SMBC - Earnings call transcript Q2 2025 | Southern Missouri Bancorp, Inc.

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Operator

Hello, and welcome to the Southern Missouri Bancorp Earnings Conference Call. My name is Alex and I'll be coordinating the call today. [Operator Instructions]

I'll now hand it over to your host, Stefan Chkautovich, CFO, to begin. Please go ahead.

Stefan Chkautovich

Alex. you, Thank everyone. Good morning, Stefan Chkautovich, Missouri is with CFO Bancorp. This Southern joining Thank us. for you

The review Monday, is data call questions. purpose this of to and take our earnings XXXX, presented quarterly the release XX, dated January to your in and information

forward-looking release. make today's during to certain refer statements contained call, regarding cautionary statement We forward-looking we in you statements may and our the press

will and Chief today quarter. on Greg Steffens, our Matt CEO; the Administrative and and President call from by off today by joined conversation Funke, I'm Chairman Matt highlights our with lead Officer. our some recent most

Matthew Funke

a and Thanks, second and asset everyone. off in income in fiscal Thanks with profitability and of quarter quarter, results earning an in is provision start for on to highlights Matt lower December a our financial losses, our Stefan, a Funke. due improved good for morning, net larger some for increase earnings credit I'll decrease combination the interest joining driving is us. base, the This expense. year. Quarter-over-quarter, noninterest with which

into first second and and earnings the seen see in good year, of trends we our we fiscal positive going have the profitability we momentum improvement half. feel With half have the

was the compared the in as We quarter-over-quarter earned X.XX%. X.XX% quarter quarter up period Net to flat X% year-over-year. was was fiscal up the $X.XX compared to from income September up XX.X% and first quarter. $X.XX year-ago 'XX recorded for it interest the diluted of quarter from relatively December X.XX% December about margin XXXX the when interest was and for That's the linked $X.XX it's and quarter. Net

we from drive agricultural funds held of public depositors, customers our seasonal inflows can in margin quarter of receive second those generally the which balances. with cash higher our interest and unit fiscal net compression some year, In deposits

grown over rate points decreased XXX that in basis have our recent points short-term interest due expand X the steady reducing were able helped the with quarter-over-quarter. our this of variable of funding year, cuts interest the we margin rate deposits, quarter driving to cost and However, hold basis down net net FOMC by costs, which and rates spread periods, relatively to

gross of of during second just increased On quarter. deposit increased year by under Compared by from a loan the gross was up increased core or balances $XXX prior offered December compared quarter. ago quarter the XX, about $XX $XXX December XX X%. rights second million deposits year. this $XXX and a to nonmaturity balances quarter result sheet, million just X.X% to over in million accounts balance Deposit the balances special the CD deposit during were from the by growth about in well-received million or XXXX, growth at seasonal and Strong inflows

million and Due and XX%, to took strong or a grew equivalents bonds deposit $XX liquidity. on advantage purchase available-for-sale our growth, we as securities about quarter-over-quarter, better portfolio grew cash environment to sheet million spread balance add of $XX

during and value share last increased book $X.XX months. by or Tangible XX XX% per $XX.XX was the

Greg to credit. discussion for over hand I'll some it now on

Greg Steffens

several owned. the Nonperforming total XX the real dropped which asset as prior slightly linked $XXX,XXX and everyone. of points with but by due of XX at loans, of XX/XX, parcels in quality quarter basis down points points, last year-end. other our Matt, $X classified the decrease Thanks, adversely total to to strong points, sale to X percentage loan asset XX million a at totaling quarter. Nonperforming loans or basis balances points $XX from a good points estate $XXX,XXX Overall, of balances remained morning, basis million X or up December loans about line basis compared basis XX or is to XX at of increased from basis

decrease Total to XX due XX XX also to loans. compared to basis September. basis $X is ago. charge-offs past delinquent points flat on were $XX September a loans a which at gross X the X basis X totaled to This low stable compared remained was XX from million, of days points and compared and point million linked quarter down points year Net basis a benign and at Loans annualized.

to although could period expect and industry net below due remain higher strong averages. increase credit expect we Overall, recent modestly, and sustained rates, do quality but the charge-offs loans has to remained problem of we interest them manageable

equipment and were compared as XX to the compared were -- prior September real little December up the changed production they million been seasonal balances $X compared up down and have to million As million far year-over-year. a pattern. and balances relatively so limited But following prior quarter-end year ago. to normal paydowns agricultural estate end are were quarter-over-quarter $XX XX, a Ag balances loan our $XX

a agricultural demonstrated reported XXXX, including replanning, In infrastructure, by our weather-related resilience despite spring integration that hot, expectations. customers robust to But summer. those calendar dry required year thanks followed facing exceeded rains that farmers yields several challenges,

which and declined price However, throughout cotton, have particularly pressuring profitability, commodity prices recoveries the [indiscernible]. limited corn, experienced for year, soybeans

agricultural spring, shifts rice, improve. crops paydowns Looking acreage pricing may repayments stronger is this to Many unless likely conditions in in which to March delayed soybeans should of but carried farmers Corn to in XXXX cotton market prices costs. have ahead favor hopes quarter. higher of result over on lines, and calendar farmers in and decline respond has higher in weaker acreage the be and reduced XXXX, crop as input we expect acreage

potential to While disciplined lower And on price and government stress base, flows Despite shortfalls ensure lending address much practices, proactively we farm support by expect [indiscernible] are of through customer satisfactory cash supported be leveraging restructuring farm testing working these capitals customer programs will should some of these challenges, programs. relationships loans. across our or customers deep we credits. our performance guarantee any are working

in well-rounded growth to South as our quarter. based slower some region seasonal was and of loan X Louis bank Loan gross factors, family new year St. loan stemming The the grew well Looking regions loans ag. our the C&I, a part construction, multifamily. annualized estate including We're X Kansas experienced at the led as out and residential X.X% City. the as from by or growth due fiscal million to growth of real during for portfolio whole, $XX for

As our new added last that we totals. have to lenders over started [indiscernible] the to add have year

million Our $XXX days compared pipeline ago. and for XX in year September quarter-end at X XX loans million the next $XXX as to fund totaled $XXX to million at

Although in at growth least we for pipeline, the building loan growth with about slower our period due first in of feel optimistic year. winter mid-single-digit fiscal achieving half the seasonality growth loan are normal strong to the a currently we

Stefan, would our some financial additional you on provide details performance?

Stefan Chkautovich

Thanks, the a already, some items of financial Greg. Matt I'll note additional key details. few hit but

margin which to X.XX%, it points fair addition September but was basis interest X value net compared quarter's this December amortization of quarter at XX on included points. accretion static from on discount assumed premium basis of and of about the portfolios deposits, quarter acquired Looking down loan prior-year linked the

vary a this this trend expect about can based quarter. a basis would activity, on we point prepayment Although to by lower

interest-earning increased in average basis by the mostly $XX point our equivalents as increase The X.XX%. net lower-yielding point as an the XX and decrease balance of the cost to the quarter interest-bearing of primary of to by portfolio linked the the offset quarter-over-quarter. compression almost million liabilities cash in investment basis contributor was compared This interest assets margin to X was

in March the our to slightly through which loans increases growth, at would seasonally down. renewal continued addition we Federal held Looking elevated which expect interest-bearing are have This, CDs quarter, spread, the January, improve deposits, see and in equivalent higher balances, Reserve. is at our margin. have to yield at earning which we the to compress seasonal quarter further loan being continue cost interest of asset net to slower difference for cash But primarily reprice reprice between the net interest and liabilities, as could

the addition, will have reduced quarter In on impact day income. in negative net a small the count quarterly interest the March

receipt to down income primarily per of linked decrease decrease compared included due lower sale loans, fees the interchange quarter's gain other results incentives on card of additional annual loan transaction, the Noninterest income and on and a a saw as we SBA, X.X% in in based volume reduced fees. as September network was quarter to interchange

primarily to of expense expenses loans onetime compensation lower due fees. initiative associated payment the is travel to quarter in accruals. compensation increase due December SBA primarily expenses performance X.X% the the quarter-over-quarter, other due were Legal and September quarter and lower professional an The associated $XXX,XXX. in These with and with for expense offset due expense decreased was have training. of timing legal noninterest professional to in by down employee cost and partially Noninterest the the improvement decreases to

annual run for awarded and merit increase, cost increase quarterly take in expect including the would We adjustments see benefits. March percentage as the rate which expense in to quarter cost-of-living of effect, compensation mid-single-digit we the a increases

$XXX,XXX $X.X support loan as individually in quarter, Our elevated compared linked reviewed quarter the growth provision to for the losses credit an reserves to was loans. for million and The in strong quarter. provision September credit increase in was

of $XX XXXX credit $XX for or as December XXX% ACL nonperforming or loans allowance at and XX, linked compared Our X.XX% September of losses an loans X.XX% at million gross XX, gross and was of million to XXXX loans, of quarter. XXX% the loans of nonperforming

exposures. $XXX,XXX to loan PCL balances the for ACL result attributable was the sheet for of credit $XXX,XXX allowance attributable current period provision off-balance The to and the outstanding provision

the Our little assessment outlook economic was of changed.

Our losses was our CRE level the consolidated nonowner-occupied allowance our X XX. points bank XX, compared X XX, nonowner-occupied credit concentration December was to X basis, Tier growth approximately down capital September at capital in percentage of at Tier and On outpacing December due our for to CRE ratio XXX% about CRE. at a XXX% XXXX, as

measure pick construction CRE next hold would it few our quarters somewhat we with relatively draws. expect intent up on this with Our but to grow may capital, steady be in in line and the

to to the linked the expect rate compared to We the same was in of accruals normal in prior our $XXX,XXX quarter the the tax of rate second was to merger XXXX XX.X% an tax fiscal the quarter effective effective due completed tax and effective adjustment to the The of of in range half return XX.X% elevated rate year. year. of quarter activity. XX.X% tax for attributable would fiscal the quarter, The in second fiscal as

loan healthy growth of To of With optimistic year. conclude, improved thoughts? a fiscal the the about pipeline any and are profitability. by been trends, the underlying a closing we characterized robust year and the loan strong first Greg, favorable has one, XXXX remainder half

Greg Steffens

but in the initiative quarter. initiative quickly tool not to an it's serves And it efficiency. longer-run ability our as for also customer improve professional needs our our and team. to meet development also our valuable enhancing effectively, opportunity We're last a is from the stages only in Stefan. recommendations launched currently of step that Thanks, a pivotal we This receiving final performance improvement

employees with I'm immensely our energy embraced dedication. have and proud of the how process team and members

enhancements some of And across really will full with of implemented results. organization. the frame optimistic move but to that these are intend our recommendations adoption The forward already we're longer-term over we years, several about run for time being

our Services, a incredible expanding we newer Trust results. we're trusted higher services level. and and improved positive recently, Alongside These in in we new actively move we a the take More already brokerage on her Louis. to talent welcomed to as excited Director are been contributions our see pool, St. Wealth particularly Management of and yielding team, and City from have Kansas our efforts markets

in favorable yield We as a our activity the the for 'XX fiscal improving strong about optimistic also remainder business create markets curve earnings of growth. environment slope and are

[ encouraging but Lastly, conversations. increased we M&A ] of signs reserved small

stages, While interest the valuations sellers intermediate bank future. in remain from potential we these believe in in improvement more the preliminary drive will

Stefan?

Stefan Chkautovich

questions our At Thanks, time, from take Greg. Alex, ready this participants. to we're

please the how time. at you So for would, if queue remind may questions they callers this

Operator

for [Operator today Instructions] Matt first of from Olney Our question Stephens. comes

Matt Olney

on want kind markets. of of first more broad just I question ask a to operating your

rural some and and seeing the larger curious markets on on the about weeks in just -- I'm months. what some edges metro maybe deposit of operate You in you're recent more markets. competition

various types of within footprint. you're those your any in Just in differences markets seeing

Unknown Executive

and kind front rural overall. right of don't metro the to competition I specific a point could mixed on I now. a between know bag that It's difference

one-off the think in been But last the for X towards I for, there's 'XX. of it's were most there with some are for clear kind Xs, do the a us, decreased 'XX it to outliers does we months high it we I pretty compared situation. which is activity. guess, pipe some see that see of to puzzling up but funds some of in we end And rates where still maybe very in drive

Greg Steffens

pricing ratios it loan-to-deposit consistent have of metro. drive would rural . variety banking we in wouldn't seem a some say deposit In to higher different markets, markets, that brethren versus I from be have do that but

Matt Olney

you And December in you decision it that. then then bought just during just about and some end. sounds on purchased feel to color Any buy front, quarter the you're more liquidity on terms securities of color Okay. more durations bringing like And good and in I opportunistic the yields. guess, and you're liquidity Appreciate the what that on securities?

Stefan Chkautovich

Thanks, Yes. for Matt, question. the

of deposits. market in higher us. took CDs real market took Net, some see gave million a, we didn't deposits. with So purchase broker I opportunistically to we had -- what bit $XX a we some the yes, broker rates, we that growth in We so took about and paired guess any

Greg Steffens

CDs, we didn't buy CDs.

Matthew Funke

pass-throughs... for CDs purchase took the on We funding, side, but

Stefan Chkautovich

and CDs. mostly fixed with the purchases funded mix, available-for-sale mortgage-backed broker securities. But XX-XX, about was variable and CMOs rate, it We of

Matt Olney

And nice this then Any just controls, next more quarters? just the on broadly just past the helpful. on on expect cost guess, I expenses expense lastly, more on quarter. over what performance we the few should in side, Okay. just color That's

Matthew Funke

data coming will a then That's Nothing of time. Occupancy, We've new remainder meant. real for on, new We've there going costs. a the really significant. March, Nothing but branch of note, I what hit on shouldn't We do just . that there pretty tailwind prepared well and be the roll connectivity in of us. anything kind some to year. for will be really over got bringing on mentioned seasonal while. doing been into our over the a is our that remarks adjustments, it compensation of down have Stefan kind

Operator

from comes Liesch question next Piper Andrew Our of Sandler.

Andrew Liesch

to agriculture quarter, that -- and cadence decline possibly but coming quarter, fiscal balances like to good. think here. Just of see pipeline elevated then the payoffs year? Do It maybe you'd growth the what ask the want this loan end the you accelerate have here this looks sounds you could some

Greg Steffens

higher doing I would anticipate I this the balances. see we stable that have we could that would us to half did balances quarter. growth slightly last roughly

Andrew Liesch

Then fiscal single to is now. where some certainly last last Because Got least makes like growth this -- your your might forward? it so digits seems X.X% pulled quarter, it, sense. strongest it. one you Do That just the quarters. high you call usually think given year from doable is of be that's looking of beat year, or at right the are into, which

digits think you do could surpassed? So that maybe mid-single be the

Greg Steffens

when definitely it's agricultural to be point crop, definitely in move to the -- in possibility. for weather feel But single impossible But Will going the June the it in The occur. part the a towards of some will farmers like growth the think tracks, part everything be digits. higher growth we predicated of that. it where June mid- this leaning quarter I part know of quarter? by it's it of if could to do later? be planting that conditions is plant to and conditions at Will

Andrew Liesch

And as recognizing then now, quarter, could at quarter Is the current side. liquidity? we the some step factor you past that this maybe, kind the or like some is the it? we're to rightsizes helpful. about It Very bigger this looking pressure. higher, just liquidity in it. good seems on right that Got see the margin have that due funding a opportunities think to way good of margin And

Stefan Chkautovich

at look great it, a Andrew. that's way to Sure, Yes.

the So clients. act these a of and deposits it's the balancing a of seasonal ag depending little the public for outflows there bit on NII of unit from some

the NII, the longer, NIM So bit around a income would expect whole net more see balances average expect quarter. quicker, if wouldn't would pressure give us a to little out little growth basically, maybe interest if reverse, see then go we on balances you the better. NIM bit of But the more a in improvement I bit lot of little a bit or should a hang little hanging

Operator

comes of next from question Our Motta Kelly KBW.

Unknown Analyst

on This Charlie for is Kelly Motta.

healthy more. construction. was growth this It growth to into Just the some really supported by loan quarter dig in

Are more activity funded those Just more there. seeing curious markets? you're projects being you seeing and what in

Greg Steffens

Really we a seeing of we're continuation underway. just -- had that projects we're

draws stable completed slow occurring. expect are a construction that as have will pipeline, as of projects that progresses do Would and off. paid rate that we the some get growth of quarter the existing So

million down growth So our land The $XXX construction over slow we've June that and little a year. we'd pace part development had might bit XX. . that latter in in the little will balances since fiscal of anticipate of moderate a

Unknown Analyst

XXX% growth, over given and of then this just helpful. December [ CRE as is possibly That's throughout And said increasing XXXX. ] you

and you with longer your how Just and term. is concentrations concentration wondering where level trend shorter this comfort expect to current

Greg Steffens

is a limit this. than amount internal fair Our higher

is limit between target kind fluctuate basically internal Our is and anticipate XXX, balances that of to XXX ratio. our We XXX%. we where

Operator

we further At this currently time, have no questions.

for I'll back So to any further remarks. hand Stefan

Stefan Chkautovich

call. on the And Thanks have all. jumping afternoon. everyone a Appreciate great

Greg Steffens

you Thanks, to everyone. Talk next quarter.

Operator

today's Thank you all joining call. for

You may now disconnect your lines.

Southern Missouri Bancorp (SMBC) 28 Jan 252025 Q2 Earnings call transcript