<PAGE> 1
UNITED STATES
SECURITIES & EXCHANGE COMMISSION
Washington, DC. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934]
For the quarter ended June 30, 1996
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 0-24084
-------
SHO-ME FINANCIAL CORP.
----------------------
(Exact name of registrant as specified in its charter)
DELAWARE 44-0363938
-------- ----------
(State or other jurisdiction (I.R.S. Employer ID Number)
of incorporation or organization)
109 N. HICKORY, MT. VERNON, MISSOURI 65712
------------------------------------------------
(Address of principal executive offices) (Zip Code)
(417) 466-2171
---------------
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
------------ -----------
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date.
Class Outstanding at July 31,1996
----------------------------- ---------------------------
Common Stock, Par Value $ .01 1,732,674 Shares
<PAGE> 2
SHO-ME FINANCIAL CORP.
AND SUBSIDIARY
INDEX
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION (UNAUDITED) PAGE NO.
<S> <C> <C>
Item 1. Consolidated Condensed Financial Statements
- Consolidated Statements of Financial Condition 3
- Consolidated Condensed Statements of Income 4-5
- Consolidated Statements of Cash Flows 6-7
- Notes to Consolidated Financial Statements 8-9
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10-15
PART II OTHER INFORMATION 16-17
Signature Page 18
</TABLE>
<PAGE> 3
SHO-ME FINANCIAL CORP.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note 1: Basis of Presentation
The accompanying unaudited interim consolidated financial statements
have been prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form 10-QSB 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. In the opinion of management, all
adjustments (consisting only of normal recurring accruals) considered necessary
for a fair presentation have been included. Operating results for the three
and six months ended June 30, 1996 and 1995 are not necessarily indicative of
the results that may be expected for the full year. For further information,
refer to the Company's December 31, 1995 Form 10-KSB which was filed with the
Securities and Exchange Commission and the Company's annual report which
includes a complete set of audited financial statements for the fiscal years
ended December 31, 1995 and 1994.
Note 2: Holding Company Formation and Stock Issuance
Sho-Me Financial Corp. (SMFC) was established May 9, 1990, for the
purpose of becoming a holding company for the shares of 1st Savings Bank,
f.s.b., upon its conversion from a federal mutual savings bank to a federal
stock savings bank.
The Company's subscription and community stock offering was completed on
June 28, 1994, with the issuance of 2,049,875 shares at a price of $10 per
share, providing net proceeds of approximately $18.1 million after conversion
costs and approximately $1.6 million in debt incurred by the employee stock
ownership plan (ESOP).
Note 3: Principles of Consolidation
The consolidated financial statements include the accounts of SMFC and
its wholly-owned subsidiary, 1st Savings Bank, f.s.b. which in turn owns all of
First Savings Financial Corporation. Significant intercompany accounts and
transactions have been eliminated in consolidation.
Note 4: Employee Stock Ownership Plan
In conjunction with the stock conversion, the Company established an
ESOP with 163,990 unallocated shares available for distribution. The
unallocated shares have been credited to Unearned ESOP Shares, a contra-equity
account. As shares are released from collateral the Company reports
compensation expense equal to the current market price of the shares, and the
shares become outstanding for Earnings Per Share calculations. The ESOP
has allocated 41,158 shares to the employees of the Bank.
<PAGE> 4
Note 5: Benefit Plans
On April 26, 1995, the Company's stockholders voted to approve both a
Management Recognition and Retention Plan (MRP) and a Stock Option and
Incentive Plan (SOIP). The MRP authorized 81,995 shares to be issued to
directors, officers and employees of the Bank of which 63,038 shares have been
awarded. The SOIP authorized 204,987 stock options on shares to be issued to
directors, officers, and employees of the Bank, of which 143,346 have been
awarded. Both the MRP and SOIP vest over a five year period with compensation
expense being amortized over each participant's vesting period for the MRP.
Note 6: Investments in Debt Securities
As of November 17, 1995, the Company redesignated held-to-maturity
securities with an aggregate amortized cost of $7,886,143 and net unrealized
gains of $49,265 to the available-for-sale portfolio. The redesignation was
prompted by an announcement by the Financial Accounting Standards Board to
allow a one-time redesignation and reflected management's revised expectations
of liquidity needs. Currently, the Company accounts for all of its investment
and mortgage-backed and related securities as available-for-sale.
Note 7: Earnings Per Share
Earnings per share of common stock have been determined by dividing net
income for the period by the weighted average number of outstanding shares of
common stock, common stock equivalents and allocated ESOP shares. Unallocated
ESOP shares were not included in the determination of either primary or fully
diluted earnings per share. Stock options were considered to be common stock
equivalents and were therefore included in both primary and fully diluted
earnings per share calculations. Primary and fully diluted earnings per share
for the three and six months ended June 30, 1996 were computed on weighted
average shares or share equivalents of 1,668,294 and 1,702,471, respectively,
as compared to weighted average shares or share equivalents of 1,931,423 and
1,895,083 for the same period of the prior year.
<PAGE> 5
Part I: FINANCIAL INFORMATION
Item I
SHO-ME FINANCIAL CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
JUNE 30, 1996 (UNAUDITED) and DECEMBER 31, 1995
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
---- ----
ASSETS
<S> <C> <C>
Cash $ 1,538,582 $ 1,323,867
Interest bearing deposits in other
financial institutions 2,840,338 4,250,841
------------ ------------
Cash and cash equivalents 4,378,920 5,574,708
Available-for-sale investment securities 12,482,037 9,154,546
Available-for-sale mortgage-backed securities 8,491,515 11,655,941
Loans held for sale 74,970 0
Loans receivable, net 242,649,763 214,445,042
------------ ------------
Foreclosed assets held for sale, net 52,052 0
Premises and equipment 5,551,489 5,216,836
Accrued interest receivable
Loans 1,488,201 1,238,760
Investments 217,259 213,487
Investment in FHLB stock 3,890,000 3,871,000
Prepaid expenses and other assets 234,119 283,032
Deferred income taxes 516,473 406,390
------------ ------------
Total Assets $280,026,798 $252,059,742
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits $168,849,289 $146,550,426
Federal Home Loan Bank advances 77,831,000 73,024,000
Advances from borrowers for taxes and insurance 1,274,519 502,188
Accounts payable and accrued expenses 1,085,902 765,867
Income taxes payable 198,807 251,746
------------ ------------
Total Liabilities 249,239,517 221,094,227
Common stock 20,499 20,499
Additional paid-in-capital 19,773,231 19,716,466
Unrealized depreciation on
available-for-sale securities, net (204,110) (3,899)
Retained earnings 17,838,764 16,688,663
Unearned ESOP shares (1,144,389) (1,228,346)
Unearned MRP shares (433,498) (600,966)
Treasury Stock (5,063,216) (3,626,902)
------------ ------------
Total Stockholders' Equity 30,787,281 30,965,515
------------ ------------
Total Liabilities and Stockholders' Equity $280,026,798 $252,059,742
============ ============
See Notes to Consolidated Financial Statements
</TABLE>
<PAGE> 6
PART I: FINANCIAL INFORMATION
SHO-ME FINANCIAL CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE AND SIX MONTH PERIODS ENDED JUNE 30, 1996 AND 1995
<TABLE>
<CAPTION>
Three-months Six-months
ended ended
June 30, June 30,
1996 1995 1996 1995
---- ---- ---- ----
(unaudited) (unaudited) (unaudited) (audited)
<S> <C> <C> <C> <C>
INTEREST INCOME
Loans $4,828,839 $3,315,322 $9,323,859 $6,138,010
Investment securities 155,004 239,927 300,139 467,136
Mortgage-backed securities 166,907 192,988 356,446 431,899
Other 17,441 30,342 52,983 46,219
---------- ---------- ---------- ----------
5,168,191 3,778,579 10,033,427 7,083,264
INTEREST EXPENSE
Deposits 1,911,168 1,558,615 3,678,327 2,963,172
Federal Home Loan Bank advances 1,059,663 693,972 2,123,055 1,089,968
---------- ---------- ---------- ----------
2,970,831 2,252,587 5,801,382 4,053,140
NET INTEREST INCOME 2,197,360 1,525,992 4,232,045 3,030,124
PROVISION FOR LOAN LOSSES 45,000 45,000 65,000 85,000
---------- ---------- ---------- ----------
NET INTEREST INCOME
AFTER PROVISION FOR
LOAN LOSSES 2,152,360 1,480,992 4,167,045 2,945,124
---------- ---------- ---------- ----------
NONINTEREST INCOME
Service charges 129,512 98,775 230,194 191,643
Gain (Loss) on sale of loans
and investment securites (20,443) 3,229 (18,309) 6,345
Income (Loss) on foreclosed assets (623) 7,174 (623) 3,006
Other income 160,473 138,891 319,543 212,828
---------- ---------- ---------- ----------
268,919 248,069 530,805 413,822
---------- ---------- ---------- ----------
NONINTEREST EXPENSE
Salaries and employee benefits 698,184 536,070 1,353,161 1,046,048
Net occupancy expense 170,859 136,402 435,851 283,230
Deposit insurance premium 83,719 77,227 166,195 154,197
FHLB service charges 61,182 50,710 115,250 98,265
Data processing 85,638 75,898 182,657 159,452
Legal and professional fees 94,200 60,643 110,625 112,175
Advertising 61,748 36,843 93,107 73,811
Other expense 169,633 109,654 343,686 220,884
---------- ---------- ---------- ----------
1,425,162 1,083,447 2,800,532 2,148,062
---------- ---------- ---------- ----------
</TABLE>
See Notes to Consolidated Financial Statements
<PAGE> 7
PART I: FINANCIAL INFORMATION
SHO-ME FINANCIAL CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE AND SIX MONTH PERIODS ENDED JUNE 30, 1996 AND 1995
<TABLE>
<CAPTION>
Three-months Six-months
ended ended
June 30, June 30,
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
INCOME BEFORE
INCOME TAXES 996,117 645,613 1,897,318 1,210,884
PROVISION FOR
INCOME TAXES 396,440 257,166 747,217 462,711
-------- -------- ---------- ----------
NET INCOME $599,677 $388,447 $1,150,101 $ 748,173
======== ======== ========== ==========
EARNINGS PER COMMON SHARE: $ .36 $ .21 $ .68 $ .39
</TABLE>
See Notes to Consolidated Financial Statements
<PAGE> 8
PART I: FINANCIAL INFORMATION
SHO-ME FINANCIAL CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND 1995
<TABLE>
<CAPTION>
Six-months
ended
June 30,
1996 1995
---- ----
CASH FLOWS FROM OPERATING (unaudited) (unaudited)
ACTIVITIES
<S> <C> <C>
Net income $1,150,101 $748,173
Items not requiring (providing) cash:
Depreciation 150,000 142,434
Provision for loan losses 65,000 85,000
Net realized losses on available-for-sale
securities 27,645 2,867
Origination of loans held for delivery against
commitments (395,330) (306,400)
Proceeds from sale of loans held for delivery
against commitments 329,695 237,728
Gain on sale of loans (9,335) (3,478)
Amortization of deferred income,
premiums and discounts on loans and investments (45,486) 28,912
Vesting of MRP shares 167,468
Accruals for ESOP shares 140,722 104,074
Changes in:
Accrued interest receivable (253,213) (307,861)
Prepaid expenses and other assets (47,373) (125,104)
Accounts payable and accrued expenses 320,035 631,271
Income taxes payable (40,312) (23,593)
Net cash provided by
----------- -----------
operating activities 1,559,617 1,214,023
----------- -----------
CASH FLOWS FROM INVESTING
ACTIVITIES
Net originations of loans (28,266,490) (29,402,470)
Purchase of loans 0 (1,026,670)
Purchase of premises and equipment (484,653) (951,029)
Proceeds from maturity of held-to-maturity securities 0 1,000,000
Proceeds from maturity of available-for-sale securities 2,000,000 0
Proceeds from the sale of available-for-sale
investment and mortgage-backed securities 2,595,545 6,798,295
Purchases of available-for-sale investment and
mortgage-backed securities (5,710,902) (4,523,562)
Principal reductions of investment and mortgage-backed
securites 688,215 887,358
Purchases of Federal Home Loan Bank stock (19,000) (1,270,000)
Proceeds from the sale of foreclosed assets 0 50,501
----------- -----------
Net cash used in investing activities ($29,197,285) ($28,437,577)
----------- -----------
</TABLE>
See Notes to Consolidated Financial Statements
<PAGE> 9
PART I: FINANCIAL INFORMATION
SHO-ME FINANCIAL CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND 1995
<TABLE>
<CAPTION>
Six-months
ended
June 30,
1996 1995
---- ----
CASH FLOWS FROM FINANCING ACTIVITIES (unaudited) (unaudited)
<S> <C> <C>
Net increase in certificates of deposit $18,053,356 $ 3,850,846
Net increase (decrease) in checking and savings 4,245,507 (1,233,702)
Proceeds from FHLB advances 14,807,000 26,400,000
Repayments of FHLB advances (10,000,000) 0
Net increase in advances from borrowers
for taxes and insurance 772,331 613,133
Purchase of treasury stock (1,436,314) (1,587,666)
----------- -----------
Net cash provided by financing activities 26,441,880 28,042,611
----------- -----------
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (1,195,788) 819,057
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 5,574,708 3,911,000
----------- -----------
CASH AND CASH EQUIVALENTS,
END OF PERIOD $4,378,920 $4,730,057
</TABLE>
See Notes to Consolidated Financial Statements
<PAGE> 10
PART I
Item 2
Sho-Me Financial Corp.
Management's Discussion and Analysis of Financial
Condition and Results of Operations
GENERAL
The accompanying Consolidated Financial Statements include the accounts of
Sho-Me Financial Corp. (the "Company") and all accounts of its wholly-owned
subsidiary, 1st Savings Bank, f.s.b. (the "Bank" or "1st Savings"). All
significant intercompany transactions and balances have been eliminated in
consolidation.
The Company's results of operations are primarily dependent on the
difference (or "interest rate spread") between the average yield earned on its
interest-earning assets, which consist primarily of loans receivable,
mortgage-backed securities (MBS), and other investments, and the average rate
paid on interest-bearing liabilities which consist primarily of retail deposits
and Federal Home Loan Bank ("FHLB") advances. The interest rate spread is
affected by economic, regulatory, and competitive factors which influence
interest rates, loan demand, prepayment rates, and deposit flows. The Bank,
like other financial institutions, is subject to interest-rate risk to the
degree that its interest-earning assets mature or reprice at different times,
or on a varying basis, from its interest-bearing liabilities.
The Company's results of operations are also affected by provisions for
loan losses, non-interest income and non-interest expenses, such as employee
salary and benefits, occupancy expenses, and other expenses. The following
discussion reviews the Company's financial condition at June 30, 1996 and the
results of operations for the three and six months ended June 30, 1996 and
1995.
FINANCIAL CONDITION
The Company's total assets increased $27.9 million, or 11.1%, from $252.1
million at December 31, 1995 to $280.0 million at June 30, 1996. The increase
was primarily due to a $28.3 million increase in loans receivable which was
primarily funded by an increase in deposits of $22.3 million and an increase in
FHLB advances of $4.8 million.
Loans receivable increased $28.3 million, or 13.2%, from $214.4 million at
December 31, 1995 to $242.7 million at June 30, 1996. The growth in loans
receivable was attributed to good local economic conditions and a successful
marketing program. Loan growth consisted primarily of a $23.6 million, or
13.9% increase in one- to four-family residential loans and, to a lesser
degree, an increase in loans secured by non-residential properties of $4.1
million. Growth in loans receivable has been and continues to be the primary
component of the Company's asset growth.
Deposits increased $22.3 million, or 15.2%, from $146.6 million at
December 31, 1995 to $168.8 million at June 30, 1996. The increase was
attributable to increased advertising, the
<PAGE> 11
opening of a new branch facility, enhanced cross-selling efforts, and price
competitiveness. The increase was composed of a $17.8 million increase in
certificates of deposit and a $4.5 million increase in transaction accounts,
statement savings accounts, and accrued interest.
FHLB advances increased $4.8 million, or 6.6%, from $73.0 million at
December 31, 1995 to $77.8 million at June 30, 1996. Outstanding advances have
terms of up to five years at both variable and fixed interest rates and were
primarily used to finance growth in loans receivable. During the second
quarter of 1996, the average cost of advances was .41% higher than the average
cost of the Company's certificates of deposit.
At June 30, 1996, stockholders' equity was $30.8 million, or 11.0% of
total assets as compared to $31.0 million, or 12.3% of total assets at December
31, 1995. The reduction in stockholders' equity was primarily attributed to
the $1.4 million cost of stock repurchased during the year exceeding net income
of $1.2 million which in conjunction with asset growth, resulted in a 1.3%
decline in the ratio of equity to total assets.
Results of Operations - Comparison of the three and six month periods ended
June 30, 1996 and 1995.
- --------------------------------------------------------------------------------
GENERAL. The Company's net income increased $211,000, or 54.4%, from
$388,000 for the quarter ended June 30, 1995 to $600,000 for the quarter ended
June 30, 1996. Over the six month period ended June 30, 1996, net income
increased $402,000, or 53.7%, to $1.2 million from $748,000 earned during the
same period of the prior year. The increases were primarily attributed to
increased net interest income which was partially offset by increased
noninterest expenses and provisions for income taxes.
NET INTEREST INCOME. Net interest income before provision for loan losses
increased by $671,000, or 44.0%, to $2.2 million for the quarter ended June 30,
1996 as compared to $1.5 million earned during the same quarter of the prior
year. The increase was due primarily to the average net interest rate spread
increasing from 2.31% during the quarter ended June 30, 1995 to 3.01% during
the quarter ended June 30, 1996 which was partially offset by the average
balance of interest-bearing liabilities increasing by $5.7 million more than
the average balance of interest-earning assets over this same period.
Net interest income before provision for loan losses increased by $1.2
million, or 39.7%, to $4.2 million for the six months ended June 30, 1996 as
compared to $3.0 million earned during the same period of the prior year. The
increases were due primarily to the average net interest rate spread increasing
from 2.38% during the six months ended June 30, 1995 to 2.96% during the six
months ended June 30, 1996 which was partially offset by the average balance of
interest-bearing liabilities increasing by $7.0 million more than the average
balance of interest-earning assets over this same period.
INTEREST INCOME. Interest income for the three and six months ended June
30, 1996 increased $1.4 million, or 36.8%, and $3.0 million, or 41.6%,
respectively, as compared to the three and six months ended June 30, 1995. The
increases were primarily attributed to the $50.7
<PAGE> 12
million, or 25.4% increase in the average balance of interest-earning assets
and the .73% increase in the average yield earned on interest-earning assets,
from 7.31% during the first six months of 1995 to 8.04% during the first half
of 1996. The increase in interest-earning assets was primarily due to growth
in loans receivable, while improved yields were primarily attributed to upward
loan repricing and an increase in the ratio of loans, which earned higher
yields than other interest-earning assets, to total assets.
INTEREST EXPENSE. Interest expense for the three and six months ended
June 30, 1996 increased $718,000, or 31.9%, and $1.7 million, or 43.1%,
respectively, as compared to the three and six months ended June 30, 1995. The
increases were primarily due to a $57.7 million increase in the average balance
of interest-bearing liabilities and a .34% increase in the average rate paid on
interest-bearing liabilities, from 4.71% during the first six months of 1995 to
5.05% during the first half of 1996. The increase in interest-bearing
liabilities was primarily due to the growth of deposits and FHLB advances,
while the increase in the average rate was primarily due to an increase in the
ratio of certificates of deposit and FHLB advances, which represented higher
costing liabilities than transaction and savings accounts, to interest-bearing
liabilities.
PROVISION FOR LOSSES ON LOANS The provision for loan losses for the three
and six months ended June 30, 1996 was $45,000 and $65,000, respectively, as
compared to the $45,000 and $85,000 established during the three and six month
periods ended June 30, 1995. The Company will continue to monitor its
allowance for loan losses and make future additions based on management's
analysis of the loan portfolio, the amount of non-performing and classified
assets, and general economic conditions. Although the Company maintains its
allowance for loan losses at a level which it considers to be sufficient to
provide for potential losses, there can be no assurance that future losses will
not exceed internal estimates. In addition, the amount of the allowance for
loan losses is subject to review by regulatory agencies which can order the
establishment of additional loss provisions (See "Nonperforming Assets").
NONINTEREST INCOME. Noninterest income for the three and six months ended
June 30, 1996 increased $21,000, or 8.4%, and $117,000, or 28.3%, respectively,
as compared to the three and six months ended June 30, 1995. Increased
noninterest income over the six months ended June 30, 1996 when compared to the
same period of the prior year was partially due to increased lease income of
$127,000 and FHLB dividends of $71,000. Increased lease income was due to
rents received from leased space in the recently opened Springfield location
while increased dividends were attributed to increased average balances.
Offsetting some of the increases was a $34,000 reduction in income from the
sale of available-for-sale loans and investments. For the three months ended
June 30, 1996, noninterest income increased for the same general reasons.
NONINTEREST EXPENSE. Noninterest expense for the three and six months
ended June 30, 1996 increased $342,000, or 31.5%, and $652,000, or 30.4%,
respectively, as compared to the three and six months ended June 30, 1995.
The increases over the six months ended June 30, 1996 when compared to the same
period of 1995 were primarily due to a $307,000 increase in compensation
expenses and $153,000 in occupancy expenses. Costs related to staffing and
operating the new Springfield location caused the majority of the
increased occupancy expenses and along with higher benefit plan costs caused
the majority of increased compensation expenses.
<PAGE> 13
Much of the remaining increase in costs was distributed over each expense
grouping and was primarily the result of the Company's asset growth. For the
three months ended June 30, 1996 noninterest expense increased for the same
general reasons.
PROVISION FOR INCOME TAXES. The provision for income taxes for the three
and six months ended June 30, 1996 increased $139,000, or 54.2%, and $285,000,
or 61.5%, respectively, as compared to the three and six months ended June 30,
1995. The increased provisions for taxes were primarily due to increased
taxable income over the three and six month periods.
NONPERFORMING ASSETS
The allowance for loan losses is calculated based upon an evaluation of
pertinent factors underlying the various types and quality of the Company's
loans. Management considers such factors as the repayment status of a loan,
the estimated net realizable value of the underlying collateral, the borrower's
intent and ability to repay the loan, local economic conditions, and the
Company's historical loss ratios. The Company's allowance for loan losses was
$1.7 million at both June 30, 1996 and December 31, 1995. At June 30, 1996,
assets classified as substandard, doubtful, or loss totaled $191,000, or .07%
of total assets. Management has considered each of these factors in evaluating
the adequacy of the allowance for loan losses.
The ratio of nonperforming assets to total assets is another useful tool
in evaluating exposure to credit risk. Non-performing assets of the Company
include non-accruing loans, accruing loans delinquent/past maturity 90 days or
more, and assets which have been acquired as a result of foreclosure or
deed-in-lieu of foreclosure. The following table illustrates changes in the
Company's level of non-performing assets:
<TABLE>
<CAPTION>
06/30/96 12/31/95 12/31/94
-------- -------- --------
(Dollars In Thousands)
<S> <C> <C> <C>
Loans Delinquent/Past Maturity 90 Days or More $ 114 $ 35 $ 46
Foreclosed Assets 52 0 51
--------- --------- ---------
Total Non-performing Assets $ 166 $ 35 $ 97
Total Non-Performing Assets as a ========= ========= =========
Percentage of Total Assets .06% .01% .05%
</TABLE>
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of funds are deposits, principal and
interest payments on loans receivable, investments and MBS, and FHLB advances.
While scheduled loan and security repayments and the maturity of short-term
investments are somewhat predictable sources of funding, deposit flows and loan
prepayment rates are influenced by many factors which make their cash flows
difficult to anticipate. Office of Thrift Supervision regulations require the
Bank to maintain cash and eligible investments in an amount equal to at least
5% of customer accounts and
<PAGE> 14
short-term borrowings to assure its ability to meet demands for withdrawals and
repayment of short-term borrowings. During the month ended June 30, 1996, the
Bank's liquidity ratio averaged 5.3%.
The Company uses its liquidity resources principally to satisfy its
ongoing cash requirements which include funding loan commitments, funding
maturing certificates of deposit as well as deposit withdrawals, maintaining
liquidity, purchasing investments, and meeting operating expenses. At June 30,
1996 the Company had approximately $5.8 million in commitments to originate
mortgage loans, and $7.1 million in loans-in-process on mortgage loans. These
commitments are anticipated to be funded primarily through a combination of
FHLB advances, deposit growth, and principal and interest payments received on
loans receivable. Management believes that anticipated cash flows will be
adequate to meet the Company's liquidity needs.
IMPACT OF NEW ACCOUNTING STANDARDS
The FASB has issued Statement of Financial Accounting Standards No. 122,
"Accounting for Mortgage Servicing Rights" ("FAS 122"). FAS 122 requires that
mortgage banking enterprises recognize as separate assets rights to service
mortgage loans for others. Adoption of FAS 122 is required by the Company
during the year ending December 31, 1996. The impact of this statement is not
expected to have a material effect on the Company's financial statements.
The FASB recently adopted Financial Accounting Standards Statement No. 123
("FAS 123"), "Accounting for Stock-Based Compensation". This statement
establishes a fair value based method of accounting for stock-based
compensation plans. It encouraged 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 1996. Management expects to
continue to account for stock-based compensation in accordance with the
provisions of APB No. 25. Therefore, FAS 123 is not expected to have a
significant impact on the Company's consolidated financial statements.
REGULATORY CAPITAL
At June 30, 1996, the Bank continued to exceed all regulatory capital
requirements with tangible capital of $24.7 million (9.0% of tangible assets);
core capital of $24.7 million (9.0% of adjusted tangible assets); and
risk-based capital of $26.4 million (17.1% of risk-weighted assets). Under
current regulatory guidelines, the Bank is classified as well-capitalized.
REGULATORY ITEMS
Federal law requires that the FDIC maintain reserves at both the Savings
Association Insurance Fund ("SAIF") and the Bank Insurance Fund ("BIF") of at
least 1.25% of estimated insured deposits. The reserves are funded through the
payment of insurance premiums by the insured institution members of each fund.
The BIF reached this level during 1995. The FDIC has
<PAGE> 15
decided to reduce insurance premiums applicable to BIF-insured institutions
while retaining the premiums applicable to SAIF members, such as 1st Savings,
at their current levels until the SAIF reached its required reserve level.
Proposed federal legislation provides for a one-time assessment estimated to be
.80% to .90%, to be imposed on all SAIF assessable deposits, as of March 31,
1995, including those held by commercial banks, and for BIF deposit insurance
premiums to be used to pay the Financing Corporation ("FICO") bond interest on
a pro rata basis together with SAIF premiums. If a requirement were
implemented as of June 30, 1996 for 1st Savings to pay a one-time assessment
equal to .90% of insured deposits, the amount of such assessment would have
been approximately $1.2 million.
Effective in the third quarter of 1995, the FDIC revised the premium
schedule for BIF-insured banks to provide a range of .04% to .31% of deposits
(as compared to the current range of .23% to .31% of deposits for SAIF-insured
institutions). In addition, in November 1995, the FDIC further revised the
schedule to provide a range of 0% to .27% (with a minimum annual premium of
$2,000), effective January 1996. The majority of BIF-insured members are
subject to the minimum $2,000 annual premium. As a result, BIF members
generally pay significantly lower premiums than SAIF members. While the
magnitude of the competitive advantage of BIF-insured institutions and its
impact on 1st Savings' results of operations cannot be determined at this time,
the decrease in BIF premiums could place 1st Savings at a material competitive
disadvantage should BIF members seek to price deposits higher or loan products
lower than SAIF members. 1st Savings currently qualifies for the minimum SAIF
premium level of .23% of deposits.
To the extent it becomes available, 1st Savings may consider paying an
exit fee to the SAIF and an entrance fee to the BIF in order to convert its
insured deposits to the BIF. No prediction can be made at this time as to
whether this option, currently prohibited, may become available.
<PAGE> 16
Part II - Other Information
Item 1 - Legal Proceedings
The Company and the Bank are not involved in any pending legal
proceedings other than legal proceedings incident to the business of
the Company and the Bank, involving amounts in the aggregate which
management believes are material to the financial condition and
results of operations of the Company and the Bank.
Item 2 - Changes in Securities
Not applicable
Item 3 - Defaults upon Senior Securities
Not applicable
Item 4 - Submission of Matters to a Vote of Security Holders
(a) On April 24, 1996, the Company held its Annual Meeting of
Stockholders.
(b) At the meeting, Raymond G. Merryman and Donald R. Millsap were
elected for terms to expire in 1999.
(c) Stockholders voted on the following matters:
(i) The election of the following directors of the Company;
<TABLE>
<CAPTION>
VOTES: FOR AGAINST ABSTAIN NON-VOTES
------ --- ------- ------- ---------
<S> <C> <C> <C> <C>
Donald R. Millsap 1,393,001 52,187 0 0
Raymond G. Merryman 1,392,576 52,612 0 0
</TABLE>
(ii) The ratification of the appointment of Baird Kurtz & Dobson
as independent auditors of the Company for the fiscal year
ending December 31, 1996.
<TABLE>
<CAPTION>
VOTES: FOR AGAINST ABSTAIN NON-VOTES
------ --- ------- ------- ---------
<S> <C> <C> <C> <C>
1,445,188 1,391,288 50,800 3,100 0
</TABLE>
Item 5 - Other Information
None.
<PAGE> 17
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits
None.
(b) The following is a description of the Form 8-K's filed during the
quarter ended June 30, 1996.
On April 15, 1996, the Corporation filed a current report on
Form 8-K which contained a press release announcing earnings for
the quarter ended March 31, 1996.
On April 22, 1996, the Corporation filed a current report of
Form 8-K which contained a press release announcing the Company's
intention to repurchase up to approximately five percent, or
87,876 shares of its outstanding stock.
On June 13, 1996, the Corporation filed a current report on Form
8-K which contained a press release announcing that the Company had
completed its repurchase of approximately five percent or 87,876
shares of its outstanding stock.
<PAGE> 18
SIGNATURES
Pursuant to the requirement 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.
SHO-ME FINANCIAL CORP.
Registrant
Date: July 31, 1996 /s/ Raymond G. Merryman
------------------- ---------------------------------------
Raymond G. Merryman
President and Chief Executive Officer
Date: July 31, 1996 /s/ Greg A. Steffens
------------------- ---------------------------------------
Greg A. Steffens
Chief Financial Officer
<PAGE> 19
EXHIBIT INDEX
Exhibit No. Description Page No.
- ----------- ----------- --------
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE QUARTERLY
REPORT ON FORM 10-Q FOR THE FISCAL QUARTER ENDED MARCH 31, 1996 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 1,538,582
<INT-BEARING-DEPOSITS> 2,840,338
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 20,973,552
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 242,724,733
<ALLOWANCE> 1,742,155
<TOTAL-ASSETS> 280,026,798
<DEPOSITS> 168,849,289
<SHORT-TERM> 77,831,000
<LIABILITIES-OTHER> 2,559,227
<LONG-TERM> 0
30,787,281
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITIES-AND-EQUITY> 280,026,798
<INTEREST-LOAN> 4,828,839
<INTEREST-INVEST> 321,911
<INTEREST-OTHER> 17,441
<INTEREST-TOTAL> 5,168,191
<INTEREST-DEPOSIT> 1,911,168
<INTEREST-EXPENSE> 2,970,831
<INTEREST-INCOME-NET> 2,197,360
<LOAN-LOSSES> 45,000
<SECURITIES-GAINS> (20,443)
<EXPENSE-OTHER> 1,425,162
<INCOME-PRETAX> 996,117
<INCOME-PRE-EXTRAORDINARY> 996,117
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 599,677
<EPS-PRIMARY> .36
<EPS-DILUTED> .36
<YIELD-ACTUAL> 8.04
<LOANS-NON> 112,145
<LOANS-PAST> 1,452
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 783,070
<ALLOWANCE-OPEN> 1,708,223
<CHARGE-OFFS> 16,491
<RECOVERIES> 5,540
<ALLOWANCE-CLOSE> 1,742,155
<ALLOWANCE-DOMESTIC> 1,742,155
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
