UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 1999
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 1-14577
SECURITY OF PENNSYLVANIA FINANCIAL CORP.
- --------------------------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
Delaware 23-2980576
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
31 W. Broad Street, Hazleton, Pennsylvania 18201
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(Address of principal executive offices) (Zip Code)
(570) 454-0824
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(Issuer's telephone number, including area code)
Not Applicable
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(Former name, former address and former fiscal year,
if changes since last report)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 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
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YES NO X
------ ------
APPLICABLE ONLY TO CORPORATE ISSUERS:
State the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date: the Issuer had 1,507,650
shares of common stock, par value $0.01 per share, outstanding as of November 4,
1999.
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SECURITY OF PENNSYLVANIA FINANCIAL CORP.
FORM 10-QSB
INDEX
Page
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PART I.FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheet at
September 30, 1999 (unaudited) and June 30, 1999 ....................... 1
Consolidated Income Statement and Statement of Comprehensive Income
for the Three Months Ended September 30, 1999 and 1998 (unaudited) ..... 2
Consolidated Statement of Changes in Equity
for the Three Months Ended September 30, 1999 .......................... 3
Consolidated Statement of Cash Flows for the
Three Months Ended September 30, 1999 and 1998 ......................... 4
Notes to Consolidated Financial Statements ............................. 5
Item 2. Management's Discussion and Analysis or Plan of Operation .............. 6
PART II:OTHER INFORMATION
Item 1. Legal Proceedings ...................................................... 11
Item 2. Changes in Securities and Use of Proceeds .............................. 11
Item 3. Defaults Upon Senior Securities ........................................ 11
Item 4. Submission of Matters to a Vote of Security Holders .................... 11
Item 5. Other Information ...................................................... 11
Item 6. Exhibits and Reports on Form 8-K ....................................... 12
SIGNATURES ........................................................................ 13
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
--------------------
SECURITY OF PENNSYLVANIA FINANCIAL CORP.
CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1999 (UNAUDITED) AND JUNE 30, 1999
(In thousands, except share and per share information)
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<CAPTION>
September 30, June 30,
1999 1999
---------- ---------
(Unaudited)
<S> <C> <C>
Assets:
Cash and cash equivalents ................................ $991 $1,853
Interest-bearing deposits with banks ..................... 11,493 13,383
--------- ---------
Total cash and cash equivalents ....................... 12,484 15,236
Held-to-maturity securities (fair value of $5,415 at
9/99 and $1,492 at 6/99)............................... 9,373 1,492
Available for sale securities ............................ 27,459 27,424
Loans (less allowance for loan loss of $430 at 9/99
and $419 at 6/99)...................................... 77,560 72,789
Property and equipment, net .............................. 1,292 1,281
Accrued interest receivable .............................. 881 836
Real estate owned, net ................................... 134 53
Other assets ............................................. 466 420
--------- ---------
Total assets .................................... $129,650 $119,531
========= =========
Liabilities and Equity:
Deposits ................................................. $97,953 $95,815
Advances from borrowers for taxes and insurance .......... 15 26
Borrowed funds ........................................... 9,000 1,000
Accrued interest payable and other liabilities ........... 197 174
--------- ---------
Total liabilities ............................... 107,165 97,015
Common Stock ($.01 par value; 6,000,000 authorized shares,
1,587,000 shares issued ............................... 16 16
Additional paid-in capital ............................... 14,869 14,869
Unearned Employee Stock Ownership Plan (ESOP) shares ..... (1,210) (1,227)
Retained earnings - substantially restricted ............. 9,834 9,596
Accumulated other comprehensive income ................... (1,024) (738)
--------- ---------
Total equity .................................... 22,485 22,516
--------- ---------
Total liabilities and equity .................... $129,650 $119,531
======== ========
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SECURITY OF PENNSYLVANIA FINANCIAL CORP.
CONSOLIDATED INCOME STATEMENT
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1999 AND SEPTEMBER 30, 1998
(in thousands)
<TABLE>
<CAPTION>
Sepember 30, September 30,
1999 1998
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(Unaudited)
<S> <C> <C>
Interest income:
Loans ............................................. $1,426 $1,335
Interest and dividends on securities:
Taxable .................................. 464 321
Non-taxable .............................. 119 7
Dividends ................................ 10 10
Interest-bearing deposits with banks ..... 133 246
------- -------
Total interest income ........... 2,152 1,919
Interest expense:
Deposits .......................................... 970 1,085
FHLB advances and other borrowings ................ 50 --
------- -------
Total interest expense ................... 1,020 1,085
Net interest income ............................... 1,132 834
Provision for loan losses ......................... 9 5
------- -------
Net interest income after provision for loan losses 1,123 829
Noninterest income:
Other loan fees and service charges ............... 92 69
Gain (loss) on sale of:
Real estate owned ........................ (21) 1
Other .................................... 11 12
------- -------
Total noninterest income ........ 82 82
Noninterest Expense:
Salaries and net employee benefits ................ 388 322
Occupancy costs ................................... 68 68
Federal deposit insurance premiums ................ 14 15
Data processing ................................... 39 38
Professional fees ................................. 79 37
Foreclosed real estate expenses, net .............. 32 31
Charitable contributions .......................... 5 2
Other noninterest expense ......................... 136 107
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Total noninterest expense ....... 761 620
Income before provision for income taxes ................... 443 290
Income tax provision ....................................... 126 92
------- -------
NET INCOME ................................................. $317 $199
======= =======
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SECURITY OF PENNSYLVANIA FINANCIAL CORP.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1999 AND SEPTEMBER 30, 1998
(in thousands)
<TABLE>
<CAPTION>
September 30, September 30,
1999 1998
----------------- -----------------
(Unaudited)
<S> <C> <C>
Net income .................................................................... $ 317 $199
Increase/(decrease) in unrealized losses available-for-sale securities ........ (285) 49
----- ----
Comprehensive income .......................................................... $ 32 $248
===== ====
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SECURITY OF PENNSYLVANIA FINANCIAL CORP.
STATEMENT OF CHANGES IN EQUITY
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1999
(in thousands)
<TABLE>
<CAPTION>
Accumulated
Additional Other
Common Paid-in Retained Comprehensive Net
Stock Capital ESOP Earnings (Loss) Equity
--------- ---------- ---------- ---------- -------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance at June 30, 1999 ......... $ 16 $ 14,869 $ (1,227) $ 9,596 $ (738) $ 22,516
Net income ....................... -- -- -- 317 -- 317
Dividend payment ................. -- -- -- (79) -- (79)
Increase in unrealized losses on
available-for-sale securities.. -- -- -- -- (286) (286)
ESOP shares earned ............... -- -- 17 -- -- 17
---- -------- -------- -------- -------- --------
Balance at September 30, 1999 .... $ 16 $ 14,869 $ (1,210) $ 9,834 $ (1,024) $ 22,485
==== ======== ======== ======== ======== ========
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3
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SECURITY OF PENNSYLVANIA FINANCIAL CORP.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THREE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
(in thousands)
<TABLE>
<CAPTION>
September 30, September 30,
1999 1998
----------- ----------
(unaudited)
<S> <C> <C>
OPERATING ACTIVITIES:
Net income ............................................ $ 371 $ 198
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan losses and foreclosed real estate .. 9 5
Depreciation and amortization ......................... 26 62
Dividend Payment ...................................... (78) --
Real estate acquired through foreclosure .............. (81) (40)
Change in assets and liabilities:
Accrued interest receivable .................. (46) (44)
Other assets ................................. 96 (364)
Accrued interest payable and other liabilities 23 98
-------- --------
Net cash provided by operating activities ............. 257 (85)
-------- --------
INVESTMENT ACTIVITIES:
Purchase of held-to-maturity securities ............... (7,622) (420)
Purchase of available-for-sale securities ............. (285) (2,250)
Proceeds from maturities of held-to-maturity securities 2,094 1,886
Proceeds from the call of held-to-maturity securities . 250 --
Proceeds from maturities and principal paydowns on
available-for-sale securities ................ -- 1,796
Loans made to customers, net of principal collected ... (4,771) 365
Acquisition of office premises and equipment .......... (37) (37)
NET CASH USED IN INVESTING ACTIVITIES ................. (10,371) 1,340
-------- --------
FINANCING ACTIVITIES:
Net increase (decrease) in deposit accounts ........... 2,138 (2,316)
Net (decrease) in advances from borrowers
for taxes and insurance ...................... (11) (23)
Borrowed funds ........................................ 8,000 --
-------- --------
Net cash provided by financing activities ............. 10,127 (2,339)
-------- --------
Increase (decrease) by cash and equivalents ........... 4,747 (910)
Cash and equivalents - beginning of the year .......... 11,858 27,315
-------- --------
Cash and equivalents - end of year .................... $ 16,605 $ 26,405
======== ========
Supplemental Disclosure of Cash Flow Information:
Interest paid on deposits .................... $ 3,138 $ 987
Income taxes paid ............................ (65) 77
Supplemental Disclosure of Non-Cash Information:
Transfer from loans to real estate owned ..... 50 35
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4
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SECURITY OF PENNSYLVANIA FINANCIAL CORP.
Notes to Consolidated Financial Statements
(1) ORGANIZATION
Security of Pennsylvania Financial Corp. (the Company") was
incorporated under the laws of Delaware in August 1998 for the purpose of
serving as the holding company of Security Savings Association of Hazleton (the
"Association") as part of the Association's conversion from the mutual to stock
form of organization (the "Conversion"). The Company is a savings and loan
holding company and is subject to regulation by the Office of Thrift Supervision
(the "OTS"). The Association is regulated by the Commonwealth of Pennsylvania,
the OTS and the Federal Deposit Insurance Corporation. The Conversion, completed
on December 30, 1998 resulted in the Company issuing an aggregate of 1,587,000
shares of its common stock, par value $.01 per share, at a price of $10 per
share, of which 1,511,617 shares were issued in a subscription offering and
75,383 shares were issued and sold to Security Savings Charitable Foundation.
Prior to the Conversion, the Company had not engaged in any material operations.
(2) ACCOUNTING PRINCIPLES
The accompanying unaudited financial statements of Security of
Pennsylvania Financial Corp. have been prepared in accordance with generally
accepted accounting principles for interim financial information and with
instructions to Form 10-QSB and Regulation S-B. Accordingly, the financial
statements 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 a normal recurring
nature) considered necessary for a fair presentation have been included.
Operating results for the three months ended September 30, 1999 are not
necessarily indicative of the results that may be expected for the current
fiscal year.
For further information, refer to the consolidated financial statements
included in the Company's Annual Report on Form 10-KSB filed with the Securities
and Exchange Commission.
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Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
----------------------------------------------------------
The following analysis discusses changes in the financial condition and
results of operations at and for the three months ended September 30, 1999, and
should be read in conjunction with the Company's Consolidated Financial
Statements and the notes thereto, appearing in Part I, Item 1 of this document.
FORWARD-LOOKING STATEMENTS
This report contains certain forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended. The Company intends such
forward-looking statements to be covered by the safe harbor provisions for
forward-looking statements contained in the Private Securities Reform Act of
1995, and is including this statement for purposes of these safe harbor
provisions. Forward -looking statements, which are based on certain assumptions
and describe future plans, strategies and expectations of the Company, are
generally identified by use of the words "believe," "expect," "intend,"
"anticipate," "estimate," "project," or similar expressions. The Company's
ability to predict results or the actual effect of future plans or strategies is
inherently uncertain. Factors which could have a material adverse effect on the
operations of the Company and the subsidiaries include, but are not limited to,
changes in: interest rates, general economic conditions, legislative/regulatory
changes, monetary and fiscal policies of the U.S. Government, including policies
of the U.S. Treasury and the Federal Reserve Board, the quality or composition
of the loan or investment portfolios, demand for loan products, deposit flows,
competition, demand for financial services in the Company's market area and
accounting principles and guidelines. These risks and uncertainties should be
considered in evaluating forward-looking statements and undue reliance should
not be placed on such statements. Further information concerning the Company and
its business, including additional factors that could materially affect the
Company's financial results, is included in the Company's filings with the SEC.
The Company does not undertake - and specifically disclaims any
obligation - to publicly release the result of any revisions which may be made
to any forward-looking statements to reflect events or circumstances after the
date of such statements or to reflect the occurrence of anticipated or
unanticipated events.
GENERAL
Security of Pennsylvania Financial Corp. (the "Company") is the holding
company for Security Savings Association of Hazleton (the "Association"), a
Pennsylvania chartered capital stock savings association. The Association's
results of operations are dependent primarily on net interest income, which is
the difference between the income earned on its loan and investment portfolios
and its cost of funds, consisting of the interest paid on deposits and
borrowings. Results of operations are also affected by the Association's
provision for loan losses, loan and security sales activities, service charges
and other fee income, and noninterest expense. The Association's noninterest
expense principally consists of compensation and employee benefits, office
occupancy and
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equipment expense, federal deposit insurance premiums, data processing,
advertising and business promotion and other expenses. Results of operations are
also significantly affected by general economic and competitive conditions,
particularly changes in interest rates, government policies and actions of
regulatory authorities.
MANAGEMENT STRATEGY
The Company's operating strategy has been that of a community-based
banking institution, offering a wide variety of savings products to its retail
customers, while concentrating on residential and consumer lending and, to a
lesser extent, multi-family and commercial real estate and construction lending.
Additionally, in February 1999, the Association opened a commercial loan
department. The Association expects to expand its services in that area. In
order to promote long-term financial strength and profitability, the
Association's operating strategy has focused on: (i) maintaining strong asset
quality by originating primarily one- to four-family mortgage loans and home
equity loans and lines of credit secured by residential real estate located in
its market area; (ii) managing its interest rate risk within the context of its
significant fixed-rate one- to four-family mortgage lending activity; (iii)
providing products and delivery systems directed at the needs and expectations
of its customer base, including through taking advantage of technological
advances when appropriate; and (iv) maintaining a strong regulatory capital
position.
COMPARISON OF FINANCIAL CONDITION AT SEPTEMBER 30, 1999 AND JUNE 30, 1999
Total assets increased $10.1 million, or 8.5%, to $129.7 million at
September 30, 1999 compared to $119.5 million at June 30, 1999. The increase was
primarily due a $7.9 million increase in held-to-maturity securities due to the
purchase of additional callable government agency securities and short-term
commercial paper investments. The loan portfolio also increased $4.7 million,
primarily due to $5.9 million of mortgage loan originations during the quarter.
These increases were primarily funded by Federal Home Loan Bank borrowings which
increased by $8.0 million to $9.0 million at September 30, 1999. An increase of
$2.2 million in deposits, primarily due to special interest rates offered on
certificates of deposit during the latter part of the quarter, also helped fund
the asset growth. Total equity decreased $31,000 at September 30, 1999 primarily
due to an increase in unrealized losses on securities and a dividend payment of
$79,350, offset by increased earnings.
COMPARISON OF OPERATING RESULTS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1999
AND 1998
GENERAL. The Company reported net income of $317,000, or $0.22 per
share, for the three months ended September 30, 1999, which represented an
increase of $118,300, or 59.5%, in net income compared to the three month period
ended September 30, 1998. Due to the timing of the Association's conversion to
stock form, earnings per share figures for the prior year's quarter are
inapplicable. Based on annualized earnings, the return on assets for the quarter
was 0.98% compared to 0.73% for the first quarter in 1998. Return on equity for
the three months ended September 30, 1999 decreased to 5.64% compared to 8.33%
for the three months ended September 30, 1998 as the Company continued to
assimilate the infusion of capital it received in the conversion in
higher-
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yielding investments.
NET INTEREST INCOME. Net interest income increased $297,000, or 35.7%,
from $834,000 for the three months ended September 30, 1998 to $1.1 million for
the three months ended September 30, 1999, primarily due to higher outstanding
loan and investment balances. The increase in loan and investment balances was
due to $5.9 million in loan originations and a $7.9 million increase in the
security portfolio during the quarter. A $64,000, or 5.9%, decrease in interest
expense also contributed to the increase in net interest income. The decrease in
interest expense was primarily attributable to lower interest rates paid on
deposits, offset in part by the increased interest paid on Federal Home Loan
Bank borrowings.
PROVISION FOR LOAN LOSSES. Provisions for loan losses are charged to
operations to bring the total allowance for loan losses to a level considered by
management to be adequate to provide for probable losses based on management's
evaluation of the quality and composition of the loan portfolio, the level of
nonperforming loans and charge-offs, the amount of loan commitments and lines of
credit outstanding and the general economy of the Company's market area. The
provision for loan losses increased by $4,000, or 80.0%, to $9,000 for the three
months ended September 30, 1999 compared to the September 30, 1998 quarter. At
September 30, 1999 and September 30, 1998, the allowance for loan losses was
$430,000 and $419,000, respectively, which represented 58.6% of nonperforming
loans and 0.55% of total loans at September 30, 1999 and 24.6% of nonperforming
loans and 0.65% of total loans at September 30, 1998.
While management believes that, based on information currently
available, the Company's allowance for loan losses is sufficient to cover
probable losses inherent in its loan portfolio at this time, no assurances can
be given that the Company's level of allowance for loan losses will be
sufficient to cover loan losses incurred by the Company or that future
adjustments to the allowance for loan losses will not be necessary if economic
and other conditions differ substantially from the economic and other conditions
used by management to determine the current level of the allowance for loan
losses. Management may increase its level of allowance for loan losses as a
percentage of total loans and nonperforming loans if the level of multi-family,
commercial, construction or consumer lending as a percentage of its total loan
portfolio increases.
NONINTEREST INCOME. Loan fees and service charges increased $22,800, or
33.0% for the three months ended September 30, 1999 compared to the prior
quarter due to the high volume of loan originations in the quarter.
Nevertheless, noninterest income remained at $82,000 for the three months ended
September 30, 1999 and September 30, 1998 due to the loss of $21,000 on the sale
of real estate owned compared to a gain of $1,000 on the sale of real estate
owned for the three months ended September 30, 1998. The loss on the sale of
real estate owned occurred as the Company continued to foreclose on problem
loans and sell the real estate owned.
NONINTEREST EXPENSE. Noninterest expense increased $141,000, or 22.8%,
from $620,000 for the three months ended September 30, 1998 to $761,000 for the
three months ended September 30, 1999 due primarily to increases in salaries and
benefits, professional fees and other noninterest expense. Specifically,
salaries and employee benefits increased $66,000, or 20.5%, from the first
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quarter in 1998 to the first quarter in 1999 due to ordinary merit raises and
the addition of personnel to staff the new commercial loan department.
Professional fees and other noninterest expense increased $42,000, or 114%, and
$29,300, or 27.4%, respectively, primarily due to increased costs associated
with the additional requirements of being a public company.
PROVISION FOR INCOME TAXES. Income tax expense increased $34,000, or
36.9%, to $126,000 for the three months ended September 30, 1999 compared to
$92,000 for the three months ended September 30, 1998, primarily due to the
increase in pre-tax income. The effective tax rates were 28.4% and 31.7% for the
three months ended September 30, 1999 and 1998, respectively.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of funds are deposits, principal and
interest payments on loans, mortgage-backed and investment securities. The
Company uses the funds generated to support its lending and investment
activities as well as any other demands for liquidity such as deposit outflows.
While maturities and scheduled amortization of loans are predictable sources of
funds, deposit flows, mortgage prepayments and the exercise of call features are
greatly influenced by general interest rates, economic conditions and
competition. The Company has continued to maintain levels of liquid assets
greater than those required by OTS regulations. This requirement of the OTS,
which may be varied at the direction of the OTS depending upon economic
conditions and deposit flows, is based upon a percentage of deposits and
short-term borrowings. The Company's currently required liquidity ratio is 4.0%.
At September 30, 1999 and 1998 the Company's liquidity ratios were 32.1% and
22.0%, respectively.
At September 30, 1999, the Association exceeded all of its regulatory
capital requirements with a tangible capital level of $16.2 million, or 12.6% of
total adjusted assets, which is above the required level of $1.9 million, or
1.5%; core capital of $16.2 million, or 12.6%, of total adjusted assets, which
is above the required level of $5.1 million, or 4.0%; and risk-based capital of
$16.6 million, or 28.2%, of risk-weighted assets, which is above the required
level of $4.7 million, or 8.0%.
The Company has other sources of liquidity if a need for additional
funds arises, including FHLB advances. At September 30, 1999, the Company had
advances outstanding from the FHLB of $9.0 million and at September 30, 1999 had
an overall borrowing capacity from the FHLB of $55.5 million.
The Company's most liquid assets are cash and due from banks,
interest-bearing deposits with banks and its investment and mortgage-related
securities available-for-sale. The levels of these assets are dependent on the
Company's operating, financing, lending and investing activities during any
given period. At September 30, 1999, cash and due from banks, interest-bearing
deposits with banks and investment securities available for sale totaled $40.0
million, or 30.9% of total assets.
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At September 30, 1999, the Company had commitments to originate loans
and unused outstanding lines of credit and undisbursed proceeds of construction
mortgages totaling $6.6 million. The Company anticipates that it will have
sufficient funds available to meet its current loan origination commitments.
Certificate accounts, which are scheduled to mature in less than one year from
September 30, 1999, totaled $33.9 million. The Company expects that
substantially all of the maturing certificate accounts will be retained by the
Company at maturity.
YEAR 2000 COMPLIANCE
As the year 2000 approaches, an important business issue has emerged
regarding how existing application software programs and operating systems can
accommodate this date value. Many existing application software products were
designed to accommodate only two-digits. For example, "96" is stored on the
system and represents 1996. The Association relies significantly on an outside
service bureau for its data processing. While the Association has not received
any guarantee from the outside service bureau that the bureau will be Year 2000
compliant, the service bureau has completed its assessment of its Year 2000
compliance and resolved all identified problems. The Association's service
bureau completed its proxy testing of their system and the Association has
conducted on-line testing at each of its offices on February 14, 1999. No
problems were encountered during testing. Additionally, the Association's
service bureau conducting testing with other third parties that communicate with
the service bureau. No problems were encountered during these tests. The
Association has completed its inventory and assessment and has completed
upgrading its internal system to handle the Year 2000 problem. The cost to the
Association for the internal system upgrade, not including staff time, has been
less than $50,000. There can be no assurances, however, that the performance by
the Association and its service bureau will be effective to remedy all potential
problems. To the extent the Company's systems are not fully Year 2000 compliant,
there can be no assurance that potential systems interruptions or the cost
necessary to update software would not have a materially adverse effect on the
Company's business, financial condition, results of operations and business
prospects. The Association has prepared a contingency plan in the event there
are any system interruptions. Primarily the Association will resort to a manual
method for handling customer transactions and although cumbersome will be
adequate. Any Year 2000 failure on the part of the Association's customers could
result in additional expense or loss to the Association. The Association plans
to work with its customers to address any potential Year 2000 problems.
RECENT ACCOUNTING PRONOUNCEMENTS
REPORTING COMPREHENSIVE INCOME. In September 1997, the Financial
Accounting Standard Board ("FASB") issued SFAS No. 130, "Reporting Comprehensive
Income, " which establishes standards for the reporting and display of
comprehensive income and its components in a full set of general-purpose
financial statements. This statement requires that all items that are required
to be recognized as components of comprehensive income be reported in a
financial statement that is displayed with the same prominence as other
financial statements. The statement does not require a specific format for
financial statement but requires that an enterprise display an amount
representing total comprehensive income for the period in that financial
statement. This statement
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is effective for fiscal years beginning after December 15, 1997. The Company
adopted this statement as of July 1, 1998.
ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES. In June
1998, the FASB issued SFAS No. 133, "Accounting for Derivative Instruments and
Hedging Activities." This statement establishes accounting and reporting
standards for derivative instruments, including certain derivative instruments
embedded in other contracts and for hedging activities. It requires that an
entity recognize all derivatives as either assets or liabilities in the
statement of financial position and measure those instruments at fair value. In
connection with the implementation of this statement, the Company, as of April
1, 1999, transferred debt securities classified as held-to-maturity to the
available-for-sale category. Such transfer will not call into question the
Company's intention to hold other debt to maturity in the future. This statement
is effective for financial statements for periods beginning after June 15, 1999.
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings.
------------------
The Company is not involved in any pending legal proceedings other than
routine legal proceedings occurring in the ordinary course of business. Such
routine legal proceedings, in the aggregate, are believed by management to be
immaterial to the Company's financial condition or results of operations.
ITEM 2. Changes in Securities and Use of Proceeds.
------------------------------------------
Not applicable.
ITEM 3. Defaults Upon Senior Securities.
--------------------------------
None.
ITEM 4. Submission of Matters to a Vote of Security Holders.
----------------------------------------------------
None.
ITEM 5. Other Information.
------------------
None.
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ITEM 6. Exhibits and Reports On Form 8-K (Ss.249.308 of This Chapter)
-------------------------------------------------------------
(a) Exhibits
2.1 Amended Plan of Conversion (including the Stock
Articles of Incorporation and Bylaws of the Security
Savings Association of Hazleton)*
3.1 Certificate of Incorporation of Security of
Pennsylvania Financial Corp.*
3.2 Bylaws of Security of Pennsylvania Financial Corp.*
11.0 Statement regarding Computation of Per Share Earnings
27.0 Financial Data Schedule
-----------------------------
* Incorporated by reference into this document from the
Exhibits to the Form SB-2, Registration Statement,
and any amendments thereto, Registration No.
333-63271
(b) Reports on Form 8-K
On July 23, 1999, the Company filed an 8-K to
announce the declaration of a cash dividend. The press release
announcing the dividend was filed by exhibit.
12
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the issuer
caused this report to be signed on its behalf by the undersigned hereunto duly
authorized.
SECURITY OF PENNSYLVANIA FINANCIAL CORP.
Dated: November 5, 1999 By: /s/ RICHARD C. LAUBACH
-------------------------------
Richard C. Laubach
President and Chief Executive Officer
(principal executive officer)
Dated: Novermber 5, 1999
By: /s/ DAVID P. MARCHETTI, SR.
-------------------------------
David P. Marchetti, Sr.
Chief Financial Officer and Treasurer
(principal financial and accounting officer)
13
Exhibit 11.0
Statement regarding Computation of Per Share Earnings
<PAGE>
Exhibit 11.0
SECURITY OF PENNSYLVANIA FINANCIAL CORP.
STATEMENT REGARDING COMPUTATION OF EARNINGS PER SHARE
THREE MONTHS ENDED SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
Three Months Ended
----------------------------------------------------
September 30, 1999 September 30, 1998
------------------------ ------------------------
<S> <C>
NET INCOME ............................................... $ 317,125 --
========= ===
Weighted average shares outstanding:
Weighted average shares outstanding ...................... 1,587,000 --
Less: Unallocated shares held by ESOP ................... (126,960) --
Plus: ESOP shares released or committed to be
Released During the fiscal year .......................... 5,855 --
---------
1,465,925 --
========= ===
Earnings Per Share (1) ................................... $ 0.22 N/A
========= ===
</TABLE>
- -----------------------
(1) Earnings per share, basic and diluted, are the same for the three months
ended September 30, 1999.
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
This schedule contains summary information extracted form the form 10-QSB and is
qualified in its entirety by reference to the unaudited financial statements
contained therein.
</LEGEND>
<CIK> 0001069880
<NAME> SECURITY OF PENNSYLVANIA FINANCIAL CORP.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-START> JUL-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 991
<INT-BEARING-DEPOSITS> 11,493
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 27,459
<INVESTMENTS-CARRYING> 9,373
<INVESTMENTS-MARKET> 5,415
<LOANS> 77,560
<ALLOWANCE> 430
<TOTAL-ASSETS> 129,650
<DEPOSITS> 97,953
<SHORT-TERM> 9,000
<LIABILITIES-OTHER> 197
<LONG-TERM> 0
0
0
<COMMON> 16
<OTHER-SE> 22,469
<TOTAL-LIABILITIES-AND-EQUITY> 129,650
<INTEREST-LOAN> 92
<INTEREST-INVEST> 726
<INTEREST-OTHER> 82
<INTEREST-TOTAL> 2,152
<INTEREST-DEPOSIT> 970
<INTEREST-EXPENSE> 1,020
<INTEREST-INCOME-NET> 1,132
<LOAN-LOSSES> 9
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 136
<INCOME-PRETAX> 443
<INCOME-PRE-EXTRAORDINARY> 443
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 317
<EPS-BASIC> .22
<EPS-DILUTED> .22
<YIELD-ACTUAL> .98
<LOANS-NON> 734
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 419
<CHARGE-OFFS> 3
<RECOVERIES> 5
<ALLOWANCE-CLOSE> 430
<ALLOWANCE-DOMESTIC> 430
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
