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 December 31, 1999
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)
Missouri 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 February 12, 2000
Common Stock, Par Value $.01 1,286,788 Shares
SOUTHERN MISSOURI BANCORP, INC. AND SUBSIDIARY
FORM 10-QSB
INDEX
PART I. Financial Information (Unaudited) PAGE NO.
Item 1. Consolidated Financial Statements (Unaudited)
- Consolidated Statements of Financial Condition 3
- Consolidated Statements of Income and
Comprehensive 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 9-12
PART II. OTHER INFORMATION 13
Item 1. Legal Proceedings 13
Item 2. Changes in Securities and Use of Proceeds 13
Item 3. Defaults upon Senior Securities 13
Item 4. Submission of Matters to a Vote of Security-Holders 13
Item 5. Other Information 13
Item 6. Exhibits and Reports on Form 8-K 13
- Signature Page 14
PART I Item 1. Financial Information
SOUTHERN MISSOURI BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
DECEMBER 31, 1999 AND JUNE 30, 1999
(UNAUDITED)
ASSETS
December 31, June 30,
1999 1999
Cash and due from banks $ 1,871,413 $ 1,790,590
Interest bearing deposits in other
financial institutions 3,621,127 2,278,085
Cash and cash equivalents 5,492,540 4,068,675
Available-for-sale investment securities 22,307,704 20,979,044
Mortgage-backed securities, available-for-sale 13,762,049 16,899,641
Loans receivable, net 123,197,698 118,248,638
Foreclosed assets held for sale 534,120 477,537
Premises and equipment 1,850,555 1,878,719
Accrued interest receivable:
Loans 560,241 555,923
Investments 489,091 477,152
Federal Home Loan Bank stock 1,362,500 1,091,000
Prepaid expenses and other assets 389,849 296,014
Total Assets $169,946,347 $164,972,343
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits $119,478,267 $120,154,540
Federal Home Loan Bank advances 27,250,000 20,550,000
Accrued interest payable 579,649 707,341
Advances from borrowers for taxes and insurance 163,619 318,431
Accrued expenses and other liabilities 448,306 612,569
Total Liabilities 147,919,841 142,342,881
STOCKHOLDERS' EQUITY
Preferred stock, $.01 par value; 500,000 shares
authorized; none issued and outstanding - -
Common stock, $.01 par value; 4,000,000 shares
authorized; 1,803,201 shares issued 18,032 18,032
Additional paid-in capital 17,578,544 17,545,543
Accumulated other comprehensive income (556,217) (250,879)
Retained earnings, substantially restricted 14,185,196 13,759,487
Unearned ESOP shares (366,853) (426,853)
Unearned MRP shares (91,192) (104,214)
Treasury stock, at cost; 487,841 and 424,991
shares at December 31, 1999 and June 30, 1999,
respectively (8,741,004) (7,911,654)
Total stockholders' equity 22,026,506 22,629,462
Total Liabilities and Stockholders' Equity $169,946,347 $164,972,343
See Notes to Consolidated Financial Statements
SOUTHERN MISSOURI BANCORP, INC AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
FOR THE THREE AND SIX MONTH PERIODS ENDED DECEMBER 31, 1999 AND 1998
(UNAUDITED)
<TABLE>
<CAPTION>
Three-months ended Six-months ended
December 31, December 31,
1999 1998 1999 1998
<S> <C> <C> <C> <C>
INTEREST INCOME:
Loans receivable $2,354,659 $2,362,830 $4,680,255 $4,735,787
Investment securities 368,528 181,304 721,882 384,866
Mortgage-backed and related securities 215,785 246,927 442,739 456,042
Other interest-earning assets 16,454 45,943 33,737 87,541
Total interest income 2,955,426 2,837,004 5,878,613 5,664,236
INTEREST EXPENSE:
Deposits 1,287,612 1,345,284 2,594,211 2,631,073
Federal Home Loan Bank advances 333,300 245,287 596,645 501,592
Total interest expense 1,620,912 1,590,571 3,190,856 3,132,665
NET INTEREST INCOME 1,334,514 1,246,433 2,687,757 2,531,571
PROVISION FOR LOAN LOSSES 15,000 15,000 35,000 25,000
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 1,319,514 1,231,433 2,652,757 2,506,571
NONINTEREST INCOME:
Service charges 93,568 82,344 180,823 147,076
Losses on investment and mortgage-
backed securities, available-for-sale (3,250) 0 (21,205) (625)
Insurance commissions 14,892 86,524 15,637 165,621
Income (expense) on foreclosed assets (9,813) (15,601) (12,734) (19,973)
Late charges and other fees 16,889 18,251 34,886 36,404
Other income 15,606 3,950 28,246 4,724
Total noninterest income 127,892 175,468 225,653 333,227
NONINTEREST EXPENSE:
Compensation and benefits 542,077 555,154 1,030,209 1,122,619
Occupancy and equipment, net 137,986 120,408 259,994 229,437
SAIF deposit insurance premiums 17,716 24,071 35,463 48,575
Professional fees 44,472 24,742 78,300 57,435
Advertising 28,322 30,029 50,530 56,775
Postage and office supplies 33,244 33,228 73,146 69,224
Other operating expense 106,165 104,884 196,798 189,232
Total noninterest expense 909,982 892,516 1,724,440 1,773,297
INCOME BEFORE INCOME TAXES 537,424 514,385 1,153,970 1,066,501
PROVISION FOR INCOME TAXES 177,381 176,495 393,321 371,117
NET INCOME 360,043 337,890 760,649 695,384
OTHER COMPREHENSIVE INCOME, NET:
Unrealized gains (losses) AFS securities (296,076) (31,106) (318,697) 17,920
Adjustment for losses included in
net income 2,048 - 13,359 394
Other comprehensive income (294,028) (31,106) (305,338) 18,314
COMPREHENSIVE INCOME $ 66,015 $ 306,784 $ 455,311 $ 713,698
Basic earnings per common share $ 0.27 $ 0.25 $ 0.57 $ 0.51
Diluted earnings per common share $ 0.27 $ 0.25 $ 0.57 $ 0.50
Dividends per common share $ 0.125 $ 0.125 $ 0.25 $ 0.25
</TABLE>
See Notes to Consolidated Financial Statements
PART I: FINANCIAL INFORMATION
SOUTHERN MISSOURI BANCORP, INC. AND SUBSIDIRY
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Six-months ended
December 31,
1999 1998
Cash Flows From Operating Activities:
Net income $ 760,649 $ 695,384
Items not requiring (providing) cash:
Depreciation and amortization 126,493 119,000
MRP expense and ESOP expense 106,022 162,101
Loss on sale of available-for-sale securities 21,205 625
Provision for loan losses 35,000 25,000
Gain on foreclosed real estate, net (10,700) (1,090)
Net amortization of deferred income, premiums,
and discounts 32,733 54,248
Changes in:
Accrued interest receivable (16,256) (45,015)
Prepaid expenses and other assets 18,756 7,950
Accounts payable and other liabilities (201,367) 193,987
Accrued expense and other liabilities (90,588) (48,054)
Net cash provided by operating activities 781,947 1,164,136
Cash flows from investing activities:
Net (increase) decrease in loans (5,065,642) 4,070,949
Proceeds from sales of available-for-sale
investment securities 1,034,500 999,375
Proceeds from sales of available-for-sale
mortgage-backed securities 3,365,084 -
Proceeds from maturing available-for-sale
investment securities 65,000 1,130,000
Proceeds from maturing available-for-sale
mortgage-backed securities 1,536,186 2,841,321
Proceeds from maturing held-to-maturity
mortgage-backed securities - 275,000
Purchase of Federal Home Loan Bank stock (271,500) (37,500)
Purchase of available-for-sale securities (2,759,750) (8,667,519)
Purchase of available-for-sale mortgage-backed
securities (1,976,250) -
Purchase of premises and equipment (98,328) (169,422)
Proceeds from sale of foreclosed real estate 107,998 1,950
Net cash (used in) provided by investing activities (4,062,702) 444,154
Cash flows from financing activities:
Net (decrease) increase in certificates of deposit (2,843,045) 2,709,826
Net increase in demand, NOW and Saving accounts 2,166,767 3,265,368
Net decrease in advances from borrowers for taxes
and insurance (154,812) (174,527)
Proceeds from Federal Home Loan Bank advances 107,050,000 5,500,000
Repayments of Federal Home Loan Bank advances (100,350,000) (6,768,905)
Cash dividends paid (334,940) (350,419)
Exercise of stock options 28,500 40,000
Purchase of treasury stock (857,850) (2,803,952)
Net cash provided by financing activities 4,704,620 1,417,391
Increase in cash and cash equivalents 1,423,865 3,025,681
Cash and cash equivalents at beginning of period 4,068,675 4,326,474
Cash and cash equivalents at end of period $ 5,492,540 $7,352,155
See Notes to Consolidated Financial Statements
SOUTHERN MISSOURI BANCORP, INC. AND SUBSIDIRY
CONSOLIDATED STATEMENTS OF CASH FLOWS - Continued
(UNAUDITED)
Six-months ended
December 31,
1999 1998
Supplemental disclosures of
Cash flow information:
Noncash investing and financing activities:
Conversion of loans to foreclosed real estate
and other assets $ 306,075 $ 544,376
Conversion of foreclosed real estate to loans $ 87,000 $ 94,500
Cash paid during the period for:
Interest (net of interest credited) $1,500,836 $1,501,063
Income taxes $ 335,000 $ 165,000
See Notes to Consolidated Financial Statements
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 Securities and Exchange Commission ("SEC")
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 six month periods ended December 31, 1999 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, 1999 Form 10-KSB, which was filed with the SEC and the Company's
annual report, which contains the audited consolidated financial
statements for the fiscal years ended June 30, 1999 and 1998.
Note 2: Holding Company Formation, and Stock Issuance, Charter
Conversions and State of Incorporation
Southern Missouri Bancorp, Inc. (the "Company"), a Delaware corporation,
was incorporated on December 30, 1993 for the purpose of becoming a holding
company for Southern Missouri Savings Bank, upon its conversion from a state
chartered mutual savings bank to a state chartered stock savings bank.
The Company'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 stock offering 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 June 20, 1995, Southern Missouri Savings Bank converted from a state
chartered stock savings bank to a federally chartered stock savings bank and
changed its name to Southern Missouri Savings Bank, FSB.
On February 17, 1998, Southern Missouri Savings Bank, FSB converted from
a federally chartered stock savings bank to a Missouri chartered stock
savings bank and changed its name to Southern Missouri Bank and Trust Co.
(the "Bank" or "SMBT").
On October 19, 1998, the Company's stockholders approved a proposal to
change the Company's state of incorporation from Delaware to Missouri. This
reincorporation was completed on April 1, 1999.
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, the Company 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.
The Company 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 December 31, 1999, the ESOP had allocated 100,147 shares and had
6,000 shares committed for allocation to employees of the Bank.
Note 5: Benefit Plans
In conjunction with the stock offering, the Company 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 62,158 have been awarded and vested, 5,100 have been awarded and are
not yet vested and 4,158 remain unawarded. The SOIP authorized 246,472
stock options for shares to be issued to directors, officers and employees of
SMBT, pursuant to which 192,540 options have been awarded and 115,623 remain
outstanding and unexercised. Currently, awards under the MRP and SOIP
vest over five years, with compensation expense for the MRP being amortized
over each participant's vesting period.
Note 6: Earnings Per Share
Basic and diluted earnings per share are 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 six months ended December 31,
1999 and 1998, under SFAS No. 128:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
December 31, December 31,
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Net earnings $ 360,043 $ 337,890 $ 760,649 $ 695,384
Weighted-average shares -
Basic earnings per share 1,325,318 1,326,412 1,332,860 1,358,148
Stock options under treasury
stock method 14,631 34,144 16,231 38,859
Weighted-average shares -
Diluted earnings per share 1,339,949 1,360,556 1,349,091 1,397,007
Basic earnings per common share $ 0.27 $ 0.25 $ 0.57 $ 0.51
Diluted earnings per common share $ 0.27 $ 0.25 $ 0.57 $ 0.50
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 the Bank, since
the Company has no significant assets other than the common stock of the
Bank and $875,000 in investments and other assets. The Bank'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. The Bank remains 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 the Company's consolidated financial condition
at December 31, 1999 and the results of operations for the three and
six-month periods ended December 31, 1999 and 1998, 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 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 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 the Company's judgement
as of the date of this Form 10-QSB. The Company disclaims however, any
intent or obligation to update these forward-looking statements.
Financial Condition
The Company's total assets increased $5.0 million, or 3.0%, to $170.0
million at December 31, 1999 as compared to $165.0 million at June 30, 1999.
The increase was largely attributed to a $5.0 million, or 4.2% increase in
loans receivable. The rate of growth was consistent with the Company's
internal growth estimates and was comprised of $4.7 million in loans secured
by one- to four-family real estate and $811,000 in commercial loans,
which was partially offset by a $722,000 reduction in consumer loans.
The Company's stockholders' equity declined from $22.6 million at June 30,
1999 to $22.0 million at December 31, 1999. The decline was primarily due to
the repurchase of $858,000 of the Company's common stock, $345,000 in cash
dividends paid on common stock and mark-to-market adjustments on the
investment portfolio of $305,000. The decline was partially offset by the
Company's $761,000 in net income and $106,000 in benefit shares committed
to be released.
The growth in loans receivable and reduction in stockholders' equity was
primarily funded by an increase in FHLB advances of $6.7 million, or 32.6%,
to $27.3 million at December 31, 1999 from $20.6 million at June 30, 1999.
Outstanding advances have terms of up to ten years at either variable or fixed
rates of interest and may be subject to early redemption on the part of the
issuer. At December 31, 1999 the average cost of FHLB advances was 5.70%,
which was 68 basis points higher than the average cost of the Company's
certificates of deposit.
Results of Operations - Comparison of the three and six month periods ended
December 31, 1999 and 1998.
Net Income. The Company's net income for the three and six month periods
ended December 31, 1999 was $360,000 and $761,000, respectively, as compared
to the $338,000 and $695,000 earned during the same periods of the prior year.
Increased earnings over the three and six month periods ended December 31,
1999 was primarily due to increased net interest income, which was partially
offset by reduced non-interest income.
Net Interest Income. Net interest income increased $88,000, or 7.1%, to
$1.3 million for the three months ended December 31, 1999 as compared to the
$1.2 million earned during the same period of the prior year. The increase was
primarily due to the incremental spread earned on the difference between the
$12.0 million increase in average interest-earning assets and the $10.2
million increase in interest-bearing liabilities as the average interest rate
spread remained stable at 2.71%.
Net interest income increased $156,000, or 6.2%, to $2.7 million for the six
months ended December 31, 1999 as compared to the $2.5 million earned during
the same period of the prior year. The increase was primarily due to the
incremental spread earned on the difference between the $10.8 million increase
in average interest-earning assets and the $10.4 million increase in average
interest-costing liabilities as well as a 4 basis point increase in the
average interest rate spread, from 2.75% to 2.79%.
Interest Income. Interest income for the three and six-month periods
ended December 31, 1999 increased $118,000 and $214,000, respectively, as
compared to the same periods of the prior year. The increase over the
three-month period was primarily due to a $12.0 million, or 8.0% increase
in average interest-earning assets, partially offset by a 26 basis point
decline in the average yield earned on these assets, to 7.26% from 7.52%.
Over the six-month period, the increase was primarily due to a $10.8
million, or 7.2% increase in average interest-earning assets, which was
partially offset by a 24 basis point decline in the average yield earned on
these assets, to 7.28% from 7.52%. The decline in the average yield earned
on interest-earning assets was primarily due to the downward repricing of the
Company's cost-of-funds indexed adjustable rate loans, partially offset by an
increase in the average yield of the investment portfolio.
Interest Expense. Interest expense for the three and six-month periods
ended December 31, 1999 increased $30,000 and $58,000, respectively, as
compared to the same periods of the prior year. The increase over the
three-month period was primarily due to a $10.2 million, or 7.7% increase in
average interest-bearing liabilities, partially offset by a 26 basis point
decline in the average cost of these liabilities, to 4.55% from 4.81%. Over
the six-month period, the increase was primarily due to a $10.4 million, or
7.9% increase in average interest-bearing liabilities, partially offset by a
28 basis point decline in the average cost of these liabilities, from
4.78% to 4.50%. The decline in the average cost of interest-bearing
liabilities was primarily due to the downward repricing of the Company's
certificates of deposit, partially offset by an increase in the average cost
of FHLB advances.
Provision for Loan Losses. The provision for loan losses for the three-
month period ended December 31, 1999 was $15,000, which equaled the provision
made during the same period of the prior year. The provision for loan losses
for the six-month period ended December 31, 1999 was $35,000 as compared to the
$25,000 provision made during the same period of the prior year (see "Loan
Loss Activity" and "Nonperforming Assets").
Noninterest Income. Noninterest income for the three months ended
December 31, 1999 declined $47,000, or 27.1%, to $128,000 as compared to the
$175,000 earned during the same period of the prior year. The decline was
primarily due to a $72,000 decline in insurance commissions, which was
partially offset by a $12,000 increase in banking service charges and other
income of $12,000. Noninterest income for the six months ended December 31,
1999 declined $108,000, or 32.3%, to $226,000 as compared to the $333,000
earned during the same period of the prior year. The decrease was primarily
due to a $150,000 decline in insurance commissions and a $20,000 loss
realized on the sale of available-for-sale securities, which was partially
offset by a $34,000 increase in banking service charges and a $24,000
increase in other income. The decline in insurance commissions was due to
the sale of the Company's insurance operation in the fourth quarter of fiscal
1999.
Noninterest Expense. Noninterest expense for the three-month period ended
December 31, 1999 increased $17,000, or 2.0%, to $910,000 as compared to the
$893,000 expended during the same period of the prior year. The increase was
primarily due to respective increases in professional fees and occupancy expense
of $20,000 and $18,000, partially offset by respective declines in compensa-
tion expense and SAIF insurance premiums of $13,000 and $6,000. Noninterest
expense for the six-month period ended December 31, 1999 declined $49,000, or
2.8%, to $1.7 million as compared to the $1.8 million expended during the same
period of the prior year. The decline was primarily due to a $92,000 decline
in compensation expense, partially offset by increased occupancy expense of
$31,000 and professional fees of $21,000. Respective one-time expenses of
$13,000 and $9,000 were included in professional fees and compensation
expense from the settlement of pending litigation. Overall, the decline in
compensation expense was primarily due to the sale of the Company's insurance
operation and a reduction in benefit plan expenditures.
Provision for Income Taxes. The provision for income taxes for the three
and six-month periods ended December 31, 1999 was $177,000 and $393,000,
respectively, as compared to the $176,000 and $371,000 expended for the same
periods of the prior year.
Allowance for Loan Loss Activity
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, as well as
general economic conditions. Although the Company 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 establish-
ment of additional loss provisions. The following table summarizes changes
in the allowance for loan losses over the six months ended December 31, 1999
and 1998:
1999 1998
Balance, beginning of period $1,191,147 $1,295,222
Loans charged off:
Real estate (29,042) (37,664)
Unsecured consumer (11,706) (52,275)
Secured consumer (103,873) (36,310)
Mobile homes (28,780) (4,038)
Gross charged off loans (173,401) (130,287)
Recoveries of loans previously charged off:
Real estate 375 657
Unsecured consumer 11,744 3,070
Secured consumer 25,157 -
Mobile homes 22,681 33,076
Gross recoveries of charged off loans 59,957 36,803
Net charge offs (113,444) (93,464)
Provision charged to expense 35,000 25,000
Balance, end of period $1,112,703 $1,226,738
Ratio of net charge offs (recoveries) during the period
to average loans outstanding during the period .09% .08%
The increase in charge offs was partially the result of underwriting
guidelines for secured and unsecured consumer loans, which were utilized
during a period beginning in July 1997, which emphasized consumer loan
portfolio growth. In an effort to reduce loan delinquencies and charge-offs in
the future, the Company began to adopt and implement more restrictive
consumer loan underwriting guidelines in December 1998. Management believes
that these new guidelines will result in reduced future consumer loan charge-
offs, while allowing modest portfolio growth. However, management anticipates
that charge-offs will remain at levels higher than historical averages over the
next several quarters due to the previous underwriting guidelines. These
factors were considered in the Company's analysis of the adequacy of its
provision for loan losses. In addition, the Company anticipates future loan
recoveries since it has 16 loans totaling $132,000, secured primarily by
mobile home loans which have been charged off, but the actual value of the
collateral had not yet been realized through repossession. The Company does
not expect to realize the full charged off balance of these loans.
Nonperforming Assets
The allowance for loan losses has been 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 allowance for loan losses
declined $114,000 to $1.1 million at December 31, 1999 from $1.2 million on
June 30, 1999. At December 31, 1999, the Bank had $5.0 million, or 3.0% of
assets adversely classified (substandard, doubtful, or loss) as compared to
adversely classified assets of $5.1 million, or 3.1% of assets at June 30,
1999.
The ratio of nonperforming assets to total assets and net loans receivable
is another measure of asset quality. Nonperforming assets of the Company
include nonaccruing 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 the
Company's level of nonperforming assets over selected time
periods:
Loans past maturity/delinquent 90 days or more 12/31/99 6/30/99 12/31/98
Residential real estate $ 394,000 $ 181,000 $ 677,000
Commercial real estate 182,000 86,000 2,306,000
Commercial 60,000 27,000 -
Consumer 39,000 143,000 189,000
Mobile homes 23,000 55,000 182,000
Total loans past maturity/delinquent 90+ days 698,000 492,000 3,354,000
Assets acquired in settlement of loans 534,000 560,000 556,000
Total nonperforming assets $1,232,000 $1,052,000 $3,876,000
Percentage nonperforming assets to total assets .72% .64% 2.47%
Percentage nonperforming loans to net loans .57% .42% 3.41%
Asset and Liability Management and Market Risk
The goal of the Bank's asset/liability management strategy is to manage the
interest rate sensitivity of both interest-earning assets and interest-
bearing liabilities so as to maximize net interest income without exposing it
or the Bank to an excessive level of interest-rate risk. The Bank has
employed various strategies intended to manage the potential effect that
changing interest rates have on future operating results. Historically,
the primary asset/liability management strategy had been to focus on matching
the repricing intervals of interest-earning assets and interest-bearing
liabilities. This strategy has resulted in a manageable exposure to
interest-rate risk with modest asset and loan growth rates.
The primary elements of the Bank's current asset/liability strategy
includes (i) increasing loans receivable through the origination of both
fixed and adjustable-rate residential loans, (ii) growth in loans secured by
commercial real estate, which typically provide higher yields, increased credit
risk and shorter repricing periods, (iii) expanding the consumer loan
portfolio by beginning to offer home equity lines-of-credit, which reprice
monthly and typically provide higher average loan yields with a moderate
increase in credit risk, (iv) active solicitation of less rate-sensitive
deposits, (v) offering competitively priced short-term certificates of deposit,
and (vi) the use of FHLB advances to help manage sensitivity to fluctuating
interest rates. The degree to which each segment of the strategy is achieved
will affect profitability and exposure to interest-rate risk.
The Bank has not and does not anticipate the use of derivative financial
instruments or other financial instruments for managing its exposure to
interest-rate risk or use in a trading account. Further, the Bank is not
subject to any foreign currency exchange rate risk, commodity price risk,
equity price risk or risk to any hedge funds.
Liquidity and Capital Resources
The Company'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.
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
December 31, 1999, the Company had outstanding commitments to fund $7.9
million in mortgage loans and $2.8 million in non-mortgage loans. These
commitments are expected to be funded through existing cash balances, cash
flow from normal operations and, if needed, FHLB advances. At December 31,
1999, the Bank had available credit at the FHLB of approximately $86.8
million, of which $27.3 million had been advanced. Management believes that
these and other liquidity resources will be sufficient to meets the Company's
liquidity needs.
Regulatory Capital
The Bank is subject to minimum regulatory capital requirements equal to a
leverage ratio (or core capital) of 4.0% of average total assets, a tier I
capital to risk-weighted assets of 4.0% and a risk-based capital ratio of
8.0% of risk-weighted assets. At December 31, 1999, the Bank exceeded all
regulatory capital requirements with leverage capital of $21.3 million (12.7% of
average total assets), tier I capital of $21.3 million (22.9% of risk-based
assets) and risk-based capital of $22.4 million (24.1% of risk-weighted assets).
Under current regulatory guidelines, the Bank 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 aggregate amounts
management believes to be immaterial 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
(a) 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 Greg Steffens ****
10 (d) Director's Retirement Agreements***
(i) Robert A. Seifert
(ii) Thadis R. Seifert
(iii) Leonard W. Ehlers
(iv) James W. Tatum
(v) Samuel H. Smith
10 (e) Tax Sharing Agreement***
(27) 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.
**** Files as an exhibit to the registrant's Annual Report on Form 10-KSB
for the year ended June 30, 1999.
(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: February 14, 2000 xThadis R. Seifert
Thadis R. Seifert
President and Chief Executive Officer
Date: February 14, 2000 xGreg A. Steffens
Greg A. Steffens
Chief Financial Officer
</TABLE>
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<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-END> DEC-31-1999
<CASH> 1,871,413
<INT-BEARING-DEPOSITS> 3,621,127
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 36,069,753
<INVESTMENTS-CARRYING> 0
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<ALLOWANCE> 1,112,703
<TOTAL-ASSETS> 169,946,347
<DEPOSITS> 119,478,267
<SHORT-TERM> 13,750,000
<LIABILITIES-OTHER> 1,191,574
<LONG-TERM> 13,500,000
0
0
<COMMON> 17,566,576
<OTHER-SE> 4,459,930
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<INTEREST-INCOME-NET> 2,687,757
<LOAN-LOSSES> 35,000
<SECURITIES-GAINS> (21,205)
<EXPENSE-OTHER> 1,724,440
<INCOME-PRETAX> 1,153,970
<INCOME-PRE-EXTRAORDINARY> 1,153,970
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 760,649
<EPS-BASIC> .57
<EPS-DILUTED> .57
<YIELD-ACTUAL> 7.05
<LOANS-NON> 233,000
<LOANS-PAST> 465,000
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 5,022,713
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<CHARGE-OFFS> 173,401
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