UNITED STATES
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 March 31, 1998
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)
(573) 785-1421
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 May 5, 1998
Common Stock, Par Value $.01 1,637,913 Shares
SOUTHERN MISSOURI BANCORP, INC. AND SUBSIDIARY
FORM 10-QSB
INDEX
PART I. Financial Information (Unaudited) PAGE NO.
Item 1. Consolidated Condensed Financial Statements
- Consolidated Statements of Financial Condition 3
- Consolidated Condensed Statements of Income 4
- Consolidated Statements of Cash Flows 5-6
- Notes to Consolidated Financial Statements 7-8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9-15
PART II. OTHER INFORMATION 16
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-Holders16
Item 5. Other Information 16
Item 6. Exhibits and Reports on Form 8-K 16-17
- Signature Page 18
PART I: FINANCIAL INFORMATION
Item I
SOUTHERN MISSOURI BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITIONS
(UNAUDITED)
March 31, June 30,
1998 1997
ASSETS
Cash and due from banks $ 3,135,799 $ 2,013,318
Interest bearing deposits in other
financial institutions 3,741,408 1,411,857
Cash and cash equivalents 6,877,207 3,425,175
Certificate of deposits - 91,199
Investment and mortgage-backed and
related securities:
Available for sale - at estimated
market value(amortized cost of
$23,194,391 and $39,571,322 at
March 31, 1998 and June 30, 1997,
respectively) 23,174,981 39,577,474
Held to maturity - at amortized
cost estimated, market value of
$4,814,000 and $4,905,000 at
March 31, 1998 and June 30, 1998,
respectively) 4,645,838 4,780,845
Loans receivable, net 118,000,082 107,782,977
Foreclosed assets held for
sale, net 100,642 54,838
Premises and equipment, net 1,887,137 1,682,075
Interest receivable
Loans 565,510 536,118
Investments 329,794 543,849
Investment in FHLB stock 1,519,700 1,519,700
Prepaid expenses and other assets 149,786 221,020
Deferred income taxes 187,560 77,764
Total Assets $ 157,438,237 $ 160,393,034
LIABILITEIS AND STOCKHOLDERS' EQUITY
Deposits $ 107,926,853 $ 118,704,601
Federal Home Loan Bank advances 21,573,372 13,535,321
Accrued Interest payable 701,702 848,435
Advances from borrowers for
taxes and insurance 242,092 321,609
Accounts payable and other
liabilities 518,719 470,667
Income tax payable 72,879 112,158
Total Liabilities 131,035,617 133,992,791
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 18,032 18,032
Additional paid-in capital 17,717,512 17,579,778
Unrealized appreciation(depreciation)
on investment and mortgage-backed
securities available-for-sale, net (12,810) 2,966
Retained Earnings, substantially
restricted 12,709,590 12,476,753
Unearned ESOP shares (561,126) (714,160)
Unearned MRP shares (184,360) (279,368)
Treasury Stock, at cost;197,895
and 169,898 shares at March 31, 1998
and June 30, 1997, respectively (3,280,643) (2,680,183)
Minimum pension liability (3,575) (3,575)
Total Stockhoders' Equity 26,402,620 26,400,243
Total Liabilities and Stockholders'
Equity $ 157,438,237 $ 160,393,034
See Notes to Consolidated Financial Statements
PART I: FINANCIAL INFORMATION
SOUTHERN MISSOURI BANCORP, INC AND SUBSIDIARY
CONSOLIDATED STATEMENTS FO INCOME
(unaudited)
FOR THE THREE MONTH PERIODS ENDED MARCH 31,1998 AND 1997
Three-months
ended
1998 1997
INTEREST INCOME:
Loans receivable $ 2,322,505 $ 2,016,137
Investment securities 206,048 259,845
Mortgage-backed and related securities 257,405 495,557
Other interest-earning assets 56,512 49,961
Total interest income 2,842,470 2,821,500
INTEREST EXPENSE:
Deposits 1,224,762 1,386,323
Federal Home Loan Bank advances 290,032 221,049
Total interest expense 1,514,794 1,607,372
NET INTEREST INCOME 1,327,676 1,214,128
PROVISION FOR LOAN LOSSES 262,500 22,500
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 1,065,176 1,191,628
NONINTEREST INCOME:
Banking service charges 46,670 41,453
Net realized gains on sales of
Available-for-sale securities 10,615 34,947
Insurance commissions 68,852 78,716
Net income on foreclosed assets 609 51,255
Loan late charges 22,414 11,251
Other income 11,987 349
161,147 217,971
NONINTEREST EXPENSE:
Compensation and benefits 642,730 561,430
Net occupancy and equipment 117,042 85,164
SAIF special assessment 0 0
SAIF deposit insurance premium 27,329 4,122
Legal and professional fees 69,579 46,308
Advertising 23,321 21,137
Postage and office supplies 38,691 36,415
Other operating expense 68,139 52,927
986,831 807,503
INCOME BEFORE INCOME TAXES 239,492 602,096
PROVISION FOR INCOME TAXES 76,480 186,964
NET INCOME $ 163,011 $ 415,132
Basic Earnings Per Common Share $ 0.11 $ 0.27
Diluted Earnings Per Commons Share $ 0.10 $ 0.26
Dividends Per Share $ 0.125 $ 0.125
See Notes to Consolidated Financial Statements
PART I: FINANCIAL INFORMATION
SOUTHERN MISSOURI BANCORP, INC AND SUBSIDIARY
CONSOLIDATED STATEMENTS FO INCOME
(unaudited)
FOR THE NINE MONTH PERIODS ENDED MARCH 31,1998 AND 1997
Nine-months
ended
1998 1997
INTEREST INCOME:
Loans receivable $ 6,798,499 $ 5,968,832
Investment securities 739,906 861,405
Mortgage-backed and related securities 964,650 1,610,017
Other interest-earning assets 111,678 79,929
Total interest income 8,614,734 8,520,183
INTEREST EXPENSE:
Deposits 3,897,952 4,166,857
Federal Home Loan Bank advances 812,529 561,135
Total interest expense 4,710,481 4,727,992
NET INTEREST INCOME 3,904,253 3,792,191
PROVISION FOR LOAN LOSSES 398,959 62,500
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 3,505,294 3,729,691
NONINTEREST INCOME:
Banking service charges 140,083 126,569
Net realized gains on sales of
Available-for-sale securities 79,643 34,912
Insurance commissions 225,182 261,090
Net income on foreclosed assets (8,248) 57,669
Loan late charges 49,484 35,498
Other income 30,135 14,217
516,279 529,955
NONINTEREST EXPENSE:
Compensation and benefits 1,816,075 1,619,514
Net occupancy and equipment 303,034 243,797
SAIF special assessment 0 779,184
SAIF deposit insurance premium 84,396 144,302
Legal and professional fees 171,898 107,019
Advertising 87,642 70,600
Postage and office supplies 94,494 88,104
Other operating expense 201,969 194,438
2,759,509 3,246,958
INCOME BEFORE INCOME TAXES 1,262,064 1,012,688
PROVISION FOR INCOME TAXES 449,027 271,251
NET INCOME $ 813,037 $ 741,437
Basic Earnings Per Common Share $ 0.53 $ 0.48
Diluted Earnings Per Commons Share $ 0.51 $ 0.47
Dividends Per Share $ 0.375 $ 0.375
See Notes to Consolidated Financial Statements
PART I: FINANCIAL INFORMATION
SOUTHERN MISSOURI BANCORP, INC. AND SUBSIDIRY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
Nine-months
Ended
March 31,
1998 1997
Cash Flows From Operating Activities:
Net income $ 813,037 $ 741,437
Items not requiring (providing) cash:
Depreciation and amortization 166,041 133,774
MRP expense and ESOP expense 385,776 322,310
Gain on sale of investment securities,
available for sale (9,206) (58,462)
(Gain)loss on sale of MBS,
available for sale (70,437) 23,550
Provision for loan losses 398,959 62,500
(Gain) loss on foreclosed real
estate, net 8,248 (71,451)
Net amortization of deferred income,
premiums, and discounts 42,163 88,450
Changes in:
Accrued interest receivable 184,663 196,022
Prepaid expenses and other assets 71,234 134,182
Accounts payable and other liabilities 48,052 842
Federal income taxes payable (39,297) 16,465
Accrued interest payable (146,733) 47,346
Net cash provided by operating
activities 1,852,500 1,636,965
Cash flows from investing activities:
Net increase in loans (10,630,868) (10,043,301)
Proceeds from sales of investment
securities, available for sale 2,491,094 2,085,304
Proceeds from maturing investment
securities, available for sale 5,435,000 3,738,955
Proceeds from maturing investment
securities, held to maturity - 90,000
Purchase of investment securities,
available for sale (1,997,810) (3,762,604)
Proceeds from sales of MBS,
available for sale 7,543,774 4,088,134
Proceeds from maturing MBS,
available for sale 3,999,516 3,822,374
Proceeds from maturing MBS,
held to maturity 130,724 59,178
Proceeds from sales of certificates
of deposit 93,825 -
Purchase of MBS, available for sale (1,107,089) -
Proceeds from maturing certificates
of deposit - 95,000
Purchase of premises and equipment (371,103) (403,578)
Proceeds from sale of foreclosed
real estate 12,343 19,600
Net cash provided by(used in)
investing activities $ 5,599,406 $ (210,938)
PART I: FINANCIAL INFORMATION
SOUTHERN MISSOURI BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine-months
Ended
March 31,
1998 1997
Cash flows from financing activities:
Net (decrease)increase in deposits $(10,777,748) $ 4,171,118
Net decrease in advances from
Borrowers for taxes and insurance (79,517) (114,422)
Net increase in advances from FHLB
of Des Moines 8,038,051 1,988,746
Dividends on common stock (580,200) (589,359)
Sale of treasury stock 107,274 1,000
Payments to acquire treasury stock (707,734) 983,588)
Net cash (used in) provided by
financing activities (3,999,874) 4,473,495
Increase in cash and cash equivalents 3,452,032 5,899,522
Cash and cash equivalents at beginning
of period 3,425,175 4,477,872
Cash and cash equivalents at end
of period $ 6,877,207 $ 10,377,394
Supplemental disclosures of
cash flow information:
Noncash investing and financing activities
Conversion of loans to foreclosed
real estate $ 36,626 $ 135,118
Conversion of foreclosed real
estate to loans $ 6,950 $ 55,100
Cash paid during the period for
Interest (net of interest credited) $ 1,136,343 $ 1,582,886
Income taxes $ 487928 $ 172,500
SOUTHERN MISSOURI BANCORP, INC. 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 material 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 March 31, 1998 and 1997 are not
necessarily indicative of the results that may be expected for
the entire fiscal year. For additional information, refer to the
Company's June 30, 1997 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 June 30, 1997 and 1996.
Note 2: Holding Company Formation and Stock Issuance and Charter
Conversions
Southern Missouri Bancorp, Inc. ("Southern Missouri" or
"Company"), a Delaware corporation, was established April 13,
1994 for the purpose of becoming a holding company for the shares
of Southern Missouri Savings Bank, upon its conversion from a
state chartered mutual savings bank to a state chartered stock
savings bank.
Southern Missouri's subscription and community stock
offering was completed on April 13, 1994 with the issuance of
1,803,201 shares of common stock at a price of $10 per share.
The issuance provided net proceeds of approximately $15.2 million
after conversion costs and unearned compensation related to
shares issued to the Employee Stock Ownership Plan ("ESOP") and
Management Recognition Plan ("MRP").
On February 17, 1998, the Company's subsidiary converted
from a federally chartered stock savings bank to a Missouri
chartered stock savings bank. In connection with the charter
conversion, Southern Missouri Savings Bank, FSB, changed its name
to Southern Missouri Bank and Trust Co. (the "Bank" or "SMBT").
Note 3: Principles of Consolidation
The accompanying consolidated financial statements include
the accounts of the Company and its wholly owned subsidiary,
SMBT, which in turn owns all of S.M.S. Financial Services, Inc.
All significant intercompany accounts and transactions have been
eliminated in consolidation.
Note 4: Employee Stock Ownership Plan
In conjunction with the stock offering, Southern Missouri
established an ESOP with 142,832 unallocated shares available for
distribution. The unallocated shares have been debited to
unearned ESOP shares, a contra-equity account. Southern Missouri
recognizes compensation expense based on shares expected to be
released equal to the average market price of the shares in
addition to including the shares as outstanding for purposes of
determining earnings per share. At March 31, 1998, the ESOP had
allocated 71,416 shares to employees of SMBT.
Note 5: Benefit Plans
In conjunction with the stock offering, Southern Missouri
established both a MRP and a Stock Option and Incentive Plan
("SOIP"). The MRP authorized 71,416 shares to be issued to
directors, officers and employees of SMBT of which 68,918 have
been awarded and 63,218 have vested or remain outstanding. The
SOIP authorized 178,540 stock options on shares to be issued to
directors, officers and employees of SMBT, pursuant to which
151,049 options have been awarded and 125,425 remain outstanding.
Stock awarded under the MRP vests over five years, with
compensation expense being amortized over each participant's
vesting period. As of March 31, 1998, unvested MRP shares
totaled 12,411.
Note 6: Earnings Per Share
The Financial Accounting Standards Board recently adopted
Statement of Financial Accounting Standard ("SFAS") No. 128,
"Earnings Per Share" and SFAS No. 129, "Disclosure of Information
about Capital Structure." The statements replaced the
presentation of primary earnings per share with a presentation of
basic earnings per share. These statements also required dual
presentation of basic and diluted earnings per share by entities
with complex capital structures and required a reconciliation of
the numerators and denominators between the two calculations.
These statements became effective for financial statements issued
for periods ending after December 15, 1997, including those for
interim periods.
Basic and diluted earnings per share were based upon the
weighted-average shares outstanding. ESOP shares that have been
committed to be released are considered outstanding. The
following table summarizes basic and diluted earnings per common
share for the three and nine months ended March 31, 1998 and the
three and nine months ended March 31, 1997, as restated, under
SFAS No. 128:
Three Months Ended Nine Months Ended
March 31, March 31,
1998 1997 1998 1997
Net earnings $ 163,011 $ 415,132 $ 813,037 $ 741,437
Weighted-average shares -
Basic EPS 1,531,629 1,548,279 1,539,346 1,547,857
Stock options under treasury
stock method 55,663 40,799 50,958 35,797
Weighted-average shares -
Diluted EPS 1,587,292 1,589,078 1,590,304 1,583,654
Basic earnings per
common share $ .11 $ .27 $ .53 $ .48
Diluted earnings per
common share $ .10 $ .26 $ .51 $ .47
PART I
Item 2
Southern Missouri Bancorp, Inc. and Subsidiary
Management's Discussion and Analysis of Financial
Condition and Results of Operations
General
The Company's performance is reliant on the operations of
SMBT, since the Company has no significant assets other than the
common stock of SMBT and $3.7 million in cash and investments.
SMBT's results of operations are primarily dependent on the
difference (or "interest rate spread") between the average yield
earned on its interest-earning assets and the average rate paid
on interest-bearing liabilities. Interest-earning assets consist
primarily of loans receivable, investment securities, mortgage-
backed and related securities ("MBS") and other investments while
interest bearing liabilities 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. SMBT, 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 Bank'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 operational expenditures. The following
discussion reviews Southern Missouri's consolidated financial
condition at March 31, 1998 and the results of operations for the
three and nine months ended March 31, 1998 and 1997,
respectively.
Forward Looking Statements
Except for the historical information contained herein, the
matters discussed in this form 10-QSB may be deemed to be forward-
looking statements that involve risks and uncertainties,
including changes in economic conditions in Southern Missouri's
market area, changes in policies by regulatory agencies,
fluctuations in interest rates, demand for loans in Southern
Missouri's market area and price competition for loans and
deposits. Actual strategies and results in future periods may
differ materially from those currently expected. These forward-
looking statements represent Southern Missouri's judgement as of
the date of this release. Southern Missouri disclaims however,
any intent or obligation to update these forward-looking
statements.
Financial Condition
Southern Missouri's total assets declined $3.0 million, or
1.8%, from $160.4 million at June 30, 1997 to $157.4 million at
March 31, 1998. The decrease was primarily due to a $16.6
million reduction in investment securities and MBS, which was
primarily used to fund a $10.2 million increase in loans
receivable and a $2.8 million reduction in interest-bearing
liabilities.
Investment securities and MBS declined $16.6 million, or
37.4%, from $44.4 million at June 30, 1997 to $27.8 million at
March 31, 1998. The reduction was attributed to sales and
maturities of $10.1 million and $9.6 million, respectively, which
exceeded purchases of $3.1 million. This reduction in balances
was consistent with management's intention to increase the
percentage and amount of loans in the statement of financial
condition.
The balance of net loans receivable increased $10.2 million,
or 9.5%, from $107.8 million at June 30, 1997 to $118.0 million
at March 31, 1998. Loan growth consisted primarily of a $5.1
million increase in loans secured by one- to four-family
residences and to a lesser degree, increased commercial real
estate balances of $4.0 million and installment loan balances of
$615,000. Southern Missouri originated $36.9 million mortgage
and installment loans over the nine month period ended March 31,
1998 as compared to originations of $32.5 million over the same
period of the prior year.
Interest-bearing liabilities declined $2.8 million, or 2.0%,
from $132.2 million at June 30, 1997 to $129.4 million at March
31, 1998. Over this period, the composition of interest-bearing
liabilities changed, as deposit balances were replaced with FHLB
advances. From June 30, 1997 to March 31, 1998, outstanding
deposits declined by $10.8 million while FHLB advances increased
by $8.0 million. The change was primarily the result of public
unit deposits being replaced with lower-costing FHLB advances.
Results of Operations - Comparison of the three and nine month
periods ended March 31, 1998 and 1997.
Net Income. Southern Missouri's net income for the three and
nine month periods ended March 31, 1998 was $163,000 and
$813,000, respectively, as compared to net income of $415,000 and
$741,000 earned during the same periods of 1997. Net income in
1997 was adversely affected by a $779,000 one-time industry-wide
special assessment to recapitalize the Savings Association
Insurance Fund ("SAIF"). Exclusive of the one-time SAIF
assessment, income for the nine months ended March 31, 1997 would
have approximated $1.2 million. The declines were primary due to
increased provisions for loan losses and noninterest expenses.
Net Interest Income. Net interest income before provision
for loan losses increased by $114,000, or 9.4%, to $1.3 million
for the quarter ended March 31, 1998 as compared to the $1.2
million earned during the same quarter of the prior year. The
increase was primarily due to a 26 basis point increase in the
average interest rate spread. Net interest income before
provision for loan losses increased by $112,000, or 3.0%, to $3.9
million for the nine month period ended March 31, 1998 as
compared to the $3.8 million for the same period of the prior
year. The increase was primarily due to a 6 basis point increase
in the average interest rate spread.
Interest Income. Interest income for the three and nine
month periods ended March 31, 1998 increased $21,000 and $95,000,
respectively, as compared to the same periods of the prior year.
The increases were primarily due to a shift in the composition of
interest-earning assets as the average balance of loans
receivable increased $13.2 million, or 13.0%, while average
investment securities and MBS declined by $13.5 million. During
the nine months ended March 31, 1998, the Company's average yield
earned on interest-earning assets was 7.42% as compared to the
average yield of 7.31% earned during the same period of the prior
year.
Interest Expense. Interest expense for the three and nine month
periods ended March 31, 1998 declined $93,000 and $18,000,
respectively, as compared to the same periods of the prior year.
The decline was primarily the result of a $5.4 million and $1.8
million decline in average interest-bearing liabilities for the
three and nine months, respectively. The average rate paid on
interest-bearing liabilities during the three and nine months
ended March 31, 1998 was 4.71% and 4.81%, respectively, as
compared to the respective average rates of 4.80% and 4.77% paid
during the same periods of the prior year.
Provision for Loan Losses. The provision for loan losses for the
three and nine month periods ended March 31, 1998 increased
$240,000 and $336,000, respectively, as compared to the same
periods of the prior year. The increased provision for loan
losses was primarily due to a significant increase in loans
charged off which were secured by mobile home loans and consumer
loans during the nine month period ended March 31, 1998 when
compared to the same period of the prior year. Accordingly,
management increased the allowance for loan losses (see "Loan
Loss Activity" and "Nonperforming Assets").
Noninterest Income. Noninterest income for the three months
ended March 31, 1998 declined $57,000, or 26.1%, to $161,000 as
compared to the $218,000 earned during the same period of the
prior year. The decrease was primarily due to a $51,000
reduction in income on foreclosed assets as well as a $24,000
reduction in net realized gains on security sales, which were
partially, offset by a $16,000 increase in customer charges.
Noninterest income for the nine months ended March 31, 1998
declined $14,000, or 2.6%, to $516,000 as compared to the
$530,000 earned during the same period of the prior year. The
decline was primarily due to a $45,000 increase in gains realized
on security sales and $28,000 increase in customer charges being
more than offset by a $66,000 reduction in income on foreclosed
assets and a $36,000 decline in insurance commissions. Gains
realized on security sales do not represent a stable source of
income and no assurance can be made that such gains will be
generated in the future.
Noninterest Expense. Noninterest expense for the three
months ended March 31, 1998 increased $179,000, or 22.2%, to
$987,000 as compared to the $808,000 expended during the same
period of the prior year. Contributing to the increase was an
$81,000 rise in compensation and benefits expense due primarily
to increased staffing and higher benefit costs for the Company's
ESOP. Additionally, occupancy costs and legal and professional
fees increased by $32,000 and $23,000, respectively. The
increase in occupancy costs was primarily due to increased
depreciation and data processing costs while the increase in
legal fees was primarily due to SMBT's conversion to a bank
charter. Finally, SAIF deposit insurance premiums increased
$23,000 over the same period of the prior year (see "Regulatory
Matters").
Noninterest expense for the nine months ended March 31, 1998
declined $487,000; however, exclusive of the aforementioned SAIF
assessment, noninterest expense increased $292,000, or 11.8%, to
$2.8 million as compared to the $2.5 million expended during the
same period of the prior year. Contributing to the increase was
a $197,000 rise in compensation and benefits expense due
primarily to increased staffing and higher benefit costs for the
Company's ESOP. Additionally, a $65,000 increase in legal and
professional fees and a $59,000 increase in operating costs were
partially offset by a $60,000 decline in SAIF deposit insurance
premiums. The increase in legal and professional fees related
to SMBT's conversion to a bank charter and costs associated with
the supervisory agreement while increased depreciation and data
processing costs led to the increase in occupancy costs (see
"Regulatory Matters").
Provision for Income Taxes. The provision for income taxes
for the three months ended March 31, 1998 declined $110,000 to
$77,000 as compared to the $187,000 established during the same
period of the prior year, due primarily to reduced taxable
income. The provision for income taxes for the nine months ended
March 31, 1998 increased $178,000 to $449,000 as compared to the
$271,000 established during the same period of the prior year;
however, excluding the tax effect of the SAIF assessment, the
provision for income taxes would have declined by approximately
$111,000, due mostly to reduced taxable income.
Regulatory Matters and Supervisory Agreement
On February 17, 1998, the OTS approved the conversion of Southern
Missouri's financial institution subsidiary, Southern Missouri
Savings Bank, FSB, from a federally chartered stock savings bank
to a Missouri chartered stock savings bank. In connection with
the charter conversion, Southern Missouri Savings Bank, FSB.
changed its name to Southern Missouri Bank and Trust Co.
Additionally, the primary regulator of SMBT changed
from the OTS to the Missouri Division of Finance. Furthermore,
the operating restrictions placed on Southern Missouri Savings
Bank, FSB pursuant to an OTS Supervisory Agreement were lifted.
However, SMBT remains subject to increased SAIF deposit insurance
premium assessments due to the Bank's former regulatory status.
During the three and nine months ended March 31, 1998, SMBT
recognized additional expense of $9,000 and $28,000, respectively
due to these higher deposit premiums.
Loan Loss Activity
Southern Missouri 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 as well as general economic conditions.
Although Southern Missouri maintains its allowance for loan
losses at a level, which it considers to be sufficient to provide
for 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. The following table summarizes changes in the
allowance for loan losses over the nine months ended March 31,
1998 and 1997:
1998 1997
Balance, beginning of period $706,000 $628,000
Loans charged off - residential (2,000) -
Loans charged off - consumer (90,000) (5,000)
Loans charged off - mobile home (202,000) -
Recoveries of loans previously
charged off
Consumer 12,000 -
Mobile homes 75,000 -
Net charge offs (207,000) (5,000)
Provision charged to expense 399,000 63,000
Balance, end of period $898,000 $684,000
Ratio of net charge offs during
the period to average loans
outstanding during the period 1.81% .01%
Nonperforming Assets
The allowance for loan losses has been calculated based upon
an evaluation of pertinent factors underlying the various types
and quality of Southern Missouri'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
Southern Missouri's historical loss ratios. Southern Missouri's
allowance for loan losses increased $214,000 to $898,000 at March
31, 1998 from $684,000 on June 30, 1997. At March 31, 1998, the
Company had $1.1 million, or .71% of total assets and 4.21% of
total equity classified as substandard, doubtful, or loss as
compared to classified assets of $1.7 million, or 1.06% of total
assets and 6.29% of total equity at June 30, 1997. The
improvement in these ratios was attributed to enhanced collection
efforts and the establishment of the aforementioned loss
provisions.
The ratio of nonperforming assets to total assets is another
useful tool in evaluating exposure to credit risk. Non-
performing assets of Southern Missouri 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 summarizes
changes in Southern Missouri's level of non-performing assets:
Loans accounted for on a 3/31/98 6/30/97 3/31/97
Nonaccrual basis:
Residential real estate $ 501,000 $ 707,000 $ 896,000
Commercial real estate 346,000 279,000 106,000
Commercial - - 365,000
Consumer 5,000 24,000 100,000
Mobile homes 45,000 155,000 232,000
Total non-accrual assets 897,000 1,380,000 1,699,000
Assets acquired in
settlement of loans 101,000 55,000 120,000
Total nonperforming assets $ 998,000 $1,435,000 $1,819,000
Percentage to total assets .63% .90% 1.10%
Percentage to net loans
receivable .85% 1.33% 1.73%
Liquidity and Capital Resources
Southern Missouri's primary sources of funds are deposits,
the receipt of principal and interest payments on loans and
mortgage-backed securities, 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.
Southern Missouri 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 March 31, 1998,
Southern Missouri had outstanding commitments to fund $3.4
million in undisbursed loans-in-process and $753,000 in mortgage
and installment loans. These commitments are expected to be
funded through existing cash balances, cash flow from normal
operations and, if needed, FHLB advances. At March 31, 1998,
SMBT had available credit at the FHLB of approximately $52.7
million, of which $21.6 million had been advanced. Management
believes that these and other liquidity resources will be
sufficient to meets the Company's liquidity needs.
Year 2000 Considerations
Many existing computer programs and data processing systems
use only two digits to identify a year in the date datum field.
These programs were designed and developed without considering
the impact of the upcoming change in the century. If
uncorrected, many computer applications could fail or create
erroneous results by or at the Year 2000. The Year 2000 issue
affects virtually all companies and organizations.
The Company uses an in-house computer processing system and is in
the process of reviewing it and other data processing functions
as well as those of its software providers, vendors, suppliers,
and major customers to ascertain the degree to which each will be
impacted by Year 2000 failures. Initial testing of internal
systems and how they interact with those of vendors and suppliers
is scheduled to begin by June 30, 1998 and be completed by March
31, 1999. Management anticipates Year 2000 expenditures to be
less than $100,000. Incomplete or untimely compliance, however,
would have a material adverse effect on the Company, the dollar
amount of which cannot be accurately quantified at this time
because of the inherent variables and uncertainties involved.
Impact of New Accounting Standards
SFAS No. 130 "Reporting Comprehensive Income," issued in
July 1997, establishes standards for reporting and presentation
of comprehensive income and its components (revenues, expenses,
gains, and losses) in a full set of general-purpose financial
statements. It requires that all items that are required to be
recognized under accounting standards as components of
comprehensive income be reported in a financial statement that is
presented with the same prominence as other financial statements.
SFAS No. 130 requires that companies (I) classify items of other
comprehensive income by their nature in a financial statement and
(ii) display the accumulated balance of other comprehensive
income separately from retained earnings and additional paid-in-
capital in the equity section of the statement of condition.
SFAS No. 130 is effective for fiscal years beginning after
December 15, 1997. Reclassification of financial statements for
earlier periods provided for comprehensive purposes is required.
SFAS No. 131, "Disclosure about Segments of an Enterprise
and Related Information," issued in June 1997, establishes
standards for disclosure about operating segments in annual
financial statements and selected information in interim
financial reports. It also establishes standards for related
disclosures about products and services, geographic areas, and
major customers. SFAS No. 131 supersedes SFAS No. 14, "Financial
Reporting for Segments of a Business Enterprise." SFAS No. 131
becomes effective for the Company's fiscal year ending June 30,
1998, and requires that comparative information from earlier
years be restated to conform to its requirements. The adoption
of the provisions of SFAS No. 131 is not expected to have a
material impact on the Company.
Regulatory Capital
SMBT is subject to minimum regulatory capital requirements
equal to tangible capital of 3.0% of tangible assets, a leverage
ratio of 3.0% of adjusted tangible assets, and a risk-based
capital ratio of 8.0% of risk-weighted assets. At March 31,
1998, SMBT exceeded all regulatory capital requirements with a
tangible capital ratio of $21.9 million (14.04% of tangible
assets); a leverage capital ratio of $21.9 million (14.04% of
adjusted tangible assets); and risk-based capital of $22.8
million (26.39% of risk-weighted assets). Under current
regulatory guidelines, SMBT is considered to be "well-
capitalized".
PART II - OTHER INFORMATION
Southern Missouri Bancorp, Inc. and Subsidiary
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, 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 and Use of Proceeds
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
Exhibits
(3) (a) Certificate of Incorporation of the Registrant*
(3) (b) Bylaws of the Registrant*
10 (a) Registrant's Stock Option Plan**
10 (b) Southern Missouri Savings Bank, FSB Management
Recognition and Development Plans**
10 (c) Employment Agreement with Donald R. Crandell***
10 (d) Director's Retirement Agreements***
Robert A. Seifert
Thadis R. Seifert
Leonard W. Ehlers
James W. Tatum
Samuel H. Smith
Item 6 - Exhibits and Reports on Form 8-K (continued)
10 (e) Tax Sharing Agreement***
Financial Data Schedule
* Filed as an exhibit to the registrant's Registration
Statement on Form S-1 (33-73746).
** Filed as an exhibit to the registrant's 1994 annual meeting
proxy statement dated October 21, 1994.
*** Filed as an exhibit to the registrant's Annual Report on Form
10-KSB for the year ended June 30, 1995.
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: May 14, 1998 /s/ Donald R. Crandell
Donald R. Crandell
President and Chief Executive Officer
Date: May 14, 1998 /s/ Greg A. Steffens
Greg A. Steffens
Chief Financial Officer
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<PERIOD-END> MAR-31-1998
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