Southern Missouri Bancorp's Q2 2025: Navigating Contradictions in Deposits, Loans, and Expenses

These are the key contradictions discussed in Southern Missouri Bancorp's latest 2025 Q2 earnings call, specifically including: Deposit Competition and Rate Adjustments, Loan Growth Expectations, and Expense Projections:



Earnings and Profitability Improvement:
- Southern Missouri Bancorp reported earnings of $1.30 diluted for the December quarter, up $0.20 from the linked September quarter and up $0.23 from the December 2023 quarter.
- This improvement was due to a larger earning asset base driving an increase in net interest income, a lower provision for credit losses, and a decrease in non-interest expense.

Net Interest Income and Margin:
- Net interest margin for the quarter was 3.36%, as compared to 3.25% recorded for the year ago period, and was relatively flat compared to the first quarter of fiscal '25 at 3.37%.
- The expansion of the net interest spread by 4 basis points in the quarter was due to decreased funding costs from FOMC rate cuts, which helped hold the net interest margin steady.

Loan and Deposit Growth:
- Gross loan balances increased by just over $60 million during the second quarter, with an annualized growth rate of 6.1%.
- Deposit balances increased by about $170 million in the second quarter, with a year-over-year increase of 5.5%. Strong growth in deposits was attributed to seasonal deposit inflows and core CD growth from well-received special rights offered during the quarter.

Credit Quality and Loan Portfolio:
- Adverse classified loans totaled $20 million or 98 basis points of total loans, a decrease of about $849,000 or 4 basis points compared to the linked quarter.
- Agricultural real estate balances were largely unchanged, with ag production and equipment loan balances down $12 million quarter-over-quarter but up $42 million year-over-year. The stability in credit quality was attributed to the company's disciplined lending practices and stress testing of farm cash flows.