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Southern Missouri Bancorp (SMBC) Q4 Earnings call transcript Jul 30, 2024

AInvestWednesday, Jul 31, 2024 4:03 pm ET
2min read

Southern Missouri Bancorp (SMB), a regional bank, recently held its quarterly earnings call for the first quarter of 2024, providing insights into the bank's financial performance and outlook for the future. Despite the challenging higher rate environment, SMB reported a 13.4% increase in tangible book value per share for the fiscal year ending June 2024. This increase, coupled with a net interest margin of 3.25%, demonstrates the bank's resilience and strategic positioning.

Financial Highlights and Challenges

During the call, SMB executives highlighted the bank's financial performance, including a 39.1% increase in noninterest income in the quarter due to losses realized on the sale of securities and seasonal fee income. However, this increase was offset by a 13.2% decrease in year-over-year fee income due to reduced loan fee income and NSF revenues. The net interest margin expansion more than offset the 1.3% decrease in average earning assets, but it was down 3.1% year-over-year due to the decrease in margin.

SMB's loan portfolio experienced strong growth, with gross loan balances increasing by 8.3% annualized compared to March 31, 2024, and 6.4% compared to June 30, 2023. The bank's credit quality remained strong, with adversely classified loans decreasing by $1.5 million or 6 basis points during the quarter. However, nonperforming loans increased slightly, totaling 0.17% of gross loans at June 30, 2024.

Strategic Focus and Future Outlook

SMB's executives discussed their strategic focus on core deposit retention and expansion in key markets, particularly Kansas City and St. Louis. The bank also mentioned ongoing M&A conversations with potential partners for achieving scale in target markets, as well as exploring partnerships with other financial service providers. The uptick in bank valuations is expected to lead to further discussions with potential partners.

Market Trends and Competitive Positioning

The earnings call also provided insights into market trends and competitive positioning. SMB's loan growth was driven by single-family residential loans, and the pipeline is weighted towards construction draws and commercial real estate. The bank's loan growth is anticipated to continue at a mid-single-digit pace in fiscal 2025.

Credit Quality and Regulatory Compliance

Credit quality remained strong, with net charge-offs being 6 basis points annualized for the current quarter and 5 basis points in the trailing 12 months. The bank's provision for credit losses was $900,000 in the quarter, in line with the linked quarter and the previous year. SMB's allowance for credit losses was 1.36% of gross loans and 786% of nonperforming loans at June 30, 2024.

Operational Efficiency and Expense Management

SMB's executives discussed their focus on operational efficiencies and fostering a strong culture to better serve clients, local communities, and shareholders. They also mentioned their intent to hold relatively steady on the nonowner-occupied CRE ratio while growing CRE commensurate with capital.

Conclusion

The Southern Missouri Bancorp's first-quarter earnings call for 2024 provided a comprehensive overview of the bank's financial performance, strategic focus, and outlook for the future. The bank's strong credit quality, strategic growth initiatives, and focus on operational efficiency position it well for continued success in the challenging higher rate environment. SMB's commitment to serving its clients, local communities, and shareholders, coupled with its strategic expansion plans, bodes well for the bank's future growth and profitability.

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