-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, BZy+utf5XBh8BQo2PEGEpF4HL8clp6VKZASbOWd/+jmejSnA9XZRkQXjdPaR+w/z S2yumcromjHZF4jd9ak4qA== 0000916907-96-000004.txt : 19960802 0000916907-96-000004.hdr.sgml : 19960802 ACCESSION NUMBER: 0000916907-96-000004 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960514 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: SOUTHERN MISSOURI BANCORP INC CENTRAL INDEX KEY: 0000916907 STANDARD INDUSTRIAL CLASSIFICATION: 6036 IRS NUMBER: 431665523 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-23406 FILM NUMBER: 96562578 BUSINESS ADDRESS: STREET 1: 531 VINE ST CITY: POPLAR BLUFF STATE: MO ZIP: 63901 BUSINESS PHONE: 3147851421 10QSB 1 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, 1996 OR ___ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 0-23406 Southern Missouri Bancorp, Inc. (Exact name of registrant as specified in its charter) Delaware 43-1665523 (State or jurisdiction of incorporation) (IRS employer id. no.) 531 Vine Street Poplar Bluff, MO 63901 (Address of principal executive offices) (Zip code) Registrant's telephone number, including area code 573-785-1421 Not Applicable Former name, former address and former fiscal year, if changed since last report. Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: 1,724,013 as of April 30, 1996. SOUTHERN MISSOURI BANCORP, INC. FORM 10-QSB FOR THE QUARTER ENDED MARCH 31, 1996 INDEX Page No. PART I - Financial Information Item 1. Financial Statements (Unaudited) Consolidated Statements of Financial Condition 1-2 Consolidated Statements of Income 3-4 Consolidated Statements of Cash Flows 5-6 Notes to Consolidated Financial Statements 7-8 (Unaudited) Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 9-15 PART II - Other Information Item 1. Legal Proceedings 16 Item 2. Changes in Securities 16 Item 3. Defaults upon Senior Securities 16 Item 4. Submission of Matters to a Vote of Security-Holders 16 Item 5. Other Information 16 Item 6. Exhibits and Reports on Form 8-K 16 SOUTHERN MISSOURI BANCORP, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (Unaudited) March 31, June 30, ASSETS 1996 1995 Cash and cash equivalents $ 7,267,667 2,985,898 Certificates of deposit 186,519 276,741 Investment and mortgage-backed and related securities: Available for sale - at estimated market value (amortized cost of $52,280,200 and $17,938,084 at March 31, 1996 and June 30, 1995, respectively) 52,144,966 17,762,860 Held to maturity - at amortized cost (estimated market value of $5,682,192 and $39,442,358 at March 31, 1996 and June 30, 1995, respectively) 5,621,340 38,969,530 Total investment and mortgage- backed and related securities 57,766,306 56,732,390 Stock in Federal Home Loan Bank of Des Moines 1,519,700 1,489,700 Loans receivable, net 91,489,764 82,886,563 Accrued interest receivable 1,088,172 1,194,993 Foreclosed real estate, net 680,403 727,518 Premises and equipment 1,319,945 1,294,741 Prepaid expenses and other assets 673,409 734,438 Total assets $ 161,991,885 148,322,982 See accompanying notes to consolidated financial statements. SOUTHERN MISSOURI BANCORP, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (Unaudited) March 31, June 30, LIABILITIES AND STOCKHOLDERS' EQUITY 1996 1995 Deposits $ 121,882,519 118,152,385 Advances from borrowers for taxes and insurance 284,711 472,846 Advances from FHLB of Des Moines 11,554,083 1,314,474 Federal income taxes payable 191,681 8,243 Accounts payable and other liabilities 514,318 529,773 Accrued interest payable 992,661 798,285 Total liabilities 135,419,973 121,276,006 Commitments and contingencies 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 17,408,733 17,325,586 Common stock acquired by ESOP (969,217) (1,122,251) Common stock acquired by MRP (433,681) (540,805) Retained earnings -substantially restricted 11,987,290 11,491,096 Unrealized loss on investment securities and mortgage-backed and related securities available for sale, net (66,430) (115,647) Minimum pension plan liability (9,035) (9,035) Treasury stock, 79,188 shares at cost (1,363,780) -- Total stockholders' equity 26,571,912 27,046,976 Total liabilities and stockholders' equity $ 161,991,885 148,322,982 See accompanying notes to consolidated financial statements. SOUTHERN MISSOURI BANCORP, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF INCOME (Unaudited) Three Months Ended March 31, 1996 1995 Interest income: Loans receivable $ 1,777,607 1,448,084 Investment securities 456,387 492,602 Mortgage-backed and related securities 580,779 426,526 Other interest-earning assets 68,285 42,834 Total interest income 2,883,058 2,410,046 Interest expense: Deposits 1,455,890 1,308,478 Other borrowings - 172 Advances from FHLB of Des Moines 166,011 16,243 Total interest expense 1,621,901 1,324,893 Net interest income 1,261,157 1,085,153 Provision for loan losses 15,000 15,000 Net interest income after provision for loan losses 1,246,157 1,070,153 Noninterest income: Gain on sale of investment securities, available for sale -- -- Gain (loss) on sale of mortgage-backed securities, available for sale 40,337 -- Gain on sale of mortgage-backed securities, held to maturity 54,487 -- Insurance commissions 66,864 69,874 Banking service charges 32,027 28,840 Net income on foreclosed real estate (7,513) (15,626) Loan late charges 20,393 8,075 Other 5,573 5,766 Total noninterest income 212,168 96,929 Noninterest expense: Compensation and benefits 534,358 514,490 Occupancy and equipment 62,634 70,378 SAIF deposit insurance premium 68,672 66,432 Gain on foreclosed real estate, net (30,322) (9,121) Professional fees 25,743 48,917 Advertising 19,260 25,030 Postage and office supplies 29,994 31,549 Other 82,930 76,463 Total noninterest expense 793,269 824,138 Income before income taxes 665,056 342,944 Income taxes 210,706 96,985 Net income $ 454,350 245,959 Earnings per share $ .29 .16 Dividends per share $ .125 .125 See accompanying notes to consolidated financial statements. SOUTHERN MISSOURI BANCORP, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF INCOME (Unaudited) Nine Months Ended March 31, 1996 1995 Interest income: Loans receivable $ 5,222,927 4,300,144 Investment securities 1,459,518 1,469,133 Mortgage-backed and related securities 1,348,407 1,253,988 Other interest-earning assets 152,275 132,652 Total interest income 8,183,127 7,155,917 Interest expense: Deposits 4,450,499 3,714,796 Other borrowings -- 1,551 Advances from FHLB of Des Moines 276,289 28,935 Total interest expense 4,726,788 3,745,282 Net interest income 3,456,339 3,410,635 Provision for loan losses 45,000 20,000 Net interest income after provision for loan losses 3,411,339 3,390,635 Noninterest income: Gain on sale of investment securities, available for sale 75,633 85,172 Gain (loss) on sale of mortgage-backed securities, available for sale (12,720) (74,295) Gain on sale of mortgage-backed securities, held to maturity 63,748 -- Insurance commissions 224,484 214,986 Banking service charges 106,339 90,372 Net income on foreclosed real estate (17,981) (32,970) Loan late charges 40,546 26,323 Other 11,035 10,705 Total noninterest income 491,084 320,293 Noninterest expense: Compensation and benefits 1,581,570 1,454,801 Occupancy and equipment 222,255 240,582 SAIF deposit insurance premium 205,587 209,008 Gain on foreclosed real estate, net (64,075) (47,357) Professional fees 99,986 126,384 Advertising 66,431 68,919 Postage and office supplies 82,690 80,212 Other 223,458 223,705 Total noninterest expense 2,417,902 2,356,254 Income before income taxes 1,484,521 1,354,674 Income taxes 425,062 385,127 Net income $ 1,059,459 969,547 Earnings per share $ .65 .61 Dividends per share $ .375 .275 See accompanying notes to consolidated financial statements. SOUTHERN MISSOURI BANCORP, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Nine Months Ended March 31, 1996 1995 Cash flows from operating activities: Net income $ 1,059,459 969,547 Items not requiring (providing) cash: Depreciation and amortization 131,727 156,957 MRP expense and ESOP expense 343,305 260,158 Gain on sale of investment securities - available for sale (75,633) (85,172) Loss on sale of mortgage-backed securities - available for sale 12,720 74,295 Gain on sale of mortgage-backed securities, held to maturity (63,748) -- Provision for loan losses 45,000 20,000 FHLB stock dividend (30,000) -- Gain on foreclosed real estate, net (64,075) (47,357) Net amortization of deferred income, premiums, and discounts 155,904 (46,160) Changes in: Accrued interest receivable 106,821 36,088 Prepaid expenses and other assets 61,029 (118,204) Accounts payable and other liabilities (15,455) (220,877) Federal income taxes payable 183,438 17,673 Accrued interest payable 194,376 497,638 Net cash provided by operating activities 2,044,868 1,514,586 Cash flows from investing activities: Net increase in loans (8,632,133) (6,027,213) Proceeds from sales of investment securities, available for sale 5,903,998 2,792,770 Proceeds from maturing investment securities, available for sale 8,775,000 3,250,000 Proceeds from maturing investment securities, held to maturity 2,900,000 1,040,000 Purchase of investment securities, available for sale (7,457,104) (1,095,361) Purchase of investment securities, held to maturity (500,000) (4,279,568) Proceeds from sales of mortgage-backed securities, held to maturity 1,161,028 -- Proceeds from sales of mortgage-backed securities, available for sale 5,120,870 369,256 Proceeds from maturing mortgage-backed securities, available for sale 4,086,474 884,064 Proceeds from maturing mortgage-backed securities, held to maturity 1,064,529 2,043,818 Purchase of mortgage-backed securities, held to maturity -- (3,426,640) Purchase of mortgage-backed securities, available for sale (22,094,619) -- Purchase of certificates of deposits of other financial institutions -- (500,000) SOUTHERN MISSOURI BANCORP, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Nine Months Ended March 31, 1996 1995 Proceeds from maturing certificates of deposit $ 90,000 340,000 Purchase of premises and equipment (114,784) (178,150) Proceeds from sale of foreclosed real estate 79,079 11,475 Net cash used in investing activities (9,617,662) (4,775,549) Cash flows from financing activities: Net increase in deposits 3,730,134 4,506,395 Net decrease in advances from borrowers for taxes and insurance (188,135) (110,141) Repayment of other borrowings -- (84,250) Proceeds from advances from FHLB of Des Moines 15,250,000 2,000,000 Repayment of advances from FHLB of Des Moines (5,010,391) (2,010,143) Dividends on common stock (563,265) (495,880) Sale of treasury stock 108,120 -- Payments to acquire treasury stock (1,471,900) -- Net cash provided by financing activities 11,854,563 3,805,981 Increase in cash and cash equivalents 4,281,769 545,018 Cash and cash equivalents at beginning of period 2,985,898 5,094,873 Cash and cash equivalents at end of period $ 7,267,667 5,639,891 Supplemental disclosures of cash flow information: Noncash investing and financing activities Conversion of loans to foreclosed real estate $ 77,824 44,450 Conversion of foreclosed real estate to loans $ 93,892 58,845 Cash paid during the period for Interest (net of interest credited) $ 1,534,387 1,069,124 Income taxes $ 241,500 352,400 See accompanying notes to consolidated financial statements. SOUTHERN MISSOURI BANCORP, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (1) The information contained in the accompanying consolidated financial statements is unaudited. In the opinion of management, the financial statements contain all adjustments (none of which were other than normal recurring accruals) necessary for a fair statement of the results of operations for the interim periods. These financial statements should be read in conjunction with the audited consolidated financial statements contained in the Company's 1995 Annual Report to Stockholders. The results of operations for the three and nine month periods ended March 31, 1996 are not indicative of the results of operations for the entire fiscal year. (2) The Savings Bank is a member of the Savings Association Insurance fund (SAIF). Legislation has been introduced in the United State Congress that would require financial institutions that are members of SAIF to pay a one-time premium to recapitalize the SAIF, which is expected to be approximately 85 basis points applied to insured deposits. If this legislation is enacted into law, it is likely that the premium would be immediately charged against current earnings and therefor would serve to reduce the capital of the Company by the amount of the premium, net of related income taxes. Based upon the Savings Bank's level of insured deposits at March 31, 1995, the measurement date proposed in the legislation and the provisions of the legislation currently proposed, the potential one-time premium would be approximately $1,008,000. Management cannot predict whether the proposed legislation will be enacted or, if enacted, the amount of the one-time premium. Proposed legislation before the U.S. Congress contains a provision that repeals the reserve method of accounting for thrift bad debt reserves (including the percentage-of- taxable-income) for tax years beginning after December 31, 1995. This would require the Savings Bank to account for bad debts using the specific charge-off method. Under the proposed legislation, the change in accounting method that eliminates the reserve method would trigger bad debt reserve recapture for post-1987 excess reserves over a six-year period. However, at December 31, 1995 the Savings Bank had no post-1987 excess reserves. A special provision suspends recapture of post-1987 excess reserves for up to two years if, during those years, the institution satisfies a "residential loan requirement." This requirement would be met if the principal amount of the institution's residential loans exceeds a base year amount, which is determined by reference to be the average of the institution's loans during the six taxable years ending before January 1, 1996. However, notwithstanding this special provision, recapture would be required to begin no later than the first taxable year beginning after December 31, 1997. Management cannot predict whether the legislation providing for the recapture SOUTHERN MISSOURI BANCORP, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) of bad debt reserves will be enacted, or, if enacted, the final form of such legislation and its ultimate impact on the Savings Bank. (3) A recent interpretation of Statement of Financial Accounting Standards (SFAS) No. 115 permitted a one-time opportunity, through December 1995, to transfer investment and mortgage- backed and related securities from held to maturity classification to the available for sale classification. SFAS No. 115 permits transfer from the held to maturity classification to the available for sale classification only in rare circumstances. The Company transferred $23,041,000 of investment and mortgage-backed and related securities from the held to maturity classification to the available for sale classification. The transfer under this one-time opportunity was made in order to increase investment management flexibility. Available for sale securities are recorded at fair value. Unrealized gains and losses, net of tax effect, are reported as a separate component of stockholders' equity. Stockholders' equity will be subject to increased volatility to the extent that changes in interest rates affect the fair value of securities available for sale. SOUTHERN MISSOURI BANCORP, INC. AND SUBSIDIARY MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS General On April 13, 1994, Southern Missouri Savings Bank (Savings Bank) completed its conversion from mutual to stock form and became a wholly-owned subsidiary of a newly formed Delaware holding company, Southern Missouri Bancorp, Inc. (Company). The Company sold 1,785,375 shares of common stock at $10 per share in conjunction with the subscription offering to the Savings Bank Employee Stock Ownership Plan (ESOP), eligible account holders and other members of the Savings Bank. In addition, 17,826 shares of authorized common stock were granted to the Savings Bank's Management Recognition Plan to fulfill its order in the subscription offering. Net proceeds of the sale of common stock in the subscription offering were $15,160,161, after deduction of conversion costs of $729,369. The Company retained 50% of the net conversion proceeds less the funds used to make the ESOP loan to the Savings Bank for the purchase of shares of common stock for the Savings Bank's ESOP and used the balance of the net proceeds to purchase all of the stock of the Savings Bank in the conversion. The Company has no significant assets other than common stock of the Savings Bank and net proceeds retained by the Company following the conversion. The Company's principal business is the business of the Savings Bank. Therefore, the discussion in the Management's Discussion and Analysis of Financial Condition and Results of Operations relates primarily to the Savings Bank and its operations. Supervisory Agreement On December 21, 1994, the Savings Bank voluntarily entered into a Supervisory Agreement with the OTS as a result of its latest OTS examination. The Supervisory Agreement generally concerns the Savings Bank's investment portfolio and more specifically focuses on the reporting, monitoring and assessment of interest rate risk in connection with the Savings bank's portfolio of collateralized mortgage obligations (CMOs). As part of the Supervisory agreement, the Savings Bank has hired an investment officer who will augment the Savings Bank's expertise and facilitate compliance with regard to the Savings bank's portfolio of CMOs. The investment officer is expected to become the Savings Bank's Chief Financial Officer. In addition, the Savings Bank has revised its Investment Policy to conform more closely to the OTS's policy on securities activities and the Savings Bank's Board of Directors are expected to implement additional procedures to review the Savings Bank's investment activities and monitor its interest rate risk management. SOUTHERN MISSOURI BANCORP, INC. AND SUBSIDIARY MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued Liquidity and Capital Resources The Savings Bank's principal sources of funds are cash receipts from deposits, loan repayments by borrowers, and net income. The Savings Bank has an agreement with the Federal Home Loan Bank of Des Moines (FHLB of Des Moines) to provide cash advances, should the need for additional funds be required. Commitments to originate fixed rate and adjustable-rate mortgage loans at March 31, 1996 were approximately $289,000 and $4,144,000, respectively. For regulatory purposes, liquidity is measured as a ratio of cash and certain investments to withdrawable deposits and short term borrowings. The minimum level of liquidity required by OTS regulation is presently 5%. The Savings Bank's liquidity ratio was approximately 11.71% at March 31, 1996. The Savings Bank maintains a high level of liquidity as a matter of management philosophy in order to more closely match interest-sensitive assets with interest-sensitive liabilities. The savings and loan industry historically has accepted interest rate risk as a part of its operating philosophy. Long-term, fixed-rate loans were funded with deposits which adjust to market interest rates more frequently. In recent years, the Savings Bank has originated primarily mortgage loans which permit adjustment of the interest rate after an initial term of one year in order to reduce inherent interest rate risk. Investment and mortgage-backed and related securities with a carrying value of $52,145,000 are classified as available for sale at March 31, 1996. Such securities are carried at fair value and can be liquidated with no further impact on capital. The Company's unrealized gains and losses on investment and mortgage-backed and related securities net of applicable income taxes, are recorded in stockholders' equity. The Savings Bank must maintain core capital equal to 3% of adjusted total assets and tangible capital equal to 1.5% of adjusted total assets. The Savings Bank must maintain an 8% risk-based capital. In November, 1994 the OTS adopted a regulation which excludes unrealized losses or gains on debt securities classified as available for sale and unrealized gains on equity securities for regulatory capital purposes. SOUTHERN MISSOURI BANCORP, INC. AND SUBSIDIARY MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued The following table presents the Savings Bank's capital position relative to its regulatory capital requirements at March 31, 1996: Unaudited Regulatory Capital Tangible Core Stockholders' equity per consolidated financial statements $ 26,571,912 26,571,912 Stockholders' equity of Southern Missouri Bancorp, Inc. not available for regulatory capital purposes 6,937,504 6,937,504 GAAP capital 19,634,408 19,634,408 General valuation allowances -- -- Non-includable unrealized loss on investment and mortgage-backed and related securities available for sale 89,255 89,255 Non-includable deferred tax assets (309,980) (309,980) Non-includable intangible assets (95,124) (95,124) Regulatory capital 19,318,559 19,318,559 Regulatory capital requirement 2,346,000 4,692,000 Regulatory capital - excess $ 16,972,559 14,626,559 Regulatory capital ratio 12.33% 12.33% Regulatory capital requirement 1.50 3.00 Regulatory capital ratio - excess 10.83% 9.33% Unaudited Regulatory Capital Risk-Based Stockholders' equity per consolidated financial statements $ 26,571,912 Stockholders' equity of Southern Missouri Bancorp, Inc. not available for regulatory capital purposes 6,937,504 GAAP capital 19,634,408 General valuation allowances 612,535 Non-includable unrealized loss on investment and mortgage-backed and related securities available for sale 89,255 Non-includable deferred tax assets (300,980) Non-includable intangible assets (95,124) Regulatory capital 19,940,094 Regulatory capital requirement 6,077,000 Regulatory capital - excess $ 13,863,094 Regulatory capital ratio 26.24% Regulatory capital requirement 8.00 Regulatory capital ratio - excess 18.24% SOUTHERN MISSOURI BANCORP, INC. AND SUBSIDIARY MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued Financial Condition Total assets increased from $148.3 million at June 30, 1995 to $162.0 million at March 31, 1996. Cash flows from the maturities, sales and prepayments of securities, deposits and advances from the FHLB of Des Moines were used to originate loans, purchase securities and cash and cash equivalents. The Savings Bank intends to borrow from the FHLB when the cost is less than the overall cost of retail deposits. Foreclosed real estate, net decreased due to the sale of certain properties. Premises and equipment increased due to the purchase of an automatic teller machine to be installed at the Poplar Bluff branch in the fourth quarter. Advances from borrowers for taxes and insurance decreased as a result of real estate taxes being paid in December for loan customers. Federal income taxes payable increased due to the timing of federal income tax payments. Accrued interest payable increased due to the timing of interest payments on a promotional nine-month certificate. Additional paid-in capital and common stock acquired by the ESOP and MRP changed as a result of the recognition of compensation expense for the ESOP and MRP. Unrealized loss on investment securities and mortgage-backed and related securities available for sale, net of income tax changed from a loss $116,000 at June 30, 1995 to a loss of $66,000 at March 31, 1996. The balance is expected to fluctuate in the future based on changes in interest rates, as well as the amount and maturities of securities and mortgage-backed securities available for sale. COMPARISON OF OPERATING RESULTS FOR THE THREE AND NINE MONTHS ENDED MARCH 31, 1996 AND 1995 Net Income Net income for the three-months ended March 31, 1996 was $454,000 compared to $246,000 for the three-months ended March 31, 1995. Net income increased due to higher net interest income and higher noninterest income and lower noninterest expense. Net income for the nine months ended March 31, 1996 was $1,059,000 compared to $970,000 for the nine months ended March 31, 1995. The increase was due to higher net interest income and noninterest income, offset by higher provision for loan losses and noninterest expense. SOUTHERN MISSOURI BANCORP, INC. AND SUBSIDIARY MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued Net Interest Income Net interest income increased from $1.08 million for the three months ended March 31, 1995 to $1.26 million for the comparable three month period in 1996. Net interest income increased from $3.41 million for the nine months ended March 31, 1995 to $3.46 million for the comparable nine month period in 1996. The interest rate spread increased due to an increase in average interest earnings assets and weighted average rates. This increase was offset, in part, by an increase in interest expense due to higher weighted average rates on interest-bearing liabilities, as well as an increase in average interest-bearing liabilities. Interest rates in 1996 were generally higher than in 1995. Interest Income Interest income was $2.41 million for the three months ended March 31, 1995 compared to $2.88 million for the comparable three month period in 1996. Interest income was $7.16 million for the nine months ended March 31, 1995 compared to $8.18 million for the comparable nine month period in 1996. Interest on loans receivable increased for both the three months and nine months periods ended March 31, 1996 compared to 1995 periods as a result of higher average loans outstanding for 1996, and a higher yield. The weighted-average rate on loans increased from 7.15% at March 31, 1995 to 7.83% at March 31, 1996. New loans originated in 1996 generally had a higher interest rate than those originated in 1995. In addition, adjustable-rate mortgage loans repriced upwards to reflect higher interest rates in 1996. Interest on mortgage-backed securities (MBSs) increased due to a higher average balance outstanding in the three and nine month periods ended March 31, 1996 compared to the 1995 periods, offset by lower weighted-average yield on MBSs. The weighted- average rate on MBSs decreased from 6.64% at March 31, 1995 to 6.33% at March 31, 1996. Interest on investment securities decreased in the three and nine month periods ended March 31, 1996 compared to the 1995 periods due to lower average balance outstanding, offset by a higher weighted-average yield. The weighted average rate on investment securities increased from 6.51% at March 31, 1995 to 6.82% at March 31, 1996. Interest on other interest-earning assets increased in the three months ended March 31, 1996 from the comparable period in 1995 due to higher average balance and higher interest rates on overnight funds and short term deposits. The components of interest-bearing assets change from time to time based on the availability and interest rates of loans, investment securities, and MBSs. SOUTHERN MISSOURI BANCORP, INC. AND SUBSIDIARY MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued In the prevailing interest rate environment, the Savings Bank was able to take advantage of investment opportunities resulting from the interest rate differential between the yield earned on investment securities and the rate paid on advances from the FHLB of Des Moines. During the quarter ended December 31, 1995, the Savings Bank borrowed $11.2 million from the FHLB of Des Moines at an average rate of 5.68% and invested such funds in adjustable rate MBSs with an average yield of 6.53%. The Savings Bank expects to continue to evaluate these arbitrage opportunities as they arise. Interest Expense Interest expense increased due to higher interest rates and higher average balances. The weighted-average rate on interest- bearing liabilities was 4.73% at March 31, 1995 as compared to 4.85% at March 31, 1996. Provision for Loan Losses Provision for loan losses are charged to income to bring the total allowance for loan losses to a level considered adequate by management to provide for loan losses based on prior loss experience, known and inherent risks in the portfolio, adverse situations that may affect the borrower's ability to repay, the estimated value of any underlying collateral and current economic conditions. Management also considers other factors relating to the collectibility of the Savings Bank's loan portfolio. For the three months ended March 31, 1996 and 1995 the Savings Bank established a provision for loan losses of $15,000. For the nine months ended March 31, 1996 the Savings Bank established a provision for loan losses of $45,000 compared with $20,000 for the nine months ended March 31, 1995. The book value of nonaccrual loans at March 31, 1996 was $867,000 compared to $737,000 at June 30, 1995. The average balance of nonaccrual loans for the nine months ended March 31, 1996 was approximately $771,000. Allowance for losses on nonaccrual loans amounted to approximately $25,000 at March 31, 1996. For the three months and nine months ended March 31, 1996, gross interest income which would have been recorded had nonaccrual loans been current in accordance with their original terms amounted to approximately $18,000 and $55,000, respectively. The amount of interest income included in the Company's net earnings for the three months and nine months ended March 31, 1996 was approximately $11,000 and $48,000, respectively. SOUTHERN MISSOURI BANCORP, INC. AND SUBSIDIARY MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued Noninterest Income Noninterest income increased from $97,000 for the three months ended March 31, 1995 to $212,000 for 1996. Noninterest income increased from $320,000 for the nine months ended March 31, 1995 to $491,000 for 1996. The Savings Bank realized net gains on sales of securities and MBSs of $95,000 for the three months ended March 31, 1996 compared to none in 1995. Such gains were $127,000 for the nine months ended March 31, 1996, compared to $11,000 in 1995. Gains on sales of securities and MBSs are not a stable source of income and no assurance can be given that the Savings Bank will generate such gains in the future. Gain on sale of MBSs held to maturity relate to small balance pools, which are permitted to be sold prior to maturity under Statement of Financial Accounting Standards No. 115. Banking service charges increased for both the three and nine months ended March 31, 1996 over comparable periods in 1995 due to increased checking account activity. Loan late charges increased for both periods in 1996 over 1995 periods due to the collection of more late charges. In prior years the Savings Bank waived late charges for many borrowers. Although past due loans over 30 days have increased slightly, there was no significant change in the trend of delinquent loans. Noninterest Expense Noninterest expense decreased from $824,000 for the three months ended March 31, 1995 to $793,000 for the three months ended March 31, 1996. Noninterest expense increased from $2,356,000 for the nine months ended March 31, 1995 to $2,418,000 for the nine months ended March 31, 1996. The increase is due primarily to higher compensation and benefits in 1996 due to higher Employee Stock Ownership (ESOP) expense, hiring of an additional officer and salary increases, offset by lower bonuses. Under generally accepted accounting principles, expense of the ESOP is affected by changes in the market price of the Company's stock, which increased substantially during 1996. ESOP expense will fluctuate in the future based on changes in the market price of the Company's stock. Occupancy and equipment expense decreased as a result of lower repairs in 1996. Professional fees decreased as a result of services performed in connection with the supervisory agreement in 1995. Income Taxes Income taxes increased for the three and nine months ended March 31, 1996 compared with the same periods in 1995 due to higher earnings before income taxes and a higher effective tax rate, as a result of lower nontaxable municipal interest income. SOUTHERN MISSOURI BANCORP, INC. PART II - OTHER INFORMATION Item 1 - Legal Proceedings There are no material legal proceedings to which the Holding Company or the Savings Bank is a party or of which any of their property is subject. From time to time, the Savings Bank is a party to various legal proceedings incident to its business. Item 2 - Changes in Securities None Item 3 - Defaults upon Senior Securities Not applicable Item 4 - Submission of Matters to a Vote of Security-Holders None Item 5 - Other Information None Item 6 - Exhibits and Reports on Form 8-K (a) Exhibits: none (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 Persuant 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 10, 1996 BY: Donald R. Crandell Donald R. Crandell, Chief Executive Officer Chief Financial Officer and Duly Authorized Officer EX-27 2
9 9-MOS JUN-30-1996 MAR-31-1996 7,267,667 186,519 0 0 52,144,966 5,621,340 5,682,192 92,099,646 609,822 161,991,885 121,882,519 11,250,000 1,983,371 304,083 0 0 18,032 26,553,880 161,991,885 1,777,607 1,037,166 68,285 2,903,451 1,455,890 1,621,901 1,281,550 15,000 94,824 793,269 665,056 665,056 0 0 454,350 .29 .29 3.15 867,000 0 426,206 0 600,093 5,118 0 609,882 609,882 0 609,882
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