SOUTHERN MISSOURI BANCORP, INC.
FORM 10-QSB
FOR THE QUARTER ENDED SEPTEMBER 30, 1997
INDEX
Page No.
PART I - Financial Information
Item 1. Financial Statements (Unaudited)
Consolidated Statements of Financial Condition 1
Consolidated Statements of Income 2
Consolidated Statements of Cash Flows 3-4
Notes to Consolidated Financial Statements 5
(Unaudited)
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations 6-15
PART II - Other Information
Item 1. Legal Proceedings 16
Item 2. Changes in Securities 16
Item 3. Defaults upon Senior Securities 16
Item 4. Submission of Matters to a
Vote of Security-Holders 16
Item 5. Other Information 16
Item 6. Exhibits and Reports on Form 8-K 16-17
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
__________
FORM 10-QSB
(Mark One)
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period 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 0-23406
Southern Missouri Bancorp, Inc.
(Exact name of registrant as specified in its charter)
Delaware 43-1665523
(State or jurisdiction of incorporation) (IRS employer id. no.)
531 Vine Street Poplar Bluff, MO 63901
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code 573-785-1421
Not Applicable
Former name, former address and former fiscal year, if changed
since last report.
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
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practicable
date: 1,612,094 as of October 31, 1997.
SOUTHERN MISSOURI BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Unaudited)
September 30, June 30,
ASSETS 1997 1997
Cash and cash equivalents $ 7,472,794 3,425,175
Certificates of deposit 91,121 91,199
Investment and mortgage-backed and
related securities:
Available for sale - at estimated
market value (amortized cost of
$34,456,403 and $39,571,322 at
September 30, 1997 and June 30, 1997,
respectively) 34,358,233 39,577,474
Held to maturity - at amortized cost
(estimated market value of $4,909,487
and $4,904,989 at September 30, 1997
and June 30, 1997, respectively) 4,762,313 4,780,845
Stock in Federal Home Loan Bank of
Des Moines 1,519,700 1,519,700
Loans receivable, net 111,943,066 107,782,977
Accrued interest receivable 961,205 1,079,967
Foreclosed real estate, net 77,661 54,838
Premises and equipment 1,759,524 1,682,075
Prepaid expenses and other assetS 351,565 398,784
Total assets $ 163,297,182 160,393,034
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits $ 117,294,449 118,704,601
Advances from borrowers for taxes
and insurance 415,095 321,609
Advances from FHLB of Des Moines 17,531,338 13,535,321
Accounts payable and other liabilities 727,413 582,825
Accrued interest payable 952,549 848,435
Total liabilities 136,920,844 133,992,791
Commitments and contingencies - -
See accompanying notes to consolidated financial statements.
<PAGE>
SOUTHERN MISSOURI BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Unaudited)
September 30, June 30,
1997 1997
Preferred stock, $.01 par value; 500,000
shares authorized; none issued and
outstanding - -
Common stock, $.01 par value; 3,000,000
shares authorized; 1,803,201 shares
issued and outstanding 18,032 18,032
Additional paid-in capital 17,617,691 17,579,778
Retained earnings - substantially
restricted 12,639,315 12,476,753
Treasury stock of 191,107 shares at
September 30, 1997 and 169,898 shares
at June 30, 1997, at cost (3,048,263) (2,680,183)
Common stock acquired by ESOP (663,149) (714,160)
Common stock acquired by MRP (248,506) (279,368)
Unrealized gain on investment and
mortgage-backed securities
available for sale 64,793 2,966
Minimum pension liability (3,575) (3,575)
Total stockholders' equity 26,376,338 26,400,243
Total liabilities and
stockholders' equity $ 163,297,182 160,393,034
See accompanying notes to consolidated financial statements.
<PAGE>
SOUTHERN MISSOURI BANCORP, INC AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended
September 30,
1997 1996
Interest income:
Loans receivable $ 2,196,470 1,949,722
Investment securities 255,298 344,681
Mortgage-backed related securities 395,123 566,246
Other interest-earning assets 28,844 15,399
Total interest income 2,875,735 2,876,048
Interest expense:
Deposits 1,374,213 1,412,466
Advances from FHLB 232,724 169,677
Total interest expense 1,606,937 1,582,143
Net interest income 1,268,798 1,293,905
Provision for loan losses 22,500 17,500
Net interest income after
provision for loan losses 1,246,298 1,276,405
Noninterest income:
Gain on mortgage-backed securities,
available for sale 31,612 -
Insurance commissions 71,594 89,706
Banking service charges 48,876 38,645
Net income on foreclosed real estate (554) (2,532)
Loan late charges 12,853 10,542
Other 8,414 7,910
Total noninterest income 172,795 144,271
Noninterest expense:
General and administrative:
Compensation and benefits 589,907 555,749
Occupancy and equipment 79,742 79,825
SAIF special assessment - 779,184
SAIF deposit insurance premium 29,063 70,322
Provisions for losses on foreclosed
real estate 7,889 (3,422)
Professional fees 37,092 24,108
Advertising 31,786 22,352
Postage and office supplies 26,091 23,176
Other 65,409 64,292
Total noninterest expense 866,979 1,615,586
Income (loss) before income taxes 552,114 (194,910)
Income taxes 194,963 (96,663)
Net income (loss) $ 357,151 (98,247)
Earnings per share $ .22 (.06)
Dividends per share $ .125 .125
See accompanying notes to consolidated financial statements.
<PAGE>
SOUTHERN MISSOURI BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended
September 30,
1997 1996
Cash flows from operating activities:
Net income(loss) $ 357,151 (98,247)
Items not requiring (providing) cash:
Depreciation and amortization 51,753 41,159
MRP expense and ESOP expense 119,786 104,784
Gain on sale of mortgage-backed
securities - available for sale (31,612) -
Provision for loan losses 22,500 17,500
Loss (gain) on foreclosed real
estate, net 7,889 (3,422)
Net amortization of deferred income,
premiums, and discounts 33,031 31,872
Changes in:
Accrued interest receivable 118,762 82,539
Prepaid expenses and other assets 39,401 42,462
Accounts payable and other
liabilities 108,166 721,592
Accrued interest payable 104,114 73,389
Net cash provided by operating
activities 930,941 1,013,628
Cash flows from investing activities:
Net increase in loans (4,207,183) (4,224,069)
Proceeds from maturing investment
securities, available for sale 1,680,000 1,933,400
Proceeds from maturing investment
securities, held to maturity - 30,000
Proceeds from sales of mortgage-backed
securities, available for sale 2,303,652 -
Proceeds from maturing mortgage-backed
securities, available for sale 1,328,063 1,266,979
Proceeds from maturing mortgage-backed
securities, held to maturity 16,848 12,576
Purchase of premises and equipment (121,384) (160,716)
Proceeds from sale of foreclosed
real estate - 3,400
Net cash provided(used)in
investing activities 999,996 (1,138,430)
See accompanying notes to consolidated financial statements.
SOUTHERN MISSOURI BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended
September 30,
1997 1996
Cash flows from financing activities:
Net decrease in deposits (1,410,152) (571,481)
Net increase in advances from
borrowers for taxes and insurance 93,486 79,430
Net increase in advances from
FHLB of Des Moines 3,996,017 996,323
Dividends on common stock (194,589) (192,621)
Payments to acquire treasury stock (368,080) (983,588)
Net cash provided (used) by
financing activities 2,116,682 (671,937)
Increase (decrease) in cash
and cash equivalents 4,047,619 (796,739)
Cash and cash equivalents
at beginning of period 3,425,175 4,477,872
Cash and cash equivalents
at end of period $ 7,472,794 3,681,133
Supplemental disclosures of
cash flow information:
Noncash investing and financing activities
Conversion of loans to
foreclosed real estate $ 32,670 112,660
Conversion of foreclosed real
estate to loans $ 9,000 11,400
Cash paid during the period for
Interest (net of interest credited) $ 404,847 506,334
Income taxes $ 50,000 -
See accompanying notes to consolidated financial statements
<PAGE>
SOUTHERN MISSOURI BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(1> The information contained in the accompanying consolidated
financial statements is unaudited. In the opinion of
management, the financial statements contain all
adjustments (none of which were other than normal recurring
accruals) necessary for a fair statement of the results of
operations for the interim periods. These financial
statements should be read in conjunction with the audited
consolidated financial statements contained in the
Company's 1997 Annual Report to Stockholders. The results
of operations for the three months ended September 30, 1997
are not necessarily indicative of the results of operations
for the entire fiscal year.
<PAGE>
SOUTHERN MISSOURI BANCORP, INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
On April 13, 1994, Southern Missouri Savings Bank (Savings Bank)
completed its conversion from mutual to stock form and became a
wholly-owned subsidiary of a newly formed Delaware holding
company, Southern Missouri Bancorp, Inc. (Company). The Company
sold 1,785,375 shares of common stock at $10 per share in
conjunction with the subscription offering to the Savings Bank
Employee Stock Ownership Plan (ESOP), eligible account holders
and other members of the Savings Bank. In addition, 17,826
shares of authorized common stock were granted to the Savings
Bank's Management Recognition Plan to fulfill its order in the
subscription offering. Net proceeds of the sale of common stock
in the subscription offering were $15,160,161, after deduction of
conversion costs of $729,369. The Company retained 50% of the
net conversion proceeds less the funds used to make the ESOP loan
to the Savings Bank for the purchase of shares of common stock
for the Savings Bank's ESOP and used the balance of the net
proceeds to purchase all of the stock of the Savings Bank in the
conversion.
The Company has no significant assets other than common stock of
the Savings Bank and net proceeds retained by the Company
following the conversion. The Company's principal business is
the business of the Savings Bank. Therefore, the discussion in
the Management's Discussion and Analysis of Financial Condition
and Results of Operations relates primarily to the Savings Bank
and its operations.
Certain statements in this report which relate to the Company's
plans, objectives or future performance may be deemed to be
forward-looking statements within the meaning of Private
Securities Litigation Act of 1995. Such statements are based on
management's current expectations. Actual strategies and results
in future periods may differ materially from those currently
expected because of various risks and uncertainties. Additional
discussion of factors affecting the Company's business and
prospects is contained in periodic filings with the Securities
and Exchange Commission.
Supervisory Agreement
On December 21, 1994, the Savings Bank voluntarily entered into a
Supervisory Agreement with the OTS, its primary federal
regulator. The Supervisory Agreement generally concerns the
Savings Bank's investment portfolio and, more specifically,
focuses on the reporting, monitoring, and assessment of interest
rate risk in connection with the Savings Bank's portfolio of
collateralized mortgage obligations. In an effort to comply with
SOUTHERN MISSOURI BANCORP, INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued
the Supervisory Agreement, the Savings Bank has hired a Chief
Financial Officer who serves primarily as a senior investment
officer. In addition, the Savings Bank revised its Investment
Policy to conform more closely to the OTS' s policy on securities
activities and implemented additional procedures to review the
investment activities and monitor interest rate risk management.
In connection with the Savings Bank's most recent regulatory
examination conducted during the fourth quarter of 1996, OTS
examiners noted the Savings Bank's noncompliance with the
Supervisory Agreement. Accordingly, additional actions,
primarily relating to the Savings Bank's internal operations and
lending activities, have been imposed by the OTS on the Savings
Bank's management to achieve compliance and improve the
operations of the Savings Bank. As a result of the most recent
OTS examination and existing Supervisory Agreement, certain
growth restrictions have been placed on the Savings Bank.
Additionally, as a result of the Savings Bank s current
regulatory status, the Savings Bank will no longer be eligible
for the lowest assessment rate for deposit insurance. Instead,
the assessment rate increased from .065% to .095% of deposits
beginning July 1, 1997. This will result in approximately $9,000
in additional costs per quarter for deposit insurance.
During the third quarter of fiscal 1997, the Savings Bank
exceeded the growth restriction imposed by the Supervisory
Agreement and, as a result, may be subject to sanction for
violation of the Supervisory Agreement. The Savings Bank sought
an exemption from compliance with the terms of the Supervisory
Agreement for its growth during the third quarter and the request
was denied. If the OTS determines that a material violation has
occurred the OTS may impose the sanctions discussed below. The
Savings Bank achieved compliance with the growth limitations
during the fourth quarter of fiscal 1997. The Savings Bank
requested a waiver of the growth limitations for future periods
and received permission for an asset growth rate of 2 percent per
quarter beginning with the quarter ending September 30, 1997.
A savings association engaging in unsafe and unsound practices is
subject to a variety of regulatory enforcement actions.
Management believes that the growth restrictions have not to date
had an adverse effect on the Savings Bank's operations. In the
future, the continued existence of growth restrictions could have
a material adverse effect on the operations of the Savings Bank,
and, consequently, on the operations of the Company. Failure to
achieve compliance with the Supervisory Agreement could lead to
further regulatory enforcement actions, including the assessment
of civil money penalties against the Savings Bank and/or its
officers and directors. To the Savings Bank's knowledge, no such
SOUTHERN MISSOURI BANCORP, INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued
actions have been initiated. The Supervisory Agreement will
remain in effect until it is terminated by the OTS.
Quantitative and Qualitative Disclosures About Market Risk
In January, 1997, the SEC adopted new rules about registrants
accounting policies for derivatives, and quantitative and
qualitative disclosures about market risk (Item 305 of Regulation
S-K) inherent in derivative financial instruments, other
financial instruments, and derivative commodity instruments.
Registrants are required to disclose quantitative information
about market risk, including interest rate risk, foreign currency
exchange rate risk, commodity price risk, and other market or
price risks (equity price risk) for trading and other than
trading portfolios in accordance with one or more of three
alternatives. The disclosure alternatives include tabular
presentation of fair values of market risk sensitive financial
instruments and contract terms sufficient to determine cash flows
from those instruments, categorized by maturity dates;
sensitivity analysis of potential losses in future earnings, fair
values or cash flows of market risk sensitive financial
instruments from selected hypothetical changes in market rates or
prices; and value at risk disclosures of potential losses in
future earnings, fair values or cash flows of market risk
sensitive instruments over a selected period using a selected
likelihood of occurrence from changes in market rates or prices.
Registrants are also required to disclose qualitative information
about market risk for trading and other than trading portfolios.
Qualitative disclosures include the registrant's primary market
risk, including interest rate risk, foreign currency exchange
rate risk, commodity price risk, and other market or price risks
(equity price risk); approach to managing these risks, including
discussion of objectives, strategies and instruments used; and
changes in either of the above two qualitative disclosures
compared to the most recent fiscal year and if known, in future
periods.
The Savings Bank does not purchase derivative financial
instruments or other financial instruments for trading purposes.
Further, the Savings Bank is not subject to any foreign currency
exchange rate risk, commodity price risk or equity price risk.
The Savings Bank is subject to interest rate risk. A discussion
of the Savings Bank's quantitative and qualitative disclosures
about market risk is discussed in the following paragraphs.
The Savings Bank's principal financial objective is to achieve
long-term profitability while reducing its exposure to
fluctuating interest rates. The Savings Bank has an exposure to
SOUTHERN MISSOURI BANCORP, INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued
interest rate risk, including short-term U.S. prime interest
rates. The Savings Bank has sought to reduce exposure of its
earnings to changes in market interest rates by managing the
mismatch between asset and liability maturities and interest
rates. The principal element in achieving this objective is to
increase the interest-rate sensitivity of the Savings Bank's
assets by originating loans with interest rates subject to
periodic adjustment to market conditions. Accordingly, when
possible, the Savings Bank has emphasized the origination of
adjustable-rate mortgage (ARM) loans for retention in its
portfolio, and originates a limited amount of fixed-rate loans.
In addition the Savings Bank maintains the majority of its
investment portfolio with maturities up to ten years. The
Savings Bank relies on retail deposits as its primary source of
funds. Management believes retail deposits, compared to brokered
deposits, reduce the effects of interest rate fluctuations
because they generally represent a more stable source of funds.
As part of its interest rate risk management strategy, the
Savings Bank promotes transaction accounts and one- to three-year
certificates of deposit. Management does not anticipate that
either financial objectives, strategies or instruments used, to
reduce its interest rate risk exposure will change significantly
in the near future.
The OTS provides a net market value methodology to measure the
interest rate risk exposure of thrift institutions. This
exposure is a measure of the potential decline in the net
portfolio value (NPV) of the institution based upon the effect of
an assumed 200 basis point increase or decrease in interest
rates. NPV is the present value of the expected net cash flows
from the institution's financial instruments (assets, liabilities
and off-balance sheet contracts). Cash and cash equivalents and
other assets and liabilities are valued at their carrying
amounts. Loans, deposits and investments are valued taking into
consideration similar maturities, related discount rates and
applicable prepayment assumptions. Under OTS regulations, an
institution's normal level of interest rate risk in the event of
this assumed change in interest rates is a decrease in the
institution's NPV in an amount not exceeding 2% of the present
value of its assets. Utilizing this measurement concept, at June
30, 1997, the change in the Savings Bank's NPV as a percent of
the present value of its assets was negative 2.36% in the event
of a 200 basis point increase in interest rates. The interest
rate risk rule did not have a significant effect on risk based
capital at June 30, 1997. This procedure for measuring interest
rate risk was developed by the OTS to replace the gap analysis
(the difference between interest-earning assets and interest-
bearing liabilities that mature or reprice within a specific time
period).
SOUTHERN MISSOURI BANCORP, INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued
The following table, sets forth as of the most recent date
available from the OTS, June 30, 1997, the estimated changes in
fair value of equity, based on the indicated interest rate
environments:
Change (In
Basis Points) NPV as % of PV
in Interest Estimated Net Portfolio Value of Assets
Rates $ Amount $ Change % Change NPV Ratio BP Change
(Dollars in Thousands)
+400 $ 13,510 (10,375) (43)% 9.23% (582)bp
+300 16,650 (7,235) (30) 11.10 (395)bp
+200 19,455 (4,430) (19) 12.69 (236)bp
+100 21,927 (1,957) (8) 14.03 (101)bp
0 23,885 15.04
-100 25,246 1,361 6 15.72 67 bp
-200 26,308 2,424 10 16.21 117 bp
-300 27,455 3,571 15 16.75 170 bp
-400 28,878 4,993 21 17.40 236 bp
As with any method of measuring interest rate risk, certain
shortcomings are inherent in the method of analysis presented in
the foregoing table. For example, although certain assets and
liabilities may have similar maturities or periods to repricing,
they may react in different degrees to changes in market interest
rates. Also, the interest rates on certain types of assets and
liabilities may fluctuate in advance of changes in market
interest rates, while interest rates on other types may lag
behind changes in market rates. Additionally, certain assets,
such as ARM loans, have features which restrict changes in
interest rates on a short term basis and over the life of the
asset. Further, in the event of a change in particular, short-
term U.S. prime interest rates, expected rates of prepayments on
loans and early withdrawals from certificates could likely
deviate significantly from those assumed in calculating the
table.
Year 2000
The Savings Bank is reviewing computer applications with its
outside data processing software vendors to ensure operational
and financial systems are not adversely affected by Year 2000
software failures. All major customer applications are processed
internally by the Savings Bank' s data processing department. The
software vendors have indicated that they expect to modify
existing programs to make them year 2000 compliant. Management
of the Savings Bank is unable to estimate any additional expense
SOUTHERN MISSOURI BANCORP, INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued
related to this issue. Any year 2000 compliance failures could
result in additional expense to the Savings Bank.
Liquidity and Capital Resources
The Savings Bank's principal sources of funds are cash receipts
from deposits, loan repayments by borrowers and net income. The
Savings Bank has an agreement with the Federal Home Loan Bank
(FHLB) of Des Moines to provide cash advances, should the Savings
Bank need additional funds. Commitments to originate fixed rate
and adjustable-rate mortgage loans at September 30, 1997 were
approximately $1,213,000 and $2,824,000, respectively.
For regulatory purposes, liquidity is measured as a ratio of cash
and certain investments to withdrawable deposits and short-term
borrowings. The present minimum level of liquidity required by
regulation is 5%. The Savings Bank's liquidity ratio was
approximately 9.8% at September 30, 1997.
Investment and mortgage-backed and related securities with a
carrying value of $34,358,000 are classified as available for
sale at September 30, 1997. Such securities are carried at fair
value and can be liquidated with no further impact on capital.
The Company's unrealized gains and losses on investment and
mortgage-backed and related securities net of applicable income
taxes, are recorded in stockholders' equity.
Under the capital adequacy guidelines and regulatory framework
for prompt corrective action, the Savings Bank is required to
maintain tangible capital, core capital, tier 1 risk-based
capital (core capital to risk-weighted assets), and risk-based
capital of 1.5%, 4%, 4%, and 8%. The Savings Bank met such
capital requirements at September 30, 1997.
<PAGE>
SOUTHERN MISSOURI BANCORP, INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued
The following table presents the Savings Bank's capital position
relative to its regulatory capital requirements at September 30,
1997:
Unaudited Regulatory Capital
Tier 1
Tangible Core Risk-Based Risk-Based
Stockholders' equity
per consolidated
financial
statements $ 26,376,338 26,376,338 26,376,338 26,376,338
Stockholders' equity of
Southern Missouri Bancorp,
Inc. not available
for regulatory capital
purposes (4,939,379) (4,939,379) (4,939,379) (4,939,379)
GAAP capital 21,436,959 21,436,959 21,436,959 21,436,959
General valuation
allowances - - - 738,958
Non-includable unrealized
gain on investment and
mortgage-backed and related
securities available for
sale (10,756) (10,756) (10,756) (10,756)
Non-includable deferred
tax assets (190,323) (190,323) (190,323) (190,323)
Non-includable intangible
assets (48,216) (48,216) (48,216) (48,216)
Regulatory
capital 21,187,664 21,187,664 21,187,664 21,926,622
Regulatory capital
requirement (2,384,000) (4,769,000) (3,459,000) (6,917,000)
Regulatory capital
- excess $ 18,803,664 16,418,664 17,728,664 15,009,622
Regulatory capital
ratio 13.33% 13.33 24.50% 25.36%
Regulatory capital
requirement 1.50 4.00 4.00 8.00
Regulatory capital
ratio - excess 11.83% 9.33% 20.50% 17.36%
SOUTHERN MISSOURI BANCORP, INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued
Financial Condition
Total assets increased from $160,393,000 at June 30, 1997 to
$163,297,000 at September 30, 1997. Cash flows from sales,
maturities and prepayments of securities, advances from the FHLB
of Des Moines, and cash and cash equivalents were used to
originate loans and fund deposits. The Savings Bank intends to
borrow from the FHLB when the cost of such borrowings is less
than the overall cost of retail deposits or in the event of other
cash flow needs. Premises and equipment increased due to
upgrading of the data processing system. Accounts payable and
other expenses increased due to an increase in income taxes
payable. This was a result of recording net income in 1997
versus a net loss in 1996.
Additional paid-in capital and common stock acquired by the ESOP
and MRP changed as a result of the recognition of compensation
expense for the ESOP and MRP. Unrealized gain on investment
securities and mortgage-backed and related securities available
for sale, net of income tax changed from a gain of $3,000 at June
30, 1997 to a gain of $65,000 at September 30, 1997. The balance
is expected to fluctuate in the future based on changes in
interest rates, as well as the amount and maturities of
securities and mortgage-backed securities available for sale.
COMPARISON OF OPERATING RESULTS FOR THE THREE MONTHS ENDED
SEPTEMBER 30, 1997 AND 1996
Net Income
Net income for the three-months ended September 30, 1997 was
$357,000 compared with a net loss of $98,000 for the three-months
ended September 30, 1996. The loss for 1996 was due to recording
a charge to income of $779,000 related to a special assessment
for the Savings Association Insurance Fund(SAIF).
Net Interest Income
Net interest income decreased by $25,000 from $1.29 million for
1996 to $1.27 million in 1997. Net interest income decreased due
to a lower interest rate spread and partially offset by a higher
interest-earning assets. Interest expense increased principally
due to an increase in average interest-bearing liabilities.
Interest Income
Interest income was $2.88 million for the three-months ended
September 30, 1996 and 1997.
SOUTHERN MISSOURI BANCORP, INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued
Interest on loans receivable increased from $1.95 million in 1996
to $2.20 million in 1997 as a result of higher average loans
outstanding for 1997, offset by a slightly lower yield. The
weighted-average yield on loans decreased from 7.84% for 1996 to
7.76% for 1997. Interest on mortgage-backed securities (MBSs)
decreased due to a lower average balance and a lower weighted
average yield. The weighted-average yield on mortgage-backed
securities decreased from 6.53% in 1996 to 6.35% in 1997.
Interest on investment securities decreased due to lower interest
rates and a lower average balance. The weighted-average yield on
investment securities decreased from 6.46% in 1996 to 5.75% in
1997.
Interest on other interest-earning assets increased as a result
of higher average balances. Interest rates on overnight funds
and short term deposits remained substantially the same. The
components of interest-bearing assets change from time to time
based on the availability and interest rates of loans, investment
securities, and MBSs.
<PAGE>
SOUTHERN MISSOURI BANCORP, INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued
Interest Expense
Interest expense increased by $25,000 from $1.58 million in 1996
to $1.61 million in 1997 due to higher average interest-bearing
liabilities and slightly higher interest rates. The weighted-
average rate on interest-bearing liabilities increased from 4.78%
for the three-months ended September 30, 1996 to 4.80% for the
three-months ended September 30, 1997.
Provision for Loan Losses
Provision for loan losses are charged to earnings to bring the
total allowance for loan losses to a level considered adequate by
management to provide for loan losses based on prior loss
experience, known and inherent risks in the portfolio, adverse
situations that may affect the borrower's ability to repay, the
estimated value of any underlying collateral and current economic
conditions. Management also considers other factors relating to
the collectibility of the Savings Bank's loan portfolio.
For the three-months ended September 30, 1997, the Savings Bank
established a provision for loan losses of $22,500 compared with
$17,500 for the three-months ended September 30, 1996.
Following is a summary of activity in the allowance for loan
losses for the three months ended September 30, 1997 and 1996:
1997 1996
Balance, beginning of period $ 706,487 627,564
Loans charged off - consumer (1,377) -
Recoveries of loans previously
charged off - consumer 11,348 -
Net recoveries (charge-offs) 9,971 -
Provision charged to expense 22,500 17,500
Balance, end of period $ 738,958 645,064
Ratio of net charge-offs during
the period to average loans
outstanding during the period .01% -
The book value of non-accrual loans at September 30, 1997 was
$1,358,000 compared to $1,380,000 at June 30, 1997. The average
balance of nonaccrual loans for the three months ended September
30, 1997 was approximately $1,347,000. Allowance for losses on
nonaccrual loans amounted to approximately $31,000 at September
30, 1997. For the three months ended September 30, 1997 and
1996, gross interest income which would have been recorded had
nonaccrual loans been current in accordance with their original
terms amounted to approximately $30,000 and $13,000,
respectively. The amount of interest income included in the
Company's net earnings for the three months ended September 30,
1997 and 1996 was approximately $20,000 and $13,000,
respectively.
The following table sets forth information with respect to the
Savings Bank's nonaccrual loans at September 30, 1997 and June
30, 1997:
Loans accounted for on a
nonaccrual basis:
Residential real estate $ 837 922
Commercial real estate 306 279
Commercial - -
Consumer 46 24
Mobile homes 169 155
Total $ 1,358 1,380
Total loans delinquent 90 days
or more to net loans 1.21% 1.28%
Nonaccrual residential real estate loans at September 30, 1997
consists of 37 loans in the Savings Bank's market area that range
in balances from $2,000 to $81,000. On a majority of these
loans, the borrowers are communicating and cooperating with the
Savings Bank and are making payments, but are unable to bring
their loans to a current status. Management anticipates no
significant loss on these loans.
At September 30, 1997, the Savings Bank had an aggregate of
$287,000 of loans to a borrower that were secured by commercial
property. As of that date, these loans were 90 to 200 days past
due. Management is in the process of foreclosing on these loans.
Management believes that the loans are well secured and a loss on
these loans, if any, will be minimal.
Nonaccrual mobile home loans at September 30, 1997 consists of
loans made by a local dealer and underwritten by the Savings
Bank. Management has assigned an officer to these loans in an
effort to reduce the level of past due loans. The dealer is
cooperating with the Savings Bank in bringing the mobile homes to
his lot, refurbishing them and then reselling them. The Savings
Bank has discontinued underwriting new loans for this dealer,
except for the mobile homes that he is reselling. Reserves for
losses maintained by the dealer at September 30, 1997 totaled
$50,000.
Management believes that the allowance for loan losses is
adequate. The Savings Bank does not accrue interest on loans
more than 90 days past due.
SOUTHERN MISSOURI BANCORP, INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued
Noninterest Income
Noninterest income increased from $144,000 for the three-months
ended September 30, 1996 to $173,000 for 1997. The Savings Bank
realized net gains on sales of MBSs of $32,000 in 1997, compared
to none in 1996. Gains on sales of MBSs are not a stable source
of income and no assurance can be given that the Savings Bank
will generate such gains in the future. Commissions on insurance
decreased from $90,000 for 1996 to $72,000 for 1997. Banking
service charges increased from $39,000 for 1996 to $49,000 for
1997 due to increased checking account activity.
Noninterest Expense
Noninterest expense decreased from $1,616,000 for the three
months ended September 30, 1996 to $867,000 for the three months
ended September 30, 1997.
Legislation was enacted September 30, 1996 to recapitalize the
Savings Association Insurance Fund. The Savings Bank was
assessed .657 percent of deposits at March 31, 1995. This
assessment of $779,000 was paid on November 28, 1996.
Compensation and benefits increased from $556,000 for 1996 to
$590,000 for 1997 due to salary increases and additional
employees. SAIF deposit insurance premium decreased from $70,000
in 1996 to $29,000 for 1997 as a result of a substantially lower
assessment rate effective January 1, 1997. Provision for losses
on foreclosed real estate was a net credit of $3,000 for 1996 and
a net loss of $8,000 for 1997. Professional fees, which includes
supervisory examination fees, increased from $24,000 for 1996 to
$37,000 for 1997 as a result of legal fees paid regarding the
Supervisory Agreement. Advertising increased from $22,000 for
1996 to $32,000 for 1997 due to an increase in cost and an
increase in advertising activity in general.
Income Taxes
Income tax expense is $195,000 in 1997 compared to a tax benefit
of $97,000 for 1996 as a result of the SAIF special assessment.
The effective rate of the tax benefit for 1996 was affected by
the relationship of nontaxable municipal interest income to
income before income taxes.
<PAGE>
SOUTHERN MISSOURI BANCORP, INC. AND SUBSIDIARY
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings
There are no material legal proceedings to which the Holding
Company or the Savings Bank is a party or of which any of
their property is subject. From time to time, the Savings
Bank is a party to various legal proceedings incident to its
business.
Item 2 - Changes in Securities
None
Item 3 - Defaults upon Senior Securities
Not applicable
Item 4 - Submission of Matters to a Vote of Security-Holders
None
Item 5 - Other Information
None
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits: Exhibit 11
(b) Reports on Form 8-K: No reports on Form 8-K have been
filed during the quarter for which this report is
filed.
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.
SOUTHERN MISSOURI BANCORP, INC.
(Registrant)
Date: November 13, 1997 BY: Donald R. Crandell
Donald R. Crandell,
Chief Executive Officer
Chief Financial Officer and
Duly Authorized Officer
Exhibit 11
SOUTHERN MISSOURI BANCORP, INC. AND SUBSIDIARY
STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS
Three Months Ended
September 30,
1997 1996
Primary
Average shares
outstanding $ 1,556,888 1,572,921
Net effect of dilutive
stock options - based
on the treasury stock
method using average
market price 48,185 33,907
Total 1,605,073 1,606,828
Net income (loss) $ 357,151 (98,247)
Earnings per share $ .22 (.06)
Fully Diluted
Average shares
outstanding 1,556,888 1,572,921
Net effect of dilutive
stock options - based
on the treasury stock
method using the period
end market price, if
greater than average
market price 48,920 36,442
Total 1,605,808 1,609,363
Net income (loss) $ 357,151 (98,247)
Earnings per share $ .22 (.06)
<PAGE>
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