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 2 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…

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 3.65% 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 3.65% relative to the 3.76% 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.

Congrats on all the moves you guys made.

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 2 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 2 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 not like that. 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 3.77%, 3.53% 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 Olney 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.