PART I. Financial Information Item 1. Condensed Consolidated Financial Statements This section presents Southern Missouri Bancorp, Inc.'s unaudited interim financial statements for Q3 2022, covering balance sheets, income, comprehensive income, equity, and cash flows with notes Condensed Consolidated Balance Sheets Total assets grew to $3.44 billion by September 30, 2022, driven by increased net loans, funded by FHLB advances and deposits Condensed Consolidated Balance Sheets (unaudited) | (dollars in thousands) | September 30, 2022 | June 30, 2022 | | :--- | :--- | :--- | | Total assets | $ 3,444,843 | $ 3,214,782 | | Loans receivable, net | $ 2,939,191 | $ 2,686,198 | | Cash and cash equivalents | $ 47,718 | $ 86,792 | | Total liabilities | $ 3,118,443 | $ 2,894,010 | | Deposits | $ 2,851,013 | $ 2,815,075 | | Advances from FHLB | $ 224,973 | $ 37,957 | | Total stockholders' equity | $ 326,400 | $ 320,772 | Condensed Consolidated Statements of Income Net income for Q3 2022 decreased to $9.6 million from $12.7 million year-over-year, primarily due to a $5.1 million provision for credit losses Condensed Consolidated Statements of Income (unaudited) | (dollars in thousands except per share data) | Three months ended September 30, 2022 | Three months ended September 30, 2021 | | :--- | :--- | :--- | | Net Interest Income | $ 28,508 | $ 25,638 | | Provision for Credit Losses | $ 5,056 | $ (305) | | Noninterest Income | $ 5,514 | $ 4,515 | | Noninterest Expense | $ 16,920 | $ 14,224 | | Net Income | $ 9,603 | $ 12,746 | | Diluted earnings per share | $ 1.04 | $ 1.43 | Condensed Consolidated Statements of Comprehensive Income Comprehensive income for Q3 2022 decreased to $7.5 million from $12.8 million year-over-year, reflecting lower net income and a $2.1 million other comprehensive loss Condensed Consolidated Statements of Comprehensive Income (unaudited) | (dollars in thousands) | Three months ended September 30, 2022 | Three months ended September 30, 2021 | | :--- | :--- | :--- | | Net Income | $ 9,603 | $ 12,746 | | Total other comprehensive income (loss) | $ (2,091) | $ 10 | | Comprehensive Income | $ 7,512 | $ 12,756 | Condensed Consolidated Statements of Stockholders' Equity Total stockholders' equity increased to $326.4 million by September 30, 2022, driven by net income, partially offset by dividends and AFS unrealized losses - For the three months ended September 30, 2022, stockholders' equity increased by $5.6 million, with net income of $9.6 million being the primary driver, offset by dividends and changes in AOCI13 Condensed Consolidated Statements of Cash Flows Cash and cash equivalents decreased by $39.1 million for Q3 2022, with a $267.1 million investing outflow largely offset by $221.0 million from financing Cash Flow Summary (unaudited) | (dollars in thousands) | Three months ended September 30, 2022 | | :--- | :--- | | Net cash provided by operating activities | $ 7,060 | | Net cash used in investing activities | $ (267,146) | | Net cash provided by financing activities | $ 221,012 | | Decrease in cash and cash equivalents | $ (39,074) | Notes to Condensed Consolidated Financial Statements This section provides detailed disclosures on accounting policies, ACL, AFS securities, loan portfolio, business combinations, and fair value measurements - The company estimates the Allowance for Credit Losses (ACL) using a discounted cash flow (DCF) methodology, incorporating a four-quarter forecast and a four-quarter reversion period to historical averages3738 - On September 20, 2022, the Company entered into a merger agreement with Citizens Bancshares, Co. for approximately $140.0 million, expected to close in Q1 2023142 - The company completed its acquisition of Fortune Financial Corporation on February 25, 2022, for $35.5 million, resulting in $12.8 million of goodwill and $1.6 million of core deposit intangible143145 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q1 FY2023 financial performance, highlighting a 24.7% net income decrease due to credit loss provisions and loan growth - Net income for Q1 FY2023 was $9.6 million, a 24.7% decrease from the prior year, primarily due to a swing from a $305,000 credit loss recovery to a $5.1 million provision expense172194 - Total assets grew by $230.1 million during the quarter, driven by a $253.0 million increase in net loans, funded by a $187.0 million increase in FHLB advances and a $35.9 million increase in deposits170171180 - Net interest margin decreased to 3.65% from 4.01% year-over-year, largely due to reduced PPP loan fee accretion, which contributed less than one basis point compared to 34 basis points a year ago196 Comparison of Financial Condition Total assets reached $3.4 billion by September 30, 2022, a 7.2% increase driven by a 9.4% rise in net loans, funded by FHLB advances and deposits Balance Sheet Changes (Q1 FY2023) | Account | Change from June 30, 2022 (millions of dollars) | % Change | | :--- | :--- | :--- | | Total Assets | +$230.1 million | +7.2% | | Net Loans | +$253.0 million | +9.4% | | Deposits | +$35.9 million | +1.3% | | FHLB Advances | +$187.0 million | +492.7% | Results of Operations Net income for Q3 2022 decreased to $9.6 million from $12.7 million year-over-year, despite rising net interest income, due to a $5.1 million credit loss provision - The provision for credit losses was a charge of $5.1 million, compared to a credit of $305,000 in the prior year, driven by significant loan growth and a modest decline in the economic outlook204 - Noninterest income growth was driven by increases in other loan fees, loan servicing fees, and deposit account service charges205 - Noninterest expense increased primarily due to higher compensation and benefits, occupancy costs, and data processing expenses, partly related to the Fortune merger208 Allowance for Credit Loss Activity The Allowance for Credit Losses (ACL) increased to $37.4 million by September 30, 2022, representing 1.26% of gross loans, driven by a $4.25 million provision ACL Ratios | Metric | September 30, 2022 | June 30, 2022 | | :--- | :--- | :--- | | ACL | $37.4 million | $33.2 million | | ACL / Gross Loans | 1.26% | 1.22% | | ACL / Nonperforming Loans | 960% | 806% | - The allowance for off-balance sheet credit exposures also increased by $806,000 to $4.2 million, primarily due to an increase in unfunded commitments216217 Nonperforming Assets Total nonperforming assets (NPAs) decreased to $5.7 million by September 30, 2022, from $6.3 million in the prior quarter, due to reduced nonperforming loans Nonperforming Assets Summary | (dollars in thousands) | September 30, 2022 | June 30, 2022 | September 30, 2021 | | :--- | :--- | :--- | :--- | | Total nonperforming loans | $ 3,899 | $ 4,118 | $ 6,133 | | Foreclosed assets held for sale | $ 1,830 | $ 2,180 | $ 2,240 | | Total nonperforming assets | $ 5,729 | $ 6,309 | $ 8,381 | Liquidity and Capital The company maintains strong liquidity and remains well-capitalized, exceeding all regulatory minimums with a 10.30% Tier 1 leverage ratio - At quarter-end, the bank had $225.9 million in FHLB advances outstanding against total available credit of $508.1 million226 Consolidated Capital Ratios (September 30, 2022) | Ratio | Actual | Minimum for Adequacy | | :--- | :--- | :--- | | Total Capital (to Risk-Weighted Assets) | 12.61% | 8.00% | | Tier 1 Capital (to Risk-Weighted Assets) | 11.22% | 6.00% | | Tier 1 Capital (to Average Assets) | 10.30% | 4.00% | | Common Equity Tier 1 Capital | 10.72% | 4.50% | Item 3. Quantitative and Qualitative Disclosures about Market Risk The company manages interest rate risk by matching asset and liability repricing, with NPV analysis showing increased liability sensitivity Net Portfolio Value (NPV) Sensitivity Analysis (September 30, 2022) | Change in Rates | NPV % Change | | :--- | :--- | | +300 bp | (51)% | | +200 bp | (34)% | | +100 bp | (14)% | | 0 bp | 0% | | -100 bp | 18% | | -200 bp | 39% | | -300 bp | 65% | - The company's interest rate sensitivity has increased during the quarter due to origination of fixed-rate loans and the significant rise in market interest rates244 Item 4. Controls and Procedures As of September 30, 2022, management concluded that the company's disclosure controls and procedures were effective, with no material changes to internal control - Management concluded that the Company's disclosure controls and procedures were effective as of September 30, 2022249 PART II. OTHER INFORMATION Item 1. Legal Proceedings The company is not party to any pending legal proceedings expected to materially affect its financial condition or operations, only routine claims - Management states that the Company is not a party to any pending claims or lawsuits expected to have a material effect on its financial condition or operations253 Item 1a. Risk Factors No material changes to risk factors have been reported from the Annual Report on Form 10-K for FY2022 - No material changes to risk factors from the Annual Report on Form 10-K for the year ended June 30, 2022, have been reported254 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company has a stock repurchase program for up to 445,000 shares, with no repurchases made during Q3 2022 - No shares of common stock were repurchased during the three-month period ended September 30, 2022256257 Item 6. Exhibits This section lists exhibits filed with Form 10-Q, including management certifications and iXBRL financial data
Southern Missouri Bancorp(SMBC) - 2023 Q1 - Quarterly Report