Good day and welcome to the Southern Missouri Bancorp Quarterly Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions] Please note this event is being recorded. I would like to now turn the conference over to Mr. Matt Funke, Chief Financial Officer. Please go ahead.

Thank you, Elisa. Good afternoon everyone. This is Matt Funke, CFO with Southern Missouri Bancorp. The purpose of this call is to review the information and data presented in our quarterly earnings release dated Monday, April 22nd, 2019, 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. So, thank you for joining us today. I want to start by reviewing the preliminary results highlighted in the quarterly earnings release. The quarter ended March 31st, 2019 is the third quarter of our 2019 fiscal year. This March quarter was the first full quarter after our November acquisition of Gideon Bancshares and its subsidiary, First Commercial Bank. And in December of 2018, we merged the bank subsidiary and that occurred legally at the same time as we converted data systems and merged those. So, we have a full solid quarter with results including that acquisition. We earned $0.76 diluted in the March quarter. That is down $0.05 from the linked December quarter and it is up $0.16 from the $0.60 diluted that we earned in the March 2018 quarter. Compared to the year ago period, we had slightly more discount accretion from acquired loan portfolios in the current period, but it had slightly less impact on our net interest margin due to our larger balance sheet. And compared to the linked quarter, we saw a modest increase in discount accretion both in dollar terms and in the impact to the margin. Non-recurring items and non-interest income and non-interest expense were roughly offsetting in the current quarter. The March quarter is typically weaker for us due to seasonal factors and the shorter day count. We've provisioned slightly less for loan losses compared…

Thank you, Matt. I'd like to provide a brief summary of other items that we have today. We are quite pleased with loan growth for the quarter and the year-to-date as it has exceeded our initial expectations at the beginning of the fiscal year. Exclusive of the Gideon acquisition, organic loan growth for the year has totaled $117 million or 7.4%. We have projected organic loan growth for the fiscal year to come in at 6% to 8%, but we have revised our estimates to 8% to 10%. We have exceeded expected loan totals due to stronger than anticipated loan demand and reduced prepayment rates. Our organic growth continues to be led by increases in our commercial loan portfolios. This growth, along with the Gideon acquisition, has changed the composition of our loan portfolio with an increase of $86 million in non-residential, non-owner-occupied real estate; $58 million in commercial loans; $33 million in multifamily; $30 million in owner-occupied non-residential real estate; $22 million in ag real estate; and $12 million in one to four family. With this growth and changes in our loan portfolio, Southern Missouri Bancorp's CRE concentration has moved from 233% at June 30th, 2018, to 260% at 12/31/18; and approximately 265% at 3/31/2019, which is also slightly above our CRE levels of one year ago of 234%. Our organic loan growth continues to be centered primarily in our East and West regions, which have grown by $44 million and $78 million, respectively for the fiscal year-to-date. We are pleased with our volume of loan originations also, which have totaled $149 million for the quarter and $482 million for the fiscal year-to-date, which is up from $424 million over the same period of the prior year. Now, I'd like to provide an agricultural update. Agricultural real estate production…

Thank you, Greg. Elisa, at this time, we'd like to take any questions our participants have. If you could remind them how to queue for questions.

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

Good afternoon guys.

Good afternoon Andrew.

Hi. So, just on the securities book, just down the $36 million or so that you referenced, Matt, is this a good level to build off of here, this $160 million, $162 million or so?

Yes, we would've probably preferred to be a little more active putting some of those dollars back to work, but with the market where it has been and where it is, we are going to be patient on that.

Okay. And then the margin here came in a little bit better than I was expecting, partly on a reported basis, and then I was also expecting a little bit of core compression as well. Just some of this 3.73% level though, do you -- I mean do you expect the provision or the allowance in the -- not the allowance, I apologize, the accretion to decline slowly over time and kind of then converge with the core margin in the quarters ahead?

Sure. Certainly, over time, we're seeing that every quarter as we move forward outside of the unusual instances where we resolve something that was a larger impaired relationship. So, outside of those, which I can't predict, yes, those will definitely compress over time.

Okay. And then just on deposit cost in general, just if you have any comments on what you're seeing in the marketplace as far as competition for new deposits and how much are you having to pay up to retain good customers.

I feel like -- and I hope I'm not being overly optimistic that we may be passed a little bit of an inflection point in the last 60 days. I'm looking at Greg to see if he'll nod his head on that. But I think we've been hearing a little bit less from our retail folks about what they are seeing from competitors in the market. I'd say early February, we were seeing some really silly one-year CD pricing. We're not hearing as much of that right now. And maybe just every quarter that every month that passes after the Fed has kind of taken a pause here, we'll get a little bit of relief from that repricing pressure.

Okay, very good. That covers all my questions. Thanks.

Thanks Andrew.

[Operator Instructions] Our next question comes from Kelly Motta of KBW. Please go ahead.

Hi guys, good afternoon.

Afternoon Kelly.

Hi. I was hoping to ask you a bit about expenses. It sounds great that you're expecting to get some more cost saves from the Gideon deal. I was wondering about how much you'd realized in your March quarter and kind of how we should be thinking about the expense level as you realize a greater amount of these cost saves having just closed the branches.

Well, I mean we closed them during the quarter, so we would've had severance agreements for the people that departed or moved to other places and our operating costs would have only been in the numbers for two months. So, we have realized most of what we have to be a modest reduction from expenses so we would've carried in the March quarter.

Okay. And then you had referenced the hirings you've done in the wealth group. Could you give us a bit more color on what you're doing there and when you kind of expect to see their production pull through and kind of your outlook for fees?

Well, we certainly hope so, produce as soon as possible. They've been working very hard here over the last couple of months to move business as they can. Their upfront costs, as you saw from the numbers, we have identified. What was the second part of the question?

Expectations for revenue moving forward.

Yes. We don't want to provide any guidance on that, but we are reasonably optimistic that they'll reach breakeven here relatively soon.

Okay. Thank you.

This concludes our question-and-answer session. I would like to turn the conference back over to Matt Funke for any closing remarks.

Okay. Thank you, Elisa. Thank you, everyone for joining us. We appreciate your interest in the company and we'll speak again in a few months. Have a good afternoon.

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