Southern Missouri Bancorp (SMBC)

Matt Funke Chief Financial Officer
Greg Steffens President and CEO
Andrew Liesch Piper Sandler
Kelly Motta KBW
Call transcript
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Hello and welcome to Southern Missouri Bancorp 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. I would now like to turn the conference over to Matt Funke. Mr. ahead. go please Funke,

Matt Funke

in and questions. Southern everyone. of Missouri review and data is release. Keith, Monday, statement release Funke, XX, today’s we July refer press this you is CFO to XXXX We presented and information may of Bancorp. may take the joined quarterly we good in and -- you, I’m forward-looking earnings This dated make your afternoon, certain to Matt call contained our Thank our The call call Greg cautionary regarding the make any forward-looking such statements statements and today during our Steffens, on to CEO. the by purpose President

to to for update of you quick you in and on joining the thank Bank’s to COVID-XX all provide we just environment. operations a today So want the us start out,

has While loosened COVID and the positivity significantly rate. seen restrictions since primarily where increased we we have cases states operate April,

restrictions. are fully And did open. communities remain some in of to reopen our up ratcheting The and continue lobbies Bank May we some back

we online to machines utilize our and and when possible interactive continued continue also of and encourage customers seeing Although, drive-throughs we’re teller higher mobile to usage our channels. do our

our administrative least continuing to encourage we’re of travel. Greg? to good necessity business a number of judgment work remotely use We’re at the to team of some trying and time about the

Greg Steffens

June have I of late the additional loans everyone. million to a on a we April, provide afternoon, an are Good want program. last at Bank $XXX withstanding in PPP $XX SBA under Matt. Since total PPP outstanding call lending the Thanks, activities and XXth. brief update million our our in

we around relatively to originate small program under of forgiveness mid-August. process are the the beginning amount We continuing anticipate loans a also and

and XXth or modifications by these to deferrals by to million June were the pandemic. current the We’re assist with Through continuing modifications modifications for million borrowers are administrative are loans of XX% the XX% Also X% XX% modifications of deferrals by and volume non-owner-occupied the in or and are are services to accommodation quality. and All and bars or all to deferrals our that deferrals follow modifications are touch retail. customers. working providing and manufacturing, multifamily, otherwise trade, C&I CRE saying, we’ve that pandemic worth CRE, service, X% $XX loans support and XX% of are anticipate retail, $XXX loans. performance, interest-only X% Within million in and the our $XX retail restaurants, XX% regulatory Almost affected deferrals totaling in while convenience our approved million are multi-tenant I $XXX is XX% was period, deferrals X% hotels, are our owner-occupied I guidelines transportation or management have want and to the warehousing, time three-month million waste million periods. are dollar care XX% Within credit Approximately the non-owner-occupied $XX in $XX CRE, were single-family on the stores, CRE, and six-month a were been deferrals owner-occupied manufacturers in XX% firms. portfolio, XX% healthcare modifications facilities. of systems modifications in XX% our are restaurants, at this to commercial for food of socialist difficulties to

are on compared XX points XX and $XX.X ago. year basis basis past points and loans to due than to down or loans XX gross loans we million on million $X.X million. down March million, $X.X down days non-performing in past and million since which which are greater a basis $X.X loans Our loans, down days points Loans all improvement were approximately XX past due days XX were at $XX.X million one as XXst $X.X classified about XX good or approximately due, saw XXst $X.X March million were

We with of pleased of XX are underlying earnings have detailed Overall, our quite performance release. also our a we page of the on breakdown portfolios loans. loan provided

our For downgraded this occupancy loans due loans for that to at we the which portfolio granted during deferrals or quarter hotel several modifications of during area the are we to relates time primary for pandemic. concern

Our and portfolios this than been these have performing months three restaurant better retail ago within portfolios anticipating limited at we and we’re multi-tenant time. anticipated problems

with portfolio to the are monitor they continue that impacts to generally endure determine of continue we remain We loan these downturn the on to weather the we We believe these underwriting will have as well. ratios reasonably loans in portfolios comfortable we this how our performing initial pandemic. and closely loan-to-value

But update, the crop down over quarter, million year, round agricultural our real about fiscal agricultural quarter for the our during of $X.X million estate and for first increased for the agricultural million $X.X production $X.X for $XX balances million underway. Now the were inspections year. the loan is while quarter balances fiscal

double crop soybeans Our of growing all and with agricultural in production customers are planted including their mid-stages crops well. crop

of XX% XX% XX% XX% including rice specialty X% mix peanuts. consists crop soybeans, overall Our corn, and and crops, in cotton, popcorn

to a crops spring start Some late had rains. due

our of historical topsoil XX% well growing and that are their corn and plant looks to the average conditions and averages. that yields of expected to to acreage farmers than in is estimate we However, better be corn planted exceed the favorable majority

or attractive be well corn farmers for popcorn this well as went acreage crop XXXX price. planned our The were yields year, planting growing is our the the to most if historical was when conditions, weather planning has diverted able their farmers popcorn, of acreage. majority of to Rice expected and pollination crop above contract average. some of at Some to with are

growing their average. are cotton above time. crop at yields XX% The and Cotton for XXXX. acreage well expected looks this good of planted is at be time approximately this or at planned Our to farmers historical

prices are ahead average prices. would crop this assistance for that acreage Program lower, comparison and hold cotton as Matt prices they’re with received go trending XXX% running trending from are government Food Livestock additional what offset an the brings lower to to lower livestock our from soybeans trending being of that trending are USDA our the to the pandemic. prices the part in from expecting There’s with for the was hold will conditions helped approximately payments still below putting plus in farmers Our majority soybeans increase our of approximately breakeven our farmers to underwriting lower Assistance Program for weather than higher, and pandemic, came farmers financial still results. that in XXXX their usual cattle the livestock In government on prices average cattle our market. approximately XX% Facilities to spring. them is XXXX also them planted had farmers sending rice cattle hoping similar agricultural a longer farmers would the have cattle corn aid for to come, due above are most the Coronavirus diverted at extra commodity projected. additional X% year, related corn in payments the under least in help auctions farmers Farmers economy markets before you can’t our are uncertainties prices. to and some The of for some is slightly to foresee. before lower due continuing to greatly the cotton spring it plant of to think that we our closed due weight as additional Market XX% livestock and of form also to With to however, instability totally Overall, that pandemic year. due of this than XXXX the they we our underwriting,

Matt Funke

was quarter. and We levels, and income. Greg. earn up Provision non-interest to it’s March earned the June to remained we that’s down margin the $X.XX Central fourth which our quarter is -- $X.XX on had from from up good linked good XXXX quarter year Federal losses of normal acquisition $X.XX We related from that’s quarter in loan results June quarter. Thanks, it significant diluted Sure. compared high Bancshares, charges the in $X.XX linked down the our on fiscal the from the results of relatively for but

more half problem resolve Program Central since to at level Protection the by the million We as from to points NPAs of were at provision total X shrank non-performing the acquisition XX-month Gideon worked year the end loans the $X.X Net good and the basis million in is a year gross but excluding a Paycheck XXX% just ago, on the have non-performing basis COVID-XX loans trailing the we uncertainty economic down due to this because annualized, the points loans, X trailing prior allowance on our that results are Both increased bit surrounding than were that’s took were fiscal year. same continued asset prior which points NPLs was loans, June loan million our also figure Outside XX-month acquisition we end slightly charge-offs guaranteed figure. basis end basis the down by up points. of the provisioned A quarter still assets. middle balances $X.X pandemic higher down our and and portfolio they we to saw Federal on XX million. $X.X $X.X our which normal SBA than quarter, were fiscal XX in place that

CECL, towards expected for June points gross to an have effective while XXst, us XXth, down of X but under not decreased Xst. calendar end would allowance March at to CARES X, percent our to adopt points Act for on been beyond the loss an loans, a option, June as The evaluating adopt ago. on which credit to the or towards continue the of FASB from As July is up a do the work of for a July X.XX% year and current time extension though loans. XXth standard We XXXX. Outside PPP continue year we’re allowance we work percent company basis gross X.XX% accounting of -- provides basis to X from loans us that implementation adoption pronouncements of for

in loan fair benefit value X.XX%, or $XXX,XXX portfolios included quarter dollar net our points Our the discounted margin basis was fourth X in which about terms. acquired interest on of creation about from

year our which about We number benefited benefits of discount the also by quarter, $XXX,XXX X resulted A margin accretion. from in as non-accrual, been points. points basis the realized X.XX%, classified that June so had XX previously value a limited loans fair of of was basis on another ago margin that

discount cost we also our when X quarter XX. core yield June about had from basis basis compared recognition or this our XX reported June core down point the XX under $XXX,XXX near-term, our margin which respectively, included about of points about June re-pricing sequentially. expect of income as our loans optimistic to XX% basis the $XX cautiously gains better core So better basis were asset margin rights. was the that see period period in points to by linked expected margin basis, points, we by compression Last cost charges we see the X XX% reductions we able dropping June increase and had on be year quarter, increased would saw core and of offset From volume year on was margin the reductions points of any on on ago linked funds Compared margin value of ago servicing income were XX benefit our servicing up secondary made our we and to impairment March as than each early report more were accretion, the the as the residential basis funds of compared outpace originated pleased further deposits million. total funds the a we In Bank to X.XX% contract. quarter. core servicing the in we in new market with by could about if limited we the quarter we see to activity deposit quarter, dropping a processing to of significantly a periods, lower up of XXX,XXX, dollar here, mortgage was we comparing of compared card We and non-maturity increase year cost ‘XX may interchange quarter on cost rate our I benefits would and in ago up declines under loans a and were what loan incentive charges we’d think, sell, as significantly. Non-interest realize. in loans income ‘XX as accounts service

service NSF income. We’re charges charges unusual least pattern. declined gain CARES be the unemployment on expectations benefited deposit in resulted $XXX,XXX our is normal annum remaining at our income sequentially, to acquisition spending charge Central could have for Federal to non-interest looked goodwill to interchange no year-over-year, which our cautious and declined and Relatedly, despite for reduced. as a Act from benefits, about which increase in that year seasonal coming the depositors payments XX% purchase include which the per contributing bargain and they

and expense, linked $X.X quarter just in quarter. compared XX higher current As contributed we quarter the a quarter this XX XX%, higher linked increase that bargain same quarter, points as in same income compared annualized a percent a the expense year basis significant acquisition up $XX,XXX almost improvement. Non-interest XX and to ago this respectively. non-interest of none ago points, quarter XX% purchase and basis which ago a linked the was basis of points average period the assets, and a In had and same quarter gain year in or than is the merger to X year -- showed million the points the

linked the the charge We disposition that the acquired Bank $XXX,XXX $XX,XXX provision down non-recurring property also from Capaha for to off also $XXX,XXX, had the a same the recovery in in we of we’d in quarter charge from of current losses year credit but as recorded acquisition. a balance for vacant And quarter in a of exposure a $XXX,XXX sheet ago, the at compared in quarter.

items our ongoing in non-interest properties. Looking we and at foreclosed losses saw on expenses expense, increases and

as Our utilized credits prior FDIC mostly quarter. in were deposit the insurance assessments, assessment the

data and to network quarter-over-quarter same personnel processing. increases the and occupancy compensation to ago, we modest card a volume quarter compensation, higher Some year Compared year-over-year. as due on and increases saw larger higher compensation in we’ve increases Bank added expenses adjusted

Deposits up both from last almost took been under modest higher or -- off deposits balance and about Central foreclosed in fiscal growth $XXX balances million. Over -- outside non-interest been XXXX. last a exclusive June We XX% businesses all after here. allowed fixed to XX% the basis Non-maturity early CARES charges recoveries up On we’re the saw quarter, We’re offset been year-over-year year, more expenses funding flat compared deposits. modestly acquisition, million that on brokered year is quarter. noted to or to Compared seeing earnings as very non-maturity a Brokered or on expense over were effect credit Federal brokered this higher under what or PPP of and that hand that we data core back are almost seeing attributable and expenses data the this expenses contract processing the We by at likely in from a acquisitions. release higher Act. loan M&A, X% deposits PPP of holding in would some Outside sheet, Bank than consistent we’re Outside losses for up as new otherwise look loans the the sheet up as June again funds loans a Greg, and the of almost about up tax the acquisition. growing time processing would their properties. coming exposure. would of asset public to X.X%, pretty you $XXX outside balance was ago, the $XXX year decline what X.X% let down of million the have we’re to what million, about last of growth this outside up we it payments The much in a saw me portfolio PPP have year. year, M&A. meanwhile stronger out million you activity if outside million were up in back $XXX we of about this in of quarter. unit loans, roughly $XX we have card the current quarter of funding up $X after deferring

Greg Steffens

we PPP Okay. growth remain loan loans, portfolio Thanks, year. the have our Matt. In the but acquisition with of rate loan to outside growth, for and our our the pleased of fiscal regards reasonably slightly would grown

outside loan we expect PPP growth forgiveness. would be forward, Looking of the to limited impact

led for loans the loans quarters. single-family, grown residential, and by Our the recent construction Residential multi-family CRE increases non-owner-occupied loans have in single-family multi-family, over and property organic including was loans. year growth faster

periods, relatively has March June XX, capital ‘XX at recent been at and CRE June and at stable from our XX, at During regulatory moved XXX% XX, of has XXX% concentration ‘XX, $XXX XXXX.

the Our in compared year. million volume the includes the $XXX strong which of up is same PPP was of June period totaling loans, $XXX originations quarter, million, which prior to

For the originations the $XXX fiscal loan year year. fiscal million, up prior from million totaled $XXX

compared June million portfolio nature funds in $XX June our be loans loan diverse in as at pipeline to days The similar $XX.X fairly XX mix. at was XXXX million at to $XX for to existing Our continues XXth, XXst. and pipeline March million XX, to and at

have the at next growth we what M&A really deposit We and the to we the or XXX,XXX for over XXXX. Xth. its like may will pipeline Federal plan slower expect completed growth were in we’re will expect way wondering in what did potential Again, progressed. stock for repurchase for at partners much this with any announce systems out hold We look continue hear the of for Xth would to conversion XXnd, close of of being. pleased acquisition When pandemic. year quarters. economic data expect We to as of be a the the weekend again, of plans company pursuing the don’t in But to complete The balances as and on time time the November looked anyone to those with on good we as what several putting opportunities conditions. as rate the talking last we ultimately loan over of June time not happen should at changes Central since knowing with a activity, shares our partnership the did and quarter fall any growth but that what just with the May we M&A within we’re outbreak some in

is XXX,XXX no quarter, continue year purchases were an impact XXth. suspended there stock resumes the the close $XX.XX. more the under under During as business company company’s evaluate Repurchases this fully June to at March of as of plan understood. this totaled the the it activity price during the fiscal plan, repurchase will whether on pandemic The average to of we at activity shares

at dividend per would be sound dividend of previous quarterly long dividends our continue the safe continued is $X.XX We pay concludes for and my remarks. level That do to as intention regular share to August as to so. it and

Matt Funke

All may questions this can if have, Thank participants any you At Greg. answer Keith, you, questions we’ll like how remind would, right. we what our we’d time, folks they and can. please take for queue to so


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

Andrew Liesch

Good afternoon, guys.

Greg Steffens

Good afternoon, Liesch.

Andrew Liesch


a here. questions So couple

of the you declining and have were in those figures Just what cost on, for quarter? mentioned, cost the the the deposits you quarter. fund fourth Do of

Matt Funke

second, in X Fourth below both case. slightly quarter, thinking one just were they

Andrew Liesch


prevent are on remain go higher like, further costs balance case with deposit priced like that’s given -- margin what’s re-pricing reductions than the some it re-price like in rate but So funding still that but faster that there there’s are -- the the sounds to some it for there X, cost some going environment. earning than below of seems quarter? or if some in you’d then like the room just to CDs funding, to assets there to expect just this funding with Is any sheet, the now costs,

Matt Funke

continued deposits. won’t to prevent is with recent that some regional prevented you’ve reductions expect in anything locally terms or seen I say we’ve low has continue don’t this portfolio certainly in generally overall work any further. not banks larger as from want maybe CD that that it’s competition that declines of lower quarter. way. the -- we to some cost long just had the of I not of there’s I It’s like their concentrated going -- I to had us in don’t further think would as But wouldn’t particularly we and And what most

Andrew Liesch

Got it.

of month. think what’s think left, in and of said, process we Okay. do sounds its through $XXX million you do That’s how your get then the of still you year? year start that you PPP much going PPP, And XX% helpful. working the next million much how you Just your When is this $XXX conversations the Do calendar forgiveness spillover end the of of next to around? to the with remains outlook, given customers? think like

Greg Steffens

balances the somewhere would end that of -- anticipate be repaid the of calendar. between and would of the XX% XX% or extended by forgive PPP the We end year

Andrew Liesch

banking on helpful. Okay. And total the what million just gain for then $X.X million? piece of in Got of the $X.X the income That’s that you. sale quarter, non-interest was mortgage

Matt Funke

Cost been, basis Andrew, your XX was was cost It for would other question, deposits funds points of have XX of quarter. on the points. basis

Andrew Liesch


Matt Funke

And loan million. on than little $X sales the been gains a have less

Andrew Liesch

question. covers Okay. I’ll Great. step Thanks. That my back.


Thank you. KBW. Motta next from with question And comes Kelly the

Kelly Motta

And everyone. about how was recognition, Good that’s I this fee NII? afternoon, you the wanted the that PPP recognition, to to contribution quarter Hi. about ask much Hi.

Matt Funke

yield in with It’s of those In dollar effective month, it’s coupon. it’s $XXX,XXX of about think, on an about loans. running, and Kelly, the on those X% loans, terms I X% yield along the terms, a

Kelly Motta

Okay. got And -- it.

bill Let’s -- would estimate initially point adopt you you planned come on at standard? preparing that to see like where July as your you that seems under a mentioned on CECL, and then, the Are to you’re that a reserve with CECL, as Xst. preliminary you moved have

Matt Funke

No. Unfortunately, we’re not.

Kelly Motta

Thank Got you. right. it. All

Matt Funke

Kelly. Thanks,


Thank you. right. All Instructions] [Operator

the would are at turn present time, floor to like closing there comments. I no for to management As questions more any the

Matt Funke

and we’ll interest three again to All Appreciate joining right. speak Thank you months. for us. again everyone in your


so today’s for attending you much. presentation. thank you And Thank

You lines. your may disconnect