UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20552
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OF 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended September 30, 1998
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT
For the transition period from to
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Commission File Number 333-57277
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Nittany Financial Corp.
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(Exact name of registrant as specified in its charter)
Pennsylvania 23-2925762
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(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
PO Box 10283 Calder Square, State College, Pennsylvania 16805
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(Address of principal executive offices)
(814) 466 - 6336
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(Registrant's telephone number, including area code)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No
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State the number of shares outstanding of each of the issuer's classes of common
equity as of the latest practicable date:
Class: Common Stock, par value $.10 per share
Outstanding at October 31, 1998: 577,436 shares
NITTANY FINANCIAL CORP.
INDEX
Page
Number
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheet (Unaudited) as of
Sept 30, 1998 and Dec 31, 1997 3
Statement of Operations (Unaudited) for the
Three Months, Nine Months ended Sept 30,1998, 4
And period from inception through Sept 30, 1998
Statement of Cash Flows (Unaudited)
for the Nine Months ended Sept 30,1998, 5
And period from inception through Sept 30, 1998
Notes to Unaudited Financial Statements 6
Item 2. Management's Discussion and Analysis of
Recent Developments 7-8
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 9
Item 2. Changes in Securities 9
Item 3. Defaults Upon Senior Securities 9
Item 4. Submission of Matters to a Vote of Security Holders 9
Item 5. Other Information 9
Item 6. Exhibits and Reports on Form 8-K 9
SIGNATURES 10
NITTANY FINANCIAL CORP.
BALANCE SHEET (UNAUDITED)
Sept 30, December 31,
1998 1997
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ASSETS
Cash in banks $ 96,656 $ 29,449
Certificate of Deposits in banks 10,548 --
Furniture and equipment 2,649 --
Deferred organization costs 25,000 70,000
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TOTAL ASSETS $ 134,853 $ 99,449
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LIABILITIES
Accounts payable $ 94,162 $ 75,226
Advances from organizers -- 50,000
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TOTAL LIABILITIES 94,162 125,226
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STOCKHOLDERS' EQUITY
Preferred stock, no par value; 5,000,000 shares
authorized; none issued -- --
Common Stock, $.10 par value; 10,000,000
shares authorized; 30,000 shares issued
and outstanding 3,000 --
Additional paid - in capital 297,000 --
Retained deficit (259,309) (25,777)
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TOTAL STOCKHOLDERS' EQUITY 40,691 (25,777)
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 134,853 $ 99,449
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See accompanying notes to the unaudited financial statements.
3
NITTANY FINANCIAL CORP.
STATEMENT OF OPERATIONS (UNAUDITED)
Period from
Inception
Three Months Nine Months (October 9, 1997
Ended Ended Through
September 30, September 30, September 30,
1998 1998 1998)
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INTEREST INCOME $ 788 $ 1,996 $ 2,291
EXPENSES
Salary and benefits 38,017 79,730 99,479
Occupancy and equipment -- 439 439
Professional services 100,453 104,175 110,083
Other 31,773 51,184 51,599
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Total expenses 170,243 235,528 261,600
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Loss before income taxes (169,455) (233,532) (259,309)
Income taxes -- -- --
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NET LOSS $(169,455) $(233,532) $(259,309)
========= ======== ========
LOSS PER SHARE $( 6.22) $ ( 10.99) $ (12.20)
WEIGHTED AVERAGE SHARES OUTSTANDING 27,228 21,259 21,259
See accompanying notes to the unaudited financial statements.
4
NITTANY FINANCIAL CORP
STATEMENT OF CASH FLOWS (UNAUDITED)
Period from
Inception
Nine Months (October 9, 1997
Ended Through
September 30, September 30,
1998 1998)
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OPERATING ACTIVITIES
Net loss $(233,532) $(259,309)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Decrease in deferred and accrued organizational
Expenses, net 63,936 69,162
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Net cash provided by operating activities (169,596) (190,147)
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INVESTING ACTIVITIES
Purchase of one year bank certificate of deposit (10,548) (10,548)
Purchase of equipment (2,649) (2,649)
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Net cash used for investing activities (13,197) (13,197)
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FINANCING ACTIVITIES
Advances from organizers -- 50,000
Proceeds from sale of common stock 250,000 250,000
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Net cash provided by financing activities 250,000 300,000
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Increase in cash and cash equivalents 67,207 96,656
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD 29,449 --
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CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ 96,656 $ 96,656
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See accompanying notes to the unaudited financial statements.
5
NITTANY FINANCIAL CORP.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared in accordance
with the instructions to Form 10-QSB and, therefore, do not necessarily include
all information that would be included in audited financial statements. The
information furnished reflects all adjustments, which are, in the opinion of
management, necessary for a fair statement of the results of operations. All
such adjustments are of a normal recurring nature. As of the date of these
financial statements, Nittany Financial Corp.'s (the "Company") operations have
been limited to in-formation procedures; raising capital, recruiting officers
and staff, obtaining a banking facility and working towards obtainment of
regulatory approval. Since the Company's planned principal operations have not
yet commenced; no significant revenue has been derived therefrom. The results of
operations for the interim periods are not indicative of the results that may be
expected for a full year and could be materially different if the Company was
not an "in-formation" entity and operation.
NOTE 2 - STOCKHOLDERS EQUITY
Initial capitalization of the Company occurred through the issuance of common
stock in a private placement which was exclusively offered to the organizers of
the Company during the first quarter of 1998. A total of 30,000 shares at an
offering price of $10.00 per share were issued.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
The Company was incorporated under the laws of the Commonwealth of Pennsylvania
on December 8, 1997 for the purpose of becoming a unitary savings and loan
holding company, which will own all of the outstanding shares of capital stock
of a proposed federal stock savings bank, Nittany Bank (the "Bank"). The Company
received regulatory approval to open the Bank from the Office of Thrift
Supervision and the Federal Deposit Insurance Corporation on September 8, 1998
and September 14, 1998, respectively. On October 23, 1998 (the "Closing"), the
Company completed its common stock offering selling 537,436 shares at $10.00 per
share and raising $5,374,360 in net proceeds. At the Closing, the Company
acquired from First Commonwealth Financial Corp. two branch offices and assumed
such branch leases (the "Branch Agreement"). Pursuant to such Branch Agreement,
the Company assumed deposit liabilities of approximately $10.2 million and paid
a deposit premium in the form of cash and stock. The Company also acquired
furniture and equipment of approximately $30,000, personal credit lines and
home equity lines of credit loans of approximately $695,000, and vault cash
of approximately $154,000. The Bank opened for business on October 26, 1998.
The proposed business of the Bank will consist of offering a full range of
banking services to individuals, professional and business customers in its
primary service area. These services will include providing personal and
business demand deposits, savings and time certificates of deposit, and the
origination of residential and commercial mortgages, home equity loans, consumer
loans, small business and other loans. Customer deposits with the Bank will be
at rates competitive with those offered in the Bank's primary service area.
Customer deposits with the Bank will be insured to the maximum extent provided
by law through the FDIC. The Bank does not anticipate offering brokered
deposits. The loans the Bank anticipates originating will consist of both
adjustable and fixed rate instruments. The Bank or Company may also offer
through affiliations with other companies, alternative non-deposit investments,
such as mutual funds and securities. The Bank intends to also offer night
depository, telephone banking, bank-by-mail, and safe depository services. The
Bank does not anticipate offering trust and fiduciary services, but may rely on
trust and fiduciary services offered by correspondent banks, if customers
request such services. Additional staff was hired by management during the
months of September and October to adequately support bank operations, bank
staff, including management, totaled 14 full time equivalent employees as of
October 26, 1998.
Initially, the Bank anticipates deriving its income principally from interest
charged on loans and interest earned on its investment portfolio. Income will
also be derived, to a lesser extent; from fees received in connection with
deposit services offered and loan originations. The Bank's principal expenses
will be interest expense incurred on customer deposits, and noninterest
operating expenses such as salaries and employee benefits, data processing
charges and occupancy costs.
7
YEAR 2000
A great deal of information has been disseminated about the global computer year
2000. Many computer programs that can only distinguish the final two digits of
the year entered (a common programming practice in earlier years) are expected
to read entries for the year 2000 as the year 1900 and compute payment, interest
or delinquency based on the wrong date or are expected to be unable to compute
payment, interest or delinquency. Rapid and accurate data processing is
essential to our Bank's operation. Data processing is also essential to most
other financial institutions and many other companies. A third party service
bureau will be providing all of the material data processing that could be
affected by this problem. Our prospective service bureau has advised us that it
is substantially compliant and it expects to resolve this potential problem
before the year 2000. In this vein, the core application software vendor, whose
products are used by our prospective service bureau, has recently obtained
ITAA*2000 certification, which indicates that the software has the core
capabilities needed to handle the Year 2000 challenge. However, if our service
bureau is unable to resolve all facets of this potential problem in time, we
could likely experience significant data processing delays, mistakes or
failures. These delays, mistakes or failures could have a significant adverse
impact on our financial condition and our results of operation. In order to
determine the service bureau is year 2000 compliant, management must develop a
test plan, which it intends to implement during the first half of 1999.
Management is aware of the significant of the Y2K issue and is presently working
to define a comprehensive plan of action for Year 2000. Management expects to
incur additional operating expenses during 1999 relating to the designing and
performing tests of the Bank's computer systems. Currently, the Bank estimates
such costs will be approximately $10,000. Management is also addressing a
contingency plan in the event any portion of its operations is adversely
affected by Year 2000 related processing errors.
Successful and timely completion of the Year 2000 plan is based on management's
best estimates derived from various assumptions of future events, which are
inherently uncertain, including the progress of testing plans and all vendors,
suppliers and customer readiness.
CAUTIONARY STATEMENT - FORWARD-LOOKING STATEMENTS
Certain statements contained in this filing are "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995, such
statements relating to financial results and plans for future business
development activities, and are thus prospective. Such forward-looking
statements are subject to risks, uncertainties and other factors, which could
cause actual results to differ materially from future results expressed or
implied by such forward-looking statements. Potential risks and uncertainties
include, but are not limited to; economic conditions, competition and other
uncertainties detailed from time to time in the Company's Securities and
Exchange Commission filings.
For additional information regarding the Company and proposed operations, please
refer to the Company's Form SB-2 (333-57277) dated July 31, 1998.
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PART II - OTHER INFORMATION
Item 1 - Legal proceedings
NONE
Item 2 - Changes in securities
NONE
Item 3 - Defaults upon senior securities
NOT APPLICABLE
Item 4 - Submission of matters to a vote of security holders
NONE
Item 5 - Other information
NONE
Item 6 - Exhibits and reports on Form 8-K
(a) Exhibits. The following exhibits are filed with this report:
The exhibits filed as part of this Registration Statement are as
follows:
3(i) Amended Articles of Incorporation of Nittany Financial Corp.*
3(ii) Bylaws of Nittany Financial Corp.*
4 Specimen Stock Certificate of Nittany Financial Corp.*
10 Employment Agreement with David Z. Richards*
10.1 Branch Purchase and Deposit Assumption Agreement (including
Amendment No. 1 to Agreement)* (Form of Amendment No. 2 to
Agreement)*
27 Financial Data Schedule**
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* Incorporated by reference to the registration statement on Form
SB-2 (333-57277)
** Electronic filing only
(b) Reports on Form 8-K
No reports on Form 8-K have been filed during the third quarter
of the year ending December 31, 1998.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused the report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Nittany Financial Corp.
Date: November 16, 1998 By:\s\ David Z. Richards, Jr.
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David Z. Richards, Jr.
President ,Chief Executive Officer
And Chief Financial Officer
\s\ Matthew J. Ford
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Matthew J. Ford
Asst. Controller
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