Simmons First National Corporation (SFNC) Earnings

Management highlights

- **Deposit Strategy & Performance** • High-quality non-interest bearing deposits grew 4% annualized in Q2, and checking accounts grew over 1% quarter-over-quarter and year-over-year, with new customer deposit inflows exceeding outflows for the quarter. • The bank is allowing higher-cost non-relationship customer CD balances to run off, as conversion to core customers has had limited success. • Public funds outflows in the quarter are purely seasonal, with no customer attrition. • The bank shifted wholesale funding from brokered deposits to cheaper FHLB borrowings, maintaining a short duration stance for all wholesale funding. • Deposit competition remains very fierce industry-wide, and core deposit growth is the bank's top strategic priority, with heavy investment planned over the next 12-24 months. - **Lending Performance & Strategy** • Q2 2026 loan production reached near four-year highs, with 7% annualized loan growth year-to-date, putting the bank on track to hit the top end of its full-year loan growth outlook. • Quarterly committed production hit multi-year highs, and the unfunded loan commitment balance grew, indicating a healthy top-of-funnel opportunity pipeline; the slight sequential drop in ready-to-close loans is purely a timing effect from originations shifting to unfunded commitments. • The bank maintains strict credit underwriting and pricing discipline, and will not stretch for growth; it prioritizes relationships with full relationship profitability (including operating deposits and fee revenue) over standalone loan volume. • The most attractive risk-adjusted returns currently come from full C&I relationships that include core deposits and fee income, alongside selectively selected commercial real estate and agricultural lending opportunities; the bank saw strong ag loan growth in Q2, in part from picking up top-tier generational farmer clients that other lenders abandoned amid sector headwinds. - **Efficiency & Investment Initiatives** • Post-restructuring efficiency efforts are on track: the bank reduced total square footage by an additional 2.5% in Q2, bringing cumulative reductions to 8.5% since the initiative launched, with a target of 15% total reduction; the largest remaining opportunities are in corporate office space, not just branch space. • The bank is making heavy investments in new talent (senior leadership, commercial bankers, wealth teams), new consumer deposit products, marketing campaigns, and technology to drive core deposit and loan growth; these investments are being self-funded through internal efficiency savings. • New talent hires from industry disruption (related to M&A activity at other banks) are already delivering early wins in both wealth balances and core deposits.

Guidance

- **Net interest income**: Management reaffirms the full-year 2026 guidance of 9% to 11% year-over-year net interest income growth, and is now comfortable that results will land at the top end of this range. - **Non-interest expenses**: Management previously guided for 2% to 3% full-year non-interest expense growth; the bank now expects to beat this guidance (come in below this growth range) even after making significant new investments in growth, and will not hit the 2% to 3% level. - **Operating leverage & pre-provision net revenue (PPNR)**: Management previously guided for over 5% positive operating leverage and strong PPNR growth; the bank now expects to exceed these full-year 2026 expectations. - **Net charge-offs**: Management maintains the prior full-year 2026 guidance of ~25 basis points in annual net charge-offs; the bank is below this level through the first half of the year, and no changes to the outlook are needed based on current information. - **Loan growth**: Full-year 2026 loan growth guidance is maintained at a low to mid-single digit range, and the bank is currently on track to hit the top end of this outlook halfway through the year.

Segment performance

The transcript does not break out standalone financial performance for separate product or business segments with absolute revenue figures or revenue contribution percentages. All performance discussion is focused on overall bank-level deposit and lending activity.

Risks & headwinds

- Fierce industry-wide deposit competition is expected to continue, and will likely eat into some of the U.S. banking industry's asset sensitivity if rates rise, or erode some back-book repricing benefits even if rates stay flat. • Consumer spending headwinds from higher gas prices acted as a drag on consumer deposit balances in prior quarters, and broader macroeconomic factors continue to impact consumer credit and deposit trends. • There is one large non-performing 1-4 family construction loan that migrated to non-accrual status, with an 11% specific reserve held against it; resolution timing is uncertain, and it could extend into 2027. • Intense lending competition means the bank regularly loses loan opportunities to competitors willing to offer lower pricing, so it must maintain pricing discipline to protect returns.

Analyst Q&A

• Q: How is Simmons progressing on core deposit growth, and what is the current competitive landscape for deposits? /

  A: Core deposit growth is Simmons' top strategic priority, with heavy investment planned over 12-24 months. The bank saw early positive results in Q2: 4% annualized growth in high-quality non-interest bearing deposits, 1% quarter-over-quarter checking account growth, and net positive new customer deposit inflows. Deposit competition remains very fierce industry-wide, and this environment is expected to continue. The bank is allowing higher-cost non-relationship CDs to run off, and shifted to cheaper FHLB borrowings for wholesale funding this quarter. (317 characters)

• Q: What is your outlook for non-interest expense guidance after your recent restructuring and new investments? /

  A: Management originally guided for 2% to 3% full-year non-interest expense growth in January 2026. Even after making significant new investments in talent, products, and technology, the bank now expects to beat this guidance (come in below the 2-3% growth range) for full-year 2026. Management also reaffirmed all other prior guidance ranges, and expects to exceed the prior outlook for 5%+ positive operating leverage and strong PPNR growth. (351 characters)

• Q: What is the bank's comfort level for the loan-to-deposit ratio, and what is driving recent core deposit growth? /

  A: The current loan-to-deposit ratio is already within Simmons' comfort range, and can flex incrementally in either direction going forward. The bank's core goal is to continue growing the core deposit franchise to fund loan growth, rather than relying on lower-quality wholesale funding. Recent core deposit growth comes from multiple initiatives: expanded targeted marketing (tested and scaled over the past year), new consumer deposit products, aligned customer incentives, and new talent hires from industry disruption at other banks, which are already delivering early new deposit wins. (456 characters)

• Q: How should we think about the trajectory of deposit costs in the second half of 2026, especially in a higher-for-longer rate environment? /

  A: Q2 average deposit cost was 193 basis points, and management expects one more quarter of declining deposit costs before any potential impact from a projected October 2026 rate hike. If a rate hike happens, management models a 45% deposit beta increase, which would push deposit costs higher. If rates stay flat, deposit costs are expected to hover between 190 and 195 basis points. Simmons' focus on shifting the deposit mix to higher-quality, lower-cost deposits could help outperform industry deposit cost headwinds. (419 characters)