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

Well, thank you, Rocco, and 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, October 21, 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 all for joining us today. I’ll begin by reviewing the preliminary results highlighted in the quarterly earnings release. The quarter ended September 30, 2019 is the first quarter of our 2020 fiscal year.We earned $0.85 diluted in the current September quarter, that is up $0.04 from the linked June quarter and up $0.09 from the $0.76 diluted that we earned in the September 2018 quarter. Our net interest margin in the first quarter was 3.81%, and that included about 10 basis points of benefit from fair value discount accretion on acquired loan portfolios and premium amortization on assumed deposits, which was about $508,000 in dollar terms. Additionally, the current period’s margin included about 8 basis points of benefit or $414,000 in dollar terms from interest collected on a few larger loans that had been previously treated as nonaccrual.In the year-ago period, our margin was 3.92%, of which 27 basis points resulted from fair value discount accretion or $1.2 million. So on what we see as a core basis then, our margin was down by about 2 basis points comparing the September 2019 quarter to the September 2018 quarter.Our core asset yield is up 30 basis points less than the increase in our core costs of deposit which we see at 37 basis points. But our total core cost of fund is a little less than deposits by themselves…

Thank you, Matt, and thank you all for dialing in this afternoon. I’d like to say, to begin with, we are satisfied with loan growth for the first quarter of our fiscal year of $28 million or 1.5% as it came within our guidance of 5% to 7% loan growth. However, it should be noted that the first quarter of our fiscal year has typically been one of our stronger quarters for growth, but seasonal growth factors have been less pronounced over recent periods, and we’re able to reduce our NPAs as expected from the Gideon acquisition.Our organic growth was led by increases in agricultural operating and equipment loans, followed by growth in non-construction balances and consumer loans related, and partially offset by declines in our commercial real estate loans. Overall, the changes in the composition of our loan portfolio is fairly limited.During recent periods, Southern Missouri Bancorp’s CRE concentration moved from 244% at September 30, 2018, to 255% at June 30, 2019 and is back below 250% at September 30, 2019. Our organic loan growth during the quarter was centered primarily in our South and East regions, as our West region was relatively flat due to increased competition within that market. Overall, the South region grew by $16 million and the East region grew by $12 million, respectively.Our volume of loan originations, which totaled $124 million for the quarter, was comparable to the linked quarter, but was down from $177 million over the same period of the prior year. The drop in originations over the prior year reflects our lower pipeline as of June 30, 2019. Reduced loan originations were primarily in non-owner occupied CRE and commercial loans, and were attributable to reduced loan demand than we anticipated in our lower loan growth expectations.Now I’d like to provide an…

Thank you, Greg. And at this time, Rocco, we’d like to take any questions that our participants may have. So if you would, please, remind folks how they can queue for questions.

Absolutely, sir. Thank you. [Operator Instructions] Today’s first question comes from Andrew Liesch of Sandler O’Neill. Please go ahead.

Good afternoon, everyone.

Good afternoon, Andrew.

Good afternoon, Andrew.

Just one question for me here, just kind of like your thoughts on the margin here, you had held up a little better than I was expecting. Certainly drops in LIBOR and expectations of more Fed rate cuts should be putting pressure on earning assets yields. Do you guys have opportunities to lower funding costs as well to keep pace and maybe keep the margin range-bound?

We’ll have some opportunity with some wholesale funding, some of the brokered funding, some of the FHLB. We don’t anticipate significant opportunities probably in the coming quarter. We think we’ll get more relief in the January quarter on the funding costs.

Okay. And then, just back on M&A, it sounded like maybe you’re looking at deals in market, but also maybe next to or addition to what your current footprint is. Are there any locations that when you look on a map that you think that this will be a nice place for us to expand to?

We have looked primarily at our market footprint. It’s ranging from Kansas City, to St. Louis, to Memphis to Little Rock within that general geographic footprint.

Got you. Thank you. Those are all my questions.

Thanks, Andrew.

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

Hi, guys. Good afternoon.

Good afternoon.

So my first question is on expenses. You mentioned in the text of the press release, the FDIC benefit. I was wondering about how much that was this quarter?

Well, if you look back to the June quarter, I think we’re running somewhere around $160,000 per quarter. Let me verify that for you.

Okay. And so that kind of amount should come out of the following quarter as well and then kind of builds back up based on…

Yeah, look, our expectation is that we won’t have anything due for the December quarter either and then a partial assessment for the March quarter before it’s back up to normal.

Got you. Was there anything else, I think outside of that, expenses grew about 3% quarter-over-quarter? What were the drivers of that?

Some of it is just yearend clean up of accruals, year-end type expenses, bonuses, 401(k) accounting, those types of things fell a little bit more in our favor for the June 30 quarter end. I think we had a relatively small loss on some fixed assets we recognized in the June quarter end. No, no one big thing.

Okay. And then, maybe on fees, I think you mentioned there is nothing really unusual about that. But you did in your prepared remarks reference the MSR and you recorded a, I believe, loss on that in the fourth quarter of 2019, your June quarter. I’m just wondering if you had kind of the moving parts of that, and if there is anything else to kind of consider with these or if this is kind of a good level to think about building off of from here.

I don’t think there is anything else there on the mortgage servicing. We were – roughly a $230,000 swing there. It looks like quarter-to-quarter. I don’t think the write-down on the service being right was quite that much, but it was in that ballpark.

It was around $200,000, yeah.

Great. Thank you.

Kelly, on the FDIC, it was – I’m sorry, it was 220 for the fourth quarter. It had been running a little bit below that previously before the Gideon numbers kind of filtered it through into ours in the assessment, around $160,000 prior to that.

Thank you, sir. This concludes today’s question-and-answer session. I would like to turn the conference back over to the management team for any final remarks.

Thank you, Rocco, and thank you, everyone, for participating and for your interest in the stock. I’ll speak with you again in three months.

Thank you, sir. Today’s conference has now concluded. And we thank you all for attending today’s presentation. You may now disconnect your lines and have a wonderful day.