Business Overview and History
Southern Missouri Bancorp, Inc. (NASDAQ: SMBC) is a bank holding company that has demonstrated steadfast growth and a strategic focus on serving its local communities. With a history dating back to 1994, this Poplar Bluff, Missouri-based institution has evolved into a respected regional player, leveraging its diversified business model and disciplined approach to navigate the dynamic financial landscape.
Southern Missouri Bancorp was founded in 1994 as the parent company of Southern Bank, which primarily engages in traditional commercial banking activities, including the acceptance of deposits and the making of loans. The company has grown significantly over the years through both organic expansion and strategic acquisitions. In July 2009, Southern Bank of Commerce was merged into Southern Bank, marking the beginning of a series of successful acquisitions. This was followed by the acquisition of First Commercial Bank in November 2018, further expanding the company's market presence.
In May 2020, amidst the challenging environment of the COVID-19 pandemic, Southern Missouri Bancorp demonstrated its resilience and strategic vision by acquiring Central Federal Savings & Loan Association. This move not only expanded the company's footprint but also diversified its product offerings and customer base. The company's growth trajectory continued with the merger with FortuneBank in February 2022, further solidifying its position in the regional banking landscape.
As of December 31, 2024, Southern Missouri Bancorp's operations have expanded significantly. The Bank now operates from its headquarters, 62 full-service branch offices, two limited-service branch offices, and two loan production offices, primarily located in Missouri. This extensive network allows the company to serve a wide range of customers across its market areas. Notably, the Bank owns the office building and related land for 59 of its branch offices, reflecting its commitment to establishing a strong physical presence in the communities it serves.
Throughout its history, Southern Missouri Bancorp has faced and overcome various challenges. The COVID-19 pandemic in 2023 presented significant hurdles, including increased provision for credit losses and lower loan demand. However, the company's resilience and adaptive strategies allowed it to navigate this period successfully while maintaining solid financial performance. Additionally, the company has demonstrated its ability to manage through fluctuating interest rate environments, continuously adjusting its asset-liability management strategies to optimize performance in changing market conditions.
Financial Performance and Ratios
Southern Missouri Bancorp has demonstrated a consistent track record of financial strength and profitability. As of December 31, 2024, the company reported total assets of $4.60 billion, up from $4.36 billion a year earlier, reflecting a 5.5% year-over-year increase. This growth was primarily driven by a 6.8% increase in total deposits, which reached $4.21 billion as of the same date.
The company's net income for the fiscal year ended June 30, 2024, was $50.18 million, representing a 27.9% increase from the previous fiscal year's net income of $39.24 million. This translates to a return on average assets (ROAA) of 1.15% and a return on average equity (ROAE) of 10.80%, indicating the company's ability to generate solid returns for its shareholders.
For the most recent quarter ended December 31, 2024 (Q2 FY2025), Southern Missouri Bancorp reported quarterly revenue of $69.42 million and quarterly net income of $14.65 million. This represents a significant year-over-year growth, with revenue increasing by 12.7% and net income rising by 20.2% compared to the same quarter in the previous year. The increase in revenue and net income was primarily attributable to increases in net interest income and noninterest income, partially offset by increases in noninterest expense, income taxes, and provision for credit losses.
Southern Missouri Bancorp's financial ratios also reflect its strong position. As of December 31, 2024, the company's Tier 1 capital ratio was 11.79%, and its total risk-based capital ratio was 13.23%, well above the regulatory requirements for a "well-capitalized" institution. Additionally, the company's nonperforming asset ratio stood at 0.26%, demonstrating its prudent risk management practices.
The company's liquidity position remains robust, with a debt-to-equity ratio of 0.26 and cash holdings of $145.83 million as of December 31, 2024. Southern Missouri Bancorp also maintains strong access to additional liquidity, with $858.10 million in available credit from the Federal Home Loan Bank (FHLB), of which $107.07 million was advanced as of December 31, 2024. Furthermore, the Bank has access to $357.30 million in primary credit borrowings from the Federal Reserve's discount window, none of which was utilized at the end of the quarter.
Diversified Business Model and Strategic Initiatives
Southern Missouri Bancorp's success can be attributed to its diversified business model, which includes commercial and industrial (C&I) lending, commercial real estate (CRE) lending, agricultural lending, and retail banking services. This diversification helps the company mitigate concentration risks and adapt to changing market conditions.
The company operates through several key product segments:
1. Lending Segment: This segment represents the core of SMBC's operations, with net loans receivable totaling $3.97 billion as of December 31, 2024, up 4.6% from June 30, 2024. The one- to four-family residential real estate loan portfolio was the largest component at $967.2 million, or 24.0% of total gross loans. Non-owner occupied commercial real estate loans stood at $882.5 million (21.9% of the portfolio), while owner-occupied commercial real estate accounted for $435.4 million (10.8%). Commercial and industrial loans totaled $484.8 million (12.0%), and agriculture-related lending made up $428.2 million (10.6%) of gross loans.
2. Deposit Segment: SMBC's deposit base is a major source of funding for its lending and investment activities. Total deposits grew 6.8% to $4.21 billion as of December 31, 2024, compared to June 30, 2024. The deposit portfolio consisted of non-interest bearing demand accounts (12.2%), NOW accounts (28.8%), money market and savings accounts (21.9%), and certificates of deposit (37.1%). The bank has also utilized brokered deposits, which increased to $254.0 million, or 6.0% of total deposits.
3. Investment Segment: SMBC maintains an investment portfolio, primarily in available-for-sale securities, which totaled $468.1 million as of December 31, 2024. This portfolio is composed of obligations of states and political subdivisions, corporate obligations, asset-backed securities, and mortgage-backed securities. The investment portfolio provided $12.1 million in interest income during the first six months of fiscal 2025, up from $10.4 million in the year-ago period.
4. Other Revenue Streams: Beyond its core lending and deposit-taking activities, SMBC generates noninterest income from various sources, including deposit account charges and fees, bank card interchange income, loan servicing fees, wealth management fees, and earnings on bank-owned life insurance. Noninterest income totaled $14.0 million in the first half of fiscal 2025, up 22.2% year-over-year.
In recent years, the company has placed a strategic emphasis on enhancing its commercial lending capabilities, particularly in its C&I and CRE portfolios. This focus has paid dividends, with these segments contributing a significant portion of the company's overall loan growth. As of December 31, 2024, CRE loans accounted for 32.7% of the company's total loan portfolio, while C&I loans represented 12.0%.
To further bolster its competitiveness, Southern Missouri Bancorp has also been investing in technology and digital banking initiatives. The company has rolled out enhanced online and mobile banking platforms, improving the customer experience and driving efficiency. Additionally, the bank has been actively exploring opportunities to expand its wealth management and insurance brokerage services, diversifying its revenue streams.
Navigating Challenges and Maintaining Resilience
Like many financial institutions, Southern Missouri Bancorp has navigated its share of challenges in recent years. The COVID-19 pandemic, for instance, placed significant stress on certain sectors of the company's loan portfolio, particularly in the hospitality and retail industries. However, the bank's proactive approach to portfolio management and its strong customer relationships have enabled it to weather the storm.
Moreover, the company has demonstrated resilience in the face of broader economic headwinds. During the fiscal year ended June 30, 2024, Southern Missouri Bancorp successfully managed the impacts of rising interest rates, maintaining a relatively stable net interest margin of 3.34% despite the challenging environment. In the most recent quarter ended December 31, 2024, the company reported a net interest margin of 3.36%, compared to 3.25% in the year-ago period, showcasing its ability to adapt to changing market conditions.
Looking ahead, the company remains vigilant in monitoring and addressing potential risks, such as ongoing inflationary pressures, geopolitical tensions, and evolving regulatory frameworks. By continuously enhancing its risk management practices and adapting its strategies, Southern Missouri Bancorp is well-positioned to navigate these challenges and continue its growth trajectory.
Commitment to Community and Stakeholders
At the heart of Southern Missouri Bancorp's success is its deep-rooted commitment to the communities it serves. The company takes pride in its role as a trusted financial partner, supporting local businesses, individuals, and organizations through tailored products and services. This community-centric approach has fostered strong customer relationships and loyalty, contributing to the bank's resilience and long-term sustainability.
Furthermore, Southern Missouri Bancorp is dedicated to maintaining a high standard of corporate governance and transparency. The company's management team and board of directors work diligently to align the interests of all stakeholders, including shareholders, employees, and the communities they serve. This unwavering focus on ethical and responsible practices has earned the company a reputation as a reliable and trustworthy institution.
Financial Outlook and Guidance
Southern Missouri Bancorp's management has provided insights into the company's future performance and expectations. For the upcoming March quarter (Q3 FY2025), the company anticipates further increases in seasonal deposits, which could potentially compress the net interest margin. However, management expects the net interest spread to improve slightly as loans reprice higher at renewal and certificates of deposit continue to reprice down.
The company also projects a quarterly increase in the compensation expense run rate in the March quarter as annual merit increases and cost-of-living adjustments take effect, with mid-single-digit percentage increases expected. Loan growth in the March quarter is anticipated to be roughly half the growth seen in the December quarter, with balances potentially remaining stable to slightly higher.
For the full fiscal year 2025, Southern Missouri Bancorp is optimistic about achieving at least mid-single-digit loan growth. The company expects its commercial real estate (CRE) ratio to potentially increase somewhat in the next few quarters due to construction draws, but management intends to hold it relatively steady and grow CRE in line with capital.
Southern Missouri Bancorp's financial performance continues to show positive momentum. The company reported earnings of $1.30 per diluted share in the second quarter of fiscal year 2025, up $0.20 from the linked September quarter and up $0.23 from the December 2023 quarter. Net interest income increased by 4% quarter-over-quarter and approximately 10.5% year-over-year. The company's gross loan balances grew by just over $60 million (6.1% annualized) during the second quarter and were up $295 million or just under 8% compared to a year ago.
Deposit growth has also been strong, with balances increasing by about $170 million in the second quarter and $225 million or about 5.5% compared to December 31 of the prior year. The company's tangible book value per share reached $38.91, an increase of $4.26 or 12% during the last 12 months, reflecting the company's continued focus on creating shareholder value.
Conclusion
Southern Missouri Bancorp's story is one of resilience, strategic vision, and a steadfast dedication to its local communities. As the company navigates the evolving financial landscape, it continues to leverage its diversified business model, technological advancements, and disciplined approach to risk management. With a strong balance sheet, a talented team, and a commitment to sustainable growth, Southern Missouri Bancorp is well-positioned to capitalize on future opportunities and deliver long-term value for its shareholders.
The company's consistent financial performance, robust liquidity position, and strategic focus on key growth areas demonstrate its ability to thrive in a competitive banking environment. As Southern Missouri Bancorp continues to execute its growth strategy and adapt to changing market conditions, it remains a compelling investment opportunity for those seeking exposure to a well-managed, community-focused financial institution with a track record of success and a clear vision for the future.