SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Form 10-Q
Quarterly Report Under Section 13 or 15(d) of
The Securities Exchange Act of 1934
For the Quarter Ended June 30, 1995, Commission File Number 0-13425
PREMIER FINANCIAL SERVICES, INC.
(Exact name of registrant as specified in its Charter)
Delaware 36-2852290
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
27 W. Main Street, Suite 101 61032
Freeport, Illinois (Zip Code)
(Address of Principal executive
offices)
Registrant's telephone number, including area code (815) 233-3671
Number of Shares of Common Stock ($5 Par Value) outstanding as of
June 30, 1995: 6,526,227
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
(This report contains 4 pages)
Part I
Item 1. Financial Statements.
The following consolidated financial statements of the
Company are submitted herewith as an exhibit and are incorporated herein by
reference:
1. Consolidated Balance Sheets, June 30, 1995, June 30, 1994
and December 31, 1994.
2. Consolidated Statements of Earnings, quarters ended June
30, 1995 and 1994 and six months ended June 30, 1995 and
1994.
3. Consolidated Statements of Cash Flows, six months ended
June 30, 1995 and 1994.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
Premier Financial Services, Inc.'s per share earnings for the
quarter ended June 30, 1995 edged up to $.17 as compared to $.15
per share recorded in the first quarter this year and $.16 in the
second quarter of 1994. Year to date earnings totaled $2.67
million, slightly less than $2.75 million in 1994. Year-to-date
earnings per share results were unchanged at $.32 due to lower
preferred dividends. Return on average assets and common equity
was .86% and 9.97%, respectively for the six months ended June 30,
1995, as compared to .93% and 9.89% for the same period in 1994.
Year-to-date net interest income totaled $10.8 million in 1995, as
compared to $10.5 million in 1994. Net interest income for the
second quarter of 1995 increased by approximately $168,000 and
$160,000 as compared to the first quarter of 1995 and the second
quarter of 1994. The slight period-to-period increases are
primarily a result of earning asset volume as opposed to rate or
net interest margin improvement. Average earning assets totaled
$553.6 million at June 30, 1995, an increase of $32.8 million from
$520.8 million reported at June 30, 1994. Net loans have grown by
more than $17 million since year end 1994. The increase in loans
was funded by a $30 million or 7% growth in interest-bearing
deposits. Compression of our net interest margin continues as it
declined to 4.19% at June 30, 1995 from 4.21% and 4.32% at March
31, 1995 and June 30, 1994, respectively.
Nonperforming loans decreased to $4.6 million, or 1.54%, of total
loans as of June 30, 1995 compared to $5.7 million, or 1.99%, of
total loans at December 31, 1994. The allowance for possible loan
losses as a percentage of total loans decreased from 1.30% at
December 31, 1994 to 1.04% at June 30, 1995. The adequacy of the
allowance for possible loan losses remains consistent with the
composition of the portfolio and recent credit quality history.
-2-
As the loan portfolio continues to grow, it is likely that normal
provisions to the allowance for possible loan losses will increase
in conjunction with the anticipated growth.
Total noninterest income, excluding gains on investment securities,
decreased $54,000 in the second quarter of 1995 as compared to the
same period in 1994. The decrease is attributable to a one-time
recovery recorded in 1994. Noninterest expenses in the second
quarter of 1995 increased approximately $156,000 as compared to
1994. Contributing to the increase were expenses relating to our
aggressive collection efforts such as legal fees and costs
associated with temporary holding of other real estate for sale.
In the second quarter of 1995, the Financial Accounting Standards
Board issued Financial Accounting Statement No. 122, "Accounting
for Mortgage Servicing Rights". Statement 122 requires a company
to recognize an asset for the rights to service mortgage loans for
others, regardless if the owner purchased the rights or originated
the rights themselves. Previously, when a company purchased
mortgage servicing rights, the value was recorded on the financial
statements as an asset. However, the value of the servicing rights
created by the origination of mortgage loans was not recorded.
This Statement applies prospectively on January 1, 1996. Premier
plans on implementing FAS No. 122 on January 1, 1996 and it is the
opinion of management that implementation will have an immaterial
effect on the financial condition of the Company.
Part II
Item 4. Submission of Matters to a Vote of Security Holders
The following matters were submitted to a vote of security holders
during the quarter ended June 30, 1995, at the Annual Meeting held
April 27, 1995.
1. Election of Directors. Stockholders voted to elect to
the Board of Directors two nominees to serve until the
Annual Meeting in 1998. The following Directors were
nominated and elected: Charles M. Luecke and H. Barry
Musgrove.
2. Adoption of the 1995 non-qualified stock option plan.
Stockholders voted to adopt the 1995 non-qualified
stock option plan.
3. Ratification and approval of the Senior Leadership
and Directors Deferred Compensation Plan.
Stockholders voted to ratify and approve the Senior
Leadership and Directors Deferred Compensation Plan.
-3-
Item 6. Exhibits and Reports on Form 8-K.
1. The following documents are filed as a part of this
report:
A. Consolidated Financial Statements of the Company
for the quarter ended June 30, 1995 as follows:
1. Consolidated Balance Sheets, June 30, 1995,
June 30, 1994 and December 31, 1994.
2. Consolidated Statements of Earnings,
quarters ended June 30, 1995 and 1994 and
six months ended June 30, 1995 and 1994.
3. Consolidated Statements of Cash Flows, six
months ended June 30, 1995 and 1994.
B. Exhibits as follows:
27. Financial Data Schedule, six months ended
June 30, 1995.
2. Reports on Form 8-K - The registrant has not filed any
reports on Form 8-K, nor has it been required to file
such reports, for the quarter ended June 30, 1995.
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.
PREMIER FINANCIAL SERVICES, INC.
By: David L. Murray
David L. Murray, Executive Vice
President & Chief Financial Officer
August 1, 1995
(Date)
-4-
<TABLE>
Consolidated Balance Sheets
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June 30, June 30, December 31,
1995 1994 1994
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Assets
<S> <C> <C> <C>
Cash & non-interest bearing deposits $33,838,174 $21,720,917 $31,186,418
Interest bearing deposits 405,104 13,562,111 14,683,941
Federal funds sold - 5,150,000 -
---------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents 34,243,278 40,433,028 45,870,359
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Investments held to maturity (approximate market value):
June 30, 1995 - $39,578,000;
June 30, 1994 - $42,939,000;
December 31, 1994 - $40,516,000; 38,887,614 42,149,854 40,513,480
Securities available for sale 224,688,318 198,256,942 207,964,644
Loans 301,399,436 278,074,998 284,799,933
Less: Unearned discount ( 300,380) ( 403,662) ( 343,902)
Allowance for possible loan losses ( 3,146,078) ( 3,603,729) ( 3,688,386)
---------------------------------------------------------------------------------------------------------------------------------
Net loans 297,952,978 274,067,607 280,767,645
---------------------------------------------------------------------------------------------------------------------------------
Bank premises & equipment 14,291,915 14,624,346 14,254,748
Excess cost over fair value of net assets acquired 20,804,367 22,396,801 21,600,583
Accrued interest receivable 6,791,903 5,455,475 5,835,006
Other assets 4,421,965 3,870,163 3,697,272
---------------------------------------------------------------------------------------------------------------------------------
Total assets $642,082,338 $601,254,216 $620,503,737
---------------------------------------------------------------------------------------------------------------------------------
Liabilities & stockholders' equity
Non-interest bearing deposits $76,619,555 $86,903,784 $86,018,604
Interest bearing deposits 467,559,082 426,780,657 437,674,799
---------------------------------------------------------------------------------------------------------------------------------
Deposits 544,178,637 513,684,441 523,693,403
---------------------------------------------------------------------------------------------------------------------------------
Short-term borrowings 17,430,000 16,385,000 26,185,000
Securities sold under agreements to repurchase 16,743,584 13,341,421 16,085,872
Accrued taxes & other expenses 4,501,776 2,376,866 1,759,512
Other liabilities 435,372 481,335 303,118
---------------------------------------------------------------------------------------------------------------------------------
Liabilities $583,289,369 $546,269,063 $568,026,905
---------------------------------------------------------------------------------------------------------------------------------
Stockholders' equity
Preferred stock - $1 par value, 1,000,000 shares authorized:
Series A perpetual, $1,000 stated value, 8.25%, 7,000 shares
authorized, 5,000 shares issued and outstanding; 5,000,000 5,000,000 5,000,000
Series B convertible, $1,000 stated value, 7.50%, 7,250 shares
authorized, 7,250 shares issued and outstanding at June 30, 1995
and December 31, 1994, 5,950 shares issued and outstanding at June 30, 1994 7,250,000 5,950,000 7,250,000
Series C perpetual, $1,000 stated value, 7.00%, 1,950 shares
authorized, issued and outstanding at June 30, 1994; - 1,950,000 -
Series D perpetual, $1,000 stated value, 7.50%, 3,300 shares
authorized, 2,000 issued and outstanding, 7.50%
at June 30, 1995, and December 31, 1994, 3,300 shares
issued and outstanding, 9.00% at June 30, 1994 2,000,000 3,300,000 2,000,000
Common stock- $5.00 par value
June 30, June 30, December 31,
No. of Shares 1995 1994 1994
Authorized 15,000,000 15,000,000 15,000,000
Issued 6,526,227 2,172,863 6,526,227
Outstanding 6,526,227 2,163,107 6,504,876 32,631,135 10,864,315 32,631,135
Surplus - 16,134,180 -
Retained earnings 11,614,935 13,963,211 10,149,027
Unrealized gain (loss) on securities available for sale, net of tax 296,899 ( 1,967,775) ( 4,403,568)
Less: Treasury stock, (9,756 shares at cost,
June 30, 1994 and 21,351 shares at cost,
December 31, 1994) - ( 208,778) ( 149,762)
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Stockholders' equity $58,792,969 $54,985,153 $52,476,832
---------------------------------------------------------------------------------------------------------------------------------
Total liabilities & stockholders' equity $642,082,338 $601,254,216 $620,503,737
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</TABLE>
<TABLE>
Consolidated Statements of Earnings
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Six Months Ended Three Months Ended
June 30, June 30,
1995 1994 1995 1994
Interest income
<S> <C> <C> <C> <C>
Interest & fees on loans $13,301,848 $11,825,963 $6,858,822 $5,832,297
Interest & dividends on investment securities:
Taxable 6,957,988 4,218,572 3,624,227 2,321,267
Exempt from federal income tax 1,112,889 1,095,888 558,914 568,473
Other interest income 151,235 317,858 48,254 191,729
-----------------------------------------------------------------------------------------------------------------------------------
Interest income 21,523,960 17,458,281 11,090,217 8,913,766
-----------------------------------------------------------------------------------------------------------------------------------
Interest expense
Interest on deposits 9,513,580 6,244,038 4,978,262 3,184,400
Interest on short-term borrowings 1,172,909 704,039 609,122 386,731
-----------------------------------------------------------------------------------------------------------------------------------
Interest expense 10,686,489 6,948,077 5,587,384 3,571,131
-----------------------------------------------------------------------------------------------------------------------------------
Net interest income 10,837,471 10,510,204 5,502,833 5,342,635
Provision for possible loan losses 102,000 25,000 51,000 25,000
-----------------------------------------------------------------------------------------------------------------------------------
Net interest income after provision
for possible loan losses 10,735,471 10,485,204 5,451,833 5,317,635
-----------------------------------------------------------------------------------------------------------------------------------
Other income
Trust fees 1,285,976 1,214,916 637,037 607,458
Service charges on deposits 1,001,561 937,468 501,884 473,525
Net gains on loans sold to secondary market 59,940 203,811 43,393 47,971
Investment securities gains, net 60,273 6,996 37,755 6,996
Other operating income 855,003 1,162,688 435,141 542,205
-----------------------------------------------------------------------------------------------------------------------------------
Other income 3,262,753 3,525,879 1,655,210 1,678,155
-----------------------------------------------------------------------------------------------------------------------------------
Other expenses
Salaries 4,043,789 3,822,591 2,036,286 1,920,576
Pension, profit sharing, & other employee benefits 660,080 686,886 340,063 337,646
Net occupancy of bank premises 1,051,687 1,007,061 513,278 483,621
Furniture & equipment 559,454 556,387 263,672 271,864
Federal deposit insurance premiums 561,548 598,659 280,774 299,329
Amortization of excess cost over fair value
of net assets acquired 796,216 796,216 398,108 398,108
Other 2,536,207 2,586,667 1,323,728 1,288,285
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Other expense 10,208,981 10,054,467 5,155,909 4,999,429
-----------------------------------------------------------------------------------------------------------------------------------
Earnings before income taxes 3,789,243 3,956,616 1,951,134 1,996,361
Applicable income taxes 1,116,017 1,211,193 576,711 605,572
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Net earnings $2,673,226 $2,745,423 $1,374,423 $1,390,789
===================================================================================================================================
Earnings per share:
Average weighted shares outstanding 6,686,431 6,631,302 6,683,825 6,645,819
Net earnings $.32 $.32 $.17 $.16
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</TABLE>
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six months ended June 30, 1995 and 1994 (unaudited)
1995 1994
------ ------
Cash flows from operating activities:
<S> <C> <C>
Net earnings $2,673,226 $2,745,423
Adjustments to reconcile net earnings
to net cash from operating activities:
Amortization net, related to:
Investment securities 687,934 956,580
Excess of cost over net assets acquired 796,216 796,215
Other 167,679 96,481
Depreciation 552,884 585,110
Provision for possible loan losses 102,000 25,000
Gain on sale related to:
Investment securities ( 60,273) ( 6,996)
Loans sold to secondary market ( 59,940) ( 203,811)
Change in:
Securities available for sale - ( 56,833,510)
Accrued interest receivable ( 956,897) ( 385,143)
Other assets ( 726,466) ( 484,228)
Accrued taxes & other expenses 2,742,264 ( 1,290,429)
Other liabilities 132,254 ( 97,940)
-------------------------------------------------------------------------------------------------------
Net cash from operating activities 6,050,881 ( 54,097,248)
-------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Purchase of securities held-to-maturity ( 1,249,800) ( 8,813,221)
Purchase of securities available for sale (81,762,186) -
Proceeds from:
Maturities of securities held-to-maturity 2,881,563 2,808,883
Sales of securities available for sale 50,709,062 -
Maturities of securities available for sale 18,396,359 -
Net (increase) decrease in loans (17,367,939) 53,059,969
Purchase of bank premises & equipment ( 617,184) ( 82,620)
-------------------------------------------------------------------------------------------------------
Net cash from investing activities (29,010,125) 46,973,011
-------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Net increase (decrease) in:
Deposits 20,485,234 ( 3,298,002)
Securities sold under agreements to repurchase 657,712 ( 8,266,737)
Short term borrowings ( 8,755,000) 3,975,000
Reissuance of treasury stock 149,762 -
Cash dividends paid ( 1,205,545) ( 1,208,530)
-------------------------------------------------------------------------------------------------------
Net cash from financing activities 11,332,163 ( 8,798,269)
-------------------------------------------------------------------------------------------------------
Decrease in cash and cash equivalents (11,627,081) ( 15,922,506)
Cash and cash equivalents, beginning of year 45,870,359 56,355,534
-------------------------------------------------------------------------------------------------------
Cash and cash equivalents, six months ended $34,243,278 $40,433,028
-------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 33,838,174
<INT-BEARING-DEPOSITS> 405,104
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 224,688,318
<INVESTMENTS-CARRYING> 38,887,614
<INVESTMENTS-MARKET> 39,578,000
<LOANS> 301,399,436
<ALLOWANCE> ( 3,146,078)
<TOTAL-ASSETS> 642,082,338
<DEPOSITS> 544,178,637
<SHORT-TERM> 17,430,000
<LIABILITIES-OTHER> 21,680,732
<LONG-TERM> 0
<COMMON> 32,631,135
0
14,250,000
<OTHER-SE> 11,911,834
<TOTAL-LIABILITIES-AND-EQUITY> 642,082,338
<INTEREST-LOAN> 13,301,848
<INTEREST-INVEST> 8,070,877
<INTEREST-OTHER> 151,235
<INTEREST-TOTAL> 21,523,960
<INTEREST-DEPOSIT> 9,513,580
<INTEREST-EXPENSE> 10,686,489
<INTEREST-INCOME-NET> 10,837,471
<LOAN-LOSSES> 102,000
<SECURITIES-GAINS> 59,940
<EXPENSE-OTHER> 10,208,981
<INCOME-PRETAX> 3,789,243
<INCOME-PRE-EXTRAORDINARY> 2,673,226
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,673,226
<EPS-PRIMARY> .32
<EPS-DILUTED> .32
<YIELD-ACTUAL> 4.19
<LOANS-NON> 2,922,623
<LOANS-PAST> 1,629,415
<LOANS-TROUBLED> 88,012
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 3,688,386
<CHARGE-OFFS> 812,767
<RECOVERIES> 168,459
<ALLOWANCE-CLOSE> 3,146,078
<ALLOWANCE-DOMESTIC> 2,095,078
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 1,051,000
</TABLE>
