SOUTHERN MISSOURI BANCORP, INC. Q2 FY2025 earnings call

• Matt Funke noted improved earnings and profitability due to larger earning asset base, higher net interest income, lower provision for credit losses, and decreased non-interest expense. Net interest margin was 3.36%, up from year ago. - Greg Steffens discussed strong asset quality, with adversely classified loans down, non-performing loans slightly up but manageable. - Stefan Chkautovich provided details on net interest margin components, non-interest income and expense, tax rate, and CRE concentration. - Greg Steffens mentioned progress on performance improvement initiative, talent expansion in new markets, and M&A conversations in preliminary stages

In the December quarter (second quarter of fiscal year), earnings and profitability improved. Net interest income was up 4% quarter-over-quarter and about 10.5% year-over-year. Net interest margin was 3.36% compared to 3.25% year ago. Gross loan balances increased by just over $60 million during the quarter. Deposit balances increased by about $170 million in the quarter. Tangible book value per share was $38.91, increasing by $4.26 or 12% over the last 12 months. Net interest income contribution: up 4% QoQ and 10.5% YoY; Net interest margin contribution: 3.36% Qo, 3.25% YoY; Loan balance contribution: +$60M QoQ; Deposit balance contribution: +$170M QoQ; Tangible book value contribution: +$4.26 or 12% YoY

• Management feels optimistic about achieving at least mid-single-digit loan growth for the fiscal year. - Expect remainder of fiscal '25 to be favorable with improving yield curve slope and strong business activity. - CRE ratio expected to fluctuate between 300% and 325%

• Potential increase in problem loans and net charge-offs despite current strong quality. - Deposit competition variability across markets. - Weather impacts on agricultural customers potentially affecting loan repayments

Q: Matt Olney asked about deposit competition in rural vs metro markets and liquidity decisions.

A: Stefan Chkautovich said competition mixed, some outliers with high rates; Greg Steffens noted varying loan-to-deposit ratios drive deposit pricing but not consistent rural vs metro; Stefan Chkautovich discussed buying securities with broker CDs, mix of available-for-sale variable and fixed rate.

Q: Andrew Liesch inquired about loan growth cadence, potential decline vs acceleration, and margin.

A: Greg Steffens anticipated stable to slightly higher loan balances, could do half the growth of last quarter; optimistic mid-to-higher single-digit growth possible; Stefan Chkautovich said balancing act for NII with seasonal deposit outflows.

Q: Charlie Driscoll asked about loan growth in construction and CRE concentration.

A: Greg Steffens said construction growth pace will slow as projects complete; internal CRE limit 375%, target ratio 300-325%