<PAGE>
As filed with the Securities and Exchange Commission on December 13, 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 organization) identification no.)
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:
Jeffrey D. Haas, Esq.
Philip R. Bevan, 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 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 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, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [ X ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
Proposed
Proposed Maximum
Title of Each Maximum Aggregate
Class of Securities Amount to be Offering Offering Amount of
to be Registered Registered(1) Price(2) Price(2) Registration Fee
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock,
$1.00 par value
per share 300,000(3) $6.00 $1,800,000 $620.69
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
</TABLE>
(1) Pursuant to Rule 416 promulgated under the Securities Act of 1933, as
amended, there are also being registered such additional shares of Common
Stock as may become issuable pursuant to the anti-dilution provisions of
certain warrants which were issued by the Registrant ("Warrants").
(2) Estimated solely for the purposes of calculating the Registration Fee
pursuant to the provisions of Rule 457(g).
(3) Represents the estimated number of shares which may be issued pursuant to
the exercise of the Warrants.
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.
i
<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 Registration Statement Outside Front Cover Page
and Outside Front Cover 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 Changes
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
9. Description of Securities to be Description of Capital Stock
Registered
10. Interests of Named Experts and Not Applicable
Counsel
11. Information With Respect to the Summary; Incorporation of Certain
Registrant Documents by Reference
12. Incorporation of Certain Information Incorporation of Certain
by 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.
ii
<PAGE>
Subject to Completion - Dated December __, 1995
PROSPECTUS
PROGRESS FINANCIAL CORPORATION
300,000 Shares
of Common Stock
This Prospectus relates to the issuance of common stock, $1.00 par value
per share (the "Common Stock"), of Progress Financial Corporation (the
"Company") pursuant to the exercise of Warrants (the "Warrants") which were
issued by the Company, at an exercise price of $6.00, subject to adjustment.
The Warrants are exercisable at any time until 5:00 p.m., Eastern Time, on June
30, 1999.
The Common Stock of the Company is traded in the over-the-counter market
and is quoted through the Nasdaq National Market System under the symbol
"PFNC." The last sale price of the Company's Common Stock as reported by
Nasdaq on December __, 1995 was $_____ per share.
The Company is paying all the expenses of registering the Common Stock
under the Securities Act of 1933, as amended ("Securities Act") (including
filing, legal, and miscellaneous expenses in connection with the registration)
which are estimated to aggregate approximately $23,000. The Company will use
its best efforts to maintain the effectiveness of the registration statement
with respect to the Common Stock to be issued upon exercise of the Warrants
until the earlier to occur of June 30, 1999 or the exercise of all the Warrants.
THE SECURITIES OFFERED HEREBY INVOLVE CERTAIN RISKS. SEE "RISK FACTORS."
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION
NOR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
---------------------------------------------------------
---------------------------------------------------------
Offering Estimated Estimated
Price Expenses Net Proceeds
---------------------------------------------------------
<S> <C> <C> <C>
Per Share $ 6.00 $ .08 $ 5.92
---------------------------------------------------------
Total $1,800,000 $23,000 $1,777,000
---------------------------------------------------------
---------------------------------------------------------
</TABLE>
The date of this Prospectus is December __, 1995
<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 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.
2
<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 ("Annual Report");
(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 most recent Annual Report
on Form 10-K and, if applicable, its Quarterly Report on Form 10-Q for the most
recent quarter following its fiscal year end. Copies of the documents
incorporated by reference
3
<PAGE>
herein 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 (the "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 two
loan production offices in Montgomery and Lancaster Counties 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
4
<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.
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."
5
<PAGE>
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."
6
<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) 1,394 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 46 (171) (176) 606 1,428 319 ---
activities
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 8 8 8 8 7 8 8
</TABLE>
7
<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
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
8
<PAGE>
months ended September 30, 1995, the Company's interest rate spread amounted
to 3.08%. 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 implemented an interest rate risk component into its risk-based
capital rules, which 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 by 2.02% 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.
9
<PAGE>
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
approximately $200,000. 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.
10
<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.
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
11
<PAGE>
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 Fund to 1.25% of insured deposits. Based on the current level of
reserves maintained by the SAIF Fund 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").
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
12
<PAGE>
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.
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 Banks' 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 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.
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
13
<PAGE>
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 the transactions contemplated
hereby, 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.
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
14
<PAGE>
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. 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.
In addition, if the Net Unrealized Built-In Losses of the Company 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 is computed by
multiplying the aggregate fair market value of the Company Common Stock
immediately prior to the "ownership change" by the then-applicable interest rate
published by the IRS for this purpose. Based upon the market value of the
outstanding Company Common Stock on September 30, 1995, Section 382 would 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.
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.
15
<PAGE>
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."
USE OF PROCEEDS
Each Warrant entitles the holder thereof to purchase one share of Common
Stock at an exercise price of $6.00 at any time prior to 5:00 p.m., Eastern
Time, on June 30, 1999. The proceeds from the exercise, if any, of Warrants
will be used by the Company for general corporate purposes. The maximum amount
of gross proceeds to be received by the Company assuming the exercise of all
300,000 Warrants would be $1.8 million.
16
<PAGE>
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
-------- --------- -----------
<S> <C> <C> <C>
1993
------------------
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 5.625 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 8, 1995) 6.125 5.50 --
</TABLE>
On December __, 1995, the last trading day before the commencement of the
offering of the securities offered hereby, the closing sale price of a share of
Common Stock on the Nasdaq National Market System was $____.
17
<PAGE>
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 in connection with the initial sale of 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.
18
<PAGE>
REGULATORY CAPITAL
The following is a reconciliation of the Bank's capital determined in
accordance with generally accepted accounting principles ("GAAP") to regulatory
tangible, core, and risk-based capital at September 30, 1995.
<TABLE>
<CAPTION>
Tangible Core Risk-Based
Capital % Capital % Capital %
-------- ----- ------- ------ ---------- -----
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Adjusted GAAP capital $17,411 $17,411 $17,411
General valuation allowance --- --- 1,556
Unrealized loss on securities
available for sale 337 337 337
Goodwill (150) (150) (150)
Investment in joint venture (8) (8) (8)
Non-qualifying deferred tax
asset (520) (520) (520)
------- ------- -------
Total 17,070 4.79% 17,070 4.79% 18,626 9.36%
Minimum capital requirement 5,345 1.50 10,690 3.00 15,914 8.00
------- ------- -------
Regulatory capital - excess $11,725 3.29% $ 6,380 1.79% $ 2,712 1.36%
------- ------- -------
------- ------- -------
</TABLE>
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 7,000(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>
(FOOTNOTES ON FOLLOWING PAGE)
19
<PAGE>
___________________
* 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.
(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.
20
<PAGE>
<TABLE>
<CAPTION>
Amount of Common
Stock Beneficially
Name and Address of Owned as of Percent of
Beneficial Owner September 30, 1995 Common Stock
- ------------------- ------------------ ------------
<S> <C> <C>
1993 SOP Partners, L.P. 200,000(1) 6.1%
Two World Trade Center
104th Floor
New York, New York 10048
W. Kirk Wycoff 174,155(2) 5.1
875 Lantern Lane
Blue Bell, Pennsylvania 19422
Directors and executive 506,128(3) 14.7
officers of the Company
as a group (9 persons)
</TABLE>
_______________________
(1) Does not include 50,000 Warrants.
(2) 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.
(3) 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.
21
<PAGE>
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.
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
22
<PAGE>
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." 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 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,
23
<PAGE>
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 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.
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<PAGE>
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 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
25
<PAGE>
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.
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."
26
<PAGE>
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.
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 (see "Management and Principal Stockholders"). The remaining
175,000 Warrants are held by eight 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 "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
27
<PAGE>
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.
The Company has agreed to use its best efforts to maintain the
effectiveness of the Registration Statement (of which this Prospectus is a
part) 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. 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
28
<PAGE>
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 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 as a result of the exercise of Warrants,
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
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<PAGE>
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.
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 minimum preferential liquidation payment of $100 per share but
will be entitled to 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 Warrants and the Common Stock is
American Stock Transfer & Trust Company, New York, New York.
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<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. 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 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. 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.
31
<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
_________________________
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information. . . . . . . . . . . . . . . 2
Incorporation of Certain
Documents by Reference . . . . . . . . . . . . . . 3
Summary. . . . . . . . . . . . . . . . . . . . . . 4
Selected Consolidated
Financial and Other Data . . . . . . . . . . . . . 7
Risk Factors . . . . . . . . . . . . . . . . . . . 8
Use of Proceeds. . . . . . . . . . . . . . . . . . 16
Market Price for Common Stock
and Dividends. . . . . . . . . . . . . . . . . . 17
Regulatory Capital . . . . . . . . . . . . . . . . 19
Management and Principal
Stockholders . . . . . . . . . . . . . . . . . . 19
Restrictions on Acquisition
of the Company . . . . . . . . . . . . . . . . . 22
Description of Capital Stock . . . . . . . . . . . 26
Experts. . . . . . . . . . . . . . . . . . . . . . 31
Legal Matters. . . . . . . . . . . . . . . . . . . 31
</TABLE>
PROGRESS
FINANCIAL
CORPORATION
300,000 SHARES OF
COMMON STOCK
____________________
PROSPECTUS
____________________
December __, 1995
<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:
<TABLE>
<CAPTION>
<S> <C>
Securities and Exchange Commission ("Commission")
registration fee. . . . . . . . . . . . . . . . . . . . . . . $ 620.69
Accounting fees and expenses . . . . . . . . . . . . . . . . . 6,000.00
Legal fees and expenses. . . . . . . . . . . . . . . . . . . . 10,000.00
Printing . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,000.00
Blue Sky qualification fees and expenses . . . . . . . . . . . 3,000.00
Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . 2,379.31
----------
$23,000.00
----------
----------
</TABLE>
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 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:
<TABLE>
<CAPTION>
Exhibit No. Exhibit Location
- ----------- ------- --------
<C> <S> <C>
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 E-1
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)
21 Subsidiaries of the Company (7)
</TABLE>
II-2
<PAGE>
<TABLE>
<C> <S> <C>
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-4
24 Power of Attorney (included in the
signature page to this Registration
Statement)
</TABLE>
_______________
(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.
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<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 are 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 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 12th day of December 1995.
PROGRESS FINANCIAL CORPORATION
By: /s/ W. Kirk Wycoff Date: December 12, 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 12, 1995
- ---------------------------------------
W. Kirk Wycoff
Director, President and
Chief Executive Officer
(principal executive officer)
/s/ Peter J. Meier Date: December 12, 1995
- ---------------------------------------
Peter J. Meier
Vice President and Corporate
Controller (principal accounting
officer)
/s/ William O. Daggett, Jr. Date: December 12, 1995
- ---------------------------------------
William O. Daggett, Jr.
Director
<PAGE>
/s/ Joseph R. Klinger Date: December 12, 1995
- ---------------------------------------
Joseph R. Klinger
Director
/s/ John E. F. Corson Date: December 12, 1995
- ---------------------------------------
John E. F. Corson
Director
/s/ Donald F. U. Goebert Date: December 12, 1995
- ---------------------------------------
Donald F. U. Goebert
Director
/s/ Joseph R. Klinger Date: December 12, 1995
- ---------------------------------------
Joseph R. Klinger
/s/ Paul M. LaNoce Date: December 12, 1995
- ---------------------------------------
Paul M. LaNoce
Director
/s/ A. John May, III Date: December 12, 1995
- ---------------------------------------
A. John May, III
Director
/s/ William L. Mueller Date: December 12, 1995
- ---------------------------------------
William L. Mueller
Director
/s/ Charles J. Tornetta Date: December 12, 1995
- ---------------------------------------
Charles J. Tornetta
Director
<PAGE>
EXHIBIT 5
Opinion of Elias, Matz, Tiernan & Herrick L.L.P.
regarding legality of securities being registered
<PAGE>
[ELIAS, MATZ, TIERNAN & HERRICK L.L.P. LETTERHEAD]
December 13, 1995
Board of Directors
Progress Financial Corporation
Plymouth Meeting Executive Campus
600 West Germantown Pike
Plymouth Meeting, Pennsylvania 19462-1060
Gentlemen:
We are acting as special counsel to Progress Financial Corporation,
Plymouth Meeting, Pennsylvania (the "Company"), in connection with the
preparation and filing with the Securities and Exchange Commission ("SEC")
pursuant to the Securities Act of 1933, as amended, of a Registration Statement
on Form S-2 ("Registration Statement"), relating to the issuance of shares of
common stock, par value $1.00 per share (the "Common Stock"), of the Company
upon the exercise of 300,000 Warrants which were previously issued by the
Company and were outstanding as of the date hereof. Each Warrant entitles the
holder thereof to purchase one share of Common Stock at an exercise price of
$6.00 at any time prior to 5:00 p.m., Eastern Time, on June 30, 1999 ("Warrant
Share").
In this regard, we have examined originals or copies, certified or
otherwise identified to our satisfaction, of the Certificate of Incorporation
and Bylaws of the Company, Board of Directors' resolutions and such other
documents and corporate records as we deemed appropriate for the purpose of
rendering this opinion. In addition, we have assumed, without independent
verification, the genuiness of all signatures and the authenticity of all
documents furnished to us and the conformance in all respects of copies to
originals.
Based upon the foregoing and subject to the qualifications and assumptions
set forth herein, we are of the opinion as of the date hereof that the Warrant
Shares to be issued upon the exercise of the Warrants have been duly and validly
authorized and, assuming that (i) the Warrant Shares so issuable will continue
to be validly authorized on the dates of exercise of the Warrants, (ii) on the
dates of exercise, the Warrants are and continue to constitute valid, legal and
binding obligations of the Company and will be enforceable as to the Company in
accordance with their terms, (iii) no change occurs in the applicable law or the
pertinent facts, (iv) the provisions of "blue sky" and other securities laws as
may be
<PAGE>
Board of Directors
Progress Financial Corporation
December 13, 1995
Page 2
applicable have been complied with, and (v) the Warrants are exercised in
accordance with their terms and the exercise price for the Warrant Shares is
paid in accordance with the terms of the Warrants, the Warrant Shares so issued
will be legally issued, fully paid and non-assessable.
We consent to the filing of this opinion as an exhibit to the Registration
Statement and to the reference to our name under the caption "Legal Matters" in
the Prospectus included in the Registration Statement.
Very truly yours,
ELIAS, MATZ, TIERNAN & HERRICK L.L.P.
By: /s/ Jeffrey D. Haas
--------------------------------------
Jeffrey D. Haas, a Partner
<PAGE>
EXHIBIT 23(b)
Consents of Independent Public Accountants
<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 11, 1995
<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 11, 1995
