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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
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(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2002
[ ] 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 1-14154
GA FINANCIAL, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 25-1780835
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
4750 CLAIRTON BOULEVARD 15236
PITTSBURGH, PENNSYLVANIA (Zip Code)
(Address of principal executive offices)
(412) 882-9946
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
COMMON STOCK, PAR VALUE $0.01 PER SHARE THE AMERICAN STOCK EXCHANGE
(Title of class) (Name of exchange on which registered)
Securities registered pursuant to Section 12(g) of the Act: NONE
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Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes_X_ No___.
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ X ]
Indicate by check mark whether the registrant is an accelerated filer (as
defined in rule 12b-2 of the Exchange Act). Yes_X_ No___.
The aggregate market value of the voting stock held by non-affiliates of the
registrant, i.e., persons other than the directors and executive officers of the
registrant, was $98,572,849 based upon the last market price as listed on The
American Stock Exchange for June 28, 2002, the last business day of the
registrant's most recently completed second fiscal quarter.
The number of shares of Common Stock outstanding at March 17, 2003 is:
4,984,617.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Annual Report to Shareholders for the year ended December
31, 2002, are incorporated by reference into Part I and II of this Form 10-K.
Portions of the Proxy Statement for the Annual Meeting of Shareholders to
be held on April 23, 2003 are incorporated by reference into Part III of this
Form 10-K.
GA FINANCIAL, INC.
FORM 10-K
DECEMBER 31, 2002
CONTENTS
PAGE
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PART I.
ITEM 1. BUSINESS ..................................................................................... 1
ITEM 2. PROPERTIES ................................................................................... 5
ITEM 3. LEGAL PROCEEDINGS ............................................................................ 5
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS .......................................... 5
PART II.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS ........................ 6
ITEM 6. SELECTED FINANCIAL DATA ...................................................................... 6
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ........ 6
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK ................................... 6
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA .................................................. 6
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE ......... 6
PART III.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT ........................................... 7
ITEM 11. EXECUTIVE COMPENSATION ....................................................................... 7
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT ............................... 7
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS ............................................... 7
ITEM 14. CONTROLS AND PROCEDURES ...................................................................... 7
PART IV.
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES,AND REPORTS ON FORM 8-K .............................. 8
SIGNATURES ................................................................................................... 9
CERTIFICATIONS ............................................................................................... 10
PART I.
GA FINANCIAL, INC.
ITEM 1. BUSINESS
OVERVIEW
GA Financial, Inc. (the "Company") was incorporated in December 1995, and is
the holding company for Great American Federal (the "Bank"), a community bank
and the Company's principal subsidiary, New Eagle Capital, Inc., an investment
company, and the Bank's wholly owned subsidiaries, GA Financial Strategies, LLC,
established in 2001 to provide wealth management services, Steel City
Investments, Inc. established in December 2002 to hold and manage investments
securities, and Great American Financial Services, Inc., currently inactive.
In 1996, the Bank completed its conversion from a federally chartered mutual
savings and loan association to a stock form of ownership and, simultaneously,
the Company issued 8,900,000 shares of common stock, utilizing a portion of the
net proceeds to acquire all of the outstanding stock of the Bank.
The Company currently transacts banking activities through Great American
Federal. The Bank, serving customers for over 85 years, operates its
administrative office in Whitehall, Pennsylvania and 12 community offices in
Allegheny County located in southwestern Pennsylvania. Through these office
locations, the Bank offers a broad array of consumer and commercial loan,
deposit, and wealth management products and services. In addition to conducting
community banking activities, the Bank invests in various marketable securities.
New Eagle Capital, Inc., the Company's other subsidiary, operating as an
investment company in Wilmington, Delaware, also invests in various marketable
securities as well as marketable equity securities. The Company has 173
full-time equivalent employees at December 31, 2002. The Company competes with
local, regional, and national banks.
The Company's results of operations are dependent primarily on net interest
income, which is the difference between the interest income earned on
interest-earning assets, such as loans and securities, and the interest expense
incurred on interest-bearing liabilities, such as deposits and borrowed funds.
The Company also generates noninterest income, such as service fees, gains on
the sale of education loans and securities, trading account profits, earnings on
bank owned life insurance, wealth management fees, and other miscellaneous
noninterest income. The Company's operating expenses consist primarily of
compensation and employee benefits, occupancy, furniture and equipment,
marketing, and other general and administrative expenses. The Company's results
of operations are also significantly affected by general economic and
competitive conditions, particularly changes in market interest rates,
government policies, and actions of regulatory agencies.
Certain critical accounting policies affect the more significant judgments
and estimates used in the preparation of the consolidated financial
statements. The Company's most critical accounting policy relates to the
Company's allowance for loan losses, which reflects the estimated losses
resulting from the inability of the Company's borrowers to make required loan
payments. If the financial condition of the Company's borrowers were to
deteriorate, resulting in an impairment of their ability to make payments, the
Company's estimates would be updated, and additional provisions for loan losses
may be required.
Further discussion of the estimates used in determining the allowance for
loan losses appears under "Management's Discussion and Analysis of Financial
Condition and Results of Operations - Allowance for Loan Losses" on page 17 and
"Notes to the Consolidated Financial Statements - Note 1. Accounting Policies"
on pages 30 and 31 of the Registrant's 2002 Annual Report to Shareholders and is
incorporated herein by reference.
Additional discussion of the above-captioned information appears under
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" pages 13 through 18 of the Registrant's 2002 Annual Report to
Shareholders and is incorporated herein by reference.
The Company's Internet website is www.greatamericanfederal.com. The Company
makes available free of charge on or through its website its annual report on
Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and any
amendments to those reports filed or furnished pursuant to Section 13(a) or
15(d) of the Securities Exchange Act of 1934 as soon as reasonably practicable
after the Company electronically files such materials with, or furnish it to,
the Securities and Exchange Commission. This reference to the Company's website
is here for the convenience of shareholders as required by the Securities and
Exchange Commission.
REGULATION AND SUPERVISION
As a savings and loan holding company, the Company is required by federal
law to report to, and otherwise comply with the rules and regulations of, the
Office of Thrift Supervision ("OTS"). The Bank is subject to extensive
regulation, examination and supervision by the OTS, as its primary federal
regulator, and the Federal Deposit Insurance Corporation ("FDIC"), as its
deposit insurer. The Bank is a member of the Federal Home Loan Bank ("FHLB")
system and, with respect to deposit insurance, of the Savings Association
Insurance Fund ("SAIF") managed by the FDIC. The Bank must file reports with the
OTS and the FDIC concerning its activities and financial condition in addition
to obtaining regulatory approvals prior to entering into certain transactions
such as mergers with, or acquisitions of, other savings institutions. The OTS
and/or the FDIC conduct periodic examinations to test the Bank's safety and
soundness and compliance with various regulatory requirements. This regulation
and supervision establishes a comprehensive framework of activities in which an
institution can engage and is intended primarily for the protection of the
insurance fund and depositors. The regulatory structure also gives the
regulatory authorities extensive discretion in connection with their supervisory
and enforcement activities and examination policies, including policies with
respect to the classification of assets and the establishment of adequate loan
loss reserves for regulatory purposes. Any change in such regulatory
requirements and policies, whether by the OTS, the FDIC or Congress, could have
a material adverse impact on the Company, the Bank and their operations. Certain
regulatory requirements applicable to the Bank and to the Company are referred
to below or elsewhere herein. The description of statutory provisions and
regulations applicable to savings institutions and their holding companies set
forth in this Form 10-K does not purport to be a complete description of such
statutes and regulations and their effects on the Bank and the Company.
1
PART I.
GA FINANCIAL, INC.
HOLDING COMPANY REGULATION
GENERAL
The Company is a nondiversified unitary savings and loan holding company
within the meaning of federal law. Under prior law, a unitary savings and loan
holding company, such as the Company, was not generally restricted as to the
types of business activities in which it could engage, provided that the Bank
continued to be a qualified thrift lender. Further discussion appears under the
caption "Federal Savings Institution Regulation - QTL Test." The
Gramm-Leach-Bliley Act of 1999 provides that no company may acquire control of a
savings association after May 4, 1999 unless it engages only in the financial
activities permitted for financial holding companies under the law or for
multiple savings and loan holding companies as described below. Further, the
Gramm-Leach-Bliley Act specifies that existing savings and loan holding
companies may only engage in such activities. The Gramm-Leach-Bliley Act,
however, grandfathered the unrestricted authority for activities with respect to
unitary savings and loan holding companies existing prior to May 4, 1999, so
long as the holding company's savings association subsidiary continues to comply
with the QTL Test. The Company qualifies for the grandfathering. Upon any
non-supervisory acquisition by the Company of another savings institution or
savings bank that meets the qualified thrift lender test and is deemed to be a
savings institution by the OTS, the Company would become a multiple savings and
loan holding company (if the acquired institution is held as a separate
subsidiary) and would generally be limited to activities permissible for bank
holding companies under Section 4(c)(8) of the Bank Holding Company Act, subject
to the prior approval of the OTS, and certain activities authorized by OTS
regulation. However, the OTS has issued an interpretation concluding that
multiple savings and loan holding companies may also engage in activities
permitted for financial holding companies.
A savings and loan holding company is prohibited from, directly or
indirectly, acquiring more than 5% of the voting stock of another savings
institution or savings and loan holding company, without prior written approval
of the OTS and from acquiring or retaining control of a depository institution
that is not insured by the FDIC. In evaluating applications by holding companies
to acquire savings institutions, the OTS considers the financial and managerial
resources and future prospects of the Company and institution involved, the
effect of the acquisition on the risk to the deposit insurance funds, the
convenience and needs of the community and competitive factors.
The OTS may not approve any acquisition that would result in a multiple
savings and loan holding company controlling savings institutions in more than
one state, subject to two exceptions: (i) the approval of interstate supervisory
acquisitions by savings and loan holding companies and (ii) the acquisition of a
savings institution in another state if the laws of the state of the target
savings institution specifically permit such acquisitions. The states vary in
the extent to which they permit interstate savings and loan holding company
acquisitions.
Although savings and loan holding companies are not currently subject to
specific capital requirements or specific restrictions on the payment of
dividends or other capital distributions, federal regulations do prescribe such
restrictions on subsidiary savings institutions as described below. The Bank
must notify the OTS 30 days before declaring any dividend to the Company. In
addition, the financial impact of a holding company on its subsidiary
institution is a matter that is evaluated by the OTS and the agency has
authority to order cessation of activities or divestiture of subsidiaries deemed
to pose a threat to the safety and soundness of the institution.
ACQUISITION OF THE COMPANY
Under the Federal Change in Bank Control Act ("CIBCA"), a notice must be
submitted to the OTS if any person (including a company), or group acting in
concert, seeks to acquire 10% or more of the Company's outstanding voting stock,
unless the OTS has found that the acquisition will not result in a change of
control of the Company. Under the CIBCA, the OTS has 60 days from the filing of
a complete notice to act, taking into consideration certain factors, including
the financial and managerial resources of the acquirer and the anti-trust
effects of the acquisition. Any company that acquires control would then be
subject to regulation as a savings and loan holding company.
FEDERAL SAVINGS INSTITUTION REGULATION
BUSINESS ACTIVITIES
The activities of federal savings banks are governed by federal law and
regulations. These laws and regulations delineate the nature and extent of the
activities in which federal savings banks may engage. In particular, certain
lending authority for federal savings banks (e.g., commercial, non-residential
real property loans and consumer loans) is limited to a specified percentage of
the institution's capital or assets.
CAPITAL REQUIREMENTS
The OTS capital regulations require savings institutions to meet three
minimum capital standards: a 1.50% tangible capital to total assets ratio, a
4.00% tier I core (leverage) ratio (3.00% for institutions receiving the highest
examination rating) and an 8.00% total risk-based capital ratio. In addition,
the prompt corrective action standards discussed below also establish, in
effect, a minimum 2.00% tangible capital standard, a 4.00% tier I core
(leverage) ratio (3.00% for institutions receiving the highest examination
rating) and, together with the risk-based capital standard itself, a 4.00% tier
I risk-based capital standard. The OTS regulations also require that, in meeting
the tangible, tier I core (leverage) and risk-based capital standards,
institutions must generally deduct investments in and loans to subsidiaries
engaged in activities as principal that are not permissible for a national bank.
2
PART I.
GA FINANCIAL, INC.
The risk-based capital standard for savings institutions requires the
maintenance of tier I and total risk-based capital (which is defined as core
capital and supplementary capital) to risk-weighted assets of at least 4.00% and
8.00%, respectively. In determining the amount of risk-weighted assets, all
assets, including certain off-balance sheet assets, are multiplied by a
risk-weight factor of 0% to 100%, assigned by the OTS capital regulation based
on the risks believed inherent in the type of asset. Tier I risk-based capital
is defined as common stockholders' equity (including retained earnings), certain
noncumulative perpetual preferred stock and related surplus, and minority
interests in equity accounts of consolidated subsidiaries less intangibles other
than certain mortgage servicing rights and credit card relationships. The
components of supplementary capital currently include cumulative preferred
stock, long-term perpetual preferred stock, mandatory convertible securities,
subordinated debt and intermediate preferred stock, the allowance for loan
losses limited to a maximum of 1.25% of risk-weighted assets and up to 45% of
unrealized gains on available-for-sale equity securities with readily
determinable fair market values. Overall, the amount of supplementary capital
included as part of total capital cannot exceed 100% of core capital.
The OTS also has authority to establish individual minimum capital
requirements in appropriate cases upon a determination that an institution's
capital level is or may become inadequate in light of the particular
circumstances. At December 31, 2002, the Bank met each of its capital
requirements.
The following table presents the Bank's capital position at December 31,
2002:
Actual Minimum Requirement Excess
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(DOLLARS IN THOUSANDS) Amount Ratio Amount Ratio Amount
- --------------------------------------------------------------------------------------------------------------------
Tier I core (leverage) ................ $78,532 9.44% $33,276 4.00% $45,256
Tier I risk-based ..................... 78,532 17.23 18,234 4.00 60,298
Total risk-based ...................... 83,505 18.32 36,468 8.00 47,037
Tangible .............................. 78,532 9.44 12,478 1.50 66,054
- --------------------------------------------------------------------------------------------------------------------
PROMPT CORRECTIVE REGULATORY ACTION
The OTS is required to take certain supervisory actions against
undercapitalized institutions, the severity of which depends upon the
institution's degree of undercapitalization. Generally, a savings institution
that has a ratio of total capital to risk-weighted assets of less than 8.00%, a
ratio of tier I risk-based capital to risk-weighted assets of less than 4.00% or
a ratio of tier I core (leverage) capital to total assets of less than 4.00%
(3.00% or less for institutions with the highest examination rating) is
considered to be "undercapitalized."A savings institution that has a total
risk-based capital ratio of less than 6.00%, a tier I risk-based capital ratio
of less than 3.00% or a tier I core (leverage) ratio that is less than 3.00% is
considered to be "significantly undercapitalized" and a savings institution that
has a tangible capital to assets ratio equal to or less than 2.00% is deemed to
be "critically undercapitalized." Subject to a narrow exception, the OTS is
required to appoint a receiver or conservator for an institution that is
"critically undercapitalized."The regulation also provides that a capital
restoration plan must be filed with the OTS within 45 days of the date a savings
institution receives notice that it is "undercapitalized,""significantly
undercapitalized" or "critically undercapitalized." Compliance with the plan
must be guaranteed by any parent holding company. In addition, numerous
mandatory supervisory actions become immediately applicable to an
undercapitalized institution, including, but not limited to, increased
monitoring by regulators and restrictions on growth, capital distributions and
expansion. The OTS could also take any one of a number of discretionary
supervisory actions, including the issuance of a capital directive and the
replacement of senior executive officers and directors.
INSURANCE OF DEPOSIT ACCOUNTS
The Bank is a member of the SAIF. The FDIC maintains a risk-based assessment
system by which institutions are assigned to one of three categories based on
their capitalization and one of three subcategories based on examination ratings
and other supervisory information. An institution's assessment rate depends upon
the categories to which it is assigned. Assessment rates for SAIF member
institutions are determined semi-annually by the FDIC and currently range from
zero basis points for the healthiest institutions to 27 basis points of
assessable deposits for the riskiest.
In addition to the assessment for deposit insurance, institutions are
required to make payments on bonds issued in the late 1980s by the Financing
Corporation ("FICO") to recapitalize the predecessor to the SAIF. During fiscal
2002, FICO payments for SAIF members approximated 1.70 basis points of
assessable deposits.
The Bank's assessment rate for the fiscal year 2002 was 1.70 basis points
and the total assessment paid for this period (including the FICO assessment)
was $92,000. The FDIC has authority to increase insurance assessments. A
significant increase in SAIF insurance premiums would likely have an adverse
effect on the operating expenses and results of operations of the Bank.
Management cannot predict what insurance assessment rates will be in the future.
Insurance of deposits may be terminated by the FDIC upon a finding that the
institution has engaged in unsafe or unsound practices, is in an unsafe or
unsound condition to continue operations or has violated any applicable law,
regulation, rule, order or condition imposed by the FDIC or the OTS. The
management of the Bank does not know of any practice, condition or violation
that might lead to termination of deposit insurance.
3
PART I.
GA FINANCIAL, INC.
LOANS TO ONE BORROWER
Federal law provides that savings institutions are generally subject to the
limits on loans to one borrower applicable to national banks. A savings
institution may not make a loan or extend credit to a single or related group of
borrowers in excess of 15% of its unimpaired capital and surplus. An additional
amount may be lent, equal to 10% of unimpaired capital and surplus, if secured
by specified readily-marketable collateral. At December 31, 2002, the Bank's
limit on loans to one borrower was $12.5 million, and the Bank's largest
aggregate outstanding balance of loans to one borrower was $11.0 million.
QTL TEST
The Home Owners' Loan Act requires savings institutions to meet a qualified
thrift lender test. Under the test, a savings association is required to either
qualify as a "domestic building and loan association" under the Internal Revenue
Code or maintain at least 65% of its "portfolio assets" (total assets less: (i)
specified liquid assets up to 20% of total assets; (ii) intangibles, including
goodwill; and (iii) the value of property used to conduct business) in certain
"qualified thrift investments" (primarily residential mortgages and related
investments, including certain mortgage-backed securities) in at least 9 months
out of each 12 month period.
A savings institution that fails the qualified thrift lender test is subject
to certain operating restrictions and may be required to convert to a bank
charter. At December 31, 2002, the Bank maintained 86.3% of its portfolio assets
in "qualified thrift investments" and, therefore, met the qualified thrift
lender test. Recent legislation has expanded the extent to which education
loans, credit card loans and small business loans may be considered "qualified
thrift investments."
LIMITATION ON CAPITAL DISTRIBUTIONS
OTS regulations impose limitations upon all capital distributions by a
savings institution, including cash dividends, payments to repurchase its shares
and payments to shareholders of another institution in a cash-out merger. Under
the regulations, an application to and the prior approval of the OTS is required
prior to any capital distribution if the institution does not meet the criteria
for "expedited treatment" of applications under OTS regulations (i.e.,
generally, examination ratings in the two top categories), the total capital
distributions for the calendar year exceed net income for that year plus the
amount of retained net income for the preceding two years, the institution would
be undercapitalized following the distribution or the distribution would
otherwise be contrary to a statute, regulation or agreement with the OTS. If an
application is not required, the institution must still provide prior notice to
the OTS of the capital distribution if, like the Bank, it is a subsidiary of a
holding company. In the event the Bank's capital fell below its regulatory
requirements or the OTS notified it that it was in need of increased
supervision, the Bank's ability to make capital distributions could be
restricted. In addition, the OTS could prohibit a proposed capital distribution
by any institution, which would otherwise be permitted by the regulation, if the
OTS determines that such distribution would constitute an unsafe or unsound
practice.
ASSESSMENTS
Savings institutions are required to pay assessments to the OTS to fund the
agency's operations. The general assessments, paid on a semi-annual basis, are
computed upon the savings institution's total assets, including consolidated
subsidiaries, as reported in the Bank's latest quarterly thrift financial
report. The assessments paid by the Bank for the fiscal year ended December 31,
2002 totaled $171,000.
TRANSACTIONS WITH RELATED PARTIES
The Bank's authority to engage in transactions with "affiliates" (e.g., any
company that controls or is under common control with an institution, including
the Company and its non-savings institution subsidiaries) is limited by federal
law. The aggregate amount of covered transactions with any individual affiliate
is limited to 10% of the capital and surplus of the savings institution. The
aggregate amount of covered transactions with all affiliates is limited to 20%
of the savings institution's capital and surplus. Certain transactions with
affiliates are required to be secured by collateral in an amount and of a type
described in federal law. The purchase of low quality assets from affiliates is
generally prohibited. The transactions with affiliates must be on terms and
under circumstances, that are at least as favorable to the institution as those
prevailing at the time for comparable transactions with non-affiliated
companies. In addition, savings institutions are prohibited from lending to any
affiliate that is engaged in activities that are not permissible for bank
holding companies and no savings institution may purchase the securities of any
affiliate other than a subsidiary.
The recently enacted Sarbanes-Oxley Act generally prohibits loans by the
Company to its executive officers and directors. However, that act contains a
specific exception for loans by the Bank to its executive officers and directors
in compliance with federal banking laws. Under such laws, the Bank's authority
to extend credit to executive officers, directors and 10% shareholders
("insiders"), as well as entities such persons control, is limited. The law
limits both the individual and aggregate amount of loans the Bank may make to
insiders based, in part, on the Bank's capital position and requires certain
board approval procedures to be followed. Such loans are required to be made on
terms substantially the same as those offered to unaffiliated individuals and
not involve more than the normal risk of repayment. There is an exception for
loans made pursuant to a benefit or compensation program that is widely
available to all employees of the institution and does not give preference to
insiders over other employees.
4
PART I.
GA FINANCIAL, INC.
ENFORCEMENT
The OTS has primary enforcement responsibility over savings institutions and
has the authority to bring actions against the institution and all
institution-affiliated parties, including stockholders, and any attorneys,
appraisers and accountants who knowingly or recklessly participate in wrongful
action likely to have an adverse effect on an insured institution. Formal
enforcement action may range from the issuance of a capital directive or cease
and desist order to removal of officers and/or directors to institution of
receivership, conservatorship or termination of deposit insurance. Civil
penalties cover a wide range of violations and can amount to $25,000 per day, or
even $1 million per day in especially egregious cases. The FDIC has the
authority to recommend to the Director of the OTS that enforcement action to be
taken with respect to a particular savings institution. If action is not taken
by the Director, the FDIC has authority to take such action under certain
circumstances. Federal law also establishes criminal penalties for certain
violations.
STANDARDS FOR SAFETY AND SOUNDNESS
The federal banking agencies have adopted Interagency Guidelines prescribing
Standards for Safety and Soundness. The guidelines set forth the safety and
soundness standards that the federal banking agencies use to identify and
address problems at insured depository institutions before capital becomes
impaired. If the OTS determines that a savings institution fails to meet any
standard prescribed by the guidelines, the OTS may require the institution to
submit an acceptable plan to achieve compliance with the standard.
FEDERAL HOME LOAN BANK SYSTEM
The Bank is a member of the FHLB system, which consists of 12 regional
FHLBs. The FHLB provides a central credit facility primarily for member
institutions. The Bank, as a member of the FHLB, is required to acquire and hold
shares of capital stock in the FHLB in an amount at least equal to 1% of the
aggregate principal amount of its unpaid residential mortgage loans and similar
obligations at the beginning of each year, or 1/20 of its advances (borrowings)
from the FHLB, whichever is greater. The Bank was in compliance with this
requirement with an investment in FHLB stock at December 31, 2002 of $12.0
million.
The FHLBs are required to provide funds for the resolution of insolvent
thrifts in the late 1980s and to contribute funds for affordable housing
programs. These requirements could reduce the amount of dividends that the FHLBs
pay to their members and could also result in the FHLBs imposing a higher rate
of interest on advances to their members. If dividends were reduced, or interest
on future FHLB advances increased, the Bank's net interest income would likely
also be reduced. Recent legislation has changed the structure of the FHLBs
funding obligations for insolvent thrifts, revised the capital structure of the
FHLBs and implemented entirely voluntary membership for FHLBs. Management cannot
predict the effect that these changes may have with respect to its FHLB
membership.
FEDERAL RESERVE SYSTEM
The Federal Reserve Board regulations require savings institutions to
maintain noninterest-earning reserves against their transaction accounts
(primarily Negotiable Order of Withdrawal (NOW) and regular checking
accounts).The regulations generally provide that reserves be maintained against
aggregate transaction accounts as follows: a 3% reserve ratio is assessed on
net transaction accounts up to and including $42.1 million; a 10% reserve
ratio is applied above $42.1 million. The first $6.0 million of otherwise
reservable balances (subject to adjustments by the Federal Reserve Board) are
exempted from the reserve requirements. The amounts are adjusted annually. The
Bank complies with the foregoing requirements.
ITEM 2. PROPERTIES
The above-captioned information appears under "Notes to the Consolidated
Financial Statements - Note 5. Premises and Equipment" on page 38 and "Community
Offices" on the outside back cover of the Registrant's 2002 Annual Report to
Shareholders and is incorporated herein by reference.
ITEM 3. LEGAL PROCEEDINGS
The Company is subject to a number of asserted and unasserted potential
claims encountered in the normal course of business. In the opinion of
management, after consultation with legal counsel, the resolution of these
claims will not have a material adverse effect on the Company's financial
position, liquidity or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
5
PART II.
GA FINANCIAL, INC.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The above-captioned information appears under "Common Stock Price Range and
Dividends (Unaudited)" on page 49 and "Stock Information" on the inside back
cover of the Registrant's 2002 Annual Report to Shareholders and is incorporated
herein by reference.
ITEM 6. SELECTED FINANCIAL DATA
The above-captioned information appears under "Selected Consolidated
Financial Data" on page 12 of the Registrant's 2002 Annual Report to
Shareholders and is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The above-captioned information appears under "Management's Discussion and
Analysis of Financial Condition and Results of Operations" on pages 13 through
24 of the Registrant's 2002 Annual Report to Shareholders and is incorporated
herein by reference.
In the normal course of evaluating its loan portfolio, the Company obtained
certain information relating to a $1.3 million commercial real estate loan which
was performing and classified as "special mention" at December 31, 2002. Based
on this subsequent information, the loan was downgraded to "substandard" in the
first quarter of fiscal 2003 and the Company estimates that an additional charge
to the provision for loan losses will be incurred and may range from $200,000 to
$250,000. This estimate may be adjusted in light of additional information or
other factors as they become available.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The above-captioned information appears under "Management's Discussion and
Analysis of Financial Condition and Results of Operations - Management of
Interest Rate and Market Risks" and "Net Portfolio Value" on pages 18 and 19 of
the Registrant's 2002 Annual Report to Shareholders and is incorporated herein
by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The above-captioned information appears under:"Report of Independent
Auditors,""Consolidated Statements of Financial Condition,""Consolidated
Statements of Income and Comprehensive Income,""Consolidated Statements of
Shareholders' Equity," and "Consolidated Statements of Cash Flows" on pages 25
through 29; "Notes to the Consolidated Financial Statements" on pages 30 through
48; and "Quarterly Financial Data (Unaudited)" on page 49, of the Registrant's
2002 Annual Report to Shareholders and is incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
6
PART III.
GA FINANCIAL, INC.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The above-captioned information appears under "Information with Respect to
Nominees, Continuing Directors, and Certain Executive Officers" on pages 4
through 7 and under "Section 16(a) Beneficial Ownership Reporting Compliance" on
pages 7 and 8 of the Registrant's Proxy Statement for the Annual Meeting of
Shareholders to be held on April 23, 2003 and is incorporated herein by
reference.
ITEM 11. EXECUTIVE COMPENSATION
The above-captioned information appears under "Directors' Compensation" and
"Executive Compensation" on pages 8 through 10 and under "Summary Compensation
Table" and "Compensation Arrangements" on pages 12 through 15 of the
Registrant's Proxy Statement for the Annual Meeting of Shareholders to be held
on April 23, 2003 and is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The above-captioned information appears under "Security Ownership of Certain
Beneficial Owners" on pages 3 and 4 of the Registrant's Proxy Statement for the
Annual Meeting of Shareholders to be held on April 23, 2003 and is incorporated
herein by reference.
The table below represents equity compensation plans of which equity
securities of the Registrant are authorized for issuance at December 31, 2002:
A B C
---------------------------------------------------------------------------------------------
Securities to be Weighted average Securities remaining available
issued upon exercise of exercise price of for future issuance under equity
outstanding options, outstanding options, compensation plans (excluding
Plan Category warrants and rights warrants and rights securities reflected in column (A)
- ------------------------------------------------------------------------------------------------------------------------------------
Equity compensation plans
approved by shareholders .............. 530,800 $14.94 166,675
Equity compensation plans not
approved by shareholders .............. - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Total ................................. 530,800 $14.94 166,675
====================================================================================================================================
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The above-captioned information appears under "Transactions With Certain
Related Persons" on page 17 of the Registrant's Proxy Statement for the Annual
Meeting of Shareholders to be held on April 23, 2003 and is incorporated herein
by reference.
ITEM 14. CONTROLS AND PROCEDURES
The Company maintains controls and procedures designed to ensure that
information required to be disclosed in the reports that the Company files or
submits under the Securities Exchange Act of 1934 is recorded, processed,
summarized and reported within time periods specified in the rules and forms of
the Securities and Exchange Commission. Based upon their evaluation of those
controls and procedures performed within 90 days of the filing date of this
report, the chief executive officer and the chief financial officer of the
Company concluded that the Company's disclosure controls and procedures were
adequate.
The Company made no significant changes in its internal controls or in other
factors that would significantly affect these controls subsequent to the date of
the evaluation of those controls by the chief executive office and chief
financial officer.
7
PART IV.
GA FINANCIAL, INC.
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following documents are filed as a part of this report:
(1) The Consolidated Financial Statements of the Company are incorporated by
reference to the following indicated pages of the Registrant's 2002 Annual
Report to Shareholders.
PAGE
----
Report of Independent Auditors for 2002 Financial Statements .............................................. 25
Consolidated Statements of Financial Condition at December 31, 2002 and 2001 .............................. 26
Consolidated Statements of Income and Comprehensive Income for the Years Ended
December 31, 2002, 2001, and 2000 ....................................................................... 27
Consolidated Statements of Shareholders' Equity for the Years Ended
December 31, 2002, 2001, and 2000 ....................................................................... 28
Consolidated Statements of Cash Flows for the Years Ended
December 31, 2002, 2001, and 2000 ....................................................................... 29
Notes to the Consolidated Financial Statements for the Years Ended December 31, 2002, 2001, and 2000 ...... 30-48
Quarterly Financial Data (Unaudited) for the Years Ended December 31, 2002 and 2001 ....................... 49
Common Stock Price Range and Dividends (Unaudited) for the Years Ended December 31, 2002 and 2001 ......... 49
The remaining information appearing in the Registrant's 2002 Annual Report
to Shareholders is not deemed to be filed as part of this report, except as
expressly provided herein.
(2) All schedules are omitted because they are not required or applicable, or
the required information is shown in the Consolidated Financial Statements
or the notes thereto.
(3) Exhibits
(a) The following exhibits are filed as part of this report.
3.1 Certificate of Incorporation of GA Financial, Inc.(1)
3.2 Amended Bylaws of GA Financial, Inc.(2)
4.0 Stock Certificate of GA Financial, Inc.(1)
10.1 Amended and Restated GA Financial, Inc. 1996 Stock-Based Incentive Plan(3)
10.2 Employment Agreement between Great American Federal and John M. Kish(4)
10.3 Employment Agreement between GA Financial, Inc. and John M. Kish(4)
10.4 Employment Agreement between Great American Federal and Todd Cover(5)
10.5 Change in Control Agreement between Great American Federal and James V. Dionise(6)
11.0 Statement of computation of earnings per share is incorporated herein by reference to "Note 16. Earnings Per
Share" on page 45 of the Registrant's 2002 Annual Report to Shareholders
13.0 Portions of the Registrant's 2002 Annual Report to Shareholders (filed herewith)
21.0 Subsidiary information is incorporated herein by reference to "Note 2. Subsidiary/Segment Reporting" on pages 32
and 33 of the Registrant's 2002 Annual Report to Shareholders
23.0 Consent of KPMG LLP (filed herewith)
99.1 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002 (filed herewith)
99.2 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002 (filed herewith)
(b) Reports on Form 8-K:
None.
1 Incorporated by reference into this document from the Exhibits to Form S-1,
Registration Statement, filed on December 21, 1995, as amended, Registration
No. 33-80715.
2 Incorporated by reference into this document from the Company's Form 10-Q
filed on November 15, 1999.
3 Incorporated by reference into this document from the Company's Proxy
Statement for the 1999 Annual Meeting of Shareholders filed on
March 26, 1999.
4 Incorporated by reference into this document from the Company's Form 10-Q
filed on May 13, 1998.
5 Incorporated by reference into this document from the Company's Form 10-Q
filed on November 13, 2000.
6 Incorporated by reference into this document from the Company's Form 10-Q
filed on November 13, 2001.
8
SIGNATURES
GA FINANCIAL, INC.
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
GA FINANCIAL, INC.
By: /s/ John M. Kish
----------------------------
JOHN M. KISH
CHAIRMAN OF THE BOARD AND
CHIEF EXECUTIVE OFFICER
Date: March 31, 2003
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ John M. Kish Chairman of the Board and March 31, 2003
- ------------------------------ Chief Executive Officer
John M. Kish (principal executive officer)
/s/ James V. Dionise Chief Financial Officer March 31, 2003
- ------------------------------ and Secretary
James V. Dionise (principal accounting and
financial officer)
/s/ Todd L. Cover Senior Vice President March 31, 2003
- ------------------------------ and Treasurer
Todd L. Cover
/s/ Thomas E. Bugel Director March 31, 2003
- ------------------------------
Thomas E. Bugel
/s/ Darrell J. Hess Director March 31, 2003
- ------------------------------
Darrell J. Hess
/s/ Thomas M. Stanton Director March 31, 2003
- ------------------------------
Thomas M. Stanton
/s/ Robert J. Ventura Director March 31, 2003
- ------------------------------
Robert J. Ventura
/s/ David R. Wasik Director March 31, 2003
- ------------------------------
David R. Wasik
9
CERTIFICATION
GA FINANCIAL, INC.
I, John M. Kish, certify that:
1. I have reviewed this Annual Report on Form 10-K of GA Financial, Inc.;
2. Based on my knowledge, this Annual 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 Annual Report;
3. Based on my knowledge, the financial statements, and other financial
information included in this Annual 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 Annual 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-14 and 15d-14) for the registrant and
we have:
a) designed such disclosure controls and procedures 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 Annual
Report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date
of this Annual Report (the "Evaluation Date"); and
c) presented in this Annual Report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons
performing the equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officers and I have indicated in this
Annual Report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and
material weaknesses.
Date: March 31, 2003
/s/ John M. Kish
- --------------------
JOHN M. KISH
CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER
10
CERTIFICATION
GA FINANCIAL, INC.
I, James V. Dionise, certify that:
1. I have reviewed this Annual Report on Form 10-K of GA Financial, Inc.;
2. Based on my knowledge, this Annual 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 Annual Report;
3. Based on my knowledge, the financial statements, and other financial
information included in this Annual 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 Annual 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-14 and 15d-14) for the registrant and
we have:
a) designed such disclosure controls and procedures 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 Annual
Report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date
of this Annual Report (the "Evaluation Date"); and
c) presented in this Annual Report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons
performing the equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officers and I have indicated in this
Annual Report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and
material weaknesses.
Date: March 31, 2003
/s/ James V. Dionise
- ----------------------
JAMES V. DIONISE
CHIEF FINANCIAL OFFICER AND SECRETARY
11