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 September 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 November 12, 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 September 30, 1996 (unaudited) and December 31, 1995 1
Consolidated Statements of Income of Prestige Bancorp, Inc. for the three
months ended September 30, 1996 and 1995 (unaudited) 2
Consolidated Statements of Income of Prestige Bancorp, Inc. for the
nine months ended September 30, 1996 and 1995 (unaudited) 3
Consolidated Statements of Equity of Prestige Bancorp, Inc. for the nine months
ended September 30, 1996 and 1995 (unaudited) 4
Consolidated Statements of Cash Flows of Prestige Bancorp, Inc. for the nine
months ended September 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
September 30,
1996 December 31,
(Unaudited) 1995
------------- ------------
ASSETS
------
Cash and due from banks $ 880,057 $ 779,397
Interest-bearing deposits with banks 2,352,874 3,614,270
Investment securities:
Available for sale 11,318,171 7,491,045
Held to maturity (market value $12,563,678 and
$15,193,150, respectively) 12,806,527 15,074,601
Loans 73,659,524 61,737,509
Less- Unearned income 27,492 42,204
Allowance for loan losses 316,160 287,060
Loans in process 396,712 --
------------ -----------
Net loans 72,919,160 61,408,245
------------ -----------
Federal Home Loan Bank stock, at cost 735,400 733,700
Premises and equipment, net 1,904,773 1,868,569
Accrued interest receivable 676,739 573,548
Deferred tax asset 93,053 --
Other assets 692,651 297,280
------------ -----------
Total assets $104,379,405 $91,840,655
============ ===========
LIABILITIES AND EQUITY
----------------------
Liabilities:
Noninterest-bearing deposits $ 2,223,182 $ 2,082,444
Interest-bearing deposits 79,763,219 78,648,228
------------ -----------
Total deposits 81,986,401 80,730,672
Federal Home Loan Bank advances 6,177,000 2,977,000
Advance payments by borrowers for taxes and
insurance 356,448 571,780
Income taxes payable -- 71,149
Deferred tax liability -- 45,317
Other liabilities 673,602 266,762
------------ -----------
Total liabilities 89,193,451 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 7,242,553 7,245,432
Net unrealized holding gains (losses) on
available for sale securities, net of taxes (254,993) (67,457)
------------ -----------
Total equity 15,185,954 7,177,975
------------ -----------
Total liabilities and equity $104,379,405 $91,840,655
============ ===========
The accompanying notes are an integral part of these financial statements.
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PRESTIGE BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended
September 30,
----------------------------------
1996 1995
---------- ----------
Interest income:
Interest and fees on loans $1,342,274 $1,087,917
Interest on mortgage-backed
securities 222,904 258,840
Interest and dividends on
other investment securities 165,914 85,531
Interest on deposits in other
financial institutions 15,927 19,265
---------- ----------
Total interest income 1,747,019 1,451,553
---------- ----------
Interest expense:
Interest on deposits 847,732 838,702
Advances from Federal Home
Loan Bank 51,123 36,882
---------- ----------
Total interest expense 898,855 875,584
---------- ----------
Net interest income 848,164 575,969
Provision for loan losses 11,000 9,000
---------- ----------
Net interest income
after provision
for loan losses 837,164 566,969
---------- ----------
Other income:
Fees and service charges 63,516 62,649
Other income, net 8,716 9,434
---------- ----------
Total other income 72,232 72,083
---------- ----------
Other expenses:
Salaries and employee benefits 309,861 247,099
Premises and occupancy costs 79,614 79,205
Federal deposit insurance
premiums 548,485 43,911
Data processing costs 43,505 39,041
Advertising costs 25,217 24,777
Federal Home Loan Bank deposit and
demand account charges 40,392 35,934
ATM transaction fees 24,300 22,141
Other expenses 79,192 63,917
---------- ----------
Total other expenses 1,150,566 556,025
---------- ----------
Income (loss) before income
tax expense (241,170) 83,027
Income tax (benefit)/expense (95,848) 28,246
---------- ----------
Net income (loss) $ (145,322) $ 54,781
========== ==========
Earnings (loss) per share (1) $ (0.16) N/A
(1) Earnings per share information is not presented as the Corporation
completed its stock offering on June 27, 1996.
The accompanying notes are an integral part of these financial statements.
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PRESTIGE BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Nine Months Ended
September 30,
----------------------------------
1996 1995
---------- ----------
Interest income:
Interest and fees on loans $3,676,562 $3,179,817
Interest on mortgage-backed
securities 705,873 760,674
Interest and dividends on
other investment securities 456,803 249,606
Interest on deposits in other
financial institutions 72,044 46,098
---------- ----------
Total interest income 4,911,282 4,236,195
---------- ----------
Interest expense:
Interest on deposits 2,556,656 2,360,871
Advances from Federal Home
Loan Bank 163,258 144,444
---------- ----------
Total interest expense 2,719,914 2,505,315
---------- ----------
Net interest income 2,191,368 1,730,880
Provision for loan losses 29,000 27,000
---------- ----------
Net interest income
after provision
for loan losses 2,162,368 1,703,880
---------- ----------
Other income:
Fees and service charges 192,894 159,926
Other income, net 27,463 374
---------- ----------
Total other income 220,357 160,300
---------- ----------
Other expenses:
Salaries and employee benefits 887,934 750,896
Premises and occupancy costs 246,424 232,652
Federal deposit insurance
premiums 639,329 129,120
Data processing costs 129,084 117,765
Advertising costs 67,156 70,516
Federal Home Loan Bank deposit and
demand account charges 116,982 105,165
ATM transaction fees 69,219 63,972
Other expenses 239,440 195,429
---------- ----------
Total other expenses 2,395,568 1,665,515
---------- ----------
Income (loss) before income
tax expense (12,843) 198,665
Income tax (benefit)/expense (9,964) 67,994
---------- ----------
Net income (loss) $ (2,879) $ 130,671
========== ==========
Earnings (loss) per share (1) N/A N/A
(1) Earnings (loss) per share information is not presented as the Corporation
completed its stock offering on June 27, 1996.
The accompanying notes are an integral part of these financial statements.
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PRESTIGE BANCORP, INC.
CONSOLIDATED STATEMENTS OF EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 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) $ 7,177,976
Net income (loss) -- -- -- (2,879) -- (2,879)
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 -- -- -- -- (187,536) (187,537)
-------- ---------- ---------- ---------- --------- -----------
Balance, September 30, 1996 $963,023 $8,005,781 $ (770,410) $7,242,553 $(254,993) $15,185,954
======== ========== ========== ========== ========= ===========
Balance, December 31, 1994 $ -- $ -- $ -- $7,084,573 $ (35,463) $ 7,049,110
Net income -- -- -- 130,671 -- 130,671
Decrease in net unrealized
holding losses on
available for sale
securities, net of taxes -- -- -- -- 16,621 16,621
-------- ---------- ---------- ---------- --------- -----------
Balance, September 30, 1995 $ -- $ -- $ -- $7,215,244 $ (18,842) $ 7,196,402
======== ========== ========== ========== ========= ===========
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PRESTIGE BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended
September 30,
-----------------------------------
1996 1995
------------ -----------
Operating activities:
Net (loss) income $ (2,879) $ 130,671
------------ -----------
Adjustments to reconcile net income
to net cash (used) provided by operating
activities-
Depreciation of premises and equipment 128,715 114,345
Amortization of premiums and discounts, net (6,421) (2,156)
Loss on sale of premises and equipment -- 28,533
Provision for loan losses 29,000 27,000
Deferred income taxes (5,621) 4,926
Increase (decrease) in other liabilities 406,840 (64,331)
Decrease in income taxes payable (71,149) (31,553)
Increase in accrued interest receivable (103,191) (9,406)
Increase in other assets (395,371) (74,789)
Other, net 1,786 (2,522)
------------ -----------
Total adjustments (15,412) (9,953)
------------ -----------
Net cash (used) provided by
operating activities (18,291) 120,718
------------ -----------
Investing activities:
Loan originations (19,638,827) (6,389,534)
Principal payments on loans 8,097,126 5,708,970
Principal payments on mortgage-backed securities
available for sale 522,502 --
Principal payments on mortgage-backed securities
held to maturity 1,265,646 1,230,900
Purchases of-
Mutual fund investments available for sale (48,102) (50,992)
Investment securities available for sale (4,612,962) --
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 (164,919) (436,471)
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 (13,581,236) (887,184)
------------ -----------
Financing activities:
Net change in advance payments by
borrowers for taxes and insurance (215,332) (174,294)
Proceeds from Federal Home Loan Bank advances 20,150,000 --
Payments on Federal Home Loan Bank advances (16,950,000) (1,800,000)
Net increase (decrease) in Money Market, NOW and
Passbook savings accounts 2,624,047 (3,048,784)
Net increase (decrease) in certificate accounts (1,368,318) 5,909,876
Additional paid-in-capital from stock offering 8,198,394 --
------------ -----------
Net cash provided by financing activities 12,438,791 886,798
------------ -----------
Net (decrease) increase in cash and cash equivalents (1,160,736) 120,332
Cash and cash equivalents at beginning
of period 4,393,667 1,540,231
------------ -----------
Cash and cash equivalents at end of period $ 3,232,931 $ 1,660,563
============ ===========
Supplemental disclosures of cash flow information:
Cash paid during the period for
income taxes $ 132,000 $ 92,770
============ ===========
Cash paid during the period for
interest on deposits and borrowings $ 2,718,371 $ 2,505,647
============ ===========
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 at $10.00 per share. Simultaneously the Bank converted (see
Note 8) from a federally-chartered mutual savings bank to a federally-chartered
stock savings bank with a corresponding exchange of its stock for approximately
50% of the net offering 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 and public offering 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 nine months ended September 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).
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9
2. INVESTMENT SECURITIES:
The cost and market values of investment securities are summarized as follows:
Investment securities held to maturity:
SEPTEMBER 30, 1996
------------------------------
AMORTIZED MARKET
COST VALUE
----------- -----------
U.S. government and government
agency obligations due within one year $ 500,051 $ 499,375
U.S. government and government
agency obligations due within five years 2,001,900 1,969,375
Federal Home Loan Mortgage
Corporation (FHLMC) certificates 8,775,189 8,534,427
Government National Mortgage
Association (GNMA) certificates 1,461,327 1,444,129
Federal National Mortgage Association
(FNMA) certificates 113,060 116,371
----------- -----------
$12,806,527 $12,563,677
=========== ===========
Investment securities available for sale:
SEPTEMBER 30, 1996
------------------------------
MARKET
COST VALUE
----------- -----------
U.S government and government
agency obligations due within five years $ 1,999,896 1,945,000
U.S. government and government
agency obligations due within ten years 2,503,918 2,412,368
U.S. government and government
agency obligations due within fifteen years 2,000,000 1,891,555
Federal Home Loan Mortgage Corporation
(FHLMC) certificates 2,436,788 2,354,018
Federal National Mortgage Association
(FNMA) certificates 1,361,932 1,284,673
Mutual fund investment 1,334,915 1,305,557
Common stock portfolio 113,375 125,000
----------- -----------
$11,750,824 $11,318,171
=========== ===========
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3. LOANS RECEIVABLE:
Loans receivable are summarized as follows:
SEPTEMBER 30,
1996
-----------
Commercial, including commercial secured by real estate $ 1,459,008
-----------
Real estate loans:
1-4 family 63,405,892
Construction 583,200
-----------
63,989,092
Less-Undisbursed loan proceeds 396,712
Deferred loan fees 27,492
-----------
63,564,888
-----------
Consumer loans:
Share 521,640
Automobile 1,258,265
Home equity 3,807,750
Student 2,198,728
Credit cards 350,501
Other 74,540
-----------
8,211,424
-----------
73,235,320
Less-Allowance for loan losses 316,160
-----------
$72,919,160
===========
4. ALLOWANCE FOR LOAN LOSSES:
Activity with respect to the allowance for loan losses is summarized as
follows:
NINE MONTHS ENDED
JUNE 30,
-------------------------
1996 1995
-------- -------
Balance at beginning of period $287,060 $303,312
Provision for loan losses 29,000 27,000
Charge-offs -- (9,429)
Recoveries 100 489
-------- --------
Balance at end of period $316,160 $321,372
======== ========
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5. DEPOSITS:
Deposits are summarized as follows:
SEPTEMBER 30,
1996
-----------
Total noninterest-bearing deposits $ 2,223,182
===========
Interest-bearing deposits:
Money market demand accounts $11,412,003
NOW accounts 8,213,327
Passbook and club accounts 15,664,407
-----------
35,289,737
-----------
Certificate accounts:
Due within one year 28,488,482
Due after one but within three years 11,226,000
Thereafter 4,759,000
-----------
44,473,482
-----------
Total interest-bearing deposits $79,763,219
===========
Deposits of $100,000 or more $ 7,271,057
===========
6. INCOME TAXES:
The provision for income taxes is as follows:
Nine Months Ended
September 30,
-------------------------
1996 1995
------- -------
Federal $(9,058) $63,425
State (906) 4,569
------- -------
Total income tax expense $(9,964) $67,994
======= =======
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 September 30, 1996, and December 31, 1995,
amounted to $336,260 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
Prestige Bancorp, Inc., a Pennsylvania corporation. The Plan provided that the
holding company offer nontransferable subscription rights to purchase common
stock of the holding company. The rights were 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. The costs of issuing the
common stock were 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 with net proceeds from the offering totaling $8,198,394 after
expenses.
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 accordance with supervisory regulations. 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.
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13
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FINANCIAL CONDITION
At September 30, 1996, the Company's total assets amounted to $104.4
million compared with $91.8 million at December 31, 1995. The $12.5 million or
13.7% increase was primarily due to an increase of $11.5 million or 18.7% in
loans receivable and an increase of $1.6 million or 6.9% in investment
securities. Such increase in assets was funded through an increase in deposits
of $1.3 million or 1.6% and a $3.2 million increase or 107.5% 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, Federal Savings Bank (Prestige Bank) from a mutual chartered
savings association to a stock chartered savings association on June 27, 1996
and the public offering of stock of the Company. All operations of the Company
prior to June 27, 1996, were conducted by Prestige Bank. Prestige Bank is the
sole subsidiary of the Company. Total shareholders' equity amounted to $15.2
million or 14.55% of total assets at September 30, 1996, compared to equity of
$7.2 million or 7.8% of total assets at December 31, 1995.
The Company's nonperforming assets decreased $163,000 or 46.8% to
$185,000 at September 30, 1996, compared to $348,000 at December 31, 1995. The
decrease was due to a decrease in nonperforming loans.
RESULTS OF OPERATIONS
GENERAL--The Company's net loss for the quarter ended September 30,
1996, was $145,000 compared to net income of $55,000 for the same quarter in
the prior year. The net loss for the nine months ended September 30, 1996, was
$3,000 compared to $131,000 for the same period in the prior year. The net loss
for the quarter and nine months ended was due to the impact of a one-time
special assessment of 65.7 basis points or $502,000 before tax ($308,000 after
tax) charged by the Federal Deposit Insurance Corporation (FDIC) to provide
additional capital for the savings association insurance fund. Excluding the
effect of this one-time special assessment, Prestige Bancorp, Inc. would have
recognized net income of $163,000 for the quarter ended September 30, 1996, and
the annualized return on average assets and return on average equity for the
quarter ended September 30, 1996, would have been .63% and 4.21%, respectively,
compared to .25% and 3.07% for the comparable period of 1995. For the quarter
ended September 30, 1996, earnings (loss) per share was ($0.16) and would have
been $0.18 without the special assessment, would have been $305,000 and the
annualized return on average assets and return on average equity for the nine
months ended September 30, 1996, would have been .42% and 3.77%, respectively,
compared to .20% and 2.44% for the comparable period of 1995.
INTEREST INCOME--The Company reported interest income of $1.7 million
and $4.9 million for the three and nine months ended, respectively, September
30, 1996, as compared to $1.5 million and $4.2 million for the three and nine
months ended, respectively, September 30, 1995. The increase of $295,000 or
20.4% for the quarter ended September 30, 1996, as compared
- 11 -
14
to the same period in the prior year can be attributed to a $254,000 or 23.4%
increase in interest and fees on loans and a $80,000 or 94.0% increase in
interest and dividends on other investment securities. The increase of $675,000
or 15.9% for the nine months ended September 30, 1996, as compared to the same
period in the prior year can be attributed to a $497,000 or 15.6% increase in
interest and fees on loans and a $207,000 or 83.0% increase in interest and
dividends on other investment securities. The increases from 1996 to 1995 for
both the quarter and nine months ended September 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 and earning assets.
INTEREST EXPENSE--Interest expense increased $23,000 or 2.7% and
$215,000 or 8.6% during the three and nine months ended September 30, 1996,
respectively. The increase for the three months ended September 30, 1996, was
primarily due to growth in deposits. The increase for the nine months ended
September 30, 1996, was due to growth in deposits along with an increase in the
average cost of interest-bearing liabilities from 4.16% to 4.22%. Such increase
in the average cost of interest-bearing liabilities was the result of rates
offered by the Company on certain deposit products in response to rated offered
by other financial institutions.
PROVISION FOR LOAN LOSSES--During the three months and nine months
ended September 30, 1996 the Company recorded provisions for losses on loans of
$11,000 and $29,000, respectively. The Company recorded such provisions to
adjust the Company's allowance for loan losses to a level deemed appropriate
based upon an assessment of the volume and type of lending presently being
conducted by the Company, industry standards and economic conditions in the
Company's market area.
OTHER INCOME--Other income remained stable for the quarter ended
September 30, 1996, compared to the same quarter in the prior year. Other
income increased by $60,000 for the nine months ended September 30, 1996,
compared to the same period in the prior year which can be primarily attributed
to additional mortgage applications and, conversely, during the first quarter
of 1995, the Company recognized a loss of $28,000 on the sale of its previous
Mt. Oliver branch building.
OTHER EXPENSES--The increase of $595,000 and $730,000 in other
expenses for the three months and nine months, respectively, ended September
30, 1996, was the result of the one-time special assessment by the FDIC of
$502,000, increased employees, increases in salary, increases in benefit costs
and increases in other expenses.
INCOME TAXES--the Company received an income tax benefit of $96,000
and $10,000 for the three months and nine months, respectively, ended September
30, 1996, as compared to an income tax provision of $28,000 and $68,000 for the
same period in the prior year. Such decreases were due to the $194,000
reduction in provision for income taxes for the one-time special assessment.
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15
LIQUIDITY AND CAPITAL RESOURCES
The Company'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 Company manages the pricing of its deposits to
maintain a deposit balance deemed appropriate and desirable by its Board of
Directors. In addition, the Company invests in short-term, interest-earning
assets which provides liquidity to meet lending requirements. As of September
30, 1996, the Company had $6.2 million of outstanding advances from the Federal
Home Loan Bank (FHLB) of Pittsburgh.
During the nine months ended September 30, 1996 and 1995, the
Company's operating activities used net cash of approximately $18,000 and
provided net cash of approximately $121,000, respectively. The primary reasons
for this change were an increase in other assets and accrued interest
receivable of approximately $321,000 and $94,000, respectively, a decrease in
net income and income taxes payable of $134,000 and $40,000, respectively. This
was partially offset by a $471,000 increase other liabilities.
Net cash used by investing activities was approximately $12.7 million
more between years for the nine months ended September 30, 1996. During the
nine months ended September 30, 1996, the Company originated $11.5 million in
new loans in excess of principal payments received on existing loans. This was
approximately $10.9 million greater than in 1995. Also, the Company purchased
$4.6 million of investment securities available for sale while $1.0 million of
held-to-maturity investment securities matured.
Net cash provided by financing activities for the nine months ended
September 30, 1996, was approximately $12.4 million, attributable to increases
in core deposits of $2.6 million, increases in net Federal Home Loan Bank
advances of $3.2 million and a $8.2 million increase of capital raised in
connection with the conversion of Prestige Bank from a mutual chartered savings
association to a stock chartered savings association. During the same period
last year, the Company experienced a $887,000 increase in net cash provided by
financing activities. Such increase was due to $5.9 million increase in
certificate accounts which was offset by a decrease of $1.8 million and $3.0
million in Federal Home Loan Bank advances and core deposits, respectively.
The Company 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 September 30, 1996, the Company's tangible, core, and risk-based
capital ratios amounted to 11.19%, 11.19%, and 25.63%, respectively, which
substantially exceeded applicable requirements.
PRESTIGE BANCORP, INC.
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16
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
27 Financial data Schedule
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17
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: November 12, 1996 By: /s/ ROBERT S. ZYLA
-----------------------
Robert S. Zyla,
President
Dated: November 12, 1996 By: /s/ JAMES M. HEIN
-----------------------
James M. Hein,
Controller
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