Thank you. Your next question is coming from David Chiaverini from Jefferies. Your line is live.

Speaker #2: So you have to revisit your targets and think about where you want capital ratios to be post-implementation of the Fed NPR. So there are a lot of moving parts, but I would say we expect continued strong capital accretion getting to our getting to our target.

Speaker #7: Hi. Thanks for taking the questions. Wanted to ask about rate sensitivity at no Fed actions are assumed in your guide. What's the impact on NII or NIM in the quarters following a rate hike?

Speaker #2: The Fed NPR will be a positive. We're looking forward to implementation of that. And then we'll be where we expect to be.

Speaker #6: It's largely neutral. Now, to be clear, our sensitivity we've actually balanced more since last quarter, and I believe that we're really neutral to the front end of the curve.

Speaker #6: Thank you.

Speaker #1: Thank you. Your next question is coming from David Chiaverini from Jefferies. Your line is live.

Speaker #6: And so I would say it's immaterial to us. As you're aware, our balance sheet is naturally asset sensitive. So to get to a spot of neutrality at the front of the curve, we have hedges in place.

Speaker #5: Hi. Thanks for taking the questions. Wanted to ask about rate sensitivity at no Fed actions are assumed in your guide. What's the impact on NII or NIM in the quarters following a rate hike?

Speaker #6: And so if you go out and you look at year two and year three, that asset sensitivity just naturally comes back as hedges roll off.

Speaker #2: It's largely neutral. Now, to be clear, our sensitivity—we've actually balanced more since last quarter, and I believe that we're really neutral to the front end of the curve.

Speaker #6: And so I would say to the front of the curve, we're neutral in a multi-year period. You would see asset sensitivity to the belly and long in the curve.

Speaker #2: And so I would say it's immaterial to us. As you're aware, our balance sheet is naturally asset sensitive. So, to get to a spot of neutrality at the front of the curve, we have hedges in. If you look at year two and year three, that asset sensitivity just naturally comes back as hedges roll off.

Speaker #6: We remain asset sensitive.

Speaker #7: Thank you for that. And then on your ROTC target, 18% is what you guys are looking for out in 2027. You're nearly there at adjusted 17.7.

Speaker #7: Is this kind of the steady state level? Could there be upside as you progress through the merger?

Speaker #2: And so I would say to the front of the curve, we're neutral in a multi-year period. You would see asset sensitivity to the belly and long in the curve.

Speaker #6: So as we look at return on tangible, as we discussed earlier, we believe that the growth impact of the impact of growth on return on tangible is neutral.

Speaker #2: We remain asset sensitive.

Speaker #5: Thank you for that. And then on your ROTC target, 18% is what you guys are looking for out in 2027. You're nearly there at adjusted 17.7.

Speaker #6: We are putting assets on the book that will drop to the bottom line, and we expect return on tangible to be stable. We're at 17.7% right now.

Speaker #5: Is this kind of the steady-state level? Could there be upside as you progress through the merger?

Speaker #6: The only caveat I would give to that is as we accrete capital, as I just discussed over the next few quarters or a couple of quarters to get to our target, that will be a slight headwind to return on tangible.

Speaker #2: So as we look at return on tangible, as we discussed earlier, we believe that the growth impact of the impact of growth on return on tangible is neutral.

Speaker #6: So there's no impact to return on tangible for the growth. There is a slight headwind due to growing absolute levels of capital. And then going forward, once we achieve our objectives on capital target, that's when we'll be balanced on share purchases, things like that.

Speaker #2: We are putting assets on the book that will drop to the bottom line, and we expect return on tangible to be stable. We're at 17.7% right now.

Speaker #2: The only caveat I would give to that is, as we accrete capital— as I just discussed— over the next few quarters, or a couple of quarters, to get to our target, that will be a slight headwind to return on tangible.

Speaker #6: And that's where you may you should expect to see maybe a little bit of a tailwind there.

Speaker #7: Very helpful. Thank you.

Speaker #1: Thank you. Your next question is coming from Janet Lee from TD Cowan. Your line is live.

Speaker #2: So there's no impact to return on tangible for the growth. There is a slight headwind due to growing absolute levels of capital. And then going forward, once we achieve our objectives on capital target, that's when we'll be balanced on share purchases, things like that.

Speaker #5: Good morning. On your for your deposit growth, somewhere in the six and a half billion range in the second half of 2026, are you able to you talked about broker deposits are likely going to increase maybe one and a half to two billion of seasonal.

Speaker #2: And that's where you may—you should expect to see maybe a little bit of a tailwind there.

Speaker #5: Very helpful. Thank you.

Speaker #5: As you look at the composition of that expected growth in the second half, should we think about the mixes pretty much the same as what you have, like 20% NIB, or how should we think about the totality of the composition of the deposit growth?

Speaker #1: Thank you. Your next question is coming from Janet Lee from TD Cowen. Your line is live.

Speaker #4: Good morning.

Speaker #2: Morning. Morning.

Speaker #4: On your for your deposit growth, somewhere in the six and a half billion range in the second half of 2026, are you able to you talked about broker deposits are likely going to increase maybe one and a half to two billion of seasonal.

Speaker #6: If you look at the mix of our deposits and these comments are based on a combined basis for prior year, it is really stable.

Speaker #6: 20 to 21 percent NIB, you have approximately a third of the book is money market and similar amount is now accounts. We expect that to continue.

Speaker #4: As you look at the composition of that expected growth in the second half, should we think about the mixes pretty much the same as what you have, like 20% NIB, or how should we think about the totality of the composition of the deposit growth?

Speaker #6: And so as we look into the second half of the year, we think that that core deposit growth will come in at pretty similar levels as where we are today.

Speaker #2: If you look at the mix of our deposits and these comments are based on a combined basis for prior year, it is really stable.

Speaker #2: And the only thing I'd say, James, is we've really leaned a little more into money market versus time deposits. Those don't have a significantly different rate paid there, but you'll see greater growth in money market this year than you would have seen in time.

Speaker #2: Twenty to twenty-one percent NIB, you have approximately a third of the book in money market and a similar amount in NOW accounts. We expect that to continue.

Speaker #2: But to Jamie's point, all the other categories are growing roughly at a similar rate.

Speaker #5: Got it. And sorry to be on that horse, but where do you currently stand in terms of deposit pricing? Are you around the middle of the pack in your markets, or are you and based on your comments, as you're obviously growing much faster than peers, should we is it fair to say you may be a little bit you will be willing to be a little bit above the market on pricing as long as it's accretive to NII and maybe if you could give us a spot rate on interest-bearing deposit costs versus 269, that would be helpful.

Speaker #2: And so as we look into the second half of the year, we think that that core deposit growth will come in at pretty similar levels as where we are today.

Speaker #3: And the only thing I’d say, yes, is we’ve really leaned a little more into money market versus time deposits. Those don’t have a significantly different rate paid there, but you’ll see greater growth in money market this year than you would have seen in time.

Speaker #3: But to Jamie's point, all the other categories are growing roughly at a similar rate.

Speaker #4: Got it. And sorry to be on that horse, but where do you currently stand in terms of deposit pricing? Are you around the middle of the pack and your markets, or are you based on your comments, as you're obviously growing much faster than peers, should we is it fair to say you may be a little bit you will be willing to be a little bit above the market on pricing as long as it's accretive to NII and maybe if you could give us a spot rate on interest-bearing deposit costs versus 269, that would be helpful.

Speaker #5: Thank you.

Speaker #6: Yeah. As we look at the competitive landscape, we all kind of use the similar pricing service. We believe that we are in line with others and not especially an outlier.

Speaker #6: On deposit pricing. From time to time, there are markets where you may have a special rate, but in large part, we're not an outlier on deposit calls.

Speaker #6: And it kind of circles back to the prior conversation where our deposit production coming in in the 250s is similar as our prior quarters.

Speaker #4: Thank you.

Speaker #2: Yeah. As we look at the competitive landscape, we all kind of use the similar pricing service. We believe that we are in line with others and not especially an outlier.

Speaker #6: We've been very stable in those rates and so we're not doing anything different than what we have done in the past. And so those have been very stable.

Speaker #2: On deposit pricing, from time to time there are markets where we may have a special rate, but for the most part, we're not an outlier on deposit calls.

Speaker #6: We think we're kind of middle of the pack. But that's where we are. And then you asked the question on interest-bearing. On interest-bearing deposit calls, we were up one basis point.

Speaker #2: And it kind of circles back to the prior conversation, where our deposit production coming in in the $250s is similar to our prior quarters.

Speaker #6: And it's right at 253.

Speaker #2: We've been very stable in those rates and so we're not doing anything different than what we have done in the past. And so those have been very stable.

Speaker #2: And I should just say, when you look at you ask where do we stack up relative to our competition, Janet, Jamie was right on the production.

Speaker #2: You look at it relative to our peers, we would show a little higher. And part of that just remember that about 70% of our mix is commercial.

Speaker #2: We think we're kind of middle of the pack. But that's where we are. And then you asked a question on interest-bearing. On interest-bearing deposit calls, we were up one basis point.

Speaker #2: So we have less consumer deposits. And so that's why our rate paid is going to be a little higher than some of our peers, especially as we enter the category four comparisons where you have folks that have bigger branch networks.

Speaker #2: And it's right at 253.

Speaker #2: But I would argue that within each peer set amongst the liability classes, we're very competitive, but kind of middle of the pack.

Speaker #3: And I should just say, when you look at – you asked, "Where do we stack up relative to our competition?" Janet, Jamie was right on the production.

Speaker #6: And Janet, that interest-bearing number was interest-bearing core.

Speaker #3: You look at it relative to our peers, we would show a little higher. And part of that just remember that about 70% of our mix is commercial.

Speaker #5: Oh, okay. So it's not apples to apples, apples to 269?

Speaker #6: Yeah, yeah. That's right. That's total interest-bearing is 269.

Speaker #3: So, we have fewer consumer deposits, and that's why our rate paid is going to be a little higher than some of our peers, especially as we enter the Category Four comparisons, where you have folks that have bigger branch networks.

Speaker #5: Oh, okay. So what was that in the second quarter for the core?

Speaker #6: 253.

Speaker #5: Okay. Thank you.

Speaker #3: But I would argue that within each peer set among the liability classes, we're very competitive, but kind of middle of the pack.

Speaker #1: Thank you. Your next question is coming from Christopher Marinac from Breen Capital. Your line is live.

Speaker #2: And Janet, that interest-bearing number was interest-bearing core.

Speaker #8: Hey, thanks for taking all of our questions this morning. Jamie, just wanted to go back to the capital discussion from a few minutes ago.

Speaker #4: Oh, okay. So it's not apples to apples, apples to 269?

Speaker #8: Where do share repurchases in '27 land? Is that a possibility, or is the growth really going to cover kind of how you manage that?

Speaker #2: Yeah, yeah. That's right. That's total interest-bearing is 269.

Speaker #4: Oh, okay. So what was that in the second quarter for the core?

Speaker #6: It's absolutely a possibility. As we look to 2027 and the capital accretion we're seeing so far in 2026, and we expect to see for the rest of the year, it's part of the plan.

Speaker #2: 253.

Speaker #4: Okay. Thank you.

Speaker #1: Thank you. Your next question is coming from Christopher Marinac from Breen Capital. Your line is live.

Speaker #6: And so as we look forward, we believe that the earnings generation of this company will be strong enough to sustain both really strong best-in-class loan growth as well as capital actions to help balance capital ratios.

Speaker #5: Hey, thanks for taking all of our questions this morning. Jamie, just wanted to go back to the capital discussions from a few minutes ago.

Speaker #5: Where do share repurchases in '27 land? Is that a possibility, or is the growth really going to cover kind of how you manage that?

Speaker #6: And so again, we feel we're very comfortable where we are. As we look forward, we think that longer-term capital planning will be balanced as far as core organic growth and then capital management actions led by shared purchases.

Speaker #2: It's absolutely a possibility. As we look to 2027 and the capital accretion we're seeing so far in 2026, and we expect to see for the rest of the year, it's part of the plan.

Speaker #2: And so as we look forward, we believe that the earnings generation of this company will be strong enough to sustain both really strong best-in-class loan growth as well as capital actions to help balance capital ratios.

Speaker #8: Great. Thanks for reiterating that. And again, thanks for having us to call this morning.

Speaker #2: Thanks, Chris.

Speaker #1: Thank you. Your next question is coming from Catherine Mealer from KBW. Your line is live.

Speaker #5: Thanks. Good morning.

Speaker #2: And so, again, we feel we're very comfortable where we are. As we look forward, we think that longer-term capital planning will be balanced as far as core organic growth and then capital management actions led by share repurchases.

Speaker #8: Good morning, Catherine.

Speaker #5: I wanted to just circle back one thing on just the average earning assets and the cash bill this quarter. If you mentioned, Jamie, part of that happened really late in the quarter, late in June.

Speaker #5: And so if we look at that 7.6 billion in cash kind of exiting the quarter, how do we think about what that looks like over the next couple of quarters?

Speaker #5: Great. Thanks for reiterating that. And again, thanks for having us to call this morning.

Speaker #3: Thanks, Chris.

Speaker #5: It feels like a lot of that bill was in June. And so can you give us a little bit of color on what you expect for the pace of that bill over the back half of the year?

Speaker #1: Thank you. Your next question is coming from Catherine Miller from KBW. Your line is live.

Speaker #4: Thanks. Good morning.

Speaker #2: Good morning, Catherine.

Speaker #6: In cash itself, I actually would not expect a bill in the second half of the year. You should expect to see average cash balances be somewhat consistent to the second quarter, but I would probably give a range of 4 to 4 and a half billion for cash balances.

Speaker #4: I wanted to just circle back one thing on just the average earning assets and the cash bill this quarter. If you mentioned Jamie, part of that happened really late in the quarter, late in June.

Speaker #4: And so if we look at that 7.6 billion in cash kind of exiting the quarter, how do we think about what that looks like over the next couple of quarters?

Speaker #6: In the second half of the year.

Speaker #5: Oh, so that's a 4 to 4 and a half billion relative to the 6 billion that you have in the second quarter?

Speaker #4: It feels like a lot of that build was in June. And so, can you give us a little bit of color on what you expect for the pace of that build over the back half of the year?

Speaker #6: To the end of period, yeah, but relative to the 4 and a half billion average for the second quarter.

Speaker #2: In cash itself, I actually would not expect a build in the second half of the year. You should expect to see average cash balances be somewhat consistent with the second quarter, but I would probably give a range of $4 to $4.5 billion for cash balances.

Speaker #5: Got it. Okay. So you're saying the average will not expand to where you were at an end-of-period basis. From an end-of-period basis, you're going to come back down.

Speaker #6: Exactly.

Speaker #2: In the second half of the year.

Speaker #5: Got it. Okay. That's helpful. And then maybe I'll turn into expenses. I think the lower expenses this quarter was great, but I know from your guide, that's going to be increasing over the back half of the year.

Speaker #4: Oh, so the 4 to 4 and a half billion relative to the 6 billion that you have in the second quarter?

Speaker #2: To the end of period, yeah. But relative to the 4 and a half billion average for the second quarter.

Speaker #5: Can you give us a sense I know we're not to 27 yet, but any kind of updates on how you're thinking about the expense growth into 27 and just what that means from both impact from recent hires and then the impact of cost savings?

Speaker #4: Got it. Okay. So you're saying the average will not expand to where you were at an end of period basis. From an end of period basis, you're going to come back down.

Speaker #5: It feels like cost savings are coming in a little bit better than expected so far this year and just curious what that means for next year.

Speaker #4: Got it. Okay, that's helpful. And then maybe I'll turn to expenses. I think the lower expenses this quarter were great, but I know from your guide that's going to be increasing over the back half of the year.

Speaker #5: Thanks.

Speaker #6: Do your synergies are coming in as planned. We're going to achieve our 40% target for this year and we're on track for 75% next year.

Speaker #4: Can you give us a sense—I know we're not to '27 yet—but any kind of updates on how you're thinking about the expense growth into '27, and just what that means from both the impact from recent hires and then the impact of cost savings?

Speaker #6: So we feel really good about our prior commitments there. And what I would say is when you look to next year, just think assume high single-digit expense growth, driven by continued hiring, continued winning, and bringing over experienced team members, and then subtract out the incremental synergies, which is the 35% of the 250.

Speaker #4: It feels like cost savings are coming in a little bit better than expected so far this year, and I'm just curious what that means for next year.

Speaker #4: Thanks.

Speaker #2: Do your synergies are coming in as planned? We're going to achieve our 40% target for this year, and we're on track for 75% next year.

Speaker #6: And so that's how we look at 2027. For the rest of this year, you're right. Expenses will increase a little bit in the third quarter.

Speaker #2: So we feel really good about our prior commitments there. And what I would say is, when you look to next year, just assume high single-digit expense growth, driven by continued hiring, continued winning, and bringing over experienced team members. And then subtract out the incremental synergies, which is the 35% of the $250 million.

Speaker #6: We will see a slight increase. But a part of that's driven by BHG. Part of that's driven by personnel costs, the combination of those two is a 20 million quarter-on-quarter increase heading into the third quarter.

Speaker #6: And so we'll see expenses increase here in the second half of the year. But again, we expect strong positive operating leverage in 2027, and we'll give more color on that as we get later in the year.

Speaker #2: And so that's how we look at 2027. For the rest of this year, you're right—expenses will increase a little bit in the third quarter.

Speaker #5: Okay. Helpful. And actually, can I ask you one more on the balance sheet? I'm just playing with this. So if I'm not going to take my cash to where you were end of period, does that mean borrowings on an end of period basis will also come down from that level into next quarter?

Speaker #2: We will see a slight increase. But a part of that's driven by BHG. Part of that's driven by personnel costs, the combination of those two is a 20 million quarter-on-quarter increase heading into the third quarter.

Speaker #2: And so we'll see expenses increase here in the second half of the year. But again, we expect strong positive operating leverage in 2027, and we'll give more color on that as we get later in the year.

Speaker #6: From end of period, yes.

Speaker #5: Yes. Okay. Helpful. Thank you.

Speaker #1: Thank you. This concludes our question and answer session. I'd now like to turn the conference back over to Kevin Blair for any closing remarks.

Speaker #4: Okay. Helpful. And actually, can I ask you one more on the balance sheet? I'm just playing with this. So if I'm not going to take my cash to where you were end of period, does that mean borrowings on an end of period basis will also come down from that level into next quarter?

Speaker #2: Thank you, Matthew. Tomorrow marks one year from the announcement of our combination, and a little over six months since we've closed. On our original call, we said we were creating the southeastern growth champion.

Speaker #2: What I'm most pleased about is pretty simple. We are executing and delivering on what we said we would. This is scale with the soul in practice.

Speaker #2: From end of period, yes.

Speaker #4: Yes. Okay. Helpful. Thank you.

Speaker #1: Thank you. This concludes our question-and-answer session. I'd Blair for any closing remarks.

Speaker #2: I want to make sure that doesn't get lost in the quarter-to-quarter noise. We are delivering strong results, EPS and revenue are growing at a significant pace driven by strong balance sheet and core client fee income momentum.

Speaker #3: Thank you, Matthew. Tomorrow marks one year from the announcement of our combination, and a little over six months since we closed. On our original call, we said we were creating the Southeastern growth champion.

Speaker #2: Credit is strong, capital is building, team member retention is high, and others are joining at an elevated pace. And best of all, the most recent industry surveys point to clients and prospects saying they want to do more business with Pinnacle, more so than any of our peers.

Speaker #3: What I'm most pleased about is pretty simple. We are executing and delivering on what we said we would. This is scale with the soul in practice.

Speaker #2: The leverage points of this proven model are working, and it comes down to strong execution by 8,500 passionate team members and so to each of you again, thank you.

Speaker #3: I want to make sure that doesn't get lost in the quarter-to-quarter noise. We are delivering strong results, EPS and revenue are growing at a significant pace driven by strong balance sheet and core client fee income momentum.

Speaker #2: We have real runway ahead, and it involves taking share. One quarter, one client, and one banker at a time. As our founder and chairman, Terry Turner has said for 25 years, the energy in this firm is about advancing the ball and moving forward.

Speaker #3: Credit is strong, capital is building, team member retention is high, and others are joining at an elevated pace. And best of all, recent industry surveys point to clients and prospects saying they want to do more business with Pinnacle—more so than any of our peers.

Speaker #2: We intend to keep doing exactly that. Thanks for listening in today, and your continued interest. And with that, Matthew, we will conclude today's call.

Speaker #3: The leverage points of this proven model are working, and it comes down to strong execution by 8,500 passionate team members. So to each of you again, thank you.

Speaker #3: We have real runway ahead, and it involves taking share. One quarter, one client, and one banker at a time. As our founder and chairman, Terry Turner has said for 25 years, the energy in this firm is about advancing the ball and moving forward.

Speaker #3: We intend to keep doing exactly that. Thanks for listening in today and for your continued interest. And with that, Matthew, we will conclude today's call.

Q2 2026 Pinnacle Financial Partners Inc Earnings Call

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