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Southern Missouri Bancorp (SMBC)

Participants
Matthew Funke EVP & CFO
Greg Steffens President, CEO & Director
Andrew Liesch Piper Sandler & Co.
Call transcript
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Operator

Good day, and welcome to the Southern Missouri Bancorp Quarterly Earnings Conference Call. [Operator Instructions]. Please note, today's event is being recorded. I'd now like to turn the conference over to Matt Funke, Chief Financial Officer. Please go ahead, sir.

Matthew Funke

Rocco. you, Thank everyone. Good afternoon, Matt Funke, Missouri is with CFO Bancorp. This Southern July this The quarterly review Monday, to call the of your earnings XXXX questions. take information dated our to in is purpose 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. on Steffens, our CEO. Greg call President by today the I'm joined and

today to all and lead for joining some is current Greg our to conversation Greg? credit activity you us. off going operations, our thank with measures. lending on commentary So our quality

Greg Steffens

you, last Thank joining transmissions, authorities Steffens, us. this afternoon, our we've our of call, COVID with reporting Again, for and to from public going health I'm brief start off seen fairly COVID most Matt, Greg in good areas significant and increase I'm just largely and market you our I a that understand Since thank we a everyone. update. is to Delta locations seen and an drive-through-only restrictions general cases referring markets. we service our we've in time. unfortunately, they're activity to And what our periods some had team But move within as short have our business communities. date, to variant. we uptick our not renewed of the just attributed primary seeing are of members To for in to

reduction portfolio credit. Moving further positive balance performance. the borrower and credit June modifications remain At Act. on we under our We a in to about the of XX, saw quite CARES

loans are the nearly requiring least loans All interest-only have now borrowers payments, that and in on of dollars of all at industry. been are modified hotel the those to

through steady monitoring. We're for by risk the analyze our that are and our most improvement to have cases we properties. current it won't this continued in we remain area, to significantly June, continue underlying COVID does impacted in increase portfolio but a they of borrowers closely, that be hopeful and We see

Moving PPP. to

those of of to a at the due have our nonperforming And those $X.X quarter. we're We in noted at XX the basis very again Adversely in is points totaling loans for loans during first most that the which million. PPP the the level only lower were a a being by the our higher the proud release moved We latter quarter, end of on the well, June bit our total $XX.X lower the $XX had release received $XX a we remaining quarter. $XX in were loans picked were parts at million the from and hold during The which from second of we excuse million the up loans. At forgiveness million a expecting round me, of notes of million during first March Our probably June million in of PPP the which little that similar down currently outstanding, PPP quarter. XX, from quarter, million to We're forgiveness forgiveness has as classified based and loans hope the $XX.X PPP little the fee larger percentage June June in million from of $XX September in origination the round of the $XX forgiveness additional second fees would round round. appreciation round accelerated completed to than accretion -- $XX average in first quarter, dropping loans to past loans level outstanding. moved of million, June August.

what are probably the made normal to COVID of reducing in borrowers for Act the able and the level loans originally not scheduled true CARES payments for of past modifications a be been and yet we've our due to Some return have environment. would

the down end or on at special categories watch And $XX at is XX, loans list March ago. subject those relief $XX.X $XX.X our including been June are of million million those and which generally have we million credits. a so at year mention And to combined from

and nearly fiscal for in for Now to were for ag down update. production and the fiscal $X.X moving ag real up other quarter were farmers million $X.X $X.X year, Agricultural million while balances loans million portfolio the million $XX the our year. quarter estate to on up our and are and the

recent Our of which lenders delayed row But our was that's for of crop soybeans. planting The into of diverted price have acres wet some some that worked anticipated pretty borrowers soybeans. with reported out planted. of intended well crops XX% have their spring the increases corn,

and positioned or their after acreage. as our planted look to near ground farmers our better plant well Mississippi well of Otherwise, the in crops be to XXXX. further part on than of compared markets to their not rainfall replant most our or did eastern of Some experienced heavy had were the of River some farmers

has impact impacts irrigation the weather higher recently, we'll dried additional and see and the of our on As costs. maintenance for out some cost farmers fuel

loan have to will be prices prices be rice is higher, at XX% will to a allotments from our Our utilize making XX%, and XX% we've rice acres remainder. are X% about team ranged corn the estimates other higher. at that XX% underwriting, XX% comparison and XX%, soybeans XX% higher In XX% will XX% with XXXX the mixture financed, of corn crops of roughly for to to higher, the used corn cotton now, soybeans

of lock the Matt, last bit our have strong our on this the to is And little able that a favorable. to risk you in remains overall substantial would financial update downside a the outlook contracted -- ag prices. 'XX at this where cost. have borrowers crop, been of at sale they overall provide year year as portion most our ahead is 'XX time significant running results? they borrowers an report quite pricing their lenders for for Our were production Currently, their for

Matthew Funke

quarter, period. to a figure relatively June diluted from from March The Thanks, that the fiscal our the in large ago primarily that improvement from up up $X.XX attributable that's loan Greg. and for also in $X.XX swing ago period from provision year $X.XX negative the June provision the quarter. $X.XX is quarter in We the the we current fourth XXXX earned quarter. the earned losses year, diluted the is a in of linked year to a It's

Additionally, interest a And quarter, origination loans M&A provision. had year increased, a of March acquired while we deferred combined was income discount net charges. From larger limited the PPP to negative biggest the significant effect fees. accretion we ago, on the change and our saw change

basis June, X.XX%, points was see our basis was margin in as $XXX,XXX that a origination basis fair $X.X million of XX we and was was X.XX%, core fair which the June the down our -- loan core net from value continued was June another basis included to points core basis value accretion on June loans. our Our discount basis margin down terms. interest resulted of what dollar cost which contribution yield And quarter A accretion Also, margin income, see XX points to of which On fee comparing 'XX the interest accretion, points was X forgiveness in then, deposits in $XXX,XXX. X accelerated about We about loans our on acquired points quarter ago June down 'XX quarter. in XX margin. PPP of our as XX. added from year or

asset from in outside March of basis basis by a of quarter, reduced In discount forgiveness, accretion the discount contributed cash points cost the recognition origination accelerated we PPP our down points current had adding as a quarter, interest-earning X.XX%. which contribution accelerated than which on reported average benefit a accretion points. That XX funds margin margin XX same. also yield, the included they XX the of the core the is margin a basis balances but PPP bit basis fees less or origination Higher of more on little linked dropped to overall decline fees. of Our drove

rights linked service March loan offsetting for And year-end of were end pickup basis year down secondary decline upward servicing in compared X So and X quarter and year sequential loan on ago compared XX-day compensation, basis as of consider linked we've compared Compensation included the Bank quarter compared period to foreclosed basis And June, XX-day the the a credit Noninterest due what The quarter, have period exposure, to that to $XXX,XXX changed card included consulting less also, the almost loans. ago, when strong, March. point mortgage was on as ago $X.X the provision is March expenses to were see servicing the current charges run X provision is from and for million higher current average returning Deposit were is year increase accounting losses. occupancy expense charge June up ago ago income year-over-year. sheet little quarter. intangible we improvement market Noninterest in a in Net charge-offs which an June for gains an would amortization. year income a up to included in up which improved to that the interchange the a in advertising, the accruals, which in half million a we on to quarter properties current compared and the to the were adjustments. to we on and $XXX,XXX of income to contained Compared $X.X charges. sales. million charges we credit increased and quarter, ago legal bonus trend, M&A continued and meaning than including the noninterest component had seen our almost period, X basis, almost combined quarter valuation expenses. year $X.X is points. in year quarter core points down a for levels also and a off-balance

dollar balances allowance $X indicated positive in is XX-month the Our economic appropriate for related the provision with expectations was our outstanding losses our metrics including off-balance current negative points, estimate credit basis lower for ticked credit to million growth for credit loan quarter, $XXX,XXX terms. to $XXX,XXX quarter, an recovery, trailing Loan but provision sheet to negative our related about X in in a exposures. and was and stronger which building figure

were loan accounting the of loans $XX balances million more $XX most June for PPP June XXXX, to came $XX our down of growth. million. million that than up On that gross PPP balance dropped by X.X%. balances quarter, were And over or time same up $XX balances are million the even the in Compared year's period. gross fiscal sheet, as

for our have of year PPP. outside you above growth for So little been X% if a annual rate the would adjusted that,

more investment percentage we'd some by basis a balances, and most we're as our to dollars put public grow and of cash outside Outside excluding quarter trying than We yields XX the at funding, points work, portfolio as to gross X.XX% improved fiscal year, much remain funding and this Nonmaturity loans they're fiscal more the to year-ago down our from bit strong broker, unit negative activity as Brokered to were by this in we unit by of strong nonmaturity borrowings our of was were a continue a a excess grew asset levels, million is $XX $XX XX%. growth quarter of up they're assets the down than they're fiscal and growth $XX quarter, $XX.X pretty and basis X growth during well what balances. recent our Deposits investment the by just bit, June which of and the little from $XXX PPP That June repurchase when similar FHLB growth with of the disappointing. quarter, our $XX a or the a over gross brokered to $X in by little were deposits in prior XX from the year. opportunistic million every a quarter, lower about X.XX% our down in was was earlier. is the the $X as about of Public XX income to slowed almost almost but the about than million quarters. declined and down year percentage limited. is total million points by allowance million. in for by provision. last to faster PPP reflected million time quarter off year prefer, the utilizing time March as equity move after loans, down quarter million runoff that $X declined down The balances December basis deposits. XX% for Tangible Outside activity deposits of points decline. in down million were during growth million

less ratios comments? risk-based Greg, Our be would impacted. final

Greg Steffens

the the million bit Matt. had to Thanks, retention note were normally growth that this secondary of residential talking I June mortgages that a market. growth. of we discussed finished quarter in sold as was Loan strong up helpful, about in have a $XX quarter. we earlier Seasonal want year the draws wrap little would on about lag

of multifamily, saw we construction in largest $XX And draws Our to multifamily. also which growth related category were the that was grew quarter million.

Our growth, contributor leader fiscal a quarterly to while the region West largest year. was our region was the for South the

expect Our outlook days $XXX X% loans the for June to the seasonal, than to year the fiscal outside growth and fund September to this for look time as XX XX We're same the March somewhat at about do was quarter to strong, were we at PPP of to be year. continue last We budgeting forgiveness. similar about for our 'XX. pace remained wouldn't next we million where the for XX% pipeline XX, also within at higher and

the are seen we've contribute drops, we recently other in from or that we growth year. to will last will the And parts drop One those here, growth did latter in quarter. seen So if know is that prepayment those continue the go prepayment rates over of we decline have don't to stabilize but where factor to rates. a expecting

March loan of nonowner X quarter, capital to growth XXX% consolidated ago. categories, compared Our our June current relevant at at as the capital our from In in XX regulatory approximately was and concentrations especially XXX% year outpaced down growth. multifamily, XXX% CRE XX

from March PPP million Our in is as funded. year when volume loan but $XXX down June which was originations which the remained in quarter, to the in our $XXX were quarter the a $XXX quarter, million of the elevated million of of bulk ago, compared June loans

from million million, year. Outside million PPP, For originated up the million $XXX $XXX fiscal $XXX $XXX year, versus loans, been is we of last originations would in those which respectively. have

seeing discussions in our of outstanding. are XXXX late late M&A opportunities in-depth June in relatively shares. spoke have XXX,XXX plan we together quarter something had about announced for more shares putting and front, In and XXX,XXX a the we several last repurchase for future. have completed repurchase we the near the announced new more optimistic when On the of quarter, more bids We're considerably than and plan originally chances

plan. repurchased about only price which For newly at shares $XX.XX, the an we quarter, XX,XXX were of minimal a average number of under the announced

a we plan repurchase a more utilization about Matt? optimistic the possible our little current would of during less little currently, quarter. we're anticipate As current M&A to be

Matthew Funke

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

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

Operator

comes Sandler. from [Operator question Today's Piper Instructions]. Andrew Liesch first with

Andrew Liesch

much to I level quarter. What's mix multifamily? last much different pipeline residential, a just wanted how ago? how I to much about it? that mean of the from the loan is quarter is Is talk here, comparable

Greg Steffens

off the it. anticipate secondary in where continues we lot quarter. It loans It's drop residential really have pretty to of a were originations. a similar as in multifamily to of in last have we some, seeing portfolio level The dropped pipeline market

it a this pipeline, pretty and have good have point. we happy to we're at pretty So

Andrew Liesch

And the With basis of the expansion, that had how be it. margin X points loan on we improved move guys asset growth Great. trending about as then the year. that I from into mean mix you looking quarter, next in roughly we the presumably, earning fiscal core an have should could here? you Got

margin you trend? how can that So do think

Matthew Funke

bit make a asset percentage to quarters, next to up down, the too. left continue the hopeful. the got ought Cash earning of of room assets of little we're see average for term. near the on come but in we'll of optimistic yields We're funds, Yes. a we've And cost lower couple

couple next optimistic reasonably we're of for So quarters. the

Operator

today comes from KBW. next Motta with Our Kelly question

Unidentified Analyst

for in is Matt Reich Motta. Kelly stepping This [ph]

question you grow provision one level? level. about just in and guys see a yourselves reserve where or more that the if And have it's reserve Do the to below reserve you Just do it target now, the into releasing trying future? is

Matthew Funke

continue Really, follow we're the now were where We there. got economic through no stabilization, as on we GAAP conservative June the that but lower, can to to one conditions software maybe is target see modeled is we at too. what If appropriate that mind XX. want that always to are hopeful economic we've releasing, we but trend based the level be in

Operator

Instructions]. [Operator

from Our a David comes Investor. Cohen next question Private [ph],

Unidentified Analyst

have quarter but I of to do couple I great just just on and you to another congratulate questions, want not but want year. team. a your entire -- another Congratulate I you great only to

favor preventative toward has against the you If Southern can or bank that Missouri could that? do against taken from a protect and and you about to talk me the maybe hacking, do of some Russia wherever, these what thieves to me here measures

Greg Steffens

parties third done have defenses place, trying we test on we we are have have continuing add to access and to to -- And updates. what system that basis. a quarterly provide We we're our continually in testing

that variety a security protocols training And regulatory well as secured of as are of they we members. we We come regular And provide look basis our a on and have in our at all as we we security testing well. every like and And can. well. team on as friends then security we quarter feel have

In of addition, we carry liability a lot cyber coverage.

Unidentified Analyst

Also, successful significantly? Have mobile banking an idea adopted can how give app is? about you that Good. customers me your

Greg Steffens

We more the continuing to all see are adoption time. and more

lot to increase it just and higher continue continue of mobile that numbers quarter deposits would quite quarterly mobile COVID we the grow. advent every to on time. And bit, to of continued utilization. a Our increased over activity trend The to a and anticipate

Operator

turn team to for session. remarks. our final management concludes gentlemen, over the and to any Ladies I'd like question-and-answer the this conference back

Matthew Funke

you again appreciate we'll Okay. Missouri Southern in thank today, interest you X and everyone. with again, your and your months. in Well, talk We time

Operator

presentation. all concludes Thank We call. today's thank you, for This today's you conference attending sir.

lines, now a You wonderful day. your have disconnect and may

Greg Steffens

Thank you.