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, 2000
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
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(Name of small business issuer in its charter)
MISSOURI 43-1694505
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(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
14 North Jackson Street, Perryville, Missouri 63775
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(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
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Securities Registered Pursuant to Section 12(g) of the Act:
COMMON STOCK, PAR VALUE $0.01 PER SHARE
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(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 ___.
1
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. [ X ]
State the issuer's revenues for its most recent fiscal year:
$6.3 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 15, 2000, was approximately $10.0 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, 2000, 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, 2000.
Part III of Form 10-KSB - Other Information
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 mutual to 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, 2000, the Company had $93.9 million of assets and
stockholders' equity of $11.8 million (or 12.6% 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.
2
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, 2000, 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.
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, 2000, the Bank's gross loans outstanding
totaled $18.0 million, of which $15.5 million or 86.1% 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 $918,000, including fixed-rate
3
loans of $905,000 and adjustable-rate loans of $13,000. Also at that date,
the Bank's construction and land loans totaled $1.3 million or 7.1% of the
Bank's total loan portfolio, all of which were fixed-rate loans. Loans secured
by deposit accounts were $303,000 at September 30, 2000.
The Bank and the Company also invest in mortgage-backed and related
securities and U.S. government and agency obligations. At September 30, 2000,
mortgage-backed securities totaled $34.3 million or 36.5% of total
assets and U.S. government and agency obligations totaled $5.0 million or
5.3% 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, 2000, the maximum
amount which the Bank could have lent under this limit to any one borrower and
the borrower's related entities was approximately $1.5 million.
At September 30, 2000, 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, 2000 was a
commercial loan of $368,000. The next largest lending relationship at
September 30, 2000 was a commercial loan of $346,000. Both loans were
current as of September 30, 2000.
LOAN PORTFOLIO COMPOSITION. The following information summarizes the
composition of the Bank's loan portfolio in dollar amounts and in percentages
as of the dates indicated.
<TABLE>
<CAPTION>
September 30,
--------------------------------------------------
2000 1999 1998
-------------------------------------------------
Amount Percent Amount Percent Amount Percent
-------------------------------------------------
(Dollars in Thousands)
REAL ESTATE LOANS:
<S> (C) <C> <C> <C> <C> <C>
One- to four-family........ $15,516 86.1% $14,379 84.7% $13,496 84.4%
Multi-family............... 14 .1 26 .2 42 .3
Commercial................. 904 5.0 618 3.6 727 4.6
Construction or land....... 1,276 7.1 1,669 9.8 1,269 7.9
-------- ------ ------- ----- ------ -----
Total real estate loans... 17,710 98.3 16,692 98.3 15,534 97.2
-------- ------ ------- ----- ------- ----
OTHER LOANS:
Consumer Loans:
Deposit account........... 303 1.7 280 1.7 454 2.8
-------- ----- ------- ----- ------- -----
Total consumer loans.... 303 1.7 280 1.7 454 2.8
-------- ----- ------- ----- ------- -----
Total loans............. 18,013 100.0% 16,972 100.0% 15,988 100.0%
====== ===== =====
LESS:
Loans in process............ 283 329 190
Deferred fees and discounts. 15 13 9
Allowance for losses........ 30 30 25
--------- ------- -------
Total loans receivable, net $17,685 $16,600 $15,764
========= ======= =======
4
Adjustable rate loans included in the loan portfolio amounted to
$401,000 at September 30, 2000.
The following table sets forth certain information at September 30,
2000 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.
</TABLE>
<TABLE>
<CAPTION>
Real Estate Loans Secured by
Mortgage Loans(2) Deposit Accounts Total
---------------- ----------------- ------------
(Dollars in Thousands)
Due During Years Ending:
<S> <C> <C> <C>
Within 1 year(1).............. $ 43 $ 303 $ 346
After 1 year through 3 years.. 83 - 83
After 3 years through 5 years. 636 - 636
After 5 years through 10 years 1,200 - 1,200
Beyond 10 years............... 15,748 - 15,748
------- ------ -------
Total gross loans...... $ 17,710 $ 303 $ 18,013
======= ====== =======
</TABLE>
(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, 2000, due after September 30, 2001, which have
fixed interest rates and adjustable interest rates.
Real Estate
Mortgage Loans(1)
-------------------------
(Dollars in Thousands)
Fixed rate...................................... $17,266
Adjustable rate................................. 401
______
Total gross loans........................ $17,667
======
(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, 2000, $15.5 million, or 86.1%, 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, 2000, the Bank offered one- to four-family residential
fixed-rate loans with loan payments (amortization) based on a 25 year maturity,
but with a loan term of 20 years. In prior years, the Bank originated fixed-rate
5
loans with terms to maturity up to 30 years. At September 30, 2000, the total
balance of one- to four-family fixed-rate loans was $15.1 million or 84.0% 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,
2000, the total balance of one- to four-family AMLs was $388,000, or 2.2% 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. While some of these loans exceeded the 80% Bank's
loan-to-value ratio requirement, (such loans were covered by private mortgage
insurance which reduced the Bank's exposure to no more than 80%. The Bank's
purchased loans are well-seasoned, 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 and at September 30,
2000 represented less than 2% of the Bank's loan portfolio.
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, 2000, the Bank had $918,000 in its
multi-family and commercial real estate loan portfolio. The Bank does
not currently purchase these types of loans. These loans represented
5.1% 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
6
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
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, 2000, the Bank had $1.3
million of construction and land 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, 2000, the Bank's consumer loan
portfolio totaled $303,000 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.
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.
7
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.
<TABLE>
<CAPTION>
Year Ended September 30,
--------------------------------------------
2000 1999 1998
--------------------------------------------
(In Thousands)
ORIGINATIONS BY TYPE:<S> <C> <C> <C>
Adjustable rate:
Real estate - one- to four-family $ - $ --- $ -
------- ------ ------
Total adjustable-rate..... - --- -
------- ------ ------
Fixed rate:
Real estate:
Commercial and development 100 603 467
One- to four-family....... 3,440 5,376 6,449
Non-real estate - consumer..... 613 611 786
------- ------ ------
Total fixed-rate........ 4,153 6,590 7,702
------- ------ ------
Total loans originated... $ 4,153 $6,590 $7,702
======= ====== ======
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.
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.
8
The following table sets forth the Bank's loan delinquencies by type,
by amount and by percentage of type at September 30, 2000.
</TABLE>
<TABLE>
<CAPTION>
<S>
Total Loans
Loans Delinquent For: Delinquent
60-89 Days 90 Days and Over 60 Days and Over
-------------------- ------------------- --------------------
Percent Percent Percent
Num- of Loan Num- of Loan Num- of Loan
ber Amount Category ber Amount Category ber Amount Category
--------------------- -------------------- --------------------
(Dollars in Thousands)
Real Estate:
One- to
four-family 1 $ 3 .02% 1 $ 156 1.0 % 2 $ 159 1.02%
----- ----- ----- ----- ----- ------
Total.. 1 $ 3 .02% 1 $ 156 1.0% 2 $ 159 - %
===== ===== ===== ====== ==== ======
<S>
</TABLE>
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,
2000, the Bank had one non-performing loan. 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,
--------------------------
2000 1999 1998
--------------------------
(Dollars in Thousands)
Non-accruing loans:
One- to four-family................................ $156 $--- $----
---- ---- -----
Total........................................... 156 --- -----
---- ---- -----
Total non-performing assets.......................... $156 $--- $----
==== ==== =====
Total as a percentage of total assets................ .17% ---% ----%
==== ==== =====
OTHER LOANS OF CONCERN. As of September 30, 2000 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 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, 2000, the Bank had assets
OF $156,000 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, 2000,
the Bank had a total allowance for losses on loans of $30,000, or .17% 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,
---------------------------
2000 1999 1998
---------------------------
(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 $ 30 $ 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................. ---% ---% ---%
====== ==== ====
The distribution of the Bank's allowance for losses on loans at the
dates indicated is summarized as follows:
<TABLE>
<CAPTION>
September 30,
---------------------------------------------------------------
2000 1999
-------------------------------------------------------------
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)
<S> <C> <C> <C> <C> <C> <C>
One- to four-family... $ 30 86.1% .19% $ 30 84.7% .21%
Multi-family.......... --- .1 --- --- .2 ---
Commercial real estate --- 5.0 --- --- 3.6 ---
Construction or land.. --- 7.1 --- --- 9.8 ---
Consumer.............. --- 1.7 --- --- 1.7 ---
Unallocated........... --- --- --- --- --- ---
---- ------ ---- ----
Total.............$ 30 100.0% $ 30 100.0%
==== ====== ==== =====
11
September 30,
-------------------------------------
1998
-------------------------------------
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 84.4% .19%
Multi-family.................. --- .3 ---
Commercial real estate........ --- 4.6 ---
Construction or development... --- 7.9 ---
Consumer...................... --- 2.8 ---
Unallocated................... --- --- ---
---- ------
Total................... $ 25 100.0%
==== ======
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, 2000, 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
12
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
due to the wide variety of maturity and repayment options available through such
investments. The Bank did not hold any CMOs at September 30, 2000. 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 rate 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, 2000, the Company and Bank's securities
(including a $750,000 investment in the common stock of the FHLB of Des
Moines) totaled $5.7 million, or 6.1% 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
13
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 $1.5 million as of September 30, 2000, plus an
additional 10% if the investments are fully secured by readily marketable
collateral. At September 30, 2000, 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.
The following table sets forth the composition of the Company's and
Bank's securities and mortgage-backed securities at the dates indicated.
</TABLE>
<TABLE>
<CAPTION>
September 30,
---------------------------------------------------
2000 1999 1998
---------------------------------------------------
Carrying % of Carrying % of Carrying % of
Value Total Value Total Value Total
---------------------------------------------------
(Dollars in Thousands)
Debt securities:
<S> <C> <C> <C> <C> <C> <C>
U.S. government securities $ --- % $ --- ---% $ --- ---%
Federal agency obligations 4,950 86.8 37,599 98.0 33,274 97.8
------- ------- ------- ------ ------- -----
Subtotal............... 4,950 86.8 37,599 98.0 33,274 97.8
------- ------- ------- ------ ------- -----
Equity securities:
FHLB stock................ 750 13.2 750 2.0 750 2.2
------- ------- ------- ------ ------- ----
Subtotal............... 750 13.2 750 2.0 750 2.2
------- ------- ------- ------ ------- ----
Total debt and
equity securities... $ 5,700 100.0% $38,349 100.0% $34,024 100.0%
======= ======= ======= ====== ======= =====
Other interest-earning assets:
Interest-bearing deposits
with banks.. $33,315 100.0% $ 2,450 100.0% $11,651 100.0%
------- ------- ------- ------ ------- ------
Total.................. $33,315 100.0% $ 2,450 100.0% $11,651 100.0%
======= ======= ======= ====== ======= ======
Mortgage-backed securities:
Ginnie Mae............... $ 21,966 64.1% $30,077 82.4% $19,767 57.9%
Fannie Mae............... 10,001 29.2 5,959 16.3 11,103 32.5
Freddie Mac.............. 2,299 6.7 456 1.3 3,259 9.6
-------- ------ ------- ------ ------- ------
Total mortgage-
backed securities.. $ 34,266 100.0% $36,492 100.0% $34,129 100.0%
======== ======= ======= ====== ======= ======
The composition and maturities of the securities portfolio, excluding
FHLB stock and other equity securities, are indicated in the following table.
14
September 30, 2000
----------------------------------------------------
Less Than 1 to 5 5 to 10 Over Total Investment
1 Year Years Years 10 Years Securities
------------------------------------------------------
Carrying Carrying Carrying Carrying Amortized Market
Value Value Value Value Cost Value
------------------------------------------------------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Federal agency obligations
available-for-sale....... $ 1,994 $ 2,944 $ --- $ --- $ 4,938 $ 4,950
------- ------ --- --- -------- -----
Weighted average yield.... 6.75% 6.19% - % - % 6.48%
======== ======= === === ========
The Company and the Bank's securities portfolio at September 30, 2000,
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.
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.
15
Year Ended September 30,
---------------------------------------
2000 1999 1998
---------------------------------------
(In Thousands)
Opening balance.................. $ 67,747 $ 64,151 $ 61,071
Deposits......................... 38,438 39,712 36,467
Withdrawals...................... (42,222) (38,698) (35,827)
Interest credited................ 2,646 2,582 2,440
------- -------- --------
Ending balance................... $ 66,609 $ 67,747 $ 64,151
======== ========= ========
Net increase (decrease).......... $ (1,138) $ 3,596 $ 3,080
======== ========= ========
Percent increase (decrease)...... (1.68)% 5.61% 5.04%
======== ========= ========
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,
------------------------------------------------
2000 1999 1998
------------------------------------------------
Percent Percent Percent
Amount of Total Amount of Total Amount of Total
------------------------------------------------
(Dollars in Thousands)
TRANSACTIONS AND SAVINGS DEPOSITS:
<S> <C> <C> <C> <C> <C> <C>
Noninterest Bearing NOW
Accounts $ 41 .1% $ 59 0.1% $ 81 0.1%
NOW Accounts 2.25%........... 3,589 5.4 3,468 5.1 3,015 4.7
Passbook Accounts 2.75%...... 3,636 5.5 4,075 6.0 4,004 6.3
Money Market Accounts 4.96%,
4.72% and 4.69%............. 9,553 14.3 10,046 14.8 8,218 12.8
------ ----- ------ ------ ------ ------
Total transaction accounts.. 16,819 25.3 17,648 26.0 15,318 23.9
------ ----- ------ ------ ------ ------
CERTIFICATES:
2.00 - 4.00%.............. 130 .2 120 0.2 117 0.2
4.01 - 6.00%.............. 24,596 36.9 48,471 71.6 44,265 69.0
6.01 - 8.00%.............. 25,064 37.6 1,509 2.2 4,451 6.9
------ ----- ------ ------ ------ ------
Total Certificates.......... 49,790 74.7 50,100 74.0 48,833 76.1
------ ----- ------- ------ ------ ------
Total Deposits.............. $66,609 100.0% $67,748 100.0% $64,151 100.0%
====== ===== ======= ====== ====== ======
16
The following table shows rate and maturity information for the
Bank's certificates of deposit as of September 30, 2000.
</TABLE>
<TABLE>
<CAPTION>
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:
-------------------------------
<S> <C> <C> <C> <C> <C>
September 30, 2001.... $ 130 $18,195 $22,191 $40,516 81.4%
September 30, 2002.... - 3,932 2,857 6,789 13.6
September 30, 2003.... - 1,782 16 1,798 3.6
September 30, 2004.... - 491 - 491 1.0
September 30, 2005.... - 196 - 196 .4
-------- ------- ------- ------- -----
Total.............. $ 130 $24,596 $25,064 $49,790 100.0%
======== ======== ======== ======== ======
Percent of total... .3% 49.4% 50.3% 100.0%
======== ======== ======== ========
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,
2000.
Maturity
---------------------------------------------------
Over Over
3 Months 3 to 6 6 to 12 Over
or Less Months Months 12 Months Total
-------------------------------------------------
(In Thousands)
<S> <C> <C> <C> <C> <C>
Certificates of deposit
less than $100,000....... $ 8,822 $10,607 $13,288 $9,274 $41,991
Certificates of deposit
of $100,000 or more(1)... 3,131 2,582 2,086 --- 7,799
Total certificates of
deposit................. $11,953 $13,189 $15,374 $9,274 $49,790
====== ====== ====== ===== ======
-----------------------
(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.
17
There were $15.0 million of advances from FHLB of Des Moines
outstanding as of September 30, 2000.
The following table sets forth the maximum month-end balance and
average balance of FHLB advances for the periods indicated.
Year Ended September 30,
------------------------------------
2000 1999 1998
------------------------------------
(Dollars in Thousands)
MAXIMUM BALANCE:
FHLB advances................ $15,000 $15,000 $15,000
AVERAGE BALANCE:
FHLB advances................ $15,000 $15,000 $ 8,538
The following table sets forth certain information as to the Bank's
borrowings at the dates indicated.
September 30,
------------------------------------------
2000 1999 1998
------------------------------------------
(Dollars in Thousands)
<S> <C> <C> <C>
FHLB advances...................... $15,000 $15,000 $15,000
------- ------- -------
Total borrowings.............. $15,000 $15,000 $15,000
======= ======= =======
Weighted average interest
rate of FHLB advances........... 5.5% 5.5% 5.5%
======= ======= ======
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,
2000, 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.
18
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 February 28, 2000. 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
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, 2000, Perry County's lending
limit under this restriction was $1.5 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
19
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, 2000, Perry
County met the requirements of a well-capitalized institution.
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, 2000, 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, 2000, Perry County had tangible capital of $10.2
million, or 11.0% of adjusted total assets, which is approximately $8.8
million above the minimum requirement of 1.5% of adjusted total assets in
effect on that date. See also Note 10 on notes to consolidated financial
statements.
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
least 4% to be considered adequately capitalized unless its supervisory
condition is such to allow it to maintain a 3% ratio. At September 30, 2000,
Perry County had no intangibles which were subject to these tests.
At September 30, 2000, Perry County had core capital equal to
$10.2 million, or 11.0% of adjusted total assets, which is $6.5 million
above the minimum leverage ratio requirement of 4% 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
20
additional amount of total capital to account for concentration of credit risk
and the risk of non-traditional activities. At September 30, 2000, 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, 2000.
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 Fannie Mae or Freddie
Mac.
At September 30, 2000, Perry County had total risk-based capital of
$10.2 million and risk-weighted assets of $22.0 million; or total
capital of 46.5% of risk-weighted assets. This amount was
$8.5 million above the 8% requirement in effect on that date.
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 risk-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.
21
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 generally permit a Federal savings association to
pay dividends in any calendar year equal to net earnings for that year plus
net earnings for the preceding two years.
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, 2000, 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, 2000,
Perry County met the QTL test.
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
22
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
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 holding company are more limited than
are the activities authorized for a unitary or multiple savings and loan
23
holding Company. See
"--Qualified Thrift Lender Test."
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 holding 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 common 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, 2000, 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, 2000, 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
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.
24
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.
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, 2000, the Bank had
approximately $292,000 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, 2000, 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.
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.
25
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, 2000, 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.
ITEM 2. DESCRIPTION OF PROPERTIES
The following table sets forth the location and certain additional
information regarding the Bank's office at September 30, 2000. The office is
owned by the Bank. At September 30, 2000, the Bank's premises and equipment had
an aggregate net book value of $288,000.
Net Book Value
Year Square of Premises and
Opened Footage Equipment
--------------------------------------------
Office:
14 North Jackson Street 1957 4,780 $288,000
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 Company.
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,
2000.
26
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Page 1 of the attached 2000 Annual Report to Stockholders, filed as
Exhibit 13 to this Form 10-KSB, 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 2000 Annual Report to
Stockholders, filed as Exhibit 13 to this Form 10-KSB are herein incorporated
by reference.
ITEM 7. FINANCIAL STATEMENTS
The following information appearing in the Company's Annual Report to
Stockholders for the year ended September 30, 2000, filed as Exhibit 13 to this
Form 10-KSB is herein incorporated by reference.
Pages in
Annual
ANNUAL REPORT SECTION Report
--------------------- --------
<S> <C>
Report of Independent Auditors.................................... 10
Consolidated Balance Sheets as of September 30, 2000 and 1999..... 11
Consolidated Statements of Operations for the Years Ended
September 30, 2000, 1999 and 1998............................... 12
Consolidated Statements of Stockholders' Equity for
Years Ended September 30, 2000, 1999 and 1998..... ............. 13
Consolidated Statements of Cash Flows for Years Ended September 30,
2000, 1999 and 1998.............................................. 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, 2000, 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.
27
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONRTOL
PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE
ACT
Directors and Executive Officers
The Company's Board of Directors is currently composed of five
members, each of whom is also a director of the Bank. Directors are
generally elected to serve for three-year terms or until their respective
successors are elected and qualified. The directors are divided into
three classes, and approximately one-third of the directors are elected
annually.
The business experience of each director and executive officer
of the Company is set forth below. All directors and executive
officers have held their present position for at least five years
unless otherwise indicated.
Thomas L. Hoeh. Mr. Hoeh has served as a Director of the
Company since June 1995. He is a graduate of the University of
Missouri Law School, having received a Juris Doctor Degree.
Since 1987, Mr. Hoeh has practiced law in Perry County, Missouri,
including serving as the County's Prosecuting Attorney.
Leo J. Rozier. Mr. Rozier serves as Chairman of the Board,
President and Chief Executive Officer for the Company, a position
he has held since its formation. Mr. Rozier has been associated
with the Bank as its attorney since 1946 and was elected to the
Board of Directors in 1947. Mr. Rozier served 4.5 years in the
Missouri House of Representatives and 8 years in the Missouri
State Senate. He is a graduate of the University of Missouri Law
School, having received a Juris Doctor Degree. He served as
President of the State Historical Society of Missouri and is now
a permanent Trustee. Mr. Rozier is a retired Colonel, having
served in the Infantry during World War II and subsequent thereto
in the Judge Advocate General Corps. He was a member of the
Advisory Committee for the Redevelopment Plan for Downtown
Perryville, Missouri 1990. Mr. Rozier is the father of
Stephen C. Rozier, the Company's Director, Assistant Vice
President and Assistant Secretary.
Stephen C. Rozier. Mr. Rozier has served as a Director of
the Company since September 1996, filling the vacancy caused by
the untimely death of Director Patricia E. Rozier. He is a 1974
graduate of Southeast Missouri University, having received a B.S.
degree in Secondary Education. After teaching in the Hannibal
and Ft. Zumwalt School District for six years, he joined the Bank
in 1980 and now serves as Assistant Vice President and Assistant
Secretary.
James K. Young. Mr. Young has served as a Director of the
Company since its formation and as a member of the Board of
Directors of the Bank for 27 years. Mr. Young is retired and was
a part owner/director of Young & Sons Funeral Home located in
Perryville, Missouri. He served on the Board of Directors for
the Conservation Federation of Missouri and also served as its
President and Vice President.
Milton A. Vogel. Mr. Vogel is a retired Owner/Operator of
the Lawrence & Moore Automobile Agency located in Perryville,
28
Missouri. Mr. Vogel has served as a Director of the Company
since its formation and of the Bank since 1978.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
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 the Company's Common Stock (or
any other equity securities, of which there is none), to file
with the Securities and Exchange Commission (the "SEC") initial
reports of ownership and reports of changes in ownership of the
Company's Common Stock. Officers, directors and greater than 10%
shareholders are required by SEC regulations 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, 2000, all Section 16(a) filing
requirements applicable to its officers, directors and greater
than 10% beneficial owners were complied with during fiscal 2000.
ITEM 10. Executive Compensation
The Company has not paid any compensation to its executive officers since
its formation.
SUMMARY COMPENSATION TABLE
The following table sets forth information regarding
compensation paid by the Bank to the Chief Executive Officer of the
Company and the Bank for services rendered during the fiscal year
ended September 30, 2000. No other executive officer made in excess
of $100,000 (salary plus bonus) during the fiscal year ended September 30,
2000.
Long-Term
Compensation
Annual Compensation Awards
------------------- -----------------------------
Restricted
Stock Options/ All Other
Salary Bonus Award(s) SARs Compensation
Name and Principal Year ($)(1) ($) ($)(3) (#) ($)
Position
Leo J. Rozier, 2000 $138,300 $5,616 $--- --- $3,267(2)
President and Chief 1999 133,200 5,363 --- --- 2,842
Executive Officer 1998 136,125 5,113 --- --- 3,587
(1) Includes board fees of $9,786, $9,999 and $8,925 paid in
fiscal 2000, 1999 and 1998, respectively.
(2) Includes $3,267 of life, health and accidental death
insurance premiums paid by the Bank on behalf of Mr. Rozier.
(3) As of September 30, 2000, the value of Mr. Rozier's unvested
shares of restricted stock was $27,027.
The following table provides information as to the value of
the options held by the Company's Chief Executive Officer on
September 30, 2000, none of which have been exercised. No stock
options or stock appreciation rights were granted during fiscal
2000.
29
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END
OPTION VALUES
Value of
Number of Unexercised
Unexercised In-the-Money
Options at Options at
FY-End (#)(1) FY-End ($)(2)
Shares
Acquired Value
Name on Realized Exercisable Unexercisable Exercisable Unexercisable
Exercise
(#) ($) (#) (#) ($) ($)
Leo J. --- $--- 17,128 4,282 $ - $ -
Rozier
(1) Represents an option to purchase Common Stock awarded to
the Company's Chief Executive Officer. The option vests
in five equal annual installments. The first four
installments vested on January 16, 1997, 1998, 1999 and
2000 with the remaining installment to vest on
January 16, 2001.
(2) An option is "in the money" if the market value of shares underlying
the option is greater than the exercise price of the option.
Mr. Rozier's option was not in the money at September 30, 2000.
Employment Agreement
The Bank has entered into an employment agreement with
Leo J. Rozier for a three year term. The employment
agreement provides for an annual base salary as determined by
the Board of Directors, but not less than Mr. Rozier's then
current salary. Salary increases are reviewed not less often
than annually thereafter and are subject to the sole
discretion of the Board of Directors. The employment
contract provides for an automatic extension for one
additional year by the Board of Directors at the end of each
year. The contract provides for termination upon the
employee's death, for cause or upon certain events specified
by OTS regulations. The employment contract is terminable by
the employee upon 90 days' notice to the Bank. The
employment contract provides for payment to the employee, in
the event there is a change in control of the Company or the
Bank, as defined in such agreement, where employment
terminates involuntarily in connection with such change in
control or within 12 months thereafter, of the remaining
salary payable under the contract, plus a termination payment
equal to 299% of Mr. Rozier's "base compensation" as defined
under Section 280G of the Internal Revenue Code of 1986, as
amended (the "Code"), provided that total payments under the
agreement may not exceed three times the employee's annual
salary or an amount that would cause certain adverse tax
consequences to the Bank and the employee under Section 280G
of the Code. Assuming a change in control were to take place
as of September 30, 2000, the aggregate amounts payable to
Mr. Rozier pursuant to this change in control provision would
be approximately $512,000. The contract provides, among
other things, for participation in an equitable manner in
employee benefits applicable to executive personnel. This
30
employment contract may be deemed to have an "anti-takeover"
effect that could affect a proposed future acquisition of
control of the Bank.
Director Compensation
Directors were not paid fees for serving on the Company's Board
during fiscal 2000.
Each director was paid a fee of $787 per month for serving on
the Bank's Board through December 31, 1999 and $825 per month
thereafter. Directors receive no additional fees for attendance
of Board or Board Committee meetings.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As of September 30, 2000, the Company had 741,928 shares of Common Stock
issued and outstanding. The following table sets forth information
regarding share ownership of: (i) those persons or entities known by
management to beneficially own more than five percent of the Company's
Common Stock and (ii) each director and executive officer of the Company
and the Bank, individually and (iii) all directors and executive officers
of the Company and the Bank as a group.
Shares
Beneficially Percent
Beneficial Owner Owned of Class
Perry County Financial 65,550 8.84%
Corporation Employee Stock
Ownership Plan
14 North Jackson Street
Perryville, Missouri 63775 (1)
The Roosevelt Group, L.L.C. 48,740 6.57
400 North Fifth Street,
Suite 200
St. Charles, Missouri 63301
and
Bradshaw Capital Management,
L.L.C.
P.O. Box 1972
Village of Pinehurst, North
Carolina 28370 (2)
Gilster-Mary Lee Corporation 68,600 9.25
1037 State Street
Chester, Illinois 62233 (3)
Leo J. Rozier 94,737 12.77
President and Chief Executive Officer
14 North Jackson Street
Perryville, Missouri 63775 (4)
Stephen C. Rozier 14,681 1.98
Assistant Vice President and
Assistant Secretary
14 North Jackson Street
Perryville, Missouri 63775 (4)
31
James K. Young 9,836 1.33
Director
14 North Jackson
Perryville, Missouri 63775 (4)
Milton A. Vogel 11,336 1.53
Director
14 North Jackson
Perryville, Missouri 63775 (4)
Thomas L. Hoeh 7,338 .99
Director
14 North Jackson
Perryville, Missouri 63775 (4)
Directors and executive officers of the 137,928 18.60
Company and the Bank as a group (5 persons) (4)
(1) The amount reported represents shares held by the Employee
Stock Ownership Plan ("ESOP"), 22,431 of which were allocated to
accounts of participants. First Bankers Trust Co., N.A., Quincy,
Illinois, the trustee of the ESOP, may be deemed to beneficially
own the shares held by the ESOP which have not been allocated to
the accounts of participants. Pursuant to the terms of the ESOP,
participants have the right to direct the voting of shares
allocated to participant accounts.
(2) As reported on Amendment No. 2 to Schedule 13D filed
August 4, 2000. The Roosevelt Group, L.L.C. and
Bradshaw Capital Management, L.L.C. each reported sole
voting and dispositive power over the 48,740 shares of
Common Stock.
(3) As reported on Amendment No. 1 to a Schedule 13G filed January 28,
2000, in which Gilster-Mary Lee Corporation reported sole voting
and dispositive power over 68,600 shares of Common Stock.
(4) Includes shares held directly, as well as jointly with
family members, and shares held in retirement accounts in a
fiduciary capacity or by certain family members, with
respect to which shares the listed individual or group
members may be deemed to have sole voting and/or investment
power. Included in the shares beneficially owned are
options to purchase shares of Common Stock granted under the
Company's 1995 Stock Option and Incentive Plan ("Stock
Option Plan"), which options are currently exercisable or
exercisable within 60 days of the Record Date, totaling
21,411 for Mr. Rozier, 4,110 for Stephen C. Rozier, 4,282
for Mr. Young, 4,282 for Mr. Vogel, and 4,282 for Mr. Hoeh
(38,367 for all directors and executive officers of the
Company and the Bank as a group).
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Bank has followed a policy of granting loans to
eligible directors, officers, employees and members of their
immediate families for the financing of their personal
residences. All such loans to directors and executive
officers are required to be made in the ordinary course of
business and on the same terms, including collateral and
interest rates, as those prevailing at the time for
comparable transactions and do not involve more than the
normal risk of collectibility. Loans to employees (other
than executive officers) are made at reduced interest rates
32
which are one-half percent per annum off the stated rates for
customers, with a waiver of any initial service charge.
However, should the employee voluntarily leave the employment
of the Bank, the interest rate would return to the regular
rate at the time of departure. At September 30, 2000, the
Bank's loans to directors, executive officers, employees
and members of their immediate families totaled $245,007 or
1.9% of the Company's stockholders' equity.
All loans by the Bank to its executive officers and
directors are subject to OTS regulations restricting loans
and other transactions with affiliated persons of the Bank.
Federal law prohibits a savings association from making loans
to its executive officers and directors at favorable rates or
on terms not comparable to those prevailing to the general
public.
At September 30, 2000, the Bank had the following loans
to its directors, executive officers and their affiliates
whose aggregate indebtedness exceeded $60,000 at any time
since September 30, 1999.
Largest
Amount
Name and Position Date Type of Outstanding Balance Interest
Loan Loan Since at Rate
September 30, September 30,
1999 2000
Thomas L. Hoeh 4/14/99 Mortgage $182,620 $175,143 6.850%
Director
Stephen C. 2/3/99 Mortgage 73,105 69,864 6.375
Rozier(1)
Director,
Assistant Vice
President and
Assistant
Secretary
(1) Stephen C. Rozier is the son of Leo Rozier.
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, 2000.
33
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 27, 2000 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 27, 2000 Date: December 27, 2000
---------------------------------- ------------------------------
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 27, 2000 Date: December 27, 2000
---------------------------------- ------------------------------
By: /S/ THOMAS L. HOEH
----------------------------------
Thomas L. Hoeh, Director
Date: December 27, 2000
----------------------------------
INDEX TO EXHIBITS
REFERENCE
TO PRIOR
FILING OR
REGULATION EXHIBIT
S-B NUMBER
EXHIBIT ATTACHED
NUMBER DOCUMENT HERETO
------------------------------------------------------------------------------
<S> <C> <C>
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).
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