Simmons First National Corp 2026 Q3 Earnings Call

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 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 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 interest margin.

These statements involve risk and uncertainties, and you should therefore not place undue reliance on any forward-looking statement as actual results could differ materially from those expressed in or implied by the forward-looking statements due to a variety of factors. Additional information concerning some of these factors is contained in our earnings release and investor presentation furnished with our Form 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.

Yeah. Thanks, Gary. This is Jay. Let me start. 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 year plus, you've seen a lot of expressions of our commitment to a few strategic objectives in the business. 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. 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. We want to be consistently in pursuit of that. 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. 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 different. That would be kind of strategic objective number one that 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.

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? 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.

When I get into the third quarter and look back at the results that we're talking about today, and even look forward to 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 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. What I mean by that is 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.

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. Brokered deposit costs, as an example, are meaningfully higher, given the demand for that type of funding. 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 pay downs, and this is just a factor of timing, sort of timing of cash flows, maturity walls, et cetera. We had extremely outsized maturities and pay downs 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 five years ago that are maturing. So we're not going to have that level of pay down every quarter. I think the confluence of all of those factors comes together to really express all of that. 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. We are competing for volume all day, every day. 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 V side of the equation, the volume side of the equation. 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.