0000950148-95-000539.txt : 19950816 0000950148-95-000539.hdr.sgml : 19950816 ACCESSION NUMBER: 0000950148-95-000539 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950630 FILED AS OF DATE: 19950815 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: PRESIDENTIAL MORTGAGE CO CENTRAL INDEX KEY: 0000757078 STANDARD INDUSTRIAL CLASSIFICATION: ASSET-BACKED SECURITIES [6189] IRS NUMBER: 953611304 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-14500 FILM NUMBER: 95563943 BUSINESS ADDRESS: STREET 1: 21031 VENTURA BLVD CITY: WOODLAND HILLS STATE: CA ZIP: 91364 BUSINESS PHONE: 8189928999 10-Q 1 FOR THE QUARTER PERIOD ENDED JUNE 30, 1995 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q QUARTERLY REPORT --------------------- /X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1995 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 2-94289 PRESIDENTIAL MORTGAGE COMPANY (Exact name of Registrant as specified in its charter) California 95-3611304 (State or other jurisdiction of (IRS Employer Identification Number) incorporation or organization) 21031 Ventura Boulevard Woodland Hills, California 91364 (Address of Principal Executive Office) (Zip Code) Registrant's telephone number, including area code (818) 992-8999 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 NO X . --- --- 2 PRESIDENTIAL MORTGAGE COMPANY (A California Limited Partnership) AND SUBSIDIARIES Consolidated Balance Sheet Unaudited December 31, 1994 and June 30, 1995
JUNE 30, DECEMBER 31, 1995 1994 Assets Cash & cash equivalents $13,840,000 19,628,000 Accounts receivable, net 10,393,000 5,549,000 Interest receivable 559,000 1,125,000 Loans receivable, net (note 2) 55,739,000 65,056,000 Excess yield receivable 1,805,000 888,000 Real estate acquired in settlement of loans 5,291,000 7,621,000 Property and equipment, net 1,537,000 1,322,000 Goodwill 1,651,000 1,749,000 Other assets 1,407,000 809,000 ----------- ------------ Total Assets $92,222,000 103,747,000 =========== ============ Liabilities and Partners' Capital Liabilities: Thrift certificates payable $64,748,000 69,501,000 Accounts payable, accrued expenses and interest payable 4,945,000 5,610,000 Partnership withdrawals payable 1,120,000 1,120,000 Notes payable 10,000,000 14,778,000 Mortgages payable - secured by real estate acquired in settlement of loans 1,313,000 2,313,000 ----------- ------------ $82,126,000 93,322,000 ----------- ------------ Partners' Capital 10,096,000 10,425,000 ----------- ------------ Total Liabilities & Partners' Capital $92,222,000 103,747,000 =========== ============
3 PRESIDENTIAL MORTGAGE COMPANY (A California Limited Partnership) AND SUBSIDIARIES Consolidated Statements of Income Unaudited
THREE MONTHS ENDED SIX MONTHS ENDED June 30, June 30, June 30, June 30, 1995 1994 1995 1994 Interest Income: Interest and fees on loans receivable 4,009,000 3,449,000 7,910,000 6,296,000 Interest on deposits with banks 233,000 65,000 459,000 131,000 --------- ---------- --------- ---------- Total interest income 4,242,000 3,514,000 8,369,000 6,427,000 Interest Expense: Interest on thrift certificates greater than $100,000 2,000 5,000 6,000 19,000 Interest on other thrift certificates 1,045,000 663,000 2,021,000 1,324,000 Interest on notes payable 379,000 532,000 804,000 1,042,000 --------- ---------- --------- ---------- Total interest expense 1,426,000 1,200,000 2,831,000 2,385,000 --------- ---------- --------- ---------- Net interest income 2,816,000 2,314,000 5,538,000 4,042,000 Provision for loan losses 554,000 468,000 1,000,000 685,000 --------- ---------- --------- ---------- Net interest income afer provision for loan losses 2,262,000 1,846,000 4,538,000 3,357,000 Noninterest income: Trustee and reconveyance fees 738,000 813,000 1,523,000 1,690,000 Other income 285,000 278,000 593,000 546,000 --------- ---------- --------- ---------- 1,023,000 1,091,000 2,116,000 2,236,000 Noninterest expense: General and administrative 1,729,000 1,807,000 3,142,000 3,317,000 Salaries, employee benefits and personnel services 1,895,000 1,983,000 3,692,000 3,742,000 Amortization of organization costs 45,000 25,000 73,000 39,000 Depreciation and amortization 123,000 136,000 239,000 271,000 Expenses on real estate acquired in settlement of loans (136,000) 588,000 25,000 935,000 Net loss (gain) on sales of real estate acquired in settlement of loans 249,000 199,000 326,000 117,000 --------- ---------- --------- ---------- 3,905,000 4,738,000 7,497,000 8,421,000 --------- ---------- --------- ---------- Net income before tax provision (620,000) (1,801,000) (843,000) (2,828,000) --------- ---------- --------- ---------- Tax Provision (84,000) 0 (514,000) 0 --------- ---------- --------- ---------- Net income after tax provision (536,000) (1,801,000) (329,000) (2,828,000) ========= ========== ========= ==========
4 PRESIDENTIAL MORTGAGE COMPANY (A California Limited Partnership) AND SUBSIDIARIES Consolidated Statements of Cash Flows (Unaudited) Six months ended June 30, 1995 and 1994
Six Months Six Months Ended Ended 6-30-95 6-30-94 Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Net income (329,000) (2,828,000) Depreciation & Amortization 312,000 310,000 Provision for loan losses 1,000,000 685,000 Net (gain) loss on sales of real estate acquired in settlement of loans 326,000 117,000 (Increase) decrease in asset accounts: Accounts Receivable (4,844,000) 467,000 Interest receivable 566,000 511,000 Excess yield receivable (917,000) 168,000 Goodwill 98,000 (132,000) Other assets (671,000) (935,000) Increase (decrease) in liability accounts: Accounts payable and accrued expenses (665,000) (787,000) Net cash provided by (used in) operating ---------- ---------- activities (5,124,000) (2,424,000) ---------- ---------- Cash flows from investing activities: (Increase) Decrease in Loans Receivable 8,317,000 1,609,000 (Increase) Decrease in Prop & Equip (454,000) (429,000) Decrease in Mortgages Payable on Other Real Estate (1,000,000) (264,000) Decrease in Other Real Estate 2,004,000 283,000 Proceeds from repayment of receivable from related party 0 0 ---------- ---------- Net cash provided by (used in) investing 8,867,000 1,199,000 activities ---------- ---------- Cash flow from financing activities: Distribution to Partners 0 0 Withdrawal of Partnership Shares 0 0 Decrease in Thrift Certificates (4,753,000) 4,130,000 Decrease in Line of Credit (4,778,000) (3,000,000) Proceeds from issuance of partnership shares 0 0 ---------- ---------- Net cash provided by (used in) financing (9,531,000) 1,130,000 activities ---------- ---------- Net decrease in Cash and Cash Equivalents (5,788,000) (95,000) Cash and Cash Equivalents at Year End 19,628,000 13,219,000 ---------- ---------- Cash and Cash Equivalents at June 30, 13,840,000 13,124,000 ========== ==========
5 PRESIDENTIAL MORTGAGE COMPANY (A California Limited Partnership) AND SUBSIDIARIES Notes to Combined Financial Statements 1) The unaudited financial information furnished herein, in the opinion of management, reflects all adjustments (all of which are of a normal recurring nature) which are necessary to fairly state the Partnership's financial position, its cash flows and the results of its operations. The Partnership presumes that users of the interim financial information herein have read or have access to the audited financial statements and Management's Discussion and Analysis of Financial Condition and Results of Operations for the preceding fiscal year and that the adequacy of additional disclosure needed for a fair presentation, except in regard to material contingencies, may be determined in that context. Accordingly, footnote and other disclosures which would substantially duplicate the disclosure contained in the Partnership's most recent annual report has been omitted. The interim financial information herein is not necessarily representative of operations for a full year for various reasons including changes in interest rates, volume of loans origi- nated and loans paid off. 2) Loans Receivable The following is a summmary of Loans Receivable:
at 6-30-95 at 12-31-94 Interest bearing loans $60,779,000 $70,791,000 Deferred loan fees, net (1,240,000) (1,428,000) Allowance for loan losses (3,800,000) (4,307,000) ----------- ----------- Total $55,739,000 $65,056,000 =========== ===========
The following is a summmary of Allowance for Loan Losses: Balance at 12-31-94 $ 4,307,000 Additions to reserve 1,000,000 Charge offs/recoveries (1,507,000) ----------- Balance at 6-30-95 $ 3,800,000 ===========
6 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FINANCIAL CONDITION Total consolidated assets of Presidential Mortgage Company (referred to herein as the "Company" with respect to consolidated information, and as "Presidential" with respect to the unconsolidated operations of Presidential Mortgage Company) decreased $11.5 million (11.1%) to $92.2 million at June 30, 1995 from $103.7 million at December 31, 1994. The decrease resulted primarily from declines in cash and cash equivalents, loans receivable, real estate acquired in settlement of loans ("OREO") and interest receivable, offset by increases in accounts receivable and excess yield receivable. Loans receivable decreased by $9.3 million (14.3%), to $55.7 million from $65.1 million, as a result of loan pay offs and loan sales. Cash and cash equivalents decreased by $5.8 million (29.5%), to $13.8 million from $19.6 million. However, this decline in cash and cash equivalents was offset by a $4.8 million (87.3%) increase in accounts receivable, to $10.4 million at June 30, 1995 from $5.5 million at December 31, 1994. Accounts receivable reflected $6.4 million due for loans sold as of June 30, 1995, for which payment was not received until July 1995. Excess yield receivable increased $.9 million (100%), to $1.8 million from $.9 million, reflecting primarily the present value of an annual servicing released fee payable to Pacific Thrift and Loan Company ("Pacific Thrift"), the Company's primary operating subsidiary, by the purchaser of certain loans originated for sale. See the Company's Annual Report on Form 10-K for the year ended December 31, 1994, Item 1. "Business -- Lending Activities -- Loans Originated for Sale." OREO declined by $2.3 million (30.6%), to $5.3 million at June 30, 1995 from $7.6 million at December 31, 1994, reflecting sales of OREO. Interest receivable declined by $.6 million (50.3%), to $.5 million from $1.1 million, primarily due to the reduction of the loan portfolio. Total liabilities decreased $11.2 million (12.0%) to $82.1 million at June 30, 1995 from $93.3 at December 31, 1994. The decrease resulted from declines in notes payable, thrift certificates payable, accounts payable, accrued expenses and interest payable and mortgages payable on OREO. Notes payable decreased by $4.8 million (32.4%), to $10.0 million from $14.8 million, due to pay down of the bank debt. Thrift certificates payable decreased by $4.8 million (6.8%) to $64.7 million from $69.5 million, reflecting the reduction in total assets of Pacific Thrift. Accounts payable, accrued expenses and interest payable decreased by $.7 million (11.9%), to $4.9 million from $5.6 million at December 31, 1994, primarily due to a $.4 million reduction in accrued expenses for the environmental remediation of OREO acquired by Pacific Thrift after receiving a lower bid for completion of the work. Mortgages payable on OREO decreased by $1.0 million (43.2%), to $1.3 million from $2.3 million, due to sale of OREO. Total partnership capital decreased by $.3 million (3.2%) to $10.1 million from $10.4 million, due to net losses of $.3 million incurred during the six months ended June 30, 1995. RESULTS OF OPERATIONS The Company incurred a net operating loss of $.6 million for the quarter ended June 30, 1995, compared with a net operating loss of $1.8 million for the quarter ended June 30, 1994. Net operating losses for the six months ended June 30, 1995 were $.8 million, compared with $2.8 million for the six months ended June 30, 1994. However, due to the recognition of tax benefits from Pacific Thrift's operating loss carryforward equal to $.1 million for the second quarter and $.5 million for the six months ended June 30, 1995, net losses after taxes were $.5 million for the quarter ended June 30, 1995 and $.3 million for the six months ended June 30, 1995. The reduction in the net operating loss in the first and second quarters of 1995 was due primarily to increases in total interest income and decreases in noninterest expenses from the first and second quarters of 1994. Total interest income increased by $.7 million (20.7%) for the quarter and $1.9 million (30.2%) for the six months ended June 30, 1995, from the same periods of 1994. Total interest expense increased by $.2 million (18.8%) for the quarter and $.4 million (18.7%) for the six months ended June 30, 1995 from the same periods of 1994, due to higher interest rates paid on thrift certificates by Pacific Thrift. Net interest income after provision for loan losses increased by $.4 million (22.5%) for the quarter and $1.2 million (35.2%) for the six months ended June 30, 1995, from the same periods of 1994. Noninterest income decreased by less than $.1 million (6.2%) for the quarter and by $.1 million (5.4%) for the six months ended June 30, 1995, primarily as a result of decreases in trustee and reconveyance fees. Noninterest expense decreased by $.8 million (17.6%) for the quarter and $.9 million (11.0%) for the six months ended June 30, 1995. Reductions in noninterest expense were primarily due to reductions in general and administrative expenses, salaries, employee benefits and personnel services, and expenses on OREO. General and administrative expenses declined by $.1 million (4.3%) for the quarter and $.2 million (5.3%) for the six months ended June 30, 1995 from the same periods of 1994. Salaries, employee benefits and personnel services decreased by $.1 million (4.4%) for the quarter and $.05 million (1.3%) for the six months ended June 30, 1995 from the same periods of 1994. Expenses on OREO decreased by $.7 million (123%) for the quarter and $.9 million (97.3%) for the six months ended June 30, 1995 compared with the same periods of 1994. Offsetting these 7 reductions were increases in losses on sales of OREO of $.05 million (25%) for the quarter and $.2 million (178.6%) for the six months ended June 30, 1995, compared with the same periods of 1994. PROVISION FOR LOAN LOSSES The provision for loan losses was $.55 million for the quarter and $1.0 million for the six months ended June 30, 1995, compared with $.47 million for quarter and $.68 million for the same periods of 1994. The total allowance for loan losses was $3.8 million at June 30, 1995 compared with $4.3 million at December 31, 1994, reflecting sales and payoffs of loans as to which reserves had previously been taken and improvements in status in some portfolio loans. LIQUIDITY AND CAPITAL RESOURCES The primary source of the Company's liquidity is the cash and cash equivalents maintained by Pacific Thrift in connection with its deposit-taking and lending activities. At June 30, 1995, cash and cash equivalent assets totalled $13.8 million, compared with $19.6 million at December 31, 1994. However, this did not reflect an additional receivable of $6.4 million for loans sold as of June 30, 1995 which was paid for in July 1995. Presidential does not maintain significant cash and cash equivalent assets on its own behalf, and uses substantially all of its cash flow to pay down the bank debt on a monthly basis. Pacific Thrift is subject to certain leverage and risk-based capital adequacy standards applicable to FDIC-insured institutions. At June 30, 1995, Pacific Thrift was classified as "adequately capitalized." See the Company's Annual Report on Form 10-K for the year ended December 31, 1994, Item 1. "Business -- Supervision and Regulation -- Governmental Policies and Recent Legislation -- Capital Adequacy Guidelines." At June 30, 1995, the Company had no material outstanding commitments to fund loans. Certificates of deposit which are scheduled to mature in one year or less from June 30, 1995 totalled $52.9 million. Based upon historical experience, management believes that a significant portion of such deposits will be renewed and will remain with Pacific Thrift. As indicated in the Statements of Cash Flows, the Company used $5.1 million in cash from operating activities from December 31, 1994 through June 30, 1995. This includes a deduction from cash for the $6.4 million receivable for loans sold at June 30, 1995 which were paid for in July 1995. The Company realized $8.9 million from investing activities for the six months ended June 30, 1995, primarily due to a net decrease of $8.3 million in loans receivable. The Company used $9.5 million in financing activities for the six months ended June 30, 1995, primarily reflecting a $4.7 million decrease in thrift certificates and a $4.8 million decrease in the bank debt. No distributions or withdrawal payments were made to limited partners in accordance with the restrictions on such payments under the bank loan agreement. PART II OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS. At the end of March 1995, Pacific Thrift and one of its employees were served with a complaint by a lending industry competitor filed in the superior court for Los Angeles County on March 24, 1995. The complaint alleges that Pacific Thrift's employee wrongfully used certain trade secrets of the competitor and wrongfully solicited another employee of the plaintiff to join Pacific Thrift. The complaint seeks injunctive relief and unspecified actual and punitive damages. Plaintiff's motion for a preliminary injunction was denied at a hearing held in August 1995, and management believes that the complaint is without merit. There have been no other material developments in legal proceedings since the date of filing of the Company's Annual Report on Form 10-K for the year ended December 31, 1994. ITEM 2. CHANGES IN SECURITIES. None. ITEM 3. DEFAULTS UPON SENIOR SECURITIES. None. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. No matters were submitted to the vote of security holders during the quarter ended June 30, 1995. 8 ITEM 5. OTHER INFORMATION. None. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. (a) Exhibits. None. (b) Reports on Form 8-K. None. 9 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized. PRESIDENTIAL MORTGAGE COMPANY (Registrant) August 14, 1995 JOEL R. SCHULTZ --------------- Joel R. Schultz, Chief Managing Officer of Registrant; President of Presidential Services Corporation ("PSC"), general partner of Presidential Management Company, a California limited partnership, general partner of the Registrant August 14, 1995 CHARLES J. SIEGEL ----------------- Charles J. Siegel, Chief Financial and Accounting Officer of the Registrant EX-27 2 FINANCIAL DATA SCHEDULE
9 1,000 6-MOS DEC-31-1994 JAN-01-1995 JUN-30-1995 13,660 180 0 0 0 0 0 59,539 3,800 92,222 64,748 10,000 5,658 1,720 0 0 0 10,096 92,222 7,910 459 0 8,369 2,027 2,831 5,538 1,000 0 7,497 (843) (843) 0 0 (329) 0 0 12.42 4,800 1,359 217 0 4,307 1,508 1 3,800 0 0 0