<PAGE> 1
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
UNITED STATES
SECURITIES & EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------
FORM 10-Q
/X/ Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Quarterly Period ended March 31, 1997, or
/ / Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from _________ to _________
--------------------------
Commission File Number 0-18082
--------------------------
GREAT SOUTHERN BANCORP, INC.
(Exact name of registrant as specified in its charter)
DELAWARE
(State or other jurisdiction of incorporation or organization)
43-1524856
(IRS Employer Identification Number)
1451 E. BATTLEFIELD
SPRINGFIELD, MISSOURI
(Address of principal executive offices)
65804
(Zip Code)
(417) 887-4400
(Registrant's telephone number, including area code)
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 / /
The number of shares outstanding of each of the registrant's classes
of common stock: 8,130,372 shares of common stock, par value $.01,
outstanding at April 30, 1997
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
<PAGE> 2
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
GREAT SOUTHERN BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Unaudited)
<TABLE>
<CAPTION>
March 31, June 30,
1997 1996
------------ ------------
<S> <C> <C>
ASSETS
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,974,120 $ 6,661,290
Interest-bearing deposits in other financial institutions. . . . . . . . . 5,272,757 22,953,737
----------- -----------
Cash and cash equivalents. . . . . . . . . . . . . . . . . . . . . . . . . 12,066,877 29,615,027
Available for sale securities. . . . . . . . . . . . . . . . . . . . . . . 6,454,507 4,655,816
Held to maturity securities (fair value $48,587,000 - March 1997;
$49,291,000 - June 1996) . . . . . . . . . . . . . . . . . . . . . . . . 48,793,797 49,182,323
Loans receivable, net. . . . . . . . . . . . . . . . . . . . . . . . . . . 579,070,007 546,759,467
Foreclosed assets held for sale, net . . . . . . . . . . . . . . . . . . . 4,603,019 9,861,556
Premises and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . 6,808,846 6,686,954
Accrued interest receivable
Loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,222,678 4,289,192
Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 810,079 1,067,230
Investment in FHLBank Stock. . . . . . . . . . . . . . . . . . . . . . . . 10,792,600 10,022,800
Prepaid expenses and other assets. . . . . . . . . . . . . . . . . . . . . 2,653,258 1,774,439
Excess of cost over fair value of net assets acquired. . . . . . . . . . . -- 1,101,961
Deferred income taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . 2,877,054 3,088,540
------------ ------------
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $679,152,722 $668,105,305
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $462,893,905 $397,054,516
Federal Home Loan Bank advances. . . . . . . . . . . . . . . . . . . . . . 133,733,398 180,797,043
Short-term borrowings. . . . . . . . . . . . . . . . . . . . . . . . . . . 15,989,253 16,467,825
Advances from borrowers for taxes and insurance. . . . . . . . . . . . . . 1,735,365 2,659,427
Accounts payable and accrued expenses. . . . . . . . . . . . . . . . . . . 2,144,248 2,431,507
Income taxes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,757,615 887,418
------------ ------------
Total Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . 618,253,784 600,297,736
------------ ------------
Capital stock
Serial preferred stock, $.01 par value; authorized 1,000,000 shares
Common stock, $.01 par value; authorized 10,000,000 shares; issued
12,325,002 - March 1997; issued 6,162,501 shares - June 1996. . . . 123,250 61,625
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . 16,972,327 16,834,507
Retained earnings (substantially restricted) . . . . . . . . . . . . . . . 71,792,926 67,917,888
Unrealized appreciation on available-for-sale securities, net of
income taxes of $572,946 - March 1997 and $61,460 - June 1996 . . . . 896,147 96,129
Treasury stock, at cost; 4,045,027 shares - March 1997;
3,512,906 shares - June 1996 . . . . . . . . . . . . . . . . . . . . . . (28,885,712) (17,102,580)
------------ ------------
Total Stockholders' Equity. . . . . . . . . . . . . . . . . . . . . . . 60,898,938 67,807,569
------------ ------------
Total Liabilities and Stockholders' Equity . . . . . . . . . . . . . $679,152,722 $668,105,305
============ ============
<FN>
See Notes to Consolidated Financial Statements
</TABLE>
<PAGE> 3
GREAT SOUTHERN BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
MARCH 31, MARCH 31,
1997 1996 1997 1996
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
INTEREST INCOME
Loans $12,949,649 $12,487,950 $38,265,046 $37,110,162
Investment Securities 931,273 963,073 2,926,323 2,857,825
Other 60,549 42,186 193,222 145,390
---------- ---------- ---------- ----------
TOTAL INTEREST INCOME 13,941,471 13,493,209 41,384,591 40,113,377
---------- ---------- ---------- ----------
INTEREST EXPENSE
Deposits 4,820,305 4,271,225 13,062,173 12,804,282
FHLBank advances 2,317,515 2,735,961 7,871,619 7,856,859
Short-term borrowings 130,766 124,421 451,522 421,266
---------- ---------- ---------- ----------
TOTAL INTEREST EXPENSE 7,268,586 7,131,607 21,385,314 21,082,407
---------- ---------- ---------- ----------
NET INTEREST INCOME 6,672,885 6,361,602 19,999,277 19,030,970
PROVISION FOR LOAN LOSSES 427,615 350,016 1,287,100 997,421
---------- ----------- ---------- ----------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 6,245,270 6,011,586 18,712,177 18,033,549
---------- ---------- ---------- ----------
NONINTEREST INCOME
Commissions 1,103,300 1,044,825 3,684,975 3,252,086
Service charge fees 673,886 572,170 2,004,445 1,766,944
Net realized gains on sales of loans and
available-for-sale securities 181,370 167,339 578,487 996,029
Income (expense) on foreclosed assets (23,517) 972,129 292,919 819,649
Other income 372,473 454,285 1,037,176 1,130,148
---------- ---------- ---------- ----------
TOTAL NONINTEREST INCOME 2,307,512 3,210,748 7,598,002 7,964,856
---------- ---------- ---------- ----------
NONINTEREST EXPENSE
Salaries and employee benefits 2,331,679 2,137,559 6,856,723 6,197,216
Net occupancy expense 589,509 572,074 1,696,091 1,672,304
Postage 164,971 165,966 470,232 466,969
Insurance 119,290 317,057 3,262,927 950,859
Amortization of goodwill 0 48,211 1,106,961 144,634
Advertising 143,843 111,417 416,578 345,711
Office supplies and printing 151,344 115,822 388,000 325,692
Other operating expenses 526,483 816,014 1,599,228 2,023,690
---------- ---------- ---------- ----------
TOTAL NONINTEREST EXPENSE 4,027,119 4,284,120 15,796,740 12,127,075
---------- ---------- ---------- ----------
INCOME BEFORE INCOME TAXES 4,525,663 4,938,214 10,513,439 13,871,300
PROVISION FOR INCOME TAXES 1,616,413 1,717,800 4,203,157 5,288,300
---------- ---------- ---------- ----------
NET INCOME $ 2,909,250 $ 3,220,414 $ 6,310,282 $ 8,583,030
========== ========== ========== ==========
EARNINGS PER COMMON SHARE $.35 $.35 $.74 $.94
=== === === ===
<FN>
See Notes to Consolidated Financial Statements
</TABLE>
<PAGE> 4
GREAT SOUTHERN BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
NINE MONTHS ENDED MARCH 31,
1997 1996
-------------- ---------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 6,310,282 $ 8,583,030
Items not requiring (providing) cash:
Depreciation 682,166 730,554
Amortization 1,101,961 63,585
Provision for loan losses 1,287,100 997,421
Provision for losses on foreclosed assets 100,000 175,000
Net realized gains on sale of loans (373,062) (388,474)
FHLBank stock dividend -- (176,400)
(Gain)/loss on sale of premises and equipment (2,382) 2,171
Gain on sale of foreclosed assets (511,420) (1,273,949)
Amortization of deferred income,
premiums and discounts (710,439) (504,190)
Net realized gains on sale of available-for-sale securities (205,426) (607,154)
Deferred income taxes (300,000) 704,000
Changes in:
Accrued interest receivable 323,665 (806,379)
Prepaid expenses and other assets (878,819) 272,579
Accounts payable and accrued expenses (287,259) 532,295
Income taxes payable 1,046,697 (703,002)
----------- -----------
Net cash provided by operating activities 7,583,064 7,601,087
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Net increase in loans (27,419,910) (23,848,503)
Purchase of premises and equipment (807,467) (775,283)
Proceeds from sale of premises and equipment 5,791 2,875
Proceeds from sale of foreclosed assets 945,514 1,924,721
Capitalized costs on foreclosed assets (194,660) (192,278)
Proceeds from sale of available-for-sale securities 1,377,623 2,219,926
Proceeds from maturing held-to-maturity securities 31,398,775 3,524,684
Purchase of held-to-maturity securities (31,185,375) (8,865,991)
Purchase of available-for-sale securities (1,659,384) (2,702,316)
Purchase of Federal Home Loan Bank Stock (769,800) (861,100)
----------- -----------
Net cash used in investing activities (28,308,893) (29,573,265)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in certificates of deposit 72,506,020 5,827,656
Net increase (decrease) in checking and savings (6,666,632) 657,448
Proceeds from FHLBank advances 363,210,755 337,104,678
Repayments of FHLBank advances (410,274,400) (311,608,290)
Net increase (decrease) in short-term borrowings (478,571) 2,356,726
Advances from borrowers for taxes and insurance (924,062) (1,274,139)
Purchase of treasury stock (12,234,178) (2,439,524)
Dividends paid (2,435,244) (2,356,559)
Stock options exercised 473,991 203,222
----------- -----------
Net cash provided by financing activities 3,177,679 28,471,218
----------- -----------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (17,548,150) 6,499,040
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 29,615,027 17,459,951
----------- -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 12,066,877 $ 23,958,991
=========== ===========
<FN>
See Notes to Consolidated Financial Statements
</TABLE>
<PAGE> 5
GREAT SOUTHERN BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: BASIS OF PRESENTATION
The accompanying unaudited interim consolidated financial
statements of Great Southern Bancorp, Inc. (the "Company") have been
prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form
10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not
include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. The
financial statements presented herein reflect all adjustments, which
are in the opinion of management, necessary for a fair statement of
the results for the periods presented. Operating results for the
three and nine months ended March 31, 1997 and 1996 are not
necessarily indicative of the results that may be expected for the
full year. For further information, refer to the consolidated
financial statements and footnotes thereto included in the Company's
annual report on Form 10-K for the year ended June 30, 1996. When
necessary, reclassifications have been made to prior period balances
to conform to current period presentation. These reclassifications
had no effect on net income.
The Company completed a 2-for-1 stock split on October 21, 1996.
Prior period information included in this form 10-Q reflects this
stock split, when necessary.
ITEM II. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATION
The discussion set forth below, as well as other portions of this
Form 10-Q, may contain forward-looking comments. Such comments are
based upon the information currently available to management of the
Company and management's perception thereof as of the date of this
Form 10-Q. Actual results of the Company's operations could
materially differ from those forward-looking comments. The
differences could be caused by a number of factors or combination of
factors including, but not limited to, changes in the availability
and/or cost of capital; changes in demand for banking services;
changes in the portfolio composition; change in the interest rate
yield on the Company's investments; changes in management strategy;
increased competition from both bank and non-bank companies; changes
in the economic, political or regulatory environments in the United
States; litigation involving the Company and/or its subsidiaries; and
changes in the availability of qualified labor. Readers should take
these factors into account in evaluating any such forward-looking
comments.
<PAGE> 6
General
Parts of management's discussion and analysis in the annual report
on Form 10-K are not included below. The following should be read in
conjunction with management's discussion and analysis in the Company's
June 30, 1996 Form 10-K.
The consolidated net income of the Company and more specifically,
the net income of its primary subsidiary, Great Southern Bank, FSB
(the "Bank"), is primarily dependent upon the difference or spread
between the average yield earned on loans and investments and the
average rate paid on deposits and borrowings, as well as the relative
amounts of such assets and liabilities. The interest rate spread is
affected by regulatory, economic and competitive factors that
influence interest rates, loan demand and deposit flows. The Bank,
like other financial institutions, is subject to interest rate risk to
the degree that its interest-bearing liabilities mature or reprice at
different times, or on a different basis than its interest-earning
assets. The Company's consolidated net income is also affected by,
among other things, gains on sales of loans and available-for-sale
investments, provisions for loan losses, service charge fees and
commissions, operating expenses and income taxes.
Management of the Company has developed and implemented an
asset/liability management strategy to match the repricing and/or
maturity of its interest-earning assets and its interest-bearing
liabilities and to achieve improved and sustained operating income
without adversely affecting asset quality. In implementing this
strategy, the Company has sought, subject to market conditions, to
increase its origination of adjustable-rate loans secured by one- to
four-family residential real estate in order to increase its
investment in loans that are interest rate sensitive. The Company has
also sold substantially all of the fixed-rate, one- to four-family
residential loans originated since fiscal 1986, with servicing
retained through fiscal 1995 and primarily servicing released
beginning in fiscal 1996. Beginning in fiscal 1992, the Company's
lending returned to origination of adjustable-rate commercial real
estate and commercial business loans. By doing so, the Company is
attempting to increase significantly its loan fees, increase its
investment in loans that are interest rate sensitive and improve the
yield on its loan portfolio. The Company intends to continue to
prudently evaluate the origination of commercial real estate loans
(both to purchase existing properties and construct new properties) in
its total loan portfolio subject to commercial real estate and other
market conditions and to applicable regulatory restrictions and may
increase the percent of the commercial real estate loans to the
overall portfolio.
<PAGE> 7
EFFECT OF FEDERAL LAWS AND REGULATIONS
Federal legislation and regulation significantly affect the banking
operations of the Company and the Bank, and have increased competition
among savings institutions, commercial banks, mortgage banking
enterprises and other financial institutions. In particular, the
capital requirements and operations of regulated depository
institutions such as the Company and the Bank have been and will be
subject to changes in applicable statutes and regulations from time to
time, which changes could, under certain circumstances, adversely
affect the Company or the Bank.
On September 30, 1996, the President of the United States signed
into law, legislation that impacted two major areas of the Bank. The
first major area was a one-time assessment of SAIF-insured
institutions of 65.7 basis points of March 31, 1995 SAIF-assessable
deposits. The Bank was assessed approximately $2.5 million ($1.6
million after income taxes) which was paid at the end of November
1996. The payment was expensed in the September 30, 1996 quarter and
had a significant impact on the Bank's earnings as of the time the
payment was accrued.
Along with this one-time SAIF assessment, the semi-annual SAIF
assessment was reduced, beginning January 1, 1997, from an annualized
23 basis points on SAIF-assessable deposits, to approximately 6.48
basis points annualized on SAIF-assessable deposits. This reduced the
monthly expense of the Bank, beginning January 1, 1997, by
approximately $55,000 ($35,000 after tax). As a result of this lower
assessment rate, the Bank significantly increased (approximately $80
million) the level of brokered deposits used to fund asset growth
beginning in the March 31, 1997 quarter. The rates paid on these
deposits, when compared to alternative sources and allowing for
deposit insurance costs, is comparable to FHLBank advances but do not
require the asset pledging the FHLBank requires.
The second major area of change is the repeal of the bad debt
reserve method of accounting for bad debts by large thrifts for
taxable years beginning after 1995 (year ended June 30, 1997 for the
Bank). The legislation requires applicable excess reserves
accumulated after 1987 (year ended June 30, 1988 for the Bank) be
recaptured and restored to income over a six year period with the
first year beginning after 1995 (year ended June 30, 1997 for the
Bank), and no longer creates recapture of the applicable excess
reserves accumulated prior to 1988 for thrifts at the time they
convert to bank charters. The post 1987 recapture may be delayed for
a one- or two-year period if certain residential loan origination
requirements are met. The amount of post 1987 recapture for the Bank
is estimated at $5 million which would create income taxes of
approximately $2 million, or $333,000 per year for each of the six
years. The $2 million of tax has been accrued and expensed by the
Bank in previous periods and accordingly, will not be reflected as a
reduction in earnings or capital when paid.
<PAGE> 8
Beginning with the current fiscal year ending June 30, 1997, the
Bank will be required to follow the specific charge-off method which
only allows a bad debt deduction equal to actual charge-offs, net of
recoveries, experienced during the fiscal year of the deduction. In a
year where recoveries exceed charge-offs, the Bank would be required
to include the net recoveries in taxable income.
RECENT CHANGES IN ACCOUNTING PRINCIPLES
In March 1995, the FASB issued Statement of Financial Accounting
Standards No. 121. "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to be Disposed of" ("SFAS 121"). This
statement applies to assets to be held and used as well as assets to
be disposed of. SFAS 121 requires an entity to evaluate long-lived
assets, certain identifiable intangibles, and related goodwill for
impairment whenever events or changes in circumstances indicate that
the carrying amount of an asset may not be recoverable. The Company
adopted SFAS 121 during the current fiscal year ending June 30, 1997.
The adoption of SFAS 121 has not had a material effect on the
financial condition or net income of the Company.
In May 1995, the FASB issued Statement of Financial Accounting
Standards No. 122, "Accounting for Mortgage Servicing Rights" ("SFAS
122"). SFAS 122 requires that mortgage banking enterprises recognize
as separate assets, rights to service mortgage loans for others,
however those servicing rights are acquired. The Company adopted SFAS
122 during the current fiscal year ending June 30, 1997. The adoption
of SFAS 122 has not had a material effect on the financial condition
or net income of the Company.
In October 1995, the FASB issued Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS
123"). SFAS 123 establishes a fair value based method of accounting
for stock-based compensation plans. It encourages entities to adopt
that method in place of the provisions of APB Opinion No. 25,
"Accounting for Stock Issued to Employees", for all arrangements under
which employees receive shares of stock or other equity instruments of
the employer or the employer incurs liabilities to employees in
amounts based on the price of its stock. This statement applies to
financial statements for fiscal 1997. Management is continuing to
account for stock-based compensation in accordance with the provisions
of APB No. 25. Therefore, SFAS 123 has not had a significant impact
on the Company's consolidated financial statements.
<PAGE> 9
In June 1996, the FASB issued Statement of Financial Accounting
Standards No. 125 "Accounting for Transfers and Servicing of Financial
Assets and Extinguishment of Liabilities" ("SFAS 125"). SFAS 125
extends the rules in SFAS 122 from servicing of mortgage loans to all
loan servicing. The Company adopted SFAS 125 during the current
fiscal year ending June 30, 1997. The adoption of SFAS 125 has not
had a material effect on the financial condition or net income of the
Company.
ASSET AND LIABILITY MANAGEMENT
During the nine months ended March 31, 1997, the Company
experienced a small increase of $11.1 million in its total assets.
There was a change in the various asset categories with the main areas
of change being an increase in net loans of $32.3 million, offset by a
decrease in cash and interest-bearing deposits in other financial
institutions of $17.5 million and a decrease in foreclosed assets of
$5.3 million.
The increase in net loans was primarily from commercial real estate
loans of $16 million and other residential loans of $11.2 million
including one loan originated for the sale of a large foreclosed
asset. The decrease in interest-bearing deposits in other financial
institutions primarily resulted from the reversal of the higher than
normal balances at correspondent banks due to the timing of
transferring funds with June 30, 1996 falling on the weekend. The
decrease in foreclosed assets is primarily from the sale of one large
property discussed in the non-performing asset section below.
Total liabilities increased $18 million, primarily from an increase
in deposits of $66 million offset by a decrease in FHLBank advances of
$47 million. The increase in deposits resulted from the increase in
brokered deposits (approximately $80 million) due to the SAIF
insurance assessment decrease discussed above and the paydown of
primarily short-term FHLBank advances with those additional funds not
used to fund net loan originations or for other funding needs.
Stockholders' equity decreased $6.9 million primarily as a result
of net treasury stock purchases of $11.8 million and dividend
declarations and payments of $2.4 million, offset by net income of
$6.3 million and unrealized appreciation on available-for-sale
securities of $800,000. The Company repurchased 767,547 shares of
common stock at an average price of $15.94 per share and reissued
235,426 shares of treasury stock at an average price of $1.92 per
share for stock options exercised during the nine months ended March
31, 1997. During the month of April 1997, the Company purchased
150,400 shares of treasury stock at an average price of $17.40 per
share and reissued 11,620 shares of treasury stock at an average price
of $1.50 per share for stock option exercises.
<PAGE> 10
Management believes that a key component of successful
asset/liability management is the monitoring and management of
interest rate sensitivity, which encompasses the repricing and
maturity of interest-earning assets and interest-bearing liabilities.
During any period in which a financial institution has a positive
interest rate sensitivity gap, the amount of its interest-earning
assets maturing or otherwise repricing within such period exceeds the
amount of the interest-bearing liabilities maturing or otherwise
repricing within the same period. Accordingly, in a rising interest
rate environment, financial institutions with positive interest rate
sensitivity gaps generally will experience greater increases in yield
on their assets than in the cost of their liabilities. Conversely, in
a falling interest rate environment, the cost of funds of financial
institutions with positive interest rate sensitivity gaps generally
will decrease less than the yield on their assets. Changes in
interest rates generally will have the opposite effect on financial
institutions with negative interest rate sensitivity gaps.
In a rising interest rate environment financial institutions with
negative gaps have more liabilities than assets mature or reprice
during the relevant period, causing the increase in the cost of
liabilities to exceed the increase in the yield on assets.
Conversely, in a falling interest rate environment, the cost of funds
of financial institutions with negative interest rate sensitivity gaps
generally will decrease more than the yield on their assets. The
Company's experience with interest rates is discussed in more detail
under the headings "Results of Operations and Comparisons of the Three
and Nine Months Ended March 31, 1997 and 1996" and in management's
discussion and analysis in the June 30, 1996 Form 10-K.
The Company's one-year interest rate sensitivity gap, as a
percentage of total interest-earning assets was a positive $21
million, or 3.1%, at March 31, 1997, as compared to a positive $89
million, or 13.6%, at June 30, 1996. The decrease of $67 million
resulted primarily from: (i) a $74 million increase in time deposits,
substantially all being brokered deposits and in the 1 year or less
category; (ii) a $35 million decrease in investment securities
primarily due to a shifting of maturities from the 1 year or less
category to the 1 to 2 years category and an $18 million reduction in
interest-bearing deposits; offset by (iii) a $29 million increase in
funded loans, the majority of which are in the one-year category, and
(iii) a $22 million decrease in FHLBank advances paid down with the
brokered deposits not used to fund loan growth as well as shifts from
other periods.
<PAGE> 11
As a part of its asset and liability management strategy, the
Company has increased its investment in loans which are interest rate
sensitive by emphasizing the origination of adjustable-rate, one- to
four-family residential loans and adjustable-rate or relatively short-
term commercial business and consumer loans, and originating fixed-
rate, one- to four-family residential loans primarily for immediate
resale in the secondary market. Approximately 30% of total assets are
currently invested in commercial real estate and commercial business
loans. This part of the strategy was designed to improve asset yield
and fee income, and to shorten the average maturity and increase the
interest rate sensitivity of the loan portfolio. While efforts to
date have contributed to the changes in the one-year interest rate
sensitivity gap and increasing net interest income, such lending,
commensurate with the increased risk levels, has also resulted in an
increase in the level of non-performing assets. Management
continually evaluates existing and potential commercial real estate
and commercial business loans, in order to try to reduce undesirable
risks including concentrations in a given geographic area or a
particular loan category.
While from a credit risk standpoint the Company would prefer higher
levels of one- to four-family and other residential loan originations
rather than commercial real estate and commercial business loan
originations, the Company has adapted to the changing lending
environment and originates commercial real estate and commercial
business loans to help maintain the desired size of the loan portfolio
and assets in total, as well as to maintain the desired yield on the
Company's investments.
Interest rate risk exposure estimates (the sensitivity gap) are not
exact measures of an institution's actual interest rate risk. They
are only indicators of interest rate risk exposure produced in a
simplified modeling environment designed to allow management to gauge
the Company's sensitivity to changes in interest rates. They do not
necessarily indicate the impact of general interest rate movements on
the Company's net interest income because the repricing of certain
categories of assets and liabilities is subject to competitive and
other factors beyond the Company's control. As a result, certain
assets and liabilities indicated as maturing or otherwise repricing
within a stated period may in fact mature or reprice at different
times and in different amounts and would therefore cause a change
(which potentially could be material) in the Company's interest rate
risk.
<PAGE> 12
The following table sets forth the Company's interest rate
sensitive assets and liabilities that mature or reprice within one
year as of the dates indicated and on the basis of the factors and
assumptions set forth at the end of the tables.
<TABLE>
<CAPTION>
March 31, June 30,
1997 1996
------------ --------
<S> <C> <C>
(000'S OMITTED)
Residential, commercial real estate and
construction loans $484,015 $463,559
Commercial business loans 18,854 12,349
Consumer loans 18,526 16,202
Investment securities and other 22,540 76,343
------- -------
Total interest rate sensitive assets
repricing within one year 543,935 568,453
------- -------
Interest-bearing demand deposits 107,057 112,289
Savings deposits 34,364 37,009
Time deposits 266,878 192,909
FHLBank advances 99,315 120,849
Other borrowings and liabilities 15,801 16,468
------- -------
Total interest rate sensitive liabilities
repricing within one year 523,415 479,524
------- -------
One year interest rate sensitivity gap (1) $20,520 $ 88,929
======= =======
Interest rate sensitive assets/interest rate
sensitive liabilities 103.9% 118.5%
===== =====
One year interest rate sensitivity gap as a
percent of interest-earning assets 3.1% 13.6%
==== ====
<FN>
___________________________________________
(1) Defined as the Company's interest-earning assets which mature or
reprice within one year minus its interest-bearing liabilities that
mature or reprice within one year.
</TABLE>
<PAGE> 13
The following table sets forth the interest rate sensitivity of the
Company's assets and liabilities at March 31, 1997, on the basis of
the factors and assumptions set forth below.
<TABLE>
<CAPTION>
Maturing or Repricing
---------------------------------------------------------------
Over 6
6 Months Months Over 1-3 Over 3-5 Over
or Less to 1 Year Years Years 5 Years Total
-------- --------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
(Dollars in thousands)
Residential, commercial real
estate and construction loans $375,326 $108,689 $ 15,751 $10,424 $40,566 $550,756
Commercial business loans 18,556 298 239 0 0 19,093
Consumer loans 16,202 2,324 6,161 0 0 24,687
Investment securities and other 19,543 2,997 48,775 0 0 71,315
------- ------- ------- ------ ------ -------
Total interest-earning assets 429,627 114,308 70,926 10,424 40,566 665,851
------- ------- ------- ------ ------ -------
Interest-bearing demand deposits 107,057 0 0 0 0 107,057
Savings deposits 34,364 0 0 0 0 34,364
Time deposit 162,955 103,923 34,204 10,368 0 311,450
FHLBank advances 72,351 26,964 12,596 3,975 17,847 133,733
Other borrowings and liabilities 15,801 0 0 0 0 15,801
------- ------- ------- ------ ------ -------
Total interest-bearing liabilities 392,528 130,887 46,800 14,343 17,847 602,405
------- ------- ------- ------ ------ -------
Interest-earning assets less
interest-bearing liabilities $ 37,099 $(16,579) $ 24,126 $(3,919) $22,719 $ 63,446
======= ======= ======= ====== ====== =======
Cumulative interest rate sensitivity gap $ 37,099 $ 20,520 $44,646 $40,727 $63,446
======= ======= ====== ====== ======
Cumulative interest rate sensitivity gap
as a percent of interest-earning
assets at March 31, 1997 5.6% 3.1% 6.7% 6.1% 9.5%
=== ==== ==== ==== ====
Cumulative interest rate sensitivity gap
as a percent of interest-earning
assets at June 30, 1996 (0.4)% 13.6% 8.9% 8.3% 10.2%
=== ==== === === ====
<FN>
The assumptions used in the above two tables are:
-- Prepayment rates are derived from market prepayment rates
observed on or about March 31, 1997. They are supplied by the FHLBank
of Des Moines Risk Management Department.
-- Fixed-rate loans, net of loans in process, deferred fees and
discounts are shown on the basis of contractual amortization and the
prepayment assumptions noted above.
-- Adjustable-rate loans are assumed to reprice at the earlier of
maturity or the next contractual repricing date.
-- Zero growth and constant percentage composition of assets and
liabilities and funds from contractual amortization are not
reinvested.
</TABLE>
<PAGE> 14
RESULTS OF OPERATIONS AND COMPARISON OF THE THREE AND NINE MONTHS
ENDED MARCH 31, 1997 and 1996
The decrease in earnings of $310,000, or 9.7%, for the three months
ended March 31, 1997 when compared to the same period in 1996, was
primarily due to a decrease in non-interest income of $900,000 and an
increase in provision for loan losses of $80,000, offset by an
increase in net interest income of $310,000, a decrease in non-
interest expense of $260,000 and a decrease in provision for income
taxes of $100,000 during the period.
The decrease in earnings for the nine months ended March 31, 1997
when compared to the same period in 1996 of $2.3 million, or 26.5%,
was primarily due to an increase in non-interest expense of $3.7
million, an increase in provision for loan losses of $290,000 and a
decrease in non-interest income of $370,000, offset by an increase in
net interest income of $970,000, and a decrease in provision for
income taxes of $1.1 million during the period.
Total Interest Income
Total interest income increased $450,000, or 3.3%, during the three
months ended March 31, 1997, when compared to the three months ended
March 31, 1996. The increase was primarily due to a $460,000, or
3.7%, increase in interest income on loans.
Total interest income increased $1.3 million, or 3.2%, during the
nine months ended March 31, 1997, when compared to the nine months
ended March 31, 1996. The increase was primarily due to a $1.2
million, or 3.1%, increase in interest income on loans.
Interest Income - Loans
For the three month period, interest income on loans increased from
higher average balances, offset by a decrease from lower average
yields. Interest income increased $540,000 as the result of higher
average loan balances from $544 million during the three months ended
March 31, 1996 to $567 million during the three months ended March 31,
1997. Interest income decreased $80,000 as the result of a decrease
in average yield from 9.19% in the three months ended March 31 1996,
to 9.13% in the three months ended March 31, 1997, as a result of
lower market rates.
For the nine month period, interest income on loans increased from
higher average balances, offset by a decrease from lower average
yields. Interest income increased $1.6 million as the result of
higher average loan balances from $532 million during the nine months
ended March 31, 1996 to $556 million during the nine months ended
March 31, 1997. Interest income decreased $460,000 as the result of a
decrease in average yield from 9.29% in the nine months ended March
31, 1996, to 9.17% in the nine months ended March 31, 1997, as a
result of lower market rates.
<PAGE> 15
Interest Income - Investments and Other Interest-Bearing Deposits
For the three month period, interest income on investments and
other interest-bearing deposits increased from higher average
balances, offset by a decrease from lower average yields. Interest
income increased $25,000 as the result of higher average balances from
$76 million during the three months ended March 31, 1996 to $78
million during the three months ended March 31, 1997. Interest income
decreased $35,000 as the result of a decrease in average yield from
5.28% in the three months ended March 31 1996, to 5.09% in the three
months ended March 31, 1997, as a result of lower market rates.
For the nine month period, interest income on investments and other
interest-bearing deposits increased from both higher average balances
and higher average yields. Interest income increased $85,000 as the
result of higher average balances from $76 million during the nine
months ended March 31, 1996 to $78 million during the nine months
ended March 31, 1997. Interest income increased $30,000 as the result
of an increase in average yield from 5.27% in the nine months ended
March 31, 1996, to 5.32% in the nine months ended March 31, 1997, as a
result of higher market rates.
Total Interest Expense
Total interest expense increased $140,000, or 1.9%, during the
three months ended March 31, 1997 when compared with the same period
in 1996 and $300,000, or 1.4%, during the nine months ended March 31,
1997 when compared with the same period in 1996. The increase during
the three month period was primarily due to a $550,000, or 12.9%,
increase in interest expense on deposits, offset by a $410,000, or
14.4%, decrease in interest expense on FHLBank advances and other
borrowings. The increase during the nine month period was primarily
due to a $260,000, or 2.0%, increase in interest expense on deposits,
offset by a $45,000, or 0.5%, decrease on FHLBank advances and other
borrowings. These changes were primarily the result of the funding
changes discussed previously.
Interest Expense - Deposits
For the three month period, interest expense on deposits increased
as a result of an increase in overall average balances, offset by a
decrease in overall market rates. Interest expense increased $690,000
as a result of higher average balances of time deposits from $243
million during the three months ended March 31, 1996, to $293 million
during the three months ended March 31, 1997 and increased $40,000 as
a result of higher average balances of interest-bearing demand
deposits from $99 million during the three months ended March 31,
1996, to $105 million during the three months ended March 31, 1997.
These increases were offset by a decrease of $105,000 due to lower
average rates on time deposits from 5.69% during the three months
ended March 31, 1996, to 5.51% during the three months ended March 31,
1997 and a decrease of $60,000 due to lower average rates on interest-
bearing demand deposits from 2.43% during the three months ended March
31, 1996, to 2.21% during the three months ended March 31, 1997.
<PAGE> 16
For the nine month period, interest expense on deposits increased
as a result of an overall increase in average balances, offset by an
overall decrease in market rates. Interest expense increased $540,000
as a result of higher average balances on time deposits from $239
million during the nine months ended March 31, 1996 to $252 million
during the nine months ended March 31, 1997 and increased $125,000 as
a result of higher average balances on interest-bearing demand
deposits from $101,000 during the three months ended March 31, 1996 to
$108,000 during the nine months ended March 31, 1997. These increases
were offset by a decrease of $335,000 due to lower average rates on
time deposits from 5.74% during the nine months ended March 31, 1996,
to 5.53% during the nine months ended March 31, 1997 and a decrease of
$30,000 due to lower average rates on interest-bearing demand deposits
from 2.44% during the nine months ended March 31, 1996 to 2.39% during
the nine months ended March 31, 1997.
Interest Expense - FHLBank and Other Borrowings
For the three month period, interest expense on FHLBank advances
and other borrowings decreased $410,000 due to lower average balances
from $194 million in the three months ended March 31, 1996 to $167
million in the three months ended March 31, 1997.
For the nine month period, interest expense on FHLBank advances and
other borrowings increased $45,000 due to higher average balances from
$184 million in the nine months ended March 31, 1996 to $188 million
in the nine months ended March 31, 1997. This increase was offset by
a decrease of $120,000 due to lower average interest rates from 6.00%
in the nine months ended March 31, 1996 to 5.91% in the nine months
ended March 31, 1997.
In the three month period, average balances decreased as a result
of the Company's use of brokered deposits to fund loan growth and
reduce short term FHLBank advances as discussed previously in this
document.
In the nine month period, average balances increased as a result of
the Company's use of short term FHLBank advances to partially fund
loan growth and manage overall funds costs in the first six months of
the nine month period. The changes in average rates were a result of
changes in market rates.
<PAGE> 17
Net Interest Income
For the three month period, the Company's overall interest rate
spread increased 6 basis points, or 1.6%, from 3.72% during the three
months ended March 31, 1996, to 3.78% during the three months ended
March 31, 1997.
For the nine month period, the Company's overall interest rate
spread increased 4 basis points, or 1.1%, from 3.78% during the three
months ended March 31, 1996, to 3.82% during the three months ended
March 31, 1997.
The increase in both periods was due to an overall decrease in the
weighted average rates paid on interest-bearing liabilities partially
offset by a lesser overall decrease in the yields received on
interest-earning assets.
Provision for Loan Losses
The provision for loan losses increased from $350,000 and $997,000,
respectively, during the three and nine months ended March 31, 1996 to
$428,000 and $1,287,000, respectively, during the three and nine
months ended March 31, 1997. In any accounting period, the provision
for loan losses is affected by many factors including, but not limited
to, the change in the composition of the loan portfolio, the increase
or decrease in total loans, the level of delinquencies and other non-
performing loans and the historical loss experience of the portfolio.
Non-performing assets decreased $3.7 million, or 22%, during the
nine months ended March 31, 1997 from $16.9 million at June 30, 1996
to $13.2 million at March 31, 1997. Non-performing loans increased
$1.9 million, or 32.2%, from $5.9 million at June 30, 1996 to $7.8
million at March 31, 1997, and foreclosed assets declined $5.5 million
from $10.9 million at June 30, 1996 to $5.4 million at March 31, 1997.
Non-performing loans at March 31, 1997 and June 30, 1996, included
$320,000 and $452,000, respectively, of loans in connection with the
sale of foreclosed assets, which are loans that have higher than usual
loan-to-value ratios and are originated in connection with the sale of
foreclosed assets. Substantially all of these loans were performing
at March 31, 1997.
<PAGE> 18
The $1.9 million increase in non-performing loans was primarily the
result of (i) the addition of a net loan for $3.8 million (net of
deferred gain and actual payments received) as a result of 100%
financing of the sale of the foreclosed asset described in the
Company's Annual Report on Form 10-K for the year ended June 30, 1996
on page 31 under the heading "Branson, Missouri"; partially offset by
(ii) the payoff of the $934,000 loan described in the Company's Annual
Report on Form 10-K for the year ended June 30, 1996 on page 31 under
the heading "Lake Ozark, Missouri"; (iii) the receipt of all scheduled
payments currently due on the loans totaling $984,000 described in the
Company's Annual Report on Form 10-K for the year ended June 30, 1996
on page 30 under the heading "Branson, Missouri - Restaurant"; (iv)
the receipt of all scheduled payments currently due on the $600,000
Tax Increment Financing (TIF) loan of the project described in the
Company's Annual Report on Form 10-K for the year ended June 30, 1996
on page 31 under the heading "Lake Ozark, Missouri"; and (v) the
foreclosure, net of charge-offs of approximately $110,000, of a
$250,000 restaurant loan (sold during the nine months ended March 31,
1997) and various single family properties totaling $490,000.
The net loan of $3.8 million on the sale of the foreclosed assets
has a deferred gain of $427,000 currently netted against it. If the
buyer is able to liquidate the project as planned, this gain will be
recognized at a future time when the loan has paid down to an adequate
level.
The $5.5 million decline in foreclosed assets during the nine
months ended March 31, 1997 was primarily due to: (i) the sale of the
$4.3 million property noted in the non-performing loan section above
($3.8 million net loan balance); (ii) the sale of the $550,000
property described in the Company's Annual Report on Form 10-K for the
year ended June 30, 1996 on page 33 under the heading "Springfield,
Missouri - Ellis Trucking Terminal" with 28% cash down and normal
long-term financing for the balance; (iii) the sale of condominium
units carried at an aggregate of $312,000 and 1 single-family home
carried at $54,000; offset by (iv) the foreclosure of the properties
noted in the non-performing loan section above; (vi) a $207,000
charge-down on the property described in the Company's Annual Report
on Form 10-K for the year ended June 30, 1996 on page 32 under the
heading "Branson, Missouri - Clevenger Cove Campground" as the result
of an updated appraisal; and (vii) various other activity of smaller
properties in the account.
<PAGE> 19
Potential problem loans increased $7.8 million during the nine
months ended March 31, 1997 from $4.7 million at June 30, 1996 to
$12.5 million at March 31, 1997. These are loans which management has
identified through routine internal review procedures as having
possible credit problems which may cause the borrowers difficulty in
complying with current loan repayment terms. These loans are not
reflected in the non-performing loans. The main reason for the
increase in potential problem loans is: (i) an increase of $5.5
million from the continued cash flow problems of a theater in Branson,
Missouri (subsequent to March 31, 1997, this loan was paid in full and
a prepayment penalty of approximately $300,000 was collected); (ii)
the continued credit deterioration of the borrower on a $985,000 loan
secured by commercial lots located in Branson, Missouri; (iii) an
increase of $950,000 from the improved credit quality and upgrade from
non-performing status of the project disclosed in the non-performing
loan section above; (iv) the increase of $280,000 in a condominium
project in Branson, Missouri due to additional advances from increased
collateral positions; (v) the deterioration of credit quality of a
$250,000 commercial real estate loan secured by a building in
Springfield, Missouri; and (vi) the deterioration of the credit
quality of various projects, partially offset by the improvement from
non-performing of other projects.
The allowance for loan losses at March 31, 1997 and June 30, 1996,
respectively, totaled $15.5 million and $14.4 million, representing
2.7% and 2.6% of total loans, 197% and 243% of non-performing loans,
and 76% and 136% of non-performing loans and potential problem loans
in total. The allowance for foreclosed asset losses totaled $828,000
and $1.1 million at March 31, 1997 and June 30, 1996, respectively,
representing 15.2% and 9.9% of total foreclosed assets. Although the
Company maintains the allowance for loan losses and the allowance for
foreclosed asset losses at levels which it considers to be adequate to
provide for potential losses and selling expenses, there can be no
assurance that such losses will not exceed the estimated amounts,
thereby adversely affecting future results of operations.
Non-interest Income
Non-interest income decreased $900,000, or 28.1%, in the three
months ended March 31, 1997 when compared to the same period in 1996.
The decrease was primarily due to: (i) a decrease in income on
foreclosed assets of $1 million due to a gain on one large property in
the March 31, 1996 quarter; (ii) an increase in service charge income
of $102,000, or 18%, on transaction accounts from an increased fee
structure; and (iii) various increases and decreases in other non-
interest income items.
<PAGE> 20
Non-interest income decreased $365,000, or 4.6%, in the nine months
ended March 31, 1997 when compared to the same period in 1996. The
decrease was primarily due to: (i) a decrease in income on foreclosed
assets of $525,000 due to a gain of $1.2 million on one property in
the March 31, 1996 period with smaller gains in the March 31, 1997
period; and (ii) a decrease in income of $400,000 from the sale of
available-for-sale securities; offset by (iii) an increase in
commission income of $435,000, or 13%, from the travel and investment
subsidiaries; (iv) an increase of $235,000, or 13%, in service charge
income on transaction accounts from an increased fee structure; and
(v) various increases and decreases in other non-interest income
items.
Non-interest Expense
Non-interest expense decreased $250,000, or 6%, in the three months
ended March 31, 1997 when compared to the same period in 1996
primarily due to a decrease in deposit insurance of $200,000 due to
SAIF changes previously discussed, offset by an increase of $200,000
in salaries and other employee benefits due to asset and earnings
growth, and various increases and decreases in other non-interest
expense items.
Non-interest expense increased $3.7 million, or 30%, in the nine
months ended March 31, 1997 when compared to the same period in 1996.
The increase was primarily due to: (i) an increase in insurance of
$2.5 million due to the accrual of the one-time SAIF assessment
discussed previously; (ii) an increase in goodwill amortization of $1
million due to the write-off of goodwill remaining from a 1982 failed
thrift purchase; (iii) an increase of $660,000 in salaries and other
employee benefits due to asset and earnings growth; and (iv) decreases
in various other non-interest expense items.
Provision for Income Taxes
Provision for income taxes as a percentage of pre-tax income
increased from 34.8% in the three months ended March 31, 1996 to 35.7%
in the three months ended March 31, 1997. The increase was due to
fluctuations in accrual estimates.
Provision for income taxes as a percentage of pre-tax income
increased from 38.1% in the nine months ended March 31, 1996 to 40.0%
in the nine months ended March 31, 1997. The increase was primarily
due to the write-off of the goodwill amortization discussed above,
which is a non-deductible item as well as fluctuations in accrual
estimates.
<PAGE> 21
Average Balances, Interest Rates and Yields
The following tables present for the periods indicated the total
dollar amount of interest income from average interest-earning assets
and the resultant yields, as well as the interest expense on average
interest-bearing liabilities, expressed both in dollars and rates, and
the net interest margin. The tables do not include non-interest-
bearing demand deposits and do not reflect any effect of income taxes.
<TABLE>
<CAPTION>
Three Months Ended March 31,
---------------------------------------------------------
1997 1996
--------------------------- --------------------------
Average Yield/ Average Yield/
Balance Interest Rate Balance Interest Rate
-------- -------- ------ -------- -------- ------
<S> <C> <C> <C> <C> <C> <C>
(Dollars in thousands)
Interest-earning assets:
Loans receivable $567,456 $12,949 9.13% $543,695 $12,488 9.19%
Investment securities and other
interest-earning assets 77,887 992 5.09 76,192 1,005 5.28
------- ------ ---- ------- ------- ----
Total interest-earning assets $645,343 13,941 8.64 $619,887 13,493 8.71
======= ------ ---- ======= ------ ----
Interest-bearing liabilities:
Demand deposits $104,598 578 2.21 $ 98,716 599 2.43
Savings deposits 34,118 207 2.43 36,248 222 2.45
Time deposits 292,788 4,035 5.51 242,532 3,450 5.69
------- ----- ---- ------- ----- ----
Total deposits 431,504 4,820 4.47 377,496 4,271 4.53
FHLBank advances and other borrowings 166,507 2,448 5.88 194,447 2,860 5.88
------- ----- ---- ------- ----- ----
Total interest-bearing liabilities $598,011 7,268 4.86 $571,943 7,131 4.99
======= ----- ---- ======= ----- ----
Net interest income:
Interest rate spread $6,673 3.78% $6,362 3.72%
===== ==== ===== ====
Net interest margin(1) 4.14% 4.11%
==== ====
Average interest-earning assets to
average interest-bearing liabilities 107.9% 108.4%
===== =====
<FN>
(1) Defined as the Company's net interest income divided by total
interest-earning assets.
</TABLE>
<PAGE> 22
<TABLE>
<CAPTION>
Nine Months Ended March 31,
---------------------------------------------------------
1997 1996
--------------------------- --------------------------
Average Yield/ Average Yield/
Balance Interest Rate Balance Interest Rate
-------- -------- ------ -------- -------- ------
<S> <C> <C> <C> <C> <C> <C>
(Dollars in thousands)
Interest-earning assets:
Loans receivable $556,183 $38,265 9.17% $532,607 $37,110 9.29%
Investment securities and other
interest-earning assets 78,106 3,119 5.32 75,994 3,003 6.59
------- ------ ---- ------- ------- ----
Total interest-earning assets $634,289 41,384 8.70 $608,601 40,113 8.79
======= ------ ---- ======= ------ ----
Interest-bearing liabilities:
Demand deposits $108,228 1,942 2.39 $101,191 1,849 2.44
Savings deposits 35,399 653 2.46 37,071 691 2.49
Time deposits 252,442 10,467 5.53 238,546 10,264 5.74
------- ------ ---- ------- ------ ----
Total deposits 396,069 13,062 4.40 376,808 12,804 4.43
FHLBank advances and other borrowings 187,875 8,323 5.91 183,951 8,278 5.81
------- ------ ---- ------- ------ ----
Total interest-bearing liabilities $583,944 21,385 4.88 $560,759 21,082 5.01
======= ------ ---- ======= ------ ----
Net interest income:
Interest rate spread $19,999 3.82% $19,031 3.78%
====== ==== ====== ====
Net interest margin(1) 4.20% 4.17%
==== ====
Average interest-earning assets to
average interest-bearing liabilities 108.6% 108.5%
===== =====
<FN>
(1) Defined as the Company's net interest income divided by total
interest-earning assets.
</TABLE>
<PAGE> 23
Rate/Volume Analysis
The following schedule presents the dollar amount of changes in
interest income and interest expense for major components of interest-
earning assets and interest-bearing liabilities for the periods shown.
For each category of interest-earning assets and interest-bearing
liabilities, information is provided on changes attributable to (i)
changes in rate (i.e., changes in rate multiplied by old volume) and
(ii) changes in volume (i.e., changes in volume multiplied by old
rate). For purposes of this table, changes attributable to both rate
and volume which cannot be segregated have been allocated
proportionately to volume and to rate.
<TABLE>
<CAPTION>
Three Months Ended March 31, Nine Months Ended March 31,
1997 vs. 1996 1997 vs. 1996
-------------------------------- ------------------------------
Increase Increase
(Decrease) (Decrease)
Due to Total Due to Total
------------- Increase ------------- Increase
Rate Volume (Decrease) Rate Volume (Decrease)
---- ------ ---------- ---- ------ ----------
<S> <C> <C> <C> <C> <C> <C>
(Dollars in thousands) (Dollars in thousands)
Interest-earning assets:
Loans receivable $ (81) $ 542 $ 461 $(459) $1,614 $1,155
Investment securities and
other interest-earning assets (37) 24 (13) 32 84 116
--- --- --- --- ----- -----
Total interest-earning assets (118) 566 448 (427) 1,698 1,271
--- --- --- --- ----- -----
Interest-bearing liabilities:
Demand deposits (63) 42 (21) (32) 125 93
Savings deposits (2) (13) (15) (7) (31) (38)
Time deposits (104) 689 585 (337) 540 203
--- --- --- --- ----- -----
Total deposits (169) 718 549 (376) 634 258
FHLBank advances and other borrowings (1) (411) (412) (121) 166 45
--- --- --- --- ----- -----
Total interest-bearing liabilities (170) 307 137 (497) 800 303
--- --- --- --- ----- -----
Net interest income $ 52 $259 $ 311 $ 70 $ 898 $ 968
=== === === === ===== =====
</TABLE>
<PAGE> 24
LIQUIDITY AND CAPITAL RESOURCES
General
The Company's capital position remained strong, with stockholders'
equity at $60.9 million, or 9.0% of total assets of $679 million at
March 31, 1997 compared to equity at $67.8 million, or 10.1%, of total
assets of $668 million at June 30, 1996. In addition, the Bank
exceeds each of the regulatory capital requirements. At March 31,
1997, the Bank had ratios of tangible and core capital to assets of
7.9% and risk-based capital of 11.8%. Federal regulations at that
date required tangible, core and risk-based capital ratios of 1.5%, 3%
and 8%, respectively.
The Bank is required by regulation to maintain liquidity ratios at
certain levels. Currently, a minimum of 5% of the combined total of
deposits and short-term borrowings must be maintained in the form of
cash and eligible investments. The Bank has historically maintained
its liquidity ratio at a level in excess of that required. As of
March 31, 1997, the Bank's liquidity ratio was 5.1%, compared to 7.3%
at June 30, 1996. Management believes that the Company has sufficient
cash flows and borrowing capacity available to meet its commitments
and other foreseeable cash needs for operations. At March 31, 1997,
the Company had commitments of approximately $60 million to fund loan
originations, issued lines of credit, outstanding letters of credit
and unadvanced loans.
At March 31, 1997, the investment securities held to maturity
included $3,000 of gross unrealized gains and $211,000 of gross
unrealized losses related to securities intended to be held until
maturity. The unrealized gains and losses are not expected to have a
material effect on future earnings beyond the usual amortization of
acquisition premium or accretion of discount because no sale of the
investment portfolio is foreseen.
The Company's primary sources of funds are savings deposits,
FHLBank advances, other borrowings, loan repayments, proceeds from
sales of loans and available-for-sale securities and funds provided
from operations. The Company utilizes particular sources of funds
based on the comparative costs and availability at the time. The
Company has from time to time chosen not to pay rates on deposits as
high as the rates paid by certain of its competitors and, when
necessary, supplement deposits with less expensive alternative sources
of funds.
<PAGE> 25
STATEMENT OF CASH FLOWS
During the nine months ended March 31, 1997 and 1996, the Company
had positive cash flows from operating activities and positive cash
flows from financing activities. The Company experienced negative
cash flows from investing activities during the nine months ended
March 31, 1997 and 1996.
Cash flows from operating activities for the periods covered by the
Statements of Cash Flows have been primarily related to adjustments in
deferred assets, credits and other liabilities, the provision for loan
losses and losses on foreclosed assets, depreciation, sale of
foreclosed assets and the amortization of deferred loan origination
fees and discounts (premiums) on loans and investments, all of which
are non-cash or non-operating adjustments to operating cash flows. As
a result, net income, adjusted for non-cash and non-operating items,
was the primary source of cash flows from operating activities.
Operating activities provided cash flows of $7.6 million in cash
during each of the nine months ended March 31, 1997 and 1996.
During the nine months ended March 31, 1997 and 1996, investing
activities used cash of $28.3 million and $29.6 million, respectively,
primarily due to the net increase of loans in both periods and
purchases of held-to-maturity investments in the March 31, 1996
period.
Changes in cash flows from financing activities of the periods
covered by the Statements of Cash Flows are due to changes in deposits
after interest credited, changes in FHLBank advances and changes in
short-term borrowings as well as purchases of treasury stock and
dividend payments to stockholders. Financing activities provided $3.2
million and $28.5 million, respectively, in cash during the nine
months ended March 31, 1997 and 1996. Financing activities in the
future are expected to primarily include changes in deposits, changes
in FHLBank advances, changes in short-term borrowings and changes in
treasury stock.
DIVIDENDS
During the nine months ended March 31, 1997 and 1996, respectively,
the Company declared and paid dividends of $0.2875 and $0.2625 per
share. The Board of Directors meets regularly to consider the level
and the timing of dividend payments.
<PAGE> 26
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The Registrant and its subsidiaries are involved as plaintiff or
defendant in various legal actions arising in the normal course of
their business. While the ultimate outcome of the various legal
proceedings involving the Registrant and its subsidiaries cannot be
predicted with certainty, it is the opinion of management, after
consultation with legal counsel, that these legal actions currently
are not material to the Registrant.
Item 2. Changes in Securities
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to Vote of Common Stockholders
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
See the attached exhibit 11, Statement re computation of earnings
per share.
See the attached exhibit 27, Financial Data Schedule.
b) Reports on Form 8-K
None.
<PAGE> 27
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
Great Southern Bancorp, Inc.
Registrant
Date: May 13, 1997 /s/ William V. Turner
--------------------------
William V. Turner
Chairman of the Board,
President and Chief
Executive Officer
Date: May 13 1997 /s/ Don M. Gibson
--------------------------
Don M. Gibson,
Executive Vice President and
Chief Financial Officer
<PAGE> 28
Exhibit Index
-------------
Exhibit
No. Description
- ------- -----------
11 Statement Re Computation of Earnings Per Share
27 Financial Data Schedule, which is submitted electronically
to the Securities and Exchange Commission for information
only and not filed.
<PAGE> 29
<TABLE>
<CAPTION>
Exhibit 11- Statement Re Computation of Earnings Per Share
Three Months Ended Six Months Ended
March 31, March 31,
1997 1996 1997 1996
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Primary:
Average shares outstanding 8,312,650 8,901,624 8,476,188 8,834,876
Net effect of dilutive stock options -
based on the treasury stock method
using average market price 104,001 272,696 93,518 263,908
--------- --------- --------- ---------
Primary shares 8,416,651 9,174,320 8,569,706 9,098,784
========= ========= ========= =========
Net income $2,909,249 $3,220,413 $6,310,281 $8,583,029
========= ========= ========= =========
Per share amount $0.35 $0.35 $0.74 $0.95
==== ==== ==== ====
Fully diluted:
Average shares outstanding 8,312,650 8,901,624 8,476,188 8,834,876
Net effect of dilutive stock options -
based on the treasury stock method
using average market price 104,676 275,992 104,676 275,992
--------- --------- --------- ---------
Primary shares 8,417,326 9,177,616 8,580,864 9,110,868
========= ========= ========= =========
Net income $2,909,249 $3,220,413 $6,310,281 $8,583,029
========= ========= ========= =========
Per share amount $0.35 $0.35 $0.74 $0.94
==== ==== ==== ====
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
This schedule contains summary financial information extracted from
the Consolidated Balance Sheet and the Consolidated Statement of
Income filed as part of the quarterly report on Form 10-Q and is
qualified in its entirety by reference to such quarterly report on
Form 10-Q.
</LEGEND>
<MULTIPLIER> 1,000
<CAPTION>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> MAR-31-1997
<CASH> 6,794
<INT-BEARING-DEPOSITS> 5,273
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 6,455
<INVESTMENTS-CARRYING> 48,794
<INVESTMENTS-MARKET> 48,587
<LOANS> 579,070
<ALLOWANCE> 15,466
<TOTAL-ASSETS> 679,153
<DEPOSITS> 462,894
<SHORT-TERM> 115,305
<LIABILITIES-OTHER> 5,637
<LONG-TERM> 34,418
0
0
<COMMON> 123
<OTHER-SE> 60,776
<TOTAL-LIABILITIES-AND-EQUITY> 679,153
<INTEREST-LOAN> 38,265
<INTEREST-INVEST> 2,926
<INTEREST-OTHER> 193
<INTEREST-TOTAL> 41,385
<INTEREST-DEPOSIT> 13,062
<INTEREST-EXPENSE> 21,385
<INTEREST-INCOME-NET> 19,999
<LOAN-LOSSES> 1,287
<SECURITIES-GAINS> 40
<EXPENSE-OTHER> 15,797
<INCOME-PRETAX> 10,513
<INCOME-PRE-EXTRAORDINARY> 10,513
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,310
<EPS-PRIMARY> .74
<EPS-DILUTED> .74
<YIELD-ACTUAL> 4.20
<LOANS-NON> 7,849
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 12,490
<ALLOWANCE-OPEN> 14,356
<CHARGE-OFFS> 243
<RECOVERIES> 66
<ALLOWANCE-CLOSE> 15,466
<ALLOWANCE-DOMESTIC> 15,466
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
