Simmons First National Corp Q1 FY2026 Earnings Call

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

The first question comes from David Feaster with Raymond James.

I wanted to start by discussing growth. It was an excellent quarter with 10% annualized growth that was diverse, and our pipelines remain solid. One of the concerns in the market over the past few years has been about your ability to maintain this level of growth, and you are clearly demonstrating your capabilities. My question is, what has changed to reach this point? Is this due to an increase in demand? Are payoffs and paydowns improving? Or is it more of an internal change, like a cultural shift and a greater focus on quality growth? How sustainable do you believe this 7% to 10% annualized growth rate we’ve observed over the past couple of quarters will be?

Yes. David, I'll respond to that. Thanks for your comments and question. To address the sustainability of the loan growth, I believe it's important to note that we've been concentrating on quality growth for several years. We began focusing on organic growth a few years ago, and it has taken time to develop internal capabilities and maturity. A significant aspect of this has been our emphasis on soundness and profitability. As we've mentioned repeatedly, there have been shifts in behaviors, incentive plans, and target client strategies. What you've observed in the last couple of quarters is a reflection of this maturation process. It's also worth noting that the timing and market conditions over the last part of last year and the start of this year have been very favorable for us, resulting in strong demand. Our main concern regarding the growth outlook isn't related to the factors we can control, but rather to external uncertainties. We recognize the unpredictability of the macro environment and ongoing pricing competition. These issues introduce some caution to our overall optimistic view of the business and our growth potential. However, we were very pleased with our performance this quarter. I don’t want to guarantee 10% annualized loan growth every quarter, as this was an exceptional quarter. Nonetheless, it clearly highlights the capabilities we've been developing and our ability to leverage them in the marketplace.

That's great. One of the comments in the press release that stood out to me is the positive talent environment supporting your organic growth. I have a couple of questions on the talent side. First, I know you've made some leadership hires on the commercial and consumer side. Can you share what they're working on and where they see the most near-term opportunities to accelerate organic growth? Secondly, on the banker side, what is your pipeline like and your appetite for new hires? Also, I know you recently hired a wealth management team; how have your new hires been performing 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 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 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 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, etc., 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. Staying at a high level and following up on your comments, you mentioned in the release designing a more efficient and scalable infrastructure. We've discussed the better bank initiative and your focus on improving processes and procedures. You've made significant progress on expenses, as shown in your results. I was hoping you could share some of the initiatives you're excited about that aim to enhance efficiency and scalability to support your organic growth.

Yes, David, I might sound repetitive here, but our core belief at the bank is to fund every investment we want to make in the business, and we have successfully done that in recent years, including this first quarter. We've made significant investments in talent and other areas and have still maintained strong expense discipline. This principle will continue to guide us. Looking back at last year's balance sheet repositioning, our current focus is on optimizing our business structure. We're concentrating on how we can effectively deliver for our clients and improve both customer and associate experiences. This process is helping us identify efficiencies, such as eliminating redundancies in our operations and enhancing our speed of delivery. As we see progress, we are achieving significant operating leverage, which enhances scalability and repeatability within the business. These are the areas we're focused on, and as we move further into the year, we hope to have more specifics to share. For now, we're continuing with our established approach from the past 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. Thank you for your question. I'll begin with our net interest margin for the linked quarter. In the previous quarter, I mentioned that we had some potential to increase our NIM by one or two basis points in the first quarter. We actually achieved an increase of three basis points compared to the previous quarter. This growth reflects our ongoing efforts to reduce funding and deposit costs by restructuring our balance sheet. We have decreased time deposits and expanded our core deposit base, which remains a key priority for us moving forward. We strive to manage deposit costs in relation to growth, maintaining a delicate balance. On the loan yield front, we experienced a decrease of seven basis points, partly due to the hedging from low fixed-rate loans we've previously discussed. If we take a broader look at our margin trends over recent years, loan yields are only down four basis points year-over-year, primarily influenced by the repricing of our low fixed-rate loans amid three rate cuts that occurred in the latter half of the year. On the deposit cost side, we saw a decline of 48 basis points. Considering the cumulative beta for both aspects, when rates began to decrease in 2024, loan betas fell by just under 15%, while the cumulative interest-bearing deposit beta decreased by 63 basis points. We have managed this well. For the fourth quarter, our guidance indicated NII growth of 9% to 11%, and I also noted that NIM could likely be in the mid-3.80s by year-end. Initially, the guidance accounted for two rate cuts in May and August, but currently, there are no anticipated rate cuts, which should provide us with some benefit. As we proceed towards the end of the year, we expect to be near the high end of that 9% to 11% range. There are various factors that could either enhance or slightly diminish that outlook. We remain focused on macroeconomic conditions, particularly inflation, and how they might impact deposit growth since the biggest contributor to NIM will be the deposit side. Our core deposit growth is vital as we look at the necessary funding for loans. Connecting it back to loan growth, we've stated before that our foremost constraint on loan growth will be our ability to grow deposits. We are prepared to fund some of that loan growth at the margin, but there's a threshold beyond which we would prefer to curtail loan growth if it means enhancing our deposit growth. Regarding deposit growth, we have been relatively stable this quarter. There are positive signs within our consumer base. I like to track net interest-bearing and interest-bearing deposits for both consumer and commercial sectors, which serve as the bank's core engine. Consumers represent about 47% of this, and we are seeing stability and growth among them. Over the last four quarters, year-over-year averages show that we are growing net interest-bearing and interest-bearing consumer deposits in the range of 2% to 3%, indicating that we have reached a solid position there. On the commercial side, we are excelling in terms of interest-bearing growth, though we still have some progress to make on net interest-bearing commercial deposits. David's earlier inquiry about our priorities underscores that deposits are a significant focus for us. Everything Jay mentioned relates to our strategies for enhancing deposit growth. Many initiatives are underway, and some are beginning to yield results, while others just require more time to permeate through our bank and network to drive growth.

That's really helpful information. You addressed a few of my follow-up questions, so I appreciate that. Regarding the deposit base, given the various moving components and the increase in time deposits and public funds, how much flexibility do you have for remixing going forward? Do you have a segment of deposits that you believe can be adjusted in the remaining year? Is it really influenced by several factors, including deposit growth and loan growth?

Yes. I'll begin by noting that we've observed some remixing of CDs since the interest rates have started to decline. Currently, there are still fewer CDs available, both in terms of remixing and pricing. Our success will largely depend on our growth in new customers, strengthening existing relationships, and enhancing engagement with our current customers while also minimizing churn. These are the three key areas we are focusing on and developing strategies around, which include our products and platforms. We recently introduced new consumer deposit products on March 31, and I am starting to see some early positive indicators. Therefore, our ability to achieve core customer growth will influence how much remixing we can accomplish.

I’d like to add that we’ve previously stated we don’t need to increase loans or our balance sheet to grow Net Interest Income (NII). We focus on expanding the balance sheet and fostering profitable customer relationships. This approach helps us maintain discipline in our structural and pricing strategies, as well as relationship profitability. As a result, we are seeing Net Interest Margin (NIM) gradually increase due to several factors. There is a structural advantage from repricing our existing assets, a significant opportunity in deposit remixes, and successful engagement with our customer base. We also have a better outlook for the forward curve this year compared to our initial expectations, which suggests that both NIM and NII can expand while we maintain our disciplined approach. In the first quarter, we notably grew loans in line with our internal standards, although we did observe increased competition, especially from larger banks entering some commercial real estate products where they had been less active recently. We will navigate these fluctuations in the market and competition while adhering strictly to our disciplined strategy, which we believe leads to sustainable, 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 start by addressing that and see how uncomfortable I can make Daniel, who can then add anything he wishes. Daniel mentioned earlier that our net interest margin and net interest income are projected to be in the 9% to 11% range for 2026. Considering everything we've discussed recently, I feel very confident in achieving the upper end of that range. There have been remarks regarding fees and private wealth, and we've demonstrated significant progress not just in the first quarter but over the last several years in managing expenses. I’m quite optimistic about the momentum in our pre-provision net revenue and overall earnings growth. While I don’t have an updated guide for operating leverage, we indicated back in January that we expect it to be over 5%. Just as we are confident about the upper end of our net interest income outlook, I also believe we can achieve more than that 5% expectation. Dan, would you like to add anything?

I completely agree with your earlier point about sustainability in our earnings profile. I'd also like to emphasize resiliency. Reflecting on the balance sheet restructuring, we really transformed the company's earnings profile. We shifted from being more sensitive to liabilities to being slightly more asset sensitive. We implemented some hedges and have experienced three rate cuts since then, while also growing our margin every quarter. Jay mentioned that the net interest margin is expected to improve slightly moving forward. Given all the strategies we have in place and our goal to achieve top quartile performance, I feel quite optimistic about our progress.

Okay, that's helpful. Now shifting topics, previously we discussed expectations for charge-offs for the full year around 25 basis points. This quarter, we had about a $30 million nonaccrual. Can you provide more details on that specific loan? Additionally, what is your comfort level with the charge-off guidance based on what you know today?

Yes, Matt, I believe you captured it well, and we aimed to communicate this clearly in our disclosures. Thankfully, we're not seeing a lot of lost content in the loans under evaluation. The quarter showed a mixed result in credit migration, with improvements in both criticized and classified loans compared to the previous quarter. There was some migration in non-performing loans and past due loans, but we managed to significantly address that in the first few days of April. When I consider credit and the loans showing migration, these are already familiar situations. Nothing new or unexpected has arisen. The migration we are observing is quite limited or isolated. Thus, we are not witnessing any widespread deterioration in our portfolio. More importantly, we are not seeing a significant risk of loss. For the largest non-performing loan that migrated this quarter, it has a very low loan-to-value ratio, and the migration mainly occurred due to a legal proceeding that has now concluded. We should be able to resolve that matter quickly, and we expect a favorable outcome for the bank regarding the associated risk of loss. These are the types of situations we're encountering. Overall, I can assure you that based on what we know today, we are diligently reviewing the portfolio and feel confident in our net charge-off outlook that we provided at the start of the year.

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, we experienced some early loan growth this quarter, which certainly helped us. The demand for this growth started to build last year, particularly in the latter part. While our client base remains optimistic about demand, the current pipeline is healthy. However, with factors like fuel prices, there's some incremental macro uncertainty that introduces a degree of caution, though it’s still based on solid demand and strong sentiment so far. Early in the quarter was exceptionally strong for us. Specifically addressing your question about commercial real estate, we saw a good amount of demand, but we didn't experience the same level of pull-through from our pipeline due to our pricing discipline. Competition has intensified from larger banks becoming more aggressive in the CRE space. We don't expect this to be a permanent situation, but it could pose challenges to our overall growth. Nevertheless, from a macro perspective, sentiment still feels positive to me.

Got it. That's helpful. I have a question about the cost of deposits. You guys included a slide with the CD maturities. I'm curious about where new customer CDs are coming in relative to the amount that looks like it is repricing in the second quarter.

Yes, Stephen. In the last 90 days or during the first quarter, the CDs that matured were around 356, while the new ones were about 313. In that context, there is a portion of the 346 that consists of a public fund deposit which will adjust based on market rates. However, the majority is expected to reprice down to around the 313 range, give or take a few. Looking ahead, there are likely 1 to 2 more quarters where we will benefit from CD repricing, after which it will stabilize somewhat.

Yes, I think the advantages from deposit repricing are likely diminishing for the industry now that some time has passed since the last rate cut. Moving forward, we will still see some incremental benefits on the cost side, but it will mainly revolve around the mix and remixing of our offerings. Additionally, I want to revisit a part of your previous question regarding the paydown environment. We are still experiencing a relatively high pay down environment. The growth we've observed in the fourth quarter and again in the first quarter is largely driven by the demand we are seeing and our capability to originate and manage through this elevated pay down environment. I do not anticipate seeing anything on the horizon that would indicate a slowdown in paydowns. This appears to be a structural aspect of strong permanent markets, and we will continue to face that as part of our dynamics.

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, our primary focus on capital will remain on investing in the growth of the business. We will prioritize anything that drives sustainable organic growth. Paying our dividend, which we have maintained for 117 consecutive years, is our second priority, and we intend to uphold that tradition. We are also considering share buybacks, but we are exercising patience. Given the potential for organic opportunities and the pace of investments in the business, we are being measured in our approach to buybacks, especially in light of the current macroeconomic uncertainty. We believe in maintaining capital buffers. At the same time, we are somewhat more optimistic about forward earnings estimates than the market appears to be, which makes the consideration of buybacks quite appealing given the current low price-to-earnings multiple. All these factors will continue to be part of our evaluation process, and we are committed to making decisions that enhance long-term shareholder value in a sustainable manner.

Really helpful. I appreciate all the insights 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.

I want to emphasize that we still believe our ideal or most efficient capital target remains around 10.5% CET1. This represents our strong baseline for capital at 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 involves the construction of some relatively large one to four family properties. It is linked to a relationship that we acquired in our most recent acquisition from a few years ago, making it unique for us. It's not typically a type of business we would initiate. The relationship encompasses several different properties. I don’t recall the exact dollar amount; Daniel might have that, but it likely accounts for about two-thirds of the increase in nonperforming loans for the quarter. We are really confident about the equity in these projects and the sponsors behind them, as well as the very low loan-to-value ratios. We have up-to-date appraisals, and even with significant discounts on those appraisals, the risk of loss is minimal. This is the situation I referred to earlier. We had to navigate some legal issues that delayed the loan process, which might have prevented it from becoming problematic if it weren't for the court-related matters. This timeline does not alter our assessment of the risk of loss in any way.

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 mostly answered. I just have a couple of additional items. I didn't catch the March 31 deposit spot rate; could you please provide that information?

Yes. Can you provide the overall deposit costs for the month of March?

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

Yes, for the month of March, it was $195 million. I don't have the details at the moment.

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

Yes. The overall impact on valuations was a negative $1.8 million, with just one item exceeding $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.