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 www.pnfp.com. Today's call is being recorded and will be available for replay on Pinnacle Financial's website for the next 90 days. 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 www.pnfp.com. With that, I'm now going to turn the presentation over to Mr. Terry Turner, Pinnacle's President and CEO.

Thank you, Matt. As those familiar with our calls over the past decade know, we start every call with our shareholder value dashboard, beginning with GAAP measures followed by non-GAAP measures that better reflect our management of the firm. I focus on revenue growth, EPS growth, and tangible book value per share growth because these three metrics are most correlated with share price performance. Our steadfast attention to these metrics has driven remarkable total shareholder returns over the last two decades. While other metrics like net interest margin and efficiency ratios are notable, I believe they do not correlate as strongly with total shareholder returns, which is why we prioritize revenue, EPS, and tangible book value per share growth. Over the past 4.5 years, the consistency of our performance is evident, particularly in the second quarter, where revenue increased by 15.1% compared to the same quarter last year, adjusted EPS rose by 22.7%, and tangible book value per share grew by 10.9%. We have achieved double-digit compound annual growth rates in these metrics over the last decade, significantly outperforming our peers. Looking into how we achieve this reliable growth, approximately 75% to 80% of our revenues are derived from spread revenues. To sustain double-digit growth in net interest income, we focus on growing our earning assets at the same pace, which we have successfully maintained over the long term. Equally important is the rapid growth of core deposits to support this earning asset growth, and we've achieved 13% core deposit growth, far exceeding the peer median, even amid a challenging rate environment. Since the second quarter of 2023, we have navigated a tough rate cycle with an inverted yield curve, yet we have managed to grow our net interest income by 7%. While many of our peers have struggled with limited loan and earning asset growth, we achieved double-digit growth in our earning assets. Our ability to attract and integrate talented revenue producers is critical; we focus on hiring experienced associates with an average of 18 years in their field, allowing for quick transitions and excellent asset quality. We have consistently added experienced revenue producers at a 12% compound annual growth rate, mirroring the growth in both our earning assets and core deposits. Our strategy centers on capturing market share from the largest, most vulnerable competitors, leveraging their challenges as an opportunity to recruit top talent. Our hiring process relies on referrals from our current associates, enabling us to attract the best candidates while minimizing hiring errors. The data illustrates our success in hiring highly qualified relationship managers, as we have not only recruited the best talent but also built a service model that delivers an unparalleled banking experience. Our approach has consistently yielded high client satisfaction, evidenced by our 83 Net Promoter Score. This commitment to attracting top talent and creating a standout service experience enables us to achieve reliable and sustainable growth in our revenue, EPS, and tangible book value per share. Now I'll turn it over to Harold to highlight key aspects of our performance in the second quarter, which reflects our ongoing commitment to this differentiated model.

Thanks, Terry. Good morning, everybody. We will again start with loans. End-of-period loans increased by 10.7% linked quarter annualized, which was better than we thought at the beginning of the quarter. We continue to lean on our new markets and new relationship managers to provide the punch for our loan growth. Again, as we've said many times before, our loan growth is not so much dependent on economic tailwinds. It's about all these great bankers we've hired and the movement of their relationships to us. There was a lot of macro uncertainty last time, and there remains a lot this time around. Our pipelines continue to remain in great shape. Given second quarter results in our pipelines, we've adjusted the low end of our loan outlook range to consider now 9% to 11% growth this year. The yield curve continues to bounce around and continues to do so as we begin the third quarter. But in the end, we are pleased with how our loan rates performed during the second quarter. Our fixed rate loan repricing came in at 6.39% for the quarter, just shy of our targeted 6.5% to 7% range. Although the lift from fixed rate repricing is not as opportunistic as it once was, we still anticipate continued lift in fixed rate loan rates throughout this year. Absent a surprise rate decrease by the Fed, our loan yield estimate for the third quarter is that rates are flat to perhaps slightly up from here. Deposit growth came in at a 4.7% linked quarter annualized growth rate. This was less than we had anticipated at the start of the quarter, but given the strength of our first quarter growth and as we mentioned last time, the impact of second quarter tax payments, we are pleased with the result. We typically experience more deposit growth in the second half of the year than the first half. And with our new markets and new relationship managers, this should provide for another strong year of deposit growth for us. As a result, we are maintaining our estimated growth rate for total deposits at 7% to 10% for 2025. We're also very pleased with how deposit pricing has performed thus far and how both our deposit and loan betas have performed through the current rate cycle. For both loan and deposit pricing, we don't see a lot of change as we head into the third quarter. We anticipated a flat to slightly up NIM for the second quarter, so we're pleased that our NIM finished up 2 basis points at 3.23%. Our outlook for the third quarter of 2025 is the same, that our NIM will remain flattish with some upward bias. As to net interest income, we anticipated a nice bounce in the second quarter, so we're pleased with better than 16% linked quarter annualized growth. As to 2025, we have adjusted the lower end and thus tightened our estimated growth range for net interest income to now believing our net interest income growth outlook will approximate a range of 12% to 13%. Any surprise rate cuts and the slope of the yield curve will have influence on how all this plays out for the remainder of the year, but we remain optimistic. As to rate cuts, we've modeled out many scenarios and again, feel we're in pretty good shape to manage through most rate forecasts that are talked about in the markets today. We continue to delay rate cuts now forecasting only one rate cut in October. We do believe more rate cuts are helpful than no cuts, but given the timing, we don't believe whatever happens will have a substantial impact on our 2025 results either way. As to credit. Our net charge-offs increased to 20 basis points in the second quarter from 16 basis points in the first quarter with almost $7 million of the second quarter charge-offs arising from relationships where we had set aside reserves in prior quarter. For 2025, the current view of our charge-off outlook is that net charge-offs for 2025 should come in around 18 to 20 basis points with the only change from our prior estimate being up 2 basis points on the lower end of the range and no change to the high end of the estimated range. With the charge-offs of previously reserved for loans, our reserve did decrease 2 basis points this quarter. We still believe our reserves will remain at or near these levels for the remainder of 2025 if economic conditions don't materially deteriorate from here. We modified our estimated 2025 outlook for our provision to average loans to 24 to 25 basis points as we kept the low end of the range consistent but lowered the upper end of the range. This is considering use of a 70% baseline economic forecast and a 30% more pessimistic forecast going forward. Merely as a reference point, if we were to use 100% pessimistic, we've estimated that we would have had needed about $35 million in increased reserves. As to BHG, consistent with the last quarter, all of the usual slides are in the supplementals for your reference. BHG had a strong second quarter, providing fee revenues to us of over $26 million. Production was again strong in the second quarter and loans sold in their community bank network were at the largest spread since 2022. Credit was consistent with the prior quarter and vintage loss curves also seem to mark continued improvement in the quality of the book. We and BHG are both comfortable in raising our earnings estimate for 2025 from 20% growth to now approximately 40% growth over the result reported in 2024. Several factors are contributing to this decision, lower operating costs this year, better credit performance than anticipated and stronger production lead flow, all of which point to what should be a much stronger year for Bankers Healthcare. Lastly, as to our guide for 2025, I've already mentioned much of the information on the slide previously. Again, the investments we've made in our new markets and our hiring success are the building blocks we will lean into in order to position us for top quartile results amongst our peers. As to our outlook for fees and expenses, we continue to be pleased in our fee line. Banking fees and wealth management are performing well. Along with strength in core banking fees and BHG's estimated growth this year, we are comfortable increasing our guidance from 8% to 10% growth to now 12% to 15% growth in fees this year. As to expenses, our prior outlook reflected a target award for our associates, which now given our more positive outlook, we are increasing to an anticipated 115% of target payout as of June 30. Obviously, our goal is to maximize our award and increase it to 125% max payout but we can't do that unless we achieve the results required to warrant the maximum payout. And as always, we will decrease the incentive award if our earnings fail to support increased incentive costs. Through all of that, we are modifying our total expense outlook to now a range of $1.145 billion to $1.155 billion for estimated expenses for this year. As the tariff discussion plays out, as the yield curve and rate cut discussions play out, we are hopeful that more clarity will come forward. But as it sits today, we are more positive today and remain very optimistic about our prospects for this year and are confident that 2025 should be another strong year for Pinnacle. With that, I'll send it back to Matt for Q&A.

Your first question is coming from Ben Gerlinger from Citi.

I want to take a moment to look at Slide #9. It's the vintage of hires from 2020 to 2024. Just want to make sure I got that correctly, that kind of 5-year cohort, you're expecting them to have kind of peak out at roughly $19 billion.

Yes, I think that's a reasonable perspective, Ben. Just remember, we are presenting the annual revenue producer hires. We have revenue producers who do not contribute to balance sheet growth, like brokers and trusted administrators that enhance fee income. What we are discussing here are relationship managers. If you refer back to the slide, which I believe is Slide 49 in the supplemental deck, you will see the relationship managers. This illustrates their share in the total revenue producers. Additionally, there's information regarding the average growth associated with our hiring practice for relationship managers with respect to the balance sheet, including both loans and deposits. This outlines the expansion in the number of hired relationships and their capability to grow that portfolio, which is approximately a $65 million portfolio on both sides of the balance sheet.

Right. No, I totally get that. Where I was going with it was I'm just kind of thinking that the 5-year cohort, you essentially hired what would be the kind of 70th largest bank in the United States with no dilution or no M&A. So when I think about just the magnitude of your hiring and the flywheel, if the rules change and let's just say, you took away every bright line, whether it be 100 or whatever, do you have any appetite to do M&A? Or is it simply just the Pinnacle brand and workhorse of the onboarding staff within HR can sustain a pretty healthy growth, you really have no appetite at all?

Yes, I believe you're on the right path. We really value our organic growth model, as it leads to rapid and reliable growth. I'm sharing insights based on what this cohort achieves. As you know, other relationship managers may experience net negative growth during tough times. For instance, if you manage a $300 million loan book in a challenging loan demand situation, you might not generate enough growth to offset your costs. All these factors come into play. However, you understand how our hiring impacts our balance sheet and interacts with our revenue cycle. Regarding M&A, I often receive inquiries about it. Historically, we've completed about six transactions that account for roughly $12 billion of the $55 billion we manage. We primarily see ourselves as an organic grower for the very reasons you mentioned. With the ability to hire a significant number of people who contribute to growth, it’s hard to justify acquiring banks and taking on the associated integration risks just to achieve growth. We can generate considerable growth organically. Additionally, we frequently discuss succession planning. Our Board recognizes its responsibility in this area and evaluates it regularly using five different approaches. This includes considering high-performing candidates within our company and potential outside candidates with connections to Nashville. We could also look into acquiring banks, engaging in mergers of equals, or even selling the company. These are options the Board is always considering, and they expect me to update them on our status. However, I don't foresee M&A being necessary just to accelerate growth, as I can't imagine wanting to take on that integration risk.

No, absolutely. I think that's great. And the only other question I had in terms of just growth is, I know it started with Nashville and Tennessee and the Southeast and kind of drifted north of the Atlantic a little bit. Is there any other geographies to think about at this point? Or is it just deepening the current map that you have laid out in front of you?

I think it's largely deepening the map that we have in front of us. We talk about this triangle that if you go to Memphis and draw a line up to D.C. and down to South Florida, we want to be in all the large urban markets there. So we probably got opportunities in Florida, in particular, we're in Jacksonville, but there are other attractive markets in Florida that might be useful to us. And very honestly, if we ran out of turf, I think we obviously would turn our sight toward Texas. But I think you're on the right point. Fundamentally, we just need to push ahead in these markets that we're in that ought to produce outsized growth going forward.

Your next question is coming from Jared Shaw from Barclays Capital.

Sorry, I couldn't hear you for a moment. Let's focus on growth. If we look at Slide 9, it highlights the growth potential from our new hires ramping up and integrating those businesses. What feedback are you receiving from your current customers or existing relationship managers regarding their appetite for growth, whether that involves increased utilization or general customer sentiment?

Jared, this is Harold. That's a great question. During the quarter, the credit officers put out a survey. I think they surveyed over 1,100 clients, both commercial and commercial real estate, about $13 billion in commitments altogether. Primarily, that was about tariffs and other current macro items. But I think where the current customer base probably sits is in a cautious state. We're not really feeling like the current client base is willing to take a whole lot of additional risk right now. Perhaps over the next two or three quarters as some of these issues play out, they'll be back to where we thought they'd be at the beginning of the year, and we'd be looking at some significant kind of opportunities to enhance our growth rates. But right now, I think, Terry, I believe our client base is not worried, not concerned. Our credit is holding up really well, but at the same time, cautious.

I think that's a great description. I think there's sort of an underlying optimism around the general direction for business owners. I mean you just look at things like accelerated depreciation and they got a lot of things that excite them, but they're going to keep the clutch in until they get a little clearer on tariffs and so forth.

Okay. And then you talked a little bit about the appetite for increasing CRE. How should we think about you looking into that from here? And where would you like to see that as a target of capital?

Yes. We began re-entering the commercial real estate sector around three to four months ago, and we are starting to issue new credits in that area. It will take a few quarters before we begin to see those balances turn positive in a significant way. We are not expanding our focus beyond what we currently consider to be solid projects in multifamily and industrial sectors. Therefore, we do not believe we are adding substantial risk to our balance sheet. We aim to maintain our target levels for both construction and overall commercial real estate, which is approximately 70% of capital for construction and around 225% for commercial real estate. We are slightly above the 225% threshold, but we believe we will adjust our approach to align with market trends and will likely be below that 225% figure soon.

Your next question is coming from Catherine Mealor from KBW.

I wanted to just turn to BHG for a minute. It was really nice to see the higher earnings coming from BHG. I guess my first question on just the bigger outlook for the second half of the year in BHG. Is that primarily coming from just kind of better origination growth and better volumes? Or is it also a part of that coming from credit? Just kind of curious what's really driving that? And then just within that, a secondary question was I noticed that the equity in BHG and then your equity method on your balance sheet both declined this quarter. And I was just curious what was driving that?

Yes, the CEO at BHG sometimes makes dividend payments for various reasons. There was a significant dividend we received in the second quarter, which is why the equity or investment decreased. Regarding the second half of the year, it's driven by both production growth and credit conditions. However, credit has been the bigger surprise this year. It seems to have pivoted, and we hope that trend continues. I believe they will continue to build reserves for the rest of the year, while currently, the loss content appears manageable.

Okay. Great. Regarding deposits and funding related to growth, could you provide some insight on the stabilization of your deposit costs? I assume this is reflected in your margin guidance for the next quarter. Can you share details on the current incremental deposit costs as your deposits grow, particularly as we see improvements in deposit growth in the latter half of the year?

Yes. Currently, the interest-bearing deposits are approximately 50 basis points above the book rate. This figure pertains to new accounts that have been added to the trial balances.

You're saying your current cost of interest-bearing deposits is 319, and that 50 basis points over that reflects where new deposits are coming in?

Yes, something in that neighborhood. I'd say 350 to 360 are the reports that I'm looking at.

Okay. Okay. Great. But your incremental loan yields are still coming on, it seems like in the high 6s.

Your next question is coming from Stephen Scouten from Piper Sandler.

I just wanted to follow up on the BHG business mix. I noticed some of the trends around the commercial delinquencies were kind of going up, but the consumer looks to be improving. It looks like maybe that mix of business is pretty close to balance between commercial and consumer loans based on those trends you disclosed on Slide 45. But can you give us a better feel for what that BHG business mix looks like currently?

Yes. I'd say that right now, and I'll go back and look at the slide, but I think it's more of a 70-30 consumer commercial kind of business mix right now.

Okay. So the improvement in the consumer would be more impactful than the slight kind of worsening maybe in commercial, if I think about it broadly.

Yes, for sure. They've just allocated a lot more resources towards that consumer end.

Perfect. Great. And then can you remind us with the incentive payout, it's great to see it going up to 115% because of what it implies, obviously, for the success of the franchise. What would you need to see to take it to that 125%? Because obviously, the guide in and of itself didn't change a lot, but is it just greater certainty around what EPS will be for the full year? Just kind of give us a feel for what would take it to the top end of that payout range.

Yes, you're on it. I think our internal forecast give us a path to get there. But if you look at the ranges, we'd have to be on the better side of those estimated ranges. I'll put it that way. If we can get on the higher end of the loan growth, on the higher end of the deposit growth, on the higher end of the fee growth, that ought to support towards that 125 that we're all looking for.

Great. And then just lastly for me, can you guys give an update on the opportunity in Richmond, the new hires you have there and kind of what you think the scale of that opportunity could be over the next two or three years?

Stephen, I'm not understanding your question. You're asking about our ability to keep hiring people.

Well, I mean, just how big a bank you think you could run in Richmond, if that's $1 billion in asset kind of franchise there in the Richmond market.

I'm sorry, in Richmond specifically. Yes. I think our target would be to build a $1 billion to $1.5 billion asset bank over a five-year period of time.

Okay. I feel pretty good about that based on the initial progress and opportunities we've identified.

Your next question is coming from Casey Haire from Autonomous Research.

This is Jackson Singleton on for Casey Haire. Just wanted to touch on the NIM. Could you just please provide some more color on the drivers and what could drive the 3Q NIM to maybe be up a couple of bps?

Yes. I think it's just the way the model is working out right now. We think if we can keep loans flat to a little bit up this quarter, which we think we'll do with the fixed rate loan repricing, our noninterest-bearing deposit balances are hanging in there. So we don't see any kind of degradation in deposit yields because of erosion of noninterest-bearing. So we think just based on what our growth metrics look like right now, Jackson, we think we're in pretty good shape to have at least a stable, if not a bias towards a few basis points up in NIM.

Okay. Great. And then as my follow-up, I was wondering if you could provide some color just on beta expectations and if you feel like there's more room for improvement here going forward?

There is always room for improvement, but I don't expect our beta to change much in the next three months. What we need is a rate decrease. We're essentially waiting for the Fed to lower rates sooner rather than later, but I don't anticipate anything until October. A rate decrease would allow us to really focus on the deposit book and reduce some rates on that side of the balance sheet.

Your next question is coming from Samuel Varga from UBS.

I just wanted to drill down on the fixed rate loan renewals. You obviously noted that, that part of the story is a bit less exciting, which makes sense given just the increased competition for these loans. Can you comment a bit on the sort of the pace of spread compression? Like could we see that slow down now? Or do you think that more and more people are likely to come in and try to compete for these loans?

If we're discussing the spread on the originated credit, those spreads are holding up reasonably well according to our observations across the curve. However, the reduced opportunity we want to highlight this morning is that the renewal rate on the loans we are refinancing is not as favorable as it was previously. A few quarters ago, these loans were being renewed at around 4.5%, and now they're coming in at approximately 5% or higher. This means we don't have as much opportunity to increase the net interest margin as we did in the past. Nonetheless, I believe our loan spreads are performing decently, whether they are fixed-rate, floating-rate, or SOFR-based. Overall, it seems to be holding steady.

Okay. Great. And then just a broader question. Can you provide any updates on regulatory developments over the past few months? There's been a lot of different proposals talked about and coming out. I'm just curious if that changes at all how you think about running the bank from an operational standpoint?

I think it seems to me that clearly, there's a more positive tone set by regulators. We've seen things, as you point out, like the FDIC sort of rescinding their previous position on M&A. I think there's a dialogue, who knows where it will end on the $100 billion threshold. But I would just say broadly that all the movement and all the conversations seems generally more positive for banks and so forth in terms of altering our own plans as we've sort of hit at here. We like the markets that we're in and sort of anxious to continue executing this model that we think produces outsized growth.

Your next question is coming from Tim Mitchell from Raymond James.

Just wanted to follow up on the BHG conversation and kind of a bigger picture question, but the EPS contribution from that business has increased the past couple of quarters. And based on the new guide, it sounds like it will continue to do so. So I was just curious your thoughts on whether there's a level that you would target or not want to exceed in terms of earnings contribution. And then within that context, if there's any change to your attitude toward the investment in BHG.

Yes. Many years ago, BHG contributed between 15% and 20% to our earnings. It's currently less than that. Over time, our aim is to not minimize but reduce the rate of that contribution to our overall earnings. We plan to achieve this mainly by increasing our side of the equation. I hope we'll be able to accomplish that. However, we are not considering implementing any backstops on them. They are managing a franchise that has pivoted, and I believe they are following their plan. I anticipate this will be a strong year for them, and looking forward to 2026, I expect them to return to a pre-COVID operating model, free from the disruptions caused by COVID-19.

Okay. Makes sense. And then just one follow-up on loan growth on your comments around kind of sentiment from existing customers. It sounds like the vast majority of your loan growth outlook is tied to the benefit from hiring and so forth. So is it fair to think that if loan growth were to accelerate for the industry more broadly, essentially banks that are relying on economic growth that you could actually exceed the range for 2025? Or are there other considerations that maybe that's not so realistic?

No, I think that makes sense. You've captured it perfectly. Over the past few quarters, all of our loan growth has been driven by new hires. As I mentioned earlier, our top producers struggle to cover amortization in their portfolios during periods of low loan demand, which can be a hindrance. Our relationship managers oversee those clients, so if loan demand does increase, I believe that would be in addition to our current projections.

Your next question is coming from Timur Braziler from Wells Fargo.

The first question is about deposits. I'm wondering if, with future rate cuts, you'll be able to achieve the same level of beta as you did previously. Or do you think the competitive landscape and increased lending might lessen the potential advantages of lowering deposit costs with future rate cuts?

No, I think we'll be ready to reduce deposit costs. I'm sure that when you get to the line of scrimmage, there will be a lot of blocking and tackling going on around those kind of issues. But our intent is to get that beta to at least maintain where we are currently and try to get as much out of a rate cut as we can because I think that's going to be one of the key ways that we're going to see our margin expand in a much more meaningful way.

Okay. And I think the last comment was around 50% of the deposit base was indexed and you got close to 100% beta on that. So we should expect similar type of performance on the next call.

Yes, we do.

Can you provide an overview of the monetization strategy for BHG in light of credit improvements and reserve build-out? Do you think the partners are nearing a resolution, or are macroeconomic factors still a barrier? Additionally, Terry mentioned succession planning, and there are various speculations regarding Pinnacle's future. Is this affecting your ability to recruit new producers, or do you foresee it impacting your hiring capabilities due to the current uncertainties in the market?

Just to make sure I understand your question, you're asking does ambiguity around succession planning temper our ability to hire people?

Yes.

Well, I mean, I don't know what to say to you on that, Tim. I mean, I guess you can tell me how long that ambiguity has existed, and you can compare that to what the hiring chart looks like. But it feels like our hiring ability is incredibly strong. We have hired 71 revenue producers year-to-date, which is a pretty rapid clip. And I would say that the momentum seems incredibly strong and that I believe we have at quarter end, 59 job offers out to revenue producers. We won't get 100% of those people hired, but I guess you'd have to draw your own conclusions, but it looks like to me, our ability to hire people seems as good as it's ever been.

Okay. Could you just maybe comment on monetization of BHG and what that timeline might look like?

I believe our position on BHG remains unchanged, and we continue to see it as an exceptional investment for the company. We are optimistic about the possibility of a monetization event that would benefit both our partner shareholders and Pinnacle. However, I cannot specify when that might occur. I have communicated our preference to avoid monetization in unfavorable market conditions, and the market has not been strong. It appears to be improving, and if it reaches a favorable state, something may happen, but it is difficult to provide a specific timeline.

Your next question is coming from Brian Martin from KKR.

Just a couple of things. Harold, just clarifying on the BHG, given kind of the annual outlook for revenue, I guess, could second quarter be the high point for the year and it maybe drift a bit lower in terms of the quarterly performance in the back half of the year? Does that seem fair based on your commentary on the outlook for growth?

Yes. I think that's possible. I like flattish from here. So your comment is a good one. I think from here, we're looking at probably a flat for BHG for the rest of the year, somewhere in that neighborhood.

Okay. Around the $25 million level. In terms of hiring, Terry, you mentioned the outlook. Can you discuss the opportunities, like moving into Richmond, to enter a new market compared to just filling positions in existing markets? Are you still optimistic about entering new markets as well as hiring new people, or are you focusing more on one than the other at this moment?

I would say both, Brian. However, to provide some perspective, we will hire more people within our current locations than we will in new markets. That's how it typically works because we maintain a continuous recruitment cycle and are hiring everywhere. We are still adding personnel in Nashville, believe it or not. That said, I don't want to dwell on this too much. Generally speaking, Brian, the reason we enter a new market isn't merely because we analyze maps, census data, and demographics. It's really about having a team that we believe can establish a significant presence in that market. If we come across another opportunity or two this year, we will pursue it. If we don't find any additional opportunities, that's fine too. We are confident that we will achieve substantial growth without expanding into new markets.

Got it. Okay. My last question is about the new loan yield production this quarter. Harold, regarding the margin, you mentioned the possibility of it expanding more rapidly than what we're currently observing. What do we need to see for the margin to exceed, say, the 3.30% level in the upcoming quarters? What factors contribute to this as we consider its trend towards 2026?

Yes. I think the near-term recipe has to involve a rate decrease. I think that's going to give us the opportunity to reduce our deposit costs in an outsized way and make that happen. So yes, we need that. You're talking about a near-term event.

As you consider the yield curve, what are your expectations regarding it, particularly in terms of your guidance or outlook for the near term?

That is flat. No real change. It's a flat yield curve. For us to really get kind of a longer-term margin that we think this client base that we call on will deliver to us, we need a more traditional curve, something that's got sloped from overnight to call it, the five-year part of the curve is where we operate. And if we can get a decent amount of steepness in that from overnight to five years, we ought to be in great shape.

Your next question is coming from Anthony Elian from JPMorgan.

Harold, on the 22% annualized C&I growth you saw in the quarter, I was wondering if you could provide more color what drove that? Any specific subsegments within C&I that contributed to that strong growth?

Yes. I believe it was quite widespread. There wasn't any one specific industry or concentration of large credits that stands out. It seemed to be generally distributed across the entire franchise. I don't currently see any single factor that I can identify.

Fair enough. And then, Terry, my follow-up, another question on the revenue producer. So you hired 38 in 2Q, total of 71 in the first half. My question is, is the pool of talent available in the Southeast and adjacent markets still as robust as it's been in the past few years? I only ask this because there are a couple of other banks in the Southeast that are now also active with hiring talent. I'm just curious if there's enough talent, enough experienced talent to go around.

It's a great question, Tony. I can say that we’re continuing to experience exceptional success, and the quality of our hires is the best it has ever been. As I mentioned, we've brought on 71 people, and currently have 59 job offers outstanding. While we may not hire everyone, we will secure a significant number. The pace of recruitment and hiring is definitely not slowing down; if anything, it's increasing. Our recruiting approach is distinct. We hire individuals based on referrals from existing employees, asking them who else we should consider bringing on board, which enhances our ability to attract talent. The more we hire, the easier it becomes to continue hiring more talent. This is crucial for our growth and the quality of that growth. Unlike other banks that rely on headhunters or traditional resume pool recruitment, our model is unique and contributes positively to the speed and quality of our balance sheet growth.

And Tony, I want to add to that. We invest significant effort into the work environment. Many sell-side and buy-side analysts tend to overlook this topic, but it's crucial to ensure our relationship managers feel they have the opportunity to succeed. We have implemented various initiatives, including compensation plans and ways to monitor their key performance indicators, which enhance their experience compared to what they would encounter at a traditional large-cap regional bank, particularly in terms of our credit culture. This is a key reason why we believe we've been more successful in hiring compared to others pursuing a more aggressive organic growth strategy.

Tony, I don’t want to dwell on this too much, but this topic is very important to me regarding our business approach. I would refer you to Slide 10, which shows the Greenwich ratings across an eight-state Southeastern area. Many of the people coming in to hire are doing so against us, where we have the top rating for being easy to do business with. We also have the top rating for being a bank that can be trusted and for fostering long-term relationships. Additionally, we have the top rating for treasury management capabilities, the service level of our treasury management, and the digital experience. I don’t intend to overemphasize this, but I believe this reputation helps with recruiting. I expect we will continue to attract the best bankers in the market.

Thank you. That completes our Q&A session. Everyone, this concludes today's event. You may disconnect at this time, and have a wonderful day. Thank you for your participation.