Simmons First National (SFNC) Q2 2026 earnings call transcript

Good morning, and welcome to SIMMONS FIRST NATIONAL CORPORATION'S second 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 the 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 then interest margin. These statements involve risk 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 8K yesterday, as well as our Form 10K for the year ended December 31, 2025, and our Form 10Q for the quarter ended March 31, 2026, 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 8K we filed yesterday with the SEC and are also available on our investor relations page of our website, SIMMONSBank. com. Operator, we're ready to begin the Q&A.

Morning, David. I wanted to start on the funding side. Obviously, there are a lot of moving parts here just with seasonality of the public funds. You had some optimization of using borrowings versus brokered, but there's some really encouraging trends, right? You got NIV growth, had declining deposit costs. I was just hoping you could maybe elaborate on what you're seeing on the funding side, the competitive landscape, how you plan on driving core deposits. How do you think about the investment in the market, especially given some of the recent leadership hires that you've made and initiatives they're working on?

Yeah. Hey, David. This is Daniel. I appreciate that question. So, you know, we've been talking about deposits a lot, and, you know, that continues to be one of our biggest focuses strategically and probably will be where we invest probably some of the most investment that we'll have over the next 12 to 24 months. You know, we're proud of growth in our non-interest-bearing deposits in the second quarter. I mean, obviously, that's the highest quality of deposits, and, you know, we grew that 4% annualized. And if you kind of work down the quality versus the highest quality, lowest quality, interest-bearing money market savings, although in an ending balance standpoint, it was down, when you look at it on average, we grew that.

And so when you think about those two pieces, we're starting to see some fruition of a lot of the work that we've put into place. And we're very early innings in our strategy and executing around that deposit growth. So a lot of the things that we're doing, we've talked about marketing campaigns, focus on attraction of new customers versus deepening existing with existing customers and reducing attrition. And actually, when you look at actual balances from this quarter, we had more inflows of new customer balances versus outflows of customer balances. And so that was a positive trend for us. You know, the other thing I think is, as you think about the core customer balances that we saw in the first quarter, especially on the consumer side, there was some headwinds there as it relates to debit spend around gas prices.

Gas prices were up pretty significantly, about 35% in terms of the debit spend going to convenience stores in the first quarter. And so that was a drag on, and we were still able to grow. So we're pleased with that. As you work your way down, you look at non-relationship customer CDs. Those are balances that we're willing to let those run off. There's just not much ability to convert those to core customers. We've had a little bit of success there, but not a ton. So we're willing to let those go off at high prices. And then public funds is very seasonal. And you typically see that this time of year. We're not losing any customers there.

It's just seasonal outflows. And then if you think about just the wholesale funding, we're really just taking a capitalistic approach to how we think about broker deposits and FHLB funding. And you will see that we've kind of moved more into FHLB this quarter, just because the spread of that price is material enough for us to do that. And we will continue to be opportunistic and flexible around that. We're short duration in both of those. And so that's how we're thinking about that. And just as we go forward, again, our focus on growing high-quality, poor customers is our biggest focus. One last thing is you think about poor customers. We grew checking accounts over 1% year-over-year and linked quarter.

So that's an indication of some of the things that we're doing that are working and start to pay off, and we'll be doubling down on those things over the next 12, 24 months.

Hey, David, I'll jump in. This is Jay, just with one other incremental comment. One of the things in your question that you alluded to is just, you know, what's the competitive environment out there? And so all of the things Daniel said, and what I would say unsurprisingly, is that, you know, deposit competition is very, very fierce. And our outlook is that that's going to continue. We saw that throughout the second quarter. We've seen that for a couple of quarters now and really expect that to continue. And so when I think about all of the kind of underlying fundamentals in terms of – that Daniel just discussed in terms of our ability to begin to see origination and growth and success in the highest quality categories of the funding base amidst that backdrop, that's actually very encouraging to me.

Yeah, so I would say, you know, I there too am encouraged from a loan growth perspective. You know, I think we kind of have low to mid single digit outlook for this year from a loan growth perspective, where it may be 7% annualized loan growth year to date. So, you know, we would be comfortably at kind of the top end of that outlook halfway through the year.

You know, obviously the second quarter growth wasn't as strong as the first quarter. But that, as you indicated, David, and as we disclosed in the materials, wasn't a sign of a lack of production. We had a great quarter of production. All of that production would fit squarely into our strong standards in terms of both credit underwriting as well as pricing.

And I don't see us unrelenting in our focus in either of those areas of generating production. And so when you think about generating good growth in the second quarter, some of that growth obviously offset by a healthy level and an expected level of paydowns, I look at a very strong amount of growth in the unfunded commitment bucket due to some of that production, continued health in the pipeline, and really a good top of funnel in terms of the opportunities we're seeing across the footprint and across asset classes. And I'm certainly optimistic as we think about our ability to grow loans out into the future as a result of all of those things. I think the only thing I'd balance against that is maybe just that balanced view on what Daniel talked about impacting the consumer in terms of some of the macro factors that are out there.

We're not going to stretch for growth right now. We are going to stick to our discipline, be unapologetic if the growth for some reason isn't there, but we are certainly seeking to add clients and add good assets both in terms of relationships on the funding and on the loan side all day every day. Wide open for business for that, and again, encouraged with some of the success we're seeing.

I think what Daniel and I may both have some comments here, but I think what you hit on in the question is perhaps the most important thing to me. And it's something we've talked about before, and that is just a focus and an ability to self-fund investments. And importantly, we are investing and investing heavily in the business. And the market, you all have seen evidence of that with some of the hires and other things that we're doing. But we are actively investing in both talent and technology, among other things. And we really believe that there is a very opportune time right now in the marketplace for us to be doing those things. So to be able to look into the business and pull upon some of the muscle that I think we've developed over the last few years in terms of things we've historically called the Better Bank Initiative, et cetera, to continue to fund those investments I think is really, really important and something that we'll continue to focus on.

Daniel, I don't know if you want to add anything specifically from your perspective.

Yeah, I would. So, you know, as you think about some of the things that we've done in the past, we feel like we've got a pretty extensive list of things that we're still working on and opportunities there. You saw in the quarter that we reduced square footage another 2.5%, which brings our total up to 8.5% since we've started this initiative. We feel like we've still got a lot of opportunity there. And a lot of that's in corporate space and not just the branch space. And that's probably going to be where some of our biggest opportunities come from as we move forward. Our goal is to do 15%, and we'll continue to go from there. And then so that's part of it.

The other thing we are looking at is just process improvement all across the bank, from the front, middle, and back office. There's a number of things that we're looking at that we have identified. And some of those things, back to your question around investments, some of those things are going to require investments to make it more efficient. And so there's just a lot of opportunity for us as we move forward and things that we're working on that we believe will help, as Jay said, fund the investments that we need to make.

That's great. Thanks, everybody.

Good morning, Woody. So maybe just to follow up on the expenses, I was just curious how the, you know, some of these initiatives you announced within the quarter, does that impact the annual expense guide you gave at the start of the year of kind of that 2% to 3% growth? Just curious on your thoughts there. Yeah, Woody, let me maybe just take that question and expand upon it. I'd go back. I'm a pretty simple guy. Daniel does a great job of filling in a lot of more sophistication than what I do, and I appreciate that about him. But if I just sit back and think about kind of the core fundamentals of the business now, including your question around expenses, we guided back in January our outlook for the year of 9% to 11% net interest income growth year over year.

And I would tell you in the middle of the year, halfway through performing against that outlook, we are very comfortable at the top end of that range. You know, we guided on fees and non-interest expenses. We are very comfortable in our ability to hit those guides. And to your question on the expense guide, I think we will beat that guidance for the year this year. And it's hard for me, as I sit here right now, to give you an order of magnitude on that. But, you know, I think we guided the 2% to 3% growth in non-interest expenses back in January. I don't expect us to hit that level of non-interest expense growth for the year this year.

And so altogether, I think we had provided an outlook for 5-plus percent positive operating leverage, strong PPNR growth year over year. I think we will exceed in 2026 all of those expectations based on the performance we're seeing and the fundamentals in the business as they sit here midway through the year.

And just one point to add to that, Woody, the comment Jay made around beating that guy, that's with making some significant investments. You've already seen us come to the market with some of those, and we'll continue to do that.

Yeah, I think obviously we're a bit top-heavy in NPLs. We put a top ten list in the investor presentation. That relationship certainly sticks out. Timing is difficult to predict right now, Woody. I would just tell you that we are obviously putting a tremendous amount of energy into seeking resolution there. You'll see us pursue that as quickly as we can. Does that carry past the end of the year and into next year fully or partially? It could. I'm just not sure as I sit here, but again, the assurance I can provide is we're all over it. I think the other assurance I can provide, and really this is across the board for us, and I think we've demonstrated this even with a couple of loans last year and really throughout our history, we try to hit these things pretty conservatively.

We're all about lost content in the portfolio and particularly in these loans, and as I see credit, I see some pretty healthy migration in our credit backdrop right now. I see the level of criticized and classified loans coming down, past dues moderating to historical norms, and some stacked quarter trends, again, in those criticized and classified buckets. That should be a leading indicator of the credit outlook into the future.

Again, we're going to work expeditiously toward resolution of the things that have migrated into non-performing, And we feel comfortable about the lost content in the portfolio and have even stated in the presentation, and I'll say it out loud right now, but based on everything we know today, the other outlook we gave back in January for the year this year was approximately 25 basis points in annual net charge-offs. We're below that through the first half of the year. We don't know anything that would cause us to want to change that outlook as we sit here today.

Thanks, Woody.

Well, I think some of that's probably just timing right at the end of the quarter, honestly, Matt. I mean, something that's going to pull out of the pipeline and into an unfunded commitment is going to come out of that bucket. So if you kind of square up the statements that quarterly committed production was at nearing an all-time high, a four-year high, against that move in the ready-to-close portion of the pipeline, those things square in my mind. And so I think what you'll see, what I expect to see, and what in fact already happened even here into the third quarter, is we continue to see things moving through the funnel from opportunity into ready to close.

And so I think everything from my perspective in the pipeline is normal and healthy. And so as I think about that in terms of outlook for growth, the most given item in that outlook is an unfunded commitment. And then the next most given would be something ready to close. And so I think, if anything, that kind of strengthens the outlook for assets to be able to fund in the balance of the year and continue to offset any paydowns in the portfolio.

I'll mention just a couple of things, and again, I'm sure Daniel may have some comments he wants to make on this one too, Matt. But I think that the competition for loans has been similar to what I commented earlier in this call around deposits. It's been very competitive. We have seen a number of opportunities, not just in Q2, but just in recent history, the last few quarters, There a number of opportunities where we missed and we haven been close in terms of what other banks have been willing to do from a pricing perspective We believe we are as sophisticated as anyone certainly in our asset class when it comes to thinking about relationship profitability and how we price for relationships We going to stick to that discipline We are all about thinking about returns on invested capital for every bit of funding and capital that we put into a relationship on the loan side And the good news is, even amidst that competitive backdrop, again, we still see a healthy pipeline.

We've seen incredibly healthy production here in recent history. And I think that we'll be able to continue to experience that if that recent history is any indication of the future. The other data point that I point out here, and again, some of it has to do with timing, so I don't want to overplay it, but as you think about pricing opportunities, you called out yourself, Matt, the pipeline and the movement in the ready-to-close portion of the pipeline. I would point you to the statistic on our rate ready-to-close, and that actually improved pretty meaningfully from the first quarter to the second quarter. And so I think that's maybe a little bit further evidence of what I'm trying to describe in terms of our ability to demonstrate discipline and pipeline opportunity and production at the same time.

Daniel, I don't know if you want to add anything to any of that.

No, I mean, the only thing I would say is, you know, our yields were only down one basis point length quarter. Prior to that, it was down seven basis points, so that decline is lessening. And as you think about just the betas on loans, you know, we've got 18% cumulative today, what our beta was. And, you know, as you think about forward views, we've got right now in our outlook, we've got rate increase at the 1026 meeting. And so, you know, that would provide long yield growth as well if that were to happen.

Matt, the last comment I'd call you to that occurs to me, you referred to it in your question, and I just want to point out that we, in our interest rate sensitivity slot on slide 11, we point out that there's $1.8 billion of fixed rate loans that are repricing in the next 12 months to have an average yield below 4%. And so that back book tailwind is very real.

I think, Stephen, we're in the range of where our comfort level would be. It could flex either direction incrementally from here. I think everything that Daniel described on the funding earlier is, again, is just us being opportunistic in and around any of the elements of funding that are, you know, not as core as the core customer base is. But I think your point is around the loan-to-deposit ratio is we have to continue to demonstrate the ability to grow the core deposit franchise as we are in order to continue to core fund the loan book. And that's our goal. That's our expectation.

It's not our strategy to be a less than high-quality funded institution.

Yes, Stephen, we've got a lot of different initiatives how we think about deposit growth. Marketing is one significant one, one that we've only been doing really for the better part of a year, and we've been kind of testing and learning and growing into that over that timeframe.

We've been targeting consumer small business and private wealth customers, and we're seeing some positive momentum there. Other things that we're doing is around incentives, making sure that our incentives are aligned both on the consumer and the commercial side. We're working through those. And new product rollout, you asked about that. We did roll out some new products on the consumer side on March 31, so we're starting to see some of that come through. And then there are other investments that we're looking to make on the commercial side from a platform standpoint that we feel like will give us some advantages in order to get some deeper relationships and some new customer looks that we might not have gotten before.

So there's a number of things that we're working on there. And as I said earlier in the call and kind of started off, this is probably an area that we would have a lot of investment go into. Chris, do you want to chime in?

Yeah, hey, Steven. Chris Van Steenberg here. I'd say the other thing, you know, a couple of folks have mentioned, Some of the hires we've made this year, and you referenced disruption in the industry, as we look at some of the teams and individuals we've brought in this year, we're already seeing some meaningful wins from those as well. And so those are investments that are already returning for us, and those are showing up both in terms of wealth generation and moving balances here in terms of AUA, AUM, is also on the deposit side. So good early results there, which I think reinforces the message that we've sent around taking advantage of other people's lack of focus due to M&A.

So I think that just reinforces where we're headed.

Yeah, I think, Stephen, we'll just continue to, you know, we'll evaluate that. We'll continue to be opportunistic there. You've heard us, we're going to be a broken record on this, but our priority is investing in the business. And so if we have opportunities to drive organic growth, drive investment in the business that has strong returns, that's going to be clear priority number one time and time again.

But we do think there, you know, with the excess capital and particularly with how we look at kind of the shape of our returns outlook when we look forward and, you know, the capital levels that should build as a result of that, You know, we've got pencil to paper a little more in terms of how we think about being able to return some of that capital to the shareholder via the buyback, and you saw us have an opportunity to do that in the second quarter.

Thanks, Stephen.

Good morning, Brian. So you talked about deposit competition earlier in the call, and it's very clear that you're really focused on growing customer deposits. Given the environment and that focus that you have, how should we think about the trajectory of deposit costs in the second half of the year, particularly if we end up in a higher for longer rate environment? Thanks.

Yeah, hey, Brian, appreciate that question. So I think what you will see is probably, you know, we kind of exited the quarter at about a 190 deposit cost. The average for the quarter was 193. So there's probably one more quarter of potential benefit from deposit cost if we get the rate increase in the 1026 meeting. That would obviously flip that the other way. So as you think about deposit costs and the beta over that course of the rest of this year and next year, we would view that what we're modeling is about a 45% beta increase. If we get a rate increase, if rates are flat, I think it will kind of hover kind of where we are.

However, I mentioned some of the investments that we may be making. Those investments will be on the rate side as well as the marketing side, so that could potentially drive that up. But if rates stay flat, I think you'll see deposit costs relatively hover in that, you know, call it $190, $195 range. But there's probably one more quarter of benefit there.

Brian, I would just add, too, I really think that my best read of the crystal ball here is, kind of regardless of what the Fed does, there's some amount of competition on the deposit side that is going to compete away some of the industry's either asset sensitivity, if rates do come up, Or compete away some of the back book repricing that's there. And that's not SIMMONS commentary that I'm giving you. That's more just my perspective as I think about the industry right now. And I think that our particular focus on deposits actually has an opportunity to perhaps even help us outperform that industry headwind because we have opportunities from a remix perspective. I will now turn the call over to management for the first time Given that we coming from behind in some of our composition of the deposit franchise So perhaps we can make some of the investments that we been making in both people products tools and even in front book pricing to drive mix that would benefit the overall cost of deposits And just to the point on mix, can you just give a little bit more color on the opportunity to pay down broker deposits from here?

Yeah, Ryan. On the funding mix side, Daniel, I think it really goes back to your earlier comment, if I understand Brian's question, that the way we're looking at the outlook, Brian, for FHLBs versus brokers is really just Daniel's word earlier is we're going to be capitalists about it. We're going to be opportunistic about it. And so right now, or at least late in the second quarter and coming into the third quarter, it's more advantageous from a cost perspective for us to lean into FHLDs and allow some of the short-duration brokers to mature and run off. And so we'll just continue to be opportunistic in that regard.

Got it.

Yes, I think, again, you have to look at the relationship here. Purely on the asset side, without any kind of allocation of funding against it, we're still seeing some really good returns from a commercial real estate point of view and some good opportunities there. And again, that's through a very, very strong lens in terms of exactly what asset classes and even just sort of what geographies and what street corners we're willing to look at for some of those transactions.

But I think when you think about C&I, the real opportunity to drive stronger returns, and we're seeing some of this, is on being able to pull over full relationships. When we're bringing in and leading with operating accounts, institutional and corporate wealth fees, other fee-type business, and then, of course, bringing in the credit relationships alongside of those as well, those are some incredibly attractive return profiles. And that's something that we're very, very focused on, seeing some success on. And that's some of our heaviest investment as we look forward is continuing to build the teams and the platforms to generate that type of client profile growth on a consistent and respectable basis.

Thanks, Brian.

Yeah, well, I appreciate that question. I couldn't be more excited to have Jim here. We've had a number of great talent opportunities. Chris Van Stenberg mentioned earlier, I think basically was referring to the St. Louis Wealth Team and others, but we brought a team on a bit earlier this year that is absolutely knocking the cover off the ball in terms of new business that they're bringing into the bank. And those businesses, and I want to use that example to kind of get all the way back to your question with Jim, the business that that team and those types of talent are bringing into the organization are very, very synergistic to the commercial bank as well.

Because we are banking in those markets, commercial executives, centers of influence, et cetera, that we just didn't have as deep a relationship with before. And so that's really opening up the pipeline. And I think it's some of those things that are unfolding inside the business that allow us to sit down with a professional like Jim Reeser, and he gets excited about the direction of the bank and the things that we're building. And I think, Gary, in a nutshell, we're just kind of seeing success begets success right now on both the talent and the production front there, and it's in the extreme early innings as we sit here today.

Yeah, so on the ag side, I want to remind everyone, we've been banking farmers for 123 years at SIMMONS Bank. So that's a sector that requires a unique kind of set of experience and understanding of the farmer and of the entire system. And so that's something we pride ourselves on. It is a sector that has challenges right now. And we're finding ourselves, I think, benefiting just for the quarter, to your question, Gary, just to limit it just to the quarter. We're benefiting, I think, from a couple of things. One is just some seasonality. One is just seasonality and production in that business. But the other is some of the headwinds to that sector have a lot of folks who are looking a little bit inward or less willing to support kind of generational farmers and top-tier clients in our footprint that we've been close to for a long, long time.

And we're now able to take kind of primary relationship with. And so that's some of what we're seeing, I think, on that side of the business. Gary, remind me, what was the second part of your question there?

Yeah, I think there is a bit of a numerator and denominator impact to that. And that's why I mentioned earlier in response to another question that I don't want to overplay the increase in the yield in that bucket because the denominator impact is just with some of the production that we saw and there's some asset specificity in there that's driving a portion of that. But at the same time, I don't want to apologize for the reality that a portion of that is more on that numerator side, as I'll call it, which is just driving discipline in terms of how we evaluate profitable relationships and what we're willing to move through the production.

Yeah, allow me to – I just want to spend a few moments as we wrap up here, and maybe just share a few things that are on the top of my mind as I think about our business.

What I'd say is I believe there is significant untapped efficiency and potential in our business as we sit here today. Yeah, I might look backwards before I look forward a bit here. If you think about the past few years, and we've commented on this on the call, we've been deep into what we've called a better bank initiative. I think we've demonstrated some very real results in terms of expense discipline. And what I've categorized that as over the last couple of years is mostly very tactical things that we've worked on, and we're still doing that in 2026. We sometimes refer to it as good hygiene or continuous improvement. And so that work will continue and is continuing now.

So what I want to call everybody's attention to is our focus over the past year, in addition to those tactical efforts, has also shifted a lot more strategic. You've seen evolution in our leadership team to support some of that strategic shift. And what I'd say is right now we are in that strategic focus. We're focused heavily on how we optimize the organization of our teams, how we engineer better processes, and how we enable the business through technology. I think these investments, as we move forward through the balance of the year, are going to allow us to deliver an operating model at SIMMONS Bank that can consistently drive returns at or above any of the long-range targets we've published.

Again, what I'd say is we have a demonstrated track record in this regard over the past few years. So, as I look forward, what I would describe today is I think there's more to come in this regard, and I don't think you will be disappointed as we deliver those results. So, we'll look forward to sharing more of this with you as we move through the second half of the year. Appreciate you for sharing some time with us this morning, and have a great day.