Expanding
Southern Missouri Bancorp, Inc. | 2014 Annual Report
> F I N A N C I A L S U M M A R Y <
2013
C HA NG E(%)
E A R N I N G S (dollars in thousands)
Net interest income
Provision for loan losses
Noninterest income
Noninterest expense
Income taxes
Net income
Effective dividend on preferred shares
Net income available to common stockholders
P E R C O M M O N S H A R E
Net income:
Basic
Diluted
Tangible book value
Closing market price
Cash dividends declared
A T Y E A R - E N D (dollars in thousands)
Total assets
Loans, net of allowance
Reserves as a percent of nonperforming loans
Deposits
Stockholders’ equity
F I N A N C I A L R A T I O S
Return on average common stockholders’ equity
Return on average assets
Net interest margin
Efficiency ratio
Allowance for loan losses to loans
Equity to average assets at year-end
O T H E R D A T A (1)
14.6%
-4.1
37.2
35.0
-5.3
0.1
-42.0
1.6
1.4
1.0
6.5
39.0
6.7
28.3
23.8
24.3
9.1
$
$
2014
32,986
1,646
6,132
23,646
3,745
10,081
200
9,881
2.99
2.91
26.38
35.69
.64
$
$
28,790
1,716
4,468
17,521
3,954
10,067
345
9,722
2.95
2.88
24.77
25.67
.60
$ 1,021,422
801,056
663 %
$ 785,801
111,111
$ 796,391
647,166
584 %
$ 632,379
101,829
11.55 %
1.09
3.81
60.63
1.14
12.03
12.34 %
1.32
4.02
52.68
1.28
13.32
Common shares outstanding
Common shares outstanding for book value calculation (2)
Average common and dilutive
shares outstanding
Common stockholders of record
Full-time equivalent employees
Assets per employee (in thousands)
Banking offices
3,340,440
3,304,440
3,399,079
261
227
$ 4,500
25
3,294,040
3,262,040
3,375,553
249
173
4,603
18
$
(1) Other data is as of year-end, except for average shares.
(2) Excludes unvested restricted stock award shares.
$5.12
$3.32
$3.20 (3)
$2.88
$2.91
$1.95
$0.64
$0.60
$23.01
$22.08
$0.48
$0.48 $0.48
$17.39
$27.57
$25.09
1 0
1 1
1 2
1 3
1 4
1 0
1 1
1 2
1 3
1 4
1 0
1 1
1 2
1 3
1 4
(3) Diluted Earnings Per Share for fiscal 2011, excluding impact of bargain purchase gain on Fiscal 2011 Acquisition, net of related tax and transaction
expenses. (See "Non-GAAP Financial Information" included in Item 7 of the Company's Annual Report on Form 10-K.)
In fiscal 2014, Southern Missouri Bancorp
grew assets by 28.3% as a result of both
organic growth and acquisitions, expanded
its footprint by seven facilities, signed a
definitive merger agreement that will
significantly improve the Company’s
opportunity for future growth in southwest
Missouri, and maintained solid core
profitability and sound asset quality.
For fiscal 2014, net income available to common shareholders was $9.9 million, an increase of 1.6% from
the $9.7 million earned in fiscal 2013. Included in this year’s results were (pre-tax) expenses totaling $1.1
million related to the completed acquisitions of Citizens State Bank and the Bank of Thayer, and $150,000
related to the acquisition of Peoples Bank of the Ozarks, which occurred after the fiscal year end.
Return on common equity compares well to peer banks
The Company’s returns have trended down since fiscal 2011, as the purchase
accounting benefits of that year’s acquisition dissipate. Additional expenses
related to acquisitions lowered this year’s returns.
The Company generated a return
on common equity of 11.5%, and
a return on average assets of 1.09%
for fiscal 2014, as compared to
12.3% and 1.32%, respectively, in
fiscal 2013. A continued reduction
in accretion of fair value discount
on loans resulting from the fiscal
2011 acquisition of the former
First Southern Bank, Batesville,
Arkansas, negatively impacted the
comparison, but this effect should
be negligible going forward. In fis-
cal 2014, we estimate that this non-
core item improved results by $395,000, after tax, compared to $873,000 in fiscal 2013.
Our net interest income improved 14.6%, as a result of an increase of 21.0% in the average balance of
interest-earning assets. Our net interest margin decreased, from 4.02% in fiscal 2013, to 3.81% in fiscal
2014, attributable somewhat to the reduced fair value discount accretion noted above, but also due to
the continued low rate environment, and the larger percentage of our balance sheet held in investment
securities, as compared to the prior year. Average loan balances did improve 19.0%, but did not quite
keep pace with total interest-earning asset growth of 21.0%, as the acquisitions discussed above provided
a significant boost to the size of the investment securities portfolio. Some of the acquired securities
balances were liquidated, with proceeds used to reduce borrowings.
(1) Peer data is based on the median year-end figures (December) from SNL DataSource’s Index of publicly traded commercial banks and thrifts with assets of $500 million to
$2 billion, headquartered in Missouri, Arkansas, Illinois, Iowa, Kansas, Kentucky, Nebraska, Oklahoma, and Tennessee. SMBC data is as of fiscal year-end (June).
Noninterest income improved 37.2% in fiscal 2014, as a full year’s benefit was realized from an overdraft
privilege program revamped during fiscal 2013. Bank card interchange revenue continued to improve on
higher transaction volume, gains on secondary market loan sales increased, loan origination fees
improved, and gains on sales of available-for-sale securities were realized. Some of this noninterest
income improvement was attributable to the operations of the acquired entities.
Efficiency remains ahead of peers
While core efficiency continues to compare well to peers, this year’s results were
impacted by acquisition costs, and efficiency will be a key focus for 2015.
Noninterest expense increased 35.0% for
fiscal 2014. Increases in compensation,
legal and professional fees, occupancy,
data processing, bank card network fees,
and intangible amortization accounted
for most of the increase. Data processing
charges, legal and professional fees, and
compensation included a total of $1.2
million attributable to the acquisitions.
A charge of $376,000 was incurred for
the early termination of the Company’s
debit card processing contract, with the
new contract expected to provide better
financial and customer service results
in the coming year.
Loan growth of $153.9 million, or 23.8%, resulted primarily from organic production, and also benefited
from the Citizens State Bank and Bank of Thayer acquisitions ($51.4 million). Growth consisted
primarily of increases in our residential real estate (both single- and multi-family) and commercial real
estate loans. Deposit growth of $153.4 million, or 24.3%, resulted primarily from the two acquisitions
closed during the fiscal year ($132.4 million), and was concentrated in interest-bearing and noninterest-
bearing transaction accounts, and certificates of deposit.
Significant growth in loans, deposits, and total assets
Strong organic loan growth complimented merger activity and
acquisitions of strong deposit franchises in fiscal 2014.
Problem asset levels decrease
Problem assets remained relatively stable while the Company acquired
two relatively small portfolios, and the Company’s asset quality
continues to compare favorably versus peers.
Nonperforming assets decreased to
$4.4 million, or 0.43% of total assets,
at June 30, 2014, as compared to $4.6
million, or 0.58% of assets, at June 30,
2013. Asset quality continued to
compare very favorably to peers.
At June 30, 2014, non-performing
loans were 0.17% of gross loans, as
compared to 0.22% of gross loans at
June 30, 2013. Net charge-offs were
0.10% of average loans outstanding for
fiscal 2014, as compared to 0.13% for
fiscal 2013.
Book value per common share
increased to $27.57 at June 30, 2014,
up 9.9% over the prior fiscal year end. Tangible book value per share, a non-GAAP measure, improved to
$26.38 at June 30, 2014, up 6.5%, as we experienced some dilution resulting from the acquisitions.
Our closing stock price for the fiscal year was $35.69, up 39.0%, as compared to the previous year end.
Over that same one-year period, the SNL U.S. Bank Index increased 16.9%. In the three years ended
June 30, 2014, our stock price has increased 71.8%, as compared to a 51.9% price increase in the SNL
U.S. Bank Index. Including dividends, SMBC has returned 83.4% over that three-year period, while the
SNL U.S. Bank Index has returned 60.8%.
Our dividends paid during
fiscal 2014 represented a
1.8% return on our
closing stock price on
the final day of the fiscal
year, and a 2.0% return on
our average closing stock
price for fiscal 2014. In
July 2014, the board was
pleased to increase our
dividend by 6.3%, to $0.17
per quarter, effective with
the August 2014 payment.
Tangible common equity
as a percentage of tangible
assets stood at 8.6% at
the end of fiscal 2014, as
compared to 10.2% at the end of fiscal 2013, still providing capacity to fund the Peoples Bank acquisition,
which closed August 5, 2014, with shareholders being paid a mix of cash and stock.
Our goals for 2015 include:
Successful integration and improved operations for our recently-completed acquisitions.
The Company closed the Bank of Thayer acquisition in October, 2013; the Citizens State Bank acquisition
in February, 2014; and the Peoples Bank of the Ozarks acquisition in August, 2014. The earlier two
acquisitions underwent systems conversions shortly after acquisition. For Peoples Bank, the Company
plans a December 2014 bank merger and systems conversion. With almost $270 million in assets, ten
facilities, and entry as a substantial presence in a market that will be important for our Company’s future
growth, we are taking a deliberate, methodical approach to integration of the Peoples Bank franchise.
Improved efficiency and profitability. As we have ramped up operations over the last year to add seven
facilities and added ten more under the Peoples Bank charter since the end of the fiscal year, we’ve made
investments in personnel, facilities, and technology necessary to operate our growing Company.
As we reach the planned December merger of the Peoples operation into Southern Bank, we will work
to improve efficiency.
Continued focus on generating core deposit and loan growth. As noted above, organic loan growth
was robust in fiscal 2014. We don’t expect to repeat that performance in most years, but we do expect
that our lenders will continue to perform well by providing our customers with service that is timely,
consistent, and convenient. Meanwhile, the dollar amount of organic deposit growth this year was
relatively low. In fact, as we measure our core deposits, we were pleased with non-maturity deposit
growth, which reached the high single digits in percentage terms. With CDs, we were less willing to
compete on price. As the rate environment appears set to change over the next several years, we expect
deposit growth to be more challenging, and we’ll meet that challenge with innovative service in our
branches, online, and via mobile applications.
Ultimately, our focus remains, as always, on shareholder value. We are very pleased with our results over
the last several years, and we know that our standing today is the product of an emphasis, over time, on
the two key metrics that matter the most to you: long-term improvement in core earnings per share and
tangible book value.
I remain very pleased to have the opportunity to lead a fine team of bankers here at Southern Missouri
Bancorp, and that team’s efforts have been the key to producing these positive results. It is their
dedication to serving the customer base trusting us to meet their needs that allows us to be successful.
I appreciate your continued investment in our Company, I look forward to another year of progress, and
I hope to see you at our upcoming annual meeting.
Samuel H. Smith
Chairman of the Board;
Retired Engineer and former Majority
Owner, S.H. Smith and Company, Inc.
L. Douglas Bagby
Vice-Chairman of the Board;
Retired City Manager, City of Poplar Bluff
Ronnie D. Black
Retired Executive Director,
General Association of General Baptists
Sammy A. Schalk
President,
Gamblin Lumber Company
> D I R E C T O R S <
Greg A. Steffens
President and Chief Executive Officer,
Southern Missouri Bancorp, Inc.
Rebecca M. Brooks
Financial Manager,
McLane Transport
Charles R. Love
Certified Public Accountant,
Kraft, Miles and Tatum
Charles R. Moffitt
Agency Manager,
Morse Harwell Jiles Insurance Agency
Dennis C. Robison
President, Robison Farms, Inc.
David J. Tooley
Retired President and CEO,
Metropolitan National Bank
Todd E. Hensley
Investor/Former Chairman,
Peoples Bank of the Ozarks
Leonard W. Ehlers
Director Emeritus,
Retired Court Reporter,
36th Judicial Circuit
> E X E C U T I V E O F F I C E R S <
Greg A. Steffens
President and Chief Executive Officer
Kimberly A. Capps
Executive Vice President and
Chief Operations Officer
William D. Hribovsek
Executive Vice President and
Chief Lending Officer
Matthew T. Funke
Executive Vice President and
Chief Financial Officer
Lora L. Daves
Executive Vice President and
Chief Credit Officer
please join us
at our 2014 Annual Meeting, where shareholders will hear
management review this year's performance in detail.
annual meeting
monday, october 27, 2014 at 9:00 am
chamber of commerce building
1111 west pine, poplar bluff, missouri
continues to actively pursue
opportunities to grow profitably,
serve our communities,
and deliver shareholder value.