EX-13 4 ex13.txt TABLE OF CONTENTS Page Letter to Stockholders 1 Business of the Company and the Bank 2 Common Stock 2 Selected Consolidated Financial Condition, Operating and Other Data 3-4 Management's Discussion and Analysis of Financial Condition and Results of Operations 5-14 Independent Auditors' Report 15 Consolidated Financial Statements: Consolidated Statements of Financial Condition as of June 30, 2001 and 2000 16 Consolidated Statements of Income for the Years Ended June 30, 2001, 2000 and 1999 17 Consolidated Statements of Stockholders' Equity for the Years Ended June 30, 2001, 2000 and 1999 18 Consolidated Statements of Cash Flows for the Years Ended June 30, 2001, 2000 and 1999 19-20 Notes to Consolidated Financial Statements 21-40 Directors and Officers 41 Corporate Information 42 i [Logo of Southern Missouri Bancorp, Inc.] 531 Vine Street P.O. Box 520 Poplar Bluff, MO 63902-0520 573-758-1421 Fax 573-686-2920 September 10, 2001 To Our Fellow Stockholders: On behalf of the Board of Directors, Management, and Associates of Southern Missouri Bancorp, Inc. and its wholly owned subsidiary, Southern Missouri Bank and Trust, we are pleased to present the results of the Company's performance for the year ended June 30, 2001 and discuss some of our strategic plans and initiatives for a prosperous and exciting year ahead. During the past year, our Company started to realize some of the rewards for our efforts, initiatives and changes undertaken over the last several years. As a Company, we made significant strides on improving customer satisfaction, enhancing product lines, expanding market share and improving the quality and expertise of our staff. Our strategic focus for the year centered on overseeing the successful integration of two purchased full-service branches located in Kennett and Qulin, Missouri, the opening of a third full-service facility in Poplar Bluff and the conversion to a new data processing system. Financially, fiscal 2001 was an exciting year for Southern Missouri as we completed two branch acquisitions and two branch sales. These transactions aided our efforts in expanding market share, improving operating efficiency and increasing deposits and contributed to the 22.8% increase in our earnings per share. As a result of asset growth, the branch transactions, and changing interest rates, the Company's net interest rate spread at June 30, 2001 had expanded to its highest level ever. During fiscal 2001, we earned $1.25 per diluted share as compared to the $1.04 per diluted share earned during the prior year. Southern Missouri Bancorp's total assets climbed to $240.5 million at June 30, 2001, which reflected growth of $56.1 million since the end of our last fiscal year. The 30.4% increase was the result of our acquisition and internally generated growth, which was consistent with our strategic plan. We believe our management team and product lines will allow us the opportunity to continue on this path of growth, which in turn will allow us to continue to leverage our capital base and increase our financial returns. Even though we are not satisfied with our present financial returns, we are pleased with the improvements over prior years and we believe that our strategic business plan will continue to provide consistent improvement in our financial performance. Progress has been made, as evidenced by the 14.7% increase in our return on average equity to 6.86%. As we turn our attention toward the future, we intend to focus on continuing to generate asset growth through residential and commercial loan originations, expanding our market presence through strategic acquisitions, opening a new full-service facility in Doniphan, Missouri, attracting new deposits through enhanced product lines and prudently managing our stockholders' equity. It is our pledge to remain committed to the growth and performance goals of the Company, which we believe will generate long-term value and opportunity for the main groups that hold the keys to our success: our customers, our staff, our stockholders and our communities. Thank you for your investment in Southern Missouri Bancorp, and for the confidence you have placed in our team here at Southern Missouri as we strive to provide a higher standard of service to both our customers and stockholders. We look forward to a prosperous and bright future together. /s/ Greg A. Steffens Greg A. Steffens President Southern Missouri Bancorp, Inc. 1 BUSINESS OF THE COMPANY AND THE BANK Southern Missouri Bancorp, Inc. (Southern Missouri or Company) is a Missouri Corporation and owns all outstanding stock of Southern Missouri Bank and Trust Co. (SMBT or the Bank). The Company's earnings are primarily dependent on the operations of the Bank. As a result, the following discussion relates primarily to the operations of the Bank. The Bank was originally chartered by the State of Missouri in 1887 and converted from a state-chartered stock savings and loan association to a Federally-chartered stock savings bank effective June 20, 1995. Then, effective February 17, 1998, the Bank converted its charter to a state-chartered stock savings bank. The Bank's deposit accounts are insured up to a maximum of $100,000 by the Savings Association Insurance Fund (SAIF), which is administered by the Federal Deposit Insurance Corporation (FDIC). The Bank's primary business is the origination of mortgage loans secured by one-to four-family residences. The Bank currently conducts its business through its home office located in Poplar Bluff and seven full service branch facilities in Poplar Bluff, Van Buren, Dexter, Kennett, Doniphan, and Qulin, Missouri. Lending activities are funded through the attraction of deposit accounts, consisting of certificate accounts with terms of 60 months or less, passbook accounts and money-market deposit accounts and advances from the Federal Home Loan Bank of Des Moines. The Bank also originates mortgage loans on commercial real estate, construction loans on single-family residences and commercial properties, consumer loans, and loans secured by deposit accounts. COMMON STOCK The common stock of the Company is listed on the Nasdaq Stock Market under the symbol "SMBC". The following table sets forth per share market price and dividend information for the Company's common stock. As of August 1, 2001, there were approximately 313 stockholders of record. This does not reflect the number of persons or entities who hold stock in nominee or "street name." Fiscal 2001 High Low Dividend Paid ----------- ---- --- ------------- First Quarter $ 13.25 $ 12.50 $ .125 Second Quarter 13.625 12.25 .125 Third Quarter 14.00 13.00 .125 Fourth Quarter 14.15 13.00 .125 Fiscal 2000 High Low Dividend Paid ----------- ---- --- ------------- First Quarter $ 14.25 $ 12.00 $ .125 Second Quarter 13.625 10.875 .125 Third Quarter 13.125 10.875 .125 Fourth Quarter 13.125 10.594 .125 Any future dividend declarations and payments are subject to the discretion of the Board of Directors of the Company. The ability of the Company to pay dividends depends primarily on the ability of the Bank to pay dividends to the Company. For a discussion of the restrictions on the Bank's ability to pay dividends, see Note 14 of Notes to Consolidated Financial Statements included elsewhere in this report. 2 SELECTED CONSOLIDATED FINANCIAL CONDITION, OPERATING AND OTHER DATA
At June 30, (In thousands) FINANCIAL CONDITION DATA: 2001 2000 1999 1998 1997 ------------------------ ---- ---- ---- ---- ---- Total assets $ 240,494 $184,391 $164,972 $155,947 $160,393 Loans receivable, net 180,857 138,425 118,249 119,083 107,783 Mortgage-backed securities 26,224 12,957 16,900 14,154 26,236 Cash, interest-bearing deposits and investment securities 19,607 26,425 25,048 18,324 21,638 Deposits 173,281 123,920 120,155 109,410 118,705 Borrowings 41,115 37,000 20,550 21,069 13,535 Stockholders' equity 23,582 21,457 22,629 24,112 26,400
Year Ending June 30, (In thousands) OPERATING DATA: 2001 2000 1999 1998 1997 -------------- ---- ---- ---- ---- ---- Interest income $ 16,161 $ 12,290 $ 11,414 $ 11,444 $ 11,408 Interest expense 9,490 6,919 6,247 6,212 6,318 ------ ------ ------ ------ ------ Net interest income 6,671 5,371 5,167 5,232 5,090 Provision for loan losses 510 215 235 783 241 ------ ------ ------ ------ ------ Net interest income after provision for loan losses 6,161 5,156 4,932 4,449 4,849 Noninterest income 1,447 612 1,255 797 618 Noninterest expense 5,219 3,758 3,682 3,660 3,972 ------ ------ ------ ------ ------ Income before income taxes 2,389 2,010 2,505 1,586 1,495 Income tax expense 840 690 860 522 440 ------ ------ ------ ------ ------ Net income $ 1,549 $ 1,320 $ 1,645 $ 1,064 $ 1,055 ====== ====== ====== ====== ====== Basic earnings per common share $ 1.26 1.03 1.23 .69 .68 Diluted earnings per common share 1.25 1.02 1.20 .67 .67 Dividends per share .50 .50 .50 .50 .50
3 At June 30, OTHER DATA: 2001 2000 1999 1998 1997 ---------- ---- ---- ---- ---- ---- Number of: Real estate loans 2,910 2,811 2,920 3,035 3,040 Deposit accounts 15,630 12,887 13,189 12,762 12,542 Full service offices 8 8 8 8 8 KEY OPERATING RATIOS: At or For the Year Ended June 30, -------------------- ------------------------------------ 2001 2000 1999 1998 1997 ---- ---- ---- ---- ---- Return on assets (net income divided by average assets) .71% .77% 1.02% .67% .65% Return on average equity (net income divided by average equity) 6.86 5.98 7.30 4.06 4.09 Average equity to average assets 10.29 12.84 14.01 16.40 16.01 Interest rate spread (spread between weighted average rateon all interest-earning assets and all interest- bearing liabilities) 2.92 2.69 2.76 2.67 2.51 Net interest margin (net interest income as a percentage of average interest-earning assets) 3.22 3.22 3.32 3.39 3.25 Noninterest expense to average assets 2.38 2.16 2.29 2.29 2.46 Average interest-earning assets to interest-bearing liabilities 106.61 112.78 114.15 117.76 118.32 Allowance for loan losses to total loans at end of period .79 .91 .99 1.07 .64 Allowance for loan losses to nonperforming loans 299.08 237.79 658.09 243.01 51.19 Net charge offs to average out- standing loans during the period .35 .10 .29 .17 .16 Ratio of nonperforming assets to total assets .69 .59 .64 .98 .89 Dividend payout ratio 39.72 48.53 39.95 72.29 73.06 4 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Southern Missouri Bancorp, Inc. is a Missouri corporation originally organized for the principal purpose of becoming the holding company of Southern Missouri Savings Bank. The Bank converted from a Federally-chartered stock savings bank to a state-chartered stock savings bank effective February 17, 1998 and subsequently changed its name to Southern Missouri Bank and Trust Co. The Company's state of incorporation changed from Delaware to Missouri effective April 1, 1999. The principal business of SMBT consists primarily of attracting deposits from the general public and using such deposits along with wholesale funding from the Federal Home Loan Bank of Des Moines (FHLB) to finance mortgage loans secured by one-to four-family residences and, to a lesser extent, consumer loans, commercial real estate loans, and commercial business loans. These funds have also been used to purchase investment securities, mortgage-backed securities (MBS), U.S. government and federal agency obligations and other permissible securities. The revenues of Southern Missouri are derived principally from interest earned on loans and, to a lesser extent, from interest earned on investment securities and MBS. Southern Missouri's operations are significantly influenced by general economic conditions including monetary and fiscal policies of the U.S. government and Federal Reserve. Additionally, Southern Missouri is subject to policies and regulations issued by financial institution regulatory agencies, including the Federal Deposit Insurance Corporation (FDIC), the Office of Thrift Supervision (OTS) and the Missouri Division of Finance. Each of these factors may influence interest rates, loan demand, prepayment rates and deposit flows. Interest rates available on competing investments as well as general market interest rates influence the Bank's cost of funds. Lending activities are affected by the demand for financing real estate and other types of loans, which in turn is affected by the interest rates at which such financing may be offered. The Bank intends to continue to focus on its lending programs for one-to four-family residential real estate, commercial mortgage, business and consumer financing on loans secured by properties or collateral located in Southeastern Missouri. FORWARD-LOOKING STATEMENTS Except for the historical information contained herein, the matters discussed in this annual report may be deemed to be forward-looking statements, which we believe are within the meaning of the Private Securities Litigation Reform Act of 1995. These matters 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 judgment as of the date of this report. Southern Missouri disclaims, however, any intent or obligation to update these forward-looking statements. FINANCIAL CONDITION The Company's financial condition changed significantly during fiscal 2001, due to the acquisition of two full-service banking facilities located in Kennett and Qulin, Missouri, internally generated loan growth, a change in the composition and amount of deposits and the Company's sale of two full-service banking facilities located in Malden and Ellington, Missouri. In the acquisition, the Company assumed $44.7 million in deposits, received $14.0 million in cash, acquired $25.3 million in loans, assumed $1.6 million in premises and equipment and recorded $3.8 million in goodwill. In addition, the acquisition resulted in the consolidation of the Company's former banking facility in Kennett into the acquired facility and the repayment of $7.0 million in FHLB advances. In the sale, the Company transferred $13.2 million in deposits along with loans of $8.5 million and cash of $4.2 million, resulting in a pretax gain on the sale of $634,000. Southern Missouri's total assets increased $56.1 million, or 30.4%, to $240.5 million at June 30, 2001, as compared to $184.4 million at June 30, 2000. The growth was primarily due to a $42.4 million increase in loans, of which $27.2 million was generated internally, a $6.2 million increase in cash balances and a $6.1 million increase in goodwill and premises and equipment. The growth in the loan portfolio approximated growth targets and was comprised of increased 5 balances in loans secured by residential real estate of $15.2 million, commercial business of $14.9 million and commercial real estate of $13.3 million. Allowance for loan losses increased $185,000, to $1.5 million at June 30, 2001, from $1.3 million at June 30, 2000. The allowance for loan losses at June 30, 2001 represented 0.8% of loans receivable and 299.1% of nonperforming loans, as compared to respective balances of 0.9% and 237.8% at June 30, 2000 (see Provision for Loan Losses). Premises and equipment increased $2.5 million, to $5.1 million at June 30, 2001, from $2.5 million at June 30, 2000 due to the aforementioned branch acquisitions, the opening of another branch office in Poplar Bluff, and upgrades in data processing and information technology systems capabilities. Total deposits increased $49.4 million, or 39.8%, to $173.3 million at June 30, 2001 as compared to $123.9 million at June 30, 2000. The increase was primarily due to the branch purchase and $17.8 million in internally generated deposit growth, partially offset by the branch sales. These changes and the introduction of a high-yield savings account contributed to significant changes in the composition of deposits, as transaction and savings accounts increased to $92.7 million at June 30, 2001 as compared to $33.9 million at June 30, 2000. The cost of interest bearing deposits declined to 4.08% at June 30, 2001, as compared to 4.79% at June 30, 2000, due in part to the decline in interest rates and increased balances in transaction and savings accounts. In January 2001, Southern Missouri introduced a new savings account, the money-market passbook account ("MMPA") in order to attract new deposits and generate a more stable source of funds that was less price sensitive than certificates of deposit ("CD"). The MMPA was originally offered at an above-market interest rate that was guaranteed until June 1, 2001 and has a minimum deposit requirement of $10,000. The MMPA was designed to give the customer a yield similar to those available from 6 to 12-month CD's, while allowing the depositor immediate access to their funds. At June 30, 2001, the MMPA had attracted $39.6 million in deposits and was priced similar to the cost of a 1-year CD. RESULTS OF OPERATIONS Southern Missouri's results of operations are primarily dependent on the level of its net interest income, noninterest income, and the control of operating expenses. Net interest income is dependent primarily on the difference or spread between the average yield earned on interest-earning assets and the average rate paid on interest-bearing liabilities, as well as the relative amounts of such assets and liabilities. Southern Missouri, like other financial institutions, is also 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. Southern Missouri's noninterest income consists primarily of fees charged on transaction and loan accounts. Southern Missouri's operating expenses include employee compensation and benefits, occupancy expenses, legal and professional fees, federal deposit insurance premiums and other general and administrative expenses. COMPARISON OF THE YEARS ENDED JUNE 30, 2001 AND 2000 Net Income. Southern Missouri's net income totaled $1.5 million during fiscal 2001, which represented a $228,000, or 17.3% increase from the results of the prior year. Increased earnings were primarily due to the gain realized on the sale of the two branches and increased net interest income, partially offset by higher non-interest expense and an increase in the provision for loan losses. Net Interest Income. Net interest income increased $1.3 million, or 24.2%, to $6.7 million for fiscal 2001 when compared to the prior fiscal year. The increase was primarily due to the 23 basis point increase in the average interest rate spread between interest-earning assets and interest-bearing liabilities, and the $40.2 million increase in average interest-earning assets, partially offset by a $46.3 million increase in average interest-earning liabilities and a 6% decline in the ratio of interest earning assets to interest bearing liabilities from 113% to 107%. The decline was primarily the result of the acquisition, which included the addition of goodwill, and premises and equipment, which are non-earning assets. 6 Interest Income. Interest income for fiscal 2001 increased $3.9 million, up 31.5% to $16.2 million from the $12.3 million earned during the prior fiscal year. The increase was mostly attributed to a $40.2 million or 24.1% increase in average interest-earning assets as well as a 44 basis point increase in the average yield earned on these assets, to 7.81% from 7.37%. A general rise in average interest rates and an increased concentration of higher yielding commercial loans contributed to the increase. Interest Expense. Interest expense for fiscal 2001 increased $2.6 million or 37.2% to $9.5 million from $6.9 million during the prior fiscal year. The increase was largely due to a $46.3 million, or 31.3% increase in average interest-bearing liabilities and a 21 basis point increase in the average cost of these liabilities, to 4.89%, from 4.68%. Provision for Loan Losses. A provision for loan losses is charged to earnings to bring the total allowance for loan losses to a level considered adequate by management to provide for potential 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 loan portfolio. The provision for loan losses for fiscal 2001 was $510,000, as compared to $215,000 for the prior fiscal year. The increase in the provision was the result of loan growth, the resolution of several problem loans and the recent slow down of national economic conditions. At June 30, 2001, classified assets totaled $5.5 million, as compared to $4.0 million at June 30, 2000. The increase in classified assets related primarily to the deterioration in the financial condition of three customers with loans primarily secured by commercial real estate, one of which was resolved through foreclosure. The largest classified asset consisted of a commercial real estate relationship, which totaled $2.4 million as of June 30, 2001 and was current at that date and performing in accordance with its terms. The above provision was made based on management's analysis of the various factors which affect the loan portfolio and management's desire to maintain the allowance at a level considered adequate. Management performed a detailed analysis of the loan portfolio, including types of loans, the historical charge-off history and an analysis of the allowance for loan losses. Management also considered the continued origination of loans secured by commercial businesses and commercial real estate. Such loans bear an inherently higher level of credit risk than one- to four-family residential real estate loans. While management believes the allowance for losses at June 30, 2001 is adequate to cover all losses inherent in the portfolio, there can be no assurance that, in the future, the Bank's regulators will not require further increases in the allowance or actual losses will not exceed the allowance. Noninterest Income. Noninterest income for fiscal 2001 increased $835,000 from the prior year. Exclusive of the $634,000 pretax gain realized on the sale of branches, noninterest income increased $201,000, to $813,000 as compared to the $612,000 earned during the same period of the prior year. The increase was primarily due to a $113,000 increase in banking service charges, a $46,000 increase in other customer charges and an $11,000 gain realized on the sale of available for sale securities versus a $21,000 loss during the prior year. Overall, increased banking and other customer service charges were the result of a revised fee structure, changes in the philosophy on the assessment of service charges and an increased customer base from the branch acquisitions. Noninterest Expense. Noninterest expense for fiscal 2001 increased $1.5 million, to $5.2 million, as compared to $3.8 million expended for the prior year. The increase was primarily due to increased expenses for compensation and benefits, occupancy, advertising, amortization of goodwill and other expense of $413,000, $224,000, $71,000, $214,000 and $352,000, respectively. In addition, fiscal 2001 expenses included a $125,000 provision for loss on impairment of premises and equipment, which consisted of a $51,000 write down on the carrying value of computer equipment and a $75,000 expense related to an adjustment in the carrying value of the Company's former office in Kennett. Increased compensation expense was primarily due to increased staffing levels due to the acquisition, the addition of several loan officers, increased support staff and transitional labor cost related to the acquisition and opening of a new branch. Increased occupancy expense was primarily due to an increase in depreciation expense due 7 to increased investment in premises and equipment. Increased advertising expense was due to promotions related to the branch acquisition, a new branch opening and the offering of the new MMPA. Other expense increased due to $85,000 in data processing conversion costs, $63,000 in check issuance charges for customers of the acquired branches, $128,000 in expenses related to repossessions and foreclosures and overall growth of the Company. Provision for Income Taxes. The provision for income taxes for fiscal 2001 was $840,000, as compared to the $690,000 expected for the prior fiscal year. The increase was attributed to increased income. COMPARISON OF THE YEARS ENDED JUNE 30, 2000 AND 1999 Net Income. Southern Missouri's net income totaled $1.3 million, which approximated the results of the prior year, exclusive of a $526,000 pre-tax gain realized on the sale of the Bank's insurance operations during fiscal 1999. Net Interest Income. Net interest income increased by $204,000, or 4.0%, to $5.4 million for fiscal 2000 when compared to the prior fiscal year. The increase was primarily due to the $11.2 million increase in the average balance of interest earning assets, which was largely offset by a $11.6 million increase in the average balance of interest bearing liabilities as well as a 7 basis point decline in the average interest rate spread between these assets and liabilities. The decline in average interest rate spread was primarily due to an increased ratio of short-term interest bearing liabilities to interest earning assets as well as the lagging nature of the repricing of the Bank's cost of funds loan portfolio versus its cost of deposits. Interest Income. Interest income increased $876,000, or 7.7%, to $12.3 million for fiscal 2000 as compared to the prior fiscal year. The increase was primarily due to an $11.2 million increase in the average balance of interest earning assets and a 3 basis point increase in the average yield on these assets. Interest income on loans receivable increased $607,000, or 6.5%, to $9.9 million for fiscal 2000 as compared to $9.3 million for the prior fiscal year. The increase was primarily due to a $9.6 million increase in average loans receivable, partially offset by a 12 basis point decline in the average yield on these loans. Interest income on the investment and mortgage-backed security portfolio increased $382,000, or 19.7%, to $2.3 million for fiscal 2000 as compared to $1.9 million for the prior fiscal year. The increase was primarily due to a $4.0 million increase in average investments and a 41 basis point increase in the average yield on these investments. Other interest income decreased $114,000 in fiscal 2000 as compared to fiscal 1999 due to lower average balances and yields earned on these assets. Interest Expense. Interest expense increased $672,000, or 10.8%, to $6.9 million for fiscal 2000 as compared to the prior fiscal year. The increase was primarily due to an $11.6 million increase in the average balance of interest-bearing liabilities and a 10 basis point increase in the average rate paid on these liabilities, to 4.68% during fiscal 2000 from 4.58% during fiscal 1999. Provision for Loan Losses. Provision for loan losses decreased $20,000 to $215,000 for the year ended June 30, 2000 as compared to $235,000 for the year ended June 30, 1999. The decline was primarily due to a reduction in classified assets from $5.1 million at June 30, 1999 to $4.0 million at June 30, 2000. The largest classified commercial real estate relationship as of June 30, 2000 totaled $2.6 million and was current at that date and performing in accordance with its terms. Noninterest Income. Noninterest income declined $643,000, or 48.7%, to $612,000 for fiscal 2000 as compared to the $1.3 million earned during fiscal 1999. The decline was primarily due to a $526,000 one-time gain realized during fiscal 1999 from the sale of the Bank's insurance operations which resulted in a $292,000 reduction in insurance commissions, partially offset by a $107,000 increase in banking service charges. Noninterest Expense. Noninterest expense increased $75,000, or 2.0% to $3.8 million for fiscal 2000 as compared to the prior fiscal year. The change was primarily due to higher occupancy expense of $73,000, professional fees of $40,000 and postage and office supplies of $23,000, partially offset by reductions in compensation expense of $31,000, advertising expense of $36,000 and deposit insurance premiums of $37,000. 8 The reduction in compensation and benefits was primarily due to the sale of the Bank's insurance operations in the fourth quarter of fiscal 1999 partially offset by hiring additional personnel in the loan department during this fiscal year. Occupancy and equipment expense increased due to higher depreciation and maintenance. SAIF deposit insurance premiums decreased as a result of a full year benefit of the Bank's supervisory risk classification being upgraded during fiscal 1999. Professional fees increased primarily due to outside data processing consulting and legal fees. Provision for Income Taxes. Provision for income taxes declined $170,000 to $690,000 for fiscal 2000 as compared to $860,000 for the prior fiscal year. The decrease was due to a reduction in pre-tax income. ASSET/LIABILITY MANAGEMENT The goal of Southern Missouri's asset/liability management strategy is to manage the interest rate sensitivity of both interest-earning assets and interest-bearing liabilities in order to maximize net interest income without exposing the Bank's Net Portfolio Value (NPV) 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 focused on matching the repricing intervals of interest-earning assets and interest-bearing liabilities. This strategy resulted in a manageable exposure to interest-rate risk with modest loan growth. The primary elements of Southern Missouri's current asset/liability strategy include (i) increasing loans receivable through the origination of both fixed and adjustable-rate residential loans, (ii) growth in loans secured by commercial business and commercial real estate, which typically provide higher yields and shorter repricing periods, but inherently increase credit risk, (iii) expanding the consumer loan portfolio, (iv) active solicitation of less rate-sensitive deposits, (v) offering competitively priced CD's with maturities of up to 5 years, and (vi) the use of FHLB advances with maturities of up to 10 years, subject to early redemption (See Note 10 of audited financial statements) to help manage exposure to interest-rate risk. The degree to which each segment of the strategy is achieved will affect Southern Missouri's overall profitability and exposure to interest-rate risk. During the last three years, Southern Missouri expanded its loan products to include fixed rate loans for residential financing based on an amortization schedule of up to 30 years. This, as well as more competitive pricing and an increase in customer preferences for fixed-rate residential financing, led to fixed rate originations of $24.6 million during fiscal 2001 and $12.2 million in fiscal 2000. At June 30, 2001, fixed rate loans with remaining maturities in excess of 10 years totaled $46.4 million, or 29.7% of loans receivable, as compared to $34.1 million, or 24.7% of loans receivable at the end of the prior year. AVERAGE BALANCE, INTEREST AND AVERAGE YIELDS AND RATES The following table sets forth certain information relating to the Company's average interest-earning assets and interest-bearing liabilities and reflects the average yield on assets and the average cost of liabilities for the periods indicated. These yields and costs are derived by dividing income or expense by the average month-end balance of assets or liabilities, respectively, for the periods indicated. During the periods indicated, nonaccrual loans are included in the net loan category. The table also presents information for the periods indicated with respect to the difference between the weighted-average yield earned on interest-earning assets and the weighted-average rate paid on interest-bearing liabilities, or "interest rate spread," which financial institutions have traditionally used as an indicator of profitability. Another indicator of an institution's net interest income is its "net yield on interest-earning assets," which is its net interest income divided by the average balance of interest-earning assets. Net interest income is affected by the interest rate spread and by the relative amounts of interest-earning assets and interest-bearing liabilities. When interest-earning assets approximate or exceed interest-bearing liabilities, any positive interest rate spread will generate net interest income. 9
Year Ended June 30, ---------------------------------------------------------------------------------- 2001 2000 1999 -------------------------- -------------------------- -------------------------- Interest Interest Interest Average and Yield/ Average and Yield/ Average and Yield/ Balance Dividends Cost Balance Dividends Cost Balance Dividends Cost ------- --------- ------ ------- --------- ------ ------- --------- ------ (Dollars in thousands) Interest-earning assets: Mortgage loans (1) $140,690 $ 11,361 8.08% $114,109 $ 8,784 7.70% $106,117 $ 8,315 7.84% Other loans (1) 24,993 2,445 9.78 12,139 1,109 9.14 10,510 971 9.24 -------- -------- ----- -------- ------- ----- -------- ------- ----- Total net loans 165,683 13,806 8.33 126,248 9,893 7.84 116,627 9,286 7.96 Mortgage-backed securities 15,812 1,002 6.34 14,180 867 6.11 17,074 973 5.70 Investment securities (2) 18,681 1,117 5.98 23,546 1,455 6.18 16,693 967 5.79 Other interest-earning assets 6,875 236 3.43 2,869 75 2.61 5,200 188 3.62 -------- -------- ----- -------- ------- ----- -------- ------- ----- Total interest-earning assets (1) 207,051 16,161 7.81 166,843 12,290 7.37 155,594 11,414 7.34 Other noninterest-earning assets 12,445 - 5,158 - 5,292 - -------- -------- -------- ------- -------- ------- Total assets $219,496 $ 16,161 $172,001 $12,290 $160,886 $11,414 ======== ======== ======== ======= ======== ======= Interest-bearing liabilities: Passbook accounts $ 19,757 $ 794 4.02 $ 6,920 $ 175 2.53 $ 7,190 $ 182 2.53 NOW accounts 22,567 389 1.72 12,266 240 1.96 10,672 210 1.97 Money market accounts 19,298 777 4.03 15,703 606 3.86 11,265 414 3.68 Certificates of deposit 92,959 5,308 5.71 86,346 4,402 5.10 87,189 4,457 5.11 -------- -------- ----- -------- ------- ----- -------- ------- ----- Total interest-bearing deposits 154,581 7,268 4.70 121,235 5,423 4.47 116,316 5,263 4.52 Borrowings Securities sold under agreements to repurchase 3,486 99 2.84 - - - - - - FHLB advances 36,139 2,123 5.87 26,705 1,496 5.60 19,990 984 4.92 -------- -------- ----- -------- ------- ----- -------- ------- ----- Total interest-bearing liabilities 194,206 9,490 4.89 147,940 6,919 4.68 136,306 6,247 4.58 Other liabilities 2,702 - 1,973 - 2,045 - -------- -------- -------- ------- -------- ------- Total liabilities 196,908 9,490 149,913 6,919 138,351 6,247 Stockholders' equity 22,588 - 22,088 - 22,535 - -------- -------- -------- ------- -------- ------- Total liabilities and stockholders' equity $219,496 $ 9,490 $172,001 $ 6,919 $160,886 $ 6,247 ======== ======== ======== ======= ======== ======= Net interest income - $ 6,671 - - $ 5,371 - - $ 5,167 - Interest rate spread (3) - - 2.92% - - 2.69% - - 2.76% Net interest margin (4) - - 3.22% - - 3.22% - - 3.32% Ratio of average interest- earning assets to average interest-bearing liabilities 106.61% - - 112.78% - - 114.15% - - (1) Calculated net of deferred loan fees, loan discounts and loans-in-process. (2) Includes FHLB stock and related cash dividends. (3) Net interest spread represents the difference between the average rate on interest-earning assets and the average cost of interest-bearing liabilities. (4) Net yield on average interest-earning assets represents net interest income divided by average interest-earning assets.
10 YIELDS EARNED AND RATES PAID: The following table sets forth for the periods and at the dates indicated, the weighted average yields earned on the Company's assets, the weighted average interest rates paid on the Company's liabilities, together with the net yield on interest-earning assets.
At For June 30, Year Ended June 30, ------- ------------------------------- 2001 2001 2000 1999 ------- ------- ------- ------- Weighted-average yield on loan portfolio 8.09% 8.33% 7.84% 7.96% Weighted-average yield on mortgage-backed securities 5.87 6.34 6.11 5.70 Weighted-average yield on investment securities (1) 4.98 5.98 6.18 5.79 Weighted-average yield on other interest-earning assets 3.87 3.43 2.61 3.62 Weighted-average yield on all interest-earning assets 7.56 7.81 7.37 7.34 Weighted-average rate paid on deposits 4.08 4.70 4.47 4.52 Weighted-average rate, paid on securities sold under agreements to repurchase 3.25 2.84 - - Weighted-average rate paid on FHLB advances 5.73 5.87 5.60 4.92 Weighted-average rate paid on all interest-bearing liabilities 4.35 4.89 4.68 4.58 Interest rate spread (spread between weighted average rate on all interest-earning assets and all interest-bearing liabilities) 3.21 2.92 2.69 2.76 Net interest margin (net interest income as a percentage of average interest- earning assets) - 3.22 3.22 3.32 (1) Includes Federal Home Loan Bank stock.
11 RATE/VOLUME ANALYSIS The following table sets forth the effects of changing rates and volumes on net interest income of the Bank. Information is provided with respect to (i) effects on interest income attributable to changes in volume (changes in volume multiplied by prior rate); (ii) effects on interest income attributable to changes in rate (changes in rate multiplied by prior volume); and (iii) changes in rate/volume (change in rate multiplied by change in volume).
Years Ended June 30, Years Ended June 30, 2001 Compared to 2000 2000 Compared to 1999 --------------------------------------- --------------------------------------- Increase (Decrease) Increase (Decrease) Due to Due to ------------------ Rate/ ------------------ Rate/ Rate Volume Volume Net Rate Volume Volume Net -------- --------- --------- ---------- -------- --------- --------- ---------- (Dollars in Thousands) Interest-earning assets: Loans receivable (1) $619 $3,092 $ 202 $3,913 $(140) $ 759 $(12) $ 607 Mortgage-backed securities 33 100 2 135 70 (164) (12) (106) Investment securities (40) (216) (82) (338) 65 396 27 488 Other interest- earning deposits 24 104 33 161 (54) (84) 24 (114) ---- ------ ----- ------ ----- ----- ---- ----- Total net change in income on interest- earning assets 636 3,080 155 3,871 (59) 907 27 875 ---- ------ ----- ------ ----- ----- ---- ----- Interest-bearing liabilities: Deposits 629 1,001 216 1,846 9 142 8 159 Securities sold under agreements to repurchase 0 0 99 99 0 0 0 0 FHLB advances 72 528 26 626 136 330 46 512 ---- ------ ----- ------ ----- ----- ---- ----- Total net change in expense on interest- bearing liabilities 701 1,529 341 2,571 145 472 54 671 ---- ------ ----- ------ ----- ----- ---- ----- Net change in net interest income $(65) $1,551 $(186) $1,300 $(204) $ 435 $(27) $ 204 ===== ====== ===== ====== ===== ===== ==== ===== (1) Does not include interest on loans placed on nonaccrual status.
12 INTEREST RATE SENSITIVITY ANALYSIS The following table sets forth as of June 30, 2001, management's estimates of the projected changes in net portfolio value and net interest income in the event of 1%, 2%, and 3%, instantaneous, permanent increases or decreases in market interest rates. NPV as % of Change Net Portfolio PV of Assets in Rates $ Amount $ Change % Change NPV Ratio Change -------- -------- -------- -------- --------- ------ (Dollars in thousands) +300 bp 16,437 (6,803) (29) 7.04 -256 bp +200 bp 19,178 (4,062) (17) 8.11 -149 bp +100 bp 21,726 (1,514) (7) 9.08 -52 bp 0 bp 23,240 - - 9.60 - -100 bp 23,446 206 9 9.59 -1 bp -200 bp 23,307 67 29 9.44 -16 bp -300 bp 22,143 (1,097) (4) 8.92 -68 bp Computations in the table are based on prospective effects of hypothetical changes in interest rates and are based on an internally generated model using the actual maturity and repricing schedules for SMBT's loans and deposits, adjusted by management's assumptions for prepayment rates and deposit runoff. Further, the computations do not consider any reactions that the Bank may undertake in response to changes in interest rates. These projected changes should not be relied upon as indicative of actual results in any of the aforementioned interest rate changes. The Bank's reduced exposure to interest-rate risk over the last year was attributed to several factors including the general decline in interest rates from June 30, 2000 to June 30, 2001. Also, the Bank significantly increased its balances of transaction and savings accounts, which have historically provided less sensitivity to fluctuating interest rates than CDs. The change in the composition of deposits was largely due to the branch acquisitions and the introduction of the MMPA. In addition, interest rate sensitivity was reduced when the Bank replaced $19.0 million in short-term FHLB advances with long-term callable FHLB advances, which was partially offset by a $16.3 million increase in the portfolio of fixed rate residential loans. Management cannot accurately predict future interest rates or their effect on the Bank's NPV and net interest income in the future. Certain shortcomings are inherent in the method of analysis presented in the computation of NPV and net interest income. For example, although certain assets and liabilities may have similar maturities or periods of 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 of assets and liabilities may lag behind changes in market interest rates. Additionally, most of Southern Missouri's 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 interest rates, prepayment and early withdrawal levels would likely deviate significantly from those assumed in calculating the foregoing table. Finally, the ability of many borrowers to service their debt may decrease in the event of an interest rate increase. LIQUIDITY AND CAPITAL RESOURCES Southern Missouri's primary potential sources of funds include deposit growth, securities sold under agreements to repurchase, FHLB advances, amortization and prepayment of loan principal, investment maturities and sales, and ongoing operating results. While scheduled loan repayments and maturing investments are relatively predictable, deposit flows and loan prepayment rates are significantly influenced by factors outside of the Bank's control, including general economic conditions and competition. Southern Missouri has relied on FHLB advances as a source for funding cash or liquidity needs. Southern Missouri uses its liquid assets as well as other funding sources to meet ongoing commitments, to fund loan commitments, to repay maturing certificates of deposit and FHLB advances, to make investments, to fund other deposit withdrawals and to meet operating expenses. At June 30, 2001, the Bank had outstanding commitments to extend credit of $8.8 million (including $1.7 million on lines of credit). Management anticipates that current funding sources will be adequate to meet foreseeable liquidity needs. 13 The primary sources of funding for the Company are deposits, securities sold under agreements to repurchase and FHLB advances. For the year ended June 30, 2001, Southern Missouri increased deposits and securities sold under agreements to repurchase by $49.4 million and $4.1 million, respectively. The level of FHLB advances remained stable. During the prior year, Southern Missouri increased deposits by $3.8 million, while the level of FHLB advances increased by $16.4 million. At June 30, 2001, the Bank had additional borrowing capacity from the FHLB of approximately $45.1 million. Liquidity management is an ongoing responsibility of the Bank's management. The Bank adjusts its investment in liquid assets based upon a variety of factors including (i) expected loan demand and deposit flows, (ii) anticipated investment and FHLB advance maturities, (iii) the impact on profitability, and (iv) asset/liability management objectives. At June 30, 2001, the Bank had $68.1 million in certificates of deposit maturing within one year and $92.7 million in other deposits without a specified maturity. Management believes that most maturing interest-bearing liabilities will be retained or replaced by new interest-bearing liabilities. Also at June 30, 2001, the Bank had $18.0 million in FHLB advances subject to early redemption within one year. REGULATORY CAPITAL Federally insured savings banks are required to maintain a minimum level of regulatory capital. FDIC regulations established capital requirements, including a leverage (or core capital) requirement and a risk-based capital requirement. The FDIC is also authorized to impose capital requirements in excess of these standards on individual institutions on a case-by-case basis. At June 30, 2001, SMBT exceeded regulatory capital requirements with core and risk-based capital of $18.8 million and $20.3 million, or 8.2% and 14.0% of adjusted total assets and risk-weighted assets, respectively. These capital levels exceeded minimum requirements of 4.0% and 8.0% for adjusted total assets and risk-weighted assets, by approximately $9.6 million and $8.7 million, respectively. Under regulatory guidelines, SMBT was considered well-capitalized at June 30, 2001. IMPACT OF INFLATION The consolidated financial statements and related data presented herein have been prepared in accordance with generally accepted accounting principles, which require the measurement of financial position and operating results in historical dollars without considering changes in the relative purchasing power of money over time due to inflation. The primary impact of inflation on the operations of the Company is reflected in increased operating costs. Unlike most industrial companies, virtually all of the assets and liabilities of a financial institution are monetary in nature. As a result, changes in interest rates generally have a more significant impact on a financial institution's performance than does inflation. Interest rates do not necessarily move in the same direction or to the same extent as the prices of goods and services. In the current interest rate environment, liquidity and maturity structure of the Company's assets and liabilities are critical to the maintenance of acceptable performance levels. IMPACT OF RECENT ACCOUNTING PRONOUNCEMENTS See Note 1 of Notes to Consolidated Financial Statements for a discussion of the impact of recent accounting pronouncements. 14 [Letterhead of Kraft, Miles & Tatum, LLC] INDEPENDENT AUDITORS' REPORT Board of Directors Southern Missouri Bancorp, Inc. Poplar Bluff, Missouri We have audited the accompanying consolidated statements of financial condition of Southern Missouri Bancorp, Inc. and Subsidiary (Company) as of June 30, 2001 and 2000, and the related consolidated statements of income, stockholders' equity, and cash flows for each of the years in the three year period ended June 30, 2001. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Southern Missouri Bancorp, Inc. and Subsidiary as of June 30, 2001 and 2000, and the results of their operations and their cash flows for each of the years in the three year period ended June 30, 2001 in conformity with accounting principles generally accepted in the United States of America. /s/ Kraft, Miles & Tatum, LLC Poplar Bluff, Missouri July 25, 2001 15 SOUTHERN MISSOURI BANCORP, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION JUNE 30, 2001 AND 2000 2001 2000 ------------ ------------ ASSETS Cash and cash equivalents $ 10,710,122 $ 4,470,373 Investment and mortgage-backed securities: (Note 3) Available for sale - at estimated market value (amortized cost $34,728,747 and $35,910,780 at June 30, 2001 and 2000, respectively) 35,121,355 34,910,850 Stock in Federal Home Loan Bank of Des Moines 2,150,000 1,850,000 Loans receivable, net (Note 4) 180,856,594 138,424,750 Accrued interest receivable (Note 5) 1,601,830 1,151,557 Foreclosed real estate, net (Note 6) 1,162,156 463,591 Premises and equipment (Note 7) 5,068,808 2,549,357 Goodwill 3,624,706 - Prepaid expenses and other assets 198,462 570,690 ------------ ------------ Total assets $240,494,033 $184,391,168 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY Deposits (Note 8) $173,281,419 $123,920,293 Securities sold under agreements to repurchase (Note 9) 4,115,142 - Advances from FHLB of Des Moines (Note 10) 37,000,000 37,000,000 Advances from borrowers for taxes and insurance 280,112 334,841 Accounts payable and other liabilities 1,095,738 723,061 Accrued interest payable 1,139,134 956,386 ------------ ------------ Total liabilities 216,911,545 162,934,581 ------------ ------------ Commitments and contingencies (Note 15) - - 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 17,450,851 17,517,834 Retained earnings-substantially restricted 15,372,440 14,438,957 Treasury stock of 530,621 shares in 2001 and 549,352 shares in 2000, at cost (9,164,892) (9,451,693) Unearned employee benefits (341,287) (436,587) Accumulated other comprehensive income 247,344 (629,956) ------------ ------------ Total stockholders' equity 23,582,488 21,456,587 ------------ ------------ Total liabilities and stockholders' equity $240,494,033 $184,391,168 ============ ============
See accompanying notes to consolidated financial statements. 16 SOUTHERN MISSOURI BANCORP, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF INCOME YEARS ENDED JUNE 30, 2001, 2000 AND 1999 2001 2000 1999 ------------ ------------ ------------ Interest income: Loans receivable $ 13,806,477 9,893,254 9,285,757 Investment securities 1,116,939 1,455,486 967,142 Mortgage-backed securities 1,002,102 866,792 972,770 Other interest-earning assets 235,556 74,631 188,834 ------------ ------------ ------------ Total interest income 16,161,074 12,290,163 11,414,503 ------------ ------------ ------------ Interest expense: Deposits (Note 8) 7,268,120 5,422,703 5,263,225 Securities sold under agreements to repurchase 99,087 - - Advances from FHLB 2,122,810 1,496,250 984,168 ------------ ------------ ------------ Total interest expense 9,490,017 6,918,953 6,247,393 ------------ ------------ ------------ Net interest income 6,671,057 5,371,210 5,167,110 Provision for loan losses (Note 4) 510,000 215,000 235,000 ------------ ------------ ------------ Net interest income after provision for loan losses 6,161,057 5,156,210 4,932,110 ------------ ------------ ------------ Noninterest income: Gain (loss) on sale of investment securities, available for sale 11,121 14,500 (625) Loss on sale of mortgage-backed securities, available for sale - (35,705) (27,942) Insurance commissions 22,359 31,780 323,603 Banking service charges 503,452 390,949 284,058 Loan late charges 92,328 72,726 82,574 Gain on sale of insurance agency - - 526,413 Gain on sale of branches 633,538 - - Other 184,024 137,625 67,070 ------------ ------------ ------------ Total noninterest income 1,446,822 611,875 1,255,151 ------------ ------------ ------------ Noninterest expense: General and administrative: Compensation and benefits 2,618,465 2,205,770 2,237,166 Occupancy and equipment 794,172 570,283 496,929 SAIF deposit insurance premium 27,516 47,842 85,265 Professional fees 205,177 175,920 136,304 Advertising 169,302 97,887 133,925 Postage and office supplies 218,252 165,350 142,608 Amortization of goodwill 214,519 - - Provision for loss on impairment of premises and equipment 125,338 - - Other 846,536 494,864 450,300 ------------ ------------ ------------ Total noninterest expense 5,219,277 3,757,916 3,682,497 ------------ ------------ ------------ Income before income taxes 2,388,602 2,010,169 2,504,764 ------------ ------------ ------------ Income taxes (Note 12) Current 850,000 775,300 580,300 Deferred (10,000) (85,300) 279,700 ------------ ------------ ------------ 840,000 690,000 860,000 ------------ ------------ ------------ Net income $ 1,548,602 1,320,169 1,644,764 ============ ============ ============ Basic earnings per common share $ 1.26 1.03 1.23 Diluted earnings per common share $ 1.25 1.02 1.20
See accompanying notes to consolidated financial statements. 17 SOUTHERN MISSOURI BANCORP, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY YEARS ENDED JUNE 30, 2001, 2000 AND 1999
Accumulated Additional Unearned Other Total Common Paid-in Retained Treasury Employee Comprehensive Stockholders' Stock Capital Earnings Stock Benefits Income Equity ---------- ----------- ---------- ----------- ----------- ------------ ------------- Balance at June 30, 1998 $ 18,032 17,628,758 12,771,731 (5,613,008) (665,824) (27,804) 24,111,885 ---------- ----------- ---------- ----------- ----------- ------------ ------------- Net income 1,644,764 1,644,764 Change in unrealized gain (loss) on available for sale securities (355,788) (355,788) Cumulative effect of change in accounting principle, net of tax (Note 1) 132,713 132,713 ----------- Total comprehensive income 1,421,689 ----------- Purchase of treasury stock (2,803,903) (2,803,903) Dividends paid ($.50 per share) (657,007) (657,007) Release of ESOP awards 52,250 83,261 135,511 MRP expense, net 16,800 66,309 83,109 MRP shares awarded 14,814 (14,814) - Exercise of stock options (167,078) 505,256 338,178 ---------- ----------- ---------- ----------- ----------- ------------ ------------- Balance at June 30, 1999 18,032 17,545,544 13,759,488 (7,911,655) (531,068) (250,879) 22,629,462 ---------- ----------- ---------- ----------- ----------- ------------ ------------- Net income 1,320,169 1,320,169 Change in unrealized gain (loss) on available for sale securities (379,077) (379,077) ------------ Total comprehensive income 941,092 ------------ Purchase of treasury stock (1,762,530) (1,762,530) Dividends paid ($.50 per share) (640,700) (640,700) Release of ESOP awards 23,023 84,021 107,044 MRP expense, net 20,210 20,210 MRP shares awarded 9,750 (9,750) - Exercise of stock options (60,483) 222,492 162,009 ---------- ----------- ---------- ----------- ----------- ------------ ------------- Balance at June 30, 2000 18,032 17,517,834 14,438,957 (9,451,693) (436,587) (629,956) 21,456,587 ---------- ----------- ---------- ----------- ----------- ------------ ------------- Net income 1,548,602 1,548,602 Change in unrealized gain (loss) on available for sale securities 877,300 877,300 ------------- Total comprehensive income 2,425,902 ------------- Purchase of treasury stock (10,646) (10,646) Dividends paid ($.50 per share) (615,119) (615,119) Release of ESOP awards 25,128 81,876 107,004 MRP expense, net 13,424 13,424 Exercise of stock options (92,111) 297,447 205,336 ---------- ----------- ---------- ----------- ----------- ------------ ------------- Balance at June 30, 2001 $ 18,032 17,450,851 15,372,440 (9,164,892) (341,287) 247,344 23,582,488 ========== =========== ========== =========== =========== ============ =============
See accompanying notes to consolidated financial statements. 18 SOUTHERN MISSOURI BANCORP, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS YEARS ENDED JUNE 30, 2001, 2000 AND 1999 2001 2000 1999 ------------ ------------ ----------- Cash flows from operating activities: Net income $ 1,548,602 1,320,169 1,644,764 Items not requiring (providing) cash: Depreciation and amortization 413,087 263,726 265,769 MRP expense and ESOP expense 120,429 127,254 201,820 (Gain) loss on sale of investment securities, available for sale (11,121) (14,500) 625 Loss on sale of mortgage-backed securities, available for sale - 35,705 27,942 Amortization of goodwill 214,519 - - Provision for loss on impairment of premises and equipment 125,338 - - Provision for loan losses 510,000 215,000 235,000 Gain on sale of insurance agency - - (526,413) Gain on sale of branches (633,538) - - Net amortization of deferred income, premiums, and discounts 47,713 87,489 117,757 Changes in: Accrued interest receivable (115,188) (118,481) (125,298) Prepaid expenses and other assets 85,903 (82,027) 189,333 Accounts payable and other liabilities 227,847 131,533 132,409 Accrued interest payable 2,729 227,527 147,269 ------------ ------------ ----------- Net cash provided by operating activities 2,536,320 2,193,395 2,310,977 ------------ ------------ ----------- Cash flows from investing activities: Net (increase) decrease in loans (27,157,886) (20,522,582) 874,888 Net cash received in acquisition of branches 14,021,579 - - Net cash paid in sale of branches (4,153,644) - - Proceeds from sales of investment securities, available for sale 7,102,357 1,034,500 999,375 Proceeds from maturing investment securities, available for sale 10,195,000 415,000 5,440,000 Proceeds from maturing investment securities, held to maturity - - 875,000 Purchase of investment securities, available for sale (3,558,681) (2,759,750) (14,581,010) Proceeds from sales of mortgage-backed securities, available for sale - 3,365,084 1,700,497 Proceeds from maturing mortgage-backed securities, available for sale 2,343,854 2,202,514 5,659,654 Purchase of mortgage-backed securities, available for sale (14,937,089) (1,976,250) (10,330,331) Purchase of FHLB stock (300,000) (759,000) (37,500) Purchase of premises and equipment (1,648,548) (934,364) (282,257) Proceeds from sale of foreclosed real estate 365,347 178,122 39,477 ------------ ------------ ----------- Net cash used in investing activities $(17,727,711) (19,756,726) (9,642,207) ============ ============ ===========
See accompanying notes to consolidated financial statements. 19 SOUTHERN MISSOURI BANCORP, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS - Continued YEARS ENDED JUNE 30, 2001, 2000 AND 1999 2001 2000 1999 ------------ ------------ ----------- Cash flows from financing activities: Net increase in demand deposits and savings accounts $ 38,489,609 1,894,048 6,331,517 Net increase (decrease) in certificates of deposit (20,730,046) 1,871,705 4,412,587 Net increase in securities sold under agreements to repurchase 4,115,142 - - Proceeds from Federal Home Loan Bank Advances 77,000,000 143,550,000 6,250,000 Repayments of Federal Home Loan Bank Advances (77,000,000) (127,100,000) (6,768,905) Net increase (decrease) in advances from borrowers for taxes and insurance (16,460) 16,887 2,831 Dividends on common stock (615,119) (640,700) (657,007) Exercise of stock options 198,660 135,620 306,310 Payments to acquire treasury stock (10,646) (1,762,530) (2,803,903) ------------ ------------ ----------- Net cash provided by financing activities 21,431,140 17,965,030 7,073,430 ------------ ------------ ----------- Increase (decrease) in cash and cash equivalents 6,239,749 401,699 (257,800) Cash and cash equivalents at beginning of year 4,470,373 4,068,674 4,326,474 ------------ ------------ ----------- Cash and cash equivalents at end of year $ 10,710,122 4,470,373 4,068,674 ============ ============ ===========
Supplemental disclosures of cash flow information: Noncash investing and financing activities Conversion of loans to foreclosed real estate $ 1,134,909 424,507 395,375 Conversion of foreclosed real estate to loans $ 153,000 175,000 134,000 Transfer of investment securities from held to maturity to available for sale $ - - 3,766,292 Cash paid during the period for Interest (net of interest credited) $ 3,718,786 2,677,920 1,577,100 Income taxes $ 797,254 706,051 468,514
Noncash investing and financing transactions relating to the two branch acquisitions that are not reflected in the Consolidated Statement of Cash Flows for the year ended June 30, 2001 are listed below: Fair value of assets acquired excluding cash and cash equivalents acquired $27,249,092 Liabilities assumed (45,109,896) Goodwill 3,839,225 Net cash received in acquisition of branches 14,021,579 See accompanying notes to consolidated financial statements. 20 SOUTHERN MISSOURI BANCORP, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 2001, 2000 AND 1999 NOTE 1: Organization and Summary of Significant Accounting Policies Organization Southern Missouri Bancorp, Inc., a Missouri corporation (the Company) was organized in 1994 and is the parent company of Southern Missouri Bank and Trust (the Bank) and the Bank's wholly-owned subsidiary S.M.S. Financial Services, Inc. Substantially all of the Company's consolidated revenues are derived from the operations of the Bank, and the Bank represents substantially all of the Company's consolidated assets and liabilities. Basis of Financial Statement Presentation The financial statements of the Company have been prepared in conformity with generally accepted accounting principles and general practices within the financial institution industry. In the normal course of business, the Company encounters two significant types of risk; economic and regulatory. Economic risk is comprised of interest rate risk, credit risk, and market risk. The Company is subject to interest rate risk to the degree that its interest-bearing liabilities reprice on a different basis than its interest-earning assets. Credit risk is the risk of default on the Company's loan portfolio that results from the borrowers' inability or unwillingness to make contractually required payments. Market risk reflects changes in the value of collateral underlying loans receivable and the value of the Company's investment in real estate. Management of the Company has made a number of estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent assets and liabilities to prepare the consolidated financial statements in conformity with generally accepted accounting principles. Actual results could differ from those estimates. The determination of the provision for loan losses and the valuation of real estate are based on estimates that are particularly susceptible to changes in the economic environment and market conditions. These balances may be adjusted in the future based on such changes, or based on requirements of regulatory examiners of the Company's subsidiary. Principles of Consolidation The consolidated financial statements include the accounts of the Company, its wholly-owned subsidiary, the Bank, and the Bank's wholly-owned subsidiary, S.M.S. Financial Services, Inc. The insurance agency of S.M.S. Financial Services, Inc. was sold effective May 31, 1999. The operations of the agency were not material to the consolidated financial condition or operations of the Company. All significant intercompany accounts and transactions have been eliminated. Cash and Cash Equivalents For purposes of reporting cash flows, cash and cash equivalents include cash and due from depository institutions and interest-bearing deposits in other depository institutions with original maturities of three months or less. Interest bearing deposits in other depository institutions were $8,686,946 and $3,074,277 at June 30, 2001 and 2000, respectively. Investment and Mortgage-Backed Securities Effective April 1, 1999, the Company adopted Statement of Financial Accounting Standards(SFAS) No. 133, "Accounting for Derivative Instruments and Hedging Activities". SFAS No. 133 establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts and hedging activities. The statement further requires that all derivatives should be recognized as either assets or liabilities and measured at the fair value. The accounting for changes in the fair value, or gains and losses, of a derivative depends on the use of the derivative and resulting designation. Presently, management does not intend to purchase derivative instruments or enter into hedging activities. 21 SOUTHERN MISSOURI BANCORP, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 2001, 2000 AND 1999 With the adoption of SFAS No. 133, the Company transferred its remaining held to maturity investment securities into the available for sale category. All investments transferred were obligations of state and political subdivisions with an amortized cost of $3,766,292 at the date of transfer. The cumulative effect of the change in accounting principle of $132,713, net of income taxes of $77,942, is included as a credit in other comprehensive income for the year ended June 30, 1999. The transition provisions of SFAS No. 133 provide that at the date of initial application, any debt security categorized as held to maturity may be transferred into the available for sale category without calling into question the Company's intent to hold other debt securities to maturity in the future. Debt securities classified as available for sale are carried at fair value. Their related unrealized gains and losses, net of tax, are reported in accumulated other comprehensive income, a component of stockholders' equity. Debt securities that the Company has the positive intent and ability to hold to maturity are classified as held to maturity securities and reported at amortized cost. Debt securities that are bought and held principally for the purpose of selling in the near term are classified as trading securities and reported at fair value, with unrealized gains and losses included in earnings. All securities have been classified as available for sale. Premiums and discounts on debt securities are amortized or accreted as adjustments to income over the estimated life of the security using the level yield method. Gain or loss on the sale of securities is based on the specific identification method. The fair value of securities is based on quoted market prices or dealer quotes. If a quoted market price is not available, fair value is estimated using quoted market prices for similar securities. The Company does not invest in collateralized mortgage obligations that are considered high risk. The Bank is a member of the Federal Home Loan Bank system. As a member of this system, it is required to maintain an investment in capital stock of the Federal Home Loan Bank (FHLB) in an amount equal to the greater of 1% of its outstanding home loans, 0.3% of its total assets, or one-twentieth of its outstanding advances from FHLB. Loans Receivable, Net Loans receivable, net are stated at unpaid principal balances, less the allowance for loan losses, net deferred loan origination fees, and deferred gain on sale of real estate. Interest on loans is accrued based upon the principal amount outstanding. The accrual of interest on loans is discontinued when in management's judgement, the collectibility of interest or principal in the normal course of business is doubtful. Interest income previously accrued but not collected at the date a loan is placed on nonaccrual status is reversed against interest income. Cash receipts on a nonaccrual loan are applied to principal and interest in accordance with its contractual terms unless full payment of principal is not expected, in which case cash receipts, whether designated as principal or interest, are applied as a reduction of the carrying value of the loan. A nonaccrual loan is generally returned to accrual status when principal and interest payments are current, full collectibility of principal and interest is reasonably assured and a consistent record of performance has been demonstrated. The allowance for loan losses is increased by charges to income and decreased by charge-offs (net of recoveries). Management's periodic evaluation of the adequacy of the allowance is based on the Company's past loan 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. In accordance with SFAS No. 114, "Accounting by Creditor for Impairment of a Loan," as amended by SFAS No. 118, the Company considers a loan impaired when, based upon current information and events, it is probable that it will be unable to collect all amounts due, both principal and interest, according to the contractual terms of the loan agreement. SFAS No. 114 does not apply to large groups of smaller-balance homogeneous 22 SOUTHERN MISSOURI BANCORP, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 2001, 2000 AND 1999 loans that are collectively evaluated for impairment, which, for the Company, include residential real estate loans and consumer loans. Valuation allowances are established for impaired loans for the difference between the loan amount and fair value of collateral less estimated selling costs. Impaired loans are placed on nonaccrual status at the point they become contractually delinquent 90 days or more and cash receipts are applied, and interest income recognized, pursuant to the discussion above for nonaccrual loans. Impairment losses are recognized through an increase in the allowance for loan losses. Loan Origination Fees Loan fees and certain direct loan origination costs are deferred, and the net fee or cost is recognized as an adjustment to interest income using the interest method over the contractual life of the loans. Foreclosed Real Estate Real estate acquired by foreclosure or by deed in lieu of foreclosure is initially recorded at the lower of cost or fair value less estimated selling costs. Costs for development and improvement of the property are capitalized. Valuations are periodically performed by management, and an allowance for losses is established by a charge to operations if the carrying value of a property exceeds its estimated fair value, less estimated selling costs. Loans to facilitate the sale of real estate acquired in foreclosure are discounted if made at less than market rates. Discounts are amortized over the fixed interest period of each loan using the interest method. Income Taxes The Company and its subsidiary file consolidated income tax returns. Deferred income taxes are provided on temporary differences between the financial reporting bases and income tax bases of the Company's assets and liabilities. Premises and Equipment Premises and equipment are stated at cost less accumulated depreciation and include expenditures for major betterments and renewals. Maintenance, repairs, and minor renewals are expensed as incurred. When property is retired or sold, the retired asset and related accumulated depreciation are removed from the accounts and the resulting gain or loss taken into income. The Company reviews property and equipment for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If such assets are considered to be impaired, the impairment loss recognized is measured by the amount by which the carrying amount exceeds the fair value of the assets. Depreciation is computed by use of straight-line and accelerated methods over the estimated useful lives of the assets. Estimated lives are generally twenty to forty years for premises, and five to seven years for equipment. Earnings Per Share Basic income per share is computed using the weighted average number of common shares outstanding. ESOP shares which have been committed to be released are considered outstanding. Diluted income per share includes the effect of all dilutive potential common shares (primarily stock options) outstanding during each year. Goodwill Goodwill represents the excess of purchase price over the fair value of net assets, acquired by the Company and is being amortized over fifteen years using the straight-line method. The Company reviews goodwill for impairment whenever events or changes in circumstances indicate the carrying value may not be recoverable over the original estimated life. As adjustments become necessary, they are reflected in the results of operations in which they become known. 23 SOUTHERN MISSOURI BANCORP, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 2001, 2000 AND 1999 Segments Southern Missouri Bancorp, Inc., through the branch network of its subsidiary, Southern Missouri Bank and Trust, provides a broad range of financial services to individuals and companies in Southeast Missouri. These services include demand, time and savings deposits, and lending activities. While the Company's chief decision makers monitor the revenue streams of the various Company products and services, operations are managed and financial performance is evaluated on a Company-wide basis. Accordingly, all of the Company's banking operations are considered by management to be aggregated in one reportable segment. The following paragraph summarizes the impact of new accounting pronouncements: In July 2001, the Financial Accounting Standards Board issued SFAS No. 141, "Business Combinations", and SFAS No. 142, "Goodwill and Other Intagible Assets". SFAS No. 141 requires all business combinations initiated after June 30, 2001 to be accounted for using the purchase method. SFAS No. 142 eliminates the amortization of goodwill relating to past and future acquisitions and instead subjects goodwill to an impairment assessment. The provisions of SFAS No. 142 will apply to existing goodwill and other intangible assets effective July 1, 2002. The adoption of SFAS No. 141 will not have an impact on our historical financial statements. NOTE 2: Acquisitions and Divestitures In August 2000, the Bank purchased two full service branches in Kennett and Qulin, Missouri, from Commerce Bancshares, Inc. for $4.9 million in cash. The transaction resulted in the acquisition of approximately $25.3 million in loans, $1.6 million in premises and equipment and the assumption of $44.7 million in deposits. The excess of the cost over the fair value of the net assets acquired was $3.8 million and is being amortized over 15 years. In September 2000, the Bank completed its divesture of its branches in Malden and Ellington, Missouri resulting in a reduction of the deposit base of approximately $13.2 million and a pre-tax gain of $633,538 recorded in other noninterest income. The aforementioned acquisition was accounted for using the purchase method of accounting and accordingly, the consolidated financial statements include the financial position and results of operations for the period subsequent to the acquisition date. NOTE 3: Investment and Mortgage-Backed Securities Available for Sale - The amortized cost, gross unrealized gains, gross unrealized losses and estimated market value of securities available for sale consisted of the following:
June 30, 2001 Gross Gross Estimated Amortized Unrealized Unrealized Market Cost Gains Losses Value ---------- ------- -------- ---------- Investment securities: U.S. government and federal agency obligations $ 4,955,106 10,514 - 4,965,620 Obligations of states and political subdivisions 3,796,472 134,972 - 3,931,444 ---------- ------- -------- ---------- Total investment securities 8,751,578 145,486 - 8,897,064 ---------- ------- -------- ---------- Mortgage-backed securities: FHLMC certificates 1,823,691 7,381 - 1,831,072 GNMA certificates 1,436,790 15,702 2,554 1,449,938 FNMA certificates 479,853 - 3,813 476,040 CMO's issued by government agencies 20,539,801 248,054 41,773 20,746,082 CMO's issued by private issuer 1,697,034 24,125 - 1,721,159 ---------- ------- -------- ---------- Total mortgage-backed securities 25,977,169 295,262 48,140 26,224,291 ---------- ------- -------- ---------- Total $ 34,728,747 440,748 48,140 35,121,355 ========== ======= ======== ==========
24 SOUTHERN MISSOURI BANCORP, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 2001, 2000 AND 1999
June 30, 2000 Gross Gross Estimated Amortized Unrealized Unrealized Market Cost Gains Losses Value ---------- ------- --------- ---------- Investment securities: U.S. government and federal agency obligations $ 18,339,118 - 593,386 17,745,732 Obligations of states and political subdivisions 4,146,903 62,348 789 4,208,462 ---------- ------- --------- ---------- Total investment securities 22,486,021 62,348 594,175 21,954,194 ---------- ------- --------- ---------- Mortgage-backed securities: GNMA certificates 1,977,258 - 39,860 1,937,398 FNMA certificates 603,330 - 17,450 585,880 CMO's issued by government agencies 10,844,171 - 410,793 10,433,378 ---------- ------- --------- ---------- Total mortgage-backed securities 13,424,759 - 468,103 12,956,656 ---------- ------- --------- ---------- Total $ 35,910,780 62,348 1,062,278 34,910,850 ========== ======= ========= ==========
The amortized cost and estimated market value of investment and mortgage-backed securities by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. June 30, 2001 Available for Sale Estimated Amortized Market Cost Value ---------- ---------- Due in one year or less $ 1,095,561 1,108,511 Due after one year thru 5 years 7,215,643 7,310,028 Due after 5 years thru 10 years 440,374 478,525 ---------- ---------- Total investment securities 8,751,578 8,897,064 ---------- ---------- Mortgage-backed securities 25,977,169 26,224,291 ---------- ---------- Total $ 34,728,747 35,121,355 ========== ========== Proceeds from sales of investment and mortgage-backed securities and gross realized gains and losses are summarized below. June 30, 2001 2000 1999 ---------- ---------- ---------- Proceeds from sales: Investment securities $7,102,357 1,034,500 999,375 Mortgage-backed securities - 3,365,084 1,700,497 Gross realized gains: Investment securities 15,680 14,500 - Mortgage-backed securities - - 4,879 Gross realized losses: Investment securities (4,559) - (625) Mortgage-backed securities - (35,705) (32,821) 25 SOUTHERN MISSOURI BANCORP, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 2001, 2000 AND 1999 The carrying value of investment and mortgage-backed securities pledged as collateral to secure public deposits amounted to $12,080,527 and $14,238,015 at June 30, 2001 and 2000, respectively. Adjustable rate mortgage loans included in mortgage-backed securities at June 30, 2001 and 2000 amounted to $3,292,580 and $3,801,832, respectively. NOTE 4: Loans Receivable, net Loans receivable, net are summarized as follows: June 30, 2001 2000 ----------- ----------- Real estate loans: Conventional $ 109,979,202 94,747,953 Construction 3,374,680 5,703,982 Commercial 36,612,380 23,303,047 Loans secured by deposit accounts 871,319 824,899 Consumer loans 10,949,930 8,829,338 Commercial 22,287,531 7,349,605 ----------- ----------- 184,075,042 140,758,824 Loans in process (1,728,786) (1,021,289) Deferred loan fees, net (27,978) (31,673) Deferred gain on sale of real estate - (4,159) Allowance for loan losses (1,461,684) (1,276,953) ----------- ----------- $ 180,856,594 138,424,750 =========== =========== Adjustable-rate loans included in the loan portfolio amounted to $90,801,530 and $82,167,478 at June 30, 2001 and 2000, respectively. One-to four-family residential real estate loans amounted to $107,809,992 and $91,290,092 at June 30, 2001 and 2000, respectively. Real estate construction loans are secured principally by single and multi-family dwelling units. Commercial real estate loans are secured principally by commercial buildings, motels, medical centers, churches, fast food restaurants and farm land. Following is a summary of activity in the allowance for loan losses: June 30, 2001 2000 1999 --------- --------- --------- Balance, beginning of period $ 1,276,953 1,191,147 1,295,222 --------- --------- --------- Loans charged-off (628,289) (240,036) (429,998) Recoveries of loans previously charged off 53,020 110,842 90,923 --------- --------- --------- Net charge-offs (575,269) (129,194) (339,075) --------- --------- --------- Provision charged to expense 510,000 215,000 235,000 Acquired allowance for losses 250,000 - - --------- --------- --------- Balance, end of period $ 1,461,684 1,276,953 1,191,147 ========= ========= ========= The Company ceased recognition of interest income on loans with a book value of $0, $537,000 and $181,000 at June 30, 2001, 2000 and 1999, respectively. The average balance of nonaccrual loans for the years ended June 30, 2001, 2000, and 1999 was $132,000, $217,000 and $321,000 respectively. Allowance for losses on nonaccrual loans amounted to $0, $146,000, and $18,000 at June 30, 2001, 2000, and 1999. Interest income of approximately $0, $23,000 and $13,000 was recognized on these loans for the years ended June 30, 2001, 2000 and 1999, respectively. Gross interest income would have been approximately $0, $51,000 and $17,000 for the years ended June 30, 2001, 2000 and 1999, respectively, if the interest payments had been received in accordance with the original terms. The Bank is not committed to lend additional funds to customers whose loans have been placed on nonaccrual. 26 SOUTHERN MISSOURI BANCORP, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 2001, 2000 AND 1999 Of the above nonaccrual loans at June 30, 2001, 2000 and 1999 none were considered to be impaired. The average balance of impaired loans for the years ended June 30, 2001, 2000 and 1999 was $0, $0, and $26,000, respectively. Following is a summary of loans to directors, executive officers and loans to corporations in which executive officers and directors have a substantial interest: Balance, June 30, 1999 $ 434,570 Additions 604,294 Repayments (234,986) ---------- Balance, June 30, 2000 803,878 Additions 973,570 Repayments (189,603) ---------- Balance, June 30, 2001 $1,587,845 ========== These loans were made on substantially the same terms as those prevailing at the time for comparable transactions with unaffiliated persons. NOTE 5: Accrued Interest Receivable Accrued interest receivable is summarized as follows: June 30, 2001 2000 ----------- --------- Investment securities $ 205,051 408,314 Mortgage-backed securities 139,443 72,279 Loans receivable 1,257,336 670,964 ----------- --------- $ 1,601,830 1,151,557 =========== ========= NOTE 6: Foreclosed Real Estate Foreclosed real estate consists of the following: June 30, 2001 2000 --------- --------- Foreclosed real estate $ 1,162,156 463,591 Allowance for losses - - --------- --------- $ 1,162,156 463,591 ========= ========= NOTE 7: Premises and Equipment Following is a summary of premises and equipment: June 30, 2001 2000 --------- ---------- Land $ 1,095,080 650,941 Buildings and improvements 3,536,414 2,418,814 Furniture, fixtures, and equipment 2,296,987 1,630,995 Automobiles 29,797 51,696 Construction in progress 199,833 - --------- --------- 7,158,111 4,752,446 Less accumulated depreciation (2,089,303) (2,203,089) --------- ---------- $ 5,068,808 2,549,357 ========= ========== Depreciation expense for the years ended June 30, 2001, 2000 and 1999 was $413,087, $263,726 and $265,769, respectively. Construction in progress consists of a new full service branch being built in Doniphan, Missouri. Estimated completion date is October 2001 at an additional estimated cost of $500,000. During 2001, an impairment loss of $125,338 was recognized on the abandonment of certain computer equipment and as a result of a decrease in the market value of the Company's former office in Kennett, Missouri. 27 SOUTHERN MISSOURI BANCORP, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 2001, 2000 AND 1999 NOTE 8: Deposits Deposits are summarized as follows: June 30, 2001 2000 ----------- ----------- Non-interest bearing accounts $ 9,731,376 2,049,111 NOW accounts 15,980,318 11,408,738 Money market deposit accounts 20,695,313 13,572,245 Savings accounts 46,291,900 6,864,899 ----------- ----------- Total transaction accounts 92,698,907 33,894,993 ----------- ----------- Certificates: 3.00 - 3.99% 1,787,509 - 4.00 - 4.99% 19,546,986 28,950,737 5.00 - 5.99% 38,770,988 37,008,198 6.00 - 6.99% 12,326,045 23,947,540 7.00 - 7.99% 8,092,874 52,666 8.00 - 8.99% 58,110 66,159 ----------- ---------- Total certificates, 5.53% and 5.47%, respectively 80,582,512 90,025,300 ----------- ----------- Total deposits $ 173,281,419 123,920,293 =========== =========== Weighted-average rates - deposits 4.08% 4.79% =========== =========== The aggregate amount of certificates of deposit with a minimum denomination of $100,000 was $12,864,088 and $20,507,645 at June 30, 2001 and 2000, respectively. Certificate maturities at June 30, 2001 are summarized as follows: July 1, 2001 to June 30, 2002 $ 68,072,202 July 1, 2002 to June 30, 2003 7,708,961 July 1, 2003 to June 30, 2004 3,652,548 July 1, 2004 to June 30, 2005 544,579 July 1, 2005 to June 30, 2006 604,222 ---------- $ 80,582,512 Interest expense on deposits is summarized as follows: Year Ended June 30, 2001 2000 1999 ---------- ---------- ---------- NOW accounts $ 388,792 239,815 210,180 Money market deposit accounts 777,089 606,109 414,011 Savings accounts 793,810 174,494 181,567 Certificates of deposit 5,308,429 4,402,285 4,457,467 ---------- ---------- ---------- $7,268,120 5,422,703 5,263,225 ========== ========== ========== NOTE 9: Securities Sold Under Agreements to Repurchase Securities sold under agreements to repurchase, which are classified as borrowings, generally mature within one to four days. The following table presents balance and interest rate information on the securities sold under agreements to repurchase. Prior to July 1, 2000 the company had not entered into these type of contracts. June 30 2001 ----------- Year end balance $ 4,115,142 Average balance during the year 3,486,000 Maximum month-end balance during the year 5,169,096 Average interest during the year 2.84% Year end interest rate 3.25% The market value of the securities underlying the agreements at June 30, 2001 was $4,377,104. The securities sold under agreements to repurchase are under the Company's control. 28 SOUTHERN MISSOURI BANCORP, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 2001, 2000 AND 1999 NOTE 10: Advances from Federal Home Loan Bank of Des Moines Advances from Federal Home Loan Bank of Des Moines are summarized as follows: Call Date or Quarterly Interest Maturity Thereafter Rate 2001 2000 ------------ ---------- 07-06-00 ---- 6.60% $ - 7,000,000 01-10-01 07-10-00 6.67% - 9,000,000 02-15-01 07-17-00 6.64% - 3,000,000 02-06-08 08-06-01 5.17% 3,000,000 3,000,000 10-26-09 12-01-01 5.50% 10,000,000 10,000,000 01-20-10 07-20-01 5.77% 5,000,000 5,000,000 10-27-10 10-27-03 5.86% 9,000,000 - 12-09-10 12-09-05 5.93% 10,000,000 - ------------ ---------- $ 37,000,000 37,000,000 ============ ========== Weighted average rate 5.73% 6.09% ============ ========== In addition to the above advances, the Bank had an available line of credit amounting to $45,170,000, $33,672,000 and $39,785,000 with the FHLB at June 30, 2001, 2000 and 1999, respectively. Advances from Federal Home Loan Bank of Des Moines are secured by FHLB stock and one- to four-family mortgage loans of $44,400,000 and $46,250,000 at June 30, 2001 and 2000, respectively. Scheduled principal maturities of advances from Federal Home Loan Bank of Des Moines are over the next seven to ten years. NOTE 11: Employee Benefits The Bank has adopted a 401(k) profit sharing plan that covers substantially all eligible employees. Contributions to the plan are at the discretion of the Board of Directors of the Bank. During 2001, 2000 and 1999, there were no contributions made to the plan. The Bank established a tax-qualified employee stock ownership plan (ESOP) in April 1994. The plan covers substantially all employees who have attained the age of 21 and completed one year of service. The Bank makes contributions to the ESOP equal to the ESOP's debt service less dividends on unallocated ESOP shares used to repay the ESOP loan. Dividends on allocated ESOP shares are paid to participants of the ESOP. The ESOP shares are pledged as collateral on the ESOP loan. Shares are released from collateral and allocated to participants based on pro-rata compensation as the loan is repaid over seven years. Effective July 1, 1998, the loan terms were modified and principal payments were extended an additional four years. Benefits are vested over five years. Forfeitures are allocated on the same basis as other contributions. Benefits are payable upon a participant's retirement, death, disability or separation of service. The purchase of the shares of the ESOP has been recorded in the consolidated financial statements through a credit to common stock and additional paid-in capital with a corresponding charge to a contra equity account for the unreleased shares. As shares are committed to be released from collateral, the Bank reports compensation expense equal to the average fair value of the ESOP shares committed to be released. The ESOP expense for 2001, 2000 and 1999 was $107,004, $107,044, and $135,511, respectively. The number of ESOP shares at June 30, 2001 and 2000 were as follows: 2001 2000 ---- ---- Allocated shares 55,730 66,976 Unreleased shares 26,096 34,283 ------- ------- Total ESOP shares 81,826 101,259 ======= ======= The fair value of unreleased ESOP shares at June 30, 2001 was $365,344. 29 SOUTHERN MISSOURI BANCORP, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 2001, 2000 AND 1999 The Bank adopted a management recognition plan (MRP) for the benefit of non-employee directors and two MRPs for officers and key employees (who may also be directors) in April 1994. Total shares in the MRP left to be issued are 4,158 at June 30, 2001. During 2001, 2000, and 1999, the Bank granted 0, 2,700 and 1,500 shares, respectively, to employees. The shares granted are in the form of restricted stock payable at the rate of 20% of such shares per year. Compensation expense, in the amount of the fair market value of the common stock at the date of grant, will be recognized pro rata over the five years during which the shares are payable. The Board of Directors can terminate the MRPs at any time, and if it does so, any shares not allocated will revert to the Company. The MRP expense for 2001, 2000 and 1999 was $13,425, $20,210 and $66,309, respectively. The Company sponsors a stock option plan adopted in April 1994. The purpose of the plan is to provide additional incentive to certain directors, officers and key employees of the Bank. In October 1999, the stockholders voted to increase the number of shares reserved for options by 67,932 shares. The stock options are granted at the fair market value of the common stock on the date of the grant. Through June 30, 1999, all options granted were 100% vested at the grant date. For shares granted since June 30, 1999, the vesting period range from the grant date up to a five year period. All options expire ten years from the date of the grant. At June 30, 2001, there are 36,932 shares remaining available for option grants. The weighted average remaining contractual life of options outstanding at June 30, 2001 is 6.1 years. Changes in options outstanding were as follows: Number of Weighted Average Shares Exercise Price ------------ ----------------- Balance at June 30, 1998 118,325 $ 12.08 Granted 15,000 13.50 Exercised (30,631) 10.00 ------- Balance at June 30, 1999 102,694 12.29 Granted 31,491 13.48 Exercised (13,562) 10.00 ------- Balance at June 30, 2000 120,623 12.86 Granted 20,000 13.38 Exercised (19,566) 10.00 Forfeited (6,000) 13.00 ------- Balance at June 30,2001 115,057 13.40 ======= The Company has estimated the fair value of awards granted under its stock option plan during 2001, 2000, and 1999 utilizing the Black-Scholes pricing model. For the options granted in 2001, 2000 and 1999, the Company has applied Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees." Accordingly, no compensation expense has been recognized for its stock-based compensation plans. Had compensation cost for the Company's stock option plan been determined based upon the fair value at the grant date for awards under these plans consistent with the methodology prescribed under SFAS No. 123, "Accounting for Stock-Based Compensation," the Company's net income and diluted earnings per share would have been reduced by approximately $19,000, $62,000 and $38,000, or $.02, $.05 and $.03 per share in 2001, 2000 and 1999, respectively. 30 SOUTHERN MISSOURI BANCORP, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 2001, 2000 AND 1999 Following is a summary of the fair values of options granted using the Black-Scholes pricing model. 2001 2000 1999 ---- ---- ---- Fair value at grant date $ 28,000 $ 93,000 $ 57,000 Assumptions: Expected dividend yield 5.00% 5.00% 5.00% Expected volatility 21.00% 22.00% 19.00% Risk-free interest rate 5.60% 6.20% 5.64% Weighted-average expected life 5 years 5 years 5 years The Bank adopted a directors' retirement plan in April 1994 for outside directors. The directors' retirement plan provides that each non-employee director (participant) shall receive, upon termination of service on the Board on or after age 60, other than termination for cause, a benefit in equal annual installments over a five year period. The benefit will be based upon the product of the participant's vesting percentage and the total Board fees paid to the participant during the calendar year preceding termination of service on the Board. The vesting percentage shall be determined based upon the participant's years of service on the Board, whether before or after the reorganization date, according to the following schedule: Full Years of Service Non-Employee Director's on the Board Vested Percentage Less than 5 0% 5 to 9 50% 10 to 14 75% 15 or more 100% In the event that the participant dies before collecting any or all of the benefits, the Bank shall pay the participant's beneficiary. No benefits shall be payable to anyone other than the beneficiary, and shall terminate on the death of the beneficiary. The following items are components of net pension cost for the years ended June 30, 2001, 2000 and 1999. 2001 2000 1999 ---- ---- ---- Service cost - benefits earned during the year $ 5,537 4,062 1,836 Interest cost on benefit obligation 12,258 11,998 11,401 Amortization of prior service cost and net obligation 0 0 0 Amortization of unrecognized gains (589) (1,148) (1,178) ------- ------- ------- Net pension cost $ 17,206 14,912 12,059 ======= ======= ======= 31 SOUTHERN MISSOURI BANCORP, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 2001, 2000 AND 1999 The following table sets forth the directors' retirement plan's funded status and amounts recognized in the consolidated financial statements at June 30, 2001 and 2000: 2001 2000 ---- ---- Actuarial present value of benefit obligations: Vested accumulated benefits $ 150,414 160,932 Non-vested accumulated benefits 13,781 8,648 ------- ------- Total accumulated benefits 164,195 169,580 Effect of projected future fee increases - - ------- ------- Projected benefit obligation for service rendered to date 164,195 169,580 Unrecognized net gain 23,862 21,671 ------- ------- Accrued pension cost included in other liabilities $ 188,057 191,251 ======= ======= A reconciliation of the projected benefit obligation and fair value of plan assets is summarized as follows: 2001 2000 ---------------------- ---------------------- Projected Plan Assets Projected Plan Assets Benefit at Benefit at Obligation Fair Value Obligation Fair Value ---------- ----------- ---------- ----------- Balance, beginning of year $169,580 - 167,337 - Service cost 5,537 - 4,062 - Interest cost 12,258 - 11,998 - Actual return - - - - Actuarial gain (2,780) - 1,183 - Contributions - 20,400 - 15,000 Benefits paid (20,400) (20,400) (15,000) (15,000) -------- -------- -------- -------- Balance, end of year $164,195 - 169,580 - ======== ======== ======== ======== 2001 2000 1999 ---- ---- ---- Weighted average assumptions as of June 30: Discount rate 7% 7% 7% Rate of directors fees increase 0% 0% 0% NOTE 12: Income Taxes SFAS No. 109 requires the Bank to establish a deferred tax liability for the tax bad debt reserves over the base year amounts. The Bank's base year tax bad debt reserves are $1,798,626. The estimated deferred tax liability on such amount is approximately $611,000, which has not been recorded in the accompanying consolidated financial statements. If these tax bad debt reserves are used for other than loan losses, the amount will be subject to Federal income taxes at the then prevailing corporate rate. 32 SOUTHERN MISSOURI BANCORP, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 2001, 2000 AND 1999 The components of net deferred tax assets (liabilities) are summarized as follows: 2001 2000 -------- -------- Deferred tax assets: Provision for losses on loans and foreclosed real estate $411,972 408,664 Accrued compensation and benefits 113,455 119,704 Unrealized loss on available for sale securities - 369,974 -------- -------- Gross deferred tax assets 525,427 898,342 Valuation allowance - - -------- -------- Total deferred tax assets 525,427 898,342 -------- -------- Deferred tax liabilities: FHLB stock dividends 166,566 166,566 Purchase accounting adjustments 10,514 51,327 Premises and equipment, tax vs book accumulated depreciation 107,020 75,975 Installment sale 166,513 181,977 Unrealized gain on available for sale securities 145,265 - -------- -------- Total deferred tax liabilities 595,878 475,845 -------- -------- Net deferred tax (liabilities) assets $(70,451) 422,497 ======== ======== Income taxes are summarized as follows: Year Ended June 30, 2001 2000 1999 ------- ------- ------- Current: Federal $ 726,000 661,700 482,000 State 124,000 113,600 98,300 ------- ------- ------- 850,000 775,300 580,300 ------- ------- ------- Deferred: Federal (8,000) (76,800) 258,700 State (2,000) (8,500) 21,000 ------- ------- ------- (10,000) (85,300) 279,700 ------- ------- ------- $ 840,000 690,000 860,000 ======= ======= ======= The provision for income taxes varies from the amount of income tax determined by applying the statutory Federal income tax rate to income before income taxes as a result of the following differences: Year Ended June 30, 2001 2000 1999 ------- ------- ------- Tax at statutory Federal rate $ 812,124 683,457 851,620 Increase (reduction) in taxes resulting from: Nontaxable municipal income (76,635) (66,493) (94,951) State tax, net of Federal benefit 83,200 69,300 83,592 Nondeductible ESOP expenses 9,474 7,827 15,894 Other, net 11,837 (4,091) 3,845 ------- ------- ------- Actual provision $ 840,000 690,000 860,000 ======= ======= ======= 33 SOUTHERN MISSOURI BANCORP, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 2001, 2000 AND 1999 NOTE 13: Comprehensive Income SFAS No. 130 "Reporting Comprehensive Income" requires the reporting of comprehensive income and its components. Comprehensive income is defined as the change in equity from transactions and other events and circumstances from nonowner sources, and excludes investments by and distributions to owners. Comprehensive income includes net income and other items of comprehensive income meeting the above criteria. Components of other comprehensive income are as follows: Year Ended June 30, 2001 2000 1999 ---------- ---------- ---------- Unrealized gains (losses) on available for sale securities: Unrealized holding gains (losses) arising during period $1,403,360 (612,555) (593,309) Less: reclassification adjustments for (gains) losses realized in net income (11,121) 21,205 28,567 ---------- ---------- ---------- Total unrealized gains (losses) on securities 1,392,239 (591,350) (564,742) Income tax expense (benefit) 514,939 (212,273) (208,954) ---------- ---------- ---------- Net unrealized gains (losses) on securities 877,300 (379,077) (355,788) Cumulative effect of change in accounting principle, net of income taxes of $77,942 (See Note 1) - - 132,713 ---------- ---------- ---------- Other comprehensive income (loss) $ 877,300 (379,077) (223,075) ========== ========== ========== At June 30, 2001 and 2000, accumulated other comprehensive income in the statement of financial condition consisted entirely of unrealized gains (losses) on available for sale investment and mortgage-backed securities. 34 SOUTHERN MISSOURI BANCORP, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 2001, 2000 AND 1999 NOTE 14: Stockholders' Equity and Regulatory Capital The Bank is subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can result in certain mandatory -- and possibly additional discretionary -- actions by regulators that, if undertaken, could have a direct material effect on the Company's financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of the Bank's assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices. The Bank's capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors. Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the table below) of total capital and Tier I risk-based capital (as defined in the regulations) to risk-weighted assets (as defined), and of Tier I capital (as defined) to average total assets (as defined). Management believes, as of June 30, 2001, that the Bank meets all capital adequacy requirements to which it is subject. As of June 30, 2001, the most recent notification from the Federal Deposit Insurance Corporation categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized the Bank must maintain minimum total risk-based, Tier I risk-based, and Tier I leverage ratios as set forth in the table. There are no conditions or events since that notification that management believes have changed the Bank's category. The following table summarizes the Bank's actual and required regulatory capital as of June 30, 2001 and 2000:
To Be Well Capitalized Under Prompt Corrective For Capital Action Actual Adequacy Purposes Provisions ------------------ -------------------- -------------------- Amount Ratio Amount Ratio Amount Ratio ------- -------- --------- --------- --------- --------- (Dollars in Thousands) As of June 30, 2001: Total Capital (to Risk-Weighted Assets) $20,290 14.0% $11,554 >=8.0% $14,442 >=10.0% Tier I Capital (to Risk-Weighted Assets) 18,828 13.0% 5,777 >=4.0% 8,665 >= 6.0% Tier I Capital (to Average Assets) 18,828 8.2% 9,238 >=4.0% 11,547 >= 5.0% As of June 30, 2000: Total Capital (to Risk-Weighted Assets) 22,759 21.2% 8,593 >=8.0% 10,741 >=10.0% Tier I Capital (to Risk-Weighted Assets) 21,482 20.0% 4,296 >=4.0% 6,445 >=6.0% Tier I Capital (to Average Assets) 21,482 11.9% 7,229 >=4.0% 9,037 >=5.0%
The Bank's ability to pay dividends on its common stock to the Company is restricted to maintain adequate capital as shown in the above table. NOTE 15: Commitments and Contingencies In the ordinary course of business, the Bank has various outstanding commitments and contingent liabilities that are not reflected in the accompanying consolidated financial statements. The Bank is involved in litigation of a routine nature which is being defended and handled in the ordinary course of business. These matters are not considered significant to the Company's financial condition. 35 SOUTHERN MISSOURI BANCORP, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 2001, 2000 AND 1999 NOTE 16: Off-Balance-Sheet and Credit Risk The Company's consolidated financial statements do not reflect various financial instruments to extend credit to meet the financing needs of its customers. These financial instruments include commitments to extend credit and standby letters of credit. These instruments involve, to varying degrees, elements of credit and interest-rate risk in excess of the amount recognized in the statements of financial condition. A summary of the Company's commitments to extend credit and standby letters of credit is as follows: Contract or Notional Amount June 30, 2001 2000 ---- ---- Commitments to extend credit $8,799,461 14,297,519 Standby letters of credit $ 195,413 116,010 At June 30, 2001, total commitments to originate fixed rate loans with terms in excess of one year were $4.2 million at interest rates ranging from 7.2% to 9.5%. Commitments to extend credit and standby letters of credit include exposure to some credit loss in the event of nonperformance of the customer. The Company's policies for credit commitments and financial guarantees are the same as those for extension of credit that are recorded in the statements of financial condition. The commitments extend over varying periods of time with the majority being disbursed within a thirty-day period. The Company grants collateralized commercial, real estate, and consumer loans to customers in Southeast Missouri. Although the Company has a diversified portfolio, loans aggregating $110,224,204 at June 30, 2001, are secured by single and multi-family residential real estate in the Company's primary lending area. NOTE 17: Earnings Per Share The following table sets forth the computations of basic and diluted earnings per common share for the year ended June 30: 2001 2000 1999 ---------- --------- --------- Numerator - net income $1,548,602 1,320,169 1,644,764 ========== ========= ========= Denominators Denominator for basic earnings per share - Weighted average shares outstanding 1,229,652 1,277,562 1,334,244 Common equivalent shares due to stock options under treasury stock method 10,507 13,496 31,793 ---------- --------- --------- Denominator for diluted earnings per share 1,240,159 1,291,058 1,366,037 ========== ========= ========= Basic earnings per common share $ 1.26 1.03 1.23 Diluted earnings per common share $ 1.25 1.02 1.20 36 SOUTHERN MISSOURI BANCORP, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 2001, 2000 AND 1999 NOTE 18: Fair Value of Financial Instruments The carrying amounts and estimated fair values of the Company's financial instruments at June 30, 2001 and 2000, are summarized as follows:
2001 2000 ------------------------- ------------------------- Carrying Fair Carrying Fair Amount Value Amount Value ------------ ----------- ----------- ------------ Non-trading instruments and nonderivatives: Cash and cash equivalents $ 10,710,122 10,710,122 4,470,373 4,470,373 Investment and mortgage- backed securities available for sale 35,121,355 35,121,335 34,910,850 34,910,850 Stock in FHLB of Des Moines 2,150,000 2,150,000 1,850,000 1,850,000 Loans receivable, net 180,856,594 182,200,836 138,424,750 136,002,792 Accrued interest receivable 1,601,830 1,601,830 1,151,557 1,151,557 Deposits 173,281,419 174,189,325 123,920,293 123,794,141 Securities sold under agreements to repurchase 4,115,142 4,115,142 - - Advances from FHLB of Des Moines 37,000,000 37,840,239 37,000,000 36,940,000 Accrued interest payable 1,139,134 1,139,134 956,386 956,386
The following methods and assumptions were used in estimating the fair values of financial instruments: Cash and cash equivalents are valued at their carrying amounts due to the relatively short period to maturity of the instruments. Fair values of securities and mortgage-backed securities are based on quoted market prices or, if unavailable, quoted market prices of similar securities. Stock in FHLB of Des Moines is valued at cost, which represents redemption value and approximates fair value. Fair value of loans is estimated by discounting the future cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities. Loans with similar characteristics are aggregated for purposes of the calculations. The carrying amounts of accrued interest approximate their fair values. Deposits with no defined maturities, such as NOW accounts, savings accounts and money market deposit accounts, are valued at the amount payable on demand at the reporting date. The fair value of certificates of deposit is estimated using a discounted cash flow calculation that applies the rates currently offered for deposits of similar remaining maturities. The carrying amounts of securities sold under agreements to repurchase approximate fair value. Fair value of advances from the FHLB of Des Moines is estimated by discounting maturities using an estimate of the current market for similar instruments. 37 SOUTHERN MISSOURI BANCORP, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 2001, 2000 AND 1999 NOTE 19: Condensed Parent Company Only Financial Statements The following condensed statements of financial condition and condensed statements of income and cash flows for Southern Missouri Bancorp, Inc. should be read in conjunction with the consolidated financial statements and the notes thereto. STATEMENTS OF FINANCIAL CONDITION At June 30, Assets 2001 2000 ---------- ---------- Cash $ 551,175 167,503 ESOP note receivable 289,187 362,060 Other assets 79,393 111,420 Equity in net assets of the Bank 22,699,953 20,852,378 ---------- ---------- Total assets $ 23,619,708 21,493,361 ========== ========== Liabilities and Stockholders' Equity Accrued expenses and other liabilities $ 37,220 36,774 ---------- ---------- Total liabilities 37,220 36,774 ---------- ---------- Stockholders' equity 23,582,488 21,456,587 ---------- ---------- Total liabilities and stockholders' equity $ 23,619,708 21,493,361 ========== ========== STATEMENTS OF INCOME Year Ended June 30, 2001 2000 1999 --------- --------- --------- Interest income $ 40,334 90,226 116,423 Dividend from Bank 800,000 800,000 2,300,000 Other income 4,606 22,376 - --------- --------- --------- 844,940 912,602 2,416,423 Operating expenses 198,340 189,963 193,937 --------- --------- --------- Income before income taxes and equity in undistributed income of the Bank 646,600 722,639 2,222,486 Income taxes 52,155) (34,037) (44,017) --------- --------- --------- Income before equity in undistributed income of the Bank 698,755 756,676 2,266,503 Equity in undistributed income of the Bank 849,847 563,493 (621,739) --------- --------- --------- Net income $1,548,602 1,320,169 1,644,764 ========= ========= ========= 38 SOUTHERN MISSOURI BANCORP, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 2001, 2000 AND 1999 STATEMENTS OF CASH FLOWS Year Ended June 30, 2001 2000 1999 ---------- ----------- ----------- Cash flows from operating activities: Net income $1,548,602 1,320,169 1,644,764 Adjustments to reconcile net income to net cash provided by operating activities: Equity in undistributed income of the Bank (849,847) (563,493) 621,739 Other adjustments, net 18,068 60,171 57,835 ---------- ----------- ----------- Net cash provided by operating activities 716,823 816,847 2,324,338 ---------- ----------- ----------- Cash flows from investing activities: Principal collected on loan to ESOP 72,873 75,181 72,873 Purchase of investment security, available for sale (100,000) - - Proceeds from sales and maturities of investment securities, available for sale 104,581 1,034,500 999,375 Proceeds from sales of other assets 16,500 - - ---------- ----------- ----------- Net cash provided by investing activities 93,954 1,109,681 1,072,248 ---------- ----------- ----------- Cash flows from financing activities: Dividends on common stock (615,119) (640,700) (657,007) Exercise of stock options 198,660 135,620 306,310 Payments to acquire treasury stock (10,646) (1,762,530) (2,803,903) ---------- ----------- ----------- Net cash used in financing activities (427,105) (2,267,610) (3,154,600) ---------- ----------- ----------- Net increase (decrease) in cash and cash equivalents 383,672 (341,082) 241,986 Cash and cash equivalents at beginning of period 167,503 508,585 266,599 ---------- ----------- ----------- Cash and cash equivalents at end of period $ 551,175 167,503 508,585 ========== =========== =========== 39 SOUTHERN MISSOURI BANCORP, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 2001, 2000 AND 1999 NOTE 20: Quarterly Financial Data (Unaudited) Quarterly operating data for the years ended June 30 is summarized as follows (in thousands): First Second Third Fourth 2001: Quarter Quarter Quarter Quarter Interest income $ 3,714 4,082 4,111 4,254 Interest expense 2,221 2,393 2,413 2,463 ------ ------ ------ ------ Net interest income 1,493 1,689 1,698 1,791 Provision for loan losses 170 60 140 140 Noninterest income 804 204 197 242 Noninterest expense 1,409 1,274 1,225 1,311 ------ ------ ------ ------ Income before income taxes 718 559 530 582 Income taxes 267 178 188 207 ------ ------ ------ ------ Net income $ 451 381 342 375 ====== ====== ====== ====== First Second Third Fourth 2000: Quarter Quarter Quarter Quarter Interest income $ 2,923 2,955 3,133 3,279 Interest expense 1,570 1,621 1,785 1,943 ------ ------- ------ ------ Net interest income 1,353 1,334 1,348 1,336 Provision for loan losses 20 15 15 165 Noninterest income 109 138 140 225 Noninterest expense 825 920 936 1,077 ------ ------- ------ ------ Income before income taxes 617 537 537 319 Income taxes 216 177 185 112 ------ ------- ------ ------ Net income $ 401 360 352 207 ====== ======= ====== ====== 40
DIRECTORS AND OFFICERS SOUTHERN MISSOURI BANCORP, INC. SOUTHERN MISSOURI BANK AND TRUST DIRECTORS: DIRECTORS: Thadis R. Seifert Samuel H. Smith Chairman of the Board Chairman of the Board Retired former executive vice president Engineer and majority owner of of Bank S.H. Smith and Company, Inc. Leonard M. Ehlers James W. Tatum Vice-Chairman Vice-Chairman Retired court reporter of the 36th Retired certified public accountant Judicial Circuit Thadis R. Seifert Samuel H. Smith Retired former executive vice president Engineer and majority owner of of Bank S.H. Smith and Company, Inc. James W. Tatum Ronnie D. Black Retired certified public accountant Executive Director General Association of General Baptists Ronnie D. Black Executive Director General Association L. Douglas Bagby of General Baptists General Manager Municipal Utilities of City of Poplar Bluff L. Douglas Bagby General Manager Municipal Utilities of Sammy A. Schalk City of Poplar Bluff President of Gamblin Lumber Company Sammy A. Schalk Greg A. Steffens President of Gamblin Lumber Company President Chief Executive Officer EXECUTIVE OFFICERS: EXECUTIVE OFFICERS: Greg A. Steffens President Greg A. Steffens Chief Financial Officer President Chief Executive Officer James W. Tatum Vice President James W. Duncan Executive Vice President Chairman Loan Department Kimberly A. Capps Chief Financial Officer
41 CORPORATE INFORMATION CORPORATE HEADQUARTERS TRANSFER AGENT 531 Vine Street Registrar and Transfer Company Poplar Bluff, Missouri 63901 10 Commerce Drive Cranford, New Jersey 07016 INDEPENDENT AUDITORS COMMON STOCK Kraft, Miles & Tatum, LLC Nasdaq Stock Market Poplar Bluff, Missouri 63901 Nasdaq Symbol: SMBC SPECIAL COUNSEL Silver, Freedman & Taff, L.L.P. Washington, D.C. ANNUAL MEETING The Annual Meeting of Stockholders will be held Monday, October 15 , 2001, at 9:00 a.m., Central Time, at the Greater Poplar Bluff Area Chamber of Commerce Building, 1111 West Pine, Poplar Bluff, Missouri 63901. ANNUAL REPORT ON FORM 10-KSB AND OTHER REPORTS A copy of the Company's annual report on Form 10-KSB, including financial statement schedules and our quarterly reports as filed with the Securities and Exchange Commission, will be furnished without charge to stockholders as of the record date upon written request to the Secretary, Southern Missouri Bancorp, Inc., 531 Vine Street, Poplar Bluff, Missouri 63901. These documents also may be accessed through the SEC's website at "www.sec.gov". 42