{"url_path":"/sec/smbc/10-k/2026/item-1a","section_key":"item-1a","section_title":"Item 1A Risk Factors","topic":"sec","document":{"doc_type":"10-K","doc_date":"2026-09-11","source_url":"https://www.sec.gov/Archives/edgar/data/916907/0001104659-26-107119-index.html","accession_number":"0001104659-26-107119","cik":"0000916907","ticker":"SMBC","issuer_name":"SOUTHERN MISSOURI BANCORP, INC.","edgar_url":"https://www.sec.gov/Archives/edgar/data/916907/0001104659-26-107119-index.html","primary_entity_key":"0000916907","primary_entity_name":"SOUTHERN MISSOURI BANCORP, INC."},"word_count":9344,"has_tables":true,"body_markdown":"Item 1A. Risk Factors\n\nAn investment in our securities is subject to inherent risks. Before making an investment decision, you should carefully consider the risks and uncertainties described below together with all of the other information included in this report. In addition to the risks and uncertainties described below, other risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially and adversely affect our business, financial condition and results of operations. The value or market price of our securities could decline due to any of these identified or other risks, and you could lose all or part of your investment.\n\n38\n\n[Table of Contents](#TOC)\n\nRisks Relating to the Company and the Bank\n\nRisks Relating to Marcoeconomic Conditions\n\nChanges in economic conditions, particularly an economic slowdown in Missouri or northern Arkansas, could hurt our business.\n\nOur business is directly affected by broad macroeconomic and policy factors including, inflation or deflation, changes in monetary policy, interest rate volatility, trends in industry and finance, legislative and regulatory changes, and changes in governmental monetary and fiscal policies, all of which are beyond our control. Future deterioration in economic conditions including declining employment, reduced consumer spending, business failures or adverse weather events, particularly within our primary market area, could result in the following consequences, among others, any of which could hurt our business materially:\n\n●loan delinquencies may increase;\n\n●problem assets and foreclosures may increase;\n\n●demand for our products and services may decline which may lead to lower loan originations, deposits and other revenues;\n\n●loan collateral may decline in value, in turn reducing a customer’s borrowing power and reducing the value of collateral securing our loans;\n\n●the net worth and liquidity of loan guarantors may decline, impairing their ability to honor commitments to us;\n\n●the need to increase the allowance for credit losses; and\n\n●reduction in our low-cost or noninterest-bearing deposits.\n\nIn addition, a decline in local or regional economic conditions may have a greater effect on our earnings and capital than on the earnings and capital of larger financial institutions whose real estate loan portfolios are more geographically diverse.\n\nDownturns in the real estate markets in our primary market area could hurt our business.\n\nOur business activities and credit exposure are primarily concentrated in Missouri and northern Arkansas. While we did not and do not have a sub-prime lending program, our residential real estate, construction and land loan portfolios, our commercial and multi-family loan portfolios and certain of our other loans could be affected by the downturn in the real estate market. We anticipate that significant declines in the real estate markets in our primary market area would hurt our business and would mean that collateral for our loans would hold less value. As a result, our ability to recover on defaulted loans by selling the underlying real estate would be diminished, and we would be more likely to suffer losses on defaulted loans. The events and conditions described in this risk factor could therefore have a material adverse effect on our business, results of operations and financial condition.\n\nInflationary pressures and rising prices may adversely affect our results of operations and financial condition.\n\nInflation and higher costs for goods, services, labor and other operating expenses could adversely affect our customers and our business. Although inflationary pressures have moderated from the elevated levels experienced in recent years, the continued uncertainty surrounding inflation, interest rates and other economic conditions could affect consumer and business activity and the financial condition of our customers. Small and medium-sized businesses may be impacted more during periods of high inflation, as they are not able to leverage economies of scale to mitigate cost pressures compared to larger businesses. Consequently, the ability of our business customers to repay their loans may deteriorate, and in some cases this deterioration may occur quickly, which would adversely impact our results of\n\n39\n\n[Table of Contents](#TOC)\n\noperations and financial condition. Furthermore, increases in employee compensation and benefits costs, occupancy, technology, insurance and other operating costs could increase our expenses and reduce our profitability. Any of these factors could have a material adverse effect on our business, results of operations and financial condition.\n\nSevere weather and other natural disasters, acts of war or terrorism, new public health issues or other adverse external events could harm our business.\n\nSevere weather and other natural disasters, acts of war or terrorism, new public health issues or other adverse external events could have a significant impact on our ability to conduct business. Such events could harm our operations through interference with communications, including the interruption or loss of our computer systems, which could prevent or impede us from gathering deposits, originating loans and processing and controlling the flow of business, as well as through the destruction of our facilities and our operational, financial and management information systems. There is no assurance that our business continuity and disaster recovery program can adequately mitigate these risks. Such events could also affect the stability of our deposit base, cause significant property damage, adversely affect our employees, adversely impact the values of collateral securing our loans and/or interfere with our borrowers’ abilities to repay their debt obligations to us.\n\nRisks Relating to Credit and Lending Activities\n\nOur ACL may be insufficient to absorb losses in our loan portfolio.\n\nLending money is a substantial part of our business. Every loan carries a certain risk that it will not be repaid in accordance with its terms or that any underlying collateral will not be sufficient to ensure repayment. This risk is affected by, among other things:\n\n●cash flow of the borrower and/or the project being financed;\n\n●in the case of a collateralized loan, the changes and uncertainties as to the future value of the collateral;\n\n●the credit history of a particular borrower;\n\n●changes in economic and industry conditions; and\n\n●the duration of the loan.\n\nWe maintain an ACL which we believe is appropriate to provide for expected losses over the life of loans in our portfolio. The amount of this allowance is determined by our management through a periodic review and consideration of several factors, including, but not limited to:\n\n●historical default and loss experience;\n\n●historical recovery experience;\n\n●economic conditions;\n\n●evaluation of non-performing loans;\n\n●the amount and quality of collateral, including guarantees, securing the loans.\n\n●risk characteristics of the various classifications of loans; and\n\n●the rate of growth, quality, size and diversity of the loan portfolio;\n\nIf actual credit losses exceed the projections modeled in arriving at our estimate of the allowance for credit losses, our business, financial condition and profitability may suffer.\n\nThe Financial Accounting Standards Board (FASB), adopted Accounting Standards Update (ASU), 2016 13 “Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments,” on June\n\n40\n\n[Table of Contents](#TOC)\n\n16, 2016, which changed previous allowance for loan losses methodology to consider current expected credit losses (CECL).\n\nOur determination of the appropriate level of the ACL under CECL inherently involves a high degree of subjectivity and requires us to make significant estimates of current credit risks and future trends, all of which may undergo material changes over time. If our estimates are incorrect, the ACL may not be sufficient to cover the expected losses in our loan portfolio, resulting in the need for increases in our ACL. Management also recognizes that significant new growth in loan portfolios, new loan products and the refinancing of existing loans can result in portfolios comprised of unseasoned loans that may not perform in a historical or projected manner and will increase the risk that our ACL may be insufficient to absorb losses without significant additional provisions.\n\nIn addition, bank regulatory agencies periodically review our ACL and may require an increase in the provision for credit losses or the recognition of further loan charge-offs based on judgments different than those of management, if charge-offs in future periods exceed the ACL, we may need additional provisions to increase the ACL. Any increases in the ACL will result in a decrease in net income and possibly capital and may have a material adverse effect on our financial condition and results of operations.\n\nIf our nonperforming assets increase, our earnings will be adversely affected.\n\nAt June 30, 2026, our nonperforming assets were $33.5 million, or 0.64% of total assets. Our nonperforming assets adversely affect our net income in various ways:\n\n●We do not accrue interest income on nonaccrual loans, nonperforming investment securities, or other real estate owned.\n\n●We must provide for expected credit losses through a current period charge to the provision for credit losses.\n\n●Non-interest expense increases when we must write down the value of properties in our other real estate owned portfolio to reflect changing market values.\n\n●There are legal fees associated with the resolution of problem assets, as well as carrying costs, such as taxes, insurance, and maintenance fees related to our other real estate owned.\n\n●The resolution of nonperforming assets requires active involvement of management, which can divert management’s attention from more profitable activities.\n\nIf additional borrowers become delinquent and do not pay their loans and we are unable to successfully manage our nonperforming assets, our losses and troubled assets could increase significantly, which could have a material adverse effect on our financial condition and results of operations. See also “Regulation – Regulatory Capital Requirements.”\n\nOur construction lending exposes us to significant risk.\n\nOur construction loan portfolio, which totaled $310.0 million, or 7.1% of loans at June 30, 2026, includes residential and non-residential construction and development loans. Construction and development lending, especially non-residential construction and development lending, is generally considered to have more complex credit risks than traditional one-to-four-family residential lending because the principal is concentrated in a limited number of loans with repayment dependent on the successful completion and sale, leasing, or operation of the related real estate project. Consequently, these loans are often more sensitive to adverse conditions in the real estate market or the general economy than other real estate loans. These loans are generally less predictable and more difficult to evaluate and monitor and collateral may be difficult to dispose of in a market decline. Additionally, we may experience significant construction credit losses because independent appraisers or project engineers inaccurately estimate the cost or value of construction loan projects.\n\n41\n\n[Table of Contents](#TOC)\n\nDeterioration in our construction portfolio could result in increases in the provision for credit losses and an increase in charge-offs, all of which could have a material adverse effect on our financial condition and results of operations.\n\nOur loan portfolio possesses increased risk due to our percentage of commercial real estate and commercial business loans.\n\nAt June 30, 2026, 55.8% of our loans consisted of commercial real estate, excluding construction as previously mentioned above, and commercial business loans to small and mid-sized businesses, generally located in our primary market area, which are the types of businesses that have a heightened vulnerability to local economic conditions. At June 30, 2026, our loan portfolio included $1.9 billion of commercial real estate loans and $552.6 million of commercial business loans. The credit risk related to these types of loans is considered to be greater than the risk related to one- to four-family residential loans because the repayment of commercial real estate loans and commercial business loans typically is dependent on the successful operation and income stream of the borrower’s business or the real estate securing the loans as collateral, which can be significantly affected by economic conditions. Additionally, commercial loans typically involve larger loan balances to single borrowers or groups of related borrowers compared to residential real estate loans. If loans that are collateralized by real estate become troubled and the value of the real estate has been significantly impaired, then we may not be able to recover the full contractual amount of principal and interest that we anticipated at the time we originated the loan, which could require us to increase our provision for credit losses and adversely affect our operating results and financial condition. Commercial loans not collateralized by real estate are often secured by collateral that may depreciate over time, be difficult to appraise and fluctuate in value (such as accounts receivable, inventory and equipment).\n\nSeveral of our commercial borrowers have more than one commercial real estate or business loan outstanding with us. Consequently, an adverse development with respect to a single loan or credit relationship can expose us to significantly greater risk of loss compared to an adverse development with respect to a single one- to four-family residential mortgage loan. Finally, if we foreclose on a commercial real estate loan, our holding period for the collateral, if any, typically is longer than for one- to four-family residential property because there are fewer potential purchasers of the collateral. Since we plan to continue to increase our originations of these loans, it may be necessary to increase the level of our ACL due to the increased risk characteristics associated with these types of loans. Any increase to our provision credit losses would adversely affect our operating results and financial condition. Any delinquent payments or the failure to repay these loans would hurt our operating results and financial condition.\n\nOur loan portfolio possesses risk due to our agricultural lending.\n\nOur agricultural real estate loans totaled $295.8 million, or 6.8% of our loan portfolio at June 30, 2026. Agricultural real estate lending involves a greater degree of risk and typically involves larger loans to single borrowers than lending on one-to-four-family residences. Payments on agricultural real estate loans are dependent on the profitable operation or management of the farm property securing the loan. The success of the farm may be affected by many factors outside the control of the farm borrower, including adverse weather conditions that prevent the planting of a crop or limit crop yields (such as hail, drought and floods), loss of livestock due to disease or other factors, declines in market prices for agricultural products (both domestically and internationally) and the impact of government regulations (including changes in price supports, subsidies, and environmental regulations). In addition, many farms are dependent on a limited number of key individuals whose injury or death may significantly affect the successful operation of the farm. If the cash flow from a farming operation is diminished, the borrower’s ability to repay the loan may be impaired. The primary agricultural activity in our market areas is livestock, dairy, poultry, rice, timber, soybeans, wheat, melons, corn, and cotton. Accordingly, adverse circumstances affecting these activities could have an adverse effect on our agricultural real estate loan portfolio.\n\nOur agricultural production and equipment loans totaled $219.2 million, or 5.1%, of our loan portfolio at June 30, 2026, these loans. As with agricultural real estate loans, the repayment of operating loans is dependent on the successful operation or management of the farm property. The same risk applies to agricultural operating loans which are unsecured or secured by rapidly depreciating assets such as farm equipment or assets such as livestock or crops. Any\n\n42\n\n[Table of Contents](#TOC)\n\nrepossessed collateral for a defaulted loan may not provide an adequate source of repayment of the outstanding loan balance as a result of the greater likelihood of damage, loss or depreciation to the collateral.\n\nAt times, various agricultural commodity prices have been negatively impacted by recent actions taken, or which are feared could be taken, by governments in markets where U.S. agricultural products are exported. Declines in the pricing available to U.S. farmers negatively impacts cash flows for these borrowers to service their debts, and negatively affects the value of real estate and equipment which may be pledged as collateral to secure borrowings. In addition to the various risks to farm operations and management noted above, agricultural loans often are structured for annual payments, to coincide with borrower cash flows. As compared to other loan types which generally require monthly payments, an annual payment schedule may increase risk that the Company would not timely identify a borrower experiencing financial difficulties, hindering its ability to work to mitigate losses.\n\nContinued growth of our commercial real estate and commercial business loan portfolios may increase the risk of credit defaults in the future.\n\nDue to our emphasis on commercial real estate and commercial business lending, a substantial amount of the loans in our commercial real estate and commercial business portfolios and our lending relationships are of relatively recent origin. In general, loans do not begin to show signs of credit deterioration or default until they have been outstanding for some period of time, a process referred to as “seasoning.” A portfolio of older loans will usually behave more predictably than a newer portfolio. Commercial real estate and commercial business loans naturally create portfolio “churn” as loans are originated and repaid. As a result, our portfolio consists of a mix of seasoned and unseasoned loans. We believe that our underwriting practices are sound and based on industry standards and best practices. However, a significant portion of our loan portfolio is relatively new. Therefore, the current level of delinquencies and defaults may not be representative of the level that will prevail as the portfolio becomes more seasoned, which may be higher than current levels. If delinquencies and defaults increase, we may be required to increase our provision for credit losses, which would adversely affect our results of operations and financial condition.\n\nCredit losses on investment securities could require charges to earnings, which could negatively impact our results of operations.\n\nIn assessing the potential credit losses of investment securities, we are required to evaluate instances in which the fair value of particular securities are less than their amortized cost basis. The evaluation considers factors including; past events, current conditions, and reasonable & supportable forecasts, and the Company’s ability and intent to hold the security until maturity. A qualitative determination is acceptable. There were no credit-related factors underlying unrealized losses on AFS securities at June 30, 2026, or June 30, 2025.\n\nRisks Relating to Market Interest Rates\n\nChanges in interest rates may negatively affect our earnings and the value of our assets.\n\nOur earnings and cash flows depend substantially upon our net interest income. Net interest income is the difference between interest income earned on interest-earning assets, such as loans and investment securities, and interest expense paid on interest-bearing liabilities, such as deposits and borrowed funds. Interest rates are sensitive to many factors that are beyond our control, including general economic conditions, competition and policies of various governmental and regulatory agencies and, in particular, the policies of the Federal Reserve Board. Changes in monetary policy, including changes in interest rates, could influence not only the interest we receive on loans and investment securities and the amount of interest we pay on deposits and borrowings, but these changes could also affect: (i) our ability to originate loans and obtain deposits; (ii) the fair value of our financial assets and liabilities, including our securities portfolio; and (iii) the average duration of our interest-earning assets. This also includes the risk that interest-earning assets may be more responsive to changes in interest rates than interest-bearing liabilities, or vice versa (repricing risk), the risk that the individual interest rates or rate indices underlying various interest-earning assets and interest-bearing liabilities may not change in the same degree over a given time period (basis risk), and the risk of changing interest rate relationships across the spectrum of interest-earning asset and interest-bearing liability maturities (yield curve risk), including a prolonged flat or inverted yield curve environment. Changes in interest rates may also\n\n43\n\n[Table of Contents](#TOC)\n\naffect the composition and stability of our deposit base, as customers may move funds among deposit products or from deposits to other investments, which could increase our funding costs and adversely affect our net interest margin. They could also move their funds out of the Bank into other investment products, which could result in an increase in funding costs to replace these funds. Any substantial, unexpected, prolonged change in market interest rates could have a material adverse effect on our financial condition and results of operations. See also, Part II, Item 7(a) “Interest Rate Sensitivity Analysis”.\n\nWe may incur losses on our securities portfolio due to factors beyond our control, including changes in interest rates.\n\nFactors beyond our control can significantly influence the fair value of securities in our portfolio and can cause potential adverse changes to the fair value of these securities. These factors include, but are not limited to, rating agency actions in respect of the securities, defaults by, or other adverse events affecting the issuer or the underlying securities, and changes in market interest rates and continued instability in the capital markets. Any of these factors, among others, could cause credit impairments and realized and/or unrealized losses in future periods and declines in other comprehensive income, which could have a material effect on our business, financial condition, and results of operations. The process for determining whether impairment of a security is due to credit usually requires complex, subjective judgments about the future financial performance and liquidity of the issuer and any collateral underlying the security to assess the probability of receiving all contractual principal and interest payments on the security. Furthermore, there can be no assurance that the declines in market value will not result in losses realized on these assets and lead to provision for credit loss charges that could have a material adverse effect on our net income and capital levels. For the year ended June 30, 2026, we did not incur any credit impairments on our securities portfolio.\n\nRisks Relating to Liquidity\n\nLiquidity risk could impair our ability to fund operations and jeopardize our financial condition.\n\nLiquidity is essential to our business and our ability to meet the financial obligations of our customers, fund loans and investments, and satisfy deposit withdrawal requests. Our primary sources of liquidity include deposits, repayments and maturities of loans and investment securities, proceeds from the sale or maturity of investment securities, borrowings from the Federal Home Loan Bank and other financial institutions, and other sources of funding. Our deposits represent our primary source of funding, and we compete with banks, credit unions, money market funds and other financial institutions for deposits. Changes in interest rates, customer preferences, market conditions or concerns about the financial condition of financial institutions could cause customers to withdraw or transfer deposits, potentially at a rapid pace. A significant portion of our deposits may also consist of balances that exceed applicable FDIC insurance limits. The loss of significant deposits could reduce our liquidity and increase our reliance on wholesale or other sources of funding, which may be more expensive or less readily available. Our access to these sources of liquidity could be adversely affected by economic conditions, market disruptions, changes in interest rates, regulatory requirements, the financial condition or performance of the Company, or other factors beyond our control.\n\nFactors that could detrimentally impact our access to liquidity sources include a decrease in the level of our business activity as a result of a downturn in the markets in which our loans are concentrated or an adverse regulatory action against us. Our ability to borrow could also be impaired by factors that are not specific to us, such as a disruption in the financial markets or negative views and expectations about the prospects for the financial services industry generally. A significant deterioration in our liquidity position could adversely affect our ability to meet our obligations, fund loans, maintain required liquidity levels or continue to operate our business as planned. While we maintain liquidity management policies and contingency funding arrangements designed to address potential liquidity needs, these measures may not be sufficient to address all circumstances, particularly in the event of rapid or significant deposit outflows or broader market disruption. Any significant reduction in the availability of deposits or other funding sources, or any material increase in our cost of funding, could have a material adverse effect on our business, results of operations and financial condition.\n\n​\n\n​\n\n44\n\n[Table of Contents](#TOC)\n\nRisks Relating to Merger and Acquisition Activities\n\nWe may fail to realize all of the anticipated benefits of our acquisition activities.\n\nThe success of our acquisition activities depends on, among other things, our ability to realize anticipated cost savings and to combine the businesses of the companies in a manner that does not materially disrupt the existing customer relationships of the companies or result in decreased revenues from customers. If we are unable to achieve these objectives, the anticipated benefits of the acquisitions may not be realized fully, if at all, or may take longer to realize than expected.\n\nWe have pursued a strategy of supplementing internal growth by acquiring other financial companies or their assets and liabilities that we believe will help fulfill our strategic objectives and enhance our earnings. There are risks associated with this strategy, including the following:\n\n●We may be exposed to potential asset quality issues or unknown or contingent liabilities of the banks, businesses, assets and liabilities we acquire. If these issues or liabilities exceed our estimates, our results of operations and financial condition may be adversely affected;\n\n●Prices at which acquisitions can be made fluctuate with market conditions. We have experienced times during which acquisitions could not be made in specific markets at prices we considered acceptable and expect that we will experience this condition in the future;\n\n●The acquisition of other entities generally requires integration of systems, procedures and personnel of the acquired entity into us to make the transaction economically successful. This integration process is complicated and time-consuming and can also be disruptive to the customers of the acquired business. If the integration process is not conducted successfully and with minimal effect on the acquired business and its customers, we may not realize the anticipated economic benefits of particular acquisitions within the expected time frame, or at all, and we may lose customers or employees of the acquired business. We may also experience greater than anticipated customer losses even if the integration process is successful;\n\n●To the extent our costs of an acquisition exceed the fair value of the net assets acquired, the acquisition will generate goodwill. We are required to assess our goodwill for impairment at least annually, and any goodwill impairment charge could have a material adverse effect on our results of operations and financial condition;\n\n●To finance an acquisition, we may borrow funds, thereby increasing our leverage and diminishing our liquidity, or raise additional capital, which could dilute the interests of our existing shareholders;\n\n●We expect our net interest income will increase following our acquisitions; however, we also expect our general and administrative expenses to increase; and\n\n●We have completed seven acquisitions since June 2017 which enhanced our rate of growth. We do not necessarily expect to be able to maintain our past rate of growth, and may not be able to grow at all in the future.\n\nRisks Relating to Future Growth\n\nOur growth or future losses may require us to raise additional capital in the future, but that capital may not be available when it is needed or the cost of that capital may be very high.\n\nWe are required by federal and state regulatory authorities to maintain adequate levels of capital to support our operations. While we anticipate that our capital resources will satisfy our capital requirements for the foreseeable future, we may at some point need to raise additional capital to support our operations or continued growth, both internally and through acquisitions. Any capital we obtain may result in the dilution of the interests of existing holders of our common stock, or otherwise adversely affect your investment.\n\n45\n\n[Table of Contents](#TOC)\n\nOur ability to raise additional capital, if needed, will depend on conditions in the capital markets at that time, which are outside our control, and on our financial condition and performance. Accordingly, we cannot make assurances of our ability to raise additional capital if needed, or if the terms will be acceptable to us. If we cannot raise additional capital when needed, our ability to further expand our operations through internal growth and acquisitions could be materially impaired and our financial condition and liquidity could be materially and adversely affected.\n\nRisks Relating to Regulation\n\nLegislative or regulatory changes or actions, or significant litigation, could adversely impact us or the businesses in which we are engaged.\n\nThe financial services industry is extensively regulated. We are subject to extensive state and federal regulation, supervision and legislation that govern almost all aspects of our operations. Laws and regulations may change from time to time and are primarily intended for the protection of consumers, depositors and the deposit insurance funds, and not to benefit our shareholders. The impact of any changes to laws and regulations or other actions by regulatory agencies may negatively impact us or our ability to increase the value of our business. Regulatory authorities have extensive discretion in connection with their supervisory and enforcement activities, including the imposition of restrictions on the operation of an institution, the classification of assets by the institution and the adequacy of an institution’s allowance for credit losses. Additionally, actions by regulatory agencies or significant litigation against us could require us to devote significant time and resources to defending our business and may lead to penalties that materially affect us and our shareholders. See “Government Supervision and Regulation.”\n\nNon-compliance with USA Patriot Act, Bank Secrecy Act, or other laws and regulations could result in fines or sanctions.\n\nThe USA Patriot and Bank Secrecy Acts require financial institutions to develop programs to prevent financial institutions from being used for money laundering and terrorist activities. If such activities are detected, financial institutions are obligated to file suspicious activity reports with the U.S. Treasury’s Office of Financial Crimes Enforcement Network. These rules require financial institutions to establish procedures for identifying and verifying the identity of customers seeking to open new financial accounts. Failure to comply with these regulations could result in fines or sanctions. Several banking institutions have received large fines for non-compliance with these laws and regulations. Although we have developed policies and procedures designed to assist in compliance with these laws and regulations, no assurance can be given that these policies and procedures will be effective in preventing violations of these laws and regulations.\n\nWe operate in a highly regulated environment and may be adversely affected by changes in federal and state laws and regulations, some of which is expected to increase our costs of operations.\n\nWe are currently subject to extensive examination, supervision and comprehensive regulation by the FDIC, the Missouri Division of Finance, and the Federal Reserve. The FDIC, the Missouri Division of Finance, and the Federal Reserve govern the activities in which we may engage, primarily for the protection of depositors and the Deposit Insurance Fund. These regulatory authorities have extensive discretion, including the ability to restrict an institution’s operations, require the institution to reclassify assets, determine the adequacy of the institution’s ACL and determine the level of deposit insurance premiums assessed. Any change in such regulation and oversight, whether in the form of regulatory policy, new regulations or legislation or additional deposit insurance premiums could have a material adverse impact on our operations. Because our business is highly regulated, the laws and applicable regulations are subject to frequent change. See “Government Supervision and Regulation.”\n\nThe Federal Reserve as our primary federal bank regulator and the Missouri Division of Finance regulate the activities in which the Bank may engage primarily for the protection of depositors and not for the protection or benefit of stockholders. In addition, new laws and regulations may increase our costs of regulatory compliance and of doing business and otherwise affect our operations. New laws and regulations may significantly affect the markets in which we do business, the markets for and value of our loans and investments, the fees we can charge and our ongoing operations, costs and profitability. Regulatory changes regarding card interchange fee income do not currently apply to us but could\n\n46\n\n[Table of Contents](#TOC)\n\nchange in the future. Further, legislative proposals limiting our rights as a creditor could result in credit losses or increased expense in pursuing our remedies as a creditor.\n\nThe level of our non-owner occupied commercial real estate portfolio may subject us to additional regulatory scrutiny.\n\nThe federal banking agencies have issued guidance on sound risk management practices for concentrations in commercial real estate lending (see “Government Supervision and Regulation – Guidance on Commercial Real Estate Concentrations”). For the purposes of this guidance, “commercial real estate” includes, among other types, construction and land development loans, multi-family residential loans, and non-owner occupied nonresidential loans, which have been a source of loan growth for the Company. A bank that has experienced rapid growth in commercial real estate lending, has notable exposure to a specific type of commercial real estate loan, or is approaching or exceeding the following supervisory criteria may be identified for further supervisory analysis with respect to real estate concentration risk: total loans for construction land development and other land representing 100% or more of the bank’s tier 1 regulatory capital plus the allowance for credit losses includable in total regulatory capital; or total commercial real estate loans (as defined in the guidance) that exceed 300% of the bank’s tier 1 regulatory capital plus the ACL includable in total regulatory capital and the bank’s commercial real estate portfolio has increased by 50% or more during the prior 36 months.\n\nThe Bank’s concentration in non-owner occupied commercial real estate loans was 287.9% of Tier 1 capital and ACL at June 30, 2026, as compared to 301.1% as of June 30, 2025, with these loans representing 38.8% of total loans at June 30, 2026. The 36-month growth rate at June 30, 2026, inclusive of acquisitions, was 14.9%. The Company’s non-owner occupied commercial real estate loans was 275.8% of Tier 1 capital and ACL at June 30, 2026, as compared to 288.6% as of June 30, 2025.\n\nThe Company’s non-owner occupied commercial real estate includes other nonfarm nonresidential real estate (149.6% as a percentage of Tier 1 capital and ACL), multifamily properties (76.1% as a percentage of Tier 1 capital and ACL), and construction and land development (50.2% as a percentage of Tier 1 capital and ACL). The majority of these loans are concentrated within the company’s primary operational footprint. The other nonfarm nonresidential real estate portfolio includes a variety of collateral types, with hospitality (hotels/restaurants), care facilities, strip centers, retail stand-alone, and storage units are the most common. The hospitality and retail stand-alone segments include primarily franchised businesses; care facilities consisting mainly of skilled nursing and assisted living centers; and strip centers, which can be defined as non-mall shopping centers with a variety of tenants.\n\nCommercial real estate lending represents a significant portion of our loan portfolio. Although our commercial real estate concentration is currently below the supervisory screening criteria under the interagency guidance, we continue to maintain enhanced risk management, monitoring and reporting processes appropriate for the size and composition of our commercial real estate portfolio. These processes include monitoring our commercial real estate concentrations by property type and other relevant risk characteristics and assessing the potential impact of changes in economic and commercial real estate market conditions.\n\nOur commercial real estate concentration could increase in the future and may approach or exceed the supervisory screening criteria. If this occurs, we may be subject to additional costs. In addition, we may determine to slow the growth of our commercial real estate portfolio or particular concentrations within that portfolio. Any decision to limit or slow commercial real estate lending could adversely affect our asset growth, net interest margin, earnings or other strategic objectives.\n\nClimate change may materially affect our business and the value of collateral securing our loans.\n\nClimate change and severe weather events may adversely affect our customers, the communities in which we operate and the value and condition of real estate and other assets securing our loans. The frequency, severity and geographic distribution of severe weather events, including storms, flooding, droughts, wildfires and other natural disasters, may affect property values, business operations, insurance availability and costs, and the financial condition of our borrowers.\n\n47\n\n[Table of Contents](#TOC)\n\nThe physical effects of severe weather events could damage or reduce the value of real estate and other collateral securing our loans. In addition, borrowers may experience business interruptions, property damage, increased operating or insurance costs, loss of income or other financial difficulties as a result of severe weather events. If insurance coverage is unavailable, inadequate or insufficient to cover losses to collateral or other property, the resulting deterioration in the value of collateral or the borrower's financial condition could increase our credit losses.\n\nClimate-related risks may also affect regional and local economic conditions and the financial condition of businesses and consumers in our markets. In addition, changes in laws, regulations, market practices, technology or consumer preferences associated with efforts to address climate change could affect certain of our borrowers or industries and could indirectly affect our credit exposure to those borrowers. The extent and timing of these effects are difficult to predict and may vary significantly across geographic regions and industries.\n\nAlthough the federal banking agencies have withdrawn their interagency Principles for Climate-Related Financial Risk Management for Large Financial Institutions, financial institutions remain subject to existing safety-and-soundness requirements to identify, monitor and manage material risks appropriate to the size, complexity and risk of their activities.\n\nThe effects of climate change, severe weather events and related economic or financial impacts could increase our credit, operational or other risks and could have a material adverse effect on our business, results of operations and financial condition.\n\nRisks Relating to Technology and Cyber Security and Other Operational Matters\n\nThe Company continually encounters technological change.\n\nThe financial services industry is continually undergoing rapid technological change with frequent introductions of new technology-driven products and services, including the entrance of financial technology companies offering new financial service products. The Company regularly upgrades or replaces core technological systems. The effective use of technology increases efficiency and enables financial institutions to better serve customers and reduce costs. The Company’s future success depends, in part, upon its ability to address the needs of its customers by using technology to provide products and services that will satisfy customer demands, as well as to create additional efficiencies in the Company’s operations. Many of the Company’s competitors have substantially greater resources to invest in technological improvements. The Company may encounter significant problems or may not be able to effectively implement new technology-driven products, including the core deposit system, and services, or be successful in marketing the new products and services to its customers. These problems might include significant time delays, cost overruns, loss of key people, and technological system failures. Failure to successfully keep pace with technological change affecting the financial services industry or failure to successfully complete the replacement of the core deposit system, or another core technological system, could have a material adverse effect on the Company’s business, financial condition and results of operations.\n\nWe are subject to security and operational risks relating to our use of technology that could damage our reputation and business.\n\nSecurity breaches in our mobile and consumer and commercial internet banking activities and wealth management or mobile access could expose us to possible liability and damage our reputation. Any compromise of our security also could deter customers from using our internet banking services that involve the transmission of confidential information. We rely on internet security systems to provide the security and authentication necessary to effect secure transmission of data. These precautions may not protect our systems from compromises or breaches of our security measures, which could damage our reputation and business.\n\nWe face significant operational risks because the financial services business involves a high volume of transactions and increased reliance on technology, including risk of loss related to cyber-security breaches.\n\nWe operate in diverse markets and rely on the ability of our employees and systems to process a high number of transactions and to collect, process, transmit and store significant amounts of confidential information regarding our\n\n48\n\n[Table of Contents](#TOC)\n\ncustomers, employees and others and concerning our own business, operations, plans and strategies. Operational risk is the risk of loss resulting from our operations, including but not limited to, the risk of fraud by employees or persons outside our company, the execution of unauthorized transactions by employees, errors relating to transaction processing and technology, systems failures or interruptions, breaches of our internal control systems and compliance requirements, and business continuation and disaster recovery. Insurance coverage may not be available for such losses, or where available, such losses may exceed insurance limits. This risk of loss also includes the potential legal actions that could arise as a result of operational deficiencies or as a result of non-compliance with applicable regulatory standards or customer attrition due to potential negative publicity. In addition, we outsource some of our data processing to certain third-party providers. If these third-party providers encounter difficulties, including as a result of cyber-attacks or information security breaches, or if we have difficulty communicating with them, our ability to adequately process and account for transactions could be affected, and our business operations could be adversely affected.\n\nThe financial services industry has noted recent increases in electronic fraudulent activity, attempted security breaches, and cyber-attacks, including attempts to initiate fraudulent activity through consumer, commercial, and public unit accounts. We are regularly the target of attempted cyber and other security threats and must continuously monitor and develop our information technology networks and infrastructure to prevent, detect, address and mitigate the risk of unauthorized access, misuse, computer viruses and other events that could have a security impact. Insider or employee cyber and security threats are increasingly a concern for companies, including ours. We are not aware that we have experienced any material misappropriation, loss or other unauthorized disclosure of confidential or personally identifiable information as a result of a cybersecurity breach or other act, however, some of our clients may have been affected by these breaches, which could increase their risks of identity theft, credit card fraud and other fraudulent activity that could involve their accounts with us.\n\nIn the event of a breakdown in our internal control systems, improper operation of systems or improper employee actions, or a breach of our security systems, including if confidential or proprietary information were to be mishandled, misused or lost, we could suffer financial loss, face regulatory action, civil litigation and/or suffer damage to our reputation.\n\nOur information technology systems may be subject to failure, interruption, or security breaches.\n\nOur business depends heavily on information technology systems, including systems used to process and maintain customer information, deposits, loans, securities, payments and other financial transactions. We also rely on third-party service providers for certain technology, data processing, communications, cloud-based and other services. A failure, interruption, cybersecurity incident or other disruption affecting our systems or those of our third-party service providers could adversely affect our ability to conduct business and serve our customers.\n\nFinancial institutions and their service providers continue to face increasingly sophisticated cybersecurity threats, including ransomware, malware, phishing, social engineering, credential theft, denial-of-service attacks, business email compromise, fraud and other attempts to obtain unauthorized access to systems or confidential information. The techniques used to obtain unauthorized access or disrupt systems are continually evolving and may be difficult to detect or prevent. The increasing use of mobile and online banking, cloud computing, remote access, artificial intelligence and other technologies may increase the number and complexity of potential vulnerabilities and attack vectors.\n\nA cybersecurity incident or other technology disruption could result in the theft, destruction, loss, alteration or unauthorized disclosure of confidential, proprietary or customer information; unauthorized transactions or fraud; disruption of our operations; damage to our systems or those of our service providers; or the inability of our customers to access banking services. We may also experience business interruption, reputational damage, loss of customers, increased operating costs or other adverse consequences. Although we have policies, procedures and controls designed to prevent, detect and respond to cybersecurity incidents and other technology disruptions, we cannot guarantee that these measures will prevent or adequately mitigate every incident.\n\nOur reliance on third-party service providers also exposes us to risks arising from the cybersecurity practices, systems and controls of those providers. A cybersecurity incident or operational failure at a significant service provider could adversely affect us even if our own systems and controls remain secure. In addition, a disruption affecting multiple\n\n49\n\n[Table of Contents](#TOC)\n\nfinancial institutions or critical third-party providers could limit the availability of alternative services and make recovery more difficult.\n\nCybersecurity incidents and other technology-related events may also subject us to regulatory scrutiny, increased compliance costs, contractual liabilities, litigation, claims for damages, remediation expenses and other financial losses. We may be required to notify affected customers, regulators or other parties following certain incidents, and applicable laws and regulations governing cybersecurity, privacy and data protection may impose additional obligations and costs. The costs associated with investigating, responding to and remediating a significant cybersecurity incident could be substantial.\n\nAs cybersecurity threats continue to evolve, we may be required to devote additional financial and operational resources to protecting our systems, enhancing our controls, replacing or upgrading technology, and responding to incidents. Despite these efforts, there can be no assurance that our information technology systems, or those of our third-party service providers, will not experience failures, interruptions or cybersecurity incidents. Any such event could have a material adverse effect on our business, reputation, financial condition and results of operations.\n\nThe Company’s operations rely on certain external vendors.\n\nThe Company relies on third-party vendors to provide products and services necessary to maintain day-to-day operations. For example, the Company outsources a portion of its information systems, communication, data management, and transaction processing to third parties. Accordingly, the Company is exposed to the risk that these vendors might not perform in accordance with the contracted arrangements or service level agreements for a number of reasons, including, but not limited to, changes in the vendor’s organizational structure, financial condition, support for existing products and services, or strategic focus. Such failure to perform could be disruptive to the Company’s operations, which could have a materially adverse impact on its business, results of operations and financial condition. These third parties are also sources of risk associated with operational errors, system interruptions or breaches and unauthorized disclosure of confidential information. If the vendors encounter any of these issues, the Company could be exposed to disruption of service, damage to reputation and litigation. Because the Company is an issuer of debit cards, it is periodically exposed to losses related to security breaches which occur at retailers that are unaffiliated with the Company (e.g., customer card data being compromised at retail stores). These losses include, but are not limited to, costs and expenses for card reissuance as well as losses resulting from fraudulent card transactions.\n\nThe occurrence of any system failures, interruption, or breach of security could damage our reputation and result in a loss of customers and business, subject us to additional regulatory scrutiny, or could expose us to litigation and possible financial liability. Any of these events could have a material adverse effect on our financial condition and results of operations.\n\nThe soundness of other financial institutions could adversely affect us.\n\nOur ability to engage in routine funding transactions could be adversely affected by the actions and commercial soundness of other financial institutions. Financial services institutions are interrelated as a result of trading, clearing, counterparty or other relationships. We have exposure to many different industries and counterparties, and we routinely execute transactions with counterparties in the financial industry. As a result, defaults by, or even rumors or questions about, one or more financial services institutions, or the financial services industry generally, have led to market-wide liquidity problems and could lead to losses or defaults by us or by other institutions. Many of these transactions expose us to credit risk in the event of default of our counterparty or client. In addition, our credit risk may be exacerbated when the collateral we hold cannot be realized upon or is liquidated at prices insufficient to recover the full amount of the loan. We cannot assure you that any such losses would not materially and adversely affect our business, financial condition or results of operations.\n\nSignificant legal actions could subject us to substantial liabilities.\n\nWe are from time to time subject to claims related to our operations. These claims and legal actions, including supervisory actions by our regulators, could involve large monetary claims and significant defense costs. As a result, we\n\n50\n\n[Table of Contents](#TOC)\n\nmay be exposed to substantial liabilities, which could adversely affect our results of operations and financial condition. See also, Item 3. “Legal Proceedings”.\n\nRisks Relating to Earnings and Capital from Potential Impairment of Intangible or Deferred Tax Assets\n\nImpairment of intangible assets or deferred tax assets could require charges to earnings, which could negatively impact our results of operations.\n\nDeferred tax assets are only recognized to the extent it is more likely than not they will be realized. Should our management determine it is not more likely than not that the deferred tax assets will be realized, a valuation allowance with a charge to earnings would be reflected in the period. At June 30, 2026, our net deferred tax asset was $10.3 million, none of which was disallowed for regulatory capital purposes. Based on the levels of taxable income in prior years and our expectation of profitability in the current year and future years, management has determined that no valuation allowance was required at June 30, 2026. If we are required in the future to take a valuation allowance with respect to our deferred tax asset, our financial condition, results of operations and regulatory capital levels would be negatively affected.\n\nRisks Relating to Our Common Stock\n\nThe price of our common stock may fluctuate significantly, and this may make it difficult for you to resell our common stock when you want or at prices you find attractive.\n\nWe cannot predict how our common stock will trade in the future. The market value of our common stock will likely continue to fluctuate in response to a number of factors including the following, most of which are beyond our control, as well as the other factors described in this “Risk Factors” section:\n\n●actual or anticipated quarterly fluctuations in our operating and financial results;\n\n●developments related to investigations, proceedings or litigation;\n\n●changes in financial estimates and recommendations by financial analysts;\n\n●dispositions, acquisitions and financings;\n\n●actions of our current shareholders, including sales of common stock by existing shareholders and our directors and executive officers;\n\n●fluctuations in the stock prices and operating results of our competitors;\n\n●regulatory developments; and\n\n●other developments in the financial services industry.\n\nThe market value of our common stock may also be affected by conditions affecting the financial markets in general, including price and trading fluctuations. These conditions may result in (i) volatility in the level of, and fluctuations in, the market prices of stocks generally and, in turn, our common stock and (ii) sales of substantial amounts of our common stock in the market, in each case that could be unrelated or disproportionate to changes in our operating performance. These broad market fluctuations may adversely affect the market value of our common stock.\n\nRegulatory and contractual restrictions may limit or prevent us from paying dividends on and repurchasing our common stock.\n\nSouthern Missouri Bancorp, Inc., is an entity separate and distinct from its subsidiary bank and derives substantially all of its revenue in the form of dividends from the Bank. Accordingly, the Company is and will be dependent upon dividends from its subsidiary bank to pay the principal of and interest on its indebtedness, to satisfy its other cash needs and to pay dividends on its common and preferred stock. The Bank’s ability to pay dividends is subject to its ability to earn net income and to meet certain regulatory requirements. In the event the subsidiary bank is unable to\n\n51\n\n[Table of Contents](#TOC)\n\npay dividends to the Company, the Company may not be able to pay dividends on its common or preferred stock. Also, the Company’s right to participate in a distribution of assets upon the subsidiary’s liquidation or reorganization is subject to the prior claims of the subsidiary’s creditors. In addition, holders of our common stock are entitled to receive dividends only when, as and if declared by our Board of Directors. Although we have historically paid cash dividends on our common stock, we are not required to do so and our Board of Directors could reduce, suspend or eliminate our common stock cash dividend in the future.\n\nIf we defer interest payments on our outstanding junior subordinated debt securities or if certain defaults relating to those debt securities occur, we will be prohibited from declaring or paying dividends or distributions on, and from making liquidation payments with respect to, our common stock.\n\nAs of June 30, 2026, we had outstanding $16.8 million aggregate principal amount of junior subordinated debt securities issued in connection with the sale of trust preferred securities by subsidiaries of ours that are statutory business trusts. As of that date, those debt securities were carried at a book value of $15.8 million.\n\nWe guarantee the trust preferred securities described above. The indentures under which the junior subordinated debt securities were issued, together with the guarantee, prohibit us, subject to limited exceptions, from declaring or paying any dividends or distributions on, or redeeming, repurchasing, acquiring or making any liquidation payments with respect to, any of our capital stock at any time when (i) there shall have occurred and be continuing an event of default under the indenture; (ii) we are in default with respect to payment of any obligations under the guarantee; or (iii) we have elected to defer payment of interest on the junior subordinated debt securities. In that regard, we are entitled, at our option but subject to certain conditions, to defer payments of interest on the junior subordinated debt securities from time to time for up to five years.\n\nEvents of default under the indentures generally consist of our failure to pay interest on the junior subordinated debt securities under certain circumstances, our failure to pay any principal of or premium on such junior subordinated debt securities when due, our failure to comply with certain covenants under the indenture, and certain events of bankruptcy, insolvency or liquidation relating to us.\n\nAs a result of these provisions, if we were to elect to defer payments of interest on the junior subordinated debt securities, or if any of the other events described in clause (i) or (ii) of the second paragraph of this risk factor were to occur, we would be prohibited from declaring or paying any dividends on our common stock, from redeeming, repurchasing or otherwise acquiring any of our common stock, and from making any payments to holders of our common stock in the event of our liquidation, which would likely have a material adverse effect on the market value of our common stock. Moreover, without notice to or consent from the holders of our common stock, we may issue additional series of junior subordinated debt securities in the future with terms similar to those of our existing junior subordinated debt securities or enter into other financing agreements that limit our ability to purchase or to pay dividends or distributions on our capital stock, including our common stock.\n\nAnti-takeover provisions could negatively impact our shareholders.\n\nProvisions of our articles of incorporation and bylaws, Missouri law and various other factors may make it more difficult for companies or persons to acquire control of us without the consent of our board of directors. These provisions include limitations on voting rights of beneficial owners of more than 10% of our common stock, the election of directors to staggered terms of three years and not permitting cumulative voting in the election of directors. Our bylaws also contain provisions regarding the timing and content of shareholder proposals and nominations for service on the Board of Directors.\n\n​"}