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 March 31, 1997 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 May 1,
1997:
Common Stock (par value $.01) 3,231,173 Shares
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Table of Contents Page
Part I. Financial information
Item 1. Financial statements
Consolidated Statements of Financial Condition as
of March 31, 1997, December 31, 1996 and
March 31, 1996 3
Consolidated Statements of Income for the Three Months
Ended March 31, 1997 and 1996 4
Consolidated Statements of Changes in Stockholders'
Equity for the Three Months Ended March 31,
1997 and 1996 5
Consolidated Statements of Cash Flows for the Three
Months Ended March 31, 1997 and 1996 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
Item 3. Quantitative and Qualitative Disclosures About Market Risk 16
Part II. Other information
Item 6. Exhibits and reports on Form 8-K 17
Signatures 18
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Item 1. Financial Statements
Prestige Financial Corp. and Subsidiary
Consolidated Statements of Financial Condition
(Unaudited)
(Dollars in thousands)
<TABLE>
<CAPTION> 03/31/97 12/31/96 03/31/96
<S> <C> <C> <C>
ASSETS:
Cash and due from banks $7,464 $9,579 $5,239
Federal funds sold and 4,230 8,950 3,200
short-term investments
Total cash and cash
equivalents 11,694 18,529 8,439
Loans held for sale, net 15,241 15,013 11,658
Investment securities held
to maturity, net:
Taxable
(Market value $71,053,
$64,744, and $57,500
respectively) 71,859 64,943 57,955
Exempt from Federal
income tax
(Market value $4,798,
$3,937 and $918
respectively) 4,794 3,931 908
Loans, net 125,503 123,455 107,711
...Less allowance for loan losses 1,598 1,592 1,355
Net loans 123,905 121,863 106,356
Premises and equipment, net 2,717 2,490 2,046
Accrued interest receivable 1,564 1,538 1,184
Other assets 5,039 1,210 932
TOTAL ASSETS $236,813 $229,517 $189,478
LIABILITIES AND STOCKHOLDERS' EQUITY:
LIABILITIES
Deposits:
Non-interest bearing 32,565 35,318 21,040
Interest bearing 186,168 177,278 154,464
Total deposits 218,733 212,596 175,504
Accrued interest payable 315 308 301
Accrued expenses and
other liabilities 1,174 903 677
TOTAL LIABILITIES 220,222 213,807 176,482
STOCKHOLDERS' EQUITY
Common stock, par value
$.01; 5,000,000 shares authorized;
2,690,683, 2,661,331 and 2,017,015
shares issued and outstanding at
March 31, 1997, December 31, 1996
and March 31, 1996, respectively 27 27 20
Paid in capital 13,961 13,581 11,989
Retained earnings 2,603 2,102 987
TOTAL STOCKHOLDERS' EQUITY 16,591 15,710 12,996
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $263,813 $229,517 $189,478
</TABLE>
See accompanying notes to Consolidated Financial Statements
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Prestige Financial Corp. and Subsidiary
Consolidated Statements of Income
(Unaudited)
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION> Three Months Ended
March 31,
1997 1996
<S> <C> <C>
Interest income:
Loans $3,266 $2,703
Federal funds sold and short-term
investments 114 134
Investment Securities:
Taxable 1,065 753
Exempt from Federal income tax 43 14
TOTAL INTEREST INCOME 4,488 3,604
Interest expense:
Deposits 2,069 1,752
TOTAL INTEREST EXPENSE 2,069 1,752
Net interest income 2,419 1,852
Provision for loan losses 90 45
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 2,329 1,807
Non-interest income:
Service charges on deposit accounts 86 44
Gain on sale of loans 438 175
Other income 34 10
TOTAL NON-INTEREST INCOME 558 229
Non-interest expense:
Salaries and employee benefits 917 675
Net occupancy expense 354 290
Data processing 89 62
Advertising/business development 71 39
Directors fees 56 39
Other expenses 301 263
TOTAL NON-INTEREST EXPENSE 1,788 1,368
Income before provision for income taxes 1,099 668
Provision for income taxes 398 267
NET INCOME $701 $401
Net income per common share:
Primary $0.25 $0.15
Fully diluted $0.25 $0.15
Weighted average shares
outstanding - primary 2,833,154 2,590,356
Weighted average shares
outstanding - fully diluted 2,855,785 2,606,793
</TABLE>
See accompanying notes to Consolidated Financial Statements
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Prestige Financial Corp. and Subsidiary
Consolidated Statements of Changes in Stockholders' Equity
Three Months Ended March 31, 1997 and 1996 (Unaudited)
(Dollars in thousands)
<TABLE>
<CAPTION> Number of Total
Common Common Paid-In Retained Stockholders'
Shares Stock Capital Earnings Equity
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1995 1,972,539 20 11,354 684 12,058
Exercise of warrants 4,400 - 34 - 34
Exercise of options 110 - 1 - 1
Common stock grants 7,480 - 59 - 59
Dividend reinvestment and
common stock purchase plan 32,486 - 541 - 541
Common stock cash dividend - - - (98) (98)
Net income - - - 401 401
Balance, March 31, 1996 2,017,015 $20 $11,989 $987 $12,996
Balance, December 31, 1996 2,661,331 27 13,581 2,102 15,710
Common stock grants 9,348 - 59 - 59
Dividend reinvestment
and common stock
purchase plan 18,571 - 300 - 300
Common stock issued
under 401(k) plan 1,433 - 21 - 21
Common stock cash dividend - - - (200) (200)
Net income - - - 701 701
Balance, March 31, 1997 2,690,683 $27 $13,961 $2,603 $16,591
</TABLE>
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Prestige Financial Corp. and Subsidiary
Consolidated Statements of Cash Flow
Three Months Ended March 31, 1997 and 1996
(Unaudited)
(Dollars in thousands)
<TABLE>
<CAPTION> Three Months Ended
March 31,
1997 1996
<S> <C> <C>
Cash flows from operating activities:
Net income $701 $401
Adjustments to reconcile net income to net
cash (used in) provided by
operating activities:
Provision for loan losses 90 45
Depreciation and amortization 103 80
Amortization (accretion) of investment
securities premiums and discounts, net 167 51
Amortization of organizational costs 4 4
Increase in accrued interest receivable (26) (226)
(Increase) decrease in other assets (3,833) 968
Gain on sale of loans (438) (175)
Proceeds from sale of loans held for sale 8,323 2,706
Net increase in loans held for sale (8,113) (3,948)
Increase in accrued interest payable 7 52
Increase in accrued expenses and other
liabilities 271 120
Decrease in deferred loan fees and unearned
discounts (91) (101)
Common stock grants 59 59
NET CASH (USED IN) PROVIDED BY OPERATING
ACTIVITIES (2,776) 36
Cash flows from investing activities:
Proceeds from maturities of investment
securities 5,612 6,351
Principal paydowns on mortgage-backed
securities 1,546 646
Purchases of investment and mortgage-backed
securities (15,104) (22,641)
Net increase in loans (2,041) (4,279)
Capital expenditures (330) (195)
NET CASH USED IN INVESTING ACTIVITIES (10,317) (20,118)
Cash flows from financing activities:
Net increase in demand deposits, MMA, NOW and
savings accounts 3,589 1,102
Net increase in certificates of deposit 2,548 10,885
Proceeds from issuance of common stock, net 321 576
Dividends paid (200) (98)
NET CASH PROVIDED BY FINANCING ACTIVITIES 6,258 12,465
Decrease in cash and cash equivalents (6,835) (7,617)
Cash and cash equivalents at begining of year 18,529 16,056
Cash and cash equivalents at end of period $11,694 $8,439
Supplemental disclosure of cash flow information-
Cash paid during the year for:
Interest $2,062 $1,700
Income taxes 85 10
</TABLE>
See accompanying notes to Consolidated Financial Statements
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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 March 31,
1997 are not necessarily indicative of the results that may be expected for
the year ended December 31, 1997.
3. Stockholders' Equity
On February 24, 1997 the Board of Directors approved a 7.5 cent per share
cash dividend on common stock, paid March 31, 1997 to shareholders of
record at March 20, 1997. Also on February 24, 1997 the Board of Directors
approved a six-for-five stock split, distributed April 18, 1997 to
shareholders of record at April 9, 1997.
4. Recent Accounting Pronouncements
In February 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings Per
Share". SFAS No. 128 supersedes Accounting Principles Board Opinion No.
15, "Earnings Per Share", and specifies the computation, presentation, and
disclosure requirements for earnings per share (EPS) for entities with
publically held common stock or potential common stock. SFAS No. 128
replaces Primary EPS and Fully Diluted EPS with Basic EPS and Diluted EPS,
respectively. SFAS No. 128 also requires dual presentation of Basic and
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Diluted EPS on the face of the income statement for entities with complex
capital structures and a reconciliation of the information utilized to to
calculate Basic EPS to that used to calculate Diluted EPS.
SFAS No. 128 is effective for periods ending after December 15, 1997.
Earlier application is not permitted. After adoption, all prior period EPS
is required to be restated to conform with SFAS No. 128. The Corporation
will adopt SFAS No. 128 at December 31, 1997 and expects that the adoption
will result in Basic EPS being higher than Primary EPS and Diluted EPS
being approximately the same as Fully Diluted EPS.
SFAS No. 129, "Disclosure of Information About Capital Structure" was also
issued in February 1997. SFAS No. 129 is effective for periods ending
after December 15, 1997. SFAS No. 129 lists required disclosures about
capital structure that had been included in a number of separate statements
and opinions of authoritative accounting literature. As such, the adoption
of SFAS No. 129 is not expected to have a significant impact on the
disclosures in the financial statements of the Corporation.
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Prestige Financial Corp. and Subsidiary
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Financial Condition
At March 31, 1997, total assets had reached $236.8 Million which was a $7.3
Million, or 3%, increase as compared to the December 31, 1996 balance of
$229.5 Million; and a $47.3 Million, or 25%, increase when compared to the
March 31, 1996 balance of $189.5 Million. This growth was funded primarily
from deposits (mainly "core" demand and time accounts) which increased by
$6.1 Million, or 3%, to $218.7 Million at March 31, 1997 as compared to
$212.6 Million at December 31, 1996; and by $43.2 Million, or 25%, when
compared to the March 31, 1996 balance of $175.5 Million. The opening of
the Corporation's fourth location in Clinton Township in May of 1996
contributed to this growth as did several CD promotions.
Total Stockholders' Equity stood at $16.6 Million as of March 31, 1997 and
was $.9 Million, or 6%, higher than the year-end 1996 balance of $15.7
Million; and $3.6 Million, or 28%, higher than the March 31, 1996 balance
of $13.0 Million. These increases were primarily attributable to increased
earnings, dividends reinvested and optional cash purchases made by
shareholders in accordance with the Corporation's Dividend Reinvestment and
Common Stock Purchase Plan, partially offset by cash dividends paid.
Within the asset composition, the above growth was primarily utilized to
fund increases in the loan and investment portfolios. As of March 31, 1997
outstanding loans, including loans held for sale, totaled $140.7 Million
which was $2.2 Million, or 2%, more than the December 31, 1996 balance of
$138.5 Million; and $21.3 Million, or 18%, greater than the March 31, 1996
balance of $119.4 Million. Loan growth was positively effected by Small
Business Administration (SBA) loan production, as the Bank continued to
benefit from its "Preferred SBA Lender" status.
Loans held for sale totaled $15.2 Million at March 31, 1997 vs. $15.0
Million at December 31, 1996 and $11.7 Million at March 31, 1996. The
loans held for sale category is comprised primarily of SBA 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 March 31,
1997 amounted to $76.7 Million, an increase of $7.8 Million, or 11% as
compared to the December 31, 1996 balance of $68.9 Million; and higher by
$17.8 Million, or 30%, when compared with the March 31, 1996 balance of
$58.9
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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 March 31, 1997, other assets totaled $5.0 Million, an increase of $3.8
Million versus the December 31, 1996 balance of $1.2 Million, and an
increase of $4.1 Million when compared with the March 31, 1996 balance of
$.9 Million. These increases are primarily attributable to an investment
in corporate owned life insurance.
At March 31, 1997, the allowance for loan losses stood at $1.598 Million --
$6 Thousand more than the year-end 1996 figure of $1.592 Million and $243
Thousand more than the March 31, 1996 balance of $1.355 Million. The
increase in the first three months of 1997 from year-end 1996 resulted from
provisions of $90 Thousand less net charge-offs of $84 Thousand. The
allowance as a percentage of total outstanding loans as of March 31, 1997
was 1.14% as compared to 1.15% as of December 31, 1996, and 1.14% as of
March 31, 1996.
Non-performing loans consist of loans on which the 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. Non-performing loans totaled $839 Thousand at March 31, 1997
compared with $810 Thousand at December 31, 1996 and $175 Thousand at March
31, 1996. Non-accrual loans (also classified as impaired loans) totaled
$454 Thousand (approximately .33% of total loans) as of March 31, 1997 and
December 31, 1996, and $164 Thousand (.14% of total loans) as of March 31,
1996. Of the $454 Thousand in non-accrual loans at March 31, 1997, $144
Thousand is fully guaranteed by the SBA.
Considering the information in the previous two paragraphs as well as other
relevant factors, management believes that the allowance for loan losses is
adequate. While management uses available information to determine the
adequacy of the allowance, future additions may occur based upon growth in
the loan portfolio or changes in loan quality resulting from circumstances
beyond the Corporation's control such as changes in economic conditions in
the region in which the Corporation conducts business. 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.
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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 March 31, 1997, the Corporation's and the Bank's core (Tier 1) risk-
based capital ratios were 11.42% and 10.55%, respectively, versus 11.69%
and 10.89% at December 31, 1996; and 11.16% and 9.90% at March 31, 1996.
These ratios compare favorably to a minimum of 4% as required by the FRB
and the FDIC.
At March 31, 1997, the Corporation's and the Bank's total (Tier 1 plus Tier
2) risk-based capital ratios were 12.52% and 11.65%, respectively, versus
12.87% and 12.08% at December 31, 1996; and 12.33% and 11.07% at March 31,
1996. 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 March 31, 1997, the Corporation's and the Bank's leverage ratios were
7.14% and 6.62%, respectively, versus 7.01% and 6.55% at December 31, 1996;
and 6.84% and 6.10% at March 31, 1996. Again, these ratios compare
favorably with existing guidelines established by the FRB and the FDIC.
The foregoing capital ratios are based in part on specific quantitative
measures of assets, liabilities and certain off-balance sheet items as
calculated under regulatory accounting practices. Capital amounts
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and classifications are subject to qualitative judgments by the regulatory
authorities about capital components, risk weightings and other factors.
Management believes that, as of March 31, 1997, the Corporation and the
Bank meet all capital adequacy requirements to which they are subject.
Further, the most recent FDIC notification characterized the Bank as a well-
capitalized institution under the prompt corrective action regulations.
There have been no conditions or events since that notification that
management believes have changed the Bank's capital classification.
It should be noted that additional capital raised via the Dividend
Reinvestment and Common Stock Purchase Plan provides the ability to
downstream capital from Prestige Financial Corp. to the Bank should the
Bank'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 362% for March 31, 1997, versus 401% for December 31, 1996, and
versus 332% for March 31, 1996. 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
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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.
As of March 31, 1997 there was a cumulative twelve month gap of negative
$39.3 Million as compared to a negative $30.6 Million gap as of December
31, 1996 and a negative $26.4 Million gap as of March 31, 1996. In each of
these cases, the percentage of imbalance from a perfectly matched 100% was
no more than 25%. Management does not 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 March 31, 1997 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, though not as significant as the improvement
projected in a rising rate environment.
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Results of Operations
Net income for the first three months of 1997 amounted to $701 Thousand
compared to $401 Thousand for the same period in 1996. Related fully
diluted earnings-per-share data were: $.25 per share for the first three
months of 1997 versus $.15 per share for the same period in 1996. The
annualized return on average assets was 1.21% and .89% for the first three
months of 1997 and 1996, respectively. The annualized return on average
shareholders' equity was 17.45% and 13.06% for the first three months of
1997 and 1996, respectively.
Net Interest Income.
The $567 Thousand, or 31%, increase in net interest income reflected in the
first three months of 1997 (at $2.4 Million) over the same period in 1996
(at $1.9 Million) was attributable to an increase in higher yielding loan
and investment volume coupled with a decline in the cost of supporting
funds, as higher yielding certificates of deposit have run off and non-
interest bearing demand deposit accounts have grown as a percentage of
total deposit libilities.
Noninterest Income.
For the first three months of 1997 noninterest income increased $329
Thousand or 144% to $558 Thousand, up from $229 Thousand for the same
period in 1996.
This increase was primarily attributable to gains from sales of loans which
amounted to $438 Thousand during the first three months of 1997 versus $175
Thousand in the first three months of 1996. Virtually all of the increase
in gains on loan sales was due to a higher volume of loans sold. As
discussed earlier, SBA loan production has remained strong, with the Bank
recognized as the leading SBA lender in New Jersey in 1996 and 1995, and
carrying the designation of "Preferred Lender" in New York and Pennsylvania
as well.
In addition, the Corporation's residential mortgage division contributed
$33 Thousand in gains during the first three months of 1997 vs. $9 Thousand
in the first three months of 1996. Management expects the ongoing
origination and sale of residential mortgages to help control reliance on
the production and sale of SBA loans, with fewer sales allowing the higher
yielding SBA loans to accumulate and help maintain a satisfactory net
interest margin.
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Service charges on deposit accounts contributed another $42 Thousand to the
increase in noninterest income from the three months ended March 31, 1997
compared to the three months ended March 31, 1996 as a result of increased
volume as well as more stringent collections of heretofore waived service
charges, where appropriate.
Noninterest Expense.
For the first three months of 1997 as compared to the same period in 1996,
total noninterest expense increased by $420 Thousand, or 31%, to $1.8
Million from $1.4 Million.
Salaries and benefits accounted for $242 Thousand of the above increase due
to the January 1 effective date for all pay increases, the addition of
staff resulting from the opening of the Clinton Township branch in May
1996, the adoption of a supplemental executive retirement plan in February
1997, and overall growth in personnel to service the Corporation's growing
customer base.
Occupancy related expenses increased $64 Thousand for the first three
months of 1997 versus the same period in 1996 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,
increased commercial lending staff, and increased operational staff
necessary to manage growth in both the number and dollar volume of new
business.
Data Processing costs contributed another $27 Thousand to the increase in
noninterest expense from the three months ended March 31, 1997 compared to
the three months ended March 31, 1996, primarily as a result of increased
volume.
Advertising and business development costs increased by $32 Thousand for
the three months ended March 31, 1997 versus the same period in 1996 as the
Corporation continues to expand its presence in Hunterdon and Somerset
counties and surrounding environs.
Directors fees grew by $17 Thousand for the three months ended March 31,
1997 compared to the three months ended March 31, 1996 as a result of the
adoption of a non-tax qualified retirement plan for outside directors.
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
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the sum of taxable equivalent net interest income and noninterest
income)improved to 59.33% from 60.48% for the first three months of 1997
vs. the first three months of 1996. More strictly directed at noninterest
expense control, the "overhead ratio" (annualized noninterest expense over
average assets for the period)remained consistent at 3.08% for the first
three months of 1997 as compared to 3.05% for the first three months of
1996.
Further increases in noninterest expense, particularly salaries and
benefits and occupany expenses, are expected as the Corporation expands its
operations with two branch locations opening in the new "Prestige Plaza"
(Edwards Food Store) shopping center on Route 31 in Raritan Township in the
second quarter of 1997, and another branch opening scheduled for the third
quarter of 1997 on the western side of the Clinton market.
Provisions for Loan Losses.
For the first three months of 1997 as compared to the first three months of
1996, the provision for loan losses increased by $90 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-accrual loans at March 31, 1997
amounted to just .33% of total loans.
Income Tax Expense
Provisions for income tax totaled $398 Thousand for the first three months
of 1997, up from $267 Thousand in the first three months of 1996 as a
result of the Corporation's increased taxable earnings. The Corporation's
effective tax rate declined to 36.2% for the three months ended March 31,
1997 from 40.0% for the three months ended March 31, 1996. This decrease
was primarily attributable to the formation in the third quarter of 1996 of
PSB Investment Management, Inc., a wholly-owned subsidiary of the Bank
which manages a portfolio of investment securities for its own account.
The earnings of PSB Investment Management, Inc. are taxed by the State of
New Jersey at a rate of 2.25% as opposed to the 9% state income tax rate to
which the Bank and the Corporation are subject.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not applicable.
16
<PAGE>
Part II Other Information
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 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 effective on April 19, 1996.
(a)(27) Financial Data Schedule
(b) No reports on Form 8-K were filed during the quarter ended
March 31, 1997.
17
<PAGE>
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: /s/ Robert J. Jablonski
Robert J. Jablonski
Chief Executive Officer and
Treasurer/Principal
Financial Officer
Date: April 24,1997
18
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
This schedule contains summary financial information extraxted from SEC Form 10Q
and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 7,464
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 4,230
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 0
<INVESTMENTS-CARRYING> 76,653
<INVESTMENTS-MARKET> 75,851
<LOANS> 140,744
<ALLOWANCE> 1,598
<TOTAL-ASSETS> 236,813
<DEPOSITS> 218,733
<SHORT-TERM> 0
<LIABILITIES-OTHER> 1,489
<LONG-TERM> 0
0
0
<COMMON> 27
<OTHER-SE> 16,564
<TOTAL-LIABILITIES-AND-EQUITY> 236,813
<INTEREST-LOAN> 3,266
<INTEREST-INVEST> 1,108
<INTEREST-OTHER> 114
<INTEREST-TOTAL> 4,488
<INTEREST-DEPOSIT> 2,069
<INTEREST-EXPENSE> 2,069
<INTEREST-INCOME-NET> 2,419
<LOAN-LOSSES> 90
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 1,788
<INCOME-PRETAX> 1,099
<INCOME-PRE-EXTRAORDINARY> 1,099
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 701
<EPS-PRIMARY> .25
<EPS-DILUTED> .25
<YIELD-ACTUAL> 4.45
<LOANS-NON> 454
<LOANS-PAST> 384
<LOANS-TROUBLED> 0
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<ALLOWANCE-OPEN> 1,592
<CHARGE-OFFS> 87
<RECOVERIES> 3
<ALLOWANCE-CLOSE> 1,598
<ALLOWANCE-DOMESTIC> 1,598
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</TABLE>
