Simmons First Ntl (NASDAQ:SFNC) released first-quarter financial results and hosted an earnings call on Friday. Read the complete transcript below.
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Summary
Simmons First Ntl reported a strong quarter with 10% annualized loan growth, driven by a focus on quality growth and internal shifts, such as changes in incentive plans and client targeting strategies.
The company is optimistic about future organic growth, supported by a favorable talent environment and recent leadership hires in commercial and consumer sectors.
Simmons First Ntl expects net interest margin (NIM) to continue improving, driven by deposit cost management, balance sheet remixing, and a structural tailwind from back book repricing.
Operating leverage is expected to surpass the initial 5% growth guidance for the year, with confidence in achieving the top end of the 9-11% NII growth range.
Credit quality remains stable despite some non-performing loan increases, with management expressing confidence in their net charge-off outlook.
Capital deployment remains focused on organic growth and dividends, with share buybacks under consideration given the current valuation and earnings outlook.
Full Transcript
Ed Billick (Director of Investor Relations)
Good morning and welcome to the Simmons First National Corporation First Quarter 2026 Earnings Conference call and webcast. All participants will be in listen only mode. Should you need assistance, please signal a conference specialist by pressing Star then zero on your telephone keypad. After today's presentation there will be an opportunity to ask questions. To ask a question, you may press Star then one on your telephone keypad. To withdraw your question, please press Star then two. Please note this event is being recorded. I would now like to turn the conference over to Ed Billick,, Director of Investor Relations. Please go ahead. Good morning and welcome to Simmons First National Corporation first quarter 2026 earnings call. Joining me today are several members of our Executive management team including President and CEO Jay Brogden and CFO Daniel Hobbs. Today's call will be in a Q and A format. Before we begin, I would like to remind you that our first 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 statement 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 8K yesterday as well as our Form 10K for the year ended December 31, 2025 including the risk factors contained in that filing. 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 furnished as exhibits to the Form 8K we filed yesterday with the SEC and are also available on the Investor Relations page of our website. simmonsbank.com Operator we're ready to begin the Q and A session.
OPERATOR
Thank you. We will now begin the Question and Answer session. To ask a question, you may press Star then one on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you'd like to withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster. The first question comes from David Feaster with Raymond James. Please go ahead.
David Feaster (Equity Analyst)
Hey, good morning, everybody. Hey, David. Good morning. I wanted to start on the growth front. It was a terrific quarter for growth. You know, 10% annualized, that was, it was diverse. Pipelines remain solid. You know, I think one of the concerns that the markets had over the past few years, we've really questioned your ability to grow like this and your growth clearly showing what you can do. I guess my question is, what's changed to get here? Is this a function of demand? Is payoffs and pay downs improving? Or is this just more of an internal shift, like a cultural shift and an increased emphasis on quality growth? And just how sustainable do you think this kind of 7 to 10% pace of annualized growth that we've seen over the past couple quarters is?
Jay Brogden (President and CEO)
Yeah. Hey, David, I'll jump in on that. Thanks for the comments and the question there. So, you know, I think overall probably the best way to answer the sustainability of the loan growth is really say we've been focused on quality growth for really a few years now. We started focusing on organic growth really a handful of years ago. And it's taken time to inflect and create some of those internal capabilities, bring maturity. Big part of that has been focus on both soundness and profitability, as you've heard us say over and over again. And so there's been changes in behaviors, changes in incentive plans, changes in how we, you know, target clients that we want to grow. And I think what you've seen in the last couple of quarters is, you know, one part, some of that, you know, inflecting some of the maturity in those programs coming to bear. I do think you also have to acknowledge that a part of it is just the timing. The market setup, the last part of last year and early into this year has been very, very good for us. We've seen really, really robust demand. Our biggest concern as we think about the growth outlook really isn't the things that we control, it's the non controllables. We would acknowledge uncertainty in the macro. We have acknowledged, I think several times in recent calls, pricing, competition, all of those things still give us some caution to the overall optimism that we have about our business and our ability to grow the business. But we were really, really pleased with what we saw in the quarter this quarter. I don't want to promise 10% annualized loan growth every quarter. This just happened to be a really good quarter for that. But I do think it clearly demonstrates the capabilities that we've been working on and our ability to bring those to bear in the marketplace.
David Feaster (Equity Analyst)
Okay, that's great. And then one of the comments in the press release that stood out to me is just the comments on the talent environment being favorable and supporting that organic growth trajectory. So a couple questions on the talent side first. I know you've made a couple leadership hires on the commercial and consumer side, so was hoping you could touch on what they're working on and where they see the most opportunity near term to kind of accelerate organic growth. And then secondarily, just on the banker side, the pipelines that you've got there, your appetite for new hires, and then just any comments on that? I know you hired a recent wealth management team. How have some of the new hires that you've. You've made been going so far?
Jay Brogden (President and CEO)
Yeah. So again, I'll jump in on this. Our two new leadership hires over consumer and commercial have been here, I guess eight or nine weeks at this point. So really, really pleased with what they're already bringing to bear in the organization. On the consumer side, I think just the rhythms of everyday life are in our retail network is changing or evolving in very, very good ways. And the approach to driving business, deepening relationships. We've got some very strong and loyal customers that have been with us for a long time. But in many of those situations with those customers, there's still relatively thin relationships to the bank and so really focused on deepening and capitalizing on the loyalty and strong relationships we have in those regards as well as driving marketing and better penetrating the communities that we serve throughout the retail network. So real focus on sales, performance and again, kind of deepening through that network. On the commercial side, it's really a lot of the things that I was describing in the first question that you asked around, that real organic growth emphasis, its total banking relationship focus. I think it would be fair to say that a lot of our focus in some of our recent history has been more kind of a lending growth focus and a commercial loan growth focus. We've been really, really investing heavily in commercial treasury management, really our full commercial payments suite of products, and the talent in the organization that can really go after those types of relationships and drive more diversified commercial business. And so we've got a lot of really good things going in that regard under both of those leaders. And I would just say that the talent pipeline, the opportunities that we are seeing, from senior leadership all the way down to very productive bankers who have strong reputations in our markets, we're seeing some really, really good opportunities to continue to grow and invest in that way. So that will continue to be a great focus. You asked about the wealth team that we also brought on throughout the first quarter and just as a reminder, we brought on about half that team in kind of mid or late January. The other half joined in March. So they haven't been here for all that long when you think about first quarter results. But what I could tell you is that that group has already brought over about in terms of assets under management that are either transferring or verbally committed, over 350 million in AUM. And so we could not be more pleased with what we're seeing in terms of early success. And actually the part of that team, what we're seeing that has me most excited is the referrals. When I think about what that team's doing in terms of referring their client relationships into the commercial bank, into private banking, et cetera, really, really excited. And that's just one small example, David. We can look all across the footprint and see some great examples of those kinds of behaviors. And again, I dovetail that all the way back to your first question. Those are the things that are helping me, helping all of us get more and more optimistic about our ability to drive organic growth in a very meaningful and profitable way.
David Feaster (Equity Analyst)
The business that's great. And then maybe just staying a bit more high level still. And you know, kind of following up on some of your commentary. I mean, in the release you talked about designing a more efficient and scalable infrastructure. And I know we've spent a lot of time talking about the Better bank initiative and some of the things that you're focusing on there from improving processes and procedures. I mean, you've obviously made a lot of progress on the expense front that's demonstrated in your results. I was just hoping you could maybe elaborate on some of the things that you're working on to improve the efficiency and scalability of what you got to support the organic growth that you got. Just some of the things that you're more excited about and key initiatives that you're focused on as a part of that Better bank initiative.
Jay Brogden (President and CEO)
Yeah, I think, at least for now, David, I'll probably sound like a broken record here or Daniel would too. But really our mantra in the bank is fund every investment that we want to make in the business. And we have been able to do that over the last few years. We were able to do that here in the first quarter. We made some very big investments in terms of talent and other things in the bank in the first quarter and still were able to demonstrate strong expense discipline. So that's going to continue to be the mantra here. When I think about. I think I said this a couple of calls ago, perhaps after we did the balance sheet repositioning last year, when you think about how our focus is evolving, we really dealt with the structure of our balance sheet last year, and we're really focused this year on continuing to sort of optimize the structure of our business. So how we deliver effectively for our clients, how we drive both customer and associate experience in a more positive way. And then importantly, what that's doing is that's helping us identify efficiencies, whether that's redundancies in the back office or on the front side of the bank and removing those redundancies, speeding up how we deliver the business. And our sum total of all of that is what we keep seeing as we make progress, is that we are able to drive significant operating leverage because it's just driving scalability and repeatability and speed that's really driving scale in the business. And so those are the things we're focused on. You know, hopefully as we get deeper into the year this year, maybe there'll be more for us to talk about specifically in those regards. But for now, I would just say it's kind of. It's kind of more of the same that we've been doing over the last few years.
David Feaster (Equity Analyst)
That's great. Thanks, everybody.
Jay Brogden (President and CEO)
Thanks, David.
OPERATOR
The next question comes from Woody Ley with kbw. Please go ahead.
Woody Ley (Equity Analyst)
Hey, good morning, guys. Hey, Woody wanted to start on the NIM outlook. Another quarter of, you know, the NIM tracking higher. Just curious, you know, it sounds like you're remaining optimistic on the growth front. It does feel like anecdotally we've been hearing of some, you know, deposit competition being pretty fierce. So with the higher growth outlook, you know, how are you expecting the NIM to project from here? Yeah. Hey, Woody, this is Daniel. Appreciate that question. You know, I'll start with just the linked quarter NIM, if you call back to the previous quarter, I said we had a little bit of room in the first quarter to grow NIM about a basis point or two. We came in three basis points, linked quarter growth. And when you look at that, it's really continuation of the things that we've been doing, which is a focus on driving our Funding and deposit costs lower through remixing of the balance sheet. You know, you'll notice that we reduced time deposits, kind of, kind of grew our core deposit base there. That's a key focus for us going forward. We're also always trying to manage deposit cost relative to growth. So that's a fine balance we're always trying to strike. And then on the loan yield side, loan yields were down seven basis points. And that's partially hedged because of the low fixed rate loans that we've been talking about. If you just take a step back and look at what our margin has done over the last years and you look at those two pieces and you look at loan yields, loan yields are only down 4 basis points points year over year. And again that is primarily driven by our low fixed rate loans repricing. And that's with three rate cuts that have happened in the back half of the year. And then on the deposit cost side, we're down 48 basis points. And so then if you think about the cumulative beta on both of those from when rates started to come down in 24 long betas are only down a little bit less than 15%. And the cumulative interest bearing deposit beta down 63 basis points. So done a really nice job there. You know, as we look forward into the fourth part of the year, our guide was NII of 9 to 11% growth. And I said NIM would probably be in the mid-380s by the end of the year. And recall that the guide had two rate cuts, one in May and one in August. As you look at the forward today, there's zero rate cuts. So that should be marginally helpful to us. As you know, we flip from liability sensitive to asset sensitive. So what I would tell you is as we move forward through the end of the year, we're probably going to be looking at the high end of that range of that 9, 11% range. And there's some puts and takes in there that could cause it to be better or a little bit worse. We're always focused on, on the macro, looking at inflation to see how that affects deposit growth. Because if you think about the biggest driver of what that NIM could be is the deposit side. What we're doing on the core deposit growth side relative to having to fund it at wholesale. And connecting this back to the long growth side, we've said this before, is I think the biggest governor of our loan growth is going to be how we're able to grow deposits. You know, we are willing to fund some of that Loan growth at the margin. But there's a point sensitivity point there where we're willing to pull back a little bit on long growth to the extent that we can grow deposits. And then on the deposit growth, which will probably be your next question. As I think about that, you know we pretty much stable in the quarter. We're seeing some positive things happening within our consumer base. I like to look at kind of NIB and IB for both consumer and commercial. That's the core engine of the bank. Consumer makes up about 47%. Commercial is the other piece of that. And consumer is really starting to show some stability and growth. If you go back over the past four quarters and look year over year averages, we're growing NIB and IB consumer deposits in that 2 to 3% range. And so, you know, it feels like we've, we've kind of gotten to a good spot there. On the commercial side we're doing a really good job on the interest bearing growth side we've got some work remaining to do on the commercial NIB side. And so you know, David's question earlier about what are the new guys focus on deposits is a big piece of what they're focused on. All the things that Jay talked about really speaks to what are we doing to improve our strategies around growing deposits. And we've got a lot of things in the works. Some of those are starting to pay off and we're starting to see that. And then some of just it takes a little time to get through our bank and through our network to start to drive some of that. That's really helpful. Color. You answered a couple of my follow up questions. So I appreciate all the color there. I mean just on the looking at the deposit base, you know, between some of the moving pieces and the time deposits and the public funds increasing, you know, how much room is there to remix going forward? Do you have a bucket of deposits that you think can be remixed over the over the remaining years that really dependent on multiple functions of deposit growth, loan growth and all the above?
Jay Brogden (President and CEO)
Yeah, you know, I'll start with, you know, we've seen CDs remixing over some time since rates started coming down. So there's still a little bit left in CDs both on the remixing part and the pricing part there. It's really going to be a function of our NIB and IB growth. What are we able to do in terms of growing our new customers, deepening existing relationships and driving primacy with our existing customers and then how can we reduce the amount of Churn on the back end. So those are the three buckets that we are focused on things that we're driving strategies around and those strategies involve products, platforms. We just rolled out brand new consumer deposit products on March 31. Starting to see some early positive signs there. So it's product pricing, service platforms, all those things that we're doing, which Brian and Jonathan and coming in the bank are helping us do that. So it's going to be how well do we deliver on that? Core customer growth will depend on the amount of remixing that we can do. Yeah, I'd just jump in on that one too, Woody, and say that you've heard us talk before and even make the comment that we don't have to grow loans or grow the balance sheet to grow nii. We are all about growing the balance sheet and growing profitable customer relationships. But this dynamic is what really allows us in my mind to maintain our discipline around how we think about structure, how we think about pricing, how we think about relationship profitability. So I just kind of put it all together. NIM keeps grinding higher because of all of these things. You know, we have a structural tailwind from a back book repricing point of view. We've got this tremendous deposit remix opportunity and we've got a range of success that we're seeing across our customer base there. But we decked significant focus in our bank in terms of continuing to drive success across that range. And then we look at a forward curve environment that's better than our original outlook was this year. And I put all of that together and we can see NIM expand, we can see NII grow while being very, very sort of disciplined in how we approach the business. So you saw us grow loans very attractively in our minds relative to our standards in the first quarter. At the same time, as I mentioned earlier, I can tell you that in the first quarter we saw a pickup in competition, for example, a pickup in competition from bigger banks coming into some of the CRE products where we hadn't seen them as much in recent months. And so, you know, we're going to ebb and flow with some of those macro and competitive dynamics. But we're just going to really, really stick to our discipline and we think on the long that's what helps us drive very sustainable and strong risk adjusted returns.
Woody Ley (Equity Analyst)
Yeah, definitely. Well, it's good to hear of all the strong trends. That's all for me. Thanks for talking. Take my questions.
Jay Brogden (President and CEO)
Thanks, Woody.
OPERATOR
The next question comes from Matt Olney with Stevens Inc. Please go Ahead.
Matt Olney (Equity Analyst)
Hey, thanks. Morning, everybody. Morning, Matt. We talked in January about expectations of positive operating leverage throughout the year. I think you guys threw out their 5% plus growth for the full year. And in looking at these results in the first quarter, it feels like you're pacing well above those expectations. So we'd love just to appreciate your views of the updated views of the operating leverage in 26 and perhaps how this compares to your previous views back in January.
Jay Brogden (President and CEO)
I'll jump in on that first and see how uncomfortable I can make Daniel and then he can come in and add anything he wants to Matt. You know, Daniel, if you heard him in his comments a while ago on the NIM and NII, you know, mentioned that we were at a 9 to 11% range in our 2026 outlook. Given everything that he and I just talked about over the last few minutes, it's hard for us to not be very confident at the top end of that range. And you know, you heard some commentary on fees and private wealth. You've seen what we've been able to do not only in the first quarter, but for the last few years on the expense side. So, you know, I'm pretty optimistic as I think about the momentum in terms of PPNR and earnings growth overall. And you know what that pencils out to exactly in terms of operating leverage. I don't have an updated guide for you, but I think we put on that slide back in January 5% plus. And same way we're confident in the top end of the range on NII. I'm confident in the plus side of that 5% outlook. So, Daniel, I don't know if you want to add anything.
Daniel
Yeah, I, I fully agree with you. And you made a comment earlier about the sustainability of our earnings profile. I'd add another word to that, which is resiliency. Go back to the balance sheet restructure. And we really changed the earnings profile of the company. We flipped from liability sensitive to slightly asset sensitive. We put on some hedges and we've gone through three rate cuts since then and we've grown our margin each quarter since then. So Jay also mentioned, you know, Nim kind of grinding higher, you know, slightly from here forward. So I feel like from everything that we see here, all the strategies that we've got in place, the aspiration for us to get to top quartile performance. I feel pretty good about the plus on the five.
Jay Brogden (President and CEO)
Yep. Okay, that's helpful. And then switching gears, I think we talked previously about expectations for charge offs to fully year around that 25 basis points and now we've got the, I think it was about a $30 million non accrual that came on this quarter. Any more color you can provide on that specific loan and then kind of what's the comfort level of the charge off guidance based off what you know today? Yeah, Matt, I think, you know, you, you hit it. And we tried to say it as clearly as we could in our disclosures. We, you know, we don't, fortunately we don't see a lot of loss content in the loans that we're evaluating there. We actually saw a mixed bag in terms of credit migration for the quarter. Both criticized and classified loans improved linked quarter, you saw a little bit of migration into mpls, you saw some past due migration. But really we significantly alleviated that in the first few days in April. And so in every instance when I think about credit right now and the loans that are showing migration, these are already known situations. There's nothing sort of new or surprising to us. The migration we see is very isolated or episodic. So no broad based deterioration in the portfolio that we're seeing. And again, most importantly, we're just not seeing a lot of risk of loss. And the largest NPL that migrated in the quarter, again this is a loan that we have very, very low LTV in. There's actually the biggest reason for the migration has been just because of legal proceeding that had to take place. That's behind us now. We should be able to move expeditiously toward resolution in that situation and there's very, very good outcome for the bank in terms of risk of loss associated with that loan. So those are the types of things that we're seeing overall. I would just tell you from what we see today, everything we know today we're as proactive as we can be inspecting the portfolio but we feel confident in our net charge off outlook that we gave at the beginning of the year based on what we know.
Matt Olney (Equity Analyst)
Yeah. And Matt, I would just, I just want to clarify one comment you made. That 30 million is not just one, one loan. It's multiple loans spread across a number of properties and it's one relationship. And so just clarifying that for you. Yeah, that's a good point. Got it. Okay, that's helpful guys. Thank you.
Jay Brogden (President and CEO)
Thanks Matt.
OPERATOR
The next question comes from Steven Scouten with Piper Sandler. Please go ahead.
Steven Scouten (Equity Analyst)
Hey, good morning guys. I wanted to hop back to kind of the loan growth trends and just kind of curious if you could give any color around any quarter over quarter changes around repayments and if that allowed growth to kind of peak even higher this quarter. And then maybe if you could give us some visibility into kind of the pace of demand throughout the quarter and if you saw any changes in terms of customer demand building or any pushback, given macro events and the like.
Jay Brogden (President and CEO)
Yeah, Steven, I would say that, you know, we had some early loan growth in the quarter which certainly benefited us. The demand for that loan growth would have really started last year right in the latter part of last year. So we I would say that demand optimism in our in our client base still feels really good. The pipeline's healthy. I think there's, you know, you can acknowledge with things like fuel prices, just a little incremental macro uncertainty, to say the least, that there's maybe some caution out there. But it's caution that's still rooted in a decent amount of demand and a pretty strong overall sentiment, at least thus far is kind of how we're seeing it. But early in the quarter was very, very strong for us. The one thing that I sort of alluded to earlier, I'll maybe make more specific to your exact question is on the commercial real estate side, we saw plenty of demand. We just didn't have the same kind of pull through that I'm used to seeing in our pipeline because of our discipline from a pricing point of view, as I said earlier, that competition really was coming from bigger banks getting a little more aggressive coming into the CRE space. We don't think that's a permanent reality, but those are the types of things that we're seeing. They're kind of destructive to or could be headwinds to growth overall for us. But in terms of just macro or sentiment, it still feels pretty good to me.
Steven Scouten (Equity Analyst)
Helpful. And then I guess one question on the cost of deposits, I mean, you guys put the slide on slide 11 I think with the CD maturities. Just kind of curious where new customer CDs are coming on relative to the 346 that looks like is repricing in 2Q.
Daniel
Yeah, Stephen, so over the last 90 days or in the first quarter, the CDs that matured was in the 356 range and what went on was in the 313 range. So as you think about the 346 in that bucket, there's a component of that that is a public fund deposit that will kind of reprice at the market. But the biggest majority of that is going to likely reprice down kind of in that 313 probably range, maybe plus or minus a couple there. And then as you look into there's probably one to two more quarters worth of CD repricing benefit there. And then as you get out past that, it kind of neutralizes a bit.
Jay Brogden (President and CEO)
Yeah, I think deposit repricing tailwinds are waning probably for the industry given the distance we put between the most recent rate cut and now the biggest driver for us as we move forward. Still some incremental benefit from a cost side for sure, but it's really going to be on the mix side, on the remixing side. Stephen, I also want to double back. I failed to answer a portion of your question earlier, which was around the paydown environment. We are still seeing a pretty elevated pay down environment. So the growth that we saw in the fourth quarter and here again in the first quarter in my mind was really predicated on the demand that we're seeing and our ability to originate and kind of produce through a still elevated pay down environment. And I still don't really see anything on the horizon that would suggest to me that pay downs are going to decelerate necessarily. I think that's just a kind of a structural part of strong permanent markets, et cetera. And we're going to experience that as part of the dynamic here.
Steven Scouten (Equity Analyst)
Maybe last thing for me, if I could, is the share repurchase. Curious. Any updates on how you're thinking about that, how you think about excess capital? Kind of what, you know, capital metric you really peg to as you think about that incremental capital build and deployment from here?
Jay Brogden (President and CEO)
Yeah, so, you know, probably at risk again, sounding a bit like a broken record here. But our number one priority on capital will continue to be just sort of investing, investing in the growth of the business. So anything we can do to drive sustainable organic growth is going to be priority one. Priority two for us will be paying the dividend, which we've now paid consecutively for 117, 117 years. So we're going to keep that track record alive. But I would tell you, yeah, I mean, evaluating share buybacks would kind of be the next thing. On the buybacks, Stephen, we continue to, you know, we continue to exercise patience. I think what I'd say just sort of given the potential for really organic opportunities and investments in the business and the pace of those investments, you know, give us reason to just be a little bit measured right now in how we think about buybacks as well as just again that uncertain macro. We think patience around capital. We like capital and we like buffers to capital. And so that's there at the same time you know what I would tell you, and we've described it at length here in the Call at this point, but when we pencil out forward earnings estimates, we're probably a little more optimistic than the street is right now. And so it's hard not to consider buybacks given that dynamic. We can buy back stock at a pretty low PE multiple right now on forward earnings. So I'd say that all of that will continue to be in the mix and a strong part of our evaluation and we're going to our commitment, I guess, would just be that we're going to make the right decisions on how we deploy capital to create long term shareholder value in a very sustainable way.
Steven Scouten (Equity Analyst)
Really helpful. Appreciate all the color and congrats on the continued successes here.
OPERATOR
The next question comes from Brian Wolzynski with Morgan Stanley. Please go ahead.
Brian Wolzynski (Equity Analyst)
Hi, good morning. Hey Brian, maybe just staying on the capital topic, I wanted to get your thoughts on the new capital proposals that we got from the bank regulators a few weeks ago. Understand it's still early and there's a comment period, but do you have any initial view on what the capital benefit for Simmons could be? Any areas of the proposal that are the most relevant for you?
Daniel
Yeah, Brian, it is early. We have taken a look at it. We're continuing to evaluate that. You know, I think as you think about when that might come in, we're thinking it's probably first part of 27 when that might become real. You know, our initial expectations are that it will be beneficial for us. The LTV component of that is very helpful and I don't want to give you a number just yet, but we think it's a decent improvement to capital. And back to Jay's comments about how do we think about deploying that capital? We'll take that into consideration when it does become part of the calculus and it'll just continue to add buffers to capital and ways for us to deploy that capital over time. So I don't want to give you a number just yet, but we feel pretty good about our opportunities to improve capital there.
Jay Brogden (President and CEO)
And the one thing I would add to that is I think we continue there's nothing at least to date that's changed our view that our definition of optimal or most efficient capital is in and around 10.5% CET1. That's how we think about a strong baseline of capital for the bank.
Brian Wolzynski (Equity Analyst)
I appreciate that. Thank you. And then maybe just going back to credit for a moment, the increase in non performing loans Q on Q. I think you highlighted A single construction loan within that that drove a piece of the increase. Can you just give a little bit more color on that exposure? You know, the nature of the relationship, maybe how big it is. And if you have a specific reserve on that particular one would be great. Thank you.
Jay Brogden (President and CEO)
That loan is. It's a construction of some relatively large one to four family properties. This was actually a loan that a relationship that was acquired in our most recent acquisition, which dates back if you few years ago. It's a unique relationship for us in that regard. It's not exactly a business that we would originate at the same time, as I mentioned earlier, those properties. So the total of the relationship represents several different properties. I can't remember the exact dollar amount, Daniel. I don't know if you have that, but it's probably is this thing's property probably 2/3 of the increase in NPL, something along those lines for the quarter. And we feel really, really good about the equity that's in the projects, that's in each home, the sponsors that are behind it, the very low LTVs. We have very, very fresh appraisals. And even at significantly discounted appraisals, we have very minimal risk loss. So this is the one, Brian, that I mentioned earlier. We had to get through some, you know, some legal aspects around it that really prevented us from this loan. Perhaps should have never even migrated were it not needing to navigate a court system. And that timeline got us to where we are. Doesn't change our view on risk of loss in any way, shape or form.
Daniel
Yeah, that increase for that one relationship's a little over $18 million as it relates to. To NPL. Bucket.
Jay Brogden (President and CEO)
Yeah, there you go.
Brian Wolzynski (Equity Analyst)
Got it. Really appreciate the detail and thank you for taking my questions.
Jay Brogden (President and CEO)
Thanks, Brian.
OPERATOR
The next question comes from Gary Tenner with DA Davidson. Please. Go ahead.
Gary Tenner (Equity Analyst)
Thanks. Good morning, everybody. Hey, Gary. So my questions have been largely answered, so just a couple of kind of bookkeeping items, I guess. I wonder if you could. I didn't see it in the deck, so apologies if I missed it, but can you give us what the March 31 deposit spot rate was? You talking about the overall deposit cost for the entire for the month of March? No. Well, as of March 31st, if you have it. If not, then for the month of March. Sure. Yeah. I mean, for the month of March it was 195. I don't have it at the end of the day of the month. Okay, got it. Thank you. And then in terms of that SBIC valuation adjustment, can you give us what that dollar amount was. Yeah. So the net of all of it was. When you think about all valuations, was negative 1.8 million. When you look at just the one item, two point. Little over 2 million. Yeah. Okay. Thank you.
Jay Brogden (President and CEO)
Thank you. Thanks, Gary.
OPERATOR
This concludes our question and answer session. I would like to turn the conference back over to Jay Brogdon, president and CEO, for any closing remarks.
Jay Brogden (President and CEO)
Yeah, I'll just be brief. I want to thank everyone for your time and for your interest in Simmons. We appreciate everyone devoting your attention to us. If you've got questions, as always, please reach out. Thanks and have a great day.
Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company's SEC filings and official press releases. Corporate participants' and analysts' statements reflect their views as of the date of this call and are subject to change without notice.
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