<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 JUNE 30, 1994 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)
<TABLE>
<CAPTION>
<S> <C>
California 95-3611304
(State or other jurisdiction of incorporation or organization) (IRS Employer Identification Number)
</TABLE>
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 .
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PRESIDENTIAL MORTGAGE COMPANY
(A California Limited Partnership)
AND SUBSIDIARIES
Consolidated Balance Sheet
Unaudited
December 31, 1993 and June 30, 1994
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1994 1993
<S> <C> <C>
Assets
Cash & cash equivalents $ 13,124,512 13,219,565
Accounts receivable, net 3,666,202 4,133,661
Interest receivable 1,580,336 2,091,425
Loans receivable, net (note 2) 82,460,869 84,754,592
Excess yield receivable 727,789 895,220
Real estate acquired in settlement of loans 5,603,223 6,003,295
Property and equipment, net 1,373,004 1,215,496
Goodwill 1,753,336 1,621,781
Other assets 1,284,557 388,555
-------------------- -----------------
Total Assets $ 111,573,828 114,323,590
==================== =================
Liabilities and Partners' Capital
Liabilities:
Thrift certificates payable $ 66,550,809 62,420,561
Accounts payable, accrued expenses and interest payable 4,479,353 5,266,440
Partnership withdrawals payable 1,120,379 1,120,379
Notes payable 20,800,000 23,800,000
Mortgages payable - secured by real estate acquired in
settlement of loans 1,512,786 1,777,278
-------------------- -----------------
$ 94,463,327 94,384,658
-------------------- -----------------
Partners' Capital 17,110,501 19,938,932
-------------------- -----------------
Total Liabilities & Partners' Capital $ 111,573,828 114,323,590
==================== =================
</TABLE>
See accompanying Notes to Consolidated Financial Statements and Management's
discussion and Analysis of Financial Condition and Results of Operations
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PRESIDENTIAL MORTGAGE COMPANY
(A California Limited Partnership)
AND SUBSIDIARIES
Consolidated Statements of Income
Unaudited
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
June 30, June 30, June 30, June 30,
1994 1993 1994 1993
<S> <C> <C> <C> <C>
Interest Income:
Interest and fees on loans receivable 3,448,753 4,030,901 6,296,493 7,955,414
Interest on deposits with banks 64,910 483 131,019 1,451
---------- --------- ---------- ---------
Total interest income 3,513,663 4,031,384 6,427,512 7,956,865
Interest Expense:
Interest on thrift certificates greater than $100,000 4,830 77,831 18,844 154,638
Interest on other thrift certificates 662,938 722,242 1,324,259 1,429,081
Interest on notes payable 532,433 635,788 1,042,165 1,326,522
---------- --------- ---------- ---------
Total interest expense 1,200,201 1,435,861 2,385,268 2,910,241
---------- --------- ---------- ---------
Net interest income 2,313,462 2,595,523 4,042,244 5,046,624
Provision for loan losses 467,999 464,150 684,978 848,483
---------- --------- ---------- ---------
Net interest income afer provision for loan losses 1,845,463 2,131,373 3,357,266 4,198,141
Noninterest income:
Trustee and reconveyance fees 812,993 929,132 1,690,392 1,947,925
Other income 278,415 357,415 545,895 563,701
Gain on sale of Title I loans 0 (4,823) 0 15,177
---------- --------- ---------- ---------
1,091,408 1,281,724 2,236,287 2,526,803
Noninterest expense:
General and administrative 1,806,754 1,413,881 3,317,427 2,610,658
Salaries, employee benefits and personnel services 1,983,037 1,349,255 3,741,824 2,811,029
Amortization of organization costs 25,346 (6,484) 38,892 2,581
Depreciation and amortization 136,106 40,420 271,363 79,605
Expenses on real estate acquired in settlement of loans 587,823 191,235 935,664 409,474
Net loss (gain) on sales of real estate acquired
in settlement of loans 198,722 222,921 116,814 215,811
---------- --------- ---------- ---------
4,737,788 3,211,228 8,421,984 6,129,158
---------- --------- ---------- ---------
0 12,700 0 71,788
---------- --------- ---------- ---------
Net income (1,800,917) 189,169 (2,828,431) 523,998
========== ========= ========== =========
</TABLE>
See accompanying Notes to Consolidated Financial Statements and
Management's discussion and Analysis of Financial
Condition and Results of Operations
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PRESIDENTIAL MORTGAGE COMPANY
(A California Limited Partnership)
AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Unaudited)
Six months ended June 30, 1994 and 1993
<TABLE>
<CAPTION>
Six Months Six Months
Ended Ended
6-30-94 6-30-93
<S> <C> <C>
Adjustments to reconcile net income (loss)
to net cash provided by (used in) operating
activities:
Net income (2,828,431) 523,998
Depreciation & Amortization 310,255 469,516
Provision for loan losses 684,978 848,483
Net (gain) loss on sales of real estate
acquired in settlement of loans 116,814 215,811
(Increase) decrease in asset accounts:
Accounts Receivable 467,459 (1,547,836)
Interest receivable 511,089 1,093,725
Excess yield receivable 167,431 (205,206)
Goodwill (131,555) (15,171)
Other assets (934,894) (958,918)
Increase (decrease) in liability accounts:
Accounts payable and accrued expenses
and Interest Payable (787,087) 1,008,841
Net cash provided by (used in) operating ---------- -----------
activities (2,423,941) 1,433,243
---------- -----------
Cash flows from investing activities:
(Increase) Decrease in Loans Receivable 1,608,745 14,436,284
Increase in Property & Equipment (428,871) (1,227)
Decrease in Mortgages Payable on Other
Real Estate (264,492) (73,597)
Decrease in Other Real Estate 283,258 1,096,136
Proceeds from repayment of receivable
from related party 0 354,621
---------- -----------
Net cash provided by (used in) investing
activities 1,198,640 15,812,217
---------- -----------
Cash flow from financing activities:
Distribution to Partners 0 (1,943,435)
Withdrawal of Partnership Shares 0 (1,282,500)
Increase in Thrift Certificates 4,130,248 14,742,252
Decrease in Line of Credit (3,000,000) (29,150,000)
Proceeds from issuance of partnership
shares 0 34,097
---------- -----------
Net cash provided by (used in) financing 1,130,248 (17,599,586)
activities ---------- -----------
Net decrease in Cash and Cash Equivalents (95,053) (354,126)
Cash and Cash Equivalents at Year End 13,219,565 789,412
---------- -----------
Cash and Cash Equivalents at June 30, 13,124,512 435,286
========== ===========
</TABLE>
See accompanying Notes to Consolidated Financial Statements and Management's
discussion and Analysis of Financial Condition and Results of Operations
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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:
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<CAPTION>
@ 6-30-94 @ 12-31-93
<S> <C> <C>
Interest bearing loans $ 85,948,647 $ 89,482,481
Deferred loan fees, net (1,467,165) (1,605,488)
Allowance for loan losses (2,020,613) (3,122,401)
----------------- ----------------
Total $ 82,460,869 $ 84,754,592
================= ================
The following is a summmary of Allowance for Loan Losses:
Balance at 12-31-93 $ 3,122,400
Additions to reserve 684,978
Charge offs/recoveries (1,786,765)
-----------------
Balance at 6-30-94 $ 2,020,613
=================
</TABLE>
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
FINANCIAL CONDITION
Total consolidated assets of Presidential Mortgage Company (referred to
herein as the "Company" with respect to consolidated information, and as
"Presidential" with respect to the unconsolidated operations of Presidential
Mortgage Company) decreased $2.7 million (2%) to $111.6 million at June 30, 1994
from $114.3 million at December 31, 1993. The decline was due primarily to
reductions in loans receivable, interest receivable and OREO (other real estate
acquired in settlement of loans). Loans receivable decreased by $2.3 million
(3%), due to use of proceeds from loan payoffs and sales of loans to pay down
Presidential's bank debt. Interest receivable decreased by $.5 million (24%),
due to reduced interest rates charged on loans. OREO decreased by $.4 million
(7%) due to sales of OREO during the first and second quarters of 1994. Accounts
receivable decreased by $.4 million (10%), to $3.7 million from $4.1 million.
Total liabilities increased $.1 million (0.1%) to $94.5 at June 30,
1994 from $94.4 at December 31, 1993. The increase was due to the increase of
$4.1 million (7%) in thrift certificates issued by the Company's wholly owned
subsidiary, Pacific Thrift and Loan Company ("Pacific Thrift"), to $66.5 million
at June 30, 1994 from $62.4 million at December 31, 1993. This increase was
partially offset by reductions in notes payable and accounts and interest
payable. Notes payable decreased $3.0 million (13%), to $20.8 million at June
30, 1994 from $23.8 million at December 31, 1993, as Presidential continued to
pay down the bank debt. Accounts and interest payable decreased $.8 million
(15%), to $4.5 million at June 30, 1994 from $5.3 million at December 31, 1993.
Total partnership capital decreased by $2.8 million (14%) to $17.1
million at June 30, 1994 from $19.9 at December 31, 1993, due to net operating
losses in the first and second quarters of 1994.
RESULTS OF OPERATIONS
The Company incurred a net operating loss of $1.8 million for the
quarter ended June 30, 1994, compared with a net operating profit of $.2 million
for the quarter ended June 30, 1993. For the six months ended June 30, 1994, the
Company incurred a net operating loss of $2.8 million, compared with a net
operating profit of $.5 million for the first six months of 1993. The net loss
in the first two quarters of 1994 was due primarily to declines in net interest
income and increases in non-interest expense.
Total interest income declined by $.5 million (13%), to $3.5 million
for the quarter ended June 30, 1994 compared with $4.0 million for the quarter
ended June 30, 1993. For the year-to-date, total interest income declined by
$1.6 million (19%), to $6.4 million for the first two quarters of 1994 compared
with $8.0 million for the first two quarters of 1993. Net interest income after
provision for loan losses decreased by $.3 million (13%) to $1.8 million in the
second quarter of 1994 compared with $2.1 million in the second quarter of 1993,
and by $.8 million (20%) in the first two quarters of 1994, to $3.4 million for
the first two quarters of 1994 compared with $4.2 million for the first two
quarters of 1993. Declines in interest income reflect declines in the loan
portfolio and reductions in interest rates on loans receivable.
Noninterest income declined $.2 million (15%) for the quarter ended
June 30, 1994, to $1.1 million for the second quarter of 1994 from $1.3 million
for the second quarter of 1993. For the year-to-date ended June 30, 1994,
noninterest income declined $.3 million (11%), to $2.2 million for the first two
quarters of 1994 compared with $2.5 million for the first two quarters of 1993.
These declines were primarily due to reduced foreclosures serviced by the
Company's trust deed service company subsidiaries.
Noninterest expense increased $1.5 million (48%) for the quarter ended
June 30, 1994, to $4.7 million for the second quarter of 1994 from $3.2 million
for the second quarter of 1993. For the year-to-date ended June 30, 1994,
noninterest expense increased $2.3 million (37%), to $8.4 million for the first
two quarters of 1994 compared with $6.1 million for the first two quarters of
1993. Increases for the 1994 second quarter consisted primarily of a $.4 million
(28%) increase in general and administrative expenses, a $.7 million (47%)
increase in salaries, employee benefits and personnel services, and a $.4
million (207%) increase in expenses on OREO. Increases for the first two
quarters of 1994 consisted primarily of a $.7 million (27%) increase in general
and administrative expenses, a $.9 million (33%) increase in salaries, employee
benefits and personnel services, and a $.5 million (128%) increase in expenses
on OREO. The increases in general and administrative expenses were due to an
increase in professional fees and a write off of certain fixed assets, and the
increases in salaries and employee benefits were due to increased staffing by
Pacific Thrift and a reduction in the amount of loan origination fees deferred
under FASB 91. The increase in expenses on OREO was due to a management decision
to upgrade certain OREO properties in order to sell those properties for cash.
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PROVISION FOR LOAN LOSSES
The provision for loan losses was $.5 million for the second quarter of
1994, which was substantially unchanged from the provision for the second
quarter of 1993. For the first two quarters of 1994, the provision for loan
losses totalled $.7 million, which was 19% less than the $.8 million provision
for the first two quarters of 1993. The total allowance for loan losses was $2.0
million at June 30, 1994, compared with $3.1 million at December 31, 1993.
Management believes that a lower allowance for loan losses at June 30, 1994 was
warranted due to the reduction in total delinquencies at June 30, 1994 from
total delinquencies at June 30, 1993 and December 31, 1993.
LIQUIDITY AND CAPITAL RESOURCES
The primary source of the Company's liquidity is the cash and cash
equivalents maintained by Pacific Thrift in connection with its deposit-taking
and lending activities. At June 30, 1994, cash and cash equivalent assets
totalled $13.1 million, compared with $13.2 million at December 31, 1993.
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.
Pacific Thrift is subject to certain leverage and risk-based capital
adequacy standards applicable to FDIC-insured institutions. At June 30, 1994, as
a result of an operating loss of $1.0 million for the first two quarters of 1994
and a difference in accounting treatment for certain sales of senior loan
participation interests between regulatory and generally accepted accounting
principles, Pacific Thrift was classified as "adequately capitalized under the
FDIC's leverage and risk-based capital guidelines. See the Company's Annual
Report on Form 10-K for the year ended December 31, 1993, Item 1. "Business
- - -Supervision and Regulation -- Governmental Policies and Recent Legislation --
Capital Adequacy Guidelines."
At June 30, 1994, the Company had no material outstanding commitments
to fund loans. Certificates of deposit which are scheduled to mature in one year
or less from June 30, 1994 totalled $36.2 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 Company utilized $2.4
million in cash from operating activities from December 31, 1993 through June
30, 1994, primarily reflecting the $2.8 million net operating loss.
The Company realized cash flow from investing activities of $1.2
million from December 31, 1993 through June 30, 1994, primarily from a net $1.6
million reduction in loans receivable and a net $.3 million decrease in OREO.
The Company realized $1.1 million from financing activities from
December 31, 1993 through June 30, 1994, reflecting $4.1 million in proceeds
from issuance of thrift certificates, used to fund lending activity of Pacific
Thrift. Presidential used $3.0 million in cash proceeds from loan payments and
sales of loans to pay down of 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 Company's Annual Report on Form 10-K for the year ended
December 31, 1993.
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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 June 30, 1994.
ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
None.
(b) Reports on Form 8-K.
The Company filed no Reports on Form 8-K during the second quarter of
1994.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Company has duly caused this Report to be signed on its behalf by the
undersigned, thereunto duly authorized.
PRESIDENTIAL MORTGAGE COMPANY
(Registrant)
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<CAPTION>
<S> <C>
May 1, 1995 JOEL R. SCHULTZ
- - ------------------------- -----------------------------
Date 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
May 1, 1995 CHARLES J. SIEGEL
- - ----------------------------- -------------------------------
Date Charles J. Siegel,
Chief Financial and Accounting Officer of the Registrant
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