-----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, AklOrMhC8ZK3CCj4nCIIrN5W0UIP4WlgJvVGkf/nYO/CNXXbYnZMfNyFZCYvy6Vd Tzg89tEnIFmSUCvu/M1c6Q== 0000916907-98-000014.txt : 19981116 0000916907-98-000014.hdr.sgml : 19981116 ACCESSION NUMBER: 0000916907-98-000014 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980930 FILED AS OF DATE: 19981112 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: 98745772 BUSINESS ADDRESS: STREET 1: 531 VINE ST CITY: POPLAR BLUFF STATE: MO ZIP: 63901 BUSINESS PHONE: 5737851421 10QSB 1 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 September 30, 1998 OR ___ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 0-23406 Southern Missouri Bancorp, Inc. (Exact name of registrant as specified in its charter) Delaware 43-1665523 (State or jurisdiction of incorporation) (IRS employer id. no.) 531 Vine Street Poplar Bluff, MO 63901 (Address of principal executive offices) (Zip code) (573) 785-1421 Registrant's telephone number, including area code Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date: Class Outstanding at November 3, 1998 Common Stock, Par Value $.01 1,375,278 Shares SOUTHERN MISSOURI BANCORP, INC. AND SUBSIDIARY FORM 10-QSB INDEX PART I. Financial Information (Unaudited) PAGE NO. Item 1. Consolidated Financial Statements (Unaudited) - Consolidated Statements of Financial Condition 3 - Consolidated Statements of Income and Comprehensive Income 4 - Consolidated Statements of Cash Flows 5-6 - Notes to Consolidated Financial Statements 7-8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 9-12 PART II. OTHER INFORMATION 13 Item 1. Legal Proceeding 13 Item 2. Changes in Securities and Use of Proceeds 13 Item 3. Defaults upon Senior Securities 13 Item 4. Submission of Matters to a Vote of Security-Holders 13 Item 5. Other Information 13 Item 6. Exhibits and Reports on Form 8-K 14-15 - Signature Page 16 PART I Item 1. Financial Information SOUTHERN MISSOURI BANCORP, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION SEPTEMBER 30, 1998 AND JUNE 30, 1998 (UNAUDITED) ASSETS September 30, June 30, 1998 1998 Cash and due from banks $ 1,922,300 $ 2,462,679 Interest bearing deposits in other financial institutions 5,610,064 1,863,795 Cash and cash equivalents 7,532,364 4,326,474 Available-for-sale investment securities 8,368,739 9,352,412 Held-to-maturity investment securities 4,642,449 4,645,407 Mortgage-backed securities, available-for-sale 15,036,943 14,154,096 Loans receivable, net 116,180,688 119,083,215 Foreclosed assets held for sale 273,616 171,721 Premises and equipment 1,872,660 1,883,064 Accrued interest receivable: Loans 607,759 607,955 Investments 270,074 299,823 Federal Home Loan Bank stock 1,091,000 1,053,500 Prepaid expenses and other assets 317,195 369,391 Total Assets $156,193,487 $155,947,058 LIABILITIES AND STOCKHOLDERS' EQUITY LIABILITIES Deposits $ 111,789,845 $ 109,410,436 Federal Home Loan Bank advances 19,800,000 21,068,905 Accrued interest payable 754,298 581,590 Advances from borrowers for taxes and insurance 384,048 315,123 Accrued expenses and other liabilities 640,475 459,119 Total Liabilities 133,368,666 131,835,173 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 17,668,935 17,628,758 Accumulated other comprehensive income 21,616 (27,804) Retained earnings, substantially restricted 12,939,364 12,771,731 Unearned ESOP shares (484,314) (510,114) Unearned MRP shares (131,710) (155,710) Treasury stock, at cost; 383,023 and 310,813 shares at September 30, 1998 and June 30, 1998, respectively (7,207,102) (5,613,008) Total stockholders' equity 22,824,821 24,111,885 Total Liabilities and Stockholders' Equity $156,193,487 $155,947,058 See Notes to Consolidated Financial Statements SOUTHERN MISSOURI BANCORP, INC AND SUBSIDIARY CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME FOR THE THREE MONTH PERIODS ENDED SEPTEMBER 30, 1998 AND 1997 (UNAUDITED) Three-months ended September 30, INTEREST INCOME: 1998 1997 Loans receivable $2,372,957 $2,196,470 Investment securities 203,562 255,298 Mortgage-backed and related securities 209,114 395,123 Other interest-earning assets 41,598 28,844 Total interest income 2,827,231 2,875,735 INTEREST EXPENSE: Deposits 1,285,789 1,374,213 Federal Home Loan Bank advances 256,305 232,724 Total interest expense 1,542,094 1,606,937 NET INTEREST INCOME 1,285,137 1,268,798 PROVISION FOR LOAN LOSSES 10,000 22,500 NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 1,275,137 1,246,298 NONINTEREST INCOME: Service charges 59,555 48,876 Gains (losses) on investment and mortgage- backed securities, available-for-sale (625) 31,612 Insurance commissions 79,098 71,594 Income (expense) on foreclosed assets (4,373) (8,443) Late charges and other fees 18,153 12,853 Other income 5,952 8,414 Total noninterest income 157,760 164,906 NONINTEREST EXPENSE: Compensation and benefits 567,465 589,907 Occupancy and equipment, net 109,029 79,742 SAIF deposit insurance premiums 24,504 29,063 Professional fees 32,693 37,092 Advertising 26,745 31,786 Postage and office supplies 35,996 26,091 Other 84,349 65,409 Total noninterest expense 880,781 859,090 INCOME BEFORE INCOME TAXES 552,116 552,114 PROVISION FOR INCOME TAXES 194,622 194,963 NET INCOME 357,494 357,151 OTHER COMPREHENSIVE INCOME, NET OF TAX: Unrealized gains on AFS investment and mortgage-backed securities 49,026 81,742 Reclassification adjustment for (gains) losses included in net income 394 (19,915) Other comprehensive income 49,420 61,827 COMPREHENSIVE INCOME $ 406,914 $ 418,978 Basic earnings per common share $ 0.26 $ 0.23 Diluted earnings per common share $ 0.25 $ 0.22 Dividends per common share $ 0.125 $ 0.125 See Notes to Consolidated Financial Statements PART I: FINANCIAL INFORMATION SOUTHERN MISSOURI BANCORP, INC. AND SUBSIDIRY CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) Three-months ended September 30, 1998 1997 Cash Flows From Operating Activities: Net income $ 357,494 $ 357,151 Items not requiring (providing) cash: Depreciation and amortization 57,062 51,753 MRP expense and ESOP expense 81,050 119,786 Loss (gain) on sale of available-for-sale securities 625 (31,612) Provision for loan losses 10,000 22,500 (Gain) loss on foreclosed real estate, net 69 7,889 Net amortization of deferred income, premiums, and discounts 16,869 33,031 Changes in: Accrued interest receivable 29,945 118,762 Prepaid expenses and other assets 5,259 39,401 Accounts payable and other liabilities 6,536 108,166 Accrued expense and other liabilities 354,064 104,114 Net cash provided by operating activities 918,973 930,941 Cash flows from investing activities: Net decrease (increase) in loans 2,817,285 (4,207,183) Proceeds from sales of available-for-sale investment securities 999,375 - Proceeds from sales of available-for-sale mortgage-backed securities - 2,303,652 Proceeds from maturing available-for-sale investment securities - 1,680,000 Proceeds from maturing available-for-sale mortgage-backed securities 1,171,264 1,328,063 Proceeds from maturing held-to-maturity mortgage-backed securities - 16,848 Purchase of Federal Home Loan Bank stock (37,500) - Purchase of available-for-sale securities (2,022,500) - Purchase of premises and equipment (46,658) (121,384) Proceeds from sale of foreclosed real estate 1,250 - Net cash provided by investing activities 2,882,516 999,996 Cash flows from financing activities: Net increase(decrease)in certificates of deposit 946,202 (1,769,137) Net increase in demand, NOW and Saving accounts 1,433,207 358,985 Net increase in advances from borrowers for taxes and insurance 68,925 93,486 Proceeds from Federal Home Loan Bank advances 5,500,000 4,000,000 Repayments of Federal Home Loan Bank advances (6,768,905) (3,983) Cash dividends paid (180,934) (194,589) Exercise of stock options 20,000 - Purchase of treasury stock (1,614,094) (368,080) Net cash (used in) provided by financing activities (595,599) 2,116,682 Increase in cash and cash equivalents 3,205,890 4,047,619 Cash and cash equivalents at beginning of period 4,326,474 3,425,175 Cash and cash equivalents at end of period $7,532,364 $7,472,794 See Notes to Consolidated Financial Statements PART I: FINANCIAL INFORMATION SOUTHERN MISSOURI BANCORP, INC. AND SUBSIDIRY CONSOLIDATED STATEMENTS OF CASH FLOWS - Continued (UNAUDITED) Three-months ended September 30, 1998 1997 Supplemental disclosures of Cash flow information: Noncash investing and financing activities: Conversion of loans to foreclosed real estate $ 176,973 $ 32,670 Conversion of foreclosed real estate to loans $ 94,500 $ 9,000 Cash paid during the period for: Interest (net of interest credited) $ 329,662 $ 404,847 Income taxes $ - $ 50,000 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 month period ended September 30, 1998 is 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, 1998 Form 10-KSB, which was filed with the SEC and the Company's annual report, which contains the audited financial statements for the fiscal years ended June 30, 1998 and 1997. Note 2: Holding Company Formation, and Stock Issuance, Charter Conversions and Proposed 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 is expected to become effective during the quarter ending December 31, 1998. 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 September 30, 1998, the ESOP had allocated 85,096 shares and had 3,000 shares committed for allocation to employees of the Bank. Note 5: Benefit Plans In conjunction with the stock offering, the Company established both a MRP and a Stock Option and Incentive Plan ("SOIP"). The MRP authorized 71,416 shares to be issued to directors, officers and employees of SMBT of which 68,918 have been awarded and 63,218 have vested or remain outstanding. The SOIP authorized 178,540 stock options for shares to be issued to directors, officers and employees of SMBT, pursuant to which 151,049 options have been awarded and 116,325 remain outstanding. Stock awarded under the MRP vests over five years, with compensation expense being amortized over each participant's vesting period. As of September 30, 1998, unvested MRP shares totaled 12,411. Note 6: Earnings Per Share The Financial Accounting Standards Board recently adopted Statement of Financial Accounting Standard ("SFAS") No. 128, "Earnings Per Share," and SFAS No. 129, "Disclosure of Information about Capital Structure." The statements replaced the presentation of primary earnings per share with a presentation of basic earnings per share. These statements also required dual presentation of basic and diluted earnings per share by entities with complex capital structures and required a reconciliation of the numerators and denominators between the two calculations. These statements became effective for financial statements issued for periods ending after December 15, 1997, including those for interim periods. Basic and diluted earnings per share are based upon the weighted-average shares outstanding. ESOP shares that have been committed to be released are considered outstanding. The following table summarizes basic and diluted earnings per common share for the three months ended September 30, 1998 and 1997, as restated, under SFAS No. 128: Three Months Ended September 30, 1998 1997 Net earnings $ 357,494 $ 357,151 Weighted-average shares - Basic earnings per share 1,389,884 1,545,928 Stock options under treasury stock method 43,573 47,412 Weighted-average shares - Diluted earnings per share 1,433,457 1,593,340 Basic earnings per common share $ 0.26 $ 0.2 Diluted earnings per common share $ 0.25 $ 0.22 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 $1.3 million in cash and investments. 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 September 30, 1998 and the results of operations for the three months ended September 30, 1998 and 1997, respectively. Forward Looking Statements Except for the historical information contained herein, the matters discussed in this Form 10-QSB may be deemed to be forward-looking statements that involve risks and uncertainties, including changes in economic conditions in 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 $246,000, or 0.2%, from $155.9 million at June 30, 1998 to $156.2 million at September 30, 1998. During this period, net loans receivable declined $2.9 million, from $119.1 million at June 30, 1998 to $116.2 million at September 30, 1998. In addition, cash and cash equivalents increased $3.2 million from $4.3 million at June 30, 1998 to $7.5 million at September 30, 1998. This was primarily the result of increased loan prepayments and a reduction in loan originations. The loan portfolio's decline consisted of a $2.3 million and $709,000 reduction in loans secured by one- to four-family residences and consumer loans, respectively. The Company has re-evaluated its loan product offerings and remains committed to its plan to increase loans receivable. Deposits increased $2.4 million, or 2.2%, from $109.4 million at June 30, 1998 to $111.8 million at September 30, 1998. The increase consisted primarily of increased MMDA accounts and certificates of deposit. The increase in deposits funded the repayment of $1.3 million in FHLB advances. At September 30, 1998, stockholders' equity was $22.8 million as compared to $24.1 million at June 30, 1998. The $1.3 million decline in stockholders' equity was primarily due to the repurchase of $1.6 million in stock and $181,000 in cash dividends on common stock. This decline was partially offset by the Company's $357,000 net income, $81,000 in benefit plan shares committed to be released and $49,000 in mark-to-market adjustments on the Company's available-for-sale securities. Results of Operations - Comparison of the three month periods ended September 30, 1998 and 1997. Net Income. The Company's net income for the three month period ended September 30, 1998 was $357,000, which equaled the $357,000 earned during the same period of the prior year. Earnings were stable as a $29,000 increase in net interest income after loss provisions was offset by a $7,000 decline in noninterest income and increased noninterest expense of $22,000. Net Interest Income. Net interest income increased by $16,000, or 1.3%, to $1.29 million for the quarter ended September 30, 1998 as compared to the $1.27 million earned during the same quarter of the prior year. The increase was primarily due to a 34 basis point increase in the average interest-rate spread, which was mostly offset by a 4.0% decline in the average ratio of interest-earning assets to interest-bearing liabilities, from 119.0% to 115.0%. Interest Income. Interest income for the three month period ended September 30, 1998 declined $49,000, or 1.7% to $2.83 million as compared to the $2.88 million earned during the same period of the prior year. The decrease was primarily due to a $6.1 million or 3.9% decline in interest- earning assets which was partially offset by a 17 basis point increase in the average yield earned on these assets, to 7.52% from 7.35%. In addition, the composition of interest-earning assets changed as the average balance of loans receivable increased $7.2 million, or 6.6%, while average investment securities and MBS declined $14.1million. Interest Expense. Interest expense for the three month period ended September 30, 1998 declined $65,000, or 4.0% to $1.54 million as compared to the $1.61 million expended during the same period of the prior year. The decline was primarily the result of a 17 basis point decline in the average cost of interest-bearing liabilities as the average cost of FHLB advances declined from 5.89% during the three months ended September 30, 1997 to 4.99% during the three months ended September 30, 1998. The average rate paid on these interest-bearing liabilities during the three months ended September 30, 1998 was 4.72% as compared to the 4.89% paid during the same period of the prior year. Provision for Loan Losses. The provision for loan losses for the three month period ended September 30, 1998 decreased $13,000, or 55.6% to $10,000 as compared to $23,000 during the same period of the prior year. The reduction in the provision was primarily due to a reduction in adversely classified assets, primarily due to the improved financial condition of several of the Bank's loan customers, which resulted in their removal from the list of adversely classified assets. At September 30, 1998, adversely classified assets totaled $5.2 million, or 3.31% of total assets and 22.65% of total equity, as compared to $5.6 million, or 3.61% of assets and 23.35% of total equity at June 30, 1998 (see "Loan Loss Activity" and "Nonperforming Assets"). Noninterest Income. Non-interest income for the three months ended September 30, 1998 declined $7,000, or 4.3% to $158,000, as compared to the $165,000 earned during the same period of the prior year. The decline was primarily attributed to a $32,000 reduction in gains realized on the sale of available-for-sale securities, which was partially offset by increased income from service charges and insurance commissions of $11,000 and $8,000, respectively. Noninterest Expense. Non-interest expense for the three months ended September 30, 1998 increased $22,000, or 2.5% to $881,000, as compared to the $859,000 expended during the same period of the prior year. The increase was primarily attributed to a $29,000, or 36.7% increase in occupancy expense and an increase in general operating expenses of $19,000. The increases were partially offset by a $22,000, or 3.8% reduction in compensation and benefits expense as well as a general reduction in expenses for professional fees, advertising and deposit insurance. Increased occupancy expense was due to higher depreciation expenses realized from the Bank upgrading its data processing equipment, while the decline in compensation expense was mostly due to lower ESOP expenses, which resulted from extending the term loan and number of shares committed to be released under the ESOP. Provision for Income Taxes. The provision for income taxes for both the three months ended September 30, 1998 and 1997 was $195,000. Regulatory Matters and Supervisory Agreement On February 17, 1998, the Office of Thrift Supervision ("OTS") approved the conversion of the Bank from a federally chartered stock savings bank to a Missouri chartered stock savings bank. In connection with the charter conversion, the Bank changed its name to Southern Missouri Bank and Trust Co., the primary regulator of the Bank changed from the OTS to the Missouri Division of Finance and the operating restrictions placed on the Bank pursuant to an OTS Supervisory Agreement were lifted. However, the Bank remains subject to increased SAIF deposit insurance premium assessments due to the Bank's former regulatory status. During the three months ended September 30, 1998, the Bank recognized additional expense of $9,000 due to these higher deposit premiums. 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 three months ended September 30, 1998 and 1997: 1998 1997 Balance, beginning of period $1,295,222 $ 706,487 Loans charged off - residential (1,205) - Loans charged off - consumer (2,510) (1,377) Loans charged off - mobile home (88) - Recoveries of loans previously charged off Residential real estate 275 - Consumer 2,270 11,348 Mobile homes 22,566 - Net recoveries (charge offs) 21,308 9,971 Provision charged to expense 10,000 22,500 Balance, end of period $1,326,530 $ 738,958 Ratio of net charge offs (recoveries) during the period to average loans outstanding during the period (1.81%) (.01%) The increase in recoveries on mobile homes related primarily to the sale of 3 mobile homes, which had been charged off. At September 30, 1998, the Company had 15 loans for $145,000, which had been charged off the Company's books, but had not yet been repossessed. 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 Bank'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 Bank's historical loss ratios. The allowance for loan losses increased $31,000 to $1.33 million at September 30, 1998 from $1.30 million on June 30, 1998. At September 30, 1998, the Bank had $5.2 million, or 3.31% of total assets and 22.65% of stockholders' equity adversely classified (substandard, doubtful, or loss) as compared to adversely classified assets of $5.6 million, or 3.61% of total assets and 23.35% of stockholders' equity at June 30, 1998. The slight improvement in these ratios was attributed to enhanced collection efforts and the improved financial condition of several of the Bank's loan customers, which resulted in their removal from the balance of adversely classified assets. The ratio of nonperforming assets to total assets is a measure of asset quality. Nonperforming assets of the Company include nonaccruing loans, accruing loans delinquent/past maturity 90 days or more and assets which have been acquired as a result of foreclosure or deed-in-lieu of foreclosure. The following table summarizes changes in the Company's level of nonperforming assets: Loans past maturity/delinquent 90 days or more 9/30/98 6/30/98 9/30/97 Residential real estate $ 541,000 $ 843,000 $ 837,000 Commercial real estate 455,000 347,000 306,000 Consumer 235,000 67,000 46,000 Mobile homes 143,000 80,000 169,000 Total loans past maturity/ delinquent 90+ days 1,374,000 1,337,000 1,358,000 Assets acquired in settlement of loans 273,000 172,000 120,000 Total nonperforming assets $1,647,000 $1,509,000 $1,478,000 Percentage nonperforming assets to total assets 1.06% .98% .91% Percentage nonperforming loans to net loans 1.18% 1.12% 1.21% 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, (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 exposure to interest-rate risk. The degree to which each segment of the strategy is achieved will affect the Bank's overall profitability and exposure to interest-rate risk. The Bank has not and does not anticipate the use of derivative financial instruments or other financial instruments for managing its exposure to interest-rate risk or use in a trading account. Further, the Bank is not subject to any foreign currency exchange rate risk, commodity price risk, equity price risk or risk to any hedge funds. Liquidity and Capital Resources The Company's primary sources of funds are deposits, the receipt of principal and interest payments on loans and mortgage-backed securities, investments and FHLB advances. While the scheduled repayments on loans and securities as well as the maturity of short-term investments are somewhat predictable sources of funding, deposit flows and loan prepayment rates are influenced by many factors, which make their cash flows difficult to anticipate. The Company uses its liquidity resources principally to satisfy its ongoing cash requirements which include funding loan commitments, funding maturing certificates of deposit as well as deposit withdrawals, maintaining liquidity, purchasing investments, and meeting operating expenses. At September 30, 1998, the Company had outstanding commitments to fund $2.2 million in mortgage loans and $125,000 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 September 30, 1998, the Bank had available credit at the FHLB of approximately $57.3 million, of which $19.8 million had been advanced. Management believes that these and other liquidity resources will be sufficient to meets the Company's liquidity needs. Year 2000 Considerations The Year 2000 issue exists because many computer systems and applications use two-digit date fields to designate the current year. When the millenium changes, date-sensitive systems may recognize the year 2000 as 1900, or not at all. This inability to recognize or properly treat the year 2000 may cause systems to process financial and operational information incorrectly. The Year 2000 issue affects virtually all companies and organizations. The Company performs all material data processing functions on an in-house computer processing system provided by a third party. The Company is in the process of assessing this system, other informational and data processing systems as well as those of its vendors, and suppliers to ascertain the degree to which each will be impacted by Year 2000. Initial testing of internal systems and how they interact with those of vendors and suppliers began June 30, 1998 and is scheduled to be completed by March 31, 1999. Upon completion of system testing, the Company will modify its contingency plan to incorporate the results of this testing. The Company has notified its depositors and loan customers of the Year 2000 issue and is in the process of assessing their Year 2000 preparedness. Management anticipates Year 2000 expenditures to be less than $100,000, of which approximately $25,000 had been expended as of September 30, 1998. In addition, the Company has expended approximately $250,000 to upgrade its data processing system since June 30, 1996. Incomplete or untimely compliance, however, may have a material adverse effect on the Company, the dollar amount of which cannot be accurately quantified at this time because of the inherent variables and uncertainties involved. In the event the Company's Year 2000 efforts fails in any material respect, the Company has formulated a contingency plan for its data processing functions. The contingency plan calls for the use of the Company's backup data processing system if the current system fails to operate properly. In the event that the backup system is unable to properly function, the Company plans to operate manually. 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 September 30, 1998, the Bank exceeded all three regulatory capital requirements with leverage capital of $20.9 million (13.57% of average total assets), tier I capital of $20.9 million (23.67% of risk- based assets) and risk-based capital of $22.0 million (24.92% 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 (a) On October 19, 1998, the Company held its Annual Meeting of Stockholders. (b) At the meeting, Mr. Leonard M. Ehlers and Mr. Thadis R. Seifert were elected to three year terms to expire in 2001, the Company's proposal to change its state of incorporation from Delaware to Missouri was approved, as was the amendment to increase the Company's number of authorized shares of common stock. (c) The results of the voting on each of the proposals is as follows: (i) The election of Mr. Leonard M. Ehlers as a director of the Company; VOTES: FOR WITHHELD 1,237,766 1,190,761 47,005 (ii) The election of Mr. Thadis R. Seifert as a director of the Company; VOTES: FOR WITHHELD 1,237,766 1,190,761 47,005 (iii) The proposal to change the Corporation's state of incorporation to Missouri from Delaware; VOTES: FOR AGAINST ABSTAIN NON-VOTES 1,420,178 825,486 21,315 4,514 386,451 (iv) The proposal to change the Company's authorized number of shares; VOTES: FOR AGAINST ABSTAIN NON-VOTES 1,237,766 1,187,482 44,195 6,089 -0- 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* Item 6 - Exhibits and Reports on Form 8-K (continued) 10 (a) Registrant's Stock Option Plan** 10 (b) Southern Missouri Savings Bank, FSB Management Recognition and Development Plans** 10 (c) Employment Agreement with Donald R. Crandell*** 10 (d) Director's Retirement Agreements*** (i) Robert A. Seifert (ii) Thadis R. Seifert (iii) Leonard W. Ehlers (iv) James W. Tatum (v) Samuel H. Smith 10 (e) Tax Sharing Agreement*** (27) Financial Data Schedule * Filed as an exhibit to the registrant's Registration Statement on Form S-1 (33-73746). ** Filed as an exhibit to the registrant's 1994 annual meeting proxy statement dated October 21, 1994. *** Filed as an exhibit to the registrant's Annual Report on Form 10-KSB for the year ended June 30, 1995. (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 10, 1998 Donald R. Crandell President and Chief Executive Officer Date: November 10, 1998 Greg A. Steffens Chief Financial Officer EX-27 2
9 3-MOS JUN-30-1998 SEP-30-1998 1,922,300 5,610,064 00 00 23,405,682 4,642,449 4,855,668 116,180,688 1,326,530 156,193,487 111,789,845 00 1,778,821 19,800,000 00 00 17,686,967 5,137,854 156,193,487 2,372,957 412,676 41,598 2,827,231 1,285,789 1,542,094 1,285,137 10,000 (625) 880,781 552,116 00 00 00 357,494 .26 .25 7.52 363,666 1,009,995 00 5,192,701 1,295,222 3,803 25,111 1,326,530 1,326,530 00 660
-----END PRIVACY-ENHANCED MESSAGE-----