UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
450 5TH STREET, N.W.
WASHINGTON, D. C. 20549
FORM 10-QSB
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 2000
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to Commission File No. 0-25088
PERRY COUNTY FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
Missouri 43-1694505
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
14 North Jackson Street, Perryville, Missouri 63775-1334
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code (573) 547-4581
Not applicable
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Sections 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 the number of shares outstanding of the issuer's classes of common
stock, as of the latest practicable date.
Class Outstanding January 31, 2001
Common Stock, par value $.01 per share 741,928 Shares
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PERRY COUNTY FINANCIAL CORPORATION AND SUBSIDIARY
FORM 10-QSB
FOR THE QUARTER ENDED DECEMBER 31, 2000
INDEX
PAGE NO.
PART I - Financial Information (Unaudited)
Consolidated Balance Sheets 1
Consolidated Statements of Operations 2
Consolidated Statements of Comprehensive Earnings (Loss) 3
Consolidated Statements of Cash Flows 4
Notes to Consolidated Financial Statements 5
Management's Discussion and Analysis of
Financial Condition and Results of Operations 6
PART II - Other Information 10
<PAGE ii>
PERRY COUNTY FINANCIAL CORPORATION AND SUBSIDIARY
Consolidated Balance Sheets
(Unaudited)
December 31, September 30,
Assets 2000 2000
Cash and cash equivalents $ 37,050,802 33,551,233
Securities available for sale, at market value
(amortized
cost of $3,951,321 and $4,938,404) 3,994,530 4,950,056
Federal Home Loan Bank stock 750,000 750,000
Mortgage-backed securities available for sale,
at market value (amortized cost of $34,011,020
and $35,125,029) 33,731,781 34,265,602
Loans receivable, net 18,236,402 17,685,109
Premises and equipment, net 281,716 288,416
Accrued interest receivable:
Securities 40,979 98,201
Mortgage-backed securities 192,710 196,629
Loans receivable 72,055 72,530
Deferred tax asset 811,663 1,104,907
Refundable income taxes 948,636 948,636
Other assets 23,018 37,905
Total assets $ 96,134,292 93,949,224
Liabilities and Stockholders' Equity
Deposits $ 68,323,034 66,608,646
Accrued interest on deposits 166,996 156,265
Advances from FHLB of Des Moines 15,000,000 15,000,000
Advances from borrowers for taxes and insurance 110,220 225,469
Other liabilities 84,816 82,289
Accrued income taxes 39,995 30,485
Total liabilities 83,725,061 82,103,154
Commitments and contingencies
Serial preferred stock, $.01 par value, 1,000,000
shares authorized; none issued and outstanding - -
Common stock, $.01 par value; 5,000,000 shares
authorized; 856,452 shares issued 8,565 8,565
Additional paid-in capital 8,261,484 8,254,013
Common stock acquired by ESOP (397,813) (409,305)
Common stock acquired by MRP (28,185) (50,934)
Unrealized loss on securities available for sale, net (148,699) (534,098)
Treasury stock at cost, 114,524 shares (2,193,325) (2,193,325)
Retained earnings - substantially restricted 6,907,204 6,771,154
Total stockholders' equity 12,409,231 11,846,070
Total liabilities and stockholders' equity $ 96,134,292 93,949,224
See accompanying notes to consolidated financial statements.
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PERRY COUNTY FINANCIAL CORPORATION AND SUBSIDIARY
Consolidated Statements of Operations
(Unaudited)
Three Months Ended
December 31,
2000 1999
Interest income:
Loans receivable $ 342,074 317,550
Mortgage-backed securities 590,457 579,632
Securities 89,589 691,767
Other interest-earning assets 563,481 44,684
Total interest income 1,585,601 1,633,633
Interest expense:
Deposits 941,262 833,575
Advances from FHLB 211,017 210,974
Total interest expense 1,152,279 1,044,549
Net interest income 433,322 589,084
Provision for loan losses - -
Net interest income after provision
for loan losses 433,322 589,084
Noninterest income:
Service charges on NOW accounts 6,263 6,517
Gain on sale of MBSs - 933
Provision for loss on MBSs - (188,431)
Provision for loss on securities - (486,563)
Other 7,713 397
Total noninterest income 13,976 (667,147)
Noninterest expense:
Compensation and benefits 170,312 159,734
Occupancy expense 7,028 7,210
Equipment and data processing expense 22,600 21,938
SAIF deposit insurance premium 3,311 10,055
Other 37,665 37,076
Total noninterest expense 240,916 236,013
Earnings (loss) before income taxes 206,382 (314,076)
Income taxes 70,332 (112,821)
Net earnings (loss) $ 136,050 (201,255)
Basic earnings (loss) per common share $ .19 (.29)
Diluted earnings (loss) per common share $ .19 (.29)
Dividends per share $ .00 .00
See accompanying notes to consolidated financial statements.
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PERRY COUNTY FINANCIAL CORPORATION AND SUBSIDIARY
Consolidated Statements of Comprehensive Earnings (Loss)
(Unaudited)
Three Months Ended
December 31,
2000 1999
Net earnings (loss) $ 136,050 (201,255)
Other comprehensive earnings - unrealized gain (loss)
on securities available for sale, net:
Reclassification adjustment for gain, net of
of income taxes, included in net earnings (loss) - (588)
Unrealized holding gains (losses), net 385,399 (1,894,631)
Comprehensive earnings (loss) $ 521,449 (2,096,474)
See accompanying notes to consolidated financial statements.
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PERRY COUNTY FINANCIAL CORPORATION AND SUBSIDIARY
Consolidated Statements of Cash Flows
(Unaudited)
Three Months Ended
December 31,
2000 1999
Cash flows from operating activities:
Net earnings (loss) $ 136,050 (201,255)
Adjustments to reconcile net earnings (loss)
to net cash provided by (used for) operating
activities:
Depreciation expense 6,700 6,836
ESOP expense 18,963 23,128
MRP expense 22,749 21,875
Gain on sale of MBSs - (933)
Provision for loss on MBSs - 188,431
Provision for loss on securities - 486,563
Amortization of premiums and discounts, net (20,209) (159,124)
Decrease (increase) in:
Accrued interest receivable 61,616 7,636
Deferred tax asset 66,898 -
Other assets 14,887 (104,640)
Increase (decrease) in:
Accrued interest on deposits 10,731 (35,280)
Other liabilities 2,527 (11,252)
Accrued income taxes 9,510 (122,812)
Net cash provided by (used for) operating
activities 330,422 99,173
Cash flows from investing activities:
Loans originated, net of principal collections (551,293) (283,217)
Mortgage-backed securities available for sale:
Purchased - (776,541)
Principal collections 1,121,301 1,195,131
Proceeds from sale - 2,225,427
Securities available for sale - proceeds from
maturity or call 1,000,000 500,000
Net cash provided by (used for) investing
activities 1,570,008 2,860,800
Cash flows from financing activities:
Net increase (decrease) in:
Deposits 1,714,388 (358,632)
Advances from borrowers for taxes and insurance (115,249) (179,498)
Net cash provided by (used for) financing
activities 1,599,139 (538,130)
Net increase (decrease) in cash and cash
equivalents 3,499,569 2,421,843
Cash and cash equivalents at beginning of period 33,551,233 2,702,394
Cash and cash equivalents at end of period $ 37,050,802 5,124,237
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest on deposits $ 930,531 868,855
Interest on advances from FHLB 211,017 210,974
Federal income taxes $ - 137,735
See accompanying notes to consolidated financial statements.
<PAGE 4>
PERRY COUNTY FINANCIAL CORPORATION AND SUBSIDIARY
Notes to Consolidated Financial Statements
(Unaudited)
(1) The information contained in the accompanying consolidated financial
statements is unaudited. In the opinion of management, the consolidated
financial statements contain all adjustments (none of which were other than
normal recurring entries) necessary for a fair statement of the results of
operations for the interim periods. The results of operations for the
interim periods are not necessarily indicative of the results which may be
expected for the entire fiscal year. These consolidated financial statements
should be read in conjunction with the consolidated financial statements of
the Company for the year ended September 30, 2000 contained in the 2000 Annual
Report to Stockholders which is filed as an exhibit to the Company's Annual
Report on Form 10-KSB.
(2) Following is a summary of basic and diluted earnings (loss) per common
share for the three months ended December 31, 2000 and 1999:
Three Months Ended
December 31,
2000 1999
Net earnings (loss) $ 136,050 (201,255)
Weighted-average shares - Basic EPS 701,572 695,100
Stock options under treasury stock method - 1,875
Weighted-average shares - Diluted EPS 701,572 696,975
Basic earnings (loss) per common share $ .19 (.29)
Diluted earnings (loss) per common share $ .19 (.29)
Options to purchase 49,387 shares of common stock at $19.00 per share were
outstanding during the three months ended December 31, 2000, but were not
included in the computation of diluted earnings (loss) per share since the
exercise price was greater than the average market price of the common stock.
(3) Perry County Financial Corporation entered into a definitive agreement to
be acquired by Jefferson County Bancshares on January 26, 2001. Under the
terms of the agreement, Perry County Financial Corporation shareholders will
receive $23.50 per share in cash. The acquisition, subject to regulatory and
other requirements, is expected to close in the second half of 2001.
General
Perry County Financial Corporation (Company) has no significant assets other
than common stock of Perry County Savings Bank, FSB (Bank), the loan to the
ESOP and net proceeds retained by the Company following the conversion. The
Company's principal business is the business of the Bank. Therefore, the
discussion in the Management's Discussion and Analysis of Financial Condition
and Results of Operations relates to the Bank and its operations.
Certain statements in this report which relate to the Company's plans,
objectives or future performance may be deemed to be forward-looking
statements within the meaning of the Private Securities Litigation Act of
1995. Such statements are based on management's current expectations. Actual
strategies and results in future periods may differ materially from those
currently expected because of various risks and uncertainties. Additional
discussion of factors affecting the Company's business and prospects is
contained in periodic filings with the Securities and Exchange Commission.
<PAGE 5>
Asset and Liability Management and Market Risk
The Bank's net interest income is dependent primarily upon the difference or
spread between the average yield earned on loans, securities and mortgage-
backed securities (MBSs) and the average rate paid on deposits and advances
from the FHLB, as well as the relative amounts of such assets and
liabilities. The Bank, as other thrift institutions, is subject to interest
rate risk to the degree that its interest-bearing liabilities mature or
reprice at different times, or on a different basis, than its interest-
earning assets. The Bank does not purchase derivative financial instruments or
other financial instruments for trading purposes. Further, the Bank is not
subject to foreign currency exchange rate risk, commodity price risk or
equity price risk.
The Bank's principal financial objective is to achieve long-term profitability
while managing its exposure to fluctuating interest rates. The Bank has an
exposure to interest rate risk, including short-term U.S. prime interest
rates. The Bank has employed various strategies intended to manage the adverse
effects of interest rate risk on future operations by providing a better
match between the interest rate sensitivity of its assets and liabilities.
Although the Bank has originated adjustable rate mortgage loans (AMLs) in the
past, the Bank originated primarily 20-year, fixed rate loans in recent years.
The Bank also purchased $6.6 million in AMLs and balloon MBSs during the year
ended September 30, 2000 and $11.3 million of long-term, fixed rate MBSs
during the year ended September 30, 1999. Advances from the FHLB with a 10-
year term, callable in 5 years, were used to fund a portion of the purchases.
Until March 2000, the Bank held securities under a "leveraged investment"
program. Long-term Federal agency obligations, which are callable in the
near term, were purchased with intermediate-term FHLB advances (or other
available funds). The Bank was able to earn a higher interest rate spread since
the market prices callable obligations differently than noncallable
obligations with otherwise identical terms. Leveraged investments usually
result in increased interest rate risk. The effect on net interest income
is positive unless rates change significantly. Because of the rise in interest
rates, the market price of such securities were adversely affected, even
though the interest rate spread remained positive. The Bank expects to
purchase short and intermediate-term securities and MBSs in the future.
The OTS provides a net market value methodology to measure the interest rate
risk exposure of thrift institutions. This exposure is a measure of the
potential decline in the net portfolio value (NPV) of the institution based
upon the effect of an assumed 100 basis point increase or decrease in interest
rates. NPV is the present value of the expected net cash flows from the
institution's financial instruments (assets, liabilities and off-balance
sheet contracts). Loans, deposits, and investments are valued taking into
consideration similar maturities, related discount rates and applicable
prepayment assumptions.
Year 2000
The Bank reviewed its computer applications with its outside data processing
service bureau and other software vendors to ensure operational and financial
systems were not adversely affected by "year 2000" software failures. All
major customer applications are processed through an outside service bureau
which has been tested. Other major systems have been tested. Connectivity
testing between Bank and vendor systems to ensure continued compatibility
have also been tested.
No significant problems have been encountered with the year 2000 issue to date.
There are other widely reported dates which could cause software failures,
and which were part of the Bank's year 2000 review and testing. Any year
2000 or other date related compliance failure could result in additional
expense to the Bank.
<PAGE 6>
Liquidity and Capital Resources
The Bank's principal sources of funds are cash receipts from deposits, security
maturities and calls, principal collections on mortgage-backed securities,
loan repayments by borrowers and net earnings. The Bank has an agreement
with the Federal Home Loan Bank of Des Moines to provide cash advances,
should the Bank need additional funds.
The minimum level of liquidity required by regulation is presently 4%. The
Bank's liquidity ratio exceeded the regulatory requirement at December 31,
2000.
Under the capital adequacy guidelines and 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.
Capital adequacy guidelines require Tier 1 (core) capital of at least 4% (3%
under certain circumstances) of total assets, Tier 1 capital of 4% of risk-
weighted assets and total capital (risk-based capital) of 8% of risk-weighted
assets. As of December 31, 2000, the Bank was categorized as well capitalized
under the regulatory framework for prompt corrective action.
Commitments to originate mortgage loans and fund loans in process at
December 31, 2000 amounted to $8,000, expiring in 180 days or less.
The Bank's regulatory capital and regulatory capital requirements at
December 31, 2000 are summarized as follows:
Minimum Required Minimum Required
for Capital to be "Well
Actual Adequacy Capitalized"
Amount Ratio Amount Ratio Amount Ratio
(Dollars in Thousands)
Consolidated stockholders'
equity $12,409
Stockholders' equity of
Company (1,288)
Unrealized loss on securities
and MBSs available for sale,
net 149
Deferred tax assets not
includable in regulatory
capital (531)
Tangible capital 10,739 11.3% $1,419 1.5%
General valuation allowance 30
Other adjustments (10)
Total capital to risk-
weighted assets $10,759 47.3% $1,818 8.0% $ 2,273 10.0%
Tier 1 capital to risk-
weighted assets $10,739 47.3% $ 909 4.0% $ 1,364 6.0%
Tier 1 capital to total
assets $10,739 11.3% $3,785 4.0% $ 4,731 5.0%
Generally, unrealized losses on securities and MBSs do not affect the
computation of regulatory capital. However, the Bank is limited in the
amount of deferred tax assets which may be considered in computing regulatory
capital. Losses on sales of securities and MBSs are charged to earnings and
reduce regulatory capital.
<PAGE 7>
Financial Condition
Customer deposits, maturity of securities and loan repayments were invested in
cash and cash equivalents. Accrued interest on securities decreased due to
the timing of interest receipts and a lower average balance. Deferred tax
asset decreased due to a lower unrealized loss on securities and MBSs
available for sale. Lower unrealized losses resulted from a decline in market
interest rates. Accrued interest on deposits increased due to timing of
interest payments and a higher average balance of certificates. Advances
from borrowers for taxes and insurance decreased due to the payment of real
estate taxes on behalf of borrowers in December. The Company did not repurchase
shares of common stock in the open market during the quarter. While the
purchase of treasury stock may be beneficial to the Company or shareholders,
the purchase of treasury stock reduces interest-earning assets of the
Company. Capital of the Bank is also reduced to the extent treasury stock
purchases are funded by dividends from the Bank to the Company.
Asset Quality
Loans are placed on a nonaccrual status when contractually delinquent more than
ninety days. There were two nonaccrual loans at December 31, 2000 amounting
to $223,000. The borrower on one of the loans has declared bankruptcy and
the Bank expects to foreclose on the property.
Following is a summary of activity in the allowance for loan losses:
Balance at September 30, 2000 $ 30,000
Charge-offs -
Recoveries -
Provision for loan loss -
Balance at December 31, 2000 $ 30,000
Results of Operations
Net Earnings
Net earnings increased from a net loss of $201,000 for the three months ended
December 31, 1999 to net earnings of $136,000 for the three months ended
December 31, 2000. The increase was due primarily to provisions for loss on
MBSs and securities for the quarter ended December 31, 1999, partially offset
by lower net interest income in the three months ended December 31, 2000, less
related tax effects.
Net Interest Income
Net interest income decreased from $589,000 for the three months ended
December 31, 1999 to $433,000 for the three months ended December 31, 2000.
The decrease is due primarily to lower interest rates earned as a result of
sale of callable Federal agency obligations and reinvestment of the proceeds
in the FHLB daily time account. The Board of Directors authorized the
investment in the FHLB daily time account pending review of the Company's
strategic options. Long-term, fixed-rate loans were originated to replace
loan prepayments and refinances. Interest on MBSs decreased due to higher
average interest rates. Interest on securities decreased due to the sale of
all callable securities. Other interest-earning assets increased due to a
substantially higher average balance in the three months ended December 31,
2000 than in the prior period. Components of interest income vary from time
to time based on the availability and interest rates of loans, securities,
MBSs and other interest-earning assets.
<PAGE 8>
Provision for Loan Losses
Provision for loan losses is based upon management's consideration of economic
conditions which may affect the ability of borrowers to repay the loans.
Management also reviews individual loans for which full collectibility may
not be reasonably assured and considers, among other matters, the risks
inherent in the Bank's portfolio and the estimated fair value of the
underlying collateral. This evaluation is ongoing and results in variations
in the Bank's provision for loan losses. As a result of this evaluation,
the Bank made no provision for loan losses for the three months ended
December 31, 2000 and 1999.
Noninterest Income
Noninterest income for the three months ended December 31, 1999 includes
provisions for loss on MBSs and securities of $188,000 and $487,000,
respectively. Other noninterest income increased from $397 for the three
months ended December 31, 1999 to $8,000 for the three months ended
December 31, 2000 due to nonrecurring income.
Noninterest Expense
Noninterest expense increased from $236,000 for the three months ended
December 31, 1999 to $241,000 for the three months ended December 31, 2000.
The increase was due primarily to hiring an additional employee in 2000,
partially offset by lower Federal insurance premiums. Management expects
that legal and professional fees will increase substantially in future periods
as the proposed merger progresses.
Income Taxes
Income taxes increased from a credit of $113,000 for the three months ended
December 31, 1999 to expense of $70,000 for the three months ended
December 31, 2000 due to the increase in earnings before income taxes. The
Bank has a net operating loss carryforward for Federal income tax purposes
of $1,981,000 which expires in 2020.
<PAGE 9>
PERRY COUNTY FINANCIAL CORPORATION AND SUBSIDIARY
PART II - Other Information
Item 1 - Legal Proceeding
There are no material legal proceedings to which the Holding Company or the
Bank is a party or of which any of their property is subject. From time to
time, the Bank is a party to various legal proceedings incident to its business.
Item 2 - Changes in Securities
None.
Item 3 - Defaults upon Senior Securities
Not applicable.
Item 4 - Submission of Matters to a Vote of Security Holders
None.
Item 5 - Other Information
None.
Item 6 - Exhibits and Reports on Form 8-K.
(a)Exhibits: none
(b)Reports on Form 8-K: None
SIGNATURES
Pursuant to the requirements 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.
PERRY COUNTY FINANCIAL CORPORATION
(Registrant)
DATE: February 9, 2001 BY: /S/ Leo J. Rozier
Leo J. Rozier, President, Chief Executive
Officer and Duly Authorized Officer
and Principal Financial Officer
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