8-K/A

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K/A

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of Report (Date of earliest event reported)

December 17, 2010

SOUTHERN MISSOURI BANCORP, INC.
(Exact name of Registrant as specified in its Charter)
Missouri	000-23406	43-1665523
(State or other jurisdiction of incorporation)	(Commission File No.)	(IRS Employer Identification Number)

531 Vine Street, Poplar Bluff, Missouri	63901
(Address of principal executive offices)	(Zip Code)

       Registrant's telephone number, including area code:    (573) 778-1800

      Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:      

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 1 4d-2(b) under the Exchange Act (17 CFR 240.1 4d-2(b))

o Pre-commencement communications pursuant to Rule 1 3e-4(c) under the Exchange Act (17 CFR 240.1 3e-4(c))

Item 2.01. Completion of Acquisition or Disposition of Assets.

On December 23, 2010, Southern Missouri Bancorp, Inc. (“the Company”) filed a Current Report on Form 8-K to report that on December 17, 2010, its wholly owned subsidiary, Southern Bank., a state-chartered trust with banking powers (“Southern Bank”), entered into a definitive whole-bank purchase and assumption agreement (the “Agreement”) with the Federal Deposit Insurance Corporation (“FDIC”) to assume all non-brokered deposits and acquire certain assets of the former First Southern Bank, headquartered in Batesville, Arkansas, with a branch in Searcy, Arkansas. The Arkansas State Bank Department closed First Southern Bank (the “Acquired Entity”) on December 17, 2010, and appointed the FDIC as receiver.

As a result of the transaction, Southern Bank was to assume deposits of approximately $156 million, less some brokered deposits, paying a premium of 0.25% on core deposits.  Total assets expected to be acquired were approximately $153 million.  Loans and other assets were not subject to a loss-share agreement, but loans were acquired at a $17.5 million discount.

This Current Report on Form 8-K/A is being filed in order to provide certain financial statements with respect to the Acquired Entity and other pro forma information. The Company recognized $460,000 of costs related to completion of the acquisition during the first six months of fiscal 2011. These acquisition costs are included in noninterest expense in the statement of income of the Company and are not reflected in the financial statements filed herewith.

The purchase was accounted for under the acquisition method in accordance with Accounting Standards Codification (“ASC”) 805, “Business Combinations,” and accordingly, the assets and liabilities were recorded at their fair values on the date of acquisition. The following table summarizes the estimated fair values of assets acquired and liabilities assumed at the date of acquisition (in thousands).

Fair Value of Consideration Transferred
Equity position of target at closing							$	(2,453,832	)
Asset discount bid								(17,500,000	)
Deposit premium bid								224,028
Total cash (to) from buyer							$	(19,729,804	)
	Acquired from			Fair Value			As Recorded by
Recognized amounts of identifiable assets acquired and liabilities assumed	the FDIC			Adjustments			Southern Bank
Cash and cash equivalents	$	18,519,482		$	-		$	18,519,482
Loans		124,409,033			(9,801,830	)		114,607,203
Premises and equipment		1,159			-			1,159
Identifiable intangible assets		-			624,952			624,952
Other		1,680,991			-			1,680,991
Deposits		(130,314,617	)		(524,043	)		(130,838,660	)
Long-term debt		(16,658,022	)		(548,781	)		(17,206,803	)
Other		(91,858	)		(29,520	)		(121,378	)
Total identifiable net assets	$	(2,453,832	)	$	(10,279,222	)	$	(12,733,054	)
Bargain purchase gain							$	(6,996,750	)

The difference between the fair value and acquired value of the purchased loans of $9.8 million results from fair value adjustments for both credit quality and interest rates.  The difference between the fair value and acquired value of the assumed time deposits of $524,000 will be amortized against interest expense over the remaining term of the time deposits. The core deposit intangible asset, with a fair value of $625,000, will be amortized on a straight line basis over its estimated life of five years.

Item 9.01. Financial Statements and Exhibits.

In accordance with the Company’s request for relief submitted to the Securities and Exchange Commission, to which the staff of the Securities and Exchange Commission informed the Company that it would not object, the Company has provided the information described below in Item 9.01 (a) and Item 9.01 (b) and Exhibit 99.1 and Exhibit 99.2 in lieu of certain historical financial information of the acquired business required by Rule 8-04 and Article 11 of Regulation S-X, given that the Acquired Entity had a significant amount of assets and liabilities that were not acquired by the Company in the transaction.

Certain financial information of the Acquired Entity required by Rule 8-04 of Regulation S-X and certain related pro forma financial information under Article 11 of Regulation S-X have been omitted as the historical financial information for the acquired entity does not exist or is impracticable to provide. The financial statements presented are not indicative of the financial condition or results of operations of the Acquired Entity going forward due to omission of various expenses and changes in business practices. See notes to financial statements for further explanation of these financial statements.

(a)   Financial Statements of Businesses Acquired.

The following are included in the attached Exhibit 99.1 and incorporated herein by reference:

1.   Report of Independent Registered Public Accounting Firm

2.   Statement of Assets Acquired and Liabilities Assumed for the year ended December 31, 2009 and the nine months ended September 30, 2010 (unaudited)

3.   Statement of Revenues and Direct Expenses for the year ended December 31, 2009 and the nine-month periods ended September 30, 2009 (unaudited) and September 30, 2010 (unaudited)

4.   Notes to Financial Statements

(b)   Pro Forma Financial Information.

The following are included in the attached as Exhibit 99.2 and incorporated herein by reference:

1.   Pro Forma Balance Sheet as of December 31, 2009 and September 30, 2010

2.   Pro Forma Results of Operations for the year ended December 31, 2009, and the nine-month periods ended September 30, 2010 and 2009

(c)   Exhibits.

 1 Whole Bank Purchase and Assumption Agreement between Southern Bank and the FDIC, dated December 17, 2010 (incorporated by reference to Exhibit 1 to the Company’s Current Report on Form 8-K filed December 23, 2010).

23 Consent of BKD, LLP

99.1 Financial Statements of the Businesses Acquired

99.2 Pro Forma Financial Information

99.3 Press Release dated December 17, 2010 (incorporated by reference to Exhibit 99 to the Company’s Current Report on Form 8-K filed December 23, 2010).

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

SOUTHERN MISSOURI BANCORP, INC.

Dated: March 2, 2011                                                                    By:  /s/ Greg A. Steffens                        

Name: Greg A. Steffens

Title: President and CEO

EX-23

Exhibit 23

Consent of Independent Registered Public Accounting Firm

Audit Committee, Board of Directors and Stockholders

Southern Missouri Bancorp, Inc.

Mattoon, Illinois

We consent to incorporation by reference in the Registration Statements on Form S-3 (No. 333-156563) and Form S-8 (Nos. 333-2320 and 333-127134) of Southern Missouri Bancorp, Inc. of our report dated September 17, 2010, relating to the statement of assets acquired and liabilities assumed of the former First Southern Bank, Batesville, Arkansas, acquired pursuant to a purchase and assumption agreement with the FDIC, for the year ended December 31, 2009 and the related statement of revenues and direct expenses in the period ended December 31, 2009.

/s/ BKD LLP

St. Louis, Missouri

March 2, 2011

EX-99.1

 Exhibit 99.1

FIRST SOUTHERN BANK, BATESVILLE, ARKANSAS

Financial Statements

For the Year Ended December 31, 2009

and Nine Months Ended September 30, 2010 (unaudited) and 2009 (unaudited)

	Page
Table of Contents	Number
Report of Independent Registered Public Accounting Firm	2
Statements of Assets Acquired and Liabilities Assumed	3
Statements of Revenues and Direct Expenses	4
Notes to Financial Statements	5

Report of Independent Registered Public Accounting Firm

Audit Committee, Board of Directors and Stockholders

Southern Missouri Bancorp, Inc.

Poplar Bluff, Missouri

We have audited the accompanying statement of assets acquired and liabilities assumed by Southern Bank (a wholly owned subsidiary of Southern Missouri Bancorp, Inc.) as of December 31, 2009 and the related statement of revenues and direct expenses for the year then ended pursuant to the purchase and assumption agreement dated December 17, 2010. The Company's management is responsible for these financial statements. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. Our audit included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the assets acquired and liabilities assumed as of December 31, 2009, and the results of its revenues and direct expenses for the year ended December 31, 2009, in conformity with accounting principles generally accepted in the United States of America.

/s/ BKD LLP

Decatur, Illinois March 2, 2011

First Southern Bank, Batesville, Arkansas
Statements of Assets Acquired and Liabilities Assumed
September 30, 2010 and December 31, 2009
(in thousands)
	(unaudited)
	September 30, 2010			December 31, 2009
Assets Acquired
Cash and cash equivalents	$	24,574		$	4,590
Loans		127,783			96,236
Allowance for loan losses		(1,584	)		(1,855	)
Net loans		126,199			94,381
Interest receivable		1,000			484
Other assets		1,716			711
Total assets acquired	$	153,489		$	100,166
Liabilities Assumed
Deposits:
Demand	$	7,278		$	4,046
Interest-bearing non-maturity		31,598			17,513
Time		105,510			62,108
Total deposits		144,386			83,667
Borrowed funds		16,497			7,768
Interest payable and other liabilities		180			181
Total liabilities assumed	$	161,063		$	91,616
Commitments and Contingent Liabilities		--			--
(Excess) deficit of liabilities    assumed over assets acquired	$	(7,574	)	$	8,550
See accompanying notes to financial statements.

First Southern Bank, Batesville, Arkansas
Statements of Revenues and Direct Expenses
For the year ended December 31, 2009 and
Nine Months Ended September 30, 2010 and 2009
(in thousands)
				(Unaudited)
	Year Ended			Nine Months Ended
	December 31, 2009			September 30, 2010			September 30, 2009
Interest income:
Interest and fees on loans	$	5,227		$	5,180		$	3,786
Other interest earned		7			10			3
Total interest income		5,234			5,190			3,789
Interest expense:
Interest on deposits		1,784			1,494			1,348
Interest on borrowings		83			225			53
Total interest expense		1,867			1,719			1,401
Net interest income		3,367			3,471			2,388
Provision for loan losses		1,844			474			1,335
Net interest income after provision for loan losses		1,523			2,997			1,053
Other income:
Service charges		280			157			215
Other		3			63			1
Total other income		283			220			216
Other expense:
Salaries and employee benefits		1,419			1,793			929
Occupancy, equipment,    and data processing		721			706			470
Deposit insurance premiums		225			163			137
Printing and office supplies		68			60			34
Legal and professional		131			200			88
Marketing and promotion		60			159			50
Foreclosed assets, net		80			28			46
Other		320			346			218
Total other expense		3,024			3,455			1,972
Total direct revenue in excess of (less than) direct expenses	$	(1,218	)	$	(238	)	$	(703	)
See accompanying notes to financial statements.

First Southern Bank, Batesville, Arkansas

Notes to Financial Statements

(Table dollar amounts in thousands, except share data)

Note 1 – Summary of Significant Accounting Policies

Basis of Accounting and Consolidation

The accompanying financial statements include the accounts of First Southern Bank, Batesville, Arkansas (the “Acquired Entity”), that were acquired and assumed by Southern Bank, a state-chartered trust with banking powers and a wholly-owned subsidiary of Southern Missouri Bancorp, Inc. (“the Company”). The accounting and reporting policies of the Acquired Entity conform to accounting principles generally accepted in the United States of America.  Following is a description of the more significant of these policies.

Prior to December 17, 2010, the Acquired Entity operated as a financial institution with headquarters in Batesville, Arkansas, with a branch in Searcy, Arkansas.  Accordingly, these financial statements are presented based on information as previously maintained and provided by the Acquired Entity for its operations. The financial statements presented are not a full set of financial statements, but rather they present assets acquired and liabilities assumed and revenues and direct expenses attributable to the acquired operations. Further, in accordance with a request for relief submitted to the Securities and Exchange Commission, to which the staff of the Securities and Exchange Commission informed the Company that it would not object, the information provided is in lieu of certain historical financial infor mation of the Acquired Entity required by Rule 8-04 and Article 11 of Regulation S-X, given that the Acquired Entity had a significant amount of assets and liabilities that were not acquired by the Company in the transaction.  Assets that were not acquired and excluded from the statements of assets acquired and liabilities assumed were investment securities, deferred income taxes receivable, investment income receivable, fixed assets, and prepaid FDIC deposit insurance assessments.  Liabilities that were not assumed and excluded from the statements of assets acquired and liabilities assumed were brokered certificates of deposit, income taxes payable, and accrued interest payable on brokered certificates of deposit.  The statements of revenues and direct expenses excluded interest income on investment securities that were not purchased and interest expense on brokered certificates of deposit that were not assumed.  The statements of revenues and direct expenses include depreciation and expenses related to the fixed assets and FDIC deposit insurance assessments. The statements of revenues and direct expenses exclude income taxes, as these relate to the Acquired Entity as a distinct, stand-alone entity, both in the periods reported therein and in prior periods. As such, the financial statements presented are not indicative of the financial condition or results of operations of the Acquired Entity going forward due to omission of various expenses, changes in business practices, and recognition of fair market value adjustments recognized with the acquisition.

Current Economic Conditions

The current protracted economic decline continues to present financial institutions with circumstances and challenges, which in some cases have resulted in large and unanticipated declines in the fair values of investments and other assets, constraints on liquidity and capital and significant credit quality problems, including severe volatility in the valuation of real estate and other collateral supporting loans.

The accompanying financial statements have been prepared using values and information currently available regarding the Acquired Entity as acquired by the Company.

Given the volatility of current economic conditions, the values of assets and liabilities recorded in the financial statements could change rapidly, resulting in material future adjustments in asset values, the allowance for loan losses and capital that could negatively impact the Company’s ability to meet regulatory capital requirements and maintain sufficient liquidity.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.

Material estimates that are particularly susceptible to significant change relate to the determination of the allowance for loan losses, valuation of real estate acquired in connection with foreclosures or in satisfaction of loans, and fair value of financial instruments.

Cash and Cash Equivalents

The Acquired Entity considers all liquid investments with original maturities of three months or less to be cash equivalents.  At December 31, 2009, and September 30, 2010 (unaudited), cash equivalents consisted primarily of federal funds sold.

The financial institutions holding the Acquired Entity’s noninterest-bearing accounts are participating in the FDIC’s Transaction Account Guarantee Program.  Under that program, through December 31, 2010, all noninterest-bearing transaction accounts are fully guaranteed by the FDIC for the entire amount in the account.  The program was effectively replaced by amendments to the deposit insurance regulations pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act, providing for unlimited deposit insurance for noninterest-bearing transaction accounts through December 31, 2012.

The Acquired Entity maintains a deposit account with the Federal Home Loan Bank of Dallas (FHLB).  Funds on deposit with the FHLB are not insured by the FDIC.  At December 31, 2009, and September 30, 2010 (unaudited), funds on deposit with the FHLB totaled $189,000 and $225,000, respectively.

Loans

Loans that management has the intent and ability to hold for the foreseeable future or until maturity or payoffs are reported at their outstanding principal balances adjusted for unearned income, charge-offs, the allowance for loan losses, and any unamortized deferred fees or costs on originated loans.

For loans amortized at cost, interest income is accrued based on the unpaid principal balance.  Loan origination fees, net of certain direct origination costs, as well as premiums and discounts, are deferred and amortized as a level yield adjustment over the respective term of the loan.

The accrual of interest on mortgage and commercial loans is discontinued at the time the loan is 90 days past due unless the credit is well-secured and in process of collection.  Past due status is based on contractual terms of the loan.  In all cases, loans are placed on nonaccrual or charged off at an earlier date if collection of principal or interest is considered doubtful.

All interest accrued but not collected for loans that are placed on nonaccrual or charged off are reversed against interest income.  The interest on these loans is accounted for on the cash-basis or cost-recovery method, until qualifying for return to accrual.  Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.

Allowance for Loan Losses

The allowance for loan losses is established as losses are estimated to have occurred through a provision for loan losses charged to income.  Loan losses are charged against the allowance when management believes the uncollectability of a loan balance is confirmed.  Subsequent recoveries, if any, are credited to the allowance.

The allowance for loan losses is evaluated on a regular basis by management and is based upon management’s periodic review of the collectability of the loans in light of historical experience, the nature and volume of the loan portfolio, adverse situations that may affect the borrower’s ability to evaluation is inherently subjective as it required estimates that are susceptible to significant revision as more information becomes available.

The allowance consists of allocated and general components.  The allocated component relates to loans that are classified as impaired.  For those loans that are classified as impaired, an allowance is established when the discounted cash flows, collateral value or observable market price of the impaired loan is lower than the carrying value of that loan.  The general component covers nonclassified loans and is based on Arkansas State Bank Department ratios and expected loss given default derived from the Acquired Entity’s internal risk rating process.  Historical charge-off experience is not used due to the Acquired Entity’s short history.  Other adjustments may be made to the allowance for pools of loans after an assessment of internal or external influenc es on credit quality that are not fully reflected in the historical loss or risk rating data.

A loan is considered impaired when, based on current information and events, it is probable that the Acquired Entity will be unable to collect the scheduled payments of principal and/or interest when due according to the contractual terms of the loan agreement.  Factors considered by management in determining impairment include payment status, collateral value and the probability of collecting scheduled principal and interest payments when due.  Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired.  Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, th e reasons for the delay, the borrower’s prior payment record and the amount of the shortfall in relation to the principal and interest owed.  Impairment is measured on a loan-by-loan basis for commercial and construction loans by either the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s obtainable market price or the fair value of the collateral if the loan is collateral dependent.

Groups of loans with similar risk characteristics, including individually evaluated loans not determined to be impaired, are collectively evaluated for impairment based on the group’s historical loss experience adjusted for changes in trends, conditions and other relevant factors that affect repayment of the loans.  Accordingly, the Acquired Entity does not separately identify individual consumer and residential loans for impairment measurements.

Premises and Equipment

Fixed assets were not acquired by the assuming institution in the purchase and assumption agreement with the FDIC.  However, Southern Bank has the option to purchase fixed assets at fair value as determined by an independent appraisal.  The fixed assets were excluded from the statements of assets acquired and liabilities assumed; however, the related expenses, including depreciation, are included in the statements of revenues and direct expenses.

Depreciation is charged to expense using the straight-line method over the estimated useful lives of the assets.  Leasehold improvements are depreciated using the straight-line method over the terms of the respective leases or the estimated useful lives of the improvements, whichever is shorter.  Expected terms include lease option periods to the extent that the exercise of such options is reasonably assured.

Long-lived Asset Impairment

The Acquired Entity evaluates the recoverability of the carrying value of long-lived assets whenever events or circumstances indicate the carrying amount may not be recoverable.  If a long-lived asset is tested for recoverability and the undiscounted estimated future cash flows expected to result from the use and eventual disposition of the asset is less than the carrying amount of the asset, the asset cost is adjusted to fair value, and an impairment loss is recognized as the amount by which the carrying amount of a long-lived asset exceeds its fair value.

No asset impairment was recognized during the year ended December 31, 2009, or the nine-month period ended September 30, 2010 (unaudited).

Adoption of New Accounting Guidance

The following paragraphs summarize the impact of new accounting pronouncements:

In July 2010, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2010-20, “Receivables (Topic 310) – Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses,” which requires significant new disclosures about the allowance for credit losses and the credit quality of financing receivables.  The requirements are intended to enhance transparency regarding credit losses and the credit quality of loan and lease receivables.  Under this statement, allowance for credit losses and fair value are to be disclosed by portfolio segment, while credit quality information, impaired financing receivables and nonaccrual status are to be presented by class of financing receivable.  Disclosure of the nature, extent, and financial impact and segment information concerning troubled debt restructurings will also be required.  The disclosures are to be presented at the level of disaggregation that management uses when assessing and monitoring the portfolio’s risk and performance.  ASU 2010-20 is effective for interim and annual reporting periods after December 15, 2010.

In January 2010, the FASB issued ASU No. 2010-06, “Fair Value Measurement and Disclosures (Topic 820) – Improving Disclosures about Fair Value Measurements.”  ASU 2010-06 amends the fair value disclosure guidance.  The amendments include new disclosures and changes to clarify existing disclosure requirements.  ASU 2010-06 was effective for interim and annual reporting periods beginning after December 15, 2009, except for the disclosures about purchases, sales, issuances, and settlements of Level 3 fair value measurements.  Those disclosures are effective for fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years.

Note 2 – Loans

Categories of loans include:

	(unaudited) September 30,		December 31,
	2010		2009
Mortgage loans on real estate
Residential 1-4 family	$	22,844	$	13,601
Commercial		60,052		56,289
Construction		8,828		6,933
Second mortgage		1,980		783
Total mortgage loans on real estate		93,704		77,606
Commercial loans		29,647		15,740
Consumer installment loans		4,432		2,890
Total loans		127,783		96,236
Less: allowance for loan losses		1,584		1,855
Net loans	$	126,199	$	94,381

Activity in the allowance for loan losses was as follows:

	(unaudited) September 30,			December 31,
	2010			2009
Balance, beginning of year	$	1,855		$	838
Provision charged to expense		474			1,844
Loans charged off		(759	)		(829	)
Recoveries		14			2
Balance, end of year	$	1,584		$	1,855

A loan is considered impaired, in accordance with the impairment accounting guidance (ASC 310-10-35-16), when, based on current information and events, it is probable the Acquired Entity will be unable to collect all amounts due from the borrower in accordance with the contractual terms of the loan.  Impaired loans include nonperforming commercial loans, but also include loans modified in troubled debt restructurings where concessions could include a reduction in the interest rate on the loan, payment extensions, forgiveness of principal, forbearance or other actions intended to maximize collection.

Included in certain loan categories in the impaired loans are troubled debt restructurings that were classified as impaired.  At September 30, 2010 (unaudited), performing troubled debt restructurings were $1,195,000, as compared to an immaterial amount at December 31, 2009.  Nonperforming troubled debt restructurings were immaterial at September 30, 2010 (unaudited), and December 31, 2009.

The following table presents impaired loans of the Acquired Entity at September 30, 2010 (unaudited), and December 31, 2009.  This table excludes performing troubled debt restructurings.

	(unaudited) September 30,		December 31,
	2010		2009
Impaired loans without a valuation allowance	$	3,825	$	4,360
Impaired loans with a valuation allowance		523		1,351
Total impaired loans	$	4,348	$	5,711
Valuation allowance related to impaired loans	$	157	$	910
Total non accural loans	$	1,421	$	3,808
Total loans past due 90 days or more still accruing	$	-	$	-
Average investment in impaired loans	$	2,557	$	3,296
Interest income recognized on impaired loans	$	94	$	281
Interest income recognized on a cash basis on impaired loans	$	94	$	278

Note 3 – Premises and Equipment

Fixed assets were not acquired by Southern Bank and are excluded in the statements of assets acquired and liabilities assumed; however, the related expenses, including depreciation, are included in the statements of revenues and direct expenses.  Depreciation and amortization expense was $110,000 and $111,000, respectively, for the nine months ended  September 30, 2010 (unaudited) and 2009 (unaudited), and $154,000 for the year ended December 31, 2009.

Note 4 – Interest-bearing Deposits

Interest-bearing time deposits in denominations of $100,000 or more were $44.8 million on September 30, 2010 (unaudited), and $39.8 million on December 31, 2009.

The scheduled maturities of time deposits are as follows:

	(unaudited) September 30,		December 31,
	2010		2009
2010	$	15,720	$	56,069
2011		54,573		4,052
2012		24,116		1,636
2013		6,955		281
2014		4,052		70
2015		95		-
Total	$	105,510	$	62,108

Note 5 – Federal Home Loan Bank Advances

Federal Home Loan Bank advances totaled $16,497,000 on September 30, 2010 (unaudited), and $7,768,000 at December 31, 2009.  These advances were secured by a blanket lien on certain mortgages totaling approximately $42.6 million at September 30, 2010 (unaudited), and $32.2 million at December 31, 2009.  Advances, at interest rates from 1.62 percent to 5.93 percent at September 30, 2010 (unaudited), and 2.33 percent to 5.93 percent at December 31, 2009, are subject to restrictions or penalties in the event of prepayment.

The scheduled maturities of Federal Home Loan Bank advances are as follows:

	(unaudited) September 30,		December 31,
	2010		2009
2010	$	288	$	764
2011		1,190		764
2012		2,554		1,850
2013		5,325		692
2014		1,336		971
2015		732		-
Thereafter		5,073		2,727
Total	$	16,497	$	7,768

Note 6 – Related Parties

At September 30, 2010 (unaudited), and December 31, 2009, the Acquired Entity had loans outstanding to executive officers, directors, significant shareholders and their affiliates (related parties), in the amount of $4.0 million and $2.2 million, respectively.

At both September 30, 2010 (unaudited), and December 31, 2009, deposits from related parties held by the Acquired Entity totaled $1.3 million.

In management’s opinion, such loans and other extensions of credit and deposits were made in the ordinary course of business and were made on substantially the same terms (including interest rates and collateral) as those prevailing at the time for comparable transactions with other persons.  Further, in management’s opinion, these loans did not involve more than normal risk of collectability or present other unfavorable features.

Note 7 – Employee Benefits

The Acquired Entity maintains a defined contribution plan covering substantially all employees.  Contributions to the Plan are determined annually by the Acquired Entity’s Board of Directors.  Employer contributions charged to expense was $42,706 for the year ended December 31, 2009; for the nine-month periods ended September 30, 2010 (unaudited), and September 30, 2009 (unaudited), employer contributions charged to expense were $58,000 and $32,000, respectively.

Note 8 – Disclosure of Fair Values of Assets and Liabilities

SFAS No. 157, Fair Value Measurements, which was codified into ASC 820, establishes a framework for measuring the fair value of financial instruments that considers the attributes specific to particular assets or liabilities and establishes a three-level hierarchy for determining fair value based on the transparency of inputs to each valuation as of the fair value measurement date. The three levels are defined as follows:

·   Level 1 – quoted prices (unadjusted) for identical assets or liabilities in active markets.

·   Level 2 – inputs include quoted prices for similar assets and liabilities in active markets, quoted prices of identical or similar assets or liabilities in markets that are not active, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

·   Level 3 – inputs that are unobservable and significant to the fair value measurement.

Following is a description of the valuation methodologies and inputs used for assets measured at fair value on a nonrecurring basis and recognized in the accompanying balance sheets, as well as the general classification of such assets pursuant to the valuation hierarchy.

Impaired loans (collateral dependent).  Loans for which it is probable that the Acquired Entity will not collect all principal and interest due according to contractual terms are measured for impairment.  Allowable methods for determining the amount of impairment includes estimating fair value using the fair value of the collateral for collateral-dependent loans.

If the impaired loan is identified as collateral dependent, then the fair value method of measuring the amount of impairment is utilized.  This method requires obtaining a current independent appraisal of the collateral and applying a discount factor to the value.

Impaired loans that are collateral dependent are classified within Level 3 of the fair value hierarchy when impairment is determined using the fair value method.

The following tables present the fair value measurement of assets measured at fair value on a nonrecurring basis and the level within the fair value hierarchy in which the fair value measurements fall at September 30, 2010 (unaudited), and December 31, 2009, and:

		Fair Value Measurements Using
(unaudited) At September 30, 2010:	Fair Value	Quoted Prices Active Markets for Identical Assets (Level 1)	Significant Other Observable Inputs (Level 2)	Significant Unobservable Inputs (Level 3)
Impaired loans (collateral
dependent)	$               1,200,117	$                           -	$                           -	$               1,200,117

		Fair Value Measurements Using
At December 31, 2009:	Fair Value	Quoted Prices Active Markets for Identical Assets (Level 1)	Significant Other Observable Inputs (Level 2)	Significant Unobservable Inputs (Level 3)
Impaired loans (collateral
dependent)	$                  441,145	$                           -	$                           -	$                  441,145

The following methods were used to estimate the fair value of all other financial instruments recognized in the accompanying balance sheets at amounts other than fair value.

Cash and cash equivalents, Federal Home Loan Bank stock, Interest receivable, and Interest payable. The carrying amount approximates fair value.

Loans. The fair value of loans is estimated by discounting the future cash flows using the market rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities.  Loans with similar characteristics were aggregated for purposes of the calculations.

Deposits. Deposits include demand deposits, savings accounts, NOW accounts and certain money market deposits. The carrying amount of these deposits approximates fair value. The fair value of fixed-maturity time deposits is estimated using a discounted cash flow calculation that applies the rates currently offered for deposits of similar remaining maturities.

Federal Home Loan Bank advances.  Rates currently available to the Acquired Entity for debt with similar terms and remaining maturities are used to estimate the fair value of existing debt.  Fair value of long-term debt is based on quoted market prices or dealer quotes for the identical liability when traded as an asset in an active market.  If a quoted market price is not available, an expected present value technique is used to estimate fair value.

The following table presents estimated fair values of the Acquired Entity’s financial instruments in accordance with FAS 107-1 and APB 28-1, codified with ASC 805 as of September 30, 2010 (unaudited) and December 31, 2009.

	(unaudited) September 30, 2010				December 31, 2009
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Financial Assets
Cash and cash equivalents	$	24,574	$	24,574	$	4,590	$	4,590
Loans, net of allowance for loan    losses		126,199		126,402		94,381		94,553
Federal Home Loan Bank stock		754		754		380		380
Interest receivable		1,000		1,000		484		484
Financial Liabilities
Deposits		144,386		143,675		83,667		83,719
Federal Home Loan Bank    advances		16,497		17,405		7,768		8,096
Interest payable		117		117		93		93

The fair value of commitments to extend credit and letters of credit is not presented since management believes the fair value to be insignificant.

Note 9 – Cash Flows

For the nine months ended September 30, 2010 (unaudited) and 2009 (unaudited) and for the year ended December 31, 2009, the following cash items occurred:

	Year ended			Nine months ended
	December 31, 2009			September 30, 2010			September 30, 2009
Non-cash operating items:
Depreciation	$	154		$	110		$	111
Provision for loan losses		1,844			474			1,416
Decrease (increase) in accrued interest receivable		97			(516	)		(374	)
Decrease (increase) in other assets		84			(632	)		79
Increase (decrease) in accrued interest payable		80			32			52
	$	2,259		$	(532	)	$	1,284
Investing activities
Increase in loans		(20,877	)		(32,292	)		(18,068	)
Purchase of Federal Home Loan Bank stock		(277	)		(373	)		(110	)
	$	(21,154	)	$	(32,665	)	$	(18,178	)
Financing activites
(Decrease) increase in demand deposit, money market
NOW, and savings accounts		(552	)		17,317			(2,377	)
Increase in time deposits		14,628			43,402			15,916
Proceeds from Federal Home Loan Bank advances		6,539			8,729			2,441
	$	20,615		$	69,448		$	15,980

Note 10 – Leases

The Acquired Entity has an operating lease for the building in which it operates its Batesville facility with original terms that expired January 31, 2008, which now renews on a month-to-month basis.

The Acquired Entity has an operating lease for its Searcy, Arkansas, facility with original terms that expired September 30, 2010 (unaudited), which now renews on a month-to-month basis.

Monthly lease expense for the two facilities is approximately $15,000.  For the year ended December 31, 2009, lease expense totaled $129,000; for the nine months ended September 30, 2010 (unaudited), and September 30, 2009 (unaudited), lease expense totaled $138,000 and $75,000 respectively.

Note 11 – Significant Estimates and Concentrations

Accounting principles generally accepted in the United States of America require disclosure of certain significant estimates and current vulnerabilities due to certain concentrations.  Estimates related to the allowance for loan losses are reflected in the footnote regarding loans.  Current vulnerabilities due to certain concentrations of credit risk are discussed in the footnote on commitments and credit risk.

Note 12 – Commitments and Credit Risk

The Acquired Entity grants commercial, agricultural, residential and consumer loans to customers in central and east Arkansas.  Although the Acquired Entity has a diversified loan portfolio, a majority of commercial and consumer loans are secured by real estate mortgages in central Arkansas.  At December 31, 2009, and September 30, 2010 (unaudited), secured debt in the form of real estate loans comprised approximately 81% and 73% of the loan portfolio, respectively.  The Acquired Entity has engaged in activity outside the normal trade area by purchasing participations in northwest Arkansas.  Total participations purchased in northwest Ar kansas as of September 30, 2010 (unaudited), and December 31, 2009, was approximately $2.1 million and $1.1 million.

Commitments to Extend Credit

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract.  Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee.  Since a portion of the commitments may expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements.  Each customer’s creditworthiness is evaluated on a case-by-case basis.  The amount of collateral obtained, if deemed necessary, is based on management’s credit evaluation of the borrower.  Collateral held varies but may include accounts receivable, inventory, property, plant equipment, commercial real estate and residential real estate.

At December 31, 2009, and September 30, 2010 (unaudited), the Acquired Entity had outstanding commitments to extend credit aggregating approximately $2.1 million and $5.3 million, respectively.

Standby Letters of Credit

Standby letters of credit are irrevocable conditional commitments issued by the Acquired Entity to guarantee the performance of a customer to a third party.  Financial standby letters of credit are primarily issued to support public and private borrowing arrangements, including commercial paper, bond financing and similar transactions.  Performance standby letters of credit are issued to guarantee performance of certain customers under non-financial contractual obligations.  The credit risk involved in issuing standby letters of credit is essentially the same as that involved in extending loans to customers.  Should the Acquired Entity be obligated to perform under the standby letters of credit, the Acquired Entity may seek recourse from the customer for reimbursement of amounts paid.

The Acquired Entity had total outstanding letters of credit amounting to $145,000 at both December 31, 2009, and September 30, 2010 (unaudited).

Lines of Credit

Lines of credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract.  Lines of credit generally have fixed expiration dates.  Since a portion of the line may expire without being drawn upon, the total unused lines do not necessarily represent future cash requirements.  Each customer’s creditworthiness is evaluated on a case-by-case basis.  The amount of collateral obtained, if deemed necessary, is based on management’s credit evaluation of the borrower.  Collateral held varies but may include accounts receivable, inventory, property, plant and equipment, commercial real estate and residential real estate.

Management uses the same credit policies in granting lines of credit as it does for on-balance-sheet instruments.

At December 31, 2009, and September 30, 2010 (unaudited), the Acquired Entity had granted unused lines of credit to borrowers aggregating approximately $4.9 million and $5.8 million, respectively, for commercial and open-end consumer lines.

Other Credit Risks

At December 31, 2009, and September 30, 2010 (unaudited) CDARs accounts accounted for approximately 4.3% and 1.6%, respectively of the Acquired Entity’s time deposits.

Note 13 – Subsequent Events

The Acquired Entity was acquired by Southern Bank at the close of business on December 17, 2010.

EX-99.2

Exhibit 99.2

(b)      Pro Forma Financial Information.

The following pro forma financial information is the result of combining the Company's reported historical financial information with the historical financial information of the Acquired Entity, and making adjustments to the combined information to reflect events that have occurred or that are assumed to have occurred because of the acquisition. The pro forma information should be read in conjunction with the Company’s previously reported historical financial statements and First Southern Bank financial statements included in this filing.

The pro forma condensed consolidating statements do not assume or include any possible cost savings or revenue opportunities that may be realized as a result of the combination. This condensed consolidating pro forma information is provided for illustrative purposes only and is not necessarily indicative of the results of operations or financial position which would have resulted if the combination had been effected at the beginning of the periods presented or as of the date indicated or the financial position or results of operation which we might obtain in the future.

The following pro forma condensed combined financial information presents the financial position of the Company, including the effects of the purchase accounting adjustments and acquisition expenses, had the acquisition taken place at the dates identified (in thousands):

(Unaudited)	Southern Missouri		Acquired		Pro Forma
As of September 30, 2010	Bancorp, Inc.		Entity		Transactions			Note		Pro Forma
Assets
Cash and cash equivalents	$	32,366	$	32,148	$	17,276			A	$	81,790
Investment securities		64,950		-		-					64,950
Loans, net		435,724		126,199		(9,802	)		B		552,121
Interest receivable		3,573		1,000		-					4,573
Premises and equipment		7,556		1		-					7,557
Intangible assets, net		1,531		-		625			C		2,156
Other assets		19,568		1,715		-					21,283
Total assets	$	565,268	$	161,063	$	8,099				$	734,430
Liabilities
Deposits	$	435,894	$	144,386	$	524			D	$	580,804
Repurchase agreements with customers		29,136		-		-					29,136
Interest payable		1,857		116		-					1,973
Borrowings and other debt		43,500		16,497		549			E		60,546
Other liabilities		8,103		64		2,653			F		10,820
Total liabilities		518,490		161,063		3,726					683,279
Stockholders’ equity		46,778		-		4,373			G		51,151
Total liabilities and stockholders’ equity	$	565,268	$	161,063	$	8,099				$	734,430

(Unaudited)	Southern Missouri		Acquired			Pro Forma
As of December 31, 2009	Bancorp, Inc.		Entity			Transactions			Note		Pro Forma
Assets
Cash and cash equivalents	$	32,518	$	(3,960	)	$	17,276			A	$	45,834
Investment securities		63,449		-			-					63,449
Loans, net		402,505		94,381			(9,802	)		B		487,084
Interest receivable		3,028		484			-					3,512
Premises and equipment		9,414		1			-					9,415
Intangible assets, net		1,750		-			625			C		2,375
Other assets		20,185		710			-					20,895
Total assets	$	532,849	$	91,616		$	8,099				$	632,564
Liabilities
Deposits	$	397,397	$	83,667		$	524			D	$	481,588
Repurchase agreements with customers		29,361		-			-					29,361
Interest payable		858		93			-					951
Borrowings and other debt		52,500		7,768			549			E		60,817
Other liabilities		8,624		88			2,653			F		11,365
Total liabilities		488,740		91,616			3,726					584,082
Stockholders’ equity		44,109		-			4,373			G		48,482
Total liabilities and stockholders’ equity	$	532,849	$	91,616		$	8,099				$	632,564

Notes:
A	Pro forma transaction amount represents cash paid to the Company’s subsidiary, Southern Bank, by FDIC at closing. Also paid at closing was a net negative equity adjustment of $2.5 million as of the closing date.  At September 30, 2010, and December 31, 2009, the net equity adjustment would have been different, and those differences are reflected in the target's cash and cash equivalent figures.
B	The difference between the fair value and carrying value of the acquired loans on the date of the acquisition.
C	Core deposit intangible asset.
D	The difference between the fair value and carrying value of the acquired time deposits on the date of the acquisition.
E	The difference between the fair value and carrying value of the acquired Federal Home Loan Bank advances on the date of acquisition.
F	The difference between the fair value and carrying value of the acquired interest rate swaps on the date of acquisition.
G	Amount represents negative equity position of target at date of acquisition, added to bargain purchase gain, net of tax, resulting from the acquisition.

The following pro forma condensed combined financial information presents the results of operations of the Company, including the effects of the purchase accounting adjustments and acquisition expenses, had the acquisition taken place at the beginning of each period (in thousands):

(Unaudited)	Southern Missouri		Acquired			Pro Forma
For the year ended December 31, 2009	Bancorp, Inc.		Entity			Transactions		Note		Pro Forma
Net interest income	$	15,303	$	3,367		$	2,060		A	$	20,730
Provision for loan losses		1,071		1,844			-				2,915
Noninterest income		2,739		283			-				3,022
Noninterest expense		11,094		3,024			585		B, C		14,703
Income before taxes		5,877		(1,218	)		1,475				6,134
Income tax expense		1,504		(457	)		553		D		1,600
Net income		4,373		(761	)		922				4,534
Dividends on preferred shares		509		-			-				509
Net income available to common stockholders	$	3,864	$	(761	)	$	922			$	4,025
Earnings per share:
Basic	$	1.86								$	1.93
Diluted	$	1.85								$	1.93
Basic weighted-average shares		2,083									2,083
Diluted weighted-average shares		2,085									2,085
(Unaudited)	Southern Missouri		Acquired			Pro Forma
For the nine months ended September 30, 2010	Bancorp, Inc.		Entity			Transactions		Note		Pro Forma
Net interest income	$	12,715	$	3,471		$	1,545		A	$	17,731
Provision for loan losses		1,048		474			-				1,522
Noninterest income		2,419		220			-				2,639
Noninterest expense		9,327		3,455			555		B, C		13,337
Income before taxes		4,759		(238	)		990				5,511
Income tax expense		1,183		(89	)		371		D		1,465
Net income		3,576		(149	)		619				4,046
Dividends on preferred shares		384		-			-				384
Net income available to common stockholders	$	3,192	$	(149	)	$	619			$	3,662
Earnings per share:
Basic	$	1.53								$	1.76
Diluted	$	1.52								$	1.74
Basic weighted-average shares		2,084									2,084
Diluted weighted-average shares		2,107									2,107

(Unaudited)	Southern Missouri		Acquired			Pro Forma
For the nine months ended September 30, 2009	Bancorp, Inc.		Entity			Transactions		Note		Pro Forma
Net interest income	$	11,258	$	2,388		$	1,545		A	$	15,191
Provision for loan losses		761		1,335			-				2,096
Noninterest income		1,948		216			-				2,164
Noninterest expense		8,159		1,972			555		B, C		10,686
Income before taxes		4,286		(703	)		990				4,573
Income tax expense		1,076		(264	)		371		D		1,184
Net income		3,210		(439	)		619				3,389
Dividends on preferred shares		381		-			-				381
Net income available to common stockholders	$	2,829	$	(439	)	$	619			$	3,008
Earnings per share:
Basic	$	1.36								$	1.44
Diluted	$	1.36								$	1.44
Basic weighted-average shares		2,083									2,083
Diluted weighted-average shares		2,084									2,084
Notes:
A	To reflect accretion of the discount on loans acquired and amortization of premium on time deposits acquired.
B	To reflect amortization of the core deposit intangible asset.
C	To reflect estimated costs resulting from the transaction.
D	Tax impact of marginal activity estimated at 37.5%.