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DATE

Friday, Oct. 16, 2026

CALL PARTICIPANTS

• Investor Relations - Edward J. Bilek
• President and Chief Executive Officer - Jay Brogdon
• Executive Vice President and Chief Financial Officer - Daniel Hobbs

TAKEAWAYS

• Net Income -- $47.1 million, representing a decrease from $66.7 million in the previous quarter due to $43.2 million in pre-tax strategic initiative charges.
• Adjusted Net Income -- $79.0 million, reflecting the exclusion of one-time charges related to rightsizing and professional services.
• Diluted EPS -- $0.32, while adjusted diluted EPS was $0.54 for the third quarter.
• Net Interest Margin -- 3.92%, an expansion of 8 basis points linked quarter driven by higher loan yields and optimized funding costs.
• Total Revenue -- $251.2 million, representing an increase from $248.6 million in the previous quarter due to higher net interest income.
• Total Loans -- $17.5 billion, representing a linked quarter decline of $597 million due to the intentional deleveraging of lower yielding, low-relationship credits.
• Total Deposits -- $18.6 billion, a decrease of $1.1 billion from the second quarter reflecting a reduction in high-rate brokered deposits and seasonal public fund outflows.
• Cost of Deposits -- 1.85%, an improvement of 8 basis points from the prior quarter.
• Efficiency Ratio -- 71.59%, compared to 58.72% in the second quarter; the adjusted efficiency ratio was 53.31%.
• One-time Charges -- $43.2 million, consisting of $17.1 million for professional services, $14.2 million for branch and real estate rightsizing, $6.0 million for severance, and $5.9 million in accelerated prepaid expenses.
• Common Equity Tier 1 Ratio -- 12.05%, up from 11.60% in the second quarter due to capital preservation and balance sheet contraction.
• Net Charge-off Ratio -- 0.27% of average loans, representing an increase from 0.20% in the previous quarter.
• Allowance for Credit Losses -- 1.37% of total loans, an increase from 1.32% in the second quarter to buffer against potential credit migration.
• Branch Optimization -- 26 financial centers, representing locations management announced it will close to optimize the retail footprint and reinvest in growth markets.
• Commercial Loan Pipeline -- $1.3 billion, with ready-to-close commercial loans totaling $455 million at a weighted average rate of 6.78%.
• Low-rate Loan Book -- $2.1 billion, representing the portfolio of loans with a weighted average rate below 4% that management is actively repricing or allowing to runoff.
• Wealth Management Revenue -- $11.4 million, an increase from $10.2 million in the second quarter driven by new customer acquisition and recent investments in talent.
• Service Charges -- $13.6 million, up from $12.3 million linked quarter due to higher transaction volumes and related fees.
• Annual Net Interest Income Guidance -- management confirmed expectations for the year to finish at the high end of the 9% to 11% growth range.
• Operating Leverage -- management stated the company expects to exceed its previous annual operating leverage targets for 2026.
• Tangible Book Value Per Share -- $13.52, a decrease from $14.42 in the previous quarter reflecting higher long-term interest rates impacting accumulated other comprehensive loss.

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RISKS

• Brogdon stated, "there are a number of environmental factors that do not make me all that optimistic about you know, quality and profitable growth in the immediate term outlook," noting that risk spreads are being competed away in the market.
• Hobbs warned that the deposit "exit rate for September was 1.83%. And I will tell you that is probably going to be the bottom," indicating a likely increase in funding costs following recent and projected interest rate hikes.
• Brogdon indicated that early paydowns and maturities remained at elevated levels, stating the "early pay down environment was underappreciated" 90 days ago, which could further impact loan growth in the fourth quarter.

SUMMARY

Simmons First National Corporation (SFNC -0.85%) reported third quarter results that focused on balance sheet deleveraging and strategic efficiency initiatives. Management stated that the company is intentionally reducing exposure to low-margin, single-threaded loan relationships while closing 26 branches to optimize its retail footprint. The company executed $43.2 million in one-time charges related to professional services and severance to support a long-term goal of $40 million in pre-tax net revenue improvement. Financial results included an expansion of the net interest margin to 3.92% and an increase in the common equity tier 1 ratio to 12.05%. Capital levels remained significantly above regulatory requirements, and the company indicated an increased appetite for share repurchases as strategic investments conclude.

• Management reported that its "Project 2026" initiatives are designed to create an efficient and scalable model, with approximately $40 million in pre-tax net revenue improvement identified.
• Brogdon noted the company is shifting its posture toward growth, stating, "we are narrowing our focus on the type of growth that we pursue," to drive high-margin business.
• The company utilized a test and control model for consumer money market accounts, which Hobbs noted led to a "$2 million interest expense savings" by identifying segments that were not sensitive to price changes.
• Management reported a successful lift out of a St. Louis wealth management team, which contributed to noninterest revenue growing faster than the overall business.
• Simmons reported that a portion of the savings from its efficiency program will be earmarked for reinvestment in deposit growth technology and hiring commercial bankers.
• Brogdon stated the company is prepared for a potential period of balance sheet contraction if risk spreads remain unattractive, saying, "we are not going to dilute our standards along the way... just to solve for the v side of the equation."

INDUSTRY GLOSSARY

• ACL (Allowance for Credit Losses): A reserve established by a bank to cover estimated losses on loans that may not be fully repaid.
• Asset Sensitivity: The degree to which a bank's net interest income will change in response to a change in market interest rates.
• Brokered Deposits: Large-denomination deposits that are placed in a bank by a third-party broker rather than being directly sourced from local customers.
• CET1 (Common Equity Tier 1): A core regulatory capital ratio that measures a bank's capital strength against its risk-weighted assets.
• FTE (Fully Taxable Equivalent): A method of adjusting interest income from tax-exempt securities to make it comparable to income from taxable securities.
• Net Interest Margin (NIM): The difference between the interest income generated by a bank and the amount of interest paid out to lenders, relative to the amount of its interest-earning assets.
• Paydowns: The portion of loan principal that is repaid early or at maturity, which must be replaced with new production to maintain balance sheet size.
• ROTCE (Return on Average Tangible Common Equity): A performance ratio measuring the net income available to common stockholders as a percentage of average tangible common equity.

Full Conference Call Transcript

Operator: Woody day, and welcome to the Simmons First National Corporation Third Quarter 2026 Earnings Conference Call and Webcast. All participants will be in listen only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by 0. After today's presentation, there will be an opportunity to ask questions. To ask a question, may press star then 1 on your touch tone phone. To withdraw your question, please press star and then 2. Please note this event is being recorded. I would now like to turn the conference over to Edward J. Bilek, Investor Relations. Please go ahead.

Edward J. Bilek: Woody morning, and welcome to Simmons First National 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. plans, During today's call, we will make forward looking statements about our future 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 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-Ks yesterday. As well as our Form 10 ks for the year ended 12/31/2025, and our Form 10 Q for the quarter ended 06/30/2026, 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-Ks we filed yesterday with the SEC and are also available on the Investor Relations page of our website simmonsbank.com. Operator, we are ready to begin the Q&A session.

Operator: We will now begin the question and answer session. To ask a question, you may press star then 1 on a touch tone phone. To withdraw your question, please press star then 2. If you would like to withdraw your question, please press star and then 2. At this time, we will pause momentarily to assemble our roster. And our first question comes from Gary Tenner with D. A. David. Please go ahead.

Gary Tenner: Morning. Woody morning. You know, 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 kinda go forward looks like from here.

James Brogdon: Yeah. Thanks, Gary. This is Jay. I will let me let me start. And what I would really like to do is maybe just step back as part of answering that question. Remind you sort of where we have been, what we are committed to, and then we will talk about sort of growth and fundamentals and dynamics as we move forward. You know, I think if you look back over the past year even or year plus, you have you have seen a lot of expressions of our 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 would say is that we are 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--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 does not even necessarily mean new products or new types of loans in the 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 1. 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 you know, every single day when we come into the bank, we are 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 I. Again, I think if you looked over the past the past year, you would see a lot of evidence of that of that commitment and of those types of outcomes.

And so when I get into the, you know, into the third quarter and look back at the results that we are talking about today and even look forward, to sort of where we are headed, there is a couple of dynamics coming to play. 1 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 do not make me all that optimistic about you know, quality and profitable growth in the immediate term outlook.

And what and what I mean by that is we see we see risk spreads compressing very meaningfully in a number of instances. We do not think in those instances, you know, we are we are. We have the opportunity to be paid for the risk. That we see in some of those situations. So we see 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 broke. Brokered 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 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 wanna acknowledge is you know, I think our level of paydowns, and this is just a factor of timing, sort of timing of cash flows, maturity walls, etcetera. 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, you know, we are not gonna have that level of pay down every quarter And I think kind of the confluence of all of those factors comes together to really, you know, to really express all of that. I want to just kind of. I will maybe wrap this part of the question Gary, with just a couple of other thoughts. And here's what I would say. I would say that we fully understand that, you know, 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 is strong relationship and profitable quality business we are we are going to exception price, and we do that. And compete and win in those areas every single day. But what I would also say is we are 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.

And so as we continue to do that, I think what you will see us be able to accomplish is you will 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.

Gary Tenner: Thanks, Jay, for the very comprehensive overlook on that side of things. Appreciate it. And then just move over real quick to the expense side. I mean, obviously, you know, a lot of moving parts, you know, some noise in 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, you know, when with all the savings embedded And then you know, where you see some of the potential investment offsets focused on.

James Brogdon: Let me let me jump in with a couple of comments. I know Daniel's going to want to talk about that more specifically. But what I would just remind everyone is you know, 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, etcetera, that I talked about earlier. I believe we noted in that 8 k that the onetime charges this quarter would range, you know, 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 net revenue improvement as a result of those initiatives. So I think that is really clear evidence again of some of the things that we are committed to in the business. I wanna 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 are pursuing and the growth that we are confident in being able to generate over time in the business. The pace and timing of that investment is gonna be opportunistic.

We are gonna be just as disciplined in that invest investment as we are in the investments of our capital into a new loan or 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 we have been working through and announced. Daniel, I will let you kind of click into that in any way you want to.

Charles Daniel Hobbs: Yeah. Gary, I would maybe just add to that. You know, I will remind you back to our guidance that we gave the year, which was 2% to 3% expense growth in 2026 over 2025. And as I think about where we are today and what is left in the fourth quarter, we have a we have 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, he talked about continuous improvement even before the specific initiatives that we commented on in the 8 k, we have had the continuous improvement self funding mindset for years here.

And so if you 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 have 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 have not even made it in the run rate yet. So I do not wanna give you a number yet. We are gonna we are gonna talk about that at our investor day on December 10. But, you know, we do expect improvement from here.

And then on the investment side, you know, a lot of that we know what some of that investment is today. But some of that is gonna be opportunistic as things come our way. You know, the buckets of those reinvestments, the number 1 thing that we talked about here is deposit growth. that is an area that will probably get the highest reinvestment. The second thing was just to be hiring good quality bankers. Especially in that C&I space. And so we expect to have some meaningful investments here over time. Some are going to be opportunistic.

So come back to you on December tenth and give you a more hard number of what that could look like for 2027 and beyond.

Gary Tenner: Thank you. Thank you.

Operator: And the next question comes from David Feaster with Raymond James. Please go ahead.

David Feaster: Hey. Woody morning, everybody.

James Brogdon: Morning, David.

David Feaster: I wanted to follow-up maybe on some of your comments Jay, with Gary's first question. You know, I mean, you know, just kind of given the different focus in production, and some of the macro headwinds and competition, I mean, do you think would 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. Both still really good. Obviously, we are coming off a really strong quarter last quarter.

I am just curious how demand's trending, where you are 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.

James Brogdon: Yeah. The thing I would say is, David, we are wide open for business. So, you know, when I think about top of funnel, ability to, you know, ability to generate production, I do not I do not have concerns in that regard right in terms of our posture. I do think there is a couple of dynamics As I mentioned, 1, Q3 was a very high level of maturities and pay downs. Q4 is going to be a reasonably high level. I do not I do not expect it to be as high as Q3, but both of those would be.

Both those quarters would be above sort of normal pay down quarters for us, maturity and pay down quarters. And, again, that is just 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 you know, the. My confidence interval and top of funnel activity making its way into sort of, you know, committed and funding production. Is a bit lower right now back to really just discipline and standards that we are--you know, we are not gonna flex around. We are being reasonable. We are not being unreasonable. About that.

But at the same time, we just see risk spreads that do not make sense in a lot of production that. that is happening away from us. And I, you know, I think we are just gonna have a thick skin about that. For whatever period of time that lasts so that we are confident that, again, we are doing those high value, high margin things that are going to produce consistently strong outcomes over time.

David Feaster: Okay. And, again, with that book that you are talking about that you have been deleveraging, you know, the lower yielding, low relationship credits Could you size that portfolio? what is that low rate fixed rate loan book down to? We have that metric in here.

Charles Daniel Hobbs: I think it is probably Or maybe just it is $2.1 billion, David, of weighted average with weighted average rate less than 4%. And that expands as you make that weighted average rate go up. So it is still pretty sizable. Q3 was probably 1 of the bigger paydowns of that portion. Q4 will be another 1, as Jay mentioned. But we do expect that to continue to be a favorable tailwind for us. I will 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 is appropriate to know, focus on profitability.

James Brogdon: The important thing to note there, David, is out of those out of the loans that we are talking about, it would be lower profitability loans. Not all of that is going away. I mean, we are working to deepen those relationships, to reprice those relationships. And we have success doing that. That success varies, and can. Can vary quarter based on you know, a variety of factors. But you know, we are we are very committed to deepening those relationships. But at the same time, we are very committed to allowing sort of single threaded loan relationships that do not churn a very high bar from a profitability perspective. You know, to find a home elsewhere.

Charles Daniel Hobbs: Yeah. They have made--1 other just data point there that might help you contextualize this. You know, 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 a billion dollars of that in terms of paydowns, and it only had a relationship deposit of around less than $50 million. So to Jay's point around single threaded nonrelationships stuff, that is the piece that we are either trying to deepen or figure out other places for it to go.

James Brogdon: And all of that gives us significant opportunity to Right? Recycle it back into higher margin growth, or provide capital flexibility. And in either scenario, we think we think those things are gonna point to an ability to even if we are sort of deleveraging or your question original question was really around shrinking the balance sheet. If that the environment where we find ourselves in, an environment where the application of standards allows for further deleveraging, You know, we are confident in our ability to not only expand returns, but, you know, to also grow earnings.

It. that is going to free up significant growth in capital, the ability to you know, maybe be more aggressive from a share buyback point of view than we have been historically, etcetera. We are gonna let the environment kind of drive that optionality for us, and we will we will be opportunistic on either side.

David Feaster: that is great. And then maybe just following up kinda from the 8 k and the question on the expense front. I mean, obviously, if we are improving profitability, you are gonna be accruing capital like you talked about, positive operating leverage on the horizon. You know, there is a lot of back book reprice. there is a lot there is a lot of tailwinds, and then you got these savings. Right? And a portion of which is going to be in reinvested, and I do not wanna steal too much of your thunder from the analyst day, but I am 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. You know, is there technologies or systems that maybe help improve efficiency further? I am just kind of curious what kind of things are you looking at for reinvesting some of those savings?

James Brogdon: Yeah. I would say some of it is equipping and enabling. Daniel mentioned earlier just activities that we may not have 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 you know, technology enablement, It could be in the form of, you know, 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 our. The strong talent we have here in the bank as well as opportunities in the marketplace to grow talent and then I do.

You know, we are spending a fair amount of time thinking about some of the some of the efficiencies embedded in what we put in the 8 k back in September include the benefits of some technology and automation that we are continuing to insert into the business. And I think we are 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, you know, the main themes within the reinvestment buckets.

David Feaster: that is great. Thanks, everybody.

Operator: Thank you. And the next question comes from Matt Olney with Stephen. Please go ahead.

Matt Olney: Hey. Thanks. Woody morning. Can you talk more about your recent investments that you have made in 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 unique opportunity given all the market disruption, you know, 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.

James Brogdon: Yeah. So I would say in terms of again, I will be more categorical, and we will we will. We may 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 on. Measurable return on investment looks like faster turn times, speed, generation of elimination of kind of redundancies and duplexes, in the business. And so when you think about an ability to sustainably grow organically high margin, high value business, you.

You have gotta have really, really strong standards in terms of efficiency, turn times, etcetera. that is that is where some of the investments around, some of the automation and tooling that we are doing are enabling our bankers and our back office teams. Kinda think front, middle, and back office really, really making the job much more consistent, easier, and freeing up time for sort of higher value product And there is a number of measures that we can look at and kinda see that return on investment. Numb. Number of days to close and fund the loan, etcetera. Number of ways we can look at those things. So those are those are big areas of investment.

Your point around talent is something that we get really, really excited about and candidly was 1 of our big motivators for going in and identifying capacity in the system. So a great example would be while we have not exited any markets, we have announced that we are 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 have actually built branches but did not close any branches. And so we are taking that. You know, we have observed customer behaviors. We have been patient.

Now we are 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 expect more of that type of dislocation And, honestly, we are even benefiting in instances where there is not existing dislocation. there is either just threat of dislocation or dissatisfaction, etcetera.

We are we are we are beginning to develop a bit of a reputation for ourselves in the market in terms of willingness to do the things to improve and grow the business, and that is attractive to strong talent, out there in the market. And so we are the spigot is wide open in terms of you know, of our 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. So we are gonna be thoughtful and measured as we move forward in that. But we think the field is very, very ripe for harvest in that category.

Charles Daniel Hobbs: Matt, I would maybe just give you 2 investments that--that is. 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 it is exceeded all the expectations that we have had. We have also made investments within the core wealth business, and you can see the noninterest revenue growing faster. So that is that is very visible. The other would be talked about the investments that we will be making in our deposit growth outlook, but we have made investments over the last year within that. Now we have 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 are 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.

Matt Olney: Okay. that is a great commentary. Appreciate the color there. And then maybe as a follow-up, Daniel, maybe more on your side as far as the margin 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 the exit NIM for the quarter?

Charles Daniel Hobbs: Yeah. So, Matt, I. Let me let me back you up just a second. I will. And I will get into that specific question. But 1, I just want to comment on you know, 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, you know, some of the deleveraging that we have done, And, you know, our margins that sits today at 3.92, 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 know, you also got a rates up environment that is in front of us.

You know? I think the outlook when we did our when we did our modeling was that a rate increase in December, 1 in March, 1 in June. So we have got that ability to grow. We have also feel like from a durability standpoint, we continue to try to protect on the downside. And you will see that in the in the deck where we put on additional $550 million swaps to do that. It was a cheap, opportunistic time to do that. While we still have asset sensitivity as rates go up. We wanna 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, the adding asset sensitivity through the variable rate loan production mix increasing, so we need to do some of that hedging on the backside keep our sensitivity temp down a little bit. So that is kind of the strategy behind that. As you think. As we look at 8 basis point growth, linked quarter, about half of that was from deleveraging, and about half of that was kind of core, you know, 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 full quarter. And some of that will be opportunistic. But we still believe there is strong upside from the core things that are embedded in our strategy to grow NIM from here.

James Brogdon: Yeah. I mean, I would just say, Matt, I look back at the quarter and just sort of think about what happened in third quarter. Right? I mean, NII grew linked quarter compared to Q2. NIM expanded 8 bps. EPS grew by 4 pennies. ROA increased 12 basis points linked quarter, and candidly, ROA is above our long range target that we had previously published. ROCE improved 113 basis points. You know? So I just. I kinda look at the. All of the mechanics of what we are talking about in our strategy and what we are focused on and sort of the benefits of discipline here beginning to pay off. And I think we are gonna continue to.

You asked about margin, but I am. I guess I am expanding the conversation beyond just net interest margin. I am confident we can continue to see expansion in all of these returns as we execute forward from here.

Matt Olney: Okay, guys. Great color. Thanks again. Thank you.

Operator: And our next question comes from Woody Lay with KBW. Please go ahead.

Woody Lay: Hey. Woody morning, guys.

James Brogdon: Morning, Woody.

Woody Lay: I 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 is, like, some moving pieces with the deleveraging, and then you had the 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.

Charles Daniel Hobbs: Yeah. Hey, Woody. So there is a couple of things that went on within the quarter. Down 8 basis points, a function of that was the deleveraging A function of that was transitioning some of the remaining f a. Excuse me, broker deposits into FHLB. You know, there is a. They are the story behind that, we have talked about that, but broker deposit cost has outrun FHLB in large part due to the demand of across the industry to fund volume. Back to Jay's p times v conversation. And so that has caused the cost of broker deposits to get about a 30 basis points ahead of what FHLB for us is.

So that is 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 will give you a real quick example, and then I will answer your questions.

But an example, in the 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 or rate sensitivity of customers are trying to get to a terminal value And we took a large portion of our money market book and reduced those by, you know, call it 15 to 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 nonsensitive to time.

And so what that did was 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 will tell you that is probably going to be the bottom. We will go up from here primarily because, you know, we got the rate increase in September. We expect to get another 1 in December.

But having said that, the betas that we have modeled for loan beta and deposit beta we will significantly drive value through the margin because of our asset sensitivity. Now if you if you look through the entire cycle, of the additional 3 rate cuts that we have got in there--rate hikes. Yeah. I am sorry. Rate hikes. Yes. The loan beta is going to be around 85% and the total deposit beta is going to be, you know, 30% to 35%. That will give you a sense of how we are thinking about that.

Woody Lay: Great. that is really helpful color. And maybe the 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 have made, some focus you have been on. been on I was just curious, is this mostly coming from current customers and you are taking more of their wallet? Is it new customers to the bank? In any specific, you know, segments or markets where you are where you are seeing the success in?

James Brogdon: Yeah. Christopher, you can jump in here in just a second. Well, go ahead.

Christopher J. Van Steenberg: I will say, yeah, it is a great question. I think we are 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 have 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 are seeing really good response rates, seeing good sticky relationships showing up as a result of that. So it is a nice mix of deepening with existing, which is always valuable.

But the harder thing to do, and we are demonstrating that to our own satisfaction, is the ability to acquire in markets where we do not necessarily have the same brand depth. And tenure that we have in some of our legacy markets.

Charles Daniel Hobbs: Well, I would give you 1 more data point on that. On the example that I gave you around our campaign, You know, the campaign was designed around new money to the bank. And that new money comes from deepening existing and new customers and what we have seen so far is about 75% of that campaign is new money to the bank.

Woody Lay: Got it. Alright. Well, I appreciate all the detail. Thanks for taking my questions. Thank you.

Operator: And the next question comes from Stephen Scouten with Piper Sandler. Please go ahead.

Stephen Scouten: Yeah. Thanks. Woody morning. Hey. I wanted to kind of circle back on the kind of mindset or 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 let's actually, you know, 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 of risk adjusted spreads that said you know, 4% loans.

Let's not rebook these loans, but they are still kind of very price conscious Just walk me through maybe the ideology about what maybe changed from last quarter's call to what progressed in the quarter?

James Brogdon: Yeah. I think the first thing I would say is I do not I do not think really anything has structurally changed in terms of like you know, 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 1 is I knew there was a good size maturity wall in the third quarter. The level of early pay downs, again, was as great as it was at any point in 2-plus years, maybe even longer than that.

So the early pay down environment was underappreciated. So that, I think, is 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 is 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 is 1 part of it. The second part is we. You know, as I as I mentioned earlier, Stephen, we just saw risk spreads continue to compress all throughout the quarter.

And I would I would say there was a shift at least in my mindset, in the third quarter around appetite. And that was purely a. James moved a lot this quarter. And rates have been volatile. And that. 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 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 you know, premium valuation in any industry and in this industry come from doing high quality things repeatedly, and that is what we are focused on right now.

Stephen Scouten: Yeah. Well, clearly, the right decision based on profitability and earnings trajectory. So, you know, congratulations on making what was probably a hard decision. Would it be fair to say that, you know, this $2.1 billion with a rate less than 4% given this compression in risk spread that you are seeing, could be more at risk to leave the balance sheet than maybe see that kind of fixed asset repricing tailwind as we sit here today?

James Brogdon: I think I think our. Again, our commitment to the discipline and overlaid against the environment As I said earlier, I am less optimistic about growth in the immediate terms, like Q4 or Q1. Yeah. Just in the this is the whole environmental piece, we do not control or influence. But, I mean, it is it is real right now. And so I would say, yeah, there is some risk to that outlook from an immediate-term kind of loan growth outlook in my mind 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 is the scenario we are in, to drive significant capital flexibility beyond, you know, what we would otherwise kind of model or expect in a more normal environment.

Stephen Scouten: Yep. Sense. And then maybe just last thing for me. Kind of thinking about the share repurchase. I know you have kind of stacked rank priority, you know, growth dividend and the repurchase, but obviously, you know, the loan book did shrink this quarter. CET1 was higher. And maybe talk about why no share repurchase this quarter. Is that more a function of TCE and a rate move? Or how we should think about the potential aggressiveness on that repurchase moving forward?

James Brogdon: Really, the patience 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 1 time investments we made in the quarter. And there was significant 1-time 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 is kind of be the primary factor You know, candidly, the secondary factor, but it is, you know, it is. it is an important factor is, you know, 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 in the sort of environment that we see evolving right now is increasing.

And so I think what you saw as patience in the third quarter is not how I would extrapolate from here.

Stephen Scouten: Got it. Great. Well, congrats on all the continued progress. Appreciate the time.

James Brogdon: Thanks, Stephen.

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

Brian Wilczynski: Hi, good morning. Thank you for taking my questions. 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 are making in those areas and any updated thoughts on the outlook for total fees over the next few quarters?

Charles Daniel Hobbs: Yes. Hey, Brian. I kind of referred to this a little bit earlier. So if you look at wealth management, it was an area of strength for us and that is a reflection of some of the investments that we have made early in the year and investments in overall business We are just seeing a lot of good momentum there. A lot of good customer acquisition. We are 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 is really a function of just higher level of transaction volume that has service fees associated with that. So that is kind of what drove that. We will talk a bit more about how we are thinking about a go forward run rate for us at Investor Day. But a good quarter for us. And you know, it is an area that we continue to focus on and invest in.

Brian Wilczynski: Great. Appreciate that color, and that as a follow-up, I wanted to ask about the net interest income outlook. You talked about the upside drivers to NIM. You are 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 ahead? Thanks.

Charles Daniel Hobbs: Yeah. It is. It is, Brian. We still feel really confident about the high end of that range. So Yeah.

James Brogdon: And I would just I would just say from an. that is a. That was an annual outlook. We feel very confident in that outlook. Had an annual outlook for operating leverage, and we are going to blow that 1 out of the park, I think. For this year. I think, again, back to back to NII and discipline and commitment, you know, 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 does not change, that gets harder to do in the fourth quarter in my mind.

I am not saying that is not doable, but that gets more challenging in the immediate term if we do not see sort of risk spreads coming back into the business. Again, I do not think that is a long term concern. From a terminal growth rate point of view for our business. But I wanna be realistic about the. You know, what we are seeing in the marketplace and very expressive around our commitment to the standards and discipline that we have talked about in the call today.

Brian Wilczynski: Great. Really appreciate all the color, and thank you for taking my question.

James Brogdon: Thank you, Brian.

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

James Brogdon: Yes. Just a few closing remarks today. First, what I would really like to do in light of everything we have talked about on this call is just acknowledge you know, things like instilling new discipline, setting higher standards, evolving an operating model, These things do not. They do not happen easily, and they do not happen overnight and we have just. You know, I could not be more proud of how we have been tackling some very difficult decisions head on in our business and we are producing results that indicate real progress toward our goals.

So With that acknowledgment, what I really wanna 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 are 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.

Operator: The conference has now concluded. You may now disconnect.