Earnings call: Simmons First National sees stable margins, modest loan growth

In their Third Quarter 2024 Earnings Conference Call, Simmons First National Corporation (NASDAQ: SFNC) executives, including Executive Chairman George Makris and CEO Bob Fehlman, outlined the bank’s financial performance and strategic initiatives. The bank’s management emphasized a disciplined approach to growth, focusing on profitability and maintaining a strong balance sheet. They also discussed the impact of recent interest rate cuts on the bank’s net interest margin (NIM) and loan growth, expressing cautious optimism for the future.

Key Takeaways

Simmons First National Corporation reported a proactive approach to managing deposit costs, which decreased ahead of a 50 basis point rate cut in September.
The bank anticipates a stable net interest margin in Q4, with potential improvements in 2025 depending on Federal Reserve actions.
Loan demand is expected to improve as rates decrease, with a disciplined focus on profitability over aggressive expansion.
Simmons First National is consolidating branches and reallocating savings towards revenue-generating initiatives, aiming for a reduction in core expenses.
The bank’s net interest margin, currently at 2.74%, could approach 3% in the latter half of 2025, contingent on economic conditions and Fed policies.
Management highlighted the success of their Better Bank initiative and the upcoming Simmons Bank Championship PGA Tour event.

Company Outlook

Executives anticipate a stable NIM in Q4, with a notable inflection point in 2025, particularly if the Fed continues to cut rates.
The bank aims to improve operating return on assets to 1% in the near term, with a long-term target of 1.25% and a mid-3s NIM.

Bearish Highlights

The bank faces challenges in replicating the 51% deposit betas experienced during rising rates, projecting a more modest 40% as rates decrease.
Current loan demand remains uncertain due to macroeconomic factors and election-related concerns.

Bullish Highlights

There are signs of improving loan demand as rates decrease, with management optimistic about building relationships to drive growth.
The bank’s patient approach to its bond portfolio capitalized on favorable market conditions, particularly a significant drop in 10-year rates.

Misses

Despite an opportunistic bond sale, the bank acknowledges the competitive landscape for deposits and the difficulty in replicating high deposit betas on the decline.

Q&A Highlights

Management discussed the potential for NIM to approach 3% in the latter half of 2025, contingent on the Fed’s actions and overall economic conditions.
The bank is observing an industry-wide increased willingness to lend, although demand has not yet surged.

Simmons First National Corporation remains committed to optimizing their funding base and prioritizing customer account growth. With a focus on short-duration liabilities and conservative risk appetite, the bank is positioning itself for positive trends into 2025. Executives concluded the call by inviting participation in the Simmons Bank Championship PGA Tour event, showcasing the bank’s community engagement and marketing initiatives.

InvestingPro Insights

Simmons First National Corporation’s (NASDAQ: SFNC) recent earnings call paints a picture of cautious optimism, which is further supported by data from InvestingPro. The bank’s focus on profitability and maintaining a strong balance sheet aligns with several positive indicators.

InvestingPro data shows that SFNC has a market capitalization of $2.92 billion, with a P/E ratio of 22.86. This valuation suggests that investors are willing to pay a premium for the company’s earnings, possibly due to its strong financial position and growth prospects.

One of the most notable InvestingPro Tips is that SFNC “Has raised its dividend for 12 consecutive years.” This consistent dividend growth underscores management’s commitment to returning value to shareholders, even in challenging economic environments. Moreover, the current dividend yield stands at an attractive 3.61%, which could appeal to income-focused investors.

The bank’s disciplined approach to growth is reflected in another InvestingPro Tip, which indicates that “Analysts predict the company will be profitable this year.” This aligns with management’s focus on profitability over aggressive expansion, as discussed in the earnings call.

SFNC’s financial health is further evidenced by its operating income margin of 25.47% for the last twelve months, as reported by InvestingPro. This robust margin supports the company’s ability to navigate the current interest rate environment and potentially capitalize on future rate cuts, as outlined in their outlook.

The InvestingPro data also reveals a significant 1-year price total return of 57.39%, indicating strong market performance. This aligns with the management’s optimistic view on improving loan demand and potential NIM expansion in the latter half of 2025.

It’s worth noting that InvestingPro offers 11 additional tips for SFNC, providing investors with a comprehensive analysis of the company’s financial health and market position. These insights can be particularly valuable for those looking to make informed decisions in the dynamic banking sector.

Full transcript – Simmons First National Corporation (SFNC) Q3 2024:

Operator: Hello, and welcome to the Simmons First National Corporation Third Quarter 2024 Earnings Conference Call and Webcast. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to hand the call to Ed Bilek, Director of Investor Relations. Ed, please go ahead.

Ed Bilek: Good morning, and welcome to Simmons First National Corporation’s third quarter 2024 earnings call. Joining me today are several members of our executive management team, including our Executive Chairman, George Makris; CEO, Bob Fehlman; President, Jay Brogdon; and CFO, Daniel Hobbs. Today’s call will be in a Q&A format. Before we begin, I would like to remind you that our third quarter earnings materials including the earnings release and presentation deck are available on our website at simmonsbank.com under the Investor Relations tab. During today’s call, we will make forward-looking statements about our future plans, goals, expectations, estimates, projections and outlook, including, among others, our outlook regarding future economic conditions, interest rates, lending and deposit activity, credit quality, liquidity and net interest margin. These statements involve risks and uncertainties, and you should therefore not place undue reliance on any forward-looking statements as actual results could differ materially from those expressed in or implied by the forward-looking statements due to a variety of factors. Additional information concerning some of these factors is contained in our earnings release and investor presentation furnished with our Form 8-K today and our Form 10-K for the year ended December 31, 2023, and including the risk factors contained in that Form 10-K. These forward-looking statements speak only as of the date they are made, and Simmons assumes no obligation to update or revise any forward-looking statements or other information. Finally, in this presentation, we will discuss certain non-GAAP financial metrics we believe provide useful information to investors. Additional disclosures regarding non-GAAP metrics, including the reconciliations of these non-GAAP metrics to GAAP, are contained in our earnings release and investor presentation, which are included as exhibits to the Form 8-K we filed this morning with the SEC and are also available on the Investor Relations page of our website, simmonsbank.com. Operator, we are ready to begin the Q&A session.

Operator: [Operator Instructions] Today’s first question comes from Woody Lay with KBW. Please go ahead.

Woody Lay: Hey, good morning, guys.

Jay Brogdon: Good morning.

Woody Lay: So it was great to see the opportunistic bond sale in the quarter. Could you just give us some detail on the thought process of the transaction and how you landed on the sizing of the sale?

Jay Brogdon: Yes, I’ll jump in with some remarks there. This is Jay. I’m sure some others may have some remarks on our side as well. But really, what I’d start with is this has just been kind of consistently our thought process around it is very patient with the bond portfolio, evaluating opportunities when the market affords those to us. We have not — and we’ve said before, we’ll reiterate it again, at least at this point in time, we have not sort of wanted to do a bond overhaul or kind of rip the Band-Aid off approach on the bond portfolio. We think patience is a better virtue here. We balance earnings and capital here and are thoughtful and try to be disciplined around the earn-back. So all of those things kind of come in to factor into the equation, thinking about sizing, timing, et cetera. Obviously, rates came our direction in the quarter. 10-year in particular, moved quite a bit during the quarter, and so we were in a position to take advantage of that. What you and others have probably heard us say before, we’re very scenario rich when it comes to the way we look at the bond portfolio and all the analysis that we do. And we saw the market come right into a number of the scenarios that we’ve looked at, and feel like the transaction we put forward really is one that offers good economic returns in and of itself, balancing the size of the loss and the pro forma earnings implications. And so all of those stars kind of aligned and that’s how we put forward the transaction in the quarter.

Woody Lay: Got it. That’s helpful color. Maybe shifting over to deposits and deposit pricing in the quarter. Obviously, we’ve got the 50 basis point cut towards the end of the quarter. Could you just give some color on deposit pricing trends sort of from a from a pre and a post-cut perspective?

Daniel Hobbs: Yeah. Hey, Lay, this is Daniel. So you’ll note in the IP that we talked about, higher deposit costs peaking in June at about I would tell you, it peaked at 2.81%. For the second quarter, we were at 2.79%. So our top point was 2.81%. We were at 2.81% for June, July and August. And then we had the rate cut happen. We got 50 basis points. And so as you think about that impact to deposit cost for the month of September, that brought our total for September down to 2.75%. We were already trending down, I’ll tell you because we — you’ve heard us talk about some of the management decisions that we’ve been doing, some of the testing that we’ve been doing. We’ve actually doubled down on a few of those tests to include more markets specifically around the money market tests that we were doing. Those have performed really well. So we’ve been forward-leading going into the rate cut on money market CDs, we’ve changed our standard pricing. We’ve changed our promo pricing. We brought those down. And then the other part was brokered deposit cost was trending down ahead of the rate move. So if you think about just the rate move itself, that was about, call it, 2 to 3 basis points of impact for the quarter, for that third quarter. So we were already — like I said, we were already moving down a path of rates coming down from that 2.81% peak, but the rate cut helped us get there a little bit faster.

Woody Lay: Got it. And then just lastly, I mean, looking at the CD maturity schedule you provide, you’ve got a pretty large tranche here in the fourth quarter. Could you just give us an idea on sort of the incremental repricing there? And do you expect those CDs to remain sort of short duration? Or do you expect the terms to sort of be increased a little bit?

Daniel Hobbs: Yeah. So if you go back and look at the last 90 days, our CDs are maturing at a rate of about 4.40%, [are] (ph) going on today, all in is in that rate of about 3.97%, close to 4%. So a pretty good tailwind there. In terms of your question on duration, yeah, I mean we’re pretty short in that right now, and we would expect to keep that in the near term, relatively short.

Jay Brogdon: The only thing I’d add on top of that, Woody, is just yet to be seen, we can all maybe speculate, but yet to be seen what the competitive environment is going to be around deposits, whether we’re talking about CD promo rates, et cetera. I think one of Daniel’s earlier point is an important one. We leaned a little harder into brokered CDs, especially kind of late in the quarter, simply because a number of competitors were keeping rates above broker rates, and we just weren’t willing to do that for kind of hotter money in the balance sheet when we had better opportunities in the brokered area. And so I think the one caveat will just be what does the competitive environment look like for deposits overall.

Woody Lay: Yeah. All right, that’s all for me. Thanks for taking my question.

Jay Brogdon: Thank you.

Daniel Hobbs: Thanks, Woody.

Operator: Thank you. The next question comes from David Feaster with Raymond James. Please go ahead.

David Feaster: Hi, good morning, everybody.

Jay Brogdon: Good morning, David.

David Feaster: Maybe just kind of following up on that line of questioning, just look, you guys have been very active both on managing assets and liabilities, right? You got the restructuring, you talked about utilizing brokered funding instead of borrowings. I know you’re not looking for a rip the Band-Aid off transaction, but do you expect maybe more opportunistic and smaller repositionings, especially as loan growth comes? And then on the other side of the coin, is there any other opportunities to optimize the funding base, especially with the FHLB advances maturing here soon?

Jay Brogdon: Yeah, I’ll take a shot at that, at least out of the gate here. I think the answer on the bond portfolio side is we’re going to continue to be opportunistic. And — that’s not to — I don’t want to get out over our skis. The opportunity is one we don’t really control, all we control is preparation and preparedness. And we were very prepared. We saw the 10-year come down to 3.80% range. It hadn’t been there in a while and it shot right back above there soon after we did the transaction. And so we stepped into the market and we’re prepared to do so in the quarter, and we will continue to be opportunistic if and when the market gives us opportunities to do so for any bonds that we’re evaluating to trade out of. And David, in my mind, that’s really the key driver. I mean we are overall on the balance sheet, we continue to focus on relationships from both the deposit and the loan side. To your point, we’re looking at both sides of the balance sheet. But when I think about kind of brokered funding or wholesale funding in general, I think our ability to optimize those aspects of our liabilities is going to be really — is really hinge upon duration and ability to pull forward duration in the bond portfolio and then, of course, the ability to continue to grow core customer accounts.

Bob Fehlman: David, one thing I’d like to point out also on the security trade. One of our parameters, many parameters that we look at is what is our current period earnings, what are we going to do? Our balance sheet has remained relatively flat as we’re remixing the balance sheet. And one of our parameters as to really what earnings do we have in the quarter after dividends to utilize for a bond sales. So that’s one of the many factors we look at, and that’s our choice of use of the capital today to optimize the balance sheet.

Daniel Hobbs: Yeah. I might add one more thing to that discussion is the long end of the curve is going to drive the loss and then the short end of the curve is going to drive the reducing of the wholesale funding. So with short end coming down, that’s going to make it a little bit more challenging as we move forward in that earn-back calculus. So that’s something that we think about every day.

David Feaster: Yeah. That’s a good point. And then maybe just kind of putting it all together, like just thinking about the margin side, I mean, you [scream] (ph) moderately liability-sensitive. But curious maybe, how do you think about the trajectory of the margin as we look forward? Obviously, we got the 50 basis point cut at the last meeting. But if I look at the forward curve, I’m just curious how you think about the margin trajectory? You got the lag impact on repricing some deposits, but you do have some index deposits as well. I’m just kind of curious how do you think about the margin trajectory as we look forward.

Jay Brogdon: Let me take a shot at that, David. So I think, let’s start with immediate term. I think even just looking to Q4, I think when I’m looking at numbers, I think something even close to where we were in Q3 is probably a realistic starting point for Q4. And the reason for that is there’s a lot of puts and takes in the quarter. We obviously get the benefit of continued asset repricing, a full quarter benefit from the bond transaction where we only got about a half quarter in Q3. So there are some obvious positives in there in Q4, but something that we have been saying consistently, I want to remind everyone of is there is a lag effect with the 50 basis point down move in September, we have probably as many or more assets repricing in the fourth quarter as we do liabilities. And so I think when we think about liability sensitivity, really the inflection of that happens more notably into 2025. And so — and then you’ve got to start thinking about what does the Fed do along the way as you start stacking rate cuts together. So I think we’re more — probably a little more conservative or balanced in our view, again, acknowledging there’s a lot of puts and takes here coming into Q4. But when we look out into 2025, we think that increasingly through the year, especially if the Fed does anything close to what the dot plot or the forwards would suggest now that we see some notable inflection in the net interest margin in the next year.

David Feaster: Yeah. Okay. That’s great. Maybe touching on the loan growth side, I mean, look, loan growth has been modest. We’ve talked a lot about how your focus has shifted from growth to really profitability. But look, the pipeline is built, rates are down, expectations are we could see improving loan demand. I’m curious maybe what you’re seeing on the growth front, the complexion of that pipeline and your appetite for growth here and maybe what you would expect to be some of the key drivers of your growth.

Jay Brogdon: Yeah. Well, first of all, thank you for pointing out something we say all the time. We definitely are focused on soundness and profitability and growth. And we say it, when we say that, we’re focused on them in that order. And we’re seeing some good progress there. I’m very, very pleased with some large relationship wins that we saw in the third quarter, and I want to emphasize the word relationships on the commercial side. And then just even all the way out through things that we’re doing within the community bank more broadly. And so I think we’re seeing some good progress in all those regards. Our appetite to grow is as strong as it’s ever been. I think our filters around soundness and profitability are also as tough — as strong as they’ve ever been. So we’re going to continue to be disciplined. We’ve indicated kind of low single-digit growth throughout the year this year. I think that continues to come through in the numbers. As I look out into next year, I’m going to be balanced, I think, in my remarks to you here. On the one hand, I think the rate trajectory and the economy can stay strong, if there’s a soft landing here from a macro perspective, then I think we’re going to see demand increasing, and we’re going to be ready to capture that demand. On the flip side, we’re not seeing that demand yet. We’re seeing optimism and some green shoots around, okay, the Fed made a good move in September, I think a lot of our borrowers and a lot of the demand out there, there’s election uncertainty, there’s still overall macro uncertainty. And so we lean optimistic, but that optimism hasn’t started to firm up yet. We hope that it does, and we’re going to be ready for it and our appetite for it will be strong when it gets there.

David Feaster: Okay, terrific. Thanks everybody.

Jay Brogdon: Thanks, David.

Operator: Thank you. The next question comes from Matt Olney with Stephens. Please go ahead.

Matt Olney: Hi, guys, good morning.

Jay Brogdon: Good morning, Matt.

Matt Olney: On the expense side, I saw the disclosure, some savings, some branch closings. It sounds like you want to reinvest that. Any color on those reinvestments? And then just more broadly on expenses, we saw the core expense levels step down a little bit in the third quarter. Just any color on expense levels in the near term? Thanks.

Daniel Hobbs: Yeah. Hey, Matt. This is Daniel. So a little bit on the branch consolidation. So we’re constantly reviewing our retail network and our strategy there. We’re evaluating the profitability, the trends, customer usage, how that has evolved over time. And so we’re constantly reviewing that. And we’re reviewing our markets and where we have density, where we have share, where we might need to add some branches. So your question about where would we invest? I would kind of put it in a bucket of if you think about our better bank initiative. That’s not all about cost reduction. There’s investments into revenue that we’re doing there, too. So we haven’t put a finite pin to that $3 million and how we would deploy that. We’ll likely take some of the bottom line. We’ll likely reinvest that. We have opened, I think, four de novos this year. So there’s been some reinvestment there. We always want to hire a great banker when we find one. We’ve invested in some of our back office function. We talked about investments in procurement, which has driven future benefits to us. So we’re investing all over the bank. And so that’s what I’ll tell you about that. And then just the whole mindset that we are operating under is how can we self-fund our investments. And we’ve done a really good job of that, I think, over the last couple of years. You look at the guide that we gave which was kind of [5.55% to 5.60%] (ph) and to remind you, I know we say this a lot, but I think it’s worth repeating, that’s down 1% to 2% from our Q4 ’22 annualized run rate. So you’ve got couple of years of merit, high inflation investments that we’re making, and we’re still down 1% to 2%. I think as you think about that guide for this year, I think we’ll come in on the — probably below that. Within that, there’s a couple of parts to that. There’s things some one-timers that have gone our way this year. There’s also some things that we’ve done to have permanent reductions to expenses. We’ve renegotiated several of our major vendor contracts, and that’s providing benefits. So as you think about fourth quarter, you probably — relative to third quarter, there’s probably a little bit higher in the fourth quarter just because there was a onetime benefit for some salary incentive accruals in the third quarter, but I still feel really good about our guidance, and we’ll probably come under that 5.55% number.

Matt Olney: Okay. Great. Thanks for the color there, Daniel. And then I guess putting that all together, it just feels like there are some nice opportunities for some nice positive operating leverage next year. I mean we talked about the benefits of lower rates potentially. We talked about maybe some loan growth next year, some good cost discipline. Any just big picture thoughts you want to leave us with as far as achieving some operating leverage in 2025.

Jay Brogdon: I’ll jump in on that at least initially on our side here, Matt. I mean I think you’re absolutely right. Everything we’re doing is on the balance sheet and the bank for positive operating leverage and really just overall for scalability, things we talk about internally all the time, the things George drives us on from his seat are really around how do we ensure that everything we’re doing today puts us in a position to grow revenue faster than expenses going forward. And we feel pretty optimistic that we’re poised for that in 2025. And again, increasingly through the year, given a lot of the remarks that have been made so far and then ongoing into 2026. And so we’ll continue to sharpen up our outlook and probably provide an outlook in our January earnings call, consistent with how we have historically. But I think the liability sensitivity, the balance sheet, the opportunity we think we have to continue to be really disciplined on expenses, et cetera, have a nice shape in terms of the trajectory of our pre-provision net revenues and earnings going forward.

Matt Olney: Okay. Thanks for that, Jay. And if I can sneak in just one more, you disclosed, I guess, the index deposits, at pretty material level there. Any more color on that? What are those indexed to? And how quickly and how often do those index deposits reprice?

Daniel Hobbs: Yeah. So those are generally indexed to Fed funds. And they’re going to reprice immediately when the rate cut happens. And so we did see that, and that was some of that benefit that we got when I mentioned that three basis points from the quarter from the deposit production.

Matt Olney: Okay. Perfect. Thanks, guys. Appreciate it.

Jay Brogdon: Thank you.

Operator: Thank you. The next question comes from Stephen Scouten with Piper Sandler. Please go ahead.

Stephen Scouten: Hey, good morning, everyone. I guess if I could revisit some of the discussion around the NIM. I know, Jay, you said not necessarily ready to give specific guidance, but you did note kind of this idea of a notable inflection for the NIM, which could be construed as a pretty wide burst. I mean we’re at 2.74% here. I mean as you think about the possibilities for the NIM next year, I mean, could this move towards 3%? Is that too far of a road to hold, like how can we kind of frame up that notable inflection as we look at the projected Fed path?

Jay Brogdon: Yeah. I think what you just said is important to note, right? I mean what the Fed does is going to be material to any outlook we would have there. But if you just kind of follow the forwards and assume the macro remains at least intact, and I think we’re on a glide path toward 3% in the back half of next year for sure. The factors at the end of the day that we’re really focused on, Stephen, probably even more than net interest margins, dollars of net interest income. We’re really trying to focus on the balance sheet overall, loan growth, as we’ve talked about profitability, et cetera. And so again, I think we feel pretty good about our prospects for growing NII moving forward from here. But if you want to focus on a NIM trajectory, I think it’s fair to think of in a status quo or subject to all of the caveats on the market contributors that we don’t control, but kind of follow the glide path and the forward curve, I think it’s fair to think that there’s a 3% clip on NIM in the back half of next year.

Stephen Scouten: Great. That’s extremely helpful, Jay. And then just as I think specifically about maybe deposit betas on the way back down, I think they’re around 51% total on the way up. Do you think that’s replicable on the way down or do you think we’ve had kind of structural changes in terms of customer perception that maybe creates a little bit of a headwind to achieving that same path on the way back down.

Daniel Hobbs: Yeah. Hey, Stephen, it’s Daniel. I’ll take a shot at that and others can jump in. If you think about that 51%, where we started from and where we got to, we went from 0% to 5.50% in a pretty short period of time. So I think it would be difficult to replicate the 51% on the way down. I think that’s going to be determined by the volume of reduction and the frequency of the reduction. I think if the frequency is quicker, the beta might be more. If it’s more protracted, it might be less. But what we’ve modeled right now is we’ve got 100 basis points in the fourth quarter which was down from 5.50% to 5% and another 100 basis points for next year. And so what I would tell you is we’re kind of in that range of somewhere plus or minus 40% on the deposit beta on the way down through that part of the cycle.

Stephen Scouten: Okay. Great. That’s super helpful as well. Thank you. And then just lastly for me, Jay, you kind of touched on, worried more about NII dollars and ultimately, profitability, which is clearly the right thought process and message, how do you think about profitability for the bank in the maybe near and medium term from — we’re looking at a 67 basis point kind of operating ROA by my math this quarter. What’s kind of — does it take till ’26 to get to a one ROA? I mean how can we think about the return to kind of peer and like profitability for you all?

Jay Brogdon: Yeah. I think what I’d say to that, Stephen, is that in the intermediate term, the near to intermediate term, we’re fighting to get the margin back above 3%. We’re fighting to get ROA back toward 1%. Those are not long-term targets. Those are the more near-term targets. And again, we think we see past that direction with extrapolating from where we are here on rate expectations and macro backdrop. Longer term, I’m going to reiterate what we’ve said before. We think a good ROA for our balance sheet for where we are today is 125 or greater. We think that pencils out to a lower 50% type efficiency ratio. We think that’s net interest margin in the mid-3s, give or take. Those are areas where we think we can operate the balance sheet where we think that we can grow relationships within our risk appetite, which is a conservative one. But we think that’s a very, very high quality of earnings given the retail base that we have, the long history we have in terms of disciplined underwriting and credit risk and we think we can generate some strong returns on tangible common equity by doing those things. And so that’s the target that we’re focused on as we move forward.

Stephen Scouten: Fantastic. Great color, Jay. And it’s nice to see everything moving here in the right direction.

Jay Brogdon: Thank you, Stephen.

Operator: Thank you. The next question is from Gary Tenner with D.A. Davidson. Please go ahead.

Gary Tenner: Thanks. Good morning, guys. I wanted to ask a question about the competitive nature on the lending side. You kind of mentioned that obviously, the competitive dynamics on the deposit side kind of remains to be seen how that will shake out. But your rate on the ready to close loans is quite strong. Wondering if you’ve seen, given just maybe some more general economic optimism, have you seen any change in stance from other banks in your markets from a lending perspective, a little more willingness to lend or greater activity there?

Jay Brogdon: Yeah. I think there’s definitely more willingness to lend across the industry candidly. In terms of pricing. I want to go back to what I said though earlier, we’re not seeing just a massive influx of demand yet. We’re seeing optimism. We’re seeing people who were delaying projects or maybe even more interested in paying down debt and entering into new loans. We’re seeing conversations pick up, but that’s not really turned into demand yet. So I think there’s willingness by us and the industry in this rate environment to understand where that’s headed. We’re going to be very relationship focused where we can move over to businesses’ operating accounts and other services alongside the loan. That’s going to give us even more opportunity to be flexible in terms of long term, and we’re already doing that. But at the same time, to your point, we’ve — thus far, we’ve been able to maintain really good discipline and still grow the pipeline for several quarters in a row. What we think is pretty strong pricing, and we’re going to continue to try to stay very, very focused there. But yeah, I think the industry, to your point, is going to be more flexible here on pricing. And if we sense really firm footing and can remove some of the uncertainty that’s out there, hopefully, that can convert into some demand and some continued increasing growth for all of us going forward here.

Gary Tenner: Thank you. And then just as a follow-up to clarify something. So the $1 billion of FHLB you’ve got due in the fourth quarter and the reference, I think, on Slide 12, the increase in broker deposits, was that kind of just prefunding, some of that maturing at FHLB? Is that what…

Jay Brogdon: Yeah. I do think some of what you see there is in and out of FHLB, quarter-to-quarter in and out between FHLB and brokered funding. That’s one part of it. Another part of it, as I said earlier, is even just some of the higher-cost customer CDs we had, we were willing to let the [indiscernible] portion of those balances go out to other banks at above broker rates. And so those are the factors really that I would point you to. Maybe stepping away from your question and just reinforcing a couple of points. We continue to stay pretty short in duration overall on the liability side, and we haven’t really come off that posture. A couple of years ago, we extended duration on the liability side. We’re not an extension of duration mode right now. And then the other big point that I think is the most important point is we’re really focused at the end of the day on just customer account growth. We’ve had customer account growth this year. I mentioned earlier in the call, we’re very focused. While we’ll let hot money walk out of the bank, we’re very focused on retaining relationship dollars, very focused on core accounts, whether it’s the household account or a business or commercial operating account and we’re seeing growth in those accounts. And big parts of our better bank initiatives are geared around continuing to grow and increasing the growth of those operating accounts. And so we’re pleased to see that. You don’t see it in aggregate numbers yet because of the factors that come into play in total balances with impact of inflation, people willing to chase rate right now. But what we do control there that’s very valuable is growth in customer accounts, and we are seeing that, for sure.

Gary Tenner: Thank you.

Jay Brogdon: Yeah. Thank you, Gary.

Operator: Thank you. This concludes our question-and-answer session. I would now like to turn the call back over to George Makris for closing remarks.

George Makris: Okay. Thanks to each of you for joining the call today. As you’ve heard this morning, we’re very pleased with our performance this quarter and the trajectory of our trends. Our Better Bank initiative has produced good results so far, and our team has been diligent in its efforts to improve our market penetration and deepen our customer relationships. Starting to see those efforts pay off and are encouraged about the potential headed into 2025. Sort of changing the subject, we hope you’ll tune in next week to the inaugural Simmons Bank Championship PGA Tour champions playoff event here in Little Rock. Tournament will be televised Friday through Sunday on the Golf Channel. We’re excited to be the title sponsor, and we look forward to welcoming the world to Arkansas. Thanks again for your participation today, and have a great week.

Operator: The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect your lines, and have a great day.

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