How Simmons First National Corporation is Mastering Net Interest Margin Expansion in a High-Interest-Rate World

In an era where rising interest rates have strained financial institutions, Simmons First National Corporation (NASDAQ: SFNC) has emerged as a standout performer. By leveraging disciplined loan repricing, deposit remixing, and prudent expense management, the bank has not only stabilized its net interest margin (NIM) but expanded it to a robust 3.06% in Q2 2025—a 37-basis-point increase year-over-year. This achievement is no accident. It reflects a deliberate, long-term strategy to build a durable, profitable growth model in a challenging macroeconomic environment.

The NIM Expansion: A Product of Strategic Precision

Simmons' NIM growth is rooted in its ability to balance two critical levers: loan yield optimization and deposit cost reduction.

1. Disciplined Loan Repricing
   In Q2 2025, the bank's loan yields increased by 6 basis points on a fully taxable equivalent (FTE) basis compared to Q1 2025. This was driven by two factors:
2. Strategic Pricing on New Loans: Management has avoided aggressive rate undercutting, instead pricing new commercial and industrial (C&I) loans to reflect the current high-rate environment. This ensures margins remain resilient even as older, lower-rate loans mature.
3. Natural Repricing of Fixed-Rate Loans: As interest rates have plateaued, Simmons has benefited from the gradual repricing of fixed-rate loans to higher levels, boosting net interest income without sacrificing customer retention.

1. Deposit Remixing: Shifting to Low-Cost Funding
   Deposit remixing has been equally impactful. Simmons reduced its cost of deposits by 8 basis points in Q2 2025, a 43-basis-point decline compared to Q2 2024. This was achieved by:
2. Growing Low-Cost Customer Deposits: Noninterest-bearing and interest-bearing transaction accounts surged by $233.1 million in Q2 2025, reducing reliance on higher-cost certificates of deposit (CDs).
3. Proactive Pricing Adjustments: The bank has selectively reduced rates on time deposits and money market accounts, shifting customer behavior toward more stable, lower-cost funding.

The result? A net interest margin that now exceeds 3%, a threshold many peers are still striving to reach.

Expense Discipline and Asset Quality: The Unsung Drivers

Beyond NIM, Simmons' profitability is bolstered by disciplined expense management and strong asset quality.

• Cost Optimization: Noninterest expenses fell to $138.6 million in Q2 2025, a 4.1% decline from the prior quarter. This was driven by reduced salaries and benefits, as well as tighter control over operating costs. Management has prioritized efficiency without compromising customer service, a rare balance in the banking sector.
• Resilient Credit Quality: With a nonperforming loan ratio of 0.92% and an allowance for credit losses (ACL) of 1.48% of total loans, Simmons has maintained a conservative risk profile. This prudence ensures that even in a downturn, the bank's balance sheet remains protected.

A Model for Sustainable Growth

The combination of these strategies has created a self-reinforcing cycle:
1. Higher loan yields and lower deposit costs → Expanded NIM.
2. Expanded NIM → Increased profitability and capital generation.
3. Strong capital position → Capacity to fund organic growth in its core markets.

Simmons' footprint in the Southeast and Midwest—markets with resilient economies and growing commercial activity—provides a fertile ground for this model. Its strong loan pipeline and focus on C&I lending further position it to capitalize on business expansion in a high-rate environment.

Investment Implications

For investors, Simmons First National Corporation represents a rare opportunity: a regional bank with strategic agility, operational discipline, and market-leading NIM growth. While larger banks struggle with legacy liabilities and regulatory constraints, Simmons has executed a clean, customer-focused playbook.

• Valuation Attraction: With a price-to-tangible-book ratio of ~1.2x and a dividend yield of 2.8%, the stock offers both capital appreciation and income potential.
• Catalysts for Growth: Continued NIM expansion, deposit remixing, and a strong loan pipeline could drive earnings per share (EPS) growth of 10–12% in 2025.

Conclusion: A High-Interest-Rate Champion

Simmons First National Corporation's success in a high-interest-rate environment underscores the power of disciplined balance sheet management. By prioritizing loan pricing, deposit cost control, and expense efficiency, the bank has built a durable, profitable model that transcends short-term volatility. For long-term investors seeking a high-conviction regional bank play, Simmons offers a compelling case—one where strategy, execution, and market dynamics align to create lasting value.

Investment Recommendation: Buy. Position Simmons as a core holding in a diversified financials portfolio, with a 12-month price target of $38–$40.