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, 2009          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:
Title of each class: Common Stock, par value $0.01 per share	Name of each exchange on which registered: The NASDAQ Stock Market LLC

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 mart whether the registrant has submitted electronically and posted on its corporate web site, if any, every interactive data file required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.402 of this chapter) during the preceding 12 months (or for such shorter period that the registration was required to submit and post such files.   YES __   NO __

Indicate by check mark whether disclosure of delinquent filers pursuant to Item 405 of Regulation S-K 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. _____

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.

Large accelerated filer  __     Accelerated filer  __     Non-accelerated filer  __     Smaller reporting company    x  

(Do not check if a smaller reporting company)

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 high and low traded price of such stock as of the last business day of the registrant's most recently completed second fiscal quarter, was $17.3 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 25, 2009, there were issued and outstanding 2,087,976 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, 2009.

Part III of Form 10-K - Portions of the Proxy Statement for the 2009 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. converted from a Missouri chartered stock savings bank to a Missouri state chartered trust company with banking powers ("Charter Conversion").  On June 1, 2009, the institution changed its name to Southern Bank ("Bank").

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, 2009, the Company had total assets of $465.9 million, total deposits of $312.0 million and stockholders' equity of $42.0 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, CMOs 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.

On December 5, 2008, as part of the Troubled Asset Relief Program ("TARP") Capital Purchase Program, the Company entered into a Letter Agreement and Securities Purchase Agreement (collectively, the "Purchase Agreement") with the United States Department of the Treasury ("Treasury"), pursuant to which the Company (i) sold 9,550 shares of the Company's Fixed Rate Cumulative Perpetual Preferred Stock, Series A (the "Series A Preferred Stock") for a purchase price of $9,550,000 in cash and (ii) issued a warrant (the "Warrant") to purchase 114,326 shares of the Company's common stock, par value $0.01 per share (the "Common Stock"), for a per share price of $12.53 per share. The Series A Preferred Stock is entitled to cumulative dividends at a rate of 5% per annum for the first five years, and 9% per annum thereafter. The Series A Preferred Stock may be redeemed by the Company at any time, subject to consultation. The Warrant has a 10-year term and is immediately exercisable upon its issuance, with an exercise price, subject to anti-dilution adjustments, equal to $12.53 per share of the Common Stock. If the Series A Preferred Stock is redeemed, the Warrant will be liquidated at the current market price. Treasury has agreed not to exercise voting power with respect to any shares of Common Stock issued upon exercise of the Warrant that it holds.

Pursuant to the terms of the Purchase Agreement, the ability of the Company to declare or pay dividends or distributions on, or purchase, redeem or otherwise acquire for consideration, shares of its Junior Stock (as defined below) and Parity Stock (as defined below) will be subject to restrictions, including a restriction against increasing

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dividends from the last quarterly cash dividend per share ($0.12) declared on the Common Stock prior to December 5, 2008. The redemption, purchase or other acquisition of trust preferred securities of the Company or its affiliates also will be restricted. These restrictions will terminate on the earlier of (a) the third anniversary of the date of issuance of the Series A Preferred Stock, (b) the date on which the Series A Preferred Stock has been redeemed in whole; and (c) the date Treasury has transferred all of the Series A Preferred Stock to third parties. In addition, the ability of the Company to declare or pay dividends or distributions on, or repurchase, redeem or otherwise acquire for consideration, shares of its Junior Stock and Parity Stock will be subject to restrictions in the event that the Company fails to declare and pay full dividends (or declare and set aside a sum sufficient for payment thereof) on its Series A Preferred Stock. "Junior Stock" means the Common Stock and any other class or series of stock of the Company the terms of which expressly provide that it ranks junior to the Series A Preferred Stock as to dividend rights and/or rights on liquidation, dissolution or winding up of the Company. "Parity Stock" means any class or series of stock of the Company the terms of which do not expressly provide that such class or series will rank senior or junior to the Series A Preferred Stock as to dividend rights and/or rights on liquidation, dissolution or winding up of the Company (in each case without regard to whether dividends accrue cumulatively or non-cumulatively).

Through June 30, 2009, the Company had placed $5.0 million of TARP proceeds into its wholly-owned subsidiary, Southern Bank, while maintaining $4.6 million with the Company, of which approximately $3.0 million was expected to be used as additional capital provided to the Bank to support the acquisition of the Southern Bank of Commerce, following the fiscal year end. Using the additional capital, along with additional funding from the Federal Home Loan Bank, Southern Bank increased its investment portfolio by $20.3 million during the 2009 fiscal year.  These purchases were primarily in mortgage and municipal securities, and would likely have not been made absent the Treasury investment.  Also during the 2009 fiscal year, the Company increased its loan portfolio by $25.5 million. The funds held at Southern Bank were placed in working capital, which was used to fund loans and meet the cash needs of Southern Bank.

On July 17, 2009, the Company acquired 100% of the outstanding stock of Southern Bank of Commerce (SBOC), headquartered in Paragould, Arkansas.  SBOC was merged into the Company's subsidiary Bank on July 20, 2009.  The Company acquired SBOC primarily for the purpose of obtaining entry to markets where it believes the Company's business model will perform well.  At acquisition, SBOC held assets of $29.9 million, including loans of $16.2 million, and held deposits of $29.1 million.

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;

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· 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 nine additional full service offices located in Poplar Bluff, Van Buren, Dexter, Kennett, Doniphan, Sikeston, and Qulin, Missouri. At June 30, 2009, 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 Medial Center, employing approximately 1,200 persons, and Briggs & Stratton, a small engine manufacturing facility employing approximately 1,100 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, Mid-Continent Nail, Tyson Foods, and ArvinMeritor. The Bank's market area 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.  Following the acquisition in July 2009 of the Southern Bank of Commerce, located in northeast Arkansas, the Bank's market area expanded significantly, adding a population of approximately 180,000, including Jonesboro, Arkansas, a community of approximately 60,000 persons located in Craighead County (population: 93,000), and Paragould, Arkansas, a community of approximately 22,000 persons located in Greene County (population 41,000).  The economy of these northeast Arkansas markets are characterized by agricultural production and related processing, industrial production, education, retail, and healthcare services.  Major employers in the region include Frito-Lay, Nestle, Ralcorp (f/k/a Ralston-Purina), Arkansas State University, American Railcar, Emerson Electric, Monroe Shocks, L.A. Darling, hospitals and other healthcare providers, and school districts.

Competition

The Bank faces strong competition in attracting deposits (its primary source of lendable funds) and originating loans. At June 30, 2009, the Bank was one of 27 financial institution groups located in its primary market area. Following its July 2009 acquisition of and merger with Southern Bank of Commerce, the Bank was one of 35 financial institution groups located in its newly-expanded 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-

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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

The Company maintains a website at www.bankwithsouthern.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. The Company currently makes available on or through its website its 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 2009 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 19 of the Annual Report.

Rate/Volume Analysis

This information is incorporated by reference from page 19 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 17 and 18 of the Annual Report.

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 next level of authority, or 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, 2009, the maximum amount which the Bank could lend to any one borrower and the borrower's related entities was approximately $11.6 million. However, the Bank's internal lending limit established by the Board of Directors is $10.0 million. At June 30, 2009, the Bank's five largest extensions of credit to one entity ranged from $8.0 million to $9.7 million, net of participation interests sold. The majority of these credits were commercial real estate, commercial, or multi-family 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,
	2009						2008						2007
	Amount			Percent			Amount			Percent			Amount			Percent
	(Dollars in thousands)
Type of Loan:
Mortgage Loans:
Residential real estate	$	155,490			42.19	%	$	149,340			43.53	%	$	135,288			43.35	%
Commercial real estate(1)		97,161			26.36			85,860			25.03			77,723			24.91
Construction		23,532			6.38			13,945			4.06			7,981			2.56
Total mortgage loans		276,183			74.93			249,145			72.62			220,942			70.82
Other Loans:
Automobile loans		8,329			2.26			8,872			2.56			9,462			3.03
Commercial business(2)		89,066			24.17			81,575			23.78			76,053			24.37
Home equity		10,976			2.98			8,213			2.39			6,548			2.10
Other		3,836			1.04			4,439			1.32			3,407			1.09
Total other loans		112,207			30.45			103,099			30.05			95,470			30.59
Total loans	$	388,390			105.38		$	352,244			102.67		$	316,412			101.41
Less:
Undisbursed loans in process	$	15,511			4.21		$	5,668			1.65		$	1,913			0.61
Deferred fees and discounts		(107	)		(0.03	)		(61	)		(0.02	)		(52	)		(0.02	)
Allowance for loan losses		4,430			1.20			3,567			1.04			2,538			0.81
Net loans receivable	$	368,556			100.00	%	$	343,070			100.00	%	$	312,013			100.00	%
Type of Security:
Residential real estate
One-to four-family	$	158,739			43.07		$	154,403			45.01		$	137,289			43.99	%
Multi-family		14,171			3.84			22,971			6.70			6,205			1.99
Commercial real estate		74,937			20.33			58,365			17.01			63,139			20.23
Land		29,584			8.03			24,891			7.26			16,187			5.19
Commercial		87,817			23.83			68,379			19.93			74,226			23.79
Consumer and other		23,142			6.28			23,235			6.77			19,416			6.22
Total loans	$	388,390			105.38		$	352,244			102.67		$	316,462			101.41
Less:
Undisbursed loans in process	$	15,511			4.21		$	5,668			1.65			1,913			2.04
Deferred fees and discounts		(107	)		(0.03	)		(61	)		(0.02	)		(52	)		(0.02	)
Allowance for loan losses		4,430			1.20			3,567			1.04			2,538			0.81
Net loans receivable	$	368,556			100.00	%	$	343,070			100.00	%	$	312,063			100.00	%

(1) Commercial real estate loan balances included farmland and other agricultural-related real estate loans of $21.3 million, $14.9 million, and $9.1 million, as of June 30, 2009, 2008, and 2007, respectively.

(2) Commercial business loan balances included agricultural equipment and production loans of $27.5 million, $22.7 million, and $15.9 million as of June 30, 2009, 2008, and 2007, respectively.

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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,
	2009						2008						2007
	Amount			Percent			Amount			Percent			Amount			Percent
	(Dollars in thousands)
Type of Loan:
Fixed-Rate Loans:
Residential real estate	$	107,994			29.30	%	$	108,052			31.50	%	$	97,922			31.38	%
Commercial real estate		52,169			14.15			63,983			18.65			46,410			14.87
Construction		18,444			5.00			13,005			3.79			5,329			1.71
Consumer		12,140			3.29			13,280			3.87			12,821			4.11
Commercial business		50,364			13.67			59,796			17.43			40,167			12.87
Total fixed-rate loans		241,111			65.41			258,116			75.24			202,649			64.94
Adjustable-Rate Loans:
Residential real estate		47,497			12.89			41,288			12.03			37,366			11.98
Commercial real estate		44,992			12.21			21,877			6.38			31,313			10.03
Construction		5,087			1.38			940			0.27			2,652			0.85
Consumer		11,002			2.99			8,244			2.40			6,595			2.11
Commercial business		38,701			10.50			21,779			6.35			35,887			11.50
Total adjustable-rate loans		147,279			39.97			94,128			27.43			113,813			36.47
Total Loans	$	388,390			105.38			352,244			102.67			316,462			101.41
Less:
Undisbursed loans in process		15,511			4.21			5,668			1.65			1,913			0.61
Net deferred loan fees		(107	)		(0.03	)		(61	)		(0.02	)		(52	)		(0.02	)
Allowance for loan loss		4,430			1.20			3,567			1.04			2,538			0.81
Net loans receivable	$	368,556			100.00	%	$	343,070			100.00	%	$	312,063			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, 2009, net mortgage loans secured by one- to four-family residences totaled $141.3 million, or 38.3% of net loans receivable.

The Bank currently offers both fixed-rate and adjustable-rate mortgage ("ARM") loans. During the year ended June 30, 2009, the Bank originated $14.3 million of ARM loans and $23.1 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 50 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 contain prepayment penalties. Most are written using secondary market guidelines. At June 30, 2009, one- to four-family loans with a fixed rate totaled $96.9 million, and had a weighted-average maturity of 206 months.

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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, initial rates which may be at a premium or discount, 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, 2009, loans tied to the CMT index totaled $42.0 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. Most properties securing real estate loans made by the Bank during fiscal 2009 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, 2009, the Bank had $97.2 million in commercial real estate loans, which represented 26.4 of net loans receivable. Of the $97.2 million in commercial real estate loans, $21.3 million were loans secured by agricultural properties.

Most 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.  The Bank typically includes an interest rate "floor" in the loan agreement. The Bank's fixed-rate commercial real estate portfolio has a weighted average maturity of 36 months. Variable rate commercial real estate originations typically adjust daily, 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. Agricultural real estate terms offered differ slightly, with amortization schedules of up to 25 years with an 80% loan-to-value ratio, or 30 years with a 75% loan-to-value ratio. 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 guarantees 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, 2009, the Bank had $23.5 million, or 6.4% of net loans receivable in construction loans outstanding.

Construction loans originated by the Bank are generally secured by 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 or non-owner occupied commercial real estate. At June 30, 2009, the Bank had $23.5 million in construction loans, $16.2 million of which were secured by one- to four-family residential real estate (of which $2.2 million was for speculative construction, while another $10.6 million was additionally secured by low-income housing tax credits), and $6.8 million of which were secured by commercial real estate. An additional $600,000 is secured by land. The Bank's increase in construction loan balances is primarily due to loans to

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develop single family homes also backed by low-income housing tax credits, with outstanding balances of $1.1 million and unused commitments of $9.5 million.

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 generally limited to 80% 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, 2009, the Bank's consumer loan portfolio totaled $23.1 million, or 6.3% of net loans receivable.

Home equity loans represented 47.4% of the Bank's consumer loan portfolio at June 30, 2009, and totaled $11.0 million, or 3.0% of net loans receivable.

Home equity lines of credit (HELOCs) 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 HELOCs 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. HELOCs, 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. At June 30, 2009, lines of credit up to 80% of the property value represented 80.0% of outstanding balances, and 84.0% of balances and commitments; lines of credit for more than 80%, but not exceeding 90%, of the property value represented 17.8% of outstanding balances and 14.3% of balances and commitments; and lines of credit in excess of 90% of the property value represented 2.2% of outstanding balances and 1.7% of balances and commitments.

Automobile loans represented 36.0% of the Bank's consumer loan portfolio at June 30, 2009, and totaled $8.3 million, or 2.3% of net loans receivable. Of that total, $672,000 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.

9

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, 2009, the Bank also had $89.1 million in commercial business loans outstanding, or 24.2% of net loans receivable. Of this amount, $27.5 million were loans related to agriculture, including amortizing equipment loans and annual production lines. 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 $50.4 million in fixed rate and $38.7 million of adjustable rate commercial business loans. The adjustable rate business loans typically reprice daily, monthly, quarterly, or annually, in accordance with the Wall Street prime rate of interest. The Bank typically includes an interest rate "floor" in the loan agreement. 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 or agricultural production lines 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.

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, 2009. Commitments to extend credit totaled $64.2 million at June 30, 2009.

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	Less Than 1 year		1-3 Years		4-5 years		More Than 5 Years		Total
	(In Thousands)
Federal Home Loan Bank    advances	$	26,250	$	19,000	$	6,000	$	27,500	$	78,750
Certificates of deposit		112,810		37,630		9,860		6		160,306
Total	$	139,060	$	56,630	$	15,860	$	27,506	$	239,056
	Less Than 1 year		1-3 Years		4-5 years		More Than 5 Years		Total
	(In Thousands)
Construction loans in process	$	6,003	$	9,508	$	---	$	---	$	15,511
Other commitments		41,342		870		1,433		5,011		48,656
	$	47,345	$	10,378	$	1,433	$	5,011	$	64,167

Loan Maturity and Repricing

The following table sets forth certain information at June 30, 2009 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
	(In thousands)
Residential real estate	$	24,382	$	34,025	$	19,055	$	78,028	$	155,490
Commercial real estate		27,157		62,966		2,128		4,910		97,161
Construction		12,554		10,978		---		---		23,532
Consumer		2,615		11,022		9,505		---		23,142
Commercial business		47,451		33,414		735		7,465		89,065
Total loans	$	114,159	$	152,405	$	31,423	$	90,403	$	388,390

As of June 30, 2009, loans with a maturity date after June 30, 2010 with fixed interest rates totaled $189.6 million, and loans with a maturity date after June 30, 2010 with adjustable rates totaled $107.5 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, which are also originated by the Bank's staff, to customers during fiscal year 2002.

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 2009, the Bank originated $141.3 million of loans, compared to $123.6 million and $130.9 million in fiscal 2008 and 2007, respectively. Of these loans, mortgage loan originations were $94.4 million, $82.2 million and $77.8 million in fiscal 2009, 2008 and 2007, respectively.

From time to time, the Bank has purchased loan participations consistent with its loan underwriting standards. In fiscal 2009, the Bank purchased $10.9 million of new loans. At June 30, 2009, loan participations totaled $28.2 million, or 7.6% of net loans receivable. At June 30, 2009, all of these participations 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.

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

	Year Ended June 30,
	2009			2008			2007
	(Dollars in thousands)
Total loans at beginning of period	$	352,244		$	316,462		$	288,662
Loans originated:
One-to four-family residential		36,598			31,879			29,935
Multi-family residential and         commercial real estate		45,956			39,518			36,976
Construction loans		11,821			10,815			10,887
Commercial and industrial		30,921			25,350			38,342
Consumer and others		15,959			16,065			14,803
Total loans originated		141,255			123,627			130,943
Loans purchased:
Total loans purchased		10,887			17,725			14,220
Loans sold:
Total loans sold		(10,203	)		(4,566	)		(10,599	)
Principal repayments		(92,906	)		(90,425	)		(98,655	)
Participation principal repayments		(12,410	)		(9,925	)		(7,820	)
Foreclosures		(477	)		(654	)		(289	)
Net loan activity		36,146			35,782			27,800
Total loans at end of period	$	388,390		$	352,244		$	316,462

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 standby letters-of-credit. The Bank had outstanding net loan commitments of approximately $64.2 million at June 30, 2009. See Note 14 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, 2009.

	Loans Delinquent For:								Total Loans
	60-89 Days				90 Days and Over				Delinquent 60 Days or More
	Numbers		Amounts		Numbers		Amounts		Numbers		Amounts
	(Dollars in thousands)
Residential real estate		6	$	523		3	$	298		9	$	821
Commercial real estate		---		---		1		241		1		241
Commercial non-real estate		---		---		1		52		1		52
Other consumer		2		5		1		9		3		14
Totals		8	$	528		6	$	600		14	$	1,128

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, 2009, the Bank had seven loans on which interest was not being accrued, in accordance with SFAS No. 114 as amended by SFAS No. 118. The Bank would have recorded $52,000 of interest income during the year ended June 30, 2009, and an immaterial amount of interest income during the years ended June 30, 2008 and 2007, 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 year ended June 30, 2009, was $25,000, while interest income recognized on non-accrual loans for the years ended June 30, 2008 and 2007, was considered nominal. The Bank also has $137,000 in non-performing investment securities. For additional information regarding non-performing investment securities, see "- Investment Securities Analysis."

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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,
	2009			2008			2007			2006			2005
	(Dollars in thousands)
Nonaccruing loans:
Residential real estate	$	343		$	---		$	---		$	---		$	52
Commercial real estate		241			---			---			---			---
Consumer		9			---			2			51			41
Commercial business		66			---			---			---			334
Total	$	659		$	---		$	2		$	51		$	427
Loans 90 days past due    accruing interest:
Residential real estate	$	137		$	---		$	---		$	---		$	78
Commercial real estate		---			---			20			--			---
Consumer		---			6			4			2			6
Commercial business		---			---			---			---			60
Total	$	137		$	6		$	24		$	2		$	144
Total nonperforming loans	$	796		$	6		$	26		$	53		$	571
Nonperforming investments	$	125		$	---		$	---		$	---		$	---
Foreclosed assets held for sale:
Real estate owned		313			38			111			200			87
Other nonperforming assets		137			24			11			16			7
Total nonperforming assets	$	1,371		$	68		$	148		$	269		$	665
Total nonperforming loans    to net loans		0.22	%		0.00	%		0.01	%		0.02	%		0.21	%
Total nonperforming loans    to total assets		0.17	%		0.00	%		0.01	%		0.02	%		0.17	%
Total nonperforming assets    to total assets		0.29	%		0.02	%		0.04	%		0.08	%		0.20	%

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, 2009, the Company's balance of real estate owned totaled $313,000 and included two 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 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.

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On the basis of management's review of the assets of the Company, at June 30, 2009, classified assets totaled $9.7 million, or 2.1% of total assets as compared $4.5 million, or 1.07% of total assets at June 30, 2008. The full amount classified as of June 30, 2009, was considered substandard. At June 30, 2009, significant classified assets included two loans with outstanding classified balances of $3.3 million, secured by commercial and agricultural real estate, and another two loans with outstanding classified balances of $3.5 million to a bank holding company, both classified due to concerns regarding the borrower's ability to generate sufficient cash flows to service the debt.  All of the Company's investments in pooled trust preferred securities, with a book value of $1.5 million, were classified, also due to concerns about the ability of the pools to continue to generate sufficient cash flows to service the debt.  Two of these securities, with a book value of $559,000 (included in the total of $1.5 million, above) have deferred interest payments as of June 30, 2009. With the exception of these two securities, all classified assets were performing in accordance with terms at June 30, 2009.

Other Loans of Concern. In addition to the non-performing assets discussed above, there was also an aggregate of $1.8 million in loans (consisting mostly of an agribusiness relationship) 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.

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, 2009, of $4.4 million, which represented 323% of nonperforming assets as compared to an allowance of $3.6 million, which represented 5,305% of nonperforming assets at June 30, 2008.

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,
	2009			2008			2007			2006			2005
	(Dollars in thousands)
Allowance at beginning of period	$	3,567		$	2,538		$	2,058		$	2,016		$	1,978
Recoveries
Residential real estate		3			1			1			---			5
Commercial real estate		6			---			---			---			---
Commercial business		3			168			22			11			---
Consumer		14			14			15			54			39
Total recoveries		26			183			38			65			44
Charge offs:
Residential real estate		19			34			83			57			7
Commercial real estate		11			---			---			---			---
Commercial business		242			5			24			374			4,687
Consumer		111			55			56			147			127
Total charge offs		383			94			163			578			4,821
Net recoveries (charge offs)		(357	)		89			(125	)		(513	)		(4,777	)
Provision for loan losses		1,220			940			605			555			4,815
Balance at end of period	$	4,430		$	3,567		$	2,538		$	2,058		$	2,016
Ratio of allowance to total loans    outstanding at the end of the    period		1.19	%		1.03	%		0.81	%		0.73	%		0.75	%
Ratio of net charge offs to    average loans outstanding    during the period		0.10	%		(0.03	)%		0.04	%		0.19	%		1.84	%

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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,
	2009					2008					2007					2006					2005
	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	$	750		40.03	%	$	626		42.40	%	$	279		42.98	%	$	205		44.07	%	$	225		46.04	%
Construction		128		6.06			88		3.96			70		2.52			81		3.76			67		3.13
Commercial real estate		1,217		25.02			969		24.37			774		24.49			619		22.65			595		21.28
Consumer		367		5.96			333		6.11			256		6.10			293		6.97			306		7.84
Commercial business		1,475		22.93			1,320		23.16			935		23.91			857		22.55			770		21.71
Unallocated		493		---			231		---			234		---			3		---			53		---
Total allowance for       loan losses	$	4,430		100.00	%	$	3,567		100.00	%	$	2,538		100.00	%	$	2,058		100.00	%	$	2,016		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, 2009, AFS securities totaled $60.2 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 reviewed potential uses for derivative instruments and hedging activities, but has no immediate plans to employ these tools.

Investment and Other Securities. At June 30, 2009, the Company's investment securities portfolio totaled $24.5 million, or 5.3% of total assets as compared to $15.2 million, or 3.6% of total assets at June 30, 2008. During 2009, the Bank had $3.3 million in maturities and $12.5 million in security purchases. Of the securities that matured, $2.0 million was called for early redemption. At June 30, 2009, the investment securities portfolio included $3.3 million in U.S. government and government agency bonds, of which $2.2 million is subject to early redemption at the option of the issuer, and $13.6 million in municipal bonds, of which $12.6 is subject to early redemption at the option of the issuer. The remaining portfolio consists of $4.6 million in FHLB stock, and $3.0 million in other securities (including $250,000 estimated fair value in pooled trust preferred securities). Based on the projected maturities, the weighted average life of the investment securities portfolio at June 30, 2009, excluding the FHLB stock, was 83 months.

At June 30, 2009, the Company owned four pooled trust preferred securities with a fair value of $250,000 and a book value of $1.5 million. The June 30, 2009, cash flow analysis for three of these securities showed it is probable the Company will receive all contracted principal and related interest projected, though interest payments have been deferred on one of the three securities and are projected to be deferred on a second security. For the fourth security, analysis at December 31, 2008, indicated other-than temporary impairment (OTTI), and the Company performed further analysis to determine the portion of the loss that was related to credit conditions of the underlying issuers. The credit loss was calculated by comparing expected discounted cash flows based on performance indicators of the underlying assets in the security to the carrying value of the investment. The discounted cash flow was based on anticipated default and recovery rates, and the resulting projected cash flows were discounted based on the yield anticipated at the time the security was purchased. Based on this analysis, the Company recorded an impairment charge of $375,000 for the credit portion of the unrealized loss for this trust preferred security. This loss established a new, lower amortized cost basis of $125,000 for this security, and reduced non-interest income for the second quarter and twelve months ended June 30, 2009.

During the first quarter of fiscal 2009, the Company’s investment in Freddie Mac Preferred Stock was deemed other-than-temporarily impaired, based on quoted market prices which reflected market participants’ expectations regarding the likelihood of recovery of their investment following the placement of the firm into receivership by the U.S. Treasury Department.  Accordingly, the Company recorded an impairment charge for the

18

full amortized cost of the security, $304,000.  The loss established a new, lower amortized cost basis of $0 for this security, and reduced non-interest income for the first quarter and twelve months ended June 30, 2009.

Mortgage-Backed Securities. At June 30, 2009, MBS totaled $40.3 million, or 8.6%, of total assets as compared to $28.0 million, or 6.7%, of total assets at June 30, 2008. During fiscal 2009, the Bank had maturities and prepayments of $5.9 million and had purchases of $16.6 million in MBS. At June 30, 2009, the MBS portfolio included $233,000 in adjustable-rate MBS, $20.4 million in fixed-rate MBS and $19.6 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, 2009 was 32 months. Prepayment rates may cause the anticipated average life of MBS portfolio to extend or shorten based upon actual prepayment rates.

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,
	2009					2008					2007
	Fair Value		Percent of Portfolio			Fair Value		Percent of Portfolio			Fair Value		Percent of Portfolio
						(Dollars in thousands)
U.S. government and government    agencies	$	3,279		13.39	%	$	4,019		26.39	%	$	21,484		78.91	%
State and political subdivisions		13,623		55.60			6,031		39.59			2,016		7.40
FHLMC preferred stock		8		0.03			295		1.94			---		---
FHLB stock		4,592		18.74			3,324		21.82			3,071		11.28
Other securities		3,000		12.24			1,563		10.26			656		2.41
Total	$	24,502		100.00	%	$	15,232		100.00	%	$	27,232		100.00	%

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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, 2009.

	Available for Sale Securities June 30, 2009
	Amortized Cost		Fair Value		Tax-Equiv. Wtd.-Avg. Yield
	(Dollars in thousands)
U.S. government and government agencies    securities:
Due after 1 year but within 5 years	$	998	$	1,050		5.14	%
Due after 5 years but within 10 years		2,219		2,229		4.87
Due over 10 years		---		---		---
Total		3,217		3,279		4.95
State and political subdivisions:
Due within 1 year		260		260		4.99
Due after 1 year but within 5 years		150		152		6.71
Due after 5 years but within 10 years		550		563		6.27
Due over 10 years		12,553		12,648		6.01
Total		13,513		13,623		6.01
Other securities:
Due within 1 year		2,750		2,750		5.00
Due after 5 years but within 10 years		---		8		---
Due over 10 years		1,514		250		1.71
Total		4,264		3,008		3.83
No stated maturity:
FHLB stock		4,592		4,592		---	(1)
Total Available for Sale	$	25,586	$	24,502		4.43	%

(1) Due to the uncertainty regarding the amount of dividends to be declared by the FHLB, the Company recognized dividends in arrears for FHLB stock.  For the four quarters representing the Company’s fiscal year ended June 30, 2009, the FHLB declared dividends of 3%, 1%, 1%, and 2%.  The Company recognized dividends at a weighted-average rate of 1.08% during the Company’s fiscal year ended June 30, 2009.

The following table sets forth certain information at June 30, 2009 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, 2009
	(In thousands)
Amounts due:
Within 1 year	$	233
After 1 year through 3 years		---
After 3 years through 5 years		2,429
After 5 years		36,352
Total	$	39,014

20

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, 2009, which have fixed, floating, or adjustable interest rates.

	At June 30, 2009
	(In thousands)
Interest rate terms on amounts due after 1 year:
Fixed	$	38,781
Adjustable		233
Total	$	39,014

The following table sets forth certain information with respect to each MBS and CMO security at the dates indicated.

	At June 30,
	2009				2008				2007
	Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value
	(In thousands)
FHLMC certificates	$	10,163	$	10,398	$	13,114	$	12,825	$	1,229	$	1,183
GNMA certificates		114		115		128		127		156		156
FNMA certificates		9,812		10,112		11,247		11,093		4,387		4,213
Collateralized mortgage obligations issued    by government agencies		18,925		19,644		3,935		3,961		5,274		5,171
Total	$	39,014	$	40,269	$	28,424	$	28,006	$	11,051	$	10,723

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 and entities located in 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. The table on the following page depicts the composition of the Bank's deposits at June 30, 2009:

21

Weighted Average Interest Rate at 6/30		Term	Category	Minimum Amount			Balance		Percentage of Total Deposits
						(In thousands)
	0.00%	None	Non-interest Bearing	$	100		$	21,304		6.83	%
	2.34	None	NOW Accounts		100			65,114		20.87
	1.10	None	Savings Accounts		100			58,598		18.78
	1.39	None	Money Market Deposit Accounts		1,000			6,633		2.13
			Certificates of Deposit
	1.94	Less than 6 months	Fixed Rate/Term		1,000			8,996		2.88
	1.54	Less than 6 months	IRA Fixed Rate/Term		1,000			573		0.18
	2.42	7-12 months	Fixed Rate/Term		1,000			75,679		24.26
	2.58	7-12 months	IRA Fixed Rate/Term		1,000			9,769		3.13
	2.93	13-24 months	Fixed Rate/Term		1,000			19,591		6.28
	2.80	13-24 months	IRA Fixed Rate/Term		1,000			2,613		0.84
	1.00	13-24 months	IRA Variable Rate/Fixed Term		1,000			281		0.09
	3.69	25-36 months	Fixed Rate/Term		1,000			20,852		6.68
	3.77	25-36 months	IRA Fixed Rate/Term		1,000			6,401		2.05
	4.03	48 months and more	Fixed Rate/Term		1,000			12,828		4.11
	4.26	48 months and more	IRA Fixed Rate/Term		1,000			2,723		0.87	%
							$	311,955		100.00	%

The following table indicates the amount of the Bank's jumbo certificates of deposit by time remaining until maturity as of June 30, 2009. Jumbo certificates of deposit require minimum deposits of $100,000 and rates paid on such accounts are negotiable.

Maturity Period	Amount
	(In thousands)
Three months or less	$	12,821,510
Over three through six months		20,720,844
Over six through twelve months		10,375,913
Over 12 months		18,780,247
Total	$	62,698,514

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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,
		2009		2008		2007
		(In thousands)
	1.00 - 1.99%	$	45,344	$	7,135	$	---
	2.00 - 2.99%		51,949		33,105		1,087
	3.00 - 3.99%		47,718		50,555		6,558
	4.00 - 4.99%		13,898		48,414		27,805
	5.00 - 5.99%		1,397		11,149		95,119
Total		$	160,306	$	150,358	$	130,569

The following table sets forth the amount and maturities of all time deposits at June 30, 2009.

		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)
	1.00 - 1.99%	$	44,946	$	398	$	---	$	---	$	---	$	45,344		28.29	%
	2.00 - 2.99%		40,089		10,467		1,265		128		---		51,949		32.41
	3.00 - 3.99%		23,394		17,144		525		1,799		4,855		47,717		29.77
	4.00 - 4.99%		4,381		5,056		1,883		2,036		543		13,899		8.67
	5.00 - 5.99%		2		87		805		503		---		1,397		0.87
Total		$	112,812	$	33,152	$	4,478	$	4,466	$	5,398	$	160,306		100.00	%

23

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,
	2009								2008								2007
	Amount		Percent of Total			Increase (Decrease)			Amount		Percent of Total			Increase (Decrease)			Amount		Percent of Total			Increase (Decrease)
	(Dollars in thousands)
Noninterest bearing	$	21,304		6.83	%		2,083		$	19,221		6.58	%		(3,055	)	$	22,276		8.25	%	$	3,566
NOW checking		65,114		20.87			27,964			37,150		12.71			6,027			31,123		11.52			86
Savings accounts		58,598		18.78			(14,825	)		73,423		25.12			(5,485	)		78,908		29.22			5,083
Money market deposit		6,633		2.13			(5,472	)		12,105		4.14			4,893			7,212		2.67			(1,646	)
Fixed-rate certificates    which mature(1)
Within one year		112,664		36.12			(17,217	)		129,881		44.44			12,976			116,905		43.28			3,953
Within three years		33,016		10.58			19,698			13,318		4.56			4,565			8,753		3.24			(1,247	)
After three years		14,344		4.60			7,468			6,876		2.35			2,282			4,594		1.70			2,271
Variable-rate certificates    which mature within    one year		146		0.05			(2	)		144		0.05			(33	)		177		0.07			84
Variable-rate certificates    which mature within    two years		136		0.04			(3	)		139		0.05			(1	)		140		0.05			(26	)
Total	$	311,955		100.00	%	$	19,698		$	292,257		100.00	%	$	22,169		$	270,088		100.00	%	$	12,019

___________________________

(1)  At June 30, 2009, 2008 and 2007, certificates in excess of $100,000 totaled $62.7 million, $58.2 million, and $41.4 million, respectively.

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

	At June 30,
	2009		2008		2007
	(In thousands)
Beginning Balance	$	292,257	$	270,088	$	258,069
Net increase before interest credited		13,700		14,355		4,198
Interest credited		5,998		7,814		7,821
Net increase in deposits		19,698		22,169		12,019
Ending balance	$	311,955	$	292,257	$	270,088

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, 2009, the Bank had $78.8 million in FHLB advances, of which $58.5 million had an original term of ten years, subject to early redemption by the FHLB after an initial period of one to five years, $14.0 million in borrowings, all of which had fixed rates and original maturities of one to seven years, and $6.3 million in short-term borrowings. In order for the Bank to borrow from the FHLB, it has pledged $175.5 of its residential and commercial real estate loans to the FHLB million (although the actual collateral required for advances taken amounts to $105.3 million) and has purchased $4.6 million in FHLB stock. At June 30, 2009, the Bank had additional borrowing capacity on its pledged residential and commercial real estate loans from the FHLB of $52.5 million as compared to $37.4 million at June 30, 2008.

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.

25

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,
	2009			2008			2007
	(Dollars in thousands)
Year end balances
Short-term FHLB advances	$	6,250		$	5,550		$	7,000
Securities sold under agreements to repurchase		23,748			21,804			17,758
Total short-term borrowings	$	29,998		$	27,354		$	24,758
Weighted average rate at year end		0.73	%		1.90	%		5.06	%

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

	Year Ended June 30,
	2009			2008			2007
	(Dollars in thousands)
FHLB advances
Daily average balance	$	77,923		$	58,526		$	62,906
Weighted average interest rate		4.43	%		5.25	%		5.40	%
Maximum outstanding at any month end	$	92,675		$	65,600		$	71,150
Securities sold under agreements to repurchase
Daily average balance	$	24,345		$	20,567		$	11,863
Weighted average interest rate		0.94	%		3.31	%		4.84	%
Maximum outstanding at any month end	$	27,819		$	24,659		$	17,758
Subordinated Debt
Daily average balance	$	7,217		$	7,217		$	7,217
Weighted average interest rate		4.95	%		7.47	%		8.24	%
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, 2009 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, 2009, the Bank was in compliance with these reserve requirements.

The Bank is authorized to borrow from the Federal Reserve Bank "discount window," but has not pledged any collateral in order to do so.  Additionally, 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 administer the home financing credit function of savings 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 or advances to members 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. See Business - Deposit Activities and Other Sources of Funds - Borrowings.

As a member, the Bank is required to purchase and maintain stock in the FHLB of Des Moines. At June 30, 2009, the Bank had $4.6 million in FHLB stock, which was in compliance with this requirement. The Bank received $137,000 and $84,000 in dividends from the FHLB of Des Moines for the years ended June 30, 2009 and 2008, respectively.

27

The FHLBs have continued and continue 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 affected adversely 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.

Federal Deposit Insurance Corporation. The Bank's deposits are insured up to applicable limits by the Deposit Insurance Fund of the FDIC. Under new legislation, through December 31, 2013, the insurance limit is $250,000. The Deposit Insurance Fund is the successor to the Bank Insurance Fund and the Savings Association Insurance Fund, which were merged effective March 31, 2006. As insurer, the FDIC imposes deposit insurance premiums and is authorized to conduct examinations of and to require reporting by FDIC-insured institutions. It also may prohibit any FDIC-insured institution from engaging in any activity the FDIC determines by regulation or order to pose a serious risk to the fund. The FDIC also has the authority to initiate enforcement actions against savings institutions, after giving the OTS an opportunity to take such action, and may terminate the deposit insurance if it determines that the institution has engaged in unsafe or unsound practices or is in an unsafe or unsound condition.

The FDIC assesses deposit insurance premiums on each FDIC-insured institution quarterly based on annualized rates for four risk categories applied to its deposits, subject to certain adjustments. Each institution is assigned to one of four risk categories based on its capital, supervisory ratings and other factors. Well capitalized institutions that are financially sound with only a few minor weaknesses are assigned to Risk Category I. Risk Categories II, III and IV present progressively greater risks to the DIF. Under FDIC's risk-based assessment rules, effective April 1, 2009, the initial base assessment rates prior to adjustments range from 12 to 16 basis points for Risk Category I, and  are 22 basis points for Risk Category II, 32 basis points for Risk Category III, and 45 basis points for Risk Category IV. Initial base assessment rates are subject to adjustments based on an institution's unsecured debt, secured liabilities and brokered deposits, such that the total base assessment rates after adjustments range from 7 to 24 basis points for Risk Category I, 17 to 43 basis points for Risk Category II, 27 to 58 basis points for Risk Category III, and 40 to 77.5 basis points for Risk Category IV. The rule also includes authority for the FDIC to increase or decrease total base assessment rates in the future by as much as three basis points without a formal rulemaking proceeding. In addition to the regular quarterly assessments, due to losses and projected losses attributed to failed institutions, the FDIC has adopted a rule imposing a special assessment of 5 basis points on the amount of each depository institution's assets reduced by the amount of its Tier 1 capital (not to exceed 10 basis points of its assessment base for regular quarterly premiums) as of June 30, 2009, to be collected on September 30, 2009. The special assessment rule also permits the FDIC to impose two additional special assessments, each of the same amount or less, based on assets, capital and deposits as of September 30, 2009 and December 31, 2009, to be collected, respectively, on December 31, 2009 and March 30, 2010. The FDIC has announced that the first of the additional special assessments is probable and the second is less certain.

The FDIC has authority to increase insurance assessments. A significant increase in insurance premiums would likely have an adverse effect on the operating expenses and results of operations of the Bank. There can be no prediction as to what insurance assessment rates will be in the future. Insurance of deposits may be terminated by the FDIC upon a finding that the institution has engaged in unsafe or unsound practices, is in an unsafe or unsound condition to continue operations or has violated any applicable law, regulation, rule, order or condition imposed by the FDIC or the OTS. Management of the Bank is not aware of any practice, condition or violation that might lead to termination of the Bank's deposit insurance.

In addition to the assessment for deposit insurance, institutions are required to make payments on bonds issued in the late 1980s by the Financing Corporation to recapitalize a predecessor deposit insurance fund. This payment is established quarterly and during the fiscal year ending March 31, 2009 averaged 1.12 basis points of assessable deposits. The Financing Corporation was chartered in 1987, by the FHLB board solely for the purpose of functioning as a vehicle for the recapitalization of the Federal Savings and Loan Insurance Corporation.

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

28

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, 2009, 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.

The American Recovery and Reinvestment Act of 2009. On February 17, 2009, President Obama signed The American Recovery and Reinvestment Act of 2009 ("ARRA") into law. The ARRA is intended to revive the US economy by creating millions of new jobs and stemming home foreclosures. For financial institutions that have received or will receive financial assistance under TARP or related programs, the ARRA significantly rewrites the original executive compensation and corporate governance provisions of Section 111 of the EESA. Among the most important changes instituted by the ARRA are new limits on the ability of TARP recipients to pay incentive compensation to up to 20 of the next most highly-compensated employees in addition to the "senior executive officers," a restriction on termination of employment payments to senior executive officers and the five next most highly-compensated employees and a requirement that TARP recipients implement "say on pay" shareholder votes.  As a TARP recipient, the Company has taken the appropriate steps to comply with the foregoing restrictions and requirements, including a "say on pay" proposal in this year's proxy statement.

In February 2009, the Administration also announced its Financial Stability Plan and Homeowners Affordability and Stability Plan ("HASP"). The Financial Stability Plan is the second phase of TARP, to be administrated by the Treasury. Its four key elements include:

· the development of a public/private investment fund essentially structured as a government sponsored enterprise with the mission to purchase troubled assets from banks with an initial capitalization from government funds;

· the Capital Assistance Program under which the Treasury will purchase additional preferred stock available only for banks that have undergone a new stress test given by their regulator;

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· an expansion of the Federal Reserve's term asset-backed liquidity facility to support the purchase of up to $1 trillion in AAA-rated asset backed securities backed by consumer, student, and small business loans, and possible other types of loans; and

· the establishment of a mortgage loan modification program with $50 billion in federal funds further detailed in the HASP.

The HASP is a program aimed to help seven to nine million families restructure their mortgages to avoid foreclosure. The plan also develops guidance for loan modifications nationwide. HASP provides programs and funding for eligible refinancing of loans owned or guaranteed by Fannie Mae or Freddie Mac, along with incentives to lenders, mortgage servicers, and borrowers to modify mortgages of "responsible" homeowners who are at risk of defaulting on their mortgage. The goals of HASP are to assist in the prevention of home foreclosures and to help stabilize falling home prices. See the Company's Annual Report to Shareholders, included as Exhibit 13 for a discussion of the company's participation in the TARP Capital Purchase Program.

Initiatives Prompted by the Subprime Mortgage Crisis. In response to the recent subprime mortgage crisis, federal and state regulatory agencies have focused attention on subprime and nontraditional mortgage products both with an aim toward enhancing the regulation of such loans and providing relief to adversely affected borrowers.

Guidance on Subprime Mortgage Lending. On July 10, 2007, the federal banking agencies issued guidance on subprime mortgage lending to address issues related to certain mortgage products marketed to subprime borrowers, particularly adjustable rate mortgage products that can involve "payment shock" and other risky characteristics. Although the guidance focuses on subprime borrowers, the banking agencies note that institutions should look to the principles contained in the guidance when offering such adjustable rate mortgages to non-subprime borrowers. The guidance prohibits predatory lending programs; provides that institutions should underwrite a mortgage loan on the borrower's ability to repay the debt by its final maturity at the fully-indexed rate, assuming a fully amortizing repayment schedule; encourages reasonable workout arrangements with borrowers who are in default; mandates clear and balanced advertisements and other communications; encourages arrangements for the escrowing of real estate taxes and insurance; and states that institutions should develop strong control and monitoring systems. The guidance recommends that institutions refer to the Real Estate Lending Standards (discussed above) which provide underwriting standards for all real estate loans.

The federal banking agencies announced their intention to carefully review the risk management and consumer compliance processes, policies and procedures of their supervised financial institutions and their intention to take action against institutions that engage in predatory lending practices, violate consumer protection laws or fair lending laws, engage in unfair or deceptive acts or practices, or otherwise engage in unsafe or unsound lending practices.

Guidance on Loss Mitigation Strategies for Servicers of Residential Mortgages. On September 4, 2007, the federal banking agencies issued a statement encouraging regulated institutions and state-supervised entities that service residential mortgages to pursue strategies to mitigate losses while preserving homeownership to the extent possible and appropriate. The guidance recognizes that many mortgage loans, including subprime loans, have been transferred into securitization trusts and servicing for such loans is governed by contract documents. The guidance advises servicers to review governing documentation to determine the full extent of their authority to restructure loans that are delinquent or are in default or are in imminent risk of default.

The guidance encourages loan servicers to take proactive steps to preserve homeownership in situations where there are heightened risks to homeowners losing their homes to foreclosures. Such steps may include loan modification; deferral of payments; extensions of loan maturities; conversion of adjustable rate mortgages into fixed rate or fully indexed, fully amortizing adjustable rate mortgages; capitalization of delinquent amounts; or any combination of these actions. Servicers are instructed to consider the borrower's ability to repay the modified obligation to final maturity according to its terms, taking into account the borrower's total monthly housing-related payments as a percentage of the borrower's gross monthly income, the borrower's other obligations, and any additional tax liabilities that may result from loan modifications. Where appropriate, servicers are encouraged to refer borrowers to qualified non-profit and other homeownership counseling services and/or to government programs that are able to work with all parties and avoid unnecessary foreclosures. The guidance states that servicers are expected to treat consumers fairly and to adhere to all applicable legal requirements.

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Relief for Homeowners. In October 2007, the Treasury helped to facilitate the creation of the HOPE NOW Alliance, a private sector coalition formed to encourage mortgage servicers, mortgage counselors, government officials and non-profit groups to coordinate their efforts to help struggling borrowers restructure their mortgage payments and stay in their homes. HOPE NOW is aimed at coordinating and improving outreach to borrowers, developing best practices for mortgage counselors across the country and ensuring that groups able to help homeowners work out new loan arrangements with lenders have adequate resources to carry out this mission. Treasury has worked with other agencies and HOPE NOW to create a stream-lined loan modification program. In October 2003, HUD implemented Hope for Homeowners, a voluntary FHA program for refinancing affordable home mortgages.

Housing and Economic Recovery Act of 2008. The Housing and Economic Recovery Act of 2008, signed by President Bush on July 30, 2008, was designed to address a variety of issues relating to the subprime mortgage crises. This act established a new maximum conforming loan limit for Fannie Mae and Freddie Mac in high cost areas to 150% of the conforming loan limit of $417,000 to take effect after December 31, 2008. The FHA's maximum conforming loan limit has been increased from 95% to 110% of the area median home price up to 150% of the Fannie Mae/Freddie Mac conforming loan limit, to take effect at the same time. Among other things, the Housing and Economic Recovery Act of 2008 enhanced the regulation of Fannie Mae, Freddie Mac and Federal Housing Administration loans; established a new Federal Housing Finance Agency to replace the prior Federal Housing Finance Board and Office of Federal Housing Enterprise Oversight; will require enhanced mortgage disclosures; and will require a comprehensive licensing, supervisory, and tracking system for mortgage originators. Using its new powers, on September 7, 2008 the Federal Housing Finance Agency announced that it had put Fannie Mae and Freddie Mac under conservatorship. The Housing and Economic Recovery Act of 2008 also establishes the HOPE for Homeowners program, which is a new, temporary, voluntary program to back Federal Housing Administration-insured mortgages to distressed borrowers. The new mortgages offered by Federal Housing Administration-approved lenders will refinance distressed loans at a significant discount for owner-occupants at risk of losing their homes to foreclosure.

New Regulations Establishing Protections for Consumers in the Residential Mortgage Market. The Federal Reserve Board has issued new regulations under the federal Truth-in-Lending Act and the Home Ownership and Equity Protection Act. For mortgage loans governed by the Home Ownership and Equity Protection Act, the new regulations further restrict prepayment penalties, and enhance the standards relating to the consumer's ability to repay. For a new category of closed-end "higher-priced" mortgage loans, the new regulations restrict prepayment penalties, and require escrows for property taxes and property-related insurance for most first lien mortgage loans. For all closed-end loans secured by a principal dwelling, the new regulations prohibit the coercion of appraisers; require the prompt crediting of payments; prohibit the pyramiding of late fees; require prompt responses to requests for pay-off figures; and require the delivery of transaction-specific Truth-in-Lending Act disclosures are to be provided within three business days following the receipt of an application for a closed-end home loan. The new regulations also impose new restrictions on mortgage loan advertising for both open-end and closed-end products. In general, the new regulations are effective October 1, 2009, but the rules governing escrows for higher-priced mortgages are effective on April 1, 2010, and for higher-priced mortgage loans secured by manufactured housing, on October 1, 2010.

Pending Legislation and Regulatory Proposals. As a result of the credit crisis and current financial conditions, federal and state legislators and agencies are considering a broad variety of legislative and regulatory proposals covering lending products, loan terms and underwriting standards, risk management practices, supervision and consumer protection. It is unclear which, if any, of these initiatives will be adopted, what effect they will have on the Company or the Bank and whether any of these initiatives will change the competitive landscape in the banking  industry.

Guidance on Nontraditional Mortgage Product Risks. On September 29, 2006, the federal banking agencies issued guidance to address the risks posed by nontraditional residential mortgage products, that is, mortgage products that allow borrowers to defer repayment of principal or interest. The guidance instructs institutions to ensure that loan terms and underwriting standards are consistent with prudent lending practices, including consideration of a borrower's ability to repay the debt by final maturity at the fully indexed rate and assuming a fully amortizing repayment schedule; requires institutions to recognize, for higher risk loans, the necessity of verifying the borrower's income, assets and liabilities; requires institutions to address the risks associated with simultaneous second-lien loans, introductory interest rates, lending to subprime borrowers, non-owner-occupied investor loans,

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and reduced documentation loans; requires institutions to recognize that nontraditional mortgages, particularly those with risk-layering features, are untested in a stressed environment; requires institutions to recognize that nontraditional mortgage products warrant strong controls and risk management standards, capital levels commensurate with that risk, and allowances for loan and lease losses that reflect the collectibility of the portfolio; and ensure that consumers have sufficient information to clearly understand loan terms and associated risks prior to making product and payment choices. The guidance recommends practices for addressing the risks raised by nontraditional mortgages, including enhanced communications with consumers, beginning when the consumer is first shopping for a mortgage; promotional materials and other product descriptions that provide information about the costs, terms, features and risks of nontraditional mortgages, including with respect to payment shock, negative amortization, prepayment penalties, and the cost of reduced documentation loans; more informative monthly statements for payment option adjustable rate mortgages; and specified practices to avoid. Subsequently, the federal banking agencies produced model disclosures that are designed to provide information about the costs, terms, features and risks of nontraditional mortgages.

Guidance on Real Estate Concentrations. On December 6, 2006, the federal banking agencies issued  guidance on sound risk management practices for concentrations in commercial real estate lending. The particular focus is on exposure to commercial real estate loans that are dependent on the cash flow from the real estate held as collateral and that are likely to be sensitive to conditions in the commercial real estate market (as opposed to real estate collateral held as a secondary source of repayment or as an abundance of caution). The purpose of the guidance is not to limit a bank's commercial real estate lending but to guide banks in developing risk management practices and capital levels commensurate with the level and nature of real estate concentrations. The FDIC and other bank regulatory agencies will be focusing their supervisory resources on institutions that may have significant commercial real estate loan concentration risk. A bank that has experienced rapid growth in commercial real estate lending, has notable exposure to a specific type of commercial real estate loan, or is approaching or exceeding the following supervisory criteria may be identified for further supervisory analysis with respect to real estate concentration risk:

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 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

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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.

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, 2009, 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.

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)

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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.

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

Bank Holding Company Regulation. Bank holding companies are subject to comprehensive regulation by the FRB under the BHCA. As a bank holding company, the Company is required to file reports with the FRB and such additional information as the FRB may require, and the Company and its non-banking affiliates will be subject to examination by the FRB. Under FRB policy, a bank 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, a holding company to contribute additional capital to an undercapitalized subsidiary bank. Under the BHCA, a bank 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

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(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 holding company; or (iii) merging or consolidating with another bank holding company.

The Company is subject to the activity limitations imposed on bank holding companies. The BHCA prohibits a bank holding company, with certain exceptions, from acquiring direct or indirect  ownership or control of more than 5% of the voting shares of any company which is not a bank or bank holding company, or from engaging directly or indirectly in activities other than those of banking, managing or controlling banks, or providing services for its subsidiaries. The principal exceptions to these prohibitions involve certain non-bank activities which, by statute or by FRB regulation or order, have been identified as activities closely related to the business of banking or managing or controlling banks. The list of activities permitted by the FRB includes, among other things, operating a savings institution, mortgage company, finance company, credit card company or factoring company; performing certain data processing operations; providing certain investment and financial advice; underwriting and acting as an insurance agent for certain types of credit-related insurance; leasing property on a full-payout, non-operating basis; selling money orders, travelers' checks and United States Savings Bonds; real estate and personal property appraising; providing tax planning and preparation services; and, subject to certain limitations, providing securities brokerage services for customers. The scope of permissible activities may be expanded from time to time by the FRB. Such activities may also be affected by federal legislation.

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).

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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 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, 2009, the Company had 97 full-time employees and 22 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.

Internet Website

We maintain a website with the address of www.bankwithsouthern.com. The information contained on our website is not included as a part of, or incorporated by reference into, this Annual Report on Form 10-K. This Annual Report on Form 10-K and our other reports, proxy statements and other information, including earnings press releases, filed with the SEC are available on that website through a link to the SEC's website at "Resource Center - Investor Relations - SEC Filings." For more information regarding access to these filings on our website, please contact our Corporate Secretary, Southern Missouri Bancorp, Inc., 531 Vine Street, Poplar Bluff, Missouri, 63901; telephone number (573) 778-1800.

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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.

Changes in economic conditions, particularly a significant economic slowdown in Southeast Missouri, could hurt our business.

Our business is directly affected by market conditions, trends in industry and finance, legislative and regulatory changes, and changes in governmental monetary and fiscal policies and inflation, all of which are beyond our control. In 2008, the housing and real estate sectors experienced an economic slowdown that has continued into 2009. Further deterioration in economic conditions, in particular within our primary market area in Southeast Missouri real estate markets, could result in the following consequences, among others, any of which could hurt our business materially:

· loan delinquencies may increase;

· problem assets and foreclosures may increase;

· demand for our products and services may decline; and

· collateral for loans made by us, especially real estate, may decline in value, in turn reducing a customer's borrowing power and reducing the value of assets and collateral securing our loans.

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Downturns in the real estate markets in our primary market area could hurt our business.

Our business activities and credit exposure are primarily concentrated in Southeast Missouri. While we did not and do not have a sub-prime lending program, our residential real estate, construction and land loan portfolios, our commercial and multifamily loan portfolios and certain of our other loans could be affected by the downturn in the residential real estate market. We anticipate that significant declines in the real estate markets in our primary market area would hurt our business and would mean that collateral for our loans would hold less value. As a result, our ability to recover on defaulted loans by selling the underlying real estate would be diminished, and we would be more likely to suffer losses on defaulted loans. The events and conditions described in this risk factor could therefore have a material adverse effect on our business, results of operations and financial condition.

Liquidity risk could impair our ability to fund operations and jeopardize our financial condition.

Liquidity is essential to our business. An inability to raise funds through deposits, borrowings, the sale of loans and other sources could have a substantial negative effect on our liquidity. Our access to funding sources in amounts adequate to finance our activities or the terms of which are acceptable to us could be impaired by factors that affect us specifically or the financial services industry or economy in general. Factors that could detrimentally impact our access to liquidity sources include a decrease in the level of our business activity as a result of a downturn in the markets in which our loans are concentrated or adverse regulatory action against us. Our ability to borrow could also be impaired by factors that are not specific to us, such as a disruption in the financial markets or negative views and expectations about the prospects for the financial services industry in light of the recent turmoil faced by banking organizations and the continued deterioration in credit markets.

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, 2009, $98.6 million, or 28.0%, 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.

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

38

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.

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.

If we are unable to redeem our Series A Preferred Stock after five years, the cost of this capital to us will increase substantially.

If we are unable to redeem the Series A Preferred Stock prior to December 5, 2013, the cost of this capital to us will increase substantially on that date, from 5.0% per annum (approximately $478,000 annually) to 9.0% per annum (approximately $860,000 annually). Depending on our financial condition at the time, this increase in the annual dividend rate on the Series A Preferred Stock could have a material negative effect on our earnings.

The securities purchase agreement between us and Treasury limits our ability to pay dividends on and repurchase our common stock.

The securities purchase agreement between us and Treasury provides that prior to the earlier of (i) December 5, 2011 and (ii) the date on which all of the shares of the Series A Preferred Stock have been redeemed by us or transferred by Treasury to third parties, we may not, without the consent of Treasury, (a) increase the cash dividend on our common stock or (b) subject to limited exceptions, redeem, repurchase or otherwise acquire shares of our common stock or preferred stock (other than the Series A Preferred Stock) or any trust preferred securities then outstanding. In addition, we are unable to pay any dividends on our common stock unless we are current in our

39

dividend payments on the Series A Preferred Stock. These restrictions, together with the potentially dilutive impact of the warrant described in the next risk factor, could have a negative effect on the value of our common stock. Moreover, holders of our common stock are entitled to receive dividends only when, as and if declared by our Board of Directors. Although we have historically paid cash dividends on our common stock, we are not required to do so and our Board of Directors could reduce or eliminate our common stock dividend in the future.

The Series A Preferred Stock impacts net income available to our common shareholders and earnings per common share, and the warrant we issued to Treasury may be dilutive to holders of our common stock.

The dividends declared on the Series A Preferred Stock will reduce the net income available to common shareholders and our earnings per common share. The Series A Preferred Stock will also receive preferential treatment in the event of liquidation, dissolution or winding up of Southern Missouri Bancorp, Inc. Additionally, the ownership interest of the existing holders of our common stock will be diluted to the extent the warrant we issued to Treasury in conjunction with the sale to Treasury of the Series A Preferred Stock is exercised. The shares of common stock underlying the warrant represent approximately 5.2% of the shares of our common stock outstanding (including the shares issuable upon exercise of the warrant in total shares outstanding). Although Treasury has agreed not to vote any of the shares of common stock it receives upon exercise of the warrant, a transferee of any portion of the warrant or of any shares of common stock acquired upon exercise of the warrant is not bound by this restriction.

Item 1B.     Unresolved Staff Comments

None.

40

Item 2.                      Description of Properties

The following table sets forth certain information regarding the Bank's offices as of June 30, 2009.

Location	Year Opened	Building Net Book Value as of June 30, 2009		Land Owned/ Leased	Building Owned/ Leased
	(Dollars in thousands)
Main Office
531 Vine St. Poplar Bluff, Missouri	1966	$	662	Owned	Owned
Branch Offices
502 Main St. Van Buren, Missouri	1982		20	Owned	Owned
1330 N. Westwood Blvd. Poplar Bluff, Missouri	1976		55	Leased(1)	Owned
4214 Highway PP Poplar Bluff, Missouri	2001		505	Owned	Owned
713 Business 60 West Dexter, Missouri	1979		32	Owned	Owned
301 First St. Kennett, Missouri	2000		790	Owned	Owned
302 Washington St. Doniphan, Missouri	2001		553	Owned	Owned
13371 Highway 53 Qulin, Missouri	2000		95	Owned	Owned
1205 S. Main St. Sikeston, Missouri	2006		932	Owned	Owned
100 W. Main St. Matthews, Missouri	2008		---	Leased	Leased

______________________

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

Item 3.     Legal Proceedings

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.

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, 2009.

41

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 10-K.

The following table summarizes the Company's stock repurchase activity for each month during the three months ended June 30, 2009. All shares repurchased during three months ended June 30, 2009, 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
06/01/09-06/30/09 period	-	-	-	-
05/01/09-05/31/09 period	-	-	-	-
04/01/09-04/30/09 period	-	-	-	-

Item 6.     Selected Financial Data

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

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, 2009 and 2008*
(b)	Consolidated Statements of Income for the Years Ended June 30, 2009, 2008 and 2007*
(c)	Consolidated Statements of Stockholders' Equity For the Years Ended June 30, 2009, 2008 and 2007*
(d)	Consolidated Statements of Cash Flows For the Years Ended June 30, 2009, 2008 and 2007*
(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.

42

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, 2009, 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, 2009, that has materially affected, 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.

The Company does not expect that its disclosure controls and procedures will prevent all error and all fraud. A control procedure, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control procedure are met. Because of the inherent limitations in all control procedures, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any control procedure also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control procedure, misstatements due to error or fraud may occur and not be detected.

Management's Report on Internal Control Over Financial Reporting

The management of Southern Missouri Bancorp, Inc. is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). The Company's internal control over financial reporting is a process designed to provide reasonable assurance to the Company's management and board of directors regarding the reliability of financial reporting and the preparation of the financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America.

The Company's internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company's assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal controls over financial reporting may not prevent or detect misstatements. All internal control systems, no matter how well designed, have inherent limitations, including the possibility of human error and the circumvention of overriding controls. Accordingly, even effective internal control

43

over financial reporting can provide only reasonable assurance with respect to financial statement preparation. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Our management assessed the effectiveness of the Company's internal control over financial reporting as of June 30, 2009. In making this assessment, it used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework. Based on our assessment, we believe that, as of June 30, 2009, the Company's internal control over financial reporting was effective based on those criteria.

This annual report does not include an attestation of our independent public accounting firm regarding internal controls over financial reporting. Management's report was not subject to attestation by our independent public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to provide only management's report in this annual report.

Date:  September 25, 2009 By: /s/ Greg A. Steffens                                                        Greg A. Steffens President (Principal Executive and Principal Financial   and Accounting Officer)

Item 9B.     Other Information

None.

44

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 19, 2009, 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 19, 2009, 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), Smith, Bagby, Black, Schalk, Moffitt, Brooks, and Robison, 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 2009, 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, 2009. 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 Conduct and Ethics (the "Code") based upon the standards set forth under Item 406 of the Securities Exchange Act. The Code applies to all of the Company's directors, officers and employees.  The Code may be reviewed at the Company's website, www.bankwithsouthern.com, by following the "investor relations" and "corporate governance" links.

Nomination Procedures

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

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 19, 2009, 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.

45

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 19, 2009, 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, 2009 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		85,500	$	14.01		24,500
Equity Compensation Plans Not Approved By Security Holders		---		---		---
Capital Purchase Program Implemented by the U.S. Treasury		114,326	$	12.53		n/a

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 19, 2009, 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 2009 Annual Meeting of Stockholders, a copy of which will be filed not later than 120 days after the close of the fiscal year.

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.

46

(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
			(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	*****
			(xiii)	Dennis C. Robison	++
		(e)		Tax Sharing Agreement	***
11	Statement Regarding Computation of Per Share Earnings				11
13	2009 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				31
32	Section 1350 Certifications				32
99.1	31 C.F.R. section 30.15 Certification of Principal Executive and Financial Officer				99.1

_______________________

*	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 Registrant's Quarterly Report on Form 10-Q for the quarter ended December 31, 2008.
+++	Filed as an exhibit to the Current Report on Form 8-K filed on September 15, 2005.

47

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 25, 2009	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/ Samuel H. Smith                                        Samuel H. Smith Chairman of the Board of Directors	September 25, 2009
By:	/s/ Greg A. Steffens                                       Greg A. Steffens President (Principal Executive and Financial    and Accounting Officer)	September 25, 2009
By:	/s/ Sammy A. Schalk                                     Sammy A. Schalk Vice Chairman and Director	September 25, 2009
By:	/s/ Ronnie D. Black                                      Ronnie D. Black Secretary and Director	September 25, 2009
By:	/s/ L. Douglas Bagby                                     L. Douglas Bagby Director	September 25, 2009
By:	/s/ Rebecca McLane Brooks                       Rebecca McLane Brooks Director	September 25, 2009
By:	/s/ Charles R. Love                                      Charles R. Love Director	September 25, 2009
By:	/s/ Charles R. Moffitt                                  Charles R. Moffitt Director	September 25, 2009
By:	/s/ Dennis C. Robison                                 Dennis C. Robison Director	September 25, 2009

48

Index to Exhibits

Regulation S-K Exhibit Number	Document
10.1	Named Executive Officer Salary and Bonus Agreement for 2009
10.2	Director Fee Arrangements
11	Statement Regarding Computation of Per Share Earnings
13	2009 Annual Report to Stockholders
21	Subsidiaries of the Registrant
23.1	Consent of Auditors
23.2	Consent of Auditors
31	Rule 13a-14(a)/15d-14(a) Certifications
32	Section 1350 Certifications
99	31 C.F.R. section 30.15 Certification of Principal Executive and Financial Officer

EX-10.1

EXHIBIT 10.1

Named Executive Officer Salary and Bonus Arrangements for 2009

Base Salaries

The base salaries for 2009 for the executive officers (the "named executive officers") of Southern Missouri Bancorp, Inc. (the "Company") who will be named in the compensation table that will appear in the Company's upcoming 2009 annual meeting proxy statement are as follows:

Name and Title	Base Salary
Greg A. Steffens President, Chief Executive Officer, and Chief Financial Officer, Southern Missouri Bancorp., Inc.; President and Chief Executive Officer, Southern Bank	$	190,292
William Hribovsek Chief Lending Officer, Southern Bank		143,278
William Aslin Market Area President, Southern Bank		117,797

Description of 2009 Bonus Arrangement

The Company has no formal written incentive bonus plan for executive management; however, the compensation committee does have written guidelines regarding bonus payments. The guidelines indicate that the amount of bonus available for award to executive management should be predicated on the Company's performance in meeting various goals, including return on equity, growth in earnings per share, efficiency and control of non-interest expense, and diversification of revenues. Officers outside of executive management (including market area presidents) generally participate in a bonus program that conditions awards upon reaching employee and branch goals regarding loan and deposit growth, and overall company profitability.

Additional information about the 2009 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 2009, except for information contained under the heading "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 2009

Each director of Southern Missouri Bancorp, Inc. (the "Company") also is a director of Southern Bank (the "Bank"). For 2009, each director receives an annual fee of $10,800 for serving on the Company's Board of Directors and $13,200 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,
	2009		2008		2007
Basic    Average shares outstanding		2,123,144		2,199,928		2,225,658
Net income	$	3,835,077	$	3,613,480	$	2,928,413
Less: effective dividend on preferred shares		288,841		-		-
Net income available to common stockholders	$	3,546,236	$	3,613,480	$	2,928,413
Basic earnings per share available to common       stockholders	$	1.67	$	1.64	$	1.32
Diluted    Average shares outstanding		2,123,144		2,199,928		2,225,658
Net effect of dilutive stock options - based on the       treasury stock method using the period end market       price, if greater than average market price		1,225		12,204		38,578
Total		2,124,369		2,212,132		2,264,326
Net income	$	3,835,077	$	3,613,480	$	2,928,413
Less: effective dividend on preferred shares		288,841		-		-
Net income available to common stockholders	$	3,546,236	$	3,613,480	$	2,928,413
Diluted earnings per share available to common       stockholders	$	1.67	$	1.63	$	1.29

EX-13

 

Weathering               

the Storm

SOUTHERN MISSOURI BANCORP, INC.     |     2009 ANNUAL REPORT

>   CORPORATE PROFILE   <

Southern Missouri Bancorp, Inc. (NASDAQ: SMBC)

is the holding company for Southern Bank.

The last twelve months have seen an historic upheaval

in the financial industry, but the Company reported

solid results and took steps to provide

for continued growth.

>TABLE ofCONTENTS<

Letter to Shareholders	2
Common Share Data	8
Financial Review	9
Report of 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

>   FINANCIAL SUMMARY   <

	2009			2008			CHANGE(%)
EARNINGS(dollars in thousands)
Net interest income	$	14,097		$	11,780			19.7
Provision for possible loan losses		1,220			940			29.8
Other income		1,820			2,412			-24.5
Other expense		9,150			7,864			16.4
Income taxes		1,712			1,775			-3.5
Net income		3,835			3,613			6.1
Effective dividend on preferred shares		289			---			N/A
Net income available to common stockholders		3,546			3,613			-1.9
PER COMMON SHARE
Net income:
Basic	$	1.67		$	1.64			1.8
Diluted		1.67			1.63			2.5
Tangible book value		14.82			13.11			13.0
Closing market price		9.95			15.49			-35.8
Cash dividends declared		.48			.40			20.0
AT YEAR-END(dollars in thousands)
Total assets	$	465,897		$	417,820			11.5
Loans, net of allowance		368,556			343,070			7.4
Reserves as a percent of nonperforming loans		556.78	%		58,865	%
Deposits	$	311,955		$	292,257			6.7
Stockholders’ equity		42,008			30,472			37.9
FINANCIAL RATIOS
Return on average common stockholders’ equity		11.38	%		12.06	%
Return on average assets		.87			.92
Net interest margin		3.37			3.17
Efficiency ratio		57.49			55.41
Allowance for possible loan losses to net loans		1.20			1.04
Equity to average assets at year-end		9.51			7.73
OTHER DATA(1)
Common shares outstanding		2,087,976			2,190,833
Average common and dilutive
shares outstanding		2,124,369			2,212,132
Common stockholders of record		283			276
Full-time equivalent employees		108			100
Assets per employee (in thousands)	$	4,314		$	4,178
Banking offices		10			9

(1) Other data is as of year-end, except for average shares.

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>   LETTER to SHAREHOLDERS   <

  In 2009, Southern Missouri Bancorp weathered the financial market storm, continuing to generate strong returns, and taking steps to grow the company for the future.  

In last year’s report, we announced outstanding earnings growth, and noted that the economy had

soured. Since then, we’ve seen the recession plunge to depths that would have been nearly unimaginable

twelve months ago.  But our results have held up remarkably well.  Earnings per diluted common share

were $1.67 for fiscal 2009, up from $1.63 in 2008.  The Company generated a return on average common

equity of 11.4% and a return on average assets of 0.87% in fiscal 2009.

Return on common equity again surpasses peer banks

Our ROE was down slightly, but well ahead of peer banks in a troubled banking environment.

(1) Peer data is based on the average year-end figures (December) from SNL DataSource’s Index of publicly traded commercial banks and thrifts with assets of $100 million to $1 billion, headquartered in Missouri, Arkansas, Illinois, Iowa, Kansas, Kentucky, Nebraska, Oklahoma, and Tennessee. SMBC data is as of fiscal year-end (June).

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Net income available to common shareholders totaled $3.5 million in fiscal 2009, down slightly from $3.6 million in the prior year.  Our net interest income was up 19.7% in 2009, as we expanded our net interest margin by 20 basis points, and grew our average interest earning assets by 12.1%.  Non-interest expense grew – up 16.4% – as we geared up operations to position ourselves for future opportunities, and as we paid higher deposit insurance premiums resulting from industry-wide base assessment rate increases and a special assessment from the FDIC.  Non-interest income was down – off 24.6% – due to charges the bank recorded to reflect the other-than-temporary impairment of two investments.

Our net interest

income was up

19.7% in 2009

Our net loan portfolio grew 7.4% in 2009, while our commercial and commercial real estate loans   continued to account for much of that growth, up a combined 11.2%.  Deposits increased 6.7% as we introduced a successful new rewards checking product, now marketed nationally under the “Kasasa” brand.  Repurchase agreements, all of which are with local governments and businesses, were up 8.9%, even before accounting for a significant new public unit relationship which did not fund until early July.

Continued steady growth in our core business

Asset growth was above-trend due to the leveraging of additional capital.

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The Company’s book value per common share increased by 11.7%, and tangible book value per common share increased by 13.0%. While our stock price did not perform well over the last year, it roughly mirrored the industry, down 35.8%, compared to a decline of 32.3% for the SNL bank index, and a decline of 38.4% for SNL micro cap banks. Earnings and increases in book value, however, outperformed the industry, and we believe that those results should bode well for our stock performance as the markets return to normal functioning over time. The Company also repurchased 5.8% of shares that were outstanding at July 1, 2008, increasing each remaining shareholder's percentage of ownership.

Tangible Book Value per share growth beats peers We have regularly exceeded our peer banks (1) in this key measure of shareholder value.

Asset quality at Southern Missouri has always been important, and we are benefitting from that focus today.  Net charge-offs were up, but are still far below peers; non-performing assets have increased, but, again, remain at very manageable levels.  However, we have continued to grow loan loss reserves in these uncertain economic times, increasing our allowance from 1.03% of total loans at June 30, 2008, to 1.19% at June 30, 2009.

Loan quality is sound

Problem loans and assets increased, but credit quality remained relatively strong.

(1) Peer data is based on the average year-end figures (December) from SNL DataSource’s Index of publicly traded commercial banks and thrifts with assets of $100 million to $1 billion, headquartered in Missouri, Arkansas, Illinois, Iowa, Kansas, Kentucky, Nebraska, Oklahoma, and Tennessee. SMBC data is as of fiscal year-end (June).

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	In April 2009, Southern Missouri announced that it was acquiring a small financial institution, Southern Bank of Commerce, located in northeast Arkansas. The transaction closed in July 2009, and the Company is working diligently to implement its successful business model in these attractive new markets.  The bank acquired was a
troubled financial institution, and the acquisition is expected to have a relatively small negative impact on our near-term earnings. However, we believe entry to these markets will provide a framework for us to deliver consistent growth in the future as the available potential customer base for us will nearly double.

The Company also announced, in December 2008, that it received an investment of $9.6 million from the U.S. Treasury under the terms of its Capital Purchase Program (CPP), whereby the Company sold shares of fixed-rate, cumulative preferred stock and issued warrants to purchase 114,000 shares of common stock.  The Company accepted the investment due to the uncertainty in the economic environment at the time, the relatively attractive cost of capital compared to the market at the time, and the strategic opportunities the Company foresaw regarding the potential uses of the capital.

While the program has become highly politicized, we believe we have put it to good uses that have helped accomplish Treasury's objectives: increasing the flow of financing to U.S. businesses and consumers, and to support the U.S. economy. Provided not a handout, but capital - an investment to be repaid, plus interest - the Company has increased its loan and investment portfolios - collectively, our investment in the credit markets - by more than we would have been likely to do, otherwise. Additionally, the Company utilized the additional capital when it made the aforementioned acquisition of Southern Bank of Commerce, a troubled financial institution, thereby improving credit availability in markets where it operated.

We will strongly consider our opportunities to raise capital and repay the Treasury investment at the earliest possible time, subject to consideration of the best possible uses of the capital. But we will not be pressured into raising capital at an inopportune time, or into reducing capital levels in a time of economic turbulence, if needed to maintain the safe and sound operation of the Company.

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We look forward with great anticipation to 2010.

Our goals include:

Ø	First and foremost, continuing growth in core shareholder value - these can be disappointing
	times for investors who check the ticker daily. We hope that our solid results in key measures
	of shareholder value translate to an improved stock price in coming periods.
Ø	Second, building our retail deposit base – especially in our new markets, where we think our
	products will be well received.
Ø	Third, resolving problem assets at our newly-acquired Arkansas operations, and generating
	sound asset growth in those markets to build profitability.
Ø	And fourth, due to our expansion into new Arkansas markets, accomplishing a complicated
	re-branding of Southern Missouri Bank as simply

Southern

BANK

Next year's results will be hampered by the northeast Arkansas integration.  We know the return to profitability for these branches will not be easy.  But we also know they represent an impressive opportunity for the future of our Company.

Moreover, we don’t expect this economy to turn around overnight, and that means we must remain committed to operating at the highest efficiency and with strong asset quality.  We will continue to bring the best products to our markets, do so at reasonable costs, and ensure that our customers

receive outstanding support from our employees.

Efficiency remains ahead of peers

We again outperformed peer banks in this key measure.

 (1) Peer data is based on the average year-end figures (December) from SNL DataSource’s Index of publicly traded commercial banks and thrifts with assets of $100 million to $1 billion, headquartered in Missouri, Arkansas, Illinois, Iowa, Kansas, Kentucky, Nebraska, Oklahoma, and Tennessee. SMBC data is as of fiscal year-end (June).

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In these trying times, we could hardly	In these trying times, we could hardly be prouder of our solid results in 2009.
be prouder of our solid results in 2009.
Our institution is well-positioned for the
coming year due to the diligence of our
management team, the hard work of our
employees, and the loyalty of our valued
customers.  I want to take this opportunity
to thank them all.

I would also like to take this opportunity to thank our board of directors for the steady hand of

leadership they have provided over the years, and, especially, our former Chairman, James W. Tatum,

who retired from the board in October 2008. Mr. Tatum served our Company on the board for over

25 years, and I am happy to note that he continues to serve in the role of Director Emeritus.

And finally, I thank you for your investment in Southern Missouri, and consider myself fortunate to

hold your trust.  I am pleased to issue this positive report on your investment.

/s/ Greg Steffens

GREG STEFFENS

PRESIDENT and CHIEF EXECUTIVE OFFICER

SOUTHERN MISSOURI BANCORP, INC.

PLEASE JOIN US

at our 2009 Annual Meeting, where shareholders and those considering invest-

ing in Southern Missouri Bancorp, Inc. will hear management review this year’s

performance in detail and discuss our plans to achieve continued superior results.

ANNUAL MEETING

MONDAY, OCTOBER 19, 2009 AT 9:00 AM

CHAMBER OF COMMERCE BUILDING

1111 WEST PINE, POPLAR BLUFF, MISSOURI

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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 for the last three fiscal years.

The following table sets forth per share market price and dividend information for the Company’s common stock. As of June 30, 2009, there were approximately 283 common stockholders of record. This does not reflect the number of persons or entities who hold common stock in nominee or “street name.”

Fiscal 2009	High		Low		Close		Book Value At End Of Period		Market Price To Book Value			Dividends Declared
4th Quarter (6-30-09)	$	11.00	$	8.99	$	9.95	$	15.58		63.86	%	$	0.12
3rd Quarter (3-31-09)	$	11.70	$	7.63	$	10.80	$	15.16		71.24	%	$	0.12
2nd Quarter (12-31-08)	$	14.91	$	9.87	$	11.09	$	14.75		75.19	%	$	0.12
1st Quarter (9-30-08)	$	15.01	$	12.36	$	13.05	$	14.23		91.71	%	$	0.12
Fiscal 2008
4th Quarter (6-30-08)	$	15.89	$	11.21	$	15.49	$	13.95		111.04	%	$	0.10
3rd Quarter (3-31-08)	$	15.10	$	12.75	$	15.10	$	13.95		108.24	%	$	0.10
2nd Quarter (12-31-07)	$	15.02	$	12.75	$	13.99	$	13.76		101.67	%	$	0.10
1st Quarter (9-30-07)	$	15.25	$	14.45	$	14.96	$	13.35		112.06	%	$	0.10
Fiscal 2007
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

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 on its common stock 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 Bank (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 $250,000 under current law 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 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.  As of June 30, 2009, the Bank conducted its business through its home office located in Poplar Bluff and nine full service branch facilities in Poplar Bluff (2), Van Buren, Dexter, Kennett, Doniphan, Sikeston, Matthews, and Qulin, Missouri. Subsequent to June 30, 2009, the Company added four branches through its acquisition of Southern Bank of Commerce. Those branches are located in Paragould, Jonesboro, Leachville, and Brookland, Arkansas.

(dollars in thousands)	At June 30
Financial Condition Data:	2009		2008		2007		2006		2005
Total assets	$	465,897	$	417,820	$	379,927	$	350,684	$	330,360
Loans receivable, net		368,556		343,070		312,063		280,931		267,568
Mortgage-backed securities		40,269		28,006		10,723		14,440		17,243
Cash, interest-bearing deposits
and investment securities		27,983		19,931		31,492		30,328		21,344
Deposits		311,955		292,257		270,088		258,069		224,666
Borrowings		102,498		85,854		71,758		57,296		72,257
Subordinated debt		7,217		7,217		7,217		7,217		7,217
Stockholders’ equity		42,008		30,472		28,714		26,554		25,003
(dollars in thousands, except per share data)	For The Year Ended June 30
Operating Data:		2009		2008		2007		2006		2005
Interest income	$	25,301	$	25,327	$	23,550	$	20,363	$	17,284
Interest expense		11,204		13,547		13,621		10,763		8,032
Net interest income		14,097		11,780		9,929		9,600		9,252
Provision for loan losses		1,220		940		605		555		4,815
Net interest income after
provision for loan losses		12,877		10,840		9,324		9,045		4,437
Noninterest income		1,820		2,412		2,207		2,144		2,313
Noninterest expense		9,150		7,864		7,458		7,028		6,728
Income before income taxes		5,547		5,388		4,073		4,161		22
Income tax (benefit) expense		1,712		1,775		1,145		1,377		(82	)
Net income	$	3,835	$	3,613	$	2,928	$	2,784	$	104
Less: effective dividend on preferred stock		289		-		-		-		-
Net income available to common stockholders	$	3,546	$	3,613	$	2,928	$	2,784	$	104
Basic earnings per share available to
common stockholders	$	1.67	$	1.64	$	1.32	$	1.25	$	.05
Diluted earnings per share available to
common stockholders	$	1.67	$	1.63	$	1.29	$	1.24	$	.05
Dividends per share	$	.48	$	.40	$	.36	$	.36	$	.36

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>   FINANCIAL REVIEW   (continued)   <

	At June 30
Other Data:	2009	2008	2007	2006	2005
Number of:
Real estate loans	2,957	2,868	2,795	2,808	2,850
Deposit accounts	22,069	20,560	19,978	18,845	17,336
Full service offices	10	9	9	9	8
	At Or For The Year Ended June 30
Key Operating Ratios:	2009	2008	2007	2006	2005
Return on assets (net income
divided by average assets)	.87%	.92%	.80%	.80%	.03%
Return on average common equity (net
income available to common stockholders
divided by average common equity)	11.38	12.06	10.49	10.83	.39
Average equity to average assets	8.29	7.60	7.66	7.43	8.18
Interest rate spread (spread
between weighted average rate on
all interest-earning assets and all
interest-bearing liabilities)	3.11	2.86	2.57	2.69	2.84
Net interest margin (net interest
income as a percentage of average
interest-earning assets)	3.37	3.17	2.90	2.96	3.06
Noninterest expense to average assets	2.07	2.00	2.05	2.03	2.07
Average interest-earning assets to
average interest-bearing liabilities	109.77	108.60	108.29	108.15	108.10
Allowance for loan losses to gross
loans (1)	1.19	1.03	.81	.73	.75
Allowance for loan losses to
nonperforming loans (1)	556.78	58,864.74	9,845.43	3,888.50	353.36
Net charge-offs (recoveries) to average
outstanding loans during the period	.10	(0.03)	.04	.19	1.85
Ratio of nonperforming assets
to total assets (1)	.29	.02	.04	.08	.20
Common shareholder dividend
payout ratio (common dividends as a
percentage of earnings available to
common shareholders)	28.27	24.49	27.50	28.80	776.14

(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. 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. On June 1, 2009, the Bank changed its name to Southern Bank. The principal business of Southern Bank consists of attracting deposits from the general public and using such deposits along with advances 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 Bank’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 Bank 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 Bank’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 Bank’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 Bank’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 Bank 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 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 secured by properties or collateral located primarily in southeast Missouri and northeast Arkansas. 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 provisions 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 Bank 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 $48.1 million, or 11.5%, to $465.9 million at June 30, 2009, when compared to $417.8 million at June 30, 2008. The growth was primarily due to growth in the net loan portfolio of $25.5 million, or 7.4%, as well as growth in available for sale investments of $20.3 million, or 50.8%. Asset growth was primarily funded by growth in deposit balances of $19.7 million, or 6.7%, FHLB advances of $14.7 million, or 23.0%, total equity of $11.5 million, or 37.9%, and repurchase agreements of $1.9 million, or 8.9%.   Loans. Loans increased $25.5 million, or 7.4%, to $368.6 million at June 30, 2009, from $343.1 million at June 30, 2008. The growth in the loan portfolio was comprised principally of commercial real estate loans of $11.3 million, commercial loans of $7.5 million, and residential real estate loans of $6.2 million.   Allowance for Loan Losses. The allowance for loan losses increased $863,000, or 24.2%, from $3.6 million at June 30, 2008, to $4.4 million at June 30, 2009. The allowance for loan losses represented 1.19% of gross loans receivable at June 30, 2009, as compared to 1.03% at June 30, 2008. At June 30, 2009, nonperforming loans, which included loans past due greater than 90 days and nonaccruing loans, were $796,000, compared to $6,000 at June 30, 2008 (see also, Provision for Loan Losses, under Comparison of Operating Results for the Years Ended June 30, 2009 and 2008).   Investments. The investment portfolio increased $20.3 million, or 50.8%, to $60.2 million at June 30, 2009, from $39.9 million at June 30, 2008. The increase in the investment portfolio was primarily due to the Company’s leveraged deployment of $9.6 million in capital raised from the U.S. Treasury under the terms of its Capital Purchase Program.  Investment growth was comprised primarily of collateralized mortgage obligations (CMOs) issued by U.S. government agencies and obligations of state and political subdivisions.   Premises and Equipment. Premises and equipment decreased $70,000 to $8.1 million at June 30, 2009, from $8.2 million at June 30, 2008. The decrease was due to an increase in accumulated depreciation for the fiscal year, partially offset by investments in buildings, equipment and software.   Bank Owned Life Insurance. The Bank purchased “key person” life insurance policies on six employees with 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, 2009, the cash surrender value had increased to $7.6 million.   Intangible Assets. Intangible assets generated through branch acquisitions in 2000 decreased $255,000 to $1.6 million as of June 30, 2009, and will continue to be amortized in accordance with Statement of Financial Accounting Standards (SFAS) No. 142.   Deposits. Deposits increased $19.7 million, or 6.7%, to $312.0 million at June 30, 2009, from $292.3 million at June 30, 2008. The deposit growth was primarily comprised of increases in interest checking accounts of $28.0 million and certificate of deposit balances of $9.9 million, partially offset by decreases in money market passbook and statement savings accounts of $14.8 million, and money market deposit accounts of $5.5 million.  The increase in interest checking balances was attributed to the success of the Bank’s rewards checking product, and the increase in certificates was attributed to customers’ seeking higher rates, as well as a $5.7 million increase in brokered CDs, which were added due to advantageous pricing and to help manage interest rate risk.  Brokered CDs totaled $5.8 million at June 30, 2009, compared to less than $100,000 at June 30, 2008.  Decreases in money market passbook and statement

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savings, as well as money market deposit accounts were attributed primarily to a decrease in public unit deposits in those products, as well as customers shifting from those products to our rewards checking product, or to CDs.  During fiscal 2009, public unit deposits decreased by $15.4 million.  Total retail, non-public deposits increased by $29.3 million during the fiscal year.   Borrowings. FHLB advances increased $14.7 million, or 23.0%, to $78.8 million at June 30, 2009, from $64.1 million at June 30, 2008. The increase was primarily attributed to the use of borrowings to leverage the $9.6 million investment by the U.S. Treasury to purchase investments and grow loan balances.  Of the outstanding advances, $6.3 million was in overnight and short term borrowings at June 30, 2009, compared to $5.6 million in overnight and short term borrowings at June 30, 2008. Of the remaining $72.5 million in long-term advances, the entire amount carries fixed interest rates, and $58.5 million is subject to early redemption by the issuer.   At June 30, 2009, the long-term advances had a weighted average maturity of 3.8 years, compared to 4.3 years at June 30, 2008. At June 30, 2009, all FHLB advances had a weighted-average cost of 4.31%, as compared to 4.91% at June 30, 2008.   Subordinated Debt. In March 2004, $7.0 million of Floating Rate Capital Securities of Southern Missouri Statutory Trust I with a liquidation value of $1,000 per share were issued. 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 $11.5 million, or 37.9%, to $42.0 million at June 30, 2009, from $30.5 million at June 30, 2008. This increase was primarily due to the investment by the U.S. Treasury of $9.6 million pursuant to the terms of its Capital Purchase Program (CPP).  Additionally, net income of $3.8 million, a $733,000 increase in the market value of the investment portfolio, net of tax, and stock options exercised for $161,000, were partially offset by treasury stock purchases of $1.5 million, and common and preferred dividend payments of $1.3 million. The Company completed its most recently announced share repurchase program on November 19, 2008, and has not announced a new repurchase plan. Due to the Company’s participation in the CPP, new repurchase activity is restricted.   COMPARISON OF OPERATING RESULTS FOR THE YEARS ENDED JUNE 30, 2009 AND 2008   Net Income. The Company’s net income available to common stockholders for the fiscal year ended June 30, 2009, was $3.5 million, a decrease of $67,000, or 1.9%, from the $3.6 million net income available to common stockholders for the prior fiscal year.  Before an effective dividend on preferred shares of $289,000, net income was $3.8 million for the 2009 fiscal year, an increase of $222,000, or 6.1%, compared to the $3.6 million in net income for the prior fiscal year.  The increase in net income was primarily due to a $2.3 million increase in net interest income, partially offset by a $1.3 million increase in non-interest expense, a $592,000 decrease in non-interest income, and a $280,000 increase in loan loss provisions.   Net Interest Income. Net interest income increased $2.3 million, or 19.7%, to $14.1 million for fiscal 2009, when compared to the prior fiscal year. The increase was primarily due to a $47.0 million increase in average interest-earning assets, combined with a 25 basis point increase in the average interest rate spread. The increase in interest rate spread was primarily a result of decreasing short-term interest rates, prompted by actions of the Federal Reserve’s Federal Open Market Committee, as well as a steepened yield curve for most of the fiscal year. For fiscal 2009, the average interest rate spread was 3.11%, compared to 2.86% for fiscal year 2008. At June 30, 2009, the spread was 3.11%. Interest Income. Interest income decreased $26,000 or 0.1%, to $25.3 million for fiscal 2009, when compared to the prior fiscal year. The decrease was primarily due to the 78 basis point decrease in the average yield earned on interest-earning assets, from 6.82% in fiscal 2008 to 6.04% in fiscal 2009, mostly offset by the $47.0 million increase in the average balance of interest-earning assets.   Interest income on loans receivable decreased by $455,000, or 2.0%, to $22.8 million for fiscal 2009 when compared to the prior fiscal year. The decrease was due to a 77 basis point decrease in the average yield earned on loans receivable, partially offset by a $32.2 million increase in the average balance of loans receivable.   Interest income on the investment portfolio and other interest-earning assets increased $430,000 or 21.1%, to $2.5 million for fiscal 2009 when compared to the prior fiscal year. The increase was due to a $14.8 million increase in the average balance of these assets, partially offset by a 36 basis point decrease in the average yield earned on these assets.   Interest Expense. Interest expense decreased $2.3 million, or 17.3%, to $11.2 million for fiscal 2009 when compared to the prior fiscal year. The decrease was due to the 103 basis point decrease in the average rate paid on interest-bearing liabilities, from 3.96% in fiscal 2008 to 2.93% in fiscal 2009, reflecting the decrease in market rates, partially offset by a $39.2 million increase in the average balance of interest-bearing liabilities.   Interest expense on deposits decreased $2.1 million, or 22.6%, to $7.2 million for fiscal 2009 when compared to the prior fiscal year. The decrease was due to a 98 basis point decrease in the average rate paid on deposits, partially offset by a $16.0 million increase in average deposits outstanding.   Interest expense on FHLB advances increased $378,000, or 12.3%, to $3.5 million for fiscal 2009 when compared to the prior fiscal year. The increase was due to the $19.4 million increase in the average balance of FHLB advances for fiscal 2009, partially offset by the 82 basis point decrease in the average rate paid on advances, reflecting the decrease in market rates.   In March 2009, $7.0 million of Floating Rate Capital Securities were issued, with an interest rate of three month LIBOR plus 275 basis points, repricing quarterly. Interest expense on these securities was $357,000 for fiscal 2009 as compared to $539,000 for the prior fiscal year. This decrease was due to the average rate paid decreasing by 252 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 collectability of the loan portfolio.   The provision for loan losses was $1.2 million for fiscal 2009, compared to $940,000 for the prior fiscal year. The increase in provision was primarily due to loan growth, the deteriorating health of the national and regional economy, the potential for declining real estate collateral values, and increased non-performing asset levels experienced by the Company. In fiscal 2009, net charge offs were $357,000, compared to net recoveries of $90,000 for the prior year. At June 30, 2009, classified assets totaled $9.7 million, or 2.1% of total assets, compared to classified assets of $4.5 million, or 1.1% of total assets, at June 30, 2008.  The increase is primarily due to the classification of two loans totaling $3.5 million outstanding to a bank holding company, as well as the classification of the Company’s investments in pooled trust preferred securities with a book value of $1.5 million (see Note 2 – Securities).  Other classified assets were generally comprised of loans secured by commercial and agricultural real estate, or inventory and equipment.  Two investments in pooled

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trust preferred securities with a total book value of $559,000 (included in the total of $1.5 million, above) have deferred interest payments as of June 30, 2009; all other classified assets were performing in accordance with terms. All assets were classified due to concerns as to the borrowers’ ability to continue to generate sufficient cash flows to service the debt. 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, 2009, is adequate to cover all losses inherent in the portfolio, there can be no assurance that, in the future, increases in the allowance will not be necessary, or that actual losses will not exceed the allowance.   Noninterest Income. Noninterest income decreased $592,000, or 24.6%, to $1.8 million for fiscal 2009, when compared to the prior fiscal year.  The decrease was primarily due to charges of $679,000 incurred to recognize the other-than-temporary impairment of two investments held by the Company (see Note 2 – Securities).  Exclusive of those charges, noninterest income would have increased 3.6% in fiscal 2009, attributable to increased debit and ATM card income, secondary market income, loan fees and late charges, partially offset by decreases in NSF and account service charges, miscellaneous customer fees, and smaller increases in the cash surrender value of BOLI.   Noninterest Expense. Noninterest expense increased $1.3 million, or 16.4%, to $9.2 million for fiscal 2009, when compared to the prior fiscal year.  The increase resulted primarily from higher deposit insurance assessments, compensation expenses, legal and professional fees, and electronic banking and other charges.  These increases were partially offset by lower charges for correspondent banking services and insurance.  Deposit insurance assessments were $536,000 for fiscal 2009, an increase of $506,000 when compared to the prior year, the result of base assessment rate increases and special assessments collected by the FDIC to rebuild depleted insurance fund balances.  Compensation expenses were $4.8 million, an increase of $371,000, or 8.4%, when compared to the prior fiscal year.  The increase was due to increased salaries, the addition of key personnel, and increased health care benefit costs.  Legal expenses increased due primarily to work required for the acquisition of the Southern Bank of Commerce.  Electronic banking and other charges increased due to the development and promotion of our popular new rewards checking product, as well as the additional costs of servicing those accounts.   Provision for Income Taxes. The Company expensed an income tax provision of $1.7 million for fiscal 2009, a decrease of $63,000, or 3.6%, compared to $1.8 million in fiscal 2008. The decrease was primarily due to larger investments in tax-exempt securities and tax credits, partially offset by increased pre-tax income.   COMPARISON OF OPERATING RESULTS FOR THE YEARS ENDED JUNE 30, 2008 AND 2007 Net Income. Southern Bank’s net income was $3.6 million for the fiscal year ended June 30, 2008, an increase of $685,000, or 23.4%, when compared to the results of the prior fiscal year. The increase in net income was primarily due to a $1.9 million increase in net interest income and an increase in non-interest income of $205,000, partially offset by a $630,000 increase in income tax provisions, a $406,000 increase in non-interest expenses, and a $335,000 increase in loan loss provisions. Net Interest Income. Net interest income increased $1.9 million, or 18.6%, to $11.8 million for fiscal 2008, when compared to the prior fiscal year. The increase was primarily due to a 29 basis point increase in the average interest rate spread, combined with a $29.0 million increase in average interest-earning assets. The increase in interest rate spread was primarily a result of decreasing short-term interest rates, prompted by actions of the Federal Reserve’s Federal Open Market Committee, as well as a steeper yield curve for most of the fiscal year. For fiscal 2008, the average interest rate spread was 2.86%, compared to 2.57% for fiscal year 2007. At June 30, 2008, the spread was 3.12%.   Interest Income. Interest income increased $1.8 million, or 7.5%, to $25.3 million for fiscal 2008, when compared to the prior fiscal year. The increase was primarily due to the $29.0 million increase in the average balance of interest-earning assets, partially offset by a five basis point decrease in average yield earned on interest-earning assets, from 6.87% in fiscal 2007 to 6.82% in fiscal 2008. Interest income on loans receivable increased by $1.6 million, or 7.4%, to $23.3 million for fiscal 2008 when compared to the prior fiscal year. The increase was due to a $27.6 million increase in average balance of loans receivable, partially offset by a 13 basis point decrease in the average yield earned on loans receivable. Interest income on the investment portfolio and other interest-earning assets increased $183,000 or 9.8%, to $2.0 million for fiscal 2008 when compared to the prior fiscal year. The increase was due to a 27 basis point increase in the average yield earned on these assets, combined with a $1.4 million increase in the average balance of investments and other interest-earning assets.   Interest Expense. Interest expense decreased $74,000, or 0.5%, to $13.5 million for fiscal 2008 when compared to the prior fiscal year. The decrease was due to the 34 basis point decrease in the average rate paid on interest-bearing liabilities, from 4.30% in fiscal 2007 to 3.96% in fiscal 2008, partially offset by a $25.8 million increase in the average balance of interest-bearing liabilities. Interest expense on deposits increased $199,000, or 2.2%, to $9.3 million for fiscal 2008 when compared to the prior fiscal year. The increase was due to a $21.4 million increase in average deposits outstanding, partially offset by a 24 basis point decrease in the average rate paid on deposits. Interest expense on FHLB advances decreased $324,000, or 9.5%, to $3.1 million for fiscal 2008 when compared to the prior fiscal year. The decrease was primarily due to the $4.4 million decrease in the average balance of FHLB advances for fiscal 2008, combined with the 15 basis point decrease 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 $539,000 for fiscal 2008 as compared to $594,000 for the prior fiscal year. This decrease was due to the average rate paid decreasing by 77 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 $940,000 for fiscal 2008, compared to $605,000 for the prior fiscal year. The increase in provision was primarily due to loan growth, the health of the national and regional economy, and the potential for declining real estate collateral values. In fiscal 2008, net recoveries were $90,000, compared to net charge offs of $125,000 for the prior year. At June 30, 2008, classified assets totaled $4.5 million, compared to classified assets of $1.3 million at June 30, 2007.  The increase in classifications was due primarily to a single loan relationship with outstanding classified balances of $3.5 million, secured by commercial and agricultural real estate, and was performing according to terms at June 30, 2008.  The relationship was classified due to concerns regarding the borrower’s ability to generate sufficient cash flow from operations to service the debt. 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, 2008, is adequate to cover all losses inherent in the portfolio, there can be no assurance that, in the future, increases in the allowance will not be necessary, or that actual losses will not exceed the allowance.   Noninterest Income. Noninterest income increased $205,000, or 9.3%, to $2.4 million for fiscal 2008, when compared to the prior fiscal year.  The increase was primarily due to increased collection of insufficient funds charges, increased debit and ATM card income, loan late charges, and increases in the cash surrender value of BOLI, partially offset by lower secondary market loan income.   Noninterest Expense. Noninterest expense increased $406,000, or 5.4%, to $7.9 million for fiscal 2008, when compared to the prior fiscal year.  The increase resulted primarily from higher compensation expenses, partially offset by lower professional, advertising, and miscellaneous expenses.  Expenses for compensation and benefits increased $422,000, or 10.5%, for fiscal 2008 when compared to the prior year. The increase was due to increased salaries, addition of personnel, and the payment of additional bonuses based on the Company’s strong financial performance.   Provision for Income Taxes. The Company expensed an income tax provision of $1.8 million for fiscal 2008, compared to $1.1 million in fiscal 2007. The increase was primarily due to increased pre-tax income, as well as the prior fiscal year’s adjustments related to compliance with new accounting standards.   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), fixed-rate FHLB advances, which may be subject to early redemption, 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 five years or less, (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, 2009, fixed rate residential loan originations totaled $23.1 million, compared to $22.0 million during the prior year. At June 30, 2009, the fixed-rate residential loan portfolio totaled $96.6 million with a weighted average maturity of 206 months, compared to $98.6 million at June 30, 2008, with a weighted average maturity of 207 months. At June 30, 2009, fixed rate loans with remaining maturities in excess of 10 years totaled $90.4 million, or 24.2%, of loans receivable, compared to $83.7 million, or 24.1%, of loans receivable, at June 30, 2008. The Company originated $57.7 million in fixed rate commercial and commercial real estate loans during the year ended June 30, 2009, compared to $58.3 million during the prior fiscal year. The Company also originated $74.0 million in adjustable rate commercial and commercial real estate loans during the year ended June 30, 2009, compared to $50.1 million during the prior year. The Company originated $14.3 million in adjustable rate residential loans during the year ended June 30, 2009, compared to $9.9 million during the prior year. At June 30, 2009, adjustable-rate home equity lines of credit had increased to $11.0 million as compared to $8.2 million as of June 30, 2008. At June 30, 2009, the Company’s weighted average life of its investment portfolio was 3.9 years, as compared to 5.9 years at June 30, 2008.  At June 30, 2009, CDs with original terms of two years or more totaled $45.7 million compared to $20.8 million at June 30, 2008.

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INTEREST RATE SENSITIVITY ANALYSIS The following table sets forth as of June 30, 2009, and 2008, management’s estimates of the projected changes in net portfolio value 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 Bank’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 Bank’s loans have features which restrict changes in interest rates on a short-term basis and over the life of the asset. Further, in the event of a change in interest rates, prepayment and early withdrawal levels would likely deviate significantly from those assumed in calculating the foregoing table. Finally, the ability of many borrowers to service their debt may decrease in the event of an interest rate increase.						LIQUIDITY AND CAPITAL RESOURCES Southern Missouri’s primary potential sources of funds include deposit growth, securities sold under agreements to repurchase, FHLB advances, amortization and prepayment of loan principal, investment maturities and sales, and ongoing operating results. While scheduled 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, 2009, the Bank had outstanding commitments to extend credit of $62.8 million (including $53.4 million in unused lines of credit). Total commitments to originate fixed-rate loans with terms in excess of one year were $6.6 million at rates ranging from 4.75% to 7.25%. Management anticipates that current funding sources will be adequate to meet foreseeable liquidity needs.          For the year ended June 30, 2009, Southern Missouri increased deposits, securities sold under agreements to repurchase, and FHLB advances by $19.7 million, $1.9 million, and $14.7 million, respectively. During the prior year, Southern Missouri increased deposits, securities sold under agreements to repurchase, and FHLB advances by $22.2 million, $4.0 million, and $10.1 million, respectively. At June 30, 2009, the Bank had pledged $175.5 million of its residential and commercial real estate loan portfolios to the FHLB for available credit of approximately $131.3 million, of which $78.8 million had been advanced.  In addition, the Bank has the ability to pledge several of its other loan portfolios, including, for example, its home equity and commercial business loans, which could provide collateral for an additional $34.3 million in borrowings at June 30, 2009.  In total, FHLB borrowings are generally limited to 40% of Bank assets, or approximately $184.3 million, which means that an amount up to $105.5 million may still be eligible to be borrowed from the FHLB, subject to available collateral. Along with the ability to borrow from the FHLB, management believes its liquid resources will be sufficient to meet the Company’s liquidity needs. 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, 2009, the Bank had $112.8 million in CDs maturing within one year and $175.4 million in other deposits and securities sold under agreements to repurchase without a specified maturity, as compared to the prior year of $130.0 million in CDs maturing within one year and $163.7 million in other deposits and securities sold under agreements to repurchase without a specified maturity. Management believes that most maturing interest-bearing liabilities will be retained or replaced by new interest-bearing liabilities. Also at June 30, 2009, the Bank had $39.0 million in FHLB advances eligible for early redemption by the lender within one year.
June 30, 2009
	Net Portfolio			NPV as % of PV of Assets
	$ Amount	$ Change	% Change	NPV Ratio	Change
Change in Rates	(dollars in thousands)
+300 bp	$  42,388	$  (5,131)	(11)	9.51	-0.61
+200 bp	44,863	(2,656)	(6)	9.90	-0.22
+100 bp	46,998	(521)	(1)	10.19	0.07
0 bp	47,519	-	-	10.12	-
-100 bp	44,881	(2,638)	(6)	9.45	-0.67
-200 bp	42,397	(5,122)	(11)	8.88	-1.24
-300 bp	41,942	(5,577)	(12)	8.78	-1.41
June 30, 2008
	Net Portfolio			NPV as % of PV of Assets
	$ Amount	$ Change	% Change	NPV Ratio	Change
Change in Rates	(dollars in thousands)
+300 bp	$  20,957	$ (15,791)	(43)	5.33	-3.51
+200 bp	26,442	(10,306)	(28)	6.60	-2.24
+100 bp	31,816	(4,932)	(13)	7.79	-1.05
0 bp	36,748	-	-	8.84	-
-100 bp	39,471	2,723	7	9.36	0.52
-200 bp	42,133	5,385	15	9.85	1.01
-300 bp	43,892	7,144	19	10.15	1.31

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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, 2009, the Bank exceeded regulatory capital requirements with core and total risk-based capital of $40.4 million and $44.7 million, or 8.87% and 12.98% of adjusted total assets and risk-weighted assets, respectively. These capital levels exceeded minimum requirements of 4.0% and 8.0%, respectively, and well-capitalized requirements of 5% and 10%, respectively 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.

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 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.

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>   FINANCIAL REVIEW   (continued)   <

(dollars in thousands)
	2009								2008								2007
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)	$	254,355		$	16,781		6.60	%	$	232,500	$	16,541			7.11	%	$	211,203	$	14,726		6.97	%
Other loans (1)		102,963			6,050		5.88			92,614		6,745			7.28			86,352		6,966		8.07
Total net loans		357,318			22,831		6.39			325,114		23,286			7.16			297,555		21,692		7.29
Mortgage-backed securities		35,714			1,729		4.84			19,372		923			4.76			13,082		556		4.25
Investment securities (2)		20,487			706		3.45			22,552		1,059			4.69			28,234		1,256		4.45
Other interest-earning assets		5,133			35		0.68			4,567		59			1.29			3,780		46		1.22
TOTAL INTEREST- EARNING ASSETS (1)		418,652			25,301		6.04			371,605		25,327			6.82			342,651		23,550		6.87
Other noninterest-earning
assets (3)		23,045			-		-			22,429		-			-			21,563		-		-
TOTAL ASSETS	$	441,697			25,301		-		$	394,034	$	25,327			-		$	364,214	$	23,550		-
Interest-bearing liabilities:
Savings accounts	$	64,349		$	1,155		1.80		$	76,126	$	2,426			3.19	%	$	71,211	$	2,660		3.74	%
NOW accounts		49,325			1,015		2.06			32,461		427			1.31			30,742		402		1.31
Money market accounts		6,905			99		1.43			6,319		112			1.77			7,321		142		1.94
Certificates of deposit		151,316			4,896		3.24			140,955		6,287			4.46			125,149		5,849		4.67
TOTAL INTEREST- BEARING DEPOSITS		271,895			7,165		2.64			255,861		9,252			3.62			234,423		9,053		3.86
Borrowings:
Securities sold under
agreements to repurchase		24,345			229		0.94			20,567		682			3.31			11,863		575		4.84
FHLB advances		77,923			3,453		4.43			58,526		3,074			5.25			62,906		3,399		5.40
Junior subordinated debt		7,217			357		4.95			7,217		539			7.47			7,217		594		8.24
TOTAL INTEREST-
BEARING LIABILITIES		381,380			11,204		2.93			342,171		13,547			3.96			316,409		13,621		4.30
Noninterest-bearing
demand deposits		23,140			-		-			20,055		-			-			17,850		-		-
Other liabilities		546			-		-			1,848		-			-			2,041		-		-
TOTAL LIABILITIES		405,066			11,204					364,074		13,547			-			336,300		13,621		-
Stockholders’ equity		36,631			-		-			29,960		-			-			27,914		-		-
TOTAL LIABILITIES AND
STOCKHOLDERS’ EQUITY	$	441,697		$	11,204		-		$	394,034	$	13,547			-		$	364,214	$	13,621		-
Net interest income				$	14,097						$	11,780							$	9,929
Interest rate spread (4)							3.11	%							2.86	%						2.57	%
Net interest margin (5)							3.37	%							3.17	%						2.90	%
Ratio of average interest-earning
assets to average interest-
bearing liabilities		109.77	%									108.60	%									108.29	%

(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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>   FINANCIAL REVIEW   (continued)   <

YIELDS EARNED AND RATES PAID

The following table sets forth for the periods and at the dates indicated, the weighted average yields earned on the Company’s assets, the weighted average interest rates paid on the Company’s liabilities, together with the net yield on interest-earning assets.

	At		For
	June 30,		The Year Ended June 30,
	2009		2009		2008		2007
Weighted-average yield on loan portfolio		6.13%		6.39%		7.16%		7.29%
Weighted-average yield on mortgage-backed securities		4.63		4.84		4.76		4.25
Weighted-average yield on investment securities (1)		3.35		3.45		4.69		4.45
Weighted-average yield on other interest-earning assets		0.00		0.68		1.29		1.22
Weighted-average yield on all interest-earning assets		5.76		6.04		6.82		6.87
Weighted-average rate paid on deposits		2.34		2.64		3.62		3.86
Weighted-average rate paid on securities sold under
agreements to repurchase		0.69		0.94		3.31		4.84
Weighted-average rate paid on FHLB advances		4.31		4.43		5.25		5.40
Weighted-average rate paid on subordinated debt		3.36		4.95		7.47		8.24
Weighted-average rate paid on all interest-bearing liabilities		2.65		2.93		3.96		4.30
Interest rate spread (spread between weighted average rate on
all interest-earning assets and all interest-bearing liabilities)		3.11		3.11		2.86		2.57
Net interest margin (net interest income as a percentage of
average interest-earning assets)		3.36		3.37		3.17		2.90

(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, 2009 Compared to 2008 Increase (Decrease) Due to												Years Ended June 30, 2008 Compared to 2007 Increase (Decrease) Due to
(dollars in thousands)	Rate			Volume			Rate/ Volume			Net			Rate			Volume			Rate/ Volume			Net
Interest-earning assets:
Loans receivable (1)		(2,503	)		2,306			(258	)		(455	)		(387	)		2,009			(28	)		1,594
Mortgage-backed securities		15			778			13			806			67			267			33			367
Investment securities (2)		(280	)		(97	)		24			(353	)		68			(253	)		(12	)		(197	)
Other interest-earning deposits		(28	)		7			(3	)		(24	)		3			10			-			13
Total net change in income on
interest-earning assets		(2,796	)		2,994			(224	)		(26	)		(249	)		2,033			(7	)		1,777
Interest-bearing liabilities:
Deposits		(2,556	)		317			152			(2,087	)		(667	)		926			(60	)		199
Securities sold under
agreements to repurchase		(487	)		125			(91	)		(453	)		(182	)		421			(132	)		107
Subordinated debt		(182	)		-			-			(182	)		(56	)		-			1			(55	)
FHLB advances		(480	)		1,018			(159	)		379			(94	)		(237	)		6			(325	)
Total net change in expense on
interest-bearing liabilities		(3,705	)		1,460			(98	)		(2,343	)		(999	)		1,110			(185	)		(74	)
Net change in net interest income		909			1,534			(126	)		2,317			750			923			178			1,851

(1) Does not include interest on loans placed on nonaccrual status.

(2) Does not include dividends earned on equity securities.

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>   REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM   <

l 20 l

>   CONSOLIDATED BALANCE SHEETS   <

JUNE 30, 2009 AND 2008

Southern Missouri Bancorp, Inc.

Assets	2009		2008
Cash and cash equivalents	$	8,074,465	$	6,042,408
Interest-bearing time deposits		-		1,980,000
Available for sale securities (Note 2)		60,177,992		39,915,280
Stock in FHLB of Des Moines		4,592,300		3,323,700
Loans, net of allowance for loan losses of
$4,430,210 and $3,567,203 at
June 30, 2009 and 2008, respectively (Note 3)		368,555,962		343,069,775
Accrued interest receivable		2,650,161		3,011,777
Premises and equipment, net (Note 4)		8,135,092		8,204,631
Bank owned life insurance - cash surrender value		7,563,855		7,289,819
Intangible assets, net		1,582,645		1,837,903
Prepaid expenses and other assets		4,564,164		3,145,090
TOTAL ASSETS	$	465,896,636	$	417,820,383

Liabilities and Stockholders’ Equity
Deposits (Note 5)	$	311,955,468		$	292,257,045
Securities sold under agreements to repurchase (Note 6)		23,747,557			21,803,513
Advances from FHLB of Des Moines (Note 7)		78,750,000			64,050,000
Accounts payable and other liabilities		1,229,187			821,407
Accrued interest payable		989,086			1,199,769
Subordinated debt (Note 8)		7,217,000			7,217,000
TOTAL LIABILITIES		423,888,298			387,348,734
Commitments and contingencies (Note 14)		-			-
Preferred stock, $.01 par value; $1,000 liquidation value
500,000 shares authorized; 9,550 issued and outstanding		9,388,815			-
Common stock, $.01 par value; 4,000,000 shares
authorized; 2,957,226 shares issued		29,572			29,572
Warrants to acquire common stock		176,790			-
Additional paid-in capital		16,344,725			16,675,839
Retained earnings		29,947,297			27,364,219
Treasury stock of 869,250 shares in 2009
and 766,393 shares in 2008, at cost		(13,994,870	)		(13,002,803	)
Accumulated other comprehensive gain (loss) - AFS securities		106,930			(626,673	)
Accumulated other comprehensive income - FAS 158		9,079			31,495
TOTAL STOCKHOLDERS’ EQUITY		42,008,338			30,471,649
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	465,896,636		$	417,820,383

See accompanying notes to consolidated financial statements.

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>   CONSOLIDATED STATEMENTS OF INCOME   <

YEARS ENDED JUNE 30, 2009, 2008 AND 2007

Southern Missouri Bancorp, Inc.

Interest income:	2009			2008			2007
Loans	$	22,830,730		$	23,285,907		$	21,691,579
Investment securities		706,429			1,058,742			1,255,676
Mortgage-backed securities		1,728,958			923,039			556,235
Other interest-earning assets		35,010			58,992			46,144
TOTAL INTEREST INCOME		25,301,127			25,326,680			23,549,634
Interest expense:
Deposits		7,165,030			9,251,569			9,052,748
Securities sold under agreements
to repurchase		228,893			681,817			574,570
Advances from FHLB of Des Moines		3,452,840			3,074,378			3,398,868
Subordinated debt		357,387			539,017			594,357
TOTAL INTEREST EXPENSE		11,204,150			13,546,781			13,620,543
NET INTEREST INCOME		14,096,977			11,779,899			9,929,091
Provision for loan losses (Note 3)		1,220,000			940,000			605,000
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES		12,876,977			10,839,899			9,324,091
Noninterest income:
Net gains on sales of
available for sale securities		-			6,084			-
AFS securities losses due to
other-than-temporary impairment		(678,973	)		-			-
Customer service charges		1,223,449			1,257,525			1,140,474
Loan late charges		155,454			142,232			124,076
Increase in cash surrender value
of bank owned life insurance		274,036			291,254			263,210
Other		845,778			715,016			679,038
TOTAL NONINTEREST INCOME		1,819,744			2,412,111			2,206,798
Noninterest expense:
Compensation and benefits		4,800,224			4,428,909			4,006,971
Occupancy and equipment		1,528,850			1,525,999			1,432,659
Deposit insurance premium		535,971			30,393			31,022
Professional fees		311,461			223,136			246,271
Advertising		217,295			176,479			224,438
Postage and office supplies		317,844			275,585			298,440
Amortization of intangible assets		255,258			255,258			255,258
Other		1,183,241			947,968			962,959
TOTAL NONINTEREST EXPENSE		9,150,144			7,863,727			7,458,018
INCOME BEFORE INCOME TAXES		5,546,577			5,388,283			4,072,871
Income taxes (Note 10)
Current		2,004,500			2,278,803			1,307,458
Deferred		(293,000	)		(504,000	)		(163,000	)
		1,711,500			1,774,803			1,144,458
NET INCOME	$	3,835,077		$	3,613,480		$	2,928,413
Less: effective dividend on preferred shares		288,841			-			-
NET INCOME AVAILABLE TO COMMON STOCKHOLDERS	$	3,546,236		$	3,613,480		$	2,928,413
Basic earnings per share available to common stockholders	$	1.67		$	1.64		$	1.32
Diluted earnings per share available to common stockholders	$	1.67		$	1.63		$	1.29

See accompanying notes to consolidated financial statements.

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>   CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY   <

YEARS ENDED JUNE 30, 2009, 2008 AND 2007

Southern Missouri Bancorp, Inc.

	Preferred Stock		Common Stock		Warrants to Acquire Common Stock		Additional Paid-in Capital			Retained Earnings			Treasury Stock			Accumulated Other Comprehensive Income (Loss)			Total Stockholders’ Equity
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
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 on common
stock ($.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
Net income											3,613,480									3,613,480
Change in unrealized loss
on available for sale securities																	(277,871	)		(277,871	)
Defined benefit pension
plan net gain																	31,495			31,495
TOTAL COMPREHENSIVE INCOME																				3,367,104
Purchases of treasury stock														(1,364,279	)					(1,364,279	)
Dividends paid on common
stock ($.40 per share)											(884,115	)								(884,115	)
SOP Expense								48,481												48,481
MRP expense								19,777												19,777
Tax benefit of MRP								4,817												4,817
Exercise of stock options								(786,392	)					1,352,017						565,625
BALANCE AT JUNE 30, 2008	$	-	$	29,572	$	-	$	16,675,839		$	27,364,219		$	(13,002,803	)	$	(595,178	)	$	30,471,649
Net income										$	3,835,077								$	3,835,077
Change in unrealized gain
on available for sale securities																	733,603			733,603
Defined benefit pension
plan net loss																	(22,416	)		(22,416	)
TOTAL COMPREHENSIVE INCOME																				4,546,264
Preferred stock issued		9,373,210				176,790		(38,871	)											9,511,129
Purchases of treasury stock														(1,507,825	)					(1,507,825	)
Dividends paid on common
stock ($.48 per share)											(1,024,172	)								(1,024,172	)
Dividends paid on preferred stock											(212,222	)								(212,222	)
Accretion of discount on preferred stock		15,605									(15,605	)					-
SOP Expense								47,215												47,215
MRP expense								12,809												12,809
Tax benefit of MRP								2,422												2,422
Exercise of stock options								(354,689	)					515,758						161,069
BALANCE AT JUNE 30, 2009	$	9,388,815	$	29,572	$	176,790	$	16,344,725		$	29,947,297		$	(13,994,870	)	$	116,009		$	42,008,338

See accompanying notes to consolidated financial statements.

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>   CONSOLIDATED STATEMENTS OF CASH FLOWS   <

YEARS ENDED JUNE 30, 2009, 2008 AND 2007

Southern Missouri Bancorp, Inc.

Cash flows from operating activities:	2009			2008			2007
Net income	$	3,835,077		$	3,613,480		$	2,928,413
Items not requiring (providing) cash:
Depreciation		625,582			680,693			713,774
SOP and MRP expense		62,446			73,075			66,535
AFS securities losses due to other-than-temporary
impairment		678,973			-			-
Net realized gains on available
for sale securities		-			(6,084	)		-
Gain on sale of foreclosed assets		(21,369	)		(18,455	)		(1,035	)
Amortization of intangible assets		255,258			255,258			255,258
Increase in cash surrender value
of bank owned life insurance		(274,036	)		(291,254	)		(263,210	)
Provision for loan losses		1,220,000			940,000			605,000
Amortization of premiums and discounts
on securities		136,347			(52,965	)		(9,373	)
Deferred income taxes		(293,000	)		(504,000	)		(163,000	)
Changes in:
Accrued interest receivable		361,616			(763,713	)		(346,437	)
Prepaid expenses and other assets		95,720			49,053			(346,378	)
Accounts payable and other liabilities		385,364			110,086			160,803
Accrued interest payable		(210,683	)		(206,511	)		440,422
NET CASH PROVIDED BY OPERATING ACTIVITIES	$	6,857,295		$	3,878,663		$	4,040,772
Cash flows from investing activities:
Net change in interest-bearing deposits	$	1,980,000		$	(1,980,000	)	$	-
Net increase in loans		(27,425,708	)		(32,445,458	)		(31,877,876	)
Proceeds from sales of
available for sale securities		-			233,500			-
Proceeds from maturities of
available for sale securities		9,227,820			24,698,058			8,919,334
Purchases of available for
sale securities		(29,141,403	)		(30,345,266	)		(4,849,941	)
Investment in federal and state tax credits		(1,263,944	)		-			-
Purchase of Federal Home Loan Bank stock		(1,268,600	)		(253,100	)		(429,300	)
Purchase of premises and equipment		(556,043	)		(234,651	)		(347,815	)
Proceeds from sale of vehicle		-			-			1,867
Proceeds from sale of foreclosed and repossessed property		352,194			578,367			201,946
NET CASH USED IN INVESTING ACTIVITIES	$	(48,095,684	)	$	(39,748,550	)	$	(28,381,785	)

See accompanying notes to consolidated financial statements.

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>   CONSOLIDATED STATEMENTS OF CASH FLOWS   (continued)   <

YEARS ENDED JUNE 30, 2009, 2008 AND 2007

Southern Missouri Bancorp, Inc.

Cash flows from financing activities:	2009			2008			2007
Net increase in demand deposits and savings accounts	$	9,750,488		$	2,405,635		$	7,025,174
Net increase in certificates of deposit		9,947,935			19,763,314			4,993,903
Net increase in securities sold under
agreements to repurchase		1,944,044			4,045,149			6,462,753
Proceeds from Federal Home Loan Bank advances		212,675,000			353,550,000			388,475,000
Repayments of Federal Home Loan Bank advances		(197,975,000	)		(343,500,000	)		(380,475,000	)
Proceeds from issuance of preferred stock		9,511,129	)		-			-
Dividends paid on preferred stock		(212,222	)		-			-
Dividends paid on common stock		(1,024,172	)		(884,115	)		(805,439	)
Exercise of stock options		161,069			565,625			26,000
Purchases of treasury stock		(1,507,825	)		(1,364,279	)		(397,020	)
NET CASH PROVIDED BY FINANCING ACTIVITIES	$	43,270,446		$	34,581,329		$	25,305,371
Increase (Decrease) in cash and cash equivalents		2,032,057			(1,288,558	)		964,358
Cash and cash equivalents at beginning of year		6,042,408			7,330,966			6,366,608
CASH AND CASH EQUIVALENTS AT END OF YEAR	$	8,074,465		$	6,042,408		$	7,330,966
Supplemental disclosures of cash flow information:
Noncash investing and financing activities
Conversion of loans to foreclosed real estate	$	477,177		$	654,369		$	288,577
Conversion of foreclosed real estate to loans		13,172			235,000			52,611
Cash paid during the period for
Interest (net of interest credited)		4,981,065			5,050,895			5,223,263
Income taxes		1,886,405			1,965,393			1,472,391

See accompanying notes to consolidated financial statements.

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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 Bank (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 accounting principles generally accepted in the United States of America 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 $5,614,330 and $5,656,273 at June 30, 2009 and 2008, respectively. The deposits are held at the Federal Reserve and Federal Home Loan Bank of Des Moines.   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.   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.  

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Southern Missouri Bancorp, Inc.

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, 2009 and 2008 was $3,837,416 and $3,837,416, respectively, with accumulated amortization of $2,254,771 and $1,999,513, 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 Plan. 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 stockholders’ 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.   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 reserved at the initial public offering were fully distributed and the Bank began purchasing additional shares under the ESOP plan.   Earnings Per Share. Basic earnings per share available to common stockholders is computed using the weighted-average number of common shares outstanding. Diluted earnings per share available to common stockholders 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 2008 and 2007 consolidated financial statements have been reclassified to conform to the 2009 presentation. These reclassifications had no effect on net income.   The following paragraphs summarize the impact of new accounting pronouncements:   In September 2006, the Financial Accounting Standards Board (FASB) issued Statement No. 157, “Fair Value Measurements” (“SFAS No. 157”), which defines fair value, establishes a framework for measuring fair value in generally accepted accounting standards, and expands disclosures about fair value measurements. SFAS No. 157 was effective for the Company for the fiscal year which began July 1, 2008. In March 2008, the FASB issued Staff Position No. FAS 157-2 (“FSP No. 157-2”), which delays the effective date of SFAS No. 157 for non-financial assets and liabilities, except for items that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually), to fiscal years and interim periods beginning after November 15, 2008. The Company added the required footnote disclosures as a result of adopting this standard.   In December 2007, the FASB issued Statement No. 141 (revised 2007), “Business Combinations—A Replacement of FASB Statement No. 141” (“SFAS No. 141(R)”) and Statement No. 160, “Noncontrolling Interests in Consolidated Financial Statements—An Amendment of ARB No. 51” (“SFAS No. 160”). SFAS No. 141(R) establishes principles and requirements for how an acquirer recognizes and measures certain items in a business combination, as well as disclosures about the nature and financial effects of a business combination. SFAS No. 160 establishes accounting and reporting standards surrounding noncontrolling interest, or minority interests, which are the  

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Southern Missouri Bancorp, Inc.

portions of equity in a subsidiary not attributable, directly or indirectly, to a parent. The pronouncements will be effective for the Company beginning July 1, 2009. Presentation and disclosure requirements related to noncontrolling interests must be retrospectively applied. The Company will be impacted by the adoption of this standard with its July 2009 acquisition. The Company is in the process of determining the purchase accounting adjustments.   In March 2008, the FASB issued Statement No. 161, “Disclosures about Derivative Instruments and Hedging Activities—An Amendment of FASB Statement No. 133” (“SFAS No. 161”). SFAS No. 161 requires enhanced qualitative disclosures about objectives and strategies for using derivatives, quantitative disclosures about fair value amounts of and gains and losses on derivative instruments, and disclosures about credit-risk-related contingent features in derivative agreements. SFAS No. 161 was effective for the Company for the interim period which began January 1, 2009, and did not have a significant effect on the Company’s consolidated financial statements.   In October 2008, the FASB issued the FASB Staff Position on FAS 157-3, “Determining the Fair Value of a Financial Asset When the Market for That Asset is Not Active” (“FSP 157-3”).  FSP 157-3 clarifies the application of SFAS No. 157, “Fair Value Measurements,” in a market that is not active and provides an example to illustrate key considerations in determining fair value of financial assets when the market for that financial asset is not active.   FSP 157-3 applies to financial assets within the scope of accounting pronouncements that require or permit fair value measurements in accordance with FAS 157.  FSP 157-3 was effective upon issuance and included prior periods for which financial statements had not been issued.  The application of FSP 157-3 did not have a material impact on the Company’s consolidated financial statements.   In April 2009, the FASB issued the FASB Staff Position on FAS 157-4, “Determining Fair Value When the Volume and Level of Activity For the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly” (FSP 157-4).  FSP 157-4 provides additional guidance for estimating fair value in accordance with SFAS 157 when the volume and level of activity for the asset or liability have decreased significantly.  FSP 157-4 also provides guidance on identifying circumstances that indicate a transaction is not orderly.  The provisions of FSP 157-4 were effective for the Company’s year ended June 30, 2009.  Implementation of this standard had a minimal effect on the Company’s consolidated financial statements.   In April 2009, the FASB issued the FASB Staff Position on FAS 115-2 and FAS 124-2, “Recognition and Presentation of Other-Than-Temporary Impairments” (the FSP).  The FSP establishes a methodology of determining and recording other-than-temporary impairments of debt securities and expands disclosures about fair value measurements.  The provisions of the FSP were effective for the Company’s year ended June 30, 2009. The Company has included the disclosure provisions from this FSP in the footnotes.   On May 28, 2009, the FASB issued Statement No. 165, “Subsequent Events” (“SFAS No. 165”).  Under SFAS No. 165, companies are required to evaluate events and transactions that occur after the balance sheet date but before the date the financial statements are issued, or available to be issued in the case of non-public entities.  SFAS No. 165 requires entities to recognize in the financial statements the effect of all events or transactions that provide additional evidence of conditions that existed at the balance sheet date, including the estimates inherent in the financial preparation process.  Entities shall not recognize the impact of events or transactions that provide evidence about conditions that did not exist at the balance sheet date, but arose after that date.  SFAS No. 165 also requires entites to disclose the date through which subsequent events have been evaluated.  SFAS No. 165 was effective for interim and annual periods ending after June 15, 2009.  The Company adopted the provisions of SFAS No. 165 during the year ended June 30, 2009, and the adoption did not have a material impact on the Company’s financial statements.   On June 12, 2009, the FASB issued Statement No. 166, “Accounting for Transfers of Financial Assets” (“SFAS No. 166”).  SFAS No. 166 is a revision to SFAS No. 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities,” and will require more information about transfers of financial assets, including securitization transactions, and where companies will have continuing exposure to the risks related to transferred financial assets.  SFAS No. 166 also eliminates the concept of a “qualifying special-purpose entity,” changes the requirements for derecognizing financial assets, and requires additional disclosures.  SFAS No. 166 will be effective as of the beginning of the Company’s first annual reporting period that begins after November 15, 2009, for interim periods within that first annual reporting period and for interim and annual reporting periods thereafter.  Earlier application is prohibited.  The recognition and measurement provisions of SFAS No. 166 shall be applied to transfers that occur on or after the effective date.  The Company will adopt SFAS No. 166 on July 1, 2010, as required.  Management has not determined the impact the adoption may have on the Company’s consolidated financial statements.   On June 12, 2009, the FASB issued Statement No. 167, “Amendments to FASB Interpretation No. 46(R)” (“SFAS No. 167”).  SFAS No. 167 is a revision to FASB Interpretation No. 46(R), “Consolidation of Variable Interest Entities,” and changes how a company determines when an entity that is insufficiently capitalized or is not controlled through voting (or similar rights) should be consolidated.  The determination of whether a company is required to consolidate an entity is based on, among other things, an entity’s purpose and design, and a company’s ability to direct the activities of the entity that most significantly impact the entity’s economic performance.  SFAS No. 167 will be effective as of the Company’s first annual reporting period that begins after November 15, 2009, for interim periods within that first annual reporting period, and annual reporting periods thereafter.  Earlier application is prohibited.  The Company will adopt SFAS No. 167 on July 1, 2010, as required.  Management has not determined the impact the adoption may have on the Company’s consolidated financial statements.   On June 29, 2009, the FASB issued Statement No. 168, “Accounting Standards Codification TM and the Hierarchy of Generally Accepted Accounting Principles” (“SFAS No. 168”), a replacement of FASB Statement No. 162.  SFAS No. 168 establishes the FASB Accounting Standards Codification TM as the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in conformity with US GAAP.  SFAS No. 168 will be effective for financial statements issued for interim and annual periods ending after September 15, 2009, for most entities.  On the effective date, all non-SEC accounting and reporting standards will be superseded.  The Company will adopt SFAS No. 168 for the quarterly period ended September 30, 2009, as required, and the adoption is not expected to have a material impact on the Company’s consolidated financial statements.

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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, 2009
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
Investment securities:
U.S. government and Federal
agency obligations	$	3,216,975	$	61,733	$	-		$	3,278,708
Obligations of states and
political subdivisions		13,512,789		212,308		(102,402	)		13,622,695
FHLMC preferred stock		-		7,920		-			7,920
Other securities		4,264,409		-		(1,264,753	)		2,999,656
TOTAL INVESTMENT SECURITIES		20,994,173		281,961		(1,367,155	)		19,908,979
Mortgage-backed securities:
FHLMC certificates		10,163,401		236,649		(1,839	)		10,398,211
GNMA certificates		113,986		667		(153	)		114,500
FNMA certificates		9,811,522		307,453		(6,795	)		10,112,180
CMOs issued by government agencies		18,925,210		718,912		-			19,644,122
TOTAL MORTGAGE-BACKED SECURITIES		39,014,119		1,263,681		(8,787	)		40,269,013
TOTAL	$	60,008,292	$	1,545,642	$	(1,375,942	)	$	60,177,992

	June 30, 2008
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
Investment securities:
U.S. government and Federal
agency obligations	$	3,992,999	$	52,103	$	(25,660	)	$	4,019,442
Obligations of states and
political subdivisions		6,299,763		7,195		(276,075	)		6,030,883
FHLMC preferred stock		304,125		-		(8,925	)		295,200
Other securities		1,889,424		-		(325,979	)		1,563,445
TOTAL INVESTMENT SECURITIES		12,486,311		59,298		(636,639	)		11,908,970
Mortgage-backed securities:
FHLMC certificates		13,114,487		2,658		(291,529	)		12,825,616
GNMA certificates		127,583		108		(807	)		126,884
FNMA certificates		11,247,033		11,441		(165,909	)		11,092,565
CMOs issued by government agencies		3,934,614		49,547		(22,916	)		3,961,245
TOTAL MORTGAGE-BACKED SECURITIES		28,423,717		63,754		(481,161	)		28,006,310
TOTAL	$	40,910,028	$	123,052	$	(1,117,800	)	$	39,915,280

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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, 2009
Available for Sale	Amortized Cost		Estimated Fair Value
Within one year	$	3,010,178	$	3,010,333
After one but less than five years		1,148,429		1,209,380
After five but less than 10 years		2,768,546		2,791,532
After 10 years		14,067,020		12,897,734
Total investment securities		20,994,173		19,908,979
Mortgage-backed securities		39,014,119		40,269,013
TOTAL	$	60,008,292	$	60,177,992

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 $46,361,060 and $37,886,510 at June 30, 2009 and 2008, respectively.   No gains or losses resulted from sales of available-for-sale securities in 2009 or 2007. Gross gains of $6,084, and no gross losses resulted from sales of available-for-sale securities in 2008.   With the exception of U.S. government agencies and corporations, the Company did not hold any securities of a single issuer, payable from and secured by the same source of revenue or taxing authority, the book value of which exceeded 10% of stockholders’ equity at June 30, 2009. 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, 2009 was $5.6 million, which is approximately 9.3% of the Bank’s available for sale investment portfolio, as compared to $31.7 million or approximately 79.5% of the Bank’s available for sale investment portfolio at June 30, 2008. Except as discussed below, management believes the declines in fair value for these securities to be temporary.   The tables below 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, 2009 and 2008.

	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, 2009
U.S. government agencies	$	-	$	-	$	-	$	-	$	-	$	-
Mortgage-backed securities		276,201		1,992		291,621		6,795		567,822		8,787
Other securities		-		-		249,656		1,264,753		249,656		1,264,753
Obligations of state and political subdivisions		3,243,030		82,933		1,547,675		19,469		4,790,705		102,402
Total temporarily impaired securities	$	3,519,231	$	84,925	$	2,088,952	$	1,291,017	$	5,608,183	$	1,375,942
	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, 2008
U.S. government agencies	$	1,971,482	$	25,660	$	-	$	-	$	1,971,482	$	25,660
Mortgage-backed securities		21,382,034		449,610		1,407,530		31,551		22,789,564		481,161
Other securities		1,858,645		334,904		-		-		1,858,645		334,904
Obligations of state and political subdivisions		5,117,601		276,075		-		-		5,117,601		276,075
Total temporarily impaired securities	$	30,329,762	$	1,086,249	$	1,407,530	$	31,551	$	31,737,292	$	1,117,800

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Southern Missouri Bancorp, Inc.

Mortgage-backed securities. At June 30, 2009, there were three mortgage-backed securities issued by Federal Home Loan Mortgage Corporation and Federal National Mortgage Association with a fair value of $292,000 and unrealized losses of $7,000 in a continuous unrealized loss position for twelve months or more.  This position was due to intermediate rates increasing since the purchase of these securities, resulting in the market value of the securities being lower than book value. Because the decline in market value is attributable to changes in interest rates and not credit quality, and because the Company does not intend to sell these securities and it is not more-likely-than-not the Company will be required to sell these securities before recovery of their amortized cost basis, which may be maturity, the Company does not consider these investments to be other than temporarily impaired at June 30, 2009. Obligations of states and political subdivisions. At June 30, 2009, there were two obligations of states and political subdivisions issued by two municipalities with a fair value of $1.5 million and unrealized losses of $19,000 in a continuous unrealized loss position for twelve months or more.  This position was due to municipal rates increasing since the purchase of the securities, resulting in the market value being lower than book value. The contractual terms of these investments do not permit the issuer to settle the securities at a price less than the amortized cost basis of the investments.  Because the Company does not intend to sell these securities and it is not more-likely-than-not the Company will be required to sell these securities, before recovery of their amortized cost bases, which may be maturity, the Company does not consider these investments to be other than temporarily impaired at June 30, 2009. Other Securities. At June 30, 2009, there were four pooled trust preferred securities with a fair value of $250,000 and unrealized losses of $1.3 million in a continuous unrealized loss position for twelve months or more.  These unrealized losses were primarily due to the long-term nature of the pooled trust preferred securities, a lack of demand or inactive market for these securities, and concerns regarding the financial institutions that have issued the underlying trust preferred securities. The June 30, 2009 cash flow analysis for three of these securities showed it is probable the Company will receive all contracted principal and related interest projected, though interest payments have been deferred on one of the three securities and are projected to be deferred on a second security. Because the Company does not intend to sell these securities and it is not more-likely-than-not that the Company will be required to sell these securities prior to recovery of their amortized cost bases, which may be maturity, the Company does not consider these investments to be other than temporarily impaired at June 30, 2009. At December 31, 2008, analysis of the fourth pooled trust preferred security indicated other-than-temporary impairment (OTTI) and the Company performed further analysis to determine the portion of the loss that was related to credit conditions of the underlying issuers. The credit loss was calculated by comparing expected discounted cash flows based on performance indicators of the underlying assets in the security to the carrying value of the investment. The discounted cash flow was based on anticipated default and recovery rates, and resulting projected cash flows were discounted based on the yield anticipated at the time the security was purchased.  Based on this analysis, the Company recorded an impairment charge of $375,000 for the credit portion of the unrealized loss for this trust preferred security. This loss established a new, lower amortized cost basis of $125,000 for this security, and reduced non-interest income for the second quarter and the twelve months ended June 30, 2009. At June 30, 2009, cash flow analyses showed it is probable the Company will receive all of the remaining cost basis and related interest projected for the	security. Because the Company does not intend to sell this security and it is not more-likely-than-not the Company will be required to sell this security before recovery of its new, lower amortized cost basis, which may be maturity, the Company does not consider the remainder of the investment in this security to be other-than-temporarily impaired at June 30, 2009. During the first quarter of fiscal 2009, the Company’s investments in Freddie Mac Preferred Stock was deemed other than temporarily impaired, based on quoted market prices which reflected market participants’ expectations regarding the likelihood of recovery of their investment following the placement of the firm into receivership by the U.S. Treasury Department.  Accordingly, the Company recorded an impairment charge for the full amortized cost of the security, $304,000.  The loss established a new, lower amortized cost basis of $0 for this security, and reduced non-interest income for the first quarter of fiscal 2009. The Company does not believe any other individual unrealized loss as of June 30, 2009 represents OTTI. However, given the continued disruption in the financial markets, the Company may be required to recognize OTTI losses in future periods with respect to its available for sale investment securities portfolio. The amount and timing of any additional OTTI will depend on the decline in the underlying cash flows of the securities. 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 the period the other-than-temporary impairment is identified. Credit Losses Recognized on Investments. As described above, some of the Company’s investments in trust preferred securities have experienced fair value deterioration due to credit losses, but are not otherwise other-than-temporarily impaired. During 2009, the Company adopted FASB Staff Position 157-4, “Determining Fair Value when the Volume and Level of Activity For the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly.” The following table provides information about the trust preferred security for which only a credit loss was recognized in income and other losses are recorded in other comprehensive income (loss) for the years ended June 30, 2009 and 2008.
		Accumulated Credit Losses Year Ended June 30
		2009	2008
	Credit losses on debt securities held
	Beginning of period	$                -	$                -
	Additions related to OTTI losses           not previously recognized	375,000	-
	Reductions due to sales	-	-
	Reductions due to change in intent           or likelihood of sale	-	-
	Additions related to increases in           previously recognized OTTI           losses	-	-
	Reductions due to increases in           expected cash flows	-	-
	End of period	$     375,000	$                -

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>   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS   (continued)   <

Southern Missouri Bancorp, Inc.

NOTE 3:  Loans

Loans are summarized as follows:

	June 30
	2009			2008
Real estate loans:
Residential	$	155,490,317		$	149,340,248
Construction		23,531,528			13,945,027
Commercial		97,160,828			85,859,482
Consumer loans		23,141,738			21,524,166
Commercial		89,065,652			81,574,995
		388,390,063			352,243,918
Loans in process		(15,511,237	)		(5,667,898	)
Deferred loan fees, net		107,346			60,958
Allowance for loan losses		(4,430,210	)		(3,567,203	)
TOTAL	$	368,555,962		$	343,069,775

Adjustable rate loans included in the loan portfolio amounted to $154,037,379 and $118,302,376 at June 30, 2009 and 2008, respectively.   One- to four-family residential real estate loans amounted to $141,340,882 and $136,732,435 at June 30, 2009 and 2008, respectively.   Following is a summary of activity in the allowance for loan losses: 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.

	June 30
	2009			2008			2007
Balance, beginning of period	$	3,567,203		$	2,537,659		$	2,058,144
Loans charged-off		(382,542	)		(93,755	)		(162,719	)
Recoveries of loans previously charged-off		25,549			183,299			37,234
Net recoveries (charge-offs)		(356,993	)		89,544			(125,485	)
Provision charged to expense		1,220,000			940,000			605,000
Balance, end of period	$	4,430,210		$	3,567,203		$	2,537,659

Total loans past due 90 days or more and still accruing interest amounted to $137,000 and $6,000 at June 30, 2009 and 2008, respectively. The Company had ceased recognition of interest income on loans with a book value of $659,000 and $0 at June 30, 2009 and 2008, respectively. The average balance of nonaccrual loans for the years ended June 30, 2009, 2008, and 2007 was $66,000, $28,000, and $47,000, respectively.  The allowance for losses allocated to nonaccrual loans at June 30, 2009 and 2008 was approximately $67,000 and $0, respectively.  Interest income recognized on these loans for the year ended June 30, 2009, was $25,000, while interest income recognized on these loans for the years ended June 30, 2008 and 2007 was immaterial.  Gross interest income was $52,000 for the year ended June 30, 2009, and would have been immaterial for the years ended June 30, 2008 and 2007 if 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, 2009 and 2008, none were considered to be impaired. There were no impaired loans during the years ended June 30, 2009 and 2008.	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, 2008	$8,460,333
	Additions	1,196,839
	Repayments	(1,193,458)
	Balance, June 30, 2009	$8,463,714
	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
	2009		2008
Land	$	3,487,898	$	3,448,083
Buildings and improvements		6,202,134		6,016,459
Furniture, fixtures and equipment		4,918,784		4,598,236
Automobiles		41,775		32,376
		14,650,591		14,095,154
Less accumulated depreciation		6,515,499		5,890,523
TOTAL	$	8,135,092	$	8,204,631

NOTE 5:  Deposits

Deposits are summarized as follows:

	June 30
	2009	2008
Noninterest-bearing accounts	$    21,303,646	$    19,220,977
NOW accounts	65,114,474	37,150,005
Money market deposit accounts	6,632,987	12,104,527
Savings accounts	58,598,085	73,423,195
TOTAL TRANSACTION ACCOUNTS	$  151,649,192	$  141,898,704
Certificates:
1.00 - 1.99%	$    45,305,667	$      7,134,672
2.00 - 2.99%	51,985,401	33,105,497
3.00 - 3.99%	47,719,837	50,555,205
4.00 - 4.99%	13,898,373	48,413,758
5.00 - 5.99%	1,396,998	11,149,209
TOTAL CERTIFICATES	160,306,276	150,358,341
TOTAL DEPOSITS	$   311,955,468	$  292,257,045

The aggregate amount of certificates of deposit with a minimum denomination of $100,000 was $62,698,514 and $58,181,336 at June 30, 2009 and 2008, respectively.

Certificate maturities at June 30, 2009 are summarized as follows:

July 1, 2009 to June 30, 2010	$	112,810,093
July 1, 2010 to June 30, 2011		33,152,417
July 1, 2011 to June 30, 2012		4,477,766
July 1, 2012 to June 30, 2013		4,465,794
July 1, 2013 to June 30, 2014		5,394,425
Thereafter		5,781
TOTAL	$	160,306,276

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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, 2009 and 2008, was $24,832,415 and $24,854,028, respectively. The securities sold under agreements to repurchase are under the Company’s control.

	June 30
	2009			2008
Year-end balance	$	23,747,557		$	21,803,513
Average balance during the year		24,344,511			20,567,605
Maximum month-end balance during the year		27,819,186			24,659,429
Average interest during the year		0.94	%		3.31	%
Year-end interest rate		0.67	%		1.67	%

NOTE 7:  Advances from Federal Home Loan Bank

Advances from Federal Home Loan Bank are summarized as follows:

			June 30
Maturity	Call Date or Quarterly Thereafter	Interest Rate	2009	2008
Overnight borrowings and short-term
repurchase agreements	-	0.96%	$    6,250,000	-
Overnight borrowings and short-term
repurchase agreements	-	2.81%	-	$    5,550,000
10-26-09	09-01-03	5.58%	10,000,000	10,000,000
01-08-10	-	1.43%	5,000,000	-
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
10-30-12	-	4.87%	3,000,000	3,000,000
04-01-13	-	3.65%	3,000,000	3,000,000
01-30-15	-	3.75%	3,000,000	3,000,000
11-29-16	11-29-07	3.93%	5,000,000	5,000,000
11-29-16	11-29-11	4.42%	5,000,000	5,000,000
11-20-17	11-22-10	3.87%	3,000,000	3,000,000
11-29-17	11-29-12	4.07%	2,500,000	2,500,000
08-14-18	08-15-11	3.53%	4,000,000	-
08-14-18	08-14-13	4.04%	5,000,000	-
		TOTAL	$  78,750,000	$  64,050,000
Weighted-average rate			4.31%	4.91%

In addition to the above advances, the Bank had an available line of credit amounting to $52,514,528 and $37,380,792, with FHLB at June 30, 2009 and 2008, respectively. Advances from FHLB of Des Moines were secured by FHLB stock, commercial real estate loans, and one- to four-family mortgage loans of $105,288,000 and $76,860,000 at June 30, 2009 and 2008, respectively. The principal maturities of FHLB advances at June 30, 2009, are at right:	FHLB Advance Maturities
	July 1, 2009 to June 30, 2010		$26,250,000
	July 1, 2010 to June 30, 2011		19,000,000
	July 1, 2011 to June 30, 2012		-
	July 1, 2012 to June 30, 2013		6,000,000
	July 1, 2013 to June 30, 2014		-
	July 1, 2014 and thereafter		27,500,000
		total	$78,750,000

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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, 2009, the current rate was 3.36%. 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 2009, 2008, and 2007, 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 2009, 2008, and 2007 was $210,000, $200,000, and $190,000, respectively. The number of ESOP shares at June 30, 2009 and 2008 were as follows:			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 2009, 2008, and 2007, was $12,809, $19,777, and $13,147, 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 75,500 options to employees and directors. As of June 30, 2009, there was $15,000 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, 2009, was $32,000. The aggregate intrinsic value of stock options exercisable at June 30, 2009, was $32,000. The intrinsic value of options exercised in fiscal 2009 was $110,400. The intrinsic value of options vested in fiscal 2009 was $0.
	2009	2008
Allocated shares	194,919	173,719
Unreleased shares	-	-
TOTAL ESOP SHARES	194,919	173,719
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; and during 2008, an additional 2,500 shares were awarded. The shares granted are in the form of restricted stock payable at the rate of 20% of such shares per year. During 2009, 1,300 MRP shares vested, which had been awarded in 2004, 2007, and 2008. 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.

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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
	2009					2008					2007
	Weighted Average Price		Number			Weighted Average Price		Number			Weighted Average Price		Number
Outstanding at beginning of year	$	12.43		104,500		$	10.73		176,500		$	10.64		180,500
Granted		12.15		5,000			-		-			-		-
Exercised		6.71		(24,000	)		8.08		(70,000	)		6.50		(4,000	)
Forfeited		-		-			15.23		(2,000	)		-
Outstanding at year-end	$	14.01		85,500		$	12.43		104,500		$	10.73		176,500
Options exercisable at year-end	$	14.08		75,500		$	11.88		86,800		$	9.75		144,100

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 2009, 2008, and 2007 (no options were granted

in fiscal 2008 or 2007):

	2009			2008		2007
Assumptions:
Expected dividend yield		3.95	%		-		-
Expected volatility		17.85	%		-		-
Risk-free interest rate		3.68	%		-		-
Weighted-average expected life		10.0			-		-
Weighted-average fair value of
options granted during the year	$	1.73			-		-

The following table summarizes information about stock options under

the plan outstanding at June 30, 2009:

				Options Outstanding			Options Exercisable
Exercise Price		Number Outstanding		Weighted Average Remaining Contractual Life	Weighted Average Exercise Price		Number Exercisable		Weighted Average Exercise Price
$	6.7500		10,000	17.3 mo.	$	6.7500		10,000	$	6.7500
	15.2300		50,500	70.6 mo.		15.2300		50,500		15.2300
	15.3000		15,000	75.7 mo.		15.3000		12,000		15.3000
	14.2600		5,000	86.5 mo.		14.2600		3,000		14.2600
	12.1500		5,000	112.7 mo.		12.1500		-		-

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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:

		2009		2008
Deferred tax assets:
Provision for losses on loans		$	1,671,156	$	1,373,373
Unrealized loss on available for sale securities			-		368,075
Accrued compensation and benefits			125,617		121,319
Other-than-temporary impairment on available
for sale securities			261,405		-
Other			-		64,503
Total deferred tax assets			2,058,178		1,927,270
Deferred tax liabilities:
FHLB stock dividends			188,612		188,612
Purchase accounting adjustments			55,664		71,062
Depreciation			271,362		211,550
Prepaid expenses			125,361		-
Unrealized gain on available for sale securities			62,770		-
Other			36,209		-
Total deferred tax liabilities			739,978		471,224
	NET DEFERRED TAX ASSET	$	1,318,200	$	1,456,046

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
		2009			2008			2007
Tax at statutory rate		$	1,806,276		$	1,832,016		$	1,384,776
Increase (reduction) in taxes
resulting from:
Nontaxable municipal income			(217,004	)		(56,886	)		(31,983	)
State tax, net of Federal benefit			181,500			74,951			52,006
Cash surrender value of bank
owned life insurance			(93,172	)		(99,026	)		(89,491	)
Other, net			33,900			23,748			(170,850	)
	ACTUAL PROVISION	$	1,711,500		$	1,774,803		$	1,144,458

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>   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS   (continued)   <

Southern Missouri Bancorp, Inc.

NOTE 11:  Other Comprehensive (Loss) Income

Other comprehensive (loss) income components are as follows:

	Year Ended June 30
	2009			2008			2007
Unrealized gains (losses) on
arising during period	$	1,206,610		$	(434,981	)	$	542,101
Unrealized losses on available-
impairment has been recognized
in income		(42,162	)					-
net income		-			(6,084	)		-
on securities	$	1,164,448			(441,065	)		542,101
net (loss) gain		(22,416	)		31,495			-
Income tax (expense) benefit		(430,845	)		163,194			(200,578	)
Other comprehensive income (loss)	$	711,187		$	(246,376	)	$	341,523

The components of accumulated other comprehensive income (loss), included in stockholders’ equity, are as follows:

	June 30
	2009			2008
Net unrealized gain (loss) on securities available-for-sale	$	289,717		$	(994,748	)
Net unrealized gain (loss) on securities available-for-sale          securities for which a portion of an other-than-temporary          impairment has been recognized in income		(120,017	)		-
Unrealized gain (loss) from defined benefit pension plan		9,079			31,495
	$	178,779			(963,253	)
Tax effect		(62,770	)		368,075
Net of tax amount	$	116,009		$	(595,178	)

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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, 2009, that the Bank meets all capital adequacy requirements to which it is subject.   As of June 30, 2009, 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, 2009	Amount		Ratio			Amount		Ratio	Amount		Ratio
Total Capital (to Risk-Weighted Assets)	$	44,699		12.98	%	$	27,557	>8.00%	$	34,446	>10.00%
Tier I Capital (to Risk-Weighted Assets)		40,388		11.72	%		13,779	>4.00%		20,668	>6.00%
Tier I Capital (to Average Assets)		40,388		8.87	%		18,215	>4.00%		22,769	>5.00%
As of June 30, 2008
Total Capital (to Risk-Weighted Assets)	$	36,302		11.79	%	$	24,631	>8.00%	$	30,789	>10.00%
Tier I Capital (to Risk-Weighted Assets)		32,735		10.63	%		12,315	>4.00%		18,473	>6.00%
Tier I Capital (to Average Assets)		32,735		8.08	%		16,214	>4.00%		20,267	>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:  Capital Purchase Program Implemented by the U.S. Treasury   In December 2008, the Company received $9.6 million from the U.S. Treasury through the sale of 9,550 shares of the Company’s Fixed Rate Cumulative Perpetual Preferred Stock, Series A, as part of the Treasury’s Capital Purchase Program.  The Company also issued to the U.S. Treasury a warrant to purchase 114,326 shares of common stock at $12.53 per share.  The amount of preferred shares sold represented approximately 3% of the Company’s risk-weighted assets as of September 30, 2008.   The transaction was part of the Treasury’s program to infuse capital into the nation’s healthiest and strongest banks for the purpose of stabilizing the US financial system and promoting economic activity.  The Company elected to participate in the program given the uncertain economic outlook, the relatively attractive cost of capital compared to the current market, and the strategic opportunities the Company foresees regarding potential uses of the capital.  The additional capital increased the Company’s already well-capitalized position.  The Company used the proceeds of the issue for working capital and investment in its banking subsidiary.             The preferred shares pay a cumulative dividend of 5% per year for the first five years and 9% per year thereafter.  The preferred shares are callable after three years at 100% of the issue price, subject to the approval of the Company’s federal regulator.  Earlier redemptions of the preferred shares also require that the Company complete an offering of at least $2,387,500.

NOTE 14:  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 Company.   Standby letters of credit are irrevocable conditional commitments issued by the Company 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 Company had total outstanding standby letters of credit amounting to $1.1 million at June 30, 2009 and 2008, with terms ranging from 12 to 24 months. At June 30, 2009, the Company’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 balance sheets. 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 $64.2 million in commitments to extend credit at June 30, 2009 and $50.4 million at June 30, 2008.   At June 30, 2009, total commitments to originate fixed-rate loans with terms in excess of one year were $6.6 million at rates ranging from 4.75% to 7.25%. 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 balance sheet. 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 $155,490,000 at June 30, 2009, 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 15:  Earnings Per Share

The following table sets forth the computations of basic and diluted

earnings per common share:

	Year Ended June 30
	2009		2008		2007
Net income	$	3,835,077	$	3,613,480	$	2,928,413
Less: Effective dividend on preferred shares		288,841		-		-
Net income available to common stockholders	$	3,546,236	$	3,613,480	$	2,928,413
Denominator for basic earnings per share -
Weighted-average shares outstanding		2,123,144		2,199,928		2,225,658
Effect of dilutive securities stock options		1,225		12,204		38,578
Denominator for diluted earnings per share		2,124,369		2,212,132		2,264,236
Basic earnings per share available to common stockholders	$	1.67	$	1.64	$	1.32
Diluted earnings per share available to common stockholders	$	1.67	$	1.63	$	1.29

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>   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS   (continued)   <

Southern Missouri Bancorp, Inc.

NOTE 16:  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.   Effective July 1, 2008, the Company adopted Statement of Financial Accounting Standards No. 157, Fair Value Measurements (“SFAS No. 157”).  SFAS No. 157 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements.  SFAS No. 157 has been applied prospectively as of the beginning of the year.   SFAS No. 157 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.  SFAS No. 157 also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.  The standard describes three levels of inputs that may be used to measure fair value: Level 1.   Quoted prices in active markets for identical assets or liabilities   Level 2.   Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in active markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities   Level 3.   Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities   Following is a description of the valuation methodologies used for instruments measured at fair value on a recurring basis and recognized in the accompanying balance sheet, as well as the general classification of such instruments pursuant to the valuation hierarchy.   Available-for-sale Securities.  Available-for-sale securities are recorded at fair value on a recurring basis. Available-for-sale securities is the only balance sheet category our Company is required, in accordance with accounting principles generally accepted in the United States of America (US GAAP), to carry at fair value on a recurring basis. Securities classified as available for sale are reported at fair value utilizing Level 2 inputs. For these securities, our Company obtains fair value measurements from an independent pricing service. The fair value measurements consider observable data that may include dealer quotes, market spreads, cash flows, the U.S. Treasury yield curve, live trading levels, trade execution data, market consensus prepayment speeds, credit information and the bond’s terms and conditions, among other things.

	Fair Value Measurements at June 30, 2009, Using:
	Fair Value at June 30, 2009		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Available-for-sale securities	$	60,177,992	$	-	$	60,177,992	$	-

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>   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS   (continued)   <

Southern Missouri Bancorp, Inc.

          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.

	2009				2008
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
	(in thousands)				(in thousands)
Financial Assets
Cash and cash equivalents	$	8,074	$	8,074	$	6,042	$	6,042
Interest-bearing time deposits		-		-		1,980		1,980
Investment and mortgage-
backed securities
available for sale		60,178		60,178		39,915		39,915
Stock in FHLB		4,592		4,592		3,324		3,324
Loans receivable, net		368,556		374,328		343,070		344,330
Accrued interest receivable		2,650		2,650		3,012		3,012
Bank owned life insurance		7,564		7,564		7,290		7,290
Financial Liabilities
Deposits		311,955		313,059		292,257		289,214
Securities sold under
agreements to repurchase		23,748		23,748		21,804		21,804
Advances from FHLB		78,750		82,510		64,050		65,968
Accrued interest payable		989		989		1,200		1,200
Subordinated Debt		7,217		7,217		7,217		7,217
Unrecognized financial instruments
(net of contract amount)
Commitments to originate loans		-		-		-		-
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 and interest-bearing time deposits 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.   The fair value of commitments to originate loans is estimated using the fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the present creditworthiness of the counterparties.  For fixed-rate loan commitments, fair value also considers the difference between current levels of interest rates and committed rates.  The fair value of letters of credit and lines of credit are based on fees currently charged for similar agreements or on the estimated cost to terminate or otherwise settle the obligations with the counterparties at the reporting date.

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>   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS   (continued)   <

Southern Missouri Bancorp, Inc.

NOTE 17:  Significant Estimates   Accounting principles generally accepted in the United States of America require disclosure of certain significant estimates and current vulnerabilities due to certain concentrations. Estimates related to the allowance for loan losses are described in Note 1.   Current Economic Conditions.  The current economic environment presents financial institutions with unprecedented circumstances and challenges which in some cases have resulted in large declines in the fair values of investments and other assets, constraints on liquidity and significant credit quality problems, including severe volatility in the valuation of real estate and other collateral supporting loans. The financial statements have been prepared using values and information currently available to the Company.  Given the volatility of current economic conditions, the values of assets and liabilities recorded in the financial statements could change rapidly, resulting in material future adjustments in asset values, the allowance for loan losses, and capital that could negatively impact the Company’s ability to meet regulatory capital requirements and maintain sufficient liquidity.

NOTE 18:  Subsequent Events             On July 17, 2009, the Company acquired 100% of the outstanding stock of Southern Bank of Commerce (SBOC), headquartered in Paragould, Arkansas.  SBOC was merged into the Company’s existing banking subsidiary, Southern Bank, on July 20, 2009. The Company acquired SBOC primarily for the purpose of obtaining entry to markets where it believes the Company’s business model will perform well.  The Company paid $600,000 in cash to acquire the target, of which $200,000 is held in escrow pending settlement of certain tax matters.  An amount in excess of the amounts above may be paid based on the realization of additional tax benefits pursuant to recent changes in the tax code regarding net operating loss carryback.  At acquisition, SBOC held assets of $29.9 million, including loans of $16.2 million, and held total deposits of $29.1 million.  The initial accounting for the business combination was incomplete as of the date these financial statements were issued, due to work required to identify the fair value of the target’s assets and liabilities. The Company will determine any goodwill or bargain purchase gain when the fair values of the purchased assets and liabilities are determined. The Company expects fair value adjustments to loans, investments, deposits, and fixed assets. A core deposit intangible is also expected to be recognized from the acquisition. The Company will recognize all acquisition-related costs as an expense. The Company’s acquisition-related costs were $109,000 through June 30, 2009, and are reflected in professional fees.             Subsequent events have been evaluated through August 25, 2009, which is the date the financial statements were issued.

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>   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS   (continued)   <

Southern Missouri Bancorp, Inc.

NOTE 19:  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		2009		2008
Assets
Cash and cash equivalents		$	1,606,209	$	1,378,574
Premise and equipment			2,109,667		2,109,667
Other assets			3,493,480		251,752
Investment in common stock of Bank			42,086,832		33,987,344
	TOTAL ASSETS	$	49,296,188	$	37,727,337
Liabilities and Stockholders’ Equity
Accrued expenses and other liabilities		$	70,850	$	38,688
Subordinated debt			7,217,000		7,217,000
	TOTAL LIABILITIES		7,287,850		7,255,688
Stockholders’ equity			42,008,338		30,471,649
	TOTAL LIABILITIES AND
	STOCKHOLDERS’ EQUITY	$	49,296,188	$	37,727,337

		Year Ended June 30
Condensed Statements of Income		2009			2008			2007
Interest income		$	37,908		$	23,843		$	61,165
Interest expense			357,387			539,017			594,357
Net interest income (expense)			(319,479	)		(515,174	)		(533,192	)
Dividends from Bank			2,000,000			1,600,000			1,200,000
Operating expenses			464,801			316,897			294,479
Income before income taxes and
equity in undistributed income
of the Bank			1,215,720			767,929			372,329
Income tax benefit			293,500			311,000			309,000
Income before equity in undistributed
income of the Bank			1,509,220			1,078,929			681,329
Equity in undistributed income
of the Bank			2,325,857			2,534,551			2,247,084
	NET INCOME	$	3,835,077		$	3,613,480		$	2,928,413

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>   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS   (continued)   <

Southern Missouri Bancorp, Inc.

	Year Ended June 30
Condensed Statements of Cash Flow	2009				2008				2007
Cash flows from operating activities:
Net income	$	3,835,077			$	3,613,480			$	2,928,413
Changes in:
Equity in undistributed income
of the Bank		(2,325,857	)			(2,534,551	)			(2,247,084	)
Other adjustments, net		(459,564	)			(18,919	)			32,480
NET CASH PROVIDED BY OPERATING ACTIVITIES		1,049,656				1,060,010				713,809
Cash flows from investing activities:
Purchase of available for sale securities		(2,750,000	)	-						(1,330,000	)
Investment in real estate		-				(30,009	)	-
Proceeds from sales and maturities of
available for sale securities		-				161,025				2,618,975
Investment in Bank subsidiary		(5,000,000	)	-						-
NET CASH PROVIDED BY OR (USED IN) INVESTING ACTIVITIES		(7,750,000	)			131,016				1,288,975
Cash flows from financing activities:
Proceeds from issuance
of preferred stock		9,511,129				-				-
Dividends on preferred stock		(212,222	)			-		-
Dividends on common stock		(1,024,172	)			(884,115	)			(805,439	)
Exercise of stock options		161,069				565,625				26,000
Payments to acquire treasury stock		(1,507,825	)			(1,364,279	)			(397,020	)
NET CASH PROVIDED BY OR (USED IN) FINANCING ACTIVITIES		6,927,979				(1,682,769	)			(1,176,459	)
Net increase (decrease) in cash and    cash equivalents		227,635				(491,743	)			826,325
Cash and cash equivalents at beginning    of year		1,378,574				1,870,317				1,043,992
CASH AND CASH EQUIVALENTS AT END OF YEAR	$	1,606,209			$	1,378,574			$	1,870,317

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>   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS   (continued)   <

Southern Missouri Bancorp, Inc.

NOTE 20:  Quarterly Financial Data (Unaudited)

          Quarterly operating data is summarized as follows (in thousands):

	June 30, 2009
	First Quarter		Second Quarter		Third Quarter		Fourth Quarter
Interest income	$	6,342	$	6,304	$	6,290	$	6,365
Interest expense		2,889		2,846		2,714		2,755
Net interest income		3,453		3,458		3,576		3,610
Provision for loan losses		400		200		410		210
Noninterest income		336		240		582		662
Noninterest expense		2,037		2,206		2,341		2,566
Income before income taxes		1,352		1,292		1,407		1,496
Income tax expense		425		404		423		460
NET INCOME	$	927	$	888	$	984	$	1,036
	June 30, 2008
	First Quarter		Second Quarter		Third Quarter		Fourth Quarter
Interest income	$	6,333	$	6,377	$	6,386	$	6,231
Interest expense		3,701		3,606		3,310		2,930
Net interest income		2,632		2,771		3,076		3,301
Provision for loan losses		110		90		350		390
Noninterest income		590		602		601		621
Noninterest expense		1,899		1,978		1,987		2,003
Income before income taxes		1,213		1,305		1,340		1,529
Income tax expense		400		432		442		500
NET INCOME	$	813	$	873	$	898	$	1,029
	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

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>   CORPORATE INFORMATION   <

CORPORATE HEADQUARTERS 531 Vine Street Poplar Bluff, Missouri 63901 COMPANY WEBSITE www.bankwithsouthern.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 19, 2009, 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 Southern Bank’s website at www.bankwithsouthern.com, under the Investor Relations tab.

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>   DIRECTORS and OFFICERS   <

Standing: Sammy Schalk, Dennis Robison, Rebecca Brooks, Charles Moffitt, Charles Love, Ronnie Black   Seated: Douglas Bagby, Samuel Smith, Greg Steffens

SOUTHERN MISSOURI BANCORP, INC.

Directors 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 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	Dennis C. Robison President, Robison Farms, Inc. Leonard W. Ehlers Director Emeritus, Retired Court Reporter, 36th Judicial Circuit James W. Tatum Director Emeritus, Retired Certified Public Accountant
	SOUTHERN BANK
Directors L. Douglas Bagby Vice-Chairman of the Board, City Manager, Poplar Bluff General Manager, Municipal Utilities of Poplar Bluff Sammy A. Schalk President, Gamblin Lumber Company Samuel H. Smith Chairman of the Board, Engineer and Majority Owner, S.H. Smith and Company, Inc. Ronnie D. Black Executive Director, General Association of General Baptists	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 Dennis C. Robison President, Robison Farms, Inc.	Senior Officers 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

l 49 l

SOUTHERN MISSOURI BANCORP, INC.

is a single-bank holding company that has outperformed

peers in this troubled economic environment.

We are weathering the storm.

Southern Missouri Bancorp, Inc.531Vine StreetPoplar Bluff, Missouri63901   (573) 778-1800www.bankwithsouthern.com

EX-21

EX-23

EXHIBIT 23

Consent of Independent Registered Public Accounting Firm

We consent to the incorporation by reference in the registration statement on Form S-3 (File No. 333-156563), and 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 Southern Missouri Bancorp, Inc. of our report dated August 25, 2009 with respect to the consolidated financial statements of Southern Missouri Bancorp, Inc., which report appears in this Annual Report on Form 10-K of Southern Missouri Bancorp, Inc. for the year ended June 30, 2009.

/s/ BKD, LLP

St. Louis, Missouri

September 25, 2009

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 25, 2009 By:     /s/ Greg A. Steffens                                                             Greg 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, 2009 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 25, 2009 By: /s/ Greg A. Steffens                                                              Greg A. Steffens President (Principal Executive and Principal Financial and  Accounting Officer)

EX-99.1

EXHIBIT 99.1

SOUTHERN MISSOURI BANCORP, INC.

CERTIFICATION

OF THE PRINCIPAL EXECUTIVE AND FINANCIAL OFFICER

I, Greg A. Steffens, President, Chief Executive Officer and Chief Financial Officer certify, based on my knowledge, that:

(i)            The compensation committee of Southern Missouri Bancorp, Inc. has discussed, reviewed, and evaluated with senior risk officers during the period beginning on December 3, 2008 (the date on which the TARP Agreement was executed) and ending with the last day of Southern Missouri Bancorp, Inc.'s fiscal year ended June 30, 2009, senior executive officer (SEO)compensation plans and employee compensation plans and the risks these plans pose to Southern Missouri Bancorp, Inc.;

(ii)           The compensation committee of Southern Missouri Bancorp, Inc. has identified and limited during the period beginning December 3, 2008 and ending on June 30, 2009, the features in the SEO compensation plans that could lead SEOs to take unnecessary and excessive risks that could threaten the value of Southern Missouri Bancorp, Inc. and identified any features in the employee compensation plans that pose risks to Southern Missouri Bancorp, Inc. and limited those features to ensure that Southern Missouri Bancorp, Inc. is not unnecessarily exposed to risks;

(iii)          The compensation committee has reviewed during the period beginning on December 3, 2008 and ending on June 30, 2009, the terms of each employee compensation plan and identified the features in the plan that could encourage the manipulation of reported earnings of Southern Missouri Bancorp, Inc. to enhance the compensation of an employee and has limited those features;

(iv)          The compensation committee of Southern Missouri Bancorp, Inc. will certify within 120 days of June 30, 2009 to the reviews of the SEO compensation plans and employee compensation plans required under (i)and (iii)above;

(v)           The compensation committee of Southern Missouri Bancorp, Inc. will provide a narrative description of how it limited during any part of the most recently completed fiscal year that included a TARP period the features in:

 (A)          SEO compensation plans that could lead SEOs to take unnecessary and excessive risks that could threaten the value of Southern Missouri Bancorp, Inc.;

(B)           Employee compensation plans that unnecessarily expose Southern Missouri Bancorp, Inc. to risks; and

 (C)           Employee compensation plans that could encourage the manipulation of reported earnings of Southern Missouri Bancorp, Inc. to enhance the compensation of an employee;

(vi)          Southern Missouri Bancorp, Inc. has required that bonus payments, if any, as defined in the regulations and guidance established under section 111 of EESA (bonus payments), of the SEOs and twenty next most highly compensated employees be subject to a recovery or "clawback" provision during its most recently completed fiscal year if the bonus payments were based on materially inaccurate financial statements or any other materially inaccurate performance metric criteria;

(vii)         Southern Missouri Bancorp, Inc. has prohibited any golden parachute payment, as defined in the regulations and guidance established under section 111 of EESA, to an SEO or any of the next five most highly compensated employees during the period beginning on December 3, 2008 and ending June 30, 2009;

(viii)        Southern Missouri Bancorp, Inc. has limited bonus payments to its applicable employees in accordance with section 111 of EESA and the regulations and guidance established thereunder during the period beginning on December 3, 2008 and ending June 30, 2009;

(ix)           The board of directors of Southern Missouri Bancorp, Inc. has established an excessive or luxury expenditures policy, as defined in the regulations and guidance established under section 111 of EESA, has provided this policy to Treasury and its primary regulatory agency, and Southern Missouri Bancorp, Inc. and its employees have complied with this policy during the period beginning on December 3, 2008 and ending June 30, 2009, and that any expenses requiring approval of the board of directors, a committee of the board of directors, an SEO, or an executive officer with a similar level of responsibility, were properly approved;

(x)            Southern Missouri Bancorp, Inc. will permit a non-binding shareholder resolution in compliance with any applicable federal securities rules and regulations on the disclosures provided under the federal securities laws related to SEO compensation paid or accrued during the period beginning on December 3, 2008 and ending June 30, 2009;

(xi)           Southern Missouri Bancorp, Inc. will disclose the amount, nature, and justification for the offering during the period beginning on December 3, 2008, and ending June 30, 2009, containing that date of any perquisites, as defined in the regulations and guidance established under section 111 of EESA, whose total value exceeds $25,000 for each employee subject to the bonus payment limitations identified in paragraph (vii);

(xii)          Southern Missouri Bancorp, Inc. will disclose whether Southern Missouri Bancorp, Inc., the board of directors of Southern Missouri Bancorp, Inc., or the compensation committee of Southern Missouri Bancorp, Inc. has engaged during the period beginning on December 3, 2008, and ending on June 30, 2009, a compensation consultant; and the services the compensation consultant or any affiliate of the compensation consultant provided during this period;

(xiii)         Southern Missouri Bancorp, Inc. has prohibited the payment of any gross-ups, as defined in the regulations and guidance established under section 111 of EESA, to the SEOs and the next twenty most highly compensated employees during the period beginning on December 3, 2008, and ending on June 30, 2009;

(xiv)        Southern Missouri Bancorp, Inc. has substantially complied with all other requirements related to employee compensation that are provided in the agreement between Southern Missouri Bancorp, Inc. and Treasury, including any amendments;

(xv)         The following employees are the SEOs and the twenty next most highly compensated employees for the current fiscal year and the most recently completed fiscal year, with the non-SEOs ranked in order of level of annual compensation starting with the greatest amount:

	SEOs
Name	Title	Employer
Greg A. Steffens	President & CEO	Company & Bank
William Hribovsek	Chief Lending Officer	Bank
William Aslin	Community Bank President	Bank

MHCEs

[The list of MHCEs is not included in this Form 10-K due to personal privacy issues.  The complete list has been provided to the United States Department of the Treasury in accordance with 31 CFR § 30.15.]

; and

(xvi)        I understand that a knowing and willful false or fraudulent statement made in connection with this certification may be punished by fine, imprisonment, or both. (See, for example, 18 USC 1001).

Date:       September 25 ,2009                                              By:             /s/ Greg A. Steffens