Southern Missouri Bancorp, Inc. | 2018 Annual Report
> FINANCIAL SUMMARY <
2018
2017
CHANGE (%)
22.0%
30.2%
25.1%
16.3%
28.7%
34.6%
15.4%
15.5%
21.0%
10.0%
10.4%
11.9%
8.5%
16.0%
EARNINGS (dollars in thousands)
Net interest income
Provision for loan losses
Noninterest income
Noninterest expense
Income taxes
Net income
PER COMMON SHARE
Net income:
Basic
Diluted
Closing market price
Cash dividends declared
AT YEAR-END (dollars in thousands)
Total assets
Loans, net of allowance
Reserves as a percent of nonperforming loans
Deposits
Stockholder's equity
FINANCIAL RATIOS
Return on average common stockholder's equity
Return on average assets
Net interest margin
Efficiency ratio
Allowance for loan losses to loans
Equity to average assets at year-end
OTHER DATA(1)
Common shares outstanding
Common shares outstanding for book value calculation(2)
Average common and dilutive shares outstanding
Full-time equivalent employees
Assets per employee (in thousands)
Banking offices
$ 62,383
3,047
13,871
44,475
7,803
20,929
$ 2.40
2.39
39.02
0.44
$ 1,886,115
1,563,380
199%
$ 1,579,902
200,694
11.30%
1.17
3.78
58.58
1.15
11.18
8,996,584
8,967,884
8,745,522
393
$ 4,799
41
$ 51,122
2,340
11,084
38,252
6,062
15,552
$ 2.08
2.07
32.26
0.40
$ 1,707,712
1,397,730
482%
$ 1,455,597
173,083
11.70%
1.05
3.74
61.49
1.10
11.66
8,591,363
8,572,588
7,510,880
375
$ 4,554
42
$2.39
$1.98 $2.07
$1.79
$1.45
$0.32 $0.34 $0.36
$0.44
$0.40
$22.38
$20.19
$13.79
$15.30
$17.02
2014
2015
2016
2017
2018
2014
2015
2016
2017
2018
2014
2015
2016
2017
2018
DILUTED EARNINGS
PER SHARE
CASH DIVIDENDS
PER SHARE
BOOK VALUE
PER SHARE
(1)Other data is as of year-end, except for average shares.
(2)Excludes unvested restricted stock award shares.
Dear Shareholder,
In fiscal 2018, Southern Missouri Bancorp reported improved profitability
as it began to recognize the benefits of federal corporate income tax
reform,operated more efficiently while continuing our merger and
acquisition activity, realized stable core margins in an increasing rate
environment, and achieved solid organic loan and deposit growth, all while
capital ratios were strengthened, providing support for future growth.
Southern Missouri Bancorp, Inc. (the
Company), was pleased to report net
income available to common shareholders
of $20.9 million for fiscal 2018, an
increase of $5.4 million, or 34.6%, over
fiscal 2017. The Company’s return on
average common equity was 11.3%, and
its return on average assets was 1.17% for
fiscal 2018, as compared to 11.7% and
1.05%, respectively, for fiscal 2017.
RETURN ON COMMON EQUITY EXCEEDS
THAT OF PEER1 BANKS
Return on common equity decreased for fiscal 2018 as the company held more capital.
11.5%
9.4%
8.5%
12.5%
12.3%
11.7%
11.3%
8.9%
9.0%
8.0%
Jun-15 Dec-15
Jun-16 Dec-16 Jun-17
Dec-13 Jun-14 Dec-14
Declines in purchase accounting benefits
reported on the acquired loan and deposit
portfolios from the fiscal 2015 acquisition
of Peoples Bank of the Ozarks (“Peoples”)
were more than offset by new benefits
resulting from the fiscal 2017 acquisition
of Capaha Bank (“Capaha”) and, to a much smaller extent, the fiscal 2018 acquisition of Southern Missouri Bank
of Marshfield (“SMB-Marshfield”). In total, these benefits increased net interest income (pre-tax) by $2.3 million
in fiscal 2018, as compared to $1.5 million in the prior fiscal year. Fiscal 2018 results included $925,000 (pre-tax)
in merger-related expenses, as compared to $710,000 in the prior fiscal year.
RETURN ON AVERAGE COMMON EQUITY
Southern Missouri Bancorp, Inc.
Peer Companies
Dec-17
Jun-18
Net interest income improved 22.0%, as our average earning asset balances increased by 20.9%, while net interest
margin increased by four basis points. Average earning asset balance growth was due in part to the late-fiscal
2017 Capaha acquisition and the mid-2018 SMB-Marshfield acquisition. Purchase accounting benefits from our
three most recent acquisitions, noted above, contributed 14 basis points to net interest margin in fiscal 2018, as
compared to 11 basis points in the prior fiscal year.
(1) Peer data is based on the median year-end figures (December) reported by S&P Global Market Intelligence for publicly-traded commercial
banks and thrifts with assets of $1 billion to $3 billion as of December 31, 2017, headquartered in Missouri, Arkansas, Illinois, Iowa, Kansas,
Kentucky, Nebraska, Oklahoma, and Tennessee. SMBC data is as of fiscal year-end (June).
Noninterest income increased 25.1%, attributable in part to our growth through acquisitions. The increase consisted
of higher bank card interchange income, deposit account service charges, loan servicing fees, gains on the sale of
available-for-sale securities, and loan origination and other loan fees, partially offset by reduced earnings on bank-
owned life insurance (BOLI).
EFFICIENCY IMPROVES, REMAINS AHEAD OF PEERS
While M&A expenses remained elevated in the current year,
revenue growth improved results on this measure.
71.5%
71.0%
70.4%
66.9%
62.4%
61.5%
58.5%
57.6%
58.6%
60.6%
Dec-13 Jun-14 Dec-14
Jun-15 Dec-15
Jun-16 Dec-16 Jun-17
Dec-17
Jun-18
EFFICIENCY RATIO
Southern Missouri Bancorp, Inc.
Peer Companies
expenses,
Noninterest expense
increased 16.3%,
also due in part to the to our growth
through acquisitions, as we saw increased
compensation
occupancy
expenses, amortization of core deposit
card network
intangibles, and bank
expense, partially offset by inclusion in
the prior fiscal year’s results of charges to
recognize the impairment of fixed assets
and expenses attributable to the prepayment
of FHLB advances. The increase included
the additional merger-related charges noted
above.
The Company improved its efficiency ratio for the year, as noninterest expenses grew at a contained rate relative
to our organic and acquisitive earning asset growth, while net interest margin was stable and noninterest income
growth outpaced expense growth.
Loan growth slowed somewhat in fiscal 2018, as net loans increased $165.6 million, or 11.9%, inclusive of the
February 2018 SMB-Marshfield acquisition, which contributed $68.3 million in loans at fair value as of the
acquisition date. Inclusive of these acquired loans, growth consisted primarily of increases in commercial real estate
loans, commercial loans, consumer loans, drawn balances in construction loans, and residential real estate loans.
LONG-TERM GROWTH IN LOANS, DEPOSITS, AND TOTAL ASSETS
After brisk growth in the previous year, loan and deposit growth slowed,
and growth was supplemented with a smaller acquisition.
TOTAL ASSETS
Dollars in Millions
$1,708
$1,886
$1,300
$1,404
$1,021
TOTAL LOANS, NET OF ALLOWANCE FOR
LOAN LOSSES
Dollars in Millions
$1,563
$1,398
$1,053
$1,135
$801
TOTAL DEPOSITS
Dollars in Millions
$1,456
$1,580
$1,055
$1,121
$785
14
15
16
17
18
14
15
16
17
18
14
15
16
17
18
Deposits grew more slowly, as well, increasing $124.3 million, or 8.5%, as the SMB-Marshfield added $68.2 million
to internally-generated growth. We significantly reduced traditional brokered deposit funding, while we continued
to use reciprocal brokered deposit arrangements, especially as a solution for public unit depositors. On a core
basis, excluding traditional brokered deposits, public unit deposits, and the Marshfield acquisition, and evaluating
monthly average balances, nonmaturity deposit growth dropped to 6.2% for fiscal 2018, down from 8.5% in fiscal
2017. Measured similarly, core certificate of deposit growth improved in fiscal 2018, as monthly average balances
improved 7.4% in fiscal 2018, up from 4.0% in fiscal 2017, as depositors showed more interest in this product as
rates moved higher.
After reporting improved credit quality for fiscal 2017, the Company saw an increase in nonperforming assets in
fiscal 2018, finishing the fiscal year with nonperformers of $13.1 million, or 0.69% of total assets, as compared to
$6.3 million, or 0.37% of total assets, at the previous fiscal year end. Nonperforming loans (NPLs) were 0.59% of
gross loans at June 30, 2018, as compared to 0.23%, at the prior fiscal year end. Management believes the increases
in NPLs are not systemic or indicative of the quality of the loan portfolio generally, and believes potential losses
are manageable and properly reserved for. Net charge-offs for fiscal 2018 were lower, at 0.02% of average loans
outstanding, as compared to 0.05% for fiscal 2017.
PROBLEM ASSET LEVELS INCREASED
Nonperforming asset levels increased as a percentage of average assets, following solid
improvement in the prior fiscal year. Peer performance continues to improve.
1.43%
1.10%
0.74%
0.69%
0.55%
0.64%
0.64%
0.57%
0.43%
0.37%
Dec-13 Jun-14 Dec-14
Jun-15 Dec-15
Jun-16 Dec-16 Jun-17
Dec-17
Jun-18
NON-PERFORMING ASSETS RATIO
Southern Missouri Bancorp, Inc.
Peer Companies
Book value per common share at June 30, 2018, was $22.38, an increase of 10.8% from the June 30, 2017. Tangible
book value per common share, a non-GAAP measure, improved 9.5%, to $20.15 at June 30, 2018. Our closing
stock price at the end of the fiscal year was $39.02, up 21.0% from $32.26 at the previous fiscal year end. Over that
same period, the SNL U.S. Bank Index reported price appreciation of 8.2%, while the S&P 500 increased 12.2%.
Assuming dividends had been reinvested, our total shareholder return over the five years ended June 30, 2018, has
been 229.7%, while the SNL U.S. Bank Index has returned 90.3%, and the S&P 500 has returned 87.7%.
Our dividends paid during fiscal 2018 represented a 1.1% return on our closing stock price on the final day of the
fiscal year, and a 1.2% return on our average closing stock price for fiscal 2018. In July 2018, the board was pleased
to increase our dividend by 18.2%, to $0.13 per quarter, effective with the August 2018 payment.
The Company’s capital base strengthened in fiscal 2018, as earnings retention outpaced organic asset growth, while
we issued stock in the relatively small SMB-Marshfield acquisition, resulting in little change to our capital ratios.
We ended fiscal 2018 with a ratio of tangible common equity to tangible assets (TCE/TA) of 9.68%, up from 9.32%
a year earlier. We expect a modest decrease in the ratio with the pending acquisition of Gideon Bancshares, and
its subsidiary, First Commercial Bank (“First Commercial”), and we expect that improved profitability and slower
asset growth in the coming year will partially offset that reduction, even given the recently announced increase in
our quarterly dividends.
In fiscal 2019, we will continue to look for opportunities to drive long-term shareholder value. We look forward to
closing on our pending acquisition of First Commercial, targeted for the December quarter, subject to regulatory
and shareholder approval. If successful, this will mark our third acquisition to close in an 18-month period, and I
am very grateful to our hard-working team members who make this pace of activity possible.
We remain focused, as well, on organic growth in our communities, and expect that the coming year will again be
a more challenging one as we work to maintain our trend of strong organic growth. We continue, as always, to be
attentive to credit quality as we compete for opportunities, especially as we may be approaching the later stages
of this business cycle. Finally, we are mindful of pricing in this current market with rising short term rates and a
flattening yield curve.
I remain appreciative to our many customers in the communities we call home for the privilege to serve them.
Thank you for your continued confidence in our Company. I look forward with confidence to our new fiscal year
and to the challenges and opportunities it presents.
Sincerely,
GREG STEFFENS
PRESIDENT and CHIEF EXECUTIVE OFFICER
SOUTHERN MISSOURI BANCORP, INC.
> DIRECTORS <
L. Douglas Bagby
Chairman of the Board;
Retired City Manager, City of Poplar Bluff
Greg A. Steffens
President & CEO,
Southern Missouri Bancorp, Inc.
Sammy A. Schalk
Vice-Chairman of the Board;
President, Gamblin Lumber Company
Ronnie D. Black
Retired Executive Director,
General Association of General Baptists
Rebecca M. Brooks
Financial Manager, McLane Transport
Charles R. Love
Certified Public Accountant,
Kraft, Miles & Tatum
Dennis C. Robison
President, Robison Farms, Inc.
David J. Tooley
Retired President & CEO,
Metropolitan National Bank
Todd E. Hensley
Investor/Former Chairman,
Peoples Bank of the Ozarks
John R. Abercrombie
Retired President, Chairman & CEO,
Capaha Bank
> EXECUTIVE OFFICERS <
Greg A. Steffens
President & Chief Executive Officer
Justin G. Cox
Executive Vice President & Regional President
Kimberly A. Capps
Executive Vice President & Chief Operations Officer
Mark E. Hecker
Executive Vice President & Chief Credit Officer
Matthew T. Funke
Executive Vice President & Chief Financial Officer
Rick A. Windes
Executive Vice President & Chief Lending Officer
Lora L. Daves
Executive Vice President & Chief Risk Officer
PLEASE JOIN US
at our 2018 Annual Meeting, where shareholders will hear
management review this year’s performance in detail.
ANNUAL MEETING
Monday, October 29, 2018, at 9:00 AM
To be held at our headquarters facility
2991 Oak Grove Road
Poplar Bluff, Missouri
SOUTHERN MISSOURI BANCORP, INC.
offers community banking services
in Missouri, Arkansas, and Illinois
through its single bank subsidiary, Southern Bank.
Southern Bank is…
Accessible – Southern Bank is always accessible through our branches, website, mobile applications,
ATMs and ITMs.
Dynamic – We are charismatic and progressive. We grow and adapt to meet the ever-changing needs of
our customers and communities.
Innovative – We are unconventional pioneers. We offer cutting edge products, like Kasasa, to help our
customers put their hard-earned money to work.
Competitive – We are as ambitious and driven as the people we serve. We offer the same quality products
of mega bank chains without losing personal service or outsourcing decisions.
Rooted – Our culture is rooted in nearly 130 years of impeccable customer service, superior products,
and philanthropy.
Involved – We believe that our personal investment in the lives of our customers and in the communities
we serve is just as important as our financial investments.
Southern Missouri Bancorp, Inc.
2991 Oak Grove Road, Poplar Bluff, Missouri 63901
(573) 778-1800
www.bankwithsouthern.com