UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1999
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 NUMBER 0-25088
PERRY COUNTY FINANCIAL CORPORATION
- - -------------------------------------------------------------------------------
(Name of small business issuer in its charter)
MISSOURI 43-1694505
- - -------------------------------------------------------------------------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
14 North Jackson Street, Perryville, Missouri 63775
- - -------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (573) 547-4581
Securities Registered Pursuant to Section 12(b) of the Act:
NONE
- - -------------------------------------------------------------------------------
Securities Registered Pursuant to Section 12(g) of the Act:
COMMON STOCK, PAR VALUE $0.01 PER SHARE
- - -------------------------------------------------------------------------------
(Title of class)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 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 ___.
Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B contained herein, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [ ]
State the issuer's revenues for its most recent fiscal year:
$6.6 million.
The aggregate market value of the voting stock held by non-affiliates
of the registrant, computed by reference to the average of the bid and ask price
of such stock as of December 16, 1999, was approximately $12.1 million. (The
exclusion from such amount of the market value of the shares owned by any
person shall not be deemed an admission by the registrant that such person
is an affiliate of the registrant.)
As of November 30, 1999, there were 741,928 shares
issued and outstanding of the Registrant's Common Stock.
DOCUMENTS INCORPORATED BY REFERENCE
Parts II and IV of Form 10-KSB - Annual Report to Stockholders for the
fiscal year ended September 30, 1999.
Part III of Form 10-KSB - Proxy Statement for 1999 Annual Meeting of
Stockholders.
PART I
ITEM 1. DESCRIPTION OF BUSINESS
GENERAL
THE COMPANY. Perry County Financial Corporation (the "Company") a
Missouri corporation, was formed in September 1994 to act as the holding company
for Perry County Savings Bank, FSB (the "Bank" or "Perry County") upon the
completion of the Bank's conversion from the mutual to the stock form (the
"Conversion"). The Company received approval from the Office of Thrift
Supervision (the "OTS") to acquire all of the common stock of the Bank to be
outstanding upon completion of the Conversion. The Conversion was completed on
February 10, 1995. All references to the Company prior to February 10, 1995,
except where otherwise indicated, are to the Bank.
At September 30, 1999, the Company had $96.6 million of assets and
stockholders' equity of $13.2 million (or 13.7% of total assets).
The executive offices of the Company are located at 14 North Jackson
Street, Perryville, Missouri 63775, and its telephone number at that address is
(573) 547-4581.
The activities of the Company itself have been limited to investments
in U.S. Treasury and Federal Agency Obligations, interest-bearing deposits at
financial institutions and a note receivable from the Bank's Employee Stock
Ownership Plan. Unless otherwise indicated, all activities discussed
below are of the Bank.
THE BANK. The Bank is a federally chartered stock savings association
headquartered in Perryville, Missouri. Its deposits are insured up to applicable
limits by the Federal Deposit Insurance Corporation (the "FDIC"), which is
backed by the full faith and credit of the United States. The Bank's primary
market area is Perry County, Missouri, which is serviced through its office in
Perryville, Missouri.
The principal business of the Bank consists of attracting retail
deposits from the general public and using such deposits to purchase securities
and mortgage-backed securities and to originate mortgage loans secured by one-
to four-family residences and, to a lesser extent, commercial, construction,
development and multi-family real estate loans and loans secured by deposit
accounts. At September 30, 1999, at least 90% of the Bank's real estate mortgage
loans were secured by properties located in Missouri.
The Bank's revenues are derived primarily from interest earned on
securities, mortgage- backed securities and on mortgage loans. The Bank does not
originate loans to fund leveraged buyouts, and has no loans to foreign
corporations or governments. The Bank only solicits deposits in its primary
market area and does not accept brokered deposits.
2
FORWARD-LOOKING STATEMENTS
When used in this Form 10-KSB and in future filings by the Company with
the Securities and Exchange Commission (the "SEC"), in the Company's press
releases or other public or shareholder communications, and in oral statements
made with the approval of an authorized executive officer, the words or phrases
"will likely result", "are expected to", "will continue", "is anticipated",
"estimate", "project" or similar expressions are intended to identify
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. Such statements are subject to risks and
uncertainties, including but not limited to changes in economic conditions in
the Company's market area, changes in policies by regulatory agencies,
fluctuations in interest rates, demand for loans in the Company's market area
and competition, all or some of which could cause actual results to differ
materially from historical earnings and those presently anticipated or
projected. The Company wishes to caution readers not to place undue reliance on
any such forward-looking statements, which speak only as of the date made and
are subject to the above-stated qualifications in any event. The Company wishes
to advise readers that the factors listed above could affect the Company's
financial performance and could cause the Company's actual results for future
periods to differ materially from any opinions or statements expressed with
respect to future periods in any current statements.
The Company does not undertake--and specifically declines any
obligation--to publicly release the result of any revisions which may be made to
any forward-looking statements to reflect events or circumstances after the date
of such statements or to reflect the occurrence of anticipated or unanticipated
events.
LENDING ACTIVITIES
MARKET AREA. The Bank's office is located at 14 North Jackson Street in
Perryville, Missouri. Through this office, the Bank currently serves primarily
Perry County. Perryville, Missouri is located approximately 80 miles south of
St. Louis, Missouri. Perryville is the County Seat of Perry County. Perry County
has a population of approximately 17,000. The major employers in Perry County
are engaged in light industry and include Gilster-Mary Lee, Sabreliner
Corporation, Miraculous Medal Association, East Perry Lumber Company, NPS
Corporation, TG (USA) Corporation, Perry Crating Company and Solar Press.
GENERAL. The Bank's loan portfolio consists primarily of conventional,
first mortgage loans secured by one- to four-family residences and, to a lesser
extent, consumer, multi-family and commercial real estate loans and construction
or development loans. At September 30, 1999, the Bank's gross loans outstanding
totaled $17.0 million, of which $14.4 million or 84.7% were one-to four-
family residential mortgage loans. One- to four-family mortgage loans
were primarily fixed rate loans. At that same date, commercial and multi-
family residential real estate loans totaled $644,000, all of which were
fixed-rate loans. Also at that date, the Bank's construction and
land loans totaled $1.0 million or 6.1% of the Bank's total loan
portfolio, all of which were fixed-rate loans. Loans secured by deposit
accounts were $280,000 at September 30, 1999.
3
The Bank and the Company also invest in mortgage-backed and related
securities and U.S. government and agency obligations. At September 30, 1999,
mortgage-backed securities totaled $36.5 million or 37.8% of total
assets and U.S. government and agency obligations totaled $37.6 million or
38.9% of total assets. See "Investment Activities."
All loans up to $85,000 must be approved by the Bank's President.
Requests for loans greater than $85,000 are reviewed and considered for
approval by the Board of Directors on a case-by-case basis. The Bank's loans
- - -to-one-borrower limit is generally limited to the greater of 15% of
unimpaired capital and surplus or $500,000. See "Regulation - Federal
Regulation of Savings Associations." At September 30, 1999, the maximum
amount which the Bank could have lent under this limit to any one borrower and
the borrower's related entities was approximately $2.1 million.
At September 30, 1999, the Bank had no loans or groups of loans to related
borrowers with outstanding balances in excess of this amount. The Bank's
largest lending relationship at September 30, 1999 was a
commercial loan of $384,000. The next largest lending relationship at
September 30, 1999 was a commercial loan of $350,000. Both loans were
current as of September 30, 1999.
LOAN PORTFOLIO COMPOSITION. The following information concerning the
composition of the Bank's loan portfolios in dollar amounts and in percentages
(before deductions for loans in process, deferred fees and discounts and
allowances for losses) as of the dates indicated.
September 30,
--------------------------------------------------------------------------
1999 1998 1997
--------------------------------------------------------------------------
Amount Percent Amount Percent Amount Percent
--------------------------------------------------------------------------
(Dollars in Thousands)
REAL ESTATE LOANS:
One- to four-family..................... $14,379 84.7% $13,496 84.4% $11,844 81.5%
Multi-family............................ 26 .2 42 0.3 64 0.4
Commercial.............................. 618 3.6 727 4.6 726 5.0
Construction or land.................... 1,669 9.8 1,269 7.9 1,519 10.5
--------- ------- ------- ----- ------- -----
Total real estate loans............. 16,692 98.3 15,534 97.2 14,153 97.4
--------- ------- ------- ----- ------- -----
OTHER LOANS:
Consumer Loans:
Deposit account........................ 280 1.7 454 2.8 382 2.6
--------- ------- ------- ----- ------- -----
Total consumer loans................ 280 1.7 454 2.8 382 2.6
--------- ------- ------- ----- ------- -----
Total loans......................... 16,972 100.0% 15,988 100.0% 14,535 100.0%
======= ===== =====
LESS:
Loans in process........................ 329 190 591
Deferred fees and discounts............. 13 9 9
Allowance for losses.................... 30 25 25
--------- ------- -------
Total loans receivable, net............. $16,600 $15,764 $13,910
========= ======= =======
4
Adjustable rate loans included in the loan portfolio amounted to
$504,000 at September 30, 1999.
The following table sets forth certain information at September 30,
1999 regarding the dollar amount of principal repayments becoming due during the
periods indicated for loans. The table below does not include any estimate of
prepayments which significantly shorten the average life of all loans and may
cause the Bank's actual repayment experience to differ from that shown below.
Construction loans are automatically converted to permanent loans, and are
included in the related real estate mortgage loans category.
Real Estate Loans Secured by
Mortgage Loans(2) Deposit Accounts Total
---------------------------------------------------
(Dollars in Thousands)
Due During Years Ending:
Within 1 year(1)................... $ 6 $ 280 $ 286
After 1 year through 3 years....... 45 - 45
After 3 years through 5 years...... 172 - 172
After 5 years through 10 years..... 888 - 888
Beyond 10 years.................... 15,581 - 15,581
------------ ----------- ----------
Total gross loans........... $ 16,692 $ 280 $16,972
============ =========== ==========
(1) Includes demand loans and loans having no stated maturity.
(2) Includes single- and multi-family loans, construction, land and
commercial loans.
The following table sets forth the dollar amount of all real estate
mortgage loans at September 30, 1999, due after September 30, 2000, which have
fixed interest rates and adjustable interest rates.
Real Estate
Mortgage Loans(1)
-------------------------
(Dollars in Thousands)
Fixed rate........................................... $16,182
Adjustable rate...................................... 504
______
Total gross loans............................. $16,686
======
(1) Includes single and multi-family loans, construction, land and commercial
loans.
ONE- TO FOUR-FAMILY RESIDENTIAL REAL ESTATE LENDING. The Bank's primary
lending activity consists of the origination of one- to four-family residential
mortgage loans secured by property located in the Bank's primary market area. At
September 30, 1999, $14.4 million, or 84.7%, of the Bank's gross loan
portfolio consisted of permanent loans secured by one- to four-family
residences. Approximately 90% of these loans were located in the
Bank's market area.
At September 30, 1999, the Bank offered one- to four-family residential
fixed rate loans with loan payments (amortization) based on a 25 year maturity,
5
but with a loan term of 20 years. In prior years, the Bank originated fixed rate
loans with terms to maturity up to 30 years, and during fiscal 1999 the Bank
offered fixed rate residential mortgage loans based on a 20 year maturity.
At September 30, 1999, the total balance of one- to four-family fixed rate
loans was $13.9 million or 81.8% of the Bank's gross loan portfolio.
The Bank also offers one- to four-family residential adjustable rate
mortgages ("AMLs") which are fully amortizing loans with contractual maturities
of up to 20 years. The interest rates on substantially all of the AMLs
originated by the Bank are subject to adjustment after the initial period at one
year intervals. The Bank's AML products generally carry interest rates which are
reset to a stated margin over an independent index. Increases or decreases in
the interest rate of the Bank's AMLs are generally limited to 2% at any
adjustment date and 6% over the life of the loan. The Bank's AMLs do not contain
prepayment penalties and do not produce negative amortization. At September 30,
1999, the total balance of one- to four-family AMLs was $.5 million, or
3.0% of the Bank's gross loan portfolio.
The Bank evaluates both the borrower's ability to make principal and
interest payments and the value of the property that will secure the loan. Perry
County also verifies the borrower's employment history and the source of the
downpayment.
The Bank generally originates residential mortgage loans with
loan-to-value ratios up to 80%. The Bank does not require private mortgage
insurance on its loans. As a result of the lack of insurance, in the event of a
foreclosure, the Bank is subject to a potential risk of loss on the disposition
of such property in the event of a decrease in value of the property. The Bank
has, however, had a very limited loss experience on such loans. See
"Non-Performing Assets and Classified Assets." Property securing real estate
loans made by Perry County is appraised by independent appraisers. The Bank
requires evidence of marketable title and lien position on all loans secured by
real property and requires homeowners or fire and extended coverage casualty
insurance in amounts at least equal to the principal amount of the loan or the
value of improvements on the property, depending on the type of loan. The Bank
may also require flood insurance to protect the property securing its interest.
Residential mortgage loan originations derive from a number of sources,
including real estate and mortgage broker referrals, existing borrowers and
depositors, builders and walk-in customers. Loan applications are accepted at
the Bank's office.
In the past, the Bank has purchased one- to four-family residential
mortgage loans secured by property located outside its market area. The loans
purchased were reviewed by the Bank prior to purchase for compliance with its
own underwriting standards. Some of these loans did, however, exceed the 80%
loan-to-value ratio requirement (but were covered by private mortgage insurance
which reduced the Bank's exposure to no more than 80%). The Bank's purchased
loans are wellseasoned, since it has not purchased any such loans for at least
five years. The Bank's purchased residential mortgage loans have performed in
a manner consistent with its originated loans.
MULTI-FAMILY AND COMMERCIAL REAL ESTATE LENDING. The Bank has also
engaged in a limited amount of multi-family and commercial real estate lending
in its market area. At September 30, 1999, the Bank had $644,000 in its
6
multi-family and commercial real estate loan portfolio. The Bank does
not currently purchase these types of loans. These loans represented
3.8% of the Bank's gross loan portfolio.
The Bank's multi-family and commercial real estate loan portfolio is
secured primarily by office, other commercial or apartment buildings.
Commercial and multi-family real estate loans generally have terms that do
not exceed 20 years and are made in amounts up to 80% of the appraised value
of the security property. All of these loans have fixed rates of interest.
In underwriting these loans, the Bank currently analyzes the financial
condition of the borrower (including a review of the borrower's personal
financial statements), the borrower's credit history, and the reliability
and predictability of the cash flow generated by the property securing
the loan. The Bank may also require a personal guarantee from the borrower
on these loans. Appraisals on properties securing commercial real estate
loans originated by the Bank are, to the extent required by federal
regulations, performed by independent appraisers.
Multi-family and commercial real estate loans generally present a
higher level of risk than loans secured by one- to four-family residences. This
greater risk is due to several factors, including the concentration of principal
in a limited number of loans and borrowers, the effect of general economic
conditions on income producing properties and the increased difficulty of
evaluating and monitoring these types of loans. Furthermore, the repayment of
loans secured by multi-family and commercial real estate is typically dependent
upon the successful operation of the related real estate project. If the cash
flow from the project is reduced (for example, if leases are not obtained or
renewed, or a bankruptcy court modifies a lease term, or a major tenant is
unable to fulfill its lease obligations), the borrower's ability to repay the
loan may be impaired.
CONSTRUCTION LENDING. At September 30, 1999, the Bank had $1.0
million of construction and development loans. Perry County offers
loans to individuals for the construction of their residences, as well as
to builders principally for the construction of one- to four-family
residences.Currently, such loans are offered with fixed rates of interest.
Following the six month construction period, these loans may become permanent
loans.
Construction lending generally affords the Bank an opportunity to
receive interest at rates higher than those obtainable from residential lending.
Nevertheless, construction lending is generally considered to involve a higher
level of credit risk than one- to four-family residential lending since the risk
of loss on construction loans is dependent largely upon the accuracy of the
initial estimate of the individual property's value upon completion of the
project and the estimated cost (including interest) of the project. If the cost
estimate proves to be inaccurate, the Bank may be required to advance funds
beyond the amount originally committed to permit completion of the project.
CONSUMER LENDING. The only consumer loans offered by the Bank are loans
secured by deposit accounts. At September 30, 1999, the Bank's consumer loan
portfolio totaled $280,000 or 1.7% of the Bank's gross loan portfolio.
The Bank lends up to 90% of the amount of the deposit and the rate is
currently the greater of 6.75% per annum or 1.5% above the certificate rate on
the pledged account.
7
LOAN ORIGINATIONS
Loan originations are developed from continuing business with
depositors and borrowers, soliciting realtors and builders and walk-in
customers. Loans are originated by the Bank's staff of salaried loan officers.
When the Bank originates a loan, it retains the servicing. Loan applications are
taken, processed in the administrative office of the Bank, and then submitted to
the President or the Board, as appropriate.
The Bank's ability to originate loans is dependent upon the customer
demand for loans in its market. Demand is affected by the local economy and
interest rate environment.
The Bank has not sold any of its loans and does not currently
contemplate doing so in the future. While the Bank has purchased and
participated in loans in the past, it does not currently contemplate purchasing
or participating in new loans.
The following table shows the loan origination activities of the Bank
for the periods indicated.
Year Ended September 30,
--------------------------------------------
1999 1998 1997
--------------------------------------------
(In Thousands)
ORIGINATIONS BY TYPE:
Adjustable rate:
Real estate - one- to four-family..... $ - $ --- $ 71
---------- ------ ------
Total adjustable-rate.......... - --- 71
---------- ------ ------
Fixed rate:
Real estate - commercial and development 603 467 238
Real estate - one- to four-family....... 5,376 6,449 4,996
Non-real estate - consumer.............. 611 786 716
---------- ------ ------
Total fixed-rate................. 6,590 7,702 5,950
---------- ------ ------
Total loans originated........... $6,590 $7,702 $6,021
========== ====== ======
NON-PERFORMING ASSETS AND CLASSIFIED ASSETS
When a borrower fails to make a required payment on a mortgage loan
within 35 days of its due date, a late notice is mailed by the Bank to the
borrower. If payment is not made after the first notice, a second notice is
mailed to the borrower approximately 15 days from the date of the first notice.
If payments are over 60 days delinquent, personal contact with the
borrower will be made by a representative of the Bank to establish satisfactory
payment arrangements.
Normally after the loan is 95 days past due and satisfactory payment
arrangements have not been made, the loan will be recommended by management to
the Board of Directors for foreclosure. An evaluation of the value of the
security is made at that time, and an appraisal is made at the time a property
is acquired through foreclosure.
8
When deemed appropriate by management, Perry County may acquire the
real estate by deed in lieu of foreclosure as an alternative to a foreclosure
action. The decision as to when to begin foreclosure proceedings is based on
such factors as the amount of loan in relation to the original indebtedness, the
extent of the delinquency and the borrower's ability and willingness to
cooperate in curing the delinquency. Should a foreclosure occur, the real estate
is sold at public sale and may be purchased by the Bank.
The following table sets forth the Bank's loan delinquencies by type,
by amount and by percentage of type at September 30, 1999.
Loans Delinquent For:
----------------------------------------------------------------- Total Loans Delinquent
60-89 Days 90 Days and Over 60 Days and Over
----------------------------------------------------------------- --------------------------------
Percent Percent Percent
of Loan of Loan of Loan
Number Amount Category Number Amount Category Number Amount Category
----------------------------------------------------------------- --------------------------------
(Dollars in Thousands)
Real Estate:
One- to four-family...... - $ - - % - $ - - % - $ - - %
----- ------ ----- ------ ----- ------
Total................. - $ - - % - $ - - % - $ - - %
===== ====== ===== ====== ===== ======
ASSET QUALITY. The Bank currently concentrates its lending activity
primarily on one- to four-family mortgage loans in Perry County, Missouri and
has traditionally experienced low non-performing asset levels. At September 30,
1999, the Bank had no non-performing assets, which is below average for
comparable institutions. See "- Allowance for Losses on Loans."
The table below sets forth the amounts and categories of non-performing
assets in the Bank's loan portfolio. Loans are placed on non-accrual status when
the collection of principal and/or interest become doubtful. For all years
presented, the Bank has had no troubled debt restructurings (which involve
forgiving a portion of interest or principal on any loans or making loans at a
rate materially less than that of market rates) and no foreclosed assets.
Foreclosed assets include assets acquired in settlement of loans.
September 30,
--------------------------
1999 1998 1997
--------------------------
(Dollars in Thousands)
Non-accruing loans:
One- to four-family................................ $--- $--- $ 11
---- ---- -----
Total........................................... ---- --- 11
---- ---- -----
Total non-performing assets.......................... $--- $--- $ 11
==== ==== =====
Total as a percentage of total assets................ ---% ---% 0.06%
==== ==== =====
OTHER LOANS OF CONCERN. As of September 30, 1999 there were no loans
classified by the Bank with respect to which known information about the
possible credit problems of the borrowers or the cash flows of the security
properties have caused management to have some doubts as to the ability of the
borrowers to comply with present loan repayment terms and which may result in
the future inclusion of such items in the non-performing asset categories.
9
CLASSIFIED ASSETS. Federal regulations provide for the classification
of loans and other assets such as debt and equity securities considered by the
OTS to be of lesser quality as "substandard," "doubtful" or "loss." An asset is
considered "substandard" if it is inadequately protected by the current net
worth and paying capacity of the obligor or of the collateral pledged, if any.
"Substandard" assets include those characterized by the "distinct possibility"
that the savings association will sustain "some loss" if the deficiencies are
not corrected. Assets classified as "doubtful" have all of the weaknesses
inherent in those classified "substandard," with the added characteristic that
the weaknesses present make "collection or liquidation in full," on the basis of
currently existing facts, conditions, and values, "highly questionable and
improbable." Assets classified as "loss" are those considered "uncollectible"
and of such little value that their continuance as assets without the
establishment of a specific loss allowance is not warranted.
When a savings association classifies problem assets as either
substandard or doubtful, it may establish general allowances for loan losses in
an amount deemed prudent by management. General allowances represent loss
allowances which have been established to recognize the inherent risk associated
with lending activities, but which, unlike specific allowances, have not been
allocated to particular problem assets. When a savings association classifies
problem assets as "loss," it is required either to establish a specific
allowance for losses equal to 100% of that portion of the asset so classified or
to charge-off such amount. An association's determination as to the
classification of its assets and the amount of its valuation allowances is
subject to review by the association's District Director at the regional OTS
office, who may order the establishment of additional general or specific loss
allowances.
In connection with the filing of its periodic reports with the OTS and
in accordance with its classification of assets policy, the Bank regularly
reviews the loans in its portfolio to determine whether any loans require
classification in accordance with applicable regulations. On the basis of
management's review of its assets, at September 30, 1999, the Bank had no assets
classified as substandard.
ALLOWANCE FOR LOSSES ON LOANS. The allowance for loan losses is
established through a provision for loan losses based on management's evaluation
of the risk inherent in its loan portfolio and changes in the nature and volume
of its loan activity. Such evaluation, which includes a review of all loans of
which full collectibility may not be reasonably assured, considers among other
matters, the estimated fair value (generally, the amount that could reasonably
be expected to be received in a current sale between a willing buyer and a
willing seller) of the underlying collateral, economic conditions, historical
loan loss experience and other factors that warrant recognition in providing for
an adequate loan loss allowance.
Although management believes that it uses the best information
available to determine the allowances, unforeseen market conditions could result
in adjustments and net earnings could be significantly affected if circumstances
differ substantially from the assumptions used in making the final
determination. Future additions to the Bank's allowances will be the result of
periodic loan, property and collateral reviews and thus cannot be predicted in
advance and no assurance can be made that future additions to the allowance will
not be as large or larger than those in previous years. At September 30, 1999,
the Bank had a total allowance for losses on loans of $30,000, or .18% of
total gross loans. See Note 5 of the Notes to Consolidated
Financial Statements.
10
The following table sets forth an analysis of the Bank's allowance for
loan losses.
Year Ended
September 30,
---------------------------
1999 1998 1997
---------------------------
(Dollars in Thousands)
Balance at beginning of period................. $ 30 $ 25 $ 25
Net charge-offs................................ --- --- ---
Additions charged to operations................ 5 --- ---
------ ---- ----
Balance at end of period....................... $ 30 $ 25 $ 25
====== ==== ====
Ratio of net charge-offs during the period to
average loans outstanding during the period... ---% ---% ---%
====== ==== ====
Ratio of net charge-offs during the period to
average non-performing assets................. ---% ---% ---%
====== ==== ====
11
The distribution of the Bank's allowance for losses on loans at the
dates indicated is summarized as follows:
September 30,
-----------------------------------------------------------------------------
1999 1998
-----------------------------------------------------------------------------
Percentage Percent of Percentage Percent of
of Loans Allowance of Loans Allowance
Amount in Each to Gross Amount in Each to Gross
of Loan Category Loans in of Loan Category Loans in
Loss to Total Each Loss to Total Each
Allowance Gross Loans Category Allowance Gross Loans Category
-----------------------------------------------------------------------------
(Dollars in Thousands)
One- to four-family........... $ 30 84.7% .21% $ 25 0.19% 84.4%
Multi-family.................. --- .2 --- --- --- 0.3
Commercial real estate........ --- 3.6 --- --- --- 4.6
Construction or development... --- 9.8 --- --- --- 7.9
Consumer...................... --- 1.7 --- --- --- 2.8
Unallocated................... --- --- --- --- --- ---
-------- -------- -------- ---- ------ ------
Total................... $ 30 100.0% .21% $ 25 .19% 100.0%
======== ======== ======== ==== ====== ======
September 30,
-------------------------------------
1997
-------------------------------------
Percentage Percent of
of Loans Allowance
Amount in Each to Gross
of Loan Category Loans in
Loss to Total Each
Allowance Gross Loans Category
-------------------------------------
One- to four-family........... $ 25 81.5% 0.21%
Multi-family.................. --- 0.4 ---
Commercial real estate........ --- 5.0 ---
Construction or development... --- 10.5 ---
Consumer...................... --- 2.6 ---
Unallocated................... --- --- ---
---- ------ -----
Total................... $ 25 100.0% 0.21%
==== ====== =====
12
INVESTMENT ACTIVITIES
Perry County must maintain minimum levels of investments that qualify
as liquid assets under OTS regulations. Liquidity may increase or decrease
depending upon the availability of funds and comparative yields on investments
in relation to the return on loans. Historically, the Bank has generally
maintained its liquid assets above the minimum requirements imposed by the OTS
regulations and at a level believed adequate to meet requirements of normal
daily activities, repayment of maturing debt and potential deposit outflows. As
of September 30, 1999, the Bank met its regulatory liquidity ratio
requirement (which is the ratio of liquid assets as a percentage of net
withdrawable savings deposits and current borrowings). See "Regulation -
Liquidity."
Federally chartered savings institutions have the authority to invest
in various types of liquid assets, including United States Treasury obligations,
securities of various federal agencies, certain certificates of deposit of
insured banks and savings institutions, certain bankers' acceptances, repurchase
agreements and federal funds. Subject to various restrictions, federally
chartered savings institutions may also invest their assets in commercial paper,
investment grade corporate debt securities and mutual funds whose assets conform
to the investments that a federally chartered savings institution is otherwise
authorized to make directly.
Generally, the investment policy of the Bank is to invest funds among
various categories of investments and maturities based upon the Bank's need for
liquidity, to achieve the proper balance between its desire to minimize risk and
maximize yield, to provide collateral for borrowings, and to fulfill the Bank's
asset/liability management policies.
MORTGAGE-BACKED SECURITIES. The Bank first began making significant
purchases of mortgage-backed securities in the early 1980s as an alternative to
home mortgage originations for portfolio when management determined that such
investments would produce higher risk-adjusted yields for the Bank in light of
the competition and limited consumer demand for home mortgages in its market
area. The Bank's current investment strategy emphasizes mortgage-backed
securities with high credit quality, high cash flow, high liquidity and
minimal prepayment risk. The Bank has invested primarily in federal agency
securities, principally Freddie Mac, Ginnie Mae and Fannie Mae obligations
and certain types of CMOs. See Note 4 of the Notes to Consolidated
Financial Statements.
The Fannie Mae, Freddie Mac and Ginnie Mae certificates are modified
pass-through mortgage-backed securities that represent undivided interests in
underlying pools of fixed-rate, or certain types of adjustable rate,
single-family residential mortgages issued by these government- sponsored
entities. Fannie Mae and Freddie Mac provide the certificate holder a guarantee
of timely payments of interest and scheduled principal payments, whether or not
they have been collected. Ginnie Mae's guarantee to the holder of timely
payments of principal and interest is backed by the full faith and credit of the
U.S. government.
A CMO is a special type of pass-through debt in which the stream of
principal and interest payments on the underlying mortgages or mortgage-backed
securities is used to create classes with different maturities and, in some
cases, amortization schedules, as well as a residual interest, with each such
class possessing different risk characteristics. Management believes these
securities may represent attractive alternatives relative to other investments
13
due to the wide variety of maturity and repayment options available through such
investments. The Bank did not hold any CMOs at September 30, 1999. The
Bank does not anticipate purchasing significant amounts of CMOs in the future.
Mortgage-backed securities generally yield less than the loans that
underlie such securities, because of the cost of payment guarantees or credit
enhancements that result in nominal credit risk. In addition, mortgage-backed
securities are more liquid than individual mortgage loans and may be used to
collateralize obligations of the Bank. In general, mortgage-backed securities
issued or guaranteed by Fannie Mae and Freddie Mac and certain AA-rated
mortgage-backed pass-through securities are weighted at no more than 20% for
risk-based capital purposes, and mortgage-backed securities issued or guaranteed
by Ginnie Mae and the SBA are weighted at 0% for risk-based capital purposes,
compared to an assigned risk weighting of 50% to 100% for whole residential
mortgage loans. These types of securities thus allow the Bank to optimize
regulatory capital to a greater extent than non-securitized whole loans.
While mortgage-backed securities carry a reduced credit risk as
compared to whole loans, such securities remain subject to the risk that a
fluctuating interest rate environment, along with other factors such as the
geographic distribution of the underlying mortgage loans, may alter the
prepayment rate of such mortgage loans and so affect both the prepayment speed,
and value, of such securities. The adjustable rate and/or short maturity of the
Bank's portfolio is designed to minimize that risk. In contrast to
mortgage-backed securities in which cash flow is received (and, hence,
prepayment risk is shared) PRO RATA by all securities holders, the cash flows
from the mortgages or mortgage-backed securities underlying CMOs are segmented
and paid in accordance with a predetermined priority to investors holding
various tranches of such securities or obligations. A particular tranche of CMOs
may therefore carry prepayment risk that differs from that of both the
underlying collateral and other tranches. The classes of CMOs purchased by the
Bank have been in the lower risk tranche categories.
SECURITIES. At September 30, 1999, the Company and Bank's securities
(including a $750,000 investment in the common stock of the FHLB of Des
Moines) totaled $38.3 million, or 39.7% of its total assets.
It is the Bank's general policy to purchase U.S. Government securities and
federal agency obligations and other investment securities. See Note 3 of
the Notes to Consolidated Financial Statements.
OTS regulations restrict investments in corporate debt and equity
securities by the Bank. These restrictions include prohibitions against
investments in the debt securities of any one issuer in excess of 15% of the
Bank's unimpaired capital and unimpaired surplus as defined by federal
regulations, which totaled $2.1 million as of September 30, 1999, plus an
additional 10% if the investments are fully secured by readily marketable
collateral. At September 30, 1999, the Bank was in compliance with
this regulation. See "Regulation - Federal Regulation of Savings
Associations" for a discussion of additional restrictions on the Bank's
investment activities.
14
The following table sets forth the composition of the Company's and
Bank's securities and mortgage-backed securities at the dates indicated.
September 30,
---------------------------------------------------------------
1999 1998 1997
---------------------------------------------------------------
Carrying % of Carrying % of Carrying % of
Value Total Value Total Value Total
---------------------------------------------------------------
(Dollars in Thousands)
Debt securities:
U.S. government securities............ $ --- % $ --- ---% $ --- ---%
Federal agency obligations............ 37,599 98.0 33,274 97.8 35,411 98.3
--------- ------- ------- ------ ------- ------
Subtotal........................... 37,599 98.0 33,274 97.8 35,411 98.3
--------- ------- ------- ------ ------- ------
Equity securities:
FHLB stock............................ 750 2.0 750 2.2 602 1.7
--------- ------- ------- ------ ------- ------
Subtotal........................... 750 2.0 750 2.2 602 1.7
--------- ------- ------- ------ ------- ------
Total debt and equity securities... $ 38,349 100.0% $34,024 100.0% $36,013 100.0%
========= ======= ======= ====== ======= ======
Other interest-earning assets:
Interest-bearing deposits with banks.. $ 2,702 100.0% $11,651 100.0% $ 2,346 100.0%
--------- ------- ------- ------ ------- ------
Total.............................. $ 2,702 100.0% $11,651 100.0% $ 2,346 100.0%
========= ======= ======= ====== ======= ======
Mortgage-backed securities:
Ginnie Mae............................ $30,077 82.4% $19,767 57.9% $16,222 53.0%
Fannie Mae............................ 5,959 16.3 11,103 32.5 10,074 32.9
Freddie Mac........................... 456 1.3 3,259 9.6 4,335 14.1
--------- ------- ------- ------ ------- ------
Total mortgage-backed securities... $ 36,492 100.0% $34,129 100.0% $30,631 100.0%
========= ======= ======= ====== ======= ======
The composition and maturities of the securities portfolio, excluding
FHLB stock and other equity securities, are indicated in the following table.
September 30, 1999
-------------------------------------------------------------------------------
Less Than 1 to 5 5 to 10 Over Total Investment
1 Year Years Years 10 Years Securities
-------------------------------------------------------------------------------
Carrying Carrying Carrying Carrying Market Amortized
Value Value Value Value Value Cost
-------------------------------------------------------------------------------
(Dollars in Thousands)
Federal agency obligations
available-for-sale.................. $ --- $ --- $ 2,423 $35,176 $37,599 $40,690
-------- -------- -------- -------- -------- --------
Weighted average yield............... % % 7.03% 6.74% 6.76%
======== ======== ======== ======== ========
The Company and the Bank's securities portfolio at September 30, 1999,
contained neither tax-exempt securities nor securities of any issuer with an
aggregate book value in excess of 10% of the Bank's retained earnings, excluding
those issued by the U.S. government, or its agencies.
Perry County's investments, including the mortgage-backed securities
portfolio, are managed in accordance with a written investment policy adopted by
the Board of Directors.
15
SOURCES OF FUNDS
GENERAL. The Bank's primary sources of funds are deposits, amortization
and prepayment of loan principal, borrowings, interest earned on or maturation
of investment securities and short-term investments, and net earnings.
Borrowings may be used on a short-term basis to compensate for seasonal
reductions in deposits or deposit inflows at less than projected levels, and may
be used on a longer-term basis to support expanded lending activities or to
increase the effectiveness of the Bank's asset/liability management program.
DEPOSITS. Perry County offers the following types of deposit accounts:
passbook savings, demand and NOW accounts, money market deposit accounts and
certificates of deposit. The Bank only solicits deposits from its market area
and does not use brokers to obtain deposits. The Bank relies primarily on
competitive pricing policies and customer service to attract and retain these
deposits.
The flow of deposits is influenced significantly by general economic
conditions, changes in money market and prevailing interest rates, and
competition. The Bank currently offers competitive rates on longer term
certificates of deposit, the result of which is designed to extend the maturity
of its liabilities. The Bank believes that this will have a positive effect on
its results of operations, both for asset/liability management purposes and in
the event market rates of interest increase.
The variety of deposit accounts offered by the Bank has allowed it to
be competitive in obtaining funds and to respond with flexibility to changes in
consumer demand. The Bank has become more susceptible to short-term fluctuations
in deposit flows, as customers have become more interest rate conscious. Based
on its experience, the Bank believes that its passbook savings, demand and NOW
accounts and certificates of deposit are relatively stable sources of deposits.
However, the ability of the Bank to attract and maintain certificates of
deposit, and the rates paid on these deposits, has been and will continue to be
significantly affected by market conditions.
The following table sets forth the savings flows at the Bank during the
periods indicated.
Year Ended September 30,
---------------------------------------
1999 1998 1997
---------------------------------------
(In Thousands)
Opening balance.................. $ 64,151 $ 61,071 $ 62,712
Deposits......................... 39,712 36,467 33,795
Withdrawals...................... (38,698) (35,827) (37,673)
Interest credited................ 2,582 2,440 2,237
--------- -------- --------
Ending balance................... $ 67,747 $ 64,151 $ 61,071
========= ======== ========
Net increase (decrease).......... $ 3,596 $ 3,080 $ (1,641)
========= ======== ========
Percent increase (decrease)...... 5.61% 5.04% (2.62)%
========= ======== ========
16
The following table sets forth the dollar amount of savings deposits in
the various types of deposit programs offered by the Bank at the dates
indicated.
September 30,
---------------------------------------------------------------
1999 1998 1997
---------------------------------------------------------------
Percent Percent Percent
Amount of Total Amount of Total Amount of Total
---------------------------------------------------------------
(Dollars in Thousands)
TRANSACTIONS AND SAVINGS DEPOSITS:
Noninterest Bearing NOW Accounts.................. $ 59 .1% $ 81 0.1% $ 177 0.3%
NOW Accounts 2.25%................................ 3,478 5.1 3,015 4.7 3,303 5.4
Passbook Accounts 2.75%........................... 4,075 6.0 4,004 6.3 4,182 6.9
Money Market Accounts 4.72%, 4.69%
and 4.65%........................................ 10,046 14.8 8,218 12.8 7,349 12.0
-------- -------- ------- ------ ------- ------
Total Non-Certificates............................ 17,658 26.0 15,318 23.9 15,011 24.6
-------- -------- ------- ------ ------- ------
CERTIFICATES:
2.00 - 4.00%.................................... 120 .2 117 0.2 215 0.3
4.01 - 6.00%.................................... 48,471 71.6 44,265 69.0 30,351 49.7
6.01 - 8.00%.................................... 1,509 2.2 4,451 6.9 15,494 25.4
-------- -------- ------- ------ ------- ------
Total Certificates................................ 50,100 74.0 48,833 76.1 46,060 75.4
-------- -------- ------- ------ ------- ------
Total Deposits.................................... $ 67,758 100.0% $64,151 100.0% $61,071 100.0%
======== ======== ======= ====== ======= ======
The following table shows rate and maturity information for the Bank's
certificates of deposit as of September 30, 1999.
2.00- 4.01- 6.01- Percent
4.00% 6.00% 8.00% Total of Total
------------------------------------------------------------
(Dollars in Thousands)
Certificate accounts
maturing in year ending:
- - -------------------------------
September 30, 2000............. $ 120 $39,010 $ 1,057 $40,187 80.2%
September 30, 2001............. - 7,211 452 7,663 15.3
September 30, 2002............. - 1,357 - 1,357 2.7
September 30, 2003............. - 416 - 416 .8
September 30, 2004............. - 477 - 477 1.0
-------- -------- -------- -------- ------
Total....................... $ 120 $48,471 $ 1,509 $50,100 100.0%
======== ======== ======== ======== ======
Percent of total............ .3% 96.7% 3.0% 100.0%
======== ======== ======== ========
17
The following table indicates the amount of the Bank's certificates of
deposit and other deposits by time remaining until maturity as of September 30,
1999.
Maturity
---------------------------------------------------
Over Over
3 Months 3 to 6 6 to 12 Over
or Less Months Months 12 Months Total
--------------------------------------------------- ---------
(In Thousands)
Certificates of deposit less than $100,000....... $ 8,171,107 $10,878,652 $13,418,481 $ 9,913,515 $42,381,755
Certificates of deposit of $100,000 or more(1)... 3,129,484 2,609,065 1,979,442 --- 7,717,991
Total certificates of deposit.................... $11,300,591 $13,487,717 $15,397,923 $ 9,913,515 $50,099,746
========== ========= ========= ========= =========
- - -----------------------
(1) Includes deposits from governmental and other public entities.
Generally, the Bank does not pay interest rates on its jumbo
certificates of deposit (certificates of deposit with balances of $100,000 or
more) in excess of the interest rates paid on certificates of deposit with
balances of less than $100,000.
BORROWINGS. On occasion, the Bank has used advances from the FHLB of
Des Moines to supplement its deposits when the rates are favorable. As a member
of the FHLB of Des Moines, the Bank is required to own capital stock and is
authorized to apply for advances. Each FHLB credit program has its own interest
rate, which may be fixed or variable, and includes a range of maturities. The
FHLB of Des Moines may prescribe the acceptable uses to which these advances may
be put, as well as limitations on the size of the advances and repayment
provisions.
There were $15.0 million of advances from FHLB of Des Moines
outstanding as of September 30, 1999.
The following table sets forth the maximum month-end balance and
average balance of FHLB advances, securities sold under agreements to repurchase
and other borrowings for the periods indicated.
Year Ended September 30,
------------------------------------
1999 1998 1997
------------------------------------
(Dollars in Thousands)
MAXIMUM BALANCE:
FHLB advances................ $15,000 $15,000 $6,500
AVERAGE BALANCE:
FHLB advances................ $15,000 $ 8,538 $3,346
18
The following table sets forth certain information as to the Bank's
borrowings at the dates indicated.
September 30,
------------------------------------------
1999 1998 1997
------------------------------------------
(Dollars in Thousands)
FHLB advances............................................. $15,000 $15,000 $6,500
---------- ------- ------
Total borrowings..................................... $15,000 $15,000 $6,500
========== ======= ======
Weighted average interest rate of FHLB advances........... 5.5% 5.5% 6.0%
========== === ===
SUBSIDIARY AND OTHER ACTIVITIES
As a federally chartered savings association, Perry County is permitted
by OTS regulations to invest up to 2% of its assets in the stock of, or
unsecured loans to, service corporation subsidiaries. The Bank may invest an
additional 1% of its assets in service corporations where such additional funds
are used for inner-city or community development purposes. At September 30,
1999, Perry County had no subsidiaries.
REGULATION
GENERAL. Perry County is a federally chartered savings bank, the
deposits of which are federally insured and backed by the full faith and credit
of the United States Government. Accordingly, Perry County is subject to broad
federal regulation and oversight extending to all its operations. Perry County
is a member of the FHLB of Des Moines and is subject to certain limited
regulation by the Board of Governors of the Federal Reserve System ("Federal
Reserve Board"). As the savings and loan holding company of Perry County, the
Company also is subject to federal regulation and oversight. The purpose of the
regulation of the Company and other holding companies is to protect subsidiary
savings associations. Perry County is a member of the Savings Association
Insurance Fund ("SAIF") and the deposits of Perry County are insured by the
FDIC. As a result, the FDIC has certain regulatory and examination authority
over Perry County.
Certain of these regulatory requirements and restrictions are discussed
below or elsewhere in this document.
FEDERAL REGULATION OF SAVINGS ASSOCIATIONS. The OTS has extensive
authority over the operations of savings associations. As part of this
authority, Perry County is required to file periodic reports with the OTS and is
subject to periodic examinations by the OTS and the FDIC. The last regular OTS
examination of Perry County was as of January 30, 1997. All savings
associations are subject to a semi-annual assessment, based upon the savings
association's total assets, to fund the operations of the OTS.
The OTS also has extensive enforcement authority over all savings
institutions and their holding companies, including Perry County and the
Company. This enforcement authority includes, among other things, the ability to
assess civil money penalties, to issue cease-and-desist or removal orders and to
initiate injunctive actions. In general, these enforcement actions may be
initiated for violations of laws and regulations and unsafe or unsound
19
practices. Other actions or inactions may provide the basis for enforcement
action, including misleading or untimely reports filed with the OTS. Except
under certain circumstances, public disclosure of final enforcement actions by
the OTS is required.
In addition, the investment, lending and branching authority of Perry
County is prescribed by federal laws and it is prohibited from engaging in any
activities not permitted by such laws. For instance, no savings institution may
invest in non-investment grade corporate debt securities. In addition, the
permissible level of investment by federal associations in loans secured by
non-residential real property may not exceed 400% of total capital, except with
approval of the OTS. Federal savings associations are also generally authorized
to branch nationwide. Perry County is in compliance with the noted restrictions.
Perry County's general permissible lending limit for
loans-to-one-borrower is equal to the greater of $500,000 or 15% of unimpaired
capital and surplus (except for loans fully secured by certain readily
marketable collateral, in which case this limit is increased to 25% of
unimpaired capital and surplus). At September 30, 1999, Perry County's lending
limit under this restriction was $2.1 million. Perry County is
in compliance with the loans-to-one-borrower limitation.
The OTS, as well as the other federal banking agencies, has adopted
guidelines establishing safety and soundness standards on such matters as loan
underwriting and documentation, internal controls and audit systems, interest
rate risk exposure and compensation and other employee benefits. Any institution
which fails to comply with these standards must submit a compliance plan.
INSURANCE OF ACCOUNTS AND REGULATION BY THE FDIC. Perry County is a
member of the SAIF, which is administered by the FDIC. Deposits are insured up
to applicable limits by the FDIC and such insurance is backed by the full faith
and credit of the United States Government. As insurer, the FDIC imposes deposit
insurance premiums and is authorized to conduct examinations of and to require
reporting by FDIC-insured institutions. It also may prohibit any FDIC-insured
institution from engaging in any activity the FDIC determines by regulation or
order to pose a serious risk to the FDIC. The FDIC also has the authority to
initiate enforcement actions against savings associations, after giving the OTS
an opportunity to take such action, and may terminate the deposit insurance if
it determines that the institution has engaged in unsafe or unsound practices or
is in an unsafe or unsound condition.
The FDIC's deposit insurance premiums are assessed through a risk-based
system under which all insured depository institutions are placed into one of
nine categories, based upon their level of capital and supervisory evaluation.
Under the system, institutions classified as well capitalized (i.e., a core
capital ratio of at least 5%, a ratio of Tier 1 or core capital to risk-weighted
assets ("Tier 1 risk-based capital") of at least 6% and a risk-based capital
ratio of at least 10%) and considered healthy pay the lowest premium while
institutions that are less than adequately capitalized (i.e., core or Tier 1
risk-based capital ratios of less than 4% or a risk-based capital ratio of less
than 8%) and considered of substantial supervisory concern pay the highest
premium. Risk classification of all insured institutions will be made by the
FDIC for each semi-annual assessment period. As of September 30, 1999, Perry
County met the requirements of a well-capitalized institution.
20
The FDIC is authorized to increase assessment rates, on a semiannual
basis, if it determines that the reserve ratio of the SAIF will be less than the
designated reserve ratio of 1.25% of SAIF insured deposits. In setting these
increased assessments, the FDIC must seek to restore the reserve ratio to that
designated reserve level, or such higher reserve ratio as established by the
FDIC. The FDIC may also impose special assessments on SAIF members to repay
amounts borrowed from the United States Treasury or for any other reason deemed
necessary by the FDIC.
Effective January 1, 1997, the premium schedule for BIF and SAIF
insured institutions ranged from 0 to 27 basis points. However, SAIF-insured
institutions are required to pay a Financing Corporation (FICO) assessment, in
order to fund the interest on bonds issued to resolve thrift failures in the
1980s, equal to approximately 6.48 basis points for each $100 in domestic
deposits, while BIF-insured institutions pay an assessment equal to
approximately 1.52 basis points for each $100 in domestic deposits. The
assessment is expected to be reduced to 2.43 basis points no later than January
1, 2000, when BIF insured institutions fully participate in the assessment.
These assessments, which may be revised based upon the level of BIF and SAIF
deposits will continue until the bonds mature in the year 2017.
REGULATORY CAPITAL REQUIREMENTS. Federally insured savings
associations, such as Perry County, are required to maintain a minimum level of
regulatory capital. The OTS has established capital standards, including a
tangible capital requirement, a leverage ratio (or core capital) requirement and
a risk-based capital requirement applicable to such savings associations. These
capital requirements must be generally as stringent as the comparable capital
requirements for national banks. The OTS is also authorized to impose capital
requirements in excess of these standards on individual associations on a
case-by-case basis.
The capital regulations require tangible capital of at least 1.5% of
adjusted total assets (as defined by regulation). Tangible capital generally
includes common stockholders' equity and retained income, and certain
noncumulative perpetual preferred stock and related income. In addition, all
intangible assets, other than a limited amount of purchased mortgage servicing
rights, must be deducted from tangible capital for calculating compliance with
the requirement. At September 30, 1999, Perry County did not have any intangible
assets.
The OTS regulations establish special capitalization requirements for
savings associations that own subsidiaries. In determining compliance with the
capital requirements, all subsidiaries engaged solely in activities permissible
for national banks or engaged in certain other activities solely as agent for
its customers are "includable" subsidiaries that are consolidated for capital
purposes in proportion to the association's level of ownership. For excludable
subsidiaries the debt and equity investments in such subsidiaries are deducted
from assets and capital.
At September 30, 1999, Perry County had tangible capital of $14.0
million, or 14.4% of adjusted total assets, which is approximately $11.1
million above the minimum requirement of 1.5% of adjusted total assets in
effect on that date.
The capital standards also require core capital equal to at least 3% of
adjusted total assets. Core capital generally consists of tangible capital plus
certain intangible assets, including a limited amount of purchased credit card
relationships. As a result of the prompt corrective action provisions discussed
below, however, a savings association must maintain a core capital ratio of at
21
least 4% to be considered adequately capitalized unless its supervisory
condition is such to allow it to maintain a 3% ratio. At September 30, 1999,
Perry County had no intangibles which were subject to these tests.
At September 30, 1999, Perry County had core capital equal to
$14.0 million, or 14.4% of adjusted total assets, which is $12.9 million
above the minimum leverage ratio requirement of 3% as in effect on that date.
The OTS risk-based requirement requires savings associations to have
total capital of at least 8% of risk-weighted assets. Total capital consists of
core capital, as defined above, and supplementary capital. Supplementary capital
consists of certain permanent and maturing capital instruments that do not
qualify as core capital and general valuation loan and lease loss allowances up
to a maximum of 1.25% of risk-weighted assets. Supplementary capital may be used
to satisfy the risk-based requirement only to the extent of core capital. The
OTS is also authorized to require a savings association to maintain an
additional amount of total capital to account for concentration of credit risk
and the risk of non-traditional activities. At September 30, 1999, Perry County
was in compliance with this requirement.
Certain exclusions from capital and assets are required to be made for
the purpose of calculating total capital. Such exclusions consist of equity
investments (as defined by regulation) and that portion of land loans and
nonresidential construction loans in excess of an 80% loan-to-value ratio and
reciprocal holdings of qualifying capital instruments. Perry County had no such
exclusions from capital and assets at September 30, 1999.
In determining the amount of risk-weighted assets, all assets,
including certain off-balance sheet items, will be multiplied by a risk weight,
ranging from 0% to 100%, based on the risk inherent in the type of asset. For
example, the OTS has assigned a risk weight of 50% for prudently underwritten
permanent one- to four-family first lien mortgage loans not more than 90 days
delinquent and having a loan to value ratio of not more than 80% at origination
unless insured to such ratio by an insurer approved by the Fannie Mae or Freddie
Mac.
OTS regulations also require that savings associations with more than
normal interest rate risk exposure to deduct from its total capital, for
purposes of determining compliance with such requirement, an amount equal to 50%
of its interest-rate risk exposure multiplied by the present value of its
assets. This exposure is a measure of the potential decline in the net portfolio
value of a savings association, greater than 2% of the present value of its
assets, based upon a hypothetical 200 basis point increase or decrease in
interest rates (whichever results in a greater decline). Net portfolio value is
the present value of expected cash flows from assets, liabilities and
off-balance sheet contracts. The rule will not become effective until the OTS
evaluates the process by which savings associations may appeal an interest rate
risk deduction determination. It is uncertain as to when this evaluation may be
completed. Any savings association with less than $300 million in assets and a
total capital ratio in excess of 12% is exempt from this requirement unless the
OTS determines otherwise.
At September 30, 1999, Perry County had total risk-based capital of
$14.1 million and risk-weighted assets of $20.5 million; or total
capital of 68.6% of risk-weighted assets. This amount was
$12.4 million above the 8% requirement in effect on that date.
22
The OTS and the FDIC are authorized and, under certain circumstances
required, to take certain actions against savings associations that fail to meet
their capital requirements. The OTS is generally required to take action to
restrict the activities of an "undercapitalized association" (generally defined
to be one with less than either a 4% core capital ratio, a 4% Tier 1
risked-based capital ratio or an 8% risk-based capital ratio). Any such
association must submit a capital restoration plan and until such plan is
approved by the OTS may not increase its assets, acquire another institution,
establish a branch or engage in any new activities, and generally may not make
capital distributions. The OTS is authorized to impose the additional
restrictions that are applicable to significantly undercapitalized associations.
As a condition to the approval of the capital restoration plan, any
company controlling an undercapitalized association must agree that it will
enter into a limited capital maintenance guarantee with respect to the
institution's achievement of its capital requirements.
Any savings association that fails to comply with its capital plan or
is "significantly undercapitalized" (i.e., Tier 1 risk-based or core capital
ratios of less than 3% or a risk-based capital ratio of less than 6%) must be
made subject to one or more of additional specified actions and operating
restrictions which may cover all aspects of its operations and include a forced
merger or acquisition of the association. An association that becomes
"critically undercapitalized" (i.e., a tangible capital ratio of 2% or less) is
subject to further mandatory restrictions on its activities in addition to those
applicable to significantly undercapitalized associations. In addition, the OTS
must appoint a receiver (or conservator with the concurrence of the FDIC) for a
savings association, with certain limited exceptions, within 90 days after it
becomes critically undercapitalized. Any undercapitalized association is also
subject to the general enforcement authority of the OTS and the FDIC, including
the appointment of a conservator or a receiver.
The OTS is also generally authorized to reclassify an association into
a lower capital category and impose the restrictions applicable to such category
if the institution is engaged in unsafe or unsound practices or is in an unsafe
or unsound condition.
The imposition by the OTS or the FDIC of any of these measures on Perry
County may have a substantial adverse effect on Perry County's operations and
profitability. Company shareholders do not have preemptive rights, and
therefore, if the Company is directed by the OTS or the FDIC to issue additional
shares of Common Stock, such issuance may result in the dilution in the
percentage of ownership of the Company.
LIMITATIONS ON DIVIDENDS AND OTHER CAPITAL DISTRIBUTIONS. OTS
regulations impose various restrictions or requirements on associations with
respect to their ability to pay dividends or make other distributions of
capital. OTS regulations also prohibit a savings association from declaring or
paying any dividends or from repurchasing any of its stock if, as a result, the
regulatory capital of the association would be reduced below the amount required
to be maintained for the liquidation account established in connection with its
mutual to stock conversion.
23
LIQUIDITY. All savings associations, including Perry County, are
required to maintain an average daily balance of liquid assets equal to a
certain percentage of the sum of its average daily balance of net withdrawable
deposit accounts and borrowings payable in one year or less. For a discussion of
what the Bank includes in liquid assets, see "Management's Discussion and
Analysis of Financial Condition and Results of Operations - Liquidity and
Capital Resources." This liquid asset ratio requirement may vary from time to
time depending upon economic conditions and savings flows of all savings
associations.
Penalties may be imposed upon associations for violations of the liquid
asset ratio requirement. At September 30, 1999, Perry County was in compliance
with the requirement.
QUALIFIED THRIFT LENDER TEST. All savings associations, including Perry
County, are required to meet a qualified thrift lender ("QTL") test to avoid
certain restrictions on their operations. This test requires a savings
association to have at least 65% of its portfolio assets (as defined by
regulation) in qualified thrift investments on a monthly average for nine out of
every 12 months on a rolling basis. As an alternative, the savings association
may maintain 60% of its assets in those assets specified in Section 7701(a)(19)
of the Internal Revenue Code. Under either test, such assets primarily consist
of residential housing related loans and investments. At September 30, 1999,
Perry County met the test and has always met the test since its effectiveness.
Any savings association that fails to meet the QTL test must convert to
a national bank charter, unless it requalifies as a QTL and thereafter remains a
QTL. If an association does not requalify and converts to a national bank
charter, it must remain SAIF-insured until the FDIC permits it to transfer to
the BIF. If such an association has not yet requalified or converted to a
national bank, its new investments and activities are limited to those
permissible for both a savings association and a national bank, and it is
limited to national bank branching rights in its home state. In addition, the
association is immediately ineligible to receive any new FHLB borrowings and is
subject to national bank limits for payment of dividends. If such association
has not requalified or converted to a national bank within three years after the
failure, it must divest of all investments and cease all activities not
permissible for a national bank. In addition, it must repay promptly any
outstanding FHLB borrowings, which may result in prepayment penalties. If any
association that fails the QTL test is controlled by a holding company, then
within one year after the failure, the holding company must register as a bank
holding company and become subject to all restrictions on bank holding
companies. See "- Holding Company Regulation."
COMMUNITY REINVESTMENT ACT. Under the Community Reinvestment Act
("CRA"), every FDIC insured institution has a continuing and affirmative
obligation consistent with safe and sound banking practices to help meet the
credit needs of its entire community, including low and moderate income
neighborhoods. The CRA does not establish specific lending requirements or
programs for financial institutions nor does it limit an institution's
discretion to develop the types of products and services that it believes are
best suited to its particular community, consistent with the CRA. The CRA
requires the OTS, in connection with the examination of Perry County, to assess
the institution's record of meeting the credit needs of its community and to
take such record into account in its evaluation of certain applications, such as
24
a merger or the establishment of a branch, by Perry County. An unsatisfactory
rating may be used as the basis for the denial of an application by the OTS.
The federal banking agencies, including the OTS, have recently revised
the CRA regulations and the methodology for determining an institution's
compliance with the CRA. Due to the heightened attention being given to the CRA
in the past few years, Perry County may be required to devote additional funds
for investment and lending in its local community. Perry County was examined for
CRA compliance in 1997 and received a rating of "Satisfactory."
TRANSACTIONS WITH AFFILIATES. Generally, transactions between a savings
association or its subsidiaries and its affiliates are required to be on terms
as favorable to the association as transactions with non-affiliates. In
addition, certain of these transactions, such as loans to an affiliate, are
restricted to a percentage of the association's capital. Affiliates of Perry
County include the Company and any company which is under common control with
Perry County. In addition, a savings association may not lend to any affiliate
engaged in activities not permissible for a bank Company or acquire the
securities of most affiliates. Perry County's subsidiaries are not deemed
affiliates, however; the OTS has the discretion to treat subsidiaries of savings
associations as affiliates on a case by case basis.
Certain transactions with directors, officers or controlling persons
are also subject to conflict of interest regulations enforced by the OTS. These
conflict of interest regulations and other statutes also impose restrictions on
loans to such persons and their related interests. Among other things, such
loans must be made on terms substantially the same as for loans to unaffiliated
individuals.
HOLDING COMPANY REGULATION. The Company is a unitary savings and loan
holding company subject to regulatory oversight by the OTS. As such, the Company
is required to register and file reports with the OTS and is subject to
regulation and examination by the OTS. In addition, the OTS has enforcement
authority over the holding company and its non-savings association subsidiaries
which also permits the OTS to restrict or prohibit activities that are
determined to be a serious risk to the subsidiary savings association.
As a unitary savings and loan holding company, the Company generally is
not subject to activity restrictions. If the Company acquires control of another
savings association as a separate subsidiary, it would become a multiple savings
and loan holding company, and the activities of the Company and any of its
subsidiaries (other than Perry County or any other SAIF-insured savings
association) would become subject to such restrictions unless such other
associations each qualify as a QTL and were acquired in a supervisory
acquisition.
If Perry County fails the QTL test, the Company must obtain the
approval of the OTS prior to continuing after such failure, directly or through
its other subsidiaries, any business activity other than those approved for
multiple savings and loan holding companies or their subsidiaries. In addition,
within one year of such failure the Company must register as, and will become
subject to, the restrictions applicable to bank holding companies. The
activities authorized for a bank Company are more limited than are the
activities authorized for a unitary or multiple savings and loan Company. See
"--Qualified Thrift Lender Test."
25
The Company must obtain approval from the OTS before acquiring control
of any other SAIF-insured association. Such acquisitions are generally
prohibited if they result in a multiple savings and loan Company controlling
savings associations in more than one state. However, such interstate
acquisitions are permitted based on specific state authorization or in a
supervisory acquisition of a failing savings association.
FEDERAL SECURITIES LAW. The stock of the Company is registered with the
SEC under the Securities Exchange Act of 1934, as amended (the "Exchange Act").
The Company is subject to the information, proxy solicitation, insider trading
restrictions and other requirements of the SEC under the Exchange Act.
Company stock held by persons who are affiliates (generally officers,
directors and principal stockholders) of the Company may not be resold without
registration or unless sold in accordance with certain resale restrictions. If
the Company meets specified current public information requirements, each
affiliate of the Company is able to sell in the public market, without
registration, a limited number of shares in any three-month period.
FEDERAL RESERVE SYSTEM. The Federal Reserve Board requires all
depository institutions to maintain non-interest bearing reserves at specified
levels against their transaction accounts (primarily checking, NOW and Super NOW
checking accounts). At September 30, 1999, Perry County was in compliance with
these reserve requirements. The balances maintained to meet the
reserve requirements imposed by the Federal Reserve Board may be used to satisfy
liquidity requirements that may be imposed by the OTS. See "--Liquidity."
Savings associations are authorized to borrow from the Federal Reserve
Bank "discount window," but Federal Reserve Board regulations require
associations to exhaust other reasonable alternative sources of funds, including
FHLB borrowings, before borrowing from the Federal Reserve Bank.
FEDERAL HOME LOAN BANK SYSTEM. Perry County is a member of the FHLB of
Des Moines, which is one of 12 regional FHLBs, that administers the home
financing credit function of savings associations. Each FHLB serves as a reserve
or central bank for its members within its assigned region. It is funded
primarily from proceeds derived from the sale of consolidated obligations of the
FHLB System. It makes loans to members (i.e., advances) in accordance with
policies and procedures, established by the board of directors of the FHLB,
which are subject to the oversight of the Federal Housing Finance Board. All
advances from the FHLB are required to be fully secured by sufficient collateral
as determined by the FHLB. In addition, all long-term advances are required to
provide funds for residential home financing.
As a member, Perry County is required to purchase and maintain stock in
the FHLB of Des Moines. At September 30, 1999, Perry County had $750,000 in
FHLB stock, which was in compliance with this requirement.
Under federal law the FHLBs are required to provide funds for the
resolution of troubled savings associations and to contribute to low- and
moderately priced housing programs through direct loans or interest subsidies on
advances targeted for community investment and low- and moderate-income housing
26
projects. These contributions have affected adversely the level of FHLB
dividends paid and could continue to do so in the future. These contributions
could also have an adverse effect on the value of FHLB stock in the future. A
reduction in value of Perry County's FHLB stock may result in a corresponding
reduction in Perry County's capital.
FEDERAL AND STATE TAXATION
FEDERAL TAXATION. Savings associations such as the Bank that meet
certain definitional tests relating to the composition of assets and other
conditions prescribed by the Internal Revenue Code of 1986, as amended (the
"Code"), are permitted to establish reserves for bad debts and to make annual
additions thereto which may, within specified formula limits, be taken as a
deduction in computing taxable income for federal income tax purposes. The
amount of the bad debt reserve deduction for "nonqualifying loans" is computed
under the experience method. Under the experience method, the bad debt reserve
deduction is an amount determined under a formula based generally upon the bad
debts actually sustained by the savings association over a period of years.
In August 1996, legislation was enacted that repealed the percentage of
taxable income method used by many thrifts, including the Bank, to calculate
their bad debt reserve for federal income tax purposes. As a result, thrifts
such as the Bank must recapture that portion of the reserve that exceeds the
amount that could have been taken under the experience method for tax years
beginning after December 31, 1987. The recapture occurs over a six-year period,
commencing with the 1998 tax year. At September 30, 1999, the Bank had
approximately $390,000 in bad debt reserves subject to recapture for
federal income tax purposes. The deferred tax liability related to the
recapture has been previously established so there will be no effect on future
net income.
In addition to the regular income tax, corporations, including savings
associations such as the Bank, generally are subject to a minimum tax. An
alternative minimum tax is imposed at a minimum tax rate of 20% on alternative
minimum taxable income, which is the sum of a corporation's regular taxable
income (with certain adjustments) and tax preference items, less any available
exemption. The alternative minimum tax is imposed to the extent it exceeds the
corporation's regular income tax and net operating losses can offset no more
than 90% of alternative minimum taxable income.
A portion of the Bank's reserves for losses on loans may not, without
adverse tax consequences, be utilized for the payment of cash dividends or other
distributions to a shareholder (including distributions on redemption,
dissolution or liquidation) or for any other purpose (except to absorb bad debt
losses). As of September 30, 1999, the portion of Perry County's reserves
subject to this treatment for tax purposes totaled approximately $1.4
million.
Perry County files federal income tax returns on a calendar year basis
using the accrual method of accounting. The Company does not anticipate filing
consolidated federal income tax returns with Perry County Savings Bank.
The Company and the Bank have not been audited by the IRS within the last
ten years.
27
MISSOURI TAXATION. Missouri-based thrift institutions, such as the
Bank, are subject to a special financial institutions tax, based on net earnings
without regard to net operating loss carryforwards, at the rate of 7% of net
earnings. This tax is in lieu of all other state taxes on thrift institutions,
on their property, capital or income, except taxes on tangible personal property
owned by the Bank, contributions paid pursuant to the Unemployment Compensation
law of Missouri, real estate taxes, social security taxes, sales taxes and use
taxes. In addition, Perry County is entitled to credit against this tax all
taxes paid to the State of Missouri or any political subdivision except taxes on
tangible personal property owned by the Bank and held for lease or rental to
others and on real estate, contributions paid pursuant to the Unemployment
Compensation Law of Missouri, social security taxes, sales taxes and use taxes,
and taxes imposed by the Missouri Financial Institutions Tax Law. Missouri
thrift institutions are not subject to the regular state corporate income tax.
COMPETITION
Perry County faces strong competition, both in originating loans and in
attracting deposits. Competition in originating loans comes primarily from other
commercial banks and savings associations making loans secured by real estate
located in the Bank's market area. The Bank competes for loans principally on
the basis of the quality of services it provides to borrowers, interest rates
and loan fees it charges, and the types of loans it originates.
The Bank attracts all of its deposits through its retail banking
office, primarily from the communities it serves. Therefore, competition for
those deposits is principally from other commercial banks, savings associations
and credit unions located or doing business in the same and surrounding
communities. The Bank competes for these deposits by offering deposit accounts
at competitive rates and convenient business hours.
The Bank's primary market area is Perry County, Missouri. There are
four commercial banks and one savings association which compete for deposits and
loans in Perry County.
EMPLOYEES
The Bank had eight full-time employees and one part-time
employee as of September 30, 1999, none of whom was represented by a collective
bargaining agreement. The Bank believes that it enjoys good relations
with its personnel. There are no executive officers of the Company and the Bank
who are not directors.
28
ITEM 2. DESCRIPTION OF PROPERTIES
The following table sets forth the location and certain additional
information regarding the Bank's office at September 30, 1999. The office is
owned by the Bank. At September 30, 1999, the Bank's premises and equipment had
an aggregate net book value of $312,000.
Net Book Value
Year Square of Premises and
Opened Footage Equipment
--------------------------------------------
Office:
14 North Jackson Street 1957 4,780 $312,000
Perryville, Missouri
The Bank's accounting and record-keeping activities are maintained on
an on-line basis with an independent service bureau.
ITEM 3. LEGAL PROCEEDINGS
Currently, the Bank is not involved in any pending legal proceedings
other than a routine legal proceeding occurring in the ordinary course of
business, which in the aggregate involves an amount that is believed by
management to be immaterial to the financial condition of the Bank.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of security holders, through the
solicitation of proxies or otherwise, during the quarter ended September 30,
1999.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Page 1 of the attached 1999 Annual Report to Stockholders is
herein incorporated by reference.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION
Pages 3 through 9 of the attached 1999 Annual Report to
Stockholders are herein incorporated by reference.
29
ITEM 7. FINANCIAL STATEMENTS
The following information appearing in the Company's Annual Report to
Stockholders for the year ended September 30, 1999, is incorporated by reference
in this Annual Report on Form 10- KSB as Exhibit 13.
Pages in
Annual
ANNUAL REPORT SECTION Report
- - --------------------- --------
Report of Independent Auditors................................................ 10
Consolidated Balance Sheets as of September 30, 1999 and 1998................. 11
Consolidated Statements of Earnings for the Years Ended September 30,
1999, 1998 and 1997.......................................................... 12
Consolidated Statements of Stockholders' Equity for
Years Ended September 30, 1999, 1998 and 1997................................ 13
Consolidated Statements of Cash Flows for Years Ended September 30,
1999, 1998 and 1997.......................................................... 14
Notes to Consolidated Financial Statements.................................... 15
With the exception of the aforementioned information, the Company's
Annual Report to Stockholders for the year ended September 30, 1999, is not
deemed filed as part of this Annual Report on Form 10-KSB.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
30
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND
CONTROL PERSONS; COMPLIANCE WITH SECTION 16(A)
OF THE EXCHANGE ACT
DIRECTORS
Information concerning Directors of the Company is incorporated herein
by reference from the definitive Proxy Statement for the Annual Meeting of
Stockholders to be held in 2000, a copy of which will be filed not later than
120 days after the close of the fiscal year.
EXECUTIVE OFFICERS
Information concerning Executive Officers of the Company is
incorporated herein by reference from the definitive Proxy Statement for the
Annual Meeting of Stockholders to be held in 2000, a copy of which will be filed
not later than 120 days after the close of the fiscal year.
COMPLIANCE WITH SECTION 16(A)
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and executive officers, and persons who own more than 10% of
a registered class of the Bank's equity securities, to file with the SEC initial
reports of ownership and reports of changes in ownership of Common Stock and
other equity securities of the Company. Officers, directors and greater than 10%
stockholders are required by SEC regulation to furnish the Company with copies
of all Section 16(a) forms they file.
To the Company's knowledge, based solely on a review of the copies of
such reports furnished to the Company and written representations that no other
reports were required during the fiscal year ended September 30, 1999, all
Section 16(a) filing requirements applicable to its officers, directors and
greater than 10 percent beneficial owners were complied with except that Mr.
Stephen C. Rozier inadvertently failed to file a Form 3 within ten days of
becoming a director. Mr. Rozier filed the Form 3 on November 18, 1999.
ITEM 10. EXECUTIVE COMPENSATION
Information concerning executive compensation is incorporated herein by
reference from the definitive Proxy Statement for the Annual Meeting of
Stockholders to be held in 2000, a copy of which will be filed not later than
120 days after the close of the fiscal year.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
Information concerning security ownership of certain beneficial owners
and management is incorporated herein by reference from the definitive Proxy
Statement for the Annual Meeting of Stockholders to be held in 2000, a copy of
which will be filed not later than 120 days after the close of the fiscal year.
31
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information concerning certain relationships and related transactions
is incorporated herein by reference from the definitive Proxy Statement for the
Annual Meeting of Stockholders to be held in 2000, a copy of which will be filed
not later than 120 days after the close of the fiscal year.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS
See Index to Exhibits.
(B) REPORTS ON FORM 8-K
There were no Form 8-Ks filed by the Registrant during the quarter
ended September 30, 1999.
32
SIGNATURES
In accordance with Section 13 of 15(d) of the Exchange Act, the Issuer
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
PERRY COUNTY FINANCIAL CORPORATION
Date: December 22, 1999 By: /S/ LEO J. ROZIER
----------------------- --------------------------------
Leo. J. Rozier
(DULY AUTHORIZED REPRESENTATIVE)
In accordance with the Exchange Act, this report has been signed below
by the following persons on behalf of the Issuer and in the capacities and on
the dates indicated.
By: /S/ LEO J. ROZIER By: /S/ JAMES K. YOUNG
---------------------------------- ------------------------------
Leo J. Rozier, Chairman of the James K. Young, Director,
Board, President and Chief Secretary
Executive Officer (CHIEF FINANCIAL AND ACCOUNTING
(PRINCIPAL EXECUTIVE AND OPERATING OFFICER)
OFFICER)
Date: December 22, 1999 Date: December 22, 1999
---------------------------------- ------------------------------
By: /S/ STEPHEN C. ROZIER By: /S/ MILTON A. VOGEL
---------------------------------- ------------------------------
Stephen C. Rozier, Director, Milton A. Vogel, Director
Assistant Vice President and
Assistant Secretary
Date: December 22, 1999 Date: December 22, 1999
---------------------------------- ------------------------------
By: /S/ THOMAS L. HOEH
----------------------------------
Thomas L. Hoeh, Director
Date: December 22, 1999
----------------------------------
INDEX TO EXHIBITS
REFERENCE
TO PRIOR
FILING OR
REGULATION EXHIBIT
S-B NUMBER
EXHIBIT ATTACHED
NUMBER DOCUMENT HERETO
- - -------------------------------------------------------------------------------------------
3(i) Articles of Incorporation, including amendments thereto *
3(ii) By-Laws *
4 Instruments defining the rights of security holders, *
including debentures
10 Executive Compensation Plans and Arrangements
(a) Employment Contract between Leo J. Rozier and the Bank *
(b) 1995 Stock Option and Incentive Plan *
(c) Recognition and Retention Plan *
13 Annual Report to Security Holders 13
16 Letter re: change in certifying accountants **
21 Subsidiaries of Registrant 21
23 Consents of Experts and Counsel 23
27 Financial Data Schedule 27
- - ----------------
* Filed as exhibits to the Company's Form S-1 registration statement filed
on October 4, 1994 (File No. 33-84786) of the Securities Act of 1933. All
of such previously filed documents are hereby incorporated herein by
reference in accordance with Item 601 of Regulation S-B.
** Filed as an exhibit to the Company's Form 8-K filed on August 23, 1995
(File No. 0-25088).