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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, 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)
California 95-3611304
(State or other jurisdiction of incorporation or organization) (IRS Employer
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
--- ---
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PRESIDENTIAL MORTGAGE COMPANY
(A California Limited Partnership)
AND SUBSIDIARIES
Consolidated Balance Sheets
Unaudited
December 31, 1993 and March 31, 1994
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1994 1993
Assets
<S> <C> <C>
Cash & cash equivalents $ 11,909,806 $ 13,219,565
Accounts receivable, net 3,599,112 4,133,661
Interest receivable 1,910,009 2,091,425
Loans receivable, net (Note 2) 89,305,762 84,754,592
Excess yield receivable 807,761 895,220
Real estate acuqired in settlement of loans 5,531,703 6,003,295
Property and equipment, net 1,645,685 1,215,496
Goodwill 1,434,708 1,621,781
Other assets 998,229 388,555
------------- -------------
$ 117,142,775 $ 114,323,590
============= =============
Liabilities and Partners' Capital
Liabilities:
Thrift certificates payable 68,377,066 62,420,561
Accounts payable, accrued expenses and interest payable 4,327,356 5,266,440
Partnership withdrawals payable 1,120,379 1,120,379
Notes payable 22,950,000 23,800,000
Mortgages payable - secured by real estate acquired in
settlement of loans 1,456,556 1,777,278
------------- -------------
$ 98,231,357 $ 94,384,658
------------- -------------
Partners' capital 18,911,418 19,938,932
------------- -------------
$ 117,142,775 $ 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
March 31, March 31,
1994 1993
<S> <C> <C>
Interest Income:
Interest and fees on loans receivable 2,847,740 3,924,513
Interest on investments 67,612 968
------------- -------------
Total interest income 2,915,352 3,925,481
Interest Expense:
Interest on thrift certificates greater than $100,00 14,014 76,807
Interest on other thrift certificates 661,321 706,839
Interest on notes payable 509,732 690,734
------------- -------------
Total interest expense 1,185,067 1,474,380
------------- -------------
Net interest income 1,730,285 2,451,101
Provision for loan losses 216,979 384,333
------------- -------------
Net interest income afer provision for loan losses 1,513,306 2,066,768
Noninterest income:
Trustee and reconveyance fees 877,399 1,018,793
Other income 265,977 206,286
Gain on sale of Title I loans 0 20,000
------------- -------------
1,143,376 1,245,079
Noninterest expense:
General and administrative 1,510,673 1,196,777
Salaries, employee benefits and personnel services 1,758,787 1,461,774
Amortization of organization costs 13,546 9,065
Depreciation and amortization 135,257 39,185
Expenses on real estate acquired in settlement of loans 347,841 218,239
Net (gain)loss on sales of real estate acquired
in settlement of loans (81,908) (7,110)
------------- -------------
3,684,196 2,917,930
------------- -------------
Net income before management fee (1,027,514) 393,917
------------- -------------
Management fee (Note 3) 0 59,088
------------- -------------
Net income (1,027,514) 334,829
============= =============
</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)
Three months ended March 31, 1994 and 1993
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
3-31-94 3-31-93
<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 (1,027,514) 334,829
Depreciation & Amortization 148,803 135,663
Provision for loan losses 216,979 384,333
Net (gain) loss on sales of real estate
acquired in settlement of loans (81,908) (7,110)
(Increase) decrease in asset accounts:
Accounts Receivable 534,549 (753,789)
Interest receivable 181,416 6,344
Excess yield receivable 87,459 65,905
Goodwill 187,073 16,325
Other assets (623,220) (548,551)
Increase (decrease) in liability accounts:
Accounts payable and accrued expenses
and Interest Payable (939,084) 1,500,972
Net cash provided by (used in) operating ------------- -------------
activities (1,315,447) 1,134,921
------------- -------------
Cash flows from investing activities:
(Increase) Decrease in Loans Receivable (4,768,149) 818,934
Increase in Property & Equipment (565,446) (60,341)
Decrease in Mortgages Payable on Other
Real Estate (320,722) (429,650)
Decrease in Other Real Estate 553,500 245,136
Proceeds from repayment of receivable
from related party 0 321,621
------------- -------------
Net cash provided by (used in) investing (5,100,817) 895,700
activities ------------- -------------
Cash flow from financing activities:
Distribution to Partners 0 (1,027,924)
Withdrawal of Partnership Shares 0 (306,644)
Increase in Thrift Certificates 5,956,505 2,707,579
Decrease in Line of Credit (850,000) (3,100,000)
Proceeds from issuance of partnership
shares 0 17,382
------------- -------------
Net cash provided by (used in) financing 5,106,505 (1,709,607)
activities ------------- -------------
Net decrease in Cash and Cash Equivalents (1,309,759) 321,014
Cash and Cash Equivalents at Year End 13,219,565 453,278
------------- -------------
Cash and Cash Equivalents at March 31, 11,909,806 774,292
============= =============
</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:
<TABLE>
<CAPTION>
@ 3-31-94 @ 12-31-93
<S> <C> <C>
Interest bearing loan $ 93,790,148 $ 89,482,481
Deferred loan fees, net (1,638,661) (1,605,488)
Allowance for loan losses (2,845,725) (3,122,401)
---------- ----------
Total $ 89,305,762 $ 84,754,592
========== ==========
</TABLE>
The following is a summmary of Allowance for Loan Losses:
<TABLE>
<CAPTION>
<S> <C>
Balance at 12-31-93 $ 3,122,400
Additions to reserve 216,979
Charge offs/recoveries (493,654)
---------
Balance at 3-31-94 $ 2,845,725
=========
</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) increased $2.8 million (2%) to $117.1 million at March 31,
1994 from $114.3 million at December 31, 1993. The increase was due primarily
to an increase of $4.5 million (5%) in net loans. The increase in net loans was
partially offset by reductions of $1.3 million (10%) in cash and cash
equivalents and $.5 million (8%) in OREO (other real estate acquired in
settlement of loans) due to sales of OREO.
Total liabilities increased $3.8 million (4%) to $98.2 at March 31,
1994 from $94.4 at December 31, 1993. The increase was due entirely to an
increase of $6.0 million (10%) in thrift certificates issued by Pacific Thrift,
to $68.4 million at March 31, 1994 from $62.4 million at December 31, 1993. The
increase in thrift certificates was partially offset by reductions of $.9
million (18%) in accounts and interest payable, $.9 million (4%) in notes
payable, due to pay down of the bank debt, and $.3 million (18%) in mortgages
payable secured by OREO.
Total partnership capital decreased by $1.0 million (5%) to $18.9
million at March 31, 1994 from $19.9 at December 31, 1993, due to the net
operating loss incurred during the quarter.
RESULTS OF OPERATIONS
The Company incurred a net operating loss of $1.0 million for the
quarter ended March 31, 1994 compared with a net operating profit of $.3 million
for the quarter ended March 31, 1993. The net loss in the first quarter of 1994
was due primarily to declines in net interest income and increases in
non-interest expense. Total interest income declined $1.0 million (26%), and
net interest income after provision for loan losses decreased by $.6 million
(29%), primarily due to reduced interest rates charged on loans. Non-interest
expense increased by $.8 million (28%) for the quarter ended March 31, 1994,
including increases of $.3 million (25%) in general and administrative expenses
due to write-offs of certain fixed assets and an increase in professional fees,
and $.3 million (20%) in salaries and employee benefits, due to increased
staffing at Pacific Thrift and a reduced deferral of loan origination costs
pursuant to FASB 91.
PROVISION FOR LOAN LOSSES
The provision for loan losses was $.2 million for the first quarter of
1994, compared with $.4 million for the first quarter of 1993. The total
allowance for loan losses was $2.8 million at March 31, 1994 compared with $3.1
million at December 31, 1993. Management believes that a lower allowance for
loan losses was warranted because of a reduction in total loan delinquencies
from total delinquencies at March 31, 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 March 31, 1994, cash and cash equivalent assets
totalled $11.9 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 March 31, 1994,
Pacific Thrift's leverage and risk-based capital adequacy ratios exceeded the
FDIC's requirements for "well-capitalized" institutions. 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 March 31, 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 March 31, 1994 totalled $32.7 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 $1.3
million in cash from operating activities from December 31, 1993 through March
31, 1994, primarily reflecting the net operating loss for the quarter.
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The Company used $5.1 million in cash from investing activities,
primarily to fund a $4.8 million increase in loans receivable and a $.6 million
in additions to property and equipment.
The Company realized $5.1 million from financing activities from
December 31, 1993 through March 31, 1994, reflecting the issuance of $6.0
million in thrift certificates, used to funding lending activity by Pacific
Thrift. Presidential used $.9 million in cash from proceeds of loan payments
and sales of loans to pay down 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.
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, 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 first quarter of
1994.
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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)
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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