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, 1997 Commission File Number: 0-17286
PRIME BANCORP, INC.
-----------------------------------------------------
(Exact name of registrant as specified in its charter)
Pennsylvania 23-2860688
- ------------------------------- -------------------
(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
7111 Valley Green Road, Fort Washington, Pennsylvania 19111
- ------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(215) 836-2400
(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, 1997:
Common Stock -- 5,378,926
<PAGE>
PRIME BANCORP, INC.
INDEX
Part I Financial Information
Item 1. Consolidated Financial Statements
Consolidated Statements of Financial 1
Condition:
December 31, 1996 and March 31, 1997
(Unaudited)
Consolidated Statements of Operations, 2
Three Months Ended:
March 31, 1996 and 1997
(Unaudited)
Consolidated Statements of Cash Flows, 3 - 4
Three Months Ended:
March 31, 1996 and 1997
(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
<PAGE>
PRIME BANCORP, INC.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Dollars in thousands)
<TABLE>
<CAPTION>
December 31, March 31,
1996 1997
- -------------------------------------------------------------------------
(Unaudited)
<S> <C> <C>
Assets
Cash and due from banks...................... $ 29,161 $ 26,561
Interest-bearing deposits.................... 2,703 8,959
Federal funds sold........................... 600 1,500
--------- ---------
Cash and cash equivalents................. 32,464 37,020
--------- ---------
Investment securities (fair value of
($110,874 and $118,103)................... 110,766 118,744
Investment securities available for sale..... 125,428 127,775
Loans receivable............................. 624,426 610,482
Deferred fees.............................. (327) (381)
Allowance for loan losses.................. (7,206) (7,835)
--------- ---------
Loans receivable, net................... 616,893 602,266
--------- ---------
Loans held for sale ......................... 49 365
Accrued interest receivable.................. 6,826 6,757
Real estate owned............................ 1,335 2,701
Land acquired for development and resale..... 8,858 8,018
Property and equipment....................... 10,291 10,370
Other assets................................. 13,161 8,695
--------- ---------
Total assets........................... $ 926,071 $ 922,711
--------- ---------
--------- ---------
Liabilities and Stockholders' Equity
Liabilities:
Deposits.................................. $ 736,642 $ 722,582
Advances from Federal Home Loan Bank of
Pittsburgh.............................. 56,598 57,574
Other borrowed money...................... 51,685 58,862
Advance payments by borrowers for taxes
and insurance........................... 2,104 1,502
Other liabilities......................... 8,526 9,412
-------- --------
Total liabilities...................... 855,555 849,932
-------- --------
Stockholders' equity
Serial preferred, $1 par value; 2,000,000
shares authorized and unissued.......... -- --
Common stock, $1 par value; 13,000,000
shares authorized; 5,291,157 and
5,378,926 shares issued in 1996 and 1997 5,291 5,379
Additional paid-in capital................ 37,390 38,239
Retained earnings......................... 29,156 30,556
Valuation adjustment for debt securities
net of taxes............................ (1,321) (1,395)
Total stockholders' equity................ 70,516 72,779
--------- ---------
Total liabilities and stockholders' equity $ 926,071 $ 922,711
--------- ---------
--------- ---------
</TABLE>
See accompanying notes to consolidated financial statements.
1
<PAGE>
PRIME BANCORP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands)
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------
1996 1997
---------- ----------
(Unaudited)
<S> <C> <C>
Interest income:
Loans receivable, net................... $ 11,336 $ 13,259
Investment securities................... 3,859 3,801
Interest-bearing deposits............... 150 70
--------- ---------
Total interest income.............. 15,345 17,130
--------- ---------
Interest expense:
Deposits................................ 6,673 6,982
Short-term borrowings................... 775 1,196
Long-term borrowings.................... 403 234
--------- ---------
Total interest expense............. 7,851 8,412
--------- ---------
Net interest income................ 7,494 8,718
--------- ---------
Provision for loan losses.................... 363 845
--------- ---------
Net interest income after provision
for loan losses...................... 7,131 7,873
--------- ---------
Non-interest income:
Fees and service charges................ 608 478
Gain (loss) on sale of:
Loans held for sale................... 26 7
Investment securities available for
sale................................ 131 518
Real estate owned..................... -- 17
Rental income........................... 68 55
Other................................... 137 166
--------- ---------
Total non-interest income.......... 970 1,241
--------- ---------
Non-interest expenses:
Salaries and employee benefits.......... 2,478 2,906
Occupancy and equipment................. 1,114 1,267
Federal insurance premiums.............. 252 80
Other................................... 1,069 1,313
--------- ---------
Total non-interest expenses........ 4,913 5,566
--------- ---------
Income before income taxes.............. 3,188 3,548
Income taxes............................ 1,092 1,233
--------- ---------
Net Income......................... $ 2,096 $ 2,315
--------- ---------
--------- ---------
Earnings per share:
Primary and fully diluted.................... $ .39 $ .43
--------- ---------
--------- ---------
Weighted average number of shares
outstanding................................. 5,410,082 5,434,138
--------- ---------
--------- ---------
Dividends declared per share................. $ .17 $ .17
--------- ---------
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE>
PRIME BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------
1996 1997
---------- ----------
(Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net Income................................. $ 2,096 $ 2,315
Adjustments to reconcile net income
to net cash from operating
activities:
Depreciation......................... 498 613
(Gain) loss on sale of:
Loans held for sale................ (26) (7)
Investment securities available for
sale............................. (131) (518)
Real estate owned ................. -- (17)
Provision for loan losses............ 363 845
Increase in accrued interest
receivable ........................ 32 69
Decrease in other assets............. 295 4,551
Increase in other liabilities........ 908 1,351
--------- ---------
Net cash provided from operating
activities.................... 4,035 9,202
--------- ---------
Cash flows from investing activities:
Investment securities available for sale:
Purchases................................ (25,550) (14,698)
Maturities............................... 5,299 6,433
Sales.................................... 5,856 21,894
Investment securities:
Purchases................................ (16,265) (13,875)
Maturities............................... 12,965 5,897
Loans receivable:
Originations, net of repayments.......... (12,883) (3,237)
Loans held for sale:
Originations, net of repayments.......... (1,533) (1,850)
Sales.................................... 1,663 1,541
Proceeds from sale of land acquired for
development and resale................... 421 1,160
Increase in land acquired for development
and resale............................... (383) (320)
Purchase of property and equipment......... (405) (600)
(Increase) decrease real estate owned...... 9 (123)
Proceeds from sale of real estate owned.... 120 84
--------- ---------
Net cash provided from (used in) investing
activities............................. (30,686) 2,306
--------- ---------
</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,
----------------------------
1996 1997
---------- ----------
(Unaudited)
<S> <C> <C>
Cash flows from financing activities:
Net increase (decrease) in deposits........ $ 12,094 $ (14,060)
Advances from the Federal Home Loan Bank
of Pittsburgh........................... 528,250 189,200
Repayments of advances from the Federal
Home Loan Bank of Pittsburgh ............ (527,774) (188,224)
(Increase) decrease in other borrowed money (11,722) 7,177
Decrease in advance payments by borrowers
taxes and insurance...................... (540) (602)
Net proceeds from issuance of common stock. 120 472
Cash dividends paid........................ (630) (915)
--------- ---------
Net cash used in financing activities... (202) (6,952)
--------- ---------
Net change in cash and cash equivalents (26,853) 4,556
--------- ---------
Cash and cash equivalents:
Beginning of period...................... 52,890 32,464
--------- ---------
End of period............................ $ 26,037 $ 37,020
--------- ---------
--------- ---------
Supplemental disclosure of cash flow
information:
Cash paid during the period for:
Interest.............................. $ 6,184 $ 6,344
Income taxes.......................... 25 4
--------- ---------
--------- ---------
Non-cash investing activity consist of:
Securitization of residential loans... $ -- $ 15,709
--------- ---------
--------- ---------
Transfer of loans to real estate owned $ 279 $ 1,310
--------- ---------
--------- ---------
Tax benefit associated with the
exercise of stock options.......... $ 74 $ 465
--------- ---------
--------- ---------
</TABLE>
See accompanying notes to consolidated financial statements.
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.
Business
Prime Bancorp, Inc. ("the Company") was incorporated under the
laws of the Commonwealth of Pennsylvania in 1996 for the purpose of
converting the Company's predecessor, incorporated in 1988 from a
Delaware Corporation to a Pennsylvania Corporation, while at the
same time effecting the merger with First Sterling Bancorp, Inc.
The Company is regulated as a bank holding company. The Company's
principal subsidiaries are Prime Bank, a savings bank, and First
Sterling Bank (the "Banks") whose principal business consists of
attracting deposits and obtaining borrowings, then converting those
deposits and borrowings into various types of loans and
investments.
The Company's operations are headquartered in northeast
Philadelphia, Pennsylvania with corporate offices located in Fort
Washington, Pennsylvania with eight additional full service branch
offices in northeast Philadelphia, five full service branches in
Bucks County, Pennsylvania, seven full service branches in
Montgomery County, Pennsylvania, two in Delaware County,
Pennsylvania, and one in Chester County, Pennsylvania.
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 subsidiaries are the Banks.
All significant intercompany balances and transactions have been
eliminated in consolidation. Certain reclassifications have been
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,
1997 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.
5
<PAGE>
PRIME BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Earnings Per Share - Continued
In February 1997, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 128 ("SFAS
128"), Earnings Per Share. SFAS 128, which supersedes APB Opinion
No. 15 ("APB 15"), Earnings Per Share, specifies the computation,
presentation, and disclosure requirements for earnings per share
("EPS") for entities with publicly held common stock. It replaces
the presentation of primary EPS, unlike primary EPS, excludes
dilution and is computed by dividing income available to common
stockholders by the weighted average number of common shares
outstanding for the period. Diluted EPS is computed similarly to
fully diluted EPS under APB 15. The Company will adopt SFAS 128 as
of December 31, 1997. Management does not expect SFAS 128 to have
a material effect on the EPS of the Company.
6
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Financial Condition
Assets of the company decreased 0.36% or $3.4 million from
$926.1 million at December 31, 1996 to $922.7 million at March 31,
1997. This decrease is primarily attributable to the
securitization of $15.7 million of residential loans and the
subsequent sale of the security. Proceeds from the sale were used
to purchase investment securities and to fund deposit outflows.
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 3.1 years. The market value of mortgage-backed
securities is 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.
The Company's liabilities decreased by 0.66% or $5.7 million,
from $855.6 million at December 31, 1996 to $849.9 million at March
31, 1997. This decrease was primarily due to a decrease in
deposits of $14.1 million which is partially off set by increases
in advances from the Federal Home Loan Bank of Pittsburgh of $976
thousand, other borrowed money of $7.2 million and other
liabilities.
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. The Company's
principal sources of funds are deposits, principal repayments on
loans, proceeds from the sale of loans, funds from operations,
advances from the FHLB of Pittsburgh and other borrowed money.
Cash flows provided from investing activities were $2.3
million for the three months ended March 31, 1997 compared to cash
used in investing activities of $30.7 million for the same period
in 1996. This change was primarily attributable to a decrease in
investment security purchases to $28.6 million in 1997 from $41.8
million in 1996 offset by an increase in security sales of $21.9
million in 1997 from $5.9 million in 1996. Loan originations net
of repayments decreased to $3.2 million in 1997 from $12.9 million
in 1996. This decrease is primarily attributable to the
securitization of $15.7 million of residential loans.
7
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
Liquidity and Capital Resources - Continued
Cash flows used in financing activities were $7.0 million for
the three months ended March 31, 1997 compared to $202 thousand for
the same period in 1996. This change is primarily attributable to
a decrease of $14.1 million in deposits in 1997 compared to an
increase of $12.1 million for the same period in 1996 which was
offset an increase in other borrowed money of $7.2 million in 1997
compared to a decrease of $11.7 million for the same period in
1996.
Cash flows from operating activities provided $4.0 million and
$9.2 million for the three months ended March 31, 1996 and 1997,
respectively. This increase is primarily due to a decrease in
other assets of $4.6 million in 1997 compared to $295 thousand in
1996 which is partially offset by increases in provision for loan
losses, other liabilities, depreciation and amortization and the
gain on sale of loans and investment securities.
Capital
The Federal Deposit Insurance Corporation has adopted risk-
based capital and leverage ratios requirements for non-member
insured banks such as Prime Bank. At March 31, 1997, Prime Bank
met each of its capital requirements. The table below sets forth
the minimum capital ratios applicable to Prime Bank, together with
the actual dollar amounts and percentages of capital for Prime Bank
in each category at March 31, 1997:
<TABLE>
<CAPTION>
Required Prime Bank
Capital Requirement Ratio Amount Ratio
- ------------------------ -------- ------ -----
<S> <C> <C> <C>
Risk-Based Capital
Tier 1 Ratio 4.00% $45,459 10.20%
Total Capital Ratio 8.00% 50,511 11.33%
Tier 1 Leverage Ratio 4.00%/5.00% 45,459 6.79%
</TABLE>
First Sterling Bank is a member of the Federal Reserve System
which has established a minimum level of "primary capital" to total
assets of 5.5% and a minimum level of "total capital" to total
assets of 6.0%.
At March 31, 1997, First Sterling Bank met each of its
regulatory capital requirements. The table below sets forth the
minimum capital ratios applicable to First Sterling Bank, together
with the actual dollar amounts and percentages of capital for First
Sterling Bank in each category at March 31, 1997:
<TABLE>
<CAPTION>
Required First Sterling
Capital Requirement Ratio Amount Ratio
- ---------------------- -------- ------- ------
<S> <C> <C> <C>
Primary Capital Ratio 5.50% $18,877 8.25%
Total Capital Ratio 6.00% 18,877 8.25%
</TABLE>
8
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
Capital - Continued
The Federal Reserve Bank has adopted risk-based capital and
leverage ratio requirements for bank holding companies such as the
Company. At March 31, 1997, the Company meets all regulatory
capital requirements.
Net Income
The Company reported consolidated net income of $2.3 million
for the three months ended March 31, 1997. This represents an
increase of 10.45% or $219 thousand when compared to the same
period in 1996. This increase was primarily attributable to an
increase in net interest income after the provision for loan losses
of $742 thousand and an increase of non-interest income of $271
thousand, which was offset by an increase in other expenses of $653
thousand and an increase in income taxes of $141 thousand.
On a fully diluted per share basis net income increased to
$.43 from $.39 for the three months ended March 31, 1997 compared
to the same period in 1996. The Company's return on average assets
was 1.03% and 1.00% for the three months ended March 31, 1996 and
1997, respectively. The Company's return on average equity for the
three months ended March 31, 1996 and 1997 was 12.66% and 12.77%.
Net Interest Income
The major component of the Company'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 $8.7 million for the three months ended March 31, 1997.
This represents a 16.3% increase when compared to net interest
income of $7.5 million for the same period in 1996.
The net interest margin increased from 3.99% to 4.09% for the
three months ended March 31, 1996 and 1997. The increase is
primarily the result of a change in the mix of earning assets.
The yield on average interest-earning assets decreased 11
basis points for the three months ended March 31, 1997 compared to
the same period in 1996. This decrease is primarily attributable
to decreases of 32 basis points on loans receivable for the three
months ended March 31, 1997 and the comparable period in 1996.
The cost of average interest-bearing liabilities decreased 28
basis points for the three months ended March 31, 1997 compared to
the respective period in 1996. This decrease is attributable to a
general decrease in rates being offered on deposit products.
9
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
Net Interest Income - Continued
The table below illustrates the changes in the net interest
rate margin and interest rate spread for the three months ended
March 31, 1996 and 1997.
<TABLE>
<CAPTION>
Three Months
March 31,
-------------
1996 1997
----- -----
<S> <C> <C>
Interest-earning assets:
Loans receivable................. 8.90% 8.58%
Investment securities............ 6.63% 6.61%
Deposit and other investments... 4.65% 4.64%
----- -----
Total interest-bearing assets...... 8.12% 8.01%
----- -----
Interest-bearing liabilities:
Deposits......................... 4.02% 3.83%
Borrowings....................... 6.95% 5.15%
----- -----
Total interest-bearing liabilities. 4.29% 4.01%
----- -----
Net interest rate spread........... 3.83% 4.00%
----- -----
----- -----
Net interest rate margin........... 3.99% 4.09%
----- -----
----- -----
</TABLE>
Net interest income has also been affected by a
disproportionate growth of interest-earning assets to interest-
bearing liabilities. Total average interest-earning assets
increased $99.2 million for the three months ended March 31, 1997
to $858.9 million from $759.7 million at March 31, 1996. Total
average interest-bearing liabilities increased $108.0 million for
the three months ended March 31, 1997 to $839.9 million from $731.9
million at March 31, 1996.
Provisions for Loan Losses
The provision for loan losses was $845 thousand for the three
months ended March 31, 1997 compared to $363 thousand for the same
period in 1996. The allowance for loan losses was $7.8 million and
$7.2 million at March 31, 1997 and December 31, 1996, respectively.
The Company had net charge-offs of $216 thousand for the three
months ended March 31, 1997, compared to $249 thousand for the
respective periods in 1996.
Management considers a variety of factors when establishing
the allowance, recognizing that an inherent risk of loss always
exists in the lending process. Consideration is given to the
impact of current economic conditions, diversification of the loan
portfolio, historical loss experience, delinquency statistics,
results of detailed loan and regulatory reviews, borrowers'
financial and managerial strengths, the adequacy of underlying
collateral, and other relevant factors.
10
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
Provisions for Loan Losses - Continued
The following is a summary of the activity in the allowance
for loan losses for the three months ended March 31, 1996 and 1997
(Dollars in thousands):
<TABLE>
<CAPTION>
1996 1997
-------- -------
<S> <C> <C>
Balance at the beginning of period $ 6,082 $ 7,206
Provision for loan losses 363 845
Recoveries 41 77
Losses charged against allowance (290) (293)
-------- --------
Balance at the end of period $ 6,196 $ 7,835
-------- --------
-------- --------
</TABLE>
Credit Risk
The Bank manages credit risk by maintaining diversification in
its loan portfolio, by establishing and enforcing rigorous
underwriting standards, by intensive collection efforts, and by
establishing and performing regular loan classification reviews of
loans by the loan review committee.
Asset Quality
Non-performing assets, which include non-accruing loans and
real estate owned, totaled $8.5 million at December 31, 1996
compared to $8.6 million at March 31, 1997.
The following table sets forth non-performing assets as of
December 31, 1996 and March 31, 1997 (Dollars in thousands):
<TABLE>
<CAPTION>
December 31, March 31,
1996 1997
- -----------------------------------------------------------------
<S> <C> <C>
Non-accrual loans (1):
Residential loans $ 1,003 $ 741
Construction 3,162 2,031
Consumer loans 243 429
Commercial loans 2,751 2,703
-------- --------
Total non-accrual loans 7,159 5,904
Real estate owned 1,335 2 701
-------- --------
Total non-performing assets $ 8,494 $ 8,605
-------- --------
-------- --------
Total non-performing assets to
loans receivable, net 1.38% 1.43%
-------- --------
-------- --------
Total non-performing assets to
total assets 0.92% 0.93%
-------- --------
-------- --------
Ratio of allowance for loan
losses to non-performing loans 100.66% 132.71%
-------- --------
-------- --------
</TABLE>
11
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
(1) Statistics do not include the impact of the 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 $17.0 million, 2.8% and 1.8% at December 31, 1996 and
$16.4 million, 2.7% and 1.8% at March 31, 1997 if the
condominium project was included in non-performing assets.
Non-Interest Income
Non-interest income increased by $271 thousand for the three
months ended March 31, 1997 to $1.2 million from $970 thousand for
the comparable period in 1996. This increase was primarily
attributable to an increase of $207 thousand in gains on the sale
of investment securities and other income of $209 thousand which is
partially offset by a decrease in fees and service charges of $130.
Non-Interest Expense
The primary component of non-interest expenses is salaries and
employee benefits, which increased 17.3% for the three months ended
March 31, 1997 to $2.9 million from $2.5 million in 1996. This
increase is primarily attributable to additional personnel in the
lending and operations area to support our growth in these areas.
Occupancy and equipment expense increased 13.7% to $1.3
million for the three months ended March 31, 1997 from $1.1 million
for the same period in 1996. The increase is primarily
attributable to the expansion of the branch network and the
technological enhancements involving the upgrading of data
processing and telecommunication systems.
Federal insurance premiums decreased to $80 thousand for the
three months ended March 31, 1997 from $252 thousand for the same
period in 1996. This decrease is primarily attributable to
decrease in Prime Bank's assessment rates from 23 basis points in
1996 to 6 basis points in 1997.
Other expenses increased to $1.3 million for the three months
ended March 31, 1997 from $1.1 million for the same period in 1996.
This increase is primarily attributable to increases in
advertising, legal and office supplies.
12
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
Dividend Policy
The Board of Directors of the Company declared a cash dividend
of $0.17 per share of common stock on March 13, 1997, payable May
1, 1997, to shareholders of record on April 3, 1997. It is
currently the Board's intention to continue to pay dividends on a
quarterly basis. This is the Company's thirty third 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 Banks' payment of dividends 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.
Under Pennsylvania banking law, each of the Banks may declare
and pay dividends only out of accumulated net earnings, and a
dividend may not be declared or paid out of its surplus.
Furthermore, under federal and state banking laws, an institution
may be prevented from paying dividends under certain circumstances
when it is not adequately capitalized. In addition, Prime Bank
(which converted in 1988 from a mutual savings and loan association
to a stock savings bank) may not be permitted to declare or pay a
dividend if the effect of the dividend would be to reduce its
regulatory capital below the amount required for its liquidation
account.
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 1997 Annual Meeting of Shareholders of Prime Bancorp, Inc.
was held on April 23, 1997 for the purpose of electing four
directors and the appointment of KPMG Peat Marwick LLP as
independent auditors for the fiscal year 1997. 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. Frederick G. Betz 3,721,992 63,172 --
b. Robert A. Fox 3,721,992 63,172 --
c. James J. Lynch 3,721,992 63,172 --
d. David H. Platt 3,721,992 63,172 --
</TABLE>
<TABLE>
<CAPTION>
2. Ratification of Auditors
- -----------------------------
For Against Abstain Non-Vote
--------- ------- ------- --------
<S> <C> <C> <C> <C>
3,776,240 2,491 6,432 --
</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
Form 8-K filed with the Securities and Exchange
Commission on 1/10/97.
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 14, 1997 /s/ James J. Lynch
James J. Lynch
President and Chief
Executive Officer
Date: May 14, 1997 /s/ Frank H. Reeves
Frank H. Reeves
Senior Vice President and
Chief Accounting Officer
15
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1997
<CASH> 26,561
<INT-BEARING-DEPOSITS> 8,959
<FED-FUNDS-SOLD> 1,500
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 127,775
<INVESTMENTS-CARRYING> 118,744
<INVESTMENTS-MARKET> 118,103
<LOANS> 610,101
<ALLOWANCE> 7,835
<TOTAL-ASSETS> 922,711
<DEPOSITS> 722,582
<SHORT-TERM> 114,436
<LIABILITIES-OTHER> 10,914
<LONG-TERM> 2,000
0
0
<COMMON> 5,379
<OTHER-SE> 67,400
<TOTAL-LIABILITIES-AND-EQUITY> 922,711
<INTEREST-LOAN> 13,259
<INTEREST-INVEST> 3,801
<INTEREST-OTHER> 70
<INTEREST-TOTAL> 17,130
<INTEREST-DEPOSIT> 6,982
<INTEREST-EXPENSE> 1,430
<INTEREST-INCOME-NET> 8,718
<LOAN-LOSSES> 845
<SECURITIES-GAINS> 518
<EXPENSE-OTHER> 5,566
<INCOME-PRETAX> 3,548
<INCOME-PRE-EXTRAORDINARY> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,315
<EPS-PRIMARY> .43
<EPS-DILUTED> .43
<YIELD-ACTUAL> 8.01
<LOANS-NON> 5,904
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 440
<ALLOWANCE-OPEN> 7,206
<CHARGE-OFFS> 293
<RECOVERIES> 77
<ALLOWANCE-CLOSE> 7,835
<ALLOWANCE-DOMESTIC> 6,235
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 1,600
</TABLE>
