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 June 30, 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 July 31, 1997
Common Stock, par value $.01 per share 827,897
PERRY COUNTY FINANCIAL CORPORATION AND SUBSIDIARY
FORM 10-QSB
FOR THE QUARTER ENDED JUNE 30, 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 9
PERRY COUNTY FINANCIAL CORPORATION AND SUBSIDIARY
Consolidated Balance Sheets
(Unaudited)
June 30, September 30,
1997 1996
Assets
Cash and cash equivalents $ 3,357,305 3,236,497
Securities available for sale, at market value
(amortized cost of $34,983,792 and $34,972,835,
respectively) 34,659,062 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
$27,984,747 and $30,016,120, respectively) 27,953,695 29,818,666
Loans receivable, net 13,310,585 11,717,799
Premises and equipment, net 290,282 300,664
Accrued interest receivable:
Securities 631,259 500,824
Mortgage-backed and related securities 174,765 210,702
Loans receivable 60,229 52,324
Other assets 66,359 397,973
Total assets $ 81,105,041 81,149,444
Liabilities and Stockholders' Equity
Deposits $ 60,692,256 62,711,509
Accrued interest on deposits 114,028 130,848
Advances from FHLB of Des Moines 4,500,000 2,500,000
Advances from borrowers for taxes and insurance 131,554 146,917
Other liabilities 24,007 428,302
Income taxes payable 72,979 159,442
Total liabilities 65,534,824 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 and outstanding 8,565 8,565
Additional paid-in capital 8,098,354 8,034,660
Common stock acquired by ESOP (558,708) (593,186)
Common stock acquired by MRP (276,792) (335,359)
Unrealized gain (loss) on securities
and mortgage-backed and related securities
available for sale, net (224,143) (540,409)
Treasury stock, at cost, 28,555 and 3,886 shares (499,815) (68,977)
Retained earnings - substantially restricted 9,022,756 8,567,132
Total stockholders' equity 15,570,217 15,072,426
Total liabilities and stockholders' equity $ 81,105,041 81,149,444
See accompanying note to consolidated financial statements.
PERRY COUNTY FINANCIAL CORPORATION AND SUBSIDIARY
Consolidated Statements of Earnings
(Unaudited)
Three Months Ended Nine Months Ended
June 30, June 30,
1997 1996 1997 1996
Interest income:
Loans receivable $ 257,184 203,835 740,722 555,700
Mortgage-backed and
related securities 511,707 568,228 1,514,837 1,700,402
Securities 599,231 540,219 1,706,143 1,579,560
Other interest-earning assets 19,934 26,284 148,041 78,161
Total interest income 1,388,056 1,338,566 4,109,743 3,913,823
Interest expense:
Deposits 747,850 764,428 2,263,399 2,286,789
Advances from FHLB 47,809 21,546 122,625 21,546
Total interest expense 795,659 785,974 2,386,024 2,308,335
Net interest income 592,397 552,592 1,723,719 1,605,488
Provision for loan losses - - - -
Net interest income after
provision for loan losses 592,397 552,592 1,723,719 1,605,488
Noninterest income:
Gain (loss) on sale of securities
available for sale (12,500) 4,375 (17,500) 6,875
Gain (loss) on sale of
mortgage-backed and related
securities available for sale 8,415 - 148,070 -
Service charges on NOW accounts 6,815 7,223 20,237 21,544
Gain on investment in data center - 17,679 - 17,679
Other 964 531 6,831 3,230
Total noninterest income 3,694 29,808 157,638 49,328
Noninterest expense:
Compensation and benefits 137,218 302,304 417,024 588,166
Occupancy expense 6,920 6,938 20,897 21,050
Equipment and data
processing expense 18,967 19,658 59,165 60,796
SAIF deposit insurance premium 10,098 34,574 45,508 102,834
Professional services 32,086 21,894 72,160 75,699
Other 12,854 17,054 52,453 71,532
Total noninterest expense 218,143 402,422 667,207 920,077
Earnings before income taxes 377,948 179,978 1,214,150 734,739
Income taxes 147,700 71,317 458,859 270,999
Net earnings $ 230,248 108,661 755,291 463,740
Net earnings per share $ .30 .14 .98 .59
Weighted-average shares outstanding 770,894 782,738 774,413 790,124
Dividends per share $ .00 .00 .40 .30
See accompanying note to consolidated financial statements.
PERRY COUNTY FINANCIAL CORPORATION AND SUBSIDIARY
Consolidated Statements of Cash Flows
(Unaudited)
Nine Months Ended
June 30,
1997 1996
Cash flows from operating activities:
Net earnings $ 755,291 463,740
Adjustments to reconcile net earnings to
net cash provided by (used for) operating
activities:
Depreciation expense 10,925 10,903
ESOP expense 62,645 62,063
MRP expense 58,567 198,284
Amortization of premiums (discounts)
and loan fees, net (134,343) (37,999)
FHLB stock dividend - (11,800)
Dividends reinvested in Asset Management Fund - (5,611)
Loss (gain) on sale of securities available
for sale 17,500 (6,875)
Loss (gain) on sale of mortgage-backed and
related securities available for sale (148,070) -
Decrease (increase) in:
Accrued interest receivable (102,403) (131,532)
Other assets 145,860 205,493
Increase (decrease) in:
Accrued interest on deposits and other
liabilities (421,115) (22,447)
Income taxes payable (86,463) (267,527)
Net cash provided by (used for)
operating activities 158,394 456,692
Cash flows from investing activities:
Loans originated, net of principal
collections on loans (1,587,538) (3,290,255)
Mortgage-backed and related securities
available for sale:
Purchased (5,259,212) (4,254,451)
Principal collections 2,961,817 3,954,136
Proceeds from sale 4,594,985 -
Securities available for sale:
Purchased (8,500,000) (11,798,500)
Proceeds from maturity or call 6,500,000 6,798,564
Proceeds from sale 1,982,500 2,006,875
Purchase of premises and equipment, net (543) (1,959)
Net cash provided by (used for)
investing activities 692,009 (6,585,590)
Cash flows from financing activities:
Net increase (decrease) in:
Deposits (2,019,253) 2,343,745
Advances from borrowers for taxes
and insurance (15,363) 14,667
Proceeds from advance from FHLB of Des Moines 4,500,000 2,500,000
Payment of advance from FHLB of Des Moines (2,500,000) -
Exercise of stock options 406,809 -
Purchase of treasury stock (802,121) (584,500)
Dividends paid to shareholders (299,667) (237,801)
Net cash provided by (used for)
financing activities (729,595) 4,036,111
Net increase (decrease) in cash
and cash equivalents 120,808 (2,092,787)
Cash and cash equivalents at beginning of period 3,236,497 3,554,902
Cash and cash equivalents at end of period $ 3,357,305 1,462,115
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest on deposits $ 2,280,219 2,312,039
Interest on advances from FHLB of Des Moines 122,625 21,546
Federal and state income taxes 403,740 383,460
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 note to consolidated financial statements.
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.
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
Bank need additional funds.
For regulatory purposes, liquidity is measured as a ratio of cash and certain
investments to withdrawable deposits and short-term borrowings. The minimum level
of liquidity required by regulation is presently 5%. The Bank's regulatory liquidity
ratio was approximately 24% at June 30, 1997.
Under the capital adequacy guidelines and regulatory framework for prompt
corrective action, the Association must meet specific capital guidelines that
involve quantitative measures of the Association'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
June 30, 1997, the Association was categorized as well capitalized under the
regulatory framework for prompt corrective action.
PERRY COUNTY FINANCIAL CORPORATION AND SUBSIDIARY
Management's Discussion and Analysis of
Financial Condition and Results of Operations
The Association's regulatory capital and regulatory 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)
Consolidated stockholders' equity $ 15,570
Stockholders' equity of Company $ (3,075)
GAAP capital $ 12,495
Unrealized loss on securities
available for sale, net $ 208
Tangible capital $ 12,703 16.2% $ 1,180 1.5%
General valuation allowance $ 25
Total capital to risk-weighted assets $ 12,728 72.6% $ 1,402 8.0% $ 1,752 10.0%
Tier 1 capital to risk-weighted assets $ 12,703 72.5% $ 701 4.0% $ 1,051 6.0%
Tier 1 capital to total assets $ 12,703 16.2% $ 2,359 3.0% $ 3,932 5.0%
Commitments to originate mortgage loans at June 30, 1997 amounted to $587,000.
During the nine months ended June 30, 1997, treasury stock of the Company
increased by $431,000. 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 remained at approximately $81.1 million at September 30, 1996 and June 30,
1997. Advances from the FHLB and proceeds from sales, maturity or call of
securities were used to fund loan originations and deposit account withdrawals.
The Bank's loan portfolio increased from $11.7 million at September 30, 1996 to
$13.3 million at June 30, 1997. 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 nine
months ended June 30, 1997, the Company repurchased 46,080 shares of common
stock in the open market at an average price of $17.41 per share. Of such shares,
21,411 shares were issued upon the exercise of stock options at $19.00 per share.
At June 30, 1997, there were 9,877 shares exercisable.
PERRY COUNTY FINANCIAL CORPORATION AND SUBSIDIARY
Management's Discussion and Analysis of
Financial Condition and Rusults of Operations
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 $24,000
of nonaccrual loans at June 30, 1997. The interest not recognized and interest
recognized on such loans for the nine months ended June 30, 1997 was $1,400 and
$200, 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, June 30, 1997 $ 25,000
Results of Operation
Net Earnings
Net earnings increased from $109,000 for the three months ended June 30, 1996 to
$230,000 for the three months ended June 30, 1997. Net earnings increased from
$464,000 for the nine months ended June 30, 1996 to $755,000 for the nine months
ended June 30, 1997. The increases were due to higher net interest income and
lower noninterest expense offset by higher income taxes. For the nine month
periods, the increase in net income was also due to higher noninterest income.
Net Interest Income
Interest income increased from $1,339,000 for the three months ended June 30,
1996 to $1,388,000 for the three months ended June 30, 1997. Interest income
increased from $3,914,000 for the nine months ended June 30, 1996 to $4,110,000
for the nine months ended June 30, 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 on deposits
decreased due to a decline in deposit accounts. 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 nine months ended June 30, 1997 and 1996.
PERRY COUNTY FINANCIAL CORPORATION AND SUBSIDIARY
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Noninterest Income
During the three and nine months ended June 30, 1996, securities available for
sale with a carrying value of $1.0 million and $2.0 million were sold at a gain of
$4,000 and $7,000, respectively. During the three and nine months ended June 30,
1997, securities available for sale with a carrying value of $1.0 and $2.0 million
were sold at a loss of $12,500 and $17,500, respectively. During the three and
nine months ended June 30, 1997, mortgage-backed and related securities with a
balance of $2.8 million and $4.6 million were sold, resulting in gains of $8,000 and
$148,000, respectively. The sales were primarily small balance pools and one
collateralized mortgage obligation of $500,000. The Association had recorded a
gain on investment in data center of $18,000 for the three and nine months ended
June 30, 1996. No such gain was recorded for the comparable 1997 periods.
Noninterest Expense
Noninterest expense decreased from $402,000 for the three months ended June
30, 1996 to $218,000 for the three months ended June 30, 1997. Noninterest
expense decreased from $920,000 for the nine months ended June 30, 1996 to
$667,000 for the nine months ended June 30, 1997. The decrease was primarily a
result of lower compensation and benefits and SAIF deposit insurance premium
expense. Compensation and benefits decreased due primarily to lower Management
Recognition Plan (MRP) expense. MRP expense for the three and nine months ended
June 30, 1997, included $156,000 related to acceleration of vesting of MRP shares
upon the death of an officer. 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 approximately
6.48 basis points of deposits.
Income Taxes
Income taxes increased due to higher pretax earnings.
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: August 11, 1997 BY: Leo J. Rozier
Leo J. Rozier, President, Chief Executive
Officer and Duly Authorized Officer
and Principal Financial Office