Southern Missouri Bancorp(US:SMBC)2025-04-20 23:00Financial Data and Key Metrics Changes - Earnings per share for the quarter was $1.39 diluted, up $0.09 from the linked December and up $0.40 from the previous March [5] - Net interest margin for the quarter was 3.39%, compared to 3.15% for the same period last year and up from 3.36% in the previous quarter [5] - Net interest income increased by 3.5% quarter over quarter and 14.4% year over year due to higher average earning asset balances and net interest margin expansion [6][7] - Tangible book value per share increased to $40.37, up $4.86 or almost 14% year over year [8] Business Line Data and Key Metrics Changes - Gross loan balances decreased by $3.5 million compared to December but increased by $252 million year over year, reflecting a growth of almost 7% [6][7] - Deposit balances increased by approximately $51 million in the third quarter and by $275 million or about 7% year over year [7] - Non-interest income decreased by 2.9% compared to the linked quarter, primarily due to lower deposit account fees [20] Market Data and Key Metrics Changes - Adversely classified loans increased to $49 million or 1.2% of total loans, up $9 million during the quarter [9] - Non-performing loans (NPLs) were $22 million, an increase of $14 million compared to the last quarter, totaling 0.55% of gross loans [10] - Total delinquent loans were $24 million, up $11 million from December [11] Company Strategy and Development Direction - The company is focusing on improving credit quality and has redoubled efforts to address recent trends in problem loans [12] - A new qualitative factor in the calculation for allowance for credit losses has been implemented to reserve more for agricultural-related exposure [16] - The company is optimistic about achieving at least mid-single-digit loan growth for the fiscal year, supported by a strong pipeline [17] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about continuing positive trends in earnings and profitability through fiscal year 2025 [25] - The company is monitoring economic conditions closely, particularly in light of potential changes in economic policy that could affect credit losses [24] - Management noted that while there are signs of stress among consumers and small businesses, broader trends in commercial real estate remain stable [50] Other Important Information - The company has initiated performance improvement initiatives to enhance customer service and operational efficiency [26] - There are ongoing discussions regarding potential mergers and acquisitions, although no immediate opportunities are anticipated due to market volatility [26] Q&A Session Summary Question: Inquiry about margin specifics and CD roll-off rates - Management indicated that approximately $215 million in CDs are rolling off at rates averaging around 4.25% over the next three months, with a total of $1.2 billion renewing at an average rate of 4.26% over the next year [30] Question: Assessment of agricultural commodities and tariffs - Management noted limited visibility on the impact of tariffs but indicated that government price supports would kick in if prices remain low [32] Question: Discussion on net interest margin and renewal rates - Management confirmed that the reported net interest margin was around 3.4%, with renewal rates for loans averaging between 7.25% and 7.50% [39] Question: Concerns regarding non-performing loans and collateral - Management acknowledged the increase in NPLs, particularly related to medical lease properties, and indicated that charge-offs are anticipated [41] Question: Capital priorities and potential share buybacks - Management stated that share repurchases would depend on stock price and market conditions, with a target tangible common equity ratio of 8% to 9% [45]