Southern Missouri Bancorp Inc (SMBC) Q4 2025 Earnings Call Highlights: Strong Earnings Growth ...
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
Southern Missouri Bancorp Inc (NASDAQ:SMBC) reported a year-over-year earnings growth of 17%, with earnings per share increasing from $4.42 in fiscal '24 to $5.18 in fiscal '25.
The company saw a tangible book value per share increase by 14% over the last 12 months, reaching $41.87.
Net interest margin improved to 3.46% from 3.39% in the previous quarter, driven by loan yield expansion and lower funding costs.
Gross loan balances increased by 7.6% annualized during the quarter, indicating strong loan growth.
Southern Missouri Bancorp Inc (NASDAQ:SMBC) announced an 8.7% increase in quarterly dividends, bringing it to $0.25 per share, reflecting confidence in their financial position.
Negative Points
Credit quality has deteriorated somewhat, with non-performing loans increasing by $1.1 million compared to the last quarter.
Provision for credit losses rose to $2.5 million, up from $932,000 in the previous quarter, indicating increased credit risk.
The agricultural segment is facing challenges with rising input costs and lower commodity prices, impacting farmer profitability.
There is an expectation of higher prepayment activity in the near term, which could slow net loan growth.
The company experienced a $3.8 million charge-off related to a special purpose CRE loan, highlighting ongoing credit challenges.
Q & A Highlights
Warning! GuruFocus has detected 2 Warning Sign with SMBC.
Q: Can you provide more details on the loan growth throughout the quarter and any expectations for prepayments in the near term? A: Our loan growth was steady over the entire quarter, with loans in the pipeline consistently added. Regarding prepayments, we have not seen them yet, but several larger credits have indicated plans to pay off soon, primarily in our non-owner occupied commercial real estate sector.
Q: What are your expectations for the net interest margin, especially if there are Fed rate cuts? A: We are currently more neutral to rate movements due to higher levels of excess cash. As this cash is deployed through loan growth, we may become more liability sensitive. We expect natural expansion from loan origination activity and renewals repricing at higher rates than our current portfolio.
Q: How is the competitive environment for deposits, and what are your strategies regarding CDs? A: The deposit competition has been more reasonable over the last 6 to 9 months, although there was a slight pickup in July. We don't expect growth to be as heavily weighted towards CDs this year, given our strong funding position. We aim to be less aggressive on the CD side, which might slow growth relative to non-maturity deposits.
Q: Can you elaborate on the credit charge-offs and any potential future appraisals? A: We wrote down the balance on one loan after an appraisal came in lower than expected. This was due to a special purpose entity operating it with above-market lease rates. We might see additional charge-offs on other remaining buildings, and we have 42% of the balance in specific reserve.
Q: Are you seeing an increase in M&A discussions, and how do you view stock buybacks in the current environment? A: There are more calls from investment bankers, but we haven't seen a significant increase in actionable items. Regarding stock buybacks, it depends on our trading relative to tangible book value. We believe a potential M&A transaction could have a shorter earn-back period than repurchasing shares.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
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