Southern Missouri Bancorp(US:SMBC)2025-10-23 15:32Financial Data and Key Metrics Changes - The diluted EPS for the current quarter was $1.38, down $0.01 from the linked June 2025 quarter, but up $0.28 from the September quarter a year ago [4] - Net interest margin for the quarter was 3.57%, up from 3.47% for the fourth quarter of fiscal 2025 and from 3.34% in the year-ago quarter [5][18] - Non-interest income was down by 9.7% or $707,000 compared to the linked quarter, but was more than offset by lower non-interest expense of $925,000 or a 3.6% decrease quarter over quarter [5][21] - The allowance for credit losses at September 30, 2025, totaled $52.1 million, representing 1.24% of gross loans and 200% of non-performing loans [22] Business Line Data and Key Metrics Changes - Gross loan balances increased by $91 million or 2.2% during the first quarter, which would be 8.8% annualized [6] - Loan balances increased by $225 million or 5.7% over the last 12 months, led by non-owner occupied CRE, one-to-four family residential, C&I, and multifamily loans [6][7] - Deposit balances were relatively flat compared to the linked quarter, but up $240 million or 5.9% over the last 12 months [7] Market Data and Key Metrics Changes - Strong growth was experienced in the east region, where much of the agricultural activity is concentrated, with the south region following closely [7] - The loan pipeline anticipated to fund in the next 90 days remains strong, totaling about $195 million at September 30 [7] Company Strategy and Development Direction - The company is optimistic about achieving mid-single-digit loan growth in the fiscal year despite expectations of a slowdown in loan growth in the upcoming quarters [7][20] - The company is focusing on improving credit quality and has been proactive in working with borrowers to assess their positions and utilize government programs to mitigate risk [17] - There is a modest uptick in M&A discussions, with the company well-positioned to act when the right partner is ready [25][26] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the performance in the new fiscal year, despite a larger provision for credit losses due to the evolving economic environment [3][23] - The company expects to remain liability-sensitive and a net beneficiary of rate cuts over the next four years [20] - Management noted that while charge-offs and non-performing loans have remained elevated, they are comparable to national averages for banks under $10 million [25] Other Important Information - The company repurchased just over 8,000 shares at an average price of just under $55 for a total of $447,000 [9] - Tangible book value increased by $5.09 or 13.3% over the last 12 months, attributed to earnings retention and improvement in the bank's unrealized loss in the investment portfolio [8][9] Q&A Session Summary Question: Outlook for provision expense and charge-offs - Management expects charge-off activity to drop from the levels of the last two quarters, with current delinquency levels running similar to historical ranges [32][33] Question: Bank's rate sensitivity and margin expansion - The bank remains overall liability-sensitive and expects to be a net beneficiary of rate cuts, estimating a 1%-3% increase in net interest income per 100 basis points of rate cuts [34][35] Question: Update on loan pipeline and growth expectations - The loan pipeline remains consistent, with expectations for mid-single-digit growth for the fiscal year, though seasonal slowdowns are anticipated [41][43] Question: Appetite for buybacks and M&A activity - Management anticipates being more active in buybacks given current pricing and is exploring M&A opportunities, ideally targeting banks in the billion-dollar asset range [48][49]