Southern Missouri Bancorp(SMBC) - 2025 Q3 - Quarterly Report

PART I. Financial Information Item 1. Condensed Consolidated Financial Statements This section presents Southern Missouri Bancorp, Inc.'s unaudited condensed consolidated financial statements, including balance sheets, income statements, comprehensive income statements, stockholders' equity statements, and cash flow statements, along with detailed notes explaining the basis of presentation, significant accounting policies, and specific financial instrument details for the periods ended March 31, 2025, and June 30, 2024 Condensed Consolidated Balance Sheets This section presents the company's financial position, detailing assets, liabilities, and stockholders' equity at specific dates Table: Condensed Consolidated Balance Sheets (dollars in thousands) | (dollars in thousands) | March 31, 2025 | June 30, 2024 | | :--------------------- | :------------- | :------------ | | Assets | | | | Cash and cash equivalents | $226,891 | $60,904 | | Loans receivable, net | $3,968,569 | $3,797,287 | | Total assets | $4,976,496 | $4,604,316 | | Liabilities | | | | Deposits | $4,261,382 | $3,943,059 | | Total liabilities | $4,447,706 | $4,115,568 | | Stockholders' Equity | | | | Total stockholders' equity | $528,790 | $488,748 | - Total assets increased by $372.2 million (8.1%) from June 30, 2024, to March 31, 2025, primarily driven by increases in net loans receivable, cash equivalents, and available-for-sale securities[9][183][194] - Total liabilities increased by $332.1 million, mainly due to a $318.3 million increase in deposits[9][183][199] Condensed Consolidated Statements of Income This section details the company's revenues, expenses, and net income over specific reporting periods Table: Condensed Consolidated Statements of Income (dollars in thousands except per share data) | (dollars in thousands except per share data) | Three months ended March 31, 2025 | Three months ended March 31, 2024 | Nine months ended March 31, 2025 | Nine months ended March 31, 2024 | | :------------------------------------------- | :-------------------------------- | :-------------------------------- | :------------------------------- | :------------------------------- | | Total interest income | $69,925 | $64,025 | $206,728 | $183,707 | | Total interest expense | $30,446 | $29,516 | $92,444 | $79,319 | | Net Interest Income | $39,479 | $34,509 | $114,284 | $104,388 | | Provision for Credit Losses | $932 | $900 | $4,023 | $2,700 | | Total noninterest income | $6,666 | $5,584 | $20,705 | $17,077 | | Total noninterest expense | $25,391 | $25,049 | $76,109 | $72,616 | | Net Income | $15,683 | $11,307 | $42,792 | $36,652 | | Basic earnings per share | $1.39 | $1.00 | $3.79 | $3.23 | | Diluted earnings per share | $1.39 | $0.99 | $3.79 | $3.22 | | Dividends paid per share | $0.23 | $0.21 | $0.69 | $0.63 | - Net income for the three months ended March 31, 2025, increased by $4.4 million (38.7%) YoY, and for the nine months, it increased by $6.1 million (16.8%) YoY[10][216][226] - Diluted EPS for the three months ended March 31, 2025, was $1.39, up from $0.99 YoY, and for the nine months, it was $3.79, up from $3.22 YoY[10][217][227] Condensed Consolidated Statements of Comprehensive Income This section presents net income and other comprehensive income components, reflecting total changes in equity from non-owner sources Table: Condensed Consolidated Statements of Comprehensive Income (dollars in thousands) | (dollars in thousands) | Three months ended March 31, 2025 | Three months ended March 31, 2024 | Nine months ended March 31, 2025 | Nine months ended March 31, 2024 | | :--------------------- | :-------------------------------- | :-------------------------------- | :------------------------------- | :------------------------------- | | Net Income | $15,683 | $11,307 | $42,792 | $36,652 | | Unrealized gains (losses) on securities available-for-sale | $3,175 | $(1,130) | $4,488 | $2,195 | | Total other comprehensive income (loss) | $2,439 | $(251) | $3,463 | $2,874 | | Comprehensive Income | $18,122 | $11,056 | $46,255 | $39,526 | - Comprehensive income for the three months ended March 31, 2025, increased to $18.1 million from $11.1 million YoY, primarily due to positive unrealized gains on available-for-sale securities[12] Condensed Consolidated Statements of Stockholders' Equity This section details changes in the company's equity, including net income, other comprehensive income, and dividends Table: Condensed Consolidated Statements of Stockholders' Equity (dollars in thousands) | (dollars in thousands) | March 31, 2025 | June 30, 2024 | | :--------------------- | :------------- | :------------ | | Total Stockholders' Equity | $528,790 | $488,748 | | Net Income | $42,792 | $36,652 | | Change in unrealized loss on available for sale securities | $3,463 | $2,874 | | Dividends paid on common stock | $(7,783) | $(7,145) | - Total stockholders' equity increased by $40.0 million (8.2%) from June 30, 2024, to March 31, 2025, driven by retained earnings and a $3.5 million reduction in accumulated other comprehensive losses due to appreciating investment values[13][202] Condensed Consolidated Statements of Cash Flows This section summarizes cash inflows and outflows from operating, investing, and financing activities over specific periods Table: Condensed Consolidated Statements of Cash Flows (dollars in thousands) | (dollars in thousands) | Nine months ended March 31, 2025 | Nine months ended March 31, 2024 | | :--------------------- | :------------------------------- | :------------------------------- | | Net cash provided by operating activities | $54,234 | $55,047 | | Net cash used in investing activities | $(206,367) | $(172,261) | | Net cash provided by financing activities | $318,120 | $231,508 | | Increase in cash and cash equivalents | $165,987 | $114,294 | | Cash and cash equivalents at end of period | $226,891 | $168,273 | - Cash and cash equivalents increased by $166.0 million during the nine months ended March 31, 2025, reaching $226.9 million, primarily due to strong financing activities[14][195] Notes to Condensed Consolidated Financial Statements This section provides detailed explanations and additional information supporting the condensed consolidated financial statements Note 1: Basis of Presentation This note outlines the accounting principles and conventions used in preparing the interim financial statements - The interim financial statements are prepared in accordance with GAAP for interim financial information and SEC Regulation S-X, Rule 10-01, and do not include all disclosures required for complete annual financial statements[15] - An immaterial error in prior period financial statements was corrected, reclassifying 'securities sold under agreements to repurchase' from 'deposits' to a separate line item on the balance sheet and income statement, with no material impact on previously presented financial statements[17][18][19][20][21] Note 2: Organization and Summary of Significant Accounting Policies This note describes the company's structure, business activities, and key accounting policies, including significant estimates and new pronouncements - Southern Missouri Bancorp, Inc. is the parent company of Southern Bank, which provides banking and financial services, and controls SB Real Estate Investments, LLC, a REIT with approximately $1.3 billion in assets[22] - The Company faces economic risks (interest rate, credit, market) and regulatory risks, with material estimates particularly susceptible to change relating to the allowance for credit losses (ACL)[24][27] - New accounting pronouncements, including ASU 2021-01, ASU 2023-07, ASU 2023-02, ASU 2023-09, and ASU 2024-03, are being evaluated, with most not expected to have a material impact on consolidated financial statements, though ASU 2024-03 will impact disclosures[69][70][71][72][73][74] Note 3: Available for Sale Securities This note provides details on the company's available-for-sale securities, including fair values and unrealized gains or losses Table: Available for Sale Securities Fair Value (dollars in thousands) | (dollars in thousands) | March 31, 2025 Fair Value | June 30, 2024 Fair Value | | :--------------------- | :------------------------ | :----------------------- | | Total debt securities | $100,904 | $123,042 | | Total MBS and CMOs | $362,026 | $304,861 | | Total AFS securities | $462,930 | $427,903 | Table: Available for Sale Securities Gross Unrealized Losses (dollars in thousands) | (dollars in thousands) | March 31, 2025 Gross Unrealized Losses | June 30, 2024 Gross Unrealized Losses | | :--------------------- | :------------------------------------- | :------------------------------------ | | Obligations of state and political subdivisions | $1,918 | $2,211 | | Corporate obligations | $877 | $1,781 | | Asset-backed securities | $180 | $249 | | Other securities | $66 | $74 | | MBS and CMOs | $17,407 | $20,705 | | Total AFS securities | $20,448 | $25,020 | - The Company does not believe any individual unrealized loss on AFS securities as of March 31, 2025, is due to credit loss, as the securities are performing and of high credit quality, with losses primarily caused by increases in market interest rates[78][79][80][81][82] Note 4: Loans and Allowance for Credit Losses This note details the composition of the loan portfolio and the methodology and balances of the allowance for credit losses Table: Loans and Allowance for Credit Losses (dollars in thousands) | (dollars in thousands) | March 31, 2025 | June 30, 2024 | | :--------------------- | :------------- | :------------ | | 1-4 residential real estate | $978,908 | $925,397 | | Non-owner occupied commercial real estate | $897,125 | $899,770 | | Owner occupied commercial real estate | $440,282 | $427,476 | | Multi-family real estate | $405,445 | $384,564 | | Construction and land development | $323,499 | $290,541 | | Agriculture real estate | $247,027 | $232,520 | | Commercial and industrial | $488,116 | $450,147 | | Agriculture production | $186,058 | $175,968 | | Consumer | $54,022 | $59,671 | | Gross loans | $4,023,698 | $3,850,035 | | Allowance for credit losses | $(54,940) | $(52,516) | | Net loans | $3,968,569 | $3,797,287 | Table: Provision for Credit Losses on Loans (dollars in thousands) | (dollars in thousands) | Nine months ended March 31, 2025 | Nine months ended March 31, 2024 | | :--------------------- | :------------------------------- | :------------------------------- | | Provision for credit losses on loans | $3,822 | $4,850 | | Net charge offs | $(1,398) | $(1,334) | | ACL, end of period | $54,940 | $51,336 | - Past due loans increased significantly to $24.4 million (0.61% of total loans) at March 31, 2025, from $9.2 million (0.24%) at June 30, 2024, primarily due to $10.0 million in non-owner occupied commercial real estate loans with an insolvent tenant[117][121] - Nonaccrual loans increased to $22.0 million at March 31, 2025, from $6.7 million at June 30, 2024, with no nonaccrual loans individually evaluated for which no ACL was recorded[123] - Four loan modifications totaling $22.3 million were made for borrowers experiencing financial difficulty during the nine months ended March 31, 2025, primarily involving changes to interest-only payments[125][126] Note 5: Premises and Equipment This note provides details on the company's premises and equipment, including net book values and operating lease obligations Table: Premises and Equipment, Net (dollars in thousands) | (dollars in thousands) | March 31, 2025 | June 30, 2024 | | :--------------------- | :------------- | :------------ | | Total Premises and Equipment, net | $95,987 | $95,952 | | Operating leases ROU asset | $6,855 | $6,669 | | Operating leases liability | $6,855 | $6,669 | - The Company's operating lease costs classified as occupancy and equipment expense were $886,000 for the nine months ended March 31, 2025, with future lease payments totaling $11.5 million[135] Note 6: Deposits This note details the composition of the company's deposit accounts, including interest-bearing and non-interest-bearing categories Table: Total Deposit Accounts (dollars in thousands) | (dollars in thousands) | March 31, 2025 | June 30, 2024 | | :--------------------- | :------------- | :------------ | | Non-interest bearing accounts | $513,418 | $514,107 | | NOW accounts | $1,167,296 | $1,239,663 | | Money market deposit accounts | $347,823 | $336,799 | | Savings accounts | $626,175 | $517,084 | | Certificates | $1,606,670 | $1,335,406 | | Total Deposit Accounts | $4,261,382 | $3,943,059 | - Total deposits increased by $318.3 million (8.1%) from June 30, 2024, to March 31, 2025, driven by increases in certificates of deposit and savings accounts[136][199] - Brokered certificates increased to $233.6 million at March 31, 2025, from $171.8 million at June 30, 2024[136] Note 7: Repurchase Agreements This note provides information on the company's securities sold under agreements to repurchase, including balances and interest rates Table: Repurchase Agreements (dollars in thousands) | (dollars in thousands) | March 31, 2025 | June 30, 2024 | | :--------------------- | :------------- | :------------ | | Period-end balance | $15,000 | $9,398 | | Average interest during the period | 5.43 % | 5.39 % | | Period-end interest rate | 5.11 % | 5.39 % | - Securities sold under agreements to repurchase increased by $5.6 million to $15.0 million at March 31, 2025, from $9.4 million at June 30, 2024[137] Note 8: Earnings Per Share This note details the calculation of basic and diluted earnings per share, including the impact of anti-dilutive securities Table: Earnings Per Share (dollars in thousands except per share data) | (dollars in thousands except per share data) | Three months ended March 31, 2025 | Three months ended March 31, 2024 | Nine months ended March 31, 2025 | Nine months ended March 31, 2024 | | :------------------------------------------- | :-------------------------------- | :-------------------------------- | :------------------------------- | :------------------------------- | | Net income available to common shareholders | $15,612 | $11,249 | $42,599 | $36,464 | | Basic earnings per share | $1.39 | $1.00 | $3.79 | $3.23 | | Diluted earnings per share | $1.39 | $0.99 | $3.79 | $3.22 | - Certain stock options and restricted stock awards were excluded from diluted EPS computation due to their anti-dilutive nature, totaling 56,000 shares for the three-month period and 63,500 shares for the nine-month period ended March 31, 2025[139] Note 9: Income Taxes This note provides information on the company's income tax provision and deferred tax assets and liabilities Table: Total Income Tax Provision (dollars in thousands) | (dollars in thousands) | Three months ended March 31, 2025 | Three months ended March 31, 2024 | Nine months ended March 31, 2025 | Nine months ended March 31, 2024 | | :--------------------- | :-------------------------------- | :-------------------------------- | :------------------------------- | :------------------------------- | | Total income tax provision | $4,139 | $2,837 | $12,065 | $9,497 | Table: Net Deferred Tax Asset (dollars in thousands) | (dollars in thousands) | March 31, 2025 | June 30, 2024 | | :--------------------- | :------------- | :------------ | | Net deferred tax asset | $10,210 | $11,187 | - The income tax provision for the nine months ended March 31, 2025, increased by $2.6 million (27.0%) YoY, primarily due to higher pre-tax income and a $380,000 adjustment to tax accruals from merger and acquisition activity[141][235] Note 10: 401(k) Retirement Plan This note describes the company's 401(k) retirement plan, including employer contributions and related expenses Table: Retirement Plan Expenses (dollars in thousands) | (dollars in thousands) | Three months ended March 31, 2025 | Three months ended March 31, 2024 | Nine months ended March 31, 2025 | Nine months ended March 31, 2024 | | :--------------------- | :-------------------------------- | :-------------------------------- | :------------------------------- | :------------------------------- | | Retirement plan expenses | $521 | $683 | $1,900 | $2,100 | - The Bank maintains a 401(k) retirement plan with safe harbor matching contributions up to 4% of eligible compensation and expects to continue discretionary profit-sharing contributions for fiscal 2025[145] Note 11: Subordinated Debt This note provides details on the company's subordinated debt instruments, including carrying values, interest rates, and maturities Table: Subordinated Debt Carrying Value (dollars in thousands) | (dollars in thousands) | March 31, 2025 Carrying Value | June 30, 2024 Carrying Value | | :--------------------- | :---------------------------- | :--------------------------- | | Southern Missouri Statutory Trust I Debentures | $7,200 | $7,200 | | OLCF junior subordinated debt securities | $2,800 | $2,800 | | PSC junior subordinated debt securities | $5,600 | $5,600 | | Fortune fixed-to-floating rate subordinated notes | $7,600 | $7,600 | | Total Subordinated Debt | $23,195 | $23,156 | - The Company has various subordinated debt instruments, primarily assumed through mergers, with floating interest rates based on SOFR and maturities ranging from 2031 to 2035[146][147][148][149][151] Note 12: Fair Value Measurements This note explains the fair value hierarchy and provides fair value measurements for various financial instruments and assets Table: Fair Value Measurements (dollars in thousands) | (dollars in thousands) | March 31, 2025 Fair Value | June 30, 2024 Fair Value | | :--------------------- | :------------------------ | :----------------------- | | Recurring Measurements | | | | Total AFS securities | $462,930 | $427,903 | | Mortgage servicing rights | $2,388 | $2,448 | | Derivative financial instruments (assets) | $605 | $20 | | Derivative financial instruments (liabilities) | $578 | $15 | | Nonrecurring Measurements | | | | Foreclosed and repossessed assets held for sale | $625 | $759 | | Collateral dependent loans | $25,288 | $12,994 | - Fair value measurements are categorized into Level 1 (quoted prices in active markets), Level 2 (significant other observable inputs), and Level 3 (significant unobservable inputs), with mortgage servicing rights, foreclosed assets, and collateral-dependent loans classified as Level 3[152][156][159][160] - Losses recognized on assets measured on a non-recurring basis for the nine months ended March 31, 2025, totaled $80,000, a decrease from $687,000 in the prior year[158] Note 13: Derivative Financial Instruments This note describes the company's use of derivative financial instruments, primarily interest rate swaps, for managing interest rate risk Table: 1-4 Family Interest Rate Swaps Notional Amount (dollars in thousands) | (dollars in thousands) | March 31, 2025 Notional Amount | June 30, 2024 Notional Amount | | :--------------------- | :----------------------------- | :---------------------------- | | 1-4 Family interest rate swaps | $50,000 | $40,000 | - The Company uses interest rate swaps, primarily designated as fair value hedges, to convert long-term fixed-rate loans to floating rates and manage interest rate risk, with the notional amount increasing to $50.0 million in fiscal 2025[167][168][169] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the Company's financial condition and results of operations, highlighting key performance drivers, balance sheet changes, and operational results for the three- and nine-month periods ended March 31, 2025, compared to prior periods. It also discusses forward-looking statements, critical accounting policies, credit loss activity, nonperforming assets, liquidity, and regulatory capital General This section provides an overview of Southern Missouri Bancorp, Inc.'s operations and its wholly-owned subsidiary, Southern Bank - Southern Missouri Bancorp, Inc. operates through its wholly-owned subsidiary, Southern Bank, which has 62 full-service branches, two limited-service branches, and two loan production offices[171] - The Company's earnings are primarily dependent on the Bank's operations, with deposit accounts insured up to $250,000 by the FDIC[171] Forward Looking Statements This section highlights the inherent uncertainties and risks associated with the company's future operating and financial performance - The document contains forward-looking statements regarding future operating and financial performance, growth, interest rates, and cost savings, which are subject to various risks and uncertainties[175] - Key risk factors include integration challenges from mergers, adverse economic conditions (inflation, recession), interest rate fluctuations, monetary/fiscal policies, bank failures, lending risks, liquidity access, real estate values, regulatory changes, cyber threats, and climate change[175][176][177] Critical Accounting Policies This section discusses the accounting policies that require significant judgment and estimates, which are crucial to the company's financial reporting - The Company's critical accounting policies involve significant judgments, assumptions, and estimates, particularly susceptible to change, and are reviewed with the Audit Committee[180] Executive Summary This section provides a high-level overview of the company's financial performance and key changes in its financial condition - Net income for the first nine months of fiscal 2025 increased by $6.1 million (16.8%) to $42.8 million, with diluted EPS of $3.79, up from $3.22 in the prior year[183] - Total assets grew by $372.2 million, primarily due to increases in net loans receivable, cash equivalents, and available-for-sale securities, while liabilities increased mainly from deposits[183] - Net interest margin expanded by nine basis points to 3.37% for the first nine months of fiscal 2025, driven by higher yields on earning assets and eased pressure on interest expense due to federal funds rate cuts[187] Comparison of Financial Condition at March 31, 2025 and June 30, 2024 This section analyzes the changes in the company's balance sheet items between March 31, 2025, and June 30, 2024 Table: Comparison of Financial Condition (dollars in thousands) | (dollars in thousands) | March 31, 2025 | June 30, 2024 | Change (Amount) | Change (%) | | :--------------------- | :------------- | :------------ | :-------------- | :--------- | | Total Assets | $4,976,496 | $4,604,316 | $372,180 | 8.1% | | Cash equivalents and time deposits | $227,136 | $61,395 | $165,741 | 270.0% | | AFS securities | $462,930 | $427,903 | $35,027 | 8.2% | | Loans, net of ACL | $3,968,569 | $3,797,287 | $171,282 | 4.5% | | Deposits | $4,261,382 | $3,943,059 | $318,323 | 8.1% | | FHLB advances | $104,072 | $102,050 | $2,022 | 2.0% | | Stockholders' Equity | $528,790 | $488,748 | $40,042 | 8.2% | - Gross loans increased by $173.7 million, with growth in 1-4 family residential, commercial and industrial, construction and land development, multi-family real estate, agriculture real estate, owner occupied commercial real estate, and agricultural production loans[196] - The Bank's concentration in non-owner occupied commercial real estate loans was 304.0% of Tier 1 capital and ACL at March 31, 2025, down from 317.5% at June 30, 2024[198] Average Balance Sheet, Interest, and Average Yields and Rates for the Three- and Nine- Month Periods Ended March 31, 2025 and 2024 This section presents average balance sheet data, interest income and expense, and corresponding yields and rates for specified periods Table: Average Yields and Rates (%) | (dollars in thousands) | 3 Months Ended Mar 31, 2025 Yield/Cost (%) | 3 Months Ended Mar 31, 2024 Yield/Cost (%) | 9 Months Ended Mar 31, 2025 Yield/Cost (%) | 9 Months Ended Mar 31, 2024 Yield/Cost (%) | | :--------------------- | :----------------------------------------- | :----------------------------------------- | :----------------------------------------- | :----------------------------------------- | | Total net loans | 6.26 | 6.01 | 6.31 | 5.93 | | TOTAL INTEREST-EARNING ASSETS | 6.01 | 5.84 | 6.10 | 5.77 | | TOTAL INTEREST-BEARING DEPOSITS | 3.08 | 3.20 | 3.24 | 2.96 | | TOTAL INTEREST-BEARING LIABILITIES | 3.14 | 3.25 | 3.30 | 3.04 | | Net interest spread | 2.87 | 2.59 | 2.80 | 2.73 | | Net interest margin | 3.39 | 3.15 | 3.37 | 3.28 | - For the nine months ended March 31, 2025, the average yield on earning assets increased by 33 basis points, while the cost of interest-bearing liabilities increased by 26 basis points, leading to an increase in net interest spread and net interest margin[187] Rate/Volume Analysis This section analyzes the impact of changes in interest rates and asset/liability volumes on net interest income Table: Net Change in Net Interest Income (dollars in thousands) | (dollars in thousands) | 3 Months Ended Mar 31, 2025 vs 2024 Net Change | 9 Months Ended Mar 31, 2025 vs 2024 Net Change | | :--------------------- | :--------------------------------------------- | :--------------------------------------------- | | Total net change in income on interest-earning assets | $5,900 | $23,021 | | Total net change in expense on interest-bearing liabilities | $930 | $13,125 | | Net change in net interest income | $4,970 | $9,896 | - For the nine months ended March 31, 2025, the increase in net interest income was primarily driven by a $9.8 million increase, with rate changes contributing $5.6 million and volume changes contributing $6.0 million[214] Results of Operations – Comparison of the three-month periods ended March 31, 2025 and 2024 This section compares the company's financial performance for the three-month periods ended March 31, 2025, and 2024 Table: Results of Operations (dollars in thousands) | (dollars in thousands) | Three months ended March 31, 2025 | Three months ended March 31, 2024 | Change (Amount) | Change (%) | | :--------------------- | :-------------------------------- | :-------------------------------- | :-------------- | :--------- | | Net Income | $15,683 | $11,307 | $4,376 | 38.7% | | Diluted EPS | $1.39 | $0.99 | $0.40 | 40.4% | | Net Interest Income | $39,479 | $34,509 | $4,970 | 14.4% | | Noninterest Income | $6,666 | $5,584 | $1,082 | 19.4% | | Noninterest Expense | $25,391 | $25,049 | $342 | 1.4% | | Income Tax Provision | $4,139 | $2,837 | $1,302 | 45.9% | | PCL | $932 | $900 | $32 | 3.6% | - Net interest margin expanded by 24 basis points to 3.39%, driven by a 17 basis point increase in the yield on interest-earning assets and an 11 basis point decrease in the cost of interest-bearing liabilities[218] - Noninterest income increased due to the absence of AFS securities sale losses ($807,000 in prior year) and higher deposit account charges, partially offset by lower loan late charges and servicing fees[221] - Noninterest expense increased due to card fraud losses, deposit product expenses, higher occupancy and equipment costs, and legal/professional fees, partially offset by lower telecommunication, intangible amortization, and advertising expenses[222][223][224] Results of Operations – Comparison of the nine-month periods ended March 31, 2025 and 2024 This section compares the company's financial performance for the nine-month periods ended March 31, 2025, and 2024 Table: Results of Operations (dollars in thousands) | (dollars in thousands) | Nine months ended March 31, 2025 | Nine months ended March 31, 2024 | Change (Amount) | Change (%) | | :--------------------- | :------------------------------- | :------------------------------- | :-------------- | :--------- | | Net Income | $42,792 | $36,652 | $6,140 | 16.8% | | Diluted EPS | $3.79 | $3.22 | $0.57 | 17.7% | | Net Interest Income | $114,284 | $104,388 | $9,896 | 9.5% | | Noninterest Income | $20,705 | $17,077 | $3,628 | 21.2% | | Noninterest Expense | $76,109 | $72,616 | $3,493 | 4.8% | | Income Tax Provision | $12,065 | $9,497 | $2,568 | 27.0% | | PCL | $4,023 | $2,700 | $1,323 | 49.0% | - Net interest margin increased to 3.37% from 3.28% YoY, driven by a 6.3% increase in average interest-earning assets and a higher interest-earning asset yield[228] - Noninterest income increased primarily due to the absence of a net realized loss on AFS securities sales and increases in other loan fees, deposit account charges, bank card interchange income, wealth management fees, and BOLI earnings[231][232] - Noninterest expense increased due to higher compensation and benefits (employee headcount, merit increases), legal and professional fees (performance improvement project, audit accruals), and occupancy and equipment expenses (depreciation, maintenance)[234] Allowance for Credit Loss Activity This section details the changes and adequacy of the allowance for credit losses, including key ratios and qualitative adjustments Table: Allowance for Credit Loss Activity (dollars in thousands) | (dollars in thousands) | March 31, 2025 | June 30, 2024 | | :--------------------- | :------------- | :------------ | | ACL on loans | $54,940 | $52,516 | | ACL as % of gross loans | 1.37% | 1.36% | | ACL as % of nonperforming loans | 250% | 786% | | Allowance for off-balance sheet credit exposures | $3,464 | $3,263 | - The ACL totaled $54.9 million at March 31, 2025, representing 1.37% of gross loans and 250% of nonperforming loans. Management believes the ACL is adequate based on current estimates, despite significant uncertainty from high market interest rates[240] - Qualitative adjustments in the ACL model increased compared to June 30, 2024, due to various factors relevant to expected credit collectability, including loan net charge-offs and reserves for overdrafts[240] Nonperforming Assets This section provides an overview of the company's nonperforming assets, including nonaccrual loans and foreclosed assets Table: Nonperforming Assets (dollars in thousands) | (dollars in thousands) | March 31, 2025 | June 30, 2024 | March 31, 2024 | | :--------------------- | :------------- | :------------ | :------------- | | Total nonperforming loans | $21,970 | $6,680 | $7,410 | | Foreclosed assets held for sale | $1,775 | $3,865 | $3,791 | | Total nonperforming assets | $23,801 | $10,568 | $11,261 | - Total nonperforming assets increased to $23.8 million at March 31, 2025, from $10.6 million at June 30, 2024, primarily due to an increase in nonperforming loans, partially offset by a reduction in other real estate owned[248] - The increase in nonperforming loans was largely attributable to several commercial relationships added in Q3 2025, including $10 million in loans secured by two non-owner occupied commercial properties with an insolvent tenant[248] Liquidity Resources This section describes the company's sources of liquidity and its ability to meet financial obligations - Primary funding sources include deposit growth, FHLB advances, brokered deposits, loan principal amortization, investment maturities, and operations[249] - At March 31, 2025, the Company had $901.4 million in outstanding commitments to extend credit. The Bank had $863.8 million in available credit from FHLB (with $1.5 billion pledged collateral) and $324.6 million from the Federal Reserve's discount window (with $377.1 million pledged collateral)[251] Regulatory Capital This section outlines the company's regulatory capital ratios and compliance with capital adequacy requirements Table: Regulatory Capital Ratios (%) | (dollars in thousands) | March 31, 2025 Actual Ratio | June 30, 2024 Actual Ratio | | :--------------------- | :-------------------------- | :------------------------- | | Consolidated Total Capital (to RWA) | 13.86% | 13.23% | | Southern Bank Total Capital (to RWA) | 13.22% | 12.68% | | Consolidated Tier I Capital (to RWA) | 12.43% | 11.79% | | Southern Bank Tier I Capital (to RWA) | 11.97% | 11.43% | | Consolidated Tier I Capital (to Average Assets) | 10.30% | 10.19% | | Southern Bank Tier I Capital (to Average Assets) | 9.82% | 9.79% | | Consolidated Common Equity Tier I Capital (to RWA) | 12.04% | 11.39% | | Southern Bank Common Equity Tier I Capital (to RWA) | 11.97% | 11.43% | - The Company and Bank met all capital adequacy requirements as of March 31, 2025, with the Bank categorized as 'well capitalized' under regulatory frameworks[255][257] - The Company and Bank elected a five-year transition period to recognize the estimated impact of the CECL standard adoption on regulatory capital[256] Item 3. Quantitative and Qualitative Disclosures about Market Risk This section details the Company's strategies for managing market risk, particularly interest rate sensitivity, through asset/liability management, and provides an interest rate sensitivity analysis using Net Portfolio Value (NPV) projections under various hypothetical rate changes Asset and Liability Management and Market Risk This section describes the company's approach to managing interest rate risk through its asset and liability management strategies - The Company's asset/liability management strategy aims to maximize net interest income by matching repricing intervals of interest-earning assets and interest-bearing liabilities, while managing interest rate risk[261] - Strategies include using longer-term fixed-rate FHLB advances, increasing originations of higher-yielding loans with shorter repricing periods, limiting investment portfolio price volatility, and actively soliciting less rate-sensitive deposits[262] - At March 31, 2025, the fixed-rate residential loan portfolio was $634.2 million with a weighted average maturity of 167 months, and the investment portfolio had an expected weighted-average life of 4.7 years[263] Interest Rate Sensitivity Analysis This section presents an analysis of the company's Net Portfolio Value (NPV) sensitivity to hypothetical changes in interest rates Table: Interest Rate Sensitivity Analysis - NPV Change (%) | Change in Rates | March 31, 2025 NPV Change (%) | June 30, 2024 NPV Change (%) | | :-------------- | :---------------------------- | :--------------------------- | | +300 bp | (13)% | (23)% | | +200 bp | (7)% | (15)% | | +100 bp | (3)% | (7)% | | 0 bp | — | — | | -100 bp | 2% | 6% | | -200 bp | 1% | 9% | | -300 bp | (2)% | 8% | - The Company's Net Portfolio Value (NPV) sensitivity to rising rates improved at March 31, 2025, compared to June 30, 2024, with a smaller percentage decrease in NPV for upward rate shocks[265] - The improved NPV sensitivity is attributed to decreased market interest rates at the mid-point of the curve, an overall increase in earning asset yields, increased cash balances, a slight decrease in fixed-rate loans, and an increase in variable-rate securities, along with an increase in interest rate swaps to $50 million[267][268] Item 4. Controls and Procedures This section confirms the effectiveness of the Company's disclosure controls and procedures as of March 31, 2025, based on an evaluation by senior management, and states that there have been no material changes to internal control over financial reporting during the quarter. It also acknowledges the inherent limitations of control procedures - The Company's disclosure controls and procedures were deemed effective as of March 31, 2025, ensuring timely and accurate reporting of required information[272] - No material changes to internal control over financial reporting occurred during the quarter ended March 31, 2025[272] - The Company acknowledges that control procedures provide only reasonable, not absolute, assurance and have inherent limitations, such as faulty judgments, simple errors, circumvention by individuals or collusion, and management override[273] PART II. OTHER INFORMATION Item 1. Legal Proceedings Management believes the Company is not a party to any pending claims or lawsuits that are expected to have a material effect on its financial condition or operations, beyond those incident to ordinary business - No material legal proceedings are pending against the Company that would significantly impact its financial condition or operations[276] Item 1a. Risk Factors There have been no material changes to the risk factors previously disclosed in the Company's Annual Report on Form 10-K for the year ended June 30, 2024 - No material changes to previously reported risk factors were identified[277] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The Company has an ongoing stock repurchase program, authorized to repurchase up to 445,000 shares, but reported no repurchase activity during the three months ended March 31, 2025 - The Company has an authorized stock repurchase program for up to 445,000 shares, with 213,580 shares remaining available for purchase as of March 31, 2025[278][280] - No shares were repurchased during the three months ended March 31, 2025[280] Item 3. Defaults upon Senior Securities This item is not applicable to the Company for the reporting period - This item is not applicable[281] Item 4. Mine Safety Disclosures This item is not applicable to the Company for the reporting period - This item is not applicable[281] Item 5. Other Information No directors or officers adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the quarter ended March 31, 2025 - No Rule 10b5-1 or non-Rule 10b5-1 trading arrangements were adopted or terminated by directors or officers during the quarter[281] Item 6. Exhibits This section lists all exhibits filed with the Form 10-Q, including articles of incorporation, bylaws, material contracts, certifications, and financial information in iXBRL format - The exhibits include corporate governance documents, various incentive and retirement plans, employment and change-in-control agreements, tax sharing agreements, and certifications[283][284] - Financial and related information for the quarter ended March 31, 2025, is provided in Inline Extensible Business Reporting Language (iXBRL) format[284] Signature Page The report is duly signed on behalf of Southern Missouri Bancorp, Inc. by its Chairman & Chief Executive Officer, President & Chief Administrative Officer, and Executive Vice President & Chief Financial Officer - The report is signed by Greg A. Steffens (Chairman & CEO), Matthew T. Funke (President & CAO), and Stefan Chkautovich (EVP & CFO) on May 12, 2025[287]