Securities and Exchange Commission
Washington, D.C. 20549
Form 10-K
Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the fiscal year ended December 31, 1995
Commission File Number: 0-14815
PROGRESS FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 23-2413363
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
Plymouth Meeting Executive Campus
600 West Germantown Pike
Plymouth Meeting, Pennsylvania 19462-1060
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (610) 825-8800
Securities registered pursuant to Section 12(b) of the Act: Not applicable
Securities registered pursuant to Section 12(g) of the Act: Common Stock,
$1.00 par value
(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days. Yes |X| No |_|
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. |X|
The aggregate market value of the voting stock, held by non-affiliates of the
Registrant as a group, was $18,647,910 as of March 8, 1996.
As of March 8, 1996, there were 3,780,000 issued and outstanding shares of the
Registrant's Common Stock.
Documents Incorporated By Reference:
(1) Portions of the Annual Report to Stockholders for the year ended December
31, 1995 are incorporated into Part II, Items 5 through 8 of this Form 10-K
(2) Portions of the definitive proxy statement for the 1996 Annual Meeting of
Stockholders are incorporated into Part III, Items 10 through 13 of this
Form 10-K.
PROGRESS FINANCIAL CORPORATION
Table of Contents
PART I Page
Item 1. Business.......................................................... 3
Item 2. Properties........................................................ 17
Item 3. Legal Proceedings................................................. 17
Item 4. Submission of Matters to a Vote of Security Holders............... 17
PART II
Item 5. Market for the Registrant's Common Equity and Related
Stockholder Matters............................................. 17
Item 6. Selected Consolidated Financial Data.............................. 17
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations........................................... 17
Item 8. Financial Statements and Supplementary Data....................... 17
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure............................................ 17
PART III
Item 10. Directors and Executive Officers of the Registrant................ 18
Item 11. Executive Compensation............................................ 18
Item 12. Security Ownership of Certain Beneficial Owners and Management.... 18
Item 13. Certain Relationships and Related Transactions.................... 18
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K... 19
Signatures........................................................ 20
PART I
Item 1. Business
General
Progress Financial Corporation (the "Company") was incorporated under the laws
of the State of Delaware in February 1986 by authorization of the Board of
Directors of Progress Federal Savings Bank (the "Bank") for the purpose of
becoming a unitary thrift holding company owning all of the outstanding stock of
the Bank. On July 18, 1986, pursuant to a plan of reorganization approved by the
Bank's shareholders, all of the outstanding shares of capital stock of the Bank
were converted into shares of capital stock of the Company on a share-for-share
basis so that the shareholders of the Bank became the shareholders of the
Company, and the Company became the sole shareholder of the Bank. The business
activity of the Company as a unitary thrift holding company consists primarily
of the operation of the Bank as a wholly-owned savings bank subsidiary.
The Company is authorized as a Delaware corporation to engage in any activity
permitted by the Delaware General Corporation Law. The holding company structure
permits the Bank, through the Company, to expand the size and scope of the
financial services offered beyond those that the Bank is permitted to offer.
The Bank is a Federally chartered stock savings bank conducting community
banking business through six offices in Montgomery County, Pennsylvania, one
office in Delaware County, Pennsylvania, one office in Chester County,
Pennsylvania and one office in the Andorra community of Philadelphia,
Pennsylvania.
The principal business of the Bank consists 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, commercial business loans consisting primarily of loans to
small and medium-sized businesses, and various consumer loans. The Bank
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 Bank 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 Bank invests in mortgage-backed securities which are insured or
guaranteed by the U.S. Government and 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 ("REO").
The Company also conducts commercial mortgage banking and brokerage services for
institutional real estate investors and lenders as well as real estate owners
and developers and provides equipment leasing for small and medium-sized
companies through its subsidiaries, Progress Realty Advisors, L.P. ("PRA") and
Quaker State Financial Corporation ("QSFC"). PRA was established in September
1993, while a 75% majority interest in QSFC was recently acquired in July 1995.
On January 31, 1996, the Company successfully completed the offering of 500,000
shares of common stock at a price of $5.25 per share.
3
Competition
The Company faces strong competition both in attracting deposits and making
loans. As a provider of a wide range of financial services, the Company competes
with national and state banks, savings and loan associations, securities
dealers, brokers, mortgage bankers, finance and insurance companies, and other
financial service companies. The ability of the Company to attract and retain
deposits depends on its ability to generally provide a rate of return, liquidity
and risk comparable to that offered by competing investment opportunities. The
Company competes for loans principally through the interest rates and loan fees
it charges and the efficiency and quality of services it provides borrowers.
Subsidiaries
At December 31, 1995, in addition to the Bank, the Company had two other
subsidiaries, Progress Realty Advisors, L.P. ("PRA") and Quaker State Financial
Corporation ("QSFC"). PRA, which was formed in September 1993, provides loan
sale advisory, commercial mortgage banking, and commercial mortgage brokerage
services to both institutional real estate investors and lenders, as well as
real estate owners and developers. QSFC, which was acquired in July 1995, is
active in leasing a wide range of equipment and machinery generally to small and
medium sized businesses.
REGULATION AND SUPERVISION
General
The Company's non-banking subsidiaries are subject to the laws of the
Commonwealth of Pennsylvania. The Company, as a unitary thrift holding company
is subject to comprehensive examination, supervision and regulation by the
Office of Thrift Supervision ("OTS"). As a subsidiary of a unitary thrift
holding company, the Bank is subject to certain restrictions in its dealings
with the Company and affiliates thereof.
The Bank
Insurance of Deposits
The Bank's deposits are insured by the Savings Association Insurance Fund
("SAIF") to a maximum of $100,000 for each depositor. The Federal Deposit
Insurance Corporation ("FDIC") requires an annual audit by independent
accountants and may also examine Federal savings banks whose deposits are
insured.
The annual assessment for SAIF members for deposit insurance for the period from
January 1, 1995 through December 31, 1995 was between .23% and .31% of insured
deposits, which was payable on a semi-annual basis. The Bank's deposit insurance
during 1995 was assessed at a rate of .29%.
Federal law requires that the FDIC maintain the reserve level of each of the
SAIF and the Bank Insurance Fund ("BIF") at 1.25% of insured deposits. The BIF
reached this level during 1995. A one-time assessment on thrift institutions
sufficient to recapitalize the SAIF to a level which would at least approach
that of BIF is in current legislation. The current legislation, if enacted,
would result in a one-time assessment of approximately $2.4 million.
Qualified Thrift Lender Test
All savings associations are required to meet a qualified thrift lender ("QTL")
test set forth in Section 10(m) of the Home Owners' Loan Act("HOLA") and
regulations of the OTS thereunder to avoid certain restrictions on their
operations.
Currently, the QTL test requires that 65% of an institution's "portfolio assets"
(as defined) consist of certain housing and consumer related assets on a monthly
average basis in 9 out of every 12 months.
At December 31, 1995, approximately 75.8% of the Bank's assets were invested in
qualified thrift investments, which was in excess of the percentage required to
qualify under the QTL test. For all 12 months of 1995, the bank exceeded the QTL
requirement.
4
Federal Home Loan Bank System
The Bank is a member of the FHLB which administers the home financing credit
function and serves as a source of liquidity for member savings associations and
commercial banks within its assigned region. It makes loans to members (i.e.,
advances) in accordance with policies and procedures establish by its Board of
Directors. As of December 31, 1995, the Bank's advances from the FHLB amounted
to $25.4 million.
As a member, the Bank is required to purchase and maintain stock in the FHLB of
Pittsburgh in amount equal to the greater of 1% of its mortgage related assets
or .3% of total assets. At December 31, 1995, the Bank had $2.1 million in FHLB
stock, which was in compliance with this requirement.
Federal Limitations on Transactions with Affiliates
Transactions between savings associations and any affiliate are governed by
Sections 23A and 23B of the Federal Reserve Act. In addition to the restrictions
imposed, no savings associations may (i) loan or otherwise extend credit to an
affiliate, except for any affiliate which engages only in activities which are
permissable for bank holding companies, or (ii) purchase or invest in any
stocks, bonds, debentures, notes, or similar obligations of any affiliate,
except for affiliates which are subsidiaries of the savings association.
In addition, Section 12 CRF-215 (Regulation O) of the Code of Federal
Regulations places restrictions on loans by savings associations to executive
officers, directors, and principal stockholders of the Company and the Bank. At
December 31, 1995, the Bank was in compliance with this regulation.
Employees
As of December 31, 1995, there were no employees of the Company. The Bank had 98
full-time and 22 part-time employees, while PRA and QSFC had 6 and 4 full-time
employees, respectively.
Statistical Information
Statistical information is furnished pursuant to the requirements of Guide 3
(Statistical Disclosure by Bank Holding Companies) promulgated under the
Securities Act of 1933. The information required herein is incorporated by
reference from pages 10 to 18 of the Company's Annual Report to Stockholders.
Additional disclosures required in Guide 3 and not incorporated by reference are
included below.
5
Tabular information is provided in thousands of dollars except for share and per
share data.
Investment securities are comprised of the following at December 31, 1995, 1994
and 1993:
- --------------------------------------------------------------------------------
1995
----
Held to Maturity Available for Sale
---------------- ------------------
Amortized Estimated Amortized Estimated
Cost Fair Value Cost Fair Value
- --------------------------------------------------------------------------------
FHLB of Pittsburgh stock, pledged $ 2,149 $ 2,149 $ -- $ --
U.S. agency obligations -- -- 5,497 5,474
Equity investments -- -- 30 30
- --------------------------------------------------------------------------------
Total investment securities $ 2,149 $ 2,149 $ 5,527 $ 5,504
================================================================================
- --------------------------------------------------------------------------------
1994
----
Held to Maturity Available for Sale
---------------- ------------------
Amortized Estimated Amortized Estimated
Cost Fair Value Cost Fair Value
- --------------------------------------------------------------------------------
FHLB of Pittsburgh stock, pledged $ 2,303 $ 2,303 $ -- $ --
U.S. agency obligations 10,564 9,625 4,999 4,597
Equity investments -- -- 30 30
- --------------------------------------------------------------------------------
Total investment securities $12,867 $11,928 $ 5,029 $ 4,627
================================================================================
- --------------------------------------------------------------------------------
1993
----
Held to Maturity Available for Sale
---------------- ------------------
Amortized Estimated Amortized Estimated
Cost Fair Value Cost Fair Value
- --------------------------------------------------------------------------------
FHLB of Pittsburgh stock, pledged $ 2,632 $ 2,632 $ -- $ --
U.S. agency obligations 2,000 1,977 -- --
- --------------------------------------------------------------------------------
Total investment securities $ 4,632 $ 4,609 $ -- $ --
================================================================================
The investment securities which are classified as held to maturity and available
for sale have a weighted average coupon rate of 6.75% and 6.63%, respectively,
at December 31, 1995.
6
Mortgage-Backed Securities
The following table details the Bank's mortgage-backed securities by
classification at December 31, 1995, 1994 and 1993.
- --------------------------------------------------------------------------------
1995
----
Held to Maturity Available for Sale
---------------- ------------------
Amortized Estimated Amortized Estimated
Cost Fair Value Cost Fair Value
- --------------------------------------------------------------------------------
GNMA $26,618 $26,113 $ 168 $ 168
FNMA 8,620 8,529 8,801 8,631
FHLMC 17,595 17,448 19,040 18,863
Collateralized mortgage
obligations -- -- 7,501 7,440
Non-agency pass through certificate -- -- 1,734 1,740
- --------------------------------------------------------------------------------
$52,833 $52,090 $37,244 $36,842
================================================================================
- --------------------------------------------------------------------------------
1994
----
Held to Maturity Available for Sale
---------------- ------------------
Amortized Estimated Amortized Estimated
Cost Fair Value Cost Fair Value
- --------------------------------------------------------------------------------
GNMA $29,325 $27,080 $ 227 $ 219
FNMA 21,577 19,932 1,098 1,014
FHLMC 42,771 40,093 3,429 3,155
Collateralized mortgage
obligations -- -- 4,998 4,715
- --------------------------------------------------------------------------------
$93,673 $87,105 $ 9,752 $ 9,103
================================================================================
- --------------------------------------------------------------------------------
1993
----
Held to Maturity Available for Sale
---------------- ------------------
Amortized Estimated Amortized Estimated
Cost Fair Value Cost Fair Value
- --------------------------------------------------------------------------------
GNMA $34,739 $34,457 $ 204 $ 204
FNMA 32,145 31,910 -- --
FHLMC 45,010 44,710 5,683 5,695
Collateralized mortgage
obligations 5,160 5,163 3,006 3,000
- --------------------------------------------------------------------------------
$117,054 $116,240 $ 8,893 $ 8,899
================================================================================
7
The following table sets forth the activity in the Bank's mortgage-backed
securities portfolio during the periods indicated:
- ------------------------------------------------------------------------------------------------------------------------------------
For the years ended December 31, 1995 1994 1993
- ------------------------------------------------------------------------------------------------------------------------------------
Mortgage-backed securities at beginning of period $ 102,776 $ 125,947 $ 86,011
Purchases (1) 11,577 26,555 125,332
Conversion of existing loans to mortgage-backed securities 241 24,979 64,530
Sales of loans converted to securities (241) (24,979) (64,530)
Sales from portfolio (11,182) (19,833) (35,739)
Repayments (13,096) (27,299) (46,912)
Premium amortization (553) (2,001) (2,806)
Other (94) 55 61
Change in unrealized loss on securities available for sale 247 (648) --
- ------------------------------------------------------------------------------------------------------------------------------------
Mortgage-backed securities at end of period (2) $ 89,675 $ 102,776 $ 125,947
- ------------------------------------------------------------------------------------------------------------------------------------
Weighted average coupon at end of period 7.63% 7.38% 7.64%
====================================================================================================================================
<FN>
(1) Includes applicable premiums and discounts.
(2) Includes $36.8 million, $9.1 million and $8.9 million of mortgage-backed
securities classified as available for sale (at fair value in 1995 and
1994; at lower of aggregate cost or fair value in 1993) at December 31,
1995, 1994 and 1993, respectively.
</FN>
8
Loan Portfolio
The principal categories of loans in the Bank's portfolio are residential real
estate loans, which are secured by single-family (one-to-four units) residences;
commercial real estate loans, which are secured by multi-family (over five
units) residential and commercial real estate; loans for the construction of
single-family, multi-family and commercial properties, including land
acquisition and development loans; commercial business loans, consumer loans and
credit card receivables. Substantially all of the Bank's mortgage loan portfolio
consists of conventional mortgage loans, which are loans that are neither
insured by the Federal Housing Administration nor partially guaranteed by the
Department of Veterans Affairs.
The Bank's net loan portfolio, including loans held for sale, totalled $224.8
million at December 31, 1995 or 65.1% of its total assets, an increase of $18.7
million or 9.1% from the $206.1 million outstanding at December 31, 1994. The
following table depicts the composition of the Bank's loan portfolio at December
31 for the years indicated net of unearned discounts and fees.
- ------------------------------------------------------------------------------------------------------------------------------------
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
Amount Percent Amount Percent Amount Percent Amount Percent Amount Percent
- ------------------------------------------------------------------------------------------------------------------------------------
Real estate loans:
Single family
residential (1) $ 91,091 40.21% $ 99,917 48.12% $ 80,196 45.26% $ 54,560 34.27% $ 64,089 32.16%
Commercial
real estate 81,535 36.00 71,273 34.33 68,530 38.69 70,646 44.38 73,229 36.75
Construction 14,230 6.28 5,379 2.59 3,922 2.22 6,038 3.79 24,386 12.24
- ------------------------------------------------------------------------------------------------------------------------------------
Total real estate
loans 186,856 82.49 176,569 85.04 152,648 86.17 131,244 82.44 161,704 81.15
- ------------------------------------------------------------------------------------------------------------------------------------
Commercial business loans 17,244 7.61 12,005 5.78 9,250 5.22 12,025 7.56 21,309 10.69
- ------------------------------------------------------------------------------------------------------------------------------------
Consumer loans:
Consumer 21,666 9.57 19,027 9.17 15,257 8.61 15,928 10.00 16,259 8.16
Credit card receivables 757 .33 24 .01 -- -- -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Total consumer loans 22,423 9.90 19,051 9.18 15,257 8.61 15,928 10.00 16,259 8.16
- ------------------------------------------------------------------------------------------------------------------------------------
Total loans 226,523 100.00% 207,625 100.00% 177,155 100.00% 159,197 100.00% 199,272 100.00%
- ------------------------------------------------------------------------------------------------------------------------------------
Allowance for possible
loan losses (1,720) (1,503) (2,113) (2,703) (5,483)
- ------------------------------------------------------------------------------------------------------------------------------------
Net loans $ 224,803 $ 206,123 $ 175,042 $ 156,494 $ 193,789
====================================================================================================================================
<FN>
(1) Includes $3.2 million, $351,000 and $16.8 million of loans classified as
held for sale at December 31, 1995, 1994 and 1993, respectively.
</FN>
9
The following table sets forth the scheduled contractual amortization of loans
in the Bank's total loan portfolio (including loans classified as held for sale)
at December 31, 1995. Loans having no stated schedule of repayments and no
stated maturity are reported as due in one year or less. The following table
also sets forth the dollar amount of loans which are scheduled to mature after
one year which have fixed or adjustable rates.
- ------------------------------------------------------------------------------------------------------------------------------------
Real Estate Real Estate Commercial
Mortgage Construction Business Consumer Total
- ------------------------------------------------------------------------------------------------------------------------------------
Amounts due:
One year or less $ 12,390 $ 6,409 $ 7,552 $ 1,147 $ 27,498
After one year through
five years 50,818 7,821 6,115 7,625 72,379
Beyond five years 109,418 -- 3,577 13,651 126,646
- ------------------------------------------------------------------------------------------------------------------------------------
Total $172,626 $14,230 $17,244 $22,423 $226,523
====================================================================================================================================
Interest rate terms on
amounts due after one year:
Fixed $ 45,874 $ -- $ 1,593 $15,297 $ 62,764
- ------------------------------------------------------------------------------------------------------------------------------------
Adjustable $114,362 $ 7,821 $ 8,099 $ 5,979 $136,261
====================================================================================================================================
Scheduled contractual principal repayments do not reflect the actual maturities
of loans. The average maturity of loans is less than their average contractual
terms because of prepayments and, in the case of conventional mortgage loans due
and payable in the event, among other things, that the borrower sells the real
property subject to the mortgage and the loan is not repaid. The average life of
mortgage loans tends to increase when current mortgage loan rates are higher
than rates on existing mortgage loans and, conversely, decrease when rates on
existing mortgages are lower than current mortgage loan rates (due to
refinancings of adjustable-rate and fixed rate loans at lower rates). Under the
latter circumstances, the weighted average yield on loans decreases as higher
yielding loans are paid or refinanced at lower rates.
The following table shows total loans originated, purchased, sold and repaid
during the periods ended December 31 for the years indicated.
- ------------------------------------------------------------------------------------------------------------------------------------
1995 1994 1993
- ------------------------------------------------------------------------------------------------------------------------------------
Loan originations:
Single family residential $ 18,404 $ 56,210 $ 123,129
Commercial real estate 23,773 20,335 13,416
Construction 21,798 7,833 8,595
Commercial business 11,201 18,168 4,285
Consumer 9,398 8,943 6,294
- ------------------------------------------------------------------------------------------------------------------------------------
Total loans originated 84,574 111,489 155,719
Purchases 447 10,827 11,175
- ------------------------------------------------------------------------------------------------------------------------------------
Total loans originated and purchased 85,021 122,316 166,894
- ------------------------------------------------------------------------------------------------------------------------------------
Sales and loan principal reductions:
Loans sold (1) 16,230 34,026 81,917
Loan principal reductions 49,205 55,760 58,808
- ------------------------------------------------------------------------------------------------------------------------------------
Total loans sold and principal reductions 65,435 89,786 140,725
- ------------------------------------------------------------------------------------------------------------------------------------
Net change due to other items (688) (2,060) (8,211)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in loan portfolio, net of
unearned discounts and deferred fees $ 18,898 $ 30,470 $ 17,958
====================================================================================================================================
<FN>
(1) For the years ended December 31, 1995, 1994, and 1993, $241,000, $25.0
million, and $64.5 million of loans, respectively, were converted into
mortgage-backed securities and subsequently sold.
</FN>
10
The accrual of interest on commercial and mortgage loans is generally
discontinued when loans become 90 days past due and when, in management's
judgement, it is determined that a reasonable doubt exists as to collectibility.
The accrual of interest is also discontinued on residential and consumer loans
when such loans become 90 days past due, except for those loans in the process
of collection which are secured by real estate with a loan to value less than
80% where the accrual of interest ceases at 180 days. Consumer loans generally
are charged-off when the loan becomes over 120 days delinquent, unless secured
by real estate and meeting the above mentioned criteria. When a loan is placed
on non-accrual status, interest accruals cease and uncollected accrued interest
is reversed and charged against current income. Additional interest income on
such loans is recognized only when received. A loan remains on non-accrual
status until the factors which indicate doubtful collectibility no longer exist,
or the loan is liquidated, or when the loan is determined to be uncollectible
and is charged-off against the allowance for possible loan losses.
The following table details the Bank's non-performing assets at December 31:
- ------------------------------------------------------------------------------------------------------------------------------------
1995 1994 1993 1992 1991
- ------------------------------------------------------------------------------------------------------------------------------------
Loans accounted for on a
non-accrual basis $ 3,879 $ 4,369 $ 5,743 $ 6,539 $12,774
Accruing loans 90 or
more days past due -- 182 308 423 1,234
- ------------------------------------------------------------------------------------------------------------------------------------
Total non-performing loans 3,879 4,551 6,051 6,962 14,008
REO, net of related reserves (1) 728 4,534 11,577 27,867 36,419
- ------------------------------------------------------------------------------------------------------------------------------------
Total non-performing assets $ 4,607 $ 9,085 $ 17,628 $ 34,829 $50,427
- ------------------------------------------------------------------------------------------------------------------------------------
Non-performing loans as a
percentage of total loans 1.71% 2.19% 3.42% 4.37% 7.03%
====================================================================================================================================
Non-performing assets as a
percentage of total assets 1.33% 2.61% 5.29% 11.95% 16.13%
====================================================================================================================================
<FN>
(1) Includes real estate acquired by foreclosure and by deed in lieu of
foreclosure. Prior to 1993, also includes loans deemed in- substance
foreclosure.
</FN>
Gross interest income that would have been recorded during 1995, 1994 and 1993
if the Company's non-performing loans at the end of such periods had been
performing in accordance with their terms during such periods was $242,000,
$430,000 and $287,000, respectively. The amount of interest income that was
actually recorded during 1995, 1994 and 1993 with respect to such non-performing
loans amounted to approximately $174,000, $23,000, and $20,000, respectively.
The $3.9 million of non-accrual loans at December 31, 1995 consists of $995,000
of loans secured by single-family residential property, $2.4 million of loans
secured by commercial property, $31,000 of commercial business loans, $17,000 of
construction loans and $400,000 of consumer loans. The $728,000 of REO at
December 31, 1995 consisted of three single-family residences and four
undeveloped residential lots.
11
Delinquencies
All loans are reviewed on a regular basis and are placed on non-accrual status
when, in the opinion of management, the collection of additional interest is
deemed insufficient to warrant further accrual.
The following table sets forth information concerning the principal balances and
percent of the total loan portfolio represented by delinquent loans at the dates
indicated:
- ------------------------------------------------------------------------------------------------------------------------------------
As of December 31, 1995 1994 1993
- ------------------------------------------------------------------------------------------------------------------------------------
Amount Percent Amount Percent Amount Percent
------ ------- ------ ------- ------ -------
Delinquencies:
30 to 59 days $ 2,973 1.31% $ 719 .35% $ 1,579 .89%
60 to 89 days 450 .20 282 .14 332 .19
90 or more days and non-accrual loans (1) 3,879 1.71 4,551 2.19 6,051 3.42
- ------------------------------------------------------------------------------------------------------------------------------------
Total $ 7,302 3.22% $ 5,552 2.68% $ 7,962 4.50%
====================================================================================================================================
<FN>
(1) Includes $0, $182,000, and $308,000 in loans that are accruing interest at
December 31, 1995, 1994 and 1993, respectively.
</FN>
12
Allocation of the Allowance for Possible Losses
The following table details the allocation of the allowances for possible loan
losses to the various loan categories at the dates indicated. The allocation is
not necessarily indicative of the categories in which future loan losses will
occur, and the entire allowance is available to absorb losses in any category of
loans.
- ------------------------------------------------------------------------------------------------------------------------------------
December 31, 1995 1994 1993 1992 1991
- ------------------------------------------------------------------------------------------------------------------------------------
Percent of Percent of Percent of Percent of Percent of
Loans to Loans to Loans to Loans to Loans to
Total Total Total Total Total
Amount Loans Amount Loans Amount Loans Amount Loans Amount Loans
- ------------------------------------------------------------------------------------------------------------------------------------
Residential real estate $ 148 40.21% $ 268 48.12% $ 194 45.26% $ 168 34.27% $ 139 32.16%
Commercial real estate 1,045 36.00 917 34.33 1,403 38.69 1,908 44.38 2,920 36.75
Real estate construction 286 6.28 125 2.59 149 2.22 207 3.79 1,784 12.24
Commercial business 166 7.61 152 5.78 294 5.22 315 7.56 534 10.69
Consumer 75 9.90 41 9.18 73 8.61 105 10.00 106 8.16
- ------------------------------------------------------------------------------------------------------------------------------------
Total $1,720 100.00% $1,503 100.00% $2,113 100.00% $2,703 100.00% $5,483 100.00%
====================================================================================================================================
13
The following table details the Bank's allowance for possible loan losses for
the periods indicated:
- ------------------------------------------------------------------------------------------------------------------------------------
For the years ended December 31, 1995 1994 1993 1992 1991
- ------------------------------------------------------------------------------------------------------------------------------------
Average loans outstanding $213,525 $189,053 $166,419 $180,695 $250,127
- ------------------------------------------------------------------------------------------------------------------------------------
Balance beginning of period $ 1,503 $ 2,113 $ 2,703 $ 5,483 $ 4,123
Charge-offs:
Residential real estate 20 -- 148 86 9
Commercial real estate -- 1,160 810 1,395 3,339
Real estate construction 100 50 5 626 2,565
Consumer 26 20 89 209 414
Commercial 281 88 283 814 2,588
- ------------------------------------------------------------------------------------------------------------------------------------
Total charge-offs 427 1,318 1,335 3,130 8,915
- ------------------------------------------------------------------------------------------------------------------------------------
Recoveries:
Residential real estate -- -- 42 5 --
Commercial real estate -- -- -- -- --
Real estate construction 1 137 72 4 --
Consumer 15 14 25 30 38
Commercial 3 36 137 36 93
- ------------------------------------------------------------------------------------------------------------------------------------
Total recoveries 19 187 276 75 131
- ------------------------------------------------------------------------------------------------------------------------------------
Net charge-offs 408 1,131 1,059 3,055 8,784
Additions charged
to operations 625 521 368 275 10,144
Additions acquired (1) -- -- 101 -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Total additions 625 521 469 275 10,144
- ------------------------------------------------------------------------------------------------------------------------------------
Balance at end
of period $ 1,720 $ 1,503 $ 2,113 $ 2,703 $ 5,483
====================================================================================================================================
Ratio of net charge-
offs during the period
to average loans out-
standing during the
period .19% .60% .64% 1.69% 3.51%
====================================================================================================================================
Ratio of allowance for
possible loan losses to non-
performing loans at end of period 44.34% 33.03% 34.92% 38.83% 39.14%
====================================================================================================================================
<FN>
(1) In conjunction with the Rosemont branch purchase on July 1, 1993.
</FN>
An allowance for possible loan losses is maintained at a level that management
considers adequate to provide for potential losses based upon an evaluation of
known and inherent risks in the loan portfolio. Management's periodic evaluation
of the adequacy of the allowance for possible loan losses is based upon
examination of the portfolio, past loss experience, adverse situations that may
affect the borrower's ability to repay, the estimated value of any underlying
collateral, current economic conditions, the results of the most recent
regulatory examinations, and other relevant factors. While management uses the
best information available to make such evaluations, future adjustments to the
allowance may be necessary if economic conditions differ substantially from the
assumptions used in making such evaluations.
14
Average Balances of the Company's Deposits
- ------------------------------------------------------------------------------------------------------------------------------------
For the years ended December 31, 1995 1994 1993 1992
---- ---- ---- ----
Amount Rate Amount Rate Amount Rate Amount Rate
- ------------------------------------------------------------------------------------------------------------------------------------
Interest-bearing deposits:
NOW and Super NOW $ 26,661 2.69% $ 21,932 2.43% $ 17,488 2.39% $ 15,677 3.39%
Money market accounts 33,577 3.10 41,428 2.75 42,128 2.82 41,440 3.69
Passbook and statement
savings 27,290 2.87 27,808 2.95 21,212 2.94 16,592 3.49
Time deposits 177,972 5.46 168,250 4.56 159,973 4.47 166,556 5.45
- ------------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing deposits 265,500 4.62% 259,418 3.92% 240,801 3.89% 240,265 4.88%
- ------------------------------------------------------------------------------------------------------------------------------------
Non-interest-bearing deposits 20,210 16,713 13,778 14,398
- ------------------------------------------------------------------------------------------------------------------------------------
Total deposits $285,710 $276,131 $254,579 $254,663
- ------------------------------------------------------------------------------------------------------------------------------------
The following table presents the interest rate and maturity information for the
Bank's time deposits at December 31, 1995.
- ------------------------------------------------------------------------------------------------------------------------------------
Maturity Date
----------------------------------------------------------------------------------
One Year Over
or less 1-2 Years 2-3 Years 3 Years Total
- ------------------------------------------------------------------------------------------------------------------------------------
Interest Rate
2.00 -- 3.99% $ 1,972 $ 62 $ 121 $ 77 $ 2,232
4.00 -- 5.99% 97,637 34,739 4,880 4,105 141,361
6.00 -- 7.99% 16,179 12,032 2,801 8,772 39,784
8.00 -- 9.99% 100 28 50 43 221
10.00 -- 11.99% -- -- -- 13 13
- ------------------------------------------------------------------------------------------------------------------------------------
$ 115,888 $46,861 $ 7,852 $13,010 $183,611
- ------------------------------------------------------------------------------------------------------------------------------------
The Bank's time deposits of $100,000 or more totalled $22.4 million at December
31, 1995, which mature as follows: $8.6 million within three months; $5.9
million between three and six months; $4.4 million between six and twelve
months; and $3.5 million after twelve months.
The ability of the Bank to attract and maintain deposits and the Bank's cost of
funds on these deposit accounts have been, and will continue to be,
significantly affected by economic and competitive conditions.
15
FHLB Advances
The following table presents certain information regarding FHLB advances:
- --------------------------------------------------------------------------------
For the years ended December 31, 1995 1994 1993
- --------------------------------------------------------------------------------
Average balance outstanding $ 44,177 $ 44,007 $ 48,702
Maximum amount outstanding at
any month-end during the period 50,845 57,244 61,067
Weighted average interest rate
during the period 6.37% 5.00% 4.29%
Weighted average interest rate
at end of the period 6.53% 6.35% 4.45%
The Bank continued to utilize advances from the FHLB in 1995. Total advances
outstanding were $25.4 million at December 31, 1995, a decrease of $18.7 million
from year end 1994.
16
Item 2. Properties
The Company's and the Bank's executive offices are located at the Plymouth
Meeting Executive Campus, Plymouth Meeting, Pennsylvania. The Bank conducts
business from nine branch offices in Bridgeport, Plymouth Meeting, Conshohocken,
King of Prussia, Norristown, Jeffersonville, the Andorra community of
Philadelphia, Rosemont and Paoli, Pennsylvania, one of which one is owned and
eight are leased.
Item 3. Legal Proceedings
The Company is involved in routine legal proceedings occurring in the ordinary
course of business which management, after reviewing the foregoing actions with
legal counsel, is of the opinion that the liability, if any, resulting from such
actions will not have a material effect on the financial condition or results of
operations of the Company.
Item 4. Submissions of Matters to a Vote of Security Holders
Not applicable.
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.
The information required herein is incorporated by reference from page 39 of the
Company's 1995 Annual Report to Stockholders, which is included herein as
Exhibit 13 ("Annual Report")
Item 6. Selected Financial Data.
The information required herein is incorporated by reference from page 9 of the
Company's 1995 Annual Report to Stockholders.
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations.
The information required herein is incorporated by reference from pages 10 to 18
of the Company's 1995 Annual Report to Stockholders.
Item 8. Financial Statements and Supplementary Data.
The information required herein is incorporated by reference from pages 19 to 40
of the Company's 1995 Annual Report to Stockholders.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
Not applicable.
17
PART III
Item 10. Directors and Executive Officers of the Registrant
The information contained in the section titled "Election of Directors" in the
Company's definitive Proxy Statement for the 1996 Annual Meeting to be held
April 30, 1996 (the "Proxy Statement"), with respect to the Directors of the
Company is incorporated herein by reference.
Item 11. Executive Compensation
The information appearing in the caption "Executive Compensation and
Transactions" in the Proxy Statement is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The information appearing in the captions "Security Ownership of Certain
Beneficial Owners" and "Election of Directors" (with respect to security
ownership by Directors) in the Proxy Statement is incorporated herein by
reference.
Item 13. Certain Relationships and Related Transactions
The information appearing in the caption "Indebtedness of Management" in the
Proxy Statement is incorporated herein by reference.
18
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
a. The financial statements listed on the index set forth in Item 8 of this
Annual Report on Form 10-K are filed as part of this Annual Report.
Financial Statement schedules are not required under the related
instructions of the Securities and Exchange Commission or are inapplicable
and, therefore, have been omitted.
b. The following exhibits are incorporated by reference herein or are filed as
part of this Annual Report:
No. Exhibits
--- --------
*3.1 Certificate of Incorporation (Exhibit 3.1 to the Company's
Annual Report on Form 10-K for the year ended December 31,
1987)
*3.2 By-Laws (Exhibit 3.2 to the Company's Registration Statement
No. 33-3685 On Form S-4, filed with the Securities and Exchange
Commission on March 3, 1986 [the "1986 Form S-4"])
*10.1 Key Employee Stock Compensation Program (Exhibit 28 to the
Company's Registration Statement No. 33-10160 on Form S-8,
filed with the Securities and Exchange Commission on November
13, 1986)
*10.2 Amendment dated December 15, 1987 to Key Employee Stock
Compensation Program (Exhibit 4.2 to the Company's Registration
Statement, No. 33-19570)
*10.3 1993 Stock Incentive Plan (Exhibit 10.3 to the Company's Annual
Report in Form 10-K for the year ended December 31, 1994)
*10.4 1993 Directors' Stock Option Plan (Exhibit 10.4 to the
Company's Annual Report on Form 10-K for the year ended
December 31, 1994)
*10.5 Employment Agreement between Progress Financial Corporation,
Progress Federal Savings Bank and W. Kirk Wycoff dated January
1, 1995 (Exhibit 10.6 to the Company's Registration Statement,
No. 33-60817 on Form S-1, filed with the Securities and
Exchange Commission on August 9, 1995)
13 1995 Annual Report to Stockholders
21 Subsidiaries of the Registrant
23 Consent of Independent Accountants
c. On November 6, 1995 the Registrant filed Form 8-K with the Securities and
Exchange Commission announcing the termination of the Agreement and Plan of
Reorganization between Progress Financial Corporation and FJF Financial,
M.H.C. pursuant to which Progress Federal Savings Bank was to merge with
Roxborough Manayunk Federal Savings Bank.
*Incorporated by reference.
19
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto being duly authorized.
PROGRESS FINANCIAL CORPORATION
March 28, 1996 BY: /s/ W. Kirk Wycoff
---------------- ------------------------------------
Date W. Kirk Wycoff, Chairman, President
and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed below by the following
persons on behalf of the Registrant and in the capacities and on the dates
indicated.
/s/ W. Kirk Wycoff March 28, 1996
- ----------------------------------- --------------
W. Kirk Wycoff, Chairman, President Date
and Chief Executive Officer
/s/ William O. Daggett, Jr. March 28, 1996
- ----------------------------------- --------------
William O. Daggett, Jr., Director Date
/s/ Joseph R. Klinger March 28, 1996
- ----------------------------------- --------------
Joseph R. Klinger, Director Date
/s/ John E. Flynn Corson March 28, 1996
- ----------------------------------- --------------
John E. Flynn Corson, Director Date
/s/ Donald F. U. Goebert March 28, 1996
- ----------------------------------- --------------
Donald F. U. Goebert, Director Date
/s/ Paul M. LaNoce March 28, 1996
- ----------------------------------- --------------
Paul M. LaNoce, Director Date
/s/ William L. Mueller March 28, 1996
- ----------------------------------- --------------
William L. Mueller, Director Date
/s/ Charles J. Tornetta March 28, 1996
- ----------------------------------- --------------
Charles J. Tornetta, Director Date
- ----------------------------------- --------------
A. John May, III, Director Date
/s/ Frederick E. Schea March 28, 1996
- ----------------------------------- --------------
Frederick E. Schea Date
Sr. Vice President and
Chief Financial Officer
20