-----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, WJOM+cRR4fRSMWye4sMkwA6vYW4gyj1LaFeVY8ry90a/vNx423Ny95gjrLE2SRUb dGIu+xsFOIplG5AAZeikmA== 0000916907-97-000011.txt : 19971117 0000916907-97-000011.hdr.sgml : 19971117 ACCESSION NUMBER: 0000916907-97-000011 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971114 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: SOUTHERN MISSOURI BANCORP INC CENTRAL INDEX KEY: 0000916907 STANDARD INDUSTRIAL CLASSIFICATION: SAVINGS INSTITUTIONS, NOT FEDERALLY CHARTERED [6036] IRS NUMBER: 431665523 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 000-23406 FILM NUMBER: 97719488 BUSINESS ADDRESS: STREET 1: 531 VINE ST CITY: POPLAR BLUFF STATE: MO ZIP: 63901 BUSINESS PHONE: 3147851421 10QSB 1 SOUTHERN MISSOURI BANCORP, INC. FORM 10-QSB FOR THE QUARTER ENDED SEPTEMBER 30, 1997 INDEX Page No. PART I - Financial Information Item 1. Financial Statements (Unaudited) Consolidated Statements of Financial Condition 1 Consolidated Statements of Income 2 Consolidated Statements of Cash Flows 3-4 Notes to Consolidated Financial Statements 5 (Unaudited) Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 6-15 PART II - Other Information Item 1. Legal Proceedings 16 Item 2. Changes in Securities 16 Item 3. Defaults upon Senior Securities 16 Item 4. Submission of Matters to a Vote of Security-Holders 16 Item 5. Other Information 16 Item 6. Exhibits and Reports on Form 8-K 16-17 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 __________ FORM 10-QSB (Mark One) x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1997 OR ___ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 0-23406 Southern Missouri Bancorp, Inc. (Exact name of registrant as specified in its charter) Delaware 43-1665523 (State or jurisdiction of incorporation) (IRS employer id. no.) 531 Vine Street Poplar Bluff, MO 63901 (Address of principal executive offices) (Zip code) Registrant's telephone number, including area code 573-785-1421 Not Applicable Former name, former address and former fiscal year, if changed since last report. Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: 1,612,094 as of October 31, 1997. SOUTHERN MISSOURI BANCORP, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (Unaudited) September 30, June 30, ASSETS 1997 1997 Cash and cash equivalents $ 7,472,794 3,425,175 Certificates of deposit 91,121 91,199 Investment and mortgage-backed and related securities: Available for sale - at estimated market value (amortized cost of $34,456,403 and $39,571,322 at September 30, 1997 and June 30, 1997, respectively) 34,358,233 39,577,474 Held to maturity - at amortized cost (estimated market value of $4,909,487 and $4,904,989 at September 30, 1997 and June 30, 1997, respectively) 4,762,313 4,780,845 Stock in Federal Home Loan Bank of Des Moines 1,519,700 1,519,700 Loans receivable, net 111,943,066 107,782,977 Accrued interest receivable 961,205 1,079,967 Foreclosed real estate, net 77,661 54,838 Premises and equipment 1,759,524 1,682,075 Prepaid expenses and other assetS 351,565 398,784 Total assets $ 163,297,182 160,393,034 LIABILITIES AND STOCKHOLDERS' EQUITY Deposits $ 117,294,449 118,704,601 Advances from borrowers for taxes and insurance 415,095 321,609 Advances from FHLB of Des Moines 17,531,338 13,535,321 Accounts payable and other liabilities 727,413 582,825 Accrued interest payable 952,549 848,435 Total liabilities 136,920,844 133,992,791 Commitments and contingencies - - See accompanying notes to consolidated financial statements. SOUTHERN MISSOURI BANCORP, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (Unaudited) September 30, June 30, 1997 1997 Preferred stock, $.01 par value; 500,000 shares authorized; none issued and outstanding - - Common stock, $.01 par value; 3,000,000 shares authorized; 1,803,201 shares issued and outstanding 18,032 18,032 Additional paid-in capital 17,617,691 17,579,778 Retained earnings - substantially restricted 12,639,315 12,476,753 Treasury stock of 191,107 shares at September 30, 1997 and 169,898 shares at June 30, 1997, at cost (3,048,263) (2,680,183) Common stock acquired by ESOP (663,149) (714,160) Common stock acquired by MRP (248,506) (279,368) Unrealized gain on investment and mortgage-backed securities available for sale 64,793 2,966 Minimum pension liability (3,575) (3,575) Total stockholders' equity 26,376,338 26,400,243 Total liabilities and stockholders' equity $ 163,297,182 160,393,034 See accompanying notes to consolidated financial statements. SOUTHERN MISSOURI BANCORP, INC AND SUBSIDIARY CONSOLIDATED STATEMENTS OF INCOME (Unaudited) Three Months Ended September 30, 1997 1996 Interest income: Loans receivable $ 2,196,470 1,949,722 Investment securities 255,298 344,681 Mortgage-backed related securities 395,123 566,246 Other interest-earning assets 28,844 15,399 Total interest income 2,875,735 2,876,048 Interest expense: Deposits 1,374,213 1,412,466 Advances from FHLB 232,724 169,677 Total interest expense 1,606,937 1,582,143 Net interest income 1,268,798 1,293,905 Provision for loan losses 22,500 17,500 Net interest income after provision for loan losses 1,246,298 1,276,405 Noninterest income: Gain on mortgage-backed securities, available for sale 31,612 - Insurance commissions 71,594 89,706 Banking service charges 48,876 38,645 Net income on foreclosed real estate (554) (2,532) Loan late charges 12,853 10,542 Other 8,414 7,910 Total noninterest income 172,795 144,271 Noninterest expense: General and administrative: Compensation and benefits 589,907 555,749 Occupancy and equipment 79,742 79,825 SAIF special assessment - 779,184 SAIF deposit insurance premium 29,063 70,322 Provisions for losses on foreclosed real estate 7,889 (3,422) Professional fees 37,092 24,108 Advertising 31,786 22,352 Postage and office supplies 26,091 23,176 Other 65,409 64,292 Total noninterest expense 866,979 1,615,586 Income (loss) before income taxes 552,114 (194,910) Income taxes 194,963 (96,663) Net income (loss) $ 357,151 (98,247) Earnings per share $ .22 (.06) Dividends per share $ .125 .125 See accompanying notes to consolidated financial statements. SOUTHERN MISSOURI BANCORP, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Three Months Ended September 30, 1997 1996 Cash flows from operating activities: Net income(loss) $ 357,151 (98,247) Items not requiring (providing) cash: Depreciation and amortization 51,753 41,159 MRP expense and ESOP expense 119,786 104,784 Gain on sale of mortgage-backed securities - available for sale (31,612) - Provision for loan losses 22,500 17,500 Loss (gain) on foreclosed real estate, net 7,889 (3,422) Net amortization of deferred income, premiums, and discounts 33,031 31,872 Changes in: Accrued interest receivable 118,762 82,539 Prepaid expenses and other assets 39,401 42,462 Accounts payable and other liabilities 108,166 721,592 Accrued interest payable 104,114 73,389 Net cash provided by operating activities 930,941 1,013,628 Cash flows from investing activities: Net increase in loans (4,207,183) (4,224,069) Proceeds from maturing investment securities, available for sale 1,680,000 1,933,400 Proceeds from maturing investment securities, held to maturity - 30,000 Proceeds from sales of mortgage-backed securities, available for sale 2,303,652 - Proceeds from maturing mortgage-backed securities, available for sale 1,328,063 1,266,979 Proceeds from maturing mortgage-backed securities, held to maturity 16,848 12,576 Purchase of premises and equipment (121,384) (160,716) Proceeds from sale of foreclosed real estate - 3,400 Net cash provided(used)in investing activities 999,996 (1,138,430) See accompanying notes to consolidated financial statements. SOUTHERN MISSOURI BANCORP, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Three Months Ended September 30, 1997 1996 Cash flows from financing activities: Net decrease in deposits (1,410,152) (571,481) Net increase in advances from borrowers for taxes and insurance 93,486 79,430 Net increase in advances from FHLB of Des Moines 3,996,017 996,323 Dividends on common stock (194,589) (192,621) Payments to acquire treasury stock (368,080) (983,588) Net cash provided (used) by financing activities 2,116,682 (671,937) Increase (decrease) in cash and cash equivalents 4,047,619 (796,739) Cash and cash equivalents at beginning of period 3,425,175 4,477,872 Cash and cash equivalents at end of period $ 7,472,794 3,681,133 Supplemental disclosures of cash flow information: Noncash investing and financing activities Conversion of loans to foreclosed real estate $ 32,670 112,660 Conversion of foreclosed real estate to loans $ 9,000 11,400 Cash paid during the period for Interest (net of interest credited) $ 404,847 506,334 Income taxes $ 50,000 - See accompanying notes to consolidated financial statements SOUTHERN MISSOURI BANCORP, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (1> The information contained in the accompanying consolidated financial statements is unaudited. In the opinion of management, the financial statements contain all adjustments (none of which were other than normal recurring accruals) necessary for a fair statement of the results of operations for the interim periods. These financial statements should be read in conjunction with the audited consolidated financial statements contained in the Company's 1997 Annual Report to Stockholders. The results of operations for the three months ended September 30, 1997 are not necessarily indicative of the results of operations for the entire fiscal year. SOUTHERN MISSOURI BANCORP, INC. AND SUBSIDIARY MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS General On April 13, 1994, Southern Missouri Savings Bank (Savings Bank) completed its conversion from mutual to stock form and became a wholly-owned subsidiary of a newly formed Delaware holding company, Southern Missouri Bancorp, Inc. (Company). The Company sold 1,785,375 shares of common stock at $10 per share in conjunction with the subscription offering to the Savings Bank Employee Stock Ownership Plan (ESOP), eligible account holders and other members of the Savings Bank. In addition, 17,826 shares of authorized common stock were granted to the Savings Bank's Management Recognition Plan to fulfill its order in the subscription offering. Net proceeds of the sale of common stock in the subscription offering were $15,160,161, after deduction of conversion costs of $729,369. The Company retained 50% of the net conversion proceeds less the funds used to make the ESOP loan to the Savings Bank for the purchase of shares of common stock for the Savings Bank's ESOP and used the balance of the net proceeds to purchase all of the stock of the Savings Bank in the conversion. The Company has no significant assets other than common stock of the Savings Bank and net proceeds retained by the Company following the conversion. The Company's principal business is the business of the Savings Bank. Therefore, the discussion in the Management's Discussion and Analysis of Financial Condition and Results of Operations relates primarily to the Savings Bank and its operations. Certain statements in this report which relate to the Company's plans, objectives or future performance may be deemed to be forward-looking statements within the meaning of Private Securities Litigation Act of 1995. Such statements are based on management's current expectations. Actual strategies and results in future periods may differ materially from those currently expected because of various risks and uncertainties. Additional discussion of factors affecting the Company's business and prospects is contained in periodic filings with the Securities and Exchange Commission. Supervisory Agreement On December 21, 1994, the Savings Bank voluntarily entered into a Supervisory Agreement with the OTS, its primary federal regulator. The Supervisory Agreement generally concerns the Savings Bank's investment portfolio and, more specifically, focuses on the reporting, monitoring, and assessment of interest rate risk in connection with the Savings Bank's portfolio of collateralized mortgage obligations. In an effort to comply with SOUTHERN MISSOURI BANCORP, INC. AND SUBSIDIARY MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued the Supervisory Agreement, the Savings Bank has hired a Chief Financial Officer who serves primarily as a senior investment officer. In addition, the Savings Bank revised its Investment Policy to conform more closely to the OTS' s policy on securities activities and implemented additional procedures to review the investment activities and monitor interest rate risk management. In connection with the Savings Bank's most recent regulatory examination conducted during the fourth quarter of 1996, OTS examiners noted the Savings Bank's noncompliance with the Supervisory Agreement. Accordingly, additional actions, primarily relating to the Savings Bank's internal operations and lending activities, have been imposed by the OTS on the Savings Bank's management to achieve compliance and improve the operations of the Savings Bank. As a result of the most recent OTS examination and existing Supervisory Agreement, certain growth restrictions have been placed on the Savings Bank. Additionally, as a result of the Savings Bank s current regulatory status, the Savings Bank will no longer be eligible for the lowest assessment rate for deposit insurance. Instead, the assessment rate increased from .065% to .095% of deposits beginning July 1, 1997. This will result in approximately $9,000 in additional costs per quarter for deposit insurance. During the third quarter of fiscal 1997, the Savings Bank exceeded the growth restriction imposed by the Supervisory Agreement and, as a result, may be subject to sanction for violation of the Supervisory Agreement. The Savings Bank sought an exemption from compliance with the terms of the Supervisory Agreement for its growth during the third quarter and the request was denied. If the OTS determines that a material violation has occurred the OTS may impose the sanctions discussed below. The Savings Bank achieved compliance with the growth limitations during the fourth quarter of fiscal 1997. The Savings Bank requested a waiver of the growth limitations for future periods and received permission for an asset growth rate of 2 percent per quarter beginning with the quarter ending September 30, 1997. A savings association engaging in unsafe and unsound practices is subject to a variety of regulatory enforcement actions. Management believes that the growth restrictions have not to date had an adverse effect on the Savings Bank's operations. In the future, the continued existence of growth restrictions could have a material adverse effect on the operations of the Savings Bank, and, consequently, on the operations of the Company. Failure to achieve compliance with the Supervisory Agreement could lead to further regulatory enforcement actions, including the assessment of civil money penalties against the Savings Bank and/or its officers and directors. To the Savings Bank's knowledge, no such SOUTHERN MISSOURI BANCORP, INC. AND SUBSIDIARY MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued actions have been initiated. The Supervisory Agreement will remain in effect until it is terminated by the OTS. Quantitative and Qualitative Disclosures About Market Risk In January, 1997, the SEC adopted new rules about registrants accounting policies for derivatives, and quantitative and qualitative disclosures about market risk (Item 305 of Regulation S-K) inherent in derivative financial instruments, other financial instruments, and derivative commodity instruments. Registrants are required to disclose quantitative information about market risk, including interest rate risk, foreign currency exchange rate risk, commodity price risk, and other market or price risks (equity price risk) for trading and other than trading portfolios in accordance with one or more of three alternatives. The disclosure alternatives include tabular presentation of fair values of market risk sensitive financial instruments and contract terms sufficient to determine cash flows from those instruments, categorized by maturity dates; sensitivity analysis of potential losses in future earnings, fair values or cash flows of market risk sensitive financial instruments from selected hypothetical changes in market rates or prices; and value at risk disclosures of potential losses in future earnings, fair values or cash flows of market risk sensitive instruments over a selected period using a selected likelihood of occurrence from changes in market rates or prices. Registrants are also required to disclose qualitative information about market risk for trading and other than trading portfolios. Qualitative disclosures include the registrant's primary market risk, including interest rate risk, foreign currency exchange rate risk, commodity price risk, and other market or price risks (equity price risk); approach to managing these risks, including discussion of objectives, strategies and instruments used; and changes in either of the above two qualitative disclosures compared to the most recent fiscal year and if known, in future periods. The Savings Bank does not purchase derivative financial instruments or other financial instruments for trading purposes. Further, the Savings Bank is not subject to any foreign currency exchange rate risk, commodity price risk or equity price risk. The Savings Bank is subject to interest rate risk. A discussion of the Savings Bank's quantitative and qualitative disclosures about market risk is discussed in the following paragraphs. The Savings Bank's principal financial objective is to achieve long-term profitability while reducing its exposure to fluctuating interest rates. The Savings Bank has an exposure to SOUTHERN MISSOURI BANCORP, INC. AND SUBSIDIARY MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued interest rate risk, including short-term U.S. prime interest rates. The Savings Bank has sought to reduce exposure of its earnings to changes in market interest rates by managing the mismatch between asset and liability maturities and interest rates. The principal element in achieving this objective is to increase the interest-rate sensitivity of the Savings Bank's assets by originating loans with interest rates subject to periodic adjustment to market conditions. Accordingly, when possible, the Savings Bank has emphasized the origination of adjustable-rate mortgage (ARM) loans for retention in its portfolio, and originates a limited amount of fixed-rate loans. In addition the Savings Bank maintains the majority of its investment portfolio with maturities up to ten years. The Savings Bank relies on retail deposits as its primary source of funds. Management believes retail deposits, compared to brokered deposits, reduce the effects of interest rate fluctuations because they generally represent a more stable source of funds. As part of its interest rate risk management strategy, the Savings Bank promotes transaction accounts and one- to three-year certificates of deposit. Management does not anticipate that either financial objectives, strategies or instruments used, to reduce its interest rate risk exposure will change significantly in the near future. The OTS provides a net market value methodology to measure the interest rate risk exposure of thrift institutions. This exposure is a measure of the potential decline in the net portfolio value (NPV) of the institution based upon the effect of an assumed 200 basis point increase or decrease in interest rates. NPV is the present value of the expected net cash flows from the institution's financial instruments (assets, liabilities and off-balance sheet contracts). Cash and cash equivalents and other assets and liabilities are valued at their carrying amounts. Loans, deposits and investments are valued taking into consideration similar maturities, related discount rates and applicable prepayment assumptions. Under OTS regulations, an institution's normal level of interest rate risk in the event of this assumed change in interest rates is a decrease in the institution's NPV in an amount not exceeding 2% of the present value of its assets. Utilizing this measurement concept, at June 30, 1997, the change in the Savings Bank's NPV as a percent of the present value of its assets was negative 2.36% in the event of a 200 basis point increase in interest rates. The interest rate risk rule did not have a significant effect on risk based capital at June 30, 1997. This procedure for measuring interest rate risk was developed by the OTS to replace the gap analysis (the difference between interest-earning assets and interest- bearing liabilities that mature or reprice within a specific time period). SOUTHERN MISSOURI BANCORP, INC. AND SUBSIDIARY MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued The following table, sets forth as of the most recent date available from the OTS, June 30, 1997, the estimated changes in fair value of equity, based on the indicated interest rate environments: Change (In Basis Points) NPV as % of PV in Interest Estimated Net Portfolio Value of Assets Rates $ Amount $ Change % Change NPV Ratio BP Change (Dollars in Thousands) +400 $ 13,510 (10,375) (43)% 9.23% (582)bp +300 16,650 (7,235) (30) 11.10 (395)bp +200 19,455 (4,430) (19) 12.69 (236)bp +100 21,927 (1,957) (8) 14.03 (101)bp 0 23,885 15.04 -100 25,246 1,361 6 15.72 67 bp -200 26,308 2,424 10 16.21 117 bp -300 27,455 3,571 15 16.75 170 bp -400 28,878 4,993 21 17.40 236 bp As with any method of measuring interest rate risk, certain shortcomings are inherent in the method of analysis presented in the foregoing table. For example, although certain assets and liabilities may have similar maturities or periods to repricing, they may react in different degrees to changes in market interest rates. Also, the interest rates on certain types of assets and liabilities may fluctuate in advance of changes in market interest rates, while interest rates on other types may lag behind changes in market rates. Additionally, certain assets, such as ARM loans, have features which restrict changes in interest rates on a short term basis and over the life of the asset. Further, in the event of a change in particular, short- term U.S. prime interest rates, expected rates of prepayments on loans and early withdrawals from certificates could likely deviate significantly from those assumed in calculating the table. Year 2000 The Savings Bank is reviewing computer applications with its outside data processing software vendors to ensure operational and financial systems are not adversely affected by Year 2000 software failures. All major customer applications are processed internally by the Savings Bank' s data processing department. The software vendors have indicated that they expect to modify existing programs to make them year 2000 compliant. Management of the Savings Bank is unable to estimate any additional expense SOUTHERN MISSOURI BANCORP, INC. AND SUBSIDIARY MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued related to this issue. Any year 2000 compliance failures could result in additional expense to the Savings Bank. Liquidity and Capital Resources The Savings Bank's principal sources of funds are cash receipts from deposits, loan repayments by borrowers and net income. The Savings Bank has an agreement with the Federal Home Loan Bank (FHLB) of Des Moines to provide cash advances, should the Savings Bank need additional funds. Commitments to originate fixed rate and adjustable-rate mortgage loans at September 30, 1997 were approximately $1,213,000 and $2,824,000, respectively. For regulatory purposes, liquidity is measured as a ratio of cash and certain investments to withdrawable deposits and short-term borrowings. The present minimum level of liquidity required by regulation is 5%. The Savings Bank's liquidity ratio was approximately 9.8% at September 30, 1997. Investment and mortgage-backed and related securities with a carrying value of $34,358,000 are classified as available for sale at September 30, 1997. Such securities are carried at fair value and can be liquidated with no further impact on capital. The Company's unrealized gains and losses on investment and mortgage-backed and related securities net of applicable income taxes, are recorded in stockholders' equity. Under the capital adequacy guidelines and regulatory framework for prompt corrective action, the Savings Bank is required to maintain tangible capital, core capital, tier 1 risk-based capital (core capital to risk-weighted assets), and risk-based capital of 1.5%, 4%, 4%, and 8%. The Savings Bank met such capital requirements at September 30, 1997. SOUTHERN MISSOURI BANCORP, INC. AND SUBSIDIARY MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued The following table presents the Savings Bank's capital position relative to its regulatory capital requirements at September 30, 1997: Unaudited Regulatory Capital Tier 1 Tangible Core Risk-Based Risk-Based Stockholders' equity per consolidated financial statements $ 26,376,338 26,376,338 26,376,338 26,376,338 Stockholders' equity of Southern Missouri Bancorp, Inc. not available for regulatory capital purposes (4,939,379) (4,939,379) (4,939,379) (4,939,379) GAAP capital 21,436,959 21,436,959 21,436,959 21,436,959 General valuation allowances - - - 738,958 Non-includable unrealized gain on investment and mortgage-backed and related securities available for sale (10,756) (10,756) (10,756) (10,756) Non-includable deferred tax assets (190,323) (190,323) (190,323) (190,323) Non-includable intangible assets (48,216) (48,216) (48,216) (48,216) Regulatory capital 21,187,664 21,187,664 21,187,664 21,926,622 Regulatory capital requirement (2,384,000) (4,769,000) (3,459,000) (6,917,000) Regulatory capital - excess $ 18,803,664 16,418,664 17,728,664 15,009,622 Regulatory capital ratio 13.33% 13.33 24.50% 25.36% Regulatory capital requirement 1.50 4.00 4.00 8.00 Regulatory capital ratio - excess 11.83% 9.33% 20.50% 17.36% SOUTHERN MISSOURI BANCORP, INC. AND SUBSIDIARY MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued Financial Condition Total assets increased from $160,393,000 at June 30, 1997 to $163,297,000 at September 30, 1997. Cash flows from sales, maturities and prepayments of securities, advances from the FHLB of Des Moines, and cash and cash equivalents were used to originate loans and fund deposits. The Savings Bank intends to borrow from the FHLB when the cost of such borrowings is less than the overall cost of retail deposits or in the event of other cash flow needs. Premises and equipment increased due to upgrading of the data processing system. Accounts payable and other expenses increased due to an increase in income taxes payable. This was a result of recording net income in 1997 versus a net loss in 1996. Additional paid-in capital and common stock acquired by the ESOP and MRP changed as a result of the recognition of compensation expense for the ESOP and MRP. Unrealized gain on investment securities and mortgage-backed and related securities available for sale, net of income tax changed from a gain of $3,000 at June 30, 1997 to a gain of $65,000 at September 30, 1997. The balance is expected to fluctuate in the future based on changes in interest rates, as well as the amount and maturities of securities and mortgage-backed securities available for sale. COMPARISON OF OPERATING RESULTS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996 Net Income Net income for the three-months ended September 30, 1997 was $357,000 compared with a net loss of $98,000 for the three-months ended September 30, 1996. The loss for 1996 was due to recording a charge to income of $779,000 related to a special assessment for the Savings Association Insurance Fund(SAIF). Net Interest Income Net interest income decreased by $25,000 from $1.29 million for 1996 to $1.27 million in 1997. Net interest income decreased due to a lower interest rate spread and partially offset by a higher interest-earning assets. Interest expense increased principally due to an increase in average interest-bearing liabilities. Interest Income Interest income was $2.88 million for the three-months ended September 30, 1996 and 1997. SOUTHERN MISSOURI BANCORP, INC. AND SUBSIDIARY MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued Interest on loans receivable increased from $1.95 million in 1996 to $2.20 million in 1997 as a result of higher average loans outstanding for 1997, offset by a slightly lower yield. The weighted-average yield on loans decreased from 7.84% for 1996 to 7.76% for 1997. Interest on mortgage-backed securities (MBSs) decreased due to a lower average balance and a lower weighted average yield. The weighted-average yield on mortgage-backed securities decreased from 6.53% in 1996 to 6.35% in 1997. Interest on investment securities decreased due to lower interest rates and a lower average balance. The weighted-average yield on investment securities decreased from 6.46% in 1996 to 5.75% in 1997. Interest on other interest-earning assets increased as a result of higher average balances. Interest rates on overnight funds and short term deposits remained substantially the same. The components of interest-bearing assets change from time to time based on the availability and interest rates of loans, investment securities, and MBSs. SOUTHERN MISSOURI BANCORP, INC. AND SUBSIDIARY MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued Interest Expense Interest expense increased by $25,000 from $1.58 million in 1996 to $1.61 million in 1997 due to higher average interest-bearing liabilities and slightly higher interest rates. The weighted- average rate on interest-bearing liabilities increased from 4.78% for the three-months ended September 30, 1996 to 4.80% for the three-months ended September 30, 1997. Provision for Loan Losses Provision for loan losses are charged to earnings to bring the total allowance for loan losses to a level considered adequate by management to provide for loan losses based on prior loss experience, known and inherent risks in the portfolio, adverse situations that may affect the borrower's ability to repay, the estimated value of any underlying collateral and current economic conditions. Management also considers other factors relating to the collectibility of the Savings Bank's loan portfolio. For the three-months ended September 30, 1997, the Savings Bank established a provision for loan losses of $22,500 compared with $17,500 for the three-months ended September 30, 1996. Following is a summary of activity in the allowance for loan losses for the three months ended September 30, 1997 and 1996: 1997 1996 Balance, beginning of period $ 706,487 627,564 Loans charged off - consumer (1,377) - Recoveries of loans previously charged off - consumer 11,348 - Net recoveries (charge-offs) 9,971 - Provision charged to expense 22,500 17,500 Balance, end of period $ 738,958 645,064 Ratio of net charge-offs during the period to average loans outstanding during the period .01% - The book value of non-accrual loans at September 30, 1997 was $1,358,000 compared to $1,380,000 at June 30, 1997. The average balance of nonaccrual loans for the three months ended September 30, 1997 was approximately $1,347,000. Allowance for losses on nonaccrual loans amounted to approximately $31,000 at September 30, 1997. For the three months ended September 30, 1997 and 1996, gross interest income which would have been recorded had nonaccrual loans been current in accordance with their original terms amounted to approximately $30,000 and $13,000, respectively. The amount of interest income included in the Company's net earnings for the three months ended September 30, 1997 and 1996 was approximately $20,000 and $13,000, respectively. The following table sets forth information with respect to the Savings Bank's nonaccrual loans at September 30, 1997 and June 30, 1997: Loans accounted for on a nonaccrual basis: Residential real estate $ 837 922 Commercial real estate 306 279 Commercial - - Consumer 46 24 Mobile homes 169 155 Total $ 1,358 1,380 Total loans delinquent 90 days or more to net loans 1.21% 1.28% Nonaccrual residential real estate loans at September 30, 1997 consists of 37 loans in the Savings Bank's market area that range in balances from $2,000 to $81,000. On a majority of these loans, the borrowers are communicating and cooperating with the Savings Bank and are making payments, but are unable to bring their loans to a current status. Management anticipates no significant loss on these loans. At September 30, 1997, the Savings Bank had an aggregate of $287,000 of loans to a borrower that were secured by commercial property. As of that date, these loans were 90 to 200 days past due. Management is in the process of foreclosing on these loans. Management believes that the loans are well secured and a loss on these loans, if any, will be minimal. Nonaccrual mobile home loans at September 30, 1997 consists of loans made by a local dealer and underwritten by the Savings Bank. Management has assigned an officer to these loans in an effort to reduce the level of past due loans. The dealer is cooperating with the Savings Bank in bringing the mobile homes to his lot, refurbishing them and then reselling them. The Savings Bank has discontinued underwriting new loans for this dealer, except for the mobile homes that he is reselling. Reserves for losses maintained by the dealer at September 30, 1997 totaled $50,000. Management believes that the allowance for loan losses is adequate. The Savings Bank does not accrue interest on loans more than 90 days past due. SOUTHERN MISSOURI BANCORP, INC. AND SUBSIDIARY MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued Noninterest Income Noninterest income increased from $144,000 for the three-months ended September 30, 1996 to $173,000 for 1997. The Savings Bank realized net gains on sales of MBSs of $32,000 in 1997, compared to none in 1996. Gains on sales of MBSs are not a stable source of income and no assurance can be given that the Savings Bank will generate such gains in the future. Commissions on insurance decreased from $90,000 for 1996 to $72,000 for 1997. Banking service charges increased from $39,000 for 1996 to $49,000 for 1997 due to increased checking account activity. Noninterest Expense Noninterest expense decreased from $1,616,000 for the three months ended September 30, 1996 to $867,000 for the three months ended September 30, 1997. Legislation was enacted September 30, 1996 to recapitalize the Savings Association Insurance Fund. The Savings Bank was assessed .657 percent of deposits at March 31, 1995. This assessment of $779,000 was paid on November 28, 1996. Compensation and benefits increased from $556,000 for 1996 to $590,000 for 1997 due to salary increases and additional employees. SAIF deposit insurance premium decreased from $70,000 in 1996 to $29,000 for 1997 as a result of a substantially lower assessment rate effective January 1, 1997. Provision for losses on foreclosed real estate was a net credit of $3,000 for 1996 and a net loss of $8,000 for 1997. Professional fees, which includes supervisory examination fees, increased from $24,000 for 1996 to $37,000 for 1997 as a result of legal fees paid regarding the Supervisory Agreement. Advertising increased from $22,000 for 1996 to $32,000 for 1997 due to an increase in cost and an increase in advertising activity in general. Income Taxes Income tax expense is $195,000 in 1997 compared to a tax benefit of $97,000 for 1996 as a result of the SAIF special assessment. The effective rate of the tax benefit for 1996 was affected by the relationship of nontaxable municipal interest income to income before income taxes. SOUTHERN MISSOURI BANCORP, INC. AND SUBSIDIARY PART II - OTHER INFORMATION Item 1 - Legal Proceedings There are no material legal proceedings to which the Holding Company or the Savings Bank is a party or of which any of their property is subject. From time to time, the Savings Bank is a party to various legal proceedings incident to its business. Item 2 - Changes in Securities None Item 3 - Defaults upon Senior Securities Not applicable Item 4 - Submission of Matters to a Vote of Security-Holders None Item 5 - Other Information None Item 6 - Exhibits and Reports on Form 8-K (a) Exhibits: Exhibit 11 (b) Reports on Form 8-K: No reports on Form 8-K have been filed during the quarter for which this report is filed. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. SOUTHERN MISSOURI BANCORP, INC. (Registrant) Date: November 13, 1997 BY: Donald R. Crandell Donald R. Crandell, Chief Executive Officer Chief Financial Officer and Duly Authorized Officer Exhibit 11 SOUTHERN MISSOURI BANCORP, INC. AND SUBSIDIARY STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS Three Months Ended September 30, 1997 1996 Primary Average shares outstanding $ 1,556,888 1,572,921 Net effect of dilutive stock options - based on the treasury stock method using average market price 48,185 33,907 Total 1,605,073 1,606,828 Net income (loss) $ 357,151 (98,247) Earnings per share $ .22 (.06) Fully Diluted Average shares outstanding 1,556,888 1,572,921 Net effect of dilutive stock options - based on the treasury stock method using the period end market price, if greater than average market price 48,920 36,442 Total 1,605,808 1,609,363 Net income (loss) $ 357,151 (98,247) Earnings per share $ .22 (.06) EX-27 2
9 3-MOS JUN-30-1998 SEP-30-1997 7,472,794 91,121 0 0 34,358,233 4,762,313 4,909,487 112,681,982 738,958 163,297,182 117,294,449 17,266,746 2,095,057 264,592 18,083 0 0 26,358,306 163,297,182 2,591,593 255,298 28,844 2,875,735 1,374,213 232,724 1,268,798 22,500 31,612 866,979 552,114 552,114 0 0 357,151 .22 .22 7.53 1,358,000 0 127,128 0 706,487 1,377 11,348 738,958 00 0 738,958
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