Prepared remarks
Good day, and welcome to the Simmons First National Corporation second quarter 2026 earnings conference call and webcast. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your touch tone phone. To withdraw your question, please press star then two. 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 second quarter 2026 earnings call. Joining me today are several members of our executive management team, including President and CEO, Jay Brogdon, and CFO, Daniel Hobbs. Today's call will be in 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. 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. 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.
Questions and answers
Thank you. We will now begin the question-and-answer session. To ask a question, you may press star then one on your touch tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two. Our first question for today will come from David Feaster with Raymond James. Please go ahead.
Hey, good morning, everybody.
Morning, David.
I wanted to start on the funding side. Obviously, there are a lot of moving parts here just with seasonality of the public funds. You had some optimization of using borrowings versus brokered, there are some really encouraging trends. You got NIB growth and had declining deposit costs. I was hoping you could elaborate on what you're seeing on the funding side, the competitive landscape, how you plan on driving core deposit growth, especially given some of the recent leadership hires you've made and initiatives they're working on.
Yeah. Hey, David, this is Daniel. Appreciate that question. We've been talking about deposits a lot, and that continues to be one of our biggest strategic focuses, and probably where we will invest the most over the next 12 to 24 months. We're proud of growth in our non-interest-bearing deposits in the second quarter. That's the highest quality of deposits, and we grew that 4% annualized. If you work down the quality spectrum, interest-bearing money market and savings, while the ending balance was down, on an average basis we grew those balances. When you think about those two pieces, we're starting to see some fruition of a lot of the work we've put into place, and we're very early in our strategy and execution around deposit growth. A lot of the things we're doing include marketing campaigns, a focus on attracting new customers versus only deepening existing relationships, and reducing attrition.
In this quarter, we had more inflows from new customer balances than outflows from existing customers, and that was a positive trend. On the consumer side, we saw some headwinds earlier in the year related to debit spend at convenience stores due to higher gas prices, which was a drag, and yet we were still able to grow. Moving down the quality ladder, non-relationship customer CDs are balances we're willing to let run off; there isn't much ability to convert those to core customers. We've had limited success converting those, so we're comfortable letting them run off at relatively high costs. Public funds were very seasonal, which is typical this time of year; we're not losing customers there, it's seasonal outflows. On wholesale funding, we're taking a capitalistic approach to broker deposits and FHLB funding. You'll see that we've moved more into FHLB this quarter because the spread there made it advantageous.
We will continue to be opportunistic and flexible; we're short duration in both buckets. Going forward, growing high-quality core customers is our biggest focus. One last point: we grew checking accounts over 1% year-over-year and linked quarter. That's an indication of some of the things we're doing that are working, and we'll be doubling down on those over the next 12 to 24 months.
Hey, David, I'll jump in with one incremental comment. One of the things you alluded to is the competitive environment. Deposit competition is very fierce and we expect that to continue. Given that backdrop, all of the underlying fundamentals Daniel described—our ability to see origination, growth, and success in the highest-quality categories of the funding base—are actually very encouraging to me.
Okay. That's great. Similarly encouraging was the loan production side, near four-year highs, roughly 3% annualized growth. Could you 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 how you think about rebuilding the pipeline and expectations for growth going forward?
I am encouraged on loan growth. We have a low- to mid-single-digit outlook for loan growth this year. We're at about 7% annualized loan growth year-to-date, which would put us comfortably at the top end of that outlook halfway through the year. The second-quarter growth wasn't as strong as the first quarter, but that wasn't a sign of a lack of production. We had a strong quarter of production, and that production fits squarely within our standards for credit underwriting and pricing. We won't sacrifice discipline to chase growth. Some of the growth is offset by paydowns, and we have a strong amount of growth in unfunded commitments due to production, a healthy pipeline, and a good top of funnel across the footprint and asset classes. I'm optimistic about our ability to grow loans as a result of these factors, though we remain balanced given some macro factors impacting consumers. We're not stretching for growth; we'll stick to our discipline and pursue adding clients and good assets on both the funding and loan sides. We're wide open for business and encouraged by our recent success.
That's great. Just one last question from me: this quarter demonstrated execution on initiatives, especially on efficiency after the restructuring. Could you talk about initiatives and investments you're working on? You've been active recruiting. Can you continue to fund investments in growth with internally generated savings, and where might those savings come from?
Daniel and I both can add to this. The most important thing to me is the ability to self-fund investments. We are investing heavily in the business—in talent and technology among other things—and we believe this is an opportune time in the marketplace to do that. We're tapping into capabilities we've developed over the last few years, such as the Better Bank Initiative, to continue funding these investments. That focus is critical and will continue. Daniel, do you want to add anything from your perspective?
Yes. As you think about things we've done, we still have an extensive list of opportunities. In the quarter, we reduced square footage another 2.5%, bringing our total to 8.5% since starting the initiative. We think there's more opportunity, much of it in corporate space rather than branch space, and we expect that to be where our biggest opportunities come from. Our goal is 15% and then continue from there. We're also focused on process improvement across front, middle, and back office. Some of these improvements will require investments to make processes more efficient, and we believe these efforts will help fund the investments we need to make.
That's great. Thanks, everybody.
Thanks, David.
Your next question will come from Woody Lay with KBW. Please go ahead.
Hey, good morning, guys.
Morning, Woody.
Maybe a follow-up on expenses. Do some of the initiatives you announced within the quarter impact the annual expense guide you gave at the start of the year of about 2% to 3% growth? Curious on your thoughts.
Let me expand on that. We're simple in our approach. We guided in January to an outlook for 9% to 11% net interest income growth year-over-year. Midyear, halfway through, we are very comfortable at the top end of that range. We guided on fees and non-interest expenses, and we are comfortable hitting those guides. I think we will beat the non-interest expense guide for the year. It's hard to give an exact magnitude today, but I don't expect us to hit the 2% to 3% non-interest expense growth level we guided back in January. Altogether, we provided an outlook for more than 5% positive operating leverage and strong PPNR growth year-over-year, and I think we will exceed those expectations in 2026 based on current performance and fundamentals.
Just to add, Jay's comment about beating the guide is even while we are making significant investments. You've already seen us pursue some of those investments, and we will continue to do that.
That's very encouraging to hear. My next question: NPAs were up slightly, partly due to a four-family construction borrower that fully migrated in the quarter. I think you have an 11% specific reserve against the loan. How do you think about timing around resolution and what the ultimate loss content could be?
When you look at our NPLs, a few larger relationships make up a top portion of that. That four-family construction relationship certainly stands out. Timing is difficult to predict; we're putting significant energy into resolution and pursuing that as quickly as we can. It could carry past the end of the year into next year, fully or partially. We're all over it. Generally, we try to be conservative in our loss recognition and are focused on loss content in the portfolio. I see healthy migration in our credit backdrop: levels of criticized and classified loans are coming down, past dues are moderating toward historical norms, and there are stacked-quarter improvements in those buckets, which should be a leading indicator for credit outlook. We'll work expeditiously to resolve migrated non-performing loans. Based on what we know today, our outlook from January for approximately 25 basis points in annual net charge-offs remains intact; we're below that through the first half of the year and see nothing currently that would cause us to change that outlook.
Got it. That's helpful. All right, that's all from me. Thanks for taking my questions.
Thanks, Woody.
The next question will come from Matt Olney with Stephens. Please go ahead.
Hey, thanks. Good morning, guys. Just want to follow up on loan growth. Jay, you mentioned unfunded loan balances moved higher, and I can see that in the deck. But the ready-to-close loan pipeline moved a bit lower. Help reconcile those two data points and what it means for loan growth for the back half of the year.
Some of that is timing at quarter-end. When deals move from pipeline to funded commitments, they may move out of the ready-to-close bucket into unfunded commitments. Committed production was near an all-time high, which squares with movement in ready-to-close. I expect, and already see into the third quarter, continued movement through the funnel from opportunity into ready-to-close. The pipeline looks normal and healthy. The most reliable indicator for assets funding in the balance of the year is the unfunded commitment, followed by ready-to-close, so this actually strengthens the outlook for funding the balance of the year and offsetting paydowns.
Perfect. Thanks. Shifting to loan yields: over recent quarters we've seen nice repricing of loan yields higher, but that wasn't as apparent this quarter. Any color on loan yields, the competitive environment, and expectations for the next few quarters? I know you have a meaningful fixed-rate repricing story.
Competition for loans has been similar to deposits—very competitive. We've had opportunities where we lost deals on price. We're sophisticated on relationship profitability and pricing, and we'll stick to discipline. We're focused on returns on invested capital for every funding and capital dollar we put into a relationship. The good news is that despite competition, we still have a healthy pipeline and strong production in recent history. Also, the rate on the ready-to-close portion of the pipeline improved meaningfully from Q1 to Q2, which supports what I'm describing: discipline and pipeline opportunity alongside production.
Our loan yields were down only 1 basis point linked quarter; prior to that decline was 7 basis points. The decline is lessening. On cumulative loan beta to date, we've seen 18%. In our outlook, a potential rate increase at the October 2026 meeting would provide loan yield growth if it happens.
Also, in our interest rate sensitivity discussion, we have $1.8 billion of fixed-rate loans repricing in the next 12 months with an average yield below 4%. That back-book repricing tailwind is meaningful.
Okay, guys. Thanks for the color.
The next question will come from Stephen Scouten with Piper Sandler. Please go ahead.
Good morning, guys. I'm curious how you think about the loan-to-deposit ratio from here and where you'd allow that to move if it continued trending higher. I know some of this quarter's dynamic is the capitalistic shift of moving to FHLB borrowings versus brokered. How do you think about a comfortable level for that ratio?
We're in a range where our comfort level would be, and it could flex either direction incrementally. Daniel described our funding approach: opportunistic. The point on the loan-to-deposit ratio is we must continue to grow the core deposit franchise to core-fund the loan book. That's our goal and expectation; it's not our strategy to be less-than high-quality funded.
You spoke to some metrics—checking account growth year-over-year and quarter-over-quarter, and many new customer looks. Is that from advertising or product changes, or are you getting more inbound due to disruption at other banks? Can you describe the 'looks' you're getting from industry disruption and new talent?
We have many initiatives for deposit growth. Marketing is significant and has been in testing and learning mode for about a year; we've been targeting consumer, small business, and private wealth customers and seeing positive momentum. We're aligning incentives on the consumer and commercial sides, and we rolled out new consumer products on March 31, so we're starting to see impact. We're also investing in commercial platforms that we believe will help deepen relationships and attract new customers. This is an area where we'll likely continue to invest heavily.
Chris, do you want to chime in here too?
Hey, Stephen, Chris Van Steenberg here. A couple of the hires we made this year have already driven meaningful wins. For example, the St. Louis wealth team we brought on earlier this year is generating strong new business and moving balances, both AUA and AUM, which also shows up on the deposit side. Early results reinforce the strategy of taking advantage of others' strategic distraction, such as M&A. Those hires are returning for us already and are contributing to growth.
Got it. One last question: the repurchase this quarter was good to see. I think you noted excess capital north of 10.5% CET1. You have about $161 million remaining in that authorization. How should we think about using that remaining capacity?
We'll evaluate it opportunistically. Our priority is investing in the business—driving organic growth and making investments with strong returns is priority number one. Given our excess capital and how we see returns building, we have been putting pencil to paper on returning capital via buybacks. You saw us take that opportunity in Q2, and we'll continue to consider repurchases where appropriate.
Great. Appreciate all that color. Congrats on a nice quarter.
Thanks, Stephen.
The next question will come from Brian Wilczynski with Morgan Stanley. Please go ahead.
Hi, good morning.
Morning, Brian.
You talked about deposit competition and focusing on growing customer deposits. Given the environment and that focus, 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?
Hey, Brian. We exited the quarter at about a 190 basis point deposit cost, and the quarter average was 193. There's probably one more quarter of benefit on deposit costs. If the Fed raises rates at the October meeting, that would flip the direction. In our modeling, we're using about a 45% beta on deposit betas over the course of the remainder of this year and next year. If rates stay flat, deposit costs will likely hover in the 190 to 195 basis point range. The investments we make—on rate offers and marketing—could push that up, but with flat rates we'd expect costs to remain relatively steady. So one more quarter of benefit is possible, but an October rate move would change that.
My read is that regardless of Fed action, there's a competitive dynamic that will pressure some of the industry's asset sensitivity or back-book repricing. That's an industry headwind. Our focus on deposits gives us a chance to outperform that trend because we can improve mix and invest in people, products, and front-book pricing to reduce overall deposit cost.
On mix, any color on the opportunity to pay down brokered deposits from here? I saw borrowings were up a bit. How are you managing funding mix as we look ahead to H2?
On funding mix, we're opportunistic and capitalistic. Late in Q2 and into Q3, it was advantageous to lean into FHLB and allow short-duration brokered deposits to mature and run off. We'll continue to be opportunistic between FHLB and brokers based on price.
One more on loan growth: you're not stretching for growth given competition and conservative posture on returns and credit. Where are you seeing the most attractive risk-adjusted returns today—C&I versus CRE—and how are you thinking about mix of incremental loan growth going forward?
On an asset-only basis, we're seeing good returns in commercial real estate, though we apply strong scrutiny to asset classes and geographies. For C&I, the best risk-adjusted returns come from pulling over full relationships—leading with operating accounts, wealth and fee products, and then adding credit alongside them. Those combined relationships generate attractive returns, and we're focused on building teams and platforms to consistently win that profile.
I appreciate the detail. Thanks for taking my questions.
Thanks, Brian.
The next question will come from Gary Tenner with D.A. Davidson. Please go ahead.
Thanks. Good morning, everybody. Jay, as you talk about C&I opportunity and investments, any comments around bringing on Jim Recer and the opportunity to focus on C&I through his relationships?
I'm excited to have Jim here. We've had several strong talent additions this year, such as the St. Louis wealth team I mentioned earlier, and they've been very successful bringing new business into the bank. Those businesses are synergistic with the commercial bank because we have banking presence in those markets and stronger centers of influence than before, which opens the pipeline. Jim is excited about the direction of the bank and what we're building. In short, we're seeing success beget success across talent and production, and it's still early innings.
Specific to Q2, can you talk about the strength in ag growth that drove C&I this quarter? Also, you mentioned the rate on the ready-to-close portfolio increased about 33 basis points quarter-over-quarter. Is that mix or something else?
On agriculture, we've banked farmers for 123 years at Simmons. That's a sector that requires unique experience. The sector has challenges, but for the quarter we benefited from some seasonality in production and from opportunities where some other institutions have been less willing to support top-tier generational farmers; we're taking primary relationships with some of those clients. On the ready-to-close yield increase, there is both a numerator and denominator effect—some of the move is timing related with production flows. Part of it is asset specificity driving higher yields, and part reflects our discipline in pricing profitable relationships.
Thank you.
Thank you.
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.
I want to spend a few minutes sharing what's top of mind. I believe there is significant untapped efficiency and potential in our business today. Over the past few years, we've been deep into what we've called the Better Bank Initiative and have demonstrated real results in expense discipline. That work has been mostly tactical, and it will continue in 2026 as continuous improvement. Over the past year, our focus has shifted more strategic: evolving leadership, optimizing organizational design, engineering better processes, and enabling the business through technology. We're heavily focused on those strategic moves now. As we move through the balance of the year, these investments should allow us to deliver an operating model at Simmons Bank that can consistently drive returns at or above our long-range targets. We have a demonstrated track record, and I believe there's more to come. We look forward to sharing more as we progress through the second half of the year. Appreciate your time this morning, and have a great day.