SIMMONS FIRST NATIONAL CORP Q1 FY2025 earnings call

• Balance Sheet: Total period-end loans up 2% linked quarter annualized; commercial loan pipeline up 43% linked quarter. Total deposits down slightly linked quarter due to brokered funding reduction, but customer deposits grew $183M.
• Earnings: Total revenue up $1.1M linked quarter. Net interest margin 2.95%, up 8 bps linked quarter and 29 bps year-over-year. Non-interest income grew 6% linked quarter. Adjusted non-interest expense up $4.3M linked quarter, excluding a $4.3M fraud event.
• Credit: Migrated two credit relationships to nonperforming, boosting specific reserves. One is a $27M hotel loan in Downtown St. Louis, the other is a $23M fast food franchise loan with fraud issues. Past due loans were 21 basis points as of 3/31, down from 22 bps at 12/31, and net charge-offs were 23 bps compared to 27 bps in Q4 2024.

Loans: Total period-end loans were up 2% on a linked quarter annualized basis. The commercial loan pipeline was up 43% linked quarter and is at its highest level since the second quarter of 2022. Average loans were down for the quarter as most funded growth was back-end loaded. Deposits: Total deposits were down slightly on a linked quarter basis due to reductions in brokered funding. Customer deposits grew $183 million during the quarter, roughly 4% linked quarter annualized, with consumer checking accounts growing by 1.5% year-over-year.

• 2025 outlook for 3% plus positive operating leverage and mid-teens year-over-year growth in PPNR remains intact.
• Net interest margin could cross 3% sooner than originally anticipated due to positive trends in customer deposits and favorable asset repricing.
• Confident in asset quality outlook for the remainder of 2025 based on current reserves.

• Potential challenges in loan growth due to the current macro backdrop.
• Intense deposit competition.
• Uncertainty in economic conditions and interest rates impacting earnings.
• Credit risks associated with specific nonperforming loans, including potential further deterioration in certain relationships.

Q: Do you have a timeline for resolution of those credits?

A: Jay Brogdon responded that they'd like to resolve the credits by end of year but both have specific timelines; the Downtown St. Louis Hotel credit could benefit from seasonal improvement, and the fast food franchise loan is in early analysis of the fraud situation.

Q: Thoughts on deposit growth strategy?

A: Jay Brogdon and Daniel Hobbs discussed deposit remixing, consumer deposit growth (1.5% year-over-year in core checking accounts), ongoing initiatives, and competitive deposit environment. They also mentioned positive shifts in time deposits into interest-bearing accounts.

Q: Capital deployment?

A: Jay Brogdon stated priorities are organic growth, dividend, and capital preservation; buybacks would be considered if market dislocation presents attractive opportunities.