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, 2000
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 May 12, 2000
Common Stock, Par Value $.01 1,249,691 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 9-13
PART II. OTHER INFORMATION 14
Item 1. Legal Proceedings 14
Item 2. Changes in Securities and Use of Proceeds 14
Item 3. Defaults upon Senior Securities 14
Item 4. Submission of Matters to a Vote of Security-Holders 14
Item 5. Other Information 14
Item 6. Exhibits and Reports on Form 8-K 14
- Signature Page 15
PART I Item 1. Financial Information
SOUTHERN MISSOURI BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
MARCH 31, 2000 AND JUNE 30, 1999
(UNAUDITED)
ASSETS
March 31, June 30,
2000 1999
Cash and due from banks $ 1,514,682 $ 1,790,590
Interest bearing deposits in other
financial institutions 2,954,536 2,278,084
Cash and cash equivalents 4,469,218 4,068,674
Available-for-sale investment securities 21,903,881 20,979,044
Mortgage-backed securities, available-for-sale 13,390,270 16,899,641
Loans receivable, net 133,341,333 118,248,638
Foreclosed assets held for sale 552,004 477,537
Premises and equipment 1,864,130 1,878,719
Accrued interest receivable:
Loans 604,370 560,165
Investments 356,952 472,911
Federal Home Loan Bank stock 1,500,000 1,091,000
Prepaid expenses and other assets 470,265 296,014
Total Assets $178,452,423 $164,972,343
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits $125,420,802 $120,154,540
Federal Home Loan Bank advances 30,000,000 20,550,000
Accrued interest payable 741,602 728,859
Advances from borrowers for taxes and insurance 270,626 317,954
Accrued expenses and other liabilities 584,062 591,528
Total Liabilities 157,017,092 142,342,881
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 17,581,544 17,545,544
Accumulated other comprehensive income (613,026) (250,879)
Retained earnings, substantially restricted 14,377,550 13,759,488
Unearned ESOP shares (363,353) (426,854)
Unearned MRP shares (86,852) (104,214)
Treasury stock, at cost; 549,352 and 424,991
shares at March 31, 2000 and June 30, 1999,
respectively (9,478,564) (7,911,655)
Total stockholders' equity 21,435,331 22,629,462
Total Liabilities and Stockholders' Equity $178,452,423 $164,972,343
See Notes to Consolidated Financial Statements
<TABLE>
SOUTHERN MISSOURI BANCORP, INC AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
FOR THE THREE AND NINE MONTH PERIODS ENDED MARCH 31, 2000 AND 1999 (UNAUDITED)
<CAPTION>
Three-months ended Nine-months ended
March 31, March 31,
2000 1999 2000 1999
<S> <C> <C> <C> <C>
INTEREST INCOME:
Loans receivable $2,527,294 $2,194,964 $7,207,549 $6,930,751
Investment securities 364,040 270,218 1,085,922 673,577
Mortgage-backed and related securities 214,808 261,944 657,547 717,986
Other interest-earning assets 27,238 55,700 60,975 124,748
Total interest income 3,133,380 2,782,826 9,011,993 8,447,062
INTEREST EXPENSE:
Deposits 1,374,776 1,292,436 3,968,987 3,923,509
Federal Home Loan Bank advances 410,618 239,955 1,007,263 741,547
Total interest expense 1,785,394 1,532,391 4,976,250 4,665,056
NET INTEREST INCOME 1,347,986 1,250,435 4,035,743 3,782,006
PROVISION FOR LOAN LOSSES 15,000 10,000 50,000 35,000
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 1,332,986 1,240,435 3,985,743 3,747,006
NONINTEREST INCOME:
Service charges 96,868 51,533 277,692 185,599
Losses on investment and mortgage-
backed securities, available-for-sale 0 0 (21,205) (625)
Insurance commissions 3,464 90,553 19,101 256,175
Expense on foreclosed assets (8,049) (2,654) (20,783) (22,627)
Late charges and other fees 14,789 31,721 49,675 68,124
Other income 22,865 28,058 51,110 47,065
Total noninterest income 129,937 199,211 355,590 533,711
NONINTEREST EXPENSE:
Compensation and benefits 546,126 578,358 1,576,334 1,702,250
Occupancy and equipment, net 144,812 134,890 348,428 364,327
SAIF deposit insurance premiums 6,218 19,785 41,680 68,359
Professional fees 44,158 41,178 122,459 98,614
Advertising 26,795 33,909 77,325 90,684
Postage and office supplies 33,000 40,192 106,147 109,416
Deposit services 50,847 33,858 122,547 94,010
Other operating expense 73,736 65,486 255,212 194,566
Total noninterest expense 925,692 947,656 2,650,132 2,722,226
INCOME BEFORE INCOME TAXES 537,231 491,990 1,691,201 1,558,491
PROVISION FOR INCOME TAXES 185,521 162,496 578,842 533,614
NET INCOME 351,710 329,494 1,112,359 1,024,877
OTHER COMPREHENSIVE INCOME, NET:
Unrealized (losses) AFS securities (56,809) (29,308) (375,506) (11,388)
Adjustment for losses included in net income 0 0 13,359 394
Other comprehensive income (56,809) (29,308) (362,147) (10,994)
COMPREHENSIVE INCOME $ 294,901 $ 300,186 $ 750,212 $ 1,013,883
Basic earnings per common share $ 0.29 $ 0.25 $ 0.86 $ 0.76
Diluted earnings per common share $ 0.28 $ 0.24 $ 0.85 $ 0.74
Dividends per common share $ 0.125 $ 0.125 $ 0.375 $ 0.375
</TABLE>
See Notes to Consolidated Financial Statements
SOUTHERN MISSOURI BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Nine-months ended
March 31,
2000 1999
Cash Flows From Operating Activities:
Net income $ 1,112,359 $ 1,024,877
Items not requiring (providing) cash:
Depreciation and amortization 196,160 185,202
MRP expense and ESOP expense 116,863 248,572
Loss on sale of available-for-sale securities 21,205 625
Provision for loan losses 50,000 35,000
Gain on foreclosed real estate, net (13,500) (20,580)
Net amortization of deferred income, premiums,
and discounts 44,612 83,134
Changes in:
Accrued interest receivable 71,754 48,307
Prepaid expenses and other assets 4,767 (1,860)
Accrued interest payable 34,260 342,438
Accounts payable and other liabilities (28,982) (39,911)
Net cash provided by operating activities 1,609,498 1,905,804
Cash flows from investing activities:
Net (increase) decrease in loans (15,313,109) 1,946,073
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 415,000 4,212,120
Proceeds from maturing available-for-sale
mortgage-backed securities 1,856,588 4,276,567
Proceeds from maturing held-to-maturity
mortgage-backed securities - 275,000
Purchase of Federal Home Loan Bank stock (409,000) (37,500)
Purchase of available-for-sale investment
securities (2,759,750) (11,581,011)
Purchase of available-for-sale mortgage-backed
securities (1,976,250) (8,048,143)
Purchase of premises and equipment (181,570) (267,660)
Proceeds from sale of foreclosed real estate 151,822 39,477
Net cash used in by investing activities (13,816,685) (8,185,702)
Cash flows from financing activities:
Net increase in certificates of deposit 1,050,794 7,446,654
Net increase in demand, NOW and Saving accounts 4,215,470 5,874,841
Net decrease in advances from borrowers for
taxes and insurance (47,328) (64,219)
Proceeds from Federal Home Loan Bank advances 128,550,000 5,500,000
Repayments of Federal Home Loan Bank advances(119,100,000) (6,768,905)
Cash dividends paid (494,296) (510,719)
Exercise of stock options 135,620 40,000
Purchase of treasury stock (1,702,530) (2,803,401)
Net cash provided by financing activities 12,607,730 8,714,251
Increase in cash and cash equivalents 400,543 2,434,353
Cash and cash equivalents at beginning of period 4,068,675 4,326,474
Cash and cash equivalents at end of period $ 4,469,218 $6,760,827
See Notes to Consolidated Financial Statements
SOUTHERN MISSOURI BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS - Continued
(UNAUDITED)
Nine-months ended
March 31,
2000 1999
Supplemental disclosures of
Cash flow information:
Noncash investing and financing activities:
Conversion of loans to foreclosed real estate
and other assets $ 423,091 $ 721,305
Conversion of foreclosed real estate to loans $ 87,000 $ 169,783
Cash paid during the period for:
Interest (net of interest credited) $2,168,951 $1,158,376
Income taxes $ 446,000 $ 300,000
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 nine month periods
ended March 31, 2000 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 March 31, 2000, the ESOP had
allocated 100,147 shares and had 7,500 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 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, 2000 and 1999, under SFAS
No. 128:
<TABLE>
<CAPTION>
Three-Months Ended Nine-Months Ended
March 31, March 31,
2000 1999 2000 1999
<S> <C> <C> <C> <C>
Net earnings $ 351,710 $ 329,494 $1,112,359 $1,024,877
Weighted-average shares -
Basic earnings per share 1,233,471 1,301,108 1,295,030 1,339,081
Stock options under treasury
stock method 10,956 35,332 14,472 37,683
Weighted-average shares -
Diluted earnings per share 1,248,102 1,336,440 1,309,502 1,376,764
Basic earnings per common share $ 0.29 $ 0.25 $ 0.86 $ 0.76
Diluted earnings per common share $ 0.28 $ 0.24 $ 0.85 $ 0.74
</TABLE>
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 $612,000 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 March 31, 2000 and the results of operations for the three and
nine-month periods ended March 31, 2000 and 1999, 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 $13.5 million, or 8.2%, to
$178.5 million at March 31, 2000 as compared to $165.0 million at
June 30, 1999. The increase was largely attributable to a $15.1
million, or 12.8% increase in loans receivable. The rate of loan
growth slightly exceeded the Company's internal growth estimates
and consisted primarily of $8.8 million in commercial loans and
$6.4 million in loans secured by one- to four-family real estate.
The Company's stockholders' equity declined from $22.6 million
at June 30, 1999 to $21.4 million at March 31, 2000. The decline
was primarily due to the repurchase of $1.8 million of the
Company's common stock, $494,000 in cash dividends paid on common
stock and mark-to-market adjustments on the investment portfolio
of $362,000. The decline was partially offset by the Company's
$1.1 million in net income.
The growth in loans receivable and reduction in stockholders'
equity was primarily funded by an increase in deposits of $5.3
million, or 4.4%, and an increase in FHLB advances of $9.5
million, or 46.0%, to $30.0 million at March 31, 2000 from $20.6
million at June 30, 1999. Outstanding FHLB 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 March 31, 2000 the average cost of FHLB advances was 5.79%,
which was 53 basis points higher than the average cost of the
Company's certificates of deposit.
During the quarter, the Company announced an agreement to
acquire two full-service banking facilities located in Kennett,
Missouri and Qulin, Missouri, including deposits and loans of
approximately $50.1 million and $27.8 million, respectively. In
addition, the Company announced an agreement to sell two of its full-
service banking facilities located in Malden, Missouri and
Ellington, Missouri, including deposits and loans of
approximately $15.0 million and $9.5 million, respectively. Both
transactions are expected to be completed during the first
quarter of fiscal 2001.
Results of Operations - Comparison of the three and nine month
periods ended March 31, 2000 and 1999.
Net Income. The Company's net income for the three and nine
month periods ended March 31, 2000 was $352,000 and $1.1 million,
respectively, as compared to the $329,000 and $1.0 million earned
during the same periods of the prior year. Increased earnings
over the three and nine month periods ended March 31, 2000 was
primarily due to increased net interest income and lower
noninterest expense, which was partially offset by reduced
noninterest income.
Net Interest Income. Net interest income increased $98,000,
or 7.8%, to $1.3 million for the three months ended March 31,
2000 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 $10.1
million increase in average interest-earning assets and the $11.4
million increase in interest-bearing liabilities and the 7 basis
point increase in the average interest rate spread from 2.62% to
2.69% for the three month period.
Net interest income increased $254,000, or 6.7%, to $4.0 million
for the nine months ended March 31, 2000 as compared to the $3.8
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 $10.4 million increase in average
interest-earning assets and the $10.6 million increase in average
interest-bearing liabilities as well as a 5 basis point increase
in the average interest rate spread, from 2.71% to 2.76% for the
nine month period.
Interest Income. Interest income for the three and nine-month
periods ended March 31, 2000 increased $351,000 and $565,000,
respectively, as compared to the same periods of the prior year.
The increase over the three-month period was primarily due to a
$10.1 million, or 6.4% increase in average interest-earning
assets and a 41 basis point increase in the average yield earned
on these assets, to 7.40% from 6.99%. Over the nine-month
period, the increase was primarily due to a $10.4 million, or
6.8% increase in average interest-earning assets, while the
average yield earned on these assets stayed substantially the
same at 7.34%.
Interest Expense. Interest expense for the three and nine-
month periods ended March 31, 2000 increased $253,000 and
$311,000, respectively, as compared to the same periods of the
prior year. The increase over the three-month period was
primarily due to an $11.4 million, or 8.1% increase in average
interest-bearing liabilities and a 34 basis point increase in the
average cost of these liabilities, to 4.71% from 4.37%. Over the
nine-month period, the increase was primarily due to a $10.6
million, or 7.9% increase in average interest-bearing
liabilities, partially offset by a decline in the average cost of
these liabilities, from 4.63% to 4.58%.
Provision for Loan Losses. The provision for loan losses for
the three-month period ended March 31, 2000 was $15,000 as
compared to the $10,000 provision made during the same period of
the prior year. The provision for loan losses for the nine-month
period ended March 31, 2000 was $50,000 as compared to the
$35,000 provision made during the same period of the prior year
(see "Allowance for Loan Loss Activity" and "Nonperforming
Assets").
Noninterest Income. Noninterest income for the three months
ended March 31, 2000 declined $69,000, or 34.8%, to $130,000 as
compared to the $199,000 earned during the same period of the
prior year. The decline was primarily due to declines in
insurance commissions and loan late charges of $87,000 and
$17,000, respectively, which was partially offset by a $45,000
increase in banking service charges. Noninterest income for the
nine months ended March 31, 2000 declined $178,000, or 33.4%, to
$356,000 as compared to the $534,000 earned during the same
period of the prior year. The decrease was primarily due to a
$237,000 decline in insurance commissions, a $21,000 loss
realized on the sale of available-for-sale securities and an
$18,000 reduction in loan late charges, which was partially
offset by a $92,000 increase in banking service charges. 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 March 31, 2000 declined $22,000, or 2.3%, to
$926,000 as compared to the $948,000 expended during the same
period of the prior year. The decline was primarily due to
respective declines in compensation expense and SAIF insurance
premiums of $32,000 and $14,000, partially offset by respective
increases in occupancy expense and deposit services of $10,000
and $17,000,. Noninterest expense for the nine-month period
ended March 31, 2000 declined $72,000, or 2.7%, to $2.6 million
as compared to the $2.7 million expended during the same period
of the prior year. The decline was primarily due to respective
declines in compensation expense and SAIF insurance premiums of
$126,000 and $27,000, partially offset by increased occupancy
expense of $16,000, professional fees of $24,000 and deposit
services of $24,000. Reduced compensation expense was primarily
due to the sale of the Company's insurance operation in the
fourth quarter of fiscal 1999 offset by hiring additional
personnel in the loan department during this fiscal year.
Provision for Income Taxes. The provision for income taxes for
the three and nine-month periods ended March 31, 2000 was
$186,000 and $579,000, respectively, as compared to the $162,000
and $534,000 expended for the same periods of the prior year.
The increases were primarily due to increased taxable income.
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 establishment of additional loss provisions. The
following table summarizes changes in the allowance for loan
losses over the nine months ended March 31, 2000 and 1999:
2000 1999
Balance, beginning of period $1,191,147 $1,295,222
Loans charged off:
Real estate (29,042) (37,664)
Unsecured consumer (12,108) (68,426)
Secured consumer (127,018) (80,739)
Mobile homes (37,554) (11,120)
Gross charged off loans (205,722) (197,949)
Recoveries of loans previously charged off:
Real estate 625 1,790
Unsecured consumer 11,744 4,195
Secured consumer 44,040 8,919
Mobile homes 29,122 54,309
Gross recoveries of charged off loans 85,531 69,213
Net charge offs (120,191) (128,736)
Provision charged to expense 50,000 35,000
Balance, end of period $1,120,956 $1,201,486
Ratio of net charge offs (recoveries) during
the period to average loans outstanding
during the period .10% .11%
During the last two fiscal years, the Company's level of net
loan charge offs has been higher than historical averages. This
increase was partially the result of underwriting guidelines and
collection procedures used by previous management. Beginning in
mid-1999, the process of implementing revised underwriting
guidelines, loan programs and collection procedures was
instituted. The implementation of each of these initiatives is
underway, but full attainment and compliance with these
initiatives is not expected to be achieved for several quarters.
Net loan charge offs are expected to rise over the next several
quarters as more aggressive collection procedures are fully
implemented. Management believes that these new guidelines, over
time, will result in a lower percentage of future loan charge-
offs, while allowing loan portfolio growth. 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 $123,000,
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 $70,000 to $1.1 million at March 31, 2000 from $1.2
million on June 30, 1999. At March 31, 2000, the Bank had $4.4
million, or 2.5% 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 nonaccru ing 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 3/31/00 6/30/99 3/31/99
Residential real estate $ 196,000 $ 181,000 $ 326,000
Commercial real estate 161,000 86,000 415,000
Commercial 82,000 27,000 -
Consumer 49,000 143,000 145,000
Mobile homes 13,000 55,000 167,000
Total loans past maturity/delinquent 90+ days 501,000 492,000 1,053,000
Assets acquired in settlement of loans 552,000 560,000 478,000
Total nonperforming assets $1,053,000 $1,052,000 $1,531,000
Percentage nonperforming assets to total assets 0.59% 0.64% 0.92%
Percentage nonperforming loans to net loans 0.38% 0.42% 0.90%
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 offering 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 used 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.
The Bank anticipates the average spread and net interest margin
to remain under downward pressure over the next several quarters
due to rising interest rates, a mismatch in the volume of assets
and liabilities subject to repricing, the use of annual and
lifetime interest rate caps on the Bank's adjustable-rate
mortgages and the Bank's historic use of "lagging" loan indices.
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 March 31, 2000,
the Company had outstanding commitments to fund $6.4 million in
mortgage loans and $4.3 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 March 31, 2000, the Bank had available credit at
the FHLB of approximately $88.3 million, of which $30.0 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 March 31, 2000, the Bank exceeded all regulatory capital
requirements with leverage capital of $21.4 million (12.1% of
average total assets), tier I capital of $21.4 million (21.1% of
risk-based assets) and risk-based capital of $22.6 million (22.2%
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 Agreements
(i) Greg A. 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
(vi) L. Douglas Bagby
(vii) Ronnie D. Black
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.
**** Filed 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: May 12, 2000 xThadis R. Seifert
Thadis R. Seifert
President
Date: May 12, 2000 xGreg A. Steffens
Greg A. Steffens
Chief Financial Officer
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<NAME> SOUTHERN MISSOURI BANCORP, INC
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