Southern Missouri Bancorp's Q4 2025: Unraveling Contradictions in Growth Funding, Margin Impact, and M&A Prospects

Funding sources for growth, impact of Fed rate cuts on bank margin, loan growth expectations, deposit funding strategy, and M&A activity are the key contradictions discussed in Southern Missouri Bancorp's latest 2025Q4 earnings call.



Earnings Growth and Dividend Increase:
- Southern Missouri Bancorp reported diluted earnings of $1.39 for the June quarter, unchanged from the previous quarter but up 17% year-over-year.
- The increase was driven by stronger net interest income from earning asset growth and net interest margin expansion, leading to an 8.7% increase in the quarterly dividend.

Loan Growth and Credit Quality:
- Gross loan balances increased by $76 million or 7.6% annualized in the quarter, with growth led by C&I, multifamily, and ag production loans.
- Despite problem credits moving higher, credit quality remained relatively strong, with nonperforming loans at $23 million or 0.56% of gross loans.

Deposit Trends and Funding Strategy:
- Deposit balances increased by $20 million or 2% annualized compared to the previous quarter, with seasonal outflows affecting growth.
- The bank plans to fund growth less aggressively on the CD side, replacing CDs with an average rate of 4.24% with new ones at an average rate of 4%.

Net Interest Margin Expansion:
- The net interest margin improved to 3.46% for the quarter, up from 3.39% in the previous quarter.
- This was due to loan yield expansion and a decline in the cost of interest-bearing liabilities, with opportunities for further expansion from loan repricing.