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Southern Missouri Bancorp Inc. Reports Operating Results (10-Q)

November 13, 2009 | About:

Southern Missouri Bancorp Inc. (NASDAQ:SMBC) filed Quarterly Report for the period ended 2009-09-30.

SOUTHERN MO BANCORP, INC. is a bank holding company. Southern Missouri Bancorp Inc. has a market cap of $23.2 million; its shares were traded at around $11.1 with and P/S ratio of 0.9. The dividend yield of Southern Missouri Bancorp Inc. stocks is 4.3%. Southern Missouri Bancorp Inc. had an annual average earning growth of 15.8% over the past 5 years.

Highlight of Business Operations:

During the first three months of fiscal 2009, we grew our balance sheet by $48.6 million; this growth was partially due to the July 2009 acquisition of Southern Bank of Commerce (SBOC). In that acquisition, the Company acquired loans at a fair value of approximately $15 million; cash, cash equivalents, and investments of approximately $12 million; and deposits of $29 million. Total growth for the quarter reflected a $36.7 million increase in net loans; a $1.0 million increase in available-for-sale investments; and a $6.5 million increase in cash and cash equivalents. Deposits increased $59.6 million, and Federal Home Loan Bank (FHLB) advances decreased $11.4 million. Growth in loans was primarily comprised of residential and commercial real estate loans. Deposit growth was primarily in certificates of deposit, savings accounts, and interest-bearing checking.

In December 2008, the Company announced its participation in the U.S. Treasury Department s Capital Purchase Program (CPP), which is one component of its Troubled Asset Relief Program (TARP). The Treasury invested $9.6 million in perpetual preferred stock carrying a dividend of 5% for the first five years, increasing to 9% thereafter. The Treasury Department created the CPP with the intention of building capital at healthy U.S. financial institutions in order to increase the flow of financing to U.S. businesses and consumers, and to support the U.S. economy. Since the issuance of the preferred stock to the Treasury, the Company has increased loan balances by approximately $56 million. The increase in loans was partially due to the SBOC acquisition. The acquired bank was a small, troubled institution headquartered in Paragould, Arkansas, which had significantly reduced lending activity in recent periods. The Company believes that it can increase credit availability in the communities in which SBOC was located. Additionally, the Company has contributed to the accomplishment of Treasury s objective by leveraging the investment to support the purchase of U.S. government agency mortgage backed securities and municipal debt, helping to improve the availability of credit in two distressed markets. Since the preferred stock issuance, the Company has increased its securities portfolio balance by $19.5 million. Much of these securities purchases would not likely have been made by the Company, absent the Treasury investment. Including both securities and direct loans, the Company has increased its investment in credit markets by $75.5 million since the preferred stock issuance.

Net income for the first quarter of fiscal 2010 increased 28.4% to $1.2 million, as compared to $927,000 earned during the same period of the prior year. After accounting for preferred stock dividends of $127,000 in the quarter, net earnings available to common shareholders increased 14.6%, to $1.1 million. The increase in net income compared to the year-ago period was primarily due to a $258,000 reduction in income tax provisions in the quarter, compared to the year-ago period, due to tax benefits resulting from the July SBOC acquisition. Compared to the same period of the prior year, net interest income was up $618,000, or 17.9%, due to increased interest-earning balances and improved net interest margin; non interest income was up $369,000, or 109.8%, due primarily to the $304,000 other-than-temporary impairment charge recorded in the same quarter of fiscal 2009, with no similar charges during the current period; and loan loss provisions were down $190,000, or 47.5%. These improvements were mostly offset by a 56.2% increase in noninterest expense, primarily the result of expenses related to the SBOC acquisition and the subsequent operation of additional branches in new markets. Diluted earnings per common share for the first quarter of fiscal 2010 were $0.51, as compared to $0.42 for the first quarter of fiscal 2009. In the Company s earnings release for the first quarter of fiscal 2010, earnings were preliminarily reported at $0.52 per share, based on the impact of a $29,000 bargain purchase gain. The final revisions to the purchase accounting for the SBOC acquisition resulted in the recognition of $171,000 in goodwill.

The Company s total assets increased by $48.6 million, or 10.4%, to $514.5 million at September 30, 2009, as compared to $465.9 million at June 30, 2009. Loans, net of the allowance for loan losses, increased $36.7 million, or 10.0%, to $405.2 million at September 30, 2009, as compared to $368.5 million at June 30, 2009. Growth was partially due to the approximately $15 million fair value in loans acquired in the SBOC acquisition. In total, commercial loans grew $10.1 million, residential real estate loans grew $9.7 million, and commercial real estate loans were up $8.8 million. Available-for-sale investment balances increased by $1.0 million, or 1.6%, to $60.2 million, as compared to $60.2 million at June 30, 2009.

Asset growth during the first three months of fiscal 2010 has been funded with deposit growth, which totaled $59.6 million, or 19.1%, bringing deposit balances to $371.5 million at September 30, 2009, as compared to $312.0 million at June 30, 2009. The increase in deposits was due in part to deposits acquired in the SBOC acquisition of approximately $29 million. Growth was also attributed to continued strong growth in the Company s reward checking product and promotion of special high-rate savings accounts in the Company s new Arkansas markets. In total, the increase reflected growth of $38.7 million in certificates of deposit, a $10.1 million increase in passbook and statement savings, and an $8.5 million increase in interest-bearing checking accounts. Certificates of deposit growth included $11.1 million in new brokered CD funds, acquired due to the competitive rate at which the funds were available. Public unit deposits were up $6.7 million, as the Company established a significant new relationship with an area municipality. Net retail, non-brokered deposits were up $41.7 million. Of the $29 million in deposits acquired from SBOC, approximately $5 million was public unit and brokered funds, meaning that organic growth in retail, non-brokered deposits was approximately $18 million in the first quarter. As a result of strong deposit growth and redeployment of cash and cash equivalents acquired in the SBOC acquisition, the Company reduced FHLB borrowings, which were down $11.4 million, or 14.5%, to $67.4 million at September 30, 2009, as compared to $78.8 million at June 30, 2009. Securities sold under agreements to repurchase totaled $23.1 million at September 30, 2009, a decrease of $678,000, or 2.9%, compared to $23.7 million at June 30, 2009.

Total stockholders equity increased $1.6 million, or 3.7%, to $43.6 million at September 30, 2009, as compared to $42.0 million at June 30, 2009. The increase was due to retention of net income and an increase in the market value of the Company s available-for-sale investment portfolio, net of tax, partially offset by cash dividends paid on common and preferred shares.

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