Simmons First National Corporation Class A Stock

Good day, and welcome to the Simmons First National Corporation Third 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, Investor Relations. Please go ahead.

Good morning, and welcome to Simmons First National Corporation's Third Quarter 2026 Earnings Call. Joining me today are several members of our executive management team, including President and CEO, Jay Bogden; 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 third 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, and our Form 10-Q for the quarter ended June 30, 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 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] And our first question comes from Gary Tenner with D.A. Davidson..

Morning. Pretty significant decline on an end-of-period basis. Can you just talk about how much of this was sort of selective on your side in terms of not chasing after certain deals and just kind of what the kind of go-forward looks like from here?

Yes. Thanks, Gary. This is Jay. I'll -- let me start, and what I'd really like to do is maybe just sort of step back as part of answering that question. remind you sort of where we've been, what we're committed to, and then we'll talk about sort of growth and fundamentals and dynamics as we move forward. I think if you look back over the past year even or a year plus, you've seen a lot of expressions of our commitment to a few strategic objectives in the business. And if I were to really -- even just try to, in our most essential way describe those strategic objectives.

I think the first thing I'd say is that we're narrowing our focus on the type of growth that we pursue. And within that focus, again, in its simplest form, it is around driving very high value, high-margin business into the bank. We have a good amount of that business in our bank. We know what that looks like and we want to be consistently in pursuit of that. And what that ultimately means is there are going to be periods of time where the front book origination and mix is going to look somewhat different than the back book.

And that doesn't even necessarily mean new products or new types of loans in the front book. It just means that the quality of the relationship the quality of the profitability and the level of the profitability look very, very different. And so that would be kind of strategic objective, number one, we have been very resolute and committed to.

The second thing is really just what I would kind of call what we often refer to as continuous improvement. And what I would put into that category is every single day when we come into the bank, we're thinking about how can we do things more efficiently, how can we deliver the growth of high-quality, high-margin business in a very efficient and scalable way. And again, I think if you looked over the past year, you'd see a lot of evidence of that commitment and of those types of outcomes.

And so when I get into the third quarter and look back at the results that we're talking about today and even look forward to sort of where we're headed. There's a couple of dynamics coming to play. One is that continued expression of that commitment. The second thing is really alongside of that commitment, as you sort of indicated, I think, in your question, Gary, there are a number of environmental factors that don't make me all that optimistic about quality and profitable growth in the immediate term outlook. And what I mean by that is we see we see risk spreads compressing very meaningfully in a number of instances.

We don't think in those instances, we have the opportunity to be paid for the risk that we see in some of those situations. So we see risk spreads being competed away. And then at the same time, what we see in our own business and what we see just again in the market is significant demand for wholesale funding of any kind, and broker deposit costs, as an example, are meaningfully higher given the demand for that type of funding. And so if we think about the commitment of high-quality, high-margin business in that type of an environment, I think what you saw in the third quarter is just an expression of that commitment.

The other thing that you saw in the third quarter that I want to acknowledge is I think our level of paydowns, and this is just a factor of timing, sort of timing of cash flows, maturity walls, et cetera. We had extremely outsized maturities and paydowns in the third quarter. Good news is, and you see it in our return metrics, those were a lot of the lower rate fixed-rate loans that had been originated some 5 years ago. That are maturing. And so we're not going to have that level of pay down every quarter. And I think kind of the confluence of all of those factors comes together to really express all of that I want to just kind of -- I'll maybe wrap this part of the question, Gary, with just a couple of other thoughts.

And here's what I'd say. I'd say that we fully understand that the formula for revenue in this business is both P times V. And we are competing for volume all day, every day. And where there's strong relationship and profitable quality business, we're going to exception price and we do that and compete and win in those areas every single day. But what I'd also say is we're just not going to dilute our standards along the way in doing that just to solve for the side of the equation, the volume side of the equation.

And so as we continue to do that, I think what you'll see us be able to accomplish is you'll see quality of the balance sheet continue to improve, the profitability of the business to continue to improve, and really, the capital flexibility of our business to continue to improve, and we are very optimistic in our ability to do that.

Thanks, Jay, for the very comprehensive overlook on that side of things. I appreciate it. And then just to move over real quick to the expense side. I mean, obviously, a lot of moving parts some noise in the third quarter related to savings that you expect to start to show up in the fourth quarter. Can you talk about kind of where the -- maybe just a normalized expense run rate might look like when kind of with all the savings embedded. And then where you see some of the potential investment offsets focused on?

Let me jump in with a couple of comments. I know Daniel is going to want to talk about that more specifically. But what I'd just remind everyone is -- we put out an 8-K, I think it was in early September. There are a number of initiatives underway in our business that fall into that category of continuous improvement designing an efficient and scalable model, et cetera, that I talked about earlier.

I believe we noted in that 8-K that the onetime charges this quarter would range in that area of $40 million plus or minus, which came to fruition in the quarter. We also commented that we would have in that area of $40 million of pre-provision net revenue improvement as a result of those initiatives. So I think that's really clear evidence again of some of the things that we're committed to in the business.

And I want to remind everyone, we commented in that 8-K that a portion of those savings would be earmarked for reinvestment in the business. And that reinvestment, again, is designed for the growth that we're pursuing and the growth that we're confident in being able to generate over time in the business. The pace and timing of that investment is going to be opportunistic. We're going to be just as disciplined in that investment as we are in the investments of our capital into a new loan or a new relationship in the business.

And so those things are all very fluid. There are environmental factors that will impact the timing and extent of those things. But in any scenario, I expect to see significant improvement in the run rate of our business and returns as a result of these initiatives that we've been working through and announce. Dan, do you want to let you kind of click into that in any way you want to.

Yes. Gary, I'd maybe just add to that. I'll remind you back to our guidance that we gave for the year, which was 2% to 3% and expense growth in '26 over '25. And as I think about where we are today and what's left in the fourth quarter, we had a real shot to kind of be flat to maybe even slightly down depending on how the fourth quarter shapes up. So a lot of the things that Jay talked about, talked about continuous improvement even before the specific initiatives that we commented on in the 8-K, we've had a continuous improvement self-funding mindset for years here.

And so if you go back and think about what the run rate would have been with a 2% to 3% guide compare that to where we are for this year, we've already started to recognize some of those savings throughout the year. And then a number of these things that we talked about in the 8-K haven't even made it in the run rate yet. So I don't want to give you a number yet. We're going to talk about that at our Investor Day on December 10. But we do expect improvement from here, and then on the investment side, a lot of that -- we know what some of that investment is today, but some of that is going to be opportunistic as things come our way.

The buckets of those reinvestments. The #1 thing that we've talked about here is deposit growth. That's an area that will probably get the highest reinvestment. The second thing was just the hiring good quality bankers especially in that C&I space. And so we expect to have some meaningful investments here over time, some of it be opportunistic. So we'll come back to you on December 10 and give you more hard number of what that could look like for 2017 and beyond.

And the next question comes from David Feaster with Raymond James.

I wanted to follow up maybe on some of your comments, Jay, with Gary's first question. I mean, just kind of given the different focus in production, and some of the macro headwinds and competition. I mean, do you think you expect the balance sheet, I mean, to continue to contract? And just talk about maybe demand for a second. I mean production came down slightly, pipelines are down slightly, but still really good. Obviously, we're coming off a really strong quarter last quarter. I'm just curious how demand is trending? Where you're seeing opportunity? And then maybe just how you think about the size of the balance sheet as you focus on profitability and maybe a smaller, more profitable bank.

Yes, the thing I'd say is, David, we're wide open for business. So when I think about top of funnel ability to generate production I don't have concerns in that regard right now in terms of our posture. I do think there's a couple of dynamics as I mentioned, one, Q3 was a very high level of maturities and pay downs. Q4 is going to be a reasonably high level. I don't expect it to be as high as Q3, but both of those would be -- both those quarters would be above sort of normal paydown quarters for us, maturity and pay down quarters.

And again, that's just kind of a function of timing. So you do have that factor in there in Q3 that impacted us and could impact us to some degree in Q4. But the bigger thing is just as I -- my confidence interval and top of funnel activity making its way in the sort of committed and funding production is a bit lower right now back to really just discipline and standards that we're going to -- we're not going to flex around. We're going to -- we're being reasonable. We're not being unreasonable about that.

But at the same time, we just see risk spreads that don't make sense and a lot of production that's happening away from us. And I think we're just going to have a thick skin about that for whatever period of time that, that lasts so that we are confident that, again, we're doing those high-value, high-margin things that are going to produce consistently strong outcomes over time.

Okay. And again, with that book that you're talking about that you've been deleveraging the lower yielding, low relationship credits, could you size that portfolio?

What's that low rate fixed rate loan book down to I think you have that metric in here I think it's probably it's .

It's $2.1 billion David of weighted average -- with a weighted average rate of less than 4%. And that expands as you make that weighted average rates go up. So it's still pretty sizable. Q3 was probably 1 of the bigger paydowns of that portion in Q4 will be another one, as Jay mentioned. But we do expect that to continue to be a favorable tailwind for us. I'll just give you 1 metric here the production that we put on in the third quarter versus that low rate stuff had a meaningfully higher return on capital of over 300 basis points from what ran off versus what we put on. So you couple that along with the ability to grow deposits and to fund that loan growth, all those things come together to kind of create this narrative of where we feel like it's appropriate to focus on profitability.

The important thing to note there, David, is out of those out of the loans that we're talking about that would be lower profitability loans, not all of that is going away. I mean we're working hard to deepen those relationships, to reprice those relationships. And we have success doing that. That success varies kind of can vary quarter-to-quarter based on a variety of factors. But we are very committed to deepening those relationships. But at the same time, we're very committed to allowing sort of single threaded loan relationships that don't then a very high bar from a profitability perspective to find a home elsewhere.

Yes. Dave made 1 other just data point there that might help you contextualize this. When you look at the volume of paydowns that we had, we took a look at the paydowns that were $5 million or greater. And there was over $1 billion of that in terms of paydowns, and it only had a relationship deposits of around less than $50 million. So to Jay's point around single thread and nonrelationship staff -- that's the piece that we're either trying to deepen or figure out other places for it to go.

And all of that gives us significant opportunity to recycle capital, right, recycle it back into higher margin growth or provide capital flexibility. And in either scenario, we think those things are going to point to an ability to -- even if we're sort of deleveraging or your question -- original question was really around shrinking the balance sheet, if that's the environment we find ourselves in an environment where the application of standards allows for further deleveraging. We're confident in our ability to not only expand returns, but it also grow earnings it's going to free up significant growth in capital, the ability to maybe be more aggressive from a share buyback point of view than we've been historically, et cetera. We're going to let the environment kind of drive that optionality for us, and we'll be opportunistic on either side.

That's great. And then maybe just following up kind of from the 8-K and the question on the expense front. I mean, obviously, if we're improving profitability, you're going to be accreting capital like you talked about positive operating leverage on the horizon. There's a lot of back book or price. There's a lot of tailwinds. And then you've got the savings, right? And a portion of which you're going to be in reinvested, and I don't want to steal too much of your thunder from the Analyst Day, but I'm curious, how do you think about reinvestment of those -- some of those savings? Like what are you focused on? You talked about C&I hiring? Is there technologies or systems that maybe help improve efficiency further? I'm just kind of curious, what kind of things are you looking at for reinvesting some of those savings?

Yes, I'd say some of it is equipping and enabling. Daniel mentioned earlier, just activities that we maybe haven't done historically in the category of driving deposits and deposit outcomes. And so that investment could be in the form and will be in the form of technology enablement. It could be in the form of direct marketing spend and campaigns that we would do. All of this will include spend in the category of continuing to invest in people and talent, both are -- the strong talent we have here in the bank as well as opportunities in the marketplace to grow talent.

And then I do -- we're spending a fair amount of time thinking about some of the efficiencies embedded in what we put in the 8-K back in September includes the benefits of some technology and automation that we're continuing to insert into the business. And I think we're barely scratching the surface as we sit here today of what those continued opportunities will be. So I think that gives you some good flavor, David, around the main themes within the reinvestment buckets.

And the next question comes from Matt Olney with Stephens.

Can you talk more about your recent investments that you've made and any early progress from these recent executive and new producer investments? And Jay, you mentioned that the bank will be opportunistic on additional producer hires from here. It seems like your footprint has a unique opportunity given the market disruption kind of throughout your entire footprint, frankly. So it feels like the window is open today to capitalize on that. Just appreciate any more thoughts you have on that dislocation and what that means for the bank being opportunistic?

Yes. So I'd say in terms of -- again, I'll be more categorical, and we'll further reveal some of these things in December at Investor Day. But I think what I would with the first part of your question, Matt, what I would describe is a lot of our more recent kind of return -- measurable return on investment, looks like faster turn times, speed, generation of capacity, elimination of kind of redundancies and duplications in the business.

And so when you think about an ability to sustainably grow organically high-margin, high-value business, you've got to have really, really strong standards in terms of efficiency, turn times, et cetera. That's where some of the investments around some of the automation and tooling that we're doing are enabling our bankers and our back office teams kind of think front, middle and back office really making the job much more consistent, easier and freeing up time for sort of higher-value productivity. And there's a number of measures that we can look at and kind of see that return on investment. Number of days to close and fund a loan, et cetera. A number of ways we can look at those things. So those are big areas of investment.

Your point around talent is something that we get really, really excited about. And candidly, it was 1 of our big motivators for going in and identifying capacity in the system. So a great example would be, while we've not exited any markets, we've announced that we're going to close 26 branches. And in a number of those instances, the number of those markets are markets where over the past several years, we've actually built branches but didn't close any branches. And so we are taking that -- we observed customer behaviors. We've been patient. Now we're pulling the lever in terms of optimizing the footprint.

And that capacity allows us to reinvest back into what we think is an incredibly, incredibly robust environment from a talent acquisition point of view. We see tremendous dislocation already in our footprint. We see -- we expect more of that type of dislocation, and honestly, we're even benefiting in the instances where there's not existing dislocation. There's either just threat of dislocation or dissatisfaction, et cetera. We're beginning to developed a bit of a reputation for ourselves in the marketplace in terms of willingness to do the things to improve and grow the business, and that's attractive to strong talent out there in the market.

And so we are -- the spigot is wide open in terms of our hiring. But again, we want to be disciplined in hiring the same way we want to be disciplined in underwriting or other things in the business. And so we're going to be thoughtful and measured as we move forward in that. But we think the field is very, very right for harvest in that category.

Matt, I would maybe just give you 2 investments that would be visible to you in the numbers. The first was being, if you recall, we did a lift out of St. Louis Wealth team that has been very, very positive for us and has exceeded all expectations that we've had. We've also made investments within the core wealth business, and you can see the noninterest revenue growing faster. So that's very visible.

The other would be -- we've talked about the investments that we will be making in our deposit growth outlook. But we've made investments over the last year within that, how we've reallocated some marketing dollars, we self-funded some marketing dollars we funded incentives to grow deposits. And you can see that when you look at the deposit number, you look at what we focused on, which has been that core customer transaction type account growth, whether it be NIB, or whether it be money market, you can see that in the numbers. You can see it this quarter.

When I look at consumer and the consumer book and I go back and look at every month this year, we have grown our core customer transaction account balances year-over-year every single quarter. So all those things that we're focused on is showing some good early returns, and we will do more of that and at a bigger scale over the coming quarters and years.

Okay. That's a great commentary. I appreciate the color there. And Vijun,maybe as a follow-up, Gene, maybe more on your side as far as the margin this quarter, good to see the 8 bps of expansion in the third quarter. It feels like that margin has nice momentum as you get more impact from kind of deleveraging the balance sheet. Any more color on the NIM as it progressed throughout the quarter or maybe to exit NIM for the quarter? .

Yes. So Matt, let me back up just a second and I'll get into that specific question. But one, I just want to comment on every quarter that goes by, the quality and durability of our balance sheet continues to improve, with all the focus on profitability, the focus on some of the deleveraging that we've done. And our margins that sits today is 392, which is a very strong margin. We feel like that margin has meaningful upside as we continue to execute our strategy of growing core funding.

You also got a rate sub environment that's in front of us. I think the outlook when we did our modeling was another rate increase in December, 1 in March and 1 in June. So we've got that ability to grow. We've also -- so like from a durability standpoint, we continue to try to protect on the downside, and you will see that in the deck where we put on additional 550 million slots to do that. It was cheap opportunistic time to do that. While we still have asset sensitivity as rates go up, we want to be able to protect on the downside given the strong NIM that we have.

And then the other thing to think about that in conjunction is every quarter that goes by, we're adding asset sensitivity through the variable rate loan production mix increasing. So we need to do some of that hedging on the back side to see our sensitivity tamp down a little bit. So that's kind of the strategy on that. As you think -- as we look at the 8 basis point growth linked quarter. About half of that was from deleveraging and about half of that was from kind of core strategy around profitability, all the back book repricing and all of those things.

So I would expect us to be able to continue to do that. The pace at which we do that will depend on the deleveraging that could potentially happen in the fourth quarter. And some of that will be opportunistic, but we still believe there's strong upside from the core themes that are embedded in our strategy to grow NIM from here.

Yes. I mean I'd just say, Matt, I look back at the quarter and just sort of think about what happened in the third quarter, right? I mean NII grew linked quarter compared to NIM expanded 8 bps. EPS grew by $0.04, ROA increased 12 basis points linked quarter. And candidly, ROA is above our long-range target that we had previously published. ROTCE improved 113 basis points. So I just -- I kind of look at the -- all of the mechanics of what we're talking about in our strategy and what we're focused on. And sort of the benefits of discipline here beginning to pay off. And I think we're going to continue to -- you asked about margin, but I guess I'm expanding the conversation beyond just net interest margin. I'm confident we can continue to see expansion in all of these returns as we execute forward from here.

Our next question comes from Woody Lay with KBW.

Wanted to follow up on the margin and maybe focus on deposit costs. It was great to see costs down about 8 basis points quarter-over-quarter I know there's some moving pieces with the deleveraging and then you had the rate hike in September. So I was curious if you all had a spot rate for the cost of deposits? Just trying to kind of figure out the starting point for the fourth quarter.

Yes. Woody. So there's a couple of things that went on within the quarter, about 8 basis points function of that was the deleveraging. A function of that was transitioning some of the remaining broker deposits into FHLB. The story behind that, we've talked about that, but broker deposit cost has outrun FHLB, in large part due to the demand of across the industry to find volume back to Jay's Pets Week conversation. And so that has caused the cost of brokered deposits to get about 30 basis points ahead of what FHLB for us is. So that's a piece that went in there.

And then the other part is just we continue to optimize the existing customer interest-bearing deposit book. And I'll give you a real quick example, then I'll answer your questions. But an example, in the third quarter, we did a pretty sizable test and control of consumer money market accounts, really looking at where the elasticity or the price sensitivity or rate sensitivity of customers are kind of trying to get to a terminal value. And we took a large portion of our money market book and reduce those by, call it, 15, 20 basis points across a bunch of different markets held out a control group and looked at that over time. And what we found is in large part, almost all of that decline was not sensitive to time.

And so what that did is that generated about a $2 million interest expense savings that we then put that back into money market promos to bring in new customers. So we self-funded some of that, and there will probably be a little bit of timing difference as you think about that relative to Q3 to Q4. But specific to your question on cost of deposits, our exit rate for September was $1.83. And I would tell you that's probably going to be the bottom. We will go up from here primarily because we got the rate increase in September. We expect to get another 1 in December.

But having said that, the betas that we've modeled for loan beta and deposit beta we will significantly drive value through the margin because of our asset sensitivity. If you look through the entire cycle of the additional 3 rate cuts that we've got in there. , I'm sorry, rate hikes, yes. The loan beta is going to be around 85% and the total deposit beta is going to be 30% to 35%. That will give you a sense of how we're thinking about that.

Great. That's really helpful color. And maybe to circle back to deposits and that those core customer growth that you did see this past quarter. It sounds like this is a reflection of some investments you've made some focus that you've been on I was just curious, is this mostly coming from current customers and you're taking more of their wallet? Is it new customers to the bank? And any specific segments or markets where you're seeing the success in?

Yes. Chris can jump into here in just a second. Well, go ahead.

Yes, great question. I think we're seeing a fair mix of both deepening with existing relationships, which is where we started out when we went down this -- started on this journey last year, and continue to expand that. But where we've really seen some positive returns is on the acquisition side. So stepping into markets where we have both a long legacy as well as some of the markets we acquired into over the last decade. We're seeing really good response rates, seeing good, sticky relationship showing up as a result of that. So it's a nice mix of deepening with existing, which is always valuable. But the harder thing to do, and we're demonstrating that to our own satisfaction is the ability to acquire in markets where we don't necessarily have the same brand depth and tenure that we have in some of our legacy markets.

Well, I'd give you 1 more data point on that, on the example that I gave you around our campaign. The campaign was designed around new money to the bank. And that new money comes from deepening existing and new customers. And what we've seen so far is about 75% of that campaign is new money to the bank.

And the next question comes from Stephen Scouten with Piper Sandler.

Yes. I wanted to kind of circle back on the kind of mindset of the strategic mindset kind of through the quarter. If we go back to last quarter's call, thinking about maybe still mid-single-digit growth. Was there at some point during the quarter, a decision change or a shift change that said, hey, let's actually remix some of this loan book more aggressively? Or was it just pricing and spreads kind of as you spoke to, Jay, maybe a reduction in risk-adjusted spreads that said, hey, these 4% loans, let's not rebook the loans, but they're still kind of very price con. Just walk me through maybe the ideology about what maybe changed from last quarter's call to what progressed in the quarter?

Yes. I think the first thing I'd say is I don't think really anything has structurally changed in terms of like a reasonable expectation for terminal growth for our business. Nothing's really changed there and nothing changed in the quarter from that point of view in my mind. The couple of things that did maybe happen to a greater degree than I would have anticipated even 90 days ago. One is I knew there was a good-sized maturity wall in the third quarter. The level of early paydowns again was as great as it was at any point in 2-plus years, maybe even longer than that.

So the early paydown environment was underappreciated. So I think that's just 1 aspect of it. But again, a lot of the paydowns that we saw in the quarter, whether they were maturities or paydowns were low rate in nature. And there's nothing that changed from Q2 to Q3 in terms of our focus around either converting that business to more profitable business, deepening those relationships or allowing those relationships to walk out the door. So that's 1 part of it.

The second part is, we -- as I mentioned earlier, Stephen, we just saw risk spreads continue to compress all throughout the quarter. And I would say there was a shift at least in my mindset in the third quarter around appetite and that was purely a rates moved a lot this quarter, and rates have been volatile and the beta, if you will, on pricing for loans has not reflected that environment because spreads have compressed so much. And so that would be the only part of that I would look to as kind of a mindset shift throughout the quarter. But again, overall, I just look at it as we understand P times V. We just think that sort of consistent premium valuation in any industry. And in this industry comes from doing high-quality things repeatably, and that's what we're focused on right now.

Yes. Well, clearly, it's the right decision based on profitability and earnings trajectory. So congratulations on making what was probably a hard decision. Would that be -- would it be fair to say that this $2.1 billion with a rate less than 4% given this compression and risk spreads that you're seeing could be more at risk to lead the balance sheet and maybe see that kind of fixed asset repricing tailwind as we sit here today?

I think our -- again, our commitment to the discipline overlaid against the environment. As I said earlier, I'm less optimistic about growth in the immediate term, by Q4 or Q1 just in -- this is the whole -- the environmental piece, we don't control more influence, but I mean it's real right now. And so I would say, yes, there's some risk to that outlook from an immediate term kind of loan growth outlook in Maman as a result of those things. Again, none of that gives me concern about our ability to continue to expand returns meaningfully and to drive in that scenario, if that's the scenario we're in, to drive significant capital flexibility beyond what we would otherwise kind of model or expect in a more normal environment.

Yes. Makes sense. And then maybe just last thing for me. Kind of thinking about the share repurchase, I know you've kind of stacked ranked priority growth dividend and the repurchase, but obviously the loan book did shrink this quarter. CET1 was higher. Kind of maybe talk about why no share repurchases this quarter. Is that more a function of TCE and the rate move? Or -- and how we should think about the potential aggressiveness on that repurchase moving forward?

Really, the patients from a share repurchase point of view, in the third quarter was a function of a couple of things. The primary 1 is we were just really earmarking capital. You can accuse us of being conservative here, but we were really earmarking capital around the onetime investments we made in the quarter. There was significant onetime charges. We sort of think of that as an investment in the business with a return associated with it. And we thought the returns associated with that investment were much stronger than any share repurchase we could have done would have been.

And so that kind of be the primary factor. Candidly, the secondary factor, but it's an important factor is we had important information to share with the market in the form of that 8-K that came out in early September. And so we just felt like, again, it was the right thing to do for a number of reasons to sort of not be active in the third quarter. Our appetite to repurchase in the sort of environment that we see evolving right now is increasing. And so I think what you saw as patients in the third quarter is not how I would extrapolate from here.

And the next question comes from Brian Wilczynski with Morgan Stanley.

I wanted to ask about fee income. So you saw some nice growth this quarter in both wealth management and also service charges. Can you talk a little bit more about the progress you're making in those areas? And any updated thoughts on the outlook for total fees over the next few quarters?

Brian. So I've kind of referred to this a little bit earlier. So if you look at wealth management was an area of strength for us and that's a reflection of some of the investments that we've made early in the year and investments in the overall business. We're just seeing a lot of good momentum there, a lot of good customer acquisition. We're seeing some deposit growth there. So we would expect that to continue to inflect from here, and we will likely continue to make investments in that business. We feel like that should -- that business has an opportunity to be much bigger than it is today.

And then on service charges, that's really a function of just higher level of transaction volume that has service fees associated with that. So that's kind of what drove that. We'll talk a bit more about how we're thinking about a go-forward run rate for us at Investor Day. But a good quarter for us, and it's an area that we continue to focus on invest in.

Great. Appreciate that color. And then as a follow-up, I wanted to ask about the net interest income outlook. You talked about the upside drivers to NIM. You're clearly focused on the profitability of the loan book, which does include some loan runoff. Can you just give us an update on the net interest income outlook? I think last quarter, you had talked about maybe being near the high end of the up 9% to 11% for the year. Is that still a good expectation as we look at it?

Yes, it is, Brian. We still feel really confident about the high end of that range. So yes.

Yes. And I would just say from an -- that was an annual outlook. We feel very confident in that outlook. We had an annual outlook for operating leverage, and we're going to blow that 1 out of the park. I think for this year. I think, again, back to NII and discipline and commitment we were able through really good discipline and commitment in the third quarter to grow NII linked quarter, while significantly expanding margin returns. Look, if the environment doesn't change, that gets harder to do in the fourth quarter in my mind. I'm not saying that's not doable, but that gets more challenging in the immediate term if we don't see sort of risk spreads coming back into the business.

Again, I don't think that's a long-term concern from a terminal growth rate point of view for our business. But I want to be realistic about what we're seeing in the marketplace and very expressive around our commitment to the standards and discipline that we've talked about in the call today.

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

Yes. Just a few closing remarks today. First, what I'd really like to do in light of everything we've talked about on this call is just acknowledge things like instilling new discipline, setting higher standards, evolving an operating model, these things don't -- they don't happen easily, and they don't happen overnight. And we've just -- I couldn't be more proud of how we've been tackling some very difficult decisions head on in our business, and we're producing results that indicate real progress toward our goals.

So with that acknowledgment, what I really want to do is just thank every single associate at Simmons Bank for the dedication and for the loyalty to our customers, to our teammates and of course, to our shareholders. And then just 1 final reminder as we wrap up here. Again, we're going to be in New York on December 10 for Investor Day. We really look forward to sharing more about our strategy, more about our outlook and we hope to see you there. Thanks for your time today, and have a great day.

The conference has now concluded. You may now disconnect.

Good day, and welcome to the Simmons First National Corporation Second 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 Mr. Ed Bilek. Please go ahead, sir.

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, James 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 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 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, 2025, and our Form 10-Q 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 8-K 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.

[Operator Instructions] And our first question for today will come from David Feaster with Raymond James.

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 are some really encouraging trends, right? You got NIB 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 deposit growth, especially just given some of the recent leadership hires that you've made and initiatives they're working on.

Yes. David, this is Daniel. I appreciate that question. So we've been talking about deposits a lot, and 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. We're proud of growth in our noninterest-bearing deposits in the second quarter. Obviously, that's the highest quality of deposits, and we grew that 4% annualized.

And if you kind of work down the quality versus the highest quality, lowest quality, the interest-bearing money market savings, although on 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 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 with existing customers and reducing attrition.

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. The other thing, I think, as you think about core customer balances that we saw in the first quarter, especially on the consumer side, there were 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 were very seasonal, and you typically see that this time of the 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 core customers is our biggest focus. One last thing, as you think about core 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.

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 what's the competitive environment out there. And so all of the things Daniel said and what I would say unsurprisingly is that 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.

Okay. That's great. Similarly encouraging, I thought, was the loan production side. I mean, at near 4-year highs. Obviously, like 3% annualized growth. But I was just hoping you could touch on the lending landscape across your footprint. Where are you seeing opportunities, your willingness to compete on pricing to continue to drive growth? And just how you think about rebuilding the pipeline and expectations for growth as we look forward?

Yes. So I would say there, too, I am encouraged from a loan growth perspective. I think we kind of have low to mid-single-digit outlook for this year from a loan growth perspective. We're at maybe 7% annualized loan growth year-to-date. So we would be comfortably at kind of the top end of that outlook halfway through the year. 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 a 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.

That's great. And just last one for me. To me, I saw this quarter kind of really demonstrating you executing on your initiatives, especially on the efficiency front post the restructuring, right? That's been a big focus. Could you just talk about, I guess, as we look forward, some of the initiatives and investments that you're working on? I know you've been very active recruiting. We've had several announcements, both on the senior management and banker side. And then whether you can continue to fund a lot of the investments in the growth that you're making with internally generated savings and where some of those might be coming from?

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

Yes, I would. So 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 then 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.

Your next question will come from Woody Lay with KBW.

Maybe just a follow-up on the expenses. I was just curious how the -- 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.

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. 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.

We guided on fees and noninterest 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 I think we guided to 2% to 3% growth in noninterest expenses back in January. I don't expect us to hit that level of noninterest 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 guide, 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.

Exactly.

Right. Yes. No, that's very encouraging to hear. Maybe my next question, I just wanted to shift to credit real fast and NPLs were up just a touch with this one to four family construction borrower that fully migrated in the quarter. I know it partly migrated last quarter. I think you have an 11% specific reserve against the loan. I was just curious how you all think about timing around resolution and what the ultimate loss content there could be?

Yes. I think, obviously, we're a bit top heavy in NPLs when you look -- and we put a top 10 list in the investor presentation. That loan certainly -- 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. And so 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 loss 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. So that should be a leading indicator of the credit outlook into the future.

And again, we're going to work expeditiously toward resolution of the things that have migrated into nonperforming, and we feel comfortable about the loss content in the portfolio and have even stated in the presentation, and I'll say it out loud right now, 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.

Your next question will come from Matt Olney with Stephens.

Just want to follow up on the loan growth discussion. Jay, you mentioned the unfunded loan balance moved higher. I can see that in the deck. On the other hand, it looks like the rate of close loan pipeline moved a little bit lower. Just help us reconcile those 2 data points and what that means for loan growth for the back half of the year.

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 4-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.

Okay. Perfect. That's helpful, Jay. Thanks for that. And then I guess shifting over to loan yields. Over the last few quarters, we've seen some nice repricing of loan yields higher. That wasn't as apparent this quarter to me as it has been. Any more color on just loan yields, the competitive environment? And I know you have a nice fixed rate repricing story. Just any more color on expectations that we should have the next few quarters there?

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 a number of opportunities where we've missed, and we haven't 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. And so we're 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'd 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 rate ready to close or 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 our yields were only down 1 basis point linked quarter prior to that, it was down 7 basis points. So that decline is lessening. And as you think about just the betas on loans, we've got, I think, 18% cumulative to date, what our beta was. And as you think about forward views, we've got -- right now in our outlook, we've got rate increase at the 10/26 meeting. And so that would provide loan 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 slide 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.

The next question will come from Stephen Scouten with Piper Sandler.

I'm curious just how you think about the loan-to-deposit ratio from here, kind of where you would allow that to move to if it continue to trend higher. And I know some of that dynamic this quarter is obviously just that kind of capitalistic shift you referenced of moving to the FHLB borrowings versus brokered. But how do you think about what would be the level of comfort with that ratio where you would allow it to go?

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

Yes. Makes sense. And then you guys spoke to some of those metrics, the checking account growth year-over-year, quarter-over-quarter and a lot of new customer looks. Has there been a push from an advertising perspective or a product perspective? Or is some of that coming from just more looks given disruption of other banks in and around your markets? Can you give us a feel for kind of what sort of looks you're getting due to that disruption in terms of whether it's new customers or new talent?

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 time frame. 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, we kind of started off, this is probably an area that we would have a lot of investment go into. Chris, do you want to comment?

Stephen, Chris Van Steenberg here. I'd say the other thing, 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 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.

Got it. And maybe one last thing for me is just the repurchase, obviously, was nice to see this quarter. And I think if I remember correctly, you talked about excess capital kind of being north of 10.5% CET1. So it seems like you've got a fair amount of room. So just wondering how to think about that remaining $161 million remaining in that authorization.

Yes. I think, Stephen, we'll just continue to be -- 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 #1 time and time again. But we do think there -- with the excess capital and particularly with how we look at kind of the shape of our returns outlook when we look forward and the capital levels that should build as a result of that, we've got penciled 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.

Your next question will come from Brian Wilczynski with Morgan Stanley.

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?

Yes. Brian, I appreciate that question. So I think what you will see is probably -- we kind of exited the quarter at about a 10% deposit cost. That's the average for the quarter was 193%. So there's probably one more quarter of potential benefit from deposit costs if we get the rate increase in the 10/26 meeting, that would kind of 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.

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, 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 could -- 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 Simmon's 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, given that we're coming from behind in some of our composition of the deposit franchise. So perhaps we can make some of the investments that we've 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 brokered deposits from here? And then maybe for just funding mix more broadly, I did see that the borrowings were up a bit Q-on-Q. Can you just talk about how you're managing that as we look ahead to the second half of the year?

Yes, Brian.

So on the funding mix side, Daniel, I think what -- 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 brokered is really just Daniel's word earlier is we're going to be capitalist 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 FHLBs and allow some of the short duration brokered to mature and run off. And so we'll just continue to be opportunistic in that regard.

Got it. And then maybe just one more on loan growth. You talked about not stretching for growth just given the competitive environment and you have a pretty conservative posture around returns and credit. Can you just talk a little bit about where you're seeing the most attractive risk-adjusted return across the portfolio today, whether it's C&I versus CRE? And just how you're thinking about the mix of incremental loan growth going forward?

Yes. So I think on -- again, you have to look at 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 if you -- 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.

And so when we're bringing in and leading with operating accounts, institutional and sort of 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.

The next question will come from Gary Tenner with D.A. Davidson.

I had just a question. Jay, I was wondering, as you talk about the C&I opportunity and investments you've made, any comments you wanted to make around bringing on Jim Reeser to the business and kind of the opportunity to focus on C&I through his relationships?

Yes. Well, I appreciate that question. I couldn't be more excited to have Jim here. And we've had a number of great talent opportunities. Chris Van Steenberg 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 that -- and just 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 you're bringing -- we are banking in those markets, commercial executives, centers of influence, et cetera, that we just didn't have a deeper 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 beget 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.

Got it. Appreciate that. And then specific to the second quarter, can you talk a little bit about just the strength in the ag growth that really drove C&I this quarter? And then secondarily, you had mentioned earlier, I think Daniel mentioned the increase in the yield in the ready-to-close portfolio, I think it was up like 33 basis points quarter-over-quarter. Is that a mix phenomenon? Or what's kind of driving that?

Yes. 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 is -- 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 in production in that business. But the other is some of the headwinds to that sector are -- 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?

The second part used to be the yields on the ready to close, yes.

Yes. I think there is a bit of a numerator and denominator impact to that. So -- 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 just -- there's some asset specificity in there that's driving a portion of that. 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.

And this will conclude our question-and-answer session. I would like to turn the conference back over to Mr. Jay Brogdon, President and CEO, for any closing remarks. Please go ahead.

Yes. 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. 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'd categorize 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. 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.

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 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.