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Southern Missouri Bancorp (SMBC)

Participants
Matt Funke Chief Financial Officer
Greg Steffens President and CEO
Andrew Liesch Piper Sandler
Kelly Motta KBW
Call transcript
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Operator

Good day and welcome to Southern Missouri Bancorp Inc. Quarterly Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note, today’s event is being recorded. to conference like Funke. to now would turn over the Matt I go Please ahead.

Matt Funke

and This October statements may this contained today’s by cautionary in forward-looking quick statements during operations afternoon, CFO and the Bank’s you, earnings and questions. statement joined is data good I’m a Thank you we Greg Chug, We Greg on to our in going everyone. and President today the our review to information in Missouri continuing quarterly on call to The we refer your presented to our CEO. call dated of pandemic Bancorp. release. forward-looking is And XXXX purpose the make update provide is of Monday, press regarding the Steffens, certain environment. call release the and XX, Southern Funke, Matt take

Greg Steffens

afternoon, Matt, continue continuing pleased We’ll a that are to to provide and you, us we our towards get to joining work do Thank on restrictions as today. in Schools good be very that seeing although We of COVID-XX. back have normal, cases would Thanks actual is brought few communities We're going deal spread operations most with can update everyone. the before brief report for to remain our markets. to activity activity in required. restrictions soon currently virus our open significant currently and on hoping hospitalizations. -- we increasing are we're control under

time. through or some needed drive only temporarily affected the have by situations to While to period for we've a were had facility a virus a of of service our members where team few close simply move

for this time. remain business All of facilities open our at

were a by increase a on loans levels up were to our of down $X number XX. and $XXX in we funded $XXX few and have that last touch I make at Gross loans good And TDR $XX September about earnings since loans are encouragement and when CARES early of rate regulators. loans loans. the without classified deal loans see handful end quarter-end, the had in XX. such since Act very move good million. at remaining our substantial the a as a are payment deferral to and back the of change to submitted balances than And as months Also, at approved million we majority SBA, $XX significant designations amortizing end and of basis million. of as basically applications that little flat $X.X modifications loans quality, September the points expect forgiveness relatively importantly, and to the from release progress We've small million have have they've substantial levels towards to past-due the focused were past-dues the full that Most few and call, for made deferrals a on we $XX as March under in over $XXX less just our the are of this resuming we XX modifications. the contractual XX, saw in credit below million million On last began million, have we June at October. we provided those similar We Classified a million since a we interest only and and to payments seen up quarter loan terms were non-performing amount few at only of funded that reductions of continuing at to October. stuck June PPP, at by want with

We release breakdown environment. a We would our very remain of with earnings the pleased in at our performance loans review our current loan that. of portfolio detailed back underlying the to our of provided encourage have you

borrowers continue work several loans did And portfolio. due hotel in downgrade pandemic. with the occupancy we the in to our closely the poor We during to June quarter

loans continue those more to in of some areas and urban struggle. were And

Our to at perform of have of multi-tenant remain better we continue pandemic anticipated and portfolios than restaurant could guardedly retail portfolios. the outset we optimistic loan those and the

while Now bit harvest estate loans real a ag borrowers making over $XX years. our farmers are increased to the several agricultural for bit by past the the down $X than draws over million, our progress. and our which seasonal portfolio million in update, stronger little a were Agricultural, generally our balances season over good quarter, is little production

coming reporting pounds higher an some are X,XXX Rice an hybrid varieties are And acre X,XXX up reporting to are soybean reporting an from pounds around Our Producers acre XX are in yields acre. averaging with an to productive an around with comparison yields XXX bushels acre some bushels acre, from an reports our X,XXX in crop range, lower and more pounds the to productive coming an acre. up bushels on varieties better to bushels progress fall at XXX their with lenders crops Corn to producers in Cotton are reports previous to early XXX season XXX are XXX years to longer of producers more acre. bushels land average yields the some in XX most with bushels XX yielding ranging on reports. yields reporting bushel range. ground. for going

and Overall, yields up and our still they’ve XX% then such popcorn primarily soybeans soybeans, mix crops reported farm cotton, rice corn, normally to than For much XX% what crops non-irrigated X% which crop average include XX% peanuts. of specialty as land and who corn compared higher being our XX% fields, on ended their do. farmers our they

XXX Our rice harvest should along in with their crops bushel improve yields their incomes complete is market range, approximately the and to with producers a expecting improved price to XX% XXX bushel delivered. on their which pricing

it producers XX] estimating sales cotton is cotton is little the how [indiscernible] yet. harvest are [XX to going a season this determine to their early to but with cotton pound farmers approximately with be graded Our range, XX% in complete [indiscernible]

the averaging that to market corn bushel harvest with to at in Our We're of is fully help more reporting move prices this people and producers a may typical time XXX corn contract. some harvest are that spikes season saying bushels XX% XXX sales our complete, range.

higher, of our XX% even farmers in trending farm customers. Livestock or crops Our cotton pricing and are about yields, optimistic below allow market. still soybean combined earlier soybeans In to non-contracted is about range before our trending in for are is seeing Overall farmers continuing with anticipated maintain per that for price most underwriting, our prices are cattle spikes XX% to to approximately gain beans prices hold higher, additional on corn than our to underwriting cattle XX% are contracting the the we're the higher outlook in they for more of sending soybeans $XX their XXXX comparison weight an in XXX trending some And issues Overall, complete XX% with with with of prices for seasonal prices farmers XX% soybean should bushel. sell we are the several improved prices year the farmers. rice our lower. XXX hoping range. harvest trending majority to

But hold the have the later help government of average that payments expecting this anticipating processing and how those we yet markets early that pandemic slaughter year the relative that an cattle being received of now FSA in with to grown is demand some Farmers impact quarter’s offset of we farmers pandemic. -- call purchasing when to prices. go to usual longer for of in And to months considerable the agriculture many and improve cost the and lingering a assistance with next, will are to currently results? portion update to But production. will They in would increase seeing ago. area from to we're we a noted in help a freezers helping the for agricultural market or table in ahead livestocks as fall. facilities CFAP-X government similar locally our additional last for see farmers. are than had families farmers did three pandemic. Matt, closed. offset to income. to determine assistance to with locally demand direct beef We payment average We're our early are what you good to XXXX this payments expect do related cattle crop the seeing increased payments their But Farmers distributing will commodity the from our financial optimistic overall cattle this too As in say problem. to program. improve possible year spoke restock than their it's prices would spring us better There's they to also the the USDA instability result above XXXX. farm most

Matt Funke

and residential did period. in we from expense diluted We from quarter’s And change expenses reduction somewhat economic slow Central we quarter. the earned the income linked write-downs elevated loan ago that outlook Non-interest diluted XXXX of quarter the of last an Non-interest continued a and see income quarter. September significant earned to had increase way. X year And June included our remained $X.XX growth saw continued in That's on adoption. Acquisition that's increases secondary we year. Sure. Federal strong Gains loan sales that levels and as our property. year the for July CECL charges much following foreclosed compared from quarter. $X. the $X.XX not the compared quarter, ago declined the we up Thanks, to lead to the Greg. loan in September XX Provision the non-interest $X.XX and in relatively related losses to to show market from it's fiscal first

sharply is servicing year in $XX dollars and are bit Now up with the as increase also our to ago We're servicing ago, volume times a of is as income or under servicing by we little the to originations loans the well. Compared servicing rights three originations. about year than loan mortgage under generating per generated more period new a average more the increasing continue mortgage million. XX% gain and better

follow components the charge. stimulus, expense period, card non-interest about the concern, that interchange ago to year separately and XX% as netting NSF, on is a those debit changed despite increase from interchange income faith. here now an and reporting some account against basis how up dollar instead including government for of card as reporting pandemic charges service in is We notice XX%, of debit may we volume. adjusted in per have consumers which you’ve outlook down our income little deposit Compared to overtime, than note little respond you income NSF more expense. non-interest still the a On be the we've tougher in If a closely there those transactions expenses, them are item increase ongoing on a year-over-year, X% presumably increase and a the similar X% may XX%

Finally, we the a expenses expansion. produced compensation area a linked in ago Management year to which current about Management in same ago benefit we [$X,XXX,XXX] XX% X.X% saw Wealth a when and call was material the In year quarter, with periods. related non-recurring, charges quarter would up to no expense agreement income Wealth as with had compared market we current quarter market the XXX,XXX an Non-interest compared the non-recurring we bring the same was services income. M&A to broker dealer new or XXX,XXX in one-time to had a on to down

as charge core to outside figure year spins June year-end. credit compensation to the at we ago in And both of only and a current and current the we quarter basis, as Compared ratio was On an more in couple year year had also same accretion. a as this last September base data after in of other we a at the or in either. assessment level categories. quarter in zero was to in expenses result provision of was compared accruals a and our not of had Central unusually earlier, compared up included for ago as current XXX,XXX to quarter We as fiscal the see FDIC we PPP a saw fair value higher return facilities, XXX our those sheet Net significant quarter to which the foreclosed projects, in our an linked should off credits X changes marketing a Acquisition we XX% couple quarter exposure about we of deposit of quarter for year of little a recovery we've the lower FDIC’s benefits which a some declines XX basis of ongoing leverage accretion. on way was And be quarter, and ago, occupancy, margin from probably large X% insurance, was processing, somewhat balance noted quarters ongoing the non-recurring core exclusive about is due also bonus about X.XX%, somewhat we June year, lower some departments of One points a occupancy basis projects, premiums XXX to the quarter basis regular were A quarter. to in item a we expect a than XXX,XXX intended the the a of discount the the processing due were and recorded additional loan from on increased the September, that which in had growth. Meanwhile, a points basis time hit more are one-time the than a where marketing a compared influenced at we capital assessment interest which receivable margin compensation charges and the when June items up running an where a added inflated saw this increases contribution charge value to fair expenses the data what our property Federal took the the the ago timing September timing they're quarter. on basis. just core XXX,XXX as

loans those returning with hard We to to On been specifically did very excluded X of was unit resolved. we a XX-day in after gross of XXX XX charge-offs the time preferences to from of the of million. loans going also expect loans million million back over XXXX. strong the it they of this XX on approval about somewhat moving in accounts. down quarter be quarter. washout for we little forward the moved bit decline had recognized. months we're We slight $X cost million, to has loans lower CECL rate of Deposits day maybe that That's the up a Also, basis were just status ago, deposits adoption, June. acquisition trailing of balance well. improvement margin the September of months see up sorry, and on adoption. at to basis just months. had that over and the million a loans XX since remained September growth were of if X.X% to down we stable days non-performing towards quarter what in balances about a resolved, last and Federal match XX far that's asset the adjust flee provision the figure combined $XX our CECL percentage and the -- basis million PPP which that balances just loan Acquisition tax when as did a non-accrual pre-tax were NPAs last about $XX status little accretion, calculation. XX about some investments. benefits we the gross funding March But but points. our basis NPAs again, quarters September on which our of income, -- remained being hand as XX on of with some the a the pricing Non-performing this A at were the quarter. quarter sequential asset for loans, PPP XXX,XXX number $X.X on basis at advantaged cash the year net versus quarter. last Net bit and running a as or we do we would up But core sheet, as quarter, tick We're assets. quarter balances seems of a funds. NPLs had because we or some on down September basis loans, positive see rate you basis I'm in quarter core some quarters, the total growth in sitting Both loans. to had But we see XXX,XXX XXX X points loans points due from million Over see XX other points showed problem a XX interest X.X you Outside on in being points points. a last prior strategic little tax basis down X $XX but about today. gross growth reduce as increase were higher quarter, to outside the Greg, basis XX ourselves was provisioning in our compared there. Brokered couple provisioning ago from X.X%, improvement million $X.X see we if year this core margin, bit about and Public deposits November performance X last points numbers seeing discount in of XX the up points $X at quarter loans almost the in And in is linked at items. the adjusted, the for of let to of a might over at effective by as time XXX,XXX, we gross almost about to Gideon of points. basis on bit me – slowdown over June rate back of ago looking little basis by as with XX.X% a X a basis, down had to due months. the in deferred were accrual points. income we really you couple another a be M&A basis running points fair we status returning of non-maturity backed a value about at But year so couple A Allowance was core Central pleased margin then had XXX, attributable after X over as

Greg Steffens

Thanks, Matt.

forgiveness. growth, of over our In our its loan started. line And modest is approves that up occupied over was forgiveness which relatively clients terms non-owner approximately the at at anticipate of XXX% depending And June speed with year roughly PPP or down getting in with was expectations. last gross slow upon the quarter. CRE XX XXX that is one and this pace from the of SBA to growth At We're with next to regulatory from quarter are non-party fairly capital which concentration XXX% going ago. loan

in by year. lending, period up Our the of volume but the June was same the than we PPP all from in September prior substantially was The loan where lower artificially originations of were the quarter June. inflated we were

million year loan XX. were for loans at pipeline $XXX was we it $XX when XX, Our September to million fund and from million at compared where to XX-days was a $XXX ago. higher Notably June in

expect similar for balances activity expectation plan to believe hearing quarter, aren't the we're We for loans sold lead the expected closed. of Even our the M&A, last upcoming over in approved in loan operating that stock phone But that Our seasonal moment, our for we at on earnings some it they ultimately in our do seeing production larger to repurchase months. though prior in our But where to downs periods. PPP announced regards And quarter ring announced pay very In limited X-K market continued last after does originally ag include that it growth will a filing not opportunities deals. be that often. will to nature we increase the disruption than the many our [XXXX]. secondary present. little we late and coming pipeline our a is are prepayment bit remains pipeline and in and week more reiterated diverse board is resumption on was forgiveness, release, do

quarter our few current of plan. for expectation on attractive We could XXX,XXX levels have the near-term that remaining given the and as $X.XX believe limited per And use growth for outlook M&A opportunities, shares Thanks, represent under repurchase We credit quarterly well. relatively for the share capital. current we a repurchasing portfolio, at November maintain dividend and around at Matt. shares the

Matt Funke

And mind, take questions Chug, like time, that may you so. how if thanks, and participants queue to reminding for to our them this have, Okay, any Greg. at wouldn't we'd we'll do questions

Operator

our ahead. time, question with Thank go pause you. roster. momentarily to [Operator we'll Andrew instructions]. And Please our assemble [Operator first come instructions]. Liesch At from Piper this will Sandler.

Andrew Liesch

you Good How are How afternoon guys. you? doing? are

Greg Steffens

Doing well. you? are Andrew, how

Andrew Liesch

were you're pre a in maybe stand Where's now? that of having those how did occupancy on maybe key spoke conference of Greg, some credits downgraded hotel Thanks. those at? last quarter’s is sort you few call Good. about relationships. monitoring that right the But What update -- any were loans weakness. the potential

Greg Steffens

hotel the move are they watch primarily three list are where at they And continued They watch travel. have struggle, they're to markets currently community we remain The business status. business list on to cater We they and status. to struggling. are status, that relationships in repayment

performing. how But are as We any presently we're those they we adjustments make And are necessary. negotiating with customers. monitoring will

Andrew Liesch

-- beyond areas be can of And concern? are three loans, this thanks. portfolio are of that these other other maybe Okay, giving the hospitality any right you areas now that targeted any then -- pause are there

Greg Steffens

limited on they small. that aren't allow do but one -- restaurant that it's they're can restaurant. their are occupancy And amount struggling is but really the just of they customer level saying only making interest in We We much. of payments very their have relatively

Andrew Liesch

Okay.

Greg Steffens

of area are hotels our three concern. The primary

Andrew Liesch

pretty going little in that few upcoming it this it. Got there into -- on in are natural your bit been Matt we And increase rate might items here quarter, just quarter? -- to safe head so to commentary, like as expenses assume but a run it. below Got expense then the sounds line have in

Matt Funke

Yes, on our little we March the we little there, back bit we quarter, some new but probably December those probably normalized with would we and more see calendar year. items then have generally see some level quarter huge nothing bounce pickup to of the expense of into in the noted a a build

Andrew Liesch

the Understand. will I my Thanks, questions, -- step back. That covers guys.

Greg Steffens

Andrew. Thanks

Matt Funke

Thank you Andrew.

Operator

[Operator Instructions].

Our next Kelly come Please question will from KBW. ahead. go Motta with

Kelly Motta

Hi, you good the I about been to you're revenues? mortgage Thank question. Matt, volumes seeing wanted times noted quarters comments in was in afternoon. I if that you another were for three mortgage ask what believe had -- wondering your couple revenues your I year-over-year, you markets just of what banking expect they outsized of

Matt Funke

just those where of increase a before. I point away. And means refi have now the we're is maintaining we Kelly the calendar where that of start opportunities, we're end like is it wind-down pipeline But But the one Greg some same the will will loans a really opportunities go the amount At for mentioned balances, -- anticipate think production what share now just after really level We quarter. running under market same those yes. we similar present we're the little the would of taking wind-down he in pipeline some but to with right servicing. originations of last year mortgage pretty that our bit. was refi were some saying for right as would balances to

Kelly Motta

you the this much for how was -- Do color. refi Thanks have Understood. quarter?

Matt Funke

Remember… I -- about refi. probably that have two-thirds it's is think don't I

Greg Steffens

XX% XX% about and refi purchase. We've got

Kelly Motta

should to if any it. kind conditions stimulus about, maybe built adoption. Got of any include was line needed loss potential deterioration? stay reserve And I further if the is lot we [indiscernible] wondering a your turn of then your credit, assumptions you I without further loan CECL if down thinking just with build and here obviously could how be if kind

Greg Steffens

CECL -- FOMC So at that -- Presuming within GDP a most But I and of would and look the hopes forward. sort are think in GDP you going model, is some their outside to those the from expectations know to for don't looking are we're fade, couple they're that might there presuming of how what working expectations between some quantify in economists for those the expectations. of parties really we're there that see in stimulus add and as downgrade would that. I primarily

Kelly Motta

Thank Understood. Thanks so you. much that.

Greg Steffens

You're welcome.

Matt Funke

Kelly. Thanks

Kelly Motta

Thanks guys.

Operator

This over closing Please for answer back I like session. to ahead, concludes Funke remarks. our would sir. to go turn question and Matt the conference any

Matt Funke

you, And everyone participating. thanks, Chug. interest Okay, in talk We appreciate again three months. we'll your and for thank

Greg Steffens

Thank you all.

Operator

conference has attending presentation. you for The now concluded. Thank today's

You may disconnect. now