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What changed in SOUTHERN MISSOURI BANCORP, INC.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of SOUTHERN MISSOURI BANCORP, INC.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+423 added−442 removedSource: 10-K (2023-09-13) vs 10-K (2022-09-13)

Top changes in SOUTHERN MISSOURI BANCORP, INC.'s 2023 10-K

423 paragraphs added · 442 removed · 335 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

182 edited+33 added−47 removed172 unchanged
Biggest changeThe carrying value of the notes was approximately $7.7 million at June 30, 2022. ​ The Company had no short-term borrowings at the end of the fiscal years 2022, 2021 and 2020. ​ 29 ​ ​ Table of Contents The following table presents the maturity of term borrowings, along with associated weighted average rates as of June 30, 2022. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ June 30, 2022 ​ Wtd-Avg ​ FHLB Advance Maturities by Fiscal Year (dollars in thousands) ​ Rate ​ 2023 ​ $ 7,994 ​ 1.21 % 2024 ​ ​ 12,967 ​ 1.89 ​ 2025 ​ ​ 12,940 ​ 1.36 ​ 2026 ​ ​ 1,913 ​ 0.77 ​ 2027 ​ ​ 2,143 ​ 1.27 ​ Thereafter ​ ​ — ​ — ​ Total ​ $ 37,957 ​ 1.47 % ​ ​ The following table sets forth certain information as to the Bank’s borrowings for the periods indicated: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended June 30, ​ 2022 2021 2020 ​ (Dollars in thousands) ​ FHLB advances ​ ​ ​ ​ Daily average balance ​ $ 43,410 ​ $ 65,896 ​ $ 87,241 ​ Weighted average interest rate ​ 1.83 % 2.07 % 2.21 % Maximum outstanding at any month end ​ $ 57,537 ​ $ 85,678 ​ $ 123,452 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Securities sold under agreements to repurchase ​ ​ ​ ​ ​ Daily average balance ​ $ — ​ $ — ​ $ 82 ​ Weighted average interest rate ​ — % — % 0.03 % Maximum outstanding at any month end ​ $ — ​ $ — ​ $ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Subordinated Debt ​ ​ ​ ​ ​ Daily average balance ​ $ 18,189 ​ $ 15,193 ​ $ 15,093 ​ Weighted average interest rate ​ 3.77 % 3.51 % 5.22 % Maximum outstanding at month end ​ $ 23,055 ​ $ 15,243 ​ $ 15,142 ​ ​ Subsidiary Activities The Bank has six active subsidiaries, SB Corning, LLC, SB Real Estate Investments, LLC, Southern Insurance Services, LLC, Fortune Investment Group, LLC, Fortune Insurance Group, LLC, and Fortune SBA, LLC.
Biggest changeThe carrying value of the notes was approximately $7.7 million at June 30, 2023, and the effective rate was 3.71%. ​ 30 ​ ​ Table of Contents The following table sets forth certain information regarding short-term borrowings by the Bank at the end of the periods indicated: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended June 30, ​ 2023 2022 2021 ​ ​ (Dollars in thousands) Year end balances ​ ​ ​ ​ Short-term FHLB advances ​ $ 33,500 ​ $ — ​ $ — ​ Securities sold under agreements to repurchase ​ — ​ — ​ — ​ ​ ​ $ 33,500 ​ $ — ​ $ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted average rate at year end ​ 5.35 % — % — % ​ ​ The following table presents the maturity of term borrowings, along with associated weighted average rates as of June 30, 2023. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ June 30, 2023 ​ Wtd-Avg ​ FHLB Advance Maturities by Fiscal Year (dollars in thousands) ​ Rate ​ 2024 ​ $ 46,491 ​ 4.38 % 2025 ​ ​ 7,966 ​ 1.25 ​ 2026 ​ ​ 1,939 ​ 0.77 ​ 2027 ​ ​ 47,118 ​ 4.10 ​ 2028 ​ ​ 30,000 ​ 3.99 ​ Thereafter ​ ​ — ​ — ​ Total ​ $ 133,514 ​ 3.95 % ​ ​ The following table sets forth certain information as to the Bank’s borrowings for the periods indicated: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended June 30, ​ 2023 2022 2021 ​ (Dollars in thousands) ​ FHLB advances ​ ​ ​ ​ Daily average balance ​ $ 107,661 ​ $ 43,410 ​ $ 65,896 ​ Weighted average interest rate ​ 3.37 % 1.83 % 2.07 % Maximum outstanding at any month end ​ $ 231,328 ​ $ 57,537 ​ $ 85,678 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Securities sold under agreements to repurchase ​ ​ ​ ​ ​ Daily average balance ​ $ — ​ $ — ​ $ — ​ Weighted average interest rate ​ — % — % — % Maximum outstanding at any month end ​ $ — ​ $ — ​ $ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Subordinated Debt ​ ​ ​ ​ ​ Daily average balance ​ $ 23,253 ​ $ 18,189 ​ $ 15,193 ​ Weighted average interest rate ​ 6.19 % 3.77 % 3.51 % Maximum outstanding at month end ​ $ 23,105 ​ $ 23,055 ​ $ 15,243 ​ ​ Other Services The Bank offers fiduciary and investment management services through its Southern Wealth Management division.
Home equity lines of credit (HELOCs) are secured with a deed of trust and are generally issued for up to 90% of the appraised or assessed value of the property securing the line of credit, less the outstanding balance on the first mortgage.
Home equity lines of credit (HELOCs) are secured with a deed of trust or mortgage and are generally issued for up to 90% of the appraised or assessed value of the property securing the line of credit, less the outstanding balance on the first mortgage.
If fair value at the date of foreclosure is lower than the balance of the related loan, the difference will be charged-off to the allowance for loan losses at the time of transfer. Management periodically updates real estate valuations and if the value declines, a specific provision for losses on such property is established by a charge to noninterest expense.
If fair value at the date of foreclosure is lower than the balance of the related loan, the difference will be charged-off to the allowance for credit losses at the time of transfer. Management periodically updates real estate valuations and if the value declines, a specific provision for losses on such property is established by a charge to noninterest expense.
Consumers with additional qualifying Bank products are eligible for additional pricing discounts. The underwriting standards employed for consumer loans include employment stability, an application, a determination of the applicant’s payment history on other debts, and an assessment of ability to meet existing and proposed obligations.
Consumers with additional qualifying Bank products are eligible for additional pricing discounts. The underwriting standards employed for consumer loans include employment stability, a determination of the applicant’s payment history on other debts, and an assessment of ability to meet existing and proposed obligations.
On June 4, 2004, Southern Missouri Bank & Trust Co. converted from a Missouri chartered stock savings bank to a Missouri state chartered trust company with banking powers ("Charter Conversion"). On June 1, 2009, the institution changed its name to Southern Bank. The primary regulator of the Bank is the Missouri Division of Finance.
On June 4, 2004, Southern Missouri Bank & Trust Co. converted from a Missouri chartered stock savings bank to a Missouri chartered trust company with banking powers ("Charter Conversion"). On June 1, 2009, the institution changed its name to Southern Bank. The primary regulator of the Bank is the Missouri Division of Finance.
However, the ability of the Bank to attract and maintain money market deposit accounts, passbook savings accounts, and certificates of deposit, and the rates paid on these deposits, has been and will continue to be significantly affected by market conditions.
However, the ability of the Bank to attract and maintain money market deposit accounts, savings accounts, and certificates of deposit, and the rates paid on these deposits, has been and will continue to be significantly affected by market conditions.
In general, these loans were subject to classification as TDRs at June 30, 2022 and 2021, on the basis of guidance under ASU 2011- 02 “Receivables: A Creditor’s Determination of Whether a Restructuring is a Troubled Debt Restructuring”, which indicates that the Company may not consider the borrower’s effective borrowing rate on the old debt immediately before the restructuring in determining whether a concession has been granted.
In general, these loans were subject to classification as TDRs at June 30, 2023 and 2022, on the basis of guidance under ASU 2011- 02 “Receivables: A Creditor’s Determination of Whether a Restructuring is a Troubled Debt Restructuring”, which indicates that the Company may not consider the borrower’s effective borrowing rate on the old debt immediately before the restructuring in determining whether a concession has been granted.
Most properties securing real estate loans made by the Bank during fiscal 2022 had appraisals performed on them by independent fee appraisers approved and qualified by the Board of Directors. The Bank generally requires borrowers to obtain title insurance and fire, property and flood insurance (if indicated) in an amount not less than the amount of the loan.
Most properties securing real estate loans made by the Bank during fiscal 2023 had appraisals performed on them by independent fee appraisers approved and qualified by the Board of Directors. The Bank generally requires borrowers to obtain title insurance and fire, property and flood insurance (if indicated) in an amount not less than the amount of the loan.
This expansion also excludes such holding companies from the minimum capital requirements of the Dodd-Frank Act. In addition, the Act includes regulatory relief for community banks regarding regulatory examination cycles, call reports, the Volcker Rule (proprietary trading prohibitions), mortgage disclosures and risk weights for certain high-risk commercial real estate loans.
This expansion also excludes such holding companies from the minimum capital requirements of the Dodd-Frank Act. In addition, the Act includes regulatory relief for community banks regarding regulatory examination cycles, call reports, the Volcker Rule (proprietary trading prohibitions), mortgage disclosures and risk weights for certain high-risk commercial real estate loans. The Bank General.
Residential ARM loan originations are subject to annual and lifetime interest rate caps and floors. As a consequence of using interest rate caps, initial rates which may be at a premium or discount, and a "CMT" loan index, the interest earned on the Bank’s ARMs will react differently to changing interest rates than the Bank’s cost of funds.
Owner occupied residential ARM loan originations are subject to annual and lifetime interest rate caps and floors. As a consequence of using interest rate caps, initial rates which may be at a premium or discount, and a "CMT" loan index, the interest earned on the Bank’s ARMs will react differently to changing interest rates than the Bank’s cost of funds.
The guidance prohibits predatory lending programs; provides that institutions should underwrite a mortgage loan on the borrower’s ability to repay the debt by its final maturity at the fully-indexed rate, assuming a fully amortizing repayment schedule; encourages reasonable workout arrangements with borrowers who are in default; mandates clear and balanced 34 ​ ​ Table of Contents advertisements and other communications; encourages arrangements for the escrowing of real estate taxes and insurance; and states that institutions should develop strong control and monitoring systems.
The guidance prohibits predatory lending programs; provides that institutions should underwrite a mortgage loan on the borrower’s ability to repay the debt by its final maturity at the fully-indexed rate, assuming a fully amortizing repayment schedule; encourages reasonable workout arrangements with borrowers who are in default; mandates clear and balanced advertisements and other communications; encourages arrangements for the escrowing of real estate taxes and insurance; and states that institutions should develop strong control and monitoring systems.
For larger depositors, such as public units, the Company often utilizes a reciprocal deposit program to provide additional FDIC coverage to our customer through other 25 ​ ​ Table of Contents financial institutions while conveniently allowing management of the deposit relationship through our institution.
For larger depositors, such as public units, the Company often utilizes a reciprocal deposit program to provide additional FDIC coverage to our customer through other 26 ​ ​ Table of Contents financial institutions while conveniently allowing management of the deposit relationship through our institution.
In addition to the minimum CET1, Tier 1 and total capital ratios, the capital regulations require a capital conservation buffer consisting of additional CET1 capital greater than 2.5% of risk-weighted assets above the required 35 ​ ​ Table of Contents minimum risk-based in order to avoid limitations on paying dividends, engaging in share repurchases and paying discretionary bonuses based on percentages of eligible retained income that could be utilized for such actions.
In addition to the minimum CET1, Tier 1 and total capital ratios, the capital regulations require a capital conservation buffer consisting of additional CET1 capital greater than 2.5% of risk-weighted assets above the required minimum risk-based in order to avoid limitations on paying dividends, engaging in share repurchases and paying discretionary bonuses based on percentages of eligible retained income that could be utilized for such actions.
Of the available credit, in addition to the amount advanced, $331,000 is encumbered in relation to residential real estate loans sold onto the secondary market through the FHLB, and $305,000 was utilized for the issuance of letters of credit to secure public unit deposits.
Of the available credit, in addition to the amount advanced, $417,000 is encumbered in relation to residential real estate loans sold onto the secondary market through the FHLB, and $305,000 was utilized for the issuance of letters of credit to secure public unit deposits.
At June 30, 2022 the Bank’s south region includes 13 of its facilities, one of which is limited service, which are situated in Dunklin, Howell, and Oregon counties in Missouri, and Craighead, Greene, Independence, Lonoke, and White counties in Arkansas.
At June 30, 2023 the Bank’s south region includes 13 of its facilities, one of which is limited service, which are situated in Dunklin, Howell, and Oregon counties in Missouri, and Craighead, Greene, Independence, Lonoke, and White counties in Arkansas.
As of June 30, 2022, the majority of these credits were commercial real estate, multi-family real estate, or commercial business loans, and all of these relationships were performing in accordance with their terms. 9 ​ ​ Table of Contents Loan Portfolio Analysis.
As of June 30, 2023, the majority of these credits were commercial real estate, multi-family real estate, or commercial business loans, and all of these relationships were performing in accordance with their terms. 9 ​ ​ Table of Contents Loan Portfolio Analysis.
Missouri Taxation General. Missouri-based banks, such as the Bank, are subject to a Missouri bank franchise and income tax. Bank Franchise Tax. The Missouri bank franchise tax is imposed on the bank’s taxable income at the rate of 4.48%, less credits for certain Missouri taxes, including income taxes.
Missouri-based banks, such as the Bank, are subject to a Missouri bank franchise and income tax. Bank Franchise Tax. The Missouri bank franchise tax is imposed on the bank’s taxable income at the rate of 4.48%, less credits for certain Missouri taxes, including income taxes.
The Company completed each of the above whole bank acquisitions primarily for the purpose of expanding its commercial banking activities where it believes the Company’s business model will perform well and for the long-term value of its core deposit franchise. 5 ​ ​ Table of Contents Capital Raising Transactions On June 20, 2017, the Company completed an at-the-market common stock issuance.
The Company completed each of the above whole bank acquisitions primarily for the purpose of expanding its commercial banking activities where it believes the Company’s business model will perform well and for the long-term value of its core deposit franchise. Capital Raising Transactions On June 20, 2017, the Company completed an at-the-market common stock issuance.
A bank holding company is required to give the FRB prior written notice of any purchase or redemption of its outstanding equity securities if the gross consideration for the purchase or redemption, when combined with the net consideration paid for all such purchases or redemptions during the preceding 12 months, is equal to 10% or more of the company’s consolidated net worth.
A bank holding company is required to give the FRB prior written notice of any purchase or redemption of its outstanding equity securities if the gross consideration for the purchase or redemption, when combined with the net 38 ​ ​ Table of Contents consideration paid for all such purchases or redemptions during the preceding 12 months, is equal to 10% or more of the company’s consolidated net worth.
The Senior Agricultural Loan Committee is authorized to approve agricultural lending relationships up to $5.0 million and consists of our Chief Credit Officer, as well as several senior lending officers with agricultural lending experience selected by our Senior Lending and Credit Officers.
The Senior Agricultural Loan Committee is authorized to approve agricultural lending relationships up to $10.0 million and consists of our Chief Credit Officer, as well as several senior lending officers with agricultural lending experience selected by our Senior Lending and Credit Officers.
Our policy is that we do not discriminate on the basis of race, color, religion, sex, gender, sexual orientation, ancestry, pregnancy, medical condition, age, marital status, national origin, citizenship status, disability, veteran status, gender identity, genetic information, or any other status protected by law.
Our policy is that we do not discriminate on the basis of race, color, religion, sex, gender, sexual orientation, ancestry, pregnancy, medical condition, age, marital status, national origin, citizenship status, 32 ​ ​ Table of Contents disability, veteran status, gender identity, genetic information, or any other status protected by law.
Federal and state banking laws and regulations govern all areas of the operation of the Bank, including reserves, loans, mortgages, capital, issuance of securities, payment of dividends, and establishment of branches.
Federal and state banking laws and regulations govern all areas of the operation of the Bank, including reserves, loans, mortgages, capital, trust services issuance of securities, payment of dividends, and establishment of branches.
The FRB as the primary federal regulator of the Company and the Bank has authority to impose penalties, initiate civil and administrative actions and take other steps intended to prevent banks from engaging in unsafe or unsound practices. State Regulation and Supervision.
The FRB as the primary federal regulator of the Company and the Bank has authority to impose 34 ​ ​ Table of Contents penalties, initiate civil and administrative actions and take other steps intended to prevent banks from engaging in unsafe or unsound practices. State Regulation and Supervision.
Although creditworthiness of the applicant is a primary consideration, the underwriting process also includes a comparison of the value of the security, if any, in relation to the proposed loan amount.
Although creditworthiness of the applicant is a primary consideration, the underwriting process also includes a comparison of the value of the collateral, if any, in relation to the proposed loan amount.
Federal Deposit Insurance Corporation . The Bank’s deposits are insured up to applicable limits by the Deposit Insurance Fund (“DIF”) of the FDIC. The general insurance limit is $250,000. As insurer, the FDIC imposes deposit insurance premiums and is authorized to conduct examinations of and to require reporting by FDIC-insured institutions.
Federal Deposit Insurance Corporation . The Bank’s deposits are insured up to applicable limits by the Deposit Insurance Fund (“DIF”) of the FDIC. The general insurance limit is $250,000 per account relationship. As insurer, the FDIC imposes deposit insurance premiums and is authorized to conduct examinations of and to require reporting by FDIC-insured institutions.
Generally, consumer loans are originated with fixed rates for terms of up to approximately 66 months, with the exception of home equity lines of credit, which are variable, tied to the prime rate of interest, and are for a period of ten years.
Generally, consumer loans are originated with fixed rates for terms of up to approximately 66 months, with the exception of home equity lines of credit, which are variable, tied to the prime rate of interest, and are 13 ​ ​ Table of Contents for a period of ten years.
The principal business of the Bank consists primarily of attracting retail deposits from the general public and using such deposits along with wholesale funding from the Federal Home Loan Bank of Des Moines ("FHLB"), and, to a lesser extent, brokered deposits, to invest in one- to four-family residential mortgage loans, mortgage loans secured by commercial real estate, commercial non-mortgage business loans, construction loans, and consumer loans.
The principal business of the Bank consists of attracting retail deposits from the general public and using such deposits along with wholesale funding from the Federal Home Loan Bank of Des Moines, ("FHLB"), and brokered deposits, to invest in one- to four-family residential mortgage loans, mortgage loans secured by commercial real estate, commercial non-mortgage business loans, construction loans, and consumer loans.
In addition, in connection with examinations of insured institutions, regulatory examiners have authority to identify problem assets and, if appropriate, require them to be classified. There are three classifications for problem assets: substandard, doubtful and loss.
In addition, in connection with examinations of insured institutions, regulatory examiners have 19 ​ ​ Table of Contents authority to identify problem assets and, if appropriate, require them to be classified. There are three classifications for problem assets: substandard, doubtful and loss.
The Bank’s commercial business loans are evaluated based on the loan application, a determination of the applicant’s payment history on other debts, business stability and an assessment of ability to meet existing obligations and payments on the proposed loan.
The Bank’s commercial business loans are evaluated based on the loan application, a determination of the applicant’s 14 ​ ​ Table of Contents payment history on other debts, business stability and an assessment of ability to meet existing obligations and payments on the proposed loan.
Loan applications are generally taken and processed at each of the Bank’s full-service locations, and the Bank in recent years began processing online applications for single-family residential loans. While the Bank originates both adjustable-rate and fixed-rate loans, the ability to originate loans is dependent upon the relative customer demand for loans in its market.
Loan applications are generally taken and processed at each of the Bank’s full-service locations and online for single-family residential loans. While the Bank originates both adjustable-rate and fixed-rate loans, the ability to originate loans is dependent upon the relative customer demand for loans in its market.
Regulatory Capital Requirements . The Bank is required to maintain specified levels of regulatory capital under federal banking regulations. The capital adequacy requirements are quantitative measures established by regulation that require the Bank to maintain minimum amounts and ratios of capital.
Regulatory Capital Requirements . The Bank is required to maintain specified levels of regulatory capital under federal banking regulations. The capital adequacy requirements are quantitative measures established by regulation that 36 ​ ​ Table of Contents require the Bank to maintain minimum amounts and ratios of capital.
The Bank’s west region includes 12 of its facilities, which are situated in Christian, Greene, Phelps, Stone, Taney, and Webster counties in Missouri. These counties have a total population of approximately 531,000, and included within this market area is the Springfield, Missouri, MSA, which has a population of approximately 465,000.
The Bank’s west region includes 12 of its facilities, which are situated in Christian, Greene, Phelps, Stone, Taney, and Webster counties in Missouri. These counties have a total population of approximately 571,000, and included within this market area is the Springfield MSA, which has a population of approximately 493,000.
Fixed rate commercial real estate loans represented 86.1% of the commercial real estate portfolio with a weighted average maturity of 5.4 years. 12 ​ ​ Table of Contents Commercial real estate loans originated by the Bank are generally based on amortization schedules of up to 25 years with monthly principal and interest payments.
Fixed rate commercial real estate loans represented 82.8% of the commercial real estate portfolio with a weighted average maturity of 5.1 years. 12 ​ ​ Table of Contents Commercial real estate loans originated by the Bank are generally based on amortization schedules of up to 25 years with monthly principal and interest payments.
The Bank and its holding company and related subsidiaries are subject to an income tax that is imposed on the consolidated taxable income apportioned to Missouri at the rate of 4.0%. The return is filed on a consolidated basis by all members of the consolidated group including the Bank. Arkansas Taxation General.
The Bank and its holding company and related subsidiaries are subject to an income tax that is imposed on the consolidated taxable income apportioned to Missouri at the rate of 4.0%. The return is filed on a consolidated basis by all members of the consolidated group including the Bank. Earnings Tax.
Substantially all of the one- to four-family residential mortgage originations in the Bank’s portfolio are secured by property located within the Bank’s market area. Fixed rate one- to four- family loans represented 83.6% of the one- to four- family portfolio with a weighted average maturity of 15.3 years.
Substantially all of the one- to four-family residential mortgage originations in the Bank’s portfolio are secured by property located within the Bank’s market area. Fixed rate one- to four- family loans represented 81.3% of the one- to four- family portfolio with a weighted average maturity of 15.7 years.
The Company’s investment portfolio is managed in accordance with the Bank’s investment policy which was adopted by the Board of Directors of the Bank and is implemented by members of the asset/liability management committee which consists of the President/Chief Executive Officer, the Chief Financial Officer, the Chief Operations Officer, and four outside directors.
The Company’s investment portfolio is managed in accordance with the Bank’s investment policy which was adopted by the Board of Directors of the Bank and is implemented by members of the asset/liability management committee which consists of the Chairman of the Board, the President/Chief Administrative Officer, the Chief Financial Officer, the Chief Operations Officer, the Chief Lending Officer, and four outside directors.
As a result, the availability of funds for the repayment of commercial business loans may be substantially dependent on the success of the business itself. Further, the collateral securing the loans may depreciate over time, may be difficult to appraise and may fluctuate in value based on the success of the business.
As a result, the availability of funds for the repayment of commercial business loans may be substantially dependent on the success of the business itself. Further, the collateral securing the loans may depreciate over time, may be difficult to appraise and may fluctuate in value based on the success of the business. Small Business Administration (SBA) Lending.
The Bank also originates loans secured by multi-family residential properties that are often located outside the Company’s primary market area, but made to borrowers who operate within the primary market area. At June 30, 2022, the Bank had $308.0 million, or 11.5% of net loans receivable, in multi-family residential real estate.
The Bank also originates loans secured by multi-family residential properties that are often located outside the Company’s primary market area, but made to borrowers who operate within the primary market area. At June 30, 2023, the Bank had $393.0 million, or 11.0% of net loans receivable, in multi-family residential real estate.
These counties have a total population of approximately 425,000, and included within this market area is the Jonesboro, Arkansas, MSA, which has a population of approximately 150,000. The Cabot, Arkansas, branch in Lonoke County, is located in the northeast corner of the Little Rock, Arkansas, MSA.
These counties have a total population of approximately 458,000, and included within this market area is the Jonesboro MSA, which has a population of approximately 157,000. The Cabot, Arkansas, branch in Lonoke County, is located in the northeast corner of the Little Rock MSA.
Fortune SBA, LLC is an entity acquired in the Fortune acquisition, and was engaged in the origination of SBA guaranteed loans, sale of the guaranteed portion of the loan, and servicing of loans. At June 30, 2022, Fortune SBA, LLC held no assets or liabilities and is 30 ​ ​ Table of Contents currently inactive.
Fortune SBA, LLC is an entity acquired in the Fortune acquisition, and was engaged in the origination of SBA guaranteed loans, sale of the guaranteed portion of the loan, and servicing of loans. At June 30, 2023, Fortune SBA, LLC held no assets or liabilities and is currently inactive.
For more information regarding access to these filings on our website, please contact our Corporate Secretary, Southern Missouri Bancorp, Inc., 2991 Oak Grove Road, Poplar Bluff, Missouri, 63901; telephone number (573) 778-1800. ​ ​
For more information regarding access to these filings on our website, please contact our Corporate Secretary, Southern Missouri Bancorp, Inc., 2991 Oak Grove Road, Poplar Bluff, Missouri, 63901; telephone number (573) 778-1800. ​ 41 ​ ​ Table of Contents ​
The Company views the acquisition and updates to the new facility as an expression of its continuing commitment to the Cairo community. The acquisition resulted in goodwill of $442,000, and was not deductible for tax purposes. On May 22, 2020, the Company completed its acquisition of Central Federal Bancshares, Inc.
The Company views the acquisition and updates to the new facility as an expression of its continuing commitment to the Cairo community. The acquisition resulted in goodwill of $442,000, which was recorded at the Bank level, and was not deductible for tax purposes. On May 22, 2020, the Company completed its acquisition of Central Federal Bancshares, Inc.
The corporate dividends-received deduction is generally 50% in the case of dividends received from unaffiliated corporations with which the Company and the Bank will not file a consolidated tax return, except that if the Company or the Bank owns more than 20% of the stock of a corporation distributing a dividend, then 65% of any dividends received may be deducted.
The corporate dividends-received deduction is generally 50% in the case of dividends received from unaffiliated corporations with which the Company and the Bank will not file a consolidated tax return, except that if the Company or the Bank owns more than 20% of the stock of a corporation distributing a dividend, then 65% of any dividends received may be deducted. 40 ​ ​ Table of Contents Missouri Taxation General.
As a member, the Bank is required to purchase and maintain stock in the FHLB of Des Moines. At June 30, 2022, the Bank had $5.9 million in FHLB stock, which was in compliance with this requirement.
As a member, the Bank is required to purchase and maintain stock in the FHLB of Des Moines. At June 30, 2023, the Bank had $11.5 million in FHLB stock, which was in compliance with this requirement.
This Annual Report on Form 10-K and our other reports, proxy statements and other information, including earnings press releases, 39 ​ ​ Table of Contents filed with the SEC are available at http://investors.bankwithsouthern.com.
This Annual Report on Form 10-K and our other reports, proxy statements and other information, including earnings press releases, filed with the SEC are available at http://investors.bankwithsouthern.com.
At June 30, 2022, the Bank had additional borrowing capacity on its reported residential and commercial real estate loans pledged to the FHLB of approximately $500.1 million, as compared to $383.0 million at June 30, 2021. Additionally, the Bank is approved to borrow from the Federal Reserve Bank’s discount window on a primary credit basis.
At June 30, 2023, the Bank had additional borrowing capacity on its reported residential and commercial real estate loans pledged to the FHLB of approximately $541.3 million, as compared to $500.1 million at June 30, 2022. Additionally, the Bank is approved to borrow from the Federal Reserve Bank’s discount window on a primary credit basis.
(2) Commercial business loan balances included agricultural equipment and production loans of $110.3, $104.9 million, $100.3 million, $95.5 million, and $81.5 million as of June 30, 2022, 2021, 2020, 2019, and 2018, respectively.
(2) Commercial business loan balances included agricultural equipment and production loans of $138.3 million, $110.3 million, $104.9 million, $100.3 million, and $95.5 million, as of June 30, 2023, 2022, 2021, 2020, and 2019, respectively.
Each Regional Senior Loan Committee is authorized to approve lending relationships up to $3.0 million. The Bank’s Agricultural Loan Committee consists of several lending officers with agricultural lending experience selected by our Senior Lending and Credit Officers, and is authorized to approve agricultural lending relationships up to $3.0 million.
The Bank’s Agricultural Loan Committee consists of several lending officers with agricultural lending experience selected by our Senior Lending and Credit Officers, and is authorized to approve agricultural lending relationships up to $4.0 million.
Such commitments may be oral or in writing with specified terms, conditions and at a specified rate of interest. The Bank had outstanding net loan commitments of approximately $707.7 million at June 30, 2022. See Note 12 of Notes to the Consolidated Financial Statements contained in Item 8.
Such commitments may be oral or in writing with specified terms, conditions and at a specified rate of interest. The Bank had outstanding net loan commitments of approximately $912.0 million at June 30, 2023. See Note 12 of Notes to the Consolidated Financial Statements contained in Item 8.
The Bank received 33 ​ ​ Table of Contents $239,000 and $269,000 in dividends from the FHLB of Des Moines for the years ended June 30, 2022 and 2021, respectively. The FHLBs continue to contribute to low- and moderately-priced housing programs through direct loans or interest subsidies on advances targeted for community investment and low- and moderate-income housing projects.
The Bank received $555,000 and $239,000 in dividends from the FHLB of Des Moines for the years ended June 30, 2023 and 2022, respectively. The FHLBs continue to contribute to low- and moderately-priced housing programs through direct loans or interest subsidies on advances targeted for community investment and low- and moderate-income housing projects.
As of June 30, 2022, the Company had no derivative instruments and no outstanding hedging activities. Management has reviewed potential uses for derivative instruments and hedging activities, but has no definitive plans to employ these tools. Debt and Other Securities.
As of June 30, 2023, the Company had no derivative instruments and no outstanding hedging activities. Management has reviewed potential uses for derivative instruments and hedging activities, but has no definitive plans to employ these tools. 23 ​ ​ Table of Contents Debt and Other Securities.
Fortune Investment Group, LLC is an entity acquired in the Fortune acquisition that was engaged in the brokerage of wealth management products, with no assets or liabilities at June 30, 2022, and is currently inactive. Fortune Insurance Group, LLC is an entity acquired in the Fortune acquisition, and is engaged in the brokerage of commercial and consumer insurance products.
Fortune Investment Group, LLC is an entity acquired in the Fortune acquisition that was engaged in the brokerage of wealth management products, with no assets or liabilities at June 30, 2023, and is currently inactive.
These provisions for credit losses are charged against earnings in the year they are established. The Bank had an allowance for credit losses at June 30, 2022, of $33.2 million, which represented 526% of nonperforming assets as compared to an allowance of $33.2 million, which represented 409% of nonperforming assets at June 30, 2021.
These provisions for credit losses are charged against earnings in the year they are established. The Bank had an allowance for credit losses at June 30, 2023, of $47.8 million, which represented 424% of nonperforming assets as compared to an allowance of $33.2 million, which represented 526% of nonperforming assets at June 30, 2022.
At June 30, 2022, AFS securities totaled $235.4 million (not including FHLB and Federal Reserve Bank membership stock, or other equity securities without readity-determinable fair values). For information regarding the amortized cost and market values of the Company’s investments, see Note 2 of Notes to the Consolidated Financial Statements contained in Item 8.
At June 30, 2023, AFS securities totaled $417.6 million (not including FHLB and Federal Reserve Bank membership stock, or other equity securities without readily-determinable fair values). For information regarding the amortized cost and market values of the Company’s investments, see Note 2 of Notes to the Consolidated Financial Statements contained in Item 8.
The Bank’s east and south regions are generally rural in nature with economies supported by manufacturing activity, agriculture (livestock, dairy, poultry, rice, timber, soybeans, wheat, melons, corn, and cotton), healthcare, and education. Large employers include hospitals, manufacturers, school districts, and colleges.
The Bank’s east and south regions, and part of the northwest region. are generally rural in nature with economies supported by manufacturing activity, agriculture (livestock, dairy, poultry, rice, timber, soybeans, wheat, melons, corn, and cotton), healthcare, and education. Large employers include hospitals, manufacturers, school districts, 7 ​ ​ Table of Contents and colleges.
Increases in originations over recent periods is attributed to increased lending activity, increased borrower refinancing, and an expanded market area and customer base following recent acquisitions. From time to time, the Bank has purchased loan participations consistent with its loan underwriting standards. During fiscal 2022, the Bank committed to purchase $31.8 million of new loan participations.
Increases in originations over recent periods is attributed to increased lending activity, increased borrower refinancing, and an expanded market area and customer base following recent mergers. From time to time, the Bank has purchased loan participations consistent with its loan underwriting standards. During fiscal 2023, the Bank committed to purchase $118.7 million of new loan participations.
In fiscal 2022, the Bank originated $1.1 billion of loans, compared to $971.8 million and $848.1 million, respectively, in fiscal 2021 and 2020. Of these loans, mortgage loan originations were $970.1 million, $771.2 million, and $570.1 million in fiscal 2022, 2021, and 2020, respectively.
In fiscal 2023, the Bank originated $1.2 billion of loans, compared to $1.1 billion and $971.8 million, respectively, in fiscal 2022 and 2021. Of these loans, mortgage loan originations were $1.0 billion, $970.1 million, and $771.2 million in fiscal 2023, 2022, and 2021, respectively.
These funds are also used to purchase mortgage-backed and related securities ("MBS"), municipal bonds, and other permissible investments. At June 30, 2022, the Company had total assets of $3.2 billion, total deposits of $2.8 b illion and stockholders’ equity of $320.8 million. The Company has not engaged in any significant activity other than holding the stock of the Bank.
These funds are also used to purchase mortgage-backed and related securities ("MBS"), municipal bonds, and other permissible investments. At June 30, 2023, the Company had total assets of $4.4 billion, total deposits of $3.7 b illion and stockholders’ equity of $446.1 million. The Company has not engaged in any significant activity other than holding the stock of the Bank.
Fixed rate loans secured by multi-family residential properties represented 89.5% of the multi-family residential property portfolio with a weighted average maturity of 8.0 years. The majority of the multi-family residential loans that are originated by the Bank are amortized over periods generally up to 25 years, with balloon maturities up to ten years.
Fixed rate loans secured by multi-family residential properties represented 85.7% of the multi-family residential property portfolio with a weighted average maturity of 7.6 years. The majority of the multi-family residential loans that are originated by the Bank are amortized over periods generally up to 25 years, with balloon maturities up to ten years.
Included in adversely classified assets at June 30, 2022, were various loans totaling $27.1 million (see Note 3 of Notes to the Consolidated Financial Statements contained in Item 8 for more information on adversely classified loans) and foreclosed real estate and repossessed assets totaling $2.2 million.
Included in adversely classified assets at June 30, 2023, were various loans totaling $46.3 million (see Note 3 of Notes to the Consolidated Financial Statements contained in Item 8 for more information on adversely classified loans) and foreclosed real estate and repossessed assets totaling $3.6 million.
At June 30, 2022, the Bank also had an allowance for credit losses on off-balance sheet credit exposures of $3.4 million, as compared to $1.8 million at June 30, 2021.
At June 30, 2023, the Bank also had an allowance for credit losses on off-balance sheet credit exposures of $6.3 million, as compared to $3.4 million at June 30, 2022.
SMS Financial Services, Inc. is a wholly owned subsidiary of the Bank, which had no assets or liabilities at June 30, 2022, and is currently inactive. Employees and Human Capital Resources As of June 30, 2022, the Company had 511 full-time employees and 33 part-time employees for a total of 544 employees (collectively, our “Team Members”).
SMS Financial Services, Inc. is a wholly owned subsidiary of the Bank, which had no assets or liabilities at June 30, 2023, and is currently inactive. Employees and Human Capital Resources As of June 30, 2023, the Company had 665 full-time employees and 38 part-time employees for a total of 703 employees (collectively, our “Team Members”).
In underwriting one- to four-family residential real estate loans, the Bank evaluates the borrower’s ability to meet debt service requirements at current as well as fully indexed rates for ARM loans, and the value of the property securing the loan.
One- to four-family loans tied to other indices totaled $65.9 million. ​ In underwriting one- to four-family residential real estate loans, the Bank evaluates the borrower’s ability to meet debt service requirements at current as well as fully indexed rates for ARM loans, and the value of the property securing the loan.
Service providers are required under the rule to notify affected banking organization customers as soon as possible when the provider determines that it has experienced a computer-security incident that has materially affected or is reasonably likely to materially affect the banking organization’s customers for four or more hours. 37 ​ ​ Table of Contents The Company Federal Securities Law.
Service providers are required under the rule to notify affected banking organization customers as soon as possible when the provider determines that it has experienced a computer-security incident that has materially affected or is reasonably likely to materially affect the banking organization’s customers for four or more hours.
The Regional Small Business Loan Committees each consists of lenders selected by our Senior Lending and Credit Officers, and is authorized to approve lending relationships up to $1.5 million. The Regional Senior Loan Committees each consists of one director appointed by the Board of Directors, and senior lenders selected by our Senior Lending and Credit Officers.
The Regional Loan Committees each consists of one director appointed by the Board of Directors and lenders selected by our Senior Lending and Credit Officers, and is authorized to approve lending relationships up to $4.0 million.
The securities had been issued in June 2005 by Ozarks Legacy in connection with the sale of trust preferred securities, bear interest at a floating rate based on LIBOR, and mature in 2035. At June 30, 2022, the carrying value was $2.7 million, and bore interest at a current coupon rate of 2.57% and an effective rate of 4.28%.
The securities had been issued in June 2005 by Ozarks Legacy in connection with the sale of trust preferred securities, bear interest at a floating rate based on LIBOR, and mature in 2035. At June 30, 2023, the carrying value was $2.7 million, and bore interest at a current coupon rate of 8.00% and an effective rate of 10.02%.
The Bank’s commercial business lending activities encompass loans with a variety of purposes and security, including loans to finance accounts receivable, inventory, equipment and operating lines of credit. At June 30, 2022, the Bank had $441.6 million in commercial business loans outstanding, or 16.4% of net loans receivable.
The Bank’s commercial business lending activities encompass loans with a variety of purposes and security, including loans to finance accounts receivable, inventory, equipment and operating lines of credit. At June 30, 2023, the Bank had $599.0 million in commercial business loans outstanding, or 16.8% of net loans receivable.
Based on projected prepayment rates, the weighted average life of the MBS and CMOs at June 30, 2022, was 57 months.
Based on projected prepayment rates, the weighted average life of the MBS and CMOs at June 30, 2023, was 68 months.
In order for the Bank to borrow from the FHLB, it has reported $889.7 million of its residential and 28 ​ ​ Table of Contents commercial real estate loans to the FHLB as eligible collateral for available credit of approximately $539.5 million, and has purchased $5.9 million in membership stock in the FHLB of Des Moines.
In order for the Bank to borrow from the FHLB, it has reported $1.1 billion of its residential and commercial real estate loans to the FHLB as 29 ​ ​ Table of Contents eligible collateral for available credit of approximately $539.5 million, and has purchased $11.5 million in membership stock in the FHLB of Des Moines.
The following table sets forth the composition of the Bank’s loan portfolio by type of loan and type of security as of the dates indicated. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ At June 30, ​ ​ 2022 ​ 2021 ​ 2020 ​ 2019 ​ 2018 ​ Amount Percent Amount Percent Amount Percent Amount Percent Amount Percent ​ ​ (Dollars in thousands) Type of Loan: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Mortgage Loans: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Residential real estate ​ $ 904,160 33.66 % $ 721,216 32.78 % $ 627,357 29.29 % $ 491,992 26.65 % $ 450,919 28.84 % Commercial real estate (1) ​ 1,146,673 42.69 ​ 889,793 40.44 ​ 887,419 41.43 ​ 840,777 45.53 ​ 704,647 45.07 ​ Construction ​ 258,072 9.61 ​ 208,824 9.49 ​ 185,924 8.68 ​ 123,287 6.68 ​ 112,718 7.21 ​ Total mortgage loans ​ 2,308,905 85.96 ​ 1,819,833 82.71 ​ 1,700,700 79.40 ​ 1,456,056 78.86 ​ 1,268,284 81.12 ​ Other Loans: ​ ​ ​ ​ ​ ​ Automobile loans ​ 17,316 0.64 ​ 15,146 0.69 ​ 12,084 0.56 ​ 11,379 0.62 ​ 9,056 0.58 ​ Commercial business (2) (3) ​ 441,598 16.44 ​ 414,124 18.82 ​ 468,448 21.87 ​ 355,874 19.27 ​ 281,272 17.99 ​ Home equity ​ 45,460 1.69 ​ 37,783 1.72 ​ 43,149 2.01 ​ 43,369 2.35 ​ 39,218 2.51 ​ Other ​ 30,220 1.13 ​ 24,745 1.12 ​ 25,534 1.20 ​ 42,786 2.32 ​ 30,297 1.94 ​ Total other loans ​ 534,594 19.90 ​ 491,798 22.35 ​ 549,215 25.64 ​ 453,408 24.56 ​ 359,843 23.02 ​ Total loans ​ 2,843,499 105.86 ​ 2,311,631 105.06 ​ 2,249,915 105.04 ​ 1,909,464 103.42 ​ 1,628,127 104.14 ​ Less: ​ ​ ​ ​ ​ ​ Undisbursed loans in process ​ 123,656 4.60 ​ 74,540 3.39 ​ 78,452 3.66 ​ 43,153 2.34 ​ 46,533 2.98 ​ Deferred fees and discounts ​ 453 0.02 ​ 3,625 0.16 ​ 4,395 0.21 ​ 3 0 ​ — — ​ Allowance for loan losses ​ 33,192 1.24 ​ 33,222 1.51 ​ 25,139 1.17 ​ 19,903 1.08 ​ 18,214 1.16 ​ Net loans receivable ​ $ 2,686,198 100.00 % $ 2,200,244 100.00 % $ 2,141,929 100.00 % $ 1,846,405 100.00 % $ 1,563,380 100.00 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Type of Security: ​ ​ ​ ​ ​ ​ Residential real estate ​ ​ ​ ​ ​ ​ One-to four-family ​ $ 690,478 25.71 % $ 526,208 23.92 % $ 482,009 22.50 % $ 395,317 21.41 % $ 414,258 26.50 % Multi-family ​ 376,854 14.03 ​ 359,200 16.33 ​ 286,654 13.38 ​ 172,303 9.33 ​ 137,238 8.78 ​ Commercial real estate ​ 975,100 36.30 ​ 701,438 31.88 ​ 688,145 32.13 ​ 647,078 35.05 ​ 502,073 32.11 ​ Land ​ 266,472 9.92 ​ 232,987 10.59 ​ 243,892 11.39 ​ 241,360 13.07 ​ 214,715 13.73 ​ Commercial ​ 441,598 16.44 ​ 414,124 18.82 ​ 468,448 21.88 ​ 355,874 19.28 ​ 281,272 17.99 ​ Consumer and other ​ 92,997 3.46 ​ 77,674 3.52 ​ 80,767 3.77 ​ 97,532 5.28 ​ 78,571 5.03 ​ Total loans ​ 2,843,499 105.86 ​ 2,311,631 105.06 ​ 2,249,915 105.04 ​ 1,909,464 103.42 ​ 1,628,127 104.14 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Less: ​ ​ ​ ​ ​ ​ Undisbursed loans in process ​ 123,656 4.60 ​ 74,540 3.39 ​ 78,452 3.66 ​ 43,153 2.34 ​ 46,533 2.98 ​ Deferred fees and discounts ​ 453 0.02 ​ 3,625 0.16 ​ 4,395 0.21 ​ 3 — ​ — — ​ Allowance for loan losses ​ 33,192 1.24 ​ 33,222 1.51 ​ 25,139 1.17 ​ 19,903 1.08 ​ 18,214 1.16 ​ Net loans receivable ​ $ 2,686,198 100.00 % $ 2,200,244 100.00 % $ 2,141,929 100.00 % $ 1,846,405 100.00 % $ 1,563,380 100.00 % (1) Commercial real estate loan balances included farmland and other agricultural-related real estate loans of $213.1, $180.6 million, $185.3 million, $182.7 million, and $160.3 million as of June 30, 2022, 2021, 2020, 2019, and 2018, respectively.
The following table sets forth the composition of the Bank’s loan portfolio by type of loan and type of security as of the dates indicated. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ At June 30, ​ ​ 2023 ​ 2022 ​ 2021 ​ 2020 ​ 2019 ​ Amount Percent Amount Percent Amount Percent Amount Percent Amount Percent ​ ​ (Dollars in thousands) Type of Loan: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Mortgage Loans: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Residential real estate ​ $ 1,133,417 31.74 % $ 904,160 33.66 % $ 721,216 32.78 % $ 627,357 29.29 % $ 491,992 26.65 % Commercial real estate (1) ​ 1,562,379 43.75 ​ 1,146,673 42.69 ​ 889,793 40.44 ​ 887,419 41.43 ​ 840,777 45.53 ​ Construction ​ 550,052 15.40 ​ 258,072 9.61 ​ 208,824 9.49 ​ 185,924 8.68 ​ 123,287 6.68 ​ Total mortgage loans ​ 3,245,848 90.89 ​ 2,308,905 85.96 ​ 1,819,833 82.71 ​ 1,700,700 79.40 ​ 1,456,056 78.86 ​ Other Loans: ​ ​ ​ ​ ​ ​ Automobile loans ​ 21,761 0.61 ​ 17,316 0.64 ​ 15,146 0.69 ​ 12,084 0.56 ​ 11,379 0.62 ​ Commercial business (2) (3) ​ 599,030 16.77 ​ 441,598 16.44 ​ 414,124 18.82 ​ 468,448 21.87 ​ 355,874 19.27 ​ Home equity ​ 65,053 1.82 ​ 45,460 1.69 ​ 37,783 1.72 ​ 43,149 2.01 ​ 43,369 2.35 ​ Other ​ 46,701 1.32 ​ 30,220 1.13 ​ 24,745 1.12 ​ 25,534 1.20 ​ 42,786 2.32 ​ Total other loans ​ 732,545 20.52 ​ 534,594 19.90 ​ 491,798 22.35 ​ 549,215 25.64 ​ 453,408 24.56 ​ Total loans ​ 3,978,393 111.41 ​ 2,843,499 105.86 ​ 2,311,631 105.06 ​ 2,249,915 105.04 ​ 1,909,464 103.42 ​ Less: ​ ​ ​ ​ ​ ​ Undisbursed loans in process ​ 359,196 10.06 ​ 123,656 4.60 ​ 74,540 3.39 ​ 78,452 3.66 ​ 43,153 2.34 ​ Deferred fees and discounts ​ 299 0.01 ​ 453 0.02 ​ 3,625 0.16 ​ 4,395 0 ​ 3 0.00 ​ Allowance for loan losses ​ 47,820 1.34 ​ 33,192 1.24 ​ 33,222 1.51 ​ 25,139 1.17 ​ 19,903 1.08 ​ Net loans receivable ​ $ 3,571,078 100.00 % $ 2,686,198 100.00 % $ 2,200,244 100.00 % $ 2,141,929 100.00 % $ 1,846,405 100.00 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Type of Security: ​ ​ ​ ​ ​ ​ Residential real estate ​ ​ ​ ​ ​ ​ One-to four-family ​ $ 865,144 24.23 % $ 690,478 25.71 % $ 526,208 23.92 % $ 482,009 22.50 % $ 395,317 21.41 % Multi-family ​ 648,697 18.17 ​ 376,854 14.03 ​ 359,200 16.33 ​ 286,654 13.38 ​ 172,303 9.33 ​ Commercial real estate ​ 1,431,166 40.08 ​ 975,100 36.30 ​ 701,438 31.88 ​ 688,145 32.13 ​ 647,078 35.05 ​ Land ​ 300,841 8.42 ​ 266,472 9.92 ​ 232,987 10.59 ​ 243,892 11.39 ​ 241,360 13.07 ​ Commercial ​ 599,030 16.77 ​ 441,598 16.44 ​ 414,124 18.82 ​ 468,448 21.88 ​ 355,874 19.28 ​ Consumer and other ​ 133,515 3.74 ​ 92,997 3.46 ​ 77,674 3.52 ​ 80,767 3.77 ​ 97,532 5.28 ​ Total loans ​ 3,978,393 ​ 111.41 ​ ​ 2,843,499 ​ 105.86 ​ ​ 2,311,631 ​ 105.06 ​ ​ 2,249,915 ​ 105.04 ​ ​ 1,909,464 ​ 103.42 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Less: ​ ​ ​ ​ ​ ​ Undisbursed loans in process ​ 359,196 10.06 ​ 123,656 4.60 ​ 74,540 3.39 ​ 78,452 3.66 ​ 43,153 2.34 ​ Deferred fees and discounts ​ 299 0.01 ​ 453 0.02 ​ 3,625 0.16 ​ 4,395 0.21 ​ 3 — ​ Allowance for loan losses ​ 47,820 1.34 ​ 33,192 1.24 ​ 33,222 1.51 ​ 25,139 1.17 ​ 19,903 1.08 ​ Net loans receivable ​ $ 3,571,078 100.00 % $ 2,686,198 100.00 % $ 2,200,244 100.00 % $ 2,141,929 100.00 % $ 1,846,405 100.00 % (1) Commercial real estate loan balances included farmland and other agricultural-related real estate loans of $238.1 million, $213.1, $180.6 million, $185.3 million, and $182.7 million, as of June 30, 2023, 2022, 2021, 2020, and 2019, respectively.
Consumer loans for the purchase of automobiles represented 19.9% of the Bank’s consumer loan portfolio at June 30, 2022, and totaled $17.3 million, or 0.64% of net loans receivable. Of that total, an immaterial amount was originated by auto dealers. Typically, automobile loans are made for terms of up to 66 months for new and used vehicles.
Consumer loans for the purchase of automobiles represented 16.3% of the Bank’s consumer loan portfolio at June 30, 2023, and totaled $21.8 million, or 0.6% of net loans receivable. Of that total, an immaterial amount was originated by auto dealers. Typically, automobile loans are made for terms of up to 66 months for new and used vehicles.
Insurance of deposits may be terminated by the FDIC upon a finding that the institution has engaged in unsafe or unsound practices, is in an unsafe or unsound condition to continue operations or has violated any applicable law, regulation, rule, order or condition imposed by the FDIC.
We cannot predict what assessment rates will be in the future. ​ Insurance of deposits may be terminated by the FDIC upon a finding that the institution has engaged in unsafe or unsound practices, is in an unsafe or unsound condition to continue operations or has violated any applicable law, regulation, rule, order or condition imposed by the FDIC.
Typically, originated ARM loans secured by owner occupied properties reprice at a margin of 2.75% to 3.00% over the weekly average yield on United States Treasury securities adjusted to a constant maturity of one year (“CMT”). Generally, ARM loans secured by non-owner occupied residential properties reprice at a margin of 3.75% over the CMT index.
Typically, originated ARM loans secured by owner occupied properties reprice at a margin of 2.75% to 3.00% over the weekly average yield on United States Treasury securities adjusted to a constant maturity of one year (“CMT”). Generally, ARM loans secured by non-owner occupied residential properties are tied to the Wall Street Journal prime rate.
The important factors we discuss below, as well as other factors discussed under the caption "Management’s Discussion and Analysis of Financial Condition and Results of Operations" and identified in the filing and in our other filings with the SEC and those presented elsewhere by our management from time to time, could cause actual results to differ materially from those indicated by the forward-looking statements made in this document: ● potential adverse impacts to economic conditions in the Company’s local market areas, other markets where the Company has lending relationships, or other aspects of the Company’s business operations or financial markets, generally, resulting from the ongoing COVID-19 pandemic and any governmental or societal responses thereto; ● expected cost savings, synergies and other benefits from our merger and acquisition activities, including our ongoing and recently completed acquisitions, might not be realized within the anticipated time frames, to the extent anticipated, or at all, and costs or difficulties relating to integration matters, including but not limited to customer and employee retention, might be greater than expected; ● the strength of the United States economy in general and the strength of the local economies in which we conduct operations, including unemployment levels and labor shortages; ● fluctuations in interest rates and inflation, including the effects of a potential recession or slowed economic growth caused by changes in oil prices or supply chain disruptions; ● monetary and fiscal policies of the Board of Governors of the Federal Reserve System (the “Federal Reserve Board”) and the U.S.
The important factors we discuss below, as well as other factors discussed under the caption "Management’s Discussion and Analysis of Financial Condition and Results of Operations" and identified in the filing and in our other filings with the SEC and 5 ​ ​ Table of Contents those presented elsewhere by our management from time to time, could cause actual results to differ materially from those indicated by the forward-looking statements made in this document: ● the remaining effects of the COVID-19 pandemic on general economic conditions, either nationally or in the Company’s market and lending areas; ● expected cost savings, synergies and other benefits from our merger and acquisition activities, including our recently completed acquisitions, might not be realized within the anticipated time frames, to the extent anticipated, or at all, and costs or difficulties relating to integration matters, including but not limited to customer and employee retention and labor shortages, might be greater than expected and goodwill impairment charges might be incurred; ● the strength of the United States economy in general and the strength of the local economies in which we conduct operations; ● fluctuations in interest rates and inflation, including the effects of a potential recession whether caused by Federal Reserve actions or otherwise or slowed economic growth caused by changes in oil prices or supply chain disruptions; ● monetary and fiscal policies of the Board of Governors of the Federal Reserve System (the “Federal Reserve Board”) and the U.S.
At fiscal year end, fixed rate commercial loans represented 63.0% of the commercial loan portfolio with a weighted average maturity of 3.2 years.The adjustable rate business loans typically reprice daily, monthly, quarterly, or annually, in accordance with the Wall Street prime rate of interest.
At fiscal year end, fixed rate commercial loans represented 58.0% of the commercial loan portfolio with a weighted average maturity of 2.9 years. The adjustable rate business loans typically reprice daily, monthly, quarterly, or annually, in accordance with the Wall Street prime rate of interest. The Bank typically includes an interest rate "floor" in the loan agreement.
These borrowers requested and received payment deferrals or modifications due to the impact of the COVID-19 pandemic on their operations, and were not able to return to their previously contracted arrangements by the fiscal year ends noted.
These borrowers requested and received payment deferrals or modifications due to the impact of the COVID- 19 pandemic on their operations, and were not able to return to their previously contracted arrangements by June 30, 2022.
For fiscal years ended June 30, 2022, 2021, 2020, 2019, and 2018, originations of one- to four-family loans in excess of 80% loan-to-value have totaled $50.8 million, $52.2 million, $45.9 million, $23.3 million, and $26.3 million, respectively, totaling $198.4 million. The outstanding balance of those loans at June 30, 2022, was $95.9 million.
For fiscal years ended June 30, 2023, 2022, 2021, 2020, and 2019, originations of one- to four-family loans in excess of 80% loan-to-value have totaled $27.3 million, $50.8 million, $52.2 million, $45.9 million, and $23.3 million, respectively, totaling $199.5 million. The outstanding balance of those loans at June 30, 2023, was $110.7 million.
Generally, these loans have fixed interest rates and maturities ranging up to ten years, with a balloon payment due at maturity. Alternatively, for some loans, the interest rate adjusts at least annually after an initial fixed-rate period up to seven years, based upon the Wall Street prime rate. The Bank typically includes an interest rate "floor" in the loan agreement.
Generally, these loans have fixed interest rates and maturities ranging up to ten years, with a balloon payment due at maturity. Alternatively, for some loans, the interest rate adjusts at least annually, based on the Wall Street Journal prime rate, after an initial fixed-rate period up to seven years.
Further, such assessment is required of any bank which has applied, among other things, to establish a new branch office that will accept deposits, relocate an existing office or merge or consolidate with, or 36 ​ ​ Table of Contents acquire the assets or assume the liabilities of, a financial institution.
The regulatory agency’s assessment of the bank’s record is made available to the public. Further, such assessment is required of any bank which has applied, among other things, to establish a new branch office that will accept deposits, relocate an existing office or merge or consolidate with, or acquire the assets or assume the liabilities of, a financial institution.
At June 30, 2022, the carrying value was $5.4 million and bore interest at a current coupon rate of 1.92% and an effective rate of 3.63%. In the February 2022 acquisition of Fortune Financial Corporation (Fortune), the Company assumed $7.5 million in fixed-to-floating rate subordinated notes.
At June 30, 2023, the carrying value was $5.5 million and bore interest at a current coupon rate of 7.35% and an effective rate of 10.11%. In the February 2022 acquisition of Fortune Financial Corporation (Fortune), the Company assumed $7.5 million in fixed-to-floating rate subordinated notes.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

52 edited+29 added−26 removed114 unchanged
Biggest changeSince June 30, 2017, the Bank has been below the 300% threshold, and reached a low of 260% of tier 1 regulatory capital plus the allowance for credit losses includable in total regulatory capital at September 30, 2019. 45 ​ ​ Table of Contents In recent years, the Company’s non-owner occupied commercial real estate loans (as defined in the guidance) as a percent of tier 1 regulatory capital plus the allowance for loan losses includable in total regulatory capital has remained below the 300% threshold.
Biggest changeAt times since June 30, 2017, the Bank has been below the 300% threshold, and reached a low of 260% of tier 1 regulatory capital plus the allowance for credit losses includable in total regulatory capital at September 30, 2019.
The market value of our common stock will likely continue to fluctuate in response to a number of factors including the following, most of which are beyond our control, as well as the other factors described in this “Risk Factors” section: ● actual or anticipated quarterly fluctuations in our operating and financial results; 52 ​ ​ Table of Contents ● developments related to investigations, proceedings or litigation; ● changes in financial estimates and recommendations by financial analysts; ● dispositions, acquisitions and financings; ● actions of our current shareholders, including sales of common stock by existing shareholders and our directors and executive officers; ● fluctuations in the stock prices and operating results of our competitors; ● regulatory developments; and ● other developments in the financial services industry.
The market value of our common stock will likely continue to fluctuate in response to a number of factors including the following, most of which are beyond our control, as well as the other factors described in this “Risk Factors” section: ● actual or anticipated quarterly fluctuations in our operating and financial results; 54 ​ ​ Table of Contents ● developments related to investigations, proceedings or litigation; ● changes in financial estimates and recommendations by financial analysts; ● dispositions, acquisitions and financings; ● actions of our current shareholders, including sales of common stock by existing shareholders and our directors and executive officers; ● fluctuations in the stock prices and operating results of our competitors; ● regulatory developments; and ● other developments in the financial services industry.
We are required to assess our goodwill for impairment at least annually, and any goodwill impairment charge could have a material adverse effect on our results of operations and financial condition; ● To finance an acquisition, we may borrow funds, thereby increasing our leverage and diminishing our liquidity, or raise additional capital, which could dilute the interests of our existing shareholders; and ● We have completed five acquisitions since June 2017 which enhanced our rate of growth.
We are required to assess our goodwill for impairment at least annually, and any goodwill impairment charge could have a material adverse effect on our results of operations and financial condition; ● To finance an acquisition, we may borrow funds, thereby increasing our leverage and diminishing our liquidity, or raise additional capital, which could dilute the interests of our existing shareholders; and ● We have completed six acquisitions since June 2017 which enhanced our rate of growth.
If we cannot raise additional capital when needed, our ability to further expand our operations through internal growth and acquisitions could be materially impaired and our financial condition and liquidity could be materially and adversely affected. ​ 48 ​ ​ Table of Contents Risks Relating to Regulation Legislative or regulatory changes or actions, or significant litigation, could adversely impact us or the businesses in which we are engaged.
If we cannot raise additional capital when needed, our ability to further expand our operations through internal growth and acquisitions could be materially impaired and our financial condition and liquidity could be materially and adversely affected. ​ 50 ​ ​ Table of Contents Risks Relating to Regulation Legislative or regulatory changes or actions, or significant litigation, could adversely impact us or the businesses in which we are engaged.
We have established policies and procedures to prevent or limit the impact of system failures, interruptions, and security breaches, including privacy breaches and cyber-attacks, but such events may still occur or may not be adequately addressed if they do occur. 50 ​ ​ Table of Contents There have been increasing efforts by third parties to breach data security at financial institutions.
We have established policies and procedures to prevent or limit the impact of system failures, interruptions, and security breaches, including privacy breaches and cyber-attacks, but such events may still occur or may not be adequately addressed if they do occur. 52 ​ ​ Table of Contents There have been increasing efforts by third parties to breach data security at financial institutions.
The Bank and Company may see its non-owner occupied commercial real estate lending grow as a percentage of total regulatory capital, or it may slow the growth of this type of lending activity. Should we continue to grow this category of our loan portfolio, we may incur additional expense to meet the heightened supervisory expectations related to this lending activity.
The Bank and Company may see its non-owner occupied commercial real estate lending grow as a percentage of total regulatory capital, or it may slow the growth of this type of lending activity. Should we continue to grow this category of our loan portfolio, we may incur additional expense to meet increasing supervisory expectations related to this lending activity.
As of June 30, 2022, we had outstanding $24.3 million aggregate principal amount of junior subordinated debt securities issued in connection with the sale of trust preferred securities by subsidiaries of ours that are statutory business trusts. As of that date, those debt securities were carried at a book value of $23.1 million.
As of June 30, 2023, we had outstanding $24.3 million aggregate principal amount of junior subordinated debt securities issued in connection with the sale of trust preferred securities by subsidiaries of ours that are statutory business trusts. As of that date, those debt securities were carried at a book value of $23.1 million.
Further, legislative proposals limiting our rights as a creditor could result in credit losses or increased expense in pursuing our remedies as a creditor. ​ 49 ​ ​ Table of Contents Risks Relating to Technology and Cyber Security and Other Operational Matters We are subject to security and operational risks relating to our use of technology that could damage our reputation and business.
Further, legislative proposals limiting our rights as a creditor could result in credit losses or increased expense in pursuing our remedies as a creditor. ​ 51 ​ ​ Table of Contents Risks Relating to Technology and Cyber Security and Other Operational Matters We are subject to security and operational risks relating to our use of technology that could damage our reputation and business.
Because the Company is an issuer of debit cards, it is periodically exposed to losses related to security breaches which occur at retailers that are unaffiliated with the 51 ​ ​ Table of Contents Company (e.g., customer card data being compromised at retail stores).
Because the Company is an issuer of debit cards, it is periodically exposed to losses related to security breaches which occur at retailers that are unaffiliated with the 53 ​ ​ Table of Contents Company (e.g., customer card data being compromised at retail stores).
Agricultural real estate lending involves a greater degree of risk and typically involves larger loans to single borrowers than lending on single-family residences. Payments on agricultural real estate loans are dependent on the profitable operation or management of the farm property securing the loan.
Agricultural real estate lending involves a greater degree of risk and typically involves larger loans to single borrowers than lending on one-to-four-family residences. Payments on agricultural real estate loans are dependent on the profitable operation or management of the farm property securing the loan.
In that regard, we are 53 ​ ​ Table of Contents entitled, at our option but subject to certain conditions, to defer payments of interest on the junior subordinated debt securities from time to time for up to five years.
In that regard, we are 55 ​ ​ Table of Contents entitled, at our option but subject to certain conditions, to defer payments of interest on the junior subordinated debt securities from time to time for up to five years.
The credit risk related to these types of loans is considered to be greater than the risk related to one- to four-family residential loans because the repayment of commercial real estate loans and commercial business loans typically is dependent on the successful operation and income stream of the borrower’s business or the real estate securing the loans as collateral, which can be significantly affected by economic conditions.
The credit risk related to these types of loans is considered to be greater than the risk related to one- to four-family residential loans because the repayment of commercial real estate loans and commercial business loans typically is dependent on 45 ​ ​ Table of Contents the successful operation and income stream of the borrower’s business or the real estate securing the loans as collateral, which can be significantly affected by economic conditions.
Based on the levels of taxable income in prior years and our expectation of profitability in the current year and future years, management has determined that no valuation allowance was required at June 30, 2022.
Based on the levels of taxable income in prior years and our expectation of profitability in the current year and future years, management has determined that no valuation allowance was required at June 30, 2023.
Construction and development lending, especially non-residential construction and development lending, is generally considered to have more complex credit risks than traditional single-family residential lending because the principal is concentrated in a limited number of loans with repayment dependent on the successful completion and sale, leasing, or operation of the related real estate project.
Construction and development lending, especially non-residential construction and development lending, is generally considered to have more complex credit risks than traditional one-to-four-family residential lending because the principal is concentrated in a limited number of loans with repayment dependent on the successful completion and sale, leasing, or operation of the related real estate project.
Deterioration in our construction portfolio could result in increases in the provision for credit losses and an increase in charge-offs, all of which could have a material adverse effect on our financial condition and results of operations. 43 ​ ​ Table of Contents Our loan portfolio possesses increased risk due to our percentage of commercial real estate and commercial business loans.
Deterioration in our construction portfolio could result in increases in the provision for credit losses and an increase in charge-offs, all of which could have a material adverse effect on our financial condition and results of operations. Our loan portfolio possesses increased risk due to our percentage of commercial real estate and commercial business loans.
In general, expectations are that the CECL methodology will lead to increased volatility in banking organizations’ required level of allowances at different points in the economic cycle, and in their results of operations. If our nonperforming assets increase, our earnings will be adversely affected.
In general, expectations are that the CECL methodology will lead to increased volatility in banking organizations’ required level of allowances at different points in the economic cycle, and in their results of operations. 44 ​ ​ Table of Contents If our nonperforming assets increase, our earnings will be adversely affected.
If the integration process is not conducted successfully and with minimal effect on the acquired business and its customers, we may not realize the anticipated economic benefits of particular acquisitions within the 47 ​ ​ Table of Contents expected time frame, or at all, and we may lose customers or employees of the acquired business.
If the integration process is not conducted successfully and with minimal effect on the acquired business and its customers, we may not realize the anticipated economic benefits of particular acquisitions within the expected time frame, or at all, and we may lose customers or employees of the acquired business.
Future deterioration in economic conditions, particularly within our primary market area in southern Missouri and northern Arkansas, could result in the following consequences, among others, any of which could hurt our business materially: ● loan delinquencies may increase; ● problem assets and foreclosures may increase; ● demand for our products and services may decline; ● loan collateral may decline in value, in turn reducing a customer’s borrowing power and reducing the value of collateral securing our loans; and ● the net worth and liquidity of loan guarantors may decline, impairing their ability to honor commitments to us. 41 ​ ​ Table of Contents Downturns in the real estate markets in our primary market area could hurt our business.
Future deterioration in economic conditions, particularly within our primary market area in southern Missouri and northern Arkansas, could result in the following consequences, among others, any of which could hurt our business materially: ● loan delinquencies may increase; ● problem assets and foreclosures may increase; ● demand for our products and services may decline; ● loan collateral may decline in value, in turn reducing a customer’s borrowing power and reducing the value of collateral securing our loans; and 42 ​ ​ Table of Contents ● the net worth and liquidity of loan guarantors may decline, impairing their ability to honor commitments to us.
If these issues or liabilities exceed our estimates, our results of operations and financial condition may be adversely affected; ● Prices at which acquisitions can be made fluctuate with market conditions.
If these issues or liabilities exceed our estimates, our results of operations and financial condition may be adversely affected; 49 ​ ​ Table of Contents ● Prices at which acquisitions can be made fluctuate with market conditions.
Should our management determine it is not more likely than not that the deferred tax assets will be realized, a valuation allowance with a charge to earnings would be reflected in the period. At June 30, 2022, our net deferred tax asset was $10.7 million, none of which was disallowed for regulatory capital purposes.
Should our management determine it is not more likely than not that the deferred tax assets will be realized, a valuation allowance with a charge to earnings would be reflected in the period. At June 30, 2023, our net deferred tax asset was $12.9 million, none of which was disallowed for regulatory capital purposes.
Any delinquent payments or the failure to repay these loans would hurt our operating results and financial condition. Our loan portfolio possesses risk due to our agricultural lending. Included in the commercial real estate loans described above are agricultural real estate loans totaling $213.1 million, or 7.9% of our loan portfolio, net, at June 30, 2022.
Any delinquent payments or the failure to repay these loans would hurt our operating results and financial condition. Our loan portfolio possesses risk due to our agricultural lending. Included in the commercial real estate loans described above are agricultural real estate loans totaling $238.1 million, or 6.7% of our loan portfolio, net, at June 30, 2023.
Any repossessed collateral for a defaulted loan may not provide an adequate source of repayment of the outstanding loan balance as a result of the greater likelihood of damage, loss or depreciation to the collateral. Our agricultural operating loans have also grown significantly since June 30, 2012, when such loans totaled $50.8 million, or 8.7% of our loan portfolio.
Any repossessed collateral for a defaulted loan may not provide an adequate source of repayment of the outstanding loan balance as a result of the greater likelihood of damage, loss or depreciation to the collateral. Our agricultural operating loans have also grown significantly since June 30, 2013, when such loans totaled $47.4 million, or 7.3% of our loan portfolio.
In addition to the various risks to farm operations and management noted above, agricultural loans often are structured for annual payments, to coincide with borrower cash flows.
In addition to the various risks to farm operations and management noted above, agricultural loans often are structured for 46 ​ ​ Table of Contents annual payments, to coincide with borrower cash flows.
At June 30, 2022, 59.1% of our loans, net, consisted of commercial real estate and commercial business loans to small and mid-sized businesses, generally located in our primary market area, which are the types of businesses that have a heightened vulnerability to local economic conditions.
At June 30, 2023, 60.5% of our loans, net, consisted of commercial real estate and commercial business loans to small and mid-sized businesses, generally located in our primary market area, which are the types of businesses that have a heightened vulnerability to local economic conditions.
However, during fiscal year 2022, the non-owner occupied commercial real estate portfolio growth (inclusive of acquisitions) has resulted in the Company reporting 313% of tier 1 regulatory capital plus the allowance for loan losses includable in total regulatory capital at June 30, 2022, as compared to 271% at June 30, 2021.
However, non-owner occupied commercial real estate portfolio growth (inclusive of acquisitions) during fiscal years 2022 and 2023 has resulted in the Company reporting 330% of tier 1 regulatory capital plus the allowance for loan losses includable in total regulatory capital at June 30, 2023, as compared to 313% at June 30, 2022.
Our agricultural real estate lending has grown significantly since June 30, 2012 when these loans totaled $48.6 million, or 8.3% of our loan portfolio, and we intend to continue to grow this portion of our loan portfolio. Included in the commercial business loans described above are agricultural production and equipment loans.
Our agricultural real estate lending has grown significantly since June 30, 2013 when these loans totaled $53.0 million, or 8.2% of our loan portfolio, and we intend to continue to grow this portion of our loan portfolio. Included in the commercial business loans described above are agricultural production and equipment loans.
Commercial real estate and commercial business loans naturally create portfolio “churn” as loans are originated and repaid. As a result, our portfolio consists of a mix of seasoned and unseasoned loans. We believe that our underwriting practices are sound and based on industry standards and best practices.
Commercial real estate and commercial business loans naturally create portfolio “churn” as loans are originated and repaid. As a result, our portfolio consists of a mix of seasoned and unseasoned loans. We believe that our underwriting practices are sound and based on industry standards and best practices. However, a significant portion of our loan portfolio is relatively new.
CECL has substantially changed how we calculate our allowance for credit losses. We have adopted CECL and prepared our consolidated financial statements based on the required methodology; however we cannot predict how it will affect our results of operations and financial condition over time, including our regulatory capital.
We have adopted CECL and prepared our consolidated financial statements based on the required methodology; however we cannot predict how it will affect our results of operations and financial condition over time, including our regulatory capital.
The federal banking regulators, including the Federal Reserve have adopted rules that gives a banking organization the option 42 ​ ​ Table of Contents to phase in over a three-year or five-year period the day-one adverse effects of CECL on its regulatory capital. We elected the five-year period for our Company.
The federal banking regulators, including the Federal Reserve have adopted rules that gives a banking organization the option to phase in over a three-year or five-year period the day-one adverse effects of CECL on its regulatory capital. We elected the five-year period for our Company. CECL has substantially changed how we calculate our allowance for credit losses.
Net interest income is the difference between interest income earned on interest-earning assets, such as loans and investment securities, and interest expense paid on interest-bearing liabilities, such as deposits and borrowed funds.
Our earnings and cash flows depend substantially upon our net interest income. Net interest income is the difference between interest income earned on interest-earning assets, such as loans and investment securities, and interest expense paid on interest-bearing liabilities, such as deposits and borrowed funds.
At June 30, 2022, our loan portfolio included $1.1 billion of commercial real estate loans and $441.6 million of commercial business loans compared to $889.8 million and $414.1 million, respectively, at June 30, 2021.
At June 30, 2023, our loan portfolio included $1.6 billion of commercial real estate loans and $599.0 million of commercial business loans compared to $1.1 billion and $441.6 million, respectively, at June 30, 2022.
Our business activities and credit exposure are primarily concentrated in southern Missouri and northern Arkansas. While we did not and do not have a sub-prime lending program, our residential real estate, construction and land loan portfolios, our commercial and multi-family loan portfolios and certain of our other loans could be affected by the downturn in the real estate market.
While we did not and do not have a sub-prime lending program, our residential real estate, construction and land loan portfolios, our commercial and multi-family loan portfolios and certain of our other loans could be affected by the downturn in the real estate market.
At June 30, 2022 and June 30, 2021, our nonperforming assets were $6.3 million and $8.1 million, respectively, or 0.20% and 0.30% of total assets, respectively.
At June 30, 2023 and June 30, 2022, our nonperforming assets were $11.3 million and $6.3 million, respectively, or 0.26% and 0.20% of total assets, respectively.
Risks Relating to Credit and Lending Activities Our allowance for credit losses may be insufficient to absorb losses in our loan portfolio. Lending money is a substantial part of our business. Every loan carries a certain risk that it will not be repaid in accordance with its terms or that any underlying collateral will not be sufficient to ensure repayment.
Lending money is a substantial part of our business. Every loan carries a certain risk that it will not be repaid in accordance with its terms or that any underlying collateral will not be sufficient to ensure repayment.
Over the last ten years, we have increased this type of lending from 57.9% of our portfolio at June 30, 2012, to 59.1% of our portfolio at June 30, 2022, in order to improve the yield on our assets.
Over the last ten years, we have increased this type of lending from 57.7% of our portfolio at June 30, 2013, to 60.5% of our portfolio at June 30, 2023, in order to improve the yield on our assets.
Several of our commercial borrowers have more than one commercial real estate or business loan outstanding with us. Consequently, an adverse development with respect to a single loan or credit relationship can expose us to significantly greater risk of loss compared to an adverse development with respect to a single one- to four-family residential mortgage loan.
Consequently, an adverse development with respect to a single loan or credit relationship can expose us to significantly greater risk of loss compared to an adverse development with respect to a single one- to four-family residential mortgage loan.
If we slow the growth of commercial real estate loans generally, or particular concentrations of borrowers or categories of properties within that definition, we may be negatively impacted in terms of our asset growth, net interest margin and earnings, leverage, or other targets.
If we slow the growth of commercial real estate loans generally, or particular concentrations of borrowers or categories of properties within that definition, we may be negatively impacted in terms of our asset growth, net interest margin and earnings, leverage, or other targets. 47 ​ ​ Table of Contents Credit losses on investment securities could require charges to earnings, which could negatively impact our results of operations.
Security breaches in our mobile and internet banking activities could expose us to possible liability and damage our reputation. Any compromise of our security also could deter customers from using our internet banking services that involve the transmission of confidential information. We rely on internet security systems to provide the security and authentication necessary to effect secure transmission of data.
Security breaches in our mobile and consumer and commercial internet banking activities and wealth management or mobile access could expose us to possible liability and damage our reputation. Any compromise of our security also could deter customers from using our internet banking services that involve the transmission of confidential information.
These precautions may not protect our systems from compromises or breaches of our security measures, which could damage our reputation and business. We face significant operational risks because the financial services business involves a high volume of transactions and increased reliance on technology, including risk of loss related to cyber-security breaches.
We face significant operational risks because the financial services business involves a high volume of transactions and increased reliance on technology, including risk of loss related to cyber-security breaches.
Our construction loan portfolio, which totaled $258.0 million, or 9.61% of loans, net, at June 30, 2022, includes residential and non-residential construction and development loans.
Our construction loan portfolio, which totaled $550.1 million, or 15.4% of loans, net, at June 30, 2023, includes residential and non-residential construction and development loans.
Additionally, commercial loans typically involve larger loan balances to single borrowers or groups of related borrowers compared to residential real estate loans. Commercial loans not collateralized by real estate are often secured by collateral that may depreciate over time, be difficult to appraise and fluctuate in value (such as accounts receivable, inventory and equipment).
Commercial loans not collateralized by real estate are often secured by collateral that may depreciate over time, be difficult to appraise and fluctuate in value (such as accounts receivable, inventory and equipment). Several of our commercial borrowers have more than one commercial real estate or business loan outstanding with us.
As with agricultural real estate loans, the repayment of operating loans is dependent on the successful operation or management of the farm property. 44 ​ ​ Table of Contents The same risk applies to agricultural operating loans which are unsecured or secured by rapidly depreciating assets such as farm equipment or assets such as livestock or crops.
The same risk applies to agricultural operating loans which are unsecured or secured by rapidly depreciating assets such as farm equipment or assets such as livestock or crops.
Any substantial, unexpected, prolonged change in market interest rates could have a material adverse effect on our financial condition and results of operations. See also, Part II, Item 7(a) “Interest Rate Sensitivity Analysis”. The replacement of the LIBOR benchmark interest rate may adversely affect us. On July 27, 2017, the U.K.
Any substantial, unexpected, prolonged change in market interest rates could have a material adverse effect on our financial condition and results of operations. See also, Part II, Item 7(a) “Interest Rate Sensitivity Analysis”. We may incur losses on our securities portfolio due to factors beyond our control, including changes in interest rates.
The value or market price of our securities could decline due to any of these identified or other risks, and you could lose all or part of your investment.
The value or market price of our securities could decline due to any of these identified or other risks, and you could lose all or part of your investment. Risks Relating to the Company and the Bank Risks Relating to Marco Economic Conditions Recent events in the financial services industry may have a material adverse effect on us.
However, a significant portion of our loan portfolio is relatively new, therefore, the current level of delinquencies and defaults may not be representative of the level that will prevail as the portfolio becomes more seasoned, which may be higher than current levels.
Therefore, the current level of delinquencies and defaults may not be representative of the level that will prevail as the portfolio becomes more seasoned, which may be higher than current levels. If delinquencies and defaults increase, we may be required to increase our provision for loan losses, which would adversely affect our results of operations and financial condition.
If delinquencies and defaults increase, we may be required to increase our provision for loan losses, which would adversely affect our results of operations and financial condition. As we approach thresholds defined in interagency guidance on commercial real estate concentrations, we may incur additional expense or slow the growth of certain categories of commercial real estate lending.
We currently exceed thresholds defined in interagency guidance on commercial real estate concentrations, and as such, we may incur additional expense or slow the growth of certain categories of commercial real estate lending.
The evaluation considers factors including; past events, current conditions, and reasonable & supportable forecasts, and the Company’s ability and intent to hold the security until maturity. A qualitative determination is acceptable. We currently hold additional collateralized debt obligations (CDOs) for which credit losses are not currently expected, based on our best judgment using information currently available.
A qualitative determination is acceptable. We currently hold additional collateralized debt obligations (CDOs) for which credit losses are not currently expected, based on our best judgment using information currently available. Risks Relating to Market Interest Rates Changes in interest rates may negatively affect our earnings and the value of our assets.
Credit losses on investment securities could require charges to earnings, which could negatively impact our results of operations. In assessing the potential credit losses of investment securities, we are required to evaluate instances in which the fair value of particular securities are less than their amortized cost basis.
In assessing the potential credit losses of investment securities, we are required to evaluate instances in which the fair value of particular securities are less than their amortized cost basis. The evaluation considers factors including; past events, current conditions, and reasonable & supportable forecasts, and the Company’s ability and intent to hold the security until maturity.
ICE Benchmark Administration (“IBA”), the authorized and regulated administrator of LIBOR recently announced it would consult on its plans for the discontinuation of LIBOR. IBA intends to end publication of some LIBOR tenors on December 31, 2021 and the remaining LIBOR tenors in June 2023.
ICE Benchmark Administration, the authorized and regulated administrator of LIBOR, ended publication of the one-week and two-month USD LIBOR tenors on December 31, 2021, and ended publication of the remaining USD LIBOR tenors on June 30, 2023.
At June 30, 2022, these loans totaled $110.3 million, or 4.1%, of our loan portfolio, net.
At June 30, 2023, these loans totaled $138.3 million, or 3.9%, of our loan portfolio, net. As with agricultural real estate loans, the repayment of operating loans is dependent on the successful operation or management of the farm property.
The ultimate impact will depend on future developments, which are highly uncertain and cannot be predicted, including the scope and duration of the pandemic and actions taken by governmental authorities in response to the pandemic.
The extent of this impact will depend on future developments, which are highly uncertain. Additionally, the responses of various governmental and nongovernmental authorities and consumers to the pandemic may have material long-term effects on the Company and its customers, which are difficult to quantify in the near-term or long-term.
Notwithstanding these modifications, these borrowers may not be able to resume making full payments on their loans as the COVID-19 pandemic subsides. Any increases in the allowance for credit losses will result in a decrease in net income, and, most likely, capital, and may have a material negative effect on our financial condition and results of operations.
We could be subject to a number of risks as the result of the COVID-19 pandemic, any of which could have a material adverse effect on our business, financial condition, liquidity and results of operations.
Removed
Risks Relating to the Company and the Bank Risks Relating to Marco Economic Conditions The COVID-19 pandemic has adversely impacted our ability to conduct business and is expected to adversely impact our financial results and those of our customers.
Added
Recent events in the financial services industry, including the failures of two large U.S. banks in the span of three days in March 2023 and another failure in early May 2023, created industry-wide concerns related to liquidity, deposit outflows, uninsured deposit concentrations and eroding consumer confidence in the banking system.
Removed
The COVID-19 pandemic has significantly adversely affected our operations and the way we provide banking services to businesses and individuals, some of whom are currently, and many of whom have recently been under government issued stay-at-home orders.
Added
These events occurred against the backdrop of a rapidly rising interest rate environment which, among other things, has resulted in unrealized losses in longer duration securities and loans held by banks and more competition for bank deposits. These events have had, and may continue to have, an adverse impact on the market price of our common stock. While the U.S.
Removed
As an essential business, we have continued to provide banking and financial services to our customers, at times with only drive-thru service available our facilities. After re-opening our lobbies, we have again moved to only drive-thru service in some communities due to unavailability of team members complying with quarantine orders from local health authorities.
Added
Department of the Treasury, the Federal Reserve and the FDIC acted to fully protect the insured and uninsured depositors of two of the recently failed banks, and the FDIC secured an agreement with a large financial institution for that institution to assume all the deposits of the third recently failed bank, no assurance can be given that these or similar actions will restore confidence in the banking system, and we may be further impacted by concerns regarding the soundness of other financial institutions, or other future bank failures or disruptions.
Removed
In addition, we have continued to provide access to banking and financial services through online and mobile banking, ATMs and by telephone. If the COVID-19 pandemic worsens, it could limit or disrupt our ability to provide banking and financial services to our customers.
Added
Any loss of customer deposits could increase our cost of funding or negatively affect our overall liquidity or capital. The cost of resolving the recent bank failures may prompt the FDIC to charge higher deposit insurance premiums and/or impose special assessments on insured depository institutions.
Removed
There is a pervasive uncertainty surrounding the future economic conditions that will emerge in the months and years following the onset of the pandemic. As a result, management is confronted with a significant and unfamiliar degree of uncertainty in estimating the impact of the pandemic on credit quality, revenues and asset values.
Added
These events and any future similar events may also result in changes to laws or regulations governing bank holding companies and banks, including higher capital requirements, or the imposition of restrictions through supervisory or enforcement activities, any of which could have a material adverse effect on us. ​ Changes in economic conditions, particularly an economic slowdown in southern Missouri or northern Arkansas, could hurt our business.
Removed
To date, throughout the industry, the COVID-19 pandemic has resulted in declines in loan demand and loan originations (other than through government sponsored programs, such as the Payroll Protection Program) and market interest rates, and it has negatively impacted some of our business and consumer borrowers’ ability or willingness to make their loan payments timely.
Added
Downturns in the real estate markets in our primary market area could hurt our business. Our business activities and credit exposure are primarily concentrated in southern Missouri and northern Arkansas.
Removed
Because the length of the pandemic and the efficacy of the extraordinary measures being put in place to address its economic consequences are unknown, including recent reductions in the targeted federal funds rate, until the pandemic subsides, we expect our net interest income and net interest margin may be adversely affected in the near term, if not longer.
Added
Inflationary pressures and rising prices may adversely affect our results of operations and financial condition. Inflation has risen sharply since the end of 2021 to levels not seen in more than 40 years.
Removed
Some of our borrowers have become unemployed or may face unemployment, and certain businesses may be at risk of insolvency due to declines in revenue, especially in businesses related to travel, hospitality, leisure and physical personal services.
Added
Small and medium-sized businesses may be impacted more during periods of high inflation, as they are not able to leverage economies of scale to mitigate cost pressures compared to larger businesses.
Removed
The impact of the pandemic may continue to adversely affect us during our 2023 fiscal year and possibly longer as loan demand, market interest rates, and the ability of some customers to make timely loan payments has been significantly affected.
Added
Consequently, the ability of our business customers to repay their loans may deteriorate, and in some cases this deterioration may occur quickly, which would adversely impact our results of operations and financial condition.
Removed
Although the Company makes estimates of credit losses related to the pandemic as part of its evaluation of the allowance for credit losses, such estimates involve significant judgment and are made in the context of continued uncertainty as to the impact the pandemic will have on the credit quality of our loan portfolio.
Added
Furthermore, a prolonged period of inflation could cause wages and other costs to the Company to increase, which could adversely affect our results of operations and financial condition. The economic impact of the COVID-19 pandemic could continue to adversely affect us.
Removed
It is possible that increased loan delinquencies, adversely classified loans and loan charge-offs could result in the future due to the 40 ​ ​ Table of Contents pandemic. Consistent with guidance provided by banking regulators, we have modified loans by providing various loan payment deferral options to our borrowers affected by the COVID-19 pandemic.
Added
The COVID-19 pandemic has adversely impacted the global and national economy and certain industries and geographies in which our customers reside and operate. Because of its ongoing and dynamic nature, it is difficult to predict the full impact of the COVID-19 pandemic on the Company and its customers, employees and third-party service providers.
Removed
The PPP loans made by the Bank are guaranteed by the SBA and, if used by the borrower for authorized purposes, may be fully forgiven.
Added
These risks include, but are not limited to, changes in demand for our products and services; increased loan losses or other impairments in our loan portfolios and increases in our allowance for loan losses; a decline in collateral for our loans, especially real estate; unanticipated unavailability of employees; increased cyber security risks to the extent employees work remotely; a prolonged weakness in economic conditions; and increased costs as we and our regulators, customers and third-party service providers adapt to evolving pandemic conditions.
Removed
However, in the event of a loss resulting from a default on a PPP loan and a determination by the SBA that there was a deficiency in the manner in which the PPP loan was originated, funded or serviced by the Bank, the SBA may deny its liability under the guaranty, reduce the amount of the guaranty, or, if it has already made payment under the guaranty, seek recovery of any loss related to the deficiency from the Bank.
Added
Severe weather and other natural disasters, acts of war or terrorism, new public health issues or other adverse external events could harm our business. Severe weather and other natural disasters, acts of war or terrorism, new public health issues or other adverse external events could have a significant impact on our ability to conduct business.
Removed
In addition, several larger banks were subject to litigation regarding their processing of PPP loan applications. The Bank could be exposed to the risk of similar litigation, from both customers and non-customers that approached the Bank seeking PPP loans.
Added
Such events could harm our operations through interference with communications, including the interruption or loss of our computer systems, which could prevent or impede us from gathering deposits, originating loans and processing and controlling the flow of business, as well as through the destruction of our facilities and our operational, financial and management information systems.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeItem 2. ​ ​ Description of Properties At June 30, 2022, the Bank operated from its headquarters, 48 full-service branch offices, and two limited-service branch offices. The Bank owns the office building and related land in which its headquarters are located, and 46 of its branch offices. The remaining four branch offices are either leased or partially owned.
Biggest changeItem 2. ​ ​ Description of Properties At June 30, 2023, the Bank operated from its headquarters, 62 full-service branch offices, and three limited-service branch offices. The Bank owns the office building and related land in which its headquarters are located, and 58 of its branch offices. The remaining seven branch offices are either leased or partially owned.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changePeriodically, there have been various claims and lawsuits involving the Company or the Bank, mainly as defendants, such as claims to enforce liens, condemnation proceedings on properties in which the Company or the Bank holds security interests, claims involving the making and servicing of real property loans and other activities incident to the Company’s or the 54 ​ ​ Table of Contents Bank’s business.
Biggest changePeriodically, there have been various claims and lawsuits involving the Company or the Bank, mainly as defendants, such as claims to enforce liens, condemnation proceedings on properties in which the Company or the Bank holds security interests, claims involving the making and servicing of real property loans and other activities incident to the Company’s or the 56 ​ ​ Table of Contents Bank’s business.

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeItem 4. Mine Safety Disclosures 55 Item 4A. Information About Our Executive Officers 55 ​ ​ ​ PART II ​ 58 ​ ​ ​ Item 5. Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 58 Item 6. [Reserved] 59 Item 7.
Biggest changeItem 4. Mine Safety Disclosures 57 Item 4A. Information About Our Executive Officers 57 ​ ​ ​ PART II ​ 60 ​ ​ ​ Item 5. Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 60 Item 6. [Reserved] 61 Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations 60 Item 7A Quantitative and Qualitative Disclosures About Market Risk 75 Item 8. Financial Statements and Supplementary Information 77
Management’s Discussion and Analysis of Financial Condition and Results of Operations 62 Item 7A Quantitative and Qualitative Disclosures About Market Risk 76 Item 8. Financial Statements and Supplementary Information 78

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

6 edited+1 added−3 removed3 unchanged
Biggest changeThe Company repurchased the full number of shares authorized under the program at an average cost of $33.32 per share. ​ Also, on May 20, 2021, the Company announced its intention to repurchase up to an additional 445,000 shares of its common stock, or approximately 5.0% of its 8.9 million outstanding common shares.
Biggest changeOn May 20, 2021, the Company announced its intention to repurchase up to 445,000 shares of its common stock, or approximately 5.0% of its 8.9 million outstanding common shares. The shares will be purchased at prevailing market prices in the open market or in privately negotiated transactions, subject to availability and general market conditions.
The following table summarizes the Company’s stock repurchase activity for each month during the three months ended June 30, 2022. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total # of Shares ​ ​ ​ ​ ​ Average ​ Purchased as Part of a ​ Maximum Number ​ ​ Total # ​ Price ​ Publicly ​ of Shares That ​ ​ of Shares ​ Paid Per ​ Announced ​ May Yet Be ​ ​ Purchased ​ Share ​ Program ​ Purchased (1) 04/01/22 - 04/30/22 period — ​ $ — — 411,962 05/01/22 - 05/31/22 period 94,816 ​ 43.96 94,816 317,146 06/01/22 - 06/30/22 period 10,771 ​ 46.07 10,771 306,375 (1) Represents the remaining shares available for purchase as of the last calendar day of the month shown. ​ 58 ​ ​ Table of Contents The following graph shows a comparison of stockholder return on the common stock of Southern Missouri Bancorp, Inc., to the cumulative total returns for the indices shown below.
The following table summarizes the Company’s stock repurchase activity for each month during the three months ended June 30, 2023. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total # of Shares ​ ​ ​ ​ ​ Average ​ Purchased as Part of a ​ Maximum Number ​ ​ Total # ​ Price ​ Publicly ​ of Shares That ​ ​ of Shares ​ Paid Per ​ Announced ​ May Yet Be ​ ​ Purchased ​ Share ​ Program ​ Purchased (1) 04/01/23 - 04/30/23 period — ​ $ — — 306,375 05/01/23 - 05/31/23 period — ​ — — 306,375 06/01/23 - 06/30/23 period — ​ — — 306,375 (1) Represents the remaining shares available for purchase as of the last calendar day of the month shown. ​ 60 ​ ​ Table of Contents The following graph shows a comparison of stockholder return on the common stock of Southern Missouri Bancorp, Inc., to the cumulative total returns for the indices shown below.
Item 5. ​ ​ Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The common stock of Southern Missouri Bancorp, Inc., is traded under the symbol “SMBC” on the Nasdaq Global Market. At September 9, 2022, there were 9,229,151 shares of common stock outstanding and approximately 287 common stockholders of record.
Item 5. ​ ​ Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The common stock of Southern Missouri Bancorp, Inc., is traded under the symbol “SMBC” on the Nasdaq Global Market. At September 8, 2023, there were 11,336,462 shares of common stock outstanding and approximately 482 common stockholders of record.
Risk Factors – Risks Relating to our Common Stock – Regulatory and Contractual Restrictions may limit or prevent us from paying dividends on and repurchasing our common stock.” Information regarding our equity compensation plans is included in Part II, Item 11 of this Form 10-K. On May 19, 2021, Southern Missouri Bancorp, Inc.
Risk Factors – Risks Relating to our Common Stock – Regulatory and Contractual Restrictions may limit or prevent us from paying dividends on and repurchasing our common stock.” Information regarding our equity compensation plans is included in Part II, Item 11 of this Form 10-K. From time to time, the Company has utilized share repurchase programs.
The graph is historical only and may not be indicative of possible future performance. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Period Ending Index 6/30/17 6/30/18 6/30/19 6/30/20 6/30/21 6/30/22 Southern Missouri Bancorp, Inc. 100.00 122.49 110.97 78.96 149.06 152.49 KBW NASDAQ Bank Index 100.00 110.94 107.58 84.76 146.72 121.45 S&P U.S.
The graph is historical only and may not be indicative of possible future performance. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Period Ending Index 6/30/18 6/30/19 6/30/20 6/30/21 6/30/22 6/30/23 Southern Missouri Bancorp, Inc. 100.00 90.60 64.47 121.69 124.49 107.78 KBW NASDAQ Bank Index 100.00 96.97 76.40 132.25 109.47 90.06 S&P U.S.
SmallCap Banks Index 100.00 111.35 102.48 76.57 128.71 119.08 S&P U.S. BMI Banks - Midwest Region Index 100.00 106.77 104.06 76.85 124.97 110.33 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
SmallCap Banks Index 100.00 92.03 68.77 115.59 106.94 87.01 S&P U.S. BMI Banks - Midwest Region Index 100.00 97.46 71.98 117.04 103.34 83.57 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Removed
(the “Company”), the parent corporation of Southern Bank, completed its program, originally announced November 28, 2018, to repurchase up to 450,000 common shares.
Added
Repurchased shares will be held as treasury shares to be used for general corporate purposes. During fiscal 2023, there was no stock repurchase activity.
Removed
The shares will be purchased at prevailing market prices in the open market or in privately negotiated transactions, subject to availability and general market conditions. Repurchased shares will be held as treasury shares to be used for general corporate purposes.
Removed
During fiscal 2022, stock repurchase activity totaled 132,194 shares acquired for $5.8 million, at an average price of $44.17 per share.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

91 edited+25 added−31 removed74 unchanged
Biggest changeWhen interest-earning assets approximate or exceed interest-bearing liabilities, any positive interest rate spread will generate net interest income. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years Ended June 30, ​ ​ 2022 ​ 2021 ​ 2020 (dollars in thousands) Average Interest and Yield/ Average Interest and Yield/ Average Interest and Yield/ ​ ​ Balance ​ Dividends ​ Cost Balance ​ Dividends ​ Cost Balance ​ Dividends ​ Cost Interest-earning assets: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Mortgage loans (1) ​ $ 1,953,460 ​ $ 90,522 ​ 4.63 % $ 1,664,650 ​ $ 84,319 ​ 5.07 % $ 1,506,098 ​ $ 77,906 ​ 5.17 % Other loans (1) ​ ​ 471,350 ​ ​ 20,973 ​ 4.45 ​ ​ 505,350 ​ ​ 20,758 ​ 4.11 ​ ​ 455,562 ​ ​ 24,223 ​ 5.32 ​ Total net loans ​ 2,424,810 ​ 111,495 4.60 ​ 2,170,000 ​ 105,077 4.84 ​ 1,961,660 ​ 102,129 5.21 ​ Mortgage-backed securities ​ ​ 152,280 ​ ​ 2,738 ​ 1.80 ​ ​ 121,149 ​ ​ 2,042 ​ 1.69 ​ ​ 121,079 ​ ​ 2,802 ​ 2.31 ​ Investment securities (2) ​ ​ 77,996 ​ ​ 2,197 ​ 2.82 ​ ​ 71,489 ​ ​ 2,130 ​ 2.98 ​ ​ 62,985 ​ ​ 1,992 ​ 3.16 ​ Other interest-earning assets ​ ​ 127,958 ​ ​ 437 ​ 0.34 ​ ​ 97,548 ​ ​ 226 ​ 0.23 ​ ​ 7,767 ​ ​ 129 ​ 1.66 ​ TOTAL INTEREST- EARNING ASSETS (1) ​ 2,783,044 ​ 116,867 4.20 ​ 2,460,186 ​ 109,475 4.45 ​ 2,153,491 ​ 107,052 4.97 ​ Other noninterest-earning assets (3) ​ ​ 181,973 ​ ​ — ​ — ​ ​ 170,336 ​ ​ — ​ — ​ ​ 186,019 ​ ​ — ​ — ​ TOTAL ASSETS ​ $ 2,965,017 ​ ​ 116,867 — ​ $ 2,630,522 ​ ​ 109,475 — ​ $ 2,339,510 ​ ​ 107,052 — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest-bearing liabilities: ​ ​ ​ ​ ​ ​ ​ Savings accounts ​ $ 253,651 ​ ​ 672 ​ 0.26 ​ $ 203,493 ​ ​ 566 ​ 0.28 ​ $ 167,458 ​ ​ 1,099 ​ 0.66 ​ NOW accounts ​ ​ 1,062,913 ​ ​ 5,164 ​ 0.49 ​ ​ 861,796 ​ ​ 5,036 ​ 0.58 ​ ​ 679,277 ​ ​ 6,529 ​ 0.96 ​ Money market accounts ​ ​ 276,579 ​ ​ 928 ​ 0.34 ​ ​ 241,534 ​ ​ 833 ​ 0.34 ​ ​ 211,059 ​ ​ 2,654 ​ 1.26 ​ Certificates of deposit ​ ​ 586,017 ​ ​ 5,058 ​ 0.86 ​ ​ 618,884 ​ ​ 8,454 ​ 1.37 ​ ​ 667,987 ​ ​ 13,802 ​ 2.07 ​ TOTAL INTEREST- BEARING DEPOSITS ​ 2,179,160 ​ 11,822 0.54 ​ 1,925,707 ​ 14,889 0.77 ​ 1,725,781 ​ 24,084 1.40 ​ Borrowings: ​ ​ ​ ​ ​ ​ ​ ​ ​ Securities sold under agreements to repurchase ​ ​ — ​ ​ — ​ — ​ ​ — ​ ​ — ​ — ​ ​ 82 ​ ​ — ​ 0.03 ​ FHLB advances ​ ​ 43,410 ​ ​ 792 ​ 1.83 ​ ​ 65,896 ​ ​ 1,366 ​ 2.07 ​ ​ 87,241 ​ ​ 1,932 ​ 2.21 ​ Note payable ​ — ​ — — ​ — ​ — — ​ 2,547 ​ 112 4.39 ​ Junior subordinated debt ​ ​ 18,189 ​ ​ 686 ​ 3.77 ​ ​ 15,193 ​ ​ 534 ​ 3.51 ​ ​ 15,093 ​ ​ 788 ​ 5.22 ​ TOTAL INTEREST- BEARING LIABILITIES ​ 2,240,759 ​ 13,300 0.59 ​ 2,006,796 ​ 16,789 0.84 ​ 1,830,744 ​ 26,916 1.47 ​ Noninterest-bearing demand deposits ​ ​ 408,148 ​ ​ — ​ — ​ ​ 343,643 ​ ​ — ​ — ​ ​ 244,090 ​ ​ — ​ — ​ Other liabilities ​ ​ 10,651 ​ ​ — ​ — ​ ​ 13,375 ​ ​ — ​ — ​ ​ 16,780 ​ ​ — ​ — ​ TOTAL LIABILITIES ​ 2,659,558 ​ 13,300 — ​ 2,363,814 ​ 16,789 — ​ 2,091,614 ​ 26,916 — ​ Stockholders’ equity ​ 305,459 ​ — — ​ 266,708 ​ — — ​ 247,896 ​ — — ​ TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ​ $ 2,965,017 ​ ​ 13,300 — ​ $ 2,630,522 ​ ​ 16,789 — ​ $ 2,339,510 ​ ​ 26,916 — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net interest income ​ ​ $ 103,567 ​ ​ $ 92,686 ​ ​ $ 80,136 ​ Interest rate spread (4) ​ ​ 3.61 % ​ 3.61 % ​ 3.50 % Net interest margin (5) ​ ​ 3.72 % ​ 3.77 % ​ 3.72 % Ratio of average interest-earning assets to average interest-bearing liabilities ​ 124.20 % ​ 122.59 % ​ 117.63 % ​ (1) Calculated net of deferred loan fees, loan discounts and loans-in-process.
Biggest changeWhen interest-earning assets approximate or exceed interest-bearing liabilities, any positive interest rate spread will generate net interest income. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years Ended June 30, ​ ​ 2023 ​ 2022 ​ 2021 (dollars in thousands) Average Interest and Yield/ Average Interest and Yield/ Average Interest and Yield/ ​ ​ Balance ​ Dividends ​ Cost Balance ​ Dividends ​ Cost Balance ​ Dividends ​ Cost Interest-earning assets: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Mortgage loans (1) ​ $ 2,585,065 ​ $ 126,315 ​ 4.89 % $ 1,953,460 ​ $ 90,522 ​ 4.63 % $ 1,664,650 ​ $ 84,319 ​ 5.07 % Other loans (1) ​ ​ 589,625 ​ ​ 35,909 ​ 6.09 ​ ​ 471,350 ​ ​ 20,973 ​ 4.45 ​ ​ 505,350 ​ ​ 20,758 ​ 4.11 ​ Total net loans ​ 3,174,690 ​ 162,224 5.11 ​ 2,424,810 ​ 111,495 4.60 ​ 2,170,000 ​ 105,077 4.84 ​ Mortgage-backed securities ​ ​ 241,642 ​ ​ 6,967 ​ 2.88 ​ ​ 152,280 ​ ​ 2,738 ​ 1.80 ​ ​ 121,149 ​ ​ 2,042 ​ 1.69 ​ Investment securities (2) ​ ​ 118,386 ​ ​ 5,324 ​ 4.50 ​ ​ 77,996 ​ ​ 2,197 ​ 2.82 ​ ​ 71,489 ​ ​ 2,130 ​ 2.98 ​ Other interest-earning assets ​ ​ 42,287 ​ ​ 1,901 ​ 4.50 ​ ​ 127,958 ​ ​ 437 ​ 0.34 ​ ​ 97,548 ​ ​ 226 ​ 0.23 ​ TOTAL INTEREST- EARNING ASSETS (1) ​ 3,577,005 ​ 176,416 4.93 ​ 2,783,044 ​ 116,867 4.20 ​ 2,460,186 ​ 109,475 4.45 ​ Other noninterest-earning assets (3) ​ ​ 234,047 ​ ​ — ​ — ​ ​ 181,973 ​ ​ — ​ — ​ ​ 170,336 ​ ​ — ​ — ​ TOTAL ASSETS ​ $ 3,811,052 ​ ​ 176,416 — ​ $ 2,965,017 ​ ​ 116,867 — ​ $ 2,630,522 ​ ​ 109,475 — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest-bearing liabilities: ​ ​ ​ ​ ​ ​ ​ Savings accounts ​ $ 286,959 ​ ​ 1,623 ​ 0.57 ​ $ 253,651 ​ ​ 672 ​ 0.26 ​ $ 203,493 ​ ​ 566 ​ 0.28 ​ NOW accounts ​ ​ 1,280,134 ​ ​ 17,756 ​ 1.39 ​ ​ 1,062,913 ​ ​ 5,164 ​ 0.49 ​ ​ 861,796 ​ ​ 5,036 ​ 0.58 ​ Money market accounts ​ ​ 382,032 ​ ​ 7,846 ​ 2.05 ​ ​ 276,579 ​ ​ 928 ​ 0.34 ​ ​ 241,534 ​ ​ 833 ​ 0.34 ​ Certificates of deposit ​ ​ 810,570 ​ ​ 17,167 ​ 2.12 ​ ​ 586,017 ​ ​ 5,058 ​ 0.86 ​ ​ 618,884 ​ ​ 8,454 ​ 1.37 ​ TOTAL INTEREST- BEARING DEPOSITS ​ 2,759,695 ​ 44,392 1.61 ​ 2,179,160 ​ 11,822 0.54 ​ 1,925,707 ​ 14,889 0.77 ​ Borrowings: ​ ​ ​ ​ ​ ​ ​ ​ Securities sold under agreements to repurchase ​ ​ 4,148 ​ ​ 213 ​ 5.13 ​ ​ — ​ ​ — ​ — ​ ​ — ​ ​ — ​ — ​ FHLB advances ​ ​ 107,661 ​ ​ 3,627 ​ 3.37 ​ ​ 43,410 ​ ​ 792 ​ 1.83 ​ ​ 65,896 ​ ​ 1,366 ​ 2.07 ​ Junior subordinated debt ​ ​ 23,253 ​ ​ 1,439 ​ 6.19 ​ ​ 18,189 ​ ​ 686 ​ 3.77 ​ ​ 15,193 ​ ​ 534 ​ 3.51 ​ TOTAL INTEREST- BEARING LIABILITIES ​ 2,894,757 ​ 49,671 1.72 ​ 2,240,759 ​ 13,300 0.59 ​ 2,006,796 ​ 16,789 0.84 ​ Noninterest-bearing demand deposits ​ ​ 522,159 ​ ​ — ​ — ​ ​ 408,148 ​ ​ — ​ — ​ ​ 343,643 ​ ​ — ​ — ​ Other liabilities ​ ​ 16,484 ​ ​ — ​ — ​ ​ 10,651 ​ ​ — ​ — ​ ​ 13,375 ​ ​ — ​ — ​ TOTAL LIABILITIES ​ 3,433,400 ​ 49,671 — ​ 2,659,558 ​ 13,300 — ​ 2,363,814 ​ 16,789 — ​ Stockholders’ equity ​ 377,652 ​ — — ​ 305,459 ​ — — ​ 266,708 ​ — — ​ TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ​ $ 3,811,052 ​ ​ 49,671 — ​ $ 2,965,017 ​ ​ 13,300 — ​ $ 2,630,522 ​ ​ 16,789 — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net interest income ​ ​ $ 126,745 ​ ​ $ 103,567 ​ ​ $ 92,686 ​ Interest rate spread (4) ​ ​ 3.21 % ​ 3.61 % ​ 3.61 % Net interest margin (5) ​ ​ 3.54 % ​ 3.72 % ​ 3.77 % Ratio of average interest-earning assets to average interest-bearing liabilities ​ 123.57 % ​ 124.20 % ​ 122.59 % ​ (1) Calculated net of deferred loan fees, loan discounts and loans-in-process.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES Critical accounting estimates are those estimates made in accordance with generally accepted accounting principles that involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on the financial condition or results of operations of the registrant. provide qualitative and quantitative information necessary to understand the estimation uncertainty and the impact the critical accounting estimate has had or is reasonably likely to have on financial condition or results of operations to the extent the information is material and reasonably available. this information should include why each critical accounting estimate is subject to uncertainty and, to the extent the information is material and reasonably available, how much each estimate and/or assumption has 62 ​ ​ Table of Contents changed over a relevant period, and sensitivity of the reported amount to the methods, assumptions and estimates underlying its calculation. ​ The Company has established various accounting policies, which govern the application of accounting principles generally accepted in the United States of America in the preparation of our financial statements.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES Critical accounting estimates are those estimates made in accordance with generally accepted accounting principles that involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on the financial condition or results of operations of the registrant. provide qualitative and quantitative information necessary to understand the estimation uncertainty and the impact the critical accounting estimate has had or is reasonably likely to have on financial condition or results of operations to the extent the information is material and reasonably available. this information should include why each critical accounting estimate is subject to uncertainty and, to the extent the information is material and reasonably available, how much each estimate and/or assumption has changed over a relevant period, and sensitivity of the reported amount to the methods, assumptions and estimates underlying its calculation. ​ 64 ​ ​ Table of Contents The Company has established various accounting policies, which govern the application of accounting principles generally accepted in the United States of America in the preparation of our financial statements.
In the current period, the PCL was attributable to the $1.9 million charge required to fund the ACL for purchased credit deteriorated (PCD) loans acquired in the Fortune acquistion, along with a charge of $120,000 to fund to the allowance for off-balance sheet credit exposures acquired in the Fortune acquisition.
In the current period, the PCL was attributable to the $1.9 million charge required to fund the ACL for purchased credit deteriorated (PCD) loans acquired in the Fortune acquisition, along with a charge of $120,000 to fund to the allowance for off-balance sheet credit exposures acquired in the Fortune acquisition.
Other elements of the Company’s current asset/liability strategy include: (i) increasing originations of commercial real estate, commercial business loans, agricultural real estate, and agricultural operating lines, which typically provide higher yields and shorter repricing periods, but inherently increase credit risk, (ii) limiting the price volatility of the investment portfolio by maintaining a relatively short weighted average maturity, (iii) actively soliciting less rate-sensitive nonmaturity deposits, and (iv) offering competitively priced money market accounts and CDs with 75 ​ ​ Table of Contents maturities of up to five years.
Other elements of the Company’s current asset/liability strategy include: (i) increasing originations of commercial real estate, commercial business loans, agricultural real estate, and agricultural operating lines, which typically provide higher yields and shorter repricing periods, but inherently increase credit risk, (ii) limiting the price volatility of the investment portfolio by maintaining a relatively short weighted average maturity, (iii) actively soliciting less rate-sensitive nonmaturity deposits, and (iv) offering competitively priced money market accounts and CDs with maturities of up to five years.
INTEREST RATE SENSITIVITY ANALYSIS The following table sets forth as of June 30, 2022 and 2021, management’s estimates of the projected changes in net portfolio value in the event of 100, 200, and 300 basis point, instantaneous and permanent increases or decreases in market interest rates.
INTEREST RATE SENSITIVITY ANALYSIS The following table sets forth as of June 30, 2023 and 2022, management’s estimates of the projected changes in net portfolio value in the event of 100, 200, and 300 basis point, instantaneous and permanent increases or decreases in market interest rates.
The carrying value of these debt securities was approximately $2.7 million at June 30, 2022, relatively unchanged as compared to June 30, 2021. In connection with the Peoples Acquisition, the Company assumed $6.5 million in floating rate junior subordinated debt securities.
The carrying value of these debt securities was approximately $2.7 million at June 30, 2023, relatively unchanged as compared to June 30, 2022. In connection with the Peoples Acquisition, the Company assumed $6.5 million in floating rate junior subordinated debt securities.
Deposit service charge income, loan fees, nondeposit investment products, gains on the sale of the guaranty portion of newly originated government-guaranteed loans, and other income contributed to the year-over year increase, partially offset by a decrease in gains on sale of residential loans originated into the secondary market, loan servicing income, and earnings on bank-owned life insurance (BOLI). 67 ​ ​ Table of Contents Noninterest Expense.
Deposit service charge income, loan fees, nondeposit investment products, gains on the sale of the guaranty portion of newly originated government-guaranteed loans, and other income contributed to the year-over year increase, partially offset by a decrease in gains on sale of residential loans originated into the secondary market, loan servicing income, and earnings on bank-owned life insurance (BOLI). Noninterest Expense.
While scheduled repayments on loans and securities as well as the maturity of short-term investments are a relatively predictable source of funding, deposit flows, FHLB advance redemptions and loan and security prepayment rates are significantly influenced by factors outside of the Bank’s control, including general economic conditions and market competition.
While 71 ​ ​ Table of Contents scheduled repayments on loans and securities as well as the maturity of short-term investments are a relatively predictable source of funding, deposit flows, FHLB advance redemptions and loan and security prepayment rates are significantly influenced by factors outside of the Bank’s control, including general economic conditions and market competition.
Lending activities are funded through the attraction of deposit accounts consisting of checking accounts, passbook and statement savings accounts, money market deposit accounts, certificate of deposit accounts with terms of 60 months or less, securities sold under agreements to repurchase, advances from the Federal Home Loan Bank of Des Moines, and, to a lesser extent, brokered deposits.
Lending activities are funded through the attraction of deposit accounts consisting of checking accounts, passbook and statement savings accounts, money market deposit accounts, certificate of deposit accounts with terms of 60 months or less, securities sold under agreements to repurchase, advances from the Federal Home Loan Bank of Des Moines, and brokered deposits.
The June 2017 acquisition of Tammcorp, Inc., and its subsidiary, Capaha Bank (the “Capaha Acquisition”) resulted in goodwill of $4.1 million and a $3.4 million core deposit intangible, which is being amortized over a seven-year period using the straight-line method.
The June 2017 acquisition of Tammcorp, Inc., and its 66 ​ ​ Table of Contents subsidiary, Capaha Bank (the “Capaha Acquisition”) resulted in goodwill of $4.1 million and a $3.4 million core deposit intangible which is being amortized over a seven-year period using the straight-line method.
Of the advances with maturity dates in excess of one year, $5.0 million was eligible for early redemption by the lender within one year. We also incur capital expenditures on an ongoing basis to expand and improve our product offerings, enhance and modernize our technology infrastructure, and to introduce new technology-based products to compete effectively in our markets.
Of the advances with maturity dates in excess of one year, none was eligible for early redemption by the lender within one year. We also incur capital expenditures on an ongoing basis to expand and improve our product offerings, enhance and modernize our technology infrastructure, and to introduce new technology-based products to compete effectively in our markets.
Another indicator of an institution’s net interest income is its net yield (or net interest margin) on interest-earning assets, which is its net interest income divided by the average balance of interest-earning assets. Net interest income is affected by the interest rate spread and by the 72 ​ ​ Table of Contents relative amounts of interest-earning assets and interest-bearing liabilities.
Another indicator of an institution’s net interest income is its net yield (or net interest margin) on interest-earning assets, which is its net interest income divided by the average balance of interest-earning assets. Net interest income is affected by the interest rate spread and by the relative amounts of interest-earning assets and interest-bearing liabilities.
The decrease in the average rate paid was attributable primarily to the maturity of advances that had carried higher rates, combined with the assumption of advances at lower rates in the Fortune acquisition. Provision for Credit Losses .
The decrease in the average rate paid was attributable primarily to the maturity of advances that had carried higher rates, combined with the assumption of advances at lower rates in the Fortune acquisition. 70 ​ ​ Table of Contents Provision for Credit Losses .
The degree to which each segment of the strategy is achieved will affect profitability and exposure to interest rate risk. The Company continues to generate long-term, fixed-rate residential loans.
The degree to which each segment of the strategy is achieved will affect profitability and exposure to interest rate risk. 76 ​ ​ Table of Contents The Company continues to generate long-term, fixed-rate residential loans.
Based on our current capital allocation objectives, during fiscal 2023 we project expending approximately $4.0 million to $6.0 million of cash for capital investment in technology, property, plant and equipment.
Based on our current capital allocation objectives, during fiscal 2024 we project expending approximately $6.0 million to $8.0 million of cash for capital investment in technology, property, plant and equipment.
The Company originated $580.0 million in fixed rate commercial, commercial real estate, and multi-family loans during the year ended June 30, 2022, compared to $399.2 million during the prior fiscal year.
The Company originated $614.2 million in fixed rate commercial, commercial real estate, and multi-family loans during the year ended June 30, 2023, compared to $580.0 million during the prior fiscal year.
In total, FHLB borrowings are limited to 45% of Bank assets, or approximately $1.5 billion as most recently reported by the FHLB on June 30, 2022, which means that an amount up to $1.5 billion may still be eligible to be borrowed from the FHLB, subject to available collateral.
In total, FHLB borrowings are limited to 45% of Bank assets, or approximately $1.9 billion as most recently reported by the FHLB as of June 30, 2023, which means that an amount up to $1.8 billion may still be eligible to be borrowed from the FHLB, subject to available collateral.
The amount of capital investment is influenced by, among other things, current and projected demand for our services and products, cash flow generated by operating activities, cash required for other purposes and regulatory considerations. At June 30, 2022, we had other future obligations and accrued expenses of $1.5 million.
The amount of capital investment is influenced by, among other things, current and projected demand for our services and products, cash flow generated by operating activities, cash required for other purposes and regulatory considerations. At June 30, 2023, we had other future obligations and accrued expenses of $18.6 million.
During the fiscal year ended June 30, 2022, fixed rate residential loan originations totaled $269.9 million (of which $43.2 million was originated for sale into the secondary market), compared to $311.5 million during the prior year (of which $152.9 million was originated for sale into the secondary market).
During the fiscal year ended June 30, 2023, fixed rate residential loan originations totaled $147.2 million (of which $21.5 million was originated for sale into the secondary market), compared to $269.9 million during the prior year (of which $43.2 million was originated for sale into the secondary market).
Management anticipates that current funding sources will be adequate to meet foreseeable liquidity needs. For the fiscal year ended June 30, 2022, Southern Missouri increased deposits by $484.3 million. The Company decreased FHLB advances by $19.6 million. During the prior fiscal year, Southern Missouri increased deposits by $146.0 million and decreased FHLB advances by $12.5 million.
Management anticipates that current funding sources will be adequate to meet foreseeable liquidity needs. For the fiscal year ended June 30, 2023, Southern Missouri increased deposits by $910.5 million, and increased FHLB advances by $95.6 million. During the prior fiscal year, Southern Missouri increased deposits by $484.3 million and decreased FHLB advances by $19.6 million.
The table also presents information with respect to the difference between the weighted-average yield earned on interest-earning assets and the weighted-average rate paid on interest-bearing liabilities, or interest rate spread, which financial institutions have traditionally used as an indicator of profitability.
Nonaccrual loans are included with other noninterest-earning assets. 73 ​ ​ Table of Contents The table also presents information with respect to the difference between the weighted-average yield earned on interest-earning assets and the weighted-average rate paid on interest-bearing liabilities, or interest rate spread, which financial institutions have traditionally used as an indicator of profitability.
Management believes that most maturing interest-bearing liabilities will be retained or replaced by new interest-bearing liabilities. Also, at June 30, 2022, the Bank had no overnight advances from the FHLB, $8.0 million in term FHLB advances maturing within one year, and $30.2 million in FHLB advances with a maturity date in excess of one year.
Management believes that most maturing interest-bearing liabilities will be retained or replaced by new interest-bearing liabilities. Also, at June 30, 2023, the Bank had $33.5 million in overnight advances from the FHLB, $13.0 million in term FHLB advances maturing within one year, and $87.0 million in FHLB advances with a maturity date in excess of one year.
The decrease in the average yield was attributed primarily to origination and repricing of loans and borrower refinancing as average market interest rates decreased significantly compared to the prior fiscal year, as the economy was impacted by the COVID-19 pandemic.
The decrease in the average yield was attributed primarily to origination and repricing of loans and borrower refinancing as average market interest rates decreased significantly compared to the prior fiscal year.
At June 30, 2022, fixed rate loans with remaining maturities in excess of 10 years totaled $338.1 million, or 15.4%, of loans receivable, compared to $220.1 million, or 10.0%, of loans receivable, at June 30, 2021.
At June 30, 2023, fixed rate loans with remaining maturities in excess of 10 years totaled $365.1 million, or 10.2%, of loans receivable, compared to $338.1 million, or 15.4%, of loans receivable, at June 30, 2022.
At June 30, 2022, the Bank had $377.8 million in CDs maturing within one year and $2.2 billion in other deposits without a specified maturity, as compared to $358.8 million in CDs maturing within one year and $1.8 billion in other deposits without a specified maturity as of June 30, 2021.
At June 30, 2023, the Bank had $690.5 million in CDs maturing within one year and $2.7 billion in other deposits without a specified maturity, as compared to $377.8 million in CDs maturing within one year and $2.2 billion in other deposits without a specified maturity as of June 30, 2022.
The Company also originated $64.2 million in adjustable rate commercial, commercial real estate, and multi-family loans during the fiscal year ended June 30, 2022, compared to $63.3 million during the prior fiscal year. At June 30, 2022, adjustable-rate home equity lines of credit totaled $45.4 million, compared to $37.8 million as of June 30, 2021.
The Company also originated $157.0 million in adjustable rate commercial, commercial real estate, and multi-family loans during the fiscal year ended June 30, 2023, compared to $64.2 million during the prior fiscal year. At June 30, 2023, adjustable-rate home equity lines of credit totaled $64.6 million, compared to $45.4 million as of June 30, 2022.
The Company recorded an income tax provision of $12.7 million for fiscal 2022, an increase of $210,000, or 1.7%, as compared to the prior fiscal year, attributable to higher pre-tax income, and an increase in the effective tax rate to 21.3% for fiscal 2022, as compared to 21.0% for fiscal 2021. ​ COMPARISON OF OPERATING RESULTS FOR THE YEARS ENDED JUNE 30, 2021 AND 2020 Net Income.
The Company recorded an income tax provision of $12.7 million for fiscal 2022, an increase of $210,000, or 1.7%, as compared to the prior fiscal year, attributable to higher pre-tax income, and an increase in the effective tax rate to 21.3% for fiscal 2022, as compared to 21.0% for fiscal 2021.
In addition, for the fiscal year ending June 30, 2023, we project that our fixed commitments will include (i) $442,000 of operating and finance lease and other fixed payments and (ii) $1.1 million of scheduled interest payments on subordinate notes.
In addition, for the fiscal year ending June 30, 2024, we project that our fixed commitments will include (i) $1.0 million of operating and 72 ​ ​ Table of Contents finance lease and other fixed payments and (ii) $1.7 million of scheduled interest payments on subordinate notes.
At June 30, 2022, the Bank had reported $889.7 million of its single-family residential and commercial real estate loan portfolios as eligible collateral to the FHLB for available credit of approximately $539.5 million, of which $38.2 million was advanced, while $331,000 was encumbered in relation to residential real estate loans sold onto the secondary market through FHLB, and $305,000 was utilized for the issuance of letters of credit to secure public unit deposits.
At June 30, 2023, the Bank reported $1.1 billion of its single-family residential and commercial real estate loan portfolios as eligible collateral to the FHLB for available credit of approximately $675.7 million, of which $133.7 million was advanced, while $417,000 was encumbered in relation to residential real estate loans sold onto the secondary market through the FHLB, and $305,000 was utilized for the issuance of letters of credit to secure public unit deposits.
“Financial Statements and Supplementary Data.” Results for past periods are not necessarily indicative of results that may be expected for any future period. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (Dollars in thousands) ​ At June 30, Financial Condition Data: 2022 2021 2020 2019 2018 Total assets ​ $ 3,214,782 ​ $ 2,700,530 ​ $ 2,542,157 ​ $ 2,214,402 ​ $ 1,886,115 Loans receivable, net ​ 2,686,198 ​ 2,200,244 ​ 2,141,929 ​ 1,846,405 ​ 1,563,380 Mortgage-backed securities ​ 170,585 ​ 138,341 ​ 126,912 ​ 110,429 ​ 90,176 Cash, interest-bearing deposits and investment securities ​ 156,369 ​ 193,250 ​ 104,831 ​ 91,475 ​ 84,428 Deposits ​ 2,815,075 ​ 2,330,803 ​ 2,184,847 ​ 1,893,695 ​ 1,579,902 Borrowings ​ 37,957 ​ 57,529 ​ 70,024 ​ 52,284 ​ 82,919 Subordinated debt ​ 23,055 ​ 15,243 ​ 15,142 ​ 15,043 ​ 14,945 Stockholder's equity ​ 320,772 ​ 283,423 ​ 258,347 ​ 238,392 ​ 200,694 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (Dollars in thousands, except per share data) ​ For the Year Ended June 30, Operating Data: 2022 2021 2020 2019 2018 Interest income ​ $ 116,867 ​ $ 109,475 ​ $ 107,052 ​ $ 97,482 ​ $ 77,174 Interest expense ​ 13,300 ​ 16,789 ​ 26,916 ​ 24,700 ​ 14,791 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net interest income ​ 103,567 ​ 92,686 ​ 80,136 ​ 72,782 ​ 62,383 Provision for credit losses ​ 1,487 ​ (1,024) ​ 6,002 ​ 2,032 ​ 3,047 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net interest income after provision for credit losses ​ 102,080 ​ 93,710 ​ 74,134 ​ 70,750 ​ 59,336 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Noninterest income ​ 21,203 ​ 20,042 ​ 14,750 ​ 13,093 ​ 12,369 Noninterest expense ​ 63,379 ​ 54,047 ​ 54,452 ​ 47,892 ​ 42,973 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Income before income taxes ​ 59,904 ​ 59,705 ​ 34,432 ​ 35,951 ​ 28,732 Income taxes ​ 12,735 ​ 12,525 ​ 6,887 ​ 7,047 ​ 7,803 Net Income ​ $ 47,169 ​ $ 47,180 ​ $ 27,545 ​ $ 28,904 ​ $ 20,929 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Basic earnings per share available to common stockholders ​ $ 5.22 ​ $ 5.22 ​ $ 3.00 ​ $ 3.14 ​ $ 2.40 Diluted earnings per share available to common stockholders ​ $ 5.21 ​ $ 5.22 ​ $ 2.99 ​ $ 3.14 ​ $ 2.39 Dividends per share ​ $ 0.80 ​ $ 0.62 ​ $ 0.60 ​ $ 0.52 ​ $ 0.44 ​ ​ ​ 60 ​ ​ Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ At June 30, Other Data: 2022 2021 2020 2019 2018 Number of: Real Estate Loans 9,190 8,506 8,127 7,695 7,241 Deposit Accounts 107,038 100,407 96,813 91,086 79,762 Full service offices 49 47 46 45 38 Limited service offices 2 2 2 2 3 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ At or for the year ended June 30, Key Operating Ratios: 2022 2021 2020 2019 2018 Return on assets (net income divided by average assets) ​ 1.59 % 1.79 % 1.18 % 1.38 % 1.17 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Return on average common equity (net income available to common stockholders divided by average common equity) ​ 15.44 17.69 11.11 13.13 11.30 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Average equity to average assets ​ 10.30 10.14 10.60 10.49 10.31 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest rate spread (spread between weighted average rate on all interest-earning assets and all interest-bearing liabilities) ​ 3.61 3.61 3.50 3.56 3.62 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net interest margin (net interest income as a percentage of average interest-earning assets ​ 3.72 3.77 3.72 3.78 3.78 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Noninterest expense to average assets ​ 2.14 2.05 2.33 2.28 2.39 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Average interest-earning assets to average interest-bearing liabilities ​ 124.20 122.59 117.63 116.89 117.15 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Allowance for credit losses to gross loans (1) ​ 1.22 1.49 1.16 1.07 1.15 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Allowance for credit losses to nonperforming loans (1) ​ 806.02 566.16 290.38 94.72 198.58 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net charge-offs (recoveries) to average outstanding loans during the period ​ 0.00 0.03 0.04 0.02 0.02 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Ratio of nonperforming assets to total assets (1) ​ 0.20 0.30 0.44 1.12 0.69 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Dividend payout ratio ​ 15.25 11.87 20.02 16.48 18.29 ​ (1) At end of period. 61 ​ ​ Table of Contents This discussion and analysis reviews our consolidated financial statements and other relevant statistical data and is intended to enhance your understanding of our financial condition and results of operations.
“Financial Statements and Supplementary Data.” Results for past periods are not necessarily indicative of results that may be expected for any future period. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (Dollars in thousands) ​ At June 30, Financial Condition Data: 2023 2022 2021 2020 2019 Total assets ​ $ 4,360,211 ​ $ 3,214,782 ​ $ 2,700,530 ​ $ 2,542,157 ​ $ 2,214,402 Loans receivable, net ​ 3,571,078 ​ 2,686,198 ​ 2,200,244 ​ 2,141,929 ​ 1,846,405 Mortgage-backed securities ​ 270,252 ​ 170,585 ​ 138,341 ​ 126,912 ​ 110,429 Cash, interest-bearing deposits and investment securities ​ 202,523 ​ 156,369 ​ 193,250 ​ 104,831 ​ 91,475 Deposits ​ 3,725,540 ​ 2,815,075 ​ 2,330,803 ​ 2,184,847 ​ 1,893,695 Borrowings ​ 133,514 ​ 37,957 ​ 57,529 ​ 70,024 ​ 52,284 Subordinated debt ​ 23,105 ​ 23,055 ​ 15,243 ​ 15,142 ​ 15,043 Stockholder's equity ​ 446,058 ​ 320,772 ​ 283,423 ​ 258,347 ​ 238,392 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (Dollars in thousands, except per share data) ​ For the Year Ended June 30, Operating Data: 2023 2022 2021 2020 2019 Interest income ​ $ 176,416 ​ $ 116,867 ​ $ 109,475 ​ $ 107,052 ​ $ 97,482 Interest expense ​ 49,671 ​ 13,300 ​ 16,789 ​ 26,916 ​ 24,700 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net interest income ​ 126,745 ​ 103,567 ​ 92,686 ​ 80,136 ​ 72,782 Provision (benefit) for credit losses ​ 17,061 ​ 1,487 ​ (1,024) ​ 6,002 ​ 2,032 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net interest income after provision (benefit) for credit losses ​ 109,684 ​ 102,080 ​ 93,710 ​ 74,134 ​ 70,750 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Noninterest income ​ 26,204 ​ 21,203 ​ 20,042 ​ 14,750 ​ 13,093 Noninterest expense ​ 86,425 ​ 63,379 ​ 54,047 ​ 54,452 ​ 47,892 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Income before income taxes ​ 49,463 ​ 59,904 ​ 59,705 ​ 34,432 ​ 35,951 Income taxes ​ 10,226 ​ 12,735 ​ 12,525 ​ 6,887 ​ 7,047 Net Income ​ $ 39,237 ​ $ 47,169 ​ $ 47,180 ​ $ 27,545 ​ $ 28,904 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Basic earnings per share available to common stockholders ​ $ 3.86 ​ $ 5.22 ​ $ 5.22 ​ $ 3.00 ​ $ 3.14 Diluted earnings per share available to common stockholders ​ $ 3.85 ​ $ 5.21 ​ $ 5.22 ​ $ 2.99 ​ $ 3.14 Dividends per share ​ $ 0.84 ​ $ 0.80 ​ $ 0.62 ​ $ 0.60 ​ $ 0.52 ​ 62 ​ ​ Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ At June 30, Other Data: 2023 2022 2021 2020 2019 Number of: Real Estate Loans 9,707 9,190 8,506 8,127 7,695 Deposit Accounts 144,219 107,038 100,407 96,813 91,086 Full service offices 63 49 47 46 45 Limited service offices 3 2 2 2 2 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ At or for the year ended June 30, Key Operating Ratios: 2023 2022 2021 2020 2019 Return on assets (net income divided by average assets) ​ 1.03 % 1.59 % 1.79 % 1.18 % 1.38 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Return on average common equity (net income available to common stockholders divided by average common equity) ​ 10.39 15.44 17.69 11.11 13.13 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Average equity to average assets ​ 9.91 10.30 10.14 10.60 10.49 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest rate spread (spread between weighted average rate on all interest-earning assets and all interest-bearing liabilities) ​ 3.21 3.61 3.61 3.50 3.56 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net interest margin (net interest income as a percentage of average interest-earning assets ​ 3.54 3.72 3.77 3.72 3.78 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Noninterest expense to average assets ​ 2.27 2.14 2.05 2.33 2.28 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Average interest-earning assets to average interest-bearing liabilities ​ 123.57 124.20 122.59 117.63 116.89 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Allowance for credit losses to gross loans (1) ​ 1.32 1.22 1.49 1.16 1.07 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Allowance for credit losses to nonperforming loans (1) ​ 624.93 806.02 566.16 290.38 94.72 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net charge-offs (recoveries) to average outstanding loans during the period ​ 0.02 0.00 0.03 0.04 0.02 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Ratio of nonperforming assets to total assets (1) ​ 0.26 0.20 0.30 0.44 1.12 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Dividend payout ratio ​ 22.00 15.25 11.87 20.02 16.48 ​ (1) At end of period. 63 ​ ​ Table of Contents OVERVIEW Southern Missouri Bancorp, Inc., is a Missouri corporation originally organized for the principal purpose of becoming the holding company of Southern Bank.
The Company originated $14.9 million in adjustable rate residential loans during the fiscal year ended June 30, 2022, compared to $18.5 million during the prior fiscal year.
The Company originated $38.4 million in adjustable rate residential loans during the fiscal year ended June 30, 2023, compared to $14.9 million during the prior fiscal year.
Southern Bank’s noninterest income consists primarily of fees charged on transaction and loan accounts, interchange income from customer debit and ATM card use, gains on sales of loans originated for sale on the secondary market, and increased cash surrender value of bank owned life insurance (“BOLI”).
Southern Bank’s noninterest income consists primarily of fees charged on transaction and loan accounts, interchange income from customer debit and ATM card use, gains on sales of loans, trust and wealth management services, and increased cash surrender value of bank owned life insurance (“BOLI”).
At June 30, 2022, the fixed-rate, single-family residential loan portfolio totaled $499.2 million, with a weighted average maturity of 183 months, compared to $346.9 million with a weighted average maturity of 187 months at June 30, 2021.
At June 30, 2023, the fixed-rate, single-family residential loan portfolio totaled $586.4 million, with a weighted average maturity of 188 months, compared to $499.2 million with a weighted average maturity of 183 months at June 30, 2022.
At June 30, 2022, the Company’s weighted average life of its investment portfolio was 5.2 years, compared to 4.7 years at June 30, 2021. At June 30, 2022, CDs with original terms of two years or more totaled $321.5 million, compared to $249.9 million at June 30, 2021.
At June 30, 2023, the Company’s weighted average life of its investment portfolio was 5.3 years, compared to 5.2 years at June 30, 2022. At June 30, 2023, CDs with original terms of two years or more totaled $383.8 million, compared to $321.5 million at June 30, 2022.
The summary statement of financial condition information and statement of income information are derived from our consolidated financial statements, which have been audited by FORVIS LLP. See Item 8.
SELECTED CONSOLIDATED FINANCIAL INFORMATION ​ The following tables set forth selected consolidated financial information and other financial data of the Company. The summary statement of financial condition information and statement of income information are derived from our consolidated financial statements, which have been audited by FORVIS LLP. See Item 8.
The Bank intends to continue to focus on its lending programs for one- to four-family and multi-family residential real estate, commercial real estate, commercial business and consumer financing on loans secured by properties or collateral located primarily in Missouri and Arkansas.
The Bank intends to continue to focus on its lending programs for one- to four-family and multi-family residential real estate, commercial real estate, commercial business and consumer financing on loans secured by properties or collateral located in its primary lending area or to borrowers who operate within that area.
The decrease in the average yield was attributed primarily to origination and repricing of loans and borrower refinancing as average market interest rates decreased significantly compared to the prior fiscal year. 66 ​ ​ Table of Contents Interest income on the investment portfolio and other interest-earning assets was $5.4 million for fiscal 2022, an increase of $974,000, or 22.2%, when compared to the prior fiscal year, attributable to a 23.4% increase in the average balance of such assets, partially offset by a two basis point decrease in the yield on these assets.
Interest income on the investment portfolio and other interest-earning assets was $5.4 million for fiscal 2022, an increase of $974,000, or 22.2%, when compared to the prior fiscal year, attributable to a 23.4% increase in the average balance of such assets, partially offset by a two basis point decrease in the yield on these assets.
These yields and costs are derived by dividing income or expense by the average balance of assets or liabilities, respectively, for the years indicated. Nonaccrual loans are included with other noninterest-earning assets.
These yields and costs are derived by dividing income or expense by the average balance of assets or liabilities, respectively, for the years indicated.
The Bank has purchased “key person” life insurance policies (BOLI) on employees at various times since fiscal 2003, and has acquired additional BOLI in connection with certain acquisitions. At June 30, 2022, the cash surrender value of all such policies was $48.7 million, up $4.9 million, or 11.2%, as compared to June 30, 2021, attributable primarily to the Fortune acquisition.
The Bank has purchased “key person” life insurance policies (BOLI) on employees at various times since fiscal 2003, and has acquired additional BOLI in connection with certain mergers. At June 30, 2023, the cash surrender value of all such policies was $71.7 million, up $23.0 million, or 47.2%, as compared to June 30, 2022, attributable primarily to the Citizens merger.
Specific qualitative factors considered include, but may not be limited to: ● Changes in lending policies and/or loan review system ● National, regional, and local economic trends and/or conditions ● Changes and/or trends in the nature, volume, or terms of the loan portfolio ● Experience, ability, and depth of lending management and staff ● Levels and/or trends of delinquent, non-accrual, problem assets, or charge offs and recoveries ● Concentrations of credit ● Changes in collateral values ● Agricultural economic conditions ● Risks from regulatory, legal, or competitive factors ​ At our June 30, 2020, fiscal year end, prior to the adoption of ASU 2016-13, the Company’s ALLL was $25.1 million.
Specific qualitative factors considered include, but may not be limited to: ● Changes in lending policies and/or loan review system ● National, regional, and local economic trends and/or conditions ● Changes and/or trends in the nature, volume, or terms of the loan portfolio ● Experience, ability, and depth of lending management and staff ● Levels and/or trends of delinquent, non-accrual, problem assets, or charge offs and recoveries ● Concentrations of credit ● Changes in collateral values ● Agricultural economic conditions ● Risks from regulatory, legal, or competitive factors ​ Premises and Equipment.
The Bank’s tier 1 capital represented 10.22% of total adjusted assets and 11.91% of total risk-weighted assets, while total risk-based capital was 12.90% of total risk-weighted assets, and tangible common equity capital was 11.91% of total risk-weighted assets.
The Bank’s tier 1 capital represented 9.54% of total adjusted assets and 10.56% of total risk-weighted assets, while total risk-based capital was 11.77% of total risk-weighted assets, and tangible common equity capital was 10.56% of total risk-weighted assets.
The February 2022 Fortune acquisition resulted in goodwill of $12.8 million and a $1.6 million core deposit intangible, which is being amortized over a seven-year period using the straight-line method. Goodwill from these acquisitions is not being amortized, but is tested for impairment at least annually. Deposits.
The February 2022 Fortune acquisition resulted in goodwill of $12.8 million and a $1.6 million core deposit intangible which is being amortized over a seven-year period using the straight-line method.
At June 30, 2022, the Bank exceeded regulatory capital requirements with tier 1 leverage, total risk-based capital, and tangible common equity capital of $325.2 million, $352.2 million and $325.2 million, respectively.
At June 30, 2023, the Bank exceeded regulatory capital requirements with tier 1 leverage, total risk-based capital, and tangible common equity capital of $407.8 million, $454.7 million and $407.8 million, respectively.
The Bank had also pledged $304.8 million of its agricultural real estate and agricultural operating and equipment loans to the Federal Reserve Bank of St. Louis’s discount window 70 ​ ​ Table of Contents for available credit of approximately $248.1 million, as of June 30, 2022, none of which was advanced.
The Bank had also pledged $344.3 million of its agricultural real estate and agricultural operating and equipment loans to the Federal Reserve Bank of St. Louis’s discount window for available credit of approximately $276.6 million, as of June 30, 2023, none of which was advanced.
(5) Represents net interest income divided by average interest-earning assets. ​ 73 ​ ​ Table of Contents YIELDS EARNED AND RATES PAID The following table sets forth for the periods and at the date indicated, the weighted average yields earned on the Company’s assets, the weighted average interest rates paid on the Company’s liabilities, together with the net yield on interest-earning assets. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ At June 30, ​ For The Year Ended June 30, ​ 2022 2022 2021 2020 Weighted-average yield on loan portfolio 4.49 % 4.60 % 4.84 % 5.21 % Weighted-average yield on mortgage-backed securities 2.03 1.80 1.69 2.31 ​ Weighted-average yield on investment securities (1) 3.09 2.82 2.98 3.16 ​ Weighted-average yield on other interest-earning assets 1.67 0.34 0.23 1.66 ​ Weighted-average yield on all interest-earning assets 4.27 4.20 4.45 4.97 ​ Weighted-average rate paid on interest-bearing deposits 0.68 0.54 0.77 1.40 ​ Weighted-average rate paid on securities sold under agreements to repurchase — — — 0.03 ​ Weighted-average rate paid on FHLB advances 1.47 1.83 2.07 2.21 ​ Weighted-average rate paid on note payable — — — 4.39 ​ Weighted-average rate paid on subordinated debt 4.77 3.77 3.51 5.22 ​ Weighted-average rate paid on all interest-bearing liabilities 0.73 0.59 0.84 1.47 ​ Interest rate spread (spread between weighted average rate on all interest-earning assets and all interest- bearing liabilities) 3.54 3.61 3.61 3.50 ​ Net interest margin (net interest income as a percentage of average interest-earning assets) 3.67 3.72 3.77 3.72 ​ (1) Includes Federal Home Loan Bank, Federal Reserve Bank stock. 74 ​ ​ Table of Contents RATE/VOLUME ANALYSIS The following table sets forth the effects of changing rates and volumes on net interest income of the Company.
(5) Represents net interest income divided by average interest-earning assets. ​ 74 ​ ​ Table of Contents YIELDS EARNED AND RATES PAID The following table sets forth for the periods and at the date indicated, the weighted average yields earned on the Company’s assets, the weighted average interest rates paid on the Company’s liabilities, together with the net yield on interest-earning assets. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ At June 30, ​ For The Year Ended June 30, ​ 2023 2023 2022 2021 Weighted-average yield on loan portfolio 5.58 % 5.11 % 4.60 % 4.84 % Weighted-average yield on mortgage-backed securities 3.24 2.88 1.80 1.69 ​ Weighted-average yield on investment securities (1) 5.82 4.50 2.82 2.98 ​ Weighted-average yield on other interest-earning assets 3.02 4.50 0.34 0.23 ​ Weighted-average yield on all interest-earning assets 5.43 4.93 4.20 4.45 ​ Weighted-average rate paid on interest-bearing deposits 2.32 1.61 0.54 0.77 ​ Weighted-average rate paid on FHLB advances 3.95 3.37 1.83 2.07 ​ Weighted-average rate paid on subordinated debt 7.40 6.19 3.77 3.51 ​ Weighted-average rate paid on all interest-bearing liabilities 2.42 1.72 0.59 0.84 ​ Interest rate spread (spread between weighted average rate on all interest-earning assets and all interest- bearing liabilities) 3.01 3.21 3.61 3.61 ​ Net interest margin (net interest income as a percentage of average interest-earning assets) 3.48 3.54 3.72 3.77 ​ (1) Includes Federal Home Loan Bank and Federal Reserve Bank stock. 75 ​ ​ Table of Contents RATE/VOLUME ANALYSIS The following table sets forth the effects of changing rates and volumes on net interest income of the Company.
Our ACL at June 30, 2022, totaled $33.2 million, representing 1.22% of gross loans and 806.2% of nonperforming loans, as compared to $33.2 million, representing 1.49% of gross loans and 566.1% of nonperforming loans at June 30, 2021.
Our ACL at June 30, 2023, totaled $47.8 million, representing 1.32% of gross loans and 624.9% of nonperforming loans, as compared to $33.2 million, representing 1.22% of gross loans and 806.2% of nonperforming loans at June 30, 2022.
The Company’s tier 1 capital represented 10.41% of total adjusted assets and 12.16% of total risk-weighted assets, while total risk-based capital was 13.42% of total risk-weighted assets, and tangible common equity capital was 11.61% of total risk-weighted assets.
The Company’s tier 1 capital represented 9.95% of total adjusted assets and 11.10% of total risk-weighted assets, while total risk-based capital was 12.52% of total risk-weighted assets, and tangible common equity capital was 10.70% of total risk-weighted assets.
Net interest income for fiscal 2022 was $103.6 million, an increase of $10.9 million, or 11.7%, when compared to the prior fiscal year. The increase, as compared to the prior fiscal year, was attributable to a 13.1% increase in the average balance of interest-earning assets, partially offset by a decrease in the net interest margin, from 3.77% to 3.72%.
The increase, as compared to the prior fiscal year, was attributable to a 13.1% increase in the average balance of interest-earning assets, partially offset by a decrease in the net interest margin, from 3.77% to 3.72%.
The Company experienced balance sheet growth in fiscal 2022, with total assets of $3.2 billion at June 30, 2022, reflecting an increase of $514.2 million, or 19.0%, as compared to June 30, 2021. Asset growth was comprised mainly of increases in loans and available-for-sale (“AFS”) securities. Cash and equivalents.
The Company experienced balance sheet growth in fiscal 2023, with total assets of $4.4 billion at June 30, 2023, reflecting an increase of $1.1 billion, or 35.6%, as compared to June 30, 2022. Asset growth was attributable in large part to the Citizens merger and was comprised mainly of increases in loans and available-for-sale (“AFS”) securities. Cash and equivalents.
In connection with the Fortune acquisition, the Company assumed $7.5 million in fixed-to-floating rate subordinated notes. The notes had been issued in May 2021 by Fortune to a multi-lender group, bear interest through May 2026 at a fixed rate of 4.5%, and will bear interest thereafter at SOFR plus 3.77%.
The notes had been issued in May 2021 by Fortune to a multi-lender group, bear interest through May 2026 at a fixed rate of 4.5%, and will bear interest thereafter at SOFR plus 3.77%. The notes will be redeemable at par beginning in May 2026, and mature in May 2031.
At June 30, 2022, the Bank had outstanding commitments to extend credit of $707.7 million (including $584.1 million in unused lines of credit). Total commitments to originate fixed-rate loans with terms in excess of one year were $240.0 million at rates ranging from 2.19% to 6.75%, with a weighted-average rate of 4.67%.
At June 30, 2023, the Bank had outstanding commitments to extend credit of $912.0 million (including $552.1 million in unused lines of credit). Total commitments to originate fixed-rate loans with terms in excess of one year were $213.3 million at rates ranging from 3.95% to 11.0%, with a weighted-average rate of 6.07%.
OVERVIEW Southern Missouri Bancorp, Inc., is a Missouri corporation originally organized for the principal purpose of becoming the holding company of Southern Bank. The principal business of Southern Bank consists of attracting deposits from the communities it serves and investing those funds in loans secured by residential and commercial real estate, as well as commercial business and consumer loans.
The principal business of Southern Bank consists of attracting deposits from the communities it serves and investing those funds in loans secured by residential and commercial real estate, as well as commercial business and consumer loans.
Interest income for fiscal 2021 was $109.5 million, an increase of $2.4 million, or 2.3%, when compared to the prior fiscal year.
Interest income for fiscal 2023 was $176.4 million, an increase of $59.5 million, or 51.0%, when compared to the prior fiscal year.
COMPARISON OF OPERATING RESULTS FOR THE YEARS ENDED JUNE 30, 2022 AND 2021 Net Income. The Company’s net income for the fiscal year ended June 30, 2022, was $47.2 million, roughly unchanged as compared to the prior fiscal year. Net Interest Income .
COMPARISON OF OPERATING RESULTS FOR THE YEARS ENDED JUNE 30, 2023 AND 2022 Net Income. The Company’s net income for the fiscal year ended June 30, 2023, was $39.2 million, a decrease of $7.9 million, or 16.8%, as compared to the prior fiscal year. Net Interest Income .
Provision for Credit Losses . The Company recorded a negative provision for credit losses of $1.0 million for fiscal 2021, as compared to a provision for loan losses of $6.0 million for the prior fiscal year.
The Company recorded a provision for credit losses (PCL) of $17.1 million for fiscal 2023, as compared to a PCL of $1.5 million for the prior fiscal year.
The debt securities had been issued in 2005 by Peoples, in connection with the sale of trust preferred securities, bear interest at a floating rate based on LIBOR, are now redeemable at par, and mature in 2035. The carrying value of these debt securities was approximately $5.4 million at June 30, 2022, relatively unchanged as compared to June 30, 2021.
The debt securities had been issued in 2005 by Peoples, in connection with the sale of trust preferred securities, bear interest at a floating rate based on LIBOR, are now redeemable at par, and mature in 2035.
To be considered well capitalized, the Bank must maintain tier 1 leverage capital levels of at least 5.0% of adjusted total assets and 8.0% of risk-weighted assets, total risk-based capital of 10.0% of risk-weighted assets, and tangible common equity capital of 6.5% of risk-weighted assets. 71 ​ ​ Table of Contents At June 30, 2022, the Company exceeded regulatory capital requirements with tier 1 leverage, total risk-based capital, and tangible common equity capital of $335.3 million, $370.0 million and $320.0 million, respectively.
To be considered well capitalized, the Bank must maintain tier 1 leverage capital levels of at least 5.0% of adjusted total assets and 8.0% of risk-weighted assets, total risk-based capital of 10.0% of risk-weighted assets, and tangible common equity capital of 6.5% of risk-weighted assets.
(See Note 1 and Note 3 to the consolidated financial statements, “Critical Accounting Policies” and “Financial Condition – Allowance for Credit Losses” in this Item 7, and “Asset Quality” in Item 1 of this Form 10-K.) Noninterest Income. Noninterest income was $20.0 million for fiscal 2021, an increase of $5.3 million, or 35.9%, when compared to the prior fiscal year.
(See Note 1 and Note 3 of the Notes to Consolidated Financial Statements, “Critical Accounting Policies” and “Financial Condition – Allowance for Credit Losses” in this Item 7, and “Asset Quality” in Item 1 of this Form 10-K.) ​ Noninterest Income.
The Company’s net income available for the fiscal year ended June 30, 2021, was $47.2 million, an increase of $19.6 million, or 71.3%, as compared to the prior fiscal year. Net Interest Income . Net interest income for fiscal 2021 was $92.7 million, an increase of $12.6 million, or 15.7%, when compared to the prior fiscal year.
The Company’s net income for the fiscal year ended June 30, 2022, was $47.2 million, roughly unchanged as compared to the prior fiscal year. Net Interest Income . Net interest income for fiscal 2022 was $103.6 million, an increase of $10.9 million, or 11.7%, when compared to the prior fiscal year.
The higher effective tax rate was attributable primarily to reduced tax-advantaged investments relative to the Company’s pre-tax income. LIQUIDITY AND CAPITAL RESOURCES Southern Missouri’s primary potential sources of funds include deposit growth, FHLB advances, amortization and prepayment of loan principal, investment maturities and sales, and capital generated from ongoing operations.
LIQUIDITY AND CAPITAL RESOURCES Southern Missouri’s primary potential sources of funds include deposit growth, FHLB advances, amortization and prepayment of loan principal, investment maturities and sales, and capital generated from ongoing operations.
Finally, the ability of many borrowers to service their debt may decrease in the event of an interest rate increase. ​ 76 ​ ​ Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ June 30, 2022 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ NPV as Percentage of ​ ​ Net Portfolio ​ PV of Assets Change in Rates Value Change % Change NPV Ratio Change ​ ​ (Dollars in thousands) ​ (%) ​ (basis points) ​ +300 bp ​ $ 189,624 ​ $ (129,048) (40) ​ 6.50 ​ (345) ​ +200 bp ​ 231,603 ​ (87,069) (27) ​ 7.70 ​ (225) ​ +100 bp ​ 286,614 ​ (32,058) (10) ​ 9.20 ​ (75) ​ 0 bp ​ 318,672 ​ — — ​ 9.95 ​ — ​ ‑100 bp ​ 350,857 ​ 32,185 10 ​ 10.66 ​ 71 ​ ‑200 bp ​ 442,479 ​ 123,807 39 ​ 13.06 ​ 311 ​ ‑300 bp ​ 523,486 ​ 204,814 64 ​ 15.09 ​ 514 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ June 30, 2021 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ NPV as Percentage of ​ ​ Net Portfolio ​ PV of Assets Change in Rates Value Change % Change NPV Ratio Change ​ ​ (Dollars in thousands) ​ (%) ​ (basis points) ​ +300 bp ​ $ 252,800 ​ $ (46,274) (15) ​ 10.05 ​ (96) ​ +200 bp ​ 277,898 ​ (21,176) (7) ​ 10.76 ​ (25) ​ +100 bp ​ 297,372 ​ (1,702) (1) ​ 11.23 ​ 21 ​ 0 bp ​ 299,074 ​ — — ​ 11.01 ​ — ​ ‑100 bp ​ 334,713 ​ 35,638 12 ​ 12.11 ​ 109 ​ ‑200 bp ​ 347,520 ​ 48,446 16 ​ 12.51 ​ 149 ​ ‑300 bp ​ 352,759 ​ 53,685 18 ​ 12.67 ​ 165 ​ ​ The Company’s growth strategy has included origination of fixed-rate loans, as discussed under Item 7a “Quantitative and Qualitative Disclosures About Market Risk” above.
Finally, the ability of many borrowers to service their debt may decrease in the event of an interest rate increase. ​ 77 ​ ​ Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ June 30, 2023 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ NPV as Percentage of ​ ​ Net Portfolio ​ PV of Assets Change in Rates Value Change % Change NPV Ratio Change ​ ​ (Dollars in thousands) ​ (%) ​ (basis points) ​ +300 bp ​ $ 259,599 ​ $ (114,765) (31) ​ 6.66 ​ (226) ​ +200 bp ​ 296,514 ​ (77,850) (21) ​ 7.43 ​ (149) ​ +100 bp ​ 334,226 ​ (40,138) (11) ​ 8.17 ​ (75) ​ 0 bp ​ 374,364 ​ — — ​ 8.92 ​ — ​ ‑100 bp ​ 426,243 ​ 51,879 14 ​ 9.91 ​ 99 ​ ‑200 bp ​ 480,345 ​ 105,981 28 ​ 10.95 ​ 203 ​ ‑300 bp ​ 518,672 ​ 144,307 39 ​ 11.64 ​ 272 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ June 30, 2022 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ NPV as Percentage of ​ ​ Net Portfolio ​ PV of Assets Change in Rates Value Change % Change NPV Ratio Change ​ ​ (Dollars in thousands) ​ (%) ​ (basis points) ​ +300 bp ​ $ 189,624 ​ $ (129,048) (40) ​ 6.50 ​ (345) ​ +200 bp ​ 231,603 ​ (87,069) (27) ​ 7.70 ​ (225) ​ +100 bp ​ 286,614 ​ (32,058) (10) ​ 9.20 ​ (75) ​ 0 bp ​ 318,672 ​ — — ​ 9.95 ​ — ​ ‑100 bp ​ 350,857 ​ 32,185 10 ​ 10.66 ​ 71 ​ ‑200 bp ​ 442,479 ​ 123,807 39 ​ 13.06 ​ 311 ​ ‑300 bp ​ 523,486 ​ 204,814 64 ​ 15.09 ​ 514 ​ ​ The Company’s growth strategy has included the origination of fixed-rate loans, as discussed under Item 7a “Quantitative and Qualitative Disclosures About Market Risk” above.
Cash and cash equivalents were $86.8 million at June 30, 2022, a decrease of $36.8 million, or 29.8%, as compared to June 30, 2021. The decrease was primarily a result of loan growth outpacing deposit growth during the period.
Cash and cash equivalents were $55.2 million at June 30, 2023, a decrease of $36.3 million, or 39.7%, as compared to June 30, 2022. The decrease was primarily a result of organic loan growth outpacing organic deposit growth during the period, partially offset by the net effects of the Citizens merger.
Interest-bearing time deposits were $4.8 million at June 30, 2022, an increase of $3.8 million, or 387.0% as compared to June 30, 2021. Investments. Available-for-sale (AFS) securities were $235.4 million at June 30, 2022, an increase of $28.4 million, or 13.7%, as compared to June 30, 2021.
Interest-bearing time deposits were $1.2 million at June 30, 2023, a decrease of $3.5 million, or 74.0% as compared to June 30, 2022. Investments. Available-for-sale (AFS) securities were $417.6 million at June 30, 2023, an increase of $182.2 million, or 77.4%, as compared to June 30, 2022.
The increase was due primarily to increased gains realized on the sale of residential real estate loans originated for that purpose, loan servicing income, bank card interchange income, earnings on bank owned life insurance (BOLI), and other income, partially offset by a decrease in deposit account service charges and fees.
Increases in deposit service charges, bank card interchange income, income on non-deposit investment products, loan servicing fees, other loan fees, and earnings on BOLI contributed to the year-over year increase, partially offset by a decrease in gains on sale of residential loans originated for sale into the secondary market.
The decrease in the average rate paid on deposits was attributable primarily lower market interest rates over the course of fiscal 2021, as compared to the prior fiscal year. Interest expense on FHLB advances was $1.4 million for fiscal 2021, a decrease of $566,000, or 29.3%, when compared to the prior fiscal year.
The increase in the average rate paid on deposits was attributable primarily to higher market interest rates over the course of fiscal 2023. 68 ​ ​ Table of Contents Interest expense on FHLB advances was $3.6 million for fiscal 2023, an increase of $2.8 million, or 358.0%, when compared to the prior fiscal year.
Information is provided with respect to (i) effects on interest income attributable to changes in volume (changes in volume multiplied by prior rate), (ii) effects on interest income attributable to changes in rate (changes in rate multiplied by prior volume), and (iii) changes in rate/volume (change in rate multiplied by change in volume). ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years Ended June 30, ​ Years Ended June 30, ​ ​ 2022 Compared to 2021 ​ 2021 Compared to 2020 ​ ​ Increase (Decrease) Due to ​ Increase (Decrease) Due to ​ ​ ​ ​ ​ ​ Rate/ ​ ​ ​ ​ ​ ​ ​ Rate/ ​ ​ (dollars in thousands) Rate ​ Volume ​ Volume ​ Net Rate ​ Volume ​ Volume ​ Net Interest-earning assets: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Loans receivable (1) ​ $ (5,452) ​ $ 13,232 ​ $ (1,362) ​ $ 6,418 ​ $ (7,128) ​ $ 10,848 ​ $ (772) ​ $ 2,948 Mortgage-backed securities ​ 136 ​ 525 ​ 35 ​ 696 ​ (761) ​ 2 ​ (1) ​ (760) Investment securities (2) ​ (117) ​ 194 ​ (10) ​ 67 ​ (115) ​ 269 ​ (15) ​ 139 Other interest-earning deposits ​ 108 ​ 70 ​ 33 ​ 211 ​ (111) ​ 1,486 ​ (1,278) ​ 97 Total net change in income on interest-earning assets ​ (5,325) ​ 14,021 ​ (1,304) ​ 7,392 ​ (8,115) ​ 12,605 ​ (2,066) ​ 2,424 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest-bearing liabilities: ​ ​ ​ ​ ​ ​ ​ ​ Deposits ​ (4,011) ​ 986 ​ (42) ​ (3,067) ​ (9,796) ​ 1,359 ​ (758) ​ (9,195) Securities sold under agreements to repurchase ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — FHLB advances ​ (163) ​ ​ (466) ​ 55 ​ (574) ​ (124) ​ ​ (473) ​ 31 ​ (566) Note payable ​ — ​ — ​ — ​ — ​ — ​ (112) ​ — ​ (112) Subordinated debt ​ 38 ​ 105 ​ 9 ​ 152 ​ (257) ​ 5 ​ (1) ​ (253) Total net change in expense on interest-bearing liabilities ​ (4,136) ​ 625 ​ 22 ​ (3,489) ​ (10,177) ​ 779 ​ (728) ​ (10,126) Net change in net interest income ​ $ (1,189) ​ $ 13,396 ​ $ (1,326) ​ $ 10,881 ​ $ 2,062 ​ $ 11,826 ​ $ (1,338) ​ $ 12,550 (1) Does not include interest on loans placed on nonaccrual status.
Information is provided with respect to (i) effects on interest income attributable to changes in volume (changes in volume multiplied by prior rate), (ii) effects on interest income attributable to changes in rate (changes in rate multiplied by prior volume), and (iii) changes in rate/volume (change in rate multiplied by change in volume). ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years Ended June 30, ​ Years Ended June 30, ​ ​ 2023 Compared to 2022 ​ 2022 Compared to 2021 ​ ​ Increase (Decrease) Due to ​ Increase (Decrease) Due to ​ ​ ​ ​ ​ ​ Rate/ ​ ​ ​ ​ ​ ​ ​ Rate/ ​ ​ (dollars in thousands) Rate ​ Volume ​ Volume ​ Net Rate ​ Volume ​ Volume ​ Net Interest-earning assets: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Loans receivable (1) ​ $ 12,664 ​ $ 34,531 ​ $ 3,534 ​ $ 50,729 ​ $ (5,452) ​ $ 13,232 ​ $ (1,362) ​ $ 6,418 Mortgage-backed securities ​ 1,653 ​ 1,607 ​ 969 ​ 4,229 ​ 136 ​ 525 ​ 35 ​ 696 Investment securities (2) ​ 1,311 ​ 1,138 ​ 678 ​ 3,127 ​ (117) ​ 194 ​ (10) ​ 67 Other interest-earning deposits ​ 5,315 ​ (293) ​ (3,558) ​ 1,464 ​ 108 ​ 70 ​ 33 ​ 211 Total net change in income on interest-earning assets ​ 20,943 ​ 36,983 ​ 1,623 ​ 59,549 ​ (5,325) ​ 14,021 ​ (1,304) ​ 7,392 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest-bearing liabilities: ​ ​ ​ ​ ​ ​ ​ ​ Deposits ​ 22,447 ​ 3,435 ​ 6,688 ​ 32,570 ​ (4,011) ​ 986 ​ (42) ​ (3,067) Securities sold under agreements to repurchase ​ ​ — ​ ​ — ​ ​ 213 ​ ​ 213 ​ ​ — ​ ​ — ​ ​ — ​ ​ — FHLB advances ​ 670 ​ ​ 1,173 ​ 992 ​ 2,835 ​ (163) ​ ​ (466) ​ 55 ​ (574) Subordinated debt ​ 440 ​ 191 ​ 122 ​ 753 ​ 38 ​ 105 ​ 9 ​ 152 Total net change in expense on interest-bearing liabilities ​ 23,557 ​ 4,799 ​ 8,015 ​ 36,371 ​ (4,136) ​ 625 ​ 22 ​ (3,489) Net change in net interest income ​ $ (2,614) ​ $ 32,184 ​ $ (6,392) ​ $ 23,178 ​ $ (1,189) ​ $ 13,396 ​ $ (1,326) ​ $ 10,881 (1) Does not include interest on loans placed on nonaccrual status.
This increased sensitivity is reflected in the tables above. ​ The Company has worked to limit its exposure to rising rates by (a) increasing the share of funding on its balance sheet obtained from non-maturity transaction accounts, (b) limiting FHLB borrowings and (c) limiting the duration of its available-for-sale investment portfolio. ​
The Company’s interest rate sensitivity has increased over the recent period as a result of these originations and due to the behavior of fixed-rate borrowers in a higher interest rate environment, but this increased sensitivity was partially offset by the fiscal 2023 Citizens merger, as the acquired balance sheet included a higher percentage of rate sensitive assets. ​ The Company has worked to limit its exposure to rising rates by (a) increasing the share of funding on its balance sheet obtained from non-maturity transaction accounts, (b) limiting short-term FHLB borrowings and (c) limiting the duration of its available-for-sale investment portfolio. ​ ​
The increase was due to an increase of $306.7 million, or 14.2%, in the average balance of interest-earning assets, partially offset by a 52 basis point decrease in the average yield earned on interest-earning assets, from 4.97% in fiscal 2020, to 4.45% in fiscal 2021. 68 ​ ​ Table of Contents Interest income on loans receivable for fiscal 2021 was $105.1 million, an increase of $2.9 million, or 2.9%, when compared to the prior fiscal year.
Interest income on loans receivable for fiscal 2023 was $162.2 million, an increase of $50.7 million, or 45.5%, when compared to the prior fiscal year. The increase was due to a $749.9 million, or 30.9%, increase in the average balance of loans receivable, combined with a 51 basis point increase in the average yield earned on loans receivable.
The increase, as compared to the prior fiscal year, was attributable to a 14.2% increase in the average balance of interest-earning assets, combined with an increase in the net interest margin, from 3.72% to 3.77%.
Net interest income for fiscal 2023 was $126.7 million, an increase of $23.2 million, or 22.4%, when compared to the prior fiscal year. The increase, as compared to the prior fiscal year, was attributable to a 28.5% increase in the average balance of interest-earning assets, partially offset by a decrease in the net interest margin, from 3.72% to 3.54%.
The decrease was due to a 63 basis point decrease in the average rate paid on interest-bearing liabilities, from 1.47% in fiscal 2020, to 0.84% in fiscal 2021, partially offset by an increase of $176.1 million, or 9.6%, in the average balance of interest-bearing liabilities.
The increase was due to a 113-basis point increase in the average rate paid on interest-bearing liabilities, to 1.72% in fiscal 2023, from 0.59% in fiscal 2022, combined with an increase of $654.0 million, or 29.2%, in the average balance of interest-bearing liabilities.
The increase was attributable primarily to $22.9 million in equity issued to Fortune shareholders, as well as to earnings retatined after cash dividends paid, partially offset by a $20.4 million reduction in accumulated other comprehensive income (loss) as the market value of the Company’s investments declined due to increases in market interest rates, and by $5.8 million utilized for repurchases of 132,194 shares of the Company’s common stock during the fiscal year, at an average price of $44.17 per share.
The increase was attributable primarily to $98.3 million in equity issued to Citizens shareholders, as well as to earnings retained after cash dividends paid, partially offset by a $4.4 million increase in accumulated other comprehensive loss as the market value of the Company’s investments declined due to increases in market interest rates.
These funds have also been used to purchase investment securities, mortgage-backed securities (MBS), U.S. government and federal agency obligations and other permissible securities. Southern Bank’s results of operations are primarily dependent on the levels of its net interest margin and noninterest income, and its ability to control operating expenses.
Southern Bank’s results of operations are primarily dependent on the levels of its net interest margin and noninterest income, and its ability to control operating expenses and net charge offs.
Interest expense on deposits was $14.9 million for fiscal 2021, a decrease of $9.2 million, or 38.2%, when compared to the prior fiscal year. The decrease was due to a 63 basis point decrease in the average rate paid on interest-bearing deposits, partially offset by the $199.9 million increase in the average balance of those deposits.
Interest expense on deposits was $44.4 million for fiscal 2023, an increase of $32.6 million, or 275.5%, as compared to the prior fiscal year. The increase was due to a 107-basis point increase in the average rate paid on interest-bearing deposits, combined with the $580.5 million, or 26.6%, increase in the average balance of those deposits.
Inclusive of the Fortune acquisition, the loan portfolio showed growth during the year ended June 30, 2022, in commercial and residential real estate loans, along with a modest contribution from consumer loans. Residential real estate loan balances increased due to growth in single and multi-family loans.
The Company also noted legacy growth in residential and commercial real estate loans, drawn construction loan balances, commercial loans, and a modest contribution from consumer loans. Residential real estate loan balances increased primarily due to growth in multi-family loans.
The decrease was due to a $21.3 million decrease in the average balance of these advances, combined with a 14 basis point decrease in the average rate paid on advances. The decrease in the average rate paid was attributable primarily to market declines in borrowing rates available on average during fiscal 2021, as compared to the prior fiscal year.
The increase was due primarily to a $64.3 million, or 148.0%, increase in the average balance of these advances, combined with a 154-basis point increase in the average rate paid on advances.
During the prior fiscal year, the provision for loan losses as a percentage of average loans outstanding represented a charge of 0.31%, while the Company recorded net charge offs of 0.04% (annualized).
As a percentage of average loans outstanding, the Company recorded net charge offs of 0.02% during fiscal year 2023, as compared to net charge offs of less than one basis point in the prior fiscal year.
The Company recorded an income tax provision of $12.5 million for fiscal 2021, an increase of $5.6 million, or 81.9%, as compared to the prior fiscal year, attributable to higher pre-tax income, and an increase in the Company’s effective tax rate, to 21.0% for fiscal 2021, as compared to 20.0% for fiscal 2020.
The Company recorded an income tax provision of $10.2 million for fiscal 2023, a decrease of $2.5 million, or 19.7%, as compared to the prior fiscal year, which was attributable to lower pre-tax income and a decrease in the effective tax rate to 20.7% for fiscal 2023, as compared to 21.3% for fiscal 2022. ​ COMPARISON OF OPERATING RESULTS FOR THE YEARS ENDED JUNE 30, 2022 AND 2021 Net Income.
The notes will be redeemable at par beginning in May 2026, and mature in May 2031. The carrying value of the notes was approximately $7.7 million at June 30, 2022. ​ Stockholders’ Equity. The Company’s stockholders’ equity was $320.8 million at June 30, 2022, an increase of $37.3 million, or 13.2%, as compared to June 30, 2021.
The carrying value of the notes was approximately $7.7 million at June 30, 2023, relatively unchanged as compared to June 30, 2022. ​ 67 ​ ​ Table of Contents Stockholders’ Equity. The Company’s stockholders’ equity was $446.1 million at June 30, 2023, an increase of $125.3 million, or 39.1%, as compared to June 30, 2022.
Noninterest expense was $54.0 million for fiscal 2021, a decrease of $405,000, or 0.7%, when compared to the prior fiscal year.
Interest Expense. Interest expense was $49.7 million for fiscal 2023, an increase of $36.4 million, or 273.5%, when compared to the prior fiscal year.
We continued to utilize reciprocal deposit programs, and at fiscal year end, we had placed deposits of $387.9 million through reciprocal programs, up from $260.5 million a year earlier. At June 30, 2022, $278.0 million reflected deposits we had placed on behalf of our public unit depositors, up from $157.4 million a year ago.
Brokered deposits totaled $159.6 million at June 30, 2023, an increase of $136.7 million compared to June 30, 2022. Our discussion of brokered deposits excludes those deposits originated through reciprocal arrangements. We continued to utilize reciprocal deposit programs, and at June 30, 2023, we had placed deposits of $524.1 million through reciprocal programs, up from $387.9 million a year earlier.

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