Southern Missouri Bancorp (SMBC) 25 Jul 232023 Q4 Earnings call transcript

Hello, and welcome to Southern Missouri Bancorp Earnings Conference Call. My name is Elliot, and I will be coordinating your call today. [Operator Instructions]

I'd now like to hand over to Matt Funke, President. The floor is yours. ahead. go Please

joined during and regarding on and to President refer Elliot, The you everyone. is July press the This cautionary of statement forward-looking may earnings our Greg contained Chairman Thank we dated release. call Steffens, your release make with Southern good questions. Missouri. financial Funke, to Monday, information review and I'll to of call XXXX, us. presented Thanks Matt the in and this quarterly highlights I'm certain today by CEO. results. and today's call, you, XX, on our forward-looking is morning, start data the statements statements take for some in purpose our our off joining And We

with to the related nonrecurring showed in a quarter that noise quarter, mostly the merger the We're some non-interest this call some quarter rebound as to still and in charges smaller those. large March side, quarter morning had year, June merger some other to June benefits charges headline of fiscal had the the happy we related to also in expense the report income but had our profitability our would what we Bancshares. offset on final Citizens included We

to in year to $X.XX merger-related this The linked due quarter quarter. in $X.XX $X.XX compared common from Earnings similar was the XXX% approximately as quarter in the to the compared common as $X.XX, of impact and or X.X% the per quarter share charges or same up period charges. from diluted pretax year down per June $XXX,XXX quarter ago the $X.XX were fiscal share a XXXX, approximately third ago,

same X.XX%, merger the Our compared the those annualized equity charges, ROE, return a ROA was XX.X%, X.XX% in the impacted X.XX% was average average by was year larger and and quarter, the common March respectively, And to ROA are in was quarter XX.X% ago. ROE while annualized and on assets X.X%. return our on

down period was up a quarter in quarter. fourth decline same in $XX.X which our for the million or Net of million or increase the $X.X up compared merger interest linked interest large ago the quarter X.XX%, is for ended X X.XX%, XX the the due and the was period net third company's XXXX, partially was the month June and the as increase of to for from interest-earning million, to by third assets year income attributable part was the of The basis balance an about X.X% quarter. XX.X% margin three compared ago, Year-over-year, average from period a up X.XX% third Citizens a point fiscal in to year $X.X that offset margin. and reported of to

fee of impact deferred Net interest point stop the reporting in one. a Also, discount quarter, X we XX the loan on I third to XX in contributed accelerated PPP out, fourth $XX,XXX income quarter. had have of last basis margin the points quarter And origination March here and And ago on X points contributed accretion year, about last quarter, to current resulting income going current net on time from net compared accretion quarter, in from am or on interest basis basis income loans the from linked contributed quarter, accretion comment the interest in in basis points. contribution income similar PPP the no the to the on fees that year to origination the margin.

Noninterest about quarter about we basis XX margin about year-over-year X points reported Compared XX-day margin. March, a to the balance core down the as or impact quarter basis XX.X% view see additionally, merged of benefit sheet million, compared and June for then, last. would $X.X to points year relative quarter XX this compared to we million of ago up Citizens sequentially. add would And linked to three-month a for and a XX.X% the on an – to view period points what million or increase our income the basis was On basis $X.X full was $X up in quarter.

up this management, an as line as item – in other we what And on our This larger payment report well the mortgage MSR, improvement income adjustment credit trust to in year-end. additional year loan processor. investments as and last. servicing What some June some of wealth annual our would a due to incentives from the we interchange we on tax ahead resulting we was categorize had generally, rights, little income due adjustments reimbursements to compared servicing an from was and adjustment valuation quarter,

down three-month $XX or prior in to the item, Noninterest had million almost a processing other quarter, and than more related March acquisition and or million reflected compensation period data more they of to $X.X were to linked just were a little totaled than XX.X% million. charges period, $X.X same $XXX,XXX. expense an the for benefits charges X% increase year totaling activity in some the our merger and the similar primarily And line ago In quarter. miscellaneous. of the period was little compared million, $X Direct the year compared $XXX,XXX

$XXX,XXX Our the million ago totaled $XX just provision linked year and more That a $XXX,XXX March same for or the compared losses, quarter under in the for PCL, than was to credit quarter. in quarter. as

that commitments. The for were $X.X booked previously credit deteriorated quarter, March the an we in current the the and as quarter components to June of a recovery attributable commitments. loans $X.X to for loans As in million discussed purchase million outstanding was to designated $X credit credit attributable PCL the the as of attributable million, Citizens and were not allowance merger we

to to recover of number loans. over due increased slow adjustments a been from relationships, individually hotel – the classified modestly modestly last ACL talked to they and evaluated of a decreased as years, we COVID-XX, We small couple have we've several related the about

Net with quarters. consistent our points, charge quarter to holding remained several levels XX-month during at two figure which the previous offs is low the trailing basis

The allowance XX non-performers X.XX% ago, over XXX% was loans of June for which loans X.XX% of gross XXX% ACL represented compared $XX.X and non-performers XXX% million, at our totaled credit X.XX% gross or of was of to million, XX. of which of year and ACL as loans $XX.X million of gross at $XX.X non-performers. and A just March losses

XXXX gross from added net by loan the of the On was fair by during which included $XXX during fourth sheet, million million fiscal year. Citizens quarter our quarter merger, the $XXX third fiscal increased almost $XXX the the balances for that million all adjustments the of value and balance

have growth Organic and XXXX, final numbers that was this growth somewhat the loaded in strong was of quarter approximately year front fiscal we XX.X% did too. although in early

fourth balances which Our growth. $XX for included value the June attributable are and by million of net our for adjustments September million during Deposit decreased increase and increased to quarters almost fiscal million by deposit usually an $XXX they $XXX fair quarter, soft XXXX, of all Citizens.

depositors little we've We'll CDs branch We migrate generated time our touch to funding growth more available seen quarter wholesale we've in on in liquidity. supplemented seen have a with that deposits later. maintain this detail and to

some credit. I'll to discussion for Greg now hand it on over

little And a at at of $XX.X June quarter. million our than a total points morning quite million everyone. basis loans or Matt. Thank loans you, classified Overall, remains or decreasing XX, more strong seven during asset adversely X.XX% quality the $X.X good with

with year to June Non-performing gross fiscal significant merger from were the XX, dollar loans. loans in or million comparison the points of our in at X.XX% but of In increased slightly million loans increase with terms, XXXX, Citizens. $X.X up $X.X overall basis majority steady X resulting non-performing

basis March at they million basis up the on XX XX Loans up of or to levels and Citizens gross were due our million of days or prior very basis XX were low nine past linked again compared quarter points compared year. is the increase, $XX.X loans, the up the more merger. and to Most points attributed points to $X.X XX from

the XX real up estate $X more other total with the real estate little balances are loans of March a million, ag million and increased production ag by and ag From $XX.X a quarter, loans, over a farmers of than evenly increase operating combined the pretty million. $XX.X the Citizens Compared split balances million $XX up real And acquisition. loans. some to and attributable balances then to estate was up between year ago

they the for For in year. our mid-season customers ag are XXXX crop production an update on the

in an the end to Our most reporting ground to have lenders drier were conditions. irrigated the are that and planting continued, able have customers farmers a get earlier fortunately spring, than by to Dry due help our crops but drought most of ag land to conditions mitigate May. of season off were usual

a requires for drive However, effort lot irrigation. more this and managing manual does the expenses higher

Farm cost more do maintain as well year being the are more suppliers also the are fertilizer expenses to spending which this additional lines has chemicals, to passed our farmer. from needed. been to along with higher XXXX. all paying up and estimating make year and worked impacts Other for these would sure We due fuel, in so, support to and financial conservatively completed if borrowers to position their underwriting inventories

lines, as are by irrigation now situations the driven We cost. seeing aforementioned utilizing that especially these many they additional in are

But good the our at peanuts, other good this which including early rice, X% on This are of or some time corn pollination. that this this then acres better slightly and as expect we’re With and this negative about our our see looking sorghum. about least harvest. we’ve monitoring XX% corn, feel corn, XX% the soybean consistent and year year than hot closely we cotton an XX% in crop may have with acreage at temperatures crops year soybeans, crop point, mix of Rice do point. crops, expected, of effect farmers in most XX% at popcorn, roughly last specialty at

more some comparable expected offset years. We’re or compared underwriting on pretty lock-in our too a our early rice. some the prices little have a cotton prior expected good for bit year to in and and corn Overall, at than to about expenses. of the get read current higher of to year’s this for looking on is feel been it’s expectations gains crop and XX% production as the cotton, to this above lower borrowers on to year and still stage, but good soybeans Pricing contracting

$XXX.X excluding of the quarter million increased loan the portfolio a whole, again net grew merger. during as fiscal to $XXX and the the Speaking year, during the Citizens million ACL portfolio

was XX%. growth in region South second. our our organic was a led over – closed very was centered and little region Missouri, This loan West by growth Springfield, So

trend the region, in expected our which for ag into is during due ag the quarter and continue East increased saw that Our to balances loan includes the activity much to seasonal of pickup fall.

fund in the somewhat expect XX $XXX slow the June XX and in for XXXX. quarter than next million as we’re March next to pipeline at $XXX in to to days, the Other today, that million we growth our compared June ag, quarter for at at XX loans with $XXX XX, totaling current million

our Speaking was in growth during of ag million, in most ended, quarter growth the nonowner-occupied an just owner-occupied our $XX growth then $XX million, the the estate much remainder and of growth commercial the aforementioned of real estate of representing of real commercial quarter. primarily

Our volume categories, the originations The real we from million again, originated we million quarter was and estate June growth March leading an the in nonresidential the $XXX.X of earlier. were quarter, million. approximately mentioned this ago, the In $XXX quarter a in $XX ag $XXX the loan year June million quarter. for of originated increase

XX, of to XXX% June Our and ago. points bank approximately CRE one as was at nonowner-occupied to year regulatory XXX% capital XX X compared compared at concentration the March down level basis

Matt, other comments?

Greg. Thanks,

Our last trends more the a detailed on over deposit earnings include did year. release table

did we see with [ph] compared March, jumped of merger in but to outside outflows show the we the Citizens course, impact. December Of as XX merger,

if a a negative the by the then total bit February, up April brokered for relatively deposits positive May funding. you and and March months On merger, year months year funding. but were down of little in balances the had a little outside merger, monthly just any exclude in of and outside June. stable We for basis the in outside and and We brokerage January of for followed

this well. pretty behaving environment, Given noninterest-bearing are pleased see balances rate we’re our to

ago. within Our businesses down, holding alike the lower year interest-bearing hard moved outflows stimulus. – catch to don’t transaction June a both our a tax lot seem years consumers in up deposits accounts and of maybe we and year have of after average have stats have balances on customer to see payment than few this to a We do and did migration portfolio. We time they it, April

the been have units most Public outflows. notable

those holding have had of that and some funds some were that those Some deployed some over is with short-term of public They’ve securities last others that the of some were grant invested units seasonal, few holding cyclical. years brokers balances. who deposit is excess in of We funds. some or

we year over unfortunately, relationships the did well. of of couple And as first lose the a half

picked up June relationships number picked ones. versus about the have terms XX. those old But wash We a in up even will balance new their total probably but several hadn’t those as more by as relationships new generally more balances recently, be relationships moved far

So September quarter for a us those some public new balances while inflows due seasonal some unit is on may help offset always seasonality, tougher to drawdowns. of of just these

Greg? thoughts, closing Any

Yes.

Just an update on the Citizens Bancshares.

past months the past now systems our merger We’re months five and six conversion.

sidelines very pursuing markets the merger circumstance deposits to additional service opportunities a continue and focused remain bit that than stay currently expect a on will actively elsewhere. for those and for on would longer. We not integration, and little expansion unique and We're other

some have And pickup here forward entered. bankers actually market the new as be in of City to well the community anticipated could most of Kansas achieving cost achieved banking, market area. forward success look the markets we've compensation to the in as middle as from achieved We that recruit and slight communities a We're savings we'd basically rural there merger. in we looking in same the in we've

Greg. Thanks this to we're take questions time from at ready participants. Elliot,

how would for can they remind if them for be So those. questions. please We'll you ready queue

from Our question Thank Sandler. first you. Liesch [Operator with Piper Instructions] comes Andrew

Your line is open.

morning good guys. Hey,

Andrew. morning Good

the to wanted But there. see the here, I morning. nice has just for increase, to the wanted on full to. from I the to benefit see Good surprising the benefit focus just the quarter margin to margin of on deal going here? you seeing – down do deal played out and result Citizens trending Citizens just what with costs already itself you're from think that's in funding

little any going was of than wouldn't rising as ours the additional set better There sheet as merger benefit a far rates. Their the Yes. balance be forward. for timing up

fact we're as – So big the merger would raises changes we from have will yes, as deposit rates driver some on that looking happened cost ongoing the from further here. or continued to an from in tomorrow maybe the fed has But benefit there. basis, we the any the be

on that on like there the mentioned. Got may items should income fee a forward this line And one-time it. that – the have quarter rate non-interest affected some of right. going or All guess fourth then are that run I on backing you few through your seasonal what ran income be of fourth one-time items right up some – quarter results?

Yes.

reported want So the little it we far out would over any what impacts number to tried release forward those down lay to while we provide the probably don't are. guidance, the a those would as be than trend We bit near in here term. from heavy a as little sustainable. that here expect But what's

this so through And were some flow Like benefit before that there? or quarter Okay. you up from loan they back fees, then down other interchange there to Citizens quite didn't bit. might was was a through so and trend go where the is

some in management Citizens. ad for There an trust wealth from would benefit Their was us. be

interchange I benefit of XXX,XXX. think income was north that

we're We the tax XXX,XXX. have credits think I

the that our mortgage was XXX,XXX quarter year. rate. this were little of heavy normal from rights plus this fees year Some up to last – a Loan compared this run servicing

questions. step back. Got I will you. Thanks the for All taking right.

Absolutely.

Motta [Operator KBW. Instructions] with to turn Kelly Now

open. is line Your

for a congrats thanks the – Thanks on guys. morning strong good quarter. really Hey, questions and

Thank you, Kelly.

having rate to the rates the you're higher ahead? finished it in you really about through – maybe tightening potential and up if in quarter. we impact of fourth really environment growth underwriting just think was just growth borrower any be wondering loan the terms that Wondering the as and pullback I'm year strong this see the – demand might finished strong into starting

what We're underwriting We concerns have the months criteria ago, much definitely due liquidity and were tightened loans then months – and near about part at harder our opportunities tougher are activity a than before. in just payments credit to limiting taking to we some, we have we are six looking just with. ago, today future. equity not get three not to loan had that at then have we're look banked than And people many requirements, before. more we a what as underwriting We're more down overall, done for relationship customers they

on pipeline loans through anticipating do but we draw existing we'll before. still construction is also have those we six bit originations, new activity process are be slower then months, fair a lot will And [ph] be anticipate than prepayment having a working that less over we that what more will have We book activity. our little had to of next the the a funding three

anticipate loaded year would fiscal will and front-end So goes year, off when then this as for looking taper forward, I current we'll more on. that we're have growth growth the

might helpful. see wondering rebounded return, higher in and the then you Great. buybacks, you for That's capital? dividend your mentioned profitability, margin commentary, as level this upside quarter thoughts you wondering what well surprised the high-level any just Citizens viewing be and this definitely your as any M&A but Got super have dividends I nicely. on it. on At of know deal. thoughts you And this capital especially issued but month, with if did recently I maintained updated slowing, how in you're

of catch just but speaking that, about board. of of time with didn't We the our talking Kelly, dividend. maintaining I the a to end quite that the lot spent

the little a bit Just we this lot, could program up approved environment. to much, that. a and balance have maintain environment, we more decided want current just we too pick growth be cautious a capital Should maintain ratios it always be current there. But – to slow deploy sheet a do strong sheet out was that share that and an repurchase little balance We best in conservative. see in

Got it. Appreciate it...

at Higher the moment. capital ratios

me. from question Last Understood.

higher brought up, from of on industry. you really and loan-to-deposit of with are being down. levels the kind more level least from level Citizens, with pressure you this your that You side, at deposits the and loan-to-deposit cash liquidity under more any Are room of across and benefited cash ratio comfortable especially

mindful to would more to we We have like cost the be of have of overall just versus... Well, are the deposits. deposits what

funding. Wholesale

over I likely term. loan-to-deposit be to this than But at mean, ratio is level that that where would higher Yes. the think environment like maintain levels maybe reaching we're overall, this even grow continue to we slightly our near to levels I or in

it. Got

step I'll additional you Okay. color. for back. much the Thank so

Kelly. Thanks,

you. Thank

This to President hand closing for our back Matt remarks. Q&A. now concludes Funke, I'll

Thank you pleased Elliot, to appreciate thank We we'll you joining and talk again on and for again, you, to quarter, interest everyone, and the us. months. in three report

Thank you all.

today's Ladies gentlemen, for concluded. call is you thank your to now participation. We'd like and

You lines. disconnect your may now