Southern Missouri Bancorp, Inc. Annual Report 2020

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FY2020 Annual Report · Southern Missouri Bancorp, Inc.

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Southern Missouri Bancorp, Inc.

2991 Oak Grove Road

Poplar Bluff, Missouri 63901

(573) 778-1800

Annual Report

2020

2019

CHANGE (%)

Financial Summary

EARNINGS (dollars in thousands)

Net interest income
Provision for loan losses
Noninterest income
Noninterest expense
Income taxes
Net income

PER COMMO N SHARE

Net income:
Basic
Diluted
Closing market price
Cash dividends declared

80,136
6,002
14,750
54,452
6,887
27,545

72,782
2,032
13,093
47,892
7,047
28,904

3.00
2.99
24.30
0.60

AT YE AR-END (dollars in thousands)

Total assets
Loans, net of allowance
Reserves as a percent of nonperforming loans
Deposits
Stockholder’s equity

E
E
2,542,157
$
2,141,929
290
2,184,847
258,347

FINANCIAL RATIOS

Return on average shareholder 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
Common stockholders record
Full-time equivalent employees
Assets per employee (in thousands)
Banking offices

E
%
11.11
1.18
3.72
57.39
1.16
11.04

E
9,127,390
9,099,365
9,199,169
251
475
5,352
48

3.14
3.14
34.83
0.52

E
E
2,214,402
1,846,405
95
1,893,695
238,392

E
%

13.13
1.38
3.78
55.93
1.07
11.36

E
9,289,308
9,261,058
9,203,909
277
454
4,878
47

10.1
195.4
12.7
13.7
-2.3
-4.7

-4.5
-4.8
-30.2
15.4

14.8
16.0

15.4
8.4

$3.14 $2.99

$1.98 $2.07

$2.39

$0.36 $0.40

$0.44

$0.60

$0.52

$28.39

$25.74

$22.38

$20.19

$17.02

2017

2020
2018
2016
DILUTE D EARNINGS PER SHARE

2019

2016

2017

2018
CASH DIVIDE NDS PER S HARE

2019

2020

(1) Other data is as of year-end, except for average shares.

(2) Excludes unvested restricted stock award shares.

2016

2017

2018
BOOK VALUE PER SHARE

2019

2020

Investor Relations Contact

Lorna Brannum

bancorp@bankwithsouthern.com

DEAR SHAREHOLDE R,

In fiscal 2020, Southern Missouri Bancorp worked with our customers in responding to

the COVID-19 pandemic, reduced nonperforming assets acquired in recent acquisitions,

increased our allowance for loan losses, completed a small acquisition in an attractive

market, and posted strong core results in a challenging environment.

Southern Missouri Bancorp, Inc. (the “Company” or “SMBC”), reported net income of $27.5 million for fiscal 2020,

a decrease of $1.4 million, or 4.7%, from fiscal 2019. Despite reporting a year-over-year decline, the Company was

pleased to continue to show relatively strong core profitability excluding the increased provision for loan losses,

with a return on average common equity of 11.1%, and a return on average assets of 1.18% for fiscal 2020, as

compared to 13.1% and 1.38%, respectively, for fiscal 2019.

RETURN ON COMMON EQUITY DECLINES DUE TO INCREASED PROVISIONING
Peer banks1 figures are based on their twelve months ended December 31, 2019, coinciding with their
typical fiscal year, and would not reflect increased provisioning for loan losses following the onset of
the COVID-19 pandemic.

12.3%

Return on Average Common Equity

13.1%

11.7%

11.3%

11.1%

8.8%

8.9%

8.0%

10.1%

9.6%

Dec.
2015

June
2016

Dec.
2016

June
2017

Dec.
2017

June
2018

Dec.
2018

June
2019

Dec.
2019

June
2020

SMBC

peer

The Company saw a significant decrease in purchase accounting benefits reported on acquired loan and deposit
portfolios, primarily due to inclusion in the prior year’s results of benefits from the resolution of particular purchased
credit impaired loans, partially offset by a full-year’s results from the mid-fiscal 2019 acquisition of Gideon
Bancshares Company and its subsidiary, First Commercial Bank (“Gideon”). In total, these benefits increased net
interest income (pre-tax) by $1.8 million in fiscal 2020, as compared to $2.9 million in the prior fiscal year. Partially
offsetting the decline in the accretion of fair value discount on acquired loans, the Company saw material benefits
from the resolution of a limited number of nonperforming loans, at $767,000, while there was no comparable
material item in the prior fiscal year. Fiscal 2020 results included $1.0 million (pre-tax) in merger-related expenses,
net of a small bargain purchase gain, as compared to $829,000 in the prior fiscal year.

Net interest income improved 10.1%, as our average earning asset balances increased by 11.8%, while net interest
margin declined from 3.78% in fiscal 2019 to 3.72% in fiscal 2020. Average earning asset balance growth was due
mostly to solid organic growth through the first three quarters of the fiscal year, the full-year effect of the mid-
fiscal 2019 Gideon acquisition, and the SBA-guaranteed Paycheck Protection Program (“PPP”) loans originated
relatively late in the fiscal year. Purchase accounting benefits from our three most recent acquisitions, noted above,
contributed eight basis points to net interest margin in fiscal 2020, as compared to 15 basis points in the prior

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, 2019, headquartered in Missouri, Arkansas, Illinois, Iowa, Kansas, Kentucky, Nebraska,

This page left intentionally blank.

Oklahoma, and Tennessee. SMBC data is as of fiscal year-end (June).

fiscal year. An additional four basis points in net interest margin was the result of recognition of income on a limited
number of nonperforming relationships favorably resolved during the year which had been on nonaccrual status.

Noninterest income increased 12.7%, and the increase continued to be attributable in part to our growth through
acquisitions. The increase consisted of higher bank card interchange income, deposit account service charges,
gains on the sale of residential real estate loans originated for that purpose, and a small bargain purchase gain,
partially offset by decreases in loan servicing income, gains realized on the sale of available-for-sale securities,
and earnings on bank-owned life insurance, which decreased due to the inclusion in the prior year’s results of a
nonrecurring benefit.

Noninterest expense increased 13.7%, also due in part to our growth through acquisitions, as we saw increases in
compensation expenses, occupancy, and data processing expenses, and expenses related to foreclosed properties,
partially offset by decreases in assessments for deposit insurance, as the Company benefited from credits made
available by the FDIC for smaller banks, such as the Company’s subsidiary, as required under the Dodd-Frank Act to
offset the costs borne by smaller banks over several years in order to increase the deposit insurance fund to levels
required under that law. Noninterest expenses attributable to mergers and acquisition were up modestly in fiscal
2020.

The Company saw slight deterioration in its efficiency ratio for the year, as noninterest expenses grew faster
than net interest income and noninterest income, on a combined basis. Increased expenses related to acquisition
activities pushed the figure higher.

Southern Missouri Bancorp, Inc.

offers community banking services in Missouri, Arkansas, and Illinois

through its single bank subsidiary, Southern Bank. Southern Bank is...

EFF ICIENCY DET ERIORATES, BUT RE MAINS AHEA D OF P EER S
Noninterest expenses grew faster than revenues, in part due to M&A expenses.

Efficiency Ratio

70.8%

68.2%

65.1%

67.3%

66.3%

57.0%

60.8%

57.7%

55.9%

57.4%

Dec.
2015

June
2016

Dec.
2016

June
2017

Dec.
2017

June
2018

Dec.
2018

June
2019

Dec.
2019

June
2020

COMPE TI TI VE We are as ambitious and driven as the people we serve. We offer the same

SMBC

peer

quality products of mega bank chains without losing personal service or

Loan growth was strong in fiscal 2020, aided by the PPP lending activity, which added $132.3 to our portfolio at fiscal
year end. In total, net loans increased $295.5 million, or 16.0%, inclusive of the May 2020 acquisition of Central Federal
Bancshares (“Central Federal”), which contributed $51.4 million in loans at fair value as of the acquisition date. Inclusive
of these acquired loans, growth consisted primarily of residential real estate loans, commercial loans, commercial real
estate loans, and funded balances in construction loans, partially offset by declines in consumer loans.

We had a very strong year for deposit growth, as businesses and consumers held more cash in the face of economic
uncertainty, and as cash available from payments to taxpayers under the CARES Act, deferrals of payroll and other
taxes due from businesses, and proceeds not yet utilized from PPP activity swelled account balances. Total deposit
growth of $291.2 million, or 15.4%, included $46.7 million from the Central Federal acquisition, while traditional
brokered deposit funding declined by $9.9 million. Total public unit deposits increased $38.4 million, with a minimal
amount attributable to the Central Federal acquisition. The increase in public unit funding was primarily the result
of higher nonmaturity balances held by our existing customer base.

ACCE SSI BLE

Southern Bank is always accessible through our branches, website, mobile

applications, ATMs and ITMs.

DYNA MIC

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.

outsourcing decisions.

ROOTED

Our culture is rooted in more than 130 years of impeccable customer

service, superior products, and philanthropy.

INV OLVE D

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

Directors

L. DOU GLAS BA GBY

Chairman of the Board;

GRE G A. S TEFF EN S

President & CEO,

DENNIS C. ROBISON

President,

Retired City Manager, City of Poplar Bluff

Southern Missouri Bancorp, Inc.

Robison Farms, Inc.

S AM MY A . SCHA LK

Vice-Chairman of the Board;

President, Gamblin Lumber Company

RE BE CCA M. B ROO KS

Financial Manager,

McLane Transport

DAVID J. TOOLEY

Retired President & CEO,

Metropolitan National Bank

RON NIE D. BLA CK

CHA RLE S R. LOV E

TODD E. HENSLE Y

Retired Executive Director,

Certified Public Accountant,

Investor/Former Chairman,

General Association of General Baptists

Kraft, Miles & Tatum

Peoples Bank of the Ozarks

Executive Officers

GRE G A. S TEF F ENS

President

Chief Executive Officer

K IMBE RLY A. CAP PS

Executive Vice President

Chief Operations Officer

LOR A L. D AVE S

JUS TIN G. COX

Executive Vice President

Chief Risk Officer

Regional President

RICK A. WINDE S

Executive Vice President

Chief Lending Officer

BRE TT A. DO RTO N

Executive Vice President

Chief Strategies Officer

MATTHEW T. FUNKE

Executive Vice President

Chief Financial Officer

MARK E. HECKER

Executive Vice President

Chief Credit Officer

MARTIN J. WEISHAA R

Executive Vice President

Chief Legal Officer

LON G-T ER M GRO WTH I N LOA N S , DE P OS IT S , A ND TO TA L A S S ET S
Loan growth was strong in fiscal 2020, ahead of the pandemic, and increased further with the PPP program. Nonmaturity
deposit growth was also strong in advance of the pandemic, though CDs attracted fewer depositors due to falling rates.

Total Assets
(Dollars in millions)

Total Loans,
net of allowance for loan losses
(Dollars in millions)

Total Deposits
(Dollars in millions)

$2,542

$2,214

$2,142

$1,846

$2,185

$1,894

$1,886

$1,708

$1,404

$1,563

$1,398

$1,135

$1,456

$1,580

$1,121

2016

2017

2018

2019

2020

2016

2017

2018

2019

2020

2016

2017

2018

2019

2020

The Company reported nonperforming assets of $11.2 million, or 0.44% of total assets, at June 30, 2020, as
compared to $24.8 million, or 1.12% of total assets, at the previous fiscal year end. Nonperforming loans (NPLs) were
0.40% of gross loans at June 30, 2020, as compared to 1.13%, at the prior fiscal year end. The Company improved
nonperformers due in large part to a reduction in problem loans and assets acquired in the Gideon acquisition,
which included NPLs of $1.8 million, at fair value, as of June 30, 2020, down from $10.2 million a year earlier. Net
charge-offs for fiscal 2020 remained low, at 0.04% of average loans outstanding, up from 0.02% in fiscal 2019.

PROBLEM ASSET LEV ELS IMPROVED
Nonperforming asset (NPA) levels decreased as a percentage of average assets, as
the Company resolved a number of NPAs acquired through the Gideon acquisition.
1.20%

Non-performing Assets Ratio

0.71%

0.69%

0.62%

0.69%

0.51%

0.64%

1.12%

0.37%

0.44%

Dec.
2015

June
2016

Dec.
2016

June
2017

Dec.
2017

June
2018

Dec.
2018

June
2019

Dec.
2019

June
2020

SMBC

peer

Book value per common share at June 30, 2020, was $28.39, an increase of 10.3% from June 30, 2019. Tangible
book value per common share, a non-GAAP measure, improved 12.0%, to $26.00 at June 30, 2020. Despite
improvements in our book value and earnings per share, however, our closing stock price at the end of the fiscal
year was $24.30, down 30.2% from $34.83 at the previous fiscal year end. Over that same period, the SNL U.S.
Bank and Thrift Index reported a decline of 24.7%, while the S&P 500 increased 5.4%. Our total shareholder return
over the five years ended June 30, 2020, assuming dividends had been reinvested, has been 39.3%, while the SNL
U.S. Bank and Thrift Index has returned 7.1%, and the S&P 500 has returned 66.5%. We understand that bank
stocks in general are out of favor in the market, with expectations for tighter margins in a lower rate environment
coupled with the possibility of higher credit losses in coming periods. Further, the market has favored larger-cap
stocks in the volatile economy. While we think our stock is attractively priced, we continue to remain paused on
our stock repurchase plan, until we see more economic data that will allow us to better assess the possibility of
credit losses and ensure that we preserve capital and liquidity to meet the credit needs of our customers. To date,
we remain cautiously optimistic about the performance of our loan portfolio.

Our dividends paid during fiscal 2020 represented a 2.5% return on our closing stock price on the final day of the
fiscal year, and a 1.9% return on our average closing stock price for fiscal 2020. In assessing our dividend payments
in July 2020, the board determined that maintaining our current dividend level of $0.15 per quarter is appropriate
and prudent at this time.

The Company’s capital base grew somewhat slower than our assets in fiscal 2020, as the late-year surge of loans
and deposits resulting from our PPP activity and the Central Federal acquisition combined to add to what would have
otherwise been more contained growth levels relative to capital retention. As PPP loans are forgiven, we would expect
capital ratios to rebound. Earlier in the fiscal year, the Company utilized $5.8 million in capital in its stock repurchase
activity. We ended fiscal 2020 with a ratio of tangible common equity to tangible assets (TCE/TA) of 9.39%, down
43 basis points from 9.82% a year earlier. Regulatory risk-based ratios saw a minimal decrease, while the regulatory
leverage ratio saw a larger decline, owing in large part to the increase in PPP loans.

For fiscal 2021, we expect to be focused on credit management, assisting our borrowers as they work through this
unprecedented environment. We expect to have less interest in growth through acquisitions, though we will continue
to evaluate opportunities. We’re pleased with progress made in reduction of our nonperforming assets, and we’ll look
to continue reducing the nonperformers we hold as we prepare for the possibility of increased credit difficulties in the
coming year.

We expect that growth will be difficult to achieve in fiscal 2021, due to the anticipated forgiveness of most of the
PPP loans originated in the fiscal year just ended, but we do want to support our communities by continuing to
originate loans based on sound underwriting. It’s too early to assess commercial borrower appetite as the economy
attempts to recover, though homebuyer and refinancing activity remains strong at this time. We will work to
improve our ability to serve our customers through digital channels and reduce reliance on in-branch services.
Additionally, we will be focused on mitigating spread compression.

I would like to take this opportunity to recognize the importance to our Company of John Abercrombie, who
retired from our board last fall. Mr. Abercrombie served as Chairman, President & CEO of Capaha Bank prior to
its merger with our Company in June of 2017. I knew John for many years prior to our merger, and I know how his
leadership of Capaha Bank guided that institution from its roots as a small, rural Illinois savings bank to become a
significant participant in the Cape Girardeau, Missouri, MSA. The Capaha acquisition provided Southern Bank with
an opportunity to enter that market, which has been a key to our growth over the last three years. We’ve been very
pleased with the continued expansion there from the great entry position from which we benefited. I extend my
congratulations and best wishes to John for a long and happy retirement.

In the last six months, Southern Missouri has required unprecedented contributions from our team members,
and we are fortunate to have had the fantastic team available to meet our organization’s needs. I am grateful for
each and every one of them. We continue to do our part to help limit the spread of COVID-19, maintain availability
to meet the needs of our customers, and provide an essential service to our communities. Our Company always
appreciates the opportunity to serve our customers, and I especially appreciate the flexibility they’ve shown in
recent months as we follow the recommendations of our state and local authorities. Finally, I am thankful to you,
our shareholders, for your investment and continued confidence in Southern Missouri.

Sincerely,

Greg Steffens
President and Chief Executive Officer
Southern Missouri Bancorp, Inc.

PL E A SE JOIN U S

at our 2020 Annual Meeting, where shareholders will hear

management review this year’s performance in detail.

A NN UA L ME ET IN G

Monday, October 26, 2020 at 9:00 AM

to be held at our headquarters facility, located at:

2991 Oak Grove Road

Poplar Bluff, Missouri

Our dividends paid during fiscal 2020 represented a 2.5% return on our closing stock price on the final day of the

fiscal year, and a 1.9% return on our average closing stock price for fiscal 2020. In assessing our dividend payments

in July 2020, the board determined that maintaining our current dividend level of $0.15 per quarter is appropriate

and prudent at this time.

The Company’s capital base grew somewhat slower than our assets in fiscal 2020, as the late-year surge of loans

and deposits resulting from our PPP activity and the Central Federal acquisition combined to add to what would have

otherwise been more contained growth levels relative to capital retention. As PPP loans are forgiven, we would expect

capital ratios to rebound. Earlier in the fiscal year, the Company utilized $5.8 million in capital in its stock repurchase

activity. We ended fiscal 2020 with a ratio of tangible common equity to tangible assets (TCE/TA) of 9.39%, down

43 basis points from 9.82% a year earlier. Regulatory risk-based ratios saw a minimal decrease, while the regulatory

leverage ratio saw a larger decline, owing in large part to the increase in PPP loans.

For fiscal 2021, we expect to be focused on credit management, assisting our borrowers as they work through this

unprecedented environment. We expect to have less interest in growth through acquisitions, though we will continue

to evaluate opportunities. We’re pleased with progress made in reduction of our nonperforming assets, and we’ll look

to continue reducing the nonperformers we hold as we prepare for the possibility of increased credit difficulties in the

coming year.

We expect that growth will be difficult to achieve in fiscal 2021, due to the anticipated forgiveness of most of the

PPP loans originated in the fiscal year just ended, but we do want to support our communities by continuing to

originate loans based on sound underwriting. It’s too early to assess commercial borrower appetite as the economy

attempts to recover, though homebuyer and refinancing activity remains strong at this time. We will work to

improve our ability to serve our customers through digital channels and reduce reliance on in-branch services.

Additionally, we will be focused on mitigating spread compression.

I would like to take this opportunity to recognize the importance to our Company of John Abercrombie, who

retired from our board last fall. Mr. Abercrombie served as Chairman, President & CEO of Capaha Bank prior to

its merger with our Company in June of 2017. I knew John for many years prior to our merger, and I know how his

leadership of Capaha Bank guided that institution from its roots as a small, rural Illinois savings bank to become a

significant participant in the Cape Girardeau, Missouri, MSA. The Capaha acquisition provided Southern Bank with

an opportunity to enter that market, which has been a key to our growth over the last three years. We’ve been very

pleased with the continued expansion there from the great entry position from which we benefited. I extend my

congratulations and best wishes to John for a long and happy retirement.

In the last six months, Southern Missouri has required unprecedented contributions from our team members,

and we are fortunate to have had the fantastic team available to meet our organization’s needs. I am grateful for

each and every one of them. We continue to do our part to help limit the spread of COVID-19, maintain availability

to meet the needs of our customers, and provide an essential service to our communities. Our Company always

appreciates the opportunity to serve our customers, and I especially appreciate the flexibility they’ve shown in

recent months as we follow the recommendations of our state and local authorities. Finally, I am thankful to you,

our shareholders, for your investment and continued confidence in Southern Missouri.

Sincerely,

Greg Steffens

President and Chief Executive Officer

Southern Missouri Bancorp, Inc.

PLEASE JOIN US

at our 2020 Annual Meeting, where shareholders will hear

management review this year’s performance in detail.

ANNUAL MEETING

Monday, October 26, 2020 at 9:00 AM

to be held at our headquarters facility, located at:

2991 Oak Grove Road

Poplar Bluff, Missouri

Directors

L. DOU GLAS BA GBY
Chairman of the Board;

GRE G A. S TEF F ENS
President & CEO,

DE N NIS C. ROBISON
President,

Retired City Manager, City of Poplar Bluff

Southern Missouri Bancorp, Inc.

Robison Farms, Inc.

SAMM Y A. SC HALK
Vice-Chairman of the Board;

RE BE CCA M. B RO OKS
Financial Manager,

DAVID J. TOOLEY
Retired President & CEO,

President, Gamblin Lumber Company

McLane Transport

Metropolitan National Bank

RONNIE D. BLA CK
Retired Executive Director,

CHA RLE S R. LOV E
Certified Public Accountant,

General Association of General Baptists

Kraft, Miles & Tatum

TODD E. HENSLEY
Investor/Former Chairman,

Peoples Bank of the Ozarks

Executive Officers

GREG A. S TEF FENS
President

Chief Executive Officer

LO R A L. DAVES
Executive Vice President

Chief Risk Officer

RICK A. W INDE S
Executive Vice President

Chief Lending Officer

K IMBE RLY A. CAP PS
Executive Vice President

Chief Operations Officer

JUS TIN G. COX
Executive Vice President

Regional President

BRE TT A. DO RT ON
Executive Vice President

Chief Strategies Officer

MATTHEW T. FUNKE
Executive Vice President

Chief Financial Officer

MARK E. HECKER
Executive Vice President

Chief Credit Officer

MA RTIN J. WEISHAAR
Executive Vice President

Chief Legal Officer

L ON G -TER M G R OWT H IN L OAN S, D EP O SIT S, AND TOTAL ASSETS

Loan growth was strong in fiscal 2020, ahead of the pandemic, and increased further with the PPP program. Nonmaturity

deposit growth was also strong in advance of the pandemic, though CDs attracted fewer depositors due to falling rates.

Total Assets

(Dollars in millions)

Total Loans,

net of allowance for loan losses

(Dollars in millions)

Total Deposits

(Dollars in millions)

$2,542

$2,214

$2,142

$1,846

$2,185

$1,894

$1,886

$1,708

$1,404

$1,563

$1,398

$1,135

$1,456

$1,580

$1,121

2016

2017

2018

2019

2020

2016

2017

2018

2019

2020

2016

2017

2018

2019

2020

The Company reported nonperforming assets of $11.2 million, or 0.44% of total assets, at June 30, 2020, as

compared to $24.8 million, or 1.12% of total assets, at the previous fiscal year end. Nonperforming loans (NPLs) were

0.40% of gross loans at June 30, 2020, as compared to 1.13%, at the prior fiscal year end. The Company improved

nonperformers due in large part to a reduction in problem loans and assets acquired in the Gideon acquisition,

which included NPLs of $1.8 million, at fair value, as of June 30, 2020, down from $10.2 million a year earlier. Net

charge-offs for fiscal 2020 remained low, at 0.04% of average loans outstanding, up from 0.02% in fiscal 2019.

P R OB L EM ASSET L EVEL S IM P ROVED

Nonperforming asset (NPA) levels decreased as a percentage of average assets, as

the Company resolved a number of NPAs acquired through the Gideon acquisition.

1.20%

Non-performing Assets Ratio

0.71%

0.69%

0.62%

0.69%

0.51%

0.64%

1.12%

0.37%

0.44%

Dec.

2015

June

2016

Dec.

2016

June

2017

Dec.

2017

June

2018

Dec.

2018

June

2019

Dec.

2019

June

2020

SMBC

peer

Book value per common share at June 30, 2020, was $28.39, an increase of 10.3% from June 30, 2019. Tangible

book value per common share, a non-GAAP measure, improved 12.0%, to $26.00 at June 30, 2020. Despite

improvements in our book value and earnings per share, however, our closing stock price at the end of the fiscal

year was $24.30, down 30.2% from $34.83 at the previous fiscal year end. Over that same period, the SNL U.S.

Bank and Thrift Index reported a decline of 24.7%, while the S&P 500 increased 5.4%. Our total shareholder return

over the five years ended June 30, 2020, assuming dividends had been reinvested, has been 39.3%, while the SNL

U.S. Bank and Thrift Index has returned 7.1%, and the S&P 500 has returned 66.5%. We understand that bank

stocks in general are out of favor in the market, with expectations for tighter margins in a lower rate environment

coupled with the possibility of higher credit losses in coming periods. Further, the market has favored larger-cap

stocks in the volatile economy. While we think our stock is attractively priced, we continue to remain paused on

our stock repurchase plan, until we see more economic data that will allow us to better assess the possibility of

credit losses and ensure that we preserve capital and liquidity to meet the credit needs of our customers. To date,

we remain cautiously optimistic about the performance of our loan portfolio.

fiscal year. An additional four basis points in net interest margin was the result of recognition of income on a limited

number of nonperforming relationships favorably resolved during the year which had been on nonaccrual status.

Noninterest income increased 12.7%, and the increase continued to be attributable in part to our growth through

acquisitions. The increase consisted of higher bank card interchange income, deposit account service charges,

gains on the sale of residential real estate loans originated for that purpose, and a small bargain purchase gain,

partially offset by decreases in loan servicing income, gains realized on the sale of available-for-sale securities,

and earnings on bank-owned life insurance, which decreased due to the inclusion in the prior year’s results of a

nonrecurring benefit.

Noninterest expense increased 13.7%, also due in part to our growth through acquisitions, as we saw increases in

compensation expenses, occupancy, and data processing expenses, and expenses related to foreclosed properties,

partially offset by decreases in assessments for deposit insurance, as the Company benefited from credits made

available by the FDIC for smaller banks, such as the Company’s subsidiary, as required under the Dodd-Frank Act to

offset the costs borne by smaller banks over several years in order to increase the deposit insurance fund to levels

required under that law. Noninterest expenses attributable to mergers and acquisition were up modestly in fiscal

2020.

The Company saw slight deterioration in its efficiency ratio for the year, as noninterest expenses grew faster

than net interest income and noninterest income, on a combined basis. Increased expenses related to acquisition

activities pushed the figure higher.

Southern Missouri Bancorp, Inc.
offers community banking services in Missouri, Arkansas, and Illinois

through its single bank subsidiary, Southern Bank. Southern Bank is...

EFFI CIENCY DET ERIORATES, BUT RE MAINS AHEA D OF P EER S

Noninterest expenses grew faster than revenues, in part due to M&A expenses.

Efficiency Ratio

70.8%

68.2%

65.1%

67.3%

66.3%

57.0%

60.8%

57.7%

55.9%

57.4%

ACCE SS IBLE

Southern Bank is always accessible through our branches, website, mobile

applications, ATMs and ITMs.

DYNA MI C

We are charismatic and progressive. We grow and adapt to meet the ever-

changing needs of our customers and communities.

INNO VATI VE We are unconventional pioneers. We offer cutting edge products, like

Kasasa, to help our customers put their hard-earned money to work.

Dec.

2015

June

2016

Dec.

2016

June

2017

Dec.

2017

June

2018

Dec.

2018

June

2019

Dec.

2019

June

2020

COMPE TI TI VE We are as ambitious and driven as the people we serve. We offer the same

SMBC

peer

quality products of mega bank chains without losing personal service or

Loan growth was strong in fiscal 2020, aided by the PPP lending activity, which added $132.3 to our portfolio at fiscal

year end. In total, net loans increased $295.5 million, or 16.0%, inclusive of the May 2020 acquisition of Central Federal

Bancshares (“Central Federal”), which contributed $51.4 million in loans at fair value as of the acquisition date. Inclusive

of these acquired loans, growth consisted primarily of residential real estate loans, commercial loans, commercial real

estate loans, and funded balances in construction loans, partially offset by declines in consumer loans.

We had a very strong year for deposit growth, as businesses and consumers held more cash in the face of economic

uncertainty, and as cash available from payments to taxpayers under the CARES Act, deferrals of payroll and other

taxes due from businesses, and proceeds not yet utilized from PPP activity swelled account balances. Total deposit

growth of $291.2 million, or 15.4%, included $46.7 million from the Central Federal acquisition, while traditional

brokered deposit funding declined by $9.9 million. Total public unit deposits increased $38.4 million, with a minimal

amount attributable to the Central Federal acquisition. The increase in public unit funding was primarily the result

of higher nonmaturity balances held by our existing customer base.

outsourcing decisions.

ROOTED

Our culture is rooted in more than 130 years of impeccable customer

service, superior products, and philanthropy.

INVO LVED

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

DEAR SHAREHOLDER,