Southern Missouri Bancorp (SMBC) 31 Jan 232023 Q2 Earnings call transcript

Ladies and gentlemen, welcome to the Southern Missouri Bancorp Quarterly Earnings Conference Call. My name is Glenn and I will be the moderator for today’s call. [Operator Instructions] I will now hand you over to your host, Lora Daves to begin. Laura, please go ahead.

Thank you, Glenn. everyone. morning, Good Daves, Lora Southern Bancorp. Missouri This CFO is with Thank you us. joining for January to this quarterly information Monday, to of purpose review your earnings XXXX questions. take call dated our The in is the and presented and release XX, data statements make forward-looking and regarding we today’s may in contained the to We during cautionary you our call forward-looking certain statement statements refer press release.

lead and Administrative joined Greg with from Steffens, and year. will CEO by Officer. today the Chief our and today Matt our call on President some I our am quarter Funke, conversation most off Matt and Chairman highlights recent fiscal

Lora us. This everyone. is good joining for Thanks Thanks, and Matt morning, Funke.

pleased end, is for merger continued are December growth Bancshares. report quarter we the with Missouri. Citizens year, that quarter, the after Shortly closed provided We Southern which our quarter this of to morning second our fiscal

the about reviewing more talk will merger after We results.

We offset down share receivable decrease $X.XX this the in in net that’s and quarter, linked Growth loans from XXXX quarter. assets. December $X.XX from an increase up the primarily September by a quarter the December earned quarter partially $X.XX diluted reflected other in per

reported material periods and earning compared impact loan down from cash core year-over-year. of the linked in Net X.XX% the as Net the X.XX% the for to to We quarter margin XX and quarter-over-quarter balances during ago growth quarter linked year cash is year accelerated for compared interest both period. decreased fiscal and year quarter and PPP deposit X.XX% point interest viewed to ago wasn’t was either. as quarter first ago outpaced ‘XX, interest deferred reported ago resulting the points the XX a year loans our points, less growth. quarter period origination compared quarter. X margin the for of There in compared linked reduced accretion basis about basis to as the the income origination was period, from fees as on fees equivalent significantly PPP than adding basis current Average

income million compared quarter fiscal the interest a the $XX.X offset interest increase net an of for XX.X% interest-earning as the of same balance of prior increase average period XX.X% by million, to decrease attributable in $X.X was Net to was year. noted assets margin. the increase the partially The or in

million or On the million second quarter. $XX balance ago to are $XXX increased December gross a balances Compared during sheet, XX, XX%. ‘XX, balances loan at gross year the up

trailing Fortune our – in the XXXX period. of over merger Fortune $XXX XX-month February million added

adjusted a annual the rate growth XX%. net would of that, our year So be for of little under

increased million than The investment quarter December increased by XX while was increase a provided The million $X in compared to at cash $XXX almost quarter, in was more by $X and increased the the portfolio down in prior million. Deposit merger, and equivalents which just the to part attributable million fair million about second year-over-year $XXX balances over $XXX year. of value. the deposits Fortune little

accurate, not million more acquisition that’s our ‘XX end. than just XX/XX we $XX period a picked in – was that We branch also up no, actually had before

decreased quarter utilized $XXX the company borrowings significant The brokered the funding FHLB overnight of quarter position. end, balances. the in reduction consisting overnight to current with reduce primarily million CD compared its linked to

lending Greg talk activity. to credit I to about will over M&A, it hand and now quality

City other parent Citizens and metro Chillicothe, company Central Jos, & by like that announced noting of and Matt St. we January the good is communities with with customers XX the Company, area, Citizens everyone. XX, Northern Missouri. the completion of morning, to branch Thanks, Bank Bancshares several Maryville, which open on and in Trust I’d locations the merger in serving Kansas

at Bank Missouri revenue. footprint, improve & with a is existing will into now the time Bank’s conversion, scheduled Southern in potential Citizens for our data is Southern share for locations February. of subsidiary late complement to our Citizens’ enhanced Trust of market Bank Southern Missouri plans opportunities which provide merge and

their of mitigate of mortgaging nature liquidity, and sheet asset-sensitive hope their our rate high to will levels balance we their compression rising current to Due environment. in

XX/XX, of assets Funds, million, overnight loans $XXX million of million, million, $XXX over As including which many had its of of an for significantly Citizens our cash has improve $XXX will was million, great provide of in $XXX deposit funding $XXX are deposits net million. maintained rate opportunity us history of $XXX mix. of citizens and Fed of floating to which a core and funding securities base

this of loans reflecting we where at mention Watch special and that migration This borrower million the X the the down at expiration modification with the million category XX/XX, of we delinquencies, one overall substandard we $XX and a closely on have pandemic loans from to performance. since been had or uptick did not XX, to hotel at relationship. to feel ultimately status Adversely It’s and the one allowed. million XX. to degraded September as at situation payment monitoring continue credits very a credit, to $XX see short-term be XX/XX mention we quarter, special in needed good the to some classified were of compared it mention loans substandard. compared a credit the intended total classified million profile $XX non-performers million felt $XX necessarily have combined Turning but our where be But was performance as any classifications and September X.XX% we and special concerns. to classification transitional is totaled bit a about new

remain at XX as million quarter X.XX% were September basis XX/XX, guarantor to support. loans XX been an loans, payments than and non-performing and to up estate loans on attributable points P&I other slightly were basis Non-performing points in linked up just due basis year under increase was XX and years XX Both are the ago. X more real residential loan but relationships from increase XX or period September these low $X non-performing in average year X amortizations with classified almost an points X of loan compared The levels. points at substandard. continue our XX, X the points The X and gross already the days have of commercial manageable levels on the at of from compared we strong exhibit current basis of Loans watching very past as ago. There loans. and of basis up linked increase to was less quarter to hotel loans was very or

$X production the last same over million million saw year. up up of we to last million real $X year. our to estate compared period ag $XX and Turning balances other $XX compared the portfolio, expected million quarter Ag to to quarter of and in up as pay-downs, were but December almost down ag farmers the loans were seasonal

grain, Our complete agricultural allowed market finished the weather normal. harvest, a fall books through them pace calendar out customers at and XXXX the and faster in year to renewals the work dry their very a strong close than position annual

deliveries winter in issues timely for manner. river caught of point, to less We we the has spoke a borrowers. from are with and what up our a But renewals back low on more wet marketing January. higher grain brought some a or this consider prevent vast our river there that would levels ag of their at normal majority quarter very farmers some Also concern was levels expect no ago, when we

set acreage cotton little loan a Going our and into higher corn book. calendar trend in XXXX, look to bit

Soybeans and little should will steady. bit be a move down rise

Chemical and fertilizer the input oil. cost generally of follow costs

Lora, of have farmers half they contracted expected the stabilized now of and a farm And the crop begun in some the last reasonable additional have borrowers have of in year, details on so with but many the a well A you some our would second performance, priced locked table provide our we price for similar in what number volatility saw last have as their these of percentage we year, commodities new a financial to generally already saw move the off please? downward to higher. trend taking second half of and costs year. little

it to Thank details was real to X a fair key this ago acquired X value from basis year quarter’s was a the Might a XX origination discount discount was and about fee had margin origination or when it from quarter, points on PPP contribution points margin portfolios that loan I basis you, accretion we basis linked effect and on on accretion points. hit some noted margin. and X.XX%, I’d more of point had loans deposits, few amortization margin recognition benefit the similar value reported of assumed wanted a included share declined the benefit a meaningful. included PPP points In add $XXX,XXX premium from has in recognition on quarter-over-quarter, X X.XX% X.XX%, fee already, that financial Matt items when the on of dollar discount terms. the although Greg. that it year of we accretion ago, no basis more September but fair acquired

purpose. the to September as as and to servicing XX were funds attributable offset or loan of $XXX,XXX ago average card lower cash was residential a asset realized while resulting our basis originated to deposit our XX service in and increasing cash which we loan account was for in interchange the of compared gains fees, core other income, and yields quarter, partially Compared year basis cost increases the up that X.X% income, loan other loans by yield period, viewed decrease from bank income higher fees points on up points. sale equivalents, charges, Non-interest

a of in gains up the of the income our currently the a acquisitions. was This other offset that in increase partially older The fact attributable as from ago that energy sale credit we included exit $XXX,XXX renewable partnership. the fixed results year properties on had assets company picked not tax on sold in use gain to

residential was of loans. non-interest on had portion gains and with income the from guaranteed a of mostly for of guaranteed was loans, the of government gain sale sale secondary fixed to estate the origination offsetting quarter, While some linked market of sale down, fees. decline loan-related X.X%, December the Compared on offset assets, servicing on down real in we

ago up to related year the was the to to in M&A quarter. in Non-interest expense compared $XXX,XXX quarter. $XXX,XXX this year $X.X charges including compared quarter, as million ago

property addition health expense occupancy data decreases non-interest in processing expenses In benefits, attributable to by inflation was the offset foreclosed partially and primarily expenses costs, expenses advertising. were and and and to M&A increase other the

reflected increase count. in primarily increased compensation purchases. resulting from head continuing in increased merger facilities Occupancy of the to merger increases and a added headcount the other legacy compensation in Fortune Fortune year-over-year due equipment benefits increase and and levels, The employee expenses trend in

with charges was uptick an the see XXX,XXX but of in much to the level merger-related still X Compared on quarter, quarter, basis up a average linked an than charge-offs more company approximating that loan net non-interest a $XXX,XXX points the did annualized balances. total The little very up made expense and at increase. manageable during

Our to same trailing fiscal XX-month in the company figure credit rounds point. of compared or in period losses is a million no as the prior to X just basis period which December PCL the ended X-month $X.X provision $XXX,XXX, XX for year. under for provision recorded The

allowance or X.XX% and of loans December of Our XX to or million X.XX% loans XX, September as loans XXX% of non-performing quarter. non-performing compared or gross or and linked loans $XX.X of ACL million an was ACL XXX% of at gross the XXXX, at $XX.X

in the outstanding PCL required loans, when our and increase off-balance on $X.X exposures, an by construction ACL. loan sheet quarter linked large in credit to increase us PCL but the increase in part amount lines this from for larger required significant a requiring available dollar a million allowance driven of in September The quarter it balances operating ag the decreased was

basis grew in to ratio due assets law. comprehensive equity other faster you loan earnings increased XX common and in than tangible growth, the Matt, other capital modest have comments? points reduction quarter retention do during as Our a slowdown accumulated the

Lora. Thanks,

more our partially downs for portion of pay that the $XX from resulted than offset our and million loan commercial highlight commercial to ag consumer seasonal a and real estate quarter multi the want mostly Just by loans real loan of book. from estate, single-family residential of contribution growth modest

to continues and Missouri Springfield, loan year-over-year. growth in quarter-over-quarter centered have region West Our

ag loan in this declined West our As much region expected, but quarter, which our trails of East activity our year-over-year region, in includes loan it balances only growth.

year. modest XX, at $XXX in quarter from with and remain earlier We for $XXX pipeline organic last December million down a at to to growth from at fund this in days reported quarter our loans coming down $XXX million XX the million expect time

by concentration and CRE at regulatory non-owner capital percentage down Our to was of year ago. September XX XXX% points as XX, to approximately XXX% as compared compared a XX December

this the September December ago, the million. originations from and of $XXX are single million loan categories quarter in And also loans and in million were of year commercial originated quarter approximately that several slowing December quarter. the $XXX real volume showed estate estate, real a but quarter, Our was in construction categories multifamily residential the quarter. leading this down $XXX we The the those most

We CDs for accounted to in of changed growth the last in unit was million fund large little quarter, they but Deposit with from public $XX in million enhanced different across attributable and mentioned year-to-date new relationships of part was Public that the over came brokered growth funds growth, million our use CD up several the $XXX the it are balances. a footprint. to CD our it communities depositors South East, months fiscal by $XXX were asset XX from in prior. regions and growth West unit

and September balances for from of ended quarter and would position On the our but the years, for expect of due going reduced stand-alone forward. use remain deposits margin cost in basis, high mostly a competition continued an our balances few compared it have much XX much to to Our funding. of as cash last to funds brokered pressure overnight we to was borrowing the we unusually lower

chance in Although begin pace would to catch Fed we’d increases some of the book up. by the the but the be slowdown to loan provide optimistic for

Citizens Greg funds pressure closing our benefit and management our offset margin a with cost well. As to some should liquidity, help earlier, of as be our should it mentioned thoughts. merger Greg, our of to

Matt. Thanks, Yes.

well. are we forward the the more looking to balance the markets Joseph to as St. that Kansas addition represent Metro sheet ours, the benefits combining well and in long-term both opportunities City really In as these and Citizens from immediate markets rural as markets

grow integration to expectations We are on meeting in to be and franchise. really a the merger customer opportunity to we good are forward going looking process. the concentrating And

opportunities said, our Lora? we expect near-term. the new to looking for that and being, plate for on be we for plenty expect With M&A not being would have time to the

you, Glenn, Greg. At our we questions participants. are this from Thank time, to ready take

how So, if make you remind for they folks questions please would, queue time. this at

We from have open. Liesch now line comes question first Piper Andrew, Instructions] [Operator your Andrew is our Sandler. from

right how at going the a Is done, we obviously, Thanks look to now everyone. Question morning. balance look with of construct in Good an in lot put with sheet, should came funding deal or that should the especially How on right higher cash at emphasis allow cost used pay-down to brokered be some we away look accounts? to less that of at the cash. growth deposit now, balances? that, of

I a with think it some of that We will be of the brokered bit funding. little ladder. mix did a

call have of off. that options be term immediately. won’t We we some It longer as that brokered have we So, CDs will real just did rolls issued to some some well. significant our

about looks think that rate environment to want will we where what So, like is. the and

for future to Some of it, as liquidity as well. expect would a we bit loan war little chest growth

down the a much towards this at on going out deposits it. be of to growing Got legacy ratio then Is point? looking franchise XX%. emphasis the loan-to-deposit just is at now And there

to as we continue feel to would to I would non-maturity be on forward. pricing pressured not that aggressive We grow going want deposits. definitely quite our expect

it. And on forward, you have all Got rate? the going saves cost expenses just expect in when the then do the run to

July as I all we the there much as cost the X, way should saves. far pretty think be

within achieved June the amount it have will a fair We of quarter.

Wonderful. taking the Thank questions. you for

Andrew. Thanks

from your Thanks line now Andrew. Kelly [Operator question Kelly, Motta Our open. is next comes Instructions] from KBW.

of question. much on a some you Thanks sort. growth kind Maybe loan Hi. mentioned I would so for start and of the slowdown

most there returns growth this of at And Just you having the thoughts look demand anticipating you cycle, point? point on the well outlook categories if you the to your we growth what categories interested in risk-adjusted as see is are any this as for at kind forward. better in that are loan wondering on for as in attractive that

growth quarter begin a having have again. during June in quarter. earnest do quite modest drawing we as And the our lines anticipate bit really We March growth more historically, up ag loan then the in

our we seasonality So, have calendar we part expect seasonality of of year. same for the some that would XXXX that had, historically

As we have far historically. some rate what to calendar to continue in for to have residential and anticipate we ‘XX, would our bit owner-occupied slower in we our than We we portfolios. lot will buckets, loan growth what as continue. large, have continue by some categories historically growth are growth growth little have had, C&I Overall, continue do now in had growth a would we and a that more of our non-owner our CRE to are had growth, year expect of looking CRE to expect in we than to occupied and going we but patterns XXXX. we for But lending be still

Understood. much. Thanks so

City. So, just level, transaction on Citizens into a Kansas your gets you high

markets may Just as the is de wondering, banks Greg, high-level prepared convert are novos now, the Kansas be kind you M&A of that subs. as interested jumping well to is to still well, to market, in is sure just or in I a thoughts interested feeling future, – good I M&A your it’s some this see I But in you am slower early if where something remarks, you add? looking know primarily the if be would any would you as in other you and working there. be right but not month know are point off ahead there wondering as but there through about in City and how add merge

City the excited market. very Kansas are We about

that is been Kansas have hired have would the in City president we locations. market to added that market a based Citizens We have what

the add have not products of feel citizens that like for mix loan to opportunity as in operated in. some product the to rural the did footprints. Citizens those in forward our some opportunities will looking we market several result personnel and some real addition markets growth some also of are And We in

office. much March of it opportunities. organic standpoint from long-term we growth will our enhance in or We are those integration that just personnel we much time, me focus. will to in changing we just point think online, where it’s of time primary add will is something And and pretty of a a quarter wouldn’t well. that facility not out really de at we but relocate nature. I novo bring will limited the anticipate I might wouldn’t as probably not an branching some anticipating be And occur wouldn’t be our would It And the to But as consider if as some novo branching And Citizens period be relocation. operated in of. change. we take for surprise But that de that

for question. get will so Thanks the I Great. much answering back.

Thanks Kelly.

Thank will line. now [Operator questions have no for the to further hand Instructions] Kelly. back We remarks. on I Lora closing you,

who We to participated Thank want you, you has future say anything everyone look just Glenn. or calls. to Matt, do you and thank Greg to have add? forward to

everyone you day. good quarter. and next a have we look update Thank Everybody, forward our will to