<PAGE>
As filed with the Securities and Exchange Commission on December 22, 1995
Registration No. 33-________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________
FORM S-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
_______________
PROGRESS FINANCIAL CORPORATION
- --------------------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Delaware 23-2413363
---------------------------- -------------------
(State or other jurisdiction (I.R.S. employer
of incorporation or identification no.)
organization)
Plymouth Meeting Executive Campus
600 West Germantown Pike
Plymouth Meeting, Pennsylvania 19462-1003
(610) 825-8800
- --------------------------------------------------------------------------------
(Address, including zip code, and telephone number, including area code,
of Registrant's principal executive offices)
_______________
W. Kirk Wycoff
President and Chief Executive Officer
Progress Financial Corporation
Plymouth Meeting Executive Campus
600 West Germantown Pike
Plymouth Meeting, Pennsylvania 19462-1003
(610) 825-8800
- --------------------------------------------------------------------------------
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
_______________
Copies to:
Raymond A. Tiernan, Esq.
Jeffrey D. Haas, Esq.
Elias, Matz, Tiernan & Herrick L.L.P.
734 Fifteenth Street, N.W., Suite 1200
Washington, D.C. 20005
(202) 347-0300
Approximate date of commencement of proposed sale to the public: As soon as
practicable after this Registration Statement becomes effective.
<PAGE>
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ X ]
If the Registrant elects to deliver its latest annual report to security
holders or a complete and legible facsimile thereof, pursuant to Item 11(a)(1)
of this Form, check the following box. [ X ]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
Proposed
Proposed Maximum
Title of Each Class Maximum Aggregate Amount of
of Securities to Amount to be Offering Offering Registration
be Registered Registered Price(1) Price(1) Fee
<S> <C> <C> <C> <C>
Common Stock,
$1.00 par value
per share 500,000(3) $5.25 $2,625,000 $905.17
- ----------------------------------------------------------------------------------------------------
Preferred Stock
Purchase Right(2) 500,000 $ -- $ -- $ --
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
</TABLE>
(1) Calculated pursuant to Rule 457 of the Securities Act of 1933.
(2) Each share of Common Stock has one Preferred Stock Purchase Right attached
thereto without charge.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
PROGRESS FINANCIAL CORPORATION
CROSS REFERENCE SHEET
Showing the Location in the Prospectus of Information Required
by Items 1 through 13 of Part I of Form S-2
<TABLE>
<CAPTION>
Registration Statement
Item Number and Caption Location or Caption in Prospectus
- ------------------------------------------- -------------------------------------------
<C> <S> <C>
1. Forepart of the Registration Statement Outside Front Cover Page
and Outside Front Cover Page of
Prospectus
2. Inside Front and Outside Back Cover Inside Front and Outside Back
Pages of Prospectus Cover Pages; Available
Information; Incorporation of
Certain Documents by Reference
3. Summary Information, Risk Factors and Summary; Risk Factors
Ratio of Earnings to Fixed Charges
4. Use of Proceeds Use of Proceeds
5. Determination of Offering Price Not Applicable
6. Dilution Not Applicable
7. Selling Security Holders Not Applicable
8. Plan of Distribution Outside Front Cover Page;
Summary; The Offering
9. Description of Securities to be Description of Capital Stock
Registered
10. Interests of Named Experts and Counsel Not Applicable
11. Information With Respect to the Summary; Incorporation of
Registrant Certain Documents by Reference
12. Incorporation of Certain Information by Incorporation of Certain
Reference Documents by Reference
13. Disclosure of Commission Position and *
Indemnification for Securities Act
Liabilities
</TABLE>
- ---------------------
* Item is omitted because answer is negative or item is inapplicable.
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT IS
DECLARED EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF ANY OFFER TO BUY NOR SHALL THERE BY ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY
SUCH STATE.
<PAGE>
SUBJECT TO COMPLETION: DATED DECEMBER __, 1995
PROSPECTUS
PROGRESS FINANCIAL CORPORATION
500,000 Shares
of Common Stock
Progress Financial Corporation (the "Company"), a Delaware corporation, is
hereby offering 500,000 shares of its common stock, par value $1.00 per share
("Common Stock"), at a price of $____ per share to members of the general public
to whom a copy of this Prospectus is delivered (the "Offering"). The Company
will invest approximately $2.0 million of the net proceeds of this Offering in
equity of its wholly owned subsidiary, Progress Federal Savings Bank, a
federally chartered savings bank (the "Bank"). The Bank intends to use such
additional capital to increase its regulatory capital ratios, which may reduce
the Bank's federal deposit insurance premiums, enhance core earnings and support
the growth of its business.
The Company has engaged Sandler O'Neill & Partners, L.P. ("Sandler
O'Neill") to consult with and advise the Company with respect to the Offering.
The Company must sell all 500,000 shares of Common Stock in the Offering,
or the Offering will not be consummated and all funds submitted will be promptly
returned without interest. The Offering will terminate at 5:00 p.m., Eastern
Time, on ________ __, 1996, unless extended by the Company (the "Expiration
Time").
The Common Stock is quoted on the Nasdaq National Market System under the
symbol "PFNC." The last reported sale price of the Common Stock as quoted
through the Nasdaq National Market System on _______ __, 1996 was $_____ per
share.
THE SECURITIES OFFERED HEREBY INVOLVE CERTAIN RISKS. SEE "RISK
FACTORS" ON PAGE 11.
THE SECURITIES OFFERED HEREBY ARE NOT SAVINGS ACCOUNTS
OR DEPOSITS AND ARE NOT INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
NOR HAS THE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTA-
TION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------
Estimated
Underwriting
Offering Fees and Proceeds to the
Price Expenses(1) Company(1)
<S> <C> <C> <C>
- ----------------------------------------------------------------------------------------
Per Share $ $ 0.40 $
- ----------------------------------------------------------------------------------------
Total $ $200,000 $
- ----------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------
</TABLE>
- ------------------
(1) Consists of estimated expenses of the Company. Such expenses are estimated
to be $200,000. See "Use of Proceeds" for the assumptions used to arrive
at this estimate.
The date of this Prospectus is ________ __, 1996.
2
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information can be inspected and copied at the Commission's
public reference rooms located at 450 Fifth Street, N.W., Washington, D.C.
20549, and at the Commission's Regional Offices at Northwestern Atrium Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661, and 7 World Trade
Center, Suite 1300, New York, New York 10048. Copies of such material can be
obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates. The Common Stock is
listed on the Nasdaq National Market System, and such reports, proxy statements
and other information concerning the Company also may be inspected at the
offices of the National Association of Securities Dealers, Inc. ("NASD"), 1735 K
Street, N.W., Washington, D.C. 20006.
The Company has filed a Registration Statement on Form S-2 (herein together
with all amendments and exhibits thereto, called the "Registration Statement")
under the Securities Act of 1933, as amended (the "Securities Act"), with
respect to the Common Stock offered hereby. This Prospectus does not contain
all the information set forth in the Registration Statement. For further
information with respect to the Company and the Common Stock offered hereby,
reference is made to the Registration Statement. Statements contained in the
Prospectus concerning provisions of certain documents are not necessarily
complete and in each instance, reference is made to the copy of such document
filed as an exhibit to the Registration Statement or attached hereto, each such
statement being qualified in all respects by such references.
3
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
This Prospectus is summary in nature, does not purport to be a full and
complete statement of the business, affairs and financial condition of the
Company and should be read in conjunction with the following documents of the
Company which have been filed with the Commission and are hereby incorporated by
reference into this Prospectus:
(i) the Company's Annual Report on Form 10-K for the year ended
December 31, 1994;
(ii) the Company's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1995;
(iii) the Company's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1995;
(iv) the Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1995;
(v) the Company's Current Report on Form 8-K dated May 24, 1995; and
(vi) the Company's Current Report on Form 8-K dated November 1, 1995.
All documents filed by the Company pursuant to Sections 13(a) or 15(d) of
the Exchange Act subsequent to the date hereof are hereby incorporated by
reference in this Prospectus and shall be deemed a part hereof from the date of
filing such documents with the Commission. Any statement contained herein, in
any supplement or amendment hereof or in a document all or any portion of which
is incorporated or deemed to be incorporated by reference herein shall be deemed
to be modified or superseded for purposes of this Prospectus to the extent that
a statement contained herein, in any supplement or amendment hereof or in any
document incorporated herein by reference modifies or supersedes such statement.
Any statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus or any
supplement or amendment hereof.
Neither the delivery of this Prospectus nor any sale of securities made
hereunder shall, under any circumstances, create any implication that there has
been no change in the affairs of the Company or its affiliates since the date
hereof or that the information contained herein is correct as of any time
subsequent to its date.
This Prospectus is accompanied by the Company's Annual Report on Form 10-K
for the year ended December 31, 1994 and its Quarterly Report on Form 10-Q for
the quarter ended September 30, 1995. Copies of the other documents
incorporated by reference herein
4
<PAGE>
are available from the Company without charge (other than exhibits to such
documents, unless such exhibits are specifically incorporated by reference
into the information that this Prospectus incorporates) to any person to whom
this Prospectus is delivered, upon written request of such person. Requests
for such copies should be directed to W. Kirk Wycoff, Chairman, President and
Chief Executive Officer of the Company, at the Company's principal executive
offices located at Plymouth Meeting Executive Campus, 600 West Germantown
Pike, Plymouth Meeting, Pennsylvania 19462-1003. The Company's telephone
number is (610) 825-8800.
SUMMARY
The following summary does not purport to be complete and is qualified in
its entirety by the more detailed information, including the Consolidated
Financial Statements and related Notes, accompanying this Prospectus.
THE COMPANY
Progress Financial Corporation is a Delaware-chartered, registered thrift
holding company headquartered in Plymouth Meeting, Pennsylvania. The Company is
the sole stockholder of Progress Federal Savings Bank, a federally chartered
savings bank, which has been engaged in the thrift business since 1878. The
Company was organized in 1986 in connection with the reorganization of the Bank
into a thrift holding company structure. The Bank conducts its business through
six full-service offices located in Montgomery County, one full-service office
in Delaware County, one full-service office in Chester County, one full-service
office in the Andorra section of Philadelphia, and one loan production office in
Montgomery County in southeastern Pennsylvania. Unless the context otherwise
requires, references herein to the Company include the Bank. At September 30,
1995, the Company had total consolidated assets of $356.7 million, total
consolidated liabilities of $341.8 million, including total consolidated
deposits of $288.9 million, and total consolidated stockholders' equity of $14.9
million.
The principal business of the Company has in the past consisted of
attracting deposits from the general public through its offices and using such
deposits to originate loans secured by first mortgage liens on existing single-
family residential real estate and existing multi-family residential and
commercial real estate, construction loans (which in the past included land
acquisition and development loans), commercial business loans, consisting
primarily of loans to small and medium-sized businesses, and various consumer
loans. The Company originates single-family residential real estate loans for
sale in the secondary market and secured consumer loans, such as home equity
loans and lines of credit. The Company also originates commercial business
loans to small and medium sized businesses in the communities its branches serve
and commercial real estate (including multi-family residential) and residential
construction loans. In addition, the Company invests in mortgage-backed
securities which are insured or guaranteed by the U.S. Government and
5
<PAGE>
agencies thereof and other similar investments permitted by applicable laws
and regulations. The Bank is also involved in real estate development and
related activities, through its subsidiaries, primarily to facilitate the
completion and sale of certain property held as real estate owned.
The principal sources of funds for the Company's activities are
amortization and repayment of loans, proceeds from sales of assets classified as
available for sale, net savings inflows and advances from the Federal Home Loan
Bank ("FHLB") of Pittsburgh. The Company's principal sources of revenues are
interest and other payments on loans, including origination and servicing fees,
interest on investments and mortgage-backed securities, service charges on
deposits, gains (losses) from mortgage banking activities and from the sale of
loans and mortgage-backed securities classified as available for sale and loan
and other fee income. Its principal expenses are interest paid on deposits and
advances from the FHLB of Pittsburgh, provisions for possible loan losses and
real estate owned, personnel, occupancy and equipment, and other administrative
expenses.
The Company, as a registered savings and loan holding company, is subject
to examination and regulation by the Office of Thrift Supervision ("OTS") and is
subject to various reporting and other requirements of the Commission. The
Bank, as a federally chartered savings bank, is subject to comprehensive
regulation and examination by the OTS, as its chartering authority and primary
regulator, and by the Federal Deposit Insurance Corporation ("FDIC"), which
administers the Savings Association Insurance Fund ("SAIF"), which insures the
Bank's deposits to the maximum extent permitted by law. The Bank is a member of
the FHLB of Pittsburgh, which is one of the 12 regional banks which comprise the
FHLB System. The Bank is further subject to regulations of the Board of
Governors of the Federal Reserve System ("Federal Reserve Board") governing
reserves required to be maintained against deposits and certain other matters.
The Company's principal executive offices are located at Plymouth Meeting
Executive Campus, 600 West Germantown Pike, Plymouth Meeting, Pennsylvania
19462-1003, and its telephone number is (610) 825-8800.
6
<PAGE>
THE OFFERING
SHARES OFFERED HEREBY The Company is offering 500,000
shares of Common Stock to members of
the general public to whom a copy of
this Prospectus is delivered. The
minimum individual purchase pursuant
to this Offering is 5,000 shares,
and the maximum is 100,000 shares.
The Company reserves the right to
alter the individual minimum and
maximum purchase amounts should
conditions so warrant and
specifically reserves the right to
approve purchases of more than
100,000 shares.
PURCHASE PRICE $____ per share of Common Stock
("Purchase Price").
FINANCIAL ADVISOR The Company and Sandler O'Neill have
entered into an agreement pursuant
to which Sandler O'Neill is acting
as the Company's exclusive financial
advisor in connection with the
Offering. The Company has agreed to
pay certain fees to and expenses of
Sandler O'Neill for its services in
the Offering. See "The Offering -
Financial Advisor."
EXPIRATION TIME The Offering will expire at 5:00
p.m., Eastern Time, on ________ __,
1996, unless extended at the
discretion of the Board of Directors
of the Company. See "The Offering -
Expiration Time."
CONDITIONS TO CONSUMMATION OF The Offering will not be consummated
THE OFFERING and all funds received with orders
will be promptly returned without
interest if all 500,000 shares of
Common Stock are not sold through
the Offering. See "The Offering -
Conditions to Consummation of the
Offering."
7
<PAGE>
PROCEDURE FOR ORDERING COMMON Persons who desire to participate in
STOCK IN THE OFFERING the Offering must properly complete
the Order Form which accompanies
this Prospectus and forward the
Order Form, with payment of the
aggregate Purchase Price, to the
Company on or prior to the
Expiration Time. If the mail is
used to forward Order Forms, it is
recommended that insured, registered
mail, return receipt requested, be
used. See "The Offering - Issuance
of Common Stock."
ORDERS FOR THE COMMON STOCK WHICH
ARE RECEIVED BY THE COMPANY FROM
PERSONS PARTICIPATING IN THE
OFFERING MAY NOT BE REVOKED. See
"The Offering - Procedure for
Ordering Common Stock in the
Offering."
ISSUANCE OF COMMON STOCK Certificates representing shares of
Common Stock purchased in the
Offering will be delivered as soon
as practicable after the Expiration
Time. See "The Offering - Issuance
of Common Stock."
USE OF PROCEEDS The Company intends to invest
approximately $2.0 of the net
proceeds of the Offering in equity
of the Bank. The Bank intends to
use such additional capital to
increase its regulatory capital
ratios, which may reduce the Bank's
federal deposit insurance premiums,
enhance core earnings and support
the growth of its business. Any net
proceeds retained by the Company
will be used by the Company for
general corporate purposes. See
"Use of Proceeds."
REGULATORY LIMITATION The Company will not be required to
issue shares of Common Stock
pursuant to the Offering to any
person who, in the opinion of the
Company, would be required to obtain
prior clearance or approval from any
state or federal regulatory
authority to own or control such
shares if, at the expiration of the
Offering, such clearance or approval
has not been obtained or any
required waiting period has not
expired. See "The Offering -
Regulatory Limitation."
8
<PAGE>
INTENTION OF DIRECTORS AND Directors and executive officers of
EXECUTIVE OFFICERS the Company as a group (nine
persons) have indicated to the
Company that they intend to
subscribe for in the aggregate
125,000 shares of Common Stock.
Assuming the full purchases
indicated by the directors and
executive officers of the Company
and the Bank, such persons would be
deemed to beneficially own 16.02% of
the Common Stock assumed to be
outstanding on a pro forma basis
following the Offering. In
addition, the Company's and the
Bank's Employee Stock Ownership Plan
("ESOP") intends to purchase in the
Offering 50,000 shares of Common
Stock (which may be increased to
100,000 shares of Common Stock).
See "The Offering - Intention of
Directors and Executive Officers."
NASDAQ NATIONAL MARKET SYSTEM PFNC
SYMBOL FOR THE COMMON STOCK
RISK FACTORS
The Company has experienced financial and operating problems in recent
periods and for these and other reasons an investment in the Common Stock
involves a certain degree of risk. Prospective purchasers should carefully
consider the matters set forth under "Risk Factors."
DIVIDEND POLICY
The Company is currently not paying dividends on the Common Stock. The
Company's ability to pay dividends on the Common Stock depends on the receipt of
dividends from the Bank. Dividends, when and if paid, will be subject to
determination and declaration by the Board of Directors in its discretion, which
will take into account the Company's consolidated financial condition and
results of operations, tax considerations, industry standards, economic
conditions, statutory and regulatory restrictions, general economic conditions
and other factors. There can be no assurance that dividends will in fact be
paid on the Common Stock or that, if paid, such dividends will not be reduced or
eliminated in future periods. See "Market Price for Common Stock and Dividends -
Dividends."
9
<PAGE>
SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA
(Dollars in Thousands, Except Per Share Data)
The selected consolidated financial and other data set forth below should
be read in conjunction with, and is qualified in its entirety by, the more
detailed information, including the Consolidated Financial Statements and
related Notes set forth in the Annual Report. See "Available Information."
<TABLE>
<CAPTION>
December 31,
September 30, ----------------------------------------------------------------
1995 1994 1993 1992 1991 1990
------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
FINANCIAL CONDITION DATA:
Total assets $356,716 $348,189 $333,209 $291,542 $312,622 $324,708
Loans, net 210,609 205,771 158,268 153,734 193,789 277,490
Loans held for sale(1) 2,139 351 16,744 2,761 -- --
Investment securities:
Available for sale(1) 6,936 4,627 -- -- -- --
Held to maturity 12,918 12,866 4,632 5,260 2,212 1,694
Mortgage-backed securities:
Available for sale(1) 15,530 9,103 8,893 25,072 -- --
Held to maturity 84,476 93,673 117,054 60,939 47,875 315
Deposits 288,883 283,958 273,583 245,015 265,197 292,478
Borrowings 47,950 47,052 40,536 36,071 38,585 12,500
Stockholders' equity 14,874 13,021 14,787 6,877 5,599 15,844
Delinquent loans(2) 3,164 1,001 1,911 9,859 9,072 12,018
Non-performing assets(2) 4,873 9,085 17,628 34,829 50,427 29,239
Allowance for possible loan losses 1,556 1,502 2,113 2,703 5,483 4,123
Book value per share(3) 4.53 3.98 4.52 6.81 5.54 15.69
</TABLE>
<TABLE>
<CAPTION>
Nine Months Ended
September 30, Year Ended December 31,
------------------ ----------------------------------------------------
1995 1994 1994 1993 1992 1991 1990
------- ------- ------- ------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATIONS DATA:
Interest income $19,884 $16,518 $22,830 $20,824 $21,979 $ 27,122 $34,834
Interest expense 11,493 9,025 12,505 11,465 13,737 18,010 21,775
------- ------- ------- ------- ------- -------- -------
Net interest income 8,391 7,493 10,325 9,359 8,242 9,112 13,059
Provision for possible loan losses 350 406 521 368 275 10,144 4,696
------- ------- ------- ------- ------- -------- -------
Net interest income (expense) after
provision for possible loan
losses 8,041 7,087 9,804 8,991 7,967 (1,032) 8,363
Gain (loss) from sales
of securities (35) (124) (322) 215 1,197 341 --
Gain (loss) from mortgage banking
activities 46 (171) (176) 606 1,428 319 --
Income (loss) on properties sold (34) (60) (62) 102 1,218 153 --
Other income 1,863 1,597 2,105 1,303 1,774 1,038 1,518
Provision for real estate owned 455 1,541 1,576 1,733 2,835 2,607 2,015
Other expense 8,292 7,852 10,489 9,835 9,397 10,280 11,610
------- ------- ------- ------- ------- -------- -------
Income (loss) before income
taxes (benefit) 1,134 (1,064) (716) (351) 1,352 (12,068) (3,744)
Income tax expense (benefit) -- -- -- (1,034) 74 (1,823) (755)
------- ------- ------- ------- ------- -------- -------
Net income (loss) $1,134 $(1,064) $ (716) $ 683 $ 1,278 $(10,245) $(2,989)
------- ------- ------- ------- ------- -------- -------
------- ------- ------- ------- ------- -------- -------
Net income (loss) per share $ .33 $ (.32) $ (.22) $ .29 $ 1.27 $ (10.14) $ (2.96)
------- ------- ------- ------- ------- -------- -------
------- ------- ------- ------- ------- -------- -------
Cash dividends per share $ -- $ -- $ -- $ -- $ -- $ -- $ .12
------- ------- ------- ------- ------- -------- -------
------- ------- ------- ------- ------- -------- -------
</TABLE>
<TABLE>
<CAPTION>
Nine Months Ended
September 30, At or For the Year Ended December 31,
----------------- ----------------------------------------------------
1995 1994 1994 1993 1992 1991 1990
------- ------- ------- ------- ------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
OTHER DATA(4):
Return (loss) on average assets .43% (.42)% (.21)% .21% .42% (3.31)% (.92)%
Return (loss) on average equity 10.80 (10.26) (5.24)% 6.25 20.93 (101.81) (16.60)
Average equity to average assets 4.00 4.10 4.01 3.42 1.99 3.24 5.52
Dividend payout ratio -- -- -- -- -- -- (.04)
Net interest margin(5) 3.37 3.17 3.23 3.25 3.13 3.31 4.30
Interest rate spread(5) 3.08 2.99 3.04 3.26 3.47 3.44 3.97
Non-performing loans as a percent
of total loans at end of period(2) .66 2.92 2.19 3.42 4.37 7.03 4.85
Non-performing assets as a percent
of total assets at end of
period(2) 1.37 2.95 2.61 5.29 11.95 16.13 9.00
Allowance for possible loan
losses as a percent of non-
performing loans at end of
period 111.62 27.18 33.00 34.92 38.83 39.14 30.19
Net charge-offs as a percent of
average loans .14 .51 .60 .64 1.69 3.51 0.65
Capital Ratios(6):
Tangible 4.79 4.14 4.57 4.14 2.36 1.54 4.70
Core 4.79 4.14 4.57 4.14 2.36 1.54 4.70
Risk-based 9.36 8.86 9.47 9.39 5.37 3.33 6.62
Full service banking offices 9 8 8 8 7 8 8
</TABLE>
(FOOTNOTES ON FOLLOWING PAGE)
10
<PAGE>
- -------------------
(1) Loans classified as held for sale are carried at the lower of aggregate
cost or fair value while mortgage-backed securities and investment
securities classified as available for sale are carried at fair value.
(2) Delinquent loans consist of loans which are 30 to 89 days overdue. Non-
performing loans consist of non-accrual loans and accruing loans 90 days or
more overdue; and non-performing assets consist of non-performing loans and
real estate owned, which include in-substance foreclosures and
repossessions, in each case net of related reserves.
(3) Book value per share represents stockholders' equity divided by the number
of shares of Common Stock issued and outstanding.
(4) With the exception of end of period ratios, all ratios are based on average
daily balances during the indicated periods.
(5) Interest rate spread represents the difference between the weighted average
yield on interest-earning assets and the weighted average cost of interest-
bearing liabilities (which do not include non-interest-bearing accounts),
and net interest margin represents net interest income as a percent of
average interest-earning assets.
(6) For additional information concerning the Bank's compliance with its
regulatory capital requirements, see "Regulatory Capital."
RISK FACTORS
An investment in the Common Stock involves certain investment risks. In
determining whether or not to make an investment in the Common Stock,
prospective purchasers should carefully consider the matters set forth below, as
well as the other information included or incorporated by reference in this
Prospectus.
POTENTIAL EFFECTS OF CHANGES IN INTEREST RATES AND THE CURRENT INTEREST RATE
ENVIRONMENT
The operations of the Company are substantially dependent on its net
interest income, which consists of the difference between the interest income
earned on its interest-earning assets and the interest expense paid on its
interest-bearing liabilities. Like most financial institutions, the Company's
earnings are affected by changes in market interest rates, which increased from
early 1994 to early 1995, and other economic factors beyond its control. As a
result of borrowers refinancing higher rate mortgage loans in 1993 and the rise
in short-term interest rates from early 1994 to early 1995, the Company's
interest rate spread decreased from 3.47% for 1992 to 3.26% for 1993 and 3.04%
for 1994. For the nine
11
<PAGE>
months ended September 30, 1995, the Company's interest rate spread amounted to
3.08%. However, the Company's net interest margin has increased from 3.13% for
1992 to 3.23% for 1995 and amounted to 3.37% for the nine months ended September
30, 1995. Further increases in short-term interest rates could adversely affect
the Company's interest rate spread and net interest income in future periods.
In addition to affecting interest income and expense, changes in interest
rates also can affect the market value of the Company's interest-earning assets,
which are comprised of fixed and adjustable-rate instruments. Generally, the
market value of fixed-rate instruments fluctuates inversely with changes in
interest rates. At September 30, 1995, the Company had $12.9 million of
investment securities and $84.5 million of mortgage-backed securities which were
classified as held to maturity in accordance with the terms of Statement of
Financial Accounting Standards No. 115 ("SFAS No. 115"). Such designation
effectively restricts the Company's ability to sell such assets in order to meet
its liquidity needs or in response to increases in interest rates. Generally,
the reclassification and sale of any of such assets could result in the
remainder of the Company's portfolio of investment and mortgage-backed
securities classified as held to maturity being reclassified as available for
sale. However, the Financial Accounting Standards Board recently announced that
companies (including financial institutions) will be permitted to reclassify
securities originally classified under SFAS No. 115 without affecting the
classifications of its remaining securities portfolio. This announcement
provides the Company with the opportunity to reclassify individual securities
previously classified as "held to maturity" or "available for sale" without
having to reclassify the entire portfolio of similarly classified securities.
The time period in which such reclassifications may be made is from November 15,
1995 to December 31, 1995. Although the Company currently intends to take
advantage of this opportunity and restructure its "held to maturity" portfolio,
the exact extent of such restructuring has not yet been determined. Pursuant to
SFAS No. 115, securities classified as available for sale must be reported at
fair value, with unrealized gains or losses being reported as a separate
component of stockholders' equity. The Company's investment and mortgage-backed
securities (including securities classified as available for sale) had an
aggregate carrying value and market value of $119.9 million and $117.7 million,
respectively, at September 30, 1995. At September 30, 1995, the Company had
$2.1 million of loans classified as held for sale.
The OTS has adopted a final rule (the effective date of which has been
postponed) which will incorporate an interest rate risk component into its risk-
based capital rules. This interest rate risk component is designed to calculate
on a quarterly basis the extent to which the value of an institution's assets
and liabilities would change if interest rates increase or decrease. If the net
portfolio value of an institution would decline by more than 2% of the estimated
market value of the institution's assets in the event of a 200 basis point
increase or decrease in interest rates, then the institution is deemed to be
subject to a greater than "normal" interest rate risk and must deduct from its
capital 50% of the amount by which the decline in net portfolio value exceeds 2%
of the estimated market value of the institution's assets, as of an effective
date to be determined by the OTS. As of September 30, 1995, if interest rates
increased by 200 basis points, the Bank's net portfolio value would decrease
12
<PAGE>
by 2.00% of the estimated market value of the Bank's assets, as calculated by
the OTS, which would result in a $6,000 capital deduction if such deduction was
currently required.
Changes in interest rates also can affect the average life of loans and
mortgage-related securities. Decreases in interest rates in recent periods have
resulted in increased prepayments of loans and mortgage-backed securities, as
borrowers refinanced to reduce borrowing costs. Under these circumstances, the
Company is subject to reinvestment risk to the extent that it is not able to
reinvest such prepayments at rates which are comparable to the rates on the
maturing loans or securities. A significant increase in the level of interest
rates may also have an adverse effect on the ability of certain of the Company's
borrowers with adjustable-rate loans to repay their loans.
HISTORICAL FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The Company has recognized operating losses in recent years due, to a large
extent, to the prior economic recession and the resulting decline in real estate
values in the Company's market area. These conditions had a material adverse
effect on the quality of the Company's loan portfolio and contributed in 1990
and 1991 to substantial increases in the Company's non-performing assets, which
consist of non-accrual loans and accruing loans 90 days or more overdue
(collectively "non-performing loans"), as well as real estate acquired by the
Company through foreclosure proceedings and real estate acquired through
acceptance of a deed in lieu of foreclosure (collectively "REO"). The Company's
non-performing assets increased from $17.5 million or 5.2% of total assets at
December 31, 1989 to $50.4 million or 16.1% of total assets at December 31,
1991. In 1991, the Company changed its senior management and began the process
of improving the credit quality of the Company's assets through the early
identification of potential problem assets and the administration,
rehabilitation or liquidation of the Company's non-performing assets. As a
result of management's efforts, the Company's non-performing assets have since
declined and totalled $4.9 million or 1.4% of total assets at September 30,
1995.
At September 30, 1995, the Company's allowance for loan losses amounted to
$1.6 million or .73% and 111.62% of total loans and total non-performing loans,
respectively, and the net carrying value of the Company's REO amounted to $3.5
million at such date. The $3.5 million of REO at September 30, 1995 included a
$3.1 million property which the Company has recently sold at a loss of $280,000.
Future additions to the Company's allowance for loan losses or reductions in
carrying values of REO could become necessary in the event of a deterioration in
the real estate market and economy in the Company's primary market area, future
increases in non-performing assets or for other reasons, which would adversely
affect the Company's results of operations. In addition, various regulatory
agencies, as an integral part of their examination process, periodically review
the Company's allowance for loan losses and the carrying value of its REO. Such
agencies may require the Company to make additions to the allowance for loan
losses and adjustments to the carrying values of REO based on their judgments
about information available to them at the time of their examination.
13
<PAGE>
INCREASED EMPHASIS ON COMMERCIAL BUSINESS, CONSTRUCTION, COMMERCIAL REAL ESTATE
AND CONSUMER LENDING
At September 30, 1995, the Company's commercial business loans,
construction loans, commercial real estate loans (including multi-family
residential loans) and consumer loans amounted to $15.3 million or 7.1%, $10.8
million or 5.0%, $76.0 million or 35.5% and $21.9 million or 10.2% of the
Company's total loan portfolio (including loans classified as held for sale),
respectively.
The Company intends to increase its emphasis on commercial business,
residential construction, commercial real estate (primarily multi-family
residential) and consumer lending. Commercial business and commercial real
estate lending entails different and significant risks when compared to single-
family residential lending because such loans often involve large loan balances
to single borrowers and because the payment experience on such loans is
typically dependent on the successful operation of the project or the borrower's
business. Commercial real estate lending can also be significantly affected by
supply and demand conditions in the local market for apartments, offices,
warehouses or other commercial space. Construction financing is generally
considered to involve a higher degree of risk of loss than long-term financing
on improved, owner-occupied real estate. Risk of loss on a construction loan is
dependent largely upon the accuracy of the initial estimate of the property's
value at completion of construction or development and the estimated cost
(including interest) of construction. During the construction phase, a number of
factors could result in delays and cost overruns. If the estimate of value
proves to be inaccurate, the Company may be confronted, at or prior to the
maturity of the loan, with a project, when completed, having a value which is
insufficient to assure full repayment. Finally, consumer lending is also
generally considered to involve additional credit risk than traditional mortgage
lending because of the type and nature of the collateral and, in certain cases,
the absence of collateral.
REGULATION
The Company, as a savings and loan holding company, and the Bank, as a
federally chartered savings bank, are subject to extensive governmental
supervision and regulation, which is intended primarily for the protection of
depositors. In addition, the Company and the Bank are subject to changes in
federal and state law, as well as changes in regulations, governmental policies
and accounting principles. The effects of any such potential changes cannot be
accurately predicted at this time but could adversely affect the business and
operations of the Company and the Bank.
14
<PAGE>
RECAPITALIZATION OF SAIF AND RELATED LEGISLATIVE PROPOSALS
Applicable law requires that both the SAIF and Bank Insurance Fund ("BIF")
be capitalized at a ratio of 1.25% of reserves to deposits. The FDIC has
reported that the BIF attained the 1.25% reserve ratio in May 1995 but that the
SAIF is not likely to reach the 1.25% reserve ratio until 2002. SAIF reserves
have not grown as quickly as the BIF reserves due to a number of factors,
including the fact that a significant portion of SAIF premiums have been and are
currently being used to make payments on bonds ("FICO bonds") issued in the late
1980s by the Financing Corporation to recapitalize the now defunct Federal
Savings and Loan Insurance Corporation.
On November 14, 1995, the FDIC approved a final rule regarding deposit
insurance premiums. The final rule will reduce deposit insurance premiums for
BIF member institutions to zero basis points (subject to a $2,000 minimum) for
institutions in the lowest risk category, while holding deposit insurance
premiums for SAIF members at their current levels (23 basis points for
institutions in the lowest risk category). The reduction will be effective with
respect to the semiannual premium assessment beginning January 1, 1996.
Accordingly, in the absence of further legislative action, SAIF members such as
the Bank will be competitively disadvantaged as compared to commercial banks by
the resulting premium differential.
The U.S. House of Representatives and Senate have provided for a resolution
of the recapitalization of the SAIF in the Balanced Budget Act of 1995 (the
"Reconciliation Bill") which was sent to the President on November 29, 1995.
The President recently vetoed the Reconciliation Bill for reasons unrelated to
the recapitalization of the SAIF. The Reconciliation Bill provides that all
SAIF member institutions will pay a special one-time assessment to recapitalize
the SAIF, which in the aggregate will be sufficient to bring the reserve ratio
in the SAIF to 1.25% of insured deposits. Based on the current level of
reserves maintained by the SAIF it is currently anticipated that the amount of
the special assessment required to recapitalize the SAIF will be approximately
80 to 85 basis points of the SAIF-assessable deposits. The special assessment
would be payable on January 1, 1996, based on the amount of SAIF deposits on
March 31, 1995. It is anticipated that after the recapitalization of the SAIF,
that premiums of SAIF-insured institutions would be reduced comparable to those
currently being assessed BIF-insured commercial banks.
The Reconciliation Bill also provides for the merger of the BIF and SAIF on
January 1, 1998, with such merger being conditioned upon the prior elimination
of the thrift charter. The Banking Committees of the House of Representatives
and the Senate in adopting the Reconciliation Bill agreed that Congress should
consider and act upon separate legislation as early as possible in 1996 to
eliminate the thrift charter. If adopted, such legislation would require that
the Bank, as a federal savings bank, convert to a bank charter. Such a
requirement to convert to a bank charter could cause savings institutions to
lose favorable tax treatment for their bad debt reserves that they currently
enjoy under Section 593 of the Internal Revenue Code of 1986, as amended
("Code").
15
<PAGE>
While the outcome of the proposed legislation cannot be predicted with
certainty, it is likely that some kind of legislative or regulatory action will
be undertaken that will impact the Bank's insured deposits. A one-time special
assessment of 85 basis points would result in the Bank paying approximately $2.3
million, net of related tax benefits, if any. In addition, the enactment of
such legislation may have the effect of immediately reducing the capital of
SAIF-member institutions by the amount of the special assessment. As of
September 30, 1995, after giving effect to the payment and deduction of an 85
basis point special assessment, the Bank's tangible, core and risk-based capital
ratios would have amounted to, on a pro forma basis, approximately 4.13%, 4.13%,
and 8.18%, respectively, and the Bank would continue to be classified as "well
capitalized" pursuant to the OTS' prompt corrective action regulations.
In light of the different proposals currently under consideration and the
uncertainty of the legislative process generally, management cannot predict
whether legislation reducing SAIF premiums and/or imposing a special one-time
assessment will be adopted, or, if adopted, the amount of the assessment, if
any, that would be imposed on the Bank.
PENDING LEGISLATION REGARDING BAD DEBT RESERVES
Under Section 593 of the Code, thrift institutions such as the Bank, which
meet certain definitional tests primarily relating to their assets and the
nature of their business, are permitted to establish a tax reserve for bad debts
and to make annual additions thereto, which additions may, within specified
limitations, be deducted in arriving at their taxable income. The Bank's
deduction with respect to "qualifying loans," which are generally loans secured
by certain interests in real property, may currently be computed using an amount
based on the Bank's actual loss experience (the "experience method"), or a
percentage equal to 8.0% of the Bank's taxable income (the "percentage of
taxable income method"), computed without regard to this deduction and with
additional modifications and reduced by the amount of any permitted addition to
the non-qualifying reserve.
Under the Reconciliation Bill, the percentage of taxable income method
would be repealed and the Bank would be permitted to use only the experience
method of computing additions to its bad debt reserve. In addition, the Bank
would be unable to make additions to its tax bad debt reserve, would be
permitted to deduct bad debts only as they occur and would additionally be
required to recapture (i.e. take into income) over a six-year period the excess
of the balance of its bad debt reserves as of December 31, 1995 over the balance
of such reserves as of December 31, 1987. However, under the proposed
legislation, such recapture requirements would be suspended for each of two
successive taxable years beginning January 1, 1996, in which the Bank originates
a minimum amount of certain residential loans based upon the average of the
principal amounts of such loans made by the Bank during its six taxable years
preceding 1996. It is anticipated that any recapture of the Bank's bad debt
reserves accumulated after 1987 would not have a material adverse effect on the
Company's consolidated financial condition and results of operations.
16
<PAGE>
DIVIDENDS
The Company suspended dividend payments on the Common Stock after the
second quarter of 1990 in order to conserve its capital resources in light of
operating losses and the inability of the Bank to meet its risk-based capital
requirement at the time, and the Company has not paid any dividends since such
date. Dividends, when and if paid, will be subject to determination and
declaration by the Board of Directors in its discretion, which will take into
account the Company's consolidated financial condition and results of
operations, tax considerations, industry standards, economic conditions,
statutory and regulatory restrictions, general economic conditions and other
factors. There can be no assurance that dividends will in fact be paid on the
Common Stock or that, if paid, such dividends will not be reduced or eliminated
in future periods. The Company's ability to pay dividends on the Common Stock
depends on the receipt of dividends from the Bank. See "Market Price for Common
Stock and Dividends."
POSSIBLE LIMITATION OF TAX BENEFITS
At September 30, 1995, the Company and the Bank had a net operating loss
carryforward for federal tax purposes of approximately $7.3 million, $417,000 of
which expires in 2006, $4.5 million of which expires in 2007, $654,000 of which
expires in 2008 and $1.7 million of which expires in 2009. In addition, at such
date, the Company and the Bank had an allowance for possible loan losses of
approximately $1.6 million. The majority of the allowance for possible loan
losses is anticipated to give rise to deductible losses in the current and
future years. In addition, approximately $2.0 million of losses on loans and
other assets have been recognized in prior years for financial accounting
purposes, and it is anticipated that such losses will be recognized in future
years for tax purposes. Losses which the Company and the Bank have not yet
recognized for tax purposes that may be utilized to offset taxable income in the
current, or a past or future year are sometimes referred to as "Built-in
Losses."
If an "ownership change," discussed below, occurs with respect to the
Company and the Bank, either in connection with this transaction, or in future
years as a result of transactions unrelated thereto, the Company and the Bank
may be limited in their ability to use their net operating loss carryforward.
In addition, if the Built-in Losses of the Company and the Bank (netted against
gains which they have not yet recognized for tax purposes, together, the "Net
Unrealized Built-In Losses" of the Company and the Bank) exceed certain
threshold amounts, the Company may be limited in its ability to use its Built-in
Losses to offset otherwise taxable income in the current or a future year.
Accordingly, two factors are involved in evaluating whether the ability of the
Company and the Bank to deduct their Built-in Losses will be limited in the
current, or a past or future year. The first factor is whether the Company and
the Bank have undergone an "ownership change," as defined. The second factor is
whether the Net Unrealized Built-In Losses of the Company and the Bank exceed
the applicable threshold limitations, discussed below, at the time such an
"ownership change" occurs.
17
<PAGE>
The determination whether an "ownership change" has occurred is made by (i)
determining, in the case of any 5% stockholder, the increase, if any, in the
percentage ownership of such 5% stockholder at the end of any three-year testing
period relative to such stockholder's lowest percentage ownership at any time
during such testing period, and expressing such increase in terms of percentage
points (for example, a stockholder whose percentage ownership increased from 2%
to 9% during the testing period will be considered to have had an increase of 7
percentage points), and (ii) aggregating such percentage point increases for all
5% stockholders during the applicable testing period. For purposes of the
preceding sentence, any direct or indirect holder, taking into account certain
attribution rules, of 5% or more of the Company's stock is a 5% stockholder, and
all holders of less that 5% collectively are generally treated as a single 5%
stockholder. An "ownership change" will occur as of the end of any three-year
testing period if the aggregate percentage point increases for all 5%
stockholders for such testing period exceeds 50 percentage points.
The Internal Revenue Service ("IRS") has issued regulations which provide
that if a corporation with a net built-in loss or net operating loss
carryforwards issues stock for cash, a percentage of the stock issued equal to
one-half of the percentage of stock owned by the group of less-than-5%
stockholders immediately before the issuance (the "Pre-Issuance Public Group")
will be presumed to have been acquired by the Pre-Issuance Public Group. The
amount of stock subject to this presumption is limited to the amount of stock
issued less the amount of stock acquired by 5% stockholders (other than the Pre-
Issuance Public Group). The corporation may treat the Pre-Issuance Public Group
as acquiring more stock than the amount presumed to be acquired if it knows that
the amount actually acquired by the Pre-Issuance Public Group is greater.
Accordingly, the Company's existing stockholders may be deemed to have purchased
a percentage of the shares of Common Stock being offered, reducing the
likelihood that the Offering may result in an ownership change of the Company
and the Bank.
IRS regulations also provide that outstanding stock options to acquire
shares of Common Stock of the Company will only be considered to have been
exercised for the purpose of determining whether there has been an ownership
change if the options had been issued for an abusive principal purpose, as
defined. Since the Company's outstanding stock options were ordinary options
designed to provide compensation to officers, and were not issued for the
purpose of manipulating the timing of an ownership change, or for another
prescribed purpose, it appears that such options will not be required to be
considered to have been exercised.
Other regulations which will apply in determining whether the Offering will
be deemed to have resulted in an ownership change of the Company and the Bank
provide that shares held in the name of an investment advisor may be deemed to
be owned by the persons represented by such investment advisor in relation to
their relative economic interest, based on the facts and circumstances. Shares
acquired by a 5% stockholder during a three-year testing period are deemed to
have been acquired proportionately from each
18
<PAGE>
public group of stockholders in existence prior to the 5% stockholder's purchase
of such shares.
Based upon an analysis of its known 5% stockholders during the past three
years, the Company believes that the Offering is unlikely to cause an "ownership
change" to be deemed to have occurred. However, no assurance may be given that
an "ownership change" will not occur as a result of the Offering or in the
future as a result of the cumulative effect of the Offering and other
acquisitions and transfers of Common Stock. Whether the Offering will result in
the Company being deemed to have experienced an "ownership change" within the
meaning of Section 382 of the Code will depend on the number of shares of Common
Stock purchased by existing stockholders.
Section 382 of the Code provides that if the amount of Net Unrealized
Built-in Losses of a corporation, generally, the cumulative amount by which its
tax basis in its assets exceeds the fair market value of such assets, is greater
than the lesser of: (i) 15 percent of the fair market value of the corporation's
assets or (ii) $10 million, then the corporation's Net Unrealized Built-In
Losses will be subject to limitation under Section 382 of the Code if the
corporation were to experience an "ownership change," as defined.
Management of the Company believes, based upon a review of its consolidated
assets and liabilities undertaken in connection herewith, that its unrealized
built-in gains (generally, the amount by which the fair market value of certain
assets of the Company and the Bank exceed the tax basis of such assets), when
netted against its unrealized built-in losses (including the reserve for
possible loan losses), would result in an amount of Net Unrealized Built-In
Losses that would be less than the applicable threshold amounts set forth above.
Accordingly, management believes that, in the event of an "ownership change" in
conjunction with the transactions contemplated hereby, the Company and the Bank
would be considered to have no Net Unrealized Built-In Losses and that it would
continue to be able to utilize its Built-in Losses without limitation. No
assurance can be given that the IRS would concur with the Company's review of
its assets and liabilities and its conclusion that no limitation would apply to
the deduction of Built-in Losses by the Company.
If an "ownership change" occurs with respect to the Company and the Bank,
an annual limitation (the "Section 382 Limitation") would be imposed pursuant to
Section 382 of the Code on the rate at which net operating loss carryforwards
could be deducted against taxable income. In addition, if the Net Unrealized
Built-In Losses of the Company and the Bank were deemed to exceed the above
threshold amounts, the Company would be limited to the Section 382 Limitation in
the rate at which it could deduct its Built-in Losses as they are recognized.
The Section 382 Limitation would be computed by multiplying the aggregate fair
market value of the Common Stock immediately prior to an "ownership change" by
the then-applicable interest rate published by the IRS for this purpose. Based
upon the market value of the outstanding Common Stock on September 30, 1995,
Section 382 could limit the Company's ability to utilize in any one year more
than $1.2 million of its net operating loss carryforward and its as yet
unrecognized Built-in Losses in the event
19
<PAGE>
that the Offering were deemed to result in an "ownership change." The
limitation on the use of Built-in Losses would apply only with respect to Built-
in Losses recognized in the five year period beginning on the date of the
"ownership change." Further, the legislative history regarding Section 382 of
the Code provides that Built-in Losses may only be carried forward, and may not
be carried back. Accordingly, if the Section 382 Limitation were to apply to
the Company and the Bank to limit the rate of utilization of such losses, it is
uncertain whether the Company and the Bank would be able to fully utilize their
net operating loss carryforward and Built-in Losses in the current, or a past or
future year.
If the Offering does not result in an "ownership change," transactions in
shares of Common Stock subsequent to consummation of the Offering which
generally are beyond the control of the Company, could result in an
unanticipated increase in the ownership of Common Stock by one or more 5%
shareholders. If a sufficient number of shares of Common Stock were sold or
purchased by an applicable stockholder group in the current or future years, an
ownership change could occur and the Section 382 Limitation may then be
applicable to the Company and its subsidiaries. In such circumstances, the
determination whether the Company and its subsidiaries have Net Unrealized
Built-in Losses in excess of the applicable threshold amounts would be made as
of the date of such a future "ownership change."
ANTI-TAKEOVER PROVISIONS
Certain provisions of the Company's Certificate of Incorporation and Bylaws
and the Delaware General Corporation Law ("DGCL"), as well as a shareholder
rights plan adopted by the Company, could have the effect of discouraging non-
negotiated takeover attempts which certain stockholders might deem to be in
their interest and making it more difficult for stockholders of the Company to
remove members of its Board of Directors and management. In addition, various
federal laws and regulations could affect the ability of a person, firm or
entity to acquire the Company or shares of its Common Stock. See "Restrictions
on Acquisition of the Company" and "Description of Capital Stock."
THE OFFERING
GENERAL
The Company is offering 500,000 shares of its Common Stock to members of
the general public to whom a copy of this Prospectus is delivered. The minimum
individual purchase pursuant to this Offering is 5,000 shares, and the maximum
is 100,000 shares. The Company reserves the right to alter the individual
minimum and maximum purchase amounts should conditions so warrant and
specifically reserves the right to approve purchases of more than 100,000
shares. The shares of Common Stock offered for sale in the Offering are subject
to the right of the Company to accept or reject orders received in the Offering
in whole or in part and the other limitations described herein. If the number
20
<PAGE>
of shares of Common Stock offered hereby are not sufficient to satisfy all
orders received from participants in the Offering, such excess shares will be
allocated among such persons in any manner determined by the Company in its sole
discretion. If a proration of such excess shares results in a person receiving
fewer shares than the person ordered in the Offering, then any excess funds paid
by such person as the Purchase Price for shares not issued will be returned
without interest or deduction as soon as practicable following the Expiration
Time. There can be no assurance that any shares of Common Stock will be
available to persons desiring to order Common Stock in the Offering. To order
Common Stock in the Offering properly, the enclosed Order Form must be
completed, and payment in full of the aggregate Purchase Price for all shares of
Common Stock ordered must accompany the Order Form.
FINANCIAL ADVISOR
The Company has engaged Sandler O'Neill as its exclusive financial advisor
in connection with the Offering pursuant to an agreement executed between the
Company and Sandler O'Neill. Sandler O'Neill was engaged because of its general
experience in the financial services industry and because of its experience in
similar types of offerings.
Sandler O'Neill has provided advice to the Company regarding the structure
of the Offering as well as with respect to marketing the shares of Common Stock
to be issued in the Offering. An affiliate of Sandler O'Neill, 1993 SOP
Partners, L.P., is currently deemed to beneficially own 6.1% of the outstanding
Common Stock and 16.7% of the Company's outstanding subordinated debt and
warrants. See "Management and Principal Stockholders."
Sandler O'Neill has not prepared any report or opinion constituting a
recommendation or advice to the Company or its stockholders, nor have they
prepared an opinion as to the fairness of the Purchase Price or the terms of the
Offering to the Company. SANDLER O'NEILL EXPRESSES NO OPINION AS TO THE PRICES
AT WHICH SHARES TO BE DISTRIBUTED IN CONNECTION WITH THE OFFERING MAY TRADE IF
AND WHEN THEY ARE ISSUED OR ANY FUTURE TIME. See "- Determination of Purchase
Price."
As compensation for its services, the Company has agreed to pay Sandler
O'Neill a fee equal to $75,000, contingent upon consummation of the Offering.
In connection with its engagement of Sandler O'Neill, the Company has agreed to
indemnify Sandler O'Neill against certain liabilities arising out of its
engagement (including liabilities under the federal securities laws) or, in the
event such indemnification is unavailable, to contribute payments that Sandler
O'Neill may be required to make in respect thereof.
21
<PAGE>
EXPIRATION TIME
The Offering will expire at 5:00 p.m., Eastern Time, on _______ __, 1996,
unless extended in the sole discretion of the Board of Directors of the Company.
The Company will not be obligated to honor any Order Form received after the
Expiration Time, regardless of when the documents were sent.
CONDITIONS TO CONSUMMATION OF THE OFFERING
The Offering will not be consummated and all funds received with
subscriptions will be promptly returned without interest if all 500,000 shares
of Common Stock are not sold through the Offering.
PROCEDURE FOR ORDERING COMMON STOCK IN THE OFFERING
Persons who desire to participate in the Offering must deliver to the
Company, on or prior to the Expiration Time, a properly completed and executed
Order Form with any required signatures guaranteed, together with payment in
full of the aggregate Purchase Price for the shares of Common Stock ordered.
Such payment in full must be by (a) check or bank draft drawn upon a U.S. bank
or postal, telegraphic or express money order payable to Progress Federal
Savings Bank, as Escrow Agent for Progress Financial Corporation, or (b) wire
transfer of funds to the account maintained by the Company for such purpose at
____________________, Account No. _________; ABA No. _________. The aggregate
Purchase Price will be deemed to have been received by the Company only upon (i)
clearance of any non-certified check, (ii) receipt by the Company of any
certified check or bank draft drawn upon a U.S. bank or of any postal,
telegraphic or express money order or (iii) receipt of good funds in the account
designated above. All payments received by the Company will be delivered to the
escrow account designated above promptly. If paying by non-certified personal
check, please note that the funds paid thereby may take at least five business
days to clear. Accordingly, persons who wish to pay the aggregate Purchase
Price by means of a non-certified personal check are urged to make payment
sufficiently in advance of the Expiration Time to ensure that such payment is
received and clears by such date and are urged to consider payment by means of a
certified or cashier's check, money order or wire transfer of funds. Earnings
on the funds held in the escrow account designated above (which are not expected
to be material) will be retained by the Company whether or not the Offering is
consummated.
22
<PAGE>
The address to which the Order Form and payment of the Purchase Price
should be delivered is:
Progress Financial Corporation
Plymouth Meeting Executive Campus
600 West Germantown Pike
Plymouth Meeting, Pennsylvania 19462-1003
Attention: W. Kirk Wycoff
Payment may be made by wire transfer as described above. Persons who make
payment by such method must be sure to deliver to the Company, prior to the
Expiration Time, a properly executed and completed Order Form. Order Forms may
be delivered to the Company as described above or by telecopy. The Company's
telephone number is (610) 825-8800. The Company's telecopy number is (610) 825-
4460. The contact person is W. Kirk Wycoff.
If the aggregate Purchase Price paid by an Offering participant is
insufficient to purchase the number of shares of Common Stock that the person
indicates are being ordered, or if such Offering participant does not specify
the number of shares of Common Stock ordered, then the Offering participant will
be deemed to have ordered the number of whole shares of Common Stock which may
be purchased by the full extent of the payment tendered (subject only to
reduction to comply with regulatory limitations or conditions of the Offering).
If the aggregate Purchase Price paid by an Offering participant exceeds the
amount necessary to purchase the number of shares of Common Stock for which the
Offering participant has ordered, then the Offering participant will be deemed
to have ordered the number of whole shares of Common Stock which may be
purchased by the full extent of the payment tendered (subject only to reduction
to comply with regulatory limitations or conditions of the Offering).
THE INSTRUCTIONS ACCOMPANYING THE ORDER FORM SHOULD BE READ CAREFULLY AND
FOLLOWED IN DETAIL. THE METHOD OF DELIVERY OF ORDER FORMS AND PAYMENT OF THE
AGGREGATE PURCHASE PRICE TO THE COMPANY WILL BE AT THE ELECTION AND RISK OF
OFFERING PARTICIPANTS, BUT IF SENT BY MAIL, IT IS RECOMMENDED THAT SUCH ORDER
FORM AND PAYMENTS BE SENT BY REGISTERED MAIL, PROPERLY INSURED, WITH RETURN
RECEIPT REQUESTED AND THAT A SUFFICIENT NUMBER OF DAYS BE ALLOWED TO ENSURE
DELIVERY TO THE COMPANY AND CLEARANCE OF PAYMENT PRIOR TO THE EXPIRATION TIME.
BECAUSE UNCERTIFIED PERSONAL CHECKS MAY TAKE FIVE BUSINESS DAYS TO CLEAR, YOU
ARE STRONGLY URGED TO PAY, OR ARRANGE FOR PAYMENT, BY MEANS OF A CERTIFIED OR
CASHIER'S CHECK, MONEY ORDER OR WIRE TRANSFER OF FUNDS.
All questions concerning the timeliness, validity, form and eligibility of
Order Forms received will be determined by the Company, whose determinations
will be final and binding. The Company in its sole discretion may waive any
defect or irregularity, or permit a defect or irregularity to be corrected
within such time as it may determine, or reject the purported orders for shares
of Common Stock. Order Forms will not be deemed to have
23
<PAGE>
been received or accepted until all irregularities have been waived or cured
within such time as the Company determines in its sole discretion. The Company
will not be under any duty to give notification of any defect or irregularity in
connection with the submission of Order Forms and will not incur any liability
for failure to give such notification.
ORDERS FOR THE COMMON STOCK WHICH ARE RECEIVED BY THE COMPANY FROM PERSONS
IN THE OFFERING MAY NOT BE REVOKED.
Certain directors and executive officers of the Company and the Bank will
assist the Company in the Offering by, among other things, generally being
available to answer questions of potential purchasers and soliciting orders in
the Offering. None of such directors and executive officers will receive
compensation for such services. None of such directors and executive officers
are registered as securities brokers or dealers under the federal or applicable
state securities laws, nor are any of such persons affiliated with any broker or
dealer. Because none of such persons are in the business of either effecting
securities transactions for others or buying and selling securities for their
own account, they are not required to register as brokers or dealers under the
federal securities laws. In addition, the proposed activities of such directors
and executive officers are exempted from registration pursuant to a specific
safe-harbor provision under Rule 3a4-1 under the Exchange Act. Substantially
similar exemptions from registration are available under applicable state
securities laws.
ISSUANCE OF COMMON STOCK
Provided that all conditions necessary to consummate the Offering are
satisfied, certificates representing shares of Common Stock purchased pursuant
to the Offering will be delivered to purchasers as soon as practicable after the
Expiration Time and after all prorations and adjustments contemplated by the
Offering have been effected. No fractional shares will be issued in the
Offering.
DETERMINATION OF PURCHASE PRICE
The Purchase Price was determined by the Company with the assistance of
Sandler O'Neill. As part of the Company's determination of the Purchase Price,
the Company's management and Board of Directors reviewed such factors as recent
offerings in the thrift and banking industries, the reported price and trading
activity of the Common Stock, certain financial and stock market information for
the Company as compared to certain other publicly traded companies, the business
prospects for the Company and the general condition of the securities markets at
the time of the meeting of the Board of Directors at which the Purchase Price
was determined.
There can be no assurance that the market price of the Common Stock will
not decline during the Offering to a level equal to or below the Purchase Price,
or that following completion of the Offering and the issuance of the Common
Stock sold pursuant thereto,
24
<PAGE>
an Offering participant will be able to sell shares purchased in the Offering at
a price equal to or greater than the Purchase Price. Moreover, until
certificates for shares of Common Stock are delivered, Offering participants may
not be able to sell the shares of Common Stock that they have purchased in the
Offering.
NEITHER SANDLER O'NEILL NOR THE BOARD OF DIRECTORS EXPRESSES AN OPINION,
AND NEITHER SANDLER O'NEILL NOR THE BOARD OF DIRECTORS MAKES ANY RECOMMENDATION,
TO OFFERING PARTICIPANTS AS TO WHETHER OFFERING PARTICIPANTS SHOULD ORDER COMMON
STOCK IN THE OFFERING. AN INVESTMENT IN THE COMMON STOCK OF THE COMPANY MUST BE
MADE PURSUANT TO EACH INVESTOR'S EVALUATION OF THE OFFERING IN THE CONTEXT OF
HIS OR HER BEST INTERESTS.
INTENTION OF DIRECTORS AND EXECUTIVE OFFICERS
Directors and executive officers of the Company as a group (nine persons)
have indicated to the Company that they intend to order, in the aggregate,
125,000 shares of Common Stock. These intentions are not commitments and could
change based upon individual circumstances. Assuming the full purchases
indicated by the directors and executive officers of the Company and the Bank,
such persons would be deemed to beneficially own 16.02% of the Common Stock
assumed to be outstanding on a pro forma basis following the Offering. In
addition, the Company's and the Bank's ESOP intends to purchase in the Offering
50,000 shares of Common Stock (which may be increased to 100,000 shares of
Common Stock).
REGULATORY LIMITATION
The Company will not be required to issue shares of Common Stock pursuant
to the Offering to any person who, in the opinion of the Company, would be
required to obtain prior clearance or approval from any state or federal bank
regulatory authority to own or control such shares if, at the Expiration Time,
such clearance or approval has not been obtained or any required waiting period
has not expired.
RIGHT TO AMEND OR TERMINATE THE OFFERING
The Company expressly reserves the right to amend the terms and conditions
of the Offering, whether the terms and conditions are more or less favorable to
Offering participants. In the event of a material change to the terms of the
Offering, the Company will file a post-effective amendment to its Registration
Statement, of which this Prospectus is a part, and resolicit persons to the
extent required by the Commission. The Company expressly reserves the right, at
any time prior to delivery of shares of Common Stock offered hereby, to
terminate the Offering if the Offering is prohibited by law or regulation or the
Board of Directors concludes, in its judgment, that it is not in the best
interests of the Company to complete the Offering under the circumstances. The
Offering would be terminated by the Company by giving oral or written notice
thereof to Sandler O'Neill and making a public announcement thereof. If the
Offering is so terminated, all funds received from Offering participants will be
promptly refunded, without interest.
25
<PAGE>
USE OF PROCEEDS
The Company intends to invest substantially all of the net proceeds from
the sale of the shares of Common Stock offered hereby in equity of the Bank, in
order to increase its regulatory capital ratios, which may reduce the Bank's
federal deposit insurance premiums, enhance its core earnings and support the
growth of its business. Any net proceeds retained by the Company will be used
by the Company for general corporate purposes. Initially, the net proceeds from
the Offering will be invested in short-term investment grade securities.
The estimated net proceeds to be raised in the Offering depends on the
amount of the actual expenses incurred in the Offering, which may differ from
the estimates thereof.
The following table shows estimated gross and net proceeds based upon the
sale of 500,000 shares of Common Stock in the Offering. In determining net
proceeds, the estimated expenses of the Offering (which, including the fee to be
paid to Sandler O'Neill, are currently estimated to amount to $200,000 in the
aggregate) have been subtracted from gross proceeds.
Issuance of the
500,000 Shares
--------------------
Gross proceeds $
Less: estimated expenses 200,000
-------
Total net proceeds $
-------
-------
26
<PAGE>
CAPITALIZATION
The following table sets forth the consolidated capitalization of the
Company at September 30, 1995 and the pro forma consolidated capitalization of
the Company at such date after giving effect to the Company's receipt of all of
the estimated net proceeds from the sale of the Common Stock offered hereby,
based on the assumptions set forth in "Use of Proceeds" and in the notes below.
For a tabular presentation of the estimated pro forma effects of the Offering on
the regulatory capital ratios of the Bank, see "Regulatory Capital."
<TABLE>
<CAPTION>
September 30, 1995
---------------------------------
Actual As Adjusted
--------------- ---------------
(Dollars in Thousands, Except Per
Share Amounts)
<S> <C> <C>
Deposits $288,883 $288,883
Advances from the FHLB
of Pittsburgh 44,950 44,950
Subordinated debt 3,000 3,000
Loan to ESOP(1) --
------- -------
Total deposits and
borrowed funds $336,833 $
------- -------
------- -------
Stockholders' equity:
Preferred Stock
(authorized: 1,000,000
shares, par value $.01 $ --- $ ---
outstanding: none)
Common Stock
(authorized: 6,000,000
shares, par value $1.00;
issued: 3,280,000 shares and
3,780,000 shares, as adjusted) 3,280 3,780
Additional paid-in capital 15,706
Retained earnings (deficit) (3,775) (3,775)
Unrealized loss on securities
available for sale (337) (337)
Less: Common Stock
acquired by the ESOP(1) --
------- -------
Total stockholders' equity $ 14,874 $
------- -------
------- -------
Book value per share of
Common Stock(2) $4.53 $
------- -------
------- -------
</TABLE>
(FOOTNOTES ON FOLLOWING PAGE)
27
<PAGE>
_______________
(1) Assumes that 50,000 shares of Common Stock will be purchased by the ESOP
(which may be increased to 100,000 shares, which would reduce total
stockholders' equity to $________ and book value per share of Common Stock
to $_______). The Common Stock acquired by the ESOP is reflected as a
reduction of stockholders' equity. The funds used to acquire the ESOP
shares are expected to be borrowed from a third party lender.
(2) Book value per share of Common Stock is determined by dividing the
Company's actual and as adjusted consolidated total stockholders' equity at
September 30, 1995 by 3,280,000 shares of issued and outstanding Common
Stock and 3,780,000 shares of Common Stock, as adjusted, respectively.
REGULATORY CAPITAL
Under regulations adopted by the OTS, each savings institution is currently
required to maintain tangible and core capital equal to at least 1.5% and 3.0%,
respectively, of its adjusted total assets, and total capital equal to at least
8.0% of its risk-weighted assets.
The following table sets forth the actual regulatory capital ratios of the
Bank at September 30, 1995 and as adjusted to give effect to the receipt of the
estimated net proceeds from the sale of the Common Stock offered hereby, based
on the Company's contribution of approximately $2.0 million of the net proceeds
to the Bank.
<TABLE>
<CAPTION>
As Adjusted
Historical Pro Forma
at September 30, 1995 at September 30, 1995
--------------------------------------------------- ---------------------------------------------------
Capital Excess Capital Excess
Capital Requirement Capital Capital Requirement Capital
--------------- --------------- --------------- --------------- --------------- --------------
<S> <C> <C> <C> <C> <C> <C>
DOLLAR BASIS:
Tangible $17,070 $ 5,345 $11,725 $ $ $
Core(1) 17,070 10,690 6,380
Risk-based(2)(3) 18,626 15,914 2,712
PERCENTAGE BASIS:
Tangible 4.79% 1.50% 3.29% % 1.50% %
Core(1) 4.79 3.00 1.79 3.00
Risk-based(2)(3) 9.36 8.00 1.36 8.00
</TABLE>
(FOOTNOTES ON FOLLOWING PAGE)
28
<PAGE>
_______________
(1) Does not reflect the 4.0% requirement to be met in order for an institution
to be deemed "adequately capitalized" under applicable laws and
regulations.
(2) Does not reflect amendments to the risk-based capital requirement.
(3) Assumes the net proceeds are initially invested in 20% risk-weighted
assets.
MARKET PRICE FOR COMMON STOCK AND DIVIDENDS
MARKET PRICE FOR COMMON STOCK
The Common Stock is traded in the over-the-counter market on the Nasdaq
National Market System under the symbol "PFNC." The following table sets forth
the high and low sales prices of the Common Stock as reported by the Nasdaq
National Market System and the cash dividends declared per share of Common Stock
during the periods indicated.
<TABLE>
<CAPTION>
Sales Price
--------------------------
Dividends
High Low Per Share
----------- ----------- -----------
1993
- -----------------
<S> <C> <C> <C>
First Quarter $7.25 $3.00 --
Second Quarter 7.50 3.50 --
Third Quarter 5.50 3.50 --
Fourth Quarter 5.25 4.25 --
1994
- -----------------
First Quarter 6.25 4.50 --
Second Quarter 5.62 4.25 --
Third Quarter 5.50 4.25 --
Fourth Quarter 5.50 3.50 --
1995
- -----------------
First Quarter 5.00 4.25 --
Second Quarter 6.25 4.50 --
Third Quarter 6.25 5.00 --
Fourth Quarter
(through
December __, 1995)
</TABLE>
29
<PAGE>
On December __, 1995, the last trading day before the commencement of the
Offering, the closing sale price of a share of Common Stock on the Nasdaq
National Market System was $____.
As of September 30, 1995, there were 3,280,000 shares of Common Stock
outstanding, which were held by approximately 1,100 holders of record. The
number of holders of record does not reflect the number of persons or entities
who or which hold their stock in nominee or "street" name through various
brokerage firms or other entities. Although the Common Stock is traded on the
Nasdaq National Market System, historically, the Common Stock has not been
actively traded.
DIVIDENDS
The Company has not paid dividends on the Common Stock since the second
quarter of 1990. The Company's ability to pay dividends on the Common Stock
will depend on the receipt of dividends from the Bank. In addition, the
Company's ability to pay dividends on the Common Stock will be affected by its
obligation to pay interest on the $3.0 million of 8.25% Subordinated Notes due
2004 (the "Notes") issued together with 300,000 Common Stock Purchase Warrants
(the "Warrants") in June 1994. Interest expense on such Notes amounts to
approximately $248,000 per year. Applicable rules and regulations of the OTS
impose limitations on capital distributions by savings institutions. Savings
institutions, such as the Bank, which have capital in excess of all fully
phased-in capital requirements before and after the proposed capital
distribution are permitted, after giving prior notice to the OTS, to make
capital distributions during a calendar year up to the greater of (i) 100% of
net income to date during the calendar year, plus the amount that would reduce
by one-half its "surplus capital" (excess capital over its fully phased-in
capital requirements) at the beginning of the calendar year or (ii) 75% of its
net income over the most recent four-quarter period. However, such capital
distribution may not reduce surplus capital below the fully phased-in capital
requirement at the date of the capital distribution. Institutions with less
capital are more restricted in the payment of dividends and no institution can
pay dividends if such payment would cause the institution to no longer satisfy
its capital requirements. Furthermore, institutions may not be permitted by the
OTS to distribute the full amount of dividends otherwise permitted under the
regulations due to safety and soundness concerns.
30
<PAGE>
MANAGEMENT AND PRINCIPAL STOCKHOLDERS
BOARD OF DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information regarding each director
and executive officer of the Company, including information regarding their age
and the number and percent of shares of Common Stock beneficially owned by such
persons as of September 30, 1995. No director is related to any other director
or executive officer of the Company or the Bank by blood, marriage or adoption,
and there were no arrangements or understandings between a director and any
other person pursuant to which such person was elected as a director. The
Company does not have any executive officers who are not also directors.
<TABLE>
<CAPTION>
Amount and Percentage of
Year of Shares Beneficially Owned
Director Expiration as of
Name Age(1) Since of Term September 30, 1995
- --------------------- ------ -------- ---------- -------------------------
Amount Percentage
------ ----------
<S> <C> <C> <C> <C> <C>
John E. F. Corson 54 1991 1996 7000(2) *
William O. Daggett, Jr. 54 1990 1995 62,230(3) 1.9%
Donald F. U. Goebert 58 1987 1996 140,766(4) 4.3
Joseph R. Klinger 52 1992 1995 8,500(2) *
Paul M. LaNoce 35 1991 1996 16,400(2) *
A. John May, III 39 1993 1997 8,193(5) *
William L. Mueller 43 1990 1995 65,726(6) 2.0
Charles J. Tornetta 64 1991 1997 23,158(7) *
W. Kirk Wycoff 37 1991 1997 174,155(8) 5.1
</TABLE>
___________________
* Represents less than 1% of the issued and outstanding Common Stock of the
Company.
(1) As of September 30, 1995.
(2) Includes options to purchase 5,500 shares subject to stock options which
are exercisable within 60 days of September 30, 1995.
(3) Includes 47,230 shares owned by companies of which Mr. Daggett is a
director, officer and 10% stockholder and 5,500 shares subject to stock
options which are exercisable within 60 days of September 30, 1995. Does
not include 12,500 Warrants.
31
<PAGE>
(4) Includes 135,266 shares owned by a company of which Mr. Goebert is a
director, officer and 10% stockholder and 5,500 shares subject to stock
options which are exercisable within 60 days of September 30, 1995. Does
not include 50,000 Warrants.
(5) Includes options to purchase 500 shares subject to stock options which are
exercisable within 60 days of September 30, 1995.
(6) Includes 15,114 shares held jointly by Mr. Mueller with or for the benefit
of certain family members and 5,500 shares subject to stock options which
are exercisable within 60 days of September 30, 1995. Does not include
25,000 Warrants.
(7) Includes 5,500 shares subject to stock options which are exercisable within
60 days of September 30, 1995. Does not include 25,000 Warrants.
(8) Includes 7,000 shares held jointly by Mr. Wycoff with or for the benefit of
certain family members and 120,000 shares subject to stock options which
are exercisable within 60 days of September 30, 1995. Does not include
12,500 Warrants.
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information relating to the only
persons known to the Company to be the beneficial owners of 5% or more of the
Company's Common Stock as of September 30, 1995, and the amount of Common Stock
of the Company held by all directors and executive officers of the Company as a
group as of such date. The information below is based upon filings made
pursuant to the Exchange Act and information furnished by the respective
individuals.
Amount of Common
Stock
Name and Address of Beneficially Owned Percent of
Beneficial Owner as of September 30, 1995 Common Stock
- ------------------- ------------------------ ------------
1993 SOP Partners, L.P. 200,000(2) 6.1%
Two World Trade Center
104th Floor
New York, New York 10048(1)
W. Kirk Wycoff 174,155(3) 5.1
875 Lantern Lane
Blue Bell, Pennsylvania 19422
Directors and executive 506,128(4) 14.7
officers of the Company
as a group (nine persons)
(FOOTNOTES ON FOLLOWING PAGE)
32
<PAGE>
(FOOTNOTES ON FOLLOWING PAGE)
_______________________
(1) 1993 SOP Partners, L.P. is an affiliate of Sandler O'Neill who has been
retained as a consultant and advisor in connection with the Offering.
(2) Does not include 50,000 Warrants.
(3) Includes 7,000 shares which are held jointly by Mr. Wycoff with or for the
benefit of certain family members and 120,000 shares which may be acquired
upon the exercise of stock options exercisable within 60 days of September
30, 1995. Does not include 12,500 Warrants.
(4) Includes 7,000 shares which are held jointly by Mr. Wycoff with or for the
benefit of certain family members, 47,230 shares which are owned by
companies of which Mr. Daggett is a director, officer or 10% stockholder,
135,266 shares owned by companies of which Mr. Goebert is a director,
officer or 10% stockholder and 15,114 shares held jointly by Mr. Mueller
with or for the benefit of certain family members. Also includes 159,000
shares subject to stock options which are exercisable within 60 days from
September 30, 1995. Does not include 125,000 shares subject to the
Warrants held by the group.
RESTRICTIONS ON ACQUISITION OF THE COMPANY
GENERAL
The Certificate of Incorporation and Bylaws of the Company, the DGCL and
applicable federal laws and regulations contain certain provisions which may be
deemed to have a potential anti-takeover effect. Such provisions may have the
effect of discouraging a future takeover attempt which is not approved by the
Board of Directors but which the Company's stockholders may deem to be in their
best interest or in which stockholders may receive a substantial premium for
their shares over then current market prices. As a result, stockholders who
might desire to participate in such a transaction may not have an opportunity to
do so. Certain of such provisions also may make it more difficult for
stockholders of the Company to remove members of its Board of Directors and
management. The Company is not aware of any existing or threatened effort to
acquire control of the Company.
The following description of certain provisions of the Certificate of
Incorporation and Bylaws of the Company, the DGCL and applicable federal laws
and regulations is necessarily general and is qualified by reference to such
Certificate of Incorporation and Bylaws, the DGCL and applicable federal laws
and regulations.
33
<PAGE>
CERTIFICATE OF INCORPORATION AND BYLAWS
AUTHORIZED BUT UNISSUED SHARES OF CAPITAL STOCK. The Company currently has
1,000,000 authorized but unissued shares of Preferred Stock and 6,000,000
authorized shares of Common Stock, of which 3,280,000 shares were issued and
outstanding as of September 30, 1995. As a general matter, the existence of
unissued and unreserved shares of capital stock provides a board of directors
with the ability to cause the issuance of shares of capital stock under
circumstances that might prevent or render more difficult or costly the
completion of a takeover of a company by diluting the voting or other rights of
any proposed acquiror, by creating a substantial voting block in institutional
or other hands that might undertake to support the position of a board of
directors, by effecting an acquisition that might complicate or preclude a
takeover or otherwise.
The Board of Directors also has the authority to issue shares of Preferred
Stock with such terms as it deems advisable. In the event of a proposed merger,
tender offer or other attempt to gain control of the Company which the Board of
Directors does not approve, the Board of Directors could authorize the issuance
of a series of Preferred Stock with rights and preferences which could impede
the completion of such a transaction. An effect of the possible issuance of
Preferred Stock, therefore, may be to deter a future takeover attempt. See
"Description of Capital Stock - Preferred Stock."
In addition to the authorized but unissued shares of Common Stock and
Preferred Stock, the Company has adopted a shareholder rights plan which
generally would cause substantial dilution to a person or group that acquires
20% or more of the outstanding shares of Common Stock. See "Description of
Capital Stock - Preferred Stock Purchase Rights."
BOARD OF DIRECTORS. The Certificate of Incorporation provides that the
Board of Directors of the Company shall be divided into three classes as nearly
equal in number as the then total number of directors permits, with one class to
be elected annually for a term of three years and until their successors are
elected and qualified. See "Management and Principal Stockholders - Board of
Directors and Executive Officers." Vacancies occurring in the Board of
Directors of the Company by reason of an increase in the number of directors may
be filled by a vote of 67% of the remaining directors, and any directors so
chosen shall hold office until the next election of directors by stockholders
and until their successors are elected and qualified. Any other vacancy in the
Board of Directors, whether by reason of death, resignation, disqualification,
removal or other cause, may be filled by a vote of 67% of the remaining
directors, and any directors so chosen shall hold office until the next election
of the class for which such directors shall have been chosen and until their
successors are elected and qualified.
Directors of the Company may be removed from office only for cause by the
affirmative vote of the holders of 67% or more of the outstanding shares of
Common Stock entitled to vote generally in the election of directors. Cause for
removal exists only if the
34
<PAGE>
director whose removal is proposed either has been convicted of a felony or has
been adjudged by a court of competent jurisdiction to be liable for gross
negligence or misconduct in the performance of such directors' duty to the
Company.
MEETINGS OF STOCKHOLDERS. Special meetings of stockholders of the Company,
for any purpose or purposes, may be called only upon the affirmative vote of 67%
of the Board of Directors and may not be called by the stockholders of the
Company.
STOCKHOLDER NOMINATIONS AND PROPOSALS. The Certificate of Incorporation of
the Company generally provides that stockholders must provide the Company with
written notice of stockholder nominations for election as directors and
stockholder proposals not later than 30 days prior to the date of the scheduled
annual meeting; provided, however, that if fewer than 21 days' notice of the
meeting is given to stockholders, such written notice must be received not later
than the close of the tenth day following the day on which notice of the meeting
was mailed to stockholders. Stockholder proposals which are proposed to be
included in the Company's proxy materials must be submitted in accordance with
the notice and other requirements of Rule 14a-8 under the Exchange Act. In each
case the stockholder also is required to submit specified information regarding
such stockholder and the proposed nominee(s) and/or business to be acted upon at
a meeting of stockholders.
SUPERMAJORITY PROVISION. The Certificate of Incorporation of the Company
includes a provision which generally requires the affirmative vote of 67% of the
Company's stockholders to approve a merger or consolidation involving the
Company or the sale, lease, exchange or other disposition of all or
substantially all of the assets of the Company. This voting requirement is not
applicable, however, if the Board of Directors of the Company shall have
approved the transaction by a vote of 67% of the entire Board.
FAIR PRICE PROVISION. The Certificate of Incorporation includes a
provision which governs any proposed "business combination" (defined generally
to include certain sales, purchases, exchanges, leases, transfers, dispositions
or acquisitions of assets, mergers or consolidations, or certain
reclassifications of securities of the Company) between the Company or its
subsidiaries, on the one hand, and a "Related Person," on the other hand. A
"Related Person" is defined generally to include any person, partnership,
corporation, group or other entity (other than the Company and its subsidiaries)
which is the beneficial owner (as defined) of 10% or more of the shares of the
Company entitled to vote generally in an election of directors ("Voting
Shares").
Under the Certificate of Incorporation, if certain specified conditions are
not met, neither the Company nor any of its subsidiaries may become a party to
any business combination with a Related Person without the prior affirmative
vote at a meeting of the Company's stockholders by the holders of at least 80%
of all shares outstanding and entitled to vote thereon (the Company's "Voting
Shares"), voting separately as a class, and by an "Independent Majority of
Stockholders," which is defined to mean the holders of a majority of the
outstanding Voting Shares that are not beneficially owned, directly or
indirectly, by
35
<PAGE>
a Related Person. If such approval were obtained, the specific conditions would
not have to be met. Such conditions also would not have to be met if the Board
of Directors approved the business combination at times and by votes specified
in the Certificate of Incorporation. The conditions necessary to avoid the vote
of 80% of the Company's outstanding Voting Shares and of an Independent Majority
of Stockholders include conditions providing that, upon consummation of the
business combination, the stockholders would receive at least a certain minimum
price per share for their shares.
AMENDMENTS TO CERTIFICATE OF INCORPORATION AND BYLAWS. The affirmative
vote of a majority of the issued and outstanding voting stock of the Company is
required to amend the Certificate of Incorporation, with the exception of
certain sections thereof, including provisions relating to business
combinations, which can only be amended by a vote of 67% of the whole Board of
Directors, a majority of the Continuing Directors, as defined, the vote of at
least 67% of the Voting Shares, and an Independent Majority of Stockholders
entitled to vote thereon.
The Bylaws may be altered, amended or repealed or new bylaws adopted by the
Board of Directors at a regular or special meeting upon the affirmative vote of
both 67% of the whole Board of Directors and a majority of the Continuing
Directors, as defined. The Bylaws may also be altered, amended or repealed by
the stockholders upon the affirmative vote of 67% of the outstanding Voting
Shares of the Company and by an Independent Majority of Stockholders.
FEDERAL LAWS AND REGULATIONS
Federal laws and regulations generally require any person who intends to
acquire control of a savings and loan holding company or savings institution to
give at least 60 days prior written notice to the OTS. "Control" is defined as
the power, directly or indirectly, to direct the management or policies of a
savings institution or to vote 25% or more of any class of voting securities of
the savings institution. In addition to the foregoing restrictions, a company
must secure the approval of the OTS before it can acquire control of a savings
institution. Under federal regulations, a person (including business entities)
is deemed conclusively to have acquired control if, among other things, such
person acquires: (a) 25% or more of any class of voting stock of the savings
institution; (b) irrevocable proxies representing 25% or more of any class of
voting stock of the savings institution; (c) any combination of voting stock and
irrevocable proxies representing 25% or more of any class of such institution's
voting stock; or (d) control of the election of a majority of the directors of
the savings institution. In addition, a rebuttable presumption of control
arises in the event a person acquires more than 10% of any class of voting stock
(or more than 25% of any class of non-voting stock) and is subject to one or
more of eight enumerated control factors. Such regulations also set forth
rebuttable presumptions of concerted action and the procedures to follow to
rebut any such presumptions. The OTS is specifically empowered to disapprove
such an acquisition of control if it finds, among other reasons, that (i) the
acquisition would substantially lessen competition; (ii) the financial condition
of the
36
<PAGE>
acquiring person might jeopardize the institution or its depositors; or (iii)
the competency, experience or integrity of the acquiring person indicates that
it would not be in the interest of the depositors, the institution or the public
to permit the acquisition of control by such person.
DELAWARE GENERAL CORPORATION LAW
Section 203 of the DGCL generally provides that a Delaware corporation
shall not engage in any "business combination" with an "interested stockholder"
for a period of three years following the date that such stockholder became an
interested stockholder unless (1) prior to such date the board of directors of
the corporation approved either the business combination or the transaction
which resulted in the stockholder becoming an interested stockholder; or (2)
upon consummation of the transaction which resulted in the stockholder becoming
an interested stockholder, the interested stockholder owned at least 85% of the
voting stock of the corporation outstanding at the time the transaction
commenced, excluding for this purpose, shares owned by persons who are directors
and also officers and shares owned by employee stock ownership plans in which
employee participants do not have the right to determine confidentially whether
the shares held subject to the plan will be tendered in a tender offer or
exchange offer; or (3) on or subsequent to such date, the business combination
is approved by the board of directors and authorized at an annual or special
meeting of stockholders by the affirmative vote of at least 66 2/3% of the
outstanding voting stock which is not owned by the interested stockholder. The
three-year prohibition on business combinations with an interested stockholder
does not apply under certain circumstances, including business combinations with
a corporation which does not have a class of voting stock that is (i) listed on
a national securities exchange, (ii) authorized for quotation on an inter-dealer
quotation system of a registered national securities association, or (iii) held
of record by more than 2,000 stockholders, unless in each case this result was
directly or indirectly caused by the interested stockholder.
An "interested stockholder" generally means any person that (i) is the
owner of 15% or more of the outstanding voting stock of the corporation or (ii)
is an affiliate or associate of the corporation and was the owner of 15% or more
of the outstanding voting stock of the corporation at any time within the three-
year period immediately prior to the date on which it is sought to be determined
whether such person is an interested stockholder; and the affiliates and
associates of such a person. The term "business combination" is broadly defined
to include a wide variety of transactions, including mergers, consolidations,
sales of 10% or more of a corporation's assets and various other transactions
which may benefit an interested stockholder.
37
<PAGE>
DESCRIPTION OF CAPITAL STOCK
The Company is currently authorized to issue up to 6,000,000 shares of
Common Stock, par value $1.00 per share, and 1,000,000 shares of Preferred
Stock, par value $.01 per share. At September 30, 1995 the Company had
3,280,000 shares of Common Stock issued and outstanding and no shares of
Preferred Stock issued or outstanding. THE CAPITAL STOCK OF THE COMPANY DOES
NOT REPRESENT OR CONSTITUTE A SAVINGS ACCOUNT OR DEPOSIT OF THE COMPANY OR THE
BANK AND IS NOT INSURED BY THE FDIC OR ANY OTHER GOVERNMENTAL AGENCY.
COMMON STOCK
GENERAL. Each share of Common Stock has the same relative rights and is
identical in all respects with each other share of Common Stock. The Common
Stock is not subject to call for redemption and, upon receipt by the Company of
the full purchase price therefor, each share of Common Stock offered hereby will
be fully paid and non-assessable.
VOTING RIGHTS. Except as provided in any resolution or resolutions adopted
by the Board of Directors establishing any series of Preferred Stock, the
holders of Common Stock possess exclusive voting rights in the Company. Each
holder of Common Stock is entitled to one vote for each share held on all
matters voted upon by stockholders. Stockholders are not permitted to cumulate
votes in elections of directors.
DIVIDENDS. The holders of the Common Stock are entitled to such dividends
as may be declared from time to time by the Board of Directors of the Company
out of funds legally available therefor. For a discussion of the requirements
and limitations relating to the Company's ability to pay dividends to
stockholders and the ability of the Bank to pay dividends to the Company, see
"Market Price for Common Stock and Dividends."
PRE-EMPTIVE RIGHTS. Holders of the Common Stock do not have any pre-
emptive rights with respect to any shares which may be issued by the Company in
the future; the Company, therefore, may sell shares of Common Stock without
first offering them to its then-existing stockholders.
LIQUIDATION. In the event of any liquidation, dissolution or winding up of
the Company, the holders of the Common Stock would be entitled to receive, after
payment of all debts and liabilities of the Company, all assets of the Company
available for distribution, subject to the rights of the holders of any
Preferred Stock which may be issued with a priority in liquidation or
dissolution over the holders of the Common Stock.
38
<PAGE>
WARRANTS TO PURCHASE COMMON STOCK
As of September 30, 1995, the Company had Warrants to purchase 300,000
shares of Common Stock outstanding. The following is a summary of the material
provisions of the Warrants. THE WARRANTS ARE NOT SAVINGS ACCOUNTS OR DEPOSITS
OF THE COMPANY OR THE BANK AND ARE NOT INSURED BY THE FDIC OR ANY OTHER
GOVERNMENTAL AGENCY.
The Company issued 12 units consisting of subordinated debt and Warrants in
a private placement on June 30, 1994, with each unit consisting of $250,000 of
subordinated debt and Warrants to purchase 25,000 shares of Common Stock.
Because fractional units were issued, there are currently 13 holders of the
Warrants. Five of the directors and executive officers of the Company own
125,000 Warrants and an affiliate of Sandler O'Neill, 1993 SOP Partners, L.P.,
owns 50,000 Warrants (see "Management and Principal Stockholders"). The
remaining 125,000 Warrants are held by seven individuals or entities.
Each Warrant entitles the holder thereof to purchase one share of the
Common Stock at an exercise price (the "Exercise Price") of $6.00. The Warrants
may not be exercised prior to the earlier to occur of May 31, 1996 or the
effective date of the registration of the shares of Common Stock underlying the
Warrants (the "Common Stock Registration Statement"). The Warrants may be
exercised, in whole or in part, any time subsequent thereto until 5:00 p.m.,
Eastern Time, on June 30, 1999.
The Exercise Price is subject to adjustment upon the occurrence of certain
events, including the issuance of Common Stock as a dividend or distribution on
the Common Stock and subdivisions, combinations and certain reclassifications of
Common Stock. No adjustment in the Exercise Price will be required unless such
adjustment would require a change of at least 1% of the Exercise Price then in
effect; provided, however, that any adjustment that would otherwise be required
to be made shall be carried forward and taken into account in any subsequent
adjustment.
The Warrants do not confer upon the holders thereof any of the rights or
privileges of a stockholder. Accordingly, the Warrants do not entitle holders
thereof to receive any dividends, to vote, to call meetings or to receive any
distribution upon a liquidation of the Company. The Company has authorized and
reserved for issuance a number of shares of Common Stock sufficient to provide
for the exercise of the rights represented by the Warrants. Shares issued upon
exercise of the Warrants will be fully paid and non-assessable. Warrants not
exercised prior to 5:00 p.m., Eastern Time, on June 30, 1999 shall become null
and void.
The Company has filed a registration statement with respect to the Warrants
and has agreed to use its best efforts to continuously maintain the
effectiveness of such registration statement until the earlier to occur of the
second anniversary of the initial issuance of the Warrants (June 30, 1996) or
the sale of all of the Warrants.
39
<PAGE>
The Company has filed the Common Stock Registration Statement with the
Commission and has agreed to use its best efforts to maintain the effectiveness
of the Common Stock Registration Statement until the earlier to occur of the
exercise of all the Warrants or June 30, 1999. In the event that the Company
plans to repurchase or bid for shares of Common Stock, whether on the open
market or otherwise, the Company may request that holders of Warrants that have
not previously been sold, if any, suspend or postpone the distribution thereof
for a period of 45 days or more; provided, however, the aggregate amount of days
during which the Company can delay the offering or distribution of the Warrants
shall not exceed 90 days during any 12 month period.
PREFERRED STOCK
The Board of Directors of the Company is authorized to issue Preferred
Stock and to fix and state voting powers, designations, preferences or other
special rights of such shares and the qualifications, limitations and
restrictions thereof. The Preferred Stock may be issued in distinctly
designated series, may be convertible into Common Stock and may rank prior to
the Common Stock as to dividend rights, liquidation preferences, or both.
The authorized but unissued shares of Preferred Stock (as well as the
authorized but unissued and unreserved shares of Common Stock) are available for
issuance in future mergers or acquisitions, in a future public offering or
private placement or for other general corporate purposes. Except as otherwise
required to approve the transaction in which the additional authorized shares of
Preferred Stock would be issued, stockholder approval generally would not be
required for the issuance of these shares. Depending on the circumstances,
however, stockholder approval may be required pursuant to the requirements for
continued listing of the Common Stock on the Nasdaq National Market System or
the requirements of any exchange on which the Common Stock may then be listed.
PREFERRED STOCK PURCHASE RIGHTS
In April 1990, the Company's Board of Directors declared a dividend
distribution of one preferred stock purchase right ("Right") for each
outstanding share of Common Stock (including subsequently issued shares such as
those proposed to be issued in connection with the Offering). Each Right
entitles each registered holder, upon the occurrence of certain events, to
purchase from the Company a unit consisting of one one-hundredth of a share (a
"Rights Unit") of Series A Junior Participating Preferred Stock, par value $.01
per share, at a purchase price of $40.00 per Rights Unit (the "Purchase Price"),
subject to adjustment. The description and terms of the Rights are set forth in
a Rights Agreement (the "Rights Agreement") between the Company and American
Stock Transfer and Trust Company, as Rights Agent.
The Rights will separate from the Common Stock and be distributed on a date
("Distribution Date") which will occur upon the earlier of (i) ten business days
following a public announcement that a person or group of affiliated or
associated persons, other than
40
<PAGE>
employee benefit plans of the Company (an "Acquiring Person"), has acquired
beneficial ownership of 20% or more of the outstanding shares of Common Stock
(the "Stock Acquisition Date"), or (ii) ten business days (or such later date as
may be determined by action of the Board of Directors of the Company prior to
such time as any person becomes an Acquiring Person) following the commencement
of a tender offer or exchange offer that would result in a person or group
beneficially owning 20% or more of such outstanding shares of Common Stock.
Until the Distribution Date, (i) the Rights will be evidenced by the Common
Stock certificates and will be transferred with and only with such Common Stock
certificates, (ii) new Common Stock certificates issued after the Rights were
declared, including shares to be issued in the Offering, will contain a notation
incorporating by reference the Rights Agreement and (iii) the surrender for
transfer of any certificate for Common Stock outstanding will also constitute
the transfer of the Rights associated with the Common Stock represented by such
certificate. As soon as practicable after the Distribution Date, separate
certificates representing the Rights (the "Rights Certificates") will be mailed
to the holders of record of the Common Stock as of the close of business on the
Distribution Date and, thereafter, the separate Rights Certificates alone will
represent the Rights. The Rights will not be exercisable until the Distribution
Date and will cease to be exercisable at the close of business on May 11, 2000,
unless the Rights are earlier redeemed by the Company as described below.
Unless the Rights are redeemed earlier pursuant to the Rights Agreement, in
the event that, at any time following the Stock Acquisition Date, (i) the
Company is involved in a merger or other business combination in which the
Company is not the surviving corporation or in which the Common Stock of the
Company is changed into or exchanged for other securities of any other person or
cash or any other property, or (ii) 50% or more of the Company's assets or
earning power is sold or transferred, each holder of a Right shall thereafter
have the right to receive, upon exercise and payment of the Purchase Price,
common stock of the acquiring company having a value equal to two times the
exercise price of the Right. In addition, unless the Rights are redeemed
pursuant to the Rights Agreement, in the event that any person or group of
affiliated or associated persons becomes an Acquiring Person, the Rights
Agreement provides that proper provision shall be made so that each holder of a
Right will thereafter have the right to receive, upon exercise and payment of
the Purchase Price, Common Stock (or, in certain circumstances, cash, property
or other securities of the Company) having a value equal to two times the
exercise price of the Right. The events set forth in this paragraph are
referred to in the Rights Agreement as a "Triggering Event." Following the
occurrence of a Triggering Event, any Rights that are, or (under certain
circumstances) were, beneficially owned by any Acquiring Person shall
immediately become null and void.
41
<PAGE>
At any time after a person becomes an Acquiring Person, the Company may
exchange all or part of the Rights (other than Rights which previously have been
voided as set forth above) for shares of Common Stock (an "Exchange") at an
exchange ratio of one share per Right, as such may be appropriately adjusted to
reflect any stock split or similar transaction.
In general, the Company may redeem the Rights in whole, but not in part, at
any time until ten days following the Stock Acquisition Date, at a price of $.01
per Right ("Redemption Price"). Immediately upon the action of the Board of
Directors ordering redemption of the Rights, the Rights will terminate and the
only right of the holders of Rights will be to receive the Redemption Price.
Until a Right is exercised or exchanged, the holder thereof, as such, will have
no rights as a stockholder of the Company, including the right to vote or to
receive dividends.
Preferred Stock purchasable upon exercise of the Rights will not be
redeemable. Each share of Preferred Stock will be entitled to a minimum
preferential quarterly dividend payment of $1 per share but will be entitled to
an aggregate dividend of 100 times the dividend declared per share of Common
Stock. In the event of liquidation, the holders of the Preferred Stock will be
entitled to a preferential liquidation payment equal to the greater of $100 per
share or an aggregate payment of 100 times the payment made per share of Common
Stock. Each share of Preferred Stock will have 100 votes, voting together with
the Common Stock. Finally, in the event of any merger, consolidation or other
transaction in which shares of Common Stock are exchanged, each share of
Preferred Stock will be entitled to receive 100 times the amount received per
share of Common Stock.
The Rights may have certain antitakeover effects. The Rights would cause
substantial dilution to a person or group that acquires 20% or more of the
outstanding shares of Common Stock of the Company if a Triggering Event
thereafter occurs without the Rights having been redeemed or in the event of an
Exchange. However, the Rights should not interfere with any merger or other
business combination approved by the Board of Directors because the Rights are
redeemable under certain circumstances.
TRANSFER AGENT
The transfer agent and registrar for the Common Stock and the Warrants is
American Stock Transfer & Trust Company, New York, New York.
42
<PAGE>
EXPERTS
The consolidated financial statements of the Company as of December 31,
1994 and 1993 and for each of the two years in the period ended December 31,
1994 have been audited by Coopers & Lybrand L.L.P., independent certified public
accountants, as stated in their report thereon dated January 18, 1995, except
for Note 19, as to which the date is May 24, 1995 which includes an explanatory
paragraph regarding the Company's change in its methods of accounting for
investments and income taxes. Such consolidated financial statements are
incorporated herein by reference in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.
The consolidated financial statements of the Company for the year ended
December 31, 1992 have been audited by KPMG Peat Marwick LLP, independent
certified public accountants, as stated in their report thereon dated January
22, 1993, except for the last paragraph thereof which is as of February 16,
1993. Such report contains an explanatory paragraph that states that (i) at
December 31, 1992, the Bank failed to meet the minimum capital thresholds under
the Federal Deposit Insurance Corporation Improvement Act of 1991 to be
considered "adequately capitalized" and was categorized as "significantly
undercapitalized," (ii) the Bank filed a capital plan for attaining the required
levels of regulatory capital and that such plan had been accepted by the OTS,
but that on February 16, 1993 the Bank submitted an amendment to its plan and
the Bank had not received notification as to acceptance or rejection of its
amended capital plan, (iii) because the Bank does not meet the minimum capital
thresholds to be considered "adequately capitalized" it was subject to certain
operating restrictions such as growth limitations, prohibition on dividend
payments, increased supervisory monitoring by its primary regulator, limitations
on executive compensation, and restriction on deposit interest rates, (iv)
failure to increase its capital ratios in accordance with its capital plan or
further declines in its capital ratios exposed the Bank to additional
restrictions and regulatory actions, including regulatory takeover, (v) there
is substantial doubt about the Company's ability to continue as a going concern,
and (vi) the ability of the Company to continue as a going concern is dependent
upon many factors including regulatory action and the ability of management to
achieve its plan. Such consolidated financial statements are incorporated
herein by reference in reliance upon such report given upon the authority of
such firm as experts in accounting and auditing.
LEGAL MATTERS
Certain legal matters relating to the Common Stock will be passed upon for
the Company by Elias, Matz, Tiernan & Herrick L.L.P., 734 15th Street, N.W.,
12th Floor, Washington, D.C. 20005.
43
<PAGE>
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION
NOT CONTAINED IN THIS PROSPECTUS AND ANY INFORMATION OR REPRESENTATION NOT
INCLUDED HEREIN MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OF ANY SECURITIES OTHER
THAN THE SECURITIES TO WHICH IT RELATES OR AN OFFER TO ANY PERSON IN ANY
JURISDICTION WHERE SUCH AN OFFER WOULD BE UNLAWFUL. NEITHER THE DELIVERY OF
THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES,
CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE
COMPANY SINCE THE DATE HEREOF.
_________________________
TABLE OF CONTENTS
_________________________
Page
----
Available Information. . . . . . . . . . . . . . . . . . . . . . . . .
Incorporation of Certain Documents
by Reference. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Summary. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selected Consolidated Financial
and Other Data . . . . . . . . . . . . . . . . . . . . . . . . . . .
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The Offering . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Use of Proceeds. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Regulatory Capital . . . . . . . . . . . . . . . . . . . . . . . . . .
Market Price for Common Stock
and Dividends. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Management and Principal
Stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restrictions on Acquisition
of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . .
Description of Capital Stock . . . . . . . . . . . . . . . . . . . . .
Experts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Legal Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
APPENDIX A - Annual Report on Form
10-K for the Year
Ended December 31, 1994
APPENDIX B - Quarterly Report on
Form 10-Q for the
Quarter Ended
September 30, 1995
PROGRESS
FINANCIAL
CORPORATION
500,000 SHARES OF
COMMON STOCK
____________________
PROSPECTUS
____________________
________ __, 1996
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the estimated expenses in connection with
the issuance and distribution of the securities being registered, all of which
are being borne by the Registrant:
Securities and Exchange Commission ("Commission") registration fee. $ 905.17
Accounting fees and expenses . . . . . . . . . . . . . . . . . . . . 15,000.00
Legal fees and expenses. . . . . . . . . . . . . . . . . . . . . . . 70,000.00
Financial advisory fee . . . . . . . . . . . . . . . . . . . . . . . 75,000.00
Printing and mailing expenses. . . . . . . . . . . . . . . . . . . . 20,000.00
Blue Sky qualification fees and expenses . . . . . . . . . . . . . . 10,000.00
Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,094.83
-----------
$200,000.00
-----------
-----------
In addition to the foregoing expenses, Sandler O'Neill will receive fees
based on the number of shares of Common Stock sold in the Offering. See "The
Offering - Financial Advisor" in the Prospectus.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law ("DGCL") sets forth
circumstances under which directors, officers, employees and agents may be
insured or indemnified against liability which they may incur in their capacity
as such. The Certificate of Incorporation and Bylaws of the Company provide
that the directors, officers, employees and agents of the Company shall be
indemnified to the full extent permitted by law. Such indemnity shall extend to
expenses, including attorney's fees, judgments, fines and amounts paid in the
settlement, prosecution or defense of the foregoing actions. Section 102(b)(7)
of the DGCL sets forth circumstances under which a director's personal liability
to a corporation or its stockholders for money damages for breach of fiduciary
duty as a director may be eliminated or limited. The Certificate of
Incorporation provides for the limitation of personal liability of directors to
stockholders for monetary damages to the Company or its stockholders for such
director's breach of fiduciary duty as a director of the Company to the full
extent permitted by law.
The Company carries a liability insurance policy for its officers and
directors.
II - 1
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
The exhibits and financial statement schedules filed as a part of this
Registration Statement are as follows:
(a) List of Exhibits:
Exhibit No. Exhibit Location
----------- ------- --------
1 Agreement between Sandler O'Neill and
the Company *
3(a) Certificate of Incorporation (1)
3(b) Bylaws (2)
4(a) Specimen Common Stock certificate (3)
4(b) Specimen Preferred Stock Purchase
Rights certificate (4)
5 Opinion of Elias, Matz, Tiernan &
Herrick L.L.P. regarding legality of
securities being registered *
10(a) Key Employee Stock Compensation Plan (3)
10(b) Amendment, dated December 15, 1987,
to Key Employee Stock Compensation
Plan (5)
10(c) 1993 Stock Incentive Plan (6)
10(d) 1993 Directors' Stock Option Plan (6)
10(e) Stockholders Rights Agreement, dated
April 25, 1990, between the
Registrant and American Stock
Transfer and Trust Company, as
Rights Agent (4)
13 Annual Report to Stockholders for the
year ended December 31, 1994 (7)
II - 2
<PAGE>
21 Subsidiaries of the Company (7)
23(a) Consent of Elias, Matz, Tiernan &
Herrick L.L.P. (contained in the
opinion included as Exhibit 5)
23(b) Consents of Independent Public
Accountants E-1
24 Power of Attorney (included in the
signature page to this Registration
Statement)
99 Form of Order Form *
_______________
* To be filed by amendment.
(1) Exhibit is incorporated by reference to the Registrant's Annual Report on
Form 10-K for the year ended December 31, 1987 filed by the Registrant with
the Commission.
(2) Exhibit is incorporated by reference to the Registrant's Registration
Statement on Form S-4 (File No. 33-3685) filed with the Commission on March
3, 1986.
(3) Exhibit is incorporated by reference to the Registrant's Registration
Statement on Form S-8 (File No. 33-10160) filed with the Commission on
November 13, 1986.
(4) Exhibit is incorporated by reference to the Registrant's Registration
Statement on Form 8-A filed with the Commission on April 30, 1990.
(5) Exhibit is incorporated by reference to the Registrant's Registration
Statement on Form S-8 (File No. 33-19570) filed with the Commission on
January 19, 1988.
(6) Exhibit is incorporated by reference to the Registrant; Registration
Statement on Form S-1 (File No. 33-59218) filed with the Commission on
March 8, 1993.
(7) Incorporated by reference to the Registrant's Annual Report on Form 10-K
for the year ended December 31, 1994 filed with the Commission on March 24,
1995.
(b) Financial Statement Schedules.
No financial statement schedules are filed because the required information
is not applicable or is included in the Consolidated Financial Statements or
related Notes.
II - 3
<PAGE>
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the Registration Statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate, represent
a fundamental change in the information set forth in the Registration Statement.
Notwithstanding the foregoing, any increase or decrease in volume of securities
offered (if the total dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the maximum
aggregate offering price set forth in the "Calculation of Registration Fee"
table in the effective registration statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the Registration Statement or any
material change to such information in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
(4) That, for purposes of determining any liability under the Securities
Act of 1933, each filing of the Registrant's annual report pursuant to Section
13(a) or Section 15(d) of the Securities Exchange Act of 1934 that is
incorporated by reference in the Registration Statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
II - 4
<PAGE>
(5) To deliver or cause to be delivered with the prospectus, to each
person to whom the prospectus is sent or given, the latest annual report to
security holders that is incorporated by reference in the prospectus and
furnished pursuant to and meeting the requirements of Rule 14a-3 or Rule 14c-3
under the Securities Exchange Act of 1934; and, where interim financial
information required to be presented by Article 3 of Regulation S-X is not set
forth in the prospectus, to deliver, or cause to be delivered to each person to
whom the prospectus is sent or given, the latest quarterly report that is
specifically incorporated by reference in the prospectus to provide such interim
financial information.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Commission such
indemnification is against public policy and expressed in the Act, and is
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
II - 5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-2 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Plymouth Meeting, Commonwealth of Pennsylvania on the
21st day of December 1995.
PROGRESS FINANCIAL CORPORATION
By: /s/ W. Kirk Wycoff Date: December 21, 1995
------------------------------
W. Kirk Wycoff
Director, President and
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated. Each person whose signature appears
below hereby makes, constitutes and appoints W. Kirk Wycoff his true and lawful
attorney, with full power to sign for such person and in such person's name and
capacity indicated below any and all amendments to this Registration Statement,
hereby ratifying and confirming such person's signature as it may be signed by
said attorney to any and all amendments.
/s/ W. Kirk Wycoff Date: December 21, 1995
- ------------------------------
W. Kirk Wycoff
Director, President and
Chief Executive Officer
(principal executive officer)
/s/ Joanne M. Calibeo Date: December 21, 1995
- ------------------------------
Joanne M. Calibeo
Acting Controller (principal
accounting officer)
/s/ William O. Daggett, Jr. Date: December 21, 1995
- ------------------------------
William O. Daggett, Jr.
Director
<PAGE>
/s/ Joseph R. Klinger Date: December 21, 1995
- ------------------------------
Joseph R. Klinger
Director
/s/ John E. F. Corson Date: December 21, 1995
- ------------------------------
John E. F. Corson
Director
/s/ Donald F. U. Goebert Date: December 21, 1995
- ------------------------------
Donald F. U. Goebert
Director
/s/ Paul M. LaNoce Date: December 21, 1995
- ------------------------------
Paul M. LaNoce
Director
/s/ A. John May, III Date: December 21, 1995
- ------------------------------
A. John May, III
Director
/s/ William L. Mueller Date: December 21, 1995
- ------------------------------
William L. Mueller
Director
/s/ Charles J. Tornetta Date: December 21, 1995
- ------------------------------
Charles J. Tornetta
Director
<PAGE>
Exhibit 23(b)
Consents of Independent Public Accountants
<PAGE>
[Coopers & Lybrand LETTERHEAD]
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statement on
Form S-2 of our report dated January 18, 1995, except for Note 19, as to which
the date is May 24, 1995 which includes an explanatory paragraph regarding the
Company's change in its methods of accounting for investments and income taxes,
on our audits of the financial statements of Progress Financial Corporation as
of December 31, 1994 and 1993 and for the years ended December 31, 1994 and
1993. We also consent to the reference to our firm under the caption "Experts."
/s/ Coopers & Lybrand L.L.P.
2400 Eleven Penn Center
Philadelphia, Pennsylvania
December 20, 1995
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
To the Stockholders and Board of Directors
Progress Financial Corporation:
We consent to incorporation by reference in the registration statement on Form
S-2 of Progress Financial Corporation of our report dated January 22, 1993,
except for matters referred to below, which are as of February 16, 1993, on the
consolidated financial statements of Progress Financial Corporation and to the
reference of our firm under the heading "Experts" in the prospectus.
Our report contains an explanatory paragraph that states that i) at December 31,
1992, Progress Federal Savings Bank (the Bank), the principal wholly-owned
subsidiary of the Company, failed to meet the minimum capital thresholds under
the Federal Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA") to
be considered "adequately capitalized" and is categorized as "significantly
undercapitalized," ii) the Bank filed a capital plan for attaining the required
levels of regulatory capital and that plan has been accepted by the OTS, but
that on February 16, 1993 the Bank submitted an amendment to its plan and the
Bank had not received notification as to acceptance or rejection of its amended
capital plan, iii) because the Bank does not meet the minimum capital thresholds
to be considered "adequately capitalized" it is subject to certain operating
restrictions such as growth limitations, prohibition on dividend payments,
increased supervisory monitoring by its primary regulator, limitations on
executive compensation, and restriction on deposit interest rates, iv) failure
to increase its capital ratios in accordance with its capital plan or further
declines in its capital ratios exposes the Bank to additional restrictions and
regulatory actions, including regulatory take-over, v) there is substantial
doubt about the Company's ability to continue as a going concern, and vi) the
ability of the Company to continue as a going concern is dependent upon many
factors including regulatory action and the ability of management to achieve its
plan.
/s/ KPMG Peat Marwick LLP
Philadelphia, Pennsylvania
December 20, 1995
