10-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________________

FORM 10-K

[X]	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the fiscal year ended June 30, 2007          OR
[   ]	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number:       0-23406   

SOUTHERN MISSOURI BANCORP, INC.(Exact name of small business issuer as specified in its charter)

Missouri(State or other jurisdiction of incorporation or organization)	43-1665523(I.R.S. Employer Identification No.)
531 Vine Street, Poplar Bluff, Missouri (Address of principal executive offices)	63901 (Zip Code)

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

Securities registered pursuant to Section 12(b) of the Act:    None   

Securities registered pursuant to Section 12(g)of the Act: Common Stock, par value $0.01 per share(Title of Class)

            Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  YES         NO  X

            Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    YES             NO    X   

            Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    YES   X   NO       

            Indicate by check mark whether disclosure of delinquent filers pursuant to Item 405 of Regulation S-B is not contained herein, and will not be contained, to the best of the registrant's knowledge, in definitive proxy or other information statements incorporated by reference in Part III of this Form 10-K or any amendments to this Form 10-K.       X   

            Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer.
            Large accelerated filer                  Accelerated filer                 Non-accelerated filer    X   

            Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    YES               NO       X   

            The aggregate market value of the voting stock held by non-affiliates of the registrant, computed by reference to the average of the bid and asked price of such stock as of the last business day of the registrant's most recently completed second fiscal quarter, was $26.9 million. (The exclusion from such amount of the market value of the shares owned by any person shall not be deemed an admission by the registrant that such person is an affiliate of the registrant.)

            As of September 12, 2007, there were issued and outstanding 2,200,776 shares of the Registrant's common stock.

DOCUMENTS INCORPORATED BY REFERENCE
            Part II of Form 10-K - Annual Report to Stockholders for the fiscal year ended June 30, 2007.
            Part III of Form 10-K - Portions of the Proxy Statement for the 2007 Annual Meeting of Stockholders.

PART I

Item 1. Description of Business

General

            Southern Missouri Bancorp, Inc. ("Company"), which changed its state of incorporation to Missouri on April 1, 1999, was originally incorporated in Delaware on December 30, 1993 for the purpose of becoming the holding company for Southern Missouri Savings Bank upon completion of Southern Missouri Savings Bank's conversion from a state chartered mutual savings and loan association to a state chartered stock savings bank. As part of the conversion in April 1994, the Company sold 1,803,201 shares of its common stock to the public. The Company's Common Stock is quoted on the National Association of Securities Dealers Automated Quotations ("NASDAQ") National Market System under the symbol "SMBC".

            Southern Missouri Savings Bank was originally chartered as a mutual Missouri savings and loan association in 1887. On June 20, 1995, it converted to a federally chartered stock savings bank and took the name Southern Missouri Savings Bank, FSB. On February 17, 1998, Southern Missouri Savings Bank converted from a federally chartered stock savings bank to a Missouri chartered stock savings bank and changed its name to Southern Missouri Bank & Trust Co. On June 4, 2004, Southern Missouri Bank & Trust Co. ("Bank") converted from a Missouri chartered stock savings bank to a Missouri state chartered trust company with banking powers ("Charter Conversion").

            The primary regulator of the Bank is the Missouri Division of Finance. The Bank's deposits continue to be insured up to applicable limits by the Deposit Insurance Fund ("DIF") of the Federal Deposit Insurance Corporation ("FDIC"). With the Bank's conversion to a trust company with banking powers, the Company became a bank holding company regulated by the Federal Reserve Board ("FRB").

            The principal business of the Bank consists primarily of attracting retail deposits from the general public and using such deposits along with wholesale funding from the Federal Home Loan Bank of Des Moines ("FHLB"), and to a lesser extent, brokered deposits, to invest in one- to four-family residential mortgage loans, mortgage loans secured by commercial real estate, commercial non-mortgage business loans and consumer loans. These funds are also used to purchase mortgage-backed and related securities ("MBS"), U.S. Government Agency obligations and other permissible investments.

            At June 30, 2007, the Company had total assets of $379.9 million, total deposits of $270.1 million and stockholders' equity of $28.7 million. The Company has not engaged in any significant activity other than holding the stock of the Bank. Accordingly, the information set forth in this report, including financial statements and related data, relates primarily to the Bank. The Company's revenues are derived principally from interest earned on loans, investment securities, MBS, CMO's and, to a lesser extent, banking service charges, loan late charges, increases in the cash surrender value of bank owned life insurance and other fee income.

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Forward Looking Statements

            This document, including information incorporated by reference, contains forward-looking statements about the Company and its subsidiaries which we believe are within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, without limitation, statements with respect to anticipated future operating and financial performance, growth opportunities, interest rates, cost savings and funding advantages expected or anticipated to be realized by management. Words such as "may," "could," "should," "would," "believe," "anticipate," "estimate," "expect," "intend," "plan" and similar expressions are intended to identify these forward-looking statements. Forward-looking statements by the Company and its management are based on beliefs, plans, objectives, goals, expectations, anticipations, estimates and the intentions of management and are not guarantees of future performance. The Company disclaims any obligation to update or revise any forward-looking statements based on the occurrence of future events, the receipt of new information, or otherwise. The important factors we discuss below, as well as other factors discussed under the caption "Management's Discussion and Analysis of Financial Condition and Results of Operations" and identified in our filings with the SEC and those presented elsewhere by our management from time to time, could cause actual results to differ materially from those indicated by the forward-looking statements made in this document:

• the strength of the United States economy in general and the strength of the local economies in which we conduct operations;
• the effects of, and changes in, trade, monetary and fiscal policies and laws, including interest rate policies of the Federal Reserve Board;
• inflation, interest rate, market and monetary fluctuations;
• the timely development of and acceptance of our new products and services and the perceived overall value of these products and services by users, including the features, pricing and quality compared to competitors' products and services;
• the willingness of users to substitute our products and services for products and services of our competitors;
• the impact of changes in financial services' laws and regulations (including laws concerning taxes, banking, securities and insurance);
• the impact of technological changes;
• acquisitions;
• changes in consumer spending and saving habits; and
• our success at managing the risks involved in the foregoing.

            The Company disclaims any obligation to update or revise any forward-looking statements based on the occurrence of future events, the receipt of new information, or otherwise.

Market Area

            The Bank provides its customers with a full array of community banking services and conducts its business from its headquarters in Poplar Bluff and seven additional full service offices located in Poplar Bluff, Van Buren, Dexter, Kennett, Doniphan, Sikeston, and Qulin, Missouri. The Bank's primary market area includes all or portions of Butler, Carter, Dunklin, Ripley, Stoddard, Scott, Mississippi, New Madrid, Wayne, and Pemiscot Counties in Missouri, and Mississippi and Clay Counties in Arkansas. The Bank's market area has a population of approximately 200,000. The largest employers in the Bank's primary market area are the Poplar Bluff Regional Medical Center, employing approximately 1,300 persons, and Briggs & Stratton, a small engine manufacturing facility employing approximately 1,200 persons. Other major employers include Noranda Aluminum, Visiting Nurse Association, Good Humor-Breyers, Gates Rubber, John Pershing VA Hospital, Nordyne, the Poplar Bluff School District, the Missouri Delta Medical Center, Wal-Mart Stores, Emerson Electric, Tyson Foods, and ArvinMeritor. The Bank's market area

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is primarily rural in nature and relies heavily on the manufacturing industries and agriculture, with products including livestock, rice, timber, soybeans, wheat, melons, corn and cotton.

Competition

            The Bank faces strong competition in attracting deposits (its primary source of lendable funds) and originating loans. The Bank is one of 27 financial institution groups located in its primary market area. Competitors for deposits include commercial banks, credit unions, money market funds, and other investment alternatives, such as mutual funds, full service and discount broker-dealers, equity markets, brokerage accounts and government securities. The Bank's competition for loans comes principally from other financial institutions, mortgage banking companies, mortgage brokers and life insurance companies. The Bank expects competition to continue to increase in the future as a result of legislative, regulatory and technological changes within the financial services industry. Technological advances, for example, have lowered barriers to market entry, allowed banks to expand their geographic reach by providing services over the Internet and made it possible for non-depository institutions to offer products and services that traditionally have been provided by banks. The Gramm-Leach-Bliley Act, which permits affiliation among banks, securities firms and insurance companies, also has changed the competitive environment in which the Bank conducts business.

Internet Website

            Bancorp maintains a website at www.smbtonline.com. The information contained on that website is not included as part of, or incorporated by reference into, this Annual Report on Form 10-K. Bancorp currently makes available on or through its website Bancorp's Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K or amendments to these reports. These materials are also available free of charge on the Securities and Exchange Commission's website at www.sec.gov.

Selected Consolidated Financial Information

            This information is incorporated by reference from pages 9 and 10 of the 2007 Annual Report to Stockholders attached hereto as Exhibit 13 ("Annual Report").

Yields Earned and Rates Paid

            This information contained under the section captioned "Yields Earned and Rates Paid" is incorporated herein by reference from page 18 of the Annual Report.

Rate/Volume Analysis

            This information is incorporated by reference from page 18 of the Annual Report.

Average Balance, Interest and Average Yields and Rates

            This information contained under the section captioned "Average Balance, Interest and Average Yields and Rates" is incorporated herein by reference from pages 16 and 17 of the Annual Report.

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Lending Activities

            General. The Bank's lending activities consist of origination of loans secured by mortgages on one- to four-family residences and commercial real estate, construction loans on residential and commercial properties, commercial business loans and consumer loans. The Bank has also occasionally purchased loan participation interests originated by other lenders and secured by properties generally located in the State of Missouri.

            Supervision of the loan portfolio is the responsibility of William D. Hribovsek, Chief Lending Officer. Loan officers have varying amounts of lending authority depending upon experience and types of loans. Loans beyond their authority are presented to the Loan Officers Committee, comprised of President Greg Steffens and Chief Lending Officer William D. Hribovsek, along with various appointed loan officers. Loans to one borrower (or group of related borrowers), in aggregate, in excess of $750,000 require the approval of a majority of the Discount Committee, which consists of all Bank directors, prior to the closing of the loan. All loans are subject to ratification by the full Board of Directors.

            The aggregate amount of loans that the Bank is permitted to make under applicable federal regulations to any one borrower, including related entities, or the aggregate amount that the Bank could have invested in any one real estate project, is based on the Bank's capital levels. See "Regulation - Loans to One Borrower." At June 30, 2007, the maximum amount which the Bank could lend to any one borrower and the borrower's related entities was approximately $8.6 million. At June 30, 2007, the Bank's five largest extensions of credit to one entity ranged from $8.2 million to $7.6 million, net of participation interests sold. The majority of these credits were commercial or commercial real estate loans and all of them were performing according to their terms.

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            Loan Portfolio Analysis. The following table sets forth the composition of the Bank's loan portfolio by type of loan and type of security as of the dates indicated.

			At June 30,
			2007		2006		2005
			Amount	Percent	Amount	Percent	Amount	Percent
			(Dollars in thousands)
Type of Loan:
Mortgage Loans:
	Residential real estate		$135,288	43.35%	$127,205	45.28%	$125,775	47.01%
	Commercial real estate		77,723	24.91	65,374	23.27	58,144	21.73
	Construction		7,981	2.56	10,868	3.87	8,557	3.20
	Total mortgage loans		$220,942	70.82	$203,447	72.42	$192,476	71.94
Other Loans:
	Automobile loans		9,462	3.03	10,428	3.71	11,444	4.28
	Commercial business		76,053	24.37	65,109	23.18	59,284	22.16
	Home equity		6,548	2.10	7,007	2.49	7,504	2.80
	Other		3,407	1.09	2,671	0.95	2,466	0.92
		Total other loans	95,470	30.59	85,215	30.33	80,698	30.16
		Total loans	$316,412	101.41	$288,662	102.75	$273,174	102.10
Less:
	Undisbursed loans in process		$    1,913	0.61	$    5,738	2.04	$    3,627	1.36
	Deferred fees and discounts		(52)	(0.02)	(65)	(0.02)	(37)	(0.01)
	Allowance for loan losses		2,538	0.81	2,058	0.73	2,016	0.75
		Net loans receivable	$312,013	100.00%	$280,931	100.00%	$267,568	100.00%
Type of Security:
Residential real estate
	One-to four-family		$137,289	43.99%	$134,111	47.74%	$130,610	48.82%
	Multi-family		6,205	1.99	1,571	0.56	1,752	0.65
Commercial real estate			63,139	20.23	54,544	19.41	50,486	18.87
Land			16,187	5.19	14,177	5.04	9,628	3.60
Commercial			74,226	23.79	64,153	22.84	59,284	22.16
Consumer and other			19,416	6.22	20,106	7.16	21,414	8.00
		Total loans	$316,462	101.41	$288,662	102.75	$273,174	102.10
Less:
	Undisbursed loans in process		1,913	2.04	5,738	2.04	3,627	1.36
	Deferred fees and discounts		(52)	(0.02)	(65)	(0.02)	(37)	(0.01)
	Allowance for loan losses		2,538	0.81	2,058	0.73	2,016	0.75
		Net loans receivable	$312,063	100.00%	$280,931	100.00%	$267,568	100.00%

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            The following table shows the fixed and adjustable rate composition of the Bank's loan portfolio at the dates indicated.

			At June 30,
			2007		2006		2005
			Amount	Percent	Amount	Percent	Amount	Percent
			(Dollars in thousands)
Type of Loan:
Fixed-Rate Loans:
	Residential real estate		$  97,922	31.38%	$  88,261	31.42%	$  84,440	31.56%
	Commercial real estate		46,410	14.87	25,667	9.13	18,430	6.89
	Construction		5,329	1.71	6,536	2.33	5,882	2.20
	Consumer		12,821	4.11	13,059	4.65	13,867	5.18
	Commercial business		40,167	12.87	25,315	9.01	24,247	9.06
		Total fixed-rate loans	202,649	64.94	158,838	56.54	146,866	54.89
Adjustable-Rate Loans:
	Residential real estate		37,366	11.98	38,944	13.86	41,335	15.45
	Commercial real estate		31,313	10.03	39,706	14.13	39,714	14.84
	Construction		2,652	0.85	4,333	1.54	2,675	1.00
	Consumer		6,595	2.11	7,047	2.51	7,547	2.82
	Commercial business		35,887	11.50	39,794	14.17	35,037	13.10
		Total adjustable-rate loans	113,813	36.47	129,824	46.21	126,308	47.21
		Total Loans	316,462	101.41	288,662	102.75	273,174	102.10
Less:
	Undisbursed loans in process		1,913	0.61	5,738	2.04	3,627	1.36
	Net deferred loan fees		(52)	(0.02)	(65)	(0.02)	(37)	(0.01)
	Allowance for loan loss		2,538	0.81	2,058	0.73	2,016	0.75
			$312,063	100.00%	$280,931	100.00%	$267,568	100.00%

            One- to Four-Family Residential Mortgage Lending. The Bank actively originates loans for the acquisition or refinance of one- to four-family residences. These loans are originated as a result of customer and real estate agent referrals, existing and walk-in customers and from responses to the Bank's marketing campaigns. At June 30, 2007, net mortgage loans secured by one- to four-family residences totaled $129.9 million, or 41.6% of net loans receivable.

            The Bank currently offers both fixed-rate and adjustable-rate mortgage ("ARM") loans. During the year ended June 30, 2007, the Bank originated $6.8 million of ARM loans and $20.1 million of fixed-rate loans that were secured by one- to four-family residences. Substantially all of the one- to four-family residential mortgage originations in the Bank's portfolio are located within the Bank's primary market area.

            The Bank generally originates one- to four-family residential mortgage loans in amounts up to 90% of the lower of the purchase price or appraised value of residential property. For loans originated in excess of 80%, the Bank charges an additional 37.5 basis points, but does not require private mortgage insurance. The majority of new residential mortgage loans originated by the Bank conform to secondary market standards. The interest rates charged on these loans are competitively priced based on local market conditions, the availability of funding, and anticipated profit margins. Fixed and ARM loans originated by the Bank are amortized over periods as long as 30 years, but typically are repaid over shorter periods.

            Fixed-rate loans secured by one- to four-family residences have contractual maturities up to 30 years, and are generally fully amortizing with payments due monthly. These loans normally remain outstanding for a substantially shorter period of time because of refinancing and other prepayments. A significant change in the interest rate environment can alter the average life of a residential loan portfolio. The one- to four-family fixed-rate loans do not

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contain prepayment penalties. Most are written using secondary market guidelines. At June 30, 2007, one- to four-family loans with a fixed rate totaled $92.9 million, and had a weighted-average maturity of 200 months.

            The Bank currently originates ARM loans, which adjust annually, after an initial period of one, three or five years. Typically, originated ARM loans secured by owner occupied properties reprice at a margin of 2.75% to 3.00% over the weekly average yield on United States Treasury securities adjusted to a constant maturity of one year ("CMT"). Generally, ARM loans secured by non-owner occupied residential properties reprice at a margin of 3.75% over the CMT index. Current residential ARM loan originations are subject to annual and lifetime interest rate caps and floors. As a consequence of using interest rate caps, discounted initial rates and a "CMT" loan index, the interest earned on the Bank's ARMs will react differently to changing interest rates than the Bank's cost of funds. At June 30, 2007, loans tied to the CMT index totaled $32.9 million.

            Until 1999, most of the owner occupied residential loans originated by the Bank repriced annually at a margin of 2.50% or 2.75% over the 11^th district cost of funds index or the Bank's internal cost of funds, while non-owner occupied residential loans typically repriced at a margin of 3.00% to 3.75% over these same indices. The maximum annual interest rate adjustment on these ARMs was typically limited to a 1.00% to 2.00% adjustment, while the maximum lifetime adjustment was generally limited to 5.00% to 6.00%. Generally, each of these indices are considered a "lagging" index because they adjust more slowly to changes in market interest rates than most other indices. At June 30, 2007, loans tied to these indices totaled $4.3 million.

            In underwriting one- to four-family residential real estate loans, the Bank evaluates the borrower's ability to meet debt service requirements at current as well as fully indexed rates for ARM loans, as well as the value of the property securing the loan. During fiscal 2007, most properties securing real estate loans made by the Bank had appraisals performed on them by independent fee appraisers approved and qualified by the Board of Directors. The Bank generally requires borrowers to obtain title insurance and fire, property and flood insurance (if indicated) in an amount not less than the amount of the loan. Real estate loans originated by the Bank generally contain a "due on sale" clause allowing the Bank to declare the unpaid principal balance due and payable upon the sale of the security property.

            Commercial Real Estate Lending. The Bank actively originates loans secured by commercial real estate including land (improved and unimproved), strip shopping centers, retail establishments and other businesses generally located in the Bank's primary market area. At June 30, 2007, the Bank had $77.7 million in commercial real estate loans, which represented 24.9% of net loans receivable.

            Commercial real estate loans originated by the Bank generally are based on amortization schedules of up to 20 years with monthly principal and interest payments. Generally, the interest rate received on these loans is fixed for a maturity for up to five years, with a balloon payment due at maturity. Alternatively, for some loans, the interest rate adjusts at least annually after an initial period up to five years, based upon the Wall Street prime rate or the one year CMT. The Banks fixed-rate commercial real estate portfolio has a weighted average maturity of 31 months. Variable rate commercial real estate originations typically adjust monthly, quarterly or annually based on the Wall Street prime rate. Generally, improved commercial real estate loan amounts do not exceed 80% of the lower of the appraised value or the purchase price of the secured property. Before credit is extended, the Bank analyzes the financial condition of the borrower, the borrower's credit history, and the reliability and predictability of the cash flow generated by the property and the value of the property itself. Generally, personal guaranties are obtained from the borrower in addition to obtaining the secured property as collateral for such loans. The Bank also generally requires appraisals on properties securing commercial real estate to be performed by a Board-approved independent certified fee appraiser.

            Generally, loans secured by commercial real estate involve a greater degree of credit risk than one- to four-family residential mortgage loans. These loans typically involve large balances to single borrowers or groups of related borrowers. Because payments on loans secured by commercial real estate are often dependent on the successful operation or management of the secured property, repayment of such loans may be subject to adverse conditions in the real estate market or the economy. See "Asset Quality."

            Construction Lending. The Bank originates real estate loans secured by property or land that is under construction or development. At June 30, 2007, the Bank had $8.0 million, or 2.6% of net loans receivable in construction loans outstanding.

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            Construction loans originated by the Bank are generally secured by permanent mortgage loans for the construction of owner occupied residential real estate or to finance speculative construction secured by residential real estate, land development or owner-operated commercial real estate. At June 30, 2007, the Bank had $8.0 million in construction loans, $5.6 million of which were secured by one- to four-family residential real estate (of which $1.8 million was for speculative construction), $1.6 million of which were secured by commercial real estate and $805,000 of which were secured by multi-family real estate. During construction, these loans typically require monthly interest-only payments and have maturities ranging from 6 to 12 months. Once construction is completed, permanent construction loans are converted to monthly payments using amortization schedules of up to 30 years on residential and up to 20 years on commercial real estate.

            Speculative construction and land development lending generally affords the Bank an opportunity to receive higher interest rates and fees with shorter terms to maturity than those obtainable from residential lending. Nevertheless, construction and land development lending is generally considered to involve a higher level of credit risk than one- to four-family residential lending due to (i) the concentration of principal among relatively few borrowers and development projects, (ii) the increased difficulty at the time the loan is made of accurately estimating building or development costs and the selling price of the finished product, (iii) the increased difficulty and costs of monitoring and disbursing funds for the loan, (iv) the higher degree of sensitivity to increases in market rates of interest and changes in local economic conditions, and (v) the increased difficulty of working out problem loans. Due in part to these risk factors, the Bank may be required from time to time to modify or extend the terms of some of these types of loans. In an effort to reduce these risks, the application process includes a submission to the Bank of accurate plans, specifications and costs of the project to be constructed. These items are also used as a basis to determine the appraised value of the subject property. Loan amounts are limited to 85% of the lesser of current appraised value and/or the cost of construction.

            Consumer Lending. The Bank offers a variety of secured consumer loans, including home equity, direct and indirect automobile loans, second mortgages, mobile homes and loans secured by deposits. The Bank originates substantially all of its consumer loans in its primary market area. Usually, consumer loans are originated with fixed rates for terms of up to five years, with the exception of home equity lines of credit, which are variable, tied to the prime rate of interest and are for a period of ten years. At June 30, 2007, the Bank's consumer loan portfolio totaled $19.4 million, or 6.2% of net loans receivable.

            Home equity loans represented 33.7% of the Bank's consumer loan portfolio at June 30, 2007, and totaled $6.5 million, or 2.1% of net loans receivable.

            Home equity lines of credit are secured with a deed of trust and are issued up to 100% of the appraised or assessed value of the property securing the line of credit, less the outstanding balance on the first mortgage. Interest rates on the home equity lines of credit are adjustable and are tied to the current prime interest rate. This rate is obtained from the Wall Street Journal and adjusts on a daily basis. Interest rates are based upon the loan-to-value ratio of the property with better rates given to borrowers with more equity. Home equity lines of credit, which are secured by residential properties, are secured by stronger collateral than automobile loans and because of the adjustable rate structure, contain less interest rate risk to the Bank. Lending up to 100% of the value of the property presents greater credit risk to the Bank. Consequently, the Bank limits this product to customers with a favorable credit history.

            Automobile loans represented 48.7% of the Bank's consumer loan portfolio at June 30, 2007, and totaled $9.5 million, or 3.0% of net loans receivable. Of that total, $1.1 million represented loans originated by auto dealers. These loans generally pay a negotiated fee back to the dealer. Typically, automobile loans are made for terms of up to 60 months for new and used vehicles. Loans secured by automobiles have fixed rates and are generally made in amounts up to 100% of the purchase price of the vehicle.

            Consumer loan terms vary according to the type and value of collateral, length of contract and creditworthiness of the borrower. The underwriting standards employed for consumer loans include employment stability, an application, a determination of the applicant's payment history on other debts, and an assessment of ability to meet existing and proposed obligations. Although creditworthiness of the applicant is a primary consideration, the underwriting process also includes a comparison of the value of the security, if any, in relation to the proposed loan amount.

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            Consumer loans may entail greater credit risk than do residential mortgage loans, because they are generally unsecured or are secured by rapidly depreciable or mobile assets, such as automobiles or mobile homes. In the event of repossession or default, there may be no secondary source of repayment or the underlying value of the collateral could be insufficient to repay the loan. In addition, consumer loan collections are dependent on the borrower's continuing financial stability, and thus are more likely to be affected by adverse personal circumstances. Furthermore, the application of various federal and state laws, including bankruptcy and insolvency laws, may limit the amount which can be recovered on such loans. The Bank's delinquency levels for these types of loans are reflective of these risks. See "Asset Classification."

            Commercial Business Lending. At June 30, 2007, the Bank also had $76.1 million in commercial business loans outstanding, or 24.4% of net loans receivable. The Bank's commercial business lending activities encompass loans with a variety of purposes and security, including loans to finance accounts receivable, inventory, equipment and operating lines of credit.

            The Bank currently offers both fixed and adjustable rate commercial business loans. At year end, the Bank had $40.2 million in fixed rate and $35.9 million of adjustable rate commercial business loans. The adjustable rate business loans can reprice daily, monthly or annually, in accordance with the Wall Street prime rate of interest. The Bank expects to continue to maintain or increase the current percentage of commercial business loans in its total loan portfolio.

            Commercial business loan terms vary according to the type and value of collateral, length of contract and creditworthiness of the borrower. Generally, commercial loans secured by fixed assets are amortized over periods up to five years, while commercial operating lines of credit are generally for a one year period. The Bank's commercial business loans are evaluated based on the loan application, a determination of the applicant's payment history on other debts, business stability and an assessment of ability to meet existing obligations and payments on the proposed loan. Although creditworthiness of the applicant is a primary consideration, the underwriting process also includes a comparison of the value of the security, if any, in relation to the proposed loan amount.

            Unlike residential mortgage loans, which generally are made on the basis of the borrower's ability to make repayment from his or her employment and other income, and which are secured by real property whose value tends to be more easily ascertainable, commercial business loans are of higher risk and typically are made on the basis of the borrower's ability to make repayment from the cash flow of the borrower's business. As a result, the availability of funds for the repayment of commercial business loans may be substantially dependent on the success of the business itself. Further, the collateral securing the loans may depreciate over time, may be difficult to appraise and may fluctuate in value based on the success of the business.

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            Contractual Obligations and Commitments, Including Off-Balance Sheet Arrangements. The following table discloses our fixed and determinable contractual obligations and commercial commitments by payment date as of June 30, 2007. Commitments to extend credit totaled $36.7 million at June 30, 2007.

		Less Than 1 Year	1-3 Years	4-5 Years	More Than 5 Years	Total
		(In Thousands)
Federal Home Loan Bank
	advances	$  10,000	$15,000	$19,000	$10,000	$  54,000
Certificates of deposit		117,082	8,898	4,594	---	130,569
	Total	$127,082	$23,893	$23,594	$10,000	$184,569
		Less Than 1 Year	1-3 Years	4-5 Years	More Than 5 Years	Total
		(In Thousands)
Construction loans in process		$  1,913	$      ---	$   ---	$      ----	$   1,913
Other commitments		25,229	4,053	518	4,951	34,751
		$27,142	$   4,053	$      518	$ 4,951	$36,664

Loan Maturity and Repricing

            The following table sets forth certain information at June 30, 2007 regarding the dollar amount of loans maturing or repricing in the Bank's portfolio based on their contractual terms to maturity or repricing, but does not include scheduled payments or potential prepayments. Demand loans, loans having no stated schedule of repayments and no stated maturity, and overdrafts are reported as due in one year or less. Mortgage loans that have adjustable rates are shown as maturing at their next repricing date. Listed loan balances are shown before deductions for undisbursed loan proceeds, unearned discounts, unearned income and allowance for loan losses.

	Within One Year	After One Year Through 5 Years	After 5 Years Through 10 Years	After 10 Years	Total
	(Dollars in thousands)
Residential real estate	$  16,677	$  29,250	$14,221	$75,140	$135,888
Commercial real estate	41,887	32,050	2,182	1,654	77,723
Construction	7,981	---	---	---	7,981
Consumer	9,142	10,157	118	---	19,417
Commercial business	39,615	35,792	489	157	76,053
Total loans	$115,302	$107,249	$16,960	$76,951	$316,462

            As of June 30, 2007, loans with a maturity date after June 30, 2008 with fixed interest rates totaled $165.6 million, and loans with a maturity date after June 30, 2008 with adjustable rates totaled $79.0 million.

Loan Originations, Sales and Purchases

            Generally, all loans are originated by the Bank's staff, who are salaried loan officers. Loan applications are taken and processed at each of the Bank's full-service locations. The Bank began offering secondary market loans to customers during fiscal year 2002 which are also originated by the Bank's staff.

            While the Bank originates both adjustable-rate and fixed-rate loans, the ability to originate loans is dependent upon the relative customer demand for loans in its market. In fiscal 2007, the Bank originated $130.9 million of loans,

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compared to $120.0 million and $110.3 million in fiscal 2006 and 2005, respectively. Of these loans, mortgage loan originations were $77.8 million, $74.0 million and $61.0 million in fiscal 2007, 2006 and 2005, respectively.

            From time to time, the Bank has purchased loan participations consistent with its loan underwriting standards. In fiscal 2007, the Bank purchased $14.2 million of new loans. At June 30, 2007, loan participations totaled $21.1 million, or 6.6% of net loans receivable. At June 30, 2007, all of these participations with the exception of one, totaling $227,000, were performing in accordance to their respective terms. The Bank will evaluate purchasing additional loan participations, based in part on local loan demand, liquidity, portfolio and leverage rate.

            The following table shows total loans originated, purchased, sold and repaid during the periods indicated.

	Year Ended June 30,
	2007	2006	2005
	(Dollars in thousands)
Total loans at beginning of period	$288,662	$273,174	$253,437
Loans originated:
One-to four-family residential	29,935	31,079	33,306
Multi-family residential and         commercial real estate	36,976	32,754	19,309
Construction loans	10,887	10,143	8,406
Commercial and industrial	38,342	36,265	39,703
Consumer and others	14,803	9,728	9,764
Total loans originated	130,943	119,969	110,488
Loans purchased:
Total loans purchased	14,220	4,118	9,819
Loans sold:
Total loans sold	(10,599)	(5,184)	(9,217)
Principal repayments	(106,475)	(103,159)	(91,343)
Foreclosures	(289)	(256)	(10)
Net loan activity	27,800	15,488	19,737
Total loans at end of period	$316,462	$288,662	$273,174

Loan Commitments

            The Bank issues commitments for one- to four-family residential mortgage loans, operating or working capital lines of credit. Such commitments may be oral or in writing with specified terms, conditions and at a specified rate of interest and stand by letters-of-credit. The Bank had outstanding net loan commitments of approximately $36.7 million at June 30, 2007. See Note 13 of Notes to Consolidated Financial Statements contained in the Annual Report to Stockholders.

Loan Fees

            In addition, to interest earned on loans, the Bank receives income from fees in connection with loan originations, loan modifications, late payments and for miscellaneous services related to its loans. Income from these activities varies from period to period depending upon the volume and type of loans made and competitive conditions.

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Asset Quality

            Delinquent Loans. Generally, when a borrower fails to make a required payment on mortgage or installment loans, the Bank begins the collection process by mailing a computer generated notice to the customer. If the delinquency is not cured promptly, the customer is contacted again by notice or telephone. After an account secured by real estate becomes over 60 days past due, the Bank will send a 30-day demand notice to the customer which, if not cured or unless satisfactory arrangements have been made, will lead to foreclosure. For consumer loans, the Missouri Right-To-Cure Statute is followed, which requires issuance of specifically worded notices at specific time intervals prior to repossession or further collection efforts.

            The following table sets forth the Bank's loan delinquencies by type and by amount at June 30, 2007.

	Loans Delinquent For:				Total Loans Delinquent 60 Days or More
	60-89 Days		90 Days and Over
	Numbers	Amounts	Numbers	Amounts	Numbers	Amounts
	(Dollars in thousands)
Residential real estate	2	$ 56	---	$ ---	2	$ 56
Commercial real estate	---	---	1	20	1	20
Commercial non-real estate	---	---	---	---	---	---
Other consumer	10	52	2	4	12	56
Totals	12	$108	3	$ 24	15	$132

            Non-Performing Assets. The table below sets forth the amounts and categories of non-performing assets in the Bank's loan portfolio. Loans are placed on non-accrual status when the collection of principal and/or interest become doubtful, and as a result, previously accrued interest income on the loan is removed from current income. The Bank has no reserves for uncollected interest and does not accrue interest on non-accrual loans. A loan may be transferred back to accrual status once a satisfactory repayment history has been restored. Foreclosed assets held for sale include assets acquired in settlement of loans and are shown net of reserves.

            At June 30, 2007, the Bank had one loan on which interest was not being accrued, in accordance with SFAS No. 114 as amended by SFAS No. 118. The Bank would have recorded a nominal amount of interest income during the years ended June 30, 2007 and 2006, and would have recorded interest income of $146,000 during the year ended June 30, 2005, on non-accrual loans, if these loans had been performing in accordance with their terms during such periods. Interest income recognized on non-accrual loans for the years ended June 30, 2007, 2006, and 2005, was considered nominal.

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            The following table sets forth information with respect to the Bank's non-performing assets as of the dates indicated. At the dates indicated, the Bank had no restructured loans within the meaning of SFAS 15.

	At June 30,
	2007	2006	2005	2004	2003
	(Dollars in thousands)
Nonaccruing loans:
Residential real estate	$  ---	$  ---	$  52	$    ---	$    ---
Commercial real estate	---	--	---	---	---
Consumer	2	51	41	4	7
Commercial business	---	---	334	---	---
Total	$   2	$  51	$427	$      4	$      7
Loans 90 days past due     accruing interest:
Residential real estate	$  ---	$  ---	$  78	$  114	$    74
Commercial real estate	20	--	---	---	---
Consumer	4	2	6	17	---
Commercial business	---	---	60	---	8
Total	$  24	$    2	$144	$  131	$    82
Total nonperforming loans	$  26	$  53	$571	$  135	$    89
Foreclosed assets held for sale:
Real estate owned	$111	$200	$  87	$  163	$  217
Other nonperforming assets	11	16	7	17	41
Total nonperforming assets	$148	$269	$665	$  315	$  347
Total nonperforming loans     to net loans	0.01%	0.02%	0.21%	0.05%	0.04%
Total nonperforming loans    to net assets	0.01%	0.02%	0.17%	0.04%	0.03%
Total nonperforming assets    to total assets	0.04%	0.08%	0.20%	0.10%	0.12%

            Other Loans of Concern. In addition to the non-performing assets discussed above, there was also an aggregate of $1.1 million in loans (all were commercial real estate and commercial business lending relationships) with respect to which management has doubts as to the ability of the borrowers to continue to comply with present loan repayment terms, which may ultimately result in the classification of such assets.

            Real Estate Owned. Real estate properties acquired through foreclosure or by deed in lieu of foreclosure are recorded at the lower of cost or fair value, less estimated disposition costs. If fair value at the date of foreclosure is lower than the balance of the related loan, the difference will be charged-off to the allowance for loan losses at the time of transfer. Management periodically updates real estate valuations and if the value declines, a specific provision for losses on such property is established by a charge to operations. At June 30, 2007, the Company's balance of real estate owned totaled $111,000 and included three residential properties.

            Asset Classification. Applicable regulations require that each insured institution review and classify its assets on a regular basis. In addition, in connection with examinations of insured institutions, regulatory examiners have authority to identify problem assets and, if appropriate, require them to be classified. There are three classifications for problem assets: substandard, doubtful and loss. Substandard assets must have one or more defined weaknesses and are

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characterized by the distinct possibility that the insured institution will sustain some loss if the deficiencies are not corrected. Doubtful assets have the weaknesses of substandard assets with the additional characteristic that the weaknesses make collection or liquidation in full on the basis of currently existing facts, conditions and values questionable, and there is a high possibility of loss. An asset classified loss is considered uncollectible and of such little value that continuance as an asset of the institution is not warranted. When an insured institution classifies problem assets as loss, it charges off the balance of the assets. Assets, which do not currently expose the Bank to sufficient risk to warrant classification in one of the aforementioned categories but possess weaknesses, may be designated as special mention. The Bank's determination as to the classification of its assets and the amount of its valuation allowances is subject to review by the FDIC and the Missouri Division of Finance, which can order the establishment of additional loss allowances.

            On the basis of management's review of the assets of the Company, at June 30, 2007, classified assets totaled $1.1 million, or 0.30% of total assets as compared $1.1 million, or 0.27% of total assets at June 30, 2006. Of the amount classified as of June 30, 2007, $1.1 million were substandard and $4,000 were doubtful. The largest classified commercial lending relationship at June 30, 2007 totaled $554,000 and was performing in accordance with its terms. In addition, the Bank had classified two other commercial lending relationships, which in the aggregate totaled $518,000. All three borrowing relationships were classified due to concerns over whether the borrowers were generating sufficient cash flow to repay the loans in accordance with their terms.

            Allowance for Loan Losses. The Bank's allowance for loan losses is established through a provision for loan losses based on management's evaluation of the risk inherent in the loan portfolio and changes in the nature and volume of loan activity, including those loans which are being specifically monitored. Such evaluation, which includes a review of loans for which full collectibility may not be reasonably assured, considers among other matters, the estimated fair value of the underlying collateral, economic conditions, historical loan loss experience and other factors that warrant recognition in providing for an adequate provision for loan losses. These provisions for loan losses are charged against earnings in the year they are established. The Bank had an allowance for loan losses at June 30, 2007, of $2.5 million, which represented 1,712% of nonperforming assets as compared to an allowance of $2.1 million, which represented 765% of nonperforming assets at June 30, 2006. See "Item 3. Legal Proceedings" for a discussion of the fiscal 2005 impact on the Bank of allegedly fraudulent actions by a significant borrower.

            Although management believes that it uses the best information available to determine the allowance, unforeseen market conditions could result in adjustments and net earnings could be significantly affected if circumstances differ substantially from assumptions used in making the final determination. Future additions to the allowance will likely be the result of periodic loan, property and collateral reviews and thus cannot be predicted with certainty in advance.

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            The following table sets forth an analysis of the Bank's allowance for loan losses for the periods indicated. Where specific loan loss reserves have been established, any difference between the loss reserve and the amount of loss realized has been charged or credited to current income.

	Year Ended June 30,
	2007	2006	2005	2004	2003
	(Dollars in thousands)
Allowance at beginning of period	$2,058	$2,016	$1,978	$1,836	$1,569
Recoveries
Residential real estate	1	---	5	---	---
Commercial real estate	---	---	---	---	---
Commercial business	22	11	---	2	20
Consumer	15	54	39	24	42
Total recoveries	38	65	44	26	62
Charge offs:
Residential real estate	83	57	7	39	18
Commercial real estate	---	---	---	9	---
Commercial business	24	374	4,687	16	20
Consumer	56	147	127	95	87
Total charge offs	163	578	4,821	159	125
Net charge offs	(125)	(513)	(4,777)	(133)	(63)
Acquired allowance for losses	---	---	---	---	---
Provision for loan losses	605	555	4,815	275	330
Balance at end of period	$2,538	$2,058	$2,016	$1,978	$1,836
Ratio of allowance to total loans    outstanding at the end of the    period	0.81%	0.73%	0.75%	0.80%	0.81%
Ratio of net charge offs to    average loans outstanding    during the period	0.09%	0.19%	1.84%	0.06%	0.03%

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            The following table sets forth the breakdown of the allowance for loan losses by loan category for the periods indicated.

	At June 30,
	2007		2006		2005		2004		2003
	Amount	Percent of Loans in Each Category to Total Loans	Amount	Percent of Loans in Each Category to Total Loans	Amount	Percent of Loans in Each Category to Total Loans	Amount	Percent of Loans in Each Category to Total Loans	Amount	Percent of Loans in Each Category to Total Loans
	(Dollars in thousands)
Residential real estate	$ 279	42.98%	$ 205	44.07%	$   225	46.04%	$   219	48.29%	$   214	51.59%
Construction	70	2.52	81	3.76	67	3.13	60	2.97	25	1.49
Commercial real estate	774	24.49	619	22.65	595	21.28	634	22.14	546	21.49
Consumer	256	6.10	293	6.97	306	7.84	321	8.48	326	9.07
Commercial business	935	23.91	857	22.55	770	21.71	743	18.12	536	16.36
Unallocated	234	---	3	---	53	---	1	---	189	---
Total allowance for       loan losses	$2,538	100.00%	$2,058	100.00%	$2,016	100.00%	$1,978	100.00%	$1,836	100.00%

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Investment Activities

            General. Under Missouri law, the Bank is permitted to invest in various types of liquid assets, including U.S. Government and State of Missouri obligations, securities of various federal agencies, certain certificates of deposit of insured banks and savings institutions, banker's acceptances, repurchase agreements, federal funds, commercial paper, investment grade corporate debt securities and obligations of States and their political sub-divisions. Generally, the investment policy of the Company is to invest funds among various categories of investments and repricing characteristics based upon the Bank's need for liquidity, to provide collateral for borrowings and public unit deposits, to help reach financial performance targets and to help maintain asset/liability management objectives.

            The Company's investment portfolio is managed in accordance with the Bank's investment policy which was adopted by the Board of Directors of the Bank and is implemented by members of the asset/liability management committee which consists of the President, the CFO, the COO and three outside directors.

            Investment purchases and/or sales must be authorized by the appropriate party, depending on the aggregate size of the investment transaction, prior to any investment transaction. The Board of Directors reviews all investment transactions. All investment purchases are identified as available-for-sale ("AFS") at the time of purchase. The Company has not classified any investment securities as hold-to-maturity over the last five years. Securities classified as "AFS" must be reported at fair value with unrealized gains and losses recorded as a separate component of stockholders' equity. At June 30, 2007, AFS securities totaled $34.9 million (excluding FHLB stock). For information regarding the amortized cost and market values of the Company's investments, see Note 2 of Notes to Consolidated Financial Statements contained in the Annual Report.

            Presently, the Company has no high risk derivative instruments and no outstanding hedging activities. Management has no current plans to purchase derivative instruments or enter into hedging activities.

            Investment and Other Securities. At June 30, 2007, the Company's investment securities portfolio totaled $27.2 million, or 7.2% of total assets as compared to $26.6 million, or 7.6% of total assets at June 30, 2006. During 2007, the Bank had $4.0 million in maturities and $4.3 million in security purchases. Of the securities that matured, $1.0 million was called for early redemption. At June 30, 2007, the investment securities portfolio included $21.5 million in U.S. government and government agency bonds and $2.0 million in municipal bonds, $21.7 million of which are subject to early redemption at the option of the issuer. The remaining portfolio consists of $3.1 million in FHLB stock, and $656,000 in other securities. Based on the projected maturities, the weighted average life of the investment securities portfolio at June 30, 2007, excluding the FHLB stock, was 31 months.

            Mortgage-Backed Securities. At June 30, 2007, MBS totaled $10.7 million, or 2.8%, of total assets as compared to $14.4 million, or 4.1%, of total assets at June 30, 2006. During fiscal 2007, the Bank had maturities and prepayments of $4.9 million and had purchases of $1.0 million in MBS. At June 30, 2007, the MBS portfolio included $397,000 in adjustable-rate MBS, $5.1 million in fixed-rate MBS and $5.2 million in fixed rate collateralized mortgage obligations (CMOs), which passed the Federal Financial Institutions Examination Council's sensitivity test. Based on recent prepayment rates, the weighted average life of the MBS and CMOs at June 30, 2007 was 37 months. Prepayment rates may cause the anticipated average life of MBS portfolio to extend or shorten based upon actual prepayment rates.

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Investment Securities Analysis

            The following table sets forth the Company's investment securities AFS portfolio at carrying value and FHLB stock at the dates indicated.

	At June 30,
	2007		2006		2005
	Fair Value	Percent of Portfolio	Fair Value	Percent of Portfolio	Fair Value	Percent of Portfolio
	(Dollars in thousands)
U.S. government and government    agencies	$21,484	78.91%	$20,164	75.80%	$14,373	69.85%
State and political subdivisions	2,016	7.40	850	3.19	1,600	7.78
FNMA preferred stock	---	---	1,000	3.76	984	4.78
FHLB stock	3,071	11.28	2,641	9.93	3,121	15.16
Other securities	656	2.41	1,948	7.32	500	2.43
Total	$27,232	100.00%	$26,603	100.00%	$20,578	100.00%

            The following table sets forth the maturities and weighted average yields of AFS debt securities in the Company's investment securities portfolio at June 30, 2007.

	Available for Sale Securities June 30, 2007
	Amortized Cost	Fair Value	Weighted Average Yield
	(Dollars in thousands)
U.S. government, government agencies and    other securities:
Due within 1 year	$ 9,490	$ 9,425	3.62%
Due after 1 year but within 5 years	11,382	11,242	4.67
Due after 5 years but within 10 years	999	983	5.68
Due over 10 years	500	495	4.77
Total	22,371	22,145	4.27
State and political subdivisions:
Due within 1 year	---	---	---
Due after 1 year but within 5 years	611	610	4.20
Due after 5 years but within 10 years	---	---	---
Due over 10 years	1,404	1,406	2.17
Total	2,015	2,016	2.78
No stated maturity:
FHLB stock	3,071	3,071	4.25
Total Available for Sale	$27,457	$27,232	4.16%

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            The following table sets forth certain information at June 30, 2007 regarding the dollar amount of MBS and CMOs in the Bank's portfolio based on their contractual terms to maturity, but does not include scheduled payments or potential prepayments. MBS that have adjustable rates are shown at amortized cost as maturing at their next repricing date.

	At June 30, 2007
	(Dollars in thousands)
Amounts due:
Within 1 year	$     454
After 1 year through 3 years	---
After 3 years through 5 years	---
After 5 years	10,597
Total	$11,051

            The following table sets forth the dollar amount of all MBS and CMOs at amortized cost due, based on their contractual terms to maturity, one year after June 30, 2007, which have fixed interest rates and have floating or adjustable rates.

	At June 30, 2007
	(Dollars in thousands)
Interest rate terms on amounts due after 1 year:
Fixed	$10,598
Adjustable	396
Total	$10,994

            The following table sets forth certain information with respect to each security (other than U.S. Government and agency securities) at the dates indicated.

	At June 30,
	2007		2006		2005
	Amortized Cost	Fair Value	Amortized Cost	Fair Value	Amortized Cost	Fair Value
	(Dollars in thousands)
FHLMC certificates	$ 1,229	$ 1,183	$ 1,854	$ 1,771	$  2,705	$  2,673
GNMA certificates	156	156	194	192	259	259
FNMA certificates	4,387	4,213	5,624	5,335	7,127	7,066
Collateralized mortgage obligations issued    by government agencies	5,274	5,171	7,351	7,142	7,319	7,245
Total	$11,051	$10,723	$15,023	$14,440	$17,410	$17,243

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Deposit Activities and Other Sources of Funds

            General. The Company's primary sources of funds are deposits, borrowings, payments of principal and interest on loans, MBS and CMOs, interest and principal received on investment securities and other short-term investments, and funds provided from operating results. Loan repayments are a relatively stable source of funds, while deposit inflows and outflows and loan prepayments are significantly influenced by general market interest rates and overall economic conditions.

            Borrowings, including FHLB advances, have been used at times to provide additional liquidity. Borrowings are used on an overnight or short-term basis to compensate for periodic fluctuations in cash flows, and are used on a longer term basis to fund loan growth and to help manage the Company's sensitivity to fluctuating interest rates.

            Deposits. Substantially all of the Bank's depositors are residents of the State of Missouri or Northeast Arkansas. Deposits are attracted from within the Bank's market area through the offering of a broad selection of deposit instruments, including checking accounts, negotiable order of withdrawal ("NOW") accounts, money market deposit accounts, saving accounts, certificates of deposit and retirement savings plans. Deposit account terms vary according to the minimum balance required, the time periods the funds may remain on deposit and the interest rate, among other factors. In determining the terms of its deposit accounts, the Bank considers current market interest rates, profitability to the Bank, managing interest rate sensitivity and its customer preferences and concerns. The Bank's Asset/Liability Committee regularly reviews its deposit mix and pricing.

            The Bank will periodically promote a particular deposit product as part of the Bank's overall marketing plan. Deposit products have been promoted through various mediums, which include radio and newspaper advertisements. The emphasis of these campaigns is to increase consumer awareness and market share of the Bank.

            The flow of deposits is influenced significantly by general economic conditions, changes in prevailing interest rates, and competition. The Bank has become more susceptible to short-term fluctuations in deposit flows, as customers have become more interest rate conscious. Based on its experience, the Bank believes that its deposits are relatively stable sources of funds. However, the ability of the Bank to attract and maintain certificates of deposit, and the rates paid on these deposits, has been and will continue to be significantly affected by market conditions.

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Weighted Average Interest Rate	Term	Category	Minimum Amount	Balance	Percentage of Total Deposits
			(In thousands)
0.00%	None	Non-interest Bearing	$   100	$22,276	8.25%
1.48	None	NOW Accounts	100	31,123	11.52
3.89	None	Savings Accounts	100	78,908	29.23
1.44	None	Money Market Deposit Accounts	1,000	7,212	2.67
		Certificates of Deposit
5.15%	30-day	30-day Fixed-term/Fixed rate	1,000	100	0.04%
4.90	91-day	Fixed-term/Fixed-rate	1,000	1,385	0.51
3.26	91-day	IRA Fixed-term/Fixed-rate	1,000	53	0.62
4.54	5 month	Fixed-term/Fixed-rate	1,000	663	0.25
4.86	6 month	Fixed-term/Fixed-rate	1,000	4,055	1.50
4.72	6 month	IRA Fixed-term/Fixed-rate	1,000	315	0.12
5.12	7 month	Fixed-term/Fixed-rate	1,000	46,723	17.31
5.09	7 month	IRA Fixed-term/Fixed-rate	1,000	4,749	1.76
5.05	9 month	Fixed-term/Fixed-rate	1,000	4,138	1.53
4.92	9 month	IRA Fixed-term/Fixed-rate	1,000	1,124	0.42
5.08	11 month	Fixed-term/Fixed-rate	1,000	7,707	2.85
5.04	11 month	IRA Fixed-term/Fixed-rate	1,000	1,514	0.56
5.15	12 month	Fixed-term/Fixed-rate	1,000	27,640	10.23
5.12	12 month	IRA Fixed-term/Fixed-rate	1,000	4,404	1.63
5.13	13 month	Fixed-term/Fixed-rate	1,000	4,115	1.52
5.16	13 month	IRA Fixed-term/Fixed-rate	1,000	121	0.04
4.26	15 month	Fixed-term/Fixed-rate	1,000	2,227	0.82
4.45	15 month	IRA Fixed-term/Fixed-rate	1,000	443	0.16
4.55	18 month	Fixed-term/Fixed-rate	1,000	438	0.16
4.13	18 month	IRA Fixed-term/Fixed-rate	1,000	229	0.08
4.17	24 month	Fixed-term/Fixed-rate	1,000	2,120	0.78
3.90	24 month	IRA Fixed-term/Fixed-rate	1,000	158	0.06
4.49	24 month	IRA Fixed-term/Variable rate	1,000	318	0.12
3.70	25 month	Fixed-term/Fixed-rate	1,000	226	0.08
3.70	25 month	IRA Fixed-term/Fixed-rate	1,000	7	---
3.46	29 month	Fixed-term/Fixed-rate	1,000	1	---
3.87	30 month	Fixed-term/Fixed-rate	1,000	261	0.10
3.04	35 month	Fixed-term/Fixed-rate	1,000	86	0.03
3.37	35 month	IRA Fixed-term/Fixed-rate	1,000	114	0.04
3.76	36 month	Fixed-term/Fixed-rate	1,000	2,292	0.85
3.86	36 month	IRA Fixed-term/Fixed-rate	1,000	1,938	0.72
3.59	48 month	Fixed-term/Fixed-rate	1,000	504	0.19
3.69	48 month	IRA Fixed-term/Fixed-rate	1,000	116	0.04
4.53	55 month	Fixed-term/Fixed-rate	1,000	1,173	0.43
4.64	55 month	IRA Fixed-term/Fixed-rate	1,000	241	0.04
4.22	60 month	Fixed-term/Fixed-rate	1,000	6,799	2.52
4.02	60 month	IRA Fixed-term/Fixed-rate	1,000	1,997	0.74
4.00	84 month	Fixed-term/Fixed-rate	1,000	74	0.03
3.96	96 month	Fixed-term/Fixed-rate	1,000	1	---
				$270,088	100.00%

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            The following table indicates the amount of the Bank's jumbo certificates of deposit by time remaining until maturity as of June 30, 2007. Jumbo certificates of deposit require minimum deposits of $100,000 and rates paid on such accounts are negotiable.

Maturity Period	Amount
	(Dollars in thousands)
Three months or less	$16,940
Over three through six months	11,801
Over six through twelve months	9,938
Over 12 months	2,769
Total	$41,448

Time Deposits by Rates

            The following table sets forth the time deposits in the Bank classified by rates at the dates indicated.

	At June 30,
	2007	2006	2005
	(Dollars in thousands)
1.00 - 1.99%	$         ---	$         ---	$     9,291
2.00 - 2.99%	1,087	9,475	40,481
3.00 - 3.99%	6,558	56,044	36,306
4.00 - 4.99%	27,805	49,635	10,600
5.00 - 5.99%	95,119	10,435	3,036
6.00 - 6.99%	---	---	213
Total	$130,569	$125,589	$99,927

            The following table sets forth the amount and maturities of all time deposits at June 30, 2007.

	Amount Due
	Less Than One Year	1-2 Years	2-3 Years	3-4 Years	After 4 Years	Total	Percent of Total Certificate Accounts
	(Dollars in thousands)
2.00 - 2.99%	$    1,061	$        26	$       ---	$       ---	$       ---	$    1,087	0.83%
3.00 - 3.99%	3,890	2,293	374	1	---	6,558	5.02
4.00 - 4.99%	18,557	1,961	3,496	1,788	2,003	27,805	21.30
5.00 - 5.99%	43,574	710	33	14	788	95,119	72.85
Total	$117,082	$   4,990	$  3,903	$  1,803	$ 2,791	$130,569	100.00%

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Deposit Flow

            The following table sets forth the balance of savings deposits in the various types of savings accounts offered by the Bank at the dates indicated.

	At June 30,
	2007			2006			2005
	Amount	Percent of Total	Increase (Decrease)	Amount	Percent of Total	Increase (Decrease)	Amount	Percent of Total	Increase (Decrease)
	(Dollars in thousands)
Noninterest bearing	$ 22,276	8.25%	$  3,566	$  18,710	7.25%	$  3,052	$  15,658	6.97%	$  1,515
NOW checking	31,123	11.52	86	31,037	12.03	2,066	28,971	12.90	(1,607)
Savings accounts	78,908	29.22	5,083	73,825	28.61	8,275	65,550	29.18	636
Money market deposit	7,212	2.67	(1,646)	8,908	3.45	(5,652)	14,560	6.48	(5,171)
Fixed-rate certificates    which mature(1):
Within one year	116,905	43.88	3,953	112,952	43.77	52,447	60,505	26.93	6,748
Within three years	8,753	3.24	(1,247)	10,000	3.87	(25,214)	35,214	15.67	12,503
After three years	4,594	1.70	2,271	2,323	0.90	(1,542)	3,865	1.72	(1,883)
Variable-rate certificates    which mature within    one year	177	0.02	84	148	0.06	(54)	202	0.09	40
Variable-rate certificates    which mature within    two years	140		(26)	166	0.06	25	141	0.06	(74)
Total	$270,088	100.00%	$12,019	$258,069	100.00%	$33,403	$224,666	100.00%	$12,707

___________________________

⁽¹⁾ At June 30, 2007, 2006 and 2005, certificates in excess of $100,000 totaled $41.4 million, $47.5 million and $33.7 million, respectively.

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            The following table sets forth the deposit activities of the Bank for the periods indicated.

	At June 30,
	2007	2006	2005
	(Dollars in thousands)
Beginning Balance	$258,069	$224,666	$211,959
Net increase before interest credited	4,198	27,511	9,105
Interest credited	7,821	5,892	3,602
Net increase in deposits	12,019	33,403	12,707
Ending balance	$270,088	$258,069	$224,666

            In the unlikely event the Bank is liquidated, depositors will be entitled to payment of their deposit accounts prior to any payment being made to the Company as the sole stockholder of the Bank.

            Borrowings. As a member of the FHLB of Des Moines, the Bank has the ability to apply for FHLB advances. These advances are available under various credit programs, each of which has its own maturity, interest rate and repricing characteristics. Additionally, FHLB advances have prepayment penalties as well as limitations on size or term. In order to utilize FHLB advances, the Bank must be a member of the FHLB system, have sufficient collateral to secure the requested advance and own stock in the FHLB equal to 4.45% of the amount borrowed. See "REGULATION - The Bank -- Federal Home Loan Bank System."

            Although deposits are the Bank's primary and preferred source of funds, the Bank actively uses FHLB advances. The Bank's general policy has been to utilize borrowings to meet short-term liquidity needs, or to provide a longer-term source of funding loan growth when other cheaper funding sources are unavailable or to aide in asset/liability management. As of June 30, 2007, the Bank had $54.0 million in FHLB advances, of which $44.0 million had an original term of ten years, subject to early redemption by the FHLB after an initial period of one to five years, $3.0 million in borrowings, all of which had fixed rates and original maturities of five to six years, and $7.0 million in short-term borrowings. In order for the Bank to borrow from the FHLB, it has pledged $121.7 million of its residential loans to the FHLB and has purchased $3.1 million in FHLB stock. At June 30, 2007, the Bank had additional borrowing capacity on its pledged residential loans from the FHLB of $42.4 million as compared to $51.2 million at June 30, 2006.

            Southern Missouri Statutory Trust I, a Delaware business trust subsidiary of the Company, issued $7.0 million in Floating Rate Capital Securities (the "Trust Preferred Securities") with a liquidation value of $1,000 per share in March, 2004. The securities are due in 30 years, redeemable after five years and bear interest at a floating rate based on LIBOR. The securities represent undivided beneficial interests in the trust, which was established by Southern Missouri Bancorp for the purpose of issuing the securities. The Trust Preferred Securities were sold in a private transaction exempt from registration under the Securities Act of 1933, as amended (the "Act") and have not been registered under the Act. The securities may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements.

            Southern Missouri Statutory Trust I used the proceeds of the sale of the Trust Preferred Securities to purchase Junior Subordinated Debentures of Southern Missouri Bancorp. Southern Missouri Bancorp is using the net proceeds for working capital and investment in its subsidiaries. Trust Preferred Securities qualify as Tier I Capital for regulatory purposes.

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            The following table sets forth certain information regarding short-term borrowings by the Bank at the end of and during the periods indicated:

			Year Ended June 30,
			2007	2006	2005
			(Dollars in thousands)
Year end balances
	Short-term FHLB advances		$  7,000	$       ---	$  9,500
	Securities sold under agreements to repurchase		17,758	11,296	10,757
		Total short-term borrowings	$24,758	$11,296	$20,257
	Weighted average rate at year end		5.06%	4.69%	3.16%

            The following table sets fort certain information as to the Bank's borrowings for the periods indicated:

		Year Ended June 30,
		2007	2006	2005
		(Dollars in thousands)
FHLB advances
	Daily average balance	$62,906	$54,642	$60,263
	Weighted average interest rate	5.40%	5.28%	4.93%
	Maximum outstanding at any month end	$71,150	$67,750	$68,750
Securities sold under agreements to repurchase
	Daily average balance	$11,863	$10,420	$  8,847
	Weighted average interest rate	4.84%	3.84%	2.11%
	Maximum outstanding at any month end	$17,758	$12,589	$13,231
Subordinated Debt
	Daily average balance	$  7,217	$  7,217	$  7,217
	Weighted average interest rate	8.24%	7.10%	5.12%
	Maximum outstanding at month end	$  7,217	$  7,217	$  7,217

Subsidiary Activities

            The Bank has one subsidiary, SMS Financial Services, Inc., which had no assets or liabilities at June 30, 2007 and is currently inactive. The activities of the subsidiary are not significant to the financial condition or results of the Bank's operations.

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REGULATION

The Bank

            General. As a state-chartered, federally-insured trust company with banking powers, the Bank is subject to extensive regulation. Lending activities and other investments must comply with various statutory and regulatory requirements, including prescribed minimum capital standards. The Bank is regularly examined by the FDIC and the Missouri Division of Finance and files periodic reports concerning the Bank's activities and financial condition with its regulators. The Bank's relationship with depositors and borrowers also is regulated to a great extent by both federal law and the laws of Missouri, especially in such matters as the ownership of savings accounts and the form and content of mortgage documents.

            Federal and state banking laws and regulations govern all areas of the operation of the Bank, including reserves, loans, mortgages, capital, issuance of securities, payment of dividends and establishment of branches. Federal and state bank regulatory agencies also have the general authority to limit the dividends paid by insured banks and bank holding companies if such payments should be deemed to constitute an unsafe and unsound practice. The respective primary federal regulators of the Company and the Bank have authority to impose penalties, initiate civil and administrative actions and take other steps intended to prevent banks from engaging in unsafe or unsound practices.

            State Regulation and Supervision. As a state-chartered trust company with banking powers, the Bank is subject to applicable provisions of Missouri law and the regulations of the Missouri Division of Finance adopted thereunder. Missouri law and regulations govern the Bank's ability to take deposits and pay interest thereon, to make loans on or invest in residential and other real estate, to make consumer loans, to invest in securities, to offer various banking services to its customers, and to establish branch offices. The Bank is subject to periodic examination and reporting requirements by and of the Missouri Division of Finance.

            Federal Securities Law. The stock of the Company is registered with the SEC under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). As such, the Company is subject to the information, proxy solicitation, insider trading restrictions and other requirements of the SEC under the Exchange Act.

            The Company's stock held by persons who are affiliates (generally officers, directors and principal stockholders) of the Company may not be resold without registration or unless sold in accordance with certain resale restrictions. If the Company meets specified current public information requirements, each affiliate of the Company is able to sell in the public market, without registration, a limited number of shares in any three-month period.

            Federal Reserve System. The Federal Reserve Board ("FRB") requires all depository institutions to maintain non-interest bearing reserves at specified levels against their transaction accounts (checking, NOW and Super NOW checking accounts). At June 30, 2007, the Bank was in compliance with these reserve requirements.

            The Bank is authorized to borrow from the Federal Reserve Bank "discount window," but FRB regulations require associations to exhaust other reasonable alternative sources of funds, including FHLB borrowings, before borrowing from the FRB.

            Federal Home Loan Bank System. The Bank is a member of the FHLB of Des Moines, which is one of 12 regional FHLBs that administers the home financing credit function of financial institutions. Each FHLB serves as a reserve or central bank for its members within its assigned region. It is funded primarily from proceeds derived from the sale of consolidated obligations of the FHLB System. It makes loans to members (i.e., advances) in accordance with policies and procedures established by the board of directors of the FHLB, which are subject to the oversight of the Federal Housing Finance Board. All advances from the FHLB are required to be fully secured by sufficient collateral as determined by the FHLB. In addition, all long-term advances are required to provide funds for residential home financing. As a member, the Bank is required to purchase and maintain stock in the FHLB of Des Moines. At June 30, 2007, the Bank had $3.1 million in FHLB stock, which was in compliance with this requirement. The Bank is paid a quarterly dividend on this stock which averaged 4.25% in 2007.

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            Under federal law, the FHLBs are required to provide funds for the resolution of troubled savings associations and to contribute to low- and moderately priced housing programs through direct loans or interest subsidies on advances targeted for community investment and low- and moderate-income housing projects. These contributions have adversely affected the level of FHLB dividends paid and could continue to do so in the future. These contributions could also have an adverse effect on the value of FHLB stock in the future. A reduction in value of the Bank's FHLB stock may result in a corresponding reduction in the Bank's capital.

            Deposit Insurance. The FDIC is an independent federal agency that insures the deposits, up to prescribed statutory limits, of depository institutions through the DIF. As insurer of the Bank's deposits, the FDIC has examination, supervisory and enforcement authority over the Bank.

            The Bank's accounts are insured by the DIF to the maximum extent permitted by law. The Bank pays deposit insurance premiums based on a risk-based assessment system established by the FDIC. Under applicable regulations, institutions are assigned to one of three capital groups that are based solely on the level of an institution's capital -- "well capitalized," "adequately capitalized," and "undercapitalized" -- which are defined in the same manner as the regulations establishing the prompt corrective action system, as discussed below. These three groups are then divided into three subgroups, which reflect varying levels of supervisory concern, from those which are considered to be healthy to those which are considered to be of substantial supervisory concern.

            Prior to the Federal Deposit Insurance Reform Act of 2005, the Bank participated in the Savings Association Insurance Fund ("SAIF"). Pursuant to the Deposit Insurance Funds Act ("DIF Act"), which was enacted on September 30, 1996, the FDIC imposed a special assessment on each depository institution with SAIF-assessable deposits, which resulted in the SAIF achieving its designated reserve ratio. In connection therewith, the FDIC reduced the assessment schedule for SAIF members, effective January 1, 1997, to a range of 0% to 0.27%, with most institutions, including the Bank, paying 0%. This assessment schedule has been the same as that for the Bank Insurance Fund ("BIF"), which reached its designated reserve ratio in 1995. In addition, since January 1, 1997, DIF members are charged an assessment based on DIF-assessable deposits for the purpose of paying interest on the obligations issued by the Financing Corporation ("FICO") in the 1980s to help fund the thrift industry cleanup. The FICO assessment is currently equal to about 1.60 basis points for each $100 in domestic deposits for institutions that were insured through the BIF and SAIF.

            Under the Federal Deposit Insurance Reform Act of 2005, the FDIC promulgated new regulations on risk-based deposit insurance assessments. The FDIC created four Risk Categories. Risk Category I applies to institutions that are well capitalized and have composite CAMELS ratings of 1 or 2. CAMELS is an acronym for the six supervisory ratings assigned in examinations for an institution's capital adequacy, asset quality, management, earnings, liquidity and sensitivity to market risk. Annual base rate assessments for Risk Category I will range between 2 and 4 basis points, applied to an institution's assessment base, which is generally its deposits. Within Risk Category I, the precise base rate for an institution will be determined for an institution with less than $10 billion in assets by a formula using the institution's CAMELS ratings, certain financial ratios and other factors. The Federal Deposit Insurance Corporation has stated that currently, 95% of institutions it insures will be in Risk Category I. Risk Categories II, III and IV would apply to institutions with progressively greater risk of loss to the deposit insurance fund. The proposed base rates for these categories will be 7, 25 and 40 basis points, respectively. The FDIC has authority to increase the base assessment rates by up to 3 basis points without new regulations.

           Under the new regulations, the Bank has a one-time credit based on previous assessments. The Bank anticipates the credit will be exhausted in 2008 and will expense additional deposit insurance assessments beginning in 2009.

            The FDIC may terminate the deposit insurance of any insured depository institution if it determines after a hearing that the institution has engaged or is engaging in unsafe or unsound practices, is in an unsafe or unsound condition to continue operations, or has violated any applicable law, regulation, order or any condition imposed by an agreement with the FDIC. It also may suspend deposit insurance temporarily during the hearing process for the permanent termination of insurance, if the institution has no tangible capital. If insurance of accounts is terminated,

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the accounts at the institution at the time of termination, less subsequent withdrawals, shall continue to be insured for a period of six months to two years, as determined by the FDIC. Management is aware of no existing circumstances that could result in termination of the deposit insurance of the Bank.

            Prompt Corrective Action. Under the Federal Deposit Insurance Act ("FDIA"), each federal banking agency is required to implement a system of prompt corrective action for institutions that it regulates. The federal banking agencies have promulgated substantially similar regulations to implement this system of prompt corrective action. Under the regulations, an institution shall be deemed to be (i) "well capitalized" if it has a total risk-based capital ratio of 10.0% or more, has a Tier I risk-based capital ratio of 6.0% or more, has a leverage ratio of 5.0% or more and is not subject to specified requirements to meet and maintain a specific capital level for any capital measure; (ii) "adequately capitalized" if it has a total risk-based capital ratio of 8.0% or more, has a Tier I risk-based capital ratio of 4.0% or more, has a leverage ratio of 4.0% or more (3.0% under certain circumstances) and does not meet the definition of "well capitalized;" (iii) "undercapitalized" if it has a total risk-based capital ratio that is less than 8.0%, has a Tier I risk-based capital ratio that is less than 4.0% or has a leverage ratio that is less than 4.0% (3.0% under certain circumstances); (iv) "significantly undercapitalized" if it has a total risk-based capital ratio that is less than 6.0%, has a Tier I risk-based capital ratio that is less than 3.0% or has a leverage ratio that is less than 3.0%; and (v) "critically undercapitalized" if it has a ratio of tangible equity to total assets that is equal to or less than 2.0%.

            A federal banking agency may, after notice and an opportunity for a hearing, reclassify a well capitalized institution as adequately capitalized and may require an adequately capitalized institution or an undercapitalized institution to comply with supervisory actions as if it were in the next lower category if the institution is in an unsafe or unsound condition or has received in its most recent examination, and has not corrected, a less than satisfactory rating for asset quality, management, earnings or liquidity. (The FDIC may not, however, reclassify a significantly undercapitalized institution as critically undercapitalized.)

            An institution generally must file a written capital restoration plan that meets specified requirements, as well as a performance guaranty by each company that controls the institution, with the appropriate federal banking agency within 45 days of the date that the institution receives notice or is deemed to have notice that it is undercapitalized, significantly undercapitalized or critically undercapitalized. Immediately upon becoming undercapitalized, an institution shall become subject to various mandatory and discretionary restrictions on its operations.

            At June 30, 2007, the Bank was categorized as "well capitalized" under the prompt corrective action regulations of the FDIC.

            Standards for Safety and Soundness. The federal banking regulatory agencies have prescribed, by regulation, standards for all insured depository institutions relating to: (i) internal controls, information systems and internal audit systems; (ii) loan documentation; (iii) credit underwriting; (iv) interest rate risk exposure; (v) asset growth; (vi) asset quality; (vii) earnings; and (viii) compensation, fees and benefits ("Guidelines"). The Guidelines set forth the safety and soundness standards that the federal banking agencies use to identify and address problems at insured depository institutions before capital becomes impaired. If the FDIC determines that the Bank fails to meet any standard prescribed by the Guidelines, the agency may require the Bank to submit to the agency an acceptable plan to achieve compliance with the standard. FDIC regulations establish deadlines for the submission and review of such safety and soundness compliance plans.

            Capital Requirements. The FDIC's minimum capital standards applicable to FDIC-regulated banks and savings banks require the most highly-rated institutions to meet a "Tier 1" leverage capital ratio of at least 3% of total assets. Tier 1 (or "core capital") consists of common stockholders' equity, noncumulative perpetual preferred stock and minority interests in consolidated subsidiaries minus all intangible assets other than limited amounts of purchased mortgage servicing rights and certain other accounting adjustments. All other banks must have a Tier 1 leverage ratio of at least 100-200 basis points above the 3% minimum. The FDIC capital regulations establish a minimum leverage ratio of not less than 4% for banks that are not the most highly rated or are anticipating or experiencing significant growth.

            The FDIC's capital regulations require higher capital levels for banks which exhibit more than a moderate degree of risk or exhibit other characteristics which necessitate that higher than minimum levels of capital be

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maintained. Any insured bank with a Tier 1 capital to total assets ratio of less than 2% is deemed to be operating in an unsafe and unsound condition pursuant to Section 8(a) of the FDIA unless the insured bank enters into a written agreement, to which the FDIC is a party, to correct its capital deficiency. Insured banks operating with Tier 1 capital levels below 2% (and which have not entered into a written agreement) are subject to an insurance removal action. Insured banks operating with lower than the prescribed minimum capital levels generally will not receive approval of applications submitted to the FDIC. Also, inadequately capitalized state nonmember banks will be subject to such administrative action as the FDIC deems necessary.

            FDIC regulations also require that banks meet a risk-based capital standard. The risk-based capital standard requires the maintenance of total capital (which is defined as Tier 1 capital and Tier 2 or supplementary capital) to risk weighted assets of 8% and Tier 1 capital to risk-weighted assets of 4%. In determining the amount of risk-weighted assets, all assets, plus certain off balance sheet items, are multiplied by a risk-weight of 0% to 100%, based on the risks the FDIC believes are inherent in the type of asset or item. The components of Tier 1 capital are equivalent to those discussed above under the 3% leverage requirement. The components of supplementary capital currently include cumulative perpetual preferred stock, adjustable-rate perpetual preferred stock, mandatory convertible securities, term subordinated debt, intermediate-term preferred stock and allowance for possible loan and lease losses. Allowance for possible loan and lease losses includable in supplementary capital is limited to a maximum of 1.25% of risk-weighted assets. Overall, the amount of capital counted toward supplementary capital cannot exceed 100% of Tier 1 capital. The FDIC includes in its evaluation of a bank's capital adequacy an assessment of the exposure to declines in the economic value of the bank's capital due to changes in interest rates. However, no measurement framework for assessing the level of a bank's interest rate risk exposure has been codified. In the future, the FDIC will issue a proposed rule that would establish an explicit minimum capital charge for interest rate risk, based on the level of a bank's measured interest rate risk exposure.

            An undercapitalized, significantly undercapitalized, or critically undercapitalized institution is required to submit an acceptable capital restoration plan to its appropriate federal banking agency. The plan must specify (i) the steps the institution will take to become adequately capitalized, (ii) the capital levels to be attained each year, (iii) how the institution will comply with any regulatory sanctions then in effect against the institution and (iv) the types and levels of activities in which the institution will engage. The banking agency may not accept a capital restoration plan unless the agency determines, among other things, that the plan "is based on realistic assumptions, and is likely to succeed in restoring the institution's capital" and "would not appreciably increase the risk...to which the institution is exposed."

            The FDIA provides that the appropriate federal regulatory agency must require an insured depository institution that is significantly undercapitalized or is undercapitalized and either fails to submit an acceptable capital restoration plan within the time period allowed or fails in any material respect to implement a capital restoration plan accepted by the appropriate federal banking agency to take one or more of the following actions: (i) sell enough shares, including voting shares, to become adequately capitalized; (ii) merge with (or be sold to) another institution (or holding company), but only if grounds exist for appointing a conservator or receiver; (iii) restrict certain transactions with banking affiliates as if the "sister bank" requirements of Section 23A of the Federal Reserve Act ("FRA") did not exist; (iv) otherwise restrict transactions with bank or non-bank affiliates; (v) restrict interest rates that the institution pays on deposits to "prevailing rates" in the institution's region; (vi) restrict asset growth or reduce total assets; (vii) alter, reduce or terminate activities; (viii) hold a new election of directors; (ix) dismiss any director or senior executive officer who held office for more than 180 days immediately before the institution became undercapitalized; (x) employ "qualified" senior executive officers; (xi) cease accepting deposits from correspondent depository institutions; (xii) divest certain non-depository affiliates which pose a danger to the institution; (xiii) be divested by a parent holding company; and (xiv) take any other action which the agency determines would better carry out the purposes of the Prompt Corrective Action provisions. See "-- Prompt Corrective Action."

            The FDIC has adopted the Federal Financial Institutions Examination Council's recommendation regarding the adoption of Statement of Financial Accounting Standards ("SFAS") No. 115, "Accounting for Certain Investments in Debt and Equity Securities." Specifically, the agencies determined that net unrealized holding gains or losses on available for sale debt and equity securities should not be included when calculating core and risk-based capital ratios.

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            FDIC capital requirements are designated as the minimum acceptable standards for banks whose overall financial condition is fundamentally sound, which are well-managed and have no material or significant financial weaknesses. The FDIC capital regulations state that, where the FDIC determines that the financial history or condition, including off-balance sheet risk, managerial resources and/or the future earnings prospects of a bank are not adequate and/or a bank has a significant volume of assets classified substandard, doubtful or loss or otherwise criticized, the FDIC may determine that the minimum adequate amount of capital for that bank is greater than the minimum standards established in the regulation.

            The Bank's management believes that, under the current regulations, the Bank will continue to meet its minimum capital requirements in the foreseeable future. However, events beyond the control of the Bank, such as a downturn in the economy in areas where the Bank has most of its loans, could adversely affect future earnings and, consequently, the ability of the Bank to meet its capital requirements.

            For a discussion of the Bank's capital position relative to its FDIC Capital requirements at June 30, 2007, see Note 12 of the Notes to the Consolidated Financial Statements in the annual report to stockholders included in Exhibit 13 and hereby incorporated by reference.

            Loans to One Borrower. As a result of the 10(1) Election made by the Bank in connection with the Charter Conversion (see "Item 1. Description of Business - General,") the Bank remains subject to the loans to one borrower regulations applicable to federal savings associations.

            Activities and Investments of Insured State-Chartered Banks. The FDIA generally limits the activities and equity investments of FDIC-insured, state-chartered banks to those that are permissible for national banks. Under regulations dealing with equity investments, an insured state bank generally may not directly or indirectly acquire or retain any equity investment of a type, or in an amount, that is not permissible for a national bank. An insured state bank is not prohibited from, among other things, (i) acquiring or retaining a majority interest in a subsidiary, (ii) investing as a limited partner in a partnership the sole purpose of which is direct or indirect investment in the acquisition, rehabilitation or new construction of a qualified housing project, provided that such limited partnership investments may not exceed 2% of the bank's total assets, (iii) acquiring up to 10% of the voting stock of a company that solely provides or reinsures directors', trustees' and officers' liability insurance coverage or bankers' blanket bond group insurance coverage for insured depository institutions, and (iv) acquiring or retaining the voting shares of a depository institution if certain requirements are met.

            Subject to certain regulatory exceptions, FDIC regulations provide that an insured state-chartered bank may not, directly, or indirectly through a subsidiary, engage as "principal" in any activity that is not permissible for a national bank unless the FDIC has determined that such activities would pose no risk to the insurance fund of which it is a member and the bank is in compliance with applicable regulatory capital requirements. Any insured state-chartered bank directly or indirectly engaged in any activity that is not permitted for a national bank or for which the FDIC has granted and exception must cease the impermissible activity.

            Affiliate Transactions. The Company and the Bank are legal entities separate and distinct. Various legal limitations restrict the Bank from lending or otherwise supplying funds to the Company (an "affiliate"), generally limiting such transactions with the affiliate to 10% of the bank's capital and surplus and limiting all such transactions to 20% of the bank's capital and surplus. Such transactions, including extensions of credit, sales of securities or assets and provision of services, also must be on terms and conditions consistent with safe and sound banking practices, including credit standards, that are substantially the same or at least as favorable to the bank as those prevailing at the time for transactions with unaffiliated companies.

            Federally insured banks are subject, with certain exceptions, to certain restrictions on extensions of credit to their parent holding companies or other affiliates, on investments in the stock or other securities of affiliates and on the taking of such stock or securities as collateral from any borrower. In addition, such banks are prohibited from engaging in certain tie-in arrangements in connection with any extension of credit or the providing of any property or service.

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            Community Reinvestment Act. Banks are also subject to the provisions of the Community Reinvestment Act of 1977 ("CRA"), which requires the appropriate federal bank regulatory agency, in connection with its regular examination of a bank, to assess the bank's record in meeting the credit needs of the community serviced by the bank, including low and moderate income neighborhoods. The regulatory agency's assessment of the bank's record is made available to the public. Further, such assessment is required of any bank which has applied, among other things, to establish a new branch office that will accept deposits, relocate an existing office or merge or consolidate with, or acquire the assets or assume the liabilities of, a federally regulated financial institution. The Bank received a "satisfactory" rating during its most recent CRA examination.

            Dividends. Dividends from the Bank constitute the major source of funds for dividends that may be paid by the Company. The amount of dividends payable by the Bank to the Company depends upon the Bank's earnings and capital position, and is limited by federal and state laws, regulations and policies.

            The amount of dividends actually paid during any one period will be strongly affected by the Bank's management policy of maintaining a strong capital position. Federal law further provides that no insured depository institution may make any capital distribution (which would include a cash dividend) if, after making the distribution, the institution would be "undercapitalized," as defined in the prompt corrective action regulations. Moreover, the federal bank regulatory agencies also have the general authority to limit the dividends paid by insured banks if such payments should be deemed to constitute an unsafe and unsound practice.

The Company

            The Company is a bank holding company that has elected to be treated as a financial holding company by the FRB. Financial holding companies are subject to comprehensive regulation by the FRB under the Bank Holding Company Act, and the regulations of the FRB. As a financial holding company, the Company is required to file reports with the FRB and such additional information as the FRB may require, and is subject to regular examinations by the FRB. The FRB also has extensive enforcement authority over financial holding companies, including, among other things, the ability to assess civil money penalties, to issue cease and desist or removal orders and to require that a holding company divest subsidiaries (including its bank subsidiaries). In general, enforcement actions may be initiated for violations of law and regulations and unsafe or unsound practices.

            Under FRB policy, a financial holding company must serve as a source of strength for its subsidiary banks. Under this policy the FRB may require, and has required in the past, that a holding company to contribute additional capital to an undercapitalized subsidiary bank.

            Under the Bank Holding Company Act, a financial holding company must obtain FRB approval before: (i) acquiring, directly or indirectly, ownership or control of any voting shares of another bank or bank holding company if, after such acquisition, it would own or control more than 5% of such shares (unless it already owns or controls the majority of such shares); (ii) acquiring all or substantially all of the assets of another bank or bank or financial holding company; or (iii) merging or consolidating with another bank or financial holding company.

            The Bank Holding Company Act also prohibits a financial holding company generally from engaging directly or indirectly in activities other than those involving banking, activities closely related to banking that are permitted for a bank holding company, securities, insurance or merchant banking.

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TAXATION

Federal Taxation

            General. The Company and the Bank report their income on a fiscal year basis using the accrual method of accounting and are subject to federal income taxation in the same manner as other corporations with some exceptions, including particularly the Bank's reserve for bad debts discussed below. The following discussion of tax matters is intended only as a summary and does not purport to be a comprehensive description of the tax rules applicable to the Bank or the Company.

            Bad Debt Reserve. Historically, savings institutions, such as the Bank used to be, which met certain definitional tests primarily related to their assets and the nature of their business ("qualifying thrift"), were permitted to establish a reserve for bad debts and to make annual additions thereto, which may have been deducted in arriving at their taxable income. The Bank's deductions with respect to their loans, which are generally loans secured by certain interests in real property, are computed using an amount based on the Bank's actual loss experience, in accordance with IRS Section 585(B)(2). Due to the Bank's loss experience, the Bank generally recognized a bad debt deduction equal to their net charge-offs.

            Distributions. To the extent that the Bank makes "nondividend distributions" to the Company, such distributions will be considered to result in distributions from the balance of its bad debt reserve as of December 31, 1987 (or a lesser amount if the Bank's loan portfolio decreased since December 31, 1987) and then from the supplemental reserve for losses on loans ("Excess Distributions"), and an amount based on the Excess Distributions will be included in the Bank's taxable income. Nondividend distributions include distributions in excess of the Bank's current and accumulated earnings and profits, distributions in redemption of stock and distributions in partial or complete liquidation. However, dividends paid out of the Bank's current or accumulated earnings and profits, as calculated for federal income tax purposes, will not be considered to result in a distribution from the Bank's bad debt reserve. The amount of additional taxable income created from an Excess Distribution is an amount that, when reduced by the tax attributable to the income, is equal to the amount of the distribution. Thus, if the Bank makes a "nondividend distribution," then approximately one and one-half times the Excess Distribution would be includable in gross income for federal income tax purposes, assuming a 34% corporate income tax rate (exclusive of state and local taxes). See "REGULATION" for limits on the payment of dividends by the Bank. The Bank does not intend to pay dividends that would result in a recapture of any portion of its tax bad debt reserve.

            Corporate Alternative Minimum Tax. The Internal Revenue Code imposes a tax on alternative minimum taxable income ("AMTI") at a rate of 20%. In addition, only 90% of AMTI can be offset by net operating loss carry-overs. AMTI is increased by an amount equal to 75% of the amount by which the Bank's adjusted current earnings exceeds its AMTI (determined without regard to this preference and prior to reduction for net operating losses).

            Dividends-Received Deduction. The Company may exclude from its income 100% of dividends received from the Bank as a member of the same affiliated group of corporations. The corporate dividends-received deduction is generally 70% in the case of dividends received from unaffiliated corporations with which the Company and the Bank will not file a consolidated tax return, except that if the Company or the Bank owns more than 20% of the stock of a corporation distributing a dividend, then 80% of any dividends received may be deducted.

Missouri Taxation

            Missouri-based banks, such as the Bank, are subject to a Missouri bank franchise and income tax. The Missouri bank franchise tax is based on the Bank's taxable income, however, it is reduced by its portion of the Missouri income tax.

            The Missouri franchise tax is imposed on (i) the bank's taxable income at the rate of 7% of the taxable income (determined without regard for any net operating losses), less credits for all other state or local taxes, including income tax, however, the credits excludes taxes paid for real estate, unemployment taxes, bank tax, and taxes on tangible personal property owned by the Bank and held for lease or rentals to others - income-based calculation; and (ii) the

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bank's assets at a rate of .033% of total assets less deposits and the investment in greater than 50% owned subsidiaries - asset-based calculation.

            The Bank and its holding company and related subsidiaries are subject to an income tax that is imposed on the consolidated taxable income at the rate of 6.25%. The return is filed on a consolidated basis by all members of the consolidated group including the Bank.

Audits

            There have been no IRS audits of the Company's Federal income tax returns or audits of the Bank's state income tax returns during the past five years.

            For additional information regarding taxation, see Note 10 of Notes to Consolidated Financial Statements contained in the Annual Report.

Personnel

            As of June 30, 2007, the Company had 88 full-time employees and 8 part-time employees. The Company believes that employees play a vital role in the success of a service company and that the Company's relationship with its employees is good. The employees are not represented by a collective bargaining unit.

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Item 1A. Risk Factors

            An investment in our common stock is subject to risks inherent in our business. Before making an investment decision, you should carefully consider the risks and uncertainties described below together with all of the other information included and incorporated by reference in this report. In addition to the risks and uncertainties described below, other risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially and adversely affect our business, financial condition and results of operations. The value or market price of our common stock could decline due to any of these identified or other risks, and you could lose all or part of your investment.

Our allowance for loan losses may prove to be insufficient to absorb probable losses in our loan portfolio.

            Lending money is a substantial part of our business. Every loan carries a certain risk that it will not be repaid in accordance with its terms or that any underlying collateral will not be sufficient to assure repayment. This risk is affected by, among other things:

• cash flow of the borrower and/or the project being financed;
• in the case of a collateralized loan, the changes and uncertainties as to the future value of the collateral;
• the credit history of a particular borrower;
• changes in economic and industry conditions; and
• the duration of the loan.

            We maintain an allowance for loan losses which we believe is appropriate to provide for potential losses in our loan portfolio. The amount of this allowance is determined by our management through a periodic review and consideration of several factors, including, but not limited to:

• an ongoing review of the quality, size and diversity of the loan portfolio;
• evaluation of non-performing loans;
• historical default and loss experience;
• historical recovery experience;
• existing economic conditions;
• risk characteristics of the various classifications of loans; and
• the amount and quality of collateral, including guarantees, securing the loans.

If our loan losses exceed our allowance for probable loan losses, our business, financial condition and profitability may suffer.

Rising interest rates may hurt our profits.

            To be profitable we have to earn more interest on our loans and investments than we pay on our deposits and borrowings. If interest rates continue to rise, our net interest income and the value of our assets could be reduced if interest paid on interest-bearing liabilities, such as deposits and borrowings, increases more quickly than interest received on interest-earning assets, such as loans and investments. This is most likely to occur if short-term interest rates increase at a faster rate than long-term interest rates, which would cause income to go down. At June 30, 2007, $92.9 million, or 29.8%, of our loan portfolio consisted of fixed rate one- to four-family residential real estate loans. In addition, rising interest rates may hurt our income because they may reduce the demand for loans and the value of our securities. A flat yield curve may also hurt our income, because it would reduce our ability to reinvest proceeds from loan and investment repayments at higher rates. See "Management's Discussion and Analysis of Financial Condition and Results of Operations" included in the Annual Report as Exhibit 13.

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Non-compliance with USA Patriot Act, Bank Secrecy Act, or other laws and regulations could result in fines or sanctions.

            The USA Patriot and Bank Secrecy Acts require financial institutions to develop programs to prevent financial institutions from being used for money laundering and terrorist activities. If such activities are detected, financial institutions are obligated to file suspicious activity reports with the U.S. Treasury Department's Office of Financial Crimes Enforcement Network. These rules require financial institutions to establish procedures for identifying and verifying the identity of customers seeking to open new financial accounts. Failure to comply with these regulations could result in fines or sanctions. During the last year, several banking institutions have received large fines for non-compliance with these laws and regulations. Although we have developed policies and procedures designed to assist in compliance with these laws and regulations, no assurance can be given that these policies and procedures will be effective in preventing violations of these laws and regulations.

New or changes in existing tax, accounting, and regulatory rules and interpretations could significantly impact strategic initiatives, results of operations, cash flows, and financial condition.

            The financial services industry is extensively regulated. Federal and state banking regulations are designed primarily to protect the deposit insurance funds and consumers, not to benefit a financial company's shareholders. These regulations may sometimes impose significant limitations on operations. The significant federal and state banking regulations that affect us are described in this report under the heading "Item 1. Business-Supervision and Regulation." These regulations, along with the currently existing tax, accounting, securities, insurance, and monetary laws, regulations, rules, standards, policies, and interpretations control the methods by which financial institutions conduct business, implement strategic initiatives and tax compliance, and govern financial reporting and disclosures. These laws, regulations, rules, standards, policies, and interpretations are constantly evolving and may change significantly over time.

Significant legal actions could subject the Company to substantial liabilities.

            The Company is from time to time subject to claims related to its operations. These claims and legal actions, including supervisory actions by the Company's regulators, could involve large monetary claims and significant defense costs. As a result, the Company may be exposed to substantial liabilities, which could adversely affect the Company's results of operations and financial condition.

Our future success is dependent on our ability to compete effectively in the highly competitive banking industry.

            We face substantial competition in all phases of our operations from a variety of different competitors. Our future growth and success will depend on our ability to compete effectively in this highly competitive environment. To date, we have grown our business successfully by focusing on our business lines in geographic markets and emphasizing the high level of service and responsiveness desired by our customers. We compete for loans, deposits and other financial services with other commercial banks, thrifts, credit unions, brokerage houses, mutual funds, insurance companies and specialized finance companies. Many of our competitors offer products and services which we do not offer, and many have substantially greater resources and lending limits, name recognition and market presence that benefit them in attracting business. In addition, larger competitors may be able to price loans and deposits more aggressively than we do, and smaller newer competitors may also be more aggressive in terms of pricing loan and deposit products than we are in order to obtain a share of the market. Some of the financial institutions and financial services organizations with which we compete are not subject to the same degree of regulation as is imposed on bank holding companies, federally insured state-chartered banks and national banks and federal savings banks. As a result, these nonbank competitors have certain advantages over us in accessing funding and in providing various services.

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We are subject to security and operational risks relating to our use of technology that could damage our reputation and our business.

            Security breaches in our internet banking activities could expose us to possible liability and damage our reputation. Any compromise of our security also could deter customers from using our internet banking services that involve the transmission of confidential information. We rely on standard internet security systems to provide the security and authentication necessary to effect secure transmission of data. These precautions may not protect our systems from compromises or breaches of our security measures that could result in damage to our reputation and our business. Additionally, we outsource our data processing to a third party. If our third party provider encounters difficulties or if we have difficulty in communicating with such third party, it will significantly affect our ability to adequately process and account for customer transactions, which would significantly affect our business operations.

Item 1B. Unresolved Staff Comments

            None.

Item 2. Description of Properties

            The following table sets forth certain information regarding the Bank's offices as of June 30, 2007.

Location	Year Opened	Building Net Book Value as of June 30, 2007	Land Owned/ Leased	Building Owned/ Leased
	(Dollars in thousands)
Main Office
531 Vine Street Poplar Bluff, Missouri	1966	$590	Owned	Owned
Branch Offices
502 Main Street Van Buren, Missouri	1982	32	Owned	Owned
1330 N. Westwood Blvd. Poplar Bluff, Missouri	1976	28	Leased(1)	Owned
4214 Highway PP Poplar Bluff, Missouri	2001	538	Owned	Owned
713 Business 60 West Dexter, Missouri	1979	60	Owned	Owned
301 First Street Kennett, Missouri	2000	845	Owned	Owned
302 Washington Doniphan, Missouri	2001	587	Owned	Owned
13371 Highway 53 Qulin, Missouri	2000	51	Owned	Owned
1205 S. Main St. Sikeston, Missouri	2006	942	Owned	Owned

______________________
⁽¹⁾ Lease expires on November 30, 2014 but includes options to renew at lessee's discretion.

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Item 3. Legal Proceedings

            Except as set forth below, in the opinion of management, the Bank is not a party to any pending claims or lawsuits that are expected to have a material effect on the Bank's financial condition or operations. Periodically, there have been various claims and lawsuits involving the Bank mainly as a defendant, such as claims to enforce liens, condemnation proceedings on properties in which the Bank holds security interests, claims involving the making and servicing of real property loans and other issues incident to the Bank's business. Aside from such pending claims and lawsuits, which are incident to the conduct of the Bank's ordinary business, the Bank is not a party to any material pending legal proceedings that would have a material effect on the financial condition or operations of the Bank.

            In April 2005, the Bank discovered there had been an adverse development with respect to a substandard loan that resulted from allegedly fraudulent activities on the part of the borrower. To date, we have liquidated all assets of the borrower of which we were able to take possession, and have incurred charge-offs of $4.7 million. Since June 30, 2006, the Bank no longer reports any amount of this loan relationship, or any collateral related thereto, as an asset.

            In December 2006, the Bank and two other financial institutions settled their claims against the bonding company which insured the accounting firm had performed audits on said borrower in exchange for the payment by the bonding company of a total of $850,000. That amount will be distributed among the three financial institutions, including the Bank, according to the terms of an agreement that is yet to be reached among the financial institutions. The Company cannot predict to what extent a recovery will occur.

Item 4. Submission of Matters to a Vote of Security Holders

            No matters were submitted to a vote of security holders during the quarter ended June 30, 2007.

PART II

Item 5. Market for the Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

            The information contained in the section captioned "Common Stock" in the Annual Report is incorporated herein by reference.

            Information regarding our equity compensation plans is included in Item 12 of this Form 8-K.

            The following table summarizes the Company's stock repurchase activity for each month during the three months ended June 30, 2007. All shares repurchased during three months ended June 30, 2007, were repurchased in the open market.

	Total # of Shares Purchased	Average Price Paid Per Share	Total # of Shares Purchased as Part of a Publicly Announced Program	Maximum Number of Shares That May Yet Be Purchased
06/01/07-06/30/07 period	6,355	15.11	6,355	110,000
05/01/07-05/31/07 period	20,000	15.05	20,000	6,355
04/01/07-04/30/07 period	---	---	---	26,355

Item 6. Selected Financial Data

            The information contained in the section captioned "Financial Review" in the Annual Report is incorporated herein by reference.

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Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

            The information contained in the section captioned "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Annual Report is incorporated herein by reference.

Item 7A Quantitative and Qualitative Disclosures About Market Risk

            The information contained in the section captioned "Management's Discussion and Analysis of Financial Condition and Results of Operations - Interest Rate Sensitivity Analysis" in the Annual Report is incorporated herein by reference.

Item 8. Financial Statements and Supplementary Data

            Report From Independent Registered Public Accounting Firm*

(a)	Consolidated Balance Sheets as of June 30, 2007 and 2006*
(b)	Consolidated Statements of Income for the Years Ended June 30, 2007, 2006 and 2005*
(c)	Consolidated Statements of Stockholders' Equity For the Years Ended June 30, 2007, 2006 and 2005*
(d)	Consolidated Statements of Cash Flows For the Years Ended June 30, 2007, 2006 and 2005*
(e)	Notes to Consolidated Financial Statements*

* Contained in the Annual Report filed as an exhibit hereto and incorporated herein by reference. All schedules have been omitted as the required information is either inapplicable or contained in the Consolidated Financial Statements or related Notes contained in the Annual Report.

Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

            None.

Item 9A. Controls and Procedures

            (a)            Evaluation of Disclosure Controls and Procedures

            An evaluation of the Company's disclosure controls and procedures (as defined in Rule13a-15(e) under the Securities Exchange Act of 1934 (the "Exchange Act")) as of June 30, 2007, was carried out under the supervision and with the participation of our Chief Executive Officer, who is also our Chief Financial Officer, and several other members of our senior management. Our Chief Executive Officer concluded that our disclosure controls and procedures as currently in effect are effective in ensuring that the information required to be disclosed in the reports the Company files or submits under the Exchange Act is (i) accumulated and communicated to our management (including the Chief Executive Officer and Chief Financial Officer) in a timely manner, and (ii) recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms. There have been no changes in our internal controls over financial reporting (as defined in Rule 13a-15(f) under the Act) that occurred during the year ended June 30, 2007, that has materially effected, or is reasonably likely to materially affect, our internal control over financial reporting.

            We intend to continually review and evaluate the design and effectiveness of the Company's disclosure controls and procedures and to improve the Company's controls and procedures over time and to correct any deficiencies that we may discover in the future. The goal is to ensure that senior management has timely access to all material financial and non-financial information concerning the Company's business. While we believe the present design of the disclosure controls and procedures is effective to achieve its goal, future events affecting its business may cause the Company to modify its disclosure controls and procedures.

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Item 9B. Other Information

            None.

PART III

Item 10. Directors, Executive Officers, Promoters and Control Persons; Compliance with
               Section 16(a) of the Exchange Act                                                                                

Directors

            Information concerning the Directors of the Company is incorporated herein by reference from the definitive proxy statement for the annual meeting of shareholder to be held October 15, 2007, a copy of which will be filed not later than 120 days after the close of the fiscal year.

Executive Officers

            Information concerning the Executive Officers of the Company is incorporated herein by reference from the definitive proxy statement for the annual meeting of shareholders to be held October 15, 2007, except for information contained under the headings "Compensation Committee Report" and "Stock Performance Presentation," a copy of which will be field not later than 120 days after the close of the fiscal year.

Audit Committee Matters and Audit Committee Financial Expert

            The Board of Directors of the Company has a standing Audit/Compliance Committee, which has been established in accordance with Section 3(a)(58)(A) of the Exchange Act. The members of that committee are Directors Love (Chairman), Tatum, Smith, Bagby, Black, Schalk, Moffitt and Brooks, all of whom are considered independent under applicable Nasdaq listing standards. The Board of Directors has determined that Mr. Love is an "audit committee financial expert" as defined in applicable SEC rules. Additional information concerning the audit committee of the Company's Board of Directors is incorporated herein by reference from the Company's definitive proxy statement for its Annual Meeting of Stockholders to be held in October 2007, except for information contained under the heading "Compensation Committee Report" and "Report of the Audit Committee", a copy of which will be filed not later than 120 days after the close of the fiscal year.

Section 16(a) Compliance

            Section 16(a) of the Securities Exchange Act of 1934 requires that the Company's directors and executive officers, and persons who own more than 10% of the Company's Common Stock, file with the SEC initial reports of ownership and reports of changes in ownership of the Company's Common Stock. Officers, directors and greater than 10% shareholders are required by SEC regulations to furnish the Company with copies of all Section 16(a) forms they file. To the Company's knowledge no late reports occurred during the fiscal year ended June 30, 2007. All other Section 16(a) filing requirements applicable to our executive officers, directors and greater than 10% beneficial owners were complied with.

Code of Ethics

            On January 20, 2005, the Company adopted a written Code of Ethics based upon the standards set forth under Item 406 of the Securities Exchange Act. The Code of Ethics applies to all of the Company's directors, officers and employees.

Nomination Procedures

            There have been no material changes to the procedures by which stockholders may recommend nominees to the Company's Board of Directors.

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Item 11. Executive Compensation

            Information concerning executive compensation is incorporated herein by reference from the definitive proxy statement for the annual meeting of shareholders to be held October 15, 2007, except for information contained under the headings "Compensation Committee Report" and "Stock Performance Presentation," a copy of which will be filed not later than 120 days after the close of the fiscal year.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

            Information concerning security ownership of certain beneficial owners and management is incorporated herein by reference from the definitive proxy statement for the annual meeting of shareholders to be held October 15, 2007, except for information contained under the headings "Compensation Committee Report" and "Stock Performance Presentation," a copy of which will be filed not later than 120 days after the close of the fiscal year.

            The following table sets forth information as of June 30, 2007 with respect to compensation plans under which shares of common stock were issued.

Equity Compensation Plan Information

Plan Category	Number of securities to be issued upon exercise of outstanding options warrants and rights	Weighted-average exercise price of outstanding options warrants and rights	Number of Securities remaining available for future issuance under equity compensation plans
Equity Compensation Plans Approved By Security Holders	176,500	$10.73	27,500
Equity Compensation Plans Not Approved By Security Holders	---	---	---

Item 13. Certain Relationships and Related Transactions

            Information concerning certain relationships and related transactions is incorporated herein by reference from the definitive proxy statement for the annual meeting of shareholders to be held October 15, 2007, except for information contained under the headings "Compensation Committee Report" and "Stock Performance Presentation," a copy of which will be filed not later than 120 days after the close of the fiscal year.

Item 14. Principal Accountant Fees and Services

            Information concerning fees and services by our principal accountants is incorporated herein by reference from our definitive Proxy Statement for the 2007 Annual Meeting of Stockholders, a copy of which will be filed not later than 120 days after the close of the fiscal year.

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PART IV

Item 15. Exhibits and Financial Statement Schedules

(a)(1)	Financial Statements: Part II, Item 8 is hereby incorporated by reference.
(a)(2)	Financial Statement Schedules: All financial statement schedules have been omitted as the information is not required under the related instructions or is not applicable.
(a)(3)	Exhibits:

Regulation S-K Exhibit Number	Document				Reference to Prior Filing or Exhibit Number Attached Hereto
3(i)	Certificate of Incorporation of the Registrant				++
3(ii)	Bylaws of the Registrant				++
10	Material contracts:
		(a)	Registrant's 1994 Stock Option Plan		*
		(b)	Southern Missouri Savings Bank, FSB Management Recognition and Development Plans		*
		(c)	Employment Agreements:		**
			(i)	Greg A. Steffens	**
		(d)		Director's Retirement Agreements
			(v)	James W. Tatum	***
			(vi)	Samuel H. Smith	***
			(vii)	Sammy A. Schalk	****
			(viii)	Ronnie D. Black	****
			(ix)	L. Douglas Bagby	****
			(x)	Rebecca McLane Brooks	*****
			(xi)	Charles R. Love	*****
			(xii)	Charles R. Moffitt	*****
		(e)		Tax Sharing Agreement	***
11	Statement Regarding Computation of Per Share Earnings				11
13	2006 Annual Report to Stockholders				13
14	Code of Conduct and Ethics				+++
21	Subsidiaries of the Registrant				21
23	Consent of Auditors				23
31	Rule 13a-14(a)/15d-14(a) Certifications
32	Section 1350 Certifications

_______________________

*	Filed as an exhibit to the Registrant's 1994 annual meeting proxy statement dated October 21, 1994.
**	Filed as an exhibit to the Registrant's Annual Report on Form 10-KSB for the year ended June 30, 1999.
***	Filed as an exhibit to the Registrant's Annual Report on Form 10-KSB for the year ended June 30, 1995.
****	Filed as an exhibit to the registrant's Report on Form 10-QSB for the quarter ended December 31, 2000.
*****	Filed as an exhibit to the registrant's Report on Form 10-QSB for the quarter ended December 31, 2004.
++	Filed as an exhibit to the Registrant's Annual Report on Form 10-K for the year ended June 30, 1999.
+++	Filed as an exhibit to the Current Report on Form 8-K filed on September 15, 2005.

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SIGNATURES

            Pursuant to the requirements of section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

		SOUTHERN MISSOURI BANCORP, INC.
Date:	September 28, 2007	By:	/s/ Greg A. Steffens Greg A. Steffens President (Duly Authorized Representative)

            Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

By:	/s/ James W. TatumJames W. Tatum Chairman of the Board of Directors	September 28, 2007
By:	/s/ Greg A. Steffens Greg A. Steffens President (Principal Executive and Financial and Accounting Officer)	September 28, 2007
By:	/s/ Samuel H. SmithSamuel H. Smith Vice Chairman and Director	September 28, 2007
By:	/s/ Ronnie D. BlackRonnie D. Black Secretary and Director	September 28, 2007
By:	/s/ L. Douglas BagbyL. Douglas Bagby Director	September 28, 2007
By:	/s/ Sammy A. SchalkSammy A. Schalk Director	September 28, 2007
By:	/s/ Rebecca McLane BrooksRebecca McLane Brooks Director	September 28, 2007
By:	/s/ Charles R. LoveCharles R. Love Director	September 28, 2007
By:	/s/ Charles R. MoffittCharles R. Moffitt Director	September 28, 2007

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Index to Exhibits

Regulation S-B Exhibit Number	Document
10.1	Named Executive Officer Salary and Bonus Agreement for 2007
10.2	Director Fee Arrangements
11	Statement Regarding Computation of Per Share Earnings
13	2007 Annual Report to Stockholders
21	Subsidiaries of the Registrant
23	Consent of Auditors
31	Rule 13a-14(a)/15d-14(a) Certifications
32	Section 1350 Certifications

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EX-10.1

EXHIBIT 10.1

Named Executive Officer Salary and Bonus Arrangements for 2007

Base Salaries

            The base salaries for 2007 for the executive officers (the "named executive officers") of Southern Missouri Bancorp, Inc. (the "Company") also is a director of Southern Missouri Bank & Trust (the "Bank") who will be named in the compensation table that will appear in the Company's upcoming 2007 annual meeting proxy statement are as follows:

Name and Title	Base Salary
Greg Steffens President and Chief Financial Officer	$180,608
William Hribovsek Chief Lending Officer	$134,844

Description of 2007 Bonus Arrangement

            The Company has no formal written incentive bonus plan. The amount of bonus award is determined by the Compensation Committee and can vary based on various factors, including Company performance.

            Additional information about the 2007 bonus compensation is incorporated herein by reference from the Company's definitive proxy statement for its Annual Meeting of Stockholders to be held in October 2007, except for information contained under the headings "Compensation Committee Report," and "Report of the Audit Committee," a copy of which will be filed not later than 120 days after the close of the fiscal year.

EX-10.2

EXHIBIT 10.2

Director Fee Arrangements for 2007

            Each director of Southern Missouri Bancorp, Inc. (the "Company") also is a director of Southern Missouri Bank & Trust (the "Bank"). For 2007, each non-employee director receives an annual fee of $10,800 for serving on the Company's Board of Directors and $11,000 for serving on the Bank's Board of Directors.

EX-11

EXHIBIT 11

Statement Regarding Computation of Per Share Earnings

SOUTHERN MISSOURI BANCORP, INC. AND SUBSIDIARY
STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS

	Year Ended June 30,
	2007	2006	2005
Basic
Average shares outstanding	2,225,658	2,224,409	2,225,493
Net income	$2,928,413	$2,784,166	$   104,259
Basic earnings per share	$         1.32	$         1.25	$         0.05
Diluted   Average shares outstanding	2,225,658	2,224,409	2,225,493
Net effect of dilutive stock options - based on the     treasury stock method using the period end market     price, if greater than average market     price	38,578	27,852	64,255
Total	2,264,326	2,252,261	2,289,748
Net income	$2,928,413	$2,784,166	$   104,259
Diluted earnings per share	$         1.29	$         1.24	$         0.05

EX-13

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>    CORPORATE PROFILE    <
	Southern Missouri Bancorp, Inc. (NASDAQ: SMBC) is the holding company for Southern Missouri Bank & Trust Company (Southern Missouri Bank). This year, the company celebrated its 120th anniversary by reporting strong asset growth and record earnings. The Company's management team believes that its success this year in core business growth has laid the groundwork for even better results in future periods.
>    TABLE of CONTENTS    <
		Letter to Shareholders	2
		Common Share Data	8
		Financial Review	9
		Report from Independent   Registered Public Accounting Firm	20
		Consolidated Financial Statements	21
		Notes to Consolidated Financial Statements	26
		Corporate and Investor Information	48
		Directors and Officers	49

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>    FINANCIAL SUMMARY    <
		2007		2006		CHANGE(%)
	EARNINGS (dollars in thousands)
	Net interest income	$  9,929		$  9,600		3.4
	Provision for possible loan losses	605		555		9.0
	Other income	2,207		2,144		2.9
	Other expense	7,458		7,028		6.1
	Income taxes	1,145		1,377		(16.9	)
	Net income	2,928		2,784		5.2
	PER COMMON SHARE
	Net income:
	Basic	$       1.32		$       1.25		5.6
	Diluted	1.29		1.24		4.0
	Tangible book value	12.06		10.86		11.1
	Closing market price	14.95		13.00		15.0
	Cash dividends declared	.36		.36		-
	AT YEAR-END (dollars in thousands)
	Total assets	$379,927		$350,684		8.3
	Loans, net of allowance	312,063		280,931		11.1
	Reserves as a percent of nonperforming loans	9,845.43	%	3,888.50	%
	Deposits	$270,088		$258,069		4.7
	Stockholders' equity	28,714		26,554		8.1
	FINANCIAL RATIOS
	Return on average stockholders' equity	10.49	%	10.83	%
	Return on average assets	.80		.80
	Net interest margin	2.90		2.96
	Efficiency ratio	61.45		59.84
	Allowance for possible loan losses to net loans	.81		.73
	Equity to average assets at year-end	7.88		7.67
	OTHER DATA(1)
	Common shares outstanding	2,213,976		2,236,331
	Average common and dilutive       shares outstanding	2,264,236		2,276,071
	Stockholders of record	276		282
	Full-time equivalent employees	95		96
	Assets per employee (in thousands)	$   3,999		$   3,653
	Banking offices	9		9
	(1)Other data is as of year-end, except for average shares.
	| 1 |

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>    LETTER to SHAREHOLDERS    <

In 2007, Southern Missouri Bancorp realized record net income and earnings per share, experienced strong loan and deposit growth, and positioned itself for even better results in the future.

Despite a challenging interest rate environment, we expanded our core business and grew earnings.

We realized strong asset growth – our total loan portfolio grew by 11%, most of it in commercial and commercial real estate loans, meeting our strategic objectives of diversifying our loan portfolio.

We achieved strong growth in retail and public unit deposits - up a combined 10% - and reduced

higher-cost, brokered deposit balances from $13.5 million to less than $100,000.

We increased Book Value per share by 9%, to $13.01, and Tangible Book Value per share by 11%, to $12.06, reflecting the growth in our Company's value to shareholders.

Diluted earnings per share were $1.29, a record, up from $1.24 in the previous fiscal year. Total earnings rose from $2,784,000 in 2006 to $2,928,000 in 2007, a 5% increase.

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Overcoming Challenges

While our earnings increased this year, they declined as a percentage of average assets and equity. This was due to a balance sheet that grew more quickly than earnings. To help improve these key measures, the Company completed its share repurchase plan and announced a new one in June 2007, and in the first quarter of our liabilities have already repriced to current market rates. We saw evidence of this in the last two quarters of the fiscal year, when our CD portfolio repriced upwards by an average of just seven basis points, less than a fourth of the average 29 basis point increase over the previous six quarters.

of fiscal 2008 announced an 11% increase in the quarterly dividend. Meanwhile, the Bank's capital levels remain strong.

As a result of an inverted yield curve for much of the year, the Company, like many in the industry, experienced interest rate spread contraction. Over the last five years, our deposits increased at a 7.5% compounded annual growth rate. Using the most recent data available, we can tell that overall deposits in our market area have grown 5.0%, by comparison. We've been able to grow faster than our market area by increasing

We were able to overcome this contraction and increase net interest income by growing our interest-earning asset balances. We are optimistic that the worst of the margin contraction is behind us, as many our market share, and we are poised to establish a leadership position. A key ingredient in this success is our formal program to expand relationships with our current customers and reach out to new ones.

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Deeper Roots for
  Stronger
     Growth





We took a number of steps that
we feel have prepared the Bank
for future growth:

> We improved and diversified the Company's asset mix. Our commercial and commercial real estate portfolios grew by a combined 18%, or $23.3 million, including agricultural loan growth of 44%, or $7.6 million. These loans, while carrying specific additional risks, earn higher yields, and generally reprice at terms more favorable than the Bank's traditional residential real estate loans.

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>	We maintained strong asset quality. The Bank's percentage of loans past due 30 days or more, at 0.3%, compares favorably to peers. At the same time, the Company increased its Allowance for Loan Losses, as a percentage of net loans, to 0.81% at June 30, 2007, from 0.73% at June 30, 2006. The increase was in response to the changing portfolio components – which require additional allowances – and management recognition of the potential for challenges in the future. Traditionally, the Bank's loan portfolio has been more concentrated in residential real estate, and has required a relatively small loan loss allowance.
>	Our Sikeston branch, opened in January 2006, achieved profitability in less than 18 months, ahead of projections. We continue to look at several acquisition opportunities each year and we will proceed cautiously, insisting that any acquisition be both affordable and capable of adding significant long-term value to the Company. In the meantime, our primary focus has moved to de novo branching, since this process is more completely under our control.

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>    LETTER to SHAREHOLDERS    <

Technology continues to enhance efficiency

By implementing a new, more efficient loan platform system, we eliminated repetitive data-entry, which reduced processing time		the Bank electronically, without sending an employee to the Bank, or even requiring a teller to process the deposit. This has pushed the "business day" cut-off
and improved our employees' ability to serve our customers. Many paper files have been replaced by image files, allowing access to documents from both headquarters and the originating branch. We were among the first in the area to introduce our commercial depositors to remote deposit capture. We now offer them the option of submitting deposits to			from 3:00 pm to 4:00 pm, improved the availability of funds for both the customers and the Bank, and reduced our courier costs.

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In Summary

This year marked Southern Missouri Bank's 120th year of operations.

For a company to persevere for such a long period of time it must provide a solid return to its shareholders. Market valuations fluctuate and share prices over shorter periods of time can be volatile, but we are optimistic that measures within our control - diluted earnings per share, Book Value per share - will continue to

show the same positive, improving results.

I would note that every eligible Southern Missouri employee is also an owner through our employee stock ownership plan; their exemplary work here demonstrates the value they hold in the Company. I appreciate their efforts more than a mere letter can convey.

Finally, we are also grateful to our customers for the opportunity to earn their business.

GREG STEFFENS
PRESIDENT, SOUTHERN MISSOURI BANCORP, INC.
PLEASE JOIN US
at our 2007 Annual Meeting where shareholders and those considering
investing in Southern Missouri Bancorp, Inc. will hear management cover
this year's performance in detail and discuss our plans for continued growth.

ANNUAL MEETING
MONDAY, OCTOBER 15 AT 9 AM - CHAMBER OF COMMERCE BUILDING, POPLAR BLUFF


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>    COMMON SHARE DATA    <

The common stock of the Company is listed on the Nasdaq Stock Market under the symbol "SMBC." The following bar graph sets forth the high, low and closing market prices of the common stock, cash dividends and other information for the last three years.

The following table sets forth per share market price and dividend information for the Company's common stock. As of June 30, 2007, there were approximately 276 stockholders of record. This does not reflect the number of persons or entities who hold stock in nominee or "street name."

Fiscal 2007	High	Low	Close	Book Value At End Of Period	Market Price To Book Value	Dividends Declared
4th Quarter (6-30-07)	$15.49	$14.00	$14.95	$13.01	114.91%	$0.09
3rd Quarter (3-31-07)	$15.50	$14.50	$15.48	$12.83	120.65%	$0.09
2nd Quarter (12-31-06)	$15.73	$14.06	$15.19	$12.59	120.65%	$0.09
1st Quarter (9-30-06)	$15.55	$12.29	$15.00	$12.29	122.05%	$0.09
Fiscal 2006
4th Quarter (6-30-06)	$15.07	$11.80	$13.00	$11.92	109.06%	$0.09
3rd Quarter (3-31-06)	$14.95	$12.02	$14.77	$11.77	125.49%	$0.09
2nd Quarter (12-31-05)	$15.47	$13.00	$14.70	$11.57	127.05%	$0.09
1st Quarter (9-30-05)	$15.06	$13.90	$14.35	$11.42	125.66%	$0.09
Fiscal 2005
4th Quarter (6-30-05)	$16.43	$13.85	$14.50	$11.24	129.00%	$0.09
3rd Quarter (3-31-05)	$18.48	$15.80	$15.85	$11.57	136.99%	$0.09
2nd Quarter (12-31-04)	$19.00	$14.81	$18.49	$12.19	151.68%	$0.09
1st Quarter (9-30-04)	$16.29	$15.01	$15.90	$11.96	132.94%	$0.09

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 12 of Notes to Consolidated Financial Statements included elsewhere in this report.

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>    FINANCIAL REVIEW    <

BUSINESS OF THE COMPANY AND THE BANK
    Southern Missouri Bancorp, Inc. (Southern Missouri or Company) is a Missouri corporation and owns all of the outstanding stock of Southern Missouri Bank & 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 1995. Then, effective February 1998, the Bank converted its charter to a state-chartered stock savings bank. On June 4, 2004, the Bank converted to a state chartered trust company with banking powers. The Bank's deposit accounts are generally insured up to a maximum of $100,000 (some retirement accounts are insured up to $250,000) by the Deposit Insurance Fund (DIF), which is administered by the Federal Deposit Insurance Corporation (FDIC).
    The Bank's primary business consists of attracting deposits from the communities it serves and investing those funds in permanent loans secured by one- to four-family residences, commercial real estate, commercial business and consumer loans. The Company's results of operations are primarily dependent on its net interest margin, which is the difference between the average yield on loans, mortgage-related securities and investments and the average rate paid on deposits, securities sold under agreements to repurchase and borrowings.
    The net interest margin is affected by economic, regulatory and competitive factors that influence interest rates, loan demand and deposits. Lending activities are funded through the attraction of deposit accounts consisting of checking accounts, passbook accounts, money market deposit accounts, certificate of deposit accounts with terms of 60 months or less, securities sold under agreements to repurchase, advances from the Federal Home Loan Bank of Des Moines, and to a lesser extent brokered deposits.
The Bank currently conducts its business through its home office located in Poplar Bluff and eight full service branch facilities in Poplar Bluff (2), Van Buren, Dexter, Kennett, Doniphan, Sikeston and Qulin, Missouri.

(dollars in thousands)
	At June 30
Financial Condition Data:	2007	2006	2005		2004	2003
Total assets	$ 379,927	$ 350,684	$ 330,360		$ 311,703	$ 279,455
Loans receivable, net	312,063	280,931	267,568		248,355	222,840
Mortgage-backed securities	10,723	14,440	17,243		20,994	25,019
Cash, interest-bearing deposits    and investment securities	31,492	30,328	21,344		23,794	13,602
Deposits	270,088	258,069	224,666		211,959	194,532
Borrowings	71,758	57,296	72,257		65,698	58,734
Subordinated debt	7,217	7,217	7,217		7,217	-
Stockholders' equity	28,714	26,554	25,003		25,952	25,108
(dollars in thousands)
	For The Year Ended June 30
Operating Data:	2007	2006	2005		2004	2003
Interest income	$ 23,550	$ 20,363	$ 17,284		$ 15,700	$ 16,404
Interest expense	13,621	10,763	8,032		6,545	7,120
Net interest income	9,929	9,600	9,252		9,155	9,284
Provision for loan losses	605	555	4,815		275	330
Net interest income after    provision for loan losses	9,324	9,045	4,437		8,880	8,954
Noninterest income	2,207	2,144	2,313		1,875	1,415
Noninterest expense	7,458	7,028	6,728		6,445	6,165
Income before income taxes	4,073	4,161	22		4,310	4,204
Income tax (benefit) expense	1,145	1,377	(82	)	1,427	1,466
Net income	$ 2,928	$ 2,784	$ 104		$ 2,883	$ 2,738
Basic earnings per common share	$ 1.32	$ 1.25	$ .05		$ 1.27	$ 1.17
Diluted earnings per common share	$ 1.29	$ 1.24	$ .05		$ 1.23	$ 1.14
Dividends per share	$ .36	$ .36	$ .36		$ .36	$ .28

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>    FINANCIAL REVIEW (continued)    <

	At June 30
Other Data:	2007		2006		2005		2004		2003
Number of:
Real estate loans	2,795		2,808		2,850		2,877		2,842
Deposit accounts	19,978		18,845		17,336		16,995		16,455
Full service offices	9		9		8		8		8
	At Or For The Year Ended June 30
Key Operating Ratios:	2007		2006		2005		2004		2003
Return on assets (net income    divided by average assets)	.80	%	.80	%	.03	%	.98	%	1.00	%
Return on average equity (net    income divided by average equity)	10.49		10.83		.39		11.09		11.08
Average equity to average assets	7.66		7.43		8.18		8.82		9.02
Interest rate spread (spread    between weighted average rate on    all interest-earning assets and all    interest-bearing liabilities)	2.57		2.69		2.84		3.06		3.29
Net interest margin (net interest    income as a percentage of average    interest-earning assets)	2.90		2.96		3.06		3.28		3.57
Noninterest expense to average assets	2.05		2.03		2.07		2.19		2.25
Average interest-earning assets to    average interest-bearing liabilities	108.29		108.15		108.10		109.42		110.67
Allowance for loan losses to total    loans (1)	.81		.73		.75		.80		.81
Allowance for loan losses to    nonperforming loans (1)	9,845.43		3,888.50		353.36		1,460.14		2,062.59
Net charge-offs to average out-    standing loans during the period	.04		.19		1.85		.06		.03
Ratio of nonperforming assets    to total assets (1)	.04		.08		.20		.10		.11
Dividend payout ratio	27.50		28.80		776.14		28.50		23.97

(1) At end of period

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>    FINANCIAL REVIEW (continued)    <

Management's Discussion and Analysis of Financial Condition and Results of Operations

OVERVIEW    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 & Trust Co. The Company's state of incorporation changed from Delaware to Missouri effective April 1, 1999. On June 4, 2004, the Bank converted to a state chartered trust company with banking powers, and the Company became a bank holding company supervised by the Federal Reserve.     The principal business of SMBT consists 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, 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.     Southern Missouri's results of operations are primarily dependent on the levels of its net interest margin and noninterest income, and its ability to control operating expenses. Net interest margin 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 these assets and liabilities. Southern Missouri is subject to interest rate risk to the degree that its interest-earning assets mature or reprice at different times, or on a varying basis, from its interest-bearing liabilities.     Southern Missouri's noninterest income consists primarily of fees charged on transaction and loan accounts and increased cash surrender value of bank owned life insurance ("BOLI"). Southern Missouri's operating expenses include: employee compensation and benefits, occupancy expenses, legal and professional fees, federal deposit insurance premiums, amortization of intangible assets and other general and administrative expenses.     Southern Missouri's operations are significantly influenced by general economic conditions including monetary and fiscal policies of the U.S. government and the Federal Reserve Board. Additionally, Southern Missouri is subject to policies and regulations issued by financial institution regulatory agencies, including the Federal Deposit Insurance Corporation, the Federal Reserve 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 real estate, commercial business and consumer financing on loans sec ured by properties or collateral located primarily in Southeastern Missouri. FORWARD-LOOKING STATEMENTS     This document, including information incorporated by reference, contains forward-looking statements about the Company and its subsidiaries which we believe are within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, without limitation, statements with respect to anticipated future operating and financial performance, growth

opportunities, interest rates, cost savings and funding advantages expected or anticipated to be realized by management. Words such as "may," "could," "should," "would," "believe," "anticipate," "estimate," "expect," "intend," "plan" and similar expressions are intended to identify these forward looking statements. Forward-looking statements by the Company and its management are based on beliefs, plans, objectives, goals, expectations, anticipations, estimates and the intentions of management and are not guarantees of future performance. The important factors we discuss below, as well as other factors discussed under the caption "Management's Discussion and Analysis of Financial Condition and Results of Operations" and identified in our filings with the SEC and those presented elsewhere by our management from time to time, could cause actual results to differ materially from those indicated by the forward-looking statements made in this document: the strength of the United States economy in general and the strength of the local economies in which we conduct operations; the effects of, and changes in, trade, monetary and fiscal policies and laws, including interest rate policies of the Federal Reserve Board; inflation, interest rate, market and monetary fluctuations; the timely development and acceptance of our new products and services and the perceived overall value of these products and services by users, including the features, pricing and quality compared to competitors' products and services; the willingness of users to substitute our products and services for products and services of our competitors; the impact of changes in financial services' laws and regulations (including laws concerning taxes, banking, securities and insurance); the impact of technological changes; acquisitions; changes in consumer spending and saving habits; and our success at managing the risks involved in the foregoing.    The Company disclaims any obligation to update or revise any forward-looking statements based on the occurrence of future events, the receipt of new information, or otherwise. CRITICAL ACCOUNTING POLICIES     The Company has established various accounting policies, which govern the application of accounting principles generally accepted in the United States of America in the preparation of our financial statements. Our significant accounting policies are described in the footnotes to the Consolidated Financial Statements. Certain accounting policies involve significant judgments and assumptions by management that have a material impact on the carrying value of certain assets and liabilities; management considers such accounting policies to be critical accounting policies. The judgments and assumptions used by management are based on historical experience and other factors, which are believed to be reasonable under the circumstances. Because of the nature of the judgments and assumptions made by management, actual results could differ from these judgments and estimates that could have a material impact on the carrying values of assets and liabilities and the results of operations of the Company.     The allowance for losses on loans represents management's best estimate of probable losses in the existing loan portfolio. The allowance for losses on loans is increased by the provision for losses on loans charged to expense and reduced by loans charged off, net of recoveries.

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>    FINANCIAL REVIEW (continued)    <

The provision for losses on loans is determined based on management's assessment of several factors: reviews and evaluations of specific loans, changes in the nature and volume of the loan portfolio, current economic conditions and the related impact on specific borrowers and industry groups, historical loan loss experience, the level of classified and nonperforming loans and the results of regulatory examinations.
    Integral to the methodology for determining the adequacy of the allowance for loan losses is portfolio segmentation and impairment measurement. Under the Company's methodology, loans are first segmented into 1) those comprising large groups of smaller-balance homogeneous loans, including single-family mortgages and installment loans, which are collectively evaluated for impairment and 2) all other loans which are individually evaluated. Those loans in the second category are further segmented utilizing a defined grading system which involves categorizing loans by severity of risk based on conditions that may affect the ability of the borrowers to repay their debt, such as current financial information, collateral valuations, historical payment experience, credit documentation, public information, and current trends. The loans subject to credit classification represent the portion of the portfolio subject to the greatest credit risk and where adjustments to the allowance for losses on loans as a result of pro visions and charge-offs are most likely to have a significant impact on operations.
    A periodic review of selected credits (based on loan size and type) is conducted to identify loans with heightened risk or probable losses and to assign risk grades. The primary responsibility for this review rests with the loan administration personnel. This review is supplemented with periodic examinations of both selected credits and the credit review process by applicable regulatory agencies. The information from these reviews assists management in the timely identification of problems and potential problems and provides a basis for deciding whether the credit represents a probable loss or risk that should be recognized.
    Loans are considered impaired if, based on current information and events, it is probable that Southern Missouri will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. The measurement of impaired loans is generally based on the fair value of the collateral for collateral-dependent loans. If the loan is not collateral-dependent, the measurement of impairment is based on the present value of expected future cash flows discounted at the historical effective interest rate or the observable market price of the loan. In measuring the fair value of the collateral, management uses the assumptions (i.e., discount rates) and methodologies (i.e., comparison to the recent selling price of similar assets) consistent with those that would be utilized by unrelated third parties. Impairment identified through this evaluation process is a component of the allowance for loan losses. If a loan that is individually evaluated for impairment is found to have none, it is grouped together with loans having similar characteristics (i.e., the same risk grade), and an allowance for loan losses is based upon historical average charge-offs for similar loans over the past five years, the historical average charge-off rate for developing trends in the economy, in industries and other factors. For portfolio loans that are evaluated for impairment as part of homogenous pools, an allowance is maintained based upon the average charge-offs for the past five years.
    Changes in the financial condition of individual borrowers, in economic conditions, in historical loss experience and in the conditions of the various markets in which collateral may be sold may all affect the required level of the allowance for losses on loans and the associated provision for losses on loans. FINANCIAL CONDITION
    General. The Company's total assets increased $29.2 million, or 8.3%, to $379.9 million at June 30, 2007, when compared to $350.7 million at June 30, 2006. The growth was primarily due to growth in the loan portfolio of $31.1 million, or 11.1%, and was partially offset by a reduction in investment balances of $3.5 million, or 9.2%. Asset growth was primarily funded by growth in deposit balances of $12.0 million, or 4.7%, FHLB advances of $8.0 million, or 17.4%, and repurchase agreements of $6.5 million, or 57.2%.
    Loans. Loans increased $31.1 million, or 11.1%, to $312.0 million at June 30, 2007, from $280.9 million at June 30, 2006. The growth in the loan portfolio was comprised principally of commercial real estate and commercial business loans of $12.3 million and $10.9 million, respectively, while multi-family real estate loans increased $4.5 million, and one- to four-family real estate loans increased $3.6 million.
    Allowance for Loan Losses. The allowance for loan losses increased $480,000, or 23.3%, from $2.1 million at June 30, 2006, to $2.5 million at June 30, 2007. The allowance for loan losses represented 0.81% of gross loans receivable at June 30, 2007, as compared to 0.73% at June 30, 2006. At June 30, 2007, nonperforming loans, which included loans past due greater than 90 days and nonaccruing loans, were $26,000, compared to $53,000 at June 30, 2006 (see Provision for Loan Losses, under Comparison of Years Ended June 30, 2007 and 2006).
    Investments. The investment portfolio decreased $3.5 million, or 9.2%, to $34.9 million at June 30, 2007, from $38.4 million at June 30, 2006. The decrease in the investment portfolio was primarily due to the Company's strategic decision to reduce investment balances due to the lower returns available, compared to loans and cost of funding.
    Premises and Equipment. Premises and equipment decreased $281,000 to $8.6 million at June 30, 2007, from $8.9 million at June 30, 2006. The decrease was due to depreciation expense for the fiscal year, partially offset by equipment and software purchases.
    Bank Owned Life Insurance. The Bank purchased "key person" life insurance policies on six employees for a cash surrender value of $4.0 million in February, 2003. In addition, in October, 2004, the Bank purchased "key person" life insurance policies on 20 employees for $2.0 million. At June 30, 2007, the cash surrender value had increased to $7.0 million.
    Intangible Assets. Intangible assets generated through branch acquisitions in 2000 decreased $255,000 to $2.1 million as of June 30, 2007, and will continue to be amortized in accordance with Statement of Financial Accounting Standards (SFAS) No. 142.
    Deposits. Deposits increased $12.0 million, or 4.7%, to $270.1 million at June 30, 2007, from $258.1 million at June 30, 2006. The deposit growth was primarily comprised of increases in retail and public CDs, savings, and checking accounts of $18.5 million, $9.6 million, and $4.5 million, respectively, partially offset by decreases in brokered CDs of $13.5 million and money market deposit and passbook accounts of $6.2 million. At June 30, 2007, brokered deposits totaled less than $100,000. Management's decision to reduce the level of brokered deposits was based on the availability of other funding sources at more attractive terms.

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    Borrowings. FHLB advances increased $8.0 million, or 17.4%, to $54.0 million at June 30, 2007, from $46.0 million at June 30, 2006, mostly as a result of the Company's use of advances in place of brokered deposits, to fund asset growth. Of the outstanding advances, $7.0 million were short term borrowings, compared to no short term borrowings at June 30, 2006. Of the remaining $47.0 million in long-term advances, the entire amount carries fixed interest rates, and $44.0 million is subject to early redemption by the issuer. At June 30, 2007, the long-term advances had a weighted average maturity of 4.2 years, compared to 3.2 years at June 30, 2006. At June 30, 2007, all FHLB advances had a weighted-average cost of 5.42%, as compared to 5.41% at June 30, 2006.
    Subordinated Debt. In March, 2004, the Company issued $7.0 million of Floating Rate Capital Securities of Southern Missouri Statutory Trust I with a liquidation value of $1,000 per share. The securities are due in 30 years, redeemable after five years and bear interest at a floating rate based on three month LIBOR.
    Stockholders' Equity. The Company's stockholders' equity increased by $2.1 million, or 8.1%, to $28.7 million at June 30, 2007, from $26.6 million at June 30, 2006. This increase was primarily due to net income of $2.9 million, and a $342,000 increase in the market value of the investment portfolio, net of tax, partially offset by dividend payments of $805,000. The Company announced its current stock repurchase program of approximately 110,000 shares on June 21, 2007. As of June 30, 2007, no activity had yet occurred under the program.

COMPARISON OF THE YEARS ENDED JUNE 30, 2007 AND 2006
    Net Income. Southern Missouri's net income was $2.9 million for the fiscal year ended June 30, 2007, an increase of $144,000, or 5.2%, when compared to the results of the prior fiscal year. The increase in net income was primarily due to a $329,000 increase in net interest income, a reduction in income tax provisions of $232,000, and an increase in non-interest income of $63,000, partially offset by a $430,000 increase in non-interest expenses, and a $50,000 increase in loan loss provisions, compared to the prior fiscal year.

    Net Interest Income. Net interest income increased $329,000, or 3.4%, to $9.9 million for fiscal 2007, when compared to the prior fiscal year. The increase was primarily due to a $17.9 million increase in average interest-earning assets, partially offset by a 12 basis point decrease in the average interest rate spread. The decrease in interest rate spread was a result of a yield curve which remained relatively flat during the fiscal year. For fiscal 2007, the average interest rate spread was 2.57%, compared to 2.69% for fiscal year 2006. At June 30, 2007, our spread was 2.55%.

    Interest Income. Interest income increased $3.2 million, or 15.6%, to $23.5 million for fiscal 2007, when compared to the prior fiscal year. The increase was primarily due to the 60 basis point increase in average yield earned on interest-earning assets from 6.27% in fiscal 2006 to 6.87% in fiscal 2007. Interest income also increased due to the $17.9 million increase in the average balance of interest-earning assets.

    Interest income on loans receivable increased by $3.1 million, or 16.9%, to $21.7 million for fiscal 2007 when compared to the prior fiscal year. The increase was primarily due to a 59 basis point increase in the average yield earned on loans receivable. Interest income on loans also increased due to the $20.5 million increase in average loans receivable.     Interest income on the investment portfolio and other interest-earning assets increased $49,000 or 2.7%, to $1.9 million for fiscal 2007 when compared to the prior fiscal year. The increase was due to a 33 basis point increase in the average yield earned on these assets, and was partially offset by a $2.6 million decrease in the average balance outstanding.

    Interest Expense. Interest expense increased $2.9 million, or 26.5%, to $13.6 million for fiscal 2007 when compared to the prior fiscal year. The increase was primarily due to the 72 basis point increase in the average rate paid on interest-bearing liabilities from 3.58% in fiscal 2006 to 4.30% in fiscal 2007. Interest expense also increased due to the $16.1 million increase in the average balance of interest-bearing liabilities.
    Interest expense on deposits increased $2.1 million, or 29.9%, to $9.1 million for fiscal 2007 when compared to the prior fiscal year. The increase was primarily due to an 80 basis point increase in the average rate paid on deposits. Interest expense on deposits also increased due to the $6.4 million increase in average deposits outstanding.
    Interest expense on FHLB advances increased $514,000, or 17.8%, to $3.4 million for fiscal 2007 when compared to the prior fiscal year. The increase was primarily due to the $8.3 million increase in the average balance of FHLB advances for fiscal 2007, and the 12 basis point increase in the average rate paid on advances.
    The Company issued $7.0 million of Floating Rate Capital Securities in March, 2004, with an interest rate of three month LIBOR plus 275 basis points, repricing quarterly. Interest expense on these securities was $594,000 for fiscal 2007 as compared to $512,000 for the prior fiscal year. This increase was due to the average rate paid increasing by 114 basis points.

    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 probable loan losses based on prior loss experience, type and amount of loans 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 was $605,000 for fiscal 2007, compared to $555,000 for the prior fiscal year. The increase in provision was primarily due to strong loan growth and additions made in anticipation of a declining credit quality environment. In fiscal 2007 net charge offs were $125,000 compared to $513,000 for the prior year. At June 30, 2007, classified assets totaled $1.3 million, roughly equal to the total of classified assets at June 30, 2006.
    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 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, which bear an inherently higher level of credit risk. While management believes the allowance for loan losses at June 30, 2007, 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 that actual losses will not exceed the allowance.

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    Noninterest Income. Noninterest income increased $63,000, or 3.0%, to $2.2 million for fiscal 2007, compared to $2.1 million in fiscal 2006. The increase was primarily due to a $102,000 increase in miscellaneous income collected (including ATM and debit card transaction income, and income from sales of loans on the secondary market), and was offset by a $61,000 decrease in non-sufficient funds charges.

    Noninterest Expense. Noninterest expense increased $430,000, or 6.1%, to $7.5 million for fiscal 2007, compared to the $7.0 million expensed during fiscal 2006. The increase resulted primarily from higher compensation, legal and occupancy expenses.
    Expenses for compensation and benefits increased $322,000, or 8.7%, for fiscal 2007 when compared to the prior year. The increase was due to the mid-fiscal 2006 addition of employees attributable to the opening of a new branch facility, increased salaries, and other compensation-related expenditures. Occupancy expenses increased $57,000, or 4.1%, primarily due to the cost of acquiring and operating a new facility for the full fiscal year. Professional fees increased $73,000, or 41.8%, primarily due to an increase in legal expenses to obtain a recovery on a large loan loss reported in fiscal 2005.

    Provision for Income Taxes. The Company expensed an income tax provision of $1.1 million for fiscal 2007, compared to $1.4 million in fiscal 2006. The decrease was due to recognition of benefits from acquired tax credits, the Company's investment in additional tax-exempt securities, a reduction in pre-tax income, and adjustments related to compliance with new accounting standards.

COMPARISON OF THE YEARS ENDED JUNE 30, 2006 AND 2005
    Net Income. Southern Missouri's net income was $2.8 million for the fiscal year ended June 30, 2006, an increase of $2.7 million when compared to the results of the prior fiscal year. The increase in net income was primarily due to a $4.3 million decrease in the provision for loan losses. Of the prior period's provision for loan losses, $4.5 million was due to alleged fraudulent activities undertaken by a credit relationship totaling $4.9 million. Partially offsetting the impact of the reduced loan loss provision was the reversal from the accrual of an income tax benefit of $82,000 during the fiscal year ended June 30, 2005, to an income tax provision of $1.4 million during the fiscal year ended June 30, 2006.

    Net Interest Income. Net interest income increased $348,000, or 3.8%, to $9.6 million for fiscal 2006, when compared to the prior fiscal year. The increase was primarily due to a 7.3% increase in average interest-earning assets, partially offset by a 15 basis point decrease in the average interest rate spread. The decrease in interest rate spread was a result of a flattening yield curve, in which short term interest rates increased, while long term interest rates remained relatively unchanged, during the fiscal year. An example of this was the prime rate which increased 200 basis points over the year (from 6.25% to 8.25%), while the 10-year treasury rate increased by only 121 basis points (from 3.94% to 5.15%). For fiscal 2006, the average interest rate spread was 2.69%, compared to 2.84% for fiscal year 2005.     Interest Income. Interest income increased $3.1 million, or 17.8%, to $20.4 million for fiscal 2006, when compared to the prior fiscal year. The increase was primarily due to the 56 basis point increase in average yield earned on interest-earning assets from 5.71% to 6.27%; additionally, interest income increased due to the $22.2 million increase in the average balance of interest-earning assets.
    Interest income on loans receivable increased by $2.8 million, or 17.5%, to $18.6 million for fiscal 2006 when compared to the prior fiscal year. The increase was primarily due to a 63 basis point increase in average yield earned on loans receivable; additionally, interest income increased due to the $17.0 million increase in average loans receivable.
    Interest income on the investment portfolio and other interest-earning assets increased $316,000, or 21.1%, to $1.8 million for fiscal 2006 when compared to the prior fiscal year. The increase was primarily due to a $5.1 million increase in the average balance outstanding; additionally, interest income increased due to a 28 basis point increase in the average yield on these investments.

    Interest Expense. Interest expense increased $2.7 million, or 34.0%, to $10.8 million for fiscal 2006 when compared to the prior fiscal year. The increase was primarily due to the 71 basis point increase in the average rate paid on interest-bearing liabilities from 2.87% in fiscal 2005 to 3.58% in fiscal 2006; additionally, interest expense increased due to the $20.4 million increase in the average balance of interest-bearing liabilities.
    Interest expense on deposits increased $2.5 million, or 54.7%, to $7.0 million for fiscal 2006 when compared to the prior fiscal year. The increase in interest expense was primarily due to an increase in the average rate paid on interest-bearing deposits to 3.06% for fiscal 2006 from 2.21% for fiscal 2005; the higher rates paid were the result of upward pricing of deposits in line with higher short-term interest rates. Additionally, interest expense on deposits increased as the average balance of deposits increased by $24.4 million for fiscal 2006 as compared to fiscal 2005. The increase was primarily due to growth in the CD portfolio.
    Interest expense on FHLB advances decreased $88,000, or 2.9%, to $2.9 million for fiscal 2006 when compared to the prior fiscal year. The decrease in interest expense was primarily due to the $5.6 million decrease in the average balance of FHLB advances for fiscal 2006, partially offset by the 35 basis point increase in the average rate paid on advances. The decrease in average balances was attributed to a reduced need for advances due to an increase in deposits during fiscal 2006.
    The Company issued $7.0 million of Floating Rate Capital Securities in March, 2004, with an interest rate of three month LIBOR plus 275 basis points, repricing quarterly. Interest expense on these securities was $512,000 for fiscal 2006 as compared to $370,000 for the prior fiscal year. Interest expense increased in fiscal 2006 as compared to the prior fiscal year as the average rate paid increased by 198 basis points.

    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 probable loan losses based on prior loss experience, type and amount of loans 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.

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    The provision for loan losses was $555,000 for fiscal 2006, compared to $4.8 million for the prior fiscal year. The decrease in the loan loss provision was primarily due to the aforementioned problem credit relationship which came to light during fiscal 2005. At June 30, 2006, classified assets totaled $1.3 million, compared to $1.8 million at June 30, 2005. The decrease in classified assets was primarily due to the improvement in the status of several relationships, as well as the charge off of others.
    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 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. These loans bear an inherently higher level of credit risk than one- to four-family residential real estate loans. While management believes the allowance for loan losses at June 30, 2006, 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 that actual losses will not exceed the allowance.

    Noninterest Income. Noninterest income decreased $170,000, or 7.3%, to $2.1 million for fiscal 2006, when compared to the $2.3 million earned during fiscal 2005. The decrease was primarily due to inclusion in the results of the same period of the prior year of $352,000 in gains realized on the sale of equity investments and $41,000 in dividend income received on those equities, partially offset by an increase in bank service charges of $193,000, or 18.9%, for fiscal 2006 when compared to the prior year. The increase in bank service charges was primarily due to the inclusion in the prior period's results of a $210,000 deposit loss related to the aforementioned problem credit relationship identified in fiscal 2005.

    Noninterest Expense. Noninterest expense increased $300,000, or 4.5%, to $7.0 million for fiscal 2006, compared to the $6.7 million expensed during fiscal 2005. The increase resulted primarily from higher compensation and occupancy expenses.
    Expenses for compensation and benefits increased $175,000, or 5.0%, for fiscal 2006 when compared to the prior year. The increase was due to the addition of employees attributable to the opening of the new branch facility, increased salaries, and other compensation-related expenditures. Occupancy expenses increased $113,000, or 8.9%, primarily due to the costs of acquiring and operating the new facility.

    Provision for Income Taxes. The Company expensed an income tax provision of $1.4 million for fiscal 2006, compared to the accrual of a benefit of $82,000 in fiscal 2005. The reversal was due to the improvement in earnings. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
    The goal of the Company'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 Company to an excessive level of interest rate risk. The Company employs various strategies intended to manage the potential effect that changing interest rates may have on future operating results. The primary asset/liability management strategy has been to focus on matching the anticipated repricing intervals of interest-earning assets and interest-bearing liabilities. At times, however, depending on the level of general interest rates, the relationship between long- and short-term interest rates, market conditions and competitive factors, the Company may increase its interest rate risk position in order to maintain its net interest margin.
    In an effort to manage the interest rate risk resulting from fixed rate lending, the Company has utilized longer term (up to 10 year maturities) FHLB advances, which are subject to early redemption and fixed terms to offset interest rate risk. Other elements of the Company's current asset/liability strategy include: (i) increasing originations of commercial real estate, commercial business loans, agricultural real estate, and agricultural operating lines, which typically provide higher yields and shorter repricing periods, but inherently increase credit risk, (ii) limiting the price volatility of the investment portfolio by maintaining a weighted average maturity of less than five years, (iii) actively soliciting less rate-sensitive deposits, and (iv) offering competitively priced money market accounts and CDs with maturities of up to five years. The degree to which each segment of the strategy is achieved will affect profitability and exposure to interest rate risk.
    The Company continues to generate long-term, fixed-rate residential loans. During the year ended June 30, 2007, fixed rate residential loan originations totaled $20.1 million compared to $21.3 million during the same period of the prior year. At June 30, 2007, the fixed-rate residential loan portfolio totaled $91.2 million with a weighted average maturity of 200 months compared to $88.2 million at June 30, 2006, with a weighted average maturity of 196 months. At June 30, 2007, fixed rate loans with remaining maturities in excess of 10 years totaled $78.0 million, or 24.8%, of loans receivable compared to $74.1 million, or 26.4%, of loans receivable at June 30, 2006. The Company originated $63.3 million in fixed rate commercial and commercial real estate loans during the year ended June 30, 2007, compared to $43.4 million during the prior fiscal year. The Company also originated $45.3 million in adjustable rate commercial loans during the year ended June 30, 2007, compared to $74.0 million during the prior ye ar. The Company originated $6.8 million in adjustable rate residential loans during the year ended June 30, 2007, compared to $9.3 million during the prior year. At June 30, 2007, home equity loans had decreased to $6.5 million as compared to $7.0 million as of June 30, 2006. Over the last several years, the Company has maintained a weighted average life of its investment portfolio of less than four years. At June 30, 2007, CDs with original terms of two years or more totaled $18.4 million compared to $32.7 million at June 30, 2006.

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INTEREST RATE SENSITIVITY ANALYSIS
    The following table sets forth as of June 30, 2007, and 2006, 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.
    Computations in the table below 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 Southern Missouri'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.
    Management cannot accurately predict future interest rates or their effect on the Company'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. AVERAGE BALANCE, INTEREST AND AVERAGE YIELDS AND RATES
    The table on the following page 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 years indicated. Nonaccrual loans are included in the net loan category.
    The table also presents information 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.

June 30, 2007
	Net Portfolio					NPV as % of PV of Assets
	$ Amount	$ Change		% Change		NPV Ratio	Change
Change in Rates	(dollars in thousands)
+300 bp	$ 16,862	(16,526	)	(49	)	4.73	-4.15
+200 bp	22,897	(10,491	)	(31	)	6.31	-2.57
+100 bp	28,458	(4,930	)	(15	)	7.70	-1.18
0 bp	33,388	-		-		8.88	-
-100 bp	37,139	3,751		11		9.74	0.86
-200 bp	39,307	5,919		18		10.19	1.31
-300 bp	40,593	7,205		22		10.42	1.54

June 30, 2007
	Net Portfolio					NPV as % of PV of Assets
	$ Amount	$ Change		% Change		NPV Ratio	Change
Change in Rates	(dollars in thousands)
+300 bp	$ 14,966	(15,129	)	(50	)	4.54	-4.15
+200 bp	20,409	(9,686	)	(32	)	6.08	-2.61
+100 bp	25,592	(4,503	)	(15	)	7.51	-1.18
0 bp	30,095	-		-		8.69	-
-100 bp	33,265	3,170		11		9.49	.80
-200 bp	35,080	4,985		17		9.91	1.22
-300 bp	36,172	6,077		20		10.13	1.44

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(dollars in thousands)

	2007					2006					2005
Year Ended June 30	Average Balance		Interest and Dividends	Yield/ Cost		Average Balance		Interest and Dividends	Yield/ Cost		Average Balance		Interest and Dividends	Yield/ Cost
Interest-earning assets:
Mortgage loans (1)	$ 211,203		$ 14,726	6.97	%	$ 192,191		$ 12,781	6.65	%	$ 181,368		$ 11,206	6.18	%
Other loans (1)	86,352		6,966	8.07		84,838		5,773	6.81		78,613		4,585	5.83
Total net loans	297,555		21,692	7.29		277,029		18,554	6.70		259,981		15,791	6.07
Mortgage-backed securities	13,082		556	4.25		15,648		596	3.81		19,521		720	3.69
Investment securities (2)	28,234		1,256	4.45		25,067		1,020	4.07		19,462		747	3.84
Other interest-earning assets	3,780		46	1.22		6,989		193	2.77		3,585		26	0.73
TOTAL INTEREST- EARNING ASSETS (1)	342,651		23,550	6.87		324,733		20,363	6.27		302,549		17,284	5.71
Other noninterest-earning    assets (3)	21,563		-	-		21,281		-	-		22,000		-	-
TOTAL ASSETS	$ 364,214		$ 23,550	-		$ 346,014		$ 20,363	-		$ 324,549		$ 17,284	-
Interest-bearing liabilities:
Savings accounts	$ 71,211		$ 2,660	3.74	%	$ 70,704		$ 2,259	3.19	%	$ 68,640		$ 1,407	2.05	%
Now accounts	30,742		402	1.31		29,619		362	1.22		30,308		341	1.13
Money market accounts	7,321		142	1.94		11,333		206	1.82		14,867		206	1.38
Certificates of deposit	125,149		5,849	4.67		116,330		4,140	3.56		89,728		2,550	2.84
TOTAL INTEREST- BEARING DEPOSITS	234,423		9,053	3.86		227,986		6,967	3.06		203,543		4,504	2.21
Borrowings:
Securities sold under       agreements to repurchase	11,863		575	4.84		10,420		400	3.84		8,847		186	2.11
FHLB advances	62,906		3,399	5.40		54,642		2,884	5.28		60,263		2,972	4.93
Junior subordinated debt	7,217		594	8.24		7,217		512	7.10		7,217		370	5.12
TOTAL INTEREST- BEARING LIABILITIES	316,409		13,621	4.30		300,265		10,763	3.58		279,870		8,032	2.87
Noninterest-bearing       demand deposits	17,850		-	-		17,745		-	-		15,439		-	-
Other liabilities	2,041		-	-		2,286		-	-		2,678		-	-
TOTAL LIABILITIES	336,300		13,621	-		320,296		10,763	-		297,987		8,032	-
Stockholders' equity	27,914		-			25,718		-	-		26,562		-	-
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$ 364,214		$ 13,621	-		$ 346,014		$ 10,763	-		$ 324,549		$ 8,032	-
Net interest income			$ 9,929					$ 9,600					$ 9,252
Interest rate spread (4)				2.57	%				2.69	%				2.84	%
Net interest margin (5)				2.90	%				2.96	%				3.06	%
Ratio of average interest-earning    assets to average interest-    bearing liabilities	108.29	%				108.15	%				108.10	%

(1) Calculated net of deferred loan fees, loan discounts and loans-in-process. Nonaccrual loans are included in average loans.
(2) Includes FHLB stock and related cash dividends.
(3) Includes equity securities and related cash dividends.
(4) Net interest spread represents the difference between the average rate on interest-earning assets and the average cost of interest-bearing liabilities.
(5) Net yield on average interest-earning assets represents net interest income divided by average interest-earning assets.


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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 June 30,		For The Year Ended June 30,
	2007		2007		2006		2005
Weighted-average yield on loan portfolio	7.41	%	7.29	%	6.70	%	6.07	%
Weighted-average yield on mortgage-backed securities	4.28		4.25		3.81		3.69
Weighted-average yield on investment securities (1)	4.16		4.45		4.07		3.84
Weighted-average yield on other interest-earning assets	1.10		1.22		2.77		.73
Weighted-average yield on all interest-earning assets	6.98		6.87		6.27		5.71
Weighted-average rate paid on deposits	4.08		3.86		3.06		2.21
Weighted-average rate paid on securities sold under    agreements to repurchase	4.90		4.84		3.84		2.11
Weighted-average rate paid on FHLB advances	5.42		5.40		5.28		4.93
Weighted-average rate paid on subordinated debt	8.11		8.24		7.10		5.12
Weighted-average rate paid on all interest-bearing liabilities	4.44		4.30		3.58		2.87
Interest rate spread (spread between weighted average rate on    all interest-earning assets and all interest-bearing liabilities)	2.55		2.57		2.69		2.84
Net interest margin (net interest income as a percentage of    average interest-earning assets)	2.93		2.90		2.96		3.06

(1) Includes Federal Home Loan Bank stock.

RATE/VOLUME ANALYSIS

    The following table sets forth the effects of changing rates and volumes on net interest income of the Company. 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, 2007 Compared to 2006 Increase (Decrease) Due to								Years Ended June 30, 2006 Compared to 2005 Increase (Decrease) Due to
(dollars in thousands)	Rate		Volume		Rate/ Volume		Net		Rate		Volume		Rate/ Volume		Net
Interest-earning assets:
Loans receivable (1)	1,634		1,375		129		3,138		1,622		1,030		111		2,763
Mortgage-backed securities	69		(98	)	(11	)	(40	)	24		(143	)	(5	)	(124	)
Investment securities (2)	95		129		12		236		45		214		14		273
Other interest-earning deposits	(108	)	(89	)	50		(147	)	73		25		69		167
Total net change in income on    interest-earning assets	1,690		1,317		180		3,187		1,764		1,126		189		3,079
Interest-bearing liabilities:
Deposits	1,721		271		94		2,086		1,523		741		199		2,463
Securities sold under       agreements to repurchase	104		55		16		175		154		33		27		214
Subordinated debt	82		0		0		82		142		0		0		142
FHLB advances	66		436		13		515		210		(277	)	(21	)	(88	)
Total net change in expense on    interest-bearing liabilities	1,973		762		123		2,858		2,029		497		205		2,731
Net change in net interest income	(283	)	555		57		329		(265	)	629		(16	)	348

(1) Does not include interest on loans placed on nonaccrual status.
(2) Does not include dividends earned on equity securities.


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>    FINANCIAL REVIEW (continued)    <

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 repayments on loans and securities as well as the maturity of short-term investments are a relatively predictable source of funding, deposit flows, FHLB advance redemptions and loan and security prepayment rates are significantly influenced by factors outside of the Bank's control, including general economic conditions and market competition. The Bank 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, 2007, the Bank had outstanding commitments to extend credit of $36.7 million (including $30.6 million in unused lines of credit). Total commitments to originate fixed-rate loans with terms in excess of one year were $2.9 million at interest rates ranging from 6.875% to 8.75%. Management anticipates that current funding sources will be adequate to meet foreseeable liquidity needs.
    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, 2007, Southern Missouri increased deposits, securities sold under agreements to repurchase, and FHLB advances by $12.0 million, $6.5 million, and $8.0 million, respectively. During the prior year, Southern Missouri increased deposits and securities sold under agreements to repurchase by $33.4 million and $538,000, respectively, while decreasing FHLB advances by $15.5 million. At June 30, 2007, the Bank had additional borrowing capacity from the FHLB of $42.4 million as compared to $51.2 million at June 30, 2007. In addition to the $42.4 million, the Bank has the ability to pledge additional loan portfolios including commercial real estate, home equity and commercial business, which could provide additional borrowing capacity of approximately $84.0 million at June 30, 2007.
    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, 2007, the Bank had $117.1 million in CDs maturing within one year and $157.3 million in other deposits and securities sold under agreements to repurchase without a specified maturity as compared to the prior year of $113.1 million in CDs maturing within one year and $143.8 million in other deposits and securities sold under agreements to repurchase. Management believes that most maturing interest-bearing liabilities will be retained or replaced by new interest-bearing liabilities. Also at June 30, 2007, the Bank had $39.0 million in FHLB advances eligible for early redemption by the lender within one year.
    REGULATORY CAPITAL
    Federally insured financial institutions are required to maintain minimum levels of regulatory capital. FDIC regulations establish 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, 2007, the Bank exceeded regulatory capital requirements with core and total risk-based capital of $29.9 million and $32.4 million, or 8.1% and 11.8% 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. (See Note 12 - Stockholders' Equity and Regulatory Capital.)

IMPACT OF INFLATION
    The consolidated financial statements and related data presented herein have been prepared in accordance with U.S. 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.

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>    REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM    <

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>    CONSOLIDATED BALANCE SHEETS    <
JUNE 30, 2007 AND 2006
Southern Missouri Bancorp, Inc.

Assets	2007		2006
Cash and cash equivalents	$ 7,330,966		$ 6,366,608
Available for sale securities (Note 2)	34,883,588		38,401,508
Stock in FHLB of Des Moines	3,070,600		2,641,300
Loans, net of allowance for loan losses    of $2,537,659 and $2,058,144 at    June 30, 2007 and 2006, respectively (Note 3)	312,062,967		280,930,991
Accrued interest receivable	2,248,064		1,955,345
Premises and equipment, net (Note 4)	8,650,673		8,931,178
Bank owned life insurance - cash surrender value	6,998,565		6,735,355
Intangible assets, net	2,093,160		2,348,418
Prepaid expenses and other assets	2,588,212		2,373,025
TOTAL ASSETS	$ 379,926,795		$ 350,683,728
Liabilities and Stockholders' Equity
Deposits (Note 5)	$ 270,088,096		$ 258,069,019
Securities sold under agreements to repurchase (Note 6)	17,758,364		11,295,611
Advances from FHLB of Des Moines (Note 7)	54,000,000		46,000,000
Accounts payable and other liabilities	742,816		803,725
Accrued interest payable	1,406,280		744,146
Subordinated debt (Note 8)	7,217,000		7,217,000
TOTAL LIABILITIES	351,212,556		324,129,501
Commitments and contingencies (Note 13)	-		-
Preferred stock, $.01 par value; 500,000 shares    authorized; none issued or outstanding	-		-
Common stock, $.01 par value; 4,000,000 shares    authorized; 2,957,226 shares issued	29,572		29,572
Additional paid-in capital	17,389,156		17,354,621
Retained earnings	24,634,854		22,511,880
Treasury stock of 743,250 shares in 2007 and 720,895    shares in 2006, at cost	(12,990,541	)	(12,651,521	)
Accumulated other comprehensive loss	(348,802	)	(690,325	)
TOTAL STOCKHOLDERS' EQUITY	28,714,239		26,554,227
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$ 379,926,795		$ 350,683,728

See accompanying notes to consolidated financial statements.

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>    CONSOLIDATED STATEMENTS OF INCOME    <
YEARS ENDED JUNE 30, 2007, 2006 AND 2005
Southern Missouri Bancorp, Inc.

Interest income:	2007		2006		2005
Loans	$ 21,691,579		$ 18,554,139		$ 15,790,675
Investment securities	1,255,676		1,020,140		747,378
Mortgage-backed securities	556,235		596,065		720,104
Other interest-earning assets	46,144		193,301		26,175
TOTAL INTEREST INCOME	23,549,634		20,363,645		17,284,332
Interest expense:
Deposits	9,052,748		6,966,798		4,504,594
Securities sold under agreements       to repurchase	574,570		400,097		186,224
Advances from FHLB of Des Moines	3,398,868		2,884,426		2,971,936
Subordinated debt	594,357		512,074		369,733
TOTAL INTEREST EXPENSE	13,620,543		10,763,395		8,032,487
NET INTEREST INCOME	9,929,091		9,600,250		9,251,845
Provision for loan losses (Note 3)	605,000		555,000		4,815,000
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES	9,324,091		9,045,250		4,436,845
Noninterest income:
Net gains (losses) on sales of       available for sale securities	-		-		351,508
Customer service charges	1,140,474		1,211,084		1,018,337
Loan late charges	124,076		119,762		147,704
Increase in cash surrender value       of bank owned life insurance	263,210		249,598		225,291
Other	679,038		563,047		570,640
TOTAL NONINTEREST INCOME	2,206,798		2,143,491		2,313,480
Noninterest expense:
Compensation and benefits	4,006,971		3,685,388		3,510,841
Occupancy and equipment	1,432,659		1,375,670		1,263,055
SAIF deposit insurance premium	31,022		30,583		30,282
Professional fees	246,271		173,685		276,587
Advertising	224,438		187,632		164,169
Postage and office supplies	298,440		294,888		254,440
Amortization of intangible assets	255,258		255,258		255,258
Other	962,959		1,024,826		973,334
TOTAL NONINTEREST EXPENSE	7,458,018		7,027,930		6,727,966
INCOME BEFORE INCOME TAXES	4,072,871		4,160,811		22,359
Income taxes (Note 10)
Current	1,307,458		1,673,184		9,000
Deferred	(163,000	)	(296,539	)	(90,900	)
	1,144,458		1,376,645		(81,900	)
NET INCOME	$ 2,928,413		$ 2,784,166		$ 104,259
Basic earnings per common share	$           1.32		$           1.25		$         0.05
Diluted earnings per common share	$           1.29		$           1.24		$         0.05

See accompanying notes to consolidated financial statements.

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>    CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY    <
YEARS ENDED JUNE 30, 2007, 2006 AND 2005
Southern Missouri Bancorp, Inc.

	Common Stock	Additional Paid-in Capital		Retained Earnings		Treasury Stock		Unearned Employee Benefits		Accumulated Other Comprehensive Income (Loss)		Total Stockholders' Equity
BALANCE AT JUNE 30, 2004	$ 29,572	$ 17,287,099		$ 21,236,686		$ (12,253,732	)	$ (109,051	)	$ (238,156	)	$ 25,952,418
Net income				104,259								104,259
Change in unrealized gain (loss)
on available for sale securities										65,041		65,041
TOTAL COMPREHENSIVE INCOME												169,300
Purchases of treasury stock						(585,884	)					(585,884	)
Dividends paid ($.36 per share)				(809,193	)							(809,193	)
Release of ESOP awards		132,638						59,140				191,778
MRP expense		11,083						4,148				15,231
Tax benefit of MRP		3,887										3,887
Exercise of stock options		(71,165	)			137,127						65,962
BALANCE AT JUNE 30, 2005	$ 29,572	$ 17,363,542		$ 20,531,752		$ (12,702,489	)	$ (45,763	)	$ (173,115	)	$ 25,003,499
Net income				2,784,166								2,784,166
Change in unrealized gain (loss)
on available for sale securities										(517,210	)	(517,210	)
TOTAL COMPREHENSIVE INCOME												2,266,956
Reclassification of unearned    compensation in accordance with    adoption of SFAS No. 123R		(45,763	)					45,763				-
Dividends paid ($.36 per share)				(804,038	)							(804,038	)
SOP expense		51,473										51,473
MRP expense		10,890										10,890
Tax benefit of MRP		2,599										2,599
Exercise of stock options		(28,120	)			50,968						22,848
BALANCE AT JUNE 30, 2006	$ 29,572	$ 17,354,621		$ 22,511,880		$ (12,651,521	)	$            -		$ (690,325	)	$ 26,554,227
Net income				2,928,413								2,928,413
Change in unrealized gain (loss)
on available for sale securities										341,523		341,523
TOTAL COMPREHENSIVE INCOME												3,269,936
Purchases of treasury stock						(397,020	)					(397,020	)
Dividends paid ($.36 per share)				(805,439	)							(805,439	)
SOP Expense		50,067										50,067
MRP expense		13,147										13,147
Tax benefit of MRP		3,321										3,321
Exercise of stock options		(32,000	)			58,000						26,000
BALANCE AT JUNE 30, 2007	$ 29,572	$ 17,389,156		$ 24,634,854		$ (12,990,541	)	$            -		$ (348,802	)	$ 28,714,239

See accompanying notes to consolidated financial statements.

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>    CONSOLIDATED STATEMENTS OF CASH FLOWS    <
YEARS ENDED JUNE 30, 2007, 2006 AND 2005
Southern Missouri Bancorp, Inc.

Cash flows from operating activities:	2007		2006		2005
Net income	$ 2,928,413		$ 2,784,166		$ 104,259
Items not requiring (providing) cash:
Depreciation	713,774		642,449		535,433
SOP, MRP expense and ESOP expense	66,535		62,364		207,008
Net realized losses (gains) on sale       of available for sale securities	-		-		(351,508	)
(Gain) Loss on sale of foreclosed assets	(1,035	)	29,938		14,977
Amortization of intangible assets	255,258		255,258		255,258
Increase in cash surrender value       of bank owned life insurance	(263,210	)	(249,598	)	(225,291	)
Provision for loan losses	605,000		555,000		4,815,000
Amortization of premiums and discounts on securities	(9,373	)	36,598		81,630
Deferred income taxes	(163,000	)	(296,539	)	(90,900	)
Changes in:
Accrued interest receivable	(346,437	)	(561,225	)	(73,453	)
Prepaid expenses and other assets	(346,378	)	(52,073	)	(1,891,167	)
Accounts payable and other liabilities	160,803		1,194,227		177,620
Accrued interest payable	440,422		246,905		161,218
NET CASH PROVIDED BY OPERATING ACTIVITIES	$ 4,040,772		$ 4,647,470		$ 3,720,084
Cash flows from investing activities:
Net increase in loans	$ (31,877,876	)	$ (14,094,508	)	$ (23,995,293	)
Proceeds from sales of    available for sale securities	-		-		7,017,287
Proceeds from maturities of    available for sale securities	8,919,334		5,007,756		8,907,916
Purchases of available for    sale securities	(4,849,941	)	(9,566,422	)	(10,046,587	)
Sale (purchase) of Federal Home Loan Bank stock	(429,300	)	479,800		49,900
Purchase of premises and equipment	(347,815	)	(1,689,261	)	(310,422	)
Purchase of land	-		-		(5,537,842	)
Proceeds from sale of land	-		-		3,497,971
Proceeds from sale of vehicle	1,867		-		-
Purchase of bank owned life insurance	-		-		(2,000,000	)
Proceeds from sale of foreclosed real estate	201,946		34,269		64,355
NET CASH USED IN INVESTING ACTIVITIES	$ (28,381,785	)	$ (19,828,366	)	$ (22,352,715	)

See accompanying notes to consolidated financial statements.

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>    CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)    <
YEARS ENDED JUNE 30, 2007, 2006 AND 2005
Southern Missouri Bancorp, Inc.

Cash flows from financing activities:	2007		2006		2005
Net increase (decrease) in demand    deposits and savings accounts	$ 7,025,174		$ 7,741,339		$ (4,627,461	)
Net increase in certificates of deposit	4,993,903		25,661,983		17,334,562
Net increase in securities sold under    agreements to repurchase	6,462,753		538,411		4,309,381
Proceeds from Federal Home Loan Bank advances	388,475,000		36,250,000		83,050,000
Repayments of Federal Home Loan Bank advances	(380,475,000	)	(51,750,000	)	(80,800,000	)
Dividends paid on common stock	(805,439	)	(804,038	)	(809,193	)
Exercise of stock options	26,000		22,848		65,962
Purchases of treasury stock	(397,020	)	-		(585,884	)
NET CASH PROVIDED BY FINANCING ACTIVITIES	$25,305,371		$ 17,660,543		$ 17,937,367
Increase (Decrease) in cash and cash equivalents	964,358		2,479,647		(695,264	)
Cash and cash equivalents at beginning of year	6,366,608		3,886,961		4,582,225
CASH AND CASH EQUIVALENTS AT END OF YEAR	$ 7,330,966		$ 6,366,608		$ 3,886,961
Supplemental disclosures of cash flow information:
Noncash investing and financing activities
Conversion of loans to foreclosed real estate	$ 288,577		$ 221,447		$ 4,000
Conversion of foreclosed real estate to loans	52,611		45,000		-
Cash paid during the period for
Interest (net of interest credited)	5,223,263		4,602,987		3,871,180
Income taxes	1,472,391		1,090,000		1,204,884

See accompanying notes to consolidated financial statements.

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>    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS    <
Southern Missouri Bancorp, Inc.

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 & Trust (the Bank). 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 U.S. generally accepted accounting principles and general practices within the banking 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.

    Principles of Consolidation. The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, the Bank. All significant intercompany accounts and transactions have been eliminated.

    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 disclosures 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. In connection with the determination of the allowance for loan losses, management obtains independent appraisals for significant properties.

    Cash and Cash Equivalents. For purposes of reporting cash flows, cash and cash equivalents includes cash 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 $4,394,010 and $3,907,302 at June 30, 2007 and 2006, respectively.    Available for Sale Securities. Available for sale securities, which include any security for which the Company has no immediate plan to sell but which may be sold in the future are carried at fair value. Unrealized gains and losses, net of tax, are reported in accumulated other comprehensive loss, a component of stockholders' equity. 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. Realized gains or losses 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.

    Federal Home Loan Bank Stock. The Bank is a member of the Federal Home Loan Bank (FHLB) system. Capital stock of the FHLB is a required investment based upon a predetermined formula and is carried at cost.

    Loans. Loans are stated at unpaid principal balances, less the allowance for loan losses and net deferred loan origination fees.
    Interest on loans is accrued based upon the principal amount outstanding. The accrual of interest on loans is discontinued when, in management's judgment, the collectibility of interest or principal in the normal course of business is doubtful. A loan is considered delinquent when a payment has not been made by the contractual due date. 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 losses on loans represents management's best estimate of losses probable in the existing loan portfolio. The allowance for losses on loans is increased by the provision for losses on loans charged to expense and reduced by loans charged off, net of recoveries. Loans are charged off in the period deemed uncollectible. Recoveries of loans previously charged off are recorded when received. The provision for losses on loans is determined based on management's assessment of several factors: reviews and evaluations of specific loans, changes in the nature and volume of the loan portfolio, current economic conditions and the related impact on specific borrowers and industry groups, historical loan loss experience, the level of classified and nonperforming loans and the results of regulatory examinations.

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>    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)    <
Southern Missouri Bancorp, Inc.

   Valuation allowances are established for impaired loans for the difference between the loan amount and fair value of collateral less estimated selling costs. Impairment losses are recognized through an increase in the allowance for loan losses.
    Loans are considered impaired if, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement.
    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.

    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 20 to 40 years for premises, and five to seven years for equipment.

    Intangible Assets. The Bank adopted the provisions of Statement of Financial Accounting Standards (SFAS) No. 142, Goodwill and Other Intangible Assets, effective July 1, 2002. Intangible assets acquired through the purchase of branches were excluded from the scope of SFAS 142. In October 2002, the Financial Accounting Standards Board (FASB) issued SFAS No. 147, Acquisitions of Certain Financial Institutions. SFAS 147 clarified that the carrying amount of an unidentified intangible asset should continue to be amortized. The Bank's gross amount of this intangible asset at June 30, 2007 and 2006 was $3,837,416 and $3,837,416, respectively, with accumulated amortization of $1,744,256 and $1,488,998, respectively. The intangible asset is being amortized over 15 years with amortization expense over the next five years expected to be $255,258 per year.    Income Taxes. The Company and its subsidiary file consolidated income tax returns. Deferred assets and liabilities are recognized for the tax effects of differences between the financial reporting bases and income tax bases of the Company's assets and liabilities.

    Incentive Plans. The Company accounts for its management and recognition plan (MRP) in accordance with Statement of Financial Accounting Standards (SFAS) No. 123 (revised 2004), "Share-Based Payment". The aggregate purchase price of all shares owned by the incentive plan is reflected as a reduction of stockholder's equity. Compensation expense is based on the market price of the Company's stock on the date the shares are granted and is recorded over the vesting period. The difference between the aggregate purchase price and the fair value on the date the shares are considered earned is recorded as an adjustment to additional paid in capital.

    Outside Directors' Retirement. 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.
    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.

    Stock Options. In December 2004, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 123 (revised 2004), "Share-Based Payment," which requires the compensation costs related to share-based payment transactions to be recognized in financial statements. With limited exceptions, the amount of compensation cost is measured based on the grant-date fair value of the equity instruments issued. Compensation cost is recognized over the vesting period during which an employee provides service in exchange for the award. SFAS No. 123R was adopted during the first quarter of fiscal 2006 for the Company primarily due to the transition from a small business filer to a full filer; stock-based compensation has been recognized for all stock options granted or modified after July 1, 2005. In addition, stock options not vested on July 1, 2005, are being recognized in expense over the remaining vesting period. Because of the July 1, 2005, adoption of SFAS No. 123 R, the table on the following page only shows pro forma compensation expense for fiscal year 2005. In the table, net income and earnings per share are displayed as if the Company had applied the fair value recognition provisions of SFAS No. 123R.

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>    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)    <
Southern Missouri Bancorp, Inc.

	June 30, 2005
Net income as reported	$ 104,259
Add: Stock-based employee compensation    expense included in reported income,    net of related tax effects	207,008
Deduct: Total stock-based employee    compensation expense determined under    fair-value-based method for all awards,
net of related tax effects	(243,469	)
Pro forma net income	$   67,798
Earnings per share
Basic as reported	$        .05
Basic pro forma	.03
Diluted as reported	.05
Diluted pro forma	.03

   Employee Stock Ownership Plan. The Company accounts for its employee stock ownership plan (ESOP) in accordance with American Institute of Certified Public Accountants (AICPA) Statement of Position 93-6.
    As of June 30, 2005, the ESOP shares were fully distributed and the Bank began purchasing additional shares under the ESOP plan.

    Earnings Per Share. Basic income per share is computed using the weighted-average number of common shares outstanding. Diluted income per share includes the effect of all dilutive potential common shares (primarily stock options) outstanding during each year.

    Treasury Stock. Treasury stock is stated at cost. Cost is determined by the first-in, first-out method.

    Reclassification.Certain amounts included in the 2006 and 2005 consolidated financial statements have been reclassified to conform to the 2007 presentation. These reclassifications had no effect on net income.

    The following paragraphs summarize the impact of new accounting pronouncements:
    In July 2006, the FASB issued Interpretation No. 48 (FIN 48), Accounting for Uncertainty in Income Taxes - an Interpretation of FASB Statement 109, which provides guidance on the measurement, recognition, and disclosure of tax positions taken or expected to be taken in a tax return. The Interpretation also provides guidance on derecognition, classification, interest and penalties, and disclosure. FIN 48 prescribes that a tax position should only be recognized if it is more-likely-than-not that the position will be sustained upon examination by the appropriate taxing authority. A tax position that meets this threshold is measured as the largest amount of benefit that is greater than 50 percent likely of being realized upon ultimate settlement. The cumulative effect of applying the provisions of FIN 48 is to be reported as an adjustment to the beginning balance of retained earnings in the period of adoption. FIN 48 is effective for fiscal years beginning after December 15, 2006. The Company plans to adopt the statement on July 1, 2007, and believes the impact of the adoption of this statement on the financial results will be minimal.
    In September 2006, FASB issued SFAS No. 157, Fair Value Measurements, which provides enhanced guidance for using fair value to measure assets and liabilities. SFAS 157 establishes a common definition of fair value, provides a framework for measuring fair value under U.S. GAAP, and expands disclosure requirements about fair value measurements. SFAS 157 is effective for financial statements issued in fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. We are currently evaluating the impact, if any, the adoption of SFAS 157 will have on our financial reporting and disclosures.
    In September 2006, FASB issued SFAS No. 158, Employers' Accounting for Defined Benefit Pension and Other Postretirement Plans – an amendment of FASB Statements No. 87, 88, 106, and 132(R). SFAS 158 requires an employer to recognize the overfunded or underfunded status of a defined benefit postretirement plan (other than a multiemployer plan) as an asset or liability in its statement of financial position and to recognize changes in the funded status in the year in which the changes occur through comprehensive income of a business entity or changes in unrestricted net assets of a not-for-profit organization. This statement also requires an employer to measure the funded status of a plan as of the date of its year-end statement of financial position, with limited exceptions. SFAS No. 158 became effective for and was adopted by our Company for the fiscal year ended June 30, 2007. The impact on our Company's financial statements at June 30, 2007, from the adoption of SFAS No. 158 is immaterial.

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>    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)    <
Southern Missouri Bancorp, Inc.

    In September, 2006, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 108, Considering the Effects of Prior year Misstatements when Quantifying Misstatements in Current Year Financial Statements. SAB 108 requires an entity to consider the effects of prior year misstatements when quantifying misstatements in current year financial statements for purposes of determining materiality. SAB 108 was effective for our Company beginning July 1, 2006. Adoption of SAB 108 has not resulted in a material impact on our Company's financial position or results of operations.
    In February 2007, FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Liabilities, which permits companies to choose to measure many financial instruments and certain other items at fair value. The objective of the new pronouncement is to improve financial reporting by providing companies with the opportunity to mitigate volatility in reported earnings caused by measuring assets and liabilities differently without having to apply complex hedge accounting provisions. SFAS 159 is effective for the Company beginning in fiscal 2008. The Company has not yet made a determination if it will elect to apply any of the options available in SFAS 159.
    In September 2006, the Emerging Issues Task Force Issue 06-4, Accounting for Deferred Compensation and Postretirement Benefit Aspects of Endorsement Split-Dollar Life Insurance Arrangements, was ratified. This EITF Issue addresses accounting for separate agreements which split life insurance policy benefits between an employer and employee. The Issue requires the employer to recognize a liability for future benefits payable to the employee under these agreements. The effects of applying this Issue must be recognized through either a change in accounting principle through an adjustment to equity or through the retrospective application to all prior periods. The Issue is effective for the Company beginning in fiscal 2009. The Company is currently reviewing the impact the adoption of the Issue will have on the Company's financial results.
    Effective November 17, 2006, the FDIC implemented a one-time credit of $4.7 billion to eligible institutions. The purpose of the credit is to recognize contributions made by certain institutions to capitalize the Bank Insurance Fund and Savings Association Insurance Fund, which have now been merged into the Deposit Insurance Fund. The Bank is an eligible institution and has received notice from the FDIC that its share of the credit is $169,000. This amount is not reflected in the accompanying financial statements as it represents contingent future credits against future insurance assessment payments. As such, the timing and ultimate recoverability of the one-time credit may change.

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>    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)    <
Southern Missouri Bancorp, Inc.

NOTE 2: Securities
    The amortized cost, gross unrealized gains, gross unrealized losses and estimated fair value of securities available for sale consisted of the following:

	June 30, 2007
	Amortized Cost	Gross Unrealized Gains	Gross Unrealized Losses		Estimated Fair Value
Investment securities:
U.S. government and Federal       agency obligations	$ 21,709,953	$           -	$ (220,616	)	$ 21,489,337
Obligations of states and       political subdivisions	2,015,783	24,276	(24,550	)	2,015,509
Other securities	661,025	-	(5,000	)	656,025
TOTAL INVESTMENT SECURITIES	24,386,761	24,276	(250,166	)	24,160,871
Mortgage-backed securities:
FHLMC certificates	1,229,108	210	(46,939	)	1,182,379
GNMA certificates	155,726	722	(104	)	156,344
FNMA certificates	4,386,823	2,913	(176,449	)	4,213,287
CMOs issued by government agencies	5,278,853	-	(108,146	)	5,170,707
TOTAL MORTGAGE-BACKED SECURITIES	11,050,510	3,845	(331,638	)	10,722,717
TOTAL	$ 35,437,271	$ 28,121	$ (581,804	)	$ 34,883,588
	June 30, 2006
	Amortized Cost	Gross Unrealized Gains	Gross Unrealized Losses		Estimated Fair Value
Investment securities:
U.S. government and Federal       agency obligations	$ 20,672,506	$            -	$ (508,951	)	$ 20,163,555
Obligations of states and       political subdivisions	851,758	10,635	(12,371	)	850,022
FNMA preferred stock	1,000,000	-	-		1,000,000
Other securities	1,950,000	-	(2,344	)	1,947,656
TOTAL INVESTMENT SECURITIES	24,474,264	10,635	(523,666	)	23,961,233
Mortgage-backed securities:
FHLMC certificates	1,853,852	580	(83,299	)	1,771,133
GNMA certificates	193,545	-	(1,385	)	192,160
FNMA certificates	5,624,398	920	(290,070	)	5,335,248
CMOs issued by government agencies	7,351,232	-	(209,498	)	7,141,734
TOTAL MORTGAGE-BACKED SECURITIES	15,023,027	1,500	(584,252	)	14,440,275
TOTAL	$ 39,497,291	$ 12,135	$ (1,107,918	)	$ 38,401,508

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>    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)    <
Southern Missouri Bancorp, Inc.

    The amortized cost and estimated fair 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, 2007
Available for Sale	Amortized Cost	Estimated Fair Value
Within one year	$ 9,490,386	$ 9,424,582
After one but less than five years	11,993,329	11,852,114
After five but less than 10 years	998,626	983,226
After 10 years	1,904,420	1,900,949
Total investment securities	24,386,761	24,160,871
Mortgage-backed securities	11,050,510	10,722,717
TOTAL	$ 35,437,271	$ 34,883,588

    The carrying value of investment and mortgage-backed securities pledged as collateral to secure public deposits and securities sold under agreements to repurchase amounted to $33,455,667 and $28,395,994 at June 30, 2007 and 2006, respectively.
    Certain investments in debt and marketable equity securities are reported in the financial statements at an amount less than their historical cost. Total fair value of these investments at June 30, 2007 was $33 million, which is approximately 94.9% of the Bank's available for sale investment portfolio, as compared to $35 million or approximately 91.1% of the Bank's available for sale investment portfolio at June 30, 2006. These declines primarily resulted from recent increases in market interest rates.

    Based on evaluation of available evidence, including recent changes in market interest rates, credit rating information and information obtained from regulatory filings, management believes the declines in fair value for these securities are temporary.
    Should the impairment of any of these securities become other than temporary, the cost basis of the investment will be reduced and the resulting loss recognized in net income in the period the other-than-temporary impairment is identified.
    The following tables show our investments' gross unrealized losses and fair value, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at June 30, 2007 and 2006.

	Less than 12 months		12 months or more		Total
Description of Securities	Fair Value	Unrealized Losses	Fair Value	Unrealized Losses	Fair Value	Unrealized Losses
For the year ended June 30, 2007
U.S. Treasury	$            -	$            -	$   500,938	$    890	$   500,938	$    890
U.S. government agencies	2,949,308	27,978	18,039,092	191,748	20,988,400	219,726
Mortgage-backed securities	2,125,963	27,702	7,760,000	303,936	9,885,963	331,638
Other securities	1,483,269	21,152	253,913	8,398	1,737,182	29,550
Total temporarily impaired securities	$ 6,558,540	$ 76,832	$ 26,553,943	$ 504,972	$ 33,112,483	$ 581,804

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>    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)    <
Southern Missouri Bancorp, Inc.

	Less than 12 months		12 months or more		Total
Description of Securities	Fair Value	Unrealized Losses	Fair Value	Unrealized Losses	Fair Value	Unrealized Losses
For the year ended June 30, 2006
U.S. Treasury	$            -	$            -	$ 504,532	$ 12,119	$ 504,532	$ 12,119
U.S. government agencies	7,776,078	165,814	11,882,946	331,018	19,659,024	496,832
Mortgage-backed securities	2,434,689	39,379	11,296,394	544,873	13,731,083	584,252
Other securities	497,656	2,344	591,007	12,371	1,088,663	14,715
Total temporarily impaired securities	$ 10,708,423	$ 207,537	$ 24,274,879	$ 900,381	$ 34,983,302	$ 1,107,918

NOTE 3: Loans

   Loans are summarized as follows:

	June 30,
	2007		2006
Real estate loans:
Conventional	$ 135,287,992		$ 127,205,201
Construction	7,981,390		10,868,078
Commercial	77,723,332		65,373,576
Consumer loans	19,416,309		20,105,818
Commercial	76,053,308		65,108,884
	316,462,331		288,661,557
Loans in process	(1,913,191	)	(5,737,933	)
Deferred loan fees, net	51,486		65,511
Allowance for loan losses	(2,537,659	)	(2,058,144	)
TOTAL	$ 312,062,967		$ 280,930,991

    Adjustable rate loans included in the loan portfolio amounted to $113,874,188 and $126,484,100 at June 30, 2007 and 2006, respectively.
    One- to four-family residential real estate loans amounted to $129,920,634 and $126,349,770 at June 30, 2007 and 2006, 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, restaurants and farmland.

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>    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)    <
Southern Missouri Bancorp, Inc.

    Following is a summary of activity in the allowance for loan losses:

	June 30,
	2007		2006		2005
Balance, beginning of period	$ 2,058,144		$ 2,016,514		$ 1,978,491
Loans charged-off	(162,719	)	(577,938	)	(4,821,112	)
Recoveries of loans previously charged-off	37,234		64,568		44,135
Net charge-offs	(125,485	)	(513,370	)	(4,776,977	)
Provision charged to expense	605,000		555,000		4,815,000
Balance, end of period	$ 2,537,659		$ 2,058,144		$ 2,016,514

    Total loans past due 90 days or more and still accruing interest amounted to $24,000 and $2,000 at June 30, 2007 and 2006, respectively.
The Company had ceased recognition of interest income on loans with a book value of $2,000 and $51,000, at June 30, 2007 and 2006, respectively. The average balance of nonaccrual loans for the years ended June 30, 2007 and 2006 was $47,000 and $272,000, respectively. Allowance for losses on nonaccrual loans amounted to $0 and $0, at June 30, 2007 and 2006. Interest income recognized on these loans for the years ended June 30, 2007 and 2006, was considered nominal. Gross interest income would have been nominal for the years ended June 30, 2007 and 2006, if the interest payments had been received in accordance with the original terms. The Company is not committed to lend additional funds to customers whose loans have been placed on nonaccrual status.
    Of the above nonaccrual loans at June 30, 2007 and 2006, none were considered to be impaired. There were no impaired loans during the years ended June 30, 2007 and 2006.

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, 2006	$ 6,868,342
Additions	1,388,216
Repayments	(212,835	)
Balance, June 30, 2007	$ 8,043,723
These loans were made on substantially the same terms as those prevailing at the time for comparable transactions with unaffiliated persons.

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>    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)    <
Southern Missouri Bancorp, Inc.

NOTE 4: Premises and Equipment

   Following is a summary of premises and equipment:

	June 30,
	2007		2006
Land	$ 3,418,074		$ 3,328,783
Buildings and improvements	5,884,266		5,857,147
Furniture, fixtures and equipment	4,567,267		4,274,139
Automobiles	32,376		48,376
	13,901,983		13,508,445
Less accumulated depreciation	(5,251,310	)	(4,577,267	)
TOTAL	$ 8,650,673		$ 8,931,178

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>    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)    <
Southern Missouri Bancorp, Inc.

NOTE 5: Deposits

   Deposits are summarized as follows:

	June 30,
	2007	2006
Noninterest-bearing accounts	$ 22,275,977	$ 18,710,087
NOW accounts	31,122,878	31,037,038
Money market deposit accounts	7,211,517	8,907,715
Savings accounts	78,908,351	73,824,996
TOTAL TRANSACTION ACCOUNTS	$139,518,723	$132,479,836
Certificates:
0.00 - 0.99%	$            -	$            -
1.00 - 1.99%	-	-
2.00 - 2.99%	1,086,670	9,474,913
3.00 - 3.99%	6,557,958	56,044,666
4.00 - 4.99%	27,805,696	49,634,850
5.00 - 5.99%	95,119,049	10,434,754
6.00 - 6.99%	-	-
Total certificates, 4.94%
and 4.06%, respectively	130,569,373	125,589,183
TOTAL DEPOSITS	$ 270,088,096	$ 258,069,019
The aggregate amount of certificates of deposit with a minimum denomination of $100,000 was $41,448,245 and $47,509,029 at June 30, 2007 and 2006, respectively.
Certificate maturities at June 30, 2007 are summarized as follows:
July 1, 2007 to June 30, 2008		$ 117,082,454
July 1, 2008 to June 30, 2009		4,989,240
July 1, 2009 to June 30, 2010		3,903,426
July 1, 2010 to June 30, 2011		1,803,393
July 1, 2011 to June 30, 2012		2,790,860
Thereafter		-
	TOTAL	$ 130,569,373

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>    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)    <
Southern Missouri Bancorp, Inc.

NOTE 6: 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.
    The market value of the securities underlying the agreements at June 30, 2007 and 2006, was $18,307,912 and $12,469,129, respectively. The securities sold under agreements to repurchase are under the Company's control.

	June 30,
	2007		2006
Year-end balance	$ 17,758,364		$ 11,295,611
Average balance during the year	11,862,732		10,420,045
Maximum month-end balance during the year	17,758,364		12,588,949
Average interest during the year	4.84	%	3.84	%
Year-end interest rate	4.90	%	4.69	%

NOTE 7: Advances from Federal Home Loan Bank

   Advances from Federal Home Loan Bank are summarized as follows:

	Call Date or Quarterly	Interest		June 30
Maturity	Thereafter	Rate		2007		2006
Overnight borrowings    and short-term
repurchase agreements	-	5.48	%	$ 7,000,000		$            0
12-18-06	-	3.05	%	-		2,000,000
01-08-07	-	2.69	%	-		2,000,000
06-11-07	-	4.96	%	-		1,000,000
06-19-07	-	4.69	%	-		1,000,000
08-30-07	-	3.96	%	1,000,000		1,000,000
10-17-07	-	4.91	%	2,000,000		2,000,000
02-06-08	08-06-03	5.24	%	-		3,000,000
10-26-09	09-01-03	5.58	%	10,000,000		10,000,000
01-20-10	07-20-03	5.85	%	5,000,000		5,000,000
10-27-10	10-27-03	5.94	%	9,000,000		9,000,000
12-09-10	12-09-05	6.01	%	10,000,000		10,000,000
11-29-16	11-29-07	3.93	%	5,000,000		-
11-29-16	11-29-11	4.42	%	5,000,000		-
		TOTAL		$ 54,000,000		$ 46,000,000
Weighted-average rate				5.42	%	5.41	%

    In addition to the above advances, the Bank had an available line of credit amounting to $42,384,625 and $51,211,125, with FHLB at June 30, 2007 and 2006, respectively.
    Advances from FHLB of Des Moines are secured by FHLB stock and one- to four-family mortgage loans of $64,800,000 and $55,200,000 at June 30, 2007 and 2006, respectively. The principal maturities of FHLB advances at June 30, 2007, are at right:

FHLB Advance Maturities
July 1, 2007 to June 30, 2008	$ 10,000,000
July 1, 2008 to June 30, 2009	-
July 1, 2009 to June 30, 2010	15,000,000
July 1, 2010 to June 30, 2011	19,000,000
July 1, 2011 to June 30, 2012	-
July 1, 2012 and thereafter	10,000,000
TOTAL	$ 54,000,000

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>    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)    <
Southern Missouri Bancorp, Inc.

NOTE 8: Subordinated Debt
    Southern Missouri Statutory Trust I issued $7.0 million of Floating Rate Capital Securities (the "Trust Preferred Securities") with a liquidation value of $1,000 per share in March 2004. The securities are due in 30 years, redeemable after five years and bear interest at a floating rate based on LIBOR. At June 30, 2007, the current rate was 8.11%. The securities represent undivided beneficial interests in the trust, which was established by Southern Missouri for the purpose of issuing the securities. The Trust Preferred Securities were sold in a private transaction exempt from registration under the Securities Act of 1933, as amended (the "Act") and have not been registered under the Act. The securities may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements.
    Southern Missouri Statutory Trust I used the proceeds from the sale of the Trust Preferred Securities to purchase Junior Subordinated Debentures of Southern Missouri Bancorp. Southern Missouri Bancorp, Inc. used its net proceeds for working capital and investment in its subsidiaries.

NOTE 9: Employee Benefits     401(k). The Bank has 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 2007, 2006, and 2005, there were no contributions made to the plan.     Employee Stock Ownership Plan (ESOP). The Bank established a tax-qualified ESOP in April 1994. The plan covers substantially all employees who have attained the age of 21 and completed one year of service.     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 Bank makes discretionary contributions to the ESOP. The ESOP expense for 2007, 2006, and 2005 was $190,000, $180,000, and $191,777, respectively.     The number of ESOP shares at June 30, 2007 and 2006 were as follows:
	2007	2006
Allocated shares	160,270	139,131
Unreleased shares	-	-
TOTAL ESOP SHARES	160,270	139,131
Management Recognition Plan (MRP). The Bank adopted an MRP for the benefit of non-employee directors and two MRPs for officers and key employees (who may also be directors) in April 1994. During 2004, the Bank granted 5,000 MRP shares to employees. During 2007, an additional 1,000 shares were granted. The shares granted are in the form of restricted stock payable at the rate of 20% of such shares per year. During 2007, 900 MRP shares vested, which had been awarded in 2004 and 2007. 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 2007, 2006, and 2005, was $13,147, $10,890, and $15,231, respectively.

    Stock Option Plan. The Company adopted a stock option plan in April 1994. The purpose of the plan was 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 were 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 after June 30, 1999, the vesting period ranged from the grant date up to a five year period. All options expire ten years from the date of the grant. The 1994 stock option plan expired in April 2004. In October 2003, a new stock option and incentive plan was adopted ("2003 Plan"). Under the 2003 Plan, the Company has granted 72,500 options to employees and directors.
    In December, 2004, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards (SFAS) No. 123R, "Share-Based Payment" (SFAS 123R). SFAS 123R requires companies to recognize the cost of employee services received in exchange for awards of equity instruments, such as stock options and restricted stock, based on the fair value of those awards at the date of grant, and eliminates the choice to account for employee stock options under Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" (APB 25), which is how the Company previously accounted for its stock options. The Company adopted SFAS 123R effective July 1, 2005. As a result of adopting SFAS 123R, incremental stock-based compensation expense recognized during fiscal 2006 was $53,106.
    As of June 30, 2007, there was $107,000 in remaining unrecognized compensation expense related to nonvested stock options, which will be recognized over the remaining weighted average vesting period. The aggregate intrinsic value of stock options outstanding at June 30, 2007, was $764,000. The aggregate intrinsic value of stock options exercisable at June 30, 2007, was $761,000.

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>    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)    <
Southern Missouri Bancorp, Inc.

Changes in options outstanding were as follows:

	Year Ended June 30
	2007		2006			2005
	Weighted Average Price	Number	Weighted Average Price	Number		Weighted Average Price	Number
Outstanding at beginning of year	$ 10.64	180,500	$ 10.70	188,515		$ 10.24	186,972
Granted	-	-	14.26	5,000		15.30	15,000
Exercised	6.50	4,000	6.50	(3,515	)	6.97	(9,457	)
Forfeited	-	-	15.23	(9,500	)	15.23	(4,000	)
Outstanding at year-end	$ 10.73	176,500	$ 10.64	180,500		$ 10.70	188,515
Options exercisable at year-end	$ 9.75	144,100	$ 9.10	134,400		$ 8.37	123,915

    The following is a summary of the assumptions used in the Black-Scholes pricing model in determining the fair values of options granted during fiscal years 2007, 2006, and 2005 (no options were granted in fiscal 2007):

	2007	2006		2005
Assumptions:
Expected dividend yield	-	2.52	%	2.35	%
Expected volatility	-	18.89	%	18.74	%
Risk-free interest rate	-	3.98	%	3.31	%
Weighted-average expected life	-	5 years		5 years
Weighted-average fair value of       options granted during the year	-	$ 3.43		$ 3.55

    The following table summarizes information about stock options under the plan outstanding at June 30, 2007:

		Options Outstanding		Options Exercisable
Exercise Price	Number Outstanding	Weighted Average Remaining Contractual Life	Weighted Average Exercise Price	Number Exercisable	Weighted Average Exercise Price
$ 6.5000	14,000	34.5 mo.	$ 6.5000	14,000	$ 6.5000
6.7500	60,000	26.0 mo.	6.7500	60,000	6.7500
9.9375	30,000	7.1 mo.	9.9375	30,000	9.9375
15.2300	52,500	82.7 mo.	15.2300	33,100	15.2300
15.3000	15,000	87.7 mo.	15.3000	6,000	15.3000
14.2600	5,000	98.5 mo.	14.2600	1,000	14.2600

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>    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)    <
Southern Missouri Bancorp, Inc.

NOTE 10: Income Taxes
    The components of net deferred tax assets (liabilities) are summarized as follows:

	2007	2006
Deferred tax assets:
Provision for losses on loans	$ 900,049	$ 792,385
Unrealized loss of available for sale securities	204,851	405,429
Accrued compensation and benefits	154,965	140,185
Other	65,698	56,810
Total deferred tax assets	1,325,563	1,394,809
Deferred tax liabilities:
FHLB stock dividends	188,612	188,612
Purchase accounting adjustments	63,694	60,175
Depreciation	284,405	319,593
Total deferred tax liabilities	536,711	568,380
NET DEFERRED TAX ASSET	$ 788,852	$ 826,429

    A reconciliation of income tax expense at the statutory rate to the Company's actual income tax expense is shown below:

	Year Ended June 30
	2007		2006		2005
Tax at statutory Federal rate	$ 1,384,776		$ 1,414,675		$ 7,602
Increase (reduction) in taxes    resulting from:
Nontaxable municipal income	(31,983	)	(17,879	)	(20,695	)
State tax, net of Federal benefit	52,006		106,194		(12,138	)
Nondeductible ESOP expenses	-		-		45,097
Cash surrender value of bank          owned life insurance	(89,491	)	(84,863	)	(76,599	)
Other, net	(170,850	)	(41,482	)	(25,167	)
ACTUAL PROVISION	$ 1,144,458		$ 1,376,645		$ (81,900	)

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>    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)    <
Southern Missouri Bancorp, Inc.

NOTE 11: Other Comprehensive Income (Loss)

    Other comprehensive income (loss) components are as follows:

	Year Ended June 30
	2007		2006		2005
Unrealized gains (losses) on    available for sale securities:
Unrealized holding gains (losses)       arising during period	$ 542,101		$ (820,968	)	$ 454,748
Less: reclassification       adjustments for (gains) losses       realized in net income	-		-		(351,508	)
Total unrealized gains (losses)       on securities	542,101		(820,968	)	103,240
Income tax (expense) benefit	(200,578	)	303,758		(38,199	)
Other comprehensive income (loss)	$ 341,523		$ (517,210	)	$ 65,041

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>    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)    <
Southern Missouri Bancorp, Inc.

NOTE 12: 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 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, 2007, that the Bank meets all capital adequacy requirements to which it is subject.
    As of June 30, 2007, 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 Company's only significant activity is ownership of the Bank, and, therefore, its capital, capital ratios, and minimum required levels of capital are materially the same as the Bank's.
    The following table summarizes the Bank's actual and required regulatory capital:

(dollars in thousands)	Actual			For Capital Adequacy Purposes			To Be Well Capitalized Under Prompt Corrective Action Provisions
As of June 30, 2007	Amount	Ratio		Amount	Ratio		Amount	Ratio
Total Capital (to Risk-Weighted Assets)	$ 32,420	11.81	%	$ 21,954	>8.00	%	$ 27,443	>10.00	%
Tier I Capital (to Risk-Weighted Assets)	29,882	10.89	%	10,977	>4.00	%	16,466	>6.00	%
Tier I Capital (to Average Assets)	29,882	8.10	%	14,756	>4.00	%	18,445	>5.00	%
As of June 30, 2006
Total Capital (to Risk-Weighted Assets)	$ 29,372	11.73	%	$ 20,035	>8.00	%	$ 25,044	>10.00	%
Tier I Capital (to Risk-Weighted Assets)	27,314	10.91	%	10,018	>4.00	%	15,026	>6.00	%
Tier I Capital (to Average Assets)	27,314	7.92	%	13,794	>4.00	%	17,242	>5.00	%

The Bank's ability to pay dividends on its common stock to the Company is restricted to maintain adequate capital as shown in the table above.

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>    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)    <
Southern Missouri Bancorp, Inc.

NOTE 13: Commitments and Credit Risk

    Standby Letters of Credit. In the normal course of business, the Bank issues various financial standby, performance standby and commercial letters of credit for its customers. As consideration for the letters of credit, the institution charges letter of credit fees based on the face amount of the letters and the creditworthiness of the counterparties. These letters of credit are stand-alone agreements, and are unrelated to any obligation the depositor has to the Bank.
    Standby letters of credit are irrevocable conditional commitments issued by the Bank 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.
    The Bank had total outstanding standby letters of credit amounting to $696,000 and $1,270,000 at June 30, 2007 and 2006, respectively, with terms ranging from 12 to 24 months. At June 30, 2007, the Bank's deferred revenue under standby letters of credit agreements was nominal.

    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. 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. 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 counterparty. 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.
    The Company had $36.0 million in commitments to extend credit at June 30, 2007, and $39.3million at June 30, 2006.
    At June 30, 2007, total commitments to originate fixed-rate loans with terms in excess of one year were $2.9 million at interest rates ranging from 6.875% to 8.75%. 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 $135,288,000 at June 30, 2007, are secured by single and multi-family residential real estate in the Company's primary lending area.

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>    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)    <
Southern Missouri Bancorp, Inc.

NOTE 14: Earnings Per Share

    The following table sets forth the computations of basic and diluted earnings per common share:

	Year Ended June 30
	2007	2006	2005
Net income	$ 2,928,413	$ 2,784,166	$ 104,259
Denominator for basic earnings       per share -
Weighted-average shares          outstanding	2,225,658	2,224,409	2,225,493
Effect of dilutive securities          Stock options	38,578	27,852	64,255
Denominator for diluted       earnings per share	2,264,236	2,252,261	2,289,748
Basic earnings per common share	$         1.32	$         1.25	$            .05
Diluted earnings per common share	$         1.29	$         1.24	$            .05

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>    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)    <
Southern Missouri Bancorp, Inc.

NOTE 15: Disclosures About Fair Value of Financial Instruments

    The following table presents estimated fair values of the Company's financial instruments. The fair values of certain of these instruments were calculated by discounting expected cash flows, which involves significant judgments by management and uncertainties. Fair value is the estimated amount at which financial assets or liabilities could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. Because no market exists for certain of these financial instruments and because management does not intend to sell these financial instruments, the Company does not know whether the fair values shown below represent values at which the respective financial instruments could be sold individually or in the aggregate.

	2007			2006
	Carrying Amount		Fair Value	Carrying Amount		Fair Value
		(in thousands)			(in thousands)
Financial Assets
Cash and cash equivalents	$ 7,331		$ 7,331	$ 6,367		$ 6,367
Investment and mortgage-       backed securities       available for sale	34,884		34,884	38,402		38,402
Stock in FHLB	3,071		3,071	2,641		2,641
Loans receivable, net	312,063		311,240	280,931		280,784
Bank owned life insurance	6,999		6,999	6,735		6,735
Accrued interest receivable	2,248		2,248	1,955		1,955
Financial Liabilities
Deposits	270,088		268,236	258,069		256,772
Securities sold under       agreements to repurchase	17,758		17,758	11,296		11,296
Advances from FHLB	54,000		54,366	46,000		46,499
Subordinated Debt	7,217		7,217	7,217		7,217
Accrued interest payable	1,406		1,406	744		744
Unrecognized financial instruments    (net of contract amount)
Letters of Credit	-		-	-		-
Lines of Credit	-		-	-		-

    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 which approximates fair value.
    Fair values of investment and mortgage-backed securities are based on quoted market prices or, if unavailable, quoted market prices of similar securities.
    Stock in FHLB is valued at cost which 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.
    Fair value of Bank owned life insurance is equal to the cash surrender value of the underlying life insurance policies.
    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 their carrying amount which 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.
    The carrying amounts of securities sold under agreements to repurchase approximate fair value.
    Fair value of advances from the FHLB is estimated by discounting maturities using an estimate of the current market for similar instruments.
    The fair value of subordinated debt is estimated using rates currently available to the Company for debt with similar terms and maturities.

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>    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)    <
Southern Missouri Bancorp, Inc.

NOTE 16: Condensed Parent Company Only Financial Statements

    The following condensed balance sheets, 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.

	June 30
Condensed Balance Sheets	2007	2006
Assets
Cash and cash equivalents	$ 1,870,317	$ 1,043,992
Premise and equipment	2,079,658	2,079,658
Other assets	433,122	1,745,972
Investment in common stock of Bank	31,626,094	28,970,952
TOTAL ASSETS	$ 36,009,191	$ 33,840,574
Liabilities and Stockholders' Equity
Accrued expenses and other liabilities	$ 77,952	$ 69,347
Subordinated debt	7,217,000	7,217,000
TOTAL LIABILITIES	7,294,952	7,286,347
Stockholders' equity	28,714,239	26,554,227
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$ 36,009,191	$ 33,840,574

	Year Ended June 30
Condensed Statements of Income	2007		2006		2005
Interest income	$ 61,165		$ 85,272		$ 96,653
Interest expense	594,357		512,074		369,733
Net interest income	(533,192	)	(426,802	)	(273,080	)
Dividends from Bank	1,200,000		1,200,000		1,200,000
Gain on sales of securities	-		-		351,508
Operating expenses	294,479		301,372		272,643
Income before income taxes and       equity in undistributed income       of the Bank	372,329		471,826		1,005,785
Income tax benefit	309,000		279,300		79,900
Income before equity in undistributed    income of the Bank;	681,329		751,126		1,085,685
Equity in undistributed (loss) income    of the Bank	2,247,084		2,033,040		(981,426	)
NET INCOME	$ 2,928,413		$ 2,784,166		$ 104,259

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>    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)    <
Southern Missouri Bancorp, Inc.

	Year Ended June 30
Condensed Statements	2007		2006		2005
Cash flows from operating activities:
Net income	$ 2,928,413		$ 2,784,166		$ 104,259
Changes in:
Equity in undistributed income          of the Bank	(2,247,084	)	(2,033,040	)	981,426
Other adjustments, net	32,480		58,329		37,355
NET CASH PROVIDED BY OPERATING ACTIVITIES	713,809		809,455		1,123,040
Cash flows from investing activities:
Principal collected on loan to ESOP	-		-		70,566
Purchase of available for sale securities	(1,330,000	)	(1,450,000	)	(1,099,000	)
Investment in real estate	-		(69,327	)	(5,537,842	)
Sale of investment real estate	-		-		3,497,971
Depreciation	-		-		39,916
Proceeds from sales and maturities of       available for sale securities	2,618,975		-		6,668,949
Capital contributed to Bank	-		-		(2,000,000	)
NET CASH PROVIDED BY OR (USED IN) INVESTING ACTIVITIES	1,288,975		(1,519,327	)	1,640,560
Cash flows from financing activities:
Dividends on common stock	(805,439	)	(804,038	)	(809,193	)
Exercise of stock options	26,000		22,848		65,962
Payments to acquire treasury stock	(397,020	)	-		(585,884	)
NET CASH (USED IN) OR PROVIDED BY FINANCING ACTIVITIES	(1,176,459	)	(781,190	)	(1,329,115	)
Net increase (decrease) in cash and    cash equivalents	826,325		(1,491,062	)	1,434,485
Cash and cash equivalents at beginning    of year	1,043,992		2,535,054		1,100,569
CASH AND CASH EQUIVALENTS AT END OF YEAR	$ 1,870,317		$ 1,043,992		$ 2,535,054

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>    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)    <
Southern Missouri Bancorp, Inc.

NOTE 17: Quarterly Financial Data (Unaudited)
    Quarterly operating data is summarized as follows (in thousands):

	June 30, 2007
	First Quarter	Second Quarter	Third Quarter		Fourth Quarter
Interest income	$ 5,686	$ 5,802	$ 5,920		$ 6,141
Interest expense	3,197	3,388	3,465		3,570
Net interest income	2,489	2,414	2,455		2,571
Provision for loan losses	125	95	100		285
Noninterest income	577	548	516		565
Noninterest expense	1,797	1,803	1,889		1,969
Income before income taxes	1,144	1,064	982		882
Income tax expense	404	341	330		69
NET INCOME	$ 740	$ 723	$ 652		$ 813
	June 30, 2006
	First Quarter	Second Quarter	Third Quarter		Fourth Quarter
Interest income	$ 4,750	$ 5,016	$ 5,187		$ 5,410
Interest expense	2,401	2,690	2,782		2,890
Net interest income	2,349	2,326	2,405		2,520
Provision for loan losses	120	85	80		270
Noninterest income	540	533	505		566
Noninterest expense	1,732	1,729	1,833		1,734
Income before income taxes	1,037	1,045	997		1,082
Income tax expense	356	366	352		303
NET INCOME	$ 681	$ 679	$ 645		$ 779
	June 30, 2005
	First Quarter	Second Quarter	Third Quarter		Fourth Quarter
Interest income	$ 4,171	$ 4,312	$ 4,325		$ 4,476
Interest expense	1,848	1,928	2,050		2,206
Net interest income	2,323	2,384	2,275		2,270
Provision for loan losses	150	95	2,610		1,960
Noninterest income	691	764	322		536
Noninterest expense	1,643	1,605	1,664		1,816
Income (loss) before income taxes	1,221	1,448	(1,677	)	(970	)
Income tax expense (benefit)	428	574	(701	)	(383	)
NET INCOME (LOSS)	$ 793	$ 874	$ (976	)	$ (587	)

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>    CORPORATE INFORMATION    <

CORPORATE HEADQUARTERS 531 Vine Street Poplar Bluff, Missouri 63901 COMPANY WEBSITE www.smbtonline.com SPECIAL COUNSEL Silver, Freedman & Taff, LLP Washington, D.C. 20007

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM BKD, LLP St. Louis, Missouri 63102 COMMON STOCK Nasdaq Stock Market Nasdaq Symbol: SMBC

TRANSFER AGENT Stockholders should report lost stock certificates or direct inquiries concerning dividend payments, change of name, address, or ownership, or consolidation of accounts, to the Company's transfer agent:    Registrar and Transfer Company    10 Commerce Drive    Cranford, New Jersey 07016    (800) 368-5948 ANNUAL MEETING The Annual Meeting of Stockholders will be held Monday, October 15, 2007, 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-K AND OTHER REPORTS A copy of the Company's annual report on Form 10-K, 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.

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>    DIRECTORS and OFFICERS    <

SOUTHERN MISSOURI BANCORP, INC.

Directors
James W. Tatum Chairman of the Board, Retired Certified Public Accountant	Ronnie D. Black Executive Director, General Association of General Baptists	Charles R. Love Certified Public Accountant, Kraft, Miles and Tatum
Samuel H. Smith Vice-Chairman of the Board, Engineer and Majority Owner, S.H. Smith and Company, Inc.	Sammy A. Schalk President, Gamblin Lumber Company	Charles R. Moffitt Agency Manager, Morse Harwell Jiles Insurance Agency
L. Douglas Bagby City Manager, Poplar Bluff General Manager, Municipal Utilities of Poplar Bluff	Greg A. Steffens President and Chief Executive Officer, Southern Missouri Bancorp, Inc. Rebecca M. Brooks Financial Manager, McLane Transport	Leonard W. Ehlers Director Emeritus, Retired Court Reporter, 36th Judicial Circuit

SOUTHERN MISSOURI BANK AND TRUST

Directors		Senior Officers
Samuel H. Smith Chairman of the Board, Engineer and Majority Owner, S.H. Smith and Company, Inc. L. Douglas Bagby Vice-Chairman of the Board, City Manager, Poplar Bluff General Manager, Municipal Utilities of Poplar Bluff Ronnie D. Black Executive Director, General Association of General Baptists James W. Tatum Retired Certified Public Accountant	Sammy A. Schalk President, Gamblin Lumber Company Greg A. Steffens President and Chief Executive Officer, Southern Missouri Bancorp, Inc. Rebecca M. Brooks Financial Manager, McLane Transport Charles R. Love Certified Public Accountant, Kraft, Miles and Tatum Charles R. Moffitt Agency Manager, Morse Harwell Jiles Insurance Agency	Greg A. Steffens President and Chief Executive Officer Kimberly A. Capps Chief Operations Officer William D. Hribovsek Chief Lending Officer Matthew T. Funke Chief Financial Officer Lora L. Daves Chief of Credit Administration Valerie E. Yates Head of Internal Audit

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EX-21

EXHIBIT 21

Parent
Southern Missouri Bancorp, Inc.
Subsidiaries(a)	Percentage of Ownership	Jurisdiction or State of Incorporation
Southern Missouri Bank and Trust Co.	100%	Missouri
SMS Financial Services, Inc.(b)	100%	Missouri

___________________________

(a)	The operation of the Company's wholly owned subsidiaries are included in the Company's Financial Statements contained in Item 7 hereof.
(b)	Wholly-owned subsidiary of Southern Missouri Bank and Trust Co.; subsidiary is inactive.

EX-23 7 ex23.htm

EXHIBIT 23

Consent of Independent Registered Public Accounting Firm

We consent to the incorporation by reference in the registration statements on Form S-8 (File No. 333-2320 and File No. 333-127134), of the Southern Missouri Bancorp, Inc. 1994 and 2003 Stock Option Plans, of our report, dated August 22, 2007, on our audits of the consolidated financial statements of Southern Missouri Bancorp, Inc. as of June 30, 2007 and 2006, and for the three years ended June 30, 2007, which report is incorporated by reference in this Annual Report on Form 10-K

/s/ BKD, LLP

St. Louis, Missouri
September 28, 2007

EX-31

EXHIBIT 31

CERTIFICATION

I, Greg A. Steffens, certify that:

1)	I have reviewed this annual report on Form 10-K of Southern Missouri Bancorp, Inc.;
2)	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3)	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4)	I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
	a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to me by others within those entities, particularly during the period in which this report is being prepared;
	b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under my supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
	c)	Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report my conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
	d)	Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5)	I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
	a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
	b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: September 28, 2007 By: /s/ Greg A. SteffensGreg A. Steffens
President
(Principal Executive and Principal Financial and
   Accounting Officer)

EX-32

EXHIBIT 32

CERTIFICATION

            Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned hereby certifies in his capacity as an officer of Southern Missouri Bancorp, Inc. (the "Company") that the Annual Report of the Company on Form 10-K for the fiscal year ended June 30, 2007 fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934, as amended, and that the information contained in such report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods presented in the financial statements included in such report.

Date: September 28, 2007 By: /s/ Greg A. SteffensGreg A. Steffens
President
(Principal Executive and Principal Financial and
   Accounting Officer)