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 March 31, 1997
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 April 22, 1997
Common Stock, par value $.01 per share 808,486
FORM 10-QSB
FOR THE QUARTER ENDED MARCH 31, 1997
INDEX
PAGE NO.
PART I - Financial Information (Unaudited)
Consolidated Balance Sheets 1
Consolidated Statements of Earnings 2
Consolidated Statements of Cash Flows 3
Note 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)
March 31, September 30,
1997 1996
Assets
Cash and cash equivalents $ 3,389,550 3,236,497
Securities available for sale, at market value (amortized cost of
$32,977,369 and $34,972,835, respectively) 32,370,969 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 $29,983,917 and $30,016,120,
respectively) 29,712,859 29,818,666
Loans receivable, net 12,393,640 11,717,799
Premises and equipment, net 293,774 300,664
Accrued interest receivable:
Securities 467,483 500,824
Mortgage-backed and related securities 187,615 210,702
Loans receivable 52,891 52,324
Other assets 244,022 397,973
Total assets $ 79,714,303 81,149,444
Liabilities and Stockholders' Equity
Deposits $ 62,196,731 62,711,509
Accrued interest on deposits 112,338 130,848
Advances from FHLB of Des Moines 2,500,000 2,500,000
Advances from borrowers for taxes and insurance 102,145 146,917
Other liabilities 44,708 428,302
Accrued income taxes 156,060 159,442
Total liabilities 65,111,982 66,077,018
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 8,565 8,565
Additional paid-in capital 8,051,910 8,034,660
Common stock acquired by ESOP (570,201) (593,186)
Common stock acquired by MRP (296,314) (335,359)
Unrealized (loss) gain on securities available for sale, net (552,799) (540,409)
Treasury stock, at cost, 47,966 and 3,886 shares, respectively (831,348) (68,977)
Retained earnings - substantially restricted 8,792,508 8,567,132
Total stockholders' equity 14,602,321 15,072,426
Total liabilities and stockholders' equity $ 79,714,303 81,149,444
See accompanying note to consolidated financial statements.
2
PERRY COUNTY FINANCIAL CORPORATION AND SUBSIDIARY
Consolidated Statements of Earnings
(Unaudited)
Three Months Ended Six Months Ended
March 31, March 31,
1997 1996 1997 1996
Interest income:
Loans receivable $ 246,235 185,915 483,538 351,865
Mortgage-backed and related securities 513,117 564,460 1,003,130 1,132,174
Securities 552,359 518,701 1,106,912 1,039,341
Other interest-earning assets 54,855 24,048 128,107 51,877
Total interest income 1,366,566 1,293,124 2,721,687 2,575,257
Interest expense:
Deposits 746,300 757,383 1,515,549 1,522,361
Advances from FHLB 36,688 - 74,816 -
Total interest expense 782,988 757,383 1,590,365 1,522,361
Net interest income 583,578 535,741 1,131,322 1,052,896
Provision for loan losses - - - -
Net interest income after
provision for loan losses 583,578 535,741 1,131,322 1,052,896
Noninterest income:
Service charges on NOW accounts 6,515 6,679 13,422 14,321
Gain (loss) on sale of securities
available for sale - 2,500 (5,000) 2,500
Gain on sale of mortgage-backed and
related securities available for sale - - 139,655 -
Other 4,334 2,207 5,867 2,699
Total noninterest income 10,849 11,386 153,944 19,520
Noninterest expense:
Compensation and benefits 136,790 151,399 279,806 285,862
Occupancy expense 7,036 7,028 13,977 14,112
Equipment and data processing expense 19,931 20,340 40,198 41,138
SAIF deposit insurance premium 2,291 34,391 35,410 68,260
Professional services 21,086 33,363 40,074 53,805
Other 20,698 30,745 39,599 54,478
Total noninterest expense 207,832 277,266 449,064 517,655
Earnings before income taxes 386,595 269,861 836,202 554,761
Income taxes 150,949 93,288 311,159 199,682
Net earnings $ 235,646 176,573 525,043 355,079
Net earnings per share $ .31 .22 .68 .45
Weighted-average shares outstanding 768,713 793,179 775,474 793,754
Dividends per share $ .40 .30 .40 .30
See accompanying note to consolidated financial statements.
3
PERRY COUNTY FINANCIAL CORPORATION AND SUBSIDIARY
Consolidated Statements of Cash Flows
(Unaudited)
Six Months Ended
March 31,
1997 1996
Cash flows from operating activities:
Net earnings $ 525,043 355,079
Adjustments to reconcile net earnings to net cash provided by (used for) operating activities:
Depreciation expense 7,302 7,277
ESOP expense 40,235 33,439
MRP expense 39,045 22,733
Amortization of premiums (discounts) and loan fees, net (1,447) (39,954)
FHLB stock dividend - (11,800)
Dividends reinvested in Asset Management Fund - (3,773)
Loss (gain) on sale of securities available for sale 5,000 (2,500)
Gain on sale of mortgage-backed and related securities
available for sale (139,655) -
Decrease (increase) in:
Accrued interest receivable 55,861 (9,852)
Other assets 161,226 (15,286)
Increase (decrease) in:
Accrued interest on deposits and other liabilities (402,104) (33,135)
Accrued income taxes (3,382) 75,962
Deferred tax liability - 12,720
Net cash provided by (used for) operating activities 287,124 390,910
Cash flows from investing activities:
Loans originated, net of principal collections on loans (673,326) (1,818,077)
Mortgage-backed and related securities available for sale:
Purchased (4,232,791) (3,272,701)
Principal collections 1,633,510 2,626,146
Proceeds from sale 2,765,537 -
Securities available for sale:
Purchased (3,500,000) (8,298,500)
Proceeds from maturity or call 4,500,000 6,798,500
Proceeds from sale 995,000 1,002,500
Purchase of premises and equipment, net (412) (709)
Net cash provided by (used for) investing activities 1,487,518 (2,962,841)
Cash flows from financing activities:
Net increase (decrease) in:
Deposits (514,778) 2,018,724
Advances from borrowers for taxes and insurance (44,772) (28,109)
Purchase of treasury stock (762,372) -
Dividends paid to shareholders (299,667) (237,802)
Net cash provided by (used for) financing activities (1,621,589) 1,752,813
Net increase (decrease) in cash and cash equivalents 153,053 (819,118)
Cash and cash equivalents at beginning of period 3,236,497 3,554,902
Cash and cash equivalents at end of period $ 3,389,550 2,735,784
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest on deposits $ 1,534,059 1,568,805
Interest on advances from FHLB of Des Moines 74,816 -
Federal and state income taxes 289,338 209,160
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 note to consolidated financial statements.
4
PERRY COUNTY FINANCIAL CORPORATION AND SUBSIDIARY
Note 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 25% at March 31, 1997.
The Bank is required to maintain certain minimum capital requirements under OTS regulations. Failure
by a savings institution to meet minimum capital requirements can initiate certain actions by regulators
that, if undertaken, could have a direct material effect on the Bank's financial statements. 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. The Bank's regulatory
capital and minimum capital requirements at March 31, 1997 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)
Total capital to risk-weighed
assets $ 12,473 73.7% $ 1,354 8% $ 1,693 10%
Tier 1 capital to risk-weighted
assets 12,449 73.5% 677 4% 1,016 6%
Tier 1 capital to total assets 12,449 15.93% 2,344 3% 3,907 5%
Tangible capital to tangible
assets $ 12,449 15.93% $ 1,172 1.5% $ - -
6
PERRY COUNTY FINANCIAL CORPORATION AND SUBSIDIARY
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Commitments to originate mortgage loans at March 31, 1997 amounted to $508,000.
During the six months ended March 31, 1997, the Company repurchased $762,000 in treasury stock.
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.
Financial Condition
Assets decreased from $81.1 million at September 30, 1996 to $79.7 million at March 31, 1997.
Securities available for sale decreased from $34.3 million at September 30, 1996 to $32.4 million at
March 31, 1997 due to the sale, maturity or call of securities. Proceeds from sales, maturity or call
were used to fund loans and deposit withdrawals. Loans increased from $11.7 million at September
30, 1996 to $12.4 million at March 31, 1997. 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. During the six months
ended March 31, 1997, the Company repurchased 44,080 shares of common stock in the open market
at an average price of $17.30 per share.
Asset Quality
Loans are placed on a nonaccrual status when contractually delinquent more than ninety days. There
were no nonaccrual loans at September 30, 1996 and $39,000 of nonaccrual loans at March 31, 1997.
The interest not recognized and interest recognized on such loans for the six months ended March 31,
1997 was $1,300 and $400, respectively.
Following is a summary of the allowance for loan losses:
Balance, September 30, 1996 $ 25,000
Charge-offs -
Recoveries -
Provision for loan losses -
Balance, March 31, 1997 $ 25,000
Results of Operation
Net Earnings
Net earnings increased from $177,000 for the three months ended March 31, 1996 to $236,000 for
the three months ended March 31, 1997. Net earnings increased from $355,000 for the six months
ended March 31, 1996 to $525,000 for the six months ended March 31, 1997. The increases for the
three and six months ended March 31, 1997 over the comparable prior periods were due to higher net
interest income and lower noninterest expense offset by higher income taxes. The six months ended
March 31, 1997 also includes a net gain on sale of securities and mortgage-backed and related
securities of $135,000. Such gains are not a stable source of income and no assurance can be given
that the Company will realize gains in the future.
7
Net Interest Income
Net interest income increased from $536,000 for the three months ended March 31, 1996 to
$584,000 for the three months ended March 31, 1997. Net interest income increased from
$1,053,000 for the six months ended March 31, 1996 to $1,131,000 for the six months ended March
31, 1997. 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 this evaluation,
the Bank made no provision for loan losses for the three and six months ended March 31, 1996 and
1997.
Noninterest Income
During the three months ended March 31, 1996, securities available for sale with a carrying value of
$1.0 million were sold at a gain of $2,500. During the six months ended March 31, 1997, securities
available for sale with a carrying value of $1.0 million were sold at a loss of $5,000. During the six
months ended March 31, 1997, 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.
Noninterest Expense
Noninterest expense decreased from $277,000 for the three months ended March 31, 1996 to
$208,000 for the three months ended March 31, 1997. Noninterest expense decreased from
$518,000 for the six months ended March 31, 1996 to $449,000 for the six months ended March 31,
1997. The decrease was primarily a result of lower compensation and benefits, SAIF deposit insurance
premium, professional services and other noninterest expense. Compensation and benefits decreased
due to fewer employees in 1997, offset by an increase in the Management Recognition Plan (MRP)
expense. The MRP was implemented in January, 1996. SAIF deposit insurance premium decreased
as a result of a substantially lower assessment rate. The special assessment recorded at September
30, 1996 recapitalized the fund. Recurring SAIF premiums are expected to be assessable based on an
annual revised rate of 6.48 basis points of deposits. Professional services decreased as a result of legal
services provided in conjunction with the Bank's benefit plans in the 1996 periods. Other noninterest
expense was reduced primarily due to lower annual meeting expenses.
Income Taxes
Income taxes increased due to higher earnings before income taxes.
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: May 6, 1997 BY: Leo J. Rozier
Leo J. Rozier, President, Chief Executive
Officer, Duly Authorized Officer
and Principal Financial Officer