<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington DC 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For quarter ended March 31, 1995
--------------
Commission file number 0-14506
-------
Pioneer American Holding Company, Corp.
(Exact name of registrant as specified in its charter)
Pennsylvania 23-2319931
------------ ----------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
41 North Main Street, Carbondale PA 18407
------------------------------------ -----
(Address of principal executive offices) (Zip Code)
(717) 282-2662
(Registrant's telephone number including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by the Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter periods 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 .
---- ----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as the latest practical date.
Common Stock, $10.00 Par Value--1,390,420 common shares as of March 31, 1995.
<PAGE> 2
INDEX
PIONEER AMERICAN HOLDING COMPANY, CORP.
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION
- - - ------ ---------------------
<S> <C>
Item 1. Financial Statements (Unaudited)
Condensed consolidated balance sheets--March 31, 1995,
December 31, 1994 and March 31, 1994.-----------------------------Pages 3-4
Condensed consolidated statements of income--Three months
ended March 31, 1995 and 1994-------------------------------------Page 5
Condensed consolidated statements of cash flows--Three months
ended March 31, 1995 and 1994.------------------------------------Pages 6-7
Notes to condensed consolidated financial statements--
March 31, 1995.---------------------------------------------------Pages 8-12
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.----------------------------------------Pages 13-15
PART II. OTHER INFORMATION
- - - -------- -----------------
Item 1. Legal Proceedings--------------------------------------------------Page 16
Item 2. Changes in Securities----------------------------------------------Page 16
Item 3. Defaults upon Senior Securities------------------------------------Page 16
Item 4. Submission of Matters to a Vote of Security Holders----------------Page 16
Item 5. Other Information--------------------------------------------------Page 16
Item 6. Exhibits and Reports on form 8-K-----------------------------------Page 16
SIGNATURES------------------------------------------------------------------Page 17
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
PIONEER AMERICAN HOLDING COMPANY, CORP.
Consolidated Balance Sheets (Unaudited)
(Dollars in thousands)
=================================================================================================================
March 31, December 31, March 31,
Assets 1995 1994 1994
- - - -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash and due from banks $ 10,888 11,489 9,577
Federal funds sold 5,750 -- 3,000
Mortgage loans held for sale -- -- 3,055
Securities available for sale (cost of securities of $50,500
on March 31, 1995, $53,186 on December 31, 1994
and $57,265 on March 31, 1994)
U.S. Treasury securities 3,602 3,532 3,735
Federal agency mortgage based obligations 16,278 17,012 22,349
Other obligations of Federal agencies 27,266 28,199 31,539
Other securities 1,959 1,724 296
- - - -----------------------------------------------------------------------------------------------------------------
Total securities available for sale 49,105 50,467 57,919
- - - -----------------------------------------------------------------------------------------------------------------
Investment securities (approximate market value of
$51,199 on March 31, 1995, $50,479 on Dec. 31, 1994
and $23,734 on March 31, 1994)
U.S. Treasury securities -- 415 --
Other obligations of Federal agencies 39,750 39,767 13,806
Obligations of states and political subdivisions 12,078 12,424 11,371
Corporate notes 199 299 299
Other securities 10 10 10
- - - -----------------------------------------------------------------------------------------------------------------
Total investment securities 52,037 52,915 25,486
- - - -----------------------------------------------------------------------------------------------------------------
Loans, net of unearned discount and deferred loan fees 184,481 179,872 160,254
Allowance for possible loan losses (2,756) (2,699) (2,728)
- - - -----------------------------------------------------------------------------------------------------------------
Net loans 181,725 177,173 157,526
- - - -----------------------------------------------------------------------------------------------------------------
Accrued interest receivable 2,573 3,023 2,094
Premises and equipment 3,564 3,462 3,095
Other real estate owned 869 824 1,037
Other assets 2,608 2,310 1,992
Cost in excess of fair value of net assets acquired
(net of accumulated amortization of $807 March 31, 1995,
$798 December 31, 1994 and $769 March 31, 1994) 736 745 774
- - - -----------------------------------------------------------------------------------------------------------------
Total assets $309,855 302,408 265,555
=================================================================================================================
</TABLE>
<PAGE> 4
<TABLE>
<CAPTION>
PIONEER AMERICAN HOLDING COMPANY, CORP.
Consolidated Balance Sheets, Continued (Unaudited)
(Dollars in thousands)
=================================================================================================================
March 31, December 31, March 31,
Liabilities and Stockholders' Equity 1995 1994 1994
- - - -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Deposits
Demand -- noninterest bearing $ 29,622 29,157 24,186
NOW and Super NOW 15,653 16,526 16,611
Savings 55,594 55,333 57,110
Money Market 22,854 24,824 26,643
Time 155,552 144,878 112,722
- - - -----------------------------------------------------------------------------------------------------------------
Total deposits 279,275 270,718 237,272
- - - -----------------------------------------------------------------------------------------------------------------
Accrued interest payable 2,220 1,716 1,140
Dividends payable 417 416 389
Short term borrowings -- 3,150 --
Note payable 275 275 --
Other liabilities 1,427 1,155 952
- - - -----------------------------------------------------------------------------------------------------------------
Total liabilities 283,614 277,430 239,753
- - - -----------------------------------------------------------------------------------------------------------------
Stockholders' equity:
Common stock, $10 par value per share,
25,000,000 shares authorized; 1,390,420 shares on
March 31, 1995, 1,387,445 on Dec. 31, 1994 and
1,387,445 on March 31, 1994 issued and outstanding 13,904 13,875 13,874
Additional paid-in capital 62 92 92
Undivided profits 13,196 12,806 11,404
Net unrealized holding gains (losses) on
available for sale securities (921) (1,795) 432
- - - -----------------------------------------------------------------------------------------------------------------
Total stockholders' equity 26,241 24,978 25,802
- - - -----------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $309,855 302,408 265,555
=================================================================================================================
</TABLE>
<PAGE> 5
<TABLE>
<CAPTION>
PIONEER AMERICAN HOLDING COMPANY, CORP.
Consolidated Statements of Income (Unaudited)
Three Months Ended
(Dollars in thousands)
===============================================================================================
March 31, March 31,
1995 1994
- - - -----------------------------------------------------------------------------------------------
<S> <C> <C>
Interest income:
Interest and fees on loans $ 4,050 3,518
Interest on Federal funds sold 22 48
Interest on investments:
Taxable 1,421 997
Non-taxable 177 167
- - - -----------------------------------------------------------------------------------------------
Total interest income 5,670 4,730
- - - -----------------------------------------------------------------------------------------------
Interest expense:
Interest on other borrowed money & note payable 21 --
Interest on deposits 2,531 1,733
- - - -----------------------------------------------------------------------------------------------
Total interest expense 2,552 1,733
- - - -----------------------------------------------------------------------------------------------
Net interest income 3,118 2,997
Provision for possible loan losses 120 130
- - - -----------------------------------------------------------------------------------------------
Net interest income after provision for loan losses 2,998 2,867
- - - -----------------------------------------------------------------------------------------------
Other operating income:
Service charges on deposit accounts 201 177
Gains on sales of securities available for sale 7 7
Other income 187 132
- - - -----------------------------------------------------------------------------------------------
Total other operating income 395 316
- - - -----------------------------------------------------------------------------------------------
Other operating expenses:
Salaries and employee benefits 1,159 1,052
Net occupancy expense of bank premises 194 183
Furniture and equipment expenses 131 134
Data processing expense 91 81
FDIC Insurance 154 134
Other expenses 587 455
- - - -----------------------------------------------------------------------------------------------
Total other operating expenses 2,316 2,039
- - - -----------------------------------------------------------------------------------------------
Income before income taxes and cumulative effect of change in
accounting principle 1,077 1,144
Income tax expense 270 320
- - - -----------------------------------------------------------------------------------------------
Income before cumulative effect of change in accounting
principle 807 824
Cumulative effect of change in accounting
for income taxes -- --
- - - -----------------------------------------------------------------------------------------------
Net income $ 807 824
===============================================================================================
Per Share Data:
Income before cumulative effect of change in
accounting principle 0.56 0.58
Cumulative effect of change in accounting for
income taxes -- --
- - - -----------------------------------------------------------------------------------------------
Net income per common share equivalent $ 0.56 0.58
===============================================================================================
Weighted average common share and share equivalents 1,448,444 1,421,098
</TABLE>
<PAGE> 6
<TABLE>
<CAPTION>
PIONEER AMERICAN HOLDING COMPANY, CORP.
Consolidated Statements of Cash Flows (Unaudited)
(Dollars in thousands)
===============================================================================================
March 31, March 31,
1995 1994
- - - -----------------------------------------------------------------------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 807 824
Adjustments to reconcile net income to net
cash from operating activities:
Net gain on sales of securities available
for sale (7) (7)
Accretion of discount on securities
and money market investments (15) (15)
Amortization of premium on investment
securities 43 31
Provision for possible loan losses 120 130
Increase (decrease) in deferred loan fees 8 (49)
Decrease (increase) in accrued interest receivable 449 (28)
Depreciation and amortization of premises
and equipment 199 172
Loss (gain) on sales of premises and equipment -- (1)
Loss on sale of other real estate 24 2
Gain on sale of mortgage
and PHEAA loans (2) (7)
Increase in other assets (748) (1,117)
Amortization of goodwill 10 10
Increase in accrued interest payable 504 89
Increase (decrease) in other liabilities 272 59
- - - -----------------------------------------------------------------------------------------------
Total adjustments to reconcile net income to net cash
from operating activities 857 (731)
- - - -----------------------------------------------------------------------------------------------
Net cash from operating activities 1,664 93
- - - -----------------------------------------------------------------------------------------------
Cash flows from investing activities:
Proceeds from maturities of investment securities
and securities available for sale 1,255 2,070
Proceeds from sales of securities available for sale 3,017 2,619
Purchases of investment securities and securities
available for sale (729) (7,187)
Proceeds from the sale of mortgage and PHEAA loans 145 3,465
Net (increase) decrease in loans made to customers, excluding
provision for loan losses and change in
deferred loan fees (5,055) (2,968)
Acquisition of premises and equipment (301) (70)
Proceeds from sales of premises and equipment -- 17
Proceeds from sale of other real estate 162 241
- - - -----------------------------------------------------------------------------------------------
Net cash used in investing activities (1,506) (1,813)
- - - -----------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 7
<TABLE>
<CAPTION>
PIONEER AMERICAN HOLDING COMPANY, CORP.
Consolidated Statements of Cash Flows, Continued (Unaudited)
(Dollars in thousands)
===============================================================================================
March 31, March 31,
1995 1994
- - - -----------------------------------------------------------------------------------------------
<S> <C> <C>
Cash flows from financing activities:
Net increase in demand, NOW and Super NOW,
savings, money market and time deposits. $ 8,557 (283)
Dividends paid (416) (379)
Other borrowed money (3,150) --
Exercise of stock options -- 149
- - - -----------------------------------------------------------------------------------------------
Net cash from financing activities 4,991 (513)
- - - -----------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents 5,149 (2,233)
Cash and cash equivalents at beginning of year 11,489 14,810
- - - -----------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $16,638 12,577
- - - -----------------------------------------------------------------------------------------------
Supplemental Disclosure:
Cash payments for interest 2,048 1,644
Cash payments for income taxes 400 475
Transfer of assets from loans
to other real estate 232 --
Net unrealized loss (gain) on securities
available for sale 1,395 (654)
Tax effect on unrealized loss (gain)
on securities available for sale 474 (222)
</TABLE>
<PAGE> 8
Notes to Condensed Consolidated Financial Statements
- - - ----------------------------------------------------
(1) Summary of Significant Accounting Policies:
Business--Pioneer American Holding Company Corp. (the "Company") and its
wholly owned subsidiary, Pioneer American Bank, National Association ("Pioneer")
provide a wide range of banking services to individual and corporate customers
through its branch banks in Lackawanna, Luzerne and Wayne counties in
Pennsylvania. Pioneer is subject to competition from other financial
institutions and other financial services companies. Pioneer is subject to the
regulations of certain federal agencies and undergoes periodic examinations by
those regulatory authorities.
Basis of Financial Statement Presentation--The accompanying consolidated
financial statements have been prepared in conformity with generally accepted
accounting principles and include the accounts of the Company and its
wholly-owned subsidiary, Pioneer. All material intercompany balances and
transactions between the Company and its subsidiary have been eliminated. In
preparing the financial statements, management is required to make estimates and
assumptions that affect the reported amounts of assets and liabilities as of
date of the balance sheet and revenues and expenses for the period. Actual
results could differ significantly from those estimates.
Material estimates that are particularly susceptible to significant change
in the near-term relate to the determination of the allowance for possible loan
losses and the valuation of real estate acquired in connection with foreclosures
or in satisfaction of loans. In connection with the determination of the
allowances for possible loan losses and real estate owned, management obtains
independent appraisals for significant properties to the extent considered
practical.
Mortgage Loans Held for Sale--The Company has identified certain loans as
held for sale. These loans consist primarily of fixed rate residential mortgages
and are recorded at the lower of cost or estimated market value.
Securities Available for Sale--Securities available for sale are accounted
for at fair value and the unrealized gains and losses are accounted for as a
separate component of stockholders equity, net of tax.
Investment Securities Held to Maturity--Investment securities held to
maturity are carried at cost, adjusted for the amortization of the related
premiums or the accretion of the related discounts into interest income using a
method which approximates level-yield over the estimated remaining period until
maturity. The Company believes it has the intent and ability to hold to maturity
its portfolio of investment securities as part of its portfolio of long-term
interest earning assets.
Interest Revenue and Expenses--Interest revenue and expenses are accrued on
various methods which approximate a level or cost when related to principal
amounts outstanding. Unearned discount on loans is amortized to income by a
method which also approximates a level yield on the principal amounts
outstanding.
Loan Fees--Loan origination fees and direct loan origination costs are
recognized over the life of the related loan as an adjustment of the loan's
yield.
Non-accrual Loans--The accrual of interest on loans is discontinued when
payment of principal or interest is considered doubtful of collection. Loans on
which payments are ninety days or more past due are considered non-accrual
unless the loan is both well secured and in the process of collection. When
interest accrual is discontinued, the interest receivable which was previously
credited to income is reversed.
<PAGE> 9
Notes to Condensed Consolidated Financial Statements, continued
- - - ---------------------------------------------------------------
(1) Summary of Significant Accounting Policies, continued:
Allowance for Possible Loan Losses--The Provision for possible loan losses
charged to operating expenses reflects the amount deemed appropriate by
management to produce a reserve adequate to meet the present risk
characteristics of Pioneer's loan portfolio. Management's judgment is based on
the evaluation of individual loans and their overall risk characteristics, past
experiences with respect to the relationship of its loan losses to the loan
portfolio, the assessment of current economic conditions and other relevant
factors.
Management believes that the allowance for possible loan losses is adequate.
While management uses available information to make its evaluations, future
adjustments to the allowance may be necessary if economic conditions differ
substantially from the assumptions used in making the evaluations. In addition,
various regulatory agencies, as an integral part of their examination process,
periodically review Pioneer's allowance for possible loan losses. Such agencies
may require Pioneer to recognize additions to the allowances based on their
judgments about information available to them at the time of their examination.
Premises and Equipment--Premises and equipment are stated at cost less
accumulated depreciation and amortization. Depreciation is computed on a
straight-line basis over the estimated lives of the related assets as follows:
building 20-33 years; building and land improvements 5-10 years; equipment 3-12
years; and leasehold improvements over 10-15 years. No depreciation is taken on
capital projects-in-progress until such projects are completed and placed in
service. Maintenance and repairs are charged to operations as incurred.
Other Real Estate Owned--Other real estate owned consists of real estate
acquired through foreclosure and is stated at the lower of estimated fair value,
less estimated disposal costs, or cost. Allowances for declines in value
subsequent to acquisition were not necessary at both March 31, 1995 and 1994.
While management uses the best information available to make its evaluations,
future adjustments to the valuation of other real estate may be necessary if
economic conditions differ significantly from the assumption used in making the
evaluation.
Cost in Excess of Fair Value of Net Assets Acquired--Cost in excess of fair
value of net assets acquired arose from an acquisition in 1976 and is being
amortized on a straight-line basis over a period of 40 years.
Income Taxes-- Effective January 1, 1994 the Company adopted Financial
Accounting Standards Board (FASB) Statement No. 109, Accounting for Income
Taxes, (SFAS No. 109) which changes the method by which the Company accounts for
deferred income taxes. Under SFAS No. 109, deferred tax assets and liabilities
are recognized for the future tax consequences attributable to differences
between the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases. Deferred tax assets and liabilities
are measured using enacted tax rates expected to apply to taxable income in the
periods in which those temporary differences are expected to be recovered or
settled.
Prior to 1994, the Company accounted for income taxes in accordance with
Accounting Principles Board Opinion No. 11. Accordingly, certain income and
expense items were recognized differently for financial reporting purposes than
for income tax purposes. Provisions for deferred taxes were made to recognize
those timing differences.
Cash and Cash Equivalents-- For purposes of reporting cash flows, cash and
cash equivalents include cash on hand, amounts due from banks, and Federal funds
sold. Generally, Federal funds are sold for one-day periods.
<PAGE> 10
Notes to Condensed Consolidated Financial Statements, continued
- - - ---------------------------------------------------------------
(1) Summary of Significant Accounting Policies, continued:
Recently Issued Accounting Standards--In December 1990, the FASB adopted
Statement of Financial Accounting Standards (SFAS) No. 106, Employers'
Accounting for Postretirement Benefits Other than Pensions. Since the Company
provided no such benefits, implementation of SFAS No. 106 has had no effect on
its financial statements.
In November 1992, the FASB issued Statement of Financial Accounting
Standards 112, Employers' Accounting for Postemployment Benefits. This statement
is effective for fiscal years beginning after December 15, 1994. Generally, the
Company does not offer postemployment benefits as defined in this Statement. The
Company believes implementation of this Statement will not have a material
effect on its financial statements.
In 1994, the FASB issued Statement of Financial Accounting standards (SFAS)
No. 114, Accounting by Creditors for Impairment of Loans. SFAS No. 114 requires
certain impaired loans to be measured based on the present value of expected
future cash flows discounted at the loan's effective interest rate, the loan's
market price or the fair value of the collateral if the loan is collateral
dependent. This statement is effective for fiscal years beginning after December
15, 1994 and will be reflected on a prospective basis. The Company believes
implementation of this statement will not have a material effect on its
financial condition.
(2) Investment Securities
During the quarter ended March 31, 1995, the Company adopted Financial
Accounting Standards Board Statement No. 115, Accounting for Certain Investments
in Debt and Equity Securities (SFAS No. 115) which changes the accounting and
reporting for investments in equity securities that have readily determinable
fair values and for all investments in debt securities.
The Company prospectively adopted SFAS No. 115 on January 1, 1994. The
effect of this change was the classification of applicable investments in three
categories consisting of held-to-maturity, trading and available for sale.
Trading securities are bought and held principally for the purpose of selling
them in the near term. Trading securities are accounted for at their fair value
with the unrealized gains and losses included in current earnings. The Company
has not classified any of it's investments as trading during the first three
months ended March 31, 1995. All other securities not included in trading or
held to maturity are classified as available for sale.
Securities available for sale are accounted for at fair value. Unrealized
gains and losses on securities available for sale are accounted for as a
separate component of stockholders' equity, net of tax.
<PAGE> 11
Notes to Condensed Consolidated Financial Statements, continued
- - - ---------------------------------------------------------------
(2) Continued:
Securities available for sale at March 31, 1995, December 31, 1994 and
March 31, 1994 are summarized as follows:
<TABLE>
<CAPTION>
March 31, December 31, March 31,
1995 1994 1994
Cost Market Value Cost Market Value Cost Market Value
<S> <C> <C> <C> <C> <C> <C>
----------------------------------------------------------------------------
U.S. Treasury Securities $ 3,504 3,602 3,506 3,532 3,513 3,735
Federal agency mortgage based obligations 17,109 16,278 18,513 17,012 22,424 22,349
Other obligations of Federal agencies 27,928 27,266 29,443 28,199 31,032 31,539
Other Securities 1,959 1,959 1,724 1,724 296 296
-----------------------------------------------------------------------------
Securities available for sale: $50,500 49,105 53,186 50,467 57,265 57,919
-----------------------------------------------------------------------------
</TABLE>
The adjustment in stockholders' equity for the unrealized loss of the
securities available for sale at March 31, 1995, net of tax, was $921,000.
Included in net deferred tax assets is $474,000 for this same unrealized loss.
Held-to-maturity securities are those securities for which the Company has
the ability and interest to hold the security until maturity. These securities
are accounted for at amortized cost. Securities at March 31, 1995, December 31,
1994 and March 31, 1994 consist of held-to-maturity securities are summarized as
follows:
<TABLE>
<CAPTION>
March 31, December 31, March 31,
1995 1994 1994
Cost Market Value Cost Market Value Cost Market Value
<S> <C> <C> <C> <C> <C> <C>
----------------------------------------------------------------------------
U.S. Treasury Securities $ -- -- 415 415 -- --
Other obligations of Federal Agencies 39,750 38,865 39,767 37,704 13,806 11,565
Obligations of States and Political subdivisions 12,078 12,123 12,424 12,049 11,371 11,837
Corporate Notes 199 202 299 302 299 322
Other Securities 10 9 10 9 10 10
----------------------------------------------------------------------------
Investment Securities $52,037 51,199 52,915 50,479 25,486 23,734
----------------------------------------------------------------------------
</TABLE>
(3) Restrictions on Cash and Due from Banks--Pioneer is required to maintain
certain average reserve balances as established by the Federal Reserve Bank. The
amount of those reserve balances for the reserve computation period which
included March 31, 1995 was $1,116,000 which amount was satisfied through the
restriction of vault cash.
Pioneer is also required to maintain certain balances at correspondent banks
based upon activity with the correspondent. At March 31, 1995, the amount of
such balances was $49,000.
<PAGE> 12
Notes to Condensed Consolidated Financial Statements, continued
- - - ---------------------------------------------------------------
(4) Stockholders' Equity and Per Share Data-- In the fourth quarter of 1993 the
Company's Board of Directors declared a two for one stock split effected in the
form of a stock dividend which was approved by the Company's shareholders. The
split was effective on February 7, 1994. Also approved was an increase in the
number authorized shares of common stock from 1,000,000 ($10 par value) to
25,000,000 ($10 par value). These financial statements have been adjusted to
reflect the stock split.
At March 31, 1995 there were 25,000,000 shares of common stock at $10 par
value authorized with 1,390,420 shares issued and outstanding.
Through March 31, 1995 the Company has issued and outstanding 129,154
options to purchase shares of the Company, exercisable at between $16.00 to
$26.00 per share. In the first quarter Officers of the Company exercised 5,475
of previously issued options.
The market value of the common shares of the Company at March 31, 1995 was
$35.50. The impact of all the options issued and outstanding on the calculation
of earnings per share was additional incremental common stock equivalents of
58,024 shares.
(5) Employee Benefit Plan--The Bank has an employee stock ownership plan which
includes substantially all employees who have at least one year of service.
During 1989 and 1990, Pioneer American Bank, N.A. Employee Stock Ownership Plan
(ESOP) obtained lines of credit from another financial institution in the amount
of $650,000 of which there was no outstanding balance at March 31, 1995 and
1994, respectively.
The Bank has a savings and investment plan. Employees who have completed one
year of service with 1,000 hours of employment during that year are eligible to
participate.
The Company maintains employment contracts with its President, Senior
Executive Vice President and Chief Operations Officer. The Company also
maintains insurance contracts for its President and Executive Vice President.
<PAGE> 13
Financial Review Management's Discussion and Analysis of
Financial Condition and Result of Operation
- - - --------------------------------------------------------
Highlights
- - - ----------
Total Assets were $309,855,000 at March 31, 1995 and $265,555,000 at March
31, 1994 which is an increase of $44,300,000 or 16.7%. Deposits increased by
$42,003,000 from $237,272,000 at March 31, 1994 which is an increase of 17.7% at
March 31 of 1995. The increase in deposits was the result of a special
certificate of deposit that was offered during the month of July, 1994 which
increased time deposits approximately 17.2%. In addition, demand deposits
non-interest bearing grew approximately 22.5% through retail growth. These new
monies were used to fund retail loan growth and securities purchases. Total loan
volume as of March 31, 1994 stood at $160,581,000, increasing by $21,144,000 or
13.2% to $181,725,000 at March 31, 1995. At March 31, 1995, total assets
increase $7,447,000 over December 31, 1994, deposits increased $8,557,000 or
3.2% and loans increased $4,552,000 or 2.6%.
The average earning assets were $283,257,000 during the three months ended
March 31, 1995 and $246,871,000 during the three months ended March 31, 1994.
This is an increase of $36,386,000 or 14.7%.
Average total assets during the three months ended March 31, 1995 were
$304,521,000 and $264,331,000 for the three months ended March 31, 1994. The
return on average total assets was 1.1% for the three months ended March 31,
1995 and 1.2% for the same period of 1994. Return on average equity for the
first three months of 1995 and 1994 were 12.8% and 13.2% respectively. Average
equity for both periods was $25,136,000 for the first three months of 1994 and
$24,991,000 for the first three months of 1994.
Net Interest Revenue
- - - --------------------
Net interest income for the first three months of 1995 increased $121,000 or
4.0% compared with the same period of 1994. While total interest revenue
increased $940,000 or 19.9%, interest paid increased by $819,000 or 47.3%
resulting in a net effect of a increase of $121,000 or 4.0% in net interest
income. The increase in interest income from the change in the volume of assets
was primarily a result of an increase in the securitues portfolio. This increase
was offset by an increase in the volume interest bearing deposits which
increased interest expense. Net income per share was $.56 for the first three
months of 1995 compared to $.58 for the first three months of 1994. Earnings per
share data is based on share equivalent of 1,448,444 March 31, 1995 and
1,421,098 shares March 31, 1994. Net income decreased $17,000 or 2.1% comparing
the first three months of 1995 to the first three months of 1994, and is
attributed to an increase in other expenses of 29.% in 1995. The increase in
1995 is do to fees incurred for the partial outsourcing of the internal audit
function and normal increases in other miscellaneous expense.
Provision and Reserve for Possible Loan Losses
- - - ----------------------------------------------
Three Months Ended March 31,
1995 1994
---------------------------
Balance at beginning of period $2,699,000 2,604,000
Recoveries 15,000 36,000
Less: Charge Offs 78,000 42,000
Provision for Loan Losses 120,000 130,000
- - - ------------------------------------------------------------------------------
Balance at end of period $2,756,000 2,728,000
- - - ------------------------------------------------------------------------------
<PAGE> 14
Financial Review Management's Discussion and Analysis of
Financial Condition and Result of Operation, continued
- - - --------------------------------------------------------
The provision for possible loan losses for the first three months of 1995
amounted to $120,000. It was $130,000 for the first three months of 1994. Net
charges offs for the first three months of 1995 totaled $63,000 while net charge
offs for the same period of 1994 were $6,000. The ratio of net charge offs
during the first three months of 1995 to average loans outstanding during the
same period was .04% and for the first three months of 1994 was .004%.
The reserve for possible loan losses at March 31, 1995 totaled $2,756,000,
increasing $28,000, 1.0% from $2,728,000 at March 31, 1994. These additions have
brought the Company ratio of reserve for possible loan losses to total loans
outstanding to 1.5% at March 31, 1995, and the same ratio as of March 31, 1994
was 1.7%.
Other Operating Revenue
- - - -----------------------
Other operating revenue for the first three months of 1994 was $316,000
increasing 25.0% to $395,000 reported for the first three months of 1995.
Included in other income in 1995 was $70,000 from life insurance proceeds due to
the death of a bank director. This represented the largest increase in total
other operating revenue, comparing the first three months of 1995 to the first
three months of 1994. Service charge income on deposit accounts increased in
1995 due to an increase in the fees collected for returned items.
Other Operating Expenses
- - - ------------------------
Total other operating expenses were $2,039,000 in the first three months of
1994 while other operating expenses were $2,316,000 in the first three months of
1995; reflecting a increase of $277,000 or 13.6% for the first three months of
1995. Other expenses increased $132,000 or 29.0% comparing the first three
months of 1995 to the first three months of 1994. Salaries and employee benefits
which represent the most significant portion of non-interest expenses, increased
by 10.2%. The 1995 increase is attributed to normal salary and benefit increases
and an increase in full time equivalents which included the addition of staff
for three new branches opened in 1994.
Income Taxes
- - - ------------
The provision for income taxes for the first three months of 1995 was
$270,000 and $320,000 for the first three months of 1994. This reflects the
current tax rates and the level of income for both periods. This is the
estimated provision for income tax for the period as determined by operations of
the corporation.
Non-Performing Loans
- - - --------------------
Non-performing loans are listed as follows:
03/31/95 03/31/94
---------- ----------
Non Accrual $ 200,000 $ 580,000
Loans 90 days or more past due 1,792,000 2,620,000
Restructured 1,071,000 756,000
---------- ----------
$3,063,000 $3,956,000
The loan loss reserve as of March 31, 1995 has been deemed adequate by
management. The allowance for loan loss as of March 31, 1995 was $2,756,000.
This amount is sufficient to cover inherent losses given the moderate past due,
nonperforming and classified levels. Determination for loan loss reserve
adequacy follows the guidelines in the Comptroller's Banking Circular
No.201(revised), including risk loss analysis, specific allocations for
problematic credits and provision for class loans.
<PAGE> 15
Financial Review Management's Discussion and Analysis of
Financial Condition and Result of Operation, continued
- - - --------------------------------------------------------
Capital Management and Liquidity and Rate Sensitivity
- - - -----------------------------------------------------
The objectives of the Corporation's capital management policy places and
emphasis on both current financial positioning and future capital needs based on
anticipated growth. These objectives are maintained by management which monitors
its liquidity requirements though its asset/liability management program. This
program, with other management analysis, enables the bank to meet its cash flow
requirements and adapt to the changing needs of the Corporation's customers and
the requirements of regulatory agencies. The Corporation's principal source of
liquidity has been short-term U.S. Government and U.S. Agency obligations, and
various corporate notes. Money market investments and portfolio investments are
kept liquid in order to effectively match our current deposit structure.
The Corporation is affected by changes in the level of rates of interest.
Earnings will be sensitive to interest rate changes to the degree that the
average yield on assets responds differently to a change in interest rates than
does average cost of funds. Adequate liquidity affords the Corporation
flexibility in meeting consumer loan demand and deposit fluctuations.
The Corporation actively manages the interest rate sensitivity
characteristics of its assets and liabilities to control the effects of changes
in the general level of interest rates upon net interest revenue. This is
accomplished by the asset/liability committee which consists of senior
management and the board of directors, who are responsible for management
decisions as to the asset/liability maturity mix.
Effects of Inflation
- - - --------------------
The economic outlook for the remaining part of 1995 and early spring of 1996
remains unsettled and uncertain. The Federal Reserve may have the task of
sustaining expansion while stemming inflationary trends, in the realm of current
fiscal policy. Economic conditions are reviewed by management in a continuing
effort to adjust to the changing economic environment. The effects of these
changes on the banking industry as a whole in the Company's market area are
reviewed by management in order to compete at a level consistent with the goals
of profitability and sound management policy.
Increases in the rate of inflation can increase longer term interest rates,
which can reduce the value of investment securities, mortgage loans and other
fixed rate and term assets. Inflationary periods also may tend to increase the
borrowing needs of consumers, leading to requests for additional funds, which
can expand total loans above expected levels and therefore require increased
efforts to ensure the maintenance of adequate capital.
The banking industry is affected by inflation in a different manner than
other industries, although certain changes have similar effects on both banks
and other business enterprises. Current economic indicators are moving in the
direction of possible inflationary changes. Interest rates have been increasing
in response to economic changes and which will affect the Asset/ Liability
policy of the bank. Rates on Deposits and Loans are changed as necessary with
consideration of economic and market conditions. Our continuing efforts to
monitor all phases of the financial condition of all assets which can be
affected by inflation includes the pricing of collateral on a regular basis. The
coming months will reveal the effect of inflationary fluctuations on the
economy.
<PAGE> 16
Part II.
- - - --------
Item 1. Legal Proceedings
- - - --------------------------
The nature of the business of Pioneer American Holding Company Corp. and its
subsidiary, Pioneer American Bank, N.A., generates a certain amount of
litigation involving matters arising in the ordinary course of business.
However, in the opinion of management, there are no proceedings pending to which
Pioneer American or its subsidiary are parties or to which their property is
subject, which, if determined adversely, would be material in relation to
Pioneer American's shareholders' equity or financial condition. In addition, no
material proceedings are pending or are known to be threatened or contemplated
against Pioneer American or its subsidiary by governmental authorities or other
parties.
Item 2. Changes in Securities
- - - ------------------------------
None
Item 3. Default Upon Senior Executives
- - - ---------------------------------------
None
Item 4. Submission of Matters to a Vote of Security Holders
- - - ------------------------------------------------------------
None
Item 5. Other Information
- - - --------------------------
Not applicable.
Item 6. Exhibits and Reports on Form 8-K
- - - -----------------------------------------
None
<PAGE> 17
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.
PIONEER AMERICAN HOLDING COMPANY, CORP.
Date: April 26, 1995 By /s/ Donald A. Hoyle, Jr.
---------------------------------------
Donald A. Hoyle, Jr.
President & C.E.O.
Date: April 26, 1995 By /s/ John W. Reuther
---------------------------------------
John W. Reuther
Senior Executive Vice President &
Chief Financial Officer
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