Southern Missouri Bancorp (NASDAQ:SMBC) reported fiscal first-quarter 2027 diluted earnings per share of $1.73, compared with $1.83 in the preceding June quarter, as loan and deposit growth continued while expenses increased and management prepared for seasonal shifts in agricultural lending and deposits.
Return on average assets was 1.44%, while return on average common equity was 12.7%, President and Chief Administrative Officer Matt Funke said. Tangible book value per share increased 2.3% during the quarter to $48.52.
Loan Growth Moderates, Deposit Base Expands
Gross loans grew $64 million, or 1.5%, during the quarter. Growth was led by one-to-four family residential real estate, agricultural production, commercial and industrial, agricultural real estate, and construction and land development loans. Those gains were partly offset by declines in multifamily and commercial real estate lending.
The company’s 90-day loan pipeline was $185 million at quarter-end, compared with $182 million at June 30. Quarterly loan originations totaled about $296 million, down from $335 million in the June quarter. Funke said the reduction largely reflected lower owner-occupied commercial real estate originations as the bank prioritized credit spreads and full banking relationships, as well as seasonal declines in agricultural real estate and agricultural production activity.
Management continues to expect mid-single-digit loan growth for fiscal 2027. However, Funke said loan growth is expected to soften in the December quarter as agricultural operating lines are repaid. The March quarter is historically the company’s weakest period for loan growth because of agricultural seasonality and slower residential and commercial real estate lending, typically followed by a fourth-quarter increase.
Deposits rose $66 million, or 1.5%, in the quarter. Core certificates of deposit increased $95 million, while brokered CDs declined $35 million. Funke said local CDs became a more economical funding source after brokered CD rates increased.
Non-maturity deposits rose about $6 million. The company’s newer business deposit accounts reached $42 million at Sept. 30, although their growth was partly offset by expected runoff in seasonal and transaction-related noninterest-bearing balances from several large customers.
Margin Expansion Included Accretion Benefits
Net interest margin increased 3 basis points sequentially to 3.70%, while net interest income rose 3.5%. Chief Financial Officer Stefan Chkautovich said fair-value accretion and liability premium amortization contributed 5 basis points to margin, compared with 3 basis points in the June quarter.
The higher accretion was primarily associated with the payoff of a loan that carried a roughly $500,000 credit mark. The quarter also included approximately $200,000 of interest recovery on a nonaccrual agricultural relationship. Excluding those items, adjusted net interest margin would have been 3.65%, representing modest sequential compression, Chkautovich said.
Management expects some near-term pressure on margin because the balance sheet is liability sensitive. Under the company’s current interest-rate risk model and a static balance sheet, a parallel 100-basis-point increase in rates would reduce net interest income by about 1% over the next 12 months.
Chkautovich said approximately $815 million of loans will reprice during the next 12 months, at an average runoff rate of about 6.5%, compared with current fixed-rate loan renewals near 7%. Meanwhile, about $1.4 billion in CDs will renew at an average rate of 3.82%, while current renewal rates average about 4.08%.
Credit Metrics Improve, Allowance Rises
Chairman and CEO Greg Steffens said credit metrics improved modestly. Adversely classified loans declined by nearly $1 million to $53 million, or about 1.2% of gross loans. Nonperforming loans fell by $1 million to $27 million, or 0.6% of gross loans, while nonperforming assets declined by slightly more than $1 million to $32 million, or 0.61% of total assets.
The bank continues to work through an agricultural production relationship placed on nonaccrual status in the fourth quarter of the prior fiscal year. Steffens said management has seen progress toward resolving several larger nonperforming loans and expects nonperforming assets to be “meaningfully lower” by the end of fiscal 2027, though the timing of individual workouts remains uncertain.
Performing modifications increased approximately $20 million to $51 million, primarily due to a $21 million commercial and industrial loan modification. The modification included a modest rate concession to support working-capital needs related to a new contract. The loan remains performing and watch-rated, with no individual reserve established, according to Steffens.
The allowance for credit losses increased $3.4 million to $58.3 million, equal to 1.31% of gross loans and 219% of nonperforming loans. Net charge-offs were $494,000, or 4 basis points of average loans on an annualized basis. Chkautovich said the allowance increase reflected management’s evaluation of reserve adequacy amid an evolving economic environment and expected loan growth.
Agriculture, Expenses and Capital Deployment
Agriculture represented about 12% of gross loans. Steffens said agricultural borrowers generally appear to be having a better year, supported by average to above-average yields in many crops and commodity prices that were generally above the bank’s spring underwriting assumptions. Higher operating costs continue to pressure profitability, but loan officers were not reporting projected customer shortfalls for the 2026 crop year.
Noninterest income totaled $7.1 million, down $212,000 from the prior quarter. Noninterest expense increased $1 million to $26.6 million, driven by higher compensation and benefits, loan collection and payoff fees, deposit operations and card fraud costs, and occupancy-related expenses. Chkautovich said the company remains on track for mid- to high-single-digit expense growth for the full fiscal year.
Stockholders’ equity increased by just over $10 million during the quarter despite a roughly $5 million rise in accumulated other comprehensive loss. The company repurchased approximately 19,000 shares for $1.4 million and maintained its quarterly dividend at $0.27 per share.
Steffens said merger-and-acquisition discussions have become more active, with the company primarily considering in-market opportunities in Missouri and its broader footprint spanning Kansas City, St. Louis, Memphis and Little Rock. He also said lower valuation levels have increased the appeal of share repurchases, and management expects a modest improvement in repurchase activity.
The company opened a new Kansas City branch in early October to replace a nearby older facility. Steffens said initial customer feedback has been positive and described the location as a flagship branch for the Kansas City market.
About Southern Missouri Bancorp (NASDAQ:SMBC)
Southern Missouri Bancorp, Inc is a bank holding company headquartered in Poplar Bluff, Missouri. Through its subsidiary, Southern Bank, the company provides community banking services to individuals, families, businesses and organizations.
Southern Bank offers deposit products, including checking, savings, money market and certificate of deposit accounts, along with residential mortgage, commercial real estate, construction, commercial and industrial, agricultural and consumer loans. Its services also include online and mobile banking, treasury management, debit cards and other financial services designed to support personal and business banking needs.
Southern Missouri Bancorp has built its operations through organic growth and acquisitions, expanding Southern Bank’s presence across Missouri and neighboring Midwestern and Southern markets.
