Good afternoon, and welcome to the Southern Missouri Bancorp, Inc. Quarterly Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Mr. Matt Funke, Chief Financial Officer of Southern Missouri Bancorp. Please go ahead.

Thank you, Allison, and good afternoon everyone. This is Matt Funke, CFO with Southern Missouri. The purpose of this call is to review the information, and data presented in our quarterly earnings release dated Monday, October 26, 2015, 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 want to start today by touching on some of the highlights from the quarter. The September quarter is the first quarter of our 2016 fiscal year. We earned $0.48 diluted in the September quarter that up $0.01 from the fourth quarter of fiscal '15, our linked quarter, and up $0.04 from the $0.44 diluted that we earned on a split adjusted basis in the prior year's first quarter. In August of 2014, we closed on the Peoples Bank acquisition. In our current quarter, the amount of our net interest income resulting from fair value discount accretion on loan, and a smaller fair value premium amortization on time deposits related to that acquisition, and now it's $412,000 in the first quarter of fiscal 2015, which again, because of the August acquisition date did not reflect a full quarter's benefit. The similar benefits to our net interest income was 390,000. Those benefits are offset somewhat by additional loan loss provisioning required as our loan dollars that were subject to the purchasing accounting and fair value mark refinanced, renewed or pay down, and are replaced with new production. All of which would mean that the new loans are then subject to allowance methodology. Also, we'd note, that over the last almost five years, we've been reporting quarterly on a similar impact resulting from the first Southern Bank acquisition, which closed in December of 2010.…

Thank you, Matt. The first item I'd like to speak about today relates to our lending, and our loan growth over the last quarter. Again, as Matt indicated, our loan growth was 16 million over the quarter. Which we are slightly disappointed with those results. Now, most of the actual growth during the quarter actually occurred during the month of September, instead of the earlier parts of the quarter. Our growth was limited basically due to a higher than anticipated level of payoffs, primarily in our Southwest Missouri market. Our loan production was strong during the quarter as we originated 106 million in loans, compared to just 79 million that we originated in the year ago quarter. When I look at the components of our loan growth that we had during our quarter, both our family loans were up 5.2 million, commercial non-owner occupied real estate was up 5.5 million. Our Ag operating balances were up 12.9 million. And these were slightly offset by a 4.5 million reduction in our C&I portfolio, and 2.1 million in our owner occupied commercial real estate. When we look at where our growth actually occurred over the last quarter, we had 18 million in growth attributed to our Southeast Missouri markets, which was fueled mostly by growth in our agricultural portfolios, again which totaled almost $13 million. In our actual Southwest Missouri locations the growth rate was a little over a negative $11 million, and that was primarily attributed to shrinkage in our existing office that we have in the Springfield area. And what we've been seeing there is we've just been seeing increased market rate competition in that particular market. As well as we had several larger projects that people [indiscernible] actually sold the projects to other non-customers. And when you look at…

Okay. Thanks, Greg. And Allison, at this time, we'd like to take any questions our participants may have. And if you would remind them on how they might queue for questions, and we'll stand ready to take any questions.

Certainly. Thank you. We will now begin the question-and-answer session. [Operator Instructions] And our first question comes from Andrew Liesch of Sandler O'Neill. Please go ahead.

Hi, guys.

Hello, Andrew.

Just a few questions from me here, you said loan originations were 106 million in the quarter. Do you know what they were or have with you what they were in June quarter?

I don't have that readily available. It would've been less than that.

All right. Okay. And then just looking at the core margin here, just curious what yields that new production was coming on at versus the existing portfolio?

Probably 25-30 basis points below the existing portfolio on average.

All right. Because it looked like it held up pretty well this quarter. So, in general, would you expect that on the core yields just to be turning downwards because of that?

I think some of the stuff that we were paid off on [indiscernible] Southwest Missouri may have been priced below in the portfolio as well.

Well, okay. Got you. And then it looked like you added some municipal securities in the quarter, just curious what yields you are getting there, and if more of those purchases are going to continue?

We report our margin before any cash benefits. Probably -- and it's a wide variety as far as maturity on those. I suppose we take what we can get here and there. But I'm going to say, between 2% to 3%. And probably on average around 2.5%.

Okay, great. Thanks so much.

Our next question comes from Bruce Baughman from Franklin. Please go ahead.

Nice quarter. I know you're a little discouraged about the loan growth. But it looks like a pretty nice quarter to me. My question had to do with any other balance sheet adjustments you're going to make, having paid off the SBLF preferred without even considering acquisitions. Is there anything you're going to do to mitigate the effect on the net interest margin or any of the proportionality of the different balance sheet accounts?

Are you asking specifically with regard to capital or just…

Well, yes, with capital or did you fund it through draw downs on the investments or just how do you do it?

We've had basically a combination of a little bit of an increase in wholesale borrowings. Greg mentioned earlier, that so far, in October, we're off to a decent start with our deposit growth, and just the combination of those two.

Do expect a material change with the net interest margin as a result of paying off the preferred?

No.

Okay. Thanks.

[Operator Instructions] Our next question comes from Chris Brown from Aristides Capital. Please go ahead.

Yes. Good afternoon, gentlemen. I was just wondering if you could give a little bit of color on how the recent mergers are going, and on how much integration, if any, is left to do?

We feel like we're doing pretty well as far as hitting our targeted cost savings. Operationally, the mergers are complete. We don't have anything significant outstanding with relation to that. It's just a matter of getting those acquired branch networks into our business model's efficiency template.

When we look at the deposit growth -- deposit and loan growth for each of the acquisitions, some of the results vary for each one. By and large, our deposit growth has been led in -- for this year that we've had, has been led by the Southwest Missouri area, where we have continued to generate deposit growth each month of the new fiscal year since the acquisition. In our acquisition of banks of Howell County, and West Plains, and Thayer, we have continued to generate pretty good loan growth and deposit growth in each of those markets. Whereas in the acquisition of Citizens of Bald Knob, that area we have not generated any loan growth whatsoever, and the deposits have been relatively stable. So, each acquisition is a little different. The Peoples is the one that we pay the most attention to. And I guess I forget to mention on its loan growth, we would've had -- I think loan balances of the acquired locations during the last quarter were down approximately 600,000. So with the new production generated versus the run-off of what we acquired, that's by far the best quarter we've had in maintaining those loan balances. And we'd look for that to probably trend more to the positive side during this quarter.

Do you feel like you guys are through the period of communicating changes to customers, and through any possible customer churn that you may have had? And then also, are you guys -- have you already consolidated computer systems?

The computer consolidation was complete last December. And I say complete, 90% complete. There's a few systems here and there that still hang up. On the first question about communicating to customers, yes, that's been largely complete for some time.

Okay. Great. Thank you.

Thanks.

You're Welcome.

Having no further questions, this concludes our question-and-answer session. Actually, we do have a question that just came in. Our next question will come from David Welch from River Oaks Capital. Please go ahead.

Thank you. Gentleman, you mentioned that you're kind of ready to get back looking at acquisitions more seriously after the consolidation is close to complete. And I know you're going to be limited in how you can answer this. But I look at your franchise, if you could make an acquisition in a more urban market that probably has better loan demand, and maybe is more competitive, versus a rural market, where you might have some funding advantages, and given your loan-to-deposits, the funding might be attractive. So I guess I'd ask -- want you to share what you can on what your preference is boxing or profiling what an acquisition target might look like?

David, when we look at that, really, it's -- I don't think we have the ideal portfolio. And we want to look, is it going to make a good financial return for us and shareholders. We definitely have interest in in-market rural area acquisitions. But, the pricing on those is going to be a lot less, and you're going to tend to see a lot [technical difficulty] heavier amount of deposits and loans, and that could help us out with some of our loan-to-deposit ratio issues with the rural community. Whereas a larger urban area, it can help us out with loan growth in that going forward, as you stated. But, I think that we just have to look at which opportunities come up, and what's going to generate the best opportunity for us on a return for our shareholders.

Okay. Thank you.

And I wouldn't preclude one over the other.

Okay.

Ladies and gentlemen, this will conclude our question-and-answer session. I would like to turn the conference back over to Mr. Funke for any closing remarks.

Okay. Well, thank you, Allison. Thank you everyone for participating. And we'll talk to you again in three months. Have a great day.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.