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Securities and Exchange Commission
Washington, D.C. 20549
Form 10-Q
[X] Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the quarter ended June 30, 2003.
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from ---------- to -----.
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 Identification Number)
incorporation or organization)
4 Sentry Parkway, Suite 200
Blue Bell, Pennsylvania 19422
- ----------------------------------------- --------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (610) 825-8800
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) had been subject to such filing
requirements for the past 90 days. Yes X No
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act.) Yes No X
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock ($1.00 par value) 6,870,451
- ----------------------------------------- ----------------------------------
Title of Each Class Number of Shares Outstanding as
of July 31, 2003
Progress Financial Corporation
Table of Contents
PART I -- Interim Financial Information
Page
Item 1. Interim Financial Statements (Unaudited)
Consolidated Interim Balance Sheets as of June 30, 2003 and December 31, 2002..................3
Consolidated Interim Statements of Income for the three and six months ended
June 30, 2003 and 2002.........................................................................4
Consolidated Interim Statements of Changes in Shareholders' Equity and
Comprehensive Income for the six months ended June 30, 2003 and 2002...........................5
Consolidated Interim Statements of Cash Flows for the six months ended
June 30, 2003 and 2002.........................................................................6
Notes to Consolidated Interim Financial Statements.............................................7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.....................................................................14
Item 3. Quantitative and Qualitative Disclosures About Market Risk....................................18
Item 4. Controls and Procedures.......................................................................18
PART II -- Other Information
Item 1. Legal Proceedings.............................................................................19
Item 2. Changes in Securities.........................................................................19
Item 3. Defaults upon Senior Securities...............................................................19
Item 4. Submission of Matters to a Vote of Security Holders...........................................20
Item 5. Other Information.............................................................................20
Item 6. Exhibits and Reports on Form 8-K..............................................................21
Signatures....................................................................................22
PART I -- INTERIM FINANCIAL INFORMATION
Item 1. Interim Financial Statements (Unaudited)
Consolidated Interim Balance Sheets
(Dollars in thousands) June 30, December 31,
2003 2002
------------ ----------------
Assets
Cash and due from other financial institutions:
Non-interest-earning $ 22,161 $ 20,650
Interest-earning 3,812 17,570
Investments and mortgage-backed securities [Note 4]:
Available for sale at fair value (amortized cost: $355,501 and $353,688) 359,500 359,290
Held to maturity at amortized cost (fair value: $159,601 and $121,968) 156,282 120,006
Loans and leases, net [Note 5] (net of reserves [Note 6]: $7,245 and $6,463] 524,838 459,350
Lease receivables held for sale (fair value: $1,955 and $--) [Note 7] 1,955 --
Premises and equipment, net 26,698 26,726
Other assets 14,636 14,252
-------------- ----------------
Total assets $1,109,882 $1,017,844
============== ================
Liabilities and Shareholders' Equity
Liabilities:
Deposits:
Non-interest-bearing $ 108,873 $ 100,075
Interest-bearing 631,979 591,463
Short-term borrowings:
Securities sold under agreements to repurchase 55,340 81,125
Federal Home Loan Bank advances 45,000 15,000
Other borrowings 656 757
Other liabilities 23,029 12,132
Long-term debt:
Federal Home Loan Bank advances 150,500 120,500
Other debt 1,196 1,227
Capital securities 28,853 28,836
-------------- ----------------
Total liabilities 1,045,426 951,115
-------------- ----------------
Commitments and contingencies [Note 11]
Shareholders' Equity:
Serial preferred stock--$.01 par value; 1,000,000 shares authorized but unissued -- --
Junior participating preferred stock--$.01 par value; 1,010 shares authorized -- --
but unissued
Common stock -- $1 par value; 12,000,000 shares authorized: 7,164,000 and
7,058,000 shares issued and outstanding; including treasury shares of
138,000 and 114,000 and unallocated Employee Stock Ownership Plan
shares of 174,000 and 169,000, respectively 7,164 7,058
Other common shareholders' equity, net 54,677 56,006
Net accumulated other comprehensive income 2,615 3,665
-------------- ----------------
Total shareholders' equity 64,456 66,729
-------------- ----------------
Total liabilities and shareholders' equity $1,109,882 $1,017,844
============== ================
See Notes of Consolidated Interim Financial Statements.
Consolidated Interim Statements of Income
(Dollars in thousands, except per share data)
For the Three Months Ended For the Six Months Ended
June 30, June 30,
---------------------------- --------------------------
2003 2002 2003 2002
------------ ------------ ----------- -----------
Interest income:
Loans and leases, including fees $ 8,649 $ 8,525 $16,509 $17,475
Mortgage-backed securities 4,644 4,285 9,654 7,655
Investment securities 785 628 1,474 1,234
Other 22 36 43 122
------------ ------------ ----------- -----------
Total interest income 14,100 13,474 27,680 26,486
------------ ------------ ----------- -----------
Interest expense:
Deposits 3,521 3,840 7,085 7,861
Short-term borrowings 562 308 1,233 411
Long-term and subordinate debt 1,603 1,860 3,151 3,808
Capital securities 586 573 1,176 1,145
------------ ------------ ----------- -----------
Total interest expense 6,272 6,581 12,645 13,225
------------ ------------ ----------- -----------
Net interest income 7,828 6,893 15,035 13,261
Provision for loan and lease losses 500 1,000 1,200 2,439
------------ ------------ ----------- -----------
Net interest income after provision for loan and lease losses 7,328 5,893 13,835 10,822
------------ ------------ ----------- -----------
Non-interest income:
Service charges on deposits 867 978 1,673 1,832
Lease financing fees 29 63 66 126
Mutual fund, annuity and insurance commissions 645 678 1,255 1,618
Loan brokerage and advisory fees 641 302 952 575
Private equity fund management fees 65 65 130 117
Gain on sale of securities 723 352 1,046 352
Gain on sale of loan and lease receivables 173 215 337 347
Client warrant income -- 35 197 1,461
Fees and other 460 528 783 1,332
------------ ------------ ----------- -----------
Total non-interest income 3,603 3,216 6,439 7,760
------------ ------------ ----------- -----------
Non-interest expense:
Salaries and employee benefits 4,035 3,904 7,927 8,305
Occupancy 565 661 1,281 1,247
Data processing 243 230 470 487
Furniture, fixtures and equipment 477 509 968 1,055
Professional services 678 641 1,325 1,219
Goodwill and other intangible assets impairment losses
and amortization 84 108 128 217
Other 1,698 1,714 3,002 3,593
------------ ------------ ----------- -----------
Total non-interest expense 7,780 7,767 15,101 16,123
------------ ------------ ----------- -----------
Income before income taxes 3,151 1,342 5,173 2,459
Income tax expense 774 435 1,349 802
------------ ------------ ----------- -----------
Net income $ 2,377 $ 907 $ 3,824 $ 1,657
============ ============ =========== ===========
Basic earnings per common share $ .34 $ .13 $ .55 $ .24
Diluted earnings per common share $ .33 $ .13 $ .53 $ .24
Dividends per common share $ .06 $ -- $ .12 $ --
Basic average common shares outstanding 6,896,326 7,134,571 6,971,948 6,827,082
Diluted average common shares outstanding 7,174,239 7,311,470 7,228,342 6,989,391
See Notes to Consolidated Interim Financial Statements.
Consolidated Interim Statements of Changes in Shareholders' Equity and
Comprehensive Income
(Dollars in thousands)
Net
Unearned Accumulated
Unearned Compensation Other Total
Common Treasury ESOP Restricted Capital Retained Comprehensive Comprehensive Shareholders'
Stock Stock Shares Stock Surplus Earnings Income (Loss) Income (Loss) Equity
--------------------------------------------------------------------------------------------------------
For the six months ended June 30, 2003:
- ------------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 2002 $7,058 $(1,050) $(1,341) $(75) $51,536 $6,936 $3,665 $66,729
Issuance of stock under
employee benefits plans
(106,118 common shares;
3,581 ESOP shares) 106 -- 28 24 487 -- -- 645
Net income -- -- -- -- -- 3,824 -- $3,824 3,824
Other comprehensive loss, net
of tax(A) -- -- -- -- -- -- (1,050) (1,050) (1,050)
------------
Net comprehensive income $2,774
============
Cash dividends declared -- -- -- -- -- (810) -- (810)
Stock dividend declared
(337,236 treasury shares;
8,427 ESOP shares) -- 3,942 -- -- 782 (4,724) -- --
Purchase of treasury stock
(361,178 shares) -- (4,882) -- -- -- -- -- (4,882)
- --------------------------------------- --------- ---------------------------------------------------- -----------
Balance at June 30, 2003 $7,164 $(1,990) $(1,313) $(51) $52,805 $5,226 $2,615 $64,456
====================================================================================================== ===========
For the six months ended June 30, 2002:
- ------------------------------------------------------------------------------------------------------ -----------
Balance at December 31, 2001 $5,818 $(628) $(1,448) $(107) $44,029 $3,620 $ (685) $50,599
Issuance of stock under
employee benefits plans
(73,156 common shares 3,258
ESOP shares) 73 -- 26 30 296 -- -- 425
Retirement of restricted stock
awards (782 common shares) (1) -- -- 9 (8) -- -- --
Net income -- -- -- -- -- 1,657 -- $1,657 1,657
Other comprehensive income,
net of tax(A) -- -- -- -- -- -- 2,328 2,328 2,328
------------
Net comprehensive income $3,985
============
Sale of treasury stock (19,813 -- 145 -- -- 38 -- -- 183
treasury shares)
Issuance of stock under
private placement
(1,153,330 common shares) 1,153 -- -- -- 7,071 -- -- 8,224
- ------------------------------ ---------------------------------------------------------------------- -----------
Balance at June 30, 2002 $7,043 $(483) $(1,422) $ (68) $51,426 $5,277 $1,643 $63,416
============================================================================== ====================== ===========
(A) For the six months ended June 30, 2003 2002
- --------------------------------------------------------------------------------------------------------
Calculation of other comprehensive income (loss), net of tax:
Unrealized holding gains (losses) arising during the period, net of tax $(360) $2,561
Less: Reclassification for gains included in net income, net of tax 690 233
------------------
Other comprehensive income (loss), net of tax $(1,050) $2,328
==================
See Notes to Consolidated Interim Financial Statements.
Consolidated Interim Statements of Cash Flows
(Dollars in thousands)
For the six months ended June 30, 2003 2002
- ---------------------------------------------------------------------------------------------------------------
Cash flows from operating activities:
Net income $3,824 $ 1,657
Add (deduct) items not affecting cash flows from operating activities:
Depreciation and amortization 1,378 1,505
Provision for loan and lease losses 1,200 2,439
Client warrant income (197) (1,461)
Gain on sale of securities available for sale (1,046) (352)
Gain on sale of loan and lease receivables (337) (347)
Accretion of deferred loan and lease fees and expenses (751) (686)
Amortization of premiums/accretion of discounts on securities 2,164 850
Other, net (8) (4)
(Increase) decrease in other assets (2,187) 3,993
Increase in other liabilities 11,632 2,196
----------- -------------
Net cash flows provided by operating activities 15,672 9,790
------------ -------------
Cash flows from investing activities:
Capital expenditures (1,167) (3,774)
Purchases of investments and mortgage-backed securities available for sale (205,877) (115,087)
Purchases of investments and mortgage-backed securities held to maturity (55,369) (52,394)
Repayments on mortgage-backed securities available for sale 86,594 37,697
Repayments on mortgage-backed securities held to maturity 15,311 631
Proceeds from sales, maturities and calls of investment and mortgage-backed
securities available for sale 118,741 22,694
Proceeds from redemptions and calls of investment securities held to maturity 3,411 1,150
Proceeds from the sale of loans and leases 5,315 11,489
Net cash paid in sale of TechBanc -- (21,399)
Net proceeds from sale of AMIC division of Progress Reality Advisors, Inc. -- (257)
Net distributions from unconsolidated entities -- 832
Net (increase) decrease in loans and lease receivables (72,935) 6,631
Other, net -- 65
------------ -------------
Net cash flows used in investing activities (105,976) (111,722)
------------ -------------
Cash flows from financing activities:
Net increase in demand, NOW and savings deposits 46,260 41,139
Net increase in time deposits 2,987 7,204
Net increase in short-term borrowings 4,083 31,444
Proceeds from issuance of long-term debt 30,000 3,500
Dividends paid (810) --
Purchases of treasury shares (4,882) --
Proceeds from sale of treasure shares -- 183
Net proceeds from issuance of stock under employee benefit plans 419 345
Net proceeds from issuance of stock in private placement -- 8,224
------------ --------------
Net cash flows provided by financing activities 78,057 92,039
------------ --------------
Net decrease in cash and cash equivalents (12,247) (9,893)
Cash and cash equivalents:
Beginning of year 38,220 32,526
------------ --------------
End of period $25,973 $22,633
============ ==============
Supplemental disclosures:
Net conversion of loans to real estate owned $ -- $ 2,705
============ ==============
Transfer of lease receivables in portfolio to lease receivables held for sale $ 1,955 $ --
============ ==============
See Notes to Consolidated Interim Financial Statements.
Notes to Consolidated Interim Financial Statements
(1) Basis of Presentation
In the opinion of management, the financial information reflects all
adjustments necessary for a fair presentation of the financial
information as of June 30, 2003 and December 31, 2002 and for the three
and six months ended June 30, 2003 and 2002 in conformity with
accounting principles generally accepted in the United States of
America. The interim financial statements should be read in conjunction
with Progress Financial Corporation's (the "Company") Annual Report on
Form 10-K for the year ended December 31, 2002. Operating results for
the three and six months ended June 30, 2003 are not necessarily
indicative of the results that may be expected for any other interim
period or the entire year ending December 31, 2003. Earnings per share
have been adjusted to reflect all stock dividends and prior period
amounts have been reclassified when necessary to conform with current
period classification. The Company's subsidiaries are Progress Bank
(the "Bank"), Progress Capital, Inc., Progress Financial Resources,
Inc., KMR Management, Inc., and Progress Capital Management, Inc. All
significant intercompany transactions have been eliminated.
(2) Recent Accounting Pronouncements
In April 2003, the Financial Accounting Standards Board ("FASB") issued
SFAS 149, "Amendment of Statement 133 on Derivative Instruments and
Hedging Activities". FAS 149 amends and clarifies accounting for
derivative instruments, including certain derivative instruments
embedded in other contracts, and for hedging activities under FAS 133.
The amendments in FAS 149 improve financial reporting by requiring that
contracts with comparable characteristics be accounted for similarly.
The Statement clarifies under what circumstances a contract with an
initial net investment meets the characteristic of a derivative in FAS
133. In addition, FAS 149 clarifies when a derivative contains a
financing component that warrants special reporting in the statement of
cash flows. FAS 149 amends certain other existing pronouncements. FAS
149 is effective for contracts entered into or modified after June 30,
2003 and for hedging relationships designated after June, 30, 2003. The
provisions of FAS 149 that relate to FAS 133 Implementation issues that
have been effective for fiscal quarters that began prior to June 15,
2003, are to be applied in accordance with their respective effective
dates. The Company does not anticipate any material changes to its
financial representation as a result of adopting FAS 149.
In May 2003, the FASB issued SFAS 150, "Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and
Equity". FAS 150 establishes standards for how an issuer classifies and
measures certain financial instruments with characteristics of both
liabilities and equity. The Statement requires that an issuer classify
a financial instrument that is within its scope as a liability (or an
asset in some circumstances). Many of these instruments were previously
classified as equity. FAS 150 requires an issuer to classify the
following instruments as liabilities (or assets in some circumstances):
1) mandatorily redeemable shares, which the issuing company is
obligated to buy back in exchange for cash or other assets 2) put
options and forward purchase contracts that require or may require the
issuer to buy back some of its shares in exchange for cash or other
assets 3) obligations that can be settled with shares, the monetary
value of which is fixed, tied solely or predominantly to a variable
such as a market index, or varies inversely with the value of the
issuers' shares. Disclosures are required about the terms of the
instruments and settlement alternatives. FAS 150 does not apply to
features embedded in a financial instrument that is not a derivative in
its entirety. The Statement is effective for all financial instruments
entered into or modified after May 31, 2003, and otherwise is effective
at the beginning of the first interim period beginning after June 15,
2003. For private companies, mandatorily redeemable financial
instruments are subject to the provisions of this Statement for the
fiscal period beginning after December 15, 2003. During the fourth
quarter of 2002, the Company reclassified its capital securities to
debt and the related expense from non-interest expense to interest on
borrowings.
In January 2003, the FASB issued FASB Interpretation No. 46,
"Consolidation of Variable Interest Entities, an Interpretation of ARB
No. 51" ("FIN 46"). FIN 46 provides a new framework for identifying
variable interest entities ("VIEs") and determining when a company
should include the assets, liabilities, noncontrolling interests and
results of activities of a VIE in its consolidated financial
statements. FIN 46 is effective immediately for VIEs created after
January 31, 2003 and is effective beginning in the third quarter of
2003 for VIEs created prior to the issuance of the interpretation. The
adoption of the provisions of FIN 46 will have no material impact on
the Company's financial condition or results of operations, earnings
per share or cash flows.
(3) Shareholders' Equity
Common Stock Offering and Repurchase Program
--------------------------------------------
On February 11, 2002, the Company issued 1,153,330 shares of common
stock at $7.50 a share in a private placement offering to accredited
investors, resulting in net proceeds of approximately $8.2 million.
Under the Company's 2002 stock repurchase program to repurchase up to
200,000 shares, or five percent, of its outstanding common stock,
50,000 shares were repurchased during 2002 and 150,000 shares were
repurchased during 2003. On February 26, 2003, the Company announced a
new stock repurchase program to repurchase up to 335,000 shares, or
five percent, of it outstanding common stock; 211,178 shares were
repurchased as of June 30, 2003.
Earnings per Share
------------------
The following table presents a summary of per share data and amounts
for the included periods.
For the three months ended June 30, 2003 2002
--------------------------------------- ---------------------------------- -----------------------------------
(Dollars in thousands, except per Per Per
share data) Share Share
Income Shares Amount Income Shares Amount
-------- ---------- --------- -------- ------------ ----------
Basic earnings per share:
Income available to common
shareholders $2,377 6,896,326 $.34 $907 7,134,571 $.13
======== =========
Effect of dilutive securities:
Options -- 277,913 -- 176,899
-------- ---------- ------- -----------
Diluted earnings per share:
Income available to common
shareholders and assumed
conversions $2,377 7,174,239 $.33 $907 7,311,470 $.13
======== ========== ========= ======= =========== =========
--------------------------------------- ---------------------------------- -----------------------------------
For the six months ended June 30, 2003 2002
--------------------------------------- ---------------------------------- -----------------------------------
(Dollars in thousands, except per Per Per
share data) Share Share
Income Shares Amount Income Shares Amount
-------- ---------- --------- ------- ----------- ---------
Basic earnings per share:
Income available to common
shareholders $3,824 6,971,948 $.55 $1,657 6,827,082 $.24
========= =========
Effect of dilutive securities:
Options -- 256,394 -- 162,309
-------- ---------- ------- -----------
Diluted earnings per share:
Income available to common
shareholders and assumed
conversions $3,824 7,228,342 $.53 $1,657 6,989,391 $.24
======== ========== ========= ======= =========== =========
Pro Forma Stock Based Compensation
----------------------------------
The Company accounts for its stock options under the recognition and
measurement principles of APB Opinion No. 25, "Accounting for Stock
Issued to Employees," and related interpretations. No stock-based
compensation cost is reflected in net income, as all options granted
had an exercise price equal to the market value of the underlying
common stock on the date of grant. The following table illustrates the
effect on net income and earnings per share if the Company had applied
the fair value recognition provision of FASB Statement No. 123,
"Accounting for Stock-Based Compensation," to stock-based employee
compensation.
For the three months ended June 30, 2003 2002
------------------------------------------------------------------- ----------------- --------------------
(Dollars in thousands, except per share data)
Net income, as reported $2,377 $907
Deduct: Total stock-based employee compensation expense
determined under fair value based method for all
grants, net of related tax effects 52 69
----------------- --------------------
Pro forma net income $2,325 $838
================= ====================
Earnings per share:
Basic--as reported $.34 $.13
Basic--pro forma $.34 $.12
Diluted--as reported $.33 $.13
Diluted--pro forma $.32 $.11
For the six months ended June 30, 2003 2002
------------------------------------------------------------------- ----------------- --------------------
(Dollars in thousands, except per share data)
Net income, as reported $3,824 $1,657
Deduct: Total stock-based employee compensation expense
determined under fair value based method for all
grants, net of related tax effects 131 97
----------------- --------------------
Pro forma net income $3,693 $1,560
================= ====================
Earnings per share:
Basic--as reported $ .55 $ .24
Basic--pro forma $ .53 $ .23
Diluted--as reported $ .53 $ .24
Diluted--pro forma $ .51 $ .22
Capital Resources
-----------------
At June 30, 2003, the Bank's tangible equity ratio was 7.15%, Tier 1
leverage ratio was 7.54%, Tier 1 risk-based capital ratio was 12.88%,
and total risk-based capital ratio was 13.95%. At June 30, 2003, the
Bank was considered "well capitalized" under the prompt and corrective
action regulations of the Office of Thrift Supervision adopted pursuant
to the Federal Deposit Insurance Corporation Improvement Act of 1991.
(4) Investment and Mortgage-backed Securities
The following table sets forth the amortized cost, gross unrealized
gains and losses, estimated fair value and carrying value of investment
and mortgage-backed securities at the dates indicated:
Gross Gross
Amortized Unrealized Unrealized Estimated Carrying
At June 30, 2003 Cost Gains Losses Fair Value Value
-------------------------------------------------------------------------------------------------------------------
(Dollars in thousands)
Available for Sale:
Equity investments $ 6,699 $ 11 $ 187 $ 6,523 $ 6,523
U.S. Government agencies 2,002 18 -- 2,020 2,020
Corporate bonds and other 11,265 286 364 11,187 11,187
Mortgage-backed securities 335,535 4,550 315 339,770 339,770
----------------------------------------- -------------- ------------ --------------- -------------- --------------
Total available for sale $355,501 $4,865 $866 $359,500 $359,500
========================================= ============== ============ =============== ============== ==============
Held to Maturity:
Federal Home Loan Bank Stock $ 11,713 $ -- $ -- $ 11,713 $ 11,713
Municipal bonds 61,645 2,251 32 63,864 61,645
Mortgage-backed securities 82,924 1,238 138 84,024 82,924
----------------------------------------- -------------- ------------ --------------- -------------- --------------
Total held to maturity $156,282 $3,489 $170 $159,601 $156,282
========================================= ============== ============ =============== ============== ==============
At December 31, 2002 Amortized Gross Gross Estimated Carrying
Unrealized Unrealized
Cost Gains Losses Fair Value Value
-------------------------------------------------------------------------------------------------------------------
(Dollars in thousands)
Available for Sale:
Equity investments $ 1,696 $ -- $ 11 $ 1,685 $ 1,685
U.S. Government agencies 10,653 13 -- 10,666 10,666
Corporate bonds and other 8,200 198 556 7,842 7,842
Mortgage-backed securities 333,139 6,014 56 339,097 339,097
-------------------------------------------------------------------------------------------------------------------
Total available for sale $353,688 $6,225 $623 $359,290 $359,290
===================================================================================================================
Held to Maturity:
Federal Home Loan Bank Stock $ 8,401 $ -- $ -- $ 8,401 $ 8,401
U.S. Government agencies 3,330 52 -- 3,382 3,330
Municipal bonds 34,805 736 190 35,351 34,805
Mortgage-backed securities 73,470 1,377 13 74,834 73,470
-------------------------------------------------------------------------------------------------------------------
Total held to maturity $120,006 $2,165 $203 $121,968 $120,006
===================================================================================================================
At June 30, 2003, certain equity investments are accounted for under
the "equity method." Losses of $194,000 were recognized on these equity
investments during the six months ended June 30, 2003. There were no
gains or losses recognized on these equity investments during the six
months ended June 30, 2002.
(5) Loans and Lease Receivables, Net
The following table depicts the composition of the Company's loan and
lease portfolio at the dates indicated:
At June 30, 2003 At December 31, 2002
-------------------------------- -------------------------------
(Dollars in thousands) Amount Percent Amount Percent
-------------- ------------- ------------- --------------
Commercial business $ 80,369 15.10% $ 83,994 18.03%
Commercial real estate 225,582 42.40 199,672 42.87
Construction, net of loans in process 111,703 20.99 87,728 18.83
Single family residential real estate 26,907 5.06 26,870 5.77
Consumer loans 78,103 14.68 50,105 10.76
Lease financing 10,367 1.95 19,673 4.22
Unearned income (948) (.18) (2,229) (.48)
-------------- ------------- ------------- --------------
Total loans and leases 532,083 100.00% 465,813 100.00%
============= ==============
Allowance for loan and lease losses (7,245) (6,463)
-------------- -------------
Net loans and leases $524,838 $459,350
============== =============
(6) Allowance for Loan and Lease Losses
The following table details changes in the Company's allowance for loan
and lease losses for the periods indicated:
For the Three Months For the Six Months Ended
Ended June 30, June 30,
-------------------------- ---------------------------
(Dollars in thousands) 2003 2002 2003 2002
----------- ----------- ------------ -----------
Balance at beginning of period $7,214 $8,775 $6,463 $9,917
Charge-offs:
Commercial business:
TechBanc 283 1,445 373 2,693
All other commercial business 59 120 59 173
----------- ----------- ------------ -----------
Total commercial business 342 1,565 432 2,866
Commercial real estate -- -- -- 696
Consumer loans 24 -- 24 --
Lease financing 224 252 284 976
----------- ----------- ------------ -----------
Total charge-offs 590 1,817 740 4,538
----------- ----------- ------------ -----------
Recoveries:
Commercial business:
TechBanc 23 23 133 88
All other commercial business 7 -- 7 --
----------- ----------- ------------ -----------
Total commercial business 30 23 140 88
Consumer loans -- 1 1 2
Lease financing 91 42 181 116
----------- ----------- ------------ -----------
Total recoveries 121 66 322 206
----------- ----------- ------------ -----------
Net charge-offs 469 1,751 418 4,332
Additions charged to operations 500 1,000 1,200 2,439
----------- ----------- ------------ -----------
Balance at end of period $7,245 $8,024 $7,245 $8,024
=========== =========== ============ ===========
Specific Valuation Allowance on Impaired Loans $ 362 $ 96 $ 362 $ 96
=========== =========== ============ ===========
(7) Leases held for Sale
At June 30, 2003 the Company held $1.9 million in lease receivables
classified as held for sale which are carried at the lower of aggregate
cost or market value.
(8) TechBanc Sale
In January 2002, the Company completed the sale of TechBanc, a division
of the Bank, to Comerica Bank-California, a subsidiary of Comerica
Incorporated. Included in the sale were loans, deposits and warrants of
certain TechBanc's technology-based companies. The aggregate fair value
of loans sold (including accrued interest receivable) was $25.0 million
and deposits sold (including accrued interest payable) totaled $46.4
million with net cash paid of $21.4 million.
(9) Goodwill, Servicing Assets and Other Intangible Assets
Changes in the carrying amounts of goodwill related to each business
segment for the three months ended June 30, 2003 are presented below:
(Dollars in thousands) Banking Equipment Other Total
Leasing Segments Goodwill
--------------------------------------------------------
Balance at December 31, 2002 $468 $112 $277 $857
Impairment losses recognized -- -- -- --
------------- --------------- -------------- --------------
Balance at June 30, 2003 $468 $112 $277 $857
============= =============== ============== ==============
The gross carrying amount, accumulated amortization and net carrying
amount for each of the Company's identified intangible assets and
servicing rights subject to amortization is presented below:
At June 30, 2003 At December 31, 2002
------------------------------------ -----------------------------------
(Dollars in thousands) Gross Net Gross Net
Carrying Accumulated Carrying Carrying Accumulated Carrying
Amount Amortization Amount Amount Amortization Amount
------------------------------------ ------------------------------------
Customer-related intangible $ 655 $(475) $180 $ 655 $(347) $308
Servicing rights 492 (185) 307 427 (147) 280
------------------------------------ ------------------------------------
Total $1,147 $(660) $487 $1,082 $(494) $588
==================================== ====================================
(10) Capital Securities
In December 2002, the Company issued $5.0 million of variable rate
capital securities due January 7, 2033 (the "Capital Securities IV") in
a private offering managed by Credit Suisse First Boston. At June 30,
2003 the interest rate was 4.64% (three month LIBOR plus 3.35%, capped
at 12.5% until January 7, 2008, the date on which the Company can call
the capital securities). The Capital Securities IV were issued by the
Company's subsidiary, Progress Capital Trust IV (the "Trust IV"), a
statutory business trust created under the laws of Delaware. The
Company is the owner of all of the common securities of the Trust IV.
The Trust IV issued $5.0 million of Capital Securities IV (and together
with the preferred and common securities of the Trust, the "Trust
Securities IV"), the proceeds from which were used by the Trust IV,
along with the Company's $155,000 capital contribution for the common
securities, to acquire $5.2 million aggregate principal amount of the
Company's Junior Subordinated Debentures due January 7, 2033, which
constitute the sole assets of the Trust IV. The Company has fully,
irrevocably and unconditionally guaranteed all of the Trust's
obligations under the Capital Securities IV.
In November 2002, the Company issued $10.0 million of variable rate
capital securities due November 8, 2032 (the "Capital Securities III")
in a private offering managed by Trapeza CDO I, LLC. At June 30, 2003
the interest rate was 4.64% (three month LIBOR plus 3.35%, capped at
12% until November 15, 2007, the date on which the Company can call the
capital securities). The Capital Securities III were issued by the
Company's subsidiary, Progress Capital Trust III (the "Trust III"), a
statutory business trust created under the laws of Delaware. The
Company is the owner of all of the common securities of the Trust III.
The Trust III issued $10.0 million of variable rate Capital Securities
III (and together with the common securities, the "Trust III
Securities"), the proceeds from which were used by the Trust III along
with the Company's $310,000 capital contribution for the common
securities, to acquire $10.3 million aggregate principal amount of the
Company's variable rate Junior Subordinated
Notes due November 8, 2032, which constitute the sole assets of the
Trust III. The Company has fully, irrevocably and unconditionally
guaranteed all of the Trust III's obligations under the Capital
Securities III.
In July 2000, the Company issued 6,000 shares, or $6.0 million, of
11.445% trust preferred securities, $1,000 liquidation amount per
security, due July 19, 2030 (the "Capital Securities II"), in a private
offering managed by First Union Securities, Inc. The Capital Securities
II represent undivided beneficial interests in Progress Capital Trust
II, (the "Trust II"), a statutory business trust created under the laws
of Delaware, which was established by the Company for the purpose of
issuing the Capital Securities II. The Company is the owner of all of
the common securities of the Trust II. The Trust II issued $6.0 million
of 11.445% Capital Securities II (and together with the common
securities, the "Trust II Securities"), the proceeds from which were
used by the Trust II along with the Company's $186,000 capital
contribution for the common securities, to acquire $6.2 million
aggregate principal amount of the Company's 11.445% Junior Subordinated
Notes due July 19, 2030, which constitute the sole assets of the Trust
II. The Company has fully, irrevocably and unconditionally guaranteed
all of the Trust II's obligations under the Capital Securities II.
During 1997 the Company issued $15.0 million of 10.5% capital
securities due June 1, 2027 (the "Capital Securities"). The Capital
Securities were issued by the Company's subsidiary, Progress Capital
Trust I, a statuatory business trust created under the laws of
Delaware. The Company is the owner of all of the common securities of
the Trust. The Trust issued $15.0 million of 10.5% Capital Securities
(and together with the common securities, the "Trust Securities"), the
proceeds from which were used by the Trust, along with the Company's
$464,000 capital contribution for the common securities, to acquire
$15.5 million aggregate principal amount of the Company's 10.5% Junior
Subordinated Deferrable Interest Debentures due June 1, 2027 (the
"Debentures"), which constitute the sole assets of the Trust. The
Company has, through the Declaration of Trust establishing the Trust,
common securities and Capital Securities Agreements, the Debentures and
a related Indenture, taken together, fully irrevocably and
unconditionally guaranteed all of the Trust's obligations under the
Trust Securities. The Company contributed approximately $6.0 million of
the net proceeds to the Bank, to increase its regulatory capital ratios
and support the growth of the expanded lending operations. During 2002,
the Company retired $6.3 million of the Capital Securities and recorded
a loss on the extinguishment of debt of $25,000.
(11) Commitments and Contingencies
At June 30, 2003, the Company had $184.5 million in loan commitments to
extend credit, including unused lines of credit, and $8.9 million in
letters of credit outstanding.
(12) Segments
The following table sets forth selected financial information by
business segment for the periods indicated:
(Dollars in thousands) Private Insurance/
Equipment Equity Fund Wealth Other
Banking Leasing Management Management Segments Corporate Total
-------------------------------------------------------------------------------------------
Total Assets at:
June 30, 2003 $1,091,888 $13,427 $39 $417 $398 $3,713 $1,109,882
December 31, 2002 986,455 18,262 44 521 595 11,967 1,017,844
Revenues for the three months ended:
June 30, 2003 10,856 214 65 640 130 (474) 11,431
June 30, 2002 9,277 583 65 672 258 (746) 10,109
Net income (loss) for the three months ended:
June 30, 2003 3,022 (251) 23 34 (23) (428) 2,377
June 30, 2002 1,519 9 27 (51) (1) (596) 907
(Dollars in thousands) Private Insurance/
Equipment Equity Fund Wealth Other
Banking Leasing Management Management Segments Corporate Total
------------------------------------------------------------------------------------------
Revenues for the six months ended:
June 30, 2003 $20,668 $ 520 $130 $1,246 $167 $(1,257) $21,474
June 30, 2002 18,961 1,166 117 1,606 458 (1,287) 21,021
Net income (loss) for the six months ended:
June 30, 2003 5,176 (338) 43 100 (88) (1,069) 3,824
June 30, 2002 2,971 (163) 2 (18) (77) (1,058) 1,657
(13) Subsequent Events
On July 1, 2003, the Company completed the sale of the Bank's
subsidiary Progress Holdings, Inc. ("PHI") to an independent third
party leasing company. The stock of PHI was sold for $25,000. PHI owns
100% of Progress Leasing Company ("PLC") which was included in the
sale. At the sale date, PLC had total assets of $1.9 million, which
consisted solely of lease financing receivables, and total borrowings
of $1.9 million. The Bank entered into a servicing agreement with this
same independent third party leasing company to service the remaining
lease finance receivables held by the Company's Equipment Leasing
segment.
On July 25, 2003 the Company declared a cash dividend of $.08 per
common share, a 33% increase over the previous quarter. The dividend is
payable on August 15, 2003 to shareholders of record on July 30, 2003.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The following discussion and analysis of financial condition and results of
operations should be read in conjunction with the Company's Consolidated
Financial Statements and accompanying notes and with the Company's Annual Report
on Form 10-K for the year ended December 31, 2002. Earnings per share have been
adjusted to reflect all stock dividends and certain reclassifications have been
made to prior period data throughout the following discussion and analysis for
comparability with 2003 data.
This report on Form 10-Q contains forward-looking statements that involve risks
and uncertainties that could cause actual results to differ materially from
estimates. When used in filings by the Company with the Securities and Exchange
Commission, in the Company's press releases or other public or shareholder
communications, or in oral statements made with the approval of an authorized
executive officer, the words or phrases "will likely result," "are expected to,"
"will continue," is anticipated," "estimate," "project," or similar expressions
are intended to identify "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995. Such statements are subject to
certain risks and uncertainties including changes in economic conditions in the
Company's market area, changes in policies by regulatory agencies, fluctuations
in interest rates, demand for loans in the Company's market area and competition
that could cause actual results to differ materially from historical earnings
and those presently anticipated or projected. The Company wishes to caution
readers not to place undue reliance on any such forward-looking statements,
which speak only as of the date made. The Company wishes to advise readers that
the factors listed above could affect the Company's financial performance and
could cause the Company's actual results for future periods to differ materially
from any opinions or statements expressed with respect to future periods in any
current statements.
CRITICAL ACCOUNTING POLICIES
Accounting policies involving significant judgments and assumptions by
management, which have, or could have, a material impact on the carrying value
of certain assets or comprehensive income, are considered critical accounting
policies. The Company recognizes the following as critical accounting policies:
Allowance for Loan and Lease Losses, Goodwill and Other Intangible Asset
Impairment, Stock-Based Compensation, and Unrealized Gains and Losses on Debt
Securities Available for Sale. There have not been any material changes in the
Company's critical accounting policies since December 31, 2002. Further
descriptions of the Company's critical accounting policies can be found in the
Company's Annual Report on Form 10-K for the year ended December 31, 2002.
Pro-forma data associated with Stock-Based Compensation for the current quarter
can be found in Footnote 3 of the Notes to Consolidated Interim Financial
Statements included as Item 1 of this Form 10-Q.
RESULTS OF OPERATIONS--THREE MONTHS ENDED JUNE 30, 2003 VERSUS 2002
The Company recognized net income of $2.4 million, or diluted earnings per share
of $.33, for the three months ended June 30, 2003 compared to $907,000, or $.13
per diluted share, for the second quarter of 2002. Return on average
shareholders' equity was 14.65% and return on average assets was .86% for the
three months ended June 30, 2003 compared to 5.90% and .41%, respectively, for
the three months ended June 30, 2002.
Net Interest Income
Tax-equivalent net interest income for the three months ended June 30, 2003
increased $1.1 million, or 16%, compared to the second quarter of 2002. The
tax-equivalent net interest margin for the second quarter of 2003 was 3.10%
compared to 3.35% for the second quarter of 2002.
Average earning assets for the second quarter of 2003 were $1.05 billion
compared to $841.9 million for the second quarter of 2002. The increase in
earning assets for the second quarter of 2003 from the comparable period in 2002
was primarily due to higher levels of investments in mortgage-backed securities.
The Company also experienced significant increases in tax-exempt municipal
securities and consumer, commercial real estate and construction loans.
Tax-equivalent interest income for the second quarter of 2003 increased
$807,000, or 6%, over the same period in 2002 primarily due to tax-exempt
municipal securities and commercial real estate loans. Interest expense for the
second quarter of 2003 decreased $309,000, or 5%, over the same period in 2002
primarily due to lower interest rates on time deposits.
Provision for Loan and Lease Losses
The provision for loan and lease losses was $500,000 for the second quarter of
2003, compared to $1.0 million for the same period in 2002. The higher provision
during 2002 was primarily due to charge-offs in the TechBanc portfolio (which
was subsequently sold) and the reserve additions to address credit and economic
concerns which have now been reduced as a result of the reduction in the
Company's classified assets.
Non-interest Income
Non-interest income for the second quarter of 2003 was $3.6 million, an increase
of 12% compared to $3.2 million for the same period in 2002. Gain on sale of
securities was $723,000 for the second quarter of 2003 compared to $352,000
during the same quarter in 2002. Although total fee income for the second
quarter of 2003 remained level with the same quarter in 2002, increases in loan
brokerage and advisory fees of $339,000 were offset by decreases in consulting
fees from the Company's subsidiary KMR Management, Inc. ("KMR") of $128,000 and
decreases in service charges on deposits of $111,000.
Non-interest Expense
Total non-interest expense was $7.8 million for the second quarter of 2003,
level with the second quarter of 2002. During the second quarter of 2003 the
Company recognized non-recurring expenses of approximately $240,000 associated
with the sale of the Bank's leasing subsidiary Progress Holdings, Inc. ("PHI")
to an independent third party leasing company, which closed in July 2003. These
non-recurring expenses and increases in salaries and employee benefits were
offset by decreases in occupancy and recurring professional services expenses.
RESULTS OF OPERATIONS--SIX MONTHS ENDED JUNE 30, 2003 VERSUS 2002
The Company recognized net income of $3.8 million, or diluted earnings per share
of $.53, for the six months ended June 30, 2003 compared to $1.7 million, or
$.24 per diluted share, for the same period in 2002. Return on average
shareholders'equity was 11.75% and return on average assets was .71% for the six
months ended June 30, 2003 compared to 5.63% and .38%, respectively, for the six
months ended June 30, 2002.
Net Interest Income
Tax-equivalent net interest income for the six months ended June 30, 2003
increased $2.1 million, or 15%, compared to the same period in 2002. The
tax-equivalent net interest margin for the six months ended June 30, 2003 was
3.06% compared to 3.30% for the same period in 2002.
Average earning assets for the six months ended June 30, 2003 were $1.03 billion
compared to $825.8 million for the same period in 2002. The increase in earning
assets for the six months ended June 30, 2003 from the comparable period in 2002
was primarily due to higher levels of investments in mortgage-backed securities.
The Company also experienced significant increases in tax-exempt municipal
securities and consumer, commercial real estate and construction loans.
Tax-equivalent interest income for the six month ended June 30, 2003 increased
$1.5 million, or 6%, over the same period in 2002 primarily due to
mortgage-backed and tax-exempt municipal securities and commercial real estate
loans. Interest expense for the six months ended June 30, 2003 decreased
$580,000, or 4%, over the same period in 2002 primarily due to lower interest
rates on time deposits.
Provision for Loan and Lease Losses
The provision for loan and lease losses was $1.2 million for the six months
ended June 30, 2003, compared to $2.4 million for the same period in 2002. The
higher provision during 2002 was primarily due to charge-offs in the TechBanc
portfolio (which was subsequently sold) and the reserve additions to address
credit and economic concerns which have now been reduced as a result of the
reduction in the Company's classified assets.
At June 30, 2003, the allowance for loan and leases losses amounted to $7.2
million or 1.36% of total loans and leases and 142.45% of total non-performing
loans and leases. At December 31, 2002, the allowance for loan and leases losses
amounted to $6.5 million or 1.39% of total loans and leases and 118.65% of total
non-performing loans and leases.
Non-interest Income
Non-interest income for the six months ended June 30, 2003 was $6.4 million, a
decrease of 17% compared to $7.8 million for the same period in 2002. This
decrease was the result of a variety of factors, including, among others, a
decline in client warrant income. The six months ended June 30, 2003 included
client warrant income of $197,000 compared to $1.5 million during the same
period in 2002. Fee income for the six months ended June 30, 2003 decreased
$594,000 primarily due to a decrease in mutual fund, annuity and insurance
commissions from the Company's subsidiary, Progress Financial Resources, Inc.
("PFR"), and a reduction in consulting fees from the Company's subsidiary, KMR,
partially offset by an increase in loan brokerage and advisory fees. Gain on
sale of securities was $1.0 million for the six months ended June 30, 2003
compared to $352,000 during the same period in 2002.
Non-interest Expense
Total non-interest expense was $15.1 million for the six months ended June 30,
2003, a decrease of 6% compared to the same period in 2002. During the six
months ended June 30, 2003 the Company recognized non-recurring expenses of
approximately $240,000 associated with the sale of the Bank's leasing subsidiary
Progress Holdings, Inc. ("PHI") to an independent third party leasing company,
which closed in July 2003. These non-recurring expenses were offset by decreases
in salaries and employee benefits and other expenses. Salaries and employee
benefits decreased by $378,000 for the six months ended June 30, 2003 from the
comparable period in 2002, mainly due to decreased commission volume for PFR.
Other expenses decreased $591,000 for the six months ended June 30, 2003
primarily due to recoveries of real estate owned expenses during 2003 and
decreased expenses related to real estate owned and loan workouts and the
write-off an uncollectible receivable from a client of KMR during the first
quarter of 2002.
FINANCIAL CONDITION
Total assets increased to $1.1 billion at June 30, 2003 from $1.0 billion at
December 31, 2002. Loans and leases outstanding totaled $532.1 million at June
30, 2003 compared to $465.8 million at December 31, 2002. This increase was
primarily due to net growth in the consumer loans of $28.0 million, commercial
real estate loan portfolio of $25.9 million and in the construction loan
portfolio of $24.0 million. Investments and mortgage-backed securities increased
$36.5 million primarily due to net increases in municipal bonds of $26.8 million
and mortgage-backed securities of $10.1 million. Total deposits increased to
$740.9 million at June 30, 2003 from $691.5 million at December 31, 2002
primarily due to net increases in money market accounts of $36.5 million.
Liquidity and Funding
The Company must maintain sufficient liquidity to meet its funding requirements
for loan commitments, scheduled debt repayments, operating expenses, and deposit
withdrawals. The Bank is the primary source of working capital for the Company.
The Company's need for liquidity is affected by loan demand and net changes in
retail deposit levels. The Company can minimize the cash required during the
times of heavy loan demand by modifying its credit policies or reducing its
marketing efforts. Liquidity demand caused by net reductions in retail deposits
is usually caused by factors over which the Company has limited control. The
Company derives its liquidity from both its assets and liabilities. Liquidity is
derived from assets by receipt of interest and principal payments and
prepayments, by the ability to sell assets at market prices and by utilizing
unpledged assets as collateral for borrowings. Liquidity is derived from
liabilities by maintaining a variety of funding sources, including retail
deposits, FHLB borrowings and securities sold under agreements to repurchase.
The Company's primary sources of funds have historically consisted of deposits,
amortization and prepayments of outstanding loans, FHLB borrowings and
securities sold under agreement to repurchase and sales of investment and
mortgage-backed securities. During the six months ended June 30, 2003, the
Company reinvested its working capital primarily by funding loan growth and
purchasing municipal securities; working capital provided by sales and
repayments of mortgage-backed securities was reinvested by purchasing additional
mortgage-backed securities to maintain its liquidity. For the six months ended
June 30, 2003, cash was used in investing activities primarily due to funding
loan growth; cash was provided by financing activities primarily due to
increases in money market deposits and long-term borrowings.
Non-performing and Underperforming Assets
The following table details the Company's non-performing and underperforming
assets at the dates indicated:
(Dollars in Thousands) June 30, December 31, June 30,
2003 2002 2002
---------------- ---------------- ----------------
Loans and leases accounted for on a non-accrual basis $5,086 $5,447 $ 8,738
Other real estate owned, net of related reserves -- -- 4,495
---------------- ---------------- ----------------
Total non-performing assets 5,086 5,447 13,233
Accruing loans 90 or more days past due 1,416 918 1,766
---------------- ---------------- ----------------
Total underperforming assets $6,502 $6,365 $14,999
================ ================ ================
Non-performing assets as a percentage of net loans and
leases and real estate owned .97% 1.19% 2.77%
================ ================ ================
Non-performing assets as a percentage of total assets .46% .54% 1.46%
================ ================ ================
Underperforming assets as a percentage of net loans and
leases and real estate owned 1.23% 1.39% 3.14%
================ ================ ================
Underperforming assets as a percentage of total assets .59% .63% 1.66%
================ ================ ================
Allowance for loan and lease losses $7,245 $6,463 $8,024
================ ================ ================
Ratio of allowance for loan and lease losses to
non-performing loans and leases at end of period 142.45% 118.65% 91.83%
================ ================ ================
Ratio of allowance for loan and lease losses to
underperforming loans and leases at end of period 111.43% 101.54% 76.39%
================ ================ ================
Non-performing assets of $5.1 million at June 30, 2003 decreased from $5.4
million at December 31, 2002 as additions of loans and leases to non-accrual
status were more than offset by payments and charge-offs on non-accrual loans
and leases. Non-performing assets decreased from $13.2 million at June 30, 2002
primarily due to principal payments, charge-offs and a net decrease in real
estate owned of $4.5 million. As of June 30, 2003 and December 31, 2002, the
Company had no real estate owned. The $5.1 million in non-performing loans and
leases at June 30, 2003 primarily consisted of: $3.9 million in commercial
business loans (of which $2.4 million were Asset-based loans and $150,000 were
TechBanc loans); $411,000 of lease financings; $158,000 of commercial real
estate loans; $410,000 of consumer loans; and $205,000 of single family
residential mortgages.
Accruing loans 90 or more days past due increased to $1.4 million at June 30,
2003 from $918,000 at December 31, 2002 primarily due to a commercial real
estate loan. The $1.4 million of accruing loans 90 or more days past due at June
30, 2003 consisted primarily of: $340,000 of commercial business loans and $1.1
million of commercial real estate loans.
Delinquencies
The following table sets forth information concerning the principal balances and
percent of the total loan and lease portfolio represented by delinquent loans
and leases at the dates indicated:
(Dollars in thousands) June 30, 2003 December 31, 2002 June 30, 2002
--------------------------- ------------------------------ ---------------------------
Amount Percent Amount Percent Amount Percent
------------ ----------- ------------- ------------- ------------ -----------
Delinquencies:
30 to 59 days $1,567 .29% $3,205 .69% $2,396 .50%
60 to 89 days 1,044 .20 1,511 .32 1,571 .32
90 or more days 1,416 .26 918 .20 1,766 .37
------------ ----------- ------------- ------------- ------------ -----------
Total $4,027 .75% $5,634 1.21% $5,733 1.19%
============ =========== ============= ============= ============ ===========
Item 3. Quantitative and Qualitative Disclosures About Market Risk
For information regarding market risk, see the Company's Annual Report on Form
10-K for the year ended December 31, 2002, Item 7A, filed with the Securities
and Exchange Commission on March 21, 2003. The market risk of the Company has
not experienced any significant changes as of June 30, 2003 from the Annual
Report on Form 10-K.
Item 4. Controls and Procedures
Management, under the supervision and with the participation of the Company's
President and Chief Executive Officer (the "CEO") and the Company's Chief
Operating and Chief Financial Officer (the "COO/CFO") have evaluated the
Company's disclosure controls and procedures (as defined in Rules 13a-15(e) and
15d-15(e) under the Exchange Act) as of the end of the period covered by this
report. Based upon that evaluation, the CEO and the COO/CFO have concluded that
the disclosure controls and procedures were effective. There were no significant
changes in the Company's internal controls over financial reporting, or in other
factors, that could significantly affect these controls during the most recent
fiscal quarter.
PART II -- OTHER INFORMATION
Item 1. 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.
In June 2003, a civil suit was filed by the U.S. Small Business Administration
("SBA") as receiver for Acorn Technology Fund, L.P. ("Acorn"), a Small Business
Investment Company, against the Bank. In October 2001, the Bank acquired two
branches, including deposits and loans, from Main Street Bancorp, Inc. One of
the loans purchased was a $2.0 million term loan to Princeton Technology
Management LLC ("PTM"), due May 31, 2002 and collateralized by a $2.0 million
certificate of deposit in the name of Acorn. During the second quarter of 2002,
the loan to PTM matured and the Bank used the proceeds from the certificate of
deposit held as collateral to satisfy the loan. The SBA alleges that the general
partner of Acorn lacked the authority to pledge Acorn's assets as collateral for
PTM and that the Bank wrongfully deprived Acorn of its property by apply the
funds from the certificate of deposit as payment on the loan. The SBA seeks the
recovery of $2.0 million that it deems was wrongfully transferred to the Bank.
The Bank denies any liability and is currently preparing its response to this
civil suit.
Item 2. Changes in Securities
None.
Item 3. Defaults upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
The Company's annual meeting of shareholders was held on Tuesday, April 22, 2003
for the following purposes:
1) To elect three directors for a three-year term and one director for a
one-year term and until their successors are elected and qualified;
2) To amend the 2000 Incentive Stock Option Plan to authorize the issuance of
an additional 100,000 shares of Common Stock pursuant to the plan;
3) To ratify the appointment by the Board of Directors of
PricewaterhouseCoopers LLP as the Company's independent accountants for the
year ending December 31, 2003; and
4) To transact such other business as may properly come before the meeting or
any adjournment thereof.
The first three proposals were adopted by the Company's shareholders and no
other business was brought before the meeting under the fourth proposal. The
following are the results of the shareholders' votes:
Abstained/ Broker
Authority Non-
For Against Withheld Votes
---------- --------- ------------- -----------
1) Election of directors for a three-year term:
A. John May . 5,320,986 -- 64,448 --
Charles J. Tornetta 5,302,041 -- 83,393 --
W. Kirk Wycoff 5,301,861 -- 83,573 --
Election of director for a one-year term:
Frank A. Farnesi 5,320,299 -- 65,135 --
2) Amend the 2000 Incentive Stock Option Plan
to authorize the issuance of an additional
100,000 shares of Common Stock 4,702,123 598,155 85,156 1,226,837
3) Proposal to ratify the appointment of
PricewaterhouseCoopers L.L.P. 5,205,103 178,434 1,896 1,226,838
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
(a) List of Exhibits
10.1 Employment Agreement between Progress Financial Corporation and
W. Kirk Wycoff dated June 30, 2003.
10.2 Employment Agreement between Progress Bank and W. Kirk Wycoff
dated June 30, 2003.
10.3 Change in Control and Termination Agreement between Progress
Financial Corporation and Michael B. High dated April 15, 2003.
10.4 Change in Control and Termination Agreement between Progress
Financial Corporation and Eric J. Morgan dated April 15, 2003.
31.1 Certification of Chief Executive Officer filed pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
31.2 Certification of Chief Financial Officer filed pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
32.1 Certification of Chief Executive Officer filed pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
32.2 Certification of Chief Financial Officer filed pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
(b) Reports on Form 8-K
1. On April 24, 2003, the Company filed a Current Report under Items
7 and 9 announcing the First Quarter 2003 earnings, declaration
of the quarterly cash dividend, the distribution of the analyst
package and the declaration of a 5% stock dividend.
2. On May 5, 2003, the Company filed a Current Report under Item 5
announcing the dismissal of the Litt Lawsuit.
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
August 12, 2003 /s/ W. Kirk Wycoff
- --------------------------- --------------------------------------------
Date W. Kirk Wycoff, Chairman, President and
Chief Executive Officer
August 12, 2003 /s/ Michael B. High
- --------------------------- --------------------------------------------
Date Michael B. High, Chief Operating Officer and
Chief Financial Officer
Exhibit 10.1
AGREEMENT
AGREEMENT, dated this 30th day of June 2003, between Progress Financial
Corporation (the "Corporation"), a Delaware corporation and the parent holding
company of Progress Bank (the "Bank"), a federally chartered savings bank, and
W. Kirk Wycoff (the "Executive").
WITNESSETH
WHEREAS, the Executive is presently an officer of the Corporation and the
Bank (together the "Employers");
WHEREAS, the Employers desire to be ensured of the Executive's continued
active participation in the business of the Employers;
WHEREAS, the Employers and the Executive have entered into an employment
agreement dated July 23, 2002 (the "2002 Agreement");
WHEREAS, in accordance with the Office of Thrift Supervision ("OTS")
Regulatory Handbook, the Corporation and the Bank desire to enter into separate
agreements with the Executive with respect to his employment by each of the
Employers; and
WHEREAS, the Corporation desires to have this new Agreement supersede the
2002 Agreement;
NOW THEREFORE, in consideration of the premises and the mutual agreements herein
contained, the parties hereby agree as follows:
1. Definitions. The following words and terms shall have the meanings set
forth below for the purposes of this Agreement:
(a) Average Annual Compensation. The Executive's "Average Annual
Compensation" for purposes of this Agreement shall be deemed to mean the average
level of compensation paid to the Executive by the Employers or any subsidiary
thereof during the most recent five taxable years preceding the Date of
Termination, including Base Salary, bonuses, any other taxable income, including
but not limited to directors' fees and income related to the exercise of stock
options, as well as profit sharing, employee stock ownership plan and other
retirement contributions or benefits (whether or not taxable) made or accrued on
the Executive's behalf pursuant to any tax-qualified or non-tax-qualified plan
or arrangement.
(b) Base Salary. "Base Salary" shall have the meaning set forth in Section
3(a) hereof.
(c) Cause. Termination of the Executive's employment for "Cause" shall mean
termination because of personal dishonesty, incompetence, willful misconduct,
breach of fiduciary duty involving personal profit, intentional failure to
perform stated duties, willful violation of any law, rule or regulation (other
than traffic violations or similar offenses) or final cease-and-desist
order or material breach of any provision of this Agreement. For purposes of
this paragraph, no act or failure to act on the Executive's part shall be
considered "willful" unless done, or omitted to be done, by the Executive not in
good faith and without reasonable belief that the Executive's action or omission
was in the best interest of the Employers.
(d) Change in Control of the Corporation. "Change in Control of the
Corporation" shall mean a change in control of a nature that would be required
to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A
promulgated under the Securities Exchange Act of 1934, as amended ("Exchange
Act"), or any successor thereto, whether or not any security of the Corporation
is registered under the Exchange Act; provided that, without limitation, such a
change in control shall be deemed to have occurred if (i) any "person" (as such
term is used in Sections 13(d) and 14(d) of the Exchange Act) is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly
or indirectly, of securities of the Corporation representing 25% or more of the
combined voting power of the Corporation's then outstanding securities; or (ii)
during any period of two consecutive years, individuals who at the beginning of
such period constitute the Board of Directors of the Corporation cease for any
reason to constitute at least a majority thereof unless the election, or the
nomination for election by stockholders, of each new director was approved by a
vote of at least two-thirds of the directors then still in office who were
directors at the beginning of the period.
(e) Code. "Code" shall mean the Internal Revenue Code of 1986, as amended.
(f) Date of Termination. "Date of Termination" shall mean (i) if the
Executive's employment is terminated by the Employers for Cause or for
Disability, the date specified in the Notice of Termination, and (ii) if the
Executive's employment is terminated for any other reason, the date on which a
Notice of Termination is given or as specified in such Notice.
(g) Disability. Termination by the Corporation of the Executive's
employment based on "Disability" shall mean termination because of death or
because of any physical or mental impairment which qualifies the Executive for
disability benefits under the applicable long-term disability plan maintained by
the Employers or, if no such plan applies, which would qualify the Executive for
disability benefits under the Federal Social Security System.
(h) IRS. "IRS" shall mean the Internal Revenue Service.
(i) Notice of Termination. Any purported termination of the Executive's
employment by the Corporation for any reason, including without limitation for
Cause, Disability or Retirement, or by the Executive for any reason, shall be
communicated by written "Notice of Termination" to the other party hereto. For
purposes of this Agreement, a "Notice of Termination" shall mean a dated notice
which (i) indicates the specific termination provision in this Agreement relied
upon, (ii) sets forth in reasonable detail the facts and circumstances claimed
to provide a basis for termination of the Executive's employment under the
provision so indicated, (iii) specifies a Date of Termination, which shall be
not less than thirty (30) nor more than ninety (90) days after such Notice of
Termination is given, except in the case of the Corporation's termination of the
Executive's employment for Cause, and (iv) is given in the manner specified in
Section 10 hereof.
(j) Retirement. "Retirement" shall mean voluntary termination by the
Executive in accordance with the Employers' retirement policies, including early
retirement, generally applicable to the Employers' salaried employees.
2. Term of Employment.
(a) The Corporation hereby employs the Executive as President and Chief
Executive Officer of the Corporation, and the Executive hereby accepts said
employment and agrees to render such services to the Corporation on the terms
and conditions set forth in this Agreement. Unless extended as provided in this
Section 2, the term of employment under this Agreement shall be for three years,
commencing on the date of this Agreement. Prior to the first annual anniversary
of the date of this Agreement and each annual anniversary thereafter, the Board
of Directors of the Corporation shall consider, review (with appropriate
corporate documentation thereof, and after taking into account all relevant
factors, including the Executive's performance) and, if appropriate, explicitly
approve a one-year extension of the remaining term of this Agreement. The term
of this Agreement shall continue to extend each year if the Board of Directors
so approves such extension unless the Executive gives written notice to the
Employers of the Executive's election not to extend the term, with such notice
to be given not less than ninety (90) days prior to any such anniversary date.
If the Executive gives timely notice that the term will not be extended as of
any annual anniversary date, or if the Corporation fails to give written notice
of its election to extend as of any annual anniversary date, then this Agreement
shall terminate at the conclusion of its remaining term. References herein to
the term of this Agreement shall refer both to the initial term and successive
terms.
(b) During the term of this Agreement, the Executive shall perform such
executive services for the Corporation as may be consistent with his titles and
from time to time assigned to him by the Corporation's Board of Directors.
3. Compensation and Benefits.
(a) The Employers shall compensate and pay Executive for his services
during the term of this Agreement at a minimum base salary of $500,000 per year
commencing July 1, 2003, ("Base Salary"), which may be increased from time to
time in such amounts as may be determined by the Boards of Directors of the
Employers and may not be decreased without the Executive's express written
consent. In addition to his Base Salary, the Executive shall be entitled to
receive during the term of this Agreement such bonus payments as may be
determined by the Boards of Directors of the Employers. In that regard, for the
term of the Agreement, the Executive shall be entitled to participate in a bonus
plan whereby he would be potentially entitled to receive a bonus potentially
equal to a maximum of 50% of his Base Salary, subject to the accomplishment of
certain goals established or to be established by the Boards of Directors of the
Employers. In the event that it is determined by the Boards of Directors of the
Employers that, with respect to any particular fiscal year during the term of
the Agreement, the Executive is expending in excess of 10% of his time on
matters primarily related to the business of the Corporation, the Corporation
and the Bank will pay their respective pro rata portion of the Executive's
compensation and benefits with respect to such fiscal year; otherwise, the Bank
shall pay all of the Executive's compensation and benefits.
(b) During the term of this Agreement, the Executive shall be entitled to
participate in and receive the benefits of any pension or other retirement
benefit plan, profit sharing, stock option, employee stock ownership, or other
plans, benefits and privileges given to employees and executives of the
Employers, to the extent commensurate with his then duties and responsibilities,
as fixed by the Boards of Directors of the Employers, except that the bonus
arrangement set forth in Section 3(a) hereof shall be provided to the Executive
in lieu of any other bonus plan or arrangement given to other employees and
executives of the Employers. The Corporation shall not make any changes in such
plans, benefits or privileges which would adversely affect the Executive's
rights or benefits thereunder, unless such change occurs pursuant to a program
applicable to all executive officers of the Corporation and does not result in a
proportionately greater adverse change in the rights of or benefits to the
Executive as compared with any other executive officer of the Corporation.
Nothing paid to the Executive under any plan or arrangement presently in effect
or made available in the future shall be deemed to be in lieu of the salary
payable to the Executive pursuant to Section 3(a) hereof.
(c) During the term of this Agreement, the Executive shall be entitled to
an annual expense allowance (exclusive of standard health benefits available to
employees) not to exceed 10.0% of his Base Salary, with the Executive to provide
documentation of the expenses at such times and in such manner as may be
reasonably requested by the Boards of Directors of the Employers.
(d) During the term of this Agreement, the Executive shall be entitled to
four (4) weeks of paid annual vacation in accordance with the policies as
established from time to time by the Boards of Directors of the Employers. The
Executive shall be entitled to accumulate unused vacation time from one year to
the next.
4. Expenses. The Employers shall reimburse the Executive or otherwise
provide for or pay for all reasonable expenses incurred by the Executive in
furtherance of, or in connection with the business of the Employers, including,
but not by way of limitation, automobile (including costs of leasing, insurance,
repairs, maintenance, and licensing) and traveling expenses, and all reasonable
entertainment expenses (whether incurred at the Executive's residence, while
traveling or otherwise), subject to such reasonable documentation and other
limitations as may be established by the Boards of Directors of the Employers.
If such expenses are paid in the first instance by the Executive, the Employers
shall reimburse the Executive therefor.
5. Termination.
(a) The Corporation shall have the right, at any time upon prior Notice of
Termination, to terminate the Executive's employment hereunder for any reason,
including without limitation termination for Cause, Disability or Retirement,
and the Executive shall have the right, upon prior Notice of Termination, to
terminate his employment hereunder for any reason.
(b) In the event that (i) the Executive's employment is terminated by the
Corporation for Cause or Retirement or Disability, or (ii) the Executive
terminates his employment hereunder other than in connection with a Change in
Control of the Corporation, the Executive shall have no right pursuant to this
Agreement to compensation or other benefits for any period after the applicable
Date of Termination except as otherwise provided herein.
(c) In the event that (i) the Executive's employment is terminated by the
Corporation for other than Cause, Retirement or Disability or (ii) such
employment is terminated by the Executive (a) due to a material breach of this
Agreement by the Corporation, which breach has not been cured within fifteen
(15) days after a written notice of non-compliance has been given by the
Executive to the Corporation, or (b) at the time of or in connection with a
Change in Control of the Corporation, then the Corporation or its successors
shall, and regardless of whether or not the Executive is subsequently re-hired
by the Corporation or its successors,
(A) pay to the Executive a cash severance amount equal to 2.99 times the
Executive's Average Annual Compensation, with such amount to be paid
at the Executive's election in either a lump sum within five business
days of the Date of Termination or in thirty-six (36) equal monthly
installments beginning with the first business day of the month
following the Date of Termination,
(B) maintain and provide for a period ending at the earlier of (i) the
expiration of the remaining term of employment pursuant hereto prior
to the Notice of Termination or (ii) the date of the Executive's
full-time employment by another employer (provided that the Executive
is entitled under the terms of such employment to benefits
substantially similar to those described in this subparagraph (B)), at
no cost to the Executive, the Executive's continued participation in
all group insurance, life insurance, health and accident, disability
and other employee benefit plans, programs and arrangements in which
the Executive was entitled to participate immediately prior to the
Date of Termination (other than stock option and restricted stock
plans of the Employers), provided that in the event that the
Executive's participation in any plan, program or arrangement as
provided in this subparagraph (B) is barred, or during such period any
such plan, program or arrangement is discontinued or the benefits
thereunder are materially reduced, the Corporation shall arrange to
provide the Executive with benefits substantially similar to those
which the Executive was entitled to receive under such plans, programs
and arrangements immediately prior to the Date of Termination, and
(C) provided that notwithstanding the foregoing, any payments or benefits
provided by the Bank pursuant to Sections 5(c)(A) and (B) of the
Executive's employment agreement with the Bank of even date (the "Bank
Agreement"), as reduced by Section 6 of the Bank Agreement, shall be
subtracted from the payments or benefits to be provided by the
Corporation pursuant to this Section 5(c).
(d) If a Change in Control of the Corporation occurs and the Executive's
employment is not terminated at the time of or in connection with such Change in
Control, but the Executive's employment is terminated subsequent to the Change
in Control of the Corporation by either the Executive or either of the Employers
(or their successors) for any reason other than Cause, Retirement or Disability,
then the Corporation or its successors shall pay to the Executive the cash
severance amount set forth in Section 5(c)(A) hereof and provide the benefits
set forth in Section 5(c)(B) hereof on a pro rata basis as set forth below, in
each case as reduced by Section 5(c)(C) hereof. The amount of the cash severance
set forth in Section 5(c)(A) hereof, as reduced by Section 5(c)(C) hereof, and
the time period set forth in Section 5(c)(B) hereof shall each be reduced by a
fraction, the numerator of which is the number of days the Executive was
employed by the Employers or their successors subsequent to the date of the
Change in Control of the Corporation, and the denominator of which is the total
number of days remaining in the Executive's term of employment as of the date of
the Change in Control of the Corporation.
(e) In the event of the failure by either of the Employers to elect or to
re-elect or to appoint or to re-appoint the Executive to the offices of
President and Chief Executive Officer of the Corporation and the Bank or a
material change made by the Employers in the Executive's functions, duties or
responsibilities as President and Chief Executive Officer of the Corporation and
President and Chief Executive Officer of the Bank without the Executive's
express written consent, the Executive shall be entitled to terminate his
employment hereunder and shall be entitled, subject to the provisions of Section
5(c)(C) hereof, to the payments and benefits provided for in Section 5(c)(A) and
(B).
6. Tax Indemnification.
(a) If the payments and benefits pursuant to this Agreement, either alone
or together with other payments and benefits which the Executive has the right
to receive from the Corporation and its subsidiaries (including, without
limitation, the payments and benefits which the Executive would have the right
to receive from the Bank pursuant to Section 5 of the Bank Agreement), would
constitute a "parachute payment" as defined in Section 280G(b)(2) of the Code
(the "Initial Parachute Payment"), then the Corporation shall pay to the
Executive, at the time such payments or benefits are paid and subject to
applicable withholding requirements, a cash amount equal to the sum of the
following:
(i) twenty (20) percent (or such other percentage equal to the tax
rate imposed by Section 4999 of the Code) of the amount by which the
Initial Parachute Payment exceeds the Executive's "base amount" from the
Corporation and its subsidiaries, as defined in Section 280G(b)(3) of the
Code, with the difference between the Initial Parachute Payment and the
Executive's base amount being hereinafter referred to as the "Initial
Excess Parachute Payment";
(ii) such additional amount (tax allowance) as may be necessary to
compensate the Executive for the payment by the Executive of state and
federal income and excise taxes on the payment provided under clause (i)
above and on any payments under this clause (ii). In computing such tax
allowance, the payment to be made under clause (i) above shall be
multiplied by the "gross up percentage" ("GUP"). The GUP shall be
determined as follows:
Tax Rate
GUP = -----------
1- Tax Rate
The Tax Rate for purposes of computing the GUP shall be the highest
marginal federal and state income and employment-related tax rate (including
Social Security and Medicare taxes), including any applicable excise tax rate,
applicable to the Executive in the year in which
the payment under clause (i) above is made, and shall also reflect the phase-out
of deductions and the ability to deduct certain of such taxes.
(b) Notwithstanding the foregoing, if it shall subsequently be determined
in a final judicial determination or a final administrative settlement to which
the Executive is a party that the actual excess parachute payment as defined in
Section 280G(b)(1) of the Code is different from the Initial Excess Parachute
Payment (such different amount being hereafter referred to as the "Determinative
Excess Parachute Payment"), then the Company's independent tax counsel or
accountants shall determine the amount (the "Adjustment Amount") which either
the Executive must pay to the Corporation or the Corporation must pay to the
Executive in order to put the Executive (or the Corporation, as the case may be)
in the same position the Executive (or the Corporation, as the case may be)
would have been if the Initial Excess Parachute Payment had been equal to the
Determinative Excess Parachute Payment. In determining the Adjustment Amount,
the independent tax counsel or accountants shall take into account any and all
taxes (including any penalties and interest) paid by or for the Executive or
refunded to the Executive or for the Executive's benefit. As soon as practicable
after the Adjustment Amount has been so determined, the Corporation shall pay
the Adjustment Amount to the Executive or the Executive shall repay the
Adjustment Amount to the Corporation, as the case may be.
(c) In each calendar year that the Executive receives payments of benefits
that constitute a parachute payment, the Executive shall report on his state and
federal income tax returns such information as is consistent with the
determination made by the independent tax counsel or accountants of the
Corporation as described above. The Corporation shall indemnify and hold the
Executive harmless from any and all losses, costs and expenses (including
without limitation, reasonable attorneys' fees, interest, fines and penalties)
which the Executive incurs as a result of so reporting such information. The
Executive shall promptly notify the Corporation in writing whenever the
Executive receives notice of the institution of a judicial or administrative
proceeding, formal or informal, in which the federal tax treatment under Section
4999 of the Code of any amount paid or payable under this Section 6 is being
reviewed or is in dispute. The Corporation shall assume control at its expense
over all legal and accounting matters pertaining to such federal tax treatment
(except to the extent necessary or appropriate for the Executive to resolve any
such proceeding with respect to any matter unrelated to amounts paid or payable
pursuant to this Section 6) and the Executive shall cooperate fully with the
Corporation in any such proceeding. The Executive shall not enter into any
compromise or settlement or otherwise prejudice any rights the Corporation may
have in connection therewith without the prior consent of the Corporation.
7. Mitigation; Exclusivity of Benefits.
(a) Except as set forth in Section 5(c)(B) hereto, the Executive shall not
be required to mitigate the amount of any benefits hereunder by seeking other
employment or otherwise, nor shall the amount of any such benefits be reduced by
any compensation earned by the Executive as a result of employment by another
employer after the Date of Termination or otherwise.
(b) The specific arrangements referred to herein are not intended to
exclude any other benefits which may be available to the Executive upon a
termination of employment with the Employers pursuant to employee benefit plans
of the Employers or otherwise.
8. Withholding. All payments required to be made by the Corporation
hereunder to the Executive shall be subject to the withholding of such amounts,
if any, relating to tax and other payroll deductions as the Corporation may
reasonably determine should be withheld pursuant to any applicable law or
regulation.
9. Assignability. The Corporation may assign this Agreement and its rights
and obligations hereunder in whole, but not in part, to any corporation, bank or
other entity with or into which the Corporation may hereafter merge or
consolidate or to which the Corporation may transfer all or substantially all of
its assets, if in any such case said corporation, bank or other entity shall by
operation of law or expressly in writing assume all obligations of the
Corporation hereunder as fully as if it had been originally made a party hereto,
but may not otherwise assign this Agreement or its rights and obligations
hereunder. The Executive may not assign or transfer this Agreement or any rights
or obligations hereunder.
10. Notice. For the purposes of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by certified or
registered mail, return receipt requested, postage prepaid, addressed to the
respective addresses set forth below:
To the Corporation: Secretary
Progress Financial Corporation
4 Sentry Parkway, Suite 230
Blue Bell, Pennsylvania 19422
To the Executive: W. Kirk Wycoff
875 Lantern Lane
Blue Bell, Pennsylvania 19422
11. Amendment; Waiver. No provisions of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing and signed by the Executive and such officer or officers as may be
specifically designated by the Board of Directors of the Corporation to sign on
its behalf. No waiver by any party hereto at any time of any breach by any other
party hereto of, or compliance with, any condition or provision of this
Agreement to be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time.
12. Governing Law. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the United States
where applicable and otherwise by the substantive laws of the Commonwealth of
Pennsylvania.
13. Nature of Obligations. Nothing contained herein shall create or require
the Corporation to create a trust of any kind to fund any benefits which may be
payable hereunder, and
to the extent that the Executive acquires a right to receive benefits from the
Corporation hereunder, such right shall be no greater than the right of any
unsecured general creditor of the Corporation.
14. Headings. The section headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
15. Validity. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other
provisions of this Agreement, which shall remain in full force and effect.
16. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
17. Regulatory Prohibition. Notwithstanding any other provision of this
Agreement to the contrary, any payments made to the Executive pursuant to this
Agreement, or otherwise, are subject to and conditioned upon their compliance
with Section 18(k) of the FDIA (12 U.S.C. 1828(k)) and any regulations
promulgated thereunder, including but not limited to 12 C.F.R. Part 359.
18. Entire Agreement. This Agreement embodies the entire agreement between
the Corporation and the Executive with respect to the matters agreed to herein.
All prior agreements between the Corporation and the Executive with respect to
the matters agreed to herein, including without limitation the 2002 Agreement
and any prior Agreements between the Employers and the Executive are hereby
superseded and shall have no force or effect. Notwithstanding the foregoing,
nothing contained in this Agreement shall affect the agreement of even date
being entered into between the Bank and the Executive.
IN WITNESS WHEREOF, this Agreement has been executed as of the date first
above written.
Attest: PROGRESS FINANCIAL CORPORATION
/s/Lois M. Anerino By: /s/Michael B. High
- ----------------------- ---------------------------------
Michael B. High
Chief Operating Officer and
Chief Financial Officer
By: /s/Kevin J. Silverang
----------------------------------
Kevin J. Silverang
Director
Attest: W. KIRK WYCOFF
/s/ Carol A. Stypinski By: /s/W. Kirk Wycoff
- ------------------------- ----------------------------------
W. Kirk Wycoff, Individually
Exhibit 10.2
AGREEMENT
AGREEMENT, dated this 30th day of June 2003, between Progress Bank (the
"Bank"), a federally chartered savings bank and a wholly-owned subsidiary of
Progress Financial Corporation (the "Corporation"), and W. Kirk Wycoff (the
"Executive").
WITNESSETH
WHEREAS, the Executive is presently an officer of the Corporation and the
Bank (together the "Employers");
WHEREAS, the Employers desire to be ensured of the Executive's continued
active participation in the business of the Employers;
WHEREAS, the Employers and the Executive have entered into an employment
agreement dated July 23, 2002 (the "2002 Agreement");
WHEREAS, in accordance with the Office of Thrift Supervision ("OTS")
Regulatory Handbook, the Corporation and the Bank desire to enter into separate
agreements with the Executive with respect to his employment by each of the
Employers; and
WHEREAS, the Bank desires to have this new Agreement supersede the 2002
Agreement;
NOW THEREFORE, in consideration of the premises and the mutual agreements
herein contained, the parties hereby agree as follows:
1. Definitions. The following words and terms shall have the meanings set
forth below for the purposes of this Agreement:
(a) Average Annual Compensation. The Executive's "Average Annual
Compensation" for purposes of this Agreement shall be deemed to mean the average
level of compensation paid to the Executive by the Employers or any subsidiary
thereof during the most recent five taxable years preceding the Date of
Termination, including Base Salary, bonuses, any other taxable income, including
but not limited to directors' fees and income related to the exercise of stock
options, as well as profit sharing, employee stock ownership plan and other
retirement contributions or benefits (whether or not taxable) made or accrued on
the Executive's behalf pursuant to any tax-qualified or non-tax-qualified plan
or arrangement.
(b) Base Salary. "Base Salary" shall have the meaning set forth in Section
3(a) hereof.
(c) Cause. Termination of the Executive's employment for "Cause" shall mean
termination because of personal dishonesty, incompetence, willful misconduct,
breach of fiduciary duty involving personal profit, intentional failure to
perform stated duties, willful violation of any law, rule or regulation (other
than traffic violations or similar offenses) or final cease-and-desist order or
material breach of any provision of this Agreement. For purposes of this
paragraph, no act
or failure to act on the Executive's part shall be considered "willful" unless
done, or omitted to be done, by the Executive not in good faith and without
reasonable belief that the Executive's action or omission was in the best
interest of the Employers.
(d) Change in Control of the Corporation. "Change in Control of the
Corporation" shall mean a change in control of a nature that would be required
to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A
promulgated under the Securities Exchange Act of 1934, as amended ("Exchange
Act"), or any successor thereto, whether or not any security of the Corporation
is registered under the Exchange Act; provided that, without limitation, such a
change in control shall be deemed to have occurred if (i) any "person" (as such
term is used in Sections 13(d) and 14(d) of the Exchange Act) is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly
or indirectly, of securities of the Corporation representing 25% or more of the
combined voting power of the Corporation's then outstanding securities; or (ii)
during any period of two consecutive years, individuals who at the beginning of
such period constitute the Board of Directors of the Corporation cease for any
reason to constitute at least a majority thereof unless the election, or the
nomination for election by stockholders, of each new director was approved by a
vote of at least two-thirds of the directors then still in office who were
directors at the beginning of the period.
(e) Code. "Code" shall mean the Internal Revenue Code of 1986, as amended.
(f) Date of Termination. "Date of Termination" shall mean (i) if the
Executive's employment is terminated by the Employers for Cause or for
Disability, the date specified in the Notice of Termination, and (ii) if the
Executive's employment is terminated for any other reason, the date on which a
Notice of Termination is given or as specified in such Notice.
(g) Disability. Termination by the Bank of the Executive's employment based
on "Disability" shall mean termination because of death or because of any
physical or mental impairment which qualifies the Executive for disability
benefits under the applicable long-term disability plan maintained by the
Employers or, if no such plan applies, which would qualify the Executive for
disability benefits under the Federal Social Security System.
(h) IRS. "IRS" shall mean the Internal Revenue Service.
(i) Notice of Termination. Any purported termination of the Executive's
employment by the Bank for any reason, including without limitation for Cause,
Disability or Retirement, or by the Executive for any reason, shall be
communicated by written "Notice of Termination" to the other party hereto. For
purposes of this Agreement, a "Notice of Termination" shall mean a dated notice
which (i) indicates the specific termination provision in this Agreement relied
upon, (ii) sets forth in reasonable detail the facts and circumstances claimed
to provide a basis for termination of the Executive's employment under the
provision so indicated, (iii) specifies a Date of Termination, which shall be
not less than thirty (30) nor more than ninety (90) days after such Notice of
Termination is given, except in the case of the Bank's termination of the
Executive's employment for Cause, and (iv) is given in the manner specified in
Section 10 hereof.
(j) Retirement. "Retirement" shall mean voluntary termination by the
Executive in accordance with the Employers' retirement policies, including early
retirement, generally applicable to the Employers' salaried employees.
2. Term of Employment.
(a) The Bank hereby employs the Executive as President and Chief Executive
Officer of the Bank, and the Executive hereby accepts said employment and agrees
to render such services to the Bank on the terms and conditions set forth in
this Agreement. Unless extended as provided in this Section 2, the term of
employment under this Agreement shall be for three years, commencing on the date
of this Agreement. Prior to the first annual anniversary of the date of this
Agreement and each annual anniversary thereafter, the Board of Directors of the
Bank shall consider, review (with appropriate corporate documentation thereof,
and after taking into account all relevant factors, including the Executive's
performance) and, if appropriate, explicitly approve a one-year extension of the
remaining term of this Agreement. The term of this Agreement shall continue to
extend each year if the Board of Directors so approves such extension unless the
Executive gives written notice to the Employers of the Executive's election not
to extend the term, with such notice to be given not less than ninety (90) days
prior to any such anniversary date. If the Executive gives timely notice that
the term will not be extended as of any annual anniversary date, or if the Bank
fails to give written notice of its election to extend as of any annual
anniversary date, then this Agreement shall terminate at the conclusion of its
remaining term. References herein to the term of this Agreement shall refer both
to the initial term and successive terms.
(b) During the term of this Agreement, the Executive shall perform such
executive services for the Bank as may be consistent with his titles and from
time to time assigned to him by the Bank's Board of Directors.
3. Compensation and Benefits.
(a) The Employers shall compensate and pay Executive for his services
during the term of this Agreement at a minimum base salary of $500,000 per year
commencing July 1, 2003, ("Base Salary"), which may be increased from time to
time in such amounts as may be determined by the Boards of Directors of the
Employers and may not be decreased without the Executive's express written
consent. In addition to his Base Salary, the Executive shall be entitled to
receive during the term of this Agreement such bonus payments as may be
determined by the Boards of Directors of the Employers. In that regard, for the
term of the Agreement, the Executive shall be entitled to participate in a bonus
plan whereby he would be potentially entitled to receive a bonus potentially
equal to a maximum of 50% of his Base Salary, subject to the accomplishment of
certain goals established or to be established by the Boards of Directors of the
Employers. In the event that it is determined by the Boards of Directors of the
Employers that, with respect to any particular fiscal year during the term of
the Agreement, the Executive is expending in excess of 10% of his time on
matters primarily related to the business of the Corporation, the Corporation
and the Bank will pay their respective pro rata portion of the Executive's
compensation with respect to such fiscal year; otherwise, the Bank shall pay all
of the Executive's compensation.
(b) During the term of this Agreement, the Executive shall be entitled to
participate in and receive the benefits of any pension or other retirement
benefit plan, profit sharing, stock option, employee stock ownership, or other
plans, benefits and privileges given to employees and executives of the
Employers, to the extent commensurate with his then duties and responsibilities,
as fixed by the Boards of Directors of the Employers, except that the bonus
arrangement set forth in Section 3(a) hereof shall be provided to the Executive
in lieu of any other bonus plan or arrangement given to other employees and
executives of the Employers. The Bank shall not make any changes in such plans,
benefits or privileges which would adversely affect the Executive's rights or
benefits thereunder, unless such change occurs pursuant to a program applicable
to all executive officers of the Bank and does not result in a proportionately
greater adverse change in the rights of or benefits to the Executive as compared
with any other executive officer of the Bank. Nothing paid to the Executive
under any plan or arrangement presently in effect or made available in the
future shall be deemed to be in lieu of the salary payable to the Executive
pursuant to Section 3(a) hereof.
(c) During the term of this Agreement, the Executive shall be entitled to
an annual expense allowance (exclusive of standard health benefits available to
employees) not to exceed 10.0% of his Base Salary, with the Executive to provide
documentation of the expenses at such times and in such manner as may be
reasonably requested by the Boards of Directors of the Employers.
(d) During the term of this Agreement, the Executive shall be entitled to
four (4) weeks of paid annual vacation in accordance with the policies as
established from time to time by the Boards of Directors of the Employers. The
Executive shall be entitled to accumulate unused vacation time from one year to
the next.
4. Expenses. The Employers shall reimburse the Executive or otherwise
provide for or pay for all reasonable expenses incurred by the Executive in
furtherance of, or in connection with the business of the Employers, including,
but not by way of limitation, automobile (including costs of leasing, insurance,
repairs, maintenance, and licensing) and traveling expenses, and all reasonable
entertainment expenses (whether incurred at the Executive's residence, while
traveling or otherwise), subject to such reasonable documentation and other
limitations as may be established by the Boards of Directors of the Employers.
If such expenses are paid in the first instance by the Executive, the Employers
shall reimburse the Executive therefor.
5. Termination.
(a) The Bank shall have the right, at any time upon prior Notice of
Termination, to terminate the Executive's employment hereunder for any reason,
including without limitation termination for Cause, Disability or Retirement,
and the Executive shall have the right, upon prior Notice of Termination, to
terminate his employment hereunder for any reason.
(b) In the event that (i) the Executive's employment is terminated by the
Bank for Cause or Retirement or Disability, or (ii) the Executive terminates his
employment hereunder other than in connection with a Change in Control of the
Corporation, the Executive shall have no right pursuant
to this Agreement to compensation or other benefits for any period after the
applicable Date of Termination except as otherwise provided herein.
(c) In the event that (i) the Executive's employment is terminated by the
Bank for other than Cause, Retirement or Disability or (ii) such employment is
terminated by the Executive (a) due to a material breach of this Agreement by
the Bank, which breach has not been cured within fifteen (15) days after a
written notice of non-compliance has been given by the Executive to the Bank, or
(b) at the time of or in connection with a Change in Control of the Corporation,
then the Bank or its successors shall, subject to the provisions of Section 6
hereof, if applicable, and regardless of whether or not the Executive is
subsequently re-hired by the Bank or its successors,
(A) pay to the Executive a cash severance amount equal to
2.99 times the Executive's Average Annual Compensation, with such
amount to be paid at the Executive's election in either a lump sum
within five business days of the Date of Termination or in thirty-six
(36) equal monthly installments beginning with the first business day
of the month following the Date of Termination, and
(B) maintain and provide for a period ending at the earlier of
(i) the expiration of the remaining term of employment pursuant hereto
prior to the Notice of Termination or (ii) the date of the Executive's
full-time employment by another employer (provided that the Executive
is entitled under the terms of such employment to benefits
substantially similar to those described in this subparagraph (B)), at
no cost to the Executive, the Executive's continued participation in
all group insurance, life insurance, health and accident, disability
and other employee benefit plans, programs and arrangements in which
the Executive was entitled to participate immediately prior to the
Date of Termination (other than stock option and restricted stock
plans of the Employers), provided that in the event that the
Executive's participation in any plan, program or arrangement as
provided in this subparagraph (B) is barred, or during such period any
such plan, program or arrangement is discontinued or the benefits
thereunder are materially reduced, the Bank shall arrange to provide
the Executive with benefits substantially similar to those which the
Executive was entitled to receive under such plans, programs and
arrangements immediately prior to the Date of Termination.
(d) If a Change in Control of the Corporation occurs and the Executive's
employment is not terminated at the time of or in connection with such Change in
Control, but the Executive's employment is terminated subsequent to the Change
in Control of the Corporation by either the Executive or either of the Employers
(or their successors) for any reason other than Cause, Retirement or Disability,
then the Bank or its successors shall, subject to the provisions of Section 6
hereof, pay to the Executive the cash severance amount set forth in Section
5(c)(A) hereof and provide the benefits set forth in Section 5(c)(B) hereof on a
pro rata basis as set forth below. The amount of the cash severance set forth in
Section 5(c)(A) hereof and the time period set forth in Section 5(c)(B) hereof
shall each be reduced by a fraction, the numerator of which is the number of
days the Executive was employed by the Employers or their successors subsequent
to the date of the Change in Control of the Corporation, and the denominator of
which is the total number of days remaining in the Executive's term of
employment as of the date of the Change in Control of the Corporation.
(e) In the event of the failure by either of the Employers to elect or to
re-elect or to appoint or to re-appoint the Executive to the offices of
President and Chief Executive Officer of the Corporation and the Bank or a
material change made by the Employers in the Executive's functions, duties or
responsibilities as President and Chief Executive Officer of the Corporation and
President and Chief Executive Officer of the Bank without the Executive's
express written consent, the Executive shall be entitled to terminate his
employment hereunder and shall be entitled, subject to the provisions of Section
6 hereof, to the payments and benefits provided for in Section 5(c)(A) and (B).
6. Limitation of Benefits under Certain Circumstances. If the payments and
benefits pursuant to Section 5 hereof, either alone or together with other
payments and benefits which the Executive has the right to receive from the
Employers, would constitute a "parachute payment" under Section 280G of the
Code, the payments and benefits pursuant to Section 5 hereof shall be reduced,
in the manner determined by the Executive, by the amount, if any, which is the
minimum necessary to result in no portion of the payments and benefits under
Section 5 being non-deductible to the Bank pursuant to Section 280G of the Code
and subject to the excise tax imposed under Section 4999 of the Code. The
determination of any reduction in the payments and benefits to be made pursuant
to Section 5 shall be based upon the opinion of independent tax counsel selected
by the Bank's independent public accountants and paid by the Employers. Such
counsel shall be reasonably acceptable to the Bank and the Executive; shall
promptly prepare the foregoing opinion, but in no event later than thirty (30)
days from the Date of Termination; and may use such actuaries as such counsel
deems necessary or advisable for the purpose. Nothing contained herein shall
result in a reduction of any payments or benefits to which the Executive may be
entitled upon termination of employment under any circumstances other than as
specified in this Section 6, or a reduction in the payments and benefits
specified in Section 5 below zero.
7. Mitigation; Exclusivity of Benefits.
(a) Except as set forth in Section 5(c)(B) hereto, the Executive shall not
be required to mitigate the amount of any benefits hereunder by seeking other
employment or otherwise, nor shall the amount of any such benefits be reduced by
any compensation earned by the Executive as a result of employment by another
employer after the Date of Termination or otherwise.
(b) The specific arrangements referred to herein are not intended to
exclude any other benefits which may be available to the Executive upon a
termination of employment with the Employers pursuant to employee benefit plans
of the Employers or otherwise.
8. Withholding. All payments required to be made by the Bank hereunder to
the Executive shall be subject to the withholding of such amounts, if any,
relating to tax and other payroll deductions as the Bank may reasonably
determine should be withheld pursuant to any applicable law or regulation.
9. Assignability. The Bank may assign this Agreement and its rights and
obligations hereunder in whole, but not in part, to any corporation, bank or
other entity with or into which the Bank may hereafter merge or consolidate or
to which the Bank may transfer all or substantially all of its assets, if in any
such case said corporation, bank or other entity shall by operation of law or
expressly in writing assume all obligations of the Bank hereunder as fully as if
it had been originally made a party hereto, but may not otherwise assign this
Agreement or its rights and obligations hereunder. The Executive may not assign
or transfer this Agreement or any rights or obligations hereunder.
10. Notice. For the purposes of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by certified or
registered mail, return receipt requested, postage prepaid, addressed to the
respective addresses set forth below:
To the Bank: Secretary
Progress Bank
4 Sentry Parkway, Suite 230
Blue Bell, Pennsylvania 19422
To the Executive: W. Kirk Wycoff
875 Lantern Lane
Blue Bell, Pennsylvania 19422
11. Amendment; Waiver. No provisions of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing and signed by the Executive and such officer or officers as may be
specifically designated by the Board of Directors of the Bank to sign on its
behalf. No waiver by any party hereto at any time of any breach by any other
party hereto of, or compliance with, any condition or provision of this
Agreement to be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time.
12. Governing Law. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the United States
where applicable and otherwise by the substantive laws of the Commonwealth of
Pennsylvania.
13. Nature of Obligations. Nothing contained herein shall create or require
the Bank to create a trust of any kind to fund any benefits which may be payable
hereunder, and to the extent that the Executive acquires a right to receive
benefits from the Bank hereunder, such right shall be no greater than the right
of any unsecured general creditor of the Bank.
14. Headings. The section headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
15. Validity. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other
provisions of this Agreement, which shall remain in full force and effect.
16. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
17. Regulatory Actions. The following provisions shall be applicable to the
parties to the extent that they are required to be included in employment
agreements between a savings association and its employees pursuant to Section
563.39(b) of the Regulations Applicable to all Savings Associations, 12 C.F.R.
563.39(b), or any successor thereto, and shall be controlling in the event of a
conflict with any other provision of this Agreement, including without
limitation Section 5 hereof.
(a) If the Executive is suspended from office and/or temporarily prohibited
from participating in the conduct of the Bank's affairs pursuant to notice
served under Section 8(e)(3) or Section 8(g)(1) of the Federal Deposit Insurance
Act ("FDIA")(12 U.S.C. 1818(e)(3) and 1818(g)(1)), the Bank's obligations under
this Agreement shall be suspended as of the date of service, unless stayed by
appropriate proceedings. If the charges in the notice are dismissed, the Bank
may, in its discretion: (i) pay the Executive all or part of the compensation
withheld while its obligations under this Agreement were suspended, and (ii)
reinstate (in whole or in part) any of its obligations which were suspended.
(b) If the Executive is removed from office and/or permanently prohibited
from participating in the conduct of the Ban's affairs by an order issued under
Section 8(e)(4) or Section 8(g)(1) of the FDIA (12 U.S.C. 1818(e)(4) and
(g)(1)), all obligations of the Bank under this Agreement shall terminate as of
the effective date of the order, but vested rights of the Executive and the Bank
as of the date of termination shall not be affected.
(c) If the Bank is in default, as defined in Section 3(x)(1) of the FDIA
(12 U.S.C. 1813(x)(1)), all obligations under this Agreement shall terminate as
of the date of default, but vested rights of the Executive and the Bank as of
the date of termination shall not be affected.
(d) All obligations under this Agreement shall be terminated pursuant to 12
C.F.R. 563.39(b)(5) (except to the extent that it is determined that
continuation of the Agreement for the continued operation of the Bank is
necessary): (i) by the Director of the OTS, or his/her designee, at the time the
Federal Deposit Insurance Corporation ("FDIC") enters into an agreement to
provide assistance to or on behalf of the Bank under the authority contained in
Section 13(c) of the FDIA (12 U.S.C. 1823(c)); or (ii) by the Director of the
OTS, or his/her designee, at the time the Director or his/her designee approves
a supervisory merger to resolve problems related to operation of the Bank or
when the Bank is determined by the Director of the OTS to be in an unsafe or
unsound condition, but vested rights of the Executive and the Employers as of
the date of termination shall not be affected.
18. Regulatory Prohibition. Notwithstanding any other provision of this
Agreement to the contrary, any payments made to the Executive pursuant to this
Agreement, or otherwise, are subject to and conditioned upon their compliance
with Section 18(k) of the FDIA (12 U.S.C. 1828(k)) and any regulations
promulgated thereunder, including but not limited to 12 C.F.R. Part 359.
19. Entire Agreement. This Agreement embodies the entire agreement between
the Bank and the Executive with respect to the matters agreed to herein. All
prior agreements between
the Bank and the Executive with respect to the matters agreed to herein,
including without limitation the 2002 Agreement and any prior Agreements between
the Employers and the Executive are hereby superseded and shall have no force or
effect. Notwithstanding the foregoing, nothing contained in this Agreement shall
affect the agreement of even date being entered into between the Corporation and
the Executive.
IN WITNESS WHEREOF, this Agreement has been executed as of the date first
above written.
Attest: PROGRESS BANK
/s/Lois M. Anerino By: /s/Michael B. High
- ---------------------- --------------------------------
Michael B. High
Chief Operating Officer and
Chief Financial Officer
By: /s/Kevin J. Silverang
--------------------------------
Kevin J. Silverang
Director
Attest: W. KIRK WYCOFF
/s/Carol A. Stypinski By: /s/W. Kirk Wycoff
- ------------------------- ---------------------------------
W. Kirk Wycoff, Individually
Exhibit 10.3
CHANGE IN CONTROL AND TERMINATION AGREEMENT
THIS AGREEMENT made as of this 15th day of April, 2003, by and between
PROGRESS FINANCIAL CORPORATION (the "Company"), a Pennsylvania business
corporation and Michael B. High ("Executive").
WHEREAS, the Executive is presently serving as Chief Operating Officer and
Chief Financial Officer of the Company; and Progress Bank.
WHEREAS, the Company recognizes that, as is the case with many publicly
held corporations, the possibility of a change in control of the Company exists
and that such possibility, and the uncertainty and questions which it may raise
among management, may result in the departure or distraction of key management
personnel to the detriment of the Company;
WHEREAS, the Company has determined that appropriate steps should be taken
to reinforce and encourage the continued attention and dedication of key members
of the Company's management to their assigned duties without distraction and
with a view to enhancing the Company's long term shareholder interests in the
event of a change in control of the Company; and
WHEREAS, in order to induce the Executive to remain in the employ of the
Company, the Company agrees that the Executive shall receive the compensation
and benefits set forth in this Agreement as a cushion against the financial and
career impact on the Executive in the event the Executive's employment with the
Company is terminated subsequent to a "Change of Control" (as defined in Section
4 hereof) of the Company.
AGREEMENT
NOW, THEREFORE, the parties hereto, intending to be legally bound, hereby
agree as follows.
1. Term of Agreement.
(a) This Agreement shall be effective as of the date first set
forth above ("Effective Date") and shall be for a term
ending on the fifth anniversary of the Effective date.
(b) Notwithstanding the provisions of Section 1 (a) of this
Agreement, this Agreement shall terminate automatically as
of the effective date of termination of the Executive's
employment, and the Executive shall not be entitled to any
payments or benefits hereunder, upon termination by the
Company of the Executive's employment for Cause. As used in
this Agreement, "Cause" shall mean (A) the Executive's
conviction of or plea of guilty or nolo contendere to a
felony or the actual incarceration of the Executive for a
period of forty-five (45) consecutive days, (B) the issuance
by any federal or state banking authority of an order
directing that the Company terminate the Executive's
employment with the Company or relieve the Executive of the
duties being performed by the Executive for the Company or
(C) Executive's willful misconduct or gross negligence in
the performance of Executive's duties.
(c) Notwithstanding the provisions of Section 1 (a) of this
Agreement, this Agreement shall terminate automatically as
of the effective date of termination of the Executive's
employment, and the Executive shall not be entitled to any
payments or benefits hereunder, upon termination of the
Executive's employment as a result of the Executive's
voluntary termination (other than in accordance with Section
2 of this Agreement), retirement at the Executive's
election, or death; provided, however, that if the Executive
dies after a Notice of Termination (as defined in Section 2
of this Agreement) is delivered by the Executive, the
provisions of Section 9(b) of this Agreement shall apply.
(d) Notwithstanding the provisions of Section 1 (a) of this
Agreement, this Agreement shall terminate automatically as
of the effective date of termination of the Executive's
employment, and the Executive shall not be entitled to any
payments or benefits hereunder upon termination of the
Executive's employment as a result of the Executive's
disability; provided, however, that, if the Executive
becomes disabled after a Notice of Termination (as defined
in Section 2 of this Agreement) is delivered by the
Executive, the Executive shall nevertheless be entitled to
receive all of the compensation and benefits provided for
in, and for the term set forth in, Section 3 of this
Agreement. For purposes of this Agreement, "disability"
shall mean the Executive's incapacity by reason of accident,
sickness, or otherwise which renders the Executive mentally
or physically incapable of performing the services required
by the Executive for three hundred and sixty (360)
consecutive days.
2. Change in Control and Termination Provisions. If at any time during
the term of this Agreement, there shall be a Change in Control
followed by:
(a) any involuntary termination of the Executive (other than as set
forth in Section 1(b), 1(c), or 1(d) of this Agreement);
(b) the Executive not holding the position of Chief Operating Officer
and Chief Financial Officer of the Company and Progress Bank or
its successor, which responsibilities shall be similar to the
Executive's duties immediately after the Effective Date;
(c) any reduction in the sum of Executive's annual base salary and
target bonus under the Company's officer or executive bonus plan
(EBP) (as distinguished from actual bonus paid) in effect on the
Effective Date or as the same may be increased from time to time
after the Effective Date;
(d) any failure to provide the Executive with a target bonus under
the EBP (as distinguished from actual bonus paid) comparable to
similarly situated executives at the Company;
(e) any failure to provide the Executive with benefits at least as
favorable as those enjoyed by similarly situated executives at
the Company under the Company's pension, life insurance, medical,
health and accident, disability or other written employee plans
under which the form and/or amounts of benefits are prescribed in
applicable documents;
(f) any relocation of the Executive's principal site of employment to
a location more than 35 miles from the Executive's principal site
of employment as of the Effective date;
(g) any material breach of this Agreement on the part of the Company;
then,at the option of the Executive, exercisable by the Executive
anytime within sixty (60) days after the occurrence of any of the
foregoing events, the Executive may resign from employment with
the Company (or, if involuntarily terminated, give notice of
intention to collect benefits under this Agreement) by delivering
a notice in writing "The Notice of Termination") to the Company
and the provisions of Section 3 of this Agreement shall apply.
3. Rights in Event of Change in Control Followed by Termination.
(a) In the event that the Executive delivers a Notice of Termination to
the Company in accordance with Section 2 above, the Executive shall be
entitled to receive the compensation and benefits set forth below:
(i) two times the sum of the Executive's annual base salary at the
highest amount in effect, and annual cash bonus under the EBP at
the highest amount paid, during the two calendar years preceding
the year in which the Notice of Termination is delivered, payable
in a lump sum or 24 monthly installments at the Executive's
election;
(ii) life, medical and dental insurance benefits for a period of 24
months following delivery of a Notice of Termination at levels
equivalent to the levels to which Executive would have been
entitled had the Executive remained in the Company's employ
during such period;
(iii)outplacement services for a period of twelve months to be
provided by a reputable outplacement firm and consist of those
services normally provided by such firm for senior executives.
(b) The Executive shall not be required to mitigate the amount of any
payment provided for in this Section 3 by seeking other employment or
otherwise, nor shall the amount of any payment or benefit provided for
in this Section 3 be reduced by any compensation earned by the
Executive as the result of employment by another employer or by reason
of the Executive's receipt of or right to receive any retirement or
other benefits after the date of termination of employment or
otherwise; provided, however, that the payments provided for in this
Section 3 shall be reduced by the amount actually received by the
Executive under the severance policy, if any, of the Company then in
effect.
(c) Except as otherwise provided in this Agreement, the Executives right
to receive payments under this Agreement shall not decrease the amount
of, or otherwise adversely affect any benefits payable to the
Executive under any plan,
agreement, or arrangement relating to employee benefits provided by
the Company.
(d) Notwithstanding the foregoing provisions of this Section 3, the
present value (determined in accordance with the provisions of Section
280G of the Internal Revenue Code of 1986, as amended (the "Code")) of
the total amount of all payments under this Section 3 when aggregated
with any other payments to Executive which constitute parachute
payments (within the meaning of section 280G of the Code) shall in no
event exceed 2.99 times the Executive's "base amount" (as determined
under Section 280G of the Code).
(e) Notwithstanding the foregoing provisions of this Section 3, the
Executive's right to receive any of the, payments or benefits set
forth in this Section 3 shall be conditioned upon execution of a
separation agreement and general release in a form satisfactory to the
Company and the Executive.
4. Change in Control Defined. For the purpose of this Agreement, a
"Change in Control" means the occurrence of any of the following: (i)
the consummation of a merger or business combination in which the
stockholders of the Company immediately prior to the merger own less
than 60% of the combined voting power of the outstanding voting
securities of the surviving corporation immediately after the merger;
(ii) any "person" within of Section 3(a)(9) of the Securities Exchange
Act of 1934 as modified in Sections 13(d) and 14(d) thereof (other
than the Company, a subsidiary of the Company, a trustee or other
fiduciary holding securities under an employee benefit plan of the
Company or a subsidiary, or an underwriter temporarily holding
securities pursuant to an offer of such securities) becomes the
"beneficial owner" as defined in Rule 13d-3 thereunder, directly or
indirectly, of more than 25% of the combined voting power of the
outstanding voting securities of the Company; or (iii) the approval by
the stockholders of the Company or of a plan of complete liquidation
of the Company.
5. Notices. Except as otherwise provided in this Agreement, any notice
required or permitted under this Agreement shall be deemed properly
given if in writing and if mailed by registered or certified mail,
postage prepaid with return receipt requested, to the Executive's
residence, in the case of notices to the Executive, and to the
principal office of the Company, Attention: Chief Executive Officer,
in the case of notices to the Company.
6. Waiver. No provision of this Agreement may be modified, waived, or
discharged unless such waiver, modification, or discharge is agreed to
in writing and signed by the Executive and Company. No waiver by
either party hereto at any time of any breach by the other party
hereto of, or compliance with, any condition or provision of this
Agreement to be performed by such other party shall be deemed a waiver
of similar or dissimilar provisions or conditions at the same or at
any prior or subsequent time.
7. Assignment. This Agreement shall not be assignable by either party,
except by the Company to any successor in interest to the Company's
business.
8. Entire Agreement. This Agreement contains the entire agreement of the
parties relating to the subject matter of this Agreement and
supersedes any prior agreement and any other prior or contemporaneous
oral or written understanding or agreement between the parties
relating to such subject matter. Any such prior agreement is
terminated in its entirety, and shall no longer have any force or
effect, as of the date first above written.
9. Successors Binding Agreement.
(a) The Company will require any successor (whether direct or indirect, by
purchase, merger, consolidation, or otherwise) to all or substantially
all of the business and/or assets of the Company to expressly assume
and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such
succession had taken place. Failure by the Company to obtain such
assumption and agreement prior to the effectiveness of any such
succession shall constitute a breach of this Agreement and the
provisions of Section 3 of this Agreement shall apply. As used in this
Agreement, "Company" shall mean the Company as defined previously and
any successor to its business and/or asset as aforesaid which assumes
and agrees to perform this Agreement by operation of law or otherwise.
(b) This Agreement shall inure to the benefit of and be enforceable by the
Executive's personal or legal representatives, executors,
administrators, heirs, distributees, devisees, and legatees. If the
Executive should die after a Notice of Termination is delivered by the
Executive and any amount would be payable to the
Executive under this Agreement if the Executive had continued to live,
all such amounts shall be paid in accordance with the terms of this
Agreement if paid in accordance with the terms of this Agreement
to the Executive's devisee, legatee, or other designee, or, if there
is no such designee, to the Executive's estate.
10. Validity. The invalidity or unenforceability of any provision of
this shall not affect the validity or enforceability of any
provision of this Agreement, which shall remain in full force and
effect.
11. Applicable Law. This Agreement shall be governed by and construed
in the domestic laws (but not the law of conflicts of law) of the
Commonwealth of Pennsylvania.
12. Headings. The headings of the sections of this Agreement are for
convenience only and shall not control or affect the meaning or
construction or limit the scope or intent of any provisions of
this Agreement.
IN WITNESS WHEREOF, the parties have executed this
Agreement as of the date first above written.
PROGRESS FINANCIAL CORPORATION
By: /s/ W. Kirk Wycoff
-------------------------------
(SEAL) Title: President
-------------------------------
Attest:/s/ Eric J. Morgan
-------------------------------
Witness:
/s/ Carol Stypinski /s/ Michael B. High
--------------------- -------------------------------------
Michael B. High
Exhibit 10.4
CHANGE IN CONTROL AND TERMINATION AGREEMENT
THIS AGREEMENT made as of this 15th day of April, 2003, by and between
PROGRESS FINANCIAL CORPORATION (the "Company"), a Pennsylvania business
corporation and Eric J. Morgan ("Executive").
WHEREAS, the Executive is presently serving as Senior Vice President, Risk
Management and Credit Administration of the Company; and Progress Bank.
WHEREAS, the Company recognizes that, as is the case with many publicly
held corporations, the possibility of a change in control of the Company exists
and that such possibility, and the uncertainty and questions which it may raise
among management, may result in the departure or distraction of key management
personnel to the detriment of the Company;
WHEREAS, the Company has determined that appropriate steps should be taken
to reinforce and encourage the continued attention and dedication of key members
of the Company's management to their assigned duties without distraction and
with a view to enhancing the Company's long term shareholder interests in the
event of a change in control of the Company; and
WHEREAS, in order to induce the Executive to remain in the employ of the
Company, the Company agrees that the Executive shall receive the compensation
and benefits set forth in this Agreement as a cushion against the financial and
career impact on the Executive in the event the Executive's employment with the
Company is terminated subsequent to a "Change of Control" (as defined in Section
4 hereof) of the Company.
AGREEMENT
NOW, THEREFORE, the parties hereto, intending to be legally bound, hereby
agree as follows.
1. Term of Agreement.
-----------------
(a) This Agreement shall be effective as of the date first set forth
above ("Effective Date") and shall be for a term ending on the
fifth anniversary of the Effective date.
(b) Notwithstanding the provisions of Section 1 (a) of this
Agreement, this Agreement shall terminate automatically as of the
effective date of termination of the Executive's employment, and
the Executive shall not be entitled to any
payments or benefits hereunder, upon termination by the Company
of the Executive's employment for Cause. As used in this
Agreement, "Cause" shall mean (A) the Executive's conviction of
or plea of guilty or nolo contendere to a felony or the actual
incarceration of the Executive for a period of forty-five (45)
consecutive days, (B) the issuance by any federal or state
banking authority of an order directing that the Company
terminate the Executive's employment with the Company or
relieve the Executive of the duties being performed by the
Executive for the Company or (C) Executive's willful misconduct
or gross negligence in the performance of Executive's duties.
(c) Notwithstanding the provisions of Section 1 (a) of this
Agreement, this Agreement shall terminate automatically as of the
effective date of termination of the Executive's employment, and
the Executive shall not be entitled to any payments or benefits
hereunder, upon termination of the Executive's employment as a
result of the Executive's voluntary termination (other than in
accordance with Section 2 of this Agreement), retirement at the
Executive's election, or death; provided, however, that if the
Executive dies after a Notice of Termination (as defined in
Section 2 of this Agreement) is delivered by the Executive, the
provisions of Section 9(b) of this Agreement shall apply.
(d) Notwithstanding the provisions of Section 1 (a) of this
Agreement, this Agreement shall terminate automatically as of the
effective date of termination of the Executive's payments or
benefits hereunder upon termination of the Executive's employment
as a result of the Executive's disability; provided, however,
that, if the Executive becomes disabled after a Notice of
Termination (as defined in Section 2 of this Agreement) is
delivered by the Executive, the Executive shall nevertheless be
entitled to receive all of the compensation and benefits provided
for in, and for the term set forth in, Section 3 of this
Agreement. For purposes of this Agreement, "disability" shall
mean the Executive's incapacity by reason of accident, sickness,
or otherwise which renders the Executive mentally or physically
incapable of performing the services required by the Executive
for three hundred and sixty (360) consecutive days.
2. Change in Control and Termination Provisions. If at any time during
the term of this Agreement, there shall be a Change in Control
followed by:
(a) any involuntary termination of the Executive (other than as set
forth in Section 1(b), 1(c), or 1(d) of this Agreement);
(b) the Executive not holding the position of Senior Vice President,
Risk Management and Credit Administration of the Company and
Progress Bank or its successor, which responsibilities shall be
similar to the Executive's duties immediately after the Effective
Date;
(c) any reduction in the sum of Executive's annual base salary and
target bonus under the Company's officer or executive bonus plan
(EBP) (as distinguished from actual bonus paid) in effect on the
Effective Date or as the same may be increased from time to time
after the Effective Date;
(d) any failure to provide the Executive with a target bonus under
the EBP (as distinguished from actual bonus paid) comparable to
similarly situated executives at the Company;
(e) any failure to provide the Executive with benefits at least as
favorable as those enjoyed by similarly situated executives at
the Company under the Company's pension, life insurance, medical,
health and accident, disability or other written employee plans
under which the form and/or amounts of benefits are prescribed in
applicable documents;
(f) any relocation of the Executive's principal site of employment to
a location more than 35 miles from the Executive's principal site
of employment as of the Effective date;
(g) any material breach of this Agreement on the part of the Company;
then,at the option of the Executive, exercisable by the Executive anytime
within sixty (60) days after the occurrence of any of the foregoing
events, the Executive may resign from employment with the Company (or,
if involuntarily terminated, give notice of intention to collect
benefits under this Agreement) by delivering a notice in writing "The
Notice of Termination") to the Company and the provisions of Section 3
of this Agreement shall apply.
3. Rights in Event of Change in Control Followed by Termination.
(a) In the event that the Executive delivers a Notice of Termination to
the Company in accordance with Section 2 above, the Executive shall be
entitled to receive the compensation and benefits set forth below:
(i) two times the sum of the Executive's annual base salary at the
highest amount in effect, and annual cash bonus under the EBP at
the highest amount paid, during the two calendar years preceding
the year in which the Notice of Termination is delivered, payable
in a lump sum or 24 monthly installments at the Executive's
election;
(ii) life, medical and dental insurance benefits for a period of 24
months following delivery of a Notice of Termination at levels
equivalent to the levels to which Executive would have been
entitled had the Executive remained in the Companys employ
during such period;
(iii)outplacement services for a period of twelve months to be
provided by a reputable outplacement firm and consist of those
services normally provided by such firm for senior executives.
(b) The Executive shall not be required to mitigate the amount of any
payment provided for in this Section 3 by seeking other
employment or otherwise, nor shall the amount of any payment or
benefit provided for in this Section 3 be reduced by any
compensation earned by the Executive as the result of employment
by another employer or by reason of the Executive's receipt of or
right to receive any retirement or other benefits after the date
of termination of employment or otherwise; provided, however,
that the payments provided for in this Section 3 shall be reduced
by the amount actually received by the Executive under the
severance policy, if any, of the Company then in effect.
(c) Except as otherwise provided in this Agreement, the Executive's
right to receive payments under this Agreement shall not decrease
the amount of, or otherwise adversely affect any benefits payable
to the Executive under any plan,
agreement, or arrangement relating to employee benefits provided
by the Company.
(d) Notwithstanding the foregoing provisions of this Section 3, the
present value (determined in accordance with the provisions of
Section 280G of the Internal Revenue Code of 1986, as amended
(the "Code")) of the total amount of all payments under this
Section 3 when aggregated with any other payments to Executive
which constitute parachute payments (within the meaning of
section 280G of the Code) shall in no event exceed 2.99 times the
Executive's "base amount" (as determined under Section 280G of
the Code).
(e) Notwithstanding the foregoing provisions of this Section 3, the
Executives right to receive any of the, payments or benefits set
forth in this Section 3 shall be conditioned upon execution of a
separation agreement and general release in a form satisfactory
to the Company and the Executive.
4. Change in Control Defined. For the purpose of this Agreement, a
"Change in Control" means the occurrence of any of the following: (i)
the consummation of a merger or business combination in which the
stockholders of the Company immediately prior to the merger own less
than 60% of the combined voting power of the outstanding voting
securities of the surviving corporation immediately after the merger;
(ii) any "person" within of Section 3(a)(9) of the Securities Exchange
Act of 1934 as modified in Sections 13(d) and 14(d) thereof (other
than the Company, a subsidiary of the Company, a trustee or other
fiduciary holding securities under an employee benefit plan of the
Company or a subsidiary, or an underwriter temporarily holding
securities pursuant to an offer of such securities) becomes the
"beneficial owner" as defined in Rule 13d-3 thereunder, directly or
indirectly, of more than 25% of the combined voting power of the
outstanding voting securities of the Company; or (iii) the approval by
the stockholders of the Company or of a plan of complete liquidation
of the Company.
5. Notices. Except as otherwise provided in this Agreement, any notice
required or permitted under this Agreement shall be deemed properly
given if in writing and if mailed by registered or certified mail,
postage prepaid with return receipt requested, to the Executive's
residence, in the case of notices to the Executive, and to the
principal office of the Company, Attention: Chief Executive Officer,
in the case of notices to the Company.
6. Waiver. No provision of this Agreement may be modified, waived, or
discharged unless such waiver, modification, or discharge is agreed to
in writing and signed by the Executive and Company. No waiver by
either party hereto at any time of any breach by the other party
hereto of, or compliance with, any condition or provision of this
Agreement to be performed by such other party shall be deemed a waiver
of similar or dissimilar provisions or conditions at the same or at
any prior or subsequent time.
7. Assignment. This Agreement shall not be assignable by either party,
except by the Company to any successor in interest to the Company's
business.
8. Entire Agreement. This Agreement contains the entire agreement of the
parties relating to the subject matter of this Agreement and
supersedes any prior agreement and any other prior or contemporaneous
oral or written understanding or agreement between the parties
relating to such subject matter. Any such prior agreement is
terminated in its entirety, and shall no longer have any force or
effect, as of the date first above written.
9. Successors Binding Agreement.
(a) The Company will require any successor (whether direct or indirect, by
purchase, merger, consolidation, or otherwise) to all or substantially
all of the business and/or assets of the Company to expressly assume
and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such
succession had taken place. Failure by the Company to obtain such
assumption and agreement prior to the effectiveness of any such
succession shall constitute a breach of this Agreement and the
provisions of Section 3 of this Agreement shall apply. As used in this
Agreement, "Company" shall mean the Company as defined previously and
any successor to its business and/or asset as aforesaid which assumes
and agrees to perform this Agreement by operation of law or otherwise.
(b) This Agreement shall inure to the benefit of and be enforceable by the
Executive's personal or legal representatives, executors,
administrators, heirs, distributees, devisees, and legatees. If the
Executive should die after a Notice of Termination is delivered by the
Executive and any amount would be payable to the Executive under this
Agreement if the Executive had continued to live, all such amounts
shall be paid in accordance with the terms of this Agreement if paid
in accordance with the terms of this Agreement to the Executive's
devisee, legatee, or other designee, or, if there is no such designee,
to the Executive's estate.
10. Validity. The invalidity or unenforceability of any provision of this
shall not affect the validity or enforceability of any provision of
this Agreement, which shall remain in full force and effect.
11. Applicable Law. This Agreement shall be governed by and construed in
the domestic laws (but not the law of conflicts of law) of the
Commonwealth of Pennsylvania.
12. Headings. The headings of the sections of this Agreement are for
convenience only and shall not control or affect the meaning or
construction or limit the scope or intent of any provisions of this
Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
PROGRESS FINANCIAL CORPORATION
By: /s/ W. Kirk Wycoff
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(SEAL) Title: President
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Attest: /s/ Michael B. High
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Witness:
/s/ Carol Stypinski /s/ Eric J. Morgan
------------------------- ------------------------------
Eric J. Morgan
Exhibit 31.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, W. Kirk Wycoff, President and Chief Executive Officer of Progress
Financial Corporation, certify that:
1. I have reviewed this report on Form 10-Q of Progress Financial Corporation
(the "Registrant");
2. Based on my knowledge, this report does not contain any untrue statement of
a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period in
which this report is being prepared;
b) Evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end
of the period covered by this report based on such evaluation; and
c) Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's
most recent fiscal quarter (the registrant's fourth fiscal quarter in
the case of an annual report) that has materially affected, or is
reasonably likely to materially affect, the registrant's internal
control over financial reporting; and
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the audit committee of the registrant's board
of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to
record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
control over financial reporting.
Date: August 12, 2003
/s/ W. Kirk Wycoff
----------------------------------------
Name: W. Kirk Wycoff
Title: President and Chief Executive Officer
Exhibit 31.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Michael B. High, Chief Operating Officer and Chief Financial Officer of
Progress Financial Corporation, certify that:
1. I have reviewed this report on Form 10-Q of Progress Financial Corporation
(the "Registrant");
2. Based on my knowledge, this report does not contain any untrue statement of
a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period in
which this report is being prepared;
b) Evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end
of the period covered by this report based on such evaluation; and
c) Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's
most recent fiscal quarter (the registrant's fourth fiscal quarter in
the case of an annual report) that has materially affected, or is
reasonably likely to materially affect, the registrant's internal
control over financial reporting; and
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the audit committee of registrant's board of
directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to
record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
control over financial reporting.
Date: August 12, 2003
/s/ Michael B. High
--------------------------
Name: Michael B. High
Title: Chief Operating Officer and
Chief Financial Officer
Exhibit 32.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350)
The undersigned executive officer of Progress Financial Corporation (the
"Registrant") hereby certifies to the best of his knowledge that the
Registrant's Form 10-Q for the quarter ended June 30, 2003 fully complies with
the requirements of Section 13(a) of the Securities Exchange Act of 1934 and
that the information contained therein fairly presents, in all material
respects, the financial condition and results of operations of the Registrant.
/s/ W. Kirk Wycoff
------------------------------------------------
Name: W. Kirk Wycoff
Title: President and Chief Executive Officer
Date: August 12, 2003
A signed original of this written statement required by Section 906 has
been provided to the Registrant and will be retained by the Registrant and
furnished to the Securities and Exchange Commission or its staff upon request.
Exhibit 32.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350)
The undersigned executive officer of Progress Financial Corporation (the
"Registrant") hereby certifies that to the best of his knowledge the
Registrant's Form 10-Q for the quarter ended June 30, 2003 fully complies with
the requirements of Section 13(a) of the Securities Exchange Act of 1934 and
that the information contained therein fairly presents, in all material
respects, the financial condition and results of operations of the Registrant.
/s/ Michael B. High
-------------------------------------
Name: Michael B. High
Title: Chief Operating Officer and
Chief Financial Officer
Date: August 12, 2003
A signed original of this written statement required by Section 906 has
been provided to the Registrant and will be retained by the Registrant and
furnished to the Securities and Exchange Commission or its staff upon request.