Hello, everyone, and thank you for joining the Southern Missouri Bancorp Earnings Conference Call. My name is Sammy, and I'll be coordinating your call today. [Operator Instructions] I will now hand over to your host, Stefan Chkautovich, CFO, to begin. Please go ahead.

Thank you, Sammy. Good morning, everyone. This is Stefan Chkautovich, 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, April 21, 2025. 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 by 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, Stefan. Good morning, everyone. Thanks for joining us. I'll start off with some highlights on our financial results for the March quarter, the third quarter of our fiscal year. Quarter-over-quarter, earnings and profitability improved as we benefited from a larger earning asset base, driving an increase in net interest income, along with an expanded reported net interest margin, which resulted from a lower cost of funds and elevated fair value accretion income, all this despite the short day count in the quarter. With the earnings and profitability improvement in the first 3 quarters of our fiscal year, we continue to see positive trends going into the last quarter as we close out fiscal '25. We earned $1.39 diluted in the March quarter. That's up $0.09 from the linked December quarter and up $0.40 from the March 2024 quarter. Net interest margin for the quarter was 3.39% as compared to 3.15% reported for the year ago period and up from 3.36% reported for the second quarter of fiscal '25, the linked quarter. The reported margin benefited from the payoff of a loan from a prior acquisition that had a large purchase accounting mark. The net interest margin included 12 basis points benefit from fair value accretion. Excluding fair value accretion, the net interest margin would have been approximately 3.26%, which would be down 1 basis point from a comparable measure for the linked quarter. However, if we normalize the core margin for the day count, we believe we actually would have had a mid-single-digit increase quarter-over-quarter. Stefan will run through more of the moving parts of the NIM in a bit. Net interest income was up 3.5% quarter-over-quarter and up 14.4% year-over-year due to the increase in average earning asset balances and NIM expansion. On the balance sheet, gross loan balances decreased by $3.5 million compared to the December quarter, but increased by $252 million as compared to March 31, 2024. Year-over-year, that's growth of almost 7%, and we are going into what is historically a stronger fourth quarter for our loan growth with a healthy pipeline. Deposit balances increased by about $51 million in the third quarter and increased by $275 million or about 7% year-over-year. Strong deposit growth through the year has been primarily led by core CDs from well-received rate specials. Due to the lower short end of the curve, we've been able to originate or renew these CDs at lower rates, which has helped our margin. Largely due to the strong deposit growth, cash equivalents grew $81 million or 56% quarter-over-quarter, setting us up well for the next 6 months when we normally see stronger loan growth. Tangible book value per share was $40.37 and has increased by $4.86 or almost 14% over the last 12 months. If you back out modest improvement in the security portfolio's mark-to-market, we'd still be up almost 12% since this time last year. I'll now hand it over to Greg for some additional discussion.

Thank you, Matt, and good morning, everyone. As we've been anticipating, credit quality has normalized a little bit this quarter, but remains relatively strong at March 31, with adversely classified loans at $49 million or 1.2% of total loans, an increase of about $9 million or 23 basis points during the quarter. Nonperforming loans were $22 million, which increased $14 million compared to last quarter and totaled 0.55% of gross loans. In comparison to March 2024, NPLs were up about $15 million and 35 basis points higher as a percentage of total loans. The increase in NPLs this quarter was mostly due to loans totaling $10 million, primarily collateralized by 2 specific purpose nonowner-occupied CRE properties in different states with guarantors in common and originally leased to a single tenant who has since become insolvent. Those loans are on nonaccrual status, and we are working with the borrowers and guarantors to improve our position. Loans past due 30 to 89 days were $15 million, up $8 million from December and 38 basis points of gross loans. This is an increase of 21 basis points compared to the linked quarter and up 23 basis points compared to 1 year ago. Total delinquent loans were $24 million, up $11 million from December. The increase in loans 30 to 89 days past due was primarily driven from NPLs I previously mentioned, and the remaining loans over 90 days delinquent are a mixture of loans collateralized by ag real estate, CRE, C&I and 1-4 family residences with an average loan size of around $120,000 and no single loan larger than $1.5 million. Despite the increase in problem loans, these issues remain at modest levels as compared favorably to the industry. In combination with strong underwriting and reserves, we feel comfortable with our ability to…

Thanks, Greg. Matt hit on some of the key financial items already, but I wanted to share a few details. Looking at this quarter's net interest margin of 3.39% it included about 13 basis points of fair value discount accretion on acquired loan portfolios and premium amortization on assumed deposits compared to the linked December quarter of 9 basis points and the prior year's March quarter of 11 basis points. During the current quarter, we realized $756,000 in interest income mostly related to the purchase accounting mark on an individual paid off loan from a past acquisition. This accounted for about 6 basis points in this quarter's net interest margin. Also, the 90-day March quarter compared to the 92-day December quarter impacted reported margin to the downside with a swing of as much of 7 basis points. Adjusting for the day count and the material accretion from the identified loan, we view our run rate net interest margin for the quarter to be about 3.40%. Due to the decrease in short-term rates, we continue to see deposits reprice down, benefiting our net interest margin as a result of our liability-sensitive balance sheet. We continue to see positive signs for an improving net interest margin as our interest-bearing liability costs decreased to 3.14%, down 19 basis points. Without further FOMC cuts, the pace of improvement on the cost of funds could slow in future quarters. Looking at asset yields, the lower short to midpoint of the curve has led to a decrease in these yields with our third quarter down to 6.01% compared to the linked quarter of 6.12%. This was impacted by a reduced pace of upward loan repricing. And in the March quarter, we had an average balance of $143 million in interest-bearing cash balances, up $78 million quarter-over-quarter,…

Thanks, Stefan. Yes, our fiscal 2025 has been a great year so far in both our financial metrics and culturally. Since last quarter, consultants have completed their evaluation of our organization as part of the performance improvement initiatives we launched in the fall. This initiative is not only a pivotal step in enhancing our ability to meet our customers' needs quickly and effectively, but it also serves as a valuable professional development opportunity for our team. I'm immensely proud of how our team members have embraced this process and are beginning to make progress on the recommended enhancements with the goal to be fully implemented within the next several years. As a result of this initiative, our West Region's Regional President and EVP, Justin Cox, was appointed to our newly created position of Chief Banking Officer. Effective May 1, Justin will be primarily responsible for overseeing business development and customer experience efforts for our lending, deposit and other fee income teams across the bank. Speaking of new additions, in January, we acquired a new insurance brokerage partner who is based out of our Southwest Missouri market, and we are excited to welcome a new agent to help support our customers' insurance needs. Lastly, we've had limited conversations about M&A since the drop-off in bank stock valuations and increased market turmoil. We remain hopeful for good opportunities, but nothing is likely in the near term, and we'd anticipate that the market may need to settle for a few months one way or the other before conversations would pick back up meaningfully. We believe that with our strong capital base and positive track record of financial performance, we're in a good position to capitalize on the right opportunity when it presents itself. There are approximately 50 banks headquartered in Missouri and 24 in Arkansas with assets between $500 million and $2 billion and a significant number in other surrounding states. So we should have M&A opportunity in the intermediate future. Stefan?

Thanks, Greg. At this time, Sammy, we are ready to take questions from our participants. So if you would, please remind the callers how they may queue for questions at this time.

[Operator Instructions] We now have a question from Andrew Liesch, Piper Sandler.

Just wanted to start with the margin. Stefan, just wondering if you have some specifics on what -- how many CDs might be rolling off over the next couple of quarters and at what rates and what they're going to be replaced at?

Yes. So looking at our CD portfolio, renewing in the next 3 months, we have about, call it, $215 million that are rolling off at a rate of about 4.25% and being replaced by current renewal rates are averaging around 4.10%. This quarter is a little bit slower on that side. But over the next 12 months, we have about $1.2 billion in CDs renewing with an average rate of 4.26%. So still a net benefit there over repricing. But this quarter, that dynamic slows down a little bit and picks up after that.

Got it. So -- when you look out at the funding for the next several months, are CDs going to be the primary source of growth? Or do you have any other accounts that you're focusing on right now that you might try to encourage clients to shift into?

We do have an attractive platinum savings rate. But as we go through this next quarter or 2, we will see our non-maturity deposit accounts start to roll off as some of those seasonal funds roll off from ag and public unit accounts. So CDs will probably start increasing as a percentage of the portfolio.

Got it. And then just on the agriculture front, maybe it's too early to tell, but have you assessed how much of the commodities are exported and what the effect of tariffs might be?

Well, the effective tariffs wouldn't be good. We don't have any real visibility once our farmers go to market where that winds up necessarily. Prices have been relatively low already. So at some point, the government price supports kick in. We don't have a lot of exposure to the downside on that.

The forecast where our grain commodities are shipped, it's -- we don't really have focus on that.

Kind of an overall impact on the pricing in the market, though.

But overall, global markets are going to drive a lot of that price. There's only a finite amount of grain that is produced around the globe and those supplies them -- carryovers are going to still have to be absorbed whether it's produced in South America or whether it's produced here. It's going to be -- there's only a certain amount of grain available. So there will be someone that needs the grain.

Our next question comes from Matt Olney from Stephens.

I want to go back to the discussion around the net interest margin. I guess the core was moved sideways during the quarter, but it still seems like there's some good momentum here. Stefan, I think you mentioned that 3.40% range as a run rate. It sounds like that could be a good starting point for the June quarter end. Is that the right interpretation? And was that a reported NIM or a core NIM?

That was a reported NIM. But yes, overall, there's some good underlying dynamics here as we sort of shift out of those excess cash balances that we mentioned that increased about $78 million. Those will start to flow out over the next 2 quarters. Overall, average earning asset balances shouldn't really grow all that much, but there are some positive NIM dynamics there from the essentially cash that we're holding in the Federal funds going into loans over the next 2 quarters.

Okay. And then I guess the other tailwind on the margin is just the repricing of some of those fixed loans. Just any commentary on renewal rates you're seeing there versus your internal expectations?

Yes. I would say, on average, our renewal rates have been in the ballpark of 7.25% to 7.50%. Overall, over the next 12 months, we have about $610 million that are renewing at a rate of 6.45%. So there's still positive shift there too. This following quarter, the renewal rates are on the higher end. So you won't see as much positive impact. But after that, it should start to shift back up.

Okay. Perfect. And then shifting over towards on the credit front, the NPLs ticked higher, and I think you mentioned that release, it was mostly about $2 million from single borrower. Any more color you can share as far as the collateral on these loans? Have you had a chance to take a good look at that collateral and any recent appraisals on that? Just trying to get an idea of what any kind of loss exposure could be to this borrower.

One of the properties is located in a -- they're both medical-related lease space or they were leased to the tenant when insolvent. So really, it's going to be dependent upon what other type of medical tenant we can find for those buildings. We do anticipate a fair amount of charge-off on these credits at a given -- at some point. We do have them marked to roughly 35% in our ACL of their balance.

[Operator Instructions] Our next question comes from Kelly Motta from KBW.

I appreciate the color, Greg, on M&A conversations flowing with the market volatility. In the interim, with the stock going back, can you remind us your priorities for capital and how you may be viewing the buyback here? Are you kind of just keeping dry powder for M&A? Or could we see you step in and become more active on that like you've been in the past?

We would anticipate depending on stock price, potentially using some of our excess capital to repurchase shares. We do target having tangible common equity of 8% to 9%. We are over those ratios a little right now. We do view that if we can repurchase our shares and have a tangible earn-back period of around 3 years that it is appropriate at that time to repurchase shares. So our repurchase activity will really depend upon our stock price and what happens with the -- just general market price for our stock. And at the current trading prices, we're right around where it would be opportunistic for us to repurchase some shares.

Got it. That's helpful. Maybe a last question from me, circling back on the credit side of things. Just from a high level, you're obviously closer to the ground than we are. Wondering kind of how you're viewing your borrower base right now? Are you seeing any -- I appreciate the color on that one relationship that drove the NPLs higher this quarter. But just from a higher level, are you seeing any additional signs of stress from your borrower base here? And kind of what are you baking into your ACL at this point based on what you're seeing today?

We're seeing a little more difficulty chasing payments. Mid-month, the past due level has continued to creep a little bit higher. There is sign that the consumers are having a little bit of stress, small businesses having a little bit of stress. Still, we're not seeing a lot that translates into loss expectation outside of kind of these limited situations, which really haven't been economically driven for the most part. Some of the things that have smaller loans that we've seen migrate to substandard or nonaccrual recently, it's not economic conditions that are driving them the factors particular to a specific business by and large.

And just an overall viewpoint, lower-end consumers seem to be struggling a little bit more. We could see our residential loan portfolio have slight upticks yet in delinquency. But we're not seeing any real trends in our CRE book or anything with really any broad-based deterioration. Primary segments where we're seeing other stress, the trucking industry continues to exhibit some weakness. And then we see periodic weakness across some of our SBA portfolio of loans we acquired from several of our acquisitions. But those trends haven't really changed any over the last several quarters.

We currently have no further questions. So I'll hand back to Matt for some closing remarks.

Okay. Thank you, Sammy, and thank you, everyone. We appreciate your interest in results, and we'll talk to you again in 3 months. Have a good day.

Thank you all.

This concludes today's call. Thank you very much for joining. You may now disconnect your lines.