Southern Missouri Bancorp, Inc. Q2 FY2026 earnings call

• Financial performance improvement: Earnings and profitability improved due to lower provision for credit losses, larger earning asset base driving net interest income and noninterest income increase. - Loan details: Gross loan balances increased by $35 million in the quarter, led by 1-4 family residential, C&I and construction and loan development loans; loan pipeline at December 31 was $159 million. - Credit quality: Overall problem asset levels increased slightly but remained at modest levels; specific CRE and agricultural loan relationships contributed to changes in nonperforming loans; made progress on specialty CRE relationship with $2 million recovery. - Net interest margin: 3.57% for the quarter, flat with prior quarter; excluding reversed interest income from nonaccrual loans, NIM was 3.63%, up 6 basis points quarter-over-quarter due to lower cost of funds. - Non-interest income: Higher due to wealth management fees, increased interchange income and deposit account charges. - Non-interest expense: Up less than 1% quarter-over-quarter, primarily due to higher compensation, other noninterest expense and data processing expenses, partially offset by decrease in legal and professional expenses. - Share repurchase: Repurchased 148,000 shares at an average price of $54.32 per share for a total of $8.1 million in the second quarter.

In the December quarter (second quarter of fiscal year), earnings and profitability improved. Earnings per share diluted was $1.62, up $0.24 or 17.4% from the linked September quarter and $0.32 or 24.6% from the December 2024 quarter. Provision for credit loss expense was about $1.7 million, a decrease of $2.8 million from the linked September quarter. Gross loan balances increased by $35 million during the quarter, up almost $200 million or 5% compared to December 31 of the prior year. Deposit balances increased by about $28 million in the quarter and $98 million or 2.3% compared to December 31 of the prior year. Net interest margin for the quarter was 3.57%, unchanged from the linked September quarter but up to 3.63% when adjusting for reversed interest income from nonaccrual loans. Tangible book value per share was $44.65, up $5.74 or almost 15% over the last 12 months. Non-interest income was up 3.1% compared to the linked quarter, and non-interest expense was up less than 1% quarter-over-quarter.

• Fiscal year growth: Expect mid-single-digit growth for the fiscal year of '26. - Net interest margin: Anticipate further improvement in funding costs as CDs mature and index deposits repricing continues; see opportunity for spread improvement. - Share repurchase: Board approved new program to repurchase up to 550,000 shares or approximately 5% of shares outstanding, disciplined and opportunistic in deployment. - M&A: Remain optimistic about potential attractive M&A opportunities in the industry, with a broad landscape of potential partnerships in the footprint.

• Credit risk: Increase in classified and nonaccrual loans due to specific CRE and agricultural loan relationships; economic conditions could bring broader pressures. - Seasonal factors: Limited net loan growth expected in the March quarter due to normal seasonality; prepayment rates higher than historical levels. - Market competition: Aggressive competition in loan pricing in the marketplace.

Q: On loan growth, asked about unexpected paydowns and loan pricing competition.

A: Greg said there were unexpected paydowns like a larger C&I relationship moving to a larger bank, and Matthew mentioned there was aggressive competition out there.

Q: On net interest margin outlook for March quarter and liquidity build.

A: Stefan said they don't give specific NIM guidance but see potential for increased spread in March quarter due to deposit cost decrease and less impact from seasonal liquidity build.

Q: On personnel costs run rate and buyback appetite.

A: Stefan said personnel costs increase is mid-single-digit for annual merit increases; Matthew said buyback activity is price dependent, disciplined on deploying capital.

Q: On charge-offs for commercial real estate loan and normalized range.

A: Greg said anticipate more to historical averages over upcoming quarters, not expecting much tailwind from the specific CRE relationship.