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SM

SOUTHERN MISSOURI BANCORP, INC. (SMBC)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 FY2025 EPS was $1.30, up 21.5% year over year and up 18.2% sequentially; net income rose to $14.7M on higher net interest income and stable net interest margin at 3.36% despite seasonal liquidity build .
  • ROAA/ROE improved to 1.21%/11.5% (vs 1.07%/10.0% in Q1), with deposits up $170.5M QoQ and loan balances up $60.5M; tangible book value per share increased to $38.91 (+12.3% YoY) .
  • Credit quality remained strong: NPL ratio 0.21%, ACL coverage ~659% of NPLs; non-owner occupied CRE concentration ~317% of Tier 1 capital and ACL at bank level, within internal target (300–325%) .
  • Management flagged near-term NIM pressure in March quarter due to elevated cash (seasonal deposits) but expects net interest spread to improve slightly as loans reprice and CDs reprice lower; effective tax rate (23.7%) was temporarily elevated due to merger accrual adjustment .
  • Consensus estimates from S&P Global were unavailable at time of writing; no beat/miss assessment provided. Estimates unavailable due to data access limits.

What Went Well and What Went Wrong

What Went Well

  • Net interest income rose $3.7M YoY (+10.6%) and $1.5M QoQ (+4.0%), driving EPS/ROE improvement; NIM held at 3.36% with net interest spread expanding 4 bps QoQ despite higher seasonal cash balances .
  • Deposit growth (+$170.5M QoQ) and funding mix (core CDs and savings) supported liquidity and AFS purchases; TBV/share increased to $38.91 (+12.3% YoY) .
  • Credit remained benign: net charge-offs at 2 bps (annualized), NPLs stable at 0.21% of loans, and ACL coverage ~659% of NPLs .

Management quotes:

  • “We were able to expand our net interest spread by 4 basis points... and that helped hold the net interest margin relatively steady quarter-over-quarter.” — President Matt Funke .
  • “We are optimistic about the remainder of the year... favorable underlying trends.” — CFO Stefan Chkautovich .
  • “We... target [non-owner CRE] ratio... between 300 and 325%.” — CEO Greg Steffens .

What Went Wrong

  • Noninterest income fell 4.3% QoQ (seasonal factors and lower SBA gains/interchange), and legal/professional fees elevated in prior quarter due to consulting project; current quarter’s effective tax rate rose to 23.7% on a $380k merger-related accrual adjustment .
  • NPLs ticked up YoY (0.21% vs 0.16% a year ago) and qualitative ACL adjustments increased versus June due to macro uncertainty and specific portfolio factors (e.g., hotels) .
  • Management guided to potential NIM compression in the March quarter due to elevated cash from seasonal deposits; compensation expense to step up with mid-single-digit merit/cost-of-living adjustments .

Financial Results

MetricQ4 2024Q1 2025Q2 2025
Total Revenue (NII + Noninterest) ($USD Millions)$42.9 $43.8 $45.0
Net Interest Income ($USD Millions)$35.1 $36.7 $38.1
Noninterest Income ($USD Millions)$7.8 $7.2 $6.9
Net Income ($USD Millions)$13.5 $12.5 $14.7
Diluted EPS ($)$1.19 $1.10 $1.30
Net Interest Margin (%)3.25% 3.37% 3.36%

KPIs

MetricQ4 2024Q1 2025Q2 2025
ROAA (%)1.17% 1.07% 1.21%
ROE (%)11.2% 10.0% 11.5%
Avg Loan-to-Deposit Ratio (%)96.0% 98.4% 96.4%
NPL / Gross Loans (%)0.17% 0.21% 0.21%
ACL / NPLs (%)786.17% 663.38% 658.80%
Tangible Book Value per Share ($)$36.68 $38.26 $38.91

Loan Portfolio (Selected Categories, $USD Millions)

CategoryDec 31, 2023Sep 30, 2024Dec 31, 2024
1–4 Residential Real Estate$893.9 $942.9 $967.2
Non-owner Occupied CRE$863.4 $903.7 $882.5
Construction & Land Development$298.3 $351.5 $393.4
Commercial & Industrial$443.5 $457.0 $484.8
Agriculture Production$146.3 $200.2 $188.3
Total Loans (Gross)$3,731.9 $3,966.5 $4,027.2

Deposits (Selected Categories, $USD Millions)

CategoryDec 31, 2023Sep 30, 2024Dec 31, 2024
Non-interest Bearing$534.2 $503.2 $514.2
NOW Accounts$1,304.4 $1,128.9 $1,211.4
Savings Accounts$372.8 $556.0 $573.3
Total Nonmaturity Deposits$2,610.5 $2,520.5 $2,649.2
Total Certificates of Deposit$1,375.0 $1,519.7 $1,561.4
Total Deposits$3,985.5 $4,040.1 $4,210.6
Public Unit Deposits$594.1 $510.5 $565.9

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net Interest MarginMarch quarter (Q3 FY25)December quarter “sideways at worst”; tailwinds from rate cuts expected FY25 Potential compression near-term (elevated cash), but net interest spread to improve slightly; minimal NII growth expected in March quarter Maintained direction with near-term caution
Net Interest SpreadMarch quarterN/ASlight improvement as loans reprice higher and CDs reprice down New detail
Compensation ExpenseMarch quarter & onwardSeasonal compensation adjustments in January Merit/COLA increases mid-single-digit; compensation run-rate expected to rise in March quarter Raised
Effective Tax Rate2H FY25Typical ~21% range historically Elevated to 23.7% in Q2 on $380k accrual; expected to return to normal range in 2H FY25 Lower later
Noninterest Income Run-RateFY25~$7.0M per quarter guidance No change implied; Q2 down 4.3% QoQ on specific items Maintained
CRE Concentration PolicyFY25Hold relatively steady; grow CRE in line with capital Target 300–325% of Tier 1 + ACL; may tick up with construction draws Clarified range
Loan GrowthFY25Mid-single-digit for fiscal year Mid-single-digit likely; potential to exceed depending on ag conditions; pipeline $173M Maintained/possibly higher
DividendOngoing$0.23 declared Q1 $0.23 declared again; payable Feb 28, 2025 Maintained

Earnings Call Themes & Trends

TopicPrevious-2 (Q4 2024)Previous-1 (Q1 2025)Current (Q2 2025)Trend
NIM trajectoryExpanded QoQ; potential further expansion if Fed cuts; deposit repricing tailwind Expect sideways at worst in Dec; longer-term NIM/NII tailwinds from rate cuts Near-term NIM pressure in March due to elevated cash; net interest spread to improve Improving spread; near-term margin noise
Deposit competition/pricingFavorable CD repricing; ~$1B CDs to reprice in 12 months Local competition starting to lower pricing post FOMC cuts Mixed competitive dynamics; some outliers with high rates; seasonal public/ag inflows Moderating pricing pressure
Liquidity & securitiesCash reduced in Q4; TBV growth; opportunistic AFS purchases Brokered CDs used; expected runoff with seasonal inflows Purchased ~50% variable/fixed MBS/CMOs; funded with broker CDs; net brokered flat Liquidity build near-term
Fee incomeSeasonal uptick Q4; plan to smooth incentives over year ~$7M run-rate commentary Down 4.3% QoQ on SBA gains/interchange timing Stable around ~$7M with variability
Credit qualityBenign; NCOs 6 bps; NPL down NPL up to 0.21%; hotel-related reserves increased NPL 0.21%; NCOs 2 bps; ACL coverage ~659% Stable/strong
CRE concentration318% (bank level) Q4; target steady 320% Q1; steady ~317% Q2; target 300–325% Within target
Agriculture trendsSeasonal draws; early planting; cost pressures Higher input costs; storage may delay paydowns Weather/commodity price pressures; paydowns expected in March Manageable seasonality
M&A & performance improvementExploring opportunities; preliminary Preliminary conversations continue Small pickup in M&A conversations; performance improvement initiative nearing recommendations Medium-term optionality

Management Commentary

  • “We feel we have good momentum and see positive trends going into the second half.” — President Matt Funke .
  • “We could compress the net interest margin [near-term], but we would expect the net interest spread... to improve slightly.” — CFO Stefan Chkautovich .
  • “Our internal [non-owner CRE] limit is 375%. We anticipate balances to fluctuate between 300 and 325%.” — CEO Greg Steffens .
  • “Our asset quality remained strong... net charge-offs remained benign at 2 basis points annualized.” — CEO Greg Steffens .

Q&A Highlights

  • Deposit competition: Mixed environment with some isolated high-rate competitors; pricing moderating post FOMC cuts; no clear rural vs metro divergence .
  • Liquidity and AFS purchases: ~50/50 variable/fixed (CMOs/MBS); funded with broker CDs; net brokered deposits did not increase .
  • Expense outlook: Compensation run-rate to increase in March on mid-single-digit merit/COLA; data connectivity costs trending down; limited occupancy changes .
  • Loan growth cadence: Expect stable to slightly higher balances in March quarter; potentially half the Q2 growth; mid- to high-single-digit full-year possible depending on ag planting/weather .
  • Margin dynamics: Elevated cash and seasonal deposits may pressure NIM; spread improvement expected as assets reprice .

Estimates Context

  • S&P Global consensus estimates for Q2 FY2025 EPS and revenue were unavailable due to data access constraints; as a result, no beat/miss analysis versus Street is provided. Consensus unavailable at time of writing.

Key Takeaways for Investors

  • Earnings quality improved: EPS, ROAA, ROE, and net interest income up; spread expanding despite seasonal liquidity—near-term NIM noise likely transient .
  • Funding tailwinds: CD repricing lower and deposit pricing moderation should support spread/NII through FY2025; watch March quarter liquidity impact .
  • Credit resilient: Low NCOs and strong ACL coverage provide buffer; CRE concentration within clarified internal range (300–325%) .
  • Growth runway: Loan pipeline ($173M) and expanding teams in St. Louis/Kansas City support mid-single-digit full-year growth, potentially higher with favorable ag conditions .
  • TBV accretion persists: Tangible book rose to $38.91; dividend maintained at $0.23—capital return supported by improved profitability and AOCL relief .
  • Trading implications: Near-term margin compression headlines in March could create entry points; medium-term thesis anchored on spread expansion and steady credit, with optional M&A upside as conversations pick up .
  • Monitor: Fee income normalization (~$7M run-rate), tax rate normalization in 2H, agricultural paydowns timing, and securities mix (variable vs fixed) on rate path .