10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC  20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended September 30, 2019

OR

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

For the transition period from                to

Commission file number   0-23406

Southern Missouri Bancorp, Inc.

(Exact name of registrant as specified in its charter)

Missouri	43-1665523
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)
2991 Oak Grove Road, Poplar Bluff, Missouri	63901
(Address of principal executive offices)	(Zip Code)
(573) 778-1800

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

Title of Each Class	Trading Symbol	Name of Each Exchange on Which Registered
Common Stock, par value $0.01 per share	SMBC	The NASDAQ Stock Market LLC

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

Yes X No

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

Yes X No

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

Large accelerated filer Accelerated filer X Non-accelerated filer Smaller reporting company

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

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

Yes No X

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

Class	Outstanding at November 8, 2019
Common Stock, Par Value $.01	9,201,783 Shares

SOUTHERN MISSOURI BANCORP, INC.

FORM 10-Q

INDEX

PART I.	Financial Information	PAGE NO.
Item 1.	Condensed Consolidated Financial Statements
	-      Condensed Consolidated Balance Sheets	3
	-      Condensed Consolidated Statements of Income	4
	-      Condensed Consolidated Statements of Comprehensive Income	5
	-      Condensed Consolidated Statements of Stockholders’ Equity	6
	-      Condensed Consolidated Statements of Cash Flows	7
	-      Notes to Condensed Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of    Operations	33
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	47
Item 4.	Controls and Procedures	49
PART II.	OTHER INFORMATION	50
Item 1.	Legal Proceedings	50
Item 1a.	Risk Factors	50
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	50
Item 3.	Defaults upon Senior Securities	50
Item 4.	Mine Safety Disclosures	50
Item 5.	Other Information	50
Item 6.	Exhibits	51
	-     Signature Page	52
	-     Certifications	53

2

PART I:  Item 1:  Condensed Consolidated Financial Statements

SOUTHERN MISSOURI BANCORP, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

SEPTEMBER 30, 2019 AND JUNE 30, 2019

(dollars in thousands)	September 30, 2019			June 30, 2019
Assets
Cash and cash equivalents	$	31,423		$	35,400
Interest-bearing time deposits		971			969
Available for sale securities		171,006			165,535
Stock in FHLB of Des Moines		7,733			5,233
Stock in Federal Reserve Bank of St. Louis		4,350			4,350
Loans receivable, net of allowance for loan losses of      $20,710 and $19,903 at September 30, 2019 and      June 30, 2019, respectively		1,874,497			1,846,405
Accrued interest receivable		11,648			10,189
Premises and equipment, net		65,480			62,727
Bank owned life insurance – cash surrender value		38,593			38,337
Goodwill		14,089			14,089
Other intangible assets, net		8,800			9,239
Prepaid expenses and other assets		22,617			21,929
Total Assets	$	2,251,207		$	2,214,402
Liabilities and Stockholders' Equity
Deposits	$	1,872,520		$	1,893,695
Securities sold under agreements to repurchase		-			4,376
Advances from FHLB of Des Moines		103,327			44,908
Note payable		3,000			3,000
Accounts payable and other liabilities		13,130			12,889
Accrued interest payable		1,900			2,099
Subordinated debt		15,068			15,043
Total liabilities		2,008,945			1,976,010
Common stock, $.01 par value; 25,000,000 shares authorized;      9,323,184 and 9,324,659 shares issued, respectively,      at September 30, 2019 and June 30, 2019		93			93
Additional paid-in capital		94,572			94,541
Retained earnings		150,123			143,677
Treasury Stock of 121,401 and 35,351 shares at September 30, 2019      and June 30, 2019, respectively, at cost		(3,980	)		(1,166	)
Accumulated other comprehensive income		1,454			1,247
Total stockholders' equity		242,262			238,392
Total liabilities and stockholders' equity	$	2,251,207		$	2,214,402

See Notes to Condensed Consolidated Financial Statements

3

SOUTHERN MISSOURI BANCORP, INC

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

FOR THE THREE-MONTH PERIODS ENDED SEPTEMBER 30, 2019 AND 2018 (Unaudited)

	Three months ended
	September 30,
	2019		2018
(dollars in thousands except per share data)
INTEREST INCOME:
Loans	$	25,640	$	20,916
Investment securities		520		517
Mortgage-backed securities		716		584
Other interest-earning assets		46		25
Total interest income		26,922		22,042
INTEREST EXPENSE:
Deposits		6,578		4,009
Securities sold under agreements to repurchase		-		8
Advances from FHLB of Des Moines		522		599
Note payable		37		35
Subordinated debt		225		224
Total interest expense		7,362		4,875
NET INTEREST INCOME		19,560		17,167
PROVISION FOR LOAN LOSSES		896		682
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES		18,664		16,485
NONINTEREST INCOME:
Deposit account charges and related fees		1,423		1,224
Bank card interchange income		1,362		1,063
Loan late charges		146		94
Loan servicing fees		130		159
Other loan fees		243		337
Net realized gains on sale of loans		273		179
Earnings on bank owned life insurance		254		246
Other income		270		128
Total noninterest income		4,101		3,430
NONINTEREST EXPENSE:
Compensation and benefits		7,125		6,047
Occupancy and equipment, net		2,888		2,470
Deposit insurance premiums		-		138
Legal and professional fees		184		256
Advertising		309		315
Postage and office supplies		183		152
Intangible amortization		441		396
Bank card network expense		617		495
Other operating expense		1,214		1,180
Total noninterest expense		12,961		11,449
INCOME BEFORE INCOME TAXES		9,804		8,466
INCOME TAXES		1,976		1,666
NET INCOME	$	7,828	$	6,800
Basic earnings per common share	$	0.85	$	0.76
Diluted earnings per common share	$	0.85	$	0.76
Dividends per common share	$	0.15	$	0.13

See Notes to Condensed Consolidated Financial Statements

4

SOUTHERN MISSOURI BANCORP, INC

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

FOR THE THREE-MONTH PERIODS ENDED SEPTEMBER 30, 2019 AND 2018 (Unaudited)

	Three months ended
	September 30,
	2019			2018
(dollars in thousands)
Net income	$	7,828		$	6,800
Other comprehensive income:
Unrealized gains (losses) on securities available-for-sale		263			(378	)
Tax benefit (expense)		(56	)		91
Total other comprehensive income (loss)		207			(287	)
Comprehensive income	$	8,035		$	6,513

See Notes to Condensed Consolidated Financial Statements

5

SOUTHERN MISSOURI BANCORP, INC

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

FOR THE THREE-MONTH PERIODS ENDED SEPTEMBER 30, 2019 AND 2018 (Unaudited)

	For the three-month period ended September 30, 2019
			Additional								Accumulated Other			Total
	Common		Paid-In		Retained			Treasury			Comprehensive			Stockholders'
(dollars in thousands)	Stock		Capital		Earnings			Stock			Income (Loss)			Equity
BALANCE AS OF JUNE 30, 2019	$	93	$	94,541	$	143,677		$	(1,166	)	$	1,247		$	238,392
Net Income						7,828									7,828
Change in unrealized loss on available for sale securities												207			207
Dividends paid on common stock ($.15 per share )						(1,382	)								(1,382	)
Stock option expense				17											17
Stock grant expense				14											14
Treasury stock purchased									(2,814	)					(2,814	)
BALANCE AS OF SEPTEMBER 30, 2019	$	93	$	94,572	$	150,123		$	(3,980	)	$	1,454		$	242,262
	For the three-month period ended September 30, 2018
			Additional								Accumulated Other			Total
	Common		Paid-In		Retained			Treasury			Comprehensive			Stockholders'
(dollars in thousands)	Stock		Capital		Earnings			Stock			Income (Loss)			Equity
BALANCE AS OF JUNE 30, 2018	$	90	$	83,413	$	119,536		$	-		$	(2,345	)	$	200,694
Net Income						6,800									6,800
Change in unrealized loss on available for sale securities						-						(287	)		(287	)
Dividends paid on common stock ($.13 per share )						(1,169	)								(1,169	)
Stock option expense				10											10
Stock grant expense				14											14
BALANCE AS OF SEPTEMBER 30, 2018	$	90	$	83,437	$	125,167		$	-		$	(2,632	)	$	206,062

See Notes to Condensed Consolidated Financial Statements

6

SOUTHERN MISSOURI BANCORP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE THREE-MONTH PERIODS ENDED SEPTEMBER 30, 2019 AND 2018 (Unaudited)

	Three months ended September 30,
(dollars in thousands)	2019			2018
Cash Flows From Operating Activities:
Net Income	$	7,828		$	6,800
Items not requiring (providing) cash:
Depreciation		920			777
(Gain) loss on disposal of fixed assets		(2	)		8
Stock option and stock grant expense		31			23
Loss on sale/write-down of REO		10			22
Amortization of intangible assets		441			396
Amortization of purchase accounting adjustments		(492	)		(1,159	)
Increase in cash surrender value of bank owned life insurance (BOLI)		(254	)		(246	)
Provision for loan losses		896			682
Net amortization of premiums and discounts on securities		264			230
Originations of loans held for sale		(10,132	)		(7,420	)
Proceeds from sales of loans held for sale		9,986			7,936
Gain on sales of loans held for sale		(273	)		(179	)
Changes in:
Accrued interest receivable		(1,459	)		(1,620	)
Prepaid expenses and other assets		(2,638	)		1,434
Accounts payable and other liabilities		276			(903	)
Deferred income taxes		6			6
Accrued interest payable		(199	)		185
Net cash provided by operating activities		5,209			6,972
Cash flows from investing activities:
Net increase in loans		(28,472	)		(62,129	)
Net change in interest-bearing deposits		(1	)		(4	)
Proceeds from maturities of available for sale securities		11,041			5,748
Net redemptions (purchases) of Federal Home Loan Bank stock		-			(1,780	)
Net purchases of Federal Reserve Bank of St. Louis stock		(2,500	)		-
Purchases of available-for-sale securities		(16,512	)		(4,655	)
Purchases of premises and equipment		(1,687	)		(622	)
Investments in state & federal tax credits		(10	)		(231	)
Proceeds from sale of fixed assets		13			-
Proceeds from sale of foreclosed assets		275			421
Net cash used in investing activities		(37,853	)		(63,252	)
Cash flows from financing activities:
Net decrease in demand deposits and savings accounts		(8,949	)		(36,827	)
Net (decrease) increase in certificates of deposits		(12,200	)		48,066
Net (decrease) increase in securities sold under agreements to repurchase		(4,376	)		364
Proceeds from Federal Home Loan Bank advances		147,550			192,550
Repayments of Federal Home Loan Bank advances		(89,162	)		(150,900	)
Purchase of treasury stock		(2,814	)		-
Dividends paid on common stock		(1,382	)		(1,169	)
Net cash provided by financing activities		28,667			52,084
Decrease in cash and cash equivalents		(3,977	)		(4,196	)
Cash and cash equivalents at beginning of period		35,400			26,326
Cash and cash equivalents at end of period	$	31,423		$	22,130
Supplemental disclosures of cash flow information:
Noncash investing and financing activities:
Conversion of loans to foreclosed real estate	$	365		$	1,495
Conversion of loans to repossessed assets		59			11
Right of use assets obtained in exchange for operating lease obligations		1,996			-
Cash paid during the period for:
Interest (net of interest credited)	$	964		$	1,005
Income taxes		2,856			310

See Notes to Condensed Consolidated Financial Statements

7

SOUTHERN MISSOURI BANCORP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note 1:  Basis of Presentation

The accompanying unaudited interim consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Securities and Exchange Commission (SEC) Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, all material adjustments (consisting only of normal recurring accruals) considered necessary for a fair presentation have been included. The consolidated balance sheet of the Company as of June 30, 2019, 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, 2019, 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, 2019, Form 10-K, which was filed with the SEC.

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

Note 2:  Organization and Summary of Significant Accounting Policies

Organization. Southern Missouri Bancorp, Inc., a Missouri corporation (the Company) was organized in 1994 and is the parent company of Southern Bank (the Bank). Substantially all of the Company’s consolidated revenues are derived from the operations of the Bank, and the Bank represents substantially all of the Company’s consolidated assets and liabilities.  SB Real Estate Investments, LLC is a wholly-owned subsidiary of the Bank formed to hold Southern Bank Real Estate Investments, LLC.  Southern Bank Real Estate Investments, LLC is a real estate investment trust (REIT) which is controlled by the investment subsidiary, and has other preferred shareholders in order to meet the requirements to be a REIT.  At September 30, 2019, assets of the REIT were approximately $744 million, and consisted primarily of 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 financial statements of the Company have been prepared in conformity with accounting principles generally accepted in the United States of America and general practices within the banking industry. In the normal course of business, the Company encounters two significant types of risk: economic and regulatory. Economic risk is comprised of interest rate risk, credit risk, and market risk. The Company is subject to interest rate risk to the degree that its interest-bearing liabilities reprice on a different basis than its interest-earning assets. Credit risk is the risk of default on the Company’s investment or loan portfolios resulting from the borrowers’ inability or unwillingness to make contractually required payments. Market risk reflects changes in the value of the investment portfolio, collateral underlying loans receivable, and the value of the Company’s investments in real estate.

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

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

8

Material estimates that are particularly susceptible to significant change relate to the determination of the allowance for loan losses and estimated fair values of purchased loans.

Cash and Cash Equivalents.For purposes of reporting cash flows, cash and cash equivalents includes cash, due from depository institutions and interest-bearing deposits in other depository institutions with original maturities of three months or less. Interest-bearing deposits in other depository institutions were $6.9 million at September 30 and June 30, 2019. The deposits are held in various commercial banks in amounts not exceeding the FDIC’s deposit insurance limits, as well as at the Federal Reserve and the Federal Home Loan Bank of Des Moines and Chicago.

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

Available for Sale Securities.Available for sale securities, which include any security for which the Company has no immediate plan to sell but which may be sold in the future, are carried at fair value. Unrealized gains and losses, net of tax, are reported in accumulated other comprehensive income (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.

When the Company does not intend to sell a debt security, and it is more likely than not the Company will not have to sell the security before recovery of its cost basis, it recognizes the credit component of an other-than-temporary impairment of a debt security in earnings and the remaining portion in other comprehensive income. As a result of this guidance, the Company’s consolidated balance sheet as of the dates presented reflects the full impairment (that is, the difference between the security’s amortized cost basis and fair value) on debt securities that the Company intends to sell or would more likely than not be required to sell before the expected recovery of the amortized cost basis. For available-for-sale debt securities that management has no intent to sell and believes that it more likely than not will not be required to sell prior to recovery, only the credit loss component of the impairment is recognized in earnings, while the noncredit loss is recognized in accumulated other comprehensive income. The credit loss component recognized in earnings is identified as the amount of principal cash flows not expected to be received over the remaining term of the security as projected based on cash flow projections.

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

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

Interest on loans is accrued based upon the principal amount outstanding. The accrual of interest on loans is discontinued when, in management’s judgment, the collectability of interest or principal in the normal course of business is doubtful. The Company complies with regulatory guidance which indicates that loans should be placed in nonaccrual status when 90 days past due, unless the loan is both well-secured and in the process of collection. A loan that is “in the process of collection” may be subject to legal action or, in appropriate circumstances, through other collection efforts reasonably expected to result in repayment or restoration to current status in the near future. A loan is considered delinquent when a payment has not been made by the contractual due date. 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.

9

The allowance for losses on loans represents management’s best estimate of losses probable in the existing loan portfolio. The allowance for losses on loans is increased by the provision for losses on loans charged to expense and reduced by loans charged off, net of recoveries. Loans are charged off in the period deemed uncollectible, based on management’s analysis of expected cash flows (for non-collateral dependent loans) or collateral value (for collateral-dependent loans). Subsequent recoveries of loans previously charged off, if any, are credited to the allowance when received. The provision for losses on loans is determined based on management’s assessment of several factors: reviews and evaluations of specific loans, changes in the nature and volume of the loan portfolio, current economic conditions and the related impact on specific borrowers and industry groups, historical loan loss experience, the level of classified and nonperforming loans and the results of regulatory examinations.

Loans are considered impaired if, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Depending on a particular loan’s circumstances, we measure impairment of a loan based upon either the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s observable market price, or the fair value of the collateral less estimated costs to sell if the loan is collateral dependent. Valuation allowances are established for collateral-dependent impaired loans for the difference between the loan amount and fair value of collateral less estimated selling costs. For impaired loans that are not collateral dependent, a valuation allowance is established for the difference between the loan amount and the present value of expected future cash flows discounted at the historical effective interest rate or the observable market price of the loan. Impairment losses are recognized through an increase in the required allowance for loan losses. Cash receipts on loans deemed impaired are recorded based on the loan’s separate status as a nonaccrual loan or an accrual status loan.

Some loans are accounted for in accordance with ASC 310-30, Loans and Debt Securities Acquired with Deteriorated Credit Quality. For these loans (“purchased credit impaired loans”), the Company recorded a fair value discount and began carrying them at book value less their face amount (see Note 4). For these loans, we determined the contractual amount and timing of undiscounted principal and interest payments (the “undiscounted contractual cash flows”), and estimated the amount and timing of undiscounted expected principal and interest payments, including expected prepayments (the “undiscounted expected cash flows”). Under acquired impaired loan accounting, the difference between the undiscounted contractual cash flows and the undiscounted expected cash flows is the nonaccretable difference. The nonaccretable difference is an estimate of the loss exposure of principal and interest related to the purchased credit impaired loans, and the amount is subject to change over time based on the performance of the loans. The carrying value of purchased credit impaired loans is initially determined as the discounted expected cash flows. The excess of expected cash flows at acquisition over the initial fair value of the purchased credit impaired loans is referred to as the “accretable yield” and is recorded as interest income over the estimated life of the acquired loans using the level-yield method, if the timing and amount of the future cash flows is reasonably estimable. The carrying value of purchased credit impaired loans is reduced by payments received, both principal and interest, and increased by the portion of the accretable yield recognized as interest income. Subsequent to acquisition, the Company evaluates the purchased credit impaired loans on a quarterly basis. Increases in expected cash flows compared to those previously estimated increase the accretable yield and are recognized as interest income prospectively. Decreases in expected cash flows compared to those previously estimated decrease the accretable yield and may result in the establishment of an allowance for loan losses and a provision for loan losses. Purchased credit impaired loans are generally considered accruing and performing loans, as the loans accrete interest income over the estimated life of the loan when expected cash flows are reasonably estimable. Accordingly, purchased credit impaired loans that are contractually past due are still considered to be accruing and performing as long as there is an expectation that the estimated cash flows will be received. If the timing and amount of cash flows is not reasonably estimable, the loans may be classified as nonaccrual 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.

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

10

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

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

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

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

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

Goodwill. The Company’s goodwill is evaluated annually for impairment or more frequently if impairment indicators are present.  A qualitative assessment is performed to determine whether the existence of events or circumstances leads to a determination that it is more likely than not the fair value is less than the carrying amount, including goodwill.  If, based on the evaluation, it is determined to be more likely than not that the fair value is less than the carrying value, then goodwill is tested further for impairment.  If the implied fair value of goodwill is lower than its carrying amount, a goodwill impairment is indicated and goodwill is written down to its implied fair value.  Subsequent increases in goodwill value are not recognized in the financial statements.  As of June 30, 2019, there was no impairment indicated, and the Company believes there continues to be no impairment of goodwill at September 30, 2019.

Intangible Assets.  The Company’s intangible assets at September 30, 2019 included gross core deposit intangibles of $14.7 million with $7.3 million accumulated amortization, gross other identifiable intangibles of $3.8 million with accumulated amortization of $3.8 million, and FHLB mortgage servicing rights of $1.4 million.  At June 30, 2019, the Company’s intangible assets included gross core deposit intangibles of $14.7 million with $6.9 million accumulated amortization, gross other identifiable intangibles of $3.8 million with accumulated amortization of $3.8 million, and FHLB mortgage servicing rights of $1.5 million. The Company’s core deposit intangible assets are being amortized using the straight line method, over periods ranging from five to seven years, with amortization expense expected to be approximately $1.3 million in the remainder of fiscal 2020, $1.3 million in fiscal 2021 through fiscal 2024, and $1.0 million in total thereafter. As of June 30, 2019, there was no impairment indicated, and the Company believes there continues to be no impairment of other intangible assets at September 30, 2019.

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

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as the largest amount of tax benefit that has a greater than 50 percent likelihood of being realized upon settlement with a taxing authority that has full knowledge of all relevant information. The determination of whether or not a tax position has met the more-likely-than-not recognition threshold considers the facts, circumstances, and information available at the reporting date and is subject to management’s judgment. Deferred tax assets are reduced by a valuation allowance if, based on the weight of evidence available, it is more likely than not that some portion or all of a deferred tax asset will not be realized.

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

The Company files consolidated income tax returns with its subsidiaries.

Incentive Plan.The Company accounts for its Management and Recognition Plan (MRP) and Equity Incentive Plan (EIP) in accordance with ASC 718, “Share-Based Payment.” Compensation expense is based on the market price of the Company’s stock on the date the shares are granted and is recorded over the vesting period. The difference between the grant date fair value and the fair value on the date the shares are considered earned represents a tax benefit to the Company that is recorded as an adjustment to income tax expense.

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

In the event that the participant dies before collecting any or all of the benefits, the Bank shall pay the participant’s beneficiary. No benefits shall 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) outstanding during each period.

Comprehensive Income. Comprehensive income consists of net income and other comprehensive income (loss), net of applicable income taxes. Other comprehensive income (loss) includes unrealized appreciation (depreciation) on available-for-sale securities, unrealized appreciation (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.

The following paragraphs summarize the impact of new accounting pronouncements:

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820) - Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement. ASU 2018-13 modifies the disclosure requirements on fair value measurements in Topic 820. The amendments in this update remove disclosures that no longer are considered cost beneficial, modify/clarify the specific requirements of certain disclosures, and add disclosure requirements identified as relevant. ASU 2018-13 is effective for fiscal years beginning after December 15, 2019, with early adoption permitted for certain removed and modified disclosures, and is not expected to have a significant impact on our financial statements.

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In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326).  The Update amends guidance on reporting credit losses for assets held at amortized cost basis and available for sale debt securities. For assets held at amortized cost basis, Topic 326 eliminates the probable initial recognition threshold in current GAAP and, instead, requires an entity to reflect its current estimate of all expected credit losses. The Update affects loans, debt securities, trade receivables, net investments in leases, off balance sheet credit exposures, and any other financial assets not excluded from the scope that have the contractual right to receive cash.  For public companies, the ASU is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years.  Early adoption is available beginning after December 15, 2018, including interim periods within those fiscal years. Adoption will be applied on a modified retrospective basis, through a cumulative-effect adjustment to retained earnings. The Company formed a working group of key personnel responsible for the allowance for loan losses estimate and initiated its evaluation of the data and systems requirements of adoption of the Update.  The group determined that purchasing third party software would be the most effective method to comply with the requirements, evaluated several outside vendors, and made a vendor recommendation that was approved by the Board.  Model validation and data testing using existing ALLL methodology have been completed. Parallel testing of the new methodology compared to the current methodology will be performed throughout fiscal year 2020 and the Company continues to evaluate the impact of adopting the new guidance.  We expect to recognize a one-time cumulative effect adjustment to the allowance for loan losses as of the beginning of the first reporting period in which the new standard is effective, which for the Company will be the three-month period ending September 30, 2020, but cannot yet determine the overall impact of the new guidance on the Company’s consolidated financial statements, or the exact amount of any such one-time adjustment.

In February 2016, the FASB issued ASU 2016-02, “Leases,” to revise the accounting related to lease accounting.  Under the new guidance, a lessee is required to record a right-of-use (ROU) asset and a lease liability on the balance sheet for all leases with terms longer than 12 months.   The Update was effective for the Company July 1, 2019.   Adoption of the standard allows the use of a modified retrospective transition approach for all periods presented at the time of adoption.  Based on the Company’s leases outstanding at September 30, 2019, which included five leased properties and numerous office equipment leases, the adoption of the new standard did not have a material impact on our consolidated statements of financial condition or our consolidated statements of income, although an increase to assets and liabilities occurred at the time of adoption.  In the first quarter of 2020, the Company recognized a ROU asset and corresponding lease liability for all leases of approximately $2.0 million based on the lease portfolio at that time.  The Company’s new leases, lease terminations, and lease modifications and renewals will impact the amount of ROU asset and corresponding lease liability recognized.  The Company’s leases are all currently “operating leases” as defined in the Update; therefore, no material change in the income statement presentation of lease expense is anticipated.

Note 3:  Securities

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

	September 30, 2019
			Gross		Gross			Estimated
	Amortized		Unrealized		Unrealized			Fair
(dollars in thousands)	Cost		Gains		Losses			Value
Investment and mortgage backed securities:
U.S. government-sponsored enterprises (GSEs)	$	5,038	$	1	$	(8	)	$	5,031
State and political subdivisions		40,966		852		(33	)		41,785
Other securities		5,176		72		(214	)		5,034
Mortgage-backed GSE residential		117,908		1,579		(331	)		119,156
Total investments and mortgage-backed securities	$	169,088	$	2,504	$	(586	)	$	171,006

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	June 30, 2019
			Gross		Gross			Estimated
	Amortized		Unrealized		Unrealized			Fair
(dollars in thousands)	Cost		Gains		Losses			Value
Investment and mortgage backed securities:
U.S. government-sponsored enterprises (GSEs)	$	7,284	$	1	$	(15	)	$	7,270
State and political subdivisions		42,123		728		(68	)		42,783
Other securities		5,176		75		(198	)		5,053
Mortgage-backed GSE residential		109,297		1,449		(317	)		110,429
Total investments and mortgage-backed securities	$	163,880	$	2,253	$	(598	)	$	165,535

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

	September 30, 2019
	Amortized		Estimated
(dollars in thousands)	Cost		Fair Value
Within one year	$	4,511	$	4,511
After one year but less than five years		9,749		9,799
After five years but less than ten years		18,017		18,298
After ten years		18,903		19,242
Total investment securities		51,180		51,850
Mortgage-backed securities		117,908		119,156
Total investments and mortgage-backed securities	$	169,088	$	171,006

The carrying value of investment and mortgage-backed securities pledged as collateral to secure public deposits and securities sold under agreements to repurchase amounted to $114.2 million at September 30, 2019 and $143.7 million at June 30, 2019.  The securities pledged consist of marketable securities, including $2.3 million and $5.6 million of U.S. Government and Federal Agency Obligations, $27.1 million and $47.3 million of Mortgage-Backed Securities, $54.2 million and $55.7 million of Collateralized Mortgage Obligations, $30.4 million and $34.9 million of State and Political Subdivisions Obligations, and $200,000 and $300,000 of Other Securities at September 30 and June 30, 2019, respectively.

The following tables show our 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 at September 30 and June 30, 2019:

	September 30, 2019
	Less than 12 months				12 months or more				Total
			Unrealized				Unrealized				Unrealized
	Fair Value		Losses		Fair Value		Losses		Fair Value		Losses
(dollars in thousands)
U.S. government-sponsored enterprises (GSEs)	$	-	$	-	$	3,489	$	8	$	3,489	$	8
Obligations of state and political subdivisions		2,877		14		2,585		19		5,462		33
Other securities		-		-		966		214		966		214
Mortgage-backed securities		29,390		185		11,783		146		41,173		331
Total investments and mortgage-backed securities	$	32,267	$	199	$	18,823	$	387	$	51,090	$	586

	June 30, 2019
	Less than 12 months				12 months or more				Total
			Unrealized				Unrealized				Unrealized
	Fair Value		Losses		Fair Value		Losses		Fair Value		Losses
(dollars in thousands)
U.S. government-sponsored enterprises (GSEs)	$	-	$	-	$	6,969	$	15	$	6,969	$	15
Obligations of state and political subdivisions		-		-		8,531		68		8,531		68
Other securities		-		-		985		198		985		198
Mortgage-backed securities		1,175		1		34,148		316		35,323		317
Total investments and mortgage-backed securities	$	1,175	$	1	$	50,633	$	597	$	51,808	$	598

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Other securities.  At September 30, 2019, there were two pooled trust preferred securities with an estimated fair value of $764,000 and unrealized losses of $209,000 in a continuous unrealized loss position for twelve months or more. These unrealized losses were primarily due to the long-term nature of the pooled trust preferred securities and a reduced demand for these securities, and concerns regarding the financial institutions that issued the underlying trust preferred securities.

The September 30, 2019, cash flow analysis for these two securities indicated it is probable the Company will receive all contracted principal and related interest projected. The cash flow analysis used in making this determination was based on anticipated default, recovery, and prepayment rates, and the resulting cash flows were discounted based on the yield spread anticipated at the time the securities were purchased. Other inputs include the actual collateral attributes, which include credit ratings and other performance indicators of the underlying financial institutions, including profitability, capital ratios, and asset quality. Assumptions for these two securities included prepayments averaging 1.5 percent, annually, annual defaults averaging 50 basis points, and a recovery rate averaging 10 percent of gross defaults, lagged two years.

One of these two securities has continued to receive cash interest payments in full since our purchase; the other security received principal-in-kind (PIK), in lieu of cash interest, for a period of time following the recession and financial crisis which began in 2008, but resumed cash interest payments during fiscal 2014. Our cash flow analysis indicates that cash interest payments are expected to continue for both securities. Because the Company does not intend to sell these securities and it is not more-likely-than-not that the Company will be required to sell these securities prior to recovery of their amortized cost basis, which may be maturity, the Company does not consider these investments to be other-than-temporarily impaired at September 30, 2019.

The Company does not believe any other individual unrealized loss as of September 30, 2019, represents other-than-temporary impairment (OTTI). However, the Company could be required to recognize OTTI losses in future periods with respect to its available for sale investment securities portfolio. The amount and timing of any required OTTI will depend on the decline in the underlying cash flows of the securities. Should the impairment of any of these securities become other-than-temporary, the cost basis of the investment will be reduced and the resulting loss recognized in the period the OTTI is identified.

Credit losses recognized on investments.  During fiscal 2009, the Company adopted ASC 820, formerly FASB Staff Position 157-4, “Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly.”  There were no credit losses recognized in income and other losses or recorded in other comprehensive income (loss) for the three-month periods ended September 30, 2019 and 2018.

Note 4:  Loans and Allowance for Loan Losses

Classes of loans are summarized as follows:

(dollars in thousands)	September 30, 2019			June 30, 2019
Real Estate Loans:
Residential	$	489,347		$	491,992
Construction		125,724			123,287
Commercial		839,729			840,777
Consumer loans		101,117			97,534
Commercial loans		375,728			355,874
		1,931,645			1,909,464
Loans in process		(36,435	)		(43,153	)
Deferred loan fees, net		(3	)		(3	)
Allowance for loan losses		(20,710	)		(19,903	)
Total loans	$	1,874,497		$	1,846,405

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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. The Company has also occasionally purchased loan participation interests originated by other lenders and secured by properties generally located in the states of Missouri and Arkansas.

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.

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 Bank 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.

Commercial Real Estate Lending. The Company actively originates loans secured by commercial real estate including land (improved, unimproved, and farmland), strip shopping centers, retail establishments 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.

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 seven 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 secured by mortgage loans for the construction of owner occupied residential real estate or to finance speculative construction secured by 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 and have maturities ranging from six to twelve 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.

While the Company typically utilizes maturity periods ranging from 6 to 12 months 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 eight months.  During construction, loans typically require monthly interest only payments which may allow the Company an opportunity to monitor for early signs of financial difficulty should the borrower fail to make a required monthly payment.  Additionally, during the construction phase, the Company typically performs interim inspections which further allow the Company opportunity to assess risk.  At September 30, 2019, construction loans outstanding included 61 loans, totaling $29.5 million, for which a modification had been agreed to.  At June 30, 2019,

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construction loans outstanding included 59 loans, totaling $27.2 million, for which a modification had been agreed to. All modifications were solely for the purpose of extending the maturity date due to conditions described above.  None of these modifications were executed due to financial difficulty on the part of the borrower and, therefore, were not accounted for as TDRs.

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 typically originated with fixed rates for terms of up to five years, with the exception of home equity lines of credit, which are typically originated with adjustable rates, tied to the prime rate of interest and are for a period of ten years.

Home equity lines of credit (HELOCs) are secured with a deed of trust and are issued up to 100% of the appraised or assessed value of the property securing the line of credit, less the outstanding balance on the first mortgage. Interest rates on the HELOCs are generally adjustable and based upon the loan-to-value ratio of the property, with better rates given to borrowers with more equity.

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

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.

The following tables present the balance in the allowance for loan losses and the recorded investment in loans (excluding loans in process and deferred loan fees) based on portfolio segment and impairment methods as of September 30 and June 30, 2019, and activity in the allowance for loan losses for the three-month periods ended  September 30, 2019 and 2018:

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	At period end and for the three months ended September 30, 2019
	Residential			Construction		Commercial
(dollars in thousands)	Real Estate			Real Estate		Real Estate		Consumer			Commercial			Total
Allowance for loan losses:
Balance, beginning of period	$	3,706		$	1,365	$	9,399	$	1,046		$	4,387		$	19,903
Provision charged to expense		(134	)		174		376		96			384			896
Losses charged off		-			-		-		(72	)		(35	)		(107	)
Recoveries		-			-		14		4			-			18
Balance, end of period	$	3,572		$	1,539	$	9,789	$	1,074		$	4,736		$	20,710
Ending Balance: individually             evaluated for impairment	$	-		$	-	$	-	$	-		$	-		$	-
Ending Balance: collectively             evaluated for impairment	$	3,572		$	1,539	$	9,789	$	1,074		$	4,736		$	20,710
Ending Balance: loans acquired             with deteriorated credit quality	$	-		$	-	$	-	$	-		$	-		$	-
Loans:
Ending Balance: individually             evaluated for impairment	$	-		$	-	$	-	$	-		$	-		$	-
Ending Balance: collectively             evaluated for impairment	$	487,680		$	87,983	$	823,649	$	101,117		$	370,298		$	1,870,727
Ending Balance: loans acquired             with deteriorated credit quality	$	1,667		$	1,306	$	16,080	$	-		$	5,430		$	24,483

	At period end and for the three months ended September 30, 2018
	Residential		Construction		Commercial
(dollars in thousands)	Real Estate		Real Estate		Real Estate			Consumer			Commercial		Total
Allowance for loan losses:
Balance, beginning of period	$	3,226	$	1,097	$	8,793		$	902		$	4,196	$	18,214
Provision charged to expense		122		196		35			92			237		682
Losses charged off		-		-		(95	)		(17	)		-		(112	)
Recoveries		1		-		-			4			1		6
Balance, end of period	$	3,349	$	1,293	$	8,733		$	981		$	4,434	$	18,790
Ending Balance: individually             evaluated for impairment	$	-	$	-	$	-		$	-		$	-	$	-
Ending Balance: collectively             evaluated for impairment	$	3,349	$	1,293	$	8,733		$	981		$	4,434	$	18,790
Ending Balance: loans acquired             with deteriorated credit quality	$	-	$	-	$	-		$	-		$	-	$	-

	At June 30, 2019
	Residential		Construction		Commercial
(dollars in thousands)	Real Estate		Real Estate		Real Estate		Consumer		Commercial		Total
Allowance for loan losses:
Balance, end of period	$	3,706	$	1,365	$	9,399	$	1,046	$	4,387	$	19,903
Ending Balance: individually             evaluated for impairment	$	-	$	-	$	-	$	-	$	-	$	-
Ending Balance: collectively             evaluated for impairment	$	3,706	$	1,365	$	9,399	$	1,046	$	4,387	$	19,903
Ending Balance: loans acquired             with deteriorated credit quality	$	-	$	-	$	-	$	-	$	-	$	-
Loans:
Ending Balance: individually             evaluated for impairment	$	-	$	-	$	-	$	-	$	-	$	-
Ending Balance: collectively             evaluated for impairment	$	490,307	$	78,826	$	821,415	$	97,534	$	349,681	$	1,837,763
Ending Balance: loans acquired             with deteriorated credit quality	$	1,685	$	1,308	$	19,362	$	-	$	6,193	$	28,548

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Management’s opinion as to the ultimate collectability of loans is subject to estimates regarding future cash flows from operations and the value of property, real and personal, pledged as collateral. These estimates are affected by changing economic conditions and the economic prospects of borrowers.

The allowance for loan losses is maintained at a level that, in management’s judgment, is adequate to cover probable credit losses inherent in the loan portfolio at the balance sheet date. The allowance for loan losses is established as losses are estimated to have occurred through a provision for loan losses charged to earnings. Loan losses are charged against the allowance when an amount is determined to be uncollectible, based on management’s analysis of expected cash flow (for non-collateral-dependent loans) or collateral value (for collateral-dependent loans). Subsequent recoveries, if any, are credited to the allowance.

The allowance for loan losses is evaluated on a regular basis by management and is based upon management’s periodic review of the collectability of the loans in light of historical experience, the nature and volume of the loan portfolio, adverse situations that may affect the borrower’s ability to repay, estimated value of any underlying collateral and prevailing economic conditions. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available.

The allowance consists of allocated and general components. The allocated component relates to loans that are classified as impaired. For those loans that are classified as impaired, an allowance is established when the discounted cash flows (or collateral value or observable market price) of the impaired loan is lower than the carrying value of that loan.

Under the Company’s allowance methodology, loans are first segmented into 1) those comprising large groups of homogeneous loans, which are collectively evaluated for impairment, and 2) all other loans which are individually evaluated.  Those loans in the second category are further segmented utilizing a defined grading system which involves categorizing loans by severity of risk based on conditions that may affect the ability of the borrowers to repay their debt, such as current financial information, collateral valuations, historical payment experience, credit documentation, public information, and current trends.  The loans subject to credit classification represent the portion of the portfolio subject to the greatest credit risk and where adjustments to the allowance for losses on loans as a result of provisions and charge offs are most likely to have a significant impact on operations.

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 represents a probable loss or risk that should be recognized.

The Company considers, as the primary quantitative factor in its allowance methodology, average net charge offs over the most recent twelve-month period.  The Company also reviews average net charge offs over the most recent five-year period.

A loan is considered impaired when, based on current information and events, it is probable that the scheduled payments of principal or interest will not be able to be collected when due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. 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. Impairment is measured on a loan-by-loan basis for commercial and agricultural loans by either the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s obtainable market price or the fair value of the collateral if the loan is collateral dependent.

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Groups of loans with similar risk characteristics are collectively evaluated for impairment based on the group’s historical loss experience adjusted for changes in trends, conditions and other relevant factors that affect repayment of the loans. Accordingly, individual consumer and residential loans are not separately identified for impairment measurements, unless such loans are the subject of a restructuring agreement due to financial difficulties of the borrower.

The general component covers non classified loans and is based on historical charge-off experience and expected loss given the internal risk rating process. The loan portfolio is stratified into homogeneous groups of loans that possess similar loss characteristics and an appropriate loss ratio adjusted for qualitative factors is applied to the homogeneous pools of loans to estimate the incurred losses in the loan portfolio.

Included in the Company’s loan portfolio are certain loans accounted for in accordance with ASC 310-30, Loans and Debt Securities Acquired with Deteriorated Credit Quality. These loans were written down at acquisition to an amount estimated to be collectible. As a result, certain ratios regarding the Company’s loan portfolio and credit quality cannot be used to compare the Company to peer companies or to compare the Company’s current credit quality to prior periods. The ratios particularly affected by accounting under ASC 310-30 include the allowance for loan losses as a percentage of loans, nonaccrual loans, and nonperforming assets, and nonaccrual loans and nonperforming loans as a percentage of total loans.

The following tables present the credit risk profile of the Company’s loan portfolio (excluding loans in process and deferred loan fees) based on rating category and payment activity as of September 30 and June 30, 2019. These tables include purchased credit impaired loans, which are reported according to risk categorization after acquisition based on the Company’s standards for such classification:

	September 30, 2019
	Residential		Construction		Commercial
(dollars in thousands)	Real Estate		Real Estate		Real Estate		Consumer		Commercial
Pass	$	481,808	$	89,289	$	802,243	$	100,742	$	363,739
Watch		1,020		-		20,893		167		5,928
Special Mention		103		-		3,438		26		-
Substandard		6,416		-		13,155		182		6,061
Doubtful		-		-		-		-		-
Total	$	489,347	$	89,289	$	839,729	$	101,117	$	375,728

	June 30, 2019
	Residential		Construction		Commercial
(dollars in thousands)	Real Estate		Real Estate		Real Estate		Consumer		Commercial
Pass	$	482,869	$	80,134	$	802,479	$	97,012	$	341,069
Watch		1,236		-		21,693		170		7,802
Special Mention		103		-		3,463		26		-
Substandard		7,784		-		13,142		291		7,003
Doubtful		-		-		-		35		-
Total	$	491,992	$	80,134	$	840,777	$	97,534	$	355,874

The above amounts include purchased credit impaired loans. At September 30, 2019, purchased credited impaired loans comprised $6.8 million of credits rated “Pass”; $10.7 million of credits rated “Watch”; none rated “Special Mention”; $7.0 million of credits rated “Substandard”; and none rated “Doubtful”. At June 30, 2019,  purchased credit impaired loans accounted for $6.9 million of credits rated “Pass”; $10.4 million of credits  rated “Watch”; none rated “Special Mention”; $11.2 million of credits rated “Substandard”; and none rated “Doubtful”.

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 Special Mention, Substandard, or Doubtful.  In addition, lending relationships of $2 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.

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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.

The following tables present the Company’s loan portfolio aging analysis (excluding loans in process and deferred loan fees) as of September 30 and June 30, 2019.  These tables include purchased credit impaired loans, which are reported according to aging analysis after acquisition based on the Company’s standards for such classification:

	September 30, 2019
					Greater Than								Greater Than 90
	30-59 Days		60-89 Days		90 Days		Total				Total Loans		Days Past Due
(dollars in thousands)	Past Due		Past Due		Past Due		Past Due		Current		Receivable		and Accruing
Real Estate Loans:
Residential	$	1,180	$	1,300	$	2,161	$	4,641	$	484,706	$	489,347	$	-
Construction		-		-		-		-		89,289		89,289		-
Commercial		854		16		2,841		3,711		836,018		839,729		-
Consumer loans		325		85		164		574		100,543		101,117		-
Commercial loans		754		5		172		931		374,797		375,728		-
Total loans	$	3,113	$	1,406	$	5,338	$	9,857	$	1,885,353	$	1,895,210	$	-

	June 30, 2019
					Greater Than								Greater Than 90
	30-59 Days		60-89 Days		90 Days		Total				Total Loans		Days Past Due
(dollars in thousands)	Past Due		Past Due		Past Due		Past Due		Current		Receivable		and Accruing
Real Estate Loans:
Residential	$	227	$	1,054	$	1,714	$	2,995	$	488,997	$	491,992	$	-
Construction		-		-		-		-		80,134		80,134		-
Commercial		296		1		5,617		5,914		834,863		840,777		-
Consumer loans		128		46		176		350		97,184		97,534		-
Commercial loans		424		25		1,902		2,351		353,523		355,874		-
Total loans	$	1,075	$	1,126	$	9,409	$	11,610	$	1,854,701	$	1,866,311	$	-

At September 30, 2019 there were no purchased credit impaired loans that were greater than 90 days past due.  At June 30, 2019 there was one purchased credit impaired loan with net fair value of $3.1 million that was greater than 90 days past due.

A loan is considered impaired, in accordance with the impairment accounting guidance (ASC 310-10-35-16), when based on current information and events, it is probable the Company will be unable to collect all amounts due from the borrower in accordance with the contractual terms of the loan. Impaired loans include nonperforming loans, as well as performing loans modified in troubled debt restructurings where concessions have been granted to borrowers experiencing financial difficulties. These concessions could include a reduction in the interest rate on the loan, payment extensions, forgiveness of principal, forbearance or other actions intended to maximize collection.

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The tables below present impaired loans (excluding loans in process and deferred loan fees) as of September 30 and June 30, 2019. These tables include purchased credit impaired loans. Purchased credit impaired loans are those for which it was deemed probable, at acquisition, that the Company would be unable to collect all contractually required payments receivable. In an instance where, subsequent to the acquisition, the Company determines it is probable, for a specific loan, that cash flows received will exceed the amount previously expected, the Company will recalculate the amount of accretable yield in order to recognize the improved cash flow expectation as additional interest income over the remaining life of the loan. These loans, however, will continue to be reported as impaired loans. In an instance where, subsequent to the acquisition, the Company determines it is probable, for a specific loan, that cash flows received will be less than the amount previously expected, the Company will allocate a specific allowance under the terms of ASC 310-10-35.

	September 30, 2019
	Recorded		Unpaid Principal		Specific
(dollars in thousands)	Balance		Balance		Allowance
Loans without a specific valuation allowance:
Residential real estate	$	4,916	$	5,152	$	-
Construction real estate		1,305		1,367		-
Commercial real estate		22,928		27,306		-
Consumer loans		-		-		-
Commercial loans		6,152		7,252		-
Loans with a specific valuation allowance:
Residential real estate	$	-	$	-	$	-
Construction real estate		-		-		-
Commercial real estate		-		-		-
Consumer loans		-		-		-
Commercial loans		-		-		-
Total:
Residential real estate	$	4,916	$	5,152	$	-
Construction real estate	$	1,305	$	1,367	$	-
Commercial real estate	$	22,928	$	27,306	$	-
Consumer loans	$	-	$	-	$	-
Commercial loans	$	6,152	$	7,252	$	-

	June 30, 2019
	Recorded		Unpaid Principal		Specific
(dollars in thousands)	Balance		Balance		Allowance
Loans without a specific valuation allowance:
Residential real estate	$	5,104	$	5,341	$	-
Construction real estate		1,330		1,419		-
Commercial real estate		26,410		31,717		-
Consumer loans		8		8		-
Commercial loans		6,999		9,187		-
Loans with a specific valuation allowance:
Residential real estate	$	-	$	-	$	-
Construction real estate		-		-		-
Commercial real estate		-		-		-
Consumer loans		-		-		-
Commercial loans		-		-		-
Total:
Residential real estate	$	5,104	$	5,341	$	-
Construction real estate	$	1,330	$	1,419	$	-
Commercial real estate	$	26,410	$	31,717	$	-
Consumer loans	$	8	$	8	$	-
Commercial loans	$	6,999	$	9,187	$	-

The above amounts include purchased credit impaired loans. At September 30, 2019, purchased credit impaired loans comprised $24.5 million of impaired loans without a specific valuation allowance.  At June 30, 2019, purchased credit impaired loans comprised $28.5 million of impaired loans without a specific valuation allowance.

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The following tables present information regarding interest income recognized on impaired loans:

	For the three-month period ended
	September 30, 2019
	Average
(dollars in thousands)	Investment in		Interest Income
	Impaired Loans		Recognized
Residential Real Estate	$	1,677	$	23
Construction Real Estate		1,306		48
Commercial Real Estate		17,721		335
Consumer Loans		-		-
Commercial Loans		5,812		93
Total Loans	$	26,516	$	499

	For the three-month period ended
	September 30, 2018
	Average
(dollars in thousands)	Investment in		Interest Income
	Impaired Loans		Recognized
Residential Real Estate	$	2,531	$	33
Construction Real Estate		1,297		101
Commercial Real Estate		7,229		370
Consumer Loans		-		-
Commercial Loans		1,628		616
Total Loans	$	12,685	$	1,120

Interest income on impaired loans recognized on a cash basis in the three-month periods ended September 30, 2019 and 2018, was immaterial.

For the three-month period ended September 30, 2019, the amount of interest income recorded for impaired loans that represented a change in the present value of cash flows attributable to the passage of time was approximately $83,000, as compared to $945,000, for the three-month period ended September 30, 2018.

The following table presents the Company’s nonaccrual loans at September 30 and June 30, 2019. Purchased credit impaired loans are placed on nonaccrual status in the event the Company cannot reasonably estimate cash flows expected to be collected.  The table excludes performing troubled debt restructurings.

(dollars in thousands)	September 30, 2019		June 30, 2019
Residential real estate	$	5,286	$	6,404
Construction real estate		-		-
Commercial real estate		6,968		10,876
Consumer loans		179		309
Commercial loans		1,588		3,424
Total loans	$	14,021	$	21,013

The above amounts include purchased credit impaired loans.  At September 30 and June 30, 2019, purchased credit impaired loans comprised $889,000 and $4.1 million of nonaccrual loans, respectively.

Included in certain loan categories in the impaired loans are troubled debt restructurings (TDRs), where economic concessions have been granted to borrowers who have experienced financial difficulties. These concessions typically result from our loss mitigation activities, and could include reductions in the interest rate, payment extensions, forgiveness of principal, forbearance, or other actions. Certain TDRs are classified as nonperforming at the time of restructuring and typically are returned to performing status after considering the borrower’s sustained repayment performance for a reasonable period of at least six months.

When loans and leases are modified into a TDR, the Company evaluates any possible impairment similar to other impaired loans based on the present value of expected future cash flows, discounted at the contractual interest rate of the original loan or lease agreement, and uses the current fair value of the collateral, less selling costs, for collateral dependent loans. If the Company determines that the value of the modified loan is less than the recorded

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investment in the loan (net of previous charge-offs, deferred loan fees or costs, and unamortized premium or discount), impairment is recognized through an allowance estimate or a charge-off to the allowance. In periods subsequent to modification, the Company evaluates all TDRs, including those that have payment defaults, for possible impairment and recognizes impairment through the allowance.

During the three-month periods ended September 30, 2019 and 2018, certain loans modified were classified as TDRs. They are shown, segregated by class, in the table below:

	For the three-month periods ended
	September 30, 2019				September 30, 2018
(dollars in thousands)	Number of		Recorded		Number of		Recorded
	modifications		Investment		modifications		Investment
Residential real estate		-	$	-		-	$	-
Construction real estate		-		-		-		-
Commercial real estate		-		-		2		922
Consumer loans		-		-		-		-
Commercial loans		-		-		1		69
Total		-	$	-		3	$	991

Performing loans classified as TDRs and outstanding at September 30 and June 30, 2019, segregated by class, are shown in the table below. Nonperforming TDRs are shown as nonaccrual loans.

	September 30, 2019				June 30, 2019
(dollars in thousands)	Number of		Recorded		Number of		Recorded
	modifications		Investment		modifications		Investment
Residential real estate		11	$	1,162		10	$	1,130
Construction real estate		-		-		-		-
Commercial real estate		18		6,398		20		6,529
Consumer loans		-		-		-		-
Commercial loans		9		4,872		10		5,630
Total		38	$	12,432		40	$	13,289

The Company may obtain physical possession of real estate collateralizing a residential mortgage loan or home equity loan via foreclosure or in-substance repossession. As of September 30 and June 30, 2019, the carrying value of foreclosed residential real estate properties as a result of obtaining physical possession was $421,000 and $752,000, respectively. In addition, as of September 30 and June 30, 2019, the Company had residential mortgage loans and home equity loans with a carrying value of $898,000 and $493,000, respectively, collateralized by residential real estate property for which formal foreclosure proceedings were in process.

Note 5: Accounting for Certain Loans Acquired in a Transfer

During the fiscal years ended June 30, 2011, 2015, 2017, and 2019, the Company acquired certain loans which evidenced deterioration of credit quality since origination and for which it was probable, at acquisition, that all contractually required payments would not be collected.

Loans purchased with evidence of credit deterioration since origination and for which it is probable that all contractually required payments will not be collected are considered to be credit impaired. Evidence of credit quality deterioration as of the purchase date may include information such as past-due and nonaccrual status, borrower credit scores and recent loan to value percentages. Purchased credit-impaired loans are accounted for under the accounting guidance for loans and debt securities acquired with deteriorated credit quality (ASC 310-30) and initially measured at fair value, which includes estimated future credit losses expected to be incurred over the life of the loan. Accordingly, an allowance for credit losses related to these loans is not carried over and recorded at the acquisition date. Management estimated the cash flows expected to be collected at acquisition using our internal risk models, which incorporate the estimate of current key assumptions, such as default rates, severity and prepayment speeds.

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The carrying amount of those loans is included in the balance sheet amounts of loans receivable at September 30 and June 30, 2019. The amount of these loans is shown below:

(dollars in thousands)	September 30, 2019		June 30, 2019
Residential real estate	$	1,904	$	1,921
Construction real estate		1,367		1,397
Commercial real estate		20,458		24,669
Consumer loans		-		-
Commercial loans		6,529		8,381
Outstanding balance	$	30,258	$	36,368
Carrying amount, net of fair value adjustment of      $5,775 and $7,821 at September 30, 2019 and      June 30, 2019, respectively	$	24,483	$	28,547

 Accretable yield, or income expected to be collected, is as follows:

	For the three-month period ended
(dollars in thousands)	September 30, 2019			September 30, 2018
Balance at beginning of period	$	220		$	589
Additions		-			-
Accretion		(83	)		(945	)
Reclassification from nonaccretable difference		46			865
Disposals		-			(204	)
Balance at end of period	$	183		$	305

During the three-month periods ended September 30, 2019 and September 30, 2018, the Company did not increase or reverse the allowance for loan losses related to these purchased credit impaired loans.

Note 6:  Premises and Equipment

Following is a summary of premises and equipment:

(dollars in thousands)	September 30, 2019		June 30, 2019
Land	$	12,407	$	12,414
Buildings and improvements		54,933		54,304
Construction in progress		489		466
Furniture, fixtures, equipment and software		17,506		16,514
Automobiles		107		107
Operating leases ROU asset		1,996		-
		87,438		83,805
Less accumulated depreciation		21,958		21,078
	$	65,480	$	62,727

Leases.  The Company adopted ASU 2016-02, Leases (Topic 842), on July 1, 2019, using the modified retrospective transition approach whereby comparative periods were not restated.  The Company also elected certain relief options under the ASU, including the option not to recognize right of use asset and lease liabilities that arise from short-term leases (leases with terms of twelve months or less).  The Company has five leased properties and numerous office equipment lease agreements in which it is the lessee, with lease terms exceeding twelve months.   Adoption of this ASU resulted in the Company recognizing a ROU asset and corresponding lease liability of $437,000, while entry into a new operating lease agreement during the three-month period ended September 30, 2019, resulted in the recognition of a ROU asset and corresponding lease liability of $1.6 million.

All of the leases are classified as operating leases, and therefore, were previously not recognized on the Company’s consolidated balance sheets.  With the adoption of ASU 2016-02, these operating leases are now included as a ROU asset in our 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.  Because these leases are classified as operating leases, the adoption of the new standard did not have a material effect on lease expense on the Company’s consolidated statements of income.

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

	At or For the
	Three Months Ended
(dollars in thousands)	September 30, 2019
Consolidated Balance Sheet
Operating leases right of use asset	$	1,996
Operating leases liability	$	1,996
Consolidated Statement of Income
Operating lease costs classified as occupancy and equipment expense	$	57
(includes short-term lease costs)
Supplemental disclosures of cash flow information
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	39
ROU assets obtained in exchange for operating lease obligations:	$	2,004

For the three months ended September 30, 2019 and 2018, lease expense was $57,000 and $26,000, respectively.  At September 30, 2019, future expected lease payments for leases with terms exceeding one year were as follows:

(dollars in thousands)
2020	$	116
2021		269
2022		243
2023		243
2024		243
2025		243
Thereafter		1,572
Future lease payments expected	$	2,929

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 months period ended September 30, 2019, income recognized from these lessor agreements was $82,000 and was included in net occupancy and equipment expense.

Note 7:  Deposits

Deposits are summarized as follows:

(dollars in thousands)	September 30, 2019		June 30, 2019
Non-interest bearing accounts	$	208,646	$	218,889
NOW accounts		634,855		639,219
Money market deposit accounts		197,976		188,355
Savings accounts		163,983		167,973
Certificates		667,060		679,259
Total Deposit Accounts	$	1,872,520	$	1,893,695

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Note 8:  Earnings Per Share

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

	Three months ended
	September 30,
	2019		2018
(dollars in thousands except per share data)
Net income available to common shareholders	$	7,828	$	6,800
Average Common shares – outstanding basic		9,232,257		8,996,321
Stock options under treasury stock method		11,891		10,194
Average Common shares – outstanding diluted		9,244,148		9,006,515
Basic earnings per common share	$	0.85	$	0.76
Diluted earnings per common share	$	0.85	$	0.76

At September 30, 2019, 15,500 options outstanding had an exercise price in excess of the market price.  At September 30, 2018, no options outstanding had an exercise price in excess of the market price.

Note 9: Income Taxes

The Company and its subsidiary files 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, 2015 and before.  The Company recognized no interest or penalties related to income taxes.

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

	For the three-month periods ended
(dollars in thousands)	September 30, 2019		September 30, 2018
Income taxes
Current	$	1,970	$	1,660
Deferred		6		6
Total income tax provision	$	1,976	$	1,666

The components of net deferred tax assets are summarized as follows:

(dollars in thousands)	September 30, 2019		June 30, 2019
Deferred tax assets:
Provision for losses on loans	$	4,758	$	4,601
Accrued compensation and benefits		493		692
NOL carry forwards acquired		300		199
Minimum Tax Credit		130		130
Unrealized loss on other real estate		51		134
Purchase accounting adjustments		-		255
Losses and credits from LLC's		1,236		1,206
Total deferred tax assets		6,968		7,217
Deferred tax liabilities:
Purchase accounting adjustments		176		-
Depreciation		1,469		1,749
FHLB stock dividends		120		120
Prepaid expenses		175		313
Unrealized gain on available for sale securities		422		364
Other		60		61
Total deferred tax liabilities		2,422		2,607
Net deferred tax asset	$	4,546	$	4,610

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As of September 30, 2019 the Company had approximately $963,000 and $1.7 million in federal and state net operating loss carryforwards, respectively, which were acquired in the July 2009 acquisition of Southern Bank of Commerce, the February 2014 acquisition of Citizens State Bankshares of Bald Knob, Inc., and the August 2014 acquisition of Peoples Service Company.  The amount reported is net of the IRC Sec. 382 limitation, or state equivalent, related to utilization of net operating loss carryforwards of acquired corporations. Unless otherwise utilized, the net operating losses will begin to expire in 2027.

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

	For the three-month periods ended
(dollars in thousands)	September 30, 2019			September 30, 2018
Tax at statutory rate	$	2,059		$	1,778
Increase (reduction) in taxes       resulting from:
Nontaxable municipal income		(113	)		(73	)
State tax, net of Federal benefit		109			122
Cash surrender value of                   Bank-owned life insurance		(53	)		(52	)
Tax credit benefits		-			(68	)
Other, net		(26	)		(41	)
Actual provision	$	1,976		$	1,666

For the three month periods ended September 30, 2019 and September 30, 2018, 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.

Note 10:  401(k) Retirement Plan

The Bank has a 401(k) retirement plan that covers substantially all eligible employees.  The Bank made a safe harbor matching contribution 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 2019; for fiscal 2020, 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, 2019, retirement plan expenses recognized for the Plan totaled approximately $381,000, as compared to $341,000 for the same period of the prior fiscal year.  Employee deferrals and safe harbor contributions are fully vested.  Profit-sharing or other contributions vest over a period of five years.

Note 11:  Subordinated Debt

Southern Missouri Statutory Trust I issued $7.0 million of Floating Rate Capital Securities (the “Trust Preferred Securities”) with a liquidation value of $1,000 per share in March 2004. The securities are due in 30 years, redeemable after five years and bear interest at a floating rate based on LIBOR. At September 30, 2019, the current rate was 4.89%. 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 of the Company. The Company used its net proceeds for working capital and investment in its subsidiaries.

In connection with its October 2013 acquisition of Ozarks Legacy Community Financial, Inc. (OLCF), the Company assumed $3.1 million in floating rate junior subordinated debt securities. The debt securities had been issued in June 2005 by OLCF in connection with the sale of trust preferred securities, bear interest at a floating rate based on LIBOR, are now redeemable at par, and mature in 2035. At September 30, 2019, the current rate was 4.57%. The carrying value of the debt securities was approximately $2.6 million at September 30 and June 30, 2019.

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In connection with its August 2014 acquisition of Peoples Service Company, Inc. (PSC), the Company assumed $6.5 million in floating rate junior subordinated debt securities. The debt securities had been issued in 2005 by PSC’s subsidiary bank holding company, Peoples Banking Company, in connection with the sale of trust preferred securities, bear interest at a floating rate based on LIBOR, are now redeemable at par, and mature in 2035. At September 30, 2019, the current rate was 3.92%.  The carrying value of the debt securities was approximately $5.2 million at September 30 and June 30, 2019.

Note 12:  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 of assets  recognized in the accompanying 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, 2019 and June 30, 2019:

	Fair Value Measurements at September 30, 2019, Using:
			Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
(dollars in thousands)	Fair Value		(Level 1)		(Level 2)		(Level 3)
U.S. government sponsored enterprises (GSEs)	$	5,031	$	-	$	5,031	$	-
State and political subdivisions		41,785		-		41,785		-
Other securities		5,034		-		5,034		-
Mortgage-backed GSE residential		119,156		-		119,156		-
	Fair Value Measurements at June 30, 2019, Using:
			Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
(dollars in thousands)	Fair Value		(Level 1)		(Level 2)		(Level 3)
U.S. government sponsored enterprises (GSEs)	$	7,270	$	-	$	7,270	$	-
State and political subdivisions		42,783		-		42,783		-
Other securities		5,053		-		5,053		-
Mortgage-backed GSE residential		110,429		-		110,429		-

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. The Company does not have Level 1 securities. 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.

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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. Level 2 securities include U.S. Government-sponsored enterprises, state and political subdivisions, other securities, mortgage-backed GSE residential securities and mortgage-backed other U.S. Government agencies. In certain cases where Level 1 or Level 2 inputs are not available, securities are classified within Level 3 of the hierarchy.

Nonrecurring Measurements. The following tables present the fair value measurement of assets measured at fair value on a nonrecurring basis and the level within the ASC 820 fair value hierarchy in which the fair value measurements fell at September 30 and June 30, 2019:

	Fair Value Measurements at September 30 , 2019, Using:
			Quoted Prices in
			Active Markets for		Significant Other		Significant
			Identical Assets		Observable Inputs		Unobservable Inputs
(dollars in thousands)	Fair Value		(Level 1)		(Level 2)		(Level 3)
Foreclosed and repossessed assets held for sale	$	365	$	-	$	-	$	365

	Fair Value Measurements at June 30, 2019, Using:
			Quoted Prices in
			Active Markets for		Significant Other		Significant
			Identical Assets		Observable Inputs		Unobservable Inputs
(dollars in thousands)	Fair Value		(Level 1)		(Level 2)		(Level 3)
Foreclosed and repossessed assets held for sale		2,430		-		-		2,430

The following table presents gains and (losses) recognized on assets measured on a non-recurring basis for the three-month periods ended September 30, 2019 and 2018:

	For the three months ended
(dollars in thousands)	September 30, 2019			September 30, 2018
Foreclosed and repossessed assets held for sale	$	(1	)	$	(115	)
Total (losses) gains on assets measured on a non-recurring basis	$	(1	)	$	(115	)

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.

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

(dollars in thousands)	Fair value at September 30 , 2019		Valuation technique	Unobservable inputs	Range of inputs applied			Weighted-average inputs applied
Nonrecurring Measurements
Foreclosed and repossessed assets	$	365	Third party appraisal	Marketability discount		0.0% - 32.6	%		32.6	%
(dollars in thousands)	Fair value at June 30, 2019		Valuation technique	Unobservable inputs	Range of inputs applied			Weighted-average inputs applied
Nonrecurring Measurements
Foreclosed and repossessed assets	$	2,430	Third party appraisal	Marketability discount		5.1% - 77.0	%		35.2	%

Fair Value of Financial Instruments. The following table presents estimated fair values of the Company’s financial instruments not reported at fair value and the level within the fair value hierarchy in which the fair value measurements fell at September 30 and June 30, 2019.

	September 30, 2019
			Quoted Prices
			in Active				Significant
			Markets for		Significant Other		Unobservable
	Carrying		Identical Assets		Observable Inputs		Inputs
(dollars in thousands)	Amount		(Level 1)		(Level 2)		(Level 3)
Financial assets
Cash and cash equivalents	$	31,423	$	31,423	$	-	$	-
Interest-bearing time deposits		971		-		971		-
Stock in FHLB		7,733		-		7,733		-
Stock in Federal Reserve Bank of St. Louis		4,350		-		4,350		-
Loans receivable, net		1,874,497		-		-		1,856,215
Accrued interest receivable		11,648		-		11,648		-
Financial liabilities
Deposits		1,872,520		1,205,460		-		668,173
Securities sold under agreements to          repurchase		-		-		-		-
Advances from FHLB		103,327		-		104,078		-
Note payable		3,000		-		-		3,000
Accrued interest payable		1,900		-		1,900		-
Subordinated debt		15,068		-		-		14,812
Unrecognized financial instruments (net of contract amount)
Commitments to originate loans		-		-		-		-
Letters of credit		-		-		-		-
Lines of credit		-		-		-		-

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	June 30, 2019
			Quoted Prices
			in Active				Significant
			Markets for		Significant Other		Unobservable
	Carrying		Identical Assets		Observable Inputs		Inputs
(dollars in thousands)	Amount		(Level 1)		(Level 2)		(Level 3)
Financial assets
Cash and cash equivalents	$	35,400	$	35,400	$	-	$	-
Interest-bearing time deposits		969		-		969		-
Stock in FHLB		5,233		-		5,233		-
Stock in Federal Reserve Bank of St. Louis		4,350		-		4,350		-
Loans receivable, net		1,846,405		-		-		1,823,040
Accrued interest receivable		10,189		-		10,189		-
Financial liabilities
Deposits		1,893,695		1,214,606		-		678,301
Securities sold under agreements to          repurchase		4,376		-		4,376		-
Advances from FHLB		44,908		-		45,547		-
Note payable		3,000		-		-		3,000
Accrued interest payable		2,099		-		2,099		-
Subordinated debt		15,043		-		-		15,267
Unrecognized financial instruments (net of contract amount)
Commitments to originate loans		-		-		-		-
Letters of credit		-		-		-		-
Lines of credit		-		-		-		-

The following methods and assumptions were used in estimating the fair values of financial instruments:

Cash and cash equivalents and interest-bearing time deposits are valued at their carrying amounts, which approximates book value. Stock in FHLB and the Federal Reserve Bank of St. Louis is valued at cost, which approximates fair value. The fair value of loans is estimated on an exit price basis incorporating contractual cash flow, prepayments discount spreads, credit loss and liquidity premiums. Loans with similar characteristics were aggregated for purposes of the calculations. The carrying amount of accrued interest approximates its fair value.

The fair value of fixed-maturity time deposits is estimated using a discounted cash flow calculation that applies the rates currently offered for deposits of similar remaining maturities. Non-maturity deposits and securities sold under agreements are valued at their carrying value, which approximates fair value. Fair value of advances from the FHLB is estimated by discounting maturities using an estimate of the current market for similar instruments. The fair value of subordinated debt is estimated using rates currently available to the Company for debt with similar terms and maturities. The fair value of commitments to originate loans is estimated using the fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the present creditworthiness of the counterparties. The carrying amount of notes payable approximates fair value.  For fixed-rate loan commitments, fair value also considers the difference between current levels of interest rates and committed rates. The fair value of letters of credit and lines of credit are based on fees currently charged for similar agreements or on the estimated cost to terminate or otherwise settle the obligations with the counterparties at the reporting date.

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

SOUTHERN MISSOURI BANCORP, INC.

General

Southern Missouri Bancorp, Inc. (Southern Missouri or Company) is a Missouri corporation and owns all of the outstanding stock of Southern Bank (the Bank). The Company’s earnings are primarily dependent on the operations of the Bank. As a result, the following discussion relates primarily to the operations of the Bank. The Bank’s deposit accounts are generally insured up to a maximum of $250,000 by the Deposit Insurance Fund (DIF), which is administered by the Federal Deposit Insurance Corporation (FDIC). At September 30, 2019, the Bank operated from its headquarters, 44 full-service branch offices, and two limited-service branch offices.  The Bank owns the office building and related land in which its headquarters are located, and 42 of its other branch offices.  The remaining four branches are either leased or partially owned.

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

The consolidated balance sheet of the Company as of June 30, 2019, has been derived from the audited consolidated balance sheet of the Company as of that date. Certain information and note disclosures normally included in the Company’s annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. These consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Form 10-K annual report filed with the Securities and Exchange Commission.

Management’s discussion and analysis of financial condition and results of operations is intended to assist in understanding the financial condition and results of operations of the Company. The information contained in this section should be read in conjunction with the unaudited consolidated financial statements and accompanying notes. The following discussion reviews the Company’s condensed consolidated financial condition at September 30, 2019, and results of operations for the three-month periods ended September 30, 2019 and 2018.

Forward Looking Statements

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

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

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

• fluctuations in interest rates and in real estate values;

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

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

• our ability to access cost-effective funding;

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

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

• demand for loans and deposits in our market area;

• legislative or regulatory changes that adversely affect our business;

• changes in accounting principles, policies, or guidelines;

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

• the impact of technological changes; and

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

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

Critical Accounting Policies

Accounting principles generally accepted in the United States of America are complex and require management to apply significant judgments to various accounting, reporting and disclosure matters. Management of the Company must use assumptions and estimates to apply these principles where actual measurement is not possible or practical. For a complete discussion of the Company’s significant accounting policies, see “Notes to the Consolidated Financial Statements” in the Company’s 2019 Annual Report. Certain policies are considered critical because they are highly dependent upon subjective or complex judgments, assumptions and estimates. Changes in such estimates may have a significant impact on the financial statements. Management has reviewed the application of these policies with the Audit Committee of the Company’s Board of Directors. For a discussion of applying critical accounting policies, see “Critical Accounting Policies” beginning on page 53 in the Company’s 2019 Annual Report.

Executive Summary

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

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

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During the first three months of fiscal 2020, we grew our balance sheet by $36.8 million. Balance sheet growth was primarily attributable to loan growth, as loans, net of the allowance for loan losses, increased $28.1 million. Available-for-sale (AFS) securities increased $5.5 million, and cash equivalents and time deposits decreased a combined $4.0 million. Deposits decreased $21.2 million. During the fiscal year to date, the Company has experienced a decrease of $24.0 million in public unit deposits, and a decrease of $19.5 million in brokered certificates of deposit, partially offset by an increase of $7.8 million in brokered nonmaturity deposits. Securities sold under agreements to repurchase decreased by $4.4 million. Advances from the Federal Home Loan Bank (FHLB) increased $58.4 million, primarily attributable to the Company’s use of this funding source to replace brokered deposits, and to fund loan growth in what is typically a seasonally slow first fiscal quarter for deposit growth. Equity increased $3.9 million, attributable to retention of net income and an increase in other comprehensive income, partially offset by cash dividends and share repurchases.

Net income for the first three months of fiscal 2020 was $7.8 million, an increase of $1.0 million, or 15.1% as compared to the same period of the prior fiscal year. Compared to the year-ago period, the Company’s increase in net income was the result of increases in net interest income and noninterest income, and partially offset by increases in noninterest expense, provision for income taxes, and provision for loan losses. Diluted net income available to common shareholders was $.85 per share for the first three months of fiscal 2020, as compared to $.76 per share for the same period of the prior fiscal year. For the first three months of fiscal 2019, net interest income increased $2.4 million, or 13.9%; noninterest income increased $671,000, or 19.6%; noninterest expense increased $1.5 million, or 13.2%, provision for income taxes increased $310,000, or 18.6%; and provision for loan losses increased $214,000, or 31.4%, as compared to the same period of the prior fiscal year. For more information see “Results of Operations.”

Interest rates during the first three months of fiscal 2020 moved lower, while the yield curve remained flat or in some segments inverted further. At September 30, 2019, as compared to June 30, 2019, the yield on two-year treasuries dropped to 1.63% from 1.75%; the yield on five-year treasuries dropped to 1.55% from 1.76%; the yield on ten-year treasuries dropped to 1.68% from 2.00%; and the yield on 30-year treasuries dropped from 2.52% to 2.12%. The spread between two- and ten-year treasuries dropped from 25 to five basis points, and inverted briefly in late August. As compared to the first three months of the prior fiscal year, our average yield on earning assets increased by 21 basis points, reflecting loans originated and renewed at higher market rates reflecting increases through December 2018 by the Federal Reserve’s Open Market Committee (FOMC), and partially offset by inclusion in the prior period’s results of larger benefits from discount accretion on acquired loan portfolios (see “Results of Operations: Comparison of the three-month periods ended September 30, 2019 and 2018 – Net Interest Income”). The FOMC increased targeted overnight rates by 25 basis points in each of March, June, September, and December of 2018, and then lowered rates by 25 basis points in each of July and September, 2019. The slope of the yield curve remains concerning, especially as funding cost increases have picked up in recent quarters. Our average cost of interest-bearing deposits increased by 34 basis points, and our average cost of interest-bearing liabilities increased 36 basis points, when comparing the current three-month period with the same period of the prior fiscal year.

Net interest income increased $2.4 million, or 13.9%, as the Company saw an increase of 17.2% in average interest earning assets, partially offset by a decline in the net interest margin. Our net interest margin decreased 11 basis points when comparing the first three months of fiscal 2020 to the same period of the prior fiscal year. The decrease was attributable primarily to an increased cost of funds and smaller benefits from the accretion of the discounts on acquired loans carried at fair value, partially offset by increased asset yields generally. Benefits attributable to accretion of discounts on acquired loans (partially offset by the accretion of discounts on assumed time deposits) resulting from the 2014 acquisition of Peoples Bank of the Ozarks (the Peoples Acquisition), the 2017 acquisition of Capaha Bank (the Capaha Acquisition), the February 2018 acquisition of Southern Missouri Bank of Marshfield (the SMB-Marshfield Acquisition), and the November 2018 acquisition of  Gideon Bancshares Company and its subsidiary, First Commercial Bank (the Gideon Acquisition) totaled $508,000, as compared to $1.2 million in the first three months of fiscal 2019. In the current period, this component of net interest income contributed 10 basis points to the net interest margin, a decrease from a contribution of 27 basis points in the year-ago period. The dollar impact of this component of net interest income has generally been declining each sequential quarter as assets mature or prepay, particularly those acquired from the Peoples Acquisition and the Capaha Acquisition, though the Gideon

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Acquisition partially offsets that decline, as there was no comparable item in the same period a year ago. In the same period a year ago resolution of particular acquired impaired credits from the Peoples Acquisition and the Capaha acquisition resulted in notably higher levels of discount accretion in that period. The Company generally expects this component of net interest income to decline. Also, the Company recognized an additional $414,000 in interest income as a result of the resolution of particular nonperforming loans during the current period. The recognition of interest income on these loans contributed eight basis points to the net interest margin, without material comparable items in the year ago or linked period.

The Company’s net income is also affected by the level of its noninterest income and noninterest expenses. Non-interest income generally consists primarily of deposit account service charges, bank card interchange income, loan-related fees, earnings on bank-owned life insurance, gains on sales of loans, and other general operating income. Noninterest expenses consist primarily of compensation and employee benefits, occupancy-related expenses, deposit insurance assessments, professional fees, advertising, postage and office expenses, insurance, bank card network expenses, the amortization of intangible assets, and other general operating expenses. During the three-month period ended September 30, 2019, noninterest income increased $671,000, or 19.6%, as compared to the same period of the prior fiscal year, attributable primarily to bank card interchange income, deposit account service charges, wealth management and insurance brokerage commissions, and gains realized on sales of residential loans originated for sale into the secondary market, partially offset by decreases in loan fees and mortgage servicing income. Noninterest expense for the three-month period ended September 30, 2019, increased $1.5 million, or 13.2%, as compared to the same period of the prior fiscal year. The increase was attributable primarily to increases in compensation and benefits, occupancy expenses, and bank card network expense, partially offset by decreases in deposit insurance premiums and legal and professional fees. There were no material charges related to merger and acquisition activity in the current period, as compared to charges of $175,000 in the same period of the prior fiscal year.

Increases in net interest income, noninterest income, and noninterest expense were attributable in part to the Gideon Acquisition, which was completed in November 2018.

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

Comparison of Financial Condition at September 30 and June 30, 2019

The Company experienced balance sheet growth in the first three months of fiscal 2019, with total assets of $2.3 billion at September 30, 2019, reflecting an increase of $36.8 million, or 1.7%, as compared to June 30, 2019.  Asset growth was comprised mainly of increases in loans and AFS securities, while cash equivalents were reduced.

Available for sale securities were $171.0 million at September 30, 2019, an increase of $5.5 million, or 3.3%, as compared to June 30, 2019. Cash equivalents and time deposits were a combined $32.4 million, a decrease of $4.0 million, or 10.9%, as compared to June 30, 2019, attributable to normal variances.

Loans, net of the allowance for loan losses, were $1.9 billion at September 30, 2019, an increase of $28.1 million, or 1.5%, as compared to June 30, 2019. The portfolio saw growth in commercial loan balances, funded balances in construction loans, and consumer loans, partially offset by declines in residential and commercial real estate loans. The increase in commercial loan balances was attributable to growth in agricultural operating and equipment loan balances, some of which is seasonal, along with increases in commercial & industrial loan balances. Construction loan balances were increase as a result of both draws on existing construction loans and new loans. Growth in consumer loans consisted primarily of loans secured by deposits and home equity line of credit balances. Residential real estate balances were lower as the Company saw reductions in loans secured by multifamily real estate, partially offset by an increase in loans secured by one- to four-family real estate. Commercial real estate loans were reduced slightly as payoffs on nonresidential properties were mostly offset by increases in loans secured by land and development ground.

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Deposits were $1.9 billion at September, 2019, a decrease of $21.2 million, or 1.1%, as compared to June 30, 2019. The decrease was attributable to public unit deposits, which decreased by $24.0 million during the first quarter of fiscal 2020, and totaled $242.8 million at September 30, 2019. The decrease was also attributable in part to a reduction in brokered deposits, which declined on net by $11.7 million, reflecting a decrease in brokered time deposits of $19.5 million, and an increase in brokered nonmaturity deposits of $7.8 million. Brokered time deposits were $25.4 million, and brokered nonmaturity deposits were $16.1 million, at September 30, 2019. Our discussion of brokered deposits excludes those deposits originated through reciprocal arrangements, as our reciprocal deposits are primarily originated by our public unit depositors and utilized as an alternative to pledging securities against those deposits. Recently updated regulatory guidance, adopted following the May 2018 enactment of the Economic Growth, Regulatory Relief, and Consumer Protection Act (Senate Bill 2155), has generally exempted deposits originated through such reciprocal arrangements from classification as brokered deposits for regulatory purposes, subject to some limitations. In total, deposit balances saw reductions in certificates of deposit, noninterest-bearing transaction accounts, interest-bearing transaction accounts, and savings accounts, partially offset by growth in money market deposit accounts. The average loan-to-deposit ratio for the first quarter of fiscal 2020 was 99.2%, as compared to 101.6% for the same period of the prior fiscal year.

FHLB advances were $103.3 million at September 30, 2019, an increase of $58.4 million, or 130.1%, as compared to June 30, 2019. The increase was primarily attributable to the Company's use of this funding source to replace brokered deposits, and to fund loan growth in what is typically a seasonally slow first quarter for deposit growth. The increase consisted of $52.6 million in overnight funding and $5.8 million in term advances. Securities sold under agreements to repurchase declined to $0, from a balance of $4.4 million at June 30, 2019. Over the past several years, the Company has worked to move public unit and business customers from a swept repurchase agreement product, which required the use of the Company’s AFS securities portfolio to provide the securities to collateralize those borrowings, to a reciprocal deposit product. During the first quarter of fiscal 2020, the final customers utilizing the sweep product were migrated.

The Company’s stockholders’ equity was $242.3 million at September 30, 2019, an increase of $3.9 million, or 1.6%, as compared to June 30, 2019. The increase was attributable to retained earnings and an increase in accumulated other comprehensive income, which is due to a decrease in market interest rates, partially offset by the payment of dividends on common stock and by repurchases of 86,050 Company shares, acquired for $2.8 million, for an average price of $32.70 per share.

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

September 30, 2019 and 2018

The tables below present certain information regarding our financial condition and net interest income for the three-month periods ended September 30, 2019 and 2018. The tables present the annualized average yield on interest-earning assets and the annualized average cost of interest-bearing liabilities. We derived the yields and costs by dividing annualized income or expense by the average balance of interest-earning assets and interest-bearing liabilities, respectively, for the periods shown. Yields on tax-exempt obligations were not computed on a tax equivalent basis.

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	Three-month period ended								Three-month period ended
	September 30, 2019								September 30, 2018
(dollars in thousands)	Average Balance			Interest and Dividends		Yield/ Cost (%)			Average Balance			Interest and Dividends		Yield/ Cost (%)
Interest earning assets:
Mortgage loans (1)	$	1,420,538		$	19,067		5.37		$	1,233,511		$	15,676		5.08
Other loans (1)		444,806			6,573		5.91			352,230			5,240		5.95
Total net loans		1,865,344			25,640		5.50			1,585,741			20,916		5.28
Mortgage-backed securities		113,614			716		2.52			94,308			584		2.48
Investment securities (2)		66,009			520		3.15			67,245			517		3.08
Other interest earning assets		7,001			46		2.62			3,196			25		3.13
Total interest earning assets (1)		2,051,968			26,922		5.25			1,750,490			22,042		5.04
Other noninterest earning assets (3)		184,415			-					150,037			-
Total assets	$	2,236,383		$	26,922				$	1,900,527		$	22,042
Interest bearing liabilities:
Savings accounts	$	167,202			346		0.83		$	153,305			243		0.63
NOW accounts		623,895			1,706		1.09			548,024			1,261		0.92
Money market deposit accounts		196,737			803		1.63			120,310			344		1.14
Certificates of deposit		673,160			3,723		2.21			541,931			2,161		1.60
Total interest bearing deposits		1,660,994			6,578		1.58			1,363,570			4,009		1.18
Borrowings:
Securities sold under agreements       to repurchase		329			-		0.03			3,649			8		0.88
FHLB advances		82,192			522		2.54			105,081			599		2.28
Note Payable		3,000			37		4.88			3,000			35		4.67
Subordinated debt		15,055			225		5.99			14,957			224		5.99
Total interest bearing liabilities		1,761,570			7,362		1.67			1,490,257			4,875		1.31
Noninterest bearing demand deposits		218,755			-					196,683			-
Other noninterest bearing liabilities		16,014			-					10,153			-
Total liabilities		1,996,339			7,362					1,697,093			4,875
Stockholders’ equity		240,044			-					203,434			-
Total liabilities and                stockholders' equity	$	2,236,383		$	7,362				$	1,900,527		$	4,875
Net interest income				$	19,560							$	17,167
Interest rate spread (4)							3.58	%							3.73	%
Net interest margin (5)							3.81	%							3.92	%
Ratio of average interest-earning assets to average interest-bearing liabilities		116.49	%							117.46	%

(1)	Calculated net of deferred loan fees, loan discounts and loans-in-process. Non-accrual loans are not included in average loans.
(2)	Includes FHLB and Federal Reserve Bank of St. Louis membership stock and related cash dividends.
(3)	Includes average balances for fixed assets and BOLI of $54.7 million and $37.6 million, respectively, for the three-month period ended September 30, 2018, as compared to $54.1 million and $34.4 million, respectively, for the same period of the prior fiscal year.
(4)	Interest rate spread represents the difference between the average rate on interest-earning assets and the average cost of interest-bearing liabilities.
(5)	Net interest margin represents annualized net interest income divided by average interest-earning assets.

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Rate/Volume Analysis

The following table sets forth the effects of changing rates and volumes on the Company’s net interest income for the three-month period ended September 30, 2019, compared to the three-month period ended September 30, 2018. Information is provided with respect to (i) effects on interest income and expense attributable to changes in volume (changes in volume multiplied by the prior rate), (ii) effects on interest income and expense attributable to change in rate (changes in rate multiplied by prior volume), and (iii) changes in rate/volume (change in rate multiplied by change in volume).

	Three-month period ended September 30, 2019
	Compared to three-month period ended September 30, 2018
	Increase (Decrease) Due to
(dollars in thousands)	Rate			Volume			Rate/Volume			Net
Interest-earnings assets:
Loans receivable (1)	$	880		$	3,688		$	156		$	4,724
Mortgage-backed securities		11			120			1			132
Investment securities (2)		13			(9	)		(1	)		3
Other interest-earning deposits		(4	)		30			(5	)		21
Total net change in income on
interest-earning assets		900			3,829			151			4,880
Interest-bearing liabilities:
Deposits		1,294			938			337			2,569
Securities sold under
agreements to repurchase		(8	)		(7	)		7			(8	)
FHLB advances		68			(130	)		(15	)		(77	)
Note Payable		1			-			1			2
Subordinated Debt		-			1			-			1
Total net change in expense on
interest-bearing liabilities		1,355			802			330			2,487
Net change in net interest income	$	(455	)	$	3,027		$	(179	)	$	2,393

(1)	Does not include interest on loans placed on nonaccrual status.
(2)	Does not include dividends earned on equity securities.

Results of Operations – Comparison of the three-month periods ended September 30, 2019 and 2018

General. Net income for the three-month period ended September 30, 2019, was $7.8 million, an increase of $1.0 million, or 15.1%, as compared to the same period of the prior fiscal year.  The increase was attributable to an increase in net interest income and noninterest income, partially offset by increases in noninterest expense, provision for income taxes, and provision for loan losses.

For the three-month period ended September 30, 2019, basic and fully-diluted net income per share available to common shareholders was $0.85 under both measures, as compared to $0.76 under both measures for the same period of the prior fiscal year, which represented an increase of $0.09, or 11.8%. Our annualized return on average assets for the three-month period ended September 30, 2019, was 1.40%, as compared to 1.43% for the same period of the prior fiscal year. Our return on average common stockholders’ equity for the three-month period ended September 30, 2019, was 13.0%, as compared to 13.4% in the same period of the prior fiscal year.

Net Interest Income. Net interest income for the three-month period ended September 30, 2019, was $19.6 million, an increase of $2.4 million, or 13.9%, as compared to the same period of the prior fiscal year. The increase was attributable to a 17.2% increase in the average balance of interest-earning assets, partially offset by a decrease in net interest margin to 3.81% in the current three-month period, from 3.92% in the three-month period a year ago.  Our net interest margin is determined by dividing annualized net interest income by total average interest-earning assets.

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Loan discount accretion and deposit premium amortization related to the Peoples Acquisition, the Capaha Acquisition, the SMB-Marshfield Acquisition, and the Gideon Acquisition resulted in an additional $508,000 in net interest income for the three-month period ended September 30, 2019, as compared to $1.2 million in net interest income for the same period a year ago. In the year ago period, there were significant impacts from the favorable resolution of specific purchased credit impaired loans obtained in the Peoples and Capaha Acquisitions, and no accretion from the Gideon Acquisition, which did not close until the second quarter of fiscal 2019. Combined, these components of net interest income contributed ten basis points to net interest margin in the three-month period ended September 30, 2019, as compared to a contribution of 27 basis points for the same period of the prior fiscal year. For the linked quarter, ended June 30, 2019, when net interest margin was 3.77%, comparable discount accretion contributed 12 basis points to the net interest margin. Over the longer term, the Company expects this component of net interest income to decline, although to the extent that we have periodic resolutions of specific credit impaired loans, this may create volatility in this component of net interest income. Also, the Company recognized an additional $414,000 in interest income as a result of the resolution of nonperforming loans during the current period. This recognition of interest income contributed eight basis points to the net interest margin, without material comparable items in the year ago or linked period.

For the three-month period ended September 30, 2019, our net interest rate spread was 3.58%, as compared to 3.73% in the year-ago period. The decrease in net interest rate spread, compared to the same period a year ago, resulted from a 36 basis point increase in the average cost of interest-earning liabilities, partially offset by a 21 basis point increase in the average yield on interest-earning assets.

Interest Income. Total interest income for the three-month period ended September 30, 2019, was $26.9 million, an increase of $4.9 million, or 22.1%, as compared to the same period of the prior fiscal year. The increase was attributed to a 17.2% increase in the average balance of interest-earning assets, combined with a 21 basis point increase in the average yield earned on interest-earning assets, as compared to the same period of the prior fiscal year. Increased average interest-earning balances were attributable primarily to growth in the loan portfolio, while investment balances increased at a slower rate. The increase in the average yield on interest-earning assets was primarily attributable to origination and renewals of loans at higher market rates over the previous 12 months, as well as to the recognition of interest on some loans previously treated as nonaccrual, partially offset by the decrease in loan discount accretion, discussed above.

Interest Expense. Total interest expense for the three-month period ended September 30, 2019, was $7.4 million, an increase of $2.5 million, or 51.0%, as compared to the same period of the prior fiscal year. The increase was attributable to a 36 basis point increase in the average cost of interest-bearing liabilities, combined with an 18.2% increase in the average balance of interest-bearing liabilities, as compared to the same period of the prior fiscal year. The increase in the average cost of interest-bearing liabilities was attributable primarily to origination and renewals of certificates of deposit at higher market rates over the previous 12 months, as well as to market rates for money market deposit accounts and savings accounts that have remained above the rates paid during the same period of the prior fiscal year. Increased average interest-bearing balances were attributable primarily to increases in certificates of deposit, money market deposit accounts, and interest-bearing transaction accounts, partially offset by lower FHLB and repurchase agreement balances.

Provision for Loan Losses. The provision for loan losses for the three-month period ended September 30, 2019, was $896,000, as compared to $682,000 in the same period of the prior fiscal year. Increased provisioning was attributed primarily to increased loan balances subject to allowance methodology, as acquired loan balances mature and prepay, and are replaced by new loan production, or are refinanced by the Company. Additionally, in the same period of the prior fiscal year, provisioning was lower as a result of principal repayment on loans for which an allowance for loan losses had been established under ASC 310-10-35. As a percentage of average loans outstanding, the provision for loan losses in the current three-month period represented a charge of 0.19% (annualized), while the Company recorded net charge offs during the period of 0.02% (annualized). During the same period of the prior fiscal year, the provision for loan losses as a percentage of average loans outstanding represented a charge of 0.17% (annualized), while the Company recorded net charge offs of 0.03% (annualized). (See “Critical Accounting Policies”, “Allowance for Loan Loss Activity” and “Nonperforming Assets”).

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Noninterest Income. The Company’s noninterest income for the three-month period ended September 30, 2019, was $4.1 million, an increase of $671,000, or 19.6%, as compared to the same period of the prior fiscal year. Increases in bank card interchange income, deposit account service charges, wealth management and insurance brokerage commissions, and gains realized on sales of residential loans originated for sale into the secondary market were partially offset by decreases in loan fees and mortgage servicing income. Bank card interchange income and deposit account service charges increased as a result of higher levels of depositor activity, attributable in part to the Gideon Acquisition. Wealth management and insurance brokerage commissions increased as a result of the establishment or acquisition of these new business lines for the Company. Gains realized on sales of residential loans originated for sale into the secondary market increased as a result of an increase in the volume of originations, as well as a shift in the loan mix to more profitable products. Loan fees were decreased primarily due to the inclusion of a larger loan prepayment penalty in the same period of the prior year, and mortgage servicing income was decreased due primarily to faster prepayments of serviced loans.

Loan servicing fees and gains realized on the sale of residential real estate loans originated for sale into the secondary market decreased primarily as a result of a reduction in this type of loan origination, attributable to the increase in market interest rates and associated declines in refinancing activity.

Noninterest Expense. Noninterest expense for the three-month period ended September 30, 2019, was $13.0 million, an increase of $1.5 million, or 13.2%, as compared to the same period of the prior fiscal year. The increase was attributable primarily to increases in compensation and benefits, occupancy expenses, and bank card network expenses, partially offset by decreases in deposit insurance premiums and legal and professional fees. Noninterest expense items generally were increased as a result of additional staff, facilities and transactions following the Gideon Acquisition. Partially offsetting these increases, in September 2019, the FDIC began applying credits to the deposit insurance assessments due from smaller banks, such as the Company’s subsidiary. These credits represented the costs borne by smaller banks over several years to increase the deposit insurance fund ratio as required under the Dodd-Frank Act. As a result, we recognized no deposit insurance premium expense for the current quarter, as compared to an expense of $138,000 in the year ago period. Provided the deposit insurance fund ratio remains above 1.35%, the Company would expect to recognize no deposit insurance premium expense in the quarter which will end December 31, 2019, and a reduced expense in the quarter which will end March 31, 2020, before the expense returns to a normalized level for the quarter ended June 30, 2020. After recording $175,000 in charges related to merger and acquisition activity in the same quarter a year ago, there were no comparable expenses in the current period. The Company also realized a reduced off-balance sheet credit exposure, resulting in a recovery of $146,000 in the current period, as compared to a charge of $23,000 in the year ago period. The efficiency ratio for the three-month period ended September 30, 2019, was 54.8%, as compared to 55.6% in the same period of the prior fiscal year.

Income Taxes. The income tax provision for the three-month period ended September 30, 2019, was $2.0 million, an increase of $310,000, or 18.6%, as compared to the same period of the prior fiscal year, attributable primarily to higher pre-tax income, combined with an increase in the effective tax rate, to 20.2%, as compared to 19.7% in the same period of the prior fiscal year. The higher effective tax rate was attributed primarily to the increases in pre-tax income in excess of increases in tax-advantaged investments.

Allowance for Loan Loss Activity

The Company regularly reviews its allowance for loan losses and makes adjustments to its balance based on management’s analysis of the loan portfolio, the amount of non-performing and classified loans, as well as general economic conditions. Although the Company maintains its allowance for loan losses at a level that it considers sufficient to provide for losses, there can be no assurance that future losses will not exceed internal estimates. In addition, the amount of the allowance for loan losses is subject to review by regulatory agencies, which can order the establishment of additional loss provision. The following table summarizes changes in the allowance for loan losses over the three-month periods ended September 30, 2019 and 2018:

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	For the three months ended
	September 30,
(dollars in thousands)	2019			2018
Balance, beginning of period	$	19,903		$	18,214
Loans charged off:
Residential real estate		-			-
Construction		-			-
Commercial business		-			-
Commercial real estate		(72	)		(95	)
Consumer		(35	)		(17	)
Gross charged off loans		(107	)		(112	)
Recoveries of loans previously charged off:
Residential real estate		-			1
Construction		-			-
Commercial business		14			1
Commercial real estate		4			-
Consumer		-			4
Gross recoveries of charged off loans		18			6
Net (charge offs) recoveries		(89	)		(106	)
Provision charged to expense		896			682
Balance, end of period	$	20,710		$	18,790

The allowance for loan losses has been calculated based upon an evaluation of pertinent factors underlying the various types and quality of the Company’s loans. Management considers such factors as the repayment status of a loan, the estimated net fair value of the underlying collateral, the borrower’s intent and ability to repay the loan, local economic conditions, and the Company’s historical loss ratios. We maintain the allowance for loan losses through the provision for loan losses that we charge to income. We charge losses on loans against the allowance for loan losses when we believe the collection of loan principal is unlikely. The allowance for loan losses increased $807,000 to $20.7 million at September 30, 2019, from $19.9 million at June 30, 2019. The increase was deemed appropriate in order to bring the allowance for loan losses to a level that reflects management’s estimate of the incurred loss in the Company’s loan portfolio at September 30, 2019.

At September 30, 2019, the Company had loans of $25.8 million, or 1.36% of total  loans, adversely classified ($25.8 million classified “substandard”; none classified “doubtful”), as compared to loans of $28.3 million, or 1.51% of total loans, adversely classified ($28.2 million classified “substandard”; $35,000 classified “doubtful”) at June 30, 2019, and $11.7 million, or 0.71% of total loans, adversely classified ($11.1 million classified “substandard”; $643,000 classified “doubtful”) at September 30, 2018. Classified loans were generally comprised of loans secured by commercial and residential real estate, and other commercial purpose collateral. All loans were classified due to concerns as to the borrowers’ ability to continue to generate sufficient cash flows to service the debt. Of our classified loans, the Company had ceased recognition of interest on loans with a carrying value of $13.4 million at September 30, 2019. As noted in Note 4 to the condensed consolidated financial statements, the Company’s total past due loans decreased from $11.6 million at June 30, 2019, to $9.9 million at September 30, 2019.

In its quarterly evaluation of the adequacy of its allowance for loan losses, the Company employs historical data including past due percentages, charge offs, and recoveries for the previous five years for each loan category. The Company’s allowance methodology considers the most recent twelve-month period’s average net charge offs and uses this information as one of the primary factors for evaluation of allowance adequacy. Average net charge offs are calculated as net charge offs by portfolio type for the period as a percentage of the average balance of respective portfolio type over the same period.

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The following table sets forth the Company’s historical net charge offs as of September 30 and June 30, 2019:

Portfolio segment	September 30, 2019	June 30, 2019
	Net charge offs –	Net charge offs –
	12-month historical	12-month historical
Real estate loans:
Residential	0.01%	0.01%
Construction	0.00%	0.00%
Commercial	0.01%	0.02%
Consumer loans	0.11%	0.14%
Commercial loans	0.03%	0.02%

Additionally, in its quarterly evaluation of the adequacy of the allowance for loan losses, the Company evaluates changes in the financial condition of individual borrowers; changes in local, regional, and national economic conditions; the Company’s historical loss experience; and changes in market conditions for property pledged to the Company as collateral. The Company has identified specific qualitative factors that address these issues and subjectively assigns a percentage to each factor. Qualitative factors are reviewed quarterly and may be adjusted as necessary to reflect improving or declining trends. At September 30, 2019, these qualitative factors included:

• Changes in lending policies

• National, regional, and local economic conditions

• Changes in mix and volume of portfolio

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

• Entry to new markets

• Levels and trends of delinquent, nonaccrual, special mention and

• Classified loans

• Concentrations of credit

• Changes in collateral values

• Agricultural economic conditions

• Regulatory risk

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The qualitative factors are applied to the allowance for loan losses based upon the following percentages by loan type:

Portfolio segment	Qualitative factor applied  at interim period ended September 30,   2019	Qualitative factor applied at fiscal year ended June 30, 2019
Real estate loans:
Residential	0.64%	0.66%
Construction	1.70%	1.69%
Commercial	1.13%	1.14%
Consumer loans	1.46%	1.40%
Commercial loans	1.28%	1.28%

At September 30, 2019, the amount of our allowance for loan losses attributable to these qualitative factors was approximately $17.7 million, as compared to $17.1 million at June 30, 2019, primarily due to loan growth. The relatively small change in qualitative factors applied was attributable to normal portfolio fluctuations with management’s assessment that risks represented by the qualitative factors are relatively unchanged since the prior quarter end.  Higher levels of net charge offs requiring additional provision for loan losses could result. Although management uses the best information available, the level of the allowance for loan losses remains an estimate that is subject to significant judgment and short-term change.

Nonperforming Assets

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

(dollars in thousands)	September 30, 2019		June 30, 2019		September 30, 2018
Nonaccruing loans:
Residential real estate	$	5,286	$	6,404	$	5,060
Construction		-		-		24
Commercial real estate		6,968		10,876		1,657
Consumer		179		309		211
Commercial business		1,588		3,424		605
Total		14,021		21,013		7,557
Loans 90 days past due accruing interest:
Residential real estate		-		-		-
Construction		-		-		-
Commercial real estate		-		-		-
Consumer		-		-		-
Commercial business		-		-		-
Total		-		-		-
Total nonperforming loans		14,021		21,013		7,557
Foreclosed assets held for sale:
Real estate owned		3,820		3,723		4,926
Other nonperforming assets		71		29		51
Total nonperforming assets	$	17,912	$	24,765	$	12,534

At September 30, 2019, troubled debt restructurings (TDRs) totaled $17.8 million, of which $5.4 million was considered nonperforming and is included in the nonaccrual loan total above. The remaining $12.4 million in TDRs have complied with the modified terms for a reasonable period of time and are therefore considered by the Company to be accrual status loans. In general, these loans were subject to classification as TDRs at September 30, 2019, on the basis of guidance under ASU No. 2011-02, which indicates that the Company may not consider the

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borrower’s effective borrowing rate on the old debt immediately before the restructuring in determining whether a concession has been granted. At June 30, 2019, TDRs totaled $19.0 million, of which $5.8 million was considered nonperforming and is included in the nonaccrual loan total above. The remaining $13.2 million in TDRs at June 30, 2019, had complied with the modified terms for a reasonable period of time and were therefore considered by the Company to be accrual status loans.

At September 30, 2019, nonperforming assets totaled $17.9 million, as compared to $24.8 million at June 30, 2019, and $12.5 million at September 30, 2018. The decrease in nonperforming assets from fiscal year end was attributable to a decrease in nonaccrual loans, as the Company resolved some of the nonaccrual loans which had been acquired in the Gideon Acquisition. At December 31, 2018, the quarter end immediately following the Gideon Acquisition, nonaccrual loans attributable to the Gideon Acquisition totaled $12.9 million. At September 30, 2019, nonaccrual loans attributable to the Gideon Acquisition totaled $8.0 million, as compared to $10.2 million at June 30, 2019.

Liquidity Resources

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

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

At September 30, 2019, the Company had outstanding commitments and approvals to extend credit of approximately $354.9 million (including $193.5 million in unused lines of credit) in mortgage and non-mortgage loans. These commitments and approvals are expected to be funded through existing cash balances, cash flow from normal operations and, if needed, advances from the FHLB or the Federal Reserve’s discount window. At September 30, 2019, the Bank had pledged $764.3 million of its single-family residential and commercial real estate loan portfolios to the FHLB for available credit of approximately $370.9 million, of which $103.7 million had been advanced. The Bank has the ability to pledge several other loan portfolios, including, for example, its commercial and home equity loans, which could provide additional collateral for additional borrowings; in total, FHLB borrowings are generally limited to 45% of bank assets, or approximately $990.4 million, subject to available collateral. Also, at September 30, 2019, the Bank had pledged a total of $270.6 million in loans secured by farmland and agricultural production loans to the Federal Reserve, providing access to $202.7 million in primary credit borrowings from the Federal Reserve’s discount window. Management believes its liquid resources will be sufficient to meet the Company’s liquidity needs.

Regulatory Capital

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

Quantitative measures established by regulatory capital standards to ensure capital adequacy require the Company and the Bank to maintain minimum amounts and ratios (set forth in the table below) of total capital, Tier 1 capital (as defined), and common equity Tier 1 capital (as defined) to risk-weighted assets (as defined) and of Tier 1 capital (as

45

defined) to average total assets (as defined). Management believes, as of September 30 and June 30, 2019, that the Company and the Bank met all capital adequacy requirements to which they are subject.

In July 2013, the Federal banking agencies announced their approval of the final rule to implement the Basel III regulatory reforms, among other changes required by the Dodd-Frank Wall Street Reform and Consumer Protection Act. The approved rule included a new minimum ratio of common equity Tier 1 (CET1) capital of 4.5%, raised the minimum ratio of Tier 1 capital to risk-weighted assets from 4.0% to 6.0%, and included a minimum leverage ratio of 4.0% for all banking institutions. Additionally, the rule created a capital conservation buffer of 2.5% of risk-weighted assets, and prohibited banking organizations from making distributions or discretionary bonus payments during any quarter if its eligible retained income is negative, if the capital conservation buffer is not maintained. This new capital conservation buffer requirement has been phased in beginning in January 2016 at 0.625% of risk-weighted assets and increasing each year until being fully implemented in January 2019.  The enhanced capital requirements for banking organizations such as the Company and the Bank began January 1, 2015. Other changes included revised risk-weighting of some assets, stricter limitations on mortgage servicing assets and deferred tax assets, and replacement of the ratings-based approach to risk weight securities.

As of September 30, 2019, the most recent notification from the Federal banking agencies categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized the Bank must maintain minimum total risk-based, Tier 1 risk-based, common equity Tier 1 risk-based, and Tier 1 leverage ratios as set forth in the table. There are no conditions or events since that notification that management believes have changed the Bank’s category.

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

	Actual					For Capital Adequacy Purposes					To Be Well Capitalized Under Prompt Corrective Action Provisions
As of September 30, 2019	Amount		Ratio			Amount		Ratio			Amount		Ratio
(dollars in thousands)
Total Capital (to Risk-Weighted Assets)
Consolidated	$	260,576		13.31	%	$	156,600		8.00	%		n/a		n/a
Southern Bank		253,953		13.80	%		147,199		8.00	%		183,999		10.00	%
Tier I Capital (to Risk-Weighted Assets)
Consolidated		238,701		12.19	%		117,450		6.00	%		n/a		n/a
Southern Bank		232,078		12.61	%		110,399		6.00	%		147,199		8.00	%
Tier I Capital (to Average Assets)
Consolidated		238,701		10.77	%		88,678		4.00	%		n/a		n/a
Southern Bank		232,078		10.49	%		88,524		4.00	%		110,656		5.00	%
Common Equity Tier I Capital (to Risk-Weighted Assets)
Consolidated		223,633		11.42	%		88,087		4.50	%		n/a		n/a
Southern Bank		232,078		12.61	%		82,800		4.50	%		119,599		6.50	%

	Actual					For Capital Adequacy Purposes					To Be Well Capitalized Under Prompt Corrective Action Provisions
As of June 30, 2019	Amount		Ratio			Amount		Ratio			Amount		Ratio
(dollars in thousands)
Total Capital (to Risk-Weighted Assets)
Consolidated	$	256,982		13.22	%	$	155,536		8.00	%		n/a		n/a
Southern Bank		247,199		12.81	%		154,364		8.00	%		192,954		10.00	%
Tier I Capital (to Risk-Weighted Assets)
Consolidated		235,768		12.13	%		116,652		6.00	%		n/a		n/a
Southern Bank		225,985		11.71	%		115,773		6.00	%		154,364		8.00	%
Tier I Capital (to Average Assets)
Consolidated		235,768		10.81	%		87,231		4.00	%		n/a		n/a
Southern Bank		225,985		10.38	%		87,077		4.00	%		108,846		5.00	%
Common Equity Tier I Capital (to Risk-Weighted Assets)
Consolidated		220,725		11.35	%		87,489		4.50	%		n/a		n/a
Southern Bank		225,985		11.71	%		86,829		4.50	%		125,420		6.50	%

46

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

SOUTHERN MISSOURI BANCORP, INC.

Asset and Liability Management and Market Risk

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

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

The Company continues to originate long-term, fixed-rate residential loans. During the first three months of fiscal year 2020, fixed rate 1- to 4-family residential loan production totaled $27.9 million, as compared to $18.3 million during the same period of the prior fiscal year. At September 30, 2019, the fixed rate residential loan portfolio was $178.5 million with a weighted average maturity of 104 months, as compared to $163.6 million at September 30, 2018, with a weighted average maturity of 98 months. The Company originated $5.3 million in adjustable-rate 1- to 4-family residential loans during the three-month period ended September 30, 2019, as compared to $8.3 million during the same period of the prior fiscal year. At September 30, 2019, fixed rate loans with remaining maturities in excess of 10 years totaled $51.2 million, or 2.7% of net loans receivable, as compared to $50.3 million, or 3.1% of net loans receivable at September 30, 2018. The Company originated $47.8 million in fixed rate commercial and commercial real estate loans during the three-month period ended September 30, 2019, as compared to $103.6 million during the same period of the prior fiscal year.  The Company also originated $10.7 million in adjustable rate commercial and commercial real estate loans during the three-month period ended September 30, 2019, as compared to $17.7 million during the same period of the prior fiscal year. At September 30, 2019, adjustable-rate home equity lines of credit increased to $44.7 million, as compared to $39.9 million at September 30, 2018. At September 30, 2019, the Company’s investment portfolio had an expected weighted-average life of 3.6 years, compared to 4.1 years at September 30, 2018. Management continues to focus on customer retention, customer satisfaction, and offering new products to customers in order to increase the Company’s amount of less rate-sensitive deposit accounts.

47

Interest Rate Sensitivity Analysis

The following table sets forth as of September 30, 2019, management’s estimates of the projected changes in net portfolio value (“NPV”) in the event of 100, 200, and 300 basis point (“bp”) instantaneous and permanent increases, and 100, 200, and 300 basis point instantaneous and permanent decreases in market interest rates. Dollar amounts are expressed in thousands.

September 30, 2019
									NPV as Percentage of
	Net Portfolio								PV of Assets
Change in Rates	Value		Change			% Change			NPV Ratio			Change
+300 bp	$	183,647	$	(46,161	)		-20	%		8.69	%		-1.64	%
+200 bp		198,612		(31,196	)		-14	%		9.24	%		-1.09	%
+100 bp		215,246		(14,561	)		-6	%		9.84	%		-0.49	%
0 bp		229,808		-			-			10.33	%		0.00	%
-100 bp		243,852		14,044			6	%		10.80	%		0.47	%
-200 bp		261,235		31,427			14	%		11.45	%		1.12	%
-300 bp		270,569		40,761			18	%		11.83	%		1.49	%

June 30, 2019
									NPV as Percentage of
	Net Portfolio								PV of Assets
Change in Rates	Value		Change			% Change			NPV Ratio			Change
+300 bp	$	173,144	$	(44,041	)		-20	%		8.35	%		-1.59	%
+200 bp		187,179		(30,006	)		-14	%		8.88	%		-1.07	%
+100 bp		203,703		(13,483	)		-6	%		9.49	%		-0.46	%
0 bp		217,185		-			-			9.94	%		0.00	%
-100 bp		229,783		12,598			6	%		10.37	%		0.43	%
-200 bp		251,078		33,893			16	%		11.19	%		1.25	%
-300 bp		261,720		44,535			21	%		11.63	%		1.69	%

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

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

The Bank’s Board of Directors (the “Board”) is responsible for reviewing the Bank’s asset and liability policies. The Board’s Asset/Liability Committees meets monthly to review interest rate risk and trends, as well as liquidity and capital ratios and requirements. The Bank’s management is responsible for administering the policies and determinations of the Boards with respect to the Bank’s asset and liability goals and strategies.

48

PART I:  Item 4:  Controls and Procedures

SOUTHERN MISSOURI BANCORP, INC.

An evaluation of Southern Missouri Bancorp’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities and Exchange Act of 1934, as amended, (the “Act”)) as of September 30, 2019, was carried out under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, and several other members of our senior management. The Chief Executive Officer and Chief Financial Officer concluded that, as of September 30, 2019, the Company’s disclosure controls and procedures were effective in ensuring that the information required to be disclosed by the Company in the reports it files or submits under the Act is (i) accumulated and communicated to management (including the Chief Executive and Financial Officer) in a timely manner, and (ii) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. There have been no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Act) that occurred during the quarter ended September 30, 2019, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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

49

PART II: Other Information

SOUTHERN MISSOURI BANCORP, INC.

Item 1:  Legal Proceedings

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

Item 1a:  Risk Factors

There have been no material changes to the risk factors set forth in Part I, Item 1A of the Company’s Annual Report on Form 10-K for the year ended June 30, 2019.

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

Period	Total Number of Shares (or Units) Purchased		Average Price Paid per Share (or Unit)		Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs		Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet be Purchased Under the Plans or Program
7/1/2019 thru 7/31/2019		63,758	$	32.50		63,758	350,891
8/1/2019 thru 8/31/2019		16,798		33.21		16,798	334,093
9/1/2019 thru 9/30/2019		5,494		33.43		5,494	328,599
Total		86,050	$	32.70		86,050		328,599

Item 3:  Defaults upon Senior Securities

Not applicable

Item 4:  Mine Safety Disclosures

Not applicable

Item 5:  Other Information

None

50

Item 6:  Exhibits

Exhibit Number	Document
3.1(i)	Articles of Incorporation of the Registrant (filed as an exhibit to the Registrant’s Annual Report on Form 10-KSB for the fiscal year ended June 30, 1999 and incorporated herein by reference)
3.1(i)A	Amendment to Articles of Incorporation of Southern Missouri increasing the authorized capital stock of Southern Missouri (filed as an exhibit to Southern Missouri's Current Report on Form 8-K filed on November 21, 2016 and incorporated herein by reference)
3.1(i)B	Amendment to Articles of Incorporation of Southern Missouri increasing the authorized capital stock of Southern Missouri(filed as an exhibit to Southern Missouri's Current Report on Form 8-K filed on November 8, 2018 and incorporated herein by reference)
3.1(ii)	Certificate of Designation for the Registrant’s Senior Non-Cumulative Perpetual Preferred Stock, Series A (filed as an exhibit to the Registrant’s Current Report on Form 8-K filed on July 26, 2011 and incorporated herein by reference)
3.2	Bylaws of the Registrant (filed as an exhibit to the Registrant’s Current Report on Form 8-K filed on December 6, 2007 and incorporated herein by reference)
10	Material Contracts:
	1.	Registrant’s 2017 Omnibus Incentive Plan (attached to the Registrant’s definitive proxy statement filed on September 26, 2017, and incorporated herein by reference)
	2.	2008 Equity Incentive Plan (attached to the Registrant’s definitive proxy statement filed on September 19, 2008 and incorporated herein by reference)
	3.	2003 Stock Option and Incentive Plan (attached to the Registrant’s definitive proxy statement filed on September 17, 2003 and incorporated herein by reference)
	4.	Employment and Change-in-control Agreements
		(i)	Employment Agreement with Greg A. Steffens
		(ii)	Change-in-control Agreement with Kimberly Capps
		(iii)	Change-in-control Agreement with Matthew Funke
		(iv)	Change-in-control Agreement with Lora Daves
		(v)	Change-in-control Agreement with Justin Cox
		(vi)	Change-in-control Agreement with Mark Hecker
		(vii)	Change-in-control Agreement with Rick Windes
	5.	Director’s Retirement Agreements
		(i)	Director’s Retirement Agreement with Sammy A. Schalk (filed as an exhibit to the Registrant’s Quarterly Report on Form 10-QSB for the quarter ended December 31, 2000 and incorporated herein by reference)
		(ii)	Director’s Retirement Agreement with Ronnie D. Black (filed as an exhibit to the Registrant’s Quarterly Report on Form 10-QSB for the quarter ended December 31, 2000 and incorporated herein by reference)
		(iii)	Director’s Retirement Agreement with L. Douglas Bagby (filed as an exhibit to the Registrant’s Quarterly Report on Form 10-QSB for the quarter ended December 31, 2000 and incorporated herein by reference)
		(iv)	Director’s Retirement Agreement with Rebecca McLane Brooks (filed as an exhibit to the Registrant’s Quarterly Report on Form 10-QSB for the quarter ended December 31, 2004 and incorporated herein by reference)
		(v)	Director’s Retirement Agreement with Charles R. Love (filed as an exhibit to the Registrant’s Quarterly Report on Form 10-QSB for the quarter ended December 31, 2004 and incorporated herein by reference)
		(vi)	Director’s Retirement Agreement with Charles R. Moffitt (filed as an exhibit to the Registrant’s Quarterly Report on Form 10-QSB for the quarter ended December 31, 2004 and incorporated herein by reference)
		(vii)	Director’s Retirement Agreement with Dennis C. Robison (filed as an exhibit to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended December 31, 2008 and incorporated herein by reference)
		(viii)	Director’s Retirement Agreement with David J. Tooley (filed as an exhibit to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended December 31, 2011 and incorporated herein by reference)
		(ix)	Director’s Retirement Agreement with Todd E. Hensley (filed as an exhibit to the Registrant’s Annual Report on Form 10-K for the year ended June 30, 2015 and incorporated herein by reference)
	6.	Tax Sharing Agreement (filed as an exhibit to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2015 and incorporated herein by reference)
10.1	Named Executive Officer Salary and Bonus Arrangements for 2019 (filed as an exhibit to Registrant’s Annual Report on Form 10-K for the year ended June 30, 2019)
10.2	Director Fee Arrangements for 2019 (filed as an exhibit to Registrant’s Annual Report on Form 10-K for the year ended June 30, 2019)
11	Statement Regarding Computation of Per Share Earnings(filed as an exhibit to Registrant’s Annual Report on Form 10-K for the year ended June 30, 2019)
14	Code of Conduct and Ethics (filed as an exhibit to the Registrant’s Annual Report on Form 10-K for the year ended June 30, 2016)
21	Subsidiaries of the Registrant (filed as an exhibit to Registrant’s Annual Report on Form 10-K for the year ended June 30, 2019)
31.1 31.2	Rule 13a-14(a)/15-d14(a) Certifications Rule 13a-14(a)/15-d14(a) Certifications
32 101	Section 1350 Certifications Attached as Exhibit 101 are the following financial statements from the Southern Missouri Bancorp, Inc. Quarterly Report on Form 10-Q for the quarter ended September30, 2019, formatted in Extensive Business Reporting Language (XBRL): (i) consolidated balance sheets, (ii) consolidated statements of income, (iii) consolidated statements of cash flows and (iv) the notes to consolidated financial statements.

51

SIGNATURES

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

	SOUTHERN MISSOURI BANCORP, INC.
	Registrant
Date:  November 12, 2019	/s/ Greg A. Steffens
	Greg A. Steffens
	President & Chief Executive Officer
	(Principal Executive Officer)
Date:  November 12, 2019	/s/ Matthew T. Funke
	Matthew T. Funke
	Executive Vice President & Chief Financial Officer
	(Principal Financial and Accounting Officer)

52

EX-10.4(I)

EXHIBIT 10.4(i)

AMENDED AND RESTATED EMPLOYMENT AGREEMENT

THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT (the “Agreement”) is made and entered into as of this 8th day of November, 2019 by and between Southern Bank (hereinafter referred to as the “Bank”), and Greg Steffens (the “Employee”).

WHEREAS, the Employee is currently serving as President and Chief Executive Officer of the Bank and Southern Missouri Bancorp, Inc., the parent company of the Bank (the “Company”);

WHEREAS, the Bank and the Employee previously entered into an employment agreement dated June 30, 1999 (the “Prior Agreement”);

WHEREAS, the board of directors of the Bank (the “Board of Directors”) believes it is in the best interests of the Bank and its affiliates and subsidiaries for the Bank to enter into this Agreement with the Employee, which amends and restates the Prior Agreement in its entirety, in order to (a) ensure compliance with Section 409A of the Internal Revenue Code of 1986, as amended, or any successor provision (the “Code”), and (b) make certain other changes; and

WHEREAS, the Board of Directors has approved and authorized the execution of this Agreement with the Employee;

NOW, THEREFORE, in consideration of the foregoing and of the respective covenants and agreements of the parties herein, it is AGREED as follows:

1.  Definitions.

(a)  The term “Change in Control” means any of the following events: (1) any person or persons acting as a group (within the meaning of Section 409A of the Code) acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such person or persons) ownership of stock of the Company or the Bank possessing 30% or more of the total voting power of the outstanding stock of the Company or the Bank; (2) individuals who are members of the Board of Directors of the Company on the date hereof (the “Incumbent Board”) cease for any reason during any 12-month period to constitute at least a majority thereof, provided that any person becoming a director subsequent to the date hereof whose election was approved by a vote of at least a majority of the directors comprising the Incumbent Board, or whose nomination for election by the Company’s stockholders was approved by the nominating committee serving under an Incumbent Board, shall be considered a member of the Incumbent Board; (3) any person or persons acting as a group (within the meaning of Section 409A of the Code) acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such person or persons) assets of the Company or the Bank that have a gross fair market value of 40% or more of the total gross fair market value of all of the assets of the Company or the Bank immediately before such acquisition or acquisitions; or (4) any other event which is not covered by the foregoing subsections but which the Board of Directors determines to affect control of the Company or the Bank and with respect to which the Board of Directors adopts a resolution that the event constitutes a Change in Control for purposes of this Agreement; provided that with respect to each of the events covered by clauses (1) through (4) above, the event must also be deemed to be either a change in the ownership of the Company or the Bank, a change in

the effective control of the Company or the Bank or a change in the ownership of a substantial portion of the assets of the Company or the Bank within the meaning of Section 409A of the Code.

(b)  The term “Date of Termination” means the date upon which the Employee’s employment with the Bank ceases, as specified in a notice of termination pursuant to Section 11 of this Agreement, provided that all references in this Agreement to a Date of Termination that results in the payment of severance shall mean the date of the Employee’s involuntary Separation from Service.

(c)  The term “Effective Date” means the date of this Agreement, as set forth on page 1.

(d)  The term “Health Insurance Benefits” shall mean the benefits to be provided pursuant to Section 7(a) of this Agreement to the Employee and his dependents who are covered by the Bank at the time of the Employee’s Involuntary Termination (each such person, including the Employee, a “Covered Person” and collectively the “Covered Persons”) for the time period set forth in Section 7(a) of this Agreement (the “Coverage Period”), which benefits shall consist of the following: (i) the Company or the Bank shall pay 100% of the premiums for COBRA coverage for each such Covered Person until the earlier of (A) the expiration of the COBRA period, (B) the expiration of the Coverage Period, or (C) the death of such person; and (ii) if the Coverage Period extends beyond the expiration of the COBRA period, then in addition to the premiums specified in clause (i) above, the Company or the Bank shall pay 100% of the premiums for alternative policies which provide the Covered Persons with benefits substantially similar to the benefits then provided to executive officers of the Bank (or its successor) and their dependents; provided, however, that in the event that the continued participation of the Covered Person in any insurance plan as provided above is barred or would trigger the payment of an excise tax under Section 4980D of the Code, or during the Coverage Period any such insurance plan is discontinued, then the Bank shall either (A) arrange to provide the Covered Person with alternative benefits substantially similar to those which the Covered Person would be entitled to receive under clauses (i) or (ii) above, provided that the alternative benefits do not trigger the payment of an excise tax under Section 4980D of the Code, or (B) in the event that the continuation of any insurance coverage as specified above would trigger the payment of an excise tax under Section 4980D of the Code or in the event such continued coverage is unable to be provided by the Company or the Bank, pay to the Employee within 30 days following the Date of Termination (or within 30 days following the discontinuation of the benefits if later) a lump sum cash amount equal to the projected cost to the Bank of providing continued coverage to the Covered Persons until the expiration of the Coverage Period, with the projected cost to be based on the costs being incurred immediately prior to the Involuntary Termination (or the discontinuation of the benefits if later), as increased by 15% on each scheduled renewal date. Any insurance premiums payable by the Bank as specified above shall be payable at such times and in such amounts (except that the Bank shall also pay any employee portion of the premiums) as if the Employee was still an executive officer of the Bank (or its successor), subject to any increases in such amounts imposed by the insurance company or COBRA, and the amount of insurance premiums required to be paid by the Bank in any taxable year shall not affect the amount of insurance premiums required to be paid by the Bank in any other taxable year.

2

(e)  The term “Involuntary Termination” means a termination of the employment of the Employee (i) by the Bank without his express written consent; or (ii) by the Employee by reason of a material diminution of or interference with his duties, responsibilities or benefits, including any of the following actions unless consented to in writing by the Employee:  (1) a change in the principal workplace of the Employee to a location outside of a 30-mile radius from the Bank’s headquarters office as of the Effective Date; (2) a material demotion of the Employee; (3) a material reduction in the number or seniority of personnel reporting to the Employee or a material reduction in the frequency with which, or in the nature of the matters with respect to which, such personnel are to report to the Employee, other than as part of a Bank- or Company-wide reduction in staff; (4) a material reduction in the Employee’s salary or a material adverse change in the Employee’s perquisites, benefits, contingent benefits or vacation, other than prior to a Change in Control as part of an overall program applied uniformly and with equitable effect to all members of the senior management of the Bank or the Company; (5) a material permanent increase in the required hours of work or the workload of the Employee; or (6) the failure of the Board of Directors (or a board of directors of a successor of the Bank) to elect him as President and Chief Executive Officer of the Bank (or a successor of the Bank) or any action by the Board of Directors (or a board of directors of a successor of the Bank) removing him from any of such office; provided in each case that Involuntary Termination shall mean a Separation from Service as defined herein and that also constitutes an involuntary Separation from Service under Treasury Regulation §1.409A-1(n). In addition, before the Employee terminates his employment pursuant to clauses (1) through (6) of the preceding sentence, the Employee must first provide written notice to the Bank within ninety (90) days of the initial existence of the condition, describing the existence of such condition, and the Bank shall thereafter have the right to remedy the condition within thirty (30) days following the date it received the written notice from the Employee.  If the Bank remedies the condition within such thirty (30) day cure period, then the Employee shall not have the right to terminate his employment as the result of such event.  If the Bank does not remedy the condition within such thirty (30) day cure period, then the Employee may terminate his employment as the result of such event at any time within sixty (60) days following the expiration of such cure period.  All references in this Agreement to an Involuntary Termination that results in the payment of severance shall mean an involuntary Separation from Service under Treasury Regulation §1.409A-1(n). The term “Involuntary Termination” does not include Termination for Cause, termination of employment due to disability pursuant to Section 7(f) of this Agreement, retirement, death or suspension or temporary or permanent prohibition from participation in the conduct of the affairs of a depository institution under Section 8 of the Federal Deposit Insurance Act.

(f)  The term “Other Insurance Benefits” shall mean the group life insurance and long-term disability insurance benefits to be provided pursuant to Section 7(a) of this Agreement for the benefit of the Employee and his dependents and beneficiaries who would have been eligible for such benefits if the Employee had not suffered an Involuntary Termination in the event such benefits were provided immediately prior to the Date of Termination, with (i) such benefits to be provided on the same terms as if the Employee had continued to remain employed as an executive officer of the Bank, (ii) such benefits to be provided until the expiration of the Coverage Period or the Employee’s death, whichever occurs first, and (iii) the Bank to pay 100% of the premiums for

3

such continued insurance coverage; provided, however, that in the event that the continued participation of the Employee in any insurance plan specified above is barred, or during the Coverage Period any such insurance plan is discontinued, then the Bank shall either (A) arrange to provide the Employee with alternative benefits substantially similar to those which the Employee was entitled to receive under such insurance plan immediately prior to the Date of Termination, or (B) in the event such continued coverage is unable to be provided by the Bank, pay to the Employee within 30 days following the Date of Termination (or within 30 days following the discontinuation of the benefits if later) a lump sum cash amount equal to the projected cost to the Bank of providing continued coverage to the Employee until the expiration of the Coverage Period, with the projected cost to be based on the costs being incurred immediately prior to the Involuntary Termination (or the discontinuation of the benefits if later), as increased by 15% on each scheduled renewal date. Any insurance premiums payable by the Bank as specified above shall be payable at such times and in such amounts (except that the Bank shall also pay any employee portion of the premiums) as if the Employee was still an executive officer of the Bank (or its successor), subject to any increases in such amounts imposed by the insurance company, and the amount of insurance premiums required to be paid by the Bank in any taxable year shall not affect the amount of insurance premiums required to be paid by the Bank in any other taxable year.

(g)  The term “Section 409A” means Section 409A of the Code and the regulations and guidance of general applicability issued thereunder.

(h)  The term “Separation from Service” shall mean a cessation or reduction in the Employee’s services for the Company and the Bank (and any other affiliated entities that are deemed to constitute a “service recipient” as defined in Treasury Regulation §1.409A-1(h)(3)) that constitutes a “Separation from Service” as determined under Section 409A of the Code, taking into account all of the facts, circumstances, rules and presumptions set forth in Treasury Regulation §1.409A-1(h).

(i)  The terms “Termination for Cause” and “Terminated for Cause” mean termination of the employment of the Employee because of the Employee’s personal dishonesty, incompetence, willful misconduct, breach of a fiduciary duty involving personal profit, intentional failure to perform stated duties, willful violation of any law, rule or regulation (other than traffic violations or similar offenses) or final cease-and-desist order, or material breach of any provision of this Agreement.  The Employee shall not be deemed to have been Terminated for Cause unless and until there shall have been delivered to the Employee a copy of a resolution, duly adopted by the affirmative vote of not less than a majority of the entire membership of the Board of Directors at a meeting of the Board duly called and held for such purpose (after reasonable notice to the Employee and an opportunity for the Employee to present his views on the matter to the Board either in person without counsel or in writing), stating that in the good faith opinion of the Board the Employee has engaged in conduct described in the preceding sentence and specifying the particulars thereof in detail. The opportunity of the Employee to be heard before the Board shall not affect the right of the Employee to arbitration as set forth in Section 16 of this Agreement.

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2.  Term.  The initial term of this Agreement shall be a period ending on December 31, 2022, subject to earlier termination as provided herein.  On each January 1^st, commencing January 1, 2021, the term shall be extended for a period of one year in addition to the then-remaining term, provided that (a) the Bank has not given notice to the Employee in writing at least 90 days prior to such anniversary that the term of this Agreement shall not be extended further, and (b) prior to such anniversary, the Board of Directors of the Bank explicitly reviews and approves the extension.  References herein to the term of this Agreement shall refer to both such initial term and such extended terms.

3.  Employment.  The Employee is employed as President and Chief Executive Officer of the Bank.  As such, the Employee shall render administrative and management services as are customarily performed by persons situated in similar executive capacities, and shall have such other powers and duties of an officer of the Bank as the Board of Directors may prescribe from time to time. The Employee shall also render services to the Company and any subsidiary or subsidiaries of the Company or the Bank as requested by the Bank from time to time consistent with his executive position.  The Employee shall devote his best efforts and reasonable time and attention to the business and affairs of the Bank to the extent necessary to discharge his responsibilities hereunder.

4.  Compensation.

(a)  Salary.  The Bank agrees to pay the Employee during the term of this Agreement the salary established by the Board of Directors, which shall be at least equal to the Employee’s salary in effect as of the Effective Date, provided that any amounts of salary actually paid to the Employee by any subsidiary or affiliate of the Bank shall reduce the amount to be paid to the Employee by the Bank.  The amount of the Employee’s salary shall be reviewed by the Board of Directors, beginning not later than the first anniversary of the Effective Date.  Adjustments in salary or other compensation shall not limit or reduce any other obligation of the Bank under this Agreement.  The Employee’s salary in effect from time to time during the term of this Agreement shall not thereafter be reduced.

(b)  Discretionary Bonuses.  The Employee shall be entitled to participate in an equitable manner with all other executive officers of the Bank in discretionary bonuses as authorized and declared by the Board of Directors to its executive employees.  No other compensation provided for in this Agreement shall be deemed a substitute for the Employee’s right to participate in such bonuses when and as declared by the Board of Directors. Any bonus shall be paid not later than 2½ months after the year in which the Employee obtains a legally binding right to the bonus.  If the bonus cannot be paid by that date, then it shall be paid on the next following April 15, or such other date during the year as permitted under Section 409A.

(c)  Expenses.  The Employee shall be entitled to receive prompt reimbursement for all reasonable expenses incurred by the Employee in performing services under this Agreement in accordance with the policies and procedures applicable to the executive officers of the Bank, provided that the Employee accounts for such expenses as required under such policies and procedures.

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5.Benefits.

(a)  Participation in Retirement and Employee Benefit Plans.  The Employee shall be entitled to participate in all plans relating to pension, retirement, thrift, profit-sharing, group life insurance, medical and dental coverage, education, cash bonuses, and other retirement or employee benefits or combinations thereof, in which the Bank’s executive officers participate.

(b)Fringe Benefits.  The Employee shall be eligible to participate in, and receive benefits under, any fringe benefit plans which are or may become applicable to the Bank’s executive officers.

6.  Vacations; Leave.  The Employee shall be entitled to annual paid vacation in accordance with the policies established by the Bank’s Board of Directors for executive officers and to voluntary leave of absence, with or without pay, from time to time at such times and upon such conditions as the Board of Directors may determine in its discretion.

7.  Termination of Employment.

(a)  Involuntary Termination.  The Board of Directors may terminate the Employee’s employment at any time, but, except in the case of Termination for Cause, termination of employment shall not prejudice the Employee’s right to compensation or other benefits under this Agreement. In the event of the Involuntary Termination of the Employee, if the Employee has offered to continue to provide the specific services contemplated to be provided by him pursuant to this Agreement and such offer has been declined, then the Bank shall, during the portion of the term of this Agreement remaining following the Date of Termination (the “Liquidated Damage Period”), as agreed upon liquidated damages for breach of contract, (i) pay to the Employee monthly one-twelfth of the Employee’s salary at the annual rate in effect immediately prior to the Date of Termination and one-twelfth of the average annual amount of cash bonus and cash incentive compensation of the Employee, based on the average amounts of such compensation earned by the Employee from the Bank for the two full calendar years preceding the Date of Termination, with such payments to commence as of the first business day of the month following the date of the Involuntary Termination, except as otherwise set forth below or in Sections 7(b) and (g) of this Agreement, (ii) provide Health Insurance Benefits to each Covered Person until the expiration of the remaining term of this Agreement or such Covered Person’s death, whichever first occurs, and (iii) provide Other Insurance Benefits until the expiration of the remaining term of this Agreement or the Employee’s death, whichever first occurs. If the Employee is a “Specified Employee” (as defined in Section 409A) at the time of his Separation from Service, then any payments under this Section 7(a) which are not covered by the separation pay plan exemption from Section 409A set forth in Treasury Regulation §1.409A-1(b)(9)(iii), and as such constitute deferred compensation under Section 409A, shall not be paid until the first business day of the later of (A) the seventh month following the Employee’s Separation from Service, or (B) the nineteenth month following the Effective Date, except that if the Employee dies beforehand, the payments shall be made on the first business day of the first month following the date of his death (the “Delayed Distribution Date”).  Any payments deferred on account of the preceding sentence shall be

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accumulated without interest and paid with the first payment that is payable in accordance with the preceding sentence and Section 409A.  To the extent permitted by Section 409A, amounts payable under this Section 7(a) which are considered deferred compensation shall be treated as payable after amounts which are not considered deferred compensation (i.e., which are considered payable on account of an involuntary Separation from Service as herein defined pursuant to a separation pay plan).

(b)  Reduction of the Bank’s Obligations under Section 7(a).

(1)  In the event the Employee becomes entitled to receive a change in control payment pursuant to Section 7(e) hereof and agreed upon liquidated damages pursuant to Section 7(a) hereof, then in that event (i) the Bank’s obligation with respect to cash damages under Section 7(a) hereof shall be reduced (but not below zero) by the Employee’s “earned income” within the meaning of Section 911(d)(2)(A) of the Code, if any, earned from providing personal services during the Liquidated Damage Period, and (ii) the Bank’s obligation to provide Health Insurance Benefits or Other Insurance Benefits under Section 7(a) shall be reduced to the extent, if any, that the Employee receives such benefits, on no less favorable terms, from another employer during the Liquidated Damage Period.

(2)  The Employee agrees that in the event he becomes entitled to a change in control payment under Section 7(e) hereof and agreed upon liquidated damages pursuant to Section 7(a) hereof, throughout the Liquidated Damage Period, he shall promptly inform the Bank of the nature and amounts of earned income which he earns and the type of health and other insurance benefits he receives from providing services other than to the Bank or its successors, and shall provide such documentation of such earned income and insurance benefits as the Bank may request.  In the event of changes to such earned income or insurance benefits from time to time during the Liquidated Damage Period, the Employee shall inform the Bank of such changes, in each case within five business days after the change occurs, and shall provide such documentation concerning the change as the Bank may request.  Upon receipt of such information, the Bank shall be entitled to make appropriate adjustments to its obligations under Section 7(a) during the remainder of the Liquidated Damage Period.

(c)  Termination for Cause.    In the event of Termination for Cause, the Bank shall pay the Employee the Employee’s salary through the Date of Termination, and the Bank shall have no further obligation to the Employee under this Agreement.

(d)  Voluntary Termination.  The Employee’s employment may be voluntarily terminated by the Employee at any time upon 90 days’ written notice to the Bank or such shorter period as may be agreed upon between the Employee and the Board of Directors of the Bank.  In the event of such voluntary termination, the Bank shall be obligated to continue to pay to  the Employee the Employee’s salary and benefits only through the Date of Termination, at the time such payments are due, and the Bank shall have no further obligation to the Employee under this Agreement.

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(e)  Change in Control.  In the event that the Employee experiences an Involuntary Termination within the 12 months preceding, at the time of, or within 12 months following a Change in Control, then in addition to the Bank’s obligations under Section 7(a) of this Agreement, the Bank shall pay to the Employee an amount equal to 299% of the Employee’s “base amount” as determined under Section 280G of the Code, with such amount to be paid in equal monthly installments over the then remaining Liquidated Damage Period, except as set forth below or in Sections 7(g) and 8 below. If the Employee is a “Specified Employee” (as defined in Section 409A) at the time of his Separation from Service, then payments under this Section 7(e) which are not covered by the separation pay plan exemption from Section 409A set forth in Treasury Regulation §1.409A-1(b)(9)(iii), and as such constitute deferred compensation under Section 409A, shall not be paid until the Delayed Distribution Date. Any payments deferred on account of the preceding sentence shall be accumulated without interest and paid with the first payment that is payable in accordance with the preceding sentence and Section 409A.  To the extent permitted by Section 409A, amounts payable under this Section 7(e) which are considered deferred compensation shall be treated as payable after amounts which are not considered deferred compensation (i.e., which are considered payable on account of an involuntary Separation from Service as herein defined pursuant to a separation pay plan).  All rights of the Employee under Section 7(a) and this Section 7(e) shall survive a termination of this Agreement.

(f)  Death; Disability.  In the event of the death of the Employee while employed under this Agreement and prior to any termination of employment, the Employee’s estate, or such person as the Employee may have previously designated in writing, shall be entitled to receive from the Bank the salary of the Employee through the last day of the calendar month in which the Employee died.  If the Employee becomes disabled as defined in the Bank’s then current disability plan, if any, or if the Employee is otherwise unable to serve as President and Chief Executive Officer, the Employee shall be entitled to receive group and other disability income benefits of the type, if any, then provided by the Bank for executive officers.

(g)  Year-End Straddle Provision. Notwithstanding any other provision contained in this Agreement, in the event any payment under this Section 7 is made contingent upon the execution of a general release and the time period that the Employee has to consider the terms of such general release (including any revocation period under such release) commences in one calendar year and ends in the succeeding calendar year, then the payment shall not be paid until the succeeding calendar year.  Payments that would have otherwise been made in the year in which the Date of Termination occurs in the absence of this Section 7(g) shall be accumulated without interest and paid in the immediately succeeding calendar year as soon as practicable following the execution of the general release and the expiration of the revocation period.

8.  Certain Reduction of Payments by the Bank.

(a)  If the payments and benefits pursuant to Section 7 hereof, either alone or together with other payments and benefits which the Employee has the right to receive from the Bank and the Company or their successors, would constitute a “parachute payment” under Section 280G of the Code, then the payments and benefits payable by the Bank pursuant to Section 7 hereof shall be

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reduced by the minimum amount necessary to result in no portion of the payments and benefits payable by the Bank under Section 7 being non‑deductible to the Bank pursuant to Section 280G of the Code and subject to the excise tax imposed under Section 4999 of the Code.  If the payments and benefits under Section 7 are required to be reduced, the cash severance shall be reduced first, followed by a reduction in the insurance benefits.  The determination of any reduction in the payments and benefits to be made pursuant to Section 7 shall be based upon the opinion of independent tax counsel selected by the Bank and paid by the Bank.  Such counsel shall promptly prepare the foregoing opinion, but in no event later than thirty (30) days from the Date of Termination, and may use such actuaries as such counsel deems necessary or advisable for the purpose.  Nothing contained in this Section 8 shall result in a reduction of any payments or benefits to which the Employee may be entitled upon termination of employment under any circumstances other than as specified in this Section 8, or a reduction in the payments and benefits specified in Section 7 below zero.

(b)  Any payments made to the Employee pursuant to this Agreement, or otherwise, are subject to and conditioned upon their compliance with 12 U.S.C. 1828(k) and any regulations promulgated thereunder.

9.  Attorneys’ Fees.  In the event the Bank exercises its right of Termination for Cause, but it is determined by a court of competent jurisdiction or by an arbitrator pursuant to Section 16 that Cause did not exist for such termination, or if in any event it is determined by any such court or arbitrator that the Bank has failed to make timely payment of any amounts owed to the Employee under this Agreement, then the Employee shall be entitled to reimbursement for all reasonable costs, including attorneys’ fees, incurred in challenging such termination or collecting such amounts.  Such reimbursement shall be in addition to all rights to which the Employee is otherwise entitled under this Agreement. The Bank agrees to pay such legal fees and related expenses to the extent permitted by law within 60 days following the date the Employee provides notice to the Bank with respect to such amounts, and in the event it is subsequently determined that the Employee is not entitled to such payments as a result of the proviso clause in the preceding sentence, the Employee shall repay to the Bank within 60 days following such determination any payments for legal fees and related expenses as to which the Employee was not entitled.

10.  No Assignments.

(a)  This Agreement is personal to each of the parties hereto, and neither party may assign or delegate any of its rights or obligations hereunder without first obtaining the written consent of the other party; provided, however, that the Bank shall require any successor or assign (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Bank, by an assumption agreement in form and substance satisfactory to the Employee, to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Bank would be required to perform it if no such succession or assignment had taken place.  Failure of the Bank to obtain such an assumption agreement prior to the effectiveness of any such succession or assignment shall be a breach of this Agreement and shall entitle the Employee to compensation from the Bank in the same amount and on the same terms as the compensation pursuant to Section 7(e) hereof.  For purposes of implementing the provisions of this Section 10(a), the date on which any such succession becomes effective shall be deemed the Date of Termination.

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(b)  This Agreement and all rights of the Employee hereunder shall inure to the benefit of and be enforceable by the Employee’s personal and legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees.  If the Employee should die while any amounts would still be payable to the Employee hereunder if the Employee had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to the Employee’s devisee, legatee or other designee or if there is no such designee, to the Employee’s estate.

11.  Notice.  For the purposes of this Agreement, notices and all other communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given when personally delivered or sent by certified mail, return receipt requested, postage prepaid, to the Bank at its home office, to the attention of the Board of Directors with a copy to the Secretary of the Bank, or, if to the Employee, to such home or other address as the Employee has most recently provided in writing to the Bank.

12.  Amendments.  No amendments or additions to this Agreement shall be binding unless in writing and signed by both parties, except as herein otherwise provided.

13.  Headings.  The headings used in this Agreement are included solely for convenience and shall not affect, or be used in connection with, the interpretation of this Agreement.

14.  Severability. The provisions of this Agreement shall be deemed severable and the invalidity or unenforceability of any provision shall not affect the validity or enforceability of the other provisions hereof.

15.  Governing Law. This Agreement shall be governed by the laws of the United States to the extent applicable and otherwise by the laws of the State of Missouri.

16.  Arbitration.  Any dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by arbitration before a single arbitrator in Poplar Bluff, Missouri under the commercial arbitration rules of theAmerican Arbitration Association (the “AAA”) then in effect.  Judgment may be entered on the arbitrator’s award in any court having jurisdiction.The arbitrator shall be selected by the mutual agreement of the parties within ten (10) business days of the date when the parties shall first have the opportunity to select an arbitrator (the “Selection Period”); provided, however, that if the parties fail to agree upon an arbitrator by the expiration of the Selection Period, then each party shall, within five (5) business days after the expiration of the Selection Period, select an arbitrator from the list of arbitrators provided by the AAA and the two arbitrators so selected by each party, acting independently, shall, as soon as practicable and within thirty (30) days of both being selected, agree upon the selection of the arbitrator to arbitrate the controversy or claim.

17.Counterparts.  This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original and all of which together will constitute one and the same instrument.

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18.Changes in Statutes or Regulations.  If any statutory or regulatory provision referenced herein is subsequently changed or re-numbered, or is replaced by a separate provision, then the references in this Agreement to such statutory or regulatory provision shall be deemed to be a reference to such section as amended, re-numbered or replaced.

19.Entire Agreement.  This Agreement embodies the entire agreement between the Bank and the Employee with respect to the matters agreed to herein. All prior agreements between the Bank and the Employee with respect to the matters agreed to herein, including the Prior Agreement, are hereby superseded and shall have no force or effect.

IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first above written.

THIS AGREEMENT CONTAINS A BINDING ARBITRATION PROVISION WHICH MAY BE ENFORCED BY THE PARTIES.

Attest:	SOUTHERN BANK
/s/ Lorna Brannum		/s/ Sammy A. Schalk
Lorna Brannum, Secretary	By:	Sammy A. Schalk
	Its:	Chairman

EMPLOYEE

/s/ Greg Steffens

Greg Steffens

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EX-10.4(II)

EXHIBIT 10.4(ii)

SOUTHERN BANK

SEVERANCE AGREEMENT

This Severance Agreement (the “Agreement”) dated as of November 7, 2019 is between Southern Bank, a Missouri state chartered trust company with banking powers (the “Bank” or the “Employer”), and Kimberly Capps (the “Executive”).

WHEREAS, the Executive is presently employed as Chief Operations Officer of the Bank;

WHEREAS, the Employer desires to be ensured of the Executive’s continued active participation in the business of the Employer;

WHEREAS, in order to induce the Executive to remain in the employ of the Employer and in consideration of the Executive’s agreeing to remain in the employ of the Employer, the parties desire to specify the severance benefits which shall be due to the Executive in the event that his employment with the Employer is terminated under specified circumstances; and

WHEREAS, the Executive is willing to serve the Bank on the terms and conditions hereinafter set forth.

NOW THEREFORE, in consideration of the premises and the mutual agreements herein contained, the parties hereby agree as follows:

1.Definitions.  The following words and terms shall have the meanings set forth below for the purposes of this Agreement:

(a)Cause. Termination of the Executive’s employment for “Cause” shall mean termination because of personal dishonesty, incompetence, willful misconduct, breach of fiduciary duty involving personal profit, intentional failure to perform stated duties, willful violation of any law, rule or regulation (other than traffic violations or similar offenses) or final cease-and-desist order, willful conduct which is materially detrimental (monetarily or otherwise) to the Employer or material breach of any provision of this Agreement.

(b)Change in Control.  “Change in Control” shall mean a change in the ownership of the Corporation or the Bank, a change in the effective control of the Corporation or the Bank or a change in the ownership of a substantial portion of the assets of the Corporation or the Bank, in each case as provided under Section 409A of the Code and the regulations thereunder.

(c)Code.  “Code” shall mean the Internal Revenue Code of 1986, as amended.

(d)Corporation.  “Corporation” shall mean Southern Missouri Bancorp, Inc., the holding company for the Bank, or any successor thereto.

(e)Date of Termination.  “Date of Termination” shall mean (i) if the Executive’s employment is terminated for Cause, the date on which the Notice of Termination is given, and (ii) if the Executive’s employment is terminated for any other reason, the date specified in such Notice of Termination.

(f)Disability. “Disability” shall mean the Executive (i) is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months, or (ii) is, by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months, receiving income replacement benefits for a period of not less than three (3) months under an accident and health plan covering employees of the Bank.

(g)Good Reason.  “Good Reason” means the occurrence of any of the following events: (i) any material breach of this Agreement by the Employer, (ii) a material diminution in the Executive’s base compensation, (iii) a material diminution in the Executive’s authority, duties or responsibilities, (iv) a material diminution in the authority, duties or responsibilities of the supervisor to whom the Executive is required to report, or (v) a change of more than thirty (30) miles in the geographic location at which the Executive performs his services as of the date of this Agreement; provided, however, that prior to any termination of employment for Good Reason, the Executive must first provide written notice to the Employer within ninety (90) days of the initial existence of the condition, describing the existence of such condition, and the Employer shall thereafter have the right to remedy the condition within thirty (30) days of the date the Employer received the written notice from the Executive.  If the Employer remedies the condition within such thirty (30) day cure period, then no Good Reason shall be deemed to exist with respect to such condition.  If the Employer does not remedy the condition within such thirty (30) day cure period, then the Executive may deliver a Notice of Termination for Good Reason at any time within sixty (60) days following the expiration of such cure period.

(h)Notice of Termination.  Any purported termination of the Executive’s employment by the Employer for any reason, including without limitation for Cause, Disability or Retirement, or by the Executive for any reason, including without limitation for Good Reason, shall be communicated by a written “Notice of Termination” to the other party hereto.  For purposes of this Agreement, a “Notice of Termination” shall mean a dated notice which (i) indicates the specific termination provision in this Agreement relied upon, (ii) sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive’s employment under the provision so indicated, (iii) specifies a Date of Termination, which shall be not less than thirty (30) nor more than ninety (90) days after such Notice of Termination is given, except in the case of the Employer’s termination of the Executive’s employment for Cause, which shall be effective immediately; and (iv) is given in the manner specified in Section 8 hereof.

(i)Retirement.  “Retirement” shall mean voluntary termination by the Executive in accordance with the Employer’s retirement policies, including early retirement, generally applicable to the Employer’s salaried employees.

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2.Term of Agreement.

Subject to the terms hereof, the term of this Agreement shall commence on the date hereof and terminate on December 31, 2020. Beginning on December 31, 2020 and on each December 31^st thereafter, the term of this Agreement shall be extended for a period of one additional year, unless either the Employer or the Executive has given notice to the other party hereto in writing at least 60 days prior to such annual renewal date that the term of this Agreement shall not be extended further; provided, however, notwithstanding the foregoing to the contrary, if a Change in Control occurs during the term of this Agreement, then the remaining term of this Agreement shall be automatically extended until the one-year anniversary of the completion of the Change in Control. If any party gives timely notice that the term will not be extended as of any such December 31^st, then this Agreement shall terminate at the conclusion of its remaining term.  References herein to the term of this Agreement shall refer both to the initial term and successive terms.

3.Benefits Upon Termination in Connection with or Following a Change in Control.

(a)If the Executive’s employment is terminated by the Employer in connection with or within one year following a Change in Control by (i) the Employer other than for Cause, Disability, Retirement or as a result of Executive’s death or (ii) the Executive for Good Reason, then the Employer shall, subject to the provisions of Section 3(b) and Section 4 hereof, if applicable:

(1) pay to the Executive, in a lump sum within five (5) business days following the Date of Termination, a cash severance amount equal to two times the Executive’s “base amount” as defined in Section 280G of the Code;

(2)maintain and provide for a period ending at the earlier of (i) the two year anniversary of the Date of Termination or (ii) the date of the Executive’s full-time employment by another employer (provided that the Executive is entitled under the terms of such employment to benefits substantially similar to those described in this subparagraph (2)), at no cost to the Executive, the continued participation of the Executive (including his dependents who are covered by the Bank as of the Date of Termination) in all group insurance, life insurance, health, dental, vision and accident insurance, and disability insurance plans offered by the Employer in which the Executive and his covered dependents were participating immediately prior to the Date of Termination, in each case subject to clauses (3) and (4) of this Section 3(a);

(3)in the event that the continued participation of the Executive and his covered dependents in any group insurance plan as provided in clause (2) of this Section 3(a) is barred or would trigger the payment of an excise tax under Section 4980D of the Code, or during the period set forth in Section 3(a)(2) any such group insurance plan is discontinued, then the Bank shall at its election either (i) arrange to provide the Executive and his covered dependents with alternative benefits substantially similar to those which the Executive and his covered dependents were entitled to receive under such group insurance plans immediately prior to the Date of Termination, provided that the alternative benefits do not trigger the payment of an excise tax under Section 4980D of the Code, or (ii) pay to the

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Executive within 10 business days following the Date of Termination (or within 10 business days following the discontinuation of the benefits if later) a lump sum cash amount equal to the projected cost to the Bank of providing continued coverage to the Executive and his covered dependents until the two year anniversary of the Date of Termination, with the projected cost to be based on the costs being incurred immediately prior to the Date of Termination (or the discontinuation of the benefits if later), as increased by 15% on each scheduled renewal date; and

(4)any insurance premiums payable by the Bank pursuant to subsections (2) or (3) of this Section 3(a) shall be payable at such times and in such amounts (except that the Employer shall also pay any employee portion of the premiums) as if the Executive was still an employee of the Bank (or its successor), subject to any increases in such amounts imposed by the insurance company or COBRA, and the amount of insurance premiums required to be paid by the Bank in any taxable year shall not affect the amount of insurance premiums required to be paid by the Bank in any other taxable year.

(b)The Bank’s obligation to pay severance and provide insurance benefits under Section 3(a) above is expressly conditioned upon the Executive executing and not revoking a general release to be provided to him by the Bank, which would release any and all claims, charges and complaints which the Executive may have against the Bank, its affiliates, assigns and successors, as well as the directors, officers and employees of such entities, in connection with the Executive’s employment and the termination of such employment.  Notwithstanding any other provision contained in this Agreement, in the event the time period that the Executive has to consider the terms of such general release (including any revocation period under such release) commences in one calendar year and ends in the succeeding calendar year, then no cash payments shall be made under Section 3(a) until the succeeding calendar year.

4.Limitation of Benefits under Certain Circumstances.  If the payments and benefits pursuant to Section 3 hereof, either alone or together with other payments and benefits which the Executive has the right to receive from the Employer and the Corporation or their successors, would constitute a “parachute payment” under Section 280G of the Code, then the payments and benefits payable by the Employer pursuant to Section 3 hereof shall be reduced by the minimum amount necessary to result in no portion of the payments and benefits payable by the Employer under Section 3 being non‑deductible to the Employer pursuant to Section 280G of the Code and subject to the excise tax imposed under Section 4999 of the Code.  If the payments and benefits under Section 3 are required to be reduced, the cash severance shall be reduced first, followed by a reduction in the insurance benefits.  The determination of any reduction in the payments and benefits to be made pursuant to Section 3 shall be based upon the opinion of independent tax counsel selected by the Employer and paid by the Employer.  Such counsel shall promptly prepare the foregoing opinion, but in no event later than thirty (30) days from the Date of Termination, and may use such actuaries as such counsel deems necessary or advisable for the purpose.  Nothing contained in this Section 4 shall result in a reduction of any payments or benefits to which the Executive may be entitled upon termination of employment under any circumstances other than as specified in this Section 4, or a reduction in the payments and benefits specified in Section 3 below zero.

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5.Mitigation; Exclusivity of Benefits.

(a)The Executive shall not be required to mitigate the amount of any benefits hereunder by seeking other employment or otherwise, nor shall the amount of any such benefits be reduced by any compensation earned by the Executive as a result of employment by another employer after the Date of Termination or otherwise, except as set forth in Section 3(a)(2)(ii) above.

(b)The specific arrangements referred to herein are not intended to exclude any other benefits which may be available to the Executive upon a termination of employment with the Employer pursuant to employee benefit plans of the Employer or otherwise.

6.Withholding.  All payments required to be made by the Employer hereunder to the Executive shall be subject to the withholding of such amounts, if any, relating to tax and other payroll deductions as the Employer may reasonably determine should be withheld pursuant to any applicable law or regulation.

7.Assignability.  The Employer may assign this Agreement and its rights and obligations hereunder in whole, but not in part, to any corporation, bank or other entity with or into which the Employer may hereafter merge or consolidate or to which the Employer may transfer all or substantially all of its assets, if in any such case said corporation, bank or other entity shall by operation of law or expressly in writing assume all obligations of the Employer hereunder as fully as if it had been originally made a party hereto, but may not otherwise assign this Agreement or its rights and obligations hereunder.  The Executive may not assign or transfer this Agreement or any rights or obligations hereunder.

8.Notice.  For the purposes of this Agreement, notices and all other communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by certified or registered mail, return receipt requested, postage prepaid, addressed to the respective addresses set forth below:

To the Employer:	President and Chief Executive Officer
	Southern Bank
	2991 Oak Grove Road
	Poplar Bluff, Missouri 63901
To the Executive:	Kimberly Capps
	At the address last appearing on the personnel records of the Employer

9.Non-Solicitation Provisions. The Executive agrees that during the term of this Agreement and for the two year period immediately following the Date of Termination (the “Non-Solicitation Period”), the Executive will not (i) solicit or induce, or cause others to solicit or induce, any employee of the Bank or any of its affiliates or subsidiaries to leave the employment of such entities, or (ii) solicit (whether by mail, telephone, personal meeting or any other means, excluding general solicitations of the public that are not based in whole or in part on any list of customers of

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the Bank or any of its affiliates or subsidiaries) any customer of the Bank or any of its affiliates or subsidiaries to transact business with any other entity which is engaged in any line of business conducted by the Bank or any of its affiliates or subsidiaries during the Non-Solicitation Period (including but not limited to entities which lend money and take deposits), or to reduce or refrain from doing any business with the Bank or its affiliates or subsidiaries, or interfere with or damage (or attempt to interfere with or damage) any relationship between the Bank or its affiliates or subsidiaries and any such customers.  All references in this Section 9 to the Bank or any of its affiliates or subsidiaries shall include any successors of such entities.

10.Amendment; Waiver.  No provisions of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing and signed by the Executive and such officer or officers as may be specifically designated by the Board of Directors of the Employer to sign on its behalf.  No waiver by any party hereto at any time of any breach by any other party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time.  In addition, notwithstanding anything in this Agreement to the contrary, the Employer may amend in good faith any terms of this Agreement, including retroactively, in order to comply with Section 409A of the Code.

11.Governing Law.  The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the United States where applicable and otherwise by the substantive laws of the State of Missouri.

12.Nature of Obligations.

(a)Nothing contained herein shall be deemed to create other than a terminable at will employment relationship between the Employer and the Executive, and the Employer may terminate the Executive’s employment at any time, subject to providing any payments specified herein in accordance with the terms hereof.

(b)Nothing contained herein shall create or require the Employer to create a trust of any kind to fund any benefits which may be payable hereunder, and to the extent that the Executive acquires a right to receive benefits from the Employer hereunder, such right shall be no greater than the right of any unsecured general creditor of the Employer.

13.Headings.  The section headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.

14.Validity.  The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provisions of this Agreement, which shall remain in full force and effect.

15.Changes in Statutes or Regulations. If any statutory or regulatory provision referenced herein is subsequently changed or re-numbered, or is replaced by a separate provision, then the references in this Agreement to such statutory or regulatory provision shall be deemed to be a reference to such section as amended, re-numbered or replaced.

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16.Counterparts.  This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original and all of which together will constitute one and the same instrument.

17.Regulatory Prohibition.  Notwithstanding any other provision of this Agreement to the contrary, any renewal of this Agreement and any payments made to the Executive pursuant to this Agreement, or otherwise, are subject to and conditioned upon their compliance with Section 18(k) of the Federal Deposit Insurance Act (12 U.S.C. §1828(k)) and the regulations promulgated thereunder, including 12 C.F.R. Part 359.  In the event of the Executive’s termination of employment with the Bank for Cause, all employment relationships and managerial duties with the Bank shall immediately cease regardless of whether the Executive is in the employ of the Corporation following such termination.  Furthermore, following such termination for Cause, the Executive will not, directly or indirectly, influence or participate in the affairs or the operations of the Bank.

18.Payment of Costs and Legal Fees and Reinstatement of Benefits.  In the event any dispute or controversy arising under or in connection with the Executive’s termination is resolved in favor of the Executive, whether by judgment, arbitration or settlement, the Executive shall be entitled to the payment of (a) all legal fees incurred by the Executive in resolving such dispute or controversy, and (b) any back-pay, including base salary, bonuses and any other cash compensation, fringe benefits and any compensation and benefits due to the Executive under this Agreement.

19.Entire Agreement.  This Agreement embodies the entire agreement between the Employer and the Executive with respect to the matters agreed to herein. All prior agreements, if any, between the Employer and the Executive with respect to the matters agreed to herein are hereby superseded and shall have no force or effect.

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

Attest:		SOUTHERN BANK
By:	/s/ Lorna Brannum		/s/ Greg A. Steffens
Name:	Lorna Brannum	By:	Greg A. Steffens
Title:	Secretary	Its:	President and Chief Executive Officer
		EXECUTIVE
		By:	/s/ Kimberly Capps
		Name:	Kimberly Capps

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EX-10.4(III)

EXHIBIT 10.4(iii)

SOUTHERN BANK

SEVERANCE AGREEMENT

This Severance Agreement (the “Agreement”) dated as of November 7, 2019 is between Southern Bank, a Missouri state chartered trust company with banking powers (the “Bank” or the “Employer”), and Matthew Funke (the “Executive”).

WHEREAS, the Executive is presently employed as Chief Financial Officer of the Bank;

WHEREAS, the Employer desires to be ensured of the Executive’s continued active participation in the business of the Employer;

WHEREAS, in order to induce the Executive to remain in the employ of the Employer and in consideration of the Executive’s agreeing to remain in the employ of the Employer, the parties desire to specify the severance benefits which shall be due to the Executive in the event that his employment with the Employer is terminated under specified circumstances; and

WHEREAS, the Executive is willing to serve the Bank on the terms and conditions hereinafter set forth.

NOW THEREFORE, in consideration of the premises and the mutual agreements herein contained, the parties hereby agree as follows:

1.Definitions.  The following words and terms shall have the meanings set forth below for the purposes of this Agreement:

(a)Cause. Termination of the Executive’s employment for “Cause” shall mean termination because of personal dishonesty, incompetence, willful misconduct, breach of fiduciary duty involving personal profit, intentional failure to perform stated duties, willful violation of any law, rule or regulation (other than traffic violations or similar offenses) or final cease-and-desist order, willful conduct which is materially detrimental (monetarily or otherwise) to the Employer or material breach of any provision of this Agreement.

(b)Change in Control.  “Change in Control” shall mean a change in the ownership of the Corporation or the Bank, a change in the effective control of the Corporation or the Bank or a change in the ownership of a substantial portion of the assets of the Corporation or the Bank, in each case as provided under Section 409A of the Code and the regulations thereunder.

(c)Code.  “Code” shall mean the Internal Revenue Code of 1986, as amended.

(d)Corporation.  “Corporation” shall mean Southern Missouri Bancorp, Inc., the holding company for the Bank, or any successor thereto.

(e)Date of Termination.  “Date of Termination” shall mean (i) if the Executive’s employment is terminated for Cause, the date on which the Notice of Termination is given, and (ii) if the Executive’s employment is terminated for any other reason, the date specified in such Notice of Termination.

(f)Disability. “Disability” shall mean the Executive (i) is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months, or (ii) is, by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months, receiving income replacement benefits for a period of not less than three (3) months under an accident and health plan covering employees of the Bank.

(g)Good Reason.  “Good Reason” means the occurrence of any of the following events: (i) any material breach of this Agreement by the Employer, (ii) a material diminution in the Executive’s base compensation, (iii) a material diminution in the Executive’s authority, duties or responsibilities, (iv) a material diminution in the authority, duties or responsibilities of the supervisor to whom the Executive is required to report, or (v) a change of more than thirty (30) miles in the geographic location at which the Executive performs his services as of the date of this Agreement; provided, however, that prior to any termination of employment for Good Reason, the Executive must first provide written notice to the Employer within ninety (90) days of the initial existence of the condition, describing the existence of such condition, and the Employer shall thereafter have the right to remedy the condition within thirty (30) days of the date the Employer received the written notice from the Executive.  If the Employer remedies the condition within such thirty (30) day cure period, then no Good Reason shall be deemed to exist with respect to such condition.  If the Employer does not remedy the condition within such thirty (30) day cure period, then the Executive may deliver a Notice of Termination for Good Reason at any time within sixty (60) days following the expiration of such cure period.

(h)Notice of Termination.  Any purported termination of the Executive’s employment by the Employer for any reason, including without limitation for Cause, Disability or Retirement, or by the Executive for any reason, including without limitation for Good Reason, shall be communicated by a written “Notice of Termination” to the other party hereto.  For purposes of this Agreement, a “Notice of Termination” shall mean a dated notice which (i) indicates the specific termination provision in this Agreement relied upon, (ii) sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive’s employment under the provision so indicated, (iii) specifies a Date of Termination, which shall be not less than thirty (30) nor more than ninety (90) days after such Notice of Termination is given, except in the case of the Employer’s termination of the Executive’s employment for Cause, which shall be effective immediately; and (iv) is given in the manner specified in Section 8 hereof.

(i)Retirement.  “Retirement” shall mean voluntary termination by the Executive in accordance with the Employer’s retirement policies, including early retirement, generally applicable to the Employer’s salaried employees.

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2.Term of Agreement.

Subject to the terms hereof, the term of this Agreement shall commence on the date hereof and terminate on December 31, 2020. Beginning on December 31, 2020 and on each December 31^st thereafter, the term of this Agreement shall be extended for a period of one additional year, unless either the Employer or the Executive has given notice to the other party hereto in writing at least 60 days prior to such annual renewal date that the term of this Agreement shall not be extended further; provided, however, notwithstanding the foregoing to the contrary, if a Change in Control occurs during the term of this Agreement, then the remaining term of this Agreement shall be automatically extended until the one-year anniversary of the completion of the Change in Control. If any party gives timely notice that the term will not be extended as of any such December 31^st, then this Agreement shall terminate at the conclusion of its remaining term.  References herein to the term of this Agreement shall refer both to the initial term and successive terms.

3.Benefits Upon Termination in Connection with or Following a Change in Control.

(a)If the Executive’s employment is terminated by the Employer in connection with or within one year following a Change in Control by (i) the Employer other than for Cause, Disability, Retirement or as a result of Executive’s death or (ii) the Executive for Good Reason, then the Employer shall, subject to the provisions of Section 3(b) and Section 4 hereof, if applicable:

(1) pay to the Executive, in a lump sum within five (5) business days following the Date of Termination, a cash severance amount equal to two times the Executive’s “base amount” as defined in Section 280G of the Code;

(2)maintain and provide for a period ending at the earlier of (i) the two year anniversary of the Date of Termination or (ii) the date of the Executive’s full-time employment by another employer (provided that the Executive is entitled under the terms of such employment to benefits substantially similar to those described in this subparagraph (2)), at no cost to the Executive, the continued participation of the Executive (including his dependents who are covered by the Bank as of the Date of Termination) in all group insurance, life insurance, health, dental, vision and accident insurance, and disability insurance plans offered by the Employer in which the Executive and his covered dependents were participating immediately prior to the Date of Termination, in each case subject to clauses (3) and (4) of this Section 3(a);

(3)in the event that the continued participation of the Executive and his covered dependents in any group insurance plan as provided in clause (2) of this Section 3(a) is barred or would trigger the payment of an excise tax under Section 4980D of the Code, or during the period set forth in Section 3(a)(2) any such group insurance plan is discontinued, then the Bank shall at its election either (i) arrange to provide the Executive and his covered dependents with alternative benefits substantially similar to those which the Executive and his covered dependents were entitled to receive under such group insurance plans immediately prior to the Date of Termination, provided that the alternative benefits do not trigger the payment of an excise tax under Section 4980D of the Code, or (ii) pay to the

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Executive within 10 business days following the Date of Termination (or within 10 business days following the discontinuation of the benefits if later) a lump sum cash amount equal to the projected cost to the Bank of providing continued coverage to the Executive and his covered dependents until the two year anniversary of the Date of Termination, with the projected cost to be based on the costs being incurred immediately prior to the Date of Termination (or the discontinuation of the benefits if later), as increased by 15% on each scheduled renewal date; and

(4)any insurance premiums payable by the Bank pursuant to subsections (2) or (3) of this Section 3(a) shall be payable at such times and in such amounts (except that the Employer shall also pay any employee portion of the premiums) as if the Executive was still an employee of the Bank (or its successor), subject to any increases in such amounts imposed by the insurance company or COBRA, and the amount of insurance premiums required to be paid by the Bank in any taxable year shall not affect the amount of insurance premiums required to be paid by the Bank in any other taxable year.

(b)The Bank’s obligation to pay severance and provide insurance benefits under Section 3(a) above is expressly conditioned upon the Executive executing and not revoking a general release to be provided to him by the Bank, which would release any and all claims, charges and complaints which the Executive may have against the Bank, its affiliates, assigns and successors, as well as the directors, officers and employees of such entities, in connection with the Executive’s employment and the termination of such employment.  Notwithstanding any other provision contained in this Agreement, in the event the time period that the Executive has to consider the terms of such general release (including any revocation period under such release) commences in one calendar year and ends in the succeeding calendar year, then no cash payments shall be made under Section 3(a) until the succeeding calendar year.

4.Limitation of Benefits under Certain Circumstances.  If the payments and benefits pursuant to Section 3 hereof, either alone or together with other payments and benefits which the Executive has the right to receive from the Employer and the Corporation or their successors, would constitute a “parachute payment” under Section 280G of the Code, then the payments and benefits payable by the Employer pursuant to Section 3 hereof shall be reduced by the minimum amount necessary to result in no portion of the payments and benefits payable by the Employer under Section 3 being non‑deductible to the Employer pursuant to Section 280G of the Code and subject to the excise tax imposed under Section 4999 of the Code.  If the payments and benefits under Section 3 are required to be reduced, the cash severance shall be reduced first, followed by a reduction in the insurance benefits.  The determination of any reduction in the payments and benefits to be made pursuant to Section 3 shall be based upon the opinion of independent tax counsel selected by the Employer and paid by the Employer.  Such counsel shall promptly prepare the foregoing opinion, but in no event later than thirty (30) days from the Date of Termination, and may use such actuaries as such counsel deems necessary or advisable for the purpose.  Nothing contained in this Section 4 shall result in a reduction of any payments or benefits to which the Executive may be entitled upon termination of employment under any circumstances other than as specified in this Section 4, or a reduction in the payments and benefits specified in Section 3 below zero.

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5.Mitigation; Exclusivity of Benefits.

(a)The Executive shall not be required to mitigate the amount of any benefits hereunder by seeking other employment or otherwise, nor shall the amount of any such benefits be reduced by any compensation earned by the Executive as a result of employment by another employer after the Date of Termination or otherwise, except as set forth in Section 3(a)(2)(ii) above.

(b)The specific arrangements referred to herein are not intended to exclude any other benefits which may be available to the Executive upon a termination of employment with the Employer pursuant to employee benefit plans of the Employer or otherwise.

6.Withholding.  All payments required to be made by the Employer hereunder to the Executive shall be subject to the withholding of such amounts, if any, relating to tax and other payroll deductions as the Employer may reasonably determine should be withheld pursuant to any applicable law or regulation.

7.Assignability.  The Employer may assign this Agreement and its rights and obligations hereunder in whole, but not in part, to any corporation, bank or other entity with or into which the Employer may hereafter merge or consolidate or to which the Employer may transfer all or substantially all of its assets, if in any such case said corporation, bank or other entity shall by operation of law or expressly in writing assume all obligations of the Employer hereunder as fully as if it had been originally made a party hereto, but may not otherwise assign this Agreement or its rights and obligations hereunder.  The Executive may not assign or transfer this Agreement or any rights or obligations hereunder.

8.Notice.  For the purposes of this Agreement, notices and all other communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by certified or registered mail, return receipt requested, postage prepaid, addressed to the respective addresses set forth below:

To the Employer:	President and Chief Executive Officer
	Southern Bank
	2991 Oak Grove Road
	Poplar Bluff, Missouri 63901
To the Executive:	Matthew Funke
	At the address last appearing on the personnel records of the Employer

9.Non-Solicitation Provisions. The Executive agrees that during the term of this Agreement and for the two year period immediately following the Date of Termination (the “Non-Solicitation Period”), the Executive will not (i) solicit or induce, or cause others to solicit or induce, any employee of the Bank or any of its affiliates or subsidiaries to leave the employment of such entities, or (ii) solicit (whether by mail, telephone, personal meeting or any other means, excluding general solicitations of the public that are not based in whole or in part on any list of customers of

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the Bank or any of its affiliates or subsidiaries) any customer of the Bank or any of its affiliates or subsidiaries to transact business with any other entity which is engaged in any line of business conducted by the Bank or any of its affiliates or subsidiaries during the Non-Solicitation Period (including but not limited to entities which lend money and take deposits), or to reduce or refrain from doing any business with the Bank or its affiliates or subsidiaries, or interfere with or damage (or attempt to interfere with or damage) any relationship between the Bank or its affiliates or subsidiaries and any such customers.  All references in this Section 9 to the Bank or any of its affiliates or subsidiaries shall include any successors of such entities.

10.Amendment; Waiver.  No provisions of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing and signed by the Executive and such officer or officers as may be specifically designated by the Board of Directors of the Employer to sign on its behalf.  No waiver by any party hereto at any time of any breach by any other party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time.  In addition, notwithstanding anything in this Agreement to the contrary, the Employer may amend in good faith any terms of this Agreement, including retroactively, in order to comply with Section 409A of the Code.

11.Governing Law.  The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the United States where applicable and otherwise by the substantive laws of the State of Missouri.

12.Nature of Obligations.

(a)Nothing contained herein shall be deemed to create other than a terminable at will employment relationship between the Employer and the Executive, and the Employer may terminate the Executive’s employment at any time, subject to providing any payments specified herein in accordance with the terms hereof.

(b)Nothing contained herein shall create or require the Employer to create a trust of any kind to fund any benefits which may be payable hereunder, and to the extent that the Executive acquires a right to receive benefits from the Employer hereunder, such right shall be no greater than the right of any unsecured general creditor of the Employer.

13.Headings.  The section headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.

14.Validity.  The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provisions of this Agreement, which shall remain in full force and effect.

15.Changes in Statutes or Regulations. If any statutory or regulatory provision referenced herein is subsequently changed or re-numbered, or is replaced by a separate provision, then the references in this Agreement to such statutory or regulatory provision shall be deemed to be a reference to such section as amended, re-numbered or replaced.

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16.Counterparts.  This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original and all of which together will constitute one and the same instrument.

17.Regulatory Prohibition.  Notwithstanding any other provision of this Agreement to the contrary, any renewal of this Agreement and any payments made to the Executive pursuant to this Agreement, or otherwise, are subject to and conditioned upon their compliance with Section 18(k) of the Federal Deposit Insurance Act (12 U.S.C. §1828(k)) and the regulations promulgated thereunder, including 12 C.F.R. Part 359.  In the event of the Executive’s termination of employment with the Bank for Cause, all employment relationships and managerial duties with the Bank shall immediately cease regardless of whether the Executive is in the employ of the Corporation following such termination.  Furthermore, following such termination for Cause, the Executive will not, directly or indirectly, influence or participate in the affairs or the operations of the Bank.

18.Payment of Costs and Legal Fees and Reinstatement of Benefits.  In the event any dispute or controversy arising under or in connection with the Executive’s termination is resolved in favor of the Executive, whether by judgment, arbitration or settlement, the Executive shall be entitled to the payment of (a) all legal fees incurred by the Executive in resolving such dispute or controversy, and (b) any back-pay, including base salary, bonuses and any other cash compensation, fringe benefits and any compensation and benefits due to the Executive under this Agreement.

19.Entire Agreement.  This Agreement embodies the entire agreement between the Employer and the Executive with respect to the matters agreed to herein. All prior agreements, if any, between the Employer and the Executive with respect to the matters agreed to herein are hereby superseded and shall have no force or effect.

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

Attest:		SOUTHERN BANK
By:	/s/ Lorna Brannum		/s/ Greg A. Steffens
Name:	Lorna Brannum	By:	Greg A. Steffens
Title:	Secretary	Its:	President and Chief Executive Officer
		EXECUTIVE
		By:	/s/ Matthew Funke
		Name:	Matthew Funke

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EX-10.4(IV)

EXHIBIT 104(iv)

SOUTHERN BANK

SEVERANCE AGREEMENT

This Severance Agreement (the “Agreement”) dated as of November 7, 2019 is between Southern Bank, a Missouri state chartered trust company with banking powers (the “Bank” or the “Employer”), and Lora Daves (the “Executive”).

WHEREAS, the Executive is presently employed as Chief Risk Officer of the Bank;

WHEREAS, the Employer desires to be ensured of the Executive’s continued active participation in the business of the Employer;

WHEREAS, in order to induce the Executive to remain in the employ of the Employer and in consideration of the Executive’s agreeing to remain in the employ of the Employer, the parties desire to specify the severance benefits which shall be due to the Executive in the event that his employment with the Employer is terminated under specified circumstances; and

WHEREAS, the Executive is willing to serve the Bank on the terms and conditions hereinafter set forth.

NOW THEREFORE, in consideration of the premises and the mutual agreements herein contained, the parties hereby agree as follows:

1.Definitions.  The following words and terms shall have the meanings set forth below for the purposes of this Agreement:

(a)Cause. Termination of the Executive’s employment for “Cause” shall mean termination because of personal dishonesty, incompetence, willful misconduct, breach of fiduciary duty involving personal profit, intentional failure to perform stated duties, willful violation of any law, rule or regulation (other than traffic violations or similar offenses) or final cease-and-desist order, willful conduct which is materially detrimental (monetarily or otherwise) to the Employer or material breach of any provision of this Agreement.

(b)Change in Control.  “Change in Control” shall mean a change in the ownership of the Corporation or the Bank, a change in the effective control of the Corporation or the Bank or a change in the ownership of a substantial portion of the assets of the Corporation or the Bank, in each case as provided under Section 409A of the Code and the regulations thereunder.

(c)Code.  “Code” shall mean the Internal Revenue Code of 1986, as amended.

(d)Corporation.  “Corporation” shall mean Southern Missouri Bancorp, Inc., the holding company for the Bank, or any successor thereto.

(e)Date of Termination.  “Date of Termination” shall mean (i) if the Executive’s employment is terminated for Cause, the date on which the Notice of Termination is given, and (ii) if the Executive’s employment is terminated for any other reason, the date specified in such Notice of Termination.

(f)Disability. “Disability” shall mean the Executive (i) is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months, or (ii) is, by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months, receiving income replacement benefits for a period of not less than three (3) months under an accident and health plan covering employees of the Bank.

(g)Good Reason.  “Good Reason” means the occurrence of any of the following events: (i) any material breach of this Agreement by the Employer, (ii) a material diminution in the Executive’s base compensation, (iii) a material diminution in the Executive’s authority, duties or responsibilities, (iv) a material diminution in the authority, duties or responsibilities of the supervisor to whom the Executive is required to report, or (v) a change of more than thirty (30) miles in the geographic location at which the Executive performs his services as of the date of this Agreement; provided, however, that prior to any termination of employment for Good Reason, the Executive must first provide written notice to the Employer within ninety (90) days of the initial existence of the condition, describing the existence of such condition, and the Employer shall thereafter have the right to remedy the condition within thirty (30) days of the date the Employer received the written notice from the Executive.  If the Employer remedies the condition within such thirty (30) day cure period, then no Good Reason shall be deemed to exist with respect to such condition.  If the Employer does not remedy the condition within such thirty (30) day cure period, then the Executive may deliver a Notice of Termination for Good Reason at any time within sixty (60) days following the expiration of such cure period.

(h)Notice of Termination.  Any purported termination of the Executive’s employment by the Employer for any reason, including without limitation for Cause, Disability or Retirement, or by the Executive for any reason, including without limitation for Good Reason, shall be communicated by a written “Notice of Termination” to the other party hereto.  For purposes of this Agreement, a “Notice of Termination” shall mean a dated notice which (i) indicates the specific termination provision in this Agreement relied upon, (ii) sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive’s employment under the provision so indicated, (iii) specifies a Date of Termination, which shall be not less than thirty (30) nor more than ninety (90) days after such Notice of Termination is given, except in the case of the Employer’s termination of the Executive’s employment for Cause, which shall be effective immediately; and (iv) is given in the manner specified in Section 8 hereof.

(i)Retirement.  “Retirement” shall mean voluntary termination by the Executive in accordance with the Employer’s retirement policies, including early retirement, generally applicable to the Employer’s salaried employees.

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2.Term of Agreement.

Subject to the terms hereof, the term of this Agreement shall commence on the date hereof and terminate on December 31, 2020. Beginning on December 31, 2020 and on each December 31^st thereafter, the term of this Agreement shall be extended for a period of one additional year, unless either the Employer or the Executive has given notice to the other party hereto in writing at least 60 days prior to such annual renewal date that the term of this Agreement shall not be extended further; provided, however, notwithstanding the foregoing to the contrary, if a Change in Control occurs during the term of this Agreement, then the remaining term of this Agreement shall be automatically extended until the one-year anniversary of the completion of the Change in Control. If any party gives timely notice that the term will not be extended as of any such December 31^st, then this Agreement shall terminate at the conclusion of its remaining term.  References herein to the term of this Agreement shall refer both to the initial term and successive terms.

3.Benefits Upon Termination in Connection with or Following a Change in Control.

(a)If the Executive’s employment is terminated by the Employer in connection with or within one year following a Change in Control by (i) the Employer other than for Cause, Disability, Retirement or as a result of Executive’s death or (ii) the Executive for Good Reason, then the Employer shall, subject to the provisions of Section 3(b) and Section 4 hereof, if applicable:

(1) pay to the Executive, in a lump sum within five (5) business days following the Date of Termination, a cash severance amount equal to two times the Executive’s “base amount” as defined in Section 280G of the Code;

(2)maintain and provide for a period ending at the earlier of (i) the two year anniversary of the Date of Termination or (ii) the date of the Executive’s full-time employment by another employer (provided that the Executive is entitled under the terms of such employment to benefits substantially similar to those described in this subparagraph (2)), at no cost to the Executive, the continued participation of the Executive (including his dependents who are covered by the Bank as of the Date of Termination) in all group insurance, life insurance, health, dental, vision and accident insurance, and disability insurance plans offered by the Employer in which the Executive and his covered dependents were participating immediately prior to the Date of Termination, in each case subject to clauses (3) and (4) of this Section 3(a);

(3)in the event that the continued participation of the Executive and his covered dependents in any group insurance plan as provided in clause (2) of this Section 3(a) is barred or would trigger the payment of an excise tax under Section 4980D of the Code, or during the period set forth in Section 3(a)(2) any such group insurance plan is discontinued, then the Bank shall at its election either (i) arrange to provide the Executive and his covered dependents with alternative benefits substantially similar to those which the Executive and his covered dependents were entitled to receive under such group insurance plans immediately prior to the Date of Termination, provided that the alternative benefits do not trigger the payment of an excise tax under Section 4980D of the Code, or (ii) pay to the

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Executive within 10 business days following the Date of Termination (or within 10 business days following the discontinuation of the benefits if later) a lump sum cash amount equal to the projected cost to the Bank of providing continued coverage to the Executive and his covered dependents until the two year anniversary of the Date of Termination, with the projected cost to be based on the costs being incurred immediately prior to the Date of Termination (or the discontinuation of the benefits if later), as increased by 15% on each scheduled renewal date; and

(4)any insurance premiums payable by the Bank pursuant to subsections (2) or (3) of this Section 3(a) shall be payable at such times and in such amounts (except that the Employer shall also pay any employee portion of the premiums) as if the Executive was still an employee of the Bank (or its successor), subject to any increases in such amounts imposed by the insurance company or COBRA, and the amount of insurance premiums required to be paid by the Bank in any taxable year shall not affect the amount of insurance premiums required to be paid by the Bank in any other taxable year.

(b)The Bank’s obligation to pay severance and provide insurance benefits under Section 3(a) above is expressly conditioned upon the Executive executing and not revoking a general release to be provided to him by the Bank, which would release any and all claims, charges and complaints which the Executive may have against the Bank, its affiliates, assigns and successors, as well as the directors, officers and employees of such entities, in connection with the Executive’s employment and the termination of such employment.  Notwithstanding any other provision contained in this Agreement, in the event the time period that the Executive has to consider the terms of such general release (including any revocation period under such release) commences in one calendar year and ends in the succeeding calendar year, then no cash payments shall be made under Section 3(a) until the succeeding calendar year.

4.Limitation of Benefits under Certain Circumstances.  If the payments and benefits pursuant to Section 3 hereof, either alone or together with other payments and benefits which the Executive has the right to receive from the Employer and the Corporation or their successors, would constitute a “parachute payment” under Section 280G of the Code, then the payments and benefits payable by the Employer pursuant to Section 3 hereof shall be reduced by the minimum amount necessary to result in no portion of the payments and benefits payable by the Employer under Section 3 being non‑deductible to the Employer pursuant to Section 280G of the Code and subject to the excise tax imposed under Section 4999 of the Code.  If the payments and benefits under Section 3 are required to be reduced, the cash severance shall be reduced first, followed by a reduction in the insurance benefits.  The determination of any reduction in the payments and benefits to be made pursuant to Section 3 shall be based upon the opinion of independent tax counsel selected by the Employer and paid by the Employer.  Such counsel shall promptly prepare the foregoing opinion, but in no event later than thirty (30) days from the Date of Termination, and may use such actuaries as such counsel deems necessary or advisable for the purpose.  Nothing contained in this Section 4 shall result in a reduction of any payments or benefits to which the Executive may be entitled upon termination of employment under any circumstances other than as specified in this Section 4, or a reduction in the payments and benefits specified in Section 3 below zero.

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5.Mitigation; Exclusivity of Benefits.

(a)The Executive shall not be required to mitigate the amount of any benefits hereunder by seeking other employment or otherwise, nor shall the amount of any such benefits be reduced by any compensation earned by the Executive as a result of employment by another employer after the Date of Termination or otherwise, except as set forth in Section 3(a)(2)(ii) above.

(b)The specific arrangements referred to herein are not intended to exclude any other benefits which may be available to the Executive upon a termination of employment with the Employer pursuant to employee benefit plans of the Employer or otherwise.

6.Withholding.  All payments required to be made by the Employer hereunder to the Executive shall be subject to the withholding of such amounts, if any, relating to tax and other payroll deductions as the Employer may reasonably determine should be withheld pursuant to any applicable law or regulation.

7.Assignability.  The Employer may assign this Agreement and its rights and obligations hereunder in whole, but not in part, to any corporation, bank or other entity with or into which the Employer may hereafter merge or consolidate or to which the Employer may transfer all or substantially all of its assets, if in any such case said corporation, bank or other entity shall by operation of law or expressly in writing assume all obligations of the Employer hereunder as fully as if it had been originally made a party hereto, but may not otherwise assign this Agreement or its rights and obligations hereunder.  The Executive may not assign or transfer this Agreement or any rights or obligations hereunder.

8.Notice.  For the purposes of this Agreement, notices and all other communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by certified or registered mail, return receipt requested, postage prepaid, addressed to the respective addresses set forth below:

To the Employer:	President and Chief Executive Officer
	Southern Bank
	2991 Oak Grove Road
	Poplar Bluff, Missouri 63901
To the Executive:	Lora Daves
	At the address last appearing on the personnel records of the Employer

9.Non-Solicitation Provisions. The Executive agrees that during the term of this Agreement and for the two year period immediately following the Date of Termination (the “Non-Solicitation Period”), the Executive will not (i) solicit or induce, or cause others to solicit or induce, any employee of the Bank or any of its affiliates or subsidiaries to leave the employment of such entities, or (ii) solicit (whether by mail, telephone, personal meeting or any other means, excluding general solicitations of the public that are not based in whole or in part on any list of customers of

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the Bank or any of its affiliates or subsidiaries) any customer of the Bank or any of its affiliates or subsidiaries to transact business with any other entity which is engaged in any line of business conducted by the Bank or any of its affiliates or subsidiaries during the Non-Solicitation Period (including but not limited to entities which lend money and take deposits), or to reduce or refrain from doing any business with the Bank or its affiliates or subsidiaries, or interfere with or damage (or attempt to interfere with or damage) any relationship between the Bank or its affiliates or subsidiaries and any such customers.  All references in this Section 9 to the Bank or any of its affiliates or subsidiaries shall include any successors of such entities.

10.Amendment; Waiver.  No provisions of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing and signed by the Executive and such officer or officers as may be specifically designated by the Board of Directors of the Employer to sign on its behalf.  No waiver by any party hereto at any time of any breach by any other party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time.  In addition, notwithstanding anything in this Agreement to the contrary, the Employer may amend in good faith any terms of this Agreement, including retroactively, in order to comply with Section 409A of the Code.

11.Governing Law.  The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the United States where applicable and otherwise by the substantive laws of the State of Missouri.

12.Nature of Obligations.

(a)Nothing contained herein shall be deemed to create other than a terminable at will employment relationship between the Employer and the Executive, and the Employer may terminate the Executive’s employment at any time, subject to providing any payments specified herein in accordance with the terms hereof.

(b)Nothing contained herein shall create or require the Employer to create a trust of any kind to fund any benefits which may be payable hereunder, and to the extent that the Executive acquires a right to receive benefits from the Employer hereunder, such right shall be no greater than the right of any unsecured general creditor of the Employer.

13.Headings.  The section headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.

14.Validity.  The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provisions of this Agreement, which shall remain in full force and effect.

15.Changes in Statutes or Regulations. If any statutory or regulatory provision referenced herein is subsequently changed or re-numbered, or is replaced by a separate provision, then the references in this Agreement to such statutory or regulatory provision shall be deemed to be a reference to such section as amended, re-numbered or replaced.

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16.Counterparts.  This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original and all of which together will constitute one and the same instrument.

17.Regulatory Prohibition.  Notwithstanding any other provision of this Agreement to the contrary, any renewal of this Agreement and any payments made to the Executive pursuant to this Agreement, or otherwise, are subject to and conditioned upon their compliance with Section 18(k) of the Federal Deposit Insurance Act (12 U.S.C. §1828(k)) and the regulations promulgated thereunder, including 12 C.F.R. Part 359.  In the event of the Executive’s termination of employment with the Bank for Cause, all employment relationships and managerial duties with the Bank shall immediately cease regardless of whether the Executive is in the employ of the Corporation following such termination.  Furthermore, following such termination for Cause, the Executive will not, directly or indirectly, influence or participate in the affairs or the operations of the Bank.

18.Payment of Costs and Legal Fees and Reinstatement of Benefits.  In the event any dispute or controversy arising under or in connection with the Executive’s termination is resolved in favor of the Executive, whether by judgment, arbitration or settlement, the Executive shall be entitled to the payment of (a) all legal fees incurred by the Executive in resolving such dispute or controversy, and (b) any back-pay, including base salary, bonuses and any other cash compensation, fringe benefits and any compensation and benefits due to the Executive under this Agreement.

19.Entire Agreement.  This Agreement embodies the entire agreement between the Employer and the Executive with respect to the matters agreed to herein. All prior agreements, if any, between the Employer and the Executive with respect to the matters agreed to herein are hereby superseded and shall have no force or effect.

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

Attest:		SOUTHERN BANK
By:	/s/ Lorna Brannum		/s/ Greg A. Steffens
Name:	Lorna Brannum	By:	Greg A. Steffens
Title:	Secretary	Its:	President and Chief Executive Officer
		EXECUTIVE
		By:	/s/ Lora Daves
		Name:	Lora Daves

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EX-10.4(V)

EXHIBIT 10.4(v)

SOUTHERN BANK

SEVERANCE AGREEMENT

This Severance Agreement (the “Agreement”) dated as of November 7, 2019 is between Southern Bank, a Missouri state chartered trust company with banking powers (the “Bank” or the “Employer”), and Justin Cox (the “Executive”).

WHEREAS, the Executive is presently employed as Regional Community Bank President of the Bank;

WHEREAS, the Employer desires to be ensured of the Executive’s continued active participation in the business of the Employer;

WHEREAS, in order to induce the Executive to remain in the employ of the Employer and in consideration of the Executive’s agreeing to remain in the employ of the Employer, the parties desire to specify the severance benefits which shall be due to the Executive in the event that his employment with the Employer is terminated under specified circumstances; and

WHEREAS, the Executive is willing to serve the Bank on the terms and conditions hereinafter set forth.

NOW THEREFORE, in consideration of the premises and the mutual agreements herein contained, the parties hereby agree as follows:

1.Definitions.  The following words and terms shall have the meanings set forth below for the purposes of this Agreement:

(a)Cause. Termination of the Executive’s employment for “Cause” shall mean termination because of personal dishonesty, incompetence, willful misconduct, breach of fiduciary duty involving personal profit, intentional failure to perform stated duties, willful violation of any law, rule or regulation (other than traffic violations or similar offenses) or final cease-and-desist order, willful conduct which is materially detrimental (monetarily or otherwise) to the Employer or material breach of any provision of this Agreement.

(b)Change in Control.  “Change in Control” shall mean a change in the ownership of the Corporation or the Bank, a change in the effective control of the Corporation or the Bank or a change in the ownership of a substantial portion of the assets of the Corporation or the Bank, in each case as provided under Section 409A of the Code and the regulations thereunder.

(c)Code.  “Code” shall mean the Internal Revenue Code of 1986, as amended.

(d)Corporation.  “Corporation” shall mean Southern Missouri Bancorp, Inc., the holding company for the Bank, or any successor thereto.

(e)Date of Termination.  “Date of Termination” shall mean (i) if the Executive’s employment is terminated for Cause, the date on which the Notice of Termination is given, and (ii) if the Executive’s employment is terminated for any other reason, the date specified in such Notice of Termination.

(f)Disability. “Disability” shall mean the Executive (i) is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months, or (ii) is, by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months, receiving income replacement benefits for a period of not less than three (3) months under an accident and health plan covering employees of the Bank.

(g)Good Reason.  “Good Reason” means the occurrence of any of the following events: (i) any material breach of this Agreement by the Employer, (ii) a material diminution in the Executive’s base compensation, (iii) a material diminution in the Executive’s authority, duties or responsibilities, (iv) a material diminution in the authority, duties or responsibilities of the supervisor to whom the Executive is required to report, or (v) a change of more than thirty (30) miles in the geographic location at which the Executive performs his services as of the date of this Agreement; provided, however, that prior to any termination of employment for Good Reason, the Executive must first provide written notice to the Employer within ninety (90) days of the initial existence of the condition, describing the existence of such condition, and the Employer shall thereafter have the right to remedy the condition within thirty (30) days of the date the Employer received the written notice from the Executive.  If the Employer remedies the condition within such thirty (30) day cure period, then no Good Reason shall be deemed to exist with respect to such condition.  If the Employer does not remedy the condition within such thirty (30) day cure period, then the Executive may deliver a Notice of Termination for Good Reason at any time within sixty (60) days following the expiration of such cure period.

(h)Notice of Termination.  Any purported termination of the Executive’s employment by the Employer for any reason, including without limitation for Cause, Disability or Retirement, or by the Executive for any reason, including without limitation for Good Reason, shall be communicated by a written “Notice of Termination” to the other party hereto.  For purposes of this Agreement, a “Notice of Termination” shall mean a dated notice which (i) indicates the specific termination provision in this Agreement relied upon, (ii) sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive’s employment under the provision so indicated, (iii) specifies a Date of Termination, which shall be not less than thirty (30) nor more than ninety (90) days after such Notice of Termination is given, except in the case of the Employer’s termination of the Executive’s employment for Cause, which shall be effective immediately; and (iv) is given in the manner specified in Section 8 hereof.

(i)Retirement.  “Retirement” shall mean voluntary termination by the Executive in accordance with the Employer’s retirement policies, including early retirement, generally applicable to the Employer’s salaried employees.

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2.Term of Agreement.

Subject to the terms hereof, the term of this Agreement shall commence on the date hereof and terminate on December 31, 2020. Beginning on December 31, 2020 and on each December 31^st thereafter, the term of this Agreement shall be extended for a period of one additional year, unless either the Employer or the Executive has given notice to the other party hereto in writing at least 60 days prior to such annual renewal date that the term of this Agreement shall not be extended further; provided, however, notwithstanding the foregoing to the contrary, if a Change in Control occurs during the term of this Agreement, then the remaining term of this Agreement shall be automatically extended until the one-year anniversary of the completion of the Change in Control. If any party gives timely notice that the term will not be extended as of any such December 31^st, then this Agreement shall terminate at the conclusion of its remaining term.  References herein to the term of this Agreement shall refer both to the initial term and successive terms.

3.Benefits Upon Termination in Connection with or Following a Change in Control.

(a)If the Executive’s employment is terminated by the Employer in connection with or within one year following a Change in Control by (i) the Employer other than for Cause, Disability, Retirement or as a result of Executive’s death or (ii) the Executive for Good Reason, then the Employer shall, subject to the provisions of Section 3(b) and Section 4 hereof, if applicable:

(1) pay to the Executive, in a lump sum within five (5) business days following the Date of Termination, a cash severance amount equal to two times the Executive’s “base amount” as defined in Section 280G of the Code;

(2)maintain and provide for a period ending at the earlier of (i) the two year anniversary of the Date of Termination or (ii) the date of the Executive’s full-time employment by another employer (provided that the Executive is entitled under the terms of such employment to benefits substantially similar to those described in this subparagraph (2)), at no cost to the Executive, the continued participation of the Executive (including his dependents who are covered by the Bank as of the Date of Termination) in all group insurance, life insurance, health, dental, vision and accident insurance, and disability insurance plans offered by the Employer in which the Executive and his covered dependents were participating immediately prior to the Date of Termination, in each case subject to clauses (3) and (4) of this Section 3(a);

(3)in the event that the continued participation of the Executive and his covered dependents in any group insurance plan as provided in clause (2) of this Section 3(a) is barred or would trigger the payment of an excise tax under Section 4980D of the Code, or during the period set forth in Section 3(a)(2) any such group insurance plan is discontinued, then the Bank shall at its election either (i) arrange to provide the Executive and his covered dependents with alternative benefits substantially similar to those which the Executive and his covered dependents were entitled to receive under such group insurance plans immediately prior to the Date of Termination, provided that the alternative benefits do not trigger the payment of an excise tax under Section 4980D of the Code, or (ii) pay to the

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Executive within 10 business days following the Date of Termination (or within 10 business days following the discontinuation of the benefits if later) a lump sum cash amount equal to the projected cost to the Bank of providing continued coverage to the Executive and his covered dependents until the two year anniversary of the Date of Termination, with the projected cost to be based on the costs being incurred immediately prior to the Date of Termination (or the discontinuation of the benefits if later), as increased by 15% on each scheduled renewal date; and

(4)any insurance premiums payable by the Bank pursuant to subsections (2) or (3) of this Section 3(a) shall be payable at such times and in such amounts (except that the Employer shall also pay any employee portion of the premiums) as if the Executive was still an employee of the Bank (or its successor), subject to any increases in such amounts imposed by the insurance company or COBRA, and the amount of insurance premiums required to be paid by the Bank in any taxable year shall not affect the amount of insurance premiums required to be paid by the Bank in any other taxable year.

(b)The Bank’s obligation to pay severance and provide insurance benefits under Section 3(a) above is expressly conditioned upon the Executive executing and not revoking a general release to be provided to him by the Bank, which would release any and all claims, charges and complaints which the Executive may have against the Bank, its affiliates, assigns and successors, as well as the directors, officers and employees of such entities, in connection with the Executive’s employment and the termination of such employment.  Notwithstanding any other provision contained in this Agreement, in the event the time period that the Executive has to consider the terms of such general release (including any revocation period under such release) commences in one calendar year and ends in the succeeding calendar year, then no cash payments shall be made under Section 3(a) until the succeeding calendar year.

4.Limitation of Benefits under Certain Circumstances.  If the payments and benefits pursuant to Section 3 hereof, either alone or together with other payments and benefits which the Executive has the right to receive from the Employer and the Corporation or their successors, would constitute a “parachute payment” under Section 280G of the Code, then the payments and benefits payable by the Employer pursuant to Section 3 hereof shall be reduced by the minimum amount necessary to result in no portion of the payments and benefits payable by the Employer under Section 3 being non‑deductible to the Employer pursuant to Section 280G of the Code and subject to the excise tax imposed under Section 4999 of the Code.  If the payments and benefits under Section 3 are required to be reduced, the cash severance shall be reduced first, followed by a reduction in the insurance benefits.  The determination of any reduction in the payments and benefits to be made pursuant to Section 3 shall be based upon the opinion of independent tax counsel selected by the Employer and paid by the Employer.  Such counsel shall promptly prepare the foregoing opinion, but in no event later than thirty (30) days from the Date of Termination, and may use such actuaries as such counsel deems necessary or advisable for the purpose.  Nothing contained in this Section 4 shall result in a reduction of any payments or benefits to which the Executive may be entitled upon termination of employment under any circumstances other than as specified in this Section 4, or a reduction in the payments and benefits specified in Section 3 below zero.

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5.Mitigation; Exclusivity of Benefits.

(a)The Executive shall not be required to mitigate the amount of any benefits hereunder by seeking other employment or otherwise, nor shall the amount of any such benefits be reduced by any compensation earned by the Executive as a result of employment by another employer after the Date of Termination or otherwise, except as set forth in Section 3(a)(2)(ii) above.

(b)The specific arrangements referred to herein are not intended to exclude any other benefits which may be available to the Executive upon a termination of employment with the Employer pursuant to employee benefit plans of the Employer or otherwise.

6.Withholding.  All payments required to be made by the Employer hereunder to the Executive shall be subject to the withholding of such amounts, if any, relating to tax and other payroll deductions as the Employer may reasonably determine should be withheld pursuant to any applicable law or regulation.

7.Assignability.  The Employer may assign this Agreement and its rights and obligations hereunder in whole, but not in part, to any corporation, bank or other entity with or into which the Employer may hereafter merge or consolidate or to which the Employer may transfer all or substantially all of its assets, if in any such case said corporation, bank or other entity shall by operation of law or expressly in writing assume all obligations of the Employer hereunder as fully as if it had been originally made a party hereto, but may not otherwise assign this Agreement or its rights and obligations hereunder.  The Executive may not assign or transfer this Agreement or any rights or obligations hereunder.

8.Notice.  For the purposes of this Agreement, notices and all other communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by certified or registered mail, return receipt requested, postage prepaid, addressed to the respective addresses set forth below:

To the Employer:	President and Chief Executive Officer
	Southern Bank
	2991 Oak Grove Road
	Poplar Bluff, Missouri 63901
To the Executive:	Justin Cox
	At the address last appearing on the personnel records of the Employer

9.Non-Solicitation Provisions. The Executive agrees that during the term of this Agreement and for the two year period immediately following the Date of Termination (the “Non-Solicitation Period”), the Executive will not (i) solicit or induce, or cause others to solicit or induce, any employee of the Bank or any of its affiliates or subsidiaries to leave the employment of such entities, or (ii) solicit (whether by mail, telephone, personal meeting or any other means, excluding general solicitations of the public that are not based in whole or in part on any list of customers of

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the Bank or any of its affiliates or subsidiaries) any customer of the Bank or any of its affiliates or subsidiaries to transact business with any other entity which is engaged in any line of business conducted by the Bank or any of its affiliates or subsidiaries during the Non-Solicitation Period (including but not limited to entities which lend money and take deposits), or to reduce or refrain from doing any business with the Bank or its affiliates or subsidiaries, or interfere with or damage (or attempt to interfere with or damage) any relationship between the Bank or its affiliates or subsidiaries and any such customers.  All references in this Section 9 to the Bank or any of its affiliates or subsidiaries shall include any successors of such entities.

10.Amendment; Waiver.  No provisions of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing and signed by the Executive and such officer or officers as may be specifically designated by the Board of Directors of the Employer to sign on its behalf.  No waiver by any party hereto at any time of any breach by any other party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time.  In addition, notwithstanding anything in this Agreement to the contrary, the Employer may amend in good faith any terms of this Agreement, including retroactively, in order to comply with Section 409A of the Code.

11.Governing Law.  The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the United States where applicable and otherwise by the substantive laws of the State of Missouri.

12.Nature of Obligations.

(a)Nothing contained herein shall be deemed to create other than a terminable at will employment relationship between the Employer and the Executive, and the Employer may terminate the Executive’s employment at any time, subject to providing any payments specified herein in accordance with the terms hereof.

(b)Nothing contained herein shall create or require the Employer to create a trust of any kind to fund any benefits which may be payable hereunder, and to the extent that the Executive acquires a right to receive benefits from the Employer hereunder, such right shall be no greater than the right of any unsecured general creditor of the Employer.

13.Headings.  The section headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.

14.Validity.  The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provisions of this Agreement, which shall remain in full force and effect.

15.Changes in Statutes or Regulations. If any statutory or regulatory provision referenced herein is subsequently changed or re-numbered, or is replaced by a separate provision, then the references in this Agreement to such statutory or regulatory provision shall be deemed to be a reference to such section as amended, re-numbered or replaced.

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16.Counterparts.  This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original and all of which together will constitute one and the same instrument.

17.Regulatory Prohibition.  Notwithstanding any other provision of this Agreement to the contrary, any renewal of this Agreement and any payments made to the Executive pursuant to this Agreement, or otherwise, are subject to and conditioned upon their compliance with Section 18(k) of the Federal Deposit Insurance Act (12 U.S.C. §1828(k)) and the regulations promulgated thereunder, including 12 C.F.R. Part 359.  In the event of the Executive’s termination of employment with the Bank for Cause, all employment relationships and managerial duties with the Bank shall immediately cease regardless of whether the Executive is in the employ of the Corporation following such termination.  Furthermore, following such termination for Cause, the Executive will not, directly or indirectly, influence or participate in the affairs or the operations of the Bank.

18.Payment of Costs and Legal Fees and Reinstatement of Benefits.  In the event any dispute or controversy arising under or in connection with the Executive’s termination is resolved in favor of the Executive, whether by judgment, arbitration or settlement, the Executive shall be entitled to the payment of (a) all legal fees incurred by the Executive in resolving such dispute or controversy, and (b) any back-pay, including base salary, bonuses and any other cash compensation, fringe benefits and any compensation and benefits due to the Executive under this Agreement.

19.Entire Agreement.  This Agreement embodies the entire agreement between the Employer and the Executive with respect to the matters agreed to herein. All prior agreements, if any, between the Employer and the Executive with respect to the matters agreed to herein are hereby superseded and shall have no force or effect.

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

Attest:		SOUTHERN BANK
By:	/s/ Lorna Brannum		/s/ Greg A. Steffens
Name:	Lorna Brannum	By:	Greg A. Steffens
Title:	Secretary	Its:	President and Chief Executive Officer
		EXECUTIVE
		By:	/s/ Justin Cox
		Name:	Justin Cox

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EX-10.4(VI)

EXHIBIT 10.4(vi)

SOUTHERN BANK

SEVERANCE AGREEMENT

This Severance Agreement (the “Agreement”) dated as of November 7, 2019 is between Southern Bank, a Missouri state chartered trust company with banking powers (the “Bank” or the “Employer”), and Mark Hecker (the “Executive”).

WHEREAS, the Executive is presently employed as Chief Credit Officer of the Bank;

WHEREAS, the Employer desires to be ensured of the Executive’s continued active participation in the business of the Employer;

WHEREAS, in order to induce the Executive to remain in the employ of the Employer and in consideration of the Executive’s agreeing to remain in the employ of the Employer, the parties desire to specify the severance benefits which shall be due to the Executive in the event that his employment with the Employer is terminated under specified circumstances; and

WHEREAS, the Executive is willing to serve the Bank on the terms and conditions hereinafter set forth.

NOW THEREFORE, in consideration of the premises and the mutual agreements herein contained, the parties hereby agree as follows:

1.Definitions.  The following words and terms shall have the meanings set forth below for the purposes of this Agreement:

(a)Cause. Termination of the Executive’s employment for “Cause” shall mean termination because of personal dishonesty, incompetence, willful misconduct, breach of fiduciary duty involving personal profit, intentional failure to perform stated duties, willful violation of any law, rule or regulation (other than traffic violations or similar offenses) or final cease-and-desist order, willful conduct which is materially detrimental (monetarily or otherwise) to the Employer or material breach of any provision of this Agreement.

(b)Change in Control.  “Change in Control” shall mean a change in the ownership of the Corporation or the Bank, a change in the effective control of the Corporation or the Bank or a change in the ownership of a substantial portion of the assets of the Corporation or the Bank, in each case as provided under Section 409A of the Code and the regulations thereunder.

(c)Code.  “Code” shall mean the Internal Revenue Code of 1986, as amended.

(d)Corporation.  “Corporation” shall mean Southern Missouri Bancorp, Inc., the holding company for the Bank, or any successor thereto.

(e)Date of Termination.  “Date of Termination” shall mean (i) if the Executive’s employment is terminated for Cause, the date on which the Notice of Termination is given, and (ii) if the Executive’s employment is terminated for any other reason, the date specified in such Notice of Termination.

(f)Disability. “Disability” shall mean the Executive (i) is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months, or (ii) is, by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months, receiving income replacement benefits for a period of not less than three (3) months under an accident and health plan covering employees of the Bank.

(g)Good Reason.  “Good Reason” means the occurrence of any of the following events: (i) any material breach of this Agreement by the Employer, (ii) a material diminution in the Executive’s base compensation, (iii) a material diminution in the Executive’s authority, duties or responsibilities, (iv) a material diminution in the authority, duties or responsibilities of the supervisor to whom the Executive is required to report, or (v) a change of more than thirty (30) miles in the geographic location at which the Executive performs his services as of the date of this Agreement; provided, however, that prior to any termination of employment for Good Reason, the Executive must first provide written notice to the Employer within ninety (90) days of the initial existence of the condition, describing the existence of such condition, and the Employer shall thereafter have the right to remedy the condition within thirty (30) days of the date the Employer received the written notice from the Executive.  If the Employer remedies the condition within such thirty (30) day cure period, then no Good Reason shall be deemed to exist with respect to such condition.  If the Employer does not remedy the condition within such thirty (30) day cure period, then the Executive may deliver a Notice of Termination for Good Reason at any time within sixty (60) days following the expiration of such cure period.

(h)Notice of Termination.  Any purported termination of the Executive’s employment by the Employer for any reason, including without limitation for Cause, Disability or Retirement, or by the Executive for any reason, including without limitation for Good Reason, shall be communicated by a written “Notice of Termination” to the other party hereto.  For purposes of this Agreement, a “Notice of Termination” shall mean a dated notice which (i) indicates the specific termination provision in this Agreement relied upon, (ii) sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive’s employment under the provision so indicated, (iii) specifies a Date of Termination, which shall be not less than thirty (30) nor more than ninety (90) days after such Notice of Termination is given, except in the case of the Employer’s termination of the Executive’s employment for Cause, which shall be effective immediately; and (iv) is given in the manner specified in Section 8 hereof.

(i)Retirement.  “Retirement” shall mean voluntary termination by the Executive in accordance with the Employer’s retirement policies, including early retirement, generally applicable to the Employer’s salaried employees.

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2.Term of Agreement.

Subject to the terms hereof, the term of this Agreement shall commence on the date hereof and terminate on December 31, 2020. Beginning on December 31, 2020 and on each December 31^st thereafter, the term of this Agreement shall be extended for a period of one additional year, unless either the Employer or the Executive has given notice to the other party hereto in writing at least 60 days prior to such annual renewal date that the term of this Agreement shall not be extended further; provided, however, notwithstanding the foregoing to the contrary, if a Change in Control occurs during the term of this Agreement, then the remaining term of this Agreement shall be automatically extended until the one-year anniversary of the completion of the Change in Control. If any party gives timely notice that the term will not be extended as of any such December 31^st, then this Agreement shall terminate at the conclusion of its remaining term.  References herein to the term of this Agreement shall refer both to the initial term and successive terms.

3.Benefits Upon Termination in Connection with or Following a Change in Control.

(a)If the Executive’s employment is terminated by the Employer in connection with or within one year following a Change in Control by (i) the Employer other than for Cause, Disability, Retirement or as a result of Executive’s death or (ii) the Executive for Good Reason, then the Employer shall, subject to the provisions of Section 3(b) and Section 4 hereof, if applicable:

(1) pay to the Executive, in a lump sum within five (5) business days following the Date of Termination, a cash severance amount equal to one times the Executive’s “base amount” as defined in Section 280G of the Code;

(2)maintain and provide for a period ending at the earlier of (i) the one year anniversary of the Date of Termination or (ii) the date of the Executive’s full-time employment by another employer (provided that the Executive is entitled under the terms of such employment to benefits substantially similar to those described in this subparagraph (2)), at no cost to the Executive, the continued participation of the Executive (including his dependents who are covered by the Bank as of the Date of Termination) in all group insurance, life insurance, health, dental, vision and accident insurance, and disability insurance plans offered by the Employer in which the Executive and his covered dependents were participating immediately prior to the Date of Termination, in each case subject to clauses (3) and (4) of this Section 3(a);

(3)in the event that the continued participation of the Executive and his covered dependents in any group insurance plan as provided in clause (2) of this Section 3(a) is barred or would trigger the payment of an excise tax under Section 4980D of the Code, or during the period set forth in Section 3(a)(2) any such group insurance plan is discontinued, then the Bank shall at its election either (i) arrange to provide the Executive and his covered dependents with alternative benefits substantially similar to those which the Executive and his covered dependents were entitled to receive under such group insurance plans immediately prior to the Date of Termination, provided that the alternative benefits do not trigger the payment of an excise tax under Section 4980D of the Code, or (ii) pay to the

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Executive within 10 business days following the Date of Termination (or within 10 business days following the discontinuation of the benefits if later) a lump sum cash amount equal to the projected cost to the Bank of providing continued coverage to the Executive and his covered dependents until the one year anniversary of the Date of Termination, with the projected cost to be based on the costs being incurred immediately prior to the Date of Termination (or the discontinuation of the benefits if later), as increased by 15% on each scheduled renewal date; and

(4)any insurance premiums payable by the Bank pursuant to subsections (2) or (3) of this Section 3(a) shall be payable at such times and in such amounts (except that the Employer shall also pay any employee portion of the premiums) as if the Executive was still an employee of the Bank (or its successor), subject to any increases in such amounts imposed by the insurance company or COBRA, and the amount of insurance premiums required to be paid by the Bank in any taxable year shall not affect the amount of insurance premiums required to be paid by the Bank in any other taxable year.

(b)The Bank’s obligation to pay severance and provide insurance benefits under Section 3(a) above is expressly conditioned upon the Executive executing and not revoking a general release to be provided to him by the Bank, which would release any and all claims, charges and complaints which the Executive may have against the Bank, its affiliates, assigns and successors, as well as the directors, officers and employees of such entities, in connection with the Executive’s employment and the termination of such employment.  Notwithstanding any other provision contained in this Agreement, in the event the time period that the Executive has to consider the terms of such general release (including any revocation period under such release) commences in one calendar year and ends in the succeeding calendar year, then no cash payments shall be made under Section 3(a) until the succeeding calendar year.

4.Limitation of Benefits under Certain Circumstances.  If the payments and benefits pursuant to Section 3 hereof, either alone or together with other payments and benefits which the Executive has the right to receive from the Employer and the Corporation or their successors, would constitute a “parachute payment” under Section 280G of the Code, then the payments and benefits payable by the Employer pursuant to Section 3 hereof shall be reduced by the minimum amount necessary to result in no portion of the payments and benefits payable by the Employer under Section 3 being non‑deductible to the Employer pursuant to Section 280G of the Code and subject to the excise tax imposed under Section 4999 of the Code.  If the payments and benefits under Section 3 are required to be reduced, the cash severance shall be reduced first, followed by a reduction in the insurance benefits.  The determination of any reduction in the payments and benefits to be made pursuant to Section 3 shall be based upon the opinion of independent tax counsel selected by the Employer and paid by the Employer.  Such counsel shall promptly prepare the foregoing opinion, but in no event later than thirty (30) days from the Date of Termination, and may use such actuaries as such counsel deems necessary or advisable for the purpose.  Nothing contained in this Section 4 shall result in a reduction of any payments or benefits to which the Executive may be entitled upon termination of employment under any circumstances other than as specified in this Section 4, or a reduction in the payments and benefits specified in Section 3 below zero.

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5.Mitigation; Exclusivity of Benefits.

(a)The Executive shall not be required to mitigate the amount of any benefits hereunder by seeking other employment or otherwise, nor shall the amount of any such benefits be reduced by any compensation earned by the Executive as a result of employment by another employer after the Date of Termination or otherwise, except as set forth in Section 3(a)(2)(ii) above.

(b)The specific arrangements referred to herein are not intended to exclude any other benefits which may be available to the Executive upon a termination of employment with the Employer pursuant to employee benefit plans of the Employer or otherwise.

6.Withholding.  All payments required to be made by the Employer hereunder to the Executive shall be subject to the withholding of such amounts, if any, relating to tax and other payroll deductions as the Employer may reasonably determine should be withheld pursuant to any applicable law or regulation.

7.Assignability.  The Employer may assign this Agreement and its rights and obligations hereunder in whole, but not in part, to any corporation, bank or other entity with or into which the Employer may hereafter merge or consolidate or to which the Employer may transfer all or substantially all of its assets, if in any such case said corporation, bank or other entity shall by operation of law or expressly in writing assume all obligations of the Employer hereunder as fully as if it had been originally made a party hereto, but may not otherwise assign this Agreement or its rights and obligations hereunder.  The Executive may not assign or transfer this Agreement or any rights or obligations hereunder.

8.Notice.  For the purposes of this Agreement, notices and all other communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by certified or registered mail, return receipt requested, postage prepaid, addressed to the respective addresses set forth below:

To the Employer:	President and Chief Executive Officer
	Southern Bank
	2991 Oak Grove Road
	Poplar Bluff, Missouri 63901
To the Executive:	Mark Hecker
	At the address last appearing on the personnel records of the Employer

9.Non-Solicitation Provisions. The Executive agrees that during the term of this Agreement and for the one year period immediately following the Date of Termination (the “Non-Solicitation Period”), the Executive will not (i) solicit or induce, or cause others to solicit or induce, any employee of the Bank or any of its affiliates or subsidiaries to leave the employment of such entities, or (ii) solicit (whether by mail, telephone, personal meeting or any other means, excluding general solicitations of the public that are not based in whole or in part on any list of customers of

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the Bank or any of its affiliates or subsidiaries) any customer of the Bank or any of its affiliates or subsidiaries to transact business with any other entity which is engaged in any line of business conducted by the Bank or any of its affiliates or subsidiaries during the Non-Solicitation Period (including but not limited to entities which lend money and take deposits), or to reduce or refrain from doing any business with the Bank or its affiliates or subsidiaries, or interfere with or damage (or attempt to interfere with or damage) any relationship between the Bank or its affiliates or subsidiaries and any such customers.  All references in this Section 9 to the Bank or any of its affiliates or subsidiaries shall include any successors of such entities.

10.Amendment; Waiver.  No provisions of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing and signed by the Executive and such officer or officers as may be specifically designated by the Board of Directors of the Employer to sign on its behalf.  No waiver by any party hereto at any time of any breach by any other party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time.  In addition, notwithstanding anything in this Agreement to the contrary, the Employer may amend in good faith any terms of this Agreement, including retroactively, in order to comply with Section 409A of the Code.

11.Governing Law.  The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the United States where applicable and otherwise by the substantive laws of the State of Missouri.

12.Nature of Obligations.

(a)Nothing contained herein shall be deemed to create other than a terminable at will employment relationship between the Employer and the Executive, and the Employer may terminate the Executive’s employment at any time, subject to providing any payments specified herein in accordance with the terms hereof.

(b)Nothing contained herein shall create or require the Employer to create a trust of any kind to fund any benefits which may be payable hereunder, and to the extent that the Executive acquires a right to receive benefits from the Employer hereunder, such right shall be no greater than the right of any unsecured general creditor of the Employer.

13.Headings.  The section headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.

14.Validity.  The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provisions of this Agreement, which shall remain in full force and effect.

15.Changes in Statutes or Regulations. If any statutory or regulatory provision referenced herein is subsequently changed or re-numbered, or is replaced by a separate provision, then the references in this Agreement to such statutory or regulatory provision shall be deemed to be a reference to such section as amended, re-numbered or replaced.

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16.Counterparts.  This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original and all of which together will constitute one and the same instrument.

17.Regulatory Prohibition.  Notwithstanding any other provision of this Agreement to the contrary, any renewal of this Agreement and any payments made to the Executive pursuant to this Agreement, or otherwise, are subject to and conditioned upon their compliance with Section 18(k) of the Federal Deposit Insurance Act (12 U.S.C. §1828(k)) and the regulations promulgated thereunder, including 12 C.F.R. Part 359.  In the event of the Executive’s termination of employment with the Bank for Cause, all employment relationships and managerial duties with the Bank shall immediately cease regardless of whether the Executive is in the employ of the Corporation following such termination.  Furthermore, following such termination for Cause, the Executive will not, directly or indirectly, influence or participate in the affairs or the operations of the Bank.

18.Payment of Costs and Legal Fees and Reinstatement of Benefits.  In the event any dispute or controversy arising under or in connection with the Executive’s termination is resolved in favor of the Executive, whether by judgment, arbitration or settlement, the Executive shall be entitled to the payment of (a) all legal fees incurred by the Executive in resolving such dispute or controversy, and (b) any back-pay, including base salary, bonuses and any other cash compensation, fringe benefits and any compensation and benefits due to the Executive under this Agreement.

19.Entire Agreement.  This Agreement embodies the entire agreement between the Employer and the Executive with respect to the matters agreed to herein. All prior agreements, if any, between the Employer and the Executive with respect to the matters agreed to herein are hereby superseded and shall have no force or effect.

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

Attest:		SOUTHERN BANK
By:	/s/ Lorna Brannum		/s/ Greg A. Steffens
Name:	Lorna Brannum	By:	Greg A. Steffens
Title:	Secretary	Its:	President and Chief Executive Officer
		EXECUTIVE
		By:	/s/ Mark Hecker
		Name:	Mark Hecker

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EX-10.4(VII)

EXHIBIT 10.4(vii)

SOUTHERN BANK

SEVERANCE AGREEMENT

This Severance Agreement (the “Agreement”) dated as of November 7, 2019 is between Southern Bank, a Missouri state chartered trust company with banking powers (the “Bank” or the “Employer”), and Rick Windes (the “Executive”).

WHEREAS, the Executive is presently employed as Chief Lending Officer of the Bank;

WHEREAS, the Employer desires to be ensured of the Executive’s continued active participation in the business of the Employer;

WHEREAS, in order to induce the Executive to remain in the employ of the Employer and in consideration of the Executive’s agreeing to remain in the employ of the Employer, the parties desire to specify the severance benefits which shall be due to the Executive in the event that his employment with the Employer is terminated under specified circumstances; and

WHEREAS, the Executive is willing to serve the Bank on the terms and conditions hereinafter set forth.

NOW THEREFORE, in consideration of the premises and the mutual agreements herein contained, the parties hereby agree as follows:

1.Definitions.  The following words and terms shall have the meanings set forth below for the purposes of this Agreement:

(a)Cause. Termination of the Executive’s employment for “Cause” shall mean termination because of personal dishonesty, incompetence, willful misconduct, breach of fiduciary duty involving personal profit, intentional failure to perform stated duties, willful violation of any law, rule or regulation (other than traffic violations or similar offenses) or final cease-and-desist order, willful conduct which is materially detrimental (monetarily or otherwise) to the Employer or material breach of any provision of this Agreement.

(b)Change in Control.  “Change in Control” shall mean a change in the ownership of the Corporation or the Bank, a change in the effective control of the Corporation or the Bank or a change in the ownership of a substantial portion of the assets of the Corporation or the Bank, in each case as provided under Section 409A of the Code and the regulations thereunder.

(c)Code.  “Code” shall mean the Internal Revenue Code of 1986, as amended.

(d)Corporation.  “Corporation” shall mean Southern Missouri Bancorp, Inc., the holding company for the Bank, or any successor thereto.

(e)Date of Termination.  “Date of Termination” shall mean (i) if the Executive’s employment is terminated for Cause, the date on which the Notice of Termination is given, and (ii) if the Executive’s employment is terminated for any other reason, the date specified in such Notice of Termination.

(f)Disability. “Disability” shall mean the Executive (i) is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months, or (ii) is, by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months, receiving income replacement benefits for a period of not less than three (3) months under an accident and health plan covering employees of the Bank.

(g)Good Reason.  “Good Reason” means the occurrence of any of the following events: (i) any material breach of this Agreement by the Employer, (ii) a material diminution in the Executive’s base compensation, (iii) a material diminution in the Executive’s authority, duties or responsibilities, (iv) a material diminution in the authority, duties or responsibilities of the supervisor to whom the Executive is required to report, or (v) a change of more than thirty (30) miles in the geographic location at which the Executive performs his services as of the date of this Agreement; provided, however, that prior to any termination of employment for Good Reason, the Executive must first provide written notice to the Employer within ninety (90) days of the initial existence of the condition, describing the existence of such condition, and the Employer shall thereafter have the right to remedy the condition within thirty (30) days of the date the Employer received the written notice from the Executive.  If the Employer remedies the condition within such thirty (30) day cure period, then no Good Reason shall be deemed to exist with respect to such condition.  If the Employer does not remedy the condition within such thirty (30) day cure period, then the Executive may deliver a Notice of Termination for Good Reason at any time within sixty (60) days following the expiration of such cure period.

(h)Notice of Termination.  Any purported termination of the Executive’s employment by the Employer for any reason, including without limitation for Cause, Disability or Retirement, or by the Executive for any reason, including without limitation for Good Reason, shall be communicated by a written “Notice of Termination” to the other party hereto.  For purposes of this Agreement, a “Notice of Termination” shall mean a dated notice which (i) indicates the specific termination provision in this Agreement relied upon, (ii) sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive’s employment under the provision so indicated, (iii) specifies a Date of Termination, which shall be not less than thirty (30) nor more than ninety (90) days after such Notice of Termination is given, except in the case of the Employer’s termination of the Executive’s employment for Cause, which shall be effective immediately; and (iv) is given in the manner specified in Section 8 hereof.

(i)Retirement.  “Retirement” shall mean voluntary termination by the Executive in accordance with the Employer’s retirement policies, including early retirement, generally applicable to the Employer’s salaried employees.

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2.Term of Agreement.

Subject to the terms hereof, the term of this Agreement shall commence on the date hereof and terminate on December 31, 2020. Beginning on December 31, 2020 and on each December 31^st thereafter, the term of this Agreement shall be extended for a period of one additional year, unless either the Employer or the Executive has given notice to the other party hereto in writing at least 60 days prior to such annual renewal date that the term of this Agreement shall not be extended further; provided, however, notwithstanding the foregoing to the contrary, if a Change in Control occurs during the term of this Agreement, then the remaining term of this Agreement shall be automatically extended until the one-year anniversary of the completion of the Change in Control. If any party gives timely notice that the term will not be extended as of any such December 31^st, then this Agreement shall terminate at the conclusion of its remaining term.  References herein to the term of this Agreement shall refer both to the initial term and successive terms.

3.Benefits Upon Termination in Connection with or Following a Change in Control.

(a)If the Executive’s employment is terminated by the Employer in connection with or within one year following a Change in Control by (i) the Employer other than for Cause, Disability, Retirement or as a result of Executive’s death or (ii) the Executive for Good Reason, then the Employer shall, subject to the provisions of Section 3(b) and Section 4 hereof, if applicable:

(1) pay to the Executive, in a lump sum within five (5) business days following the Date of Termination, a cash severance amount equal to one times the Executive’s “base amount” as defined in Section 280G of the Code;

(2)maintain and provide for a period ending at the earlier of (i) the one year anniversary of the Date of Termination or (ii) the date of the Executive’s full-time employment by another employer (provided that the Executive is entitled under the terms of such employment to benefits substantially similar to those described in this subparagraph (2)), at no cost to the Executive, the continued participation of the Executive (including his dependents who are covered by the Bank as of the Date of Termination) in all group insurance, life insurance, health, dental, vision and accident insurance, and disability insurance plans offered by the Employer in which the Executive and his covered dependents were participating immediately prior to the Date of Termination, in each case subject to clauses (3) and (4) of this Section 3(a);

(3)in the event that the continued participation of the Executive and his covered dependents in any group insurance plan as provided in clause (2) of this Section 3(a) is barred or would trigger the payment of an excise tax under Section 4980D of the Code, or during the period set forth in Section 3(a)(2) any such group insurance plan is discontinued, then the Bank shall at its election either (i) arrange to provide the Executive and his covered dependents with alternative benefits substantially similar to those which the Executive and his covered dependents were entitled to receive under such group insurance plans immediately prior to the Date of Termination, provided that the alternative benefits do not

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trigger the payment of an excise tax under Section 4980D of the Code, or (ii) pay to the Executive within 10 business days following the Date of Termination (or within 10 business days following the discontinuation of the benefits if later) a lump sum cash amount equal to the projected cost to the Bank of providing continued coverage to the Executive and his covered dependents until the one year anniversary of the Date of Termination, with the projected cost to be based on the costs being incurred immediately prior to the Date of Termination (or the discontinuation of the benefits if later), as increased by 15% on each scheduled renewal date; and

(4)any insurance premiums payable by the Bank pursuant to subsections (2) or (3) of this Section 3(a) shall be payable at such times and in such amounts (except that the Employer shall also pay any employee portion of the premiums) as if the Executive was still an employee of the Bank (or its successor), subject to any increases in such amounts imposed by the insurance company or COBRA, and the amount of insurance premiums required to be paid by the Bank in any taxable year shall not affect the amount of insurance premiums required to be paid by the Bank in any other taxable year.

(b)The Bank’s obligation to pay severance and provide insurance benefits under Section 3(a) above is expressly conditioned upon the Executive executing and not revoking a general release to be provided to him by the Bank, which would release any and all claims, charges and complaints which the Executive may have against the Bank, its affiliates, assigns and successors, as well as the directors, officers and employees of such entities, in connection with the Executive’s employment and the termination of such employment.  Notwithstanding any other provision contained in this Agreement, in the event the time period that the Executive has to consider the terms of such general release (including any revocation period under such release) commences in one calendar year and ends in the succeeding calendar year, then no cash payments shall be made under Section 3(a) until the succeeding calendar year.

4.Limitation of Benefits under Certain Circumstances.  If the payments and benefits pursuant to Section 3 hereof, either alone or together with other payments and benefits which the Executive has the right to receive from the Employer and the Corporation or their successors, would constitute a “parachute payment” under Section 280G of the Code, then the payments and benefits payable by the Employer pursuant to Section 3 hereof shall be reduced by the minimum amount necessary to result in no portion of the payments and benefits payable by the Employer under Section 3 being non‑deductible to the Employer pursuant to Section 280G of the Code and subject to the excise tax imposed under Section 4999 of the Code.  If the payments and benefits under Section 3 are required to be reduced, the cash severance shall be reduced first, followed by a reduction in the insurance benefits.  The determination of any reduction in the payments and benefits to be made pursuant to Section 3 shall be based upon the opinion of independent tax counsel selected by the Employer and paid by the Employer.  Such counsel shall promptly prepare the foregoing opinion, but in no event later than thirty (30) days from the Date of Termination, and may use such actuaries as such counsel deems necessary or advisable for the purpose.  Nothing contained in this Section 4 shall result in a reduction of any payments or benefits to which the Executive may be entitled upon termination of employment under any circumstances other than as specified in this Section 4, or a reduction in the payments and benefits specified in Section 3 below zero.

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5.Mitigation; Exclusivity of Benefits.

(a)The Executive shall not be required to mitigate the amount of any benefits hereunder by seeking other employment or otherwise, nor shall the amount of any such benefits be reduced by any compensation earned by the Executive as a result of employment by another employer after the Date of Termination or otherwise, except as set forth in Section 3(a)(2)(ii) above.

(b)The specific arrangements referred to herein are not intended to exclude any other benefits which may be available to the Executive upon a termination of employment with the Employer pursuant to employee benefit plans of the Employer or otherwise.

6.Withholding.  All payments required to be made by the Employer hereunder to the Executive shall be subject to the withholding of such amounts, if any, relating to tax and other payroll deductions as the Employer may reasonably determine should be withheld pursuant to any applicable law or regulation.

7.Assignability.  The Employer may assign this Agreement and its rights and obligations hereunder in whole, but not in part, to any corporation, bank or other entity with or into which the Employer may hereafter merge or consolidate or to which the Employer may transfer all or substantially all of its assets, if in any such case said corporation, bank or other entity shall by operation of law or expressly in writing assume all obligations of the Employer hereunder as fully as if it had been originally made a party hereto, but may not otherwise assign this Agreement or its rights and obligations hereunder.  The Executive may not assign or transfer this Agreement or any rights or obligations hereunder.

8.Notice.  For the purposes of this Agreement, notices and all other communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by certified or registered mail, return receipt requested, postage prepaid, addressed to the respective addresses set forth below:

To the Employer:	President and Chief Executive Officer
	Southern Bank
	2991 Oak Grove Road
	Poplar Bluff, Missouri 63901
To the Executive:	Rick Windes
	At the address last appearing on the personnel records of the Employer

9.Non-Solicitation Provisions. The Executive agrees that during the term of this Agreement and for the one year period immediately following the Date of Termination (the “Non-Solicitation Period”), the Executive will not (i) solicit or induce, or cause others to solicit or induce, any employee of the Bank or any of its affiliates or subsidiaries to leave the employment of such entities, or (ii) solicit (whether by mail, telephone, personal meeting or any other means, excluding general solicitations of the public that are not based in whole or in part on any list of customers of

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the Bank or any of its affiliates or subsidiaries) any customer of the Bank or any of its affiliates or subsidiaries to transact business with any other entity which is engaged in any line of business conducted by the Bank or any of its affiliates or subsidiaries during the Non-Solicitation Period (including but not limited to entities which lend money and take deposits), or to reduce or refrain from doing any business with the Bank or its affiliates or subsidiaries, or interfere with or damage (or attempt to interfere with or damage) any relationship between the Bank or its affiliates or subsidiaries and any such customers.  All references in this Section 9 to the Bank or any of its affiliates or subsidiaries shall include any successors of such entities.

10.Amendment; Waiver.  No provisions of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing and signed by the Executive and such officer or officers as may be specifically designated by the Board of Directors of the Employer to sign on its behalf.  No waiver by any party hereto at any time of any breach by any other party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time.  In addition, notwithstanding anything in this Agreement to the contrary, the Employer may amend in good faith any terms of this Agreement, including retroactively, in order to comply with Section 409A of the Code.

11.Governing Law.  The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the United States where applicable and otherwise by the substantive laws of the State of Missouri.

12.Nature of Obligations.

(a)Nothing contained herein shall be deemed to create other than a terminable at will employment relationship between the Employer and the Executive, and the Employer may terminate the Executive’s employment at any time, subject to providing any payments specified herein in accordance with the terms hereof.

(b)Nothing contained herein shall create or require the Employer to create a trust of any kind to fund any benefits which may be payable hereunder, and to the extent that the Executive acquires a right to receive benefits from the Employer hereunder, such right shall be no greater than the right of any unsecured general creditor of the Employer.

13.Headings.  The section headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.

14.Validity.  The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provisions of this Agreement, which shall remain in full force and effect.

15.Changes in Statutes or Regulations. If any statutory or regulatory provision referenced herein is subsequently changed or re-numbered, or is replaced by a separate provision, then the references in this Agreement to such statutory or regulatory provision shall be deemed to be a reference to such section as amended, re-numbered or replaced.

6

16.Counterparts.  This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original and all of which together will constitute one and the same instrument.

17.Regulatory Prohibition.  Notwithstanding any other provision of this Agreement to the contrary, any renewal of this Agreement and any payments made to the Executive pursuant to this Agreement, or otherwise, are subject to and conditioned upon their compliance with Section 18(k) of the Federal Deposit Insurance Act (12 U.S.C. §1828(k)) and the regulations promulgated thereunder, including 12 C.F.R. Part 359.  In the event of the Executive’s termination of employment with the Bank for Cause, all employment relationships and managerial duties with the Bank shall immediately cease regardless of whether the Executive is in the employ of the Corporation following such termination.  Furthermore, following such termination for Cause, the Executive will not, directly or indirectly, influence or participate in the affairs or the operations of the Bank.

18.Payment of Costs and Legal Fees and Reinstatement of Benefits.  In the event any dispute or controversy arising under or in connection with the Executive’s termination is resolved in favor of the Executive, whether by judgment, arbitration or settlement, the Executive shall be entitled to the payment of (a) all legal fees incurred by the Executive in resolving such dispute or controversy, and (b) any back-pay, including base salary, bonuses and any other cash compensation, fringe benefits and any compensation and benefits due to the Executive under this Agreement.

19.Entire Agreement.  This Agreement embodies the entire agreement between the Employer and the Executive with respect to the matters agreed to herein. All prior agreements, if any, between the Employer and the Executive with respect to the matters agreed to herein are hereby superseded and shall have no force or effect.

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

Attest:		SOUTHERN BANK
By:	/s/ Lorna Brannum		/s/ Greg A. Steffens
Name:	Lorna Brannum	By:	Greg A. Steffens
Title:	Secretary	Its:	President and Chief Executive Officer
		EXECUTIVE
		By:	/s/ Rick Windes
		Name:	Rick Windes

7

EX-31.1

EXHIBIT 31.1

CERTIFICATION

I, Greg A. Steffens, certify that:

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

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

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

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

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

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

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

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

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

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

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

Date:   November 12, 2019	By:	/s/ Greg A. Steffens
		Greg A. Steffens
		President & Chief Executive Officer
		(Principal Executive Officer)

EX-31.2

EXHIBIT 31.2

CERTIFICATION

I, Matthew T. Funke, certify that:

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

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

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

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

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

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

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

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

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

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

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

Date:   November 12, 2019	By:	/s/ Matthew T.  Funke
		Matthew T. Funke
		Executive Vice President & Chief Financial Officer
		(Principal Financial Officer)

EX-32

EXHIBIT 32

CERTIFICATION

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, each of the undersigned hereby certifies in his capacity as an officer of Southern Missouri Bancorp, Inc. (the “Company”) that the quarterly report of the Company on Form 10-Q for the quarter ended September 30, 2019, fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934, as amended, and that the information contained in such report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods presented in the financial statements included in such report.

Date:   November 12, 2019	By:	/s/ Greg A. Steffens
		Greg A. Steffens
		President & Chief Executive Officer
		(Principal Executive Officer)
Date:   November 12, 2019	By:	/s/ Matthew T. Funke
		Matthew T. Funke
		Executive Vice President & Chief Financial Officer
		(Principal Financial Officer)

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Note 5: Accounting For Certain Loans Acquired in A Transfer: Schedule of Acquired Loans in Transfer Accretable Yield (Details) - USD ($) $ in Thousands	3 Months Ended
	Sep. 30, 2019	Sep. 30, 2018
Details
Balance at beginning of period	$ 220	$ 589
Certain Loans Acquired In Transfer Accretable Yield Additions	0	0
Certain Loans Acquired In Transfer Accretable Yield Accretion	(83)	(945)
Certain Loans Acquired In Transfer Accretable Yield Reclassification from Nonaccretable Difference	46	865
Certain Loans Acquired In Transfer Accretable Yield Disposals	0	(204)
Balance at end of period	$ 183	$ 305

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NOTE 6: Premises and Equipment: Calculated Amount of Right of Use Assets and Lease Liabilities (Details) - USD ($) $ in Thousands		3 Months Ended
		Sep. 30, 2019	Sep. 30, 2018
ROU assets obtained in exchange for operating lease obligations:		$ 1,996	$ 0
Consolidated Balance Sheet
Right of Use Asset, Operating Leases		1,996
Liability, Operating Leases		1,996
Consolidated Statement of Income
Operating Lease Costs Classified as Occupancy and Equipment Expense	[1]	57
Supplemental disclosures of cash flow information
ROU assets obtained in exchange for operating lease obligations:		2,004
Supplemental disclosures of cash flow information | Cash paid for amounts included in the measurement of lease liabilities
Operating Cash Flows from Operating Leases		$ 39

[1] Includes short-term lease costs.

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Note 2: Organization and Summary of Significant Accounting Policies: Earnings Per Share, Policy (Policies)

3 Months Ended

Sep. 30, 2019

Policies

Earnings Per Share, Policy

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) outstanding during each period.

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Note 2: Organization and Summary of Significant Accounting Policies: Income Tax, Policy (Policies)

3 Months Ended

Sep. 30, 2019

Policies

Income Tax, Policy

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

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

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

The Company files consolidated income tax returns with its subsidiaries.

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Note 7: Deposits: Schedule of Deposit Liabilities (Details) - USD ($) $ in Thousands	Sep. 30, 2019	Jun. 30, 2019
Details
Noninterest-bearing Deposit Liabilities	$ 208,646	$ 218,889
Deposits, Negotiable Order of Withdrawal (NOW)	634,855	639,219
Deposits, Money Market Deposits	197,976	188,355
Deposits, Savings Deposits	163,983	167,973
Interest-bearing Domestic Deposit, Certificates of Deposits	667,060	679,259
Deposits, Domestic	$ 1,872,520	$ 1,893,695

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Condensed Consolidated Statements of Income - USD ($) $ in Thousands	3 Months Ended
	Sep. 30, 2019	Sep. 30, 2018
Interest Income:
Loans	$ 25,640	$ 20,916
Investment securities	520	517
Mortgage-backed securities	716	584
Other interest-earning assets	46	25
Total interest income	26,922	22,042
Interest Expense:
Deposits	6,578	4,009
Securities sold under agreements to repurchase	0	8
Advances from FHLB of Des Moines	522	599
Note payable	37	35
Subordinated debt	225	224
Total interest expense	7,362	4,875
NET INTEREST INCOME	19,560	17,167
PROVISION FOR LOAN LOSSES	896	682
Net Interest Income After Provision for Loan Losses	18,664	16,485
NONINTEREST INCOME:
Deposit account charges and related fees	1,423	1,224
Bank card interchange income	1,362	1,063
Loan late charges	146	94
Loan servicing fees	130	159
Other loan fees	243	337
Net realized gains on sale of loans	273	179
Earnings on bank owned life insurance	254	246
Other income	270	128
Total noninterest income	4,101	3,430
NONINTEREST EXPENSE:
Compensation and benefits	7,125	6,047
Occupancy and equipment, net	2,888	2,470
Deposit insurance premiums	0	138
Legal and professional fees	184	256
Advertising	309	315
Postage and office supplies	183	152
Intangible amortization	441	396
Bank card network expense	617	495
Other operating expense	1,214	1,180
Total noninterest expense	12,961	11,449
INCOME BEFORE INCOME TAXES	9,804	8,466
Income Tax Expense (Benefit)	1,976	1,666
Net Income	$ 7,828	$ 6,800
Basic earnings per common share	$ 0.85	$ 0.76
Diluted earnings per common share	0.85	0.76
Dividends paid	$ 0.15	$ 0.13

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Note 11: Subordinated Debt

3 Months Ended

Sep. 30, 2019

Notes

Note 11: Subordinated Debt

Note 11:  Subordinated Debt

Southern Missouri Statutory Trust I issued $7.0 million of Floating Rate Capital Securities (the “Trust Preferred Securities”) with a liquidation value of $1,000 per share in March 2004. The securities are due in 30 years, redeemable after five years and bear interest at a floating rate based on LIBOR. At September 30, 2019, the current rate was 4.89%. 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 of the Company. The Company used its net proceeds for working capital and investment in its subsidiaries.

In connection with its October 2013 acquisition of Ozarks Legacy Community Financial, Inc. (OLCF), the Company assumed $3.1 million in floating rate junior subordinated debt securities. The debt securities had been issued in June 2005 by OLCF in connection with the sale of trust preferred securities, bear interest at a floating rate based on LIBOR, are now redeemable at par, and mature in 2035. At September 30, 2019, the current rate was 4.57%. The carrying value of the debt securities was approximately $2.6 million at September 30 and June 30, 2019.

In connection with its August 2014 acquisition of Peoples Service Company, Inc. (PSC), the Company assumed $6.5 million in floating rate junior subordinated debt securities. The debt securities had been issued in 2005 by PSC’s subsidiary bank holding company, Peoples Banking Company, in connection with the sale of trust preferred securities, bear interest at a floating rate based on LIBOR, are now redeemable at par, and mature in 2035. At September 30, 2019, the current rate was 3.92%.  The carrying value of the debt securities was approximately $5.2 million at September 30 and June 30, 2019.

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Note 3: Securities

3 Months Ended

Sep. 30, 2019

Notes

Note 3: Securities

Note 3:  Securities

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

	September 30, 2019
		Gross	Gross	Estimated
	Amortized	Unrealized	Unrealized	Fair
(dollars in thousands)	Cost	Gains	Losses	Value
Investment and mortgage backed securities:
U.S. government-sponsored enterprises (GSEs)	$5,038	$1	$(8)	$5,031
State and political subdivisions	40,966	852	(33)	41,785
Other securities	5,176	72	(214)	5,034
Mortgage-backed GSE residential	117,908	1,579	(331)	119,156
Total investments and mortgage-backed securities	$169,088	$2,504	$(586)	$171,006

	June 30, 2019
		Gross	Gross	Estimated
	Amortized	Unrealized	Unrealized	Fair
(dollars in thousands)	Cost	Gains	Losses	Value
Investment and mortgage backed securities:
U.S. government-sponsored enterprises (GSEs)	$7,284	$1	$(15)	$7,270
State and political subdivisions	42,123	728	(68)	42,783
Other securities	5,176	75	(198)	5,053
Mortgage-backed GSE residential	109,297	1,449	(317)	110,429
Total investments and mortgage-backed securities	$163,880	$2,253	$(598)	$165,535

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

	September 30, 2019
	Amortized	Estimated
(dollars in thousands)	Cost	Fair Value
Within one year	$                     4,511	$                     4,511
After one year but less than five years	9,749	9,799
After five years but less than ten years	18,017	18,298
After ten years	18,903	19,242
Total investment securities	51,180	51,850
Mortgage-backed securities	117,908	119,156
Total investments and mortgage-backed securities	$                 169,088	$                 171,006

The carrying value of investment and mortgage-backed securities pledged as collateral to secure public deposits and securities sold under agreements to repurchase amounted to $114.2 million at September 30, 2019 and $143.7 million at June 30, 2019.  The securities pledged consist of marketable securities, including $2.3 million and $5.6 million of U.S. Government and Federal Agency Obligations, $27.1 million and $47.3 million of Mortgage-Backed Securities, $54.2 million and $55.7 million of Collateralized Mortgage Obligations, $30.4 million and $34.9 million of State and Political Subdivisions Obligations, and $200,000 and $300,000 of Other Securities at September 30 and June 30, 2019, respectively.

The following tables show our 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 at September 30 and June 30, 2019:

	September 30, 2019
	Less than 12 months		12 months or more		Total
		Unrealized		Unrealized		Unrealized
	Fair Value	Losses	Fair Value	Losses	Fair Value	Losses
(dollars in thousands)
U.S. government-sponsored enterprises (GSEs)	$           -	$        -	$   3,489	$        8	$   3,489	$        8
Obligations of state and political subdivisions	2,877	14	2,585	19	5,462	33
Other securities	-	-	966	214	966	214
Mortgage-backed securities	29,390	185	11,783	146	41,173	331
Total investments and mortgage-backed        securities	$ 32,267	$    199	$ 18,823	$    387	$ 51,090	$    586

	June 30, 2019
	Less than 12 months		12 months or more		Total
		Unrealized		Unrealized		Unrealized
	Fair Value	Losses	Fair Value	Losses	Fair Value	Losses
(dollars in thousands)
U.S. government-sponsored enterprises (GSEs)	$        -	$        -	$   6,969	$      15	$   6,969	$      15
Obligations of state and political subdivisions	-	-	8,531	68	8,531	68
Other securities	-	-	985	198	985	198
Mortgage-backed securities	1,175	1	34,148	316	35,323	317
Total investments and mortgage-backed        securities	$ 1,175	$        1	$ 50,633	$    597	$ 51,808	$    598

Other securities.  At September 30, 2019, there were two pooled trust preferred securities with an estimated fair value of $764,000 and unrealized losses of $209,000 in a continuous unrealized loss position for twelve months or more. These unrealized losses were primarily due to the long-term nature of the pooled trust preferred securities and a reduced demand for these securities, and concerns regarding the financial institutions that issued the underlying trust preferred securities.

The September 30, 2019, cash flow analysis for these two securities indicated it is probable the Company will receive all contracted principal and related interest projected. The cash flow analysis used in making this determination was based on anticipated default, recovery, and prepayment rates, and the resulting cash flows were discounted based on the yield spread anticipated at the time the securities were purchased. Other inputs include the actual collateral attributes, which include credit ratings and other performance indicators of the underlying financial institutions, including profitability, capital ratios, and asset quality. Assumptions for these two securities included prepayments averaging 1.5 percent, annually, annual defaults averaging 50 basis points, and a recovery rate averaging 10 percent of gross defaults, lagged two years.

One of these two securities has continued to receive cash interest payments in full since our purchase; the other security received principal-in-kind (PIK), in lieu of cash interest, for a period of time following the recession and financial crisis which began in 2008, but resumed cash interest payments during fiscal 2014. Our cash flow analysis indicates that cash interest payments are expected to continue for both securities. Because the Company does not intend to sell these securities and it is not more-likely-than-not that the Company will be required to sell these securities prior to recovery of their amortized cost basis, which may be maturity, the Company does not consider these investments to be other-than-temporarily impaired at September 30, 2019.

The Company does not believe any other individual unrealized loss as of September 30, 2019, represents other-than-temporary impairment (OTTI). However, the Company could be required to recognize OTTI losses in future periods with respect to its available for sale investment securities portfolio. The amount and timing of any required OTTI will depend on the decline in the underlying cash flows of the securities. Should the impairment of any of these securities become other-than-temporary, the cost basis of the investment will be reduced and the resulting loss recognized in the period the OTTI is identified.

Credit losses recognized on investments.  During fiscal 2009, the Company adopted ASC 820, formerly FASB Staff Position 157-4, “Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly.”  There were no credit losses recognized in income and other losses or recorded in other comprehensive income (loss) for the three-month periods ended September 30, 2019 and 2018.

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Note 1: Basis of Presentation

3 Months Ended

Sep. 30, 2019

Notes

Note 1: Basis of Presentation

Note 1:  Basis of Presentation

The accompanying unaudited interim consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Securities and Exchange Commission (SEC) Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, all material adjustments (consisting only of normal recurring accruals) considered necessary for a fair presentation have been included. The consolidated balance sheet of the Company as of June 30, 2019, 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, 2019, 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, 2019, Form 10-K, which was filed with the SEC.

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

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Note 7: Deposits

3 Months Ended

Sep. 30, 2019

Notes

Note 7: Deposits

Note 7:  Deposits

Deposits are summarized as follows:

(dollars in thousands)	September 30, 2019	June 30, 2019
Non-interest bearing accounts	$                         208,646	$                         218,889
NOW accounts	634,855	639,219
Money market deposit accounts	197,976	188,355
Savings accounts	163,983	167,973
Certificates	667,060	679,259
Total Deposit Accounts	$                      1,872,520	$                      1,893,695

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Note 4: Loans and Allowance for Loan Losses: Schedule of Accounts, Notes, Loans and Financing Receivable (Details) - USD ($) $ in Thousands	Sep. 30, 2019	Jun. 30, 2019
Loans receivable, net of allowance for loan losses of $20,710 and $19,903 at September 30, 2019 and June 30, 2019, respectively	$ 1,874,497	$ 1,846,405
Loans Receivable, Gross
Loans receivable, net of allowance for loan losses of $20,710 and $19,903 at September 30, 2019 and June 30, 2019, respectively	1,931,645	1,909,464
Loans in Process
Loans receivable, net of allowance for loan losses of $20,710 and $19,903 at September 30, 2019 and June 30, 2019, respectively	(36,435)	(43,153)
Deferred loan fees, net
Loans receivable, net of allowance for loan losses of $20,710 and $19,903 at September 30, 2019 and June 30, 2019, respectively	(3)	(3)
SEC Schedule, 12-09, Allowance, Loan and Lease Loss
Loans receivable, net of allowance for loan losses of $20,710 and $19,903 at September 30, 2019 and June 30, 2019, respectively	(20,710)	(19,903)
Loans Receivable, Net
Loans receivable, net of allowance for loan losses of $20,710 and $19,903 at September 30, 2019 and June 30, 2019, respectively	1,874,497	1,846,405
Consumer Loan
Loans receivable, net of allowance for loan losses of $20,710 and $19,903 at September 30, 2019 and June 30, 2019, respectively	101,117	97,534
Commercial Loan
Loans receivable, net of allowance for loan losses of $20,710 and $19,903 at September 30, 2019 and June 30, 2019, respectively	375,728	355,874
Residential Mortgage
Loans receivable, net of allowance for loan losses of $20,710 and $19,903 at September 30, 2019 and June 30, 2019, respectively	489,347	491,992
Construction Real Estate
Loans receivable, net of allowance for loan losses of $20,710 and $19,903 at September 30, 2019 and June 30, 2019, respectively	125,724	123,287
Commercial Real Estate
Loans receivable, net of allowance for loan losses of $20,710 and $19,903 at September 30, 2019 and June 30, 2019, respectively	$ 839,729	$ 840,777

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Note 12: Fair Value Measurements: Fair Value Option, Disclosures (Tables)

3 Months Ended

Sep. 30, 2019

Tables/Schedules

Fair Value Option, Disclosures

(dollars in thousands)	Fair value at September 30 , 2019	Valuation technique	Unobservable inputs	Range of inputs applied	Weighted- average inputs applied
Nonrecurring Measurements
Foreclosed and repossessed assets	$365	Third party appraisal	Marketability discount	0.0% - 32.6%	32.6%

(dollars in thousands)	Fair value at June 30, 2019	Valuation technique	Unobservable inputs	Range of inputs applied	Weighted- average inputs applied
Nonrecurring Measurements
Foreclosed and repossessed assets	$2,430	Third party appraisal	Marketability discount	5.1% - 77.0%	35.2%

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Note 9: Income Taxes: Reconciliation of Income Tax Expense at the Statutory Rate to Actual Income Tax (Tables)

3 Months Ended

Sep. 30, 2019

Tables/Schedules

Reconciliation of Income Tax Expense at the Statutory Rate to Actual Income Tax

	For the three-month periods ended
(dollars in thousands)	September 30, 2019	September 30, 2018
Tax at statutory rate	$                             2,059	$                           1,778
Increase (reduction) in taxes       resulting from:
Nontaxable municipal income	(113)	(73)
State tax, net of Federal benefit	109	122
Cash surrender value of                   Bank-owned life insurance	(53)	(52)
Tax credit benefits	-	(68)
Other, net	(26)	(41)
Actual provision	$                             1,976	$                           1,666

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Note 3: Securities: Contractual Obligation, Fiscal Year Maturity Schedule (Details) $ in Thousands	Sep. 30, 2019 USD ($)
Details
Debt Securities, Available-for-sale, Maturity, Allocated and Single Maturity Date, within One Year, Amortized Cost	$ 4,511
Debt Securities, Available-for-sale, Maturity, Allocated and Single Maturity Date, within One Year, Fair Value	4,511
Debt Securities, Available-for-sale, Maturity, Allocated and Single Maturity Date, after One Through Five Years, Amortized Cost	9,749
Debt Securities, Available-for-sale, Maturity, Allocated and Single Maturity Date, after One Through Five Years, Fair Value	9,799
Debt Securities, Available-for-sale, Maturity, Allocated and Single Maturity Date, after Five Through Ten Years, Amortized Cost	18,017
Debt Securities, Available-for-sale, Maturity, Allocated and Single Maturity Date, after Five Through Ten Years, Fair Value	18,298
Debt Securities, Available-for-sale, Allocated and Single Maturity Date, Maturity, after 10 Years, Amortized Cost	18,903
Debt Securities, Available-for-sale, Maturity, Allocated and Single Maturity Date, after 10 Years, Fair Value	19,242
Debt and equity securities amortized cost	51,180
Debt and equity securities fair value	51,850
Mortgage-backed securities GSE residential amortized cost	117,908
Mortgage-backed securities GSE residential fair value	119,156
Debt Securities, Available-for-sale, Maturity, without Single Maturity Date, Amortized Cost	169,088
Debt Securities, Available-for-sale, Maturity, without Single Maturity Date, Fair Value	$ 171,006

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Note 2: Organization and Summary of Significant Accounting Policies: Intangible Assets, Finite-Lived, Policy (Details) - USD ($) $ in Thousands			3 Months Ended
	Sep. 30, 2019	Jun. 30, 2019	Sep. 30, 2019	Jun. 30, 2024	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2020
Details
Finite-Lived Core Deposits, Gross	$ 14,700	$ 14,700	$ 14,700
Finite-Lived Intangible Assets, Accumulated Amortization	7,300	6,900	7,300
Other Finite-Lived Intangible Assets, Gross	3,800	3,800	$ 3,800
Gross Other Identifiable Intangibles Accumulated Amortization	3,800	3,800
FHLB Mortgage Servicing Rights	$ 1,400	$ 1,500
Core Deposits and Intangible Assets, Remaining Amortization Period			periods ranging from five to seven years
Finite-Lived Intangible Assets, Amortization Expense, Remainder of Fiscal Year								$ 1,300
Finite-Lived Intangible Assets, Amortization Expense, Year Two							$ 1,300
Finite-Lived Intangible Assets, Amortization Expense, Rolling Year Three						$ 1,300
Finite-Lived Intangible Assets, Amortization Expense, Rolling Year Four					$ 1,300
Finite-Lived Intangible Assets, Amortization Expense, Year Five				$ 1,300
Finite-Lived Intangible Assets, Amortization Expense, after Year Five				$ 1,000

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Note 4: Loans and Allowance for Loan Losses: Purchased Credit Impaired Loans Credit Quality Indicators (Details) - USD ($) $ in Thousands	Sep. 30, 2019	Jun. 30, 2019
Pass
Purchased Credit Impaired Loans	$ 6,800	$ 6,900
Watch
Purchased Credit Impaired Loans	10,700	10,400
Special Mention
Purchased Credit Impaired Loans	0	0
Substandard
Purchased Credit Impaired Loans	7,000	11,200
Doubtful
Purchased Credit Impaired Loans	$ 0	$ 0

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Note 3: Securities: Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value (Tables)

3 Months Ended

Sep. 30, 2019

Tables/Schedules

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

	September 30, 2019
	Less than 12 months		12 months or more		Total
		Unrealized		Unrealized		Unrealized
	Fair Value	Losses	Fair Value	Losses	Fair Value	Losses
(dollars in thousands)
U.S. government-sponsored enterprises (GSEs)	$           -	$        -	$   3,489	$        8	$   3,489	$        8
Obligations of state and political subdivisions	2,877	14	2,585	19	5,462	33
Other securities	-	-	966	214	966	214
Mortgage-backed securities	29,390	185	11,783	146	41,173	331
Total investments and mortgage-backed        securities	$ 32,267	$    199	$ 18,823	$    387	$ 51,090	$    586

	June 30, 2019
	Less than 12 months		12 months or more		Total
		Unrealized		Unrealized		Unrealized
	Fair Value	Losses	Fair Value	Losses	Fair Value	Losses
(dollars in thousands)
U.S. government-sponsored enterprises (GSEs)	$        -	$        -	$   6,969	$      15	$   6,969	$      15
Obligations of state and political subdivisions	-	-	8,531	68	8,531	68
Other securities	-	-	985	198	985	198
Mortgage-backed securities	1,175	1	34,148	316	35,323	317
Total investments and mortgage-backed        securities	$ 1,175	$        1	$ 50,633	$    597	$ 51,808	$    598

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Note 4: Loans and Allowance for Loan Losses: Schedule of Loan Portfolio Aging Analysis (Tables)

3 Months Ended

Sep. 30, 2019

Tables/Schedules

Schedule of Loan Portfolio Aging Analysis

The following tables present the Company’s loan portfolio aging analysis (excluding loans in process and deferred loan fees) as of September 30 and June 30, 2019.  These tables include purchased credit impaired loans, which are reported according to aging analysis after acquisition based on the Company’s standards for such classification:

	September 30, 2019
			Greater Than				Greater Than 90
	30-59 Days	60-89 Days	90 Days	Total		Total Loans	Days Past Due
(dollars in thousands)	Past Due	Past Due	Past Due	Past Due	Current	Receivable	and Accruing
Real Estate Loans:
Residential	$  1,180	$  1,300	$      2,161	$ 4,641	$    484,706	$     489,347	$                  -
Construction	-	-	-	-	89,289	89,289	-
Commercial	854	16	2,841	3,711	836,018	839,729	-
Consumer loans	325	85	164	574	100,543	101,117	-
Commercial loans	754	5	172	931	374,797	375,728	-
Total loans	$  3,113	$  1,406	$      5,338	$ 9,857	$ 1,885,353	$  1,895,210	$                  -

	June 30, 2019
			Greater Than				Greater Than 90
	30-59 Days	60-89 Days	90 Days	Total		Total Loans	Days Past Due
(dollars in thousands)	Past Due	Past Due	Past Due	Past Due	Current	Receivable	and Accruing
Real Estate Loans:
Residential	$     227	$  1,054	$      1,714	$  2,995	$    488,997	$     491,992	$                  -
Construction	-	-	-	-	80,134	80,134	-
Commercial	296	1	5,617	5,914	834,863	840,777	-
Consumer loans	128	46	176	350	97,184	97,534	-
Commercial loans	424	25	1,902	2,351	353,523	355,874	-
Total loans	$  1,075	$  1,126	$      9,409	$ 11,610	$ 1,854,701	$  1,866,311	$                  -

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Note 4: Loans and Allowance for Loan Losses: Performing Loans Classified as Troubled Debt Restructuring Loans (Details) $ in Thousands	3 Months Ended		12 Months Ended
	Sep. 30, 2019 USD ($)	Sep. 30, 2018 USD ($)	Jun. 30, 2019 USD ($)
Consumer Loan
modifications	0	0
Investment	$ 0	$ 0
Commercial Loan
modifications	0	1
Investment	$ 0	$ 69
Construction Loan Payable
modifications	0	0
Investment	$ 0	$ 0
Residential Real Estate
modifications	0	0
Investment	$ 0	$ 0
Commercial Real Estate
modifications	0	2
Investment	$ 0	$ 922
Performing Loans
modifications	38		40
Investment	$ 12,432		$ 13,289
Performing Loans | Consumer Loan
modifications	0		0
Investment	$ 0		$ 0
Performing Loans | Commercial Loan
modifications	9		10
Investment	$ 4,872		$ 5,630
Performing Loans | Construction Loan Payable
modifications	0		0
Investment	$ 0		$ 0
Performing Loans | Residential Real Estate
modifications	11		10
Investment	$ 1,162		$ 1,130
Performing Loans | Commercial Real Estate
modifications	18		20
Investment	$ 6,398		$ 6,529
Total Loans
modifications	0	3
Investment	$ 0	$ 991

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Note 8: Earnings Per Share: Schedule of Earnings Per Share, Basic and Diluted (Tables)

3 Months Ended

Sep. 30, 2019

Tables/Schedules

Schedule of Earnings Per Share, Basic and Diluted

	September 30,
	2019	2018
(dollars in thousands except per share data)
Net income available to common shareholders	$                        7,828	$                        6,800
Average Common shares – outstanding basic	9,232,257	8,996,321
Stock options under treasury stock method	11,891	10,194
Average Common shares – outstanding diluted	9,244,148	9,006,515
Basic earnings per common share	$                          0.85	$                          0.76
Diluted earnings per common share	$                          0.85	$                          0.76

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Note 4: Loans and Allowance for Loan Losses (Details) $ in Thousands		3 Months Ended
	Sep. 30, 2019 USD ($)	Sep. 30, 2019 USD ($)	Jun. 30, 2019 USD ($)
Financing Receivable, Credit Quality, Additional Information		lending relationships of $2 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
Number of Purchased Credit Impaired Loans	1
Foreclosed residential real estate properties physical possession	$ 421	$ 421	$ 752
Residential mortgage loans and home equity loans formal foreclosure proceedings in process	898	898	493
Loans without a specific valuation allowance
Purchased Credit Impaired Loans	24,500	24,500	$ 28,500
Financial Asset, Equal to or Greater than 90 Days Past Due
Purchased Credit Impaired Loans	$ 3,100	$ 3,100

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Note 4: Loans and Allowance for Loan Losses: Schedule of Debtor Troubled Debt Restructuring, Current Period (Tables)

3 Months Ended

Sep. 30, 2019

Tables/Schedules

Schedule of Debtor Troubled Debt Restructuring, Current Period

	For the three-month periods ended
	September 30, 2019		September 30, 2018
	Number of	Recorded	Number of	Recorded
(dollars in thousands)	modifications	Investment	modifications	Investment
Residential real estate	-	$                           -	-	$                                   -
Construction real estate	-	-	-	-
Commercial real estate	-	-	2	922
Consumer loans	-	-	-	-
Commercial loans	-	-	1	69
Total	-	$                           -	3	$                              991

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NOTE 6: Premises and Equipment: Property, Plant and Equipment (Tables)

3 Months Ended

Sep. 30, 2019

Tables/Schedules

Property, Plant and Equipment

(dollars in thousands)	September 30, 2019	June 30, 2019
Land	$                            12,407	$                            12,414
Buildings and improvements	54,933	54,304
Construction in progress	489	466
Furniture, fixtures, equipment and software	17,506	16,514
Automobiles	107	107
Operating leases ROU asset	1,996	-
	87,438	83,805
Less accumulated depreciation	21,958	21,078
	$                            65,480	$                            62,727

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Note 4: Loans and Allowance for Loan Losses: Loans and Leases Receivable Impaired Interest Income Recognized Change in Present Value Attributable to Passage of Time (Details) - USD ($) $ in Thousands	3 Months Ended
	Sep. 30, 2019	Sep. 30, 2018
Details
Loans and Leases Receivable, Impaired, Interest Income Recognized, Change in Present Value Attributable to Passage of Time	$ 83	$ 945

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Note 4: Loans and Allowance for Loan Losses: Consumer Lending (Policies)

3 Months Ended

Sep. 30, 2019

Policies

Consumer Lending

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 typically originated with fixed rates for terms of up to five years, with the exception of home equity lines of credit, which are typically originated with adjustable rates, tied to the prime rate of interest and are for a period of ten years.

Home equity lines of credit (HELOCs) are secured with a deed of trust and are issued up to 100% of the appraised or assessed value of the property securing the line of credit, less the outstanding balance on the first mortgage. Interest rates on the HELOCs are generally adjustable and based upon the loan-to-value ratio of the property, with better rates given to borrowers with more equity.

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

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Note 3: Securities: Credit Losses Recognized on Investments Policy (Policies)

3 Months Ended

Sep. 30, 2019

Policies

Credit Losses Recognized on Investments Policy

Credit losses recognized on investments.  During fiscal 2009, the Company adopted ASC 820, formerly FASB Staff Position 157-4, “Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly.”  There were no credit losses recognized in income and other losses or recorded in other comprehensive income (loss) for the three-month periods ended September 30, 2019 and 2018.

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Note 12: Fair Value Measurements: Gains (Losses) Recognized on Assets Measured on a Nonrecurring Basis (Details) - USD ($) $ in Thousands	3 Months Ended
	Sep. 30, 2019	Sep. 30, 2018
Foreclosed and repossessed assets held for sale
Gains (losses) recognized on assets measured on a non-recurring basis	$ (1)	$ (115)
Total losses on assets measured on a non-recurring basis
Gains (losses) recognized on assets measured on a non-recurring basis	$ (1)	$ (115)

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Note 2: Organization and Summary of Significant Accounting Policies: Use of Estimates Policy (Policies)

3 Months Ended

Sep. 30, 2019

Policies

Use of Estimates Policy

Use of Estimates. The preparation of 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 loan losses and estimated fair values of purchased loans.

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Note 2: Organization and Summary of Significant Accounting Policies: Federal Reserve Bank and Federal Home Loan Bank Stock (Policies)

3 Months Ended

Sep. 30, 2019

Policies

Federal Reserve Bank and Federal Home Loan Bank Stock

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

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Note 10: 401(k) Retirement Plan: 401(k) Retirement Plan (Details) - USD ($) $ in Thousands	3 Months Ended
	Sep. 30, 2019	Sep. 30, 2018
Details
Defined Contribution Plan, Administrative Expense	$ 381	$ 341

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Note 9: Income Taxes: Schedule of Effective Income Tax Rate Reconciliation (Details) - USD ($) $ in Thousands	3 Months Ended
	Sep. 30, 2019	Sep. 30, 2018
Details
Current Income Tax Expense (Benefit)	$ 1,970	$ 1,660
Deferred Income Taxes and Tax Credits	6	6
Income tax provision, total	$ 1,976	$ 1,666

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Note 4: Loans and Allowance for Loan Losses: Schedule of Loan Portfolio Aging Analysis (Details) - USD ($) $ in Thousands	Sep. 30, 2019	Jun. 30, 2019
Financial Asset, 30 to 59 Days Past Due | Total Loans
Financing Receivable Recorded Investment	$ 3,113	$ 1,075
Financial Asset, 30 to 59 Days Past Due | Consumer Loan
Financing Receivable Recorded Investment	325	128
Financial Asset, 30 to 59 Days Past Due | Commercial Loan
Financing Receivable Recorded Investment	754	424
Financial Asset, 30 to 59 Days Past Due | Construction Loan Payable
Financing Receivable Recorded Investment	0	0
Financial Asset, 30 to 59 Days Past Due | Residential Real Estate
Financing Receivable Recorded Investment	1,180	227
Financial Asset, 30 to 59 Days Past Due | Commercial Real Estate
Financing Receivable Recorded Investment	854	296
Financial Asset, 60 to 89 Days Past Due | Total Loans
Financing Receivable Recorded Investment	1,406	1,126
Financial Asset, 60 to 89 Days Past Due | Consumer Loan
Financing Receivable Recorded Investment	85	46
Financial Asset, 60 to 89 Days Past Due | Commercial Loan
Financing Receivable Recorded Investment	5	25
Financial Asset, 60 to 89 Days Past Due | Construction Loan Payable
Financing Receivable Recorded Investment	0	0
Financial Asset, 60 to 89 Days Past Due | Residential Real Estate
Financing Receivable Recorded Investment	1,300	1,054
Financial Asset, 60 to 89 Days Past Due | Commercial Real Estate
Financing Receivable Recorded Investment	16	1
Financial Asset, Equal to or Greater than 90 Days Past Due | Total Loans
Financing Receivable Recorded Investment	5,338	9,409
Financial Asset, Equal to or Greater than 90 Days Past Due | Consumer Loan
Financing Receivable Recorded Investment	164	176
Financial Asset, Equal to or Greater than 90 Days Past Due | Commercial Loan
Financing Receivable Recorded Investment	172	1,902
Financial Asset, Equal to or Greater than 90 Days Past Due | Construction Loan Payable
Financing Receivable Recorded Investment	0	0
Financial Asset, Equal to or Greater than 90 Days Past Due | Residential Real Estate
Financing Receivable Recorded Investment	2,161	1,714
Financial Asset, Equal to or Greater than 90 Days Past Due | Commercial Real Estate
Financing Receivable Recorded Investment	2,841	5,617
Nonperforming Financial Instruments | Total Loans
Financing Receivable Recorded Investment	9,857	11,610
Nonperforming Financial Instruments | Consumer Loan
Financing Receivable Recorded Investment	574	350
Nonperforming Financial Instruments | Commercial Loan
Financing Receivable Recorded Investment	931	2,351
Nonperforming Financial Instruments | Construction Loan Payable
Financing Receivable Recorded Investment	0	0
Nonperforming Financial Instruments | Residential Real Estate
Financing Receivable Recorded Investment	4,641	2,995
Nonperforming Financial Instruments | Commercial Real Estate
Financing Receivable Recorded Investment	3,711	5,914
Financing Receivables Current | Total Loans
Financing Receivable Recorded Investment	1,885,353	1,854,701
Financing Receivables Current | Consumer Loan
Financing Receivable Recorded Investment	100,543	97,184
Financing Receivables Current | Commercial Loan
Financing Receivable Recorded Investment	374,797	353,523
Financing Receivables Current | Construction Loan Payable
Financing Receivable Recorded Investment	89,289	80,134
Financing Receivables Current | Residential Real Estate
Financing Receivable Recorded Investment	484,706	488,997
Financing Receivables Current | Commercial Real Estate
Financing Receivable Recorded Investment	836,018	834,863
Performing Financial Instruments | Total Loans
Financing Receivable Recorded Investment	1,895,210	1,866,311
Performing Financial Instruments | Consumer Loan
Financing Receivable Recorded Investment	101,117	97,534
Performing Financial Instruments | Commercial Loan
Financing Receivable Recorded Investment	375,728	355,874
Performing Financial Instruments | Construction Loan Payable
Financing Receivable Recorded Investment	89,289	80,134
Performing Financial Instruments | Residential Real Estate
Financing Receivable Recorded Investment	489,347	491,992
Performing Financial Instruments | Commercial Real Estate
Financing Receivable Recorded Investment	839,729	840,777
Financing Receivables Greater than 90 Days Past Due and Still Accruing | Total Loans
Financing Receivable Recorded Investment	0	0
Financing Receivables Greater than 90 Days Past Due and Still Accruing | Consumer Loan
Financing Receivable Recorded Investment	0	0
Financing Receivables Greater than 90 Days Past Due and Still Accruing | Commercial Loan
Financing Receivable Recorded Investment	0	0
Financing Receivables Greater than 90 Days Past Due and Still Accruing | Construction Loan Payable
Financing Receivable Recorded Investment	0	0
Financing Receivables Greater than 90 Days Past Due and Still Accruing | Residential Real Estate
Financing Receivable Recorded Investment	0	0
Financing Receivables Greater than 90 Days Past Due and Still Accruing | Commercial Real Estate
Financing Receivable Recorded Investment	$ 0	$ 0

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Note 4: Loans and Allowance for Loan Losses: Performing Loans Classified as Troubled Debt Restructuring Loans (Tables)

3 Months Ended

Sep. 30, 2019

Tables/Schedules

Performing Loans Classified as Troubled Debt Restructuring Loans

	September 30, 2019		June 30, 2019
	Number of	Recorded	Number of	Recorded
(dollars in thousands)	modifications	Investment	modifications	Investment
Residential real estate	11	$                    1,162	10	$                          1,130
Construction real estate	-	-	-	-
Commercial real estate	18	6,398	20	6,529
Consumer loans	-	-	-	-
Commercial loans	9	4,872	10	5,630
Total	38	$                12,432	40	$                        13,289

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NOTE 6: Premises and Equipment: Calculated Amount of Right of Use Assets and Lease Liabilities (Tables)

3 Months Ended

Sep. 30, 2019

Tables/Schedules

Calculated Amount of Right of Use Assets and Lease Liabilities

	At or For the
	Three Months Ended
(dollars in thousands)	September 30, 2019
Consolidated Balance Sheet
Operating leases right of use asset	$                         1,996
Operating leases liability	$                         1,996
Consolidated Statement of Income
Operating lease costs classified as occupancy and equipment expense	$                              57
(includes short-term lease costs)
Supplemental disclosures of cash flow information
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$                              39
ROU assets obtained in exchange for operating lease obligations:	$                         2,004

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Note 4: Loans and Allowance for Loan Losses: Schedule of Financing Receivables, Non Accrual Status (Details) - USD ($) $ in Thousands	Sep. 30, 2019	Jun. 30, 2019
Total Loans
Loans and Leases Receivable, Nonperforming, Nonaccrual of Interest	$ 14,021	$ 21,013
Consumer Loan
Loans and Leases Receivable, Nonperforming, Nonaccrual of Interest	179	309
Commercial Loan
Loans and Leases Receivable, Nonperforming, Nonaccrual of Interest	1,588	3,424
Construction Loan Payable
Loans and Leases Receivable, Nonperforming, Nonaccrual of Interest	0	0
Residential Real Estate
Loans and Leases Receivable, Nonperforming, Nonaccrual of Interest	5,286	6,404
Commercial Real Estate
Loans and Leases Receivable, Nonperforming, Nonaccrual of Interest	$ 6,968	$ 10,876

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Note 5: Accounting For Certain Loans Acquired in A Transfer: Schedule of Acquired Loans With Credit Deterioration (Details) - USD ($) $ in Thousands		Sep. 30, 2019	Jun. 30, 2019
Outstanding Balance
Certain Loans and Debt Securities Acquired in Transfer, Allowance for Credit Losses Due to Subsequent Impairment		$ 30,258	$ 36,368
Carrying Amount of Acquired Loans
Certain Loans and Debt Securities Acquired in Transfer, Allowance for Credit Losses Due to Subsequent Impairment	[1]	24,483	28,547
Consumer Loan
Certain Loans and Debt Securities Acquired in Transfer, Allowance for Credit Losses Due to Subsequent Impairment		0	0
Commercial Loan
Certain Loans and Debt Securities Acquired in Transfer, Allowance for Credit Losses Due to Subsequent Impairment		6,529	8,381
Construction Loan Payable
Certain Loans and Debt Securities Acquired in Transfer, Allowance for Credit Losses Due to Subsequent Impairment		1,367	1,397
Residential Real Estate
Certain Loans and Debt Securities Acquired in Transfer, Allowance for Credit Losses Due to Subsequent Impairment		1,904	1,921
Commercial Real Estate
Certain Loans and Debt Securities Acquired in Transfer, Allowance for Credit Losses Due to Subsequent Impairment		$ 20,458	$ 24,669

[1] Fair value adjustment of $5,775 and $7,821 at September 30, 2019 and June 30, 2019, respectively.

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Note 9: Income Taxes: Schedule of Effective Income Tax Rate Reconciliation (Tables)

3 Months Ended

Sep. 30, 2019

Tables/Schedules

Schedule of Effective Income Tax Rate Reconciliation

	For the three-month periods ended
(dollars in thousands)	September 30, 2019	September 30, 2018
Income taxes
Current	$                             1,970	$                           1,660
Deferred	6	6
Total income tax provision	$                             1,976	$                           1,666

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Note 4: Loans and Allowance for Loan Losses: Construction Lending (Policies)

3 Months Ended

Sep. 30, 2019

Policies

Construction Lending

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 secured by mortgage loans for the construction of owner occupied residential real estate or to finance speculative construction secured by 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 and have maturities ranging from six to twelve 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.

While the Company typically utilizes maturity periods ranging from 6 to 12 months 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 eight months.  During construction, loans typically require monthly interest only payments which may allow the Company an opportunity to monitor for early signs of financial difficulty should the borrower fail to make a required monthly payment.  Additionally, during the construction phase, the Company typically performs interim inspections which further allow the Company opportunity to assess risk.  At September 30, 2019, construction loans outstanding included 61 loans, totaling $29.5 million, for which a modification had been agreed to.  At June 30, 2019, construction loans outstanding included 59 loans, totaling $27.2 million, for which a modification had been agreed to. All modifications were solely for the purpose of extending the maturity date due to conditions described above.  None of these modifications were executed due to financial difficulty on the part of the borrower and, therefore, were not accounted for as TDRs.

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Note 3: Securities: Other Securities Policy (Policies)

3 Months Ended

Sep. 30, 2019

Policies

Other Securities Policy

Other securities.  At September 30, 2019, there were two pooled trust preferred securities with an estimated fair value of $764,000 and unrealized losses of $209,000 in a continuous unrealized loss position for twelve months or more. These unrealized losses were primarily due to the long-term nature of the pooled trust preferred securities and a reduced demand for these securities, and concerns regarding the financial institutions that issued the underlying trust preferred securities.

The September 30, 2019, cash flow analysis for these two securities indicated it is probable the Company will receive all contracted principal and related interest projected. The cash flow analysis used in making this determination was based on anticipated default, recovery, and prepayment rates, and the resulting cash flows were discounted based on the yield spread anticipated at the time the securities were purchased. Other inputs include the actual collateral attributes, which include credit ratings and other performance indicators of the underlying financial institutions, including profitability, capital ratios, and asset quality. Assumptions for these two securities included prepayments averaging 1.5 percent, annually, annual defaults averaging 50 basis points, and a recovery rate averaging 10 percent of gross defaults, lagged two years.

One of these two securities has continued to receive cash interest payments in full since our purchase; the other security received principal-in-kind (PIK), in lieu of cash interest, for a period of time following the recession and financial crisis which began in 2008, but resumed cash interest payments during fiscal 2014. Our cash flow analysis indicates that cash interest payments are expected to continue for both securities. Because the Company does not intend to sell these securities and it is not more-likely-than-not that the Company will be required to sell these securities prior to recovery of their amortized cost basis, which may be maturity, the Company does not consider these investments to be other-than-temporarily impaired at September 30, 2019.

The Company does not believe any other individual unrealized loss as of September 30, 2019, represents other-than-temporary impairment (OTTI). However, the Company could be required to recognize OTTI losses in future periods with respect to its available for sale investment securities portfolio. The amount and timing of any required OTTI will depend on the decline in the underlying cash flows of the securities. Should the impairment of any of these securities become other-than-temporary, the cost basis of the investment will be reduced and the resulting loss recognized in the period the OTTI is identified.

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Note 9: Income Taxes: Reconciliation of Income Tax Expense at the Statutory Rate to Actual Income Tax (Details) - USD ($) $ in Thousands	3 Months Ended
	Sep. 30, 2019	Sep. 30, 2018
Effective Income Tax Rate Reconciliation at Federal Statutory Income Tax Rate, Amount	$ 2,059	$ 1,778
Other, net	(26)	(41)
Income Tax Expense, Actual	1,976	1,666
Increase (Decrease) in Taxes
Nontaxable Municipal Income	(113)	(73)
Current State and Local Tax Expense (Benefit)	109	122
Cash Surrender Value Of Bank-owned Life Insurance	(53)	(52)
Tax Credit Benefits	$ 0	$ (68)

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Note 8: Earnings Per Share (Details)	Sep. 30, 2019	Sep. 30, 2018
Details
Options Outstanding With An Exercise Price In Excess of the Market Price	15,500	0

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Note 12: Fair Value Measurements: Fair Value Measurements, Nonrecurring (Details) - USD ($) $ in Thousands	Sep. 30, 2019	Jun. 30, 2019
Foreclosed and repossessed assets held for sale
Fair value on a nonrecurring basis	$ 365	$ 2,430

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Note 2: Organization and Summary of Significant Accounting Policies: Cash and Cash Equivalents, Policy (Policies)

3 Months Ended

Sep. 30, 2019

Policies

Cash and Cash Equivalents, Policy

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 $6.9 million at September 30 and June 30, 2019. The deposits are held in various commercial banks in amounts not exceeding the FDIC’s deposit insurance limits, as well as at the Federal Reserve and the Federal Home Loan Bank of Des Moines and Chicago.

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Note 2: Organization and Summary of Significant Accounting Policies: Loans Policy (Policies)

3 Months Ended

Sep. 30, 2019

Policies

Loans Policy

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

Interest on loans is accrued based upon the principal amount outstanding. The accrual of interest on loans is discontinued when, in management’s judgment, the collectability of interest or principal in the normal course of business is doubtful. The Company complies with regulatory guidance which indicates that loans should be placed in nonaccrual status when 90 days past due, unless the loan is both well-secured and in the process of collection. A loan that is “in the process of collection” may be subject to legal action or, in appropriate circumstances, through other collection efforts reasonably expected to result in repayment or restoration to current status in the near future. A loan is considered delinquent when a payment has not been made by the contractual due date. 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 allowance for losses on loans represents management’s best estimate of losses probable in the existing loan portfolio. The allowance for losses on loans is increased by the provision for losses on loans charged to expense and reduced by loans charged off, net of recoveries. Loans are charged off in the period deemed uncollectible, based on management’s analysis of expected cash flows (for non-collateral dependent loans) or collateral value (for collateral-dependent loans). Subsequent recoveries of loans previously charged off, if any, are credited to the allowance when received. The provision for losses on loans is determined based on management’s assessment of several factors: reviews and evaluations of specific loans, changes in the nature and volume of the loan portfolio, current economic conditions and the related impact on specific borrowers and industry groups, historical loan loss experience, the level of classified and nonperforming loans and the results of regulatory examinations.

Loans are considered impaired if, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Depending on a particular loan’s circumstances, we measure impairment of a loan based upon either the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s observable market price, or the fair value of the collateral less estimated costs to sell if the loan is collateral dependent. Valuation allowances are established for collateral-dependent impaired loans for the difference between the loan amount and fair value of collateral less estimated selling costs. For impaired loans that are not collateral dependent, a valuation allowance is established for the difference between the loan amount and the present value of expected future cash flows discounted at the historical effective interest rate or the observable market price of the loan. Impairment losses are recognized through an increase in the required allowance for loan losses. Cash receipts on loans deemed impaired are recorded based on the loan’s separate status as a nonaccrual loan or an accrual status loan.

Some loans are accounted for in accordance with ASC 310-30, Loans and Debt Securities Acquired with Deteriorated Credit Quality. For these loans (“purchased credit impaired loans”), the Company recorded a fair value discount and began carrying them at book value less their face amount (see Note 4). For these loans, we determined the contractual amount and timing of undiscounted principal and interest payments (the “undiscounted contractual cash flows”), and estimated the amount and timing of undiscounted expected principal and interest payments, including expected prepayments (the “undiscounted expected cash flows”). Under acquired impaired loan accounting, the difference between the undiscounted contractual cash flows and the undiscounted expected cash flows is the nonaccretable difference. The nonaccretable difference is an estimate of the loss exposure of principal and interest related to the purchased credit impaired loans, and the amount is subject to change over time based on the performance of the loans. The carrying value of purchased credit impaired loans is initially determined as the discounted expected cash flows. The excess of expected cash flows at acquisition over the initial fair value of the purchased credit impaired loans is referred to as the “accretable yield” and is recorded as interest income over the estimated life of the acquired loans using the level-yield method, if the timing and amount of the future cash flows is reasonably estimable. The carrying value of purchased credit impaired loans is reduced by payments received, both principal and interest, and increased by the portion of the accretable yield recognized as interest income. Subsequent to acquisition, the Company evaluates the purchased credit impaired loans on a quarterly basis. Increases in expected cash flows compared to those previously estimated increase the accretable yield and are recognized as interest income prospectively. Decreases in expected cash flows compared to those previously estimated decrease the accretable yield and may result in the establishment of an allowance for loan losses and a provision for loan losses. Purchased credit impaired loans are generally considered accruing and performing loans, as the loans accrete interest income over the estimated life of the loan when expected cash flows are reasonably estimable. Accordingly, purchased credit impaired loans that are contractually past due are still considered to be accruing and performing as long as there is an expectation that the estimated cash flows will be received. If the timing and amount of cash flows is not reasonably estimable, the loans may be classified as nonaccrual 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.

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Note 2: Organization and Summary of Significant Accounting Policies: Stock Options (Policies)

3 Months Ended

Sep. 30, 2019

Policies

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.

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Note 2: Organization and Summary of Significant Accounting Policies: Intangible Assets, Finite-Lived, Policy (Policies)

3 Months Ended

Sep. 30, 2019

Policies

Intangible Assets, Finite-Lived, Policy

Intangible Assets.  The Company’s intangible assets at September 30, 2019 included gross core deposit intangibles of $14.7 million with $7.3 million accumulated amortization, gross other identifiable intangibles of $3.8 million with accumulated amortization of $3.8 million, and FHLB mortgage servicing rights of $1.4 million.  At June 30, 2019, the Company’s intangible assets included gross core deposit intangibles of $14.7 million with $6.9 million accumulated amortization, gross other identifiable intangibles of $3.8 million with accumulated amortization of $3.8 million, and FHLB mortgage servicing rights of $1.5 million. The Company’s core deposit intangible assets are being amortized using the straight line method, over periods ranging from five to seven years, with amortization expense expected to be approximately $1.3 million in the remainder of fiscal 2020, $1.3 million in fiscal 2021 through fiscal 2024, and $1.0 million in total thereafter. As of June 30, 2019, there was no impairment indicated, and the Company believes there continues to be no impairment of other intangible assets at September 30, 2019.

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Note 8: Earnings Per Share: Schedule of Earnings Per Share, Basic and Diluted (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended
	Sep. 30, 2019	Sep. 30, 2018
Details
Net income available to common shareholders	$ 7,828	$ 6,800
Weighted Average Number of Shares Outstanding, Basic	9,232,257	8,996,321
Stock options under treasury stock method	11,891	10,194
Weighted Average Number of Shares Outstanding, Diluted	9,244,148	9,006,515
Basic earnings per common share	$ 0.85	$ 0.76
Diluted earnings per common share	$ 0.85	$ 0.76

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NOTE 6: Premises and Equipment: Property, Plant and Equipment (Details) - USD ($) $ in Thousands	Sep. 30, 2019	Jun. 30, 2019
Details
Land	$ 12,407	$ 12,414
Buildings and improvements	54,933	54,304
Construction in progress	489	466
Furniture, fixtures, equipment and software	17,506	16,514
Automobiles	107	107
Less accumulated depreciation	21,958	21,078
Premises and equipment, net	$ 65,480	$ 62,727

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NOTE 6: Premises and Equipment: Operating Lease Expense (Details) - USD ($) $ in Thousands	3 Months Ended
	Sep. 30, 2019	Sep. 30, 2018
Details
Operating Lease, Expense	$ 57	$ 26

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Note 4: Loans and Allowance for Loan Losses

3 Months Ended

Sep. 30, 2019

Notes

Note 4: Loans and Allowance for Loan Losses

Note 4:  Loans and Allowance for Loan Losses

Classes of loans are summarized as follows:

(dollars in thousands)	September 30, 2019	June 30, 2019
Real Estate Loans:
Residential	$                  489,347	$                 491,992
Construction	125,724	123,287
Commercial	839,729	840,777
Consumer loans	101,117	97,534
Commercial loans	375,728	355,874
	1,931,645	1,909,464
Loans in process	(36,435)	(43,153)
Deferred loan fees, net	(3)	(3)
Allowance for loan losses	(20,710)	(19,903)
Total loans	$               1,874,497	$              1,846,405

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. The Company has also occasionally purchased loan participation interests originated by other lenders and secured by properties generally located in the states of Missouri and Arkansas.

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.

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 Bank 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.

Commercial Real Estate Lending. The Company actively originates loans secured by commercial real estate including land (improved, unimproved, and farmland), strip shopping centers, retail establishments 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.

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 seven 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 secured by mortgage loans for the construction of owner occupied residential real estate or to finance speculative construction secured by 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 and have maturities ranging from six to twelve 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.

While the Company typically utilizes maturity periods ranging from 6 to 12 months 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 eight months.  During construction, loans typically require monthly interest only payments which may allow the Company an opportunity to monitor for early signs of financial difficulty should the borrower fail to make a required monthly payment.  Additionally, during the construction phase, the Company typically performs interim inspections which further allow the Company opportunity to assess risk.  At September 30, 2019, construction loans outstanding included 61 loans, totaling $29.5 million, for which a modification had been agreed to.  At June 30, 2019, construction loans outstanding included 59 loans, totaling $27.2 million, for which a modification had been agreed to. All modifications were solely for the purpose of extending the maturity date due to conditions described above.  None of these modifications were executed due to financial difficulty on the part of the borrower and, therefore, were not accounted for as TDRs.

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 typically originated with fixed rates for terms of up to five years, with the exception of home equity lines of credit, which are typically originated with adjustable rates, tied to the prime rate of interest and are for a period of ten years.

Home equity lines of credit (HELOCs) are secured with a deed of trust and are issued up to 100% of the appraised or assessed value of the property securing the line of credit, less the outstanding balance on the first mortgage. Interest rates on the HELOCs are generally adjustable and based upon the loan-to-value ratio of the property, with better rates given to borrowers with more equity.

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

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.

The following tables present the balance in the allowance for loan losses and the recorded investment in loans (excluding loans in process and deferred loan fees) based on portfolio segment and impairment methods as of September 30 and June 30, 2019, and activity in the allowance for loan losses for the three-month periods ended  September 30, 2019 and 2018:

	At period end and for the three months ended September 30, 2019
	Residential	Construction	Commercial
(dollars in thousands)	Real Estate	Real Estate	Real Estate	Consumer	Commercial	Total
Allowance for loan losses:
Balance, beginning of period	$     3,706	$     1,365	$     9,399	$     1,046	$      4,387	$     19,903
Provision charged to expense	(134)	174	376	96	384	896
Losses charged off	-	-	-	(72)	(35)	(107)
Recoveries	-	-	14	4	-	18
Balance, end of period	$     3,572	$     1,539	$     9,789	$     1,074	$      4,736	$     20,710
Ending Balance: individually             evaluated for impairment	$             -	$            -	$             -	$             -	$              -	$               -
Ending Balance: collectively             evaluated for impairment	$     3,572	$     1,539	$     9,789	$     1,074	$      4,736	$     20,710
Ending Balance: loans acquired             with deteriorated credit quality	$             -	$            -	$             -	$             -	$              -	$               -
Loans:
Ending Balance: individually             evaluated for impairment	$             -	$            -	$             -	$             -	$              -	$               -
Ending Balance: collectively             evaluated for impairment	$ 487,680	$   87,983	$ 823,649	$ 101,117	$  370,298	$ 1,870,727
Ending Balance: loans acquired             with deteriorated credit quality	$     1,667	$     1,306	$   16,080	$             -	$      5,430	$     24,483

	At period end and for the three months ended September 30, 2018
	Residential	Construction	Commercial
(dollars in thousands)	Real Estate	Real Estate	Real Estate	Consumer	Commercial	Total
Allowance for loan losses:
Balance, beginning of period	$  3,226	$      1,097	$   8,793	$   902	$    4,196	$ 18,214
Provision charged to expense	122	196	35	92	237	682
Losses charged off	-	-	(95)	(17)	-	(112)
Recoveries	1	-	-	4	1	6
Balance, end of period	$  3,349	$      1,293	$   8,733	$   981	$    4,434	$ 18,790
Ending Balance: individually             evaluated for impairment	$          -	$             -	$           -	$        -	$           -	$          -
Ending Balance: collectively             evaluated for impairment	$  3,349	$      1,293	$   8,733	$   981	$    4,434	$ 18,790
Ending Balance: loans acquired             with deteriorated credit quality	$          -	$             -	$           -	$        -	$           -	$          -

	At June 30, 2019
	Residential	Construction	Commercial
(dollars in thousands)	Real Estate	Real Estate	Real Estate	Consumer	Commercial	Total
Allowance for loan losses:
Balance, end of period	$     3,706	$     1,365	$     9,399	$   1,046	$     4,387	$      19,903
Ending Balance: individually             evaluated for impairment	$            -	$            -	$             -	$           -	$             -	$                -
Ending Balance: collectively             evaluated for impairment	$     3,706	$     1,365	$     9,399	$   1,046	$     4,387	$      19,903
Ending Balance: loans acquired             with deteriorated credit quality	$            -	$            -	$             -	$           -	$             -	$                -
Loans:
Ending Balance: individually             evaluated for impairment	$            -	$            -	$             -	$           -	$             -	$                -
Ending Balance: collectively             evaluated for impairment	$ 490,307	$   78,826	$ 821,415	$ 97,534	$ 349,681	$ 1,837,763
Ending Balance: loans acquired             with deteriorated credit quality	$     1,685	$     1,308	$   19,362	$           -	$     6,193	$      28,548

Management’s opinion as to the ultimate collectability of loans is subject to estimates regarding future cash flows from operations and the value of property, real and personal, pledged as collateral. These estimates are affected by changing economic conditions and the economic prospects of borrowers.

The allowance for loan losses is maintained at a level that, in management’s judgment, is adequate to cover probable credit losses inherent in the loan portfolio at the balance sheet date. The allowance for loan losses is established as losses are estimated to have occurred through a provision for loan losses charged to earnings. Loan losses are charged against the allowance when an amount is determined to be uncollectible, based on management’s analysis of expected cash flow (for non-collateral-dependent loans) or collateral value (for collateral-dependent loans). Subsequent recoveries, if any, are credited to the allowance.

The allowance for loan losses is evaluated on a regular basis by management and is based upon management’s periodic review of the collectability of the loans in light of historical experience, the nature and volume of the loan portfolio, adverse situations that may affect the borrower’s ability to repay, estimated value of any underlying collateral and prevailing economic conditions. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available.

The allowance consists of allocated and general components. The allocated component relates to loans that are classified as impaired. For those loans that are classified as impaired, an allowance is established when the discounted cash flows (or collateral value or observable market price) of the impaired loan is lower than the carrying value of that loan.

Under the Company’s allowance methodology, loans are first segmented into 1) those comprising large groups of homogeneous loans, which are collectively evaluated for impairment, and 2) all other loans which are individually evaluated.  Those loans in the second category are further segmented utilizing a defined grading system which involves categorizing loans by severity of risk based on conditions that may affect the ability of the borrowers to repay their debt, such as current financial information, collateral valuations, historical payment experience, credit documentation, public information, and current trends.  The loans subject to credit classification represent the portion of the portfolio subject to the greatest credit risk and where adjustments to the allowance for losses on loans as a result of provisions and charge offs are most likely to have a significant impact on operations.

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 represents a probable loss or risk that should be recognized.

The Company considers, as the primary quantitative factor in its allowance methodology, average net charge offs over the most recent twelve-month period.  The Company also reviews average net charge offs over the most recent five-year period.

A loan is considered impaired when, based on current information and events, it is probable that the scheduled payments of principal or interest will not be able to be collected when due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. 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. Impairment is measured on a loan-by-loan basis for commercial and agricultural loans by either the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s obtainable market price or the fair value of the collateral if the loan is collateral dependent.

Groups of loans with similar risk characteristics are collectively evaluated for impairment based on the group’s historical loss experience adjusted for changes in trends, conditions and other relevant factors that affect repayment of the loans. Accordingly, individual consumer and residential loans are not separately identified for impairment measurements, unless such loans are the subject of a restructuring agreement due to financial difficulties of the borrower.

The general component covers non classified loans and is based on historical charge-off experience and expected loss given the internal risk rating process. The loan portfolio is stratified into homogeneous groups of loans that possess similar loss characteristics and an appropriate loss ratio adjusted for qualitative factors is applied to the homogeneous pools of loans to estimate the incurred losses in the loan portfolio.

Included in the Company’s loan portfolio are certain loans accounted for in accordance with ASC 310-30, Loans and Debt Securities Acquired with Deteriorated Credit Quality. These loans were written down at acquisition to an amount estimated to be collectible. As a result, certain ratios regarding the Company’s loan portfolio and credit quality cannot be used to compare the Company to peer companies or to compare the Company’s current credit quality to prior periods. The ratios particularly affected by accounting under ASC 310-30 include the allowance for loan losses as a percentage of loans, nonaccrual loans, and nonperforming assets, and nonaccrual loans and nonperforming loans as a percentage of total loans.

The following tables present the credit risk profile of the Company’s loan portfolio (excluding loans in process and deferred loan fees) based on rating category and payment activity as of September 30 and June 30, 2019. These tables include purchased credit impaired loans, which are reported according to risk categorization after acquisition based on the Company’s standards for such classification:

	September 30, 2019
	Residential	Construction	Commercial
(dollars in thousands)	Real Estate	Real Estate	Real Estate	Consumer	Commercial
Pass	$         481,808	$         89,289	$      802,243	$         100,742	$        363,739
Watch	1,020	-	20,893	167	5,928
Special Mention	103	-	3,438	26	-
Substandard	6,416	-	13,155	182	6,061
Doubtful	-	-	-	-	-
Total	$         489,347	$         89,289	$      839,729	$         101,117	$        375,728

	June 30, 2019
	Residential	Construction	Commercial
(dollars in thousands)	Real Estate	Real Estate	Real Estate	Consumer	Commercial
Pass	$         482,869	$         80,134	$      802,479	$           97,012	$        341,069
Watch	1,236	-	21,693	170	7,802
Special Mention	103	-	3,463	26	-
Substandard	7,784	-	13,142	291	7,003
Doubtful	-	-	-	35	-
Total	$         491,992	$         80,134	$      840,777	$           97,534	$        355,874

The above amounts include purchased credit impaired loans. At September 30, 2019, purchased credited impaired loans comprised $6.8 million of credits rated “Pass”; $10.7 million of credits rated “Watch”; none rated “Special Mention”; $7.0 million of credits rated “Substandard”; and none rated “Doubtful”. At June 30, 2019,  purchased credit impaired loans accounted for $6.9 million of credits rated “Pass”; $10.4 million of credits  rated “Watch”; none rated “Special Mention”; $11.2 million of credits rated “Substandard”; and none rated “Doubtful”.

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 Special Mention, Substandard, or Doubtful.  In addition, lending relationships of $2 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.

The following tables present the Company’s loan portfolio aging analysis (excluding loans in process and deferred loan fees) as of September 30 and June 30, 2019.  These tables include purchased credit impaired loans, which are reported according to aging analysis after acquisition based on the Company’s standards for such classification:

	September 30, 2019
			Greater Than				Greater Than 90
	30-59 Days	60-89 Days	90 Days	Total		Total Loans	Days Past Due
(dollars in thousands)	Past Due	Past Due	Past Due	Past Due	Current	Receivable	and Accruing
Real Estate Loans:
Residential	$  1,180	$  1,300	$      2,161	$ 4,641	$    484,706	$     489,347	$                  -
Construction	-	-	-	-	89,289	89,289	-
Commercial	854	16	2,841	3,711	836,018	839,729	-
Consumer loans	325	85	164	574	100,543	101,117	-
Commercial loans	754	5	172	931	374,797	375,728	-
Total loans	$  3,113	$  1,406	$      5,338	$ 9,857	$ 1,885,353	$  1,895,210	$                  -

	June 30, 2019
			Greater Than				Greater Than 90
	30-59 Days	60-89 Days	90 Days	Total		Total Loans	Days Past Due
(dollars in thousands)	Past Due	Past Due	Past Due	Past Due	Current	Receivable	and Accruing
Real Estate Loans:
Residential	$     227	$  1,054	$      1,714	$  2,995	$    488,997	$     491,992	$                  -
Construction	-	-	-	-	80,134	80,134	-
Commercial	296	1	5,617	5,914	834,863	840,777	-
Consumer loans	128	46	176	350	97,184	97,534	-
Commercial loans	424	25	1,902	2,351	353,523	355,874	-
Total loans	$  1,075	$  1,126	$      9,409	$ 11,610	$ 1,854,701	$  1,866,311	$                  -

At September 30, 2019 there were no purchased credit impaired loans that were greater than 90 days past due.  At June 30, 2019 there was one purchased credit impaired loan with net fair value of $3.1 million that was greater than 90 days past due.

A loan is considered impaired, in accordance with the impairment accounting guidance (ASC 310-10-35-16), when based on current information and events, it is probable the Company will be unable to collect all amounts due from the borrower in accordance with the contractual terms of the loan. Impaired loans include nonperforming loans, as well as performing loans modified in troubled debt restructurings where concessions have been granted to borrowers experiencing financial difficulties. These concessions could include a reduction in the interest rate on the loan, payment extensions, forgiveness of principal, forbearance or other actions intended to maximize collection.

The tables below present impaired loans (excluding loans in process and deferred loan fees) as of September 30 and June 30, 2019. These tables include purchased credit impaired loans. Purchased credit impaired loans are those for which it was deemed probable, at acquisition, that the Company would be unable to collect all contractually required payments receivable. In an instance where, subsequent to the acquisition, the Company determines it is probable, for a specific loan, that cash flows received will exceed the amount previously expected, the Company will recalculate the amount of accretable yield in order to recognize the improved cash flow expectation as additional interest income over the remaining life of the loan. These loans, however, will continue to be reported as impaired loans. In an instance where, subsequent to the acquisition, the Company determines it is probable, for a specific loan, that cash flows received will be less than the amount previously expected, the Company will allocate a specific allowance under the terms of ASC 310-10-35.

	September 30, 2019
	Recorded	Unpaid Principal	Specific
(dollars in thousands)	Balance	Balance	Allowance
Loans without a specific valuation allowance:
Residential real estate	$           4,916	$           5,152	$                   -
Construction real estate	1,305	1,367	-
Commercial real estate	22,928	27,306	-
Consumer loans	-	-	-
Commercial loans	6,152	7,252	-
Loans with a specific valuation allowance:
Residential real estate	$                   -	$                   -	$                   -
Construction real estate	-	-	-
Commercial real estate	-	-	-
Consumer loans	-	-	-
Commercial loans	-	-	-
Total:
Residential real estate	$           4,916	$           5,152	$                   -
Construction real estate	$           1,305	$           1,367	$                   -
Commercial real estate	$         22,928	$         27,306	$                   -
Consumer loans	$                   -	$                   -	$                   -
Commercial loans	$           6,152	$           7,252	$                   -

	June 30, 2019
	Recorded	Unpaid Principal	Specific
(dollars in thousands)	Balance	Balance	Allowance
Loans without a specific valuation allowance:
Residential real estate	$           5,104	$           5,341	$                   -
Construction real estate	1,330	1,419	-
Commercial real estate	26,410	31,717	-
Consumer loans	8	8	-
Commercial loans	6,999	9,187	-
Loans with a specific valuation allowance:
Residential real estate	$                   -	$                   -	$                   -
Construction real estate	-	-	-
Commercial real estate	-	-	-
Consumer loans	-	-	-
Commercial loans	-	-	-
Total:
Residential real estate	$           5,104	$           5,341	$                   -
Construction real estate	$           1,330	$           1,419	$                   -
Commercial real estate	$         26,410	$         31,717	$                   -
Consumer loans	$                  8	$                  8	$                   -
Commercial loans	$           6,999	$           9,187	$                   -

The above amounts include purchased credit impaired loans. At September 30, 2019, purchased credit impaired loans comprised $24.5 million of impaired loans without a specific valuation allowance.  At June 30, 2019, purchased credit impaired loans comprised $28.5 million of impaired loans without a specific valuation allowance.

The following tables present information regarding interest income recognized on impaired loans:

	For the three-month period ended
	September 30, 2019
	Average
(dollars in thousands)	Investment in	Interest Income
	Impaired Loans	Recognized
Residential Real Estate	$                    1,677	$                            23
Construction Real Estate	1,306	48
Commercial Real Estate	17,721	335
Consumer Loans	-	-
Commercial Loans	5,812	93
Total Loans	$                  26,516	$                          499

	For the three-month period ended
	September 30, 2018
	Average
(dollars in thousands)	Investment in	Interest Income
	Impaired Loans	Recognized
Residential Real Estate	$                    2,531	$                            33
Construction Real Estate	1,297	101
Commercial Real Estate	7,229	370
Consumer Loans	-	-
Commercial Loans	1,628	616
Total Loans	$                  12,685	$                       1,120

Interest income on impaired loans recognized on a cash basis in the three-month periods ended September 30, 2019 and 2018, was immaterial.

For the three-month period ended September 30, 2019, the amount of interest income recorded for impaired loans that represented a change in the present value of cash flows attributable to the passage of time was approximately $83,000, as compared to $945,000, for the three-month period ended September 30, 2018.

The following table presents the Company’s nonaccrual loans at September 30 and June 30, 2019. Purchased credit impaired loans are placed on nonaccrual status in the event the Company cannot reasonably estimate cash flows expected to be collected.  The table excludes performing troubled debt restructurings.

(dollars in thousands)	September 30, 2019	June 30, 2019
Residential real estate	$               5,286	$               6,404
Construction real estate	-	-
Commercial real estate	6,968	10,876
Consumer loans	179	309
Commercial loans	1,588	3,424
Total loans	$             14,021	$             21,013

The above amounts include purchased credit impaired loans.  At September 30 and June 30, 2019, purchased credit impaired loans comprised $889,000 and $4.1 million of nonaccrual loans, respectively.

Included in certain loan categories in the impaired loans are troubled debt restructurings (TDRs), where economic concessions have been granted to borrowers who have experienced financial difficulties. These concessions typically result from our loss mitigation activities, and could include reductions in the interest rate, payment extensions, forgiveness of principal, forbearance, or other actions. Certain TDRs are classified as nonperforming at the time of restructuring and typically are returned to performing status after considering the borrower’s sustained repayment performance for a reasonable period of at least six months.

When loans and leases are modified into a TDR, the Company evaluates any possible impairment similar to other impaired loans based on the present value of expected future cash flows, discounted at the contractual interest rate of the original loan or lease agreement, and uses the current fair value of the collateral, less selling costs, for collateral dependent loans. If the Company determines that the value of the modified loan is less than the recorded investment in the loan (net of previous charge-offs, deferred loan fees or costs, and unamortized premium or discount), impairment is recognized through an allowance estimate or a charge-off to the allowance. In periods subsequent to modification, the Company evaluates all TDRs, including those that have payment defaults, for possible impairment and recognizes impairment through the allowance.

During the three-month periods ended September 30, 2019 and 2018, certain loans modified were classified as TDRs. They are shown, segregated by class, in the table below:

	For the three-month periods ended
	September 30, 2019		September 30, 2018
	Number of	Recorded	Number of	Recorded
(dollars in thousands)	modifications	Investment	modifications	Investment
Residential real estate	-	$                           -	-	$                                   -
Construction real estate	-	-	-	-
Commercial real estate	-	-	2	922
Consumer loans	-	-	-	-
Commercial loans	-	-	1	69
Total	-	$                           -	3	$                              991

Performing loans classified as TDRs and outstanding at September 30 and June 30, 2019, segregated by class, are shown in the table below. Nonperforming TDRs are shown as nonaccrual loans.

	September 30, 2019		June 30, 2019
	Number of	Recorded	Number of	Recorded
(dollars in thousands)	modifications	Investment	modifications	Investment
Residential real estate	11	$                    1,162	10	$                          1,130
Construction real estate	-	-	-	-
Commercial real estate	18	6,398	20	6,529
Consumer loans	-	-	-	-
Commercial loans	9	4,872	10	5,630
Total	38	$                12,432	40	$                        13,289

The Company may obtain physical possession of real estate collateralizing a residential mortgage loan or home equity loan via foreclosure or in-substance repossession. As of September 30 and June 30, 2019, the carrying value of foreclosed residential real estate properties as a result of obtaining physical possession was $421,000 and $752,000, respectively. In addition, as of September 30 and June 30, 2019, the Company had residential mortgage loans and home equity loans with a carrying value of $898,000 and $493,000, respectively, collateralized by residential real estate property for which formal foreclosure proceedings were in process.

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Note 2: Organization and Summary of Significant Accounting Policies

3 Months Ended

Sep. 30, 2019

Notes

Note 2: 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 the investment subsidiary, and has other preferred shareholders in order to meet the requirements to be a REIT.  At September 30, 2019, assets of the REIT were approximately $744 million, and consisted primarily of 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 financial statements of the Company have been prepared in conformity with accounting principles generally accepted in the United States of America and general practices within the banking industry. In the normal course of business, the Company encounters two significant types of risk: economic and regulatory. Economic risk is comprised of interest rate risk, credit risk, and market risk. The Company is subject to interest rate risk to the degree that its interest-bearing liabilities reprice on a different basis than its interest-earning assets. Credit risk is the risk of default on the Company’s investment or loan portfolios resulting from the borrowers’ inability or unwillingness to make contractually required payments. Market risk reflects changes in the value of the investment portfolio, collateral underlying loans receivable, and the value of the Company’s investments in real estate.

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

Use of Estimates. The preparation of 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 loan losses and estimated fair values of purchased loans.

Cash and Cash Equivalents. For purposes of reporting cash flows, cash and cash equivalents includes cash, due from depository institutions and interest-bearing deposits in other depository institutions with original maturities of three months or less. Interest-bearing deposits in other depository institutions were $6.9 million at September 30 and June 30, 2019. The deposits are held in various commercial banks in amounts not exceeding the FDIC’s deposit insurance limits, as well as at the Federal Reserve and the Federal Home Loan Bank of Des Moines and Chicago.

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

Available for Sale Securities. Available for sale securities, which include any security for which the Company has no immediate plan to sell but which may be sold in the future, are carried at fair value. Unrealized gains and losses, net of tax, are reported in accumulated other comprehensive income (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.

When the Company does not intend to sell a debt security, and it is more likely than not the Company will not have to sell the security before recovery of its cost basis, it recognizes the credit component of an other-than-temporary impairment of a debt security in earnings and the remaining portion in other comprehensive income. As a result of this guidance, the Company’s consolidated balance sheet as of the dates presented reflects the full impairment (that is, the difference between the security’s amortized cost basis and fair value) on debt securities that the Company intends to sell or would more likely than not be required to sell before the expected recovery of the amortized cost basis. For available-for-sale debt securities that management has no intent to sell and believes that it more likely than not will not be required to sell prior to recovery, only the credit loss component of the impairment is recognized in earnings, while the noncredit loss is recognized in accumulated other comprehensive income. The credit loss component recognized in earnings is identified as the amount of principal cash flows not expected to be received over the remaining term of the security as projected based on cash flow projections.

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

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

Interest on loans is accrued based upon the principal amount outstanding. The accrual of interest on loans is discontinued when, in management’s judgment, the collectability of interest or principal in the normal course of business is doubtful. The Company complies with regulatory guidance which indicates that loans should be placed in nonaccrual status when 90 days past due, unless the loan is both well-secured and in the process of collection. A loan that is “in the process of collection” may be subject to legal action or, in appropriate circumstances, through other collection efforts reasonably expected to result in repayment or restoration to current status in the near future. A loan is considered delinquent when a payment has not been made by the contractual due date. 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 allowance for losses on loans represents management’s best estimate of losses probable in the existing loan portfolio. The allowance for losses on loans is increased by the provision for losses on loans charged to expense and reduced by loans charged off, net of recoveries. Loans are charged off in the period deemed uncollectible, based on management’s analysis of expected cash flows (for non-collateral dependent loans) or collateral value (for collateral-dependent loans). Subsequent recoveries of loans previously charged off, if any, are credited to the allowance when received. The provision for losses on loans is determined based on management’s assessment of several factors: reviews and evaluations of specific loans, changes in the nature and volume of the loan portfolio, current economic conditions and the related impact on specific borrowers and industry groups, historical loan loss experience, the level of classified and nonperforming loans and the results of regulatory examinations.

Loans are considered impaired if, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Depending on a particular loan’s circumstances, we measure impairment of a loan based upon either the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s observable market price, or the fair value of the collateral less estimated costs to sell if the loan is collateral dependent. Valuation allowances are established for collateral-dependent impaired loans for the difference between the loan amount and fair value of collateral less estimated selling costs. For impaired loans that are not collateral dependent, a valuation allowance is established for the difference between the loan amount and the present value of expected future cash flows discounted at the historical effective interest rate or the observable market price of the loan. Impairment losses are recognized through an increase in the required allowance for loan losses. Cash receipts on loans deemed impaired are recorded based on the loan’s separate status as a nonaccrual loan or an accrual status loan.

Some loans are accounted for in accordance with ASC 310-30, Loans and Debt Securities Acquired with Deteriorated Credit Quality. For these loans (“purchased credit impaired loans”), the Company recorded a fair value discount and began carrying them at book value less their face amount (see Note 4). For these loans, we determined the contractual amount and timing of undiscounted principal and interest payments (the “undiscounted contractual cash flows”), and estimated the amount and timing of undiscounted expected principal and interest payments, including expected prepayments (the “undiscounted expected cash flows”). Under acquired impaired loan accounting, the difference between the undiscounted contractual cash flows and the undiscounted expected cash flows is the nonaccretable difference. The nonaccretable difference is an estimate of the loss exposure of principal and interest related to the purchased credit impaired loans, and the amount is subject to change over time based on the performance of the loans. The carrying value of purchased credit impaired loans is initially determined as the discounted expected cash flows. The excess of expected cash flows at acquisition over the initial fair value of the purchased credit impaired loans is referred to as the “accretable yield” and is recorded as interest income over the estimated life of the acquired loans using the level-yield method, if the timing and amount of the future cash flows is reasonably estimable. The carrying value of purchased credit impaired loans is reduced by payments received, both principal and interest, and increased by the portion of the accretable yield recognized as interest income. Subsequent to acquisition, the Company evaluates the purchased credit impaired loans on a quarterly basis. Increases in expected cash flows compared to those previously estimated increase the accretable yield and are recognized as interest income prospectively. Decreases in expected cash flows compared to those previously estimated decrease the accretable yield and may result in the establishment of an allowance for loan losses and a provision for loan losses. Purchased credit impaired loans are generally considered accruing and performing loans, as the loans accrete interest income over the estimated life of the loan when expected cash flows are reasonably estimable. Accordingly, purchased credit impaired loans that are contractually past due are still considered to be accruing and performing as long as there is an expectation that the estimated cash flows will be received. If the timing and amount of cash flows is not reasonably estimable, the loans may be classified as nonaccrual 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.

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

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

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

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

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

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

Goodwill. The Company’s goodwill is evaluated annually for impairment or more frequently if impairment indicators are present.  A qualitative assessment is performed to determine whether the existence of events or circumstances leads to a determination that it is more likely than not the fair value is less than the carrying amount, including goodwill.  If, based on the evaluation, it is determined to be more likely than not that the fair value is less than the carrying value, then goodwill is tested further for impairment.  If the implied fair value of goodwill is lower than its carrying amount, a goodwill impairment is indicated and goodwill is written down to its implied fair value.  Subsequent increases in goodwill value are not recognized in the financial statements.  As of June 30, 2019, there was no impairment indicated, and the Company believes there continues to be no impairment of goodwill at September 30, 2019.

Intangible Assets.  The Company’s intangible assets at September 30, 2019 included gross core deposit intangibles of $14.7 million with $7.3 million accumulated amortization, gross other identifiable intangibles of $3.8 million with accumulated amortization of $3.8 million, and FHLB mortgage servicing rights of $1.4 million.  At June 30, 2019, the Company’s intangible assets included gross core deposit intangibles of $14.7 million with $6.9 million accumulated amortization, gross other identifiable intangibles of $3.8 million with accumulated amortization of $3.8 million, and FHLB mortgage servicing rights of $1.5 million. The Company’s core deposit intangible assets are being amortized using the straight line method, over periods ranging from five to seven years, with amortization expense expected to be approximately $1.3 million in the remainder of fiscal 2020, $1.3 million in fiscal 2021 through fiscal 2024, and $1.0 million in total thereafter. As of June 30, 2019, there was no impairment indicated, and the Company believes there continues to be no impairment of other intangible assets at September 30, 2019.

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

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

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

The Company files consolidated income tax returns with its subsidiaries.

Incentive Plan. The Company accounts for its Management and Recognition Plan (MRP) and Equity Incentive Plan (EIP) in accordance with ASC 718, “Share-Based Payment.” Compensation expense is based on the market price of the Company’s stock on the date the shares are granted and is recorded over the vesting period. The difference between the grant date fair value and the fair value on the date the shares are considered earned represents a tax benefit to the Company that is recorded as an adjustment to income tax expense.

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

In the event that the participant dies before collecting any or all of the benefits, the Bank shall pay the participant’s beneficiary. No benefits shall 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) outstanding during each period.

Comprehensive Income. Comprehensive income consists of net income and other comprehensive income (loss), net of applicable income taxes. Other comprehensive income (loss) includes unrealized appreciation (depreciation) on available-for-sale securities, unrealized appreciation (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.

The following paragraphs summarize the impact of new accounting pronouncements:

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820) - Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement. ASU 2018-13 modifies the disclosure requirements on fair value measurements in Topic 820. The amendments in this update remove disclosures that no longer are considered cost beneficial, modify/clarify the specific requirements of certain disclosures, and add disclosure requirements identified as relevant. ASU 2018-13 is effective for fiscal years beginning after December 15, 2019, with early adoption permitted for certain removed and modified disclosures, and is not expected to have a significant impact on our financial statements.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326).  The Update amends guidance on reporting credit losses for assets held at amortized cost basis and available for sale debt securities. For assets held at amortized cost basis, Topic 326 eliminates the probable initial recognition threshold in current GAAP and, instead, requires an entity to reflect its current estimate of all expected credit losses. The Update affects loans, debt securities, trade receivables, net investments in leases, off balance sheet credit exposures, and any other financial assets not excluded from the scope that have the contractual right to receive cash.  For public companies, the ASU is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years.  Early adoption is available beginning after December 15, 2018, including interim periods within those fiscal years. Adoption will be applied on a modified retrospective basis, through a cumulative-effect adjustment to retained earnings. The Company formed a working group of key personnel responsible for the allowance for loan losses estimate and initiated its evaluation of the data and systems requirements of adoption of the Update.  The group determined that purchasing third party software would be the most effective method to comply with the requirements, evaluated several outside vendors, and made a vendor recommendation that was approved by the Board.  Model validation and data testing using existing ALLL methodology have been completed. Parallel testing of the new methodology compared to the current methodology will be performed throughout fiscal year 2020 and the Company continues to evaluate the impact of adopting the new guidance.  We expect to recognize a one-time cumulative effect adjustment to the allowance for loan losses as of the beginning of the first reporting period in which the new standard is effective, which for the Company will be the three-month period ending September 30, 2020, but cannot yet determine the overall impact of the new guidance on the Company’s consolidated financial statements, or the exact amount of any such one-time adjustment.   

In February 2016, the FASB issued ASU 2016-02, “Leases,” to revise the accounting related to lease accounting.  Under the new guidance, a lessee is required to record a right-of-use (ROU) asset and a lease liability on the balance sheet for all leases with terms longer than 12 months.   The Update was effective for the Company July 1, 2019.   Adoption of the standard allows the use of a modified retrospective transition approach for all periods presented at the time of adoption.  Based on the Company’s leases outstanding at September 30, 2019, which included five leased properties and numerous office equipment leases, the adoption of the new standard did not have a material impact on our consolidated statements of financial condition or our consolidated statements of income, although an increase to assets and liabilities occurred at the time of adoption.  In the first quarter of 2020, the Company recognized a ROU asset and corresponding lease liability for all leases of approximately $2.0 million based on the lease portfolio at that time.  The Company’s new leases, lease terminations, and lease modifications and renewals will impact the amount of ROU asset and corresponding lease liability recognized.  The Company’s leases are all currently “operating leases” as defined in the Update; therefore, no material change in the income statement presentation of lease expense is anticipated.

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Note 8: Earnings Per Share

3 Months Ended

Sep. 30, 2019

Notes

Note 8: Earnings Per Share

Note 8:  Earnings Per Share

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

	September 30,
	2019	2018
(dollars in thousands except per share data)
Net income available to common shareholders	$                        7,828	$                        6,800
Average Common shares – outstanding basic	9,232,257	8,996,321
Stock options under treasury stock method	11,891	10,194
Average Common shares – outstanding diluted	9,244,148	9,006,515
Basic earnings per common share	$                          0.85	$                          0.76
Diluted earnings per common share	$                          0.85	$                          0.76

At September 30, 2019, 15,500 options outstanding had an exercise price in excess of the market price.  At September 30, 2018, no options outstanding had an exercise price in excess of the market price.

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Condensed Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands	3 Months Ended
	Sep. 30, 2019	Sep. 30, 2018
Details
Comprehensive Income (Loss), Net	$ 7,828	$ 6,800
Other comprehensive income
Unrealized gains (losses) on securities available-for-sale	263	(378)
Comprehensive Income Tax Benefit (Expense)	(56)	91
Total other comprehensive income (loss)	207	(287)
COMPREHENSIVE INCOME	$ 8,035	$ 6,513

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Note 12: Fair Value Measurements

3 Months Ended

Sep. 30, 2019

Notes

Note 12: Fair Value Measurements

Note 12:  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 of assets  recognized in the accompanying 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, 2019 and June 30, 2019:

	Fair Value Measurements at September 30, 2019, Using:
		Quoted Prices in Active Markets for Identical Assets	Significant Other Observable Inputs	Significant Unobservable Inputs
(dollars in thousands)	Fair Value	(Level 1)	(Level 2)	(Level 3)
U.S. government sponsored enterprises (GSEs)	$     5,031	$                   -	$      5,031	$                   -
State and political subdivisions	41,785	-	41,785	-
Other securities	5,034	-	5,034	-
Mortgage-backed GSE residential	119,156	-	119,156	-

	Fair Value Measurements at June 30, 2019, Using:
		Quoted Prices in Active Markets for Identical Assets	Significant Other Observable Inputs	Significant Unobservable Inputs
(dollars in thousands)	Fair Value	(Level 1)	(Level 2)	(Level 3)
U.S. government sponsored enterprises (GSEs)	$     7,270	$                   -	$      7,270	$                   -
State and political subdivisions	42,783	-	42,783	-
Other securities	5,053	-	5,053	-
Mortgage-backed GSE residential	110,429	-	110,429	-

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. The Company does not have Level 1 securities. 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. Level 2 securities include U.S. Government-sponsored enterprises, state and political subdivisions, other securities, mortgage-backed GSE residential securities and mortgage-backed other U.S. Government agencies. In certain cases where Level 1 or Level 2 inputs are not available, securities are classified within Level 3 of the hierarchy.

Nonrecurring Measurements.  The following tables present the fair value measurement of assets measured at fair value on a nonrecurring basis and the level within the ASC 820 fair value hierarchy in which the fair value measurements fell at September 30 and June 30, 2019:

	Fair Value Measurements at September 30 , 2019, Using:
		Quoted Price	Significant
		in Active	Other	Significant
		Markets for	Observable	Unobservable
		Identical Assets	Inputs	Inputs
(dollars in thousands)	Fair Value	(Level 1)	(Level 2)	(Level 3)
Foreclosed and repossessed assets held for sale	$365	$-	$-	$365

	Fair Value Measurements at June 30, 2019, Using:
		Quoted Prices	Significant
		in Active	Other	Significant
		Markets for	Observable	Unobservable
		Identical Assets	Inputs	Inputs
(dollars in thousands)	Fair Value	(Level 1)	(Level 2)	(Level 3)
Foreclosed and repossessed assets held for sale	2,430	-	-	2,430

The following table presents gains and (losses) recognized on assets measured on a non-recurring basis for the three-month periods ended September 30, 2019 and 2018:

	For the three months ended
(dollars in thousands)	September 30, 2019	September 30, 2018
Foreclosed and repossessed assets held for sale	$                   (1)	$                    (115)
Total (losses) gains on assets measured on a non-recurring basis	$                   (1)	$                    (115)

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

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

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

(dollars in thousands)	Fair value at September 30 , 2019	Valuation technique	Unobservable inputs	Range of inputs applied	Weighted- average inputs applied
Nonrecurring Measurements
Foreclosed and repossessed assets	$365	Third party appraisal	Marketability discount	0.0% - 32.6%	32.6%

(dollars in thousands)	Fair value at June 30, 2019	Valuation technique	Unobservable inputs	Range of inputs applied	Weighted- average inputs applied
Nonrecurring Measurements
Foreclosed and repossessed assets	$2,430	Third party appraisal	Marketability discount	5.1% - 77.0%	35.2%

Fair Value of Financial Instruments. The following table presents estimated fair values of the Company’s financial instruments not reported at fair value and the level within the fair value hierarchy in which the fair value measurements fell at September 30 and June 30, 2019.

	September 30, 2019
		Quoted Prices
		in Active		Significant
		Markets for	Significant Other	Unobservable
	Carrying	Identical Assets	Observable Inputs	Inputs
(dollars in thousands)	Amount	(Level 1)	(Level 2)	(Level 3)
Financial assets
Cash and cash equivalents	$31,423	$31,423	$-	$-
Interest-bearing time deposits	971	-	971	-
Stock in FHLB	7,733	-	7,733	-
Stock in Federal Reserve Bank of St. Louis	4,350	-	4,350	-
Loans receivable, net	1,874,497	-	-	1,856,215
Accrued interest receivable	11,648	-	11,648	-
Financial liabilities
Deposits	1,872,520	1,205,460	-	668,173
Securities sold under agreements to           repurchase	-	-	-	-
Advances from FHLB	103,327	-	104,078	-
Note payable	3,000	-	-	3,000
Accrued interest payable	1,900	-	1,900	-
Subordinated debt	15,068	-	-	14,812
Unrecognized financial instruments     (net of contract amount)
Commitments to originate loans	-	-	-	-
Letters of credit	-	-	-	-
Lines of credit	-	-	-	-

	June 30, 2019
		Quoted Prices
		in Active		Significant
		Markets for	Significant Other	Unobservable
	Carrying	Identical Assets	Observable Inputs	Inputs
(dollars in thousands)	Amount	(Level 1)	(Level 2)	(Level 3)
Financial assets
Cash and cash equivalents	$35,400	$35,400	$-	$-
Interest-bearing time deposits	969	-	969	-
Stock in FHLB	5,233	-	5,233	-
Stock in Federal Reserve Bank of St. Louis	4,350	-	4,350	-
Loans receivable, net	1,846,405	-	-	1,823,040
Accrued interest receivable	10,189	-	10,189	-
Financial liabilities
Deposits	1,893,695	1,214,606	-	678,301
Securities sold under agreements to           repurchase	4,376	-	4,376	-
Advances from FHLB	44,908	-	45,547	-
Note payable	3,000	-	-	3,000
Accrued interest payable	2,099	-	2,099	-
Subordinated debt	15,043	-	-	15,267
Unrecognized financial instruments     (net of contract amount)
Commitments to originate loans	-	-	-	-
Letters of credit	-	-	-	-
Lines of credit	-	-	-	-

The following methods and assumptions were used in estimating the fair values of financial instruments:

Cash and cash equivalents and interest-bearing time deposits are valued at their carrying amounts, which approximates book value. Stock in FHLB and the Federal Reserve Bank of St. Louis is valued at cost, which approximates fair value. The fair value of loans is estimated on an exit price basis incorporating contractual cash flow, prepayments discount spreads, credit loss and liquidity premiums. Loans with similar characteristics were aggregated for purposes of the calculations. The carrying amount of accrued interest approximates its fair value.

The fair value of fixed-maturity time deposits is estimated using a discounted cash flow calculation that applies the rates currently offered for deposits of similar remaining maturities. Non-maturity deposits and securities sold under agreements are valued at their carrying value, which approximates fair value. Fair value of advances from the FHLB is estimated by discounting maturities using an estimate of the current market for similar instruments. The fair value of subordinated debt is estimated using rates currently available to the Company for debt with similar terms and maturities. The fair value of commitments to originate loans is estimated using the fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the present creditworthiness of the counterparties. The carrying amount of notes payable approximates fair value.  For fixed-rate loan commitments, fair value also considers the difference between current levels of interest rates and committed rates. The fair value of letters of credit and lines of credit are based on fees currently charged for similar agreements or on the estimated cost to terminate or otherwise settle the obligations with the counterparties at the reporting date. 

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Document and Entity Information - $ / shares		3 Months Ended
	Nov. 07, 2019	Sep. 30, 2019
Details
Registrant CIK		0000916907
Fiscal Year End		--06-30
Registrant Name		SOUTHERN MISSOURI BANCORP, INC.
SEC Form		10-Q
Period End date		Sep. 30, 2019
Trading Symbol		SMBC
Trading Exchange		NASDAQ
Tax Identification Number (TIN)		43-1665523
Number of common stock shares outstanding	9,201,783
Filer Category		Accelerated Filer
Current with reporting		Yes
Interactive Data Current		Yes
Shell Company		false
Small Business		false
Emerging Growth Company		false
Document Quarterly Report		true
Entity File Number		0-23406
Entity Incorporation, State or Country Code		MO
Entity Address, Address Line One		2991 Oak Grove Road
Entity Address, City or Town		Poplar Bluff
Entity Address, State or Province		MO
Entity Address, Postal Zip Code		63901
City Area Code		573
Local Phone Number		778-1800
Title of 12(b) Security		Common
Entity Listing, Par Value Per Share	$ 0.01
Amendment Flag		false
Document Fiscal Year Focus		2020
Document Fiscal Period Focus		Q1
Document Transition Report		false

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Note 2: Organization and Summary of Significant Accounting Policies: Cash and Cash Equivalents, Policy (Details) - USD ($) $ in Thousands	Sep. 30, 2019	Jun. 30, 2019
Details
Cash Due and Interest-Bearing Deposits in Other Depository Institutions	$ 6,900	$ 6,900

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Note 4: Loans and Allowance for Loan Losses: Financing Receivable Credit Quality Indicators (Details) - USD ($) $ in Thousands	Sep. 30, 2019	Jun. 30, 2019
Consumer Loan | Pass
Financing Receivable Credit Quality Indicators	$ 100,742	$ 97,012
Consumer Loan | Watch
Financing Receivable Credit Quality Indicators	167	170
Consumer Loan | Special Mention
Financing Receivable Credit Quality Indicators	26	26
Consumer Loan | Substandard
Financing Receivable Credit Quality Indicators	182	291
Consumer Loan | Doubtful
Financing Receivable Credit Quality Indicators	0	35
Consumer Loan | Total by Credit Quality Indicator
Financing Receivable Credit Quality Indicators	101,117	97,534
Commercial Loan | Pass
Financing Receivable Credit Quality Indicators	363,739	341,069
Commercial Loan | Watch
Financing Receivable Credit Quality Indicators	5,928	7,802
Commercial Loan | Special Mention
Financing Receivable Credit Quality Indicators	0	0
Commercial Loan | Substandard
Financing Receivable Credit Quality Indicators	6,061	7,003
Commercial Loan | Doubtful
Financing Receivable Credit Quality Indicators	0	0
Commercial Loan | Total by Credit Quality Indicator
Financing Receivable Credit Quality Indicators	375,728	355,874
Construction Loan Payable | Pass
Financing Receivable Credit Quality Indicators	89,289	80,134
Construction Loan Payable | Watch
Financing Receivable Credit Quality Indicators	0	0
Construction Loan Payable | Special Mention
Financing Receivable Credit Quality Indicators	0	0
Construction Loan Payable | Substandard
Financing Receivable Credit Quality Indicators	0	0
Construction Loan Payable | Doubtful
Financing Receivable Credit Quality Indicators	0	0
Construction Loan Payable | Total by Credit Quality Indicator
Financing Receivable Credit Quality Indicators	89,289	80,134
Residential Real Estate | Pass
Financing Receivable Credit Quality Indicators	481,808	482,869
Residential Real Estate | Watch
Financing Receivable Credit Quality Indicators	1,020	1,236
Residential Real Estate | Special Mention
Financing Receivable Credit Quality Indicators	103	103
Residential Real Estate | Substandard
Financing Receivable Credit Quality Indicators	6,416	7,784
Residential Real Estate | Doubtful
Financing Receivable Credit Quality Indicators	0	0
Residential Real Estate | Total by Credit Quality Indicator
Financing Receivable Credit Quality Indicators	489,347	491,992
Commercial Real Estate | Pass
Financing Receivable Credit Quality Indicators	802,243	802,479
Commercial Real Estate | Watch
Financing Receivable Credit Quality Indicators	20,893	21,693
Commercial Real Estate | Special Mention
Financing Receivable Credit Quality Indicators	3,438	3,463
Commercial Real Estate | Substandard
Financing Receivable Credit Quality Indicators	13,155	13,142
Commercial Real Estate | Doubtful
Financing Receivable Credit Quality Indicators	0	0
Commercial Real Estate | Total by Credit Quality Indicator
Financing Receivable Credit Quality Indicators	$ 839,729	$ 840,777

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Note 3: Securities: Other Securities Policy: Pooled Trust Preferred Securities (Details) $ in Thousands	Sep. 30, 2019 USD ($)
Details
Number of Pooled Trust Preferred Securities	2
Fair Value of Pooled Trust Preferred Securities Held	$ 764
Unrealized Losses on Pooled Trust Preferred Securities in a Continuous Unrealized Loss Position for 12 Months or More	$ 209

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Note 12: Fair Value Measurements: Gains (Losses) Recognized on Assets Measured on a Nonrecurring Basis (Tables)

3 Months Ended

Sep. 30, 2019

Tables/Schedules

Gains (Losses) Recognized on Assets Measured on a Nonrecurring Basis

	For the three months ended
(dollars in thousands)	September 30, 2019	September 30, 2018
Foreclosed and repossessed assets held for sale	$                   (1)	$                    (115)
Total (losses) gains on assets measured on a non-recurring basis	$                   (1)	$                    (115)

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Note 9: Income Taxes: Schedule of Deferred Tax Assets and Liabilities (Tables)

3 Months Ended

Sep. 30, 2019

Tables/Schedules

Schedule of Deferred Tax Assets and Liabilities

(dollars in thousands)	September 30, 2019	June 30, 2019
Deferred tax assets:
Provision for losses on loans	$                             4,758	$                           4,601
Accrued compensation and benefits	493	692
NOL carry forwards acquired	300	199
Minimum Tax Credit	130	130
Unrealized loss on other real estate	51	134
Purchase accounting adjustments	-	255
Losses and credits from LLC's	1,236	1,206
Total deferred tax assets	6,968	7,217
Deferred tax liabilities:
Purchase accounting adjustments	176	-
Depreciation	1,469	1,749
FHLB stock dividends	120	120
Prepaid expenses	175	313
Unrealized gain on available for sale securities	422	364
Other	60	61
Total deferred tax liabilities	2,422	2,607
Net deferred tax asset	$                             4,546	$                           4,610

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Note 3: Securities: Schedule of Available for Sale Securities (Details) - USD ($) $ in Thousands	Sep. 30, 2019	Jun. 30, 2019
Other securities
Available-for-sale Securities, Amortized Cost Basis	$ 5,176	$ 5,176
Available for sale Securities Gross Unrealized Gain	72	75
Available For Sale Securities Gross Unrealized Losses	(214)	(198)
Available-for-sale Securities Estimated Fair Value	5,034	5,053
Mortgage-backed Securities, Issued by US Government Sponsored Enterprises
Available-for-sale Securities, Amortized Cost Basis	117,908	109,297
Available for sale Securities Gross Unrealized Gain	1,579	1,449
Available For Sale Securities Gross Unrealized Losses	(331)	(317)
Available-for-sale Securities Estimated Fair Value	119,156	110,429
Total investments and mortgage-backed securities
Available-for-sale Securities, Amortized Cost Basis	169,088	163,880
Available for sale Securities Gross Unrealized Gain	2,504	2,253
Available For Sale Securities Gross Unrealized Losses	(586)	(598)
Available-for-sale Securities Estimated Fair Value	171,006	165,535
US Government-sponsored Enterprises Debt Securities
Available-for-sale Securities, Amortized Cost Basis	5,038	7,284
Available for sale Securities Gross Unrealized Gain	1	1
Available For Sale Securities Gross Unrealized Losses	(8)	(15)
Available-for-sale Securities Estimated Fair Value	5,031	7,270
US States and Political Subdivisions Debt Securities
Available-for-sale Securities, Amortized Cost Basis	40,966	42,123
Available for sale Securities Gross Unrealized Gain	852	728
Available For Sale Securities Gross Unrealized Losses	(33)	(68)
Available-for-sale Securities Estimated Fair Value	$ 41,785	$ 42,783

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Note 4: Loans and Allowance for Loan Losses: Schedule of Accounts, Notes, Loans and Financing Receivable (Tables)

3 Months Ended

Sep. 30, 2019

Tables/Schedules

Schedule of Accounts, Notes, Loans and Financing Receivable

(dollars in thousands)	September 30, 2019	June 30, 2019
Real Estate Loans:
Residential	$                  489,347	$                 491,992
Construction	125,724	123,287
Commercial	839,729	840,777
Consumer loans	101,117	97,534
Commercial loans	375,728	355,874
	1,931,645	1,909,464
Loans in process	(36,435)	(43,153)
Deferred loan fees, net	(3)	(3)
Allowance for loan losses	(20,710)	(19,903)
Total loans	$               1,874,497	$              1,846,405

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Note 4: Loans and Allowance for Loan Losses: Schedule of Impaired Loans (Tables)

3 Months Ended

Sep. 30, 2019

Tables/Schedules

Schedule of Impaired Loans

	September 30, 2019
	Recorded	Unpaid Principal	Specific
(dollars in thousands)	Balance	Balance	Allowance
Loans without a specific valuation allowance:
Residential real estate	$           4,916	$           5,152	$                   -
Construction real estate	1,305	1,367	-
Commercial real estate	22,928	27,306	-
Consumer loans	-	-	-
Commercial loans	6,152	7,252	-
Loans with a specific valuation allowance:
Residential real estate	$                   -	$                   -	$                   -
Construction real estate	-	-	-
Commercial real estate	-	-	-
Consumer loans	-	-	-
Commercial loans	-	-	-
Total:
Residential real estate	$           4,916	$           5,152	$                   -
Construction real estate	$           1,305	$           1,367	$                   -
Commercial real estate	$         22,928	$         27,306	$                   -
Consumer loans	$                   -	$                   -	$                   -
Commercial loans	$           6,152	$           7,252	$                   -

	June 30, 2019
	Recorded	Unpaid Principal	Specific
(dollars in thousands)	Balance	Balance	Allowance
Loans without a specific valuation allowance:
Residential real estate	$           5,104	$           5,341	$                   -
Construction real estate	1,330	1,419	-
Commercial real estate	26,410	31,717	-
Consumer loans	8	8	-
Commercial loans	6,999	9,187	-
Loans with a specific valuation allowance:
Residential real estate	$                   -	$                   -	$                   -
Construction real estate	-	-	-
Commercial real estate	-	-	-
Consumer loans	-	-	-
Commercial loans	-	-	-
Total:
Residential real estate	$           5,104	$           5,341	$                   -
Construction real estate	$           1,330	$           1,419	$                   -
Commercial real estate	$         26,410	$         31,717	$                   -
Consumer loans	$                  8	$                  8	$                   -
Commercial loans	$           6,999	$           9,187	$                   -

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Note 4: Loans and Allowance for Loan Losses: Residential Mortgage Lending (Policies)

3 Months Ended

Sep. 30, 2019

Policies

Residential Mortgage Lending

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.

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 Bank 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.

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Note 2: Organization and Summary of Significant Accounting Policies: New Accounting Pronouncements (Policies)

3 Months Ended

Sep. 30, 2019

Policies

New Accounting Pronouncements

The following paragraphs summarize the impact of new accounting pronouncements:

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820) - Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement. ASU 2018-13 modifies the disclosure requirements on fair value measurements in Topic 820. The amendments in this update remove disclosures that no longer are considered cost beneficial, modify/clarify the specific requirements of certain disclosures, and add disclosure requirements identified as relevant. ASU 2018-13 is effective for fiscal years beginning after December 15, 2019, with early adoption permitted for certain removed and modified disclosures, and is not expected to have a significant impact on our financial statements.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326).  The Update amends guidance on reporting credit losses for assets held at amortized cost basis and available for sale debt securities. For assets held at amortized cost basis, Topic 326 eliminates the probable initial recognition threshold in current GAAP and, instead, requires an entity to reflect its current estimate of all expected credit losses. The Update affects loans, debt securities, trade receivables, net investments in leases, off balance sheet credit exposures, and any other financial assets not excluded from the scope that have the contractual right to receive cash.  For public companies, the ASU is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years.  Early adoption is available beginning after December 15, 2018, including interim periods within those fiscal years. Adoption will be applied on a modified retrospective basis, through a cumulative-effect adjustment to retained earnings. The Company formed a working group of key personnel responsible for the allowance for loan losses estimate and initiated its evaluation of the data and systems requirements of adoption of the Update.  The group determined that purchasing third party software would be the most effective method to comply with the requirements, evaluated several outside vendors, and made a vendor recommendation that was approved by the Board.  Model validation and data testing using existing ALLL methodology have been completed. Parallel testing of the new methodology compared to the current methodology will be performed throughout fiscal year 2020 and the Company continues to evaluate the impact of adopting the new guidance.  We expect to recognize a one-time cumulative effect adjustment to the allowance for loan losses as of the beginning of the first reporting period in which the new standard is effective, which for the Company will be the three-month period ending September 30, 2020, but cannot yet determine the overall impact of the new guidance on the Company’s consolidated financial statements, or the exact amount of any such one-time adjustment.   

In February 2016, the FASB issued ASU 2016-02, “Leases,” to revise the accounting related to lease accounting.  Under the new guidance, a lessee is required to record a right-of-use (ROU) asset and a lease liability on the balance sheet for all leases with terms longer than 12 months.   The Update was effective for the Company July 1, 2019.   Adoption of the standard allows the use of a modified retrospective transition approach for all periods presented at the time of adoption.  Based on the Company’s leases outstanding at September 30, 2019, which included five leased properties and numerous office equipment leases, the adoption of the new standard did not have a material impact on our consolidated statements of financial condition or our consolidated statements of income, although an increase to assets and liabilities occurred at the time of adoption.  In the first quarter of 2020, the Company recognized a ROU asset and corresponding lease liability for all leases of approximately $2.0 million based on the lease portfolio at that time.  The Company’s new leases, lease terminations, and lease modifications and renewals will impact the amount of ROU asset and corresponding lease liability recognized.  The Company’s leases are all currently “operating leases” as defined in the Update; therefore, no material change in the income statement presentation of lease expense is anticipated.

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Note 4: Loans and Allowance for Loan Losses: Commercial Business Lending (Policies)

3 Months Ended

Sep. 30, 2019

Policies

Commercial Business Lending

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.

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Note 4: Loans and Allowance for Loan Losses: Schedule of Interest Income Recognized on Impaired Loans (Details) - USD ($) $ in Thousands	3 Months Ended
	Sep. 30, 2019	Sep. 30, 2018
Total Loans
Impaired Financing Receivable, Average Recorded Investment	$ 26,516	$ 12,685
Impaired Financing Receivable Interest Income Recognized	499	1,120
Consumer Loan
Impaired Financing Receivable, Average Recorded Investment	0	0
Impaired Financing Receivable Interest Income Recognized	0	0
Commercial Loan
Impaired Financing Receivable, Average Recorded Investment	5,812	1,628
Impaired Financing Receivable Interest Income Recognized	93	616
Construction Loan Payable
Impaired Financing Receivable, Average Recorded Investment	1,306	1,297
Impaired Financing Receivable Interest Income Recognized	48	101
Residential Real Estate
Impaired Financing Receivable, Average Recorded Investment	1,677	2,531
Impaired Financing Receivable Interest Income Recognized	23	33
Commercial Real Estate
Impaired Financing Receivable, Average Recorded Investment	17,721	7,229
Impaired Financing Receivable Interest Income Recognized	$ 335	$ 370

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Note 5: Accounting For Certain Loans Acquired in A Transfer: Schedule of Acquired Loans in Transfer Accretable Yield (Tables)

3 Months Ended

Sep. 30, 2019

Tables/Schedules

Schedule of Acquired Loans in Transfer Accretable Yield

	For the three-month period ended
(dollars in thousands)	September 30, 2019	September 30, 2018
Balance at beginning of period	$                         220	$                         589
Additions	-	-
Accretion	(83)	(945)
Reclassification from nonaccretable difference	46	865
Disposals	-	(204)
Balance at end of period	$                         183	$                         305

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Note 7: Deposits: Schedule of Deposit Liabilities (Tables)

3 Months Ended

Sep. 30, 2019

Tables/Schedules

Schedule of Deposit Liabilities

(dollars in thousands)	September 30, 2019	June 30, 2019
Non-interest bearing accounts	$                         208,646	$                         218,889
NOW accounts	634,855	639,219
Money market deposit accounts	197,976	188,355
Savings accounts	163,983	167,973
Certificates	667,060	679,259
Total Deposit Accounts	$                      1,872,520	$                      1,893,695

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Note 4: Loans and Allowance for Loan Losses: Schedule of Debtor Troubled Debt Restructuring, Current Period (Details) $ in Thousands	3 Months Ended
	Sep. 30, 2019 USD ($)	Sep. 30, 2018 USD ($)
Total Loans
modifications	0	3
Investment	$ 0	$ 991
Consumer Loan
modifications	0	0
Investment	$ 0	$ 0
Commercial Loan
modifications	0	1
Investment	$ 0	$ 69
Construction Loan Payable
modifications	0	0
Investment	$ 0	$ 0
Residential Real Estate
modifications	0	0
Investment	$ 0	$ 0
Commercial Real Estate
modifications	0	2
Investment	$ 0	$ 922

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Note 11: Subordinated Debt (Details) - USD ($) $ in Thousands	1 Months Ended		3 Months Ended	12 Months Ended
	Aug. 31, 2014	Oct. 31, 2013	Sep. 30, 2019	Jun. 30, 2020
Ozarks Legacy Community Financial, Inc.
Assumed floating rate junior subordinated debt securities		$ 3,100
Ozarks Legacy Community Financial, Inc. | Reported Value Measurement
Assumed floating rate junior subordinated debt securities			$ 2,600	$ 2,600
Peoples Service Company, Inc.
Assumed floating rate junior subordinated debt securities	$ 6,500
Peoples Service Company, Inc. | Reported Value Measurement
Assumed floating rate junior subordinated debt securities			$ 5,200	$ 5,200

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Note 9: Income Taxes: Schedule of Deferred Tax Assets and Liabilities (Details) - USD ($) $ in Thousands	Sep. 30, 2019	Jun. 30, 2019
Details
Deferred Tax Assets Provision for Losses on Loans	$ 4,758	$ 4,601
Deferred Tax Assets Accrued Compensation and Benefits	493	692
Deferred Tax Assets NOL Carry Forwards Acquired	300	199
Deferred Tax Assets, Tax Credit Carryforwards, Alternative Minimum Tax	130	130
Deferred Tax Assets Unrealized Loss on Other Real Estate	51	134
Deferred tax assets purchase accounting adjustments	0	255
Losses and credits from LLC's	1,236	1,206
Deferred Tax Assets, Gross	6,968	7,217
Deferred tax liabilities purchase accounting adjustments	176	0
Deferred Tax Liabilities Depreciation	1,469	1,749
Deferred Tax Liabilities FHLB Stock Dividends	120	120
Deferred Tax Liabilities, Prepaid Expenses	175	313
Deferred Tax Liabilities, Net	2,422	2,607
Deferred Tax Assets, Net of Valuation Allowance	$ 4,546	$ 4,610

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Note 2: Organization and Summary of Significant Accounting Policies: Property, Plant and Equipment, Policy (Policies)

3 Months Ended

Sep. 30, 2019

Policies

Property, Plant and Equipment, Policy

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

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

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Note 2: Organization and Summary of Significant Accounting Policies: Principles of Consolidation Policy (Policies)

3 Months Ended

Sep. 30, 2019

Policies

Principles of Consolidation Policy

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

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Note 2: Organization and Summary of Significant Accounting Policies: Marketable Securities, Policy (Policies)

3 Months Ended

Sep. 30, 2019

Policies

Marketable Securities, Policy

Available for Sale Securities. Available for sale securities, which include any security for which the Company has no immediate plan to sell but which may be sold in the future, are carried at fair value. Unrealized gains and losses, net of tax, are reported in accumulated other comprehensive income (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.

When the Company does not intend to sell a debt security, and it is more likely than not the Company will not have to sell the security before recovery of its cost basis, it recognizes the credit component of an other-than-temporary impairment of a debt security in earnings and the remaining portion in other comprehensive income. As a result of this guidance, the Company’s consolidated balance sheet as of the dates presented reflects the full impairment (that is, the difference between the security’s amortized cost basis and fair value) on debt securities that the Company intends to sell or would more likely than not be required to sell before the expected recovery of the amortized cost basis. For available-for-sale debt securities that management has no intent to sell and believes that it more likely than not will not be required to sell prior to recovery, only the credit loss component of the impairment is recognized in earnings, while the noncredit loss is recognized in accumulated other comprehensive income. The credit loss component recognized in earnings is identified as the amount of principal cash flows not expected to be received over the remaining term of the security as projected based on cash flow projections.

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NOTE 6: Premises and Equipment

3 Months Ended

Sep. 30, 2019

Notes

NOTE 6: Premises and Equipment

Note 6:  Premises and Equipment

Following is a summary of premises and equipment:

(dollars in thousands)	September 30, 2019	June 30, 2019
Land	$                            12,407	$                            12,414
Buildings and improvements	54,933	54,304
Construction in progress	489	466
Furniture, fixtures, equipment and software	17,506	16,514
Automobiles	107	107
Operating leases ROU asset	1,996	-
	87,438	83,805
Less accumulated depreciation	21,958	21,078
	$                            65,480	$                            62,727

Leases.The Company adopted ASU 2016-02, Leases (Topic 842), on July 1, 2019, using the modified retrospective transition approach whereby comparative periods were not restated.  The Company also elected certain relief options under the ASU, including the option not to recognize right of use asset and lease liabilities that arise from short-term leases (leases with terms of twelve months or less).  The Company has five leased properties and numerous office equipment lease agreements in which it is the lessee, with lease terms exceeding twelve months.   Adoption of this ASU resulted in the Company recognizing a ROU asset and corresponding lease liability of $437,000, while entry into a new operating lease agreement during the three-month period ended September 30, 2019, resulted in the recognition of a ROU asset and corresponding lease liability of $1.6 million.

All of the leases are classified as operating leases, and therefore, were previously not recognized on the Company’s consolidated balance sheets.  With the adoption of ASU 2016-02, these operating leases are now included as a ROU asset in our 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.  Because these leases are classified as operating leases, the adoption of the new standard did not have a material effect on lease expense on the Company’s consolidated statements of income.

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

	At or For the
	Three Months Ended
(dollars in thousands)	September 30, 2019
Consolidated Balance Sheet
Operating leases right of use asset	$                         1,996
Operating leases liability	$                         1,996
Consolidated Statement of Income
Operating lease costs classified as occupancy and equipment expense	$                              57
(includes short-term lease costs)
Supplemental disclosures of cash flow information
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$                              39
ROU assets obtained in exchange for operating lease obligations:	$                         2,004

For the three months ended September 30, 2019 and 2018, lease expense was $57,000 and $26,000, respectively.  At September 30, 2019, future expected lease payments for leases with terms exceeding one year were as follows:

(dollars in thousands)
2020	$               116
2021	269
2022	243
2023	243
2024	243
2025	243
Thereafter	1,572
Future lease payments expected	$            2,929

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 months period ended September 30, 2019, income recognized from these lessor agreements was $82,000 and was included in net occupancy and equipment expense.

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Note 10: 401(k) Retirement Plan

3 Months Ended

Sep. 30, 2019

Notes

Note 10: 401(k) Retirement Plan

Note 10:  401(k) Retirement Plan

The Bank has a 401(k) retirement plan that covers substantially all eligible employees.  The Bank made a safe harbor matching contribution 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 2019; for fiscal 2020, 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, 2019, retirement plan expenses recognized for the Plan totaled approximately $381,000, as compared to $341,000 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.

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Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands	3 Months Ended
	Sep. 30, 2019	Sep. 30, 2018
Cash Flows From Operating Activities:
Net Income	$ 7,828	$ 6,800
Items not requiring (providing) cash:
Depreciation	920	777
(Gain) loss on disposal of fixed assets	(2)	8
Stock option and stock grant expense	31	23
Loss on sale/write-down of REO	10	22
Amortization of intangible assets	441	396
Amortization of purchase accounting adjustments	(492)	(1,159)
Increase in cash surrender value of bank owned life insurance (BOLI)	(254)	(246)
Provision for loan losses	896	682
Net amortization of premiums and discounts on securities	264	230
Originations of loans held for sale	(10,132)	(7,420)
Proceeds from sales of loans held for sale	9,986	7,936
Gain on sales of loans held for sale	(273)	(179)
Changes in:
Accrued interest receivable	(1,459)	(1,620)
Prepaid expenses and other assets	(2,638)	1,434
Accounts payable and other liabilities	276	(903)
Deferred income taxes	6	6
Accrued interest payable	(199)	185
Net cash provided by operating activities	5,209	6,972
Cash flows from investing activities:
Net increase in loans	(28,472)	(62,129)
Net change in interest-bearing deposits	(1)	(4)
Proceeds from maturities of available for sale securities	11,041	5,748
Net redemptions (purchases) of Federal Home Loan Bank stock	0	(1,780)
Net purchases of Federal Reserve Bank of St. Louis stock	(2,500)	0
Purchases of available-for-sale securities	(16,512)	(4,655)
Purchases of premises and equipment	(1,687)	(622)
Investments in state & federal tax credits	(10)	(231)
Proceeds from sale of fixed assets	13	0
Proceeds from sale of foreclosed assets	275	421
Net cash used in investing activities	(37,853)	(63,252)
Cash flows from financing activities:
Net decrease in demand deposits and savings accounts	(8,949)	(36,827)
Net (decrease) increase in certificates of deposits	(12,200)	48,066
Net (decrease) increase in securities sold under agreements to repurchase	(4,376)	364
Proceeds from Federal Home Loan Bank advances	147,550	192,550
Repayments of Federal Home Loan Bank advances	(89,162)	(150,900)
Purchase of treasury stock	(2,814)	0
Dividends paid on common stock	(1,382)	(1,169)
Net cash provided by financing activities	28,667	52,084
Decrease in cash and cash equivalents	(3,977)	(4,196)
Cash and cash equivalents at beginning of period	35,400	26,326
Cash and cash equivalents at end of period	31,423	22,130
Noncash investing and financing activities:
Conversion of loans to foreclosed real estate	365	1,495
Conversion of loans to repossessed assets	59	11
Right of use assets obtained in exchange for operating lease obligations	1,996	0
Cash paid during the period for:
Interest (net of interest credited)	964	1,005
Income taxes	$ 2,856	$ 310

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Note 12: Fair Value Measurements: Fair Value Option, Disclosures (Details) - Fair Value, Inputs, Level 3 - Foreclosed and repossessed assets - USD ($) $ in Thousands	3 Months Ended	12 Months Ended
	Sep. 30, 2019	Jun. 30, 2019
Fair Value Asset Liability Measured On Nonrecurring Basis With Unobservable Inputs	$ 365	$ 2,430
Third party appraisal
Fair Value Measurements, Valuation Processes, Description	Third party appraisal	Third party appraisal
Third party appraisal | Marketability discount
Unobservable Measurement Input, Uncertainty, Description	Marketability discount	Marketability discount
Fair Value Measurements Nonrecurring Range of discounts Applied	0.0% - 32.6%	5.1% - 77.0%
Fair Value Measurements Nonrecurring Weighted Average Discount Applied	32.6%	35.2%

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Condensed Consolidated Balance Sheets - Parenthetical - USD ($) $ in Thousands	Sep. 30, 2019	Jun. 30, 2019
Details
Loans and Leases Receivable, Allowance	$ 20,710	$ 19,903
Common Stock, Par or Stated Value Per Share	$ 0.01	$ 0.01
Common Stock, Shares Authorized	25,000,000	25,000,000
Common Stock, Shares, Issued	9,323,184	9,324,659
Treasury Stock, Shares	121,401	35,351

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Note 2: Organization and Summary of Significant Accounting Policies: Share-based Compensation, Option and Incentive Plans Policy (Policies)

3 Months Ended

Sep. 30, 2019

Policies

Share-based Compensation, Option and Incentive Plans Policy

Incentive Plan. The Company accounts for its Management and Recognition Plan (MRP) and Equity Incentive Plan (EIP) 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.

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Note 2: Organization and Summary of Significant Accounting Policies: Bank Owned Life Insurance (Policies)

3 Months Ended

Sep. 30, 2019

Policies

Bank Owned Life Insurance

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

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Note 2: Organization and Summary of Significant Accounting Policies: Comprehensive Income, Policy (Policies)

3 Months Ended

Sep. 30, 2019

Policies

Comprehensive Income, Policy

Comprehensive Income. Comprehensive income consists of net income and other comprehensive income (loss), net of applicable income taxes. Other comprehensive income (loss) includes unrealized appreciation (depreciation) on available-for-sale securities, unrealized appreciation (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.

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NOTE 6: Premises and Equipment: Lessee, Operating Lease, Disclosure: Expected Lease Terms (Details)	3 Months Ended
	Sep. 30, 2019
Operating Lease, Weighted Average Discount Rate, Percent	5.00%
Minimum
Lessee Expected Lease Terms	the expected lease terms range from 18 months
Maximum
Lessee Expected Lease Terms	20 years.

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NOTE 6: Premises and Equipment: Lessor Agreements (Details) $ in Thousands	3 Months Ended
	Sep. 30, 2019 USD ($)
Details
Income Recognized From Lessor Agreements	$ 82

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Note 4: Loans and Allowance for Loan Losses: Schedule of Financing Receivables, Non Accrual Status (Tables)

3 Months Ended

Sep. 30, 2019

Tables/Schedules

Schedule of Financing Receivables, Non Accrual Status

(dollars in thousands)	September 30, 2019	June 30, 2019
Residential real estate	$               5,286	$               6,404
Construction real estate	-	-
Commercial real estate	6,968	10,876
Consumer loans	179	309
Commercial loans	1,588	3,424
Total loans	$             14,021	$             21,013

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Note 3: Securities: Contractual Obligation, Fiscal Year Maturity Schedule (Tables)

3 Months Ended

Sep. 30, 2019

Tables/Schedules

Contractual Obligation, Fiscal Year Maturity Schedule

	September 30, 2019
	Amortized	Estimated
(dollars in thousands)	Cost	Fair Value
Within one year	$                     4,511	$                     4,511
After one year but less than five years	9,749	9,799
After five years but less than ten years	18,017	18,298
After ten years	18,903	19,242
Total investment securities	51,180	51,850
Mortgage-backed securities	117,908	119,156
Total investments and mortgage-backed securities	$                 169,088	$                 171,006

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Note 4: Loans and Allowance for Loan Losses: Financing Receivable Credit Quality Indicators (Tables)

3 Months Ended

Sep. 30, 2019

Tables/Schedules

Financing Receivable Credit Quality Indicators

	September 30, 2019
	Residential	Construction	Commercial
(dollars in thousands)	Real Estate	Real Estate	Real Estate	Consumer	Commercial
Pass	$         481,808	$         89,289	$      802,243	$         100,742	$        363,739
Watch	1,020	-	20,893	167	5,928
Special Mention	103	-	3,438	26	-
Substandard	6,416	-	13,155	182	6,061
Doubtful	-	-	-	-	-
Total	$         489,347	$         89,289	$      839,729	$         101,117	$        375,728

	June 30, 2019
	Residential	Construction	Commercial
(dollars in thousands)	Real Estate	Real Estate	Real Estate	Consumer	Commercial
Pass	$         482,869	$         80,134	$      802,479	$           97,012	$        341,069
Watch	1,236	-	21,693	170	7,802
Special Mention	103	-	3,463	26	-
Substandard	7,784	-	13,142	291	7,003
Doubtful	-	-	-	35	-
Total	$         491,992	$         80,134	$      840,777	$           97,534	$        355,874

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Note 4: Loans and Allowance for Loan Losses: Construction Lending: Construction Loans Modified for other than TDR (Details) - Construction Loans $ in Thousands	Sep. 30, 2019 USD ($)	Jun. 30, 2019 USD ($)
Number of Loans Modified for Other Than TDR	61	59
Amount of Loans Modified for Other Than TDR	$ 29,500	$ 27,200

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Note 12: Fair Value Measurements: Schedule of Financial Instruments (Tables)

3 Months Ended

Sep. 30, 2019

Tables/Schedules

Schedule of Financial Instruments

	September 30, 2019
		Quoted Prices
		in Active		Significant
		Markets for	Significant Other	Unobservable
	Carrying	Identical Assets	Observable Inputs	Inputs
(dollars in thousands)	Amount	(Level 1)	(Level 2)	(Level 3)
Financial assets
Cash and cash equivalents	$31,423	$31,423	$-	$-
Interest-bearing time deposits	971	-	971	-
Stock in FHLB	7,733	-	7,733	-
Stock in Federal Reserve Bank of St. Louis	4,350	-	4,350	-
Loans receivable, net	1,874,497	-	-	1,856,215
Accrued interest receivable	11,648	-	11,648	-
Financial liabilities
Deposits	1,872,520	1,205,460	-	668,173
Securities sold under agreements to           repurchase	-	-	-	-
Advances from FHLB	103,327	-	104,078	-
Note payable	3,000	-	-	3,000
Accrued interest payable	1,900	-	1,900	-
Subordinated debt	15,068	-	-	14,812
Unrecognized financial instruments     (net of contract amount)
Commitments to originate loans	-	-	-	-
Letters of credit	-	-	-	-
Lines of credit	-	-	-	-

	June 30, 2019
		Quoted Prices
		in Active		Significant
		Markets for	Significant Other	Unobservable
	Carrying	Identical Assets	Observable Inputs	Inputs
(dollars in thousands)	Amount	(Level 1)	(Level 2)	(Level 3)
Financial assets
Cash and cash equivalents	$35,400	$35,400	$-	$-
Interest-bearing time deposits	969	-	969	-
Stock in FHLB	5,233	-	5,233	-
Stock in Federal Reserve Bank of St. Louis	4,350	-	4,350	-
Loans receivable, net	1,846,405	-	-	1,823,040
Accrued interest receivable	10,189	-	10,189	-
Financial liabilities
Deposits	1,893,695	1,214,606	-	678,301
Securities sold under agreements to           repurchase	4,376	-	4,376	-
Advances from FHLB	44,908	-	45,547	-
Note payable	3,000	-	-	3,000
Accrued interest payable	2,099	-	2,099	-
Subordinated debt	15,043	-	-	15,267
Unrecognized financial instruments     (net of contract amount)
Commitments to originate loans	-	-	-	-
Letters of credit	-	-	-	-
Lines of credit	-	-	-	-

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Note 12: Fair Value Measurements: Fair Value, Assets Measured on Recurring Basis (Tables)

3 Months Ended

Sep. 30, 2019

Tables/Schedules

Fair Value, Assets Measured on Recurring Basis

	Fair Value Measurements at September 30, 2019, Using:
		Quoted Prices in Active Markets for Identical Assets	Significant Other Observable Inputs	Significant Unobservable Inputs
(dollars in thousands)	Fair Value	(Level 1)	(Level 2)	(Level 3)
U.S. government sponsored enterprises (GSEs)	$     5,031	$                   -	$      5,031	$                   -
State and political subdivisions	41,785	-	41,785	-
Other securities	5,034	-	5,034	-
Mortgage-backed GSE residential	119,156	-	119,156	-

	Fair Value Measurements at June 30, 2019, Using:
		Quoted Prices in Active Markets for Identical Assets	Significant Other Observable Inputs	Significant Unobservable Inputs
(dollars in thousands)	Fair Value	(Level 1)	(Level 2)	(Level 3)
U.S. government sponsored enterprises (GSEs)	$     7,270	$                   -	$      7,270	$                   -
State and political subdivisions	42,783	-	42,783	-
Other securities	5,053	-	5,053	-
Mortgage-backed GSE residential	110,429	-	110,429	-

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Note 3: Securities: Repurchase Agreements, Collateral, Policy (Details) - USD ($) $ in Thousands	Sep. 30, 2019	Jun. 30, 2019
Assets Sold under Agreements to Repurchase, Carrying Amount	$ 114,200	$ 143,700
U.S. Government and Federal Agency Obligations
Assets Sold under Agreements to Repurchase, Carrying Amount	2,300	5,600
Mortgage-backed Securities, Issued by US Government Sponsored Enterprises
Assets Sold under Agreements to Repurchase, Carrying Amount	27,100	47,300
Collateralized Mortgage Obligations
Assets Sold under Agreements to Repurchase, Carrying Amount	54,200	55,700
US States and Political Subdivisions Debt Securities
Assets Sold under Agreements to Repurchase, Carrying Amount	30,400	34,900
Other securities
Assets Sold under Agreements to Repurchase, Carrying Amount	$ 200	$ 300

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Condensed Consolidated Statements of Stockholders' Equity - USD ($) $ in Thousands		Stockholders' Equity, Total	Common Stock	Additional Paid-in Capital	Retained Earnings	Treasury Stock	AOCI Attributable to Parent
Equity Balance at Jun. 30, 2018		$ 200,694	$ 90	$ 83,413	$ 119,536	$ 0	$ (2,345)
Net Income		6,800			6,800
Change in unrealized loss on available for sale securities		(287)			0		(287)
Dividends paid on common stock	[1]	(1,169)			(1,169)
Stock option expense		10		10
Stock grant expense		14		14
Equity Balance at Sep. 30, 2018		206,062	90	83,437	125,167	0	(2,632)
Equity Balance at Jun. 30, 2019		238,392	93	94,541	143,677	(1,166)	1,247
Net Income		7,828			7,828
Change in unrealized loss on available for sale securities		207					207
Dividends paid on common stock	[2]	(1,382)			(1,382)
Stock option expense		17		17
Stock grant expense		14		14
Treasury stock purchased		(2,814)				(2,814)
Equity Balance at Sep. 30, 2019		$ 242,262	$ 93	$ 94,572	$ 150,123	$ (3,980)	$ 1,454

[1] $.13 per share

[2] $.15 per share

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Note 12: Fair Value Measurements: Schedule of Financial Instruments (Details) - USD ($) $ in Thousands	Sep. 30, 2019	Jun. 30, 2019
Letter of Credit
Financial Instruments Owned Carrying Amount	$ 0	$ 0
Line of Credit
Financial Instruments Owned Carrying Amount	0	0
Financial Assets | Cash and Cash Equivalents
Financial Instruments Owned Carrying Amount	31,423	35,400
Financial Assets | Interest-bearing time deposits
Financial Instruments Owned Carrying Amount	971	969
Financial Assets | Investment in Federal Home Loan Bank Stock
Financial Instruments Owned Carrying Amount	7,733
Financial Assets | Investment in Stock of Federal Reserve Bank of St. Louis
Financial Instruments Owned Carrying Amount	4,350	4,350
Financial Assets | Loans Receivable
Financial Instruments Owned Carrying Amount	1,874,497	1,846,405
Financial Assets | Accrued interest receivable
Financial Instruments Owned Carrying Amount	11,648	10,189
Financial Assets | Investment in Federal Home Loan Bank Stock
Financial Instruments Owned Carrying Amount		5,233
Financial Liabilities | Deposits
Financial Instruments Owned Carrying Amount	1,872,520	1,893,695
Financial Liabilities | Securities Sold under Agreements to Repurchase
Financial Instruments Owned Carrying Amount	0	4,376
Financial Liabilities | Federal Home Loan Bank Advances
Financial Instruments Owned Carrying Amount	103,327	44,908
Financial Liabilities | Note payable
Financial Instruments Owned Carrying Amount	3,000	3,000
Financial Liabilities | Accrued interest payable
Financial Instruments Owned Carrying Amount	1,900	2,099
Financial Liabilities | Subordinated Debt
Financial Instruments Owned Carrying Amount	15,068	15,043
Commitments to Extend Credit
Financial Instruments Owned Carrying Amount	$ 0	$ 0

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Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	Sep. 30, 2019	Jun. 30, 2019
Assets
Cash and cash equivalents	$ 31,423	$ 35,400
Interest-bearing time deposits	971	969
Available for sale securities	171,006	165,535
Stock in FHLB of Des Moines	7,733	5,233
Stock in Federal Reserve Bank of St. Louis	4,350	4,350
Loans receivable, net of allowance for loan losses of $20,710 and $19,903 at September 30, 2019 and June 30, 2019, respectively	1,874,497	1,846,405
Accrued interest receivable	11,648	10,189
Premises and equipment, net	65,480	62,727
Bank owned life insurance - cash surrender value	38,593	38,337
Goodwill	14,089	14,089
Other intangible assets, net	8,800	9,239
Prepaid expenses and other assets	22,617	21,929
Total Assets	2,251,207	2,214,402
Liabilities and Stockholders' Equity
Deposits	1,872,520	1,893,695
Securities sold under agreements to repurchase	0	4,376
Advances from FHLB of Des Moines	103,327	44,908
Note payable	3,000	3,000
Accounts payable and other liabilities	13,130	12,889
Accrued interest payable	1,900	2,099
Subordinated debt	15,068	15,043
Total liabilities	2,008,945	1,976,010
Common stock, $.01 par value; 25,000,000 shares authorized; 9,323,184 and 9,324,659 shares issued, respectively, at September 30, 2019 and June 30, 2019	93	93
Additional paid-in capital	94,572	94,541
Retained earnings	150,123	143,677
Treasury Stock of 121,401 and 35,351 shares at September 30, 2019 and June 30, 2019, respectively, at cost	(3,980)	(1,166)
Accumulated other comprehensive income (loss)	1,454	1,247
TOTAL STOCKHOLDERS' EQUITY	242,262	238,392
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$ 2,251,207	$ 2,214,402

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Note 5: Accounting For Certain Loans Acquired in A Transfer

3 Months Ended

Sep. 30, 2019

Notes

Note 5: Accounting For Certain Loans Acquired in A Transfer

Note 5: Accounting for Certain Loans Acquired in a Transfer

During the fiscal years ended June 30, 2011, 2015, 2017, and 2019, the Company acquired certain loans which evidenced deterioration of credit quality since origination and for which it was probable, at acquisition, that all contractually required payments would not be collected.

Loans purchased with evidence of credit deterioration since origination and for which it is probable that all contractually required payments will not be collected are considered to be credit impaired. Evidence of credit quality deterioration as of the purchase date may include information such as past-due and nonaccrual status, borrower credit scores and recent loan to value percentages. Purchased credit-impaired loans are accounted for under the accounting guidance for loans and debt securities acquired with deteriorated credit quality (ASC 310-30) and initially measured at fair value, which includes estimated future credit losses expected to be incurred over the life of the loan. Accordingly, an allowance for credit losses related to these loans is not carried over and recorded at the acquisition date. Management estimated the cash flows expected to be collected at acquisition using our internal risk models, which incorporate the estimate of current key assumptions, such as default rates, severity and prepayment speeds.

The carrying amount of those loans is included in the balance sheet amounts of loans receivable at September 30 and June 30, 2019. The amount of these loans is shown below: 

(dollars in thousands)	September 30, 2019	June 30, 2019
Residential real estate	$                     1,904	$                     1,921
Construction real estate	1,367	1,397
Commercial real estate	20,458	24,669
Consumer loans	-	-
Commercial loans	6,529	8,381
Outstanding balance	$                   30,258	$                   36,368
Carrying amount, net of fair value adjustment of      $5,775 and $7,821 at September 30, 2019 and       June 30, 2019, respectively	$                   24,483	$                   28,547

 Accretable yield, or income expected to be collected, is as follows:

	For the three-month period ended
(dollars in thousands)	September 30, 2019	September 30, 2018
Balance at beginning of period	$                         220	$                         589
Additions	-	-
Accretion	(83)	(945)
Reclassification from nonaccretable difference	46	865
Disposals	-	(204)
Balance at end of period	$                         183	$                         305

During the three-month periods ended September 30, 2019 and September 30, 2018, the Company did not increase or reverse the allowance for loan losses related to these purchased credit impaired loans.

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Note 9: Income Taxes

3 Months Ended

Sep. 30, 2019

Notes

Note 9: Income Taxes

Note 9: Income Taxes  

The Company and its subsidiary files 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, 2015 and before.  The Company recognized no interest or penalties related to income taxes.

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

	For the three-month periods ended
(dollars in thousands)	September 30, 2019	September 30, 2018
Income taxes
Current	$                             1,970	$                           1,660
Deferred	6	6
Total income tax provision	$                             1,976	$                           1,666

The components of net deferred tax assets are summarized as follows:

(dollars in thousands)	September 30, 2019	June 30, 2019
Deferred tax assets:
Provision for losses on loans	$                             4,758	$                           4,601
Accrued compensation and benefits	493	692
NOL carry forwards acquired	300	199
Minimum Tax Credit	130	130
Unrealized loss on other real estate	51	134
Purchase accounting adjustments	-	255
Losses and credits from LLC's	1,236	1,206
Total deferred tax assets	6,968	7,217
Deferred tax liabilities:
Purchase accounting adjustments	176	-
Depreciation	1,469	1,749
FHLB stock dividends	120	120
Prepaid expenses	175	313
Unrealized gain on available for sale securities	422	364
Other	60	61
Total deferred tax liabilities	2,422	2,607
Net deferred tax asset	$                             4,546	$                           4,610

As of September 30, 2019 the Company had approximately $963,000 and $1.7 million in federal and state net operating loss carryforwards, respectively, which were acquired in the July 2009 acquisition of Southern Bank of Commerce, the February 2014 acquisition of Citizens State Bankshares of Bald Knob, Inc., and the August 2014 acquisition of Peoples Service Company.  The amount reported is net of the IRC Sec. 382 limitation, or state equivalent, related to utilization of net operating loss carryforwards of acquired corporations. Unless otherwise utilized, the net operating losses will begin to expire in 2027.

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

	For the three-month periods ended
(dollars in thousands)	September 30, 2019	September 30, 2018
Tax at statutory rate	$                             2,059	$                           1,778
Increase (reduction) in taxes       resulting from:
Nontaxable municipal income	(113)	(73)
State tax, net of Federal benefit	109	122
Cash surrender value of                   Bank-owned life insurance	(53)	(52)
Tax credit benefits	-	(68)
Other, net	(26)	(41)
Actual provision	$                             1,976	$                           1,666

For the three month periods ended September 30, 2019 and September 30, 2018, 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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Note 2: Organization and Summary of Significant Accounting Policies: Fair Value Transfer Policy (Policies)

3 Months Ended

Sep. 30, 2019

Policies

Fair Value Transfer Policy

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.

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NOTE 6: Premises and Equipment: Lessee, Operating Lease, Disclosure: Lease Agreements (Details) $ in Thousands	Sep. 30, 2019 USD ($)
Details
Initial Leases and Lease Modifications and Renewals	$ 437
Finance Lease, Right-of-Use Asset	1,600
Finance Lease, Liability	$ 1,600

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NOTE 6: Premises and Equipment: Schedule of Future Minimum Rental Payments for Operating Leases (Details) $ in Thousands	Sep. 30, 2019 USD ($)
Details
Operating Leases, Future Minimum Payments, Remainder of Fiscal Year	$ 116
Operating Leases, Future Minimum Payments Due, Next Twelve Months	269
Operating Leases, Future Minimum Payments, Due in Two Years	243
Operating Leases, Future Minimum Payments, Due in Three Years	243
Operating Leases, Future Minimum Payments, Due in Four Years	243
Operating Leases, Future Minimum Payments, Due in Five Years	243
Operating Leases, Future Minimum Payments, Due Thereafter	1,572
Operating Lease, Payments	$ 2,929

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Note 2: Organization and Summary of Significant Accounting Policies: Outside Directors' Retirement (Policies)

3 Months Ended

Sep. 30, 2019

Policies

Outside Directors' Retirement

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

In the event that the participant dies before collecting any or all of the benefits, the Bank shall pay the participant’s beneficiary. No benefits shall be payable to anyone other than the beneficiary, and shall terminate on the death of the beneficiary.

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Note 2: Organization and Summary of Significant Accounting Policies: Goodwill (Policies)

3 Months Ended

Sep. 30, 2019

Policies

Goodwill

Goodwill. The Company’s goodwill is evaluated annually for impairment or more frequently if impairment indicators are present.  A qualitative assessment is performed to determine whether the existence of events or circumstances leads to a determination that it is more likely than not the fair value is less than the carrying amount, including goodwill.  If, based on the evaluation, it is determined to be more likely than not that the fair value is less than the carrying value, then goodwill is tested further for impairment.  If the implied fair value of goodwill is lower than its carrying amount, a goodwill impairment is indicated and goodwill is written down to its implied fair value.  Subsequent increases in goodwill value are not recognized in the financial statements.  As of June 30, 2019, there was no impairment indicated, and the Company believes there continues to be no impairment of goodwill at September 30, 2019.

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Note 3: Securities: Schedule of Available for Sale Securities (Tables)

3 Months Ended

Sep. 30, 2019

Tables/Schedules

Schedule of Available for Sale Securities

	September 30, 2019
		Gross	Gross	Estimated
	Amortized	Unrealized	Unrealized	Fair
(dollars in thousands)	Cost	Gains	Losses	Value
Investment and mortgage backed securities:
U.S. government-sponsored enterprises (GSEs)	$5,038	$1	$(8)	$5,031
State and political subdivisions	40,966	852	(33)	41,785
Other securities	5,176	72	(214)	5,034
Mortgage-backed GSE residential	117,908	1,579	(331)	119,156
Total investments and mortgage-backed securities	$169,088	$2,504	$(586)	$171,006

	June 30, 2019
		Gross	Gross	Estimated
	Amortized	Unrealized	Unrealized	Fair
(dollars in thousands)	Cost	Gains	Losses	Value
Investment and mortgage backed securities:
U.S. government-sponsored enterprises (GSEs)	$7,284	$1	$(15)	$7,270
State and political subdivisions	42,123	728	(68)	42,783
Other securities	5,176	75	(198)	5,053
Mortgage-backed GSE residential	109,297	1,449	(317)	110,429
Total investments and mortgage-backed securities	$163,880	$2,253	$(598)	$165,535

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Note 4: Loans and Allowance for Loan Losses: Schedule of Balance in the Allowance for Loan Losses and Recorded Invesetment (Tables)

3 Months Ended

Sep. 30, 2019

Tables/Schedules

Schedule of Balance in the Allowance for Loan Losses and Recorded Invesetment

	At period end and for the three months ended September 30, 2019
	Residential	Construction	Commercial
(dollars in thousands)	Real Estate	Real Estate	Real Estate	Consumer	Commercial	Total
Allowance for loan losses:
Balance, beginning of period	$     3,706	$     1,365	$     9,399	$     1,046	$      4,387	$     19,903
Provision charged to expense	(134)	174	376	96	384	896
Losses charged off	-	-	-	(72)	(35)	(107)
Recoveries	-	-	14	4	-	18
Balance, end of period	$     3,572	$     1,539	$     9,789	$     1,074	$      4,736	$     20,710
Ending Balance: individually             evaluated for impairment	$             -	$            -	$             -	$             -	$              -	$               -
Ending Balance: collectively             evaluated for impairment	$     3,572	$     1,539	$     9,789	$     1,074	$      4,736	$     20,710
Ending Balance: loans acquired             with deteriorated credit quality	$             -	$            -	$             -	$             -	$              -	$               -
Loans:
Ending Balance: individually             evaluated for impairment	$             -	$            -	$             -	$             -	$              -	$               -
Ending Balance: collectively             evaluated for impairment	$ 487,680	$   87,983	$ 823,649	$ 101,117	$  370,298	$ 1,870,727
Ending Balance: loans acquired             with deteriorated credit quality	$     1,667	$     1,306	$   16,080	$             -	$      5,430	$     24,483

	At period end and for the three months ended September 30, 2018
	Residential	Construction	Commercial
(dollars in thousands)	Real Estate	Real Estate	Real Estate	Consumer	Commercial	Total
Allowance for loan losses:
Balance, beginning of period	$  3,226	$      1,097	$   8,793	$   902	$    4,196	$ 18,214
Provision charged to expense	122	196	35	92	237	682
Losses charged off	-	-	(95)	(17)	-	(112)
Recoveries	1	-	-	4	1	6
Balance, end of period	$  3,349	$      1,293	$   8,733	$   981	$    4,434	$ 18,790
Ending Balance: individually             evaluated for impairment	$          -	$             -	$           -	$        -	$           -	$          -
Ending Balance: collectively             evaluated for impairment	$  3,349	$      1,293	$   8,733	$   981	$    4,434	$ 18,790
Ending Balance: loans acquired             with deteriorated credit quality	$          -	$             -	$           -	$        -	$           -	$          -

	At June 30, 2019
	Residential	Construction	Commercial
(dollars in thousands)	Real Estate	Real Estate	Real Estate	Consumer	Commercial	Total
Allowance for loan losses:
Balance, end of period	$     3,706	$     1,365	$     9,399	$   1,046	$     4,387	$      19,903
Ending Balance: individually             evaluated for impairment	$            -	$            -	$             -	$           -	$             -	$                -
Ending Balance: collectively             evaluated for impairment	$     3,706	$     1,365	$     9,399	$   1,046	$     4,387	$      19,903
Ending Balance: loans acquired             with deteriorated credit quality	$            -	$            -	$             -	$           -	$             -	$                -
Loans:
Ending Balance: individually             evaluated for impairment	$            -	$            -	$             -	$           -	$             -	$                -
Ending Balance: collectively             evaluated for impairment	$ 490,307	$   78,826	$ 821,415	$ 97,534	$ 349,681	$ 1,837,763
Ending Balance: loans acquired             with deteriorated credit quality	$     1,685	$     1,308	$   19,362	$           -	$     6,193	$      28,548

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Note 4: Loans and Allowance for Loan Losses: Schedule of Interest Income Recognized on Impaired Loans (Tables)

3 Months Ended

Sep. 30, 2019

Tables/Schedules

Schedule of Interest Income Recognized on Impaired Loans

	For the three-month period ended
	September 30, 2019
	Average
(dollars in thousands)	Investment in	Interest Income
	Impaired Loans	Recognized
Residential Real Estate	$                    1,677	$                            23
Construction Real Estate	1,306	48
Commercial Real Estate	17,721	335
Consumer Loans	-	-
Commercial Loans	5,812	93
Total Loans	$                  26,516	$                          499

	For the three-month period ended
	September 30, 2018
	Average
(dollars in thousands)	Investment in	Interest Income
	Impaired Loans	Recognized
Residential Real Estate	$                    2,531	$                            33
Construction Real Estate	1,297	101
Commercial Real Estate	7,229	370
Consumer Loans	-	-
Commercial Loans	1,628	616
Total Loans	$                  12,685	$                       1,120

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Note 4: Loans and Allowance for Loan Losses: Schedule of Balance in the Allowance for Loan Losses and Recorded Invesetment (Details) - USD ($) $ in Thousands		3 Months Ended
	Jun. 30, 2019	Sep. 30, 2019	Sep. 30, 2018
Loans Receivable
Financing Receivable, Credit Loss, Expense (Reversal)		$ 896	$ 682
Allowance for Loan and Lease Losses, Write-offs		(107)	(112)
Accounts Receivable, Allowance for Credit Loss, Recovery		18	6
Loans Receivable | Beginning of Period
Allowance for Loan Losses	$ 19,903	19,903	18,214
Loans Receivable | End of Period
Allowance for Loan Losses		20,710	18,790
Financing Receivable, Allowance for Credit Losses, Individually Evaluated for Impairment		0	0
Financing Receivable, Allowance for Credit Losses, Collectively Evaluated for Impairment	19,903	20,710	18,790
Financing Receivables Allowance for Credit Losses Acquired with Deteriorated Credit Quality	0	0	0
Financing Receivable, Individually Evaluated for Impairment	0	0
Financing Receivable, Collectively Evaluated for Impairment	1,837,763	1,870,727
Financing Receivables Acquired with Deteriorated Credit Quality	28,548	24,483
Consumer Loan
Financing Receivable, Credit Loss, Expense (Reversal)		96	92
Allowance for Loan and Lease Losses, Write-offs		(72)	(17)
Accounts Receivable, Allowance for Credit Loss, Recovery		4	4
Consumer Loan | Beginning of Period
Allowance for Loan Losses	1,046	1,046	902
Consumer Loan | End of Period
Allowance for Loan Losses		1,074	981
Financing Receivable, Allowance for Credit Losses, Individually Evaluated for Impairment		0	0
Financing Receivable, Allowance for Credit Losses, Collectively Evaluated for Impairment	1,046	1,074	981
Financing Receivables Allowance for Credit Losses Acquired with Deteriorated Credit Quality	0	0	0
Financing Receivable, Individually Evaluated for Impairment	0	0
Financing Receivable, Collectively Evaluated for Impairment	97,534	101,117
Financing Receivables Acquired with Deteriorated Credit Quality	0	0
Commercial Loan
Financing Receivable, Credit Loss, Expense (Reversal)		384	237
Allowance for Loan and Lease Losses, Write-offs		(35)	0
Accounts Receivable, Allowance for Credit Loss, Recovery		0	1
Commercial Loan | Beginning of Period
Allowance for Loan Losses	4,387	4,387	4,196
Commercial Loan | End of Period
Allowance for Loan Losses		4,736	4,434
Financing Receivable, Allowance for Credit Losses, Individually Evaluated for Impairment		0	0
Financing Receivable, Allowance for Credit Losses, Collectively Evaluated for Impairment	4,387	4,736	4,434
Financing Receivables Allowance for Credit Losses Acquired with Deteriorated Credit Quality	0	0	0
Financing Receivable, Individually Evaluated for Impairment	0	0
Financing Receivable, Collectively Evaluated for Impairment	349,681	370,298
Financing Receivables Acquired with Deteriorated Credit Quality	6,193	5,430
Construction Loan Payable
Financing Receivable, Credit Loss, Expense (Reversal)		174	196
Allowance for Loan and Lease Losses, Write-offs		0	0
Accounts Receivable, Allowance for Credit Loss, Recovery		0	0
Construction Loan Payable | Beginning of Period
Allowance for Loan Losses	1,365	1,365	1,097
Construction Loan Payable | End of Period
Allowance for Loan Losses		1,539	1,293
Financing Receivable, Allowance for Credit Losses, Individually Evaluated for Impairment		0	0
Financing Receivable, Allowance for Credit Losses, Collectively Evaluated for Impairment	1,365	1,539	1,293
Financing Receivables Allowance for Credit Losses Acquired with Deteriorated Credit Quality	0	0	0
Financing Receivable, Individually Evaluated for Impairment	0	0
Financing Receivable, Collectively Evaluated for Impairment	78,826	87,983
Financing Receivables Acquired with Deteriorated Credit Quality	1,308	1,306
Residential Real Estate
Financing Receivable, Credit Loss, Expense (Reversal)		(134)	122
Allowance for Loan and Lease Losses, Write-offs		0	0
Accounts Receivable, Allowance for Credit Loss, Recovery		0	1
Residential Real Estate | Beginning of Period
Allowance for Loan Losses	3,706	3,706	3,226
Residential Real Estate | End of Period
Allowance for Loan Losses		3,572	3,349
Financing Receivable, Allowance for Credit Losses, Individually Evaluated for Impairment		0	0
Financing Receivable, Allowance for Credit Losses, Collectively Evaluated for Impairment	3,706	3,572	3,349
Financing Receivables Allowance for Credit Losses Acquired with Deteriorated Credit Quality	0	0	0
Financing Receivable, Individually Evaluated for Impairment	0	0
Financing Receivable, Collectively Evaluated for Impairment	490,307	487,680
Financing Receivables Acquired with Deteriorated Credit Quality	1,685	1,667
Commercial Real Estate
Financing Receivable, Credit Loss, Expense (Reversal)		376	35
Allowance for Loan and Lease Losses, Write-offs		0	(95)
Accounts Receivable, Allowance for Credit Loss, Recovery		14	0
Commercial Real Estate | Beginning of Period
Allowance for Loan Losses	9,399	9,399	8,793
Commercial Real Estate | End of Period
Allowance for Loan Losses		9,789	8,733
Financing Receivable, Allowance for Credit Losses, Individually Evaluated for Impairment		0	0
Financing Receivable, Allowance for Credit Losses, Collectively Evaluated for Impairment	9,399	9,789	8,733
Financing Receivables Allowance for Credit Losses Acquired with Deteriorated Credit Quality	0	0	$ 0
Financing Receivable, Individually Evaluated for Impairment	0	0
Financing Receivable, Collectively Evaluated for Impairment	821,415	823,649
Financing Receivables Acquired with Deteriorated Credit Quality	$ 19,362	$ 16,080

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Note 2: Organization and Summary of Significant Accounting Policies: Organization, Consolidation and Presentation of Financial Statements Disclosure and Significant Accounting Policies (Details) $ in Thousands	3 Months Ended
	Sep. 30, 2019 USD ($)
Details
Entity Incorporation, State or Country Code	MO
Real Estate Investments, Net	$ 744,000

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Note 12: Fair Value Measurements: Fair Value Measurements, Nonrecurring (Tables)

3 Months Ended

Sep. 30, 2019

Tables/Schedules

Fair Value Measurements, Nonrecurring

	Fair Value Measurements at September 30 , 2019, Using:
		Quoted Price	Significant
		in Active	Other	Significant
		Markets for	Observable	Unobservable
		Identical Assets	Inputs	Inputs
(dollars in thousands)	Fair Value	(Level 1)	(Level 2)	(Level 3)
Foreclosed and repossessed assets held for sale	$365	$-	$-	$365

	Fair Value Measurements at June 30, 2019, Using:
		Quoted Prices	Significant
		in Active	Other	Significant
		Markets for	Observable	Unobservable
		Identical Assets	Inputs	Inputs
(dollars in thousands)	Fair Value	(Level 1)	(Level 2)	(Level 3)
Foreclosed and repossessed assets held for sale	2,430	-	-	2,430

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Note 3: Securities: Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value (Details) - USD ($) $ in Thousands	Sep. 30, 2019	Jun. 30, 2019
US Government-sponsored Enterprises Debt Securities
Available-for-sale Securities, Continuous Unrealized Loss Position, Less than Twelve Months, Fair Value	$ 0	$ 0
Available-for-sale Securities, Continuous Unrealized Loss Position, Less than 12 Months, Accumulated Loss	0	0
Available-for-sale Securities, Continuous Unrealized Loss Position, Twelve Months or Longer, Fair Value	3,489	6,969
Available-for-sale Securities, Continuous Unrealized Loss Position, 12 Months or Longer, Accumulated Loss	8	15
Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value	3,489	6,969
Available-for-sale Securities, Continuous Unrealized Loss Position, Accumulated Loss	8	15
US States and Political Subdivisions Debt Securities
Available-for-sale Securities, Continuous Unrealized Loss Position, Less than Twelve Months, Fair Value	2,877	0
Available-for-sale Securities, Continuous Unrealized Loss Position, Less than 12 Months, Accumulated Loss	14	0
Available-for-sale Securities, Continuous Unrealized Loss Position, Twelve Months or Longer, Fair Value	2,585	8,531
Available-for-sale Securities, Continuous Unrealized Loss Position, 12 Months or Longer, Accumulated Loss	19	68
Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value	5,462	8,531
Available-for-sale Securities, Continuous Unrealized Loss Position, Accumulated Loss	33	68
Other Debt Obligations
Available-for-sale Securities, Continuous Unrealized Loss Position, Less than Twelve Months, Fair Value	0	0
Available-for-sale Securities, Continuous Unrealized Loss Position, Less than 12 Months, Accumulated Loss	0	0
Available-for-sale Securities, Continuous Unrealized Loss Position, Twelve Months or Longer, Fair Value	966	985
Available-for-sale Securities, Continuous Unrealized Loss Position, 12 Months or Longer, Accumulated Loss	214	198
Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value	966	985
Available-for-sale Securities, Continuous Unrealized Loss Position, Accumulated Loss	214	198
Mortgage-backed Securities, Issued by US Government Sponsored Enterprises
Available-for-sale Securities, Continuous Unrealized Loss Position, Less than Twelve Months, Fair Value	29,390	1,175
Available-for-sale Securities, Continuous Unrealized Loss Position, Less than 12 Months, Accumulated Loss	185	1
Available-for-sale Securities, Continuous Unrealized Loss Position, Twelve Months or Longer, Fair Value	11,783	34,148
Available-for-sale Securities, Continuous Unrealized Loss Position, 12 Months or Longer, Accumulated Loss	146	316
Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value	41,173	35,323
Available-for-sale Securities, Continuous Unrealized Loss Position, Accumulated Loss	331	317
Total investments and mortgage-backed securities
Available-for-sale Securities, Continuous Unrealized Loss Position, Less than Twelve Months, Fair Value	32,267	1,175
Available-for-sale Securities, Continuous Unrealized Loss Position, Less than 12 Months, Accumulated Loss	199	1
Available-for-sale Securities, Continuous Unrealized Loss Position, Twelve Months or Longer, Fair Value	18,823	50,633
Available-for-sale Securities, Continuous Unrealized Loss Position, 12 Months or Longer, Accumulated Loss	387	597
Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value	51,090	51,808
Available-for-sale Securities, Continuous Unrealized Loss Position, Accumulated Loss	$ 586	$ 598

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NOTE 6: Premises and Equipment: Lessee, Operating Lease, Disclosure (Policies)

3 Months Ended

Sep. 30, 2019

Policies

Lessee, Operating Lease, Disclosure

Leases.The Company adopted ASU 2016-02, Leases (Topic 842), on July 1, 2019, using the modified retrospective transition approach whereby comparative periods were not restated.  The Company also elected certain relief options under the ASU, including the option not to recognize right of use asset and lease liabilities that arise from short-term leases (leases with terms of twelve months or less).  The Company has five leased properties and numerous office equipment lease agreements in which it is the lessee, with lease terms exceeding twelve months.   Adoption of this ASU resulted in the Company recognizing a ROU asset and corresponding lease liability of $437,000, while entry into a new operating lease agreement during the three-month period ended September 30, 2019, resulted in the recognition of a ROU asset and corresponding lease liability of $1.6 million.

All of the leases are classified as operating leases, and therefore, were previously not recognized on the Company’s consolidated balance sheets.  With the adoption of ASU 2016-02, these operating leases are now included as a ROU asset in our 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.  Because these leases are classified as operating leases, the adoption of the new standard did not have a material effect on lease expense on the Company’s consolidated statements of income.

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

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Note 4: Loans and Allowance for Loan Losses: Commercial Real Estate Lending (Policies)

3 Months Ended

Sep. 30, 2019

Policies

Commercial Real Estate Lending

Commercial Real Estate Lending. The Company actively originates loans secured by commercial real estate including land (improved, unimproved, and farmland), strip shopping centers, retail establishments 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.

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 seven 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.

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Note 3: Securities: Repurchase Agreements, Collateral, Policy (Policies)

3 Months Ended

Sep. 30, 2019

Policies

Repurchase Agreements, Collateral, Policy

The carrying value of investment and mortgage-backed securities pledged as collateral to secure public deposits and securities sold under agreements to repurchase amounted to $114.2 million at September 30, 2019 and $143.7 million at June 30, 2019.  The securities pledged consist of marketable securities, including $2.3 million and $5.6 million of U.S. Government and Federal Agency Obligations, $27.1 million and $47.3 million of Mortgage-Backed Securities, $54.2 million and $55.7 million of Collateralized Mortgage Obligations, $30.4 million and $34.9 million of State and Political Subdivisions Obligations, and $200,000 and $300,000 of Other Securities at September 30 and June 30, 2019, respectively.

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Note 4: Loans and Allowance for Loan Losses: Schedule of Impaired Loans (Details) - USD ($) $ in Thousands	Sep. 30, 2019	Jun. 30, 2019
Consumer Loan
Impaired Financing Receivable, with No Related Allowance, Recorded Investment	$ 0	$ 8
Impaired Financing Receivable, with No Related Allowance, Unpaid Principal Balance	0	8
Impaired Financing Receivable With No Related Allowance Specific Allowance	0	0
Impaired Financing Receivable, with Related Allowance, Recorded Investment	0	0
Impaired Financing Receivable, with Related Allowance, Unpaid Principal Balance	0	0
Impaired Financing Receivable With Related Allowance Specific Allowance	0	0
Impaired Financing Receivable With and Without Related Allowance Recorded Investment	0	8
Impaired Financial Receivable With and Without Related Allowance Unpaid Principal Balance	0	8
Impaired Financing Receivable With and Without Related Allowance Specific Allowance	0	0
Commercial Loan
Impaired Financing Receivable, with No Related Allowance, Recorded Investment	6,152	6,999
Impaired Financing Receivable, with No Related Allowance, Unpaid Principal Balance	7,252	9,187
Impaired Financing Receivable With No Related Allowance Specific Allowance	0	0
Impaired Financing Receivable, with Related Allowance, Recorded Investment	0	0
Impaired Financing Receivable, with Related Allowance, Unpaid Principal Balance	0	0
Impaired Financing Receivable With Related Allowance Specific Allowance	0	0
Impaired Financing Receivable With and Without Related Allowance Recorded Investment	6,152	6,999
Impaired Financial Receivable With and Without Related Allowance Unpaid Principal Balance	7,252	9,187
Impaired Financing Receivable With and Without Related Allowance Specific Allowance	0	0
Construction Loan Payable
Impaired Financing Receivable, with No Related Allowance, Recorded Investment	1,305	1,330
Impaired Financing Receivable, with No Related Allowance, Unpaid Principal Balance	1,367	1,419
Impaired Financing Receivable With No Related Allowance Specific Allowance	0	0
Impaired Financing Receivable, with Related Allowance, Recorded Investment	0	0
Impaired Financing Receivable, with Related Allowance, Unpaid Principal Balance	0	0
Impaired Financing Receivable With Related Allowance Specific Allowance	0	0
Impaired Financing Receivable With and Without Related Allowance Recorded Investment	1,305	1,330
Impaired Financial Receivable With and Without Related Allowance Unpaid Principal Balance	1,367	1,419
Impaired Financing Receivable With and Without Related Allowance Specific Allowance	0	0
Residential Real Estate
Impaired Financing Receivable, with No Related Allowance, Recorded Investment	4,916	5,104
Impaired Financing Receivable, with No Related Allowance, Unpaid Principal Balance	5,152	5,341
Impaired Financing Receivable With No Related Allowance Specific Allowance	0	0
Impaired Financing Receivable, with Related Allowance, Recorded Investment	0	0
Impaired Financing Receivable, with Related Allowance, Unpaid Principal Balance	0	0
Impaired Financing Receivable With Related Allowance Specific Allowance	0	0
Impaired Financing Receivable With and Without Related Allowance Recorded Investment	4,916	5,104
Impaired Financial Receivable With and Without Related Allowance Unpaid Principal Balance	5,152	5,341
Impaired Financing Receivable With and Without Related Allowance Specific Allowance	0	0
Commercial Real Estate
Impaired Financing Receivable, with No Related Allowance, Recorded Investment	22,928	26,410
Impaired Financing Receivable, with No Related Allowance, Unpaid Principal Balance	27,306	31,717
Impaired Financing Receivable With No Related Allowance Specific Allowance	0	0
Impaired Financing Receivable, with Related Allowance, Recorded Investment	0	0
Impaired Financing Receivable, with Related Allowance, Unpaid Principal Balance	0	0
Impaired Financing Receivable With Related Allowance Specific Allowance	0	0
Impaired Financing Receivable With and Without Related Allowance Recorded Investment	22,928	26,410
Impaired Financial Receivable With and Without Related Allowance Unpaid Principal Balance	27,306	31,717
Impaired Financing Receivable With and Without Related Allowance Specific Allowance	$ 0	$ 0

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Note 5: Accounting For Certain Loans Acquired in A Transfer: Schedule of Acquired Loans With Credit Deterioration (Tables)

3 Months Ended

Sep. 30, 2019

Tables/Schedules

Schedule of Acquired Loans With Credit Deterioration

(dollars in thousands)	September 30, 2019	June 30, 2019
Residential real estate	$                     1,904	$                     1,921
Construction real estate	1,367	1,397
Commercial real estate	20,458	24,669
Consumer loans	-	-
Commercial loans	6,529	8,381
Outstanding balance	$                   30,258	$                   36,368
Carrying amount, net of fair value adjustment of      $5,775 and $7,821 at September 30, 2019 and       June 30, 2019, respectively	$                   24,483	$                   28,547

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NOTE 6: Premises and Equipment: Schedule of Future Minimum Rental Payments for Operating Leases (Tables)

3 Months Ended

Sep. 30, 2019

Tables/Schedules

Schedule of Future Minimum Rental Payments for Operating Leases

(dollars in thousands)
2020	$               116
2021	269
2022	243
2023	243
2024	243
2025	243
Thereafter	1,572
Future lease payments expected	$            2,929

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Note 4: Loans and Allowance for Loan Losses: Purchased Credit Impaired Loans Nonaccrual (Details) - USD ($) $ in Thousands	Sep. 30, 2019	Jun. 30, 2019
Included in Nonaccrual Loans
Purchased Credit Impaired Loans	$ 889	$ 4,100

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Note 2: Organization and Summary of Significant Accounting Policies: Organization, Consolidation and Presentation of Financial Statements Disclosure and Significant Accounting Policies (Policies)

3 Months Ended

Sep. 30, 2019

Policies

Organization, Consolidation and Presentation of Financial Statements Disclosure and 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 the investment subsidiary, and has other preferred shareholders in order to meet the requirements to be a REIT.  At September 30, 2019, assets of the REIT were approximately $744 million, and consisted primarily of 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 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.

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Note 2: Organization and Summary of Significant Accounting Policies: Interest-Bearing Time Deposits (Policies)

3 Months Ended

Sep. 30, 2019

Policies

Interest-Bearing Time Deposits

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

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Note 12: Fair Value Measurements: Fair Value, Assets Measured on Recurring Basis (Details) - USD ($) $ in Thousands	Sep. 30, 2019	Jun. 30, 2019
US Government-sponsored Enterprises Debt Securities
Fair value on a recurring basis	$ 5,031	$ 7,270
US States and Political Subdivisions Debt Securities
Fair value on a recurring basis	41,785	42,783
Other Debt Obligations
Fair value on a recurring basis	5,034	5,053
Mortgage-backed Securities, Issued by US Government Sponsored Enterprises
Fair value on a recurring basis	$ 119,156	$ 110,429

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Note 9: Income Taxes (Details) $ in Thousands	3 Months Ended
	Sep. 30, 2019 USD ($)
Details
Federal Net Operating Loss Carryforwards	$ 963
State Net Operating Loss Carryforwards	$ 1,700
Effective Income Tax Rate Reconciliation, at Federal Statutory Income Tax Rate, Percent	21.00%

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Note 2: Organization and Summary of Significant Accounting Policies: Foreclosed Real Estate (Policies)

3 Months Ended

Sep. 30, 2019

Policies

Foreclosed Real Estate

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

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

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