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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, 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 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. [ ]
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 $125,885,608 based upon the last market price as listed
on The American Stock Exchange for June 30, 2003, the last business day of the
registrant's most recently completed second fiscal quarter.
The number of shares of Common Stock outstanding at February 29, 2004 is:
5,095,592.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Annual Report to Shareholders for the year ended
December 31, 2003, are incorporated by reference into Part I and II of this Form
10-K.
GA FINANCIAL, INC.
FORM 10-K
DECEMBER 31, 2003
CONTENTS
PAGE
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PART I.
ITEM 1. BUSINESS .................................................................................... 1
ITEM 2. PROPERTIES .................................................................................. 6
ITEM 3. LEGAL PROCEEDINGS ........................................................................... 6
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS ......................................... 6
PART II.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES ....................................................... 7
ITEM 6. SELECTED FINANCIAL DATA ..................................................................... 7
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ....... 7
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK .................................. 7
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA ................................................. 7
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE ........ 7
ITEM 9A. CONTROLS AND PROCEDURES ..................................................................... 7
PART III.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT .......................................... 8
ITEM 11. EXECUTIVE COMPENSATION ...................................................................... 10
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
AND RELATED STOCKHOLDER MATTERS ............................................................. 13
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS .............................................. 14
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES ...................................................... 14
PART IV.
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K ............................ 15
SIGNATURES ................................................................................................ 17
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, which provides wealth management services, Steel City
Investments, Inc., established in December 2002 to hold and manage investment
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.
On December 12, 2003, the Company announced the execution of a
definitive agreement whereby the Company would merge into First Commonwealth
Financial Corporation ("First Commonwealth") and First Commonwealth Bank,
respectively. Under the terms of the agreement, the shareholders of the Company
can elect to receive $35.00 in cash or an equivalent value of First Commonwealth
common stock for each share owned, subject to proration as provided in the
definitive agreement to ensure that 40% of the aggregate merger consideration
will be paid in cash and 60% in First Commonwealth common stock. The transaction
was unanimously approved by the Board of Directors of both organizations. The
transaction is subject to all required regulatory approvals and the approvals of
the Company's shareholders, and is expected to be completed by mid-year 2004.
Further discussion of the merger appears under "Management's Discussion and
Analysis of Financial Condition and Results of Operations - Other" on pages 14
through 15 and "Notes to the Consolidated Financial Statements - Note 19. Merger
Related Activity" on page 42 of the Registrant's 2003 Annual Report to
Shareholders and is incorporated herein by reference.
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 had 179
full-time equivalent employees at December 31, 2003. 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 securities and education loans, 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 7 and
"Notes to the Consolidated Financial Statements - Note 1. Accounting Policies"
on pages 22 through 23 of the Registrant's 2003 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 3 through 16 of the Registrant's 2003 Annual Report to
Shareholders and is incorporated herein by reference.
AVAILABLE INFORMATION
The Company makes available, free of charge, copies of its annual
reports 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 (the "Exchange Act") as
soon as reasonably practicable after the Company electronically files such
material with, or furnishes it to, the Securities and Exchange Commission
("SEC").This information is available free of charge via the Company's Internet
website at www.greatamericanfederal.com. Information on the Company's Internet
website is not incorporated into this Form 10-K or the Company's other
securities filings and is not a part of them.
1
PART I.
GA FINANCIAL, INC.
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.
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 may 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 institution 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 institution 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.
2
PART I.
GA FINANCIAL, INC.
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 "control" of a savings and loan holding company. Under
certain circumstances, a change of control may occur, and prior notice is
required, upon the acquisition of 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.
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, recourse obligations,
residual interests and direct credit substitutes, 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, 2003, the Bank met each of its capital
requirements.
The following table presents the Bank's capital position at December 31,
2003:
Actual Minimum Requirement Excess
DECEMBER 31, 2003 ----------------- ------------------- -------
(DOLLARS IN THOUSANDS) Amount Ratio Amount Ratio Amount
- ---------------------- ------ ----- ------ ----- -------
Tier I core (leverage) $ 79,258 9.06% $ 34,994 4.00% $44,264
Tier I risk-based 79,258 15.77 20,106 4.00 59,152
Total risk-based 84,820 16.87 40,212 8.00 44,608
Tangible 79,258 9.06 13,123 1.50 66,135
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 under capitalization. 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 total
risk-based capital of less than 6.00%, a tier I risk-based capital ratio of less
3
PART I.
GA FINANCIAL, INC.
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 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 SAIF. During fiscal
2003, FICO payments for SAIF members approximated 1.60 basis points of
assessable deposits.
The Bank's assessment rate for fiscal year 2003 was 1.60 basis points
and the total assessment paid for this period (including the FICO assessment)
was $85,000. 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.
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, 2003, the Bank's
limit on loans to one borrower was $12.7 million, and the Bank's largest
aggregate outstanding balance of loans to one borrower was $9.6 million.
QTL TEST
Federal law 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, 2003, the Bank maintained 90.3% 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 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 and Community Reinvestment Act 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,
4
PART I.
GA FINANCIAL, INC.
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,
2003 totaled $169,000.
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 Sarbanes-Oxley Act of 2002 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.
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 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 5% 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, 2003 of $14.8
million.
5
PART I.
GA FINANCIAL, INC.
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.
FEDERAL RESERVE SYSTEM
The Federal Reserve Board ("FRB") 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 $45.4 million; a 10% reserve ratio is
applied above $45.4 million. The first $6.6 million of otherwise reservable
balances (subject to adjustments by the FRB) 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 32
and "Community Offices" on the outside back cover of the Registrant's 2003
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.
6
PART II.
GA FINANCIAL, INC.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES
The above-captioned information appears under "Common Stock Price Range
and Dividends (Unaudited)" on page 43 and "Stock Information" on the inside back
cover of the Registrant's 2003 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 2 of the Registrant's 2003 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 3
through 16 of the Registrant's 2003 Annual Report to Shareholders and is
incorporated herein by reference.
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 8 and 9 of
the Registrant's 2003 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 17
through 21; "Notes to the Consolidated Financial Statements" on pages 22 through
42; and "Quarterly Financial Data (Unaudited)" on page 43 of the Registrant's
2003 Annual Report to Shareholders and is incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
The Company's management, including the Company's principal executive
officer and principal accounting and financial officer, have evaluated the
effectiveness of the Company's "disclosure controls and procedures," as such
term is defined in Rule 13a-15(e) promulgated under the Exchange Act, as
amended. Based upon their evaluation, the principal executive officer and
principal accounting and financial officer concluded that, as of the end of the
period covered by this report, the Company's disclosure controls and procedures
were effective for the purpose of ensuring that the information required to be
disclosed in the reports that the Company files or submits under the Exchange
Act with the SEC (1) is recorded, processed, summarized and reported within the
time periods specified in the SEC's rules and forms, and (2) is accumulated and
communicated to the Company's management, including its principal executive and
principal accounting and financial officers, as appropriate to allow timely
decisions regarding required disclosure.
7
PART III.
GA FINANCIAL, INC.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth, at February 29, 2004, the names of the
Directors and the Named Executive Officers, as defined below, as well as their
ages, a brief description of their recent business experience, including present
occupations and employment, certain directorships held by each, the year in
which each became a Director of the Company and Great American Federal, and the
year in which their term as Director of the Company and Great American Federal
expires. This table also sets forth the amount of common stock and the percent
thereof beneficially owned by each Director and Named Executive Officer and all
Directors and Named Executive Officers as a group at February 29, 2004.
Shares of Ownership
Name and Principal Expiration Common as a
Occupation at Present Director of Term as Stock Beneficially Percent
and for the Past Five Years Age Since(1) Director Owned(2) of Class
--------------------------- --- ------ ---------- ------------------ --------
DIRECTORS:
Thomas M. Stanton 61 1992 2004 50,669(3) *
Since February 2002, Mr. Stanton has been a
sales manager for Arthurs, Lestrange and
Company, Inc., an investment firm. Prior to
February 2002, Mr. Stanton was an
investment supervisor for Mass Mutual, an
insurance and financial services company.
Robert J.Ventura 54 1998 2004 39,000(4) *
Principal of Ventura Group, LLC, an
investment banking and corporate
development advisory services company.
From October 1998 to April 1999,
Mr.Ventura was an independent
acquisitions and divestitures consultant.
Prior to October 1998, Mr.Ventura was the
director of acquisitions and divestitures for
Rockwell International Corporation.
Thomas E. Bugel 59 1988 2005 72,578(3) 1.42%
Mr. Bugel is retired and the former
co-owner and Vice President of East Liberty
Electro-Plating Company.
David R.Wasik 62 1990 2005 64,124(3) 1.26%
Mr.Wasik is a partner and supervisor of
Savolskis-Wasik-Glenn Funeral Home, Inc.
Darrell J. Hess 71 1991 2006 63,000(5) 1.24%
Mr. Hess is retired and the former President
of D.J. Hess Advertising, Inc., a promotional
product company.
John M. Kish 58 1983 2006 149,153(6) 2.93%
Mr. Kish is Chairman of the Boards of
Directors and Chief Executive Officer of the
Company and Great American Federal.
8
PART III.
GA FINANCIAL, INC.
Shares of Ownership
Name and Principal Expiration Common as a
Occupation at Present Director of Term as Stock Beneficially Percent
and for the Past Five Years Age Since(1) Director Owned(2) of Class
--------------------------- --- ------ ---------- ------------------ --------
NAMED EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS:
Todd L. Cover 43 -- -- 49,274(7) *
Mr. Cover has been Senior Vice President
and Treasurer of the Company since April
2002. He was previously Assistant Treasurer
from May 2001 to April 2002 and Assistant
Secretary from April 2000 to May 2001 of
the Company. He has been Director,
President and Chief Operating Officer of
Great American Federal since May 2001.
From 1998 to May 2001, he was Executive
Vice President and Chief Operating Officer
of Great American Federal. From 1996 to
1998, he was President and Chief Executive
Officer of West Milton State Bank.
James V. Dionise 42 -- -- 27,010(8,9) *
Mr. Dionise has been Chief Financial
Officer of the Company since June 2001,
Secretary since January 2002, and previously
Treasurer from June 2001 to April 2002. He
has been Executive Vice President of Great
American Federal since May 2003, and Chief
Financial Officer/Treasurer of Great
American Federal since June 2001 and
Secretary since January 2002. From April
1999 to June 2001, he was First Vice
President and Senior Acquisition Manager of
MBNA America Bank. From May 1998 to April
1999, he was Vice President and Manager of
Support Services of PNC National Bank. Prior
to that, he served as Vice President and
Chief Financial Officer of PNC Private Bank.
Stock ownership of all Directors and Named Executive -- -- -- 514,808(10) 10.10%
Officers of the Company and Great American
Federal as a group (8 persons).
- -----------
* Does not exceed 1% of the Company's voting securities.
1 Includes years of service as a Director of the Company and Great American
Federal.
2 Each person effectively exercises sole (or shares with spouse or other
immediate family member) voting and dispositive power as to shares
reported.
3 Includes 32,000 shares subject to options granted under the Amended and
Restated GA Financial, Inc. 1996 Stock Based Incentive Plan (the "Incentive
Plan"), which are currently exercisable or will become exercisable within
sixty (60) days.
4 Includes 33,000 shares subject to options granted under the Incentive Plan,
which are currently exercisable or will become exercisable within sixty
(60) days. Does not include the remaining 4,000 shares subject to options
granted under the Incentive Plan, which are not currently exercisable.
5 Includes 30,000 shares subject to options granted under the Incentive Plan,
which are currently exercisable or will become exercisable within sixty
(60) days.
6 Includes 52,500 shares subject to options granted to Mr. Kish under the
Incentive Plan, which are currently exercisable or will become exercisable
within sixty (60) days. Does not include the remaining 5,000 shares subject
to options granted under the Incentive Plan, which are not currently
exercisable.
7 Includes 14,000 shares subject to options granted under the Incentive Plan,
which are currently exercisable or will become exercisable within sixty
(60) days. Does not include the remaining 5,000 shares subject to options
granted under the Incentive Plan which are not currently exercisable.
8 Does not include the remaining 10,000 shares subject to options granted
under the Incentive Plan, which are not currently exercisable.
9 Includes 3,000 shares awarded pursuant to the Incentive Plan, which will
vest on October 16, 2004 and 2005, and as to which the holder has voting
power but not investment power.
10 Includes a total of 3,000 shares awarded under the Incentive Plan as to
which voting may be directed and a total of 225,500 shares which may be
acquired through the exercise of stock options under the Incentive Plan,
which are currently exercisable or will become exercisable within sixty
(60) days.
9
PART III.
GA FINANCIAL, INC.
AUDIT COMMITTEE
The Board of Directors has a separately-designated standing Audit
Committee established in accordance with Section 3(a)(58)(A) of the Exchange
Act, as amended. The Audit Committee, consisting of Robert J. Ventura
(Chairman),Thomas M. Stanton and David R. Wasik, meets periodically with
independent auditors and management to review accounting, auditing, internal
control structure and financial reporting matters. This Committee met six times
during the year ended December 31, 2003. Each member of the Audit Committee is
independent in accordance with the listing standards of the American Stock
Exchange. The Board of Directors has determined that Robert J. Ventura is an
Audit Committee financial expert under the rules of the SEC. The Audit Committee
acts under a written charter adopted by the Board of Directors.
The Audit Committee of the Company has not established any policies or
procedures regarding the rendering of audit or non-audit services by the
Company's independent auditors. The Audit Committee will consider on a
case-by-case basis and, if appropriate, approve specific engagements of such
services.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act, as amended, requires the Company's
executive officers and directors, and persons who own more than 10% of any
registered class of the Company's equity securities, to file reports of
beneficial securities ownership and changes in beneficial securities ownership
with the SEC. Executive officers, directors and greater than 10% stockholders
are required by regulation to furnish the Company with copies of all Section
16(a) reports they file.
Based solely on its review of the copies of the reports it has received
and written representations provided to the Company from the individuals
required to file the reports, the Company believes that during the year ended
2003, each of its executive officers and directors has complied with applicable
reporting requirements for transactions in Company common stock, except for one
late Form 4 for Mr. Cover to report the forfeiture of 2,000 stock awards and
4,000 stock options due to an administrative error.
CODE OF ETHICS AND BUSINESS CONDUCT
The Company has adopted a Code of Ethics (the "Code") that is designed
to ensure that the Company's directors, executive officers and employees meet
the highest standards of ethical conduct. The Code requires that the Company's
directors, executive officers and employees avoid conflicts of interest, comply
with all laws and other legal requirements, conduct business in an honest and
ethical manner and otherwise act with integrity and in the Company's best
interest. Under the terms of the Code, directors, executive officers and
employees are required to report any possible violation of the Code.
As a mechanism to encourage compliance with the Code, the Company has
established procedures to document, retain and treat complaints received
regarding accounting, internal accounting controls or auditing matters. These
procedures ensure that individuals may submit concerns regarding questionable
accounting or auditing matters in a confidential and an anonymous manner. The
Code also prohibits the Company from retaliating against any director, executive
officer or employee who reports actual or apparent violations of the Code.
A copy of the Code will be furnished without charge to any person upon
written request to Mr. Thomas F. Trygar, Assistant Vice President - Manager of
Internal Audit, GA Financial, Inc, 4750 Clairton Boulevard, Pittsburgh,
Pennsylvania 15236.
ITEM 11. EXECUTIVE COMPENSATION
DIRECTORS' COMPENSATION
DIRECTORS' FEES
Non-employee members of the Board of Directors of the Company currently
receive a quarterly retainer fee of $250, a fee of $400 for each special Board
meeting attended and a fee of $250 for each committee meeting attended, except
that Audit Committee members do not receive meeting fees but instead receive a
quarterly retainer. The quarterly retainer for the Chairman of the Audit
Committee is $3,000 and the quarterly retainer for other members of the
Committee is $1,500. However, Directors of the Company do not receive Company
Board meeting fees on dates when a Great American Federal Board of Directors
meeting is held.
Non-employee Directors of Great American Federal are currently paid a
quarterly retainer of $4,200. Non-employee Directors of Great American Federal
are also currently paid a fee of $250 for committee meetings attended and a fee
of $400 for each special meeting of the Board of Directors attended. Great
American Federal also maintains one Director Emeritus position that is currently
filled by Mr. Joseph E. Bugel,
10
PART III.
GA FINANCIAL, INC.
the former Chairman of the Board of Directors who served with Great American
Federal from 1939 to 1988 and is the father of Director Thomas E. Bugel. Mr.
Joseph E. Bugel is paid an annual retainer of $6,000 and a fee of $400 for each
Board of Directors meeting that he attends.
INCENTIVE PLAN
Under the Incentive Plan, Director Robert J. Ventura received
non-statutory stock options to purchase 5,000 shares of Company common stock at
an exercise price of $25.30, the fair market value of the common stock on May
22, 2003, the date the options were granted. The options vest equally over a
five-year period commencing on April 24, 2004.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table presents, for the years ended December 31, 2003,
2002 and 2001, the cash compensation paid by the Company and Great American
Federal, as well as certain other compensation paid or accrued for those years,
to the Chief Executive Officer of the Company and Great American Federal and the
highest paid Named Executive Officers of the Company and Great American Federal,
who earned and/or received salary and bonus in excess of $100,000 in fiscal year
2003.
Annual Compensation Long-Term Compensation
----------------------------- -------------------------------------------------
Number of
Securities
Name and Principal Restricted Stock Underlying All Other
Positions Year Salary Bonus(1) Awards Options/SARs Compensation(2)
--------- ---- ------ ------ ------ ------------ -------------
John M. Kish 2003 $215,000 $40,000 $ -- -- $58,529
Chairman of the Board and Chief 2002 215,000 40,000 -- 15,000 58,739
Executive Officer of the 2001 215,000 -- -- -- 49,941
Company and Great American
Federal
Todd L. Cover 2003 $154,000 $32,500 $ -- -- $43,740
Senior Vice President and Treasurer 2002 154,000 30,000 -- 15,000 41,982
of the Company and Director, 2001 148,077 -- -- -- 38,060
President and Chief Operating
Officer of Great American Federal
James V. Dionise 2003 $145,000 $27,500 $ -- -- $42,478
Chief Financial Officer and Secretary 2002 145,000 25,000 -- 12,000 35,973
of the Company and Executive Vice 2001 75,288 24,000 125,250(3) 15,000 1,171
President, Chief Financial Officer
Treasurer, and Secretary of Great
American Federal
----------------
1 "Bonus" consists of Board of Director approved discretionary cash bonuses.
2 "All Other Compensation" includes a taxable fringe benefit for bank owned
life insurance, employer contributions to Great American Federal's 401(k)
plan, and grants of common stock pursuant to the Great American Federal
Savings and Loan Association Employee Stock Ownership Plan and Trust
("ESOP"). During fiscal 2003, Messrs. Kish, Cover and Dionise received
contributions of $1,013, $263 and $248, respectively, under the bank owned
life insurance. Contributions to Messrs. Kish, Cover and Dionise during
fiscal 2003 pursuant to the 401(k) plan were $6,046, $3,850 and $4,409,
respectively. For 2003, Messrs. Kish, Cover and Dionise were allocated
1,482, 1,141 and 1,089 shares of common stock, respectively, pursuant to
the ESOP. Dollar amounts reflect the market value of $34.73 per share at
December 31, 2003.
3 Includes 7,500 shares of restricted stock granted to Mr. Dionise under the
Incentive Plan. The dollar amount set forth in the table represents the
market value on the date of grant of the shares. The restricted stock
awards began vesting in five equal annual installments commencing on
October 16, 2001. When shares become vested and are distributed, Mr.
Dionise will also receive an amount equal to accumulated cash and stock
dividends (if any) with respect thereto plus earnings thereon. All awards
vest immediately upon termination of employment due to death, disability or
a change in control. At December 31, 2003, the market value of the stock
awards was $260,475 based upon a market value of $34.73 per share.
11
PART III.
GA FINANCIAL, INC.
COMPENSATION ARRANGEMENTS
EMPLOYMENT AGREEMENTS
Great American Federal has entered into employment agreements with
Messrs. Kish and Cover. The Company has also entered into an employment
agreement with Mr. Kish. The employment agreements are intended to ensure that
Great American Federal and the Company maintain a stable and competent
management base. The continued success of Great American Federal and the Company
depends to a significant degree on the skills and competence of these officers.
Mr. Kish's employment agreements provide for three-year terms and Mr.
Cover's employment agreement provides for a two-year term. Great American
Federal's and the Company's employment agreements are renewable on an annual
basis. The employment agreements provide that the executive's base salary will
be reviewed annually. The base salaries which currently are in effect for such
employment agreements for Messrs. Kish and Cover are $215,000 and $154,000,
respectively. In addition to the base salary, the employment agreements provide
for, among other things, participation in various employee benefit plans, as
well as furnishing fringe benefits available to similarly-situated executive
personnel.
The employment agreements provide for termination by Great American
Federal or the Company for cause, as defined in the employment agreements, at
any time. If Great American Federal or the Company chooses to terminate the
executive's employment for reasons other than for cause, or if the executive
resigns from Great American Federal or the Company after specified circumstances
that would constitute constructive termination, the executive or, if the
executive dies, his beneficiary, would be entitled to receive an amount equal to
the compensation and benefits that would have been paid or provided to the
executive during the remaining term of the employment agreement. Great American
Federal and/or the Company would also continue to pay for the executive's life,
medical, dental, vision and disability coverage for the remaining term of the
employment agreement. The employment agreements restrict each executive's right
to compete against Great American Federal or, in the case of Mr. Kish, the
Company, for a period of one year from the date of termination of the agreement
if his employment is terminated without cause, except if the termination follows
a change in control.
Under the employment agreements, if involuntary, or in certain
circumstances, voluntary termination follows a change in control of Great
American Federal or the Company, the executive or, if the executive dies, his
beneficiary, would be entitled to a severance payment equal to the greater of:
(1) the payments due for the remaining term of the agreement; or (2) three times
(in the case of Mr. Kish) or two times (in the case of Mr. Cover) the average of
the five preceding taxable years' annual compensation. Great American Federal
and/or the Company would also continue the executive's life, medical, dental,
vision and disability coverage for Mr. Kish and Mr. Cover for thirty-six months,
respectively. Even though both Great American Federal and Company employment
agreements provide for a severance payment to Mr. Kish if his employment
terminates in connection with a change in control, Mr. Kish would not receive
duplicative payments or benefits under the agreements.
Payments to the executives under Great American Federal's employment
agreements are guaranteed by the Company if payments or benefits are not paid by
Great American Federal. Payments to Mr. Kish under the Company employment
agreement would be made by the Company. All reasonable costs and legal fees paid
or incurred by the executive under any dispute or question of interpretation
relating to the employment agreements shall be paid by Great American Federal or
the Company, as appropriate, if the executive is successful on the merits in a
legal judgment, arbitration or settlement. The employment agreements also
provide that Great American Federal and/or the Company shall indemnify the
executive to the fullest extent legally allowable.
CHANGE IN CONTROL AGREEMENT
Great American Federal currently maintains a two-year change in control
agreement with Mr. Dionise. The agreement may be extended by Great American
Federal for an additional year on each anniversary date of the agreement. The
agreement provides that if involuntary termination or, under certain
circumstances, voluntary termination follows a change in control of the Company
or Great American Federal, Mr. Dionise would be entitled to receive a severance
payment equal to two times his average annual compensation for the five most
recent taxable years preceding termination. Great American Federal would also
continue to provide for life, medical, dental, vision and disability coverage
for thirty-six months following termination. Payments to Mr. Dionise under the
agreement are paid by the Company to the extent that payments (or other
benefits) are not paid by Great American Federal.
OPTION VALUE AT FISCAL YEAR END
The following table provides certain information with respect to the
number of shares of common stock represented by outstanding options held by the
Named Executive Officers at December 31, 2003.Also reported are the values for
"in-the-money" options, which represent the positive spread between the exercise
price of any such existing stock options and the year-end price of the common
stock.
12
PART III.
GA FINANCIAL, INC.
Number of Securities
Underlying Unexercised Value of Unexercised In-the-Money
Options at Fiscal Year-End Options at Fiscal Year-End(1,2)
-------------------------------------- ----------------------------------------------
Shares
Acquired Value
Name on Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
---- ----------- -------- ----------- ------------- ----------- -------------
John M. Kish 17,500 $248,625 67,500(3) 5,000(4) $1,421,150 $ 78,650
Todd L. Cover -- -- 30,000(5) 5,000(4) 577,060 78,650
James V. Dionise -- -- 17,000(6) 10,000(7) 288,110 171,100
1 The price of the common stock on December 31, 2003 was $34.73.
2 Based on the market value of the underlying common stock at fiscal
year-end, minus the exercise price.
3 57,500 options have an exercise price of $12.75 and 10,000 options have an
exercise price of $19.00.
4 5,000 options have an exercise price of $19.00.
5 16,000 options have an exercise price of $11.68, 4,000 options have an
exercise price of $21.99 and 10,000 options have an exercise price of
$19.00.
6 9,000 options have an exercise price of $16.70 and 8,000 options have an
exercise price of $19.00.
7 6,000 options have an exercise price of $16.70 and 4,000 options have an
exercise price of $19.00.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
The table below represents equity compensation plans of which equity
securities of the Company are authorized for issuance at December 31, 2003:
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 .......... 516,530 $16.66 95,915
Equity compensation plans not
approved by shareholders .......... -- -- --
------- ------ -------
Total .......................... 516,530 $16.66 95,915
------- ------ -------
13
PART III.
GA FINANCIAL, INC.
The following table sets forth certain information as to the entity
believed by management to be beneficial owner of more than 5% of the outstanding
shares of common stock on February 29, 2004, as disclosed in certain reports
regarding such ownership filed with the Company and with the SEC, in accordance
with Section 13(d) or 13(g) of the Exchange Act, as amended, by such entity.
Other than the entity listed below, the Company is not aware of any person or
group, as such term is defined in the Exchange Act, that owns more than 5% of
the common stock as of February 29, 2004.
Title of Name and Address of Number of Percent of
Class Beneficial Owner Number Shares Class
-------- ----------------------- --------- ----------
Common Stock Great American Federal Savings and 540,029(1) 10.60%
Loan Association Employee Stock
Ownership Plan and Trust
4750 Clairton Boulevard
Pittsburgh, Pennsylvania 15236
1 Under the terms of the ESOP, the ESOP trustee will vote all allocated
shares held in the ESOP in accordance with the instructions of the
participants. At February 29, 2004, 335,075 shares had been allocated under
the ESOP and 204,954 shares remained unallocated. The ESOP trustee, subject
to its fiduciary responsibilities, will vote all unallocated shares and all
allocated shares for which no timely voting instructions are received, in
the same proportion as shares for which the trustee has received timely
voting instructions from participants.
Information regarding security ownership of management is located under
"PART III - Item 10. Directors and Executive Officers of the Registrant" on this
Form 10-K.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Federal regulations require that all loans or extensions of credit to
executive officers and directors must generally be made on substantially the
same terms, including interest rates and collateral, as those prevailing at the
time for comparable transactions with other persons and must not involve more
than the normal risk of repayment or present other unfavorable features.
Notwithstanding this rule, federal regulations permit Great American Federal to
make loans to Named Executive Officers and Directors at reduced interest rates
if the loan is made under a benefit program generally available to all other
employees and does not give preference to any Named Executive Officer or
Director over any other employee. Great American Federal's policy is to offer
employees, who satisfy certain criteria and the general underwriting standards
of Great American Federal, residential mortgage loans with interest rates equal
to Great American Federal's cost of funds rounded to the next quarter point (but
in no event less than 6.25%).
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The following table sets forth the fees billed to the Company for the
fiscal years ended December 31, 2003 and 2002 by KPMG LLP:
Fees 2003 2002
---- ---- ----
Audit................. $ 152,728 $ 92,500
Audited related(1).... 47,800 24,889
Tax(2)................ 26,000 33,625
All other............. -- --
1 Consists of merger related and employee benefit plan services.
2 Consists of tax filing and tax related compliance and other advisory
services.
14
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 2003 Annual
Report to Shareholders.
PAGE
----
Report of Independent Auditors for 2003 Financial Statements ........................... 17
Consolidated Statements of Financial Condition at December 31, 2003 and 2002 ........... 18
Consolidated Statements of Income and Comprehensive Income for the Years Ended
December 31, 2003, 2002, and 2001 ................................................. 19
Consolidated Statements of Shareholders' Equity for the Years Ended
December 31, 2003, 2002, and 2001 ................................................. 20
Consolidated Statements of Cash Flows for the Years Ended
December 31, 2003, 2002, and 2001 ................................................. 21
Notes to the Consolidated Financial Statements for the Years Ended
December 31, 2003, 2002, and 2001 .................................................. 22-42
Quarterly Financial Data (Unaudited) for the Years Ended December 31, 2003
and 2002 ........................................................................... 43
Common Stock Price Range and Dividends (Unaudited) for the Years
Ended December 31, 2003 and 2002 ................................................... 43
The remaining information appearing in the Registrant's 2003 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.
2.1 Agreement of Plan of Merger among First Commonwealth
Financial Corporation, First Commonwealth Bank, GA
Financial, Inc. and Great American Federal Savings and Loan
Association, dated December 11, 2003.(7)
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 15. Earnings Per
Share" on pages 38 and 39 of the Registrant's 2003 Annual
Report to Shareholders
13.0 Portions of the Registrant's 2003 Annual Report to
Shareholders (filed herewith)
21.0 Subsidiary information is incorporated herein by reference
to "Note 2. Subsidiary/Segment Reporting" on pages 24 and 25
of the Registrant's 2003 Annual Report to Shareholders
23.0 Consent of KPMG LLP (filed herewith)
31.1 Rule 13a - 14(a)/15d-14(a) Chief Executive Officer
Certification (filed herewith)
31.2 Rule 13a - 14(a)/15d-14(a) Chief Financial Officer
Certification (filed herewith)
32.1 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(filed herewith)
32.2 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(filed herewith)
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.
7 Incorporated by reference into this document from the Current Report on
Form 8-K filed by First Commonwealth Financial Corporation (File No.
0-11242) on December 16, 2003, as Exhibit 2.1.
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PART IV.
GA FINANCIAL, INC.
(b) Reports on Form 8-K:
During the fourth quarter of 2003 the Company filed or furnished the following
Current Reports on Form 8-K.
(1) A report filed November 3, 2003 which included, under Items 7 and 12, the
Company's press release announcing financial results for the quarter ended
December 31, 2003.
(2) A report filed December 19, 2003 which included, under Items 5 and 7,
information regarding the merger of the Company with First Commonwealth
Financial Corporation.
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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 10, 2004
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 10, 2004
- ----------------------- Chief Executive Officer
John M. Kish (principal executive officer)
/s/ James V. Dionise Chief Financial Officer March 10, 2004
- ----------------------- and Secretary
James V. Dionise (principal accounting and
financial officer)
/s/ Todd L. Cover Senior Vice President March 10, 2004
- ----------------------- and Treasurer
Todd L. Cover
/s/ Thomas E. Bugel Director March 10, 2004
- -----------------------
Thomas E. Bugel
/s/ Darrell J. Hess Director March 10, 2004
- -----------------------
Darrell J. Hess
/s/ Thomas M. Stanton Director March 10, 2004
- -----------------------
Thomas M. Stanton
/s/ Robert J. Ventura Director March 10, 2004
- -----------------------
Robert J. Ventura
/s/ David R. Wasik Director March 10, 2004
- -----------------------
David R. Wasik
17