<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES AND EXCHANGE ACT OF 1934
(X) Quarterly report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
OR
( ) Transition report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Quarter Ended:
March 31, 1996 Commission File Number: 0-17286
PRIME BANCORP, INC.
(Exact name of registrant as specified in its charter)
Delaware 23-2528428
(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
6425 Rising Sun Avenue, Philadelphia, Pennsylvania 19111
(Address of principal executive offices) (Zip Code)
(215) 742-5300
(Registrant's telephone number, including area code)
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 and Exchange Act of 1934 during the preceding 12 months
(or for 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 X No
The number of shares outstanding of the Registrant's common
stock as of March 31, 1996:
Common Stock -- 3,723,353
<PAGE>
<PAGE>
PRIME BANCORP, INC.
INDEX
Part I Financial Information
Item 1. Consolidated Financial Statements
Consolidated Statements of Financial 1
Condition:
December 31, 1995 and March 31, 1996
(Unaudited)
Consolidated Statements of Operations, 2
Three Months Ended:
March 31, 1995 and 1996
(Unaudited)
Consolidated Statements of Cash Flows, 3 - 4
Three Months Ended:
March 31, 1995 and 1996
(Unaudited)
Notes to Consolidated Financial Statements 5 - 6
Item 2. Management's Discussion and Analysis of 7 - 13
Financial Condition and Results of Operations
Part II Other Information 14
Signatures 15
1
<PAGE>
<PAGE>
PRIME BANCORP, INC.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Dollars in thousands)
<TABLE>
<CAPTION>
December 31, March 31,
<S> <C> <C>
1995 1996
-------- ---------
(Unaudited)
Assets
Cash and due from banks...................... $ 13,092 $ 14,909
Interest-bearing deposits.................... 34,937 3,394
------- -------
Cash and cash equivalents................. 48,029 18,303
------- -------
Investment securities (market value of
($13,849 and $11,457)..................... 13,708 11,447
Investment securities available for sale..... 23,863 38,523
Mortgage-backed securities (market value of
($82,045 and $89,563)..................... 81,084 89,270
Mortgage-backed securities available for sale 54,739 58,077
Loans receivable............................. 348,886 355,632
Deferred fees.............................. (392) (309)
Allowance for loan losses.................. (3,764) (3,812)
------- -------
Loans receivable, net................... 344,730 351,511
------- -------
Loans held for sale ......................... 6,814 6,710
Accrued interest receivable.................. 4,339 4,557
Real estate owned............................ 370 467
Land acquired for development and resale..... 10,405 10,367
Property and equipment....................... 9,229 9,269
Other assets................................. 10,665 10,466
------- -------
Total assets........................... $ 607,975 $ 608,967
------- -------
------- -------
Liabilities and Stockholders' Equity
Liabilities:
Deposits.................................. $ 476,539 $ 484,408
Advances from Federal Home Loan Bank of
Pittsburgh.............................. 14,000 12,000
Other borrowed money...................... 54,844 47,020
Advance payments by borrowers for taxes
and insurance........................... 2,211 1,681
Other liabilities......................... 4,134 6,374
------- -------
Total liabilities...................... 551,728 551,483
------- -------
Stockholders' equity
Serial preferred, $1 par value; 5,000,000
shares authorized and unissued.......... -- --
Common stock, $1 par value; 10,000,000
shares authorized; 3,889,707 and
3,907,416 shares issued respectively.... 3,890 3,907
Additional paid-in capital................ 30,455 30,632
Retained earnings substantially restricted 24,275 25,245
Valuation adjustment for debt securities
net of taxes............................ (1,558) (1,485)
Treasury stock (184,063 shares at cost)... (815) (815)
------- -------
Total stockholders' equity................ 56,247 57,484
------- -------
Total liabilities and stockholders' equity $ 607,975 $ 608,967
------- -------
------- -------
See accompanying notes to consolidated financial statements
</TABLE>
2
<PAGE>
PRIME BANCORP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands)
<TABLE>
<CAPTION>
Three Months Ended March 31,
1995 1996
--------- ---------
(Unaudited)
<S> <C> <C>
Interest income:
Loans receivable, net................... $ 7,322 $ 7,760
Mortgage-backed securities.............. 2,082 2,257
Investment securities................... 788 777
Interest-bearing deposits............... 56 145
--------- ---------
Total interest income.............. 10,248 10,939
--------- ---------
Interest expense:
Deposits................................ 4,061 4,648
Short-term borrowings................... 958 748
Long-term borrowings.................... 39 27
--------- ---------
Total interest expense............. 5,058 5,423
--------- ---------
Net interest income................ 5,190 5,516
--------- ---------
Provision for loan losses.................... 166 300
--------- ---------
Net interest income after provision
for loan losses...................... 5,024 5,216
--------- ---------
Other income (expenses):
Fees and service charges................ 185 404
Gain (loss) on sale of:
Loans receivable, net................. 11 26
Investment securities, net............ (292) 131
Mortgage-backed securities, net....... 218 --
Land acquired for development and sale 49 --
Rental income......................... 18 68
Other................................... 123 135
--------- ---------
Total other income................. 312 764
--------- ---------
Other expenses:
Salaries and employee benefits.......... 1,443 1,844
Occupancy and equipment................. 602 784
Federal insurance premiums.............. 257 251
Other................................... 790 654
--------- ---------
Total other expenses............... 3,092 3,533
--------- ---------
Income before income taxes.............. 2,244 2,447
Income taxes............................ 784 844
--------- ---------
Net Income......................... $ 1,460 $ 1,603
--------- ---------
--------- ---------
Earnings per share:
Primary and fully diluted.................... $ .38 $ .42
Weighted average number of shares
outstanding................................. 3,753,402 3,779,600
Dividends declared per share................. .15 .17
--------- ---------
--------- ---------
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
PRIME BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
<TABLE>
<CAPTION>
Three Months Ended March 31,
1995 1996
--------- ---------
(Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net Income................................. $ 1,460 $ 1,603
Adjustments to reconcile net income
to net cash from operating activities:
Depreciation......................... 375 413
(Gain) loss on sale of:
Loans receivable................... (11) (26)
Investment securities ............. 292 (131)
Mortgage-backed securities ........ (218) --
Land acquired for development & resale (49) --
Provision for loan losses............ 166 300
Increase in accrued interest
receivable ........................ (333) (218)
Decrease in other assets............. 1,731 375
Increase (decrease) in
other liabilities.................. (1,080) 2,237
------- ------
Net cash provided from operating
activities.................... 2,333 4,553
------- ------
Cash flows from investing activities:
Investment securities available for sale:
Purchases................................ (4,661) (18,399)
Repayments............................... 1,948 3,629
Sales.................................... 11,721 --
Mortgage-backed securities available for sale:
Purchases................................ (18,060) (5,098)
Repayments............................... 1,734 1,670
Sales.................................... 15,728 --
Investment securities:
Purchases................................ (2,063) (6,593)
Repayments............................... 178 8,985
Mortgage-backed securities:
Purchases................................ -- (9,672)
Repayments............................... -- 1,486
Loans receivable:
Originations, net of repayments.......... (8,695) (7,307)
Loans held for sale:
Originations, net of repayments.......... (1,031) (1,533)
Sales.................................... 2,560 1,663
Proceeds from sale of land acquired for
development and resale................... 520 421
Increase in land acquired for
development and resale................... (91) (383)
Purchase of property and equipment...... (359) (356)
(Increase) decrease in real estate owned (125) 9
Proceeds from sale of real estate owned. 130 120
------- -------
Net cash used in investing activities (566) (31,358)
------- -------
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
PRIME BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(Dollars in thousands)
<TABLE>
<CAPTION>
Three Months Ended March 31,
1995 1996
(Unaudited)
<S> <C> <C>
Cash flows from financing activities:
Net increase in deposits................... 1,691 7,869
Advances from the Federal Home Loan Bank
of Pittsburgh........................... 26,350 19,000
Repayments of advances from the Federal
Home Loan Bank of Pittsburgh ............ (26,350) (21,000)
Decrease in other borrowed money........... (4,119) (7,824)
Decrease in advance payments by borrowers
for taxes and insurance................. (383) (530)
Net proceeds from issuance of common stock. -- 194
Cash dividends paid......................... (588) (630)
-------- --------
Net cash used in financing
activities........................... (3,399) (2,921)
-------- --------
Net change in cash and cash equivalents (1,632) (29,726)
-------- --------
Cash and cash equivalents:
Beginning of year........................ 26,852 48,029
-------- --------
End of year.............................. $ 25,220 $ 18,303
-------- --------
-------- --------
Supplemental disclosure of cash flow
information:
Cash paid during the period for:
Interest.............................. $ 4,748 $ 5,431
Income taxes.......................... 625 --
-------- --------
Non-cash investing activity consist of:
Transfer of loans to real estate owned $ 782 $ --
-------- --------
Transfer of loans to land acquired for
development and resale.............. $ 9,392 $ --
-------- --------
Tax benefit associated with the
exercise of stock options........... $ -- $ 74
-------- --------
See accompanying notes to consolidated financial statements.
</TABLE>
4
<PAGE>
PRIME BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The following is a description of the significant accounting
policies of Prime Bancorp, Inc. and subsidiaries (the "Company").
The accompanying consolidated financial statements have been
prepared in conformity with generally accepted accounting
principles, which have been applied on a consistent basis except
for the change in accounting principle as described below.
BUSINESS
The Company's principal business is conducted through Prime
Bank (the "Bank"). The Bank's principal business consists of
attracting deposits and obtaining borrowings, then investing those
deposits and borrowings in various types of loans, mortgage-backed
securities, and other investments. These operations are conducted
through a branch network in Southeastern Pennsylvania. While the
Bank is subject to competition from other financial institutions,
it is also subject to the regulations of certain federal agencies
and, therefore, undergoes periodic examinations by those regulatory
authorities.
Effective March 19, 1996, the Company's subsidiary, Prime
Bank, a federal savings bank, converted into a Pennsylvania
chartered stock savings bank with the legal name, "Prime Bank, a
savings bank." After the conversion, the Bank continues to do
business under the name, "Prime Bank." After the conversion, the
Bank's deposits will continue to be insured by the Savings
Association Insurance Fund ("SAIF") administered by the Federal
Deposit Insurance Corporation ("FDIC"). Because the Bank's
deposits are SAIF insured, the Company is deemed to be a "savings
and loan holding company" regulated by the Office of Thrift
Supervision, and not a "bank holding company," which would be
regulated by the Board of Governors of the Federal Reserve System.
The Bank continues to meet all applicable "qualified thrift lender"
tests. In the opinion of the Company's management, there are not
likely to be any material differences in the impact of Pennsylvania
banking laws and regulations on the ordinary activities of the
Bank, as compared to federal laws and regulations applicable to
federal savings associations.
BASIS OF FINANCIAL STATEMENT PRESENTATION
The accompanying consolidated financial statements include the
accounts of the Company and its wholly-owned and majority-owned
subsidiaries. The Company's principal subsidiary is the Bank. All
significant intercompany balances and transactions have been
eliminated in consolidation. Certain reclassifications have been
5
<PAGE>
PRIME BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
made to prior year amounts to conform with the current year's
presentation; such reclassifications have no impact on income. The
financial information included herein is unaudited; however, such
information reflects all adjustments (consisting solely of normal
recurring adjustments) which are, in the opinion of management,
necessary for a fair statement of results for the interim periods.
Results of operations for the three month period ended March 31,
1996 are not necessarily indicative of the results to be expected
for the full year.
EARNINGS PER SHARE
Earnings per share was calculated based on the weighted
average number of shares of common stock outstanding for the
respective periods. Stock options are considered common stock
equivalents and are included in the computation of the number of
outstanding shares using the treasury stock method.
LOAN IMPAIRMENT
On January 1, 1995, the Company has adopted the provisions of
Statement on Financial Accounting Standards ("SFAS") No. 114,
Accounting by Creditors for Impairment of a Loan and SFAS No. 118,
Accounting for Creditors of Impairment of a Loan - Income
Recognition and Disclosures. SFAS No. 114 and 118 require that
"impaired" loans be measured based on present value of expected
future cash flows, discounted at the loan's effective interest rate
or, as a practical expedient, at the loans observable market price
or the fair value of the collateral if the loan is collateral
dependent.
As of March 31, 1996, the Company has impaired loans which
consist of non-accrual loans.
6
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FINANCIAL CONDITION
Assets of the consolidated company increased 0.2% or $1.0
million from $608.0 million at December 31, 1995 to $609.0 at March
31, 1996. Proceeds from the sale of securities available for sale
in December 31, 1995 were used to fund loan originations and
security purchases. Because of the Bank's efforts to diversify
lending away from traditional thrift residential lending,
investments are disproportionally weighted into mortgage-backed
securities, so that the Bank can continue to pass the Qualified
Thrift Lender test. Interest rate risk is reduced through
investments in medium term Collateral Mortgage Obligations ("CMOs")
and Adjustable Rate Mortgages. A large percentage of the CMO
investments are U.S. Agency or backed by U.S. Agency collateral and
have average lives less than 4.5 years. The market value of
mortgage-backed securities are inversely related to interest rates,
market values generally rise as interest rates fall, and fall as
interest rates rise. Prepayment speeds, which are partly a
function of interest rates, also influence mortgage-backed security
performance.
Non-earning assets remained relatively unchanged for the three
months ended March 31, 1996 when compared to December 31, 1995.
The Company's liabilities decreased by 0.04% or $0.2 thousand, from
$551.7 million at December 31, 1995 to $551.5 million at March 31,
1996. Deposits increased $7.9 million due to the opening of the
Huntingdon Valley and Yardley branches. Proceeds from deposits
were used to payoff other borrowed money, which consists primarily
of reverse repurchase agreements.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity for a financial institution is a measure of the
financial institution's ability to fund customers' needs for
borrowings and deposit withdrawals. The Company's policy has
always been to maintain a strong liquidity position, in addition to
cash and short-term investments. The Company's principal sources
of funds are savings deposits, principal repayments on loans,
proceeds from the sale of loans, funds from operations, advances
from the FHLB of Pittsburgh and other borrowed money.
7
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
LIQUIDITY AND CAPITAL RESOURCES - CONTINUED
Cash flows used in investing activities were $31.4 million for
the three months ended March 31, 1996 compared to $566 thousand for
the same period in 1995. This increase was attributable to an
increase in net investment securities activity of $19.5 million, a
net increase in mortgage-backed security activity of $11.0 million
and an increase in land acquired for development and resale of $300
thousand.
Cash flows used in financing activities were $2.9 million for
the three months ended March 31, 1996 compared to $3.4 million cash
provided from financing activities for the same period in 1995.
This change is primarily attributable to a increase of $6.2 million
in deposit activity which is partially offset by a decrease of $2.0
million in FHLB Advances activity and a $3.8 million in other
borrowed money.
Cash flows from operating activities provided $4.6 million and
$2.3 million for the three months ended March 31, 1996 and 1995,
respectively. This increase is primarily due to an increase in
other liabilities of $2.2 million for the three months ended
March 31, 1996 in comparision to a decrease of $1.1 million for the
same period in 1995 which is partially offset by a decrease in other
assets of $1.4 million.
The Bank is required under federal regulations to maintain
specific levels of "liquidity" investments in qualifying types of
U.S. Treasury and federal agency obligations and other types of
investments having maturities of five years or less. The required
level of these liquid investments, currently 5% of the Bank's net
withdrawable deposits and plus short term liabilities, of which not
less than 1% must consist of short term liquid assets as defined by
the OTS, is changed from time to time by the OTS as a result of
changes in economic conditions. Such investments are intended to
provide a source of liquid funds upon which the Bank may rely, if
necessary, to fund deposit withdrawals and for other short-term
funding needs. At March 31, 1995 and 1996, the Bank's liquidity
ratio as measured by OTS standards was 10.7% and 7.7%, respectively.
The short-term liquidity ratios exceeded the regulatory requirement
of 1 % for both periods. Under the liquidity standards set forth by
the Federal Deposit Insurance Corporation, the Bank's liquidity
ratio was 37.6% at March 31, 1996.
8
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
CAPITAL
The following table sets forth, at March 31, 1996, the FDIC
requirements and the actual amount of regulatory capital that the
Bank had under each requirement (dollars in thousands):
<TABLE>
<CAPTION)
Actual
Regulatory Regulatory
Requirement Capital Percent
----------- ---------- -------
<S> <C> <C> <C>
Tangible Capital $ 8,582 $43,088 7.53%
Risk-based Capital 29,408 46,900 12.76%
PA Leverage Capital 22,885 43,088 7.53%
</TABLE>
The Bank meets the fully phased in risk-based capital requirements.
Net Income
The Company reported net income of $1.6 million for the three
months ended March 31, 1996. This represents an increase of $143
thousand when compared to the net income for the same period in 1995.
This increase was primarily attributable to an increase of
non-interest income of $452 thousand and an increase in net interest
income after the provision for loan losses of $192 thousand which was
offset by an increase in other expenses of $441 thousand and an increase
in income taxes of $60 thousand.
On a fully diluted per share basis net income increased to
$.42 from $.38 for the three months ended March 31, 1996 compared
to the same period in 1995. The Company's return on average assets
was 1.01% and 1.05% for the three months ended March 31, 1995 and
1996, respectively. The Company's return on average equity for the
three months ended March 31, 1995 and 1996 was 11.75% and 11.27%.
Net income for the three month period ended March 31, 1996 remained
relatively unchanged when compared to the quarter ended December
31, 1995, as reported in the 10-K filed with the SEC.
Net Interest Income
The major component of the Bank's earnings is net interest
income. Net interest income is the difference between interest
income earned on loans and other interest-earning assets and
interest expense paid on deposits and borrowings. Net interest
income was $5.5 million for the three months ended March 31, 1996.
This represents a 6.3% increase when compared to net interest
income of $5.2 million for the same period in 1995.
9
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
NET INTEREST INCOME - CONTINUED
Net interest income increased by $200 thousand for the quarter ended
March 31, 1996 compared to $5.2 million for the three months ended
December 31, 1995 as reported in the 10-K filed with the SEC.
The net interest margin decreased from 4.43% to 4.12% for the
three months ended March 31, 1995 and 1996. The yield on average
interest-earning assets decreased 33 basis points from 8.36% to
8.03% for the three months ended March 31, 1995 and 1996
respectively. The yields on investment and mortgage-backed
securities increased 23 and 29 basis points, respectively, between
the three month period ended March 31, 1996 and the comparable
period in 1995. The cost of average interest bearing liabilities
increased 2 basis points to 4.03% for the three months ended March
31, 1996 from 4.01% for the comparable period in March 31, 1995.
This increase is attributable to a general increase in rates being
offered on deposit products.
The table below illustrates the changes in the net interest
rate margin and interest rate spread for the three months ended
March 31, 1995 and 1996.
<TABLE>
<CAPTION>
Three months
March 31,
---------------
<S> <C> <C>
1995 1996
----- -----
Rate on interest-bearing assets......... 8.36% 8.03%
Rate on interest-bearing
liabilities........................ 4.01% 4.03%
----- -----
Net interest rate spread................ 4.35% 4.00%
----- -----
Net interest rate margin................ 4.43% 4.12%
----- -----
</TABLE>
Net interest income has also been affected by growth in
interest-earning assets and an increase in interest bearing
liabilities. Total average interest-earning assets increased $38.1
million for the three months ended March 31, 1996 to $554.0 million
from $515.9 million at March 31, 1995. Total average interest-
bearing liabilities increased $33.2 million for the three months
ended March 31, 1996 to $537.7 million from $504.5 million at March
31, 1995.
PROVISIONS FOR LOAN LOSSES
The provision for loan losses was $300 thousand for the three
months ended March 31, 1996 compared to $166 thousand for the same
period in 1995. The increase in the provision reflects the growth
in the loan portfolio. The allowance for loan losses was $3.76
million and $3.81 million at December 31, 1995 and March 31, 1996,
respectively. The Bank had net charge-offs of $298 thousand and
10
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
Provisions for Loan Losses - (Continued)
$290 thousand for the three months ended March 31, 1995 and 1996,
respectively.
The following is a summary of the activity in the allowance
for loan losses for the three months ended March 31, 1995 and 1996
(Dollars in thousands):
<TABLE>
<CAPTION>
1995 1996
------- -------
<S> <C> <C>
Balance at the beginning of period $4,285 $3,764
Provision for loan losses 166 300
Recoveries 7 38
Losses charged against allowance (305) (290)
-------- --------
Balance at the end of period $ 4,153 $ 3,812
</TABLE>
OTHER INCOME
Other income increased $452 thousand for the three months ended
March 31, 1996 to $764 thousand from $312 thousand for the comparable
period in 1995. This increase was primarily attributable to an
increase in fees and other service charges of $219 thousand and the
increase of $205 thousand in gains on the sale of investment and
mortgage-backed securities.
Fees and service charges increased by $219 thousand to $404
thousand for the three months ended March 31, 1996 from $185
thousand for the same period in 1995. This increase is primarily
attributable to an increase in service charges on deposit accounts
of approximately $244 thousand.
OTHER EXPENSE
Other expenses, which include salaries, employee benefits,
occupancy and equipment, federal insurance premiums and other
increased $369 thousand for the three month period ended
March 31, 1995 compared to March 31, 1994.
The primary component of other expenses is salaries and
employee benefits, which increased by $401 thousand to $1.8 million
for the three months ended March 31, 1996 from $1.4 million for the
same period in 1995. This increase is primarily attributable to
branch expansion as well as increased staffing in the lending area.
Occupancy and equipment expense increased 30.2% to $784
thousand for the three months ended March 31, 1996 from $602
thousand for the same period in 1995. This increase was primarily
attributable to costs associated with a condominium project as well
as branch expansion.
11
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
OTHER EXPENSE - CONTINUED
Federal insurance premiums remained relatively unchanged for
the three months ended March 31, 1996 as compared to the same
period in 1995.
Other expenses decreased $136 thousand for the three months
ended March 31, 1996 compared to the same period in 1995. This
decrease is attributable to decreases in legal, insurance and data
processing expenses.
DIVIDEND POLICY
The Board of Directors of the Company declared a cash dividend
of $0.17 per share of common stock on March 20, 1996, payable May
1, 1996, to shareholders of record on April 3, 1996. It is
currently the Board's intention to continue to pay dividends on a
quarterly basis. This is the Company's twenty-ninth consecutive
quarterly cash dividend.
Future payment of dividends, however, will be subject to
determination and declaration by the Board of Directors, which will
take into account the Company's financial condition, results of
operations, industry standards, economic conditions and other
factors including regulatory restrictions. Currently, the Company
must rely on the Bank's payment of a dividend to the Company in
order to generate the cash and income to pay the dividend. The
Board may also consider the payment of stock dividends from time to
time in addition to, or in lieu of, cash dividends.
The Bank may not declare or pay a cash dividend on any of its
stock if the effect thereof would cause the Bank's net worth to be
reduced below (1) the amount required for the liquidation account,
or (2) the net worth requirement imposed by OTS.
CREDIT RISK
The Bank manages credit risk by maintaining diversification in
its loan portfolio, by establishing and enforcing rigorous
underwriting standards, by requiring annual reviews of all loan
relationships in excess of $1,000,000 by the Credit Committee of
the Board of Directors, by intensive collection efforts, and by
entering regular loan classification reviews of loans by the loan
review officer.
12
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
ASSET QUALITY
Non-performing assets, which include non-accruing loans and
real estate owned, totaled $3.4 million at December 31, 1995
compared to $2.8 million at March 31, 1996. The following table
sets forth non-performing assets as of December 31, 1995 and March
31, 1996 (Dollars in thousands):
<TABLE>
<CAPTION>
December 31, March 31,
1995 1996
---------- ----------
<S> <C> <C>
Non-accrual loans:
Residential loans $ 1,786 $ 1,232
Consumer loans 269 372
Commercial loans 925 782
---------- ----------
Total non-accrual loans 2,980 2,386
Real estate owned 370 457
---------- ----------
Total non-performing assets (1) $ 3,350 $ 2,843
---------- ----------
---------- ----------
Total non-performing assets to
loans receivable, net (1) 0.97% 0.81%
---------- ----------
---------- ----------
Total non-performing assets to
total assets (1) 0.55% 0.47%
---------- ----------
---------- ----------
Ratio of allowance for loan
losses to non-performing loans 112.36% 134.08%
---------- ----------
---------- ----------
</TABLE>
(1) Statistics do not include the impact of the $10.0 million
condominium project, which was acquired by a deed in lieu of
foreclosure and classified as land acquired for development
and resale. Non-performing assets, the ratio of non-performing
assets to loans receivable, net and the ratio of non-performing
assets to total assets would have been $12.8 million, 3.6% and
2.1% at March 31, 1996 if the condominium project was included
in non-performing assets. Interest income not recorded on the
project during the three months ended December 31, 1995 and
March 31, 1996 was approximately $240 thousand and $231 thousand,
respectively.
Interest income not recognized for non-accrual loans during
the three months ended December 31, 1995 and March 31, 1996 was $7
thousand and $57 thousand respectively.
13
<PAGE>
PART II
OTHER INFORMATION
Item 1 LEGAL PROCEEDINGS
The Company is not engaged in any legal proceedings of a
material nature at the present time. From time to time, the
Company is a party to legal proceedings wherein it enforces its
security interest in mortgage loans made by it.
Item 2 CHANGES IN SECURITIES
Not applicable.
Item 3 DEFAULTS UPON SENIOR SECURITIES
Not applicable.
Item 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The 1996 Annual Meeting of Stockholders of Prime Bancorp, Inc.
was held on April 17, 1996 for the purpose of electing two
directors, the appointment of KPMG Peat Marwick LLP as independent
auditors for the fiscal year 1996. The results of the voting with
respect to each nominee for director and, with respect to the
ratification of auditors were as follows:
<TABLE>
<CAPTION>
1. Directors For Withheld Non-Vote
----------- ---------- ---------
<S> <C> <C> <C>
a. Raymond L. Weinmann 2,866,959 141,249 --
b. Erwin T. Straw 2,866,959 141,249 --
</TABLE>
<TABLE>
<CAPTION>
2. Ratification of Auditors
For Against Abstain Non-Vote
--------- ------- ------- --------
<C> <C> <C> <C>
2,993,716 6,909 7,580 --
</TABLE>
Item 5 OTHER INFORMATION
Not applicable.
Item 6 EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
None
(b) Reports on Form 8-K
None
14
<PAGE>
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.
Date: May 15, 1996 /s/ James J. Lynch
------------------ --------------------
JAMES J. LYNCH
President and Chief
Executive Officer
Date: May 15, 1996 /s/ Michael J. Sexton
------------------- -----------------------
MICHAEL J. SEXTON
Treasurer and Chief
Financial Officer
15
