SOUTHERN MISSOURI BANCORP, INC. Q1 FY2025 earnings call

• Matt noted profitability pressure due to higher provision for credit losses, noninterest expense, and lower noninterest income, but net interest income increased from loan growth and margin expansion. • A $840,000 one-time cost for a performance improvement project was recognized, reducing after-tax net income. • Stefan discussed net interest margin drivers, including yield on earning assets increasing 21 basis points and cost of liabilities increasing 11 basis points. • Loan-to-deposit ratio increased, contributing to margin expansion. • Positive outlook on loan growth for the fiscal year, aiming for mid-single-digit growth. • Ag sector had mixed yields but early planting and weather were favorable.

In the September 2024 quarter, net interest income increased due to loan growth and net interest margin expansion. The net interest margin was 3.37%, up 12 basis points quarter-over-quarter. Gross loan balances grew by $117 million (3%) quarter-over-quarter and $267 million (7.2%) over the prior 12 months. Deposit balances rose by $97 million quarter-over-quarter and $208 million over the prior 12 months. The diluted EPS for the quarter was $1.10, down from the linked prior quarter and year-ago quarter. A one-time cost of $840,000 related to a performance improvement project impacted earnings. Loan growth was led by construction, ag production, and 1-4 family loans. The ag sector had mixed yields but remained optimistic.

• Expect continued net interest income growth due to margin improvement and earning asset growth. • December quarter may see slowdown in loan growth and deposit impact on margin, but overall positive net interest income expected. • Benefit from 50 basis point Fed funds cut in September on net interest income and NIM. • Goal to achieve at least mid-single-digit loan growth for the fiscal year.

• Larger provision for credit losses impacting earnings. • Competitive pressure on deposit pricing. • $60 million of brokered CDs maturing, needing replacement. • CRE concentration uptick due to construction draws. • Ag sector facing input cost challenges and fluctuating commodity prices.

Q: Discussion on local competition deposit and loan pricing A: Prior to rate cuts, local markets weren't as swift, but after FOMC cuts, rates became more competitive. On loan pricing, were on high end but now more competitive with market, and demand is strong so not overly aggressive on loan rates Q: Margin and NII guidance A: Expect continued NII growth, December quarter may be sideways at worst, but long-term trajectory positive with rate cut tailwinds Q: Performance improvement project A: Early stages, reviewing internal audit, compliance, risk management, etc. Goal is to pay for itself in a year or so, long-term aim to improve operations and team member satisfaction Q: M&A updates A: Still in preliminary conversations, expecting more activity but nothing imminent Q: Brokered CDs maturity A: $60M of brokered CDs mature this quarter, replaced by seasonal inflows. Another $18-20M maturing in 7-12 months Q: Fee income smoothing A: $7M guideline for fee income run rate going forward