• Diluted EPS: $1.10, down 9 from the previous quarter and 6 from the same quarter last year.
• Net Interest Margin: 3.37%, up from 3.25% in the previous quarter but down from 3.44% a year ago.
• Net Interest Income: Increased by 4.5% quarter over quarter and 3.5% year over year.
• Gross Loan Balances: Increased by $117 million or 3% during the quarter, and by $267 million or 7.2% over the prior 12 months.
• Deposit Balances: Increased by $97 million during the quarter and by $208 million over the prior 12 months.
• Tangible Book Value: $38.26, reflecting an increase of $5.14 or 15.5% over the prior 12 months.
• Nonperforming Loans: $8.2 million, up $1.5 million from June 30, representing 0.21% of gross loans.
• Provision for Credit Losses: $2.2 million for the quarter, compared to $900,000 in the prior year and previous quarter.
• Noninterest Expense: Up 3.4% from the previous quarter, excluding one-time costs, expenses would have been flat quarter over quarter.
• Noninterest Income: Up 22.6% year over year, but down 7.6% from the previous quarter.

• Warning! GuruFocus has detected 6 Warning Sign with SMBC.

Release Date: October 29, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Southern Missouri Bancorp Inc (NASDAQ:SMBC) reported an increase in net interest income due to loan growth and net interest margin expansion.
• Gross loan balances increased by 117 million or 3% during the first quarter, and by 267 million or 7.2% over the prior 12 months.
• Deposit balances increased by 97 million during the first quarter and by 208 million over the prior 12 months.
• Tangible book value increased by $5.14 or 15.5% over the prior 12 months, attributed to earnings retention and improvement in the bank's unrealized loss in the investment portfolio.
• Asset quality remains strong with adversely classified loans decreasing by about 400,000 or four basis points during the quarter.

Negative Points

• The diluted EPS figure for the current quarter was down 9 cents from the previous quarter and down 6 cents from the same quarter a year ago.
• The bank realized one-time costs of 840,000 associated with a performance improvement project, impacting net income and EPS.
• Noninterest expense was up 3.4% compared to the linked quarter, primarily due to the performance review costs.
• Nonperforming loans increased by a million and a half compared to June 30, reaching 0.21% on gross loans.
• Total delinquent loans increased by 4.1 million or 10 basis points from June, primarily due to an increase in past due loans and construction loans.

Q & A Highlights

Q: Can you provide an update on local competition in your footprint, particularly regarding deposit pricing? A: Stefan Chkautovich, CFO: Prior to rate cuts, we were able to lower our rates as the treasury yield curve decreased, while local markets were slower to adjust. After the FOMC cuts, local competition began lowering their rates, making ours more competitive. We've adjusted our rates in line with treasury movements.

Q: How is the competitive landscape affecting loan pricing? A: Matt Funke, President and CAO: We were on the high end of asking rates for loans a few months ago, but the market is now aligning with us due to the uptick in the longer end of the treasury curve. With strong demand and our current loan-to-deposit ratio, there's no need to be more aggressive with loan rates.

Q: What are your expectations for net interest income (NII) and margin in the coming quarters? A: Matt Funke, President and CAO: We expect continued NII growth, although the December quarter might see the margin move sideways due to seasonal liquidity build. Long-term, we anticipate positive trends with lower rates providing tailwinds for margin and NII growth.

Q: Can you elaborate on the performance improvement project and its financial goals? A: Matt Funke, President and CAO: The project reviews nearly all operations except internal audit and compliance. Short-term, we aim for it to pay for itself within a year. Long-term, we hope for a low single-digit percentage reduction in non-interest expenses. It's not just financial; we aim to improve operations and prepare for future mergers.

Q: What is the status of M&A activities given the improved currency? A: Matt Funke, President and CAO: Conversations are still preliminary, but we expect activity to pick up. We've seen more discussions, but nothing imminent at this time.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.