<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 September 30, 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 0-24084
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 November 7, 1997
----- -------------------------------
Common Stock, Par Value $.01 1,499,036 Shares
<PAGE> 2
PART I: FINANCIAL INFORMATION
Item I
SHO-ME FINANCIAL CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
SEPTEMBER 30, 1997 (UNAUDITED) and DECEMBER 31, 1996
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
---- ----
<S> <C> <C>
ASSETS
Cash and due from banks $ 1,640,408 $ 1,687,719
Interest bearing deposits in other
financial institutions 4,970,803 9,838,295
------------ ------------
Cash and cash equivalents 6,611,211 11,526,014
Available-for-sale securities 23,638,799 18,880,277
Loans receivable, net 299,731,035 255,469,576
Foreclosed assets held for sale, net 530,957 0
Premises and equipment, net 5,628,652 5,452,142
Interest receivable
Loans 1,991,925 1,604,575
Investments 260,034 213,910
Investment in FHLB stock 5,450,000 4,325,000
Prepaid expenses and other assets 606,629 94,048
Deferred income taxes 399,949 430,913
------------ ------------
Total Assets $344,849,191 $297,996,455
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits $201,043,741 $182,014,158
Federal Home Loan Bank advances 109,082,378 84,051,000
Advances from borrowers for taxes and insurance 2,045,435 619,096
Accounts payable and accrued expenses 1,085,354 815,732
Income taxes payable 454,140 464,342
------------ ------------
Total Liabilities 313,711,048 267,964,328
Common stock 20,499 20,499
Additional paid-in-capital 20,324,202 19,997,273
Unrealized appreciation on
available-for-sale securities, net 173,030 137,194
Retained earnings 22,079,558 18,886,732
Unearned ESOP shares (912,250) (995,179)
Unearned MRP shares (198,769) (313,498)
Treasury Stock, at cost (10,348,127) (7,700,894)
------------ ------------
Total Stockholders' Equity 31,138,143 30,032,127
------------ ------------
Total Liabilities and Stockholders' Equity $344,849,191 $297,996,455
============ ============
</TABLE>
See Notes to Consolidated Financial Statements
<PAGE> 3
PART I: FINANCIAL INFORMATION
SHO-ME FINANCIAL CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE AND NINE MONTH PERIODS ENDED SEPTEMBER 30, 1997 AND 1996
<TABLE>
<CAPTION>
Three-months Nine-months
ended ended
September 30, September 30,
1997 1996 1997 1996
---- ---- ---- ----
(unaudited) (unaudited) (unaudited) (unaudited)
<S> <C> <C> <C> <C>
INTEREST INCOME
Loans $6,203,791 $5,179,093 $17,420,794 $14,502,952
Available-for-sale Securities 441,664 340,117 1,236,440 996,702
Other 40,431 17,691 135,205 70,675
---------- ---------- ----------- -----------
6,685,886 5,536,901 18,792,439 15,570,329
INTEREST EXPENSE
Deposits 2,411,186 1,991,768 6,924,756 5,670,095
Federal Home Loan Bank advances 1,532,057 1,238,123 4,047,009 3,361,178
---------- ---------- ----------- -----------
3,943,243 3,229,891 10,971,765 9,031,273
NET INTEREST INCOME 2,742,643 2,307,010 7,820,674 6,539,056
PROVISION FOR LOAN LOSSES 0 45,000 75,000 110,000
---------- ---------- ----------- -----------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 2,742,643 2,262,010 7,745,674 6,429,056
---------- ---------- ----------- -----------
NONINTEREST INCOME
Service charges 144,558 133,391 418,671 363,585
Net realized gains (losses) on sales of
loans and available-for-sale securites 6,773 3,519 163,594 (14,791)
Income on foreclosed assets (1,308) 5,701 (3,068) 5,079
Income on FHLB stock 92,568 76,463 247,800 208,896
Other income 134,124 106,275 370,869 290,585
---------- ---------- ----------- -----------
376,715 325,349 1,197,866 853,354
---------- ---------- ----------- -----------
NONINTEREST EXPENSE
Salaries and employee benefits 696,718 741,121 2,014,977 2,094,282
Net occupancy expense 190,833 224,525 576,923 653,318
Deposit insurance premium 30,005 1,001,630 66,558 1,167,825
FHLB service charges 60,726 56,238 171,293 171,487
Data processing 98,443 90,374 301,753 273,031
Legal and professional fees 37,742 40,945 187,016 155,827
Advertising 88,547 69,262 132,988 162,369
Other operating expense 108,205 130,412 382,727 474,100
---------- ---------- ----------- -----------
1,311,219 2,354,507 3,834,235 5,152,239
---------- ---------- ----------- -----------
INCOME BEFORE INCOME TAXES 1,808,139 232,852 5,109,305 2,130,171
PROVISION FOR INCOME TAXES 684,329 48,520 1,912,854 795,737
---------- ---------- ----------- -----------
NET INCOME $1,123,810 $184,332 $3,196,451 $1,334,434
========== ========== =========== ===========
Earnings Per Common Share: $ .75 $ .11 $ 2.12 $ .80
</TABLE>
See Notes to Consolidated Financial Statements
<PAGE> 4
PART I: FINANCIAL INFORMATION
SHO-ME FINANCIAL CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
<TABLE>
<CAPTION>
Nine-months
ended
September 30,
1997 1996
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES (unaudited) (unaudited)
<S> <C> <C>
Net income $ 3,196,451 $ 1,334,434
Items not requiring (providing) cash:
Depreciation 252,863 302,558
Provision for loan losses 75,000 110,000
Net realized (gains) losses on available-for-sale securities (12,171) 111,258
Net realized gains on equity investments (142,709) (83,613)
Origination of loans held for delivery against commitments (485,592) (588,820)
Proceeds from sale of loans held for delivery against commitments 494,306 601,674
Gain on sale of loans (8,714) (12,854)
Gain on sale of foreclosed assets 0 (7,406)
Amortization of deferred income,
premiums and discounts on loans and investments (86,911) (50,723)
Deferred income taxes 9,000 (28,569)
Accruals for MRP shares 114,729 227,468
Accruals for ESOP shares 346,932 272,083
Changes in:
Accrued interest receivable (433,473) (386,380)
Prepaid expenses and other assets (512,579) (63,590)
Accounts payable and accrued expenses 486,096 1,721,995
Income taxes payable 29,243 (280,788)
----------- -----------
Net cash provided by operating activities 3,322,471 3,178,727
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Net originations of loans (44,694,895) (42,893,559)
Purchase of loans (150,400) 0
Proceeds from sale of loans 0 4,367,437
Purchase of premises and equipment (429,373) (560,701)
Proceeds from maturity of available-for-sale securities 4,000,000 2,000,000
Proceeds from sale of available-for-sale securities 2,449,744 2,595,545
Purchases of available-for-sale securities (11,868,156) (8,000,103)
Principal reductions of available-for-sale securities 909,492 854,275
Purchases of Federal Home Loan Bank stock (1,125,000) (454,000)
Proceeds from the sale of foreclosed assets 27,867 59,458
----------- -----------
Net cash used in investing activities (50,880,721) (42,031,648)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in certificates of deposit 9,321,352 21,371,382
Net increase in checking and savings 9,483,688 7,669,036
Proceeds from FHLB advances 110,250,000 54,260,000
Repayments of FHLB advances (85,250,000) (44,760,000)
Stock issuance from exercised options and benefit plans 129,668 10,773
Net increase in advances from borrowers for taxes and insurance 1,426,339 1,217,672
Purchase of treasury stock (2,717,600) (2,937,304)
----------- -----------
Net cash provided by financing activities 42,643,447 36,831,559
----------- -----------
DECREASE IN CASH AND CASH EQUIVALENTS (4,914,803) (2,021,362)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 11,526,014 5,574,708
----------- -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 6,611,211 $ 3,553,346
</TABLE>
See Notes to Consolidated Financial Statements
<PAGE> 5
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 nine month periods ended September 30, 1997 and 1996 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, 1996 Form 10-KSB which was
filed with the Securities and Exchange Commission and the Company's annual
report which contains the audited financial statements for the fiscal years
ended December 31, 1996 and 1995.
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, fsb., 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, fsb. 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 64,475
shares to the employees of the Bank.
<PAGE> 6
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 63,438 were awarded.
The SOIP authorized 204,987 stock options on shares to be issued to directors,
officers, and employees of the Bank, of which 155,596 were awarded and 149,546
remain outstanding. 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. As of November 6, 1997, unvested MRP shares totaled 37,105.
Note 6: 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 earnings per share for the three and
nine months ended September 30, 1997 were computed on weighted average shares
or share equivalents of 1,496,265 and 1,504,709, respectively, as compared to
1,598,221 and 1,655,024 from the same periods of the prior year. Fully diluted
earnings per share for the three and nine months ended September 30, 1997 were
computed on weighted average shares or share equivalents of 1,497,500 and
1,508,241, respectively, as compared to 1,609,979 and 1,658,943 for the same
periods of the prior year. The reduction in both primary and fully diluted
shares outstanding was attributed to the Company's share repurchase program.
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,
investment securities, 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
<PAGE> 7
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 September 30, 1997 and
the results of operations for the three and nine months ended September 30,
1997 and 1996.
On June 23, 1997, the Company announced that it had entered into a
definitive agreement to be acquired by Union Planters Corporation, a multi-bank
holding company based out of Memphis, Tennessee. Pursuant to the agreement,
shareholders of Sho-Me Financial Corp. will receive .7694 shares of Union
Planters stock for each share of Sho-Me Financial stock held, subject to
adjustment under certain circumstances, in a tax-free exchange which is
scheduled to close on or about December 31, 1997. At a special meeting held on
October 8, 1997, the stockholders of Sho-Me approved the merger by and between
the Company and Union Planters Corporation. The proposed merger has also been
approved by the Federal Reserve, with other regulatory approvals pending. (See
Part II - Other Information)
Except for the historical information contained herein, the matters
discussed in this 10-QSB may be deemed to be forward-looking statements that
involve risks and uncertainties, including changes in economic conditions in
the Company's market area, changes in policies by regulatory agencies,
fluctuations in interest rates, demand for loans in the Company's market area
and competition. Actual strategies and results in future periods may differ
materially from those currently expected. These forward-looking statements
represent the Company's judgement as of the date of this release. The Company
disclaims, however, any intent or obligation to update these forward-looking
statements.
FINANCIAL CONDITION
The Company's total assets increased $46.8 million, or 15.7%, from $298.0
million at December 31, 1996 to $344.8 million at September 30, 1997. The
increase was primarily due to a $44.3 million increase in loans receivable
which was primarily funded by increased deposits and FHLB advances of $19.0
million and $25.0 million, respectively.
The balance of net loans receivable increased $44.3 million, or 17.3%,
from $255.5 million at December 31, 1996 to $299.7 million at September 30,
1997. Loan growth (excluding loans-in-process) consisted primarily of a $26.6
million increase in loans secured by one- to four-family residences and to a
lesser degree, increased balances of installment, land and nonresidential real
estate loans of $8.6 million, $2.1 million and $6.1 million, respectively.
During the first nine months of 1997, the Company originated $100.8 million in
mortgage loans and installment loans as compared to loan originations of $90.6
million during the same period of the prior year. The increase in loan
originations was primarily due to the origination of $11.5 million in equity
<PAGE> 8
lines-of-credit, a product which was initially offered in February of 1997.
Deposits increased $19.0 million, or 10.4%, from $182.0 million at
December 31, 1996 to $201.0 million at September 30, 1997. The increase was
attributable to the continuation of successful marketing and cross-selling of
the Company's products and services as well as expanded product offerings and
price competitiveness. The increase was comprised of $9.3 million in
certificates of deposit and $9.7 million in transaction accounts, statement
savings accounts, and accrued interest.
FHLB advances increased $25.0 million, or 29.8%, from $84.1 million at
December 31, 1996 to $109.1 million at September 30, 1997. Outstanding
advances have terms ranging up to five years at either variable or fixed rates
of interest and have been used primarily to finance growth in loans receivable.
The Company's average cost of FHLB advances was 27 basis points higher than
the Company's average cost of certificates of deposit during the three months
ended September 30, 1997.
At September 30, 1997, stockholders' equity was $31.1 million as compared
to $30.0 million, at December 31, 1996. The $1.1 million increase in equity
was primarily due to net income of $3.2 million and benefit plan adjustments of
$525,000 exceeding the $2.6 million cost of repurchased stock. These items, in
conjunction with asset growth, caused the ratio of equity to total assets to
decline from 10.1% at December 31, 1996 to 9.0% at September 30, 1997.
Results of Operations - Comparison of the three and nine month periods ended
September 30, 1997 and 1996.
GENERAL. The Company's net income for the three and nine month periods
ended September 30, 1997 was $1.1 million and $3.2 million, respectively, as
compared to net income of $184,000 and $1.3 million earned during the same
periods of 1996. Net income in 1996 was adversely affected by a $910,000
one-time special assessment to enhance the capitalization of the Savings
Associations Insurance Fund ("SAIF"). Exclusive of this SAIF assessment,
income for the three and nine months ended September 30, 1997 increased by
$376,000 and $1.3 million, respectively, from 1996 preassessment income of
$748,000 and $1.9 million. The respective increases in net income were
primarily the result of increased net interest income, noninterest income and a
reduction in noninterest expense.
NET INTEREST INCOME. Net interest income after provision for loan losses
increased by $481,000, or 21.2%, to $2.7 million for the quarter ended
September 30, 1997 as compared to the $2.3 million earned during the same
quarter of the prior year. The increase was primarily due to an 11.0 basis
point increase in the average interest rate spread and a $48.7 million, or
17.8% increase in the average balance of interest-earning assets which was
partially offset by a $50.3 million, or 19.9% increase in the average balance
of interest-bearing liabilities.
Net interest income after provision for loan losses increased by $1.3
million, or 20.5%, to $7.7 million for the nine month period ended September
30, 1997 as compared to the $6.4 million earned during the same period of the
prior year. The increase was primarily attributable to a 15.4
<PAGE> 9
basis point increase in the average interest rate spread and a $45.1
million, or 17.5% increase in the average balance of interest-earning assets
which was partially offset by a $47.3 million, or 19.9% increase in the
average balance of interest-bearing liabilities.
INTEREST INCOME. Interest income for the three and nine month periods
ended September 30, 1997 increased $1.1 million, or 20.8%, and $3.2 million, or
20.7%, respectively, as compared to the same periods of the prior year. The
increase in interest income over the nine month period was primarily the result
of a $45.1 million, or 17.5% increase in the average balance of
interest-earning assets and a 22.0 basis point rise in the average yield earned
on these assets, from 8.04% to 8.26%. The increase in average interest-earning
assets was primarily the result of growth in loans receivable, while increased
asset yields were the result of upward loan repricing and an increase in the
ratio of non one- to four-family loans and an overall increase in the ratio of
loans, which both have typically earned higher yields than other
interest-earning assets, to total assets.
INTEREST EXPENSE. Interest expense for the three and nine month periods
ended September 30, 1997 increased $713,000, or 22.1%, and $1.9 million, or
21.5%, respectively, as compared to the same periods of the prior year. The
increase in interest expense over the nine month period was primarily the
result of a $47.3 million increase in average interest-bearing liabilities and
a 6.6 basis point rise in the average cost of these liabilities, from 5.07% to
5.14%. The increase in average interest-bearing liabilities consisted of
growth in deposits and FHLB advances, while higher interest costs were
primarily the result of an increase in the ratio of certificates of deposit and
FHLB advances, which represent 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 nine month periods ended September 30, 1997 was $0 and $75,000,
respectively, as compared to provisions of $45,000 and $110,000, established
during the same periods of the prior year. The Company regularly reviews its
allowance for loan losses and makes adjustments to its balance based on
management's analysis of the loan portfolio, the amount of non-performing and
classified 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 months ended
September 30, 1997 increased $51,000, or 15.8%, to $377,000 as compared to the
$325,000 earned during the same period of the prior year. The increase was
primarily due to a $33,000 increase in lease income and FHLB stock dividends as
well as increased service charges and late fees of $19,000. Increased lease
income was due to an increase in the occupancy rate in the Company's
Battlefield office from 72.1% at September 30, 1996 to 92.1% at September 30,
1997.
Noninterest income for the nine months ended September 30, 1997 increased
$345,000, or 40.4%, to $1.2 million as compared to the $853,000 earned during
the same period of the prior year. The increase was primarily due to a
$178,000 increase in gains realized on the sale of loans
<PAGE> 10
and available-for-sale securities which included gains from the sale of equity
securities of $164,000. In addition, lease income and FHLB stock
dividends increased by $72,000 while service charges, late fees and loan
servicing fees increased by $96,000.
NONINTEREST EXPENSE. Noninterest expense for the three months ended
September 30, 1997 declined $1.0 million; however, exclusive of the
aforementioned one-time SAIF assessment, the declined in expense totaled
$133,000, or 9.2%, to $1.3 million as compared to $1.4 million expended during
the same period of the prior year. Contributing to the decline was a $62,000
reduction in SAIF premiums. In addition, salary, occupancy and general
operating expenses declined by $93,000 which more than offset increased
advertising and processing expenses of $32,000. The reductions in operating
expenses were the result of improved operating efficiencies and a reduction in
expenses related to funding benefit plans.
Noninterest expense for the nine months ended September 30, 1997 declined
$1.3 million; however, exclusive of the aforementioned one-time SAIF
assessment, the decline in expense totaled $408,000, or 9.6%, to $3.8 million
as compared to $4.2 million expended during the same period of the prior year.
Contributing to the decline was a $191,000 reduction in SAIF premiums, as well
as a $276,000 decline in salary, occupancy, advertising and general operating
expenses which more than offset a $60,000 increase in legal and processing
expenses. The reductions in operating expenses were the result of improved
operating efficiencies and a reduction in expenses related to funding benefit
plans.
PROVISION FOR INCOME TAXES. The provision for income taxes for the three
and nine month periods ended September 30, 1997 increased $636,000 and $1.1
million, respectively, as compared to the same periods of the prior year.
Increased tax expense was primarily the result of increased taxable income
which was due in part to the aforementioned SAIF assessment.
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 fair value of the underlying collateral, the borrower's
intent and ability to repay the loan, local economic conditions, and the
Company's historical loss ratios. The Company's allowance for loan losses
increased $84,000 to $1.9 million at September 30, 1997 from $1.8 million on
December 31, 1996. At September 30, 1997, the Company had $830,000, or .24% of
total assets classified as substandard, doubtful, or loss as compared to
classified assets of $263,000, or .09% of assets at December 31, 1996. The
increase was due primarily to a $548,000 increase in foreclosed or repossessed
assets held for sale which consisted of four single-family residences and one
automobile, the largest of which was a $239,000 single-family residence. Each
of these factors was considered by Management when it evaluated 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
<PAGE> 11
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>
09/30/97 12/31/96 12/31/95
-------- -------- --------
<S> <C> <C> <C>
(Dollars In Thousands)
Loans Delinquent/Past Maturity 90 Days or More $ 457 $ 258 $ 35
Foreclosed or Repossessed Assets 548 0
-------- -------- --------
Total Non-performing Assets $ 1,005 $ 258 $ 35
======== ======== ========
Total Non-Performing Assets as a
Percentage of Total Assets .29% .09% .01%
</TABLE>
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of funds are deposits, the receipt of
principal and interest payments on loans and MBS, investments and FHLB
advances. While the scheduled repayments on loans and securities as well as
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
short-term borrowings to assure its ability to meet demands for withdrawals and
repayment of short-term borrowings. During the month ended September 30, 1997,
the Bank's liquidity ratio averaged 8.23%.
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
September 30, 1997 the Company had outstanding commitments to fund $1.9 million
in mortgage loans, $8.8 million in undisbursed loans-in-process and $5.3
million in undisbursed equity lines and letters-of-credit. These commitments
are expected to be funded through a combination of FHLB advances, deposit
growth and the receipt of cash from daily operations. Management believes that
the Company's liquidity resources will be sufficient to fund anticipated
liquidity needs.
REGULATORY CAPITAL
At September 30, 1997, the Bank exceeded all regulatory capital
requirements with tangible capital of $27.1 million (8.0% of tangible assets);
core capital of $27.1 million (8.0% of adjusted tangible assets); and
risk-based capital of $29.0 million (14.8% of risk-weighted assets). Under
current regulatory guidelines, the Bank is considered to be "well-capitalized".
Part II - Other Information
Item 1 - Legal Proceedings
<PAGE> 12
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, which involve amounts in the aggregate which management
believes are not 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 October 8, 1997, the Company held a Special Meeting of the
Stockholders to vote on a proposal to adopt the Agreement and Plan of
Reorganization by and between Sho-Me Financial Corp. and Union
Planters Corporation and a related Plan of Merger.
(b) At the special meeting, the proposal to adopt the Agreement and Plan
of Reorganization and the related Plan of merger was approved.
(c) The results of the vote on the aforementioned issue is listed below:
<TABLE>
<CAPTION>
VOTES: FOR AGAINST ABSTAIN NON-VOTES
------ --- ------- ------- ---------
<S> <C> <C> <C> <C> <C>
1,498,636 971,140 42,141 27,807 457,548
</TABLE>
Item 5 - Other Information
None
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 September 30, 1997.
None.
<PAGE> 13
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: November 12, 1997 /s/ Raymond G. Merryman
------------------ -------------------------------------
Raymond G. Merryman
President and Chief Executive Officer
Date: November 12, 1997 /s/ Greg A. Steffens
----------------- -------------------------------------
Greg A. Steffens
Chief Financial Officer
<PAGE> 14
Exhibit Index
Exhibit No. Description
- ----------- -----------
Exhibit - 27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
QUARTERLY REPORT ON FORM 10-Q FOR THE FISCAL QUARTER ENDED SEPTEMBER 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-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 1,640,408
<INT-BEARING-DEPOSITS> 4,970,803
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 23,638,799
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 299,731,035
<ALLOWANCE> 1,914,477
<TOTAL-ASSETS> 344,849,191
<DEPOSITS> 201,043,741
<SHORT-TERM> 36,000,000
<LIABILITIES-OTHER> 3,584,929
<LONG-TERM> 73,082,378
0
0
<COMMON> 20,344,701
<OTHER-SE> 10,793,442
<TOTAL-LIABILITIES-AND-EQUITY> 344,849,191
<INTEREST-LOAN> 6,203,791
<INTEREST-INVEST> 441,664
<INTEREST-OTHER> 40,430
<INTEREST-TOTAL> 6,685,885
<INTEREST-DEPOSIT> 2,411,186
<INTEREST-EXPENSE> 3,943,243
<INTEREST-INCOME-NET> 2,742,643
<LOAN-LOSSES> 0
<SECURITIES-GAINS> 6,773
<EXPENSE-OTHER> 1,311,219
<INCOME-PRETAX> 1,808,139
<INCOME-PRE-EXTRAORDINARY> 1,808,139
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,123,809
<EPS-PRIMARY> .75
<EPS-DILUTED> .75
<YIELD-ACTUAL> 8.30
<LOANS-NON> 450,154
<LOANS-PAST> 6,723
<LOANS-TROUBLED> 545,957
<LOANS-PROBLEM> 1,711,482
<ALLOWANCE-OPEN> 1,851,798
<CHARGE-OFFS> 0
<RECOVERIES> 18,065
<ALLOWANCE-CLOSE> 1,914,477
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 23,813
</TABLE>
