SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended June 30, 1996 Commission File Number 0-22186
Prestige Financial Corp.
(Exact name of Registrant as specified in its charter)
New Jersey 22-3216510
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1 Royal Road P.O. Box 2480 Flemington, New Jersey 08822
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 908-806-6200
N / A
Former name, former address and former fiscal year, if changed since last
report
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by section 13 or 15 (d) of the Securities Exchange Act
if 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such report(s), 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, being
the only class of capital stock outstanding, was as follows as of August 1,
1996:
Common Stock (par value $.01) 2,596,993 Shares
Table of Contents Page
Part I. Financial information
Item 1. Financial statements
Consolidated Statements of Financial Condition as
of June 30, 1996, December 31, 1995 and
June 30, 1995 3
Consolidated Statements of Income for the Three Months
Ended and Six Months Ended June 30, 1996 and 1995 4
Consolidated Statements of Changes in Stockholders'
Equity for the Six Months Ended June 30,
1996 and 1995 5
Consolidated Statements of Cash Flows for the Six
Months Ended June 30, 1996 and 1995 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
Part II. Other information
Item 4. Submission of Matters to a Vote of Security Holders 17
Item 6. Exhibits and reports on Form 8-K 18
Signatures 19
Item 1. Financial Statements
Prestige Financial Corp. and Subsidiary
<TABLE>
<CAPTION>
Consolidated Statements of Financial Condition (Unaudited)
(Dollars in thousands)
06/30/96 12/31/95 06/30/95
<S> <C> <C> <C>
ASSETS:
Cash and due from banks $7,243 $5,531 $4,721
Federal funds sold 4,700 10,525 15,050
Total cash and cash equivalents 11,943 16,056 19,771
Loans held for sale, net 14,478 10,241 6,682
Investment securities held
to maturity, net:
Taxable 57,367 41,810 23,230
(Market value $56,322,
$42,004, and $22,985
respectively)
Exempt from Federal 3,337 1,460 3,224
income tax
(Market value $3,342,
$1,472 and $3,235
respectively)
Loans, net 114,016 103,346 96,710
...Less allowance for loan losses 1,409 1,325 1,200
Net loans 112,607 102,021 95,510
Premises and equipment, net 2,449 1,931 1,930
Accrued interest receivable 1,243 958 703
Other assets 877 1,904 1,086
TOTAL ASSETS $204,301 $176,381 $152,136
LIABILITIES AND STOCKHOLDERS' EQUITY:
LIABILITIES
Deposits:
Non-interest bearing 25,757 23,793 18,856
Interest bearing 163,538 139,724 122,611
Total deposits 189,295 163,517 141,467
Accrued interest payable 302 249 255
Accrued expenses and
other liabilities 515 557 388
TOTAL LIABILITIES 190,112 164,323 142,110
STOCKHOLDERS' EQUITY
Preferred stock (the Bank),
no par value;
$100 stated value;
200,000 shares
authorized;
0, 0, and 9,000 shares
issued and outstanding
at June 30, 1996,
December 31, 1995 and
June 30, 1995,respectively - - 900
Common stock, par value
$.01; 5,000,000 shares
authorized; 2,596,993,
1,972,539 and 1,750,823
shares issued and
outstanding at June 30, 1996,
December 31, 1995 and
June 30, 1995, respectively 26 20 17
Paid in capital 12,859 11,354 8,902
Retained earnings 1,304 684 207
TOTAL STOCKHOLDERS' EQUITY 14,189 12,058 10,026
TOTAL LIABILITIES AND $204,301 $176,381 $152,136
STOCKHOLDERS' EQUITY $204,301 $176,381 $152,136
See accompanying notes to Consolidated Financial Statements
</TABLE>
Prestige Financial Corp. and Subsidiary
<TABLE>
<CAPTION>
Consolidated Statements of Income (Unaudited)
(Dollars in thousands, except per share data)
Three Months Six Months
Ended June 30, Ended June 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Interest income:
Loans $2,958 $2,477 $5,661 $4,709
Federal funds sold 37 118 171 192
Investment Securities:
Taxable 907 327 1,660 620
Exempt from Federal income tax 15 37 29 66
TOTAL INTEREST INCOME 3,917 2,959 7,521 5,587
Interest expense:
Deposits $1,849 1,357 3,601 2,495
Federal funds purchased 3 - 3 -
TOTAL INTEREST EXPENSE 1,852 1,357 3,604 2,495
Net interest income 2,065 1,602 3,917 3,092
Provision for loan losses 100 74 145 150
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 1,965 1,528 3,772 2,942
Non-interest income:
Service charges on deposit accounts 53 38 97 72
Gain on sale of loans 234 129 409 208
Other income 13 13 23 25
TOTAL NON-INTEREST INCOME 300 180 529 305
Non-interest expense:
Salaries and employee benefits 756 533 1,431 1,048
Net occupancy expense 304 266 594 512
Advertising/business development 50 45 89 84
Federal deposit insurance - 66 1 132
Data processing 73 47 135 92
Other expenses 327 252 628 482
TOTAL NON-INTEREST EXPENSE 1,510 1,209 2,878 2,350
Income before provision for
income taxes 755 499 1,423 897
Provision for income taxes 306 232 573 386
NET INCOME $449 $267 $850 $511
Net income per common share:
Primary $0.17 $0.11 $0.32 $0.21
Fully diluted $0.17 $0.11 $0.32 $0.21
Weighted average shares
outstanding - primary 2,695,851 2,258,148 2,674,959 2,248,543
Weighted average shares
outstanding - fully diluted 2,695,851 2,277,360 2,674,959 2,268,537
See accompanying notes to Consolidated Financial Statements
</TABLE>
Prestige Financial Corp. and Subsidiary
<TABLE>
<CAPTION>
Consolidated Statements of Changes in Stockholders' Equity (Unaudited)
(Dollars in Thousands)
Six Months Ended June 30, 1996 and 1995
Number of Total
Common Preferred Common Paid-In Retained Stockholders'
Shares Stock Stock Capital Earnings Equity
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31,1994 1,570,944 900 16 7,804 786 9,506
Common stock issuance:
Exercise of options 14,728 - - 69 - 69
Common stock grants 6,800 - - 60 - 60
10% Common stock dividend 158,351 - 1 969 (970) 0
Common stock cash dividend - - - - (89) (89)
Preferred stock cash dividend - - - - (31) (31)
Net income - - - - 511 511
Balance, June 30, 1995 1,750,823 $900 $17 $8,902 $207 $10,026
Balance, December 31, 1995 1,972,539 - 20 11,354 684 12,058
Common stock issuance:
Exercise of warrants 4,400 - - 34 - 34
Exercise of options 5,535 - - 34 - 34
Common stock grants 7,480 - - 59 - 59
Dividend reinvestment plan 102,312 - 1 1,369 - 1,370
401(k) plan 612 - - 9 - 9
Five-for-four common
stock split 504,115 - 5 - (5) -
Common stock cash dividend - - - - (225) (225)
Net income - - - - 850 850
Balance, June 30, 1996 2,596,993 $ - $26 $12,859 $1,304 $14,189
See accompanying notes to Consolidated Financial Statements.
</TABLE>
Prestige Financial Corp. and Subsidiary
<TABLE>
<CAPTION>
Consolidated Statements of Cash Flows (Unaudited)
(Dollars in Thousands)
Six Months Ended June 30, 1996 and 1995
Six Months Ended
06/30/96 06/30/95
<S> <C> <C>
Cash flows from operating activities:
Net income $850 $511
Adjustments to reconcile net income to net cash
used in operating activities:
Provision for loan losses 145 150
Depreciation and amortization 168 147
Amortization (accretion) of investment
securities premiums and discounts, net 168 (240)
Amortization of organizational costs 7 11
Increase in accrued interest receivable (285) (237)
Decrease (increase) in other assets 1,020 (146)
Gain on sale of loans (409) (208)
Proceeds from sale of loans held for sale 6,897 3,736
Net increase in loans held for sale (10,725) (9,178)
Increase in accrued interest payable 53 118
Decrease in accrued expenses and other
liabilities (42) (102)
(Decrease) increase in deferred loan fees and
unearned discounts (125) 116
Common stock grants 59 60
NET CASH USED IN OPERATING ACTIVITIES (2,219) (5,262)
Cash flows from investing activities:
Proceeds from maturities of investment
securities 12,356 6,999
Principal paydowns on mortgage-backed 1,909 278
securities 1,909 278
Purchases of investment and mortgage-backed
securities (31,867) (10,950)
Net increase in loans (10,606) (4,274)
Capital expenditures (686) (64)
NET CASH USED IN INVESTING ACTIVITIES (28,894) (8,011)
Cash flows from financing activities:
Net increase in demand deposits, money market,
NOW and savings accounts 11,240 5,342
Net increase in certificates of deposit 14,538 13,686
Proceeds from issuance of common stock, net 1,447 69
Dividends paid (225) (120)
NET CASH PROVIDED BY FINANCING ACTIVITIES 27,000 18,977
(Decrease) increase in cash and cash
equivalents (4,113) 5,704
Cash and cash equivalents at begining of year 16,056 14,067
Cash and cash equivalents at end of period $11,943 $19,771
Supplemental disclosure of cash flow information-
Cash paid during the year for:
Interest $3,551 $2,377
Income taxes 557 338
See accompanying notes to Consolidated Financial Statements
</TABLE>
Prestige Financial Corp. and Subsidiary
Notes to Consolidated Financial Statements
(Unaudited)
1. Principles of consolidation
Prestige State Bank (the "Bank") is a wholly-owned subsidiary of Prestige
Financial Corp. The accompanying unaudited consolidated financial
statements include the accounts of Prestige Financial Corp. and its
subsidiary (the "Corporation"). All significant intercompany accounts and
transactions have been eliminated in consolidation.
2. Basis of presentation
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim
financial information. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation of the financial statements
have been included. Operating results for the three months ended June 30,
1996 and for the six months ended June 30, 1996 are not necessarily
indicative of the results that may be expected for the year ended December
31, 1996.
3. Stockholders' Equity
On May 28, 1996 the Board of Directors approved a five cent per share cash
dividend on common stock, paid on June 28, 1996 to shareholders of record
at June 18, 1996.
On February 23, 1996, the Board of Directors approved a five cent per share
cash dividend on common stock, paid on March 29, 1996 to shareholders of
record at March 20, 1996. The Board of Directors also approved a five-for-
four stock split on common stock, payable April 19, 1996 to shareholders of
record on April 10, 1996.
Prestige Financial Corp. and Subsidiary
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Financial Condition
At June 30, 1996, total assets had reached $204.3 Million which was a $27.9
Million, or 15.8%, increase as compared to the December 31, 1995 balance of
$176.4 Million; and a $52.2 Million, or 34.3%, increase when compared to
the June 30, 1995 balance of $152.1 Million. This growth was funded
primarily from deposits (mainly "core" demand and time accounts) which
increased by $25.8 Million, or 15.8%, to $189.3 Million at June 30, 1996 as
compared to $163.5 Million at December 31, 1995; and by $47.8 Million, or
33.8%, when compared to the June 30, 1995 balance of $141.5 Million. The
opening of our fourth location in Clinton Township in May of 1996
contributed to this growth as did several CD promotions run earlier this
year in order to insure funding for above budget loan production. In
addition, continuing industry consolidation has aided our growth as
customers seek the personal service of a true "community bank".
Total Stockholders' Equity stood at $14.2 Million as of June 30, 1996 and
was $2.1 Million, or 17.4%, higher than the year-end 1995 balance of $12.1
Million; and $4.2 Million, or 42.0%, higher than the June 30, 1995 balance
of $10.0 Million. These increases were primarily attributable to increased
earnings, dividends reinvested and optional cash purchases made by
shareholders in accordance with a plan adopted in the third quarter of
1995, and a private placement of 176,000 common shares which took place in
the fourth quarter of 1995. A portion of the proceeds from the private
placement was used to redeem all outstanding shares of preferred stock in
the fourth quarter of 1995.
Within the asset composition, the above growth was primarily utilized to
fund increases in the loan and investment portfolios. As of June 30, 1996
outstanding loans, including loans held for sale, totaled $128.5 Million
which was $14.9 Million, or 13.1%, more than the December 31, 1995 balance
of $113.6 Million; and $25.1 Million, or 24.3%, greater than the June 30,
1995 balance of $103.4 Million. Loan growth exhibited during the first
half of 1996 was positively effected by increased Small Business
Administration (SBA) loan production, as the Bank continued to benefit from
its "Preferred SBA Lender" status. After the first nine months of the SBA's
fiscal year, the Bank once again led all other lending institutions in New
Jersey with 141 loan accommodations approved, totaling $32.6 Million, of
which 120, totaling $27.5 Million were within New Jersey. This compared
with 97 SBA loans approved totaling $16.4 Million during the same time
period in 1995.
Loans held for sale totaled $14.5 Million at June 30, 1996 vs. $10.2
Million at December 31, 1995 and $6.7 Million at June 30, 1995. The loans
held for sale category is comprised of SBA and residential mortgage loans
which provide attractive yields as well as a ready source of liquidity and
potential gains on sales.
Investment securities (all classified as held to maturity) at June 30, 1996
amounted to $60.7 Million, an increase of $17.4 Million, or 40.2% as
compared to the December 31, 1995 balance of $43.3 Million; and higher by
$34.2 Million, or 129.1%, when compared with the June 30, 1995 balance of
$26.5 Million. This growth resulted primarily from the purchase of
securities issued by the United States government and its agencies,
including mortgage-backed securities and SBA guaranteed loan pool
certificates.
At June 30, 1996, the allowance for possible loan losses stood at $1.4
Million --$84 Thousand more than the year-end 1995 figure of $1.325 Million
and $200 Thousand more than the June 30, 1995 balance of $1.200 Million.
The first half 1996 change from year-end 1995 resulted from provisions of
$145 Thousand and net charge-offs of $61 Thousand. The allowance as a
percentage of total outstanding loans as of June 30, 1996 was 1.10% as
compared to 1.17% as of December 31, 1995, and 1.16% as of June 30, 1995.
The allowance as a percentage of total outstanding loans was permitted to
decline at June 30, 1996 in anticipation of the sale of $5.5 Million of
unguaranteed portions of SBA loans which was finalized in July 1996. The
sale was undertaken to reduce the Bank's credit exposure and to provide
additional liquidity for projected loan closings. Reducing the June 30,
1996 loan totals by this $5.5 Million sold in July 1996 produces a pro
forma allowance to total outstanding loans ratio of 1.15%.
Non-performing loans (also classified as impaired loans under Statement of
Financial Accounting Standards No. 114) totaled $1.1 Million (.86% of total
loans) as of June 30, 1996 as compared to $11 Thousand (.01% of total
loans) as of December 31, 1995, and $620 Thousand (.60% of total loans) as
of June 30, 1995. These are loans on which accrual of interest has been
discontinued; or loans on which interest is still being accrued but that
are contractually past due 90 days or more as to interest or principal
payments.
Considering the information in the previous two paragraphs as well as other
relevant factors, management believes that the allowance for possible loan
losses is adequate. While management uses available information to
recognize losses on loans, future additions to the allowance may be
necessary based on changes in economic conditions. In addition, various
regulatory agencies, as an integral part of their examination process,
periodically review the Bank's allowance for loan losses. Such agencies
may require the Bank to recognize additions to the allowance based on their
judgments of information available to them at the time of their
examination.
Capital Adequacy.
The Federal Reserve Board (FRB) in the case of bank holding companies such
as the Corporation and the Federal Deposit Insurance Corporation (FDIC) in
the case of state banks such as the Bank have adopted risk-based capital
guidelines which require a minimum ratio of 8% of total risk-based capital
to assets, as defined in the guidelines. At least one half of the total
capital, or 4%, is to be comprised of common equity and qualifying
perpetual preferred stock, less deductible intangibles (Tier 1 capital).
Risk-based capital ratios are expressed as percentages of capital to "risk
adjusted assets" and therefore relate capital to the risk factors inherent
within a company's asset base, including off-balance sheet risk exposure.
Various weightings are assigned to different asset categories as well as
off-balance sheet exposure depending upon the risk associated with each
category. In general, less capital is required for a less risky asset
composition.
At June 30, 1996, the Corporation's and the Bank's core (Tier 1) risk-based
capital ratios were 11.38% and 10.78%, respectively, versus 10.71% and
9.91% at December 31, 1995; and 8.55% and 9.38% at June 30, 1995. These
ratios compare favorably to a minimum of 4% as required by the FRB and the
FDIC.
At June 30, 1996, the Corporation's and the Bank's total (Tier 1 plus Tier
2) risk-based capital ratios were 12.51% and 11.91%, respectively, versus
11.89% and 11.10% at December 31, 1995; and 9.68% and 10.51% at June 30,
1995. These ratios also compare favorably to a minimum of 8% as required
by the FRB and the FDIC.
The FRB and the FDIC have supplemented the risk-based capital guidelines
with an additional capital ratio referred to as the leverage ratio or core
capital ratio. The regulations require financial institutions to maintain
a minimum leverage ratio of 4% to 5%, depending upon the condition of the
institution.
At June 30, 1996, the Corporation's and the Bank's leverage ratios were
6.93% and 6.59%, respectively, versus 6.81% and 6.32% at December 31, 1995;
and 5.97% and 6.54% at June 30, 1995. Again, these ratios compare
favorably with existing guidelines established by the FRB and the FDIC.
It should be noted that additional capital raised via the dividend
reinvestment plan and the exercise of options and warrants provide the
ability to downstream capital from the parent company to the Bank should
that entity's capital ratios require it.
Liquidity.
The liquidity position of the Corporation is dependent upon the successful
management of its assets and liabilities so as to meet the needs of both
deposit and credit customers. Liquidity needs arise principally to
accommodate possible deposit outflows and to meet customers' requests for
loans. Such needs can be satisfied by maturing loans and investments, short
term liquid assets, and the ability to raise short-term funds from external
sources.
So far, virtually all funding needs have been met via the acquisition of
deposits, and not through other sources such as borrowings or securities
sold under repurchase agreements. In addition, the total of all liquid
assets (e.g. Federal funds sold, short term investments, assets available
for sale) as measured against what may be considered volatile liabilities
(i.e. short term $100,000 certificates of deposit) produced liquidity
ratios of 368% for June 30, 1996, versus 332% for December 31, 1995, and
versus 245% for June 30, 1995. All of these are considered by management
to be satisfactory.
Interest Rate Sensitivity
The management of interest rate risk is also important to the profitability
of the entity. Interest rate risk arises when an earning asset matures or
has its interest rate change in a time period different from that of a
supporting interest bearing liability; or when an interest bearing
liability matures or has its interest rate change in a time period
different from that of an earning asset that it supports. While the
Corporation does not match specific assets and liabilities, total earning
assets and interest bearing liabilities are grouped to determine the
overall interest rate risk within a number of specific time frames.
Interest sensitivity analysis attempts to measure the responsiveness of net
interest income to changes in interest rate levels. The difference between
interest sensitive assets and interest sensitive liabilities is referred to
as the interest sensitivity gap. At any given point in time, the
Corporation may be in an asset-sensitive position, meaning its interest-
sensitive assets exceed its interest-sensitive liabilities; or in a
liability-sensitive position, whereby its interest-sensitive liabilities
exceed its interest-sensitive assets. These positions may expose the
Corporation to possible future gain or loss of net interest income,
depending upon which way interest rates move.
Management attempts to keep interest sensitive assets and liabilities as
evenly matched as possible within the three, six, and twelve month time
frames.
As of June 30, 1996 there was a cumulative twelve month gap of a negative
$22.1 Million as compared to a negative $18.1 Million gap as of December
31, 1995 and a negative $6.8 Million gap as of June 30, 1995. In the worst
of these cases, the percentage of imbalance from a perfectly matched 100%
was 23%. Management does not, however, consider this to be of concern as
this represents what is known as the "static gap" measure of assets to
liabilities.
From this simplistic static gap viewpoint, a negative gap may be expected
to cause reductions in net interest income in a rising rate environment and
enhance net interest income in a declining rate environment. However, the
repricing of liabilities can be, and often are, "lagged" behind earning
asset rate increases, or exaggerated when rates decrease, in order to
offset the gap's effects. In addition, rate sensitive assets may reprice
at different frequencies than rate sensitive liabilities within the twelve
month time frame, further offsetting the gap's effects. With such
considerations factored into a more meaningful "dynamic gap" model, the
Corporation's June 30, 1996 position indicated that an increase in average
interest rates would, in fact, have a positive impact on net interest
income. Conversely, a drop in rates would likely have a somewhat negative
impact on net interest income over the twelve months thereafter.
Incidentally, the introduction of a flat interest rate scenario into this
dynamic gap model projects improvement in the net interest margin for the
twelve months thereafter.
Results of Operations
Net income for the first six months of 1996 amounted to $850 Thousand com-
pared to $511 Thousand for the same period in 1995. Related fully diluted
earnings-per-share data were: $.32 per share for the first six months of
1996 versus $.21 per share for the same period in 1995. The annualized
return on average assets was .91% and .75% for the first six months of 1996
and 1995, respectively. The annualized return on average shareholders'
equity was 13.33% and 10.42% for the first six months of 1996 and 1995,
respectively.
Net income for the second quarter ended June 30, 1996 was $449 Thousand
compared to $267 Thousand for the same period in 1995. Related fully
diluted earnings per share were: $.17 per share for the second quarter of
1996 versus $.11 per share for the same period in 1995. The annualized
return on average assets was .92% and .75% for the second quarter of 1996
and 1995, respectively. The annualized return on average shareholders'
equity was 13.59% and 10.94% for the second quarter of 1996 and 1995,
respectively.
Net Interest Income.
The $825 Thousand, or 26.7%, increase in net interest income reflected in
the first six months of 1996 (at $3.917 Million) over the same period in
1995 (at $3.092 Million) was primarily due to an increase in higher
yielding loan and investment volume. Earning assets in 1996 have been
increasingly weighted towards loans and investments, as opposed to Federal
funds sold, and have therefore generated proportionately more interest
income. Although it may be expected that the cost of funds will creep
upward, thus shrinking the net interest margin, management believes this
will continue to be offset by the Corporation's efforts to minimize Federal
funds sold and emphasize loan production.
The $463 Thousand, or 28.9%, increase in net interest income reflected in
the second quarter of 1996 (at $2.065 Million) over the same period in 1995
(at $1.602 Million) was attributable to the same factors as discussed in
the above comparisons of the first six months of 1996 and 1995.
Noninterest Income.
For the first six months of 1996 noninterest income increased $224 Thousand
or 73.4% to $529 Thousand, up from $305 Thousand for the same period in
1995. This variance was primarily attributable to the gains from sales of
loans which amounted to $409 Thousand during the first six months of 1996
versus $208 Thousand in the first six months of 1995. Most of the increase
in gains on loan sales was due to a higher volume of loans sold; but a
portion of the increase was due to higher premiums being paid on the sold
portions of SBA loans. As alluded to earlier, SBA loan production is up
considerably, with the Bank recognized as the leading SBA lender in New
Jersey and carrying the designation of "Preferred Lender" in New York and
Pennsylvania as well. In addition, the Corporation's recently established
residential mortgage division has begun making contributions to the gains
on loans sold, accounting for $43 Thousand in gains during the first half
of 1996 vs. zero in 1995. Management expects the ongoing origination and
sale of residential mortgages to permit somewhat less reliance on sales of
SBA loans, allowing the higher yielding SBA loans to accumulate and help
maintain a satisfactory net interest margin. Exclusive of gains on the
sales of residential mortgages, the first half of 1996 saw gains produced
by the sale of SBA loans account for 25.7% of pre-tax net income vs. 23.2%
for the first half of 1995.
For the second quarter of 1996, noninterest income increased $120 Thousand
or 66.7% to $300 Thousand, up from $180 Thousand for the same period in
1995. This increase was primarily attributable to the gains from sales of
loans which amounted to $234 Thousand during the second quarter of 1996
versus $129 Thousand in the second quarter of 1995.
Noninterest Expense.
For the first six months of 1996 as opposed to the same period in 1995,
total noninterest expense increased by $528 Thousand, or 22.5%, to $2.878
Million from $2.350 Million.
Salaries and benefits accounted for $383 Thousand of the above increase
owing to the January 1 effective date for all pay increases as well as the
addition of staff resulting from the opening of the Clinton Township branch
in the middle of the second quarter of 1996 and the overall strengthening
of coverage to service the Corporation's growing customer base.
Occupancy related expenses increased $82 Thousand for the first six months
of 1996 versus the same period in 1995 primarily due to the opening of the
Clinton Township branch and the leasing of additional office space in the
Bank's Royal Road Headquarters building. The additional space was
necessary to house the Bank's growing residential mortgage operation and
increased commercial lending staff.
Federal deposit insurance premiums decreased by $131 Thousand for the first
six months of 1996 versus the same period in 1995. This occurred despite
deposit growth because of a reduction in Federal deposit insurance premiums
resulting from FDIC rate reductions instituted in mid 1995.
Data Processing costs contributed another $43 Thousand to the increase in
noninterest expense, primarily as a result of increased volume.
Within the other expense category --as compared to the first six months of
1995 --printing, stationery and supplies expense increased by $32 Thousand;
postage/telecommunications costs rose by $23 Thousand; and checkbook costs
rose by $17 Thousand. These increases are all attributed to increased
volume. In addition, professional fees and supervisory exam fees for the
six months ended June 30, 1996 rose by $17 Thousand versus the same period
in 1995.
For the second quarter of 1996 as opposed to the same period in 1995, total
noninterest expenses rose by $301 Thousand, or 24.9%, to $1.510 Million
from $1.209 Million.
Salaries and benefits accounted for $223 Thousand of the above increase
owing to the addition of staff for the Clinton Township branch opening and
the strengthening of coverage for the Corporation's growing customer base.
Occupancy related expenses increased $38 Thousand for the second quarter of
1996 versus the same period in 1995 for the reasons noted in the six month
comparison above.
Federal deposit insurance premiums decreased by $66 Thousand for the second
quarter of 1996 versus the same period in 1995. This occurred despite
deposit growth because of a reduction in Federal deposit insurance premiums
resulting from FDIC rate reductions instituted in mid 1995.
Data Processing costs contributed another $26 Thousand to the increase in
noninterest expense as a result of increased volume.
Within the other expense category --as compared to the second quarter of
1995 --printing, stationery and supplies expense increased by $21 Thousand;
postage/telecommunications costs rose by $16 Thousand; and checkbook costs
rose by $7 Thousand. These increases may all be attributed to increased
volume. In addition, external audit, accounting and supervisory exam fees
for the three months ended June 30, 1996 rose by $9 Thousand versus the
same period in 1995.
As some indication of the Corporation's control over noninterest expenses
(though combining it with a measure of the Corporation's ability to produce
noninterest income), the "efficiency ratio" (noninterest expense divided by
the sum of taxable equivalent net interest income and noninterest
income)improved to 64% from 69% for the first six months of 1996 vs. the
first six months of 1995; and to 63% from 67% for the second quarter 1996
vs. the second quarter 1995. More strictly directed at noninterest expense
control, the "overhead ratio" (annualized noninterest expense over average
assets for the period) also showed considerable improvement. This overhead
percentage was 3.07% and 3.09% for the first half and second quarter 1996,
respectively; as compared to 3.44% and 3.41% for the first half and second
quarter 1995, respectively.
Provisions for Loan Losses.
For the first six months of 1996 as compared to the first six months of
1995, the provision for loan losses decreased by $5 Thousand. For the
second quarter of 1996 as compared to the second quarter of 1995, the
provision for loan losses increased by $26 Thousand. Provisions are made
as necessary to maintain the allowance for loan losses at targeted levels
as measured against total loans and/or past due accounts. As discussed
previously, the Corporation's non-performing loans at June 30, 1996
amounted to just .86% of total loans.
Part II Other Information
Item 4. Submission of Matters to a Vote of Security Holders
On April 23,1996, Prestige Financial Corp. held its Annual Meeting of
Shareholders. Matters voted on and the results of such voting are as
follows:
Election of Directors
Roland D. Boehm, Sr.; Louis R. DeFalco; Arnold F. Horvath;
Robert J. Jablonski; Gerald A. Lustig; James W. MacDonald; and
Arthur Stryker, Jr. were elected to serve as Directors of Prestige Financial
Corp. until the 1997 Annual Meeting.
Amendment to the 1994 Stock Option Plan for Key Employees
An amendment to increase by 105,000 (to 165,800) the number of shares which
may be optioned under the plan was approved with 1,240,995 votes cast in
favor; 32,411 votes cast against; 20,079 votes abstained; and 165,794
non-votes.
Amendment to the 1994 Stock Option Plan for Outside Directors
An amendment to remove the restriction that options for no more than 2,200
shares of common stock may be granted annually to each qualified
individual was approved with 1,293,633 votes cast in favor; 60,303 votes cast
against; 28,811 votes abstained; and 76,532 non-votes.
Ratification of Independent Accountants
The selection of KPMG Peat Marwick LLP as the Corporation's independent
accountants for 1996 was ratified with 1,426,055 votes cast in favor; 9,744
votes cast against; and 23,480 votes abstained.
Item 6. Exhibits and reports on Form 8-K
(a)(11) Statement on Computation of per-share earnings
Net income per-share is calculated as net income less preferred stock
dividends divided by weighted average shares outstanding (as adjusted for the
assumed exercise of dilutive common stock equivalents, using the treasury
stock method). All weighted average shares outstanding reflect the
five-for-four stock split issued on April 19, 1996 and the 10% common stock
dividend issued on March 31, 1995.
(a)(27) Financial Data Schedule
(b) No reports on Form 8-K were filed during the quarter ended
June 30, 1996.
Prestige Financial Corp.
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.
Prestige Financial Corp.
(Registrant)
By:
Robert J. Jablonski
(Signature)
Chief Executive Officer and
Treasurer/Principal
Financial Officer
Date: August 14, 1996
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL DATA EXTRACTED FROM SEC FORM 10-Q AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 7,243
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 4,700
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 0
<INVESTMENTS-CARRYING> 60,704
<INVESTMENTS-MARKET> 59,664
<LOANS> 128,494
<ALLOWANCE> 1,409
<TOTAL-ASSETS> 204,301
<DEPOSITS> 189,295
<SHORT-TERM> 0
<LIABILITIES-OTHER> 817
<LONG-TERM> 0
0
0
<COMMON> 26
<OTHER-SE> 14,163
<TOTAL-LIABILITIES-AND-EQUITY> 204,301
<INTEREST-LOAN> 5,661
<INTEREST-INVEST> 1,689
<INTEREST-OTHER> 171
<INTEREST-TOTAL> 7,521
<INTEREST-DEPOSIT> 3,601
<INTEREST-EXPENSE> 3,604
<INTEREST-INCOME-NET> 3,917
<LOAN-LOSSES> 145
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 2,878
<INCOME-PRETAX> 1,423
<INCOME-PRE-EXTRAORDINARY> 850
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 850
<EPS-PRIMARY> .32
<EPS-DILUTED> .32
<YIELD-ACTUAL> 4.34
<LOANS-NON> 444
<LOANS-PAST> 631
<LOANS-TROUBLED> 0
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<ALLOWANCE-OPEN> 1,325
<CHARGE-OFFS> 66
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<ALLOWANCE-CLOSE> 1,409
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