Southern Missouri Bancorp, Inc. Q4 FY2025 earnings call

Financial Results - June Quarter: Earnings up slightly; net interest margin and income higher; noninterest income up; provision for income tax expense lower but provision for credit losses higher. - Full Year Fiscal '25: Earnings $5.18 vs $4.42 in '24, driven by stronger net interest income from 7% earning asset growth and net interest margin expansion. Tangible book value per share increased by $5.19 (14%) to $41.87. - Credit Quality: Deteriorated somewhat from very low levels but remains strong; nonperforming loans at $23 million; problem credits higher but manageable. - Ag Segment: Challenges for farmers due to lower commodity prices, rising costs, and lower profitability; early planting progress with mixed outcomes; farmers facing rising input costs. - Net Interest Margin: 3.46% for the quarter, planned change in NIM calculation to annualized day count for fiscal '26. - Noninterest Income: Up 9.2% due to card network bonus, offset by mortgage servicing rights charge. - Noninterest Expense: Up 2.3% due to $425,000 consulting expense and data processing costs. - Allowance for Credit Losses: $51.6 million (1.26% of gross loans), impacted by net charge-offs and qualitative adjustments.

In the June quarter, the net interest margin was 3.46%, up from 3.39% in the prior quarter. Gross loan balances increased by $76 million (7.6% annualized) and $250 million (6.5% year-over-year). Deposit balances increased by $20 million (about 2% annualized). Net interest income and noninterest income rose, while provision for credit losses increased. For full year fiscal '25, earnings were $5.18 compared to $4.42 in fiscal '24, driven by stronger net interest income from 7% earning asset growth and net interest margin expansion.

Fiscal '26 Plan: Change reported quarterly NIM calculation to be based off the annualized day count to reduce volatility. ### Loan Growth: Optimistic about mid-single-digit loan growth in fiscal '26 due to strong pipeline. ### Margin: Potential margin expansion in fiscal '26 from loan origination and renewals at higher rates; neutral to rate movements currently but could expand margin with Fed cuts as cash is deployed.

• Credit Risks: Nonowner-occupied CRE loans, including a construction loan on nonaccrual status and specific purpose CRE loans with charge-offs. - Agricultural Challenges: Lower commodity prices, rising input costs, farmer profitability issues, and potential for farmers winding down operations. - Prepayments: Higher prepayments expected in nonowner-occupied CRE due to larger credits planning to pay off near term.

Q: About loan growth momentum and prepayments A: Greg A. Steffens said loan growth was steady over the quarter, and higher prepayments expected in nonowner-occupied commercial real estate as several larger credits plan to pay off near term Q: Margin expectations and Fed cuts A: Stefan Chkautovich said they are neutral to rate movements due to excess cash, but NIM could expand from loan origination and renewals; Fed cuts could further expand margin as deposit pricing strategy positions them well Q: Deposit funding and CDs A: Matthew T. Funke said less weighted towards CDs this year, and Stefan Chkautovich mentioned CD rates rolling off averaging ~4.24% and replaced at ~4% Q: M&A and buyback A: Greg A. Steffens said more M&A conversations, and buyback depends on tangible book value relative to stock price