CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands |
Sep. 30, 2023 |
Jun. 30, 2023 |
|---|---|---|
| CONDENSED CONSOLIDATED BALANCE SHEETS | ||
| Loans And Leases Receivable Allowance | $ 49,122 | $ 47,820 |
| 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 | 11,925,087 | 11,919,087 |
| Treasury Stock | 588,625 | 588,625 |
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($) $ in Thousands |
3 Months Ended | |
|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
|
| CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME | ||
| Net Income | $ 13,151 | $ 9,603 |
| Other comprehensive loss: | ||
| Unrealized losses on securities available-for-sale | (4,146) | (2,680) |
| Tax benefit | 913 | 589 |
| Total other comprehensive loss | (3,233) | (2,091) |
| Comprehensive Income | $ 9,918 | $ 7,512 |
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY - USD ($) $ in Thousands |
Common Stock |
Additional Paid-in Capital |
Retained Earnings |
Treasury Stock, Common Stock |
Accumulated Other Comprehensive Loss |
Total |
|---|---|---|---|---|---|---|
| BEGINNING BALANCE at Jun. 30, 2022 | $ 98 | $ 119,162 | $ 240,115 | $ (21,116) | $ (17,487) | $ 320,772 |
| Net Income | 9,603 | 9,603 | ||||
| Change in unrealized loss on available for sale securities | (2,091) | (2,091) | ||||
| Dividends paid on common stock | (1,938) | (1,938) | ||||
| Stock option expense | 54 | 54 | ||||
| ENDING BALANCE at Sep. 30, 2022 | 98 | 119,216 | 247,780 | (21,116) | (19,578) | 326,400 |
| BEGINNING BALANCE at Jun. 30, 2023 | 119 | 218,260 | 270,720 | (21,116) | (21,925) | 446,058 |
| Net Income | 13,151 | 13,151 | ||||
| Change in unrealized loss on available for sale securities | (3,233) | (3,233) | ||||
| Dividends paid on common stock | (2,380) | (2,380) | ||||
| Stock option expense | 333 | 333 | ||||
| ENDING BALANCE at Sep. 30, 2023 | $ 119 | $ 218,593 | $ 281,491 | $ (21,116) | $ (25,158) | $ 453,929 |
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Parenthetical) - $ / shares |
3 Months Ended | |
|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
|
| CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY | ||
| Dividends paid on common stock | $ 0.21 | $ 0.21 |
Basis of Presentation |
3 Months Ended |
|---|---|
Sep. 30, 2023 | |
| Basis of Presentation | |
| Basis of Presentation | Note 1: Basis of Presentation The accompanying unaudited interim condensed 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, 2023, 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, 2023, 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, 2023 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. |
Organization and Summary of Significant Accounting Policies |
3 Months Ended |
|---|---|
Sep. 30, 2023 | |
| 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, 2023, assets of the REIT were approximately $1.4 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 condensed 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 condensed 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. Material estimates that are particularly susceptible to significant change relate to the determination of the allowance for credit losses, estimated fair values of purchased loans, and certain other assumptions and judgmental factors relating to investment securities. 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 $30.6 million and $3.8 million at September 30, 2023 and June 30, 2023, respectively. The deposits are held in various commercial banks with a total of $2.5 million and $1.3 million exceeding the FDIC’s deposit insurance limits at September 30, 2023 and June 30, 2023, respectively, as well as at the Federal Reserve and the Federal Home Loan Banks of Des Moines and Chicago. Interest-bearing Time Deposits. Interest bearing time deposits in banks mature within three 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 loss, 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 (loss). 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 Allowance for Credit Losses (“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. The Company evaluates impaired AFS securities at the individual level on a quarterly basis, and considers 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, 2023, or June 30, 2023. 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 of the Bank based upon a predetermined formula and is carried at cost. Loans. Loans are generally stated at unpaid principal balances, less the ACL, 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. 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 a provision for credit losses (“PCL”) charged to current earnings. The ACL is increased by the provision for credit 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 utilizes 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 to include 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. 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. 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. 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. Any costs for development and improvement of the property that are warranted 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 to forty years for premises, to seven years for equipment, and three years for software. Bank Owned Life Insurance. Bank owned life insurance policies are reflected in the condensed 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 condensed 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 that 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, 2023, 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. There was no impairment of goodwill at September 30, 2023. Intangible Assets. The Company’s intangible assets at September 30, 2023 included gross core deposit intangibles of $39.1 million with $15.0 million accumulated amortization, gross other identifiable intangibles of $6.4 million with accumulated amortization of $4.0 million, and mortgage and SBA servicing rights of $2.9 million. At June 30, 2023, the Company’s intangible assets included gross core deposit intangibles of $39.1 million with $14.0 million accumulated amortization, gross other identifiable intangibles of $6.4 million with accumulated amortization of $3.9 million, and mortgage and SBA servicing rights of $2.9 million. The Company’s core deposit and other intangible assets are being amortized using the straight line method, in accordance with ASC 350, over periods ranging from to ten years, with amortization expense expected to be approximately $3.1 million in the remainder of fiscal 2024, $3.5 million in fiscal 2025, $3.0 million in fiscal 2026, $2.7 million in fiscal 2027, $2.7 million in fiscal 2028, and $11.5 million thereafter. As of June 30, 2023, there was no impairment indicated, and there was no impairment of other intangible assets at September 30, 2023. 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, if any, 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. Non-Employee Directors’ Retirement. The Bank entered into directors’ retirement agreements beginning in April 1994 for non-employee directors and continued to do so for new non-employee directors joining the Bank’s board through December 2014. These directors’ retirement agreements provide that each participating 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. 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 loss, net of applicable income taxes. Other comprehensive income includes unrealized depreciation on available-for-sale securities, unrealized depreciation on available-for-sale securities for which a portion of an other-than-temporary impairment has been recognized in income, 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. Wealth Management Assets and Fees. Assets managed in fiduciary or investment management accounts by the Company are not included in the consolidated balance sheets since such items are not assets of the Company or its subsidiaries. Fees from fiduciary or investment management activities are recorded on a cash basis over the period in which the service is provided. Fees are generally a function of the market value of assets managed and administered, the volume of transactions, and fees for other services rendered, as set forth in the agreement between the customer and the Company. This revenue recognition involves the use of estimates and assumptions, including components that are calculated based on asset valuations and transaction volumes. Any out-of-pocket expenses or services not typically covered by the fee schedule for fiduciary activities are charged directly to the account on a gross basis as revenue is incurred. The Southern Wealth Management division, which is a division of the Bank, held fiduciary assets totaling $96.8 million and $102.0 million as of September 30, 2023 and June 30, 2023, respectively, and investment management assets totaling $444.9 million and $464.2 million as of September 30, 2023 and June 30, 2023, respectively. New Accounting Pronouncements: In January 2021, the FASB has published ASU 2021-01, “Reference Rate Reform. (Topic 848)”. ASU 2021-01 clarified that certain optional expedients and exceptions in Topic 848 for contract modifications and hedge accounting apply to derivatives that are affected by the discounting transition. The ASU also amended the expedients and exceptions in Topic 848 to capture the incremental consequences of the scope clarification and to tailor the existing guidance to derivative instruments affected by the discounting transition. An entity may elect to apply the amendments in this update on a full retrospective basis as of any date from the beginning of an interim period that includes or is subsequent to March 12, 2020, or on a prospective basis to new modifications from any date within an interim period that includes or is subsequent to the date of the issuance of a final update, up to the date that financial statements are available to be issued. If an entity elects to apply any of the amendments in this update for an eligible hedging relationship, any adjustments as a result of those elections must be reflected as of the date the entity applies the election. Originally, the amendments in this update did not apply to contract modifications made after December 31, 2022, new hedging relationships entered into after December 31, 2022, and existing hedging relationships evaluated for effectiveness in periods after December 31, 2022 except for hedging relationships existing as of December 31, 2022, that apply certain optional expedients in which the accounting effects are recorded through the end of the hedging relationship (including periods after December 31, 2022). With the issuance of ASU 2022-06 Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848, the sunset date for adoption of ASU 2021-01 was extended from December 31, 2022 to December 31, 2024. The Company is evaluating the impact of this ASU but does not expect it to have a material impact on the Company’s consolidated financial statements. In March 2023, the FASB issued ASU 2023-02, “Investments - Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method.” This ASU permits reporting entities to elect to account for tax equity investments, regardless of the tax credit program for which the income tax credits are received, using the proportional amortization method if certain conditions are met. Under the proportional amortization method, an entity amortizes the initial cost of the investment in proportion to the income tax credits and other income tax benefits received and recognizes the net amortization and income tax credits and other income tax benefits in the income statement as a component of income tax expense. A reporting entity makes an accounting policy election to apply the proportional amortization method on a tax-credit-program-by-tax-credit-program basis rather than electing to apply the proportional amortization method at the reporting entity level or to individual investments. This ASU also requires specific disclosures of investments that generate income tax credits and other income tax benefits from a tax credit program for which the entity has elected to apply the proportional amortization method. The ASU is effective for fiscal years beginning after December 15, 2023. The Company does not expect adoption of ASU 2023-02 to have a material impact on its consolidated financial statements. On July 1, 2023, the Company adopted ASU No. 2022-02, “Financial Instruments – Credit Losses (Topic 326), Troubled Debt Restructurings and Vintage Disclosures.” ASU 2022-02 eliminates the accounting guidance for TDRs in ASC 310-40, “Receivables – Troubled Debt Restructurings by Creditors” for entities that have adopted the CECL model introduced by ASU 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” ASU 2022-02 also requires that public business entities disclose current-period gross charge offs by year of origination for financing receivables and net investments in leases within the scope of Subtopic 326-20, “Financial Instruments – Credit Losses – Measured at Amortized Cost.” The adoption of this update did not have a material impact on the Company’s consolidated financial statements. |
Available for Sale Securities |
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| Available for Sale Securities | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Available for Sale Securities | Note 3: Available for Sale Securities The amortized cost, gross unrealized gains, gross unrealized losses, ACL, and approximate fair value of securities available for sale consisted of the following:
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.
The carrying value of investment and mortgage-backed securities pledged as collateral to secure public deposits amounted to $261.0 million and $253.9 million at September 30, 2023 and June 30, 2023, respectively. The securities pledged consist of marketable securities, including $140.9 million and $129.2 million of Mortgage-backed Securities, $91.8 million and $94.8 million of Collateralized Mortgage Obligations, $25.2 million and $26.5 million of State and Political Subdivisions Obligations, and $3.1 million and $3.4 million of Other Securities at September 30, 2023 and June 30, 2023, 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, 2023 and June 30, 2023:
Obligations of state and political subdivisions. The unrealized losses on the Company’s investments in obligations of state and political subdivisions include 23 individual securities which have been in an unrealized loss position for less than 12 months and 64 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 increases 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 and other Obligations. The unrealized losses on the Company’s investments in corporate obligations include 13 individual securities which have been in an unrealized loss position for less than 12 months and 14 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 increases in market interest rates since purchase or acquisition. Because the Company does not intend to sell these securities and it is more likely than not 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. Asset-Backed securities. The unrealized losses on the Company’s investments in asset-backed securities includes six individual securities which has 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 loss was caused by variations in market interest rates since purchase or acquisition. Because the Company does not intend to sell these securities and it is more likely than not 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. MBS and CMOs. As of September 30, 2023, the unrealized losses on the Company’s investments in MBS and CMOs include 25 individual securities which have been in an unrealized loss position for less than 12 months, and 124 individual securities which have been in an unrealized loss position for 12 months or more. The securities are performing and are of high credit quality. The unrealized losses were caused by increases 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, 2023, 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 loss for the three-month periods ended September 30, 2023 and 2022. |
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Loans and Allowance for Credit Losses |
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| Loans and Allowance for Credit Losses | Note 4: Loans and Allowance for Credit Losses Classes of loans are summarized as follows:
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, 2023, the Bank had purchased participations in 83 loans totaling $162.7 million, as compared to 86 loans totaling $155.6 million at June 30, 2023. 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 and supply, 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 to twelve months, while multi-family or commercial construction loans typically mature in 12 to 36 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 12 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 provide the Company an opportunity to assess risk. At September 30, 2023, construction loans outstanding included 51 loans, totaling $40.1 million, for which a modification had been agreed to. At June 30, 2023, construction loans outstanding included 53 loans, totaling $33.4 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 modifications to borrowers experiencing financial difficulty. 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 66 months, 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 90% 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 66 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 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 additional risk factors such as commodity prices, yields, input costs, and weather, as well as farm equipment values. Allowance for Credit Losses. The PCL for the three-month period ended September 30, 2023, was $900,000 compared to $5.1 million in the same period of the prior fiscal year. The current period PCL was the result of a $1.6 million provision attributable to the ACL for loan balances outstanding, partially offset by a recovery of $670,000 in provision attributable to the allowance for off-balance sheet credit exposures. The Company’s assessment of the economic outlook at September 30, 2023, was little changed as compared to the assessment as of June 30, 2023. Qualitative adjustments in the Company’s ACL model were slightly decreased based on a reduced pace of loan growth. The Company increased adjustments related to classified hotel loans that have been slow to recover from the COVID-19 pandemic and modestly decreased the ACL attributable to other individually identified loans. As a percentage of average loans outstanding, the Company recorded net charge offs of 0.03% (annualized) during the current period, up slightly from the same period of the prior fiscal year. Decreased provisioning for off-balance sheet credit exposures is attributable primarily to changes in the level and mix of outstanding credit commitments. The Company has estimated its expected credit losses as of September 30, 2023, under ASC 326-20, and management believes the ACL as of that date is adequate based on that estimate. Specifically, management considered the following primary items in its estimate of the ACL:
● 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, 2023. 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 stable risk factor, relative to June 30, 2023; ● the pace of growth of the Company’s loan portfolio, exclusive of acquisitions or government guaranteed loans, relative to overall economic growth. This measure is considered to be a moderate and decreasing risk factor, relative to June 30, 2023; ● levels and trends for loan delinquencies nationally and in the region. This measure as reported remains relatively stable. This is considered to be a moderate and stable risk factor, relative to June 30, 2023; ● exposure to the hotel industry, in particular, metropolitan area hotels which were negatively impacted by activity restrictions and a lack of business or convention-related travel. Although covid restrictions have been lifted and travel has increased, some hotels have not fully recovered. This is considered to be an elevated and increasing risk factor, relative to June 30, 2023. PCD Loans. In connection with the acquisition of Citizens Bancshares, Co. (“Citizens”) on January 20, 2023, and Fortune Financial Corporation (“Fortune”) on February 25, 2022, the Company acquired loans both with and without evidence of credit quality deterioration since origination. Acquired loans are recorded at their fair value at the time of acquisition with no carryover from the acquired institution’s previously recorded allowance for loan and lease losses. Acquired loans are accounted for under ASC 326, Financial Instruments – Credit Losses.
The fair value of acquired loans recorded at the time of acquisition is based upon several factors, including the timing and payment of expected cash flows, as adjusted for estimated credit losses and prepayments, and then discounting these cash flows using comparable market rates. The resulting fair value adjustment is recorded in the form of a premium or discount to the unpaid principal balance of the respective loans. As it relates to acquired loans that, as of the date of acquisition, have experienced a more-than-insignificant deterioration in credit quality since origination (“PCD”), the net premium or net discount is adjusted to reflect the Company’s allowance for credit losses recorded for PCD loans at the time of acquisition, and the remaining fair value adjustment is accreted or amortized into interest income over the remaining life of the respective loans. As it relates to loans not classified as PCD (“non-PCD”) loans, the credit loss and yield components of their fair value adjustment are aggregated, and the resulting net premium or net discount is accreted or amortized into interest income over the remaining life of the respective loans. The Company records an ACL for non-PCD loans at the time of acquisition through provision expense, and therefore, no further adjustments are made to the net premium or net discount for non-PCD loans. Loans that the Company acquired from Citizens and Fortune, that at the time of acquisition had more-than-insignificant deterioration of credit quality since origination, are classified as PCD loans and presented in the tables below at acquisition carrying value:
The following tables present the balance in the ACL based on portfolio segment as of September 30, 2023 and 2022, and activity in the ACL for the three-month periods ended September 30, 2023 and 2022:
The following tables present the balance in the allowance for off-balance sheet credit exposure based on portfolio segment as of September 30, 2023 and 2022, and activity in the allowance for the three-month periods ended September 30, 2023 and 2022:
The current fiscal year-to-date gross charge-offs by loan class and year of origination is presented in the following table:
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, 2023. This table includes PCD loans, which are reported according to risk categorization after acquisition based on the Company’s standards for such classification:
At September 30, 2023, PCD loans comprised $36.4 million of credits rated “Pass”; $11.8 million rated “Watch”; none rated “Special Mention” $6.8 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, 2023. This table includes PCD loans, which were reported according to risk categorization after acquisition based on the Company’s standards for such classification:
At June 30, 2023, PCD loans comprised $37.4 million of credits rated “Pass”; $12.7 million of credits rated “Watch”, none rated “Special Mention”, $6.3 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, 2023 and June 30, 2023. These tables include PCD loans, which are reported according to aging analysis after acquisition based on the Company’s standards for such classification:
At September 30, 2023, and June 30, 2023 there was no PCD loan that was 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 tables present the Company’s collateral dependent loans and related ACL at September 30, 2023, and June 30, 2023:
Nonaccrual Loans. The following table presents the Company’s amortized cost basis of nonaccrual loans segmented by class of loans at September 30, 2023, and June 30, 2023. The table excludes performing modifications to borrowers experiencing financial difficulty at September 30, 2023 and excludes performing TDRs at June 30, 2023.
At September 30, 2023, 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, 2023 and 2022, was immaterial. Modifications to Borrowers Experiencing Financial Difficulty. The Company adopted ASU 2022-02, “Financial Instruments – Credit Losses (Topic 326), Troubled Debt Restructurings and Vintage Disclosures,” effective July 1, 2023. The amendments in ASU 2022-02 eliminated the recognition and measurement of troubled debt restructurings and enhanced disclosures for loan modifications to borrowers experiencing financial difficulty. During the three-month period ended September 30, 2023, there were no modifications made to loans for borrowers experiencing financial difficulty. Performing loans classified as modifications to borrowers experiencing financial difficulty outstanding at September 30, 2023 are shown in the following table segregated by portfolio segment and type of modification. The percentage of amortized cost of loans that were modified compared to total outstanding loans is also presented below.
Troubled Debt Restructurings. Prior to the adoption of ASU 2022-02, the Company’s loans that were subject to classification as TDRs were the result of guidance under ASU No. 2011-02, which indicated 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 were classified as nonperforming at the time of restructuring and typically were 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 period ended September 30, 2022, there were no loans modified as TDRs. Performing loans classified as TDRs and outstanding at June 30, 2023, segregated by class, are shown in the table below. Nonperforming TDRs are included in the nonaccrual loans table above.
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, 2023 and June 30, 2023, the Company had no foreclosed residential real estate properties as a result of obtaining physical possession. In addition, as of September 30, 2023, and June 30, 2023, the Company had residential mortgage loans and home equity loans with a carrying value of $667,000 and $1.5 million, respectively, collateralized by residential real estate property for which formal foreclosure proceedings were in process. |
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| Premises and Equipment | Note 5: Premises and Equipment Following is a summary of premises and equipment:
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 13 leased properties, which includes banking facilities, administrative offices and ground leases, 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 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. In the February 2022 acquisition of Fortune, the Company assumed a ground lease with an entity that is controlled by a Company insider. This property is in St. Louis County, MO and is in its fourth year of a twenty year term. 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 expected lease terms range from 18 months to 20 years.
At September 30, 2023, future expected lease payments for leases with terms exceeding one year were as follows:
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 the three-month periods ended September 30, 2023 and 2022, income recognized from these lessor agreements was $57,000 and $72,000, respectively. |
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| Deposits | Note 6: Deposits Deposits are summarized as follows:
Brokered certificates totaled $202.7 million at September 30, 2023, compared to $146.5 million at June 30, 2023.
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| Earnings Per Share | Note 7: Earnings Per Share The following table sets forth the computation of basic and diluted earnings per share:
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 of stock totaling 63,706 and 57,250 were excluded from the computation of diluted earnings per share for each of the three-month periods ended September 30, 2023 and 2022, respectively. |
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| 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, 2019 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:
The components of net deferred tax assets (included in other assets on the condensed consolidated balance sheet) are summarized as follows:
As of September 30, 2023, the Company had approximately $2.1 million in federal net operating loss carryforwards, which were acquired in the July 2009 Southern Bank of Commerce merger, the February 2014 Citizens State Bankshares of Bald Knob, Inc. merger, the April 2020 Central Federal Savings and Loan merger, the February 2022 Fortune Bank merger, and the January 2023 Citizens Bank and Trust merger. 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 2030. 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 September 30, 2023 and 2022, 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. |
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401(k) Retirement Plan |
3 Months Ended |
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Sep. 30, 2023 | |
| 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 “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 2023. For fiscal 2024, 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, 2023, retirement plan expenses recognized for the Plan totaled approximately $711,000 as compared to $537,000 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. |
Subordinated Debt |
3 Months Ended |
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Sep. 30, 2023 | |
| 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, 2023, the Debentures carried an interest rate of 8.42%. The balance of the Debentures outstanding was $7.2 million at September 30, 2023 and June 30, 2023. The Company used its net proceeds for working capital and investment in its subsidiaries. In connection with the October 2013 Ozarks Legacy Community Financial, Inc. (OLCF) merger, 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, 2023, the current rate was 8.12%. The carrying value of the debt securities was approximately $2.8 million and $2.7 million at September 30, 2023 and June 30, 2023, respectively. In connection with the August 2014 Peoples Service Company, Inc. (PSC) merger, 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, 2023, the current rate was 7.47%. The carrying value of the debt securities was approximately $5.5 million at September 30, 2023 and June 30, 2023. 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 $465,000 and $464,000 at September 30, 2023 and June 30, 2023, respectively. In connection with the February 2022 Fortune merger, the Company assumed $7.5 million in fixed-to-floating rate subordinated notes. The notes had been issued in May 2021 by Fortune to a multi-lender group, bear interest through May 2026 at a fixed rate of 4.5% and will bear interest thereafter at SOFR plus 3.77%. The notes will be redeemable at par beginning in May 2026, and mature in May 2031. The carrying value of the notes was approximately $7.6 million and $7.7 million at September 30, 2023 and June 30, 2023, respectively. |
Fair Value Measurements |
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| 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 condensed 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, 2023 and June 30, 2023:
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, 2023 and June 30, 2023:
The following table presents losses recognized on assets measured on a non-recurring basis for the three-month periods ended September 30, 2023 and 2022:
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 tables present quantitative information about unobservable inputs used in recurring and nonrecurring Level 3 fair value measurements at September 30, 2023 and June 30, 2023.
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, 2023 and June 30, 2023.
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| Business Combinations | Note 12: Business Combinations On January 20, 2023, the Company completed its acquisition of Citizens Bancshares, Co., Kansas City, Missouri (“Citizens”), and its wholly owned subsidiary, Citizens Bank and Trust Company, in a stock and cash transaction. In late February 2023, the Company merged Citizens Bank and Trust Company with and into Southern Bank, coincident to the data systems conversion. For the three-month periods ended September 30, 2023 and 2022, the Company incurred $125,000 and $134,000 respectively, of third-party acquisition-related costs, included in noninterest expense in the Company’s condensed consolidated statements of income. Under the acquisition method of accounting, the total purchase price is allocated to the net tangible and intangible assets acquired based on their estimated fair values on the date of the acquisition. Based on preliminary valuations of the fair value of tangible and intangible assets acquired and liabilities assumed, the purchase price for the Citizens acquisition is detailed in the following table. If, prior to the end of the one-year measurement period for finalizing the purchase price allocation, information becomes available about facts and circumstances that existed as of the acquisition date, which would indicate adjustments are required to the purchase price allocation, such adjustments will be included in the purchase price allocation retrospectively.
Of the total purchase price, $22.1 million was allocated to core deposit intangible, and will be amortized over ten years on a straight line basis, $2.6 million was allocated to the intangible related to the acquired trust and wealth management business line and will be amortized over ten years on a straight line basis, and $23.4 million was allocated to goodwill. None of the purchase price is deductible. Goodwill is attributable to synergies and economies of scale expected from combining the operations of the Bank and Citizens Bank. To the extent that management revises any of the fair value of the above fair value adjustments as a result of continuing evaluation, the amount of goodwill recorded in the merger will change. The Company acquired the $461.5 million loan portfolio at an estimated fair value discount of $14.1 million. The excess of expected cash flows above the fair value of the performing portion of loans will be accreted to interest income over the remaining lives of the loans in accordance with ASC 310-30. Loans acquired that were not subject to guidance relating to PCD loans include loans with a fair value of $419.5 million and gross contractual amounts receivable of $520.0 million at the date of acquisition. Management identified 48 PCD loans, with a book balance of $27.5 million, associated with the Citizens acquisition (ASC 310-30). The acquired business contributed revenues of $6.2 million and earnings of $1.7 million for the period from July 1, 2023 through September 30, 2023. The following unaudited pro forma summaries present consolidated information of the Company as if the business combination had occurred on the first day of each period:
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Organization and Summary of Significant Accounting Policies (Policies) |
3 Months Ended |
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Sep. 30, 2023 | |
| 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, 2023, assets of the REIT were approximately $1.4 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 condensed 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 condensed 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. Material estimates that are particularly susceptible to significant change relate to the determination of the allowance for credit losses, estimated fair values of purchased loans, and certain other assumptions and judgmental factors relating to investment securities. |
| 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 $30.6 million and $3.8 million at September 30, 2023 and June 30, 2023, respectively. The deposits are held in various commercial banks with a total of $2.5 million and $1.3 million exceeding the FDIC’s deposit insurance limits at September 30, 2023 and June 30, 2023, respectively, as well as at the Federal Reserve and the Federal Home Loan Banks of Des Moines and Chicago. |
| Interest-bearing Time Deposits | Interest-bearing Time Deposits. Interest bearing time deposits in banks mature within three 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 loss, 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 (loss). 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 Allowance for Credit Losses (“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. The Company evaluates impaired AFS securities at the individual level on a quarterly basis, and considers 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, 2023, or June 30, 2023. 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 of the Bank based upon a predetermined formula and is carried at cost. |
| Loans | Loans. Loans are generally stated at unpaid principal balances, less the ACL, 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. 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 a provision for credit losses (“PCL”) charged to current earnings. The ACL is increased by the provision for credit 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 utilizes 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 to include 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. 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. 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. |
| 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. Any costs for development and improvement of the property that are warranted 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 to forty years for premises, 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 condensed 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 condensed 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 that 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, 2023, 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. There was no impairment of goodwill at September 30, 2023. |
| Intangible Assets | Intangible Assets. The Company’s intangible assets at September 30, 2023 included gross core deposit intangibles of $39.1 million with $15.0 million accumulated amortization, gross other identifiable intangibles of $6.4 million with accumulated amortization of $4.0 million, and mortgage and SBA servicing rights of $2.9 million. At June 30, 2023, the Company’s intangible assets included gross core deposit intangibles of $39.1 million with $14.0 million accumulated amortization, gross other identifiable intangibles of $6.4 million with accumulated amortization of $3.9 million, and mortgage and SBA servicing rights of $2.9 million. The Company’s core deposit and other intangible assets are being amortized using the straight line method, in accordance with ASC 350, over periods ranging from to ten years, with amortization expense expected to be approximately $3.1 million in the remainder of fiscal 2024, $3.5 million in fiscal 2025, $3.0 million in fiscal 2026, $2.7 million in fiscal 2027, $2.7 million in fiscal 2028, and $11.5 million thereafter. As of June 30, 2023, there was no impairment indicated, and there was no impairment of other intangible assets at September 30, 2023. |
| 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, if any, 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 | 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. |
| Non-Employee Directors' Retirement | Non-Employee Directors’ Retirement. The Bank entered into directors’ retirement agreements beginning in April 1994 for non-employee directors and continued to do so for new non-employee directors joining the Bank’s board through December 2014. These directors’ retirement agreements provide that each participating 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. 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 loss, net of applicable income taxes. Other comprehensive income includes unrealized depreciation on available-for-sale securities, unrealized depreciation on available-for-sale securities for which a portion of an other-than-temporary impairment has been recognized in income, 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. |
| Wealth Management Assets and Fees | Wealth Management Assets and Fees. Assets managed in fiduciary or investment management accounts by the Company are not included in the consolidated balance sheets since such items are not assets of the Company or its subsidiaries. Fees from fiduciary or investment management activities are recorded on a cash basis over the period in which the service is provided. Fees are generally a function of the market value of assets managed and administered, the volume of transactions, and fees for other services rendered, as set forth in the agreement between the customer and the Company. This revenue recognition involves the use of estimates and assumptions, including components that are calculated based on asset valuations and transaction volumes. Any out-of-pocket expenses or services not typically covered by the fee schedule for fiduciary activities are charged directly to the account on a gross basis as revenue is incurred. The Southern Wealth Management division, which is a division of the Bank, held fiduciary assets totaling $96.8 million and $102.0 million as of September 30, 2023 and June 30, 2023, respectively, and investment management assets totaling $444.9 million and $464.2 million as of September 30, 2023 and June 30, 2023, respectively. |
| New Accounting Pronouncements | New Accounting Pronouncements: In January 2021, the FASB has published ASU 2021-01, “Reference Rate Reform. (Topic 848)”. ASU 2021-01 clarified that certain optional expedients and exceptions in Topic 848 for contract modifications and hedge accounting apply to derivatives that are affected by the discounting transition. The ASU also amended the expedients and exceptions in Topic 848 to capture the incremental consequences of the scope clarification and to tailor the existing guidance to derivative instruments affected by the discounting transition. An entity may elect to apply the amendments in this update on a full retrospective basis as of any date from the beginning of an interim period that includes or is subsequent to March 12, 2020, or on a prospective basis to new modifications from any date within an interim period that includes or is subsequent to the date of the issuance of a final update, up to the date that financial statements are available to be issued. If an entity elects to apply any of the amendments in this update for an eligible hedging relationship, any adjustments as a result of those elections must be reflected as of the date the entity applies the election. Originally, the amendments in this update did not apply to contract modifications made after December 31, 2022, new hedging relationships entered into after December 31, 2022, and existing hedging relationships evaluated for effectiveness in periods after December 31, 2022 except for hedging relationships existing as of December 31, 2022, that apply certain optional expedients in which the accounting effects are recorded through the end of the hedging relationship (including periods after December 31, 2022). With the issuance of ASU 2022-06 Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848, the sunset date for adoption of ASU 2021-01 was extended from December 31, 2022 to December 31, 2024. The Company is evaluating the impact of this ASU but does not expect it to have a material impact on the Company’s consolidated financial statements. In March 2023, the FASB issued ASU 2023-02, “Investments - Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method.” This ASU permits reporting entities to elect to account for tax equity investments, regardless of the tax credit program for which the income tax credits are received, using the proportional amortization method if certain conditions are met. Under the proportional amortization method, an entity amortizes the initial cost of the investment in proportion to the income tax credits and other income tax benefits received and recognizes the net amortization and income tax credits and other income tax benefits in the income statement as a component of income tax expense. A reporting entity makes an accounting policy election to apply the proportional amortization method on a tax-credit-program-by-tax-credit-program basis rather than electing to apply the proportional amortization method at the reporting entity level or to individual investments. This ASU also requires specific disclosures of investments that generate income tax credits and other income tax benefits from a tax credit program for which the entity has elected to apply the proportional amortization method. The ASU is effective for fiscal years beginning after December 15, 2023. The Company does not expect adoption of ASU 2023-02 to have a material impact on its consolidated financial statements. On July 1, 2023, the Company adopted ASU No. 2022-02, “Financial Instruments – Credit Losses (Topic 326), Troubled Debt Restructurings and Vintage Disclosures.” ASU 2022-02 eliminates the accounting guidance for TDRs in ASC 310-40, “Receivables – Troubled Debt Restructurings by Creditors” for entities that have adopted the CECL model introduced by ASU 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” ASU 2022-02 also requires that public business entities disclose current-period gross charge offs by year of origination for financing receivables and net investments in leases within the scope of Subtopic 326-20, “Financial Instruments – Credit Losses – Measured at Amortized Cost.” The adoption of this update did not have a material impact on the Company’s consolidated financial statements. |
Available for Sale Securities (Tables) |
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| Schedule of Available for Sale Securities |
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| Schedule of amortized cost and fair value of available-for-sale securities, by contractual maturity |
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Loans and Allowance for Credit Losses (Tables) |
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Sep. 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Loans and Allowance for Credit Losses | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of classes of loans |
|
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| Schedule of PCD loans |
|
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| Schedule of balance in the allowance for loan losses and the recorded investment in loans based on portfolio segment and impairment methods |
|
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| Schedule of Allowance for off-balance credit exposure |
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| Gross charge-offs by loan class and year of origination |
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| Schedule of credit risk profile of the Company's loan portfolio based on rating category and payment activity |
|
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| Schedule of company's loan portfolio aging analysis |
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| Schedule of company's collateral dependent loans and related ACL |
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| Schedule of Company's nonaccrual loans |
|
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| Performing loans classified as modifications to borrowers experiencing financial difficulty |
|
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| Performing loans classified as TDRs and outstanding , segregated by class |
|
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Premises and Equipment (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Premises and Equipment | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of summary of premises and equipment |
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| Schedule of calculated amount of right of use assets and lease liabilities |
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| Schedule of Future Minimum Rental Payments for Operating Leases |
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Deposits (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Deposits | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of deposits |
|
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Earnings Per Share (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Earnings Per Share | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Earnings Per Share, Basic and Diluted |
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Income Taxes (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Income Taxes | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Income Tax Provision |
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| Schedule of components of net deferred tax assets |
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| Schedule of reconciliation of income tax expense at the statutory rate |
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Fair Value Measurements (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Fair Value Measurements | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Fair Value, Assets Measured on Recurring Basis |
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| Fair Value Measurements, Nonrecurring |
|
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| Losses Recognized on Assets Measured on a Nonrecurring Basis |
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| Fair Value Option, Disclosures |
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| Schedule of Financial Instruments |
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Business Combinations (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of unaudited pro forma |
|
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| Citizens | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Purchase price |
|
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Organization and Summary of Significant Accounting Policies - Organization (Details) $ in Billions |
Sep. 30, 2023
USD ($)
|
|---|---|
| Organization and Summary of Significant Accounting Policies | |
| Assets of the REIT | $ 1.4 |
Organization and Summary of Significant Accounting Policies - Cash and Cash Equivalents (Details) - USD ($) $ in Millions |
3 Months Ended | |
|---|---|---|
Sep. 30, 2023 |
Jun. 30, 2023 |
|
| Cash and Cash Equivalents [Line Items] | ||
| Term of interest bearing deposits | 3 years | |
| Interest-bearing deposits in other depository institutions | ||
| Cash and Cash Equivalents [Line Items] | ||
| Cash | $ 30.6 | $ 3.8 |
| Deposits are held in various commercial banks | ||
| Cash and Cash Equivalents [Line Items] | ||
| Cash | $ 2.5 | $ 1.3 |
Organization and Summary of Significant Accounting Policies - Loans (Details) |
3 Months Ended |
|---|---|
|
Sep. 30, 2023
item
| |
| Organization and Summary of Significant Accounting Policies | |
| Number of loan portfolio pools | 24 |
Organization and Summary of Significant Accounting Policies - Premises and Equipment (Details) |
Sep. 30, 2023 |
|---|---|
| Software | |
| Property, Plant and Equipment [Line Items] | |
| Estimated lives (in years) | 3 years |
| Minimum | Premises | |
| Property, Plant and Equipment [Line Items] | |
| Estimated lives (in years) | 7 years |
| Minimum | Equipment | |
| Property, Plant and Equipment [Line Items] | |
| Estimated lives (in years) | 3 years |
| Maximum | Premises | |
| Property, Plant and Equipment [Line Items] | |
| Estimated lives (in years) | 40 years |
| Maximum | Equipment | |
| Property, Plant and Equipment [Line Items] | |
| Estimated lives (in years) | 7 years |
Organization and Summary of Significant Accounting Policies - Wealth Management Assets and Fees (Details) - USD ($) $ in Millions |
Sep. 30, 2023 |
Jun. 30, 2023 |
|---|---|---|
| Organization and Summary of Significant Accounting Policies | ||
| Fiduciary assets | $ 96.8 | $ 102.0 |
| Investment management assets | $ 444.9 | $ 464.2 |
Available for Sale Securities - Amortized Cost and Fair Value of Available-for-sale Securities, by Contractual Maturity (Details) - USD ($) $ in Thousands |
Sep. 30, 2023 |
Jun. 30, 2023 |
|---|---|---|
| Amortized Cost | ||
| Within one year | $ 2,465 | |
| After one year but less than five years | 27,412 | |
| After five years but less than ten years | 56,993 | |
| After ten years | 63,201 | |
| Total investment securities | 150,071 | |
| Total AFS securities, Amortized Cost | 437,407 | $ 445,616 |
| Estimated Fair Value | ||
| Within one year | 2,459 | |
| After one year but less than five years | 26,235 | |
| After five years but less than ten years | 53,581 | |
| After ten years | 62,342 | |
| Total investment securities | 144,617 | |
| Total AFS securities | 405,198 | 417,554 |
| Total MBS and CMOs | ||
| Amortized Cost | ||
| Investment securities, without single maturity | 287,336 | |
| Total AFS securities, Amortized Cost | 287,336 | 293,147 |
| Estimated Fair Value | ||
| Investment securities, without single maturity | 260,581 | |
| Total AFS securities | $ 260,581 | $ 270,252 |
Available for Sale Securities - Other Securities Policy: Pooled Trust Preferred Securities (Details) - USD ($) |
3 Months Ended | |
|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
|
| Available for Sale Securities | ||
| Credit losses recognized on investments | $ 0 | $ 0 |
Loans and Allowance for Credit Losses - PCD Loans Acquired (Details) - USD ($) $ in Thousands |
Jan. 20, 2023 |
Feb. 25, 2022 |
|---|---|---|
| Citizens Bancshares Company | ||
| Accounts, Notes, Loans and Financing Receivable [Line Items] | ||
| Purchase price of PCD loans at acquisition | $ 27,481 | |
| Allowance for credit losses at acquisition | (1,121) | |
| Fair value of PCD loans at acquisition | $ 26,360 | |
| Fortune | ||
| Accounts, Notes, Loans and Financing Receivable [Line Items] | ||
| Purchase price of PCD loans at acquisition | $ 15,055 | |
| Allowance for credit losses at acquisition | (120) | |
| Fair value of PCD loans at acquisition | $ 14,935 |
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, 2023 |
Jun. 30, 2023 |
|
| Pass | ||
| Financing Receivable, Credit Quality Indicator [Line Items] | ||
| PCD loans receivable, net of ACL | $ 36,400,000 | $ 37,400,000 |
| Watch | ||
| Financing Receivable, Credit Quality Indicator [Line Items] | ||
| PCD loans receivable, net of ACL | 11,800,000 | 12,700,000 |
| 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 | 6,800,000 | 6,300,000 |
| Doubtful | ||
| Financing Receivable, Credit Quality Indicator [Line Items] | ||
| PCD loans receivable, net of ACL | $ 0 | $ 0 |
Loans and Allowance for Credit Losses - Nonaccrual Loans (Details) - USD ($) |
Sep. 30, 2023 |
Jun. 30, 2023 |
|---|---|---|
| Financing Receivable, Nonaccrual [Line Items] | ||
| Nonaccrual loans | $ 5,738,000 | $ 7,543,000 |
| Nonaccrual loans individually evaluated for which no ACL was recorded | 0 | |
| Residential Real Estate | ||
| Financing Receivable, Nonaccrual [Line Items] | ||
| Nonaccrual loans | 949,000 | 934,000 |
| Construction Real Estate | ||
| Financing Receivable, Nonaccrual [Line Items] | ||
| Nonaccrual loans | 368,000 | 698,000 |
| Commercial Real Estate | ||
| Financing Receivable, Nonaccrual [Line Items] | ||
| Nonaccrual loans | 3,361,000 | 4,564,000 |
| Consumer loans | ||
| Financing Receivable, Nonaccrual [Line Items] | ||
| Nonaccrual loans | 164,000 | 256,000 |
| Commercial loans | ||
| Financing Receivable, Nonaccrual [Line Items] | ||
| Nonaccrual loans | $ 896,000 | $ 1,091,000 |
Loans and Allowance for Credit Losses - TDRs Segregated by Class (Details) |
3 Months Ended |
|---|---|
|
Sep. 30, 2022
loan
| |
| Number of modifications | 0 |
Loans and Allowance for Credit Losses - Performing TDRs Segregated by Class (Details) - Performing Loans $ in Thousands |
Jun. 30, 2023
USD ($)
loan
|
|---|---|
| Number of modifications | loan | 22 |
| Recorded Investment, TDRs | $ | $ 29,765 |
| Residential Real Estate | |
| Number of modifications | loan | 10 |
| Recorded Investment, TDRs | $ | $ 3,438 |
| Commercial Real Estate | |
| Number of modifications | loan | 6 |
| Recorded Investment, TDRs | $ | $ 24,017 |
| Commercial loans | |
| Number of modifications | loan | 6 |
| Recorded Investment, TDRs | $ | $ 2,310 |
Loans and Allowance for Credit Losses - Real Estate Foreclosures (Details) - USD ($) |
Sep. 30, 2023 |
Jun. 30, 2023 |
|---|---|---|
| Financing Receivable, Troubled Debt Restructuring [Line Items] | ||
| Repossessed assets | $ 0 | $ 0 |
| Residential Real Estate. | Home Equity Loan | ||
| Financing Receivable, Troubled Debt Restructuring [Line Items] | ||
| Foreclosure proceedings in process | $ 667,000 | $ 1,500,000 |
Premises and Equipment - Summary of premises and equipment (Details) - USD ($) $ in Thousands |
Sep. 30, 2023 |
Jun. 30, 2023 |
|---|---|---|
| Premises and Equipment | ||
| Land | $ 15,434 | $ 15,415 |
| Buildings and improvements | 80,058 | 79,661 |
| Construction in progress | 611 | 450 |
| Furniture, fixtures, equipment and software | 26,085 | 26,404 |
| Automobiles | 122 | 122 |
| Operating leases ROU asset | 8,458 | 6,125 |
| Property, Plant and Equipment, Gross | 130,768 | 128,177 |
| Less accumulated depreciation | 36,051 | 35,780 |
| Premises and equipment, net | $ 94,717 | $ 92,397 |
Premises and Equipment - Additional Information (Details) |
3 Months Ended | |
|---|---|---|
|
Sep. 30, 2023
USD ($)
property
|
Sep. 30, 2022
USD ($)
|
|
| Number of leased properties | property | 13 | |
| Income recognized from lessor agreements | $ | $ 57,000 | $ 72,000 |
| Minimum | ||
| Lessee Expected Lease Terms | P18M | |
| Maximum | ||
| Lessee Expected Lease Terms | P20Y | |
Premises and Equipment - Calculated amount of right of use assets and lease liabilities (Details) - USD ($) $ in Thousands |
3 Months Ended | ||
|---|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
Jun. 30, 2023 |
|
| Right of use assets obtained in exchange for lease obligations: Operating Leases | $ 2,333 | $ 95 | |
| Consolidated Balance Sheet | |||
| Operating leases ROU asset | 8,458 | $ 6,125 | |
| Operating leases liability | 8,458 | $ 6,125 | |
| Consolidated Statement Of Income | |||
| Operating lease costs classified as occupancy and equipment expense (includes short-term lease costs) | 280 | 136 | |
| Supplemental Disclosures Of Cash Flow Information | Cash paid for amounts included in the measurement of lease liabilities | |||
| Operating cash flows from operating leases | 187 | $ 103 | |
| Right of use assets obtained in exchange for lease obligations: Operating Leases | $ 2,445 | ||
Premises and Equipment - Future expected lease payments for leases (Details) $ in Thousands |
Sep. 30, 2023
USD ($)
|
|---|---|
| Premises and Equipment | |
| 2024 | $ 742 |
| 2025 | 958 |
| 2026 | 907 |
| 2027 | 903 |
| 2028 | 882 |
| Thereafter | 10,057 |
| Future lease payments expected | $ 14,449 |
Deposits (Details) - USD ($) $ in Thousands |
Sep. 30, 2023 |
Jun. 30, 2023 |
|---|---|---|
| Deposits | ||
| Non-interest bearing accounts | $ 583,353 | $ 597,600 |
| NOW accounts | 1,231,005 | 1,328,423 |
| Money market deposit accounts | 435,387 | 452,728 |
| Savings accounts | 313,135 | 282,753 |
| Certificates | 1,278,246 | 1,064,036 |
| TOTAL DEPOSITS | $ 3,841,126 | $ 3,725,540 |
Deposits - Additional Information (Details) - USD ($) $ in Millions |
Sep. 30, 2023 |
Jun. 30, 2023 |
|---|---|---|
| Deposits | ||
| Interest-bearing Domestic Deposit, Brokered | $ 202.7 | $ 146.5 |
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, 2023 |
Sep. 30, 2022 |
|
| Earnings Per Share | ||
| Net Income | $ 13,151 | $ 9,603 |
| Less: distributed earnings allocated to participating securities | (10) | (9) |
| Less: undistributed earnings allocated to participating securities | (47) | (34) |
| Net income available to common shareholders | $ 13,094 | $ 9,560 |
| Weighted-average shares outstanding | 11,286,012 | 9,187,857 |
| Effect of dilutive securities stock options or awards | 11,803 | 22,610 |
| Denominator for diluted earnings per share | 11,297,815 | 9,210,467 |
| Basic earnings per share available to common stockholders | $ 1.16 | $ 1.04 |
| Diluted earnings per share available to common stockholders | $ 1.16 | $ 1.04 |
Earnings Per Share - Additional information (Details) - shares |
3 Months Ended | |
|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
|
| Employee Stock Option [Member] | ||
| Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
| Antidilutive securities excluded from the computation of diluted earnings per share | 63,706 | 57,250 |
| Restricted Stock | ||
| Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
| Antidilutive securities excluded from the computation of diluted earnings per share | 63,706 | 57,250 |
Income Taxes - Income tax provision (Details) - USD ($) $ in Thousands |
3 Months Ended | |
|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
|
| Income Taxes | ||
| Current | $ 3,487 | $ 2,436 |
| Deferred | 7 | |
| TOTAL INCOME TAXES | $ 3,487 | $ 2,443 |
Income Taxes - Schedule of net deferred tax assets (Details) - USD ($) $ in Thousands |
Sep. 30, 2023 |
Jun. 30, 2023 |
|---|---|---|
| Deferred tax assets: | ||
| Provision for losses on loans | $ 12,219 | $ 12,101 |
| Accrued compensation and benefits | 729 | 974 |
| NOL carry forwards acquired | 465 | 709 |
| Low income tax credit carry forward | 1,041 | 1,192 |
| Unrealized loss on other real estate | 869 | 818 |
| Unrealized loss on available for sale securities | 7,086 | 6,174 |
| Total deferred tax assets | 22,409 | 21,968 |
| Deferred tax liabilities: | ||
| Purchase accounting adjustments | 2,478 | 2,348 |
| Depreciation | 4,100 | 4,276 |
| FHLB stock dividends | 120 | 120 |
| Prepaid expenses | 656 | 728 |
| Other | 1,283 | 1,636 |
| Total deferred tax liabilities | 8,637 | 9,108 |
| Net deferred tax asset | $ 13,772 | $ 12,860 |
Income Taxes - Reconciliation of income tax expense at statutory rate (Details) - USD ($) $ in Thousands |
3 Months Ended | |
|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
|
| Effective Income Tax Rate Reconciliation, Amount [Abstract] | ||
| Tax at statutory rate | $ 3,494 | $ 2,530 |
| Nontaxable municipal income | (108) | (81) |
| State tax, net of Federal benefit | 164 | 13 |
| Cash surrender value of Bank-owned life insurance | (96) | (67) |
| Tax credit benefits | (3) | (2) |
| Other, net | 36 | 50 |
| TOTAL INCOME TAXES | $ 3,487 | $ 2,443 |
Income Taxes - Additional Information (Details) - USD ($) $ in Thousands |
3 Months Ended | |
|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
|
| Income Taxes | ||
| Interest or penalties on income taxes | $ 0 | $ 0 |
| Federal Net Operating Loss Carryforwards | $ 2,100 | |
| Effective Income Tax Rate Reconciliation, at Federal Statutory Income Tax Rate, Percent | 21.00% | 21.00% |
401(k) Retirement Plan (Details) - USD ($) |
3 Months Ended | |
|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
|
| Defined Contribution Plan Disclosure [Line Items] | ||
| Retirement plan expenses | $ 711,000 | $ 537,000 |
| Vesting period | 5 years | |
| Maximum | ||
| Defined Contribution Plan Disclosure [Line Items] | ||
| Matching contributions of eligible compensation | 4.00% | |
Fair Value Measurements - Losses Recognized on Assets Measured on a Nonrecurring Basis (Details) - Nonrecurring Measurements $ in Thousands |
3 Months Ended |
|---|---|
|
Sep. 30, 2022
USD ($)
| |
| Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |
| Total gains ( losses) on assets measured on a non-recurring basis | $ 34 |
| Foreclosed and repossessed assets held for sale | |
| Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |
| Total gains ( losses) on assets measured on a non-recurring basis | $ 34 |
Business Combinations - Additional Information (Details) $ in Thousands |
3 Months Ended | ||||
|---|---|---|---|---|---|
|
Jan. 20, 2023
USD ($)
loan
|
Feb. 25, 2022
USD ($)
|
Sep. 30, 2023
USD ($)
|
Sep. 30, 2022
USD ($)
|
Jun. 30, 2023
USD ($)
|
|
| Goodwill | $ 50,727 | $ 50,773 | |||
| Citizens | |||||
| Transaction value | $ 133,169 | ||||
| Identifiable intangible assets | 24,645 | ||||
| Goodwill | 23,438 | ||||
| Goodwill tax deductible | 0 | ||||
| Loan portfolio | 461,500 | ||||
| Fair value discount | 14,100 | ||||
| Fair value | 419,500 | ||||
| Gross | $ 520,000 | ||||
| Number of PCD loans identified | loan | 48 | ||||
| PCD loans | $ 27,481 | ||||
| Citizens | Noninterest expense | |||||
| Third-party acquisition-related costs incurred | $ 125 | $ 134 | |||
| Citizens | Core Deposits | |||||
| Identifiable intangible assets | $ 22,100 | ||||
| Acquired intangible assets useful life (in years) | 10 years | ||||
| Citizens | Acquired trust and wealth management | |||||
| Identifiable intangible assets | $ 2,600 | ||||
| Acquired intangible assets useful life (in years) | 10 years | ||||
| Fortune | |||||
| PCD loans | $ 15,055 | ||||
Business Combinations - Purchase price for the citizens bancshares acquisition (Details) - USD ($) $ in Thousands |
Jan. 20, 2023 |
Sep. 30, 2023 |
Jun. 30, 2023 |
|---|---|---|---|
| Recognized amounts of identifiable assets acquired and liabilities assumed | |||
| Goodwill | $ 50,727 | $ 50,773 | |
| Citizens | |||
| Fair Value of Consideration Transferred | |||
| Cash | $ 34,889 | ||
| Common stock, at fair value | 98,280 | ||
| Total consideration | 133,169 | ||
| Recognized amounts of identifiable assets acquired and liabilities assumed | |||
| Cash and cash equivalents | 243,225 | ||
| Investment securities | 226,497 | ||
| Loans | 447,388 | ||
| Premises and equipment | 23,430 | ||
| BOLI | 21,733 | ||
| Identifiable intangible assets | 24,645 | ||
| Miscellaneous other assets | 9,366 | ||
| Deposits | (851,140) | ||
| Securities sold under agreements to repurchase | (27,629) | ||
| Miscellaneous other liabilities | (7,784) | ||
| Total identifiable net liabilities | 109,731 | ||
| Goodwill | $ 23,438 |
Business Combinations - Pro Forma (Details) - Citizens - USD ($) $ in Thousands |
3 Months Ended | |
|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
|
| Business Acquisition [Line Items] | ||
| Acquired business contributed revenues | $ 6,200 | |
| Acquired business contributed earnings | 1,700 | |
| Revenue | 41,428 | $ 47,513 |
| Earnings | $ 13,151 | $ 14,545 |
Pay vs Performance Disclosure - USD ($) $ in Thousands |
3 Months Ended | |
|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
|
| Pay vs Performance Disclosure | ||
| Net Income (Loss) | $ 13,151 | $ 9,603 |
Insider Trading Arrangements |
3 Months Ended |
|---|---|
Sep. 30, 2023 | |
| Trading Arrangements, by Individual | |
| Rule 10b5-1 Arrangement Adopted | false |
| Non-Rule 10b5-1 Arrangement Adopted | false |
| Rule 10b5-1 Arrangement Terminated | false |
| Non-Rule 10b5-1 Arrangement Terminated | false |