<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT
___________
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1995 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 2-94289
PRESIDENTIAL MORTGAGE COMPANY
(Exact name of Registrant as specified in its charter)
California 95-3611304
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
21031 Ventura Boulevard
Woodland Hills, California 91364
(Address of Principal Executive Office) (Zip Code)
Registrant's telephone number, including area code (818) 992-8999
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 NO X.
--- ---
<PAGE> 2
PRESIDENTIAL MORTGAGE COMPANY
(A California Limited Partnership)
AND SUBSIDIARIES
Consolidated Balance Sheets
Unaudited
December 31, 1994 and September 30, 1995
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1995 1994
<S> <C> <C>
Assets
Cash & cash equivalents $ 10,013,000 $ 19,628,000
Accounts receivable, net 9,462,000 5,549,000
Interest receivable 924,000 1,125,000
Loans receivable, net (note 2) 46,992,000 53,045,000
Loans held for sale 2,380,000 12,011,000
Excess yield receivable 462,000 888,000
Real estate acquired in settlement of loans 5,336,000 7,621,000
Property and equipment, net 1,484,000 1,322,000
Goodwill 1,752,000 1,749,000
Other assets 1,243,000 809,000
------------- -------------
$ 80,048,000 $ 103,747,000
============= =============
Liabilities and Partners' Capital
Liabilities:
Thrift certificates payable $ 54,811,000 $ 69,501,000
Accounts payable, accrued expenses and interest payable 5,292,000 5,610,000
Partnership withdrawals payable 1,120,000 1,120,000
Notes payable 8,450,000 14,778,000
Mortgages payable - secured by real estate acquired in
settlement of loans 1,095,000 2,313,000
------------- -------------
$ 70,768,000 $ 93,322,000
------------- -------------
Partners' Capital 9,280,000 10,425,000
------------- -------------
$ 79,983,000 $ 103,747,000
============= =============
</TABLE>
See accompanying Notes to Consolidated Financial Statements and Management's
discussion and Analysis of Financial Condition and Results of Operations
<PAGE> 3
PRESIDENTIAL MORTGAGE COMPANY
(A California Limited Partnership)
AND SUBSIDIARIES
Consolidated Statements of Income
Unaudited
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
September 30, September 30, September 30, September 30,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Interest Income:
Interest and fees on loans receivable 2,223,000 2,614,000 6,803,000 8,296,000
Interest on deposits with banks 125,000 151,000 584,000 284,000
------------ ------------ ------------ ------------
Total interest income 2,348,000 2,765,000 7,387,000 8,580,000
Interest Expense:
Interest on thrift certificates greater than $100,000 0 5,000 6,000 24,000
Interest on other thrift certificates 927,000 746,000 2,948,000 2,071,000
Interest on notes payable 321,000 430,000 1,125,000 1,472,000
------------ ------------ ------------ ------------
Total interest expense 1,248,000 1,181,000 4,079,000 3,567,000
------------ ------------ ------------ ------------
Net interest income 1,100,000 1,584,000 3,308,000 5,013,000
Provision for loan losses 861,000 2,064,000 1,861,000 2,749,000
------------ ------------ ------------ ------------
Net interest income after provision for loan losses 239,000 (480,000) 1,447,000 2,264,000
Noninterest income:
Trustee and reconveyance fees 797,000 815,000 2,320,000 2,505,000
Other income 229,000 334,000 822,000 879,000
Gain on Sale of Loans 2,360,000 649,000 5,690,000 1,263,000
------------ ------------ ------------ ------------
3,386,000 1,798,000 8,832,000 4,647,000
Noninterest expense:
General and administrative 1,778,000 1,669,000 4,920,000 4,986,000
Salaries, employee benefits and personnel services 2,268,000 1,918,000 5,960,000 5,660,000
Amortization of organization costs 56,000 111,000 129,000 150,000
Depreciation and amortization 127,000 115,000 366,000 386,000
Expenses on real estate acquired in settlement of loans 218,000 450,000 243,000 1,385,000
Net loss (gain) on sales of real estate acquired
in settlement of loans 47,000 (123,000) 373,000 (6,000)
------------ ------------ ------------ ------------
4,494,000 4,140,000 11,991,000 12,561,000
------------ ------------ ------------ ------------
Net income before tax provision (869,000) (2,822,000) (1,712,000) (5,650,000)
------------ ------------ ------------ ------------
Tax provision (53,000) 0 (567,000) 0
------------ ------------ ------------ ------------
Net income (816,000) (2,822,000) (1,145,000) (5,650,000)
============ ============ ============ ============
</TABLE>
See accompanying Notes to Consolidated Financial Statements and
Management's discussion and Analysis of Financial Condition and
Results of Operations
<PAGE> 4
PRESIDENTIAL MORTGAGE COMPANY
(A California Limited Partnership)
AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Unaudited)
Nine months ended September 30, 1995 and 1994
<TABLE>
<CAPTION>
Nine Months Nine Months
Ended Ended
9-30-95 9-30-94
<S> <C> <C>
Adjustments to reconcile net income (loss)
to net cash provided by (used in) operating
activities:
Net income (1,145,000) (5,650,000)
Depreciation & Amortization 495,000 536,000
Provision for loan losses 1,861,000 2,749,000
Net (gain) loss on sales of real estate
acquired in settlement of loans 373,000 (6,000)
(Increase) decrease in asset accounts:
Accounts Receivable (3,913,000) (6,073,000)
Interest receivable 201,000 558,000
Excess yield receivable 426,000 242,000
Goodwill (3,000) (106,000)
Other assets (563,000) (748,000)
Increase (decrease) in liability accounts:
Accounts payable and accrued expenses
(318,000) (1,149,000)
Net cash provided by (used in) operating ------------ ------------
activities (2,586,000) (9,647,000)
------------ ------------
Cash flows from investing activities:
(Increase) Decrease in Loans Receivable 15,260,000 11,835,000
Increase in Property & Equipment (204,000) (638,000)
Decrease in Mortgages Payable on Other
Real Estate 1,218,000 207,000
Decrease in Other Real Estate (2,285,000) (341,000)
Proceeds from repayment of receivable
from related party 0 0
------------ ------------
Net cash provided by (used in) investing 13,989,000 11,063,000
activities ------------ ------------
Cash flow from financing activities:
Distribution to Partners 0 0
Withdrawal of Partnership Shares 0 0
Decrease in Thrift Certificates (14,690,000) 7,009,000
Decrease in Line of Credit (6,328,000) (5,485,000)
Proceeds from issuance of partnership
shares 0 0
------------ ------------
Net cash provided by (used in) financing (21,018,000) 1,524,000
activities ------------ ------------
Net decrease in Cash and Cash Equivalents (9,615,000) 2,940,000
Cash and Cash Equivalents at Year End 19,628,000 13,219,000
------------ ------------
Cash and Cash Equivalents at Sept 30, 10,013,000 16,159,000
============ ============
</TABLE>
See accompanying Notes to Consolidated Financial Statements and
Management's discussion and Analysis of Financial Condition and Results
of Operations
<PAGE> 5
PRESIDENTIAL MORTGAGE COMPANY
(A California Limited Partnership)
AND SUBSIDIARIES
Notes to Combined Financial Statements
1) The unaudited financial information furnished herein, in the
opinion of management, reflects all adjustments (all of which are of
a normal recurring nature) which are necessary to fairly state the
Partnership's financial position, its cash flows and the results of
its operations. The Partnership presumes that users of the interim
financial information herein have read or have access to the audited
financial statements and Management's Discussion and Analysis of
Financial Condition and Results of Operations for the preceding
fiscal year and that the adequacy of additional disclosure needed
for a fair presentation, except in regard to material contingencies,
may be determined in that context. Accordingly, footnote and other
disclosures which would substantially duplicate the disclosure
contained in the Partnership's most recent annual report has been
omitted. The interim financial information herein is not
necessarily representative of operations for a full year for various
reasons including changes in interest rates, volume of loans origi-
nated and loans paid off.
2) Loans Receivable
The following is a summmary of Loans Receivable:
<TABLE>
<CAPTION>
@ 9-30-95 @ 12-31-94
<S> <C> <C>
Interest bearing loans $ 51,639,000 $ 58,780,000
Deferred loan fees, net (972,000) (1,428,000)
Allowance for loan losses (3,675,000) (4,307,000)
------------ ------------
Total $ 46,992,000 $ 53,045,000
============ ============
</TABLE>
The following is a summmary of Allowance for Loan Losses:
<TABLE>
<S> <C>
Balance at 12-31-94 $ 4,307,000
Additions to reserve 1,861,000
Charge offs/recoveries (2,493,000)
------------
Balance at 9-30-95 $ 3,675,000
============
</TABLE>
<PAGE> 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
FINANCIAL CONDITION
Total consolidation assets of Presidential Mortgage Company (referred
to herein as the "Partnership" with respect to consolidated information, and as
"Presidential" with respect to the unconsolidated operations of Presidential
Mortgage Company) decreased $23.7 million (22.8%) to $80.0 million at September
30, 1995 from $103.7 million at December 31, 1994. The decrease resulted
primarily from declines in cash and cash equivalents, loans receivable, excess
yield receivable, real estate acquired in settlement of loans ("OREO") and
interest receivable, offset by increases in accounts receivable. Loans
receivable decreased by $6.0 million (11.4%), to $47.0 million from $53.0
million, as a result of loan pay offs and loan sales. Cash and cash
equivalents decreased by $9.6 million (49.0%), to $10.0 million from $19.6
million. However, this decline in cash and cash equivalents was offset by a
$3.9 million (70.5%) increase in accounts receivable, to $9.5 million at
September 30, 1995 from $5.6 million at December 31, 1994. Accounts
receivable reflected $3.6 million due for loans sold as of September 30, 1995,
for which payment was not received until October 1995. Excess yield
receivable decreased $.4 million, (48.0%) to $.5 million from $.9 million.
OREO declined by $2.3 million (30.0%), to $5.3 million at September 30, 1995
from $7.6 million at December 31, 1994, reflecting sales of OREO. Interest
receivable declined by $.2 million (17.9%), to $.9 million from $1.1 million,
primarily due to the reduction of the loan portfolio.
Total liabilities decreased $22.5 million (24.1%) to $70.8 million at
September 30, 1995 from $93.3 at December 31, 1994. The decrease resulted from
declines in notes payable, thrift certificates payable, accounts payable,
accrued expenses and interest payable and mortgages payable on OREO. Notes
payable decreased by $6.3 million (42.8%), to $8.4 million from $14.8 million,
due to pay down of the bank debt. Thrift certificates payable decreased by
$14.7 million (21.1%) to $54.8 million from $69.5 million, reflecting the
reduction in total assets of Pacific Thrift and Loan Company ("Pacific
Thrift"). Accounts payable, accrued expenses and interest payable decreased by
$.3 million (5.7%), to $5.3 million from $5.6 million at December 31, 1994,
primarily due to a $.4 million reduction in accrued expenses for the
environmental remediation of OREO acquired by Pacific Thrift after receiving a
lower bid for completion of the work. Mortgages payable on OREO decreased by
$1.2 million (52.7%), to $1.1 million from $2.3 million, due to sale of OREO.
Total partnership capital decreased by $1.1 million (10.6%) to $9.3
million from $10.4 million, due to net losses of $1.1 million incurred during
the nine months ended September 30, 1995.
RESULTS OF OPERATIONS
GENERAL
The Partnership incurred a net operating loss of $.9 million before tax
provision for the quarter ended September 30, 1995, compared with a net
operating loss of $2.8 million for the quarter ended September 30, 1994. The
reduction in the net operating loss in the first three quarters of 1995 was due
primarily to increases in noninterest income and decreases in noninterest
expenses from the same period of 1994. Net operating losses for the nine
months ended September 30, 1995 were $1.7 million before tax provision and $1.1
million after tax provision reflecting a tax benefit due to Pacific Thrift's
net operating loss carryforwards of $.6 million, compared with net operating
losses of $5.7 million for the nine months ended September 30, 1994. Pacific
Thrift has a remaining net operating loss carryforward of $6.8 million as of
December 31, 1994, which may be used to offset tax liability on future taxable
income of Pacific Thrift.
NET INTEREST INCOME
Net interest income before provision for loan losses decreased by $.5
million (30.5%) for the third quarter of 1995, and by $1.7 million (34.0%) for
the nine months ended September 30, 1995, compared to the same periods of 1994,
as a result of the reduction in total interest income and increase in total
interest expense. Total interest income decreased by $.4 million (15.1%) for
the third quarter of 1995 and by $1.2 million (13.9%) for the nine months ended
September 30, 1995, compared to the same periods of 1994, due to reductions in
the loan portfolio. Total interest expense increased by $.1 million (5.7%) for
the third quarter of 1995 and by $.5 million (14.3%) for the nine months ended
September 30, 1995, compared to the same periods of 1994, due to higher market
interest rates on thrift certificates by Pacific Thrift.
PROVISION FOR LOAN LOSSES
The provision for loan losses was $.9 million for the third quarter
and $1.9 million for the nine months ended September 30, 1995, compared with
$2.1 million and $2.7 million for the same periods of 1994. The total
allowance for loan losses was $3.7 million at September 30, 1995 compared with
$4.3 million at December 31,
<PAGE> 7
1994, reflecting sales and payoffs of loans as to which reserves had previously
been taken and improvements in status in some portfolio loans.
The calculation of the adequacy of the allowance for loan losses is
based on a variety of factors, including loan classifications and underlying
loan collateral values, and is not directly proportional to the level of
nonperforming loans. The ratio of nonaccrual loans past due 90 days or more to
total loans was 2.53% at September 30, 1995. The ratio of the allowance for
loan losses to nonaccrual loans past due 90 days or more was 281.61% at
September 30, 1995.
NONINTEREST INCOME
Total noninterest income increased by $1.6 million (88.3%) for the
quarter and by $4.2 million (90.0%) for the nine months ended September 30,
1995, compared to the same periods of 1994, due to increase in gains on sale of
loans by Pacific Thrift. Gains on sale of loans increased by $1.7 million
(263.7%) for the third quarter of 1995 and by $4.4 million (350.5%) for the
three quarters ended September 30, 1995, compared to the same periods of 1995.
Pacific Thrift has sold a total of $106 million of loans during the first nine
months of 1995, for a total gain on sale of $5.6 million. These sales included
$98 million of securitizable loans, for a gain on sale of $5.4 million, $7
million of portfolio loans, for a gain on sale of $.2 million and $1 million of
home improvement loans, sold at par value. Trustee and reconveyance fees
decreased by less than $.1 million (2.2%) for the third quarter of 1995 and by
$.2 million (7.4%) for the nine months ended September 30, 1995, compared to
the same periods of 1994.
NONINTEREST EXPENSE
Noninterest expense increased by $.4 million (8.6%) for the third
quarter and decreased by $.6 million (4.5%) for the nine months ended September
30, 1995, compared to the same periods of 1994. Reductions in noninterest
expense were primarily due to reductions in expenses on OREO, partially offset
by increases in salaries, employee benefits and personnel services and net
losses on sales of OREO. General and administrative expenses increased by $.1
million (6.5%) for the third quarter of 1995 but decreased by $.1 million
(1.3%) for the nine months ended September 30, 1995, compared to the same
periods of 1994. Salaries, employee benefits and personnel services increased
by $.4 million (18.2%) for the third quarter and by $.3 million (5.3%) for the
nine months ended September 30, 1995, compared to the same periods of 1994.
Expenses on OREO decreased by $.2 million (51.5%) for the third quarter and by
$1.1 million (82.5%) for the nine months ended September 30, 1995, compared to
the same periods of 1994. The Partnership recognized net losses on sales of
OREO of $47,000 for the third quarter of 1995 and $.4 million for the nine
months ended September 30, 1995, compared with gains of $.1 million and $6,000
for the same periods of 1994.
LIQUIDITY AND CAPITAL RESOURCES
Presidential does not maintain significant cash and cash equivalent
assets on its own behalf, and uses substantially all of its cash flow to pay
down the bank debt on a monthly basis. The primary source of Pacific Thrift's
liquidity is the cash and cash equivalents maintained by Pacific Thrift in
connection with its deposit-taking and lending activities. At September 30,
1995, cash and cash equivalent assets totalled $10.0 million, compared with
$19.6 million at December 31, 1994. However, this did not reflect an additional
receivable of $3.6 million for loans sold as of September 30, 1995 which was
paid for in October 1995.
Pacific Thrift is subject to certain leverage and risk-based capital
adequacy standards applicable to FDIC-insured institutions. At September 30,
1995, Pacific Thrift was classified as "adequately capitalized" by the FDIC,
and its regulatory capital ratios met the FDIC regulatory definition of
"well capitalized." However, because Pacific Thrift is currently subject to a
Cease and Desist Order, which requires it to maintain a certain capital level
(which it currently meets), Pacific Thrift may be classified by the FDIC as
"adequately capitalized." See Annual Report on Form 10-K for the year ended
December 31, 1994, Item 1. "Business - Supervision and Regulation - Regulatory
Actions."
At September 30, 1995, the Partnership had no material outstanding
commitments to fund loans. Certificates of deposit which are scheduled to
mature in one year or less from September 30, 1995 totalled $36.3 million.
Based upon historical experience, management believes that a significant
portion of such deposits will be renewed and will remain with Pacific Thrift.
As indicated in the Statements of Cash Flows, the Partnership used $2.6
million in cash from operating activities from January 1, 1995 through
September 30, 1995. This includes a deduction from cash for the $3.6 million
receivable for loans sold at September 30, 1995 which were paid for in October
1995.
<PAGE> 8
The Partnership realized $14.0 million from investing activities for
the nine months ended September 30, 1995, primarily due to a net decrease of
$15.3 million in loans receivable.
The Partnership used $21.0 million in financing activities for the nine
months ended September 30, 1995, primarily reflecting a $14.7 million decrease
in thrift certificates and a $6.3 million decrease in the bank debt. No
distributions or withdrawal payments were made to limited partners in
accordance with the restrictions on such payments under the bank loan
agreement.
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
There have been no material developments in legal proceedings since the
date of filing of the Partnership's Annual Report on Form 10-K for the year
ended December 31, 1994.
ITEM 2. CHANGES IN SECURITIES.
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to the vote of security holders during the
quarter ended September 30, 1995.
ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
None.
(b) Reports on Form 8-K.
On September 28, 1995, the Partnership filed a Report on Form 8-K
dated September 12, 1995, regarding a termination of Ernst & Young, LLP, as
independent public accountants of the Partnership and the appointment of BDO
Seidman, LLP as the Partnership's independent public accountants.
<PAGE> 9
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Partnership has duly caused this Report to be signed on its behalf by the
undersigned, thereunto duly authorized.
PRESIDENTIAL MORTGAGE COMPANY
(Registrant)
November 10, 1995 JOEL R. SCHULTZ
-----------------------------------------------
Joel R. Schultz
Chief Managing Officer of Registrant; President
of Presidential Services Corporation ("PSC"),
general partner of Presidential Management
Company, a California limited partnership,
general partner of the Registrant
November 10, 1995 CHARLES J. SIEGEL
-----------------------------------------------
Charles J. Siegel,
Chief Financial and Accounting Officer of
the Registrant
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> SEP-30-1995
<CASH> 5,333
<INT-BEARING-DEPOSITS> 180
<FED-FUNDS-SOLD> 4,500
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 0
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 53,047
<ALLOWANCE> 3,675
<TOTAL-ASSETS> 80,048
<DEPOSITS> 54,811
<SHORT-TERM> 8,450
<LIABILITIES-OTHER> 5,787
<LONG-TERM> 1,720
<COMMON> 0
0
0
<OTHER-SE> 9,280
<TOTAL-LIABILITIES-AND-EQUITY> 80,048
<INTEREST-LOAN> 6,803
<INTEREST-INVEST> 584
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 7,387
<INTEREST-DEPOSIT> 2,954
<INTEREST-EXPENSE> 4,079
<INTEREST-INCOME-NET> 3,308
<LOAN-LOSSES> 1,861
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 11,991
<INCOME-PRETAX> (1,712)
<INCOME-PRE-EXTRAORDINARY> (1,712)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,145)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<YIELD-ACTUAL> 6.09
<LOANS-NON> 1,305
<LOANS-PAST> 911
<LOANS-TROUBLED> 948
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 4,307
<CHARGE-OFFS> 2,494
<RECOVERIES> 1
<ALLOWANCE-CLOSE> 3,675
<ALLOWANCE-DOMESTIC> 3,675
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
