Simmons First National (SFNC) Q2 FY26 earnings call: guidance and Q&A

Can you elaborate on current funding trends, the competitive landscape, and strategies for driving core deposit growth, especially with recent leadership hires?

Management highlighted 4% annualized growth in noninterest-bearing deposits and positive inflows from new customers. They noted seasonal public fund outflows and an opportunistic shift to FHLB funding due to favorable spreads. They emphasized that deposit competition is "very, very fierce" and expected to continue, with significant investment planned for deposit growth initiatives.

“deposit competition is very, very fierce.”

asked by David Feaster · answered by Charles Hobbs

What are you seeing in the lending landscape, opportunities for growth, and expectations for rebuilding the pipeline?

Jay Brogdon reported loan production at near 4-year highs, contributing to 7% annualized loan growth year-to-date, positioning them at the top end of their low to mid-single-digit outlook. He noted a healthy pipeline and unfunded commitments, emphasizing strict adherence to credit underwriting and pricing standards despite competitive pressures.

“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.”

asked by David Feaster · answered by Jay Brogdon

Can you discuss ongoing initiatives and investments, and how they are funded by internally generated savings?

Management confirmed significant investments in talent and technology are being self-funded through efficiency gains, including a 2.5% square footage reduction in Q2 (8.5% total, targeting 15%) and ongoing process improvements. They stressed the importance of this self-funding capability.

“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.”

asked by David Feaster · answered by Jay Brogdon

How do recent initiatives impact the annual expense growth guidance of 2% to 3%?

Jay Brogdon stated that the company expects to "beat that guidance" for noninterest expenses for the full year, meaning growth will be lower than the initially guided 2% to 3%, even while making significant investments.

“I think we will beat that guidance for the year this year.”

asked by Woody Lay · answered by Jay Brogdon

Can you discuss the increase in NPLs, particularly a 1-4 family construction loan, its resolution timing, and potential loss content?

Jay Brogdon acknowledged the specific NPL with an 11% specific reserve, noting that resolution timing is difficult to predict but they are working expeditiously. He reiterated the full-year net charge-off outlook of approximately 25 basis points, stating they are currently below that and see no reason to change the outlook.

“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.”

asked by Woody Lay · answered by Jay Brogdon

What is the comfort level for the loan-to-deposit ratio, and how is the shift from brokered to FHLB borrowings being managed?

Jay Brogdon indicated the loan-to-deposit ratio is within their comfort range, emphasizing the need to continue growing core deposits to fund the loan book. Daniel Hobbs and Jay explained the opportunistic shift to FHLB borrowings over brokered deposits is driven by current cost advantages.

“our priority is investing in the business.”

asked by Stephen Scouten · answered by Jay Brogdon

How should we think about the trajectory of deposit costs in the second half of the year, especially in a higher-for-longer rate environment?

Daniel Hobbs expects one more quarter of potential benefit from deposit costs. He modeled a 45% beta increase if rates rise, and anticipates deposit costs to hover around 190-195 bps if rates remain flat, noting that competition might offset some asset sensitivity.

“we would view that what we're modeling is about a 45% beta increase if we get a rate increase”

asked by Brian Wilczynski · answered by Charles Hobbs