Southern Missouri Bancorp, Inc.

Good morning, everyone, and welcome to the Southern Missouri Bank Corp earnings call. All lines have been placed on mute during the presentation portion of the call, with an opportunity for question and answer at the end. If you'd like to ask a question, please press start followed by one on your telephone keypad. I would now like to turn the conference call over to Stefan Cikotovic, CFO of Southern Missouri Bank Corp. Please go ahead.

Thank you, Kathy. Good morning, everyone. This is Stephan Chkotovich, CFO with Southern Missouri Bancorp. Thank you for joining us. The purpose of this call is to review the information and data presented in our quarterly earnings release, dated Monday, January 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 Craig 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.

Thank you, Steffen, and good morning, everyone. This is Matt Funke. Thanks for joining us. I'll start off with the highlights from our December quarter, the second quarter of our fiscal year. Quarter-over-quarter profitability was down a bit as the higher cost of funds weighed on our margin. But for this current environment, we remain relatively pleased with the results and the outlook ahead. We believe we've absorbed the largest part of the impact of the prior year's sharp increase in short-term rates, and we've seen 22.1% net interest income growth year over year due to a larger balance sheet with the addition of the citizens' loan and securities portfolio early in the third quarter of the prior fiscal year, along with continued solid deposit and loan growth so far this fiscal year. We earned $1.07 diluted in the December quarter. That's down 9 cents from the linked September quarter and down 19 cents from the December 2022 quarter. During the quarter, the bank executed a securities loss trade, selling bonds with a book value of $12.4 million. realizing a loss of $682,000, or $0.05 of earnings per fully diluted share after tax. These proceeds were reinvested into $11.9 million of higher rate bonds, which are expected to result in an earnback of the realized loss in less than two years. Excluding this loss for the quarter, non-interest income would have been $6.3 million, net income after tax $12.7 million, earnings per diluted share $1.12 million, and our return on average assets would have been 1.12%. Book value per share was $41.66 and has increased by $4.98, or 13.6%, over the last 12 months, with AOCI roughly unchanged since the year-ago period. Net interest margin for the quarter was 3.25%, as compared to 3.45% reported for the year-ago period and 3.44%, reported for the first quarter of fiscal 24, the linked quarter. This decrease was attributable to a higher cost of deposits as well as an increase in cash balances. Net interest income was down 2.6% quarter over quarter and up 22.1% year over year as we grew average earning asset balances. We had a slightly lower amount of margin benefit from accretion of purchase accounting marks in the current quarter as compared to the linked quarter and a larger benefit as compared to the year-ago period which was just in advance of the citizens merger. On the balance sheet, gross loan balances increased by $32 million during the second quarter. Compared to one year ago, December 31, 2022, gross balances are up $737 million, or 25%. The citizens merger, which closed during the third quarter of fiscal 23, accounted for $447 million of that year-over-year growth. and our adjusted annual growth rate over those 12 months adjusting out the acquired citizens loans would be a little under 10%. Due to strong deposit growth, quarter-over-quarter cash and equivalents grew $128 million, and compared to December 31, 2022, cash and equivalents are up $162 million. Deposit balances increased by almost $154 million in the second quarter and increased by $989 million compared to December 31, 2022. of the prior year. That included an $851 million increase net of fair value attributable to the citizens merger, which again was during the third quarter of fiscal 23. Strong growth in deposits this quarter was a result of CD and savings account growth from well-received special rates offered during the quarter, as well as seasonal deposit inflows. With all that, I'll hand it over to Greg for some discussion on credit.