Simmons First National Earnings Call Highlights Profitable Momentum

Simmons First National ((SFNC)) has held its Q4 earnings call. Read on for the main highlights of the call.

Simmons First National Signals Strong Momentum Despite Competitive Headwinds in Earnings Call

Simmons First National’s latest earnings call struck an upbeat tone, underpinned by robust loan production, meaningful net interest margin (NIM) expansion, nearly 20% revenue growth, and a sharp increase in pre-provision earnings. Profitability metrics are running well above many regional peers, with return on assets around 1.29% and return on tangible common equity in the mid-teens. Management underscored that legacy credit issues have largely been resolved and that the balance sheet is better positioned after a major funding overhaul. While they acknowledged mounting competitive pressures in loan and deposit markets, alongside some nonrecurring fourth-quarter boosts, the overall message was one of solid operational momentum and disciplined execution.

Loan Production Surges, but Growth Outlook Turns More Cautious

Simmons delivered its strongest quarterly loan production in a couple of years, with underlying fourth-quarter loan growth running well above a 7% annualized pace even after elevated paydowns and seasonal drags in agriculture and mortgage warehouse balances. The loan pipeline remains healthy at roughly $1.5–$2.0 billion, and rate-ready-to-close volumes are at a multi-quarter high. Still, management tempered expectations for 2026, guiding to only low- to mid-single-digit loan growth as they prioritize risk-adjusted returns over chasing volume, especially in more aggressively priced commercial real estate (CRE) segments.

Net Interest Margin Jumps, Supported by Core Expansion

Fourth-quarter NIM climbed about 31 basis points sequentially to 3.81%, and nearly 94 basis points year over year, a standout move for a regional bank in a competitive rate environment. Roughly 19–20 basis points of the quarterly improvement came from the partial-quarter impact of a balance sheet restructuring, while about 11 basis points came from core NIM expansion, including 3 basis points from loan growth and 8 basis points from better rate and mix. The combination of higher-yielding assets and a more efficient funding base is driving a stronger earnings profile relative to prior years.

Back-Book Repricing Provides Ongoing Tailwind

A key structural advantage for Simmons is the embedded yield uplift in its existing loan book. Management highlighted more than $2.5 billion of loans with rates below 4% that are scheduled to reprice over the next two years. As these legacy loans roll into higher-rate structures, they should continue to support loan yields and NIM, even as benchmark rates edge lower. However, executives cautioned that the magnitude of this tailwind will be sensitive to the pace and depth of future rate cuts.

Revenue and Pre-Provision Earnings Show Strong Upside

The bank posted a significant jump in earnings power, with fourth-quarter revenue up nearly 20% year over year and pre-provision net revenue surging about 60%. This improvement reflects both stronger net interest income, driven by NIM expansion, and healthier fee income. The step-up in pre-provision profitability gives Simmons more flexibility to absorb credit costs, fund strategic investments, and maintain attractive returns even if the operating environment becomes more challenging.

Profitability Metrics Reach High-Performing Levels

Simmons’ fourth-quarter annualized return on assets reached 1.29%, while return on tangible common equity tracked in the mid-teens, around 16%. Management reiterated medium-term targets of sustaining ROA above roughly 1.25% and ROTCE in the mid-teens, positioning the bank firmly in the higher-performing tier of regional lenders. These results underscore the payoff from prior balance-sheet actions, cost controls, and a more focused growth strategy.

Funding Mix Improves, Reducing Risk and Enhancing Asset Sensitivity

The company’s balance sheet repositioning has meaningfully changed its funding profile. Simmons reduced reliance on wholesale and brokered funding, cutting brokered deposits by about $1.4 billion. This shift moves the bank from being more liability-sensitive to more asset-sensitive beyond the very short end of the curve, lowering refinancing risk and making earnings somewhat more resilient as rates adjust. The improved mix also reduces the drag from higher-cost funding and supports NIM sustainability over time.

Legacy Credit Issues Addressed, Credit Profile Deemed Stable

On asset quality, management emphasized that lingering problem credits have been tackled head-on. Two problematic credits were resolved with less impact than initially expected, while the bank sold its equipment finance business and took targeted charge-offs, including runoff in legacy portfolios. After a deep-dive review, leadership expressed confidence that reserves and specific loss recognition are adequate and described overall credit quality as stable. This reduces a key overhang that had pressured investor perception in prior periods.

Efficiency Gains Offset Inflation and Fund Strategic Investments

Despite several years of inflation and ongoing investments, Simmons expects 2025 expenses to remain below the run-rate level of the fourth quarter of 2022. The company has reduced facilities square footage by about 6% and is leaning on procurement initiatives and automation to drive further efficiency. Management characterized the current stage of their efficiency program as the “middle innings,” acknowledging that incremental gains may become more challenging but insisting that cost discipline remains central even as they invest in growth and technology.

CRE Loan Pricing Competition Pressures Risk-Adjusted Returns

Management did not shy away from highlighting “irrational” pricing behavior in certain CRE markets, where some competitors are offering aggressive terms that compress risk-adjusted returns. While Simmons’ pipeline in CRE remains strong, the bank is unwilling to match uneconomic pricing simply to gain market share. This disciplined stance supports long-term profitability but may cap near-term loan growth in segments where competition is most intense.

Deposit Competition and Core Funding Still a Constraint

Deposit competition remains elevated in parts of Simmons’ footprint, with particular pressure coming from smaller banks that are bidding aggressively for funds. The bank’s level of noninterest-bearing deposits remains below that of some peers, and management sees core deposit growth as a critical constraint on accelerating loan growth. Cumulative deposit beta stands around 64% and is expected to decline toward the high-50s by the end of 2026, assuming more rational pricing as rates settle, but deposit dynamics remain a key watchpoint for investors.

Seasonality and One-Offs Boosted Fourth-Quarter Results

While fourth-quarter profitability was strong, management acknowledged the presence of several nonrecurring and seasonal factors. These included a little over $3 million in gains from bank-owned life insurance and a tax rate that came in below the roughly 20% level expected for 2026. Certain seasonal patterns also contributed positively. As a result, investors were cautioned that Q4 earnings are somewhat above the sustainable run rate and should be normalized when modeling future quarters.

Pipeline Moderation and Conservative Loan Growth Tone for 2026

Although the portion of the pipeline that is approved and ready to close increased, the overall loan pipeline was characterized as “flattish.” In that context, Simmons is assuming a more measured growth path in 2026, guiding to low- to mid-single-digit loan growth instead of repeating the elevated production pace of the latest quarter. This reflects both competitive pressures and management’s preference for disciplined underwriting and pricing over volume.

Modest Expense Growth to Support Talent and Technology Investments

For 2026, Simmons expects expenses to grow about 2%–3% year over year, largely to fund additional hiring and technology initiatives. Management framed this as a necessary investment in future growth, even as they continue to harvest savings from efficiency projects. With the “easy” cost saves already captured, the bank is now balancing incremental efficiency gains with strategic spending aimed at strengthening capabilities and improving the customer experience.

Loan Paydowns and Divestitures Temper Reported Balance Growth

The strong production in the fourth quarter was offset by elevated loan paydowns, divested loans, and charge-offs related in part to the legacy equipment finance runoff. These factors reduced reported loan balances despite the underlying growth. Investors will need to parse gross production versus net growth, as management continues to exit lower-return or non-core exposures while building higher-quality, better-priced relationships.

Rate Cut Risk and Near-Term NIM Sensitivity Remain in Focus

Even with the improved funding mix, Simmons still exhibits some liability sensitivity in the very short term (roughly day one to three months). Management cautioned that further or faster rate cuts than expected could erode some of the back-book repricing benefit and pressure NIM, especially if deposit betas stay higher than modeled. The current outlook assumes two rate cuts and a gradual easing in cumulative deposit beta; deviations from that path could alter the net interest income trajectory.

Capital Deployment Stays Conservative, Buybacks on the Back Burner

While capital generation is improving on the back of stronger profitability, Simmons is keeping its capital deployment strategy conservative. Management is prioritizing organic growth and maintaining the dividend, with share repurchases not built into the near-term budget. Any buybacks would be opportunistic rather than a core element of the capital plan, signaling a preference for balance sheet strength and reinvestment over immediate capital returns.

Guidance: Steady NIM, Modest Growth, and Sustained Profitability Targets

Looking ahead to 2026, Simmons guided to low- to mid-single-digit loan growth, supported by a $1.5–$2.0 billion pipeline and a strong ready-to-close book, but tempered by competitive pressures and disciplined pricing. Management expects NIM to be roughly stable in the mid‑3.80% range (versus Q4’s 3.81%) and net interest income to grow 9%–11%. The guidance assumes two Federal Reserve rate cuts, a cumulative deposit beta that drifts from roughly 64% into the high‑50s by year-end, and more than $2.5 billion of sub‑4% loans repricing over the next two years. Expenses are projected to rise a modest 2%–3% year over year, while the effective tax rate moves closer to about 20%. Excess funding needs will be met primarily through securities runoff and, if necessary, targeted promotional CDs or wholesale sources. Longer term, management reiterated goals of sustaining ROA above roughly 1.25% and ROTCE in the mid‑teens.

In summary, Simmons First National’s earnings call showcased a bank that has materially strengthened its earnings power and balance sheet while cleaning up legacy credit issues. Strong NIM expansion, robust pre-provision profits, and improved funding mix provide a solid foundation, even as competitive loan and deposit markets, rate-cut uncertainty, and modest growth guidance inject some caution into the outlook. For investors, the story is one of disciplined growth, improving returns, and measured risk-taking, with management signaling confidence that current momentum can support attractive profitability through a changing rate cycle.