10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC  20549

FORM 10-Q

(Mark One)

☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2021

OR

☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from        to

Commission file number   0-23406

Southern Missouri Bancorp, Inc.
(Exact name of registrant as specified in its charter)
Missouri	43-1665523
(State or jurisdiction of incorporation)	(IRS employer id. no.)
2991 Oak Grove Road Poplar Bluff, MO	63901
(Address of principal executive offices)	(Zip code)

(573) 778-1800

Registrant’s telephone number, including area code

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common	SMBC	NASDAQ Global Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data file required to be submitted pursuant to Rule 405 of regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act (check one):

Large accelerated filer ☐ Accelerated filer ☒ Non-accelerated filer ☐ Smaller reporting company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12 b-2 of the Exchange Act)

Yes ☐ No ☒

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date:

Class	Outstanding at November 5, 2021
Common Stock, Par Value $.01	8,888,091 Shares

SOUTHERN MISSOURI BANCORP, INC.

FORM 10-Q

INDEX

PART I.	Financial Information	PAGE NO.
Item 1.	Condensed Consolidated Financial Statements
	-   Condensed Consolidated Balance Sheets	3
	-   Condensed Consolidated Statements of Income	4
	-   Condensed Consolidated Statements of Comprehensive Income	5
	-   Condensed Consolidated Statements of Stockholders’ Equity	6
	-   Condensed Consolidated Statements of Cash Flows	7
	-   Notes to Condensed Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	35
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	50
Item 4.	Controls and Procedures	52
PART II.	OTHER INFORMATION	53
Item 1.	Legal Proceedings	53
Item 1a.	Risk Factors	53
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	53
Item 3.	Defaults upon Senior Securities	53
Item 4.	Mine Safety Disclosures	53
Item 5.	Other Information	53
Item 6.	Exhibits	54
	-  Signature Page	56

PART I: Item 1:  Condensed Consolidated Financial Statements

SOUTHERN MISSOURI BANCORP, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

SEPTEMBER 30, 2021 AND JUNE 30, 2021

(dollars in thousands)	September 30, 2021		June 30, 2021
	(unaudited)
Assets
Cash and cash equivalents	$	111,402	$	123,592
Interest-bearing time deposits		980		979
Available for sale securities		209,409		207,020
Stock in FHLB of Des Moines		5,425		5,873
Stock in Federal Reserve Bank of St. Louis		5,031		5,031
Loans receivable, net of ACL of $32,543 and $33,222 at September 30, 2021 and June 30, 2021, respectively		2,249,478		2,200,244
Accrued interest receivable		11,203		10,079
Premises and equipment, net		65,253		64,077
Bank owned life insurance – cash surrender value		44,099		43,817
Goodwill		14,089		14,089
Other intangible assets, net		6,779		7,129
Prepaid expenses and other assets		15,393		18,600
Total assets	$	2,738,541	$	2,700,530
Liabilities and Stockholders' Equity
Deposits	$	2,371,695	$	2,330,803
Advances from FHLB		46,522		57,529
Accounts payable and other liabilities		11,065		12,753
Accrued interest payable		731		779
Subordinated debt		15,268		15,243
Total liabilities		2,445,281		2,417,107
Commitments and contingencies
Common stock, $.01 par value; 25,000,000 shares authorized; 9,361,629 shares issued at September 30, 2021 and June 30, 2021		94		94
Additional paid-in capital		95,622		95,585
Retained earnings		211,104		200,140
Treasury stock of 483,038 and 456,431 shares at September 30, 2021 and June 30, 2021, respectively, at cost		(16,452)		(15,278)
Accumulated other comprehensive income		2,892		2,882
Total stockholders' equity		293,260		283,423
Total liabilities and stockholders' equity	$	2,738,541	$	2,700,530

See Notes to Condensed Consolidated Financial Statements

-3-

SOUTHERN MISSOURI BANCORP, INC

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

FOR THE THREE- MONTH PERIODS ENDED SEPTEMBER 31, 2021 AND 2020 (Unaudited)

	Three months ended
	September 30,
(dollars in thousands except per share data)	2021		2020
INTEREST INCOME:
Loans	$	27,694	$	25,907
Investment securities		528		490
Mortgage-backed securities		578		534
Other interest-earning assets		60		41
Total interest income		28,860		26,972
INTEREST EXPENSE:
Deposits		2,816		4,390
Advances from FHLB		276		380
Subordinated debt		130		138
Total interest expense		3,222		4,908
NET INTEREST INCOME		25,638		22,064
PROVISION FOR CREDIT LOSSES		(305)		1,000
NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES		25,943		21,064
NONINTEREST INCOME:
Deposit account charges and related fees		1,561		1,339
Bank card interchange income		951		830
Loan late charges		107		141
Loan servicing fees		154		310
Other loan fees		451		327
Net realized gains on sale of loans		369		1,206
Earnings on bank owned life insurance		281		280
Other income		641		508
Total noninterest income		4,515		4,941
NONINTEREST EXPENSE:
Compensation and benefits		8,199		7,720
Occupancy and equipment, net		2,113		1,970
Data processing expense		1,269		1,062
Telecommunications expense		320		315
Deposit insurance premiums		178		201
Legal and professional fees		234		198
Advertising		329		230
Postage and office supplies		195		193
Intangible amortization		338		380
Foreclosed property expenses/losses		31		50
Other operating expense		1,018		953
Total noninterest expense		14,224		13,272
INCOME BEFORE INCOME TAXES		16,234		12,733
INCOME TAXES		3,488		2,747
NET INCOME	$	12,746	$	9,986
Basic earnings per share	$	1.43	$	1.09
Diluted earnings per share	$	1.43	$	1.09
Dividends paid	$	0.20	$	0.15

See Notes to Condensed Consolidated Financial Statements

-4-

SOUTHERN MISSOURI BANCORP, INC

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

FOR THE THREE- MONTH PERIODS ENDED SEPTEMBER 30, 2021 AND 2020 (Unaudited)

	Three months ended
	September 30,
(dollars in thousands)	2021		2020
Net Income	$	12,746	$	9,986
Other comprehensive income:
Unrealized gains on securities available-for-sale		13		179
Tax expense		(3)		(40)
Total other comprehensive income		10		139
Comprehensive income	$	12,756	$	10,125

See Notes to Condensed Consolidated Financial Statements

-5-

SOUTHERN MISSOURI BANCORP, INC

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

FOR THE THREE-MONTH PERIODS ENDED SEPTEMBER 30, 2021 AND 2020 (Unaudited)

	For the three- month period ended September 30, 2021
			Additional						Accumulated Other		Total
	Common		Paid-In		Retained		Treasury			Comprehensive		Stockholders'
(dollars in thousands)	Stock		Capital		Earnings		Stock		Income		Equity
BALANCE AS OF JUNE 30, 2021	$	94	$	95,585	$	200,140	$	(15,278)	$	2,882	$	283,423
Net Income						12,746						12,746
Change in unrealized gain on available for sale securities										10		10
Dividends paid on common stock ($.20 per share)						(1,782)						(1,782)
Stock option expense				37								37
Treasury stock purchased								(1,174)				(1,174)
BALANCE AS OF SEPTEMBER 30, 2021	$	94	$	95,622	$	211,104	$	(16,452)	$	2,892	$	293,260

	For the three- month period ended September 30, 2020
			Additional						Accumulated Other		Total
	Common		Paid-In		Retained		Treasury		Comprehensive		Stockholders'
(dollars in thousands)	Stock		Capital		Earnings		Stock		Income		Equity
BALANCE AS OF JUNE 30, 2020	$	93	$	95,035	$	165,709	$	(6,937)	$	4,447	$	258,347
Impact of ASU 2016-13 adoption						(7,151)						(7,151)
Net Income						9,986						9,986
Change in unrealized gain on available for sale securities										139		139
Dividends paid on common stock ($.15 per share)						(1,369)						(1,369)
Stock option expense				23								23
BALANCE AS OF SEPTEMBER 30, 2020	$	93	$	95,058	$	167,175	$	(6,937)	$	4,586	$	259,975

See Notes to Condensed Consolidated Financial Statements

-6-

SOUTHERN MISSOURI BANCORP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE THREE-MONTH PERIODS ENDED SEPTEMBER 30, 2021 AND 2020 (Unaudited)

	Three months ended
	September 30,
(dollars in thousands)	2021		2020
Cash Flows From Operating Activities:
Net Income	$	12,746	$	9,986
Items not requiring (providing) cash:
Depreciation		1,061		1,011
(Gain) Loss on disposal of fixed assets		(137)		26
Stock option and stock grant expense		37		23
Loss on sale/write-down of REO		22		36
Amortization of intangible assets		338		380
Accretion of purchase accounting adjustments		(341)		(280)
Increase in cash surrender value of bank owned life insurance (BOLI)		(281)		(281)
Provision for credit losses		(305)		1,000
Net amortization of premiums and discounts on securities		283		452
Originations of loans held for sale		(14,000)		(47,888)
Proceeds from sales of loans held for sale		14,444		45,300
Gain on sales of loans held for sale		(369)		(1,206)
Changes in:
Accrued interest receivable		(1,124)		(1,650)
Prepaid expenses and other assets		432		849
Accounts payable and other liabilities		1,439		(1,619)
Deferred income taxes		6		14
Accrued interest payable		(48)		(245)
Net cash provided by operating activities		14,203		5,908
Cash flows from investing activities:
Net increase in loans		(48,324)		(14,163)
Net change in interest-bearing deposits		(1)		(2)
Proceeds from maturities of available for sale securities		12,452		15,715
Net redemptions (purchases) of Federal Home Loan Bank stock		448		(335)
Net purchases of Federal Reserve Bank of St. Louis stock		—		(654)
Purchases of available-for-sale securities		(15,111)		(14,992)
Purchases of long-term investment		(83)		—
Purchases of premises and equipment		(3,063)		(453)
Investments in state & federal tax credits		(609)		(1,051)
Proceeds from sale of fixed assets		928		71
Proceeds from sale of foreclosed assets		38		129
Net cash used in investing activities		(53,325)		(15,735)
Cash flows from financing activities:
Net increase in demand deposits and savings accounts		49,139		10,311
Net decrease in certificates of deposits		(8,239)		(27,073)
Proceeds from Federal Home Loan Bank advances		—		34,800
Repayments of Federal Home Loan Bank advances		(11,012)		(19,212)
Purchase of treasury stock		(1,174)		—
Dividends paid on common stock		(1,782)		(1,369)
Net cash provided by (used in) financing activities		26,932		(2,543)
Decrease in cash and cash equivalents		(12,190)		(12,370)
Cash and cash equivalents at beginning of period		123,592		54,245
Cash and cash equivalents at end of period	$	111,402	$	41,875
Supplemental disclosures of cash flow information:
Noncash investing and financing activities:
Conversion of loans to foreclosed real estate	$	58	$	69
Right of use assets obtained in exchange for lease obligations: Operating Leases		35		22
Cash paid during the period for:
Interest (net of interest credited)	$	484	$	678
Income taxes		28		1,793

See Notes to Condensed Consolidated Financial Statements

-7-

SOUTHERN MISSOURI BANCORP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note 1:  Basis of Presentation

The accompanying unaudited interim consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Securities and Exchange Commission (SEC) Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, all material adjustments (consisting only of normal recurring accruals) considered necessary for a fair presentation have been included. The condensed consolidated balance sheet of the Company as of June 30, 2021, has been derived from the audited consolidated balance sheet of the Company as of that date. Operating results for the three-month period ended September 30, 2021, are not necessarily indicative of the results that may be expected for the entire fiscal year. For additional information, refer to the audited consolidated financial statements included in the Company’s June 30, 2021 Form 10-K, which was filed with the SEC.

The accompanying condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation.

Note 2:  Organization and Summary of Significant Accounting Policies

Organization. Southern Missouri Bancorp, Inc., a Missouri corporation (the Company) was organized in 1994 and is the parent company of Southern Bank (the Bank). Substantially all of the Company’s consolidated revenues are derived from the operations of the Bank, and the Bank represents substantially all of the Company’s consolidated assets and liabilities. SB Real Estate Investments, LLC is a wholly-owned subsidiary of the Bank formed to hold Southern Bank Real Estate Investments, LLC. Southern Bank Real Estate Investments, LLC is a real estate investment trust (REIT) which is controlled by SB Real Estate Investments, LLC, and has other preferred shareholders in order to meet the requirements to be a REIT. At September 30, 2021, assets of the REIT were approximately $1.1 billion, and consisted primarily of real estate loan participations acquired from the Bank.

The Bank is primarily engaged in providing a full range of banking and financial services to individuals and corporate customers in its market areas. The Bank and Company are subject to competition from other financial institutions. The Bank and Company are subject to the regulation of certain federal and state agencies and undergo periodic examinations by those regulatory authorities.

Basis of Financial Statement Presentation. The consolidated financial statements of the Company have been prepared in conformity with accounting principles generally accepted in the United States of America and general practices within the banking industry. In the normal course of business, the Company encounters two significant types of risk: economic and regulatory. Economic risk is comprised of interest rate risk, credit risk, and market risk. The Company is subject to interest rate risk to the degree that its interest-bearing liabilities reprice on a different basis than its interest-earning assets. Credit risk is the risk of default on the Company’s investment or loan portfolios resulting from the borrowers’ inability or unwillingness to make contractually required payments. Market risk reflects changes in the value of the investment portfolio, collateral underlying loans receivable, and the value of the Company’s investments in real estate.

Principles of Consolidation. The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated.

Use of Estimates. The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

-8-

On July 1, 2020, the Company adopted ASU 2016-13, Financial Instruments – Credit Losses, also known as the current expected credit loss (“CECL”) standard, which created material changes to the existing critical accounting policy that existed at June 30, 2020. Effective July 1, 2020, the significant accounting policy which was considered to be the most critical in preparing the Company’s consolidated financial statements is the determination of the allowance for credit losses (“ACL”) on loans.

Cash and Cash Equivalents. For purposes of reporting cash flows, cash and cash equivalents includes cash, due from depository institutions and interest-bearing deposits in other depository institutions with original maturities of three months or less. Interest-bearing deposits in other depository institutions were $76.4 million and $83.2 million at September 30 and June 30, 2021, respectively. The deposits are held in various commercial banks with a total of $1.7 million and $1.8 million exceeding the FDIC’s deposit insurance limits at September 30 and June 30, 2021, respectively, as well as at the Federal Reserve and the Federal Home Loan Bank of Des Moines and Chicago.

Interest-bearing Time Deposits. Interest bearing deposits in banks mature within seven years and are carried at cost.

Available for Sale Securities. Available for sale securities (“AFS”), which include any security for which the Company has no immediate plan to sell but which may be sold in the future, are carried at fair value. Unrealized gains and losses, net of tax, are reported in accumulated other comprehensive income, a component of stockholders’ equity. All securities have been classified as available for sale.

Premiums and discounts on debt securities are amortized or accreted as adjustments to income over the estimated life of the security using the level yield method. Realized gains or losses on the sale of securities is based on the specific identification method. The fair value of securities is based on quoted market prices or dealer quotes. If a quoted market price is not available, fair value is estimated using quoted market prices for similar securities.

The Company does not invest in collateralized mortgage obligations that are considered high risk.

For AFS securities with fair value less than amortized cost that management has no intent to sell and believes that it more likely than not will not be required to sell prior to recovery, only the credit loss component of the impairment is recognized in earnings, while the noncredit loss is recognized in accumulated other comprehensive income. The credit loss component recognized in earnings is identified as the amount of principal cash flows not expected to be received over the remaining term of the security as projected based on cash flow projections, and is recorded to the ACL, by a charge to provision for credit losses. Accrued interest receivable is excluded from the estimate of credit losses. Both the ACL and the adjustment to net income may be reversed if conditions change. However, if the Company intends to sell an impaired AFS security, or, if it is more likely than not the Company will be required to sell such a security before recovering its amortized cost basis, the entire impairment amount would be recognized in earnings with a corresponding adjustment to the security’s amortized cost basis. Because the security’s amortized cost basis is adjusted to fair value, there is no ACL in this situation.

At adoption of ASU 2016-13, no impairment on AFS securities was attributable to credit. The Company will evaluate impaired AFS securities at the individual level on a quarterly basis, and will consider factors including, but not limited to: the extent to which the fair value of the security is less than the amortized cost basis; adverse conditions specifically related to the security, an industry, or geographic area; the payment structure of the security and likelihood of the issuer to be able to make payments that may increase in the future; failure of the issuer to make scheduled interest or principal payments; any changes to the rating of the security by a rating agency; and the ability and intent to hold the security until maturity. A qualitative determination as to whether any portion of the impairment is attributable to credit risk is acceptable. There were no credit related factors underlying unrealized losses on AFS securities at September 30, 2021, or June 30, 2021.

Changes in the ACL are recorded as expense. Losses are charged against the ACL when management believes the uncollectability of an AFS debt security is confirmed or when either of the criteria regarding intent or requirement to sell is met.

-9-

Federal Reserve Bank and Federal Home Loan Bank Stock. The Bank is a member of the Federal Reserve and the Federal Home Loan Bank (FHLB) systems. Capital stock of the Federal Reserve and the FHLB is a required investment based upon a predetermined formula and is carried at cost.

Loans. Loans are generally stated at unpaid principal balances, less the allowance for credit losses, any net deferred loan origination fees, and unamortized premiums or discounts on purchased loans.

Interest on loans is accrued based upon the principal amount outstanding. The accrual of interest on loans is discontinued when, in management’s judgment, the collectability of interest or principal in the normal course of business is doubtful. The Company complies with regulatory guidance which indicates that loans should be placed in nonaccrual status when 90 days past due, unless the loan is both well-secured and in the process of collection. A loan that is “in the process of collection” may be subject to legal action or, in appropriate circumstances, through other collection efforts reasonably expected to result in repayment or restoration to current status in the near future. A loan is considered delinquent when a payment has not been made by the contractual due date. At September 30, 2021, some loans were modified under the terms of the Coronavirus Aid, Relief and Economic Security Act (the CARES Act), which provides that loans modified after March 1, 2020, due to the COVID-19 pandemic, and which were otherwise current at December 31, 2019, need not be accounted for as troubled debt restructurings (TDRs). While these loans may not have met the contractual due dates of payments under their previous terms, so long as they were compliant with the terms of the modification made under the CARES Act, they would not have been reported as delinquent at June 30, 2021 or September 30, 2021. See further disclosure in Note 4: Loans and Allowance for Credit Losses. Interest income previously accrued but not collected at the date a loan is placed on nonaccrual status is reversed against interest income. Cash receipts on a nonaccrual loan are applied to principal and interest in accordance with its contractual terms unless full payment of principal is not expected, in which case cash receipts, whether designated as principal or interest, are applied as a reduction of the carrying value of the loan. A nonaccrual loan is generally returned to accrual status when principal and interest payments are current, full collectability of principal and interest is reasonably assured, and a consistent record of performance has been demonstrated.

The ACL is a valuation account that is deducted from the loans’ amortized cost basis to present the net amount expected to be collected on the loans, and is established through provision for credit losses charged to current earnings. The ACL is increased by the provision for losses on loans charged to expense and reduced by loans charged off, net of recoveries. Loans are charged off in the period deemed uncollectible, based on management’s analysis of expected cash flows (for non-collateral dependent loans) or collateral value (for collateral-dependent loans). Subsequent recoveries of loans previously charged off, if any, are credited to the allowance when received.

Management estimates the ACL using relevant available information, from internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts. Adjustments may be made to historical loss information for differences identified in current loan-specific risk characteristics, such as differences in underwriting standards or terms; lending review systems; experience, ability, or depth of lending management and staff; portfolio growth and mix; delinquency levels and trends; as well as for changes in environmental conditions, such as changes in economic activity or employment, agricultural economic conditions, property values, or other relevant factors. The Company generally incorporates a reasonable and supportable forecast period of four quarters, and a four-quarter, straight-line reversion period to return to long-term historical averages.

The ACL is measured on a collective (pool) basis when similar risk characteristics exist. For loans that do not share general risk characteristics with the collectively evaluated pools, the Company estimates credit losses on an individual loan basis, and these loans are excluded from the collectively evaluated pools. An ACL for an individually evaluated loan is recorded when the amortized cost basis of the loan exceeds the discounted estimated cash flows using the loan’s initial effective interest rate or the fair value, less estimated costs to sell, of the collateral for certain collateral dependent loans. For the collectively evaluated pools, the Company segments the loan portfolio primarily by loan purpose and collateral into 24 pools, which are homogeneous groups of loans that possess similar loss potential characteristics. The Company primarily utilizes the discounted cash flow (“DCF”) methodology for measurement of the required ACL. For a limited number of pools with a relatively small balance of unpaid principal balance, the Company utilized the remaining life method. The DCF model implements probability of default (“PD”) and loss given default (“LGD”) calculations at the instrument level. PD and LGD are determined based on statistical analysis and correlation of historical losses with various economic factors over time. In general, the Company’s losses have not correlated well with economic factors,

-10-

and the Company has utilized peer data where more appropriate. The Company defines a default as an event of charge off, an adverse (substandard or worse) internal credit rating, becoming delinquent 90 days or more, or being placed on nonaccrual status. A PD/LGD estimate is applied to a projected model of the loan’s cashflow, including principal and interest payments, with consideration for prepayment speeds, principal curtailments, and recovery lag.

Subsequent to the July 1, 2020, adoption of ASU 2016-13, loans acquired in a business combination that have experienced more-than-insignificant deterioration in credit quality since origination are considered purchased credit deteriorated (“PCD”) loans. At the acquisition date, an estimate of expected credit losses is made for groups of PCD loans with similar risk characteristics and individual PCD loans without similar risk characteristics. This initial ACL is allocated to individual PCD loans and added to the purchase price or acquisition date fair values to establish the initial amortized cost basis of the PCD loans. As the initial ACL is added to the purchase price, there is no credit loss expense recognized upon acquisition of a PCD loan. Any difference between the unpaid principal balance of PCD loans and the amortized cost basis is considered to relate to non-credit factors and results in a discount or premium. Discounts and premiums are recognized through interest income on a level-yield method over the life of the loans.

Upon adoption of ASU 2016-13, the amortized cost basis of the PCD assets were adjusted to reflect the addition of $434,000 to the ACL. The remaining noncredit discount, based on the adjusted amortized cost basis, will be accreted into interest income at the effective interest rate as of July 1, 2020.

Loan fees and certain direct loan origination costs are deferred, and the net fee or cost is recognized as an adjustment to interest income using the interest method over the contractual life of the loans.

Off-Balance Sheet Credit Exposures. Off-balance sheet credit instruments include commitments to make loans, and commercial letters of credit, issued to meet customer financing needs. The Company’s exposure to credit loss in the event of non-performance by the other party to the financial instrument for off-balance sheet loan commitments is represented by the contractual amount of those instruments. Such financial instruments are recorded when they are funded. The ACL on off-balance sheet credit exposures is estimated by loan pool on a quarterly basis under the current CECL model using the same methodologies as portfolio loans, taking into consideration the likelihood that funding will occur and is included in other liabilities on the Company’s consolidated balance sheets. The Company records an ACL on off-balance sheet credit exposures, unless the commitments to extend credit are unconditionally cancelable. In prior periods the charge for credit loss expense for off-balance sheet credit exposures was included in other non-interest expense in the Company’s consolidated statements of income, whereas under updated regulatory accounting guidelines, that figure is combined with the provision for credit losses beginning July 1, 2020.

Foreclosed Real Estate. Real estate acquired by foreclosure or by deed in lieu of foreclosure is initially recorded at fair value less estimated selling costs, establishing a new cost basis. Costs for development and improvement of the property are capitalized.

Valuations are periodically performed by management, and an allowance for losses is established by a charge to operations if the carrying value of a property exceeds its estimated fair value, less estimated selling costs.

Loans to facilitate the sale of real estate acquired in foreclosure are discounted if made at less than market rates. Discounts are amortized over the fixed interest period of each loan using the interest method.

Premises and Equipment. Premises and equipment are stated at cost less accumulated depreciation and include expenditures for major betterments and renewals. Maintenance, repairs, and minor renewals are expensed as incurred. When property is retired or sold, the retired asset and related accumulated depreciation are removed from the accounts and the resulting gain or loss taken into income. The Company reviews property and equipment for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If such assets are considered to be impaired, the impairment loss recognized is measured by the amount by which the carrying amount exceeds the fair value of the assets.

Depreciation is computed by use of straight-line and accelerated methods over the estimated useful lives of the assets. Estimated lives are generally seven to forty years for premises, three to seven years for equipment, and three years for software.

-11-

Bank Owned Life Insurance. Bank owned life insurance policies are reflected in the consolidated balance sheets at the estimated cash surrender value. Changes in the cash surrender value of these policies, as well as a portion of the insurance proceeds received, are recorded in noninterest income in the consolidated statements of income.

Goodwill. The Company’s goodwill is evaluated annually for impairment or more frequently if impairment indicators are present. A qualitative assessment is performed to determine whether the existence of events or circumstances leads to a determination that it is more likely than not the fair value is less than the carrying amount, including goodwill. If, based on the evaluation, it is determined to be more likely than not that the fair value is less than the carrying value, then goodwill is tested further for impairment. If the implied fair value of goodwill is lower than its carrying amount, a goodwill impairment is indicated and goodwill is written down to its implied fair value. Subsequent increases in goodwill value are not recognized in the financial statements. As of June 30, 2021, there was no impairment indicated, based on a qualitative assessment of goodwill, which considered: the market value of the Company’s common stock, concentrations of credit; profitability; nonperforming assets; capital levels; and results of recent regulatory examinations. The Company believes there was no impairment of goodwill at September 30, 2021.

Intangible Assets. The Company’s intangible assets at September 30, 2021 included gross core deposit intangibles of $15.3 million with $10.4 million accumulated amortization, gross other identifiable intangibles of $3.8 million with accumulated amortization of $3.8 million, and mortgage servicing rights of $1.9 million. At June 30, 2021, the Company’s intangible assets included gross core deposit intangibles of $15.3 million with $10.1 million accumulated amortization, gross other identifiable intangibles of $3.8 million with accumulated amortization of $3.8 million, and mortgage servicing rights of $1.9 million. The Company’s core deposit intangible assets are being amortized using the straight line method, over periods ranging from five to seven years, with amortization expense expected to be approximately $1.0 million in the remainder of fiscal 2022, $1.4 million in fiscal 2023 and fiscal 2024, $807,000 in fiscal 2025, and $328,000 thereafter. As of June 30, 2021, there was no impairment indicated, and the Company believes there was no impairment of other intangible assets at September 30, 2021.

Income Taxes. The Company accounts for income taxes in accordance with income tax accounting guidance (ASC 740, Income Taxes). The income tax accounting guidance results in two components of income tax expense: current and deferred. Current income tax expense reflects taxes to be paid or refunded for the current period by applying the provisions of the enacted tax law to the taxable income or excess of deductions over revenues. The Company determines deferred income taxes using the liability (or balance sheet) method. Under this method, the net deferred tax asset or liability is based on the tax effects of the differences between the book and tax bases of assets and liabilities, and enacted changes in tax rates and laws are recognized in the period in which they occur.

Deferred income tax expense results from changes in deferred tax assets and liabilities between periods. Deferred tax assets are recognized if it is more likely than not, based on the technical merits, that the tax position will be realized or sustained upon examination. The term more likely than not means a likelihood of more than 50 percent; the terms examined and upon examination also include resolution of the related appeals or litigation processes, if any. A tax position that meets the more-likely-than-not recognition threshold is initially and subsequently measured as the largest amount of tax benefit that has a greater than 50 percent likelihood of being realized upon settlement with a taxing authority that has full knowledge of all relevant information. The determination of whether or not a tax position has met the more-likely-than-not recognition threshold considers the facts, circumstances, and information available at the reporting date and is subject to management’s judgment. Deferred tax assets are reduced by a valuation allowance if, based on the weight of evidence available, it is more likely than not that some portion or all of a deferred tax asset will not be realized.

The Company recognizes interest and penalties on income taxes as a component of income tax expense.

The Company files consolidated income tax returns with its subsidiaries, the Bank and SB Real Estate Investments, LLC, with a tax year ended June 30. Southern Bank Real Estate Investments, LLC files a separate REIT return for federal tax purposes, and also files state income tax returns with a tax year ended December 31.

Incentive Plans. The Company accounts for its Equity Incentive Plan (EIP), and Omnibus Incentive Plan (OIP) in accordance with ASC 718, “Share-Based Payment.” Compensation expense is based on the market price of the Company’s stock on the date the shares are granted and is recorded over the vesting period. The difference between the

-12-

grant-date fair value and the fair value on the date the shares are considered earned represents a tax benefit to the Company that is recorded as an adjustment to income tax expense.

Outside Directors’ Retirement. The Bank adopted a directors’ retirement plan in April 1994 for outside directors. The directors’ retirement plan provides that each non-employee director (participant) shall receive, upon termination of service on the Board on or after age 60, other than termination for cause, a benefit in equal annual installments over a five year period. The benefit will be based upon the product of the participant’s vesting percentage and the total Board fees paid to the participant during the calendar year preceding termination of service on the Board. The vesting percentage shall be determined based upon the participant’s years of service on the Board, whether before or after the reorganization date.

In the event that the participant dies before collecting any or all of the benefits, the Bank shall pay the participant’s beneficiary. Benefits shall not be payable to anyone other than the beneficiary, and shall terminate on the death of the beneficiary.

Stock Options. Compensation cost is measured based on the grant-date fair value of the equity instruments issued, and recognized over the vesting period during which an employee provides service in exchange for the award.

Earnings Per Share. Basic earnings per share available to common stockholders is computed using the weighted-average number of common shares outstanding. Diluted earnings per share available to common stockholders includes the effect of all weighted-average dilutive potential common shares (stock options and restricted stock grants) outstanding during each period.

Comprehensive Income. Comprehensive income consists of net income and other comprehensive income, net of applicable income taxes. Other comprehensive income includes unrealized appreciation on available-for-sale securities, and changes in the funded status of defined benefit pension plans.

Transfers Between Fair Value Hierarchy Levels. Transfers in and out of Level 1 (quoted market prices), Level 2 (other significant observable inputs) and Level 3 (significant unobservable inputs) are recognized on the period ending date.

Reclassifications. Certain immaterial revisions have been made to the 2021 consolidated financial statements to reclassify the provision for off-balance sheet credit exposure out of noninterest expense and combine with provision for credit losses on the income statement. The revisions did not have a significant impact on the financial statement line items impacted and have been reclassified to conform to the 2022 presentation. These reclassifications had no effect on the net income or retained earnings.

New Accounting Pronouncements:

In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326), which the Company adopted July 1, 2020. The Update amended guidance on reporting credit losses for financial assets held at amortized cost basis and available for sale debt securities. For financial assets held at amortized cost basis, Topic 326 eliminated the probable initial recognition threshold in current GAAP and, instead, requires an entity to reflect its current estimate of all expected credit losses. The Update affects loans, debt securities, trade receivables, net investments in leases, off balance sheet credit exposures, and any other financial assets not excluded from the scope that have the contractual right to receive cash. Adoption was applied on a modified retrospective basis, through a cumulative-effect adjustment to retained earnings. Adoption resulted in an increase to the ACL of $8.9 million, related to the transition from the incurred loss model to the CECL ACL model, and an increase of $434,000 related to the transition from PCI to PCD methodology, relative to the ALLL as of June 30, 2020. The Company also recorded an adjustment to the reserve for unfunded commitments recorded in other liabilities of $268,000. The impact at adoption was reflected as an adjustment to beginning retained earnings, net of income taxes, in the amount of $7.2 million. In accordance with the new standard, management did not reassess whether PCI assets met the criteria of PCD assets as of the date of adoption. The adoption of ASU 2016-13 in fiscal 2021 could also impact the Company’s future earnings, perhaps materially.

-13-

The following table illustrates the impact of adoption of ASU 2016-13:

	July 1, 2020
	As reported		As reported		Impact of
	under		prior to		adoption
(dollars in thousands)	ASU 2016-13		ASU 2016-13		ASU 2016-13
Loans receivable	$	2,142,363	$	2,141,929	$	434
Allowance for credit losses on loans:
Real Estate Loans:
Residential		8,396		4,875		3,521
Construction		1,889		2,010		(121)
Commercial		15,988		12,132		3,856
Consumer loans		2,247		1,182		1,065
Commercial loans		5,952		4,940		1,012
Total allowance for credit losses on loans	$	34,472	$	25,139	$	9,333
Total allowance for credit losses on off-balance sheet credit exposures	$	2,227	$	1,959	$	268

The above table includes the impact of ASU 2016-13 adoption for PCD assets previously classified as PCI. The change in the ACL includes $434,000 attributable to residential and commercial real estate loans, and the amortized cost basis of loans receivable was increased for those loans by that total amount.

In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”), that removes certain exceptions for investments, intraperiod allocations and interim calculations, and adds guidance to reduce complexity in accounting for income taxes. ASU 2019-12 introduces the following new guidance: i) guidance to evaluate whether a step-up in tax basis of goodwill relates to a business combination in which book goodwill was recognized or a separate transaction and ii) a policy election to not allocate consolidated income taxes when a member of a consolidated tax return is not subject to income tax. ASU 2019-12 is effective for fiscal years, and interim periods within those fiscal years beginning after December 15, 2020. The adoption of ASU 2019-12 did not have a material impact on the Company’s operations, financial position or disclosures.

In March 2020, the CARES Act was signed into law, creating a forbearance program for federally backed mortgage loans, protects borrowers from negative credit reporting due to loan accommodations related to the National Emergency, and provides financial institutions the option to temporarily suspend certain requirements under U.S. GAAP related to troubled debt restructurings (TDR) for a limited period of time to account for the effects of COVID-19. The Company has elected to not apply ASC Subtopic 310-40 for loans eligible under the CARES Act, based on the modification’s (1) relation to COVID-19, (2) execution for a loan that was not more than 30-days past due as of December 31, 2019, and (3) execution between March 1, 2020, and the earlier of the date that falls 60 days following the termination of the declared National Emergency, or December 31, 2020. The 2021 Consolidated Appropriations Act, signed into law in December 2020, extended the window during which loans may be modified without classification as TDRs under ASC Subtopic 310-40, to the earlier of January 1, 2022, or 60 days following the termination of the declared National Emergency.

In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): “Facilitation of the Effects of Reference Rate Reform on Financial Reporting,”.  The amendments in this update provide optional guidance for a limited period to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting. It provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments in this update are effective for all entities as of March 12, 2020 through December 31, 2022. Pursuant to the Interagency Statement on LIBOR Transition issued in November 2020, the Company will not enter into any new LIBOR-based credit agreements after December 31, 2021. The adoption of ASU 2020-04 is not expected to have a material impact on the Company’s consolidated financial statements.

In January 2021, the FASB issued ASU 2021-01, Reference Rate Reform (Topic 848): Scope. ASU 2021-01 clarifies that certain optional expedients and exceptions in ASC 848 for contract modifications and hedge accounting apply to

-14-

derivatives that are affected by the discounting transition. ASU 2021-01 also amends the expedients and exceptions in ASC 848 to capture the incremental consequences of the scope clarification and to tailor the existing guidance to derivative instruments affected by the discounting transition. ASU 2021-01 was effective upon issuance and generally can be applied through December 31, 2022. ASU 2021-01 is not expected to have a material impact on the Company’s consolidated financial statements.

Note 3:  Securities

The amortized cost, gross unrealized gains, gross unrealized losses, ACL, and approximate fair value of securities available for sale consisted of the following:

	September 30, 2021
			Gross		Gross		Allowance		Estimated
	Amortized		Unrealized		Unrealized		for		Fair
(dollars in thousands)	Cost		Gains		Losses		Credit Losses		Value
Debt and equity securities:
Obligations of states and political subdivisions	$	45,360	$	1,545	$	(36)	$	—	$	46,869
Corporate obligations		18,853		325		(346)		—		18,832
Other securities		591		17		—		—		608
Total debt and equity securities		64,804		1,887		(382)		—		66,309
Mortgage-backed securities (MBS) and collateralized mortgage obligations (CMOs):
Residential MBS issued by governmental sponsored enterprises (GSEs)		63,247		950		(258)		—		63,939
Commercial MBS issued by GSEs		35,349		1,286		(291)		—		36,344
CMOs issued by GSEs		42,263		628		(74)		—		42,817
Total MBS and CMOs		140,859		2,864		(623)		—		143,100
Total AFS securities	$	205,663	$	4,751	$	(1,005)	$	—	$	209,409

	June 30, 2021
			Gross		Gross		Allowance		Estimated
	Amortized		Unrealized		Unrealized		for		Fair
(dollars in thousands)	Cost		Gains		Losses		Credit Losses		Value
Debt and equity securities:
Obligations of states and political subdivisions	$	46,257	$	1,479	$	(40)	$	—		47,696
Corporate obligations		20,356		290		(335)		—		20,311
Other securities		647		25		—		—		672
Total debt and equity securities		67,260		1,794		(375)		—		68,679
Mortgage-backed securities (MBS) and collateralized mortgage obligations (CMOs):
Residential MBS issued by governmental sponsored enterprises (GSEs)		64,400		932		(379)		—		64,953
Commercial MBS issued by GSEs		35,425		1,394		(338)		—		36,481
CMOs issued by GSEs		36,201		755		(49)		—		36,907
Total MBS and CMOs		136,026		3,081		(766)		—		138,341
Total AFS securities	$	203,286	$	4,875	$	(1,141)	$	—	$	207,020

The amortized cost and estimated fair value of investment and mortgage-backed securities, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without penalties.

-15-

	September 30, 2021
	Amortized		Estimated
(dollars in thousands)	Cost		Fair Value
Within one year	$	1,555	$	1,562
After one year but less than five years		7,236		7,375
After five years but less than ten years		28,516		29,212
After ten years		27,497		28,160
Total investment securities		64,804		66,309
MBS and CMOs		140,859		143,100
Total AFS securities	$	205,663	$	209,409

The carrying value of investment and mortgage-backed securities pledged as collateral to secure public deposits amounted to $164.8 million at September 30, 2021 and $155.6 million at June 30, 2021. The securities pledged consist of marketable securities, including $93.2 million and $95.4 million of Mortgage-backed Securities, $30.1 million and $18.8 million of Collateralized Mortgage Obligations, and $41.5 million and $41.4 million of State and Political Subdivisions Obligations at September 30, 2021 and June 30, 2021, respectively.

The following tables show the Company’s investments’ gross unrealized losses and fair value, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position for which an ACL has not been recorded at September 30 and June 30, 2021:

	September 30, 2021
	Less than 12 months				12 months or more				Total
			Unrealized				Unrealized				Unrealized
	Fair Value		Losses		Fair Value		Losses		Fair Value		Losses
(dollars in thousands)
Obligations of state and political subdivisions	$	2,716	$	36	$	—	$	—	$	2,716	$	36
Corporate obligations		6,381		84		715		262		7,096		346
MBS and CMOs		45,063		547		4,399		76		49,462		623
Total AFS securities	$	54,160	$	667	$	5,114	$	338	$	59,274	$	1,005

	June 30, 2021
	Less than 12 months				12 months or more				Total
			Unrealized				Unrealized				Unrealized
	Fair Value		Losses		Fair Value		Losses		Fair Value		Losses
(dollars in thousands)
Obligations of state and political subdivisions	$	3,177	$	40	$	—	$	—	$	3,177	$	40
Corporate obligations		9,331		79		720		256		10,051		335
MBS and CMOs		53,893		764		70		2		53,963		766
Total AFS securities	$	66,401	$	883	$	790	$	258	$	67,191	$	1,141

Obligations of state and political subdivisions. The unrealized losses on the Company’s investments in obligations of state and political subdivisions include six individual securities which have been in an unrealized loss position for less than 12 months. The securities are performing and are of high credit quality. The unrealized losses were caused by variations in market interest rates since purchase or acquisition. Because the Company does not intend to sell these securities and it is likely that the Company will not be required to sell these securities prior to recovery of their amortized cost basis, which may be maturity, the Company has not recorded an ACL on these securities.

Corporate Obligations. The unrealized losses on the Company’s investments in corporate obligations include five individual securities which have been in an unrealized loss position for less than 12 months. The securities are performing and are of high credit quality. The unrealized losses were caused by variations in market interest rates since purchase or acquisition. Because the Company does not intend to sell these securities and it likely that the Company will not be required to sell these securities prior to recovery of their amortized cost basis, which may be maturity, the Company has not recorded an ACL on these securities.

-16-

At September 30, 2021, corporate obligations included two pooled trust preferred securities with an estimated fair value of $715,000 and unrealized losses of $262,000 in a continuous unrealized loss position for twelve months or more. These unrealized losses were primarily due to the long-term nature of the pooled trust preferred securities and a reduced demand for these securities, and concerns regarding the issuers of the underlying trust preferred securities.

A cash flow analysis performed as of September 30, 2021, for these two securities indicated it is probable the Company will receive all contracted principal and related interest projected. The cash flow analysis used in making this determination was based on anticipated default, recovery, and prepayment rates, and the resulting cash flows were discounted based on the yield spread anticipated at the time the securities were purchased. Because the Company does not intend to sell these securities and it is likely that the Company will not be required to sell these securities prior to recovery of their amortized cost basis, which may be maturity, the Company has not recorded an ACL on these securities.

Mortgage-backed securities and Collateralized mortgage obligations. As of September 30, 2021, the unrealized losses on the Company’s investments in mortgage-backed securities and collateralized mortgage obligations include 18 individual securities which have been in an unrealized loss position for less than 12 months, and two individual securities which have been in an unrealized loss position for more than 12 months. The securities are performing and are of high credit quality. The unrealized losses were caused by variations in market interest rates since purchase or acquisition. Because the Company does not intend to sell these securities and it is likely that the Company will not be required to sell these securities prior to recovery of their amortized cost basis, which may be maturity, the Company has not recorded an ACL on these securities.

The Company does not believe that any individual unrealized loss as of September 30, 2021, is the result of a credit loss. However, the Company could be required to recognize an ACL in future periods with respect to its available for sale investment securities portfolio.

Credit losses recognized on investments.  There were no credit losses recognized in income and other losses or recorded in other comprehensive income for the three-month periods ended September 30, 2021 and 2020.

Note 4:  Loans and Allowance for Credit Losses

Classes of loans are summarized as follows:

(dollars in thousands)	September 30, 2021		June 30, 2021
Real Estate Loans:
Residential	$	762,204	$	721,216
Construction		235,501		208,824
Commercial		901,281		889,793
Consumer loans		80,467		77,674
Commercial loans		411,402		414,124
		2,390,855		2,311,631
Loans in process		(107,555)		(74,540)
Deferred loan fees, net		(1,279)		(3,625)
Allowance for loan losses		(32,543)		(33,222)
Total loans	$	2,249,478	$	2,200,244

The Company’s lending activities consist of origination of loans secured by mortgages on one- to four-family residences and commercial and agricultural real estate, construction loans on residential and commercial properties, commercial and agricultural business loans and consumer loans. At September 30, 2021 the Company had purchased participations in 25 loans totaling $87.0 million, as compared to 23 loans totaling $83.0 million at June 30, 2021.

Residential Mortgage Lending. The Company actively originates loans for the acquisition or refinance of one- to four-family residences. This category includes both fixed-rate and adjustable-rate mortgage (“ARM”) loans amortizing over periods of up to 30 years, and the properties securing such loans may be owner-occupied or non-owner-occupied. Single-family residential loans do not generally exceed 90% of the lower of the appraised value or purchase price of the secured

-17-

property. Substantially all of the one- to four-family residential mortgage originations in the Company’s portfolio are located within the Company’s primary lending area. General risks related to one- to four-family residential lending include stability of borrower income and collateral values.

The Company also originates loans secured by multi-family residential properties that are often located outside the Company’s primary lending area but made to borrowers who operate within our primary market area. The majority of the multi-family residential loans that are originated by the Company are amortized over periods generally up to 25 years, with balloon maturities typically up to ten years. Both fixed and adjustable interest rates are offered and it is typical for the Company to include an interest rate “floor” and “ceiling” in the loan agreement. Generally, multi-family residential loans do not exceed 85% of the lower of the appraised value or purchase price of the secured property. General risks related to multi-family residential lending include rental demand, rental rates, and vacancies, as well as collateral values and borrower leverage.

Commercial Real Estate Lending. The Company actively originates loans secured by owner- and non-owner-occupied commercial real estate including farmland, single- and multi-tenant retail properties, restaurants, hotels, land (improved and unimproved), nursing homes and other healthcare facilities, warehouses and distribution centers, convenience stores, automobile dealerships and other automotive-related services, and other businesses. These properties are typically owned and operated by borrowers headquartered within the Company’s primary lending area, however, the property may be located outside our primary lending area. Risks to owner-occupied commercial real estate lending generally include the continued profitable operation of the borrower’s enterprise, as well as general collateral values, and may be heightened by unique, specific uses of the property serving as collateral. Non-owner-occupied commercial real estate lending risks include tenant demand and performance, lease rates, and vacancies, as well as collateral values and borrower leverage. These factors may be influenced by general economic conditions in the region, or in the United States generally. Risks to lending on farmland include unique factors such as commodity prices, yields, input costs, and weather, as well as farmland values.

Most commercial real estate loans originated by the Company generally are based on amortization schedules of up to 25 years with monthly principal and interest payments. Generally, the interest rate received on these loans is fixed for a maturity for up to ten years, with a balloon payment due at maturity. Alternatively, for some loans, the interest rate adjusts at least annually after an initial period up to seven years. The Company typically includes an interest rate “floor” in the loan agreement. Generally, improved commercial real estate loan amounts do not exceed 80% of the lower of the appraised value or the purchase price of the secured property. Agricultural real estate terms offered differ slightly, with amortization schedules of up to 25 years with an 80% loan-to-value ratio, or 30 years with a 75% loan-to-value ratio.

Construction Lending. The Company originates real estate loans secured by property or land that is under construction or development. Construction loans originated by the Company are generally to finance the construction of owner occupied residential real estate, or to finance speculative construction of residential real estate, land development, or owner-operated or non-owner occupied commercial real estate. During construction, these loans typically require monthly interest-only payments, with single-family residential construction loans having maturities ranging from six to twelve months, while multifamily or commercial construction loans typically mature in 12 to 24 months. Once construction is completed, permanent construction loans may be converted to monthly payments using amortization schedules of up to 30 years on residential and generally up to 25 years on commercial real estate. Construction and development lending risks generally include successful timely and on-budget completion of the project, followed by the sale of the property in the case of land development or non-owner-occupied real estate, or the long-term occupancy of the property by the builder in the case of owner-occupied construction. Changes in real estate values or other economic conditions may impact the ability of a borrower to sell property developed for that purpose.

While the Company typically utilizes relatively short maturity periods to closely monitor the inherent risks associated with construction loans for these loans, weather conditions, change orders, availability of materials and/or labor, and other factors may contribute to the lengthening of a project, thus necessitating the need to renew the construction loan at the balloon maturity. Such extensions are typically executed in incremental three month periods to facilitate project completion. The Company’s average term of construction loans is approximately nine months. During construction, loans typically require monthly interest only payments which may allow the Company an opportunity to monitor for early signs of financial difficulty should the borrower fail to make a required monthly payment. Additionally, during the construction phase, the Company typically performs interim inspections which further allow the Company opportunity to

-18-

assess risk. At September 30, 2021, construction loans outstanding included 43 loans, totaling $29.0 million, for which a modification had been agreed to. At June 30, 2021, construction loans outstanding included 48 loans, totaling $28.5 million, for which a modification had been agreed to. In general, these modifications were solely for the purpose of extending the maturity date due to conditions described above, pursuant to the Company’s normal underwriting and monitoring procedures. As these modifications were not executed due to financial difficulty on the part of the borrower, they were not accounted for as troubled debt restructurings (TDRs); nor were they made pursuant to exemptions provided under the CARES Act. Under the CARES Act, financial institutions have the option to temporarily suspend certain requirements under U.S. GAAP related to TDRs for a limited period of time to account for the effects of COVID-19. Loans modified under the CARES Act did not include any construction loans with drawn balances at September 30, 2021.

Consumer Lending. The Company offers a variety of secured consumer loans, including home equity, direct and indirect automobile loans, second mortgages, mobile home loans and loans secured by deposits. The Company originates substantially all of its consumer loans in its primary lending area. Usually, consumer loans are originated with fixed rates for terms of up to five years, with the exception of home equity lines of credit, which are variable, tied to the prime rate of interest and are for a period of ten years.

Home equity lines of credit (HELOCs) are secured with a deed of trust and are issued up to 100% of the appraised or assessed value of the property securing the line of credit, less the outstanding balance on the first mortgage and are typically issued for a term of ten years. Interest rates on the HELOCs are generally adjustable. Interest rates are based upon the loan-to-value ratio of the property with better rates given to borrowers with more equity. Risks related to HELOC lending generally include the stability of borrower income and collateral values.

Automobile loans originated by the Company include both direct loans and a smaller amount of loans originated by auto dealers. The Company generally pays a negotiated fee back to the dealer for indirect loans. Typically, automobile loans are made for terms of up to 60 months for new and used vehicles. Loans secured by automobiles have fixed rates and are generally made in amounts up to 100% of the purchase price of the vehicle. Risks related to automobile and other consumer lending generally include the stability of borrower income and borrower willingness to repay.

Commercial Business Lending. The Company’s commercial business lending activities encompass loans with a variety of purposes and security, including loans to finance accounts receivable, inventory, equipment and operating lines of credit, including agricultural production and equipment loans. The Company offers both fixed and adjustable rate commercial business loans. Generally, commercial loans secured by fixed assets are amortized over periods up to five years, while commercial operating lines of credit or agricultural production lines are generally for a one year period. Commercial lending risk is primarily driven by the borrower’s successful generation of cash flow from their business enterprise sufficient to service debt, and may be influenced by factors specific to the borrower and industry, or by general economic conditions in the region or in the United States generally. Agricultural production or equipment lending includes unique risk factors such as commodity prices, yields, input costs, and weather, as well as farm equipment values.

Allowance for Credit Losses. The provision for credit losses for the three-month period ended September 30, 2021, was a credit of $305,000 compared to a charge of $1.0 million in the same period of the prior fiscal year. The recovery was based on the estimated required ACL, reflecting management’s estimate of the current expected credit losses in the Company’s loan portfolio at September 30, 2021, and as of that date the Company’s ACL was $32.5 million. Reduced provisioning in the three-month period ended September 30, 2021, was attributed primarily to an improved outlook regarding the economic environment resulting as the economy recovers from the effects of the COVID-19 pandemic, and the Company notes less uncertainty regarding the potential adverse impact on its borrowers generally low and consistent levels of net charge offs, and a reduction in delinquent or adversely classified credits, and nonperforming loans. While the Company assesses that the economic outlook has continued to improve during the current quarter as compared to the year ended June 30, 2021, there remains uncertainty regarding the possible continuing impact of the COVID-19 pandemic or when transmission of the virus will abate to the point that restrictions are no longer being imposed or considered, and consumer behavior can be said to have returned to normal. As such, there remains a potential for the pandemic to negatively impact global and regional economies, or for recent efforts by the U.S. government and the Federal Reserve to respond to the pandemic and its economic impact to fall short of expectations. Specifically, management considered the following:

-19-

●  economic conditions and projections as provided by Moody’s Analytics, including baseline and downside scenarios were utilized in the Company’s estimate at September 30, 2021. Economic factors considered in the projections included national and state levels of unemployment, and national and state rates of inflation-adjusted growth in the gross domestic product. Economic conditions are considered to be a moderate and declining risk factor;

● the pace of growth of the Company’s loan portfolio, exclusive of acquisitions or government guaranteed loans, relative to overall economic growth. This measure remains elevated, but continued to moderate in the most recent quarter, and is considered to be a moderate and declining risk factor;

● levels and trends for loan delinquencies nationally and in the region. This measure as reported remains relatively stable, but management considered the potential that the measure remains under-reported due to the availability of modifications under the CARES Act. The level of uncertainty about loan delinquencies is considered to be diminishing. This is considered to be an elevated but declining risk factor;

● exposure to the hotel industry, in particular, metropolitan area hotels more impacted by activity restrictions and a lack of business or convention-related travel. This is considered to be an elevated and stable risk factor.

Management considered the impact of the COVID-19 pandemic on its consumer and business borrowers, particularly those business borrowers most affected by efforts to contain the pandemic, including our borrowers in the retail and multi-tenant retail industry, restaurants, and hotels, when making qualitative factor adjustments. To date, various relief efforts, notably including the availability of forgivable Paycheck Protection Program (PPP) loans to borrowers and deferrals or modifications available as encouraged by banking regulatory authorities and the CARES Act, have resulted in limited impact on the Company’s credit quality indicators, as is true of the industry generally. It is possible that the ongoing adverse effects of the pandemic may not be offset by future relief efforts, which could cause the outlook for economic conditions and levels and trends of past-due loans to significantly worsen, and require additions to the ACL.

The following tables present the balance in the ACL and the recorded investment in loans (excluding loans in process and deferred loan fees) based on portfolio segment as of September 30, 2021 and 2020, and activity in the ACL for the three- month periods ended September 30, 2021 and 2020:

	At period end and for the three months ended September 30, 2021
	Residential		Construction		Commercial
(dollars in thousands)	Real Estate		Real Estate		Real Estate		Consumer		Commercial		Total
Allowance for credit losses:
Balance, beginning of period	$	11,192	$	2,170	$	14,535	$	916	$	4,409	$	33,222
Provision (benefit) charged to expense		(528)		(125)		348		(72)		(302)		(679)
Losses charged off		(31)		—		—		(13)		—		(44)
Recoveries		1		—		—		42		1		44
Balance, end of period	$	10,634	$	2,045	$	14,883	$	873	$	4,108	$	32,543

	At period end and for the three months ended September 30, 2020
	Residential		Construction		Commercial
(dollars in thousands)	Real Estate		Real Estate		Real Estate		Consumer		Commercial		Total
Allowance for credit losses:
Balance, beginning of period prior to adoption of CECL	$	4,875	$	2,010	$	12,132	$	1,182	$	4,940	$	25,139
Impact of CECL adoption		3,521		(121)		3,856		1,065		1,012		9,333
Provision charged to expense		252		3		61		61		397		774
Losses charged off		(19)		—		—		(6)		(145)		(170)
Recoveries		—		—		1		3		4		8
Balance, end of period	$	8,629	$	1,892	$	16,050	$	2,305	$	6,208	$	35,084

-20-

The following tables present the balance in the allowance for off-balance sheet credit exposure based on portfolio segment as of September 30, 2021 and 2020, and activity in the allowance for the three- month periods ended September 30, 2021 and 2020:

	At period end and for the three months ended September 30, 2021
	Residential			Construction		Commercial
(dollars in thousands)	Real Estate		Real Estate		Real Estate		Consumer		Commercial		Total
Allowance for off-balance sheet credit exposure:
Balance, beginning of period	$	37	$	502	$	188	$	218	$	860	$	1,805
Provision (benefit) charged to expense		(3)		1,171		(18)		(160)		(616)		374
Balance, end of period	$	34	$	1,673	$	170	$	58	$	244	$	2,179

	At period end and for the three months ended September 30, 2020
	Residential			Construction		Commercial
(dollars in thousands)	Real Estate		Real Estate		Real Estate		Consumer		Commercial		Total
Allowance for off-balance sheet credit exposure:
Balance, beginning of period prior to CECL adoption	$	19	$	769	$	172	$	153	$	846	$	1,959
Impact of CECL adoption		35		(167)		95		197		108		268
Provision (benefit) charged to expense		5		166		32		4		19		226
Balance, end of period	$	59	$	768	$	299	$	354	$	973	$	2,453

Credit Quality Indicators. The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends among other factors. The Company analyzes loans individually by classifying the loans as to credit risk. This analysis is performed on all loans at origination, and is updated on a quarterly basis for loans risk rated Watch, Special Mention, Substandard, or Doubtful. In addition, lending relationships of $3 million or more, exclusive of any consumer or owner-occupied residential loan, are subject to an annual credit analysis which is prepared by the loan administration department and presented to a loan committee with appropriate lending authority. A sample of lending relationships in excess of $1 million (exclusive of single-family residential real estate loans) are subject to an independent loan review annually, in order to verify risk ratings. The Company uses the following definitions for risk ratings:

Watch – Loans classified as watch exhibit weaknesses that require more than usual monitoring. Issues may include deteriorating financial condition, payments made after due date but within 30 days, adverse industry conditions or management problems.

Special Mention – Loans classified as special mention exhibit signs of further deterioration but still generally make payments within 30 days. This is a transitional rating and loans should typically not be rated Special Mention for more than 12 months.

Substandard – Loans classified as substandard possess weaknesses that jeopardize the ultimate collection of the principal and interest outstanding. These loans exhibit continued financial losses, ongoing delinquency, overall poor financial condition, and insufficient collateral. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.

Doubtful – Loans classified as doubtful have all the weaknesses of substandard loans, and have deteriorated to the level that there is a high probability of substantial loss.

Loans not meeting the criteria above that are analyzed individually as part of the above described process are considered to be Pass rated loans.

A periodic review of selected credits (based on loan size and type) is conducted to identify loans with heightened risk or probable losses and to assign risk grades. The primary responsibility for this review rests with loan administration

-21-

personnel. This review is supplemented with periodic examinations of both selected credits and the credit review process by the Company’s internal audit function and applicable regulatory agencies. The information from these reviews assists management in the timely identification of problems and potential problems and provides a basis for deciding whether the credit continues to share similar risk characteristics with collectively evaluated loan pools, or whether credit losses for the loan should be evaluated on an individual loan basis.

The following table presents the credit risk profile of the Company’s loan portfolio (excluding loans in process and deferred loan fees) based on rating category and fiscal year of origination as of September 30, 2021. This table includes PCD loans, which are reported according to risk categorization after acquisition based on the Company’s standards for such classification:

(dollars in thousands)													Revolving
	2022		2021		2020		2019		2018		Prior		loans		Total
Residential Real Estate
Pass	$	83,975	$	348,844	$	165,830	$	38,339	$	30,770	$	82,928	$	5,513	$	756,199
Watch		86		326		70		407		—		801		—		1,690
Special Mention		—		—		—		—		—		—		—		—
Substandard		488		3,224		151		86		53		313		—		4,315
Doubtful		—		—		—		—		—		—		—		—
Total Residential Real Estate	$	84,549	$	352,394	$	166,051	$	38,832	$	30,823	$	84,042	$	5,513	$	762,204
Construction Real Estate
Pass	$	40,324	$	57,553	$	29,945	$	—	$	—	$	—	$	—	$	127,822
Watch		—		—		—		—		—		—		—		—
Special Mention		—		—		—		—		—		—		—		—
Substandard		—		124		—		—		—		—		—		124
Doubtful		—		—		—		—		—		—		—		—
Total Construction Real Estate	$	40,324	$	57,677	$	29,945	$	—	$	—	$	—	$	—	$	127,946
Commercial Real Estate
Pass	$	87,878	$	326,200	$	124,280	$	103,953	$	71,713	$	117,116	$	24,716	$	855,856
Watch		291		4,614		2,202		1,718		873		721		810		11,229
Special Mention		—		—		8,806		—		1,793		12,826		300		23,725
Substandard		3,307		4,733		1,129		269		27		101		69		9,635
Doubtful		—		—		—		836		—		—		—		836
Total Commercial Real Estate	$	91,476	$	335,547	$	136,417	$	106,776	$	74,406	$	130,764	$	25,895	$	901,281
Consumer
Pass	$	9,322	$	19,800	$	6,871	$	2,767	$	857	$	1,037	$	39,609	$	80,263
Watch		1		78		—		—		—		—		48		127
Special Mention		—		—		—		—		—		—		—		—
Substandard		—		31		14		2		—		30		—		77
Doubtful		—		—		—		—		—		—		—		—
Total Consumer	$	9,323	$	19,909	$	6,885	$	2,769	$	857	$	1,067	$	39,657	$	80,467
Commercial
Pass	$	29,032	$	158,480	$	28,738	$	16,176	$	4,934	$	13,914	$	155,439	$	406,713
Watch		429		1,350		262		53		7		—		458		2,559
Special Mention		—		—		—		—		—		—		—		—
Substandard		—		564		48		291		—		172		1,055		2,130
Doubtful		—		—		—		—		—		—		—		—
Total Commercial	$	29,461	$	160,394	$	29,048	$	16,520	$	4,941	$	14,086	$	156,952	$	411,402
Total Loans
Pass	$	250,531	$	910,877	$	355,664	$	161,235	$	108,274	$	214,995	$	225,277	$	2,226,853
Watch		807		6,368		2,534		2,178		880		1,522		1,316		15,605
Special Mention		—		—		8,806		—		1,793		12,826		300		23,725
Substandard		3,795		8,676		1,342		648		80		616		1,124		16,281
Doubtful		—		—		—		836		—		—		—		836
Total	$	255,133	$	925,921	$	368,346	$	164,897	$	111,027	$	229,959	$	228,017	$	2,283,300

At September 30, 2021, PCD loans comprised $12.1 million of credits rated “Pass”; none rated “Watch”; none rated “Special Mention”; $2.8 million of credits rated “Substandard”; and none rated “Doubtful”.

-22-

The following table presents the credit risk profile of the Company’s loan portfolio (excluding loans in process and deferred loan fees) based on rating category and fiscal year of origination as of June 30, 2021. This table includes PCD loans, which were reported according to risk categorization after acquisition based on the Company’s standards for such classification:

(dollars in thousands)													Revolving
	2021		2020		2019		2018		2017		Prior		loans		Total
Residential Real Estate
Pass	$	361,876	$	175,772	$	43,576	$	32,929	$	23,267	$	71,592	$	5,557	$	714,569
Watch		328		70		410		—		89		809		—		1,706
Special Mention		—		—		—		—		—		—		—		—
Substandard		4,288		89		—		92		—		472		—		4,941
Doubtful		—		—		—		—		—		—		—		—
Total Residential Real Estate	$	366,492	$	175,931	$	43,986	$	33,021	$	23,356	$	72,873	$	5,557	$	721,216
Construction Real Estate
Pass	$	88,371	$	45,866	$	—	$	—	$	—	$	—	$	—	$	134,237
Watch		—		—		—		—		—		—		—		—
Special Mention		—		—		—		—		—		—		—		—
Substandard		47		—		—		—		—		—		—		47
Doubtful		—		—		—		—		—		—		—		—
Total Construction Real Estate	$	88,418	$	45,866	$	—	$	—	$	—	$	—	$	—	$	134,284
Commercial Real Estate
Pass	$	351,732	$	147,670	$	104,746	$	75,967	$	70,927	$	61,194	$	23,699	$	835,935
Watch		4,456		2,365		9,502		1,377		726		10		810		19,246
Special Mention		—		8,806		—		1,793		12,826		—		300		23,725
Substandard		8,191		1,137		505		31		5		99		69		10,037
Doubtful		—		—		850		—		—		—		—		850
Total Commercial Real Estate	$	364,379	$	159,978	$	115,603	$	79,168	$	84,484	$	61,303	$	24,878	$	889,793
Consumer
Pass	$	23,858	$	8,626	$	3,597	$	1,126	$	534	$	650	$	39,071	$	77,462
Watch		80		—		—		—		—		—		48		128
Special Mention		—		—		—		—		—		—		—		—
Substandard		—		—		—		30		30		—		24		84
Doubtful		—		—		—		—		—		—		—		—
Total Consumer	$	23,938	$	8,626	$	3,597	$	1,156	$	564	$	650	$	39,143	$	77,674
Commercial
Pass	$	189,280	$	42,549	$	17,960	$	5,591	$	7,265	$	9,120	$	136,603	$	408,368
Watch		1,551		262		1,323		22		—		—		463		3,621
Special Mention		—		—		—		—		—		—		—		—
Substandard		594		81		305		—		176		—		979		2,135
Doubtful		—		—		—		—		—		—		—		—
Total Commercial	$	191,425	$	42,892	$	19,588	$	5,613	$	7,441	$	9,120	$	138,045	$	414,124
Total Loans
Pass	$	1,015,117	$	420,483	$	169,879	$	115,613	$	101,993	$	142,556	$	204,930	$	2,170,571
Watch		6,415		2,697		11,235		1,399		815		819		1,321		24,701
Special Mention		—		8,806		—		1,793		12,826		—		300		23,725
Substandard		13,120		1,307		810		153		211		571		1,072		17,244
Doubtful		—		—		850		—		—		—		—		850
Total	$	1,034,652	$	433,293	$	182,774	$	118,958	$	115,845	$	143,946	$	207,623	$	2,237,091

At June 30, 2021, PCD loans comprised $3.2 million of credits rated “Pass”; $9.0 million of credits rated “Watch”, none rated “Special Mention”, $2.7 million of credits rated “Substandard” and none rated “Doubtful”.

-23-

Past-due Loans. The following tables present the Company’s loan portfolio aging analysis (excluding loans in process and deferred loan fees) as of September 30, 2021 and June 30, 2021. These tables include PCD loans, which are reported according to aging analysis after acquisition based on the Company’s standards for such classification:

	September 30, 2021
					Greater Than								Greater Than 90
	30-59 Days		60-89 Days		90 Days		Total				Total Loans		Days Past Due
(dollars in thousands)	Past Due		Past Due		Past Due		Past Due		Current		Receivable		and Accruing
Real Estate Loans:
Residential	$	1,475	$	84	$	499	$	2,058	$	760,146	$	762,204	$	—
Construction		—		—		—		—		127,946		127,946		—
Commercial		598		671		—		1,269		900,012		901,281		—
Consumer loans		193		87		56		336		80,131		80,467		—
Commercial loans		283		43		817		1,143		410,259		411,402		—
Total loans	$	2,549	$	885	$	1,372	$	4,806	$	2,278,494	$	2,283,300	$	—

	June 30, 2021
					Greater Than								Greater Than 90
	30-59 Days		60-89 Days		90 Days		Total				Total Loans		Days Past Due
(dollars in thousands)	Past Due		Past Due		Past Due		Past Due		Current		Receivable		and Accruing
Real Estate Loans:
Residential	$	312	$	364	$	613	$	1,289	$	719,927	$	721,216	$	—
Construction		—		—		30		30		134,254		134,284		—
Commercial		363		—		374		737		889,056		889,793		—
Consumer loans		195		66		84		345		77,329		77,674		—
Commercial loans		368		939		110		1,417		412,707		414,124		—
Total loans	$	1,238	$	1,369	$	1,211	$	3,818	$	2,233,273	$	2,237,091	$	—

Under the CARES Act, financial institutions have the option to temporarily suspend certain requirements under U.S. GAAP related to TDRs for a limited period of time to account for the effects of COVID-19. Loans with such modifications in effect at September 30, 2021, included $23.7 million in loans reported as current in the above table, while none were reported as past due. Loans with such modifications in effect at June 30, 2021, included $23.9 million in loans reported as current in the above table, while none were reported as past due.

At September 30 and June 30, 2021 there were no PCD loans that were greater than 90 days past due.

Loans that experience insignificant payment delays and payment shortfalls generally are not adversely classified or determined to not share similar risk characteristics with collectively evaluated pools of loans for determination of the ACL estimate. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record and the amount of the shortfall in relation to the principal and interest owed. Significant payment delays or shortfalls may lead to a determination that a loan should be individually evaluated for estimated credit losses.

Collateral-dependent Loans. The following table presents the Company’s collateral dependent loans and related ACL at September 30, and June 30, 2021:

-24-

	September 30, 2021
	Amortized cost basis of
	loans determined to be		Related allowance
	collateral dependent		for credit losses
(dollars in thousands)
Residential real estate loans
1- to 4-family residential loans	$	889	$	217
Total loans	$	889	$	217

	June 30, 2021
	Amortized cost basis of
	loans determined to be		Related allowance
	collateral dependent		for credit losses
(dollars in thousands)
Residential real estate loans
1- to 4-family residential loans	$	895	$	223
Total loans	$	895	$	223

Nonaccrual Loans. The following table presents the Company’s amortized cost basis of nonaccrual loans segmented by class of loans at September 30, and June 30, 2021. The table excludes performing TDRs.

(dollars in thousands)	September 30, 2021		June 30, 2021
Residential real estate	$	3,059	$	3,235
Construction real estate		—		30
Commercial real estate		1,950		1,914
Consumer loans		65		100
Commercial loans		1,059		589
Total loans	$	6,133	$	5,868

At September 30, 2021, there were no nonaccrual loans individually evaluated for which no ACL was recorded. Interest income recognized on nonaccrual loans in the three- month periods ended September 30, 2021 and 2020, was immaterial.

Troubled Debt Restructurings. TDRs are evaluated to determine whether they share similar risk characteristics with collectively evaluated loan pools, or must be individually evaluated. These concessions typically result from our loss mitigation activities, and could include reductions in the interest rate, payment extensions, forgiveness of principal, forbearance, or other actions. In general, the Company’s loans that have been subject to classification as TDRs are the result of guidance under ASU No. 2011-02, which indicates that the Company may not consider the borrower’s effective borrowing rate on the old debt immediately before the restructuring in determining whether a concession has been granted. Certain TDRs are classified as nonperforming at the time of restructuring and typically are returned to performing status after considering the borrower’s sustained repayment performance for a reasonable period of at least six months.

-25-

During the three- month periods ended September 30, 2021 and 2020, certain loans modified were classified as TDRs. They are shown, segregated by class, in the table below:

	For the three-month periods ended
	September 30, 2021			September 30, 2020
	Number of	Recorded		Number of	Recorded
(dollars in thousands)	modifications	Investment		modifications	Investment
Residential real estate	1	$	151	1	$	98
Construction real estate	—		—	—		—
Commercial real estate	—		—	2		1,840
Consumer loans	—		—	—		—
Commercial loans	—		—	1		36
Total	1	$	151	4	$	1,974

Performing loans classified as TDRs and outstanding at September 30, and June 30, 2021, segregated by class, are shown in the table below. Nonperforming TDRs are shown as nonaccrual loans.

	September 30, 2021			June 30, 2021
	Number of	Recorded		Number of	Recorded
(dollars in thousands)	modifications	Investment		modifications	Investment
Residential real estate	3	$	1,133	1	$	895
Construction real estate	—		—	—		—
Commercial real estate	5		988	4		949
Consumer loans	—		—	—		—
Commercial loans	7		1,464	7		1,397
Total	15	$	3,585	12	$	3,241

Residential Real Estate Foreclosures. The Company may obtain physical possession of real estate collateralizing a residential mortgage loan or home equity loan via foreclosure or in-substance repossession. As of September 30 and June 30, 2021, the carrying value of foreclosed residential real estate properties as a result of obtaining physical possession was $635,000 and $622,000, respectively. In addition, as of September 30 and June 30, 2021, the Company had residential mortgage loans and home equity loans with a carrying value of $247,000 and $533,000, respectively, collateralized by residential real estate property for which formal foreclosure proceedings were in process.

Note 5:  Premises and Equipment

Following is a summary of premises and equipment:

(dollars in thousands)	September 30, 2021		June 30, 2021
Land	$	12,409	$	12,452
Buildings and improvements		58,786		56,422
Construction in progress		452		1,158
Furniture, fixtures, equipment and software		19,223		18,985
Automobiles		120		120
Operating leases ROU asset		2,735		2,770
		93,725		91,907
Less accumulated depreciation		28,472		27,830
	$	65,253	$	64,077

Leases. The Company elected certain relief options under ASU 2016-02, Leases (Topic 842), including the option not to recognize right of use asset and lease liabilities that arise from short-term leases (leases with terms of twelve months or

-26-

less). The Company has five leased properties and numerous office equipment lease agreements in which it is the lessee, with lease terms exceeding twelve months.

All of the Company’s leases are classified as operating leases. These operating leases are now included as a ROU asset in the premises and equipment line item on the Company’s consolidated balance sheets. The corresponding lease liability is included in the accounts payable and other liabilities line item on the Company’s consolidated balance sheets.

ASU 2016-02 also requires certain other accounting elections. The Company elected the short-term lease recognition exemption for all leases that qualify, meaning those with terms under twelve months. ROU assets or lease liabilities are not to be recognized for short-term leases. The calculated amount of the ROU assets and lease liabilities in the table below are impacted by the length of the lease term and the discount rate used to present value the minimum lease payments. The Company’s lease agreements often include one or more options to renew at the Company’s discretion. If at lease inception, the Company considers the exercising of a renewal option to be reasonably certain, the Company will include the extended term in the calculation of the ROU asset and lease liability. Regarding the discount rate, the ASU requires the use of the rate implicit in the lease whenever this rate is readily determinable. As this rate is rarely determinable, the Company utilizes its incremental borrowing rate at lease inception over a similar term. The discount rate utilized was 5%. The expected lease terms range from 18 months to 20 years.

	September 30, 2021		June 30, 2021
Consolidated Balance Sheet
Operating leases right of use asset	$	2,735	$	2,770
Operating leases liability	$	2,735	$	2,770

	Three months ended September 30,
	2021		2020
Consolidated Statement of Income
Operating lease costs classified as occupancy and equipment expense	$	100	$	72
(includes short-term lease costs)
Supplemental disclosures of cash flow information
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	85	$	67
ROU assets obtained in exchange for operating lease obligations:	$	—	$	—

At September 30, 2021, future expected lease payments for leases with terms exceeding one year were as follows:

(dollars in thousands)
2022	$	338
2023		272
2024		272
2025		272
2026		272
Thereafter		3,069
Future lease payments expected	$	4,495

The Company leases facilities it owns or portions of facilities it owns to other third parties. The Company has determined that all of these lease agreements, in terms of being the lessor, are classified as operating leases. For each of the three-month periods ended September 30, 2021 and 2020, income recognized from these lessor agreements was $75,000. Income from lessor agreements was included in net occupancy and equipment expense.

-27-

Note 6:  Deposits

Deposits are summarized as follows:

(dollars in thousands)	September 30, 2021		June 30, 2021
Non-interest bearing accounts	$	386,379	$	358,418
NOW accounts		938,555		925,280
Money market deposit accounts		253,827		253,614
Savings accounts		238,587		230,905
Certificates		554,347		562,586
Total Deposit Accounts	$	2,371,695	$	2,330,803

Note 7:  Earnings Per Share

The following table sets forth the computation of basic and diluted earnings per share:

	Three months ended
	September 30,
(dollars in thousands except per share data)	2021		2020
Net income	$	12,746	$	9,986
Less: distributed earnings allocated to participating securities		(6)		(4)
Less: undistributed earnings allocated to participating securities		(39)		(26)
Net income available to common shareholders	$	12,701	$	9,956
Weighted-average common shares outstanding, including participating securities		8,898,994		9,126,866
Less: weighted-average participating securities outstanding (restricted shares)		(31,845)		(27,260)
Denominator for basic earnings per share -
Weighted-average shares outstanding		8,867,149		9,099,606
Effect of dilutive securities stock options or awards		10,173		2,191
Denominator for diluted earnings per share		8,877,322		9,101,797
Basic earnings per share available to common stockholders	$	1.43	$	1.09
Diluted earnings per share available to common stockholders	$	1.43	$	1.09

Certain option and restricted stock awards were excluded from the computation of diluted earnings per share because they were anti-dilutive, based on the average market prices of the Company’s common stock for these periods. Outstanding options and shares of restricted stock totaling 0 and 50,500 were excluded from the computation of diluted earnings per share for the three-month periods ended September 30, 2021 and 2020, respectively.

Note 8: Income Taxes

The Company and its subsidiaries file income tax returns in the U.S. Federal jurisdiction and various states. The Company is no longer subject to federal and state examinations by tax authorities for tax years ending June 30, 2017 and before. The Company’s Missouri income tax returns for the fiscal years ending June 30, 2016 through 2018 are under audit by the Missouri Department of Revenue. The Company recognized no interest or penalties related to income taxes for the periods presented.

-28-

The Company’s income tax provision is comprised of the following components:

	For the three-month periods ended
(dollars in thousands)	September 30, 2021		September 30, 2020
Income taxes
Current	$	3,481	$	4,750
Deferred		7		(2,003)
Total income tax provision	$	3,488	$	2,747

The components of net deferred tax assets (included in other assets on the condensed consolidated balance sheet) are summarized as follows:

(dollars in thousands)	September 30, 2021		June 30, 2021
Deferred tax assets:
Provision for losses on loans	$	7,573	$	7,626
Accrued compensation and benefits		549		826
NOL carry forwards acquired		135		147
Unrealized loss on other real estate		183		180
Other		—		182
Total deferred tax assets		8,440		8,961
Deferred tax liabilities:
Purchase accounting adjustments		210		210
Depreciation		1,765		1,842
FHLB stock dividends		120		120
Prepaid expenses		209		283
Unrealized gain on available for sale securities		824		821
Other		830		1,193
Total deferred tax liabilities		3,958		4,469
Net deferred tax asset	$	4,482	$	4,492

As of September 30, 2021, the Company had approximately $706,000 and $0 in federal and state net operating loss carryforwards, respectively, which were acquired in the July 2009 acquisition of Southern Bank of Commerce, the February 2014 acquisition of Citizens State Bankshares of Bald Knob, Inc., and the April 2020 acquisition of Central Federal Savings and Loan. The amount reported is net of the IRC Sec. 382 limitation, or state equivalent, related to utilization of net operating loss carryforwards of acquired corporations. Unless otherwise utilized, the net operating losses will begin to expire in 2027.

A reconciliation of income tax expense at the statutory rate to the Company’s actual income tax expense is shown below:

	For the three-month periods ended
(dollars in thousands)	September 30, 2021		September 30, 2020
Tax at statutory rate	$	3,409	$	2,674
Increase (reduction) in taxes resulting from:
Nontaxable municipal income		(107)		(103)
State tax, net of Federal benefit		252		241
Cash surrender value of Bank-owned life insurance		(59)		(59)
Tax credit benefits		(11)		26
Other, net		4		(32)
Actual provision	$	3,488	$	2,747

For the three- month periods ended September 30, 2021 and 2020, income tax expense at the statutory rate was calculated using a 21% annual effective tax rate (AETR).

-29-

Tax credit benefits are recognized under the deferral method of accounting for investments in tax credits.

Note 9:  401(k) Retirement Plan

The Bank has a 401(k) retirement plan that covers substantially all eligible employees. The Bank made a “safe harbor” matching contributions to the Plan of up to 4% of eligible compensation, depending upon the percentage of eligible pay deferred into the plan by the employee, and also made additional, discretionary profit-sharing contributions for fiscal 2021. For fiscal 2022, the Company has maintained the safe harbor matching contribution of up to 4%, and expects to continue to make additional, discretionary profit-sharing contributions. During the three- month period ended September 30, 2021, retirement plan expenses recognized for the Plan totaled approximately $490,000, as compared to $457,000 for the same period of the prior fiscal year. Employee deferrals and safe harbor contributions are fully vested. Profit-sharing or other contributions vest over a period of five years.

Note 10:  Subordinated Debt

In March 2004, the Company established Southern Missouri Statutory Trust I as a statutory business trust, to issue Floating Rate Capital Securities (the “Trust Preferred Securities”). The securities mature in 2034, became redeemable after five years, and bear interest at a floating rate based on LIBOR. The securities represent undivided beneficial interests in the trust, which was established by the Company for the purpose of issuing the securities. The Trust Preferred Securities were sold in a private transaction exempt from registration under the Securities Act of 1933, as amended (the “Act”) and have not been registered under the Act. The securities may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements. Southern Missouri Statutory Trust I used the proceeds from the sale of the Trust Preferred Securities to purchase Junior Subordinated Debentures (the “Debentures”) of the Company which have terms identical to the Trust Preferred Securities. At September 30, 2021, the Debentures carried an interest rate of 2.87%. The balance of the Debentures outstanding was $7.2 million at September 30, and June 30, 2021. The Company used the net proceeds from the sale of the Debentures for working capital and investment in its subsidiaries.

In connection with its October 2013 acquisition of Ozarks Legacy Community Financial, Inc. (OLCF), the Company assumed $3.1 million in floating rate junior subordinated debt securities. The debt securities had been issued in June 2005 by OLCF in connection with the sale of trust preferred securities, bear interest at a floating rate based on LIBOR, are now redeemable at par, and mature in 2035. At September 30, 2021, the current rate was 2.57%. The carrying value of the debt securities was approximately $2.7 million at September 30, and June 30, 2021.

In connection with its August 2014 acquisition of Peoples Service Company, Inc. (PSC), the Company assumed $6.5 million in floating rate junior subordinated debt securities. The debt securities had been issued in 2005 by PSC’s subsidiary bank holding company, Peoples Banking Company, in connection with the sale of trust preferred securities, bear interest at a floating rate based on LIBOR, are now redeemable at par, and mature in 2035. At September 30, 2021, the current rate was 1.92%. The carrying value of the debt securities was approximately $5.3 million at September 30, and June 30, 2021.

The Company’s investment at a face amount of $505,000 in these trusts is included with Prepaid Expenses and Other Assets in the consolidated balance sheets, and is carried at a value of $459,000 at September 30, 2021.

Note 11:  Fair Value Measurements

ASC Topic 820, Fair Value Measurements, defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Topic 820 also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:

-30-

Level 1 Quoted prices in active markets for identical assets or liabilities

Level 2 Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in active markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities

Level 3 Unobservable inputs supported by little or no market activity that are significant to the fair value of the assets or liabilities

Recurring Measurements. The following table presents the fair value measurements recognized in the accompanying consolidated balance sheets measured at fair value on a recurring basis and the level within the fair value hierarchy in which the fair value measurements fall at September 30, and June 30, 2021:

	Fair Value Measurements at September 30, 2021, Using:
			Quoted Prices in
			Active Markets for		Significant Other		Significant
			Identical Assets		Observable Inputs		Unobservable Inputs
(dollars in thousands)	Fair Value		(Level 1)		(Level 2)		(Level 3)
Obligations of state and political subdivisions	$	46,869	$	—	$	46,869	$	—
Corporate obligations		18,832		—		18,832		—
Other securities		608		—		608		—
MBS and CMOs		143,100		—		143,100		—

	Fair Value Measurements at June 30, 2021, Using:
			Quoted Prices in
			Active Markets for		Significant Other		Significant
			Identical Assets		Observable Inputs		Unobservable Inputs
(dollars in thousands)	Fair Value		(Level 1)		(Level 2)		(Level 3)
Obligations of state and political subdivisions	$	47,696	$	—	$	47,696	$	—
Corporate obligations		20,311		—		20,311		—
Other securities		672		—		672		—
MBS and CMOs		138,341		—		138,341		—

Following is a description of the valuation methodologies and inputs used for assets measured at fair value on a recurring basis and recognized in the accompanying consolidated balance sheets, as well as the general classification of such assets pursuant to the valuation hierarchy.

Available-for-sale Securities. When quoted market prices are available in an active market, securities are classified within Level 1. If quoted market prices are not available, then fair values are estimated using pricing models, or quoted prices of securities with similar characteristics. For these securities, the Company obtains fair value measurements from an independent pricing service. The fair value measurements consider observable data that may include dealer quotes, market spreads, cash flows, the U.S. Treasury yield curve, live trading levels, trade execution data, market consensus prepayment speeds, credit information and the bond’s terms and conditions, among other things.  In certain cases where Level 1 or Level 2 inputs are not available, securities are classified within Level 3 of the hierarchy.

-31-

Nonrecurring Measurements. The following tables present the fair value measurement of assets measured at fair value on a nonrecurring basis and the level within the ASC 820 fair value hierarchy in which the fair value measurements fell at September 30, and June 30, 2021:

	Fair Value Measurements at September 30, 2021, Using:
			Quoted Prices in
			Active Markets for		Significant Other		Significant
			Identical Assets		Observable Inputs		Unobservable Inputs
(dollars in thousands)	Fair Value		(Level 1)		(Level 2)		(Level 3)
Foreclosed and repossessed assets held for sale	$	144	$	—	$	—	$	144

	Fair Value Measurements at June 30, 2021, Using:
			Quoted Prices in
			Active Markets for		Significant Other		Significant
			Identical Assets		Observable Inputs		Unobservable Inputs
(dollars in thousands)	Fair Value		(Level 1)		(Level 2)		(Level 3)
Foreclosed and repossessed assets held for sale	$	280	$	—	$	—	$	280

The following table presents losses recognized on assets measured on a non-recurring basis for the three-month periods ended September 30, 2021 and 2020:

	For the three months ended
(dollars in thousands)	September 30, 2021		September 30, 2020
Foreclosed and repossessed assets held for sale	$	(28)	$	(36)
Total losses on assets measured on a non-recurring basis	$	(28)	$	(36)

The following is a description of valuation methodologies and inputs used for assets measured at fair value on a nonrecurring basis and recognized in the accompanying consolidated balance sheets, as well as the general classification of such assets and liabilities pursuant to the valuation hierarchy. For assets classified within Level 3 of fair value hierarchy, the process used to develop the reported fair value process is described below.

Foreclosed and Repossessed Assets Held for Sale. Foreclosed and repossessed assets held for sale are valued at the time the loan is foreclosed upon or collateral is repossessed and the asset is transferred to foreclosed or repossessed assets held for sale. The value of the asset is based on third party or internal appraisals, less estimated costs to sell and appropriate discounts, if any. The appraisals are generally discounted based on current and expected market conditions that may impact the sale or value of the asset and management’s knowledge and experience with similar assets. Such discounts typically may be significant and result in a Level 3 classification of the inputs for determining fair value of these assets. Foreclosed and repossessed assets held for sale are continually evaluated for additional impairment and are adjusted accordingly if impairment is identified.

-32-

Unobservable (Level 3) Inputs. The following table presents quantitative information about unobservable inputs used in recurring and nonrecurring Level 3 fair value measurements.

					Range
	Fair value at		Valuation	Unobservable	of		Weighted-average
(dollars in thousands)	September 30, 2021		technique	inputs	inputs applied		inputs applied
Nonrecurring Measurements
Foreclosed and repossessed assets	$	144	Third party appraisal	Marketability discount	8.0% - 51.0	%	24.4	%

					Range
	Fair value at		Valuation	Unobservable	of		Weighted-average
(dollars in thousands)	June 30, 2021		technique	inputs	inputs applied		inputs applied
Nonrecurring Measurements
Foreclosed and repossessed assets	$	280	Third party appraisal	Marketability discount	7.2% - 80.6	%	37.1	%

Fair Value of Financial Instruments. The following table presents estimated fair values of the Company’s financial instruments not reported at fair value and the level within the fair value hierarchy in which the fair value measurements fell at September 30 and June 30, 2021.

	September 30, 2021
			Quoted Prices
			in Active				Significant
			Markets for		Significant Other		Unobservable
	Carrying		Identical Assets		Observable Inputs		Inputs
(dollars in thousands)	Amount		(Level 1)		(Level 2)		(Level 3)
Financial assets
Cash and cash equivalents	$	111,402	$	111,402	$	—	$	—
Interest-bearing time deposits		980		—		980		—
Stock in FHLB		5,425		—		5,425		—
Stock in Federal Reserve Bank of St. Louis		5,031		—		5,031		—
Loans receivable, net		2,249,478		—		—		2,265,086
Accrued interest receivable		11,203		—		11,203		—
Financial liabilities
Deposits		2,371,695		1,817,346		—		556,397
Advances from FHLB		46,522		—		47,419		—
Accrued interest payable		731		—		731		—
Subordinated debt		15,268		—		—		16,045
Unrecognized financial instruments (net of contract amount)
Commitments to originate loans		—		—		—		—
Letters of credit		—		—		—		—
Lines of credit		—		—		—		—

-33-

	June 30, 2021
			Quoted Prices
			in Active				Significant
			Markets for		Significant Other		Unobservable
	Carrying		Identical Assets		Observable Inputs		Inputs
(dollars in thousands)	Amount		(Level 1)		(Level 2)		(Level 3)
Financial assets
Cash and cash equivalents	$	123,592	$	123,592	$	—	$	—
Interest-bearing time deposits		979		—		979		—
Stock in FHLB		5,873		—		5,873		—
Stock in Federal Reserve Bank of St. Louis		5,031		—		5,031		—
Loans receivable, net		2,200,244		—		—		2,218,762
Accrued interest receivable		10,079		—		10,079		—
Financial liabilities
Deposits		2,330,803		1,768,217		—		565,123
Advances from FHLB		57,529		—		58,587		—
Accrued interest payable		779		—		779		—
Subordinated debt		15,243		—		—		15,468
Unrecognized financial instruments (net of contract amount)
Commitments to originate loans		—		—		—		—
Letters of credit		—		—		—		—
Lines of credit		—		—		—		—

Note 12: Business Combinations

On September 28, 2021 the Company announced the signing of an agreement and plan of merger whereby Fortune Financial Corporation (”Fortune”), and its wholly owned subsidiary, FortuneBank (“FB”), will be acquired by the Company in a stock and cash transaction valued at approximately $29.9 million. At June 30, 2021, Fortune held consolidated assets of $253.7 million, loans, net of allowance, of $209.3 million, and deposits of $214.5 million. The transaction is expected to close late in the first quarter of calendar 2022, subject to satisfaction of customary closing conditions, including regulatory and Fortune shareholder approvals. The acquired financial institution is expected to be merged with and into Southern Bank shortly after or simultaneously with the acquisition of Fortune. For the three-month period ended September 30, 2021, the Company incurred $25,000 of third-party acquisition-related costs, included in noninterest expense in the Company’s consolidated statements of income.

On October 20, 2021, the Company announced that it has entered into a definitive agreement to acquire the Cairo, Illinois, branch of First National Bank, Oldham, South Dakota. The deal, which will eventually result in Southern Bank relocating its facility from its current location to the First National Bank location in Cairo, is expected to be completed by the end of the 2021 calendar year, subject to approval by regulatory bodies at the federal and state level. The Company views the acquisition and anticipated updates to the new facility as an expression of its continuing commitment to the Cairo community.

-34-

PART I:  Item 2:  Management’s Discussion and Analysis of Financial Condition and Results of Operations

SOUTHERN MISSOURI BANCORP, INC.

General

Southern Missouri Bancorp, Inc. (Southern Missouri or Company) is a Missouri corporation and owns all of the outstanding stock of Southern Bank (the Bank). The Company’s earnings are primarily dependent on the operations of the Bank. As a result, the following discussion relates primarily to the operations of the Bank. The Bank’s deposit accounts are generally insured up to a maximum of $250,000 by the Deposit Insurance Fund (DIF), which is administered by the Federal Deposit Insurance Corporation (FDIC). At September 30, 2021, the Bank operated from its headquarters, 47 full-service branch offices, and two limited-service branch offices. The Bank owns the office building and related land in which its headquarters are located, and 44 of its other branch offices. The remaining five branches are either leased or partially owned.

The significant accounting policies followed by Southern Missouri and its wholly owned subsidiaries for interim financial reporting are consistent with the accounting policies followed for annual financial reporting. All adjustments, which are of a normal recurring nature and are in the opinion of management necessary for a fair statement of the results for the periods reported, have been included in the accompanying consolidated condensed financial statements.

The consolidated balance sheet of the Company as of June 30, 2021, has been derived from the audited consolidated balance sheet of the Company as of that date. Certain information and note disclosures normally included in the Company’s annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. These consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Form 10 K annual report filed with the Securities and Exchange Commission.

Management’s discussion and analysis of financial condition and results of operations is intended to assist in understanding the financial condition and results of operations of the Company. The information contained in this section should be read in conjunction with the unaudited consolidated financial statements and accompanying notes. The following discussion reviews the Company’s condensed consolidated financial condition at September 30, 2021, and results of operations for the three-month periods ended September 30, 2021 and 2020.

Forward Looking Statements

This document contains statements about the Company and its subsidiaries which we believe are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements may include, without limitation, statements with respect to anticipated future operating and financial performance, growth opportunities, interest rates, cost savings and funding advantages expected or anticipated to be realized by management. Words such as “may,” “could,” “should,” “would,” “believe,” “anticipate,” “estimate,” “expect,” “intend,” “plan” and similar expressions are intended to identify these forward-looking statements. Forward-looking statements by the Company and its management are based on beliefs, plans, objectives, goals, expectations, anticipations, estimates and intentions of management and are not guarantees of future performance. The important factors we discuss below, as well as other factors discussed under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and identified in this filing and in our other filings with the SEC and those presented elsewhere by our management from time to time, could cause actual results to differ materially from those indicated by the forward-looking statements made in this document:

● potential adverse impacts to the economic conditions in the Company’s local market areas, other markets where the Company has lending relationships, or other aspects of the Company’s business operations or financial markets, generally, resulting from the ongoing COVID-19 pandemic and any governmental or societal responses thereto;

-35-

● expected cost savings, synergies and other benefits from our merger and acquisition activities, including our ongoing and recently completed acquisitions, might not be realized within the anticipated time frames, to the extent anticipated, or at all, and costs or difficulties relating to integration matters, including but not limited to customer and employee retention, might be greater than expected;

● the strength of the United States economy in general and the strength of the local economies in which we conduct operations;

● fluctuations in interest rates and in real estate values;

● monetary and fiscal policies of the Board of Governors of the Federal Reserve System (the “Federal Reserve Board”) and the U.S. Government and other governmental initiatives affecting the financial services industry;

● the risks of lending and investing activities, including changes in the level and direction of loan delinquencies and write-offs and changes in estimates of the adequacy of the allowance for credit losses;

● our ability to access cost-effective funding;

● the timely development of and acceptance of our new products and services and the perceived overall value of these products and services by users, including the features, pricing and quality compared to competitors’ products and services;

● fluctuations in real estate values and both residential and commercial real estate markets, as well as agricultural business conditions;

● demand for loans and deposits in our market area;

● legislative or regulatory changes that adversely affect our business;

● changes in accounting principles, policies, or guidelines;

● results of examinations of us by our regulators, including the possibility that our regulators may, among other things, require us to increase our reserve for loan losses or to write-down assets;

● the impact of technological changes; and

● our success at managing the risks involved in the foregoing.

The Company disclaims any obligation to update or revise any forward-looking statements based on the occurrence of future events, the receipt of new information, or otherwise.

Critical Accounting Policies

Accounting principles generally accepted in the United States of America are complex and require management to apply significant judgments to various accounting, reporting and disclosure matters. Management of the Company must use assumptions and estimates to apply these principles where actual measurement is not possible or practical. For a complete discussion of the Company’s significant accounting policies, see “Notes to the Consolidated Financial Statements” in the Company’s 2021 Annual Report on Form 10-k. Certain policies are considered critical because they are highly dependent upon subjective or complex judgments, assumptions and estimates. Changes in such estimates may have a significant impact on the financial statements. Management has reviewed the application of these policies with the Audit Committee of the Company’s Board of Directors. For a discussion of applying critical accounting policies, see “Critical Accounting Policies” beginning on page 52 in the Company’s 2021 Annual Report.

COVID-19 Pandemic Response

Southern Missouri remains committed to serving our communities in this difficult time, and to the safety of our team members and customers.

-36-

General operating conditions. Beginning Monday, March 23, 2020, the Company closed its lobbies to access except by appointment, and encouraged customers to utilize our online, mobile, drive-thru, or integrated teller machines (ITMs) for service when possible. The Company began re-opening lobbies on Monday, May 4, 2020, subject to guidance by state and local authorities. At times, some facilities were again closed to the public for a short period of time due to unavailability of team members complying with quarantine orders from local health authorities, although these instances are notably reduced in recent months. From the initial onset of the pandemic in March, 2020, the Company has worked to increase our telework capabilities, and we have had as many as 10% of our team members working remotely during the month of October, 2021, either on a regular or rotating basis. No team members have been furloughed, and no furloughs are anticipated. While continuing to encourage safety, the Company has relaxed restrictions on business travel, although some training events or conferences our team members would typically have attended have remained in online format. The operations of the Company’s internal controls have not been significantly impacted by changes in our work environment.

SBA Paycheck Protection Program Lending. In the first and second rounds of funding made available through the Small Business Administration’s Paycheck Protection Program (PPP), the Company originated just over 3,200 loans totaling $197.2 million through the program’s expiration May 31, 2021. The Company has made substantial progress in processing and receiving approval from the SBA for applications by borrowers for forgiveness, and as of October 31, 2021, total PPP loans outstanding were reduced to $21.8 million.

Deferrals and modifications. In the months following the onset of the pandemic, the Company adhered to regulatory guidance encouraging financial institutions to work with borrowers affected by the pandemic to defer or temporarily modify payment arrangements. Under the CARES Act and subsequent legislation, in instances where the borrower was otherwise current and performing prior to the pandemic, the Company was permitted the option of temporarily suspending certain requirements under U.S. GAAP related to troubled debt restructurings (TDRs). As of June 30, 2020, the Company had provided such relief for approximately 900 loans totaling $380.2 million. As of June 30, 2021, the number of such modifications were reduced to six loans with balances totaling $23.9 million, and as of September 30, 20201, four loans with balances totaling $23.7 million remained under modified payment terms and are now considered a “special mention” status credit in regards to classification. For more information regarding these modifications, see discussion included at “Allowance for Credit Loss Activity.”

Executive Summary

Our results of operations depend primarily on our net interest margin, which is directly impacted by the interest rate environment. The net interest margin represents interest income earned on interest-earning assets (primarily real estate loans, commercial and agricultural loans, and the investment portfolio), less interest expense paid on interest-bearing liabilities (primarily interest-bearing transaction accounts, certificates of deposit, savings and money market deposit accounts, and borrowed funds), as a percentage of average interest-earning assets. Net interest margin is directly impacted by the spread between long-term interest rates and short-term interest rates, as our interest-earning assets, particularly those with initial terms to maturity or repricing greater than one year, generally price off longer term rates while our interest-bearing liabilities generally price off shorter term interest rates. This difference in longer term and shorter term interest rates is often referred to as the steepness of the yield curve. A steep yield curve – in which the difference in interest rates between short term and long term periods is relatively large – could be beneficial to our net interest income, as the interest rate spread between our interest-earning assets and interest-bearing liabilities would be larger. Conversely, a flat or flattening yield curve, in which the difference in rates between short term and long term periods is relatively small or shrinking, or an inverted yield curve, in which short term rates exceed long term rates, could have an adverse impact on our net interest income, as our interest rate spread could decrease.

Our results of operations may also be affected significantly by general and local economic and competitive conditions, particularly those with respect to changes in market interest rates, government policies and actions of regulatory authorities.

During the first three months of fiscal 2022, total assets increased by $38.0 million. The increase was primarily attributable to an increase in loans, net of the allowance for credit losses (ACL), partially offset by a decrease in cash and cash equivalents. Cash equivalents and time deposits decreased by a combined $12.2 million; AFS securities increased

-37-

$2.4 million; and loans, net of the ACL, increased $49.2 million. Liabilities increased $28.2 million, as deposits increased $40.9 million and advances from the Federal Home Loan Bank (FHLB) decreased $11.0 million. Equity increased $9.8 million, attributable primarily to earnings retained after cash dividends paid, partially offset by repurchases of the Company’s common stock.

Net income for the first three months of fiscal 2022 was $12.7 million, an increase of $2.8 million, or 27.6% as compared to the same period of the prior fiscal year. Compared to the year-ago period, the Company’s increase in net income was the result of an increase in net interest income and a negative provision for credit losses (PCL), as compared to a charge in the same period of the prior year, partially offset by increases in noninterest expense and provision for income taxes, and a decrease in noninterest income. Diluted net income was $1.43 per common share for the first three months of fiscal 2022, as compared to $1.09 per common share for the same period of the prior fiscal year. For the first three months of fiscal 2022, as compared to the same period of the prior fiscal year, net interest income increased $3.6 million, or 16.2%; PCL swung from a charge of $1.0 million to a recovery of $305,000; noninterest income decreased $426,000, or 8.6%; noninterest expense increased $1.0 million, or 7.2%; and provision for income tax increased $741,000, or 27.0%. For more information see “Results of Operations.”

Interest rates during the first three months of fiscal 2022 remained historically low. After steepening somewhat in early calendar year 2021, the curve flattened from mid-March through early August, and then again steepened through September 30. At September 30, 2021, as compared to June 30, 2021, the yield on two-year treasuries increased from 0.25% to 0.28%; the yield on five-year treasuries increased from 0.87% to 0.98%; the yield on ten-year treasuries increased from 1.45% to 1.52%; and the yield on 30-year treasuries increased from 2.06% to 2.08%. The spread between two- and ten-year treasuries was between 100 to 120 basis points for most of the current period, down about 40 basis points from the recent highs from March through May 2021, but still higher than any other period since early 2017.

As compared to the first three months of the prior fiscal year, our average yield on earning assets decreased by five basis points, reflecting a larger contribution to our average interest-earning asset balances of lower-yielding cash deposits and available-for-sale investments, along with downward repricing of these assets in the current market. Partially offsetting these factors was a higher yield on our loan portfolio, as we recognized deferred origination fees as PPP loans were repaid through the SBA forgiveness process. Excluding the recognition of PPP fees, the Company would have reported reduced loan yields compared to the same quarter of the prior fiscal year. Our cost of interest-bearing liabilities decreased by 38 basis points, as the Company continued to offer reduced rates on nonmaturity accounts and maturing time deposits. Time deposits and wholesale funding, which are relatively high cost sources of funding, declined as a percentage of our funding base. Lower market rates continued to reflect the policy of the Federal Reserve’s Open Market Committee (FOMC), which has held short term borrower rates near zero since March 2020, as the FOMC reacted to reduced economic activity at the outset of the COVID-19 pandemic (see “Results of Operations: Comparison of the three-month periods ended September 30, 2021 and 2020 – Net Interest Income”). The continued overall low level of market interest rates is concerning, as our asset yields may continue to decrease, while the Company’s ability to significantly reduce its cost of funds further may be limited.

Net interest income increased $3.6 million, or 16.2%, in the first three months of the fiscal year, as compared to the same period of the prior year, as the Company saw an increase of 8.2% in average interest earning assets, combined with an increase of 28 basis points in the net interest margin. The increase was attributable in part to the accelerated accretion of deferred origination fees on PPP loans as we began to receive forgiveness payments from the SBA during the period. This acceleration added approximately $2.2 million to interest income, adding approximately 34 basis points to the net interest margin; in the same quarter a year ago, there was no comparable item. Accretion of deferred fees on PPP loans will decline in future periods. The accretion of discounts on acquired loans carried at fair value resulted in limited change to the net interest margin, as benefits attributable to the accretion of discounts on acquired loans (partially offset by the accretion of discounts on assumed time deposits) resulted in a contribution of six basis points to the net interest margin in the current period, roughly equal to the contribution in the year-ago period. The Company generally expects this component of net interest income to decline over time, although volatility may occur to the extent we have periodic resolutions of specific credits.

The Company’s net income is also affected by the level of its noninterest income and noninterest expenses. Noninterest income generally consists primarily of deposit account service charges, bank card interchange income, loan-related fees,

-38-

earnings on bank-owned life insurance, gains on sales of loans, and other general operating income. Noninterest expenses consist primarily of compensation and employee benefits, occupancy-related expenses, deposit insurance assessments, professional fees, advertising, postage and office expenses, insurance, the amortization of intangible assets, and other general operating expenses. During the three-month period ended September 30, 2021, noninterest income decreased $426,000, or 8.6%, as compared to the same period of the prior fiscal year, attributable primarily to reduced gains realized on sales of residential loans originated for that purpose and loan servicing income, partially offset by increases in deposit account service charges, bank card interchange income, and other income. Noninterest expense for the three-month period ended September 30, 2021, increased $1.0 million, or 7.2%, as compared to the same period of the prior fiscal year. The increase was attributable primarily to increases in compensation and benefits, occupancy expenses, data processing charges, and advertising.

We expect, over time, to continue to grow our assets through the origination and occasional purchase of loans, and purchases of investment securities. The primary funding for this asset growth is expected to come from retail deposits, brokered funding, and short- and long-term FHLB borrowings. We have grown and intend to continue to grow deposits by offering desirable deposit products for our current customers and by attracting new depository relationships. We will also continue to explore strategic expansion opportunities in market areas that we believe will be attractive to our business model.

Comparison of Financial Condition at September 30 and June 30, 2021

The Company experienced balance sheet growth in the first three months of fiscal 2022, with total assets of $2.7 billion at September 30, 2021, reflecting an increase of $38.0 million, or 1.4%, as compared to June 30, 2021. Growth primarily reflected an increase in net loans receivable, partially offset by a decrease in cash and cash equivalents.

Cash equivalents and time deposits were a combined $112.4 million at September 30, 2021, a decrease of $12.2 million, or 9.8%, as compared to June 30, 2021. The decrease was primarily a result of loan growth outpacing deposit growth during the period. AFS securities were $209.4 million at September 30, 2021, an increase of $2.4 million, or 1.2%, as compared to June 30, 2021.

Loans, net of the ACL, were $2.2 billion at September 30, 2021, an increase of $49.2 million, or 2.2%, as compared to June 30, 2021. Gross loans increased by $48.6 million, while the ACL attributable to outstanding loan balances decreased $679,000 reflecting our negative PCL and no net charge offs during the period. The increase in loan balances in the portfolio was primarily attributable to increases in residential and commercial real estate loans, partially offset by decreases in construction loan balances and commercial loans. Residential real estate loans increased due to growth in multifamily and 1- to 4-family residential lending. Commercial loan balances decreased primarily as a result of forgiveness of PPP loans, but this was partially offset by increases in agricultural operating lines and commercial and industrial loans. After declining by $36.6 million during the period, unpaid PPP loan balances were $26.4 million at September 30, 2021, while unrecognized deferred fee income on those loans was approximately $1.3 million. Management expects forgiveness payments to continue over the next few quarters. Loans anticipated to fund in the next 90 days totaled $181.1 million at September 30, 2021, as compared to $141.5 million at June 30, 2021, and $122.7 million at September 30, 2020.

Deposits were $2.4 billion at September 30, 2021, an increase of $40.9 million, or 1.8%, as compared to June 30, 2021. This increase primarily reflected an increase in non-interest bearing transaction accounts, interest-bearing transaction accounts, and savings accounts, partially offset by a decrease in certificates of deposit. The increase was net of a $9.6 million decrease in public unit funds, which totaled $316.8 million at September 30, 2021, while brokered deposits were unchanged, and included time deposits of $5.0 million and nonmaturity deposits of $20.1 million. Customers have held unusually high balances on deposit during the uncertain environment of recent periods, but the Company expects that some of the higher-than-normal balances may dissipate over the course of calendar year 2022. The average loan-to-deposit ratio for the first quarter of fiscal 2022 was 96.4%, as compared to 99.1% for the same period of the prior fiscal year.

FHLB advances were $46.5 million at September 30, 2021, a decrease of $11.0 million, or 19.1%, as compared to June 30, 2021, as the Company utilized cash to repay maturing term advances.

-39-

The Company’s stockholders’ equity was $293.3 million at September 30, 2021, an increase of $9.8 million, or 3.5%, as compared to June 30, 2021. The increase was attributable primarily to earnings retained after cash dividends paid, partially offset by repurchases of the Company’s common stock. During the three-month period ended September 30, 2021, the Company repurchased 26,607 common shares for $1.2 million, at an average price of $44.15.

Average Balance Sheet, Interest, and Average Yields and Rates for the Three-Month Periods Ended

September 30, 2021 and 2020

The table below presents certain information regarding our financial condition and net interest income for the three- month periods ended September 30, 2021 and 2020. The table presents the annualized average yield on interest-earning assets and the annualized average cost of interest-bearing liabilities. We derived the yields and costs by dividing annualized income or expense by the average balance of interest-earning assets and interest-bearing liabilities, respectively, for the periods shown. Yields on tax-exempt obligations were not computed on a tax equivalent basis.

	Three-month period ended							Three-month period ended
	September 30, 2021							September 30, 2020
	Average			Interest and		Yield/		Average			Interest and		Yield/
(Dollars in thousands)	Balance			Dividends		Cost (%)		Balance			Dividends		Cost (%)
Interest-earning assets:
Mortgage loans (1)	$	1,785,719			22,653	5.07			1,623,073			20,392	5.03
Other loans (1)		476,376			5,041	4.23			539,052			5,515	4.09
Total net loans		2,262,095			27,694	4.90			2,162,125			25,907	4.79
Mortgage-backed securities		135,431			578	1.71			119,029			534	1.79
Investment securities (2)		77,133			528	2.74			62,506			490	3.14
Other interest-earning assets		83,697			60	0.29			19,768			41	0.83
TOTAL INTEREST- EARNING ASSETS (1)		2,558,356			28,860	4.51			2,363,428			26,972	4.56
Other noninterest-earning assets (3)		171,505			—				174,574			—
TOTAL ASSETS	$	2,729,861		$	28,860			$	2,538,002		$	26,972
Interest-bearing liabilities:
Savings accounts	$	236,073			151	0.25			185,278			146	0.32
NOW accounts		939,649			1,155	0.49			784,444			1,248	0.64
Money market accounts		252,182			177	0.28			233,476			263	0.45
Certificates of deposit		558,119			1,333	0.96			662,438			2,733	1.65
TOTAL INTEREST- BEARING DEPOSITS		1,986,023			2,816	0.57			1,865,636			4,390	0.94
Borrowings:
Securities sold under agreements to repurchase
FHLB advances		54,701			276	2.02			70,272			380	2.16
Note payable		—			—	—			—			—	—
Junior subordinated debt		15,256			130	3.40			15,155			138	3.63
TOTAL INTEREST- BEARING LIABILITIES		2,055,980			3,222	0.63			1,951,063			4,908	1.01
Noninterest-bearing demand deposits		359,717			—				316,996			—
Other liabilities		25,593			—				14,673			—
TOTAL LIABILITIES		2,441,290			3,222				2,282,732			4,908
Stockholders’ equity		288,571			—				255,270			—
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	2,729,861		$	3,222			$	2,538,002		$	4,908
Net interest income				$	25,638						$	22,064
Interest rate spread (4)						3.88	%						3.55	%
Net interest margin (5)						4.01	%						3.73	%
Ratio of average interest-earning assets to average interest-bearing liabilities		124.43	%						121.14	%

(1) Calculated net of deferred loan fees, loan discounts and loans-in-process. Non-accrual loans are not included in average loans.

(2) Includes FHLB and Federal Reserve Bank of St. Louis membership stock and related cash dividends.

(3) Includes average balances for fixed assets and BOLI of $65.2 million and $43.9 million, respectively, for the three-month period ended September 30, 2021, as compared to $65.1 million and $43.5 million, respectively, for the same period of the prior fiscal year.

(4) Interest rate spread represents the difference between the average rate on interest-earning assets and the average cost of interest-bearing liabilities.

(5) Net interest margin represents annualized net interest income divided by average interest-earning assets.

-40-

Rate/Volume Analysis

The following table sets forth the effects of changing rates and volumes on the Company’s net interest income for the three-month period ended September 30, 2021, compared to the three-month period ended September 30, 2020. Information is provided with respect to (i) effects on interest income and expense attributable to changes in volume (changes in volume multiplied by the prior rate), (ii) effects on interest income and expense attributable to change in rate (changes in rate multiplied by prior volume), and (iii) changes in rate/volume (change in rate multiplied by change in volume).

	Three-month period ended September 30, 2021
	Compared to three-month period ended September 30, 2020
	Increase (Decrease) Due to
					Rate/
(Dollars in thousands)	Rate		Volume		Volume		Net
Interest-earning assets:
Loans receivable (1)	$	563	$	1,198	$	26	$	1,787
Mortgage-backed securities		(26)		74		(4)		44
Investment securities (2)		(62)		115		(15)		38
Other interest-earning deposits		(27)		133		(87)		19
Total net change in income on interest-earning assets		448		1,520		(80)		1,888
Interest-bearing liabilities:
Deposits		(1,561)		(122)		109		(1,574)
FHLB advances		(25)		(84)		5		(104)
Subordinated debt		(9)		1		—		(8)
Total net change in expense on interest-bearing liabilities		(1,595)		(205)		114		(1,686)
Net change in net interest income	$	2,043	$	1,725	$	(194)	$	3,574

(1) Does not include interest on loans placed on nonaccrual status.

(2) Does not include dividends earned on equity securities.

Results of Operations – Comparison of the three-month periods ended September 30, 2021 and 2020

General. Net income for the three-month period ended September 30, 2021, was $12.7 million, an increase of $2.8 million, or 27.6%, as compared to the same period of the prior fiscal year. The increase was attributable to increases in net interest income and a negative PCL in the current period, as compared to a charge in the year ago period, partially offset by increases in noninterest expense and provision for income tax, and a decrease in noninterest income.

For the three-month period ended September 30, 2021, basic and fully-diluted net income per share available to common shareholders was $1.43 under both measures, as compared to $1.09 under both measures for the same period of the prior fiscal year, which represented increases of $0.34, or 31.2% under both measures. Our annualized return on average assets for the three-month period ended September 30, 2021, was 1.87%, as compared to 1.57% for the same period of the prior fiscal year. Our return on average common stockholders’ equity for the three-month period ended September 30, 2021, was 17.7%, as compared to 15.6% in the same period of the prior fiscal year.

Net Interest Income. Net interest income for the three-month period ended September 30, 2021, was $25.6 million, an increase of $3.6 million, or 16.2%, as compared to the same period of the prior fiscal year. The increase was attributable to an 8.2% increase in the average balance of interest-earning assets, combined with an increase in net interest margin to 4.01% in the current three-month period, from 3.73% in the same period a year ago. As a material amount of PPP loans were forgiven, and therefore repaid ahead of their scheduled maturity, the Company recognized accelerated accretion of interest income from deferred origination fees on these loans. In the current quarter, this component of interest income totaled $2.2 million, adding 34 basis points to the net interest margin, with no comparable item in the year ago period. In the linked quarter, ended June 30, 2021, accelerated accretion of deferred origination fees on PPP loans totaled $1.3

-41-

million, adding 20 basis points to the net interest margin. Accretion of deferred origination fees on these loans will decline in future periods, as the amount of outstanding PPP loans and related deferred origination fees has been reduced.

Loan discount accretion and deposit premium amortization related to the Company’s August 2014 acquisition of Peoples Bank of the Ozarks, the June 2017 acquisition of Capaha Bank, the February 2018 acquisition of Southern Missouri Bank of Marshfield, the November 2018 acquisition of First Commercial Bank, and the May 2020 acquisition of Central Federal Savings & Loan Association resulted in $376,000 in net interest income for the three-month period ended September 30, 2021, as compared to $339,000 in net interest income for the same period a year ago. The Company generally expects this component of net interest income to decline over time, although volatility may occur to the extent we have periodic resolutions of specific loans. Combined, this component of net interest income contributed six basis points to net interest margin in the three-month period ended September 30, 2021, as compared to a contribution of six basis points in the same period of the prior fiscal year, and a seven basis point contribution in the linked quarter, ended June 30, 2021, when net interest margin was 3.74%.

For the three-month period ended September 30, 2021, our net interest rate spread was 3.88%, as compared to 3.55% in the year-ago period. The increase in net interest rate spread, compared to the same period a year ago, resulted from a 38 basis point decrease in the average cost of interest-bearing liabilities, partially offset by a five basis point decrease in the average yield on interest-earning assets.

Interest Income. Total interest income for the three-month period ended September 30, 2021, was $28.9 million, an increase of $1.9 million, or 7.0%, as compared to the same period of the prior fiscal year. The increase was attributed to an 8.2% increase in the average balance of interest-earning assets, partially offset by a five basis point decrease in the average yield earned on interest-earning assets, as compared to the same period of the prior fiscal year. Increased average interest-earning balances were attributable primarily to growth in the loan portfolio, while average investment balances increased at a faster pace, and average cash and equivalent balances increased at a substantial rate, accounting for an unusually significant percentage of overall interest-earning asset growth. The decrease in the average yield on interest-earning assets was attributable to the composition of our average interest-earning asset balances shifting to include a higher proportion of cash and cash equivalents and investment securities, loans originated and renewed at lower market yields, adjustable-rate loans which re-priced at lower rates, lower reinvestment yields available for the AFS securities portfolio, and lower yields on cash and cash equivalents, partially offset by the accelerated accretion of a substantial amount of interest income from deferred origination fees on PPP loans.

Interest Expense. Total interest expense for the three-month period ended September 30, 2021, was $3.2 million, a decrease of $1.7 million, or 34.4%, as compared to the same period of the prior fiscal year. The decrease was attributable to a 38 basis point decrease in the average cost of interest-bearing liabilities, partially offset by a 5.4% increase in the average balance of interest-bearing liabilities, as compared to the same period of the prior fiscal year. The decrease in the average cost of interest-bearing liabilities was attributable primarily to the Company’s reduction in rates offered on certificates of deposit and nonmaturity accounts, and a decline in the percentage of our interest-bearing liabilities comprised of time deposits and wholesale funding. Increased average interest-bearing balances were attributable primarily to increases in interest-bearing transaction accounts, savings accounts, and money market deposit accounts, partially offset by lower certificate of deposit balances and FHLB balances.

Provision for Credit Losses. The provision for credit losses for the three-month period ended September 30, 2021, was a credit of $305,000, as compared to a charge of $1.0 million in the same period of the prior fiscal year. The negative provision in the current period was due to a $679,000 reduction in the Company’s required ACL on outstanding loan balances, partially offset by a $374,000 increase in the Company’s required ACL for off-balance sheet credit exposure. The Company assesses that the economic outlook has remained relatively steady as compared to the quarter ended June 30, 2021, though uncertainty remains. As a percentage of average loans outstanding, the negative provision for credit losses in the current three-month period represented a recovery of 0.05% (annualized), while the Company recorded no net charge offs during the period. During the same period of the prior fiscal year, the provision represented a charge of 0.19% (annualized), while the Company recorded net charge offs of 0.03% (annualized). (See “Critical Accounting Policies”, “Allowance for Credit Loss Activity” and “Nonperforming Assets”).

-42-

Noninterest Income. Noninterest income for the three-month period ended September 30, 2021, was $4.5 million, a decrease of $426,000, or 8.6%, as compared to the same period of the prior fiscal year. In the current period, decreases in gains realized on the sale of residential real estate loans originated for that purpose and loan servicing income were partially offset by increases in deposit account service charges, bank card interchange income, and other income. Origination of residential real estate loans for sale on the secondary market was down 69% as compared to the year ago period, as both refinancing and purchase activity declined, resulting in a decrease in both gains on sale of these loans and recognition of new mortgage servicing rights. Approximately one-fifth of the decline was due to the Company’s decision to retain for its portfolio some mortgage loans that were fully underwritten and documented for sale on the secondary market, due to its liquidity position. Deposit service charges increased primarily due to an increase in NSF activity as compared to the year ago period. Bank card interchange income increased due to a 12.3% increase in the number of bank card transactions and a 17.7% increase in bank card dollar volume, as compared to the same quarter a year ago. Other income increased as the Company recorded a $137,000 net gain on the sale of multiple properties acquired as bank facilities via acquisition, but no longer utilized for that purpose.

Noninterest Expense. Noninterest expense for the three-month period ended September 30, 2021, was $14.2 million, an increase of $1.0 million, or 7.2%, as compared to the same period of the prior fiscal year. The increase was attributable primarily to compensation and benefits, occupancy expenses, data processing charges, and advertising. The increase in compensation and benefits as compared to the prior year period primarily reflected standard increases in compensation and benefits over the prior year. Occupancy expenses increased due in part to remodeled or relocated facilities, an additional location, new ATM and ITM installations, and other equipment purchases. The increase in data processing charges reflects a change from a below-trend expense level in the year-ago period due to timing differences. The increase in advertising expense reflects a return to planned levels of expenditures following reduced activity in the year-ago period. The efficiency ratio for the three-month period ended September 30, 2021, was 47.2%, as compared to 49.1% in the same period of the prior fiscal year, with the improvement attributable primarily to the current period’s increases in net interest income, while the increase in noninterest expenses was relatively contained.

Income Taxes. The income tax provision for the three-month period ended September 30, 2021, was $3.5 million, an increase of $741,000, or 27.0% as compared to the same period of the prior fiscal year. This was a result of higher pre-tax income, while the effective tax rate was little changed at 21.5%, as compared to 21.6% in the same period a year ago.

Allowance for Credit Loss Activity

The Company regularly reviews its ACL and makes adjustments to its balance based on management’s estimate of (1) the total expected losses included in the Company’s financial assets held at amortized cost, which is limited to the Company’s loan portfolio, and (2) any credit deterioration in the Company’s available-for-sale securities as of the balance sheet date. The Company holds no securities classified as held-to-maturity.

Although the Company maintains its ACL at a level that it considers sufficient to provide for losses, there can be no assurance that future losses will not exceed internal estimates. In addition, the amount of the ACL is subject to review by regulatory agencies, which can order the Company to record additional allowances. The required ACL has been estimated based upon the guidelines in ASC Topic 326, Financial Instruments – Credit Losses, following the July 1, 2020 adoption of ASU 2016 13, also known as the current expected credit loss, or CECL, standard.

The estimate involves consideration of quantitative and qualitative factors relevant to the loans as segmented by the Company, and is based on an evaluation, at the reporting date, of historical loss experience, coupled with qualitative adjustments to address current economic conditions and credit quality, and reasonable and supportable forecasts. Specific qualitative factors considered include, but may not be limited to:

•Changes in lending policies and/or loan review system

•National, regional, and local economic trends and/or conditions

•Changes and/or trends in the nature, volume, or terms of the loan portfolio

•Experience, ability, and depth of lending management and staff

•Levels and/or trends of delinquent, non-accrual, problem assets, or charge offs and recoveries

•Concentrations of credit

-43-

•Changes in collateral values

•Agricultural economic conditions

•Risks from regulatory, legal, or competitive factors

The following table summarizes changes in the ACL over the three-month periods ended September 30, 2021 and 2020:

	For the three months ended
	September 30,
(dollars in thousands)	2021		2020
Balance, beginning of period	$	33,222	$	25,139
Impact of CECL adoption		—		9,333
Loans charged off:
Residential real estate		(31)		(19)
Construction		—		—
Commercial business		—		(145)
Commercial real estate		—		—
Consumer		(13)		(6)
Gross charged off loans		(44)		(170)
Recoveries of loans previously charged off:
Residential real estate		1		—
Construction		—		—
Commercial business		1		4
Commercial real estate		—		1
Consumer		42		3
Gross recoveries of charged off loans		44		8
Net charge offs		—		(162)
Provision charged to expense		(679)		774
Balance, end of period	$	32,543	$	35,084

Our ACL at September 30, 2021, totaled $32.5 million, representing 1.43% of gross loans and 530.6% of nonperforming loans, as compared to an ACL of $33.2 million, representing 1.49% of gross loans and 566.1% of nonperforming loans at June 30, 2021. The ACL also represents 1.44% of gross loans excluding PPP loans at September 30, 2021, as compared to 1.53% at June 30, 2021. For the three-month period ended September 30, 2021, the ACL was reduced by $679,000 and the allowance for off-balance sheet credit exposures was increased by $374,000, reflecting a negative PCL of $305,000, and no net charge offs.

The negative provision was based on the estimated required ACL, reflecting management’s estimate of the current expected credit losses in the Company’s loan portfolio at September 30, 2021. While the Company’s management believes the ACL at September 30, 2021, is adequate, based on that estimate, there remains significant uncertainty regarding the possible length of the COVID-19 pandemic and the aggregate impact that it will have on global and regional economies, including uncertainty regarding the effectiveness of recent efforts by the U.S. government and the Federal Reserve to respond to the pandemic and its economic impact. Management considered the impact of the pandemic on its consumer and business borrowers, particularly those business borrowers most affected by efforts to contain the pandemic, most notably including our borrowers in the hotel industry.

At our June 30, 2020, fiscal year end, prior to the adoption of ASU 2016-13, the Company’s ALLL was $25.1 million. Upon adoption of the standard, effective July 1, 2020, the Company increased the ACL by $8.9 million, related to the transition from the incurred loss model to the CECL ACL model, increased the ACL by $434,000 related to the transition from PCI to PCD methodology, and reduced retained earnings by $6.9 million, net of deferred taxes, through a one-time cumulative effect adjustment. For the three-month period ended September 30, 2020, the ACL increased by an additional $612,000 and the allowance for off-balance sheet credit exposures increased by $226,000, reflecting a charge to PCL of $1.0 million, and net charge offs of $162,000.

At September 30, 2021, the Bank also had accrued within other liabilities an allowance for off-balance sheet credit exposures of $2.2 million, as compared to $1.8 million at June 30, 2021. The increase reflects the component of the PCL attributable to off-balance sheet credit exposures noted above. This amount is maintained as a separate liability account to cover estimated credit losses associated with off-balance sheet credit instruments such as off-balance sheet loan commitments, standby letters of credit, and guarantees. The increase in the estimated allowance for off-balance sheet

-44-

credit exposures was primarily the result of a modest increase in unfunded commitments (unused lines of credit), and a shift in the total unfunded commitments from lending types with lower estimated credit losses, to types with higher estimated credit losses.

The following table sets forth the sum of the amounts of the ACL attributable to individual loans within each category, or the loan categories in general, and the percentage of the ACL that is attributable to each category, as of the reporting date. The table also reflects the percentage of loans in each category to the total loan portfolio, as of the reporting date.

			% of				% of
	ACL as of		total		ACL as of		total
	September 30, 2021		ACL		June 30, 2021		ALLL
Real Estate Loans:
Residential	$	10,634	32.7	%	$	11,192	33.7	%
Construction		2,045	6.3	%		2,170	6.5	%
Commercial		14,883	45.7	%		14,535	43.8	%
Consumer loans		873	2.7	%		916	2.8	%
Commercial loans		4,108	12.6	%		4,409	13.3	%
	$	32,543	100.0	%	$	33,222	100.0	%

For loans that do not exhibit similar risk characteristics, the Company evaluates the loan on an individual basis. Loans that are classified with an adverse internal credit rating or identified as troubled debt restructurings (TDRs) are most commonly considered for individual evaluation. The ACL for individually evaluated loans may be estimated based on the fair value of the underlying collateral, or based on the present value of expected cash flows.

In recent months, following regulatory guidance encouraging financial institutions to work with borrowers affected by the COVID-19 pandemic, the Company has granted payment deferrals or interest-only modifications for borrowers. For loans that were otherwise current and performing prior to the COVID-19 pandemic, but for which borrowers anticipated difficulties in the coming months due to the adverse impact of the pandemic, the Company elected to not apply requirements of U.S. GAAP related to TDRs, as allowed for in the CARES Act. At September 30, 2021, interest-only modifications were in effect for four loans totaling $23.7 million, as compared to six loans totaling $23.9 million so modified at June 30, 2021. Initially, the Company generally granted deferrals for three-month periods, while interest-only modifications were for six-month periods. Borrowers requesting additional modifications were generally reviewed for potential adverse credit classification. All loans remaining under a CARES Act modification not accounted for as TDRs at September 30, 2021, are to borrowers in the hotel industry, and have been downgraded to special mention credit status.

At September 30, 2021, the Company had loans of $17.1 million, or 0.75% of total loans, adversely classified ($16.3 million classified “substandard”; $836,000 classified “doubtful”), as compared to loans of $18.1 million, or 0.81% of total loans, adversely classified ($17.2 million classified “substandard”; $850,000 classified “doubtful”) at June 30, 2021, and $25.2 million, or 1.15% of total loans, adversely classified ($24.3 million classified “substandard”; $920,000 classified “doubtful”) at September 30, 2020. Classified loans were generally comprised of loans secured by commercial and residential real estate, and other commercial purpose collateral. All loans were classified due to concerns as to the borrowers’ ability to continue to generate sufficient cash flows to service the debt. Of our classified loans, the Company had ceased recognition of interest on loans with a carrying value of $4.3 million at September 30, 2021. As reported in Note 4 to the condensed consolidated financial statements, the Company’s total past due loans increased from $3.8 million at June 30, 2021, to $4.8 million at September 30, 2021. Total past due loans were $6.9 million at September 30, 2020.

-45-

Nonperforming Assets

The ratio of nonperforming assets to total assets and nonperforming loans to net loans receivable is another measure of asset quality. Nonperforming assets of the Company include nonaccruing loans, accruing loans delinquent/past maturity 90 days or more, and assets which have been acquired as a result of foreclosure or deed-in-lieu of foreclosure. The table below summarizes changes in the Company’s level of nonperforming assets over selected time periods:

	September 30, 2021		June 30, 2021		September 30, 2020
Nonaccruing loans:
Residential real estate	$	3,059	$	3,235	$	4,339
Construction		—		30		—
Commercial real estate		1,950		1,914		3,052
Consumer		65		100		255
Commercial business		1,059		589		1,129
Total		6,133		5,868		8,775
Loans 90 days past due accruing interest:
Residential real estate		—		—		—
Construction		—		—		—
Commercial real estate		—		—		—
Consumer		—		—		—
Commercial business		—		—		—
Total		—		—		—
Total nonperforming loans		6,133		5,868		8,775
Nonperforming investments
Foreclosed assets held for sale:
Real estate owned		2,240		2,227		2,466
Other nonperforming assets		8		23		9
Total nonperforming assets	$	8,381	$	8,118	$	11,250

At September 30, 2021, TDRs totaled $6.7 million, of which $3.1 million was considered nonperforming and included in the nonaccrual loan total above. The remaining $3.6 million in TDRs have complied with the modified terms for a reasonable period of time and are therefore considered by the Company to be accrual status loans. In general, these loans were subject to classification as TDRs at September 30, 2021, on the basis of guidance under ASU No. 2011-02, which indicates that the Company may not consider the borrower’s effective borrowing rate on the old debt immediately before the restructuring in determining whether a concession has been granted. At June 30, 2021, TDRs totaled $6.5 million, of which $3.2 million was considered nonperforming and included in the nonaccrual loan total above. The remaining $3.3 million in TDRs at June 30, 2021, had complied with the modified terms for a reasonable period of time and were therefore considered by the Company to be accrual status loans.

At September 30, 2021, nonperforming assets totaled $8.4 million, as compared to $8.1 million at June 30, 2021, and $11.3 million at September 30, 2020. The decrease in nonperforming assets from one year earlier was attributable primarily to a decrease in nonaccrual loans, as the Company resolved some nonaccrual loans which had been acquired in the First Commercial Bank acquisition in November 2018.

-46-

Liquidity Resources

The term “liquidity” refers to our ability to generate adequate amounts of cash to fund loan originations, loans purchases, deposit withdrawals and operating expenses. Our primary sources of funds include deposit growth, FHLB advances, brokered deposits, amortization and prepayment of loan principal and interest, investment maturities and sales, and funds provided by our operations. While the scheduled loan repayments and maturing investments are relatively predictable, deposit flows, FHLB advance redemptions, and loan and security prepayment rates are significantly influenced by factors outside of the Bank’s control, including interest rates, general and local economic conditions and competition in the marketplace. The Bank relies on FHLB advances and brokered deposits as additional sources for funding cash or liquidity needs.

The Company uses its liquid resources principally to satisfy its ongoing cash requirements, which include funding loan commitments, funding maturing certificates of deposit and deposit withdrawals, maintaining liquidity, funding maturing or called FHLB advances, purchasing investments, and meeting operating expenses.

At September 30, 2021, the Company had outstanding commitments and approvals to extend credit of approximately $541.5 million (including $326.1 million in unused lines of credit) in mortgage and non-mortgage loans. These commitments and approvals are expected to be funded through existing cash balances, cash flow from normal operations and, if needed, advances from the FHLB or the Federal Reserve’s discount window. At September 30, 2021, the Bank had pledged $730.2 million of its single-family residential and commercial real estate loan portfolios to the FHLB for available credit of approximately $414.7 million, of which $46.5 million was advanced, while $353,000 was encumbered in relation to residential real estate loans sold onto the secondary market through the FHLB, and none was utilized for the issuance of letters of credit to secure public unit deposits. The Bank has the ability to pledge several other loan portfolios, including, for example, its commercial and home equity loans, which could provide additional collateral for additional borrowings. In total, FHLB borrowings are generally limited to 45% of bank assets, or approximately $1.2 billion, subject to available collateral. Also, at September 30, 2021, the Bank had pledged a total of $291.9 million in loans secured by farmland and agricultural production loans to the Federal Reserve, providing access to $242.9 million in primary credit borrowings from the Federal Reserve’s discount window. Management believes its liquid resources will be sufficient to meet the Company’s liquidity needs.

Regulatory Capital

The Company and Bank are subject to various regulatory capital requirements administered by the Federal banking agencies. Failure to meet minimum capital requirements can result in certain mandatory - and possibly additional discretionary – actions by regulators that, if undertaken, could have a direct material effect on the Company’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and Bank must meet specific capital guidelines that involve quantitative measures of the Company and the Bank’s assets, liabilities, and certain off-balance sheet items as calculated under U.S. GAAP, regulatory reporting requirements and regulatory capital standards. The Company’s and Bank’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors. Furthermore, the Company’s and Bank’s regulators could require adjustments to regulatory capital not reflected in the condensed consolidated financial statements.

Quantitative measures established by regulatory capital standards to ensure capital adequacy require the Company and the Bank to maintain minimum amounts and ratios (set forth in the table below) of total capital, Tier 1 capital (as defined), and common equity Tier 1 capital (as defined) to risk-weighted assets (as defined) and of Tier 1 capital (as defined) to average total assets (as defined). Additionally, to make distributions or discretionary bonus payments, the Company and Bank must maintain a capital conservation buffer of 2.5% of risk-weighted assets. Management believes, as of September 30 and June 30, 2021, that the Company and the Bank met all capital adequacy requirements to which they are subject.

Effective January 1, 2020, depository institutions and depository institution holding companies that have less than $10 billion in total consolidated assets and meet other qualifying criteria, including a tier 1 leverage ratio of greater than 9 percent, are considered qualifying community banking organizations and are eligible to opt into an alternative, simplified

-47-

regulatory capital framework, which utilizes a newly-defined “Community Bank Leverage Ratio” (CBLR). The CBLR framework is an optional framework that is designed to reduce burden by removing the requirements for calculating and reporting risk-based capital ratios for qualifying community banking organizations that opt into the framework. Qualifying community banking organizations that elect to use the CBLR framework and that maintain a leverage ratio of greater than 9 percent are considered to have satisfied the risk-based and leverage capital requirements in the agencies’ generally applicable capital rule. In April 2020, the federal bank regulatory agencies announced the issuance of two interim final rules to provide temporary relief to community banking organizations, and adopted the final rule with no changes in October 2020. Under the rules, the CBLR requirement was a minimum of 8.0% for the remainder of calendar year 2020, and is 8.5% for calendar year 2021, and 9.0% thereafter. The Company and the Bank have not made an election to utilize the CBLR framework, but will continue to monitor the available option, and could do so in the future.

In August 2020, the Federal banking agencies adopted a final rule updating a December 2018 rule regarding the impact on regulatory capital of adoption of the CECL standard. The rule now allows institutions that adopt the CECL standard in 2020 a five-year transition period to recognize the estimated impact of adoption on regulatory capital. The Company and the Bank elected to exercise the option to recognize the impact of adoption over the five-year period.

As of September 30, 2021, the most recent notification from the Federal banking agencies categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized the Bank must maintain minimum total risk-based, Tier 1 risk-based, common equity Tier 1 risk-based, and Tier 1 leverage ratios as set forth in the table. There are no conditions or events since that notification that management believes have changed the Bank’s category.

-48-

The tables below summarize the Company’s and Bank’s actual and required regulatory capital at the dates indicated:

									To Be Well Capitalized
					For Capital				Under Prompt Corrective
	Actual				Adequacy Purposes				Action Provisions
As of September 30, 2021	Amount		Ratio		Amount		Ratio		Amount	Ratio
(dollars in thousands)
Total Capital (to Risk-Weighted Assets)
Consolidated	$	326,435	14.20	%	$	183,873	8.00	%	n/a	n/a
Southern Bank		317,450	13.89	%		182,828	8.00	%	228,535	10.00	%
Tier I Capital (to Risk-Weighted Assets)
Consolidated		297,705	12.95	%		137,904	6.00	%	n/a	n/a
Southern Bank		291,835	12.77	%		137,121	6.00	%	182,828	8.00	%
Tier I Capital (to Average Assets)
Consolidated		297,705	10.95	%		108,718	4.00	%	n/a	n/a
Southern Bank		291,835	10.72	%		108,938	4.00	%	114,268	5.00	%
Common Equity Tier I Capital (to Risk-Weighted Assets)
Consolidated		282,437	12.29	%		103,428	4.50	%	n/a	n/a
Southern Bank		291,835	12.77	%		102,841	4.50	%	148,548	6.50	%

									To Be Well Capitalized
					For Capital				Under Prompt Corrective
	Actual				Adequacy Purposes					Action Provisions
As of June 30, 2021	Amount		Ratio		Amount		Ratio		Amount		Ratio
(dollars in thousands)
Total Capital (to Risk-Weighted Assets)
Consolidated	$	315,490	14.18	%	$	177,938	8.00	%	n/a		n/a
Southern Bank		308,482	13.96	%		176,816	8.00	%	221,019		10.00	%
Tier I Capital (to Risk-Weighted Assets)
Consolidated		287,701	12.93	%		133,453	6.00	%	n/a		n/a
Southern Bank		282,638	12.79	%		132,612	6.00	%	176,816		8.00	%
Tier I Capital (to Average Assets)
Consolidated		287,701	10.61	%		108,505	4.00	%	n/a		n/a
Southern Bank		282,638	10.43	%		108,369	4.00	%	135,461		5.00	%
Common Equity Tier I Capital (to Risk-Weighted Assets)
Consolidated		272,458	12.25	%		100,090	4.50	%	n/a		n/a
Southern Bank		282,638	12.79	%		99,459	4.50	%	143,663		6.50	%

-49-

PART I: Item 3:  Quantitative and Qualitative Disclosures About Market Risk

SOUTHERN MISSOURI BANCORP, INC.

Asset and Liability Management and Market Risk

The goal of the Company’s asset/liability management strategy is to manage the interest rate sensitivity of both interest-earning assets and interest-bearing liabilities in order to maximize net interest income without exposing the Bank to an excessive level of interest rate risk. The Company employs various strategies intended to manage the potential effect that changing interest rates may have on future operating results. The primary asset/liability management strategy has been to focus on matching the anticipated re-pricing intervals of interest-earning assets and interest-bearing liabilities. At times, however, depending on the level of general interest rates, the relationship between long- and short-term interest rates, market conditions and competitive factors, the Company may determine to increase its interest rate risk position somewhat in order to maintain its net interest margin.

In an effort to manage the interest rate risk resulting from fixed rate lending, the Bank has utilized longer term FHLB advances (with maturities up to ten years), subject to early redemptions and fixed terms. Other elements of the Company’s current asset/liability strategy include (i) increasing originations of commercial business, commercial real estate, agricultural operating lines, and agricultural real estate loans, which typically provide higher yields and shorter repricing periods, but inherently increase credit risk; (ii) actively soliciting less rate-sensitive deposits, including aggressive use of the Company’s “rewards checking” product, and (iii) offering competitively-priced money market accounts and CDs with maturities of up to five years. The degree to which each segment of the strategy is achieved will affect profitability and exposure to interest rate risk.

The Company continues to originate long-term, fixed-rate residential loans. During the first three months of fiscal year 2021, fixed rate 1- to 4-family residential loan production totaled $63.6 million (of which $14.4 million was originated for sale into the secondary market), as compared to $83.3 million during the same period of the prior fiscal year (of which $48.2 million was originated for sale into the secondary market). At September 30, 2021, the fixed rate residential loan portfolio was $378.2 million with a weighted average maturity of 191 months, as compared to $279.3 million at September 30, 2020, with a weighted average maturity of 169 months. The Company originated $2.5 million in adjustable-rate 1- to 4-family residential loans during the three-month period ended September 30, 2021, as compared to $7.0 million during the same period of the prior fiscal year. At September 30, 2021, fixed rate loans with remaining maturities in excess of 10 years totaled $241.7 million, or 10.7% of net loans receivable, as compared to $152.7 million, or 7.1% of net loans receivable at September 30, 2020. The Company originated $96.8 million in fixed rate commercial and commercial real estate loans during the three-month period ended September 30, 2021, as compared to $52.7 million during the same period of the prior fiscal year. The Company also originated $9.2 million in adjustable rate commercial and commercial real estate loans during the three-month period ended September 30, 2021, as compared to $19.3 million during the same period of the prior fiscal year. At September 30, 2021, adjustable-rate home equity lines of credit decreased to $38.3 million, as compared to $42.5 million at September 30, 2020. At September 30, 2021, the Company’s investment portfolio had an expected weighted-average life of 4.6 years, compared to 3.2 years at September 30, 2020. Management continues to focus on customer retention, customer satisfaction, and offering new products to customers in order to increase the Company’s amount of less rate-sensitive deposit accounts.

-50-

Interest Rate Sensitivity Analysis

The following table sets forth as of September 30, 2021, management’s estimates of the projected changes in net portfolio value (“NPV”) in the event of 100, 200, and 300 basis point (“bp”) instantaneous and permanent increases, and 100, 200, and 300 basis point instantaneous and permanent decreases in market interest rates. Dollar amounts are expressed in thousands.

September 30, 2021
						NPV as Percentage of
	Net Portfolio					PV of Assets
Change in Rates	Value		Change		% Change	NPV Ratio	Change
	(Dollars in thousands)					(%)	(basis points)
+300 bp	$	258,704	$	(48,583)	(16)	10.13	(103)
+200 bp		284,351		(22,935)	(7)	10.86	(31)
+100 bp		306,145		(1,141)	(0)	11.40	23
0 bp		307,286		—	—	11.16	—
‑100 bp		341,626		34,339	11	12.18	102
‑200 bp		353,453		46,166	15	12.55	139
‑300 bp		359,174		51,888	17	12.72	156

June 30, 2021
						NPV as Percentage of
	Net Portfolio					PV of Assets
Change in Rates	Value		Change		% Change	NPV Ratio	Change
	(Dollars in thousands)					(%)	(basis points)
+300 bp	$	252,800	$	(46,274)	(15)	10.05	(96)
+200 bp		277,898		(21,176)	(7)	10.76	(25)
+100 bp		297,372		(1,702)	(1)	11.23	21
0 bp		299,074		—	—	11.01	—
‑100 bp		334,713		35,638	12	12.11	109
‑200 bp		347,520		48,446	16	12.51	149
‑300 bp		352,759		53,685	18	12.67	165

Computations of prospective effects of hypothetical interest rate changes are based on an internally generated model using actual maturity and repricing schedules for the Bank’s loans and deposits, and are based on numerous assumptions, including relative levels of market interest rates, loan repayments and deposit run-offs, and should not be relied upon as indicative of actual results. Further, the computations do not contemplate any actions the Bank may undertake in response to changes in interest rates.

Management cannot predict future interest rates or their effect on the Bank’s net present value (“NPV”) in the future. Certain shortcomings are inherent in the method of analysis presented in the computation of NPV. For example, although certain assets and liabilities may have similar maturities or periods to repricing, they may react in differing degrees to changes in market interest rates. Additionally, certain assets, such as adjustable-rate loans, have an initial fixed rate period typically from one to seven years and over the remaining life of the asset changes in the interest rate are restricted. In addition, the proportion of adjustable-rate loans in the Bank’s portfolios could decrease in future periods due to refinancing activity if market interest rates remain steady in the future. Further, in the event of a change in interest rates, prepayment and early withdrawal levels could deviate significantly from those assumed in the table. Finally, the ability of many borrowers to service their adjustable-rate debt may decrease in the event of an interest rate increase.

The Bank’s board of directors is responsible for reviewing the Bank’s asset and liability policies. The Bank’s Asset/Liability Committee meets monthly to review interest rate risk and trends, as well as liquidity and capital ratios and requirements. The Bank’s management is responsible for administering the policies and determinations of the board of directors with respect to the Bank’s asset and liability goals and strategies.

-51-

PART I: Item 4:  Controls and Procedures

SOUTHERN MISSOURI BANCORP, INC.

An evaluation of Southern Missouri’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities and Exchange Act of 1934, as amended, (the “Act”)) as of September 30, 2021 was carried out under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, and several other members of our senior management. The Chief Executive Officer and Chief Financial Officer concluded that, as of September 30, 2021, the Company’s disclosure controls and procedures were effective in ensuring that the information required to be disclosed by the Company in the reports it files or submits under the Act is (i) accumulated and communicated to management (including the Chief Executive and Financial Officer) in a timely manner, and (ii) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. There have been no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Act) that occurred during the quarter ended September 30, 2021, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

The Company does not expect that its disclosures and procedures will prevent all errors and all fraud. A control procedure, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control procedure are met. Because of the inherent limitations in all control procedures, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any control procedure also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control procedure, misstatements due to error or fraud may occur and not be detected.

-52-

PART II: Other Information

SOUTHERN MISSOURI BANCORP, INC.

Item 1:  Legal Proceedings

In the opinion of management, the Company is not a party to any pending claims or lawsuits that are expected to have a material effect on the Company’s financial condition or operations. Periodically, there have been various claims and lawsuits involving the Company mainly as a defendant, such as claims to enforce liens, condemnation proceedings on properties in which the Company holds security interests, claims involving the making and servicing of real property loans and other issues incident to the Bank’s business. Aside from such pending claims and lawsuits, which are incident to the conduct of the Company’s ordinary business, the Company is not a party to any material pending legal proceedings that would have a material effect on the financial condition or operations of the Company.

Item 1a:  Risk Factors

There have been no material changes to the risk factors set forth in Part I, Item 1A of the Company’s Annual Report on Form 10-K for the year ended June 30, 2021.

Item 2: Unregistered Sales of Equity Securities and Use of Proceeds

On May 20, 2021, the Company announced its intention to repurchase up to 445,000 shares of its common stock, or approximately 5.0% of its 8.9 million then-outstanding common shares. The shares will be purchased at prevailing market prices in the open market or in privately negotiated transactions, subject to availability and general market conditions. Repurchased shares will be held as treasury shares to be used for general corporate purposes.

The following table summarizes the Company’s stock repurchase activity for each month during the three months ended September 30, 2021.

				Total # of Shares
		Average		Purchased as Part of a	Maximum Number
	Total #	Price		Publicly	of Shares That
	of Shares	Paid Per		Announced	May Yet Be
	Purchased	Share		Program	Purchased (1)
07/01/21 - 07/31/21 period	—	$	—	—	438,569
08/01/21 - 08/31/21 period	4,559		44.44	4,559	434,010
09/01/21 - 09/30/21 period	22,048		44.09	22,048	411,962

(1) Represents the remaining shares available for purchase as of the last calendar day of the month shown.

Item 3:  Defaults upon Senior Securities

Not applicable

Item 4:  Mine Safety Disclosures

Not applicable

Item 5:  Other Information

None

-53-

Item 6:  Exhibits

Exhibit Number	Document
3.1(i)	Articles of Incorporation of the Registrant (filed as an exhibit to the Registrant’s Annual Report on Form 10-KSB for the fiscal year ended June 30, 1999 and incorporated herein by reference)
3.1(i)A	Amendment to Articles of Incorporation of Southern Missouri increasing the authorized capital stock of Southern Missouri (filed as an exhibit to Southern Missouri’s Current Report on Form 8-K filed on November 21, 2016 and incorporated herein by reference)
3.1(i)B	Amendment to Articles of Incorporation of Southern Missouri increasing the authorized capital stock of Southern Missouri (filed as an exhibit to Southern Missouri’s Current Report on Form 8-K filed on November 8, 2018 and incorporated herein by reference)
3.1(ii)	Certificate of Designation for the Registrant’s Senior Non-Cumulative Perpetual Preferred Stock, Series A (filed as an exhibit to the Registrant’s Current Report on Form 8-K filed on July 26, 2011 and incorporated herein by reference)
3.2	Bylaws of the Registrant (filed as an exhibit to the Registrant’s Current Report on Form 8-K filed on December 6, 2007 and incorporated herein by reference)
4	Description of Registrant’s Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934 (filed as an exhibit to the Registrant’s Annual Report on Form 10-K for the year ended June 30, 2020 and incorporated herein by reference).
10	Material Contracts:
	1.	Registrant’s 2017 Omnibus Incentive Plan (attached to the Registrant’s definitive proxy statement filed on September 26, 2017, and incorporated herein by reference)
	2.	2008 Equity Incentive Plan (attached to the Registrant’s definitive proxy statement filed on September 19, 2008 and incorporated herein by reference)
	3.	2003 Stock Option and Incentive Plan (attached to the Registrant’s definitive proxy statement filed on September 17, 2003 and incorporated herein by reference)
	4.	1994 Stock Option and Incentive Plan (attached to the Registrant’s definitive proxy statement filed on October 21, 1994 and incorporated herein by reference)
	5.	Management Recognition and Development Plan (attached to the Registrant’s definitive proxy statement filed on October 21, 1994 and incorporated herein by reference)
	6.	Employment Agreements
		(i)	Employment Agreement with Greg A. Steffens (filed as an exhibit to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2019 and incorporated herein by reference)
		(ii)	Amended and Restated Employment Agreement with Greg A. Steffens (filed as an exhibit to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2019, and incorporated herein by reference)
	7.	Director’s Retirement Agreements
		(i)	Director’s Retirement Agreement with Sammy A. Schalk (filed as an exhibit to the Registrant’s Quarterly Report on Form 10-QSB for the quarter ended December 31, 2000 and incorporated herein by reference)
		(ii)	Director’s Retirement Agreement with L. Douglas Bagby (filed as an exhibit to the Registrant’s Quarterly Report on Form 10-QSB for the quarter ended December 31, 2000 and incorporated herein by reference)
		(iii)	Director’s Retirement Agreement with Rebecca McLane Brooks (filed as an exhibit to the Registrant’s Quarterly Report on Form 10-QSB for the quarter ended December 31, 2004 and incorporated herein by reference)
		(iv)	Director’s Retirement Agreement with Charles R. Love (filed as an exhibit to the Registrant’s Quarterly Report on Form 10-QSB for the quarter ended December 31, 2004 and incorporated herein by reference)
		(v)	Director’s Retirement Agreement with Charles R. Moffitt (filed as an exhibit to the Registrant’s Quarterly Report on Form 10-QSB for the quarter ended December 31, 2004 and incorporated herein by reference)
		(vi)	Director’s Retirement Agreement with Dennis C. Robison (filed as an exhibit to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended December 31, 2008 and incorporated herein by reference)
		(vii)	Director’s Retirement Agreement with David J. Tooley (filed as an exhibit to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended December 31, 2011 and incorporated herein by reference)

-54-

		(viii)	Director’s Retirement Agreement with Todd E. Hensley (filed as an exhibit to the Registrant’s Annual Report on Form 10-K for the year ended June 30, 2015 and incorporated herein by reference)
	8.	Tax Sharing Agreement (filed as an exhibit to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2015 and incorporated herein by reference)
	9.	Change-in-Control Agreements
		(i)	Change-in-control Agreement with Kimberly A. Capps (filed as an exhibit to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2019 and incorporated herein by reference)
		(ii)	Change-in -Control Agreement with Matthew Funke (filed as an exhibit to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2019 and incorporated herein by reference)
		(iii)	Change-in-control Agreement with Lora L. Daves (filed as an exhibit to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2019 and incorporated herein by reference)
		(iv)	Change-in-control Agreement with Justin G. Cox (filed as an exhibit to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2019 and incorporated herein by reference)
		(v)	Change-in-control Agreement with Rick A. Windes (filed as an exhibit to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2019 and incorporated herein by reference)
		(vi)	Change-in -Control Agreement with Mark Hecker (filed as an exhibit to the Registrant’s Current Report on Form 8-K for the event on April 20, 2021 and incorporated herein by reference)
		(vii)	Change-in -Control Agreement with Brett Dorton (filed as an exhibit to the Registrant’s Current Report on Form 8-K for the event on April 20, 2021 and incorporated herein by reference)
		(viii)	Change-in -Control Agreement with Martin Weishaar (filed as an exhibit to the Registrant’s Current Report on Form 8-K for the event on April 20, 2021 and incorporated herein by reference)
10.1	Named Executive Officer Salary and Bonus Arrangements for 2021 (filed as an exhibit to Registrant’s Annual Report on Form 10-K for the year ended June 30, 2021 and incorporated herein by reference)
10.2	Director Fee Arrangements for 2021 (filed as an exhibit to Registrant’s Annual Report on Form 10-K for the year ended June 30, 2021 and incorporated herein by reference)
14	Code of Conduct and Ethics (filed as an exhibit to the Registrant’s Annual Report on Form 10-K for the year ended June 30, 2016 and incorporated herein by reference)
21	Subsidiaries of the Registrant (filed as an exhibit to Registrant’s Annual Report on Form 10-K for the year ended June 30, 2020 and incorporated herein by reference)
31.1	Rule 13a-14(a) Certification of Chief Executive Officer
31.2	Rule 13a-14(a) Certification of Chief Financial Officer
32	Certification pursuant to Section 906 of Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350)
101	Includes the following financial and related information from Southern Missouri Bancorp, Inc.’s Quarterly Report on Form 10-Q as of and for the quarter ended September 30, 2021, formatted in Inline Extensible Business Reporting Language (iXBRL): (1) the Consolidated Balance Sheets, (2) the Consolidated Statements of Income, (3) the Consolidated Statements of Comprehensive Income, (4) the Consolidated Statements of Changes in Stockholders’ Equity, (5) the Consolidated Statements of Cash Flows, and (6) Notes to Consolidated Financial Statements.
104	The cover page from this Quarterly Report on Form 10-Q, formatted in Inline XBRL.

-55-

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	SOUTHERN MISSOURI BANCORP, INC.
	Registrant
Date:  November 9, 2021	/s/ Greg A. Steffens
	Greg A. Steffens
	President & Chief Executive Officer
	(Principal Executive Officer)
Date:  November 9, 2021	/s/ Matthew T. Funke
	Matthew T. Funke
	Executive Vice President & Chief Financial Officer
	(Principal Financial and Accounting Officer)

-56-

EX-31.1

Exhibit 31.1

CERTIFICATION

I, Greg A. Steffens, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Southern Missouri Bancorp, Inc.

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a- 15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and

d) disclosed in this report any changes in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: November 9, 2021	By:	/s/ Greg A. Steffens
		Greg A. Steffens
		President & Chief Executive Officer
		(Principal Executive Officer)

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Matthew T. Funke, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Southern Missouri Bancorp, Inc.

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a- 15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and

d) disclosed in this report any changes in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: November 9, 2021	By:	/s/ Matthew T. Funke
		Matthew T. Funke
		Executive Vice President & Chief Financial Officer
		(Principal Financial Officer)

EX-32

Exhibit 32

CERTIFICATION

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, each of the undersigned hereby certifies in his capacity as an officer of Southern Missouri Bancorp, Inc. (the “Company”) that the quarterly report of the Company on Form 10-Q for the quarter ended September 30, 2021, fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934, as amended, and that the information contained in such report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods presented in the financial statements included in such report.

Date: November 9, 2021	By:	/s/ Greg A. Steffens
		Greg A. Steffens
		President & Chief Executive Officer
		(Principal Executive Officer)

Date: November 9, 2021	By:	/s/ Matthew T. Funke
		Matthew T. Funke
		Executive Vice President & Chief Financial Officer
		(Principal Financial Officer)

XML

Document and Entity Information - shares	3 Months Ended
	Sep. 30, 2021	Nov. 05, 2021
Cover [Abstract]
SEC Form	10-Q
Document Quarterly Report	true
Document Transition Report	false
Period End date	Sep. 30, 2021
Registrant CIK	0000916907
Entity File Number	0-23406
Registrant Name	SOUTHERN MISSOURI BANCORP, INC.
Entity Incorporation, State or Country Code	MO
Tax Identification Number (TIN)	43-1665523
Entity Address, Address Line One	2991 Oak Grove Road
Entity Address, City or Town	Poplar Bluff
Entity Address, State or Province	MO
Entity Address, Postal Zip Code	63901
City Area Code	573
Local Phone Number	778-1800
Title of 12(b) Security	Common
Trading Symbol	SMBC
Trading Exchange	NASDAQ
Current reporting status	Yes
Interactive Data Current	Yes
Filer Category	Accelerated Filer
Small Business	false
Emerging Growth Company	false
Shell Company	false
Number of common stock shares outstanding		8,888,091
Fiscal Year End	--06-30
Document Fiscal Year Focus	2022
Document Fiscal Period Focus	Q1
Amendment Flag	false

XML

CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Sep. 30, 2021	Jun. 30, 2021
Assets
Cash and cash equivalents	$ 111,402	$ 123,592
Interest-bearing time deposits	980	979
Available for sale securities	209,409	207,020
Stock in FHLB of Des Moines	5,425	5,873
Stock in Federal Reserve Bank of St. Louis	5,031	5,031
Loans receivable, net of ACL of $32,543 and $33,222 at September 30, 2021 and June 30, 2021, respectively	2,249,478	2,200,244
Accrued interest receivable	11,203	10,079
Premises and equipment, net	65,253	64,077
Bank owned life insurance - cash surrender value	44,099	43,817
Goodwill	14,089	14,089
Other intangible assets, net	6,779	7,129
Prepaid expenses and other assets	15,393	18,600
Total assets	2,738,541	2,700,530
Liabilities and Stockholders' Equity
Deposits	2,371,695	2,330,803
Advances from FHLB	46,522	57,529
Accounts payable and other liabilities	11,065	12,753
Accrued interest payable	731	779
Subordinated debt	15,268	15,243
Total liabilities	2,445,281	2,417,107
Commitments and contingencies
Common stock, $.01 par value; 25,000,000 shares authorized; 9,361,629 shares issued at September 30, 2021 and June 30, 2021	94	94
Additional paid-in capital	95,622	95,585
Retained earnings	211,104	200,140
Treasury stock of 483,038 and 456,431 shares at September 30, 2021 and June 30, 2021, respectively, at cost	(16,452)	(15,278)
Accumulated other comprehensive income	2,892	2,882
Total stockholders' equity	293,260	283,423
Total liabilities and stockholders' equity	$ 2,738,541	$ 2,700,530

XML

CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands	Sep. 30, 2021	Jun. 30, 2021
CONDENSED CONSOLIDATED BALANCE SHEETS
Loans and Leases Receivable, Allowance	$ 32,543	$ 33,222
Common Stock, Par or Stated Value Per Share	$ 0.01	$ 0.01
Common Stock, Shares Authorized	25,000,000	25,000,000
Common Stock, Shares, Issued	9,361,629	9,361,629
Treasury Stock	483,038	456,431

XML

CONDENSED CONSOLIDATED STATEMENTS OF INCOME - USD ($) $ in Thousands	3 Months Ended
	Sep. 30, 2021	Sep. 30, 2020
INTEREST INCOME:
Loans	$ 27,694	$ 25,907
Investment securities	528	490
Mortgage-backed securities	578	534
Other interest-earning assets	60	41
Total interest income	28,860	26,972
INTEREST EXPENSE:
Deposits	2,816	4,390
Advances from FHLB	276	380
Subordinated debt	130	138
Total interest expense	3,222	4,908
NET INTEREST INCOME	25,638	22,064
PROVISION FOR CREDIT LOSSES	(305)	1,000
NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES	25,943	21,064
NONINTEREST INCOME:
Deposit account charges and related fees	1,561	1,339
Bank card interchange income	951	830
Loan late charges	107	141
Loan servicing fees	154	310
Other loan fees	451	327
Net realized gains on sale of loans	369	1,206
Earnings on bank owned life insurance	281	280
Other income	641	508
Total noninterest income	4,515	4,941
NONINTEREST EXPENSE:
Compensation and benefits	8,199	7,720
Occupancy and equipment, net	2,113	1,970
Data processing expense	1,269	1,062
Telecommunications expense	320	315
Deposit insurance premiums	178	201
Legal and professional fees	234	198
Advertising	329	230
Postage and office supplies	195	193
Intangible amortization	338	380
Foreclosed property expenses/losses	31	50
Other operating expense	1,018	953
Total noninterest expense	14,224	13,272
INCOME BEFORE INCOME TAXES	16,234	12,733
INCOME TAXES	3,488	2,747
NET INCOME	$ 12,746	$ 9,986
Basic earnings per share	$ 1.43	$ 1.09
Diluted earnings per share	1.43	1.09
Dividends paid	$ 0.20	$ 0.15

XML

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($) $ in Thousands	3 Months Ended
	Sep. 30, 2021	Sep. 30, 2020
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Net Income	$ 12,746	$ 9,986
Other comprehensive income:
Unrealized gains on securities available-for-sale	13	179
Tax expense	(3)	(40)
Total other comprehensive income	10	139
Comprehensive income	$ 12,756	$ 10,125

XML

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY - USD ($) $ in Thousands	Common Stock	Additional Paid-in Capital	Retained Earnings Impact of adoption ASU 2016-13	Retained Earnings	Treasury Stock	Accumulated Other Comprehensive Income(Loss)	Impact of adoption ASU 2016-13	Total
Beginning Balance at Jun. 30, 2020	$ 93	$ 95,035	$ (7,151)	$ 165,709	$ (6,937)	$ 4,447	$ (7,151)	$ 258,347
Net Income				9,986				9,986
Change in unrealized gain on available for sale securities						139		139
Dividends paid on common stock				(1,369)				(1,369)
Stock option expense		23						23
Ending Balance at Sep. 30, 2020	93	95,058		167,175	(6,937)	4,586		259,975
Beginning Balance at Jun. 30, 2021	94	95,585		200,140	(15,278)	2,882		283,423
Net Income				12,746				12,746
Change in unrealized gain on available for sale securities						10		10
Dividends paid on common stock				(1,782)				(1,782)
Stock option expense		37						37
Treasury stock purchased					(1,174)			(1,174)
Ending Balance at Sep. 30, 2021	$ 94	$ 95,622		$ 211,104	$ (16,452)	$ 2,892		$ 293,260

XML

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Parenthetical) - $ / shares	3 Months Ended
	Sep. 30, 2021	Sep. 30, 2020
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Dividends paid on common stock	$ 0.20	$ 0.15

XML

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	3 Months Ended
	Sep. 30, 2021	Sep. 30, 2020
Cash Flows From Operating Activities:
Net Income	$ 12,746	$ 9,986
Items not requiring (providing) cash:
Depreciation	1,061	1,011
(Gain) Loss on disposal of fixed assets	(137)	26
Stock option and stock grant expense	37	23
Loss on sale/write-down of REO	22	36
Amortization of intangible assets	338	380
Accretion of purchase accounting adjustments	(341)	(280)
Increase in cash surrender value of bank owned life insurance (BOLI)	(281)	(281)
Provision for credit losses	(305)	1,000
Net amortization of premiums and discounts on securities	283	452
Originations of loans held for sale	(14,000)	(47,888)
Proceeds from sales of loans held for sale	14,444	45,300
Gain on sales of loans held for sale	(369)	(1,206)
Changes in:
Accrued interest receivable	(1,124)	(1,650)
Prepaid expenses and other assets	432	849
Accounts payable and other liabilities	1,439	(1,619)
Deferred income taxes	6	14
Accrued interest payable	(48)	(245)
Net cash provided by operating activities	14,203	5,908
Cash flows from investing activities:
Net increase in loans	(48,324)	(14,163)
Net change in interest-bearing deposits	(1)	(2)
Proceeds from maturities of available for sale securities	12,452	15,715
Net redemptions (purchases) of Federal Home Loan Bank stock	448	(335)
Net purchases of Federal Reserve Bank of St. Louis stock		(654)
Purchases of available-for-sale securities	(15,111)	(14,992)
Purchases of long-term investment	(83)
Purchases of premises and equipment	(3,063)	(453)
Investments in state & federal tax credits	(609)	(1,051)
Proceeds from sale of fixed assets	928	71
Proceeds from sale of foreclosed assets	38	129
Net cash used in investing activities	(53,325)	(15,735)
Cash flows from financing activities:
Net increase in demand deposits and savings accounts	49,139	10,311
Net decrease in certificates of deposits	(8,239)	(27,073)
Proceeds from Federal Home Loan Bank advances		34,800
Repayments of Federal Home Loan Bank advances	(11,012)	(19,212)
Purchase of treasury stock	(1,174)
Dividends paid on common stock	(1,782)	(1,369)
Net cash provided by (used in) financing activities	26,932	(2,543)
Decrease in cash and cash equivalents	(12,190)	(12,370)
Cash and cash equivalents at beginning of period	123,592	54,245
Cash and cash equivalents at end of period	111,402	41,875
Noncash investing and financing activities:
Conversion of loans to foreclosed real estate	58	69
Right of use assets obtained in exchange for lease obligations: Operating Leases	35	22
Cash paid during the period for:
Interest (net of interest credited)	484	678
Income taxes	$ 28	$ 1,793

XML

Basis of Presentation

3 Months Ended

Sep. 30, 2021

Basis of Presentation

Basis of Presentation

Note 1:  Basis of Presentation

The accompanying unaudited interim consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Securities and Exchange Commission (SEC) Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, all material adjustments (consisting only of normal recurring accruals) considered necessary for a fair presentation have been included. The condensed consolidated balance sheet of the Company as of June 30, 2021, has been derived from the audited consolidated balance sheet of the Company as of that date. Operating results for the three-month period ended September 30, 2021, are not necessarily indicative of the results that may be expected for the entire fiscal year. For additional information, refer to the audited consolidated financial statements included in the Company’s June 30, 2021 Form 10-K, which was filed with the SEC.

The accompanying condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation.

XML

Organization and Summary of Significant Accounting Policies

3 Months Ended

Sep. 30, 2021

Organization and Summary of Significant Accounting Policies

Organization and Summary of Significant Accounting Policies

Note 2:  Organization and Summary of Significant Accounting Policies

Organization. Southern Missouri Bancorp, Inc., a Missouri corporation (the Company) was organized in 1994 and is the parent company of Southern Bank (the Bank). Substantially all of the Company’s consolidated revenues are derived from the operations of the Bank, and the Bank represents substantially all of the Company’s consolidated assets and liabilities. SB Real Estate Investments, LLC is a wholly-owned subsidiary of the Bank formed to hold Southern Bank Real Estate Investments, LLC. Southern Bank Real Estate Investments, LLC is a real estate investment trust (REIT) which is controlled by SB Real Estate Investments, LLC, and has other preferred shareholders in order to meet the requirements to be a REIT. At September 30, 2021, assets of the REIT were approximately $1.1 billion, and consisted primarily of real estate loan participations acquired from the Bank.

The Bank is primarily engaged in providing a full range of banking and financial services to individuals and corporate customers in its market areas. The Bank and Company are subject to competition from other financial institutions. The Bank and Company are subject to the regulation of certain federal and state agencies and undergo periodic examinations by those regulatory authorities.

Basis of Financial Statement Presentation. The consolidated financial statements of the Company have been prepared in conformity with accounting principles generally accepted in the United States of America and general practices within the banking industry. In the normal course of business, the Company encounters two significant types of risk: economic and regulatory. Economic risk is comprised of interest rate risk, credit risk, and market risk. The Company is subject to interest rate risk to the degree that its interest-bearing liabilities reprice on a different basis than its interest-earning assets. Credit risk is the risk of default on the Company’s investment or loan portfolios resulting from the borrowers’ inability or unwillingness to make contractually required payments. Market risk reflects changes in the value of the investment portfolio, collateral underlying loans receivable, and the value of the Company’s investments in real estate.

Principles of Consolidation. The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated.

Use of Estimates. The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

On July 1, 2020, the Company adopted ASU 2016-13, Financial Instruments – Credit Losses, also known as the current expected credit loss (“CECL”) standard, which created material changes to the existing critical accounting policy that existed at June 30, 2020. Effective July 1, 2020, the significant accounting policy which was considered to be the most critical in preparing the Company’s consolidated financial statements is the determination of the allowance for credit losses (“ACL”) on loans.

Cash and Cash Equivalents. For purposes of reporting cash flows, cash and cash equivalents includes cash, due from depository institutions and interest-bearing deposits in other depository institutions with original maturities of three months or less. Interest-bearing deposits in other depository institutions were $76.4 million and $83.2 million at September 30 and June 30, 2021, respectively. The deposits are held in various commercial banks with a total of $1.7 million and $1.8 million exceeding the FDIC’s deposit insurance limits at September 30 and June 30, 2021, respectively, as well as at the Federal Reserve and the Federal Home Loan Bank of Des Moines and Chicago.

Interest-bearing Time Deposits. Interest bearing deposits in banks mature within seven years and are carried at cost.

Available for Sale Securities. Available for sale securities (“AFS”), which include any security for which the Company has no immediate plan to sell but which may be sold in the future, are carried at fair value. Unrealized gains and losses, net of tax, are reported in accumulated other comprehensive income, a component of stockholders’ equity. All securities have been classified as available for sale.

Premiums and discounts on debt securities are amortized or accreted as adjustments to income over the estimated life of the security using the level yield method. Realized gains or losses on the sale of securities is based on the specific identification method. The fair value of securities is based on quoted market prices or dealer quotes. If a quoted market price is not available, fair value is estimated using quoted market prices for similar securities.

The Company does not invest in collateralized mortgage obligations that are considered high risk.

For AFS securities with fair value less than amortized cost that management has no intent to sell and believes that it more likely than not will not be required to sell prior to recovery, only the credit loss component of the impairment is recognized in earnings, while the noncredit loss is recognized in accumulated other comprehensive income. The credit loss component recognized in earnings is identified as the amount of principal cash flows not expected to be received over the remaining term of the security as projected based on cash flow projections, and is recorded to the ACL, by a charge to provision for credit losses. Accrued interest receivable is excluded from the estimate of credit losses. Both the ACL and the adjustment to net income may be reversed if conditions change. However, if the Company intends to sell an impaired AFS security, or, if it is more likely than not the Company will be required to sell such a security before recovering its amortized cost basis, the entire impairment amount would be recognized in earnings with a corresponding adjustment to the security’s amortized cost basis. Because the security’s amortized cost basis is adjusted to fair value, there is no ACL in this situation.

At adoption of ASU 2016-13, no impairment on AFS securities was attributable to credit. The Company will evaluate impaired AFS securities at the individual level on a quarterly basis, and will consider factors including, but not limited to: the extent to which the fair value of the security is less than the amortized cost basis; adverse conditions specifically related to the security, an industry, or geographic area; the payment structure of the security and likelihood of the issuer to be able to make payments that may increase in the future; failure of the issuer to make scheduled interest or principal payments; any changes to the rating of the security by a rating agency; and the ability and intent to hold the security until maturity. A qualitative determination as to whether any portion of the impairment is attributable to credit risk is acceptable. There were no credit related factors underlying unrealized losses on AFS securities at September 30, 2021, or June 30, 2021.

Changes in the ACL are recorded as expense. Losses are charged against the ACL when management believes the uncollectability of an AFS debt security is confirmed or when either of the criteria regarding intent or requirement to sell is met.

Federal Reserve Bank and Federal Home Loan Bank Stock. The Bank is a member of the Federal Reserve and the Federal Home Loan Bank (FHLB) systems. Capital stock of the Federal Reserve and the FHLB is a required investment based upon a predetermined formula and is carried at cost.

Loans. Loans are generally stated at unpaid principal balances, less the allowance for credit losses, any net deferred loan origination fees, and unamortized premiums or discounts on purchased loans.

Interest on loans is accrued based upon the principal amount outstanding. The accrual of interest on loans is discontinued when, in management’s judgment, the collectability of interest or principal in the normal course of business is doubtful. The Company complies with regulatory guidance which indicates that loans should be placed in nonaccrual status when 90 days past due, unless the loan is both well-secured and in the process of collection. A loan that is “in the process of collection” may be subject to legal action or, in appropriate circumstances, through other collection efforts reasonably expected to result in repayment or restoration to current status in the near future. A loan is considered delinquent when a payment has not been made by the contractual due date. At September 30, 2021, some loans were modified under the terms of the Coronavirus Aid, Relief and Economic Security Act (the CARES Act), which provides that loans modified after March 1, 2020, due to the COVID-19 pandemic, and which were otherwise current at December 31, 2019, need not be accounted for as troubled debt restructurings (TDRs). While these loans may not have met the contractual due dates of payments under their previous terms, so long as they were compliant with the terms of the modification made under the CARES Act, they would not have been reported as delinquent at June 30, 2021 or September 30, 2021. See further disclosure in Note 4: Loans and Allowance for Credit Losses. Interest income previously accrued but not collected at the date a loan is placed on nonaccrual status is reversed against interest income. Cash receipts on a nonaccrual loan are applied to principal and interest in accordance with its contractual terms unless full payment of principal is not expected, in which case cash receipts, whether designated as principal or interest, are applied as a reduction of the carrying value of the loan. A nonaccrual loan is generally returned to accrual status when principal and interest payments are current, full collectability of principal and interest is reasonably assured, and a consistent record of performance has been demonstrated.

The ACL is a valuation account that is deducted from the loans’ amortized cost basis to present the net amount expected to be collected on the loans, and is established through provision for credit losses charged to current earnings. The ACL is increased by the provision for losses on loans charged to expense and reduced by loans charged off, net of recoveries. Loans are charged off in the period deemed uncollectible, based on management’s analysis of expected cash flows (for non-collateral dependent loans) or collateral value (for collateral-dependent loans). Subsequent recoveries of loans previously charged off, if any, are credited to the allowance when received.

Management estimates the ACL using relevant available information, from internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts. Adjustments may be made to historical loss information for differences identified in current loan-specific risk characteristics, such as differences in underwriting standards or terms; lending review systems; experience, ability, or depth of lending management and staff; portfolio growth and mix; delinquency levels and trends; as well as for changes in environmental conditions, such as changes in economic activity or employment, agricultural economic conditions, property values, or other relevant factors. The Company generally incorporates a reasonable and supportable forecast period of four quarters, and a four-quarter, straight-line reversion period to return to long-term historical averages.

The ACL is measured on a collective (pool) basis when similar risk characteristics exist. For loans that do not share general risk characteristics with the collectively evaluated pools, the Company estimates credit losses on an individual loan basis, and these loans are excluded from the collectively evaluated pools. An ACL for an individually evaluated loan is recorded when the amortized cost basis of the loan exceeds the discounted estimated cash flows using the loan’s initial effective interest rate or the fair value, less estimated costs to sell, of the collateral for certain collateral dependent loans. For the collectively evaluated pools, the Company segments the loan portfolio primarily by loan purpose and collateral into 24 pools, which are homogeneous groups of loans that possess similar loss potential characteristics. The Company primarily utilizes the discounted cash flow (“DCF”) methodology for measurement of the required ACL. For a limited number of pools with a relatively small balance of unpaid principal balance, the Company utilized the remaining life method. The DCF model implements probability of default (“PD”) and loss given default (“LGD”) calculations at the instrument level. PD and LGD are determined based on statistical analysis and correlation of historical losses with various economic factors over time. In general, the Company’s losses have not correlated well with economic factors,

and the Company has utilized peer data where more appropriate. The Company defines a default as an event of charge off, an adverse (substandard or worse) internal credit rating, becoming delinquent 90 days or more, or being placed on nonaccrual status. A PD/LGD estimate is applied to a projected model of the loan’s cashflow, including principal and interest payments, with consideration for prepayment speeds, principal curtailments, and recovery lag.

Subsequent to the July 1, 2020, adoption of ASU 2016-13, loans acquired in a business combination that have experienced more-than-insignificant deterioration in credit quality since origination are considered purchased credit deteriorated (“PCD”) loans. At the acquisition date, an estimate of expected credit losses is made for groups of PCD loans with similar risk characteristics and individual PCD loans without similar risk characteristics. This initial ACL is allocated to individual PCD loans and added to the purchase price or acquisition date fair values to establish the initial amortized cost basis of the PCD loans. As the initial ACL is added to the purchase price, there is no credit loss expense recognized upon acquisition of a PCD loan. Any difference between the unpaid principal balance of PCD loans and the amortized cost basis is considered to relate to non-credit factors and results in a discount or premium. Discounts and premiums are recognized through interest income on a level-yield method over the life of the loans.

Upon adoption of ASU 2016-13, the amortized cost basis of the PCD assets were adjusted to reflect the addition of $434,000 to the ACL. The remaining noncredit discount, based on the adjusted amortized cost basis, will be accreted into interest income at the effective interest rate as of July 1, 2020.

Loan fees and certain direct loan origination costs are deferred, and the net fee or cost is recognized as an adjustment to interest income using the interest method over the contractual life of the loans.

Off-Balance Sheet Credit Exposures. Off-balance sheet credit instruments include commitments to make loans, and commercial letters of credit, issued to meet customer financing needs. The Company’s exposure to credit loss in the event of non-performance by the other party to the financial instrument for off-balance sheet loan commitments is represented by the contractual amount of those instruments. Such financial instruments are recorded when they are funded. The ACL on off-balance sheet credit exposures is estimated by loan pool on a quarterly basis under the current CECL model using the same methodologies as portfolio loans, taking into consideration the likelihood that funding will occur and is included in other liabilities on the Company’s consolidated balance sheets. The Company records an ACL on off-balance sheet credit exposures, unless the commitments to extend credit are unconditionally cancelable. In prior periods the charge for credit loss expense for off-balance sheet credit exposures was included in other non-interest expense in the Company’s consolidated statements of income, whereas under updated regulatory accounting guidelines, that figure is combined with the provision for credit losses beginning July 1, 2020.

Foreclosed Real Estate. Real estate acquired by foreclosure or by deed in lieu of foreclosure is initially recorded at fair value less estimated selling costs, establishing a new cost basis. Costs for development and improvement of the property are capitalized.

Valuations are periodically performed by management, and an allowance for losses is established by a charge to operations if the carrying value of a property exceeds its estimated fair value, less estimated selling costs.

Loans to facilitate the sale of real estate acquired in foreclosure are discounted if made at less than market rates. Discounts are amortized over the fixed interest period of each loan using the interest method.

Premises and Equipment. Premises and equipment are stated at cost less accumulated depreciation and include expenditures for major betterments and renewals. Maintenance, repairs, and minor renewals are expensed as incurred. When property is retired or sold, the retired asset and related accumulated depreciation are removed from the accounts and the resulting gain or loss taken into income. The Company reviews property and equipment for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If such assets are considered to be impaired, the impairment loss recognized is measured by the amount by which the carrying amount exceeds the fair value of the assets.

Depreciation is computed by use of straight-line and accelerated methods over the estimated useful lives of the assets. Estimated lives are generally seven to forty years for premises, three to seven years for equipment, and three years for software.

Bank Owned Life Insurance. Bank owned life insurance policies are reflected in the consolidated balance sheets at the estimated cash surrender value. Changes in the cash surrender value of these policies, as well as a portion of the insurance proceeds received, are recorded in noninterest income in the consolidated statements of income.

Goodwill. The Company’s goodwill is evaluated annually for impairment or more frequently if impairment indicators are present. A qualitative assessment is performed to determine whether the existence of events or circumstances leads to a determination that it is more likely than not the fair value is less than the carrying amount, including goodwill. If, based on the evaluation, it is determined to be more likely than not that the fair value is less than the carrying value, then goodwill is tested further for impairment. If the implied fair value of goodwill is lower than its carrying amount, a goodwill impairment is indicated and goodwill is written down to its implied fair value. Subsequent increases in goodwill value are not recognized in the financial statements. As of June 30, 2021, there was no impairment indicated, based on a qualitative assessment of goodwill, which considered: the market value of the Company’s common stock, concentrations of credit; profitability; nonperforming assets; capital levels; and results of recent regulatory examinations. The Company believes there was no impairment of goodwill at September 30, 2021.

Intangible Assets. The Company’s intangible assets at September 30, 2021 included gross core deposit intangibles of $15.3 million with $10.4 million accumulated amortization, gross other identifiable intangibles of $3.8 million with accumulated amortization of $3.8 million, and mortgage servicing rights of $1.9 million. At June 30, 2021, the Company’s intangible assets included gross core deposit intangibles of $15.3 million with $10.1 million accumulated amortization, gross other identifiable intangibles of $3.8 million with accumulated amortization of $3.8 million, and mortgage servicing rights of $1.9 million. The Company’s core deposit intangible assets are being amortized using the straight line method, over periods ranging from five to seven years, with amortization expense expected to be approximately $1.0 million in the remainder of fiscal 2022, $1.4 million in fiscal 2023 and fiscal 2024, $807,000 in fiscal 2025, and $328,000 thereafter. As of June 30, 2021, there was no impairment indicated, and the Company believes there was no impairment of other intangible assets at September 30, 2021.

Income Taxes. The Company accounts for income taxes in accordance with income tax accounting guidance (ASC 740, Income Taxes). The income tax accounting guidance results in two components of income tax expense: current and deferred. Current income tax expense reflects taxes to be paid or refunded for the current period by applying the provisions of the enacted tax law to the taxable income or excess of deductions over revenues. The Company determines deferred income taxes using the liability (or balance sheet) method. Under this method, the net deferred tax asset or liability is based on the tax effects of the differences between the book and tax bases of assets and liabilities, and enacted changes in tax rates and laws are recognized in the period in which they occur.

Deferred income tax expense results from changes in deferred tax assets and liabilities between periods. Deferred tax assets are recognized if it is more likely than not, based on the technical merits, that the tax position will be realized or sustained upon examination. The term more likely than not means a likelihood of more than 50 percent; the terms examined and upon examination also include resolution of the related appeals or litigation processes, if any. A tax position that meets the more-likely-than-not recognition threshold is initially and subsequently measured as the largest amount of tax benefit that has a greater than 50 percent likelihood of being realized upon settlement with a taxing authority that has full knowledge of all relevant information. The determination of whether or not a tax position has met the more-likely-than-not recognition threshold considers the facts, circumstances, and information available at the reporting date and is subject to management’s judgment. Deferred tax assets are reduced by a valuation allowance if, based on the weight of evidence available, it is more likely than not that some portion or all of a deferred tax asset will not be realized.

The Company recognizes interest and penalties on income taxes as a component of income tax expense.

The Company files consolidated income tax returns with its subsidiaries, the Bank and SB Real Estate Investments, LLC, with a tax year ended June 30. Southern Bank Real Estate Investments, LLC files a separate REIT return for federal tax purposes, and also files state income tax returns with a tax year ended December 31.

Incentive Plans. The Company accounts for its Equity Incentive Plan (EIP), and Omnibus Incentive Plan (OIP) in accordance with ASC 718, “Share-Based Payment.” Compensation expense is based on the market price of the Company’s stock on the date the shares are granted and is recorded over the vesting period. The difference between the

grant-date fair value and the fair value on the date the shares are considered earned represents a tax benefit to the Company that is recorded as an adjustment to income tax expense.

Outside Directors’ Retirement. The Bank adopted a directors’ retirement plan in April 1994 for outside directors. The directors’ retirement plan provides that each non-employee director (participant) shall receive, upon termination of service on the Board on or after age 60, other than termination for cause, a benefit in equal annual installments over a five year period. The benefit will be based upon the product of the participant’s vesting percentage and the total Board fees paid to the participant during the calendar year preceding termination of service on the Board. The vesting percentage shall be determined based upon the participant’s years of service on the Board, whether before or after the reorganization date.

In the event that the participant dies before collecting any or all of the benefits, the Bank shall pay the participant’s beneficiary. Benefits shall not be payable to anyone other than the beneficiary, and shall terminate on the death of the beneficiary.

Stock Options. Compensation cost is measured based on the grant-date fair value of the equity instruments issued, and recognized over the vesting period during which an employee provides service in exchange for the award.

Earnings Per Share. Basic earnings per share available to common stockholders is computed using the weighted-average number of common shares outstanding. Diluted earnings per share available to common stockholders includes the effect of all weighted-average dilutive potential common shares (stock options and restricted stock grants) outstanding during each period.

Comprehensive Income. Comprehensive income consists of net income and other comprehensive income, net of applicable income taxes. Other comprehensive income includes unrealized appreciation on available-for-sale securities, and changes in the funded status of defined benefit pension plans.

Transfers Between Fair Value Hierarchy Levels. Transfers in and out of Level 1 (quoted market prices), Level 2 (other significant observable inputs) and Level 3 (significant unobservable inputs) are recognized on the period ending date.

Reclassifications. Certain immaterial revisions have been made to the 2021 consolidated financial statements to reclassify the provision for off-balance sheet credit exposure out of noninterest expense and combine with provision for credit losses on the income statement. The revisions did not have a significant impact on the financial statement line items impacted and have been reclassified to conform to the 2022 presentation. These reclassifications had no effect on the net income or retained earnings.

New Accounting Pronouncements:

In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326), which the Company adopted July 1, 2020. The Update amended guidance on reporting credit losses for financial assets held at amortized cost basis and available for sale debt securities. For financial assets held at amortized cost basis, Topic 326 eliminated the probable initial recognition threshold in current GAAP and, instead, requires an entity to reflect its current estimate of all expected credit losses. The Update affects loans, debt securities, trade receivables, net investments in leases, off balance sheet credit exposures, and any other financial assets not excluded from the scope that have the contractual right to receive cash. Adoption was applied on a modified retrospective basis, through a cumulative-effect adjustment to retained earnings. Adoption resulted in an increase to the ACL of $8.9 million, related to the transition from the incurred loss model to the CECL ACL model, and an increase of $434,000 related to the transition from PCI to PCD methodology, relative to the ALLL as of June 30, 2020. The Company also recorded an adjustment to the reserve for unfunded commitments recorded in other liabilities of $268,000. The impact at adoption was reflected as an adjustment to beginning retained earnings, net of income taxes, in the amount of $7.2 million. In accordance with the new standard, management did not reassess whether PCI assets met the criteria of PCD assets as of the date of adoption. The adoption of ASU 2016-13 in fiscal 2021 could also impact the Company’s future earnings, perhaps materially.

The following table illustrates the impact of adoption of ASU 2016-13:

	July 1, 2020
	As reported		As reported		Impact of
	under		prior to		adoption
(dollars in thousands)	ASU 2016-13		ASU 2016-13		ASU 2016-13
Loans receivable	$	2,142,363	$	2,141,929	$	434
Allowance for credit losses on loans:
Real Estate Loans:
Residential		8,396		4,875		3,521
Construction		1,889		2,010		(121)
Commercial		15,988		12,132		3,856
Consumer loans		2,247		1,182		1,065
Commercial loans		5,952		4,940		1,012
Total allowance for credit losses on loans	$	34,472	$	25,139	$	9,333
Total allowance for credit losses on off-balance sheet credit exposures	$	2,227	$	1,959	$	268

The above table includes the impact of ASU 2016-13 adoption for PCD assets previously classified as PCI. The change in the ACL includes $434,000 attributable to residential and commercial real estate loans, and the amortized cost basis of loans receivable was increased for those loans by that total amount.

In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”), that removes certain exceptions for investments, intraperiod allocations and interim calculations, and adds guidance to reduce complexity in accounting for income taxes. ASU 2019-12 introduces the following new guidance: i) guidance to evaluate whether a step-up in tax basis of goodwill relates to a business combination in which book goodwill was recognized or a separate transaction and ii) a policy election to not allocate consolidated income taxes when a member of a consolidated tax return is not subject to income tax. ASU 2019-12 is effective for fiscal years, and interim periods within those fiscal years beginning after December 15, 2020. The adoption of ASU 2019-12 did not have a material impact on the Company’s operations, financial position or disclosures.

In March 2020, the CARES Act was signed into law, creating a forbearance program for federally backed mortgage loans, protects borrowers from negative credit reporting due to loan accommodations related to the National Emergency, and provides financial institutions the option to temporarily suspend certain requirements under U.S. GAAP related to troubled debt restructurings (TDR) for a limited period of time to account for the effects of COVID-19. The Company has elected to not apply ASC Subtopic 310-40 for loans eligible under the CARES Act, based on the modification’s (1) relation to COVID-19, (2) execution for a loan that was not more than 30-days past due as of December 31, 2019, and (3) execution between March 1, 2020, and the earlier of the date that falls 60 days following the termination of the declared National Emergency, or December 31, 2020. The 2021 Consolidated Appropriations Act, signed into law in December 2020, extended the window during which loans may be modified without classification as TDRs under ASC Subtopic 310-40, to the earlier of January 1, 2022, or 60 days following the termination of the declared National Emergency.

In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): “Facilitation of the Effects of Reference Rate Reform on Financial Reporting,”.  The amendments in this update provide optional guidance for a limited period to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting. It provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments in this update are effective for all entities as of March 12, 2020 through December 31, 2022. Pursuant to the Interagency Statement on LIBOR Transition issued in November 2020, the Company will not enter into any new LIBOR-based credit agreements after December 31, 2021. The adoption of ASU 2020-04 is not expected to have a material impact on the Company’s consolidated financial statements.

In January 2021, the FASB issued ASU 2021-01, Reference Rate Reform (Topic 848): Scope. ASU 2021-01 clarifies that certain optional expedients and exceptions in ASC 848 for contract modifications and hedge accounting apply to

derivatives that are affected by the discounting transition. ASU 2021-01 also amends the expedients and exceptions in ASC 848 to capture the incremental consequences of the scope clarification and to tailor the existing guidance to derivative instruments affected by the discounting transition. ASU 2021-01 was effective upon issuance and generally can be applied through December 31, 2022. ASU 2021-01 is not expected to have a material impact on the Company’s consolidated financial statements.

XML

Securities

3 Months Ended

Sep. 30, 2021

Securities

Securities

Note 3:  Securities

The amortized cost, gross unrealized gains, gross unrealized losses, ACL, and approximate fair value of securities available for sale consisted of the following:

	September 30, 2021
			Gross		Gross		Allowance		Estimated
	Amortized		Unrealized		Unrealized		for		Fair
(dollars in thousands)	Cost		Gains		Losses		Credit Losses		Value
Debt and equity securities:
Obligations of states and political subdivisions	$	45,360	$	1,545	$	(36)	$	—	$	46,869
Corporate obligations		18,853		325		(346)		—		18,832
Other securities		591		17		—		—		608
Total debt and equity securities		64,804		1,887		(382)		—		66,309
Mortgage-backed securities (MBS) and collateralized mortgage obligations (CMOs):
Residential MBS issued by governmental sponsored enterprises (GSEs)		63,247		950		(258)		—		63,939
Commercial MBS issued by GSEs		35,349		1,286		(291)		—		36,344
CMOs issued by GSEs		42,263		628		(74)		—		42,817
Total MBS and CMOs		140,859		2,864		(623)		—		143,100
Total AFS securities	$	205,663	$	4,751	$	(1,005)	$	—	$	209,409

	June 30, 2021
			Gross		Gross		Allowance		Estimated
	Amortized		Unrealized		Unrealized		for		Fair
(dollars in thousands)	Cost		Gains		Losses		Credit Losses		Value
Debt and equity securities:
Obligations of states and political subdivisions	$	46,257	$	1,479	$	(40)	$	—		47,696
Corporate obligations		20,356		290		(335)		—		20,311
Other securities		647		25		—		—		672
Total debt and equity securities		67,260		1,794		(375)		—		68,679
Mortgage-backed securities (MBS) and collateralized mortgage obligations (CMOs):
Residential MBS issued by governmental sponsored enterprises (GSEs)		64,400		932		(379)		—		64,953
Commercial MBS issued by GSEs		35,425		1,394		(338)		—		36,481
CMOs issued by GSEs		36,201		755		(49)		—		36,907
Total MBS and CMOs		136,026		3,081		(766)		—		138,341
Total AFS securities	$	203,286	$	4,875	$	(1,141)	$	—	$	207,020

The amortized cost and estimated fair value of investment and mortgage-backed securities, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without penalties.

	September 30, 2021
	Amortized		Estimated
(dollars in thousands)	Cost		Fair Value
Within one year	$	1,555	$	1,562
After one year but less than five years		7,236		7,375
After five years but less than ten years		28,516		29,212
After ten years		27,497		28,160
Total investment securities		64,804		66,309
MBS and CMOs		140,859		143,100
Total AFS securities	$	205,663	$	209,409

The carrying value of investment and mortgage-backed securities pledged as collateral to secure public deposits amounted to $164.8 million at September 30, 2021 and $155.6 million at June 30, 2021. The securities pledged consist of marketable securities, including $93.2 million and $95.4 million of Mortgage-backed Securities, $30.1 million and $18.8 million of Collateralized Mortgage Obligations, and $41.5 million and $41.4 million of State and Political Subdivisions Obligations at September 30, 2021 and June 30, 2021, respectively.

The following tables show the Company’s investments’ gross unrealized losses and fair value, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position for which an ACL has not been recorded at September 30 and June 30, 2021:

	September 30, 2021
	Less than 12 months				12 months or more				Total
			Unrealized				Unrealized				Unrealized
	Fair Value		Losses		Fair Value		Losses		Fair Value		Losses
(dollars in thousands)
Obligations of state and political subdivisions	$	2,716	$	36	$	—	$	—	$	2,716	$	36
Corporate obligations		6,381		84		715		262		7,096		346
MBS and CMOs		45,063		547		4,399		76		49,462		623
Total AFS securities	$	54,160	$	667	$	5,114	$	338	$	59,274	$	1,005

	June 30, 2021
	Less than 12 months				12 months or more				Total
			Unrealized				Unrealized				Unrealized
	Fair Value		Losses		Fair Value		Losses		Fair Value		Losses
(dollars in thousands)
Obligations of state and political subdivisions	$	3,177	$	40	$	—	$	—	$	3,177	$	40
Corporate obligations		9,331		79		720		256		10,051		335
MBS and CMOs		53,893		764		70		2		53,963		766
Total AFS securities	$	66,401	$	883	$	790	$	258	$	67,191	$	1,141

Obligations of state and political subdivisions. The unrealized losses on the Company’s investments in obligations of state and political subdivisions include six individual securities which have been in an unrealized loss position for less than 12 months. The securities are performing and are of high credit quality. The unrealized losses were caused by variations in market interest rates since purchase or acquisition. Because the Company does not intend to sell these securities and it is likely that the Company will not be required to sell these securities prior to recovery of their amortized cost basis, which may be maturity, the Company has not recorded an ACL on these securities.

Corporate Obligations. The unrealized losses on the Company’s investments in corporate obligations include five individual securities which have been in an unrealized loss position for less than 12 months. The securities are performing and are of high credit quality. The unrealized losses were caused by variations in market interest rates since purchase or acquisition. Because the Company does not intend to sell these securities and it likely that the Company will not be required to sell these securities prior to recovery of their amortized cost basis, which may be maturity, the Company has not recorded an ACL on these securities.

At September 30, 2021, corporate obligations included two pooled trust preferred securities with an estimated fair value of $715,000 and unrealized losses of $262,000 in a continuous unrealized loss position for twelve months or more. These unrealized losses were primarily due to the long-term nature of the pooled trust preferred securities and a reduced demand for these securities, and concerns regarding the issuers of the underlying trust preferred securities.

A cash flow analysis performed as of September 30, 2021, for these two securities indicated it is probable the Company will receive all contracted principal and related interest projected. The cash flow analysis used in making this determination was based on anticipated default, recovery, and prepayment rates, and the resulting cash flows were discounted based on the yield spread anticipated at the time the securities were purchased. Because the Company does not intend to sell these securities and it is likely that the Company will not be required to sell these securities prior to recovery of their amortized cost basis, which may be maturity, the Company has not recorded an ACL on these securities.

Mortgage-backed securities and Collateralized mortgage obligations. As of September 30, 2021, the unrealized losses on the Company’s investments in mortgage-backed securities and collateralized mortgage obligations include 18 individual securities which have been in an unrealized loss position for less than 12 months, and two individual securities which have been in an unrealized loss position for more than 12 months. The securities are performing and are of high credit quality. The unrealized losses were caused by variations in market interest rates since purchase or acquisition. Because the Company does not intend to sell these securities and it is likely that the Company will not be required to sell these securities prior to recovery of their amortized cost basis, which may be maturity, the Company has not recorded an ACL on these securities.

The Company does not believe that any individual unrealized loss as of September 30, 2021, is the result of a credit loss. However, the Company could be required to recognize an ACL in future periods with respect to its available for sale investment securities portfolio.

Credit losses recognized on investments.  There were no credit losses recognized in income and other losses or recorded in other comprehensive income for the three-month periods ended September 30, 2021 and 2020.

XML

Loans and Allowance for Credit Losses

3 Months Ended

Sep. 30, 2021

Loans and Allowance for Credit Losses

Loans and Allowance for Credit Losses

Note 4:  Loans and Allowance for Credit Losses

Classes of loans are summarized as follows:

(dollars in thousands)	September 30, 2021		June 30, 2021
Real Estate Loans:
Residential	$	762,204	$	721,216
Construction		235,501		208,824
Commercial		901,281		889,793
Consumer loans		80,467		77,674
Commercial loans		411,402		414,124
		2,390,855		2,311,631
Loans in process		(107,555)		(74,540)
Deferred loan fees, net		(1,279)		(3,625)
Allowance for loan losses		(32,543)		(33,222)
Total loans	$	2,249,478	$	2,200,244

The Company’s lending activities consist of origination of loans secured by mortgages on one- to four-family residences and commercial and agricultural real estate, construction loans on residential and commercial properties, commercial and agricultural business loans and consumer loans. At September 30, 2021 the Company had purchased participations in 25 loans totaling $87.0 million, as compared to 23 loans totaling $83.0 million at June 30, 2021.

Residential Mortgage Lending. The Company actively originates loans for the acquisition or refinance of one- to four-family residences. This category includes both fixed-rate and adjustable-rate mortgage (“ARM”) loans amortizing over periods of up to 30 years, and the properties securing such loans may be owner-occupied or non-owner-occupied. Single-family residential loans do not generally exceed 90% of the lower of the appraised value or purchase price of the secured

property. Substantially all of the one- to four-family residential mortgage originations in the Company’s portfolio are located within the Company’s primary lending area. General risks related to one- to four-family residential lending include stability of borrower income and collateral values.

The Company also originates loans secured by multi-family residential properties that are often located outside the Company’s primary lending area but made to borrowers who operate within our primary market area. The majority of the multi-family residential loans that are originated by the Company are amortized over periods generally up to 25 years, with balloon maturities typically up to ten years. Both fixed and adjustable interest rates are offered and it is typical for the Company to include an interest rate “floor” and “ceiling” in the loan agreement. Generally, multi-family residential loans do not exceed 85% of the lower of the appraised value or purchase price of the secured property. General risks related to multi-family residential lending include rental demand, rental rates, and vacancies, as well as collateral values and borrower leverage.

Commercial Real Estate Lending. The Company actively originates loans secured by owner- and non-owner-occupied commercial real estate including farmland, single- and multi-tenant retail properties, restaurants, hotels, land (improved and unimproved), nursing homes and other healthcare facilities, warehouses and distribution centers, convenience stores, automobile dealerships and other automotive-related services, and other businesses. These properties are typically owned and operated by borrowers headquartered within the Company’s primary lending area, however, the property may be located outside our primary lending area. Risks to owner-occupied commercial real estate lending generally include the continued profitable operation of the borrower’s enterprise, as well as general collateral values, and may be heightened by unique, specific uses of the property serving as collateral. Non-owner-occupied commercial real estate lending risks include tenant demand and performance, lease rates, and vacancies, as well as collateral values and borrower leverage. These factors may be influenced by general economic conditions in the region, or in the United States generally. Risks to lending on farmland include unique factors such as commodity prices, yields, input costs, and weather, as well as farmland values.

Most commercial real estate loans originated by the Company generally are based on amortization schedules of up to 25 years with monthly principal and interest payments. Generally, the interest rate received on these loans is fixed for a maturity for up to ten years, with a balloon payment due at maturity. Alternatively, for some loans, the interest rate adjusts at least annually after an initial period up to seven years. The Company typically includes an interest rate “floor” in the loan agreement. Generally, improved commercial real estate loan amounts do not exceed 80% of the lower of the appraised value or the purchase price of the secured property. Agricultural real estate terms offered differ slightly, with amortization schedules of up to 25 years with an 80% loan-to-value ratio, or 30 years with a 75% loan-to-value ratio.

Construction Lending. The Company originates real estate loans secured by property or land that is under construction or development. Construction loans originated by the Company are generally to finance the construction of owner occupied residential real estate, or to finance speculative construction of residential real estate, land development, or owner-operated or non-owner occupied commercial real estate. During construction, these loans typically require monthly interest-only payments, with single-family residential construction loans having maturities ranging from six to twelve months, while multifamily or commercial construction loans typically mature in 12 to 24 months. Once construction is completed, permanent construction loans may be converted to monthly payments using amortization schedules of up to 30 years on residential and generally up to 25 years on commercial real estate. Construction and development lending risks generally include successful timely and on-budget completion of the project, followed by the sale of the property in the case of land development or non-owner-occupied real estate, or the long-term occupancy of the property by the builder in the case of owner-occupied construction. Changes in real estate values or other economic conditions may impact the ability of a borrower to sell property developed for that purpose.

While the Company typically utilizes relatively short maturity periods to closely monitor the inherent risks associated with construction loans for these loans, weather conditions, change orders, availability of materials and/or labor, and other factors may contribute to the lengthening of a project, thus necessitating the need to renew the construction loan at the balloon maturity. Such extensions are typically executed in incremental three month periods to facilitate project completion. The Company’s average term of construction loans is approximately nine months. During construction, loans typically require monthly interest only payments which may allow the Company an opportunity to monitor for early signs of financial difficulty should the borrower fail to make a required monthly payment. Additionally, during the construction phase, the Company typically performs interim inspections which further allow the Company opportunity to

assess risk. At September 30, 2021, construction loans outstanding included 43 loans, totaling $29.0 million, for which a modification had been agreed to. At June 30, 2021, construction loans outstanding included 48 loans, totaling $28.5 million, for which a modification had been agreed to. In general, these modifications were solely for the purpose of extending the maturity date due to conditions described above, pursuant to the Company’s normal underwriting and monitoring procedures. As these modifications were not executed due to financial difficulty on the part of the borrower, they were not accounted for as troubled debt restructurings (TDRs); nor were they made pursuant to exemptions provided under the CARES Act. Under the CARES Act, financial institutions have the option to temporarily suspend certain requirements under U.S. GAAP related to TDRs for a limited period of time to account for the effects of COVID-19. Loans modified under the CARES Act did not include any construction loans with drawn balances at September 30, 2021.

Consumer Lending. The Company offers a variety of secured consumer loans, including home equity, direct and indirect automobile loans, second mortgages, mobile home loans and loans secured by deposits. The Company originates substantially all of its consumer loans in its primary lending area. Usually, consumer loans are originated with fixed rates for terms of up to five years, with the exception of home equity lines of credit, which are variable, tied to the prime rate of interest and are for a period of ten years.

Home equity lines of credit (HELOCs) are secured with a deed of trust and are issued up to 100% of the appraised or assessed value of the property securing the line of credit, less the outstanding balance on the first mortgage and are typically issued for a term of ten years. Interest rates on the HELOCs are generally adjustable. Interest rates are based upon the loan-to-value ratio of the property with better rates given to borrowers with more equity. Risks related to HELOC lending generally include the stability of borrower income and collateral values.

Automobile loans originated by the Company include both direct loans and a smaller amount of loans originated by auto dealers. The Company generally pays a negotiated fee back to the dealer for indirect loans. Typically, automobile loans are made for terms of up to 60 months for new and used vehicles. Loans secured by automobiles have fixed rates and are generally made in amounts up to 100% of the purchase price of the vehicle. Risks related to automobile and other consumer lending generally include the stability of borrower income and borrower willingness to repay.

Commercial Business Lending. The Company’s commercial business lending activities encompass loans with a variety of purposes and security, including loans to finance accounts receivable, inventory, equipment and operating lines of credit, including agricultural production and equipment loans. The Company offers both fixed and adjustable rate commercial business loans. Generally, commercial loans secured by fixed assets are amortized over periods up to five years, while commercial operating lines of credit or agricultural production lines are generally for a one year period. Commercial lending risk is primarily driven by the borrower’s successful generation of cash flow from their business enterprise sufficient to service debt, and may be influenced by factors specific to the borrower and industry, or by general economic conditions in the region or in the United States generally. Agricultural production or equipment lending includes unique risk factors such as commodity prices, yields, input costs, and weather, as well as farm equipment values.

Allowance for Credit Losses. The provision for credit losses for the three-month period ended September 30, 2021, was a credit of $305,000 compared to a charge of $1.0 million in the same period of the prior fiscal year. The recovery was based on the estimated required ACL, reflecting management’s estimate of the current expected credit losses in the Company’s loan portfolio at September 30, 2021, and as of that date the Company’s ACL was $32.5 million. Reduced provisioning in the three-month period ended September 30, 2021, was attributed primarily to an improved outlook regarding the economic environment resulting as the economy recovers from the effects of the COVID-19 pandemic, and the Company notes less uncertainty regarding the potential adverse impact on its borrowers generally low and consistent levels of net charge offs, and a reduction in delinquent or adversely classified credits, and nonperforming loans. While the Company assesses that the economic outlook has continued to improve during the current quarter as compared to the year ended June 30, 2021, there remains uncertainty regarding the possible continuing impact of the COVID-19 pandemic or when transmission of the virus will abate to the point that restrictions are no longer being imposed or considered, and consumer behavior can be said to have returned to normal. As such, there remains a potential for the pandemic to negatively impact global and regional economies, or for recent efforts by the U.S. government and the Federal Reserve to respond to the pandemic and its economic impact to fall short of expectations. Specifically, management considered the following:

●  economic conditions and projections as provided by Moody’s Analytics, including baseline and downside scenarios were utilized in the Company’s estimate at September 30, 2021. Economic factors considered in the projections included national and state levels of unemployment, and national and state rates of inflation-adjusted growth in the gross domestic product. Economic conditions are considered to be a moderate and declining risk factor;

● the pace of growth of the Company’s loan portfolio, exclusive of acquisitions or government guaranteed loans, relative to overall economic growth. This measure remains elevated, but continued to moderate in the most recent quarter, and is considered to be a moderate and declining risk factor;

● levels and trends for loan delinquencies nationally and in the region. This measure as reported remains relatively stable, but management considered the potential that the measure remains under-reported due to the availability of modifications under the CARES Act. The level of uncertainty about loan delinquencies is considered to be diminishing. This is considered to be an elevated but declining risk factor;

● exposure to the hotel industry, in particular, metropolitan area hotels more impacted by activity restrictions and a lack of business or convention-related travel. This is considered to be an elevated and stable risk factor.

Management considered the impact of the COVID-19 pandemic on its consumer and business borrowers, particularly those business borrowers most affected by efforts to contain the pandemic, including our borrowers in the retail and multi-tenant retail industry, restaurants, and hotels, when making qualitative factor adjustments. To date, various relief efforts, notably including the availability of forgivable Paycheck Protection Program (PPP) loans to borrowers and deferrals or modifications available as encouraged by banking regulatory authorities and the CARES Act, have resulted in limited impact on the Company’s credit quality indicators, as is true of the industry generally. It is possible that the ongoing adverse effects of the pandemic may not be offset by future relief efforts, which could cause the outlook for economic conditions and levels and trends of past-due loans to significantly worsen, and require additions to the ACL.

The following tables present the balance in the ACL and the recorded investment in loans (excluding loans in process and deferred loan fees) based on portfolio segment as of September 30, 2021 and 2020, and activity in the ACL for the three- month periods ended September 30, 2021 and 2020:

	At period end and for the three months ended September 30, 2021
	Residential		Construction		Commercial
(dollars in thousands)	Real Estate		Real Estate		Real Estate		Consumer		Commercial		Total
Allowance for credit losses:
Balance, beginning of period	$	11,192	$	2,170	$	14,535	$	916	$	4,409	$	33,222
Provision (benefit) charged to expense		(528)		(125)		348		(72)		(302)		(679)
Losses charged off		(31)		—		—		(13)		—		(44)
Recoveries		1		—		—		42		1		44
Balance, end of period	$	10,634	$	2,045	$	14,883	$	873	$	4,108	$	32,543

	At period end and for the three months ended September 30, 2020
	Residential		Construction		Commercial
(dollars in thousands)	Real Estate		Real Estate		Real Estate		Consumer		Commercial		Total
Allowance for credit losses:
Balance, beginning of period prior to adoption of CECL	$	4,875	$	2,010	$	12,132	$	1,182	$	4,940	$	25,139
Impact of CECL adoption		3,521		(121)		3,856		1,065		1,012		9,333
Provision charged to expense		252		3		61		61		397		774
Losses charged off		(19)		—		—		(6)		(145)		(170)
Recoveries		—		—		1		3		4		8
Balance, end of period	$	8,629	$	1,892	$	16,050	$	2,305	$	6,208	$	35,084

The following tables present the balance in the allowance for off-balance sheet credit exposure based on portfolio segment as of September 30, 2021 and 2020, and activity in the allowance for the three- month periods ended September 30, 2021 and 2020:

	At period end and for the three months ended September 30, 2021
	Residential			Construction		Commercial
(dollars in thousands)	Real Estate		Real Estate		Real Estate		Consumer		Commercial		Total
Allowance for off-balance sheet credit exposure:
Balance, beginning of period	$	37	$	502	$	188	$	218	$	860	$	1,805
Provision (benefit) charged to expense		(3)		1,171		(18)		(160)		(616)		374
Balance, end of period	$	34	$	1,673	$	170	$	58	$	244	$	2,179

	At period end and for the three months ended September 30, 2020
	Residential			Construction		Commercial
(dollars in thousands)	Real Estate		Real Estate		Real Estate		Consumer		Commercial		Total
Allowance for off-balance sheet credit exposure:
Balance, beginning of period prior to CECL adoption	$	19	$	769	$	172	$	153	$	846	$	1,959
Impact of CECL adoption		35		(167)		95		197		108		268
Provision (benefit) charged to expense		5		166		32		4		19		226
Balance, end of period	$	59	$	768	$	299	$	354	$	973	$	2,453

Credit Quality Indicators. The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends among other factors. The Company analyzes loans individually by classifying the loans as to credit risk. This analysis is performed on all loans at origination, and is updated on a quarterly basis for loans risk rated Watch, Special Mention, Substandard, or Doubtful. In addition, lending relationships of $3 million or more, exclusive of any consumer or owner-occupied residential loan, are subject to an annual credit analysis which is prepared by the loan administration department and presented to a loan committee with appropriate lending authority. A sample of lending relationships in excess of $1 million (exclusive of single-family residential real estate loans) are subject to an independent loan review annually, in order to verify risk ratings. The Company uses the following definitions for risk ratings:

Watch – Loans classified as watch exhibit weaknesses that require more than usual monitoring. Issues may include deteriorating financial condition, payments made after due date but within 30 days, adverse industry conditions or management problems.

Special Mention – Loans classified as special mention exhibit signs of further deterioration but still generally make payments within 30 days. This is a transitional rating and loans should typically not be rated Special Mention for more than 12 months.

Substandard – Loans classified as substandard possess weaknesses that jeopardize the ultimate collection of the principal and interest outstanding. These loans exhibit continued financial losses, ongoing delinquency, overall poor financial condition, and insufficient collateral. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.

Doubtful – Loans classified as doubtful have all the weaknesses of substandard loans, and have deteriorated to the level that there is a high probability of substantial loss.

Loans not meeting the criteria above that are analyzed individually as part of the above described process are considered to be Pass rated loans.

A periodic review of selected credits (based on loan size and type) is conducted to identify loans with heightened risk or probable losses and to assign risk grades. The primary responsibility for this review rests with loan administration

personnel. This review is supplemented with periodic examinations of both selected credits and the credit review process by the Company’s internal audit function and applicable regulatory agencies. The information from these reviews assists management in the timely identification of problems and potential problems and provides a basis for deciding whether the credit continues to share similar risk characteristics with collectively evaluated loan pools, or whether credit losses for the loan should be evaluated on an individual loan basis.

The following table presents the credit risk profile of the Company’s loan portfolio (excluding loans in process and deferred loan fees) based on rating category and fiscal year of origination as of September 30, 2021. This table includes PCD loans, which are reported according to risk categorization after acquisition based on the Company’s standards for such classification:

(dollars in thousands)													Revolving
	2022		2021		2020		2019		2018		Prior		loans		Total
Residential Real Estate
Pass	$	83,975	$	348,844	$	165,830	$	38,339	$	30,770	$	82,928	$	5,513	$	756,199
Watch		86		326		70		407		—		801		—		1,690
Special Mention		—		—		—		—		—		—		—		—
Substandard		488		3,224		151		86		53		313		—		4,315
Doubtful		—		—		—		—		—		—		—		—
Total Residential Real Estate	$	84,549	$	352,394	$	166,051	$	38,832	$	30,823	$	84,042	$	5,513	$	762,204
Construction Real Estate
Pass	$	40,324	$	57,553	$	29,945	$	—	$	—	$	—	$	—	$	127,822
Watch		—		—		—		—		—		—		—		—
Special Mention		—		—		—		—		—		—		—		—
Substandard		—		124		—		—		—		—		—		124
Doubtful		—		—		—		—		—		—		—		—
Total Construction Real Estate	$	40,324	$	57,677	$	29,945	$	—	$	—	$	—	$	—	$	127,946
Commercial Real Estate
Pass	$	87,878	$	326,200	$	124,280	$	103,953	$	71,713	$	117,116	$	24,716	$	855,856
Watch		291		4,614		2,202		1,718		873		721		810		11,229
Special Mention		—		—		8,806		—		1,793		12,826		300		23,725
Substandard		3,307		4,733		1,129		269		27		101		69		9,635
Doubtful		—		—		—		836		—		—		—		836
Total Commercial Real Estate	$	91,476	$	335,547	$	136,417	$	106,776	$	74,406	$	130,764	$	25,895	$	901,281
Consumer
Pass	$	9,322	$	19,800	$	6,871	$	2,767	$	857	$	1,037	$	39,609	$	80,263
Watch		1		78		—		—		—		—		48		127
Special Mention		—		—		—		—		—		—		—		—
Substandard		—		31		14		2		—		30		—		77
Doubtful		—		—		—		—		—		—		—		—
Total Consumer	$	9,323	$	19,909	$	6,885	$	2,769	$	857	$	1,067	$	39,657	$	80,467
Commercial
Pass	$	29,032	$	158,480	$	28,738	$	16,176	$	4,934	$	13,914	$	155,439	$	406,713
Watch		429		1,350		262		53		7		—		458		2,559
Special Mention		—		—		—		—		—		—		—		—
Substandard		—		564		48		291		—		172		1,055		2,130
Doubtful		—		—		—		—		—		—		—		—
Total Commercial	$	29,461	$	160,394	$	29,048	$	16,520	$	4,941	$	14,086	$	156,952	$	411,402
Total Loans
Pass	$	250,531	$	910,877	$	355,664	$	161,235	$	108,274	$	214,995	$	225,277	$	2,226,853
Watch		807		6,368		2,534		2,178		880		1,522		1,316		15,605
Special Mention		—		—		8,806		—		1,793		12,826		300		23,725
Substandard		3,795		8,676		1,342		648		80		616		1,124		16,281
Doubtful		—		—		—		836		—		—		—		836
Total	$	255,133	$	925,921	$	368,346	$	164,897	$	111,027	$	229,959	$	228,017	$	2,283,300

At September 30, 2021, PCD loans comprised $12.1 million of credits rated “Pass”; none rated “Watch”; none rated “Special Mention”; $2.8 million of credits rated “Substandard”; and none rated “Doubtful”.

The following table presents the credit risk profile of the Company’s loan portfolio (excluding loans in process and deferred loan fees) based on rating category and fiscal year of origination as of June 30, 2021. This table includes PCD loans, which were reported according to risk categorization after acquisition based on the Company’s standards for such classification:

(dollars in thousands)													Revolving
	2021		2020		2019		2018		2017		Prior		loans		Total
Residential Real Estate
Pass	$	361,876	$	175,772	$	43,576	$	32,929	$	23,267	$	71,592	$	5,557	$	714,569
Watch		328		70		410		—		89		809		—		1,706
Special Mention		—		—		—		—		—		—		—		—
Substandard		4,288		89		—		92		—		472		—		4,941
Doubtful		—		—		—		—		—		—		—		—
Total Residential Real Estate	$	366,492	$	175,931	$	43,986	$	33,021	$	23,356	$	72,873	$	5,557	$	721,216
Construction Real Estate
Pass	$	88,371	$	45,866	$	—	$	—	$	—	$	—	$	—	$	134,237
Watch		—		—		—		—		—		—		—		—
Special Mention		—		—		—		—		—		—		—		—
Substandard		47		—		—		—		—		—		—		47
Doubtful		—		—		—		—		—		—		—		—
Total Construction Real Estate	$	88,418	$	45,866	$	—	$	—	$	—	$	—	$	—	$	134,284
Commercial Real Estate
Pass	$	351,732	$	147,670	$	104,746	$	75,967	$	70,927	$	61,194	$	23,699	$	835,935
Watch		4,456		2,365		9,502		1,377		726		10		810		19,246
Special Mention		—		8,806		—		1,793		12,826		—		300		23,725
Substandard		8,191		1,137		505		31		5		99		69		10,037
Doubtful		—		—		850		—		—		—		—		850
Total Commercial Real Estate	$	364,379	$	159,978	$	115,603	$	79,168	$	84,484	$	61,303	$	24,878	$	889,793
Consumer
Pass	$	23,858	$	8,626	$	3,597	$	1,126	$	534	$	650	$	39,071	$	77,462
Watch		80		—		—		—		—		—		48		128
Special Mention		—		—		—		—		—		—		—		—
Substandard		—		—		—		30		30		—		24		84
Doubtful		—		—		—		—		—		—		—		—
Total Consumer	$	23,938	$	8,626	$	3,597	$	1,156	$	564	$	650	$	39,143	$	77,674
Commercial
Pass	$	189,280	$	42,549	$	17,960	$	5,591	$	7,265	$	9,120	$	136,603	$	408,368
Watch		1,551		262		1,323		22		—		—		463		3,621
Special Mention		—		—		—		—		—		—		—		—
Substandard		594		81		305		—		176		—		979		2,135
Doubtful		—		—		—		—		—		—		—		—
Total Commercial	$	191,425	$	42,892	$	19,588	$	5,613	$	7,441	$	9,120	$	138,045	$	414,124
Total Loans
Pass	$	1,015,117	$	420,483	$	169,879	$	115,613	$	101,993	$	142,556	$	204,930	$	2,170,571
Watch		6,415		2,697		11,235		1,399		815		819		1,321		24,701
Special Mention		—		8,806		—		1,793		12,826		—		300		23,725
Substandard		13,120		1,307		810		153		211		571		1,072		17,244
Doubtful		—		—		850		—		—		—		—		850
Total	$	1,034,652	$	433,293	$	182,774	$	118,958	$	115,845	$	143,946	$	207,623	$	2,237,091

At June 30, 2021, PCD loans comprised $3.2 million of credits rated “Pass”; $9.0 million of credits rated “Watch”, none rated “Special Mention”, $2.7 million of credits rated “Substandard” and none rated “Doubtful”.

Past-due Loans. The following tables present the Company’s loan portfolio aging analysis (excluding loans in process and deferred loan fees) as of September 30, 2021 and June 30, 2021. These tables include PCD loans, which are reported according to aging analysis after acquisition based on the Company’s standards for such classification:

	September 30, 2021
					Greater Than								Greater Than 90
	30-59 Days		60-89 Days		90 Days		Total				Total Loans		Days Past Due
(dollars in thousands)	Past Due		Past Due		Past Due		Past Due		Current		Receivable		and Accruing
Real Estate Loans:
Residential	$	1,475	$	84	$	499	$	2,058	$	760,146	$	762,204	$	—
Construction		—		—		—		—		127,946		127,946		—
Commercial		598		671		—		1,269		900,012		901,281		—
Consumer loans		193		87		56		336		80,131		80,467		—
Commercial loans		283		43		817		1,143		410,259		411,402		—
Total loans	$	2,549	$	885	$	1,372	$	4,806	$	2,278,494	$	2,283,300	$	—

	June 30, 2021
					Greater Than								Greater Than 90
	30-59 Days		60-89 Days		90 Days		Total				Total Loans		Days Past Due
(dollars in thousands)	Past Due		Past Due		Past Due		Past Due		Current		Receivable		and Accruing
Real Estate Loans:
Residential	$	312	$	364	$	613	$	1,289	$	719,927	$	721,216	$	—
Construction		—		—		30		30		134,254		134,284		—
Commercial		363		—		374		737		889,056		889,793		—
Consumer loans		195		66		84		345		77,329		77,674		—
Commercial loans		368		939		110		1,417		412,707		414,124		—
Total loans	$	1,238	$	1,369	$	1,211	$	3,818	$	2,233,273	$	2,237,091	$	—

Under the CARES Act, financial institutions have the option to temporarily suspend certain requirements under U.S. GAAP related to TDRs for a limited period of time to account for the effects of COVID-19. Loans with such modifications in effect at September 30, 2021, included $23.7 million in loans reported as current in the above table, while none were reported as past due. Loans with such modifications in effect at June 30, 2021, included $23.9 million in loans reported as current in the above table, while none were reported as past due.

At September 30 and June 30, 2021 there were no PCD loans that were greater than 90 days past due.

Loans that experience insignificant payment delays and payment shortfalls generally are not adversely classified or determined to not share similar risk characteristics with collectively evaluated pools of loans for determination of the ACL estimate. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record and the amount of the shortfall in relation to the principal and interest owed. Significant payment delays or shortfalls may lead to a determination that a loan should be individually evaluated for estimated credit losses.

Collateral-dependent Loans. The following table presents the Company’s collateral dependent loans and related ACL at September 30, and June 30, 2021:

	September 30, 2021
	Amortized cost basis of
	loans determined to be		Related allowance
	collateral dependent		for credit losses
(dollars in thousands)
Residential real estate loans
1- to 4-family residential loans	$	889	$	217
Total loans	$	889	$	217

	June 30, 2021
	Amortized cost basis of
	loans determined to be		Related allowance
	collateral dependent		for credit losses
(dollars in thousands)
Residential real estate loans
1- to 4-family residential loans	$	895	$	223
Total loans	$	895	$	223

Nonaccrual Loans. The following table presents the Company’s amortized cost basis of nonaccrual loans segmented by class of loans at September 30, and June 30, 2021. The table excludes performing TDRs.

(dollars in thousands)	September 30, 2021		June 30, 2021
Residential real estate	$	3,059	$	3,235
Construction real estate		—		30
Commercial real estate		1,950		1,914
Consumer loans		65		100
Commercial loans		1,059		589
Total loans	$	6,133	$	5,868

At September 30, 2021, there were no nonaccrual loans individually evaluated for which no ACL was recorded. Interest income recognized on nonaccrual loans in the three- month periods ended September 30, 2021 and 2020, was immaterial.

Troubled Debt Restructurings. TDRs are evaluated to determine whether they share similar risk characteristics with collectively evaluated loan pools, or must be individually evaluated. These concessions typically result from our loss mitigation activities, and could include reductions in the interest rate, payment extensions, forgiveness of principal, forbearance, or other actions. In general, the Company’s loans that have been subject to classification as TDRs are the result of guidance under ASU No. 2011-02, which indicates that the Company may not consider the borrower’s effective borrowing rate on the old debt immediately before the restructuring in determining whether a concession has been granted. Certain TDRs are classified as nonperforming at the time of restructuring and typically are returned to performing status after considering the borrower’s sustained repayment performance for a reasonable period of at least six months.

During the three- month periods ended September 30, 2021 and 2020, certain loans modified were classified as TDRs. They are shown, segregated by class, in the table below:

	For the three-month periods ended
	September 30, 2021			September 30, 2020
	Number of	Recorded		Number of	Recorded
(dollars in thousands)	modifications	Investment		modifications	Investment
Residential real estate	1	$	151	1	$	98
Construction real estate	—		—	—		—
Commercial real estate	—		—	2		1,840
Consumer loans	—		—	—		—
Commercial loans	—		—	1		36
Total	1	$	151	4	$	1,974

Performing loans classified as TDRs and outstanding at September 30, and June 30, 2021, segregated by class, are shown in the table below. Nonperforming TDRs are shown as nonaccrual loans.

	September 30, 2021			June 30, 2021
	Number of	Recorded		Number of	Recorded
(dollars in thousands)	modifications	Investment		modifications	Investment
Residential real estate	3	$	1,133	1	$	895
Construction real estate	—		—	—		—
Commercial real estate	5		988	4		949
Consumer loans	—		—	—		—
Commercial loans	7		1,464	7		1,397
Total	15	$	3,585	12	$	3,241

Residential Real Estate Foreclosures. The Company may obtain physical possession of real estate collateralizing a residential mortgage loan or home equity loan via foreclosure or in-substance repossession. As of September 30 and June 30, 2021, the carrying value of foreclosed residential real estate properties as a result of obtaining physical possession was $635,000 and $622,000, respectively. In addition, as of September 30 and June 30, 2021, the Company had residential mortgage loans and home equity loans with a carrying value of $247,000 and $533,000, respectively, collateralized by residential real estate property for which formal foreclosure proceedings were in process.

XML

Premises and Equipment

3 Months Ended

Sep. 30, 2021

Premises and Equipment

Premises and Equipment

Note 5:  Premises and Equipment

Following is a summary of premises and equipment:

(dollars in thousands)	September 30, 2021		June 30, 2021
Land	$	12,409	$	12,452
Buildings and improvements		58,786		56,422
Construction in progress		452		1,158
Furniture, fixtures, equipment and software		19,223		18,985
Automobiles		120		120
Operating leases ROU asset		2,735		2,770
		93,725		91,907
Less accumulated depreciation		28,472		27,830
	$	65,253	$	64,077

Leases. The Company elected certain relief options under ASU 2016-02, Leases (Topic 842), including the option not to recognize right of use asset and lease liabilities that arise from short-term leases (leases with terms of twelve months or

less). The Company has five leased properties and numerous office equipment lease agreements in which it is the lessee, with lease terms exceeding twelve months.

All of the Company’s leases are classified as operating leases. These operating leases are now included as a ROU asset in the premises and equipment line item on the Company’s consolidated balance sheets. The corresponding lease liability is included in the accounts payable and other liabilities line item on the Company’s consolidated balance sheets.

ASU 2016-02 also requires certain other accounting elections. The Company elected the short-term lease recognition exemption for all leases that qualify, meaning those with terms under twelve months. ROU assets or lease liabilities are not to be recognized for short-term leases. The calculated amount of the ROU assets and lease liabilities in the table below are impacted by the length of the lease term and the discount rate used to present value the minimum lease payments. The Company’s lease agreements often include one or more options to renew at the Company’s discretion. If at lease inception, the Company considers the exercising of a renewal option to be reasonably certain, the Company will include the extended term in the calculation of the ROU asset and lease liability. Regarding the discount rate, the ASU requires the use of the rate implicit in the lease whenever this rate is readily determinable. As this rate is rarely determinable, the Company utilizes its incremental borrowing rate at lease inception over a similar term. The discount rate utilized was 5%. The expected lease terms range from 18 months to 20 years.

	September 30, 2021		June 30, 2021
Consolidated Balance Sheet
Operating leases right of use asset	$	2,735	$	2,770
Operating leases liability	$	2,735	$	2,770

	Three months ended September 30,
	2021		2020
Consolidated Statement of Income
Operating lease costs classified as occupancy and equipment expense	$	100	$	72
(includes short-term lease costs)
Supplemental disclosures of cash flow information
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	85	$	67
ROU assets obtained in exchange for operating lease obligations:	$	—	$	—

At September 30, 2021, future expected lease payments for leases with terms exceeding one year were as follows:

(dollars in thousands)
2022	$	338
2023		272
2024		272
2025		272
2026		272
Thereafter		3,069
Future lease payments expected	$	4,495

The Company leases facilities it owns or portions of facilities it owns to other third parties. The Company has determined that all of these lease agreements, in terms of being the lessor, are classified as operating leases. For each of the three-month periods ended September 30, 2021 and 2020, income recognized from these lessor agreements was $75,000. Income from lessor agreements was included in net occupancy and equipment expense.

XML

Deposits

3 Months Ended

Sep. 30, 2021

Deposits

Deposits

Note 6:  Deposits

Deposits are summarized as follows:

(dollars in thousands)	September 30, 2021		June 30, 2021
Non-interest bearing accounts	$	386,379	$	358,418
NOW accounts		938,555		925,280
Money market deposit accounts		253,827		253,614
Savings accounts		238,587		230,905
Certificates		554,347		562,586
Total Deposit Accounts	$	2,371,695	$	2,330,803

XML

Earnings Per Share

3 Months Ended

Sep. 30, 2021

Earnings Per Share

Earnings Per Share

Note 7:  Earnings Per Share

The following table sets forth the computation of basic and diluted earnings per share:

	Three months ended
	September 30,
(dollars in thousands except per share data)	2021		2020
Net income	$	12,746	$	9,986
Less: distributed earnings allocated to participating securities		(6)		(4)
Less: undistributed earnings allocated to participating securities		(39)		(26)
Net income available to common shareholders	$	12,701	$	9,956
Weighted-average common shares outstanding, including participating securities		8,898,994		9,126,866
Less: weighted-average participating securities outstanding (restricted shares)		(31,845)		(27,260)
Denominator for basic earnings per share -
Weighted-average shares outstanding		8,867,149		9,099,606
Effect of dilutive securities stock options or awards		10,173		2,191
Denominator for diluted earnings per share		8,877,322		9,101,797
Basic earnings per share available to common stockholders	$	1.43	$	1.09
Diluted earnings per share available to common stockholders	$	1.43	$	1.09

Certain option and restricted stock awards were excluded from the computation of diluted earnings per share because they were anti-dilutive, based on the average market prices of the Company’s common stock for these periods. Outstanding options and shares of restricted stock totaling 0 and 50,500 were excluded from the computation of diluted earnings per share for the three-month periods ended September 30, 2021 and 2020, respectively.

XML

Income Taxes

3 Months Ended

Sep. 30, 2021

Income Taxes

Income Taxes.

Note 8: Income Taxes

The Company and its subsidiaries file income tax returns in the U.S. Federal jurisdiction and various states. The Company is no longer subject to federal and state examinations by tax authorities for tax years ending June 30, 2017 and before. The Company’s Missouri income tax returns for the fiscal years ending June 30, 2016 through 2018 are under audit by the Missouri Department of Revenue. The Company recognized no interest or penalties related to income taxes for the periods presented.

The Company’s income tax provision is comprised of the following components:

	For the three-month periods ended
(dollars in thousands)	September 30, 2021		September 30, 2020
Income taxes
Current	$	3,481	$	4,750
Deferred		7		(2,003)
Total income tax provision	$	3,488	$	2,747

The components of net deferred tax assets (included in other assets on the condensed consolidated balance sheet) are summarized as follows:

(dollars in thousands)	September 30, 2021		June 30, 2021
Deferred tax assets:
Provision for losses on loans	$	7,573	$	7,626
Accrued compensation and benefits		549		826
NOL carry forwards acquired		135		147
Unrealized loss on other real estate		183		180
Other		—		182
Total deferred tax assets		8,440		8,961
Deferred tax liabilities:
Purchase accounting adjustments		210		210
Depreciation		1,765		1,842
FHLB stock dividends		120		120
Prepaid expenses		209		283
Unrealized gain on available for sale securities		824		821
Other		830		1,193
Total deferred tax liabilities		3,958		4,469
Net deferred tax asset	$	4,482	$	4,492

As of September 30, 2021, the Company had approximately $706,000 and $0 in federal and state net operating loss carryforwards, respectively, which were acquired in the July 2009 acquisition of Southern Bank of Commerce, the February 2014 acquisition of Citizens State Bankshares of Bald Knob, Inc., and the April 2020 acquisition of Central Federal Savings and Loan. The amount reported is net of the IRC Sec. 382 limitation, or state equivalent, related to utilization of net operating loss carryforwards of acquired corporations. Unless otherwise utilized, the net operating losses will begin to expire in 2027.

A reconciliation of income tax expense at the statutory rate to the Company’s actual income tax expense is shown below:

	For the three-month periods ended
(dollars in thousands)	September 30, 2021		September 30, 2020
Tax at statutory rate	$	3,409	$	2,674
Increase (reduction) in taxes resulting from:
Nontaxable municipal income		(107)		(103)
State tax, net of Federal benefit		252		241
Cash surrender value of Bank-owned life insurance		(59)		(59)
Tax credit benefits		(11)		26
Other, net		4		(32)
Actual provision	$	3,488	$	2,747

For the three- month periods ended September 30, 2021 and 2020, income tax expense at the statutory rate was calculated using a 21% annual effective tax rate (AETR).

Tax credit benefits are recognized under the deferral method of accounting for investments in tax credits.

XML

401(k) Retirement Plan

3 Months Ended

Sep. 30, 2021

401(k) Retirement Plan

401(k) Retirement Plan

Note 9:  401(k) Retirement Plan

The Bank has a 401(k) retirement plan that covers substantially all eligible employees. The Bank made a “safe harbor” matching contributions to the Plan of up to 4% of eligible compensation, depending upon the percentage of eligible pay deferred into the plan by the employee, and also made additional, discretionary profit-sharing contributions for fiscal 2021. For fiscal 2022, the Company has maintained the safe harbor matching contribution of up to 4%, and expects to continue to make additional, discretionary profit-sharing contributions. During the three- month period ended September 30, 2021, retirement plan expenses recognized for the Plan totaled approximately $490,000, as compared to $457,000 for the same period of the prior fiscal year. Employee deferrals and safe harbor contributions are fully vested. Profit-sharing or other contributions vest over a period of five years.

XML

Subordinated Debt

3 Months Ended

Sep. 30, 2021

Subordinated Debt.

Subordinated Debt

Note 10:  Subordinated Debt

In March 2004, the Company established Southern Missouri Statutory Trust I as a statutory business trust, to issue Floating Rate Capital Securities (the “Trust Preferred Securities”). The securities mature in 2034, became redeemable after five years, and bear interest at a floating rate based on LIBOR. The securities represent undivided beneficial interests in the trust, which was established by the Company for the purpose of issuing the securities. The Trust Preferred Securities were sold in a private transaction exempt from registration under the Securities Act of 1933, as amended (the “Act”) and have not been registered under the Act. The securities may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements. Southern Missouri Statutory Trust I used the proceeds from the sale of the Trust Preferred Securities to purchase Junior Subordinated Debentures (the “Debentures”) of the Company which have terms identical to the Trust Preferred Securities. At September 30, 2021, the Debentures carried an interest rate of 2.87%. The balance of the Debentures outstanding was $7.2 million at September 30, and June 30, 2021. The Company used the net proceeds from the sale of the Debentures for working capital and investment in its subsidiaries.

In connection with its October 2013 acquisition of Ozarks Legacy Community Financial, Inc. (OLCF), the Company assumed $3.1 million in floating rate junior subordinated debt securities. The debt securities had been issued in June 2005 by OLCF in connection with the sale of trust preferred securities, bear interest at a floating rate based on LIBOR, are now redeemable at par, and mature in 2035. At September 30, 2021, the current rate was 2.57%. The carrying value of the debt securities was approximately $2.7 million at September 30, and June 30, 2021.

In connection with its August 2014 acquisition of Peoples Service Company, Inc. (PSC), the Company assumed $6.5 million in floating rate junior subordinated debt securities. The debt securities had been issued in 2005 by PSC’s subsidiary bank holding company, Peoples Banking Company, in connection with the sale of trust preferred securities, bear interest at a floating rate based on LIBOR, are now redeemable at par, and mature in 2035. At September 30, 2021, the current rate was 1.92%. The carrying value of the debt securities was approximately $5.3 million at September 30, and June 30, 2021.

The Company’s investment at a face amount of $505,000 in these trusts is included with Prepaid Expenses and Other Assets in the consolidated balance sheets, and is carried at a value of $459,000 at September 30, 2021.

XML

Fair Value Measurements

3 Months Ended

Sep. 30, 2021

Fair Value Measurements

Fair Value Measurements

Note 11:  Fair Value Measurements

ASC Topic 820, Fair Value Measurements, defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Topic 820 also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:

Level 1 Quoted prices in active markets for identical assets or liabilities

Level 2 Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in active markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities

Level 3 Unobservable inputs supported by little or no market activity that are significant to the fair value of the assets or liabilities

Recurring Measurements. The following table presents the fair value measurements recognized in the accompanying consolidated balance sheets measured at fair value on a recurring basis and the level within the fair value hierarchy in which the fair value measurements fall at September 30, and June 30, 2021:

	Fair Value Measurements at September 30, 2021, Using:
			Quoted Prices in
			Active Markets for		Significant Other		Significant
			Identical Assets		Observable Inputs		Unobservable Inputs
(dollars in thousands)	Fair Value		(Level 1)		(Level 2)		(Level 3)
Obligations of state and political subdivisions	$	46,869	$	—	$	46,869	$	—
Corporate obligations		18,832		—		18,832		—
Other securities		608		—		608		—
MBS and CMOs		143,100		—		143,100		—

	Fair Value Measurements at June 30, 2021, Using:
			Quoted Prices in
			Active Markets for		Significant Other		Significant
			Identical Assets		Observable Inputs		Unobservable Inputs
(dollars in thousands)	Fair Value		(Level 1)		(Level 2)		(Level 3)
Obligations of state and political subdivisions	$	47,696	$	—	$	47,696	$	—
Corporate obligations		20,311		—		20,311		—
Other securities		672		—		672		—
MBS and CMOs		138,341		—		138,341		—

Following is a description of the valuation methodologies and inputs used for assets measured at fair value on a recurring basis and recognized in the accompanying consolidated balance sheets, as well as the general classification of such assets pursuant to the valuation hierarchy.

Available-for-sale Securities. When quoted market prices are available in an active market, securities are classified within Level 1. If quoted market prices are not available, then fair values are estimated using pricing models, or quoted prices of securities with similar characteristics. For these securities, the Company obtains fair value measurements from an independent pricing service. The fair value measurements consider observable data that may include dealer quotes, market spreads, cash flows, the U.S. Treasury yield curve, live trading levels, trade execution data, market consensus prepayment speeds, credit information and the bond’s terms and conditions, among other things.  In certain cases where Level 1 or Level 2 inputs are not available, securities are classified within Level 3 of the hierarchy.

Nonrecurring Measurements. The following tables present the fair value measurement of assets measured at fair value on a nonrecurring basis and the level within the ASC 820 fair value hierarchy in which the fair value measurements fell at September 30, and June 30, 2021:

	Fair Value Measurements at September 30, 2021, Using:
			Quoted Prices in
			Active Markets for		Significant Other		Significant
			Identical Assets		Observable Inputs		Unobservable Inputs
(dollars in thousands)	Fair Value		(Level 1)		(Level 2)		(Level 3)
Foreclosed and repossessed assets held for sale	$	144	$	—	$	—	$	144

	Fair Value Measurements at June 30, 2021, Using:
			Quoted Prices in
			Active Markets for		Significant Other		Significant
			Identical Assets		Observable Inputs		Unobservable Inputs
(dollars in thousands)	Fair Value		(Level 1)		(Level 2)		(Level 3)
Foreclosed and repossessed assets held for sale	$	280	$	—	$	—	$	280

The following table presents losses recognized on assets measured on a non-recurring basis for the three-month periods ended September 30, 2021 and 2020:

	For the three months ended
(dollars in thousands)	September 30, 2021		September 30, 2020
Foreclosed and repossessed assets held for sale	$	(28)	$	(36)
Total losses on assets measured on a non-recurring basis	$	(28)	$	(36)

The following is a description of valuation methodologies and inputs used for assets measured at fair value on a nonrecurring basis and recognized in the accompanying consolidated balance sheets, as well as the general classification of such assets and liabilities pursuant to the valuation hierarchy. For assets classified within Level 3 of fair value hierarchy, the process used to develop the reported fair value process is described below.

Foreclosed and Repossessed Assets Held for Sale. Foreclosed and repossessed assets held for sale are valued at the time the loan is foreclosed upon or collateral is repossessed and the asset is transferred to foreclosed or repossessed assets held for sale. The value of the asset is based on third party or internal appraisals, less estimated costs to sell and appropriate discounts, if any. The appraisals are generally discounted based on current and expected market conditions that may impact the sale or value of the asset and management’s knowledge and experience with similar assets. Such discounts typically may be significant and result in a Level 3 classification of the inputs for determining fair value of these assets. Foreclosed and repossessed assets held for sale are continually evaluated for additional impairment and are adjusted accordingly if impairment is identified.

Unobservable (Level 3) Inputs. The following table presents quantitative information about unobservable inputs used in recurring and nonrecurring Level 3 fair value measurements.

					Range
	Fair value at		Valuation	Unobservable	of		Weighted-average
(dollars in thousands)	September 30, 2021		technique	inputs	inputs applied		inputs applied
Nonrecurring Measurements
Foreclosed and repossessed assets	$	144	Third party appraisal	Marketability discount	8.0% - 51.0	%	24.4	%

					Range
	Fair value at		Valuation	Unobservable	of		Weighted-average
(dollars in thousands)	June 30, 2021		technique	inputs	inputs applied		inputs applied
Nonrecurring Measurements
Foreclosed and repossessed assets	$	280	Third party appraisal	Marketability discount	7.2% - 80.6	%	37.1	%

Fair Value of Financial Instruments. The following table presents estimated fair values of the Company’s financial instruments not reported at fair value and the level within the fair value hierarchy in which the fair value measurements fell at September 30 and June 30, 2021.

	September 30, 2021
			Quoted Prices
			in Active				Significant
			Markets for		Significant Other		Unobservable
	Carrying		Identical Assets		Observable Inputs		Inputs
(dollars in thousands)	Amount		(Level 1)		(Level 2)		(Level 3)
Financial assets
Cash and cash equivalents	$	111,402	$	111,402	$	—	$	—
Interest-bearing time deposits		980		—		980		—
Stock in FHLB		5,425		—		5,425		—
Stock in Federal Reserve Bank of St. Louis		5,031		—		5,031		—
Loans receivable, net		2,249,478		—		—		2,265,086
Accrued interest receivable		11,203		—		11,203		—
Financial liabilities
Deposits		2,371,695		1,817,346		—		556,397
Advances from FHLB		46,522		—		47,419		—
Accrued interest payable		731		—		731		—
Subordinated debt		15,268		—		—		16,045
Unrecognized financial instruments (net of contract amount)
Commitments to originate loans		—		—		—		—
Letters of credit		—		—		—		—
Lines of credit		—		—		—		—

	June 30, 2021
			Quoted Prices
			in Active				Significant
			Markets for		Significant Other		Unobservable
	Carrying		Identical Assets		Observable Inputs		Inputs
(dollars in thousands)	Amount		(Level 1)		(Level 2)		(Level 3)
Financial assets
Cash and cash equivalents	$	123,592	$	123,592	$	—	$	—
Interest-bearing time deposits		979		—		979		—
Stock in FHLB		5,873		—		5,873		—
Stock in Federal Reserve Bank of St. Louis		5,031		—		5,031		—
Loans receivable, net		2,200,244		—		—		2,218,762
Accrued interest receivable		10,079		—		10,079		—
Financial liabilities
Deposits		2,330,803		1,768,217		—		565,123
Advances from FHLB		57,529		—		58,587		—
Accrued interest payable		779		—		779		—
Subordinated debt		15,243		—		—		15,468
Unrecognized financial instruments (net of contract amount)
Commitments to originate loans		—		—		—		—
Letters of credit		—		—		—		—
Lines of credit		—		—		—		—

XML

Business Combinations

3 Months Ended

Sep. 30, 2021

Business Combinations

Business Combinations

Note 12: Business Combinations

On September 28, 2021 the Company announced the signing of an agreement and plan of merger whereby Fortune Financial Corporation (”Fortune”), and its wholly owned subsidiary, FortuneBank (“FB”), will be acquired by the Company in a stock and cash transaction valued at approximately $29.9 million. At June 30, 2021, Fortune held consolidated assets of $253.7 million, loans, net of allowance, of $209.3 million, and deposits of $214.5 million. The transaction is expected to close late in the first quarter of calendar 2022, subject to satisfaction of customary closing conditions, including regulatory and Fortune shareholder approvals. The acquired financial institution is expected to be merged with and into Southern Bank shortly after or simultaneously with the acquisition of Fortune. For the three-month period ended September 30, 2021, the Company incurred $25,000 of third-party acquisition-related costs, included in noninterest expense in the Company’s consolidated statements of income.

On October 20, 2021, the Company announced that it has entered into a definitive agreement to acquire the Cairo, Illinois, branch of First National Bank, Oldham, South Dakota. The deal, which will eventually result in Southern Bank relocating its facility from its current location to the First National Bank location in Cairo, is expected to be completed by the end of the 2021 calendar year, subject to approval by regulatory bodies at the federal and state level. The Company views the acquisition and anticipated updates to the new facility as an expression of its continuing commitment to the Cairo community.

XML

Organization and Summary of Significant Accounting Policies (Policies)

3 Months Ended

Sep. 30, 2021

Organization and Summary of Significant Accounting Policies

Organization

Organization. Southern Missouri Bancorp, Inc., a Missouri corporation (the Company) was organized in 1994 and is the parent company of Southern Bank (the Bank). Substantially all of the Company’s consolidated revenues are derived from the operations of the Bank, and the Bank represents substantially all of the Company’s consolidated assets and liabilities. SB Real Estate Investments, LLC is a wholly-owned subsidiary of the Bank formed to hold Southern Bank Real Estate Investments, LLC. Southern Bank Real Estate Investments, LLC is a real estate investment trust (REIT) which is controlled by SB Real Estate Investments, LLC, and has other preferred shareholders in order to meet the requirements to be a REIT. At September 30, 2021, assets of the REIT were approximately $1.1 billion, and consisted primarily of real estate loan participations acquired from the Bank.

The Bank is primarily engaged in providing a full range of banking and financial services to individuals and corporate customers in its market areas. The Bank and Company are subject to competition from other financial institutions. The Bank and Company are subject to the regulation of certain federal and state agencies and undergo periodic examinations by those regulatory authorities.

Basis of Financial Statement Presentation

Basis of Financial Statement Presentation. The consolidated financial statements of the Company have been prepared in conformity with accounting principles generally accepted in the United States of America and general practices within the banking industry. In the normal course of business, the Company encounters two significant types of risk: economic and regulatory. Economic risk is comprised of interest rate risk, credit risk, and market risk. The Company is subject to interest rate risk to the degree that its interest-bearing liabilities reprice on a different basis than its interest-earning assets. Credit risk is the risk of default on the Company’s investment or loan portfolios resulting from the borrowers’ inability or unwillingness to make contractually required payments. Market risk reflects changes in the value of the investment portfolio, collateral underlying loans receivable, and the value of the Company’s investments in real estate.

Principles of Consolidation

Principles of Consolidation. The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated.

Use of Estimates

Use of Estimates. The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

On July 1, 2020, the Company adopted ASU 2016-13, Financial Instruments – Credit Losses, also known as the current expected credit loss (“CECL”) standard, which created material changes to the existing critical accounting policy that existed at June 30, 2020. Effective July 1, 2020, the significant accounting policy which was considered to be the most critical in preparing the Company’s consolidated financial statements is the determination of the allowance for credit losses (“ACL”) on loans.

Cash and Cash Equivalents

Cash and Cash Equivalents. For purposes of reporting cash flows, cash and cash equivalents includes cash, due from depository institutions and interest-bearing deposits in other depository institutions with original maturities of three months or less. Interest-bearing deposits in other depository institutions were $76.4 million and $83.2 million at September 30 and June 30, 2021, respectively. The deposits are held in various commercial banks with a total of $1.7 million and $1.8 million exceeding the FDIC’s deposit insurance limits at September 30 and June 30, 2021, respectively, as well as at the Federal Reserve and the Federal Home Loan Bank of Des Moines and Chicago.

Interest-bearing Time Deposits

Interest-bearing Time Deposits. Interest bearing deposits in banks mature within seven years and are carried at cost.

Available for Sale Securities

Available for Sale Securities. Available for sale securities (“AFS”), which include any security for which the Company has no immediate plan to sell but which may be sold in the future, are carried at fair value. Unrealized gains and losses, net of tax, are reported in accumulated other comprehensive income, a component of stockholders’ equity. All securities have been classified as available for sale.

Premiums and discounts on debt securities are amortized or accreted as adjustments to income over the estimated life of the security using the level yield method. Realized gains or losses on the sale of securities is based on the specific identification method. The fair value of securities is based on quoted market prices or dealer quotes. If a quoted market price is not available, fair value is estimated using quoted market prices for similar securities.

The Company does not invest in collateralized mortgage obligations that are considered high risk.

For AFS securities with fair value less than amortized cost that management has no intent to sell and believes that it more likely than not will not be required to sell prior to recovery, only the credit loss component of the impairment is recognized in earnings, while the noncredit loss is recognized in accumulated other comprehensive income. The credit loss component recognized in earnings is identified as the amount of principal cash flows not expected to be received over the remaining term of the security as projected based on cash flow projections, and is recorded to the ACL, by a charge to provision for credit losses. Accrued interest receivable is excluded from the estimate of credit losses. Both the ACL and the adjustment to net income may be reversed if conditions change. However, if the Company intends to sell an impaired AFS security, or, if it is more likely than not the Company will be required to sell such a security before recovering its amortized cost basis, the entire impairment amount would be recognized in earnings with a corresponding adjustment to the security’s amortized cost basis. Because the security’s amortized cost basis is adjusted to fair value, there is no ACL in this situation.

At adoption of ASU 2016-13, no impairment on AFS securities was attributable to credit. The Company will evaluate impaired AFS securities at the individual level on a quarterly basis, and will consider factors including, but not limited to: the extent to which the fair value of the security is less than the amortized cost basis; adverse conditions specifically related to the security, an industry, or geographic area; the payment structure of the security and likelihood of the issuer to be able to make payments that may increase in the future; failure of the issuer to make scheduled interest or principal payments; any changes to the rating of the security by a rating agency; and the ability and intent to hold the security until maturity. A qualitative determination as to whether any portion of the impairment is attributable to credit risk is acceptable. There were no credit related factors underlying unrealized losses on AFS securities at September 30, 2021, or June 30, 2021.

Changes in the ACL are recorded as expense. Losses are charged against the ACL when management believes the uncollectability of an AFS debt security is confirmed or when either of the criteria regarding intent or requirement to sell is met.

Federal Reserve Bank and Federal Home Loan Bank Stock

Federal Reserve Bank and Federal Home Loan Bank Stock. The Bank is a member of the Federal Reserve and the Federal Home Loan Bank (FHLB) systems. Capital stock of the Federal Reserve and the FHLB is a required investment based upon a predetermined formula and is carried at cost.

Loans

Loans. Loans are generally stated at unpaid principal balances, less the allowance for credit losses, any net deferred loan origination fees, and unamortized premiums or discounts on purchased loans.

Interest on loans is accrued based upon the principal amount outstanding. The accrual of interest on loans is discontinued when, in management’s judgment, the collectability of interest or principal in the normal course of business is doubtful. The Company complies with regulatory guidance which indicates that loans should be placed in nonaccrual status when 90 days past due, unless the loan is both well-secured and in the process of collection. A loan that is “in the process of collection” may be subject to legal action or, in appropriate circumstances, through other collection efforts reasonably expected to result in repayment or restoration to current status in the near future. A loan is considered delinquent when a payment has not been made by the contractual due date. At September 30, 2021, some loans were modified under the terms of the Coronavirus Aid, Relief and Economic Security Act (the CARES Act), which provides that loans modified after March 1, 2020, due to the COVID-19 pandemic, and which were otherwise current at December 31, 2019, need not be accounted for as troubled debt restructurings (TDRs). While these loans may not have met the contractual due dates of payments under their previous terms, so long as they were compliant with the terms of the modification made under the CARES Act, they would not have been reported as delinquent at June 30, 2021 or September 30, 2021. See further disclosure in Note 4: Loans and Allowance for Credit Losses. Interest income previously accrued but not collected at the date a loan is placed on nonaccrual status is reversed against interest income. Cash receipts on a nonaccrual loan are applied to principal and interest in accordance with its contractual terms unless full payment of principal is not expected, in which case cash receipts, whether designated as principal or interest, are applied as a reduction of the carrying value of the loan. A nonaccrual loan is generally returned to accrual status when principal and interest payments are current, full collectability of principal and interest is reasonably assured, and a consistent record of performance has been demonstrated.

The ACL is a valuation account that is deducted from the loans’ amortized cost basis to present the net amount expected to be collected on the loans, and is established through provision for credit losses charged to current earnings. The ACL is increased by the provision for losses on loans charged to expense and reduced by loans charged off, net of recoveries. Loans are charged off in the period deemed uncollectible, based on management’s analysis of expected cash flows (for non-collateral dependent loans) or collateral value (for collateral-dependent loans). Subsequent recoveries of loans previously charged off, if any, are credited to the allowance when received.

Management estimates the ACL using relevant available information, from internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts. Adjustments may be made to historical loss information for differences identified in current loan-specific risk characteristics, such as differences in underwriting standards or terms; lending review systems; experience, ability, or depth of lending management and staff; portfolio growth and mix; delinquency levels and trends; as well as for changes in environmental conditions, such as changes in economic activity or employment, agricultural economic conditions, property values, or other relevant factors. The Company generally incorporates a reasonable and supportable forecast period of four quarters, and a four-quarter, straight-line reversion period to return to long-term historical averages.

The ACL is measured on a collective (pool) basis when similar risk characteristics exist. For loans that do not share general risk characteristics with the collectively evaluated pools, the Company estimates credit losses on an individual loan basis, and these loans are excluded from the collectively evaluated pools. An ACL for an individually evaluated loan is recorded when the amortized cost basis of the loan exceeds the discounted estimated cash flows using the loan’s initial effective interest rate or the fair value, less estimated costs to sell, of the collateral for certain collateral dependent loans. For the collectively evaluated pools, the Company segments the loan portfolio primarily by loan purpose and collateral into 24 pools, which are homogeneous groups of loans that possess similar loss potential characteristics. The Company primarily utilizes the discounted cash flow (“DCF”) methodology for measurement of the required ACL. For a limited number of pools with a relatively small balance of unpaid principal balance, the Company utilized the remaining life method. The DCF model implements probability of default (“PD”) and loss given default (“LGD”) calculations at the instrument level. PD and LGD are determined based on statistical analysis and correlation of historical losses with various economic factors over time. In general, the Company’s losses have not correlated well with economic factors,

and the Company has utilized peer data where more appropriate. The Company defines a default as an event of charge off, an adverse (substandard or worse) internal credit rating, becoming delinquent 90 days or more, or being placed on nonaccrual status. A PD/LGD estimate is applied to a projected model of the loan’s cashflow, including principal and interest payments, with consideration for prepayment speeds, principal curtailments, and recovery lag.

Subsequent to the July 1, 2020, adoption of ASU 2016-13, loans acquired in a business combination that have experienced more-than-insignificant deterioration in credit quality since origination are considered purchased credit deteriorated (“PCD”) loans. At the acquisition date, an estimate of expected credit losses is made for groups of PCD loans with similar risk characteristics and individual PCD loans without similar risk characteristics. This initial ACL is allocated to individual PCD loans and added to the purchase price or acquisition date fair values to establish the initial amortized cost basis of the PCD loans. As the initial ACL is added to the purchase price, there is no credit loss expense recognized upon acquisition of a PCD loan. Any difference between the unpaid principal balance of PCD loans and the amortized cost basis is considered to relate to non-credit factors and results in a discount or premium. Discounts and premiums are recognized through interest income on a level-yield method over the life of the loans.

Upon adoption of ASU 2016-13, the amortized cost basis of the PCD assets were adjusted to reflect the addition of $434,000 to the ACL. The remaining noncredit discount, based on the adjusted amortized cost basis, will be accreted into interest income at the effective interest rate as of July 1, 2020.

Loan fees and certain direct loan origination costs are deferred, and the net fee or cost is recognized as an adjustment to interest income using the interest method over the contractual life of the loans.

Off-Balance Sheet Credit Exposures

Off-Balance Sheet Credit Exposures. Off-balance sheet credit instruments include commitments to make loans, and commercial letters of credit, issued to meet customer financing needs. The Company’s exposure to credit loss in the event of non-performance by the other party to the financial instrument for off-balance sheet loan commitments is represented by the contractual amount of those instruments. Such financial instruments are recorded when they are funded. The ACL on off-balance sheet credit exposures is estimated by loan pool on a quarterly basis under the current CECL model using the same methodologies as portfolio loans, taking into consideration the likelihood that funding will occur and is included in other liabilities on the Company’s consolidated balance sheets. The Company records an ACL on off-balance sheet credit exposures, unless the commitments to extend credit are unconditionally cancelable. In prior periods the charge for credit loss expense for off-balance sheet credit exposures was included in other non-interest expense in the Company’s consolidated statements of income, whereas under updated regulatory accounting guidelines, that figure is combined with the provision for credit losses beginning July 1, 2020.

Foreclosed Real Estate

Foreclosed Real Estate. Real estate acquired by foreclosure or by deed in lieu of foreclosure is initially recorded at fair value less estimated selling costs, establishing a new cost basis. Costs for development and improvement of the property are capitalized.

Valuations are periodically performed by management, and an allowance for losses is established by a charge to operations if the carrying value of a property exceeds its estimated fair value, less estimated selling costs.

Loans to facilitate the sale of real estate acquired in foreclosure are discounted if made at less than market rates. Discounts are amortized over the fixed interest period of each loan using the interest method.

Premises and Equipment

Premises and Equipment. Premises and equipment are stated at cost less accumulated depreciation and include expenditures for major betterments and renewals. Maintenance, repairs, and minor renewals are expensed as incurred. When property is retired or sold, the retired asset and related accumulated depreciation are removed from the accounts and the resulting gain or loss taken into income. The Company reviews property and equipment for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If such assets are considered to be impaired, the impairment loss recognized is measured by the amount by which the carrying amount exceeds the fair value of the assets.

Depreciation is computed by use of straight-line and accelerated methods over the estimated useful lives of the assets. Estimated lives are generally seven to forty years for premises, three to seven years for equipment, and three years for software.

Bank Owned Life Insurance

Bank Owned Life Insurance. Bank owned life insurance policies are reflected in the consolidated balance sheets at the estimated cash surrender value. Changes in the cash surrender value of these policies, as well as a portion of the insurance proceeds received, are recorded in noninterest income in the consolidated statements of income.

Goodwill

Goodwill. The Company’s goodwill is evaluated annually for impairment or more frequently if impairment indicators are present. A qualitative assessment is performed to determine whether the existence of events or circumstances leads to a determination that it is more likely than not the fair value is less than the carrying amount, including goodwill. If, based on the evaluation, it is determined to be more likely than not that the fair value is less than the carrying value, then goodwill is tested further for impairment. If the implied fair value of goodwill is lower than its carrying amount, a goodwill impairment is indicated and goodwill is written down to its implied fair value. Subsequent increases in goodwill value are not recognized in the financial statements. As of June 30, 2021, there was no impairment indicated, based on a qualitative assessment of goodwill, which considered: the market value of the Company’s common stock, concentrations of credit; profitability; nonperforming assets; capital levels; and results of recent regulatory examinations. The Company believes there was no impairment of goodwill at September 30, 2021.

Intangible Assets

Intangible Assets. The Company’s intangible assets at September 30, 2021 included gross core deposit intangibles of $15.3 million with $10.4 million accumulated amortization, gross other identifiable intangibles of $3.8 million with accumulated amortization of $3.8 million, and mortgage servicing rights of $1.9 million. At June 30, 2021, the Company’s intangible assets included gross core deposit intangibles of $15.3 million with $10.1 million accumulated amortization, gross other identifiable intangibles of $3.8 million with accumulated amortization of $3.8 million, and mortgage servicing rights of $1.9 million. The Company’s core deposit intangible assets are being amortized using the straight line method, over periods ranging from five to seven years, with amortization expense expected to be approximately $1.0 million in the remainder of fiscal 2022, $1.4 million in fiscal 2023 and fiscal 2024, $807,000 in fiscal 2025, and $328,000 thereafter. As of June 30, 2021, there was no impairment indicated, and the Company believes there was no impairment of other intangible assets at September 30, 2021.

Income Taxes

Income Taxes. The Company accounts for income taxes in accordance with income tax accounting guidance (ASC 740, Income Taxes). The income tax accounting guidance results in two components of income tax expense: current and deferred. Current income tax expense reflects taxes to be paid or refunded for the current period by applying the provisions of the enacted tax law to the taxable income or excess of deductions over revenues. The Company determines deferred income taxes using the liability (or balance sheet) method. Under this method, the net deferred tax asset or liability is based on the tax effects of the differences between the book and tax bases of assets and liabilities, and enacted changes in tax rates and laws are recognized in the period in which they occur.

Deferred income tax expense results from changes in deferred tax assets and liabilities between periods. Deferred tax assets are recognized if it is more likely than not, based on the technical merits, that the tax position will be realized or sustained upon examination. The term more likely than not means a likelihood of more than 50 percent; the terms examined and upon examination also include resolution of the related appeals or litigation processes, if any. A tax position that meets the more-likely-than-not recognition threshold is initially and subsequently measured as the largest amount of tax benefit that has a greater than 50 percent likelihood of being realized upon settlement with a taxing authority that has full knowledge of all relevant information. The determination of whether or not a tax position has met the more-likely-than-not recognition threshold considers the facts, circumstances, and information available at the reporting date and is subject to management’s judgment. Deferred tax assets are reduced by a valuation allowance if, based on the weight of evidence available, it is more likely than not that some portion or all of a deferred tax asset will not be realized.

The Company recognizes interest and penalties on income taxes as a component of income tax expense.

The Company files consolidated income tax returns with its subsidiaries, the Bank and SB Real Estate Investments, LLC, with a tax year ended June 30. Southern Bank Real Estate Investments, LLC files a separate REIT return for federal tax purposes, and also files state income tax returns with a tax year ended December 31.

Incentive Plan

Incentive Plans. The Company accounts for its Equity Incentive Plan (EIP), and Omnibus Incentive Plan (OIP) in accordance with ASC 718, “Share-Based Payment.” Compensation expense is based on the market price of the Company’s stock on the date the shares are granted and is recorded over the vesting period. The difference between the

grant-date fair value and the fair value on the date the shares are considered earned represents a tax benefit to the Company that is recorded as an adjustment to income tax expense.

Outside Directors' Retirement

Outside Directors’ Retirement. The Bank adopted a directors’ retirement plan in April 1994 for outside directors. The directors’ retirement plan provides that each non-employee director (participant) shall receive, upon termination of service on the Board on or after age 60, other than termination for cause, a benefit in equal annual installments over a five year period. The benefit will be based upon the product of the participant’s vesting percentage and the total Board fees paid to the participant during the calendar year preceding termination of service on the Board. The vesting percentage shall be determined based upon the participant’s years of service on the Board, whether before or after the reorganization date.

In the event that the participant dies before collecting any or all of the benefits, the Bank shall pay the participant’s beneficiary. Benefits shall not be payable to anyone other than the beneficiary, and shall terminate on the death of the beneficiary.

Stock Options

Stock Options. Compensation cost is measured based on the grant-date fair value of the equity instruments issued, and recognized over the vesting period during which an employee provides service in exchange for the award.

Earnings Per Share

Earnings Per Share. Basic earnings per share available to common stockholders is computed using the weighted-average number of common shares outstanding. Diluted earnings per share available to common stockholders includes the effect of all weighted-average dilutive potential common shares (stock options and restricted stock grants) outstanding during each period.

Comprehensive Income

Comprehensive Income. Comprehensive income consists of net income and other comprehensive income, net of applicable income taxes. Other comprehensive income includes unrealized appreciation on available-for-sale securities, and changes in the funded status of defined benefit pension plans.

Transfers Between Fair Value Hierarchy Levels

Transfers Between Fair Value Hierarchy Levels. Transfers in and out of Level 1 (quoted market prices), Level 2 (other significant observable inputs) and Level 3 (significant unobservable inputs) are recognized on the period ending date.

New Accounting Pronouncements

New Accounting Pronouncements:

In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326), which the Company adopted July 1, 2020. The Update amended guidance on reporting credit losses for financial assets held at amortized cost basis and available for sale debt securities. For financial assets held at amortized cost basis, Topic 326 eliminated the probable initial recognition threshold in current GAAP and, instead, requires an entity to reflect its current estimate of all expected credit losses. The Update affects loans, debt securities, trade receivables, net investments in leases, off balance sheet credit exposures, and any other financial assets not excluded from the scope that have the contractual right to receive cash. Adoption was applied on a modified retrospective basis, through a cumulative-effect adjustment to retained earnings. Adoption resulted in an increase to the ACL of $8.9 million, related to the transition from the incurred loss model to the CECL ACL model, and an increase of $434,000 related to the transition from PCI to PCD methodology, relative to the ALLL as of June 30, 2020. The Company also recorded an adjustment to the reserve for unfunded commitments recorded in other liabilities of $268,000. The impact at adoption was reflected as an adjustment to beginning retained earnings, net of income taxes, in the amount of $7.2 million. In accordance with the new standard, management did not reassess whether PCI assets met the criteria of PCD assets as of the date of adoption. The adoption of ASU 2016-13 in fiscal 2021 could also impact the Company’s future earnings, perhaps materially.

The following table illustrates the impact of adoption of ASU 2016-13:

	July 1, 2020
	As reported		As reported		Impact of
	under		prior to		adoption
(dollars in thousands)	ASU 2016-13		ASU 2016-13		ASU 2016-13
Loans receivable	$	2,142,363	$	2,141,929	$	434
Allowance for credit losses on loans:
Real Estate Loans:
Residential		8,396		4,875		3,521
Construction		1,889		2,010		(121)
Commercial		15,988		12,132		3,856
Consumer loans		2,247		1,182		1,065
Commercial loans		5,952		4,940		1,012
Total allowance for credit losses on loans	$	34,472	$	25,139	$	9,333
Total allowance for credit losses on off-balance sheet credit exposures	$	2,227	$	1,959	$	268

The above table includes the impact of ASU 2016-13 adoption for PCD assets previously classified as PCI. The change in the ACL includes $434,000 attributable to residential and commercial real estate loans, and the amortized cost basis of loans receivable was increased for those loans by that total amount.

In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”), that removes certain exceptions for investments, intraperiod allocations and interim calculations, and adds guidance to reduce complexity in accounting for income taxes. ASU 2019-12 introduces the following new guidance: i) guidance to evaluate whether a step-up in tax basis of goodwill relates to a business combination in which book goodwill was recognized or a separate transaction and ii) a policy election to not allocate consolidated income taxes when a member of a consolidated tax return is not subject to income tax. ASU 2019-12 is effective for fiscal years, and interim periods within those fiscal years beginning after December 15, 2020. The adoption of ASU 2019-12 did not have a material impact on the Company’s operations, financial position or disclosures.

In March 2020, the CARES Act was signed into law, creating a forbearance program for federally backed mortgage loans, protects borrowers from negative credit reporting due to loan accommodations related to the National Emergency, and provides financial institutions the option to temporarily suspend certain requirements under U.S. GAAP related to troubled debt restructurings (TDR) for a limited period of time to account for the effects of COVID-19. The Company has elected to not apply ASC Subtopic 310-40 for loans eligible under the CARES Act, based on the modification’s (1) relation to COVID-19, (2) execution for a loan that was not more than 30-days past due as of December 31, 2019, and (3) execution between March 1, 2020, and the earlier of the date that falls 60 days following the termination of the declared National Emergency, or December 31, 2020. The 2021 Consolidated Appropriations Act, signed into law in December 2020, extended the window during which loans may be modified without classification as TDRs under ASC Subtopic 310-40, to the earlier of January 1, 2022, or 60 days following the termination of the declared National Emergency.

In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): “Facilitation of the Effects of Reference Rate Reform on Financial Reporting,”.  The amendments in this update provide optional guidance for a limited period to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting. It provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments in this update are effective for all entities as of March 12, 2020 through December 31, 2022. Pursuant to the Interagency Statement on LIBOR Transition issued in November 2020, the Company will not enter into any new LIBOR-based credit agreements after December 31, 2021. The adoption of ASU 2020-04 is not expected to have a material impact on the Company’s consolidated financial statements.

In January 2021, the FASB issued ASU 2021-01, Reference Rate Reform (Topic 848): Scope. ASU 2021-01 clarifies that certain optional expedients and exceptions in ASC 848 for contract modifications and hedge accounting apply to

derivatives that are affected by the discounting transition. ASU 2021-01 also amends the expedients and exceptions in ASC 848 to capture the incremental consequences of the scope clarification and to tailor the existing guidance to derivative instruments affected by the discounting transition. ASU 2021-01 was effective upon issuance and generally can be applied through December 31, 2022. ASU 2021-01 is not expected to have a material impact on the Company’s consolidated financial statements.

Repurchase Agreements

The carrying value of investment and mortgage-backed securities pledged as collateral to secure public deposits amounted to $164.8 million at September 30, 2021 and $155.6 million at June 30, 2021. The securities pledged consist of marketable securities, including $93.2 million and $95.4 million of Mortgage-backed Securities, $30.1 million and $18.8 million of Collateralized Mortgage Obligations, and $41.5 million and $41.4 million of State and Political Subdivisions Obligations at September 30, 2021 and June 30, 2021, respectively.

Credit losses recognized on investments

Credit losses recognized on investments.  There were no credit losses recognized in income and other losses or recorded in other comprehensive income for the three-month periods ended September 30, 2021 and 2020.

XML

Organization and Summary of Significant Accounting Policies (Tables)

3 Months Ended

Sep. 30, 2021

Organization and Summary of Significant Accounting Policies

Schedule of Adoption of ASU 2016-13

	July 1, 2020
	As reported		As reported		Impact of
	under		prior to		adoption
(dollars in thousands)	ASU 2016-13		ASU 2016-13		ASU 2016-13
Loans receivable	$	2,142,363	$	2,141,929	$	434
Allowance for credit losses on loans:
Real Estate Loans:
Residential		8,396		4,875		3,521
Construction		1,889		2,010		(121)
Commercial		15,988		12,132		3,856
Consumer loans		2,247		1,182		1,065
Commercial loans		5,952		4,940		1,012
Total allowance for credit losses on loans	$	34,472	$	25,139	$	9,333
Total allowance for credit losses on off-balance sheet credit exposures	$	2,227	$	1,959	$	268

XML

Securities (Tables)

3 Months Ended

Sep. 30, 2021

Securities

Schedule of Available for Sale Securities

	September 30, 2021
			Gross		Gross		Allowance		Estimated
	Amortized		Unrealized		Unrealized		for		Fair
(dollars in thousands)	Cost		Gains		Losses		Credit Losses		Value
Debt and equity securities:
Obligations of states and political subdivisions	$	45,360	$	1,545	$	(36)	$	—	$	46,869
Corporate obligations		18,853		325		(346)		—		18,832
Other securities		591		17		—		—		608
Total debt and equity securities		64,804		1,887		(382)		—		66,309
Mortgage-backed securities (MBS) and collateralized mortgage obligations (CMOs):
Residential MBS issued by governmental sponsored enterprises (GSEs)		63,247		950		(258)		—		63,939
Commercial MBS issued by GSEs		35,349		1,286		(291)		—		36,344
CMOs issued by GSEs		42,263		628		(74)		—		42,817
Total MBS and CMOs		140,859		2,864		(623)		—		143,100
Total AFS securities	$	205,663	$	4,751	$	(1,005)	$	—	$	209,409

	June 30, 2021
			Gross		Gross		Allowance		Estimated
	Amortized		Unrealized		Unrealized		for		Fair
(dollars in thousands)	Cost		Gains		Losses		Credit Losses		Value
Debt and equity securities:
Obligations of states and political subdivisions	$	46,257	$	1,479	$	(40)	$	—		47,696
Corporate obligations		20,356		290		(335)		—		20,311
Other securities		647		25		—		—		672
Total debt and equity securities		67,260		1,794		(375)		—		68,679
Mortgage-backed securities (MBS) and collateralized mortgage obligations (CMOs):
Residential MBS issued by governmental sponsored enterprises (GSEs)		64,400		932		(379)		—		64,953
Commercial MBS issued by GSEs		35,425		1,394		(338)		—		36,481
CMOs issued by GSEs		36,201		755		(49)		—		36,907
Total MBS and CMOs		136,026		3,081		(766)		—		138,341
Total AFS securities	$	203,286	$	4,875	$	(1,141)	$	—	$	207,020

Schedule of amortized cost and fair value of available-for-sale securities, by contractual maturity

	September 30, 2021
	Amortized		Estimated
(dollars in thousands)	Cost		Fair Value
Within one year	$	1,555	$	1,562
After one year but less than five years		7,236		7,375
After five years but less than ten years		28,516		29,212
After ten years		27,497		28,160
Total investment securities		64,804		66,309
MBS and CMOs		140,859		143,100
Total AFS securities	$	205,663	$	209,409

Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value {1}

	September 30, 2021
	Less than 12 months				12 months or more				Total
			Unrealized				Unrealized				Unrealized
	Fair Value		Losses		Fair Value		Losses		Fair Value		Losses
(dollars in thousands)
Obligations of state and political subdivisions	$	2,716	$	36	$	—	$	—	$	2,716	$	36
Corporate obligations		6,381		84		715		262		7,096		346
MBS and CMOs		45,063		547		4,399		76		49,462		623
Total AFS securities	$	54,160	$	667	$	5,114	$	338	$	59,274	$	1,005

	June 30, 2021
	Less than 12 months				12 months or more				Total
			Unrealized				Unrealized				Unrealized
	Fair Value		Losses		Fair Value		Losses		Fair Value		Losses
(dollars in thousands)
Obligations of state and political subdivisions	$	3,177	$	40	$	—	$	—	$	3,177	$	40
Corporate obligations		9,331		79		720		256		10,051		335
MBS and CMOs		53,893		764		70		2		53,963		766
Total AFS securities	$	66,401	$	883	$	790	$	258	$	67,191	$	1,141

XML

Loans and Allowance for Credit Losses (Tables)

3 Months Ended

Sep. 30, 2021

Loans and Allowance for Credit Losses

Schedule of classes of loans

(dollars in thousands)	September 30, 2021		June 30, 2021
Real Estate Loans:
Residential	$	762,204	$	721,216
Construction		235,501		208,824
Commercial		901,281		889,793
Consumer loans		80,467		77,674
Commercial loans		411,402		414,124
		2,390,855		2,311,631
Loans in process		(107,555)		(74,540)
Deferred loan fees, net		(1,279)		(3,625)
Allowance for loan losses		(32,543)		(33,222)
Total loans	$	2,249,478	$	2,200,244

Schedule of balance in the allowance for loan losses and the recorded investment in loans based on portfolio segment and impairment methods

	At period end and for the three months ended September 30, 2021
	Residential		Construction		Commercial
(dollars in thousands)	Real Estate		Real Estate		Real Estate		Consumer		Commercial		Total
Allowance for credit losses:
Balance, beginning of period	$	11,192	$	2,170	$	14,535	$	916	$	4,409	$	33,222
Provision (benefit) charged to expense		(528)		(125)		348		(72)		(302)		(679)
Losses charged off		(31)		—		—		(13)		—		(44)
Recoveries		1		—		—		42		1		44
Balance, end of period	$	10,634	$	2,045	$	14,883	$	873	$	4,108	$	32,543

	At period end and for the three months ended September 30, 2020
	Residential		Construction		Commercial
(dollars in thousands)	Real Estate		Real Estate		Real Estate		Consumer		Commercial		Total
Allowance for credit losses:
Balance, beginning of period prior to adoption of CECL	$	4,875	$	2,010	$	12,132	$	1,182	$	4,940	$	25,139
Impact of CECL adoption		3,521		(121)		3,856		1,065		1,012		9,333
Provision charged to expense		252		3		61		61		397		774
Losses charged off		(19)		—		—		(6)		(145)		(170)
Recoveries		—		—		1		3		4		8
Balance, end of period	$	8,629	$	1,892	$	16,050	$	2,305	$	6,208	$	35,084

Schedule of Allowance for off-balance credit exposure

	At period end and for the three months ended September 30, 2021
	Residential			Construction		Commercial
(dollars in thousands)	Real Estate		Real Estate		Real Estate		Consumer		Commercial		Total
Allowance for off-balance sheet credit exposure:
Balance, beginning of period	$	37	$	502	$	188	$	218	$	860	$	1,805
Provision (benefit) charged to expense		(3)		1,171		(18)		(160)		(616)		374
Balance, end of period	$	34	$	1,673	$	170	$	58	$	244	$	2,179

	At period end and for the three months ended September 30, 2020
	Residential			Construction		Commercial
(dollars in thousands)	Real Estate		Real Estate		Real Estate		Consumer		Commercial		Total
Allowance for off-balance sheet credit exposure:
Balance, beginning of period prior to CECL adoption	$	19	$	769	$	172	$	153	$	846	$	1,959
Impact of CECL adoption		35		(167)		95		197		108		268
Provision (benefit) charged to expense		5		166		32		4		19		226
Balance, end of period	$	59	$	768	$	299	$	354	$	973	$	2,453

Schedule of credit risk profile of the Company's loan portfolio based on rating category and payment activity

(dollars in thousands)													Revolving
	2022		2021		2020		2019		2018		Prior		loans		Total
Residential Real Estate
Pass	$	83,975	$	348,844	$	165,830	$	38,339	$	30,770	$	82,928	$	5,513	$	756,199
Watch		86		326		70		407		—		801		—		1,690
Special Mention		—		—		—		—		—		—		—		—
Substandard		488		3,224		151		86		53		313		—		4,315
Doubtful		—		—		—		—		—		—		—		—
Total Residential Real Estate	$	84,549	$	352,394	$	166,051	$	38,832	$	30,823	$	84,042	$	5,513	$	762,204
Construction Real Estate
Pass	$	40,324	$	57,553	$	29,945	$	—	$	—	$	—	$	—	$	127,822
Watch		—		—		—		—		—		—		—		—
Special Mention		—		—		—		—		—		—		—		—
Substandard		—		124		—		—		—		—		—		124
Doubtful		—		—		—		—		—		—		—		—
Total Construction Real Estate	$	40,324	$	57,677	$	29,945	$	—	$	—	$	—	$	—	$	127,946
Commercial Real Estate
Pass	$	87,878	$	326,200	$	124,280	$	103,953	$	71,713	$	117,116	$	24,716	$	855,856
Watch		291		4,614		2,202		1,718		873		721		810		11,229
Special Mention		—		—		8,806		—		1,793		12,826		300		23,725
Substandard		3,307		4,733		1,129		269		27		101		69		9,635
Doubtful		—		—		—		836		—		—		—		836
Total Commercial Real Estate	$	91,476	$	335,547	$	136,417	$	106,776	$	74,406	$	130,764	$	25,895	$	901,281
Consumer
Pass	$	9,322	$	19,800	$	6,871	$	2,767	$	857	$	1,037	$	39,609	$	80,263
Watch		1		78		—		—		—		—		48		127
Special Mention		—		—		—		—		—		—		—		—
Substandard		—		31		14		2		—		30		—		77
Doubtful		—		—		—		—		—		—		—		—
Total Consumer	$	9,323	$	19,909	$	6,885	$	2,769	$	857	$	1,067	$	39,657	$	80,467
Commercial
Pass	$	29,032	$	158,480	$	28,738	$	16,176	$	4,934	$	13,914	$	155,439	$	406,713
Watch		429		1,350		262		53		7		—		458		2,559
Special Mention		—		—		—		—		—		—		—		—
Substandard		—		564		48		291		—		172		1,055		2,130
Doubtful		—		—		—		—		—		—		—		—
Total Commercial	$	29,461	$	160,394	$	29,048	$	16,520	$	4,941	$	14,086	$	156,952	$	411,402
Total Loans
Pass	$	250,531	$	910,877	$	355,664	$	161,235	$	108,274	$	214,995	$	225,277	$	2,226,853
Watch		807		6,368		2,534		2,178		880		1,522		1,316		15,605
Special Mention		—		—		8,806		—		1,793		12,826		300		23,725
Substandard		3,795		8,676		1,342		648		80		616		1,124		16,281
Doubtful		—		—		—		836		—		—		—		836
Total	$	255,133	$	925,921	$	368,346	$	164,897	$	111,027	$	229,959	$	228,017	$	2,283,300

(dollars in thousands)													Revolving
	2021		2020		2019		2018		2017		Prior		loans		Total
Residential Real Estate
Pass	$	361,876	$	175,772	$	43,576	$	32,929	$	23,267	$	71,592	$	5,557	$	714,569
Watch		328		70		410		—		89		809		—		1,706
Special Mention		—		—		—		—		—		—		—		—
Substandard		4,288		89		—		92		—		472		—		4,941
Doubtful		—		—		—		—		—		—		—		—
Total Residential Real Estate	$	366,492	$	175,931	$	43,986	$	33,021	$	23,356	$	72,873	$	5,557	$	721,216
Construction Real Estate
Pass	$	88,371	$	45,866	$	—	$	—	$	—	$	—	$	—	$	134,237
Watch		—		—		—		—		—		—		—		—
Special Mention		—		—		—		—		—		—		—		—
Substandard		47		—		—		—		—		—		—		47
Doubtful		—		—		—		—		—		—		—		—
Total Construction Real Estate	$	88,418	$	45,866	$	—	$	—	$	—	$	—	$	—	$	134,284
Commercial Real Estate
Pass	$	351,732	$	147,670	$	104,746	$	75,967	$	70,927	$	61,194	$	23,699	$	835,935
Watch		4,456		2,365		9,502		1,377		726		10		810		19,246
Special Mention		—		8,806		—		1,793		12,826		—		300		23,725
Substandard		8,191		1,137		505		31		5		99		69		10,037
Doubtful		—		—		850		—		—		—		—		850
Total Commercial Real Estate	$	364,379	$	159,978	$	115,603	$	79,168	$	84,484	$	61,303	$	24,878	$	889,793
Consumer
Pass	$	23,858	$	8,626	$	3,597	$	1,126	$	534	$	650	$	39,071	$	77,462
Watch		80		—		—		—		—		—		48		128
Special Mention		—		—		—		—		—		—		—		—
Substandard		—		—		—		30		30		—		24		84
Doubtful		—		—		—		—		—		—		—		—
Total Consumer	$	23,938	$	8,626	$	3,597	$	1,156	$	564	$	650	$	39,143	$	77,674
Commercial
Pass	$	189,280	$	42,549	$	17,960	$	5,591	$	7,265	$	9,120	$	136,603	$	408,368
Watch		1,551		262		1,323		22		—		—		463		3,621
Special Mention		—		—		—		—		—		—		—		—
Substandard		594		81		305		—		176		—		979		2,135
Doubtful		—		—		—		—		—		—		—		—
Total Commercial	$	191,425	$	42,892	$	19,588	$	5,613	$	7,441	$	9,120	$	138,045	$	414,124
Total Loans
Pass	$	1,015,117	$	420,483	$	169,879	$	115,613	$	101,993	$	142,556	$	204,930	$	2,170,571
Watch		6,415		2,697		11,235		1,399		815		819		1,321		24,701
Special Mention		—		8,806		—		1,793		12,826		—		300		23,725
Substandard		13,120		1,307		810		153		211		571		1,072		17,244
Doubtful		—		—		850		—		—		—		—		850
Total	$	1,034,652	$	433,293	$	182,774	$	118,958	$	115,845	$	143,946	$	207,623	$	2,237,091

Schedule of company's loan portfolio aging analysis

	September 30, 2021
					Greater Than								Greater Than 90
	30-59 Days		60-89 Days		90 Days		Total				Total Loans		Days Past Due
(dollars in thousands)	Past Due		Past Due		Past Due		Past Due		Current		Receivable		and Accruing
Real Estate Loans:
Residential	$	1,475	$	84	$	499	$	2,058	$	760,146	$	762,204	$	—
Construction		—		—		—		—		127,946		127,946		—
Commercial		598		671		—		1,269		900,012		901,281		—
Consumer loans		193		87		56		336		80,131		80,467		—
Commercial loans		283		43		817		1,143		410,259		411,402		—
Total loans	$	2,549	$	885	$	1,372	$	4,806	$	2,278,494	$	2,283,300	$	—

	June 30, 2021
					Greater Than								Greater Than 90
	30-59 Days		60-89 Days		90 Days		Total				Total Loans		Days Past Due
(dollars in thousands)	Past Due		Past Due		Past Due		Past Due		Current		Receivable		and Accruing
Real Estate Loans:
Residential	$	312	$	364	$	613	$	1,289	$	719,927	$	721,216	$	—
Construction		—		—		30		30		134,254		134,284		—
Commercial		363		—		374		737		889,056		889,793		—
Consumer loans		195		66		84		345		77,329		77,674		—
Commercial loans		368		939		110		1,417		412,707		414,124		—
Total loans	$	1,238	$	1,369	$	1,211	$	3,818	$	2,233,273	$	2,237,091	$	—

Schedule of company's collateral dependent loans and related ACL

	September 30, 2021
	Amortized cost basis of
	loans determined to be		Related allowance
	collateral dependent		for credit losses
(dollars in thousands)
Residential real estate loans
1- to 4-family residential loans	$	889	$	217
Total loans	$	889	$	217

	June 30, 2021
	Amortized cost basis of
	loans determined to be		Related allowance
	collateral dependent		for credit losses
(dollars in thousands)
Residential real estate loans
1- to 4-family residential loans	$	895	$	223
Total loans	$	895	$	223

Schedule of Company's nonaccrual loans

(dollars in thousands)	September 30, 2021		June 30, 2021
Residential real estate	$	3,059	$	3,235
Construction real estate		—		30
Commercial real estate		1,950		1,914
Consumer loans		65		100
Commercial loans		1,059		589
Total loans	$	6,133	$	5,868

Schedule of Debtor Troubled Debt Restructuring, Current Period

	For the three-month periods ended
	September 30, 2021			September 30, 2020
	Number of	Recorded		Number of	Recorded
(dollars in thousands)	modifications	Investment		modifications	Investment
Residential real estate	1	$	151	1	$	98
Construction real estate	—		—	—		—
Commercial real estate	—		—	2		1,840
Consumer loans	—		—	—		—
Commercial loans	—		—	1		36
Total	1	$	151	4	$	1,974

Schedule of Performing loans classified as troubled debt restructuring loans

	September 30, 2021			June 30, 2021
	Number of	Recorded		Number of	Recorded
(dollars in thousands)	modifications	Investment		modifications	Investment
Residential real estate	3	$	1,133	1	$	895
Construction real estate	—		—	—		—
Commercial real estate	5		988	4		949
Consumer loans	—		—	—		—
Commercial loans	7		1,464	7		1,397
Total	15	$	3,585	12	$	3,241

XML

Premises and Equipment (Tables)

3 Months Ended

Sep. 30, 2021

Premises and Equipment

Schedule of summary of premises and equipment

(dollars in thousands)	September 30, 2021		June 30, 2021
Land	$	12,409	$	12,452
Buildings and improvements		58,786		56,422
Construction in progress		452		1,158
Furniture, fixtures, equipment and software		19,223		18,985
Automobiles		120		120
Operating leases ROU asset		2,735		2,770
		93,725		91,907
Less accumulated depreciation		28,472		27,830
	$	65,253	$	64,077

Schedule of calculated amount of right of use assets and lease liabilities

	September 30, 2021		June 30, 2021
Consolidated Balance Sheet
Operating leases right of use asset	$	2,735	$	2,770
Operating leases liability	$	2,735	$	2,770

	Three months ended September 30,
	2021		2020
Consolidated Statement of Income
Operating lease costs classified as occupancy and equipment expense	$	100	$	72
(includes short-term lease costs)
Supplemental disclosures of cash flow information
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	85	$	67
ROU assets obtained in exchange for operating lease obligations:	$	—	$	—

Schedule of Future Minimum Rental Payments for Operating Leases

(dollars in thousands)
2022	$	338
2023		272
2024		272
2025		272
2026		272
Thereafter		3,069
Future lease payments expected	$	4,495

XML

Deposits (Tables)

3 Months Ended

Sep. 30, 2020

Deposits

Schedule of deposits

(dollars in thousands)	September 30, 2021		June 30, 2021
Non-interest bearing accounts	$	386,379	$	358,418
NOW accounts		938,555		925,280
Money market deposit accounts		253,827		253,614
Savings accounts		238,587		230,905
Certificates		554,347		562,586
Total Deposit Accounts	$	2,371,695	$	2,330,803

XML

Earnings Per Share (Tables)

3 Months Ended

Sep. 30, 2021

Earnings Per Share

Schedule of Earnings Per Share, Basic and Diluted

	Three months ended
	September 30,
(dollars in thousands except per share data)	2021		2020
Net income	$	12,746	$	9,986
Less: distributed earnings allocated to participating securities		(6)		(4)
Less: undistributed earnings allocated to participating securities		(39)		(26)
Net income available to common shareholders	$	12,701	$	9,956
Weighted-average common shares outstanding, including participating securities		8,898,994		9,126,866
Less: weighted-average participating securities outstanding (restricted shares)		(31,845)		(27,260)
Denominator for basic earnings per share -
Weighted-average shares outstanding		8,867,149		9,099,606
Effect of dilutive securities stock options or awards		10,173		2,191
Denominator for diluted earnings per share		8,877,322		9,101,797
Basic earnings per share available to common stockholders	$	1.43	$	1.09
Diluted earnings per share available to common stockholders	$	1.43	$	1.09

XML

Income Taxes (Tables)

3 Months Ended

Sep. 30, 2021

Income Taxes

Schedule of Income Tax Provision

	For the three-month periods ended
(dollars in thousands)	September 30, 2021		September 30, 2020
Income taxes
Current	$	3,481	$	4,750
Deferred		7		(2,003)
Total income tax provision	$	3,488	$	2,747

Schedule of components of net deferred tax assets

(dollars in thousands)	September 30, 2021		June 30, 2021
Deferred tax assets:
Provision for losses on loans	$	7,573	$	7,626
Accrued compensation and benefits		549		826
NOL carry forwards acquired		135		147
Unrealized loss on other real estate		183		180
Other		—		182
Total deferred tax assets		8,440		8,961
Deferred tax liabilities:
Purchase accounting adjustments		210		210
Depreciation		1,765		1,842
FHLB stock dividends		120		120
Prepaid expenses		209		283
Unrealized gain on available for sale securities		824		821
Other		830		1,193
Total deferred tax liabilities		3,958		4,469
Net deferred tax asset	$	4,482	$	4,492

Schedule of reconciliation of income tax expense at the statutory rate

	For the three-month periods ended
(dollars in thousands)	September 30, 2021		September 30, 2020
Tax at statutory rate	$	3,409	$	2,674
Increase (reduction) in taxes resulting from:
Nontaxable municipal income		(107)		(103)
State tax, net of Federal benefit		252		241
Cash surrender value of Bank-owned life insurance		(59)		(59)
Tax credit benefits		(11)		26
Other, net		4		(32)
Actual provision	$	3,488	$	2,747

XML

Fair Value Measurements (Tables)

3 Months Ended

Sep. 30, 2021

Fair Value Measurements

Fair Value, Assets Measured on Recurring Basis

	Fair Value Measurements at September 30, 2021, Using:
			Quoted Prices in
			Active Markets for		Significant Other		Significant
			Identical Assets		Observable Inputs		Unobservable Inputs
(dollars in thousands)	Fair Value		(Level 1)		(Level 2)		(Level 3)
Obligations of state and political subdivisions	$	46,869	$	—	$	46,869	$	—
Corporate obligations		18,832		—		18,832		—
Other securities		608		—		608		—
MBS and CMOs		143,100		—		143,100		—

	Fair Value Measurements at June 30, 2021, Using:
			Quoted Prices in
			Active Markets for		Significant Other		Significant
			Identical Assets		Observable Inputs		Unobservable Inputs
(dollars in thousands)	Fair Value		(Level 1)		(Level 2)		(Level 3)
Obligations of state and political subdivisions	$	47,696	$	—	$	47,696	$	—
Corporate obligations		20,311		—		20,311		—
Other securities		672		—		672		—
MBS and CMOs		138,341		—		138,341		—

Fair Value Measurements, Nonrecurring

	Fair Value Measurements at September 30, 2021, Using:
			Quoted Prices in
			Active Markets for		Significant Other		Significant
			Identical Assets		Observable Inputs		Unobservable Inputs
(dollars in thousands)	Fair Value		(Level 1)		(Level 2)		(Level 3)
Foreclosed and repossessed assets held for sale	$	144	$	—	$	—	$	144

	Fair Value Measurements at June 30, 2021, Using:
			Quoted Prices in
			Active Markets for		Significant Other		Significant
			Identical Assets		Observable Inputs		Unobservable Inputs
(dollars in thousands)	Fair Value		(Level 1)		(Level 2)		(Level 3)
Foreclosed and repossessed assets held for sale	$	280	$	—	$	—	$	280

Losses Recognized on Assets Measured on a Nonrecurring Basis

	For the three months ended
(dollars in thousands)	September 30, 2021		September 30, 2020
Foreclosed and repossessed assets held for sale	$	(28)	$	(36)
Total losses on assets measured on a non-recurring basis	$	(28)	$	(36)

Fair Value Option, Disclosures

					Range
	Fair value at		Valuation	Unobservable	of		Weighted-average
(dollars in thousands)	September 30, 2021		technique	inputs	inputs applied		inputs applied
Nonrecurring Measurements
Foreclosed and repossessed assets	$	144	Third party appraisal	Marketability discount	8.0% - 51.0	%	24.4	%

					Range
	Fair value at		Valuation	Unobservable	of		Weighted-average
(dollars in thousands)	June 30, 2021		technique	inputs	inputs applied		inputs applied
Nonrecurring Measurements
Foreclosed and repossessed assets	$	280	Third party appraisal	Marketability discount	7.2% - 80.6	%	37.1	%

Schedule of Financial Instruments

	September 30, 2021
			Quoted Prices
			in Active				Significant
			Markets for		Significant Other		Unobservable
	Carrying		Identical Assets		Observable Inputs		Inputs
(dollars in thousands)	Amount		(Level 1)		(Level 2)		(Level 3)
Financial assets
Cash and cash equivalents	$	111,402	$	111,402	$	—	$	—
Interest-bearing time deposits		980		—		980		—
Stock in FHLB		5,425		—		5,425		—
Stock in Federal Reserve Bank of St. Louis		5,031		—		5,031		—
Loans receivable, net		2,249,478		—		—		2,265,086
Accrued interest receivable		11,203		—		11,203		—
Financial liabilities
Deposits		2,371,695		1,817,346		—		556,397
Advances from FHLB		46,522		—		47,419		—
Accrued interest payable		731		—		731		—
Subordinated debt		15,268		—		—		16,045
Unrecognized financial instruments (net of contract amount)
Commitments to originate loans		—		—		—		—
Letters of credit		—		—		—		—
Lines of credit		—		—		—		—

	June 30, 2021
			Quoted Prices
			in Active				Significant
			Markets for		Significant Other		Unobservable
	Carrying		Identical Assets		Observable Inputs		Inputs
(dollars in thousands)	Amount		(Level 1)		(Level 2)		(Level 3)
Financial assets
Cash and cash equivalents	$	123,592	$	123,592	$	—	$	—
Interest-bearing time deposits		979		—		979		—
Stock in FHLB		5,873		—		5,873		—
Stock in Federal Reserve Bank of St. Louis		5,031		—		5,031		—
Loans receivable, net		2,200,244		—		—		2,218,762
Accrued interest receivable		10,079		—		10,079		—
Financial liabilities
Deposits		2,330,803		1,768,217		—		565,123
Advances from FHLB		57,529		—		58,587		—
Accrued interest payable		779		—		779		—
Subordinated debt		15,243		—		—		15,468
Unrecognized financial instruments (net of contract amount)
Commitments to originate loans		—		—		—		—
Letters of credit		—		—		—		—
Lines of credit		—		—		—		—

XML

Organization and Summary of Significant Accounting Policies - Organization (Details) $ in Billions	Sep. 30, 2021 USD ($)
Organization and Summary of Significant Accounting Policies
Assets of the REIT	$ 1.1

XML

Organization and Summary of Significant Accounting Policies - Cash and Cash Equivalents (Details) - USD ($) $ in Millions	3 Months Ended
	Sep. 30, 2021	Jun. 30, 2020
Cash and Cash Equivalents [Line Items]
Term of interest bearing deposits	7 years
Interest-bearing deposits in other depository institutions
Cash and Cash Equivalents [Line Items]
Cash	$ 76.4	$ 83.2
Deposits are held in various commercial banks
Cash and Cash Equivalents [Line Items]
Cash	$ 1.7	$ 1.8

XML

Organization and Summary of Significant Accounting Policies - Loans (Details)	Jul. 01, 2020 USD ($)
Impact of adoption ASU 2016-13 | Purchased credit deteriorated ("PCD") loans
Increase to ACL	$ 434,000

XML

Organization and Summary of Significant Accounting Policies - Premises and Equipment (Details)	3 Months Ended
	Sep. 30, 2021
Software
Property, Plant and Equipment [Line Items]
Estimated lives (in years)	P3Y
Minimum | Premises
Property, Plant and Equipment [Line Items]
Estimated lives (in years)	P7Y
Minimum | Equipment
Property, Plant and Equipment [Line Items]
Estimated lives (in years)	P3Y
Maximum | Premises
Property, Plant and Equipment [Line Items]
Estimated lives (in years)	P40Y
Maximum | Equipment
Property, Plant and Equipment [Line Items]
Estimated lives (in years)	P7Y

XML

Organization and Summary of Significant Accounting Policies - Intangible Assets (Details) - USD ($)	3 Months Ended	12 Months Ended
	Sep. 30, 2021	Jun. 30, 2021
Finite-Lived Intangible Assets [Line Items]
Impairment loss on goodwill	$ 0	$ 0
Gross core deposit intangibles, accumulated amortization	10,400,000
Gross other identifiable intangibles	3,800,000	3,800,000
Gross other identifiable intangibles, accumulated amortization	3,800,000	3,800,000
Mortgage servicing rights	$ 1,900,000	1,900,000
Gross core deposit intangibles		15,300,000
Gross core deposit intangibles accumulated amortization		10,100,000
Core deposit intangible assets, amortization method	using the straight line method
Remainder of fiscal 2022	$ 1,000,000.0
2023	1,400,000
2024	1,400,000
2025	807,000
Thereafter	328,000
Impairment of intangible assets	0	$ 0
Core Deposits
Finite-Lived Intangible Assets [Line Items]
Intangible assets	$ 15,300,000
Minimum
Finite-Lived Intangible Assets [Line Items]
Core deposit intangible assets amortized period	5 years
Maximum
Finite-Lived Intangible Assets [Line Items]
Core deposit intangible assets amortized period	7 years

XML

Organization and Summary of Significant Accounting Policies - Outside Directors' Retirement (Details)	3 Months Ended
	Sep. 30, 2021 age
Organization and Summary of Significant Accounting Policies
Requisite period	60
Vesting period	5 years

XML

Organization and Summary of Significant Accounting Policies - New Accounting Pronouncements - Schedule of Adoption of ASU 2016-13 (Details) - USD ($)	Jul. 01, 2020	Sep. 30, 2021	Jun. 30, 2021	Sep. 30, 2020	Jun. 30, 2020
Allowance for Credit Loss on loans		$ 32,543,000	$ 33,222,000	$ 35,084,000	$ 25,139,000
Total allowance for credit losses on off-balance sheet credit exposures		2,179,000	1,805,000	2,453,000	1,959,000
Accounting Standards Update 2016-13
Loans receivable					2,141,929,000
Allowance for Credit Loss on loans					25,139,000
Total allowance for credit losses on off-balance sheet credit exposures					1,959,000
As reported under ASU 2016-13
Increase to the ACL	$ 8,900,000
Adjustment to the reserve for unfunded commitments	268,000
Retained earnings	7,200,000
As reported under ASU 2016-13 | Accounting Standards Update 2016-13
Loans receivable	2,142,363,000
Allowance for Credit Loss on loans	34,472,000
Total allowance for credit losses on off-balance sheet credit exposures	2,227,000
As reported under ASU 2016-13 | Purchased credit deteriorated ("PCD") loans
Increase to ACL	434,000
Impact of adoption ASU 2016-13
Allowance for Credit Loss on loans					9,333,000
Total allowance for credit losses on off-balance sheet credit exposures					268,000
Impact of adoption ASU 2016-13 | Accounting Standards Update 2016-13
Loans receivable	434,000
Allowance for Credit Loss on loans	9,333,000
Total allowance for credit losses on off-balance sheet credit exposures	268,000
Impact of adoption ASU 2016-13 | Purchased credit deteriorated ("PCD") loans
Increase to ACL	434,000
Residential and commercial real estate loans | Purchased credit deteriorated ("PCD") loans
Loans receivable	434,000
Residential Real Estate
Allowance for Credit Loss on loans		10,634,000	11,192,000	8,629,000	4,875,000
Total allowance for credit losses on off-balance sheet credit exposures		34,000	37,000	59,000	19,000
Residential Real Estate | Accounting Standards Update 2016-13
Allowance for Credit Loss on loans					4,875,000
Residential Real Estate | As reported under ASU 2016-13 | Accounting Standards Update 2016-13
Allowance for Credit Loss on loans	8,396,000
Residential Real Estate | Impact of adoption ASU 2016-13
Allowance for Credit Loss on loans					3,521,000
Total allowance for credit losses on off-balance sheet credit exposures					35,000
Residential Real Estate | Impact of adoption ASU 2016-13 | Accounting Standards Update 2016-13
Allowance for Credit Loss on loans	3,521,000
Construction Real Estate
Allowance for Credit Loss on loans		2,045,000	2,170,000	1,892,000	2,010,000
Total allowance for credit losses on off-balance sheet credit exposures		1,673,000	502,000	768,000	769,000
Construction Real Estate | Accounting Standards Update 2016-13
Allowance for Credit Loss on loans					2,010,000
Construction Real Estate | As reported under ASU 2016-13 | Accounting Standards Update 2016-13
Allowance for Credit Loss on loans	1,889,000
Construction Real Estate | Impact of adoption ASU 2016-13
Allowance for Credit Loss on loans					(121,000)
Total allowance for credit losses on off-balance sheet credit exposures					(167,000)
Construction Real Estate | Impact of adoption ASU 2016-13 | Accounting Standards Update 2016-13
Allowance for Credit Loss on loans	(121,000)
Commercial Real Estate
Allowance for Credit Loss on loans		14,883,000	14,535,000	16,050,000	12,132,000
Total allowance for credit losses on off-balance sheet credit exposures		170,000	188,000	299,000	172,000
Commercial Real Estate | Accounting Standards Update 2016-13
Allowance for Credit Loss on loans					12,132,000
Commercial Real Estate | As reported under ASU 2016-13 | Accounting Standards Update 2016-13
Allowance for Credit Loss on loans	15,988,000
Commercial Real Estate | Impact of adoption ASU 2016-13
Allowance for Credit Loss on loans					3,856,000
Total allowance for credit losses on off-balance sheet credit exposures					95,000
Commercial Real Estate | Impact of adoption ASU 2016-13 | Accounting Standards Update 2016-13
Allowance for Credit Loss on loans	3,856,000
Consumer loans
Allowance for Credit Loss on loans		873,000	916,000	2,305,000	1,182,000
Total allowance for credit losses on off-balance sheet credit exposures		58,000	218,000	354,000	153,000
Consumer loans | Accounting Standards Update 2016-13
Allowance for Credit Loss on loans					1,182,000
Consumer loans | As reported under ASU 2016-13 | Accounting Standards Update 2016-13
Allowance for Credit Loss on loans	2,247,000
Consumer loans | Impact of adoption ASU 2016-13
Allowance for Credit Loss on loans					1,065,000
Total allowance for credit losses on off-balance sheet credit exposures					197,000
Consumer loans | Impact of adoption ASU 2016-13 | Accounting Standards Update 2016-13
Allowance for Credit Loss on loans	1,065,000
Commercial loans
Allowance for Credit Loss on loans		4,108,000	4,409,000	6,208,000	4,940,000
Total allowance for credit losses on off-balance sheet credit exposures		$ 244,000	$ 860,000	$ 973,000	846,000
Commercial loans | Accounting Standards Update 2016-13
Allowance for Credit Loss on loans					4,940,000
Commercial loans | As reported under ASU 2016-13 | Accounting Standards Update 2016-13
Allowance for Credit Loss on loans	5,952,000
Commercial loans | Impact of adoption ASU 2016-13
Allowance for Credit Loss on loans					1,012,000
Total allowance for credit losses on off-balance sheet credit exposures					$ 108,000
Commercial loans | Impact of adoption ASU 2016-13 | Accounting Standards Update 2016-13
Allowance for Credit Loss on loans	$ 1,012,000

XML

Securities - Schedule of Available for Sale Securities (Details) - USD ($) $ in Thousands	3 Months Ended	12 Months Ended
	Sep. 30, 2021	Jun. 30, 2021
Debt Securities, Available-for-sale [Line Items]
Amortized Cost	$ 205,663	$ 203,286
Gross Unrealized Gains	4,751	4,875
Gross Unrealized Losses	(1,005)	(1,141)
Total AFS securities	209,409	207,020
US States and Political Subdivisions Debt Securities
Debt Securities, Available-for-sale [Line Items]
Amortized Cost	45,360	46,257
Gross Unrealized Gains	1,545	1,479
Gross Unrealized Losses	(36)	(40)
Total AFS securities	46,869	47,696
Corporate Obligations
Debt Securities, Available-for-sale [Line Items]
Amortized Cost	18,853	20,356
Gross Unrealized Gains	325	290
Gross Unrealized Losses	(346)	(335)
Total AFS securities	18,832	20,311
Other Debt Obligations
Debt Securities, Available-for-sale [Line Items]
Amortized Cost	591	647
Gross Unrealized Gains	17	25
Total AFS securities	608	672
Debt and Equity Securities
Debt Securities, Available-for-sale [Line Items]
Amortized Cost	64,804	67,260
Gross Unrealized Gains	1,887	1,794
Gross Unrealized Losses	(382)	(375)
Total AFS securities	66,309	68,679
Mortgage-backed Securities, Issued by US Government Sponsored Enterprises
Debt Securities, Available-for-sale [Line Items]
Amortized Cost	63,247	64,400
Gross Unrealized Gains	950	932
Gross Unrealized Losses	(258)	(379)
Total AFS securities	63,939	64,953
Commercial MBS issued by GSEs
Debt Securities, Available-for-sale [Line Items]
Amortized Cost	35,349	35,425
Gross Unrealized Gains	1,286	1,394
Gross Unrealized Losses	(291)	(338)
Total AFS securities	36,344	36,481
CMOs issued by GSEs
Debt Securities, Available-for-sale [Line Items]
Amortized Cost	42,263	36,201
Gross Unrealized Gains	628	755
Gross Unrealized Losses	(74)	(49)
Total AFS securities	42,817	36,907
Total MBS and CMOs
Debt Securities, Available-for-sale [Line Items]
Amortized Cost	140,859	136,026
Gross Unrealized Gains	2,864	3,081
Gross Unrealized Losses	(623)	(766)
Total AFS securities	$ 143,100	$ 138,341

XML

Securities - Amortized Cost and Fair Value of Available-for-sale Securities, by Contractual Maturity (Details) - USD ($) $ in Thousands	Sep. 30, 2021	Jun. 30, 2021
Amortized Cost
Within one year	$ 1,555
After one year but less than five years	7,236
After five years but less than ten years	28,516
After ten years	27,497
Total investment securities	64,804
Total AFS securities	205,663	$ 203,286
Estimated Fair Value
Within one year	1,562
After one year but less than five years	7,375
After five years but less than ten years	29,212
After ten years	28,160
Total investment securities	66,309
Available for sale securities	209,409	207,020
Debt and Equity Securities
Amortized Cost
Total AFS securities	64,804	67,260
Estimated Fair Value
Available for sale securities	66,309	68,679
Total MBS and CMOs
Amortized Cost
Total AFS securities	140,859	136,026
Estimated Fair Value
Available for sale securities	$ 143,100	$ 138,341

XML

Securities - Investments Pledged as Collateral to Secure Public Deposits and Securities Sold Under Agreements to Repurchase (Details) - USD ($) $ in Millions	Sep. 30, 2021	Jun. 30, 2021
Debt Securities, Available-for-sale [Line Items]
Carrying value of investment and MBS pledged as collateral to secure public deposits and securities sold under agreements to repurchase	$ 164.8	$ 155.6
Mortgage-Backed Securities
Debt Securities, Available-for-sale [Line Items]
Carrying value of investment and MBS pledged as collateral to secure public deposits and securities sold under agreements to repurchase	93.2
Mortgage-Backed Securities | Mortgage-backed Securities, Issued by US Government Sponsored Enterprises
Debt Securities, Available-for-sale [Line Items]
Carrying value of investment and MBS pledged as collateral to secure public deposits and securities sold under agreements to repurchase		95.4
Collateralized Mortgage Obligations
Debt Securities, Available-for-sale [Line Items]
Carrying value of investment and MBS pledged as collateral to secure public deposits and securities sold under agreements to repurchase	30.1	18.8
US States and Political Subdivisions Debt Securities
Debt Securities, Available-for-sale [Line Items]
Carrying value of investment and MBS pledged as collateral to secure public deposits and securities sold under agreements to repurchase	$ 41.5	$ 41.4

XML

Securities - Gross Unrealized Losses and Fair Value, Continuous Unrealized Loss Position (Details) - USD ($) $ in Thousands	Sep. 30, 2021	Jun. 30, 2021
Available-for-sale Securities
Debt Securities, Available-for-sale [Line Items]
Available-for-sale Securities, Continuous Unrealized Loss Position, Less than 12 Months, Fair Value	$ 54,160	$ 66,401
Available-for-sale Securities, Continuous Unrealized Loss Position, Less than 12 Months, Unrealized Losses	667	883
Available-for-sale Securities, Continuous Unrealized Loss Position, 12 Months or more, Fair Value	5,114	790
Available-for-sale Securities, Continuous Unrealized Loss Position, 12 Months or more, Unrealized Losses	338	258
Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value	59,274	67,191
Available-for-sale Securities, Continuous Unrealized Loss Position, Unrealized Losses	1,005	1,141
US States and Political Subdivisions Debt Securities
Debt Securities, Available-for-sale [Line Items]
Available-for-sale Securities, Continuous Unrealized Loss Position, Less than 12 Months, Fair Value	2,716	3,177
Available-for-sale Securities, Continuous Unrealized Loss Position, Less than 12 Months, Unrealized Losses	36	40
Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value	2,716	3,177
Available-for-sale Securities, Continuous Unrealized Loss Position, Unrealized Losses	36	40
Corporate Obligations
Debt Securities, Available-for-sale [Line Items]
Available-for-sale Securities, Continuous Unrealized Loss Position, Less than 12 Months, Fair Value	6,381	9,331
Available-for-sale Securities, Continuous Unrealized Loss Position, Less than 12 Months, Unrealized Losses	84	79
Available-for-sale Securities, Continuous Unrealized Loss Position, 12 Months or more, Fair Value	715	720
Available-for-sale Securities, Continuous Unrealized Loss Position, 12 Months or more, Unrealized Losses	262	256
Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value	7,096	10,051
Available-for-sale Securities, Continuous Unrealized Loss Position, Unrealized Losses	346	335
Total MBS and CMOs
Debt Securities, Available-for-sale [Line Items]
Available-for-sale Securities, Continuous Unrealized Loss Position, Less than 12 Months, Fair Value	45,063	53,893
Available-for-sale Securities, Continuous Unrealized Loss Position, Less than 12 Months, Unrealized Losses	547	764
Available-for-sale Securities, Continuous Unrealized Loss Position, 12 Months or more, Fair Value	4,399	70
Available-for-sale Securities, Continuous Unrealized Loss Position, 12 Months or more, Unrealized Losses	76	2
Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value	49,462	53,963
Available-for-sale Securities, Continuous Unrealized Loss Position, Unrealized Losses	$ 623	$ 766

XML

Securities - Other Securities Policy: Pooled Trust Preferred Securities (Details) - USD ($)	3 Months Ended
	Sep. 30, 2021	Sep. 30, 2020
Securities
Credit losses recognized on investments	$ 0	$ 0

XML

Loans and Allowance for Credit Losses - Classes of loans (Details) $ in Thousands	3 Months Ended	12 Months Ended
	Sep. 30, 2021 USD ($)	Jun. 30, 2021 USD ($)	Sep. 30, 2020 USD ($)	Jun. 30, 2020 USD ($)
Accounts, Notes, Loans and Financing Receivable [Line Items]
Real Estate Loans	$ 2,390,855	$ 2,311,631
Loans in Process	(107,555)	(74,540)
Deferred loan fees, net	(1,279)	(3,625)
Allowance for credit losses	(32,543)	(33,222)	$ (35,084)	$ (25,139)
Total loans	$ 2,249,478	$ 2,200,244
Number of purchased participation loans	25	23
Purchased participation loans	$ 87,000	$ 83,000
Residential Real Estate
Accounts, Notes, Loans and Financing Receivable [Line Items]
Real Estate Loans	762,204	721,216
Allowance for credit losses	(10,634)	(11,192)	(8,629)	(4,875)
Construction Real Estate
Accounts, Notes, Loans and Financing Receivable [Line Items]
Real Estate Loans	235,501	208,824
Allowance for credit losses	(2,045)	(2,170)	(1,892)	(2,010)
Commercial Real Estate
Accounts, Notes, Loans and Financing Receivable [Line Items]
Real Estate Loans	901,281	889,793
Allowance for credit losses	(14,883)	(14,535)	(16,050)	(12,132)
Consumer loans
Accounts, Notes, Loans and Financing Receivable [Line Items]
Real Estate Loans	80,467	77,674
Allowance for credit losses	(873)	(916)	(2,305)	(1,182)
Commercial loans
Accounts, Notes, Loans and Financing Receivable [Line Items]
Real Estate Loans	411,402	414,124
Allowance for credit losses	$ (4,108)	$ (4,409)	$ (6,208)	$ (4,940)

XML

Loans and Allowance for Credit Losses - Classes of loans information (Details) $ in Thousands	3 Months Ended
	Sep. 30, 2021 USD ($) item	Sep. 30, 2020 USD ($)	Jun. 30, 2021 USD ($)
Provision for credit losses	$ (305)	$ 1,000
ACL	$ 32,543		$ 33,222
Consumer loans
Amortization period of loans	5 years
Consumer Loans, Home Equity Lines Of Credit
Maximum percentage of appraised value or purchase price that loans cannot exceed	100.00%
Amortization period of loans	10 years
Consumer Loans, Other Than Home Equity Lines Of Credit
Maximum percentage of appraised value or purchase price that loans cannot exceed	100.00%
Amortization period of loans	60 months
Commercial loans
Amortization period of loans	5 years
Amortization period of multi-family residential loans if balloon maturities	1 year
Residential Real Estate
Fixed-rate and adjustable-rate mortgage (ARM) loans amortization period (in years)	30 years
Amortization period of multi-family residential loans if balloon maturities	10 years
Residential Real Estate | Minimum
Number of family residences | item	1
Residential Real Estate | Maximum
Number of family residences | item	4
Residential Real Estate | Single Family
Maximum percentage of appraised value or purchase price that loans cannot exceed	90.00%
Residential Real Estate | Multifamily
Maximum percentage of appraised value or purchase price that loans cannot exceed	85.00%
Amortization period of loans	25 years
Commercial
Amortization period of loans	25 years
Term of fixed interest applicability on loans	10 years
Term of variable interest applicability on loans	7 years
Agricultural real estate terms if 80% loan-to-value ratio	25 years
Agricultural real estate terms if 75% loan-to-value ratio	30 years
Residential Real Estate
Amortization period of loans	30 years
Residential Real Estate | Minimum
Maturities of single-family residential construction loans	6 months
Residential Real Estate | Maximum
Maturities of single-family residential construction loans	12 months
Commercial Real Estate
Amortization period of loans	25 years
Construction Real Estate
Average term of construction loans	9 months
Construction Real Estate | Minimum
Maturities of multifamily or commercial construction loans	12 months
Construction Real Estate | Maximum
Maturities of multifamily or commercial construction loans	24 months
Modifications for the purpose of extending the maturity date | Construction Real Estate
Incremental period that the loan maturity can be extended to	3 months
Number of construction loans outstanding, for which a modification had been agreed to	43		48
Construction loans outstanding, for which a modification had been agreed to	$ 29,000		$ 28,500

XML

Loans and Allowance for Credit Losses - Balance in the ACL and the recorded investment in loans (Details) - USD ($) $ in Thousands	3 Months Ended
	Sep. 30, 2021	Sep. 30, 2020
Allowance for credit losses:
Balance, beginning of period	$ 33,222	$ 25,139
Provision (benefit) charged to expense	(679)	774
Losses charged off	(44)	(170)
Recoveries	44	8
Balance, end of period	32,543	35,084
Residential Real Estate
Allowance for credit losses:
Balance, beginning of period	11,192	4,875
Provision (benefit) charged to expense	(528)	252
Losses charged off	(31)	(19)
Recoveries	1
Balance, end of period	10,634	8,629
Construction Real Estate
Allowance for credit losses:
Balance, beginning of period	2,170	2,010
Provision (benefit) charged to expense	(125)	3
Balance, end of period	2,045	1,892
Commercial Real Estate
Allowance for credit losses:
Balance, beginning of period	14,535	12,132
Provision (benefit) charged to expense	348	61
Recoveries		1
Balance, end of period	14,883	16,050
Consumer loans
Allowance for credit losses:
Balance, beginning of period	916	1,182
Provision (benefit) charged to expense	(72)	61
Losses charged off	(13)	(6)
Recoveries	42	3
Balance, end of period	873	2,305
Commercial loans
Allowance for credit losses:
Balance, beginning of period	4,409	4,940
Provision (benefit) charged to expense	(302)	397
Losses charged off		(145)
Recoveries	1	4
Balance, end of period	$ 4,108	$ 6,208

XML

Loans and Allowance for Credit Losses - Allowance for off-balance credit exposure (Details) - USD ($) $ in Thousands	3 Months Ended
	Sep. 30, 2021	Sep. 30, 2020
Allowance for off-balance sheet credit exposure:
Balance, beginning of period	$ 1,805	$ 1,959
Provision (benefit) charged to expense	374	226
Balance, end of period	2,179	2,453
Impact of adoption ASU 2016-13
Allowance for off-balance sheet credit exposure:
Balance, beginning of period		268
Residential Real Estate
Allowance for off-balance sheet credit exposure:
Balance, beginning of period	37	19
Provision (benefit) charged to expense	(3)	5
Balance, end of period	34	59
Residential Real Estate | Impact of adoption ASU 2016-13
Allowance for off-balance sheet credit exposure:
Balance, beginning of period		35
Construction Real Estate
Allowance for off-balance sheet credit exposure:
Balance, beginning of period	502	769
Provision (benefit) charged to expense	1,171	166
Balance, end of period	1,673	768
Construction Real Estate | Impact of adoption ASU 2016-13
Allowance for off-balance sheet credit exposure:
Balance, beginning of period		(167)
Commercial Real Estate
Allowance for off-balance sheet credit exposure:
Balance, beginning of period	188	172
Provision (benefit) charged to expense	(18)	32
Balance, end of period	170	299
Commercial Real Estate | Impact of adoption ASU 2016-13
Allowance for off-balance sheet credit exposure:
Balance, beginning of period		95
Consumer loans
Allowance for off-balance sheet credit exposure:
Balance, beginning of period	218	153
Provision (benefit) charged to expense	(160)	4
Balance, end of period	58	354
Consumer loans | Impact of adoption ASU 2016-13
Allowance for off-balance sheet credit exposure:
Balance, beginning of period		197
Commercial loans
Allowance for off-balance sheet credit exposure:
Balance, beginning of period	860	846
Provision (benefit) charged to expense	(616)	19
Balance, end of period	$ 244	973
Commercial loans | Impact of adoption ASU 2016-13
Allowance for off-balance sheet credit exposure:
Balance, beginning of period		$ 108

XML

Loans and Allowance for Credit Losses - Credit risk profile based on rating category and year of origination (Details) - USD ($) $ in Thousands	3 Months Ended
	Sep. 30, 2021	Jun. 30, 2021
Financing Receivable, Credit Quality Indicator [Line Items]
Amount of loan relationships subject to annual credit analysis	$ 3,000
Loan relationships that are subject to independent annual review	1,000
Current fiscal year	255,133	$ 1,034,652
Year One	925,921	433,293
Year Two	368,346	182,774
Year Three	164,897	118,958
Year Four	111,027	115,845
Prior	229,959	143,946
Revolving loans	228,017	207,623
Total	2,283,300	2,237,091
Pass
Financing Receivable, Credit Quality Indicator [Line Items]
Current fiscal year	250,531	1,015,117
Year One	910,877	420,483
Year Two	355,664	169,879
Year Three	161,235	115,613
Year Four	108,274	101,993
Prior	214,995	142,556
Revolving loans	225,277	204,930
Total	2,226,853	2,170,571
Watch
Financing Receivable, Credit Quality Indicator [Line Items]
Current fiscal year	807	6,415
Year One	6,368	2,697
Year Two	2,534	11,235
Year Three	2,178	1,399
Year Four	880	815
Prior	1,522	819
Revolving loans	1,316	1,321
Total	15,605	24,701
Special Mention
Financing Receivable, Credit Quality Indicator [Line Items]
Year One		8,806
Year Two	8,806
Year Three		1,793
Year Four	1,793	12,826
Prior	12,826
Revolving loans	300	300
Total	23,725	23,725
Substandard
Financing Receivable, Credit Quality Indicator [Line Items]
Current fiscal year	3,795	13,120
Year One	8,676	1,307
Year Two	1,342	810
Year Three	648	153
Year Four	80	211
Prior	616	571
Revolving loans	1,124	1,072
Total	16,281	17,244
Doubtful
Financing Receivable, Credit Quality Indicator [Line Items]
Year Two		850
Year Three	836
Total	836	850
Residential Real Estate
Financing Receivable, Credit Quality Indicator [Line Items]
Current fiscal year	84,549	366,492
Year One	352,394	175,931
Year Two	166,051	43,986
Year Three	38,832	33,021
Year Four	30,823	23,356
Prior	84,042	72,873
Revolving loans	5,513	5,557
Total	762,204	721,216
Residential Real Estate | Pass
Financing Receivable, Credit Quality Indicator [Line Items]
Current fiscal year	83,975	361,876
Year One	348,844	175,772
Year Two	165,830	43,576
Year Three	38,339	32,929
Year Four	30,770	23,267
Prior	82,928	71,592
Revolving loans	5,513	5,557
Total	756,199	714,569
Residential Real Estate | Watch
Financing Receivable, Credit Quality Indicator [Line Items]
Current fiscal year	86	328
Year One	326	70
Year Two	70	410
Year Three	407
Year Four		89
Prior	801	809
Total	1,690	1,706
Residential Real Estate | Substandard
Financing Receivable, Credit Quality Indicator [Line Items]
Current fiscal year	488	4,288
Year One	3,224	89
Year Two	151
Year Three	86	92
Year Four	53
Prior	313	472
Total	4,315	4,941
Construction Real Estate
Financing Receivable, Credit Quality Indicator [Line Items]
Current fiscal year	40,324	88,418
Year One	57,677	45,866
Year Two	29,945
Total	127,946	134,284
Construction Real Estate | Pass
Financing Receivable, Credit Quality Indicator [Line Items]
Current fiscal year	40,324	88,371
Year One	57,553	45,866
Year Two	29,945
Total	127,822	134,237
Construction Real Estate | Substandard
Financing Receivable, Credit Quality Indicator [Line Items]
Current fiscal year		47
Year One	124
Total	124	47
Commercial Real Estate
Financing Receivable, Credit Quality Indicator [Line Items]
Current fiscal year	91,476	364,379
Year One	335,547	159,978
Year Two	136,417	115,603
Year Three	106,776	79,168
Year Four	74,406	84,484
Prior	130,764	61,303
Revolving loans	25,895	24,878
Total	901,281	889,793
Commercial Real Estate | Pass
Financing Receivable, Credit Quality Indicator [Line Items]
Current fiscal year	87,878	351,732
Year One	326,200	147,670
Year Two	124,280	104,746
Year Three	103,953	75,967
Year Four	71,713	70,927
Prior	117,116	61,194
Revolving loans	24,716	23,699
Total	855,856	835,935
Commercial Real Estate | Watch
Financing Receivable, Credit Quality Indicator [Line Items]
Current fiscal year	291	4,456
Year One	4,614	2,365
Year Two	2,202	9,502
Year Three	1,718	1,377
Year Four	873	726
Prior	721	10
Revolving loans	810	810
Total	11,229	19,246
Commercial Real Estate | Special Mention
Financing Receivable, Credit Quality Indicator [Line Items]
Year One		8,806
Year Two	8,806
Year Three		1,793
Year Four	1,793	12,826
Prior	12,826
Revolving loans	300	300
Total	23,725	23,725
Commercial Real Estate | Substandard
Financing Receivable, Credit Quality Indicator [Line Items]
Current fiscal year	3,307	8,191
Year One	4,733	1,137
Year Two	1,129	505
Year Three	269	31
Year Four	27	5
Prior	101	99
Revolving loans	69	69
Total	9,635	10,037
Commercial Real Estate | Doubtful
Financing Receivable, Credit Quality Indicator [Line Items]
Year Two		850
Year Three	836
Total	836	850
Consumer loans
Financing Receivable, Credit Quality Indicator [Line Items]
Current fiscal year	9,323	23,938
Year One	19,909	8,626
Year Two	6,885	3,597
Year Three	2,769	1,156
Year Four	857	564
Prior	1,067	650
Revolving loans	39,657	39,143
Total	80,467	77,674
Consumer loans | Pass
Financing Receivable, Credit Quality Indicator [Line Items]
Current fiscal year	9,322	23,858
Year One	19,800	8,626
Year Two	6,871	3,597
Year Three	2,767	1,126
Year Four	857	534
Prior	1,037	650
Revolving loans	39,609	39,071
Total	80,263	77,462
Consumer loans | Watch
Financing Receivable, Credit Quality Indicator [Line Items]
Current fiscal year	1	80
Year One	78
Revolving loans	48	48
Total	127	128
Consumer loans | Substandard
Financing Receivable, Credit Quality Indicator [Line Items]
Year One	31
Year Two	14
Year Three	2	30
Year Four		30
Prior	30
Revolving loans		24
Total	77	84
Commercial loans
Financing Receivable, Credit Quality Indicator [Line Items]
Current fiscal year	29,461	191,425
Year One	160,394	42,892
Year Two	29,048	19,588
Year Three	16,520	5,613
Year Four	4,941	7,441
Prior	14,086	9,120
Revolving loans	156,952	138,045
Total	411,402	414,124
Commercial loans | Pass
Financing Receivable, Credit Quality Indicator [Line Items]
Current fiscal year	29,032	189,280
Year One	158,480	42,549
Year Two	28,738	17,960
Year Three	16,176	5,591
Year Four	4,934	7,265
Prior	13,914	9,120
Revolving loans	155,439	136,603
Total	406,713	408,368
Commercial loans | Watch
Financing Receivable, Credit Quality Indicator [Line Items]
Current fiscal year	429	1,551
Year One	1,350	262
Year Two	262	1,323
Year Three	53	22
Year Four	7
Revolving loans	458	463
Total	2,559	3,621
Commercial loans | Substandard
Financing Receivable, Credit Quality Indicator [Line Items]
Current fiscal year		594
Year One	564	81
Year Two	48	305
Year Three	291
Year Four		176
Prior	172
Revolving loans	1,055	979
Total	$ 2,130	$ 2,135

XML

Loans and Allowance for Credit Losses - Credit risk profile based on rating and payment activity (Details) - USD ($)	3 Months Ended	12 Months Ended
	Sep. 30, 2021	Jun. 30, 2021
Pass
Financing Receivable, Credit Quality Indicator [Line Items]
PCD loans receivable, net of ACL	$ 12,100,000	$ 3,200,000
Watch
Financing Receivable, Credit Quality Indicator [Line Items]
PCD loans receivable, net of ACL	0	9,000,000.0
Special Mention
Financing Receivable, Credit Quality Indicator [Line Items]
PCD loans receivable, net of ACL	0	0
Substandard
Financing Receivable, Credit Quality Indicator [Line Items]
PCD loans receivable, net of ACL	2,800,000	2,700,000
Doubtful
Financing Receivable, Credit Quality Indicator [Line Items]
PCD loans receivable, net of ACL	$ 0	$ 0

XML

Loans and Allowance for Credit Losses - Loan portfolio aging analysis (Details) - USD ($) $ in Thousands	Sep. 30, 2021	Jun. 30, 2021
Financing Receivable, Past Due [Line Items]
Total Loans Receivable	$ 2,283,300	$ 2,237,091
30-59 Days Past Due
Financing Receivable, Past Due [Line Items]
Total Loans Receivable	2,549	1,238
60 to 89 Days Past Due
Financing Receivable, Past Due [Line Items]
Total Loans Receivable	885	1,369
Greater than 90 Days Past Due
Financing Receivable, Past Due [Line Items]
Total Loans Receivable	1,372	1,211
Total Past Due
Financing Receivable, Past Due [Line Items]
Total Loans Receivable	4,806	3,818
Current
Financing Receivable, Past Due [Line Items]
Total Loans Receivable	2,278,494	2,233,273
Residential Real Estate
Financing Receivable, Past Due [Line Items]
Total Loans Receivable	762,204	721,216
Residential Real Estate | 30-59 Days Past Due
Financing Receivable, Past Due [Line Items]
Total Loans Receivable	1,475	312
Residential Real Estate | 60 to 89 Days Past Due
Financing Receivable, Past Due [Line Items]
Total Loans Receivable	84	364
Residential Real Estate | Greater than 90 Days Past Due
Financing Receivable, Past Due [Line Items]
Total Loans Receivable	499	613
Residential Real Estate | Total Past Due
Financing Receivable, Past Due [Line Items]
Total Loans Receivable	2,058	1,289
Residential Real Estate | Current
Financing Receivable, Past Due [Line Items]
Total Loans Receivable	760,146	719,927
Construction Real Estate
Financing Receivable, Past Due [Line Items]
Total Loans Receivable	127,946	134,284
Construction Real Estate | Greater than 90 Days Past Due
Financing Receivable, Past Due [Line Items]
Total Loans Receivable		30
Construction Real Estate | Total Past Due
Financing Receivable, Past Due [Line Items]
Total Loans Receivable		30
Construction Real Estate | Current
Financing Receivable, Past Due [Line Items]
Total Loans Receivable	127,946	134,254
Commercial Real Estate
Financing Receivable, Past Due [Line Items]
Total Loans Receivable	901,281	889,793
Commercial Real Estate | 30-59 Days Past Due
Financing Receivable, Past Due [Line Items]
Total Loans Receivable	598	363
Commercial Real Estate | 60 to 89 Days Past Due
Financing Receivable, Past Due [Line Items]
Total Loans Receivable	671
Commercial Real Estate | Greater than 90 Days Past Due
Financing Receivable, Past Due [Line Items]
Total Loans Receivable		374
Commercial Real Estate | Total Past Due
Financing Receivable, Past Due [Line Items]
Total Loans Receivable	1,269	737
Commercial Real Estate | Current
Financing Receivable, Past Due [Line Items]
Total Loans Receivable	900,012	889,056
Consumer loans
Financing Receivable, Past Due [Line Items]
Total Loans Receivable	80,467	77,674
Consumer loans | 30-59 Days Past Due
Financing Receivable, Past Due [Line Items]
Total Loans Receivable	193	195
Consumer loans | 60 to 89 Days Past Due
Financing Receivable, Past Due [Line Items]
Total Loans Receivable	87	66
Consumer loans | Greater than 90 Days Past Due
Financing Receivable, Past Due [Line Items]
Total Loans Receivable	56	84
Consumer loans | Total Past Due
Financing Receivable, Past Due [Line Items]
Total Loans Receivable	336	345
Consumer loans | Current
Financing Receivable, Past Due [Line Items]
Total Loans Receivable	80,131	77,329
Commercial loans
Financing Receivable, Past Due [Line Items]
Total Loans Receivable	411,402	414,124
Commercial loans | 30-59 Days Past Due
Financing Receivable, Past Due [Line Items]
Total Loans Receivable	283	368
Commercial loans | 60 to 89 Days Past Due
Financing Receivable, Past Due [Line Items]
Total Loans Receivable	43	939
Commercial loans | Greater than 90 Days Past Due
Financing Receivable, Past Due [Line Items]
Total Loans Receivable	817	110
Commercial loans | Total Past Due
Financing Receivable, Past Due [Line Items]
Total Loans Receivable	1,143	1,417
Commercial loans | Current
Financing Receivable, Past Due [Line Items]
Total Loans Receivable	$ 410,259	$ 412,707

XML

Loans and Allowance for Credit Losses - CARES Act (Details) - USD ($) $ in Thousands	Sep. 30, 2021	Jun. 30, 2021
Financing Receivable, Past Due [Line Items]
Total Loans Receivable	$ 2,283,300	$ 2,237,091
Current
Financing Receivable, Past Due [Line Items]
Total Loans Receivable	2,278,494	2,233,273
Current | CARES Act
Financing Receivable, Past Due [Line Items]
Total Loans Receivable	23,700	23,900
Total Past Due
Financing Receivable, Past Due [Line Items]
Total Loans Receivable	4,806	3,818
Total Past Due | CARES Act
Financing Receivable, Past Due [Line Items]
Total Loans Receivable	$ 0	$ 0

XML

Loans and Allowance for Credit Losses - Collateral dependent loans and related ACL (Details) - USD ($) $ in Thousands	Sep. 30, 2021	Jun. 30, 2021	Sep. 30, 2020	Jun. 30, 2020
Related allowance for credit losses	$ 32,543	$ 33,222	$ 35,084	$ 25,139
Collateral-dependent Loans | 1- to 4-family residential loans
Amortized cost	889	895
Related allowance for credit losses	217	223
Residential Real Estate
Related allowance for credit losses	10,634	11,192	$ 8,629	$ 4,875
Residential Real Estate | Collateral-dependent Loans
Amortized cost	889	895
Related allowance for credit losses	$ 217	$ 223

XML

Loans and Allowance for Credit Losses - Nonaccrual Loans (Details) - USD ($) $ in Thousands	Sep. 30, 2021	Jun. 30, 2021
Financing Receivable, Nonaccrual [Line Items]
Nonaccrual loans	$ 6,133	$ 5,868
Residential Real Estate
Financing Receivable, Nonaccrual [Line Items]
Nonaccrual loans	3,059	3,235
Construction Real Estate
Financing Receivable, Nonaccrual [Line Items]
Nonaccrual loans		30
Commercial Real Estate
Financing Receivable, Nonaccrual [Line Items]
Nonaccrual loans	1,950	1,914
Consumer loans
Financing Receivable, Nonaccrual [Line Items]
Nonaccrual loans	65	100
Commercial loans
Financing Receivable, Nonaccrual [Line Items]
Nonaccrual loans	$ 1,059	$ 589

XML

Loans and Allowance for Credit Losses - Performing Loans Classified as Troubled Debt Restructuring Loans (Details) $ in Thousands	3 Months Ended		12 Months Ended
	Sep. 30, 2021 USD ($) loan	Sep. 30, 2020 USD ($) loan	Jun. 30, 2021 USD ($) loan
Number of modifications | loan	1	4
Recorded Investment | $	$ 151	$ 1,974
Performing Loans
Number of modifications | loan	15		12
Recorded Investment | $	$ 3,585		$ 3,241
Residential Real Estate
Number of modifications | loan	1	1
Recorded Investment | $	$ 151	$ 98
Residential Real Estate | Performing Loans
Number of modifications | loan	3		1
Recorded Investment | $	$ 1,133		$ 895
Commercial Real Estate
Number of modifications | loan		2
Recorded Investment | $		$ 1,840
Commercial Real Estate | Performing Loans
Number of modifications | loan	5		4
Recorded Investment | $	$ 988		$ 949
Commercial loans
Number of modifications | loan		1
Recorded Investment | $		$ 36
Commercial loans | Performing Loans
Number of modifications | loan	7		7
Recorded Investment | $	$ 1,464		$ 1,397

XML

Loans and Allowance for Credit Losses - Real Estate Foreclosures (Details) - USD ($)	Sep. 30, 2021	Jun. 30, 2021
Financing Receivable, Troubled Debt Restructuring [Line Items]
Repossessed assets	$ 635,000	$ 622,000
Residential Real Estate | Home Equity Loan
Financing Receivable, Troubled Debt Restructuring [Line Items]
Foreclosure proceedings in process	$ 247,000	$ 533,000

XML

Premises and Equipment - Summary of premises and equipment (Details) - USD ($) $ in Thousands	Sep. 30, 2021	Jun. 30, 2021
Premises and Equipment
Land	$ 12,409	$ 12,452
Buildings and improvements	58,786	56,422
Construction in progress	452	1,158
Furniture, fixtures, equipment and software	19,223	18,985
Automobiles	120	120
Operating leases ROU asset	2,735	2,770
Property, Plant and Equipment, Gross	93,725	91,907
Less accumulated depreciation	28,472	27,830
Premises and equipment, net	$ 65,253	$ 64,077

XML

Premises and Equipment - Additional Information (Details) $ in Thousands	3 Months Ended
	Sep. 30, 2021 USD ($) property
Number of leased properties | property	5
Operating Lease, Weighted Average Discount Rate, Percent	5.00%
Income recognized from lessor agreements | $	$ 75,000
Minimum
Lessee Expected Lease Terms	18 months
Maximum
Lessee Expected Lease Terms	20 years

XML

Premises and Equipment - Calculated amount of right of use assets and lease liabilities (Details) - USD ($) $ in Thousands	3 Months Ended		12 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Jun. 30, 2021
Right of use assets obtained in exchange for lease obligations: Operating Leases	$ 35	$ 22
Consolidated Balance Sheet [Member]
Operating leases right of use asset	2,735		$ 2,770
Operating leases liability	2,735		$ 2,770
Consolidated Statement Of Income [Member]
Operating lease costs classified as occupancy and equipment expense (includes short-term lease costs)	100	72
Supplemental Disclosures Of Cash Flow Information [Member] | Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$ 85	$ 67

XML

Premises and Equipment - Future expected lease payments for leases (Details) $ in Thousands	Sep. 30, 2021 USD ($)
Premises and Equipment
2022	$ 338
2023	272
2024	272
2025	272
2026	272
Thereafter	3,069
Future lease payments expected	$ 4,495

XML

Deposits (Details) - USD ($) $ in Thousands	Sep. 30, 2021	Jun. 30, 2021
Deposits
Non-interest bearing accounts	$ 386,379	$ 358,418
NOW accounts	938,555	925,280
Money market deposit accounts	253,827	253,614
Savings accounts	238,587	230,905
Certificates	554,347	562,586
Total Deposit Accounts	2,371,695	2,330,803
TOTAL DEPOSITS	$ 2,371,695	$ 2,330,803

XML

Earnings Per Share - Schedule of computation of basic and diluted earnings per share (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended
	Sep. 30, 2021	Sep. 30, 2020
Earnings Per Share
Net Income	$ 12,746	$ 9,986
Less: distributed earnings allocated to participating securities	(6)	(4)
Less: undistributed earnings allocated to participating securities	39	26
Net income available to common shareholders	$ 12,701	$ 9,956
Weighted-average common shares outstanding, including participating securities	8,898,994	9,126,866
Less: weighted-average participating securities outstanding (restricted shares)	(31,845)	(27,260)
Weighted-average shares outstanding	8,867,149	9,099,606
Effect of dilutive securities stock options or awards	10,173	2,191
Denominator for diluted earnings per share	8,877,322	9,101,797
Basic earnings per share available to common stockholders	$ 1.43	$ 1.09
Basic earnings per share available to common stockholders	$ 1.43	$ 1.09

XML

Earnings Per Share - Additional information (Details) - shares	3 Months Ended
	Sep. 30, 2021	Sep. 30, 2020
Option
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities excluded from the computation of diluted earnings per share	0	0
Restricted Stock
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities excluded from the computation of diluted earnings per share	50,500	50,500

XML

Income Taxes - Income tax provision (Details) - USD ($) $ in Thousands	3 Months Ended
	Sep. 30, 2021	Sep. 30, 2020
Income Taxes
Current	$ 3,481	$ 4,750
Deferred	7	(2,003)
Total income tax provision	$ 3,488	$ 2,747

XML

Income Taxes - Schedule of net deferred tax assets (Details) - USD ($) $ in Thousands	Sep. 30, 2021	Jun. 30, 2020
Income Taxes
Provision for losses on loans	$ 7,573	$ 7,626
Accrued compensation and benefits	549	826
NOL carry forwards acquired	135	147
Unrealized loss on other real estate	183	180
Other	0	182
Total deferred tax assets	8,440	8,961
Purchase accounting adjustments	210	210
Depreciation	1,765	1,842
FHLB stock dividends	120	120
Prepaid expenses	209	283
Unrealized gain on available for sale securities	824	821
Other	830	1,193
Total deferred tax liabilities	3,958	4,469
Net deferred tax assets	$ 4,482	$ 4,492

XML

Income Taxes - Reconciliation of income tax expense (Details) - USD ($) $ in Thousands	3 Months Ended
	Sep. 30, 2021	Sep. 30, 2020
Tax at statutory rate	$ 3,409	$ 2,674
Actual provision	3,488	2,747
Increase (reduction) in taxes
Nontaxable municipal income	(107)	(103)
State tax, net of Federal benefit	252	241
Cash surrender value of Bank-owned life insurance	(59)	(59)
Tax credit benefits	(11)	26
Other, net	$ 4	$ (32)

XML

Income Taxes - Additional Information (Details) - USD ($)	3 Months Ended
	Sep. 30, 2021	Sep. 30, 2020
Income Taxes
Interest or penalties on income taxes	$ 0
Federal Net Operating Loss Carryforwards	706,000
State Net Operating Loss Carryforwards	$ 0
Effective Income Tax Rate Reconciliation, at Federal Statutory Income Tax Rate, Percent	21.00%	21.00%

XML

401(k) Retirement Plan (Details) - USD ($)	3 Months Ended
	Sep. 30, 2021	Sep. 30, 2020
Defined Contribution Plan Disclosure [Line Items]
Retirement plan expenses	$ 490,000	$ 457,000
Vesting period	5 years
Maximum
Defined Contribution Plan Disclosure [Line Items]
Matching contributions of eligible compensation	4.00%

XML

Subordinated Debt (Details) - USD ($) $ in Thousands	1 Months Ended			3 Months Ended	12 Months Ended
	Aug. 31, 2014	Oct. 31, 2013	Mar. 31, 2004	Sep. 30, 2021	Jun. 30, 2021
Subordinated debt				$ 15,268	$ 15,243
Prepaid Expenses and Other Current Assets
Investment, face amount				505,000
Investment, carrying value				459,000
Trust Preferred Securities
Subordinated debt				$ 7,200	7,200
Redeemable term (in years)			5 years
Interest rate (as a percent)				2.87%
Ozarks Legacy Community Financial, Inc.
Interest rate (as a percent)				2.57%
Floating rate		$ 3,100
Ozarks Legacy Community Financial, Inc. | Reported Value Measurement
Floating rate				$ 2,700	2,700
Peoples Service Company, Inc.
Interest rate (as a percent)				1.92%
Floating rate	$ 6,500
Peoples Service Company, Inc. | Reported Value Measurement
Floating rate				$ 5,300	$ 5,300

XML

Fair Value Measurements - Fair value of Assets Measured on a Recurring Basis and Nonrecurring Basis (Details) - USD ($) $ in Thousands	Sep. 30, 2021	Jun. 30, 2021
Nonrecurring Measurements
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Foreclosed and repossessed assets held for sale	$ 144	$ 280
Fair Value, Inputs, Level 3 | Nonrecurring Measurements
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Foreclosed and repossessed assets held for sale	144	280
US States and Political Subdivisions Debt Securities | Recurring Measurements
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities	46,869	47,696
US States and Political Subdivisions Debt Securities | Fair Value, Inputs, Level 1 | Recurring Measurements
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities	0	0
US States and Political Subdivisions Debt Securities | Fair Value, Inputs, Level 2 | Recurring Measurements
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities	46,869	47,696
US States and Political Subdivisions Debt Securities | Fair Value, Inputs, Level 3 | Recurring Measurements
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities	0	0
Corporate Obligations | Recurring Measurements
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities	18,832	20,311
Corporate Obligations | Fair Value, Inputs, Level 1 | Recurring Measurements
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities	0	0
Corporate Obligations | Fair Value, Inputs, Level 2 | Recurring Measurements
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities	18,832	20,311
Corporate Obligations | Fair Value, Inputs, Level 3 | Recurring Measurements
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities	0	0
Other Debt Obligations | Recurring Measurements
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities	608	672
Other Debt Obligations | Fair Value, Inputs, Level 1 | Recurring Measurements
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities	0	0
Other Debt Obligations | Fair Value, Inputs, Level 2 | Recurring Measurements
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities	608	672
Other Debt Obligations | Fair Value, Inputs, Level 3 | Recurring Measurements
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities	0	0
Total MBS and CMOs | Recurring Measurements
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities	143,100	138,341
Total MBS and CMOs | Fair Value, Inputs, Level 1 | Recurring Measurements
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities	0	0
Total MBS and CMOs | Fair Value, Inputs, Level 2 | Recurring Measurements
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities	143,100	138,341
Total MBS and CMOs | Fair Value, Inputs, Level 3 | Recurring Measurements
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities	$ 0	$ 0

XML

Fair Value Measurements - Losses Recognized on Assets Measured on a Nonrecurring Basis (Details) - Nonrecurring Measurements - USD ($) $ in Thousands	3 Months Ended
	Sep. 30, 2021	Sep. 30, 2020
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total losses on assets measured on a non-recurring basis	$ (28)	$ (36)
Foreclosed and repossessed assets held for sale
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total losses on assets measured on a non-recurring basis	$ (28)	$ (36)

XML

Fair Value Measurements - Unobservable (Level 3) inputs (Details) - Nonrecurring Measurements - Fair Value, Inputs, Level 3 - Foreclosed and repossessed assets - USD ($) $ in Thousands	3 Months Ended	12 Months Ended
	Sep. 30, 2021	Jun. 30, 2021
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value Measurements Nonrecurring Unobservable Inputs	$ 144	$ 280
Third party appraisal
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value Measurements Nonrecurring Valuation Technique	Third party appraisal	Third party appraisal
Third party appraisal | Marketability discount
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value Measurements Nonrecurring Unobservable Inputs	Marketability discount	Marketability discount
Fair Value Measurements Nonrecurring Weighted Average Discount Applied	24.4	37.1
Third party appraisal | Marketability discount | Minimum
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value Measurements Nonrecurring Range of discounts Applied	8.00%	7.20%
Third party appraisal | Marketability discount | Maximum
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value Measurements Nonrecurring Range of discounts Applied	51.00%	80.60%

XML

Fair Value Measurements - Schedule of financial instruments (Details) - USD ($) $ in Thousands	3 Months Ended	12 Months Ended
	Sep. 30, 2021	Jun. 30, 2021
Financial assets
Cash and cash equivalents	$ 111,402	$ 123,592
Interest-bearing time deposits	980	979
Stock in FHLB	5,425	5,873
Stock in Federal Reserve Bank of St. Louis	5,031	5,031
Loans receivable, net	2,249,478	2,200,244
Accrued interest receivable	11,203	10,079
Financial liabilities
Deposits	2,371,695	2,330,803
Advances from FHLB	46,522	57,529
Accrued interest payable	731	779
Subordinated debt	15,268	15,243
Unrecognized financial instruments (net of contract amount)
Commitments to originate loans	0
Letters of credit	0
Lines of credit	0
Fair Value, Inputs, Level 1
Financial assets
Cash and cash equivalents	111,402	123,592
Financial liabilities
Deposits	1,817,346	1,768,217
Fair Value, Inputs, Level 2
Financial assets
Interest-bearing time deposits	980	979
Stock in FHLB	5,425	5,873
Stock in Federal Reserve Bank of St. Louis	5,031	5,031
Accrued interest receivable	11,203	10,079
Financial liabilities
Advances from FHLB	47,419	58,587
Accrued interest payable	731	779
Fair Value, Inputs, Level 3
Financial assets
Loans receivable, net	2,265,086	2,218,762
Financial liabilities
Deposits	556,397	565,123
Subordinated debt	$ 16,045	$ 15,468

XML

Business Combinations (Details) - USD ($)		3 Months Ended
	Sep. 28, 2021	Sep. 30, 2021	Jun. 30, 2021
Assets		$ 2,738,541,000	$ 2,700,530,000
Loans, net of allowance		2,249,478,000	2,200,244,000
Deposits		2,371,695,000	2,330,803,000
Fortune Financial Corporation
Assets			253,700,000
Loans, net of allowance			209,300,000
Deposits			$ 214,500,000
Fortune Financial Corporation
Transaction value	$ 29,900,000
Fortune Financial Corporation | Noninterest expense
Acquisition related costs		$ 25,000