Southern Missouri Bancorp, Inc.

Hello and welcome to today's Southern Missouri Bancorp conference call. My name is Jordan and I'll be coordinating your call today. As a reminder, if you'd like to register any audio questions, you may do so by pressing star followed by one on your telephone keypad. I'm now going to hand over to Stefan Shikadovich, CFO to begin. Stefan, please go ahead.

Thank you, Jordan. Good morning, everyone. This is Stefan Shikadovich, CFO of Southern Missouri Bancorp. Thank you for joining us today. The purpose of this call is to review the information and data presented in our quarterly earnings release, dated Monday, April 29, 2024, and to take your questions. We may make certain forward-looking statements during today's call, and we refer you to our cautionary statement regarding forward-looking statements contained in the press release. I'm joined on the call today by Greg Steffens, our Chairman and CEO, and Matt Funke, President and Chief Administrative Officer. Matt will lead off our conversation today with some highlights from our most recent quarter and fiscal year.

Thank you, Stephan, and good morning, everyone. This is Matt Funke, and thanks for joining us. I'll start off with those highlights from the March quarter, which is the third quarter of our fiscal year. Quarter over quarter, our profitability was down a bit as a higher cost of funds weighed on our margin. But for this current environment, we remain relatively pleased with the results. In the third quarter, we've seen the net interest margin stabilize, although at a lower level compared to the second quarter. And net interest income was slightly above the linked quarter due to a larger average earning balance sheet. Despite the challenging rate environment and our cost of funds and inflation's impact on our operating expenses, year over year, we were still able to grow our core earnings outside of M&A costs and available for sale securities losses, and we've grown our tangible book value over the last 12 months by almost 13%. We earned $0.99 diluted in the March quarter. That's down $0.08 from the linked December quarter, and it's up $0.77 from the March 2023 quarter, which would have included the citizens' merger charges. During the current quarter, the bank executed a securities loss trade, selling bonds with a book value of $18.4 million and recognizing a loss of just over $800,000 in non-interest income. We reinvested those proceeds into higher-yielding fixed-rate securities, which is expected to result in an earn-back of the realized loss in under two years. Recognition of this loss during the quarter reduced after-tax net income by $626,000, our earnings per diluted share by six cents, and our ROA by five basis points. Our tangible book value per share ended the quarter at 35.51, and that's increased by $4.05, or 12.9% over the last 12 months. Our net interest margin for the quarter was 3.15% as compared to 3.48% for the year-ago period, and it's down from 3.25% reported for the second quarter of fiscal 24. If we would adjust for the impact of reduced purchase accounting marks and the day count in the shorter March quarter, however, we believe we're down to a low single-digit decline in the margin linked quarter to current quarter on a core basis, and I'll let Stephan run through those details in a moment. Our net interest income was up a tenth of a percent quarter over quarter and 2.2 percent year over year as we grew average earning asset balances. Non-interest expense was down 7.2% for the current quarter compared to a year ago, primarily as a result of the one-time merger expenses associated with the January 2023 merger with Citizens, and it was up 5% from the linked second quarter of fiscal 24 due primarily to annual merit compensation increases as well as higher advertising and occupancy expenses. On the balance sheet, gross loans increased by $39 million compared to the December quarter end, and by $291 million as compared to March 31, 2023. Year-over-year, gross loans have grown 8.4%, and in what is usually our seasonally soft third quarter, loans grew at an annualized rate of 4.2%. Cash equivalent balances as of March 31, 2024, decreased by $48 million compared to December 31st, as loans outpaced deposit growth and as we also purchased some securities, but we increased by $53 million over the last 12 months. Although cash balances were lower at quarter end compared to the linked quarter levels throughout the current quarter remained elevated with our average interest-bearing cash balances totaling $182 million for the third quarter, roughly doubled compared to the December quarter and up by $55 million as compared to the same quarter a year ago. During the quarter, we had some modest opportunistic stock repurchase activity, which totaled about 4,400 shares acquired at an average price of just over $42, which was just below our March 31, 24 book value. As of this quarter end, the company has about 302,000 shares remaining in its current buyback authorization, and we would expect to continue to be opportunistic with stock buybacks. I'll hand it over to Greg now for some additional discussion on credit.