Simmons First National Corporation Class A Aktie

Good morning, and welcome to the Simmons First National Corporation First Quarter 2026 Earnings Conference Call and webcast. [Operator Instructions]

Please note, this event is being recorded. I would now like to turn the conference over to Ed Bilek, Director of Investor Relations. Please go ahead.

Good morning, and welcome to Simmons First National Corporation's First Quarter 2026 Earnings Call. Joining me today are several members of our executive management team, including President and CEO, Jay Brogdon; and CFO, Daniel Hobbs.

Today's call will be in a Q&A format. Before we begin, I would like to remind you that our first quarter earnings materials including the earnings release and presentation deck are available on our website at simmonsbank.com under the Investor Relations tab.

During today's call, we will make forward-looking statements about our future plans, goals, expectations, estimates, projections and outlook including, among others, our outlook regarding future economic conditions, interest rates, lending and deposit activity, credit quality, liquidity and net interest margin. These statements involve risks and uncertainties, and you should therefore not place undue reliance on any forward-looking statements as actual results could differ materially from those expressed in or implied by the forward-looking statements due to a variety of factors. Additional information concerning some of these factors is contained in our earnings release and investor presentation furnished with our Form 8-K yesterday as well as our Form 10-K for the year ended December 31, 2025, including the risk factors contained in that filing.

These forward-looking statements speak only as of the date they are made, and Simmons assumes no obligation to update or revise any forward-looking statements or other information.

Finally, in this presentation, we will discuss certain non-GAAP financial metrics we believe provide useful information to investors. Additional disclosures regarding non-GAAP metrics including the reconciliations of these non-GAAP metrics to GAAP are contained in our earnings release and investor presentation, which are furnished as exhibits to the Form 8-K we filed yesterday with the SEC and are also available on the Investor Relations page of our website, simmonsbank.com.

Operator, we're ready to begin the Q&A session.

[Operator Instructions] The first question comes from David Feaster with Raymond James.

I wanted to start on the growth front. It was a terrific quarter for growth. 10% annualized, it was diverse, pipelines remain solid. I think one of the concerns that the markets had over the past few years, we've really questioned your ability to grow like this. And you're clearly showing what you can do. I guess my question is, is what's changed to get here? Is this a function of demand? Is payoffs and paydowns improving? Or is this just more of an internal shift like a cultural shift and an increased emphasis on quality growth and just -- how do you think -- how sustainable do you think this kind of 7% to 10% pace of annualized growth that we've seen over the past couple of quarters is?

Yes. David, I'll jump in on that. Thanks for the comments and the question there. So I think overall, probably the best way to answer the sustainability of the loan growth is really say we've been focused on quality growth for really a few years now. We started focusing on organic growth, really a handful of years ago, and it's taken time to inflect and create some of those internal capabilities, bring maturity. A big part of that has been focused on both soundness and profitability as you've heard us say over and over again. And so there's been changes in behaviors, changes in incentive plans, changes in how we target clients that we want to grow.

And I think what you've seen in the last couple of quarters is one part, some of that inflecting some of the maturity in those programs coming to bear. I do think you also have to acknowledge that a part of it is just the timing, the market set up the last -- part of last year and early into this year has been very, very good for us. We've seen really, really robust demand. Our biggest concern as we think about the growth outlook, really isn't the things that we control, it's the noncontrollables. We would acknowledge uncertainty in the macro. We have acknowledged, I think, several times in recent calls, pricing competition.

All of those things still give us some caution to the overall optimism that we have about our business and our ability to grow the business. But we were really, really pleased with what we saw in the quarter or this quarter. I don't want to promise 10% annualized loan growth every quarter. This just happened to be a really good quarter for that. But I do think it clearly demonstrates the capabilities that we've been working on and our ability to bring those to bear in the marketplace.

That's great. And then one of the comments in the press release that stood out to me is just your -- the comments on the talent environment being favorable and supporting that organic growth trajectory. So a couple of questions on the talent side. First, I know you've made a couple of leadership hires on the commercial and consumer side. So was hoping you could touch on what they're working on and where they see the most opportunity near term to kind of accelerate organic growth?

And then secondarily, just -- on the banker side, the pipeline that you've got there, your appetite for new hires. And then just any comments on the -- I know you hired a recent wealth management team. How have some of the new hires that you've made been going so far?

Yes. So again, I'll jump in on this. Our two new leadership hires over consumer and commercial have been here, I guess, 8 or 9 weeks at this point. So really, really pleased with what they're already bringing to bear in the organization. On the consumer side, I think just the rhythms of everyday life in our retail network are -- are changing or evolving in very, very good ways. And the approach to driving business, deepening relationships, we've got some very strong and loyal customers that have been with us for a long time, but in many -- in many of those situations with those customers, they're still relatively thin relationships to the bank.

And so really, focused on deepening and capitalizing on the loyalty and strong relationships we have in those regards, as well as driving marketing and better penetrating the communities that we serve throughout the retail network. So a real focus on sales performance and again, kind of deepening through that network.

On the commercial side, it's really a lot of the things that I was describing in the first question that you asked around that real organic growth emphasis, it's total banking relationship focus. I think it would be fair to say that a lot of our focus in some of our recent history has been more kind of a lending growth focus in a commercial loan growth focus. We've been really, really investing heavily in commercial treasury management, really our full commercial payment suite of products and the talent in the organization that can really go after those types of relationships and drive more diversified commercial business. And so we've got a lot of really good things going in that regard under both of those leaders.

And I would just say that the talent pipeline, the opportunities that we are seeing from senior leadership all the way down to very productive bankers who have strong reputations in our markets, we're seeing some really, really good opportunities to continue to grow and invest in that way. So that will continue to be a great focus.

You asked about the wealth team that we -- we also brought on throughout the first quarter. And just as a reminder, we brought on about half of that team in kind of mid or late January. The other half joined in March. So they haven't been here for all that long when you think about first quarter results. But what I could tell you is that, that group has already brought over about in terms of assets under management that are either transferring or verbally committed over $350 million in AUM.

And so we could not be more pleased with what we're seeing in terms of early success. And actually, the part of that team, what we're seeing that has me most excited is the referrals. When I think about what that team is doing in terms of referring their client relationships into the commercial bank, into private banking, et cetera, really, really excited. And that's just one small example, David. We can look all across the footprint and see some great examples of those kinds of behaviors. And again, dovetail that all the way back to your first question, those are the things that are helping me, helping all of us get more and more optimistic about our ability to drive organic growth in a very meaningful and profitable way to the business.

That's great. And then maybe just staying a bit more high level still and kind of following up on some of your commentary. I mean, in the release, you talked about designing a more efficient and scalable infrastructure. And I know we spent a lot of time talking about the better bank initiative and some of the things that you're focusing on there, from improving processes and procedures. I mean you've obviously made a lot of progress on the expense front. That's demonstrated in your results. I was just hoping you could maybe [indiscernible] on some of the things that you're working on to improve the efficiency and scalability of what you've got to support the organic growth that you got -- just some of the things that you're more excited about and key initiatives that you're focused on as a part of that better bank initiative?

Yes. I think, at least for now, David, I'll probably sound like a broken record here or Daniel would too. But really, the -- our mantra in the bank is fund every investment that we want to make in the business. And we have been able to do that over the last few years. We were able to do that here in the first quarter. We made some very big investments in terms of talent and other things in the bank in the first quarter and still we're able to demonstrate strong expense discipline. So that's going to continue to be the mantra here.

When I think about -- I think I said this a couple of calls ago perhaps after we did the balance sheet repositioning last year. When you think about how our focus is evolving, we really dealt with the structure of our balance sheet last year. And we're really focused this year on continuing to sort of optimize the structure of our business. So how we deliver effectively for our clients? How we drive both customer and associate experience in a more positive way? And then importantly, what that's doing is that's helping us identify efficiencies, whether that's redundancies in the back office or on the front side of the bank and removing those redundancies, speeding up how we deliver the business and our sum total of all of that is what we keep seeing as we make progress is that we are able to drive significant operating leverage because it's just driving scalability and repeatability, and speed that's really driving scale in the business.

And so those are the things we're focused on. Hopefully, as we get deeper into the year this year, maybe there'll be more force to talk about specifically in those regards. But for now, I would just say it's kind of more of the same that we've been doing over the last few years.

The next question comes from Woody Lay with KBW.

I wanted to start on the NIM outlook, another quarter of the NIM tracking higher. Just curious, it sounds like you're remaining optimistic on the growth front. It does feel like anecdotally, we've been hearing of some deposit competition being pretty fierce. So with the higher growth outlook, how are you expecting the NIM to project from here?

Yes. Woody, this is Daniel. Appreciate that question. I'll start with just the linked quarter, NIM. If you call back to the previous quarter, I said we had a little bit of room in the first quarter to grow NIM about a basis point or 2. We came in 3 basis points linked quarter growth. And when you look at that, it's really a continuation of the things that we've been doing, which is a focus on driving our funding and deposit costs lower through remixing of the balance sheet, you'll notice that we reduced time deposits, kind of grew our core deposit base there. That's a key focus for us going forward.

We're also always trying to manage deposit costs relative to growth. So that's a fine balance. We're always trying to strike. And then on the loan yield side, loan yields were down 7 basis points, and we -- that's partially hedged because of the low fixed rate loans that we've been talking about. And if you just take a step back and look at what our margin has done over the last years, and you just -- you look at those 2 pieces and you look at loan yields, loan yields are only down 4 basis points year-over-year. And again, that is primarily driven by our low fixed rate loans repricing, and that's what 3 rate cuts that have happened in the back half of the year.

And then on the deposit cost side, we're down 48 basis points. And so then if you think about the cumulative beta on both of those, when rates started to come down in '24, loan betas are only down a little bit less than 15% and the cumulative interest-bearing deposit beta is down 63 basis points. So done a really nice job there. As we look forward into the fourth part of the year, our guide was NII of 9% to 11% growth. And I said NIM would probably be in the [ mid-3.80s ] by the end of the year. And recall that the guy had 2 rate cuts, 1 in May and 1 in August. As you look at the forward today, there's 0 rate cuts. So that should be marginally helpful to us.

As you know, we flip from liability sensitive to asset sensitive. So what I would tell you is, as we move forward through the end of the year, we're probably going to be looking at the high end of that range of that 9% to 11% range. And there's some puts and takes in there that could cause it to be better or a little bit worse. We're always focused on the macro, looking at inflation to see how that affects deposit growth. Because if you think about the biggest driver of what that NIM could be is the deposit side. What we're doing on the core deposit growth side relative to having to fund -- funded at wholesale. And back -- connecting this back to the loan growth side, we've said this before is I think the biggest governor of our loan growth is going to be how we're able to grow deposits.

we are willing to fund some of that loan growth at the margin, but there's a point -- a sensitivity point there where we're willing to pull back a little bit on loan growth to the extent that we can grow deposits.

And then on the deposit growth, which is probably your next question. As I think about that, we pretty much stable in the quarter. We're seeing some positive things happening within our consumer base. I like to look at kind of NIB and ID for both consumer and commercial. That's the core engine of the bank. Consumer makes up about 47%. Commercial is the other piece of that. And consumers really starting to show some stability and growth. If you go back over the past 4 quarters and look at year-over-year averages, we're growing NIB and IV consumer deposits in that 2% to 3% range. And so it feels like we've kind of gotten to a good spot there.

On the commercial side, we're doing a really good job on the interest-bearing growth side. We've got some work remaining to do on the commercial NIB side. And so David's question earlier about what are you guys focused on, deposits is a big piece of what they're focused on. All the things that Jay talked about really speaks to what are we doing to improve our strategies around growing deposits. And we've got a lot of things in the works. Some of those are starting to pay off, and we're starting to see that. And then some of just it takes a little time to get through our bank and through our network to start to drive some of that.

That's really helpful color. You answered a couple of my follow-up questions. So I appreciate all the color there. I mean, just on the -- looking at the deposit base, between some of the moving pieces and the time deposits and the public funds increasing, how much room is there to remix going forward? Do you have a bucket of deposits that you think can be remixed over the remaining year? Is it really dependent on multiple functions of deposit growth, loan growth and all of the above?

Yes. I'll start with -- we've seen CDs remixing over some time since rates started coming down. So there's still a little bit less in CDs both on the remixing part and the pricing part there. It's really going to be a function of our and IV growth. What are we able to do in terms of growing our new customers, deepening existing relationships and driving primacy with our existing customers and then how can we reduce the amount of churn on the back end. So those are the 3 buckets that we are focused on, things that we're driving strategies around and those strategies involve products, platforms. We just rolled out brand-new consumer deposit products on March 31. I'm starting to see some early positive signs there.

So it's product pricing, service platforms, all those things that we're doing, which Brian and Jonathan and coming in the bank are helping us do that. So it's going to be how well do we deliver on that core customer growth will depend on the amount of remixing that we can do.

Yes, I'd just jump in on that one, too, Woody and say that you've heard us talk before and even make the comment that we don't have to grow loans or grow the balance sheet to grow NII. And we are all about growing the balance sheet and growing profitable customer relationships. But we -- this dynamic is what really allows us, in my mind, to maintain our discipline around how we think about structure, how we think about pricing, how we think about relationship profitability. So I just kind of put it all together.

NIM keeps grounding higher because of all of these things. This -- we have a structural tailwind from a back book repricing point of view. We've got this tremendous deposit remix opportunity. And we've got a range of success that we're seeing across our customer base there, but we get significant focus in our bank in terms of continuing to drive success across that range. And then we look at a forward curve environment that's better than our original outlook was this year. And I put all of that together, and we can see NIM expand. We can see NII grow while being very, very sort of disciplined in how we approach the business.

So you saw us grow loans very attractively in our minds relative to our standards in the first quarter. At the same time, as I mentioned earlier, I can tell you that in the first quarter, we saw a pickup in competition. For example, a pickup in competition from bigger banks coming into some of the CRE products where we hadn't seen them as much in recent months. And so we're going to ebb and flow with some of those macro and competitive dynamics. But we're just going to really, really stick to our discipline. And we think on the long, that's what helps us drive very sustainable and strong risk-adjusted returns.

Yes, definitely. Well, it's good to hear of all the strong trends. That's all for me.

The next question comes from Matt Olney with Stephens Inc.

We talked in January about expectations of positive operating leverage throughout the year. I think you guys threw out there 5% plus growth for the full year. And then looking at these results in the first quarter, it feels like you're pacing well above those expectations. So would love to just to appreciate your views or the updated views of the operating leverage in '26 and perhaps how this compares to your previous views back in January?

I'll jump in on that first and see how uncomfortable I can make Daniel and then he can come in and add anything he wants to do, Matt. Daniel, if you heard him in his comments a while ago on the NIM and NII, mentioned that we were at a 9% to 11% range in our 2026 outlook. Given everything that he and I just talked about over the last few minutes, it's hard for us to not be very confident at the top end of that range. And you heard some commentary on fees and private wealth. You've seen what we've been able to do, not only in the first quarter, but for the last few years on the expense side. So I'm pretty optimistic as I think about the momentum in terms of PPNR and earnings growth overall. And what that pencils out to exactly in terms of operating leverage, I don't have an updated guide for you, but we -- I think we put on that slide back in January, 5% plus. And same way we're confident in the top end of the range on NII. I'm confident in the plus side of that 5% outlook. So Dan, I don't know if you want to add anything to that.

I fully agree with you and you made a comment earlier about the sustainability, our earnings profile. I'd add another word to that, which is resiliency. Go back to the balance sheet restructure, and we really changed the earnings profile of the company. We split from liability sensitive to look slightly asset sensitive. We put on some hedges, and we've gone through 3 rate cuts since then, and we've grown our margin each quarter since then. So Jay also mentioned NIM kind of grinding higher slightly from here forward. So I feel like from everything that we see here all the strategy that we've got in place, the aspiration for us to get to top quartile performance. I feel pretty good about the plus on the [indiscernible].

Okay. That's helpful. And then switching gears. I think we talked previously about expectations for charge-offs for the full year around that 25 basis points. And now we've got -- I think it was about a $30 million nonaccrual that came on this quarter. Any more color you can provide on that specific loan? And then kind of what's the comfort level of the charge-off guidance based on what you know today?

Yes, Matt, I think you hit it, and we tried to say it as clearly as we could in our disclosures. We don't -- fortunately, we don't see a lot of lost content in the loans that we're evaluating there. We -- we actually saw a mixed bag in terms of credit migration for the quarter, both criticized and classified loans improved linked quarter. You saw a little bit of migration in the NPL. You saw some past due migration, but really, we significantly alleviated that in the first few days in April. And so in every instance, when I think about credit right now and the loans that are showing migration, these are already known situations. There's nothing sort of new or surprising to us.

The migration we see is very isolated or episodic. So no broad-based deterioration in the portfolio that we're seeing. And again, most importantly, there's just -- we're just not seeing a lot of risk of loss. So in the largest NPL that migrated in the quarter. Again, this is a loan that we have very, very low LTV in. There's actually -- the biggest reason for the migration has been just because of a legal proceeding that had to take place. That's behind us now. We should be able to move expeditiously toward resolution in that situation. And there's a very, very good outcome for the bank in terms of risk of loss associated with that loan.

So those are the types of things that we're seeing. Overall, I would just tell you from what we see today, everything we know today, we're as proactive as we can be inspecting the portfolio. But we feel confident in our net charge-off outlook that we gave at the beginning of the year based on what we know.

Yes. And Matt, I just want to clarify one comment you made. The $30 million is not just one loan. It's multiple loans spread across a number of properties, and it's one relationship. And so just clarifying that for you.

Yes. That's a good point.

Got it. Okay. That's helpful, guys.

The next question comes from Stephen Scouten with Piper Sandler.

I wanted to hop back to kind of the loan growth trends. And just kind of curious if you could give any color around any quarter changes around repayments? And if that allowed growth to kind of peak even higher this quarter? And then maybe if you could give us some visibility into kind of the pace of demand throughout the quarter and if you saw any changes in terms of customer demand building or any pushback given macro events and the like?

Yes, Stephen, I would say that we had some early loan growth in the quarter, which certainly benefited us. The demand for that loan growth would have really started last year, right, in the latter part of last year. So we -- I would say that demand optimism in our client base still feels really good. The pipeline is healthy.

I think there's -- you can acknowledge with things like fuel prices, just a little incremental macro uncertainty to say the least that there's maybe some caution out there. But it's caution that still rooted in a decent amount of demand and a pretty strong overall sentiment, at least thus far is kind of how we're seeing it. But early in the quarter was very, very strong for us.

The one thing that I sort of alluded to earlier, I'll maybe make more specific to your exact question is, on the commercial real estate side, we saw plenty of demand. We just didn't have the same kind of pull-through that I'm used to seeing in our pipeline because of our discipline and from a pricing point of view. And that -- as I said earlier, that competition really was coming from bigger banks, getting a little more aggressive coming into the CRE space. We don't think that's a permanent reality, but those are the types of things that we're seeing that are kind of destructive to -- or could be headwinds to growth overall for us. But in terms of just macro or sentiment, it still feels pretty good to me.

Got it. That's helpful. And then, I guess, one question on the cost of deposits. I mean you guys put the slide -- on Slide 11, I think, with the CD maturities. Just kind of curious where new customer CDs are coming on relative to the [ 346 ] that looks like is repricing in 2Q?

Yes, Stephen. So over the last 90 days or in the first quarter, the CDs that matured was in the [ 356 ] range and what went on was in the [ 313 ]range. So as you think about the [ 346 ] in that bucket, there's a component of that, that is a public fund deposit that will kind of reprice at the market. But the biggest majority of that is going to likely reprice down kind of in that 313 probably range, maybe plus or minus a couple there. And then as you look into -- there's probably 1 to 2 more quarters worth of CD repricing benefit there. And then as you get out past that, it kind of neutralizes a bit.

Yes, I think deposit repricing tailwinds are waning probably for the industry given the distance we put between the most recent rate cut and now the biggest driver for us as we move forward, still some incremental benefit from a cost side for sure, but it's really going to be on the mix side, on the remixing side.

Stephen, I also want to double back, I failed to answer a portion of your question earlier, which was around the paydown environment. We are still seeing a pretty elevated pay down environment. So the growth that we saw in the fourth quarter and here again in the first quarter, in my mind, was really predicated on the demand that we're seeing and our ability to originate and kind of produce through a still elevated pay down environment. And I don't -- I still don't really see anything on the horizon that would suggest to me that paydowns are going to decelerate necessarily. I think that's just a kind of a structural part of strong permanent markets, et cetera, and we're going to experience that as part of the dynamic here.

Got it. And maybe last thing for me, if I could. Is the share repurchase, curious any updates on how you're thinking about that, how you think about excess capital, kind of what capital metric you really pegged to as you think about that incremental capital build and deployment from here?

Yes. So probably at risk, again, it sounded a bit like a broken record here. But our #1 priority on capital will continue to be just sort of investing -- investing in the growth of the business. So anything we can do to drive sustainable organic growth is going to be priority 1. Priority 2 for us will be paying the dividend, which we've now paid consecutively for 117 years. So we're going to keep that track record alive.

But I would tell you, yes, I mean, evaluating share buybacks would kind of be the next thing. On the buybacks, Stephen, we continue to exercise patients. I think what I'd say, just sort of given the potential for really organic opportunities and investments in the business and the pace of those investments give us reason to just be a little bit measured right now in how we think about buybacks as well as just again, that uncertain macro. And we think patients around capital. We like capital, and we like buffers to capital. And so that's there.

At the same time, what I would tell you, and we've described it at length here in the call at this point. But when we pencil out forward earnings estimates, we're probably a little more optimistic than the Street is right now. And so it's hard not to consider buybacks given that dynamic. I mean we can buy back stock at a pretty low PE multiple right now on forward earnings. And so I'd say that all of that will continue to be in the mix and a strong part of our evaluation. And we're going to -- our commitment, I guess, would just be that we're going to make the right decisions on how we deploy capital to create long-term shareholder value in a very sustainable way.

Really helpful. Appreciate all the color [indiscernible] on the continued successes here.

The next question comes from Brian Wilczynski with Morgan Stanley.

Maybe just staying on the capital topic. I wanted to get your thoughts on the new capital proposals that we got from the bank regulators a few weeks ago. I understand it's still early and there's a comment period, but do you have any initial view on what the capital benefit for Simmons could be? And any areas of the proposal that are the most relevant for you?

Yes, Brian, it is early. We have taken a look at it. We're continuing to evaluate that. I think as you think about when that might come in, we're thinking it's probably first part of '27 when that might become real. Our initial expectations are that it will be beneficial for us. The LTV component of that is very helpful. And I don't want to give you a number just yet, but we think it's a decent improvement to capital. And back to Jay's comments about how do we think about deploying that capital, we'll take that into consideration when it does become part of the calculus and it will just continue to add buffers to capital and ways for us to deploy that capital over time. So I don't want to give a number just yet, but we feel pretty good about our opportunities to improve capital there.

And one thing I would add to that is I think we continue -- there's nothing, at least to date that's changed our view that our definition of optimal or most efficient capital is in and around kind of 10.5% CET1. That's how we think about a strong baseline of capital for the bank.

I appreciate that. And then maybe just going back to credit for a moment. The increase in nonperforming loans Q-on-Q, I think you highlighted a single construction loan within that, that drove a piece of the increase. Can you just give a little bit more color on that exposure, the nature of the relationship, maybe how big it is? And if you have a specific reserve on that particular one would be great.

That loan is -- it's a construction of some relatively large 1 to 4 family properties. This was actually a loan that -- a relationship that was acquired in our most recent acquisition, which dates back a few years ago. It's a unique relationship for us in that regard. It's not exactly a business that we would originate. At the same time, as I mentioned earlier, those properties. So the total of the relationship represents several different properties. I can't remember the exact dollar amount. Daniel, I don't know if you have that, but it's probably -- is this thing is probably 2/3 of the increase in NPLs, something along those lines for the quarter.

And we feel really, really good about the equity that's in the projects, that's in each home, the sponsors that are behind it, the very low LTVs. We have very, very fresh appraisals and even at significantly discounted appraisals, we have very minimal risk loss. So this is the one, Brian, that I mentioned earlier. We had to get through some legal aspects around it that really prevented us from -- this loan perhaps should have never even migrated were it not needing to navigate court system. And that time line got us to where we are, doesn't change our view on risk of loss in any way, shape [indiscernible].

Yes, that increase for that one relationship is a little over $18 million as it relates to NPL bucket.

Yes, yes. There you go.

Got it. Really appreciate the detail.

The next question comes from Gary Tenner with D.A. Davidson.

My questions have been largely answered. So just a couple of kind of bookkeeping items, I guess. I wonder if you could -- I didn't see [indiscernible], I apologies if I missed it, but can you give us what the March 31 deposit spot rate was?

You talked about the overall deposit costs for the entire -- for the month of March?

Well, as of March [indiscernible], if not then for the month of March, sure.

Yes. I mean for the month of March, it was $195 million. I don't have it at the end of the day [indiscernible].

Okay. Got it. And then in terms of that SBIC valuation adjustment, can you give us what that dollar amount was?

Yes. So the net of all of it was -- when you think about all valuations was negative $1.8 million when you look at just the 1 item, a little over $2 million.

This concludes our question-and-answer session. I would like to turn the conference back over to Jay Brogdon, President and CEO, for any closing remarks.

Yes. I'll just be brief. I want to thank everyone for your time and for your interest in Simmons. We appreciate everyone devoting your attention to us. If you've got questions, as always, please reach out. Thanks, and have a great day.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Good day, and welcome to the Simmons First National Corporation Fourth Quarter Earnings Conference Call and Webcast. [Operator Instructions] Please note today's event is being recorded.

I would now like to turn the conference over to Ed Bilek, Director of Investor Relations.

Good morning, and welcome to Simmons First National Corporation's Fourth Quarter 2025 Earnings Call. Joining me today are several members of our executive management team, including President and CEO, Jay Brogdon; CFO, Daniel Hobbs; and Chief Operating Officer, Chris Van Steinberg.

Today's call will be in a Q&A format. Before we begin, I would like to remind you that our fourth quarter earnings materials, including the earnings release and presentation deck are available on our website at simmonsbank.com under the Investor Relations tab. During today's call, we will make forward-looking statements about our future plans, goals, expectations, estimates, projections and outlook. Including, among others, our outlook regarding future economic conditions, interest rates, lending and deposit activity, credit quality, liquidity and net interest margin.

These statements involve risks and uncertainties, and you should therefore not place undue reliance on any forward-looking statements as actual results could differ materially from those expressed in or implied by the forward-looking statements due to a variety of factors.

Additional information concerning some of these factors is contained in our earnings release and investor presentation furnished with our Form 8-K yesterday as well as our Form 10-K for the year ended December 31, 2024, and Form 10-Q for the quarter ended September 30, 2025, including the risk factors contained in those filings.

These forward-looking statements speak only as of the date they are made, and Simmons assumes no obligation to update or revise any forward-looking statements or other information.

Finally, in this presentation, we will discuss certain non-GAAP financial metrics we believe provide useful information to investors. Additional disclosures regarding non-GAAP metrics, including the reconciliation of those non-GAAP metrics to GAAP, are contained in our earnings release and investor presentation, which are furnished as exhibits to the Form 8-K we filed yesterday with the SEC and are also available on the Investor Relations page of our website, simmonsbank.com. Operator, we're ready to begin the Q&A.

[Operator Instructions] Our first question today comes from Matt Olney at Stephens.

I want to start on the loan growth front, loan growth took a nice step forward in the fourth quarter. Any more color on the drivers? And then the second part, I just want to understand the pipeline discussion disclosures. It looks like the approved and rate close pipeline moved up nicely, but the overall pipeline was still flattish. So just trying to appreciate maybe the various components of that pipeline and then what that means for growth in 2026?

Yes. Thanks, Matt. So I'd say a few things to comment first on the quarter, and then we can talk about pipelines in 2026. So we were certainly pleased with the pace of growth for loans in the fourth quarter. The quarter really had the highest level of production, I think, that we've seen in at least a couple of years. At the same time, we still had elevated paydowns in the quarter, but the level of production was more than enough obviously to offset that level of paydowns and drive some meaningful growth.

I would also call out for the fourth quarter in case it's not obvious to you, there are some -- arguably some seasonable adjustments to the fourth quarter. Fourth quarter growth for us tends to be slower on the agri side. Agra loans were down. Mortgage warehouse loans were down. We obviously divested some loans and had some charge-offs in the quarter. And so really, when you think about fourth quarter underlying growth rate, it was well in excess of the 7% annualized that we disclosed on a total loan basis.

So again, I think it demonstrates the ability for us to really move the needle from a loan growth perspective. At the same time, your question on pipeline and kind of 2026 outlook, our guide is not to have sort of sustain that level of growth. We just had some good timing of some things and pipelines coming out of Q3 and early Q4 that pulled through and led to some really nice funded commitments throughout the quarter. Rate ready to close, as you commented on, that's a very, very firm high likelihood area of our pipeline, is also at a multi-quarter high.

So I think that points to probably some good production and funded growth as well in the early part of the year. And then as I think about the rest of the pipeline, our pipeline ranging in that mid kind of between $1 billion and $2 billion, $1.5 billion to $2 billion is a pretty normal pipeline for us. We're certainly active in seeing a tremendous amount of opportunities all across our footprint. And so we feel very, very confident when we put all those things together and our outlook for something that's probably a little more optimistic in loan growth than what we've had over the last couple of years. But we're still going to be very, very cautious around the credit and underwriting environment, and then also just from a pricing and profitability perspective, the competitive environment in there. And all that kind of balances out to what we -- what you saw us guide for '26 is kind of low to mid-single-digit growth.

Okay. Perfect. Appreciate the details there, Jay. And then pivoting over curious about your thoughts on the margin from here in the fourth quarter, I think it was at 3.81% margin. Just trying to appreciate how clean that number is anything you would call out as unusual in the fourth quarter. And then I think the deck mentions the back book should provide some nice tailwinds for the margin in 2026. Would you expect that to support margin expansion from here? Just trying to appreciate maybe the puts and takes on the margin from here. .

Yes. Matt, this is Daniel. I'll comment on that. So the linked quarter margin growth of 31 basis points. I'll break that down for you give you an appreciation for that. So of that 31 basis points, about 19, call it, 19 to 20 of that is from the partial quarter impact of the balance sheet restructure that we did last quarter. But then the rest of that is really from core NIM expansion from just this business practices, so 11 basis points from that. And of that 11 basis points, about 3 of the 3 basis points is related to loan growth and 8 basis points is related to rate and mix. So a couple of things to understand from that is we had the 3 rate cuts in the back half of the year, September, October and December. Post balance sheet restructure, we did move from liability sensitive to asset sensitive. But a nuance to that is as you think about our sensitivity along the curve, we're still a little bit liability sensitive on the short end of that curve.

So call it, day 1 to 3 months, we're a little bit liability sensitive. So we got some benefit from those rate cuts in the fourth quarter. We will shift to asset sensitive once you get past 3 months and towards the long end of the curve. So as you think about kind of the guide and specifically Q1, we would expect Q1 to be relatively stable to the 3.81%. There might be a basis point or two of benefit there. And then as you think about the full year, we're probably pretty stable, maybe a couple of basis points to get to the mid-3.80s by fourth quarter.

Your comment on the back book repricing. So yes, that's still a benefit for us, and we expect that to be a benefit for us as we move on. That benefit lessens a little bit as we get rate cuts. We've talked historically about a 200 basis point pickup before the 3 rate cuts that we got in the back half of the year. So that will come down a little bit. But we still have, Matt, over $2.5 billion of loans that will reprice over the next 2 years that have a rate less than 4%.

So that tailwind will continue to exist maybe a couple of points about the guide. Our rate forecast that's embedded in our guide is a rate cut in May and one in August. And so as you think about loan yields repricing. When you look at the fourth quarter, loan yields were down 8 basis points. Even if you go back to second quarter, we're only down about 3 basis points. So we're -- that back book repricing is offsetting some of the impact from the rate cuts that we've had.

And if you flip to the deposit side, you think about the beta there, our beta cumulatively is 64%. We do expect that beta to moderate some into 2025 primarily because a couple of things. Number one is our deposit book is different than it was pre balance sheet restructure. We've got about $1.4 billion less broker deposits, which have a 100% beta. So that's embedded in that 64% cumulative beta today.

What we think is the incremental beta for future rate cuts is probably around 50%. And so by the end of '26, we think the cumulative beta kind of settles in that kind of that high 50 range. So still some opportunity there, but we do expect the beta to moderate a little bit. And then just maybe connecting the NIM discussion with your question on loan growth, we still believe and feel like that we can grow NII without significant growth in the loan portfolio just because of the things that I just talked about. So our 9% to 11% guide on NII, we feel pretty good about it.

Matt, I will just chime in. I mean, as I echo everything Daniel said there. Bottom line for me is I think my outlook for NIM for '26 is relatively stable, as Daniel said, I think the back book reprice on loans as well as the deposit beta and our ability to continue to do things we've been doing from administered rates, et cetera. Those are all tailwinds that will offset any additional rate cuts to the extent they come through and allow for that more stable NIM.

I think the opportunity in excess of what we've guided, right? Our outlook is what our outlook is. The opportunity though -- and what we're focused on strategically is really on the remix on the deposit side. Our biggest opportunity to even further exceed the guide is really built around our ability to organically grow some low-cost deposits, and we're very, very focused on that and think that, to the extent we're successful there, we've already got, I think, very strong growth embedded in the guide, but that would be the area that would provide upside to the guide.

Okay. That's great commentary. I appreciate all the details there. And maybe just one more follow-up with this discussion. Any commentary about what you're seeing in markets around deposit competition, loan pricing competition. I think last quarter, you flagged the loan side was going to be more competitive. Just in general, [indiscernible] thoughts on both sides there. .

Yes, Matt, really a continuation of that same theme. On the deposit side, honestly, I would say I think we feel pretty -- see there's pretty good behavior around the rate cuts in the industry. Betas are relatively high in my mind and lags are short around the more recent rate cuts. So that feels good where we see irrational competition for the most part, today on the deposit side is from smaller banks. And the good news is in a lot of those markets where we're competing with the smaller banks, we have a very, very dominant market share and we can kind of flex around that. And so that area is still very competitive. But to me, it's nowhere near as competitive of a pressure as what we're seeing on the loan pricing side. .

You've heard us talk about that. We -- a lot of our loan growth in the fourth quarter was in a CRE bend. We're very focused, as you and others know, on C&I. We have good C&I opportunities in our pipeline. We've had great opportunities. We've had some good production on C&I. But returns on a risk-adjusted basis have been so much stronger in recent months from a CRE perspective because of what we believe is very, very irrational pricing and really pricing the way the profitability from, even in relationship-based situations where deposits and treasury management are coming with it. The yields on the loans really make no sense and particularly make no sense on a risk-adjusted basis.

So we'd like to see some improvement in that competitive dynamic. It doesn't [indiscernible] us as it relates to our overall growth outlook. But that is the biggest competitive factor that we're seeing today.

And our next question comes from David Feaster at Raymond James. .

I wanted to maybe shift gears to asset quality, nice to see the resolution of those 2 problem credits and with less impact than initially expected, also saw the sale of the equipment finance business, and you guys did the deep dive into the NPAs. I'm just curious maybe whether there's anything else that you're considering divesting? And as you did that deep dive, whether you found anything else of note that maybe has shifted underwriting at all? Or just kind of curious kind of what you're thinking on asset quality and anything that's come out of this whole process?

Yes, David, I'll jump in on this one. So you did a great job summarizing the actions that we took in the quarter. And we feel very, very good that our reserve levels and what we had done kind of on a specific reserve basis was more than adequate for the actions that we're taking, particularly on the larger credits and the equipment finance portfolio. Really is opting kind of read through credit and the results of the deep dive. Again, feel credit is very stable right now.

Those situations were very unique, each of them. They've been around for a while, particularly with the equipment finance portfolio, been in runoff for a long period of time. We hadn't originated a loan there in several years that came from historical acquisition. And so the credit read for us as we did the deep dive, was really cleaning up some of those legacy type nonperformers that have been in there. We were able to identify the loss content, got the full resolution on several of those credits and moved on and took the charge off in other instances still working toward very rigorous resolution processes in a couple of those instances. However, we had done enough work to know what the loss content was and went ahead and moved on those.

So really underlying, I think it's just a continued stable outlook in all of our kind of early indicators or predictive indicators around credit, I would fall into that characterization of just in the stable category.

Okay. And obviously, there's been a lot of disruption across your footprint in the market broadly. Just wanted to get your thoughts on where you see the most opportunity and how you're positioning to capitalize on that. And then just specifically on the hiring side, it looks like you did add some talent this quarter. Just curious your appetite for hires, where you're hiring and maybe what segments or markets you're focused on?

Yes. I don't want to be overly generic in the answer, but it is a somewhat generic answer in that. We are seeing great opportunities all across the footprint. Southwest part of our footprint, the Midwest, the Southeast parts, really just footprint wide, we are very active. Pipelines from a talent perspective are very strong. And I would suspect that you'll see us being successful in continuing to upgrade talent, add talent, and it's across all areas of our business, again, not trying to be overly generics. It is somewhat heavily focused in our revenue areas where we are adding talent. But it's not just there.

A lot of our support areas where we can bring in strong talent to help us innovate, automate and drive some of our efficiency and scale initiatives forward. We're seeing some really good talent come out of some of the disruption in those areas as well. So we're very, very excited. That's probably one of the most exciting things going on in our business right now is the prospects that we're talking to from a talent perspective and the success that I think we're going to have in that regard.

That's great. Maybe just last one, Jay. One of the things that we've discussed pretty in depth previously has been as a part of the better bank initiative, the focus on improving processes and procedures, and there's still kind of in the middle innings of that maybe a quarter or two ago. I'm just kind of curious if you could kind of give an update on where we are there on improving again, the processes and procedures in some of the business lines. And kind of maybe what's your most focused on near term?

Yes. I think from a noninterest expense and just overall kind of efficiency and scale point of view, I really think it's still fair to characterize us as in the middle innings of that journey. I also think that the latter innings are much harder to get than those early innings work because we attack the lower-hanging fruit first. There's a slide on this in the presentation. I want to remind everyone, our expenses in 2025 were below our run rate for expenses in the fourth quarter of 2022. So 3 years of inflation, merit increases, investing in the business, et cetera, and we've been very, very disciplined in our ability to keep expenses down throughout all of that. And that is a function of, I think, us demonstrating success in executing these efficiency initiatives.

We have brought a tremendous amount of automation to processes and continue to do that. We've centralized and standardized around best practices in a lot of areas of the bank. And so you might think of a decade of acquisitions and really taking the time over the last few years to fully, fully integrate and digest all across the footprint. And so I think there's still, David, some very meaningful opportunities for us there.

As I think about the expense outlook, maybe a little more tactically, not exactly embedded in your question. But if I think about an expense outlook, I'll tie it back to your question around talent opportunities, we continue just to try to fund our investments. So I think a lot of the work that we're doing in these middle and later innings on the efficiency side, are geared around kind of freeing up the investment to bring in talent, to invest and improve in the technology stack and better innovate around the bank. And so I think you saw our expense guide is up 2% to 3% year-over-year. That's really reflective, I think, of kind of a balanced view of success in these initiatives paired against the opportunities we see, maybe even on an accelerated basis to invest in our business.

Yes. David, I'd add a couple of things to what Jay said. I think when you look across our business from the back office, the middle office and the front office, we've adopted a continuous improvement mindset in that we're inspecting everything that we do. And in many of those processes, we need to tweak some things and then some of them, we need to completely blow it up and rebuild it. And we recently visited a customer that made a comment to us that says if it didn't break it. And we've adopted that in some places. And so there's still a lot of opportunity for us there. .

Just a couple points for you. We've talked about our vendor spend and our procurement group that we stood up about 2 years ago, and we've got some significant success out of that. We still see opportunity in that over the next 12 to 24 months to gain some ground. And then when you just look at our -- across our footprint, our facilities, the square footage that we have, we reduced our square footage this year by 6%. Some of that is direct savings to the bottom line and some of that is savings on future spend of maintenance that we might have to do that we are now no longer going to have to do. And that's split about 60% between retail and about 40% from corporate locations. So it's not all coming from branches, which is a good thing.

So those are examples of just things that we're looking at across our entire business to Jay's comment earlier about how can we self-fund the investments that we're trying to make to grow our businesses.

And our next question today comes from Wood Lay at KBW.

Wanted to start on your comment on the loan production, and you noted it was the highest level over the past couple of years and just wanted to get your opinion. Is that more a reflection of you all being more aggressive on growth now that the balance sheet restructure is behind you and you have more flexibility? Or is that a reflection of customers being more optimistic? Or is that a combo of both?

I think it's fair to describe it as a combo, Wood. I think it's probably more of the latter than the former. We haven't just sort of like lowered rates aggressively or started to sacrifice our standards around profitability. That said, with the significant reduction in wholesale funding as a result of the balance sheet repositioning and just improving, I'll call it the nimbleness, the flexibility around the balance sheet overall, it has certainly -- there's -- in an indirect way that has helped us to accelerate the loan growth. But the more fundamental answer is we've just seen more robust opportunities.

The pipelines were improving throughout the year last year. The quality of the pipeline. It's not just an aggregate number. You have to really look into the pipeline and think about quality of opportunity. Quality of pipeline was improving all throughout the year. And we just kind of saw a pinnacle in that activity late Q3, early Q4 and we're successful in some pull-throughs there and continue to see success.

Again, I mentioned the rate close area of the pipeline that even as we turn into January, we're seeing some -- exactly what you would expect with that kind of year-end quality of pipeline. So I think it's probably more the latter of your 2 things, but there's certainly an element of both.

Got it. That's helpful. And then maybe circling back on the NIM. I believe last earnings call, you all gave a sort of a longer-term NIM range of $3.50 to $3.75, and you're now above that. And it feels like, as you mentioned, the loan repricing over the next 2 years is very real. So has that longer-term target? Do you think it's shifted upwards a little bit?

Yes.Woody, the context of that 3.50 to 3.75 million was that we would like to manage it within that range, no matter the interest rate environment. And rates are still relatively high. We've moved asset sensitive. I would say probably that top end of the range of the 3.75 has moved up a little bit. And -- but if rates were to go down to significantly go down. We're trying to stay at that 3.50 above in that scenario. So I think it's a fair comment to say that the top end of that range has probably shifted up a bit.

Yes. And I think the forward curve has shifted as well. So that range was really embedded on an outlook that had a lot more rate cuts in it than what we're expecting today. So all of that is very fair, Woody. And good news is rates hire for longer is, I think, better for us and better for the industry right now and gives us upward bias on how we think about the NIM range. .

All right. And then just last for me. In terms of capital, I mean, you just printed a quarter of a ROTCE over almost core 16%. You're going to be building capital over the next year. How do you think about sort of where excess capital stands and opportunities to deploy it?

Yes. I think our priorities continue to really be around organic growth, investing in the business to grow sustainably and profitably is clear priority one. Priority two would be our very long-standing dividend. And then from there, Woody, I mean, we'll have to think about share buyback, I think, increasingly throughout the year this year. We're not -- we don't have any share buyback activity embedded in our budgets or forecast right now. I think we'll be -- we'll keep that tool in the toolkit.

We'll be opportunistic in how we see the growth environment evolving and candidly in how we see the valuation of the stock evolving. And where it makes very good sense economically for us to get active, we would do so. But as of now, it's really centers on priorities 1 and 2 that I outlined there.

And our next question come comes from Brian Wilczynski with Morgan Stanley.

Maybe going back to the ROTCE for a moment. clearly, a very strong quarter, 16% ROTCE. If we zoom out a bit, how do you think about the trajectory of ROTCE as we move forward? And how much of it will depend on the environment versus some of the other strategic levers that you talked about earlier?

Yes. I'll start on that, Brian. Daniel, I'm sure, is going to want to layer in some comments as well. But I think if you think about -- whether you think ROA or ROTCE, I think there's probably a couple of things about the fourth quarter to kind of first quarter and outlook that are important to the note. One is there's just always, as we go into the first quarter of any year, there's some seasonality in expenses that we have to chew through from payroll taxes to merit increases, et cetera. so the early part of the year has got a seasonal element in it that you don't see in the fourth quarter.

In the fee income area from a noninterest revenue point of view, we had we very much exceeded the top end of our range of what we normally see. And some of that was just very strong results in some of those businesses, a little over $3 million of that was [ BOLI ] gains. And so we're not going to repeat that every quarter, obviously. So I think you've kind of got to run rate that just a little bit. And then another big item I want to -- I would call out is just the effective tax rate. Our balance sheet changed a lot given the repositioning back in Q3. The fourth quarter tax rate is below what our tax rate would be in 2026, which -- that tax rate is probably, as we called out in the guide, much closer to around 20%.

And so I think of that as -- I'll do it in ROA, not ROTCE because it's just that number is more readily available in my mind. We had a 129 ROA for the quarter. I think ROA kind of on a more run rate basis is at least kind of mid-1 teens, if you will. And that's more of of what I think is the sustainable run rate as we turn the quarter into '26 with all of the tailwinds that we've been describing on this call and opportunities to continue to grow and expand that from there.

Yes. And Brian, the only thing I'd add to all that Jay said in terms of the seasonality, when you think about Q1, the additional one there, is that there are 2 fewer less days. So the NII raw dollar amount is impacted by that by about $3.5 million. So when you think about the fourth quarter returns relative to the first quarter, there will be a downward shift. But then over the long term, we think about ROTCE somewhere needs to be kind of mid-teens is where we'd like to be. And we've talked about an ROA of 1.25% and above. And we feel like we got a really good path to get there. And to Jay's point, kind of or maybe normalized rate is in the high teens right now, but we feel like we've got a really good path to get there throughout the year and towards the end of '26.

Yes. Last comment I'd make on this, Brian, is just when we did the balance sheet repositioning, we thought some of those targets from ROA and ROTCE were probably more achievable in 2027 on a run rate basis. And our jumping off point at the beginning of '26 is several basis points higher than where we thought it would be and all of that indicates kind of similar to Woody's question earlier on NIM, maybe a bit of a parallel shift up in either in what those run rates should be or in kind of accelerating the achievability of those targets.

That's really helpful. And maybe one follow-up on the funding base. That's clearly been a big area of improvement over the past 12 months. As we look forward, can you just elaborate a bit more on the strategy to grow customer deposits over the course of 2026 and beyond?

Yes. I'll jump in there and others may want to comment to, Brian. But I think I'll speak to it maybe in kind of like line of business thought process. We've got a lot of activities and efforts going on. Some of them in kind of the category of first ever in the bank, not first ever in an industry, but just maybe adopting industry best practices for the first time, particularly on the consumer side of our bank, and that spans across kind of all demographics, all categories of customer profile, and we're seeing some success, some early success there, experienced that success throughout 2025 and are creating better kind of discipline and muscle memory around those activities in the consumer bank. And so -- and that's been an area of focus from a talent perspective. And so I think that all of that is -- would fall into something that we're focused on strategically on the deposit side and the consumer category.

The other thing I'd mention from a consumer perspective is Private Banking is a product we really rolled out probably sometime in '24, if memory serves, but really, really expanded our efforts around private banking in 2025. That's another area that we are seeing very good early signs on, and we've got a lot of built-in opportunities that we can synergize across our business through more competitive products there.

And so having developed in those products, bringing in private bankers, incentivizing around that, that's another area that we're very, very optimistic in. And then the last piece that comes to mind for me in another line of business is just on the commercial side of our business. And so we've been very focused on building out business and middle market C&I capabilities that is tools, processes, people, everything. And that's been a multiyear investment. We're pretty deep in that journey.

We started in the back side of our business, really repooled and reprocessed, continue to have some very important initiatives in those areas and then have brought some very good talent into the bank over the last year or two on the sales side as well, and that continues to be an area where I think we'll see -- you'll see heavy investment from us in terms of building out and expanding on the commercial side of the business.

And I put all that together and say, one simple way I look at this is our noninterest-bearing deposits as a percentage of total deposits is below peer and below where it ought to be. And that kind of circles all the way back to an early comment to a question. I believe that is perhaps the biggest opportunity to accelerate even beyond our guide this year and into the future. is our ability to demonstrate some success in growth in those strategies.

Brian, it's Chris. I'll add to that. I think Jay referenced some of the things that are not interline to the industry but new to us. I think as we demonstrate to ourselves that we are effective at those are focus pivots from the experimentation and piloting to accelerating and scaling. And so we're -- as we find those successes or even things we didn't like, we're learning from those quickly, and we're shortening our cycle every time so that we can get from concept to execution and into results on a much shorter cycle, and we're taking those learnings. And I think one spot that Jay did mention is another one is a small business where we've got a significant opportunity in our footprint, both embedded in our existing relationships, but also prospect opportunities where we can attract really deposit-rich customers that have got limited credit needs, but they have absolutely -- have got significant needs around deposits and transaction needs. And so our ability to meet that. We already have demonstrated, we continue to focus on that area. And that's going to continue to be an area of emphasis for us.

And our next question today comes from Gary Tenner at D.A. Davidson. .

I just had one follow-up question. Just as I'm looking at the interplay between growth on both sides of the balance sheet based on the guide. I guess, two questions come to mind. One, is there any kind of anchor on the loan deposit ratio to think about now that you're up in the mid-80s there the last couple of quarters? And then the second, just to the degree that loan growth outstrip deposit growth over the course of the year. Is that funded with running from the securities portfolio? Or what are the broad thoughts around that?

Yes. I think -- I mean, you nailed it, Gary. I think that our constraining factor in our business from a growth perspective today is certainly not loans. It is on the deposit side, the core customer deposit side. Hence, all of the commentary that we've had around that being such a key element of our strategic focus going forward. So I think to the extent you see it outstripping loan growth outstripping or outpacing deposit growth, we do have cash flows from the balance sheet. That would be investment priority one. Investment, the other funding elements that could be in there is we could get more aggressive on the customer side in things like promotional CD rates, et cetera, to help fund some of that?

And then kind of your last stop would be on the wholesale side of any category.

And that concludes the question-and-answer session. I'd like to turn the conference back over to Jay Brogdon, President and CEO, for any closing remarks.

Thanks. I'd like to just maybe end today with a few closing remarks. First of all, it's just -- it's hard for me not to look back to one year ago. A year ago, we were announcing fourth quarter 2024 results and net interest margin had a 2 handle on it and was up linked quarter but was still a 2-handle. ROA was barely creeping above 70 basis points. Our efficiency ratio was in the mid-60s.

I flash forward to today and I think about the -- of course, the results from the balance sheet repositioning, but also just the ongoing commitment to sort of sound and profitable growth and the decisions we're making and the discipline that we're demonstrating as we do that. And we just find ourselves in a much stronger position.

Net interest margin was up 94 basis points compared to a year ago. Our expenses are down, as we talked about on the call, and they're down on a multiyear basis. And all of that has led to revenue fourth quarter of this past year compared to a year ago, up almost 20%. And pre-provision net revenue was up 60%. And so I just think about all the things that are now in the rearview mirror for us as we turn the corner into 2026, and we just have a great deal of momentum behind us.

And the thing I want everybody to hear me say is that we are nowhere near satisfied with where we are right now. In fact, as we've talked about on this call, we continue to design and execute a number of strategic initiatives. And we think all of these initiatives are going to bolster that already strong momentum our pipelines for adding talent, as we've discussed, are as strong as they've ever been. And so as we move through 2026 and beyond, we very much look forward to continuing to demonstrate our progress, and we remain steadfast in our commitment to delivering value for our customers. for our associates who make all of this happen and of course, for our shareholders.

So with that, I'll just thank everyone for the support, and you guys have a great day.

Thank you. That concludes today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines, and have a wonderful day.

Good day, and welcome to the Simmons First National Corporation Third Quarter 2025 Earnings Conference Call and Webcast. [Operator Instructions]

Please note, this event is being recorded. I would now like to turn the conference over to Ed Bilek, Investor Relations. Please go ahead.

Good morning, and welcome to Simmons First National Corporation's Third Quarter 2025 Earnings Call. Joining me today are several members of our executive management team, including Chairman and CEO, George Makris; President, Jay Brogdon; CFO, Daniel Hobbs; and Chief Operating Officer, Chris Van Steenberg.

Today's call will be in a Q&A format. Before we begin, I would like to remind you that our third quarter earnings materials, including the earnings release and the presentation deck, are available on our website at simmonsbank.com under the Investor Relations tab. During today's call, we will make forward-looking statements about our future plans, goals, expectations, estimates, projections and outlook, including, among others, our outlook regarding future economic conditions, interest rates, lending and deposit activity, credit quality, liquidity and net interest margin.

These statements involve risks and uncertainties, and you should, therefore, not place undue reliance on any forward-looking statement as actual results could differ materially from those expressed in or implied by the forward-looking statements due to a variety of factors.

Additional information concerning some of these factors is contained in our earnings release and investor presentation furnished with our Form 8-K yesterday as well as our Form 10-K for the year ended December 31, 2024, and Form 10-Q for the quarter ended June 30, 2025, including the risk factors contained in those filings.

These forward-looking statements speak only as of the date they are made, and Simmons assumes no obligation to update or revise any forward-looking statements or other information. Finally, in this presentation, we will discuss certain non-GAAP financial metrics we believe provide useful information to investors.

Additional disclosures regarding non-GAAP metrics, including the reconciliations of those non-GAAP metrics to GAAP are contained in our earnings release and investor presentation, which are furnished as exhibits to the Form 8-K we filed yesterday with the SEC and are also available on the Investor Relations page of our website, simmonsbank.com.

Operator, we're ready to begin the Q&A session.

[Operator Instructions] Our first question comes from David Feaster with Raymond James.

Man, it was a really busy quarter for you guys. You made a couple of transformational actions, right? We got the restructuring. Jay, you're now taking the helm. I guess my first question is, now that these transformational actions are completed, what are your key strategic initiatives, Jay? I mean, where are you focusing your time? And what are your top priorities as you're looking forward?

Yes, David, really appreciate the question, and you're exactly right. It was a busy third quarter and an important and transformational quarter for Simmons Bank. And so as we look forward from here, I'll say something on the call, David, that the folks inside of Simmons Bank have heard us say for the past several weeks.

And that is that we have put a lot of rigor and invested a lot of our capacity into addressing some structural challenges, the structure of our balance sheet, and we put that in the rearview window in the third quarter. And where we really shift all of our capacity and focus is really to the structure of our business.

And we've been focused there. I think we can point to demonstrated results over the last couple of years and our ability to gain efficiency in our business. We've been very, very focused on generating some better and improved organic growth capabilities. And I think you'll see us really focused on maybe broadly those two things, continuing to pour into our organic growth outlook and capabilities that would include all sorts of things, for example, talent acquisition, which is a place where we're spending a lot of time, and we're seeing great opportunities, particularly with a lot of disruption all throughout our footprint right now.

And so those types of things to enable and drive growth and then continuation of what we've already been doing, maybe with just more emphasis, again, more rigor on driving operational excellence in our business and gaining efficiency throughout. And so that would be, David, I think, how you could characterize the main pillars of our priorities moving forward from here.

Okay. That's helpful. And maybe just staying kind of on that growth side. Look, in my mind, you ripping the band it off with the HTM restructure, you guys are taking a major bet on yourselves, right? Your ability to execute, drive loan growth, growth has been challenging, though.

Competition is intense, pipelines are building. You've been very disciplined on pricing. Could you just touch on your thoughts on the growth side, where you're seeing opportunities? And when do you think you can start to see growth really start to accelerate?

Yes. Well, let me maybe start that one, David, with just a reminder, I hopefully sound like a broken record on this at this point. But our priority is really around growing and generating consistent, strong risk-adjusted returns. So when we start with growth, we're talking about soundness and profitability, first and foremost.

And we're not really going to sacrifice either of those disciplines in pursuit of any type of growth. And so our outlook has been pretty consistent the last couple of years. We've been talking about low single-digit growth rates for loans, for example, and that's been where we've been pretty consistently for the last couple of years.

We talked about in the third quarter around some of the restructuring transaction, we felt like that would maybe allow for some upside from those lower single-digit growth rates. And when I think about growth this quarter, when I think about top of funnel activity in our pipeline, production volumes, et cetera, I think all of that supports an increasingly positive outlook for us from a growth perspective.

And so we feel good about where we are in terms of continuing to inflect in those areas. The environment is competitive. We're going to stay really, really disciplined in light of that. But I might just mention one other thing to you, David, as it comes to growth, and this is really important. We talk about this around the table as we're evaluating our business.

And that's simply that we don't really have to grow volume to grow net interest income right now. And don't hear me saying we don't want to grow volume. We are wide open for business and seeing great activity, again, in both pipeline and production. But I think it's really important to understand what I just said. And maybe let me give you an example of what I mean when I say we don't have to grow volume to grow net interest income.

The figure that I focus on is we have almost $3 billion of fixed rate loans that were originated several years ago in a much different rate environment. That almost $3 billion in loans is yielding about 3.9%. All of those loans, almost $3 billion of those loans reprice over the next 24 months, starting this quarter. And so we see significant tailwind.

And when I think about a September net interest margin of 3.76%, kind of our run rate going into the fourth quarter, the actions we've taken to defend margin, the tailwind in the loan back book, the tailwinds in the deposit back book as the Fed continues to cut rates, we feel like we are in an incredibly strong position moving forward just by continuing to be smart, run the business well, allow all those mechanical aspects of the balance sheet to continue to support margin and grow NII.

And we'll just in the face of all of that, stay focused on growth, stay focused on operational excellence and be really, really smart and disciplined. And I think our capabilities will show through on the growth side as we do that.

That's great. And then kind of maybe just following up on that point. I mean, obviously, there's a lot of moving parts here with the margin. We only have a partial impact of the benefits this quarter. You gave a lot of good color in the slide deck on the margin. Exit rates are higher. Fourth quarter is expected to be at or above 3.65%.

But there's just a lot of moving parts with the full quarter impact of the HCM restructuring, the hedging activities. Help us think about the margin trajectory as we look forward, just given the tailwinds that you just talked about from really material repricing and remixing opportunities as well as core deposit growth opportunities.

Could you just help us think through kind of the margin trajectory over the next 12 months?

Yes. I'll stay in there. Daniel may want to chime in with some comments here as well. But First of all, I think I'd just start with the 365 plus outlook that we provided for the fourth quarter. The way I would think about that is we wanted to show the September launch point given the partial impact of the quarter. September is just the best way to think about run rates given all the activities in the third quarter.

The 365 relative to the 376 is really just an acknowledgment that there were a lot of still partial things happening even through September. The top couple of things I would mention is you had a rate cut that was -- that basically had no impact in September. We expect and in our guide, we're assuming another 25 basis point rate cut here at the next meeting.

And so I think you factor those in alongside of we were layering in some hedges throughout the balance of the third quarter. And so that really is what kind of fuels the guide from us into that 3.65% plus area. But again, I would go back to just the defensibility of margin in that area.

That's where we feel really, really strong given the hedging actions that we've taken, even with the Fed continuing to cut rates, and we're just -- our outlook is using the forward curve. That's all we're assuming. And when we use the forward curve outlook and think about all of those repricing dynamics, I think margin can kind of hold its head right here over the next 12 months.

I think it can be in this area, it will, of course, move around a little bit, but I think it's very, very defensible. And again, I think that combined with all of the back book activities plus any incremental growth that we expect to achieve would fuel some pretty good results from an NII and an overall returns perspective.

Yes, David, this is Daniel. I may just add a couple of things to that. The balance sheet restructure was the biggest part of the increase in NIM, but it's also important to note that the core fundamentals that we've been seeing since the low point of Q1 of '24, which was 2.66%, we've been growing that every quarter.

We grew that again. The core balance sheet NIM grew 7 basis points. So I would expect that trend to continue, although somewhat mitigated by the rate cuts. In our forecast, we've got 4 rate cuts over -- between now and the next 12 months. So remind you that we were liability-sensitive pre-transaction. And over the course of time, we were shifting -- we were getting closer to neutral, but the transaction shifted us to asset sensitive, and that's why we kind of expanded on our hedging program.

What our goal there is now that we've got a NIM of 3.65% plus, we have some better tools in our tool belt to be able to manage interest rate risk. And our hedging program that we did, and we put a slide on there is kind of the manifestation of that. And so our goal over the long term in an up or down 200, 250 basis point rate move, we'd like to keep our NIM somewhere in that 3.50% to 3.75% range.

And we think this hedging program that we implemented in the third quarter or evolved in the third quarter will allow us to do that. So we feel really good about that and where we're headed with NIM and our ability to protect them.

And the next question comes from Woody Lay with KBW.

I wanted to start on the deposit base and operating with a leaner deposit base now. And I was just interested if you could share any color on how deposit betas have trended so far with the September cut and how you're thinking about betas with any incremental cuts from here?

Yes. Woody, I'll take that one and others can jump in. But when you look at our beta, cumulative beta was 65% so far through the rate cycle. And then if you think from there, I mentioned there, we've got 4 rate cuts modeled over the next 12 months, it's going to be difficult for that 65% to maintain itself, primarily because if you think about the balance sheet restructure, we reduced $1.4 billion of broker deposits, which had a 100% beta.

So in that 65% beta to date had a 100% beta of those $1.4 billion that's not going to be there going forward. So that's one aspect of it. And then I just think that through this first half of the rate cycle, that banks were waiting for rates to come down to proactively start bringing rates down, rate paid down.

And so I think the competitive nature of it is going to be somewhat challenging to maintain. So all that being said, I would expect that 65% [ bet ] to moderate a little bit between now and over the next 3 to 4 rate cuts.

But still, our focus is striking the right balance between rate and deposit growth. And I think we've done a really good job of that so far. If you look at our deposit costs relative to peers and our ability to bring that down, we'll continue to do that, but we'll also fight and defend core customer deposits as we move from here.

I'd just chime in with a couple of other data points here, too, Woody, on the deposit side. Maybe just thinking about our customer base a little bit. We talked consumer and commercial more broadly. On the consumer side, the thing that continues to be kind of the positive and the negative here, the positive is we're growing accounts.

When we look at our consumer base, we are adding customers and growing the number of accounts in the business. The biggest headwind from a consumer deposit point of view is just average balances per account. And so I think good news from a macro perspective is I think the consumer is still spending. There's a lot of activity, but there's just less and less money on average in the accounts.

And so that's a factor that exists in our deposit base on the consumer side. On the commercial side, similar to consumer, at least in terms of growth, we are -- we've been heavily investing in our business and business banking and treasury management products over the last few years. We continue to invest heavily there.

It's people, processes and tools, and we're seeing some good success. We've seen really good growth in fee income as a result of these efforts. We're seeing good inflection in terms of growing accounts and expect that to also be a bright spot in terms of customer deposit growth and fee growth into the future.

That's really helpful. I wanted to pivot to expenses. And I believe you mentioned adding talent is a big initiative for you all. And obviously, over the past couple of years, you've been really defensive on the expense base just given the headwinds to revenue. And now that we're seeing the operating leverage play out, how do you think about the forward expense growth rate from here?

Yes. So I think that candidly, Q3, we cleaned up something. If I think about the Q3 total run rate of noninterest expense, it might be a little above what I would really expect in Q4. It's probably not terribly far off of kind of a launch point into next year when you think about payroll taxes, merit increases, the type of things that can inflate expenses a little bit in the first part of a new year.

And so that's kind of how I think about the immediate run rate. As I think about expenses more broadly, Woody, to your question and how we think about them into the future, I'm going to take a pretty balanced view here. On the one hand, the more actionable, more reliable view that I have is that we still have a lot of ongoing opportunity to gain efficiency, things that we've talked to you about over the last couple of -- things we've demonstrated over the last couple of years.

I still think we've got really good opportunity. Folks have heard me say we are in the middle innings of that at best right now. So there's still a lot of game to be played there. On the flip side, even I personally am spending a fair amount of time on the talent acquisition front, and we're seeing some really, really good opportunities there.

I'll stick with baseball metaphors. I want to have as many at bats as possible. We may or may not swing, but we want to have really quality at bats from a talent perspective. My mindset around talent is one of just talent infusion. I think that's a key part of an organic growth strategy.

I think in an environment where rates are coming down and there's a lot of dislocation in our footprint, we should be able to move bankers into our business, and they should be able to move their books to our bank. And so those -- we're going to keep -- maybe long story short, we've got opportunities, but we're going to continue to invest in the business, whether that's people or tools or whatever it is, and so in the absence of any more organized initiatives that we're working on that we could come and talk about, my view on expenses would be kind of balanced between those two things as we move forward.

All right. And then last for me, just wanted to touch on credit. We saw a pretty sizable move in the industry yesterday, just given some events that have occurred. And your credit was clean this quarter. But I was just hoping to get some overarching comments on how you're feeling about your credit outlook.

Yes. I'll mention a few things from a credit perspective, Woody. And I maybe just start with kind of your comment there. For us, when we look at whether it's NPLs, past dues, charge-offs. This was a very in-line quarter, kind of a benign quarter for us from all of those perspectives. And that was our expectation.

And I really don't see anything that kind of challenges that expectation as we move forward from here, even in light of some of the things we're seeing more broadly. I would maybe just remind you and everyone, we, of course, took action on a couple of loans back in the first quarter. We continue to work toward resolution on those two relationships.

I hope I'm somewhat optimistic that we can take maybe further action on those in the fourth quarter. That's our posture. That will be dependent on the facts and circumstances as we move forward from here. But just keep those loans in mind.

Feel really good still as I sit here today about the specific reserve levels there against those. So I think it's just our posture again there is just to move toward resolution and be able to migrate that out of the figures.

I might just mention one other thing from a credit perspective, Woody, that I think about, it may even tie back a little bit, probably a little less obvious, but maybe even ties back to some of the volume conversations from a loan perspective. But we've been incredibly proactive this year and continue to be really proactive on loans that we perceive as maybe lower quality than what our general expectation would be in terms of how those loans are performing.

And arguably, we had some really good success on that in the third quarter. And I would argue that maybe even muted some of our loan growth statistics that you would look at. We had much higher volume than usual in terms of moving some of those relationships out to other banks in the third quarter.

We're going to continue to do that. As we look to Q4, again, we're going to push hard toward resolution on the larger loans. We'll continue to push hard on any kind of relationships that we think aren't the quality that we want in the book.

And as we move toward kind of 2026 and beyond, our focus is to have a balance sheet that is incredibly sound, incredibly profitable and positions us really well moving forward.

I just wanted to wish George, congrats on his upcoming retirement.

And the next question comes from Jordan Ghent with Stephens.

I just wanted to kind of go back to the deposits and kind of talk more about the broker deposits. So we saw considerable declines in balances in 3Q, down to $1.8 billion at quarter end. Could you just kind of talk about where you see these going?

And if there's still a bit more work to do in 2026, I think it was -- they're 9% of total deposits. Is that where you kind of feel comfortable keeping them at? Or could they move lower?

Jordan, I appreciate the question. Maybe first, just if you go back to the balance sheet restructure, we talked about reducing wholesale funding and brokered as part of that discussion. One of the things that we did in the quarter was we had identified a meaningful tranche of public funds deposits that were effectively wholesale funding at a wholesale funding rate.

And we chose to exit those relationships as opposed to reducing more brokered deposits because, one, there's collateral that's involved there. The pricing is about the same and duration management between those 2 was part of that.

So we'll continue to -- as we go forward from here, manage how that balance a little bit. So specific to brokered, our goal is to get that to 0 over the long term. And we will do that through growing core deposits. And we're doing a number of things within our customer base, within marketing campaigns that we have historically not done that we're doing now.

That would be the goal over time is to grow core deposits. Within the quarter, commercial actually grew a little bit. Last quarter was the first time we grew NIB. Consumer was a little bit down this quarter. We're seeing some stress in the industry with the consumer that Jay kind of referred to.

But overall, we would expect and within our strategic plan that we're going to grow NIB deposits and core customer deposits to help reduce the need for brokered.

Yes. I'd just chime back in, Jordan, too. I've said this many times before, but you heard me talk earlier about some of the loan repricing dynamics on the loan side. I think that's a big part of the story. On the deposit side, it continues to be definitely a bit of a repricing story, but also a remixing story.

I think we've got a lot of good opportunity to grow the core customer book there. And all of those things would be really further accretive to both NII and margin.

Got it. Okay. And then maybe just going back -- talking about loans and you kind of talked about loan pricing. What are you seeing in the market as far as like competitive dynamics? And just what are you seeing overall from -- as far as it goes with rates and structure? Is there anything concerning for you guys?

Yes, Jordan, you probably going to get me on a soapbox here this morning. I've alluded to competition earlier. And I'd say to some degree, we're seeing structure things that we wouldn't do that's not as prevalent or as severe in my mind of a competitive dynamic as the pricing piece is. That's definitely the most significant headwind that we see out there.

And we are just going to, again, be unapologetic about generating strong returns on capital, strong risk-adjusted returns. And so I'll even just give you an anecdote. I mean we -- in the last few days, we had a pipeline opportunity that we were working on. There's a larger bank larger than us in our footprint who came in and put out a term sheet for 4.5% on a loan and Fed funds minus 25 bps on the deposit relationship.

And that just doesn't seem very smart to us. We're just like that's -- and when I talk about all the dynamics that I talked about earlier in the call, we don't have to have that volume to grow our profitability and to grow our returns, and we believe strongly to grow shareholder value.

So we're going to take a longer-term focus when we see those types of activities in the marketplace. And unfortunately, we're seeing them. But the good news is -- as I mentioned, pipeline activity remains incredibly, incredibly strong. Production is very strong. My outlook for growth moving into next year is better, not worse, as I sit here today.

Unfortunately, I just think there's some competitive behavior that we would put at somewhere between irrational or just not very smart or both.

Got it. And then just kind of following up with that, you talked about the pipeline and unfunded commitments continue to tick up and it looks like the commercial pipeline was relatively flat. Can you -- is there a target you're expecting for 2026 as far as loan growth goes?

Not yet. We'll come out with an outlook, I think, more formally in January. So I'd maybe just go back, Jordan, to -- when I look at the last few quarters of production, the ongoing activity in the pipeline, the timing of fund-ups, the expectations we have for paydowns, I would expect that we would be more positive than less positive from a growth perspective from where we've been recently.

But again, the big overarching factor there is what's the competitive environment shape out to be. And the one thing I can guarantee you is we will maintain our discipline through that environment.

And the next question comes from Gary Tenner with D.A. Davidson.

Just had a couple of more follow-ups on the deposit questions. Given the moving parts in the quarter and the reduction of the index deposits, et cetera, can you give us like a September 30 spot rate as a jumping off point, just given the kind of period end versus average differences in the quarter?

Gary, we can work on that and maybe provide it as a follow-up. I don't want to give out -- I don't have a spot rate here handy on that, but I think you can just look at sort of -- I'd key off of what we disclosed around kind of September margin and what we included in some of the interest rate sensitivity slides around repricing dynamics in both the loan and deposit books.

Okay. And then kind of the follow-up, I guess, on that is, in terms of the CD repricing, I mean, a big chunk of CD maturities in the fourth quarter between customer and brokered CDs. Any thoughts on kind of particularly on the customer CD side, where your rates are now and the type of repricing benefit you might expect in those CDs?

Yes, Gary, this is Daniel. So within the quarter, the last 90 days of the customer CDs that matured, it was in the 3.77% range and what we put on was in the 3.53% range. As we look forward from here, and we talked about this in the last quarter that, that repricing benefit would start to moderate and it did in this quarter.

I would expect that to continue to moderate with one caveat that around the rate cuts and the competitive nature around that and how banks -- the competitive market moves with the rate cuts. So that could be some opportunity for us, but just -- I don't know what that's going to be until we know what it's going to be.

So in aggregate, I would expect it to moderate, but hopefully, we get some tailwind from future rate cuts.

The good news is when you had cuts -- the prior cuts, even going back to last year, there was good behavior on the deposit side. We kind of gave it all back. It seems to us on the loan pricing side.

When I say we, I'm referring to the industry more broadly. But the deposit behavior was good looking backwards, and I hope that will continue to repeat as we see rate cuts from here.

Yes. And one other thing there, Gary, that's broader than just the CD rate is as those CDs mature, about 75% of those we retain within the bank. The other 25% are kind of CD-only relationships that go elsewhere. So of the 75% that are retained, there is a portion of those that go out of CDs into core deposits.

So there's a remixing story there that doesn't necessarily show up in the 377, 353 math. So that is going to continue, I think. That's been the trend for the last few quarters. And I think that will continue to provide additional deposit pricing benefit for us moving forward.

Yes, pricing and mix benefit.

Yes.

Yes, I appreciate that. I mean, certainly, as we've gotten further away from last year's rate cuts, the deposit pricing changes has moderated, as you pointed out.

I think most banks were -- have been waiting on the cover of some more rate cuts for that. So hopefully, there'll be an ongoing discipline around the deposit pricing side.

This concludes our question-and-answer session. I would like to turn the conference back over to George Makris for any closing remarks.

Okay. Thank you very much. Well, as we've discussed in our earnings release and here today on the call, third quarter reflected some pretty bold moves on the part of Simmons, which were possible because of the strength of our company.

As a banking friend said to me after we announced the sale of the bonds, what you all did really took guts. And while I agree, took guts, it also took exceptional planning and execution by the folks in this room, and I want to acknowledge what they were able to accomplish for our company because it was, quite honestly, a bold and exceptional move.

As we've said, we're well positioned to produce exceptional organic growth from this point forward. Our succession plan is firmly established, and I'm really optimistic about the future opportunities for Simmons.

Today will be my last earnings call at Simmons Bank. And I want to take this opportunity to thank our analysts for all of your hard work during my tenure to tell our story, which seems to have changed just about every quarter during the last 12 years. So we have a major job very easy.

But I also want to point out that [ Matt Olde ] has been saddled with us since I've been here. And we really appreciate Matt's persistence and friendship and all of your advice during that period of time. And before we close, I'll leave you with one thought, which reflects my optimism, and that is that 1 year from now, I fully expect the media headlines to read something like this.

Simmons Bank earnings up $650 million from the previous year. So thank you for joining us this morning, and have a great day.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Good morning, and welcome to the Simmons First National Corporation Second Quarter 2025 Earnings Conference Call and Webcast.

[Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Ed Bilek, Director of Investor Relations. Please go ahead.

Good morning, and welcome to Simmons First National Corporation's Second Quarter 2025 Earnings Call. Joining me today are several members of our executive management team, including Chairman and CEO, George Makris; President, Jay Brogdon; CFO, Daniel Hobbs; and Chief Operating Officer, Chris Van Steenberg.

Today's call will be in a Q&A format. Before we begin, I would like to remind you that our second quarter earnings materials, including the earnings release and presentation deck are available on our website at simmonsbank.com under the Investor Relations tab.

During today's call, we will make forward-looking statements about our future plans, goals, expectations, estimates, projections and outlook, including, among others, our outlook regarding future economic conditions, interest rates, lending and deposit activity, credit quality, liquidity and net interest margin.

These statements involve risks and uncertainties, and you should therefore not place undue reliance on any forward-looking statements as actual results could differ materially from those expressed in or implied by the forward-looking statements due to a variety of factors.

Additional information concerning some of these factors is contained in our earnings release and investor presentation furnished with our Form 8-K yesterday and our Form 10-K for the year ended December 31, 2024, including the risk factors contained in that Form 10-K.

These forward-looking statements speak only as of the date they are made, and Simmons assumes no obligation to update or revise any forward-looking statements or other information.

Finally, in this presentation, we will discuss certain non-GAAP financial metrics we believe provide useful information to investors. Additional disclosures regarding non-GAAP metrics, including the reconciliations of these non-GAAP metrics to GAAP, are contained in our earnings release and investor presentation, which are furnished as exhibits to the Form 8-K we filed yesterday with the SEC and are also available on the Investor Relations page of our website, simmonsbank.com.

Operator, we're ready to begin the Q&A session.

[Operator Instructions]

The first question comes from Woody Lay with KBW.

I wanted to start on guidance. And just looking through the slide deck, I didn't see the -- any guidance slide like that's been featured over the past couple of quarters. So I was just curious if any of your expectations for 2025 have changed for the back half relative to where we sort of started the year?

Yes. Woody, I appreciate the question. And I may just insert a reminder to you and everyone. Historically, we've really only provided guidance or outlook commentary in January each year, given sort of uncertainties around tariffs, the outlook for growth, some of the nonrecurring items in our first quarter that put noise in the numbers. We brought that back forward in our first quarter announcement. But I'd say, when you think about our outlook for our business, I think the trends in the quarter or this quarter sort of speak for themselves.

We continue to be very, very pleased with the ongoing trends in our business. We have some performance targets that we've outlined with you and others before, and we're very ambitious in those targets. And I think the acceleration in our performance improvement and the pace of that improvement continues to exceed even our internal expectations.

So I'd just say with that in turn, we're pretty confident and maybe as confident as ever about our ability to execute and execute toward achieving those target levels.

Yes, that's helpful. And yes, definitely, I mean, it looks like NII and expenses both beat it would only be positive from here. Maybe looking at the NIM, you sort of hit the 3% level ahead of schedule and kind of jumped over that line. Do you think there's room to continue to see expansion from here? And is there more juice to squeeze on the deposit base? Or would you expect deposit costs to be -- to sort of start stabilizing from here?

Yes. So let me just kind of describe, again, what we observed throughout the second quarter, and we'll talk about it maybe both ways that you posed it there. As I think about -- we'll talk about the asset side and then the deposit or liability side. I think on the asset side, we continue to primarily be a repricing story in terms of the performance that you're seeing and the expansion in the NIM. And I think there's still a lot of opportunity for us from that repricing dynamic point of view, particularly on the lower rate fixed-rate loan repricing that we have experienced over the past several quarters.

And again, we continue to expect that. The thing that maybe gets a little bit overlooked is our loan pipeline and production continues to be strong. The headwinds to overall growth are -- some elevated level of paydowns, permanent market financings that we see out there, but also just are sticking to our pricing discipline. And so we're very willing to see lower growth rate in loans as we are maintaining that discipline around credit as well as that discipline around pricing.

And we think that, that competitive market for loan pricing is one that's pretty high for what we're seeing in the industry right now. And so competition and loan pricing and our ability to sort of stick to our discipline is going to be a factor on the overall level of loan growth. But again, pipelines are strong and production is strong for us. So I think those factors come to play on the asset side of what's driving NII and NIM.

On the flip side of the balance sheet, deposits is probably more primarily at this point, a remixing story. And we're seeing really -- we saw it in the second quarter, very good continued trends in terms of remixing from higher cost deposits to lower cost deposits. And there still is an element of a repricing story in there as well. But I think your question basically alluded to kind of how we feel about that repricing dynamic.

I often say of late, the air is kind of coming out of that balloon, every day that goes by from the most recent Fed rate cut, there's less and less repricing opportunity. So we had some of that opportunity in the second quarter, particularly as we think about the kind of core customer base, and that's probably not as compelling. There still may be some opportunity there, but not as compelling as the reprice dynamics on the loan side of the balance sheet.

Yes. And Woody, this is Daniel. I'll maybe put a couple of finer points on that. On the loan yield side, kind of that pricing and remixing story, if you think about -- we talked about this before, but in that fixed rate book, our total book is about 46% fixed rate. Last quarter, it was 48.5%. Those fixed rate loans continue to reprice every quarter at near 100 -- excuse me, 200 basis point spread. That trend has been pretty consistent over the last couple of quarters.

We would expect that trend to continue that plus or minus some basis points there, but we feel good that, that's going to continue for a period of time. And then just the remixing of the portfolio, the production we put on 75% variable production this quarter. Quarter before that, it was 80%. So you'll continue to see that remix towards variable and the spread between the fixed matured and the variable repricing is around 175 basis points.

So both of those, we feel like that's a positive tailwind for us that will continue. And to Jay's point, on the funding side, that's probably going to be tougher and tougher as we move from here. Just one point on that. If you look at the CD schedule and our IP, you'll see that quarter view of the rate of the CDs that are maturing over the next couple of quarters is coming down. So that's where some of that repricing opportunity begins to fade in the next couple of quarters. We do expect some level of repricing, but maybe not the levels that we've seen historically.

Right. That's really helpful. And then maybe just last for me. As you noted, payoffs were a little bit of a headwind to growth this quarter. Just any expectation for the payoff outlook over the back half of the year?

We saw really elevated payoffs in Q1. Nothing that really exceeded our expectations in Q2. So I think it's just -- it's an environment where we're seeing good healthy paydowns, particularly on the construction side and permanent market activity. So I don't see anything on the outlook that is -- that really changes our thoughts around our expectations from a paydown environment point of view.

But I think over the next couple of quarters, we would expect something consistent with the first half of the year, maybe not even at as high level as what we saw in the first half of the year from that perspective.

The next question comes from Gary Tenner with D.A. Davidson.

I want to ask a follow-up on kind of the pipeline, I guess. And with modestly lower than last quarter, but still well above where it was certainly a year ago and even at the end of 2024. I'm just curious about the dynamics kind of intra-quarter in terms of, a, the pull-through on the first quarter pipeline looks that like it was pretty good.

Is the lower -- what would you attribute the lower pipeline to, given where we are today versus 3 months ago?

Yes, Gary, this is something that I believe I alluded to in our first quarter call. And at that point, it was probably more of a theory. At this point, I think it's something that more has proven itself out. And that is that we just -- we experienced some pull forward late in the first quarter. Again, I go back to a comment I made earlier. I think some of the tariff and other threats that were coming into the line of sight late in the first quarter, we had some opportunities where those opportunities were a little further baked and there was some pretty significant pull forward in the first quarter as it related to those items.

And so I think when I -- I kind of almost adjust for that, even when I look at the slide in the IP, there's probably a more normal -- absent that pull through, a more normal kind of view when you go from fourth quarter to first quarter to second quarter if you imagine that acceleration of some of those opportunities.

The other thing to keep in mind about our business is there is some seasonality, and we're having a tremendous amount of success in the agri area. And we've been doing that for over 120 years, and that's a sector that's not -- that has some headwinds to it for sure. We feel incredibly good about that industry from a credit perspective.

We are very, very selective about how we think about that business, but it does have normal seasonality to it. And so you see some of that pipeline growth in the early parts of the year. And I think that's a piece of what you're seeing in the pipeline trends as well.

Great. Appreciate the thoughts on that. And then in terms of the comments about continuing to recruit and kind of open for business in terms of adding talent, which I don't know if you've said today, but you certainly have in the past. It seems like it's a very competitive environment for bringing on talent. I think in the past, you flagged Nashville, particularly as a market that it could be very competitive. What's the hiring environment look like right now? And certainly, in Texas, there's been a lot of recent merger announcements. So wondering what your thoughts are around potential opportunities there.

Yes, Gary, I really appreciate the question. Let me back up for a second and then kind of come back closer to the questions you're asking there. The first thing I want to say is we're pretty proud of what we've been able to do from an expense discipline point of view over the last few years, saw really, really good evidence of our continued progress there this quarter.

And we don't think we're finished in terms of being able to do that. Daniel would say we're never going to be finished doing that, just that continuous improvement mindset. But at the same time, what I really want to underscore is we're making some significant investments in our business.

And I would maybe broadly at a tactical level, think about those investments as talent and technology and really enabling the business through things like automation and just things that are driving both associate and customer experience, but really generating capacity in our business. And we're able to free up that capacity and the savings from those investments and a large part of the deployment of that is back into talent.

And so we have been really pleased with kind of the upskilling, upgrading and attraction of talent as well as our sort of retention and investment in talent in our business. And so I'd say that the hiring environment has been very, very good. We feel like we've got a proven track record there at all levels of the business and in all areas of the business, from the back side to the front side and everywhere in between.

And then my maybe bottom line comment would be when we think about our footprint and we think about, to your point in your question, the sort of disruption that even this week is being announced, our expectation is that, that disruption is nowhere near finished throughout our footprint. And we are very ambitious in pursuing a reputation in our marketplace of one where talent and customer opportunities from that dislocation that we're in a great place, a great landing spot for that. And again, we're seeing success there. I think the environment is only getting better.

The next question comes from Jordan Ghent with Stephens.

I just had a kind of a quick question, kind of going back to the loan growth. So it looks like your unfunded commitments have had a steady upward drive. And can we kind of interpret this as loan growth going into the back half of the year, maybe even to 2026 is setting up pretty nicely?

Yes. I think that's exactly the way to think about that, Jordan. And I would just -- one comment that we haven't made, you actually see it borne out not in the pipeline and unfunded commitment chart, but you see it in the quarterly sort of loan growth mix. There are still elements of CRE growth that you've seen historically make up those unfunded commitments. But we are seeing success at maybe at the most leading indicator in the pipeline of growing mix of C&I in our pipeline.

We saw commercial activity kind of stand out relative to commercial real estate in the quarter in terms of production and growth. And we think that some of the ability to build C&I relationships will also be a factor there as we think about unused lines and lines with opcos that we'll have out there. So I think all of that points towards success of some of our strategic priorities as well as the ability to have some funded growth as we look to the coming quarters.

Perfect. And then maybe just kind of one follow-up, talking about that CRE kind of looks like classifieds, just ticked up a little bit this quarter. Is there any color you could provide on that?

Yes. There's nothing that stands out. We looked at those metrics very, very closely. And really nothing that stands out in kind of nonperformers, classifieds, past dues, charge-offs, all the metrics that we see are very indicative of all of our most recent quarters trends, but for the 2 large credits we talked about last quarter, sort of the underlying credit picture still feels, I think, stable and normalizing would be still good words for how we think about credit. And there's nothing that kind of stands out beyond that in our mind.

And again, I go back to one of the numbers I focus on. Obviously, we look at what migrates in and out of NPLs, but we also pay a lot of attention to both classifieds and past dues and thinking of those as leading indicators and had very, very good trends in past dues on a linked-quarter basis. And even just the aggregate number is a very low number for us in that category. So I think that helps kind of paint the picture overall how we think about credit.

This concludes our question-and-answer session. I would like to turn the conference back over to George Makris for any closing remarks.

Well, thank you very much for joining us this quarter. I want to reiterate one thing that Jay said earlier, and that has to do with our talent. We are extremely proud of our team whose discipline is demonstrated in our results. We have exceptional employee engagement, folks who can and want to do more and it's our job to make sure that we give them the resources for them to be successful.

So I just want to reiterate our position on talent acquisition and current talent that we have today. We're awfully encouraged by the momentum that we show going into the second half of the year. We're looking for continued profitability improvement going forward. I think that was clearly defined for you this morning by Daniel and Jay. So thank you very much for joining us this morning. Hope you have a great day and a great weekend.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.