Southern Missouri Bancorp, Inc. 2017 Annual Report
> FINANCIAL SUMMARY < 2017 2017 2016 2016 CHANGE (%) EARNINGS (dollars in thousands) Net interest income $ 51,122 $ 46,952 8.9% Provision for loan losses 2,340 2,494-6.2% Noninterest income 11,084 9,758 13.6% Noninterest expense 38,252 32,686 17.0% Income taxes > FINANCIAL > FINANCIAL SUMMARY SUMMARY < < 6,062 6,682-9.3% Net income 15,552 14,848 4.7% 2017 2017 2016 2016 CHANGE CHANGE (%) (%) Dividend on preferred shares - 85 85-100.0% $ Net income available to common $ $ stockholders $ 46,952 46,952 8.9% 8.9% 15,552 14,763 5.3% EARNINGS EARNINGS (dollars (dollars in thousands) in thousands) Net interest Net interest income income 51,122 51,122 Provision Provision for loan for losses loan losses 2,340 2,340 2,494 2,494-6.2% -6.2% Noninterest Noninterest income income 11,084 11,084 9,758 9,758 13.6% 13.6% Noninterest Noninterest expense expense 38,252 38,252 32,686 32,686 17.0% 17.0% Income Income taxes taxes 6,062 6,062 6,682 6,682-9.3% -9.3% Net income Net income 15,552 15,552 14,848 14,848 4.7% 4.7% Dividend Dividend on preferred on preferred shares shares - - 85 85-100.0% -100.0% Net income Net income available available to common to common stockholders stockholders 15,552 15,552 14,763 14,763 5.3% 5.3% PER COMMON SHARE Net income: Basic $ 2.08 $ $ 1.99 4.5% Diluted 2.07 1.98 4.5% Closing market price 32.26 23.53 37.1% Cash dividends declared 0.40 0.36 11.1% PER COMMON PER COMMON SHARE SHARE Net income: Net income: Basic Basic $ $ 2.08 2.08 $ $ 1.99 1.99 4.5% 4.5% Diluted Diluted 2.07 2.07 1.98 1.98 4.5% 4.5% Tangible Tangible book book value value 18.40 18.40 15.96 15.96 15.3% 15.3% Closing Closing market market price price 32.26 32.26 23.53 23.53 37.1% 37.1% Cash Cash dividends dividends declared declared 0.40 0.40 0.36 0.36 11.1% 11.1% AT YEAR-END (dollars in thousands) Total assets $ 1,707,712 $ 1,403,910 21.6% Loans, net of allowance 1,397,730 1,135,453 23.1% Reserves as a percent of nonperforming loans 482% % 244% % Deposits $ $ $ 1,403,910 $ 1,403,910 21.6% 21.6% $ 1,455,597 $ 1,120,693 29.9% Stockholder's equity 173,083 125,966 37.4% AT YEAR-END AT YEAR-END (dollars (dollars in thousands) in thousands) Total Total assets assets 1,707,712 1,707,712 Loans, Loans, net of net allowance of allowance 1,397,730 1,397,730 1,135,453 1,135,453 23.1% 23.1% Reserves Reserves as a percent as a percent of nonperforming of nonperforming loans loans 482 482 % % 244 244 % % Deposits Deposits $ 1,455,597 $ 1,455,597 $ 1,120,693 $ 1,120,693 29.9% 29.9% Stockholder's Stockholder's equity equity 173,083 173,083 125,966 125,966 37.4% 37.4% FINANCIAL RATIOS Return on average common stockholder's equity 11.70% % 12.34% % Return on average assets 1.05 1.11 Net interest margin 3.74 3.80 Efficiency ratio 61.49 57.64 Allowance for loan losses to loans 1.10 1.20 Equity to average assets at year-end 11.66 9.44 FINANCIAL FINANCIAL RATIOS RATIOS Return Return on average on average common common stockholder's stockholder's equity equity 11.70 11.70 % % 12.34 12.34 % % Return Return on average on average assets assets 1.05 1.05 1.11 1.11 Net interest Net interest margin margin 3.74 3.74 3.80 3.80 Efficiency Efficiency ratio ratio 61.49 61.49 57.64 57.64 Allowance Allowance for loan for losses loan losses to loans to loans 1.10 1.10 1.20 1.20 0.116639 0.116639 0.094368 0.094368 Equity Equity to average to average assets assets at year-end at year-end 11.66 11.66 9.44 9.44 173,083 173,083 1483918 1483918125,966125,966 1334843 1334843 OTHER OTHER DATA DATA (1) Common Common shares shares outstanding outstanding 8,591,363 8,591,363 7,437,616 7,437,616 Common Common shares shares outstanding outstanding for book for book value value calculation calculation (2) 8,572,588 8,572,588 7,400,816 7,400,816 Average Average common common and dilutive and dilutive shares shares outstanding outstanding 7,510,880 7,510,880 7,458,759 7,458,759 Common Common stockholders stockholders record record?????? 250 250 Full-time Full-time equivalent equivalent employees employees 356 356 321 321 Assets Assets per employee per employee (in thousands) (in thousands) 4,797 4,797 Banking Banking offices offices 42 42 36 36 (1) Other (1) Other data is data as of is as year-end, of year-end, except except for average for average shares. shares. (2) Excludes (2) Excludes unvested unvested restricted restricted stock stock award award shares. shares. OTHER DATA (1) Common shares outstanding 8,591,363 7,437,616 Common shares outstanding for book value calculation (2) 8,572,588 7,400,816 Average common and dilutive shares outstanding 7,510,880 7,458,759 Common stockholders of record 243 250 $ $ Full-time equivalent employees $ $ 4,374 4,374 375 321 Assets per employee (in thousands) $ 4,554 $ $ 4,374 Banking offices 42 36 $1.79 $1.98 $2.07 $1.79 $1.98 $1.79 $1.98 $2.07 $2.07 $1.44 $1.44 $1.44 $1.45 $1.45 $1.45 $0.30 $0.32 $0.34 $0.36 $0.40 $0.30 $0.32 $0.34 $0.36 $0.40 $0.30 $0.32 $0.34 $0.36 $0.40 $20.19 $20.19 $20.19 $12.55 $13.79 $15.30 $17.02 $12.55 $13.79 $15.30 $17.02 $12.55 $13.79 $15.30 $17.02 2013 2013 2013 2014 2014 2014 2015 2015 2015 2016 2016 2016 2017 2017 2017 DILUTED EARNINGS 2013 2013 2013 2014 2014 2014 2015 2015 2015 2016 2016 2016 2017 2017 2017 CASH CASH DIVIDENDS CASH DIVIDENDS DIVIDENDS CASH DIVIDENDS 2013 2013 2013 2014 2014 2014 2015 2015 2015 2016 2016 2016 2017 2017 2017 BOOK BOOK VALUE BOOK VALUE PER VALUE SHARE BOOK VALUE 2013 2013 2014 2014 2015 2015 2016 2016 2017 2017 DILUTED DILUTED EARNINGS EARNINGS 1.44 1.44 $ $ $ $ 1.79 1.79 $ $ 1.98 1.98 $ $ 2.07 2.07 (1) Other data is as of year-end, $ except $ for average 1.45 shares. 1.45 (2) Excludes unvested restricted stock award shares. 2013 2013 2014 2014 2015 2015 2016 2016 2017 2017 CASH CASH DIVIDENDS DIVIDENDS $ $ 0.30 0.30 $ $ 0.32 0.32 $ $ 0.34 0.34 $ $ 0.36 0.36 $ $ 0.40 0.40 2013 2013 2014 2014 2015 2015 2016 2016 2017 2017 BOOK BOOK VALUE VALUE $ $ 12.55 12.55 $ $ 13.79 13.79 $ $ 15.30 15.30 $ $ 17.02 17.02 $ $ 20.19 20.19 18.6% 18.6% Total Assets Total Total Assets Assets Dollars Dollars in millions Dollars in millions in millions $1,300 $1,404 $1,708 $1,300 $1,404 $1,708 $1,300 $1,404 $1,708 Total Loans, Total Total Loans, net of Loans, net allowance of net allowance of for allowance loan for losses loan for losses loan losses Dollars Dollars in millions Dollars in millions in millions $1,398 $1,398 $1,398 $1,135 $1,135 Total Deposits Total Total Deposits Deposits Dollars Dollars in millions Dollars in millions in millions $1,456 $1,456 $1,456 $1,121 $1,121 $1,121
Dear Shareholder, Fiscal 2017 saw Southern Missouri Bancorp complete a moderately sized acquisition in an adjacent market offering opportunities for additional growth, raise capital to support continuing growth, post solid organic loan and deposit growth, maintain solid core profitability, and improve on our already sound asset quality. Southern Missouri Bancorp, Inc. (the Company), was pleased to report net income available to common shareholders of $15.6 million for fiscal 2017, an increase of $789,000, or 5.3%, over fiscal 2016. The Company s return on average common equity was 11.7%, and its return on average assets was 1.05% for fiscal 2017, as compared to 12.3% and 1.11%, respectively, for fiscal 2016. Purchase accounting benefits reported on the acquired loan and deposit portfolios from the fiscal 2015 acquisition of Peoples Bank of the Ozarks ( Peoples ) increased net interest income (pre-tax) by $1.5 million in fiscal 2017, as compared to $1.7 million in the prior fiscal year. Fiscal 2017 results included $685,000 (pre-tax) in charges related to the acquisition of Capaha Bank, with no comparable charges in the prior fiscal year. 7.6% Return on common equity exceeds that of peer 1 banks Returns decreased slightly for fiscal 2016, but still compare favorably to peer banks. 12.3% 8.7% 11.5% 12.5% 12.3% 9.6% 9.8% 11.7% Dec-12 Jun-13 Dec-13 Jun-14 Dec-14 Jun-15 Dec-15 Jun-16 Dec-16 Jun-17 9.1% RETURN ON AVERAGE COMMON EQUITY Southern Missouri Bancorp, Inc. Peer Companies Net interest income improved 8.9%, as our average earning asset balances increased by 10.5%, while net interest margin declined by six basis points. Purchase accounting benefits from the Peoples acquisition contributed eleven basis points to net interest margin in the 2017 fiscal year, as compared to 14 basis points in the prior year. Noninterest income increased 13.6%, attributed primarily to loan origination fees, bank card interchange income, deposit account service charges, loan servicing fees, increases in the cash value of bank-owned life insurance (BOLI), and net gains realized on the sale of residential loans originated for sale into the secondary market. (1) Peer data is based on the median year-end figures (December) reported by S&P Global Market Intelligence (formerly, SNL Financial) for publicly-traded commercial banks and thrifts with assets of $1 billion to $2 billion as of December 31, 2016, headquartered in Missouri, Arkansas, Illinois, Iowa, Kansas, Kentucky, Nebraska, Oklahoma, and Tennessee. SMBC data is as of fiscal year-end (June).
Noninterest expense increased 17.0%, due to increased compensation, occupancy, legal and professional fees, charges to recognize the impairment of fixed assets, expenses attributable to the prepayment of FHLB advances, provisioning for offbalance sheet credit exposures, losses on foreclosed real estate, bank card network expenses, and expenses related to providing debit cards, internet banking, and other deposit service to new and existing customers. The increase included the $685,000 in merger-related charges noted above. While exclusion of the M&A expenses and other, smaller non-recurring items results in a core efficiency ratio we measure internally that is somewhat lower, our noninterest expense results have not been what we would want for the long term. Because operating efficiently remains a key long-term 65.9% Efficiency deteriorates, but remains ahead of peers Management remains committed to lowering the ratio as we integrate recent acquisitions 52.7% 69.4% 70.0% 71.3% 60.6% 58.5% 57.6% 68.9% strategy for the Company, we are focused on lowering the measure. Our effective tax rate improved primarily due to our formation of a real estate investment trust (REIT) subsidiary to hold certain qualified assets in order to minimize the Company s state tax liability. The formation of the REIT did require some legal and accounting expenditures, which contributed a relatively small amount to the annual increase in noninterest expense. Dec-12 Jun-13 Dec-13 Jun-14 Dec-14 Jun-15 Dec-15 Jun-16 Dec-16 Jun-17 Southern Bank s logo is a depiction of our vision to be an organization that is accessible, EFFICIENCY RATIO dynamic, innovative, competitive, rooted, and Southern Missouri Bancorp, Inc. Peer Companies involved. Each attribute is one we believe to be key to developing as a Company that has strong roots and strong branches. Since our last shareholder letter, we ve been pleased to continue to expand those roots, announcing two acquisitions, and we remain focused on further opportunities to dynamically grow. 61.5% In January, we reported that we d reached an agreement to add Capaha Bank to our organization, with locations in Cape Girardeau and Jackson, Missouri, as well as locations in Anna, Cairo, and Tamms, Illinois, providing access to the only Metropolitan Statistical Area (MSA) in southeast Missouri. The merger was completed in June, with Capaha Bank being merged with and into Southern Bank, providing a solid core deposit franchise and a loan portfolio with a positive credit outlook. We look forward to the opportunity to grow both sides of the balance sheet in that market, as access to new products and higher lending limits will help the bankers who joined us from Capaha to serve their customers. Following our 2017 fiscal year end, in August, we reported that we will enter an adjacent market in Marshfield, Missouri, as Southern Missouri Bank of Marshfield agreed to merge with our Company. We re targeting closing for the first quarter of calendar year 2018, and look forward to expanding our presence in the Springfield, Missouri, MSA, through this addition of two locations in Webster County.
We continue to evaluate new opportunities to grow through mergers and acquisitions, as a range of prospects appear to be in play across our footprint and beyond. As we consider each, we ll continue to focus on the growth of an institution built to serve our customers through an effective community banking business model providing a valued service to our market area and a solid return to our shareholders. We saw strong loan growth in fiscal 2017 totaling $262.3 million, or 23.1%. The mid-june Capaha Bank acquisition added their $152.2 million loan portfolio to our organic growth for the year. In total, loan growth consisted primarily of increases in commercial real estate loans, residential real estate loans, and commercial loans. Further growth in loans, deposits, and total assets Organic originations were supplemented by the Capaha Bank acquisition to result in an outstanding year for loan and deposit growth. $796 $1,021 TOTAL ASSETS Dollars in Millions $1,300 $1,404 $1,708 TOTAL LOANS, NET OF ALLOWANCE FOR LOAN LOSSES Dollars in Millions $647 $801 $1,053 $1,135 $1,398 $632 TOTAL DEPOSITS Dollars in Millions $785 Dollars in millions $1,055 $1,121 $1,456 13 14 15 16 17 DILUTED EARNINGS 13 14 15 16 17 CASH DIVIDENDS 13 14 15 16 17 BOOK VALUE Deposits increased $334.9 million, or 29.9%, with the Capaha Bank acquisition contributing $166.8 million to internally-generated growth. Additionally, we utilized brokered deposits to offset Federal Home Loan Bank advance repayments, and grew public unit deposits. On a core basis, excluding brokered and public unit deposits, and evaluating monthly average balances, we measured our nonmaturity deposit growth during the 2017 fiscal year at 8.5% at our legacy branches, down slightly from 9.7% growth in fiscal 2016. We continue to be quite pleased with those results. problem asset levels improved Nonperforming asset levels declined as a percentage of average assets, trending towards historical averages following recent mergers. 2.22% 1.50% 1.18% We ended fiscal 2017 with improved credit quality, with nonperforming assets of $6.3 million, or 0.37% of total assets, as compared to $9.0 million, or 0.64% of total assets, at year end for fiscal 2016. Nonperforming loans were 0.23% of gross loans at June 30, 2017, as compared to 0.50%, at the prior fiscal year end. Net charge-offs for fiscal 2017 were 0.05% of average loans outstanding, as compared to 0.09% for fiscal 2016. 0.72% 0.49% 0.58% 0.64% 0.64% 0.43% NON-PERFORMING ASSSETS RATIO Southern Missouri Bancorp, Inc. Peer Companies 0.37%
Our Company saw significant changes in its capital base during fiscal 2017, issuing common shares in the June closing of the Capaha Bank acquisition and completing an at-the-market capital raise in that same month. Absent the capital raise, the acquisition would have reduced our capital ratios compared to the prior fiscal year end. With the additional capital, however, we ended the fiscal year with a ratio of tangible common equity to tangible assets (TCE/TA) of 9.32%, as compared to 8.46% a year earlier. The additional capital raised, in addition to our normal retention, provides us with added capacity to grow organically or through acquisitions. At the same time, we are re-evaluating our targeted capital ratios, and anticipate that we ll attempt to hold somewhat higher levels of capital over the near- to medium-term, attributable to continued expected growth opportunities, and our concentration of assets in commercial real estate loans. Book value per common share at June 30, 2017, was $20.19, an increase of 18.6% from the year prior, aided by the accretive capital raise. Tangible book value per common share, a non-gaap measure, improved 15.3%, to $18.40 at June 30, 2017. Our closing stock price at the end of the fiscal year was $32.26, up 37.1% from $23.53 at the previous fiscal year end. Over that same period, the SNL U.S. Bank Index was up 43.2%, while the S&P 500 was up 15.5%. We noted in last year s report that the Company s stock had been included in the Russell 2000 Index when it reconstituted in June 2016, and we have seen improved liquidity for our shareholders since then. Assuming dividends have been reinvested, our total shareholder return over the five years ended June 30, 2017, has been 229.3%, while the SNL U.S. Bank Index has returned 136.1%, and the S&P 500 has returned 97.4%. Our dividends paid during fiscal 2017 represented a 1.24% return on our closing stock price on the final day of the fiscal year, and a 1.33% return on our average closing stock price for fiscal 2017. In July 2017, the board was pleased to increase our dividend by 10%, to $0.11 per quarter, effective with the August 2017 payment. As we plan for the coming year, we will, as always, look for opportunities to drive long-term shareholder value, including through acquisition opportunities that present growth potential, stable sources of funding, or both. As this letter goes to press, we were recently pleased to have been interviewed by the publication, Bank Director, for an upcoming article in which we were identified as one of the highest performing listed banks over the last decade. This success has provided a foundation from which we can look forward with optimism to the new fiscal year and beyond, and it is the result of a remarkable effort by our team members, the opportunities afforded by our legacy communities as well as those we ve grown into, and the outstanding relationships we re fortunate to enjoy with the businesses and consumers we serve. Thank you for your continued confidence in our Company, and for the opportunity to serve you. Sincerely, GREG STEFFENS PRESIDENT and CHIEF EXECUTIVE OFFICER SOUTHERN MISSOURI BANCORP, INC.
> DIRECTORS < L. Douglas Bagby Chairman of the Board; Retired City Manager, City of Poplar Bluff Sammy A. Schalk Vice-Chairman of the Board; President, Gamblin Lumber Company Ronnie D. Black Retired Executive Director, General Association of General Baptists Greg A. Steffens President & CEO, Southern Missouri Bancorp, Inc. Rebecca M. Brooks Financial Manager, McLane Transport Charles R. Love Certified Public Accountant, Kraft, Miles & Tatum Dennis C. Robison President, Robison Farms, Inc. David J. Tooley Retired President & CEO, Metropolitan National Bank Todd E. Hensley Investor/Former Chairman, Peoples Bank of the Ozarks John R. Abercrombie Retired President, Chairman & CEO, Capaha Bank > EXECUTIVE OFFICERS < Greg A. Steffens President & Chief Executive Officer Kimberly A. Capps Executive Vice President & Chief Operations Officer William D. Hribovsek Executive Vice President & Regional President Matthew T. Funke Executive Vice President & Chief Financial Officer Lora L. Daves Executive Vice President & Chief Risk Officer Justin G. Cox Executive Vice President & Regional President Mark E. Hecker Executive Vice President & Chief Credit Officer Christopher R. ( Robb ) Roberts Executive Vice President & Regional President PLEASE JOIN US at our 2017 Annual Meeting, where shareholders will hear management review this year s performance in detail. ANNUAL MEETING Monday, October 30, 2017, at 9:00 AM To be held at our headquarters facility 2991 Oak Grove Road Poplar Bluff, Missouri
SOUTHERN MISSOURI BANCORP, INC. offers community banking services in Missouri, Arkansas, and Illinois through its single bank subsidiary, Southern Bank. Southern Bank is Accessible Southern Bank is always accessible through our branches, website, mobile applications, ATMs and ITMs. Dynamic We are charismatic and progressive. We grow and adapt to meet the ever-changing needs of our customers and communities. Innovative We are unconventional pioneers. We offer cutting edge products, like Kasasa, to help our customers put their hard-earned money to work. Competitive We are as ambitious and driven as the people we serve. We offer the same quality products of mega bank chains without losing personal service or outsourcing decisions. Rooted Our culture is rooted in nearly 130 years of impeccable customer service, superior products, and philanthropy. Involved We believe that our personal investment in the lives of our customers and in the communities we serve is just as important as our financial investments. Southern Missouri Bancorp, Inc. 2991 Oak Grove Road, Poplar Bluff, Missouri 63901 (573) 778-1800 www.bankwithsouthern.com