SMBC - Earnings call transcript Q2 2022 | Southern Missouri Bancorp, Inc.

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Operator

Hello everyone, and welcome to the Southern Missouri Bancorp Quarterly Earnings Call. My name is Victoria and I will be coordinating your call today. [Operator Instructions] I will now pass over to your host, CFO, Matt Funke to begin. Matt, please go ahead.

Matthew Funke

Thank you, Victoria. everyone. morning, Good Funke, Matt Southern Bancorp. Missouri This CFO is with Thank you us. joining for January to this quarterly information Monday, to of purpose review your earnings XXXX, questions. take call dated our The in is the and presented and release XXth, 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 credit off our operations, conversation today measures. on commentary current and lead with lending our activity will quality Greg

Greg Steffens

We're Thank for Since This most and spiking through holidays thank call steadily you, in our morning Greg is December resurgence in or Reported right members of everyone. after But or has all team and who it infection our our with most more in the staff a of States, COVID. Matt remotely limited and times moves meeting we joining market are higher good the cases market in or reporting in customer keeping areas. to Steffens and team walk-in seen hospitalizations before staff working members our business. areas exposure, of [Indiscernible] our November open of for you continue on the problematic needs. seeing United today. been appreciate many has us last and at terms lobbies job

to light close business on primary We is we end tunnel. restrictions like see activity in our continue the few very to markets, and of feel the the

about borrower performance. very We and continue to our current good profile credit feel

particularly occupancy COVID seems December XXth. with forgiveness quickly $XX hopeful million wave historical more or whose that two a that in pandemic. into the than relationships monitor with just for some half that will hotel year, of business parts the remaining impacted to under recedes We're to of We're the the locations closely quarter balances these reason recent slowed hopeful continue that. to We there borrowers levels. September move we by PPP since this later industry and be of rates and models were the as work properties move with for optimism closer little forgiven totaling

dropped XX.X have now or count, terms. XX% is off recognition the and deferred. single-family Non-performing repayment December get return largest status X significantly loans bit loans loan being residential XX Accelerated from the million We're during secured forgiveness of dollar at relationship the just of million those quarter closed-out with remains December remaining still the XX-XX, the fee quite quarter, contributor XXX,XXX We still and We've X which the received to our comprised in of property. March of loans. and rental is to there PPP outstanding quarter. accrual about hopeful in $X.X most a of rounds that in dropped by only XX% down by

is XX quarter, of more, due past down year we represent loans, continued X loans days not $X.X adversely million, are basis but year mention loans this mention low last hotel special which larger Watch XXst, $XX.X a mentioned prior classified status. had classified at credit points XX paid at total monitoring and also combined which We're to levels. million remain At they XX with million basis in very moved basis lower million by to a and that In that year down The from compared was pleased $X.X ago Adversely and addition, totaled earlier. we're considered and we million. are quarter, $XX.X points a million. the XX from to also ago. move quarter or million A totaled points down they $X.X million off. loans historical $XX.X closely lower or $XX.X as X.X December loans have due special past credits

to quarter, to the million loans million up farmers Turning and down compared in $X.X were Ag our portfolio $XX.X other last update, and year. and agricultural production to Ag our this time

While quarter, are compared last million $XX.X balances the million and real up December to over $XX.X up estate Ag year. were

generally with to acre higher a then in borrowers X,XXX very we productive a had some in quarter. underway good soybean acre And year-end mostly helping yield agricultural on borrower’s levels projected. borrowers for yields was prices capital XXXX. yields Our positions were and farmers came our Working very better when higher less Corn, strengthened rice, and with underway, generally, last pounds and you updated these more line were XXXX harvest at but Cotton pretty the final best ground of per these per what harvest acre well Cotton was into seen. the good moved productive pricing. X,XXX expected, in an the much as pounds just around ground. calendar we've

our higher productive cautionary XXXX, the to for requirements soybeans, to Looking margin acreage of sum. in the strong relative could input to corn for underwriting well given rotation our They pricing as largest on some into XXXX. or ahead some peanuts. be as also Summarized was in of move being or borrowers due ground diverted we will for some would input particular soybeans we of same costs reasons. popcorn our where XXXX anticipate general, which our crop note the pressured rotate less to crops for But the need In cotton, fertilizer to we that acreage concentration outlook out remains move crop. pressuring that may cost they

XXXX and a very would expect market. moving for overall parts strong Additionally, our equipment, the livestock Still we picture majority some off production lines vast our be coming supply looks see renewed. XXXX, good of borrowers continue to with for reasonably to for and grain or to the loan issues chain logistics supplies and

Matthew Funke

up that in compared quarter year-ago Thanks, from provision $X.XX a earnings provision December quarter September year. earned had linked modest quarter. the $X.XX it's and down Greg. We $X.XX to the the the a credit the our to in XXXX quarter. and for linked fiscal diluted to in is no earned That charge we That's as from in the second of current quarter. of diluted the figure $X.XX for September negative as charge losses period, compared In period December the we

decline quarter origination dollar continued, X.XX, on accretion loans Our PPP to the Higher margin cost basis $XXX,XXX basis core XX, about points loan from margin, interest yield points. which dropped included X quarter accretion discount portfolios, XXXX reducing fair fees. down XX contribution loans down value reported another interest cost deferred the added discount XX points which loan which December those resulted our was points by significantly forgiveness of of down in interest acquired the quarter, recognition to of had of was core XXXX to of XX. we December average accretion of accretion, similar is XX quarter, PPP margin had accelerated September in and margin and recognition on value we forgiveness fees was what X while $XXX,XXX. as a deposits the from which net basis core linked then, see of we we as that basis accretion our or the quarter, contribution In origination basis points deferred fees $XXX,XXX X.XX% included fair of our more PPP margin. In PPP down terms. saw accelerated in yields X Also fair to or accelerated was of basis of view a caused our points margin. basis accretion what of total us the points points. X.XX% benefit value year-ago December the our the XX we balances outside But fees the XX accelerate from our period, drove points, which as basis funds basis contributed On total $XXX,XXX margin discount basis earning cash which see X a also deferred which contributed of as in comparing of being And core to asset income,

again decrease cash to X we sequential we attributable balances. So consider a average increased on core what see about basis a of points, basis,

Our a which due income included and items fees, helped the servicing up the Illinois, just at up in that consolidated to for operations revenues point. facility loans a compared well. management bank over quarter income on credit was year an as the as insurance and service ago. M&A in other XXX,XXX abnormally -- a linked-quarter to primarily higher continued tax quarter, year-ago and in gains compared due related decline the from basis. up saw as deposit in revenues charges, energy investment. we assumption. legal $XXX,XXX for mostly also in on wealth decline loan by life down the charges, Cairo, in credit to to purchase income income to this our offset ago, while non-interest purpose transaction Increases card renewable wealth income Compared million noted, management earnings XXX,XXX on compared as income included well interchange to facility non-interest non-interest income up originated year quarter and bank period on of exit where the our other and legacy sorry, to included expense benefit the was write branch strong one-time a from a our significant a investment a gain picked Increases linked one residential as tax of year-ago professional normalized were to and X charge down was a that the I'm Non-interest XXX,XXX was mostly XXX,XXX, value we other new sales benefits $XXX,XXX

up, due as foreclosed also also valuation above-trend a on XXXX, XXX,XXX category a expenses some on were attributable occupancy, expense to increased losses to had compensation write-down was increases that We their had ago. in this headcount compared increases data with and quarter. strong during linked Company Other December single the in and unusually change quarter, commissions minimal to quarter, of already dispositions compensation, wealth foreclosed due September $XXX,XXX compensation with mostly from Compared property a to took modest about the year little in uptick and processing property charge-offs a items the expense quarter, management to commented the quarter. net resulting the roughly non-interest from higher X in reported The up on. in we

million dollar provision the terms. stabilized now XX-month up metrics for modest for losses ago. trailing growth in that total a for recorded which the compared quarter Our no negative the the a basis $X.X $X to net XX/XX/XXXX, along quarter. a built a recovery Loan credit quarter charge as as picked in total XXX,XXX reserves point, year months continued of projection was of In recovery our months, XX from indicated positive -- the in heading the provision quarter December September at we Even credit with December million after we've pandemic. ended is stands into economic prior XX to charge as for million so, and compared just $XXX,XXX a last charge-offs the X of $X.X appropriate the

also On Compared the months. were of by rate XX has those over $XX portfolio the purchase. been declined declining over were the sheet, than the XX% -- loan million up Cairo little gross to PPP a moved while our to allowances of the million. are over balances X.XX% December at up percentage X be $XXX was The The balances growth, An quarter's down ago, or investment XXst, quarter a adjusted quarter, outside credit of months. $XX for the net points loans PPP balances is annual make picked balance December from losses, December PPP from above trend a our million, XX $XXX year gross that, December PPP. so last loan million XXst. down slightly down almost more growth didn't but linked provision branch XX% amount balance for gross of up we in quarter immaterial basis would

quarter quarter, to a As the the PPP points we This excluding Deposits gross was this $XXX percentages basis purchase included Cairo more be deposit million of assumption. with down adding last unit as the the were $XXX was funding assumption, Cairo branch public the million, public loans, also have had those give a in growth. as public linked funds December total down in while unit Maybe percentage from funding million and million, up strong than by quarter during which will in from loans well $X very separately. unit quarter inflows. X it $XX X.XX%. to deposits impacted Brokered was $XX.X million

were unchanged We inflows offset from significant by public public as and time new that the also In assumed Cairo balances unit for were deposit. of the saw basically relationship portion a unit seasonal deposits the current a of broker quarter, growth. accounting maturity

million, in public declined our tangible deposits growth which FHLB our the more points Over up from prior up. $XX quarter about of million borrowings almost finally, the funding. were than quarter, equity last XX million million earlier. last unit decreased asset basis XXX and picked deposits months, the XXX are $XX meanwhile, includes little XX XX during down funds. Non-maturity over months, brokerage by decreased the inclusive a And time from are total XX XX million million XX down in as months ratio

Our than remain expectations final well declined capital. the buffers. also above grew risk-based lending ratios and faster as regulatory we do But comments? we Greg, portfolio

Greg Steffens

Thanks, Matt.

multi-family, this repeat estate in very and during we portfolios. half fiscal the year Our loan residential that saw expect strong quarter strong, We growth the first growth was in commercial half. loan of our it the second real but to construction wouldn't a

increased despite in the in centered Missouri led $XX actually million months. last Springfield, in loan XX our balances over current region quarter commercial the way PPP modestly, West Activity in Our and forgiveness. the

Our March more the outlook with trends. historical quarter for would in line be

in million at September at this Our $XXX XXth, loans time the million million pipeline XX to for was we the above from last at days $XX year. down reported XX-XX, $XXX well fund

the While mentioned, come. as of begin saw repayment December quarter March we'll we've we a to PPP amount in in yet AG the modest some of and see further course, reductions paydowns quarter,

quarter we the followed anticipate is growth. growth For better a typically by loan current what quarter, total in modest June for

XX up compared September points to regulatory CRE year occupied XXX% non-owner ago. capital XX-XX, was XXX% at XXth, and basis Our one of approximately concentration

all During our the growth outstripped in capital loan growth. categories our relevant quarter, consolidated

activity. loan first half from totals up due originated the we elevated per volume ago, $XXX up PPP in comparison. second a quarter to Our $XXX by quarter, originations and quarter same was year million December about the when the of round the the from were million calendar September In year our

December in quarter Cairo deposit stabilize to prior and our We half growth in for after March consolidation significant continue Time did in Our the X our unit year December balances acquisition and best million the XX quarters quarters. balances the branch of the add strong. are exceptionally this from calendar declines usually deposits and and increased. second was public in

the Our we higher reserves elevated in the quarter. excess them December to and remain coming continue quarter, for expect move to

over we've Cairo growth. the current the the East X in Cairo, been months. it's region region be Our the Adjusted has the public West in unit XX of largest last our basically includes would Those East for leader which market, pickup where growth the quarter in seen and balances. comparable year-over-year for regions,

in from St. Oakville, received proceed Louis on approval frame. legal has system Federal the to MSA. Louis second that working part the St. transition we've Fortune for assumption, of portion which the February south And while Arnold, to XXth for time complete of which of with in Bank County. in the preparing our in Finally, headquartered facility team our merger for is also hard Missouri, simultaneous is County set and been is Jefferson The and branch mergers the the Reserve

has relatively recently. We continue opportunities to for additional also but market look acquisition been quiet this

Matthew Funke

Greg. questions this Victoria, we're our take to Thanks, from At ready time, participants.

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

Operator

from Liesch session. For first Matt. open. our you, open a question comes go ahead, [Operator from up is Please thank Piper We'll for Q&A line our Instructions]. Andrew your And fact, now Sandler.

Andrew Liesch

everyone. morning, Good Hi.

Matthew Funke

Good morning, Andrew.

Andrew Liesch

should and ramp-up getting hikes from seems months. the Morning, margin then hikes in first rate we obvious question to subsequent [Indiscernible] some rate few XX pretty on like react the XX to funds? say margin, to the assuming the hike those going over next expect we're and it's a rate be How

Matthew Funke

floor overnight we has that our generally been with recently the are. somewhat pricing as they deposit modeling, expect Our here as at the rates low

back some we cash a benefit benefit bit side. that position as of rates helpful do will regard. loans little well, move deposits are that some So deposit of the the up, as from funding but confident some at offset that continue Got in rate should we those pressure. would have probably the steepens. our first reasonably beyond margin that are see lower as what well time course, some of rate on the a curve in We shift we total may we as that so fact well is feel the XXX see basis points. increases our We of percentage see as If into floors there, do

Andrew Liesch

for able it. That's sounds the handful to seem pay. deposit you keep -- fair? pretty Got think first like first does you'll rate low be few It hikes, the that your

Matthew Funke

That's we're I think what hoping for. right. that's

Andrew Liesch

market half, What's why slowdown loan above What's that year it's well it. the Got and is was. that? more first is more that's to the just from been guidance fiscal actual obviously in driving going activity? it. growth business demand Got Is months? calling Greg, share it year, in your customers, your what efforts, you it think do driving gains, X it here next Good.

Greg Steffens

again. several size customers back larger into went that the market some had of We

we're And One big over drop increased really have beginning the for of the we the our that commercial that what up. given a Then helped going activity has months our a and our joined balances had quarter efforts really we've and had portfolio together first all growth will for with prepayment was had led of production, exceeding to fiscal rates in -- really we loan we're things we and overall, had ag good really first work picking year. repayment both We strong do some quarter we our contribute higher definitely of exceed results a just our have the anticipate this some lot than we've to team portfolio. and increased that this with contribute growth and a year that calling to at we things of to but definitely of we was budgeted do cash had quarter X what of six had members months. estimates

Andrew Liesch

Certainly. I'll the step Cool. Very Thank you questions, helpful. taking for back.

Matthew Funke

Thanks Andrew.

Operator

Thank Motta question you your our Instructions]. Kelly next comes And from Andrew [Operator question. from KBW. for

Your line open. is

Kelly Motta

morning Good Hi.

Matthew Funke

Kelly. morning, Good

Kelly Motta

over any on maybe well spends. there's pressures seen want to if upward inflationary a increased ask what articulate for banks into as country inflationary plans from I pressure Can go investment I just We're any what across the well you as just to hearing XX typically question. next lot pressure of about you're higher than the months? tax wanted expenses. you've as about seeing as expenses, the

Matthew Funke

part, second investment? for The any plans

Kelly Motta

months, Tech XX the Second, investment next for

Matthew Funke

Well, on see the the Probably over accomplish increase first We definitely part now possible. really important year trying anything say we've more our this calendar probably some into pressure. an at began pulled recognize it's how late but we -- some case as to we'll had markets. as investment, in with XXXX. continue of Tech us, priority years. the what look the wage couple. But last to seeing head obviously in more even we're wherever levers definitely little address that first to it's over question, to of than that's we that's count to And XXXX. an wouldn't move of couple more the a increase seeing new I We it bit fewer

Kelly Motta

saw then I quarter. quite And this that looking just bit at your average your a balance sheet, excess cash built Great.

either for balance looks the sense into to pace a the what's what and securities, loans size better get to you the on trying cash via of thoughts a level order any like for reasonable get deployment sheet. there, or of just Just normalized guys in

Matthew Funke

low number as to Greg possible, likes as be Kelly. that

from would is would there we in have sheet needle normal, $XXX in relatively we've course With the to we'll pretty deployment deposit below investment the point what The year, curve, those be We get do where yield portfolio. our some over well now, but of still to limited And there goal. in balance tough, more at to see our million. X sheet think How loan we're see things always growth. we been at. Really as long-term at the it size moving we portfolio. of some we the balance investment we the in as there opportunities the our outflows see the total, into continued like had limitation look in would expect

Greg Steffens

be going the that some anticipate this What up point. up quarter was in up next has would more we some cashes as future rates as going We pick picking go as do to with would are us this for rates. hinting balances at as quarter. Andrew the are much do above we remain benefit it raising But to Fed at expect levels hurting cash targeted foreseeable March,

Kelly Motta

Thanks. it. Got

Matthew Funke

Kelly. Thanks,

Operator

final Kelly your question. for I to thank over And for there questions point, Perfect back to and at no you (ph) any Matt pass like are this would further remarks.

Matthew Funke

Okay. three interest joining Victoria. always, as for Thank day. a you, Have you speak we'll you your and We in Thank good again with again, months. everyone us. appreciate

Operator

Thank today's you everybody joining call. for

You may disconnect now your lines.

Southern Missouri Bancorp (SMBC) 25 Jan 222022 Q2 Earnings call transcript