SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
July 12, 2001
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(Date of earliest event reported)
Progress Financial Corporation
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(Exact name of registrant as specified in its charter)
Delaware 0-14815 25-2413363
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(State of other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identified No.)
4 Sentry Parkway, Suite 200, Blue Bell, Pennsylvania 19422-0764
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(Address of principal executive offices) (Zip Code)
(610)-825-8800
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(Registrant's telephone number, including area code)
Not Applicable
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(Former name,former address and former fiscal year,if changed since last report)
Exhibit Index appears on page 4
Item 5. Other Events
On July 12, 2001, Progress Financial Corporation announced Board of
Director approval of Office of Thrift Supervision Directive and its intention to
eliminate lending to pre-profit Companies. For further information, see the
press release attached as Exhibit 99(a) and incorporated herein by reference.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PROGRESS FINANCIAL CORPORATION
Dated: July 20, 2001 By: /s/ Michael B. High
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Michael B. High
Executive Vice President and
Chief Financial Officer
EXHIBIT INDEX
Exhibit Number Description
99(a) Press Release on Board of Director approval
of Office of Thrift Supervision Directive and
its intention to eliminate lending to
pre-profit companies.
Exhibit 99(a)
Press Release on Board Approval of OTS Directive
And its Intention to Eliminate Lending to Pre-profit Companies
Released on July 12, 2001
Exhibit 99(a)
NEWS RELEASE
Contact: W. Kirk Wycoff, Chairman, President and Chief Executive Officer
(610) 941-4801
Michael B. High, Chief Financial Officer and Executive Vice President
(610) 941-4804
Dorothy Jaworski, Director of Investor Relations
(484) 322-4822
For immediate release (Blue Bell, Pennsylvania; July 12, 2001):
Progress Financial Corporation Announces Board of Director Approval of
Office of Thrift Supervision Directive and its
Intention to Eliminate Lending to Pre-profit Companies
Progress Financial Corporation (the "Company" - Nasdaq: PFNC) and its
principal subsidiary, Progress Bank (the "Bank") announced today that their
Boards of Directors approved a resolution to comply with the terms of a
directive issued by the Office of Thrift Supervision ("OTS") that requires the
Bank to (i) reduce its lending to early stage technology companies; (ii)
increase its leverage capital ratio to no less than 8.0% and its total
risk-based capital ratio to no less than 14.0% by April 1, 2002; and (iii)
increase its valuation allowance and implement improved credit review and
monitoring programs. In addition, the Company will not pay cash dividends on its
capital stock until the Bank achieves the required capital levels and has
implemented an acceptable capital plan. As such, the Company has suspended the
quarterly cash dividend on its common stock and its stock repurchase program
effective immediately and will undertake to achieve capital compliance as
promptly as possible.
The OTS has indicated that these higher capital levels are necessary
due to the level of business lending, particularly in the technology sector,
that the company has engaged in. The increased capital and reserve levels to a
large extent reflect concerns over the direction of the economy and the recent
growth of the Company's commercial loan portfolio, particularly in loans to
technology and growth companies. W. Kirk Wycoff, President and CEO commented,
"the level of capital and reserves required by this directive are prudent for
Progress Bank to continue to support its middle market business, SBA and real
estate lending initiatives. At this time, the Bank will focus its attention on
core banking and continued development of its retail franchise. With the support
of the Company, the Bank expects to comply with all of the OTS requirements in
an expeditious manner."
For the quarter ended June 30, 2001, the Company recorded a $3.6
million provision for loan and lease losses and wrote down its equity investment
in NewSprings Ventures, L.P., by $616 thousand. As a result, the Company
anticipates reporting a net loss for the quarter ended June 30, 2001 of between
$1.3 million and $1.5 million, or $.22 to $.26 per diluted share. The increase
in provision, which is expected to bring the Company's allowance for loan and
lease losses to $10.3 million or 1.82% of total loans and leases at June 30,
2001, was undertaken due to increases in non-performing loans and leases, loan
and lease growth and continued economic concerns. The Company's book value per
share is anticipated to be approximately $8.92 per share at June 30, 2001, and
the Bank remains well capitalized with core capital in access of $61 million.
The Company expects to announce its second quarter results on July 25, 2001.
The Company and the Bank also announced today their intention to exit
the business of lending to pre-profit companies and to wind down their
technology-based portfolio of loans to pre-profit clients by December 31, 2001.
The Bank has been an active lender in the technology and growth company area,
building a portfolio of $62 million in loans and warrant positions in 39
companies. Mr. Wycoff said "the continued slump in venture funding available to
smaller companies and the inability of these small companies to attain
profitability contributed to the Bank's decision to reduce its exposure in this
market segment. As a $900 million bank, it is important to dedicate our
resources to more traditional lines of business which have a more predictable
earnings level and can lead to appropriate returns for shareholders. We will
continue to be an active lender to small and middle market companies that have
strong balance sheets and earnings histories."
The directive includes, among other things, the following requirements:
o Regulatory Capital. Beginning on April 1, 2002, the Bank is
------------------ required to maintain its leverage capital
ratio at a level of no less than 8.0% and its total
risk-based capital ratio at a level of no less than 14.0%.
The directive permits gradual compliance with these higher
regulatory capital levels with leverage ratios of 7.25% and
7.5% required beginning on September 30, 2001 and December
31, 2001, respectively, and a risk-based ratio of 12.0%
required beginning on September 30, 2001. The directive
requires that the Company and the Bank develop a capital
plan that addresses, among other things, capital levels,
credit concentration, commercial lending risks, classified
assets and retained earnings. The Company is also required
to take all necessary actions to assist the Bank in
accomplishing the goals of the capital plan. At March 31,
2001, the Bank's leverage capital ratio was 6.95% and its
total risk-based capital ratio was 11.86%.
o Capital Distributions, Repurchase and Redemptions. The
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Company may declare and pay a cash dividend on its equity
securities only if (i) the Bank has a leverage capital ratio
of at least 8% and a risk-based capital ratio of at least
14.0% and the Company and Bank are in compliance with their
capital plan or (ii) receives the prior written approval of
the OTS Regional Director. The directive immediately
restricts capital distributions by the Bank without the
prior written approval of the OTS Regional Director and
requires that any purchases or redemptions of Company stock
be consistent with the terms of the capital plan approved by
the OTS Regional Director.
o Higher Risk Loans. Beginning on September 30, 2001, the
----------------- Bank's higher risk loans (as defined in
the directive) shall not exceed 75% of the amount of the
Bank's Tier 1 regulatory capital. Higher risk loans include
certain commercial business loans and other credit
relationships that (i) the Bank originates through its Tech
Banc/Specialized Lending Division, (ii) involve the receipt
by the Bank or an affiliate of warrants or other equity
interests; (iii) are made to a pre-profit company or a
company reliant on venture capital funding, or (iv) are
otherwise determined by the OTS to have a higher than
ordinary degree of credit risk. In order to comply, the Bank
must develop and submit to the OTS Regional Director a
written plan, that includes (i) methods used to identify
concentrations of direct and indirect credits to a specific
industry or line of business; (ii) procedures to be utilized
to achieve the plan's goals; and (iii) procedures for the
monthly monitoring of the plan by the Bank's board of
directors based on management prepared reports.
o Classified Assets to Capital Ratio Beginning on March 31,
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2002, the Bank's classified assets-to-capital ratio
(classified assets divided by the sum of the Bank's Tier 1
regulatory capital and allowance for loan and lease losses)
shall not exceed 20%. The directive permits gradual
compliance with this ratio through the imposition of an
interim required ratio of no more than 25% as of December
31, 2001.
The OTS has also advised the Company and the Bank that it intends to
implement the higher regulatory capital requirements through the establishment
of an individual minimum capital requirement for the Bank. The imposition of the
directive and the individual minimum capital requirements were the result of
concerns raised by the OTS during a recent review and examination.
Progress Financial Corporation is a unitary thrift holding company
headquartered in Blue Bell, Pennsylvania. The business of the Company consists
primarily of the operation of Progress Bank, which serves businesses and
consumers through eighteen full service offices. The Company also offers a
diversified array of financial services including equipment leasing through
Progress Leasing Company, with offices in Blue Bell, Pennsylvania, and financial
planning services and investments through Progress Financial Resources, Inc.,
headquartered in Philadelphia, Pennsylvania; and asset based lending through
Progress Business Credit. In addition, the Company also conducts commercial
mortgage banking and brokerage services through Progress Realty Advisors, Inc.
with locations in Blue Bell, Pennsylvania, and Woodbridge, New Jersey. The
Company also receives fees for construction and development of activities
through Progress Development Corporation; fees for venture capital management
services provided by Progress Capital Management, Inc.; and financial and
operational management consulting services for commercial clients through KMR
Management, Inc. located in Willow Grove, Pennsylvania. The Company's common
stock is traded on The Nasdaq Stock Market under the Symbol "PFNC".