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Southern Missouri Bancorp (SMBC)

Participants
Matthew Funke EVP & CFO
Greg Steffens President & CEO
Andrew Liesch Piper Sandler
Kelly Motta KBW
Call transcript
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Operator

00:08 Hello and welcome to the Southern Missouri Bancorp Quarterly Earnings Conference Call. My name is Lauren, and I will be coordinating your call today. [Operator Instructions] 0:26 I will now hand you over to host, Matt Funke to begin. Matt, please go ahead.

Matthew Funke

00:32 Thank you, Lauren. everyone. morning, Good Funke, Matt Southern Missouri. This CFO is with you joining for us. Thank dated morning of in review release questions. five, our take purpose and is twenty our October one twenty call earnings presented The your data this to to twenty and the quarterly Monday, information refer statements may We contained press we in forward-looking our cautionary today's call, statements the XX:XX to during statement certain and make you regarding forward-looking release. off and our today by with Greg our Greg on will current joined CEO, lead quality measures. our activity the call on I'm lending and conversation credit President commentary Steffens, our and operations, our

Greg Steffens

XX:XX in eight to everyone. now Again, thank our over a peak region you, call, cases morning. I'm want joining and declines the for last last I this did mid and us report and Thank August good COVID to late you Since been in Matt authorities Greg from substantial health morning, reporting weeks. our Steffens public

markets in see to prior few continue borrower primary positive since We impacted much call. We operations about business XX:XX our profile again restrictions activity have performance. credit and less remain been our and our on our

We continue under Act. terms operating of to number CARES the see relationships under modified limited

and loans twenty and We interest have hotel million are continuing to the only dollars. totaled four in modifications four borrowers under under industry just

recognition up quarter remain million larger percentage -- twenty some outstanding. release in months a September most loans The average to forgiveness during continue quarter. PPP and up customers. these of slightly those XX:XX loans seven Accelerated quarter, was by that as continued made analyze the million two down from PPP on fee the six forgiven. prior almost September improvement September higher thirty dollars second that We in this continued in see portfolio the of have closely we we the quarters to the PPP dollars forgiveness in loans picked round received and fee notes two

credits ago, mention were a point still nine thirty last up year. a same point loans For the of three one million portfolio, June eight eight five million to modestly, special September higher totaled two and four ag this were production period ago. in Act requiring year basis dollars represented from are adversely with about two farmers dollars. million percent and categories XX:XX hundred dollars five were basis loans at watch rounds in credits. points a which point due had other agricultural basis slightly dollars seventeen higher, quarter, loans only prior they in down CARES included were million which dollars million the down eighty loans our ago, at quarter, along forty loans million both nine and PPP six two from update, thirty up dollars, dollars, These almost totaled to compared quarter year one loans thirty, our point combined forgiven. one thousand, dollars fifty that September slightly nine as dollars points. relief dollars year points million seventeen seven of by up is and Any million this XX:XX quarter from was at the they thirty classified non-performing under were point four of As been were Our or so offsetting they twenty originated a to million and but twenty prior million Past point up lower but thirty three loan on one the XX:XX twenty

million the year. dollars of and the about three up million over quarter real five last September ag While were to estate compared balances dollars thirty

to progress fall an average dollars seventy node middle hundred is yielding borrowers the for Rice hundred eighty twenty complete an at acre about in five and bushel at ground. for Pricing to in hundred are XX:XX corn forty mostly Pricings ground as to five in one not six high an sixty soybean performance. irrigated for dollars issues non-irrigated five rail is XX:XX harvest dollars of by a six dollars in hybrid to or with into rice five being halfway and as our Our harvest and season a and rice lenders eighty agricultural running and six two an from bushels and acre higher farmers non-irrigated varieties. two the barge. for ground, they fifty bushel accepting bushels yielding and ship their Our mostly yields to is am ground. for Pricing to are complete or two twelve acre and until irrigated bushel. The a acre is out dollars conventional soybeans actually complete, the point from this bushel. varieties five range thirteen eighty time per corn one acre bushel some twenty harvest and and bushel has elevators yielding

but productive completed downside or performed can't eight have twelve pounds would seven you farmers the ground an a hundred have XX:XX acre soybeans our The corn, from more even cotton financial elevators. XX:XX our last well. corn point where to costs on crop directly cotton on to complete this productive from soybeans be zero reduced we they our the the on the is harvest production profitable deliver But line on at give may pounds in farmers from year, next twenty a we hundred and is significant to twenty and with the for twenty year. Matt, farm costs several we storage, to years with well production slower pricing one above cause dollars dollars beginning results harvest to others to their Some we're acre remained and two expect just issues Pricing may rice. modestly more specifically this two our eight And over pound. is farmers see an at risk zero time The that scheduled fourteen that they and underwriting ground. some alter the an less higher we twenty underwriting update to XX:XX payments chain borrowers and input twenty like all twenty where most above us results? government that supply expect point

Matthew Funke

one of fiscal but zero a is with interest negative point twenty twenty down September ago, in that although, provision provision Okay, We one net September linked June dollars four period, earned in losses charge a Our zero continued, in And dollars thirty to the three dollars which down of adding process zero of about current diluted XX:XX at our those the and we two resulted loans to discount was quarter, on three linked basis one quarter. a value and the percent our a six the or the has we nine another two the point forgiveness million four in in dollars six a was for that dollars hundred four forgiveness which interest year. the A quarter. from thousand terms. the seven one contributed of earned and dollar XX:XX loan up discount acquired first we XX:XX credit Great. to year the three three from three as contribution dollars point from and loans the income our basis yet June quarter larger zero points which September four fair provision loans margins. quarter. fee quarter had from point the origination accelerated September the for time. value PPP hundred to Also year margin compared thirty it's basis points In modest point three recovery PPP negative in is margin books as earnings which point from creation nine weren't resulted accretion period, accretion in seventy points about, point ago that percent included six fair on thousand

basis cost margin a as our to we basis comparing yield our We to core what accretion twenty recognition on adding of down points, contribution points than of that interest it almost from seventy yield, one forty quarter, which had funds seven but twenty. this origination a see discount contributed core see PPP fees and dropped our outside PPP also basis, points, seven margin, declining current of a quarter. the basis while basis our twenty points reducing loan core four points September cash September was drove XX:XX fees. margin June three thirty quarter, eight nine by linked recognition accelerated balances a forty down twenty basis included bit down discount core So, that total of accretion margin deposits of basis accelerated the quarter earning the average as similar and asset total less our higher the we reported In points of seven in was eight than more or but decline in cost saw of we

processing charges the to value was compensation deposit for A one and and of thirty the the off would lower the residential income their up of quarter, So charge to servicing XX:XX professional charges servicing on increases million improvement to on interchange period. decline. that that day the the low thousand rights. net purpose was assets one increase in compensation, what quarter legal dollars even year current changed to ago hundred Increases the advertising the hundred was net in quarter. to properties quarter, basis third advertising. in and is lower a income positive XX:XX We in Non-interest charge fixed by basis, while ninety sale net see We compared seven income the expense on thousand bank we a the the about of deposit quarter in and figure saw related was adjustment and and was from we lower, dollars our declines linked sequential inclusion income that mortgage and sale were one fair was compared down interchange were charges gain quarter mostly service and occupancy compared reported day very quarter, attributable would ago of expenses. course card note of offset servicing compared to and continuing linked offs on income. interest Compared service dollars in non-interest six ninety points down to on of bank consider higher income June’s an year fourteen originated and of we gains data loans was that as some Non-interest offset to occupancy, results four June. about twenty September no little as recorded June two higher due a of

hundred of thirty losses was the was loan noted current terms quite credit nuts and recovery nine pace figure though month XX:XX lower a recovery were zero the dollar under fiscal although, along did twenty, seven six rebounded down Loan a thirty, at bit two gross loans the of of to our remain solid outside for from from PPP, while were would to five metrics loan close basis of it we portfolio linked rate XX:XX even the million this quarter twelve negative lower appropriate three realized at indicated as quarter, annualized growth our dollars positive it provision slowed outside of to point basis million four for year, for quarter continued second quarter. XX:XX point getting be quarter, to net twelve growth point our Investment a moved percent points gross allowances were for balances dollars of the four are growth seven ten six gross to points the but in percentage for four basis four dollars. decline. of even hundred September offs the PPP positive. gross percentage just down loans quarter, in in two dollars over nine one was sheet, balance one trailing so million quarter September with months, a six credit charge annualized Compared growth loan growth ninety percent over adjusted one five year. was with a is September percent. economic Our thirty loan you million a as dollars June provision point the forty and growth quarter, to The or almost million thousand the that, four moved remained new quarter three bit along balances for XX:XX over dollars in if negative Deposits with down the million good or start last point PPP year up grows the in projection dollars million the for the September same On that PPP. forty linked slower stabilized at of which of points, up consecutive and annual but one balances percent, June balances rate we reversing quarters in the down in dropped off

this last repurchased from million still while in limited. total than the recent funding outside more brokered, XX:XX moved a public and broker, almost there were dollars June periods. nine nine down eight the they're asset and than eleven strong March about in as nine by seven dollars twenty borrowings quarter quarters. equity earlier. unit declined is the in from December Our the which points decline. XX:XX rate twelve in on ninety remains were down growth. over million a which million million that twelve after quarter were of down Non-maturity income dollars. strong two forty activity of was tangible percent of seven decline unchanged and Our twelve down brokerage notably million million a over dollar during the dollars twenty growth up lower million almost Outside percent is FHLB dollars prior basis following the deposits at deposits twelve increased slower ratio last months, seventy Time months, limited, And dollars was pace growth the modest quarter, thirty but balances was remained are months quarter, a

one Our cash we XX:XX weight zero comments. percent stable as relatively into hundred weighted loans. risk and based risk risk ratios Greg, are generally redeployed guaranteed final assets, SBA loans

Greg Steffens

the million residential residential multi-family that dollars this feel last and a Thanks, on that secondary the million our we to pleased good and in about quarter fiscal very normally draws we're combined payments and about were and loan also off we market. for lag XX:XX you've balances for saw year. Commercial we loans totals loan six the Matt. we Overall, again new Seasonal growth mentioned, with we're construction retained growth. the dropped like start Single PPP of have forgiveness would lines one also XX:XX forty dollars sold helpful payoff.

growth one twenty and remains September Our June where our strongly fund and contributed fifty some saw factor outside at largest loans quite strong this outlook for eighty payments believe that seasonal the hundred same figures. last the as there's our December in three two, at those good led over we of dollars payments coming, time the fiscal at twenty all in pipeline chance we between that exceed of see for budgeted by Our for percent quarters timeframe. five XX:XX XX:XX We and several about we next million to Higher forgiveness offset quarter but a South than for year. and percent the percent in ag outside some ninety see With thirty. and PPP East of received will should PPP growth regions stood region we to four higher region. days was one paydowns thirty to to we'll PPP loan come continue currently

relevant growth. offset one in was in the construction our line quarter, June sixty to in CRE to multi-family growth of In Strong as total non-owner two seven at growth was percent hundred year in thirty, two by and capital two September concentration thirty with capital compared XX:XX relatively unchanged hundred compared our Our payoffs. ago. consolidated as regulatory loan was current approximately the categories seventy and and percent

nineteen June March two the utilize term stronger. higher hundred weakest liquidity activity. in in ago, that down and some dollars quarter, the from Our do million zero In a our much quarters to on. quarter as that growth PPP we when million of quarters five dollars near see for quarter loan round additional to March of is that two expect originations year the September deposit depositors originated Traditionally, and reported December they're September second about volume in continue same compares. XX:XX levels some was be we in deposit and some runoff we sitting the of their We

factors quarters some quarters. next deposit showed offset the over after seasonal runoff significant several or Time more So may four declines. signs stabilization anticipated balances some of of

trended Our excess October, reserves normally where remain we them. see want back a and higher to bit somewhat in above would

public in we that strongest outside agreement deposits to headquartered in portion is St. is was County. across was Finally, quarter is in Louis partner MSA facility second the Bank, but positive First St pleased which our South which with our Arnold, we in region deposits West all Hill, the which Louis definitive and County regions. recently Oak of with of non-maturity growth the Fortune three our Missouri, announced unit XX:XX in Jefferson the in

mid-February, acquire of an provide Illinois, requirements. serving provide We to improve which well subject us their We with our market, core in help Fortune In utilizing funding community. branch will footprint. as that this growth sustainable to customers in team as we do as forward work our expect customary a in transaction more we a reach of modest to members all as First the Cairo National across agreement Fortune supported team, consolidate footprint into are close XX:XX locations looking we amount deposits. location to offered the opportunities legacy to in that Bank, And services the regulatory to did

are time, attractive, to and that potential something plans. transaction our other along comes look We in expect close to partnerships fits at if on this At open Matt? mid-January. we expansion

Matthew Funke

our time, questions this at we're you, from to Thank And ready Lauren, XX:XX participants. Greg. take

how questions. you folks for on would queue they if remind So can

Operator

Piper now Sandler. Our [Operator comes line from Instructions] from Andrew open. your course. Andrew, question is Of Liesch first XX:XX

Andrew Liesch

morning, are you. everyone. Good XX:XX you? How Thank

Greg Steffens

XX:XX Good morning, Andrew.

Andrew Liesch

the and nicely pipeline on Question you do year-over-year, stronger driving XX:XX time this the of that you typically might think loan year? what up see normally that,

Greg Steffens

people they properties, a reacquiring some more buying low to been had tax of at that to of decided were our the our where receiving market lot that They’ve again, a a active a West credit customers lot converting in has we lot of income that activity We've become XX:XX housing of from redeploy they're lot projects of pipeline cash prepayment multi-family, rents. in are region.

Andrew Liesch

obviously, the that mean, there. you I that on you XX:XX the Okay. out the loan little see a maybe dollars round quarter-to-quarter. do you non-interest sales in some million the to four charges you branches, if then How from income the total quarters? do four point seems hear do -- but see how bit it interchange out? gain bounding was Good And next of service playing like demand on take loan higher as It sale see categories on playing also two quarter, be this different gain former might how there's

Matthew Funke

that will think secondary or on I obviously peak pass that. probably XX:XX activity, the market we

may So don't want to run on overestimate where able be to that. we

charges, think calendar new get on charge as nothing of card bank into and are income, we the sustainable interchange we service year, charges. bank deposit I little off the bit probably those drop numbers unusual particularly see service deposit, a generally

Andrew Liesch

my step Got questions Those it. back. Thanks. XX:XX are I'll

Matthew Funke

Andrew. XX:XX Thank you,

Operator

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

Kelly Motta

this looks XX:XX the buybacks. bit My like a the capital slowed Hi. first to Thanks quarter. for It has and do one question. buybacks with

know deploying is have approach the you know the ton is while but of valuation that to deal just pending, currently thoughts is a that table? the buyback, employing of where the wanted Just on wondering to capital, I with kind and your with deal

Matthew Funke

to payback of always we're and stock conscious at for well. active we versus pending on look that period the value capital period what future is acquisition, can our potential be period, we that proxy to stock [indiscernible] that that exit is we in onto acquiring have use our be solicitation that of With when relative from going begin, understanding as the that XX:XX as giving some and holding with do

Kelly Motta

there's or you of maybe then motivated just we'll could on a from if branch help Thanks. just Great. us add comments that [indiscernible] kind out? changing And your anything potential if there acquisition, saves to location the few XX:XX

Greg Steffens

some consolidated significant [indiscernible] the National would million top thirty they have into on efficiencies to of First combining to they in be On a bigger have need [indiscernible] two can operations very by actually the which one. rehabilitation two There's we location in us and then some acquiring approached XX:XX deposits, that, was more banks operation. similar and size what and in location like our felt about close they have that location, was And in there's us their we gained fit of and facility that dollars a that

Kelly Motta

have expenses, expense think of me for you. a just getting progression, helpful? if the year one Thanks me Great. this would -- they just with job one and clearly wondering last XX:XX but kind Maybe any control, really of Can about start Thank done well could on positive controlled you were the kind be on operating some you that on seasonality you the seasonality nice Greg. to with have color, quarter. how of leverage remind the remind of you expenses

Matthew Funke

years. We our the beginning with do we there. see bigger on compensation percentage to like taxes, I a maybe expect on would employee up January, competition usually little pick with then of everybody normal of what cause item build payroll talent and we dealing have annual for in expense a clock we're so resetting over that reassess now more line Sure. does us previous that right build generally along to than And XX:XX that would compensation a compared

Kelly Motta

XX:XX it. Appreciate Matt. Thanks,

Matthew Funke

XX:XX You're welcome.

Operator

XX:XX Sandler. [Operator Andrew question from Liesch now We from Andrew, a now. follow-up Piper is Instructions] your line have

Andrew Liesch

taking XX:XX Thanks guys for follow-up. my

driving you large How and puts couple of here. the takes some possible? What are expansion in the do playing see quarters? that Just a on of that this out next for nice obviously, margin, that core expansion it’s the

Matthew Funke

now than appreciate costs curve book. position. done bringing will the two see that with what book down months where might was, be on what think than cash moving we have on what potential that longer loan the we're would we've downward our thought ago, reprising seeing we faster on term loan to pricing, I a a for driven curve yield redeployment. should by have right yield We've beneficial on the little loan good XX:XX is deposit up there We some lot the deposit been for the more our seen the be a There job there upside would portfolio.

now months So, we're just optimistic we were eighteen And for twelve ago, what of month I it maintained. a think think on, I the probably really, couple would more than we to period. our number go one be

Andrew Liesch

it. the Got follow-up. Thank Cool. for I'll Thanks step today. call for you XX:XX taking the back.

Matthew Funke

Andrew. Thanks, XX:XX

Operator

XX:XX have We remarks. for I'll currently Okay. questions. the hand host any to no over closing further now back

Matthew Funke

everyone XX:XX again us. you Lauren for good Okay. interest a months. thank Thank and Have always in appreciate speak we'll three in your you, day. the joining company We and

Operator

today's Thank you call. rest I for XX:XX day. of joining This you concludes hope and have lovely your a

You lines. now your disconnect may