Southern Missouri Bancorp, Inc. (NASDAQ:SMBC) is a community bank holding company that has demonstrated impressive financial performance and strategic growth over the past year. With a focus on serving the banking needs of individuals and businesses in its Midwestern markets, SMBC has consistently delivered solid results, navigating the challenges of the current economic environment with agility and prudence.

Financials

In the fiscal year ended June 30, 2024, SMBC reported annual net income of $49,944,000 and annual revenue of $273,071,000. The company's annual operating cash flow stood at $62,023,000, while its annual free cash flow reached $55,984,000. These figures underscore SMBC's financial strength and ability to generate consistent, sustainable earnings.

During the fourth quarter of fiscal 2024, SMBC reported net income of $11,307,000, or $1.19 per diluted share, compared to $11,489,000, or $1.21 per diluted share, in the same period of the prior year. Quarterly revenue came in at $42,860,000, a slight decrease from the $43,232,000 reported in the year-ago quarter. The company's net interest margin for the quarter was 3.25%, up from 3.15% in the linked quarter but down from 3.60% in the prior-year period, reflecting the impact of the rising interest rate environment on the company's funding costs.

Loan Portfolio and Credit Quality

SMBC's loan portfolio continued to grow, with gross loans increasing by $79 million, or 8.3% annualized, during the fourth quarter. This growth was driven by strong performance across multiple loan categories, including non-owner occupied commercial real estate, residential real estate, and construction loans. The company's loan pipeline stood at $157 million at the end of the quarter, up from $117 million in the linked quarter and $135 million a year ago, suggesting continued momentum in loan originations.

The bank's credit quality remained strong, with non-performing loans declining to $6.7 million, or 0.17% of gross loans, at the end of the quarter, compared to $7.4 million, or 0.19%, a year earlier. The allowance for credit losses stood at $52.5 million, or 1.36% of gross loans, providing ample coverage for potential credit losses.

Geographic Diversification

In terms of geographic diversification, SMBC's loan portfolio is well-balanced, with the South, East, and West regions leading the way in loan growth during fiscal 2024. The company's agricultural lending portfolio, which accounts for approximately 10.5% of total loans, has also performed well, with the earlier planting season and generally favorable weather conditions contributing to the strong performance of the company's agricultural borrowers.

Outlook

Looking ahead, SMBC's management team remains cautiously optimistic about the company's prospects. While the higher interest rate environment has put some pressure on the net interest margin, the company expects to see continued benefits from the repricing of its deposit portfolio and the origination of new loans at higher rates. Additionally, the company's focus on expense management and the potential for further improvement in credit quality should support its profitability going forward.

Capital Position

SMBC's capital position remains strong, with a total risk-based capital ratio of 13.14% and a Tier 1 leverage ratio of 9.88% as of June 30, 2024. This solid capital base provides the company with the flexibility to pursue strategic growth initiatives, including potential acquisitions, while maintaining a prudent approach to risk management.

Business Overview

One area of focus for SMBC is its ongoing efforts to expand its presence in key markets, such as St. Louis, Kansas City, and Northwest Arkansas. The company has made progress in these markets, both organically and through selective acquisitions, and it continues to explore opportunities to further enhance its geographic footprint and market share.

In terms of the company's business mix, SMBC derives a significant portion of its revenue from its core community banking operations, which include commercial and agricultural lending, residential mortgage lending, and deposit gathering. The company has also built a strong wealth management and insurance brokerage business, which contributed approximately 7% of total revenue in fiscal 2024.

Conclusion

SMBC's management team has demonstrated a keen understanding of the challenges and opportunities facing the banking industry. The company has proactively addressed the impact of the higher interest rate environment, while also investing in technology and talent to improve operational efficiency and enhance the customer experience.

Overall, SMBC's solid financial performance, prudent risk management, and strategic focus on growth and diversification make it an attractive investment opportunity in the community banking space. The company's commitment to serving the needs of its local communities, coupled with its proven ability to navigate economic cycles, positions it well for continued success in the years ahead.