Simmons First National (NASDAQ:SFNC) said its third-quarter strategy emphasized profitability, margin expansion and capital flexibility over loan volume, as management cited compressed risk spreads, elevated wholesale funding costs and an unusually high level of loan maturities and paydowns.
During the company’s third-quarter 2026 earnings call, President and CEO Jay Brogdon said Simmons remains open for business and continues to compete for profitable relationships, but will not ease underwriting or pricing standards simply to support balance-sheet growth.
“We fully understand that the formula for revenue in this business is both P times V,” Brogdon said, referring to price and volume. “But what I’d also say is we’re just not going to dilute our standards along the way in doing that, just to solve for the V side of the equation.”
Loan Growth Faces Near-Term Pressure
Brogdon said the company experienced an outsized level of maturities and paydowns during the third quarter, with the timing tied to cash flows and maturity schedules. Many of those loans were lower-rate, fixed-rate credits originated roughly five years ago, he said.
Chief Financial Officer Daniel Hobbs said Simmons had approximately $2.1 billion of loans with weighted-average rates below 4%. The company expects continued runoff from that portfolio to provide a favorable tailwind as it replaces lower-yielding balances with more profitable production.
Hobbs said third-quarter loan production generated a return on capital more than 300 basis points higher than the loans that ran off. However, management cautioned that near-term balance-sheet contraction remains possible if market pricing does not improve.
Brogdon said risk spreads compressed throughout the quarter, reducing the attractiveness of some lending opportunities. He said the company does not believe it is being adequately compensated for risk in certain market transactions and expects to maintain its discipline even if that constrains growth in the fourth quarter or first quarter.
The company is working to deepen and reprice lower-profitability customer relationships, according to Brogdon. But it is also willing to let “single-threaded” loan relationships that do not meet profitability standards move elsewhere.
Management said large paydowns during the quarter illustrated that opportunity. Hobbs said loans with paydowns of $5 million or more totaled more than $1 billion and had less than $50 million in associated relationship deposits.
Margins and Returns Improve
Simmons reported net interest margin of 3.92%, up 8 basis points from the prior quarter. Hobbs said roughly half of the linked-quarter expansion came from deleveraging, while the remainder resulted from core profitability efforts, including back-book repricing.
Brogdon said net interest income increased from the second quarter, while earnings per share rose by $0.04. He also cited a 12-basis-point sequential increase in return on assets and a 113-basis-point improvement in return on tangible common equity.
Management said it continues to see margin upside from replacing low-rate assets, expanding core funding and increasing the share of variable-rate loans in new production. Hobbs said the company added $550 million of swaps to provide downside-rate protection while retaining asset sensitivity should rates rise.
Deposit costs declined 8 basis points sequentially. Hobbs said the September exit rate for deposit costs was 1.83%, though he expects that figure to increase as the company incorporates recent and anticipated rate increases.
The company also shifted some remaining brokered deposits into Federal Home Loan Bank funding. Hobbs said brokered-deposit costs had risen to about 30 basis points above the company’s FHLB funding cost, reflecting industry demand for wholesale funding.
Expense Savings to Support Reinvestment
Management reiterated that initiatives announced in a September filing produced about $40 million of one-time charges in the third quarter and are expected to generate approximately $40 million of pre-provision net revenue improvement. Some of the savings will be reinvested in the company.
Hobbs said Simmons had previously guided for 2% to 3% expense growth in 2026 compared with 2025, but now sees a possibility that expenses could be flat or slightly lower for the year, depending on fourth-quarter results.
The company plans to provide a more detailed expense outlook at its Investor Day on Dec. 10. Management identified deposit growth, hiring commercial and industrial bankers, technology, automation, direct marketing and talent acquisition as potential reinvestment areas.
Brogdon said automation and workflow tools have already contributed to faster loan processing, increased capacity and reduced duplication across front-, middle- and back-office functions. Simmons also announced plans to close 26 branches, though Brogdon said the company is not exiting any markets.
He said branch optimization is intended to free resources for hiring and growth investments, particularly as management sees talent opportunities amid disruption in its operating footprint.
Deposits, Wealth Management and Capital Deployment
Simmons said its deposit initiatives have shown early progress. Chief Operating Officer Chris Van Steenberg said growth has come from both deeper existing customer relationships and new customer acquisition, including in markets where the company has a less-established brand presence.
Hobbs said a recent campaign focused on attracting new money produced approximately 75% new funds to the bank. The company also tested rate reductions of roughly 15 to 20 basis points on selected consumer money-market accounts, generating about $2 million of interest-expense savings that it redirected to promotional activity aimed at bringing in new customers.
Fee income also improved during the quarter, led by wealth management and service charges. Hobbs said the company’s St. Louis wealth-management team lift-out has exceeded its expectations, while broader investments in the wealth business have supported customer acquisition, deposit growth and faster noninterest revenue growth.
On capital deployment, Brogdon said the company did not repurchase shares in the third quarter largely because it prioritized capital for restructuring-related investments and associated returns. He added that Simmons’ appetite for repurchases is increasing as capital flexibility grows, particularly if the balance sheet continues to shrink.
Management maintained confidence in reaching the high end of its previously discussed 9% to 11% annual net interest income growth outlook, although Brogdon said continued pressure on lending spreads could make sequential growth more difficult in the near term.
About Simmons First National (NASDAQ:SFNC)
Simmons First National Corporation is a financial services company headquartered in Pine Bluff, Arkansas, and the parent company of Simmons Bank. Founded in 1903, the company has grown from a community bank into a regional banking organization serving businesses, individuals and institutions.
Simmons Bank provides a range of banking services, including checking and savings accounts, commercial and consumer lending, residential mortgage lending, credit cards and treasury management. The bank also offers wealth management, trust, investment and brokerage services to individuals, businesses and nonprofit organizations.
Through its branch network and digital banking platforms, Simmons Bank serves customers in Arkansas, Colorado, Kansas, Missouri, Oklahoma, Tennessee and Texas.
