<PAGE> 1
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________________ to _____________________
Commission File Number 0-27522
PRESTIGE BANCORP, INC.
----------------------
(Exact name of registrant as specified in its charter)
Pennsylvania 25-1785128
------------ ----------
(State or other jurisdiction of incorporation or (I.R.S.Employer
organization) IdentificationNumber)
710 Old Clairton Road
Pleasant Hills, Pennsylvania 15236
---------------------------- -----
(Address of principal executive office) (Zip Code)
(412) 655-1190
--------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: As of May 14, 1997, there were
914,873 shares of the registrant's common stock outstanding, par value $1.00
per share.
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<PAGE> 2
PRESTIGE BANCORP, INC.
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
PART I. FINANCIAL INFORMATION PAGE
Item 1. Financial Statements
Consolidated Balance Sheets of Prestige Bancorp, Inc. as of
March 31, 1997 (unaudited) and December 31, 1996 1
Consolidated Statements of Income of Prestige Bancorp, Inc. for the three
months ended March 31, 1997 and 1996 (unaudited) 2
Consolidated Statements of Stockholders' Equity of Prestige Bancorp, Inc.
for the three months ended March 31, 1997 and 1996 (unaudited) 3
Consolidated Statements of Cash Flows of Prestige Bancorp, Inc. for the three
months ended March 31, 1997 and 1996 (unaudited) 4
Notes to Financial Statements (unaudited) 5
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations 11
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 14
Item 2. Changes in Securities 14
Item 3. Defaults upon Senior Securities 14
Item 4. Submission of Matters to a Vote of Security-Holders 14
Item 5. Other Information 14
Item 6. Exhibits and Reports on Form 8-K 14
SIGNATURES 15
Table
</TABLE>
<PAGE> 3
PRESTIGE BANCORP, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(Unaudited)
March 31, December 31,
1997 1996
---- ----
<S> <C> <C>
ASSETS
Cash and due from banks $ 812,063 $ 735,951
Interest-bearing deposits with banks 1,119,971 1,411,727
Investment securities:
Available for sale 11,211,169 11,442,549
Held to maturity (market value $25,664,916 and
$20,364,934, respectively) 26,274,822 20,461,927
Net loans 82,569,586 76,545,153
Federal Home Loan Bank stock, at cost 1,140,100 753,900
Premises and equipment, net 1,854,047 1,880,919
Accrued interest receivable 1,149,211 810,884
Deferred tax asset 102,748 35,726
Other assets 598,681 561,413
------------ ------------
Total assets $126,832,398 $114,640,149
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Noninterest-bearing deposits $ 2,771,890 $ 2,554,148
Interest-bearing deposits 84,503,787 81,267,320
------------ -----------
Total deposits 87,275,677 83,821,468
Federal Home Loan Bank advances 22,800,125 14,477,000
Advance payments by borrowers for taxes and insurance 649,090 622,057
Income taxes payable 152,105 24,360
Other liabilities 1,134,777 265,064
------------ ------------
Total liabilities 112,011,774 99,209,949
------------ ------------
Stockholders' Equity:
Preferred stock, $1.00 par value;
5,000,000 shares authorized, none issued - -
Common stock, $1.00 par value; 10,000,000
shares authorized, 963,023 shares issued and 919,873 outstanding
on March 31, 1997; 963,023 shares issued and outstanding on
December 31, 1996 963,023 963,023
Treasury stock at cost, 43,150 shares on
March 31, 1997; none at December 31, 1996 ( 697,751) -
Additional paid-in-capital 8,006,147 8,000,176
Unearned ESOP shares (755,490) (755,490)
Retained earnings - substantially restricted 7,566,396 7,390,945
Net unrealized holding gains (losses) on
available for sale securities, net of taxes (261,701) (168,454)
------------ ------------
Total stockholders' equity 14,820,624 15,430,200
------------ ------------
Total liabilities and stockholders' equity $126,832,398 $114,640,149
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 4
PRESTIGE BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
----------------------------
1997 1996
---- ----
<S> <C> <C>
Interest income:
Interest and fees on loans $ 1,496,384 $ 1,129,164
Interest on mortgage-backed securities 211,420 246,207
Interest and dividends on other investment securities 402,538 122,727
Interest on deposits in other financial institutions 22,942 35,480
------------ -----------
Total interest income 2,133,284 1,533,578
------------ -----------
Interest expense:
Interest on deposits 853,108 859,286
Advances from Federal Home Loan Bank 298,508 46,269
------------ -----------
Total interest expense 1,151,616 905,555
------------ -----------
Net interest income 981,668 628,023
Provision for loan losses 17,000 9,000
------------ -----------
Net interest income after provision for loan losses 964,668 619,023
------------ -----------
Other income:
Fees and service charges 63,534 60,673
Other income, net 9,845 9,383
------------ -----------
Total other income 73,379 70,056
------------ -----------
Other expenses:
Salaries and employee benefits 362,828 284,882
Premises and occupancy costs 79,483 83,616
Federal deposit insurance premiums 13,752 44,609
Data processing costs 48,234 43,393
Advertising costs 22,215 18,068
Transaction processing costs 46,218 36,845
ATM transaction fees 21,548 21,559
Other expenses 114,448 62,515
------------ -----------
Total other expenses 708,726 595,487
------------ -----------
Income before income tax expense 329,321 93,592
Income tax expense 124,979 35,926
------------ -----------
Net income $ 204,342 $ 57,666
============ ===========
Earnings per share (1) $0.23 N/A
</TABLE>
(1) Earnings per share information for 1996 is not presented as the Corporation
completed its stock offering on June 27, 1996.
The accompanying notes are an integral part of these financial statements.
2
<PAGE> 5
PRESTIGE BANCORP, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996
(Unaudited)
<TABLE>
<CAPTION>
Net Unrealized
Holding Losses on
Additional Unearned Available for Sale
Common Paid-In Treasury ESOP Retained Securities,
Stock Capital Stock Shares Earnings Net of Taxes Total
----- ------- -------- ------ -------- ------------------ -----
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1996 $ 963,023 $8,000,176 $ - $(755,490) $7,390,945 $ (168,454) $15,430,200
Net income - - - - 204,342 - 204,342
Allocation of 773 ESOP shares - 5,971 - - - - 5,971
Increase in net unrealized
holding losses on
available for sale
securities, net of taxes - - - - - (93,247) (93,247)
Cash dividends declared:
Common stock ( $0.03 per
share on 963,023 shares ) - - - - (28,891) - (28,891)
Treasury stock purchases,
43,150 shares - - (697,751) - - - (697,751)
--------- ---------- ---------- --------- ---------- ---------- -----------
Balance, March 31, 1997 $ 963,023 $8,006,147 $ (697,751) $(755,490) $7,566,396 $ (261,701) $14,820,624
========= ========== ========== ========= ========== ========= ===========
Balance, December 31, 1995 $ - $ - $ - $ - $7,245,432 $ (67,457) $ 7,177,975
Net income - - - - 57,666 - 57,666
Increase in net unrealized
holding losses on
available for sale
securities, net of taxes - - - - - (150,213) (150,213)
--------- ---------- ---------- --------- ---------- --------- -----------
Balance, March 31, 1996 $ - $ - $ - $ - $7,303,098 $(217,670) $ 7,085,428
========= ========== ========== ========= ========== ========= ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE> 6
PRESTIGE BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-------------------------
1997 1996
---- ----
Operating activities:
<S> <C>
Net income $ 204,342 $ 57,666
----------- -----------
Adjustments to reconcile net income to net cash
(used) provided by operating activities-
Depreciation of premises and equipment 42,848 41,259
Amortization of premiums and discounts, net (1,661) (1,764)
Compensation expense related to ESOP benefit 18,811 -
Provision for loan losses 17,000 9,000
Increase (decrease) in other liabilities 183,654 (107,108)
Increase in income taxes payable 122,889 35,729
Increase in accrued interest receivable (338,327) (6,469)
Increase in other assets (37,268) (36,657)
Other, net - 1,786
----------- -----------
Total adjustments 7,946 (64,224)
----------- -----------
Net cash provided (used) by operating activities 212,288 (6,558)
----------- -----------
Investing activities:
Loan originations (9,631,028) (3,337,921)
Principal payments on loans 3,589,595 2,338,811
Principal payments on mortgage-backed securities available for sale 253,738 173,585
Principal payments on mortgage-backed securities held to maturity 661,495 404,366
Purchases of available for sale securities (177,375) (3,517,884)
Purchases of held to maturity investment securities (6,473,125) -
Maturities of investment securities held to maturity - 1,000,000
Purchases of premises and equipment (15,976) (45,549)
Purchase of Federal Home Loan Bank stock (386,200) (1,700)
----------- -----------
Net cash used by investing activities (12,178,876) (2,986,292)
----------- -----------
Financing activities:
Net change in advance payments by borrowers for taxes and insurance 27,033 (23,220)
Proceeds from Federal Home Loan Bank advances 19,773,125 -
Payments on Federal Home Loan Bank advances (11,450,000) -
Net increase in Money Market, NOW and Passbook savings accounts 2,452,846 777,949
Net increase in certificate accounts 1,001,363 330,779
Purchases of treasury stock (24,532) -
Common stock cash dividends paid (28,891) -
Other - (118,390)
----------- -----------
Net cash provided by financing activities 11,750,944 967,118
----------- -----------
Net decrease in cash and cash equivalents (215,644) (2,025,732)
Cash and cash equivalents at beginning of period 2,147,678 4,393,667
----------- -----------
Cash and cash equivalents at end of period $ 1,932,034 $ 2,367,935
=========== ===========
Supplemental disclosures of cash flow information:
Cash paid during the period for income taxes $ - $ 20,000
Cash paid during the period for interest on deposits
and borrowings 1,066,382 905,879
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE> 7
PRESTIGE BANCORP, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1997
(UNAUDITED)
1. PLAN OF CONVERSION:
On February 14, 1996, the Board of Directors of Prestige Bank, F.S.B. (the
Bank) adopted a Plan of Conversion (the Plan) from a federally chartered mutual
savings bank to a federally chartered stock savings bank and the issuance of
its stock to Prestige Bancorp, Inc. (the Corporation), a Pennsylvania
corporation. The Plan provided that the holding company offer nontransferable
subscription rights to purchase common stock of the holding company. The rights
were offered first to eligible account holders of record, a tax-qualified
employee stock ownership plan to be adopted by the Bank, supplemental eligible
account holders, certain other depositors and borrowers, and directors,
officers and employees.
The Corporation sold 963,023 shares of its common stock (including 77,041
shares to its newly formed Employee Stock Ownership Trust (the ESOP)) at $10.00
a share. Simultaneously there was a corresponding exchange of all the Bank's
stock for approximately 50% of the net offering proceeds. The remaining portion
of the net proceeds were retained by the Corporation net of $770,410 which was
loaned to the ESOP for its purchase. The conversion and public offering was
completed on June 27, 1996 with net proceeds from the offering, net of the ESOP
loan, totaling $8,188,394, after offering expenses.
2. BASIS OF PRESENTATION:
The following unaudited financial statements have been prepared pursuant to the
rules and regulations of the Securities and Exchange Commission. Certain
information and note disclosures normally included in annual financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to those rules and regulations,
although the Corporation believes that the disclosures made are adequate to
make the information presented not misleading. However, such interim
information reflects all adjustments (consisting solely of normal recurring
adjustments) which are, in the opinion of management, necessary for a fair
presentation of financial position and results of operations for the periods
presented. The results of operations for the three months ended March 31, 1997,
are not necessarily indicative of the results to be expected for the year
ending December 31, 1997.
The unaudited financial statements and notes hereto should be read in
conjunction with the audited financial statements and notes thereto for the
year ended December 31, 1996, contained in the Corporation's Annual Report and
Form 10-K.
5
<PAGE> 8
3. INVESTMENT SECURITIES:
The cost and market values of investment securities are summarized as follows:
Investment securities held to maturity:
<TABLE>
<CAPTION>
March 31, 1997
-------------------------------
Amortized Market
Cost Value
------------ -----------
<S> <C> <C>
U.S. government and government
agency obligations:
Due after one and within five years $ 2,001,733 $ 1,959,215
Due after five and within ten years 13,502,764 13,104,915
Due after ten years 1,500,000 1,461,870
Federal Home Loan Mortgage
Corporation (FHLMC) certificates:
Due after one and within five years 721,140 715,625
Due after ten years 7,115,919 6,950,335
Government National Mortgage
Association (GNMA) certificates due
after ten years 1,320,983 1,358,096
Federal National Mortgage Association
(FNMA) certificates due after one and
within five years 112,283 114,860
----------- -----------
$26,274,822 $25,664,916
=========== ===========
</TABLE>
Investment securities available for sale:
<TABLE>
<CAPTION>
March 31, 1997
-------------------------------
Market
Cost Value
------------ -----------
<S> <C> <C>
U.S. government and government
agency obligations:
Due after one and within five years $ 2,000,000 $ 1,956,860
Due after five and within ten years 2,503,078 2,399,990
Due after ten years 2,000,000 1,862,500
Federal Home Loan Mortgage
Corporation (FHLMC) certificates:
Due after one and within five years 1,903,325 1,841,592
Due after ten years 288,810 291,948
Federal National Mortgage Association
(FNMA) certificates due after one and
within five years 1,239,976 1,164,747
Mutual fund investment 1,380,461 1,319,457
Common stock portfolio 331,602 374,075
----------- -----------
$11,647,252 $11,211,169
=========== ===========
</TABLE>
6
<PAGE> 9
4. LOANS RECEIVABLE:
Loans receivable are summarized as follows:
<TABLE>
<S> <C>
March 31,
1997
---------
Commercial, including commercial secured by real estate $ 6,206,015
-----------
Real estate loans:
1-4 family 66,105,895
Construction 1,502,100
-----------
67,607,995
Less-Undisbursed loan proceeds 964,649
Deferred loan costs (7,040)
-----------
66,650,386
-----------
Consumer loans:
Share 504,751
Automobile 1,518,246
Home equity 5,230,765
Student 2,255,538
Credit cards 409,177
Personal unsecured/other 117,048
-----------
10,035,525
-----------
82,891,926
Less- Allowance for loan losses 322,340
===========
$82,569,586
===========
</TABLE>
5. ALLOWANCE FOR LOAN LOSSES:
Activity with respect to the allowance for loan losses is summarized as
follows:
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------------------
1997 1996
---- ----
<S> <C> <C>
Balance at beginning of period $306,926 $287,060
Provision for loan losses 17,000 l9,000
Charge-offs (1,626) --
Recoveries 40 40
======== ========
Balance at end of period $322,340 $296,100
======== ========
</TABLE>
7
<PAGE> 10
6. DEPOSITS:
The aggregate amount of short-term certificates of deposit, each with a minimum
denomination of $100,000, was approximately $5,364,000 at March 31, 1997. The
scheduled maturities of the Bank's certificate accounts as of March 31, 1997
are as follows (amounts approximate):
<TABLE>
<S> <C>
April 1, 1997 to March 31, 1998 $32,125,000
April 1, 1998 to March 31, 1999 5,417,000
April 1, 1999 to March 31, 2000 3,807,000
April 1, 2000 to March 31, 2001 2,744,000
April 1, 2001 and thereafter 592,000
===========
$44,685,000
===========
</TABLE>
7. INCOME TAXES:
The provision for income taxes is as follows:
<TABLE>
<CAPTION>
Three Months Ended
March 31,
--------------------
1997 1996
---- ----
<S> <C> <C>
Federal $101,179 $29,294
State 23,800 6,632
-------- -------
$124,979 $35,926
======== =======
</TABLE>
8. RELATED PARTY TRANSACTIONS:
Certain directors and executive officers of the Bank, including their immediate
families and companies in which they are principal owners, are loan customers
of the Bank. In management's opinion, such loans are made in the normal course
of business and were granted on substantially the same terms and conditions as
loans to other individuals and businesses of comparable creditworthiness at the
time. Total loans to these persons at March 31, 1997, and December 31, 1996,
amounted to $392,084 and $419,236, respectively. Additionally, the Bank has an
unfunded loan commitment for a director in the amount of $93,000 as of March
31, 1997 and December 31, 1996, respectively.
8
<PAGE> 11
9. RETAINED EARNINGS AND REGULATORY CAPITAL:
The Bank's actual capital amounts and ratios are presented below in the
following table. There is no deduction from capital for interest-rate risk
(amounts in thousands).
<TABLE>
<CAPTION>
To Be Well Capitalized
For Capital Adequacy Under Prompt Corrective
Actual Purposes Action Provisions
-------------------- --------------------- ------------------------
Amount Ratio Amount Ratio Amount Ratio
------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C>
Total Capital (to Risk
Weighted Assets):
As of March 31, 1997 $12,480 21.63% =>4,615 =>8.0% =>5,769 =>10.0%
Tier 1 Capital (to Risk
Weighted Assets):
As of March 31, 1997 $12,158 21.07% =>2,308 =>4.0% =>3,461 =>6.0%
Tier 1 Capital (to
Average Assets):
As of March 31, 1997 $12,158 9.72% =>5,005 =>4.0% =>6,256 =>5.0%
</TABLE>
10. FUTURE ACCOUNTING STANDARD:
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, "Earnings per Share" (SFAS No. 128).
SFAS No. 128 differs from current accounting guidance in that earnings per
share is classified as basic earnings per share and diluted earnings per share,
compared to primary earnings per share and fully diluted earnings per share
under current standards. Basic earnings per share differs from primary earnings
per share in that it includes only the weighted average common shares
outstanding and does include any dilutive securities in the calculation.
Diluted earnings per share under the new standard differs in certain
calculations than fully diluted earnings per share under existing standards.
Adoption of SFAS No. 128 is required for interim and annual periods ending
after December 15, 1997. Had the Corporation applied the provisions of SFAS
No. 128 in the first quarter of 1997 to the earnings per share calculations,
the basic and diluted earnings per share for the three months ended March 31,
1997 would have been $0.23.
11. SUBSEQUENT EVENTS:
On April 23, 1997 at the annual stockholders meeting, the Board of Directors
and shareholders formally approved the Corporation's Stock Option Plan and
Management Recognition and Retention Plan and Trust as fully described in the
Corporation's proxy statement dated March 31, 1997.
9
<PAGE> 12
Additionally, on March 3, 1997, the Corporation initiated a plan to repurchase,
at market value, up to 5% (48,150 shares) of its outstanding shares of common
stock through the use of its existing cash and cash equivalents. As of March
31, 1997, the Corporation had a liability for treasury shares purchased of
$673,219 which was paid in April 1997. This repurchase program was completed on
April 28, 1997.
10
<PAGE> 13
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FINANCIAL CONDITION
At March 31, 1997, the Company's total assets amounted to $126.8 million
compared with $114.6 million at December 31, 1996. The $12.2 million or 10.6%
increase was primarily due to an increase of $6.0 million or 7.9% in net loans
receivable and an increase of $5.6 million or 17.5% in investment securities.
The growth in net loans receivable was attributable to increases in commercial
and one-to-four family residential real estate loans. Such increase in assets
was funded through an increase in deposits of $3.5 million or 4.1% and a $8.3
million or 57.5% increase in Federal Home Loan Bank advances. Total
shareholders' equity amounted to $14.8 million or 11.69% of total assets at
March 31, 1997, compared to equity of $15.4 million or 13.46% of total assets
at December 31, 1996. The $610,000 decrease was the result of the Company's
repurchase of its common stock and quarterly dividend paid which was partially
offset by net income during the period.
The Company's nonperforming assets increased $19,000 or 4.9% to $410,000 at
March 31, 1997, compared to $391,000 at December 31, 1996. The increase was due
to an increase in nonperforming one-to-four family residential mortgage loans.
RESULTS OF OPERATIONS
GENERAL--The Company's net income for the quarter ended March 31, 1997, was
$204,000 or $0.23 per share compared to net income of $58,000 for the same
quarter in the prior year. The $146,000 increase in net income for the quarter
ended March 31, 1997 as compared to the quarter ended March 31, 1996 was
primarily the result of a $353,000 increase in net interest income before
provision for loan losses which was partially offset by a $114,000 increase in
total non-interest expense and a $89,000 increase in provision for income
taxes. A portion of the increased net interest income can be attributed to the
investment of the funds raised through the conversion of Prestige Bank from a
mutual chartered savings association to a stock chartered savings association
which occurred on June 27, 1996. The annualized return on average assets and
return on average equity for the quarter ended March 31, 1997, was .65% and
5.34%, respectively, compared to .25% and 3.23% for the comparable period of
1996.
INTEREST INCOME--The Company reported interest income of $2.1 million for the
three months ended March 31, 1997, as compared to $1.5 million for the three
months ended March 31, 1996. The increase of $600,000 or 39.0% for the quarter
ended March 31, 1997, as compared to the same period in the prior year can be
attributed to a $367,000 or 32.5% increase in interest and fees on loans and a
$280,000 or 227.6% increase in interest and dividends on other investment
securities as the Company continued to leverage its capital by expanding its
loan and investment portfolios. The average balances on loans receivable and
investment securities during the first quarter of 1997 were $80.8 million and
$26.0 million, respectively, compared to $62.3 million and $10.2 million,
respectively, for the same period in 1996. In addition, the Company benefited
from earning higher yields on loans receivable and investment securities. The
weighted average yield on loans receivable and investment securities during the
first
11
<PAGE> 14
quarter of 1997 were 7.4% and 6.2%, respectively, compared to 7.2% and 4.8%,
respectively, for the same period in 1996.
INTEREST EXPENSE--Interest expense increased $246,000 or 27.2% during the three
months ended March 31, 1997. The increase for the three months ended March 31,
1997 compared to the same period in the prior year was primarily due to growth
in average interest-bearing liabilities. Average deposits and Federal Home Loan
Bank (FHLB) of Pittsburgh advances during the first quarter of 1997 were $85.6
million and $23.2 million, respectively, compared to $81.3 million and $3.0
million, respectively, for the same period in 1996.
PROVISION FOR LOAN LOSSES--During the three months ended March 31, 1997 the
Company recorded provisions for losses on loans of $17,000 compared to $9,000
for the comparable period in 1996. The Company recorded such provisions to
adjust the Company's allowance for loan losses to a level deemed appropriate
based upon an assessment of the volume and type of lending presently being
conducted by the Company, industry standards, current analysis of the existing
portfolio of loans and a review of the current economic conditions in the
Company's market area. The increase in the first quarter of 1997 reflects the
increased amount of lending by the Company.
OTHER INCOME--Other income increased $3,000 or 4.7% for the three months ended
March 31, 1997 compared to the three months ended March 31, 1996. The increase
was primarily attributable to increases in fees and service charges.
OTHER EXPENSES-- The increase in total other expenses of $113,000 or 19.0% for
the quarter ended March 31, 1997 as compared to the quarter ended March 31,
1996 was primarily the result of a $78,000 or 27.4% increase in salaries and
employee benefits due to approved salary increases and the addition of the ESOP
plan and a $52,000 increase in other expenses primarily due to increased
professional fees and other costs associated with operating the Company as a
public reporting entity. These increases were partially offset by a $31,000
reduction in FDIC premiums due to a new premium schedule that resulted from the
1996 legislation that recapitalized the savings association fund.
INCOME TAXES--The Company incurred a provision for income taxes of $125,000 for
the three months ended March 31, 1997 compared to an income tax provision of
$36,000 for the same period in the prior year. Such increase was primarily due
to an increase in taxable income.
LIQUIDITY AND CAPITAL RESOURCES.
The Company's primary sources of funds are deposits, repayments, prepayments
and maturities of outstanding loans and mortgage-backed securities, maturities
of investment securities and other short-term investments, and funds provided
from operations. While scheduled loan and mortgage-backed securities repayments
and maturing investment securities and short-term investments are relatively
predictable sources of funds, deposit flows and loan prepayments are greatly
influenced by the movement of interest rates in general, economic conditions
and competition. The Company manages the pricing of its deposits to maintain a
deposit funding level deemed appropriate and desirable by its Board of
Directors. In addition, the Company invests in short-term interest-earning
assets which provides liquidity to meet lending requirements. Although the
Company has historically relied on deposits for
12
<PAGE> 15
funding, the Company in 1996 began to use advances from the FHLB of
Pittsburgh to leverage its strong capital position. As of March 31, 1997, the
Company had $22.8 million of outstanding advances from the FHLB of Pittsburgh.
During the three months ended March 31, 1997 and 1996, the Company's operating
activities provided net cash of approximately $212,000 and used net cash of
approximately $7,000, respectively. The primary reasons for the $212,000 net
cash provided during the three months ended March 31, 1997 were $204,000 in net
income, a $184,000 increase in other liabilities and a $123,000 increase in
income taxes payable which was partially offset by a $338,000 increase in
accrued interest receivable. During the three months ended March 31, 1996, the
$7,000 net cash used was the result of a decrease in other liabilities of
$107,000 and a $37,000 increase in other assets which was partially offset by
$58,000 in net income and $41,000 in depreciation of premises and equipment.
Net cash used by investing activities was $12.2 million for the three months
ended March 31, 1997. During the three months ended March 31, 1997, the Company
originated $6.0 million in new loans in excess of principal payments received
on existing loans and purchased $6.5 million of investment securities
designated held to maturity due to their longer term maturity structure. This
compares with the first quarter of 1996 when the Company had approximately $1.0
million in new loans in excess of principal payments received on existing loans
and purchased $3.5 million of investment securities designated available for
sale due to the Company needing more flexibility as it prepared for the
conversion of the Bank from a mutual chartered savings association to a stock
chartered savings association which occurred on June 27, 1996.
Net cash provided by financing activities for the three months ended March 31,
1997, was approximately $11.8 million, attributable to increases in core
deposits of $2.5 million and increases in net Federal Home Loan Bank advances
of $8.3 million. During the same period last year, the Company experienced a
$967,000 increase in net cash provided by financing activities primarily due to
a $778,000 increase in core deposits.
The Company announced a repurchase of its stock in the first quarter of 1997 in
an effort to prudently manage its capital position. The Bank is required to
maintain specified amounts of capital pursuant to the Financial Institutions
Reform, Recovery and Enforcement Act of 1989 and regulations thereunder.
Savings associations are required to maintain tangible capital of 1.5%, core
capital of 4.00% and risk-based capital of 8.00%. At March 31, 1997, the Bank's
tangible, core, and risk-based capital ratios amounted to 9.58%, 9.58%, and
21.63%, respectively, which substantially exceeded applicable requirements.
13
<PAGE> 16
PRESTIGE BANCORP, INC.
PART II
Item 1. Legal Proceedings
Neither the Corporation nor the Bank is involved in any pending
legal proceedings other than nonmaterial legal proceedings
occurring in the ordinary course of business.
Item 2. Changes in Securities
Not applicable.
Item 3. Defaults upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Security-Holders
The first annual meeting of Prestige Bancorp, Inc. was held in
the second quarter of 1997. The solicitation materials were not
distributed until the beginning of the second quarter 1997. The
results of the vote at the shareholders' meeting will be reported
with the 10-Q for the second quarter 1997.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
None.
14
<PAGE> 17
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PRESTIGE BANCORP, INC.
Dated: May 14, 1997 By: /s/ ROBERT S. ZYLA
--------------------------
Robert S. Zyla, President
Dated: May 14, 1997 By: /s/ JAMES M. HEIN
--------------------------
James M. Hein, Controller
15
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 812
<INT-BEARING-DEPOSITS> 1,120
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 11,211
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<LOANS> 82,570
<ALLOWANCE> 322
<TOTAL-ASSETS> 126,832
<DEPOSITS> 87,276
<SHORT-TERM> 0
<LIABILITIES-OTHER> 1,936
<LONG-TERM> 22,800
0
0
<COMMON> 7,516
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<EXPENSE-OTHER> 709
<INCOME-PRETAX> 329
<INCOME-PRE-EXTRAORDINARY> 329
<EXTRAORDINARY> 0
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<NET-INCOME> 204
<EPS-PRIMARY> 0.23
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<YIELD-ACTUAL> 7.00
<LOANS-NON> 400
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