Executive Summary

SMBC delivered Q1 FY26 diluted EPS of $1.38, up 25.5% year over year and down $0.01 sequentially, as net interest margin expanded to 3.57% and net interest income grew 15.7% YoY; efficiency improved to 51.1% from 59.0% a year ago .
Against S&P Global consensus, EPS beat by ~$0.07 ($1.38 vs $1.31*), while standardized “revenue” missed by ~$4.1M ($44.5M* actual vs $48.6M* est.); note SPGI’s revenue methodology may differ from company presentation. Values retrieved from S&P Global.
Credit costs elevated: PCL rose to $4.5M (vs $2.2M YoY and $2.5M QoQ) amid higher reserves and specific charges, with NPLs at 0.62% and net charge-offs of 0.36% annualized; management expects charge-offs and provisioning to trend lower than the past two quarters absent new issues .
Loans grew $91.2M (+2.2%) QoQ on non-owner-occupied CRE, 1-4 family, multifamily and C&I; deposits were flat QoQ as the bank leaned less on promotional pricing; TBV/share rose to $43.35; quarterly dividend of $0.25 declared .
Potential near-term stock catalysts: continued NIM expansion despite seasonal margin headwinds, visible buyback appetite (~200k shares authorized), and stabilization of credit metrics; management guides to mid-single-digit FY26 loan growth and expects to remain a net beneficiary of potential rate cuts .

What Went Well and What Went Wrong

What Went Well

Pre-provision earnings momentum: NIM expanded to 3.57% (up 10 bps QoQ; +23 bps YoY) and net interest income rose to $42.4M (+5.2% QoQ; +15.7% YoY), driving improved efficiency (51.1%) despite fee headwinds .
Expense discipline and accounting refinements: Noninterest expense fell 3.1% YoY to $25.1M; ASC 310‑20 changes deferred ~$1.6M of fee income but more than offset by ~$1.9M of deferred expenses, with only a ~$55k net income benefit; management called this a new baseline for run-rate expenses .
Strategic contract renegotiation: $572k consulting cost (after-tax $444k; ~$0.04 per share) to renegotiate a key vendor contract, with expected payback <18 months via higher bank card interchange revenue; “we estimate a less than 18‑month earned back of the expense” (Matt Funke) .

What Went Wrong

Higher credit costs and problem assets: PCL rose to $4.5M as allowance coverage adjusted and specific loans migrated to nonaccrual; NPLs increased to $26.0M (0.62% of loans) with net charge-offs of $3.7M (0.36% annualized), primarily a special‑purpose CRE relationship charge‑off .
Fee income pressure: Noninterest income decreased 8.4% YoY to $6.6M, driven by lower SBA production/sales and ASC 310‑20 fee recognition changes; bank card interchange also normalized QoQ after a Q4 network incentive .
Seasonal/structural margin headwinds ahead: Management flagged typical December/March seasonal deposit inflows and slower loan growth that can weigh on reported margin, even as they still expect net interest income to grow through the year (liability-sensitive profile but more neutral near term) .

Financial Results

Sequential trend (Q3 FY25 → Q4 FY25 → Q1 FY26)

Metric	Q3 FY25	Q4 FY25	Q1 FY26
Net Interest Income ($MM)	$39.479	$40.333	$42.418
Noninterest Income ($MM)	$6.666	$7.280	$6.573
Provision for Credit Losses ($MM)	$0.932	$2.500	$4.500
Net Income ($MM)	$15.683	$15.786	$15.650
Diluted EPS ($)	$1.39	$1.39	$1.38
Net Interest Margin (%)	3.39%	3.46%	3.57%
Efficiency Ratio (%)	55.1%	54.6%	51.1%

Year-over-year comparison (Q1 FY25 → Q1 FY26)

Metric	Q1 FY25	Q1 FY26
Net Interest Income ($MM)	$36.661	$42.418
Noninterest Income ($MM)	$7.173	$6.573
Provision for Credit Losses ($MM)	$2.159	$4.500
Net Income ($MM)	$12.456	$15.650
Diluted EPS ($)	$1.10	$1.38
Net Interest Margin (%)	3.34%	3.57%
Efficiency Ratio (%)	59.0%	51.1%

Loan portfolio composition (period-end balances)

Loan Type ($000s)	Sep 30, 2024	Jun 30, 2025	Sep 30, 2025
1-4 Residential RE	942,916	992,445	1,021,300
Non-owner Occ. CRE	903,678	888,317	918,275
Multifamily RE	371,177	422,758	445,953
Construction & Land Dev.	351,481	332,405	283,912
Commercial & Industrial	457,018	510,259	521,945
Ag Production	200,215	206,128	229,338
Total Loans (gross)	3,966,518	4,100,590	4,191,743

Key KPIs and balance sheet

KPI	Q3 FY25	Q4 FY25	Q1 FY26
ROA (annualized)	1.27%	1.27%	1.24%
ROE (annualized)	12.1%	11.8%	11.3%
Avg Loan-to-Deposit Ratio	94.2%	94.5%	96.3%
NPLs / Loans	0.55%	0.56%	0.62%
Net Charge-offs (annualized)	0.11%	0.53%	0.36%
ACL / Loans	1.37%	1.26%	1.24%
ACL / NPLs	250%	224%	200%
Deposits ($MM)	$4,261.4	$4,281.4	$4,280.5
Tangible BV/Share ($)	$40.37	$41.87	$43.35
Dividend/Share ($)	$0.23	$0.25	$0.25

Estimates vs Actuals (S&P Global standardization)

Metric	Consensus Estimate	Actual	Surprise
EPS (Diluted)	$1.31*	$1.38	+$0.07*
Total Revenue ($MM)	$48.60*	$44.49*	-$4.11*

Values retrieved from S&P Global.
Note: S&P Global “revenue” may differ from company-presented totals due to standardization.

Guidance Changes

Metric	Period	Previous Guidance (Q4 FY25)	Current Guidance (Q1 FY26)	Change
Net Interest Margin / NII	FY26	Expected further margin expansion; ability to lower CD rates as markets ease	Expect continued NII growth through the year; seasonal deposit inflows may weigh on margin in Dec/Mar, but overall positive trajectory	Maintained (adds seasonal nuance)
Loan Growth	FY26	Target mid-single-digit loan growth; strong pipeline	Mid-single-digit loan growth reiterated; pipeline ~$195M; seasonal slowdown near term	Maintained
Rate Sensitivity	Next 12–24 months	More neutral near term given excess cash; net beneficiary if cuts occur	Overall liability-sensitive; ~1–3% NII uplift per 100 bps rate cuts; temporarily more neutral near term	Maintained (quantified)
Deposits/Brokered	Near term	Less aggressive on CDs; deposit competition moderating	Less aggressive on promotional pricing; plan to reduce brokered reliance; seasonal inflows expected in Q2	Maintained
CRE Concentration	FY26	Expected to remain ~300–325% of Tier 1+ACL	296% at bank level (285% consolidated); monitoring closely	Slightly improved
Capital Return (Buybacks)	Next 1–2 quarters	Preference to weigh M&A vs buybacks; repurchases based on TBV multiple	Expect to be more active repurchasing given pricing; ~200k shares remain authorized; 3-year earn-back target	Raised buyback appetite

Earnings Call Themes & Trends

Topic	Previous Mentions (Q3 & Q4 FY25)	Current Period (Q1 FY26)	Trend
Margin/NII	NIM up to 3.39% (Q3) and 3.46% (Q4); expected further expansion in FY26	NIM 3.57%; expect NII growth through year; seasonal margin headwinds in winter	Improving, seasonal caution
Credit Quality / CRE	NPLs rose in Q3/Q4; special‑purpose CRE charge-offs; ACL/NPL still strong	NPLs 0.62%; net charge-offs 0.36% ann.; specific relationship largely charged off; expect lower charge-offs vs past two quarters	Stabilizing after cleanup
Agriculture	Rising input costs; mixed crop conditions; line utilization elevated (Q4)	Mixed yields; lower commodity pricing; storage strategies; proactive restructuring; added reserves earlier in 2025	Margin pressure persists
Deposits & Pricing	Competition easing; less CD aggressiveness (Q4)	Promotional pullback continues; plan to reduce brokered; seasonal Q2 inflows	Stable to improving
Rate Sensitivity	More neutral near term; net beneficiary of cuts (Q4)	Liability-sensitive over cycle; 1–3% NII per 100 bps cuts; temporary neutrality due to deposits	Maintained
Capital Return / M&A	Dividend to $0.25; balancing buybacks vs M&A (Q4)	More active buybacks anticipated; modest uptick in M&A discussions	More constructive

Management Commentary

“We feel we have good momentum on pre-provision net revenue to start the year, and we're optimistic about how we'll perform in the new fiscal year.” – Matt Funke .
“Overall, through the seasonal cycle, we expect to remain liability-sensitive and a net beneficiary of rate cuts over a four-year period.” – Stefan Chkautovich .
“We would be surprised if charge-off activity remained at the level of the last two quarters… we’re not anticipating, based on what we know today, provisioning to be as high as it was this quarter.” – Greg Steffens .
“We would anticipate [being] more active [on] buybacks… we still have ~200,000 shares authorized for repurchase.” – Management Q&A .
“ASC 310‑20 changes… defer more fees and expenses… resulted in recognizing $55,000 in additional net income this quarter… this is a good baseline to start from.” – Stefan Chkautovich .

Q&A Highlights

Credit outlook: Management expects charge-offs and provisioning to decline from the last two quarters absent unforeseen issues; specific special‑purpose CRE charge-offs largely realized .
Margin and rate sensitivity: Still liability-sensitive overall; more neutral near term with deposit inflows; ~1–3% NII benefit per 100 bps cuts .
Expense run-rate: ASC 310‑20 creates a new lower baseline for noninterest expense; modest step-up expected with annual merit increases in Q3 .
Loan growth and pipeline: Pipeline remains strong (~$195M to fund in 90 days), but seasonality implies slower growth in the December/March quarters; mid-single-digit FY26 target reiterated .
Deposits and funding mix: Less aggressive on CDs, plan to reduce brokered deposits; seasonal ag/public unit inflows expected next quarter .

Estimates Context

EPS beat: $1.38 vs $1.31* consensus; beat driven by NIM expansion (+10 bps QoQ), stronger NII (+5.2% QoQ), and lower operating expenses, partially offset by higher PCL and lower fee income .
Revenue miss (SPGI standardization): $44.5M* vs $48.6M*; company-reported net interest income of $42.4M and noninterest income of $6.6M reflect different presentation vs SPGI’s standardized “revenue” . Values retrieved from S&P Global.
Revisions risk: Seasonal margin headwinds (Dec/Mar) and elevated (but declining) credit costs could temper near-term revenue lines, though management expects NII growth and mid-single-digit loan growth through FY26 .

Values retrieved from S&P Global.

Key Takeaways for Investors

Core profitability improved: NIM at 3.57% and efficiency at 51.1% underpin solid pre-provision earnings power despite fee pressure; EPS up 25.5% YoY .
Credit normalization ongoing but contained: NPLs 0.62%, net charge-offs 0.36% annualized; management anticipates lower charge-offs/provisioning ahead absent new issues .
Loan growth durable: +2.2% QoQ with a healthy near-term pipeline and mid-single-digit FY26 outlook; deposit strategy reduces rate-paid risk while lowering brokered reliance .
Rate path leverage: Liability-sensitive balance sheet implies 1–3% NII uplift per 100 bps rate cuts over time, though near-term seasonality can weigh on margin .
Capital return: Dividend maintained at $0.25; repurchases likely to be more active given valuation and 3-year earn-back discipline; ~200k shares authorized .
Watch list: Seasonal margin pressure in Q2/Q3 (Dec/Mar), ag borrower cash flows under lower commodity prices, and CRE-specific workouts are the key near-term swing factors .
Stock setup: Catalysts include continued NIM expansion/NII growth, visible buyback execution, and signs of credit stabilization; misses would likely stem from sharper-than-expected fee softness or renewed credit migration .

Notes on non-GAAP/other items:
- Tangible book value/share rose to $43.35 (+13.3% YoY) **[916907_0001104659-25-101604_smbc-20251022xex99d1.htm:11]**.
- $572k consulting cost in Q1 reduced EPS by ~$0.04; management expects <18-month payback via higher interchange fees **[916907_0001104659-25-101604_smbc-20251022xex99d1.htm:1]** **[0000916907_2199325_1]**.
- ASC 310‑20 changes shift timing of fee and expense recognition, minimally impacting net income this quarter (~$55k) and establishing a new expense baseline **[0000916907_2199325_6]**.

SOUTHERN MISSOURI BANCORP, INC. (SMBC)·Q1 2026 Earnings Summary