UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
450 5TH STREET, N.W.
WASHINGTON,D. C. 20549
FORM 10-QSB
[CAPTION]
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
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 July 31, 1996
Common Stock, par value $.01 per share 852,566
PERRY COUNTY FINANCIAL CORPORATION AND SUBSIDIARY
FORM 10-QSB
FOR THE QUARTER ENDED JUNE 30, 1996
INDEX
PART I - Financial Information (Unaudited)
Consolidated Balance Sheets
1
Consolidated Statements of Earnings
2
Consolidated Statements of Cash Flows
3
Notes to Consolidated Financial Statements
4
Management's Discussion and Analysis of
Financial Condition and Results of Operations
5
PART II - Other Information
8
1
PERRY COUNTY FINANCIAL CORPORATION AND SUBSIDIARY
Consolidated Balance Sheets
(Unaudited)
June 30, September 30,
1996 1995
Assets
Cash and cash equivalents $ 1,462,115 3,554,902
Securities:
Available for sale, at market value
amortized cost of $35,260,081 and $322,293,
respectively) 34,568,891 326,293
Held to maturity, at amortized cost
(market value of $31,587,531) - 31,906,147
Federal Home Loan Bank Stock 601,500 589,700
Mortgage-backed and related securities:
Available for sale, at market value
(amortized cost of $31,499,419) 31,406,435 -
Held to maturity, at amortized cost
(market value of $31,379,983) - 31,189,781
Loans receivable, net 11,103,294 7,810,457
Premises and equipment, net 303,828 312,772
Accrued interest receivable:
Securities 513,781 382,683
Mortgage-backed and related securities 226,233 229,395
Loans receivable 45,522 41,926
Other assets, including prepaid income taxes
of $91,182 in 1996 162,812 76,678
Total assets $ 80,394,411 76,420,734
Liabilities and Stockholders' Equity
Deposits $ 62,522,025 60,178,280
Accrued interest on deposits 130,201 155,451
Advances from FHLB of Des Moines 2,500,000 -
Advances from borrowers
for taxes and insurance 120,430 105,763
Other liabilities 33,623 30,820
Income taxes payable - 267,527
Total liabilities $ 65,306,279 60,737,841
Commitments and contingencies
Stockholders' equity:
Serial preferred stock, $.01 par value;
1,000,000 shares authorized;
shares issued and outstanding - none - -
Common stock, $.01 par value;
5,000,000 shares authorized;
856,452 shares issued and outstanding 8,565 8,565
Additional paid-in capital 8,027,763 7,962,536
Common stock acquired by ESOP (604,679) (639,160)
Common stock acquired by MRP (354,882) -
Unrealized gain (loss) on securities and
mortgage-backed and related securities
available for sale, net (494,030) 2,520
Treasury stock, at cost, 3,886 shares (68,976) -
Retained earnings - substantially restricted 8,574,371 8,348,432
Total stockholders' equity 15,088,132 15,682,893
Total liabilities and stockholders' equity $ 80,394,411 76,420,734
See accompanying notes to
consolidated financial statements.
2
PERRY COUNTY FINANCIAL CORPORATION AND SUBSIDIARY
Consolidated Statements of Earnings
(Unaudited)
Three Months Ended Nine Months Ended
June 30, June 30,
1996 1995 1996 1995
Interest income:
Loans receivable $ 203,835 145,652 555,700 386,619
Mortgage-backed and
related securities 568,228 525,847 1,700,402 1,581,478
Securities 540,219 478,232 1,579,560 1,415,923
Other interest-earning assets 26,284 96,348 78,161 179,414
Total interest income $ 1,338,566 1,246,079 3,913,823 3,563,434
Interest expense:
Deposits 764,428 734,809 2,286,789 2,082,489
Advances from FHLB 21,546 658 21,546 16,019
Total interest expense $ 785,974 735,467 2,308,335 2,098,508
Net interest income 552,592 510,612 1,605,488 1,464,926
Provision for loan losses - - - -
Net interest income after
provision for loan losses 552,592 510,612 1,605,488 1,464,926
Noninterest income:
Gain on sale of securities
available for sale 4,375 - 6,875 -
Service charges on NOW accounts 7,223 7,007 21,544 19,949
Gain on investment
in data center 17,679 - 17,679 -
Other 531 473 3,230 6,378
Total noninterest income $ 29,808 7,480 49,328 26,327
Noninterest expense:
Compensation and benefits 302,304 135,729 588,166 408,034
Occupancy expense 6,938 5,891 21,050 18,891
Equipment and data
processing expense 19,658 13,238 60,796 48,868
SAIF deposit insurance premium 34,574 35,397 102,834 106,218
Professional services 21,894 23,727 75,699 50,378
Other 17,054 7,459 71,532 41,241
Total noninterest expense $ 402,422 221,441 920,077 673,630
Earnings before income taxes 179,978 296,651 734,739 817,623
Income taxes 71,317 110,139 270,999 302,280
Net earnings 108,661 186,512 463,740 515,343
Net earnings per share $ .14 .24 .59 .65
Weighted-average
shares outstanding 782,738 790,811 790,124 789,661
Dividends per share $ .30 - .30 -
See accompanying notes to consolidated financial statements.
3
PERRY COUNTY FINANCIAL CORPORATION AND SUBSIDIARY
Consolidated Statements of Cash Flows
(Unaudited)
Nine Months Ended
June 30,
1996 1995
Cash flows from
operating activities:
Net earnings $ 463,740 515,343
Adjustments to reconcile net earnings
to net cash provided by
(used for) operating activities:
Depreciation expense 10,903 11,134
ESOP expense 62,063 72,333
MRP expense 198,284 -
Amortization of premiums
(discounts) and loan fees, net (37,999) (53,535)
FHLB stock dividend (11,800) -
Dividends reinvested in Asset Management Fund (5,611) (5,116)
Gain on sale of securities available for sale (6,875) -
Decrease (increase) in:
Accrued interest receivable (131,532) (110,156)
Other assets 205,493 66,774
Increase (decrease) in:
Accrued interest on deposits
and other liabilities (22,447) 47,635
Income taxes payable (267,527) (58,698)
Net cash provided by (used for)
operating activities 456,692 485,714
Cash flows from investing activities:
Loans originated, net of principal
collections on loans (3,290,255) (1,307,040)
Mortgage-backed and related
securities available for sale:
Purchased (4,254,451) -
Principal collections 3,954,136 -
Mortgage-backed and related
securities held to maturity:
Purchased - (3,299,342)
Principal collections - 3,115,031
Securities available for sale:
Purchased (11,798,500) -
Proceeds from maturity or call 6,798,564 -
Proceeds from sale 2,006,875 -
Securities held to maturity:
Purchased - (2,296,463)
Proceeds from maturity - 1,000,000
Purchase of premises and equipment, net (1,959) (6,937)
Net cash provided by (used for)
investing activities (6,585,590) (2,794,751)
Cash flows from financing activities:
Net increase (decrease) in:
Deposits 2,343,745 (2,052,937)
Advances from borrowers
for taxes and insurance 14,667 26,139
Proceeds from advance from
FHLB of Des Moines 2,500,000 -
Payment of advance from
FHLB of Des Moines - (500,000)
Net proceeds from sale of common stock - 7,267,041
Purchase of treasury stock (584,500) -
Dividends paid to shareholders (237,801) -
Net cash provided by (used for)
financing activities 4,036,111 4,740,243
Net increase (decrease) in cash
and cash equivalents (2,092,787) 2,431,206
Cash and cash equivalents
at beginning of period 3,554,902 916,470
Cash and cash equivalents at end of period 1,462,115 3,347,676
Supplemental disclosures
of cash flow information:
Cash paid during the period for:
Interest on deposits 2,312,039 2,035,339
Interest on advances from
FHLB of Des Moines 21,546 19,211
Federal and state income taxes 383,460 369,892
Noncash investing activity - transfer of
securities and mortgage-backed and related
securities from held to maturity to
available for sale 63,095,928 -
See accompanying notes to consolidated financial statements.
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, 1995 contained in the
1995 Annual Report to Stockholders which is filed as an exhibit to the
Company's Annual Report on Form 10-KSB.
(2)Proposals have been introduced in the U.S. Congress which, if
adopted, would overhaul the savings association industry.
The most significant of these proposals would recapitalized the SAIF
through a one-time special assessment of approximately 85 basis points
on the amount of deposits held by the institution.
Should the Bank be required to pay such special assessment,
the Bank's capital will be reduced by approximately $335,000,
based on deposits of $62.5 million at June 30, 1996 and
a tax rate of 37%. In the event the assessment is not deductible for
tax purposes, capital would be reduced by approximately $531,000.
Management cannot predict whether the special assessment proposal
will be enacted, or, if enacted, the amount of any one-time fee or
the date to be used for determining deposits on which the assessment
will be based.
(3)On January 16, 1996, the stockholders of Perry County Financial
Corporation ratified the 1995 Stock Option and Incentive Plan
(Stock Option Plan). Of the 85,645 shares reserved for issuance under
the Stock Option Plan, 70,798 shares were awarded in January,
1996, and the remainder are available for future awards.
The stock options were awarded at $19 per share which was equal to
the market value of the Company's common stock at the date of
grant. At June 30, 1996 there were 21,411 shares exercisable.
On January 16, 1996, the stockholders ratified the Management
Recognition and Retention Plan (MRP). Of the 34,258 shares reserved
for issuance under the MRP, 29,114 shares were awarded in January, 1996,
to directors, executive officers and employees and the remainder are
available for future awards. Compensation expense in the amount of the
fair market value of the common stock at the date of grant is recognized
pro rata over a five year period following the date of grant of the award.
(4)The Company reclassified its entire portfolio of marketable
debt securities and mortgage-backed and related securities from held to
maturity to available for sale in December, 1995. Stockholders' equity
is expected to increase or decrease in the future to the extent
(net of income tax effect) that the market value of securities and
mortgage-backed and related securities increase or decrease.
(5)The Company initiated a stock repurchase program upon approval
by the OTS of up to 5% of its common stock issued in the Company's
initial common stock offering. During May, 1996 the Company repurchased
29,114 shares for the MRP awards and an additional 3,886 shares of common
stock in the open market. Of the 33,000 shares repurchased,5,000 and
28,000 shares were at a price of $17.50 and $17.75 per share, respectively.
(6)Earnings per share are based upon the weighted-average shares
outstanding. Earnings per share for the nine months ended June 30, 1995
are stated on a pro forma basis as if the shares were outstanding for the
entire period. ESOP shares which have been committed to be released are
considered outstanding.
5
PERRY COUNTY FINANCIAL CORPORATION AND SUBSIDIARY
Management's Discussion and Analysis of Financial Condition and Results of
Operations.
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 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.
Liquidity and Capital Resources
The Bank's principal sources of funds are cash receipts from deposits,
security maturities, principal collections on mortgage-backed and related
securities (MBSs), 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 need for additional funds be required.
For regulatory purposes, liquidity is measured as a ratio of cash
and certain investments to withdrawable deposits. The minimum level of
liquidity required by regulation is presently 5%. The Bank's regulatory
liquidity ratio was approximately 32% at June 30, 1996.
The savings and loan industry historically has accepted interest
rate risk as a part of its operating philosophy. Long-term, fixed-rate
loans were funded with deposits which adjust to market interest
rates more frequently. In recent years, the Bank originated primarily
mortgage loans which permit adjustment of the interest rate after an
initial term of one to three years in order to reduce inherent interest
rate risk.
The Financial Institutions Reform, Recovery and Enforcement Act of 1989
(FIRREA) requires that the Bank maintain core capital equal to 3% of
adjusted total assets and maintain tangible capital equal to 1.5% of
adjusted total assets. The Bank must maintain an 8% risk-based capital.
The following table presents the Bank's capital position relative to its
regulatory capital requirements under FIRREA at June 30, 1996:
Unaudited Regulatory Capital
Tangible Core Risk-Based
Stockholders' equity per
consolidated financial statements $ 15,088,132 15,088,132 15,088,132
Stockholders' equity of Perry County
Financial Corporation not available for
regulatory capital purposes (3,289,932) (3,289,932) (3,289,932)
GAAP capital 11,798,200 11,798,200 11,798,200
General valuation allowances - - 10,000
Unrealized loss on securities
available for sale, net 435,833 435,833 435,833
Regulatory capital 12,234,033 12,234,033 12,244,033
Regulatory capital requirement (1,172,679) (2,345,358) (1,242,800)
Regulatory capital - excess $ 11,061,354 9,888,675 11,001,233
Regulatory capital ratio 15.65% 15.65% 78.82%
Regulatory capital requirement (1.50) (3.00) (8.00)
Regulatory capital ratio - excess 14.15% 12.65% 70.82%
Commitments to originate mortgage loans at June 30, 1996 amounted
to $646,000.
Financial Condition
Assets increased from $76.4 million at September 30, 1995 to
$80.4 million at June 30, 1996. Customer deposits, advances from the FHLB,
and cash and cash equivalents were used to purchase securities and fund loan
originations. Due to renewed emphasis on lending activities, the Bank's loan
portfolio increased $3.3 million from September 30, 1995 to June 30, 1996.
The Bank transferred its debt securities and all mortgage-backed and related
securities to its available for sale portfolio during the quarter ended
December 31, 1995. Accrued interest on securities increased due to the
timing of interest receipts and a higher portfolio balance. Other assets
and income taxes payable fluctuated as a result of timing of Federal income
tax payments. Accrued interest on deposits decreased as a result of the
timing of interest paid on certain certificate accounts. Advances from
borrowers for taxes and insurance increased due to seasonal factors.
Real estate taxes on behalf of borrowers are paid in December of each year.
Asset Quality
Loans are placed on a nonaccrual status when contractually delinquent more
than ninety days. Nonaccrual loans decreased from $62,857 at September 30,
1995 to zero at June 30, 1996.
Results of Operation
Net Earnings
Net earnings decreased from $186,512 for the three months ended June 30,
1995 to $108,661 for the three months ended June 30, 1996. Net earnings
decreased from $515,343 for the nine months ended June 30, 1995 to
$463,740 for the nine months ended June 30, 1996. The decreases were
due to higher noninterest expense offset by higher net interest income and
noninterest income and lower income taxes.
Net Interest Income
Net interest income increased from $510,612 for the three months ended
June 30, 1995 to $552,592 for the three months ended June 30, 1996.
Net interest income increased from $1,464,926 for the nine months ended
June 30, 1995 to $1,605,488 for the nine months ended June 30, 1996.
Interest income increased as a result of the effect on earnings of proceeds
from the sale of common stock effective February 10, 1995 and higher
interest rates. Interest on deposits increased as a result of a higher
weighted-average rate. Interest on advances from FHLB increased due to a
higher average balance.
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
and nine months ended June 30, 1996 and 1995.
PERRY COUNTY FINANCIAL CORPORATION AND SUBSIDIARY
Noninterest Expense
Noninterest expense increased from $221,441 for the three months ended
June 30, 1995 to $402,422 for the three months ended June 30, 1996.
Noninterest expense increased from $673,630 for the nine months ended
June 30, 1995 to $920,077 for the nine months ended June 30, 1996.
The increase was due to recognition of MRP and ESOP expenses, higher
equipment and data processing expense, professional services and expenses
associated with operating as a public company.
ESOP expense was $28,624 for the three months ended June 30, 1996
and $62,063 for the nine months ended June 30, 1996 compared to $30,293
for the three months ended June 30, 1995 and $72,333 for the nine months
ended June 30, 1995. ESOP expense was lower than expected since the plan
was "top heavy" under the Internal Revenue Code. ESOP expense for the nine
month periods would have been approximately $30,000 higher had the plan
not been top heavy. Management is investigating alternative strategies to
alleviate the top heavy limitations. Proposed Federal tax legislation would
eliminate the top heavy status. ESOP expense is affected by changes in the
market price of the Company's stock, which increased substantially during
the year ended September 30, 1995. During January, 1996, the Bank
implemented a management recognition plan similar to plans of other publicly
traded thrift institutions. MRP expense for the three and nine months ended
June 30, 1996 was $175,552 and $198,284, respectively, compared with no
expense for the three and nine months ended June 30, 1995. MRP expense for
the three and nine months ended June 30, 1996 includes $156,029 related to
acceleration of vesting of MRP shares upon the death of Mrs. Patricia E.
Rozier. Recurring MRP expense is expected to be approximately $20,000 per
quarter.
Other noninterest expense and professional services increased due principally
to costs associated with operating as a public company, including annual
report printing, annual meeting expenses and NASDAQ fees. Professional
services for the three month periods remained virtually unchanged.
Income Taxes
Income taxes decreased due to lower pretax earnings.
8
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: July 31, 1996
BY: Leo J. Rozier
Leo J. Rozier, President,
Chief Executive Officer
Officer and Duly Authorized
and Principal Financial Office