Simmons First National's Deposit Push and Disciplined Growth Drive Q2 Beat
Regional bank raises expense and NII guidance as core customer growth, loan production, and self-funded investments gain traction.
SFNC · Earnings Call · 2026-07-17
Deposit Strategy Takes Root as Core Customers Return
Simmons First National's second-quarter 2026 earnings call painted a picture of a bank finally seeing its strategic bets on the deposit base pay off. CFO Daniel Hobbs emphasized that growth in non-interest-bearing deposits rose 4% annualized, and checking accounts grew over 1% year-over-year and linked quarter. This is not just a quarterly blip—it reflects a deliberate focus on core customer acquisition and retention, with marketing and product initiatives launched over the past year. Hobbs noted: “We're proud of growth in our non-interest-bearing deposits in the second quarter. Obviously, that's the highest quality of deposits, and we grew that 4% annualized.” — Daniel Hobbs, Chief Financial Officer (CFO) · 2026-07-17 This shift is also visible in the mix: the bank is allowing non-relationship CDs to run off and is being "capitalistic" about brokered versus FHLB funding, choosing the cheaper source. The competitive environment remains fierce, but management expressed confidence. CEO Jay Brogdon remarked, “All of the things Daniel said... deposit competition is very, very fierce. Our outlook is that that's going to continue.” — Jay Brogdon, President and CEO · 2026-07-17 Yet the bank is winning the high-quality deposits, a positive signal for future margin and funding stability.Loan Production at Multi-Year Highs, Pipeline Solid
On the loan side, Jay Brogdon highlighted that quarterly committed production hit a four-year high, even as overall growth moderated to roughly 3% annualized due to paydowns. The bank's outlook remains a low to mid-single-digit growth rate, and management is unapologetic about sticking to underwriting and pricing discipline. "We're going to stick to our discipline, be unapologetic if the growth for some reason isn't there," Brogdon said. The strength in Unfunded commitments and a healthy ready-to-close pipeline, with yields improving 33 basis points quarter-over-quarter, suggest continued momentum into the back half. The bank is also seeing tailwinds from $1.8 billion of fixed-rate loans repricing above 4% over the next 12 months. Notably, agricultural lending—a legacy strength—drove much of the C&I growth in the quarter, as competitors pulled back. "We're benefiting... from some of the headwinds to that sector have a lot of folks who are looking a little bit inward or less willing to support kind of generational farmers," Brogdon explained.Self-Funding Investments; Expense Guidance Beaten
The efficiency story continues. The bank reduced square footage another 2.5% in Q2, bringing the total reduction to 8.5% since the initiative began, and it continues to seek process improvements across the bank. This is funding investments in talent and technology, including the recent hire of Jim Recer to drive C&I relationships. "We are investing and investing heavily in the business," Brogdon said, but they are self-funding through the Better Bank initiative. CFO Daniel Hobbs confirmed they expect to beat the original 2-3% expense growth guidance for the year. "We feel like we've got a pretty extensive list of things that we're still working on and opportunities there," he added. This disciplined approach is reflected in the metrics. Net interest income grew 21% year-over-year to $197 million, and management raised the NII outlook to the top end of the 9-11% range. Efficiency ratio improved to 40.7%, down from prior levels, and the bank posted a 19.8% net profit margin. The market has taken notice: the stock is up 12% over the last 90 days, trading near its recent high.Credit: One Large Loan, But Overall Stable
Credit quality remains a small overhang. NPAs ticked up due to a single 4-family construction borrower, fully migrated in the quarter, with an 11% specific reserve. Jay Brogdon said they are working expeditiously toward resolution, but timing is uncertain. "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. We're below that through the first half of the year," he noted. The bank sees criticized/classified loans declining and past dues moderating, which bodes well for forward credit quality.Capital: Buyback Initiated
With excess capital above the 10.5% CET1 target, Simmons repurchased shares in Q2, and management is evaluating further deployment, with the priority still on investing in the business. "Our priority is investing in the business... We do think there, with the excess capital and particularly with how we look at the shape of our returns outlook, we've got pencil to paper a little more in terms of how we think about being able to return some of that capital to the shareholder via the buyback," Brogdon said. In summary, Simmons First National is executing on a consistent strategy—growing core customer deposits, maintaining loan discipline, and harnessing efficiency to fund growth. The Q2 results demonstrate that the strategy is working, and the market is beginning to reward it. As Jay Brogdon summed up in his closing remarks:The bank's focus on deposit franchise and competitive environment sets it apart in a sector where deposit competition is intense. With a clear plan and early wins, Simmons looks positioned for continued outperformance.I believe there is significant untapped efficiency and potential in our business as we sit here today... As I look forward, what I would describe today is I think there's more to come in this regard, and I don't think you will be disappointed as we deliver those results.