<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 MARCH 31, 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)
<TABLE>
<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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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 $2.0 million (1.9%) to $101.7 million at March 31,
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, and interest receivable, offset by an increase in accounts
receivable. Loans receivable decreased by $5.8 million (8.9%), to $59.3
million from $65.1 million, as a result of loan pay offs and loan sales. Cash
and cash equivalents decreased by $1.3 million (6.9%), to $18.3 million from
$19.6 million. Interest receivable declined by $.5 million (41.9%), to $.6
million from $1.1 million, primarily due to the reduction of the loan
portfolio. Accounts receivable increased by $6.2 million (111.8%), primarily
due to $6.1 million of loans originated for sale which were sold in March, for
which payment was not received until April 1995. In addition, accounts
receivable reflect an asset valued by management at $.8 million, representing
the present value of an annual servicing released fee payable to Pacific Thrift
and Loan Company ("Pacific Thrift"), the Company's primary operating
subsidiary, by the purchaser of certain loans originated for sale. See the
Company's Annual Report on Form 10-K for the year ended December 31, 1994,
Item 1. "Business -- Lending Activities -- Loans Originated for Sale."
Total liabilities decreased $2.3 million (2.4%) to $91.1 at March 31,
1995 from $93.3 at December 31, 1994. The decrease resulted primarily from
declines in notes payable, thrift certificates payable and mortgages payable on
OREO. Notes payable decreased by $1.0 million (6.5%), to $13.8 million from
$14.8 million, due to pay down of the bank debt. Thrift certificates decreased
by $.5 million (.7%) to $69.0 million from $69.5 million. Mortgages payable on
OREO decreased by $.5 million (22.1%), to $1.8 million from $2.3 million.
Total partnership capital increased by $.2 million (2.0%) to $10.6
million from $10.4 million, due to net income of $.2 million earned during the
quarter ended March 31, 1995.
RESULTS OF OPERATIONS
The Company incurred a net operating loss of $.2 million for the
quarter ended March 31, 1995, compared with a net operating loss of $1.0
million for the quarter ended March 31, 1994. However, due to the recognition
of a $.4 million tax benefit from Pacific Thrift's operating loss carryforward,
net income after taxes was $.2 million. The reduction in the net operating
loss in the first quarter of 1995 was due primarily to an increase in total
interest income. Total interest income increased by $1.2 million (41.5%),
which included an increase of $1.1 million (37.0%) in interest and fees on
loans receivable, due to increased originations and sales of loans originated
for sale, and $.2 million (234.5%) in interest on investments, due to higher
balances and yields on cash and cash equivalents. Total interest expense
increased by $.2 million (18.6%) to $1.4 million from $1.2 million, due to
increased rates paid by Pacific Thrift on thrift certificates under $100,000.
Net interest income after provision for loan losses increased by $.8 million
(50.4%).
Noninterest income decreased by less than $.1 million ($4.4%) to $1.09
million from $1.14 million, primarily as a result of a $.1 million decrease in
trustee and reconveyance fees. Noninterest expense decreased by $.1 million
(2.5%) to $3.6 million from $3.7 million, primarily as a result of a $.2
million reduction in expenses on OREO and a $.1 million reduction in general
and administrative expense, partially offset by a net loss on sales of OREO of
less than $.1 million.
PROVISION FOR LOAN LOSSES
The provision for loan losses was $.4 million for the first quarter of
1995, compared with $.2 million for the first quarter of 1994. The total
allowance for loan losses was $3.9 million at March 31, 1995 compared with $4.3
million at December 31, 1994, reflecting sales and payoffs of loans as to which
reserves had previously been taken and improvements in status in some portfolio
loans. Included in loan sales were $2 million in Title I loans, as to which
Pacific Thrift had previously reserved $.2 million.
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 March 31, 1995, cash and cash equivalent assets
totalled $18.3 million, compared with $19.6 million at December 31, 1994.
Presidential does not maintain
2
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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 March 31, 1995,
Pacific Thrift was classified as "adequately capitalized." See the Company's
Annual Report on Form 10-K for the year ended December 31, 1994, Item 1.
"Business -- Supervision and Regulation -- Governmental Policies and Recent
Legislation -- Capital Adequacy Guidelines."
At March 31, 1995, the Company had no material outstanding commitments
to fund loans. Certificates of deposit which are scheduled to mature in one
year or less from March 31, 1995 totalled $57.2 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 used $4.5
million in cash from operating activities from December 31, 1994 through
March 31, 1995, primarily reflecting a temporary increase of $6.2 million in
loans originated for sale which were sold in March 1995 for which payment was
received in April. In addition, accounts receivable reflects an asset valued
by management at $.8 million, representing the present value of an annual
servicing released fee payable to Pacific Thrift by the purchaser of certain
loans originated for sale. See the Company's Annual Report on Form 10-K for
the year ended December 31, 1994, Item 1. "Business -- Lending Activities --
Loans Originated for Sale."
The Company realized $4.5 million from investing activities for the
three months ended March 31, 1995, primarily due to a net decrease of $5.3
million in loans receivable.
The Company used $1.4 million from financing activities for the three
months ended March 31, 1995, primarily reflecting a $.5 million decrease in
thrift certificates and a $1.0 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 Company'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 March 31, 1995.
ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
None.
(b) Reports on Form 8-K.
None.
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PRESIDENTIAL MORTGAGE COMPANY
(A California Limited Partnership)
AND SUBSIDIARIES
Consolidated Balance Sheets
Unaudited
December 31, 1994 and March 31, 1995
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1995 1994
<S> <C> <C>
Assets
Cash & cash equivalents $ 18,279,000 $ 19,628,000
Accounts receivable, net 11,752,000 5,549,000
Interest receivable 653,000 1,125,000
Loans receivable, net (Note 2) 59,280,000 65,056,000
Excess yield receivable 526,000 888,000
Real estate acuqired in settlement of loans 7,504,000 7,621,000
Property and equipment, net 1,513,000 1,322,000
Goodwill 1,676,000 1,749,000
Other assets 511,000 809,000
------------ ------------
$101,694,000 $103,747,000
============ ============
Liabilities and Partners' Capital
Liabilities:
Thrift certificates payable 69,032,000 69,501,000
Accounts payable, accrued expenses and interest payable 5,299,000 5,610,000
Partnership withdrawals payable 1,120,000 1,120,000
Notes payable 13,809,000 14,778,000
Mortgages payable - secured by real estate acquired in
settlement of loans 1,802,000 2,313,000
------------ ------------
$ 91,062,000 $ 93,322,000
------------- ------------
Partners' capital 10,632,000 10,425,000
------------ ------------
$101,694,000 $103,747,000
============ ============
</TABLE>
See accompanying Notes to Consolidated Financial Statements and Management's
discussion and Analysis of Financial Condition and Results of Operations
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PRESIDENTIAL MORTGAGE COMPANY
(A California Limited Partnership)
AND SUBSIDIARIES
Consolidated Statements of Income
Unaudited
<TABLE>
<CAPTION>
THREE MONTHS ENDED
March 31, March 31,
1995 1994
<S> <C> <C>
Interest Income:
Interest and fees on loans receivable 3,901,000 2,848,000
Interest on investments 226,000 67,000
---------- ----------
Total interest income 4,127,000 2,915,000
Interest Expense:
Interest on thrift certificates greater than $100,000 4,000 14,000
Interest on other thrift certificates 976,000 661,000
Interest on notes payable 425,000 510,000
---------- ----------
Total interest expense 1,405,000 1,185,000
---------- ----------
Net interest income 2,722,000 1,730,000
Provision for loan losses 446,000 217,000
---------- ----------
Net interest income afer provision for loan losses 2,276,000 1,513,000
Noninterest income:
Trustee and reconveyance fees 785,000 877,000
Other income 308,000 266,000
Gain on sale of Title I loans 0 0
---------- ----------
1,093,000 1,143,000
Noninterest expense:
General and administrative 1,413,000 1,511,000
Salaries, employee benefits and personnel services 1,797,000 1,759,000
Amortization of organization costs 28,000 13,000
Depreciation and amortization 116,000 135,000
Expenses on real estate acquired in settlement of loans 161,000 348,000
Net (gain)loss on sales of real estate acquired
in settlement of loans 77,000 (82,000)
---------- ----------
3,592,000 3,684,000
---------- ----------
Net income before tax provision (223,000) (1,028,000)
---------- ----------
Tax Provision (430,000) 0
---------- -----------
Net income 207,000 (1,028,000)
========== ===========
</TABLE>
See accompanying Notes to Consolidated Financial Statements and Management's
discussion and Analysis of Financial Condition and Results of Operations.
<PAGE> 6
PRESIDENTIAL MORTGAGE COMPANY
(A California Limited Partnership)
AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Unaudited)
Three months ended March 31, 1995 and 1994
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
3-31-95 3-31-94
<S> <C> <C>
Cash flows from operating activities:
Adjustments to reconcile net income (loss)
to net cash provided by (used in) operating
activities:
Net income 207,000 (1,028,000)
Depreciation & Amortization 144,000 149,000
Provision for loan losses 446,000 217,000
Net (gain) loss on sales of real estate
acquired in settlement of loans 77,000 (82,000)
(Increase) decrease in asset accounts:
Accounts Receivable (6,203,000) 535,000
Interest receivable 472,000 182,000
Excess yield receivable 362,000 87,000
Goodwill 73,000 187,000
Other assets 270,000 (623,000)
Increase (decrease) in liability accounts:
Accounts payable and accrued expenses
and Interest Payable (312,000) (939,000)
Net cash provided by (used in) operating ----------- -----------
activities (4,464,000) (1,315,000)
----------- -----------
Cash flows from investing activities:
(Increase) Decrease in Loans Receivable 5,331,000 (4,768,000)
Increase in Property & Equipment (307,000) (566,000)
Decrease in Mortgages Payable on Other
Real Estate (511,000) (321,000)
Decrease in Other Real Estate 40,000 554,000
Proceeds from repayment of receivable
from related party 0 0
----------- -----------
Net cash provided by (used in) investing
activities 4,553,000 (5,101,000)
----------- -----------
Cash flow from financing activities:
Distribution to Partners 0 0
Withdrawal of Partnership Shares 0 0
Increase in Thrift Certificates (469,000) 5,957,000
Decrease in Line of Credit (969,000) (850,000)
Proceeds from issuance of partnership
shares 0 0
----------- -----------
Net cash provided by (used in) financing
activities (1,438,000) 5,107,000
----------- -----------
Net decrease in Cash and Cash Equivalents (1,349,000) (1,309,000)
Cash and Cash Equivalents at Year End 19,628,000 13,219,000
----------- -----------
Cash and Cash Equivalents at March 31, 18,279,000 11,910,000
=========== ===========
</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 originated and
loans paid off.
2) Loans Receivable
The following is a summary of Loans Receivable:
<TABLE>
<CAPTION>
@ 3-31-95 @ 12-31-94
<S> <C> <C>
Interest bearing loans $64,470,000 $70,791,000
Deferred loan fees, net (1,251,000) (1,428,000)
Allowance for loan losses (3,940,000) (4,307,000)
----------- -----------
Total $59,279,000 $65,056,000
=========== ===========
</TABLE>
The following is a summary of the Allowance for Loan Losses:
<TABLE>
<S> <C>
Balance at 12-31-94 $4,307,000
Additions to reserve 446,000
Chargeoffs/recoveries (813,000)
----------
Balance at 3-31-95 $3,940,000
==========
</TABLE>
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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)
July 31, 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
July 31, 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> 6-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> MAR-31-1994
<CASH> 599
<INT-BEARING-DEPOSITS> 180
<FED-FUNDS-SOLD> 9,500
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 0
<INVESTMENTS-CARRYING> 8,000
<INVESTMENTS-MARKET> 0
<LOANS> 63,219
<ALLOWANCE> 3,940
<TOTAL-ASSETS> 101,694
<DEPOSITS> 69,032
<SHORT-TERM> 0
<LIABILITIES-OTHER> 6,501
<LONG-TERM> 15,529
<COMMON> 0
0
0
<OTHER-SE> 10,632
<TOTAL-LIABILITIES-AND-EQUITY> 101,694
<INTEREST-LOAN> 3,901
<INTEREST-INVEST> 226
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 4,129
<INTEREST-DEPOSIT> 980
<INTEREST-EXPENSE> 1,405
<INTEREST-INCOME-NET> 2,722
<LOAN-LOSSES> 446
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 3,592
<INCOME-PRETAX> 223
<INCOME-PRE-EXTRAORDINARY> 223
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 207
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<YIELD-ACTUAL> 11.59
<LOANS-NON> 5,389
<LOANS-PAST> 3,129
<LOANS-TROUBLED> 324
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 4,307
<CHARGE-OFFS> 813
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 3,940
<ALLOWANCE-DOMESTIC> 3,940
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
