Pinnacle Bancshares Inc

Good morning everyone and welcome to the Pinnacle Financial Partners second quarter 2025 earnings conference call. Hosting the call today from Pinnacle Financial Partners is Mr. Terry Turner, Chief Executive Officer, and Mr. Harold Carpenter, Chief Financial Officer. Please note Pinnacle's earnings release and this morning's presentation are available on the investor relations page of their website at .pnfp.com. Today's call is being recorded and will be available for replay on Pinnacle Financial's website for the next 90 days. At this time all participants have been placed on a listen-only mode. The floor will be open for your questions following the presentation. If you'd like to ask a question at that time, please press star 1 on your touch-tone phone. Analysts will be given preference during the Q&A. We do ask that you please pick up your handset to allow optimal sound quality. During this presentation we may make comments which may constitute forward-looking statements. All forward-looking statements are subject to risks, uncertainties, and other facts that may cause the actual results, performance, or achievements of Pinnacle Financial to differ materially from any results expressed or implied by such forward-looking statements. Many of such factors are beyond Pinnacle Financial's ability to control or predict, and listeners are cautioned not to put undue reliance on such forward-looking statements. A more detailed description of these and other risks is contained in Pinnacle Financial's annual report on Form 10-K for the year ended December 31, 2024, and its subsequently filed quarterly reports. Pinnacle Financial disclaims any obligation to update or revise any forward-looking statements contained in this presentation, whether as a result of new information, future events, or otherwise. In addition, these remarks may include certain non-GAAP financial measures as defined by SEC Regulation G. A presentation of the most directly comparable GAAP financial measures and a reconciliation of the non-GAAP measures to the comparable GAAP measures will be available on Pinnacle Financial's website at .pnfp.com. With that, I'm now going to turn the presentation over to Mr. Terry Turner, Pinnacle's President and CEO.

Thank you, Matt. Everyone who's been on one of these calls with us over the last decade or more knows that we begin every one of them with our shareholder value dashboard. GAAP measures first, then the non-GAAP measures, which are most reflective of how we manage this firm. And specifically, I'm always going to comment on revenue growth, EPS growth, and tangible book value for share growth, because our analysis is that these three measures are the most highly correlated with share price performance. I believe that our relentless focus on these three simple metrics accounts for the extraordinary total shareholder return we've produced over more than two decades now. Other metrics like net interest margin, cost of funds, deposit betas, efficiency ratios are all interesting, but in my opinion, they're not highly correlated with total shareholder returns. And so that's why we're so dogging in our pursuit of revenue, EPS, and tangible book value for share growth. Here you can see the extraordinary reliability by quarter over the last four and a half years, with second quarter being more of the same. In 2Q25, revenue was up .1% over the same quarter last year. Adjusted EPS was up .7% over the same quarter last year. And tangible book value per share was up .9% over the same quarter last year. And as you can see on this slide, we produced double-digit CAGRS over the last decade on those same three metrics, which is meaningfully outsized versus the peers. But to peel the onion back just a little on how we produce such reliable growth since between 75 and 80% of our revenues are spread revenues, as far as I can see, you're going to have to figure out how to sustainably grow net interest income at a double-digit pace, which we've done over the long term, as you can see on the left. And our way of doing that is to reliably grow our earning assets at a double-digit pace, which we've done over the long term, as you can see in the center. And then the most important ingredient involved to be able to sustainably grow core deposits fast enough to effectively fund that double-digit earning asset growth, which we've done over the long term, as you can see on the right. So having looked at it quarterly over the last four and a half years and then looking at the CAGRS over the last decade, I thought it might also be instructive to look at it in the current very challenging rate cycle. Since 2Q23, we've lived through a disastrous rate environment with an inverted yield curve. And as you can see on the leftmost chart, peers have been unable to grow net interest income while we grew 7%.

It's