- Net Interest Margin: 3.25% for the quarter, up from 3.15% in the linked third quarter of fiscal 2024.
- Net Income: $1.19 diluted earnings per share for the June quarter, up $0.2 from the linked March quarter, but down $0.18 from the June 2023 quarter.
- Full Fiscal Year Earnings: $4.42 per share for fiscal 2024, compared to $3.85 in fiscal 2023.
- Tangible Book Value Per Share: $36.68, increased by 13.4% over the last 12 months.
- Noninterest Income: $2.2 million for the quarter, up 39.1% compared to the linked quarter, but down 13.2% year over year.
- Noninterest Expense: Down 0.2% for the current quarter compared to the linked quarter, and up 0.5% compared to the same quarter a year ago.
- Gross Loan Balances: Increased by $79 million or 8.3% annualized compared to March 31st, and by $231 million or 6.4% compared to June 30th a year ago.
- Cash Equivalent Balances: Decreased by $107 million compared to March 31st.
- Stock Repurchase Activity: $3.7 million utilized to acquire about 88,000 shares at an average price of just over $41.5.
- Adversely Classified Loans: $41 million or 1.06% of total loans, a decrease of about $1.5 million or six basis points during the quarter.
- Nonperforming Loans: $6.7 million at June 30th, down a little more than $700,000 compared to last quarter.
- Provision for Credit Losses: $900,000 for the quarter.
- Allowance for Credit Losses: $52.5 million or 1.36% of gross loans at June 30th, 2024.
- Quarterly Dividend: Increased by $0.02 or 9.5%, bringing it to $0.23 per share.
- Loan Originations: Approximately $205 million in the June quarter.
Release Date: July 30, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Southern Missouri Bancorp Inc (SMBC, Financial) reported a 13.4% increase in tangible book value per share over the fiscal year.
- Net interest margin expanded to 3.25% in the June quarter, up from 3.15% in the previous quarter.
- Noninterest income increased by 39.1% compared to the linked quarter.
- Gross loan balances increased by $79 million or 8.3% annualized compared to March 31st.
- Credit quality remained strong with nonperforming loans decreasing to $6.7 million, or 0.17% of gross loans.
Negative Points
- Net interest margin is down by 35 basis points compared to the same quarter a year ago.
- Noninterest income was down 13.2% year over year due to reduced loan fee income and NSF revenues.
- Net interest income decreased by 3.1% year over year, primarily due to margin compression.
- Noninterest expense increased by 0.5% compared to the same quarter a year ago.
- The agricultural sector faces challenges with high production costs and lower commodity prices, impacting loan draws.
Q & A Highlights
Q: Good morning, Stefan. Can you provide more details on the CD repricing dynamics and how they might impact future quarters?
A: Yes, over the next 12 months, we have around $1 billion of CDs repricing. The average renewal rate is currently about 4.79%. On the loan side, approximately 12.5% of our fixed-rate loan book will renew over the next 12 months, with current renewal rates around 8.15% to 8.17%.
Q: How do you foresee the bank's expenses evolving in the near term, considering the various moving parts and the bank's growth?
A: We expect expenses to grow in line with the bank's rate, likely in the mid-single digits. Our normal pattern includes compensation adjustments mostly effective in January, which is when we typically see a catch-up to our growth rate.
Q: Given the strong credit trends, do you see an opportunity to lower the allowance ratio over the next year?
A: While we feel our allowance ratio is reasonably conservative, we do not want to commit to any decrease in that percentage. We hope to avoid any surprises on the upside regarding provisions.
Q: Can you provide more details on the loan growth this quarter, particularly in the residential segment?
A: The growth in the residential segment was primarily in single-family loans. Our pipeline for the next 90 days includes a fair amount of construction draws and commercial real estate loans. We anticipate similar growth patterns to fiscal 2024, with stronger growth in the spring and summer.
Q: What is your outlook for fee income, especially considering the recent changes in mortgage servicing gains and other fee income components?
A: We expect fee income to stabilize and potentially exceed $7 million on a run-rate basis going forward. The recent changes in mortgage servicing gains and other fee income components should be more evenly spread throughout the year.
Q: Can you provide more color on the M&A strategy and the markets you are interested in?
A: Our priorities include markets from St. Louis to Kansas City, down through Springfield, Northwest Arkansas, Little Rock, and Memphis. We are particularly interested in adding density in Kansas City and expanding into Northwest Arkansas and Little Rock.
Q: With the significant decrease in average cash quarter over quarter, what is a good run-rate level for liquidity?
A: We expect total cash and due from balances to range in the $50 million plus range. This level should support our mid-single-digit loan growth.
Q: What is your outlook for gain on sale of loans and secondary market activity?
A: Long-term, we anticipate an uptick in gain on sale of loans as market conditions improve. Currently, residential in-house loans, including owner-occupied and rental properties, are stronger. We hope to see a turnaround in secondary market activity as rates stabilize.
Q: How do you plan to manage equity levels and capital ratios going forward?
A: We expect to manage equity levels primarily through dividends and periodic M&A activity. While current stock prices make repurchase activity less attractive, we will remain opportunistic about repurchase activity when justified by anticipated earn-back periods.
Q: Can you elaborate on the impact of the CECL model on your allowance ratio and credit trends?
A: The CECL model does impose certain constraints, but we feel our allowance ratio is conservative. We aim to maintain strong credit quality and avoid surprises in provisions, despite the challenges posed by the higher interest rate environment.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
