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, 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 January 31, 1997
Common Stock, par value $.01 per share 827,166 Shares
PERRY COUNTY FINANCIAL CORPORATION AND SUBSIDIARY
FORM 10-QSB
FOR THE QUARTER ENDED DECEMBER 31, 1996
INDEX
PAGE NO.
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
PERRY COUNTY FINANCIAL CORPORATION AND SUBSIDIARY
Consolidated Balance Sheets
(Unaudited)
December 31, September 30,
Assets 1996 1996
Cash and cash equivalents $ 6,850,705 3,236,497
Securities available for sale, at market value
(amortized cost of $30,475,515 and $34,972,835,
respectively) 30,069,359 34,312,495
Federal Home Loan Bank stock 601,500 601,500
Mortgage-backed and related securities
available for sale, at market value
(amortized cost of $29,750,515 and $30,016,120) 29,614,603 29,818,666
Loans receivable, net 12,143,278 11,717,799
Premises and equipment, net 297,197 300,664
Accrued interest receivable:
Securities 517,226 500,824
Mortgage-backed and related securities 180,193 210,702
Loans receivable 54,999 52,324
Other assets 78,556 397,973
Total assets $80,407,616 81,149,444
Liabilities and Stockholders' Equity
Deposits $62,445,010 62,711,509
Accrued interest on deposits 85,692 130,848
Advances from FHLB of Des Moines 2,500,000 2,500,000
Advances from borrowers for taxes and insurance 74,206 146,917
Other liabilities 34,067 428,302
Income taxes payable 107,002 159,442
Total liabilities 65,245,977 66,077,018
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 and
outstanding 8,565 8,565
Additional paid-in capital 8,042,704 8,034,660
Common stock acquired by ESOP (581,693) (593,186)
Common stock acquired by MRP (315,837) (335,359)
Unrealized loss on securities available for sale, net (341,503) (540,409)
Treasury stock at cost, 29,286 and 3,886 shares,
respectively (507,126) (68,977)
Retained earnings - substantially restricted 8,856,529 8,567,132
Total stockholders' equity 15,161,639 15,072,426
Total liabilities and stockholders' equity $80,407,616 81,149,444
See accompanying notes to consolidated financial statements.
1
PERRY COUNTY FINANCIAL CORPORATION AND SUBSIDIARY
Consolidated Statements of Earnings
(Unaudited)
Three Months Ended
December 31,
1996 1995
Interest income:
Loans receivable $ 237,303 165,950
Mortgage-backed and related securities 490,013 567,714
Securities 554,553 520,640
Other interest-earning assets 73,252 27,829
Total interest income 1,355,121 1,282,133
Interest expense:
Deposits 769,249 764,978
Advances from FHLB 38,128 -
Total interest expense 807,377 764,978
Net interest income 547,744 517,155
Provision for loan losses - -
Net interest income after provision
for loan losses 547,744 517,155
Noninterest income:
Service charges on NOW accounts 6,907 7,642
Gain (loss) on sale of
securities available for sale (5,000) -
Gain (loss) on sale of mortgage-backed
securities available for sale 139,655 -
Other 1,533 492
Total noninterest income 143,095 8,134
Noninterest expense:
Compensation and benefits 143,016 134,463
Occupancy expense 6,941 7,084
Equipment and data processing expense 20,267 20,798
SAIF deposit insurance premium 33,119 33,869
Other 37,889 44,175
Total noninterest expense 241,232 240,389
Earnings before income taxes 449,607 284,900
Income taxes 160,210 106,394
Net earnings $ 289,397 178,506
Net earnings per share $ .37 .23
Weighted-average shares outstanding 792,229 790,811
Dividends per share $ .00 .00
See accompanying notes to consolidated financial statements.
3
PERRY COUNTY FINANCIAL CORPORATION AND SUBSIDIARY
Consolidated Statements of Cash Flows
(Unaudited)
Three Months Ended
December 31,
1996 1995
Cash flows from operating activities:
Net earnings $ 289,397 178,506
Adjustments to reconcile net earnings
to net cash provided by (used for)
operating activities:
Depreciation expense 3,683 3,700
ESOP expense 19,537 16,719
MRP expense 19,522 -
Loss (gain) on sale of securities
available for sale 5,000 -
Loss (gain) on sale of mortgage-backed
securities available for sale (139,655) -
Amortization of premiums, discounts
and loan fees, net (12,728) (20,120)
Dividends reinvested in Asset Management Fund - (1,911)
FHLB stock dividend - (11,800)
Decrease (increase) in:
Accrued interest receivable 11,432 (96,349)
Other assets 202,598 45,366
Increase (decrease) in:
Accrued interest on deposits (45,156) (17,540)
Other liabilities (394,235) (8,216)
Income taxes payable (52,440) (4,606)
Net cash provided by (used for)
operating activities (93,045) 83,749
Cash flows from investing activities:
Loans originated, net of principal collections (422,784) (1,151,639)
Mortgage-backed securities available for sale:
Purchased (3,294,898) (1,329,390)
Principal collections 941,974 1,288,728
Proceeds from sale 2,765,537 -
Securities available for sale:
Purchased - (1,800,000)
Proceeds from maturity 3,500,000 1,300,000
Proceeds from sale 995,000 -
Purchase of premises and equipment (216) (160)
Net cash provided by (used for)
investing activities 4,484,613 (1,692,461)
Cash flows from financing activities:
Net increase (decrease) in:
Deposits (266,499) 386,442
Advances from borrowers for taxes and insurance (72,711) (48,179)
Purchase of treasury stock (438,150) -
Net cash provided by (used for)
financing activities (777,360) 338,263
Net increase (decrease) in cash and
cash equivalents 3,614,208 (1,270,449)
Cash and cash equivalents at beginning of period 3,236,497 3,554,902
Cash and cash equivalents at end of period $6,850,705 2,284,453
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest on deposits $ 814,405 782,518
Interest on advances from FHLB 38,128 -
Federal income taxes $ 54,100 87,300
Noncash investing activity - transfer of
securities and mortgage-backed and related
securities from held to maturity to available
for sale $ - 63,978,850
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, 1996 contained in the 1996 Annual
Report to Stockholders which is filed as an exhibit to the Company's Annual Report on Form 10-
KSB.
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 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.
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, 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.
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 December 31, 1996.
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
December 31, 1996:
Unaudited Regulatory Capital
Tangible Core Risk-Based
Stockholders' equity per consolidated
financial statements $15,161,639 15,161,639 15,161,639
Stockholders' equity of Perry County
Financial Corporation not available
for regulatory capital purposes (2,938,397) (2,938,397) (2,938,397)
GAAP capital 12,223,242 12,223,242 12,223,242
Unrealized loss on securities
available for sale, net 314,098 314,098 314,098
General valuation allowances - - 25,000
Regulatory capital 12,537,340 12,537,340 12,562,340
Regulatory capital requirement (1,176,061) (2,352,122) (1,330,800)
Regulatory capital - excess $11,361,279 10,185,218 11,231,540
Regulatory capital ratio 15.99% 15.99% 75.51%
Regulatory capital requirement (1.50) (3.00) (8.00)
Regulatory capital ratio - excess 14.49% 12.99% 67.51%
Commitments to originate mortgage loans at December 31, 1996 amounted to
$490,500.
6
Financial Condition
Assets decreased from $81.1 million at September 30, 1996 to $80.4 million at December 31, 1996.
Securities available for sale decreased form $34.3 million at September 30, 1996 to $30.0 million
at December 31, 1996 due to the sale, maturity or call of securities. Proceeds from the sales were
used to fund loans and increase cash and cash equivalents. Loans increased from $11.7 million at
September 30, 1996 to $12.1 million at December 31, 1996. The Bank is originating primarily 20-
year fixed-rates loans at the present time. Other liabilities decreased as a result of payment of the
one-time SAIF assessment of $393,000. Other assets decreased as a result of reversal of the
deferred tax asset for the SAIF special assessment. The special assessment was recorded as of
September 30, 1996, but not deductible until actually paid in the quarter ended December 31, 1996.
Other assets also decreased as a result of a decline in the tax effect on unrealized loss of securities
available for sale. Accrued interest on deposits decreased due to the phase out of a promotional
certificate of deposit which paid interest at maturity. Advances from borrowers for taxes and
insurance decreased due to the payment of real estate taxes on behalf of borrowers in December of
each year. Income taxes payable decreased due to the timing of income tax payments. During the
three months ended December 31, 1996, the Company repurchased 25,400 shares of common stock
in the open market at $17.25 per share.
Asset Quality
Loans are placed on a nonaccrual status when contractually delinquent more than ninety days. There
were no nonaccrual loans at December 31, 1996.
Results of Operation
Net Earnings
Net earnings increased from $179,000 for the three months ended December 31, 1995 to $289,000
for the three months ended December 31, 1996. The increase was due primarily to a gain on sale
of mortgage-backed securities available for sale of $140,000, offset by an increase in income taxes.
Net Interest Income
Net interest income increased from $517,000 for the three months ended December 31, 1995 to
$548,000 for the three months ended December 31, 1996. Interest income increased as a result
of a higher level of loans. Loans receivable, net have increased substantially in recent years.
Components of interest income vary from time to time based on the availability and interest rates of
loans, securities, mortgage-backed securities (MBSs), and other interest-bearing assets. Interest
expense increased as a result of interest paid on FHLB advances.
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
7
this evaluation, the Bank made no provision for loan losses for the three months ended December 31,
1996 and 1995.
Noninterest Income
During the three months ended December 31, 1996, mortgage-backed and related securities with a
balance of $2,626,000 were sold for $2,766,000, resulting in a gain of $140,000. The sales were
primarily small balance pools and one collateralized mortgage obligation of $500,000. During the
three months ended December 31, 1996, securities available for sale with a carrying value of $1.0
million were sold at loss of $5,000. There were no gains or losses on securities or MBSs in the three
month period ended December 31, 1995.
Noninterest Expense
Noninterest expense increased from $240,000 for the three months ended December 31, 1995 to
$241,000 for the three months ended December 31, 1996. Compensation and benefits increased
as a result of implementing the Management Recognition Plan (MRP) in January, 1996. MRP expense
was $20,000 for the three months ended December 31, 1996. There was no MRP expense for the
three months ended December 31, 1995. ESOP expense was $17,000 for the three months ended
December 31, 1995 and $20,000 for the three months ended December 31, 1996. The increase
in stock benefit plans was offset by a decrease in salaries due to fewer employees in 1996.
ESOP expense is affected by changes in the market price of the Company's stock.
SAIF deposit insurance premium for the three months ended December 31, 1996 and 1995 was
based on the same assessment rate. Because of the special assessment to recapitalize the SAIF,
managements expects lower recurring premiums in the future.
Income Taxes
Income taxes increased due to higher 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: February 11, 1997 BY: Leo J. Rozier
Leo J. Rozier, President, Chief Executive
Officer and Duly Authorized Officer
and Principal Financial Officer