Southern Missouri Bancorp, Inc. Q1 FY2026 earnings call

• Financial Results: Relatively stable earnings with solid growth in net interest income from loan growth and NIM expansion, offset by larger provision for credit losses and lower fee income. Diluted EPS was $1.38, with a $0.04 reduction due to contract renegotiation expenses.
• Credit Quality: Problem asset levels increased slightly, nonperforming loans at $26 million, with nonperforming assets up $3.4 million quarter-over-quarter. Working with borrowers on specific CRE properties and managing delinquent loans.
• Agricultural Update: Crop mix, commodity price headwinds, farmers relying on storage strategies, lenders proactively working with borrowers.
• Income Statement Details: NIM breakdown, impact of fee recognition changes under ASC 310-20, noninterest income/expense trends, and allowance for credit losses details.
• Capital and Share Repurchase: Tangible book value up, repurchased over 8,000 shares, expecting less than 18-month earn back of contract renegotiation expenses.

For the first quarter of fiscal year, net interest margin was 3.57%, up from 3.47% in the linked June '25 quarter and 3.34% in the year-ago quarter. Net interest income increased 5.2% quarter-over-quarter due to NIM expansion and loan growth. Loan balances grew by $91 million or 2.2% during the quarter, led by nonowner-occupied CRE, 1-4 family residential, C&I, and multifamily loans. Noninterest income was down 9.7% or $707,000 compared to the linked quarter, while noninterest expense decreased by $925,000 or 3.6%. Diluted EPS for the current quarter was $1.38, down $0.01 from the linked June '25 quarter but up $0.28 from the prior year's September quarter.

• Expect continued net interest income growth through the year, with seasonal slowdowns in loan growth and deposit increases in certain quarters but overall positive net interest income improvement.
• Anticipate charge-offs to decline from recent high levels.
• Interest rate outlook: Expect net interest income growth with potential rate cuts, still liability-sensitive but with neutral periods due to balance sheet positioning.
• Buyback activity expected to be more aggressive given current pricing and favorable earn-back period.

• Evolving economic environment impacting provision for credit losses.
• Potential for continued credit deterioration if economic conditions worsen.
• Seasonal factors affecting loan growth and margin.
• Uncertainty in agricultural sector impacting borrowers and credit quality.

Q: Matt Olney asked about credit outlook, provision expense, and charge-offs. Greg Steffens responded that charge-off activity would likely drop from recent levels, expecting delinquencies to trend back to historical ranges.

A: Greg Steffens stated charge-offs would be down from the last 2 quarters and not anticipate current levels continuing.

Q: Matt Olney inquired about margin and rate sensitivity. Stefan Chkautovich said the bank is still liability-sensitive, expecting net interest income growth with rate cuts, and some neutral periods due to deposit influx.

A: Stefan Chkautovich mentioned being net beneficiary of 1%-3% net interest income per 100 basis points of rate cuts.

Q: Nathan Race asked about loan pipeline, M&A, and charge-offs. Matthew Funke and Greg Steffens responded on loan pipeline stability, M&A interest in $1 billion asset range, and expectation of charge-offs declining.

A: Greg Steffens said ideal M&A size is $1 billion assets, and charge-off trajectory expected to move lower absent unforeseen circumstances.