Annual Report (10-k)

Date : 09/13/2019 @ 9:29PM
Source : Edgar (US Regulatory)
Stock : Southern Missouri Bancorp Inc (SMBC)
Quote : 37.27  0.22 (0.59%) @ 9:30PM

Annual Report (10-k)


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________________

FORM 10-K

[X]
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
 
For the fiscal year ended June 30, 2019          OR
 
[   ]
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

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 No.)
     
2991 Oak Grove Road, Poplar Bluff, Missouri
 
63901
(Address of principal executive offices)
 
(Zip Code)

Registrant's telephone number, including area 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 if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.   YES         NO   X

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.   YES      NO   X

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 and posted on its corporate web site, if any, every interactive data file required to be submitted and posted 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 registration 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.

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   YES          NO    X

The aggregate market value of the voting stock held by non-affiliates of the registrant, computed by reference to the average of the high and low traded price of such stock as of the last business day of the registrant's most recently completed second fiscal quarter, was $274.4 million. (The exclusion from such amount of the market value of the shares owned by any person shall not be deemed an admission by the registrant that such person is an affiliate of the registrant.)


As of September 13, 2019, there were issued and outstanding 9,201,783 shares of the Registrant's common stock.

DOCUMENTS INCORPORATED BY REFERENCE

Part III of Form 10-K - Portions of the Proxy Statement for the 2019 Annual Meeting of Stockholders.





PART I
Item 1.      Description of Business
General
Southern Missouri Bancorp, Inc. ("Company") is a bank holding company and the parent company of Southern Bank (“Bank”). The Company changed its state of incorporation to Missouri on April 1, 1999, and was originally incorporated in Delaware on December 30, 1993 for the purpose of becoming the holding company for the Bank, which was known as Southern Missouri Savings Bank upon completion of its conversion from a state chartered mutual savings and loan association to a state chartered stock savings bank. As part of the conversion in April 1994, the Company sold 1.8 million shares of its common stock to the public. The Company's Common Stock is quoted on the NASDAQ Global Market under the symbol "SMBC".
Southern Missouri Savings Bank was originally chartered by the state of Missouri as a mutual savings and loan association in 1887. On June 20, 1995, it converted to a federally chartered stock savings bank and took the name Southern Missouri Savings Bank, FSB. On February 17, 1998, Southern Missouri Savings Bank converted from a federally chartered stock savings bank to a Missouri chartered stock savings bank and changed its name to Southern Missouri Bank & Trust Co. On June 4, 2004, Southern Missouri Bank & Trust Co. converted from a Missouri chartered stock savings bank to a Missouri state chartered trust company with banking powers ("Charter Conversion"). On June 1, 2009, the institution changed its name to Southern Bank.
The primary regulator of the Bank is the Missouri Division of Finance. The Bank is a member of the Federal Reserve, and the Board of Governors of the Federal Reserve System ("Federal Reserve Board" or "FRB") is the Bank’s primary federal regulator. The Bank's deposits continue to be insured up to applicable limits by the Deposit Insurance Fund ("DIF") of the Federal Deposit Insurance Corporation ("FDIC"). With the Bank's conversion to a trust company with banking powers, the Company became a bank holding company regulated by the FRB.
The principal business of the Bank consists primarily of attracting retail deposits from the general public and using such deposits along with wholesale funding from the Federal Home Loan Bank of Des Moines ("FHLB"), and, to a lesser extent, brokered deposits, to invest in one- to four-family residential mortgage loans, mortgage loans secured by commercial real estate, commercial non-mortgage business loans, and consumer loans. These funds are also used to purchase mortgage-backed and related securities ("MBS"), U.S. Government Agency obligations, municipal bonds, and other permissible investments.
At June 30, 2019, the Company had total assets of $2.2 billion, total deposits of $1.9 billion and stockholders' equity of $238.4 million. The Company has not engaged in any significant activity other than holding the stock of the Bank. Accordingly, the information set forth in this report, including financial statements and related data, relates primarily to the Bank. The Company's revenues are derived principally from interest earned on loans, debt securities, MBS, CMOs and, to a lesser extent, banking service charges, bank card interchange fees, gains on sales of loans, loan late charges, increases in the cash surrender value of bank owned life insurance, and other fee income.
Acquisitions
On November 21, 2018, the Company completed its acquisition of Gideon Bancshares Company (“Gideon”) and its wholly owned subsidiary, First Commercial Bank (“First Commercial”), in a stock and cash transaction. At closing, Gideon held total assets of $217 million, loans, net, of $144 million, and deposits of $171 million. The Company acquired Gideon primarily for the purpose of conducting commercial banking activities in markets where it believes the Company’s business model will perform well, and for the long-term value of its core deposit franchise. The goodwill of $1.0 million arising from the acquisition consists largely of synergies and economies of scale expected from combining the operations of the Bank and First Commercial. Goodwill from this transaction was assigned to the acquisition of First Commercial, and is not expected to be deductible for tax purposes.

On February 23, 2018, the Company completed its acquisition of Southern Missouri Bancshares, Inc. (“Bancshares”), and its wholly owned subsidiary, Southern Missouri Bank of Marshfield (“SMB-Marshfield”), in a stock and cash transaction. SMB-Marshfield was merged into the Bank at acquisition. At closing, Bancshares held

2





total assets of $86.2 million, loans, net, of $68.3 million, and deposits of $68.2 million. The Company acquired SMB-Marshfield primarily for the purpose of conducting commercial banking activities in markets where it believes the Company’s business model will perform well, and for the long-term value of its core deposit franchise. The goodwill of $4.4 million arising from the acquisition consists largely of synergies and economies of scale expected from combining the operations of the Bank and SMB-Marshfield. Goodwill from this transaction was assigned to the acquisition of the bank holding company, and is not expected to be deductible for tax purposes.

On June 16, 2017, the Company completed its acquisition of Tammcorp, Inc. (Tammcorp), and its subsidiary, Capaha Bank (Capaha), Tamms, Illinois, in a stock and cash transaction. Capaha was merged into the Bank at acquisition. At closing, Tammcorp held total assets of $187 million, loans, net, of $153 million, and deposits of $167 million. The Company acquired Capaha primarily for the purpose of expanding its commercial banking activities to markets where it believes the Company’s business model will perform well, and for the long-term value of its core deposit franchise. A Tammcorp note payable of $3.7 million was contractually required to be repaid in conjunction with the acquisition. The goodwill of $4.1 million arising from the acquisition consists largely of synergies and economies of scale expected from combining the operations of the Bank and Capaha. Goodwill from this transaction was assigned to the acquisition of the bank holding company, and is not expected to be deductible for tax purposes.
On August 5, 2014, the Company completed its acquisition of Peoples Service Company (PSC) and its subsidiaries, Peoples Banking Company (PBC) and Peoples Bank of the Ozarks (Peoples), Nixa, Missouri, in a stock and cash transaction (the “Peoples Acquisition”). Peoples was merged into the Bank in early December, 2014, in connection with the conversion of Peoples’ data system. At closing, PSC held total assets of $267 million, loans, net, of $193 million, and deposits of $221 million. The Company acquired Peoples primarily for the purpose of expanding its commercial banking activities to markets where it believes the Company’s business model will perform well, and for the long-term value of its core deposit franchise. Notes payable of $2.9 million were contractually required to be repaid on the date of acquisition. The goodwill of $3.0 million arising from the acquisition consists largely of synergies and economies of scale expected from combining the operations of the Bank and Peoples. Goodwill from this transaction was assigned to the acquisition of the bank holding company, and is not expected to be deductible for tax purposes.
The Company completed its acquisition of Ozarks Legacy Community Financial, Inc. (Ozarks Legacy), and its subsidiary, Bank of Thayer, headquartered in Thayer, Missouri, in October 2013. At closing, Ozarks Legacy had total assets of approximately $81 million, loans, net, of $38 million, and deposits of $68 million. The Company completed its acquisition of Citizens State Bankshares of Bald Knob, Inc. (Citizens), and its subsidiary, Citizens State Bank, headquartered in Bald Knob, Arkansas, in February 2014. At closing, Citizens had total assets of approximately $72 million, loans, net, of $12 million, and deposits of $64 million. (The Ozarks Legacy and Citizens acquisitions are referred to as the “Fiscal 2014 Acquisitions” collectively.)
On December 17, 2010, the Bank entered into a Purchase and Assumption Agreement with the FDIC, as receiver, to acquire certain assets and assume certain liabilities of the former First Southern Bank, with headquarters in Batesville, Arkansas, and one branch location in Searcy, Arkansas (the “Fiscal 2011 Acquisition”). As a result of the transaction, the Company acquired loans recorded at a fair value of $115 million and assumed deposits recorded at a fair value of $131 million, at December 17, 2010.
Capital Raising Transactions
On June 20, 2017, the Company completed an at-the-market common stock issuance. A total of 794,762 shares of the Company’s common stock were sold at a weighted-average price of approximately $31.46 per share, representing gross proceeds to the Company of approximately $25.0 million. The proceeds from the transaction have been used for general corporate purposes, including working capital to support organic growth at Southern Bank, and to support acquisitions to the extent available.
On November 22, 2011, the Company completed an underwritten public offering of 1,150,000 shares of common stock at a price to the public of $19.00 per share, for aggregate gross proceeds of $21.9 million. The proceeds from the offering have been used for general corporate purposes, including the funding of loan growth and the purchase of securities.

3



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 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 the intentions of management and are not guarantees of future performance. 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. The important factors we discuss below, as well as other factors discussed in this report under the captions “Risk Factors” and "Management's Discussion and Analysis of Financial Condition and Results of Operations" and identified 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 might not be realized within the anticipated time frames 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 FRB and the U.S. Government and other governmental initiatives affecting the financial services industry;
the risks of lending and investing activities, including changes in the level and direction of loan delinquencies and write-offs and changes in estimates of the adequacy of the allowance for 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;
legislative or regulatory changes that adversely affect our business;
changes in accounting principles, policies, or guidelines;
results of regulatory examinations, including the possibility that a regulator may, among other things, require an increase in our reserve for loan losses or write-down of 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.

4



Market Area
The Bank provides its customers with a full array of community banking services and conducts its business from its headquarters in Poplar Bluff, as well as 44 full service branch offices and two limited service branch offices located in Poplar Bluff (4), Van Buren, Dexter (2), Kennett, Doniphan, Sikeston, Qulin, Matthews, Springfield (3), Thayer (2), West Plains, Alton, Clever, Forsyth, Fremont Hills, Kimberling City, Ozark, Nixa, Rogersville, Marshfield, Cape Girardeau (2), Jackson, Gideon, Chaffee, Benton, Advance, Bloomfield, and Essex Missouri; Jonesboro (2), Paragould, Batesville, Searcy, Bald Knob and Bradford, Arkansas; and Anna, Cairo, and Tamms, Illinois.
For purposes of management and oversight of its operations, the Bank has organized its facilities into three regional markets. The Bank’s east region includes 24 of its facilities, one of which is limited service, which are situated in Butler, Cape Girardeau, Carter, New Madrid, Ripley, Scott, and Stoddard counties in Missouri, and Alexander and Union counties in Illinois. These counties have a total population of approximately 250,000, and included within this market area is the Cape Girardeau, Missouri, Metropolitan Statistical Area (MSA), which has a population of approximately 98,000. The Bank’s south region includes 12 of its facilities, one of which is limited service, which are situated in Dunklin, Howell, and Oregon counties in Missouri, and Craighead, Greene, Independence, and White counties in Arkansas. These counties have a total population of approximately 350,000, and included within this market area is the Jonesboro, Arkansas, MSA, which has a population of approximately 131,000. The Bank’s west region includes 11 of its facilities, which are situated in Christian, Greene, Stone, Taney, and Webster counties in Missouri. These counties have a total population of approximately 501,000, and included within this market area is the Springfield, Missouri, MSA, which has a population of approximately 461,000. Each of these markets also serves a few communities just outside these county borders which do not have a notable impact on the demographics of the market area.
The Bank’s east and south regions are generally rural in nature with economies supported by manufacturing activity, agriculture (livestock, dairy, poultry, rice, timber, soybeans, wheat, melons, corn, and cotton), healthcare, and education. Large employers include hospitals, manufacturers, school districts, and colleges. In the west region, the Bank’s operations are generally more concentrated in the Springfield, Missouri, MSA, and major employers include healthcare providers, educational institutions, federal, local, and state government, retailers, transportation and distribution firms, and leisure, entertainment, and hospitality interests. For purposes of the Bank’s lending policy, the Bank’s primary lending area is considered to be the counties where the Bank has a branch facility, and any contiguous county.
Competition
The Bank faces strong competition in attracting deposits (its primary source of lendable funds) and originating loans. At June 30, 2019, the Bank was one of 26 bank or saving association groups located in its east region competing for approximately $5.7 billion in deposits at FDIC-insured institutions, one of 34 bank or saving association groups located in its south region (eight of these institutions overlap with the Bank’s east region) competing for $7.8 billion in deposits, and one of 39 bank or savings association groups located in its west region (12 of these overlap with the Bank’s east or south regions) competing for $10.6 billion in deposits.
Competitors for deposits include commercial banks, credit unions, money market funds, and other investment alternatives, such as mutual funds, full service and discount broker-dealers, equity markets, brokerage accounts and government securities. The Bank's competition for loans comes principally from other financial institutions, mortgage banking companies, mortgage brokers and life insurance companies. The Bank expects competition to continue to increase in the future as a result of legislative, regulatory and technological changes within the financial services industry. Technological advances, for example, have lowered barriers to market entry, allowed banks to expand their geographic reach by providing services over the Internet and made it possible for non-depository institutions to offer products and services that traditionally have been provided by banks. The Gramm-Leach-Bliley Act, which permits affiliation among banks, securities firms and insurance companies, also has changed the competitive environment in which the Bank conducts business.

5



Internet Website and Information
The Company maintains a website at www.bankwithsouthern.com. The information contained on that website is not included as part of, or incorporated by reference into, this Annual Report on Form 10-K. The Company currently makes available on or through its website at http://investors.bankwithsouthern.com its Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K or amendments to these reports. These materials are also available free of charge on the Securities and Exchange Commission's website at www.sec.gov.
Lending Activities
General. The Bank's lending activities consist of originating loans secured by mortgages on one- to four-family and multi-family residential real estate, commercial and agricultural real estate, construction loans on residential and commercial properties, commercial and agricultural business loans and consumer loans. The Bank has also occasionally purchased loan participation interests originated by other lenders which are secured by properties generally located in the States of Missouri or Arkansas.
Supervision of the loan portfolio is the responsibility of our Chief Lending Officer, Rick Windes, Regional President Justin G. Cox, and our Chief Credit Officer, Mark E. Hecker. The Chief Lending Officer and Regional President are responsible for oversight of loan production.  The Chief Credit Officer is responsible for oversight of underwriting, loan policy, and administration.  Loan officers have varying amounts of lending authority depending upon experience and types of loans. Loans beyond their authority are presented to the next level of authority, which may include one of three Regional Small Business Loan Committees, one of three Regional Senior Loan Committees, an Agricultural Loan Committee, or a Senior Agricultural Loan Committee.
The Regional Small Business Loan Committees each consists of lenders selected by the Chief Lending Officer, Regional President, and Chief Credit Officer (our “Senior Lending and Credit Officers”), and is authorized to approve lending relationships up to $1.5 million. The Regional Senior Loan Committees each consists of one director appointed by the Board of Directors, and senior lenders selected by our Senior Lending and Credit Officers. Each Regional Senior Loan Committee is authorized to approve lending relationships up to $3.0 million. The Bank’s Agricultural Loan Committee consists of several lending officers with agricultural lending experience selected by our Senior Lending and Credit Officers, and is authorized to approve agricultural lending relationships up to $1.5 million. The Senior Agricultural Loan Committee consists of our Chief Credit Officer, as well as several senior lending officers with agricultural lending experience selected by our Senior Lending and Credit Officers. The Senior Agricultural Loan Committee is authorized to approve agricultural lending relationships up to $3.0 million.
Lending relationships above $3.0 million require approval of our Bank Senior Loan Committee, comprised of our Senior Lending and Credit Officers, and an additional senior lender from each region, or the approval of our Executive Loan Committee, comprised of our Chief Executive Officer, Chief Lending Officer, Chief Credit Officer, and Regional President. In addition to the approval of the Bank Senior Loan Committee or the Executive Loan Committee, lending relationships in excess of $4.0 million require the approval of the Discount Committee, which is comprised of all Bank directors. All loans are subject to ratification by the full Board of Directors.
The aggregate amount of loans that the Bank is permitted to make under applicable federal regulations to any one borrower, including related entities, or the aggregate amount that the Bank could have invested in any one real estate project, is based on the Bank's capital levels. See "Regulation - Loans to One Borrower." At June 30, 2019, the maximum amount which the Bank could lend to any one borrower and the borrower's related entities was approximately $63.7 million. At June 30, 2019, the Bank's ten largest credit relationships, as defined by loan to one borrower limitations, ranged from $28.7 million to $16.2 million, net of participation interests sold. As of June 30, 2019, the majority of these credits were commercial real estate, multi-family real estate, or commercial business loans, and all of these relationships were performing in accordance with their terms.

6


Loan Portfolio Analysis. The following table sets forth the composition of the Bank's loan portfolio by type of loan and type of security as of the dates indicated.
    
At June 30,
 
   
2019
   
2018
   
2017
   
2016
   
2015
 
    
Amount
   
Percent
   
Amount
   
Percent
   
Amount
   
Percent
   
Amount
   
Percent
   
Amount
   
Percent
 
               
(Dollars in thousands)
             
Type of Loan:
                                                           
Mortgage Loans:
                                                           
     Residential real estate
 
$
491,992
     
26.65
%
 
$
450,919
     
28.84
%
 
$
442,463
     
31.66
%
 
$
392,974
     
34.61
%
 
$
377,465
     
35.84
%
     Commercial real estate (1)
   
840,777
     
45.53
     
704,647
     
45.07
     
603,922
     
43.21
     
452,052
     
39.81
     
404,720
     
38.43
 
     Construction
   
123,287
     
6.68
     
112,718
     
7.21
     
106,782
     
7.63
     
77,369
     
6.82
     
69,204
     
6.57
 
     Total mortgage loans
   
1,456,056
     
78.86
     
1,268,284
     
81.12
     
1,153,167
     
82.50
     
922,395
     
81.24
     
851,389
     
80.84
 
Other Loans:
                                                                               
     Automobile loans
   
11,379
     
0.62
     
9,056
     
0.58
     
6,378
     
0.46
     
6,221
     
0.55
     
6,333
     
0.60
 
     Commercial business (2)
   
355,874
     
19.27
     
281,272
     
17.99
     
247,184
     
17.68
     
202,045
     
17.79
     
191,886
     
18.22
 
     Home equity
   
43,369
     
2.35
     
39,218
     
2.51
     
35,222
     
2.52
     
25,146
     
2.21
     
23,472
     
2.23
 
     Other
   
42,786
     
2.32
     
30,297
     
1.94
     
22,051
     
1.58
     
15,174
     
1.34
     
16,965
     
1.61
 
          Total other loans
   
453,408
     
24.56
     
359,843
     
23.02
     
310,835
     
22.24
     
248,586
     
21.89
     
238,656
     
22.66
 
          Total loans
   
1,909,464
     
103.42
     
1,628,127
     
104.14
     
1,464,002
     
104.74
     
1,170,981
     
103.13
     
1,090,045
     
103.50
 
Less:
                                                                               
     Undisbursed loans in process
   
43,153
     
2.34
     
46,533
     
2.98
     
50,740
     
3.63
     
21,779
     
1.92
     
24,688
     
2.34
 
     Deferred fees and discounts
   
3
     
0.00
     
---
     
---
     
(6
)
   
(0.00
)
   
(42
)
   
(0.00
)
   
(87
)
   
(0.01
)
     Allowance for loan losses
   
19,903
     
1.08
     
18,214
     
1.16
     
15,538
     
1.11
     
13,791
     
1.21
     
12,298
     
1.17
 
          Net loans receivable
 
$
1,846,405
     
100.00
%
 
$
1,563,380
     
100.00
%
 
$
1,397,730
     
100.00
%
 
$
1,135,453
     
100.00
%
 
$
1,053,146
     
100.00
%
                                                                                 
Type of Security:
                                                                               
Residential real estate
                                                                               
     One- to four-family
 
$
395,317
     
21.41
%
 
$
414,258
     
26.50
%
 
$
352,723
     
25.24
%
 
$
326,186
     
28.73
%
 
$
316,804
     
30.08
%
     Multi-family
   
172,303
     
9.33
     
137,238
     
8.78
     
151,585
     
10.85
     
128,980
     
11.36
     
118,178
     
11.22
 
Commercial real estate
   
647,078
     
35.05
     
502,073
     
32.11
     
463,890
     
33.19
     
329,781
     
29.04
     
296,082
     
28.11
 
Land
   
241,360
     
13.07
     
214,715
     
13.73
     
184,967
     
13.23
     
137,448
     
12.11
     
120,327
     
11.43
 
Commercial
   
355,874
     
19.28
     
281,272
     
17.99
     
247,184
     
17.68
     
202,045
     
17.79
     
191,884
     
18.22
 
Consumer and other
   
97,532
     
5.28
     
78,571
     
5.03
     
63,653
     
4.55
     
46,541
     
4.10
     
46,770
     
4.44
 
          Total loans
   
1,909,464
     
103.42
     
1,628,127
     
104.14
     
1,464,002
     
104.74
     
1,170,981
     
103.13
     
1,090,045
     
103.50
 
 
Less:
                                                                               
     Undisbursed loans in process
   
43,153
     
2.34
     
46,533
     
2.98
     
50,740
     
3.63
     
21,779
     
1.92
     
24,688
     
2.34
 
     Deferred fees and discounts
   
3
     
0.00
     
---
     
---
     
(6
)
   
(0.00
)
   
(42
)
   
(0.00
)
   
(87
)
   
(0.01
)
     Allowance for loan losses
   
19,903
     
1.08
     
18,214
     
1.16
     
15,538
     
1.21
     
13,791
     
1.21
     
12,298
     
1.17
 
          Net loans receivable
 
$
1,846,405
     
100.00
%
 
$
1,563,380
     
100.00
%
 
$
1,397,730
     
100.00
%
 
$
1,135,453
     
100.00
%
 
$
1,053,146
     
100.00
%
___________________________
(1) Commercial real estate loan balances included farmland and other agricultural-related real estate loans of $182.7 million, $160.3 million, $140.0 million, $102.2 million and $82.0 million as of June 30, 2019, 2018, 2017, 2016 and 2015, respectively.
(2) Commercial business loan balances included agricultural equipment and production loans of $95.5 million, $81.5 million, $85.7 million, $73.3 million and $57.9 million as of June 30, 2019, 2018, 2017, 2016 and 2015, respectively.

7


The following table shows the fixed and adjustable rate composition of the Bank's loan portfolio at the dates indicated.
    
At June 30,
 
   
2019
   
2018
   
2017
   
2016
   
2015
 
    
Amount
   
Percent
   
Amount
   
Percent
   
Amount
   
Percent
   
Amount
   
Percent
   
Amount
   
Percent
 
               
(Dollars in thousands)
             
Type of Loan:
                                                           
Fixed-Rate Loans:
                                                           
     Residential real estate    
 
$
254,234
     
13.77
%
 
$
207,405
     
13.27
%
 
$
189,054
     
13.53
%
 
$
172,901
     
15.23
%
 
$
171,479
     
16.28
%
     Commercial real estate
   
658,874
     
35.68
     
557,556
     
35.66
     
476,132
     
34.06
     
356,613
     
31.41
     
313,361
     
29.75
 
     Construction
   
116,304
     
6.30
     
104,995
     
6.72
     
89,542
     
6.40
     
58,330
     
5.14
     
51,973
     
4.94
 
     Consumer
   
51,905
     
2.81
     
36,784
     
2.35
     
26,305
     
1.88
     
21,338
     
1.88
     
22,973
     
2.18
 
     Commercial business

 
222,290
     
12.04
     
151,766
     
9.71
     
137,613
     
9.85
     
137,426
     
12.10
     
127,017
     
12.06
 
          Total fixed-rate loans
   
1,303,607
     
70.60
     
1,058,506
     
67.71
     
918,646
     
65.72
     
746,608
     
65.76
     
686,803
     
65.21
 
Adjustable-Rate Loans:
                                                                               
     Residential real estate
   
237,758
     
12.88
     
243,514
     
15.58
     
253,409
     
18.13
     
220,073
     
19.38
     
205,986
     
19.56
 
     Commercial real estate
   
181,903
     
9.85
     
147,091
     
9.41
     
127,790
     
9.14
     
95,439
     
8.41
     
91,359
     
8.67
 
     Construction
   
6,983
     
0.38
     
7,723
     
0.49
     
17,240
     
1.23
     
19,039
     
1.68
     
17,231
     
1.64
 
     Consumer
   
45,629
     
2.47
     
41,787
     
2.67
     
37,346
     
2.67
     
25,203
     
2.22
     
23,797
     
2.26
 
     Commercial business
   
133,584
     
7.23
     
129,506
     
8.28
     
109,571
     
7.85
     
64,619
     
5.68
     
64,869
     
6.16
 
          Total adjustable-rate loans
   
605,857
     
32.81
     
569,621
     
39.43
     
545,356
     
39.02
     
424,373
     
37.37
     
403,242
     
38.29
 
          Total loans
   
1,909,464
     
103.41
     
1,628,127
     
104.14
     
1,464,002
     
104.74
     
1,170,981
     
103.13
     
1,090,045
     
103.50
 
Less:
                                                                               
     Undisbursed loans in process
   
43,153
     
2.34
     
46,533
     
2.98
     
50,740
     
3.63
     
21,779
     
1.92
     
24,688
     
2.34
 
     Net deferred loan fees
   
3
     
0.00
     
---
     
---
     
(6
)
   
(0.00
)
   
(42
)
   
(0.00
)
   
(87
)
   
(0.01
)
     Allowance for loan loss
   
19,903
     
1.07
     
18,214
     
1.16
     
15,538
     
1.11
     
13,791
     
1.21
     
12,298
     
1.17
 
          Net loans receivable
 
$
1,846,405
     
100.00
%
 
$
1,563,380
     
100.00
%
 
$
1,397,730
     
100.00
%
 
$
1,135,453
     
100.00
%
 
$
1,053,146
     
100.00
%


8



Residential Mortgage Lending. The Bank actively originates loans for the acquisition or refinance of one- to four-family residences. These loans are originated as a result of customer and real estate agent referrals, existing and walk-in customers and from responses to the Bank's marketing campaigns. At June 30, 2019, residential loans secured by one- to four-family residences totaled $351.0 million, or 20.4% of net loans receivable.
The Bank currently offers both fixed-rate and adjustable-rate mortgage ("ARM") loans. During the year ended June 30, 2019, the Bank originated $35.9 million of ARM loans and $39.4 million of fixed-rate loans that were secured by one- to four-family residences, for retention in the Bank’s portfolio. An additional $30.8 million in fixed-rate one- to four-family residential loans were originated for sale on the secondary market. Substantially all of the one- to four-family residential mortgage originations in the Bank's portfolio are located within the Bank's market area.
The Bank generally originates one- to four-family residential mortgage loans for retention in its portfolio in amounts up to 90% of the lower of the purchase price or appraised value of residential property. For loans originated in excess of 80% loan-to-value, the Bank generally charges an additional 50-100 basis points, but does not require private mortgage insurance. At June 30, 2019, the outstanding balance of loans originated with a loan-to-value ratio in excess of 80% was $76.0 million. For fiscal years ended June 30, 2019, 2018, 2017, 2016, and 2015, originations of one- to four-family loans in excess of 80% loan-to-value have totaled $23.3 million, $26.3 million, $25.0 million, $16.5 million, and $24.3 million, respectively, totaling $115.4 million. The outstanding balance of those loans at June 30, 2019, was $61.2 million. Originating loans with higher loan-to-value ratios presents additional credit risk to the Bank. Consequently, the Bank limits this product to borrowers with a favorable credit history and a demonstrable ability to service the debt. The majority of new residential mortgage loans originated by the Bank for retention in its portfolio conform to secondary market underwriting standards, however, documentation of loan files may not be adequate to allow for immediate sale. The interest rates charged on these loans are competitively priced based on local market conditions, the availability of funding, and anticipated profit margins. Fixed and ARM loans originated by the Bank are amortized over periods as long as 30 years, but typically are repaid over shorter periods.
Fixed-rate loans secured by one- to four-family residences have contractual maturities up to 30 years, and are generally fully amortizing with payments due monthly. These loans normally remain outstanding for a substantially shorter period of time because of refinancing and other prepayments. A significant change in the interest rate environment can alter the average life of a residential loan portfolio. The one- to four-family fixed-rate loans do not contain prepayment penalties. At June 30, 2019, one- to four-family loans with a fixed rate totaled $169.8 million, and had a weighted-average maturity of 95 months.
The Bank currently originates one- to four-family adjustable rate mortgage (“ARM”) loans, which adjust annually, after an initial period of one to seven years. Typically, originated ARM loans secured by owner occupied properties reprice at a margin of 2.75% to 3.00% over the weekly average yield on United States Treasury securities adjusted to a constant maturity of one year (“CMT”). Generally, ARM loans secured by non-owner occupied residential properties reprice at a margin of 3.75% over the CMT index. Current residential ARM loan originations are subject to annual and lifetime interest rate caps and floors. As a consequence of using interest rate caps, initial rates which may be at a premium or discount, and a "CMT" loan index, the interest earned on the Bank's ARMs will react differently to changing interest rates than the Bank's cost of funds. At June 30, 2019, one- to four-family loans tied to the CMT index totaled $144.8 million. One- to four-family loans tied to other indices totaled $37.7 million.
In underwriting one- to four-family residential real estate loans, the Bank evaluates the borrower's ability to meet debt service requirements at current as well as fully indexed rates for ARM loans, and the value of the property securing the loan. Most properties securing real estate loans made by the Bank during fiscal 2019 had appraisals performed on them by independent fee appraisers approved and qualified by the Board of Directors. The Bank generally requires borrowers to obtain title insurance and fire, property and flood insurance (if indicated) in an amount not less than the amount of the loan. Real estate loans originated by the Bank generally contain a "due on sale" clause allowing the Bank to declare the unpaid principal balance due and payable upon the sale of the security property.
The Bank also originates loans secured by multi-family residential properties that are often located outside the Company’s primary market area, but made to borrowers who operate within the primary market area. At June 30, 2019, the Bank had $141.0 million, or 8.2% of net loans receivable, in multi-family residential real estate. 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 up to ten years. Both fixed and adjustable interest rates are offered and it is typical for the Bank to include an interest rate “floor” and “ceiling” in these loan agreements. Variable rate loans

9



typically adjust daily, monthly, quarterly or annually based on the Wall Street prime interest rate. Generally, multi-family residential loans do not exceed 85% of the lower of the appraised value or purchase price of the secured property. The Bank generally requires a Board-approved independent certified fee appraiser to be engaged in determining the collateral value. As a general rule, the Bank requires the unlimited guaranty of all individuals (or entities) owning (directly or indirectly) 20% or more of the stock of the borrowing entity.
The primary risk associated with multi-family loans is the ability of the income-producing property that collateralizes the loan to produce adequate cash flow to service the debt. High unemployment or generally weak economic conditions may result in borrowers having to provide rental rate concessions to achieve adequate occupancy rates. In an effort to reduce these risks, the Bank evaluates the guarantor’s ability to inject personal funds as a tertiary source of repayment.
Commercial Real Estate Lending. The Bank actively originates loans secured by commercial real estate including land (improved and unimproved), shopping centers, retail establishments, nursing homes and other healthcare related facilities, and other businesses generally located in the Bank's market area. At June 30, 2019, the Bank had $840.8 million in commercial real estate loans, which represented 45.5% of net loans receivable. Of this amount, $182.7 million were loans secured by agricultural properties. The increase over the last several fiscal years in agricultural lending is the result of an intentional focus by the Bank on that segment of our market, including the hiring of personnel with knowledge of agricultural lending and experience in that type of business development. The Bank expects to continue to grow its agricultural lending portfolio, but expects that the rate of growth experienced over the last several fiscal years is unlikely to be maintained. The Bank expects to continue to maintain or increase the percentage of commercial real estate loans, inclusive of agricultural properties, in its total portfolio.
Commercial real estate loans originated by the Bank are generally based on amortization schedules of up to 25 years with monthly principal and interest payments. Generally, these loans have fixed interest rates and maturities ranging 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 five years, based upon the Wall Street prime rate. The Bank typically includes an interest rate "floor" in the loan agreement. The Bank's fixed-rate commercial real estate portfolio has a weighted average maturity of 49 months. Variable rate commercial real estate originations typically adjust daily, monthly, quarterly or annually based on the Wall Street prime rate. Generally, loans for improved commercial properties 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. Agricultural real estate loans generally require annual, instead of monthly, payments. Before credit is extended, the Bank analyzes the financial condition of the borrower, the borrower's credit history, and the reliability and predictability of the cash flow generated by the property and the value of the property itself. Generally, personal guarantees are obtained from the borrower in addition to obtaining the secured property as collateral for such loans. The Bank also generally requires appraisals on properties securing commercial real estate to be performed by a Board-approved independent certified fee appraiser.
Generally, loans secured by commercial real estate involve a greater degree of credit risk than one- to four-family residential mortgage loans. These loans typically involve large balances to single borrowers or groups of related borrowers. Because payments on loans secured by commercial real estate are often dependent on the successful operation or management of the secured property, repayment of such loans may be subject to adverse conditions in the real estate market or the economy. See "Asset Quality."
Construction Lending. The Bank originates real estate loans secured by property or land that is under construction or development. At June 30, 2019, the Bank had $123.3 million, or 6.7% of net loans receivable in construction loans outstanding.
Construction loans originated by the Bank 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. At June 30, 2019, $44.3 million of the Bank's construction loans were secured by one- to four-family residential real estate (of which $14.2 million was for speculative construction), $31.3 million were secured by multi-family residential real estate, and $47.7 million were secured by commercial real estate.  During construction, these loans typically require monthly interest-only payments and have maturities ranging from 6 to 12 months. Once construction is completed, construction loans may be converted to permanent financing, generally with monthly payments using amortization schedules of up to 30 years on residential and up to 25 years on commercial real estate.

10


Speculative construction and land development lending generally affords the Bank an opportunity to receive higher interest rates and fees with shorter terms to maturity than those obtainable from residential lending. Nevertheless, construction and land development lending is generally considered to involve a higher level of credit risk than one- to four-family residential lending due to (i) the concentration of principal among relatively few borrowers and development projects, (ii) the increased difficulty at the time the loan is made of accurately estimating building or development costs and the selling price of the finished product, (iii) the increased difficulty and costs of monitoring and disbursing funds for the loan,  (iv) the higher degree of sensitivity to increases in market rates of interest and changes in local economic conditions, and (v) the increased difficulty of working out problem loans. Due in part to these risk factors, the Bank may be required from time to time to modify or extend the terms of some of these types of loans. In an effort to reduce these risks, the application process includes a submission to the Bank of accurate plans, specifications and costs of the project to be constructed. These items are also used as a basis to determine the appraised value of the subject property. Loan amounts are generally limited to 80% of the lesser of current appraised value and/or the cost of construction.
Consumer Lending. The Bank offers a variety of secured consumer loans, including: home equity, direct and indirect automobile, second mortgage, mobile home and deposit-secured loans. The Bank originates substantially all of its consumer loans in its primary market area. Usually, consumer loans are originated with fixed rates for terms of up to five years, with the exception of home equity lines of credit, which are variable, tied to the prime rate of interest, and are for a period of ten years. At June 30, 2019, the Bank's consumer loan portfolio totaled $97.5 million, or 5.3% of net loans receivable.
Home equity loans represented 44.5% of the Bank's consumer loan portfolio at June 30, 2019, and totaled $43.4 million, or 2.3% of net loans receivable.
Home equity lines of credit (HELOCs) are secured with a deed of trust and are generally issued for up to 90% of the appraised or assessed value of the property securing the line of credit, less the outstanding balance on the first mortgage. Interest rates on the HELOCs are adjustable and are tied to the current prime interest rate, generally with an interest rate floor in the loan agreement. This rate is obtained from the Wall Street Journal and adjusts on a daily basis. Interest rates are based upon the loan-to-value ratio of the property with better rates given to borrowers with more equity. HELOCs, which are secured by residential properties, are generally secured by stronger collateral than other consumer loans and, because of the adjustable rate structure, present less interest rate risk to the Bank.
Automobile loans represented 11.7% of the Bank's consumer loan portfolio at June 30, 2019, and totaled $11.4 million, or 0.62% of net loans receivable. Of that total, an immaterial amount was originated by auto dealers. 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.
Consumer loan terms vary according to the type and value of collateral, length of contract and creditworthiness of the borrower. The underwriting standards employed for consumer loans include employment stability, an application, a determination of the applicant's payment history on other debts, and an assessment of ability to meet existing and proposed obligations. Although creditworthiness of the applicant is a primary consideration, the underwriting process also includes a comparison of the value of the security, if any, in relation to the proposed loan amount.
Consumer loans may entail greater credit risk than do residential mortgage loans, because they are generally unsecured or are secured by rapidly depreciable or mobile assets, such as automobiles. In the event of repossession or default, there may be no secondary source of repayment or the underlying value of the collateral could be insufficient to repay the loan. In addition, consumer loan collections are dependent on the borrower's continuing financial stability, and thus are more likely to be affected by adverse personal circumstances. Furthermore, the application of various federal and state laws, including bankruptcy and insolvency laws, may limit the amount which can be recovered on such loans. The Bank's delinquency levels for these types of loans are reflective of these risks. See "Asset Classification."
Commercial Business Lending. The Bank'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. At June 30, 2019, the Bank had $355.9 million in commercial business loans outstanding, or 19.3% of net loans receivable. Of this amount, $95.5 million were loans related to agriculture, including amortizing equipment loans and annual production lines. The Bank expects to continue to maintain the current percentage of commercial business loans in its total loan portfolio.

11



The Bank currently offers both fixed and adjustable rate commercial business loans. At year end, the Bank had $222.3 million in fixed rate and $133.6 million of adjustable rate commercial business loans. The adjustable rate business loans typically reprice daily, monthly, quarterly, or annually, in accordance with the Wall Street prime rate of interest. The Bank typically includes an interest rate "floor" in the loan agreement.
Commercial business loan terms vary according to the type and value of collateral, length of contract and creditworthiness of the borrower. 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 Bank's commercial business loans are evaluated based on the loan application, a determination of the applicant's payment history on other debts, business stability and an assessment of ability to meet existing obligations and payments on the proposed loan. Although creditworthiness of the applicant is a primary consideration, the underwriting process also includes a comparison of the value of the security, if any, in relation to the proposed loan amount.
Unlike residential mortgage loans, which generally are made on the basis of the borrower's ability to make repayment from his or her employment and other income, and which are secured by real property whose value tends to be more easily ascertainable, commercial business loans are of higher risk and typically are made on the basis of the borrower's ability to make repayment from the cash flow of the borrower's business. As a result, the availability of funds for the repayment of commercial business loans may be substantially dependent on the success of the business itself. Further, the collateral securing the loans may depreciate over time, may be difficult to appraise and may fluctuate in value based on the success of the business.
Contractual Obligations and Commitments, Including Off-Balance Sheet Arrangements. The following table discloses our fixed and determinable contractual obligations and commercial commitments by payment date as of June 30, 2019. Commitments to extend credit totaled $317.4 million at June 30, 2019.
   
Less Than
1 Year
   
1-3 Years
   
4-5 Years
   
More Than
5 Years
   
Total
 
   
(Dollars in thousands)
 
                               
Federal Home Loan Bank advances
 
$
2,934
   
$
33,595
   
$
8,000
   
$
379
   
$
44,908
 
Certificates of deposit
   
467,676
     
191,025
     
20,558
     
---
     
679,259
 
   Total
 
$
470,610
   
$
224,620
   
$
28,558
   
$
379
   
$
724,167
 
                                         
   
Less Than
1 Year
   
1-3 Years
   
4-5 Years
   
More Than
5 Years
   
Total
 
   
(Dollars in thousands)
 
                                         
Construction loans in process
 
$
43,153
   
$
---
   
$
---
   
$
---
   
$
43,153
 
Other loan commitments
   
202,906
     
23,485
     
11,642
     
36,228
     
274,261
 

 
$
246,059
   
$
23,485
   
$
11,642
   
$
36,228
   
$
317,414
 
                                         

Loan Maturity and Repricing

The following table sets forth certain information at June 30, 2019, regarding the dollar amount of loans maturing or repricing in the Bank's portfolio based on their contractual terms to maturity or repricing, but does not include scheduled payments or potential prepayments. Demand loans, loans having no stated schedule of repayments and no stated maturity, and overdrafts are reported as due in one year or less. Mortgage loans that have adjustable rates are shown as maturing at their next repricing date. Listed loan balances are shown before deductions for undisbursed loan proceeds, unearned discounts, unearned income and allowance for loan losses.

12




   
Within
One Year
   
After
One Year
Through
5 Years
   
After
5 Years
Through
10 Years
   
After
10 Years
   
Total
 
   
(Dollars in thousands)
 
                               
Residential real estate
 
$
178,405
   
$
211,478
   
$
74,120
   
$
27,989
   
$
491,992
 
Commercial real estate
   
231,664
     
425,260
     
175,456
     
8,397
     
840,777
 
Construction
   
111,537
     
7,183
     
4,567
     
---
     
123,287
 
Consumer
   
66,920
     
28,968
     
1,512
     
134
     
97,534
 
Commercial business
   
205,087
     
134,912
     
12,757
     
3,118
     
355,874
 
    Total loans
 
$
793,613
   
$
807,801
   
$
268,412
   
$
39,638
   
$
1,909,464
 
                                         
As of June 30, 2019, loans with a maturity date after June 30, 2020, with fixed interest rates totaled $953.6 million, and loans with a maturity date after June 30, 2020, with adjustable rates totaled $162.2 million.
Loan Originations, Sales and Purchases
Generally, loans are originated by the Bank's staff, who are salaried loan officers. All loan officers are eligible for bonuses based on production, market performance, and credit quality. Certain lenders, in particular those originating higher volume of residential loans for sale on the secondary market, may earn a relatively higher percentage of their total compensation through bonuses. Loans are originated both to be held for investment and to be sold into the secondary market. Loan applications are generally taken and processed at each of the Bank's full-service locations, and the Bank in recent years began processing online applications for single-family residential loans.
While the Bank originates both adjustable-rate and fixed-rate loans, the ability to originate loans is dependent upon the relative customer demand for loans in its market. In fiscal 2019, the Bank originated $606.3 million of loans, compared to $550.5 million and $494.9 million, respectively, in fiscal 2018 and 2017. Of these loans, mortgage loan originations were $437.6 million, $397.9 million, and $399.2 million in fiscal 2019, 2018 and 2017, respectively. Increases in originations over recent periods is attributed primarily to an expanded market area and customer base following recent acquisitions.
From time to time, the Bank has purchased loan participations consistent with its loan underwriting standards. During fiscal 2019, the Bank committed to purchase $21.5 million of new loan participations. At June 30, 2019, loan participations totaled $31.9 million, or 1.73% of net loans receivable. At June 30, 2019, all of these participations were performing in accordance with their respective terms. The Bank evaluates additional loan participations on an ongoing basis, based in part on local loan demand, liquidity, portfolio and capital levels.

13



The following table shows total loans originated, purchased, sold and repaid during the periods indicated.

   
Year Ended June 30,
 
   
2019
   
2018
   
2017
 
         
(Dollars in thousands)
 
                   
Total loans at beginning of period
 
$
1,628,127
   
$
1,464,002
   
$
1,170,981
 
                         
Loans originated:
                       
    One- to four-family residential
   
106,113
     
96,061
     
94,733
 
    Multi-family residential and
                       
       commercial real estate
   
234,075
     
185,914
     
235,427
 
    Construction loans
   
97,442
     
115,919
     
69,087
 
    Commercial business
   
143,776
     
134,318
     
78,342
 
    Consumer and others
   
24,921
     
18,316
     
17,326
 
        Total loans originated
   
606,327
     
550,528
     
494,915
 
                         
Loans purchased:
                       
    Total loans purchased (1)
   
166,112
     
72,846
     
158,808
 
                         
Loans sold:
                       
  Total loans sold
   
(50,488
)
   
(64,073
)
   
(56,131
)
                         
Principal repayments
   
(431,898
)
   
(386,912
)
   
(295,615
)
Participation principal repayments
   
(6,438
)
   
(6,098
)
   
(7,758
)
                         
Foreclosures
   
(2,278
)
   
(2,166
)
   
(1,198
)
Net loan activity
   
281,337
     
164,125
     
293,021
 
                         
        Total loans at end of period
 
$
1,909,464
   
$
1,628,127
   
$
1,464,002
 
______________
                       
(1)
Amount reported in fiscal 2019 includes the Company’s acquisition of loans from the Gideon acquisition recorded at a $144.3 million fair value.
(2)
Amount reported in fiscal 2018 includes the Company’s acquisition of loans from the Marshfield acquisition recorded at a $68.3 million fair value.
(3)
Amount reported in fiscal 2017 includes the Company’s acquisition of loans from the Capaha acquisition recorded at a $152.2 million fair value.


Loan Commitments
The Bank issues commitments for single- and multi-family residential mortgage loans, commercial real estate loans, operating or working capital lines of credit, and standby letters-of-credit. Such commitments may be oral or in writing with specified terms, conditions and at a specified rate of interest. The Bank had outstanding net loan commitments of approximately $317.4 million at June 30, 2019. See Note 14 of Notes to the Consolidated Financial Statements contained in Item 8.
Loan Fees
In addition to interest earned on loans, the Bank receives income from fees in connection with loan originations, loan modifications, late payments and for miscellaneous services related to its loans. Income from these activities varies from period to period depending upon the volume and type of loans made and competitive conditions.
Asset Quality
Delinquent Loans. Generally, when a borrower fails to make a required payment, the Bank begins the collection process by mailing a computer generated notice to the customer. If the delinquency is not cured promptly, the customer is contacted again by notice or telephone. After an account secured by real estate becomes over 60 days past due, the Bank will typically send a demand notice to the customer which, if not cured or unless satisfactory arrangements have been made within the time provided, will lead to foreclosure. Foreclosure may not

14



begin until the loan reaches 120 days delinquency in the case of consumer residential loans. For consumer loans, the Missouri Right-To-Cure Statute is followed, which requires issuance of specifically worded notices at specific time intervals prior to repossession or further collection efforts.
The following table sets forth the Bank's loan delinquencies by type and by amount at June 30, 2019.

 
Loans Delinquent For:
   
 
   
60-89 Days
   
90 Days and Over
   
Total Loans
Delinquent 60 Days
or More
 
   
Numbers
   
Amounts
   
Numbers
   
Amounts
   
Numbers
   
Amounts
 
   
(Dollars in thousands)
 
                                     
Residential real estate
   
22
   
$
1,054
     
27
   
$
1,714
     
49
   
$
2,768
 
Commercial real estate
   
1
     
1
     
7
     
5,617
     
8
     
5,618
 
Construction
   
---
     
---
     
---
     
---
     
---
     
---
 
Consumer
   
10
     
46
     
14
     
176
     
24
     
222
 
Commercial Business
   
3
     
25
     
13
     
1,902
     
16
     
1,927
 
    Totals
   
36
   
$
1,126
     
61
   
$
9,409
     
97
   
$
10,535
 

Non-Performing Assets. The table below sets forth the amounts and categories of non-performing assets in the Bank's loan portfolio. Loans are placed on non-accrual status when the collection of principal and/or interest becomes doubtful, and as a result, previously accrued interest income on the loan is removed from current income. The Bank has no reserves for uncollected interest and does not accrue interest on non-accrual loans. A loan may be transferred back to accrual status once a satisfactory repayment history has been restored. Foreclosed assets held for sale include assets acquired in settlement of loans and are shown net of reserves.
The increase in nonperforming assets in fiscal 2019 was attributed primarily to the increase in nonaccrual loans, which, in turn, was primarily attributable to the Gideon Acquisition, which included nonperforming loans of $11.4 million, at fair value, at the time of acquisition. As of December 31, 2018, certain other acquired loans had been placed on nonaccrual status, and the total attributable to the Gideon Acquisition increased to $12.9 million, at fair value. As of June 30, 2019, the fair value of those loans resulting from the Gideon Acquisition was $10.2 million.
For information regarding accrual of interest on impaired loans, see Note 1 of Notes to the Consolidated Financial Statements contained in Item 8.
The Company may treat loans acquired with impaired credit quality as an accruing asset, despite reporting such loans as impaired, because these loans are recorded at acquisition at fair value, which includes an accretable discount which is recorded as interest income over the expected life of the obligation.

15




The following table sets forth information with respect to the Bank's non-performing assets as of the dates indicated.
   
At June 30,
 
   
2019
   
2018
   
2017
   
2016
   
2015
 
   
(Dollars in thousands)
 
Nonaccruing loans:
                             
    Residential real estate
 
$
6,404
   
$
5,913
   
$
1,263
   
$
2,676
   
$
2,202
 
    Construction
   
---
     
25
     
35
     
388
     
133
 
    Commercial real estate
   
10,876
     
1,962
     
960
     
1,797
     
1,271
 
    Consumer
   
309
     
209
     
158
     
160
     
88
 
    Commercial business
   
3,424
     
1,063
     
409
     
603
     
63
 
       Total
   
21,013
     
9,172
     
2,825
     
5,624
     
3,757
 
                                         
Loans 90 days past due
   accruing interest:
                                       
    Residential real estate
   
---
     
---
     
59
     
---
     
---
 
    Construction
   
---
     
---
     
---
     
---
     
---
 
    Commercial real estate
   
---
     
---
     
---
     
---
     
---
 
    Consumer
   
---
     
---
     
13
     
7
     
34
 
    Commercial business
   
---
     
---
     
329
     
31
     
11
 
       Total
   
---
     
---
     
401
     
38
     
45
 
                                         
Total nonperforming loans
   
21,013
     
9,172
     
3,226
     
5,662
     
3,802
 
                                         
Nonperforming investments
   
---
     
---
     
---
     
---
     
---
 
Foreclosed assets held for sale:
                                       
    Real estate owned
   
3,723
     
3,874
     
3,014
     
3,305
     
4,440
 
    Other nonperforming assets
   
29
     
50
     
86
     
61
     
64
 
       Total nonperforming assets
 
$
24,765
   
$
13,096
   
$
6,326
   
$
9,028
   
$
8,306
 
                                         
Total nonperforming loans
   to net loans
   
1.14
%
   
0.59
%
   
0.23
%
   
0.50
%
   
0.36
%
Total nonperforming loans
   to total assets
   
0.95
%
   
0.49
%
   
0.19
%
   
0.40
%
   
0.29
%
Total nonperforming assets
   to total assets
   
1.12
%
   
0.69
%
   
0.37
%
   
0.64
%
   
0.64
%


At June 30, 2019, troubled debt restructurings (TDRs) totaled $19.0 million, of which $5.8 million was considered nonperforming and was included in the nonaccrual loan total above. The remaining $13.2 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. At June 30, 2018, TDRs totaled $13.0 million, of which $1.3 million was considered nonperforming and was included in the nonaccrual loan total above. In general, these loans were subject to classification as TDRs at June 30, 2019, on the basis of guidance under ASU 2011-02, which indicates that the Company may not consider the borrower’s effective borrowing rate on the old debt immediately before the restructuring in determining whether a concession has been granted.
Real Estate Owned. Real estate properties acquired through foreclosure or by deed in lieu of foreclosure are recorded at the lower of cost or fair value, less estimated disposition costs. If fair value at the date of foreclosure is lower than the balance of the related loan, the difference will be charged-off to the allowance for loan losses at the time of transfer. Management periodically updates real estate valuations and if the value declines, a specific provision for losses on such property is established by a charge to operations. At June 30, 2019, the Company's balance of real estate owned totaled $3.7 million and included $533,000 in residential properties and $3.2 million in non-residential properties.
Asset Classification. Applicable regulations require that each insured institution review and classify its assets on a regular basis. In addition, in connection with examinations of insured institutions, regulatory examiners have authority to identify problem assets and, if appropriate, require them to be classified. There are three classifications for problem assets: substandard, doubtful and loss. Substandard assets must have one or more defined weaknesses and are characterized by the distinct possibility that the insured institution will sustain some loss if the deficiencies are not corrected. Doubtful assets have the weaknesses of substandard assets with the additional

16


characteristic that the weaknesses make collection or liquidation in full on the basis of currently existing facts, conditions and values questionable, and there is a high possibility of loss. An asset classified loss is considered uncollectible and of such little value that continuance as an asset of the institution is not warranted. When an insured institution classifies problem assets as loss, it charges off the balance of the assets. Assets which do not currently expose the Bank to sufficient risk to warrant classification in one of the aforementioned categories but possess weaknesses, may be designated as special mention. The Bank's determination as to the classification of its assets and the amount of its valuation allowances is subject to review by the FRB and the Missouri Division of Finance, which can order the establishment of additional loss allowances.
On the basis of management's review of the assets of the Company, at June 30, 2019, adversely classified assets totaled $32.0 million, or 1.45% of total assets as compared to $18.2 million, or 0.96% of total assets at June 30, 2018. Of the amount adversely classified as of June 30, 2019, $32.0 million was considered substandard, and $35,000 was considered doubtful. Included in adversely classified assets at June 30, 2019, were various loans totaling $28.3 million (see Note 3 of Notes to the Consolidated Financial Statements contained in Item 8 for more information on adversely classified loans) and foreclosed real estate and repossessed assets totaling $3.8 million. The Company acquired adversely classified loans recorded at an acquisition date fair value of $17.5 million in the Gideon Acquisition. At June 30, 2019, the fair value of those acquired loans was $13.4 million. Adversely classified loans are so designated due to concerns regarding the borrower’s ability to generate sufficient cash flows to service the debt. Adversely classified loans totaling $14.6 million had been placed on nonaccrual status at June 30, 2019, of which $4.2 million were more than 30 days delinquent. Of the remaining $13.6 million of adversely classified loans, $10,000 were more than 30 days delinquent.
Other Loans of Concern. In addition to the adversely classified assets above, there were also other loans with respect to which management has concerns as to the ability of the borrowers to continue to comply with present loan terms, which may ultimately result in the adverse classification of such assets. At June 30, 2019, these other loans of concern totaled $34.5 million, as compared to $10.2 million at June 30, 2018. These loans continued to perform according to terms as of June 30, 2019, but were identified as having elevated risk due to concerns regarding the borrower’s ability to continue to generate sufficient cash flows to service the debt. Other loans of concern attributable to the Gideon Acquisition were $13.7 million, at fair value, as of the date of acquisition, and were $12.2 million, at fair value, as of June 30, 2019.
Allowance for Loan Losses. The Bank's allowance for loan losses is established through a provision for loan losses based on management's evaluation of the risk inherent in the loan portfolio and changes in the nature and volume of loan activity, including those loans which are being specifically monitored. Such evaluation, which includes a review of loans for which full collectability may not be reasonably assured, considers among other matters, the estimated fair value of the underlying collateral, economic conditions, historical loan loss experience and other factors that warrant recognition in provisioning for loan losses. These provisions for loan losses are charged against earnings in the year they are established. The Bank had an allowance for loan losses at June 30, 2019, of $19.9 million, which represented 80% of nonperforming assets as compared to an allowance of $18.2 million, which represented 139% of nonperforming assets at June 30, 2018.
At June 30, 2019, the Bank also had an allowance for credit losses on off-balance sheet credit exposures of $1.3 million, as compared to $1.2 million at June 30, 2018. This amount is maintained as a separate liability account to cover estimated potential credit losses associated with off-balance sheet credit instruments such as off-balance sheet loan commitments, standby letters of credit, and guarantees.
Although management believes that it uses the best information available to determine the allowance, unforeseen market conditions could result in adjustments and net earnings could be significantly affected if circumstances differ substantially from assumptions used in making the final determination. Future additions to the allowance will likely be the result of periodic loan, property and collateral reviews and thus cannot be predicted with certainty in advance.

17



The following table sets forth an analysis of the Bank's allowance for loan losses for the periods indicated. Where specific loan loss reserves have been established, any difference between the loss reserve and the amount of loss realized has been charged or credited to current income.

   
Year Ended June 30,
 
   
2019
   
2018
   
2017
   
2016
   
2015
 
   
(Dollars in thousands)
 
                               
Allowance at beginning of period
 
$
18,214
   
$
15,538
   
$
13,791
   
$
12,298
   
$
9,259
 
Recoveries
                                       
Residential real estate
   
23
     
2
     
10
     
5
     
11
 
Construction real estate
   
---
     
---
     
1
     
---
     
---
 
Commercial real estate
   
5
     
2
     
20
     
46
     
47
 
Commercial business
   
2
     
8
     
31
     
15
     
33
 
Consumer
   
16
     
23
     
8
     
8
     
4
 
   Total recoveries
   
46
     
35
     
70
     
74
     
95
 
                                         
Charge offs:
                                       
Residential real estate
   
30
     
190
     
211
     
167
     
54
 
Construction real estate
   
---
     
9
     
31
     
---
     
---
 
Commercial real estate
   
164
     
56
     
19
     
97
     
9
 
Commercial business
   
92
     
22
     
337
     
725
     
128
 
Consumer
   
103
     
129
     
65
     
86
     
50
 
   Total charge offs
   
389
     
406
     
663
     
1,075
     
241
 
                                         
   Net charge offs
   
(343
)
   
(371
)
   
(593
)
   
(1,001
)
   
(146
)
Provision for loan losses
   
2,032
     
3,047
     
2,340
     
2,494
     
3,185
 
                                         
   Balance at end of period
 
$
19,903
   
$
18,214
   
$
15,538
   
$
13,791
   
$
12,298
 
                                         
Ratio of allowance to total loans
   outstanding at the end of the period
   
1.07
%
   
1.15
%
   
1.10
%
   
1.20
%
   
1.15
%
Ratio of net charge offs to average
   loans outstanding during the period
   
0.02
%
   
0.02
%
   
0.05
%
   
0.09
%
   
0.01
%

18



The following table sets forth the breakdown of the allowance for loan losses by loan category for the periods indicated.
   
At June 30,
 
   
2019
   
2018
   
2017
   
2016
   
2015
 
   
Amount
   
Percent of
Loans in
Each
Category
to Total
Loans
   
Amount
   
Percent of
Loans in
Each
Category
to Total
Loans
   
Amount
   
Percent of
Loans in
Each
Category
to Total
Loans
   
Amount
   
Percent of
Loans in
Each
Category
to Total
Loans
   
Amount
   
Percent of
Loans in
Each
Category
to Total
Loans
 
   
(Dollars in thousands)
 
                                                             
Residential real estate
 
$
3,706
     
25.76
%
 
$
3,226
     
27.70
%
 
$
3,230
     
30.22
%
 
$
3,247
     
33.56
%
 
$
2,819
     
34.63
%
                                                                                 
Construction
   
1,365
     
6.46
     
1,097
     
6.92
     
964
     
7.30
     
1,091
     
6.61
     
899
     
6.35
 
                                                                                 
Commercial real estate
   
9,399
     
44.03
     
8,793
     
43.28
     
7,068
     
41.25
     
5,711
     
38.60
     
4,956
     
37.13
 
                                                                                 
Consumer
   
1,046
     
5.11
     
902
     
4.82
     
757
     
4.35
     
738
     
3.98
     
758
     
4.29
 
Commercial business
   
4,387
     
18.64
     
4,196
     
17.28
     
3,519
     
16.88
     
3,004
     
17.25
     
2,866
     
17.60
 
                                                                                 
    Total allowance for
      loan losses
 
$
19,903
     
100.00
%
 
$
18,214
     
100.00
%
 
$
15,538
     
100.00
%
 
$
13,791
     
100.00
%
 
$
12,298
     
100.00
%




19



Investment Activities
General. Under Missouri law, the Bank is permitted to invest in various types of liquid assets, including U.S. Government and State of Missouri obligations, securities of various federal agencies, certain certificates of deposit of insured banks and savings institutions, banker's acceptances, repurchase agreements, federal funds, commercial paper, investment grade corporate debt securities and obligations of States and their political sub-divisions. Generally, the investment policy of the Company is to invest funds among various categories of investments and repricing characteristics based upon the Bank's need for liquidity, to provide collateral for borrowings and public unit deposits, to help reach financial performance targets and to help maintain asset/liability management objectives.
The Company's investment portfolio is managed in accordance with the Bank's investment policy which was adopted by the Board of Directors of the Bank and is implemented by members of the asset/liability management committee which consists of the President/Chief Executive Officer, the Chief Financial Officer, the Chief Operations Officer, and five outside directors.
Investment purchases and/or sales must be authorized by the appropriate party, depending on the aggregate size of the investment transaction, prior to any investment transaction. The Board of Directors reviews all investment transactions. All investment purchases are identified as available-for-sale ("AFS") at the time of purchase. The Company has not classified any investment securities as held-to-maturity over the last five years. Securities classified as "AFS" must be reported at fair value with unrealized gains and losses, net of tax, recorded as a separate component of stockholders' equity. At June 30, 2019, AFS securities totaled $165.5 million (excluding FHLB and Federal Reserve Bank membership stock). For information regarding the amortized cost and market values of the Company's investments, see Note 2 of Notes to the Consolidated Financial Statements contained in Item 8.
As of June 30, 2019, the Company had no derivative instruments and no outstanding hedging activities. Management has reviewed potential uses for derivative instruments and hedging activities, but has no immediate plans to employ these tools.
Debt and Other Securities. At June 30, 2019, the Company's debt and other securities portfolio totaled $55.1 million, or 2.49% of total assets as compared to $56.2 million, or 2.98% of total assets at June 30, 2018. During fiscal 2019, the Bank had $14.1 million in maturities and $2.8 million in securities purchases. Of the securities that matured, $3.6 million was called for early redemption. At June 30, 2019, the investment securities portfolio included $7.3 million in U.S. government and government agency bonds, of which $4.5 million is subject to early redemption at the option of the issuer, and $42.8 million in municipal bonds, of which $36.7 million is subject to early redemption at the option of the issuer. The remaining portfolio consists of $5.1 million in other securities, including pooled trust preferred securities with an estimated fair value of $779,000. Based on projected maturities, the weighted average life of the debt and other securities portfolio at June 30, 2019, was 33 months. Membership stock held in the FHLB of Des Moines, totaling $5.2 million, FHLB of Chicago totaling $215,000, and the Federal Reserve Bank of St. Louis, totaling $4.4 million, along with equity stock of $775,000 in three correspondent (banker’s) banks, was not included in the above totals.
At June 30, 2019, the Company owned two pooled trust preferred securities with an estimated fair value of $779,000 and a book value of $973,000. The June 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 anticipated at the time the securities were purchased. See Note 2 of Notes to the Consolidated Financial Statements contained in Item 8.
Mortgage-Backed Securities. At June 30, 2019, mortgage-backed securities (“MBS”) totaled $110.4 million, or 5.0%, of total assets, as compared to $90.2 million, or 4.8%, of total assets at June 30, 2018. During fiscal 2019, the Bank had maturities and prepayments of $15.9 million and $28.4 million in purchases of MBS. At June 30, 2019, the MBS portfolio included $51.9 million in fixed-rate MBS, and $58.6 million in fixed rate collateralized mortgage obligations (“CMOs”), all of which passed the Federal Financial Institutions Examination Council's sensitivity test. Based on projected prepayment rates, the weighted average life of the MBS and CMOs at June 30, 2019, was 51 months. Actual prepayment rates experienced, which often vary due to changes in market interest rates, may cause the anticipated average life of MBS portfolio to extend or shorten as compared to prepayment rates anticipated.

20



Investment Securities Analysis
The following table sets forth the Company's debt and other securities portfolio, at carrying value, and membership stock, at cost, at the dates indicated.
   
At June 30,
 
   
2019
   
2018
   
2017
 
   
Fair
Value
   
Percent of
Portfolio
   
Fair
Value
   
Percent of
Portfolio
   
Fair
Value
   
Percent of
Portfolio
 
               
(Dollars in thousands)
       
                                     
U.S. government and government
   agencies
 
$
7,270
     
11.07
%
 
$
9,385
     
14.13
%
 
$
10,438
     
14.34
%
State and political subdivisions
   
42,783
     
65.14
     
41,612
     
62.65
     
49,978
     
68.66
 
Other securities
   
5,053
     
7.69
     
5,152
     
7.76
     
5,725
     
7.86
 
FHLB/FNBB/MIB membership stock
   
6,222
     
9.47
     
6,701
     
10.09
     
4,295
     
5.90
 
Federal Reserve Bank membership stock
   
4,350
     
6.62
     
3,566
     
5.37
     
2,357
     
3.24
 
Total
 
$
65,678
     
100.00
%
 
$
66,416
     
100.00
%
 
$
72,793
     
100.00
%

The following table sets forth the maturities and weighted average yields of AFS debt securities in the Company's investment securities portfolio and membership stock at June 30, 2019.
   
Available for Sale Securities
June 30, 2019
 
   
Amortized
Cost
   
Fair
Value
   
Tax-Equiv.
Wtd.-Avg. Yield
 
   
(Dollars in thousands)
 
                   
U.S. government and government agency securities:
                 
   Due within 1 year
 
$
4,794
   
$
4,788
     
1.68
%
   Due after 1 year but within 5 years
   
2,490
     
2,482
     
1.88
 
   Due after 5 years but within 10 years
   
---
     
---
     
---
 
   Due over 10 years
   
---
     
---
     
---
 
   Total
   
7,284
     
7,270
     
1.75
 
                         
State and political subdivisions:
                       
   Due within 1 year
   
1,984
     
1,989
     
2.23
%
   Due after 1 year but within 5 years
   
7,699
     
7,755
     
2.86
 
   Due after 5 years but within 10 years
   
15,664
     
15,862
     
3.20
 
   Due over 10 years
   
16,776
     
17,177
     
3.38
 
   Total
   
42,123
     
42,783
     
3.16
 
                         
Other securities:
                       
   Due within 1 year
   
---
     
---
     
---
%
   Due after 1 year but within 5 years
   
---
     
---
     
---
 
   Due after 5 years but within 10 years
   
3,993
     
4,068
     
5.44
 
   Due over 10 years
   
1,183
     
985
     
3.35
 
   Total
   
5,176
     
5,053
     
4.96
 
                         
No stated maturity:
                       
   FHLB/FNBB/MIB membership stock
   
6,222
     
6,222
     
3.82
%
   Federal Reserve Bank membership stock
   
4,350
     
4,350
     
5.81
 
   Total
   
10,572
     
10,572
     
4.64
 
                         
Total debt and other securities
 
$
65,155
   
$
65,678
     
3.39
%

21



The following table sets forth certain information at June 30, 2019 regarding the dollar amount of MBS and CMOs at amortized cost due, based on their contractual terms to maturity, but does not include scheduled payments or potential prepayments. MBS and CMOs that have adjustable rates are shown at amortized cost as maturing at their next repricing date.
   
At June 30, 2019
 
   
(Dollars in thousands)
 
Amounts due:
     
  Within 1 year
 
$
7
 
  After 1 year through 3 years
   
6
 
  After 3 years through 5 years
   
2,410
 
  After 5 years
   
106,874
 
    Total
 
$
109,297
 
         
The following table sets forth the dollar amount of all MBS and CMOs at amortized cost due, based on their contractual terms to maturity, one year after June 30, 2019, which have fixed, floating, or adjustable interest rates.
   
At June 30, 2019
 
   
(Dollars in thousands)
 
Interest rate terms on amounts due after 1 year:
     
   Fixed
 
$
109,297
 
   Adjustable
   
---
 
       Total
 
$
109,297
 
         

The following table sets forth certain information with respect to each MBS and CMO security at the dates indicated.
   
At June 30,
 
   
2019
   
2018
   
2017
 
   
Amortized
Cost
   
Fair
Value
   
Amortized
Cost
   
Fair
Value
   
Amortized
Cost
   
Fair
Value
 
   
(Dollars in thousands)
       
                                     
FHLMC certificates
 
$
16,373
   
$
16,372
   
$
16,598
   
$
16,113
   
$
21,380
   
$
21,489
 
GNMA certificates
   
35
     
35
     
38
     
38
     
1,437
     
1,449
 
FNMA certificates
   
34,943
     
35,458
     
25,800
     
25,062
     
28,457
     
28,628
 
Collateralized mortgage obligations issued
   by government agencies
   
57,946
     
58,564
     
50,272
     
48,963
     
26,814
     
26,709
 
       Total
 
$
109,297
   
$
110,429
   
$
92,708
   
$
90,176
   
$
78,088
   
$
78,275
 

Deposit Activities and Other Sources of Funds
General. The Company's primary sources of funds are deposits, borrowings, payments of principal and interest on loans, MBS and CMOs, interest and principal received on investment securities and other short-term investments, and funds provided from operating results. Loan repayments are a relatively stable source of funds, while deposit inflows and outflows and loan prepayments are significantly influenced by general market interest rates and overall economic conditions.
Borrowings, including FHLB advances, have been used at times to provide additional liquidity. Borrowings are used on an overnight or short-term basis to compensate for periodic fluctuations in cash flows, and are used on a longer term basis to fund loan growth and to help manage the Company's sensitivity to fluctuating interest rates.
Deposits. The Bank's depositors are generally residents and entities located in the States of Missouri, Arkansas, or Illinois. Deposits are attracted from within the Bank's market area through the offering of a broad selection of deposit instruments, including demand deposit accounts, negotiable order of withdrawal ("NOW") accounts, money market deposit accounts, saving accounts, certificates of deposit and retirement savings plans. Deposit account terms vary according to the minimum balance required, the time periods the funds may remain on deposit and the interest rate, among other factors. In determining the terms of its deposit accounts, the Bank considers current market interest rates, profitability to the Bank, managing interest rate sensitivity and its customer preferences and concerns. The Bank's Asset/Liability Committee regularly reviews its deposit mix and pricing.

22



The Bank will periodically promote a particular deposit product as part of the Bank's overall marketing plan. Deposit products have been promoted through various mediums, which include digital and social media, radio and newspaper advertisements, as well as “grassroots” marketing techniques, such as sponsorship of – or activity at – community events. The emphasis of these campaigns is to increase consumer awareness and market share of the Bank.
The flow of deposits is influenced significantly by general economic conditions, changes in prevailing interest rates, and competition. Based on its experience, the Bank believes that its deposits are relatively stable sources of funds. However, the ability of the Bank to attract and maintain money market deposit accounts, passbook savings accounts, and certificates of deposit, and the rates paid on these deposits, has been and will continue to be significantly affected by market conditions. The following table depicts the composition of the Bank's deposits as of June 30, 2019:
As of June 30, 2019  
Weighted
Average
Interest
Rate
 
Term
 
Category
 
Minimum
Amount
   
Balance
   
Percentage
of Total
Deposits
 
                 
(Dollars in thousands)
       
                           
   0.00%
 
None
 
Non-interest Bearing
 
$
100
   
$
218,889
     
11.56
%
1.01
 
None
 
NOW Accounts
   
100
     
639,219
     
33.76
 
0.73
 
None
 
Savings Accounts
   
100
     
167,973
     
8.87
 
1.38
 
None
 
Money Market Deposit Accounts
   
1,000
     
188,355
     
9.95
 
                                 
       
Certificates of Deposit
 
   
   
 
1.50
 
6 months or less
 
Fixed Rate/Term
   
1,000
     
26,769
     
1.41
 
1.09
 
6 months or less
 
IRA Fixed Rate/Term
   
1,000
     
1,416
     
0.07
 
2.12
 
7-12 months
 
Fixed Rate/Term
   
1,000
     
172,979
     
9.13
 
1.53
 
7-12 months
 
IRA Fixed Rate/Term
   
1,000
     
15,910
     
0.84
 
2.27
 
13-24 months
 
Fixed Rate/Term
   
1,000
     
268,156
     
14.16
 
2.02
 
13-24 months
 
IRA Fixed Rate/Term
   
1,000
     
27,241
     
1.43
 
2.43
 
25-36 months
 
Fixed Rate/Term
   
1,000
     
58,071
     
3.07
 
2.50
 
25-36 months
 
IRA Fixed Rate/Term
   
1,000
     
12,823
     
0.68
 
2.09
 
48 months and more
 
Fixed Rate/Term
   
1,000
     
76,475
     
4.04
 
1.97
 
48 months and more
 
IRA Fixed Rate/Term
   
1,000
     
19,419
     
1.03
 
                   
$
1,893,695
     
100.00
%

The following table indicates the amount of the Bank's jumbo certificates of deposit by time remaining until maturity as of June 30, 2019. Jumbo certificates of deposit require minimum deposits of $100,000 and rates paid on such accounts are generally negotiable.
Maturity Period
 
Amount
 
   
(Dollars in thousands)
 
       
Three months or less
 
$
74,943
 
Over three through six months
   
73,929
 
Over six through twelve months
   
145,660
 
Over 12 months
   
132,617
 
    Total
 
$
427,149
 
         

23



Time Deposits by Rates
The following table sets forth the time deposits in the Bank classified by rates at the dates indicated.
           
    At June 30,  
   
2019
   
2018
   
2017
 
   
(Dollars in thousands)
 
                   
0.00 - 0.99%
 
$
2,447
   
$
77,958
   
$
200,868
 
1.00 - 1.99%
   
221,409
     
356,172
     
296,964
 
2.00 - 2.99%
   
398,931
     
98,842
     
36,228
 
3.00 - 3.99%
   
56,310
     
479
     
---
 
4.00 - 4.99%
   
162
     
---
     
---
 
5.00 - 5.99%
   
---
     
---
     
3,000
 
                         
    Total
 
$
679,259
   
$
533,451
   
$
537,060
 
                         

The following table sets forth the amount and maturities of all time deposits at June 30, 2019.
   
Amount Due
 
                                       
Percent
 
   
Less
                                 
of Total
 
   
Than One
   
1-2
   
2-3
   
3-4
   
After
         
Certificate
 
   
Year
   
Years
   
Years
   
Years
   
4 Years
   
Total
   
Accounts
 
   
(Dollars in thousands)
 
                                                 
0.00 – 0.99%
 
$
1,858
   
$
284
   
$
305
   
$
---
   
$
---
   
$
2,447
     
0.36
%
1.00 – 1.99%
   
157,581
     
41,688
     
14,954
     
6,863
     
323
     
221,409
     
32.60
 
2.00 - 2.99%
   
290,186
     
82,104
     
17,483
     
6,768
     
2,390
     
398,931
     
58.73
 
3.00 - 3.99%
   
18,051
     
28,904
     
5,303
     
2,994
     
1,058
     
56,310
     
8.29
 
4.00 - 4.99%
   
---
     
---