-----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, BdUBqTax847BxLmdBEZ3ud+QCmg5wmfPq43XrJy8CPtcXGZaXdqNO5kp55hHG0HT NmSSGGXITEgLfoAs4LBYvw== 0000916907-98-000004.txt : 19980518 0000916907-98-000004.hdr.sgml : 19980518 ACCESSION NUMBER: 0000916907-98-000004 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980515 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: 98624690 BUSINESS ADDRESS: STREET 1: 531 VINE ST CITY: POPLAR BLUFF STATE: MO ZIP: 63901 BUSINESS PHONE: 3147851421 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 March 31, 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 May 5, 1998 Common Stock, Par Value $.01 1,637,913 Shares SOUTHERN MISSOURI BANCORP, INC. AND SUBSIDIARY FORM 10-QSB INDEX PART I. Financial Information (Unaudited) PAGE NO. Item 1. Consolidated Condensed Financial Statements - Consolidated Statements of Financial Condition 3 - Consolidated Condensed Statements of 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 9-15 PART II. OTHER INFORMATION 16 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-Holders16 Item 5. Other Information 16 Item 6. Exhibits and Reports on Form 8-K 16-17 - Signature Page 18 PART I: FINANCIAL INFORMATION Item I SOUTHERN MISSOURI BANCORP, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF FINANCIAL CONDITIONS (UNAUDITED) March 31, June 30, 1998 1997 ASSETS Cash and due from banks $ 3,135,799 $ 2,013,318 Interest bearing deposits in other financial institutions 3,741,408 1,411,857 Cash and cash equivalents 6,877,207 3,425,175 Certificate of deposits - 91,199 Investment and mortgage-backed and related securities: Available for sale - at estimated market value(amortized cost of $23,194,391 and $39,571,322 at March 31, 1998 and June 30, 1997, respectively) 23,174,981 39,577,474 Held to maturity - at amortized cost estimated, market value of $4,814,000 and $4,905,000 at March 31, 1998 and June 30, 1998, respectively) 4,645,838 4,780,845 Loans receivable, net 118,000,082 107,782,977 Foreclosed assets held for sale, net 100,642 54,838 Premises and equipment, net 1,887,137 1,682,075 Interest receivable Loans 565,510 536,118 Investments 329,794 543,849 Investment in FHLB stock 1,519,700 1,519,700 Prepaid expenses and other assets 149,786 221,020 Deferred income taxes 187,560 77,764 Total Assets $ 157,438,237 $ 160,393,034 LIABILITEIS AND STOCKHOLDERS' EQUITY Deposits $ 107,926,853 $ 118,704,601 Federal Home Loan Bank advances 21,573,372 13,535,321 Accrued Interest payable 701,702 848,435 Advances from borrowers for taxes and insurance 242,092 321,609 Accounts payable and other liabilities 518,719 470,667 Income tax payable 72,879 112,158 Total Liabilities 131,035,617 133,992,791 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 17,717,512 17,579,778 Unrealized appreciation(depreciation) on investment and mortgage-backed securities available-for-sale, net (12,810) 2,966 Retained Earnings, substantially restricted 12,709,590 12,476,753 Unearned ESOP shares (561,126) (714,160) Unearned MRP shares (184,360) (279,368) Treasury Stock, at cost;197,895 and 169,898 shares at March 31, 1998 and June 30, 1997, respectively (3,280,643) (2,680,183) Minimum pension liability (3,575) (3,575) Total Stockhoders' Equity 26,402,620 26,400,243 Total Liabilities and Stockholders' Equity $ 157,438,237 $ 160,393,034 See Notes to Consolidated Financial Statements PART I: FINANCIAL INFORMATION SOUTHERN MISSOURI BANCORP, INC AND SUBSIDIARY CONSOLIDATED STATEMENTS FO INCOME (unaudited) FOR THE THREE MONTH PERIODS ENDED MARCH 31,1998 AND 1997 Three-months ended 1998 1997 INTEREST INCOME: Loans receivable $ 2,322,505 $ 2,016,137 Investment securities 206,048 259,845 Mortgage-backed and related securities 257,405 495,557 Other interest-earning assets 56,512 49,961 Total interest income 2,842,470 2,821,500 INTEREST EXPENSE: Deposits 1,224,762 1,386,323 Federal Home Loan Bank advances 290,032 221,049 Total interest expense 1,514,794 1,607,372 NET INTEREST INCOME 1,327,676 1,214,128 PROVISION FOR LOAN LOSSES 262,500 22,500 NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 1,065,176 1,191,628 NONINTEREST INCOME: Banking service charges 46,670 41,453 Net realized gains on sales of Available-for-sale securities 10,615 34,947 Insurance commissions 68,852 78,716 Net income on foreclosed assets 609 51,255 Loan late charges 22,414 11,251 Other income 11,987 349 161,147 217,971 NONINTEREST EXPENSE: Compensation and benefits 642,730 561,430 Net occupancy and equipment 117,042 85,164 SAIF special assessment 0 0 SAIF deposit insurance premium 27,329 4,122 Legal and professional fees 69,579 46,308 Advertising 23,321 21,137 Postage and office supplies 38,691 36,415 Other operating expense 68,139 52,927 986,831 807,503 INCOME BEFORE INCOME TAXES 239,492 602,096 PROVISION FOR INCOME TAXES 76,480 186,964 NET INCOME $ 163,011 $ 415,132 Basic Earnings Per Common Share $ 0.11 $ 0.27 Diluted Earnings Per Commons Share $ 0.10 $ 0.26 Dividends Per Share $ 0.125 $ 0.125 See Notes to Consolidated Financial Statements PART I: FINANCIAL INFORMATION SOUTHERN MISSOURI BANCORP, INC AND SUBSIDIARY CONSOLIDATED STATEMENTS FO INCOME (unaudited) FOR THE NINE MONTH PERIODS ENDED MARCH 31,1998 AND 1997 Nine-months ended 1998 1997 INTEREST INCOME: Loans receivable $ 6,798,499 $ 5,968,832 Investment securities 739,906 861,405 Mortgage-backed and related securities 964,650 1,610,017 Other interest-earning assets 111,678 79,929 Total interest income 8,614,734 8,520,183 INTEREST EXPENSE: Deposits 3,897,952 4,166,857 Federal Home Loan Bank advances 812,529 561,135 Total interest expense 4,710,481 4,727,992 NET INTEREST INCOME 3,904,253 3,792,191 PROVISION FOR LOAN LOSSES 398,959 62,500 NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 3,505,294 3,729,691 NONINTEREST INCOME: Banking service charges 140,083 126,569 Net realized gains on sales of Available-for-sale securities 79,643 34,912 Insurance commissions 225,182 261,090 Net income on foreclosed assets (8,248) 57,669 Loan late charges 49,484 35,498 Other income 30,135 14,217 516,279 529,955 NONINTEREST EXPENSE: Compensation and benefits 1,816,075 1,619,514 Net occupancy and equipment 303,034 243,797 SAIF special assessment 0 779,184 SAIF deposit insurance premium 84,396 144,302 Legal and professional fees 171,898 107,019 Advertising 87,642 70,600 Postage and office supplies 94,494 88,104 Other operating expense 201,969 194,438 2,759,509 3,246,958 INCOME BEFORE INCOME TAXES 1,262,064 1,012,688 PROVISION FOR INCOME TAXES 449,027 271,251 NET INCOME $ 813,037 $ 741,437 Basic Earnings Per Common Share $ 0.53 $ 0.48 Diluted Earnings Per Commons Share $ 0.51 $ 0.47 Dividends Per Share $ 0.375 $ 0.375 See Notes to Consolidated Financial Statements PART I: FINANCIAL INFORMATION SOUTHERN MISSOURI BANCORP, INC. AND SUBSIDIRY CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) Nine-months Ended March 31, 1998 1997 Cash Flows From Operating Activities: Net income $ 813,037 $ 741,437 Items not requiring (providing) cash: Depreciation and amortization 166,041 133,774 MRP expense and ESOP expense 385,776 322,310 Gain on sale of investment securities, available for sale (9,206) (58,462) (Gain)loss on sale of MBS, available for sale (70,437) 23,550 Provision for loan losses 398,959 62,500 (Gain) loss on foreclosed real estate, net 8,248 (71,451) Net amortization of deferred income, premiums, and discounts 42,163 88,450 Changes in: Accrued interest receivable 184,663 196,022 Prepaid expenses and other assets 71,234 134,182 Accounts payable and other liabilities 48,052 842 Federal income taxes payable (39,297) 16,465 Accrued interest payable (146,733) 47,346 Net cash provided by operating activities 1,852,500 1,636,965 Cash flows from investing activities: Net increase in loans (10,630,868) (10,043,301) Proceeds from sales of investment securities, available for sale 2,491,094 2,085,304 Proceeds from maturing investment securities, available for sale 5,435,000 3,738,955 Proceeds from maturing investment securities, held to maturity - 90,000 Purchase of investment securities, available for sale (1,997,810) (3,762,604) Proceeds from sales of MBS, available for sale 7,543,774 4,088,134 Proceeds from maturing MBS, available for sale 3,999,516 3,822,374 Proceeds from maturing MBS, held to maturity 130,724 59,178 Proceeds from sales of certificates of deposit 93,825 - Purchase of MBS, available for sale (1,107,089) - Proceeds from maturing certificates of deposit - 95,000 Purchase of premises and equipment (371,103) (403,578) Proceeds from sale of foreclosed real estate 12,343 19,600 Net cash provided by(used in) investing activities $ 5,599,406 $ (210,938) PART I: FINANCIAL INFORMATION SOUTHERN MISSOURI BANCORP, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS Nine-months Ended March 31, 1998 1997 Cash flows from financing activities: Net (decrease)increase in deposits $(10,777,748) $ 4,171,118 Net decrease in advances from Borrowers for taxes and insurance (79,517) (114,422) Net increase in advances from FHLB of Des Moines 8,038,051 1,988,746 Dividends on common stock (580,200) (589,359) Sale of treasury stock 107,274 1,000 Payments to acquire treasury stock (707,734) 983,588) Net cash (used in) provided by financing activities (3,999,874) 4,473,495 Increase in cash and cash equivalents 3,452,032 5,899,522 Cash and cash equivalents at beginning of period 3,425,175 4,477,872 Cash and cash equivalents at end of period $ 6,877,207 $ 10,377,394 Supplemental disclosures of cash flow information: Noncash investing and financing activities Conversion of loans to foreclosed real estate $ 36,626 $ 135,118 Conversion of foreclosed real estate to loans $ 6,950 $ 55,100 Cash paid during the period for Interest (net of interest credited) $ 1,136,343 $ 1,582,886 Income taxes $ 487928 $ 172,500 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 Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all material adjustments (consisting only of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and nine month periods ended March 31, 1998 and 1997 are not necessarily indicative of the results that may be expected for the entire fiscal year. For additional information, refer to the Company's June 30, 1997 Form 10-KSB, which was filed with the Securities and Exchange Commission and the Company's annual report, which contains the audited financial statements for the fiscal years ended June 30, 1997 and 1996. Note 2: Holding Company Formation and Stock Issuance and Charter Conversions Southern Missouri Bancorp, Inc. ("Southern Missouri" or "Company"), a Delaware corporation, was established April 13, 1994 for the purpose of becoming a holding company for the shares of Southern Missouri Savings Bank, upon its conversion from a state chartered mutual savings bank to a state chartered stock savings bank. Southern Missouri'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 issuance 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 February 17, 1998, the Company's subsidiary converted from a federally chartered stock savings bank to a Missouri chartered stock savings bank. In connection with the charter conversion, Southern Missouri Savings Bank, FSB, changed its name to Southern Missouri Bank and Trust Co. (the "Bank" or "SMBT"). 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, Southern Missouri 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. Southern Missouri recognizes compensation expense based on shares expected to be released equal to the average market price of the shares in addition to including the shares as outstanding for purposes of determining earnings per share. At March 31, 1998, the ESOP had allocated 71,416 shares to employees of SMBT. Note 5: Benefit Plans In conjunction with the stock offering, Southern Missouri 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 on shares to be issued to directors, officers and employees of SMBT, pursuant to which 151,049 options have been awarded and 125,425 remain outstanding. Stock awarded under the MRP vests over five years, with compensation expense being amortized over each participant's vesting period. As of March 31, 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 were based upon the weighted-average shares outstanding. ESOP shares that have been committed to be released are considered outstanding. The following table summarizes basic and diluted earnings per common share for the three and nine months ended March 31, 1998 and the three and nine months ended March 31, 1997, as restated, under SFAS No. 128: Three Months Ended Nine Months Ended March 31, March 31, 1998 1997 1998 1997 Net earnings $ 163,011 $ 415,132 $ 813,037 $ 741,437 Weighted-average shares - Basic EPS 1,531,629 1,548,279 1,539,346 1,547,857 Stock options under treasury stock method 55,663 40,799 50,958 35,797 Weighted-average shares - Diluted EPS 1,587,292 1,589,078 1,590,304 1,583,654 Basic earnings per common share $ .11 $ .27 $ .53 $ .48 Diluted earnings per common share $ .10 $ .26 $ .51 $ .47 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 SMBT, since the Company has no significant assets other than the common stock of SMBT and $3.7 million in cash and investments. SMBT'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. SMBT, like other financial institutions, is 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 Southern Missouri's consolidated financial condition at March 31, 1998 and the results of operations for the three and nine months ended March 31, 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 Southern Missouri's market area, changes in policies by regulatory agencies, fluctuations in interest rates, demand for loans in Southern Missouri'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 Southern Missouri's judgement as of the date of this release. Southern Missouri disclaims however, any intent or obligation to update these forward-looking statements. Financial Condition Southern Missouri's total assets declined $3.0 million, or 1.8%, from $160.4 million at June 30, 1997 to $157.4 million at March 31, 1998. The decrease was primarily due to a $16.6 million reduction in investment securities and MBS, which was primarily used to fund a $10.2 million increase in loans receivable and a $2.8 million reduction in interest-bearing liabilities. Investment securities and MBS declined $16.6 million, or 37.4%, from $44.4 million at June 30, 1997 to $27.8 million at March 31, 1998. The reduction was attributed to sales and maturities of $10.1 million and $9.6 million, respectively, which exceeded purchases of $3.1 million. This reduction in balances was consistent with management's intention to increase the percentage and amount of loans in the statement of financial condition. The balance of net loans receivable increased $10.2 million, or 9.5%, from $107.8 million at June 30, 1997 to $118.0 million at March 31, 1998. Loan growth consisted primarily of a $5.1 million increase in loans secured by one- to four-family residences and to a lesser degree, increased commercial real estate balances of $4.0 million and installment loan balances of $615,000. Southern Missouri originated $36.9 million mortgage and installment loans over the nine month period ended March 31, 1998 as compared to originations of $32.5 million over the same period of the prior year. Interest-bearing liabilities declined $2.8 million, or 2.0%, from $132.2 million at June 30, 1997 to $129.4 million at March 31, 1998. Over this period, the composition of interest-bearing liabilities changed, as deposit balances were replaced with FHLB advances. From June 30, 1997 to March 31, 1998, outstanding deposits declined by $10.8 million while FHLB advances increased by $8.0 million. The change was primarily the result of public unit deposits being replaced with lower-costing FHLB advances. Results of Operations - Comparison of the three and nine month periods ended March 31, 1998 and 1997. Net Income. Southern Missouri's net income for the three and nine month periods ended March 31, 1998 was $163,000 and $813,000, respectively, as compared to net income of $415,000 and $741,000 earned during the same periods of 1997. Net income in 1997 was adversely affected by a $779,000 one-time industry-wide special assessment to recapitalize the Savings Association Insurance Fund ("SAIF"). Exclusive of the one-time SAIF assessment, income for the nine months ended March 31, 1997 would have approximated $1.2 million. The declines were primary due to increased provisions for loan losses and noninterest expenses. Net Interest Income. Net interest income before provision for loan losses increased by $114,000, or 9.4%, to $1.3 million for the quarter ended March 31, 1998 as compared to the $1.2 million earned during the same quarter of the prior year. The increase was primarily due to a 26 basis point increase in the average interest rate spread. Net interest income before provision for loan losses increased by $112,000, or 3.0%, to $3.9 million for the nine month period ended March 31, 1998 as compared to the $3.8 million for the same period of the prior year. The increase was primarily due to a 6 basis point increase in the average interest rate spread. Interest Income. Interest income for the three and nine month periods ended March 31, 1998 increased $21,000 and $95,000, respectively, as compared to the same periods of the prior year. The increases were primarily due to a shift in the composition of interest-earning assets as the average balance of loans receivable increased $13.2 million, or 13.0%, while average investment securities and MBS declined by $13.5 million. During the nine months ended March 31, 1998, the Company's average yield earned on interest-earning assets was 7.42% as compared to the average yield of 7.31% earned during the same period of the prior year. Interest Expense. Interest expense for the three and nine month periods ended March 31, 1998 declined $93,000 and $18,000, respectively, as compared to the same periods of the prior year. The decline was primarily the result of a $5.4 million and $1.8 million decline in average interest-bearing liabilities for the three and nine months, respectively. The average rate paid on interest-bearing liabilities during the three and nine months ended March 31, 1998 was 4.71% and 4.81%, respectively, as compared to the respective average rates of 4.80% and 4.77% paid during the same periods of the prior year. Provision for Loan Losses. The provision for loan losses for the three and nine month periods ended March 31, 1998 increased $240,000 and $336,000, respectively, as compared to the same periods of the prior year. The increased provision for loan losses was primarily due to a significant increase in loans charged off which were secured by mobile home loans and consumer loans during the nine month period ended March 31, 1998 when compared to the same period of the prior year. Accordingly, management increased the allowance for loan losses (see "Loan Loss Activity" and "Nonperforming Assets"). Noninterest Income. Noninterest income for the three months ended March 31, 1998 declined $57,000, or 26.1%, to $161,000 as compared to the $218,000 earned during the same period of the prior year. The decrease was primarily due to a $51,000 reduction in income on foreclosed assets as well as a $24,000 reduction in net realized gains on security sales, which were partially, offset by a $16,000 increase in customer charges. Noninterest income for the nine months ended March 31, 1998 declined $14,000, or 2.6%, to $516,000 as compared to the $530,000 earned during the same period of the prior year. The decline was primarily due to a $45,000 increase in gains realized on security sales and $28,000 increase in customer charges being more than offset by a $66,000 reduction in income on foreclosed assets and a $36,000 decline in insurance commissions. Gains realized on security sales do not represent a stable source of income and no assurance can be made that such gains will be generated in the future. Noninterest Expense. Noninterest expense for the three months ended March 31, 1998 increased $179,000, or 22.2%, to $987,000 as compared to the $808,000 expended during the same period of the prior year. Contributing to the increase was an $81,000 rise in compensation and benefits expense due primarily to increased staffing and higher benefit costs for the Company's ESOP. Additionally, occupancy costs and legal and professional fees increased by $32,000 and $23,000, respectively. The increase in occupancy costs was primarily due to increased depreciation and data processing costs while the increase in legal fees was primarily due to SMBT's conversion to a bank charter. Finally, SAIF deposit insurance premiums increased $23,000 over the same period of the prior year (see "Regulatory Matters"). Noninterest expense for the nine months ended March 31, 1998 declined $487,000; however, exclusive of the aforementioned SAIF assessment, noninterest expense increased $292,000, or 11.8%, to $2.8 million as compared to the $2.5 million expended during the same period of the prior year. Contributing to the increase was a $197,000 rise in compensation and benefits expense due primarily to increased staffing and higher benefit costs for the Company's ESOP. Additionally, a $65,000 increase in legal and professional fees and a $59,000 increase in operating costs were partially offset by a $60,000 decline in SAIF deposit insurance premiums. The increase in legal and professional fees related to SMBT's conversion to a bank charter and costs associated with the supervisory agreement while increased depreciation and data processing costs led to the increase in occupancy costs (see "Regulatory Matters"). Provision for Income Taxes. The provision for income taxes for the three months ended March 31, 1998 declined $110,000 to $77,000 as compared to the $187,000 established during the same period of the prior year, due primarily to reduced taxable income. The provision for income taxes for the nine months ended March 31, 1998 increased $178,000 to $449,000 as compared to the $271,000 established during the same period of the prior year; however, excluding the tax effect of the SAIF assessment, the provision for income taxes would have declined by approximately $111,000, due mostly to reduced taxable income. Regulatory Matters and Supervisory Agreement On February 17, 1998, the OTS approved the conversion of Southern Missouri's financial institution subsidiary, Southern Missouri Savings Bank, FSB, from a federally chartered stock savings bank to a Missouri chartered stock savings bank. In connection with the charter conversion, Southern Missouri Savings Bank, FSB. changed its name to Southern Missouri Bank and Trust Co. Additionally, the primary regulator of SMBT changed from the OTS to the Missouri Division of Finance. Furthermore, the operating restrictions placed on Southern Missouri Savings Bank, FSB pursuant to an OTS Supervisory Agreement were lifted. However, SMBT remains subject to increased SAIF deposit insurance premium assessments due to the Bank's former regulatory status. During the three and nine months ended March 31, 1998, SMBT recognized additional expense of $9,000 and $28,000, respectively due to these higher deposit premiums. Loan Loss Activity Southern Missouri 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 Southern Missouri maintains its allowance for loan losses at a level, which it considers to be sufficient to provide for losses, there can be no assurance that future losses will not exceed internal estimates. In addition, the amount of the allowance for loan losses is subject to review by regulatory agencies, which can order the establishment of additional loss provisions. The following table summarizes changes in the allowance for loan losses over the nine months ended March 31, 1998 and 1997: 1998 1997 Balance, beginning of period $706,000 $628,000 Loans charged off - residential (2,000) - Loans charged off - consumer (90,000) (5,000) Loans charged off - mobile home (202,000) - Recoveries of loans previously charged off Consumer 12,000 - Mobile homes 75,000 - Net charge offs (207,000) (5,000) Provision charged to expense 399,000 63,000 Balance, end of period $898,000 $684,000 Ratio of net charge offs during the period to average loans outstanding during the period 1.81% .01% Nonperforming Assets The allowance for loan losses has been calculated based upon an evaluation of pertinent factors underlying the various types and quality of Southern Missouri'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 Southern Missouri's historical loss ratios. Southern Missouri's allowance for loan losses increased $214,000 to $898,000 at March 31, 1998 from $684,000 on June 30, 1997. At March 31, 1998, the Company had $1.1 million, or .71% of total assets and 4.21% of total equity classified as substandard, doubtful, or loss as compared to classified assets of $1.7 million, or 1.06% of total assets and 6.29% of total equity at June 30, 1997. The improvement in these ratios was attributed to enhanced collection efforts and the establishment of the aforementioned loss provisions. The ratio of nonperforming assets to total assets is another useful tool in evaluating exposure to credit risk. Non- performing assets of Southern Missouri include non-accruing 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 Southern Missouri's level of non-performing assets: Loans accounted for on a 3/31/98 6/30/97 3/31/97 Nonaccrual basis: Residential real estate $ 501,000 $ 707,000 $ 896,000 Commercial real estate 346,000 279,000 106,000 Commercial - - 365,000 Consumer 5,000 24,000 100,000 Mobile homes 45,000 155,000 232,000 Total non-accrual assets 897,000 1,380,000 1,699,000 Assets acquired in settlement of loans 101,000 55,000 120,000 Total nonperforming assets $ 998,000 $1,435,000 $1,819,000 Percentage to total assets .63% .90% 1.10% Percentage to net loans receivable .85% 1.33% 1.73% Liquidity and Capital Resources Southern Missouri'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. Southern Missouri uses its liquidity resources principally to satisfy its ongoing cash requirements which include funding loan commitments, funding maturing certificates of deposit as well as deposit withdrawals, maintaining liquidity, purchasing investments, and meeting operating expenses. At March 31, 1998, Southern Missouri had outstanding commitments to fund $3.4 million in undisbursed loans-in-process and $753,000 in mortgage and installment loans. These commitments are expected to be funded through existing cash balances, cash flow from normal operations and, if needed, FHLB advances. At March 31, 1998, SMBT had available credit at the FHLB of approximately $52.7 million, of which $21.6 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 Many existing computer programs and data processing systems use only two digits to identify a year in the date datum field. These programs were designed and developed without considering the impact of the upcoming change in the century. If uncorrected, many computer applications could fail or create erroneous results by or at the Year 2000. The Year 2000 issue affects virtually all companies and organizations. The Company uses an in-house computer processing system and is in the process of reviewing it and other data processing functions as well as those of its software providers, vendors, suppliers, and major customers to ascertain the degree to which each will be impacted by Year 2000 failures. Initial testing of internal systems and how they interact with those of vendors and suppliers is scheduled to begin by June 30, 1998 and be completed by March 31, 1999. Management anticipates Year 2000 expenditures to be less than $100,000. Incomplete or untimely compliance, however, would 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. Impact of New Accounting Standards SFAS No. 130 "Reporting Comprehensive Income," issued in July 1997, establishes standards for reporting and presentation of comprehensive income and its components (revenues, expenses, gains, and losses) in a full set of general-purpose financial statements. It requires that all items that are required to be recognized under accounting standards as components of comprehensive income be reported in a financial statement that is presented with the same prominence as other financial statements. SFAS No. 130 requires that companies (I) classify items of other comprehensive income by their nature in a financial statement and (ii) display the accumulated balance of other comprehensive income separately from retained earnings and additional paid-in- capital in the equity section of the statement of condition. SFAS No. 130 is effective for fiscal years beginning after December 15, 1997. Reclassification of financial statements for earlier periods provided for comprehensive purposes is required. SFAS No. 131, "Disclosure about Segments of an Enterprise and Related Information," issued in June 1997, establishes standards for disclosure about operating segments in annual financial statements and selected information in interim financial reports. It also establishes standards for related disclosures about products and services, geographic areas, and major customers. SFAS No. 131 supersedes SFAS No. 14, "Financial Reporting for Segments of a Business Enterprise." SFAS No. 131 becomes effective for the Company's fiscal year ending June 30, 1998, and requires that comparative information from earlier years be restated to conform to its requirements. The adoption of the provisions of SFAS No. 131 is not expected to have a material impact on the Company. Regulatory Capital SMBT is subject to minimum regulatory capital requirements equal to tangible capital of 3.0% of tangible assets, a leverage ratio of 3.0% of adjusted tangible assets, and a risk-based capital ratio of 8.0% of risk-weighted assets. At March 31, 1998, SMBT exceeded all regulatory capital requirements with a tangible capital ratio of $21.9 million (14.04% of tangible assets); a leverage capital ratio of $21.9 million (14.04% of adjusted tangible assets); and risk-based capital of $22.8 million (26.39% of risk-weighted assets). Under current regulatory guidelines, SMBT 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 amounts in the aggregate which management believes are not material to the financial condition and results of operations of the Company and the Bank. Item 2 - Changes in Securities and Use of Proceeds None Item 3 - Defaults upon Senior Securities Not applicable Item 4 - Submission of Matters to a Vote of Security-Holders None Item 5 - Other Information None Item 6 - Exhibits and Reports on Form 8-K Exhibits (3) (a) Certificate of Incorporation of the Registrant* (3) (b) Bylaws of the Registrant* 10 (a) Registrant's Stock Option Plan** 10 (b) Southern Missouri Savings Bank, FSB Management Recognition and Development Plans** 10 (c) Employment Agreement with Donald R. Crandell*** 10 (d) Director's Retirement Agreements*** Robert A. Seifert Thadis R. Seifert Leonard W. Ehlers James W. Tatum Samuel H. Smith Item 6 - Exhibits and Reports on Form 8-K (continued) 10 (e) Tax Sharing Agreement*** 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. Reports on Form 8-K: No reports on Form 8-K have been filed during the quarter for which this report is filed. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. SOUTHERN MISSOURI BANCORP, INC. Registrant Date: May 14, 1998 /s/ Donald R. Crandell Donald R. Crandell President and Chief Executive Officer Date: May 14, 1998 /s/ Greg A. Steffens Greg A. Steffens Chief Financial Officer EX-27 2
9 9-MOS JUN-30-1998 MAR-31-1998 3,135,799 3,741,408 0 0 23,174,981 4,645,838 4,814,000 118,898,082 898,000 157,438,237 107,926,853 0 1,535,392 21,573,372 0 0 17,735,544 8,667,076 157,438,237 6,798,499 1,704,556 111,678 8,614,734 3,897,952 4,710,481 3,904,253 398,959 79,643 2,759,509 1,262,064 1,262,064 0 0 813,037 .53 .51 7.43 897,000 0 0 3,034,239 706,000 294,000 87,000 898,000 0 0 898,000
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