1
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______________ to __________________
Commission File Number 0-27522
PRESTIGE BANCORP, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
PENNSYLVANIA 25-1785128
- ------------------------------- ----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
710 OLD CLAIRTON ROAD
PLEASANT HILLS, PENNSYLVANIA 15236
- --------------------------------------- ----------
(Address of principal executive office) (Zip Code)
(412) 655-1190
----------------------------------------------------
(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 Exchange Act of
1934 during the preceding 12 months (or for such 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
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: As of August 13, 1996, there
were issued and outstanding 963,023 shares of the registrant's common stock,
par value $1.00 per share.
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PRESTIGE BANCORP, INC.
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION PAGE
- ------------------------------ ----
Item 1. Financial Statements
Consolidated Statements of Financial Condition of Prestige Bancorp, Inc.
as of June 30, 1996 (unaudited) and December 31, 1995 1
Consolidated Statements of Income of Prestige Bancorp, Inc. for the three
months ended June 30, 1996 and 1995 (unaudited) 2
Consolidated Statements of Income of Prestige Bancorp, Inc. for the
six months ended June 30, 1996 and 1995 (unaudited) 3
Consolidated Statements of Equity of Prestige Bancorp, Inc. for the six months
ended June 30, 1996 and 1995 (unaudited) 4
Consolidated Statements of Cash Flows of Prestige Bancorp, Inc. for the six
months ended June 30, 1996 and 1995 (unaudited) 5
Notes to Financial Statements (unaudited) 6
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations 11
PART II. OTHER INFORMATION
- --------------------------
Item 1. Legal Proceedings 14
Item 2. Changes in Securities 14
Item 3. Defaults upon Senior Securities 14
Item 4. Submission of Matters to a Vote of Security-Holders 14
Item 5. Other Information 14
Item 6. Exhibits and Reports on Form 8-K 14
SIGNATURES 15
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3
PRESTIGE BANCORP, INC.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
June 30,
1996 December 31,
(Unaudited) 1995
------------ ------------
ASSETS
------
Cash and due from banks $ 610,858 $ 779,397
Interest-bearing deposits with banks 5,009,933 3,614,270
Investment securities:
Available for sale 11,171,796 7,491,045
Held to maturity (market value $12,925,161 and
$15,193,150, respectively) 13,202,353 15,074,601
Loans 69,225,559 61,737,509
Less- Unearned income 43,148 42,204
Allowance for loan losses 305,120 287,060
Loans in process 367,048 --
------------ -----------
Net loans 68,510,243 61,408,245
------------ -----------
Federal Home Loan Bank stock, at cost 735,400 733,700
Premises and equipment, net 1,921,551 1,868,569
Accrued interest receivable 730,437 573,548
Deferred tax asset 118,053 --
Other assets 598,132 297,280
------------ -----------
Total assets $102,608,756 $91,840,655
============ ===========
LIABILITIES AND EQUITY
----------------------
Liabilities:
Noninterest-bearing deposits $ 2,010,932 $ 2,082,444
Interest-bearing deposits 80,617,983 78,648,228
------------ -----------
Total deposits 82,628,915 80,730,672
Federal Home Loan Bank advances 3,477,000 2,977,000
Advance payments by borrowers for taxes and
insurance 803,294 571,780
Income taxes payable 89,105 71,149
Deferred tax liability -- 45,317
Other liabilities 337,814 266,762
------------ -----------
Total liabilities 87,336,128 84,662,680
------------ -----------
Equity:
Preferred stock, $1.00 par value;
5,000,000 shares authorized, none issued -- --
Common stock, $1.00 par value; 10,000,000
shares authorized, 963,023 shares issued and
outstanding 963,023 --
Additional paid-in-capital 8,005,781 --
Unearned ESOP shares (770,410) --
Retained earnings - substantially restricted 7,387,875 7,245,432
Net unrealized holding gains (losses) on
available for sale securities, net of taxes (313,641) (67,457)
------------ -----------
Total equity 15,272,628 7,177,975
------------ -----------
Total liabilities and equity $102,608,756 $91,840,655
============ ===========
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PRESTIGE BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended
June 30,
---------------------------
1996 1995
---------- ----------
Interest income:
Interest and fees on loans $1,205,124 $1,053,259
Interest on mortgage-backed
securities 236,762 252,424
Interest and dividends on
other investment securities 168,162 85,043
Interest on deposits in other
financial institutions 20,637 17,323
---------- ----------
Total interest income 1,630,685 1,408,049
---------- ----------
Interest expense:
Interest on deposits 849,638 808,280
Advances from Federal Home
Loan Bank 65,866 42,926
---------- ----------
Total interest expense 915,504 851,206
---------- ----------
Net interest income 715,181 556,843
Provision for loan losses 9,000 9,000
---------- ----------
Net interest income
after provision
for loan losses 706,181 547,843
---------- ----------
Other income:
Fees and service charges 68,705 48,678
Other income, net 9,364 9,450
---------- ----------
Total other income 78,069 58,128
---------- ----------
Other expenses:
Salaries and employee benefits 293,191 251,795
Premises and occupancy costs 83,194 72,770
Federal deposit insurance
premiums 46,235 42,606
Data processing costs 42,186 36,300
Advertising costs 23,871 22,058
Federal Home Loan Bank deposit and
demand account charges 39,745 35,531
ATM transaction fees 23,360 22,394
Other expenses 97,733 59,030
---------- ----------
Total other expenses 649,515 542,484
---------- ----------
Income before income
tax expense 134,735 63,487
Income tax expense 49,958 21,598
---------- ----------
Net income $ 84,777 $ 41,889
========== ==========
Earnings per share (1) N/A N/A
(1) Earnings per share information is not presented as the Corporation
completed its stock offering on June 27, 1996.
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PRESTIGE BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Six Months Ended
June 30,
---------------------------
1996 1995
---------- ----------
Interest income:
Interest and fees on loans $2,334,288 $2,091,900
Interest on mortgage-backed
securities 482,969 501,834
Interest and dividends on
other investment securities 290,889 164,075
Interest on deposits in other
financial institutions 56,117 26,833
---------- ----------
Total interest income 3,164,263 2,784,642
---------- ----------
Interest expense:
Interest on deposits 1,708,924 1,522,169
Advances from Federal Home
Loan Bank 112,135 107,562
---------- ----------
Total interest expense 1,821,059 1,629,731
---------- ----------
Net interest income 1,343,204 1,154,911
Provision for loan losses 18,000 18,000
---------- ----------
Net interest income
after provision
for loan losses 1,325,204 1,136,911
---------- ----------
Other income:
Fees and service charges 129,378 97,277
Other income (loss), net 18,747 (9,060)
---------- ----------
Total other income 148,125 88,217
---------- ----------
Other expenses:
Salaries and employee benefits 578,073 503,797
Premises and occupancy costs 166,810 153,447
Federal deposit insurance
premiums 90,844 85,212
Data processing costs 85,579 78,724
Advertising costs 41,939 45,739
Federal Home Loan Bank deposit and
demand account charges 76,590 69,231
ATM transaction fees 44,919 41,831
Other expenses 160,248 131,509
---------- ----------
Total other expenses 1,245,002 1,109,490
---------- ----------
Income before income
tax expense 228,327 115,638
Income tax expense 85,884 39,748
---------- ----------
Net income $ 142,443 $ 75,890
========== ==========
Earnings per share (1) N/A N/A
(1) Earnings per share information is not presented as the Corporation
completed its stock offering on June 27, 1996.
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PRESTIGE BANCORP, INC.
CONSOLIDATED STATEMENTS OF EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND 1995
(Unaudited)
Net Unrealized
Holding Losses on
Additional Unearned Available for Sale
Common Paid-In ESOP Retained Securities,
Stock Capital Shares Earnings Net of Taxes Total
-------- ---------- --------- ---------- ------------------ -----------
Balance, December 31, 1995 $ -- $ -- $ -- $7,245,432 $ (67,457) $ 7,177,975
Net income -- -- -- 142,443 -- 142,443
Issuance and exchange of
common stock as a result
of the conversion 963,023 8,005,781 -- -- -- 8,968,804
Shares acquired for ESOP -- -- (770,410) -- -- (770,410)
Increase in net unrealized
holding losses on
available for sale
securities, net of taxes -- -- -- -- (246,184) (246,184)
-------- ---------- --------- ---------- --------- -----------
Balance, June 30, 1996 $963,023 $8,005,781 $(770,410) $7,387,875 $(313,641) $15,272,628
======== ========== ========= ========== ========= ===========
Balance, December 31, 1994 $ -- $ -- $ -- $7,084,573 $ (35,463) $ 7,049,110
Net income -- -- -- 75,890 -- 75,890
Decrease in net unrealized
holding losses on
available for sale
securities, net of taxes -- -- -- -- 10,354 10,354
-------- ---------- --------- ---------- --------- -----------
Balance, June 30, 1995 $ -- $ -- $ -- $7,160,463 $ (25,109) $ 7,135,354
======== ========== ========= ========== ========= ===========
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PRESTIGE BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended
June 30,
---------------------------
1996 1995
------------ -----------
Operating activities:
Net income $ 142,443 $ 75,890
------------ -----------
Adjustments to reconcile net income
to net cash (used) provided by operating
activities-
Depreciation of premises and equipment 85,901 73,028
Amortization of premiums and discounts, net (7,453) (1,826)
Loss on sale of premises and equipment -- 28,533
Provision for loan losses 18,000 18,000
Deferred income taxes 729 3,187
Increase in other liabilities 71,049 17,697
Increase (decrease) in income taxes payable 17,956 (30,261)
Increase in accrued interest receivable (156,889) (38,624)
Increase in other assets (300,852) (21,380)
Other, net 1,786 (2,522)
------------ -----------
Total adjustments (269,773) 45,832
------------ -----------
Net cash (used) provided by
operating activities (127,330) 121,722
------------ -----------
Investing activities:
Loan originations (12,495,406) (4,208,493)
Principal payments on loans 5,373,623 3,833,407
Principal payments on mortgage-backed securities
available for sale 449,513 --
Principal payments on mortgage-backed securities
held to maturity 871,270 696,363
Purchases of-
Mutual fund investments available for sale (32,528) (33,607)
Investment securities available for sale (4,499,587) --
Investment securities held to maturity -- (499,219)
Mortgage-backed securities held to maturity -- (1,000,000)
Maturities of-
Investment securities held to maturity 1,000,000 500,000
Purchases of premises and equipment (138,883) (393,393)
Proceeds from sale of premises and equipment -- 89,162
Purchase of Federal Home Loan Bank stock (1,700) (40,000)
------------ -----------
Net cash used by investing activities (9,473,698) (1,055,780)
------------ -----------
Financing activities:
Net change in advance payments by
borrowers for taxes and insurance 231,514 231,521
Proceeds from Federal Home Loan Bank advances 10,800,000 --
Payments on Federal Home Loan Bank advances (10,300,000) (1,800,000)
Net increase in Money Market, NOW and Passbook
savings accounts 2,147,870 (1,476,238)
Net increase in certificate accounts (249,626) 4,821,161
Additional paid-in-capital from stock offering 8,198,394 --
------------ -----------
Net cash provided by financing activities 10,828,152 1,776,444
------------ -----------
Net increase in cash and cash equivalents 1,227,124 842,386
Cash and cash equivalents at beginning
of period 4,393,667 1,540,231
------------ -----------
Cash and cash equivalents at end of period $ 5,620,791 $ 2,382,617
============ ===========
Supplemental disclosures of cash flow information:
Cash paid during the period for
income taxes $ 67,000 $ 65,770
============ ===========
Cash paid during the period for
interest on deposits and borrowings $ 1,819,880 $ 1,626,764
============ ===========
Supplemental schedule of noncash investing activity:
Loans transferred to real estate
owned $ -- $ 31,344
============ ===========
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PRESTIGE BANCORP, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1. BASIS OF PRESENTATION:
Prestige Bancorp, Inc. (the Corporation) was incorporated under Pennsylvania
law in March 1996 by Prestige Bank, F.S.B. (the Bank) and sold 963,023 shares of
its common stock upon the conversion of the Bank (see Note 8) from a
federally-chartered mutual savings bank to a federally-chartered stock savings
bank with a corresponding exchange of the stock for approximately 50% of the
net proceeds of the sale of the Corporation's common stock. The remaining
portion of the net proceeds were retained by the Corporation and $770,410 was
loaned to the Corporation's Employee Stock Ownership Trust (the ESOP). The
Corporation completed its conversion on June 27, 1996. For purposes of this
Form 10-Q, the financial statements and management's discussion and analysis of
financial condition and results of operations are presented for the
Corporation. No pro forma effect has been given to the sale of the
Corporation's common stock under the Plan of Conversion.
The following unaudited financial statements have been prepared pursuant to the
rules and regulations of the Securities and Exchange Commission. Certain
information and note disclosures normally included in annual financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to those rules and regulations,
although the Bank believes that the disclosures made are adequate to make the
information presented not misleading. However, such interim information
reflects all adjustments (consisting solely of normal recurring adjustments)
which are, in the opinion of management, necessary for a fair presentation of
financial position and results of operations for the periods presented. The
results of operations for the three and six months ended June 30, 1996, are not
necessarily indicative of the results to be expected for the year ending
December 31, 1996.
The unaudited financial statements and notes hereto should be read in
conjunction with the audited financial statements and notes thereto for the
year ended December 31, 1995, contained in the Corporation's prospectus dated
May 13, 1996, included in the Form S-1 Registration Statement (No. 333-2692).
- 6 -
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2. INVESTMENT SECURITIES:
The cost and market values of investment securities are summarized as follows:
Investment securities held to maturity:
JUNE 30, 1996
------------------------------
AMORTIZED MARKET
COST VALUE
----------- -----------
U.S. government and government
agency obligations due within one year $ 500,117 $ 497,813
U.S. government and government
agency obligations due within five years 2,001,985 1,965,312
Federal Home Loan Mortgage
Corporation (FHLMC) certificates 9,125,116 8,860,301
Government National Mortgage
Association (GNMA) certificates 1,461,672 1,485,486
Federal National Mortgage Association
(FNMA) certificates 113,463 116,249
----------- -----------
$13,202,353 $12,925,161
=========== ===========
Investment securities available for sale:
JUNE 30, 1996
------------------------------
MARKET
COST VALUE
----------- -----------
U.S government and government
agency obligations due within five years $ 1,999,583 1,934,375
U.S. government and government
agency obligations due within 10 years 2,504,337 2,390,500
U.S. government and government
agency obligations due within 15 years 2,000,000 1,855,800
Federal Home Loan Mortgage Corporation
(FHLMC) certificates 2,500,767 2,406,170
Federal National Mortgage Association
(FNMA) certificates 1,370,412 1,294,953
Mutual fund investment 1,319,367 1,289,998
----------- -----------
$11,694,466 $11,171,796
=========== ===========
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3. LOANS RECEIVABLE:
Loans receivable are summarized as follows:
JUNE 30,
1996
-----------
Commercial, including commercial secured by real estate $ 935,416
-----------
Real estate loans:
1-4 family 60,991,827
Construction 423,200
-----------
61,415,027
Less-Undisbursed loan proceeds 367,048
Deferred loan fees 43,148
-----------
61,004,831
-----------
Consumer loans:
Share 497,451
Automobile 1,101,931
Home equity 2,827,451
Student 2,130,493
Credit cards 317,423
Other 367
-----------
6,875,116
-----------
68,815,363
Less-Allowance for loan losses 305,120
-----------
$68,510,243
===========
4. ALLOWANCE FOR LOAN LOSSES:
Activity with respect to the allowance for loan losses is summarized as
follows:
SIX MONTHS ENDED
JUNE 30,
-------------------------
1996 1995
-------- -------
Balance at beginning of period $287,060 $303,312
Provision for loan losses 18,000 18,000
Charge-offs -- (9,429)
Recoveries 60 440
-------- --------
Balance at end of period $305,120 $312,323
======== ========
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5. DEPOSITS:
Deposits are summarized as follows:
June 30,
1996
-----------
Total noninterest-bearing deposits $ 2,010,932
===========
Interest-bearing deposits:
Money market demand accounts $10,460,327
NOW accounts 7,860,834
Passbook and club accounts 16,704,648
-----------
35,025,809
-----------
Certificate accounts:
Due within one year 29,085,174
Due after one but within three years 11,477,000
Thereafter 5,030,000
-----------
45,592,174
-----------
Total interest-bearing deposits $80,617,983
===========
Deposits of $100,000 or more $ 7,540,349
===========
6. INCOME TAXES:
The provision for income taxes is as follows:
Six Months Ended
June 30,
-------------------------
1996 1995
------- -------
Federal $69,791 $35,385
State 16,093 4,363
------- -------
Total income tax expense $85,884 $39,748
======= =======
7. RELATED PARTY TRANSACTIONS:
Certain directors and executive officers of the Bank, including their immediate
families and companies in which they are principal owners, are loan customers
of the Bank. In management's opinion, such loans are made in the normal course
of business and were granted on substantially the same terms and conditions as
loans to other individuals and businesses of comparable creditworthiness at the
time. Total loans to these persons at June 30, 1996, and December 31, 1995,
amounted to $301,938 and $192,018, respectively.
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12
8. PLAN OF CONVERSION:
On February 14, 1996, the Bank's Board of Directors adopted a Plan of
Conversion (the Plan) from a federally chartered mutual savings bank to a
federally chartered stock savings bank and the issuance of its stock to a to-
be-formed holding company, Prestige Bancorp, Inc., a Pennsylvania corporation.
The Plan provides that the holding company will offer nontransferable
subscription rights to purchase common stock of the holding company. The rights
will be offered first to eligible account holders of record, a tax-qualified
employee stock ownership plan to be adopted by the Bank, supplemental eligible
account holders, certain other depositors and borrowers, and directors,
officers and employees. Rights remaining unsold after the subscription
offering, if any, will be offered for sale to the public. The costs of issuing
the common stock will be deducted from the proceeds of the stock offering.
At a special meeting of the eligible depositors and members of the Bank on June
19, 1996, a vote was held whereby the conversion discussed above was approved.
The subscription proceeds, before any conversion expenses, and shares
(including 77,041 shares acquired by the Employee Stock Ownership Plan) were
$9,630,230 and 963,023, respectively. The Bank completed its conversion on June
27, 1996.
On the date of the conversion, the Bank established a liquidation account in an
amount equal to retained earnings reflected in the statement of financial
condition appearing in the final prospectus. The liquidation account will be
maintained for the benefit of eligible savings account holders and supplemental
eligible account holders who continue to maintain their accounts at the Bank
after the conversion.
In the event of a complete liquidation (and only in such event), each eligible
savings account holder will be entitled to receive a liquidation distribution
from the liquidation account in the amount of the then current adjusted balance
of deposit accounts held, before any liquidation distribution may be made with
respect to the common shares. Except for the repurchase of stock and payment of
dividends by the Bank, the existence of the liquidation account will not
restrict the use or further application of such retained earnings.
The Bank may not declare or pay a cash dividend on, or repurchase any of its
common shares if the effect thereof would cause the Bank's equity to be reduced
below either the amount required for the liquidation account or the regulatory
capital requirements for insured institutions.
The Bank will continue to be regulated by the Office of Thrift Supervision and
by the Federal Deposit Insurance Corporation (FDIC), which insures the Bank's
deposits. In addition, the Bank will continue to be a member of the Federal
Home Loan Bank System and all insured savings deposits will continue to be
insured by the FDIC up to the maximum provided by law.
- 10 -
13
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FINANCIAL CONDITION
At June 30, 1996, the Corporation's total assets amounted to $102.6 million
compared with $91.8 million at December 31, 1995. The $10.8 million or 11.7%
increase was primarily due to an increase of $7.1 million or 11.6% in loans
receivable and an increase of $1.8 million or 8.0% in investment securities. In
addition, cash and cash equivalents increased $1.2 million or 27.9%. Such
increase in assets was funded through an increase in deposits of $1.9 million
or 2.4% and a $500,000 increase or 16.8% increase in Federal Home Loan Bank
advances. The remainder of the asset increase was funded by $8.2 million
capital proceeds received in connection with the conversion of Prestige Bank, A
Federal Savings Bank from a mutual chartered savings bank to a stock chartered
savings bank on June 27, 1996. All operations of the Corporation prior to June
27, 1996, were conducted by Prestige Bank, A Federal Savings Bank. Prestige
Bank, A Federal Savings Bank is the sole subsidiary of the Corporation. Total
shareholders' equity amounted to $15.3 million or 14.9% of total assets at June
30, 1996, compared to $7.2 million or 7.8% of total assets at December 31,
1995.
The Corporation's nonperforming assets increased $11,000 or 3.2% to $359,000 at
June 30, 1996, compared to $348,000 at December 31, 1995. The slight increase
was due to an increase in nonperforming loans.
RESULTS OF OPERATIONS
GENERAL--The Corporation's net income for the quarter ended June 30, 1996,
increased 102.4% to $85,000 compared to $42,000 for the same quarter in the
prior year. Net income for the six months ended June 30, 1996, increased
$67,000 or 87.7% compared with the same period in the prior year. The $43,000
increase in net income for the quarter ended June 30, 1996, as compared to
quarter ended June 30, 1995, was primarily the result of a $158,000 or 28.4%
increase in net interest income, a $20,000 or 34.3% increase in noninterest
income, which was partially offset by a $107,000 or 19.7% increase in total
noninterest expense and a $28,000 or 131.3% increase in provision for income
taxes. The $67,000 increase in net income for the six months ended June 30,
1996, as compared to the six months ended June 30, 1995, was primarily the
result of a $188,000 or 16.3% increase in net interest income, a $60,000 or
67.9% increase in noninterest income, which was partially offset by a $136,000
or 12.2% increase in total noninterest expense and a $46,000 or 116.1% increase
in provision for income taxes.
INTEREST INCOME--The Corporation reported interest income of $1.6 million and
$3.2 million for the three and six months ended respectively June 30, 1996, as
compared to $1.4 million and $2.8 million for the three and six months ended
respectively June 30, 1995. The increase of $223,000 for the quarter ended June
30, 1996, as compared to the same period in the prior year can be attributed to
a $152,000 or 14.4% increase in interest and fees on loans and a $83,000 or
97.7% increase in interest and dividends on other investment securities. The
increase of $380,000 for the six months ended June 30, 1996, as compared to the
same period in the prior year can be attributed to a $242,000 or 11.6% increase
in interest and fees on loans and a $127,000 or 77.3%
- 11 -
14
increase in interest and dividends on other investment securities. The
increases from 1996 to 1995 for both the quarter and six months ended June 30,
1996, in interest and fees on loans are primarily due to an increase in loan
origination activity as well as an increase in the average yield earned on
interest earning assets.
INTEREST EXPENSE--Interest expense increased $64,000 or 7.6% and $191,000 or
11.7% during the three and six months ended June 30, 1996. The increase for the
three months ended June 30, 1996, was due to growth in deposits. The increase
for the six months ended June 30, 1996, was due to growth in deposits along
with an increase in the average cost of interest-bearing liabilities from 4.06%
to 4.26%. Such increase in the average cost of interest-bearing liabilities was
the result of rates offered by the Corporation on certain deposit products in
response to rates offered by other financial institutions.
PROVISION FOR LOAN LOSSES--During the three months and six months ended June
30, 1996 and 1995, the Corporation recorded provisions for losses on loans of
$9,000 and $18,000, respectively. The Corporation recorded such provisions to
adjust the Corporation's allowance for the loan losses to a level deemed
appropriate based upon an assessment of the volume and type of lending
presently being conducted by the Corporation, industry standards and economic
conditions in the Corporation's market area.
OTHER INCOME--The increase of $20,000 and $60,000 in other income for the three
months and six months respectively ended June 30, 1996, can be primarily
attributed to additional mortgage applications and, conversely, during the
first quarter of 1995, the Corporation recognized a loss of $28,000 on the sale
of its previous Mt. Oliver branch building.
OTHER EXPENSES--The increase of $107,000 and $136,000 in other expenses for the
three months and six months respectively ended June 30, 1996, was primarily the
result of increased employees, increases in salary, and increases in benefit
costs. In addition, other expenses increased $39,000 and $29,000 for the three
months and six months respectively ended June 30, 1996.
INCOME TAXES--The Corporation incurred a provision for income taxes of $50,000
and $86,000 for the three months and six months respectively ended June 30,
1996, as compared to $22,000 and $40,000 for the same period in the prior year.
Such increases were primarily due to increased income.
LIQUIDITY AND CAPITAL RESOURCES
The Corporation's primary sources of funds are deposits, repayments,
prepayments and maturities of outstanding loans and mortgage-backed securities,
maturities of investment securities and other short-term investments, and funds
provided from operations. While scheduled loan and mortgage-backed securities
repayments and maturing investment securities and short-term investments are
relatively predictable sources of funds, deposit flows and loan prepayments are
greatly influenced by the movement of interest rates in general, economic
conditions and competition. The Corporation manages the pricing of its deposits
to maintain a deposit balance deemed appropriate and desirable by its Board of
Directors. In addition, the Corporation invests in short-term interest-earning
assets which provides liquidity to meet lending requirements. At June 30, 1996,
the Corporation had $3.5 million of
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outstanding advances from the Federal Home Loan Bank (FHLB) of Pittsburgh.
Additionally, the Corporation has a revised revolving credit commitment from
the FHLB of Pittsburgh of $6.5 million, of which $5 million remained available
at June 30, 1996.
During the six months ended June 30, 1996 and 1995, the Corporation's operating
activities used net cash of approximately $127,000 and provided net cash of
approximately $122,000 respectively. The primary reason for this change was an
increase in other assets and accrued interest receivable of approximately
$279,000 and $118,000 respectively offset by a $67,000 increase in net income
and a $53,000 increase in other liabilities.
Net cash used by investing activities was approximately $8.4 million more
between years for the six months ended June 30, 1996. During the first six
months of 1996, the Corporation originated $7.1 million in new loans in excess
of principal payments received on existing loans. This was approximately $6.7
million greater than in 1995. Also, the Corporation purchased $4.5 million of
investment securities available for sale while $1.0 million of held to maturity
investment securities matured. During the first six months of 1995, the
Corporation purchased $1.5 million in investment and mortgage-backed securities
held to maturity while $500,000 of held to maturity investment securities
matured.
Net cash provided by financing activities for the six months ended June 30,
1996, was approximately $10.8 million, attributable to increases in core
deposits, FHLB advances and capital raised in connection with the conversion of
Prestige Bank, A Federal Savings Bank from a mutual chartered savings bank to a
stock chartered savings bank. During the same period last year, the Corporation
experienced a $1.8 million increase in net cash provided by financing
activities. Such increase was due to $4.8 million increase in certificates
accounts which was offset by a decrease of $1.8 million and $1.5 million in
FHLB advances and core deposits respectively.
The Corporation is required to maintain specified amounts of capital pursuant
to the Financial Institutions Reform, Recovery and Enforcement Act of 1989 and
regulations thereunder. Savings associations are required to maintain tangible
capital of 1.5% , core capital of 4.00% and risk-based capital of 8.00%. At
June 30, 1996, the Corporation's tangible, core and risk-based capital ratios
amounted to 11.54%, 11.54% and 27.37% respectively, which substantially
exceeded applicable requirements.
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PRESTIGE BANCORP, INC.
PART II
Item 1. LEGAL PROCEEDINGS
Neither the Corporation nor the Bank is involved in any
pending legal proceedings other than nonmaterial legal
proceedings occurring in the ordinary course of business.
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
Not applicable.
Item 5. OTHER INFORMATION
None.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
None.
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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 BANCORP, INC.
Dated: August 13, 1996 By: /s/ ROBERT S. ZYLA
-------------------------
Robert S. Zyla, President
Dated: August 13, 1996 By: /s/ JAMES M. HEIN
-------------------------
James M. Hein, Controller
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