Earnings call transcript: Southern Missouri beats Q1 2025 forecasts, stock rises

Southern Missouri Bancorp Inc. (SMBC) reported its first-quarter earnings for 2025, surpassing analysts’ expectations with an earnings per share (EPS) of $1.38, compared to the forecasted $1.31. The company also exceeded revenue projections, reporting $48.99 million against an estimated $48.5 million. Following the announcement, Southern Missouri’s stock price rose by 2.92%, closing at $50.49, reflecting investor optimism. According to InvestingPro analysis, the stock appears undervalued based on its Fair Value calculations, with a P/E ratio of 10.05 and an attractive PEG ratio of 0.59, suggesting room for potential upside.

Key Takeaways

• Southern Missouri’s EPS and revenue both surpassed forecasts, with a 5.34% EPS surprise.
• The stock price increased by 2.92% post-announcement, signaling positive investor sentiment.
• Net interest margin improved to 3.57%, contributing to the company’s strong financial performance.
• The company reported a significant increase in gross loan balances, up 8.8% on an annualized basis.
• Southern Missouri is exploring M&A opportunities, targeting banks with billion-dollar asset ranges.

Company Performance

Southern Missouri Bancorp demonstrated strong financial performance in the first quarter of 2025, with notable improvements across several key metrics. The company’s net interest margin rose to 3.57%, up from 3.47% in the previous quarter, while net interest income increased by 5.2% quarter-over-quarter. Gross loan balances grew by $91 million, marking a 2.2% increase quarterly and 8.8% annually. Despite a challenging agricultural sector, the company maintained stable deposit balances, which increased by $240 million year-over-year.

Financial Highlights

• Revenue: $48.99 million, up from $48.5 million forecast
• Earnings per share: $1.38, exceeding the $1.31 forecast
• Net interest margin: 3.57%, up from 3.47% last quarter
• Gross loan balances: Increased by $91 million (2.2% quarterly, 8.8% annualized)
• Deposit balances: Up $240 million (5.9%) year-over-year

Earnings vs. Forecast

Southern Missouri’s earnings per share of $1.38 exceeded the forecasted $1.31, resulting in a 5.34% positive surprise. The company’s revenue of $48.99 million also surpassed expectations, marking a 1.01% revenue surprise. This performance reflects Southern Missouri’s ability to navigate challenging market conditions and capitalize on growth opportunities.

Market Reaction

Following the earnings announcement, Southern Missouri’s stock price rose by 2.92%, closing at $50.49. This increase reflects investor confidence in the company’s financial health and strategic direction. The stock’s performance is notable given its 52-week high of $68.69 and low of $45.1, indicating room for further growth.

Outlook & Guidance

Looking ahead, Southern Missouri anticipates mid-single-digit loan growth for the fiscal year and expects lower charge-off activity compared to previous quarters. The company remains focused on exploring mergers and acquisitions, particularly targeting banks with billion-dollar asset ranges, which aligns with its growth strategy. Want deeper insights? InvestingPro subscribers gain access to 8 additional exclusive ProTips and comprehensive financial analysis, including detailed valuation models and peer comparisons. Plus, discover why SMBC is currently showing oversold conditions based on technical indicators.

Executive Commentary

CEO Greg Steffens expressed optimism about the company’s future, stating, "We would be surprised if charge-off activity remained at the level of the last two quarters." President Matt Funke added, "We feel good about our opportunity to maintain loan to deposit ratios where they’ve been over the last couple of years." Steffens also highlighted the company’s M&A strategy, emphasizing interest in billion-dollar asset range targets.

Risks and Challenges

• Agricultural sector challenges: Increased input costs and commodity price pressures could impact loan performance.
• Non-performing loans: Currently at $26 million, representing 0.62% of gross loans, which could pose a risk if economic conditions worsen.
• Regulatory changes: Potential shifts in banking regulations may affect operational strategies.
• Market competition: With approximately 50 banks in Missouri and 24 in Arkansas as potential M&A targets, competition for acquisitions is intense.
• Rate sensitivity: The company’s liability-sensitive position may affect earnings if interest rates change unexpectedly.

Q&A

During the earnings call, analysts inquired about Southern Missouri’s credit quality trajectory, margin expansion, and rate sensitivity. Executives addressed strategies for loan growth and deposit gathering, as well as potential share repurchase and M&A activities, providing insights into the company’s strategic priorities.

Full transcript - Southern Missouri Bancorp Inc (SMBC) Q1 2026:

Sammy, Call Coordinator: Hello, everyone, and thank you for joining us today for the Southern Missouri Bancorp earnings conference call. My name is Sammy, and I’ll be coordinating your call today. During the presentation, you can register a question by pressing star followed by one on your telephone keypad. If you change your mind, please press star followed by two on your telephone keypad to remove yourself from the question queue. I’d now like to hand over to your host, Stefan Chkautovich, Executive Vice President and CFO, to begin. Please go ahead, Stefan.

Stefan Chkautovich, Executive Vice President and CFO, Southern Missouri Bancorp: Thank you, Sammy. Good morning, everyone. This is Stefan Chkautovich, CFO with Southern Missouri Bancorp. Thank you for joining us today. The purpose of this call is to review the information and data presented in our quarterly earnings release dated Wednesday, October 22, 2025, and to take your questions. We may make certain forward-looking statements during today’s call, and we refer you to our cautionary statement regarding forward-looking statements contained in the press release. I’m joined on the call today by Greg Steffens, our Chairman and CEO, and Matt Funke, President and Chief Administrative Officer. Matt will lead off our conversation today with some highlights from our most recent quarter.

Matt Funke, President and Chief Administrative Officer, Southern Missouri Bancorp: Thanks, Stefan. Good morning, everyone. This is Matt Funke. I’ll start off with some highlights on our financial results for the September quarter, which is the first quarter of our fiscal year. Compared to the June linked quarter, we had relatively stable earnings and profitability, with solid growth in net interest income, which stemmed from loan growth and further net interest margin expansion and a decline in operating expenses. These improvements were offset by a larger provision for credit losses and a decrease in fee income. The larger provision was attributable to the evolving economic environment, additions to individually reviewed loans, and loan growth. We feel we have good momentum on pre-provision net revenue to start the year, and we’re optimistic about how we’ll perform in the new fiscal year.

The diluted EPS figure for the current quarter was $1.38, down $0.01 from the linked June 2025 quarter, but up $0.28 from the September quarter a year ago. During the quarter, we continued working with a consultant to complete the renegotiation of a significant contract. We had recognized some expenses on this renegotiation in the linked quarter, but because this was on a contingency basis and because the renegotiation worked out well for us, we had additional expense to recognize in the current quarter. These totaled $572,000, reducing after-tax net income by $444,000 or $0.04 per fully diluted common share. Between the linked quarter and the current quarter, we have recognized right at $1 million in consulting expenses related to the contract renegotiation, but with the expected increase in revenues, which will flow through bank card interchange income, we estimate a less than 18-month earned back of the expense.

Reported non-interest income was down by 9.7% or $707,000 compared to the linked quarter, but was more than offset by lower non-interest expense of $925,000 or a 3.6% decrease quarter over quarter. Stefan will give some more color on these drivers in a bit. Net interest margin for the quarter was 3.57%, up from 3.47% for the fourth quarter of fiscal 2025, the linked quarter, and from 3.34% in the year-ago quarter. Net interest income was up 5.2% quarter over quarter due to the NIM expansion and loan growth. As we indicated last quarter, we have updated our quarterly NIM calculation to annualize results for the actual day count, which should reduce volatility in the reported NIM due to differences in quarterly day counts.

Under the old methodology, the current quarter’s NIM would have been reported at 3.60%, but we’re reporting at 3.57% due to the September quarter having 92 days. By contrast, the June quarter is reported at 3.47% under the new methodology, but under the old methodology with 91 days, it was originally reported at 3.46%. We’ve carried this updated annualization method over to all our profitability ratios for the current and historical periods in the earnings release. On the balance sheet, gross loan balances increased by $91 million or 2.2% during this first quarter, which would be 8.8% annualized. Loan balances increased by $225 million or 5.7% over the last 12 months. Growth in the quarter was led by non-owner occupied commercial real estate, one-to-four family residential, commercial & industrial, and multifamily loans.

We experienced strong growth in our east region, where we have much of our ag activity, and our south region was just behind with good growth in those markets. Even with solid loan growth the last two quarters, our loan pipeline anticipated to fund in the next 90 days remains strong, totaling about $195 million at September 30. The September quarter is historically our strongest period of loan growth, and we would expect to see this pace slow next quarter as we start receiving ag line paydowns and the general slowing in new projects in the winter months. That said, we had a great quarter of loan growth and feel optimistic about achieving mid-single-digit loan growth in the fiscal year. Deposit balances were relatively flat compared to the linked quarter, but up $240 million or 5.9% over the last 12 months.

Due to good deposit growth over the last year, we’ve been able to be less aggressive on promotional deposit pricing, and we’ve called some higher-priced brokered certificates of deposit prior to maturity. Looking at our core deposit base, excluding brokered, we had an increase of about $14 million this quarter, driven mainly by savings account growth. We have $20 million in additional brokered certificates of deposit maturing by the end of the calendar year and about $18 million in brokered money market deposits expected to move out in October at the beginning of this new quarter. We’d expect to replace that with seasonal inflow of funds from ag customers and public units in the second quarter. Tangible book value was $43.35 per share and increased by $5.09 or 13.3% over the last 12 months.

This was mostly attributed to earnings retention, while improvement in the bank’s unrealized loss in the investment portfolio from the decrease in market interest rates contributed a little less than $0.20 of that year-over-year improvement. Additionally, in the current quarter, we’ve repurchased just over 8,000 shares at an average price of just under $55 for a total of $447,000. The average purchase price was 127% of tangible book value at September 30. I’ll hand it over now to Greg for some additional discussion.

Greg Steffens, Chairman and CEO, Southern Missouri Bancorp: Thank you, Matt, and good morning, everyone. I’m going to start off with credit quality. Overall, problem asset levels have increased slightly since last quarter, but remain at modest levels with adversely classified loans at $55 million or 1.3% of total loans, up $5 million or a tenth of a percent since last quarter. Non-performing loans were $26 million at September 30 and totaled 0.62% of gross loans, an increase of $3 million or 6 basis points compared to last quarter. This was primarily attributed to one commercial relationship consisting of two loans collateralized by owner-occupied commercial real estate and equipment, as well as three unrelated loans secured by one-to-four family residential properties, all of which were placed on non-accrual status during the first quarter of our fiscal year.

Non-performing assets were about $27 million and increased about $3.4 million quarter over quarter, with most of the increase due to the increase in non-performing loans. As reported last quarter, we are continuing to work with the borrowers on the two specific purpose non-owner occupied commercial real estate properties in different states with guarantors in common, and originally leased to a single tenant who has since become insolvent. As of June 30, the balances on those loans totaled $6.2 million but are now down to $2.8 million at September 30 after charging off the collateral shortfall with the appraisal on the other parcel of commercial real estate this quarter. As we indicated last quarter, we had provision for these anticipated charge-offs on the relationship, and during this quarter, they accounted for roughly 75% of our total of $3.7 million in net charge-offs.

Another item of note is one of these properties was recently leased at a higher rate than what was assumed in the appraisal. Loans past due 30 to 89 days were about $12 million, up $6 million from June and 30 basis points on gross loans. This is an increase of 15 basis points compared to the linked quarter. Overall, total delinquent loans were $29 million, up $4 million from the June quarter. The increase in the 30 to 89-day past due bucket was due to an increase in past due loans under 60 days, primarily in our owner-occupied commercial real estate and commercial & industrial loan segments. In the owner-occupied segment, the largest loan 30 to 59 days totals $3.6 million, and in commercial & industrial, the largest is $2.1 million. These two loans are the relationship discussed earlier that went to non-performing status during the quarter.

Despite the increase in problem loans experienced over the last two quarters, these issues remain at modest levels, and our asset quality has moved to be more in line with industry averages. In combination with strong underwriting and adequate reserves, we feel comfortable with our ability to work through our problem credits and any potential wider deterioration that could occur as a byproduct from the general economic conditions. Still, I don’t want to give the impression that we’re accepting of these trends, and we have been focusing on improving our credit quality. For agricultural update, from June 30, our ag real estate balances were up about $11 million over the quarter and up $16 million compared to the same quarter a year ago.

While ag production loan balances increased $23 million for the quarter and are up $29 million year over year, we have seen a general increase in ag production line utilization due to increased input costs. Our agricultural customers experienced a mixed growing season in 2025. Early planting was possible as a result of favorable weather, but heavy rains in several markets delayed progress on crops such as cotton and soybeans. As the summer turned dry, growing conditions improved for early planted crops, though irrigation costs rose, adding to an already expensive production year. Harvest has progressed well, with most corn and rice acres complete and significant progress on soybeans and cotton. Yields have generally been average to above average on most of our ground, especially on the irrigated ground. The drier fall has allowed our farmers to begin field work early in preparation for the 2026 crop season.

Our overall crop mix for 2025 consisted of roughly 30% soybeans, 30% corn, 20% cotton, 15% rice, and 5% specialty crops. Commodity prices, however, remained a headwind across most sectors. Lower future pricing for soybeans, corn, rice, and cotton, combined with elevated input and interest costs, has pressured producers’ margins despite generally strong yields. Many farmers are relying on storage strategies, which could lead to some reduction in what might have normally been paid down in the current quarter on credit lines. USDA programs such as CCC loans bridge cash flow gaps and make required payments on credit lines. At present, we are hoping for government support payments to help provide needed relief later in the year. Land values are currently stable, while equipment values have softened slightly as producers scale back on capital purchases.

Our ag lenders are working proactively with borrowers to assess their current positions, plan for restructuring where necessary, and utilize FSA and USDA programs to mitigate risk and maintain strong long-term relationships with our farm customers as they plan for 2026. Due to our stringent underwriting, including stressed commodity pricing and assumed higher operating costs, we anticipate that our borrowers will generally be able to navigate this challenging year and should ensure a satisfactory performance of these credits over the near term. In addition, due to prolonged weakness in the agricultural segment, we started to increase reserves for watch list ag borrowers in the March 2025 quarter in our calculation for our allowance for credit losses. I’ll pass things on to Stefan to add some more color on our results.

Sammy, Call Coordinator: Thanks, Greg. Going into a little more detail on the income statement, looking at this quarter’s net interest margin of 3.57%, that’s up 10 basis points quarter over quarter, and it included about 7 basis points of fair value discount accretion on acquired loan portfolios and premium amortization on assumed liabilities. That impact is up compared to the linked June quarter of 5 basis points and down from 9 basis points in the prior year’s September quarter. As stated in prior quarters, we would expect to see the level of fair value accretion decline over time. The current quarter’s bump resulted from payoff of a relationship that had a larger amount of accretable yield recorded. The net interest margin expanded over the linked quarter as the yield on interest-earning assets increased 8 basis points, primarily due to loan yield expansion, while the cost of interest-bearing liabilities declined 1 basis point.

In addition, the net interest margin benefited from an increase in the loan-to-deposit ratio. Although our spread has improved meaningfully over the last two years, we still see some room for incremental improvement as over the next 12 months we have about $550 million of fixed-rate loans maturing with an average rate of about 6.5% compared to our origination rates for the month of about 7.10%. On the deposit side, we have almost $1.2 billion in certificates of deposit maturing in the next 12 months with an average rate of 4.10% compared to our average new and renewed certificate of deposit rate of about 3.90%. With the improvement in the margin, growth of our earning asset base, and the market’s outlook for further rate cuts, we expect to see continued net interest income growth through the year.

That said, I do want to remind our audience that starting in the December quarter and peaking in the March quarter, we historically see a slowdown in loan growth and an increase in deposits that will weigh on the margin, but we still expect to see positive improvement in net interest income overall. Our average loan-to-deposit ratio for the March 2025 quarter was 94.2% for some perspective. Also with this, our balance sheet becomes more neutral from an interest rate risk perspective in these quarters due to the increase in interest-bearing cash. Overall, through the seasonal cycle, we expect to remain liability-sensitive and a net beneficiary of rate cuts over a four-year period. Non-interest income was down $707,000 or 9.7% compared to the linked quarter, driven by lower other loan fees and bank card interchange income. The prior quarter included $537,000 of annual card network value bonus.

Excluding that item, non-interest income would have been down about 2.5%. Other loan fees declined $723,000, primarily reflecting a refinement in our fee recognition under ASC 310-20, with a greater portion of loan fees now recognized in interest income over the life of a loan. In total, for the first quarter of fiscal 2026, about $1.6 million of additional fee income is being deferred, but is more than offset by $1.9 million of deferred expenses, which drove a decline in compensation and benefits. Overall, we saw a decrease of $925,000 or 3.6% in non-interest expense quarter over quarter. The net expense that was deferred had a negative impact in interest income of $176,000 or a one basis point drag on the net interest margin.

In total, these changes had a limited impact of recognizing $55,000 in additional net income in the quarter as we deferred more expenses than fee income, which will be realized through interest income over the life of a loan. With these changes, year-over-year comparisons are not truly comparable, but our first quarter results should serve as a baseline starting point for non-interest income and expenses. The allowance for credit losses at September 30, 2025, totaled $52.1 million, representing 1.24% of gross loans and 200% of non-performing loans as compared to an ACL of $51.6 million, which represented 1.6% of gross loans and 224% of non-performing loans at our June 30, 2025 fiscal year end. Net charge-offs in the first quarter were 36 basis points annualized compared to the linked quarter of 53 basis points. Both quarters experienced elevated net charge-offs primarily due to the special purpose CRE relationship mentioned previously.

The current quarter’s charge-off on this relationship was previously reserved for in the prior fiscal year, with no additional provision for credit loss attributed to it in the first quarter of fiscal 2026. Our provision for credit loss was $4.5 million in the quarter ended September 30, 2025, as compared to a PCL of $2.2 million in the same period of the prior fiscal year and $2.5 million in the linked June quarter. The increase in the provision this quarter, as Matt mentioned earlier, was due to our outlook on the current macro environment, as well as to provide for individually reserved loans, loan growth, and a slightly higher reserve required for pooled loans. Due to the charge-offs realized on the special purpose CRE relationship, ACL attributable to individually reviewed loans decreased compared to the linked quarter.

Our non-owner occupied CRE concentration at the bank level, as defined by regulatory guidance, decreased by just over 6% quarter over quarter to 296% of our regulatory capital. Although our CRE balances grew compared to the linked quarter, it was surpassed by greater growth of tier one capital reserves. On a consolidated basis, our CRE ratio was 285% at September 30, 2026. To wrap up, despite some carryover cleanup of problem loan relationship from the prior fiscal year, our strong pre-provision earnings, led by expanding net interest margin and disciplined expense management, have driven improved core profitability, and we remain optimistic about sustaining this positive momentum and delivering earnings growth through the remainder of fiscal year 2026. Greg, any closing thoughts?

Greg Steffens, Chairman and CEO, Southern Missouri Bancorp: Thanks, Stefan. I would like to highlight that we delivered another strong quarter of earnings, reflecting the strength and consistency of our core operations. While charge-offs and non-performing loans have remained elevated over the last two quarters off of very low levels, our level of non-performing loans remains comparable to national averages for banks under $10 million. Our underlying earnings momentum remains solid, and that strength has allowed us to prudently reserve for potential problems in the future quarters. We will remain diligent in monitoring and measuring risk, ensuring sound underwriting practices across the portfolio to support strong risk-adjusted returns for our shareholders. Also, since last quarter, we’ve seen a modest uptick in M&A discussions, while market conditions have stabilized somewhat.

We remain optimistic about the potential for attractive opportunities, and with our solid capital base and proven financial performance, I believe we are well positioned to act when the right partner is ready. Notably, there are approximately 50 banks headquartered in Missouri and 24 in Arkansas, with assets between $500 million and $2 billion, along with another meaningful number of others in adjacent markets, providing a broad landscape for potential partnerships. Lastly, with the profitability and earnings improvement over the last two years, we have continued to build capital in the absence of M&A activity. We were able to repurchase a modest number of shares in the first quarter of our fiscal year with a reasonable earned back period. With the recent market sell-off in bank stock prices, it’s created a positive environment for us to potentially be able to repurchase additional shares. Thanks.

Stefan Chkautovich, Executive Vice President and CFO, Southern Missouri Bancorp: Thanks, Greg. At this time, Sammy, we’re ready to take questions from our participants. If you would, please remind folks how they may queue for questions at this time.

Sammy, Call Coordinator: Thank you very much. To ask a question, please press star followed by one on your telephone keypad now. If you change your mind, please press star followed by two. When preparing to ask your question, please ensure your device is unmuted locally. Our first question comes from Matt Funke from Stephens Inc. Your line is open, Matt. Please go ahead.

Stefan Chkautovich, Executive Vice President and CFO, Southern Missouri Bancorp: Great. Thanks. Good morning, everybody.

Greg Steffens, Chairman and CEO, Southern Missouri Bancorp: Good morning, Matt.

Matt Funke, President and Chief Administrative Officer, Southern Missouri Bancorp: I want to start on credit. We saw some migration this quarter that you noted, and that, of course, comes after some migration the previous quarter. When you take a step back on credit, it feels like we’re just seeing some broader deterioration. What color would you give us as far as an outlook for provision expense, charge-offs from here? Should we just anticipate these metrics could remain a little higher the next few quarters, likely what we saw in the last two quarters? Any color would be appreciated.

Greg Steffens, Chairman and CEO, Southern Missouri Bancorp: We would be surprised if charge-off activity remained at the level of the last two quarters. We would expect that to drop. We have seen rising trends in delinquent loans back to, you know, our current delinquency levels are running similar to what they did in 2018, 2019. I think we’re basically trended back to more of a historical range on delinquencies. Charge-offs are just hard to totally predict. We would expect them to be down from what they were the last two quarters, but economically, we’re just, we’re not certain what holds in the future. We definitely hope for better charge-off ratios. We’re not anticipating, based on what we know today, provisioning to be as high as it was this quarter.

Matt Funke, President and Chief Administrative Officer, Southern Missouri Bancorp: Okay. Appreciate that, Greg. I guess shifting over towards the margin, Stefan, some really nice expansion that you noted this quarter. It sounds like there’s a tailwind there from the repricing dynamics that you mentioned. Any other color you can provide as far as the bank’s rate sensitivity? It sounds like you’re still liability-sensitive but can be volatile quarter to quarter. We’re trying to size what the impact of additional Fed cuts, what that could mean for the margin at the bank. Thanks.

Stefan Chkautovich, Executive Vice President and CFO, Southern Missouri Bancorp: Overall, as I stated earlier, we should still be overall liability-sensitive. That could change a little bit with the positioning of our balance sheet. Given the influx that we’re expecting in deposits, which will add to our Fed funds, essentially, that will make us a little bit more neutral for a quarter or two. Overall, we’ll still be a net beneficiary of, call it, 1% to 3% net interest income per 100 basis points of rate cuts.

Matt Funke, President and Chief Administrative Officer, Southern Missouri Bancorp: Okay. Perfect. It sounds like for the margin, there’s still the repricing dynamic tailwinds with flat rates. If we want to assume additional rate cuts, that would be, I guess, incremental from that dynamic.

Stefan Chkautovich, Executive Vice President and CFO, Southern Missouri Bancorp: Yes, sir.

Matt Funke, President and Chief Administrative Officer, Southern Missouri Bancorp: Okay. I guess just lastly, Stefan, you hit on expenses briefly. Really good just overall cost controls this quarter. It sounds like this is a good run rate to go off of. Any more color on just what the drivers of the good cost controls were in the third quarter?

Stefan Chkautovich, Executive Vice President and CFO, Southern Missouri Bancorp: Yeah. The ASC 310-20 changes that we made were the main driver there for expenses. This is a good baseline to use. We will see a little bit of a step up come our 3Q with merit increases, but this is a good baseline to start from.

Matt Funke, President and Chief Administrative Officer, Southern Missouri Bancorp: Okay. Great. Thanks. I’ll step back.

Sammy, Call Coordinator: As a reminder, to ask a question, please press star followed by one on your telephone keypad now. Our next question comes from Nathan Race from Piper Sandler. Your line is open, Nathan. Please go ahead.

Hey, guys. Good morning. Thanks for taking the questions. Curious just to get an update, and I apologize if you already touched on this as I hopped on late, but just an update in terms of where the pipeline stands coming out of the quarter and how you’re thinking about net loan growth and if you have any visibility if you’re expecting any increase in payoffs as, you know, rates continue to come down on the short end, at least over the next handful of quarters.

Matt Funke, President and Chief Administrative Officer, Southern Missouri Bancorp: Hey, Dan.

Yeah. Nathan, we’ve got a pretty consistent pipeline in September compared to where we’ve been the last few quarters. We would expect things to slow down just seasonally into the December quarter, probably trailing into the March quarter as well, but still feeling good at that mid-single-digit growth for the fiscal year. As far as any payoff potential due to additional rate cuts, wouldn’t really see anything material on that. Generally, the stuff that we have that’s at a lower rate, not as eager to pay us off, it’s not going to be affected by 25, 50 basis points.

Greg Steffens, Chairman and CEO, Southern Missouri Bancorp: The biggest unknown we have in potential payoff activity would be from the ag portfolio. We really don’t know what’s going to happen with ag prices and how soon farmers will market their crops. That could have a $10 million, $20 million impact on loan growth one way or the other.

Gotcha. Okay. Just given loan deposit ratio around 96, 97% coming out of the quarter, Matt, is it the expectation that deposit gathering can largely keep pace with that kind of mid-single-digit loan growth outlook for this fiscal year? Just curious to maybe get your thoughts on kind of opportunities to increase on the right side of the balance sheet from a deposit gathering perspective.

Yeah, I think we feel pretty good about our opportunity to maintain loan to deposit ratios where they’ve been over the last couple of years, seasonally adjusted. We do look to reduce our brokered deposit reliance a little bit. We’ve worked on that so far and would expect that to continue into the new year.

Okay. Great. Is there any additional appetite on the buyback front, at least over the near term? It sounds like you’re having a nice pickup in M&A discussions, just curious how you’re thinking about allocating excess capital. Obviously, organic growth remains a priority, but would love to just hear any updated thoughts on how you’re thinking about the buyback over the next quarter or two. Greg would appreciate any commentary in terms of the size of potential deals you’re considering and what that potential timing looks like.

Yeah. Buyback activity, we would anticipate to be more active, given current pricing. We kind of target an earned back on buying shares back of around that three-year horizon. With current pricing, we would be within that three-year earned back period or a little less than that. I would anticipate us being more aggressive buying shares back. We still have, Stefan, 200,000 roughly of shares authorized for repurchase. We would anticipate buying back some of those shares based on current pricing and earned back. I’m generally on the M&A front. Our ideal size would be more in that billion-dollar asset range. That’s where we’re most interested. We are talking with some people, but I’m not anticipating anything to be immediately forthcoming.

Okay. I apologize if I got to ask one more. I appreciate, you know, you guys cleaned up some of the, you know, commercial real estate loans that have been discussed over the last handful of quarters. Are those loans marked at a level coming out of the quarter where you don’t see additional charge-offs? I believe you mentioned earlier that, you know, you’re expecting charge-offs to decline going forward closer to, you know, your historical well below average levels, but just want to make sure I’m thinking about the future charge-off trajectory accurately in light of those two commercial loans.

Yeah, we expect the trajectory on charge-offs to move lower absent any unforeseen circumstances. We don’t have anything that we know that’s a problem coming up, but you never know.

Specifically with those two loans, Nathan, those charge-offs have been fully realized as far as we know.

Okay. Great. I appreciate all the color. Thanks for that, Greg and Matt.

Thanks, Steve.

Sammy, Call Coordinator: We currently have no further questions. At this time, I’d like to hand back to Matt with some closing remarks.

Thanks, Sammy. Thank you all for joining us. Appreciate your interest, and we’ll speak again in about three months. Have a good day.

Goodbye.

This concludes today’s call. We thank everyone for joining. You may now disconnect your lines.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.