Southern Missouri Bancorp, Inc. :SMBC-US: Earnings Analysis: Q2, 2017 By the Numbers : January 25, 2017

Southern Missouri Bancorp, Inc. reports financial results for the quarter ended December 31, 2016.

Highlights

  • Summary numbers: Revenues of USD 15.27 million, Net Earnings of USD 4.18 million.
  • Net interest income margins widened from 81.00% to 82.31% compared to the same period last year.
  • Net loan assets changed 12.08% compared to same period last year and 0.50% from previous period, total deposits changed 8.47% compared to same period last year and 3.81% from previous period.
  • Earnings decline from worsening in operating margins as well as one-time items.

The table below shows the preliminary results and recent trends for key metrics such as revenues and net income (See complete table at the end of this report):

2016-12-31 2016-09-30 2016-06-30 2016-03-31 2015-12-31
Relevant Numbers (Quarterly)
Revenues (mil) 15.27 15.15 14.43 13.69 14.69
Revenue Growth (%YOY) 3.96 8.95 3.46 -0.76 2.38
Earnings (mil) 4.18 3.71 3.68 3.32 4.21
Earnings Growth (%YOY) -0.78 2.04 3.28 -1.31 22.46
Net Margin (%) 27.34 24.48 25.52 24.27 28.65
EPS 0.56 0.5 0.49 0.45 0.56
Return on Equity (%) 12.89 11.65 11.87 11.01 13.09
Return on Assets (%) 1.13 1.03 1.07 0.99 1.26

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Market Share Versus Profits

Revenues History
Earnings History

Compared to the same period last year, SMBC-US‘s change in revenue was close to the amount of its change in earnings. It remains to be seen how the rest of its peer group’s results will turn out and if SMBC-US‘s performance is a sign of any major shift in the composition of market share in this sector. Also, for comparison purposes, revenues changed by 0.81% and earnings by 12.59% compared to the previous period.

Earnings Growth Analysis

The company’s year-on-year earnings decline has not come as a result of decline in net interest income margins or because of any loan loss provisions. Both net interest income margins and net interest income after provisions margins have actually improved. In fact, net interest income margins went from 81.00% to 82.31% and net interest income after provisions margins improved from 77.63% to 78.01% over this period. In addition, loan loss provisions as a percentage of net interest income were 5.22% this period , and 4.17% a year ago.

Net Interest Income Margin History
Loan Loss Provisions Margin History

Net Loans and Total Deposits

A financial institution’s core operations represented by Net Interest Income and Net Interest Income after Provisions are dependent on both the growth and quality of its deposits as well as the growth and quality of its loans. A firm could boost its interest income in the short-term by just increasing its loan assets with less concern about their quality – but this would eventually lead to greater loan loss provisions. Similarly a drive to increase deposits could result in higher interest expenses and eventually effect the firm’s equity. It is thus important to understand net interest income performance in context to loan loss provisions, loan assets and deposits.

Loan Assets Growth Rate History (Qtr YOY)
Total Deposits Growth Rate History (Qtr YOY)

The firm’s improvement in net interest income margins was influenced by the relative increase in the level of net loan assets. In addition, total deposits as a percentage of equity went from 9.37% to 9.30%. On an absolute basis, net loan assets changed 12.08% compared to the same period last year and 0.50% from the previous period, while total deposits changed 8.47% compared to the same period last year and 3.81% from the previous period.

Margins

The company’s decline in earnings has been influenced by the following factors: (1) Contraction of operating margins from 41.04% to 38.70% and (2) One-time items that contributed to a decrease in pretax margins from 41.04% to 38.70%

EBIT Margin History
PreTax Margin History

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Company Profile

Southern Missouri Bancorp, Inc. operates as a holding company for Southern Bank. It engages in the provision of banking services. It operates through the following banking sectors: Personal, Business, and Loans. The Personal Banking sector provides checking services, savings, loans and mortgages, and other services. The Business Banking sector offers checking services, commercial loans, cash management services, remote deposits, and merchant card services. The Loans Banking sector provides different types of loans such as home, agriculture, equipment, mortgage, and auto loans. The company was founded on December 30, 1993 and is headquartered in Poplar Bluff, MO.

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