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

May 17, 2010 | About:

Southern Missouri Bancorp Inc. (NASDAQ:SMBC) filed Quarterly Report for the period ended 2010-03-31.

Southern Missouri Bancorp Inc. has a market cap of $34.97 million; its shares were traded at around $16.75 with and P/S ratio of 1.29. The dividend yield of Southern Missouri Bancorp Inc. stocks is 2.87%. Southern Missouri Bancorp Inc. had an annual average earning growth of 12.1% over the past 10 years. GuruFocus rated Southern Missouri Bancorp Inc. the business predictability rank of 4.5-star.

Highlight of Business Operations:

During the first nine months of fiscal 2010, we grew our balance sheet by $73.0 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 assumed deposits of $29 million. Total growth for the nine-month period reflected a $28.2 million increase in net loans; a $7.2 million increase in available-for-sale investments; and a $33.1 million increase in cash and cash equivalents. Deposits increased $99.7 million, and Federal Home Loan Bank (FHLB) advances decreased $35.3 million. Growth in loans was primarily comprised of commercial real estate loans, construction loans, and residential real estate loans. Deposit growth was primarily in passbook and statement savings accounts, interest-bearing checking accounts, and certificates of deposit.

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. In the 16 months since the issuance of the preferred stock to the Treasury, the Company has increased loan balances by approximately $48 million, or 13.6%. 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 prior to the acquisition. 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 bonds and mortgage backed securities, and municipal debt, helping to improve the availability of credit two markets that experienced significant distress in the financial market downturn. Since the preferred stock issuance, the Company has increased its securities portfolio balance by $26 million. Much of these securities purchases would not likely have been made by the

Net income for the first nine months of fiscal 2010 increased 22.6% to $3.4 million, as compared to $2.8 million earned during the same period of the prior year. After accounting for preferred stock dividends of $382,000 in the first nine months of the fiscal year, net earnings available to common shareholders increased 15.2%, to $3.0 million. The increase in net income compared to the year-ago period was primarily due to a $1.6 million, or 15.6%, increase in net interest income, attributable to increased earning asset balances; a $1.1 million, or 90.7% increase in noninterest income, attributable to the inclusion in the prior period s results of other-than-temporary impairment (OTTI) charges of $679,000, with no corresponding charges in the current period; a reduction in income tax provisions of $386,000, or 30.8%, mostly attributable to $258,000 in tax benefits resulting from the July SBOC acquisition; and a reduction of $330,000, or 32.7%, in provisions for loan losses. These improvements were partially offset by an increase of $2.8 million, or 42.1%, in noninterest expense, largely attributable to the SBOC acquisition, including increased compensation and benefits and increased occupancy and data processing charges. Additionally, the Company recognized increased deposit insurance assessments resulting from base assessment rate increases by the FDIC and deposit growth; increased ATM network, electronic banking, and rewards checking charges; increased supplies expenses; charges to amortize the Company s investments in partnerships generating income tax credits; and a charge of $289,000 in the third quarter of fiscal 2010 for the prepayment of a $9 million FHLB advance that had been scheduled to mature in October 2010. Diluted net income per common share available to common stockholders for the first nine months of fiscal 2010 were $1.45, as compared to $1.24 for the first nine months of fiscal 2009.

The Company s total assets increased by $73.0 million, or 15.7%, to $538.9 million at March 31, 2010, as compared to $465.9 million at June 30, 2009. Loans, net of the allowance for loan losses, increased $28.1 million, or 7.6%, to $396.7 million at March 31, 2010, as compared to $368.5 million at June 30, 2009. Loan growth was partially due to the approximately $15 million fair value in loans acquired in the SBOC acquisition. In total, commercial real estate loans grew $17.1 million, construction loans grew $6.9 million, residential real estate loans grew $3.5 million, and consumer loans were up $3.7 million; commercial operating and equipment loan balances were down $3.2 million, due partially to seasonal agricultural loan paydowns. Available-for-sale investment balances increased by $7.2 million, or 11.9%, to $67.4 million at March 31, 2010, as compared to $60.2 million at June 30, 2009. Cash and cash equivalents increased $33.1 million, from $8.1 million at June 30, 2009, to $41.2 million at March 31, 2010. The increase was attributed to strong deposit growth, additional liquidity obtained through the SBOC acquisition, and higher required reserves resulting from transaction account growth.

Asset growth during the first nine months of fiscal 2010 has been funded with deposit growth, which totaled $99.7 million, or 32.0%, bringing deposit balances to $411.7 million at March 31, 2010, 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 $32.2 million in passbook and statement savings accounts, a $31.7 million increase in interest-bearing checking accounts, and a $30.8 million increase in certificates of deposit. Certificate of deposit growth included a nominal amount of new brokered CD funding, which totaled $5.9 million at March 31, 2010. Public unit deposits were up $10.9 million, as the Company established a significant new relationship with an area municipality, but also due partially to seasonality in government entity funding. Net retail, non-brokered deposits were up $88.7 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 $65 million in the first nine months of fiscal 2010. As a result of this strong deposit growth and redeployment of cash and cash equivalents acquired in the SBOC acquisition, the Company reduced FHLB borrowings, which were down $35.3 million, or 44.8%, to $43.5 million at March 31, 2010, as compared to $78.8 million at June 30, 2009. Securities sold under agreements to repurchase totaled $29.0 million at March 31, 2010, an increase of $5.3 million, or 22.3%, compared to $23.7 million at June 30, 2009.

Total stockholders equity increased $3.0 million, or 7.1%, to $45.0 million at March 31, 2010, 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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About the author:

Charlie Tian, Ph.D. - Founder of GuruFocus. You can now order his book Invest Like a Guru on Amazon.

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