As filed with the Securities and Exchange Commission on March 25, 1994.
Registration No. 33-_____
______________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
__________________
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
__________________
USBANCORP, Inc.
(Exact name of registrant as specified in its charter)
Pennsylvania 6711 25-1424278
(State or other juris- (Primary Standard Industrial (I.R.S. Employer
diction of incorporation Classification Code Number) Identification or No.)
organization)
Main & Franklin Streets
Johnstown, Pennsylvania 15901
(814) 533-5300
(Address, including zip code, and telephone number, including area
code, of registrant's principal executive offices)
Mr. Terry K. Dunkle
Chairman, President
and Chief Executive Officer
USBANCORP, Inc.
Main & Franklin Streets
Johnstown, Pennsylvania 15901
(814) 533-5300
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
___________________
Copies to:
Jeffrey P. Waldron, Esquire Raymond A. Tiernan, Esquire
Stevens & Lee Elias, Matz, Tiernan & Herrick
Four Glenhardie Corporate Center 12th Floor
1255 Drummers Lane 734 15th Street N.W.
P.O. Box 236 Washington, D.C. 20005
Wayne, Pennsylvania 19087
__________________
<PAGE>
Approximate date of commencement of proposed sale to the public:
As soon as practicable after this Registration Statement becomes
effective.
If the securities being registered on this Form are being offered
in connection with the formation of a holding company and there
is compliance with General Instruction G, check the following
box:_____
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
______________________________________________________________________________
___________
Title of each Amount to be Proposed Proposed Amount of
class of registered(1) maximum maximum registration
securities to offering aggregate fee
be registered price per offering
unit(2) price(2)
<S> <C> <C> <C> <C>
Common Stock, 988,260 $20.375 $20,037,068.25 $6,261.58
$2.50 per
share (and
associated
stock purchase
rights)(3)
______________________________________________________________________________
<FN>
(1) Based on a maximum number of shares of the Registrant's
common stock which may be issued in connection with the
proposed merger of Johnstown Savings Bank ("JSB") with and
into a wholly-owned subsidiary of the Registrant.
(2) Estimated solely for purposes of calculating the
registration fee and based, in accordance with Rule 457(c),
(f)(1) and (f)(3) promulgated under the Securities Act of
1933, as amended, on the average of the high and low prices
of JSB common stock as reported on the NASDAQ National
Market System as of March 23, 1994, less $19,812,153, the
amount of cash to be paid by Registrant to shareholders of
JSB in connection with the proposed merger.
(3) Prior to the occurrence of certain events, the stock
purchase rights will not be evidenced separately from the
Common Stock.
</TABLE>
__________________
The Registrant hereby amends this Registration
Statement on such date or dates as may be necessary to delay its
effective date until the Registrant shall file a further
amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933, as amended, or until
the Registration Statement shall become effective on such date as
the Commission, acting pursuant to said Section 8(a), may
determine.
_________________________________________________________________
<PAGE>
USBANCORP, INC.
CROSS REFERENCE SHEET
Pursuant to Item 501(b) of Regulation S-K; Showing the
Location in the Joint Proxy Statement/Prospectus of the
Information Required by Part I of Form S-4
Location in Proxy
Form S-4 Item No. Statement/Prospectus
A. Information About the
Transaction
1. Forepart of Registration Outside Front Cover Page
Statement and Outside of the Registration
Front Cover Page of Statement and the Joint
Prospectus Proxy Statement/Prospectus
2. Inside Front and Outside Table of Contents;
Back Cover Pages of Available Information;
Prospectus Incorporation of
Certain Documents by
Reference
3. Risk Factors; Ratio of Outside Front Cover Page
Earnings to Fixed of the Joint Proxy
Charges and Other Statement/Prospectus;
Information Summary
4. Terms of Transaction Summary; Introduction;
The Merger; Description
of USBANCORP Capital
Stock; Comparison of
Rights of Holders of
USBANCORP Common Stock
and JSB Common Stock
5. Pro Forma Financial Pro Forma Financial
Information Information
6. Material Contacts with Not Applicable
the Company Being
Acquired
7. Additional Information Not Applicable
Required for Reoffering
by Persons and Parties
Deemed to be Underwriters
8. Interests of Named Legal Matters; Experts
Experts and Counsel
9. Disclosure of Commission Not Applicable
Position on
Indemnification for
Securities Act Liabilities
B. Information about the Registrant
10. Information with Respect Business of USBANCORP;
to S-3 Registrants Incorporation of
Certain Information by
Reference; Pro Forma
Financial Information
11. Incorporation of Incorporation of Certain
Certain Information Information by Reference
By Reference
12. Information with Respect Not Applicable
to S-3 or S-2
Registrants
13. Incorporation of Certain Not Applicable
Information by Reference
14. Information with Respect Not Applicable
to Registrants Other
Than S-3 or S-2
Registrants
C. Information about the Company
Being Acquired
15. Information with Respect Not Applicable
to S-3 Companies
16. Information with Respect Not Applicable
to S-3 or S-2 Companies
17. Information with Respect Incorporation of Certain
to Companies Other Information by Reference;
Than S-3 or S-2 JSB Selected Historical
Companies Financial Data; Pro Forma
Financial Information;
JSB Management's Discussion
and Analysis of Financial
Condition and Results of
Operations; Business of
JSB; JSB Consolidated
Financial Statements
D. Voting and Management Information
18. Information if Proxies Incorporation of Certain
or Authorizations are Information by Reference;
to be Solicited Notice of Annual Meetings
of Shareholders;
Introduction; The
Merger - Dissenters'
Rights of JSB Shareholders;
The Merger - Management and
Operations After the Merger;
Business of USBANCORP; JSB
Management's Discussion
and Analysis of Financial
Condition and Results of
Operations; Business
of JSB; Interests of
Certain Persons in the
Merger; Adjournment of
Meetings; Election of
USBANCORP Directors;
Amendment of USBANCORP's
Articles of Incorporation;
Election of JSB
Directors; Shareholder
Proposals; Other Matters
19. Information if Proxies, Not Applicable
Consents or Authorizations
are not to be Solicited
or in an Exchange Offer
<PAGE>
LETTERHEAD OF USBANCORP, INC.
April __, 1994
Dear Shareholder:
The Annual Meeting of the Shareholders of USBANCORP, Inc.
("USBANCORP") will be held on __________________, May __, 1994,
at ______ p.m., local time, at ____________________________ (the
"USBANCORP Annual Meeting").
At the USBANCORP Annual Meeting, shareholders will be asked
to:
1. Approve the Agreement and Plan of Merger (the
"Merger Agreement"), dated November 10, 1993, and amended
January 18, 1994, among USBANCORP, United States National Bank in
Johnstown ("U.S. Bank") and Johnstown Savings Bank ("JSB"),
providing for the merger of JSB with and into U.S. Bank (the
"Merger") and the related issuance of shares of USBANCORP Common
Stock to shareholders of JSB pursuant to the Merger Agreement;
2. Vote in favor of the adjournment of the USBANCORP
Annual Meeting, if necessary, in order to give its Board of
Directors more time to solicit additional proxies in favor of the
Merger Agreement and the related issuance of USBANCORP Common
Stock;
3. Elect five directors for a term of three years or
until a successor has been elected and has qualified;
4. Consider and vote upon an amendment to USBANCORP's
articles of incorporation to increase the authorized number of
shares of USBANCORP Common Stock to 12,000,000, par value $2.50;
and
5. Act on such other matters as may properly come
before the meeting, or any adjournment thereof.
If the Merger is approved and completed, JSB shareholders
will receive $10.13 in cash and a fraction of a share of
USBANCORP Common Stock determined by dividing $22.50 by the
average closing price for USBANCORP Common Stock for the ten
trading days immediately preceding the closing date of the merger
(the "Average Closing Price") and multiplying by .55, except that
in no event will such fraction be greater than .5053 shares or
less than .4853 shares. Subject to certain restrictions with
respect to the aggregate amounts of USBANCORP Common Stock that
will be issued and cash that will be paid to JSB shareholders,
instead of $10.13 in cash and a fraction of a share of USBANCORP
Common Stock, JSB shareholders will be given the option to elect
to convert each share of JSB Common Stock into either (i) a
fraction of a share of USBANCORP Common Stock determined by
dividing $22.50 by the Average Closing Price, except that in no
event will such fraction be greater than .9184 shares or less
than .8824 shares, or (ii) $22.50 in cash. USBANCORP will pay
cash to JSB shareholders in lieu of issuing fractional shares of
USBANCORP Common Stock. On __________, 1994 the last sale price
for USBANCORP Common Stock, as reported on the NASDAQ National
Market System, was $_____ per share.
__________________
Your attention is directed to the attached Joint Proxy
Statement/Prospectus which contains a more complete description
of the terms of the Merger and provides detailed financial,
business and other information concerning JSB and USBANCORP.
The Board of Directors of USBANCORP has received an opinion
from Legg Mason Wood Walker, Incorporated, an investment banking
firm, that the consideration to be paid by USBANCORP is fair from
a financial point of view to USBANCORP. The Board of Directors
of USBANCORP has carefully considered the Merger Agreement and
believes that the Merger is in the best interests of USBANCORP
and its shareholders. ACCORDINGLY, YOUR BOARD OF DIRECTORS
UNANIMOUSLY RECOMMENDS THAT YOU VOTE IN FAVOR OF THE MERGER AND
THE RELATED ISSUANCE OF USBANCORP COMMON STOCK. YOUR BOARD OF
DIRECTORS ALSO UNANIMOUSLY RECOMMENDS THAT YOU VOTE IN FAVOR OF
(1) THE ADJOURNMENT PROPOSAL, (2) THE ELECTION OF THE NOMINEES
FOR DIRECTOR, AND (3) THE AMENDMENT TO USBANCORP'S ARTICLES OF
INCORPORATION.
The affirmative vote of a majority of the shares of
USBANCORP Common Stock represented and voting at the USBANCORP
Annual Meeting is necessary for approval of the Merger and the
related issuance of shares of USBANCORP Common Stock. Your vote
is important regardless of the number of shares you own. We urge
you to participate in these significant developments by marking,
signing, dating and returning promptly the enclosed proxy card in
the accompanying postage paid, preaddressed envelope, whether or
not you attend the USBANCORP Annual Meeting. Returning the proxy
card does not prejudice your right to vote your shares in person
at the USBANCORP Annual Meeting if you so desire.
Sincerely yours,
Terry K. Dunkle
Chairman of the Board, President
and Chief Executive Officer
<PAGE>
LETTERHEAD OF JOHNSTOWN SAVINGS BANK
April __, 1994
Dear Shareholder:
The Annual Meeting of the Shareholders of Johnstown Savings
Bank ("JSB") will be held on ___________, May __, 1994, at _____
p.m., local time, at ________________________________________
(the "JSB Annual Meeting"). We look forward, as do other members
of the Board of Directors and management, to greeting personally
those shareholders who are able to attend the JSB Annual Meeting.
At the JSB Annual Meeting, shareholders will be asked to:
1. Approve the Agreement and Plan of Merger (the
"Merger Agreement"), dated November 10, 1993, and amended
January 18, 1994, among USBANCORP, Inc. ("USBANCORP"), United
States National Bank in Johnstown ("U.S. Bank") and JSB,
providing for the merger of JSB with and into U.S. Bank (the
"Merger");
2. Vote in favor of the adjournment of the JSB Annual
Meeting, if necessary, in order to give the Board of Directors
more time to solicit additional proxies in favor of the Merger
Agreement;
3. Elect four directors for a term of three years or
until a successor has been elected and has qualified or, if the
Merger Agreement is approved and the Merger is completed, for the
period of time from the date of the JSB Annual Meeting to the
completion of the Merger;
4. Ratify the appointment of the independent auditors
for 1994; and
5. Transact such other business as may properly come
before the meeting, or any adjournment thereof.
If the Merger is approved and completed, each share of JSB
Common Stock, outstanding at the effective date of the Merger
(other than shares held by persons who have perfected their
dissenters' rights) will be converted into and become a right to
receive $10.13 in cash and a fraction of a share of USBANCORP
Common Stock determined by dividing $22.50 by the average closing
price for USBANCORP Common Stock for the ten trading days
immediately preceding the closing date of the Merger (the
"Average Closing Price") and multiplying by .55, except that in
no event will such fraction be greater than .5053 shares or less
than .4853 shares. Subject to certain restrictions with respect
to the aggregate amounts of USBANCORP Common Stock that will be
issued and cash that will be paid to JSB shareholders, instead of
$10.13 in cash and a fraction of a share of USBANCORP Common
Stock, JSB shareholders will be given the option to elect to
convert each share of JSB Common Stock into either (i) shares of
USBANCORP Common Stock or (ii) cash, provided that USBANCORP will
not issue, in the aggregate, more than 982,197 shares of
USBANCORP Common Stock or pay more than $19,690,594 in cash to
shareholders of JSB (exclusive of shares issued and amounts paid
in exchange for up to 12,000 shares of JSB Common Stock issuable
upon the exercise of stock options, amounts paid in connection
with the cancellation of options to acquire up to 106,360 shares
of JSB Common Stock, amounts paid in lieu of fractional shares
and amounts paid, in excess of $22.50 per share, to persons who
perfect their dissenters' rights, if any). JSB may terminate the
Merger Agreement if the average closing price of USBANCORP Common
Stock as reported on the NASDAQ National Market System for the
ten trading days immediately preceding the closing date is less
than $20.50 per share. USBANCORP will pay cash to JSB
shareholders in lieu of issuing fractional shares of USBANCORP
Common Stock. On ____________, 1994, the last sale price for
USBANCORP Common Stock, as reported on the NASDAQ National Market
System, was $________ per share.
JSB stock certificates should not be returned with the
proxy; a letter of transmittal will be provided to you shortly
after the Merger is consummated that will contain instructions
concerning the exchange of JSB stock certificates and the
cash/stock election described above.
Your attention is directed to the attached Joint Proxy
Statement/Prospectus which contains a more complete description
of the agenda items for the JSB Annual Meeting, including terms
of the Merger and provides detailed financial, business and other
information concerning JSB and USBANCORP and their respective
subsidiaries. Consummation of the Merger is subject to certain
conditions, including approval of the Merger Agreement by JSB
shareholders and regulatory approvals. We urge you to read the
Joint Proxy Statement/Prospectus carefully.
The Board of Directors of JSB has received opinions from
Alex. Brown & Sons Incorporated, an investment banking firm, and
RP Financial, Inc., a financial advisory firm, that the
consideration to be paid to JSB shareholders is fair from a
financial point of view and, after careful consideration of the
Merger Agreement, the Board believes that the Merger is in the
best interests of JSB and its shareholders. ACCORDINGLY, THE
BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT
AND RELATED TRANSACTIONS AND RECOMMENDS THAT YOU VOTE IN FAVOR OF
THE MERGER AGREEMENT AT THE JSB ANNUAL MEETING. THE BOARD OF
DIRECTORS ALSO UNANIMOUSLY RECOMMENDS THAT YOU VOTE IN FAVOR OF
THE PROPOSAL FOR ADJOURNMENT, THE ELECTION OF THE NOMINEES FOR
DIRECTOR AND THE APPOINTMENT OF INDEPENDENT AUDITORS.
Your vote is important! The affirmative vote of the holders
of shares of JSB Common Stock representing at least 66-2/3% of
the outstanding shares of JSB Common Stock is necessary for
approval of the Merger Agreement. We urge you to participate at
the JSB Annual Meeting by marking, signing, dating and returning
promptly the enclosed proxy card in the accompanying postage
paid, preaddressed envelope, whether or not you attend the JSB
Annual Meeting. Returning the proxy card does not prejudice your
right to vote your shares in person at the JSB Annual Meeting if
you so desire.
On behalf of the Board of Directors, I thank you for your
continued support.
Sincerely yours,
Patrick J. Coyne
President and Chief Executive
Officer
<PAGE>
____________________
USBANCORP, INC.
Main & Franklin Streets
Johnstown, Pennsylvania 15901
(814) 533-5300
____________________
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held on May __, 1994
____________________
Notice is hereby given that the Annual Meeting of
Shareholders of USBANCORP, Inc. ("USBANCORP") will be held on
__________________, May ___, 1994, at ______ p.m. at __________
_______________________ (the "USBANCORP Annual Meeting") to
consider the following matters:
1. The approval of (a) the Agreement and Plan of
Merger (the "Merger Agreement"), dated November 10, 1993, and
amended January 18, 1994, among USBANCORP, United States National
Bank in Johnstown ("U.S. Bank") and Johnstown Savings Bank
("JSB"), which is attached as Annex A to the accompanying Joint
Proxy Statement/Prospectus, providing for the merger of JSB with
and into Johnstown Interim Bank ("JIB") (the "Interim Merger"), a
wholly-owned subsidiary of USBANCORP formed solely for the
purpose of effecting the Merger (as hereinafter defined), with
JIB surviving the Interim Merger and immediately thereafter the
merger of JIB with and into U.S. Bank (the "U.S. Bank Merger")
with U.S. Bank surviving the U.S. Bank Merger (the Interim Merger
and the U.S. Bank Merger are collectively referred to herein as
the "Merger") and (b) the issuance to JSB shareholders of shares
of USBANCORP Common Stock pursuant to the Merger Agreement. On
the effective date of the Merger, each share of JSB Common Stock
outstanding (other than shares held by persons, if any, who have
perfected their dissenters' rights) will be converted into $10.13
in cash and a fraction of a share of USBANCORP Common Stock
determined by dividing $22.50 by the average closing price of
USBANCORP Common Stock for the ten trading days immediately
preceding the closing date of the merger (the "Average Closing
Price") and multiplying by .55, except that in no event will such
fraction be greater than .5053 shares or less than .4853 shares.
Subject to certain restrictions, instead of $10.13 in cash and a
fraction of a share of USBANCORP Common Stock, JSB shareholders
will be given the option to elect to convert each share of JSB
Common Stock into either (i) a fraction of a share of USBANCORP
Common Stock determined by dividing $22.50 by the Average Closing
Price, except that in no event will such fraction be greater than
.9184 shares or less than .8824 shares, or (ii) $22.50 in cash.
Subject to certain exceptions described below, USBANCORP will not
issue, in the aggregate, more than 982,197 shares of USBANCORP
Common Stock or pay more than $19,690,594 in cash to shareholders
of JSB. USBANCORP may issue additional shares of USBANCORP
Common Stock and pay additional cash in exchange for up to 12,000
shares of JSB Common Stock issuable upon the exercise of stock
options and USBANCORP will pay additional cash amounts (i) in
lieu of fractional shares (ii) in excess of $22.50 per share, to
persons who perfect their dissenters' rights, if any, and
(iii) in connection with the cancellation of options to acquire
94,360 shares of JSB Common Stock with respect to which holders
have contractually waived their exercise rights. The number of
options that will be cancelled in exchange for cash may increase
from 94,360 to 106,360 if the holders of exercisable options to
acquire 12,000 shares do not exercise their options. No
fractional shares of USBANCORP Common Stock will be issued. In
lieu of a fractional share, USBANCORP will pay cash in an amount
equal to the fractional part of a share of USBANCORP Common Stock
to which such shareholder is entitled, multiplied by $25.50.
2. To vote on adjournment of the USBANCORP Annual
Meeting, if necessary, to permit further solicitation of proxies
in the event that there are not sufficient votes at the time of
the USBANCORP Annual Meeting to constitute a quorum or to approve
the Merger Agreement and the related issuance of shares of
USBANCORP Common Stock.
3. To elect five directors for a term of three years
or until a successor has been elected and has qualified.
4. To consider and vote upon an amendment to
USBANCORP's articles of incorporation to increase the number of
shares of USBANCORP Common Stock to 12,000,000, par value $2.50.
5. Such other matters as may properly be brought
before the USBANCORP Annual Meeting or any adjournments thereof.
The Board of Directors of USBANCORP has fixed
_______________, 1994, as the record date, and only shareholders
of record at the close of business on that date are entitled to
notice of, and to vote at, the USBANCORP Annual Meeting and any
adjournments thereof. A Joint Proxy Statement/Prospectus is set
forth on the following pages and a form of proxy is enclosed. To
ensure that your vote will be counted, please complete, sign,
date and return the proxy in the enclosed postage-paid return
envelope whether or not you expect to attend the meeting in
person. If you attend the meeting, you may revoke your proxy and
vote your shares in person. However, attendance at the USBANCORP
Annual Meeting will not of itself constitute revocation of a
proxy. If your shares are not registered in your own name, you
will need additional documentation from your record holder in
order to vote personally at the USBANCORP Annual Meeting.
BY ORDER OF THE BOARD OF DIRECTORS
Betty L. Jakell, Secretary
Johnstown, Pennsylvania
April ___, 1994
YOUR VOTE IS IMPORTANT. PLEASE COMPLETE, SIGN, DATE AND RETURN
THE ENCLOSED PROXY CARD PROMPTLY WHETHER OR NOT YOU PLAN TO BE
PRESENT AT THE USBANCORP ANNUAL MEETING.
THE BOARD OF DIRECTORS OF USBANCORP UNANIMOUSLY RECOMMENDS THAT
THE HOLDERS OF USBANCORP COMMON STOCK VOTE TO (1) APPROVE THE
MERGER AGREEMENT AND THE RELATED ISSUANCE OF USBANCORP COMMON
STOCK, (2) APPROVE THE PROPOSAL TO ADJOURN THE USBANCORP ANNUAL
MEETING, IF NECESSARY, (3) ELECT THE NOMINEES STANDING FOR
ELECTION AS DIRECTORS, AND (4) APPROVE THE AMENDMENT TO
USBANCORP'S ARTICLES OF INCORPORATION.
_________________________________________________________________
<PAGE>
____________________
JOHNSTOWN SAVINGS BANK
Savings Bank Plaza
Market at Main Street
Johnstown, Pennsylvania 15901
(814) 535-8900
____________________
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held on May ___, 1994
____________________
The Annual Meeting of shareholders of Johnstown Savings
Bank ("JSB") will be held on __________________, May ___, 1994,
at _____ p.m. at ________________________________ (the "JSB
Annual Meeting") to consider the following matters:
1. The approval of the Agreement and Plan of Merger
(the "Merger Agreement"), dated November 10, 1993, and amended
January 18, 1994, among JSB, USBANCORP, Inc. ("USBANCORP") and
United States National Bank in Johnstown ("U.S. Bank"), which is
attached as Annex A to the accompanying Joint Proxy
Statement/Prospectus, providing for the merger of JSB with and
into Johnstown Interim Bank ("JIB") (the "Interim Merger"), a
wholly-owned subsidiary of USBANCORP formed solely for the
purpose of effecting the Merger (as hereinafter defined), with
JIB surviving the Interim Merger and immediately thereafter the
merger of JIB with and into U.S. Bank (the "U.S. Bank Merger")
with U.S. Bank surviving the U.S. Bank Merger (the Interim Merger
and the U.S. Bank Merger are collectively referred to herein as
the "Merger"). On the effective date of the Merger each share of
JSB Common Stock outstanding (other than shares held by persons,
if any, who have perfected their dissenters' rights) will be
converted into $10.13 in cash and a fraction of a share of
USBANCORP Common Stock determined by dividing $22.50 by the
average closing price for USBANCORP Common Stock for the ten
trading days immediately preceding the closing date of the Merger
(the "Average Closing Price") and multiplying by .55, except that
in no event will such fraction be greater than .5053 shares or
less than .4853 shares. Subject to certain restrictions, instead
of $10.13 in cash and a fraction of a share of USBANCORP Common
Stock, JSB shareholders will be given the option to elect to
convert all of their shares of JSB Common Stock into either
(i) shares of USBANCORP Common Stock or (ii) cash. Subject to
certain exceptions described below, USBANCORP will not issue, in
the aggregate, more than 982,197 shares of USBANCORP Common Stock
or pay more than $19,690,594 in cash to shareholders of JSB.
USBANCORP may issue additional shares of USBANCORP Common Stock
and pay additional cash in exchange for up to 12,000 shares of
JSB Common Stock issuable upon the exercise of stock options and
USBANCORP will pay additional cash amounts (i) in lieu of
fractional shares (ii) in excess of $22.50 per share, to persons
who perfect their dissenters' rights, if any, and (iii) in
connection with the cancellation of options to acquire 94,360
shares of JSB Common Stock with respect to which holders have
contractually waived their exercise rights. The number of
options that will be cancelled in exchange for cash may increase
from 94,360 to 106,360 if the holders of exercisable options to
acquire 12,000 shares do not exercise their options. No
fractional shares of USBANCORP Common Stock will be issued. In
lieu of a fractional share, USBANCORP will pay cash in an amount
equal to the fractional part of a share of USBANCORP Common Stock
to which such shareholder is entitled, multiplied by $25.50.
2. To vote on adjournment of the JSB Annual Meeting,
if necessary, to permit further solicitation of proxies by the
Board of Directors to be voted in favor of the Merger Agreement
in the event that there are not sufficient votes at the time of
the JSB Annual Meeting to constitute a quorum or to approve the
Merger Agreement.
3. To elect four directors for a term of three years
or until a successor has been elected and has qualified or, if
the Merger Agreement is approved and the Merger is completed, for
the period of time from the date of the JSB Annual Meeting to the
completion of the Merger.
4. To ratify the appointment of the independent
auditors for 1994.
5. Such other matters as may properly be brought
before the JSB Annual Meeting or any adjournments thereof.
The Board of Directors of JSB has fixed
_______________, 1994 as the record date, and only shareholders
of record at the close of business on that date are entitled to
notice of, and to vote at, the JSB Annual Meeting and any
adjournments thereof. A Joint Proxy Statement/Prospectus is set
forth on the following pages and a form of proxy is enclosed. To
ensure that your vote will be counted, please complete, sign,
date and return the proxy in the enclosed postage-paid return
envelope whether or not you expect to attend the meeting in
person. If you attend the meeting, you may revoke your proxy and
vote your shares in person. However, attendance at the JSB
Annual Meeting will not of itself constitute revocation of a
proxy. If your shares are not registered in your own name, you
will need additional documentation from your record holder in
order to vote personally at the JSB Annual Meeting.
BY ORDER OF THE BOARD OF DIRECTORS
Gerald R. Baxter, Secretary
Johnstown, Pennsylvania
April ___, 1994
YOUR VOTE IS IMPORTANT. PLEASE COMPLETE, SIGN, DATE AND RETURN
THE ENCLOSED PROXY CARD PROMPTLY WHETHER OR NOT YOU PLAN TO BE
PRESENT AT THE JSB ANNUAL MEETING. PLEASE DO NOT SEND IN ANY
CERTIFICATES FOR YOUR SHARES AT THIS TIME.
THE BOARD OF DIRECTORS OF JSB UNANIMOUSLY RECOMMENDS THAT THE
HOLDERS OF JSB COMMON STOCK VOTE TO (1) APPROVE THE MERGER
AGREEMENT, (2) APPROVE THE PROPOSAL TO ADJOURN THE JSB ANNUAL
MEETING, IF NECESSARY, (3) ELECT THE NOMINEES STANDING FOR
ELECTION AS DIRECTORS AND (4) RATIFY THE APPOINTMENT OF AUDITORS
FOR 1994.
_________________________________________________________________
<PAGE>
USBANCORP, INC. AND JOHNSTOWN SAVINGS BANK BRANCH NETWORK MAP
For a description of the USBANCORP, Inc. and Johnstown
Savings Bank Branch Network Map, see the Appendix to this
Registration Statement.
<PAGE>
_________________________________________________________________
USBANCORP, INC.
and
JOHNSTOWN SAVINGS BANK
JOINT PROXY STATEMENT
____________________
USBANCORP, INC.
PROSPECTUS
988,260 SHARES OF COMMON STOCK
(and associated Stock Purchase Rights)
______________________________________________________
This Joint Proxy Statement/Prospectus ("Proxy
Statement/Prospectus") is being furnished to shareholders of
USBANCORP, Inc. ("USBANCORP") and Johnstown Savings Bank ("JSB")
in connection with the solicitation by their respective Boards of
Directors of proxies to be voted at the USBANCORP Annual Meeting
of Shareholders and the JSB Annual Meeting of Shareholders
(including any adjournments or postponements thereof), each of
which is to be held on May ___, 1994, to consider and take action
upon (a) the proposed merger (the "Interim Merger") of JSB with
and into Johnstown Interim Bank ("JIB"), a Pennsylvania
commercial bank formed solely for the purpose of effecting the
Merger (as hereinafter defined), with JIB surviving the Interim
Merger and immediately thereafter the merger of JIB with and into
United States National Bank in Johnstown ("U.S. Bank"), a
national banking association and a wholly-owned subsidiary of
USBANCORP (the "U.S. Bank Merger"), with U.S. Bank surviving the
U.S. Bank Merger (the Interim Merger and the U.S. Bank Merger are
collectively referred to herein as the "Merger"), (b) the
election of five directors to the USBANCORP Board of Directors
and four directors to the JSB Board of Directors, (c) in the case
of JSB shareholders, the ratification of the appointment of the
independent auditors of JSB for 1994, (d) in the case of
USBANCORP shareholders (i) the amendment of USBANCORP's articles
of incorporation to increase the number of authorized shares of
USBANCORP Common Stock to 12,000,000 par value $2.50 per share
and (ii) the issuance of USBANCORP Common Stock, $2.50 par value
per share, and related stock purchase rights (the "USBANCORP
Common Stock") pursuant to the Agreement and Plan of Merger (the
"Merger Agreement"), dated November 10, 1993, and amended
January 18, 1994, among USBANCORP, U.S. Bank and JSB, which is
attached as Annex A to this Proxy Statement/Prospectus, and
(e) the adjournment of each of the Annual Meetings in order to
solicit additional proxies, if necessary. See "THE MERGER,"
"ELECTION OF USBANCORP DIRECTORS," "AMENDMENT OF USBANCORP'S
ARTICLES OF INCORPORATION," "ELECTION OF JSB DIRECTORS,"
"RATIFICATION OF APPOINTMENT OF JSB INDEPENDENT AUDITORS FOR
1994" and "ADJOURNMENT OF MEETINGS."
This Proxy Statement/Prospectus also constitutes a
prospectus of USBANCORP with respect to 988,260 shares of
USBANCORP Common Stock proposed to be issued in connection with
the Merger to JSB shareholders. See "THE MERGER -- General Terms
of the Merger."
This Proxy Statement/Prospectus does not cover resales
of shares of USBANCORP Common Stock following consummation of the
Merger and no person may make use of this Proxy
Statement/Prospectus in connection with any such resale.
This Proxy Statement/Prospectus and the accompanying
form of proxy are first being mailed to shareholders of USBANCORP
and JSB on or about April __, 1994.
The outstanding shares of USBANCORP Common Stock are,
and the shares offered hereby will be, included for quotation on
the National Association of Securities Dealers Automated
Quotation National Market System ("NASDAQ/NMS"). At March 1,
1994, there were 4,731,664 shares of USBANCORP Common Stock
outstanding. The closing price of USBANCORP Common Stock on the
NASDAQ/NMS on April ___, 1994, was $_____ per share.
____________________
THE SHARES OF COMMON STOCK OF USBANCORP TO BE ISSUED IN
CONNECTION WITH THE MERGER HAVE NOT BEEN APPROVED OR DISAPPROVED
BY THE SECURITIES AND EXCHANGE COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
THE SHARES OF USBANCORP COMMON STOCK OFFERED HEREBY ARE
NOT SAVINGS ACCOUNTS, DEPOSITS OR OTHER OBLIGATIONS OF A BANK OR
SAVINGS ASSOCIATION AND ARE NOT INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION OR ANY OTHER GOVERNMENTAL AGENCY.
____________________
The date of this Proxy Statement/Prospectus is
April ___, 1994.
<PAGE>
TABLE OF CONTENTS
PAGE
AVAILABLE INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
INCORPORATION OF CERTAIN DOCUMENTS BY REFEREN
SUMMARY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
The Companies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
The Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Interests of Certain Persons in the Merger . . . . . . . . . . . . . . 16
Certain Related Transactions . . . . . . . . . . . . . . . . . . . . . 17
Certain Differences in Shareholders' Rights. . . . . . . . . . . . . . 18
Comparative Unaudited Per Share Information. . . . . . . . . . . . . . 18
Market Prices of Common Stock. . . . . . . . . . . . . . . . . . . . . 22
USBANCORP SELECTED HISTORICAL FINANCIAL DATA . . . . . . . . . . . . . . . . 23
JSB SELECTED HISTORICAL FINANCIAL DATA . . . . . . . . . . . . . . . . . . . 29
SELECTED PRO FORMA FINANCIAL DATA. . . . . . . . . . . . . . . . . . . . . . 32
INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
THE MEETINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Matters to be Considered at the Meetings . . . . . . . . . . . . . . . 35
Record Date; Vote Required . . . . . . . . . . . . . . . . . . . . . . 36
Proxies; Revocation of Proxies; Solicitation . . . . . . . . . . . . . 38
THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Background and Reasons for the Merger and
Recommendations of the Boards . . . . . . . . . . . . . . . . . 40
General Terms of the Merger. . . . . . . . . . . . . . . . . . . . . . 46
Opinions of Financial Advisors . . . . . . . . . . . . . . . . . . . . 49
Effective Date of the Merger . . . . . . . . . . . . . . . . . . . . . 63
Financing the Merger . . . . . . . . . . . . . . . . . . . . . . . . . 63
Regulatory Approvals . . . . . . . . . . . . . . . . . . . . . . . . . 63
Conditions to Consummation of the Merger . . . . . . . . . . . . . . . 65
Representations and Warranties . . . . . . . . . . . . . . . . . . . . 65
Conduct of Business Pending the Merger . . . . . . . . . . . . . . . . 67
No Solicitation of Transactions. . . . . . . . . . . . . . . . . . . . 69
Waivers; Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . 69
Termination of the Merger Agreement. . . . . . . . . . . . . . . . . . 70
Election Procedures. . . . . . . . . . . . . . . . . . . . . . . . . . 70
Exchange of JSB Stock Certificates . . . . . . . . . . . . . . . . . . 72
Effect of the Merger on the Business of USBANCORP
and JSB . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
Management and Operations After the Merger . . . . . . . . . . . . . . 74
Dissenters' Rights of JSB Shareholders . . . . . . . . . . . . . . . . 76
Effect on JSB Employee Benefit Plans . . . . . . . . . . . . . . . . . 78
Tax Consequences . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
Accounting Treatment . . . . . . . . . . . . . . . . . . . . . . . . . 81
Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
USBANCORP Dividend Reinvestment Plan . . . . . . . . . . . . . . . . . 82
Restrictions on Resales of USBANCORP Common Stock. . . . . . . . . . . 82
INTERESTS OF CERTAIN PERSONS IN THE MERGER . . . . . . . . . . . . . . . . . 82
CERTAIN RELATED TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . . 83
Stock Option Agreement . . . . . . . . . . . . . . . . . . . . . . . . 83
PRO FORMA FINANCIAL INFORMATION. . . . . . . . . . . . . . . . . . . . . . . 85
Pro Forma Combined Condensed Balance Sheet . . . . . . . . . . . . . . 85
Pro Forma Combined Condensed Statement of Income . . . . . . . . . . . 90
Pro Forma Combined Capitalization. . . . . . . . . . . . . . . . . . . 95
DESCRIPTION OF USBANCORP CAPITAL STOCK . . . . . . . . . . . . . . . . . . . 97
USBANCORP Preferred Stock. . . . . . . . . . . . . . . . . . . . . . . 97
USBANCORP Common Stock . . . . . . . . . . . . . . . . . . . . . . . . 97
Shareholder Rights Plan. . . . . . . . . . . . . . . . . . . . . . . . 99
Change In Control. . . . . . . . . . . . . . . . . . . . . . . . . . . 100
COMPARISON OF RIGHTS OF HOLDERS OF USBANCORP
COMMON STOCK AND JSB COMMON STOCK. . . . . . . . . . . . 101
Directors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101
Mergers, Consolidations and Similar Transactions . . . . . . . . . . . 103
Voting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104
Amendment of Articles and Bylaws . . . . . . . . . . . . . . . . . . . 104
Special Meetings of Shareholders . . . . . . . . . . . . . . . . . . . 104
BUSINESS OF USBANCORP. . . . . . . . . . . . . . . . . . . . . . . . . . . .105
JSB MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS . . . . . . . . 105
General. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105
Results of Operations. . . . . . . . . . . . . . . . . . . . . . . . . 105
Asset and Liability Management . . . . . . . . . . . . . . . . . . . . 124
Liquidity and Capital Resources. . . . . . . . . . . . . . . . . . . . 128
Concentrations of Credit Risk. . . . . . . . . . . . . . . . . . . . . 130
Impact of Inflation and Changing Prices. . . . . . . . . . . . . . . . 136
BUSINESS OF JSB. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .136
General. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 136
The Savings Industry . . . . . . . . . . . . . . . . . . . . . . . . . 137
Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 138
Regulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 158
Taxation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 161
Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 162
Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . . . . . . 163
Common Stock Prices and Dividend Information . . . . . . . . . . . . . 163
EXPERTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .165
USBANCORP. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 165
JSB. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 165
LEGAL MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .165
ADJOURNMENT OF MEETINGS. . . . . . . . . . . . . . . . . . . . . . . . . . .166
USBANCORP Annual Meeting . . . . . . . . . . . . . . . . . . . . . . . 166
JSB Annual Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . 166
ELECTION OF USBANCORP DIRECTORS. . . . . . . . . . . . . . . . . . . . . . .167
General. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 167
Board and Committees . . . . . . . . . . . . . . . . . . . . . . . . . 170
Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . 171
Retirement Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . 176
Employment Contracts . . . . . . . . . . . . . . . . . . . . . . . . . 182
Voting Securities. . . . . . . . . . . . . . . . . . . . . . . . . . . 182
Financial Information. . . . . . . . . . . . . . . . . . . . . . . . . 185
Transactions with Management . . . . . . . . . . . . . . . . . . . . . 185
Auditors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 185
AMENDMENT OF USBANCORP'S ARTICLES OF INCORPORATION . . . . . . . . . . . . .185
ELECTION OF JSB DIRECTORS. . . . . . . . . . . . . . . . . . . . . . . . . .186
General. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 186
Shareholder Nominations to the JSB Board of
Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . 192
Security Ownership of Certain Beneficial Owners
and Management. . . . . . . . . . . . . . . . . . . . . . . . . 192
Board and Committees. . . . . . . . . . . . . . . . . . . . . . . . . . . . 192
Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . 194
RATIFICATION OF APPOINTMENT OF JSB INDEPENDENT AUDITORS
FOR 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 202
SHAREHOLDER PROPOSALS
USBANCORP. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .203
JSB. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .203
OTHER MATTERS
<PAGE>
ANNEXES
A. Agreement and Plan of Merger among USBANCORP, U.S. Bank and
JSB
B. Opinion of Legg Mason Wood Walker, Incorporated
C. Opinion of Alex. Brown & Sons Incorporated
D. Opinion of RP Financial, Inc.
E. Statutory Excerpts Concerning Dissenters' Rights
F. Stock Option Agreement
<PAGE>
No person is authorized to give any information or to
make any representation not contained in this Proxy
Statement/Prospectus in connection with the solicitation of
proxies or the offering of securities made hereby, and, if given
or made, such information or representation should not be relied
upon as having been authorized by USBANCORP or JSB. This Proxy
Statement/Prospectus does not constitute an offer to sell, or a
solicitation of an offer to purchase, the securities offered by
this Proxy Statement/Prospectus, or the solicitation of a proxy,
in any jurisdiction, to any person to whom it is unlawful to make
such offer or solicitation of an offer or proxy solicitation in
such jurisdiction. Neither the delivery of this Proxy
Statement/Prospectus nor any distribution of the securities to
which this Proxy Statement/Prospectus relates shall, under any
circumstances, create any implication that there has been no
change in the affairs of USBANCORP or JSB since the date of this
Proxy Statement/Prospectus or that the information herein is
correct as of any time subsequent to its date.
AVAILABLE INFORMATION
USBANCORP is subject to the informational requirements
of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and in accordance therewith files reports, proxy
statements, and other information with the Securities and
Exchange Commission (the "Commission"). JSB is also subject to
the informational requirements of the Exchange Act, but in
accordance with Section 12(i) of the Exchange Act, currently
files reports, proxy statements and other information with the
Federal Deposit Insurance Corporation (the "FDIC").
USBANCORP has filed a Registration Statement on
Form S-4 (together with any amendments thereto, the "Registration
Statement"), pursuant to the Securities Act of 1933, as amended
(the "Securities Act"), with respect to the shares of the
USBANCORP Common Stock to be issued in the Merger. All
information concerning USBANCORP and its subsidiaries contained
herein, incorporated herein by reference or supplied herewith has
been furnished by USBANCORP, and all information concerning JSB
and its subsidiaries contained herein, incorporated herein by
reference or supplied herewith has been furnished by JSB.
Pursuant to the rules and regulations of the Commission, this
Proxy Statement/Prospectus omits certain information contained in
the Registration Statement. For further information pertaining
to USBANCORP and JSB and the USBANCORP Common Stock to be issued
in the Merger, reference is made to the Registration Statement,
including the exhibits filed as a part thereof.
The Registration Statement, as well as the reports,
proxy statements and other information filed by USBANCORP can be
inspected at the offices of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549 and at the Commission's
regional offices located at Northwestern Atrium Center, 500 West
Madison Avenue, Suite 1400, Chicago, Illinois 60611-2511 and
14th Floor, 75 Park Place, New York, New York 10007. Copies of
such material may also be obtained at prescribed rates from the
Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549. The reports, proxy
statements and other information filed by JSB can be inspected at
the offices of the FDIC at 1776 F Street NW, Washington, D.C.
20006.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents or designated portions thereof
are incorporated herein by reference:
(i) That portion of USBANCORP's Annual Report and
Form 10-K for the year ended December 31, 1993
that constitutes USBANCORP's Form 10-K as filed
with the Commission on March 25, 1994.
(ii) USBANCORP's Current Report on Form 8-K, as filed
with the Commission on March 28, 1994.
(iii) USBANCORP's Registration Statement on Form 8A as
filed with the Commission on December 6, 1989 with
respect to USBANCORP's Series B Preferred Stock,
pursuant to Section 12(g) of the Exchange Act.
All documents and reports filed by USBANCORP pursuant
to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act after
the date of this Proxy Statement/Prospectus and prior to the date
of the USBANCORP Annual Meeting shall be deemed to be
incorporated by reference in this Proxy Statement/Prospectus and
to be a part hereof from the dates of filing of such documents or
reports. Any statement contained in a document incorporated or
deemed to be incorporated by reference herein shall be deemed to
be modified or superseded for purposes of this Proxy
Statement/Prospectus to the extent that a statement contained
herein or in any other subsequently filed document which also is,
or is deemed to be, incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or
superseded, to constitute a part of this Proxy
Statement/Prospectus.
THIS PROXY STATEMENT/PROSPECTUS INCORPORATES DOCUMENTS
BY REFERENCE WHICH ARE NOT PRESENTED HEREIN OR DELIVERED
HEREWITH. SUCH DOCUMENTS (OTHER THAN EXHIBITS TO SUCH DOCUMENTS
UNLESS SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED BY REFERENCE)
ARE AVAILABLE, WITHOUT CHARGE TO ANY PERSON TO WHOM THIS PROXY
STATEMENT/PROSPECTUS IS DELIVERED, UPON WRITTEN OR ORAL REQUEST.
DOCUMENTS RELATING TO USBANCORP MAY BE REQUESTED FROM USBANCORP,
MAIN & FRANKLIN STREETS, JOHNSTOWN, PENNSYLVANIA 15901
(ATTENTION: ORLANDO B. HANSELMAN; TELEPHONE NUMBER:
(814) 533-5319). DOCUMENTS RELATING TO JSB MAY BE REQUESTED FROM
JSB, SAVINGS BANK PLAZA, MARKET AT MAIN STREET, JOHNSTOWN,
PENNSYLVANIA 15901 (ATTENTION: WALTER F. RUSNAK; TELEPHONE
NUMBER: (814) 535-8900). IN ORDER TO RECEIVE TIMELY DELIVERY OF
THE DOCUMENTS, ANY REQUEST SHOULD BE MADE BY ____________, 1994.
The Merger Agreement and the Stock Option Agreement are
included herewith as Annexes A and F, respectively, and are
incorporated by reference herein. Discussions of the terms and
conditions of the Merger Agreement and the Stock Option Agreement
are summary in nature and holders of USBANCORP Common Stock and
JSB Common Stock are referred to the Merger Agreement and the
Stock Option Agreement for a more complete discussion of the
terms and conditions of the Merger, the Merger Agreement, the
Stock Option Agreement and related transactions. Also
incorporated herein by reference are the documents attached
hereto as Annexes B, C, D, and E to this Proxy
Statement/Prospectus.
<PAGE>
SUMMARY
The following is a summary of certain information
contained in this Proxy Statement/Prospectus. This summary is
provided for convenience, should not be considered complete and
is qualified in its entirety by reference to the full text of
this Proxy Statement/Prospectus and the Annexes hereto. Cross
references in the Summary are to captions appearing in the body
of this Proxy Statement/Prospectus, and their page references may
be obtained from the Table of Contents. Certain capitalized
terms used in this summary are defined elsewhere in this Proxy
Statement/Prospectus.
The Companies
USBANCORP
USBANCORP is a multi-bank holding company registered
under the Bank Holding Company Act of 1956, as amended (the
"BHCA"), and incorporated under the laws of the Commonwealth of
Pennsylvania. USBANCORP operates through its six direct and
indirect subsidiaries: (i) United States National Bank in
Johnstown ("U.S. Bank"), an FDIC-insured, national banking
association chartered under the laws of the United States;
(ii) Three Rivers Bank and Trust Company ("Three Rivers"), an
FDIC-insured, Pennsylvania-chartered bank and trust company;
(iii) Community Bancorp, Inc. ("Community"), a Pennsylvania
corporation that owns all of the capital stock of Community
Savings Bank ("Community Savings"), an FDIC-insured,
Pennsylvania-chartered savings bank; (iv) USBANCORP Trust Company
(the "Trust Company"), a trust company organized under the laws
of the Commonwealth of Pennsylvania; and (v) United Bancorp Life
Insurance Company ("United Life"), a credit life and disability
insurance company organized under the laws of the State of
Arizona (collectively, the "USBANCORP Subsidiaries"). At
December 31, 1993, USBANCORP had consolidated assets of
approximately $1.24 billion, total deposits of approximately
$1.05 billion, and shareholders' equity of approximately
$117.0 million. Through seventeen locations in Cambria,
Clearfield, Somerset and Westmoreland Counties, Pennsylvania,
U.S. Bank conducts a general, full service banking business. At
December 31, 1993, U.S. Bank had total assets and deposits of
$511.6 million and $453.0 million, respectively. Through twelve
locations in Allegheny and Washington Counties, Pennsylvania,
Three Rivers conducts a general, full service banking business.
At December 31, 1993, Three Rivers had total assets and deposits
of $340.1 million and $304.2 million, respectively. Through
twelve locations in Allegheny, Washington and Westmoreland
Counties, Pennsylvania, Community Savings conducts a general,
full service banking business. At December 31, 1993, Community
Savings had total assets and deposits of $364.9 million and
$291.7 million, respectively. The Trust Company provides
individual and corporate trust services primarily to customers of
USBANCORP's banking subsidiaries. At December 31, 1993, the
Trust Company had $942.6 million in assets under management in
discretionary and nondiscretionary accounts. United Life engages
in underwriting, as reinsurer, of credit life and disability
insurance within USBANCORP's six county market area. Operations
of United Life are conducted in each office of U.S. Bank, Three
Rivers and Community Savings. At December 31, 1993, United Life
had total assets of $1.3 million. USBANCORP is located at Main &
Franklin Streets, Johnstown, Pennsylvania 15901. The telephone
number is (814) 533-5300.
For additional information concerning USBANCORP, its
business, financial condition and results of operations, see
"AVAILABLE INFORMATION," "INCORPORATION OF CERTAIN DOCUMENTS BY
REFERENCE," "USBANCORP SELECTED HISTORICAL FINANCIAL DATA" and
"BUSINESS OF USBANCORP."
JSB
JSB is a Pennsylvania-chartered stock savings bank that
conducts business through six branch offices in the Johnstown,
Pennsylvania metropolitan area. JSB's primary business consists
of attracting deposits from the general public through its branch
offices and using these deposits to originate residential and
commercial loans. At December 31, 1993, JSB had total assets of
$355.8 million, total deposits of $216.2 million and total
shareholders' equity of $27.6 million. JSB owns indirectly
through its wholly-owned subsidiary, SB Realty, Inc.,
("SB Realty"), all of the issued and outstanding capital stock of
Standard Mortgage Corporation of Georgia, a corporation organized
under the laws of the State of Georgia ("SMC"). SMC is licensed
as a mortgage banking corporation under the Georgia Residential
Mortgage Act. As a mortgage banking company, SMC originates and
sells residential mortgage loans and services mortgage loans on
behalf of JSB and unaffiliated investors. For the year ended
December 31, 1993, SMC originated $179.9 million of residential
mortgage loans. At December 31, 1993 SMC was servicing
$908.9 million of residential mortgage loans. JSB is located at
Savings Bank Plaza, Market at Main Street, Johnstown,
Pennsylvania 15901 and its telephone number is (814) 535-8900.
For additional information concerning JSB, its
business, financial condition and results of operations, see
"AVAILABLE INFORMATION," "INCORPORATION OF CERTAIN DOCUMENTS BY
REFERENCE," "JSB SELECTED HISTORICAL FINANCIAL DATA," "JSB
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS," "BUSINESS OF JSB," and "JSB CONSOLIDATED
FINANCIAL STATEMENTS."
JIB
JIB was organized by USBANCORP solely to effect the
Merger; it will not open for business or operate as a commercial
bank. On the Effective Date (as defined below), pursuant to the
terms of the Merger Agreement, JSB will merge with and into JIB
with JIB surviving the Interim Merger (as defined below) and
immediately thereafter JIB will merge with and into U.S. Bank
with U.S. Bank surviving the U.S. Bank Merger (as defined below).
The Meetings
General.
The annual meeting of the shareholders of USBANCORP
will be held on __________________, May ___, 1994, at 1:30 p.m.
at _____________________________ (the "USBANCORP Annual
Meeting"). See "THE MEETINGS."
The annual meeting of the shareholders of JSB will be
held on __________________, May __, 1994, at ______ p.m. at
__________________ (the "JSB Annual Meeting"). See "THE
MEETINGS."
Matters to be Considered at the Meetings
USBANCORP. At the USBANCORP Annual Meeting, holders of
USBANCORP's common stock, $2.50 par value, and related stock
purchase rights (the "USBANCORP Common Stock") will consider and
vote upon, as a single proposal, the (i) approval of the
Agreement and Plan of Merger, dated November 10, 1993, and
amended January 18, 1994, among USBANCORP, U.S. Bank and JSB (the
"Merger Agreement"), which is attached as Annex A to this Proxy
Statement/Prospectus, providing for the merger of JSB with and
into JIB (the "Interim Merger") with JIB surviving the Interim
Merger, and immediately thereafter the merger of JIB with and
into U.S. Bank (the "U.S. Bank Merger") with U.S. Bank surviving
the U.S. Bank Merger (the Interim Merger and the U.S. Bank Merger
are collectively referred to herein as the "Merger") and
(ii) approval of the issuance of shares of USBANCORP Common Stock
to the shareholders of JSB pursuant to the Merger Agreement
(collectively, the "Merger Proposal"). In addition to the Merger
Proposal, shareholders of USBANCORP are being asked to
(i) approve a proposal to adjourn the USBANCORP Annual Meeting,
if necessary, to constitute a quorum or to permit further
solicitation of proxies voted in favor of the Merger Proposal,
(ii) elect five directors to serve for a term of three years or
until their successors have been elected and have qualified, and
(iii) approve the proposal to amend USBANCORP's articles of
incorporation to increase the number of authorized shares of
USBANCORP Common Stock to 12,000,000, par value $2.50. See
"ADJOURNMENT OF MEETINGS," "ELECTION OF USBANCORP DIRECTORS" and
"AMENDMENT OF USBANCORP'S ARTICLES OF INCORPORATION." USBANCORP,
as sole shareholder of JIB and U.S. Bank, will approve the
Interim Merger and the U.S. Bank Merger. Shareholders will also
consider and vote upon any other matter that may properly come
before the USBANCORP Annual Meeting. See "THE MEETINGS --
Matters to be Considered at the Meetings."
JSB. At the JSB Annual Meeting, holders of JSB's
common stock, $1.00 par value (the "JSB Common Stock"), will
consider and vote upon the approval of the Merger Agreement. In
addition to the Merger Agreement, shareholders of JSB are being
asked to (i) approve a proposal to adjourn the JSB Annual
Meeting, if necessary, to constitute a quorum or to permit
solicitation of additional proxies voted in favor of the Merger
Agreement in order for the Merger Agreement to be approved,
(ii) elect four directors to serve for a term of three years or
until a successor has been elected and has qualified or, if the
Merger Agreement is approved and the Merger is completed, for the
period of time from the date of the JSB Annual Meeting to the
completion of the Merger; and (iii) ratify the appointment of
KPMG Peat Marwick as JSB's independent auditors for 1994. See
"ADJOURNMENT OF MEETINGS," "ELECTION OF JSB DIRECTORS," and
"RATIFICATION OF APPOINTMENT OF JSB INDEPENDENT AUDITORS FOR
1994." Shareholders will also consider and vote upon any other
matter that may properly come before the JSB Annual Meeting. See
"THE MEETINGS -- Matters to be Considered at the Meetings."
Record Date; Vote Required
USBANCORP. Only USBANCORP shareholders of record at
the close of business on ____________, 1994 (the "USBANCORP
Record Date"), will be entitled to notice of, and to vote at, the
USBANCORP Annual Meeting. Each share of USBANCORP Common Stock
outstanding on the USBANCORP Record Date entitles its holder, as
of that date, to one vote. The affirmative vote, either in
person or by proxy, of holders representing at least a majority
of shares represented and voting at the USBANCORP Annual Meeting
is required to approve the Merger Proposal. As of the USBANCORP
Record Date, there were __________________ shares of USBANCORP
Common Stock entitled to be voted at the USBANCORP Annual Meeting
held by approximately ______ shareholders of record. On the
USBANCORP Record Date, the directors and the executive officers
of USBANCORP had sole voting power with respect to approximately
___________ shares or approximately __% of the then outstanding
shares of USBANCORP Common Stock that are entitled to be voted at
the USBANCORP Annual Meeting and shared voting power with respect
to approximately _________ shares or __% of the then outstanding
shares of USBANCORP Common Stock entitled to be voted at the
USBANCORP Annual Meeting. The directors and executive officers
of USBANCORP have indicated that they intend to vote all shares
of USBANCORP Common Stock over which they have sole voting power
for the Merger Proposal and to use their best efforts to cause
all shares of USBANCORP Common Stock over which they have shared
voting power to be voted for approval of the Merger Proposal.
The affirmative vote, either in person or by proxy, of holders
representing at least a majority of the shares represented and
voting at the USBANCORP Annual Meeting is required to approve
(i) the proposal to adjourn the USBANCORP Annual Meeting and
(ii) the proposal to amend USBANCORP's articles of incorporation.
It is also anticipated that the directors and executive officers
of USBANCORP will vote in favor of the proposal to adjourn the
USBANCORP Annual Meeting and the proposal to amend USBANCORP's
articles of incorporation. The five individuals receiving the
greatest number of votes shall be elected directors of USBANCORP.
See "THE MEETINGS -- Record Date; Vote Required," "ADJOURNMENT OF
MEETINGS," "ELECTION OF USBANCORP DIRECTORS" and "AMENDMENT OF
USBANCORP'S ARTICLES OF INCORPORATION."
JSB. Only JSB shareholders of record at the close of
business on __________, 1994 (the "JSB Record Date"), will be
entitled to vote at the JSB Annual Meeting. Each share of JSB
Common Stock outstanding on the JSB Record Date entitles its
holder, as of that date, to one vote. The affirmative vote,
either in person or by proxy, of the holders of shares
representing at least 66-2/3% of the outstanding shares of JSB
Common Stock is required to approve the Merger Agreement. As of
the JSB Record Date, there were _____________ shares of JSB
Common Stock entitled to be voted at the JSB Annual Meeting held
by approximately ______ holders of record. On the JSB Record
Date, the directors and the executive officers of JSB had sole
voting power with respect to approximately __________ shares or
approximately __% of the then outstanding shares of JSB Common
Stock that are entitled to be voted at the JSB Annual Meeting and
shared voting power with respect to approximately ______ shares
or approximately ______% of the then outstanding shares of JSB
Common Stock that are entitled to be voted at the JSB Annual
Meeting. As required by USBANCORP as a condition to its
execution of the Merger Agreement, the directors and executive
officers of JSB, in their individual capacities, have entered
into an agreement with USBANCORP to vote all shares of JSB Common
Stock over which they have sole voting power for approval of the
Merger Agreement and to use their best efforts to cause all
shares of JSB Common Stock over which they have shared voting
power to be voted for approval of the Merger Agreement. The
affirmative vote, either in person or by proxy, of holders
representing at least a majority of the shares represented at the
JSB Annual Meeting is required to approve the proposal to adjourn
the JSB Annual Meeting and the affirmative vote of a majority of
the shares eligible to be cast at the JSB Annual Meeting is
required to ratify the appointment of the independent auditors.
It is also anticipated that the directors and executive officers
of JSB will vote in favor of the proposal to adjourn the JSB
Annual Meeting and the proposal to ratify the appointment of the
independent auditors. The four individuals receiving the
greatest number of votes shall be elected directors of JSB. See
"THE MEETINGS -- Record Date; Vote Required," "ADJOURNMENT OF
MEETINGS," "ELECTION OF JSB DIRECTORS" and "RATIFICATION OF
APPOINTMENT OF INDEPENDENT AUDITORS."
The Merger
Background of the Merger
The Merger Agreement was initially executed on November
10, 1993. On December 20, 1993, USBANCORP proposed to JSB that
the parties amend the Merger Agreement to (i) reduce the
approximate per share consideration to be received by JSB
shareholders from $24.50 to $21.50 and (ii) permit JSB to solicit
offers from third parties and to enter into a merger agreement
with another party provided the merger consideration was in
excess of $21.50 per share. USBANCORP proposed to amend the
Merger Agreement because it had determined that the merger, under
the terms of the original merger agreement, would result in
materially greater dilution to USBANCORP earnings per share and
tangible book value per share than originally estimated.
USBANCORP was also advised by its financial advisor that the
financial advisor would be unable to deliver a fairness opinion
if the consideration remained unchanged. Receipt by USBANCORP of
a fairness opinion was a condition of closing under the
November 10, 1993 merger agreement. As a result of negotiations
between the parties which commenced on January 6, 1994, USBANCORP
and JSB agreed on the per share consideration of approximately
$22.50 that is described in this Proxy Statement/Prospectus. The
parties also agreed that JSB could solicit other offers for the
sale or acquisition of JSB from third parties and enter into an
agreement with another party on or before February 17, 1994 (the
"Marketing Period"), provided the consideration exceeded
$22.50 per share. The respective Boards of Directors of
USBANCORP and JSB met on January 18, 1994, and each approved
execution of the amendment to the Merger Agreement. Under the
Merger Agreement, as amended, JSB solicited other offers until
February 17, 1994. No other offers were received by JSB. The
parties also agreed to terminate the stock option agreement dated
November 10, 1993, and to execute a new stock option agreement
dated January 18, 1994, that would become effective after
February 17, 1994. See "THE MERGER --Background and Reasons for
the Merger and Recommendations of the Boards."
Effective Date of the Merger
The Merger will become effective at the close of
business on the date on which both (i) the Interim Merger is
consummated by filing of Articles of Merger with the Department
of State of the Commonwealth of Pennsylvania in accordance with
the Pennsylvania Business Corporation Law of 1988, as amended
(the "BCL") and (ii) the U.S. Bank Merger is consummated by the
filing of the Notice of Consummation with the Office of the
Comptroller of Currency (the "OCC"), in accordance with the
National Bank Act, as amended (the "National Bank Act"), or on
such later date as the Articles of Merger and the Notice of
Consummation may specify (the "Effective Date"). See "THE
MERGER -- Effective Date of the Merger."
Effects of the Merger
On the Effective Date, each outstanding share of JSB
Common Stock (other than shares held by persons who have
perfected dissenters' rights, if any) will be converted into and
become a right to receive $10.13 in cash and a fraction of a
share of USBANCORP Common Stock determined by dividing $22.50 by
the average closing price of USBANCORP Common Stock for the ten
trading days immediately preceding the closing date of the Merger
(the "Average Closing Price") and multiplying by .55, except that
in no event will such fraction be greater than .5053 shares or
less than .4853 shares (the "Exchange Rate"), unless a holder
elects to convert all of the shares of JSB Common Stock held by
such person into either (i) a fraction of a share of USBANCORP
Common Stock determined by dividing $22.50 by the Average Closing
Price, except that in no event will such fraction be greater than
.9184 shares or less than .8824 shares, (the "Stock Election") or
(ii) $22.50 in cash (the "Cash Election"). Subject to certain
exceptions described below, USBANCORP will not issue, in the
aggregate, more than 982,197 shares of USBANCORP Common Stock
(the "Stock Limitation") or pay more than $19,690,594 in cash
(the "Cash Amount") to shareholders of JSB. USBANCORP may issue
additional shares of USBANCORP Common Stock and pay additional
cash in exchange for up to 12,000 shares of JSB Common Stock
issuable upon the exercise of stock options and USBANCORP will
pay additional cash amounts (i) in lieu of fractional shares
(ii) in excess of $22.50 per share, to persons who perfect their
dissenters' rights, if any, and (iii) in connection with the
cancellation of options to acquire 94,360 shares of JSB Common
Stock with respect to which holders have contractually waived
their exercise rights. The number of options that will be
cancelled in exchange for cash may increase from 94,360 to
106,360 if the holders of exercisable options to acquire 12,000
shares do not exercise their options. The Stock Limitation and
the Cash Amount shall be collectively referred to herein as the
"Merger Consideration." See "THE MERGER -- Election Procedures"
for a discussion of the allocation mechanism. No fractional
shares of USBANCORP Common Stock will be issued. In lieu of
fractional shares, USBANCORP will pay cash in an amount equal to
the fractional part of a share to which a JSB shareholder is
entitled, multiplied by $25.50. See "THE MERGER -- General Terms
of the Merger."
In connection with the Merger, (i) options to purchase
up to 106,360 shares of JSB Common Stock granted under JSB's
Employee Stock Compensation Program prior to the date of the
Merger Agreement which remain unexercised prior to the Effective
Date will be converted, on the Effective Date, into a right to
receive cash in an amount equal to (a) the difference between
$22.50 and the exercise price of each option multiplied by
(b) the number of shares of JSB Common Stock covered by such
option. Holders of options to acquire 94,360 shares of JSB
Common Stock have committed to USBANCORP in writing not to
exercise their options prior to consummation of the Merger. See
"THE MERGER -- General Terms of the Merger."
The parties have agreed that USBANCORP will pay JSB
shareholders $22.50 per share for each share of JSB Common Stock
surrendered, assuming a USBANCORP Common Stock price between
$24.50 and $25.50 per share. Both USBANCORP and JSB shareholders
who elect to receive all or a portion of the Merger Consideration
in USBANCORP Common Stock bear the risk of change in the market
value of USBANCORP Common Stock outside of such range.
Therefore, the actual consideration received by JSB shareholders
who elect to receive all or a portion of the Merger Consideration
in USBANCORP Common Stock may be greater or less than $22.50 per
share if the market value of USBANCORP Common Stock on the
Effective Date is less than $24.50 per share or greater than
$25.50 per share. As of the date of the amendment to the Merger
Agreement and as of ___________, 1994, the value of the Merger
Consideration per share of JSB Common Stock, as determined using
the average closing price of USBANCORP Common Stock immediately
preceding such dates, was $22.48 and $_____, respectively. See
"THE MERGER -- Conditions to Consummation of the Merger."
In an effort to assure that JSB shareholders continue
to receive a cash dividend in accordance with past practices of
JSB during the pendency of the Merger, the Merger Agreement,
subject to certain restrictions, permits JSB to pay its regular
quarterly cash dividend of $.05 per share for each quarter in
1994 prior to the Effective Date if the Effective Date is not on
or before USBANCORP's record date for payment of its regular cash
dividend of at least $0.22 per share in such quarter.
Reasons for the Merger and Recommendations of the Boards of
Directors
USBANCORP. The Board of Directors of USBANCORP
believes the Merger is fair to, and in the best interest of,
USBANCORP and its shareholders and unanimously recommends that
its shareholders approve the Merger Proposal. The Board of
Directors of USBANCORP believes that the Merger will
significantly increase its market share in the Johnstown
metropolitan area and enhance the value of its franchise. See
"THE MERGER -- Background and Reasons for the Merger and
Recommendations of the Boards" and "-- Opinions of Financial
Advisors."
JSB. The Board of Directors of JSB believes the Merger
is fair to, and in the best interest of, JSB and its shareholders
and unanimously recommends that its shareholders approve the
Merger Agreement. The JSB Board of Directors believes that the
Merger will provide significant value to its shareholders and,
because JSB shareholders are given the option to convert some or
all of their JSB Common Stock into USBANCORP Common Stock, the
Merger will also enable them to participate in USBANCORP's
potential growth. The JSB Board of Directors also believes that
the Merger will result in a broader range of products and
services for JSB customers than JSB presently offers as an
independent entity. See "THE MERGER -- Background and Reasons
for the Merger and Recommendations of the Boards," and " --
Opinions of Financial Advisors." For information on the
interests of certain officers and directors of JSB in the Merger,
see "INTERESTS OF CERTAIN PERSONS IN THE MERGER."
Opinions of Financial Advisors
USBANCORP. Legg Mason Wood Walker, Incorporated ("Legg
Mason") has served as financial advisor to USBANCORP in
connection with the Merger and has delivered its opinion to the
USBANCORP Board of Directors that the Merger Consideration is
fair from a financial point of view to USBANCORP. For additional
information concerning Legg Mason and its opinion, see "THE
MERGER -- Opinions of Financial Advisors" and the opinion of Legg
Mason attached as Annex B to this Proxy Statement/Prospectus.
JSB. Alex. Brown & Sons Incorporated ("Alex. Brown")
and RP Financial, Inc. ("RP Financial") have served as financial
advisors to JSB in connection with the Merger and each has
provided an opinion to the JSB Board of Directors that the Merger
Consideration is fair from a financial point of view to JSB
shareholders. For additional information concerning Alex. Brown,
RP Financial and their opinions, see "THE MERGER -- Opinions of
Financial Advisors" and the opinions of Alex. Brown and
RP Financial attached as Annex C and Annex D, respectively, to
this Proxy Statement/Prospectus.
Financing the Merger
USBANCORP will pay approximately $19,690,594 in cash to
JSB shareholders in connection with the Merger. The source of
funds to finance this portion of the Merger Consideration will be
a combination of interest bearing deposits with banks and the
sale of investment securities classified as available for sale.
For a presentation of the pro forma effects of the Merger, see
"PRO FORMA FINANCIAL INFORMATION," and "THE MERGER -- Financing
the Merger."
Conditions to Merger
The consummation of the transactions contemplated by
the Merger Agreement is subject to satisfaction or waiver of
various conditions, including, among other things, receipt of
shareholder approvals and approval of various aspects of the
Merger from the Board of Governors of the Federal Reserve System
(the "Federal Reserve Board"), the OCC, the FDIC and the
Pennsylvania Department of Banking (the "Department"); the
absence of any material adverse change in the consolidated
assets, financial condition or results of operations, taken as a
whole, of either USBANCORP or JSB; receipt of an opinion of
counsel at the closing of the Merger with respect to certain
federal income tax consequences of the Merger satisfactory to JSB
and its counsel; and other conditions precedent customary in
transactions such as the Merger. In addition, it is a condition
to JSB's obligations under the Merger Agreement that the Average
Closing Price is greater than $20.50 per share. No assurance can
be given that all such conditions will be met. See "THE MERGER -
- - Conditions to Consummation of the Merger."
Representations, Warranties, and Covenants
The Merger Agreement contains customary
representations, warranties and covenants for transactions
similar to the Merger, including covenants which restrict the
manner in which JSB may do business to activities which are in
the ordinary course of its business, consistent with past
practices. See "THE MERGER -- Representations and Warranties,"
"-- Conduct of Business Pending the Merger," "-- Management and
Operations After the Merger."
Waiver and Amendment
At any time prior to the Effective Date, USBANCORP and
JSB may agree in a writing signed by both parties to: (i) amend
the Merger Agreement; (ii) extend the time for performance of
obligations under the Merger Agreement; (iii) waive any
inaccuracies in the representations and warranties contained in
the Merger Agreement; or (iv) waive compliance of any conditions
to consummation of the Merger. See "THE MERGER -- Waivers;
Amendment."
Termination of the Merger Agreement
The Merger Agreement may be terminated at any time on
or prior to the Effective Date: (i) by the written agreement of
the parties; or (ii) by either USBANCORP or JSB (a) if there has
been a material breach of any representation, warranty or
covenant of the other party contained in the Merger Agreement
which cannot be or is not cured within 30 days after receipt by
the other party of written notice of the same; (b) if the
Effective Date has not occurred prior to September 30, 1994,
unless the failure of such occurrence is due to the failure of
the party seeking to terminate to perform its obligations under
the Merger Agreement; (c) if a party has been informed in writing
by a regulatory authority that the approval sought is unlikely to
be granted, unless such fact results from a failure of the party
seeking to terminate to perform its obligations under the Merger
Agreement; (d) if there has been a material adverse change (as
defined in the Merger Agreement) since September 30, 1993, in the
other party; or (e) if the other party shall communicate its
unwillingness to consummate the Merger Agreement in accordance
with its terms and conditions. See "THE MERGER -- Termination of
the Merger Agreement."
Election Procedures
On or before the Effective Date, U.S. Bank, as Exchange
Agent, will mail to each holder of record of shares of JSB Common
Stock as of the Effective Date a form to be used by each holder
to make a Stock Election, Cash Election or no election, in which
case the holder will receive shares of USBANCORP Common Stock and
cash in accordance with the Exchange Rate. Because the aggregate
cash and stock components of the Merger Consideration are fixed
within a specified range, the extent to which such elections will
be accommodated will depend upon the respective numbers of JSB
shareholders who make a Stock Election, a Cash Election or no
election. Accordingly, a JSB shareholder who elects to receive
all cash may instead receive USBANCORP Common Stock (plus cash in
lieu of fractional shares) or a combination of USBANCORP Common
Stock and cash, and a JSB shareholder who elects to receive
solely USBANCORP Common Stock may instead receive cash or a
combination of USBANCORP Common Stock and cash. See "THE
MERGER -- Election Procedures."
JSB SHAREHOLDERS SHOULD NOT FORWARD JSB STOCK
CERTIFICATES TO JSB OR USBANCORP UNTIL THEY HAVE RECEIVED
TRANSMITTAL FORMS. JSB SHAREHOLDERS SHOULD NOT RETURN STOCK
CERTIFICATES WITH THE ENCLOSED PROXY CARD.
Management and Operations After the Merger
The members of the Board of Directors of USBANCORP and
U.S. Bank in office immediately prior to the Effective Date of
the Merger will remain as members of their respective Boards upon
completion of the Merger. In addition, on the Effective Date,
and without the necessity of further corporate action by
USBANCORP, the number of directors of USBANCORP will increase by
two and James M. Edwards, Sr., and James C. Dewar, each of whom
are presently directors of JSB, will become directors of
USBANCORP. In addition, one of the two new directors will be
appointed to USBANCORP's executive committee.
At the same time, the number of directors of U.S. Bank
will increase by four, and Messrs. Edwards and Dewar, together
with Howard M. Picking, III and Kim W. Kunkle, each of whom are
presently directors of JSB, will become directors of U.S. Bank.
USBANCORP, as sole shareholder of U.S. Bank, has agreed in the
Merger Agreement to vote in favor of the election of these
directors to the U.S. Bank Board of Directors in each of the two
succeeding years. Those directors of JSB who are not elected to
serve on the Board of Directors of U.S. Bank will be appointed to
serve for a one year term on U.S. Bank's Main Office Advisory
Board, will hold office until a successor is appointed, and will
continue to receive an annual retainer, for a period not to
exceed three years, in the amount they currently receive as JSB
directors. U.S. Bank has agreed in the Merger Agreement to use
its best efforts to cause such persons to be re-appointed to such
Advisory Board in each of the two succeeding years. The officers
of USBANCORP and U.S. Bank will remain the same after the Merger.
The executive officers of JSB will not be employed by USBANCORP
or any of its subsidiaries after the Merger, but will receive
certain severance payments from USBANCORP. See "THE MERGER --
Management and Operations After the Merger," and "INTERESTS OF
CERTAIN PERSONS IN THE MERGER."
USBANCORP expects to achieve cost savings and earnings
enhancements following the Merger principally through the
consolidation of certain operations, the elimination of redundant
costs and the offering of additional products and services to JSB
depositors and customers. Because of the uncertainties
associated with merging two in-market institutions, and changes
in the regulatory environment and economic conditions, no
assurances can be given as to whether any particular level of
cost savings or earnings enhancements will, in fact, be realized
or as to the ultimate timing of any such cost savings and
earnings enhancements. See "THE MERGER -- Management and
Operations After the Merger -- Consolidation of Operations;
Projected Operating Cost Savings and Earnings Enhancements."
Shareholders' Dissenters' Rights
Pursuant to Section 1607 of the Pennsylvania Banking
Code of 1965, as amended, a JSB shareholder will have the right
to dissent from the Merger and to be paid cash for the "fair
value" of such shareholder's shares provided such shareholder
does not vote in favor of the Merger Agreement and such
shareholder complies with certain notice and other statutory
procedures set forth in Section 1930 and Subchapter D of
Chapter 15 of the BCL. A copy of these sections of the BCL are
attached to this Proxy Statement/Prospectus as Annex E.
Pennsylvania law defines "fair value" to mean the fair value of
the shares immediately before the Merger is effected, taking into
account all relevant factors but excluding any appreciation or
depreciation in anticipation of the Merger. In order for a
holder of JSB Common Stock to perfect dissenters' rights, such
holder must file with JSB, prior to the JSB Annual Meeting, a
written notice of intent to demand payment for his shares if the
Merger is effected. Neither a delivery of a proxy appointment
directing a vote against the Merger nor a vote against the Merger
will constitute such written notice. Certain additional
procedures must be followed in order for a JSB shareholder to
exercise dissenters' rights. Any deviation from such procedures
may result in the forfeiture of dissenters' rights. Accordingly,
shareholders wishing to dissent from the Merger are urged to read
carefully "THE MERGER -- Dissenters' Rights of JSB Shareholders"
and Annex E to this Proxy Statement/Prospectus.
Effect on JSB Employee Benefit Plans
The employee benefit plans of JSB initially will be
unaffected by the Merger except that JSB's Deferred Compensation
Plan, Employee Stock Compensation Program, Stock Purchase Program
and Executive Annual Incentive Plan will be terminated on or
immediately following the Effective Date. Subject to the receipt
of the Internal Revenue Service's approval, USBANCORP intends to
amend its current employee benefit plans to cover those former
employees of JSB who become employees of USBANCORP or its
subsidiaries and terminate JSB's current employee benefit plans.
Under the Merger Agreement, subject to the foregoing,
the Board of Directors of USBANCORP is permitted to discontinue
or amend any particular plan of JSB after the Effective Date.
See "THE MERGER -- Effect on JSB Employee Benefit Plans."
Federal Income Tax Consequences
As a condition of closing, Stevens & Lee, counsel to
USBANCORP, or other counsel mutually acceptable to the parties,
is required to deliver an opinion that, under current federal
income tax law and regulations, the Interim and U.S. Bank Mergers
will constitute reorganizations within the meaning of
Section 368(a) of the Internal Revenue Code of 1986, as amended,
and that no gain or loss will be recognized by USBANCORP, JIB or
JSB. In such event, a holder of JSB Common Stock who receives
solely USBANCORP Common Stock in exchange for shares of JSB
Common Stock in the Merger will not recognize any gain or loss
for federal income tax purposes, except with respect to cash
received in lieu of a fractional share. If the consideration
received by a holder of JSB Common Stock consists of part cash
and part USBANCORP Common Stock, a shareholder whose adjusted
basis in the shares of JSB Common Stock surrendered in the
transaction is less than the value, as of the Effective Date, of
the USBANCORP Common Stock plus the amount of cash received will
realize income on the transaction. Provided the receipt of cash
does not have the effect of a dividend, such shareholders will
recognize gain equal to the lesser of (i) the excess, if any, as
of the Effective Date, of the value of USBANCORP Common Stock
plus the amount of cash received, over the adjusted basis of the
shares of JSB Common Stock surrendered in the transaction, and
(ii) the amount of cash received. No loss will be recognized by
a JSB shareholder who receives part cash and part USBANCORP
Common Stock in exchange for his or her JSB Common Stock. If the
consideration received by a holder of JSB Common Stock consists
entirely of cash, in general, gain will be recognized by the
shareholder to the extent of the difference, if any, between the
amount of cash received and the adjusted tax basis of the shares
of JSB Common Stock surrendered in the transaction. The receipt
of cash for shares of JSB Common Stock pursuant to the exercise
of dissenters' rights will be a taxable transaction. Any
shareholder considering the exercise of dissenters' rights should
consult his or her tax advisor regarding the tax consequences
thereof. For a more complete description of federal income tax
consequences of the Merger, see "THE MERGER -- Tax Consequences."
Because of the complexity of the tax laws and the
individual nature of the tax consequences of the Merger, it is
recommended that each shareholder consult a tax advisor
concerning the applicable federal, state and local income tax
consequences to him of such transactions.
Accounting Treatment
The Merger will be treated as a purchase for accounting
purposes. See "THE MERGER -- Accounting Treatment."
Interests of Certain Persons in the Merger
Certain members of JSB's management and the JSB Board
of Directors have interests in the Merger that are in addition to
their interests as shareholders of JSB generally. These include
(i) the appointment of certain members of the JSB Board of
Directors to the Boards of USBANCORP and U.S. Bank and certain
committees thereof (as described above), (ii) payment of
severance benefits to certain executive officers resigning on the
Effective Date and (iii) indemnification, for a period of six
years after the Effective Date, by USBANCORP of all persons who
served as officers and directors of JSB and JSB subsidiaries with
respect to all liabilities and claims resulting from (a) their
service as such prior to the Effective Date, in accordance with
the provisions of USBANCORP's Articles of Incorporation and
Bylaws, and (b) the Merger or any of the other transactions
contemplated by the Merger Agreement. See "INTERESTS OF CERTAIN
PERSONS IN THE MERGER" and "THE MERGER -- Management and
Operations After the Merger."
Certain Related Transactions
Stock Option Agreement
As a condition to USBANCORP's execution of the amended
Merger Agreement on January 18, 1994, JSB granted USBANCORP an
option to purchase up to 19.9% of the issued and outstanding JSB
Common Stock pursuant to a stock option agreement dated
January 18, 1994 (the "Stock Option Agreement"), attached hereto
as Exhibit F. The option became effective on February 18, 1994,
after expiration of the Marketing Period. The option may be
exercised by USBANCORP upon the occurrence of specified events
which have the potential for a third party to effect an
acquisition of control of JSB prior to the termination of the
Merger Agreement and, under certain circumstances, for a period
of one year thereafter. The exercise price per share to purchase
JSB Common Stock under the option is equal to the lower of $16.50
or the lowest price per share that JSB accepts in a transaction
which triggers the exercise of the option. The Stock Option
Agreement also permits USBANCORP to cause JSB to repurchase the
option in the event it becomes exercisable at a price equal to
the difference between the exercise price per share and the price
to be paid by a third party for JSB Common Stock multiplied by
the number of shares for which the option can then be exercised,
plus certain of USBANCORP's expenses. None of such triggering
events has occurred as of the date hereof. Acquisitions of
shares of JSB Common Stock pursuant to exercises of the option
would be subject to prior regulatory approval under certain
circumstances. See "CERTAIN RELATED TRANSACTIONS -- Stock Option
Agreement."
Other
Pursuant to the Merger Agreement, USBANCORP granted
JSB, through the end of the Marketing Period on February 17,
1994, the right to solicit, market, initiate or engage in
discussions regarding the sale or acquisition of JSB by any third
party and to execute a definitive agreement for the sale of JSB
with any third party for consideration that exceeded $22.50 per
share. After February 17, 1994, JSB has agreed in the Merger
Agreement that it will not solicit or engage in any discussions
or negotiations with or respond to requests or inquiries for
information from any person other than USBANCORP concerning any
acquisition of JSB or any of its subsidiaries except (i) for
responses in connection with investor relations or pursuant to
inquiries of government regulatory authorities, and (ii) that JSB
may respond to requests for information, enter into discussions,
respond to inquiries from and enter into agreements with third
parties if the JSB Board of Directors determines that such
actions are required to be taken by the JSB Board of Directors in
the exercise of its fiduciary duty, and it receives a written
opinion of counsel to such effect. See "THE MERGER -- No
Solicitation of Transactions." In addition, the executive
officers and directors of JSB have agreed to vote all shares of
JSB Common Stock over which they have sole voting power for the
Merger Agreement and to use their best efforts to cause all
shares of JSB Common Stock over which they have shared voting
power to be voted for approval of the Merger Agreement. See "THE
MEETINGS -- Matters to be Considered at the Meetings."
The Stock Option Agreement and the above-described
agreements of JSB and of such executive officers and directors
may have the effect of precluding or discouraging persons who
might now or prior to the Effective Date be interested in
acquiring all or a significant interest in JSB from considering
or proposing such an acquisition, even if such persons were
willing to pay a higher price per share for JSB Common Stock than
the price per share implicit in the Merger Consideration at that
time, or might result in a potential acquiror proposing to pay a
lower per share price to acquire JSB than it might otherwise have
proposed to pay. See "CERTAIN RELATED TRANSACTIONS -- Stock
Option Agreement."
Certain Differences in Shareholders' Rights
At the Effective Date, shareholders of JSB, except
shareholders who may perfect dissenters' rights as provided by
Section 1607 of the Pennsylvania Banking Code of 1965, as amended
and in accordance with the procedures set forth in Subchapter D
of Chapter 15 of the BCL, automatically will become shareholders
of USBANCORP unless they elect to, and do, receive all cash in
exchange for their JSB Common Stock. Their rights as
shareholders of USBANCORP will be determined by the BCL and by
USBANCORP's Articles of Incorporation and Bylaws. The rights of
shareholders of USBANCORP differ from the rights of shareholders
of JSB with respect to certain important matters, including
election of directors, the right to remove directors, the right
to amend the Articles of Incorporation and Bylaws, the right to
call a special meeting of shareholders, the required shareholder
vote as to certain matters, and restrictions on certain business
combinations. For a summary of these differences, see
"COMPARISON OF RIGHTS OF HOLDERS OF USBANCORP COMMON STOCK AND
JSB COMMON STOCK." In addition, USBANCORP has adopted a
shareholder rights plan which is discussed under "DESCRIPTION OF
USBANCORP CAPITAL STOCK -- Shareholder Rights Plan."
Comparative Unaudited Per Share Information
The following table sets forth certain unaudited
comparative per share information (i) on an historical basis for
USBANCORP and JSB, (ii) on a pro forma combined basis per share
of USBANCORP Common Stock to reflect completion of the Merger,
and (iii) on a pro forma equivalent basis per share of JSB Common
Stock to reflect completion of the Merger. The pro forma
information has been prepared giving effect to the Merger on a
purchase accounting basis. For a description of the effect of
purchase accounting, see "THE MERGER -- Accounting Treatment."
USBANCORP expects to achieve certain operating cost savings and
earnings enhancements as a result of the Merger. Such cost
savings and earnings enhancements are not reflected in the pro
forma information set forth below. See "THE MERGER -- Management
and Operations After the Merger -- Consolidation of Operations;
Projected Operating Cost Savings and Earnings Enhancements." The
pro forma financial information should be read in conjunction
with the historical consolidated financial statements of
USBANCORP and JSB and the related notes thereto included in
documents incorporated by reference herein, and in conjunction
with the unaudited pro forma financial information appearing
elsewhere in this Proxy Statement/Prospectus. See "AVAILABLE
INFORMATION," "INCORPORATION OF CERTAIN INFORMATION BY REFERENCE"
and "PRO FORMA FINANCIAL INFORMATION."
The following information is not necessarily indicative
of the results of operations or combined financial position that
would have resulted had the Merger been consummated at the
beginning of the periods indicated, nor is it necessarily
indicative of the results of operation of future periods or
future combined financial position.
<PAGE>
<TABLE>
<CAPTION> SUMMARY
At or for the
Year Ended December 31,
1993
<S> <C>
Book Value Per
Common Share
Historical:
USBANCORP $24.67
JSB 14.19
Pro Forma:
Pro forma per share
of USBANCORP Common
Stock 24.56
Equivalent pro forma
per share of JSB
Common Stock(1) 12.41
Equivalent pro forma
per share of JSB
Common Stock plus
cash consideration(2) 22.54
Dividends Declared Per
Common Share
Historical:
USBANCORP $ 0.86
JSB 0.15
Pro Forma:
Pro forma combined
per share of
USBANCORP Common Stock 0.86
Equivalent pro forma
per share of JSB Common
Stock(1) 0.43
Net Income Per Common Share
Historical:
USBANCORP
Primary(3) $ 2.45
Fully diluted(3) 2.41
JSB
Primary 1.73
Fully diluted 1.70
<PAGE>
Pro Forma:
Combined Per share
of USBANCORP Common Stock
Primary(3) $2.22
Fully diluted(3) 2.19
Equivalent pro forma
per share of JSB(1)
Common Stock
Primary 1.12
Fully diluted 1.11
_______________
<FN>
(1) Pro forma equivalent amounts represent pro forma combined
information multiplied by the exchange ratio of .5053 shares
of USBANCORP Common Stock for each share of JSB Common
Stock. The exchange ratio used in this pro forma
presentation was determined based upon the average "UBAN"
price for the ten trading days from February 17, 1994, to
March 4, 1994. In accordance with the terms of the Merger
Agreement, the actual exchange ratio will be based upon the
average trading price for the ten trading day period
immediately preceding the Effective Date.
(2) Equals the pro forma equivalent book value per common share
of JSB plus $10.13 per share cash consideration payable by
USBANCORP to JSB shareholders.
(3) Income before cumulative effect of change in accounting
principle required by the adoption of Statement of Financial
Accounting Standard No. 109, "Accounting for Income Taxes."
</TABLE>
<PAGE>
Market Prices of Common Stock
Both the USBANCORP Common Stock and the JSB Common
Stock are included for quotation on the NASDAQ/NMS.
The following table sets forth the closing price per
share as reported on the NASDAQ/NMS of USBANCORP Common Stock and
JSB Common Stock and the equivalent per share price for JSB
Common Stock giving effect to the Merger as of: (i) November 9,
1993, the last business day preceding public announcement of the
Merger, (ii) January 17, 1994, the last business day preceding
the public announcement of the amendment to the Merger Agreement
and (iii) April ___, 1994, the last practicable date prior to the
mailing of this Proxy Statement/Prospectus. The equivalent price
per share of JSB Common Stock at each specified date represents
the closing price of a share of USBANCORP Common Stock on such
date multiplied by the applicable exchange rate for the USBANCORP
Common Stock portion of the Merger Consideration as provided for
in the Merger Agreement. Total equivalent price per share of
JSB Common Stock at each specified date represents the equivalent
price per share of JSB Common Stock plus $10.13, which equals the
cash portion of the Merger Consideration to be paid for each
share of JSB Common Stock surrendered.
<TABLE>
<CAPTION>
JSB
Total
Equivalent Equivalent
Market Market
USBANCORP Value Value
Historical Historical Per Share Per Share
<S> <C> <C> <C> <C>
November 9, 1993 $26.25 $19.00 $12.74 $22.87
January 17, 1994 24.75 18.00 12.38 22.51
April __, 1994
</TABLE>
JSB shareholders are advised to obtain current market
quotations for USBANCORP Common Stock and JSB Common Stock.
Because the market price of USBANCORP Common Stock at the
Effective Date may be higher or lower than the market price at
the time the Merger Agreement was executed, at the date of
mailing of this Proxy Statement/Prospectus or at the time of the
Annual Meetings, JSB shareholders will not be assured of
receiving any specific market value of USBANCORP Common Stock at
the Effective Date.
<PAGE>
USBANCORP SELECTED HISTORICAL FINANCIAL DATA
The following table sets forth certain selected
historical consolidated summary financial data for USBANCORP.
That data is derived from, and should be read in conjunction
with, the historical consolidated financial statements of
USBANCORP, including the related notes thereto, incorporated by
reference in this Proxy Statement/Prospectus. See "INCORPORATION
OF CERTAIN INFORMATION BY REFERENCE" and "AVAILABLE
INFORMATION."
The selected historical consolidated summary financial
information for the years ended December 31, 1989, through
December 31, 1993, are derived from USBANCORP's audited
consolidated financial statements. The consolidated financial
statements of USBANCORP for the years ended December 31, 1993,
and 1992, have been audited by Arthur Andersen & Co., independent
public accountants, and the consolidated financial statements of
USBANCORP for each of the three years ended December 31, 1991,
have been audited by Price Waterhouse, independent accountants.
<PAGE>
SELECTED HISTORIAL FINANCIAL
INFORMATION OF USBANCORP
<TABLE>
<CAPTION>
Year Ended December 31,
1993 1992(1) 1991 1990 1989
(Dollars in Thousands, except per share data and ratios)
<S> <C> <C> <C> <C> <C>
Summary of Income Data:
Total interest income $ 85,735 $ 82,790 $ 66,446 $ 70,469 $ 69,237
Total interest expense 36,250 38,349 33,538 38,763 39,138
Net interest income 49,485 44,441 32,908 31,706 30,099
Provision for loan
losses 2,400 2,216 900 915 945
Net interest income after
provision for loan
losses 47,085 42,225 32,008 30,791 29,154
Total non-interest income 10,150 8,346 6,035 5,340 5,391
Total non-interest
expense 40,715 36,248 28,862 27,198 27,783
Income before income
taxes, extraordinary item,
and cumulative effect of
change in accounting
principle 16,520 14,323 9,181 8,933 6,762
Provision for income
taxes 5,484 5,440 2,873 2,745 1,957
Income before extraordinary
item, and cumulative effect
of change in accounting
principle 11,036 8,883 6,308 6,188 4,805
Extraordinary item-
utilization of net
operating loss
carryforward --- --- 1,004 1,474 1,711
Income before cumulative
effect of change in
accounting principle 11,036 8,883 7,312 7,662 6,516
Cumulative effect of change
in accounting principle--
adoption of SFAS #109 1,452 --- --- --- ---
Net income $ 12,488 $ 8,883 $ 7,312 $ 7,662 $ 6,516
Net income applicable
to common stock $ 12,385 $ 7,710 $ 6,139 $ 6,489 $ 5,343
Per Common Share Data:
Primary Earnings:
Income before extraordinary
item, and cumulative
effect of change in
accounting principle $ 2.45 $ 2.67 $ 2.00 $ 1.97 $ 1.43
Net income 2.78 2.67 2.39 2.55 2.10
Cash dividends declared 0.86 0.75 .55 0.15 ---
Book value at period
end(2) 24.67 23.08 21.71 19.85 17.43
Average number of common
shares outstanding 4,456,820(9) 2,888,145(10) 2,561,175 2,546,970 2,538,839
Fully Diluted Earnings:
Income before extraordinary
item, and cumulative
effect of change in
accounting principle $2.41 $2.53 $1.97 $1.95 $AD(11)
Net income 2.72 2.53 2.29 2.41 2.06
Average number of common
shares outstanding 4,588,622(9) 3,515,217(10) 3,188,247 3,174,042 3,165,911
<PAGE>
Balance Sheet Data:
Total assets $1,241,521 $1,139,855 $784,036 $774,403 $751,228
Loans, net of unearned
income 726,132 648,915 430,151 445,814 446,046
Allowance for loan losses 15,260 13,752 13,003 12,470 12,315
Investment securities and
investment securities
available for sale(3) 428,712 366,888 289,772 235,722 195,978
Deposits 1,048,866 997,591 676,698 674,176 658,817
Long-term debt 3,445 9,409 5,888 6,193 6,299
Shareholders' equity 116,615 82,971 70,023 65,050 58,827
Selected Financial Ratios:
Return on average total
equity before extra-
ordinary item, and
cumulative effect of
change in accounting
principle 10.13% 11.41% 9.39% 10.00% 8.60%
Return on average assets
before extraordinary
item, and cumulative
effect of change in
accounting principle 0.91 0.85 0.83 0.82 0.65
Loans, net of unearned income,
as a percent of deposits,
at period end 69.33 65.05 63.57 66.13 67.70
Ratio of average total equity to
average assets 8.96 7.48 8.85 8.18 7.53
Common stock cash dividends
as a percent of net income
applicable to common
stock 32.28 28.16 22.94 5.90 ---
<PAGE>
Common and preferred stock
cash dividends as
a percent of net
income 32.84 37.64 35.30 20.31 18.00
Interest rate spread(4) 3.72 3.93 3.69 3.46 3.23
Net interest margin(5) 4.34 4.58 4.69 4.56 4.35
Allowance for loan losses
as a percentage of
loans, net of
unearned income, at
period end(6) 2.10 2.12 3.02 2.80 2.76
Non-performing assets as a
percentage of loans and
other real estate owned,
at period end 0.89 1.58 1.10 0.87 0.94
Net charge-offs as a
percentage of average
loans 0.13 0.58 0.08 0.17 0.28
Ratio of earnings to fixed
charges and preferred
dividends(7):
Excluding interest on
deposits 5.26x 4.05x 4.54x 3.87x 3.17x
Including interest on
deposits 1.45 1.36 1.26 1.22 1.17
GAP ratio, at period
end(8) 1.10 1.14 1.06 0.97 1.00
_______________________________________________________________________________
<FN>
(1) Includes the results of operation of Community for the
period from March 23, 1992.
(2) Common shareholders' equity (total shareholders' equity less
preferred stock at redemption value) divided by outstanding
common shares at period end.
(3) At September 30, 1992, USBANCORP classified its investment
portfolio as "Available for Sale."
(4) Represents the difference between the average yield earned
on interest earning assets, computed on a tax-equivalent
basis, and the average rate paid on interest bearing
liabilities.
(5) Represents net interest income, computed on a tax-equivalent
basis, as a percentage of average total interest earning
assets.
(6) See Note 7 of the Notes to USBANCORP's Consolidated
Financial Statements.
(7) The ratio of earnings to fixed charges and preferred
dividends is computed by dividing the sum of income before
taxes, fixed charges and preferred dividends (as adjusted by
the ratio of pre-tax income to net income) by the sum of
fixed charges and preferred dividends. Fixed charges
represent interest expense and are shown as both excluding
and including interest on deposits.
(8) Represents rate sensitive assets (interest earning assets
which will mature or reprice within one year) divided by
rate sensitive liabilities (interest bearing liabilities
which will mature or reprice within one year).
(9) On February 18, 1993, USBANCORP issued 1,150,000 shares of
USBANCORP Common Stock in a secondary public offering.
(10) In connection with the acquisition by USBANCORP of
Community, USBANCORP issued 388,213 shares of USBANCORP
Common Stock.
(11) Anti-dilutive.
</TABLE>
<PAGE>
JSB SELECTED HISTORICAL FINANCIAL DATA
The following table sets forth certain selected
historical consolidated summary financial data for JSB. This
data is derived from, and should be read in conjunction with, the
historical consolidated financial statements of JSB, including
the related notes thereto, included in this Proxy
Statement/Prospectus. See "JSB CONSOLIDATED FINANCIAL
STATEMENTS."
The selected historical consolidated summary financial
information for the years ended December 31, 1989, through
December 31, 1993, are derived from JSB's audited consolidated
financial statements. The consolidated financial statements of
JSB for the years ended December 31, 1993, and 1992, have been
audited by KPMG Peat Marwick, independent public accountants.
The consolidated financial statements of JSB for each of the
three years ended December 31, 1991, have been audited by Ernst &
Young, independent public accountants.
<PAGE>
SELECTED HISTORICAL FINANCIAL
INFORMATION OF JSB
<TABLE>
<CAPTION>
Year Ended December 31,
1993 1992 1991 1990 1989
(Dollars in Thousands, except per share data and ratios)
<S> <C> <C> <C> <C> <C>
Summary of Income Data:
Total interest income $ 22,603 $ 23,282 $ 24,287 $ 24,938 $ 25,900
Total interest expense 12,162 12,778 15,924 17,275 18,651
Net interest income
before provision for
loan losses 10,441 10,504 8,363 7,663 7,249
Provision for Loan Losses 1,102 2,505 867 294 2,241
Net interest income after
provision for loan
losses 9,339 7,999 7,496 7,369 5,008
Total other operating
income 6,582 5,246 4,404 2,578 2,000
Total other operating
expense 11,000 13,013 10,178 9,240 19,120
Income (loss) before
provision for (benefit
from) income taxes
and cumulative effect
of change in accounting
principle 4,921 232 1,722 707 (12,112)
Provision for (benefit
from) income taxes 1,560 (677) 110 (116) 7
Income before cumulative
effect of change in
accounting principle 3,361 909 1,612 823 (12,119)
Cumulative effect of
change in accounting
for income taxes --- 1,673 --- --- ---
Net income (loss) $ 3,361 $ 2,582 $ 1,612 $ 823 $ (12,119)
Net income (loss)
per share $ 1.73 $ 1.33 $ 0.83 $ 0.42 $ (6.25)
Per Common Share Data:
Cash dividends declared $ 0.15 $ --- $ --- $ --- $ ---
Book value per share at
period end 14.19 12.56 11.23 10.39 9.97
Average number of shares
outstanding 1,940,160 1,940,150 1,940,150 1,940,150 1,940,150
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
At December 31,
1993 1992 1991 1990 1989
(Dollars in Thousands, except per share data and ratios)
<S> <C> <C> <C> <C> <C>
Balance Sheet Data:
Total assets $ 355,798 $ 320,444 $293,623 $278,571 $298,677
Total liabilities 328,218 296,083 271,844 258,404 279,333
Loans and mortgage-backed
securities held to
maturity (net of
allowances) 303,161 272,723 249,293 232,464 201,917
Investment securities,
investment securities
available for sale
and mortgaged-back
securities available
for sale and held
in trading account 21,908 10,498 12,617 14,722 47,163
Deposits 216,206 222,162 223,586 215,294 246,792
FHLB advances and
other borrowings 108,378 70,590 44,648 39,446 27,828
Shareholders' equity 27,580 24,361 21,779 20,167 19,344
Selected Other Data:
Return on average equity 13.07% 11.23% 7.67% 4.17% (52.97)%
Return on average assets 0.98 0.85 0.56 0.29 (4.07)
Average equity to
average assets 7.51 7.54 7.30 6.84 7.69
Net Interest rate spread 3.22 3.76 3.21 2.93 2.62
Net yield on interest-
earning assets 3.28 3.80 3.19 2.96 2.68
</TABLE>
<PAGE>
SELECTED PRO FORMA FINANCIAL DATA
The following tables set forth selected pro forma
income statement information of USBANCORP for the year ended
December 31, 1993, assuming the Merger was consummated at the
beginning of the period presented. All of the following selected
financial information should be read in conjunction with the
unaudited pro forma financial information, including the notes
thereto, appearing elsewhere in this Proxy Statement/Prospectus.
See "PRO FORMA FINANCIAL INFORMATION."
<PAGE>
<TABLE>
<CAPTION> SELECTED PRO FORMA FINANCIAL DATA
OF USBANCORP
Year Ended
December 31, 1993
(Dollars in Thousands, except per share
data and average shares outstanding)
<S> <C>
Summary of Income Data:
Total interest income $106,447
Total interest expense 48,423
Net interest income 58,024
Provision for loan losses 3,502
Net interest income after
provision for loan losses 54,522
Total non-interest income 16,574
Total non-interest expense 52,693
Income before income taxes
and cumulative effect of change in
accounting principle 18,403
Provision for income taxes 6,219
Income before cumulative effect of
change in accounting principle $ 12,184
Per Common Share Data Before Cumulative
Effect of Change in Accounting Principle:
Primary Earnings:
Primary net income $ 2.22
Fully diluted net income 2.19
Average fully diluted shares outstanding 5,570,236
Book value at period end $ 24.56
Tangible Book Value at period end(1) 21.82
Selected Financial Ratios Before Cumulative
Effect of Change in Accounting Principle:
Return on average assets 0.78%
Return on average equity 9.19
____________
<FN>
(1) Tangible book value is calculated by deducting the core deposit
and goodwill intangibles from total equity based upon the pro
forma balance sheet.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
At December 31, Regulatory
Capital Ratios(1) 1993 Requirement Excess
Amount Percent Amount Percent Amount Percent
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
U.S. Bank:
Tier 1 risk-based capital $ 44,676 13.02% $ 13,728 4.00% $ 30,948 9.02%
Total risk-based capital 48,966 14.27 27,455 8.00 21,511 6.27
Tier 1 leverage ratio 44,676 8.74 25,559 5.00 19,117 3.74
USBANCORP:
Tier 1 risk-based capital 113,718 14.72 30,893 4.00 82,825 10.72
Total risk-based capital 123,372 15.97 61,787 8.00 61,585 7.97
Tier 1 leverage ratio 113,718 9.18 61,931 5.00 51,787 4.18
<CAPTION>
Pro Forma At December 31, Regulatory
Capital Ratios(1) 1993 Requirement Excess
Amount Percent Amount Percent Amount Percent
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
U.S. Bank:
Tier 1 risk-based capital $ 74,433 13.59% $ 21,906 4.00% $ 52,527 9.59%
Total risk-based capital 81,279 14.84 43,813 8.00 37,466 6.84
Tier 1 leverage ratio 74,433 8.71 42,713 5.00 31,720 3.71
USBANCORP:
Tier 1 risk-based capital 124,567 12.75 39,072 4.00 85,495 8.75
Total risk-based capital 136,777 14.00 78,144 8.00 58,633 6.00
Tier 1 leverage ratio 124,567 7.88 79,085 5.00 45,482 2.88
____________
<FN>
(1) All ratios are calculated on a tangible basis eliminating core
deposit intangible and goodwill from each capital category and
from adjusted assets.
</TABLE>
<PAGE>
INTRODUCTION
This Proxy Statement/Prospectus is being furnished to
shareholders of USBANCORP in connection with the solicitation of
proxies by the Board of Directors of USBANCORP for use at the
Annual Meeting of Shareholders of USBANCORP (the "USBANCORP
Annual Meeting") to be held on May ___, 1994, at ____ p.m. local
time, at _________________________________, and at any
adjournments thereof for the purposes set forth in the USBANCORP
Notice of Annual Meeting of Shareholders.
This Proxy Statement/Prospectus is also being furnished
to shareholders of JSB in connection with the solicitation of
proxies by the Board of Directors of JSB for use at the Annual
Meeting of Shareholders of JSB (the "JSB Annual Meeting") to be
held on May ___, 1994, at ____ p.m. local time, at
____________________________________________________, Johnstown,
Pennsylvania, and at any adjournments thereof for the purposes
set forth in the JSB Notice of Annual Meeting of Shareholders.
All information contained herein relating to USBANCORP
and JSB has been furnished by their respective managements.
USBANCORP and JSB have each relied upon the information furnished
by the other as to the accuracy and completeness thereof.
THE MEETINGS
Matters to be Considered at the Meetings
USBANCORP
At the USBANCORP Annual Meeting, holders of the
USBANCORP Common Stock will consider and vote upon, as a single
proposal, the approval of the Merger Agreement, which is attached
as Annex A to this Proxy Statement/Prospectus and the issuance of
up to 988,260 shares of USBANCORP Common Stock to holders of JSB
Common Stock pursuant to the Merger Agreement (the "Merger
Proposal"). In addition to the Merger Proposal, shareholders of
USBANCORP will be asked to (i) approve a proposal to adjourn the
USBANCORP Annual Meeting, if necessary, to permit further
solicitation of proxies in the event that there are not
sufficient votes at the time of the USBANCORP Annual Meeting to
constitute a quorum or to approve the Merger Proposal, (ii) elect
five new directors for a term of three years and (iii) approve an
amendment to USBANCORP's articles of incorporation to increase
the authorized number of shares of USBANCORP Common Stock to
12,000,000, par value $2.50. Shareholders will also consider and
vote upon such other matters as may be properly brought before
the USBANCORP Annual Meeting.
The Board of Directors of USBANCORP has unanimously
approved the Merger Agreement and the issuance of the shares of
USBANCORP Common Stock in connection with the Merger and
unanimously recommends a vote FOR (i) approval of the Merger
Proposal, (ii) approval of the adjournment proposal,
(iii) election of the nominees for director and (iv) amendment of
USBANCORP's articles of incorporation.
JSB
At the JSB Annual Meeting, holders of JSB Common Stock
will consider and vote upon the approval of the Merger Agreement.
In addition to the Merger Agreement, holders of JSB Common Stock
will be asked to (i) approve a proposal to adjourn the JSB Annual
Meeting, if necessary, to permit solicitation of additional
proxies in favor of the Merger Agreement in the event that there
are not sufficient votes at the time of the JSB Annual Meeting to
constitute a quorum and to approve the Merger Agreement,
(ii) elect four directors for a term of three years, or, if the
Merger Agreement is approved and the Merger is completed, for the
period of time from the date of the JSB Annual Meeting to the
completion of the Merger and (iii) ratify the appointment of KPMG
Peat Marwick as the independent auditors for 1994. Shareholders
will also consider and vote upon such other matters as may be
properly brought before the JSB Annual Meeting.
The Board of Directors of JSB has unanimously approved
the Merger Agreement and unanimously recommends a vote FOR
(i) approval of the Merger Agreement, (ii) approval of the
adjournment proposal, (iii) election of the Board's nominees for
director and (iv) ratification of the appointment of the
independent auditors for 1994.
Record Date; Vote Required
USBANCORP
USBANCORP's Board of Directors has fixed the close of
business on ______________, 1994, as the date for determining
shareholders entitled to notice of and to vote at the USBANCORP
Annual Meeting (the "USBANCORP Record Date"). Only holders of
record of USBANCORP Common Stock on the USBANCORP Record Date
will be entitled to notice of, and to vote at, the USBANCORP
Annual Meeting or any adjournments thereof. As of the USBANCORP
Record Date there were _____________ shares of USBANCORP Common
Stock issued and outstanding, which were owned by approximately
______ shareholders of record.
The presence in person or by proxy of the holders of a
majority of outstanding USBANCORP Common Stock entitled to vote
at such meeting is required to constitute a quorum at the
USBANCORP Annual Meeting. Each share of USBANCORP Common Stock
entitles its holder to one vote with respect to all matters
properly submitted for action at the USBANCORP Annual Meeting.
The affirmative vote, either in person or by proxy, of a majority
of the shares represented and voting at the USBANCORP Annual
Meeting is required to approve (i) the Merger Proposal, (ii) the
proposal to adjourn the USBANCORP Annual Meeting and (iii) the
amendment to USBANCORP's articles of incorporation. The five
persons receiving the highest number of votes will be elected
directors of USBANCORP. On the USBANCORP Record Date, the
directors and executive officers of USBANCORP had sole voting
power with respect to approximately __________________ shares or
__% of the then outstanding shares of USBANCORP Common Stock that
are entitled to vote at the USBANCORP Annual Meeting and shared
voting power with respect to approximately
__________________ shares or approximately ______% of the then
outstanding shares of USBANCORP Common Stock that are entitled to
vote at the USBANCORP Annual Meeting. USBANCORP has been advised
that such directors and executive officers intend to vote all
shares of USBANCORP Common Stock over which they have sole voting
power in favor of the Merger Proposal and to use their best
efforts to cause all shares of USBANCORP Common Stock over which
they have shared voting power to be voted for the Merger
Proposal. It is also anticipated that directors and executive
officers of USBANCORP will vote in favor of the adjournment
proposal, the nominees for election as USBANCORP directors and
the proposal to amend USBANCORP's articles of incorporation.
HOLDERS OF USBANCORP COMMON STOCK ARE REQUESTED TO
COMPLETE, DATE AND SIGN THE ACCOMPANYING PROXY CARD AND RETURN IT
PROMPTLY TO USBANCORP IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
JSB
JSB's Board of Directors has fixed the close of
business on ______________, 1994, as the date for determining
shareholders entitled to notice of, and to vote at, the JSB
Annual Meeting (the "JSB Record Date"). Only holders of record
of JSB Common Stock on the JSB Record Date will be entitled to
notice of and to vote at the JSB Annual Meeting or any
adjournments or postponements thereof. As of the JSB Record Date
there were __________________ shares of JSB Common Stock issued
and outstanding, which were owned by approximately ______
shareholders of record.
The presence in person or by proxy of the holders of a
majority of outstanding JSB Common Stock entitled to vote at such
meeting is required to constitute a quorum at the JSB Annual
Meeting. Each share of JSB Common Stock entitles its holder to
one vote with respect to all matters properly submitted for
action at the JSB Annual Meeting. The affirmative vote, either
in person or by proxy, of holders representing at least 66-2/3%
of the outstanding shares of JSB Common Stock is required to
approve the Merger Agreement. Shares of JSB Common Stock as to
which the "ABSTAIN" box has been marked on the proxy card will be
counted as present for purposes of determining whether a quorum
is present; however, because approval of the Merger Agreement
requires a two-thirds majority of all outstanding shares of JSB
Common Stock, abstentions, broker non-votes or a failure to vote
in person or by proxy will have the same legal effect as a vote
against the Merger Agreement. The affirmative vote, either in
person or by proxy, of a majority of the shares represented and
voting at the JSB Annual Meeting is required in order to approve
(i) the proposal to adjourn the JSB Annual Meeting and (ii) the
ratification of the appointment of the independent auditors. The
four persons receiving the highest number of votes will be
elected directors of JSB. As of the JSB Record Date, the
directors and executive officers of JSB had sole voting power
with respect to approximately __________________ shares or __% of
the then outstanding shares of JSB Common Stock that are entitled
to vote at the JSB Annual Meeting and shared voting power with
respect to approximately __________________ shares or
approximately ______% of the then outstanding shares of JSB
Common Stock that are entitled to vote at the JSB Annual Meeting.
As a condition to entering into the Merger Agreement, USBANCORP
required that the directors and certain executive officers of
JSB, in their individual capacities, have entered into agreements
with USBANCORP to vote all shares of JSB Common Stock over which
they have sole voting power for approval of the Merger Agreement
and to use their best efforts to cause all shares of JSB Common
Stock over which they have shared voting power to be voted for
approval of the Merger Agreement. It is also anticipated that
directors and executive officers of JSB will vote in favor of the
adjournment proposal, the proposal to ratify the appointment of
the independent auditors and the nominees for election as JSB
directors.
HOLDERS OF JSB COMMON STOCK ARE REQUESTED TO COMPLETE,
DATE AND SIGN THE ACCOMPANYING PROXY CARD AND RETURN IT PROMPTLY
TO JSB IN THE ENCLOSED POSTAGE-PAID ENVELOPE. FAILURE TO RETURN
YOUR PROPERLY EXECUTED PROXY CARD OR FAILURE TO ATTEND AND VOTE
AT THE JSB ANNUAL MEETING IN PERSON WILL HAVE THE SAME EFFECT AS
A VOTE AGAINST THE MERGER AGREEMENT.
Proxies; Revocation of Proxies; Solicitation
All properly executed proxies received in time for the
USBANCORP Annual Meeting and the JSB Annual Meeting
(collectively, the "Meetings") and not revoked prior to exercise
will be voted in accordance with the instructions contained
therein. Proxies received by either party that do not contain
voting instructions will be voted in favor of each proposal
submitted to the shareholders of such party and for the nominees
for election as directors of such party. As to any other matter
properly brought before the Meetings and submitted to a
shareholder vote, all proxies will be voted in accordance with
the judgment of the proxy holders, provided, however, that such
discretionary authority will only be exercised to the extent
permissible under applicable federal securities laws. It is not
expected that any matter other than those referred to herein will
be brought before either of the Meetings.
A shareholder who has executed and returned a proxy may
revoke it at any time before it is voted by giving written notice
to the Secretary of USBANCORP (Betty L. Jakell, USBANCORP, Main
and Franklin Streets, Johnstown, Pennsylvania 15901) or JSB
(Gerald R. Baxter, Johnstown Savings Bank, Market at Main Street,
Johnstown, Pennsylvania 15901), as the case may be, by executing
a later dated proxy, or by attending and voting in person at the
USBANCORP Annual Meeting or the JSB Annual Meeting. Attendance,
without voting in person at the Meetings will not of itself
constitute revocation of a proxy. If a shareholder's shares are
not held in his or her name, such shareholder will need
additional documentation from the record holder in order to vote
personally at either of the Meetings.
Pursuant to Section 1607 of the Pennsylvania Banking
Code of 1965, as amended (the "PBC"), shareholders of JSB have
dissenters' rights of appraisal in connection with the Merger.
Failure to follow the procedures for dissenters' rights set forth
in the Pennsylvania Business Corporation Law of 1988, as amended
(the "BCL") will result in loss of such rights. For a complete
discussion of dissenters' rights and the manner in which
shareholders of JSB may perfect such rights, see "THE MERGER --
Dissenters' Rights of JSB Shareholders."
JSB and USBANCORP will bear equally the expenses
incurred in printing and mailing this Proxy Statement/Prospectus.
All other expenses incurred by or on behalf of the parties in
connection with the Merger Agreement and the transactions
contemplated thereby will be borne by the party incurring the
same. Some officers, directors and employees of JSB and
USBANCORP may solicit proxies in person, by mail, telegram,
telephone or otherwise. None of such persons will be specially
engaged for such purpose or will receive any compensation for
assisting in the solicitation of proxies. JSB and USBANCORP have
each retained Morrow & Co., Inc. ("Morrow") to solicit proxies on
behalf of each entity in favor of the Merger. JSB and USBANCORP
have each agreed to pay Morrow a fee of $4,000 plus expenses, and
to indemnify Morrow against certain liabilities in connection
with the solicitation of proxies. Pursuant to the Merger
Agreement, USBANCORP has agreed to reimburse JSB for all proxy
solicitation expenses. Arrangements will also be made with
brokerage houses and other custodians, nominees and fiduciaries
for the forwarding of solicitation material to the beneficial
owners of stock held of record by such persons, and USBANCORP and
JSB will reimburse such custodians, nominees and fiduciaries of
their respective shares for their reasonable out-of-pocket
expenses in connection therewith.
SHAREHOLDERS OF JSB SHOULD NOT SEND STOCK CERTIFICATES
WITH THEIR PROXY CARDS. AS DESCRIBED BELOW UNDER THE HEADING
"THE MERGER -- EXCHANGE OF JSB STOCK CERTIFICATES," EACH JSB
SHAREHOLDER WILL BE PROVIDED WITH MATERIALS FOR EXCHANGING SHARES
OF JSB COMMON STOCK AS PROMPTLY AS PRACTICABLE AFTER THE
EFFECTIVE DATE.
THE MERGER
Background and Reasons for the Merger and Recommendations of the
Boards
Background
In July 1993, Emerald Asset Management ("Emerald"), a
money management firm that is familiar with both USBANCORP and
JSB, suggested to USBANCORP's management that an acquisition by
USBANCORP of JSB was achievable. In a letter dated July 29,
1993, USBANCORP and Emerald agreed that Emerald would act as an
intermediary between USBANCORP and JSB in exchange for a finder's
fee of 0.30% of the consideration paid by USBANCORP to JSB
shareholders. Emerald has been paid $71,000 as a result of the
execution of the Merger Agreement and will be paid an additional
$59,000 if the Merger is consummated.
Management of USBANCORP presented the possible
transaction to USBANCORP's executive committee on August 23,
1993, and received authority to pursue the matter further.
Preliminary discussions occurred between the managements of
USBANCORP and JSB in September and October 1993. In the first
week of November 1993, managements of the two companies entered
into serious negotiations concerning a possible acquisition.
During this time, representatives of each party performed due
diligence of the other's business and operations. Negotiations
on the terms of the Merger were completed on November 9 and 10,
1993. Due to the price offered by USBANCORP, JSB did not solicit
other offers or enter into negotiations with any other party.
At a meeting of the USBANCORP Board of Directors held
on November 10, 1993, the management of USBANCORP, as well as
USBANCORP's legal advisor and Legg Mason Wood Walker,
Incorporated ("Legg Mason"), USBANCORP's financial advisor,
reviewed, among other things, a summary of management's due
diligence findings and the terms of the proposed Merger. Based
on that review and consideration of the factors discussed herein,
including the oral fairness opinion provided by Legg Mason, the
USBANCORP Board of Directors unanimously approved and authorized
the execution of the Merger Agreement.
At a meeting of the JSB Board of Directors held on
November 10, 1993, the management of JSB, as well as JSB's legal
advisor and RP Financial, Inc. ("RP Financial"), JSB's financial
advisor, reviewed, among other things, a summary of management's
due diligence findings and the terms of the proposed Merger.
Based on that review, the oral opinion of RP Financial, and
consideration of the factors discussed herein, the JSB Board of
Directors unanimously approved and authorized the execution of
the Merger Agreement.
The Merger Agreement was initially executed on
November 10, 1993. Certain directors and officers of JSB
executed in favor of USBANCORP a Letter Agreement dated
November 10, 1993, and JSB granted to USBANCORP an option to
acquire 19.9% of JSB Common Stock pursuant to a Stock Option
Agreement between JSB and USBANCORP dated November 10, 1993.
On December 20, 1993, USBANCORP proposed to JSB that
the parties enter into an amendment to the Merger Agreement to
(i) reduce the approximate consideration to be received by JSB
shareholders from $24.50 per share to $21.50 per share and
(ii) permit JSB to solicit offers for the sale or acquisition of
JSB from third parties through January 21, 1994 and enter into a
merger agreement with another party during that period provided
the merger consideration was in excess of $21.50 per share.
USBANCORP made the proposal to amend the Merger Agreement because
it had determined that, based upon the original $24.50 per share
merger consideration and certain modifications of the purchase
accounting adjustments determined by USBANCORP's independent
accountants, the Merger would result in materially greater
dilution to USBANCORP's earnings per share and tangible book
value per share than originally estimated. USBANCORP was also
advised by its financial advisor, Legg Mason, that it would be
unable to deliver a written fairness opinion to USBANCORP with
respect to the Merger if the merger consideration remained
unchanged. Receipt by USBANCORP of a written fairness opinion
from Legg Mason was a condition of closing under the Merger
Agreement executed on November 10, 1993.
The Board of Directors of JSB met on December 21, 1993
to evaluate USBANCORP's proposal but deferred any decision with
respect to the new proposal. The JSB Board of Directors held
several additional meetings during the last week of December and
the first week of January to further consider USBANCORP's
proposal and to consult with its professional advisors regarding
JSB's available alternatives and obligations as well as the terms
and conditions of the Merger Agreement.
Negotiations between the parties commenced again on
January 6, 1994, at a meeting held at JSB, continued thereafter
and culminated in JSB proposing, on or about January 10, 1994,
the Merger Consideration described in this Proxy
Statement/Prospectus based on a formula relating to the price of
USBANCORP Common Stock. Under the JSB proposal, JSB would be
permitted to solicit other offers for the sale or acquisition of
JSB for a period of time (the "Marketing Period") and enter into
an agreement with a third party provided the merger consideration
exceeded $22.50 per share. After negotiation, the parties agreed
that the Marketing Period would end on February 17, 1994. The
parties also agreed that the stock option agreement executed on
November 10, 1993, would terminate and a new stock option
agreement would be executed that would be effective only after
expiration of the Marketing Period. USBANCORP management agreed
to recommend the JSB proposal to the USBANCORP Board of
Directors. The respective Boards of Directors of USBANCORP and
JSB met on January 18, 1994, and each approved execution of the
amendment to the Merger Agreement.
On January 6, 1994, JSB hired an additional financial
advisor, Alex. Brown & Sons Incorporated ("Alex. Brown"), to
assist JSB in connection with the negotiation of the amended
Merger Agreement and in connection with the solicitation of
offers from third parties during the Marketing Period.
Immediately after the commencement of the Marketing Period, Alex.
Brown contacted nine potential third party acquirors which it,
along with the management of JSB, believed would have a strategic
and/or financial interest in the possible acquisition of JSB.
Of the original nine institutions initially contacted,
three expressed an interest in further exploration of a possible
acquisition of JSB. The three parties that expressed such an
interest (the "Interested Parties") executed Confidentiality
Agreements and were given access to certain public and non-public
financial and operating information regarding JSB, both on a
historical and projected basis, in the form of a Confidential
Offering Memorandum prepared by JSB and Alex. Brown. The
Interested Parties were given the opportunity by Alex. Brown to
ask for further detail or any clarification regarding the
contents of the Offering Memorandum, and were instructed by Alex.
Brown to render preliminary written indications of value of JSB
by February 4, 1994.
By February 4, 1994, each of the Interested Parties had
contacted Alex. Brown and indicated their respective desires not
to pursue further discussions regarding the possible acquisition
of JSB.
During the Marketing Period, which was widely
publicized, no other potential third party acquiror, exclusive of
the nine potential third party acquirors originally contacted,
indicated to Alex. Brown an interest in initiating discussions
regarding the possible acquisition of JSB.
Subsequent to the execution of the amendment to the
Merger Agreement, as required by USBANCORP as a condition to its
execution of the amendment to the Merger Agreement, certain
directors and officers of JSB executed, in favor of USBANCORP, a
letter agreement dated January 18, 1994 (the "Letter Agreement"),
pursuant to which the officers and directors have agreed in their
individual capacities, among other things, (i) to be present at
the JSB Annual Meeting so that all JSB Common Stock owned
beneficially by them will be counted for the purpose of
determining the presence of a quorum, to vote all shares over
which they have sole voting power and to use their best efforts
to cause shares over which they have shared voting power to be
voted for approval of the Merger Agreement and against the
approval of any other merger, business combination or similar
transaction involving JSB, and not to vote in favor of any
proposal to amend or rescind their prior vote, (ii) prior to the
JSB Record Date for the JSB Annual Meeting, not to sell, transfer
or otherwise dispose of any JSB Common Stock owned by such
officers and directors over which they have sole disposition
power, and to use their best efforts to prevent the sale,
transfer or disposition of shares of JSB Common Stock over which
they have shared disposition power, and after the JSB Record Date
not to sell, transfer or otherwise dispose of any JSB Common
Stock over which they have sole disposition power without the
prior written consent of USBANCORP and to use their best efforts
to prevent the sale, transfer or disposition of shares of JSB
Common Stock over which they have shared disposition power
without the prior written consent of USBANCORP, which consent
shall not be unreasonably withheld, and (iii) subject to their
fiduciary duty as directors or officers to shareholders, not to
initiate or engage in any negotiations or discussions with a
third party with respect to the sale, transfer or other
disposition of any JSB Common Stock. In addition, prior to the
execution of the amendment of the Merger Agreement, JSB granted
to USBANCORP an option to acquire 19.9% of the JSB Common Stock
pursuant to a Stock Option Agreement between JSB and USBANCORP,
dated January 18, 1994. A copy of the form of Letter Agreement
executed by the directors of JSB is included as Exhibit 1 to the
Merger Agreement at Annex A to this Proxy Statement/Prospectus.
See "CERTAIN RELATED TRANSACTIONS -- Stock Option Agreement."
USBANCORP's Reasons for the Merger and Recommendation of
USBANCORP Board.
USBANCORP's acquisition strategy consists of
identifying financial institutions with similar business
philosophies that operate in markets geographically within, or
contiguous to, those of USBANCORP. From a financial perspective,
USBANCORP seeks acquisitons that will be accretive or result in
no more than limited and acceptable initial book value and
earnings per share dilution; USBANCORP expects acquisitions to
provide an ability to accrete earnings per share over an
acceptable time frame after the acquisition to recover any
initial dilution and to provide required rates of return
commensurate with the performance of its other subsidiaries.
Acquisitions are also evaluated in terms of asset quality,
interest rate risk, core deposit base stability, potential
operating efficiencies, and management abilities.
In the view of USBANCORP's Board of Directors, the
Merger constitutes an acquisition that meets USBANCORP's
acquisition strategy and significantly enhances USBANCORP's
franchise value and market share in the Johnstown metropolitan
area. Upon consummation of the Merger, USBANCORP's total assets
and total deposits will increase 29% and 20%, respectively, and
U.S. Bank will have a 26% deposit market share in Cambria County,
compared to its current market share of 15%.
In addition to this conclusion that the Merger will
result in an enhancement of USBANCORP's franchise value, in
determining to make the offer to acquire JSB and enter into the
Merger Agreement, USBANCORP's Board of Directors also considered
a number of other material factors, including the following:
(i) the historical financial condition, operating results and
operating budgets, capital levels, asset quality, and future
prospects of USBANCORP and JSB and their projected future value
and prospects as separate entities and on a combined basis;
(ii) pro forma financial information on the Merger, including,
among other things, earnings per share dilution analysis and
ratio impact information; (iii) initial book value dilution
analysis; (iv) the sustainability of core earnings and potential
for growth; (v) a comparison of the price it proposed to offer in
the Merger to other comparable mergers, based, among other
things, on multiples of book value and earnings per share;
(vi) the tax-free nature of the transaction to USBANCORP (see,
generally, "Tax Consequences" below); (vii) historical stock
price information for both USBANCORP and JSB; (viii) the effect
of the Merger on the short and long term trading prices for
USBANCORP Common Stock; (ix) the benefits and disadvantages, from
a financial point of view, of the upper limit on the Exchange
Rate (as defined below) for JSB Common Stock; (x) the provisions
of the Merger Agreement allowing USBANCORP to terminate the
Merger Agreement if certain conditions are not satisfied (see
"Conditions to Consummation of the Merger" and "Termination of
the Merger Agreement" below); (xi) industry, regulatory, economic
and market conditions; (xii) JSB's willingness, at USBANCORP's
insistence, to grant USBANCORP an option to acquire 19.9% of
JSB's outstanding shares of common stock; and (xiii) the written
opinion from Legg Mason as to the fairness to USBANCORP from a
financial point of view of the Merger Consideration to be paid by
USBANCORP (see "Opinions of Financial Advisors" below).
In approving the transaction, the Board of Directors of
USBANCORP did not specifically identify any one factor or group
of factors as being more significant than any other factor in the
decision making process, although individual directors may have
given one or more factors more weight than other factors.
The emphasis of the USBANCORP Board of Directors'
discussion in considering the transaction, however, was on the
financial aspects of the transaction, particularly (i) the
strategic fit and enhanced franchise value, discussed above,
(ii) the upper limit on the Exchange Rate and the ability of
USBANCORP, by reason thereof, to fix the number of shares issued
in connection with the Merger and thus the relative amount of
earnings per share dilution (see "PRO FORMA FINANCIAL
INFORMATION"), (iii) USBANCORP's belief that it will be able to
recover such dilution through cost savings and earnings
enhancements within twenty-four (24) months (see "Management and
Operations After the Merger" below), (iv) the relative strength
of JSB's balance sheet and its growth in earnings in recent years
(see "JSB SELECTED HISTORICAL FINANCIAL DATA"), (v) the relative
strength of the historical combined USBANCORP consolidated pro
forma balance sheet and capital ratios (see "PRO FORMA FINANCIAL
INFORMATION") and (vi) Legg Mason's written opinion as to the
fairness to USBANCORP from a financial point of view of the
Merger Consideration to be paid by USBANCORP (see "Opinions of
Financial Advisors" below).
Although substantial analysis has been performed,
identification of all the pre-tax cost savings and potential
earnings enhancements associated with this in-market
consolidation has not been completed. In evaluating such savings
and benefits, the USBANCORP Board of Directors considered that
most of the initial savings would be offset by one-time expenses
relating to the corporate acquisition and post-acquisition
integration process; these non-recurring costs will approximate
$2.5 million pre-tax and will be recognized in the quarter in
which the Merger is consummated. These costs are necessary to
realize approximately $3.8 million pre-tax of specifically
identified annual savings resulting from economy of scale
benefits to be achieved in this intra-market acquisition. Of
these savings, $1.9 million are expected to be realized in the
first year of the Merger with the full $3.8 million in annual
savings being realized in the second year and thereafter.
However, no assurances can be given that such earnings
enhancements and cost savings will be realized at any given time
in the future. See "PRO FORMA FINANCIAL INFORMATION."
THE USBANCORP BOARD OF DIRECTORS RECOMMENDS THAT
USBANCORP SHAREHOLDERS VOTE FOR THE APPROVAL OF THE MERGER
PROPOSAL.
JSB's Reasons for the Merger and Recommendation of JSB Board
In reaching its determination that the Merger and
Merger Agreement are fair to, and in the best interests of, JSB
and its shareholders, the JSB Board of Directors consulted with
its financial advisors, as well as with JSB's management, and
considered a number of factors, including, without limitation,
the following: (i) the JSB Board of Directors' belief that the
terms of the Merger Agreement are attractive in that the Merger
Agreement allows JSB shareholders to become shareholders of
USBANCORP, a company that the JSB Board of Directors believes has
positive future prospects; (ii) the financial advice and the
written opinions of Alex. Brown and RP Financial that the Merger
Consideration is fair to JSB shareholders from a financial point
of view; (iii) USBANCORP's agreement to make certain directors of
JSB directors of USBANCORP and U.S. Bank; (iv) USBANCORP's
agreement to allow certain employees of JSB to continue as
employees of USBANCORP after the Merger and to make certain
severance payments to executive officers and employees resigning
on the Effective Date; (v) pro forma financial information on the
Merger, including, among other things, earnings per share,
dilution analysis and ratio impact information; (vi) the
sustainability of core earnings by USBANCORP and potential for
growth; (vii) the tax-free nature of the transaction to JSB (see,
generally, "Tax Consequences" below); (viii) historical stock
price information for both USBANCORP and JSB; (ix) the benefits
and disadvantages, from a financial point of view, of the range
of possible Exchange Rates for JSB Common Stock; (x) the
provisions of the Merger Agreement allowing JSB to terminate the
Merger Agreement if certain conditions are not satisfied (see
"Conditions to Consummation of the Merger" and "Termination of
the Merger Agreement" below); (xi) the JSB Board's review, based
on a presentation by JSB's management, regarding JSB's due
diligence and its analysis of the business, operations,
management, earnings and financial condition of USBANCORP on both
a historical and a prospective basis, of (A) the enhanced
opportunities for operating efficiencies, particularly in terms
of integration of operations and support functions such as
product development, asset-liability management, marketing, data
processing, loan review and finance and accounting, that could
result from the Merger and (B) the enhanced opportunities for
growth that the Merger would make possible, particularly the
ability to access the managerial and other resources of USBANCORP
in designing future products and services that JSB does not now
offer and in responding to changing competitive, technological
and regulatory environments; (xii) the JSB Board's belief that
the combined enterprise, having a greater size and greater
resources than JSB, could offer JSB's customers a broader range
of products and services than JSB presently offers as an
independent entity; (xiii) the JSB Board's review of alternatives
to the Merger (including the alternatives of remaining
independent and growing internally, remaining independent for a
period of time and then selling JSB and remaining independent and
growing through future acquisitions), including the range of
possible values to JSB's shareholders obtainable through
implementation of such alternatives and the timing and likelihood
of actually receiving such values; (xiv) the JSB Board's review
(prior to and during the Marketing Period and otherwise) of
possible affiliation partners for JSB other than USBANCORP,
likely acquisition prices which would be paid by possible
affiliation partners, the prospects of such other possible
affiliation partners and the likelihood of any such affiliation;
(xv) the JSB Board's review of the book value per share of JSB
Common Stock of $14.19 at December 31, 1993, compared to the
consideration payable by USBANCORP and comparative multiples of
book value, earnings per share and market price paid in other
comparable recent acquisitions of savings banks and thrifts; and
(xvi) the current and prospective economic environment and
competitive constraints facing financial institutions, including
JSB and USBANCORP.
THE JSB BOARD BELIEVES THAT THE TERMS OF THE MERGER ARE
FAIR AND IN THE BEST INTEREST OF JSB SHAREHOLDERS AND HAS
UNANIMOUSLY RECOMMENDED THAT SHAREHOLDERS OF JSB APPROVE THE
MERGER AGREEMENT AT THE JSB ANNUAL MEETING.
General Terms of the Merger
The detailed terms and conditions of the Merger are
contained in the Merger Agreement, which is attached to this
Proxy Statement/Prospectus as Annex A and incorporated herein.
The following description of such terms and conditions does not
purport to be complete and is qualified in its entirety by
reference to the Merger Agreement.
Pursuant to the Merger Agreement, USBANCORP has caused
Johnstown Interim Bank ("JIB") to be organized as a wholly-owned
subsidiary of USBANCORP. Subject to certain terms and conditions
contained in the Merger Agreement, on the Effective Date, the
Merger will be consummated in two steps. The first step will be
the Interim Bank Merger in which JSB will merge with and into JIB
with JIB surviving the Interim Bank Merger. The second step will
occur immediately thereafter and will be the U.S. Bank Merger in
which JIB will merge with and into U.S. Bank, with U.S. Bank
surviving the U.S. Bank Merger. Upon consummation of the Merger,
the separate existence of JSB will cease. All property, rights,
powers, duties, obligations and liabilities of JSB will
automatically, by operation of law, be transferred to U.S. Bank.
The Articles of Incorporation and Bylaws of U.S. Bank in effect
on the Effective Date will govern the surviving corporation until
altered, amended or repealed in accordance with applicable law.
If the Merger is approved by the shareholders of
USBANCORP and JSB and by the appropriate regulatory authorities
and if certain other conditions are satisfied or waived (see
"Regulatory Approvals," "Conditions to Consummation of the
Merger" and "Termination of the Merger Agreement" below), the
Merger will become effective as of the close of business on the
date on which the Articles of Merger and Notice of Consummation
are filed with the Department of State of the Commonwealth of
Pennsylvania and the OCC, respectively, or on such other date and
time as may be specified in the Articles of Merger and Notice of
Consummation. It is presently anticipated that the Effective
Date will occur in the second quarter of 1994, but no assurance
can be given that the conditions to consummation of the Merger
will be satisfied or that this timetable will be met.
On the Effective Date, each share of JSB Common Stock
issued and outstanding immediately prior to the Effective Date
(except for shares of JSB Common Stock held by persons who have
perfected their dissenters' rights as described under the heading
"Dissenters' Rights of JSB Shareholders" below) will be converted
into $10.13 in cash and a fraction of a share of USBANCORP Common
Stock determined by dividing $22.50 by the average closing price
of USBANCORP Common Stock for the ten trading days immediately
preceding the Effective Date (the "Average Closing Price") and
multiplying by .55, except that in no event shall such fraction
be greater than .5053 shares or less than .4853 shares (the cash
and the fraction of a share of USBANCORP Common Stock are
collectively called the "Exchange Rate"). Any record holder of
JSB Common Stock may specify, by executing an Election Statement,
that all of the shares of such record holder's JSB Common Stock
be converted into a fraction of a share of USBANCORP Common Stock
determined by dividing $22.50 by the Average Closing Price,
except that in no event shall such fraction be greater than
.9184 shares or less than .8824 shares, or, in the alternative,
that all of the shares of such record holder's JSB Common Stock
be converted into $22.50 in cash. If no such election is made by
a JSB shareholder, such record holder's shares will be converted
in accordance with the Exchange Rate. Subject to certain
exceptions described below, USBANCORP will not issue, in the
aggregate, more than 982,197 shares of USBANCORP Common Stock or
pay more than $19,690,594 in cash to shareholders of JSB.
USBANCORP may issue additional shares of USBANCORP Common Stock
and pay additional cash in exchange for up to 12,000 shares of
JSB Common Stock issuable upon the exercise of stock options and
USBANCORP will pay additional cash amounts (i) in lieu of
fractional shares (ii) in excess of $22.50 per share, to persons
who perfect their dissenters' rights, if any, and (iii) in
connection with the cancellation of options to acquire 94,360
shares of JSB Common Stock with respect to which holders have
contractually waived their exercise rights. The number of
options that will be cancelled in exchange for cash may increase
from 94,360 to 106,360 if the holders of exercisable options to
acquire 12,000 shares do not exercise their options. Because the
aggregate amount of the cash and stock components of the Merger
Consideration are fixed at between 943,316 shares and
982,197 shares of USBANCORP Common Stock (depending on the
Average Closing Price) and $19,690,594 (exclusive of (i) through
(iii) above), the extent to which elections will be accommodated
will depend upon the respective number of JSB shareholders who
elect cash, stock or fail to make an election. If the Merger had
been consummated on December 31, 1993, JSB shareholders would
have acquired between 16.67% and 17.24% of the outstanding shares
of USBANCORP Common Stock on a pro forma basis. See "Election
Procedures" below.
At the time the Exchange Rate was determined, the
parties agreed that USBANCORP would pay JSB shareholders
consideration equal to approximately $22.50 per share for each
share of JSB Common Stock surrendered, assuming a USBANCORP
Common Stock price of between $24.50 and $25.50 per share.
Because the number of shares of USBANCORP Common Stock to be
delivered to JSB shareholders who elect to receive all or a
portion of the Merger Consideration in the form of USBANCORP
Common Stock in connection with the Merger is fixed within a
specified range, both USBANCORP and JSB shareholders bear the
risk of change in the market value of USBANCORP Common Stock
outside this range. Therefore, the actual consideration received
by JSB shareholders who elect to receive all or a portion of the
Merger Consideration in the form of USBANCORP Common Stock may be
greater or less than $22.50 per share depending upon the market
value of USBANCORP Common Stock prior to the Effective Date. As
of the date of the Merger Agreement and as of _________, 1994,
the value of the Merger Consideration, as calculated using the
Average Closing Price at these dates, was $22.48 and $_____,
respectively.
In connection with the Merger, (i) options to purchase
up to 106,360 shares of JSB Common Stock granted under JSB's
Employee Stock Compensation Program prior to the date of the
Merger Agreement which remain unexercised prior to the Effective
Date will be converted, on the Effective Date, into a right to
receive cash in an amount equal to (a) the difference between
$22.50 and the exercise price of each option multiplied by
(b) the number of shares of JSB Common Stock covered by such
option. Holders of options to acquire 94,360 shares of JSB
Common Stock have committed to USBANCORP in writing not to
exercise their options prior to consummation of the Merger.
In an effort to assure that JSB shareholders continue
to receive a cash dividend in accordance with past practices of
JSB during the pendency of the Merger, the Merger Agreement,
subject to certain restrictions, permits JSB to pay its regular
quarterly cash dividend if the Effective Date is not on or before
USBANCORP's record date for payment of its regular cash dividend
of at least $0.22 per share in the first quarter of 1994 and each
quarter thereafter, the Merger Agreement permits JSB, consistent
with past practices, and subject to certain restrictions, to pay
a regular quarterly cash dividend not to exceed $0.05 per share
for each such calendar quarter.
No fractional shares of USBANCORP Common Stock will be
issued pursuant to the Merger. JSB shareholders who would
otherwise be entitled to receive a fractional share will receive,
in lieu thereof, cash equal to the fractional part of a share of
USBANCORP Common Stock to which such shareholder is entitled
multiplied by $25.50.
Opinions of Financial Advisors
USBANCORP
USBANCORP retained Legg Mason to render an opinion to
the USBANCORP Board of Directors with respect to the fairness
from a financial point of view of the Merger Consideration to be
paid by USBANCORP in the Merger. Legg Mason is a nationally
recognized investment banking firm regularly engaged in the
valuation of businesses and their securities in connection with
mergers and acquisitions, negotiated underwritings, competitive
biddings, secondary distributions of listed and unlisted
securities and private placements. USBANCORP selected Legg Mason
as its financial advisor based upon its qualifications, expertise
and reputation, as well as its prior investment banking
relationship and familiarity with USBANCORP.
At a meeting of the USBANCORP Board of Directors on
January 18, 1994, Legg Mason delivered a written opinion to the
USBANCORP Board of Directors that, as of such date, the Merger
Consideration was fair to USBANCORP from a financial point of
view. The full text of the opinion of Legg Mason, which sets
forth the assumptions made, matters considered and limitations on
the reviews undertaken, is attached hereto as Annex B and is
incorporated herein by reference, and should be read in its
entirety in connection with this Proxy Statement/Prospectus. The
summary of the opinion of Legg Mason set forth herein is
qualified in its entirety by reference to the opinion.
In arriving at its opinion, Legg Mason, among other
things: (i) reviewed the financial terms of the Merger
Agreement, (ii) reviewed Annual Reports and Form 10-Ks or
Form F-2s for the three years ended December 31, 1992, for
USBANCORP and JSB; (iii) reviewed certain interim financial
information for the three quarters ended September 30, 1993,
including Form 10-Qs and Form F-4s for USBANCORP and JSB;
(iv) analyzed certain other financial statements, data, reports
and analyses for USBANCORP and JSB prepared by their respective
managements, including preliminary financial statements with
respect to the quarter and year ended December 31, 1993, for
USBANCORP and JSB and the budget of JSB for fiscal 1994;
(v) analyzed certain financial projections of USBANCORP, both on
a stand-alone and combined basis, prepared by the management of
USBANCORP; (vi) discussed the current operations, financial
condition and prospects of USBANCORP and JSB with the managements
of USBANCORP and JSB; (vii) reviewed with management of USBANCORP
the results of their due diligence examination of JSB and the
expected cost savings related to the Merger; (viii) reviewed the
reported market prices and historical trading activity of
USBANCORP Common Stock and JSB Common Stock; (ix) compared
certain financial and stock market information for USBANCORP and
JSB with similar information for certain other publicly traded
companies; (x) reviewed the financial terms of certain recent
business combinations involving financial institutions;
(xi) considered the views of management of USBANCORP regarding
the strategic importance of the Merger, and (xii) analyzed the
pro forma financial impact of the Merger on USBANCORP.
Legg Mason relied without independent verification upon
the accuracy and completeness of all the financial and other
information reviewed by it for purposes of its opinion. In that
regard, Legg Mason assumed that the financial forecasts,
including, without limitation, projected cost savings and
earnings enhancements, were reasonably prepared on a basis
reflecting the best currently available judgments and estimates
of the managements of USBANCORP and JSB and that such forecasts
will be realized in the amounts and at the times contemplated
thereby. Legg Mason is not an expert in the evaluation of loan
portfolios or the allowances for possible loan losses with
respect thereto and has assumed, without independent
verification, that such allowances for JSB are in the aggregate
adequate to cover such losses. In addition, Legg Mason has not
reviewed individual credit files nor has it made or obtained an
independent evaluation or appraisal of the assets and liabilities
of USBANCORP or JSB or any of their subsidiaries.
The following is a summary of the financial analyses
performed by Legg Mason in connection with its opinion:
Pro Forma Merger Analysis. Legg Mason analyzed certain
pro forma effects on USBANCORP from the Merger in 1994 and 1995
assuming the payment, for each share of JSB Common Stock, of
$10.13 in cash and a fraction of a share of USBANCORP Common
Stock determined by dividing $22.50 by the Average Closing Price
and multiplying by .55, except that in no event shall such
fraction be greater than .5053 or less than .4853. Based on
certain assumptions, including those by USBANCORP management with
respect to cost savings from the Merger during the twelve-month
period following completion of the Merger and thereafter and the
stand alone earnings projections of USBANCORP and JSB, the
analysis showed that the Merger would be dilutive to USBANCORP's
earnings per share in 1994 by approximately 7% and accretive to
its earnings per share in 1995 by approximately 8%. In addition,
the pro forma merger analysis showed the merger would be neutral
to USBANCORP's 1993 year-end book value and dilutive to its 1993
year-end tangible book value.
Comparable Transaction Analysis. Legg Mason reviewed a
group of 28 transactions announced since the beginning of 1993
with values greater than $20 million involving acquisitions of
thrifts with assets of less than $1 billion that Legg Mason
deemed comparable in terms of location and profitability. Legg
Mason calculated, as of the respective dates of announcement of
such transactions, the multiple of last twelve months ("LTM")
earnings, market value, book value and tangible book value
implied by the consideration to be received by the shareholders
of the acquired company in each such transaction. Legg Mason
also computed the median of these multiples of LTM earnings,
market value, book value and tangible book value. The analysis
yielded a range of transaction values as a multiple of LTM
earnings of 8.0x to 21.1x, with a median of 15.9x, a range of
transaction values as a multiple of market value of 1.22x to
2.53x, with a median of 1.82x, a range of transaction values as a
multiple of book value of .71x to 2.29x, with a median of 1.64x,
and a range of transaction values as a multiple of tangible book
value of 1.14x to 2.29x, with a median of 1.65x.
Based on the market value of USBANCORP Common Stock as
of January 17, 1994, and financial data as of December 31, 1993,
Legg Mason also compared the Merger on the above bases to
selected transactions within the above group that Legg Mason
deemed to be in-market in nature and thereby present significant
cost saving opportunities. The range of transaction values as a
multiple of LTM earnings in these transactions was 13.5x to
20.1x, with a median of 15.9x, compared to 14.2x for the Merger,
and the range of transaction values as a multiple of tangible
book value was 1.59x to 2.12x, with a median of 1.82x, compared
to 1.62x for the Merger.
Discounted Cash Flow Analysis. Using discounted cash
flow analysis, Legg Mason estimated the present value of the
future dividend streams that JSB could produce over a five-year
period under various circumstances. Legg Mason then estimated
the terminal value of JSB's common equity at the end of five
years by applying a range of 9x to 11x JSB's terminal year
earnings. In arriving at terminal year earnings, Legg Mason used
JSB's projections for 1994 and 1995, as adjusted by USBANCORP,
and assumed 5 percent growth in EPS after 1995. The analysis
assumed realization of the expected $3.8 million in annual
pre-tax cost savings and revenue enhancements. The analysis also
assumed a dividend payout rate of 25 percent in 1994 and
35 percent thereafter. The dividend streams and terminal values
were then discounted to present values using discount rates
ranging from 9% to 13%, which reflect different assumptions
regarding the required rates of return of holders or prospective
buyers of JSB Common Stock. The foregoing analysis indicated a
range of present values of JSB on a stand-alone basis from $20.13
per share to $28.25 per share.
Analysis at Various Prices for USBANCORP. Legg Mason
reviewed the implied value of the Merger Consideration at
USBANCORP Common Stock prices ranging from $20.50 to $27.50 per
share, including prices between $24.50 and $25.50 per share where
the exchange ratio is structured to vary between .4853 and .5053
producing a constant transaction value. Based on the aggregate
and per share Merger Consideration implied at these various
prices, Legg Mason calculated the multiple of JSB's LTM earnings,
market value, book value and tangible book value produced in the
Merger. This analysis yielded a range of transaction values as a
multiple of earnings of 13.0x to 14.9x, a range of transaction
values as a multiple of market value of 1.41x to 1.62x, a range
of transaction values as a multiple of book value of 1.45x to
1.67x and a range of transaction values as a multiple of tangible
book value of 1.48x to 1.69x. At USBANCORP Common Stock prices
between $24.50 and $25.50 per share, this analysis yielded a
transaction value as a multiple of LTM earnings of 14.2x, a
transaction value as a multiple of market value of 1.55x, a
transaction value as a multiple of book value of 1.60x and a
transaction value as a multiple of tangible book value of 1.62x.
The preparation of a fairness opinion is a complex
process and is not necessarily susceptible to partial analysis or
summary description. Selecting portions of the analysis or of
the summary set forth above, without considering the analysis as
a whole, could create an incomplete view of the processes
underlying Legg Mason's opinion. In arriving at its fairness
determination, Legg Mason considered the results of all such
analyses. No company or transaction used in the above analysis
as a comparison is identical to USBANCORP or JSB or the
contemplated transaction. The analyses were prepared by Legg
Mason solely for the purpose of providing its opinion to the
USBANCORP Board of Directors as to the fairness of the Merger
Consideration to be paid by USBANCORP and do not purport to be
appraisals or necessarily reflect the prices at which businesses
or securities actually may be sold. Analyses based upon
forecasts of future results are not necessarily indicative of
actual future results, which may be significantly more or less
favorable than suggested by such analyses.
As described above, Legg Mason's opinion was one of
many factors taken into consideration by the USBANCORP Board of
Directors in making its determination to approve the Merger
Agreement. Legg Mason's opinion is directed only to the fairness
from a financial point of view of the Merger Consideration to be
paid by USBANCORP in the Merger, and does not address any other
aspect of the Merger. Although the foregoing summary describes
the material aspects of the analyses performed by Legg Mason in
connection with its opinion, it does not purport to be a complete
description of all the analyses performed by Legg Mason and is
qualified by reference to the written opinion of Legg Mason set
forth in Annex B hereto, which shareholders are urged to read in
its entirety.
In the ordinary course of its business, Legg Mason
trades the equity securities of USBANCORP and JSB for its own
account and the accounts of customers, and, accordingly, may at
any time hold a long or short position in such securities.
USBANCORP has paid Legg Mason $150,000 for its
services, including reimbursement for its out-of-pocket expenses,
and has agreed to indemnify Legg Mason against certain
liabilities, including certain liabilities under the federal
securities laws.
JSB
During the negotiations that culminated in the
November 10, 1993 execution of the original Merger Agreement, the
JSB Board of Directors retained RP Financial as its financial
advisor in connection with the Merger and requested RP Financial
to deliver its opinion with respect to the fairness of the Merger
from a financial point of view to JSB shareholders. Prior to
executing the original merger agreement, RP Financial provided an
oral opinion to the JSB Board of Directors on November 10, 1993,
that the proposed merger consideration was fair to shareholders
of JSB from a financial point of view. Before RP Financial
delivered a written opinion regarding the proposed merger
consideration, USBANCORP and JSB renegotiated the merger
consideration which led to the execution of the amended Merger
Agreement on January 18, 1994. Subsequent to the proposal on
December 20, 1993, by USBANCORP to JSB to reduce the merger
consideration, JSB also retained Alex. Brown to deliver, among
other things, its opinion with respect to the fairness of the
Merger from a financial point of view to JSB shareholders.
Alex. Brown. JSB retained Alex. Brown to act as JSB's
financial advisor in connection with the Merger and related
matters. Alex. Brown was selected to act as JSB's financial
advisor based upon its qualifications, expertise and reputation,
as well as Alex. Brown's familiarity with JSB's business and
market area. Alex. Brown regularly publishes research reports
regarding the financial services industry and the businesses and
securities of publicly owned companies in that industry. Alex.
Brown does not publish research reports relating to JSB nor
actively makes a market in JSB common stock.
On January 18, 1994, at the meeting at which the JSB
Board of Directors approved and adopted the Amendment, Alex.
Brown delivered a written opinion to the JSB Board of Directors
that as of such date the consideration to be received by the
shareholders of JSB for each share of JSB Common Stock, cash in
the amount of $10.13 and a fraction of a share of USBANCORP
Common Stock as follows: (a) if the Average Closing Price on the
Closing Date is less than or equal to $24.50 per share, then
.5053 shares of USBANCORP Common Stock; (b) if the Average
Closing Price on the Closing Date is greater than or equal to
$25.50 per share, then .4853 shares of USBANCORP Common Stock; or
(c) if the Average Closing Price on the Closing Date is greater
than $24.50 per share but less than $25.50 per share, then the
conversion ratio will be determined by dividing $22.50 by the
Average Closing Price and multiplying the resulting figure by
.55, was fair to the shareholder of JSB from a financial point of
view. Alex. Brown did not determine or recommend the type or
amount of Merger Consideration. No limitations were imposed by
the JSB Board of Directors upon Alex. Brown with respect to the
investigations made or procedures followed by it in rendering its
opinion.
The full text of Alex. Brown's opinion, which sets
forth assumptions made, matters considered and limits on the
review undertaken, is attached hereto as Annex C and is
incorporated herein by reference. JSB shareholders are urged to
read the Alex. Brown opinion in its entirety. The following
summary of the opinion delivered by Alex. Brown is qualified in
its entirety by reference to the full text of the opinion.
In rendering its opinion, Alex. Brown (i) reviewed the
Merger Agreement, certain publicly available business and
financial information concerning JSB and USBANCORP and certain
internal financial analyses and forecasts for JSB prepared by JSB
management; (ii) held discussions with members of senior
management of JSB regarding the past and current business
operations, financial condition, and future prospects of JSB,
(iii) reviewed the reported price and trading activity for JSB
Common Stock and USBANCORP Common Stock and compared certain
financial and stock market information for JSB and USBANCORP and
similar information for certain other companies, the securities
of which are publicly traded; (iv) reviewed the financial terms
of certain recent business combinations which Alex. Brown deemed
comparable in whole or in part; and (v) performed such other
studies and analyses as Alex. Brown considered appropriate.
Alex. Brown relied without independent verification
upon the accuracy and completeness of all of the financial and
other information reviewed by and discussed with it for purposes
of its opinion. With respect to the financial forecasts reviewed
by Alex. Brown in rendering its opinion, Alex. Brown assumed that
such forecasts were reasonably prepared on bases reflecting the
best currently available estimates and judgments of the
management of JSB as to the future financial performance of JSB.
Alex. Brown did not make an independent evaluation or appraisal
of the assets or liabilities of JSB nor was it furnished with any
such appraisal.
The summary set forth below does not purport to be a
complete description of the analyses performed by Alex. Brown in
this regard. The preparation of a fairness opinion involves
various determinations as to the most appropriate and relevant
methods of financial analysis and the application of these
methods to the particular circumstances and, therefore, such an
opinion is not readily susceptible to summary description.
Accordingly, notwithstanding the separate factors discussed
below, Alex. Brown believes that its analyses must be considered
as a whole and that selecting portions of its analyses or of the
factors considered by it, without considering all analyses and
factors, could create an incomplete view of the evaluation
process underlying its opinion. No one of the analyses performed
by Alex. Brown was assigned a greater significance than any
other. In performing its analyses, Alex. Brown made numerous
assumptions with respect to industry performance, business and
economic conditions and other matters, many of which are beyond
JSB's or USBANCORP's control. The analyses performed by Alex.
Brown are not necessarily indicative of actual values or future
results, which may be significantly more or less favorable than
suggested by such analyses. Additionally, analyses relating to
the values of businesses do not purport to be appraisals or to
reflect the prices at which businesses actually may be sold.
Analysis of Selected Publicly Traded Companies. In
preparing its opinion, Alex. Brown, using publicly available
information, compared selected financial information including
book value, tangible book value, recent earnings, asset quality
ratios and loan loss reserve levels, for JSB and a group of
thrift organizations.
The group comprised 12 thrifts located in the
Commonwealth of Pennsylvania that possessed an asset base between
$100 million and $1.0 billion ("Pennsylvania Community Thrift
Comparables Group"). The Pennsylvania Community Thrift
Comparables Group included Chester Valley Bancorp, Inc., First
Harrisburg Bancorp, Fidelity Bancorp, Inc., Harleysville Savings
Bank, Laurel Capital Group, Inc., Progress Financial Corp., Prime
Bancorp, Inc., Parkvale Financial Corp., PennFirst Bancorp, Inc.,
Reliable Financial Corp., First Shenango Bancorp, Inc. and York
Financial Corp. As of September 30, 1993, the relative multiples
of the market price of JSB Common Stock and the mean market price
of the common stock of the Pennsylvania Community Thrift
Comparables Group to such selected financial data was: to stated
book value, 136.7% for JSB and 122.1% for the Pennsylvania
Community Thrift Comparables Group; to tangible book value,
139.0% for JSB and 123.0% for the Pennsylvania Community Thrift
Comparables Group; and to total assets, 7.8% for JSB and 8.4% for
the Pennsylvania Community Thrift Comparables Group. However, as
the Pennsylvania Community Thrift Comparables Group exhibited
stronger profitability during the nine months ended September 30,
1993 than JSB, earnings multiple comparisons with this group were
deemed inappropriate by Alex. Brown.
Analysis of Comparable Acquisition Transactions. In
preparing its opinion, Alex. Brown analyzed certain comparable
merger and acquisition transactions for thrift institutions based
upon the acquisition price relative to stated book value, latest
twelve months earnings, total assets and the premiums to core
deposits. The market price premium, which is measured against
the market price of the common stock of the acquired corporation
one month prior to the acquisition's announcement, was not deemed
relevant due to the stock price volatility resulting from JSB's
previously announced and subsequently renegotiated merger
transaction with USBANCORP. The analysis included a review and
comparison of the mean multiples represented by a sample of
recently effected or pending thrift acquisitions nationwide
having a transaction value between $30 million and $150 million
which were announced since January 1, 1992 (a total of 61
transactions), as segmented into: (i) transactions in
Pennsylvania, West Virginia, Virginia, Delaware, New Jersey and
Maryland (12) ("Regionally-Segmented Transactions"); (ii)
transactions in which the selling thrift demonstrated an ROAA of
between 0.50% and 1.00% during the year of an announced
acquisition (25) ("Profitability-Segmented Transactions"); (iii)
transactions in which the selling thrift had non-performing
assets between 1.00% and 2.00% for the most recent quarter prior
to an announced acquisition (20) ("Asset Quality-Segmented
Transactions"); and (iv) nationwide thrift transactions announced
since January 1, 1993 (33) ("More Recent Transactions").
Based on the closing stock price of USBANCORP Common
Stock on January 17, 1994 ($24.75), the Merger Consideration at
January 18, 1994, was $22.50 per JSB share (the "Comparison
Value"). The relative multiples of the Comparison Value and each
of the comparable acquisition transaction segmentations are
provided in the following table:
<TABLE>
<CAPTION>
Purchase Price To Core Deposit
Transaction Group Book Value Assets Premium
<S> <C> <C> <C>
COMPARISON VALUE 165.2% 13.4% 9.1%
Comparable Acquisition Transactions
(a) Nationwide 144.7% 11.9% 6.1%
(b) Regionally-Segmented 123.0% 10.7% 3.8%
(c) Profitability-Segmented 136.1% 10.8% 5.3%
(d) Asset Quality-Segmented 154.8% 12.7% 7.2%
(e) More Recent 162.6% 13.2% 7.5%
</TABLE>
Discounted Cash Flow Analysis. Using discounted cash
flow analysis, Alex. Brown estimated the present value of the
future dividend streams that JSB could produce over a five year
period, under different assumptions as to required equity levels,
if JSB performed in accordance with JSB management's forecasts
and certain variants thereof. Alex. Brown also estimated the
terminal value for JSB's common equity after the five year period
by applying book value acquisition multiples (123-165%) derived
from the average price to book multiples generated by the
different segmentations in the comparable transaction analysis.
The dividend streams and terminal values were then discounted to
present values using discount rates ranging from 12.5% to 17.5%
which reflect different assumptions regarding the required rates
of return of holders or prospective buyers of JSB Common Stock.
Reference Range. Based in part on the several analyses
discussed above, Alex. Brown developed, for purposes of its
opinion, a reference range for the value of JSB Common Stock of
$13.49 to $21.83 per share of JSB Common Stock. The values
reflected in the foregoing reference range were considered along
with the other analyses performed by Alex. Brown and were not
intended to represent the price at which 100% of the JSB Common
Stock could actually be sold. The foregoing reference ranges
were based in part on the application of economic and financial
models and are not necessarily indicative of actual values, which
may be significantly more or less than such estimates. The
reference ranges do not purport to be appraisals.
Compensation of Financial Advisor. Pursuant to the
terms of an engagement letter dated January 6, 1994, JSB has
agreed to pay Alex. Brown a fee of $200,000 for acting as a
financial advisor in connection with the Merger, including
rendering its opinion. Of this fee, $25,000 was paid to Alex.
Brown upon execution of the engagement letter, $50,000 of this
fee was paid to Alex. Brown upon signing of the amendment to the
Merger Agreement and the balance of this fee is payable to Alex.
Brown upon consummation of the Merger. Whether or not the Merger
is consummated, JSB has agreed to reimburse Alex. Brown for
certain reasonable out-of-pocket expenses and has also agreed to
indemnify Alex. Brown and certain related persons against certain
liabilities relating to or arising out of its engagement.
RP Financial. RP Financial was selected by JSB to act
as its financial advisor because of RP Financial's expertise in
the valuation of businesses and their securities in connection
with mergers and acquisitions of savings and loans, savings banks
and savings and loan holding companies. RP Financial has not
previously acted as financial advisor to JSB. Pursuant to a
letter agreement dated November 5, 1993, RP Financial will
receive from JSB a fee of $30,000, plus reimbursement of certain
out-of-pocket expenses, for its services in connection with the
Merger. Due to the subsequent revision to the Merger Agreement,
RP Financial was paid an additional fee of $5,200 to compensate
RP Financial for the additional analyses which were required.
The full text of RP Financial's opinion, which sets
forth assumptions made, matters considered and limits on the
review undertaken, is attached hereto as Annex D and is
incorporated herein by reference. JSB shareholders are urged to
read the RP Financial opinion in its entirety. The following
summary is qualified in its entirety by reference to the full
text of the opinion.
JSB has agreed to indemnify and hold harmless RP
Financial, any affiliates of RP Financial and the respective
directors, officers, agents and employees of RP Financial who act
for or on behalf of RP Financial from and against any and all
losses, claims, damages and liabilities caused by or arising out
of any untrue statement of a material fact contained in the
information supplied by JSB to RP Financial or an omission to
state a material fact contained in the information supplied by
JSB to RP Financial or an omission to state a material fact in
the information so provided that is required to be stated or
necessary to make the statements not misleading. Pursuant to
their agreement, JSB will not be required to indemnify RP
Financial for any such losses, claims, damages and liabilities if
RP Financial is determined to be negligent or otherwise at fault,
or if RP Financial is determined to have failed to exercise such
due diligence and to conduct such independent investigations as
the circumstances indicate; provided, however, that RP Financial
will be entitled to indemnification for any such losses, claims,
damages and liabilities to the extent that RP Financial
reasonably relied upon information furnished by JSB whether or
not JSB is determined to have been negligent or otherwise at
fault. In addition, if RP Financial is entitled to
indemnification from JSB under the agreement and in connection
therewith incurs legal expenses in defending any legal action
challenging the opinion of RP Financial where RP Financial is not
negligent or otherwise at fault or is found by a court of law to
be not negligent or otherwise at fault, JSB will indemnify RP
Financial for all reasonable expenses.
RP Financial reviewed and analyzed the following
material in conjunction with its valuation of JSB and the
adequacy of the Merger Consideration: (1) the Merger Agreement,
dated November 10, 1993, and amended January 18, 1994, inclusive
of exhibits and the Stock Option Agreement; (2) the following
information for JSB: (a) audited financial statements for the
fiscal years ended December 31, 1989, through 1992, included or
incorporated in Annual Reports to Shareholders, or Annual Reports
on Form 10-Ks or Form F-2s and unaudited financial statements for
the nine months ended September 30, 1993, and internal reports
for the twelve months ended December 31, 1993, (b) proxy
statements for 1992 and 1993, (c) the budget plan for calendar
year ended December 31, 1994 and (d) unaudited internal and
regulatory financial reports and analyses prepared by management
and other related corporate records and documents regarding
various aspects of JSB's assets and liabilities, particularly
rates, volumes, maturities, market values, trends, credit risk,
interest rate risk and liquidity risk of JSB's assets,
liabilities, off-balance sheet assets, commitments and
contingencies; (3) the following information for USBANCORP: (a)
audited financial statements for the calendar years ended
December 31, 1989, through 1992, included or incorporated in
Annual Reports and Form 10-Ks including shareholder and internal
reports, and unaudited financial statements for the nine months
ended September 30, 1993, and internal reports for the twelve
months ended December 31, 1993, (b) proxy statements for 1992 and
1993, (c) the 1994 budget, (d) unaudited internal and regulatory
financial reports prepared by management and other related
corporate records and documents regarding various aspects of
USBANCORP's assets and liabilities, particularly rates, volumes,
maturities, market values, trends, credit risk, interest rate
risk and liquidity risk of USBANCORP's assets, liabilities, off-
balance sheet assets, commitments and contingencies;
(4) discussions with JSB's current management and USBANCORP's
management regarding past and current business operations,
financial condition and future prospects of the respective
institutions; (5) USBANCORP's results compared to the latest
publicly-available published financial statements, operating
results and market pricing of publicly-traded banks and bank
holding companies, including those with comparable
characteristics and those headquartered in Pennsylvania;
(6) market value information and pricing ratios of USBANCORP
Common Stock, such as market capitalization, volume, price
history, price/earnings ratio, price/book ratio, price/tangible
book ratio, price/assets ratio, dividend yield and dividend
payout ratio, compared to other publicly-traded banks and bank
holding companies, including those with comparable
characteristics and those headquartered in Pennsylvania; (7) the
trading market for the JSB Common Stock compared to similar
information for savings institutions or savings and loan holding
companies with comparable resources, financial condition,
earnings, operations and markets, including those operating in
Pennsylvania; (8) JSB's financial, operational and market area
characteristics compared to similar information for comparable
savings institutions or savings and loan holding companies,
including those operating in Pennsylvania; (9) the potential for
growth and profitability for JSB and USBANCORP in their
respective markets, specifically regarding competition by other
banks, savings institutions, mortgage banking companies and other
financial services companies, economic projections in the local
market area and the impact of the regulatory, legislative and
economic environments on operations of the thrift and banking
industries; (10) the financial terms, financial and operating
conditions and market areas of other recent business combinations
of comparable savings institutions and savings and loan holding
companies; and (11) the potential pro forma impact of the Merger
on USBANCORP's financial condition, operating results and per
share figures.
In rendering its opinion, RP Financial relied, without
independent verification, on the accuracy and completeness of the
information concerning JSB and USBANCORP as furnished by the
respective institutions to RP Financial for review for purposes
of its opinion, as well as publicly-available information
regarding other financial institutions and economic data. With
respect to the financial forecasts RP Financial reviewed for each
institution, RP Financial assumed that they had been reasonably
prepared on bases reflecting the best currently available
estimates and judgments of the managements of each respective
institution. RP Financial did not review individual credit files
nor did RP Financial perform or obtain any independent appraisals
or evaluations of the assets, liabilities, subsidiaries and
potential and/or contingent liabilities of JSB and USBANCORP. In
addition, JSB informed RP Financial and RP Financial assumed,
with JSB's consent, that the Merger will be recorded as a
purchase under generally accepted accounting principles. RP
Financial expresses no opinion on matters of a legal, regulatory,
tax or accounting nature or the ability of the Merger as set
forth in the Merger Agreement to be consummated.
RP Financial's opinion was based solely upon the
information available to it and the economic, market and other
circumstances as they existed as of January 18, 1994; events
occurring after that date could materially affect the assumptions
used in preparing the opinion.
In connection with rendering its opinion, RP Financial
performed a variety of financial analyses, which are summarized
below. Although the evaluation of the fairness, from a financial
point of view, of the consideration to be paid in the Merger was
to some extent subjective based on the experience and judgment of
RP Financial, and not merely the result of mathematical analysis
of financial data, RP Financial principally relied on three basic
financial valuation methodologies in its determinations. The
preparation of a fairness opinion is a complex process and is not
necessarily susceptible to partial analysis or summary
description. RP Financial believes its analyses must be
considered as a whole and that selecting portions of such
analyses and factors considered by RP Financial without
considering all such analyses and factors could create an
incomplete view of the process underlying RP Financial's opinion.
In its analyses, RP Financial made numerous assumptions with
respect to business, market, monetary and economic conditions,
industry performance and other matters, many of which are beyond
the control of JSB and USBANCORP. The analyses were prepared by
RP Financial solely for the purpose of providing its opinion as
to the fairness of the Merger Consideration to the JSB Board of
Directors and do not purport to be appraisals or necessarily
reflect the prices at which businesses or securities actually may
be sold. Any estimates contained in RP Financial's analyses are
not necessarily indicative of future results or values, which may
be significantly more or less favorable than such estimates.
None of the analyses performed by RP Financial was assigned a
greater significance by RP Financial than any other.
Based upon the discounted cash flow analysis and
comparable companies and comparable acquisition analyses and
other factors, including but not limited to the future prospects
of JSB as an independent savings bank, RP Financial rendered its
written opinion that the Merger Consideration, as revised, was
fair from a financial point of view. RP Financial believes that
the Merger Consideration, as revised, is fair on the basis of
these analyses. Although the Merger Consideration appears to be
less attractive than initially offered, the Merger will be less
dilutive to USBANCORP Common Stock than at the higher price, a
key aspect in that a portion of the Merger Consideration is in
the form of USBANCORP Common Stock.
Discounted Cash Flow Analysis. Using a discounted cash
flow analysis, RP Financial estimated the present value of future
dividends based on JSB's current payout ratio over a five-year
period under alternative strategies and the present value of the
sale-of-control value at the end of the fifth year, reflecting a
range of multiples to book value of 1.25 to 1.75 times. Three
alternative strategies were analyzed as set forth in the
following pages, reflecting a base case scenario, an aggressive
growth scenario and a profit improvement scenario. The
price/tangible book multiples incorporated in RP Financial's
analysis were primarily based on the annual average
price/tangible book multiple for completed acquisitions of
savings institutions falling within the range of 1.12 to 1.29 for
the last five years, and, to a lesser extent, pending
acquisitions currently averaging 1.64 times. The dividend
streams and sale-of-control values were then discounted to
present values using a 12% discount rate which reflects the
required rates of return on comparably publicly-traded savings
institutions. The range of present values per fully diluted
share of JSB's common stock resulting from these assumptions were
$16.68 to $25.61. The value of the Merger Consideration per
share of JSB Common Stock was $22.50 based on the average closing
price of USBANCORP Common Stock on January 17, 1994, which fell
in the upper end of the range of computed present values.
Comparable Acquisition Transactions. RP Financial
compared the Merger on the basis of stated multiples of stated
book value, tangible book value and earnings of JSB implied by
the Merger Consideration to be paid to the holders of JSB Common
Stock, as of the date of determination with the same ratios in
pending acquisitions and consummated acquisitions during 1992 and
1993 to date of savings and loan associations, savings banks and
savings and loan holding companies in Pennsylvania and also those
RP Financial deemed comparable in terms of size, location,
capitalization, profitability and operating strategy and who were
also publicly-traded prior to their acquisition. Such comparable
acquisitions included institutions with total assets between $200
million and $1 billion, consisting primarily of institutions
based in the Mid-Atlantic and rustbelt regions of the country,
including Pennsylvania. JSB's acquisition pricing multiples, as
determined by the last 10 trading days for USBANCORP Common Stock
and at the minimum price, fell in the upper portion of the range
of 19 comparable completed acquisitions in terms of
price/tangible book value and price/earning ratios and exceeded
the medians paid in these transactions of 1.3 times tangible book
value and 12.2 times earnings, and fell in the lower portion of
the range of 12 comparable pending acquisitions in terms of
price/tangible book value and price/earnings ratios, exceeded by
the medians offered in these pending transactions of 1.7 times
tangible book value and 16.5 times earnings. JSB's acquisition
pricing multiples, as determined by the last 10 trading days for
USBANCORP Common Stock and at the minimum price, exceeded the
multiples of all of 4 completed Pennsylvania acquisitions during
1992 and 1993, whose median price/tangible book value and
price/earnings ratios were approximately 1.0 and 8.5 times,
respectively, and fell in the upper middle of the range of the 4
pending Pennsylvania acquisitions whose median price/tangible
book value and price/earnings ratios were approximately 1.5 and
15.4 times, respectively.
No company or transaction used in this composite
analysis is identical to JSB or the Merger. Accordingly, an
analysis of the results of the foregoing is not mathematical;
rather, it involves complex considerations and judgments
concerning differences in financial and operating characteristics
of the companies involved and other factors that could affect the
public trading values of the securities of the company or
companies to which they are being compared.
Impact Analysis. RP Financial analyzed the effect of
the Merger on the earnings per share and book value per share
based on pro forma analyses prepared by the management of
USBANCORP and its independent accountants and certain estimates
by RP Financial. At the time performed, this analysis indicated
that the Merger would be dilutive to USBANCORP's earnings per
share for the nine month period ended September 30, 1993, before
factoring in the potential earnings synergies through an
anticipated reduction in duplicate staffing, other expenses and
expanded products and services offerings. RP Financial's
analysis also took into account the Merger's dilutive effect on
USBANCORP's book value and tangible book value per share at
September 30, 1993. RP Financial also considered the dilutive
impact of the Merger on the pro forma capitalization of
USBANCORP. In addition, RP Financial's analysis considered the
dilutive impact of the Merger to forecasted earnings as reflected
in USBANCORP's 1994 budget, which also incorporated the impact of
expected merger synergies as well as the one-time net impact of
one time gains on asset liquidations and acquisition related
expenses. It is RP Financial's understanding that, based on
conversations with USBANCORP and JSB, pro forma earnings
incorporating anticipated synergies beyond the first year are
currently expected to be accretive. The impact analysis was
based on data available at the time performed and should not be
construed as indicative of the actual impact of the Merger upon
consummation or future impact of the Merger following
consummation.
As described above, RP Financial's opinion and
presentation to the JSB Board of Directors was one of many
factors taken into consideration by the JSB Board of Directors in
making its determination to approve the Merger Agreement.
Although the foregoing summary describes the material provisions
of the written opinion presented by RP Financial to the JSB Board
of Directors on January 18, 1994, in connection with its opinion
of that date, it does not purport to be a complete description of
all the analyses performed by RP Financial and is qualified by
reference to the written opinion of RP Financial set forth in
Annex D hereto.
Based on the foregoing, RP Financial has advised the
JSB Board of Directors that, in its opinion, the financial terms
of the Merger are fair to JSB and its shareholders. The opinion
of RP Financial is directed toward the consideration to be
received by JSB shareholders and does not constitute a
recommendation to any JSB shareholder to vote for the Merger
Agreement.
Effective Date of the Merger
The Merger will become effective at the close of
business on the date on which all conditions to the closing of
the Merger Agreement have been satisfied (including the receipt
of all shareholder and regulatory approvals) or are waived, and
on which both (i) the Interim Merger is consummated by filing of
Articles of Merger with the Department of State of the
Commonwealth of Pennsylvania in accordance with the BCL, and
(ii) the U.S. Bank Merger is consummated by the filing of the
Notice of Consummation with the Office of the Comptroller of the
Currency (the "OCC"), in accordance with the National Bank Act,
or on such later date as the Articles of Merger and the Notice of
Consummation may specify.
Financing the Merger
USBANCORP will pay no more than $19,690,594 in cash to
JSB shareholders in connection with the Merger exclusive of
amounts paid (i) in exchange for JSB Common Stock issuable upon
the exercise of stock options, (ii) in connection with the
cancellation of options to acquire JSB Common Stock, (iii) in
lieu of fractional shares and (iv) in excess of $22.50 to holders
of JSB Common Stock, if any, who perfect their dissenters'
rights. The source of funds to finance this portion of the
consideration will be a combination of interest bearing deposits
with banks and the sale of investment securities classified as
available for sale. See "PRO FORMA FINANCIAL INFORMATION."
Regulatory Approvals
One or more separate steps of the Merger is subject to
approval of the Pennsylvania Department of Banking (the
"Department"), the Board of Governors of the Federal Reserve
System (the "Federal Reserve Board"), the OCC and the Federal
Deposit Insurance Corporation (the "FDIC").
Pennsylvania Department of Banking
USBANCORP's formation of JIB and the Interim Merger are
subject to approval by the Department under the PBC. An
application to form JIB was filed with the Department on
November 23, 1993, and was approved on December 22, 1993. JIB
was incorporated on December 22, 1993. An application for the
Interim Merger of JIB and JSB was filed on March 17, 1994. Under
the PBC, the Department will conduct an investigation to
determine whether the Interim Merger will be consistent with
adequate and sound banking and in the public interest on the
basis of (i) the financial history and condition of the parties,
(ii) their prospects, (iii) the character of their management,
(iv) the potential effect of the Interim Merger on competition
and (v) the convenience and needs of the area primarily to be
served by the resulting corporation. In ruling upon the
application, the Department must also take into consideration
whether the Interim Merger will adequately protect the interests
of the depositors, other creditors and shareholders of JSB.
Federal Reserve Board
The formation of JIB by USBANCORP is also subject to
prior approval by the Federal Reserve Board under Section 3 of
the Bank Holding Company Act of 1956, as amended (the "BHCA").
Under Section 3 of the BHCA, the Federal Reserve Board must
withhold approval of the formation of JIB if it finds that the
transaction would result in a monopoly or be in furtherance of
any combination or conspiracy to monopolize or attempt to
monopolize the business of banking in any geographic area. In
addition, the Federal Reserve Board may not approve the
transaction if it finds that the effect thereof may be
substantially to lessen competition or to tend to create a
monopoly or would in any other manner be in restraint of trade,
unless it finds that the anti-competitive effects are clearly
outweighed in the public interest by the probable effects of the
transaction in meeting the convenience and needs of the
communities to be served. In each case, the Federal Reserve
Board will also take into consideration the financial and
managerial resources and future prospects of the banking
subsidiaries following the transactions, as well as the
compliance records of such banking subsidiaries with the
Community Reinvestment Act. The Federal Reserve Board has
indicated that it will not approve a significant acquisition
unless the resulting institution has adequate capitalization
taking into account, among other things, asset quality. An
application for approval by the Federal Reserve Board was filed
on March 17, 1994.
Federal Deposit Insurance Corporation
The FDIC must approve the Interim Merger and the
granting of deposit insurance to JIB. Application for FDIC
approval of the Interim Merger and the granting of deposit
insurance was filed on March 18, 1994. In approving the Interim
Merger, Section 18(c) of the Federal Deposit Insurance Act (the
"FDIA") requires the FDIC to follow the same guidelines the
Federal Reserve Board must follow in approving the formation of
JIB. See "Regulatory Approvals -- Federal Reserve Board."
Office of the Comptroller of the Currency
The U.S. Bank Merger is subject to the approval of the
OCC, as primary regulator of U.S. Bank, under Section 18(c) of
the FDIA and Section 215a of the National Bank Act. Application
for such approval was filed with the OCC on March 17, 1994.
Under Section 18(c) of the FDIA, the OCC must follow the same
guidelines as the Federal Reserve Board must follow in approving
the formation of JIB. See "Regulatory Approvals -- Federal
Reserve Board."
Conditions to Consummation of the Merger
In addition to the regulatory approvals described above
and the approval of the Merger Agreement by the respective
shareholders of USBANCORP and JSB, consummation of the Merger is
contingent upon the satisfaction or waiver of a number of other
conditions, including, among others: (i) the continued accuracy
in all material respects of the representations and warranties
made by, and the performance of and compliance with, in all
material respects, all covenants and obligations of, USBANCORP
and JSB contained in the Merger Agreement; (ii) the due and valid
authorization by USBANCORP, U.S. Bank and JSB of the execution,
delivery and performance of the Merger Agreement, and receipt by
JSB and USBANCORP of copies of certified resolutions of the other
party evidencing such authorizations; (iii) the absence of any
order, decree or injunction which enjoins or prohibits
consummation of the Merger; (iv) the declaration and continued
effectiveness of the registration statement filed by USBANCORP
with the Securities and Exchange Commission (the "SEC") (of which
this Proxy Statement/Prospectus is a part) registering the shares
of USBANCORP Common Stock to be issued in the Merger (the
"Registration Statement"); (v) the due registration or
qualification of USBANCORP Common Stock in all states in which
such action is required; (vi) receipt of legal opinions with
respect to matters of corporate law; (vii) the absence of any
material adverse change (as defined in the Merger Agreement)
since September 30, 1993, in either USBANCORP or JSB;
(viii) receipt by USBANCORP and JSB of an opinion of counsel,
dated the Effective Date, with respect to certain tax matters in
form and substance reasonably satisfactory to USBANCORP and JSB,
and (ix) as a condition of JSB's obligation only, the Average
Closing Price being equal to or greater than $20.50. On the
Effective Date, USBANCORP and JSB must each present to the other
a certificate stating that certain of these conditions have been
satisfied.
Representations and Warranties
The representations and warranties of JSB and USBANCORP
are set forth in Articles II and III of the Merger Agreement.
These representations and warranties, among other things, relate
to: (i) the organization, good standing and capitalization of
USBANCORP, JSB and their respective subsidiaries; (ii) the
corporate power and authority of each party to enter into the
Merger Agreement; (iii) the substantial compliance by USBANCORP,
U.S. Bank and JSB with all applicable statutes, codes,
ordinances, judgments, orders, writs, decrees, rules and
regulations; (iv) the absence of any violation by USBANCORP, U.S.
Bank and JSB of their respective Articles of Incorporation,
Articles of Association or Bylaws or any agreement or similar
instrument that in any respect could materially adversely affect
their respective activities or operations, properties or assets
or the execution and delivery of the Merger Agreement and the
transactions contemplated thereby; (v) the truth and correctness
in all material respects of the information contained in the
Registration Statement at the time it is declared effective, the
regulatory applications, and all documents filed with or
submitted to any federal or state regulatory agency by USBANCORP
and JSB in connection with the Merger; (vi) the fact that the
Regulatory Reports delivered by USBANCORP and JSB to the other
have been prepared in conformity with applicable regulatory
accounting principles and practices applied on a consistent basis
and present fairly, or will present fairly, the financial
position, results of operations and changes in shareholders'
equity of JSB and USBANCORP respectively; (vii) the fact that the
financial statements delivered by USBANCORP and JSB to the other
have been prepared in conformity with generally accepted
accounting principles ("GAAP") applied on a consistent basis and
present fairly, in all material respects, the consolidated
financial position of the respective parties and their
subsidiaries; (viii) the fact that any consents required in
connection with the Merger Agreement or the Merger have been
provided; (ix) the fact that USBANCORP, JSB and their respective
subsidiaries hold all licenses, franchises and permits necessary
for the lawful conduct of their businesses and have complied in
all material respects with applicable laws, statutes, orders,
rules or regulations of any federal, state or local governmental
authority relating to them; (x) the fact that, to their
knowledge, neither USBANCORP, JSB, their respective subsidiaries
nor any properties owned or operated by any of them are not and
have not been in violation of any Environmental Law, as defined
in the Merger Agreement, that would have a material adverse
effect on their respective assets, financial condition or results
of operations; (xi) the due delivery of the securities documents
delivered by USBANCORP and JSB to the other, and compliance, in
all material respects, with the Securities Exchange Act of 1934
and the applicable rules and regulations of the Securities and
Exchange Commission; (xii) the validity of title to real and
personal property and assets owned by JSB; (xiii) the validity of
all material leases executed by JSB and its subsidiaries and the
absence of any existing material default or event which with
notice or lapse of time or otherwise would constitute a material
default under such leases by JSB, its subsidiaries or by the
lessor with respect thereto; (xiv) due filing of tax returns and
the payment of taxes due and the compliance with all other tax
matters relating to each of USBANCORP, JSB and their respective
subsidiaries; (xv) except as disclosed in JSB's financial
statements, the absence of any material transaction between JSB
and any related party as described in the Merger Agreement;
(xvi) the absence of liability of USBANCORP, JSB, their
respective subsidiaries and any pension plan maintained by any of
these parties to the Pension Benefit Guaranty Corporation or the
Internal Revenue Service and the compliance by such plans with
the Employee Retirement Income Security Act of 1974, as amended
("ERISA"); (xvii) the existence of any employment contracts with
JSB; (xviii) the absence or existence of any material litigation
pending or threatened against USBANCORP, JSB and their
respective subsidiaries except that JSB makes no representation
concerning any legal, administrative, arbitration or other
proceeding, claim or action arising out of or relating to JSB's
execution of the amendment to the Merger Agreement or the
transactions contemplated thereby; (xix) except for Emerald, the
absence of any brokers or finders retained in connection with the
Merger; (xx) the adequacy of the amount of insurance carried by
JSB and its subsidiaries; (xxi) the adequacy of the allowance for
loan losses reflected in the Regulatory Reports and balance
sheets of the parties; and (xxii) the absence of any material
adverse change in the assets, financial condition or results of
operations of USBANCORP, JSB and their respective subsidiaries,
taken as a whole.
Conduct of Business Pending the Merger
Pursuant to the Merger Agreement, JSB has agreed, among
other things, that, prior to the Effective Date, without the
prior written consent of USBANCORP, JSB and each JSB subsidiary
will conduct its business and operations only in the ordinary
course, and will use their best efforts to preserve their
business organizations intact, to maintain good relationships
with their employees and to preserve their goodwill with their
customers and others having business relations with them. For
purposes of the Merger Agreement, it is not deemed to be conduct
in the ordinary course of business for JSB to (i) make any
capital expenditure of $50,000 or more, (ii) make any sale,
assignment, transfer or other disposition of assets (other than
investment securities and residential mortgage loans sold in the
ordinary course of business) having a book or market value,
whichever is less, in the aggregate, of more than $50,000, other
than a pledge of assets to secure government deposits, the
exercise of trust powers, sale of assets received in satisfaction
of debts previously contracted in the ordinary course of business
or transactions in investment securities by a JSB subsidiary or
repurchase agreements made, in each case, in the ordinary course
of business or (iii) undertake any lease, contract or other
commitment for its account, other than in the normal course of
providing credit to customers as part of its banking business,
involving an unbudgeted payment of $50,000 in the aggregate, or
containing a material financial commitment and extending beyond
12 months from the date of the Merger Agreement. Further, both
parties have agreed that, prior to the Effective Date, each will
give to the other reasonable access during normal business hours
to their respective properties, books and records and will
furnish to the other information concerning their respective
affairs.
JSB has also agreed to certain restrictions on the
conduct of its activities pending the Merger. The Merger
Agreement provides, among other things, that neither JSB nor any
JSB subsidiary may, without the prior written consent of
USBANCORP (i) issue, sell, purchase, acquire, redeem or grant
options or rights to purchase shares of its capital stock, except
upon the exercise of outstanding options; (ii) change the number
of authorized shares of its capital stock; (iii) set aside or pay
any dividend except that JSB may pay a regular quarterly cash
dividend, consistent with past practices, not to exceed $.05 per
share for each successive quarter prior to the Effective Date, if
the Effective Date is not on or before the record date for
payment by USBANCORP of a regular cash dividend of at least
$.22 per share in such quarter, provided that such dividend
shall not exceed 30% of JSB's consolidated net income for such
quarter without reference to securities gains or losses resulting
from changes in accounting principles or other extraordinary
items; (iv) enter into any contract, arrangement or commitment,
except in the ordinary course of business, consistent with past
practices or as permitted by the Merger Agreement; (v) enter
into, amend or terminate any material contract or employment
contract or grant any severance or termination pay other than in
accordance with Exhibit 3 and Exhibits 6A through 6D to the
Merger Agreement; (vi) implement or amend any employee pension,
retirement, bonus or other benefit plan; (vii) sell or otherwise
dispose of the capital stock of any subsidiary other than in the
ordinary course of business; (viii) merge or consolidate JSB with
any other corporation; (ix) make any acquisition of all or any
substantial portion of the business or assets of any other
person, firm or organization; (x) sell or lease all or any
substantial portion of the assets or business of JSB; (xi) make
any material change in the nature of its business or operations;
(xii) amend its Articles of Incorporation or Bylaws; (xiii) incur
any indebtedness for borrowed money other than in the ordinary
course of business consistent with past practice; (xiv) take any
action which would result in any of the representations and
warranties set forth in the Merger Agreement becoming materially
untrue; (xv) change any method, practice or principle of
accounting except changes required as a result of changes in
generally accepted accounting principles; (xvi) waive, release,
grant or transfer any rights of value or modify or change in any
material respect any existing agreement to which JSB or any JSB
subsidiary is a party, other than in the ordinary course of
business, consistent with past practice; (xvii) compromise,
extend or restructure any loan with an unpaid principal balance
exceeding $250,000; (xviii) sell, exchange or otherwise dispose
of any investment securities held for investment, or any
securities or loans that are held for sale prior to scheduled
maturity, other than consistent with past practice agreed upon by
the parties; (xix) make any investment in capital stock or
securities of any other entity not rated "A" or higher either by
Standard & Poor's Corporation or Moody's Investment Services,
Inc., other than in the ordinary course of business consistent
with past practice or JSB's existing investment policy;
(xx) except consistent with past practice, make any loan or other
credit facility commitment (including without limitation, lines
of credit and letters of credit) to any affiliate or compromise,
extend, renew or modify any such commitment outstanding;
(xxi) except consistent with past practice, enter into, renew,
extend or modify any other transaction with any affiliate;
(xxii) enter into any swap or similar commitment, agreement or
arrangement which is not consistent with past practice and which
increases the credit or interest rate risk over the levels
existing at September 30, 1993; or (xxiii) agree to do any of the
foregoing or take any action that would constitute a breach of
representation or warranty contained therein, or permit any
subsidiary to do so.
No Solicitation of Transactions
The Merger Agreement provides that, except as described
below, commencing upon expiration of the Marketing Period (See
"Background and Reasons for the Merger and Recommendations of the
Boards" herein), JSB will not, and JSB will not permit its
affiliates, officers, directors, employees, agents or
representatives to, directly or indirectly, solicit, encourage,
initiate or engage in discussions or negotiations with, or
respond to requests for information, inquiries or other
communications from, any person other than USBANCORP concerning
the Merger Agreement, or any acquisition of JSB, or any JSB
subsidiary, or any assets or business of either JSB or any JSB
subsidiary, except that JSB's officers and directors may respond
to inquiries of stock analysts, regulatory authorities and
shareholders in the ordinary course of business. JSB also may
respond to unsolicited inquiries from third parties and/or engage
in discussions, negotiations, or agreements or understandings or
authorize any of its directors, officers, employees or agents to
do so if the JSB Board of Directors, after receipt of a written
opinion of counsel, determines that such actions are required in
the exercise of their fiduciary duties. Further, the Merger
Agreement requires JSB to notify USBANCORP immediately if any
such discussions or negotiations are sought by, or if any such
requests for information, inquiries or communications are
received from, any person other than USBANCORP.
As a condition to USBANCORP entering into the amendment
to the Merger Agreement, the directors of JSB have executed a
Letter Agreement in which they have agreed, among other things,
not to initiate or engage in any negotiations or discussions with
any party other than USBANCORP with respect to any offer, sale,
transfer, or other disposition of, any shares of JSB Common
Stock. Such directors have also agreed to vote shares of JSB
Common Stock owned by them in favor of the Merger Agreement. A
copy of the form of letter agreement executed by the directors of
JSB is included as Exhibit 1 to the Merger Agreement attached
hereto as Annex A. See "Background and Reasons for the Merger
and Recommendations of the Boards" above.
Waivers; Amendment
Subject to applicable law, (i) the Merger Agreement may
be amended at any time prior to the Effective Date, by written
action taken by duly authorized officers of USBANCORP, U.S. Bank,
and JSB, and (ii) USBANCORP, U.S. Bank, and JSB, by written
action taken by duly authorized officers of each, may (a) extend
the time for performance of obligations of either party under the
Merger Agreement, (b) waive any inaccuracies in the
representations and warranties contained in the Merger Agreement
or in any document delivered pursuant to the Merger Agreement, or
(c) waive compliance with any agreements or conditions to
consummation of the Merger.
Termination of the Merger Agreement
The Merger Agreement may be terminated and the Merger
abandoned at any time prior to the Effective Date,
notwithstanding prior shareholder approval, by (i) the mutual
written consent of USBANCORP, U.S. Bank and JSB, or (ii) by
either party if (a) the Merger shall not have occurred prior to
September 30, 1994, unless the failure to consummate the
transaction resulted from the failure of the party seeking to
terminate the Merger Agreement to perform its obligations under
the Merger Agreement, (b) such party has been informed in writing
by a Regulatory Authority that the consent or approval needed
from that Regulatory Authority is unlikely to be granted, unless
such fact is due to the failure of the party seeking to terminate
the Merger Agreement to perform or observe its obligations under
the Merger Agreement, (c) there has been any material breach by
the other party of any covenant, agreement or other obligation of
the other party contained in the Merger Agreement, if such breach
continues for a period of 30 days after the receipt of written
notice of the same, (d) there has been a Material Adverse Change
(as defined in the Merger Agreement) in USBANCORP or JSB since
September 30, 1993, or (e) if the other party shall communicate
its unwillingness to consummate the Merger in accordance with the
terms and conditions of the Merger Agreement.
Election Procedures
On or before the Effective Date, the Trust Company,
acting in the capacity of exchange agent for USBANCORP (the
"Exchange Agent"), will mail an election form, a letter of
transmittal and other appropriate transmittal materials
(collectively, the "Election Form") to each person who, as of the
Effective Date, holds shares of JSB Common Stock.
The Election Form will permit a holder of shares of JSB
Common Stock to elect with respect to such holder's shares to
receive cash (the "Cash Election"), to receive shares of
USBANCORP Common Stock (the "Stock Election") or to make no such
election (the "No Election Shares") in which case such holder
will receive shares of USBANCORP Common Stock and cash in
accordance with the Exchange Rate. To the extent that any holder
of shares of JSB Common Stock has not submitted an effective,
properly completed Election Form to the Exchange Agent in
accordance with the procedures and within the time periods set
forth in the Election Form, such shares shall be deemed to be No
Election Shares.
In connection with the exchange of shares of JSB Common
Stock pursuant to the Merger Agreement, USBANCORP will issue no
more than 988,260 shares of USBANCORP Common Stock (the "Stock
Limitation") and will pay no more than $19,812,153 in cash (the
"Cash Amount") to Shareholders of JSB. Because the aggregate
cash and stock components of the Merger Consideration are fixed
at any given Average Closing Price, the extent to which elections
by holders of JSB Common Stock will be accommodated will depend
upon the respective numbers of JSB shareholders who elect cash,
stock or make no election. Accordingly, a JSB shareholder who
elects to receive cash may instead receive cash and shares of
USBANCORP Common Stock and a JSB shareholder who elects to
receive shares of USBANCORP Common Stock may instead receive
shares of USBANCORP Common Stock and cash.
The cash and stock allocation will be made by the
Exchange Agent as follows:
(i) If subscriptions for USBANCORP Common Stock
do not exceed the Stock Limitation, the USBANCORP Common
Stock and the Cash Amount shall be allocated as follows:
(a) First, all shares of JSB Common Stock covered by an
effective Election Form which designates a Stock Election
will be converted into a fraction of a share of USBANCORP
Common Stock as follows: (i) if the Average Closing Price
on the Effective Date is less than or equal to $24.50 per
share, then .9184 shares of USBANCORP Common Stock; (ii) if
the Average Closing Price on the Effective Date is greater
than or equal to $25.50 per share, then .8824 shares of
USBANCORP Common Stock; or (iii) the Average Closing Price
on the Effective Date is greater than $24.50 but less than
$25.50 per share, then the conversion ratio will be
determined by dividing $22.50 by the Average Closing Price;
(b) Second, all shares of JSB Common Stock which are No
Election Shares shall be converted into a fraction of a
share of USBANCORP Common Stock and $10.13 in cash and
shares of USBANCORP common Stock as follows: (i) if the
Average Closing Price on the Effective Date is less than or
equal to $24.50 per share, then .5053 shares of USBANCORP
Common Stock; (ii) if the Average Closing Price on the
Effective Date is greater than or equal to $25.50 per share,
then .4853 shares of USBANCORP Common Stock; or (iii) if the
Average Closing Price on the Effective Date is greater than
$24.50 per share, but less than $25.50 per share, then the
conversion ratio will be determined by dividing $22.50 by
the Average Closing Price and multiplying the resulting
figure by .55; (c) Third, all shares of JSB Common Stock
which are subject to dissenters' rights shall be allocated
cash equal to an aggregate amount of $22.50 per share; and
(d) Fourth, shareholders whose shares of JSB Common Stock
are covered by an effective Election Form which designates a
Cash Election shall each have a pro rata portion of their
shares of JSB Common Stock converted, at the rate of $22.50
per share of JSB Common Stock, into a pro rata portion of
the Cash Amount, and their remaining shares of JSB Common
Stock shall be converted into USBANCORP Common Stock.
(ii) If subscriptions for USBANCORP Common Stock
exceed the Stock Limitation, the USBANCORP Common Stock and
the Cash Amount shall be allocated as follows: (a) First,
all shares of JSB Common Stock which are subject to
dissenters' rights shall be allocated a portion of the Cash
Amount equal to an aggregate amount of $22.50 per share;
(b) Second, all shares of JSB Common Stock covered by an
effective Election Form which designates a Cash Election
shall be converted into cash at the rate of $22.50 per
share; (c) Third, all shares of JSB Common Stock which are
No Election Shares shall be converted into cash and
USBANCORP Common Stock in accordance with the Exchange Rate;
and (d) Fourth, shareholders whose shares of JSB Common
Stock are covered by an effective Election Form which
designates a Stock Election shall each have a pro rata
portion of their shares of JSB Common Stock converted into a
pro rata portion of the number of shares of USBANCORP Common
Stock available for conversion by reason of the Stock
Limitation, and their remaining shares of JSB Common Stock
shall be converted into cash at the rate of $22.50 per
share.
An election to receive cash or stock will be properly
made only if the Exchange Agent has received a properly completed
Election Form in accordance with the procedures and within the
time periods set forth in the Election Form. An Election Form
will be properly completed only if accompanied by certificates
representing all shares of JSB Common Stock covered thereby. Any
Election Form may be revoked or changed by the person submitting
such Election Form by written notice to the Exchange Agent,
provided such notice is received by the Exchange Agent in
accordance with the procedures and within the time periods set
forth in the Election Form. All Election Forms will be deemed
revoked if the Exchange Agent is notified in writing by USBANCORP
or JSB that the Merger Agreement has been terminated. The
certificates representing JSB Common Stock relating to any
revoked Election Form will be returned without charge to the
person submitting such Election Form to the Exchange Agent. The
Exchange Agent will have sole discretion to determine when any
election, modification or revocation is received and whether any
such election, modification or revocation has been properly made.
Exchange of JSB Stock Certificates
On or before the Effective Date, the Exchange Agent
will mail an Election Form to each former holder of record of
shares of JSB Common Stock together with instructions for the
exchange of JSB stock certificates for the consideration into
which JSB Common Stock is being converted in the Merger. The
Election Form will specify that delivery shall be effected and
risk of loss and title to certificates previously representing
JSB Common Stock will pass only upon receipt of such certificates
by the Exchange Agent.
JSB SHAREHOLDERS SHOULD NOT SEND IN THEIR CERTIFICATES UNTIL THEY
RECEIVE THE ELECTION FORM AND INSTRUCTIONS. JSB SHAREHOLDERS
SHOULD NOT RETURN STOCK CERTIFICATES WITH THE ENCLOSED PROXY.
Upon surrender to the Exchange Agent of one or more
certificates for shares of JSB Common Stock, together with a
properly completed Election Form, the Exchange Agent will issue
and mail to the holder thereof (i) a certificate or certificates
representing the number of shares of USBANCORP Common Stock to
which such holder is entitled, where applicable, and (ii) a check
for the cash amount (without interest) in lieu of any fractional
shares of USBANCORP Common Stock and, with respect to shares of
JSB Common Stock that are converted wholly or partially into the
right to receive cash, plus the cash amount (without interest) of
the Merger Consideration to which such holder is entitled. A
certificate for shares of USBANCORP Common Stock, or any check
representing cash in lieu of fractional shares or the cash
portion of the Merger Consideration, may be issued or paid in a
name other than the name in which the surrendered certificate is
registered only if (i) the certificate surrendered is properly
endorsed in blank, accompanied by a guaranteed signature and
otherwise in proper form for transfer; and (ii) the person to
whom certificates for shares of USBANCORP Common Stock is to be
issued or to whom cash is to be paid pays to the Exchange Agent
any transfer or other taxes required by reason of the issuance or
payment to a person other than the registered holder of the
certificate for shares of JSB Common Stock which are surrendered.
All shares of USBANCORP Common Stock issued and all cash payments
made upon the surrender by holders of JSB Common Stock of one or
more certificates evidencing such shares shall have been deemed
issued and/or paid as the case may be, in full satisfaction of
all rights pertaining to such shares of JSB Common Stock,
subject, however, to USBANCORP's obligation to pay any dividends
or make any other distribution with a record date prior to the
Effective Date which may have been declared or made by JSB on
such shares of JSB Common Stock in accordance with the Merger
Agreement on or prior to the Effective Date and which remain
unpaid on the Effective Date.
All shares of USBANCORP Common Stock issued pursuant to
the Merger will be deemed issued as of the Effective Date.
Certificates which represent shares of JSB Common Stock that
(i) will be converted into shares of USBANCORP Common Stock on
the Effective Date and (ii) are outstanding on the Effective
Date, will be deemed to evidence ownership of the shares of
USBANCORP Common Stock into which those shares will be converted
by virtue of the Merger. However, until such certificates are
surrendered for exchange after completion of the Merger, holders
of such certificates will not be paid any dividends declared and
paid by USBANCORP on the USBANCORP Common Stock. When such
certificates are surrendered any accrued but unpaid dividends
will be paid without interest. After the Effective Date, there
will be no transfers on the transfer books of JSB of JSB Common
Stock that was outstanding immediately prior to the Effective
Date. If, after the Effective Date, certificates representing
such shares are presented for transfer to the Exchange Agent,
they will be cancelled and exchanged for the consideration into
which such shares have been exchanged in accordance with the
terms of the Merger Agreement.
Effect of the Merger on the Business of USBANCORP and JSB
The Merger will have a significant effect on JSB and
its depositors, employees and customers. Deposit pricing will be
conformed to U.S. Bank's generally lower deposit rates. In
addition, customers of JSB will be offered USBANCORP's broader
array of products and services, including expanded wholesale
banking products and corporate and personal trust services
tailored to meet the needs of businesses, consumers and employee
benefit plans. Operationally, a number of functions that were
out-sourced by JSB will be performed by USBANCORP, including data
processing, asset/liability management and investment portfolio
management. USBANCORP also has preliminary plans to centralize
all mortgage servicing in JSB's mortgage banking subsidiary,
Standard Mortgage Corporation of Georgia.
After the Effective Date, certain employees of JSB and
its subsidiaries will be terminated and will receive severance
benefits as set forth on Exhibit 3 to the Merger Agreement
attached as Annex A hereto. USBANCORP will use reasonable
efforts to provide continued employment within the USBANCORP
organization to certain employees of JSB and its subsidiaries.
Management of USBANCORP believes that the Merger will
have no negative impact on USBANCORP's present external dividend
policies or the sustainability of the current common stock
dividend. Rather, management of USBANCORP believes the
anticipated growth opportunities provided by the Merger will
allow USBANCORP to continue paying its dividends from current
cash flow and further support future planned periodic per share
increases in the common stock dividend.
Management and Operations After the Merger
Management
There will be no change in the Board of Directors or
executive officers of USBANCORP resulting from the Merger, except
that on the Effective Date the number of directors of USBANCORP
shall be increased by two, thereby increasing the number of
directors to eighteen. Messrs. James M. Edwards, Sr. and
James C. Dewar, each of whom are presently directors of JSB, will
become directors of USBANCORP to fill the newly created
vacancies. Each of the named individuals will serve until the
annual meeting of USBANCORP shareholders at which the class of
directors into which he is placed stands for election, which
shall be the term expiring in 1995 with respect to Mr. Dewar and
the term expiring in 1996 with respect to Mr. Edwards.
Mr. Edwards will also be appointed to the Executive Committee of
USBANCORP's Board of Directors. Under the Merger Agreement,
USBANCORP has agreed to use its best efforts to cause such
persons appointed as directors of USBANCORP to be renominated for
an additional term upon expiration of their initial terms.
Further, on the Effective Date, and without the
necessity of further corporate action, the number of directors of
U.S. Bank shall be increased by four, thereby increasing the
number of directors to nineteen. Messrs. Edwards and Dewar,
together with Howard M. Picking, III and Kim W. Kunkle, each of
whom are directors of JSB will become directors of U.S. Bank to
fill the vacancies. Under the Merger Agreement, U.S. Bank has
agreed to use its best efforts to cause such persons to be re-
elected in each of the two succeeding years, and USBANCORP, as
sole shareholder of U.S. Bank, has agreed to vote for the
election of such directors. Those directors of JSB who are not
appointed to serve on U.S. Bank's Board of Directors shall be
appointed by the U.S. Bank Board of Directors to serve for one
year terms on U.S. Bank's Main Office Advisory Board and shall
hold office until their successors are appointed and have
qualified, and will continue to receive an annual retainer, for a
period not to exceed three years, in the amount they currently
receive as JSB directors. U.S. Bank has agreed in the Merger
Agreement to use its best efforts to re-appoint these directors
to such Advisory Board in each of the two succeeding years.
On the Effective Date, the officers of USBANCORP and of
U.S. Bank, duly elected and holding office, shall remain officers
of USBANCORP and U.S. Bank, respectively.
Consolidation of Operations; Projected Operating Cost
Savings and Earnings Enhancements
Although substantial analysis has been performed,
identification of all the pre-tax cost savings and potential
earnings enhancements associated with this in-market
consolidation has not been completed. In evaluating such savings
and benefits, the USBANCORP Board of Directors considered that
most of the initial savings would be offset by one-time expenses
relating to the corporate acquisition and post-acquisition
integration process; these non-recurring costs will approximate
$2.5 million pre-tax and will be recognized in the quarter in
which the Merger is consummated. These costs are necessary to
realize approximately $3.8 million pre-tax of specifically
identified annual savings resulting from economy of scale
benefits to be achieved in this intra-market acquisition. Of
these savings, $1.9 million are expected to be realized in the
first year of the Merger with the full $3.8 million in annual
savings being realized in the second year and thereafter. See
"PRO FORMA FINANCIAL INFORMATION."
Because of the uncertainties associated with an in-
market merger, changes in the regulatory environment and changes
in economic conditions, no assurances can be given that (i) any
particular level of cost savings and earnings enhancements will
be realized, (ii) such savings and earnings enhancements will be
realized over the time period currently anticipated, and
(iii) such savings and earnings enhancements will not be offset
to some degree by increases in other expenses, including expenses
resulting from integrating the two companies.
Dissenters' Rights of JSB Shareholders
General
Pursuant to Section 1607 of the PBC, and in accordance
with the BCL, any shareholder of JSB has the right to dissent
from the Merger, and to obtain payment of the "fair value" (as
defined therein) of such holder's JSB Common Stock, in the event
that the Merger is consummated.
Any shareholder of JSB who contemplates exercising his
right to dissent is urged to read carefully the provisions of
Section 1930 and Subchapter D of Chapter 15 of the BCL attached
hereto as Annex E. The following is a summary of the steps to be
taken if the right to dissent is to be exercised, and should be
read in connection with the full text of Section 1930 and
Subchapter D of Chapter 15 of the BCL. Each step must be taken
in the indicated order and in strict compliance with the
applicable provisions of the statute in order to perfect
dissenters' rights. The failure of any shareholder to comply
with the aforesaid steps will result in the shareholder receiving
the consideration contemplated by the Merger Agreement in the
event that the Merger is consummated. See "THE MERGER -- General
Terms of the Merger."
Any written notice or demand which is required in
connection with the exercise of dissenters' rights, whether
before or after the Effective Date, must be sent to JSB, at
Savings Bank Plaza, Market at Main Street, Johnstown,
Pennsylvania 15901, Attention: Corporate Secretary.
Fair Value
The term "fair value" means the value of JSB Common
Stock immediately before the effectuation of the Merger taking
into account all relevant factors, but excluding any appreciation
or depreciation in anticipation of the Merger.
Notice of Intention to Dissent
A JSB shareholder who wishes to dissent must file with
JSB, prior to the vote of shareholders on the Merger at the JSB
Annual Meeting, a written notice of intention to demand payment
of the fair value of such holder's JSB Common Stock if the Merger
is effected, must effect no change in the beneficial ownership of
his JSB Common Stock from the date of such written notice through
the Effective Date, and must refrain from voting his JSB Common
Stock to approve the Merger Agreement. Neither a proxy nor a
vote against approval of the Merger will constitute the necessary
written notice of intention to dissent.
Notice to Demand Payment
If the Merger Agreement is approved by the required
vote of JSB's shareholders, JSB will mail a notice to all
dissenters who gave due notice of intention to demand payment and
who refrained from voting in favor of the Merger Agreement. The
notice will state where and when a written demand for payment
must be sent and certificates for JSB Common Stock must be
deposited in order to obtain payment, and will include a form for
demanding payment and a copy of Subchapter D of Chapter 15 of the
BCL. The time set for receipt of the demand for payment and
deposit of stock certificates will be not less than 30 days from
the date of mailing of the notice.
Failure to Comply with Notice to Demand Payment, etc.
A JSB shareholder who fails to timely demand payment or
fails to timely deposit his JSB Common Stock certificates, as
required by JSB's notice, will forfeit his dissenters' rights,and
if prior to the Effective Date, his shares of JSB Common Stock
will be considered to be No Election Shares, or if subsequent to
the Effective Date, such JSB shareholder will receive cash in the
amount of $22.50 per share.
Payment of Fair Value of Shares
Promptly after the Effective Date, or upon timely
receipt of demand for payment if the Merger already has been
effectuated, JSB will either remit to dissenters who have made
demand and have deposited their stock certificates the amount
that JSB estimates to be the fair value of the JSB Common Stock
or give written notice that no such remittance is being made.
The remittance or notice will be accompanied by (i) a closing
balance sheet and statement of income of JSB for a fiscal year
ending not more than 16 months before the date of remittance
together with the latest available interim financial statements,
(ii) a statement of JSB's estimate of the fair value of the JSB
Common Stock and (iii) a notice of the right of the dissenter to
demand supplemental payment under the BCL accompanied by a copy
of Subchapter D of Chapter 15 of the BCL.
Estimate by Dissenter of Fair Value of Shares
If a dissenter believes that the amount stated or
remitted by JSB is less than the fair value of the JSB Common
Stock, he may send to JSB his own estimate of the fair value of
the JSB Common Stock, which shall be deemed to be a demand for
payment of the amount of the deficiency. If JSB remits payment
of its estimated value of a dissenter's JSB Common Stock and the
dissenter does not file his own estimate within 30 days after the
mailing by JSB of its remittance, the dissenter will be entitled
to no more than the amount remitted to him by JSB.
Valuation Proceedings
Within 60 days after the latest to occur of the
Effective Date, timely receipt by JSB of any demands for payment,
or timely receipt by JSB of any estimates by dissenters of fair
value, if any demands for payment remain unsettled, JSB may file
in the Court of Common Pleas of Cambria County (the "Court") an
application requesting that the fair value of the JSB Common
Stock be determined by the Court. In such case, all dissenters,
wherever residing, whose demands have not been settled, shall be
made parties to the proceeding as in an action against their
shares, and a copy of the application shall be served on each
such dissenter.
If JSB were to fail to file such an application, then
any dissenter, on behalf of all dissenters who have made a demand
and who have not settled their claim against JSB may file an
application in the name of JSB at any time within the 30-day
period after the expiration of the 60-day period and request that
the fair value be determined by the Court. The fair value
determined by the Court may, but need not, equal the dissenters'
estimates of fair value. If no dissenter files such an
application, then each dissenter entitled to do so shall be paid
JSB's estimate of the fair value of the JSB Common Stock and no
more, and may bring an action to recover any amount not
previously remitted, plus interest at a rate the Court finds fair
and equitable.
JSB intends to negotiate in good faith with any
dissenting shareholders. If after negotiation a claim cannot be
settled, then JSB intends to file an application requesting that
the fair value of the JSB Common Stock be determined by the
Court.
Costs and Expenses
The costs and expenses of any valuation proceedings in
the Court, including the reasonable compensation and expenses of
any appraiser appointed by the Court to recommend a decision on
the issue of fair value, will be determined by the Court and
assessed against JSB except that any part of the costs and
expenses may be apportioned and assessed by the Court against all
or any of the dissenters who are parties and whose action in
demanding supplemental payment the Court finds to be dilatory,
obdurate, arbitrary, vexatious or in bad faith.
Effect on JSB Employee Benefit Plans
The employee benefit plans of JSB initially will be
unaffected by the Merger except that JSB's Deferred Compensation
Plan, Employee Stock Compensation Program, Stock Purchase Program
and Executive Annual Incentive Plan will be terminated on or
immediately following the Effective Date. Subject to the receipt
of the Internal Revenue Service's approval, USBANCORP intends to
amend its current employee benefit plans to cover those former
employees of JSB who become employees of USBANCORP or its
subsidiaries and terminate JSB's current employee benefit plans.
The Board of Directors of USBANCORP shall cause a study
to be made of the respective employee benefit plans maintained by
USBANCORP and its subsidiaries with a view to the possible
combination of the JSB and USBANCORP plans and unification of the
benefits thereunder, to the extent practicable. Subject to the
foregoing, USBANCORP's Board of Directors may discontinue or
amend any particular benefit plan of JSB after the Effective
Date.
Tax Consequences
The following is a summary description of the material
federal income tax consequences of the Interim and U.S. Bank
Mergers. This summary is not a complete description of all the
tax consequences of the Merger and, in particular, may not
address federal income tax considerations that may affect the
treatment of a shareholder who acquired JSB Common Stock pursuant
to an employee stock option. Each shareholder's individual
circumstances may affect the tax consequences of the Merger to
such shareholder. In addition, no information is provided herein
with respect to the tax consequences of the Merger under
applicable foreign, state or local laws. Consequently, each JSB
shareholder is advised to consult a tax advisor as to the
specific tax consequences of the Merger.
Completion of the Interim and U.S. Bank Mergers is
conditioned upon there being delivered to both USBANCORP and JSB
the opinion of Stevens & Lee, counsel to USBANCORP (or in the
event Stevens & Lee is unwilling to deliver such opinion, the
opinion of Elias, Matz, Tiernan & Herrick or other counsel
acceptable to the parties), that for federal income tax purposes,
under current law, assuming that the Interim and U.S. Bank
Mergers will take place as described in the Merger Agreement,
among other things, the Interim and U.S. Bank Mergers will
constitute reorganizations within the meaning of Section 368(a)
of the Internal Revenue Code of 1986, as amended (the "Code").
In that case, the material federal income tax consequences of the
Merger will be as set forth below.
Except for any loan loss reserve that may be required
to be recaptured with respect to JSB, no gain or loss will be
recognized by USBANCORP, JIB or JSB in connection with the
Interim Merger. Further, no gain or loss will be recognized by
USBANCORP, JIB, or U.S. Bank in connection with the U.S. Bank
Merger.
The federal income tax consequences of the Interim
Merger to JSB shareholders depend in part on the form of
consideration received by them. A shareholder who receives
solely USBANCORP Common Stock in exchange for all shares of JSB
Common Stock actually owned by him will not recognize any gain or
loss upon such exchange for federal income tax purposes. The tax
basis of the USBANCORP Common Stock received will be the same as
the tax basis of the JSB Common Stock surrendered in exchange
therefor. If the JSB Common Stock surrendered is held as a
capital asset at the time of the exchange, the holding period of
USBANCORP Common Stock received will include the holding period
of shares of JSB Common Stock surrendered. (See the discussion
below for the tax consequences of the receipt of cash in lieu of
fractional share interests of USBANCORP Common Stock).
A shareholder who receives cash in exchange for all of
his shares of JSB Common Stock will (unless the receipt of cash
has the effect of the receipt of a dividend - see discussion
below) recognize a gain or loss for federal income tax purposes
equal to the difference between the cash received and the
shareholder's tax basis in the JSB Common Stock surrendered in
exchange therefor. Assuming such shareholder holds JSB Common
Stock as a capital asset, such gain or loss will be capital gain
or loss, and will be long-term capital gain or loss if the
shareholder's holding period is more than one year. There are
limitations on the extent to which shareholders may deduct
capital losses from ordinary income.
If the consideration received in the Merger by a JSB
shareholder consists of part cash and part USBANCORP Common
Stock, and such shareholder's adjusted basis in the shares of JSB
Common Stock surrendered in the transaction is less than the
value, as of the Effective Date, of the USBANCORP Common Stock
plus the amount of cash received, such shareholder will realize
taxable income on the transaction. Such a shareholder will
recognize a gain equal to the lesser of (i) the excess, if any,
of the value, as of the Effective Date, of the USBANCORP Common
Stock plus the amount of cash received over the adjusted basis of
the shares of JSB Common Stock surrendered in the transaction and
(ii) the amount of cash received, provided the exchange does not
have the effect of a dividend. In such case, the gain will be
characterized as a capital gain if the JSB Common Stock exchanged
was a capital asset in the hands of the shareholder. The
determination of whether a cash payment has the effect of the
distribution of a dividend will be made in accordance with the
provisions and limitations of Section 302 of the Code, taking
into account the stock ownership attribution rules of Section 318
of the Code. Determination of whether a payment will be treated
as having the effect of a dividend is made by comparing a JSB
shareholder's interest (both actual and constructive) in JSB to
his interest in USBANCORP following the Merger (both actual and
constructive), as if his entire interest were exchanged for
USBANCORP Common Stock and a portion of that stock was redeemed
for the cash actually received in the Merger. Because the
determination of whether a payment will be treated as having the
effect of the distribution of a dividend will generally depend
upon the facts and circumstances of each JSB shareholder, JSB
shareholders are strongly advised to consult their own tax
advisors regarding the tax treatment of cash received in the
Merger. In the event the shareholder realizes a loss, under
current laws, such loss will not be currently allowed and is not
recognized for federal income tax purposes. Such disallowed loss
would be reflected in the adjusted tax basis of the shares of
USBANCORP Common Stock received in the Merger. The shareholder's
basis in the USBANCORP Common Stock received will equal his basis
in the JSB Common Stock less the cash received and increased by
any dividend income and gain recognized and, provided the JSB
Common Stock surrendered was held as a capital asset at the time
of the exchange, the holding period of USBANCORP Common Stock
received will include the holding period of shares of JSB Common
Stock surrendered.
Holders of JSB Common Stock who receive cash in lieu of
fractional share interests of JSB Common Stock will be treated as
having received such fraction of a share of USBANCORP Common
Stock and then as having received cash in redemption of the
fractional share interest, subject to the provisions and
limitations of Section 302 of the Code.
Backup Withholding
Unless an exemption applies, the Exchange Agent will be
required to withhold, and will withhold, 31% of any cash payments
to which a shareholder or other payee is entitled pursuant to the
Merger Agreement unless the shareholder or other payee provides
his tax identification number (social security number or employer
identification number), certifies that such number is correct,
and certifies that he is not otherwise subject to backup
withholding. Each shareholder and, if applicable, each other
payee should complete and sign the Substitute Form W-9 that will
be included as part of the transmittal letter to avoid backup
withholding, unless an applicable exemption exists and is proved
in a manner satisfactory to USBANCORP and the Exchange Agent.
Accounting Treatment
As required by GAAP, the purchase method of accounting
will be used by USBANCORP to reflect the Merger upon
consummation. Under purchase accounting, the tangible and
intangible assets and liabilities of JSB as of the Effective Date
will be recorded at their respective fair market values, to the
extent of the purchase price, and added to those of USBANCORP.
See "PRO FORMA FINANCIAL INFORMATION."
Expenses
The expenses incurred in printing and mailing the
Registration Statement and this Proxy Statement/Prospectus will
be shared equally by the parties hereto. All other expenses
incurred by or on behalf of the parties in connection with the
Merger Agreement and the transactions contemplated thereby,
including accounting, investment banking and legal fees, will be
borne by the party incurring the same, except that USBANCORP has
agreed to reimburse JSB for the fees and expenses of Morrow who
has been retained by JSB and USBANCORP, to solicit proxies, on
behalf of each entity, in favor of the Merger.
USBANCORP Dividend Reinvestment Plan
USBANCORP currently maintains a Dividend Reinvestment
Plan in order to provide shareholders of USBANCORP with a simple
and convenient method of investing cash dividends in additional
shares of USBANCORP Common Stock without payment of any brokerage
commission or service charge. This plan relates only to
dividends paid on USBANCORP Common Stock. Shareholders of JSB
who become shareholders of USBANCORP will be eligible to
participate in this plan after the Effective Date.
Restrictions on Resales of USBANCORP Common Stock
The shares of USBANCORP Common Stock issuable in the
Merger have been registered under the Securities Act, but this
registration does not cover resales by shareholders of JSB who
may be deemed to control or be under common control with JSB at
the time of the Effective Date and who therefore may be deemed
"affiliates" of JSB as that term is used in Rule 145 under the
Securities Act. Such affiliates may not sell their shares of
USBANCORP Common Stock acquired in connection with the Merger
except pursuant to: (i) an effective registration statement
under the Securities Act covering such shares of USBANCORP Common
Stock; (ii) the conditions contemplated by paragraph (d) of
Rule 145; or (iii) another applicable exemption from the
registration requirements of the Securities Act. The management
of JSB will notify those persons whom it believes may be such
affiliates.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Certain members of JSB's management, the JSB Board of
Directors and all JSB employees have certain interests in the
Merger that are in addition to their interests as shareholders of
JSB generally. As a part of the Merger, Messrs. James M.
Edwards, Sr. and Howard M. Picking, III, members of the JSB
Board of Directors, will be appointed to the USBANCORP Board of
Directors, and Messrs. Edwards and Picking together with James C.
Dewar and Kim W. Kunkle will be appointed to the U.S. Bank Board
of Directors. All other directors of JSB will become members of
the U.S. Bank Main Office Advisory Board and will continue to
receive an annual retainer in the amount they currently receive
as JSB directors for a period not to exceed three years.
Following the Effective Date, Messrs. Coyne, Andres,
Pugh and Rusnak will not continue in the employ of JSB or
USBANCORP. In connection with such termination, Messrs. Coyne,
Andres, Pugh and Rusnak will receive in the aggregate
$1.5 million, $459,868, $444,270, and $402,738 respectively.
Such amounts are being paid (i) pursuant to the terms and
conditions of employment, retirement and/or severance agreements,
and (ii) in consideration for the cancellation of options held by
such officers to purchase shares of JSB Common Stock in
accordance with the terms and condition of the Merger Agreement.
In accordance with the Merger Agreement, for a period
of six years after the Effective Date, USBANCORP has agreed to
indemnify, defend and hold harmless, and advance expenses in
matters subject to indemnification, the officers and directors of
JSB and JSB subsidiaries with respect to (i) all liabilities and
claims made against them resulting from their service as such
prior to the Effective Date, in accordance with USBANCORP's
Articles of Incorporation and Bylaws and (ii) the Merger and all
other transactions contemplated by the Merger Agreement.
CERTAIN RELATED TRANSACTIONS
Stock Option Agreement
As a condition to entering into the amended Merger
Agreement, JSB executed and delivered to USBANCORP the Stock
Option Agreement dated as of January 18, 1994 (the "Stock Option
Agreement"). Pursuant to the Stock Option Agreement, USBANCORP
was granted an option to purchase up to 19.9% of the issued and
outstanding JSB Common Stock after expiration of the Marketing
Period, at a price per share equal to the lower of $16.50 or the
lowest price that a person or group, other than USBANCORP or an
affiliate of USBANCORP, paid or offers to pay upon the occurrence
of one of the specified events which triggers the option, subject
to the terms and conditions set forth therein. The option may
only be exercised upon the occurrence of certain events,
including the acquisition by a person or group of a significant
number of shares of JSB Common Stock, JSB entering into an
agreement to merge, consolidate or sell assets, or a public
announcement by a third party of an intent to acquire control of
JSB under certain circumstances. The Stock Option Agreement is
attached as Annex F to this Proxy Statement/Prospectus.
The Stock Option Agreement, together with (i) JSB's
agreement not to solicit other transactions relating to the
acquisition of JSB by a third party after expiration of the
Marketing Period (see "THE MERGER -- No Solicitation of
Transactions") and (ii) the agreement of JSB's directors and
executive officers to vote their shares in favor of the Merger
Agreement (see "THE MEETINGS -- Matters to be Considered at the
Meetings"), has the effect of discouraging persons who might now
or prior to the Effective Date be interested in acquiring all of
or a significant interest in JSB from considering or proposing
such an acquisition, even if such persons were prepared to pay a
higher price per share for JSB Common Stock than the price per
share USBANCORP has agreed to pay. Certain attempts to acquire
JSB or an interest in JSB would cause the option to become
exercisable as described above. Such right would significantly
increase the cost to a potential acquiror of acquiring JSB
compared to its cost had the Stock Option Agreement not been
entered into by USBANCORP and JSB. In addition, exercise of the
option would increase the ability of USBANCORP to obtain the
approval of the shareholders to complete an alternative
transaction. Acquisition of shares of JSB Common Stock pursuant
to exercises of the option would be subject to prior regulatory
approval under certain circumstances.
<PAGE>
PRO FORMA FINANCIAL INFORMATION
Pro Forma Combined Condensed Balance Sheet
As of December 31, 1993
The following unaudited pro forma combined condensed
balance sheet information reflects (i) the historical
consolidated balance sheets of USBANCORP and JSB as of
December 31, 1993 and (ii) the pro forma combined condensed
balance sheet of USBANCORP as of such date, after giving effect
to the Merger on a purchase accounting basis effective as of such
date. Financial statements of USBANCORP issued before
consummation of the Merger will not be restated retroactively to
reflect JSB's historical financial position or results of
operations. Because the historical financial statements of
USBANCORP will not be restated retroactively following
consummation of the Merger, the pro forma financial information
included in this Proxy Statement/Prospectus is presented for
information purposes only. Such pro forma financial information
does not necessarily reflect what the actual results of USBANCORP
would be following consummation of the Merger. The unaudited
information should be read in conjunction with the historical
consolidated financial statements of USBANCORP and JSB, including
the respective notes thereto, incorporated by reference or
included in this Proxy Statement/Prospectus. See "INCORPORATION
OF CERTAIN DOCUMENTS BY REFERENCE" and "JSB CONSOLIDATED
FINANCIAL STATEMENTS."
<PAGE>
<TABLE>
<CAPTION>
USBANCORP
Pro Forma Pro Forma
USBANCORP JSB Adjustments Combined
(Dollars in Thousands, except per share data)
<S> <C> <C> <C> <C>
ASSETS
Cash and due from banks $ 38,606 $ 3,100 $ -- $ 41,706
Interest bearing deposits
with banks 4,809 5,349 ( 4,809)(A) 5,349
Federal funds sold and
securities purchased
under agreements to resell 7,000 -- -- 7,000
Investment securities and
investment securities
available for sale 428,712 174,681 (16,760)(B) 586,633
Assets held in trust for
collateralized mortgage
obligation 13,815 -- -- 13,815
Loans held for sale 1,054 32,759 179 (C) 33,992
Loans 732,026 125,768 4,388 (C) 862,182
Less: Unearned income 5,894 -- -- 5,894
Allowance for
loan losses 15,260 3,083 -- 18,343
Net Loans 710,872 122,685 4,388 837,945
Premises and equipment 16,960 2,655 812 (D) 20,427
Accrued income receivable 8,892 2,147 -- 11,039
Mortgage servicing purchased -- 7,342 1,260 (E) 8,602
Other assets 10,801 5,080 13,683 (F) 29,564
TOTAL ASSETS $1,241,521 $355,798 $ (1,247) $1,596,072
LIABILITIES
Non-interest bearing deposits $ 137,411 $ 3,957 $ -- $ 141,368
Interest bearing deposits 911,455 212,249 (2,114)(G) 1,121,590
Total Deposits 1,048,866 216,206 (2,114) 1,262,958
Federal funds purchased and
securities sold
under agreements to
repurchase 12,648 -- -- 12,648
Other short-term borrowings 270 15,267 -- 15,537
Advances from Federal Home
Loan Bank 31,285 89,000 1,176 (H) 121,461
Collateralized mortgage
obligation 12,674 -- -- 12,674
Long-term debt 3,445 4,111 -- 7,556
Other liabilities 15,718 3,634 3,702 (I) 23,054
TOTAL LIABILITIES 1,124,906 328,218 2,764 1,455,888
SHAREHOLDERS' EQUITY
Common stock 11,815 1,944 510 (J) 14,269
Surplus 70,720 15,065 6,050 (K) 91,835
Retained earnings 34,080 10,571 (10,571)(L) 34,080
TOTAL SHAREHOLDERS' EQUITY 116,615 27,580 (4,011) 140,184
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $1,241,521 $355,798 $ (1,247) $1,596,072
____________________
</TABLE>
<PAGE>
NOTE A: The total cash component of the acquisition price is
calculated as shown below:
JSB Common Stock outstanding at
December 31, 1993 1,943,790
Cash payment per share 10.13
$19,691,000
Cash cost of option buyout and
executive deferred compensation 3,217,000
TOTAL CASH PAYMENT BY USBANCORP $22,908,000
The financing of the cash component of the acquisition price
was assumed to come from the reduction in:
Interest bearing deposits
with banks 4,809,000
Investment securities available
for sale 18,099,000
$22,908,000
The remaining acquisition price will be in the form of
USBANCORP Common Stock. The conversion is shown below:
JSB Common Stock outstanding
at December 31, 1993 1,943,790
USBANCORP Common Stock
Conversion Factor .505*
Total USBANCORP Common Stock
issued 981,614**
No fractional shares of USBANCORP Common Stock will be
issued.
* The exchange ratio used in this pro forma presentation was
determined based upon the average "UBAN" price for the ten
trading days from February 17, 1994, to March 4, 1994. In
accordance with the terms of the Merger Agreement, the
actual exchange ratio will be based upon the average trading
price for the ten trading day period immediately preceding
the Effective Date.
** Excludes the potential exercise of outstanding options to
acquire 12,000 shares of JSB Common Stock. If such options
are totally exercised, the USBANCORP Common Stock to be
issued would be increased to approximately 988,260 shares.
For purposes of this pro forma presentation, these options
are included in the cash cost of the option buyout in Note A
above.
NOTE B The adjustment of the investment security portfolio
reflects the $1,339,000 write-up of Johnstown Savings
Bank's portfolio to its estimated market value using
market quotations and other comparable information, and
the downward adjustment of $18,099,000 reflecting the
use of USBANCORP securities in funding the cash portion
of the acquisition price as described in Note A.
NOTE C The adjustment of the Loan portfolio reflects the
write-up of Johnstown Savings Bank's portfolio to its
estimated market value by discounting the portfolio
using the estimated remaining lives of the various
types of loans and estimated current interest rates.
NOTE D The adjustment reflects the write-up of Johnstown
Savings Bank's premises and equipment to estimated
market value based upon current independent appraisals.
NOTE E The adjustment of the Purchased Mortgage Servicing
Portfolio reflects the write-up of Johnstown Savings
Bank's portfolio to its estimated market value by using
a discounted cash flow approach in valuing future
service fee income and related costs. This approach
incorporates mortgage prepayment assumptions in order
to project mortgage attrition rates.
NOTE F The adjustment of other assets reflects:
(1) The $963,000 write-up of Other Real Estate Owned
property to its estimated market value based upon
recent independent appraisals.
(2) The recording of a $2,499,000 core deposit
intangible related to checking, savings, and money
market accounts based upon a comprehensive core
deposit valuation study.
(3) The recording of $10,221,000 of goodwill based
upon the following calculation:
Total USBANCORP Common Shares issued
pursuant to Note A 981,614
USBANCORP implied stock value based
upon an average of ten trading days
from February 17, 1994, through
March 4, 1994 $ 24.01
Market value of shares
exchanged $23,569,000
Total Cash payment by USBANCORP
pursuant to Note A $22,908,000
Total Market Acquisition
Price $46,477,000
Deduct:
Johnstown Savings Bank's
December 31, 1993 Capital (27,580,000)
Mark to Market Adjustment of
Net Assets (12,378,000)
Add:
Adjustment for Net Deferred
Tax Liability (See Note I) 3,702,000
Goodwill generated from
transaction $10,221,000
NOTE G Adjustment of the Certificate of Deposit liability to
reflect the write-down of JSB's portfolio to its
estimated market value by discounting the portfolio
using the estimated remaining lives of the savings
certificates and estimated current interest rates.
NOTE H The adjustment of the Advances from the Federal Home
Loan Bank reflects the write-up of JSB's portfolio to
its estimated market value by discounting the debt
using the estimated remaining lives of the various
advances and estimated current interest rates.
NOTE I The increase to other liabilities reflects the
establishment of a net deferred tax liability on the
$12,378,000 net asset mark-to-market adjustments
discussed in Notes B through H above (excluding
Goodwill in Note F) and the cash payment for vested
options and executive severance. This net liability
was established at the Company's highest enacted
marginal tax rate of 35%.
NOTE J The elimination of JSB Common Stock and the recording
of issuance of 981,614 shares of USBANCORP Common Stock
at a par value of $2.50 pursuant to Note A.
NOTE K The elimination of JSB's Surplus and the recording of
the issuance of 981,614 shares of USBANCORP Common
Stock at the implied stock value of $24.01 per share
pursuant to Note F less the par value pursuant to Note
J.
NOTE L The elimination of JSB's retained earnings.
<PAGE>
Pro Forma Combined Condensed Statement of Income
for the Year Ended December 31, 1993
The following unaudited pro forma combined condensed
statements of income reflect the historical consolidated
statements of income of USBANCORP and JSB, as indicated below,
for each period presented and the pro forma combined condensed
statements of income of USBANCORP, after giving effect to the
Merger on a purchase accounting basis. The pro forma combined
condensed statements of income were prepared on the assumption
that the Merger had been effective as of the beginning of the
period presented. See "THE MERGER - Accounting Treatment." The
unaudited information should be read in conjunction with the
historical consolidated financial statements of USBANCORP and
JSB, including the respective notes thereto, incorporated by
reference or included in this Proxy Statement/Prospectus. See
"INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE" and "JSB
CONSOLIDATED FINANCIAL STATEMENTS."
<PAGE>
<TABLE>
<CAPTION>
USBANCORP
Year Ended Pro Forma Pro Forma
December 31, 1993 USBANCORP JSB Adjustments Combined(K)
(Dollars in Thousands, except per share data)
<S> <C> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans $ 60,715 $ 13,364 $ (560)(A) $ 73,519
Federal funds sold,
securities purchased
under agreements to resell
and interest bearing
deposits with banks 510 101 (125)(B) 486
Investment securities
and investment securities
available for sale
Taxable 21,494 8,777 (1,206)(C) 29,065
Tax-Exempt 1,670 361 -- 2,031
Assets held in trust
for collateralized
mortgage obligation 1,346 -- -- 1,346
Total Interest Income $ 85,735 $ 22,603 $(1,891) $106,447
INTEREST EXPENSE
Deposits 32,623 8,111 473 (D) 41,207
Federal funds purchased,
securities sold under
agreements to repurchase
and other short-term
borrowings 359 430 -- 789
Advances from the Federal
Home Loan Bank 1,163 3,522 (462)(E) 4,223
Collateralized
mortgage obligation 1,508 -- -- 1,508
Long-term debt 597 99 -- 696
Total Interest Expense $ 36,250 $ 12,162 $ 11 $ 48,423
NET INTEREST INCOME 49,485 10,441 (1,902) 58,024
Provision for loan losses 2,400 1,102 -- 3,502
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES $ 47,085 $ 9,339 $(1,902) $ 54,522
NON-INTEREST INCOME
Trust fees 2,578 211 -- 2,789
Net realized gains
on investment securities
and investment securities
available for sale 593 811 -- 1,404
Net realized gains on loans
and loans held for sale 583 1,370 -- 1,953
Wholesale cash processing
fees 1,281 -- -- 1,281
Service charges on deposit
accounts 2,771 360 -- 3,131
Mortgage servicing income -- 2,390 (158)(F) 2,232
Other income 2,344 1,440 -- 3,784
Total Non-Interest Income $ 10,150 $ 6,582 $ (158) $ 16,574
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Year Ended Pro Forma Pro Forma
December 31, 1993 USBANCORP JSB Adjustments Combined
(Dollars in Thousands, except per share data)
<S> <C> <C> <C> <C>
NON-INTEREST EXPENSE
Salaries and employee
benefits $ 19,952 $ 5,387 $ --- $ 25,339
Net occupancy expense 3,393 638 19(G) 4,050
Equipment Expense 2,608 512 --- 3,120
Professional fees 2,167 198 --- 2,365
FDIC deposit insurance
expense 2,157 571 --- 2,728
Other expense 10,438 3,694 959(H) 15,091
Total Non-Interest Expense 40,715 11,000 978 52,693
INCOME BEFORE INCOME TAXES
AND CUMULATIVE EFFECT OF
CHANGE IN ACCOUNTING
PRINCIPLE 16,520 4,921 (3,038) 18,403
Provision for income taxes 5,484 1,560 (825)(I) 6,219
INCOME BEFORE CUMULATIVE
EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE $ 11,036 $ 3,361 $(2,213) $ 12,184
PER COMMON SHARE DATA
BEFORE CUMULATIVE EFFECT
OF CHANGE IN ACCOUNTING
PRINCIPLE
Primary:
Net income $2.45 $1.73 $2.22(J)
Average number of
shares outstanding 4,456,820 1,940,160 5,438,434
Fully Diluted:
Net income $2.41 $1.73 $2.19
Average number of
shares outstanding 4,588,622 1,975,534 5,570,236
Cash Dividends Declared $0.86 $0.15 $0.86
</TABLE>
NOTE A The current net period amortization of the write-up to
fair value of the loans of JSB on a combination of the
interest method and straight line basis over an average
life of approximately 5 years.
NOTE B The adjusting entry reflects the loss of earnings on
the cash financing of the acquisition of $4,809,000 at
an average yield of 2.60% for 1993.
NOTE C The adjusting entry reflects the loss of earnings on
the cash financing of the acquisition of $18,099,000 at
an average rate of 5.70% for 1993. Additionally, the
adjustment also incorporates the current period
amortization of the write-up to fair value of the
Investment Security portfolio of JSB primarily on a
level yield basis over an average life of 8 years.
This amortization amounted to $174,000 in 1993.
NOTE D The current period amortization of the write-down to
fair value of the savings certificates of deposit of
JSB on the interest method over an average life of
approximately 3 years.
NOTE E The current period accretion of the write-up to fair
value of the Advances from the Federal Home Loan Bank
of Pittsburgh on the interest method over 2.50 years.
NOTE F The current period amortization of the write-up to fair
value of the Purchased Mortgage Servicing rights of JSB
on an 8-year straight line basis which approximates a
level yield method.
NOTE G The increase in the current period depreciation expense
related to the net write-up of premises and equipment
on a straight line basis over 9 years excluding the
write-up for land and property held for sale.
NOTE H The increase in other expense reflects the amortization
of the $2.5 million core deposit premium on a straight
line basis over 9 years, and the amortization of the
$10.2 million of goodwill on a straight line basis over
15 years.
NOTE I The reduction in current period income tax expense with
respect to the adjustments described in the Notes above
at a 35% effective tax rate exclusive of goodwill
amortization.
NOTE J Earnings per share are based upon the combined
historical income of USBANCORP and JSB including the
effects of the pro forma and purchase accounting
adjustments. For the purposes of calculating pro forma
earnings per share, the 981,614 shares of USBANCORP
Common Stock issued to JSB shareholders were assumed to
be issued as of the beginning of the period presented.
NOTE K The pro forma income statement excludes, on a pre-tax
basis in the first year of acquisition, approximately
$2.5 million of expected one time costs related
primarily to general severance pay for displaced
employees, data processing system conversion costs, and
other general acquisition related costs. These costs
are necessary to realize approximately $3.8 million of
specifically identified annual savings resulting from
economy of scale benefits to be achieved in this intra-
market acquisition. These savings, of which 50% or
$1.9 million are expected to be realized in the first
year of acquisition with the full $3.8 million being
realized in the years thereafter, are also excluded
from the pro-forma income statement.
<PAGE>
Based on the assumptions in the above presented pro forma
financial data, the net impact on pre-tax income of the
amortization of the purchase accounting adjustments as described
above for the five full calendar years subsequent to the
consummation of the merger:
<TABLE>
<CAPTION>
DECREASE IN PRE-TAX INCOME
1994 1995 1996 1997 1998
<S> <C> <C> <C> <C> <C>
Pre-Tax Income Effect ($1,880,644) ($1,817,602) ($1,999,504) ($2,237,988) ($1,755,906)
</TABLE>
<PAGE>
Pro Forma Combined Capitalization
As of December 31, 1993
The following unaudited pro forma combined capitalization
table reflects (i) the historical consolidated capitalization of
USBANCORP and JSB as of December 31, 1993, and (ii) the pro forma
combined capitalization of USBANCORP as of such date, after
giving effect to the Merger on a purchase accounting basis
effective as of such date. Also set forth below are certain pro
forma consolidated capital ratios for USBANCORP at December 31,
1993. The unaudited information should be read in conjunction
with the historical consolidated financial statements of
USBANCORP and JSB, including the respective notes thereto,
incorporated by reference or included in this Proxy
Statement/Prospectus. See "INCORPORATION OF CERTAIN DOCUMENTS BY
REFERENCE" and "JSB CONSOLIDATED FINANCIAL STATEMENTS."
<PAGE>
<TABLE>
<CAPTION>
Pro Forma Pro Forma
USBANCORP JSB Adjustments Combined
<S> <C> <C> <C> <C>
LONG-TERM DEBT $ 3,445 $ 4,111 $ -- $ 7,556
SHAREHOLDERS' EQUITY
Common Stock, par value
$2.50 per share; 6,000,000
shares authorized;
4,726,181 shares issued
and outstanding on
December 31, 1993 11,815 1,944 510 14,269
Surplus 70,720 15,065 6,050 91,835
Retained Earnings 34,080 10,571 (10,571) 34,080
TOTAL SHAREHOLDERS'
EQUITY 116,615 27,580 (4,011) 140,184
TOTAL LONG-TERM DEBT
AND SHAREHOLDERS'
EQUITY $ 120,060 $ 31,691 $ (4,011) $147,740
</TABLE>
<TABLE>
<CAPTION>
Regulatory USBANCORP
Minimum At December 31, 1993
<S> <C> <C>
PRO FORMA CONSOLIDATED CAPITAL RATIOS
Tier 1 capital to risk-adjusted
assets 4.00% 12.75%
Total capital to risk-adjusted
assets 8.00 14.00
Tier 1 Leverage Ratio(A)(B) 5.00 7.88
</TABLE>
Note A The leverage ratio is defined as the ratio of Tier 1
capital to total assets, net of goodwill and other
intangibles.
Note B Federal Reserve Board Guidelines provide that all bank
holding companies (other than those that meet certain
criteria) maintain a minimum leverage ratio of 3%, plus
an additional cushion of 100 to 200 basis points. The
guidelines also state that banking organizations
experiencing internal growth or making acquisitions
will be expected to maintain "strong capital positions"
substantially above the minimum supervisory levels
without significant reliance on intangible assets. The
guidelines do not provide guidance as to the meaning of
"strong" and the Federal Reserve Board has not
indicated to USBANCORP whether or not it considers
USBANCORP's leverage ratio as strong.
<PAGE>
DESCRIPTION OF USBANCORP CAPITAL STOCK
The authorized capital stock of USBANCORP currently
consists of 6,000,000 shares of USBANCORP Common Stock, par value
$2.50 per share, and 2,000,000 shares of preferred stock without
par value ("USBANCORP Preferred Stock"). USBANCORP is seeking to
increase the number of authorized shares of USBANCORP Common
Stock to 12,000,000. See "AMENDMENT OF USBANCORP'S ARTICLES OF
INCORPORATION." As of __________________, 1994, there were
__________________ shares of USBANCORP Common Stock issued and
outstanding. All 552,000 shares of USBANCORP Series A $2.125
Cumulative Convertible Non-Voting Preferred Stock issued and
outstanding at December 31, 1992, were converted or redeemed by
the end of the second quarter of 1993. There are no other shares
of capital stock of USBANCORP authorized, issued or outstanding,
except that as of March 15, 1994, (i) 276,207 shares were
reserved for issuance under USBANCORP's Dividend Reinvestment
Common Stock Purchase Plan and (ii) 46,000 shares are reserved
for issuance under USBANCORP's Incentive Stock Option Plan.
USBANCORP has no rights authorized, issued or outstanding, except
rights associated with the USBANCORP Shareholder Rights Plan.
See "Shareholder Rights Plan" below.
USBANCORP Preferred Stock
USBANCORP's Board of Directors has the authority to
issue Preferred Stock from time to time as a class without a
series, or in one or more series. The Preferred Stock may be
issued with such voting, dividend, redemption, sinking fund,
conversion, exchange, liquidation and other rights as shall be
determined by resolution of the USBANCORP Board of Directors,
without the approval of the holders of USBANCORP Common Stock.
All shares of one series must be identical, and all series will
rank equally except with respect to the rights particular to each
series fixed by the USBANCORP Board of Directors. USBANCORP
Preferred Stock will have a preference over USBANCORP Common
Stock as to the payment of dividends, as to the right to
distribution of assets upon redemption of shares or upon
liquidation of USBANCORP, or as to both dividends and assets, and
such other preferences as may be fixed by the USBANCORP Board of
Directors.
There is currently no class of USBANCORP Preferred
Stock issued and outstanding.
USBANCORP Common Stock
Dividends
The holders of USBANCORP Common Stock are entitled to
share ratably in dividends when and if declared by the USBANCORP
Board of Directors from funds legally available therefor, subject
to the preferences which may be granted to holders of the
USBANCORP Preferred Stock.
Voting Rights
Each holder of USBANCORP Common Stock has one vote for
each share held on matters presented for consideration by the
shareholders, except that shareholders are entitled to cumulate
their votes with respect to the election of directors.
Classification of Board of Directors
The USBANCORP Board of Directors is divided into three
classes, each serving three-year terms, so that approximately
one-third of the directors of USBANCORP are elected at each
annual meeting of the shareholders of USBANCORP. Classification
of the USBANCORP Board of Directors has the effect of decreasing
the number of directors that could be elected in a single year by
any person who seeks to elect its designees to a majority of the
seats on the USBANCORP Board of Directors and thereby could
impede a change in control of USBANCORP.
Preemptive Rights
The holders of USBANCORP Common Stock have no
preemptive rights to acquire any additional shares of USBANCORP
Common Stock.
Issuance of Stock
USBANCORP's articles of incorporation authorize the
USBANCORP Board of Directors to issue authorized shares of
USBANCORP Common Stock and USBANCORP Preferred Stock without
shareholder approval. However, USBANCORP Common Stock is
included for quotation on the NASDAQ/NMS, which requires
shareholder approval of the issuance of additional shares of
USBANCORP Common Stock or securities convertible into USBANCORP
Common Stock if the issuance of such securities (i) is in
connection with the acquisition of a company, is not in
connection with a public offering for cash, and the securities
issued have or will have voting power equal to or in excess of
20% of the voting power outstanding before such issuance, (ii) is
in connection with the acquisition of a company in which a
director, officer or substantial shareholder of USBANCORP has a
5% or greater interest and the issuance of the securities could
result in an increase in outstanding common stock or voting power
of 5% or more, (iii) is in connection with a transaction other
than a public offering at a price less than the greater of book
or market value, and will equal 20% or more of the common stock
or 20% or more of the voting power outstanding before issuance,
or (iv) would result in a change in control of USBANCORP. Under
NASDAQ/NMS rules, shareholder approval is also required for the
establishment of a stock option or purchase plan in which stock
may be acquired by officers and directors other than a
broadly-based plan in which other security holders of USBANCORP
or employees of USBANCORP participate. Under applicable
NASDAQ/NMS rules, approval of USBANCORP shareholders is required
prior to issuance of the number of shares of USBANCORP Common
Stock to be issued in this Merger.
Liquidation Rights
In the event of liquidation, dissolution or winding-up
of USBANCORP, whether voluntary or involuntary, the holders of
USBANCORP Common Stock will be entitled to share ratably in any
of its assets or funds that are available for distribution to its
shareholders after the satisfaction of its liabilities (or after
adequate provision is made therefor) and after payment of any
liquidation preferences of any outstanding USBANCORP Preferred
Stock.
Shareholder Rights Plan
Each share of USBANCORP Common Stock has attached to it
one right (a "Right") issued pursuant to a Shareholder Protection
Rights Agreement, dated November 10, 1989 (the "Rights
Agreement"). Each Right will initially entitle a holder to buy
one-tenth of a share of USBANCORP Series B Preferred Stock at a
price of $40.00, subject to adjustment (the "Exercise Price").
The Rights become exercisable if a person, group or other entity
acquires or announces a tender offer for 20% or more of the
USBANCORP Common Stock. They can also be exercised if a person
or group who has become a beneficial owner of at least 10% of the
USBANCORP Common Stock is declared by the USBANCORP Board to be
an "adverse person" (as defined in the Rights Agreement). Under
the Rights Agreement, any person, group or entity will be deemed
a beneficial owner of USBANCORP Common Stock if such person,
group or entity would be deemed to beneficially own USBANCORP
Common Stock under the rules of the Securities and Exchange
Commission which generally require that such person, group or
entity have, or have the right to acquire within sixty (60) days,
voting or dispositive power with respect to USBANCORP Common
Stock; provided, however, that the Rights Agreement excludes from
the definition of beneficial owner, holders of revocable proxies,
employee benefit plans of USBANCORP or its subsidiaries and the
Trust Company. After the Rights become exercisable, the Rights
(other than rights held by a 20% beneficial owner or an "adverse
person") will entitle the holders to purchase, under certain
circumstances, either USBANCORP Common Stock or common stock of
the potential acquiror having a value equal to twice the Exercise
Price. USBANCORP is generally entitled to redeem the Rights at
$.01 per Right at any time until the twentieth business day
following public announcement that a 20% position has been
acquired or the Board of Directors has designated a holder of
USBANCORP Common Stock an adverse person. The Rights expire on
November 10, 1994. The Rights Agreement may have the effect of
deterring or discouraging a nonnegotiated tender or exchange
offer for USBANCORP, the acquisition of a large block of
USBANCORP Common Stock and the removal of USBANCORP management.
Change In Control
Pennsylvania Law
The BCL contains certain provisions applicable to
USBANCORP which may have the effect of impeding a change in
control of USBANCORP. These provisions, among other things,
(1) require that, following any acquisition by any person or
group of 20% of a public corporation's voting power, the
remaining shareholders have the right to receive payment for
their shares, in cash, from such person or group in an amount
equal to the "fair value" of their shares, including an increment
representing a proportion of any value payable for acquisition of
control of the corporation; and (2) prohibit for five years after
an interested shareholder's acquisition date, a "business
combination" (which includes a merger or consolidation of the
corporation or a sale, lease or exchange of assets having a
minimum specified aggregate value or representing a minimum
specified percentage earning power or net income of the
corporation) with a shareholder or group of shareholders
beneficially owning 20% or more of a public corporation's voting
power.
In April 1990, the Pennsylvania legislature further
amended the BCL to expand the antitakeover protections afforded
by Pennsylvania law by redefining the fiduciary duty of directors
and adopting disgorgement and control-share acquisition statutes.
To the extent applicable to USBANCORP at the present time, this
legislation generally (1) expands the factors and groups
(including shareholders) which the Board of Directors can
consider in determining whether a certain action is in the best
interests of the corporation; (2) provides that the Board of
Directors need not consider the interests of any particular group
as dominant or controlling; (3) provides that directors, in order
to satisfy the presumption that they have acted in the best
interests of the corporation, need not satisfy any greater
obligation or higher burden of proof with respect to actions
relating to an acquisition or potential acquisition of control;
(4) provides that actions relating to acquisitions of control
that are approved by a majority of "disinterested directors" are
presumed to satisfy the directors' standard unless it is proven
by clear and convincing evidence that the directors did not
assent to such action in good faith after reasonable
investigation; and (5) provides that the fiduciary duty of
directors is solely to the corporation and may be enforced by the
corporation or by a shareholder in a derivative action, but not
by a shareholder directly. One of the effects of the new
fiduciary duty provisions may be to make it more difficult for a
shareholder to successfully challenge the actions of the Board of
Directors in a potential change in control contest. The
legislation provided a time frame during which companies could
elect not to be covered by the disgorgement and control-share
acquisition statute. USBANCORP opted out of coverage of the
disgorgement and control-share acquisition statute pursuant to a
Bylaw amendment. The legislation contains no express or implied
mechanism for reversing the election although it may be legally
permissible to reverse this action. USBANCORP has no intention
of taking any action to reverse its election.
Federal Law
The Federal Change in Bank Control Act of 1978, as
amended, prohibits a person or group of persons from acquiring
"control" of a bank holding company unless the Federal Reserve
Board has been given 60 days' prior written notice of such
proposed acquisition and, within that time period, the Federal
Reserve Board has not issued a notice disapproving the proposed
acquisition or extending, for up to another 30 days, the period
during which such a disapproval may be issued. An acquisition
may be made prior to the expiration of the disapproval period if
the Federal Reserve Board issues written notice of its intent not
to disapprove the action.
Under a rebuttable presumption established by the
Federal Reserve Board, the acquisition of more than 10% of a
class of voting stock of a bank holding company with a class of
securities registered under Section 12 of the Exchange Act would,
under the circumstances set forth in the presumption, constitute
the acquisition of control.
In addition, any "company" would be required to obtain
the approval of the Federal Reserve Board under the BHCA before
acquiring 25% (5% in the case of an acquiror that is a bank
holding company) or more of the outstanding shares of USBANCORP
Common Stock, or such lesser number of shares as constitute
control over USBANCORP.
COMPARISON OF RIGHTS OF HOLDERS OF USBANCORP
COMMON STOCK AND JSB COMMON STOCK
USBANCORP and JSB are both incorporated under the laws
of the Commonwealth of Pennsylvania. However, the rights of the
shareholders of USBANCORP are governed by the BCL as well as
USBANCORP's articles of incorporation and bylaws and the rights
of the shareholders of JSB are governed by the PBC and JSB's
articles of incorporation and bylaws. Upon consummation of the
Merger, the shareholders of JSB will become shareholders of
USBANCORP and their rights will be governed by the BCL and by
USBANCORP's articles of incorporation and bylaws. Certain
differences between the rights of JSB's shareholders and
USBANCORP's shareholders are described below.
Directors
Cumulative Voting
USBANCORP's shareholders may cumulate their votes in
the election of directors. This means each shareholder may
multiply the number of shares held by such shareholder by the
number of directors to be elected and cast the resulting number
of votes for one nominee or distribute them among the nominees as
such shareholder desires. Cumulative voting enhances the voting
power of minority shareholders and the ability of a USBANCORP
shareholder to wage a successful proxy contest and obtain
representation on USBANCORP's Board of Directors. JSB does not
permit its shareholders to cumulate their votes for the election
of directors.
Classification of the Board
Both the USBANCORP and the JSB articles of
incorporation provide for a classified Board of Directors under
which approximately one-third of the directors are elected each
year for a three-year term.
Removal of Directors
Any or all of the directors of USBANCORP may be removed
without cause by the affirmative vote of USBANCORP's shareholders
entitled to cast not less than two-thirds of the total votes
which are entitled to be cast by the USBANCORP shareholders at
an annual meeting for the election of directors. Directors of
JSB may be removed without cause by the affirmative vote of JSB
shareholders holding at least a majority of the total votes
entitled to be cast for the election of directors at a duly
constituted meeting of shareholders called expressly for such
purpose and may be removed from office with cause by the
affirmative vote of JSB shareholders holding not less than a
majority of the total votes entitled to be cast by the
shareholders.
Advance Notice of Nominations of Director Candidates
Pursuant to USBANCORP's bylaws, a shareholder of
USBANCORP may nominate a person to serve on the USBANCORP Board
of Directors only if such shareholder gives USBANCORP written
notice delivered or mailed to the President of USBANCORP not less
than 60 days nor more than 90 days prior to any meeting of
shareholders called for the election of directors.
Neither JSB's articles of incorporation nor its bylaws
provide for shareholder nomination of a person for election to
serve on the JSB Board.
Directors' Liability
USBANCORP's bylaws limit the circumstances under which
directors (but not officers or directors acting in their capacity
as officers) could be held personally liable for monetary damages
arising out of any action taken or the failure to take any action
unless:
(i) such director has breached or failed to
perform the duties of his office as provided by applicable
law, and such breach or failure to perform constitutes
self-dealing, willful misconduct or recklessness;
(ii) the responsibility or liability of a
director is pursuant to a criminal statute; or
(iii) the liability of a director is for the
payment of taxes pursuant to a local, state or federal law.
The personal liability of JSB's directors has been
similarly limited.
Indemnification
USBANCORP's bylaws provide that the directors,
officers, agents and employees of USBANCORP shall be indemnified
against liability to the extent not prohibited under Pennsylvania
law. Under Pennsylvania law, a corporation may indemnify any
person against a third party action and, to a more limited
extent, against a derivative action, if the person acted in good
faith and in a manner he reasonably believed to be in, or not
opposed to, the best interests of the corporation and, with
respect to any criminal proceeding, had no reasonable cause to
believe his conduct was unlawful. In addition, under
Pennsylvania law, expenses of defending any third party or
derivative action may be advanced by a corporation to any person
upon receipt of an undertaking by or on behalf of such person to
repay the amount if it is ultimately determined that such person
is not entitled to be indemnified under law. If a person
defending any third party or derivative action prevails on the
merits or otherwise, a Pennsylvania corporation must pay expenses
actually and reasonably incurred by such person in connection
with such defense.
JSB's articles of incorporation contain substantially
the same provisions concerning indemnification and advancement of
expenses as those allowed under Pennsylvania law.
Mergers, Consolidations and Similar Transactions
The USBANCORP articles of incorporation and bylaws do
not require a super-majority vote to effect a merger, sale of
assets, liquidation or other significant transaction. Therefore,
in accordance with the provisions of the BCL, the affirmative
vote of at least a majority of the votes cast by all the
shareholders entitled to vote on any such transaction is required
for approval.
The JSB articles of incorporation and bylaws require
the vote of the holders of not less than 80% of all outstanding
JSB Common Stock to effect a merger, sale of assets, liquidation
or other significant transaction, unless approved by 67% of the
whole JSB Board of Directors at a time prior to the acquisition
of 10% or more of the outstanding JSB Common Stock by the person
or corporation effecting the change in control.
Because USBANCORP's articles of incorporation do not
contain any limitation on the acquisition of USBANCORP Common
Stock, USBANCORP is more susceptible to a nonnegotiated tender or
exchange offer and thus, a change in control.
Voting
Except with respect to the election of directors, see
"Directors -- Cumulative Voting" herein, each shareholder of
USBANCORP Common Stock has one vote for each share of USBANCORP
Common Stock held.
JSB's articles of incorporation also provide that each
holder of JSB Common Stock shall be entitled to one vote for each
share held.
Amendment of Articles and Bylaws
USBANCORP's articles of incorporation may be amended by
the affirmative vote of holders of a majority of the total voting
stock eligible to be cast by USBANCORP shareholders at any duly
noticed and called regular or special meeting of the
shareholders. USBANCORP's bylaws may be amended by the
affirmative vote of a majority of the USBANCORP Board of
Directors then in office at any regular or special meeting of the
USBANCORP Board of Directors.
JSB's articles of incorporation may be amended only
after proposed by the JSB Board of Directors and approved by a
majority of the votes entitled to be cast at any duly noticed and
called regular or special meeting of JSB shareholders. JSB's
bylaws provide for amendment by an affirmative vote of a majority
of the entire JSB Board of Directors or by a majority of the
votes entitled to be cast at any duly noticed and called regular
or special meeting of the JSB shareholders.
In general, the requirements that the JSB Board of
Directors must propose any amendment to JSB's Articles of
Incorporation means that USBANCORP shareholders have a greater
ability to effect fundamental changes in the articles of
incorporation of USBANCORP, including changes that may facilitate
a change in control of USBANCORP as a result of a proxy contest
or a nonnegotiated tender or exchange offer.
Special Meetings of Shareholders
USBANCORP's bylaws provide that special meetings of the
USBANCORP shareholders may be called at any time by the
President, by the USBANCORP Board of Directors, or by any two or
more directors of USBANCORP. JSB's bylaws provide that special
meetings of the JSB shareholders may be called at any time by the
President, by a majority of the JSB Board of Directors or upon
written request of the holders of not less than one-half of
outstanding JSB capital stock entitled to vote at the meeting,
voting together as a single class.
BUSINESS OF USBANCORP
Financial and other information relating to USBANCORP,
including information relating to USBANCORP's directors and
executive officers, is set forth or incorporated by reference in
USBANCORP's Annual Report on Form 10-K for the year ended
December 31, 1993, which is incorporated herein by reference.
See "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE" and
"AVAILABLE INFORMATION."
JSB MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
The operations of JSB are affected by many factors,
including regulatory, economic and competitive factors that
influence interest rates, loan demand and deposit activity. The
operations of JSB are also affected by legislative changes, such
as the Federal Deposit Insurance Corporation Improvement Act of
1992 (the "FDICIA"), which was enacted into law to reform and
reorganize the federal deposit insurance system and the
regulatory structure applicable to savings institutions such as
JSB. The FDICIA and additional regulatory pronouncements enacted
within the scope of regulatory agency authority have had the
effect of increasing the amount of premiums to be paid for
deposit insurance by banks and savings institutions, increasing
the amount of capital required to be maintained by savings
institutions for regulatory purposes and imposing various
investment and other restrictions on the operations of savings
institutions. JSB management anticipates that there will be
future proposals brought forth for Congressional and/or
regulatory agency consideration that may affect the regulations
governing savings institutions, such as JSB. The overall effect
of any proposed changes on JSB will depend upon their final form
and implementation schedule and cannot be determined at this
time.
JSB is a Pennsylvania-chartered savings bank subject to
the regulatory authority of the Department and the FDIC. Prior
to March 9, 1993, when JSB converted from a federally-chartered
savings bank to a state-chartered savings bank, JSB was subject
to the regulatory authority of the FDIC and the OTS.
Results of Operations
General
The operating results of JSB depend primarily on its
net interest income, which is the difference between interest
income on interest-earning assets and interest expense on
interest-bearing liabilities. Interest rates paid and yields
earned by JSB are related to interest rates prevailing generally
in the marketplace, which are significantly affected by changes
in general economic conditions and the policies of the federal
government. JSB's operating results are also affected by the
level of its provisions for loan losses due to other operating
income, which includes mortgage servicing income (net of
amortization of the cost of purchased mortgage servicing rights)
and other loan service fees, gains on sales of mortgage loans
available for sale, gains on the sale of securities available for
sale, other fee income, and its other operating expenses, which
include salaries and employee benefits, occupancy and equipment
expense, provisions for losses and other charges relating to real
estate owned and deposit insurance premiums.
JSB reported net income of $3.4 million in 1993 as
compared to net income of $2.6 million for 1992 and net income of
$1.6 million in 1991. The increase in net income for 1993 as
compared with the prior year was primarily attributable to an
increase in net interest income after the provision for loan
losses, an increase in other operating income which was primarily
the result of substantial increases in gain and other income on
the sale of property previously acquired by foreclosure, and a
decrease in other operating expenses, which was primarily the
result of a substantial reduction in the provision for losses and
other related charges relating to real estate acquired by
foreclosure.
Partially offsetting these increases in income and
decreases in expenses in 1993 as compared with 1992, were
increases in the provision for income taxes. The results of
operations in 1992 were also benefitted by a non-recurring
cumulative effect at January 1, 1992, of the change in accounting
principle for income taxes. See "Income Taxes" below.
JSB's net interest income before provision for loan
losses decreased by $63,000 or 0.6% in 1993, following an
increase of $2.1 million or 25.6% in 1992. However, during 1993,
$1.1 million was added to JSB's allowance for loan losses as
compared to $2.5 million in 1992. Loan loss provisions were
reduced in 1993 as the result of improvements in JSB's loan asset
quality. JSB's net interest income after provision for loan
losses therefore increased by $1.3 million or 16.7% in 1993.
Total other operating income increased by $1.3 million
or 25.5% in 1993 following an increase of $842,000 or 19.1% in
1992. The increase in total other operating income during 1993
was attributable to a $976,000 increase in recovery income
derived from the sale of real estate acquired by foreclosure, and
an aggregate increase of $360,000 or 7.1% in all other income
categories, which include net mortgage servicing income and other
loan service fees, net gains on the sale of loans available for
sale and investment and MBS securities, and other miscellaneous
income.
Total other operating expenses decreased by
$2.0 million or 15.5% in 1993 following an increase of
$2.8 million or 27.9% in 1992. The decrease in other operating
expenses in 1993 was due to a $3.3 million reduction in the
provision recorded for losses and other related charges
associated with real estate acquired by foreclosure, partially
offset by an aggregate increase of $1.3 million or 13.1% in all
other expense categories, which include salaries and employee
benefits, occupancy and equipment expenses, FDIC insurance
premiums, non-recurring expenses related to the planned Merger,
the non-recurring termination gain for JSB's defined benefit plan
recorded in 1992, and other miscellaneous expenses.
The increase in net income for 1992 as compared with
the prior year was primarily attributable to a $504,000 increase
in net interest income after the provision for loan losses, a
$842,000 increase in other operating income, primarily due to a
$849,000 increase in the gains recognized from the sale of
investment securities, and a decline in net income tax expense
from a net expense of $110,000 in 1991 to a net benefit of
$677,000 in 1992. In addition, the results of operations in
1992 were also benefitted by a $1.7 million non-recurring
cumulative effect of the change in accounting principle for
income taxes.
Partially offsetting these increases in income and
decreases in expenses were a $1.7 million increase in provisions
for losses and other expenses relating to real estate acquired by
foreclosure, and $1.0 million in increases related to certain
other operating expenses.
JSB's net interest income before provision for loan
losses increased by $2.1 million or 25.6% in 1992. During 1992,
JSB recorded $2.5 million in provisions for loan losses compared
to $867,000 in 1991. Additional provisions for loan losses were
considered necessary due to the continued deterioration in
national real estate markets experienced throughout 1992. JSB's
net interest income after provision for loan losses was therefore
increased by $504,000 or 6.7% in 1992.
Total other non-interest operating income increased by
$842,000 or 19.1% in 1992. The increase in total other operating
income during 1992, as compared with the previous year, was
attributable to an $849,000 increase in securities sales gains,
partially offset by aggregate decrease in all other non-interest
income categories of $6,000.
Total other non-interest operating expenses increased
by $2.8 million or 27.9% in 1992. The increase in other
operating expenses in 1992, as compared with 1991, was due to a
$1.8 million or 120.8% increase in the provision recorded for
losses and other related charges associated with real estate
acquired by foreclosure, and an aggregate $1.0 million or 11.8%
increase in all other non-interest expense categories, which
include salaries and employee benefits, occupancy and equipment
expenses, FDIC insurance premiums, a reduction in the non-
recurring curtailment gain for JSB's defined benefit plan
recorded in 1991, and other miscellaneous non-interest expenses.
Net Interest Income
Net interest income is determined by JSB's interest
rate spread (i.e., the difference between the yields earned on
its interest earning assets and the rates paid on its
interest-bearing liabilities) and the relative amounts of
interest-earning assets and interest-bearing liabilities.
The following table presents the average balance and
the interest and dividends earned or paid on each major class of
interest-earning assets and interest-bearing liabilities during
the periods indicated, as well as certain information related to
the yields earned and rates paid thereon:
<TABLE>
<CAPTION>
Year Ended December 31,
1993 1992
(Dollars in Thousands)
Yield
Rate at Average Yield/ Average Yield/
12/31/93 Balance Interest Rate Balance Interest Rate
<S> <C> <C> <C> <C> <C> <C> <C>
Loans(1) 8.49% $156,719 $13,364 8.53% $158,243 $14,882 9.40%
Mortgage-backed securities 5.96 136,007 7,682 5.65 101,425 7,310 7.21
Investment securities and other 6.41 25,522 1,557 6.10 16,797 1,090 6.49
Total interest-earning assets 7.17 318,248 22,603 7.10 276,465 23,282 8.42
Deposits 3.46 219,581 8,111 3.69 218,850 10,216 4.67
FHLB Advances 4.59 73,375 3,522 4.80 35,182 2,060 5.86
Other borrowed funds 1.87 20,717 529 2.55 20,022 502 2.51
Total interest-bearing
liabilities 3.67 313,673 12,162 3.88 274,054 12,778 4.66
Net interest income $10,441 $10,504
Net interest spread 3.50% 3.22% 3.76%
Net interest-earning assets $ 4,575 $ 2,411
Net yield on interest-earning
assets 3.63% 3.28% 3.80%
Ratio of interest-earning
assets to interest-bearing
liabilities 1.01 1.01
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Year Ended December 31,
1991
(Dollars in Thousands)
Average Yield/
Balance Interest Rate
<S> <C> <C> <C>
Loans(1) $173,514 $16,909 9.75%
Mortgage-backed securities 66,601 5,731 8.60%
Investment securities and other 21,844 1,647 7.54%
Total interest-earning assets 261,959 24,287 9.27%
Deposits 220,839 13,582 6.15%
FHLB Advances 25,333 1,871 7.39%
Other borrowed funds 16,553 471 2.85%
Total interest-bearing
liabilities 262,725 15,924 6.06%
Net interest income $8.363
Net interest spread 3.21%
Net interest-earning assets $(766)
Net yield on interest-earning
assets 3.19%
Ratio of interest-earning
assets to interest-bearing
liabilities 1.00
__________________
<FN>
(1) Average outstanding balance includes $588,000, $3.1 million
and $5.9 million of non-accrual loans as of December 31,
1993, 1992, and 1991, respectively.
</TABLE>
<PAGE>
The following table presents the dollar amount of
changes in income and expense attributable to changes in volume
and the amount attributable to changes in rate. Any changes
attributable to both volume and rate which cannot be segregated
have been allocated proportionately:
<TABLE>
<CAPTION>
1993 Compared to 1992 1992 Compared to 1991 1991 Compared to 1990
Increase (Decrease) Increase (Decrease) Increase (Decrease)
Volume Rate Net Volume Rate Net Volume Rate Net
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Loans $ (143) $(1,375) $(1,518) $(1,488) $ (539) $(2,027) $(1,345) $ (307) $(1,652)
Mortgage-backed securities 2,492 (2,120) 372 2,997 (1,418) 1,579 2,565 (580) 1,985
Investment securities
and other 566 (99) 467 (381) (176) (557) (856) (128) (984)
Total interest-earning
assets 2,915 (3,594) (679) 1,128 (2,133) (1,005) 364 (1,015) (651)
Deposits 34 (2,139) (2,105) (122) (3,244) (3,366) (590) (1,291) (1,881)
FHLB advances 2,236 (774) 1,462 727 (538) 189 300 (109) 191
Other borrowed funds 17 10 27 99 (68) 31 189 150 339
Total interest-earning
liabilities 2,287 (2,903) (616) 704 (3,850) (3,146) (101) (1,250) (1,351)
Net interest income $ 628 $ (691) $ (63) $ 424 $ 1,717 $ 2,141 $ 465 $ 235 $ 700
</TABLE>
JSB's net interest income before provision for loan
losses decreased by $63,000 or 0.6% in 1993, following an
increase of $2.1 million or 25.6% in 1992. JSB's net interest
income (net interest income divided by average interest-earning
assets) was 3.28% in 1993 as compared with 3.80% for 1992 and
3.19% for 1991. The decrease in net interest income during 1993
was due to a decline in interest-earning asset yields due to
accelerated refinancings of higher-yielding, fixed-rate
residential and commercial real estate mortgages and mortgage-
backed securities ("MBS") which were replaced by relatively
lower-yielding mortgages and investments, and a reduction in
asset yields due to the scheduled repricing of adjustable-rate
mortgages and MBS in JSB's portfolio.
The increase in net interest income, in 1992 as
compared with 1991, was primarily the result of generally reduced
interest rates, particularly short-term interest rates. These
rate reductions had the effect of reducing the interest cost of
deposits and borrowed funds more than the concurrent reduction in
loan and other investment yields during the year.
Interest Income
Interest income decreased by $679,000 or 2.9% in 1993
and $1.0 million or 4.1% in 1992. Interest income decreased in
1993 primarily as a result of declines in general interest rates
which reduced JSB's yield on newly-originated loans, new
investment security purchases, and adjustable-rate loans and
investments that underwent a scheduled repricing during the year.
The weighted average yield on interest-earning assets was 7.10%,
8.42% and 9.27% in 1993, 1992 and 1991, respectively. The effect
of the reduction in yield on total interest income during 1993
was partially offset by a $41.8 million increase in average
interest-earning assets as compared with 1992.
In 1993, the management of JSB continued to restructure
JSB's asset portfolios by decreasing the amount of residential
mortgage loans classified as held-to-maturity, commercial
business and consumer loans and increasing the amount of MBS and
residential mortgage loans classified as available-for-sale.
JSB's total loan portfolio (net of related reserves) increased by
$3.7 million or 2.4% in 1993.
In 1993, mortgage loan interest declined $696,000 or
6.5% due to declines in the yields generated by JSB's investment
in residential mortgage loans and declines in the average
balance of commercial real estate and residential mortgage loans,
excluding loans available for sale.
During 1993, JSB management elected to sell a
substantial portion of its newly-originated residential mortgage
loans in order to achieve better matching of average asset and
liability durations, thereby reducing interest-rate risk for
future periods. Accordingly, the balance of residential mortgage
loans, excluding loans classified as available-for-sale, declined
from $50.7 million at December 31, 1992, to $47.4 million at
December 31, 1993. The residential mortgage loan portfolio
average balance, excluding loans classified as available-for-
sale, decreased 4.9% from $51.6 million in 1992 to $49.0 million
in 1993. In addition, there was a decline in the average yield
generated by the residential loan portfolio from 8.94% in 1992 to
7.96% in 1993. The decline in residential mortgage loan yield
during 1993 was due to the effects of generally declining
interest rates on adjustable-rate residential mortgages which
repriced as scheduled during the year and increased refinancings
of higher-yielding, fixed-rate mortgages.
The average balance of commercial real estate loans
held by JSB declined from $51.5 million in 1992 to $42.7 million
in 1993. The average yield generated by the commercial real
estate loan portfolio increased from 8.87% in 1992 to 8.88% in
1993.
During 1993, the weighted average yield in the loan
portfolio was enhanced by consumer lending activities. Consumer
loans generally have shorter terms and higher interest rates than
mortgage loans because of the type and nature of the collateral
and, in certain cases, the absence of collateral. At December
31, 1993, JSB had $27.5 million in consumer loans. See
"Concentrations of Credit Risk" below.
In 1993, interest income from MBS increased $372,000 or
5.1% as compared with 1992. This increase was due primarily to a
$34.6 million or 34.1% increase in JSB's average invested balance
in MBS from $101.4 million in 1992 to $136.0 million in 1993.
This increase was partially offset by a decline in the average
yield derived from MBS from 7.21% in 1992 to 5.65% in 1993. This
decline in yield on MBS was due to general declines in interest
rates, accelerated prepayments of higher-yielding securities, and
JSB management's decision to increase through purchases the
relative percentage of shorter duration MBS. MBS yields also
declined in 1993, as compared to the previous year, due to the
effects of generally declining interest rates on adjustable-rate
MBS which repriced during the year, and to the maturity of a
portion of JSB's portfolio of relatively higher-yielding MBS
which were replaced by lower-yielding securities during the
course of the year.
JSB substantially increased its investment in MBS in
1993 and 1992, based on JSB management's analysis of this type of
security's relative attributes and risks. Because MBS are
collateralized by diversified pools of individual residential
mortgages and the majority of the type held by JSB are
additionally guaranteed as to the timely payment of principal and
interest by an agency of the U.S. Government (Government National
Mortgage Association) or a government-sponsored enterprise
(Federal National Mortgage Association or the Federal Home Loan
Mortgage Corporation), their risk of default is low. During 1993
and 1992, economic conditions, primarily relating to general
interest rates and the availability of new residential mortgage
loan production nationally, combined to make the net yields
available from MBS attractive relative to alternatively
available investments. Additional advantages of MBS, as compared
with loan investments, include their negligible servicing costs
and relatively predictable cash flows. MBS can also be used to
provide liquidity because they are readily marketable and
commonly used to provide collateral for borrowed funds.
Interest and dividends on investment securities and
other earning assets increased by $467,000 or 42.8% in 1993
following a decrease of $557,000 or 33.8% in 1992. The increase
in this income category in 1993 as compared with 1992, was due to
a $8.7 million increase in the average balance invested in these
securities, partially offset by a decline in the average yield
generated by these securities from 6.49% in 1992 to 6.10% in
1993. Interest and dividend yields declined in 1993, primarily
as a result of generally declining short-term interest rates
during the year.
Interest income on loans in 1993 and 1992 was adversely
affected by the amount of JSB's non-accrual loans and troubled
debt restructurings as discussed below. During 1993 and 1992,
JSB estimates that it would have recorded $341,000 and $522,000,
respectively, of additional interest on loans if loans did not
have to be restructured and non-accrual loans had been current in
accordance with their terms. See Notes 3 and 4 to the "JSB
CONSOLIDATED FINANCIAL STATEMENTS."
In 1992, mortgage loan interest declined $1.7 million
or 13.7% due to reductions in JSB's level of investment in
relatively high-yielding commercial real estate mortgage loans
and declines in the yields generated by residential mortgage
loans. As part of JSB management's ongoing efforts to reduce
JSB's out-of-state commercial real estate mortgage loans, JSB has
generally declined to refinance maturing loans of this type. As
a result, the commercial real estate mortgage loan portfolio
average balance declined from $66.2 million in 1991 to
$49.0 million in 1992. The average yield generated by the
commercial real estate loan portfolio declined from 8.91% in 1991
to 8.87% in 1992. The decline in yield during 1992 was primarily
due to the effects of generally declining interest rates on
adjustable-rate mortgages which repriced as scheduled during the
year and increased refinancings of higher-yielding, fixed-rate
mortgage loans.
The balance of residential mortgage loans, excluding
loans classified as available-for-sale, declined from
$55.4 million at December 31, 1991, to $50.7 million at
December 31, 1992. The residential mortgage loan portfolio
average balance, excluding loans available-for-sale, decreased
9.5% from $57.0 million in 1991 to $51.6 million in 1992. In
addition, there was a decline in the average yield generated by
the residential loan portfolio from 9.68% in 1991 to 8.94% in
1992. The decline in residential mortgage loan yield during 1992
was due to the effects of generally declining interest rates on
adjustable-rate residential mortgages which repriced as scheduled
during the year and increased refinancings of higher-yielding
fixed-rate mortgages.
In 1992, interest income from MBS increased
$1.6 million or 27.5% as compared with 1991. This increase was
due primarily to a $34.8 million or 52.3% increase in JSB's
average invested balance in MBS from $66.6 million in 1991 to
$101.4 million in 1992. This increase was partially offset by a
decline in the average yield derived from MBS from 8.60% in 1991
to 7.21% in 1992. This decline in yield on MBS was due to
management's decision to increase through purchases the relative
percentage of adjustable-rate MBS and shorter duration MBS
derivative securities.
Interest Expense
Interest expense decreased by $616,000 or 4.8% in 1993
following a decrease of $3.1 million or 19.8% in 1992. Interest
expense decreased in 1993 and 1992 primarily as a result of
declines in short-term interest rates generally which reduced
JSB's cost of funds for both deposits and other borrowings. The
weighted average rate paid on interest-bearing liabilities was
3.88%, 4.66% and 6.06% in 1993, 1992 and 1991, respectively.
This reduction in the cost of funds was partially offset by a
$39.6 million increase in average interest-bearing liabilities
during 1993 as compared with 1992.
Deposit interest expense declined $2.1 million or 20.6%
in 1993, as compared with 1992 due primarily to a reduction in
the weighted average rate paid on deposits from 4.67% in 1992 to
3.69% in 1993. The effect on deposit interest expense of this
reduction in the cost of funds for deposits was slightly reduced
by an increase of $731,000 in the average deposit balance during
1993 as compared with 1992. Interest expense on FHLB advances
increased $1.5 million or 71.0% in 1993 as compared with the
previous year. The increase was due to a $38.2 million increase
in the average balance of these advances, partially offset by a
decrease in the weighted average rate paid on FHLB advances from
5.86% in 1992 to 4.80% in 1993. Interest expense related to
other borrowed funds increased $28,000 or 5.5% in 1993 as
compared to 1992. The increase was attributable to an increase
in the weighted average cost of such funds from 2.51% in 1992 to
2.55% in 1993 and an increase of $695,000 in the average amount
borrowed. The increase in the average balance for other borrowed
funds was due to increased levels of mortgage origination
activities in 1993 experienced by Standard Mortgage Corporation
("SMC"). The cost of such advances relates to the balance and
timing of mortgage servicing escrow deposits controlled by SMC
during the year. Escrow deposits are used as compensating
balances to reduce SMC's cost of funds for advances it obtains
from an unaffiliated lender. For additional information relating
to SMC, see "Mortgage Banking Activities" below and Note 13 to
the "JSB CONSOLIDATED FINANCIAL STATEMENTS."
Deposit interest expense declined $3.4 million or 24.8%
in 1992, as compared with 1991 due primarily to a reduction in
the weighted average rate paid on deposits from 6.15% in 1991 to
4.67% in 1992. The effect on deposit interest expense of this
reduction in the cost of funds for deposits was enhanced by a
decrease of $2.0 million in the average deposit balance during
1992 as compared with 1991. Interest expense on FHLB advances
increased $189,000 or 10.1% in 1992 as compared with the previous
year. The increase was due to a $9.8 million increase in the
average balance of these advances, partially offset by a decrease
in the weighted average rate paid on FHLB advances from 7.39% in
1991 to 5.86% in 1992. Interest expense related to other
borrowed funds increased $31,000 or 6.5% in 1992 as compared to
1991. The increase was attributable to an increase of
$3.5 million in the average balance of borrowed funds in 1992 as
compared to 1991, partially offset by a decrease in the weighted
average cost of such funds from 2.85% in 1991 to 2.51% in 1992.
For additional information relating to JSB's
liabilities, see Notes 9, 10 and 11 to the "JSB CONSOLIDATED
FINANCIAL STATEMENTS."
Provision for Loan Losses
Due to the credit risks involved in lending activities,
JSB management systematically reviews the quality of JSB's loan
portfolio. Provisions charged to operating results for specific
estimated losses on individual loans are made whenever
uncertainty arises as to the ongoing willingness and ability of a
borrower to repay any loan obligation to JSB. Charge-offs
against established allowances are made when a significant
impairment in value is deemed to have occurred. General loan
loss provisions are established by JSB on the basis of JSB
management's review of historical experience, the volume and
composition of the loan portfolio, industry standards, the status
of past due principal and interest payments, economic conditions
(particularly as they relate to market areas where JSB has a
significant concentration of loans) and other factors related to
the collectibility of JSB's loan portfolio.
During 1993, $1.1 million in provisions for loan losses
was recorded as compared to $2.5 million, and $867,000 during
1992 and 1991, respectively. The decrease in JSB's 1993
provision for loan losses, in comparison with 1992, reflects JSB
management's assessment of the improving conditions for
commercial real estate generally and, more specifically, in the
market areas where JSB's loan collateral is located. In addition
to the factors considered in establishing general loan loss
provisions, as described above, JSB's allowance for loan losses
considers (1) the amount and fair market value of collateral
supporting non-accrual loans and troubled debt restructurings,
which are primarily the result of adverse real estate markets in
Texas, Colorado and Georgia; and (2) charge-off experience for
commercial real estate loans secured by properties primarily in
these states. At December 31, 1993, JSB had approximately
$11.2 million, $4.1 million and $5.6 million of multi-family
residential and commercial real estate loans secured by
properties located in Texas, Colorado and Georgia, respectively.
The increase in JSB's 1992 provision for loan losses,
in comparison with 1991, reflected JSB management's assessment of
the continued deterioration, evidenced throughout 1992, in
national real estate valuations generally and, more specifically,
in the market areas where JSB's loan collateral is located. At
December 31, 1992, JSB had approximately $17.1 million,
$5.3 million and $7.9 million of multi-family residential and
commercial real estate loans secured by properties located in
Texas, Colorado and Georgia, respectively.
At December 31, 1993, JSB's total allowance for loan
losses amounted to $3.1 million or 1.9% of the total loan
portfolio, as compared to $4.1 million or 2.6% at December 31,
1992 and $3.0 million or 1.8% at December 31, 1991. For a
reconciliation of the activity in JSB's allowance for loan losses
and additional information, see Note 3 to the "JSB CONSOLIDATED
FINANCIAL STATEMENTS."
JSB management records provisions for loan losses which
it believes are adequate to cover potential future losses on
JSB's loan portfolio. To the extent JSB must alter its
assumptions, additional information becomes available to JSB
management, or real estate markets in which JSB has conducted
lending activities remain depressed, it may become necessary for
JSB to increase its provisions for loan losses in the future.
JSB management believes that JSB has adequate loan loss reserves
at December 31, 1993. However, it continues to monitor JSB's
loan portfolio and will make loan loss reserve adjustments as
necessary. In addition, loan classifications and loss reserves,
as determined by JSB management, are subject to periodic
examination by regulatory agencies. JSB management cannot
predict whether future regulatory examinations will require any
changes in JSB's loan classifications or loan loss reserves.
Other Operating Income
Total other non-interest operating income increased by
$1.3 million or 25.5% in 1993 following an increase of $842,000
or 19.1% in 1992. The increase in total other operating income
during 1993, as compared with 1992, was attributable to a
$976,000 increase in recovery income from the sale of real estate
acquired by foreclosure in prior years, a $129,000 increase in
other miscellaneous income, a $103,000 increase in net loan
servicing income and other loan service fees, a $69,000 increase
in gains on the sale of investment and mortgage-backed available
for sale securities, and a $60,000 increase in gains on the sale
of loans.
During 1993, JSB recognized $1.1 million in gains and
other income arising from the sale of real estate acquired by
foreclosure as compared with $166,000 in 1992. This income arose
from the liquidation of properties during the year at prices in
excess of the properties' carrying values. At December 31, 1993,
JSB had reduced its holdings of commercial and multi-family
residential real estate acquired by foreclosure to two properties
with a book value of $822,000 (before applicable reserves) from
20 properties with a book value of $6.6 million (before
applicable reserves) at December 31, 1992.
The $129,000 or 17.4% increase in other (miscellaneous)
operating income in 1993, as compared with the previous year, was
due to general increases in JSB's fee schedules due to general
inflationary trends and competitive factors and to an increased
emphasis by management on the generation of fee income. In
particular, JSB was successful during 1993, in increasing its
fee-based business transaction account relationships.
Loan servicing income and other loan servicing fees,
net of applicable amortization expense for purchased mortgage
servicing rights ("PMSR") increased $102,000 or 4.5% in 1993 as
compared with the previous year. The increase was primarily due
to a $108,000 or 4.5% decrease in PMSR amortization expense in
1993 as compared with 1992. During 1993, SMC serviced a mortgage
portfolio for others with an average balance of $867.5 million as
compared with an average balance of $844.8 million in 1992. For
additional information relating to SMC, see "Mortgage Banking
Activities" below and Note 13 to the "JSB CONSOLIDATED FINANCIAL
STATEMENTS."
During 1993, JSB recorded net gains of $811,000 on the
sale of $51.7 million in primarily fixed-rate securities
previously classified as available-for-sale. The securities were
sold as part of JSB's asset/liability management strategy in
response to changes in interest rates, resultant prepayment risk
and other factors related to interest rate and resultant
prepayment risk changes. Gains on the sale of investment and MBS
securities are dependent on market and economic conditions and,
accordingly, there can be no assurances that the gains
experienced in prior years can be achieved in the future. In
addition, during 1993, JSB sold $223.4 million in residential
mortgage loans realizing a net profit of $1.4 million, an
increase of $60,000 in comparison to the previous year. These
sales were completed in the normal course of business. JSB sells
such loans in order to reduce its concentration of long-term
fixed-rate assets as part of its on-going strategy to reduce its
overall interest-rate risk. The increase in 1993, as compared
with the previous year, was primarily due to increased loan
origination volumes, which provided increased loan and related
servicing rights volumes classified as available-for-sale. Gains
on the sale of loans are dependent on market and economic
conditions and, accordingly, there can be no assurances that the
gains experienced in prior years can be achieved in the future.
See "Subsidiary Operations" below.
The increase in total other operating income during
1992, as compared with 1991, was primarily attributable to a
$849,000 increase in gains on the sale of securities. This
increase was partially offset by a $127,000 decrease in net
mortgage servicing and other loan service fee income in 1992 as
compared with the previous year.
During 1992, JSB recorded net gains of $742,000 on the
sale of $57.8 million in primarily fixed-rate securities. The
securities were sold as part of JSB's asset/liability management
strategy in response to changes in interest rates, resultant
prepayment risk and other factors related to interest rate and
resultant prepayment risk changes. Net mortgage servicing income
was $2.3 million or 45.0% of total other operating income, and
$2.4 million or 56.0% of total other operating income,
respectively, in 1992 and 1991. Mortgage servicing income and
other loan service fees are primarily attributable to SMC's
mortgage banking activities. Such fees decreased in 1992 due to
a $958,000 increase in the amortization expense associated with
PMSR. During 1992, SMC experienced significant mortgage loan
refinancing activity which reduced the outstanding balance of its
PMSR. Mortgage servicing organizations nationwide experienced
increased refinancing activity due to generally lower interest
rates. Accordingly, SMC increased the amortization rate
associated with PMSR in 1992. This effect on net servicing
income was partially offset by an increase in the average balance
of PMSR in SMC's portfolio as refinanced loans were replaced with
newly-originated loans. During 1992, SMC serviced a mortgage
portfolio for others with an average balance of $844.8 million as
compared with an average balance of $743.7 million in 1991.
Other Operating Expenses
Total other non-interest operating expenses decreased
by $2.0 million or 15.5% in 1993 following an increase of
$2.8 million or 27.9% in 1992. The decrease in operating
expenses in 1993 as compared with the previous year was due to a
$3.3 million or 99.3% reduction in provisions for losses and
other charges relating to real estate acquired by foreclosure and
a $36,000 or 3.0% reduction in occupancy and equipment expenses.
These reductions in operating expenses were partially offset by a
$413,000 increase in non-recurring expenses related to the
planned acquisition of JSB by USBANCORP, a $409,000 or 13.4%
increase in other miscellaneous operating expenses, a $304,000 or
6.0% increase in salaries and benefits expense, a $122,000
reduction in the gain received from the termination of JSB's
defined benefit plan in 1991, and a $58,000 or 11.4% increase in
FDIC deposit insurance premium expenses.
The provision for losses and other related charges
associated with real estate acquired by foreclosure decreased
$3.3 million in 1993 following an increase of $1.8 million in
1992. The decrease in the provision and other related charges
associated with real estate acquired by foreclosure in 1993 was
due to improvements in valuations for commercial real estate
nationally and more specifically in the areas where JSB's loans
are concentrated, and to JSB's favorable experience in 1993 with
respect to the liquidation of foreclosed properties. The
$1.8 million increase in provision for losses and other charges
associated with real estate acquired by foreclosure in 1992 was
necessitated by continued valuation declines, evidenced
throughout 1992, in national real estate markets, and more
specifically, in the geographic areas where JSB's real estate
acquired by foreclosure is located. JSB management believes that
JSB has provided sufficient reserves to allow for the liquidation
of existing real estate acquired by foreclosure without material
impact on the future operating results of the institution. For a
reconciliation of the activity in JSB's reserve for losses on
real estate owned, see Note 4 to the "JSB CONSOLIDATED FINANCIAL
STATEMENTS."
During the fourth quarter of 1993, JSB incurred
$413,000 in expenses related to the planned acquisition of JSB by
USBANCORP. These expenses were for accounting, legal and other
professional advice and services required to evaluate and
ultimately negotiate the transaction terms. JSB management
believes that a similar level of professional services expense
will be required to complete the proposed merger transaction in
1994. These expenses will be charged to operations as they are
incurred in 1994.
Other miscellaneous operating expenses increased
$409,000 or 13.4% in 1993 as compared with 1992 primarily as a
result of a $255,000 increase in data processing costs resulting
from the installation of a new out-sourced data processing system
in late 1992, and a $205,000 increase in professional services,
performed by unaffiliated entities, related to the management of
JSB's commercial real estate loan portfolio.
Salaries and benefits expense increased by $304,000 or
6.0% in 1993, as compared with the previous year. The increase
in salaries and employee benefits during 1993 was attributable to
small increases in staffing levels at JSB and SMC and to normal
cost increases due to general price inflation, particularly in
the area of employee benefit expenses.
In addition to the $1.8 million increase in the
provision and other related expenses associated with real estate
acquired by foreclosure, other operating expenses increased in
1992 due to a $520,000 reduction, as compared with 1991, in
non-recurring gains associated with the 1991 termination of JSB's
defined benefit employee pension plan, a $281,000 increase in
other miscellaneous categories, a $183,000 increase in salaries
and employee benefit costs, and a $43,000 increase in FDIC
deposit insurance premiums.
During 1992, JSB recognized a non-recurring reversion
gain of $122,000 following the final settlement of the plan
liabilities relating to its qualified non-contributory defined
benefit employee retirement plan, which was terminated in 1991.
The plan previously covered all full-time employees who had
attained a minimum age requirement and met a required period of
service. During 1991, JSB recognized a curtailment gain of
$642,000 on the termination of the defined benefit employee
retirement plan. Effective November 1, 1991, JSB adopted a
defined contribution employee retirement plan that covers
substantially all employees of JSB and its subsidiaries. See
Note 6 to the "JSB CONSOLIDATED FINANCIAL STATEMENTS" for a more
detailed explanation of JSB's employee retirement plan.
Other miscellaneous operating expenses increased
$281,000 or 10.1% in 1992. The increase in other operating
expenses during 1992, as compared with 1991, was primarily the
result of JSB's increased use of external sources for support
services such as data processing and check processing operations
and, to a lesser degree, due to general inflationary pressures on
a variety of JSB's miscellaneous expense categories. JSB
management has determined that JSB can reduce overall operating
costs through increased utilization of cost-effective external
processing service providers. JSB management expects that the
fees paid for such processing services will continue to be more
than offset by reductions in other expense categories, such as
salaries and employee benefits and occupancy and equipment
charges.
Salaries and benefits expense increased by $183,000 or
3.7% in 1992. The increase in salaries and employee benefits
during 1992 as compared with 1991 was attributable to normal cost
increases due to general price inflation.
Deposit insurance premiums paid to the FDIC increased
$58,000 and $43,000 in 1993 and 1992, respectively. The
increases in 1993 and 1992 were due to increases in the deposit
insurance premiums charged all depository institutions
nationally. Under the provisions of the FDICIA, Congress
authorized additional deposit insurance premium increases, as may
be required, to re-capitalize the FDIC insurance fund in order to
ensure the continued stability of the banking system in the
United States. In response to this legislation, the FDIC
initiated a system of risk-based premium assessments based on a
regulatory agency determination of a financial institution's
capital adequacy and level of need for greater than normal
supervision. The introduction of this system of risk-based
assessments, on January 1, 1992, had the effect of raising
deposit insurance costs for the majority of depository
institutions nationwide.
Income Taxes
JSB is subject to the general provisions of the Code
and the Pennsylvania Mutual Thrift Tax Act, which taxes JSB's
Pennsylvania-sourced income based on a calculation substantially
in accordance with GAAP. SMC is separately subject to the
applicable income tax laws of the State of Georgia.
Effective January 1, 1992, JSB adopted Statement of
Financial Accounting Standards No. 109 ("SFAS-109"), "Accounting
for Income Taxes." SFAS-109 requires current-year recognition of
the net income effect of future tax benefits, such as net
operating and capital loss carryforwards, and certain timing
differences between business entities' financial statements and
tax returns, subject to a valuation allowance.
During 1993, JSB recorded income tax expenses of
$1.6 million as compared with a net benefit of $677,000 in 1992.
Accordingly, income tax expense increased $2.3 million in 1993 as
compared with the preceding year. The increase in this expense
was due to the exhaustion of net operating tax loss carryforwards
in 1993 and to an increase in pre-tax net income, before the
cumulative effect at January 1, 1992, of the change in the
principle of accounting for income taxes, to $4.9 million in 1993
from $232,000 in 1992. Deferred tax assets, net of applicable
valuation reserves, decreased by $979,000, or 39.8%, to $1.4
million at December 31, 1993. Federal and state income taxes
currently payable were $431,000 at December 31, 1993.
Adoption of this change in accounting principle
required JSB to record a deferred tax asset, net of applicable
valuation reserves, of $1.7 million on January 1, 1992. This net
non-recurring gain was credited to operations in 1992 as the
cumulative effect of a change in accounting principle for income
taxes. A benefit from income taxes of $677,000 was credited to
operations during 1992 in recognition of a net increase in JSB's
deferred tax asset and for federal and state taxes currently
payable. Deferred tax assets, net of applicable valuation
reserves, increased by $787,000, or 47.0%, to $2.5 million at
December 31, 1992. Federal and state income taxes currently
payable were $110,000 at December 31, 1992.
For 1991, JSB recorded a provision for state and
federal income taxes of $110,000. The provision for income
taxes, recorded in 1991, consisted of $116,000 in Georgia state
income taxes and a net benefit from federal income taxes of
$6,000. The benefit from federal income taxes resulted from
$16,000 in adjustments favoring JSB for prior period returns net
of the 1991 Alternative Minimum Tax provision of $10,000. During
1991, JSB, on a consolidated basis, derived benefit from net
operating loss carryforwards and general business tax credit
carryforwards that substantially reduced its effective federal
and Pennsylvania state income tax rates. JSB is subject to the
provisions of the federal Alternative Minimum Tax,
notwithstanding the benefit derived from its net operating and
capital loss carryforwards. For additional information, see
Notes 1, 7 and 13 to the "JSB CONSOLIDATED FINANCIAL STATEMENTS."
Subsidiary Operations
SMC is a second-tier, wholly-owned subsidiary of JSB
which conducts mortgage banking activities in the southeastern
United States. SMC recorded earnings of $440,000, $564,000 and
$893,000 for the periods ended December 31, 1993, 1992 and 1991,
respectively. Earnings decreased $124,000 or 21.9% in 1993
following a decrease of $329,000 or 36.8% in 1992. The decrease
in earnings in 1993 was primarily due to a $272,000 or 4.5%
increase in operating expenses partially offset by a $77,000 or
1.1% increase in revenues and a $71,000 or 20.1% decrease in
income taxes.
Revenues increased $77,000 or 1.1% in 1993 as compared
with 1992 primarily due to a $162,000 or 12.5% increase in
interest income due primarily to increased loan origination
activity which increased the average balance of loans classified
as available-for-sale from $13.3 million in 1992 to $18.2 million
in 1993. The increase in net income was partially offset by an
$85,000 or 1.5% aggregate decrease in other revenues sources,
which include loan origination and processing fees, loan
servicing fees and late charges, net gains on the sale of loans,
and other miscellaneous revenue sources.
Operating expenses increased $272,000 in 1993 primarily
as a result of increased staffing and additional variable
expenses associated with increased loan origination activity,
increased loan servicing volumes, and, to a lesser extent, cost
increases associated with general price inflation. During 1993,
SMC originated $179.9 million in new residential mortgage loans
as compared with origination of $176.0 million in 1992. Income
tax expense declined in 1993 as compared with 1992 due to the
decline in pre-tax net income from $918,000 in 1992 to $723,000
in 1993.
Earnings decreased $329,000 or 36.8% in 1992 as
compared with 1991. The decrease in earnings in 1992 was
primarily due to a $1.7 million or 40.2% increase in operating
expenses partially offset by a $1.1 million or 19.2% increase in
revenues and a $282,000 or 44.3% decrease in income taxes.
Revenues increased $1.1 million in 1992, as compared
with 1991, primarily due to a $710,000 increase in servicing fee
revenues and a $385,000 increase in interest income on loans
classified as available-for-sale. Servicing fee revenues
increased in 1992 due to increased servicing volumes. The
average balance of loans serviced for others increased from
$743.7 million in 1991 to $844.8 million in 1992. Interest
income increased primarily as a result of increased loan
origination activity which increased the average balance of loans
classified as available-for-sale from $9.2 million in 1991 to
$13.3 million in 1992.
Operating expenses increased $1.7 million in 1992
primarily as a result of a $958,000 or 67.2% increase in
amortization expense for PMSR and a $735,000 or 30.3% increase in
other operating expenses. Amortization expense associated with
PMSR increased in 1992 because SMC experienced significant
refinancing activity which had the effect of reducing the
outstanding balance of its PMSR. Mortgage servicing
organizations nationwide experienced increased refinancing
activity due to generally lower interest rates. Other operating
expenses increased in 1992 due primarily to increased staffing
and additional variable expenses associated with increased loan
origination activity, increased loan servicing volumes, and, to a
lesser extent, cost increases associated with general price
inflation. During 1992, SMC originated $176.0 million in new
residential mortgage loans as compared with originations of
$129.7 million in 1991. Income tax expense declined $282,000 or
41.7% in 1992, as compared with 1991, due to the decline in
pre-tax net income from $1.5 million in 1991 to $918,000 in 1992.
SMC paid JSB $42,000 and $180,000 for the years ended
December 31, 1993 and 1992, respectively, in management and other
fees to compensate JSB for direct and indirect expenditures JSB
incurred on behalf of SMC during the year. In addition, $283,000
and $302,000 representing 34% of SMC's federally taxable net
income for charges in lieu of federal income taxes were assessed
SMC and allocated to JSB during 1993 and 1992, respectively. The
income tax charge to SMC was made under the provisions of a tax-
sharing agreement between the two entities.
As a mortgage banking company, SMC originates and sells
residential mortgage loans and services loan assets owned by JSB
and unaffiliated investors within its mortgage servicing
portfolio. SMC's ability to originate residential mortgage loans
is largely dependent upon levels of interest rates and the level
of housing sales activity within its market area, which affect
the degree to which consumers obtain new loans and refinance
existing loans and which in turn are affected by general economic
conditions and by policies of regulatory authorities and other
factors. SMC's ability to sell residential mortgage loans to
supply funds for the origination of new loans is affected by the
secondary market for such loans, including but not limited to the
operations, level of activity and underwriting criteria of the
various federal agencies or government-sponsored enterprises
which are involved in this type of activity.
The level of interest rates also affects SMC's
operations to the extent that it originates loans without
pre-existing commitments by investors to purchase such loans or
which are not otherwise fully hedged against changes in interest
rates, thus subjecting SMC to gains or losses on loan sales
because the value of such loans fluctuates inversely with changes
in interest rates. In addition, SMC creates separable and
saleable mortgage-servicing rights when loans are originated.
The costs of originating loans and developing servicing rights
are substantially offset by collected origination fees.
SMC has, at various times, originated loans which were
not the subject of pre-existing purchase commitments but were
hedged against changes in interest rates. As a result of gains
from the sale of loans and separable mortgage servicing rights,
SMC realized a $1.0 million, a $1.1 million, and $1.1 million
gain on sale of loans and originated mortgage servicing rights in
1993, 1992 and 1991, respectively.
At December 31, 1993, SMC had commitments from
investors for $15.9 million of SMC's $16.6 million of loans
classified as available-for-sale. In addition, SMC had
commitments to purchase or originate loans classified as
available-for-sale totaling $23.2 million at December 31, 1993.
Commitments to purchase or originate such loans are partially
hedged against losses arising from adverse changes in general
interest rates due to SMC's practice of utilizing fixed-price
forward delivery commitments for a portion of its origination
commitments. SMC had purchase commitments from investors for
approximately 26.2% of SMC's unfunded loan origination
commitments at December 31, 1993. In addition, SMC is further
insulated from potential losses arising from the affects of
adverse interest-rate movements by its ability to offset a
significant portion of such potential losses on loan sales with
premiums received arising from the concurrent sale of related
mortgage servicing rights.
SMC's largest source of revenue is fee income from
rights held by it to collect payments on and otherwise service
loans. SMC has emphasized servicing fee income in recent years
because such income is less volatile than income based directly
on the origination and sale of loans. The amount of loans
serviced by SMC for others increased from $840.5 million at
December 31, 1992, to $908.9 million at December 31, 1993. The
increase in loans serviced was due to the creation of new
mortgage loan servicing rights resulting from SMC's loan
origination activities and the purchase of rights from
unaffiliated entities. At December 31, 1993, SMC had
$7.3 million of PMSR, which decreased from the $7.8 million at
December 31, 1992. The decrease in the carrying value of the
PMSR was due to the net effects of amortization expense related
to such rights, as previously described. Notwithstanding SMC's
emphasis on servicing fee income, in 1993 business
considerations, primarily relating to general interest rates and
the availability of newly originated residential mortgage loans
nationally, dictated that SMC sell a portion of loans originated
by it on a servicing-released basis, which increases the amount
received for the loans upon sale but decreases future servicing
income. SMC's ability to retain loan servicing rights upon the
sale of loans originated by it in the future will be dependent on
liquidity and capital needs and other business considerations.
SMC's source of funds for lending and other purposes is
a line of credit (warehouse line) from an unaffiliated lender
secured by loans originated by SMC for sale in the secondary
market and a non-revolving commercial loan commitment from an
unaffiliated lender secured by a perfected interest in mortgage
servicing rights. At December 31, 1993, SMC had received
advances from nonaffiliates in the amount of $15.2 million from
the mortgage warehouse line and $4.1 million for the commercial
loan. The available credit under the warehouse line was
$9.8 million at December 31, 1993.
The loan agreements for the warehouse line of credit
and commercial loan provide for interest rates ranging from 1% to
the prevailing prime interest rate plus 1%, depending upon the
level of compensating balances maintained on deposit with the
unaffiliated lender. The compensating balances are derived from
escrow funds held for taxes and insurance payments, from loan
principal and interest collections in transit and corporate cash
balances. During 1993, SMC maintained average monthly
compensating balances with the lender in the amount of
$22.8 million. Interest expense recorded in connection with the
commercial loan and mortgage warehouse line during 1993 was
$392,000 for an effective rate of 1.87% on the combined average
outstanding balances during the year. For additional information
relating to SMC, including condensed financial statements, see
Note 13 to the "JSB CONSOLIDATED FINANCIAL STATEMENTS."
Asset and Liability Management
JSB has adopted an Interest-Rate Risk Management Policy
which is intended to decrease JSB's vulnerability to material and
sustained changes in interest rates. In addition JSB employs an
independent investment advisory firm to provide specialized
simulation modeling services and advice regarding the structure
of JSB's interest-earning asset portfolio. The purpose of JSB's
interest rate risk management program is to insulate, in so far
as possible, the impact on JSB's earnings from changes in
interest rates. JSB's Asset/Liability Management Committee is
charged with the responsibility of implementing and managing this
program on an ongoing basis and for reporting the status of the
program to the JSB Board of Directors at least monthly. The
Committee monitors the imbalance between the relatively
longer-term nature of JSB's interest-earning assets and the term
of its interest-bearing liabilities. One of the strategies
adopted by JSB during 1991 and continued in 1992 and 1993 called
for a reduced emphasis on certificates of deposit, with a
concurrent increased emphasis on demand deposits and borrowed
funds as a source of funds for investment in interest-earning
assets. This strategy was effective in its intended goal of
lowering JSB's overall cost of funds while simultaneously
decreasing interest-rate risk.
Historically, JSB's emphasis on small to medium-sized
(generally $1.0 million or less) loans secured by existing
commercial and multi-family residential properties was integral
to JSB's asset/liability management efforts because these loans
generally have adjustable interest rates and maturities of nine
years or less. Multi-family residential and commercial real
estate loans amounted to $42.8 million or 12.0% and 26.9% of
JSB's total assets and total loan portfolio, respectively, at
December 31, 1993. As a result of the increased risk associated
with such loans, JSB, in recent periods, has changed its strategy
to emphasize adjustable-rate, one-to-four family residential
loans, consumer loans, and MBS, as discussed above.
At December 31, 1993, JSB's interest-earning assets
which were scheduled to mature or reprice within one year or less
amounted to $156.2 million or 46.9% of interest-earning assets,
as compared to $150.7 million or 51.1% of earning assets at
December 31, 1992. At December 31, 1993, the principal balance
of JSB's interest-bearing liabilities which were scheduled to
mature or reprice within one year or less amounted to
$183.8 million or 56.4% of the interest-bearing liabilities of
JSB, as compared to $159.1 million or 54.2% of interest-bearing
liabilities at December 31, 1992. JSB's interest-bearing
liabilities which are scheduled to mature or reprice within one
year exceed its interest-earning assets with similar
characteristics by $27.6 million or 8.3% of total interest-
earning assets at December 31, 1993, as compared to $8.4 million
or 2.9% of total interest-earning assets at December 31, 1992.
This difference between repricing or maturing assets and
liabilities within one year is referred to as JSB's one-year
"gap" position. The gap position is typically described as
"negative" when liabilities repricing or maturing exceed assets
repricing or maturing in a given future time period. Because of
JSB's negative one-year gap position, material and sustained
increases in interest rates would have the general tendency to
adversely affect JSB's net interest income, whereas material and
sustained decreases in interest rates would have the general
tendency to produce the opposite effect. Offsetting these
predicted effects are estimable changes in the prepayment rates
of certain assets and the renewal rates of certain deposit
products during and following such periods of material and
prolonged interest rate changes. JSB management's analysis of
these factors indicates that JSB's net interest margin exposure
to changes in interest rates is less than would be predicted by
JSB's negative one-year gap position.
JSB's analysis of the maturity and repricing of assets
and liabilities incorporates certain assumptions concerning the
amortization and prepayment of such assets and liabilities. The
major assumptions are that all adjustable-rate instruments are
believed to be rate sensitive on the next contractual rate
adjustment date, that fixed-rate mortgage loans and fixed-rate
MBS will prepay at a rate that is estimable based on historical
norms, that only 34.6% of savings, money market and NOW accounts
are rate sensitive in the one-year period and that all fixed-rate
liabilities are rate sensitive as of the contractual maturity
date. JSB management believes that these assumptions approximate
actual experience and considers them reasonable, although the
actual amortization and repayment of assets and liabilities may
vary substantially.
The following table summarizes the amounts of interest-
earning assets and interest-bearing liabilities outstanding as of
December 31, 1993, which are expected to mature, prepay, or
reprice in each of the future time periods shown. Except as
stated below, the amounts of assets or liabilities shown which
mature or reprice during a particular period were determined in
accordance with the contractual terms of the asset or liability.
Adjustable floating-rate assets are included in the period in
which interest rates are next scheduled to adjust rather than in
the period in which they are due. Fixed-rate loans and MBS are
included in the periods in which they are anticipated to be
repaid based on scheduled maturities and estimated repayment
rates based upon historical experience. Money market deposit
accounts, which are also generally subject to immediate
withdrawal, are included in the "six months or less" period.
Savings passbook and NOW accounts are spread among the periods
shown in accordance with historical experience and JSB
management's belief that such deposits are generally non-interest
rate-sensitive core deposits.
<PAGE>
<TABLE>
<CAPTION>
December 31, 1993
(Dollars in Thousands)
Six
Six Months One Year Three Years Five Years
Months through through through through Over
Or Less 1 Year 3 Years 5 Years Ten Years Ten Years TOTAL
<S> <C> <C> <C> <C> <C> <C> <C>
Interest-earning
assets:
Interest-earning
deposits with
other institutions $ 5,349 $ 0 $ 0 $ 0 $ 0 $ 0 $ 5,349
Adjustable-rate mortgage
loans and mortgage-
backed securities 35,422 37,288 26,398 12,903 8,168 0 120,179
Fixed-rate mortgage
loans and mortgage-
backed securities 37,268 16,509 42,637 22,887 29,793 4,053 153,147
Consumer and other
loans 11,351 5,707 5,973 2,941 1,341 0 27,313
Commercial business
loans and leases 5,069 17 53 34 164 163 5,500
Investment securities
and other investments 250 1,970 3,569 2,120 4,203 9,796 21,908
Other non-interest
earning assets 0 0 0 0 0 0 22,402
Total assets $ 94,709 $ 61,491 $ 78,630 $ 40,885 $ 43,669 $ 14,012 $355,798
Interest-bearing
liabilities:
Passbook, club and
escrow accounts $ 5,060 $ 4,597 $ 14,625 $ 9,540 $ 12,103 $ 10,569 $ 56,494
NOW and Money Market
accounts 17,845 10,441 13,329 4,036 4,800 2,737 53,188
Certificate accounts 43,993 29,561 23,863 8,087 1,767 457 107,728
FHLB advances 55,000 2,000 13,000 6,500 12,500 0 89,000
Other borrowings 15,267 0 0 4,111 0 0 19,378
Other non-interest
bearing liabilities 0 0 0 0 0 0 2,430
Shareholders' equity 0 0 0 0 0 0 27,580
Total liabilities and
shareholders' equity $137,165 $ 46,599 $ 64,817 $ 32,274 $ 31,170 $ 13,763 $355,798
Maturity or repricing
gap during the
period $(42,456) $ 14,892 $ 13,813 $ 8,611 $ 12,499 $ 249
Cumulative gap $(42,456) $(27,564) $(13,751) $ (5,140) $ 7,359 $ 7,608
Ratio of gap during
the period to
total assets -11.9% 4.2% 3.9% 2.4% 3.5% 0.1%
Ratio of cumulative
gap to total assets -11.9% -7.7% -3.9% -1.4% 2.1% 2.1%
</TABLE>
<PAGE>
Liquidity and Capital Resources
Shareholders' equity totaled $27.6 million or 7.8% of
total assets at December 31, 1993, as compared to $24.4 million
or 7.6% of total assets at December 31, 1992, and $21.8 million
or 7.4% of total assets at December 31, 1991. The increase in
shareholders' equity during the past two years was the result of
JSB's consolidated earnings of $3.4 million and $2.6 million in
1993 and 1992, respectively, less dividends paid of $291,000 in
1993 and a credit to capital resulting from the adoption at
December 31, 1993, of Statement of Accounting Standards No. 115
("SFAS-115"), "Accounting for Investments in Certain Debt and
Equity Securities," in the amount of $122,000. SFAS-115 requires
that unrealized market value changes relative to amortized
historical book value of investment securities categorized as
"available-for-sale" shall be credited (or charged), after
computation of related tax effects, to a separate component of
shareholders' equity. At December 31, 1993, JSB held securities
categorized as available-for-sale with aggregate market values of
$184,000 in excess of aggregate amortized historical cost. After
allowing for the potential timing-difference tax effects of this
unrealized appreciation, in accordance with the provisions of
SFAS-115, the net increase in shareholders' equity was $122,000
as a result of the adoption of this change in accounting
principle.
Regulatory capital standards have been established
which require JSB to maintain: (1) leverage capital in an amount
not less than 3% to 5% of JSB's adjusted total assets; (2) risk-
based capital in an amount not less than 4.0% of JSB's
risk-adjusted assets; and (3) total capital in an amount
currently equal to 8.0% of risk-adjusted assets. At December 31,
1993, JSB was in compliance with all applicable regulatory
capital requirements which were in effect as of that date, with
leverage, risk-based and total capital ratios of 7.6%, 13.2% and
14.5%, respectively.
Failure to comply with applicable regulatory capital
requirements can result in capital directives from the
appropriate regulatory agencies, restrictions on or prohibitions
on growth and other limitations on a savings institution's
operations and activities. JSB's primary sources of funds to
support lending and other general business activities have been
deposits and amortization and prepayments of outstanding loans
and investments. JSB may also borrow from the FHLB of Pittsburgh
and other unaffiliated sources. At December 31, 1993, JSB had
$89.0 million of FHLB advances (including $50.5 million in
fixed-rate advances with various maturities, $24.5 million in
advances funded under a line of credit agreement which is subject
to daily interest-rate repricing and $14.0 million in adjustable-
rate advances) and $107.7 million of certificates of deposit. At
December 31, 1993, $18.5 million in fixed-rate FHLB advances,
$35.5 million in FHLB adjustable-rate advances, and $73.6 million
in certificates of deposit were scheduled to mature within one
year. JSB management believes that JSB has adequate resources to
fund these commitments, that all of these commitments will be
funded by the required date and that it can adjust the rates paid
by JSB on savings certificates to retain deposits in changing
interest rate environments. For additional information, see
Notes 9, 10, and 11 to the "JSB CONSOLIDATED FINANCIAL
STATEMENTS."
Under regulation imposed by the Department and the
FDIC, JSB is required to maintain a minimum balance of liquid
assets (cash, cash equivalents, bankers' acceptances, commercial
paper and certain readily marketable securities classified as
available-for-sale) to meet the foreseeable requirements for
liquid cash on an ongoing basis. Appropriate levels of liquidity
are subject to case-by-case evaluation by the Department and the
FDIC. Such evaluation would consider factors such as JSB's
capital position, historical liquidity requirements and other
factors as deemed appropriate by regulatory examiners. Normally,
financial institutions, such as JSB, would be required to
maintain liquid assets in the amount of not less than 20% of
withdrawable deposits, short-term borrowings and other short-term
obligations. Monetary penalties may be imposed for failure to
meet such liquidity requirements. JSB management believes that
JSB maintains and has maintained sufficient short-term and liquid
assets (including loans and securities available-for-sale) to
meet the liquidity standards of the Department and the FDIC. At
December 31, 1993, JSB held sufficient liquid assets in the form
of cash on hand, FHLB deposits, loans and investments available-
for-sale, and other loans and investments maturing within one-
year to ensure, in the opinion of JSB management, full compliance
with these liquidity standards.
Shareholders' Equity
Retained earnings are substantially restricted in
connection with regulations related to the insurance of savings
accounts, which require JSB to maintain certain reserves. In
addition, JSB is required to meet certain minimum leverage and
risk-weighted assets to capital ratios adopted by the FDIC and
the Department.
The regulatory agencies have adopted the requirements
of 3% to 5% leveraged (core) capital and 8% risk-adjusted
capital. The following table sets forth a comparison of JSB's
capital position to the minimum regulatory requirements as of
December 31, 1993.
<TABLE>
<CAPTION>
Ratio Requirements Actual
<S> <C> <C>
Leverage (core) 3.0%-5.0%(1) 7.6%
Risk based capital-Tier I 4.0%(2) 13.2%
Total (Tier I and II) 8.0%(3) 14.5%
_________
<FN>
(1) JSB Common Stock, additional paid-in-capital and retained
earnings, less intangible assets, divided by total assets.
The current requirement is 3.0% for banks with the highest
regulatory rating and 4.0-5.0% for all others.
(2) JSB Common Stock, additional paid-in-capital and retained
earnings, less intangible assets, divided by risk-adjusted
total assets. The current requirement is 4.0%.
(3) The sum of Tier I and Tier II capital and the allowance for
loan losses (limited to 1.25% of risk-adjusted total
assets), divided by risk-adjusted total assets. The current
requirements is 8.0%.
</TABLE>
Concentrations of Credit Risk
Financial institutions, such as JSB, generate profits
primarily through lending and investing activities. The risk of
loss from lending and investing activities includes the
possibility that a loss may occur from the failure of another
party to perform according to the terms of the loan or investment
agreement. This possibility of loss is known as credit risk.
Credit risk is increased by lending and/or investing
activities that concentrate a financial institution's earning
assets in such a way as to expose the institution to a material
loss from any single occurrence or group of related occurrences.
Diversifying the institution's assets to prevent concentrations
is one way in which a financial institution can reduce potential
losses due to credit risk. Examples of asset concentrations
would include, but not be limited to, geographic concentrations,
loans or investments of a single type, multiple loans to a single
borrower, loans made to a single type of industry or against a
single type of property and loans of an imprudent size relative
to the overall size of the institution.
JSB has adopted policies designed to substantially
reduce concentrations within its investment portfolio. The
primary investment vehicle for JSB during 1993 was MBS which are
comprised of diversified individual residential mortgage loans.
The majority of the MBS held by JSB are additionally guaranteed
as to the timely repayment of principal and interest by an agency
of the United States Government (Government National Mortgage
Association) or a government-sponsored enterprise (Federal
National Mortgage Association or the Federal Home Loan Mortgage
Corporation).
Investments in other securities, such as corporate
securities, are made to enhance JSB's overall net interest
margin, to provide a countercyclical balance to other JSB
earnings and to provide and maintain liquidity within the
guidelines of applicable regulations. JSB's current investment
policy is designed to maintain a balance of high-quality,
diversified investments to minimize risk. At December 31, 1993,
JSB held securities with an amortized cost of $169.6 million, of
which $147.7 million was invested in MBS ($115.8 million
classified as available-for-sale) and the substantial majority of
the remaining $21.9 million ($21.8 million classified as
available-for-sale) was invested in U.S. Government agency and
investment-grade corporate securities.
JSB management has taken steps to reduce its exposure
to credit risk by diversifying its assets. Historically, JSB
emphasized small to medium-sized (generally $1.0 million or less)
loans secured by existing commercial and multi-family residential
properties located within its market area and nationwide. As a
result of the increased credit risk associated with such loans,
in recent periods JSB has changed its strategy to emphasize
one-to-four family residential loans classified as available-for-
sale, consumer loans and MBS.
Notwithstanding JSB management's efforts to reduce its
credit risk exposure in commercial property loans, JSB continues
to have a substantial multi-family residential and commercial
real estate loan portfolio relative to its total asset size.
These loan types amounted to $42.8 million or 12.0% and 27.5% of
JSB's total assets and total loan portfolio (net of reserves),
respectively, at December 31, 1993.
<PAGE>
The following table sets forth JSB's commercial real
estate and multi-family residential loan portfolio by property
type as of December 31 1993:
<TABLE>
<CAPTION>
Non-Accrual Loans and
Performing Troubled Debt Restructurings
(Dollars in Thousands)
1993 1992 1993 1992
<S> <C> <C> <C> <C>
Multi-family dwelling $ 8,535 $ 7,908 $ 0 $ 842
Mixed-use apartments 0 616 0 0
Hotel/Motel 2,541 2,655 0 213
Retail strip centers 14,277 15,037 936 1,005
Office 4,266 6,982 289 1,391
Commercial 3,991 3,866 664 1,758
Other 6,869 3,406 426 0
$40,479 $40,470 $2,315 $5,209
</TABLE>
The following table sets forth the geographic
distribution of JSB's performing mortgage loan portfolio as of
December 31, 1993:
<TABLE>
<CAPTION>
Commercial and Multi-Family
Residential Mortgages Residential Mortgages
(Dollars in Thousands)
Balance % Number Balance % Number
Location 1993 Total of Loans 1993 Total of Loans
<S> <C> <C> <C> <C> <C> <C>
Pennsylvania $17,578 43.42% 32 $42,469 90.44% 1,350
Texas 9,576 23.65 42 380 0.81 51
Colorado 4,079 10.07 19 221 0.47 2
Georgia 5,206 12.86 9 2,615 5.57 67
Other 4,040 10.00 7 1,274 2.71 82
$40,479 100.00% 109 $46,959 100.00% 1,552
</TABLE>
<PAGE>
The following table sets forth the geographic
distribution of JSB's performing mortgage loan portfolio as of
December 31, 1992:
<TABLE>
<CAPTION>
Commercial and Multi-Family
Residential Mortgages Residential Mortgages
(Dollars in Thousands)
Balance % Number Balance % Number
Location 1992 Total of Loans 1992 Total of Loans
<S> <C> <C> <C> <C> <C> <C>
Pennsylvania $ 9,006 22.25% 27 $44,325 88.17% 1,545
Texas 14,471 35.76 65 447 0.89 53
Colorado 5,294 13.08 26 226 0.45 2
Georgia 6,793 16.79 13 4,510 8.97 91
Other 4,906 12.12 10 766 1.52 20
$40,470 100.00% 141 $50,274 100.00% 1,711
</TABLE>
The following table sets forth the geographic
distribution JSB's non-accrual loans and troubled debt
restructurings as of December 31, 1993:
<TABLE>
<CAPTION>
Commercial and Multi-Family
Residential Mortgages Residential Mortgages
(Dollars in Thousands)
Balance % Number Balance % Number
Location 1993 Total of Loans 1993 Total of Loans
<S> <C> <C> <C> <C> <C> <C>
Pennsylvania $ 0 0.00% 0 $ 427 99.77% 12
Texas 1,600 69.11 4 0 0.00 0
Georgia 426 18.40 1 1 0.23 1
Other 289 12.49 1 0 0.00 0
$ 2,315 100.00% 6 $ 428 100.00% 13
</TABLE>
<PAGE>
The following table sets forth the geographic
distribution of JSB's non-accrual loans and troubled debt
restructurings as of December 31, 1992:
<TABLE>
<CAPTION>
Commercial and Multi-Family
Residential Mortgages Residential Mortgages
(Dollars in Thousands)
Balance % Number Balance % Number
Location 1992 Total of Loans 1992 Total of Loans
<S> <C> <C> <C> <C> <C> <C>
Pennsylvania $ 213 4.09% 1 $ 379 85.17% 14
Texas 2,668 51.22 7 0 0.00 0
Georgia 1,116 21.42 2 66 14.83 2
Other 1,212 23.27 2 0 0.00 0
$ 5,209 100.00% 12 $ 445 100.00% 16
</TABLE>
At December 31, 1993 and 1992, JSB had $1.7 million or
0.5% of total assets and $6.6 million or 2.1% of total assets,
respectively, classified as real estate owned. The reserve for
losses associated with real estate owned at December 31, 1993,
and 1992 was $240,000 and $2.1 million, respectively. The
following tables set forth the geographic distribution of JSB's
real estate owned as of December 31:
<TABLE>
<CAPTION>
Commercial and Multi-Family
Residential Mortgages Residential Mortgages
(Dollars in Thousands)
Balance % Number Balance % Number
Location 1993 Total of Loans 1993 Total of Loans
<S> <C> <C> <C> <C> <C> <C>
Pennsylvania $ 208 25.30% 1 $ 20 2.20% 1
Georgia 614 74.70 1 721 79.41 7
Other 0 0.00 0 167 18.39 7
$ 822 100.00% 2 $ 908 100.00% 15
<CAPTION>
Balance % Number Balance % Number
Location 1992 Total of Loans 1992 Total of Loans
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Pennsylvania $ 596 9.01% 1 $ 11 100.00% 1
Texas 3,037 45.92 13 0 0.00 0
Colorado 811 12.26 2 0 0.00 0
Georgia 2,170 32.81 4 0 0.00 0
$ 6,614 100.00% 20 $ 11 100.00% 1
</TABLE>
The following table sets forth JSB's commercial real
estate owned by property type as of December 31:
<TABLE>
<CAPTION>
1993 1992
(Dollars in Thousands)
% Number % Number
Property Type Balance Total of Loans Balance Total of Loans
<S> <C> <C> <C> <C> <C> <C>
Retail strip centers $ 0 0.00% 0 $2,556 38.65% 6
Office 614 74.70 1 0 0.00 0
Commercial 208 25.30 1 2,476 37.44 11
Other 0 0.00 0 985 14.89 2
Multi-family dwellings 0 0.00 0 597 9.02 1
$822 100.00% 2 $6,614 100.00% 20
</TABLE>
Substantially all of JSB's consumer loan portfolio is
secured (where applicable) by assets located in and around JSB's
general market area. Unsecured loans are generally granted only
to residents of the Commonwealth of Pennsylvania, substantially
all of whom reside in or around JSB's general market area. The
following table classifies JSB's consumer loan portfolio by
collateral type as of December 31:
<TABLE>
<CAPTION>
Balance Balance
Collateral Type 1993 1992
(In Thousands)
<S> <C> <C>
Unsecured:
Credit card and installment loans $ 6,692 $ 7,378
Secured:
Revolving loans secured by 1-4 dwelling units 2,499 2,601
Loans on deposits 238 278
Home improvement loans 5,452 5,884
Education loans 6,864 6,045
Auto and other loans 5,728 9,818
Total consumer loans $27,473 $32,004
</TABLE>
JSB also originates and services commercial business
loans secured by business assets, personal guarantees and liens
on secondary collateral other than the real estate occupied by
the business. These loan types amounted to $5.5 million or 1.5%
and 3.5% of JSB's total assets and total loan portfolio,
respectively, at December 31, 1993. Substantially all of JSB's
commercial loan and indirect financing lease portfolio is secured
by assets located in and around JSB's general market area.
JSB also has exposure to credit risk resulting from
relatively large loans made to single borrowers or affiliated
groups of borrowers. At December 31, 1993, JSB had 32 commercial
business, commercial real estate and multi-family residential
loans with outstanding principal balances in excess of $500,000.
The total outstanding balance for these loans was $33.3 million.
At December 31, 1993, total loans with outstanding balances in
excess of $500,000 included 30 loans totaling $32.4 million (net
of general valuation reserves of $474,000), that were performing
as originally agreed, and two loans totaling $900,000 (net of
general valuation reserves of $58,000) that were categorized as
non-accrual and/or troubled debt restructurings.
Impact of Inflation and Changing Prices
The consolidated financial statements and related data
presented herein have been prepared in accordance with GAAP,
which requires the measurement of financial position and
operating results in terms of historical dollars without
considering changes in the relative purchasing power of money
over time due to inflation.
Unlike many industrial companies, substantially all of
the assets and liabilities of JSB are monetary in nature. As a
result, interest rates have a more significant impact on JSB's
performance than the general level of inflation. Over short
periods of time, interest rates may not move in the same
direction or in the same magnitude as inflation.
BUSINESS OF JSB
General
JSB is a Pennsylvania-chartered, Bank Insurance Fund
(the "BIF") -- insured stock savings bank conducting business
from six offices in Johnstown, Pennsylvania. Originally
organized under Pennsylvania law in 1870, JSB operated under a
federal charter from February 1985 until March 1993. JSB
obtained federal insurance of accounts in 1934. In October 1986,
JSB converted from a mutual savings bank to a stock savings bank.
In addition, JSB operates SMC, a wholly-owned, second-tier
subsidiary headquartered in Atlanta, Georgia. SMC conducts
mortgage banking activities in the southeastern United States.
For additional information relating to JSB's subsidiaries, see
"Subsidiaries" below.
At December 31, 1993, JSB had $355.8 million of total
assets and $27.6 million of shareholders' equity and, based on
total assets, is the largest savings institution and the third
largest financial institution headquartered in the Johnstown
metropolitan area.
JSB historically has been primarily engaged in
attracting deposits from the general public through its branch
offices and using such deposits primarily to originate loans
secured by first liens on single-family (one-to-four units) and
multi-family (over four units) residential, commercial real
estate, commercial business and consumer loans. JSB has also
invested, directly and indirectly, in securities issued by the
United States Government and agencies thereof, securities issued
by government-sponsored enterprises, municipal and corporate debt
securities, corporate equity securities, and has provided trust
services to its customers. For additional information relating
to JSB's investments, see "Investment Activities" below.
JSB is subject to examination and comprehensive
regulation by the Department, which is JSB's chartering authority
and the FDIC, the administrator of the BIF. JSB is a member of
the FHLB, which is one of the 12 regional banks comprising the
Federal Home Loan Bank System (the "FHLB System").
JSB's principal executive offices are located at
Savings Bank Plaza, Market at Main Streets, Johnstown,
Pennsylvania 15901 and its telephone number is (814) 535-8900.
The Savings Industry
The operating results of JSB are significantly
influenced by its net interest income, which equals the
difference between income on interest-earning assets (primarily
loans and investments) and expense on interest-bearing
liabilities (primarily deposits and borrowings). The interest
income and expense of savings institutions, including JSB, are
significantly affected by the volatility and level of general
market rates of interest and by the regulatory, economic and
competitive environment in which the savings industry operates.
JSB has implemented asset and liability management strategies
which are designed to reduce JSB's vulnerability to changes in
interest rates. See "JSB MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS -- Asset and
Liability Management."
Although interest rates generally have declined from
the levels reached in the early 1980's, there can be no assurance
that interest rates will not increase from their current levels
and adversely affect JSB's results of operations. Moreover, JSB
will continue to be affected by these and other market and
economic conditions, such as inflation and factors affecting the
markets for debt and equity securities, as well as legislative,
regulatory, accounting and tax changes which are beyond its
control.
The operations of JSB are also affected by legislative
changes such as the Financial Institutions Reform, Recovery and
Enforcement Act of 1989 ("FIRREA") and the FDICIA, which were
enacted into law to reform and reorganize the federal deposit
insurance system and the regulatory structure applicable to
savings institutions such as JSB. These Acts and additional
regulatory pronouncements enacted within the scope of regulatory
agency authority have had the effect of increasing the amount of
premiums to be paid for deposit insurance by banks and savings
institutions, increasing the amount of capital required to be
maintained by savings institutions for regulatory purposes and
imposing various investment and other restrictions on the
operations of financial institutions. Following the enactment of
FIRREA, the deposits in certain savings institutions, such as
JSB, are insured by the BIF, as administered by the FDIC, up to
legally permissible limits.
Operations
Lending Activities
Loan Portfolio Composition. At December 31, 1993,
JSB's total loan portfolio, excluding mortgaged-backed
securities, amounted to $159.0 million ("total loan portfolio"),
representing approximately 44.7% of its $355.8 million of total
assets at that date.
Contractual Maturities of Loans. The following table
sets forth the contractual maturities of JSB's loan portfolio as
of December 31, 1993, by categories of loans.
<TABLE>
<CAPTION>
Principal Repayments and Rate Adjustments
Contractually Due in Year(s) Ended December 31,
(In Thousands)
Total
Outstanding
at
December 31, One Year One Year to Three to Five to Greater than
1993 or Less Three Years Five Years Ten Years Ten Years
<S> <C> <C> <C> <C> <C> <C>
Real Estate Loans:
Residential (one
to four units) $ 47,387 $26,939 $11,758 $ 5,742 $ 2,348 $ 600
Commercial/multi-
family (over four
units) 42,794 11,471 13,272 9,801 8,220 30
Construction Loans 3,099 3,099 -- -- -- --
Residential mortgage
loans available for
sale (at cost which
approximates market) 32,759 19,367 4,242 3,022 4,221 1,907
Consumer Loans 27,473 17,218 5,973 2,941 1,341 0
Commercial business
loans and leases 5,500 5,086 53 34 164 163
Total(1) $159,012 $83,180 $35,298 $21,540 $16,294 $ 2,700
__________________
<FN>
(1) Of the $75.8 million of loans contractually due after
December 31, 1994, $34.5 million have fixed-rates of
interest and $41.3 million have adjustable or floating rates
of interest.
</TABLE>
Contractual maturities of loans do not necessarily
reflect the actual term of JSB's loan portfolio. The average
life of loans is less than their contractual maturity because of
scheduled principal payments and prepayments. The average life
of loans tends to further decrease during periods where rates on
existing loans substantially exceed current loan rates due to
increased prepayment activity.
Origination, Purchase and Sale of Loans. JSB has
historically had general authority to originate and purchase
loans secured by real estate located throughout the United
States. As discussed herein under "Commercial Real Estate and
Multi-Family Residential Lending," JSB had, prior to mid-1987,
utilized this nationwide lending authority as a means to employ
the funds available to it and to increase the interest-rate
sensitivity of its assets.
In 1989, JSB entered into a Supervisory Agreement/
Memorandum of Understanding ("Supervisory Agreement") with the
OTS, JSB's then primary federal regulator, and the FDIC, which
significantly restricted the lending authority of JSB with regard
to loans secured by commercial or multi-family residential real
estate. The Supervisory Agreement, which expired in April 1992,
primarily prohibited JSB from originating or purchasing any
commercial or multi-family residential real estate loans. A
November 1990 amendment to the Supervisory Agreement allowed for
the refinancing of existing commercial real estate and multi-
family residential loans under limited circumstances. A
successor Supervisory Agreement between JSB and the OTS, to which
the FDIC was not a party, was entered into in July 1992. This
Agreement limited JSB's lending authority for commercial and
multi-family residential real estate to loans secured by
collateral within 100 miles of JSB's Johnstown offices. This
Supervisory Agreement was terminated when JSB converted to a
Pennsylvania charter in March 1993.
JSB originates loans secured by residential properties
located in its market area, as well as commercial business and
consumer loans, through salaried officers who evaluate
applications received at any of JSB's offices. Such applications
are primarily attributable to referrals from real estate brokers
and builders, depositors and walk-in customers. In addition, JSB
historically originated loans secured by commercial and multi-
family residential real estate located outside of its market
area, particularly Texas, Colorado and Georgia. During the
fourth quarter of 1986, JSB adopted the policy of phasing-out the
origination of commercial and multi-family residential real
estate loans in Texas and Colorado as a result of the unfavorable
market conditions in those locations and, during 1987, de-
emphasized this type of lending generally. See "Commercial Real
Estate and Multi-Family Residential Lending" below.
Primarily due to economic conditions in Johnstown, JSB
historically has had substantially more funds available for
lending than lending opportunities in the Johnstown area. As a
result, and in order to increase the interest-rate sensitivity
and shorten the maturity of its loan portfolio, JSB had, prior to
May 1987, emphasized small to medium-sized (generally $1 million
or less) loans secured by existing commercial properties and
multi-family residential properties located in selected markets
nationwide. Such loans had been originated by JSB outside of its
market area since the early 1960's. JSB has also originated
single-family residential real estate loans in selected markets
outside of the Johnstown area, primarily Atlanta, Georgia.
At December 31, 1993, JSB's out-of-state loan portfolio
amounted to $29.7 million, of which $25.2 million and
$4.5 million is comprised of commercial real estate and multi-
family residential mortgage loans and single-family residential
mortgage loans, respectively, including, in the aggregate,
$11.5 million in Texas ($9.9 million performing and $1.6 million
non-performing or troubled debt restructuring), $4.3 million in
Colorado (all loans currently performing) and $8.2 million in
Georgia ($7.8 million performing and $427,000 non-performing or
troubled debt restructuring). Real estate loans secured by
properties located outside of JSB's market area were primarily
referred to JSB by mortgage banking firms with which JSB has had
long-standing relationships. A significant percentage of such
loans are serviced by the originating mortgage banking firm for a
fee. Such loans generally were originated by JSB and are not
participations in loans originated by other lenders.
On December 3, 1987, JSB acquired the residential loan
origination rights, certain loan servicing rights and related
assets from the mortgage banking firm of Standard Mortgage
Corporation of Georgia. JSB has retained the name "Standard
Mortgage Corporation of Georgia." SMC is a mortgage banking
company located in Atlanta, Georgia, originating single-family
residential real estate loans and servicing loans for other
financial institutions. Substantially all of the single-family
residential real estate loans secured by properties located
outside JSB's market area were either purchased from or
originated through SMC and are located in the Atlanta
metropolitan area. For a further discussion of SMC, see "JSB
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - Subsidiary Operations."
A predominant portion of JSB's commercial and multi-
family residential real estate loans were originated with
adjustable interest rates with maturities of nine years or less
with interest rates which are scheduled to adjust at least every
one, three or five years in accordance with an index based on
United States Government securities. Such loans have balloon
payments at the end of the original term and are amortized on a
25-or 30-year schedule. Commercial real estate loans and multi-
family residential real estate loans are generally considered to
involve a higher degree of risk of loss than single-family
residential loans. JSB has taken steps to minimize the risks
associated with commercial and multi-family residential loans.
These steps include the cessation of all new loan activity for
such loans outside of JSB's primary market area in western
Pennsylvania, and improved monitoring of existing loans,
borrowers and collateral properties. See "Real Estate Owned,
Non-Accrual Loans and Troubled Debt Restructurings" below.
Since 1989, JSB has emphasized the sale of newly-
originated fixed-rate residential mortgage loans in the secondary
market due to management's desire to increase JSB's mortgage
servicing income and other loan service fees while reducing JSB's
exposure to credit and interest rate risk. This strategy has
been accomplished, primarily through the increase in the
operations of SMC. During 1993, 1992 and 1991, SMC originated
$179.9 million, $176.0 million and $129.7 million, respectively,
of residential mortgage loans which were available-for-sale in
the secondary market. In 1993, JSB also increased its
origination of residential real estate loans available-for-sale
in western Pennsylvania. At December 31, 1993, JSB had
$32.8 million of residential mortgage loans available-for-sale,
of which, $16.6 million was the result of SMC's operations. For
additional information with respect to SMC's mortgage banking
activities, see "JSB MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS -- Mortgage Banking
Activities" and Notes 13 and 16 to the "JSB CONSOLIDATED
FINANCIAL STATEMENTS."
JSB management believes that JSB's written internal
policies, and the procedures developed to ensure compliance with
those policies, governing the use of real estate appraisals and
the determination of collateral adequacy for real estate loans,
are in accordance with applicable FDIC and Department
regulations.
The following table shows total loans originated,
purchased, sold and repaid during the periods indicated.
<TABLE>
<CAPTION>
Year Ended December 31,
1993 1992 1991
(In Thousands)
<S> <C> <C> <C>
Mortgage loan origination:
Single-family residential $ 13,517 $ 8,026 $ 13,649
Multi-family residential 2,750 650 -
Commercial 8,413 160 1,373
Real estate construction 3,391 272 820
Residential mortgage loans
available-for-sale 233,841 207,181 141,112
Total mortgage origination 261,912 216,289 156,954
Non-mortgage loan origination:
Commercial business 1,871 859 615
Consumer 15,466 19,760 19,374
Indirect financing leases - - 92
Total loan origination 279,249 236,908 177,035
Purchases of loans and participations 6,521 - -
Total origination and purchases 285,770 236,908 177,035
Less:
Principal repayments 53,474 45,385 39,407
Sale of loans 226,519 195,924 144,300
Other, net(1) 2,864 6,196 5,535
Net increase (decrease) in loans $ 2,913 $(10,597) $(12,207)
_________________
<FN>
(1) Consists primarily of loans which became real estate owned,
net loan charge-offs, loans to facilitate the sale of other
real estate owned and unamortized discounts on mortgages
purchased.
</TABLE>
Single-Family Residential Real Estate Lending. JSB
offers single-family residential mortgage loans with fixed and
adjustable rates of interest. At December 31, 1993,
$47.4 million or 29.8% of JSB's total loan portfolio consisted of
single-family residential loans categorized as held-to-maturity.
Since 1985, JSB has been emphasizing the origination of
adjustable-rate, single-family residential loans. These loans
generally have 15- to 30-year terms with interest rates that
adjust every one, three or five years in accordance with an index
which is based on United States Government securities. At
December 31, 1993, 1992 and 1991, adjustable-rate, single-family
residential loans, all of which were categorized as held-to-
maturity, represented $35.5 million or 22.3%, $24.6 million or
15.8% and $37.0 million or 22.2%, respectively, of JSB's total
loan portfolio.
JSB also originates, on a limited basis, fixed-rate,
single-family residential loans with 15-and 30-year terms.
Virtually all of JSB's fixed-rate, single-family residential
loans are originated under terms and conditions which permit
their sale in the secondary market and JSB retains servicing on
all such loans which are sold in the secondary market. At
December 31, 1993, 1992 and 1991 fixed-rate, single-family
residential loans, excluding such loans categorized as available-
for-sale, represented $11.9 million or 7.5%, $26.1 million or
16.7% and $18.3 million or 11.0%, respectively, of JSB's total
loan portfolio at such dates.
Commercial Real Estate and Multi-Family Residential
Lending. As previously discussed, JSB's authority to originate
or purchase commercial real estate and multi-family residential
loans was substantially limited under the terms of the
Supervisory Agreement from April 1989 through March 1993. JSB
renewed limited origination activities in loans of this type
during 1993.
The commercial real estate and multi-family residential
loans originated by JSB were generally originated with maturities
of nine years or less with interest rates which are scheduled to
adjust at least every one, three or five years in accordance with
an index based on United States Government securities. Such
loans have balloon payments at the end of the original term and
are amortized on a 25- or 30-year schedule. Generally, there is
no limit on the amount which the interest rate may adjust over
the life of the loan. Commercial real estate and multi-family
residential lending entails significant additional risks as
compared with single-family residential property lending.
Commercial real estate and multi-family residential loans
typically involve large loan balances to single borrowers or
groups of related borrowers and the payment experience on such
loans is typically dependent on the successful operation of the
real estate project. The success of such projects is sensitive
to changes in supply and demand conditions in the market for
commercial and multi-family residential real estate as well as
economic conditions generally. See "Real Estate Owned, Non-
Accrual Loans and Troubled Debt Restructurings" below.
Residential Mortgage Loans Available-for-sale. At
December 31, 1993 and 1992, JSB had $32.8 million and
$20.7 million, respectively, of residential mortgage loans
available-for-sale as compared to $9.6 million at December 31,
1991. For additional information relating to JSB's portfolio of
residential mortgage loans available-for-sale, see "JSB
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS -- Mortgage Banking Activities" and
Notes 13 and 16 to the "JSB CONSOLIDATED FINANCIAL STATEMENTS."
Consumer Lending. JSB has been originating various
types of consumer loans since 1981 in order to expand the range
of financial services offered to its customers. JSB currently
offers a wide variety of consumer loans, including home
improvement and home equity loans; loans that are secured by
personal property, including automobiles; credit cards;
educational and personal loans. At December 31, 1993 and 1992,
$27.5 million or 17.3% and $32.0 million or 20.5%, respectively,
of JSB's total loan portfolio consisted of consumer loans. This
represents a decrease from $32.8 million, the level of consumer
loans at December 31, 1991. The decrease in consumer loans at
December 31, 1993 in comparison with the previous year was
primarily attributable to a $4.1 million decrease in automobile
loans. Consumer loans generally have shorter terms and higher
interest rates which help JSB to maintain a positive spread
between its average yield on loans and its cost of funds. The
increase in consumer lending reflects JSB's desire to shorten the
term and increase the yield of its loan portfolio. JSB intends
to continue to emphasize the origination of consumer loans within
its market area. Consumer loans generally have shorter terms and
higher interest rates than mortgage loans because of the type of
collateral and, in certain cases, the absence of collateral.
Consumer loans may be made on both a secured and
unsecured basis. At December 31, 1993, JSB estimates that
approximately 24.4% of its consumer loan portfolio was unsecured.
Unsecured loans consist in part of credit extended pursuant to
Visa Gold and Master Card credit cards. At December 31, 1993,
JSB had extended an aggregate of $5.7 million of credit pursuant
to such cards.
Commercial Business Lending. In 1982, JSB established
a commercial lending department which primarily provides loans to
medium- and small-sized businesses located in JSB's market area.
At December 31, 1993, $5.5 million or 3.5% of JSB's total loan
portfolio consisted of commercial business loans of which
$795,000 consisted of commercial lines of credit outstanding at
year end. In addition, at such date, JSB also had outstanding
$479,000 of unfunded commitments for commercial lines of credit.
JSB's commercial business loans encompass a broad
variety of purposes, including general working capital loans and
loans to finance inventory and equipment. Substantially all of
JSB's commercial business loans have maturities of five years or
less and interest rates which float in accordance with a
designated prime lending rate. Commercial business loans may be
made on both a secured and unsecured basis. At December 31,
1993, JSB estimates that approximately 14.5% of its commercial
business loan portfolio was unsecured. JSB estimates that the
average size of the commercial business loans in its portfolio at
December 31, 1993 amounted to approximately $50,000. This type
of lending generally has higher yields and increased credit risk
associated with it.
Loan Fee and Servicing Income. In addition to interest
earned on loans, JSB receives income through servicing of loans
and fees in connection with loan origination and commitments,
loan modifications, late payments, and fees for miscellaneous
services related to its loans. Income from these activities
varies from period to period with the volume and type of loans
originated and purchased. For additional information regarding
loan fees and servicing income, see "JSB MANAGEMENT'S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS -
Other Operating Income."
Real Estate Owned, Non-Accrual Loans and Troubled Debt
Restructurings. When a borrower fails to make a required payment
on a loan, JSB attempts to cause the default to be cured by
contacting the borrower. In general, contacts are made after a
payment is more than 15 days past due and a late charge is
assessed at that time. In most cases, defaults are cured
promptly. If the delinquency on a mortgage loan exceeds 90 days
and is not cured through JSB's normal collection procedures or an
acceptable arrangement is not worked out with the borrower, JSB
will institute measures to remedy the default, including
commencing a foreclosure action or, in special circumstances,
accepting from the mortgagor a voluntary deed of the secured
property in lieu of foreclosure.
If foreclosure is effected, the property is sold at a
public auction or by agreement with an individual purchaser.
Real estate acquired by JSB as a result of foreclosure or by
deed-in-lieu of foreclosure is classified as real estate acquired
by foreclosure until it is sold. When property is acquired, it
is recorded at the lower of carrying or market value at the date
of acquisition and any writedown resulting therefrom is charged
to the allowance for loan losses. All income and expenses
pertaining to the property from that date forward are credited or
charged to income in the period incurred. Costs incurred for the
improvement or development of such property are expensed. See
Note 4 to the "JSB CONSOLIDATED FINANCIAL STATEMENTS."
Loans are placed on non-accrual status when, in the
judgment of JSB management, the probability of collection of
interest is deemed to be insufficient to warrant further accrual.
When a loan is placed on non-accrual status, previously accrued
but unpaid interest is deducted from interest income. JSB does
not accrue interest on loans that are 90 days or more past due.
See Notes 3 and 4 to the "JSB CONSOLIDATED FINANCIAL STATEMENTS."
Funds received from a borrower on a non-accrual loan, with
certain limited exceptions, are applied toward the reduction of
the outstanding principal balance of the loan.
In order to avoid foreclosing on certain of JSB's loans
which have been identified by JSB management as potential real
estate owned, JSB may instead restructure the loan. A
restructuring of a debt constitutes a troubled debt restructuring
for purposes of Statement of Financial Accounting Standards
No. 15, "Accounting by Debtors and Creditors for Troubled Debt
Restructuring" if JSB, for economic or legal reasons related to a
debtor's financial condition, grants a concession to the debtor
that JSB would not otherwise consider. Such concessions
typically involve a reduction in the interest rate, interest-only
payments or an extension of the term of the loan.
The following table sets forth information regarding
non-accrual loans, loans which are troubled debt restructurings
and real estate acquired by foreclosure or deed-in-lieu thereof
held by JSB at the dates indicated. All of JSB's troubled debt
restructurings are commercial real estate loans.
<TABLE>
<CAPTION>
December 31,
1993 1992 1991 1990 1989
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C>
Non-accrual loans:
Residential real estate loans $ 428 $ 445 $ 884 $ 651 $ 362
Commercial real estate loans 0 2,128 4,716 4,941 4,677
Consumer loans 160 219 106 147 114
Commercial business loans 0 302 163 1,016 288
Total 588 3,094 5,869 6,755 5,441
Troubled debt restructurings 2,315 3,080 3,389 3,545 7,371
Total $ 2,903 $ 6,174 $ 9,258 $10,300 $12,812
Total non-accrual loans and
troubled debt restructurings
to total loans 1.83% 3.96% 5.55% 5.77% 6.77%
Total real estate acquired by
foreclosure, net of related
reserves $ 1,490 $ 4,569 $ 6,177 $ 6,313 $ 5,259
Total non-accrual loans,
troubled debt restructurings
and real estate acquired by
foreclosure, net of related
reserves, to total assets 1.23% 3.35% 5.35% 5.96% 6.05%
</TABLE>
Interest income on loans in 1993 and 1992 was adversely
affected by the amount of JSB's non-accrual loans and troubled
debt restructurings. During 1993 and 1992, JSB estimates that it
would have recorded $343,000 and $522,000, respectively, of
additional interest on loans if loans did not have to be
restructured and non-accrual loans had been current in accordance
with their terms. See Note 4 to the "JSB CONSOLIDATED FINANCIAL
STATEMENTS."
JSB has developed a policy for the establishment of
general reserve allocations against specific loans, loans which
are not classified, and the circumstances in which a charge-off
of assets is warranted. Specifically, JSB has determined that it
will generally establish a minimum general reserve allocation
against the outstanding balance of a classified loan depending
upon factors such as technical deficiencies in documentation, the
borrower's inability to continually meet his debt service
obligations or delinquency. Additional general reserve
allocations may also be made as deemed necessary. General
reserves for loans which are not classified are based upon JSB
management's review of historical experience, the volume and
composition of the loan portfolio, industry standards, economic
conditions as they relate to market areas where JSB has a
significant concentration of loans, and other factors related to
the collectibility of JSB's loan portfolio. Specific loans or
portions thereof are charged-off as a loss to the extent that the
value of the asset securing the loan, established by an appraisal
or various net realizable value techniques, is less than the
outstanding principal balance of the loan. If a portion of a
loan is charged-off as a loss, JSB will also establish a general
reserve allocation for the remaining balance after the
charge-off, to the extent general reserve allocations have not
been previously established in such amount. For a description of
regulations concerning the classification of assets, see
"Regulation -- Classification of Assets" below.
The following table sets forth the amount of loans, the
amount charged-off as loss and the amount of reserves maintained
against such loans at December 31, 1993, with respect to JSB's
loans which are performing pursuant to their original terms by
type of loan (excluding leases, construction loans and
residential mortgage loans available-for-sale) within the states
of Pennsylvania, Texas, Colorado, Georgia and all other states
combined.
<TABLE>
<CAPTION>
Pennsylvania Texas Colorado
Loans Loss Reserve Loans Loss Reserve Loans Loss Reserve
(In Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1-4 family $ 42,469 $ 1 $ 89 $ 380 $ 0 $ 0 $ 221 $ 0 $ 0
Commercial
real estate
and multi-family 17,578 275 1,536 9,576 877 320 4,079 23 117
Commercial
business loans 5,494 62 31 0 0 0 0 0 0
Consumer loans 26,167 193 439 26 0 0 5 0 0
Total $91,708 $531 $2,095 $9,982 $877 $320 $4,305 $23 $117
</TABLE>
<TABLE>
<CAPTION>
Georgia Other
Loans Loss Reserve Loans Loss Reserve
(In Thousands)
<S> <C> <C> <C> <C> <C> <C>
1-4 family $2,615 $ 0 $ 0 $1,274 $ 0 $ 0
Commercial
real estate
and multi-family 5,206 569 145 4,040 450 135
Commercial
business loans 0 0 0 0 0 0
Consumer loans 106 0 0 1,009 0 0
Total $7,927 $569 $145 $6,323 $450 $135
</TABLE>
The following table sets forth the amount of loans, the
amount charged-off as loss and the amount of reserves maintained
against such loans at December 31, 1993, with respect to JSB's
non-accrual loans and troubled debt restructurings by type of
loan (excluding leases, construction loans and residential
mortgage loans available-for-sale) within the states of
Pennsylvania, Texas, Colorado, Georgia and all other states
combined.
<TABLE>
<CAPTION>
Pennsylvania Texas Colorado
Loans Loss Reserve Loans Loss Reserve Loans Loss Reserve
(In Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1-4 family $427 $0 $66 $ 0 $0 $ 0 $0 $0 $0
Commercial
real estate
and multi-family 0 0 0 1,600 0 109 0 0 0
Commercial
business loans 0 0 0 0 0 0 0 0 0
Consumer loans 158 0 0 0 0 0 0 0 0
Total $585 $0 $66 $1,600 $0 $109 $0 $0 $0
</TABLE>
<TABLE>
<CAPTION>
Georgia Other
Loans Loss Reserve Loans Loss Reserve
(In Thousands)
<S> <C> <C> <C> <C> <C> <C>
1-4 family $ 1 $0 $ 0 $ 0 $0 $ 0
Commercial
real estate
and multi-family 426 0 32 289 0 22
Commercial
business loans 0 0 0 0 0 0
Consumer loans 0 0 0 2 0 0
Total $427 $0 $32 $291 $0 $22
</TABLE>
The $2.3 million troubled debt restructuring commercial
real estate loans at December 31, 1993, consisted of six loans,
of which four loans in an aggregate amount of $1.6 million are
located in Texas, one loan in the amount of $289,000 is located
in Tennessee, and one loan in the amount of $426,000 is located
in Georgia. At December 31, 1993, total loans with outstanding
balances in excess of $500,000 included 32 loans totalling
$32.4 million (net of allocated general valuation allowances of
$474,000) that were performing as originally agreed, and two
loans totalling $923,000 (net of allocated general valuation
allowances of $58,000) that were categorized as non-accrual
and/or troubled debt restructurings.
Allowance for Loan Losses. The amount of the
provision for loan losses is determined by JSB management after
considering potential losses in the loan portfolio as represented
by delinquencies and the risks inherent in the loan portfolio.
In 1993, JSB charged-off as loss loans in an aggregate amount of
$2.5 million and provided $1.1 million to its loan loss reserves.
At December 31, 1993, JSB's allowance for loan losses totalled
$3.1 million. Due to the risks inherent in lending activities,
further charge-offs and reserves may be necessary in the future.
For additional information, see "JSB MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS --
Provision for Loan Losses" and Notes 3 and 4 to the "JSB
CONSOLIDATED FINANCIAL STATEMENTS."
JSB management believes that JSB had adequate loan loss
reserves at December 31, 1993. However, it continues to monitor
JSB's loan portfolio and will make loan loss reserve adjustments
as necessary. In addition, loan classifications and loss
reserves, as determined by management, are subject to periodic
examination by the Department and the FDIC. JSB management
cannot predict with certainty whether future regulatory
examinations will require any changes in JSB's loan
classifications or loan loss reserves.
The following table summarizes activities in JSB's
allowance for loan losses during the periods indicated.
<TABLE>
<CAPTION>
Year Ended December 31,
1993 1992 1991 1990 1989
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C>
Balance at beginning
of period $ 4,056 $ 2,987 $ 3,889 $ 4,546 $ 4,214
Charge-offs:
Residential real estate
loans 1 0 10 12 0
Commercial real estate
loans 2,194 1,709 1,791 1,051 1,851
Consumer loans 193 111 169 128 82
Commercial business loans 62 8 383 21 26
Total loans charged-off 2,450 1,828 2,353 1,212 1,959
Less: Recoveries 375 392 584 261 50
Net charge-offs 2,075 1,436 1,769 951 1,909
Provision for losses
charged to operations:
Residential real estate
loans 9 40 30 30 143
Commercial real estate
loans 950 2,430 811 238 1,788
Consumer loans 117 20 15 15 135
Commercial business
loans 26 15 11 11 175
Total provision for
losses charged to
operations 1,102 2,505 867 294 2,241
Balance at end of period $ 3,083 $ 4,056 $ 2,987 $ 3,889 $ 4,546
Average loans outstanding $126,975 $144,972 $163,350 $179,434 $190,900
Ratio of net charge-offs
during the period to
average loans outstanding
during the period 1.63% 0.99% 1.08% 0.53% 1.00%
Period-end loans $155,444 $151,786 $163,288 $174,574 $184,487
Ratio of balance at end
of period to period-
end loans 1.98% 2.67% 1.83% 2.23% 2.46%
</TABLE>
Impairment of Loans
In May 1993, the FASB issued Statement of Financial
Accounting Standards No. 114 ("SFAS-114"), "Accounting by
Creditors for Impairment of a Loan," that addresses accounting
procedures for impaired loans by creditors. SFAS-114 is
applicable to all creditors (such as financial institutions) and
to collateralized as well as uncollateralized loans, including
loans that are troubled debt restructuring with a modification of
terms. It does not apply to the following: (1) Large groups of
smaller-balance homogeneous loans that are collectively evaluated
for aggregate impairment, (2) Loans that are carried at the lower
of fair value or cost, (3) Leases, and (4) Debt securities as
defined by SFAS-115, "Accounting for Certain Investments in Debt
and Equity Securities."
Under SFAS-114, such loans are to be measured (1) at
the present value of expected future cash flows discounted at the
loan's effective interest rate, (2) at the loan's observable
market price, or (3) at the fair value of the collateral if the
loan is collateral dependent. A loan will be considered
collateral dependent when the creditor determines that
foreclosure is probable and the loan is expected to be repaid
solely by the underlying collateral. SFAS-114 amends currently
promulgated GAAP to indicate that creditors should evaluate the
collectibility of both contractual interest and contractual
principal of all receivables when assessing the need for a loss
accrual.
The provisions of SFAS-114 are applicable to financial
statements for fiscal years beginning after December 15, 1994
with earlier application encouraged.
Since SFAS-114 contains complex language, the effects
on JSB's future operating results can not be fully determined at
this time, however, management does not believe that the
application of SFAS-114 will have a material effect on reported
earnings at the time of adoption.
Investment Activities
Investments in MBS and other securities, are made to
enhance JSB's overall net interest margin, to provide a
countercyclical balance to other JSB earnings and to provide and
maintain liquidity within the guidelines of applicable
regulations. JSB's investment policy is designed to maintain a
balance of high-quality, diversified investments to minimize
risks. At December 31, 1993, JSB held securities with an
amortized historical cost of $169.6 million and a market value of
$169.6 million, of which $147.7 million was invested in MBS and
the substantial majority of the remaining $21.9 million was
invested in a highly diversified investment-grade portfolio of
investment securities of which $13.4 million consisted of
municipal securities, $7.0 million consisted of government agency
bonds and $1.5 million consisted of corporate securities. See
Note 2 to the "JSB CONSOLIDATED FINANCIAL STATEMENTS."
In December 1993, JSB adopted SFAS-115, "Accounting for
Certain Investments in Debt and Equity Securities," which
specifies a methodology for the classification of securities as
either held-to maturity, available-for-sale or as trading assets.
Securities are classified at the time of purchase as investment
securities if it is management's intent and JSB has the ability
to hold the securities until maturity. These securities are
carried on JSB's books at cost, adjusted for amortization of
premium and accretion of discount on a level-yield basis.
Alternatively, securities are classified as available-for-sale if
it is management's intent at the time of purchase to hold the
securities for an indefinite period of time and/or to use the
securities as part of JSB's asset/liability management strategy.
Securities available-for-sale include securities which may be
sold in response to changes in interest rates, resultant changes
in prepayment risk and other factors related to interest rate or
prepayment risk. These securities are reported at fair value
with unrealized aggregate appreciation (depreciation) excluded
from income and credited (charged) to a separate component of
shareholders' equity.
Securities classified as trading assets are reported at
fair value with unrealized aggregate appreciation (depreciation)
included in current income.
JSB had $28.5 million of securities classified as held-
to-maturity, $137.6 million classified as available-for-sale, and
$3.5 million classified as trading assets. At December 31,
1993, the portfolio of securities designated as available-for-
sale had an aggregate market value which exceeded book value by
$184,000. After allowing for the potential temporary difference
tax effects of the recognition of the unrealized aggregate
appreciation in this portfolio, as required by SFAS-115,
shareholders' equity was increased $122,000 or 0.4% at
December 31, 1993.
During 1993, JSB recorded a pre-tax net gain of
approximately $811,000 from the sale of approximately
$14.3 million of fixed-income securities and $37.4 million of
MBS. Securities sales gains are dependent upon numerous economic
and market factors. Accordingly, there can be no assurance that
gains of this magnitude can be realized in future periods.
<PAGE>
The following table sets forth JSB's short-term
investments, investment securities portfolio and FHLB stock at
their respective carrying values at the dates indicated.
<TABLE>
<CAPTION>
December 31,
1993 1992 1991
(In Thousands)
<S> <C> <C> <C>
Short-term investments:
Interest-earning deposits in other
banks $ 5,349 $ 7,629 $ 3,452
Investment securities:
Available for sale:
United States Government and
agency obligations 6,880 1,985 0
Obligations of state and political
subdivisions 13,433 0 0
Corporate bonds 1,444 2,992 0
Total available for sale 21,757 4,977 0
Held to maturity:
United States Government and agency
obligations 0 4,500 0
Corporate bonds 22 891 12,313
Other bonds and investments 30 30 183
Marketable equity securities 99 100 121
Total held to maturity 151 5,521 12,617
Total investment securities 21,908 10,498 12,617
FHLB stock 5,056 2,775 1,778
Total investments $32,313 $20,902 $17,847
</TABLE>
<PAGE>
The following table sets forth the amortized cost,
estimated market value, weighted average life and weighted
average yield of JSB's investment securities portfolio at
December 31, 1993.
<TABLE>
<CAPTION>
Weighted
Estimated Average Weighted
Amortized Market Life Average
Cost Value (In Years) Yield
(Dollars in Thousands)
<S> <C> <C> <C> <C>
Available for sale:
Corporate bonds $ 1,415 $ 1,444 3.4 7.77%
U. S. Government and Agency
bonds 7,000 6,880 9.8 6.09
Obligations of state and
political subdivisions 13,364 13,433 11.7 7.32
21,779 21,757 6.95
Held to maturity:
Corporate bonds 22 22 20.9 11.63
Other bonds and
investments 30 30 5.2 7.17
Marketable equity
securities 99 99 N/A 0.00
151 151 3.12
Total investment securities $21,930 $21,908 6.92%
</TABLE>
Sources of Funds
General. Deposits obtained through branch offices have
traditionally been the principal source of JSB's funds for use in
lending and for other general business purposes. In addition,
JSB derives funds from the amortization and prepayment of
outstanding investments and loans and through the sale of loans
and investments available-for-sale. JSB also is eligible to
borrow from the FHLB of Pittsburgh and other sources.
Deposits. JSB's current deposit products include
passbook savings accounts, negotiable order of withdrawal ("NOW")
accounts, money market deposit accounts, business checking
accounts, and certificates of deposit ranging in terms from three
months to five years. Included among these deposit products are
Individual Retirement Account ("IRA") certificates and Keogh
retirement certificates. JSB does not normally issue negotiable-
rate certificates of deposit because of the adequacy and
stability of its deposit base.
JSB's deposits are obtained primarily from residents of
Cambria County, and JSB management estimates that an
insignificant amount of JSB's deposits are obtained from
customers residing outside of western Pennsylvania. JSB attracts
deposit accounts primarily by offering a wide variety of services
and accounts, competitive interest rates, and convenient office
locations and service hours. JSB's six office locations and
service hours are supplemented by eight automatic teller machines
("ATMs"), most of which remain generally accessible to customers
during times when JSB's branches are closed. JSB participates in
the regional ATM network known as "MAC" and the nationwide ATM
network known as "Cirrus."
The following table sets forth the distribution of
JSB's deposits by type of deposit as of the dates indicated.
<TABLE>
<CAPTION>
December 31,
1993 1992 1991
% of % of % of
Amount Deposits Amount Deposits Amount Deposits
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Passbook and club
accounts $ 55,290 25.5% $ 52,472 23.6% $ 49,130 21.9%
NOW and Super NOW
accounts and demand
deposits 20,496 9.5 24,107 10.9 17,213 7.7
Business checking 5,465 2.6 4,763 2.1 2,911 1.3
Money market deposit
accounts 27,227 12.6 20,692 9.3 20,624 9.2
Total 108,478 50.2 102,034 45.9 89,878 40.1
Certificates:
6 month 24,791 11.5 33,074 14.9 34,477 15.5
9 month 8,456 3.9 16,201 7.3 20,986 9.4
12 month 15,567 7.2 14,652 6.6 18,702 8.4
18 month 4,300 1.9 4,699 2.1 5,045 2.3
24 month 1,874 0.9 1,798 0.8 1,892 0.8
30 month 11,886 5.5 12,519 5.6 14,010 6.3
36 month 5,721 2.7 2,873 1.3 2,526 1.1
42 month 1,264 0.6 1,390 0.6 1,742 0.8
48 month 830 0.3 919 0.4 748 0.3
60 month 5,780 2.7 5,055 2.3 4,947 2.2
Other 9,022 4.2 8,426 3.9 9,901 4.4
IRA and Keogh
accounts 18,237 8.4 18,522 8.3 18,732 8.4
Total certificate
accounts 107,728 49.8 120,128 54.1 133,708 59.9
Total deposits $216,206 100.0% $222,162 100.0% $223,586 100.0%
</TABLE>
<PAGE>
It has been the policy of JSB to attempt to control the
flow of deposits by pricing its accounts to remain generally
competitive with other financial institutions in its market area,
but does JSB not necessarily seek to match the highest rates paid
by competing institutions.
The following table sets forth the net deposit flows of
JSB during the periods indicated.
<TABLE>
<CAPTION>
Year Ended December 31,
1993 1992 1991
(In Thousands)
<S> <C> <C> <C>
(Decrease) before interest
credited $(14,067) $(11,621) $( 5,212)
Interest credited 8,111 10,197 13,504
Net deposit increase (decrease) $ (5,956) $ (1,424) $ 8,292
</TABLE>
Although market demand generally dictates which deposit
maturities and rates will be accepted by the public, JSB,
pursuant to its interest rate risk management policy, intends to
continue reducing its emphasis on certificates of deposit, with a
concurrent increased emphasis on demand deposits. The ability of
JSB to attract and maintain deposits and JSB's cost of funds have
been, and will continue to be, significantly affected by economic
conditions.
The following table presents by various interest rate
categories the amount of certificate accounts at the date
indicated and the amount of certificate accounts at such date
which mature during the periods indicated.
<TABLE>
<CAPTION>
Amount at December 31, 1993
Maturing
After After
One Year Two Years
Within Through Through After
December 31, One Two Three Three
1993 Year Years Years Years
(In Thousands)
<S> <C> <C> <C> <C> <C>
Certificate Accounts:
Under 3% $ 7,573 $ 7,422 $ 151 $ 0 $ 0
3.00% to 3.99% 52,108 49,197 2,911 0 0
4.00% to 4.99% 18,727 5,233 6,961 5,789 743
5.00% to 5.99% 7,331 754 1,387 461 4,729
6.00% to 6.99% 5,742 3,857 193 309 1,383
7.00% to 7.99% 5,891 2,599 1,138 1,570 584
8% and over 10,356 4,488 1,676 1,322 2,871
Total Certificate Accounts $107,728 $73,550 $14,417 $ 9,451 $10,310
</TABLE>
<PAGE>
Borrowings. JSB is eligible to obtain advances from
the FHLB of Pittsburgh upon the security of the common stock it
owns in that bank and certain of its residential mortgages and
MBS, provided certain standards related to credit worthiness have
been met. See "Regulation -- Federal Home Loan Bank System"
below. Such advances are made pursuant to several different
credit programs, each of which has its own interest rate and
range of maturities. FHLB advances are generally available to
meet seasonal and other withdrawals of deposit accounts and to
expand lending, as well as to aid the efforts of members to
establish better asset and liability management through the
extension of maturities of liabilities. See Notes 10 and 11 of
the "JSB CONSOLIDATED FINANCIAL STATEMENTS."
Trust Services
In an effort to increase its non-interest related
sources of income, JSB established a Trust Department in October
1982. JSB's Trust Department provides a broad range of trust,
estate and custodial services to businesses and individuals by
assisting in estate and personal planning, acting as trustee of
both living and testamentary trusts and administering trusts for
pension and profit sharing plans, IRA's and Keogh plans. Agency
services include safekeeping of securities, periodic investment
analysis, collection of rents, interest and dividends and
disbursement of net income. On December 1, 1988, the Trust
Department became the Transfer Agent for JSB's outstanding
capital stock. At December 31, 1993, $27.9 million of assets
were under the management of JSB's Trust Department.
Mortgage Banking Activities
The FDIC has issued a ruling that prohibits an insured
institution, or its subsidiaries, from capitalizing the
acquisition costs of mortgage servicing rights derived from
"table funding" arrangements. In a table-funding arrangement, a
financial institution (such as mortgage banking enterprises)
provides the original funding for a mortgage loan "at the table"
when an unaffiliated correspondent (broker) and borrower close
the loan. Concurrent with the loan closing, the financial
institution acquires the loan and the related loan servicing
right from the correspondent.
Under the FDIC ruling, the acquisition costs of
mortgage servicing rights acquired through table-funding
arrangements must be expensed in the period incurred. Mortgage-
servicing rights are an intangible asset that represent the right
to service loans for others and to collect a fee for such
services. Mortgage servicing rights are a principal asset of
SMC. The intent of the FDIC ruling is to limit the growth of
this intangible asset on the balance sheets of insured
institutions. The acquisition costs of purchased mortgage
servicing rights (the price paid to acquire existing rights from
an unaffiliated seller) are not affected by this ruling and,
accordingly, may be capitalized under current FDIC rules.
In compliance with FDIC regulations, SMC has not
capitalized the costs associated with the acquisition of mortgage
servicing rights obtained through table-funding arrangements.
This rule effectively requires SMC to have a program in place to
sell a portion of its originated mortgage servicing rights to
offset the current costs of originating loans and servicing
rights through correspondents. During 1993, SMC sold the
mortgage servicing rights on approximately $69.6 million in newly
originated residential mortgage loans, which represented
approximately 40.0% of its total originations during the year.
Subsidiaries
JSB's first-tier subsidiary is SB Realty, Inc., which
JSB formed in January 1984 under the laws of the Commonwealth of
Pennsylvania and in which JSB had invested $50,000 of equity and
$1.3 million of loans at December 31, 1993. SB Realty, Inc. used
the funds contributed to it by JSB to acquire SMC in December
1987. In addition, JSB formed Standard Mortgage Corporation of
Pennsylvania (SMC-PA) in December 1993 to engage in mortgage
banking activities in western Pennsylvania and surrounding
regions in a manner substantially consistent with the activities
of SMC. SMC and SMC-PA are wholly-owned subsidiaries of SB
Realty. At December 31, 1993, SMC-PA had not begun operations.
JSB's combined investment in and advances to SMC was
$7.5 million at December 31, 1993, which is in compliance with
applicable regulatory limitations.
The cost in excess of fair market value resulting from
the aforementioned purchase and assumption amounted to $416,000.
For further information on SMC, see "JSB MANAGEMENT'S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS -
Mortgage Banking Activities" and Notes 13 and 16 to the "JSB
CONSOLIDATED FINANCIAL STATEMENTS."
Competition
JSB encounters strong competition both in the
attraction of deposits and in the making of real estate and other
loans. Its most direct competition for deposits has historically
come from savings institutions, commercial banks, and credit
unions with offices in Johnstown, Pennsylvania. JSB also
encounters competition for deposits from money market funds, as
well as corporate and government securities. The principal
methods used by JSB to attract deposit accounts include the
variety of services offered, the competitive interest rates
offered, quality of service provided to depositors and the
convenience of office locations, ATM's and expanded banking
hours.
JSB's competition for real estate and other loans comes
principally from savings institutions, credit unions, commercial
banks, mortgage banking companies, insurance companies and other
institutional lenders. JSB competes for loans through interest
rates, loan maturities, loan fees and the quality of service
extended to borrowers and brokers.
Employees
JSB had 150 full-time employees and 20 part-time
employees as of December 31, 1993. None of the employees are
represented by a collective bargaining agent, and JSB believes
that it enjoys good relations with its personnel.
Regulation
General
FDIC Insurance Premiums. During 1993, JSB paid deposit
insurance premiums to the FDIC based on a risk-based assessment
schedule established in 1992 by the FDIC, as required by FDICIA,
for all BIF-member institutions. This risk-based assessment
system, required JSB to pay .26% of its deposit balances during
1993 for deposit insurance premiums.
The FDIC has determined that JSB will pay an annualized
rate of .23% in the first six-month period in 1994. Based on
JSB's average deposits in 1993, the decreased rate of .23% (as
compared with the rate of .26% charged JSB in 1993) will decrease
the premiums paid by JSB in 1994 and in subsequent years
approximately $66,000 per year. Management of JSB cannot predict
with certainty if JSB's assessment will be changed at some future
date according to the existing risk-based schedule as presented
above. Neither can JSB management predict if changes to the FDIC
risk-based insurance premium system will be promulgated in the
future or in what form the changes might take.
Capital Requirements. See "JSB MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS -- Liquidity and Capital Resources."
The FDICIA requires each federal banking agency to
revise its risk-based capital standards for insured institutions
to ensure that those standards take adequate account of interest-
rate risk, concentration of credit risk and the risks of non-
traditional activities. Each federal agency is required to
promulgate final regulations in this regard. Such regulations
could increase the regulatory capital requirements that are
applicable to JSB.
On September 14, 1993, the FDIC published its final
proposal regarding the incorporation of an interest-rate risk
component in its risk-based capital calculation. This proposal
was subject to a 45 day comment period with the final regulations
expected to become effective for the March 31, 1994 quarterly
regulatory report filing period. All FDIC supervised savings
banks, such as JSB, will be required to complete new regulatory
calculations in order to determine if their interest-rate risk,
as defined in the new regulations, exceeds specified threshold
levels. Under the regulation, banks with interest-rate risk
exposures in excess of a specified "threshold" level of interest-
rate risk would be required to hold capital proportional to that
excess risk. A supervisory decision regarding what constitutes
an acceptable absolute level of measured exposure would be used
in conjunction with an industry distribution of measured
exposures to specify the threshold level.
An objective of the interest rate risk framework
proposed by the agencies is to ensure that banks with high levels
of interest-rate risk have sufficient capital to cover their
exposure. Interest-rate risk exposures would be quantified using
a measurement system that weights an institution's assets,
liabilities and off-balance-sheet positions by risk factors that
approximate each instrument's price sensitivity to changes in
interest rates. The net amount of these weighted values, the
"Net Risk-Weighted Position," would serve as the basis for
measuring an institution's exposure for capital adequacy
purposes.
JSB management believes that it has policies in place
that reduce, in as far as practicable, the risk of a negative
effect on JSB's future net interest margins or a negative effect
on the market value of JSB's portfolio equity from material and
sustained changes in general interest rates. Risk-based capital
rules, which incorporate an interest-rate risk component, will be
subject to significant revisions prior to their issuance. In
addition, any such rules will contain complex language that will
require extensive analysis following their promulgation in final
form. Although management does not believe that such a rule will
have a material effect on JSB's operations, management cannot
determine with certainty how such rules will affect the
strategies of JSB or the results of operations in future periods.
Although JSB holds capital in excess of all current
requirements, management cannot predict with certainty if, or to
what extent, JSB's capital requirements will be changed at some
future date, or in what form the changes might take, should
additional regulatory changes be promulgated in the future.
Federal Home Loan Bank System. JSB is a member of the
FHLB System which consists of 12 regional FHLBs, with each
subject to supervision and regulation by the Federal Housing
Finance Board. The FHLBs provide a central credit facility
primarily for member institutions. JSB, as a member of the FHLB
of Pittsburgh, is required to acquire and hold shares of capital
stock in that FHLB in an amount equal to at least 1% of the
aggregate principal amount of its unpaid residential mortgage
loans, home purchase contracts and similar obligations at the
beginning of each year, or 5% of its advances (borrowings) from
the FHLB of Pittsburgh whichever is greater. JSB had a
$5.1 million investment in stock of the FHLB of Pittsburgh at
December 31, 1993, which complied with this requirement.
Advances from the FHLB are secured by a member's shares
of stock in the FHLB, certain types of mortgages and other
assets. Interest rates charged for advances vary depending upon
maturity, the cost of funds to the FHLB and the purpose of the
borrowing.
Classification of Assets. Under current federal
regulations, an institution's problem assets are subject to
classification according to one of three categories:
"substandard," "doubtful" and "loss." For assets classified
"substandard" and "doubtful," the institution is required to
establish prudent general loan loss reserves in accordance with
generally accepted accounting principles. Assets classified
"loss" must be either completely written off or supported by a
100% specific reserve. A classification category designated
"special mention" also must be established and maintained for
assets not currently requiring classification but having
potential weakness or risk characteristics that could result in
future problems. An institution is required to develop an in-
house program to classify its assets, including investments in
subsidiaries, on a regular basis and set aside appropriate loss
reserves on the basis of such classification. At December 31,
1993, JSB had $7.1 million of assets classified as substandard.
Federal Reserve System. Thrift institutions, such as
JSB, are authorized to borrow from the Federal Reserve Bank
"discount window," but Federal Reserve Board regulations require
institutions to exhaust other reasonable alternative sources of
funds, including FHLB borrowings, before borrowing from the
Federal Reserve Bank.
Pennsylvania Savings Bank Law. Following its
conversion to a savings bank charter as of March 9, 1993, JSB is
now incorporated under the Pennsylvania Banking Code of 1965 (the
"PBC"), which contains detailed provisions governing the
organization, location of offices, rights and responsibilities of
directors, officers, employees and members, as well as corporate
powers, savings and investment operations and other aspects of
JSB and its affairs. The PBC delegates extensive rulemaking
power and administrative discretion to the Department so that the
supervision and regulation of state-chartered savings banks may
be flexible and readily responsive to changes in economic
conditions and in savings and lending practices.
One of the purposes of the PBC is to provide savings
banks with the opportunity to be competitive with each other and
with other financial institutions existing under other
Pennsylvania laws and other state, federal and foreign laws. A
Pennsylvania savings bank may locate or change the location of
its principal place of business and establish an office anywhere
in the Commonwealth with the prior approval of the Department.
The Department generally examines each saving bank not
less frequently than once every two years. Although the
Department may accept the examinations and reports of the FDIC in
lieu of the Department's examination, the present practice is for
the Department to conduct a joint examination with the FDIC. The
Department may order any savings bank to discontinue any
violation of law or unsafe or unsound business practice and may
direct any director, officer, attorney or employee of a savings
bank engaged in an objectionable activity, after the Department
has ordered the activity to be terminated, to show cause at a
hearing before the Department why such person should not be
removed.
The foregoing references to laws and regulations which
are applicable to JSB are brief summaries thereof which do not
purport to be complete and which are qualified in their entirety
by reference to such laws and regulations.
Capital Distributions. The ability of JSB to pay
dividends may be subject to certain restrictions and regulations
of the Department and the FDIC at a future date. In addition,
JSB may not declare or pay a cash dividend if such dividend would
cause its net capital to be reduced below either the amount
required for the liquidation account established for the benefit
of certain depositors of JSB in connection with the 1986
conversion of JSB to the stock form or the minimum regulatory
capital requirements imposed by current regulations.
Taxation
Federal Taxation
General. For federal income tax purposes, JSB files
consolidated income tax returns with its subsidiaries on a
calendar year basis and uses the accrual method of accounting.
The maximum corporate income tax rate applicable to JSB and its
subsidiaries is 35% for 1993 and tax years thereafter. In
addition, JSB is subject to the 20% alternative minimum tax
applicable to corporations generally.
Bad Debt Deductions. JSB claims a deduction each year
pursuant to the direct write-off method under which debts may be
deducted to the extent that they have become worthless in whole
or in part. JSB currently does not claim a bad debt reserve
deduction and has not maintained a bad debt reserve for federal
tax purposes since 1975.
Tax Returns. JSB's federal income tax returns, open
under the statute of limitations, are subject to review by the
Internal Revenue Service ("IRS"). JSB's federal income tax
returns for its tax years beginning in 1990 are subject to review
by the IRS.
Recent Developments. In 1993, Congress passed and the
President signed the Revenue Reconciliation Act ("RRA") of 1993.
Major provisions of the RRA that generally affect corporations,
such as JSB, are highlighted below.
Tax rates - For tax years beginning after 1992, the
corporate tax rate has been increased to 35% for taxable
income in excess of $10 million.
Intangible property - Goodwill, going concern value,
and certain other intangibles subject to the provision of
Section 179 of the Code (such as amounts paid for the
transfer of a franchise, trademark, or trade name), acquired
after May 10, 1993, are fully amortized ratably over
15 years regardless of their actual useful life.
Securities transactions - For tax years ending after
1993, securities dealers are required to recognize for
purposes of determining the taxpayer's gross income gain or
loss based on the fair market value of noninventory
securities at the close of each tax year as though the
security were actually sold. Under the Code, JSB is
considered to be a dealer subject to these rules for certain
designated loans.
JSB management does not anticipate that the effects of
this change in the tax law will materially impact either the
amount or the timing of income taxes payable in future
periods.
State Taxation
JSB is subject to tax under the Pennsylvania Mutual
Thrift Institutions Tax Act, which imposes a tax at the rate of
11.5% on JSB's net earnings, determined in accordance with GAAP,
as shown on its books. The Act exempts the bank from all other
corporate taxes imposed by Pennsylvania for state tax purposes,
and from all local taxes imposed by political subdivisions
thereof, except taxes on real estate and real estate transfers.
Properties
At December 31, 1993, JSB conducted its business from
its headquarters and main office at Market at Main Street,
Johnstown, Pennsylvania, five branch offices in the greater
Johnstown metropolitan area and an administrative facility used
by SMC in Atlanta, Georgia. The following table sets forth
certain information with respect to the offices and other
material properties of JSB as of December 31, 1993.
<PAGE>
<TABLE>
<CAPTION>
Net Book Value of
Property Owned
Owned Lease or Leasehold
or Expiration Improvements at
Office Locations Leased Date December 31, 1993
<S> <C> <C> <C>
Main office Owned -- $371,056
Savings Bank Plaza
Market at Main Street
Johnstown, Pennsylvania 15901
Branch office Owned -- $531,068
Westmont Shopping Center
Johnstown, Pennsylvania 15905
Branch office Leased 1995 $ 21,484
Richland Mall
Johnstown, Pennsylvania 15904
Branch office Leased 1999 $ 8,045
Richland Bilo Plaza
Johnstown, Pennsylvania 15904
Branch office Owned -- $339,245
Eighth Ward
Johnstown, Pennsylvania 15905
Branch office Leased 2002 $121,649
Johnstown Galleria Mall
Johnstown, Pennsylvania 15904
Other offices Leased 1995 $ 2,621
Standard Mortgage Corporation of Georgia
Atlanta, Georgia 30342
</TABLE>
Legal Proceedings
JSB is involved in routine legal proceedings occurring
in the ordinary course of business which in the aggregate are
believed by JSB management to be immaterial to the financial
condition of JSB.
Common Stock Prices and Dividend Information
JSB Common Stock is traded over-the-counter on the
NASDAQ/NMS under the symbol "JSBK." JSB presently has 1,943,790
shares of common stock outstanding.
At December 31, 1993, there were approximately 2,076
record holders of JSB Common Stock. This does not reflect the
number of persons or entities who hold stock in nominee or
"street" name through various brokerage firms.
The following table shows the high and low closing
sales prices of JSB's common stock as reported on the NASDAQ/NMS
and cash dividends declared for 1993 and 1992:
<PAGE>
<TABLE>
<CAPTION>
1993 1992
Cash Dividends Cash Dividends
High Low Declared High Low Declared
<S> <C> <C> <C> <C> <C> <C>
First Quarter $12.25 $7.75 $0.00 $6.25 $5.50 $0.00
Second Quarter 11.25 8.50 0.05 7.00 6.25 0.00
Third Quarter 15.50 9.25 0.05 8.75 7.75 0.00
Fourth Quarter 23.25 13.50 0.05 8.75 7.75 0.00
</TABLE>
JSB may not declare or pay a cash dividend if such dividend would
cause its net capital to be reduced below either the amount
required for a liquidation account established for the benefit of
certain depositors of JSB in connection with the conversion of
JSB to the stock form or the minimum regulatory capital
requirements imposed by federal regulations. Dividends must also
be in compliance with Department and FDIC capital distribution
regulations.
<PAGE>
EXPERTS
USBANCORP
The consolidated financial statements of USBANCORP and
its subsidiaries as of December 31, 1993, and 1992, incorporated
by reference in this Proxy Statement/Prospectus and elsewhere in
the registration statement have been audited by Arthur Andersen &
Co., independent public accountants, as indicated in their report
with respect thereto, and are included herein in reliance upon
the authority of said firm as experts in giving said reports.
The consolidated statements of income, of cash flows
and of changes in stockholders' equity incorporated in this Proxy
Statement/Prospectus by reference to the Annual Report and
Form 10-K of USBANCORP and its subsidiaries for the year ended
December 31, 1991, have been so incorporated in reliance on the
report of Price Waterhouse, independent accountants, given on the
authority of said firm as experts in auditing and accounting.
JSB
The consolidated financial statements of JSB and its
subsidiaries as of December 31, 1993, and 1992, included herein
and in the registration statement have been included herein and
in the registration statement in reliance upon the report of
KPMG Peat Marwick, independent certified public accountants, and
upon the authority of that firm as experts in accounting and
auditing.
The consolidated financial statements of JSB and its
subsidiaries as of December 31, 1991, and for the one year period
then ended, included herein and in the registration statement
have been included herein and in the registration statement in
reliance upon the report of Ernst & Young, independent public
accountants, incorporated by reference herein, and upon the
authority of that firm as experts in accounting and auditing.
LEGAL MATTERS
The validity of the USBANCORP Common Stock to be issued
in connection with the Merger will be passed upon by Steven &
Lee, P.C., Wayne, Pennsylvania 19087, special counsel to
USBANCORP. Certain legal matters will be passed upon for JSB by
Elias, Matz, Tiernan & Herrick, Washington, D.C., special counsel
to JSB.
<PAGE>
ADJOURNMENT OF MEETINGS
USBANCORP Annual Meeting
In the event that there are not sufficient votes to
constitute a quorum or approve the Merger Proposal at the time of
the USBANCORP Annual Meeting, such proposal could not be approved
unless the USBANCORP Annual Meeting were adjourned in order to
permit further solicitation of proxies. In order to allow
proxies that have been received by USBANCORP at the time of the
USBANCORP Annual Meeting to be voted for such adjournment, if
necessary, USBANCORP has submitted the question of adjournment
under such circumstances to its shareholders as a separate matter
for their consideration. A majority of the shares represented
and voting at the USBANCORP Annual Meeting is required to approve
any such adjournment. The Board of Directors of USBANCORP
recommends that shareholders vote their proxies in favor of such
adjournment so that their proxies may be used for such purpose in
the event it should become necessary. Properly executed proxies
will be voted in favor of any such adjournment unless otherwise
indicated thereon. If it is necessary to adjourn the USBANCORP
Annual Meeting, no notice of the time and place of the adjourned
meeting is required to be given to shareholders other than an
announcement of such time and place at the USBANCORP Annual
Meeting.
JSB Annual Meeting
In the event that there are not sufficient votes to
constitute a quorum or approve the Merger Agreement at the time
of the JSB Annual Meeting, such proposal could not be approved
unless the JSB Annual Meeting were adjourned in order to permit
further solicitation of proxies. In order to allow proxies that
have been received by JSB at the time of the JSB Annual Meeting
to be voted for adjournment, if necessary, JSB has submitted the
question of adjournment under such circumstances to its
shareholders as a separate matter for their consideration. A
majority of the shares represented and voting at the JSB Annual
Meeting is required to approve any such adjournment. The Board
of Directors of JSB recommends that shareholders vote their
proxies in favor of such adjournment so that their proxies may be
used for such purpose in the event it should become necessary.
Properly executed proxies will be voted in favor of any such
adjournment unless otherwise indicated thereon. If it is
necessary to adjourn the JSB Annual Meeting, no notice of the
time and place of the adjourned meeting is required to be given
to shareholders other than an announcement of such time and place
at the JSB Annual Meeting.
ELECTION OF USBANCORP DIRECTORS
General
USBANCORP's articles of incorporation provide that
there shall be three classes of directors as nearly equal in
number as possible, each class being elected for a three-year
term and only one class being elected each year beginning in
1987. The total number of directors shall be that number from
time to time determined by a resolution adopted by a majority
vote of the directors then in office or by resolution of the
shareholders at a meeting thereof. There shall be not less than
five directors nor more than 25. The number of directors for
1994 has been set at 16.
The USBANCORP Board of Directors has nominated
Messrs. Clifford A. Barton, James F. O'Malley, Frank J.
Pasquerilla, Thomas C. Slater and W. Harrison Vail for election
as Class II directors for three-year terms to expire at the 1997
Annual Meeting of Shareholders, or until their successors are
duly elected and qualified. All Class II directors were elected
by the shareholders at the 1991 Annual Meeting. The remaining
directors will continue to serve in accordance with their
previous election with the terms of the Class III and Class I
directors expiring in 1995 and 1996, respectively.
With respect to the election of directors, each
shareholder has the right to vote for each share of USBANCORP
Common Stock held by him or her as many votes as shall equal the
number of directors to be elected, and he or she, or his or her
proxy, may cast the whole number of votes for one nominee or
distribute them among two or more nominees. Unless authority is
withheld as to a particular nominee or as to all nominees, all
proxies will be voted for the five nominees listed below. The
proxies will have discretionary authority to cumulate votes
except to the extent a shareholder withholds such authority on
the form of proxy. The five persons receiving the highest number
of votes will be elected.
Abstentions and broker nonvotes are disregarded because
they are inconsequential and would have no effect on the results
of the election. At the 1993 Annual Meeting, 3,220,879.2240
voting shares were returned, with each nominee receiving in
excess of 97.5% of shares returned and 70.75% of total shares
outstanding.
Except as noted above, it is intended that shares
represented by proxies will be voted for the nominees listed
below, each of whom is now a director of USBANCORP and each of
whom has expressed his willingness to serve, or for any
substitute nominee or nominees designated by the USBANCORP Board
of Directors in the event any nominee or nominees become
unavailable for election. The USBANCORP Board of Directors has
no reason to believe that any of the nominees will not serve if
elected.
In the following tables are set forth as to each of the
nominees for election as Class II directors and as to each of the
continuing Class III and Class I directors his age, principal
occupation and business experience, the period during which he
has served as a director of USBANCORP or an affiliate and other
business relationships. There are no family relationships
between any of the listed persons.
<TABLE>
<CAPTION>
Nominees for Election as Class II Directors
Terms Expire in 1997
Director Directorship in other
Name and Principal Occupation(1) Age Since(2)(3) Reporting Companies
<S> <C> <C> <C>
Clifford A. Barton 65 1966 Crown American
Retired; Former Chairman, Realty Trust
President and Chief Executive
Officer of USBANCORP and
Chairman of the Board of
U.S Bank, Three Rivers,
Community and USBANCORP
Trust Company
James F. O'Malley 68 1983 None
Senior Lawyer, Yost &
O'Malley, Attorneys-at-Law
Frank J. Pasquerilla 67 1969 Crown American
Chairman of the Board and Realty Trust
Chief Executive Officer,
Crown American Realty Trust
Thomas C. Slater 51 1980 None
Owner, President and Director,
Slater Laboratories, Inc.,
Clinical Laboratory
W. Harrison Vail 53 1984 None
President and Chief Executive
Officer, Three Rivers
<CAPTION>
Class III Directors
Terms Expire in 1995
Director Directorship in other
Name and Principal Occupation(1) Age Since(2)(3) Reporting Companies
<S> <C> <C> <C>
Michael F. Butler 58 1993 None
Business Consultant and
Attorney-at-Law
Terry K. Dunkle 52 1988 None
Chairman, President and
Chief Executive Officer
of USBANCORP
John H. Kunkle, Jr. 66 1989 None
Retired; Former Vice
Chairman and Director,
Commonwealth Land Title
Insurance Company
Jack Sevy 63 1984 None
Retired; Former Owner and
Operator, New Stanton West
Auto/Truck Plaza
Kenneth J. Tyson 64 1960 None
Retired; President, Community
and Community Savings
<PAGE>
<CAPTION>
Class I Directors
Terms Expire in 1996
Director Directorship in other
Name and Principal Occupation(1) Age Since(2)(3) Reporting Companies
<S> <C> <C> <C>
Jerome M. Adams 62 1973 None
Senior Partner, Adams,
Myers and Baczkowsi,
Attorneys-at-Law
Robert A. Allen 68 1987 None
Retired; Former President,
Johnstown Sani-Dairy
Louis Cynkar 49 1994 None
President and Chief Executive
Officer, U.S. Bank
Richard W. Kappel 66 1967 None
Secretary and Treasurer,
William J. Kappel Co. (Retail
Jewelry Store Chain)
James C. Spangler 66 1980 None
Retired; Former Owner,
Somerset Auction and Transfer,
Inc.
Robert L. Wise 50 1987 Pennsylvania Electric
President, Pennsylvania Electric Company, General
Company, Public Utility Public Utilities Nuclear
Corp. and General Public
Utilities Service Corp.
__________________
<FN>
(1) All directors and nominees have held the positions indicated
or another senior executive position with the same entity or
one of its affiliates or predecessors for the past five
years except Mr. Butler who was a partner in Andrews &
Kurth, Attorneys-at-Law, prior to June 1, 1991.
(2) Reflects the earlier of the first year as a director of
USBANCORP or of U.S. Bank, Three Rivers or Community.
(3) All incumbent directors were elected by the shareholders
except Mr. Butler and Mr. Cynkar who were appointed by the
Board of Directors in 1993 and 1994, respectively.
</TABLE>
Board and Committees
USBANCORP's Board of Directors has various standing
committees including an Audit Committee, a Nominating Committee
and a Management Compensation Committee. During the year 1993,
the USBANCORP Board of Directors held six meetings, the Audit
Committee held five meetings, the Nominating Committee held five
meetings, and the Management Compensation Committee held six
meetings. Each director attended at least 75% of the combined
total of meetings of USBANCORP's Board of Directors and of each
committee of which he was a member except Messrs. Allen, Kunkle
and Tyson (excused), who attended 60%, 62%, and 66%,
respectively.
The Audit Committee is responsible for recommending to
the USBANCORP Board of Directors the appointment of an
independent public accountant to audit the books and accounts of
USBANCORP and its subsidiaries; reviewing the reports of the
Audit Department and the reports of examination conducted by the
bank and bank holding company regulators and of independent
public accountants; reviewing the adequacy of internal audit and
control procedures; and reporting to the USBANCORP Board of
Directors through the Audit Committee. The Audit Committee is
presently comprised of Messrs. Kappel, Kunkle, O'Malley and
Spangler. USBANCORP's auditor is designated to conduct the
internal audits for all subsidiaries.
The Nominating Committee presently consists of
Messrs. Barton, Dunkle, O'Malley and Pasquerilla. The Nominating
Committee is responsible for nominating directors for
consideration at the Annual Meeting of Shareholders. The
Nominating Committee will consider nominees recommended by
shareholders. Shareholders desiring to make such a
recommendation should submit the candidate's name, together with
biographical information and his or her written consent to
nomination to: Chairman, President and CEO, USBANCORP, Inc.,
Executive Offices, Main and Franklin Streets, Johnstown,
Pennsylvania 15901. Shareholders may also nominate persons for
election as directors in accordance with the procedures set forth
in Section 1.3 of USBANCORP's bylaws. Notification of such
nomination, containing the required information, must be mailed
or delivered to the President of USBANCORP not less than 60 days
or more than 90 days prior to the USBANCORP Annual Meeting.
The Management Compensation Committee is responsible
for reviewing and making recommendations regarding the
compensation of corporate officers. The Committee also makes
recommendations to the USBANCORP Board of Directors regarding the
adoption of employee benefit, bonus, incentive compensation or
similar plans and is responsible for the administration of such
plans. No director who is eligible to receive any benefit under
plans administered by the Committee may serve on the Management
Compensation Committee. The Committee is presently comprised of
Messrs. O'Malley, Pasquerilla and Wise.
Executive Compensation
Compensation of Directors
Executive officers of USBANCORP who were directors or
members of committees of the USBANCORP Board of Directors or its
subsidiaries received no compensation for such positions. In
1993, non-officer directors of USBANCORP received compensation
for attendance at USBANCORP Board of Directors meetings of $450
per meeting. A fee of $200 was paid for attendance at committee
meetings of the USBANCORP Board of Directors. Certain non-
officer directors of USBANCORP are also directors of either
U.S. Bank, Three Rivers, Community Savings, and the Trust
Company. Such directors serving on either the Board of Directors
of U.S. Bank, Three Rivers and the Trust Company are compensated
for their services by a payment of $350 for attendance at each
Board of Directors meeting and $200 for attendance at each
committee meeting of those Boards. Such directors serving on the
Board of Directors of Community Savings are compensated for their
services by a payment of $600 for attendance at each Board of
Directors committee meeting.
Beginning in 1994, Directors of USBANCORP will also
receive an annual retainer of $6,000, payable in USBANCORP Common
Stock.
Compensation of Executive Officers
The following table sets forth the amounts of compensation
paid in 1993 to the Chief Executive Officer and the Named
Officers of USBANCORP whose direct aggregate annual salary and
bonus exceeded $100,000.
<PAGE>
<TABLE>
<CAPTION>
Summary Compensation Table
Long Term All Other
Annual Compensation Compensation Compensation(5)
Other Awards
Annual Stock
Compen- Option
Year Salary Bonus sation(1) (Shares)(2) Payouts(3)
<S> <C> <C> <C> <C> <C> <C>
Clifford A. Barton 1993 $180,540 $ 27,944 $ 11,452 4,000 $25,365
1992 171,960 23,041 11,393 0 22,765
1991 164,580 39,375 11,642 5,000 0
Terry K. Dunkle 1993 156,480 37,260 9,926 4,000 16,829(6)
1992 149,404 35,655 9,875 0 5,964
1991 142,620 34,125 9,470 5,000 0
W. Harrison Vail 1993 113,828 27,102 0 4,000 0
1992 108,408 25,935 0 0 0
1991 103,764 24,938 0 5,000 0
Kenneth J. Tyson 1993 127,800 0 0 0 0
1992 125,000 0 165,117(4) 0 0
1991 117,600 0 0 0 0
Louis Cynkar 1993 103,980 10,044 6,596 2,000 991
1992 100,440 7,027 6,655 0 895
1991 92,460 16,438 6,140 2,500 0
__________________
<FN>
(1) Amounts awarded under the Profit Sharing Plan of USBANCORP
or U.S. Bank.
(2) Stock options awarded pursuant to USBANCORP's 1991 Stock
Option Plan on January 19, 1993 and December 17, 1991.
(3) USBANCORP has no long-term compensation plan other than the
1991 Stock Option Plan.
(4) Market value of USBANCORP Common Stock received on
cancellation of stock options to purchase Community shares.
(5) Amount accrued by U.S. Bank to provide additional retirement
benefits over ERISA Limitations.
(6) Includes cost of "split-dollar" life insurance policy for
Mr. Dunkle. See "Supplemental Pension Plan U.S. Bank."
</TABLE>
Option Exercises and Year End Values
Set forth below is information with respect to
exercised and unexercised options to purchase USBANCORP Common
Stock granted under USBANCORP's 1991 Stock Option Plan held by
the Named Officers as of December 31, 1993. Options were granted
on December 17, 1991 and January 19, 1993. All options become
exercisable as follows: one-third one year from date of grant,
two-thirds less the aggregate number exercised two years from
date of grant and the remainder three years from date of grant.
<TABLE>
<CAPTION>
Number of Unexercised Value of In-the-Money
Shares Options at December 31, Options at December 31,
Acquired 1993 1993(1)
On Value Unexer- Unexer-
Name Exercise Realized Exercisable cisable Exercisable cisable
<S> <C> <C> <C> <C> <C> <C>
Clifford A. Barton 1,667 $11,669 0 5,667 0 $39,669
Terry K. Dunkle 3,333 23,331 0 5,667 0 39,669
W. Harrison Vail 0 0 3,333 5,667 23,331 39,669
Louis Cynkar 0 0 1,667 2,833 11,669 19,381
__________________
<FN>
(1) Based on the average of the high and low prices on the
NASDAQ/NMS on December 31, 1993.
</TABLE>
Option Grants Table
The following table sets forth information with respect
to grants of stock options made during 1993 to each of the Named
Officers.
<TABLE>
<CAPTION>
Individual Grants
Percent
of Total
Options Potential Realized
Number of Granted Value at Assumed
Securities to Annual Rates of Stock
Underlying Employees Price Appreciation
Options in Fiscal Exercise Expiration for Option Term
Name Granted(1) Year Price Date 5% 10%
<S> <C> <C> <C> <C> <C> <C>
Clifford A. Barton 4,000 14.5 $22.34 1/19/03 $38.69 $61.60
Terry K. Dunkle 4,000 14.5 22.34 1/19/03 38.69 61.60
W. Harrison Vail 4,000 14.5 22.34 1/19/03 38.69 61.60
Louis Cynkar 2,000 7.3 22.34 1/19/03 38.69 61.60
__________________
<FN>
(1) All options were granted on January 19, 1993. One-third will
become exercisable on January 19, 1994, two-thirds less the
aggregate number exercised will become exercisable on
January 19, 1995, and the remainder will become exercisable
on January 19, 1996.
</TABLE>
Compensation Committee Report on Executive Compensation
It is the responsibility of the Management Compensation
Committee to (i) recommend to the USBANCORP Board of Directors
the compensation of executive officers of USBANCORP and
(ii) administer and recommend adoption of employee benefit and
incentive compensation plans for senior officers of USBANCORP.
The Committee also evaluates performance of management and
considers management succession planning and related matters.
The Committee reviews with the USBANCORP Board of Directors all
aspects of the compensation of the highest paid officers.
Compensation policies have been designed to enhance the
profitability and value of USBANCORP by relating and aligning the
performance and financial interests of senior officers with those
of USBANCORP and its shareholders. Base salaries for senior
officers (other than the Chief Executive Officer) are reviewed by
the Committee with the Chief Executive Officer and USBANCORP's
senior human resources officer. The salary plan is reviewed for
consistency with industry peer group surveys. The peer group
consists of five other banks in the Greater Johnstown Area of
similar asset size and additional banks in Pennsylvania and
nationally within the same asset range. The indices used in the
Shareholders Return Performance Chart are NASDAQ Stock Market
(U.S. Companies) and NASDAQ Bank Stocks. While USBANCORP
management believes many of these peer group banks are included
in the peer group surveys used by the Management Compensation
Committee, it cannot positively state which ones are included.
Judgments are made with respect to the value contributed to
USBANCORP by the various officer positions and individual salary
levels are based on the relative importance of the job and the
performance of the officer in the position. The salary of the
Chief Executive Officer is fixed by the Management Compensation
Committee based on information provided by the senior human
resources officer and the overall performance of USBANCORP. The
Committee evaluates the performance of the Chief Executive
Officer in relationship to the objectives of the strategic plans
of USBANCORP and its subsidiaries, USBANCORP's profitability,
total shareholders' return and relative strength of the key
financial performance indicators of USBANCORP and its
subsidiaries.
Performance goals for determining annual incentive
compensation are set for each of USBANCORP's functional groups.
While the determining factor is return on assets (return on
equity for two of the affiliate bank CEOs), various other factors
are taken into consideration, which help to determine the return
on assets and return on equity. Each factor is considered
corporate-wide for the Chief Executive Officer, and by functional
area of responsibility for each other Named Officer. Salary
levels reflected increases or decreases in these areas and were,
on an average percentage basis, equal to or less than average
salary increases for all other employees. Total compensation,
including salaries and incentive payments for these officers, are
consistent with those of persons holding comparable positions in
financial institutions of similar size.
The Chief Executive Officer nominates officers for
participation in incentive programs, and the level of
participation is based upon the officer's salary grade, job
performance and attainment of established goals. In addition,
with respect to the Chief Executive Officer's award, the
Committee considers USBANCORP's performance in relationship to
peer results and internal improvements. Bonuses and stock
options in 1991, 1992 and 1993 are considered to be appropriate
as pre-tax return on assets exceeded budgeted goals by 3.4%, 5.4%
and 9.7%, respectively.
While the Management Compensation Committee has general
supervision of other plans, i.e., Profit Sharing, Pension and
Retirement and Long Term Disability, no specific determinations
are made by the Committee as the benefits are available to all
participants in accordance with the express provisions of those
plans. The Committee considers changes to meet future needs, to
remain competitive and to meet regulatory compliance
requirements.
This report is furnished by Messrs. O'Malley,
Pasquerilla and Wise (Chairman).
Shareholders Return Performance Presentation
Set forth below is a graph comparing the yearly
percentage change in the cumulative total shareholder return on
USBANCORP's Common Stock against the NASDAQ Stock Market (U.S.
Companies) and the NASDAQ Bank Stocks for the five years
beginning January 1, 1989 and ended December 31, 1993.
[Insert USBANCORP Shareholders Return Performance Graph here]
Retirement Plans
Pension Plan - U.S. Bank
U.S. Bank maintains a qualified defined benefit
retirement plan for its employees (the "U.S. Bank Plan").
Remuneration for pension benefit purposes is base pay excluding
overtime, bonus or reimbursement of business expense. An
employee's benefit under the U.S. Bank Plan is determined on the
basis of Final Average Pay which means the average annual base
pay received by an employee in the five consecutive years out of
the ten ending before his normal retirement date for which the
average is highest.
There was no contribution made to the U.S. Bank Plan in
1993 due to its overfunded status.
Estimated annual benefits payable upon retirement at
age 65 considering 15 years of service (25 years of service for
highly compensated employees as such term is defined in IRC
Section 414(q) of the Code) with respect to the specified
remuneration are as follows:
<TABLE>
<CAPTION> PENSION TABLE
U.S. BANK
Five Calendar Year
Average Salary Annual Benefit at
Preceding Retirement Normal Retirement Date
<C> <C>
$ 15,000 $ 5,550
25,000 9,250
40,000 14,800
60,000 22,200
90,000 33,300
100,000 37,000
120,000 44,400
140,000 51,800
160,000 59,200
180,000 66,600
200,000 44,000
201,840 74,681
206,284 76,325
212,056 78,461
</TABLE>
The above benefits are paid for the life of the
employee with ten years of payments guaranteed. The amounts
shown do not reflect the various survivorship options which an
employee may elect. Depending upon the survivorship arrangement
chosen, the amounts shown could be substantially further reduced.
Current remuneration covered by the U.S. Bank Plan (base salary)
in 1993 for Messrs. Barton, Dunkle and Cynkar was $180,540,
$156,480 and $103,980, respectively. As of December 31, 1993,
Mr. Barton was credited with six years of service, Mr. Dunkle
with six years of service and Mr. Cynkar with eight years of
service. Mr. Barton retired as of January 31, 1994.
Effective January 1, 1986, the USBANCORP Board of
Directors adopted the U.S. Bank Plan for the benefit of employees
of USBANCORP on the same terms and conditions as for employees of
U.S. Bank. Contributions made by USBANCORP are limited to those
employees whose base salaries are paid by USBANCORP. An employee
on whose behalf a contribution is made by USBANCORP is no longer
eligible to receive a contribution from U.S. Bank.
Supplemental Pension Plan - U.S. Bank
The Board of Directors of U.S. Bank on February 20,
1981, adopted a Supplemental Pension Plan under which the
Executive Committee of the Board of Directors may from time to
time designate executive officers of the U.S. Bank as
participants and specify the amount of supplemental pension
payment the participant shall receive.
A participating officer agrees to render after
retirement such advisory services as the Executive Committee may
reasonably request and enters into a noncompetition agreement
with U.S. Bank. Upon his retirement from U.S. Bank, a
participant will be entitled to receive supplemental monthly
pension payments in the specified amount for a period of fifteen
years. If he should die before retirement while in the service
of U.S. Bank or if he should die after payment of benefits has
commenced, the participant's spouse, if any, will be entitled to
receive one-half of the specified amount for the remainder of the
fifteen year period.
No payments are currently being made under this plan.
U.S. Bank purchased an annuity in 1988 for one retired officer
who is the only present participant.
USBANCORP has provided for an additional pension for
Mr. Barton. The additional pension benefit will be paid in
monthly installments over Mr. Barton's lifetime with 180 monthly
payments guaranteed. If death occurs after retirement, but
before Mr. Barton receives 180 payments, the remaining payments
will be made to his designated beneficiary.
USBANCORP has purchased a life insurance policy which
will reimburse USBANCORP, after Mr. Barton's death, for the
after-tax cost of all supplemental pension benefits, the
insurance premiums, and a factor for the use of money.
Mr. Barton's supplemental pension benefit is designed
to provide him with a total retirement income equal to the income
benefit he would have received if he had been a participant in
the U.S. Bank Plan for all his years of eligible service
beginning with his initial date of employment with Three Rivers,
through his retirement at USBANCORP.
USBANCORP has provided for an additional retirement
benefit for Mr. Dunkle funded through a split-dollar life
insurance policy. USBANCORP pays a portion of the premiums until
Mr. Dunkle's normal retirement. At such time, the cumulative
premiums paid by USBANCORP or the policy cash value, if less,
will be refunded to USBANCORP via a withdrawal from the policy
cash value; and Mr. Dunkle will receive a paid-up life insurance
policy which will include any remaining cash value. In the event
of death prior to retirement, premiums paid by USBANCORP will be
refunded. The annual premium paid by USBANCORP is $10,000 per
year, and the bank has an interest in the policy cash value equal
to the lesser of its cumulative premiums or the policy cash
value.
Retirement Plan - Three Rivers
Three Rivers maintained a combination defined benefit
pension plan which was established during 1970 and amended as of
January 1, 1989 (the "Three Rivers Plan"). The Three Rivers Plan
covered all eligible employees, including officers. The annual
contribution to the Three Rivers Plan amounted to 6.14% of the
1992 total remuneration paid to all participants. The Three
Rivers Plan is set up on an actuarial basis and provides for
fixed benefits upon retirement at a specified age or retirement
under certain conditions.
The Three Rivers Plan was integrated with social
security, and, under the formula applicable to all participants,
the benefit of a particular participant was a function of that
participant's highest five years compensation and years of
service. Vesting occurred over five years and normal retirement
age is considered to be 65. Actuarially reduced benefits may
commence after full vesting and following separation from
service. The following table illustrates benefits payable under
the benefit formula in effect through June 30, 1993, and is based
on an unmarried participant, fully vested and 65 years of age.
<TABLE>
<CAPTION> Annual Benefits Based on Years of Service
Highest 5 Years
of Annual
Compensation 15 Years 25 Years 35 Years
<C> <C> <C> <C>
$ 15,000 $ 1,929 $ 3,214 $ 4,500
20,000 2,571 4,268 6,000
25,000 3,427 5,712 7,997
35,000 5,680 9,467 13,254
50,000 9,060 15,100 21,140
60,000 11,313 18,856 26,398
70,000 13,567 22,611 32,655
80,000 15,820 26,366 36,913
90,000 18,073 30,122 42,170
100,000 20,326 33,877 47,428
110,000 22,579 37,632 52,685
120,000 24,833 41,388 57,943
130,000 17,086 45,143 63,200
140,000 29,339 48,899 68,458
150,000 31,592 52,654 73,715
</TABLE>
Effective July 1, 1993, the benefit formula of the
Three Rivers Plan was revised to duplicate the benefit formula of
the U.S. Bank Plan. Employees retiring on or after July 1, 1993,
will receive a benefit based upon the U.S. Bank Plan formula but
not less than the benefit earned through June 30, 1993, under the
former Three Rivers Plan formula.
Current remuneration covered by the Retirement Plan
(base salary) in 1992 for Mr. Vail was $108,408. As of December
31, 1993, Mr. Vail was credited with nine years of service.
Retirement Plan - Community Savings
Prior to June 30, 1993, Community Savings maintained a
retirement plan (the "Community Plan") for all eligible
employees. Employees who were 21 years of age and who had
completed one year of service were eligible to participate. The
Community Plan was a qualified, non-contributory defined benefit
plan funded by contributions from Community Savings. Effective
September 1, 1991, the Community Plan was amended to provide for
annual benefits payable monthly at retirement on normal
retirement age (age 65) in an amount equal to (i) 1.5% times the
total years of Benefit Service times the amount of an employee's
Average Salary up to the Covered Compensation Level, plus
(ii) 2.0% times the total years of Benefit Service times the
amount of an employee's Average Annual Salary which exceeded the
Covered Compensation Level, except that an employee who retired
with at least 40 years of Benefit Service shall receive annual
benefits equal to 2.0% times the total years of Benefit Service
times the amount of the employee's Average Annual Salary.
Benefit Service is defined in the Community Plan to mean an
employee's years of service with Community Savings since the
effective date of the Community Plan plus years of service with
Community Savings prior to the effective date of the Community
Plan, if any, for which Community has purchased credit. Average
Annual Salary is defined under the Community Plan as an average
of the highest five consecutive years of compensation during
participation in the Community Plan. The Covered Compensation
Level was $10,000 as of January 1, 1991. An employee who retired
after reaching age 45 but prior to attaining age 65 is entitled
to receive benefits equal to the amount of the benefits he or she
would have received upon retirement at age 65 multiplied by a
percentage equal to 100% minus a percentage equal to 3% times the
difference between 65 and the actual retirement age. The
Community Plan also provides for benefits in the event of
disability or death.
The vesting schedule in effect during fiscal 1993 for
determining the percentage of the retirement benefits, as
calculated above, that the employee may receive is as follows:
(i) for employees under age 65, employees are 0% vested for less
than five completed years in the Community Plan and 100% vested
for five or more completed years in the Community Plan, and
(ii) all employees age 65 and above are fully vested.
The Community Plan has been approved by the IRS, and is
intended to meet the requirements of ERISA. During the six
months ended June 30, 1993, Community Savings' expense for the
Community Plan was approximately $80,000. The Community Plan was
in an overfunded status during fiscal 1993 and contributions
could not be made to the accounts of any individual.
<PAGE>
The following table illustrates annual pension benefits
for retirement at age 65 under various levels of compensation and
years of service. The figures in the table assume the Community
Plan continues in its present form. The benefits shown below are
not subject to any deduction for Social Security or other offset
amounts.
<TABLE>
<CAPTION>
Average
Annual Years of Service(1)
Salary 10 15 20 25 30 40
<C> <C> <C> <C> <C> <C> <C>
$ 10,000 $ 1,500 $ 2,250 $ 3,000 $ 3,750 $ 4,500 $ 8,000
20,000 3,500 5,250 7,000 8,750 10,500 16,000
30,000 5,500 8,250 11,000 13,750 16,500 24,000
50,000 9,500 14,250 19,000 23,750 28,500 40,000
70,000 13,500 20,250 27,000 33,750 40,500 56,000
90,000 17,500 26,250 35,000 43,750 52,500 72,000
110,000 21,500 32,250 43,000 53,750 64,500 88,000
140,000 27,500 41,250 55,000 68,750 82,500 112,000
160,000 31,500 47,250 63,000 78,750 94,500 115,641(2)
__________________
<FN>
(1) At December 31, 1993, Mr. Tyson had 40 years of credited
service under the Community Plan. Current remuneration
covered by the Community Plan in 1993 was $127,800.
(2) Maximum annual benefit payable under a defined benefit plan
during 1993. This figure is subject to annual cost of
living adjustment.
</TABLE>
Effective July 1, 1993, the Community Plan was merged into
the Three Rivers Plan. Assets and liabilities of the Community
Plan are to be transferred to the Three Rivers Plan. Employees
retiring on or after July 1, 1993, will receive a benefit based
upon the Three Rivers Plan benefit formula but not less than the
benefit earned through June 30, 1993, under the former Community
Plan formula.
Executive Long Term Disability Plan
In 1986, the USBANCORP Board of Directors adopted a
Long Term Disability Plan for senior officers who are deemed to
be policy-making executives of USBANCORP and its subsidiaries.
The plan provides for a monthly benefit equal to 50% of base
monthly salary up to a maximum of $10,000 per month. Benefits
are paid through age 65 with reducing benefits paid to age 70.
There is a 90 day elimination period, and benefits are integrated
with Social Security payments when income from all sources
exceeds 70% of an individual's pre-disability earnings. No
payments were made under the plan in 1993.
Employment Contracts
On April 22, 1988, Mr. Dunkle entered into an Agreement
with U.S. Bank providing that in the event of a change in control
which resulted in his termination or diminution of his duties,
responsibilities or titles, U.S. Bank would pay him monthly for a
period of twelve (12) months a sum equal to the highest rates of
monthly base salary paid to him at any time during the course of
his employment. Base salary is defined as the monthly rate of
compensation, exclusive of bonuses, options or other benefits.
In the case of Mr. Dunkle's death during such a twelve-month
period, the remaining payments are to be made to his designated
beneficiary or to his estate. On June 23, 1988, Mr. Vail entered
into an identical agreement with Three Rivers Bank.
On November 19, 1991, Mr. Tyson entered into an
agreement with Community which provided (1) employment for a
period of two (2) years from the effective date of the merger of
Community into a subsidiary of USBANCORP or until March 1, 1994,
whichever is longer, (2) service in an executive capacity as
President of Community and Community Savings, (3) payments of a
base salary of not less than $125,000.00 per year together with
related fringe benefits, (4) reimbursement for reasonable
business expenses, (5) participation in all employee benefits or
welfare plans in which he is or would be eligible to participate
and (6) application to any successor of Community by reason of
merger or consolidation or transfer of substantially all of
Community's assets.
Mr. Dunkle's and Mr. Vail's agreements remain in
effect. Mr. Tyson's agreement expired on March 23, 1994 and he
retired as an officer of Community on March 31, 1994. See
"Executive Compensation -- Summary Compensation Table" and
"Compensation Committee Report on Executive Compensation."
Voting Securities
General
As of the close of business on ____________, 1994,
there were outstanding ______ shares of the USBANCORP Common
Stock. Only shareholders of record as of the close of business
on March __, 1994, are entitled to notice of and to vote at the
USBANCORP Annual Meeting. Except with respect to the election of
directors, each such shareholder is entitled to one vote for each
such share held.
Set forth below is information with respect to the
beneficial ownership, as of _________________, 1994, of certain
persons, including directors and nominees for director, the Chief
Executive Officer and the four other most highly compensated
officers ("Named Officers") of shares of USBANCORP Common Stock.
<TABLE>
<CAPTION> Common Stock
Name of Amount of Percent
Beneficial Owner(1) Ownership(2) of Class
<S> <C> <C>
Jerome M. Adams 3,908.8628 *
Robert A. Allen 6,435.6224 *
Clifford A. Barton(3) 70,870.1056
Michael F. Butler 3,000.0000 *
Louis Cynkar 3,208.2194 *
Terry K. Dunkle 11,208.1076 *
Richard W. Kappel 9,515.0000 *
John H. Kunkle, Jr. 5,302.0000 *
James F. O'Malley(4) 33,041.8978 *
Frank J. Pasquerilla(5) 46,382.6779
Jack Sevy 1,064.2270 *
Thomas C. Slater 7,333.4661 *
James C. Spangler 5,141.0000 *
Kenneth J. Tyson 15,361.0082 *
W. Harrison Vail 10,872.5388 *
Robert L. Wise 1,447.3341 *
Officers, Directors
and Nominees for
Directors as a
Group (6)
__________________
<FN>
*Less than 1%
(1) Except as noted below, each of the identified beneficial
owners, including the officers, directors and nominees for
director as a group, has sole investment and voting power as
to all the shares shown as beneficially owned with the
exception of those held by certain officers, directors and
nominees for director jointly with their spouses or directly
by their spouses or other relative.
(2) Includes shares which may be acquired within sixty (60) days
upon the exercise of presently exercisable stock options as
follows: 1,333, 1,333, 4,666, 1,834, and 11,500 shares of
USBANCORP Common Stock held by Messrs. Barton, Dunkle, Vail
and Cynkar and the group, respectively. In addition,
Messrs. Barton, Dunkle, Vail and Cynkar and the group hold
outstanding options to acquire 4,334, 4,334, 4,334, 2,166,
and 17,334 shares of USBANCORP Common Stock, respectively,
which first become exercisable on December 17, 1994 and
therefore are excluded.
(3) Includes 35,510 shares of USBANCORP Common Stock held by
Mr. Barton's wife, as to which shares Mr. Barton disclaims
beneficial ownership.
(4) Includes 1,584.4124 and 57.8020 shares of USBANCORP Common
Stock held by Mr. O'Malley's daughter and wife,
respectively, as to which Mr. O'Malley disclaims beneficial
ownership.
(5) Includes 1,014 shares of USBANCORP Common Stock held by
Crown American Associates of which Mr. Pasquerilla is an
officer and controlling shareholder.
(6) The group consists of 17 persons, being the Chief Executive
Officer, the Named Officers and one additional executive
officer of USBANCORP as of _____________, 1994.
</TABLE>
Principal Holders of Stock
Except as set forth in the following table, no person
is known to USBANCORP management to own of record or beneficially
5% or more of the outstanding USBANCORP Common Stock as of
______________, 1994:
<TABLE>
<CAPTION> Common Stock
Name and Address Amount Percent
Beneficial Owner
<S> <C> <C>
First Carolina
Investor Group(l) 274,755 ______%
5224 Providence County
Club Drive
Charlotte, NC 28277-2501
(2)(3)
__________________
<FN>
(1) Comprises a total of six individuals and entities who have
filed reports jointly on Schedule 13D pursuant to the
Exchange Act.
(2) All information in the table is based upon the Schedule 13D
reports, as amended, previously filed by the Group. Except
as indicated below, each member of the Group is believed to
possess sole voting and investment power over its shares.
(3) As previously reported, USBANCORP and the respective members
of the Group namely, First Carolina Investors, Inc.;
Foundation Lyric; Hofin Anstalt; John G. Ogilvie; Trust
Alvant; and Robert G. Wilmers, have entered into a
"Standstill Agreement", dated as of January 8, 1990, under
which USBANCORP has agreed (among other things) not to
oppose increases in the Group's holdings to as much as 15%.
The agreement also provides that, unless the group's
beneficial ownership is reduced below five percent, the
members will instruct their proxies to vote their shares in
exact proportion to the votes cast by USBANCORP's other
shareholders, and that they will not solicit the proxies of
any other shareholders. The agreement will expire upon the
earlier of January 1, 1995, or the consummation of any
"change of control" transaction, as therein defined.
</TABLE>
Financial Information
Requests for printed financial material for USBANCORP
or any of its subsidiaries - annual or quarterly reports, Forms
10-K and 10-Q and Call Reports - should be directed to Orlando B.
Hanselman, Executive Vice President and Chief Financial Officer,
USBANCORP, Inc., Main & Franklin Streets, P.O. Box 670,
Johnstown, PA 15907-0670, telephone (814) 533-5319.
Transactions with Management
Certain directors, nominees and executive officers
and/or their associates were customers of and had transactions
with USBANCORP or its subsidiaries during 1993. Transactions
which involved loans or commitments by subsidiary banks were made
in the ordinary course of business and on substantially the same
terms, including interest rates and collateral, as those
prevailing at the time for comparable transactions with other
persons and did not involve more than normal risk of
collectability or present other unfavorable features. These
loans represented in the aggregate less than 10% of shareholders'
equity as of December 31, 1993 and are not considered material by
USBANCORP.
Mr. Adams is a partner in a law firm which rendered
services to Three Rivers during 1993 and will render such
services in 1994.
Auditors
Arthur Andersen & Co. has audited USBANCORP's financial
statements for the fiscal year ended December 31, 1993, and the
report on such financial statements appears in the Annual Report
to Shareholders. Arthur Andersen & Co. has been selected by the
USBANCORP Board of Directors to perform an examination of the
consolidated financial statements of USBANCORP for the year
ending December 31, 1994.
Representatives of Arthur Andersen & Co. are expected
to be present at the USBANCORP Annual Meeting with the
opportunity to make a statement if they desire to do so and are
expected to be available to respond to appropriate questions.
AMENDMENT OF USBANCORP'S ARTICLES OF INCORPORATION
Article FIFTH of USBANCORP's articles of incorporation
presently authorizes the issuance of up to 2,000,000 shares of
Preferred Stock, without par value and 6,000,000 shares of
USBANCORP Common Stock, par value $2.50. There are presently
outstanding no shares of Preferred Stock and __________ shares of
USBANCORP Common Stock. It is the opinion of USBANCORP's Board
of Directors that the remaining number of authorized but unissued
shares of USBANCORP Common Stock is not sufficient to provide
enough flexibility to management to take advantage of possible
acquisitions and other corporate opportunities and to provide
enough shares of USBANCORP Common Stock for the Dividend
Reinvestment Plan and stock options or other forms of
compensation. It is the opinion of the USBANCORP Board of
Directors that it is in USBANCORP's best interests to increase
the number of authorized shares of USBANCORP Common Stock. To
that end, the USBANCORP Board of Directors has approved amending
Article FIFTH to increase the number of authorized shares of
USBANCORP Common Stock to 12,000,000. THE USBANCORP BOARD OF
DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE TO APPROVE AND
ADOPT THE FOLLOWING RESOLUTION:
BE IT RESOLVED, that the first paragraph of Article
FIFTH of the articles of incorporation, as amended, be further
amended to read in its entirety as follows:
"The aggregate number of shares which USBANCORP shall
have the authority to issue is 2,000,000 shares of
Preferred Stock, without par value and 12,000,000
shares of Common Stock with the par value of $2.50."
A majority of shares present and voting at the
USBANCORP Annual Meeting is required to approve and adopt this
resolution. There will be no change in the number or par value
of authorized shares of USBANCORP Preferred Stock or in the par
value of shares of USBANCORP Common Stock.
ELECTION OF JSB DIRECTORS
General
The bylaws of JSB provide that the JSB Board of Directors
shall be divided into three classes as nearly equal in number as
possible, and a resolution of the JSB Board of Directors adopted
pursuant to such bylaws provides that the JSB Board of Directors
shall consist of eleven members. The members of each class are
to be elected for a term of three years or until their successors
are elected and have qualified. The terms of the three classes
are staggered so that one class of directors is to be elected
annually. Pursuant to JSB's Charter, the cumulation of votes for
the election of directors is not permitted.
Nominations have been made for four directors with terms
expiring in 1997. Unless otherwise directed in the proxy, each
proxy executed and returned by a JSB shareholder and not revoked
will be voted for the election of the four nominees listed below.
The accompanying proxy cannot be voted for any person who is not
a nominee of the JSB Board of Directors. The Board of Directors
believes that all nominees listed below will stand for election;
however, if any person nominated fails to stand for election, the
proxies will vote for a substitute nominee selected by the JSB
Board of Directors. The JSB Board of Directors believes that
each nominee named herein will serve if elected to the JSB Board
of Directors.
The following table sets forth the age and background of
each nominee for director and each director whose term continues,
his tenure as a director of JSB and the number and percentage (if
greater than 1%) of shares of JSB Common Stock beneficially owned
by each such person as of February 28, 1994. There are no
arrangements or understandings between JSB and any person
pursuant to which such person has been elected a director, and no
director is related to any other director or executive officer of
JSB by blood, marriage or adoption.
<PAGE>
<TABLE>
<CAPTION> Nominees for Three-Year Term Expiring in 1997
Position with JSB and Common Stock
Principal Occupation Director Beneficially Owned as
Name Age During the Past Five Years Since of February 28, 1994(1)
No. %
<S> <C> <C> <C> <C> <C>
James C. Dewar 56 President and General 1974 34,586(2) 1.78
Manager of Jim Dewar
Oldsmobile, Inc.,
Johnstown, Pennsylvania
since 1969
James M. Edwards, Sr.54 President and Chief 1984 11,537(3) *
Executive Officer of WJAC,
Inc., Johnstown,
Pennsylvania, a television
broadcasting station,
since 1980
Kim W. Kunkle 40 President and Chief 1984 6,606(4) *
Executive Officer of Laurel
Holdings, Johnstown,
Pennsylvania, a holding
company with subsidiaries
involved in water utility
management, water line
construction, machining,
contract cleaning, repair
of mine batteries, and
travel services,
since 1984
Howard M. Picking, 56 President of the Miller- 1970 16,600(5) *
III Picking Corporation,
Johnstown, Pennsylvania,
an air conditioning
machinery manufacturer,
since 1978
<PAGE>
<CAPTION>
Directors With Term Expiring in 1995
Position with JSB and Common Stock
Principal Occupation Director Beneficially Owned as
Name Age During the Past Five Years Since of February 28, 1994(1)
No. %
<S> <C> <C> <C> <C> <C>
Dr. Frank H. 66 President Emeritus of the 1974 1,001(6) *
Blackington, III University of Pittsburgh
at Johnstown, Johnstown,
Pennsylvania, since
December 1993; President
of the University of
Pittsburgh at Johnstown,
1974-1993
John B. Gunter 75 Chairman of the Board of 1977 2,000(6) *
JSB since March 2, 1990;
Retired; President and
Director of Winston
Corporation from 1978 to
1984; Director of
Marketing and the
Corporate Vice President
and Secretary of
Johnstown Tribune
Publishing Company from
1979 to 1984
Carl R. Sax 58 A Director of and 1980 3,970(7) *
Vice President-General
Manager, General
Kinetics, Inc., Johnstown,
Pennsylvania and
Orlando, Florida, a
manufacturer of high-tech
electronic enclosures for
the United States
Government, since January,
1993; Vice President-
Operations, General
Kinetics, Inc. from
November 1990 through
December 1992; Vice
President Branch
Operations, Sani-Dairy,
Johnstown, Pennsylvania,
from 1986 to 1990
John B. Stockton 71 Retired; Owner and 1957 6,211(8) *
operator of the Stockton
Insurance Agency,
Johnstown, Pennsylvania,
from 1947 to 1990; Mr.
Stockton is also a director
of Paramount Consumer
Discount Co., Johnstown,
Pennsylvania
<PAGE>
<CAPTION> Directors with Term Expiring in 1996
Position with JSB and Common Stock
Principal Occupation Director Beneficially Owned as
Name Age During the Past Five Years Since of February 28, 1994(1)
No. %
<S> <C> <C> <C> <C> <C>
Paul A. Cooney 68 Managing Partner, 1988 166,650(9) 8.57
Cooney Bros. Coal Co.,
Cresson, Pennsylvania,
since 1954
Patrick J. Coyne 51 President and Chief 1989 32,442(10) 1.67
Executive Officer of JSB
since March 2, 1990;
Executive Vice President
and Chief Lending
Officer of JSB from
June 1989 to March
1990; Vice President
and Senior Supervisory
Agent with the Federal
Home Loan Bank of
Pittsburgh, a federally
chartered wholesale bank,
and, at that time, a
regulator of, financial
institutions, from March
1980 to June 1989
John M. Kriak 46 Director and Executive 1983 7,693(11) *
Vice President and Chief
Operating Officer,
Crown Holding
Company, Johnstown,
Pennsylvania, a
developer and operator
of commercial real estate
properties and retail
department stores; Vice
President, Secretary and
Treasurer of The Penn
Traffic Company,
Johnstown, Pennsylvania,
a supermarket company
from 1981 to May 1993.
_______________________________
<FN>
* Represents less than 1% of the outstanding JSB Common Stock.
</TABLE>
THE JSB BOARD OF DIRECTORS RECOMMENDS THAT THE NOMINEES
BE ELECTED AS DIRECTORS.
(1) Based on information furnished by the respective
individuals. Under applicable regulations, shares are deemed to
be beneficially owned by a person if he directly or indirectly
has or shares the power to vote or dispose of the shares, whether
or not he has any economic interest in the shares. Unless
otherwise indicated, a director has sole voting and dispositive
power with respect to the indicated shares and indicated holdings
amount to less than 1.0% of the issued and outstanding JSB Common
Stock.
(2) Includes 11,966 shares of JSB Common Stock held in the
George C. Dewar trust as to which Mr. James C. Dewar is the
trustee, 5,263 shares of JSB Common Stock held in the Jim Dewar
Oldsmobile Pension Plan for the benefit of Mr. James C. Dewar and
the employees of James C. Dewar Oldsmobile, Inc. and 845 shares
of JSB Common Stock held by Mr. Dewar's wife. Mr. Dewar
disclaims beneficial ownership of the shares held by his wife.
(3) Includes 7,537 shares of JSB Common Stock held jointly with
Mr. Edwards' wife with whom voting and dispositive power is
shared and 4,000 shares owned by a pension plan trust in which
Mr. Edwards is one of three trustees. Mr. Edwards disclaims
beneficial ownership of the shares held by the trust.
(4) Includes 2,500 shares of JSB Common Stock owned by the
Laurel Management Company Defined Benefit Pension Plan, the
voting and disposition of which is determined by the Laurel
Management Company Pension Committee of which Mr. Kunkle is a
member. Mr. Kunkle disclaims beneficial ownership of the shares
owned by the plan.
(5) Includes 136 shares of JSB Common Stock held in Mr.
Picking's wife's individual retirement account and 138 shares of
JSB Common Stock held jointly by Mrs. Picking and Mr. Picking's
children. Mr. Picking disclaims beneficial ownership of the
shares held in Mrs. Picking's individual retirement account and
the shares held jointly by Mrs. Picking and their children.
(6) The indicated shares of JSB Common Stock are held jointly
with the spouse of the respective director with whom voting and
dispositive power is shared.
(7) Includes 1,052 shares of JSB Common Stock held by Mr. Sax's
mother-in-law and 950 shares of Common Stock held by Mr. Sax's
wife. Mr. Sax disclaims beneficial ownership of such shares.
(8) Includes 2,000 shares of JSB Common Stock held in the Mary
L. Stockton trust as to which Mr. John B. Stockton is co-trustee.
(9) Includes 165,650 shares of Common Stock owned by Cooney
Bros. Coal Co., of which Mr. Cooney and his two brothers are the
general partners and, as such, direct the voting and disposition
of such shares.
(10) Includes 1,702 shares of JSB Common Stock held jointly with
Mr. Coyne's wife, with whom voting and dispositive power is
shared and 115 shares owned by Mr. Coyne's son. Mr. Coyne
disclaims beneficial ownership of the shares owned by his son.
Also includes 26,360 options to acquire JSB Common Stock which
are exercisable within 60 days of the JSB Record Date.
(11) Includes 5,741 shares of JSB Common Stock held jointly with
Mr. Kriak's wife, 151 shares held in Mrs. Kriak's individual
retirement account, 52 shares of JSB Common Stock held jointly
with Mr. Kriak's mother, and 400 shares of JSB Common Stock held
jointly with Mr. Kriak's sons who reside with him, as to all of
which shares voting and dispositive power is shared with the
exception of the shares held in Mrs. Kriak's individual
retirement account. Mr. Kriak disclaims beneficial ownership of
the shares held in his wife's individual retirement account.
Shareholder Nominations to the JSB Board of Directors
Article II, Section 14 of JSB's bylaws provides that
shareholders entitled to vote for the election of directors may
name nominees for election to the Board of Directors. Any such
nominations must be submitted to the Secretary of JSB in writing,
not less than five days prior to the Annual Meeting. JSB is not
required to include such nominations in the Proxy Statement
/Prospectus. However, if such a nomination is properly made,
ballots will be provided for use by shareholders at the JSB
Annual Meeting bearing the name of such nominee or nominees.
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth information with respect
to ownership of JSB Common Stock by the only entity know to JSB
to be the beneficial owner of 5% or more of the outstanding JSB
Common Stock and by all directors and executive officers as a
group.
<TABLE>
<CAPTION> Amount of Shares of JSB
Common Stock
Name and Address Beneficially Owned as of Percent of JSB
of Beneficial Owner February 28, 1994 Common Stock
<S> <C> <C>
Cooney Bros. Coal Co. 165,650(1) 8.52%
P.O. Box 246
Cresson, Pennsylvania 16630
Directors and executive 299,172 15.38%
officers as a group (14
persons)
<FN>
(1) Based on filings made pursuant to the Exchange Act and
information provided by the company, Cooney Bros. Coal Co. has
the sole power to vote and dispose of the indicated shares of
Common Stock. Mr. Paul A. Cooney, a member of the JSB Board of
Directors, is a general partner of Cooney Bros. Coal Co.
</TABLE>
Board and Committees
Regular meetings of the JSB Board of Directors are held
monthly and special meetings are called and held as needed. The
JSB Board of Directors held a total of 22 meetings during 1993.
No director, except for Mr. Cooney, whose absence was excused by
resolution of the JSB Board of Directors, attended fewer than 75%
of the aggregate of the total number of meetings of the JSB Board
of Directors held during the last year and the total number of
meetings held by all committees of the JSB Board of Directors on
which he served during the last year. The JSB Board of Directors
has established various committees, including an Executive,
Audit, Nominating and Compensation Committee.
The Executive Committee is authorized to exercise all
the powers of the JSB Board of Directors in the management of JSB
between Board of Directors meetings, unless otherwise provided in
JSB's bylaws. The members of the Executive Committee, which met
14 times during the year ended December 31, 1993, are Messrs.
Coyne, Sax, Blackington, Edwards and Gunter.
The Audit Committee recommends to the JSB Board of
Directors independent auditors to perform audit and nonaudit
services, reviews the scope and results of such services, reviews
with management and the independent auditors the systems of
internal controls, assures adherence in accounting and financial
reporting to generally accepted accounting principles and
performs such other duties deemed appropriate by the JSB Board of
Directors. JSB's internal auditor reports to the Audit
Committee. The members of the Audit Committee, which met four
times during the year ended December 31, 1993, are Messrs. Kriak,
Sax, Stockton and Picking.
The duties of the Nominating Committee are to advise
the JSB Board of Directors with respect to nomination of
directors. The Nominating Committee recommends candidates to the
JSB Board of Directors as nominees for election at the JSB Annual
Meeting. Directors are selected on the basis of recognized
achievement and their ability to bring skills and experience to
the deliberations of the JSB Board of Directors. The members of
the Nominating Committee, which met once during the year ended
December 31, 1993, are Messrs. Blackington, Gunter, Sax and
Stockton.
The Compensation Committee reviews the compensation of
senior executive officers and recommends to the JSB Board of
Directors adjustments in such compensation based upon a number of
factors. The members of the Compensation Committee, which met
two times during the year ended December 31, 1993, are Messrs.
Blackington, Gunter, Sax and Edwards. Mr. Coyne attends the
meetings of the Compensation Committee in a non-voting, ex-
officio capacity.
During 1993, each director who was not a full-time
employee of JSB received a monthly fee of $1,000. Directors who
are also full-time employees of the Bank did not receive
additional compensation for any Board or committee meetings
attended. John B. Gunter, Chairman of the JSB Board of
Directors, receives an annual fee of $24,000 for attending JSB
Board of Directors and committee meetings. As Chairman of the
JSB Board of Directors, Mr. Gunter attended 56 committee meetings
either as a member or an ex-officio member. Mr. Gunter also
meets on a regular basis with the President of JSB, meets
periodically with other directors, communicates frequently with
the Executive Committee of the JSB Board of Directors and
performs such other duties as requested from time to time by the
Chief Executive Officer of JSB.
Executive Compensation
Report of the JSB Board of Directors on Compensation During
Fiscal 1993
The Compensation Committee of the JSB Board of
Directors is composed entirely of independent outside directors.
See "Information With Respect to Nominees for Director - The JSB
Board of Directors and Its Committees." The Compensation
Committee is responsible for reviewing the compensation of
executive officers and recommending executive compensation
proposals to the JSB Board of Directors for approval.
The Committee evaluates the base salaries of JSB's
executive officers annually. An executive officer's base salary
is determined based upon longevity with JSB, the effectiveness of
such individual in performing his or her duties, peer averages at
the position in question and JSB's overall performance. No
particular weight is assigned to these variables. The base
salary component alone, while designed to be competitive with
peer group averages, is not designed to produce top levels of
compensation for JSB's executive officers when compared to its
peer group. Based upon the foregoing, Mr. Coyne, the President
and Chief Executive Officer, earned $120,000 in base salary
during 1993.
JSB has established an Executive Annual Incentive Plan
(the "Incentive Plan") which provides for the payment of cash
performance incentives to certain officers and employees of JSB.
The Incentive Plan is administered by the Compensation Committee
of the JSB Board of Directors, excluding participants in the
Incentive Plan. Officers and key employees of JSB are eligible
to participate in the Incentive Plan. The Compensation
Committee, based on recommendations of the Chief Executive
Officer, has the discretion to select Incentive Plan
participants, establish financial performance targets, determine
the times of making awards and to establish such other measures
as may be necessary to administer the Incentive Plan. The
Incentive Plan provides for annual cash awards to be made to
Incentive Plan participants, based on target performance amounts
for JSB and individual performance amounts for each participant
depending on the participation category of the participant.
JSB's performance is based on JSB's return on assets for the
fiscal year. A participant's individual performance awards are
measured by JSB's performance appraisal system. No awards are
granted under the Incentive Plan, regardless of individual
performance, unless a threshold level of return on assets is
achieved for the fiscal year. The amounts payable under the
Incentive Plan in 1994 to executive officers for performance in
fiscal year 1993 are included in the cash compensation table set
forth below.
By the Compensation Committee:
James M. Edwards, Sr. (Chairman)
Carl R. Sax
John B. Gunter
Frank H. Blackington, III
Summary Compensation Table
To meet the goal of providing shareholders a concise,
comprehensive overview of compensation awarded, earned or paid in
the reporting period, the Summary Compensation Table has been
formulated to replace the former Cash Compensation Table. The
Summary Compensation Table includes individual compensation
information on the President and Chief Executive Officer and the
four other executive officers of JSB and its subsidiaries whose
total compensation exceeded $100,000 for services rendered in all
capacities, or who were the most highly compensated employees,
during the fiscal years ended December 31, 1993, 1992 and 1991.
<PAGE>
<TABLE>
<CAPTION> Long All
Name and Principal Annual Term Com- Other Com-
Position(1) Year Compensation pensation pensation(5)
Salary Bonus(3) Options(4)
<S> <C> <C> <C> <C> <C>
Patrick J. Coyne 1993 $120,000 $60,658 10,000 $29,876
President and Chief 1992 97,811 17,533 20,000 25,624
Executive Officer 1991 94,990 20,000 -- 17,446
Kevin J. O'Neil(2) 1993 60,644 -- 10,000 49,112
Executive Vice 1992 -- -- -- --
President - 1991 -- -- -- --
Standard Mortgage
Corporation(SMC)
Walter F. Rusnak 1993 79,200 33,884 5,000 7,475
Senior Vice President 1992 72,114 9,347 10,000 5,458
and Chief Financial 1991 70,494 -- -- 1,209
Officer
Kenneth W. Andres 1993 69,960 25,514 5,000 5,869
Senior Vice President- 1992 63,649 8,257 10,000 5,166
Chief Lending Officer 1991 62,395 -- -- 1,276
R. Craig Pugh 1993 63,250 22,614 5,000 5,765
Senior Vice President- 1992 53,271 6,491 10,000 4,148
Operations 1991 47,446 -- -- 984
________________________________________
<FN>
(1) SMC is JSB's wholly-owned mortgage banking subsidiary
located in Atlanta, Georgia. Kevin E. Kingsman, who
resigned as Executive Vice-President and Chief Operating
Officer of Standard Mortgage Corporation in May 1993,
received $42,506, $71,500 and $69,333 in salary; $0, $9,282
and $0 in bonuses; and $2,550, $4,847 and $715 in all other
compensation in 1993, 1992 and 1991, respectively.
(2) Mr. O'Neil joined SMC on June 1, 1993.
(3) Includes performance incentives under JSB's Executive Annual
Incentive Plan, described above. Performance incentives
earned in 1992 were paid in December 1993. The performance
incentives earned in 1992 and 1993 are included in the
totals for the year in which they were paid, 1993.
(4) Free standing stock options; see "Option Grants in Last
Fiscal Year."
(5) Includes for the named individuals contributions to the
401(k) Thrift Plan, deferred cash compensation, the use of
automobiles owned or leased by JSB, supplemental life
insurance benefits, club dues and other miscellaneous
benefits for certain executive officers.
</TABLE>
<PAGE>
Option Grants in Last Fiscal Year
The Board of Directors and shareholders adopted the
employee stock compensation program (the "Program") for the
benefit of full-time employees of JSB. See "Employee Stock
Compensation Program," below.
The following table sets forth individual grants of
options that were made during the last fiscal year to the
executive officers named in the Summary Compensation Table. This
table is intended to allow shareholders to ascertain the number
and size of option grants made during the fiscal year, the
expiration date of the grants and the potential realizable value
of such options under specified assumptions.
<TABLE>
<CAPTION>
PRESENT
PERCENT OF VALUE ON
NUMBER OPTIONS GRANT
OPTIONS GRANTED GRANTED EXERCISE EXPIRATION DATE
IN 1993(1) IN 1993 PRICE DATE (2)
Name
<S> <C> <C> <C> <C> <C>
Patrick J. Coyne 10,000 28.57% $11.15 FEB 16, 2003 $25,160
Kenneth W. Andres 5,000 14.29% 11.15 FEB 16, 2003 12,580
Kevin J. O'Neil 10,000 28.57% 11.15 JUL 20, 2003 24,800
R. Craig Pugh 5,000 14.29% 11.15 FEB 16, 2003 12,580
Walter F. Rusnak 5,000 14.29% 11.15 FEB 16, 2003 12,580
35,000 100.00%
______________
<FN>
(1) The options vest 100% at the end of three years. The
options became immediately exercisable upon the signing of
the Merger Agreement.
(2) The potential realizable value of the grant of options is
the present value of the grant using a variation of the
Black/Scholes option pricing model.
</TABLE>
Aggregate Option Exercises in Last Fiscal Year and Fiscal
Year-End Option Values
The following table sets forth, with respect to the
executive officers named in the Summary Compensation Table,
information with respect to the aggregate amount of options
exercised during the last fiscal year, any value realized
thereon, the number of unexercised options at the end of the
fiscal year (exercisable and unexercisable) and the value with
respect thereto.
<TABLE>
<CAPTION>
NUMBER OF VALUE OF
NUMBER UNEXERCISED UNEXERCISED
OPTIONS EXERCISED EXERCISED VALUE OPTIONS IN THE MONEY OPTIONS
IN 1993 REALIZED(1) AT FISCAL YEAR END AT FISCAL YEAR END(2)
Name
<S> <C> <C> <C> <C>
Patrick J. Coyne 3,640 $39,023 26,360 $287,657
Kenneth W. Andres -- -- 15,000 164,250
Kevin J. O'Neil -- -- 10,000 71,750
R. Craig Pugh -- -- 15,000 164,250
Walter F. Rusnak -- -- 15,000 164,250
3,640 $39,023 81,360 $852,157
_______________
<FN>
(1) Based upon the $18.00 closing market price of JSB Common
Stock on the exercise date, December 15, 1993.
(2) Based upon a closing market price for JSB Common Stock as of
December 31, 1993 of $18.50. The options became immediately
exercisable upon the signing of the Merger Agreement.
</TABLE>
Comparative Stock Performance Graph
The stock performance graph below compares the
cumulative total shareholder return of JSB Common Stock from
December 31, 1988 to December 31, 1993, with the cumulative total
return of the NASDAQ Market Index and all banks traded on the
NASDAQ ("Peer Group Index"), assuming an investment of $100 on
December 30, 1988, and the reinvestment of all dividends. JSB
paid a dividend of $0.15 on JSB Common Stock in 1993.
[Insert JSB Stock Performance Graph here]
Certain Transactions
JSB has contracted with Safari Contract Cleaners to
provide janitorial services to JSB on a month-to-month basis. In
1993, JSB paid $60,000 for such services. Kim Kunkle, a director
of JSB is the President, Chief Executive Officer and controlling
shareholder of Safari Contract Cleaners.
Employment Agreements
JSB entered into an employment agreement with Mr. Coyne,
effective June 5, 1989, and an employment agreement with Walter
F. Rusnak, effective May 29, 1990. The agreement with Mr. Coyne
provides for an employment term of three years and that it will
be extended automatically for an additional one year on the first
anniversary of the agreement and each annual anniversary
thereafter, unless it is terminated in accordance with its terms.
The agreement with Mr. Rusnak provides that he shall serve JSB as
an employee for a three-year term. Each agreement provides for
compensation at the employee's then base salary with annual
increases determined by the JSB Board of Directors. During the
term of his agreement, if Mr. Coyne terminates his employment for
good reason, as defined, and such termination is subsequent to a
change in control of JSB, then in lieu of any further salary
payments, JSB will be required to pay Mr. Coyne a lump sum equal
to 2.99 times his average annual compensation for the preceding
five years (or such shorter period if Mr. Coyne has been employed
by JSB less than five years at the time of termination). The
agreement with Mr. Rusnak provided that if he terminated his
employment with JSB for good reason, as defined, and such
termination is subsequent to a change in control of JSB, Mr.
Rusnak would have been entitled to receive a lump sum payment
equal to 2.99 times his average annual compensation for the
preceding five years (or such shorter period if Mr. Rusnak had
been employed by JSB less than five years) if such termination
occurred within one year of the date of the agreement, 2.0 times
his average compensation for the preceding five years if
termination occurred within one to two years from the date of the
agreement and 1.0 times his average compensation for the
preceding five years if termination occurred within two to three
years from the date of the agreement. The agreement with Mr.
Rusnak expired May 29, 1993. As defined in the agreements, good
reason means a failure by JSB to comply with the provisions of
the agreement, a change in the executive's positions, duties,
responsibilities and status, a reduction in the executive's
annual salary or benefits or any termination of employment not in
compliance with the agreement. A change in control is defined in
the agreements as that which would be required to be reported
under the proxy rules promulgated by the Securities and Exchange
Commission under the Exchange Act, provided that such a change
would be deemed to have occurred if any person not currently a
director or officer of JSB becomes the beneficial owner of 25% or
more of the voting stock of JSB, or without the approval of two-
thirds of the directors then in office, there is a change during
any consecutive two-year period of a majority of the members of
the JSB Board of Directors. The Merger will be deemed to be a
change in control pursuant to the terms of the agreement with
Mr. Coyne. In 1993, the agreement with Mr. Coyne was amended to
provide that the amount to be received by him as a result of a
termination subsequent to a change in control will not be limited
to the maximum permitted without triggering the penalties to JSB
and the executive officer specified in Sections 280G and 4999 of
the Code. As of the date of this Proxy Statement/Prospectus, the
cash amount which Mr. Coyne will be entitled to in lieu of
further salary payments upon his termination at the closing of
the Merger will be $735,823.
During the term of his agreement, if Mr. Coyne
terminates his employment for good reason, as defined, and such
termination is not subsequent to a change in control of JSB or
JSB terminates Mr. Coyne's employment for other than just cause,
as defined, then in lieu of any further salary payments, JSB will
be required to pay Mr. Coyne the product of Mr. Coyne's current
annual base salary in effect on the date of termination
multiplied by the greater of the number of years remaining in the
term of Mr. Coyne's employment agreement or three. Termination
for just cause is defined in the agreement to include termination
for personal dishonesty, incompetence, willful misconduct, breach
of fiduciary duty involving personal profit, conviction of a
felony, willful violation of any law or regulation enforced by
applicable federal banking agencies, willful or intentional
breach or neglect of the executive's duties, persistent
negligence or misconduct in the performance of such duties or a
material breach of any provision of the agreement, as determined
by a court or federal or state regulatory agency having
jurisdiction over JSB. Such payment is to be made in
substantially equal semi-monthly installments commencing with the
month in which the date of termination occurs and continuing for
the number of consecutive semi-monthly payments equal to the
product obtained by multiplying the number of years (including
partial years) applicable above by 24. As of the date of this
Proxy Statement/Prospectus, the cash amount which Mr. Coyne would
be entitled to in lieu of further salary payments upon
termination by Mr. Coyne for good reason not subsequent to a
change in control of JSB or termination by JSB of Mr. Coyne's
employment for other than just cause would be $372,600.
Deferred Compensation Plan
JSB has entered into a deferred compensation agreement
with Mr. Coyne whereby if he is still employed by JSB on the date
he becomes 65, he may retire, and commencing on the date of such
retirement, JSB will pay deferred compensation for services
rendered prior to retirement. Such deferred compensation will be
in the amount of $34,248 per year, payable in equal monthly
installments over the remaining life of Mr. Coyne. If, following
retirement, Mr. Coyne does not live to receive deferred
compensation amounting to 120 monthly installments, the
difference between the amount received prior to death and
$342,480, shall be paid in equal consecutive monthly payments to
a designated beneficiary. If Mr. Coyne is discharged for proper
cause, no deferred compensation shall be paid under the terms of
the agreement and the agreement shall be considered terminated.
The amount deferred on behalf of Mr. Coyne for 1993 was $13,046.
Under the terms of the Merger Agreement, Mr. Coyne will receive
$342,280 in a lump sum at the closing of the Merger in lieu of
payments due pursuant to the Deferred Compensation Plan.
401(k) Thrift Plan
Effective November 1, 1991, JSB established the 401(k)
Plan for its salaried employees by participation in the Financial
Institutions Thrift Plan. The 401(k) Plan is a defined
contribution plan which is subject to the provisions of ERISA and
is intended to qualify under Sections 401(a) and 401(k) of the
Code. Assets of the 401(k) Plan are held in trust by a trustee
which is not affiliated with JSB. In general, all employees of
JSB are eligible to participate in the 401(k) Plan upon
completion of one year of service and attainment of the age of 21
years. Each participant may elect to contribute to the 401(k)
Plan between 2% and 15% of his or her compensation as defined in
the plan, on a pre-tax basis (subject to an annual maximum of
$8,994, in 1993, and as adjusted from time to time by the
Secretary of the Treasury), and may direct that the contribution
be invested in any of four available investment options: (i) a
conservative equity fund, (ii) an equity growth fund, (iii) a
fixed income fund, and (iv) an income fund primarily investing in
obligations issued or guaranteed by the U.S. government or
agencies thereof. JSB will make a matching contribution equal to
100% of all amounts contributed by each participant up to 6% of
compensation. JSB may also make additional contributions in its
discretion under certain circumstances.
Participants in the 401(k) Plan are always 100% vested in
amounts allocated to their accounts. Upon termination of
employment, a participant's vested benefit under the 401(k) Plan
generally will be distributed immediately in a lump sum, except
that if a participant's benefits exceed $3,500 the participant
may elect to be paid in annual installments over a period not to
exceed 10 years. The 401(k) Plan provides that participants may
borrow up to 50% of their account balance from the plan. The
amounts contributed in 1993 by JSB pursuant to the 401(k) Plan to
the account of Messrs. Coyne, Rusnak, Kingsman, O'Neil, Andres
and Pugh were $8,994, $6,785, $2,550, $0, $4,809 and $5,152,
respectively. The amount of employee deferrals during 1993 are
included in the Summary Compensation Table set forth above.
Employee Stock Compensation Program
The shareholders of JSB have adopted an employee stock
compensation program (the "Program") for the benefit of full-time
employees of JSB. Directors who are not full-time employees of
JSB are not eligible to receive stock options under the Program.
An aggregate of 194,015 shares of authorized but unissued JSB
Common Stock have been reserved for future issuance under the
Program pursuant to the exercise of stock options and stock
appreciation rights and the vesting of performance shares. The
Program provides for the award of options which are intended to
qualify as incentive stock options under Section 422 of the Code,
options which are not intended to so qualify, stock appreciation
rights and performance shares. The Program is administered by a
committee of not less than three non-officer directors of JSB,
who are given sole authority and absolute discretion under the
Program to determine the employees to whom options, stock
appreciation rights and performance shares shall be granted, the
number of shares subject to each award and the exercise price of
options. Currently, this committee is comprised of Messrs.
Gunter, Blackington, Edwards and Sax. The exercise price of an
incentive stock option is required to be no less than the fair
market value of the stock at the time of the grant of the option.
For information regarding stock option grants and exercises in
the last fiscal year, see "Option Grants in Last Fiscal Year" and
"Aggregate Option Exercises in Last Fiscal Year and Fiscal Year-
End Option Values" above.
Stock Purchase Plan
JSB assists directors, officers and employees who desire to
purchase JSB Common Stock by withholding amounts designated by
the participant from the participant's salary or fees for
purposes of purchasing JSB Common Stock in the open market
through an independent registered stock broker. Although JSB
pays the brokerage fees in connection with the purchase of JSB
Common Stock by participants, JSB does not make any cash
contribution toward the purchase of shares of JSB Common Stock.
This plan is not qualified for federal income tax purposes.
Shares purchased pursuant to this plan are held by the plan
administrator in safekeeping for the participants, with the
individual participants listed separately, or distributed to such
participants if they so request. During 1993, one director of
JSB purchased JSB Common Stock in this manner.
Indebtedness of Management
JSB makes mortgage and other types of loans to its
directors, officers and employees and certain of their
affiliates. Such loans are made in the ordinary course of
business and on substantially the same terms, including interest
rates, loan fees and collateral, as those prevailing at the time
for comparable transactions with other persons. JSB believes
that loans to its directors, officers and employees do not
involve more than the normal risk of collectibility or present
other unfavorable features.
RATIFICATION OF APPOINTMENT OF JSB INDEPENDENT AUDITORS FOR 1994
The JSB Board of Directors has appointed KPMG Peat
Marwick as independent auditors of JSB for the year ending
December 31, 1994, and has further directed that the selection of
such auditors be submitted for ratification by the shareholders
at the JSB Annual Meeting. JSB has been advised by KPMG Peat
Marwick that neither that firm nor any of its associates has any
relationship with JSB or its subsidiary other than the usual
relationship that exists between independent certified public
accountants and clients. KPMG Peat Marwick will have a
representative at the JSB Annual Meeting who will have an
opportunity to make a statement, if he or she so desires, and who
will be available to respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE
RATIFICATION OF THE APPOINTMENT OF KPMG PEAT MARWICK AS JSB'S
INDEPENDENT AUDITORS FOR THE YEAR ENDING DECEMBER 31, 1994.
SHAREHOLDER PROPOSALS
USBANCORP
Any USBANCORP shareholder who desires to submit a
proposal to be considered for inclusion in USBANCORP's proxy
materials relating to its 1995 annual meeting of shareholders
(presently scheduled to be held on ___________, 1995) must submit
such proposal in writing, addressed to USBANCORP at Franklin and
Main Streets, Johnstown, Pennsylvania 15901 (Attention:
Secretary) no later than ________.
JSB
If the Merger is not consummated prior thereto, any
proposal which a shareholder wishes to have presented at the next
annual meeting of shareholders of JSB to be held in 1995, must be
received at the main office of JSB, Market at Main Street,
Johnstown, Pennsylvania 15901 no later than _______.
OTHER MATTERS
USBANCORP
USBANCORP management is not aware of any business to
come before the USBANCORP Annual Meeting other than those matters
described above in this Proxy Statement/Prospectus and procedural
matters incident to the conduct of the USBANCORP Annual Meeting.
However, if any other matters should properly come before the
USBANCORP Annual Meeting, it is intended that proxies solicited
hereby will be voted with respect to those other matters in
accordance with the judgment of the persons voting the proxies.
JSB
JSB management is not aware of any business to come
before the JSB Annual Meeting other than those matters described
above in this Proxy Statement/Prospectus and procedural matters
incident to the conduct of the JSB Annual Meeting. However, if
any other matters should properly come before the JSB Annual
Meeting, it is intended that proxies solicited hereby will be
voted with respect to those other matters in accordance with the
judgment of the persons voting the proxies.
<PAGE>
JSB CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Auditors
The Board of Directors and Stockholders
Johnstown Savings Bank:
We have audited the accompanying consolidated statements of
financial condition of Johnstown Savings Bank and subsidiaries as
of December 31, 1993 and 1992 and the related consolidated
statements of operations, stockholders' equity, and cash flows
for the years then ended. These consolidated financial
statements are the responsibility of Johnstown Savings Bank's
management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits. The
consolidated financial statements of Johnstown Savings Bank and
subsidiaries for the year ended December 31, 1991 were audited by
other auditors whose report thereon, dated January 30, 1992,
expressed an unqualified opinion on those statements.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial
position of Johnstown Savings Bank and subsidiaries as of
December 31, 1993 and 1992 and the results of their operations
and their cash flows for the years then ended in conformity with
generally accepted accounting principles.
As discussed in note 1 to the consolidated financial statements,
Johnstown Savings Bank changed its method of accounting for
investment and mortgage-backed securities in 1993 to adopt the
provisions of the Financial Accounting Standards Board's
Statement of Financial Accounting Standards No. 115, "Accounting
for Certain Investments in Debt and Equity Securities." As
discussed in notes 1 and 7 to the consolidated financial
statements, Johnstown Savings Bank changed its method of
accounting for income taxes in 1992 to adopt provisions of the
Financial Accounting Standards Board's Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes."
January 28, 1994 KPMG Peat Marwick
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors
Johnstown Savings Bank, FSB
We have audited the accompanying consolidated statements of
financial condition of Johnstown Savings, FSB at December 31,
1991 and 1990, and the related consolidated statements of
operations, stockholders' equity and cash flows for each of the
three years in the period ended December 31, 1991. These
financial statements are the responsibility of the Bank's
management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the consolidated
financial condition of Johnstown Savings Bank, FSB at
December 31, 1991 and 1990, and the consolidated results of its
operation and its cash flows for each of the three years in the
period ended December 31, 1991 in conformity with generally
accepted accounting principles.
ERNST & YOUNG
Pittsburgh, Pennsylvania
January 30, 1992
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(In thousands, except per share data)
December 31,
1993 1992
<S> <C> <C>
ASSETS
Cash and due from banks $ 3,100 $ 3,932
Interest-bearing deposits in other banks 5,349 7,629
8,449 11,561
Investment securities (Note 2):
Available for sale (market value of $21,757
and $5,082) 21,757 4,977
Held to maturity (market value of $151 and
$5,559) 151 5,521
Mortgage-backed securities (Note 2):
Available for sale (market value of $115,821
and $14,171) 115,821 13,387
Held to maturity (market value of $28,355 and
$107,672) 28,345 107,550
Held in trading account 3,551 0
Loans receivable-net (includes loans available
for sale of $32,759 and $20,738, respectively)
(Notes 3 and 4) 155,444 151,786
Real estate acquired by foreclosure-net (Note 4) 1,490 4,569
Federal Home Loan Bank (FHLB) stock 5,056 2,775
Accrued interest receivable 2,147 2,079
Office properties and equipment-net (Note 5) 2,655 2,819
Mortgage servicing purchased-net of accumulated
amortization of $9,503 and $7,228, respectively
(Note 16) 7,342 7,838
Prepaid expenses and other assets 3,590 5,582
TOTAL ASSETS $355,798 $320,444
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits (Note 9):
Savings accounts $ 55,290 $ 52,472
Savings certificates 107,728 120,128
NOW deposits and money market demand accounts 53,188 49,562
216,206 222,162
Advances by borrowers for taxes and insurance 1,204 781
Other borrowed funds (Note 10) 19,378 18,090
Accrued expenses and other liabilities 2,430 2,550
FHLB advances (Note 11) 89,000 52,500
TOTAL LIABILITIES 328,218 296,083
(continued)
<PAGE>
STOCKHOLDERS' EQUITY
Preferred stock 5,000,000 shares authorized; 0 0
Common stock, $1 par value; 15,000,000 shares
authorized
1,943,790 and 1,940,150 issued & outstanding 1,944 1,940
Additional paid-in capital 15,065 15,042
Unrealized gains on Investment and Mortgage-backed
securities available for sale-net of applicable
income taxes 122 0
Retained earnings-substantially restricted (Note 8) 10,449 7,379
TOTAL STOCKHOLDERS' EQUITY 27,580 24,361
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $355,798 $320,444
<FN>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except for per share data)
Year Ended December 31,
1993 1992 1991
<S> <C> <C> <C>
INTEREST INCOME:
Mortgage loans $10,045 $10,741 $12,440
Other loans 3,319 4,141 4,469
Mortgage-backed securities 7,682 7,310 5,731
Interest and dividends on
investment securities 1,456 920 1,437
Other interest income 101 170 210
TOTAL INTEREST INCOME 22,603 23,282 24,287
INTEREST EXPENSE:
Deposits (Note 9) 8,111 10,216 13,582
FHLB advances 3,522 2,060 1,871
Other borrowings 529 502 471
TOTAL INTEREST EXPENSE 12,162 12,778 15,924
NET INTEREST INCOME 10,441 10,504 8,363
PROVISION FOR LOAN LOSSES (Note 3) 1,102 2,505 867
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 9,339 7,999 7,496
OTHER OPERATING INCOME:
Mortgage servicing income and
other loan service fees (net
of amortization of cost of
purchased mortgage servicing
rights of $2,275, $2,383, and
$1,425) 2,390 2,288 2,414
Gains and other income-
real estate owned 1,143 166 90
Net gains on sale of loans 1,370 1,311 1,281
Gain (loss) on sale of securities
(Note 2) 811 742 (107)
Other 868 739 726
TOTAL OTHER OPERATING INCOME 6,582 5,246 4,404
OTHER OPERATING EXPENSES:
Salaries and employee benefits 5,387 5,083 4,899
Occupancy and equipment 1,150 1,186 1,186
Provision for losses
and other related charges-
real estate owned 22 3,305 1,497
FDIC insurance premium 571 513 470
Merger costs 413 0 0
Gain on termination of pension
plan 0 (122) (642)
Other 3,457 3,048 2,768
TOTAL OTHER OPERATING EXPENSES 11,000 13,013 10,178
(continued)
INCOME BEFORE PROVISION FOR (BENEFIT
FROM) INCOME TAXES AND CUMULATIVE
EFFECT OF CHANGE IN ACCOUNTING
PRINCIPLE 4,921 232 1,722
PROVISION FOR (BENEFIT FROM) INCOME
TAXES (Note 7) 1,560 (677) 110
INCOME BEFORE CUMULATIVE EFFECT
OF CHANGE IN ACCOUNTING PRINCIPLE 3,361 909 1,612
CUMULATIVE EFFECT AT JANUARY 1,
1992, OF CHANGE IN ACCOUNTING
FOR INCOME TAXES (Note 7) 0 1,673 0
NET INCOME $ 3,361 $ 2,582 $ 1,612
NET INCOME PER SHARE:
Income before cumulative effect
of change in accounting
principle $ 1.73 $ 0.47 $ 0.83
Cumulative effect of change in
accounting for income taxes 0.00 0.86 0.00
NET INCOME $ 1.73 $ 1.33 $ 0.83
<FN>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOW
(In thousands)
Year Ended December 31,
1993 1992 1991
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C> <C>
Net income $ 3,361 $ 2,582 $ 1,612
Adjustments to reconcile net income to
net cash provided by operating activities
Depreciation and amortization 2,681 2,803 1,903
Amortization of investment premiums and discounts 1,296 583 275
Provision for loan losses 1,102 2,505 867
Provision for losses-real estate owned 0 2,375 1,414
Direct write down of investment securities 17 194 107
Net (gains) losses on sale of
investment and mortgage-backed securities (811) (742) 107
Net gains on sale of loans available for sale (1,370) (1,311) (1,281)
Changes in interest payable (167) ( 601) (82)
Changes in interest receivable (68) 293 113
Changes in prepaid and other assets 1,973 (2,890) 478
Changes in accrued liabilities 47 323 41
Net change in loans available for sale (10,651) ( 9,796) (1,781)
Net change in investments held in trading account (3,787) 0 0
TOTAL ADJUSTMENTS (9,738) ( 6,264) 2,161
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES (6,377) ( 3,682) 3,773
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of investment and mortgage
backed securities held to maturity 11,821 32,220 9,916
Proceeds from principal reductions of investment
and mortgage-backed securities held to maturity 37,459 21,854 3,063
Purchase of investment and mortgage-backed securities
held to maturity (74,990) (92,503) (39,479)
Proceeds from sales of investment and mortgage-backed
securities available for sale 50,959 25,416 16,298
Proceeds from principal reductions of investment and
mortgage-backed securities available for sale 11,837 2,981 38
Purchase of investment and mortgage-backed securities
available for sale (71,991) (22,816) (16,336)
Net principal collected on loans 5,931 16,025 10,944
Purchase of properties and equipment (241) (572) (151)
Proceeds from sale of fixed assets and real estate
acquired through foreclosure 4,427 3,322 1,269
Net change in FHLB stock (2,281) (997) 0
Net acquisition of mortgage servicing rights (1,779) (595) (2,087)
NET CASH USED BY INVESTING ACTIVITIES (28,848) (15,665) (16,525)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net change in deposits (5,956) (1,424) 8,292
Net change in borrowers' advances 423 (1) (13)
Proceeds from FHLB advances 225,118 94,105 73,900
Repayment of FHLB advances (188,618) (70,605) (71,447)
Net change in other borrowed funds 1,288 2,442 2,749
Proceeds from issuance of Common Stock 27 0 0
Dividends paid on Common Stock (291) 0 0
Unrealized appreciation of investments
available for sale 122 0 0
NET CASH PROVIDED BY FINANCING ACTIVITIES 32,113 24,517 13,481
(continued)
NET CHANGE IN CASH AND CASH EQUIVALENTS (3,112) 5,170 729
CASH AND CASH EQUIVALENTS-BEGINNING OF YEAR 11,561 6,391 5,662
CASH AND CASH EQUIVALENTS-END OF YEAR $ 8,449 $11,561 $ 6,391
SUPPLEMENTAL DISCLOSURES OF NON-CASH ACTIVITIES:
Loans transferred to real estate owned and
in-substance foreclosures $ 1,840 $ 4,079 $ 3,526
Loans charged-off 2,450 1,828 2,353
Interest paid 12,329 13,378 16,006
Income taxes paid 265 113 116
Investment and mortgage-backed securities
transferred to available for sale 109,401 24,034 0
<FN>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In thousands)
UNREALIZED
GAIN ON TOTAL
ADDITIONAL SECURITIES STOCK-
COMMON PAID-IN AVAILABLE RETAINED HOLDERS'
STOCK CAPITAL FOR SALE EARNINGS EQUITY
<S> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1990 $ 1,940 $15,042 $ 0 $ 3,185 $20,167
Net Income 1,612 1,612
BALANCE, DECEMBER 31, 1991 1,940 15,042 0 4,797 21,779
Net Income 2,582 2,582
BALANCE, DECEMBER 31, 1992 1,940 15,042 0 7,379 24,361
Net Income 3,361 3,361
Common Stock Cash Dividends (291) (291)
Stock Options Exercised 4 23 27
Unrealized gains on investment 122 122
and mortgaged-backed securities,
net of income tax effect
BALANCE, DECEMBER 31, 1993 $ 1,944 $15,065 $ 122 $10,449 $27,580
<FN>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1993, 1992, and 1991
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting and reporting policies followed by Johnstown
Savings Bank (JSB) conform with generally accepted accounting
principles. The following is a description of significant
policies:
a. Principles of consolidation:
The consolidated financial statements include the accounts
of JSB and its wholly-owned subsidiaries, SB Realty, Inc.,
and Standard Mortgage Corporation of Georgia, Inc. (SMC), a
wholly-owned subsidiary of SB Realty, Inc. All significant
intercompany transactions and accounts are eliminated in
consolidation.
b. Investment and mortgage-backed securities:
Investment securities and mortgage-backed securities (MBS)
categorized as held-to-maturity are carried at historical
cost adjusted for amortization of purchase premiums and
accretion of purchase discounts computed by the interest
method. Prior to December 31, 1993, investment securities
and MBS categorized as available-for-sale were carried at
the lower of amortized historical cost or market values,
with unrealized aggregate holding period losses charged to
current operations.
In May 1993, The Financial Accounting Standards Board (FASB)
issued Statement of Financial Accounting Standards No. 115
("SFAS No. 115"), "Accounting for Certain Investments in
Debt and Equity Securities." SFAS No. 115 requires that
investments be classified into three categories:
(1) Securities held-to-maturity, reported at amortized
historical cost; (2) securities available-for-sale, reported
at fair value; and (3) trading securities, reported at fair
value. Unrealized holding gains and losses for trading
securities are included in earnings while unrealized holding
gains and losses for securities available-for-sale are
reported, net of taxes, as a separate component of equity.
Effective December 31, 1993, JSB adopted SFAS No. 115. JSB
reclassified $109.4 million of investment securities and MBS
to the available-for-sale category during 1993.
Market values are determined on an aggregate basis using
quoted market prices at the financial statement date.
Realized gains or losses on securities sold are calculated
on the adjusted cost of the securities sold.
Management determines the appropriate classification of
securities at the time of purchase. If management has the
intent and JSB has the ability at the time of purchase to
hold securities until maturity or on a long-term basis, they
are classified as held-to-maturity. Securities to be held
for indefinite periods of time are classified as available-
for-sale. Securities categorized as available-for-sale
include securities that management intends to use as part of
its asset/liability management strategy and may be sold to
effectively manage interest-rate risk exposure, prepayment
risk, and other factors (such as liquidity requirements).
The amortization rate for purchase premiums and the
accretion rate for purchase discounts on investments and MBS
can be materially affected by changes in (1) general
interest rates; (2) prepayment characteristics for certain
types of securities; and (3) changes in specific prepayment
rates for securities within JSB's portfolio. While
management believes it uses the best available information
to make estimations of these factors in income calculations,
future adjustments to interest income may be necessary if
circumstances differ substantially from the assumptions used
in making the estimation.
c. Provision for losses:
Provisions for estimated losses on loans and real estate
owned are charged to earnings in an amount that results in
an allowance sufficient, in management's judgment, to cover
anticipated losses based on management's evaluation of
portfolio risk, past and expected future loss experience and
economic conditions.
Real estate acquired by foreclosure (including loans
classified as in-substance foreclosed) in connection with
loan settlements is stated at the lower of estimated fair
value less estimated disposition costs, or the carrying
amount of the loan. A reserve for real estate acquired is
maintained on a property by property basis to recognize
estimated potential declines in value that might occur
between appraisal dates. Provisions for potential decrease
in fair value, and net direct operating expense attributable
to these assets are included in operating expenses.
In-substance foreclosures are reflected in real estate
acquired by foreclosure when the borrower has minimal equity
in the property; JSB expects repayment of the loan to come
only from the operation or sale of the property; and the
borrower either has abandoned control of the property or is
unlikely to rebuild equity or otherwise meet the terms of
the loan obligation in the foreseeable future.
While management believes it uses the best information
available to make evaluations of allowances, future
adjustments of the allowances for loans and real estate
acquired through foreclosure may be necessary if
circumstances differ substantially from the assumptions used
in making the evaluations. In addition, loan
classifications and loss reserves, as determined by
management, are subject to periodic examination by
regulatory agencies. Management cannot predict with
certainty whether future regulatory examinations will
require any changes in JSB's loan classifications or loan
loss reserves.
In May 1993, the FASB released SFAS No. 114, "Accounting by
Creditors for Impairment of a Loan". SFAS No. 114 defines
the term "impaired loan" and indicates the method used to
measure the impairment. The measurement of impairment may
be based on (1) the present value of the expected future
cash flows of the impaired loan discounted at the loan's
original effective interest rate; (2) the observable market
price of the impaired loan; or (3) the fair value of the
collateral of a collateral dependent loan. SFAS No. 114 is
effective for fiscal years beginning after December 15, 1994
and is not expected to be material to JSB.
d. Income taxes:
In 1992, the FASB issued SFAS No. 109, "Accounting for
Income Taxes". SFAS No. 109 requires a change from the
deferred method of accounting for income taxes of Accounting
Principles Board (APB) Opinion 11 to the asset and liability
method of accounting for income taxes. Under the asset and
liability method of SFAS No. 109, deferred tax assets and
liabilities are recognized for the future tax consequences
attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and
their respective tax bases and operating loss and tax credit
carryforwards. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary
differences are expected to be recovered or settled. Under
SFAS No. 109, the effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income
in the period that includes the enactment date.
Effective January 1, 1992, JSB elected to adopt SFAS
No. 109, "Accounting for Income Taxes." The cumulative
effect of this change in accounting principle at January 1,
1992, was $1.7 million, or $0.86 per share, and is reported
in the 1992 Consolidated Statements of Operations. Prior
years' financial statements have not been restated to apply
the provisions of SFAS No. 109.
Pursuant to the deferred method under APB Opinion 11, which
was applied in 1991 and prior years, deferred income taxes
were recognized for income and expense items that are
reported in different years for financial reporting purposes
and income tax purposes using the tax rate applicable in the
year of the calculation. Under the deferred method,
deferred taxes were not adjusted for subsequent changes in
tax rates.
e. Depreciation and amortization:
Depreciation on all buildings and equipment is computed
primarily by the straight-line method. Depreciable lives
are based on estimated economic useful lives of the office
properties and equipment.
Improvements to leased banking premises are being amortized
over the period including the original lease term plus the
first option term, where applicable.
Cost in excess of fair market value of assets acquired with
the acquisition of SMC is being amortized over 25 years by
the straight-line method. The net unamortized amount at
December 31, 1993, is $416,000.
Purchased mortgage servicing rights associated with loan
servicing acquired in the secondary mortgage market are
capitalized. The purchased mortgage servicing rights are
amortized as an adjustment of future servicing income using
a method that approximates the interest method over the life
of the related loans, adjusted for estimated prepayments.
The amount capitalized upon the purchase of mortgage
servicing rights is equal to the price paid to unaffiliated
sellers.
f. Loan origination and mortgage servicing:
For loans retained in JSB's portfolio, loan origination and
commitment fees, as well as certain direct loan origination
and commitment costs, are deferred and recognized as an
adjustment to yield over the lives of the related loans.
Deferred fees and costs are netted against outstanding loan
balances. Accretion is suspended for loans classified as
non-accrual. Service fees are recognized as income when the
related mortgage loan payments are collected. Origination
fees in excess of direct origination cost are initially
deferred and are recognized as income at the time of the
sale of loans to permanent investors.
The amortization rate for origination fees in excess of cost
can be materially affected by changes in: (1) general
interest rates; (2) prepayment characteristics for certain
types of loans; or (3) specific prepayment rates for loans
within JSB's portfolio. While management believes it uses
the best information available to make estimations of these
factors in income calculations, future adjustments to income
may be necessary if circumstances differ substantially from
the assumptions used in making the estimation.
g. Mortgage loans available for sale:
Mortgage loans available for sale to investors are carried
at the lower of cost or estimated market value determined on
an aggregate basis. Market values are determined using
sales commitments to permanent investors or current market
rates for loans of similar quality and type. Net unrealized
losses are recognized in a valuation allowance by charges to
income.
h. Net income per share:
Income per share for the year ended December 31, 1993, was
computed using the weighted number of common shares
outstanding of 1,940,160. For the years ended December 31,
1992 and 1991, the weighted number of common shares was
1,940,150. The common equivalent shares discussed in Note 6
have not been included in the computations since their
inclusion currently does not result in an earnings per share
dilution of more than 3%.
i. Presentation of cash flows:
For purposes of reporting cash flows, JSB considers cash and
due from banks and interest-bearing deposits in other banks
to be cash and cash equivalents.
j. Reclassifications:
Items previously reported have been reclassified to conform
with the current year classifications.
<PAGE>
<TABLE>
<CAPTION>
NOTE 2: INVESTMENT AND MORTGAGE-BACKED SECURITIES
The amortized cost and estimated market value of investment and mortgage-backed securities consist of the following (in thousands):
December 31, 1993 December 31, 1992
Gross Gross Estimated Gross Gross Estimated
Amortized Unrealized Unrealized Market Amortized Unrealized Unrealized Market
Cost Gains Losses Value Cost Gains Losses Value
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Investment Securities:
Available for sale:
Corporate bonds $ 1,415 $ 29 $ 0 $ 1,444 $ 2,992 $105 $ 0 $ 3,097
U.S. government obligations 0 0 0 0 1,985 0 0 1,985
U.S. government agencies 7,000 0 120 6,880 0 0 0 0
Municipal bonds 13,364 128 59 13,433 0 0 0 0
$ 21,779 $157 $179 $ 21,757 $ 4,977 $105 $ 0 $ 5,082
Held to maturity:
Corporate bonds $ 22 $ 0 $ 0 $ 22 $ 891 $ 4 $ 3 $ 892
Other bonds and investments 30 0 0 30 30 0 1 29
Marketable equity securities 99 0 0 99 100 0 0 100
U.S. government agencies 0 0 0 0 4,500 38 0 4,538
$ 151 $ 0 $ 0 $ 151 $ 5,521 $ 42 $ 4 $ 5,559
Mortgage-backed Securities:
Available for sale:
Mortgage-backed securities $ 34,600 $474 $ 35 $ 35,039 $ 9,970 $784 $ 0 $ 10,754
Collateralized mortgage obligations 81,015 339 572 80,782 3,417 0 0 3,417
$115,615 $813 $607 $115,821 $ 13,387 $784 $ 0 $ 14,171
Held to maturity:
Mortgage-backed securities $ 0 $ 0 $ 0 $ 0 $ 24,895 $231 $ 0 $ 25,126
Collateralized mortgage obligations 16,646 76 94 16,628 69,187 333 469 69,051
Other mortgage-backed 11,699 37 9 11,727 13,468 40 13 13,495
$ 28,345 $113 $103 $ 28,355 $107,550 $604 $482 $107,672
Held in trading account:
Mortgage-backed securities $ 3,787 $ 0 $236 $ 3,551 $ 0 $ 0 $ 0 $ 0
</TABLE>
<PAGE>
The amortized cost and estimated market value of investment and
mortgage-backed securities at December 31, 1993, by contractual
maturity, are shown below. Expected and actual maturities will
differ from contractual maturities because borrowers may have the
right to call or prepay obligations with or without call or
prepayment penalties.
At December 31, 1993, investment and mortgage-backed securities
mature as follows (in thousands):
<TABLE>
<CAPTION>
Mortgaged-backed
Investment Securities Securities
Estimated Estimated
Amortized Market Amortized Market
Cost Value Cost Value
<S> <C> <C> <C> <C>
Available for sale:
Due in one year or less $ 250 $ 251 $ 3,559 $ 3,561
Due after one year through five years 764 786 16,546 16,552
Due after five years through ten years 11,158 11,082 27,037 27,047
Due after ten years 9,607 9,638 68,473 68,661
$ 21,779 $ 21,757 $115,615 $115,821
Held to maturity:
Due in one year or less $ 0 $ 0 $ 450 $ 450
Due after one year through five years 5 5 2,099 2,099
Due after five years through ten years 25 25 3,454 3,455
Due after ten years 121 121 22,342 22,351
$ 151 $ 151 $ 28,345 $ 28,355
Held in trading account:
Due in one year or less $ 45 $ 42
Due after one year through five years 238 223
Due after five years through ten years 483 453
Due after ten years 3,021 2,833
$ 3,787 $ 3,551
</TABLE>
<PAGE>
Cash proceeds, gross gains and gross losses on the sale of
investment and mortgage-backed securities consist of the
following for the years ended (in thousands):
<TABLE>
<CAPTION>
December 31, 1993 December 31, 1992 December 31, 1991
Cash Gross Gross Cash Gross Gross Cash Gross Gross
Proceeds Gains Losses Proceeds Gains Losses Proceeds Gains Losses
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Marketable equity
security funds $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 178 $ 4 $ 15
Investment securities:
Available for sale 24,724 134 3 6,107 24 22 6,402 21 0
Held to maturity 828 4 2 8,275 229 8 5,936 11 169
Mortgage-backed
securities:
Available for sale 26,235 785 25 19,309 258 123 9,896 104 0
Held to maturity 10,993 142 39 23,945 777 200 3,980 44 0
Held in trading account 987 17 0 0 0 0 0 0 0
$63,767 $1,082 $ 69 $57,636 $1,288 $353 $26,392 $184 $184
</TABLE>
During 1992, loss on investments includes $159,000 on
securities deemed to be other than temporarily impaired.
This write-down resulted in a charge to operations for the
difference between the current market value of specific
investments and their historical cost. A valuation
allowance to carry securities available for sale at lower of
cost or market value at December 31, 1992, also resulted in
a $35,000 unrealized loss charged to operations.
<PAGE>
NOTE 3: LOANS RECEIVABLE
Loans receivable consist of the following (in thousands):
<TABLE>
<CAPTION>
December 31,
1993 1992
<S> <C> <C>
Mortgage loans:
1-4 family $ 47,387 $ 50,719
Multi-family 8,535 8,677
Commercial 34,259 37,002
Real estate construction 3,099 0
Residential mortgage loans available for sale 32,759 20,738
126,039 117,136
Consumer loans 27,473 32,004
Commercial business loans 5,494 6,860
Indirect financing leases 6 99
159,012 156,099
Less:
Allowance for loan losses 3,083 4,056
Deferred loan fees 448 281
Loans in process and other deductions 37 (24)
$155,444 $151,786
</TABLE>
JSB was servicing loans for others with balances of $926.9
million, and $603.7 million at December 31, 1993 and 1992,
respectively.
<PAGE>
Changes in the allowance for loan losses were as follows (in
thousands):
<TABLE><CAPTION>
Year Ended December 31,
1993 1992 1991
<S> <C> <C> <C>
Balance at beginning of period $4,056 $2,987 $3,889
Charge-offs:
Residential real estate loans 1 0 10
Commercial real estate loans 2,194 1,709 1,791
Consumer loans 193 111 169
Commercial business loans 62 8 383
Total loans charged off 2,450 1,828 2,353
Less: Recoveries 375 392 584
Net charge-offs 2,075 1,436 1,769
Provision for loan losses:
Residential real estate loans 9 40 30
Commercial real estate loans 950 2,430 811
Consumer loans 117 20 15
Commercial business loans 26 15 11
Total provisions for losses
charged to operations 1,102 2,505 867
Balance at end of period $3,083 $4,056 $2,987
</TABLE>
NOTE 4: NON-PERFORMING ASSETS
Non-performing assets are comprised of (1) loans which are
contractually past due 90 days or more as to interest or
principal payments and loans which have been placed on non-
accrual status; (2) troubled debt restructurings; and (3) real
estate acquired through foreclosure and in-substance foreclosed
loans. It is JSB's policy not to accrue interest on loans which
are 90 days or more past due.
The following table presents information concerning non-
performing assets (in thousands):
<TABLE>
<CAPTION>
December 31,
1993 1992 1991
<S> <C> <C> <C>
Non-accrual loans $ 588 $ 3,094 $ 5,869
Troubled debt restructurings 2,315 3,080 3,389
Real estate acquired through foreclosure
and in-substance foreclosures (net) 1,490 4,569 6,177
Total non-performing assets $ 4,393 $10,743 $15,435
</TABLE>
The gross interest that would have been recorded if non-accrual
loans had been current in accordance with their terms would have
been approximately $145,000, $405,000, and $397,000 for the years
ended December 31, 1993, 1992, and 1991, respectively. Interest
income on restructured loans under their original terms would
have been approximately $324,000, $387,000, and $409,000, for the
years ended December 31, 1993, 1992, and 1991, respectively.
Interest income actually recorded on restructured loans under
their modified terms was approximately $126,000, $270,000, and
$335,000, for the years ended December 31, 1993, 1992, and 1991.
The Bank is not committed to lend additional funds to borrowers
whose loans are classified as non-performing.
Real estate acquired through foreclosure and in-substance
foreclosures are summarized as follows (in thousands):
<TABLE>
<CAPTION>
December 31,
1993 1992 1991
<S> <C> <C> <C>
Carrying Value $ 1,730 $ 6,628 $ 7,400
Less: Reserve for losses 240 2,059 1,223
Net real estate acquired through
foreclosure $ 1,490 $ 4,569 $ 6,177
</TABLE>
Changes in the reserve for losses on real estate acquired through
foreclosure are as follows (in thousands):
<TABLE>
<CAPTION>
Year Ended December 31,
1993 1992 1991
<S> <C> <C> <C>
Balance, beginning of year $ 2,059 $ 1,223 $ 1,293
Provision charged to operations 0 2,375 1,414
Losses recognized (2,457) (1,784) (2,069)
Recovery 638 245 585
Balance, end of year $ 240 $ 2,059 $ 1,223
</TABLE>
Operating expenses, net of revenue collected, relating to real
estate owned was $22,000 and $764,000 for 1993 and 1992,
respectively, and is included in the Consolidated Statements of
Operations. During 1991, these revenues and expenses were
reserved for and accordingly, are included in the changes in the
reserve for losses on real estate acquired through foreclosure.
<PAGE>
NOTE 5: OFFICE PROPERTIES AND EQUIPMENT
Office properties and equipment valued at cost are summarized by
major classifications as follows (in thousands):
<TABLE>
<CAPTION>
December 31,
1993 1992
<S> <C> <C>
Land $ 432 $ 432
Buildings 2,496 2,496
Leasehold improvements 476 432
Furniture and equipment 2,790 2,731
6,194 6,091
Accumulated depreciation and
amortization (3,539) (3,272)
$2,655 $2,819
</TABLE>
Depreciation and amortization included in occupancy and equipment
expense for the years ended December 31, 1993, 1992 and 1991
amounted to $402,000, $355,000, and $407,000, respectively.
NOTE 6: EMPLOYEE BENEFITS
Pension Plans
On November 1, 1991, JSB adopted a defined contribution employee
retirement plan that covers substantially all employees of JSB
and its subsidiaries. The defined contribution plan was adopted
in accordance with the provisions of section 401(k) of the
Internal Revenue Code (IRC). The defined contribution plan
provides for monthly employer payments that match each
participating employee's voluntary contribution to the employee's
individual tax-deferred retirement account. The employer
matching rate is 100% of the employee's contribution up to 6% of
the employee's compensation, subject to certain individual and
aggregate limits as specified in the IRC.
On December 1, 1991, JSB terminated its qualified non-
contributory defined benefit employee retirement plan which
previously covered all full-time employees who had attained a
minimum age requirement and met a required period of service.
The reversal of current and prior period pension accruals
resulted in the recognition of a plan curtailment gain of
$642,000 reflected in the 1991 Statement of Operations.
During 1992, JSB received permission from the Pension Benefit
Guarantee Corporation and the Internal Revenue Service to satisfy
the terminated plan's liabilities through qualified distributions
of the plan's assets. Plan assets, net of required supplementary
employee distributions and federal excise taxes, exceeded plan
liabilities on the final distribution date. Accordingly, JSB
recognized a termination gain of $122,000, reflected in the 1992
Statement of Operations.
Pension expense charged to operations and included in Salary and
Employee Benefits expense for the years ended December 31, 1993,
1992, and 1991, was $177,000, $169,000, and $255,000,
respectively.
Deferred Compensation Agreements
JSB has entered into deferred compensation agreements with
certain officers whereby if the respective officer is still
employed by JSB on the date he becomes 65, he may retire and,
commencing on the date of such retirement, JSB will pay deferred
compensation for services rendered prior to retirement. Such
deferred compensation will be in predetermined amounts, payable
in equal monthly installments over the remaining life of the
respective executive officer. The accrued liability for the
deferred compensation agreements at December 31, 1993, is
approximately $194,000.
Stock Option Plan
The Board of Directors and stockholders approved a qualified
employee stock option plan under which JSB has reserved a total
of 194,015 shares of its common stock for the granting of options
to key employees. The ability of the employee to exercise such
options is conditioned upon the employee's continued employment
on the exercise date.
Currently, 26,000 stock options issued at the time JSB converted
to stock form on October 29, 1986 remain outstanding. These
options are currently exercisable at the initial public offering
price of $9.50 per share and expire on April 23, 1997.
On February 18, 1992, the Board of Directors granted 60,000
options to purchase stock, of which 47,391 remain outstanding at
December 31, 1993. These options are exercisable on or after
February 18, 1995, at $5.75 per share and expire February 18,
2002.
On February 16, 1993, the Board of Directors granted 30,000
options to purchase stock, of which 23,969 remain outstanding at
December 31, 1993, These options are exercisable on or after
February 16, 1996, at $11.15 per share and expire on February 16,
2003.
An additional 10,000 stock options were granted on July 20, 1993,
all of which remain outstanding at December 31, 1993. These
options are exercisable on or after July 20, 1996, at $11.15 per
share and expire on July 20, 2003.
NOTE 7: INCOME TAXES
As discussed in Note 1, the Bank adopted SFAS No. 109 as of
January 1, 1992; and the cumulative effect of this change is
reported in the 1992 Consolidated Statements of Operations.
Prior years financial statements have not been restated to apply
the provisions of SFAS No. 109.
The provision for (benefit from) income taxes in the consolidated
income statement consists of the following (in thousands):
<TABLE>
<CAPTION>
Year Ended December 31,
1993 1992 1991
<S> <C> <C> <C>
Federal current $ 256 $ 57 $ 10
State current 326 53 83
Federal deferred 978 (787) (16)
State deferred 0 0 33
Total $1,560 $(677) $ 110
</TABLE>
The following is a reconciliation between the federal statutory
tax to JSB's provision for (benefit from) income taxes (in
thousands):
<TABLE>
<CAPTION>
Year Ended December 31,
1993 1992 1991
<S> <C> <C> <C>
Statutory tax rate 34% 34% 34%
Expense at statutory rate $1,673 $ 79 $ 585
Tax-exempt interest (128) (62) (84)
Dividends received deduction 0 0 (1)
State income tax (net of federal income tax benefit) 215 35 76
Net operating loss carryforward (425) (796) (469)
Capital loss carryforward (82) 0 0
Other 307 67 3
Total $1,560 $(677) $ 110
</TABLE>
The significant components of deferred income tax expense for the
years ended December 31, 1993 and 1992, are as follows:
<TABLE>
<CAPTION>
1993 1992
<S> <C> <C>
Deferred income tax expense exclusive of the
effect of NOL carryforwards $553 $(1,583)
NOL carryforward. 425 796
$978 $ (787)
</TABLE>
In addition to the items included in the above table, an
adjustment to equity in the amount of $62,000 was recorded to
reflect a deferred income tax liability related to the
recognition of unrealized gains on JSB's investment and MBS
available for sale.
Temporary differences and carryforwards which give rise to a
significant portion of deferred tax assets and liabilities at
December 31, are as follows (in thousands):
<TABLE>
<CAPTION>
1993 1992
<S> <C> <C>
Tax effect of temporary differences:
Deferred income and expenses (net) $ 198 $ 158
Reserve for loan losses 1,048 1,379
Reserve for losses - real estate acquired
by foreclosure 82 700
Depreciation (69) (76)
Other 212 385
Total tax effect of temporary differences 1,471 2,546
Tax effect of carryforwards:
Net operating loss carryforwards 0 425
Capital loss carryforwards 2,160 2,242
Tax credits and other carryforwards 132 69
Total tax effect of temporary differences
and carryfowards 3,763 5,282
Valuation allowance (2,344) (2,822)
Total tax effect of deferred tax assets $1,419 $2,460
</TABLE>
Under provisions of the Internal Revenue Code, JSB currently has
available approximately $6.4 million of capital loss
carryforwards which expire December 31, 1995. JSB's utilization
of capital loss carryfowards will be limited to capital gains
generated, if any, in future periods. As of December 31, 1993,
JSB had general business tax credit and minimum tax credit
carryforwards of approximately $132,000 for federal income tax
purposes. The general business tax credit carryforwards expire
in 1994 through 2000.
JSB is subject to the Pennsylvania Mutual Thrift Tax which
imposes a tax on Pennsylvania-sourced earnings substantially in
accordance with generally accepted accounting principles. Such
taxes were substantially eliminated in 1992 and 1991 by the use
of available Pennsylvania net operating loss carryforwards. All
unused Pennsylvania loss carryforwards expired on December 31,
1992.
SMC is subject to the Georgia corporate net income tax. Georgia
taxable income is determined on a separate company basis. The
consolidated income statements reflect a provision of $44,000,
$53,000 and $116,000 in 1993, 1992, and 1991, respectively, for
Georgia income tax.
NOTE 8: STOCKHOLDER'S EQUITY
In connection with JSB's conversion from a mutual to stock form
of organization in 1986, JSB established a liquidation account in
an amount equal to its net worth as of June 30, 1986. The
liquidation account will be maintained for the benefit of
depositors as of the December 31, 1985, eligibility record date
who continue to maintain their deposit accounts in JSB after
conversion. In the event of a complete liquidation (and only in
such an event) each eligible depositor will be entitled to
receive a liquidation distribution from the liquidation account
in the proportionate amount of the then current adjusted balance
for deposits then held, before any liquidation distribution may
be made with respect to the stockholders. Except for the
repurchase of stock and payment of dividends by JSB, the
existence of the liquidation account will not restrict the use or
application of such capital. At December 31, 1993, the amount
remaining in this liquidation account was $1.4 million. JSB may
not declare or pay a cash dividend on, or repurchase any of, its
capital stock if the effect thereof would cause JSB's capital to
be reduced below either the amount required for the liquidation
account or the capital requirements imposed by the Department and
the FDIC.
NOTE 9: DEPOSITS
Savings certificate accounts mature as follows (in thousands):
<TABLE>
<CAPTION>
December 31, 1993 December 31, 1992
Amount Percent Amount Percent
<S> <C> <C> <C> <C>
1-12 months $ 73,550 68.3% $ 84,157 70.1%
13-24 months 14,417 13.4 18,192 15.1
25-36 months 9,451 8.8 8,559 7.1
37-48 months 3,066 2.8 3,555 3.0
Thereafter 7,244 6.7 5,665 4.7
Total $107,728 100.0% $120,128 100.0%
</TABLE>
At December 31, 1993 and 1992, savings certificate accounts with
balances of $100,000 or more aggregated to $4.7 million and $2.8
million, respectively.
Accrued interest payable by category on deposits is as follows
(in thousands):
<TABLE>
<CAPTION>
December 31,
1993 1992 1991
<S> <C> <C> <C>
Savings accounts $ 103 $ 123 $ 171
Savings certificates 819 966 1,445
NOW deposits and Money Market
Demand accounts 0 0 73
Total $ 922 $ 1,089 $ 1,689
</TABLE>
Interest expense by category of deposits is as follows (in
thousands):
<TABLE>
<CAPTION>
December 31,
1993 1992 1991
<S> <C> <C> <C>
Savings accounts $ 1,519 $ 1,706 $ 2,334
Savings certificates 5,275 7,172 9,573
NOW deposits and Money Market
Demand accounts 1,317 1,338 1,675
Total $ 8,111 $10,216 $13,582
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Deposits consist of the following major classifications (in thousands):
December 31, 1993 December 31, 1992
Amount Percent Amount Percent
<S> <C> <C> <C> <C>
Club accounts:
1993 - 2.40% $ 326 0.1%
1992 - 3.00% $ 331 0.1%
Passbook accounts:
1993 - 2.40% 54,964 25.4
1992 - 3.00% ________ _____ 52,141 23.5
Savings Accounts 55,290 25.5 52,472 23.6
IRA and Keogh Certificates:
1993 - 3.00% to 5.50% 18,237 8.4
1992 - 3.00% to 6.10% 18,522 8.3
Certificate accounts:
Original maturity of six
months or less:
1993 - 2.65% to 3.00% 24,791 11.5
1992 - 2.80% to 4.10% 33,074 14.9
Original maturity of more
than six months:
1993 - 3.00% to 5.50% 64,700 29.9
1992 - 3.10% to 6.10% ________ _____ 68,532 30.9
Savings Certificates 107,728 49.8 120,128 54.1
NOW accounts:
1993 - 2.15% 20,496 9.5
1992 - 3.11% 24,107 10.9
Money market accounts:
(weekly adjustments)
1993 - 2.40% to 2.60% 27,227 12.6
1992 - 3.00% to 3.30% 20,692 9.3
Business checking:
Interest bearing
1993 - 2.15% 1,508 0.7
1992 - 3.11% 1,148 0.5
Non-interest bearing 3,957 1.9 3,615 1.6
NOW and Money Market
Demand Accounts 53,188 24.7 49,562 22.3
Total Deposits $216,206 100.0% $222,162 100.0%
Weighted average interest
rates paid for:
Savings 2.74% 3.41%
Savings certificates 4.66% 5.75%
NOW and money market 2.57% 3.04%
Total Deposits 3.69% 4.67%
</TABLE>
<PAGE>
NOTE 10: OTHER BORROWED FUNDS
Other borrowed funds consist of the following:
<TABLE>
<CAPTION>
December 31,
(in thousands)
1993 1992
<S> <C> <C>
$8.0 million nonrevolving commercial loan commitment
of which the outstanding balance is payable in
fixed monthly principal installments of $111,000
through January 15, 1997. The commercial loan
bears interest at 3% on the used portion for which
a compensating balance is maintained and the prime
rate plus 1% for which no compensating balance is
maintained. The prime rate plus 1% was 7.0% at
December 31, 1993 and 1992. $ 4,111 $ 5,445
$25.0 million and $20.0 million mortgage warehouse
line of credit as of December 31, 1993 and 1992,
respectively, bearing interest at 1.625% on used
portion for which a compensating balance is
maintained, and prime on used portion for which
no compensating balance is maintained. The prime
rate was 6.0% at December 31, 1993 and 1992. The
line expires July 1, 1994. 15,161 12,464
Other 106 181
Total $19,378 $18,090
</TABLE>
The two credit arrangements described above are cross-
collateralized, secured by SMC's mortgage inventory, servicing
rights and commitments.
Compensating balances held by the lender are used in determining
the interest rates charged on the mortgage warehouse lines of
credit and the commercial loan. These balances, which are
derived from customer escrow balances, amounts of collections in
transit on loans serviced and corporate cash balances, can
further decrease the interest rate charged on the lines of credit
if the compensating balance is maintained at a level greater than
the used portion of the line. Under the loan agreements, the
effective rate of the nonrevolving commercial loan and the
mortgage warehouse line of credit can be decreased to a minimum
rate of 1.0%. These compensating balances averaged approximately
$22.8 million and $21.6 million during 1993 and 1992,
respectively. The use of these balances resulted in an effective
interest rate of 1.87% and 1.59% in 1993 and 1992, respectively.
<PAGE>
NOTE 11: FEDERAL HOME LOAN BANK ADVANCES
Federal Home Loan Bank (FHLB) advances consist of the following:
<TABLE>
<CAPTION>
December 31,
(in thousands)
1993 1992
<S> <C> <C>
$11.0 million and $3.0 million variable rate advances,
maturing December 16, 1994, and January 2, 1995,
respectively, secured by 100% of FHLB stock owned
by JSB, funds on deposit at the FHLB and up
to 90% of the fair market value of JSB's
mortgage-backed securities portfolio. The
advances can be repaid without penalty. The
average rate of these advances was 3.83% in 1993. $14,000 $14,000
$34.1 million line of credit commitment maturing
August 5, 1994, bearing interest at the variable
rate posted by FHLB at the date of the drawdown.
The commitment is secured by 100% of FHLB stock
owned by JSB, funds on deposit at the FHLB
and up to 90% of the fair market value of the
Bank's mortgage-backed securities portfolio. The
average rate of this commitment was 3.30% in 1993. 24,500 21,000
Fixed-term advances bearing interest from 4.12% to
5.71% and maturing at periods from one to four
years, secured by 100% of FHLB stock owned by the
Bank, funds on deposit at the FHLB and up to 90%
of the fair market value of JSB's mortgage-
backed securities portfolio. 6,500 6,500
Fixed-term advances bearing interest from 3.77%
to 8.05% and maturing at periods from one to ten
years, secured by various investment securities
and unencumbered first mortgage loans equal to
120% of JSB's advances, subject to prepayment
penalties. 34,000 11,000
Repurchase agreements, bearing interest at 3.49%,
maturing January 28, 1994, secured by government
agency and mortgage-backed securities with a book
value of $11.6 million, and an approximate market
value of $11.5 million. 10,000 0
$89,000 $52,500
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Federal Home Loan Bank advances mature as follows (in thousands):
Year Rate Amount Due
<C> <C> <C>
1994 3.83% $ 54,000
1995 5.04% 9,000
1996 6.31% 7,000
1997 5.61% 2,750
1998 5.69% 3,750
1999 6.09% 1,250
2000 6.15% 3,750
2001 6.49% 1,250
2002 6.59% 2,500
2003 6.61% 3,750
$ 89,000
</TABLE>
NOTE 12: FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK AND
CREDIT RISK
JSB is party to financial instruments with off-balance-sheet risk
in the normal course of business to meet the financial needs of its
customers and to reduce its own exposure to fluctuations in
interest rates. These financial instruments include commitments to
extend credit, letters of credit, consumer and commercial lines of
credit, fixed and variable rate mortgage loan commitments and
commitments to purchase securities. Those instruments involve, to
varying degrees, elements of credit and interest-rate risk in
excess of the amount recognized in the statement of financial
position. The contract or notional amounts of those instruments
reflect the extent of JSB's involvement in particular classes of
financial instruments.
JSB has exposure to credit loss in the event of nonperformance by
the other party to the financial instrument for commitments to
extend credit. JSB uses the same credit policies in making
commitments and conditional obligations as it does for on-balance-
sheet instruments. Accordingly, the amount and type of collateral
obtained by JSB is based upon industry practice and JSB's credit
assessment of the customer.
The following table sets forth the dollar amount of financial
instruments whose contract amounts represent credit-risk and
commitments outstanding, not otherwise reflected on the balance
sheet, as of December 31 (in thousands):
<TABLE>
<CAPTION>
Contract or National Amount
1993 1992
<S> <C> <C>
Financial instruments whose contract amount
represents credit risk:
Unused portion of open-end consumer lines $14,248 $13,433
Unused portion of commercial lines 479 533
Letters of credit - commercial 15 0
$14,742 $13,966
Commitments outstanding to purchase or originate:
Adjustable-rate mortgage loans secured by
1-4 family dwellings $ 5,180 $ 1,370
Fixed-rate mortgage loans secured by
1-4 family dwellings 31,615 10,045
Fixed-rate mortgage loans secured by commercial
real estate 4,944 0
Fixed-rate investment and mortgage-backed securities 4,750 3,790
$46,489 $15,205
Commitments to sell fixed-rate mortgage loans
available for sale $31,586 $20,625
</TABLE>
Market risk arises if interest rates, at the time a fixed-rate
commitment is funded, have moved adversely subsequent to the
extension of the commitment. JSB believes the market risk
associated with consumer loan commitments is minimal.
Commitments to fund residential mortgages and to purchase
mortgage-backed securities carry market risks similar to the
risks associated with similar assets currently reported on JSB's
balance-sheet. Since a portion of JSB's commitments to extend
credit are expected to expire without being drawn upon, the total
contractual amounts do not necessarily represent future cash
requirements.
Financial institutions, such as JSB, generate profits primarily
through lending and investing activities. The risk of loss from
lending and investing activities includes the possibility that a
loss may occur from the failure of another party to perform
according to the terms of the loan or investment agreement. This
possibility of loss is known as credit risk.
Credit risk is increased by lending and/or investing activities
that concentrate a financial institution's earning assets in such
a way as to expose the institution to a material loss from any
single occurrence or group of related occurrences. Diversifying
the institution's assets to prevent concentrations is one way in
which the financial institution can reduce potential losses due
to credit risk.
JSB manages its credit risk by establishing and implementing
strategies appropriate to the characteristics of borrowers,
collateral pledged and geographic locations. Diversification of
risk, within each of these areas is a primary objective of JSB.
At December 31, 1993, JSB's assets were deployed primarily in
four principal types of investments: (1) investment securities
and MBS; (2) residential real estate loans; (3) commercial and
multi-family residential real estate loans; and (4) consumer
loans.
Investment securities and MBS. Other than investment securities
and MBS issued or backed by the U. S. Government or a U. S.
Government-sponsored enterprise, JSB has no significant
concentration of any single issuer in its MBS and investment
portfolios.
Residential real estate loans. At December 31, 1993, JSB had
$80.1 million in residential mortgages, including loans available
for sale. The collateral properties for approximately $58.6
million of these loans, and a substantial majority of JSB's
mortgage loan commitments at December 31, 1993, were concentrated
primarily in western Pennsylvania. Loans and commitments of this
type are issued to an inherently diverse group of borrowers and
JSB has no significant concentration of loans to one borrower.
In addition, JSB's underwriting standards and internal control
procedures are designed to minimize, as far as possible, credit
risk associated with residential mortgage lending and the
possible risks associated with concentrations of such loans in a
geographic area of limited size.
Commercial and multi-family residential loans. At December 31,
1993, JSB had $42.8 million of commercial and multi-family
residential loans, the majority of which are located outside the
state of Pennsylvania. At December 31, 1993, $11.2 million, $4.1
million, and $5.6 million of multi-family residential and
commercial real estate loans were secured by properties located
in Texas, Colorado, and Georgia, respectively. Since 1989, JSB
has not actively sought to originate commercial real estate loans
outside of western Pennsylvania. JSB's underwriting standards
and internal control procedures are designed to minimize, as far
as possible, credit risks associated with commercial real estate
lending within western Pennsylvania.
Consumer loans. At December 31, 1993, JSB had $27.5 million in
consumer loans. Substantially all of JSB's consumer loan
portfolio is secured (where applicable) by assets located in or
around JSB's general market area. In addition, substantially all
of JSB's off-balance-sheet commitments to extend consumer loan
credit involve customers within JSB's general market area.
Consumer loans generally have shorter terms and higher interest
rates than other types of retail loans, such as residential
mortgages, because of the type and nature of the collateral and,
in certain cases, the absence of collateral. Such loans are
issued to an inherently diverse group of borrowers and JSB has no
significant concentration of loans to one borrower. JSB's
underwriting standards and internal control procedures are
designed to minimize, as far as possible, credit risk associated
with concentrations of such loans in a geographic area of limited
size.
NOTE 13: STANDARD MORTGAGE CORPORATION OF GEORGIA
SMC is a mortgage banking company located in Atlanta, Georgia.
It originates and sells loans primarily in the Atlanta
metropolitan area. SMC also acquires rights to service mortgage
loans from unaffiliated third parties throughout the United
States. During 1993, 1992, and 1991, SMC acquired the rights to
service approximately $147.0 million, $84.0 million, and $239.3
million of mortgage loans at a cost of approximately $1.8
million, $595,000, and $2.1 million, respectively.
SMC was servicing loans for others of $908.9 million, $840.5
million and $829 million at December 31, 1993, 1992, and 1991,
respectively.
For the years ended December 31, 1993 and 1992, SMC paid JSB
$42,000 and $180,000, respectively, in management and other fees
to compensate JSB for direct and indirect expenditures JSB
incurred on behalf of SMC during the year. In addition, $238,000
and $302,000 for charges in-lieu of federal income taxes were
assessed by JSB to SMC during 1993 and 1992, respectively. The
charge to SMC represents 34% of SMC's federally taxable net
income and was made under the provisions of a tax-sharing
agreement between the two entities.
The following are condensed statements of financial condition for
1993 and 1992, and condensed statements of operations for SMC for
1993, 1992, and 1991:
<PAGE>
CONDENSED STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
(in thousands):
December 31,
1993 1992
<S> <C> <C>
Assets:
Cash and cash equivalents $ 840 $ 1,526
Loans available for sale 16,648 13,830
Mortgage servicing purchased, net 7,342 7,838
Other assets 2,796 2,646
Total Assets $ 27,626 $ 25,840
Liabilities:
Accounts payable $ 2,159 $ 2,176
Borrowings from unaffiliated lender 19,272 17,909
Total Liabilities 21,431 20,085
Stockholder's Equity 6,195 5,755
Total Liabilities and Stockholder's Equity $ 27,626 $ 25,840
<CAPTION>
CONDENSED STATEMENTS OF OPERATIONS
(in thousands):
Year Ended December 31,
1993 1992 1991
<S> <C> <C> <C>
Income:
Servicing fee income $4,302 $4,360 $3,650
Gain on sale of mortgage loans 1,019 1,068 1,110
Interest earned 1,463 1,301 916
Miscellaneous 246 225 157
Total Income 7,030 6,954 5,833
Expenses:
Amortization of cost of purchased
servicing rights 2,275 2,383 1,425
Interest expense:
Paid to affiliate 135 0 0
Paid to others 523 491 452
Other operating expenses 3,374 3,162 2,427
Total Expenses 6,307 6,036 4,304
Income before taxes 723 918 1,529
Income tax expense 283 354 636
Net Income $ 440 $ 564 $ 893
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NOTE 14: SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
(In thousands except per share data)
Three Months Ended
March 31, June 30, September 30, December 31,
1993 1993 1993 1993
<S> <C> <C> <C> <C>
Interest income $ 5,699 $ 5,659 $ 5,463 $ 5,782
Interest expense 2,947 3,120 3,062 3,033
Net interest income 2,752 2,539 2,401 2,749
Provision for loan losses 760 180 72 90
Other operating income 1,578 1,198 1,767 2,039
Other operating expenses 2,579 2,590 3,092 2,739
Net income before taxes 991 967 1,004 1,959
Provision (benefit) for income taxes 272 240 202 846
Net income $ 719 $ 727 $ 802 $ 1,113
Net income per share $ 0.37 $ 0.37 $ 0.41 $ 0.58
<CAPTION>
Three Months Ended
March 31, June 30, September 30, December 31,
1992 1992 1992 1992
<S> <C> <C> <C> <C>
Interest income $ 6,076 $ 5,777 $ 5,637 $ 5,792
Interest expense 3,466 3,208 2,993 3,111
Net interest income 2,610 2,569 2,644 2,681
Provision for loan losses 365 430 280 1,430
Other operating income 806 1,982 1,245 1,047
Other operating expenses 2,481 3,465 2,857 4,044
Net income (loss) before taxes and cumulative
effect of change in accounting principle 570 656 752 (1,746)
Provision (benefit) for income taxes (1) 77 (350) 129 (533)
Cumulative effect of change in
accounting for income taxes 1,673 0 0 0
Net income (loss) $ 2,166 $ 1,006 $ 623 $(1,213)
Net income (loss) per share $ 1.12 $ 0.52 $ 0.32 $ (0.63)
<FN>
(1) Amounts have been restated to reflect the change in
accounting principle discussed in Notes 1 and 7.
</TABLE>
<PAGE>
NOTE 15: FAIR VALUE OF FINANCIAL INSTRUMENTS
The following table represents the carrying amount and the
estimated fair value of JSB's financial instruments at
December 31, 1993 (in thousands):
<TABLE>
<CAPTION>
Recorded Weighted Repricing Estimated
Book Average or Maturity Discount Fair
Notes Balance Yield Range in years Rates used Value
<S> <C> <C> <C> <C> <C> <C>
FINANCIAL ASSETS
Cash and Due from Banks $ 8,449 - - - $8,449
Investment and
mortgage-backed securities:
Available for sale 137,578 - - - 137,586
Held to maturity 28,496 - - - 28,506
Held in trading accounts 3,551 - - - 3,551
Loans receivable:
Residential mortgage loans,
1-4 family -A- 47,136 7.22% 0 to 20+ 3.97 to 6.72% 48,463
Residential mortgage loans
available for sale 32,759 7.24 15 to 20+ - 32,991
Commercial & multi-family loans 42,660 9.41 0 to 10 8.82 42,877
Commercial business
loans and leases 5,426 7.38 0 to 20 7.06 5,459
Consumer loans -B- 26,874 9.77 0 to 10 7.83 to 8.35 28,055
Non-accrual loans (net) 589 - ** - 589
FHLB stock 5,056 ** ** ** 5,056
Accrued interest receivable 2,147 ** ** ** 2,147
FINANCIAL LIABILITIES:
Certificates of deposit 73,554 3.89 0 to 1 - 73,554
Certificates of deposit 34,173 5.58 1 to 15 4.89 35,103
Checking, MMDA &
savings accounts -C- 108,478 2.29 ** - 108,478
Accrued interest payable 922 ** ** ** 922
FHLB advances 89,000 4.59 0 to 10 3.19 to 8.34 89,352
Other borrowed funds -D- 19,378 1.87 0 to 5 3.19 19,230
____________________
<FN>** - Not meaningful.
A The carrying amount consists of approximately $34.8 million
in adjustable-rate and $12.3 million in fixed-rate
residential mortgage loans. The discount rate used to
determine fair value was selected based on loans of similar
type, repricing schedule (where applicable) and remaining
maturity.
B The carrying amount includes approximately $5.6 million in
credit card receivables. The fair market value of credit
card receivables was determined using quoted prices offered
in an active secondary market.
C SFAS No. 107 defines the estimated fair value of deposits
with no stated maturity, such as demand deposits, savings,
NOW and money market demand accounts, to be equal to the
amount payable on demand (i.e., their carrying amounts).
D Other borrowed funds include $15.2 million of advances
subject to daily repricing. SFAS No. 107 defines the
estimated fair value of borrowed funds repricing within 90
days as equal to the carrying value.
</TABLE>
The estimation methods, approaches and significant assumptions
used in determining the fair market values of each category of
financial instrument are as follows:
Cash and Due From Banks
The recorded book balance approximates fair value due to the due
on demand nature of these financial instruments.
Investment and Mortgage-backed Securities
Investment and mortgage-backed securities, of the type held by
JSB, are actively traded in a secondary market and have been
valued using quoted market prices.
Loans Receivable
For certain homogeneous categories of loans, such as residential
mortgages and credit card receivables, fair market value is
estimated by using quoted market prices for similar loans or
securities backed by similar loans, adjusted for differences in
loan characteristics, if any. The fair value of other types of
loans is estimated by discounting the future cash flows using the
current rates at which similar loans would be made to borrowers
with similar credit ratings and maturities.
Fair market values for residential mortgages available for sale
are determined using sales commitments to permanent investors or
current market rate for loans of similar quality.
Non-performing Loans
Estimated fair market value represents the net realizable value
of the loan collateral including an allowance for credit risk
based upon JSB's historical credit loss experience and
disposition costs for similar assets. Fair market value is based
upon either appraisals obtained from independent sources or upon
JSB's determination of fair market value based upon the
capitalization of current and estimated future cash flows from
the collateral property.
FHLB Stock
FHLB stock is not actively traded on a secondary market. FHLB
stock is held exclusively by financial institutions that are
members of the Federal Home Loan Bank system. The stock is
generally redeemable at par. Accordingly, the fair market value
of the FHLB stock approximates the carrying value.
Accrued Interest Receivable
The fair market value of accrued interest receivable approximates
the carrying value.
Deposit Liabilities
SFAS No. 107 defines the estimated fair value of deposits with no
stated maturity, which includes demand deposits and money market
and other savings accounts, to be equal to the amount payable on
demand. Although market premiums paid for depository
institutions reflect an additional value for these low-cost
deposits, SFAS No. 107 prohibits adjusting fair value for any
value expected to be derived from retaining those deposits for a
future period of time or from the benefit that results from
ability to fund interest-earning assets with these deposit
liabilities. The fair value of fixed-maturity deposits is
estimated by discounting the future cash flows using the current
market rates offered in active secondary markets for advances
with similar terms and remaining maturities.
Accrued Interest Payable
The fair market value of accrued interest payable approximates
the carrying value.
Other Borrowings and FHLB Advances
The fair market value of other borrowed funds and advances is
estimated by discounting the future cash flows using the current
market rates offered in active secondary markets for debt with
similar terms and remaining maturities.
Off-Balance-Sheet Financial Instruments
JSB's off-balance-sheet financial instruments are primarily
commitments to extend credit, commitments to fund residential
mortgages and commitments to purchase MBS. The commitments to
fund residential mortgages and to purchase MBS were made
proximate to December 31, 1993, at the prevailing market rates
and/or prices. Accordingly, the committed funding amount for
residential mortgages and the committed purchase price for MBS
approximates the fair market value of those financial instruments
at December 31, 1993. Commitments to extend credit generally are
not sold or traded, and estimated fair values are not readily
available. For a further discussion of JSB's off-balance-sheet
financial instruments, see Note 12, Financial Instruments with
Off-Balance-Sheet and Credit Risk.
NOTE 16: PURCHASED MORTGAGE SERVICING RIGHTS
At December 31, 1993, SMC serviced $908.9 million in loans for
others. Servicing rights are acquired through both purchases and
loan origination activities. Direct acquisition expenses for
purchased servicing rights are capitalized and amortized over the
estimated economic life of the related servicing asset. The
following is an analysis of the changes in purchased mortgage
loan servicing rights asset balances for the years ended 1993,
1992 and 1991 (in thousands):
<TABLE>
<CAPTION>
1993 1992 1991
<S> <C> <C> <C>
Beginning Balance $ 7,838 $ 9,626 $8,964
Purchases 1,779 595 2,535
Amortization (2,275) (2,383) (1,425)
Sales 0 0 (448)
Ending Balance $ 7,342 $ 7,838 $ 9,626
</TABLE>
NOTE 17: LEASE COMMITMENTS
At December 31, 1993, JSB had entered into four operating lease
agreements for office and branch facility space which will expire
at various times from December 1995 to December 2014. JSB
recognized $212,000, $153,000 and $140,000 of rent expense in
1993, 1992 and 1991, respectively. The minimum lease payments
for the years subsequent to 1993 are as follows (in thousands):
1994 $ 256
1995 287
1996 272
1997 274
1998 254
1999 and
thereafter 325
Total $1,668
NOTE 18: ACQUISITION BY USBANCORP, INC.
On January 18, 1994, Johnstown Savings Bank and USBANCORP, Inc.
(USBANCORP) jointly announced that they had reached agreement on
revised terms to the definitive agreement pursuant to which JSB
would merge with United States National Bank in Johnstown, one of
USBANCORP's banking subsidiaries. The definitive agreement was
signed by the parties on November 10, 1993.
JSB has the right to terminate the amended agreement in the event
that the average closing price of USBANCORP common stock for the
ten trading days immediately preceding the closing is less than
$20.50 per share. USBANCORP common stock is traded on the NASDAQ
National Market System.
At the time the amendment was signed by the parties, financial
advisors for each party provided a written opinion to the Boards
of Directors of JSB and USBANCORP that the revised merger
consideration set forth in the amendment is fair from a financial
point of view to USBANCORP and the stockholders of JSB.
The transaction is subject to regulatory approvals and to the
approvals of the stockholders of JSB and USBANCORP.
<PAGE>
ANNEX A
AGREEMENT AND PLAN
OF MERGER
among
USBANCORP, INC.,
UNITED STATES NATIONAL BANK IN JOHNSTOWN
and
JOHNSTOWN SAVINGS BANK
<PAGE>
AGREEMENT
THIS AGREEMENT AND PLAN OF MERGER, dated as of
November 10, 1993 and amended as of January 18, 1994, is made by
and between USBANCORP, INC. ("USBANCORP"), a Pennsylvania
corporation, having its principal place of business at Main and
Franklin Streets, P.O. Box 430, Johnstown, Pennsylvania 15907,
UNITED STATES NATIONAL BANK IN JOHNSTOWN ("U.S. Bank"), a
national association and a wholly-owned subsidiary of USBANCORP,
having its principal place of business at Main and Franklin
Streets, P.O. Box 520, Johnstown, Pennsylvania 15907 and
JOHNSTOWN SAVINGS BANK ("JSB"), a Pennsylvania-chartered savings
bank, having its principal place of business at Market and Main
Streets, Johnstown, Pennsylvania 15901.
BACKGROUND
1. USBANCORP, and JSB desire to effect a merger of
JSB with and into Johnstown Interim Bank ("JIB") and immediately
thereafter the merger of JIB with and into U.S. Bank, with U.S.
Bank surviving such merger, in accordance with applicable federal
and state laws and in accordance with the plan of merger set
forth herein.
2. At or prior to the execution and delivery of this
Agreement, and as a condition and inducement to USBANCORP's and
U.S. Bank's execution of this Agreement (a) certain directors,
officers and shareholders of JSB executed, in favor of USBANCORP,
a Letter Agreement dated November 10, 1993, in the form attached
hereto as Exhibit 1, and (b) JSB granted to USBANCORP an option
to acquire JSB's common stock (the "USBANCORP Option") pursuant
to a Stock Option Agreement between USBANCORP and JSB dated
November 10, 1993, in the form attached hereto as Exhibit 2.
3. USBANCORP, U.S. Bank and JSB desire to provide the
terms and conditions governing the transactions contemplated
herein.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and of
the mutual covenants, agreements, representations and warranties
herein contained, the parties hereto, intending to be legally
bound, do hereby agree as follows:
ARTICLE III
Section 1.01 Definitions. As used in this Agreement,
the following terms shall have the indicated meanings (such
meanings to be equally applicable to both the singular and plural
forms of the terms defined):
Affiliate means, with respect to any Person, any
Person that directly, or indirectly, through one or more
intermediaries, controls, or is controlled by, or is under
common control with, such Person and, without limiting the
generality of the foregoing, includes any executive officer,
director or 10% equity owner of such Person and any
Affiliate of such executive officer, director or 10% equity
owner.
Agreement means this agreement, as amended on
January 18, 1994, and any modification, amendment or
supplement hereto or restatement hereof, which constitutes a
plan of merger among USBANCORP, U.S. Bank and JSB.
Amendment means the amendment to the Agreement
made by and between the parties as of January 18, 1994.
Applications means the applications for regulatory
approval which are required by the transactions contemplated
hereby.
Articles of Merger means the articles of merger to
be executed by JIB and JSB and to be filed in the Office of
the Secretary of State of the Commonwealth of Pennsylvania
in accordance with the applicable laws of the Commonwealth
of Pennsylvania.
Average Closing Price means the average of the
closing price for USBANCORP Common Stock as quoted on the
NASDAQ National Market System for the ten trading days
immediately preceding the Closing Date.
BCL means the Pennsylvania Business Corporation
Law of 1988, as amended.
BHC Act means the Bank Holding Company Act of
1956, as amended.
Closing Date means the fifth business day after
the last condition precedent pursuant to this Agreement has
been fulfilled or waived, or such other date as USBANCORP
and JSB shall agree.
Effective Date means the date specified in the
Notice of Consummation to be filed with the OCC which shall
be the Closing Date.
Environmental Law means any federal, state, local
or foreign law, statute, ordinance, rule, regulation, code,
license, permit, authorization, approval, consent, order,
judgment, decree, injunction or agreement with any
Regulatory Authority that administers any Environmental Law
relating to (i) the protection, preservation or restoration
of the environment (including, without limitation, air,
water vapor, surface water, groundwater, drinking water
supply, surface soil, subsurface soil, plant and animal life
or any other natural resource), and/or (ii) the use,
storage, recycling, treatment, generation, transportation,
processing, handling, labeling, production, release or
disposal of any substance presently listed, defined,
designated or classified as hazardous, toxic, radioactive or
dangerous, or otherwise regulated, whether by type or by
quantity, including any material containing any such
substance as a component.
ERISA means the Employee Retirement Income
Security Act of 1974, as amended.
Exchange Act means the Securities Exchange Act of
1934, as amended, and the rules and regulations promulgated
from time to time thereunder.
FDIA means the Federal Deposit Insurance Act, as
amended, and the rules and regulations promulgated from time
to time thereunder.
FDIC means the Federal Deposit Insurance
Corporation.
FRB means the Board of Governors of the Federal
Reserve System.
GAAP means generally accepted accounting
principles as in effect from time to time.
IRC means the Internal Revenue Code of 1986, as
amended.
IRS means the Internal Revenue Service.
JIB means Johnstown Interim Bank, a Pennsylvania
chartered commercial bank to be formed by USBANCORP solely
for the purpose of effecting the Merger.
JSB Common Stock means the common stock of JSB
described in Section 2.02(a).
JSB Disclosure Letter means a disclosure letter
delivered by JSB to USBANCORP pursuant to Article II of this
Agreement.
JSB Financials means (i) the audited consolidated
financial statements of JSB as of December 31, 1992 and 1991
and for the three years ended December 31, 1992, and
(ii) the unaudited interim consolidated financial statements
of JSB as of each calendar quarter thereafter included in
Securities Documents filed by JSB.
JSB Regulatory Reports means the Call Reports,
consolidated reports of condition and income, and
accompanying schedules, filed by JSB and other JSB
Subsidiaries with any Regulatory Authority for each calendar
quarter, beginning with the quarter ended December 31, 1990,
through the Closing Date.
JSB Subsidiaries means any corporation, 50% or
more of the capital stock of which is owned, either directly
or indirectly, by JSB, except any corporation the stock of
which is held in the ordinary course of the lending
activities of JSB.
Material Adverse Change means, with respect to
USBANCORP or JSB, any material adverse change in its assets,
financial condition or results of operations, taken as a
whole, except for any material adverse effect caused by any
change occurring after the date of the Agreement in any
federal or state law, rule or regulation or in GAAP or in
the level of general market interest rates, which changes
affect banking institutions generally, or any changes by
USBANCORP or its representatives of accounting adjustments
or entries, or in the calculation thereof, relating to the
transactions contemplated by this Agreement.
Merger means, as the context may require, (i) the
merger of JSB with and into JIB, with JIB surviving such
merger, (ii) the merger of JIB with and into U.S. Bank with
U.S. Bank surviving such merger or (iii) both such mergers,
all as contemplated by this Agreement.
NASDAQ means the National Association of
Securities Dealers Automated Quotation System.
NBA means the National Bank Act, as amended and
the rules and regulations, promulgated from time to time
thereunder.
Notice of Consummation means the Notice of
Consummation and the related articles of association filed
with the OCC to effect the Merger.
OCC means the Office of the Comptroller of the
Currency.
PBC means the Pennsylvania Banking Code of 1965,
as amended.
PDB means the Pennsylvania Department of Banking.
Person means any individual, corporation,
partnership, joint venture, association, trust or "group"
(as that term is defined under the Exchange Act).
Prospectus/Proxy Statement means the
prospectus/proxy statement, together with any exhibits,
appendices, supplements or amendments thereto, to be sent to
holders of USBANCORP Common Stock and JSB Common Stock in
connection with the transactions contemplated by this
Agreement.
Registration Statement means the registration
statement on Form S-4, including any pre-effective or
post-effective amendments or supplements thereto, as filed
with (i) the SEC under the Securities Act with respect to
the USBANCORP Common Stock to be issued in connection with
the transactions contemplated by this Agreement and the
solicitation of proxies by USBANCORP in connection with the
transactions contemplated by this Agreement and (ii) the
FDIC with respect to the solicitation of proxies by JSB in
connection with the transactions contemplated by this
Agreement.
Regulatory Agreement has the meaning given to that
term in Section 2.11 of this Agreement.
Regulatory Authority means any agency or
department of any federal or state government, including
without limitation the FRB, the FDIC, the OCC, the PDB or
the respective staffs thereof.
Rights means warrants, options, rights,
convertible securities and other capital stock equivalents
which obligate an entity to issue its securities.
SBRI means SB Realty, Inc., a Pennsylvania
corporation.
SEC means the Securities and Exchange Commission.
Securities Act means the Securities Act of 1933,
as amended, and the rules and regulations promulgated from
time to time thereunder.
Securities Documents means all registration
statements, schedules, statements, forms, reports, proxy
materials, and other documents required to be filed under
the Securities Laws.
Securities Laws means the Securities Act and the
Exchange Act.
SMC means Standard Mortgage Corporation of
Georgia, a Georgia corporation.
Subsidiary means any corporation, 50% or more of
the capital stock of which is owned, either directly or
indirectly, by another entity, except any corporation the
stock of which is held in the ordinary course of the lending
activities of a bank.
USBANCORP Common Stock has the meaning given to
that term in Section 3.02(a) of this Agreement.
USBANCORP Disclosure Letter means a disclosure
letter delivered by USBANCORP to JSB pursuant to Article III
of this Agreement.
USBANCORP Financials means (i) the audited
consolidated financial statements of USBANCORP as of
December 31, 1992 and 1991 and for the three years ended
December 31, 1992, and (ii) the unaudited interim
consolidated financial statements of USBANCORP as of each
calendar quarter thereafter included in Securities Documents
filed by USBANCORP.
USBANCORP Option means the option granted to
USBANCORP to acquire shares of JSB Common Stock referenced
in the recitals to this Agreement.
USBANCORP Rights Agreement means the Shareholder
Protection Rights Agreement dated November 10, 1989 between
USBANCORP and U.S. Bank, as rights agent, relating to
USBANCORP's Series B Preferred Stock.
USBANCORP Stock Purchase Rights means Rights to
purchase one-tenth of a share of USBANCORP's Series B
Preferred Stock in accordance with the terms of the
USBANCORP Rights Agreement.
USBANCORP Subsidiaries means any corporation, 50%
or more of the capital stock of which is owned, either
directly or indirectly, by USBANCORP, except any corporation
the stock of which is held in the ordinary course of the
lending activities of a bank.
Section 1.02 The Merger.
(a) The Merger. Subject to the terms and
conditions of this Agreement, on the Effective Date JSB shall
merge with and into JIB with JIB surviving and immediately
thereafter JIB shall merge with and into U.S. Bank with U.S. Bank
surviving; the separate existence of JSB shall cease; U.S. Bank
shall be ultimately the surviving corporation in the Merger; and
all of the property (real, personal and mixed), rights, powers
and duties and obligations of JSB shall be taken and deemed to be
transferred to and vested in U.S. Bank, as the ultimately
surviving corporation in the Merger, without further act or deed;
all debts, liabilities and duties of each of JSB and U.S. Bank
shall thereafter be the responsibility of U.S. Bank as the
ultimately surviving corporation; all in accordance with the NBA
and applicable laws of the Commonwealth of Pennsylvania.
(b) Closing. On the Closing Date, the Closing
will take place at 10:00 a.m. at the offices of USBANCORP, unless
another time and place are agreed to by the parties hereto,
provided in any case that all conditions to Closing set forth in
Article V have been satisfied or waived at or prior to Closing.
At or before the Closing, U.S. Bank and JSB shall cause the
Articles of Merger to be duly executed and filed with the
Secretary of State of the Commonwealth of Pennsylvania and the
Notice of Consummation to be duly executed and filed with the
OCC.
(c) U.S. Bank's Articles of Association and
Bylaws. On and after the Effective Date, the articles of
association and the bylaws of U.S. Bank, as in effect immediately
prior to the Effective Date, shall automatically be and remain
the articles of association and bylaws of U.S. Bank, as the
surviving corporation in the Merger, until thereafter altered,
amended or repealed.
(d) Board of Directors and Officers of USBANCORP
and U.S. Bank.
(i) On the Effective Date, the Board of
Directors of USBANCORP shall consist of (i) those persons holding
such office immediately prior to the Effective Date, and two of
the four directors elected to the Board of Directors of U.S. Bank
in accordance with Section 1.02(d)(iii) below who are designated
by USBANCORP one of whom shall sit as a Class III director (which
serves until the annual meeting of USBANCORP shareholders in
1995) and one of whom shall sit as a Class I director (which
serves until the 1996 annual meeting). USBANCORP shall cause
such persons to be elected as directors of USBANCORP effective as
of the Effective Date. Each such director shall hold office
until his successor is elected and qualified or otherwise in
accordance with the articles of incorporation and the bylaws of
USBANCORP. USBANCORP shall use its best efforts to cause such
persons to be renominated for an additional term, subject to
USBANCORP's normal director retirement policy.
(ii) On the Effective Date, the Executive
Committee of the Board of Directors of USBANCORP shall consist of
(i) those persons holding such office immediately prior to the
Effective Date, and (ii) one of the two directors elected to
serve on the Board of Directors of USBANCORP in accordance with
Section 1.02(d)(i) above, who will be designated by USBANCORP.
USBANCORP shall cause such person to be appointed as a member of
the Executive Committee as of the Effective Date. Such member
shall hold office until his successor is appointed and qualified.
(iii) On the Effective Date, the Board of
Directors of U.S. Bank shall consist of those persons holding
office immediately prior to the Effective Date and four present
JSB directors, who are designated by USBANCORP. U.S. Bank shall
cause such persons to be elected as directors of U.S. Bank
effective as of the Effective Date. Each such director shall
hold office until his or her successor is elected and qualified
or otherwise in accordance with the articles of association and
the bylaws of U.S. Bank.
(iv) U.S. Bank will use its best efforts to
cause such persons to be re-elected, and USBANCORP shall vote to
re-elect such persons, in each of the two succeeding years
subject to U.S. Bank's normal director retirement policy. Those
directors of JSB who are not elected to serve on U.S. Bank's
Board, shall be appointed by the Board of Directors of U.S. Bank
for one year terms to U.S. Bank's Main Office Advisory Board and
shall hold office until his successor is appointed and qualified.
U.S. Bank will use its best efforts to cause such persons to be
re-appointed in each of the two succeeding years. Such
individual will receive an annual retainer at a rate not less
than their current annual retainer. USBANCORP, in its sole
discretion, may elect to prepay all or any portion of the annual
retainer payable to such persons.
(v) On the Effective Date, the officers of
USBANCORP duly elected and holding office immediately prior to
the Effective Date shall remain the officers of USBANCORP. The
officers of U.S. Bank duly elected and holding office immediately
prior to such effective date shall remain the officers of U.S.
Bank, as the surviving corporation in the Merger.
(e) Conversion of Shares.
(i) USBANCORP Common Stock.
(A) Each share of USBANCORP Common
Stock issued and outstanding immediately prior to the
Effective Date shall, on and after the Effective Date,
continue to be issued and outstanding as an identical share
of USBANCORP Common Stock.
(B) Each share of USBANCORP Common
Stock issued and held in the treasury of USBANCORP as of the
Effective Date, if any, shall, on and after the Effective
Date, continue to be issued and held in the treasury of
USBANCORP.
(C) Each share of JIB Common Stock
issued and outstanding immediately prior to the Effective
Date shall be cancelled on the Effective Date.
(ii) JSB Common Stock.
(A) After giving effect to the
provisions of Section 1.02(e)(v) hereof with respect to
dissenting shares and subject to the provisions of
subparagraphs (B), (C), and (D) of this Section 1.02(e)(ii)
and Sections 1.02(e)(iii) and (iv), each share of JSB Common
Stock issued and outstanding immediately prior to the
Effective Date shall, on the Effective Date, by reason of
the Merger and without any action on the part of the holder
thereof, be converted into and become a right to receive:
(1) $10.13 in cash, and
(2) a fraction of a share of
USBANCORP Common Stock as follows: (a) if the Average
Closing Price on the Closing Date is less than or equal
to $24.50 per share, then .5053 share of USBANCORP
Common Stock; (b) if the Average Closing Price on the
Closing Date is greater than or equal to $25.50 per
share, then .4853 share of USBANCORP Common Stock; or
(c) if the Average Closing Price on the Closing Date is
greater than $24.50 per share but less than $25.50 per
share, then the conversion ratio will be determined by
dividing $22.50 by the Average Closing Price and
multiplying the resulting figure by .55.
(B) Each share of JSB Common Stock
owned by USBANCORP on the Effective Date, if any, shall be
canceled.
(C) Each share of JSB Common Stock
issued and held in the treasury of JSB or owned by any JSB
Subsidiary as of the Effective Date, if any, shall be
canceled, and no cash, stock or other property shall be
delivered in exchange therefor.
(D) No fraction of a whole share of
USBANCORP Common Stock and no scrip or certificates therefor
shall be issued in connection with the Merger. Any former
holder of JSB Common Stock who would otherwise be entitled
to receive a fraction of a share of USBANCORP Common Stock
shall receive, in lieu thereof, cash in an amount equal to
such fraction of a share multiplied by $25.50.
(E) On the Effective Date, each option
granted pursuant to the JSB Employee Stock Compensation
Program not previously exercised and exercisable into shares
of JSB Common Stock, whether or not such option is
exercisable on the Effective Date, shall, by reason of the
Merger, cease to be outstanding and be converted into the
right to receive in cash an amount equal to (A) the
difference between $22.50 and the exercise price of each
option multiplied by (B) the number of shares of JSB Common
Stock covered by such option.
(iii) In lieu of Section 1.02(e)(ii)(A), each
record holder of shares of JSB Common Stock will have the right,
except as limited by Section 1.02(e)(iv), to elect to have such
holder's shares of JSB Common Stock converted solely into
USBANCORP Common Stock or cash in accordance with the following
procedures:
(A) On or before the Effective Date, a form
letter of transmittal and election statement providing for
such election and for the tender to an exchange agent
selected by USBANCORP (the "Exchange Agent") of the related
share certificates (an "Election Statement") will be mailed
to each JSB stockholder of record on the Effective Date.
(B) Any record holder of JSB Common Stock
may specify, in an Election Statement meeting the
requirements of this Section 1.02(e)(iii) that, as to all
shares of JSB Common Stock covered by such Election
Statement:
(1) all such shares shall be converted
into shares of USBANCORP Common Stock (a "Stock
Election") as follows: (a) if the Average Closing
Price on the Closing Date is less than or equal to
$24.50 per share, then .9184 shares of USBANCORP Common
Stock; (b) if the Average Closing Price on the Closing
Date is greater than or equal to $25.50 per share, then
.8824 shares of USBANCORP Common Stock; or (c) if the
Average Closing Price on the Closing Date is greater
than $24.50 per share but less than $25.50 per share,
then the conversion ratio will be determined by
dividing $22.50 by the Average Closing Price;
(2) all such shares shall be converted
to cash at the rate of $22.50 per share (a "Cash
Election"); or
(3) the shareholder has no preference
and accordingly makes no election and will receive the
consideration specified in Section 1.02(e)(ii)(A) ("No
Election"). Shares of JSB Common Stock as to which a
record holder makes No Election, or as to which no
Effective Election Statement (as defined in
subparagraph (D) below) is filed, are hereinafter
referred to as "No Election Shares."
(C) Any record holder of JSB Common Stock
who is holding such shares for a beneficial owner, or as a
nominee for one or more beneficial owners, may submit an
Election Statement on behalf of any such beneficial owners.
Any beneficial owner of JSB Common Stock on whose behalf a
record owner of JSB Common Stock has submitted an Election
Statement in accordance with this subparagraph (C) will be
considered a separate holder of JSB Common Stock for
purposes of this Agreement.
(D) An Election Statement will be effective
only if a properly completed and signed copy thereof,
accompanied by stock certificates for the shares of JSB
Common Stock which such Election Statement covers shall have
been actually received by the Exchange Agent no later than
3:00 p.m. on the 20th day following the Closing Date (such
time and day being herein referred to as the "Election
Deadline"). (An Election Statement which meets the
requirements of this subparagraph (D) is hereinafter
referred to as an "Effective Election Statement.")
(E) USBANCORP and JSB will have the right to
make rules, not inconsistent with the terms of this
Agreement, governing the form, terms and conditions of
Election Statements, the validity and effectiveness of
Election Statements and the manner and extent to which they
are to be taken into account in making the determinations
prescribed by Section 1.02(e)(iv), the issuance and delivery
of certificates evidencing the USBANCORP Common Stock into
which shares of JSB Common Stock are converted in the Merger
and the payment for fractional interests as prescribed by
Section 1.02(e)(ii)(D).
(iv) The allocation of USBANCORP Common Stock and
cash among holders of outstanding shares of JSB Common Stock
pursuant to Section 1.02(e)(iii) shall be effected as hereinafter
provided:
(A) In the aggregate, fifty-five percent
(55%) of the shares of JSB Common Stock will be converted
into USBANCORP Common Stock (the "Stock Limitation"); and
(B) In the aggregate, forty-five percent
(45%) of the shares of JSB Common Stock will be converted
into cash (the "Cash Amount").
(C) The USBANCORP Common Stock will be
deemed, for the purposes of this Agreement, to be
oversubscribed if the number of shares of JSB Common Stock
covered by all Effective Election Statements which designate
a Stock Election, plus a fraction of the No Election Shares
determined as follows: (a) .5053 if the Average Closing
Price on the Closing Date is less than or equal to $24.50
per share; (b) .4853 if the Average Closing Price on the
Closing Date is greater than or equal to $25.50 per share;
or (c) if the Average Closing Price on the Closing Date is
greater than $24.50 per share but less than $25.50 per
share, a ratio determined by dividing $22.50 by the Average
Closing Price and multiplying the resulting figure by .55,
exceed the Stock Limitation.
(D) (1) If the USBANCORP Common Stock is
not oversubscribed, the USBANCORP Common Stock and the Cash
Amount shall be allocated as follows:
(a) First, all shares of JSB
Common Stock covered by an Effective Election
Statement which designates a Stock Election will
be converted into USBANCORP Common Stock;
(b) Second, all No Election Shares
shall be converted into $10.13 in cash and shares
of USBANCORP Common Stock as follows: (a) if the
Average Closing Price on the Closing Date is less
than or equal to $24.50 per share, then .5053
shares of USBANCORP Common Stock; (b) if the
Average Closing Price on the Closing Date is
greater than or equal to $25.50 per share, then
.4853 shares of USBANCORP Common Stock; or (c) if
the Average Closing Price on the Closing Date is
greater than $24.50 per share but less than $25.50
per share, then the conversion ratio will be
determined by dividing $22.50 by the Average
Closing Price and multiplying the resulting figure
by .55;
(c) Third, all shares of JSB
Common Stock which are Dissenting Shares (as
defined in Section 1.02(e)(v)) shall be allocated
a portion of the Cash Amount equal to an aggregate
amount of $22.50 per each such Dissenting Share;
and
(d) Fourth, if the number of
shares of JSB Common Stock converted into
USBANCORP Common Stock pursuant to (a) and (b)
above does not equal the Stock Limitation,
shareholders whose shares of JSB Common Stock are
covered by an Effective Election Statement which
designates a Cash Election shall each have a pro
rata portion of their shares of JSB Common Stock
converted, at the rate of $22.50 per share of JSB
Common Stock, into a pro rata portion of the Cash
Amount, and their remaining shares of JSB Common
Stock shall be converted into USBANCORP Common
Stock.
(2) If the USBANCORP Stock is
oversubscribed, the USBANCORP Common Stock and the Cash
Amount shall be allocated as follows:
(a) First, all shares of JSB
Common Stock which are Dissenting Shares (as
defined in Section 1.02(e)(v)) shall be allocated
a portion of the Cash Amount equal to an aggregate
amount of $22.50 per each such Dissenting Share;
(b) Second, all shares of JSB
Common Stock covered by an Effective Election
Statement which designates a Cash Election shall
be converted into cash at the rate of $22.50 per
share;
(c) Third, all shares of JSB
Common Stock which are No Election Shares shall be
converted into $10.13 in cash and shares of
USBANCORP Common Stock as follows: (a) if the
Average Closing Price on the Closing Date is less
than or equal to $24.50 per share, then .5053
shares of USBANCORP Common Stock; (b) if the
Average Closing Price on the Closing Date is
greater than or equal to $25.50 per share, then
.4853 shares of USBANCORP Common Stock; or (c) if
the Average Closing Price on the Closing Date is
greater than $24.50 per share but less than $25.50
per share, then the conversion ratio will be
determined by dividing $22.50 by the Average
Closing Price and multiplying the resulting figure
by .55; and
(d) Fourth, shareholders whose
shares of JSB Common Stock are covered by an
Effective Election Statement which designates a
Stock Election shall each have a pro rata portion
of their shares of JSB Common Stock converted into
a pro rata portion of the number of shares of
USBANCORP Common Stock available for conversion by
reason of the Stock Limitation, and their
remaining shares of JSB Common Stock shall be
converted into cash at the rate of $22.50 per
share.
(v) Dissenting Shareholders of JSB. If
there are holders of JSB Common Stock who dissent from the Merger
and exercise and perfect the right to obtain valuation of and
payment for their shares ("Dissenting Shares") pursuant to the
PBC and the BCL, the following provisions will govern payments to
be made in respect of dissenting holders of JSB Common Stock:
(A) All payments in respect of
Dissenting Shares, if any, will be made directly by
USBANCORP, on behalf of JIB as the surviving corporation in
the Merger.
(B) Dissenting Shares, if any, will be
deemed to have been retired and canceled immediately prior
to the Merger, with the effect that no conversion thereof
will occur pursuant to Sections 1.02(e)(ii) and 1.02(e)(iii)
hereof.
(vi) Anti-Dilution Provisions. If, on the
Effective Date, USBANCORP has, at any time before the Effective
Date, (A) issued a dividend in shares of USBANCORP Common Stock,
(B) combined the outstanding shares of USBANCORP Common Stock
into a smaller number of shares, (C) subdivided the outstanding
shares of USBANCORP Common Stock, or (D) reclassified the shares
of USBANCORP Common Stock, then, in any such or similar event,
the number of shares of USBANCORP Common Stock to be delivered to
JSB shareholders who are entitled to receive shares of USBANCORP
Common Stock in exchange for shares of JSB Common Stock shall be
adjusted so that each JSB shareholder shall be entitled to
receive such number of shares of USBANCORP Common Stock as such
shareholder would have been entitled to receive if the Effective
Date had occurred prior to the happening of such event.
(f) Surrender and Exchange of JSB Stock
Certificates.
(i) Exchange of Certificates. Each holder
of shares of JSB Common Stock who surrenders to USBANCORP the
certificate or certificates representing such shares will be
entitled to receive, as soon as practicable after the Effective
Date, in exchange therefor a certificate or certificates for the
number of whole shares of USBANCORP Common Stock into which such
holder's shares of JSB Common Stock have been converted by the
Merger, if any, together with the related USBANCORP Stock
Purchase Rights and a check representing the cash payment for
such shares as described in Sections 1.02(e)(ii)(A) or
1.02(e)(iii) and cash in lieu of any fractional share in
accordance with Section 1.02(e)(ii)(D) hereof.
(ii) Rights Evidenced by Certificates. Each
certificate for shares of USBANCORP Common Stock issued in
exchange for certificates for JSB Common Stock pursuant to
Section 1.02(f)(i) hereof will be dated the Effective Date and be
entitled to dividends and all other rights and privileges
pertaining to such shares of stock from the Effective Date.
Until surrendered, each certificate theretofore evidencing shares
of JSB Common Stock will, from and after the Effective Date,
evidence solely the right to receive certificates for shares of
USBANCORP Common Stock pursuant to Section 1.02(f)(i) hereof, the
related USBANCORP Stock Purchase Rights and a check representing
the cash payment for such shares as described in Sections
1.02(e)(ii)(A) or 1.02(e)(iii) and cash in lieu of any fractional
share in accordance with Section 1.02(e)(ii)(D) hereof. If
certificates for shares of JSB Common Stock are exchanged for
USBANCORP Common Stock at a date following one or more record
dates for the payment of dividends or of any other distribution
on the shares of USBANCORP Common Stock, USBANCORP will pay cash
in an amount equal to dividends theretofore payable on such
USBANCORP Common Stock and pay or deliver any other distribution
to which holders of shares of USBANCORP Common Stock have
theretofore become entitled. No interest will accrue or be
payable in respect of dividends or cash otherwise payable under
this Section 1.02(f) upon surrender of certificates for shares of
JSB Common Stock. Notwithstanding the foregoing, no party hereto
will be liable to any holder of JSB Common Stock for any amount
paid in good faith to a public official or agency pursuant to any
applicable abandoned property, escheat or similar law. Until
such time as certificates for shares of JSB Common Stock are
surrendered by a JSB shareholder to USBANCORP for exchange,
USBANCORP shall have the right to withhold dividends or any other
distributions on the shares of USBANCORP Common Stock issuable to
such shareholder.
(iii) Exchange Procedures. Each certificate
for shares of JSB Common Stock delivered for exchange under this
Section 1.02(f) must be endorsed in blank by the registered
holder thereof or be accompanied by a power of attorney to
transfer such shares endorsed in blank by such holder. If more
than one certificate is surrendered at one time and in one
transmittal package for the same shareholder account, the number
of whole shares of USBANCORP Common Stock for which certificates
will be issued pursuant to this Section 1.02(f) will be computed
on the basis of the aggregate number of shares represented by the
certificates so surrendered. If shares of USBANCORP Common Stock
or payments of cash are to be issued or made to a person other
than the one in whose name the surrendered certificate is
registered, the certificate so surrendered must be properly
endorsed in blank, with signature(s) guaranteed, or otherwise in
proper form for transfer, and the person to whom certificates for
shares of USBANCORP Common Stock is to be issued or to whom cash
is to be paid shall pay any transfer or other taxes required by
reason of such issuance or payment to a person other than the
registered holder of the certificate for shares of JSB Common
Stock which are surrendered.
(iv) Closing of Stock Transfer Books;
Cancellation of JSB Certificates. Upon the Effective Date, the
stock transfer books for JSB Common Stock will be closed and no
further transfers of shares of JSB Common Stock will thereafter
be made or recognized. All certificates for shares of JSB Common
Stock surrendered pursuant to this Section 1.02(f) will be
canceled by USBANCORP.
(g) Payment Procedures. As soon as practicable
after the Effective Date, USBANCORP shall make payment of the
cash consideration provided for in Sections 1.02(e)(ii) and
1.02(e)(iii) to each person entitled thereto.
(h) Fairness Opinions. On or before the
execution of the Amendment, the respective financial advisors of
USBANCORP and JSB shall have delivered an opinion to USBANCORP
and JSB, respectively, that the Merger is fair from a financial
point of view to JSB stockholders and USBANCORP. Copies of such
opinions are attached as Annexes 1 and 2, respectively.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF JSB
JSB hereby represents and warrants to USBANCORP and
U.S. Bank that, except as specifically set forth in the JSB
Disclosure Letter delivered to USBANCORP by JSB on or before
November 17, 1993 and as may be subsequently updated pursuant to
the terms of this Agreement:
Section 2.01 Organization.
(a) JSB is a Pennsylvania-chartered savings bank
duly organized, validly existing and in good standing under the
laws of the Commonwealth of Pennsylvania. JSB is a member of the
Federal Home Loan Bank of Pittsburgh. JSB has the corporate
power and authority to carry on its business and operations as
now being conducted and to own and operate the properties and
assets now owned and being operated by it. JSB is not qualified
or licensed to do business as a foreign corporation in any other
jurisdiction and is not required to be so qualified or licensed
as the result of the ownership or leasing of property or the
conduct of its business or, if required to be so qualified, the
failure to qualify would not have a material adverse effect on
JSB.
003 SBRI is a Pennsylvania corporation duly
organized, validly existing and in good standing under the laws
of the Commonwealth of Pennsylvania. SBRI has the corporate
power and authority to carry on its business and operations as
now being conducted and to own and operate the properties and
assets now owned and being operated by it. SBRI is not qualified
or licensed to do business as a foreign corporation in any other
jurisdiction and is not required to be so qualified or licensed
as the result of the ownership or leasing of property or the
conduct of its business.
(c) SMC is a Georgia corporation duly organized,
validly existing and in good standing under the laws of the State
of Georgia and is duly qualified as a foreign corporation and in
good standing under the laws of each jurisdiction in which the
conduct of its business or the ownership of its assets requires
such qualification. SMC has the corporate power and authority to
carry on its business and operations as now being conducted and
to own and operate the properties and assets now owned and being
operated by it. SMC is licensed as a mortgage lender under the
Georgia Residential Mortgage Act and is licensed as a mortgage
servicer in each jurisdiction that requires servicers of mortgage
loans to be licensed.
(d) There are no JSB Subsidiaries other than
those identified in the JSB Disclosure Letter.
(e) JSB is a Pennsylvania-chartered savings bank
the deposits of which are insured by the Bank Insurance Fund of
the FDIC to the full extent provided in the FDIA.
(f) The respective minute books of JSB, SBRI and
SMC and each other JSB Subsidiary accurately record, in all
material respects, all material corporate actions of their
respective shareholders and boards of directors (including
committees) through the date of this Agreement.
(g) JSB has delivered to USBANCORP true and
correct copies of the articles of incorporation and bylaws of
JSB, SBRI and of SMC, respectively, as in effect on the date
hereof.
Section 2.02 Capitalization.
(a) The authorized capital stock of JSB consists
of (a) 15,000,000 shares of common stock, with a par value of
$1.00 ("JSB Common Stock"), of which 1,940,150 shares were
outstanding, validly issued, fully paid and nonassessable and
free of preemptive rights as of the date of the execution of the
Agreement and of which 1,944,790 shares were outstanding, validly
issued, fully paid and nonassessable and free of preemptive
rights as of the date of the Amendment and (b) 5,000,000 shares
of preferred stock with a par value of $1.00 per share, none of
which are issued or outstanding. Neither JSB, SBRI, SMC nor any
other JSB Subsidiary has or is bound by any subscription, option,
warrant, call, commitment, agreement, plan or other Right of any
character relating to the purchase, sale or issuance or voting
of, or right to receive dividends or other distributions on any
shares of JSB Common Stock or any other security of JSB or any
securities representing the right to vote, purchase or otherwise
receive any shares of JSB Common Stock or any other security of
JSB, other than for shares issuable under the USBANCORP Option,
and as of the date of the execution of the Agreement, 111,000
shares which JSB was obligated to issue under its Employee Stock
Compensation Program, as follows: (A) 26,000 shares at an
exercise price of $9.50, (B) 50,000 shares at an exercise price
of $5.75 and (C) 35,000 shares at an exercise price of $11.15;
and subsequently, as of the date of the execution of the
Amendment, 106,360 shares which JSB is obligated to issue under
its Employee Stock Compensation Program as follows: (A) 25,000
shares at an exercise price of $9.50, (B) 47,391 shares at an
exercise price of $5.75 and (C) 33,969 shares at an exercise
price of $11.15.
(b) The authorized capital stock of SBRI consists
of 1,250 shares of common stock, par value $1,000.00 per share
("SBRI Common Stock"), of which 50 shares are outstanding,
validly issued, fully paid and nonassessable and free of
preemptive rights. Neither JSB nor SBRI has or is bound by any
subscription, option, warrant, call, commitment, agreement or
other Right of any character relating to the purchase, sale or
issuance or voting of, or right to receive dividends or other
distributions on any shares of SBRI Common Stock or any other
security of SBRI or any securities representing the right to
vote, purchase or otherwise receive any shares of SBRI Common
Stock or any other security of SBRI. JSB owns all of the
outstanding shares of capital stock of SBRI free and clear of all
liens, security interests, pledges, charges, encumbrances,
agreements and restrictions of any kind or nature.
(c) The authorized capital stock of SMC consists
of 1,000 shares of common stock, par value $1.00 per share ("SMC
Common Stock"), of which 600 shares are outstanding, validly
issued, fully paid and nonassessable and free of preemptive
rights. Neither JSB, SBRI nor SMC has or is bound by any
subscription, option, warrant, call, commitment, agreement or
other Right of any character relating to the purchase, sale or
issuance or voting of, or right to receive dividends or other
distributions on any shares of SMC Common Stock or any other
security of SMC or any securities representing the right to vote,
purchase or otherwise receive any shares of SMC Common Stock or
any other security of SMC. SBRI owns all of the outstanding
shares of capital stock of SMC free and clear of all liens,
security interests, pledges, charges, encumbrances, agreements
and restrictions of any kind or nature.
(d) Neither JSB, SBRI, SMC or any other JSB
Subsidiary, owns any equity interest, directly or indirectly, in
any other company or controls any other company, except for
equity interests held in the investment portfolios of JSB and JSB
Subsidiaries, equity interests held by JSB Subsidiaries in a
fiduciary capacity, and equity interests held in connection with
the commercial loan activities of JSB and JSB Subsidiaries.
Except for investments that do not exceed 5% of the subject
company, there are no subscriptions, options, warrants, calls,
commitments, agreements or other Rights outstanding and held by
JSB, or JSB Subsidiaries with respect to any other company's
capital stock or the equity of any other Person.
(e) Except as set forth in the JSB Disclosure
Letter, to the best knowledge of JSB, no person or "group" (as
that term is used in Section 13(d)(3) of the Exchange Act) is the
beneficial owner (as defined in Section 13(d) of the Exchange
Act) of 5% or more of the outstanding shares of JSB Common Stock.
Section 2.03 Authority; No Violation.
(a) JSB has full corporate power and authority to
execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of
this Agreement by JSB and the consummation by JSB of the
transactions contemplated hereby have been duly and validly
approved by the Board of Directors of JSB and, except for
approval by the shareholders of JSB as required under the PBC,
JSB's articles of incorporation and bylaws and NASDAQ
requirements applicable to it, no other corporate proceedings on
the part of JSB are necessary to consummate the transactions
contemplated hereby. This Agreement has been duly and validly
executed and delivered by JSB, subject to approval of the
shareholders of JSB as required under the PBC, JSB's articles of
incorporation and bylaws and NASDAQ requirements applicable to it
and receipt of the required approvals of Regulatory Authorities
described in Section 3.04 hereof, and constitutes the valid and
binding obligation of JSB, enforceable against JSB in accordance
with its terms, subject to applicable bankruptcy, insolvency and
similar laws affecting depository institutions and creditors'
rights generally and subject, as to enforceability, to general
principles of equity.
(b) (A) The execution and delivery of this
Agreement by JSB, (B) subject to receipt of approvals from the
Regulatory Authorities referred to in Section 3.04 hereof and
compliance with any conditions contained therein, the
consummation of the transactions contemplated hereby, and
(C) compliance by JSB with any of the terms or provisions hereof,
will not (i) conflict with or result in a breach of any provision
of the articles of incorporation or bylaws of JSB or any JSB
Subsidiary; (ii) violate any statute, code, ordinance, rule,
regulation, judgment, order, writ, decree or injunction
applicable to JSB or any JSB Subsidiary or any of their
respective properties or assets; or (iii) violate, conflict with,
result in a breach of any provisions of, constitute a default (or
an event which, with notice or lapse of time, or both, would
constitute a default) under, result in the termination of,
accelerate the performance required by, or result in a right of
termination or acceleration or the creation of any lien, security
interest, charge or other encumbrance upon any of the properties
or assets of JSB or any JSB Subsidiary under, any of the terms,
conditions or provisions of any note, bond, mortgage, indenture,
deed of trust, license, lease, agreement, commitment or other
instrument or obligation to which JSB or any JSB Subsidiary is a
party, or by which they or any of their respective properties or
assets may be bound or affected, except for such violations,
conflicts, breaches or defaults under clause (ii) or (iii) hereof
which, either individually or in the aggregate, will not have a
material adverse effect on the assets, business, financial
condition or results of operations of JSB or the JSB Subsidiaries
taken as a whole or the ability of JSB to perform any of its
material obligations under this Agreement.
Section 2.04 Consents. Except for the consents,
approvals, filings and registrations from or with the Regulatory
Authorities referred to in Section 3.04 hereof and compliance
with any conditions contained therein, and the approval of this
Agreement by the shareholders of JSB under the PBC, no consents
or approvals of, or filings or registrations with, any Regulatory
Authority are necessary, and no consents or approvals of any
third parties are necessary, or will be, in connection with
(a) the execution and delivery of this Agreement by JSB, and
(b) the consummation by JSB of the transactions contemplated
hereby. JSB has no reason to believe that any required consents
or approvals will not be received or will be received with
conditions, limitations or restrictions unacceptable to the
parties hereto or which would adversely impact JSB's ability to
consummate the transactions contemplated by this Agreement.
Section 2.05 Financial Statements.
(a) JSB has previously delivered, or will
deliver, to USBANCORP the JSB Regulatory Reports. The JSB
Regulatory Reports have been, or will be, prepared in accordance
with applicable regulatory accounting principles and practices
applied on a consistent basis throughout the periods covered by
such statements, and fairly present, or will fairly present, the
financial position, results of operations and changes in
shareholder's equity of JSB as of and for the periods ended on
the dates thereof, in accordance with applicable regulatory
accounting principles applied on a consistent basis.
(b) JSB has previously delivered, or will
deliver, its audited consolidated financial statements as of
December 31, 1992 and 1991 and for the three years ended
December 31, 1992. The JSB Financials have been, or will be,
prepared in accordance with GAAP and practices applied on a
consistent basis throughout the periods covered by such
statements, and fairly present, or will fairly present, the
consolidated financial position, results of operations and cash
flows of JSB as of and for the periods ending on the dates
thereof, in accordance with generally accepted accounting
principles applied on a consistent basis.
(c) At the date of each balance sheet included in
the JSB Financials, neither JSB, SBRI, SMC nor any other JSB
Subsidiary (as the case may be) had, or will have any
liabilities, obligations or loss contingencies of any nature
(whether absolute, accrued, contingent or otherwise) of a type
required to be reflected in such JSB Financials or in the
footnotes thereto which are not fully reflected or reserved
against therein or fully disclosed in a footnote thereto, except
for liabilities, obligations and loss contingencies which may
result from the execution of the Amendment or which are not
material in the aggregate and which are incurred in the ordinary
course of business, consistent with past practice and except for
liabilities, obligations and loss contingencies which are within
the subject matter of a specific representation and warranty
herein and subject, in the case of any unaudited statements, to
normal, recurring audit adjustments and the absence of footnotes.
Section 2.06 Taxes.
(a) JSB and JSB Subsidiaries are members of the
same affiliated group within the meaning of IRC Section 1504(a).
JSB has duly filed, and will file, in correct form all federal,
state and local tax returns required to be filed by or with
respect to JSB and all JSB Subsidiaries on or prior to the
Closing Date (all such returns being accurate and correct in all
material respects) and has duly paid or will pay, or made or will
make, provisions for the payment of all federal, state and local
taxes which have been incurred by or are due or claimed to be due
from JSB and any JSB Subsidiary by any taxing authority or
pursuant to any tax sharing agreement or arrangement (written or
oral) on or prior to the Closing Date other than taxes which
(x) (i) are not delinquent or (ii) are being contested in good
faith and (y) have not been finally determined.
(b) No consent pursuant to IRC Section 341(f) has
been filed (or will be filed prior to the Closing Date) by or
with respect to JSB or any JSB Subsidiary.
Section 2.07 No Material Adverse Change.
JSB has not suffered any Material Adverse Change since
September 30, 1993.
Section 2.08 Contracts.
(a) Except as described in JSB's proxy statement
for its 1993 annual meeting of shareholders previously delivered
to USBANCORP, or in the footnotes to the JSB Financials, neither
JSB nor any JSB Subsidiary is a party to or subject to: (i) any
employment, consulting or severance contract or arrangement with
any past or present officer, director or employee of JSB or any
JSB Subsidiary, except for "at will" arrangements; (ii) any plan,
arrangement or contract providing for bonuses, pensions, options,
deferred compensation, retirement payments, profit sharing or
similar arrangements for or with any past or present officers,
directors or employees of JSB or any JSB Subsidiary except
severance arrangements set forth in Exhibits 3 and 6A through 6D
hereof; (iii) any collective bargaining agreement with any labor
union relating to employees of JSB or any JSB Subsidiary;
(iv) any agreement which by its terms limits the payment of
dividends by any JSB Subsidiary; (v) any instrument evidencing or
related to indebtedness for borrowed money in excess of
$1 million, whether directly or indirectly, by way of purchase
money obligation, conditional sale, lease purchase, guaranty or
otherwise, in respect of which JSB or any JSB Subsidiary is an
obligor to any person, which instrument evidences or relates to
indebtedness other than deposits, repurchase agreements, bankers
acceptances and "treasury tax and loan" accounts established in
the ordinary course of business and transactions in "federal
funds" or FHLB advances, or which contains financial covenants or
other restrictions (other than those relating to the payment of
principal and interest when due) which would be applicable on or
after the Closing Date to USBANCORP or any USBANCORP Subsidiary;
(vi) any contract (other than this Agreement) limiting the
freedom of JSB to engage in any type of banking or bank-related
business permissible under law; or (vii) any contract, plan or
arrangement which provides for payments or benefits in certain
circumstances which, together with other payments or benefits
payable to any participant therein or party thereto, might render
any portion of any such payments or benefits subject to
disallowance of deduction therefor as a result of the application
of Section 280G of the Code.
(b) True and correct copies of agreements, plans,
arrangements and instruments referred to in Section 2.08(a) or
described in the JSB proxy statement for its 1993 annual meeting
of shareholders or in a footnote to the JSB Financials have been
or will be provided to USBANCORP on or before the date specified
in the preamble to this Article II and are in full force and
effect on the date hereof and neither JSB nor any JSB Subsidiary
(nor, to the knowledge of JSB, any other party to any such
contract, plan, arrangement or instrument) has breached any
provision of, or is in default in any material respect under any
term of, any such contract, plan, arrangement or instrument.
(c) With the exception of the Employment
Agreement between Mr. Coyne and JSB, no party to any material
contract, plan, arrangement or instrument that require annual
payments in excess of $100,000 will have the right to terminate
any or all of the provisions of any such contract, plan,
arrangement or instrument as a result of the transactions
contemplated by this Agreement;
(d) No plan, employment agreement, termination
agreement, or similar agreement or arrangement to which JSB or
any JSB Subsidiary is a party or under which JSB or any JSB
Subsidiary may be liable contains provisions which permit an
employee or independent contractor to terminate it without cause
and continue to accrue future benefits from JSB or any JSB
Subsidiary thereunder; and
(e) No such agreement, plan or arrangement
provides for acceleration in the vesting of benefits or payments
due thereunder upon the occurrence of a change in ownership or
control of JSB or any JSB Subsidiary absent the occurrence of a
subsequent event. No such agreement, plan or arrangement
requires JSB or any JSB Subsidiary to provide a benefit in the
form of JSB Common Stock or determined by reference to the value
of JSB Common Stock.
Section 2.09 Ownership of Property; Insurance
Coverage.
(a) JSB and JSB Subsidiaries have, or will have
as to property acquired after the date hereof, good and, as to
real property, marketable title to all assets and properties
owned by JSB or any JSB Subsidiary in the conduct of their
businesses, whether such assets and properties are real or
personal, tangible or intangible, including assets and property
reflected in the balance sheets contained in the JSB Regulatory
Reports and in the JSB Financials or acquired subsequent thereto
(except to the extent that such assets and properties have been
disposed of for fair value, in the ordinary course of business,
since the date of such balance sheets), subject to no
encumbrances, liens, mortgages, security interests or pledges,
except (i) those items which secure liabilities for borrowed
money from the Federal Home Loan Bank of Pittsburgh, (ii) the
mortgage loans and servicing rights which secure liabilities for
borrowed money under a revolving warehouse line of credit and a
servicing loan in the aggregate principal amount of
$29.4 million, available to SMC, (iii) statutory liens for
amounts not yet delinquent or which are being contested in good
faith, (iv) purchase money mortgages and (v) items permitted
under Article IV. JSB and the JSB Subsidiaries, as lessee, have
the right under valid and subsisting leases of real and personal
properties used by JSB and JSB Subsidiaries in the conduct of
their businesses to occupy or use all such properties as
presently occupied and used by each of them. Such existing
leases and commitments to lease constitute or will constitute
operating leases for both tax and financial accounting purposes
and the lease expense and minimum rental commitments with respect
to such leases and lease commitments are as disclosed in Note 17
of the Notes to the JSB Financials subject only to normal interim
period amortization.
(b) With respect to all agreements pursuant to
which JSB or any JSB Subsidiary has purchased securities subject
to an agreement to resell, if any, JSB or such JSB Subsidiary, as
the case may be, has a valid, perfected first lien or security
interest in the government securities or other collateral
securing the repurchase agreement, and the value of such
collateral equals or exceeds the amount of the debt secured
thereby.
(c) JSB and the JSB Subsidiaries currently
maintain insurance in amounts considered by JSB to be reasonable
for its operations. Neither JSB nor any JSB Subsidiary has
received notice from any insurance carrier that (i) such
insurance will be canceled or that coverage thereunder will be
reduced or eliminated, or (ii) premium costs with respect to such
policies of insurance will be substantially increased. There
are presently no claims pending under such policies of insurance
and no notices have been given by JSB or any JSB Subsidiaries
under such policies.
Section 2.10 Legal Proceedings. Neither JSB nor any
JSB Subsidiary is a party to any, and there are no pending or, to
the best of JSB's knowledge, threatened legal, administrative,
arbitration or other proceedings, claims (whether asserted or
unasserted), actions or governmental investigations or inquiries
of any nature (limited as set forth below) (i) against JSB or any
JSB Subsidiary, (ii) to which JSB or any JSB Subsidiary's assets
are or may be subject, or (iii) which could adversely affect the
ability of JSB to perform under this Agreement, except for any
proceedings, claims, actions, investigations or inquiries
referred to in clauses (i) or (ii) which, if adversely
determined, individually or in the aggregate, could not be
reasonably expected to materially and adversely affect the
assets, financial condition or results of operations of JSB or
JSB Subsidiaries, taken as a whole. However, JSB specifically
does not make any representation or warranty concerning any
legal, administrative, arbitration, or other proceeding, claims
(whether asserted or unasserted), actions, or governmental
investigations or inquiries of any nature with respect to any
matters resulting from, arising out of or relating to, or in
connection with JSB's execution of the Amendment or the
transactions contemplated thereby.
Section 2.11 Compliance With Applicable Law.
(a) JSB and JSB Subsidiaries hold all licenses,
franchises, permits and authorizations necessary for the lawful
conduct of their businesses under, and have complied in all
material respects with, applicable laws, statutes, orders, rules
or regulations of any federal, state or local governmental
authority relating to them, other than where such failure to hold
or such noncompliance will neither result in a limitation in any
material respect on the conduct of their businesses nor otherwise
have a material adverse effect on the assets, business, financial
condition or the results of operations of JSB or JSB Subsidiaries
taken as a whole.
(b) Neither JSB nor any JSB Subsidiary has
received any notification or communication from any Regulatory
Authority (i) asserting that JSB or any JSB Subsidiary is not in
substantial compliance with any of the statutes, regulations or
ordinances which such Regulatory Authority enforces;
(ii) threatening to revoke any license, franchise, permit or
governmental authorization which is material to JSB or any JSB
Subsidiary; (iii) requiring or threatening to require JSB or any
JSB Subsidiary, or indicating that JSB or any JSB Subsidiary may
be required, to enter into a cease and desist order, agreement or
memorandum of understanding or any other agreement restricting or
limiting, or purporting to restrict or limit, in any material
manner the operations of JSB or any JSB Subsidiary, including
without limitation any restriction on the payment of dividends;
or (iv) directing, restricting or limiting, or purporting to
direct, restrict or limit, in any material manner the operations
of JSB or any JSB Subsidiary, including without limitation any
restriction on the payment of dividends (any such notice,
communication, memorandum, agreement or order described in this
sentence herein referred to as a "Regulatory Agreement").
Neither JSB nor any JSB Subsidiary has consented to or entered
into any Regulatory Agreement that has not been terminated as of
the date hereof.
Section 2.12 ERISA. Neither JSB nor any JSB
Subsidiary, and no pension plan maintained by JSB or any JSB
Subsidiary, has incurred any liability to the Pension Benefit
Guaranty Corporation or to the IRS with respect to any pension
plan qualified under IRC Section 401(a), except liabilities to
the Pension Benefit Guaranty Corporation pursuant to ERISA
Section 4007, all of which have been fully paid, nor has any
reportable event under ERISA Section 4043(b) occurred with
respect to any such pension plan. Neither JSB nor any JSB
Subsidiary has incurred any liability under ERISA Section 4201
for a complete or partial withdrawal from a multi-employer plan.
All "employee benefit plans," as defined in ERISA Section 3(3),
comply in all material respects with ERISA. As of September 30,
1993, neither JSB nor any JSB Subsidiary had a material liability
under any such plan which is not reflected, reserved against or
accrued on the JSB Financials as of such date or disclosed in the
notes thereto, including any liability under SFAS No. 106 or
SFAS 112. No prohibited transaction (which shall mean any
transaction prohibited by ERISA Section 406 and not exempt under
ERISA Section 408) has occurred with respect to any employee
benefit plan maintained by JSB or any JSB Subsidiary which would
result in the imposition, directly or indirectly, of a material
excise tax under IRC Section 4975. JSB and the JSB Subsidiaries
provide continuation coverage under group health plans for
separating employees in accordance with the provisions of IRC
Section 4980B(f). Such group health plans are in compliance with
Section 1862(b)(1) of the Social Security Act.
Section 2.13 Brokers and Finders. Neither JSB nor
any JSB Subsidiary, nor any of their respective officers,
directors, employees or agents, has employed any broker, finder
or financial advisor or incurred any liability or commitment for
any fees or commissions to any such person in connection with the
transactions contemplated by this Agreement, except for R.P.
Financial, Inc. and Alex Brown & Sons, Inc., which liability
shall be the sole obligation of JSB.
Section 2.14 Environmental Matters. To the knowledge
of JSB, neither JSB nor any JSB Subsidiary, nor any properties
owned or operated by JSB or any JSB Subsidiary as of the date of
this Agreement (not including any in-substance foreclosure) has
been or is in violation of or liable under any Environmental Law,
except for such violations or liabilities that, individually or
in the aggregate, would not have a material adverse effect on the
assets, financial condition or results of operation of JSB and
its Subsidiaries taken as a whole. There are no actions, suits
or proceedings, or demands, claims, notices or, to the knowledge
of JSB, investigations (including without limitation notices,
demand letters or requests for information from any environmental
agency) instituted or pending, or to the knowledge of JSB,
threatened relating to the liability of any property (not
including any in-substance foreclosures) now owned or operated by
JSB or any JSB Subsidiary under any Environmental Law.
Section 2.15 Loan Portfolio. The allowance for loan
losses reflected, or to be reflected, in the JSB Regulatory
Reports, and shown, or to be shown, on the balance sheets
contained in the JSB Financials are, or will be, adequate, in
accordance with the requirements of GAAP and all applicable
regulatory criteria. No Regulatory Authority has requested, in
writing, JSB to increase the allowance for loan losses during
1991, 1992 or 1993 that has not been responded to in a manner
satisfactory to such Regulatory Authority.
Section 2.16 Information to be Supplied. The
information to be supplied by JSB for inclusion in the
Registration Statement will not, at the time the Registration
Statement is declared effective pursuant to the Securities Act,
contain any untrue statement of a material fact or omit to state
any material fact necessary in order to make the statements
therein not misleading. The information supplied, or to be
supplied, by JSB for inclusion in the Applications will, at the
time such documents are filed with any Regulatory Authority, be
accurate in all material aspects.
Section 2.17 Securities Documents. JSB has
delivered, or will deliver, to USBANCORP copies of its (i) annual
reports on FDIC Form F-2 or SEC Form 10-K for the years ended
December 31, 1992, 1991 and 1990, (ii) quarterly reports on FDIC
Form F-4 for the quarters ended March 31, June 30, and
September 30, 1993, and (iii) proxy materials used or for use in
connection with its meetings of shareholders held in 1993, 1992
and 1991. Such reports and such proxy materials complied, in all
material respects, with the applicable provisions of the Exchange
Act and all applicable rules and regulations of the FDIC or the
Office of Thrift Supervision.
Section 2.18 Related Party Transactions. Except as
disclosed in JSB's 1993 proxy statement or in the footnotes to
the JSB Financials, JSB is not a party to any transaction
(including any loan or other credit accommodation) with any
Affiliate of JSB (except a JSB Subsidiary). All such
transactions (a) were made in the ordinary course of business,
(b) were made on substantially the same terms, including interest
rates and collateral, as those prevailing at the time for
comparable transactions with other Persons, and (c) did not
involve more than the normal risk of collectability or present
other unfavorable features. No loan or credit accommodation to
any Affiliate of JSB is presently in default or, during the three
year period prior to the date of this Agreement, has been in
default or has been restructured, modified or extended. JSB has
no reason to believe that principal and interest with respect to
any such loan or other credit accommodation will not be paid when
due or that the loan grade classification accorded such loan or
credit accommodation by JSB is inappropriate.
Section 2.19 Quality of Representations. No
representations made by JSB in this Agreement contain any untrue
statement of a material fact or omits to state a material fact
necessary to make the statements made not misleading.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF USBANCORP
USBANCORP hereby represents and warrants to JSB that,
except as set forth in the USBANCORP Disclosure Letter delivered
to JSB on or before November 17, 1993:
Section 3.01 Organization.
(a) USBANCORP is a corporation duly organized,
validly existing and in good standing under the laws of the
Commonwealth of Pennsylvania. Each USBANCORP Subsidiary is duly
organized, validly existing, and in good standing under the laws
of the jurisdiction of its incorporation and each possesses full
corporate power and authority to carry on its respective business
and to own, lease and operate its properties as presently
conducted. Neither USBANCORP nor any USBANCORP Subsidiary is
required by the conduct of its business or the ownership or
leasing of its assets to qualify to do business as a foreign
corporation in any jurisdiction, where the failure to be so
qualified would be material to the assets, business, financial
condition or results of operations of USBANCORP and its
Subsidiaries taken as a whole. USBANCORP is a multi-bank holding
company duly registered under the BHC Act.
(b) U.S. Bank is a national bank, duly organized
and validly existing and in good standing under the laws of the
United States. U.S. Bank has the corporate power and authority
to carry on its business and operations as now being conducted
and to own and operate the properties and assets now owned and
being operated by it.
(c) U.S. Bank is a national bank the deposits of
which are insured by the Bank Insurance Fund of the FDIC to the
full extent provided in the FDIA.
(d) Prior to the execution of this Agreement,
USBANCORP has delivered to JSB true and correct copies of the
articles of incorporation and bylaws of USBANCORP and U.S. Bank
as in effect on the date hereof.
(e) The respective minute books of USBANCORP and
the USBANCORP Subsidiaries accurately record, in all material
respects, all material corporate actions of their respective
shareholders and boards of directors (including committees).
Section 3.02 Capital Structure.
(a) USBANCORP is authorized, by its articles of
incorporation, to issue (i) 6,000,000 shares of common stock, par
value $2.50 per share ("USBANCORP Common Stock"), of which, at
the date of this Agreement, as amended, no shares were issued and
held by USBANCORP as treasury stock and 4,726,181 shares are
issued and outstanding, and (ii) 2,000,000 shares of no par
preferred stock, none of which are issued and outstanding. All
shares of USBANCORP Common Stock issued and outstanding are
validly issued, fully paid and nonassessable and free of any
preemptive rights and all shares of USBANCORP Common Stock to be
issued in connection with the Merger will be validly issued,
fully paid and nonassessable and free of any preemptive rights.
Neither USBANCORP nor U.S. Bank has or is bound by any
subscription, option, warrant, call, commitment, agreement or
other Right of any character relating to the purchase or issuance
or voting of or right to receive dividends or other distributions
or any shares of USBANCORP Common Stock or any other security of
USBANCORP or any securities representing the right to vote,
purchase or otherwise receive any shares of USBANCORP Common
Stock or any other security of USBANCORP other than (i) the
USBANCORP Stock Purchase Rights and (ii) as authorized under
USBANCORP's employee benefit plans, stock option plans, and
dividend reinvestment plan.
(b) Except as disclosed in USBANCORP's definitive
proxy statement dated March 29, 1993, no person or "group" (as
that term is used in Section 13(d)(3) of the Exchange Act) is the
beneficial owner of 5% or more of the outstanding shares of
USBANCORP Common Stock.
(c) USBANCORP owns all of the capital stock of
U.S. Bank, Three Rivers Bank and Trust Company, Community
Bancorp, Inc., USBANCORP Trust Company and United Bancorp Life
Insurance Company free and clear of all liens, security
interests, pledges, charges, or encumbrances, agreements and
restrictions of any kind or nature. No USBANCORP Subsidiary has
or is bound by any subscription, option, warrant, call,
commitment, agreement or other Right of any character relating to
the purchase or issuance or voting of or right to receive
dividends or other distributions or any shares of USBANCORP
Subsidiary common stock or any other security of any USBANCORP
Subsidiary or any securities representing the right to vote,
purchase or otherwise receive any shares of any USBANCORP
Subsidiary Common Stock or any other security of any USBANCORP
Subsidiary. Except for the USBANCORP Subsidiaries, USBANCORP
does not possess, directly or indirectly, any material equity
interest in any corporation, except for equity interests held in
the investment portfolios of USBANCORP Subsidiaries, equity
interests held by USBANCORP Subsidiaries in a fiduciary capacity,
and equity interests held in connection with the commercial loan
activities of USBANCORP Subsidiaries.
Section 3.03 Authority; No Violation.
(a) USBANCORP and U.S. Bank have full corporate
power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby. The execution
and delivery of this Agreement by USBANCORP and U.S. Bank and the
consummation by USBANCORP and U.S. Bank of the transactions
contemplated hereby have been duly and validly approved by the
Board of Directors of USBANCORP and U.S. Bank, respectively, and
by USBANCORP as the sole shareholder of U.S. Bank, and, except
for approval by the shareholders of USBANCORP as required under
NASDAQ requirements applicable to it no other corporate
proceedings on the part of USBANCORP or U.S. Bank are necessary
to consummate the transactions contemplated hereby. This
Agreement has been duly and validly executed and delivered by
USBANCORP and U.S. Bank and, subject to approval by the
shareholders of USBANCORP as required under NASDAQ requirements
applicable to it, and receipt of the required approvals of
Regulatory Authorities described in Section 3.04 hereof,
constitutes the valid and binding obligation of USBANCORP and
U.S. Bank, enforceable against USBANCORP and U.S. Bank in
accordance with its terms, subject to applicable bankruptcy,
insolvency and similar laws affecting depository institutions and
creditors' rights generally and subject, as to enforceability, to
general principles of equity.
(b) (A) The execution and delivery of this
Agreement by USBANCORP and U.S. Bank, (B) subject to receipt of
approvals from the Regulatory Authorities referred to in
Section 3.04 hereof and compliance with any conditions contained
therein, the consummation of the transactions contemplated
hereby, and (C) compliance by USBANCORP and U.S. Bank with any of
the terms or provisions hereof will not (i) conflict with or
result in a breach of any provision of the articles of
incorporation or bylaws of USBANCORP and/or the articles of
association and bylaws of U.S. Bank; (ii) violate any statute,
code, ordinance, rule, regulation, judgment, order, writ, decree
or injunction applicable to USBANCORP or U.S. Bank or any of
their respective properties or assets; or (iii) violate, conflict
with, result in a breach of any provisions of, constitute a
default (or an event which, with notice or lapse of time, or
both, would constitute a default), under, result in the
termination of, accelerate the performance required by, or result
in a right of termination or acceleration or the creation of any
lien, security interest, charge or other encumbrance upon any of
the properties or assets of USBANCORP or U.S. Bank under any of
the terms, conditions or provisions of any note, bond, mortgage,
indenture, deed of trust, license, lease, agreement, commitment
or other investment or obligation to which USBANCORP or U.S. Bank
is a party, or by which they or any of their respective
properties or assets may be bound or affected, except for such
violations, conflicts, breaches or defaults under clause (ii) or
(iii) hereof which, either individually or in the aggregate, will
not have a material adverse effect on the assets, business,
financial condition or results of operations of USBANCORP and
USBANCORP Subsidiaries taken as a whole or the ability of
USBANCORP or U.S. Bank to perform any of their material
obligations under this Agreement.
Section 3.04 Consents. Except for consents and
approvals of or filings with the OCC, FRB, FDIC and PDB, and the
SEC and state "blue sky" authorities, no consents or approvals
of, or filings or registrations with, any Regulatory Authority
are necessary and no consents of any third party are necessary or
will be necessary in connection with the execution and delivery
of this Agreement by each of USBANCORP and U.S. Bank, or the
consummation by USBANCORP and U.S. Bank of the transactions
contemplated hereby. Neither USBANCORP nor U.S. Bank has any
reason to believe that any required consents or approvals will
not be received or will be received with conditions, limitations
or restrictions reasonably unacceptable to it or which would
materially adversely impact USBANCORP's or U.S. Bank's ability to
consummate the transactions contemplated by this Agreement.
Section 3.05 Financial Statements.
(a) USBANCORP has previously delivered, or will
deliver, to JSB the USBANCORP Financials. The USBANCORP
Financials are, or will be, prepared in accordance with GAAP and
practices applied on a consistent basis throughout the periods
covered by such statements, and fairly present, or will fairly
present, the consolidated financial position, results of
operations and cash flows of USBANCORP as of and for the periods
ending on the dates thereof, in accordance with GAAP applied on a
consistent basis. USBANCORP will make its regulatory reports
available to JSB for inspection. The USBANCORP Regulatory
Reports have been, or will be, prepared in accordance with
regulatory accounting principles and practices applied on a
consistent basis throughout the periods covered by such
statements and fairly present, or will fairly present, the
financial position, results of operations and changes in
shareholders' equity of USBANCORP and U.S. Bank as and for the
periods ended on the dates thereof, in accordance with applicable
regulatory accounting principles applied on a consistent basis.
(b) At the date of any balance sheet included in
the USBANCORP Financials, USBANCORP and any USBANCORP Subsidiary
did not have any liabilities, obligations or loss contingencies
of any nature (whether absolute, accrued, contingent or
otherwise) of a type required to be reflected in such USBANCORP
Financials or in the footnotes thereto which are not fully
reflected or reserved against therein or disclosed in a footnote
thereto, except for liabilities, obligations and loss
contingencies which are not material in the aggregate and which
are incurred in the ordinary course of business, consistent with
past practice, and except for liabilities, obligations and loss
contingencies which are within the subject matter of a specific
representation and warranty herein.
Section 3.06 Taxes. USBANCORP and USBANCORP
Subsidiaries are members of the same affiliated group within the
meaning of IRC Section 1504(a). USBANCORP has duly filed, and
will file, in correct form all federal, state and local tax
returns required to be filed by or with respect to USBANCORP and
all USBANCORP Subsidiaries on or prior to the Closing Date (all
such returns being accurate and correct in all material respects)
and has duly paid or will pay, or made or will make, provisions
for the payment of all federal, state and local taxes which have
been incurred by or are due or claimed to be due from USBANCORP
and any USBANCORP Subsidiary by any taxing authority or pursuant
to any tax sharing agreement or arrangement (written or oral) on
or prior to the Closing Date other than taxes which (x) (i) are
not delinquent or (ii) are being contested in good faith and
(y) have not been finally determined.
Section 3.07 No Material Adverse Change. USBANCORP
has not suffered any Material Adverse Change since September 30,
1993.
Section 3.08 Legal Proceedings. Neither USBANCORP
nor any USBANCORP Subsidiary is a party to any, and there are no
pending or, to the best of USBANCORP's knowledge, threatened
legal, administrative, arbitration or other proceedings, claims,
actions or governmental investigations or inquiries of any nature
(i) against USBANCORP or any USBANCORP Subsidiary, (ii) to which
USBANCORP's or any USBANCORP Subsidiary's assets are subject,
(iii) challenging the validity or propriety of any of the
transactions contemplated by this Agreement, or (iv) which could
adversely affect the ability of USBANCORP or U.S. Bank to perform
under this Agreement, except for any proceedings, claims,
actions, investigations or inquiries referred to in clauses (i)
or (ii) which, if adversely determined, individually or in the
aggregate, could not be reasonably expected to materially and
adversely affect the assets, financial condition or results of
operations of USBANCORP and USBANCORP Subsidiaries taken as a
whole.
Section 3.09 Compliance With Applicable Law.
(a) USBANCORP and the USBANCORP Subsidiaries hold
all licenses, franchises, permits and authorizations necessary
for the lawful conduct of their businesses under, and have
complied in all material respects with, applicable laws,
statutes, orders, rules or regulations of any federal, state or
local governmental authority relating to them, other than where
such failure to hold or such noncompliance will neither result in
a limitation in any material respect on the conduct of their
businesses nor otherwise have a material adverse effect on the
assets, business, financial condition or results of operations of
USBANCORP and USBANCORP Subsidiaries taken as a whole.
(b) Neither USBANCORP nor any USBANCORP
Subsidiary has received any notification or communication from
any Regulatory Authority (i) asserting that USBANCORP or any
USBANCORP Subsidiary is not in substantial compliance with any of
the statutes, regulations or ordinances which such Regulatory
Authority enforces; (ii) threatening to revoke any license,
franchise, permit or governmental authorization which is material
to USBANCORP or any USBANCORP Subsidiary; (iii) requiring or
threatening to require USBANCORP or any USBANCORP Subsidiary, or
indicating that USBANCORP or any USBANCORP Subsidiary may be
required, to enter into a cease and desist order, agreement or
memorandum of understanding or any other agreement restricting or
limiting, or purporting to restrict or limit, in any material
manner the operations of USBANCORP or any USBANCORP Subsidiary,
including without limitation any restriction on the payment of
dividends; or (iv) directing, restricting or limiting, or
purporting to direct, restrict or limit, in any material manner
the operations of USBANCORP or any USBANCORP Subsidiary,
including without limitation any restriction on the payment of
dividends (any such notice, communication, memorandum, agreement
or order described in this sentence herein referred to as a
"Regulatory Agreement"). Neither USBANCORP nor any USBANCORP
Subsidiary has consented to or entered into any Regulatory
Agreement that has not been terminated as of the date hereof.
Section 3.10 ERISA. Neither USBANCORP nor any
USBANCORP Subsidiary, and no pension plan maintained by USBANCORP
or any USBANCORP Subsidiary, has incurred any liability to the
Pension Benefit Guaranty Corporation or to the IRS with respect
to any pension plan qualified under IRC Section 401(a), except
liabilities to the Pension Benefit Guaranty Corporation pursuant
to ERISA Section 4007, all of which have been fully paid, nor has
any reportable event under ERISA Section 4043(b) occurred with
respect to any such pension plan. Neither USBANCORP nor any
USBANCORP Subsidiary has incurred any liability under ERISA
Section 4201 for a complete or partial withdrawal from a
multi-employer plan. All "employee benefit plans," as defined in
ERISA Section 3(3), comply in all material respects with ERISA.
As of September 30, 1993, neither USBANCORP nor any USBANCORP
Subsidiary had a material liability under any such plan which is
not reflected, reserved against or accrued on the USBANCORP
Financials as of such date or disclosed in the notes thereto,
including any liability under SFAS No. 106 or SFAS No. 112. No
prohibited transaction (which shall mean any transaction
prohibited by ERISA Section 406 and not exempt under ERISA
Section 408) has occurred with respect to any employee benefit
plan maintained by USBANCORP or any USBANCORP Subsidiary which
would result in the imposition, directly or indirectly, of a
material excise tax under IRC Section 4975. USBANCORP and the
USBANCORP Subsidiaries provide continuation coverage under group
health plans for separating employees in accordance with the
provisions of IRC Section 4980B(f). Such group health plans are
in compliance with Section 1862(b)(1) of the Social Security Act.
Section 3.11 Brokers and Finders. Neither USBANCORP
nor any USBANCORP Subsidiary, nor any of their respective
officers, directors, employees or agents, has employed any
broker, finder, or financial advisor or incurred any liability or
commitment for any fees or commissions to any such person in
connection with the transactions contemplated by this Agreement
except to Evergreen Asset Management and Legg Mason Wood Walker,
Inc., which liability shall be the sole obligation of USBANCORP.
Section 3.12 Environmental Matters. To the knowledge
of USBANCORP, neither USBANCORP nor any USBANCORP Subsidiary, nor
any properties owned or operated by USBANCORP or any USBANCORP
Subsidiary (not including any in-substance foreclosure) has been
or is in violation of or liable under any Environmental Law,
except for such violations or liabilities that, individually or
in the aggregate, would not have a material adverse effect on the
assets, financial condition or results of operation of USBANCORP
and its Subsidiaries taken as a whole. There are no actions,
suits or proceedings, or demands, claims, notices or, to the
knowledge of USBANCORP, investigations (including without
limitation notices, demand letters or requests for information
from any environmental agency) instituted or pending, or to the
knowledge of USBANCORP, threatened relating to the liability of
any property (not including any in-substance foreclosures) now
owned or operated by USBANCORP or any USBANCORP Subsidiary under
any Environmental Law.
Section 3.13 Loan Portfolio. The allowance for loan
losses reflected, or to be reflected, in the USBANCORP Regulatory
Reports, and shown, or to be shown, on the balance sheets
contained in the USBANCORP Financials are, or will be, adequate,
in accordance with the requirements of generally accepted
accounting principles and all applicable regulatory criteria. No
Regulatory Authority has requested, in writing, USBANCORP to
increase the allowance for loan losses during 1991, 1992 or 1993
that has not been responded to in a manner satisfactory to such
Regulatory Authority.
Section 3.14 Information to be Supplied. The
information to be supplied by USBANCORP for inclusion in the
Registration Statement will not, at the time the Registration
Statement is declared effective pursuant to the Securities Act,
contain any untrue statement of a material fact or omit to state
any material fact necessary in order to make the statements
therein not misleading. The Registration Statement will comply,
in all material respects, as to form with the requirements of the
Securities Act. The information supplied, or to be supplied, by
USBANCORP for inclusion in the Applications will, at the time
such documents are filed with any Regulatory Authority, be
accurate in all material aspects.
Section 3.15 Securities Documents. USBANCORP has
delivered, or will deliver, to JSB copies of its (i) annual
reports on SEC Form 10-K for the years ended December 31, 1992,
1991, and 1990, (ii) quarterly reports on SEC Form 10-Q for the
quarters ended March 31, June 30, and September 30, 1993, and
(iii) proxy materials used in connection with its annual meeting
of shareholders held in 1993. Such reports and such proxy
materials complied, in all material respects, with the Exchange
Act and the applicable rules and regulations of the SEC.
Section 3.16 Quality of Representations. No
representation made by USBANCORP in this Agreement contains any
untrue statement of a material fact or omits to state a material
fact necessary to make the statements made not misleading.
ARTICLE VI
COVENANTS OF THE PARTIES
Section 4.01 Conduct of JSB's Business.
(a) From the date of this Agreement to the
Closing Date, JSB and each JSB Subsidiary will conduct its
business and engage in transactions, including extensions of
credit, only in the ordinary course and consistent with past
practice and policies, except as otherwise required by this
Agreement or with the written consent of USBANCORP.
Notwithstanding the foregoing, USBANCORP hereby consents to the
formation by SBRI of a new wholly-owned subsidiary to be known as
Standard Mortgage Corporation of Pennsylvania provided it does
not commence operations as a mortgage banker or servicer until it
has obtained all necessary licenses. JSB will use its best
efforts to (i) preserve its business organization intact,
(ii) maintain good relationships with employees, and
(iii) preserve for itself the good will of customers of JSB and
JSB Subsidiaries and others with whom business relationships
exist. From the date hereof to the Closing Date, except as
otherwise consented to or approved by USBANCORP in writing or as
permitted or required by this Agreement or the USBANCORP option,
JSB will not, and JSB will not permit any JSB Subsidiary to:
(i) change any provision of its articles of
incorporation or bylaws;
(ii) change the number of authorized or
issued shares of its capital stock or issue or grant any option,
warrant, call, commitment, subscription, Right or agreement of
any character relating to its authorized or issued capital stock
or any securities convertible into shares of such stock, or
split, combine or reclassify any shares of capital stock, or
declare, set aside or pay any dividend or other distribution in
respect of capital stock, or redeem or otherwise acquire any
shares of capital stock, except that: (A) JSB, consistent with
past practice as to timing of record and payment dates during
1993, may pay (to the extent otherwise legally permitted) a
regular cash dividend, not to exceed $.05 per share of JSB Common
Stock outstanding, for the fourth quarter of 1993; (B) if the
Closing Date is not on or before the record date for payment by
USBANCORP of a regular cash dividend of at least $0.22 per share
in the first calendar quarter of 1993 or in any calendar quarter
thereafter, JSB, consistent with past practice as to timing of
record and payment dates during 1993, may pay (to the extent
otherwise legally permitted), a regular cash dividend, not to
exceed $.05 per share, for such calendar quarter, provided, in
each case, that such dividend shall not exceed 30% of JSB's
consolidated net income for such quarter without reference to
securities gains or losses and without reference to gains or
losses resulting from changes in accounting principles or other
extraordinary items of income; and (C) the holders of stock
options as of the date hereof exercisable into shares of JSB
Common Stock shall not be prohibited from exercising such options
and JSB is expressly authorized to issue shares of JSB Common
Stock in exchange for payment of the appropriate exercise price;
(iii) grant any severance or termination pay
to any employee, officer or director of JSB or any JSB Subsidiary
other than in accordance with the terms set forth on Exhibit 3
and Exhibits 6A through 6D hereto, or enter into or amend any
employment agreement with, or increase the compensation of, any
employee, officer or director of JSB or any JSB Subsidiary,
except for routine periodic increases, individually and in the
aggregate, in accordance with past practice except that payments
due for 1993 under the JSB Executive Annual Incentive Plan which
otherwise would be paid in February 1994 shall be paid in
December 1993;
(iv) merge or consolidate JSB with any other
corporation; sell or lease all or any substantial portion of the
assets or business of JSB; make any acquisition of all or any
substantial portion of the business or assets of any other
person, firm, association, corporation or business organization
other than in connection with the collection of any loan or
credit arrangement between JSB or any JSB Subsidiary and any
other person; enter into a purchase and assumption transaction
with respect to deposits and liabilities; permit the revocation
or surrender by JSB or any JSB Subsidiary of its certificate of
authority to maintain, or file an application for the relocation
of, any existing branch office, or file an application for a
certificate of authority to establish a new branch office;
(v) sell or otherwise dispose of the capital
stock of any JSB Subsidiary or sell or otherwise dispose of any
asset of JSB or of any JSB Subsidiary other than in the ordinary
course of business consistent with past practice; subject any
asset of JSB or of any JSB Subsidiary to a lien, pledge, security
interest or other encumbrance (other than in connection with
deposits, repurchase agreements, bankers acceptances, "treasury
tax and loan" accounts established in the ordinary course of
business and transactions in "federal funds," FHLB Advances and
the satisfaction of legal requirements in the exercise of trust
powers) other than in the ordinary course of business consistent
with past practice; modify in any material manner the manner in
which JSB or any JSB Subsidiary has heretofore conducted its
business or enter into any new line of business except with
respect to the formation of Standard Mortgage Corporation of
Pennsylvania; incur any indebtedness for borrowed money (or
guarantee any indebtedness for borrowed money), except in the
ordinary course of business consistent with past practice;
(vi) take any action which would result in
any of the representations and warranties of JSB set forth in
this Agreement becoming materially untrue as of any date after
the date hereof or in any of the conditions set forth in
Article V hereof not being materially satisfied;
(vii) change any method, practice or
principle of accounting except for implementation of SFAS
No. 106, SFAS No. 109, SFAS No. 112, SFAS 115 or other changes
required as a result of a change in generally accepted accounting
principles;
(viii) waive, release, grant or transfer any
rights of value or modify or change in any material respect any
existing agreement to which JSB or any JSB Subsidiary is a party,
other than in the ordinary course of business, consistent with
past practice;
(ix) implement any pension, retirement,
profit sharing, bonus, welfare benefit or similar plan or
arrangement that was not in effect on the date of this Agreement,
or amend any existing plan or arrangement except as required by
applicable law or regulation;
(x) compromise, extend or restructure any
loan with an unpaid principal balance exceeding $250,000;
(xi) sell, exchange or otherwise dispose of
any investment securities held for investment or sell, exchange
or otherwise dispose of any securities or loans that are held for
sale, other than pursuant to past practices or policies;
(xii) purchase any security for its
investment portfolio not rated "A" or higher by either Standard &
Poor's Corporation or Moody's Investor Services, Inc. except as
provided in, and in conformity with JSB's investment policy which
has previously been delivered to USBANCORP;
(xiii) except consistent with past practice,
make any loan or other credit facility commitment (including
without limitation, lines of credit and letters of credit) to any
Affiliate or compromise, extend, renew or modify any such
commitment outstanding;
(xiv) except consistent with past practice,
enter into, renew, extend or modify any other transaction with
any Affiliate;
(xv) enter into any swap or similar
commitment, agreement or arrangement which is not consistent with
past practice and which increases the credit or interest rate
risk over the levels existing at September 30, 1993; or
(xvi) agree to do any of the foregoing.
For purposes of this Section 4.01, it shall not be
considered in the ordinary course of business for JSB or any JSB
Subsidiary to do any of the following: (i) make any capital
expenditure of $50,000, or more, without the prior written
consent of USBANCORP; (ii) make any sale, assignment, transfer,
pledge, hypothecation or other disposition of any assets (other
than investment securities and residential mortgage loans sold in
the ordinary course of business) having a book or market value,
whichever is less, in the aggregate, of more than $50,000, other
than a pledge of assets to secure government deposits, the
exercise of trust powers, sale of assets received in satisfaction
of debts previously contracted in the normal course of business,
or transactions in investment securities by a JSB Subsidiary or
repurchase agreements made, in each case, in the ordinary course
of business; or (iii) undertake or enter any lease, contract or
other commitment for its account, other than in the normal course
of providing credit to customers as part of its banking business,
involving an unbudgeted payment by JSB or any JSB Subsidiary of
more than $50,000 in the aggregate, or containing a material
financial commitment and extending beyond 12 months from the date
hereof.
Section 4.02 Access; Confidentiality.
(a) From the date of this Agreement through the
Closing Date, each party shall afford to, and shall cause each
Subsidiary to afford to, the other party and its authorized
agents and representatives, complete access to their respective
properties, assets, books and records and personnel, at
reasonable hours and after reasonable notice; and the officers of
each party will furnish any party making such investigation with
such financial and operating data and other information with
respect to the businesses, properties, assets, books and records
and personnel as the party making such investigation shall from
time to time reasonably request.
(b) Each party agrees to conduct such
investigation and discussions hereunder in a manner so as not to
interfere unreasonably with normal operations and customer and
employee relationships.
(c) If the transactions contemplated by this
Agreement shall not be consummated, each party will destroy or
return all documents and records obtained from the other party or
its representatives, during the course of its investigation and
will cause all information with respect to the other party
obtained pursuant to this Agreement or preliminarily thereto to
be kept confidential, except to the extent such information
becomes public through no fault of such party or any of its
representatives or agents and except to the extent disclosure of
any such information is legally required. Each party shall give
prompt notice to the other party of any contemplated disclosure
where such disclosure is so legally required.
Section 4.03 Regulatory Matters and Consents.
(a) USBANCORP and JSB will prepare all
Applications and make all filings for, and use their best efforts
to obtain as promptly as practicable after the date hereof, all
necessary permits, consents, approvals, waivers and
authorizations of all Regulatory Authorities necessary or
advisable to consummate the transactions contemplated by this
Agreement. This Agreement contemplates the merger of JSB and JIB
and the subsequent merger of JIB and U.S. Bank.
(b) JSB will furnish USBANCORP with all
information concerning JSB and JSB Subsidiaries as may be
necessary or advisable in connection with any Application or
filing made by or on behalf of USBANCORP to any Regulatory
Authority in connection with the transactions contemplated by
this Agreement.
(c) USBANCORP will promptly furnish JSB with
copies of written communications to, or received by USBANCORP or
any USBANCORP Subsidiary from, any Regulatory Authority in
respect of the transactions contemplated hereby.
(d) JSB will cooperate with USBANCORP in the
foregoing matters and will furnish USBANCORP with all information
concerning JSB and JSB Subsidiaries as may be necessary or
advisable in connection with any Application or filing (including
the Registration Statement and any report filed with the SEC)
made by or on behalf of USBANCORP to any Regulatory Authority in
connection with the transactions contemplated by this Agreement,
and such information will be accurate and complete in all
material respects. In connection therewith, JSB will provide
certificates and other documents reasonably requested by
USBANCORP.
Section 4.04 Taking of Necessary Action.
(a) USBANCORP and JSB shall each use its best
efforts in good faith, and each of them shall cause its
Subsidiaries to use their best efforts in good faith, to
(i) furnish such information as may be required in connection
with the preparation of the documents referred to in Section 4.03
of this Agreement, and (ii) take or cause to be taken all action
necessary or desirable on its part so as to permit consummation
of the Merger at the earliest possible date, including, without
limitation, obtaining the consent or approval of each individual,
partnership, corporation, association or other business or
professional entity whose consent or approval is required for
consummation of the transactions contemplated hereby, provided
that neither JSB nor any JSB Subsidiary shall agree to make any
payments or modifications to agreements in connection therewith
without the prior written consent of USBANCORP. No party hereto
shall take, or cause, or to the best of its ability permit to be
taken, any action that would substantially impair the prospects
of completing the Merger pursuant to this Agreement; provided
that nothing herein contained shall preclude USBANCORP or JSB
from exercising its rights under this Agreement or the USBANCORP
Option.
(b) JSB and USBANCORP shall promptly prepare a
Prospectus/Proxy Statement to be mailed to their respective
shareholders in connection with the meetings and transactions
contemplated hereby and to be filed by USBANCORP with the SEC
(and by JSB with the FDIC) in the Registration Statement, which
Prospectus/Proxy statement shall conform to all applicable legal
requirements. USBANCORP shall, as promptly as practicable
following the preparation thereof, file the Registration
Statement with the SEC and JSB shall file the Registration
Statement with the FDIC. USBANCORP shall use all reasonable
efforts to have the Registration Statement declared effective
under the Securities Act as promptly as practicable after such
filing. USBANCORP will advise JSB, promptly after USBANCORP
receives notice thereof, of the time when the Registration
Statement has become effective or any supplement or amendment has
been filed, of the issuance of any stop order or the suspension
of the qualification of the shares of capital stock issuable
pursuant to the Registration Statement, or the initiation or
threat of any proceeding for any such purpose, or of any request
by the SEC for the amendment or supplement of the Registration
Statement or for additional information. USBANCORP shall use its
best efforts to obtain, prior to the effective date of the
Registration Statement, all necessary state securities laws or
"Blue Sky" permits and approvals required to carry out the
transactions contemplated by this Agreement.
(c) JSB shall use its best efforts to cause each
individual who has an option to acquire JSB Common Stock to
execute the Option Waiver Letter attached hereto as Annex 3.
Section 4.05 Certain Agreements.
(a) As soon as practicable after the Effective
Date, all employees of JSB and JSB Subsidiaries whose employment
is continued shall be employed upon their existing terms and
conditions, provided that this Section 4.05(a) shall not be
construed (i) to limit the ability of USBANCORP and USBANCORP
Subsidiaries to terminate the employment of any employee or to
review and adjust employee salary levels from time to time and to
make such changes as they deem appropriate or (ii) to require
USBANCORP or any USBANCORP Subsidiaries to provide employees or
former employees with post-retirement medical benefits.
(b) For a period of six years from and after the
Effective Date, USBANCORP and U.S. Bank shall indemnify, defend
and hold harmless and advance expenses in matters that may be
subject to indemnification to, persons who served as directors
and officers of JSB or any JSB Subsidiary on or before the
Effective Date with respect to all liabilities and claims (and
related expenses) made against them resulting from their service
as such prior to the Effective Date, including, but not by way of
limitation, any and all litigation, suits, actions, claims or
liabilities resulting from, arising out of, relating to, or in
connection with the Merger or any of the other transactions
contemplated by this Agreement, in accordance with and subject to
the requirements and other provisions of USBANCORP's and U.S.
Bank's articles of incorporation and bylaws in effect on the date
of this Agreement and applicable provisions of law to the same
extent as USBANCORP and U.S. Bank are obliged thereunder to
indemnify and advance expenses to their own directors and
officers with respect to liabilities and claims made against them
resulting from their service for USBANCORP or U.S. Bank.
(c) USBANCORP hereby agrees to assume, on and
after the Closing Date, any and all liability and obligation with
respect to the severance agreement relating to the employees of
JSB as set forth in Exhibit 3 hereto. USBANCORP further agrees
to execute at Closing the severance agreement relating to certain
officers of JSB as set forth in Exhibits 6A-6D hereto.
(d) USBANCORP and U.S. Bank hereby covenant and
agree not to bring any action, claim or proceeding against JSB or
any present or former director, officer or employee of JSB to
enforce any rights to which USBANCORP or U.S. Bank may succeed or
acquire by virtue of the consummation of the Merger with respect
to any claim or action resulting from, arising out of, relating
to or in connection with JSB's execution of the Amendment and the
transactions contemplated by the Agreement and USBANCORP and
U.S. Bank, as the corporate successor to JSB, hereby covenant and
agree to defend and contest any such action brought by any third
party. This covenant shall survive for six (6) years after the
consummation of the transactions contemplated by this Agreement.
Section 4.06 No Other Bids.
(a) USBANCORP and U.S. Bank hereby agree and
authorize JSB, its directors, officers, employees and
representatives, for a period of thirty (30) calendar days from
the date of the Amendment (the "Marketing Period"), to take any
and all actions deemed necessary and proper by JSB to solicit,
market, initiate or engage in discussions regarding the sale or
acquisition of JSB by and any third party (the "Sale") and to
execute a definitive agreement for the Sale (the "Sale
Agreement") with any third party for consideration which exceeds
$22.50 per share for all of the issued and outstanding shares of
the JSB Common Stock. If such consideration, or any portion
thereof, is to be paid in other than cash, the Board of Directors
of JSB shall, in its good faith, sole discretion, determine the
value of the non-cash consideration and, absent manifest bad
faith on the part of JSB, such determination shall be final and
non-reviewable by USBANCORP. If JSB enters into a Sale Agreement
within the Marketing Period, this Agreement shall automatically
terminate as of the date of the execution by JSB of the Sale
Agreement, and the Stock Option Agreement, Option Waiver Letter
and the Letter Agreements all shall be deemed to be terminated,
cancelled, made null and void and of no effect as of such date
and neither party shall have any liability to the other party
hereunder except for those sections specified in Section 6.02.
(b) On and as of the date immediately following
the expiration of the Marketing Period without the execution of a
Sale Agreement, JSB shall not, nor shall it permit any Affiliate
of JSB or any officer, director or employee of any of them, or
any investment banker, attorney, accountant or other
representative retained by JSB or any JSB Affiliate to, directly
or indirectly, solicit, encourage, initiate or engage in
discussions or negotiations with, or respond to requests for
information, inquiries, or other communications from, any person
other than USBANCORP concerning the fact of, or the terms and
conditions of, this Agreement, or concerning any acquisition of
JSB, any JSB Subsidiary, or any assets or business thereof
(except that JSB's officers may respond to inquiries from
analysts, Regulatory Authorities and holders of JSB Common Stock
in the ordinary course of business); and JSB shall notify
USBANCORP immediately if any such discussions or negotiations are
sought to be initiated with JSB by any person other than
USBANCORP or if any such requests for information, inquiries,
proposals or communications are received from any person other
than USBANCORP; provided, however, that notwithstanding the
foregoing, JSB may afford such access, enter into any such
discussions, negotiations or agreements or understandings, or
authorize or permit any of its directors, officers, employees or
agents to do so if the Board of Directors of JSB, after receipt
of a written opinion of counsel, determines that such actions are
required in the exercise of its fiduciary duties.
Section 4.07 Core Deposits. JSB shall use
commercially reasonable efforts to maintain deposits (other than
certificates of deposit of $100,000 and over).
Section 4.08 Update of JSB's Disclosure Letter. JSB
shall update the JSB Disclosure Letter provided pursuant to this
Agreement as promptly as practicable after the occurrence of an
event or fact which, if such event or fact had occurred prior to
the date of this Agreement, would have been disclosed in such
letter. The delivery of such additional schedules by JSB shall
not relieve JSB from any breach or violation of this Agreement.
Section 4.09 Conduct of USBANCORP's Business. From
the date of this Agreement to the Closing Date, USBANCORP will
use its best efforts to (x) preserve its business organizations
intact, (y) maintain good relationships with employees, and
(z) preserve for itself the goodwill of customers of USBANCORP
and USBANCORP Subsidiaries and others with whom business
relationships exist.
Section 4.10 Board and Committee Minutes. Each party
shall provide to the other, within 20 days after any meeting of
its Board of Directors, or any committee thereof, or any senior
management committee, a copy of the minutes of such meeting.
Section 4.11 Undertakings by USBANCORP and JSB.
(a) JSB shall:
(i) Voting by Directors. Use its best
efforts to obtain the agreement of all members of JSB's Board of
Directors to vote all shares of JSB's Common Stock over which
they hold sole voting power, and use their best efforts to cause
all shares over which they hold shared voting power to be voted,
in favor of this Agreement;
(ii) Proxy Solicitor. If USBANCORP
requests, retain a professional proxy solicitor at USBANCORP's
expense in connection with the solicitation of JSB shareholder
approval of this Agreement;
(iii) Reserves and Merger-related Costs. On
or immediately before the Effective Date, establish such
additional accruals and reserves as may be necessary to conform
JSB's accounting reserve practices and methods (including credit
loss practices and methods) to those of USBANCORP (as such
practices and methods are to be applied to JSB from and after the
Closing Date) and USBANCORP's plans with respect to the conduct
of JSB's business following the Merger and otherwise to reflect
Merger-related expenses and costs incurred by JSB, provided,
however, that JSB shall not be required to take such action
(A) more than five days prior to the Effective Date; (B) unless
USBANCORP agrees in writing that all conditions to closing set
forth in Section 5.02 have been satisfied or waived; (C) unless
JSB shall have received a written waiver by USBANCORP of its
right to terminate this Agreement based on the failure of the
representation contained in Section 2.15 hereof to be true, which
failure is a result of circumstances existing on or prior to the
date of such waiver, and (D) unless the shareholders of JSB and
USBANCORP shall have previously approved the Merger; prior to the
delivery by USBANCORP of the waiver referred to in the preceding
clause, JSB shall provide to USBANCORP a written statement,
certified without personal liability by the chief executive
officer of JSB and dated the date of such waiver, that the
representation made in Section 2.15 hereof is true as of such
date or, alternatively, setting forth in detail the circumstances
that prevent such representation from being true as of such date;
and no accrual or reserve made by JSB pursuant to this
Section 4.11(a)(iv), or any litigation or regulatory proceeding
arising out of any such accrual or reserve, shall constitute or
be deemed to be a breach or violation of any representation,
warranty, covenant, condition or other provision of this
Agreement.
(b) USBANCORP and JSB shall each:
(i) Shareholders' Meeting. Submit this
Agreement to its shareholders for approval at a special meeting
to be held as soon as practicable;
(ii) Filings and Approvals. Cooperate with
the other in the preparation and filing, as soon as practicable,
of (A) the Applications, (B) the Registration Statement and
related filings under state securities laws covering the
USBANCORP Common Stock to be issued pursuant to the Merger, (C)
all other documents necessary to obtain any other approvals and
consents required to effect consummation of the Merger and the
Bank Merger, and (D) all other documents contemplated by this
Agreement. USBANCORP shall file the Applications and the
Registration Statement within twenty (20) calendar days following
the expiration of the Marketing Period authorized in
Section 4.06(a) hereof.
(iii) Identification of JSB's Affiliates.
Cooperate with the other and use its best efforts to identify
those persons who may be deemed to be Affiliates of JSB;
(iv) Public Announcements. Agree upon the
form and substance of any press release related to this Agreement
and the transactions contemplated hereby, and upon the form and
substance of other public disclosures related thereto, including
without limitation communications to shareholders, internal
announcements and customer disclosures, but nothing contained
herein shall prohibit either party from making any disclosure
which its counsel deems necessary;
(v) Maintenance of Insurance. Maintain, and
cause their respective Subsidiaries to maintain, insurance in
such amounts as are reasonable to cover such risks as are
customary in relation to the character and location of its
properties and the nature of its business;
(vi) Maintenance of Books and Records.
Maintain, and cause their respective Subsidiaries to maintain,
books of account and records in accordance with generally
accepted accounting principles applied on a basis consistent with
those principles used in preparing the financial statements
heretofore delivered;
(vii) Delivery of Securities Documents.
Deliver to the other, copies of all Securities Documents
simultaneously with the filing thereof;
(viii) Taxes. File all federal, state, and
local tax returns required to be filed by them or their
respective Subsidiaries on or before the date such returns are
due (including any extensions) and pay all taxes shown to be due
on such returns on or before the date such payment is due;
(ix) Timely Review. If requested by the
other party, cause its independent certified public accountants
to perform a review of its unaudited consolidated financial
statements as of the end of any calendar quarter, in accordance
with Statement of Auditing Standards No. 36, and to issue their
report on such financial statements as soon as is practicable
thereafter; and
(x) Delivery of Interim Financial
Statements. Deliver as soon as practicable after the end of each
month and each fiscal quarter prior to the Effective Date,
commencing with the month ended October 31, 1993, an unaudited
consolidated balance sheet as of such date and related unaudited
consolidated statements of income and cash flows for the period
then ended, which financial statements shall be prepared in
accordance with generally accepted accounting principles
consistently applied and shall fairly reflect its consolidated
financial condition and consolidated results of operations and
cash flows for the periods then ended. Monthly financial
statements shall be kept confidential in accordance with
Section 4.02.
Section 4.12 Employee Benefits. On and after the
Effective Date, the life insurance, vacation pay, sick leave,
short-term disability, long-term disability, medical, pension,
stock purchase, profit sharing, deferred compensation,
supplemental executive retirement, and other employee benefit
plans of USBANCORP and JSB, shall be initially unaffected by the
Merger and the other transactions contemplated by this Agreement
provided that, contingent upon IRS approval: (A) all such plans
maintained by USBANCORP shall be amended to cover those former
employees of JSB who become employees of USBANCORP or its
Subsidiaries as if such employees had continued in their present
employment, except that such employees shall receive credit for
eligibility, participation and vesting purposes but not for
benefit accrual purposes under such plans; (B) JSB employees
shall receive benefits no less favorable, in the aggregate, than
the benefits to which employees of USBANCORP are entitled.
Subject to the foregoing, USBANCORP's Board of Directors may
discontinue or amend any particular plan of JSB after the
Effective Date and reduce the amount of benefits thereunder.
ARTICLE VII
CONDITIONS
Section 5.01 Conditions to JSB's Obligations under
this Agreement. The obligations of JSB hereunder shall be
subject to satisfaction at or prior to the Closing Date of each
of the following conditions, unless waived by JSB pursuant to
Section 7.03 hereof:
(a) Corporate Proceedings. All action required
to be taken by, or on the part of, USBANCORP and U.S. Bank to
authorize the execution, delivery and performance of this
Agreement, respectively, and the consummation of the transactions
contemplated hereby, shall have been duly and validly taken by
USBANCORP and U.S. Bank; and JSB shall have received certified
copies of the resolutions evidencing such authorizations;
(b) Covenants; Representations. The obligations
of USBANCORP required by this Agreement to be performed by
USBANCORP at or prior to the Closing Date shall have been duly
performed and complied with in all material respects; and the
representations and warranties of USBANCORP set forth in this
Agreement shall be true and correct in all material respects, as
of the date of this Agreement, and as of the Closing Date as
though made on and as of the Closing Date, except as to any
representation or warranty which (i) specifically relates to an
earlier date or (ii) where the facts which cause the failure of
any representation or warranty to be so true and correct would
not, either individually or in the aggregate, constitute a
material adverse change in the assets, business, financial
condition or results of operation of USBANCORP and its
Subsidiaries taken as a whole;
(c) Approvals of Regulatory Authorities.
USBANCORP shall have received all approvals of Regulatory
Authorities of the Merger, and delivered copies thereof to JSB;
and all notice and waiting periods required thereunder shall have
expired or been terminated;
(d) No Injunction. There shall not be in effect
any order, decree or injunction of a court or agency of competent
jurisdiction which enjoins or prohibits consummation of the
transactions contemplated hereby;
(e) No Material Adverse Change. Since
September 30, 1993, there shall not have occurred any Material
Adverse Change with respect to USBANCORP.
(f) Registration Statement. The Registration
Statement shall be effective under the Securities Act and no
proceedings shall be pending or threatened by the SEC to suspend
the effectiveness of the Registration Statement; and all required
approvals by the FDIC and by state securities or "blue sky"
authorities with respect to the transactions contemplated by this
Agreement, deemed necessary by USBANCORP's counsel, shall have
been obtained;
(g) Officer's Certificate. USBANCORP shall have
delivered to JSB a certificate, dated the Closing Date and
signed, without personal liability, by its chairman or president,
to the effect that the conditions set forth in subsections (a)
through (f) of this Section 5.01 have been satisfied, to the best
knowledge of the officer executing the same;
(h) Opinion of USBANCORP's Counsel. JSB shall
have received an opinion of Stevens & Lee, counsel to USBANCORP,
dated the Closing Date, as set forth in Exhibit 4;
(i) Tax Opinion. JSB shall have received an
opinion of Stevens & Lee (or in the event Stevens & Lee is
unwilling to deliver such opinion, the opinion of Elias, Matz,
Tiernan & Herrick or other counsel acceptable to the parties),
dated the Closing Date, with respect to certain tax matters and
in form and substance reasonably satisfactory to JSB and its
counsel;
(j) Approval of JSB's Shareholders. This
Agreement shall have been approved by the holders of at least 66-
2/3% of the outstanding shares of JSB Common Stock entitled to
vote thereon; and
(k) Closing Price of USBANCORP Common Stock. The
Average Closing Price shall not be less than $20.50 per share.
Section 5.02 Conditions to USBANCORP's Obligations
under this Agreement. The obligations of USBANCORP hereunder
shall be subject to satisfaction at or prior to the Closing Date
of each of the following conditions, unless waived by USBANCORP
pursuant to Section 7.03 hereof:
(a) Corporate Proceedings. All action required
to be taken by, or on the part of, JSB to authorize the
execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby, shall have
been duly and validly taken by JSB; and USBANCORP shall have
received a certified copy of the resolutions evidencing such
authorizations;
(b) Covenants; Representations. The obligations
of JSB, required by this Agreement to be performed by it at or
prior to the Closing Date shall have been duly performed and
complied with in all material respects; and the representations
and warranties of JSB set forth in this Agreement shall be true
and correct in all material respects as of the date of this
Agreement, and as of the Closing Date as though made on and as of
the Closing Date, except as to any representation or warranty
which (i) specifically relates to an earlier date or (ii) where
the facts which cause the failure of any representation or
warranty to be so true and correct would not, either individually
or in the aggregate, constitute a material adverse change in the
assets, business, financial condition or results of operation of
JSB and its Subsidiaries taken as a whole;
(c) Approvals of Regulatory Authorities.
USBANCORP shall have received all approvals of Regulatory
Authorities for the Merger, without the imposition of any non-
standard term or condition that would have a material adverse
effect on USBANCORP and its Subsidiaries, taken as a whole, upon
completion of the Merger; and all notice and waiting periods
required thereunder shall have expired or been terminated;
(d) No Injunction. There shall not be in effect
any order, decree or injunction of a court or agency of competent
jurisdiction which enjoins or prohibits consummation of the
transactions contemplated hereby;
(e) No Material Adverse Change. Since
September 30, 1993, there shall not have occurred any Material
Adverse Change with respect to JSB.
(f) Officer's Certificate. JSB shall have
delivered to USBANCORP a certificate, dated the Closing Date and
signed, without personal liability, by its chairman of the board
or president, to the effect that the conditions set forth in
subsections (a) through (e) of this Section 5.02 have been
satisfied, to the best knowledge of the officer executing the
same;
192 Opinions of JSB's Counsel. USBANCORP shall
have received an opinion of Elias, Matz, Tiernan & Herrick,
counsel to JSB dated the Closing Date, as set forth in Exhibit 5;
(h) Registration Statement. The Registration
Statement shall be effective under the Securities Act and no
proceedings shall be pending or threatened by the SEC to suspend
the effectiveness of the Registration Statement; and all required
approvals by state securities or "blue sky" authorities with
respect to the transactions contemplated by this Agreement,
deemed necessary by USBANCORP's counsel, shall have been
obtained;
(i) Tax Opinion. USBANCORP shall have received
an opinion of Stevens & Lee (or in the event Stevens & Lee is
unwilling to deliver such opinion, the opinion of Elias, Matz,
Tiernan & Herrick or other counsel acceptable to the parties),
dated the Closing Date, with respect to certain tax matters;
(j) Approval of USBANCORP's Shareholders. This
Agreement shall have been approved by the shareholders of
USBANCORP by such vote as is required under USBANCORP's articles
of incorporation and bylaws and the listing requirements of the
National Association of Securities Dealers.
ARTICLE VIII
TERMINATION, WAIVER AND AMENDMENT
Section 6.01 Termination. This Agreement may be
terminated on or at any time prior to the Closing Date:
(a) By the mutual written consent of the parties
hereto;
(b) By USBANCORP or JSB:
(i) if there shall have been any material
breach of any representation, warranty or covenant of USBANCORP,
on the one hand, or JSB, on the other hand, and such breach
cannot be, or shall not have been, remedied within 30 days after
receipt by such other party of notice in writing specifying the
nature of such breach and requesting that it be remedied;
(ii) if the Closing Date shall not have
occurred prior to September 30, 1994, unless the failure of such
occurrence shall be due to the failure of the party seeking to
terminate this Agreement to perform or observe its agreements set
forth in this Agreement required to be performed or observed by
such party on or before the Closing Date; or
(iii) if either party has been informed in
writing by a Regulatory Authority whose approval or consent has
been requested that such approval or consent is unlikely to be
granted, unless the failure of such occurrence shall be due to
the failure of the party (the "Breaching Party") seeking to
terminate this Agreement to perform or observe its agreements set
forth herein required to be performed or observed by such party
on or before the Closing Date in which case the Breaching Party
may not terminate this Agreement; or
(iv) if there shall have been a Material
Adverse Change since September 30, 1993 in USBANCORP or JSB.
(c) By USBANCORP or JSB, if the other party shall
communicate to the other its unwillingness to consummate this
Agreement in accordance with the terms and conditions hereof (the
"Non-Performing Party"), but then the Non-Performing Party may
not terminate this Agreement.
Section 6.02 Effect of Termination. If this
Agreement is terminated pursuant to Section 6.01 hereof, this
Agreement shall forthwith become void (other than
Section 4.02(c), Section 4.11(b)(iv) and Section 7.01 hereof,
which shall remain in full force and effect), and there shall be
no further liability on the part of USBANCORP or JSB to the
other, except for any liability of USBANCORP or JSB under such
sections of this Agreement and except for any liability arising
out of any uncured willful breach or asserted non-performance of
any covenant or other agreement contained in this Agreement or
any fraudulent breach of a representation or warranty.
ARTICLE IX
MISCELLANEOUS
Section 7.01 Expenses. Except for the cost of
printing and mailing the Proxy Statement/Prospectus which shall
be shared equally, each party hereto shall bear and pay all costs
and expenses incurred by it in connection with the transactions
contemplated hereby, including fees and expenses of its own
financial consultants, accountants and counsel.
Section 7.02 Non-Survival of Representations and
Warranties. All representations, warranties and, except to the
extent specifically provided otherwise herein, including without
limitation Sections 1.02(d) and 4.05(b), (c) and (d) herein,
agreements and covenants contained in this Agreement shall
terminate on the Closing Date.
Section 7.03 Amendment, Extension and Waiver.
Subject to applicable law, at any time prior to the consummation
of the transactions contemplated by this Agreement, the parties
may (a) amend this Agreement, (b) extend the time for the
performance of any of the obligations or other acts of either
party hereto, (c) waive any inaccuracies in the representations
and warranties contained herein or in any document delivered
pursuant hereto, or (d) waive compliance with any of the
agreements or conditions contained in Articles IV and V hereof or
otherwise. This Agreement may not be amended except by an
instrument in writing authorized by the respective Boards of
Directors and signed, by duly authorized officers, on behalf of
the parties hereto. Any agreement on the part of a party hereto
to any extension or waiver shall be valid only if set forth in an
instrument in writing signed by a duly authorized officer on
behalf of such party, but such waiver or failure to insist on
strict compliance with such obligation, covenant, agreement or
condition shall not operate as a waiver of, or estoppel with
respect to, any subsequent or other failure.
Section 7.04 Entire Agreement. This Agreement,
including the documents and other writings referred to herein or
delivered pursuant hereto, contains the entire agreement and
understanding of the parties with respect to its subject matter.
This Agreement supersedes all prior arrangements and
understandings between the parties, both written or oral with
respect to its subject matter. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their
respective successors; provided, however, that nothing in this
Agreement, expressed or implied, is intended to confer upon any
party, other than the parties hereto and their respective
successors, any rights, remedies, obligations or liabilities
other than pursuant to Sections 4.05(b) and (d) with respect to
indemnification and covenant not to sue.
Section 7.05 No Assignment. Neither party hereto may
assign any of its rights or obligations hereunder to any other
person, without the prior written consent of the other party
hereto.
Section 7.06 Notices. All notices or other
communications hereunder shall be in writing and shall be deemed
given if delivered personally, mailed by prepaid registered or
certified mail (return receipt requested), or sent by telecopy
(with receipt thereof confirmed by telephone) addressed as
follows:
(a) If to USBANCORP, to:
USBANCORP, Inc.
Main and Franklin Streets
Johnstown, Pennsylvania 15907
Attention: Terry K. Dunkle, Executive
Vice President and Orlando B.
Hanselman, Chief Financial
Officer
Telecopy No.: (814) 533-5427
with a copy to:
Stevens & Lee
Four Glenhardie Corporate Center
1255 Drummers Lane
P.O. Box 236
Wayne, Pennsylvania 19087
Attention: Jeffrey P. Waldron, Esquire
Telecopy No.: (215) 687-1384
(b) If to JSB, to:
Johnstown Savings Bank
Market at Main Streets
Johnstown, Pennsylvania 15901
Attention: Patrick J. Coyne, President
and Chief Executive Officer
Telecopy No.: (814) 535-8970
with copies to:
Elias, Matz, Tiernan & Herrick
734 15th Street, N.W.
Washington, D.C. 20005
Attention: Raymond A. Tiernan, Esquire
Daniel P. Weitzel, Esquire
Telecopy No.: (202) 347-2172
Section 7.07 Captions. The captions contained in
this Agreement are for reference purposes only and are not part
of this Agreement.
Section 7.08 Counterparts. This Agreement may be
executed in any number of counterparts, and each such counterpart
shall be deemed to be an original instrument, but all such
counterparts together shall constitute but one agreement.
Section 7.09 Severability. If any provision of this
Agreement or the application thereof to any person or
circumstance shall be invalid or unenforceable to any extent, the
remainder of this Agreement and the application of such
provisions to other persons or circumstances shall not be
affected thereby and shall be enforced to the greatest extent
permitted by law.
Section 7.10 Governing Law. This Agreement shall be
governed by and construed in accordance with the domestic
internal law (including the law of conflicts of law) of the
Commonwealth of Pennsylvania.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this
Agreement to be executed by their duly authorized officers as of
the day and year first above written and as amended on the 18th
day of January, 1994.
USBANCORP, Inc.
(CORPORATE SEAL) By:________________________________
Terry K. Dunkle,
Executive Vice
President
Attest:____________________________
Betty L. Jakell,
Assistant Secretary
U.S. BANK
By:________________________________
Terry K. Dunkle,
President and Chief
Executive Officer
JOHNSTOWN SAVINGS BANK
(CORPORATE SEAL) By:________________________________
Patrick J. Coyne,
President and Chief
Executive Officer
Attest:____________________________
Walter F. Rusnak,
Assistant Secretary
<PAGE>
Exhibits
Exhibit 1 - JSB Affiliate Agreement
Exhibit 2 - Stock Option Agreement
Exhibit 3 - Severance Plan
Exhibit 4 - Opinion of Counsel to USBANCORP
Exhibit 5 - Opinion of Counsel to JSB
Exhibit 5A - Form of Tax Opinion
Exhibit 6A-D - Severance Agreements
Annexes
Annex 1 - Fairness Opinion delivered to USBANCORP
Annex 2 - Fairness Opinion delivered to JSB
Annex 3 - Option Waiver Letter
<PAGE>
Exhibit 1
January 18, 1994
USBANCORP, Inc.
Main and Franklin Streets
Johnstown, Pennsylvania 19501
Ladies and Gentlemen:
USBANCORP, Inc. ("USBANCORP") and Johnstown Savings Bank
("JSB") desire to enter into an Agreement and Plan of Merger
dated November 10, 1993, as amended on January 18, 1994
("Agreement"), pursuant to which, subject to the terms and
conditions set forth therein, (a) JSB will merge with and into
Johnstown Interim Bank, a Pennsylvania chartered commercial bank
and wholly-owned subsidiary of USBANCORP ("JIB") with JIB
surviving the merger and immediately following such merger JIB
will merge with and into U.S. National Bank in Johnstown ("U.S.
Bank") a wholly-owned subsidiary of USBANCORP with U. S. Bank
surviving the merger, and (b) shareholders of JSB will receive
cash and common stock of USBANCORP in exchange for common stock
of JSB outstanding on the closing date (the foregoing,
collectively, referred to herein as the "Merger").
USBANCORP has required, as a condition to its execution and
delivery to JSB of the Agreement, that the undersigned, being
directors and executive officers of JSB, execute and deliver to
USBANCORP this Letter Agreement. This Letter Agreement
supersedes and replaces in its entirety the Letter Agreement
executed by the undersigned on November 10, 1993.
If JSB does not enter into a Sale Agreement as provided in
Section 4.06(a) of the Agreement (in which case this Letter
Agreement shall not be terminated), at the termination of the
Marketing Period, each of the undersigned, in order to induce
USBANCORP to execute and deliver to JSB the Agreement, hereby
severally and irrevocably:
(j) Agrees to be present (in person or by proxy) at
all meetings of shareholders of JSB called to vote for approval
of the Merger so that all shares of common stock of JSB then
beneficially owned by him will be counted for the purpose of
determining the presence of a quorum at such meetings and to vote
all such shares over which he has sole voting power and to use
his best efforts to cause all such shares over which he has
shared voting power to be voted (i) in favor of approval and
adoption of the Agreement and the transactions contemplated
thereby (including any amendments or modifications of the terms
thereof approved by the Board of Directors of JSB), and
(ii) against approval or adoption of any other merger, business
combination, recapitalization, partial liquidation or similar
transaction involving JSB, provided, however, that this
obligation shall terminate concurrently with any consummation or
termination of the Agreement;
(k) Agrees not to vote or execute any written consent
to rescind or amend in any manner any prior vote or written
consent, as a shareholder of JSB, to approve or adopt the
Agreement, provided, however, that this obligation shall
terminate concurrently with any consummation or termination of
the Agreement;
(l) Agrees to use his or her best efforts to cause the
Merger to be consummated;
(m) Agrees (i) not to sell, transfer or otherwise
dispose of any JSB Common Stock to which he had sole disposition
power prior to the record date for the special meeting of JSB
shareholders to vote upon the Merger (the "Record Date"), (ii) to
use his best efforts to prevent the sale, transfer or disposition
of shares of JSB Common Stock to which he has shared disposition
power prior to the Record Date, (iii) not to sell, transfer or
otherwise dispose of any JSB Common Stock to which he had sole
disposition power after the Record Date without the prior written
consent of USBANCORP which shall not be unreasonably withheld and
(iv) to use his best efforts to prevent the sale, transfer or
disposition of shares of JSB Common Stock as to which he has
shared disposition power after the Record Date without the prior
written consent of USBANCORP which shall not be unreasonably
withheld; provided, however, that these obligations shall
terminate concurrently with any termination or consummation of
the Agreement.
(n) Subject to the provisions of Section 4.06(b) of
the Agreement, agrees not to initiate or engage in any
negotiations or discussions with any party other than USBANCORP
with respect to any offer, sale, transfer or other disposition
of, any shares of common stock of JSB now or hereafter owned by
him, or to support any such offer, sale, transfer, or other
disposition;
(o) Agrees not to offer, sell, transfer or otherwise
dispose of any shares of common stock of USBANCORP received in
the Merger, except (i) at such time as a registration statement
under the Securities Act of 1933 ("Securities Act") covering
sales of such USBANCORP common stock is effective and a
prospectus is made available under the Securities Act,
(ii) within the limits, and in accordance with the applicable
provisions of, Rule 145 under the Securities Act, or (iii) in a
transaction which, in the opinion of counsel satisfactory to
USBANCORP or as described in a "no-action" or interpretive letter
from the staff of the Securities and Exchange Commission ("SEC"),
is not required to be registered under the Securities Act; and
acknowledges and agrees that USBANCORP is under no obligation to
register the sale, transfer or other disposition of USBANCORP
common stock by him or on his behalf, or to take any other action
necessary to make an exemption from registration available;
(p) Agrees that USBANCORP shall not be bound by any
attempted sale of any such shares of USBANCORP common stock, and
USBANCORP's transfer agent shall be given an appropriate stop
transfer order and shall not be required to register any such
attempted sale, unless the sale has been effected in compliance
with the terms of this Letter Agreement; and further agrees that
the certificate representing his shares of USBANCORP common stock
may be endorsed with a restrictive legend consistent with the
terms of this Letter Agreement;
(q) Acknowledges and agrees that the provisions of
subparagraphs (f) and (g) hereof also apply to shares of
USBANCORP common stock received in the Merger owned by (i) his
spouse, (ii) any of his relatives or relatives of his spouse
occupying his home, (iii) any trust or estate in which he, his
spouse, or any such relative owns at least a 10% beneficial
interest or of which any of them serves as trustee, executor or
in any similar capacity, and (iv) any corporation or other
organization in which he, his spouse, or any such relative owns
at least 10% of any class of equity securities or of the equity
interest;
(r) Represents that he has the capacity to enter into
this Letter Agreement and that it is a valid and binding
obligation enforceable against him, subject to bankruptcy,
insolvency and other laws affecting creditors rights and general
equitable principles.
________________________
This Letter Agreement may be executed in two or more
counterparts, each of which shall be deemed to constitute an
original, but all of which together shall constitute one and the
same Letter Agreement.
________________________
This Letter Agreement shall be effective upon execution by
two or more persons listed below, and its validity and
enforceability shall not be affected by the lack of its execution
by any person listed below. Notwithstanding the foregoing, this
Letter Agreement shall only be binding upon those persons that
executed this Letter Agreement.
________________________
Except as otherwise set forth herein, this Letter Agreement
shall terminate concurrently with any termination of the
Agreement in accordance with its terms.
The undersigned intend to be legally bound hereby.
Very truly yours,
__________________________________
Frank H. Blackington, III, Ph.D
__________________________________
Paul A. Cooney
__________________________________
Patrick J. Coyne
__________________________________
James C. Dewar
__________________________________
James M. Edwards, Sr.
__________________________________
John B. Gunter
__________________________________
John M. Kriak
__________________________________
Kim W. Kunkle
__________________________________
Howard M. Picking, III
__________________________________
Carl R. Sax
__________________________________
John B. Stockton
__________________________________
Kenneth W. Andres
__________________________________
R. Craig Pugh
__________________________________
Walter F. Rusnak
__________________________________
Gerald R. Baxter
<PAGE>
Exhibit 2
STOCK OPTION AGREEMENT
See Annex F
to the Joint Proxy Statement/Prospectus
<PAGE>
Exhibit 3
SEVERANCE PLAN
After the consummation of the Merger, certain officers and
employees of JSB will be terminated. Any individual that is
terminated, for other than cause, on or before the first
anniversary date of the Merger will receive the following
severance benefits:
(19) Senior Management (includes all officers of JSB who
held positions with the title of Vice President or
Senior Vice President on November 10, 1993 ("Senior
Management")) other than the four individuals covered
by the letter agreements set forth as Exhibits 6A to
6D: A member of Senior Management that continues to
remain in the employment of USBANCORP through the date
determined by USBANCORP in its sole discretion shall
receive upon termination of such officer's employment
his or her current weekly salary for the lesser of:
(i) number of weeks and any portion thereof equal to
the sum of (A) the number of years such officer was
employed by JSB multiplied by two (2), and (B) the
number of full months such individual has worked since
his employment anniversary date divided by twelve (12)
or (ii) twenty-six (26) weeks (the "Senior Management
Severance Period"). In addition, Senior Management
shall continue to receive those benefits currently
being offered by JSB to Senior Management, other than
any right to receive shares of JSB Common Stock under
the JSB Employee Stock Compensation Program for a
period not to exceed the greater of: (i) three months
or (ii) the Senior Management Severance Period.
(20) Management (includes all officers or JSB Managers not
provided for in (1) above who held such positions on
November 10, 1993 ("Management")): A member of
Management that continues to remain in the employment
of USBANCORP through the date determined by USBANCORP
in its sole discretion shall receive upon termination
of such employment, his or her current weekly salary
for the lesser of: (i) that number of weeks and any
portion thereof equal to the sum of: (A) the number of
years such officer was employed by JSB and (B) the
number of months such individual has worked since his
employment anniversary date divided by twelve (12) or
(ii) twenty-six (26) weeks ("Management Severance
Period"). In addition, Management shall continue to
receive those benefits currently being offered by JSB
to Management, other than any right to receive shares
of JSB Common Stock under the JSB Employee Stock
Compensation Program for a period not to exceed (i)
three months or (ii) the Management Severance Period.
(21) Employees (includes all full time employees of JSB not
provided for in (1) or (2) above): An employee that
continues to remain in the employment of USBANCORP
through the date determined by USBANCORP in its sole
discretion shall receive upon termination of such
person's employment, his or her current weekly salary
or wages, as the case may be, for the lesser of: (i)
that number of weeks and any portion thereof equal to
the sum of: (A) the number of years such person was
employed by JSB and (B) the number of full months such
individual has worked since his employment anniversary
date divided by twelve (12) or (ii) twenty-six (26)
weeks ("Employee Severance Period"). In addition, such
persons shall continue to receive those benefits
currently being offered by JSB to such employees during
the Employee Severance Period.
Notwithstanding the foregoing, if any officer or employee
terminates his or her employment prior to the date determined by
USBANCORP such officer or employee shall not be entitled to
participate in the above severance package.
To facilitate the consolidation of the operation of JSB with
and into U.S. Bank, U.S. Bank desires to retain certain
individuals designated by U.S. Bank for a period of time after
the consummation of the Merger. With respect to those
individuals, U.S. Bank will, provided such individuals agree to
remain in the employment of U.S. Bank for the period specified by
U.S. Bank, with additional severance benefits upon their
subsequent termination based upon the following classifications:
(i) with respect to individuals classified by
U.S. Bank as holding a "less critical
position," U.S. Bank will provide such
individuals with one month additional salary;
(ii) with respect to individuals classified by U.S.
Bank as holding "more critical positions," U.S.
Bank will provide such individuals with two months
additional salary; and
(iii) with respect to individuals classified by U.S.
Bank as holding "most critical positions," U.S.
Bank will provide such individuals with three
months additional salary.
<PAGE>
Exhibit 4
FORM OF OPINION OF
STEVENS & LEE
__________ __, 1994
USBANCORP, INC.
Main and Franklin Streets
Johnstown, PA 15901
Gentlemen:
We have acted as Special Counsel for USBANCORP, INC.
("USBANCORP") in connection with the proposed acquisition by
USBANCORP of Johnstown Savings Bank ("JSB") by means of the
merger of JSB with and into a wholly-owned subsidiary of
USBANCORP, Johnstown Interim Bank ("JIB"), and immediately
thereafter the merger of JIB with and into United States National
Bank in Johnstown ("U.S. Bank"), a wholly-owned subsidiary of
USBANCORP with U.S. Bank surviving. The merger will be
consummated pursuant to the terms and conditions of an Agreement
and Plan of Merger between USBANCORP, U.S. Bank and JSB dated
November 10, 1993, as amended on January 18, 1994 ("Merger
Agreement") (all capitalized terms used herein and not defined
shall have the meaning set forth in the Merger Agreement). Each
share of JSB common stock issued and outstanding as of the
effective date (except for shares for which dissenters' rights
have been perfected) will be converted into the right to receive
$10.13 in cash and shares of USBANCORP Common Stock as follows:
(a) if the Average Closing Price on the Closing Date is less than
or equal to $24.50 per share, then .5053 shares of USBANCORP
Common Stock; (b) if the Average Closing Price on the Closing
Date is greater than or equal to $25.50 per share, then .4853
shares of USBANCORP Common Stock; or (c) if the Average Closing
Price on the Closing Date is greater than $24.50 per share but
less than $25.50 per share, then the conversion ratio will be
determined by dividing $22.50 by the Average Closing Price and
multiplying the resulting figure by .55.
This opinion is being furnished pursuant to Section 5.01(h)
of the Merger Agreement.
In connection therewith, we have reviewed the Articles of
Incorporation and Bylaws of USBANCORP, and JIB, the Articles of
Association and Bylaws of U.S. Bank, the relevant corporate
proceedings of USBANCORP, U.S. Bank and JIB, the Merger
Agreement, the Joint Proxy Statement/Prospectus, the Registration
Statement and such other documents and records as we deemed
necessary.
Based upon the foregoing, it is our opinion that:
22. USBANCORP is a corporation duly incorporated,
organized, validly existing and in good standing under the laws
of the Commonwealth of Pennsylvania and a multi-bank holding
company duly registered under the Bank Holding Company Act and
the rules and regulations thereunder. USBANCORP has full
corporate power and authority to carry on its business as now
being conducted; to own, lease and operate its properties and
assets; and, subject to the approval of the Merger by all
required bank regulatory agencies and the related issuance of
USBANCORP Common Stock by USBANCORP shareholders, to execute,
deliver, and perform the Merger Agreement.
23. U.S. Bank is a corporation duly incorporated,
organized, validly existing and in good standing under the laws
of the United States. U.S. Bank has full corporate power and
authority to carry on its business as now being conducted; to
own, lease and operate its properties and assets; and to execute,
deliver and perform the Merger Agreement. The deposits of U.S.
Bank are insured by the Bank Insurance Fund administered by the
Federal Deposit Insurance Corporation to the fullest extent
permitted by applicable law.
24. JIB is a banking corporation duly incorporated,
organized and validly existing under the laws of the Commonwealth
of Pennsylvania. JIB has full corporate power and authority to
own, lease and operate its properties and assets; to carry on its
business as now being conducted; and to merge with JSB and is
authorized to perform the Merger Agreement.
25. The Merger Agreement has been duly authorized by all
necessary corporate action on the part of USBANCORP and
U.S. Bank, respectively, and has been duly executed and delivered
by their respective duly authorized officers and has been
approved and ratified by JIB. The Merger Agreement constitutes
valid and binding obligations of USBANCORP and U.S. Bank,
respectively, in accordance with their respective terms and
provisions except to the extent enforcement is limited by
bankruptcy, insolvency or similar laws of general application
affecting creditors' rights or the application by a court of
equitable principles.
26. All consents, approvals or authorizations of any
federal or state governmental authority or of any agency,
authority, commission or counsel thereof required in connection
with the consummation of the Merger Agreement by USBANCORP and
U.S. Bank have been applied for and received and continue in full
force and effect, and, to the best of our knowledge without
independent verification, no proceeding has been instituted to
rescind, modify or otherwise change any such consent, approval or
authorization.
27. There are no actions, claims, suits or judicial or
administrative proceedings or, to the best of our knowledge,
investigations pending, including proceedings initiated by or
before federal or state banking regulatory authorities, that,
either in any case or in the aggregate, might result in any
material impairment of the right or ability of USBANCORP and
U.S. Bank to carry on their respective operations as now
conducted, and none that question the validity of the Merger
Agreement or any of the actions provided for or contemplated
thereby or of any action taken or to be taken in connection with
the transactions contemplated thereby.
28. Neither USBANCORP nor U.S. Bank is in violation of any
terms of their respective articles of incorporation or
association or other governing instrument, their respective
bylaws, or any mortgage, indenture, contract, agreement,
franchise, license, instrument, judgment, decree, order, statute,
rule or regulation, in any respect that could materially
adversely affect their performance of the Merger Agreement and
performance of their obligations under the Merger Agreement will
not result in any such violation of or constitute a default under
or be in conflict with any such terms or result in the creation
of any mortgage, lien, encumbrance or change upon any of the
properties or assets of any such entity pursuant to any such
terms.
29. The shares of USBANCORP Common Stock to be issued
pursuant to the Merger Agreement will be, when so issued, validly
issued, fully paid and non-assessable and will be issued in
accordance with all requirements of the Securities Act of 1933
and applicable rules and regulations promulgated thereunder.
Each certificate representing shares of USBANCORP Common Stock
will carry with it a Right to purchase one-tenth shares of
USBANCORP Series B Preferred Stock for each share of USBANCORP
Common Stock so issued pursuant to the USBANCORP Shareholders'
Rights Plan.
Because the primary purpose of our professional engagement
was not to establish or confirm factual matters or financial,
accounting or statistical matters and because of the wholly or
partially non-legal character of many of the statements contained
in the Proxy Statement, we are not passing upon and do not assume
hereby any responsibility for the accuracy, completeness or
fairness of the statements included or incorporated by reference
in the Joint Proxy Statement/Prospectus and we make no
representation hereby that we have independently verified the
accuracy, completeness or fairness of such statements. Without
limiting the foregoing, we assume no responsibility for, and have
not independently verified, the accuracy, completeness or
fairness of the financial statements, notes to financial
statements, tables and other financial and statistical data
included or incorporated by reference in the Joint Proxy
Statement/Prospectus, and we have not examined the accounting,
financial or statistical records from which such financial
statements, schedules and data are derived. We note that we are
not experts within the meaning of the Securities Act of 1993 with
respect to such financial statements or schedules or the other
financial or statistical data included or incorporated by
reference therein.
However, during the course of the preparation of the Joint
Proxy Statement/Prospectus and the Registration Statement of
USBANCORP of which it is a part, we participated in conferences
and telephone conversations with your representatives, including
certain of its officers, its financial advisors and its
independent accountants, at which the contents of the Joint Proxy
Statement/Prospectus and the Registration Statement and related
matters were discussed.
Based on our participation in the above-mentioned
conferences and conversations, our review of the documents
described above, and our understanding of applicable law and the
experience we have gained in our practice thereunder and to the
extent of our actual knowledge, we advise you that no information
has come to our attention that causes us to believe that the
information concerning USBANCORP in the Joint Proxy
Statement/Prospectus (except we express no view as to financial
statements, notes to financial statements, tables and other
financial and statistical data included or incorporated by
reference therein and information regarding or supplied by
USBANCORP, U.S. Bank or their financial advisors included or
incorporated by reference therein, including, without limitation,
information set forth under the headings "The Merger," "Selected
Pro Forma Financial Data," "Pro Forma Financial Information,"
"Business of USBANCORP," "Description of USBANCORP Common Stock,"
and "Comparison of Rights of Holders of USBANCORP Common Stock
and JSB Common Stock") at the time it was declared effective by
the Securities and Exchange Commission on __________________,
1994 and on __________________, 1994, the date of the Annual
Meeting of shareholders of USBANCORP to consider the Merger,
contained any untrue statement of a material fact or omitted to
state any material fact required to be stated therein or
necessary to make the statements made therein, in light of the
circumstances under which they were made, not misleading.
In giving this opinion, we have relied upon certificates of
public officials and, as to matters of fact, upon certificates of
officers of USBANCORP and its subsidiaries, and as to matters of
law of any state other than the Commonwealth of Pennsylvania,
upon opinions of counsel satisfactory to us.
Very truly yours,
STEVENS & LEE
<PAGE>
Exhibit 5
[Form of Legal Opinion -
Counsel to JSB]
___________________, 1994
USBANCORP, Inc.
Main and Franklin Streets
Johnstown, Pennsylvania 15907
Re: Agreement and Plan of Merger among USBANCORP, Inc., United
States National Bank in Johnstown and Johnstown Savings Bank
Gentlemen:
We have acted as special counsel to Johnstown Savings Bank,
a Pennsylvania chartered savings bank ("JSB"), in connection with
the proposed merger (the "Merger") of JSB with and into Johnstown
Interim Bank, a Pennsylvania chartered commercial bank ("JIB")
wholly owned by USBANCORP, Inc., a Pennsylvania corporation
("USBANCORP"), and created solely for the purpose of effecting
the Merger, pursuant to the terms of an Agreement and Plan of
Merger (the "Merger Agreement") by and among JSB, USBANCORP and
United States National Bank in Johnstown, a national banking
association wholly-owned by USBANCORP ("U.S. Bank") dated as of
November 10, 1993 and amended as of January 18, 1994. This
opinion is being furnished to you pursuant to Section 5.02(g) of
the Merger Agreement. Terms defined in the Merger Agreement have
the same meaning herein unless otherwise defined herein or
required by the context.
For purposes of rendering this opinion, we have reviewed the
following:
1. The Articles of Incorporation and Bylaws of JSB;
2. The Merger Agreement;
3. The Registration Statement on Form S-4 filed by
USBANCORP with the Securities and Exchange Commission
("SEC") on or about March __, 1994, as subsequently
amended and as declared effective by the SEC on
_________________, 1994 (the "Registration Statement");
4. The Application FR Y-2 filed by USBANCORP with the
Federal Reserve Bank of Philadelphia on or about
____________, 1994, as subsequently amended and as
approved by the Board of Governors of the Federal
Reserve System by letter dated ______________, 1994;
5. The Application filed by USBANCORP with the
Commonwealth of Pennsylvania Department of Banking
("Department") on or about February __, 1994, as
subsequently amended and as approved by the Department
by letter dated _____________, 1994;
6. The Application filed by USBANCORP with the Office of
the Comptroller of the Currency ("OCC") on or about
February __, 1994, as subsequently amended, and as
approved by the OCC by letter dated _____________,
1994;
7. The Joint Proxy Statement/Prospectus dated
_____________, 1994 (the "Proxy Statement");
8. The provisions of federal and Pennsylvania law which we
deemed to be relevant for this purpose; and
9. Such minutes of the meetings of the Board of Directors
of JSB, certificates of public officials and of
officers of JSB, and such other documents, records and
matters as we deemed to be relevant as a basis for the
opinion hereinafter expressed. Without limiting the
generality of the foregoing, the opinion as to the due
incorporation and subsistence of JSB in clause (i) of
the opinion is based solely upon certificates of
officials of the appropriate government authorities.
In our examination, we have assumed, without independent
verification, (i) the genuineness of all signatures, the
authenticity of all documents submitted to us as original copies,
the conformity to original documents of all documents submitted
to us as certified, conformed or reproduction copies, and the
authenticity of such originals of such latter documents; (ii) the
execution and acknowledgment as indicated thereon of all
documents listed above or delivered in connection with the
closing by all parties thereto other than JSB; (iii) that each
party to the transactions contemplated by the Merger Agreement,
other than JSB, has the full power, authority and legal right
under its articles of incorporation, charter, bylaws or other
governing documents and applicable laws and regulations to
execute and to perform its obligations under all documents
executed by it in connection with the transactions contemplated
by the Merger Agreement; (iv) that the execution, delivery and
performance of the Merger Agreement were duly and validly
authorized by all necessary corporate action on the part of
USBANCORP, JIB and U.S. Bank, that the Merger Agreement
constitutes a valid, legally binding and enforceable obligation
of USBANCORP and U.S. Bank, and that the execution and filing of
the Articles of Merger by USBANCORP and JIB was duly and validly
authorized by all necessary corporate action on the part of
USBANCORP and JIB; (v) except as expressed below with respect to
JSB, that USBANCORP and U.S. Bank have properly applied for and
obtained all necessary consents, approvals, authorizations and
orders of any governmental agency, court or other person or
entity which are required for its execution, delivery and
performance of the Merger Agreement; (vi) the accuracy and
completeness of all corporate records and documents and of all
certificates and statements of fact made available to us;
(vii) as to matters of fact, the accuracy of the representations
and warranties of JSB set forth in the Agreement; and (viii) that
the foregoing documents, in the form submitted to us for our
review, have not been altered or amended in any respect material
to our opinion as stated herein.
The opinions which we render herein are limited to those
matters governed by federal laws and the Pennsylvania Banking
Code of 1965, as amended. We do not express any opinions herein
as to matters governed by the laws of any other jurisdiction or
choice of law provisions. We are members of the bar of the
District of Columbia and do not hold ourselves out as being
experts with respect to the laws of any jurisdiction other than
the laws of the District of Columbia and of the United States of
America.
To the extent not inconsistent with the assumptions,
qualifications and limitations set forth elsewhere herein, this
opinion is governed by, and shall be interpreted in accordance
with, the Legal Opinion Accord (the "Accord") of the American Bar
Association Section of Business Law (1991). As a consequence, it
is subject to a number of qualifications, exceptions,
definitions, limitations on coverage and other limitations, all
as more particularly described in the Accord, and this opinion
should be read in conjunction therewith. The term "Actual
Knowledge" whenever used herein shall have the meaning set forth
in the Accord.
Based on the foregoing, and subject to the assumptions,
qualifications and limitations set forth herein and in the
Accord, as of the date hereof we are of the opinion that:
(i) JSB is a savings bank incorporated and subsisting under
the laws of the Commonwealth of Pennsylvania. JSB has the
corporate power to own its assets and to transact the business in
which it is engaged as described in JSB's 1992 Annual Report on
Form 10-K, incorporated by reference in the Proxy Statement. JSB
is a member of the Federal Home Loan Bank of Pittsburgh. The
deposits of JSB are insured by the Bank Insurance Fund
administered by the Federal Deposit Insurance Corporation to the
fullest extent permitted by applicable law.
(ii) The authorized capital stock of JSB consists as of the
date hereof of 15,000,000 shares of JSB Common Stock, of which
_____ shares are presently issued and outstanding, and 5,000,000
shares of preferred stock, of which no shares have been issued.
All of such issued and outstanding shares are validly authorized
and issued, fully paid and nonassessable.
(iii) JSB had, at the dates of execution, the corporate
power to enter into the Merger Agreement, and the execution,
delivery and performance by JSB of the Merger Agreement has been
duly authorized by all necessary corporate proceedings on its
part. The Merger Agreement has been validly executed and
delivered by JSB and constitutes the valid and binding
obligations of JSB, enforceable in accordance with its terms,
except as such enforceability may be limited by (i) bankruptcy,
insolvency, laws affecting depository institutions and other
similar laws from time to time in effect affecting the rights and
remedies of creditors generally, and (ii) general equitable
principles, including the effect or availability (or lack
thereof) of equitable remedies or injunctive relief (regardless
of whether such enforceability is considered in a proceeding in
equity or at law).
(iv) Neither the execution or delivery by JSB of the Merger
Agreement, the consummation of the Merger nor compliance by JSB
with any of the provisions of the Merger Agreement violated, as
of the dates of its execution, or will violate, any provision of
the Articles of Incorporation or Bylaws of JSB, any applicable
federal or Pennsylvania banking laws or any applicable rule or
regulation of any federal or Pennsylvania bank regulatory
authority thereunder. All consents, approvals, authorizations
and orders of all federal and Pennsylvania bank regulatory
authorities required on the part of JSB in connection with the
consummation of the transactions contemplated by the Merger
Agreement have been obtained.
(v) All corporate acts and proceedings required to be taken
by or on the part of JSB, including without limitation the
approval and adoption of the Merger Agreement by the Board of
Directors and shareholders of JSB, to enable JSB to consummate
the Merger with JIB have been properly taken. Articles of Merger
for delivery to the Department of State of the Commonwealth of
Pennsylvania have been validly authorized and executed by JSB and
provide that the Merger will become effective at the close of
business on ______________, 1994.
Because the primary purpose of our professional engagement
was not to establish or confirm factual matters or financial,
accounting or statistical matters and because of the wholly or
partially non-legal character of many of the statements contained
in the Proxy Statement, we are not passing upon and do not assume
hereby any responsibility for the accuracy, completeness or
fairness of the statements included or incorporated by reference
in the Proxy Statement and we make no representation hereby that
we have independently verified the accuracy, completeness or
fairness of such statements. Without limiting the foregoing, we
assume no responsibility for, and have not independently
verified, the accuracy, completeness or fairness of the financial
statements, notes to financial statements, tables and other
financial and statistical data included or incorporated by
reference in the Proxy Statement, and we have not examined the
accounting, financial or statistical records from which such
financial statements, schedules and data are derived. We note
that we are not experts within the meaning of the Securities Act
of 1993 with respect to such financial statements or schedules or
the other financial or statistical data included or incorporated
by reference therein.
However, during the course of the preparation of the Proxy
Statement and the Registration Statement of USBANCORP of which it
is a part, we participated in conferences and telephone
conversations with your representatives, including certain of
your officers, your counsel and your independent accountants, and
with representatives of JSB, including certain of its officers,
its financial advisors and its independent accountants, at which
the contents of the Proxy Statement and the Registration
Statement and related matters were discussed.
Based on our participation in the above-mentioned
conferences and conversations, our review of the documents
described above, and our understanding of applicable law and the
experience we have gained in our practice thereunder and to the
extent of our Actual Knowledge, we advise you that no information
has come to our attention that causes us to believe that the
information concerning JSB in the Proxy Statement (except we
express no view as to financial statements, notes to financial
statements, tables and other financial and statistical data
included or incorporated by reference therein and information
regarding or supplied by USBANCORP or U.S. Bank or their
respective financial advisors included or incorporated by
reference therein, including, without limitation, information set
forth under the headings "The Merger," "Selected Pro Forma
Financial Data," "Pro Forma Financial Information," "Business of
USBANCORP," "Description of USBANCORP Common Stock," and
"Comparison of Rights of Holders of USBANCORP Common Stock and
JSB Common Stock") at the time it was declared effective by the
SEC on _____________, 1994 and on ______________, 1994, the date
of the Annual Meeting of shareholders of JSB to consider the
Merger, contained any untrue statement of a material fact or
omitted to state any material fact required to be stated therein
or necessary to make the statements made therein, in light of the
circumstances under which they were made, not misleading.
We assume no obligation to advise you of any events that
occur subsequent to the date of this opinion. This opinion is
being furnished to you at the request of our client solely for
the limited purpose of satisfying the provisions of Section
5.02(g) of the Merger Agreement, and this opinion may only be
relied upon by you. This opinion is not to be used for any other
purpose or relief upon by any other person or entity, and may not
be quoted in whole or in part or otherwise referred to, nor filed
with or provided to any governmental agency or other person or
entity, in each case without our express prior written consent.
Very truly yours
ELIAS, MATZ, TIERNAN & HERRICK
By________________________________
Raymond A. Tiernan, a Partner
<PAGE>
Exhibit 5A
FORM OF TAX OPINION
The tax opinion will contain the following individual
opinions (or opinions substantially similar thereto):
1. The merger of JSB with and into JIB (the "Interim
Merger") will constitute a reorganization within the meaning of
Sections 368(a)(1)(A) and 368(a)(2)(D) of the IRC.
2. USBANCORP, JIB and JSB will each be "a party to a
reorganization" within the meaning of Section 368(b) of the IRC.
3. Except for any loan loss reserve that may be required
to be recaptured with respect to JSB, no gain or loss will be
recognized by JSB upon the transfer of its assets to JIB in
exchange for USBANCORP Common Stock (including fractional share
interests), cash, and the assumption by JIB of the liabilities of
JSB.
4. No gain or loss will be recognized by either USBANCORP
or JIB upon the receipt by JIB of the assets of JSB in exchange
for USBANCORP Common Stock (including fractional share
interests), cash, and the assumption of JSB's liabilities by JIB.
5. The basis of the JSB assets in the hands of JIB will be
the same as the basis of such assets in the hands of JSB
immediately prior to the Interim Merger.
6. The holding period of the assets of JSB to be received
by JIB will include the period during which the assets were held
by JSB.
7. No gain or loss will be recognized by JSB shareholders
who receive solely USBANCORP Common Stock (including a fractional
share interest) in exchange for their JSB Common Stock.
8. The basis of USBANCORP Common Stock received by JSB
shareholders who receive solely USBANCORP Common Stock (including
a fractional share interest) will be the same as the basis of the
JSB Common Stock surrendered in exchange therefor.
9. Gain, if any, will be recognized by JSB shareholders
who receive both USBANCORP Common Stock (including a fractional
share interest) and cash in exchange for their JSB Common Stock,
and such gain will be recognized, but not in excess of the amount
of cash received. If the exchange has the effect of the
distribution of a dividend (determined with the application of
Section 318(a) of the IRC), then the amount of the gain
recognized that is not in excess of a shareholder's ratable share
of undistributed earnings and profits will be treated as a
dividend. The determination of whether the exchange has the
effect of a dividend will be made in accordance with the
principles set forth in Commissioner v. Clark, 489 U.S. 726
(1989). No loss will be recognized on the exchange of JSB Common
Stock for USBANCORP Common Stock (including a fractional share
interest) and cash.
10. The basis of the USBANCORP Common Stock received by JSB
shareholders who receive both USBANCORP Common Stock (including a
fractional share interest) and cash will be the same as the basis
of the JSB Common Stock exchanged therefor, decreased by the
amount of cash received, and increased by the amount, if any,
that was treated as a dividend and the amount of gain recognized
by such shareholders on the exchange, if any (not including any
portion of such gain that is treated as a dividend).
MS\ The payment of cash in lieu of fractional share
interests of USBANCORP Common Stock will be treated as if the
fractional share interests were distributed as part of the
Interim Merger and then redeemed by USBANCORP, subject to the
provisions and limitations of Section 302 of the IRC.
12. The holding period of USBANCORP Common Stock to be
received by JSB shareholders will include the holding period of
the JSB Common Stock exchanged therefor, provided that the JSB
Common Stock is held as a capital asset on the date of the
exchange.
13. The Rights transferred with the shares of USBANCORP
Common Stock will not constitute "other property" within the
meaning of Section 356(a)(1)(B) of the IRC.
14. JSB shareholders who receive solely cash in exchange
for their JSB Common Stock will be treated as having received
such cash as a distribution in redemption of their stock, subject
to the provisions and limitations of Section 302 of the IRC.
15. As provided in Section 381(c)92) of the IRC and related
Treasury regulations, JIB will succeed to and take into account
the earnings and profits, or deficit in earnings and profits, of
JSB as of the date of the Interim Merger. Any deficit in the
earnings and profits of JIB or JSB will be used only to offset
the earnings and profits accumulated after such merger.
16. Pursuant to Section 381(a) of the IRC and related
Treasury regulations, JIB will succeed to and take into account
the items of JSB described in Section 381(c) of the IRC. Such
items will be taken into account by JIB subject to the conditions
and limitations of Sections 381, 382, 383, and 384 of the IRC and
the Treasury regulations thereunder.
B\0 The merger of JIB with and into U.S. Bank (the "U.S.
Bank Merger") will constitute a reorganization within the meaning
of IRC Section 368(a)(1)(A).
18. JIB and U.S. Bank will each be "a party to a
reorganization" within the meaning of IRC Section 368(b).
19. Neither JIB nor U.S. Bank will reorganize any gain or
loss upon the transfer of JIB's assets to U.S. Bank in
constructive exchange solely for U.S. Bank Common Stock and the
assumption by U.S. Bank of the liabilities of JIB.
20. The basis of the JIB assets in the hands of U.S. Bank
will be the same as the basis of such assets in the hands of JIB
immediately prior to the U.S. Bank Merger.
21. The holding period of the JIB assets in the hands of
U.S. Bank will include the period during which such assets were
held by JIB.
22. No gain or loss will be recognized by USBANCORP, as the
shareholder of JIB, upon the constructive receipt of shares of
U.S. Bank Common Stock in exchange for the JIB Common Stock
surrendered in exchange therefor in the U.S. Bank Merger.
23. The basis of the U.S. Bank Common Stock to be held by
USBANCORP after the U.S. Bank Merger will equal the basis of such
stock immediately before the U.S. Bank Merger, increased by the
basis of the JIB Common Stock surrendered in the constructive
exchange.
24. As provided in IRC Section 381(c)(2) and related
Treasury regulations, U.S. Bank will succeed to and take into
account the earnings and profits, or deficit in earnings or
profits, of JIB as of the date of the U.S. Bank Merger. Any
deficit in the earnings and profits of JIB or U.S. Bank will be
used only to offset the earnings and profits accumulated after
the U.S. Bank Merger.
25. Pursuant to IRC Section 381(a) and related Treasury
regulations, U.S. Bank will succeed to and take into account the
items of JIB described in IRC Section 381(c). Such items will be
taken into account by U.S. Bank subject to the conditions and
limitations of IRC Sections 381, 382, 383, and 384 and the
Treasury regulations thereunder.
The opinion may not be applicable to JSB's shareholders who
received their JSB Common Stock pursuant to the exercise of
employee stock options or otherwise as compensation, or who are
not citizens or residents of the United States.
<PAGE>
Exhibit 6A
__________________, 1994
Mr. Patrick J. Coyne
President and Chief Executive Officer
Johnstown Savings Bank
Market at Main Streets
Johnstown, Pennsylvania 15901
Dear Mr. Coyne:
The purpose of this letter is to set forth the terms and
conditions upon which you have agreed to resign from your
employment at Johnstown Savings Bank ("JSB") in connection with
and as a result of the merger of JSB with and into a wholly-owned
subsidiary of USBANCORP, Inc., ("USBANCORP") with JSB thereafter
ceasing to exist as a separate entity. All capitalized terms
used herein but not defined herein shall have the meanings given
to them in that certain Agreement and Plan of Merger dated
November 10, 1993 and amended as of January 18, 1994, by and
among USBANCORP, United States National Bank in Johnstown, and
JSB (the "Merger Agreement").
26. Cessation of Employment.
Except as otherwise provided herein, in connection with
your resignation as an employee of JSB, you, JSB, USBANCORP and
U.S. Bank hereby agree that the Employment Agreement dated
June 5, 1989, between JSB and you together with any other
agreements, arrangements or understandings between or among you,
JSB, USBANCORP and/or U.S. Bank or any of their respective
subsidiaries or affiliates, if any, involving any obligation or
responsibility on your part to USBANCORP, U.S. Bank or JSB or any
of their respective subsidiaries or affiliates or on the part of
USBANCORP, U.S. Bank or JSB or any of their respective
subsidiaries or affiliates to you are hereby terminated effective
as of the date this letter is signed by you (the "Resignation
Date"), with the sole exception that your right to a pension and
other benefits under the 401k plan of JSB or its successors which
vested on or prior to the Resignation Date shall not be
terminated, waived or diminished in any way by your resignation
of employment or otherwise under this Agreement.
27. Resignations.
Concurrently herewith, you are delivering to USBANCORP,
U.S. Bank and JSB a letter (in the form attached hereto as
Exhibit 1) stating that you have elected to resign as an employee
of JSB and that you have resigned as a Director of JSB and as
President and Chief Executive Officer of JSB and from all of your
director and officer positions with any subsidiary of JSB all
effective as of the Resignation Date.
28. Severance Payment.
In lieu of receiving any severance or related payments
or benefits in connection with your resignation in accordance
with the terms and conditions of the Employment Agreement, JSB's
Deferred Compensation Plan, JSB's Employee Stock Compensation
Program, the Executive Annual Incentive Plan or any other plan or
benefit made available to you by JSB or a direct or indirect
subsidiary or affiliate of JSB except for the 401k plan of JSB
(collectively the "JSB Compensation Plans"), except for the right
to a pension and other benefits under the 401k plan of JSB or its
successors which vested on or prior to the Resignation Date, you
shall receive simultaneously with the execution hereof the
following payments and such payments shall represent payment in
full of any and all amounts due and owing to you from JSB,
USBANCORP, U.S. Bank or any direct or indirect subsidiary or
affiliate of the foregoing under the JSB Compensation Plans, or
otherwise relating to your employment relationship with JSB.
Nothing in or under this Agreement, however, shall terminate,
waive or in any way diminish any right of yours to accept,
receive and enjoy your full distribution under the 401k plan of
JSB or its successors since those rights and benefits vested on
or before the Resignation Date.
(i) an amount equal to $379,682 pursuant to
the terms and conditions of the Employment Agreement as in
effect on November 10, 1993.
(ii) $342,280 in lieu of payments due
pursuant to JSB's Deferred Compensation Plan as in effect on
November 10, 1993.
(iii) $393,097 in consideration for the
redemption of all JSB's incentive stock options held by you
on November 10, 1993.
(iv) $356,141 to permit you to pay any
excise tax required to be paid by you pursuant to
Section 4009 of the Internal Revenue Code, as amended.
(v) USBANCORP, as the successor by merger to
JSB, shall make available to you continuation coverage under
the group health plan of USBANCORP for a period of 18 months
subsequent to the Resignation Date provided you make timely
payment of the premiums thereof in accordance with the
Consolidated Omnibus Benefit Reconciliation Act of 1985,
Public Law 99-272.
29. Release of Claims.
You, for yourself and on behalf of your personal and
legal representatives, executors, administrators, successors,
heirs, distributees and legatees, intending to be legally bound,
hereby forever release, waive and discharge JSB and its direct
and indirect subsidiaries and USBANCORP and its direct and
indirect subsidiaries and their respective present and former
officers, directors, stockholders, attorneys, agents and
employees, both in their official and individual capacities, from
any right to reinstatement as an employee of JSB, and any other
claims, causes of action, suits, proceedings, debts, judgments,
damages, contracts, agreements, claims for attorneys' fees, costs
and demands whatsoever, in law or in equity, which you now have
or may have, arising from, or connected with, the Employment
Agreement or your employment or any other relationship with JSB,
USBANCORP or U.S. Bank, but excluding claims under this Agreement
and claims described in the remainder of this paragraph. Nothing
in this Agreement shall release, waive, discharge or diminish any
of your rights to contest or litigate in any legal or
administrative forum a breach of this Agreement by USBANCORP or
U.S. Bank. Nothing in this Agreement shall release, waive,
discharge or diminish any of your rights to obtain unemployment
compensation from JSB or its successors subsequent to your
Resignation Date because it is agreed that your resignation was
required to be tendered on the Resignation Date by USBANCORP,
U.S. Bank and JSB as part of their merger and it further is
agreed that all of the payments set forth in Paragraph 3 above
are severance payments due and payable in a lump sum on the
Resignation Date which were earned by your work prior to that
date. Further, nothing in this Agreement shall release, waive,
discharge or diminish your right to receive a pension and other
benefits under the 401k plan of JSB or its successors since those
pension and other benefits vested on or prior to the Resignation
Date. Moreover, nothing in this Agreement shall release, waive,
discharge or diminish your right to purchase continuation
coverage under the group health plan of USBANCORP for a period of
18 months subsequent to the Resignation Date in accordance with
the Consolidated Omnibus Budget Reconciliation Act of 1985,
Public Law 99-272.
30. Withholding.
JSB is authorized to withhold such amounts from
payments or benefits to you under this Agreement or otherwise as
is required by law. You agree to sign such certificates with
respect to withholding as may be necessary or required by law.
31. Miscellaneous.
(a) Prior Agreement and Modification. This
Agreement and Exhibit 1 hereto contain the entire understanding
between or among you, on the one hand, and JSB, USBANCORP and
U.S. Bank on the other hand, with respect to the subject matter
hereof and thereof and supersedes all prior agreements,
understandings and practices with respect to such subject matter,
including, without limitation, the Employment Agreement, and no
change, alteration or modification hereof may be made except in
writing signed by all parties hereto.
(b) Severability. If any one or more of the
provisions contained in this Agreement shall be held illegal or
unenforceable by a court, no other provisions shall be affected
by such a holding.
(c) Choice of Law. This Agreement shall be
governed by, and construed and enforced in accordance with, the
laws of the Commonwealth of Pennsylvania, without regard to its
conflicts of law principles.
If the foregoing is acceptable to you, please acknowledge
your agreement (and that your legal representative has previously
reviewed this Agreement with you and advised you regarding its
contents) by signing and dating three (3) copies of this letter
and returning two (2) of them to me whereupon this letter will
constitute our agreement with respect to the subject matter
hereof.
Very truly yours
USBANCORP, INC.
By_________________________________
Terry K. Dunkle, Executive Vice
President
UNITED STATES NATIONAL BANK IN
JOHNSTOWN
By_________________________________
Terry K. Dunkle, President and
Chief Executive Officer
JOHNSTOWN SAVINGS BANK
By_________________________________
__________________, Chairman of
the Board
AGREED TO AND ACCEPTED,
INTENDING TO BE LEGALLY
BOUND THIS ______ DAY OF
_______________, 1994:
________________________
Patrick J. Coyne
<PAGE>
__________________, 1994
Exhibit 1
Board of Directors
Johnstown Savings Bank
Market At Main Streets
Johnstown, Pennsylvania 15901
Board of Directors
USBANCORP, Inc.
United States National Bank in Johnstown
Main And Franklin Streets
Johnstown, Pennsylvania 15907
Ladies and Gentlemen:
Effective today, I have elected to resign as an employee of
Johnstown Savings Bank. In connection with my resignation of
employment, I hereby resign as a Director of Johnstown Savings
Bank and as President and Chief Executive Officer of Johnstown
Savings Bank. I also hereby resign from all of my director and
officer positions with any of the subsidiaries of Johnstown
Savings Bank.
Very truly yours,
<PAGE>
Exhibit 6B
The following severance benefits will be provided to Kenneth
Andres pursuant to a letter agreement to be executed on the
closing date in substantially the form set forth in Exhibit 6A.
Total Gross Payments
Severance Agreement $162,964
Stock Options 224,250
Excise Tax Gross-up 72,654
$459,868
<PAGE>
Exhibit 6C
The following severance benefits will be provided to R. Craig
Pugh pursuant to a letter agreement to be executed on the closing
date in substantially the form set forth in Exhibit 6A.
Total Gross Payments
Severance Agreement $146,428
Stock Options 224,250
Excise Tax Gross-up 73,592
$444,270
<PAGE>
Exhibit 6D
The following severance benefits will be provided to Walter F.
Rusnak pursuant to a letter agreement to be executed on the
closing date in substantially the form set forth in Exhibit 6A.
Total Gross Payments
Severance Agreement $179,488
Stock Options 224,250
$402,738
<PAGE>
Annex 1
OPINION OF LEGG MASON WOOD WALKER, INC.
See Annex B
to the Joint Proxy Statement/Prospectus
<PAGE>
Annex 2A
OPINION OF ALEX. BROWN & SONS, INCORPORATED
See Annex C
to the Joint Proxy Statement/Prospectus
<PAGE>
Annex 2B
OPINION OF RP FINANCIAL, INC.
See Annex D
to the Joint Proxy Statement/Prospectus
<PAGE>
Annex 3
FORM OF OPTION WAIVER LETTER
January __, 1994
USBANCORP, Inc.
Main & Franklin Streets
Johnstown, Pennsylvania 15901
Gentlemen:
In connection with the acquisition of Johnstown Savings Bank
("JSB") by USBANCORP, Inc. pursuant to the Merger Agreement dated
November 10, 1993, as amended January 18, 1994 (the "Merger
Agreement"), I hereby agree, during the term of the Merger
Agreement not to exercise any option or options that I have been
granted by JSB to acquire JSB common stock. I understand that as
a result of the Merger, and in consideration for the cancellation
of such option or options, I will receive on the closing date of
the Merger, cash in an amount equal to the difference between
$22.50 and the exercise price of the option, multiplied by the
number of JSB shares covered by such option. For example, if I
hold an option to acquire 1,000 shares at an exercise price of
$10 per share, I would receive $12,500 on the closing date of the
Merger.
This Agreement will terminate if, for any reason, the Merger
Agreement is terminated. Intending to be legally, bound, I have
executed this letter and delivered it to you. I understand that
you intend to rely upon my commitment contained in this letter.
Very truly yours
<PAGE>
ANNEX B
[Letterhead of Legg Mason Wood Walker, Incorporated]
January 18, 1994
Board of Directors
USBANCORP, Inc.
Main and Franklin Streets
Johnstown, Pennsylvania 15901
Gentlemen:
You have requested our opinion as to the fairness, from a
financial point of view, to USBANCORP, Inc. ("USBANCORP") of the
consideration to be paid by USBANCORP to the shareholders of
Johnstown Savings Bank ("JSB") in connection with the merger of
JSB into United States National Bank in Johnstown, the Johnstown-
based banking subsidiary of USBANCORP, pursuant to the Agreement
and Plan of Merger dated November 10, 1993, as proposed to be
amended by the form of amendment agreement presented to
USBANCORP's board of directors on January 18, 1994, among
USBANCORP, United States National Bank in Johnstown and JSB (the
"Agreement"). Under the Agreement, each share of JSB common
stock will be converted into and become a right to receive
(1) $10.13 in cash, and (2) a fraction of a share of USBANCORP
common stock which will be not less than .4853 shares and not
more than .5053 shares, subject to certain other election rights
and limitations thereon contained in the Agreement.
Legg Mason Wood Walker, Incorporated, as part of its
investment banking business, is continually engaged in the
valuation of businesses and their securities in connection with
mergers and acquisitions, negotiated underwritings, competitive
biddings, secondary distributions of listed and unlisted
securities, and private placements. We are familiar with
USBANCORP, having served as comanaging underwriter in connection
with a recent equity offering by USBANCORP. In the ordinary
course of our securities business, we make a market in the equity
securities of USBANCORP and JSB and trade such securities for the
accounts of our customers, and we therefore may from time to time
hold a long or short position in such securities.
In arriving at our opinion, we have, among other things:
(i) reviewed the Agreement and the draft Registration Statement
on Form S-4 with respect to the merger; (ii) reviewed Annual
Reports to Stockholders and Annual Reports on Form 10-K or Form
F-2 for the three years ended December 31, 1992 for USBANCORP and
JSB; (iii) reviewed certain interim financial information for the
three quarters ended September 30, 1993, including Form 10-Qs and
Form F-4s for USBANCORP and JSB; (iv) analyzed certain other
financial statements, data, reports and analyses for USBANCORP
and JSB prepared by their respective managements, including
preliminary financial statements with respect to the quarter and
year ended December 31, 1993 for USBANCORP and JSB and the budget
of JSB for fiscal 1994; (v) analyzed certain financial
projections of USBANCORP, both on a stand-alone and combined
basis, prepared by the management of USBANCORP; (vi) discussed
the current operations, financial condition and prospects of
USBANCORP and JSB with the managements of USBANCORP and JSB;
(vii) reviewed with management of USBANCORP the results of their
due diligence examination of JSB and the expected cost savings
related to the merger contemplated by the Agreement;
(viii) reviewed the reported market prices and historical trading
activity of USBANCORP and JSB common stock; (ix) compared certain
financial and stock market information for USBANCORP and JSB with
similar information for certain other publicly traded companies;
(x) reviewed the financial terms of certain recent business
combinations involving financial institutions; (xi) considered
the views of management of USBANCORP regarding the strategic
importance of the merger; and (xii) analyzed the pro forma
financial impact of the merger on USBANCORP.
We have relied without independent verification upon the
accuracy and completeness of all the financial and other
information reviewed by us for purposes of this opinion. In that
regard, we have assumed that the financial forecasts, including
without limitation, projected cost savings and earnings
enhancements, have been reasonably prepared on a basis reflecting
the best currently available judgments and estimates of the
managements of USBANCORP and JSB and that such forecasts will be
realized in the amounts and at the times contemplated thereby.
We are not experts in the evaluation of loan portfolios or the
allowances for loan losses with respect thereto and have assumed,
without independent verification, that such allowances for JSB
are in the aggregate adequate to cover such losses. In addition,
we have not reviewed individual credit files nor have we made or
obtained an independent evaluation or appraisal of the assets and
liabilities of USBANCORP or JSB or any of their subsidiaries.
Based upon and subject to the foregoing, it is our opinion
that as of the date hereof the consideration to be paid by
USBANCORP in the merger is fair, from a financial point of view,
to USBANCORP.
Very truly yours,
LEGG MASON WOOD WALKER INCORPORATED
<PAGE>
ANNEX C
[Letterhead of Alex. Brown & Sons Incorporated]
January 18, 1994
The Board of Directors
Johnstown Savings Bank
Market at Main Streets
Johnstown, Pennsylvania 15901
Dear Sirs:
You have requested our opinion as to the fairness, from a
financial point of view, of the consideration to be received by
the holders of the common stock, par value $1.00 per share (the
"Shares"), of Johnstown Savings Bank (the "Company") pursuant to
an Agreement and Plan of Merger dated as of November 10, 1993,
and amended as of January 18, 1994 (the "Agreement"), entered
into by and between the Company and USBANCORP, Inc. ("BANCORP")
providing for the merger of the Company with and into United
States National Bank in Johnstown, a wholly-owned subsidiary of
BANCORP (the "Merger"). The Agreement provides, among other
things, for each share of the Company's Shares to be converted in
the Merger into $10.13 in cash and into a fraction of a share of
BANCORP common stock, par value $2.50 per share ("BANCORP Common
Stock"), as follows: (a) if the Average Closing Price (as defined
in the Agreement) on the Closing Date (as defined in the
Agreement) is less than or equal to $24.50 per share, then .5053
shares of BANCORP Common Stock; (b) if the Average Closing Price
on the Closing Date is greater than or equal to $25.50 per share,
then .4853 shares of BANCORP Common Stock; or (c) if the Average
Closing Price on the Closing Date is greater than $24.50 per
share but less than $25.50 per share, then the conversion ratio
will be determined by dividing $22.50 by the Average Closing
Price and multiplying the resulting figure by .55. The Agreement
also provides the holders of the Shares the option to convert in
the Merger each share of the Company's Shares solely into cash or
BANCORP Common Stock in accordance with the procedures set forth
in the Agreement, subject to certain adjustments and limitations
set forth in the Agreement. The Agreement also authorizes the
Company, its directors, officers, employees and representatives,
for a period of thirty calendar days from the date of the
Agreement (the "Marketing Period"), to take any and all actions
deemed necessary and proper by the Company to solicit, market,
initiate or engage in discussions regarding the sale or
acquisition of the Company by any third party and to execute a
definitive agreement for the sale with any third party for
consideration which exceeds $22.50 per Share. Furthermore, the
Company and BANCORP have entered into a Stock Option Agreement
dated January 18, 1994 which shall become effective on the date
immediately following the expiration of the Marketing Period
without the execution of a Sale Agreement (as defined in the
Agreement).
Alex. Brown & Sons Incorporated, as a customary part of its
investment banking business, is engaged in the valuation of
businesses and their securities in connection with mergers and
acquisitions, negotiated underwritings, private placements and
valuations for estate, corporate and other purposes. We have
acted as financial advisor to the Board of Directors of the
Company in connection with the transactions described above and
will receive a fee for our services which is contingent upon the
consummation of the transaction contemplated by the Agreement.
Alex. Brown & Sons Incorporated regularly publishes research
reports regarding the financial services industry and the
businesses and securities of publicly owned companies in that
industry.
In connection with this opinion, we have reviewed certain
publicly available financial information concerning the Company
and BANCORP and certain internal financial analyses and other
information furnished to us by the Company and BANCORP. We have
also held discussions with members of the senior management of
the Company and BANCORP regarding the business and prospects of
their respective financial institutions. In addition, we have
(i) reviewed the reported price and trading activity for the
Shares and BANCORP Common Stock, (ii) compared certain financial
and stock market information for the Company and BANCORP,
respectively, with similar information for certain comparable
companies whose securities are publicly traded, (iii) reviewed
the Agreement, (iv) reviewed the financial terms of certain
recent business combinations which we deemed comparable in whole
or in part, (v) reviewed the potential pro forma impact of the
Merger on BANCORP's financial condition, operating results and
per share figures and (vi) performed such other studies and
analyses and considered such other factors as we deemed
appropriate.
We have not independently verified the information above and
for purposes of this opinion have assumed the accuracy,
completeness and fairness thereof. With respect to information
relating to the prospects of the Company and BANCORP, we have
assumed that such information reflects the best currently
available estimates and judgments of the respective managements
of the Company and BANCORP as to the likely future financial
performance of the Company and BANCORP. In addition, we have not
made an independent evaluation or appraisal of the assets or
liabilities of the Company or BANCORP, nor have we been furnished
with any such evaluation or appraisal. Our opinion is based on
market, economic and other conditions as they exist and can be
evaluated as of the date of this letter.
Based upon the subject to the foregoing, it is our opinion
that, as of the date of this letter, the consideration to be
received pursuant to the Agreement is fair, from a financial
point of view, to the holders of Shares.
Very truly yours,
ALEX. BROWN & SONS INCORPORATED
By:_______________________________
Donald W. Delson
Managing Director
<PAGE>
ANNEX D
[RP FINANCIAL, INC. LETTERHEAD]
January 18, 1994
Board of Directors
Johnstown Savings Bank
Market at Main Street
Johnstown, Pennsylvania 15901
Gentlemen:
You have requested RP Financial, Inc. ("RP Financial") to
provide you with its opinion as to the fairness from a financial
point of view to the shareholders of Johnstown Savings Bank,
Johnstown, Pennsylvania ("JSB"), of the Agreement and Plan of
Reorganization (the "Amended Merger Agreement"), dated
January 18, 1994, by and between USBANCORP, Johnstown,
Pennsylvania ("USBANCORP") and JSB.
Summary Description of Key Financial Terms
Pursuant to the Merger Agreement as amended (incorporated
herein by reference), in which JSB will merge with and into
USBANCORP (the "Merger"), at the Effective Time of the Merger,
each outstanding share of JSB Common Stock will be converted into
and become a right to receive $10.13 in cash and shares of
USBANCORP Common Stock pursuant to the following exchange rate
(the "Exchange Rate"): (a) 0.5053 shares if the Average Closing
Price on the Closing Date is less than or equal to $24.50 per
share; (b) 0.4853 shares if the Average Closing Price on the
Closing Date is greater than or equal to $22.50 per share; or
(c) if the Average Closing Price on the Closing Date is greater
than $24.50 per share but less than $25.50 per share, a ratio
determined by dividing $22.50 by the Average Closing Price and
multiplying the resulting figure by 0.55 times.
A JSB shareholder may elect to convert each share of JSB
Common Stock held by such person into either all USBANCORP Common
Stock (the "Stock Election") or (ii) an all cash consideration
(the "Cash Election"). Pursuant to the Stock Election, JSB
Common Stock will be convertible to USBANCORP Common Stock in
accordance with the following Exchange Rate: (a) if the Average
Closing Price on the Closing Date is less than or equal to $24.50
per share, then 0.9184 shares of USBANCORP Common Stock; (b) if
the Average Closing Price on the Closing Date is greater than or
equal to $25.50 per share, then 0.8824 shares of USBANCORP Common
Stock; or (c) if the Average Closing Price on the Closing Date is
greater than $24.50 per share but less than $25.50 per share,
then the conversion ratio will be determined by dividing $22.50
by the Average Closing Price. Pursuant to the Cash Election, a
JSB shareholder will receive $22.50 in cash. Notwithstanding the
foregoing, in the aggregate, fifty-five percent of the shares of
JSB Common Stock will be converted to USBANCORP Common Stock (the
"Common Stock Limitation") and forty-five percent of the shares
of JSB Common Stock will be converted into cash. In lieu of
fractional shares, USBANCORP will pay cash in an amount equal to
the fractional part of a share to which a JSB shareholder is
entitled, multiplied by $22.50 (the assumed price of USBANCORP
Common Stock by the parties hereto for purposes of establishing
the Exchange Rate).
In connection with the Merger, (i) options to purchase up to
106,360 shares of JSB Common Stock granted under JSB's Employee
Stock Compensation Program prior to the date of the Merger
Agreement which remain unexercised prior to the Effective Date
will be converted, on the Effective Date, into a right to receive
cash in an amount equal to (a) the difference between $22.50 and
the exercise price of each option multiplied by (b) the number of
shares of JSB Common Stock covered by such option.
At the time the Merger Consideration and the Amended Merger
Agreement was negotiated, the parties agreed that USBANCORP would
pay JSB shareholders approximately $22.50 per share or more for
each share of JSB Common Stock surrendered, assuming a USBANCORP
Common Stock price of at least $24.50 per share. The number of
shares of USBANCORP Common Stock to be delivered to JSB
shareholders bear the risk of change in the market value of
USBANCORP Common Stock. Therefore, the actual consideration
received by JSB shareholders may be greater or less than $22.50
per share if the Average Closing Price of USBANCORP Common Stock
on the Effective Date is greater than $25.50 per share or less
than $24.50 per share. However, pursuant to a condition of
closing contained in the Merger Agreement, if the average of the
closing price of USBANCORP Common Stock as quoted on the NASDAQ
Nation Market System ("NASDAQ/NMS") for the ten trading days
immediately preceding the Effective Date is below $20.50 per
share, JSB may, in its discretion, terminate the Merger
Agreement. As of January 14, 1994, the value of the Merger
Consideration per share of JSB Common Stock was $22.26.
RP Financial Background and Experience
RP Financial, as part of its financial institution valuation
and consulting practice, is regularly engaged in the valuation of
financial institution securities in connection with mergers and
acquisitions of commercial banks, savings institutions and
savings and loan holding companies, initial and secondary
offerings, mutual-to-stock conversions of savings institutions,
and business valuations for other corporate purposes for
financial institutions. As specialists in the securities of
financial institutions, RP Financial has experience in, and
knowledge of, the Pennsylvania and surrounding regional markets
for thrift and bank securities and institutions operating in
Pennsylvania and the surrounding regional area.
Materials Reviewed
In rendering this fairness opinion letter, RP Financial
reviewed and analyzed the following material: (1) the Merger
Agreement, dated November 10, 1993, inclusive of exhibits, and
the Stock Option Agreement; (2) the following information for
JSB -- (a) audited financial statements for the fiscal years
ended December 31, 1988 through 1992, included or incorporated in
Annual Reports to Shareholders, or Annual Reports on Form 10-Ks
or Form F-4s, and unaudited shareholder financial statements for
the nine months ended September 30, 1993, and internal reports
for the 12 months ended December 31, 1993, (b) proxy statements
for the last two years, (c) the budget plan for calendar year
ended December 31, 1994, and (d) unaudited internal and
regulatory financial reports and analyses prepared by management
and other related corporate records and documents regarding
various aspects of JSB's assets and liabilities, particularly
rates, volumes, maturities, market values, trends, credit risk,
interest rate risk and liquidity risk of JSB's assets,
liabilities, off-balance sheet assets, commitments and
contingencies; (3) the following information for USBANCORP --
(a) audited financial statements for the calendar years ended
December 31, 1988 through 1992, included or incorporated in
Annual Reports to Shareholders or Annual Reports on Form 10Ks and
unaudited shareholder financial statements for the nine months
ended September 30, 1993, and internal reports for the 12 months
ended December 31, 1993, (b) proxy statements for the last two
years, (c) 1994 budget, (d) unaudited internal and regulatory
financial reports prepared by management and other related
corporate records and documents regarding various aspects of
USBANCORP's assets and liabilities, particularly rates, volumes,
maturities, market values, trends, credit risk, interest rate
risk and liquidity risk of USBANCORP's assets, liabilities,
off-balance sheet assets, commitments and contingencies;
(4) discussions with JSB's current management and USBANCORP's
management regarding past and current business operations,
financial condition, and future prospects of the respective
institutions; (5) USBANCORP's results compared to the latest
publicly-available published financial statements, operating
results and market pricing of publicly-traded banks and bank
holding companies, including those with comparable
characteristics and those headquartered in Pennsylvania;
(6) market value information and pricing ratios of USBANCORP
Common Stock, such as market capitalization, volume, price
history, price/earnings ratio, price/book ratio, price/tangible
book ratio, price/assets ratio, dividend yield and dividend
payout ratio, compared to other publicly-traded banks and bank
holding companies, including those with comparable
characteristics and those headquartered in Pennsylvania; (7) the
trading market for the JSB Common Stock compared to similar
information for savings institutions or savings and loan holding
companies with comparable resources, financial condition,
earnings, operations and markets as well as for publicly-traded
savings institutions and savings and loan holding companies with
comparable financial condition, earnings, operations and markets,
including those operating in Pennsylvania; (8) JSB's financial,
operational and market area characteristics compared to similar
information for comparable savings institutions or savings and
loan holding companies, including those operating in
Pennsylvania; (9) JSB's financial operational and market area
characteristics compared to similar information for comparable
savings institutions or savings and loan holding companies,
including those operating in Pennsylvania; (10) the potential for
growth and profitability for JSB and USBANCORP in their
respective markets, specifically regarding competition by other
banks, savings institutions, mortgage banking companies and other
financial services companies, economic projections in the local
market area, and the impact of the regulatory, legislative and
economic environments on operations of the thrift and banking
industries; (11) the financial terms, financial and operating
conditions and market areas of other recent business combinations
of comparable savings institutions and savings and loan holding
companies; and (12) the potential pro forma impact of the Merger
on USBANCORP's financial condition, operating results and per
share figures.
In rendering its opinion, RP Financial relied, without
independent verification, on the accuracy and completeness of the
information concerning JSB, and USBANCORP as furnished by the
respective institutions to RP Financial for review for purposes
of its opinion, as well as publicly-available information
regarding other financial institutions and economic data. With
respect to the financial forecasts RP Financial reviewed for each
institution, RP Financial assumed that they had been reasonably
prepared on bases reflecting the best currently available
estimates and judgments of the managements of each respective
institution. JSB and USBANCORP did not restrict RP Financial as
to the material it was permitted to review. RP Financial did not
perform or obtain any independent appraisals or evaluations of
the assets and liabilities and potential and/or contingent
liabilities of JSB and USBANCORP. RP Financial expresses no
opinion on matters of a legal, regulatory, tax or accounting
nature or the ability of the Merger as set forth in the Merger
Agreement to be consummated.
In rendering its opinion, RP Financial assumed that in the
course of obtaining the necessary regulatory and governmental
approvals for the proposed Merger, no restriction will be imposed
on USBANCORP that would have a material adverse effect on the
contemplated benefits of the Merger. RP Financial also assumed
that there would not occur any change in applicable law or
regulation that would cause a material adverse change in the
prospects or operations of USBANCORP after the Merger.
Opinion
It should be noted that this opinion is based on market
conditions and other circumstances existing on the date hereof,
and this opinion does not represent RP Financial's opinion as to
what the value of the USBANCORP Common Stock necessarily will be
when the USBANCORP Common Stock is issued to the stockholders of
JSB upon consummation of the Merger or thereafter.
It is understood that this opinion may be included in its
entirety in any communication by JSB or its Board of Directors to
the stockholders of JSB. This opinion may not, however, be
summarized, excerpted from or otherwise publicly referred to
without our prior written consent.
Based upon and subject to the foregoing, and other such
matters as we consider relevant, it is RP Financial's opinion
that, as of the date hereof, the Merger Consideration to be
received by JSB shareholders is fair to such shareholders from a
financial point of view.
Respectfully submitted,
RP FINANCIAL, INC.
/bjd
<PAGE>
ANNEX E
DISSENTERS' RIGHTS STATUTE
Section 1571. Application and effect of subchapter
(a) General rule.--Except as otherwise provided in
subsection (b), any shareholder of a business corporation shall
have the right to dissent from, and to obtain payment of the fair
value of his shares in the event of, any corporate action, or to
otherwise obtain fair value for his shares, where this part
expressly provides that a shareholder shall have the rights and
remedies provided in this subchapter. See:
Section 1906(c) (relating to dissenters rights upon
special treatment).
Section 1930 (relating to dissenters rights).
Section 1931(d) (relating to dissenters rights in share
exchanges).
Section 1932(c) (relating to dissenters rights in asset
transfers).
Section 1952(d) (relating to dissenters rights in
division).
Section 1962(c) (relating to dissenters rights in
conversion).
Section 2104(b) (relating to procedure).
Section 2324 (relating to corporation option where a
restriction on transfer of a security is held invalid).
Section 2325(b) (relating to minimum vote requirement).
Section 2704(c) (relating to dissenters rights upon
election).
Section 2705(d) (relating to dissenters rights upon
renewal of election).
Section 2907(a) (relating to proceedings to terminate
breach of qualifying conditions).
Section 7104(b)(3) (relating to procedure).
(b) Exceptions.--
(1) Except as otherwise provided in paragraph (2), the
holders of the shares of any class or series of shares that, at
the record date fixed to determine the shareholders entitled to
notice of and to vote at the meeting at which a plan specified in
any of section 1930, 1931(d), 1932(c) or 1952(d) is to be voted
on, are either:
(i) listed on a national securities exchange; or
(ii) held of record by more than 2,000
shareholders;
shall not have the right to obtain payment of the fair value of
any such shares under this subchapter.
(2) Paragraph (1) shall not apply to and dissenters
rights shall be available without regard to the exception
provided in that paragraph in the case of:
(i) Shares converted by a plan if the shares are
not converted solely into shares of the acquiring,
surviving, new or other corporation or solely into such
shares and money in lieu of fractional shares.
(ii) Shares of any preferred or special class
unless the articles, the plan or the terms of the
transaction entitle all shareholders of the class to vote
thereon and require for the adoption of the plan or the
effectuation of the transaction the affirmative vote of a
majority of the votes cast by all shareholders of the class.
(iii) Shares entitled to dissenters rights under
section 1906(c) (relating to dissenters rights upon special
treatment).
(3) The shareholders of a corporation that acquires by
purchase, lease, exchange or other disposition all or
substantially all of the shares, property or assets of another
corporation by the issuance of shares, obligations or otherwise,
with or without assuming the liabilities of the other corporation
and with or without the intervention of another corporation or
other person, shall not be entitled to the rights and remedies of
dissenting shareholders provided in this subchapter regardless of
the fact, if it be the case, that the acquisition was
accomplished by the issuance of voting shares of the corporation
to be outstanding immediately after the acquisition sufficient to
elect a majority or more of the directors of the corporation.
(c) Grant of optional dissenters rights.--The bylaws or a
resolution of the board of directors may direct that all or a
part of the shareholders shall have dissenters rights in
connection with any corporate action or other transaction that
would otherwise not entitle such shareholders to dissenters
rights.
(d) Notice of dissenters rights.--Unless otherwise provided
by statute, if a proposed corporate action that would give rise
to dissenters rights under this subpart is submitted to a vote at
a meeting of shareholders, there shall be included in or enclosed
with the notice of meeting:
(1) a statement of the proposed action and a statement
that the shareholders have a right to dissent and obtain payment
of the fair value of their shares by complying with the terms of
this subchapter; and
(2) a copy of this subchapter.
(e) Other statutes.--The procedures of this subchapter
shall also be applicable to any transaction described in any
statute other than this part that makes reference to this
subchapter for the purpose of granting dissenters rights.
(f) Certain provisions of articles ineffective.--This
subchapter may not be relaxed by any provision of the articles.
(g) Cross references.--See sections 1105 (relating to
restriction on equitable relief), 1904 (relating to de facto
transaction doctrine abolished) and 2512 (relating to dissenters
rights procedure).
1988, Dec. 21, P.L. 1444, No. 177, Section 103, effective Oct. 1,
1989. As amended 1990, Dec. 19, P.L. 834, No. 198, Section 102,
imd. effective.
Section 1572. Definitions
The following words and phrases when used in this subchapter
shall have the meanings given to them in this section unless the
context clearly indicates otherwise:
"Corporation." The issuer of the shares held or owned by
the dissenter before the corporate action or the successor by
merger, consolidation, division, conversion or otherwise of that
issuer. A plan of division may designate which of the resulting
corporations is the successor corporation for the purposes of
this subchapter. The successor corporation in a division shall
have sole responsibility for payments to dissenters and other
liabilities under this subchapter except as otherwise provided in
the plan of division.
"Dissenter." A shareholder or beneficial owner who is
entitled to and does assert dissenters rights under this
subchapter and who has performed every act required up to the
time involved for the assertion of those rights.
"Fair value." The fair value of shares immediately before
the effectuation of the corporate action to which the dissenter
objects, taking into account all relevant factors, but excluding
any appreciation or depreciation in anticipation of the corporate
action.
"Interest." Interest from the effective date of the
corporate action until the date of payment at such rate as is
fair and equitable under all the circumstances, taking into
account all relevant factors, including the average rate
currently paid by the corporation on its principal bank loans.
1988, Dec. 21, P.L. 1444, No. 177, Section 103, effective Oct. 1,
1989. As amended 1990, Dec. 19, P.L. 834, No. 198, Section 102,
imd. effective.
Section 1573. Record and beneficial holders and owners
(a) Record holders of shares.--A record holder of shares of
a business corporation may assert dissenters rights as to fewer
than all of the shares registered in his name only if he dissents
with respect to all the shares of the same class or series
beneficially owned by any one person and discloses the name and
address of the person or persons on whose behalf he dissents. In
that event, his rights shall be determined as if the shares as to
which he has dissented and his other shares were registered in
the names of different shareholders.
(b) Beneficial owners of shares.--A beneficial owner of
shares of a business corporation who is not the record holder may
assert dissenters rights with respect to shares held on his
behalf and shall be treated as a dissenting shareholder under the
terms of this subchapter if he submits to the corporation not
later than the time of the assertion of dissenters rights a
written consent of the record holder. A beneficial owner may not
dissent with respect to some but less than all shares of the same
class or series owned by the owner, whether or not the shares so
owned by him are registered in his name.
1988, Dec. 21, P.L. 1444, No. 177, Section 103, effective Oct. 1,
1989. Amended 1992, Dec. 18, P.L. ____, No. 169, Section 3,
effective in 60 days.
Section 1574. Notice of intention to dissent
If the proposed corporate action is submitted to vote at a
meeting of shareholders of a business corporation, any person who
wishes to dissent and obtain payment of the fair value of his
shares must file with the corporation, prior to the vote, a
written notice of intention to demand that he be paid the fair
value for his shares if the proposed action is effectuated, must
effect no change in the beneficial ownership of his shares from
the date of such filing continuously through the effective date
of the proposed action and must refrain from voting his shares in
approval of such action. A dissenter who fails in any respect
shall not acquire any right to payment of the fair value of his
shares under this subchapter. Neither a proxy nor a vote against
the proposed corporate action shall constitute the written notice
required by this section.
1988, Dec. 21, P.L. 1444, No. 177, Section 103, effective Oct. 1,
1989.
Section 1575. Notice to demand payment
(a) General rule.--If the proposed corporate action is
approved by the required vote at a meeting of shareholders of a
business corporation, the corporation shall mail a further notice
to all dissenters who gave due notice of intention to demand
payment of the fair value of their shares and who refrained from
voting in favor of the proposed action. If the proposed
corporate action is to be taken without a vote of shareholders,
the corporation shall send to all shareholders who are entitled
to dissent and demand payment of the fair value of their shares a
notice of the adoption of the plan or other corporate action. In
either case, the notice shall:
(1) State where and when a demand for payment must be
sent and certificates for certificated shares must be deposited
in order to obtain payment.
(2) Inform holders of uncertificated shares to what
extent transfer of shares will be restricted from the time that
demand for payment is received.
(3) Supply a form for demanding payment that includes
a request for certification of the date on which the shareholder,
or the person on whose behalf the shareholder dissents, acquired
beneficial ownership of the shares.
(4) Be accompanied by a copy of this subchapter.
(b) Time for receipt of demand for payment.--The time set
for receipt of the demand and deposit of certificated shares
shall be not less than 30 days from the mailing of the notice.
1988, Dec. 21, P.L. 1444, No. 177, Section 103, effective Oct. 1,
1989.
Section 1576. Failure to comply with notice to demand payment,
etc.
(a) Effect of failure of shareholder to act.--A shareholder
who fails to timely demand payment, or fails (in the case of
certificated shares) to timely deposit certificates, as required
by a notice pursuant to section 1575 (relating to notice to
demand payment) shall not have any right under this subchapter to
receive payment of the fair value of his shares.
000 Restriction on uncertificated shares.--If the shares
are not represented by certificates, the business corporation may
restrict their transfer from the time of receipt of demand for
payment until effectuation of the proposed corporate action or
the release of restrictions under the terms of section 1577(a)
(relating to failure to effectuate corporate action).
(c) Rights retained by shareholder.--The dissenter shall
retain all other rights of a shareholder until those rights are
modified by effectuation of the proposed corporate action.
1988, Dec. 21, P.L. 1444, No. 177, Section 103, effective Oct. 1,
1989. As amended 1990, Dec. 19, P.L. 834, No. 198, Section 102,
imd. effective.
Section 1577. Release of restrictions or payment for shares
(a) Failure to effectuate corporate action.--Within 60 days
after the date set for demanding payment and depositing
certificates, if the business corporation has not effectuated the
proposed corporate action, it shall return any certificates that
have been deposited and release uncertificated shares from any
transfer restrictions imposed by reason of the demand for
payment.
(b) Renewal of notice to demand payment.--When
uncertificated shares have been released from transfer
restrictions and deposited certificates have been returned, the
corporation may at any later time send a new notice conforming to
the requirement of section 1575 (relating to notice to demand
payment), with like effect.
(c) Payment of fair value of shares.--Promptly after
effectuation of the proposed corporate action, or upon timely
receipt of demand for payment if the corporate action has already
been effectuated, the corporation shall either remit to
dissenters who have made demand and (if their shares are
certificated) have deposited their certificates the amount that
the corporation estimates to be the fair value of the shares, or
give written notice that no remittance under this section will be
made. The remittance or notice shall be accompanied by:
(1) The closing balance sheet and statement of income
of the issuer of the shares held or owned by the dissenter for a
fiscal year ending not more than 16 months before the date of
remittance or notice together with the latest available interim
financial statements.
(2) A statement of the corporation's estimate of the
fair value of the shares.
(3) A notice of the right of the dissenter to demand
payment or supplemental payment, as the case may be, accompanied
by a copy of this subchapter.
(d) Failure to make payment.--If the corporation does not
remit the amount of its estimate of the fair value of the shares
as provided by subsection (c), it shall return any certificates
that have been deposited and release uncertificated shares from
any transfer restrictions imposed by reason of the demand for
payment. The corporation may make a notation on any such
certificate or on the records of the corporation relating to any
such uncertificated shares that such demand has been made. If
shares with respect to which notation has been so made shall be
transferred, each new certificate issued thereunder or the
records relating to any transferred uncertificated shares shall
bear a similar notation, together with the name of the original
dissenting holder or owner of such shares. A transferee of such
shares shall not acquire by such transfer any rights in the
corporation other than those that the original dissenter had
after making demand for payment of their fair value.
1988 Dec. 21, P.L. 1444, No. 177, Section 103, effective Oct. 1,
1989. As amended 1990, Dec. 19, P.L. 834, No. 198, Section 102,
imd. effective.
Section 1578. Estimate by dissenter of fair value of shares
(a) General rule.--If the business corporation gives notice
of its estimate of the fair value of the shares, without
remitting such amount, or remits payment of its estimate of the
fair value of a dissenter's shares as permitted by
section 1577(c) (relating to payment of fair value of shares) and
the dissenter believes that the amount stated or remitted is less
than the fair value of his shares, he may send to the corporation
his own estimate of the fair value of the shares, which shall be
deemed a demand for payment of the amount or the deficiency.
(b) Effect of failure to file estimate.--Where the
dissenter does not file his own estimate under subsection
(a) within 30 days after the mailing by the corporation of its
remittance or notice, the dissenter shall be entitled to no more
than the amount stated in the notice or remitted to him by the
corporation.
1988, Dec. 21, P.L. 1444, No. 177, Section 103, effective Oct. 1,
1989. As amended 1990, Dec. 19, P.L. 834, No. 198, Section 102,
imd. effective.
Section 1579. Valuation proceedings generally
(a) General rule.--Within 60 days after the latest of:
(1) effectuation of the proposed corporate action;
(2) timely receipt of any demands for payment under
section 1575 (relating to notice to demand payment); or
(3) timely receipt of any estimates pursuant to
section 1578 (relating to estimate by dissenter of fair value of
shares);
if any demands for payment remain unsettled, the business
corporation may file in court an application for relief
requesting that the fair value of the share be determined by the
court.
(b) Mandatory joinder of dissenters.--All dissenters,
wherever residing, whose demands have not been settled shall be
made parties to the proceeding as in an action against their
shares. A copy of the application shall be served on each
dissenter. If a dissenter is a nonresident, the copy may be
served on him in the manner provided or prescribed by or pursuant
to 42 Pa.C.S. Ch. 53 (relating to bases of jurisdiction and
interstate and international procedure).
(c) Jurisdiction of the court.--The jurisdiction of the
court shall be plenary and exclusive. The court may appoint an
appraiser to receive evidence and recommend a decision on the
issue of fair value. The appraiser shall have such power and
authority as may be specified in the order of appointment or in
any amendment thereof.
(d) Measure of recovery.--Each dissenter who is made a
party shall be entitled to recover the amount by which the fair
value of his shares is found to exceed the amount, if any,
previously remitted, plus interest.
(e) Effect of corporation's failure to file application.--
If the corporation fails to file an application as provided in
subsection (a), any dissenter who made a demand and who has not
already settled his claim against the corporation may do so in
the name of the corporation at any time within 30 days after the
expiration of the 60-day period. If a dissenter does not file an
application within the 30-day period, each dissenter entitled to
file an application shall be paid the corporation's estimate of
the fair value of the shares and no more, and may bring an action
to recover any amount not previously remitted.
1988, Dec. 21, P.L. 1444, No. 177, Section 103, effective Oct. 1,
1989.
Section 1580. Costs and expenses of valuation proceedings
(a) General rule.--The costs and expenses of any proceeding
under section 1579 (relating to valuation proceedings generally),
including the reasonable compensation and expenses of the
appraiser appointed by the court, shall be determined by the
court and assessed against the business corporation except that
any part of the costs and expenses may be apportioned and
assessed as the court deems appropriate against all or some of
the dissenters who are parties and whose action in demanding
supplemental payment under section 1578 (relating to estimate by
dissenter of fair value of shares) the court finds to be
dilatory, obdurate, arbitrary, vexatious or in bad faith.
(b) Assessment of counsel fees and expert fees where lack
of good faith appears.--Fees and expenses of counsel and of
experts for the respective parties may be assessed as the court
deems appropriate against the corporation and in favor of any or
all dissenters if the corporation failed to comply substantially
with the requirements of this subchapter and may be assessed
against either the corporation or a dissenter, in favor of any
other party, if the court finds that the party against whom the
fees and expenses are assessed acted in bad faith or in a
dilatory, obdurate, arbitrary or vexatious manner in respect to
the rights provided by this subchapter.
(c) Award of fees for benefits to other dissenters.--If the
court finds that the services of counsel for any dissenter were
of substantial benefit to other dissenters similarly situated and
should not be assessed against the corporation, it may award to
those cousel reasonable fees to be paid out of the amounts
awarded to the dissenters who were benefitted.
1988, Dec. 21, P.L. 1444, No. 177, Section 103, effective Oct. 1,
1989.
<PAGE>
Section 1930. Dissenters rights
(a) General rule.--If any shareholder of a domestic
business corporation that is to be a party to a merger or
consolidation pursuant to a plan of merger or consolidation
objects to the plan of merger or consolidation and complies with
the provisions of Subchapter D of Chapter 15 (relating to
dissenters rights), the shareholder shall be entitled to the
rights and remedies of dissenting shareholders therein provided,
if any. See also section 1906(c) (relating to dissenters rights
upon special treatment).
(b) Plans adopted by directors only.--Except as otherwise
provided pursuant to section 1571(c) (relating to grant of
optional dissenters rights), Subchapter D of Chapter 15 shall not
apply to any of the shares of a corporation that is a party to a
merger or consolidation pursuant to section 1924(b)(1)(i)
(relating to adoption by board of directors).
(c) Cross references.--See sections 1571(b) (relating to
exceptions) and 1904 (relating to de facto transaction doctrine
abolished).
1988, Dec. 21, P.L. 1444, No. 177, Section 103, effective Oct. 1,
1989. Amended 1992, Dec. 18, P.L. ________, No. 169, Section 3,
effective in 60 days.
<PAGE>
ANNEX F
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT ("Stock Option Agreement")
dated January 18, 1994, is by and between USBANCORP, INC., a
Pennsylvania corporation ("USBANCORP"), and JOHNSTOWN SAVINGS
BANK, a Pennsylvania savings bank ("JSB").
BACKGROUND
4. USBANCORP and JSB entered into an agreement dated
November 10, 1993 and amended as of January 18, 1994 (the
"Agreement"), providing, among other things, for: (i) the merger
of JSB with and into Johnstown Interim Bank ("JIB") with JIB
surviving the merger, and (ii) immediately thereafter, the merger
by JIB with and into USBANCORP's wholly-owned subsidiary
U.S. National Bank in Johnstown ("U.S. Bank"), with U.S. Bank
surviving the merger (the "Merger").
5. As a condition of USBANCORP entering into the
Agreement at the exchange ratio specified in the Agreement, JSB
is granting to USBANCORP an option, which shall become operative
on the date immediately following the expiration of the Marketing
Period without execution of a Sale Agreement as authorized by
Section 4.06(a) of the Agreement, to purchase up to that number
of shares of common stock of JSB as shall equal 19.9% of JSB's
shares of common stock issued and outstanding immediately prior
to such purchase, on the terms and conditions hereinafter set
forth.
AGREEMENT
In consideration of the foregoing and the mutual
covenants and agreements set forth herein, USBANCORP and JSB,
intending to be legally bound hereby, agree:
1. Termination of Stock Option Agreement. The Stock
Option Agreement by and between USBANCORP and JSB dated
November 10, 1993 is hereby terminated, cancelled, made null and
void and of no effect.
1. Grant of Option. Beginning on the date
immediately following the expiration of the Marketing Period
without the execution of a Sale Agreement (as defined in
Section 4.06(a) of the Agreement), JSB hereby grants to
USBANCORP, on the terms and conditions set forth herein, the
option to purchase (the "Option") up to that number of shares
(the "Option Shares") of common stock, par value $1.00 per share
(the "Common Stock"), of JSB as shall equal 19.9% of the shares
of Common Stock issued and outstanding immediately prior to such
purchase, at a price per share (the "Option Price") equal to the
lower of (i) $16.50 or (ii) the lowest price per share that JSB
accepts in a transaction constituting a Triggering Event under
Section 2 hereof.
2. Exercise of Option. Upon or after the occurrence
of a Triggering Event (as such term is hereinafter defined) and
until termination of this Stock Option Agreement in accordance
with the provisions of Section 22, USBANCORP may exercise the
Option, in whole or in part, at any time or one or more times,
from time to time. As used herein, the term "Triggering Event"
means the occurrence of any of the following events:
(a) a person or group (as such terms are defined
in the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and the rules and regulations thereunder),
other than USBANCORP or an affiliate of USBANCORP, acquires
beneficial ownership (within the meaning of Rule 13d-3 under
the Exchange Act) of more than 15% of the then outstanding
shares of Common Stock;
(b) a person or group, other than USBANCORP or an
affiliate of USBANCORP, enters into an agreement or letter
of intent with JSB pursuant to which such person or group or
any affiliate of such person or group would (i) merge or
consolidate, or enter into any similar transaction, with
JSB, (ii) acquire all or substantially all of the assets or
liabilities of JSB, or (iii) acquire beneficial ownership of
securities representing, or the right to acquire beneficial
ownership or to vote securities representing, more than 15%
of the then outstanding shares of Common Stock; or
(c) a person or group, other than USBANCORP or an
affiliate of USBANCORP, publicly announces a bona fide
proposal (including a written communication that is or
becomes the subject of public disclosure) for (i) any
merger, consolidation or acquisition of all or substantially
all the assets or liabilities of JSB, or any other business
combination involving JSB, or (ii) a transaction involving
the transfer of beneficial ownership of securities
representing, or the right to acquire beneficial ownership
or to vote securities representing, more than 15% of the
then outstanding shares of Common Stock (collectively, a
"Proposal"), and thereafter, if such Proposal has not been
Publicly Withdrawn (as such term is hereinafter defined) at
least 30 days prior to the meeting of shareholders of JSB
called to vote on the Merger, JSB's shareholders fail to
approve the Merger by the vote required by applicable law at
the meeting of shareholders called for such purpose or such
meeting has been cancelled; or
(d) a person or group, other than USBANCORP or an
affiliate of USBANCORP, makes a bona fide Proposal and
thereafter, but before such Proposal has been Publicly
Withdrawn, JSB willfully takes any action in a manner which
would materially interfere with JSB's ability to consummate
the Merger or materially reduce the value of the transaction
to USBANCORP;
(e) JSB violates the provisions of
Section 4.06(b) of the Agreement; or
(f) JSB breaches, in any material respect, any
binding terms of the Agreement or any provision of this
Stock Option Agreement after a Proposal is made and before
it is Publicly Withdrawn or publicly announces an intention
to authorize, recommend or accept any such Proposal.
"Publicly Withdrawn" for purposes of this Section 3
shall mean an unconditional bona fide withdrawal of the Proposal
coupled with a public announcement of no further interest in
pursuing such Proposal or in acquiring any controlling influence
over JSB or in soliciting or inducing any other person (other
than USBANCORP or an affiliate of USBANCORP) to do so.
Notwithstanding the foregoing, the obligation of JSB to
issue Option Shares upon exercise of the Option shall be deferred
(but shall not terminate) (i) until the receipt of all required
governmental or regulatory approvals or consents necessary for
JSB to issue the Option Shares, or USBANCORP to exercise the
Option, or until the expiration or termination of any waiting
period required by law, or (ii) so long as any injunction or
other order, decree or ruling issued by any federal or state
court of competent jurisdiction is in effect which prohibits the
sale or delivery of the Option Shares, and, in each case,
notwithstanding any provision to the contrary set forth herein,
the Option shall not expire or otherwise terminate.
JSB shall notify USBANCORP promptly in writing of the
occurrence of any Triggering Event known to it, it being
understood that the giving of such notice by JSB shall not be a
condition to the right of USBANCORP to exercise the Option. JSB
will not take any action which would have the effect of
preventing or disabling JSB from delivering the Option Shares to
USBANCORP upon exercise of the Option or otherwise performing its
obligations under this Stock Option Agreement. In the event
USBANCORP wishes to exercise the Option, USBANCORP shall send a
written notice to JSB (the date of which is hereinafter referred
to as the "Notice Date") specifying the total number of Option
Shares it wishes to purchase and a place and date between two and
ten business days inclusive from the Notice Date for the closing
of such a purchase (a "Closing"); provided, however, that a
Closing shall not occur prior to two days after the later of
receipt of any necessary regulatory approvals or the expiration
of any legally required notice or waiting period, if any.
3. Payment and Delivery of Certificates. At any
Closing hereunder, (a) USBANCORP will make payment to JSB of the
aggregate price for the Option Shares so purchased by wire
transfer of immediately available funds to an account designated
by JSB, (b) JSB will deliver to USBANCORP a stock certificate or
certificates representing the number of Option Shares so
purchased, registered in the name of USBANCORP or its designee,
in such denominations as were specified by USBANCORP in its
notice of exercise, and (c) USBANCORP will pay any transfer or
other taxes required by reason of the issuance of the Option
Shares so purchased.
4. Registration Rights. Upon or after the occurrence
of a Triggering Event and upon receipt of a written request from
USBANCORP, JSB shall promptly prepare an offering circular in
compliance, in all material respects, with the Federal Deposit
Insurance Act, as amended, and the regulation promulgated
thereunder and covering such number of Option Shares as USBANCORP
shall specify in its request, provided that USBANCORP shall in no
event have the right to have more than one offering circular
prepared, and provided further that JSB shall not be required to
prepare any offering circular in connection with any proposed
sale with respect to which JSB's counsel delivers to JSB and to
USBANCORP its unqualified opinion to the effect that, assuming
the Common Stock were not an exempt security under Section 3 of
the Securities Act of 1933, as amended, such sale or disposition
would nevertheless be an exempt transaction under Section 4 of
the Securities Act of 1933, as amended. In connection with such
offering circular, JSB shall use its best efforts to cause to be
delivered to USBANCORP such certificates, opinions, accountant's
letters and other documents as USBANCORP shall reasonably request
and as are customarily provided in connection with registrations
of securities under the Securities Act of 1933, as amended. JSB
shall provide to USBANCORP such number of copies of the
preliminary offering circular and final offering circular and any
amendments and supplements thereto as USBANCORP may reasonably
request. All reasonable expenses incurred by JSB in complying
with the provisions of this Section 5, including, without
limitation, all registration and filing fees, reasonable printing
expenses, reasonable fees and disbursements of counsel for JSB
and blue sky fees and expenses, shall be paid by JSB.
Underwriting discounts and commissions to brokers and dealers
relating to the Option Shares, fees and disbursements of counsel
to USBANCORP and any other expenses incurred by USBANCORP in
connection with such offering circular shall be borne by
USBANCORP. In connection with such offering circular, JSB shall
indemnify and hold harmless USBANCORP against any losses, claims,
damages or liabilities, joint or several, to which USBANCORP may
become subject, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are
based upon any untrue statement or alleged untrue statement of
any material fact contained in any preliminary or final offering
circular or any amendment or supplement thereto, or arise out of
or are based upon the omission or alleged omission to state
therein a material fact required to be stated therein or
necessary to make the statements therein not misleading; and JSB
will reimburse USBANCORP for any legal or other expense
reasonably incurred by USBANCORP in connection with investigating
or defending any such loss, claim, damage, liability or action;
provided, however, that JSB will not be liable in any case to the
extent that any such loss, claim, damage or liability arises out
of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in such
preliminary or final offering circular or such amendment or
supplement thereto in reliance upon and in conformity with
written information furnished by or on behalf of USBANCORP
specifically for use in the preparation thereof. USBANCORP will
indemnify and hold harmless JSB to the same extent as set forth
in the immediately preceding sentence but only with reference to
written information furnished by or on behalf of USBANCORP for
use in the preparation of such preliminary or final offering
circular or such amendment or supplement thereto; and USBANCORP
will reimburse JSB for any legal or other expense reasonably
incurred by JSB in connection with investigating or defending any
such loss, claim, damage, liability or action.
5. Adjustment Upon Changes in Capitalization. In the
event of any change in the Common Stock by reason of stock
dividends, split-ups, recapitalizations, combinations,
conversions, divisions, exchanges of shares or the like, then the
number and kind of Option Shares and the Option Price shall be
appropriately adjusted.
6. Repurchase of Option.
(a) Upon the occurrence of a Triggering Event, at
the request of USBANCORP, delivered within 60 days of such
occurrence, JSB shall repurchase the Option from USBANCORP at a
price (the "Option Repurchase Price") equal to (i) the amount by
which (A) the market/offer price (as defined below) exceeds
(B) the Option Price, multiplied by the number of shares for
which this Option may then be exercised, plus (ii) USBANCORP's
Out-of-Pocket Expenses (as defined below) (to the extent not
previously reimbursed). The term "Out-of-Pocket Expenses" shall
mean USBANCORP's reasonable out-of-pocket expenses incurred in
connection with the transactions contemplated by the Agreement,
including, without limitation, legal, accounting and investment
banking fees. The term "market/offer price" shall mean the
highest of (i) the price per share of Common Stock at which a
tender offer or exchange offer therefor has been made, (ii) the
price per share of Common Stock to be paid by any third party
pursuant to an agreement with JSB, or (iii) in the event of a
sale of all or substantially all of JSB's assets, the sum of the
price paid in such sale for such net assets and the current
market value of the remaining assets of JSB as determined by an
investment banking firm selected by USBANCORP, divided by the
number of shares of Common Stock outstanding at the time of such
sale. In determining the market/offer price, the value of
consideration other than cash shall be determined by a nationally
recognized investment banking firm acceptable to both parties.
(b) USBANCORP may exercise its right to require
JSB to repurchase the Option pursuant hereto by surrendering for
such purpose to JSB, at its principal office, a copy of this
Option Agreement, accompanied by a written notice or notices
stating that USBANCORP elects to require JSB to repurchase this
Option in accordance with the provisions hereof. Subject to
Paragraph 7(c) below, as promptly as practicable, and in any
event within five business days after the surrender of the Option
and the receipt of such notice or notices relating thereto, JSB
shall deliver or cause to be delivered to USBANCORP the Option
Repurchase Price therefor or the portion thereof that JSB is not
then prohibited under applicable law and regulation from so
delivering.
(c) To the extent that JSB is prohibited under
applicable law or regulation, or as a result of administrative or
judicial action from repurchasing the Option in full, JSB shall
immediately so notify USBANCORP and thereafter deliver or cause
to be delivered, from time to time, to USBANCORP, the portion of
the Option Repurchase Price that it is no longer prohibited from
delivering, within seven business days after the date on which
JSB is no longer so prohibited; provided, however, that if JSB at
any time after delivery of a notice of repurchase pursuant to
paragraph 7(b) above is prohibited under applicable law or
regulation, from delivering the Option Repurchase Price in full
(and JSB hereby undertakes to use its best efforts to obtain all
required regulatory and legal approvals and to file any required
notices as promptly as practicable in order to accomplish such
repurchase), USBANCORP may revoke its notice of repurchase of
the Option either in whole or to the extent of the prohibition,
whereupon, in the latter case, JSB shall promptly (i) to the
extent of USBANCORP's partial revocation notice, deliver to
USBANCORP that portion of the Option Purchase Price that JSB is
not prohibited from delivering; and, (ii) deliver, to USBANCORP,
a new Stock Option Agreement evidencing the right of USBANCORP to
purchase that number of shares of Common Stock obtained by
multiplying the number of shares of Common Stock for which the
surrendered Stock Option Agreement was exercisable at the time of
delivery of the notice of repurchase by a fraction, the numerator
of which is the Option Repurchase Price less the portion thereof
theretofore delivered to USBANCORP and the denominator of which
is the Option Repurchase Price.
7. Filings and Consents. Each of USBANCORP and JSB
will use its best efforts to make all filings with, and to obtain
consents of, all third parties and governmental authorities
necessary to the consummation of the transactions contemplated by
this Stock Option Agreement. Within 10 days from the date
hereof, USBANCORP shall file a report of beneficial ownership on
Form F-11 with the Federal Deposit Insurance Corporation under
the Exchange Act which discloses the rights of USBANCORP
hereunder.
8. Representations and Warranties of JSB. JSB hereby
represents and warrants to USBANCORP as follows:
(a) Due Authorization. JSB has full corporate
power and authority to execute, deliver and perform this
Stock Option Agreement and all corporate action necessary
for execution, delivery and performance of this Stock Option
Agreement has been duly taken by JSB. This Stock Option
Agreement constitutes a legal, valid and binding obligation
of JSB, enforceable against JSB in accordance with its
terms.
(b) Authorized Shares. JSB has taken all
necessary corporate action to authorize and reserve for
issuance all shares of Common Stock that may be issued
pursuant to any exercise of the Option.
9. Specific Performance. The parties hereto
acknowledge that damages would be an inadequate remedy for a
breach of this Stock Option Agreement and that the obligations of
the parties hereto shall be specifically enforceable.
10. Entire Agreement. This Stock Option Agreement and
the Agreement constitute the entire agreement between the parties
with respect to the subject matter hereof and supersede all other
prior agreements and understandings, both written and oral, among
the parties or any of them with respect to the subject matter
hereof.
11. Assignment or Transfer. USBANCORP may not sell,
assign or otherwise transfer its rights and obligations
hereunder, in whole or in part, to any person or group of persons
other than to a subsidiary of USBANCORP. USBANCORP represents
that it is acquiring the Option for USBANCORP's own account and
not with a view to, or for sale in connection with, any
distribution of the Option or the Option Shares. USBANCORP is
aware that neither the Option nor the Option Shares are the
subject of a registration statement filed with, and declared
effective by, the Securities and Exchange Commission pursuant to
Section 5 of the Securities Act of 1933, as amended, but instead
are being offered in reliance upon the exemption from the
registration requirement provided by Section 3 thereof.
12. Amendment of Stock Option Agreement. By mutual
consent of the parties hereto, this Stock Option Agreement may be
amended in writing at any time, for the purpose of facilitating
performance hereunder or to comply with any applicable regulation
of any governmental authority or any applicable order of any
court or for any other purpose.
13. Validity. The invalidity or unenforceability of
any provision of this Stock Option Agreement shall not affect the
validity or enforceability of any other provisions of this Stock
Option Agreement, which shall remain in full force and effect.
14. Notices. All notices, requests, consents and
other communications required or permitted hereunder shall be in
writing and shall be deemed to have been duly given when
delivered personally, by telegram or telecopy, or by registered
or certified mail (postage prepaid, return receipt requested) to
the respective parties as follows:
(i) If to USBANCORP, to:
USBANCORP, Inc.
Main & Franklin Streets
Johnstown, Pennsylvania 15907
Attention: Terry K. Dunkle, Executive Vice
President
and
Orlando B. Hanselman
Telecopy No.: (814) 533-5427
with a copy to:
Stevens & Lee
Four Glenhardie Corporate Center
1255 Drummers Lane
P.O. Box 236
Wayne, Pennsylvania 19087
Attention: Jeffrey P. Waldron, Esquire
Telecopy No.: (215) 687-1384
(ii) If to JSB, to:
Johnstown Savings Bank
Market & Main Streets
Johnstown, Pennsylvania 15907
Attention: Patrick J. Coyne, President and
Chief Executive Officer
Telecopy No.: (814) 535-8970
with copies to:
Elias, Matz, Tiernan & Herrick
734 15th Street, N.W.
Washington, D.C. 20005
Attention: Raymond A. Tiernan, Esquire
Telecopy No.: (202) 347-2172
or to such other address as the person to whom notice is to be
given may have previously furnished to the others in writing in
the manner set forth above (provided that notice of any change of
address shall be effective only upon receipt thereof).
15. Governing Law. This Stock Option Agreement shall
be governed by and construed in accordance with the domestic
internal law (but not the law of conflicts of law) of the
Commonwealth of Pennsylvania.
000 Captions. The captions in this Stock Option
Agreement are inserted for convenience and reference purposes,
and shall not limit or otherwise affect any of the terms or
provisions hereof.
17. Waivers and Extensions. The parties hereto may,
by mutual consent, extend the time for performance of any of the
obligations or acts of either party hereto. Each party may waive
(i) compliance with any of the covenants of the other party
contained in this Stock Option Agreement and/or (ii) the other
party's performance of any of its obligations set forth in this
Stock Option Agreement.
18. Parties in Interest. This Stock Option Agreement
shall be binding upon and inure solely to the benefit of each
party hereto, and, nothing in this Stock Option Agreement,
express or implied, is intended to confer upon any other person
any rights or remedies of any nature whatsoever under or by
reason of this Stock Option Agreement.
19. Counterparts. This Stock Option Agreement may be
executed in two or more counterparts, each of which shall be
deemed to be an original, but all of which shall constitute one
and the same agreement.
20. Expenses. Except as otherwise provided herein,
all costs and expenses incurred by the parties hereto in
connection with the transactions contemplated by this Stock
Option Agreement or the Option shall be paid by the party
incurring such cost or expense.
21. Termination. This Stock Option Agreement shall
terminate and be of no further force or effect (i) upon the
execution of a Sale Agreement by JSB pursuant to Section 4.06(a)
of the Agreement; (ii) upon consummation of the transactions
contemplated by the Agreement with respect to the Merger;
(iii) except as set forth in subsection (iv) below, upon
termination of the Agreement in accordance with the provisions
thereof; or (iv) twelve (12) months after termination of the
Agreement if such termination (whether by JSB or USBANCORP)
resulted, directly or indirectly, in whole or in part, from a
willful breach by JSB of any representation, warranty or covenant
set forth in the Agreement; provided, however, that this
subsection (iv) shall not apply to a termination of the Agreement
pursuant to Section 6.01(a) of the Agreement. Notwithstanding
the foregoing, the rights granted to USBANCORP in Section 5 of
this Stock Option Agreement shall survive the termination of this
Stock Option Agreement pursuant to Section 22(iv) of this Stock
Option Agreement for a period of twelve (12) months following
such termination.
IN WITNESS WHEREOF, each of the parties hereto,
pursuant to resolutions adopted by its Board of Directors, has
caused this Stock Option Agreement to be executed by its duly
authorized officer and has caused its corporate seal to be
affixed hereunto and to be duly attested, all as of the day and
year first above written.
USBANCORP, INC.
By_________________________________
Terry K. Dunkle,
Executive Vice
President
(CORPORATE SEAL)
Attest:____________________________
Betty L. Jakell,
Assistant Secretary
JOHNSTOWN SAVINGS BANK
By_________________________________
Patrick J. Coyne,
President
(CORPORATE SEAL)
Attest:____________________________
Walter F. Rusnak,
Assistant Secretary
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers
Sections 1741, 1742 and 1743 of the Pennsylvania
Business Corporation Law of 1988, as amended, set forth
circumstances under which directors and officers may be
indemnified against liability. USBANCORP's Bylaws specifically
provide that the directors, officers, agents and employees of
USBANCORP may be indemnified against liability to the fullest
extent permitted by law.
USBANCORP has purchased a liability insurance policy
which insures USBANCORP, under certain circumstances, in the
event it indemnifies a director or officer of USBANCORP or a
subsidiary pursuant to the provisions of the Bylaws of USBANCORP
or otherwise or advances costs (including the cost of defending
any action) incurred by directors or officers in their capacity
as such.
Item 21. Exhibits.
2.1 Agreement and Plan of Merger dated as of November 10,
1993 and amended January 18, 1994, among USBANCORP,
Inc., United States National Bank in Johnstown, and
Johnstown Savings Bank (See Annex A to the Proxy
Statement/Prospectus).
3.1 Articles of Incorporation of USBANCORP, Inc.
(incorporated herein by reference to Exhibit III,
Part II to Form S-14, File No. 2-79639; Exhibit 4.2 to
Form S-2, File No. 33-685; and Exhibit 4.3 to Form S-2,
File No. 33-685).
3.2 Bylaws of USBANCORP, Inc. (incorporated herein by
reference to Exhibit IV, Part II to Form S-14, File
No. 2-79639).
5. Opinion of Stevens & Lee re: legality.
8. Opinion of Stevens & Lee re: certain federal income
tax matters.*
10.1 Agreement, dated as of __________, 1994, between
USBANCORP, Inc. and Terry K. Dunkle.*
10.2 Agreement, dated as of June 23, 1988 between USBANCORP,
Inc. and W. Harrison Vail (incorporated herein by
reference to Exhibit 10.3 to Form S-2 File
No. 33-56684).
10.3 Employment Agreement, dated as of November 19, 1991,
between Community Bancorp, Inc. and Kenneth J. Tyson
(incorporated herein by reference to Exhibit 10.4 to
Form S-2 File No. 33-56684).
10.4 Loan Agreement, dated March 26, 1992 between USBANCORP,
Inc. and Pittsburgh National Bank (incorporated herein
by reference to Exhibit 10.6 to Form S-2 File No. 33-
56684).
10.5 Collective Bargaining Agreement, dated October 16, 1991
between United States National Bank in Johnstown and
Steel Workers of America, AFL-CIO-CLC Local Union 8204
(incorporated herein by reference to Exhibit 10.7 to
Form S-2 File No. 33-56684).
10.6 Agreement, dated January 8, 1990, among USBANCORP,
Inc.; Brookside Associates, Inc.; First Carolina
Investors, Inc.; Foundation Lyric; Hoffin, Anstalt,
John G. Ogilvie; Trust Alvant and Robert G. Wilmers
(incorporated herein by reference to Exhibit 10.8 to
Form S-2 File No. 33-56684).
10.7 1991 Stock Option Plan, dated August 23, 1991
(incorporated herein by reference to Exhibit 10.9 to
Form S-2 File No. 33-56684).
21. Subsidiaries of USBANCORP, Inc.
23.1 Consent of Stevens & Lee (included in Exhibit 5
herein).
23.3 Consent of Arthur Andersen & Co.
23.4 Consent of Price Waterhouse.
23.5 Consent of KPMG Peat Marwick.
23.6 Consent of Ernst & Young.
23.7 Consent of James M. Edwards, Sr.*
23.8 Consent of Howard M. Picking, III.*
24. Power of Attorney (included on signature page hereto).
* To be filed by amendment
___________________________
Item 22. Undertakings.
1. Rule 415 Offering: The undersigned registrant
hereby undertakes:
(a) To file, during any period in which offers or
sales are being made, a post-effective amendment to this
registration statement: (i) to include any prospectus required
by section 10(a)(3) of the Securities Act of 1933; (ii) to
reflect in the prospectus any fact or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set
forth in the registration statement; (iii) to include any
material information with respect to the plan of distribution not
previously disclosed in the registration statement or any
material change to such information in the registration
statement.
(b) That, for the purpose of determining any
liability under the Securities Act of 1933, each such
post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(c) To remove from registration by means of a
post-effective amendment any of the securities being registered
which remain unsold at the termination of the offering.
2. Filing Incorporating Subsequent Exchange Act
Documents by Reference: The undersigned registrant hereby
undertakes that, for purposes of determining any liability under
the Securities Act of 1933, each filing of the registrant's
annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each
filing of an employee benefit plan's annual report pursuant to
section 15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering
thereof.
3. Incorporated Annual and Quarterly Reports: The
undersigned registrant hereby undertakes to deliver or cause to
be delivered with the prospectus, to each person to whom the
prospectus is sent or given, the latest annual report to security
holders that is incorporated by reference in the prospectus and
furnished pursuant to and meeting the requirements of Rule 14a-3
or Rule 14c-3 under the Securities Exchange Act of 1934; and,
where interim financial information required to be presented by
Article 3 of Regulation S-X are not set forth in the prospectus,
to deliver, or cause to be delivered to each person to whom the
prospectus is sent or given, the latest quarterly report that is
specifically incorporated by reference in the prospectus to
provide such interim financial information.
4. Registration on Form S-4 of Securities Offered for
Resale:
(a) The undersigned registrant hereby undertakes
as follows: that prior to any public reoffering of the
securities registered hereunder through use of a prospectus
which is a part of this registration statement, by any
person or party who is deemed to be an underwriter within
the meaning of Rule 145(c), the issuer undertakes that such
reoffering prospectus will contain the information called
for by the applicable registration form with respect to
reofferings by persons who may be deemed underwriters, in
addition to the information called for by the other Items of
the applicable form.
(b) The registrant undertakes that every
prospectus (i) that is filed pursuant to paragraph (a)
immediately preceding, or (ii) that purports to meet the
requirements of section 10(a)(3) of the Act and is used in
connection with an offering of securities subject to
Rule 415, will be filed as a part of an amendment to the
registration statement and will not be used until such
amendment is effective, and that, for purposes of
determining any liability under the Securities Act of 1933,
each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities
offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering
thereof.
5. Indemnification: Insofar as indemnification for
liabilities arising under the Securities Act of 1933 may be
permitted to directors, officers, and controlling persons of the
registrant pursuant to the bylaws of the registrant, or
otherwise, the registrant has been advised that in the opinion of
the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer,
or controlling person of the registrant in the successful defense
of any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities
being registered, the registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question
whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final
adjudication of such issue.
6. Request for Information: The undersigned
registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus
pursuant to Items 4, 10(b), 11, or 13 of this Form, within one
business day of receipt of such request, and to send the
incorporated documents by first class mail or other equally
prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration
statement through the date of responding to the request.
7. Post-Effective Amendments: The undersigned
registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a
transaction, and the company being acquired involved therein,
that was not the subject of and included in the registration
statement when it became effective.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of
1933, the Registrant has duly caused this Registration Statement
on Form S-4 to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Johnstown, Commonwealth
of Pennsylvania, March 25, 1994.
USBANCORP, INC.
By:/s/ Terry K. Dunkle
Terry K. Dunkle
Chairman, President and
Chief Executive Officer
<PAGE>
Pursuant to the requirements of the Securities Act of
1933, this Registration Statement has been signed by the
following persons in the capacities indicated as of March 25,
1994. Each of the persons whose signature appears below hereby
authorizes Terry K. Dunkle or Orlando B. Hanselman to execute in
the name of each person, and to file, any amendment to this
Registration Statement as the Registrant deems appropriate and
appoints such persons as his or her attorney-in-fact to sign on
his or her behalf individually and in each capacity stated below
and file all amendments and file post-effective amendments to
this Registration Statement.
Signature Title
/s/ Terry K. Dunkle Chairman, President and Chief
Terry K. Dunkle Executive Officer (Principal
Executive Officer)
/s/ Orlando B. Hanselman Executive Vice President,
Orlando B. Hanselman Treasurer and Chief Financial
Officer (Principal Financial and
Accounting Officer)
/s/ Jerome M. Adams Director
Jerome M. Adams
/s/ Robert A. Allen Director
Robert A. Allen
/s/ Clifford A. Barton Director
Clifford A. Barton
/s/ Michael F. Butler Director
Michael F. Butler
/s/ Louis Cynkar Director
Louis Cynkar
/s/ Richard W. Kappel Director
Richard W. Kappel
/s/ John H. Kunkle, Jr. Director
John H. Kunkle, Jr.
/s/ James F. O'Malley Director
James F. O'Malley
/s/ Frank J. Pasquerilla Director
Frank J. Pasquerilla
/s/ Jack Sevy Director
Jack Sevy
/s/ Thomas C. Slater Director
Thomas C. Slater
/s/ James C. Spangler Director
James C. Spangler
/s/ Kenneth J. Tyson Director
Kenneth J. Tyson
/s/ W. Harrison Vail Director
W. Harrison Vail
/s/ Robert L. Wise Director
Robert L. Wise
<PAGE>
EXHIBIT AND APPENDIX INDEX
Sequential
Exhibit No. Description Page No.
Appendix
5. Opinion of Stevens & Lee re: legality.
21. Subsidiaries of USBANCORP, Inc.
23.1 Consent of Stevens & Lee (included in Exhibit 5
herein).
23.3 Consent of Arthur Andersen & Co.
23.4 Consent of Price Waterhouse.
23.5 Consent of KPMG Peat Marwick.
23.6 Consent of Ernst & Young.
24. Power of Attorney (included on
signature page hereto).
<PAGE>
APPENDIX
1. USBANCORP, Inc. and Johnstown Savings Bank Branch Network
Maps
a. The USBANCORP, Inc. Service Area Map shows the
location, within Pennsylvania, of the counties in which
branches of USBANCORP's subsidiaries are located.
These counties are Clearfield, Cambria, Allegheny,
Washington, Westmoreland and Somerset. Below the
Pennsylvania map, the six counties served by
USBANCORP's subsidiaries are enlarged to show the
location within these counties of the bank branches.
b. The U.S. Bank and Johnstown Savings Bank Cambria County
Offices Map shows the location, within Cambria County,
of the Johnstown Savings Bank branches and the U.S.
Bank branches. For the Johnstown metropolitan area,
the map includes a close-up view of the streets on
which the bank branches are located.
2. USBANCORP, Inc. -- Shareholders Return Performance Graph
The USBANCORP, Inc. Shareholders Return Performance Graph
has been filed with the Commission under cover of Form SE.
3. Johnstown Savings Bank -- Stock Performance Graph
The Johnstown Savings Bank Stock Performance Graph has been
filed with the Commission under cover of Form SE.
Exhibit 5
March 24, 1994
USBANCORP, INC.
Main and Franklin Streets
Johnstown, PA 15901
Re: Registration Statement on Form S-4
Gentlemen:
We have acted as Special Counsel for USBANCORP, INC.
("USBANCORP") in connection with the proposed acquisition by
USBANCORP of Johnstown Savings Bank ("JSB") by means of the
merger of JSB with and into a wholly-owned subsidiary of
USBANCORP, Johnstown Interim Bank ("JIB"), and immediately
thereafter the merger of JIB with and into United States National
Bank in Johnstown ("U.S. Bank"), a wholly owned subsidiary of
USBANCORP, with U.S. Bank surviving the merger. The merger will
be consummated pursuant to the terms and conditions of an
Agreement and Plan of Merger between USBANCORP, U.S. Bank and JSB
dated November 10, 1993 and amended January 18, 1994 (the "Merger
Agreement"). Each share of JSB common stock issued and
outstanding as of the effective date (except for shares with
respect to which dissenters' rights shall have been perfected)
will be converted into the right to receive $10.13 in cash and a
fraction of a share of USBANCORP common stock determined by
dividing $22.50 by the average closing price of USBANCORP common
stock for the ten trading days immediately preceding the closing
date of the merger and multipying by .55; provided that, such
fraction shall be not less than .4853 shares and not greater than
.5053 shares.
This opinion is being furnished as Exhibit 5 to the
Registration Statement on Form S-4 filed by USBANCORP with the
Securities and Exchange Commission relating to the proposed
acquisition and the issuance of shares of USBANCORP common stock
to holders of JSB common stock in exchange for JSB common stock.
In connection therewith, we have reviewed the Articles of
Incorporation and Bylaws of USBANCORP, U.S. Bank and JIB, the
relevant corporate proceedings of USBANCORP, U.S. Bank and JIB,
the Merger Agreement and such other documents and records as we
deemed necessary. We have also examined the Registration
Statement on Form S-4, including the Joint Proxy
Statement/Prospectus relating to USBANCORP common stock which is
a part of the Registration Statement to which this opinion is an
Exhibit.
Based upon the foregoing, it is our opinion that the shares
of common stock to be issued by USBANCORP pursuant to the Merger
Agreement have been duly authorized and, when issued, will be
validly issued, fully paid and non-assessable, provided that such
shares are issued in strict accordance with the terms of the
Merger Agreement.
We hereby consent to the filing of this opinion as an
Exhibit to the Registration Statement.
Very truly yours,
STEVENS & LEE
Exhibit 21
SUBSIDIARIES OF USBANCORP, INC.
1. United States National Bank in Johnstown, a national
banking association chartered under the laws of the
United States
2. Three Rivers Bank and Trust Company, a Pennsylvania
chartered bank and trust company
3. Community Bancorp, Inc., a Pennsylvania corporation
4. Community Savings Bank, a wholly-owned subsidiary of
Community Bancorp, Inc. and a Pennsylvania chartered
savings bank
5. USBANCORP Trust Company, a Pennsylvania corporation
6. United Bancorp Life Insurance Company, an Arizona
corporation
Exhibit 23.3
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation in this registration statement of our report dated
January 28, 1994 included in USBANCORP, Inc.'s Form 10-K for the
year ended December 31, 1993 and to all references to our Firm
included in this registration statement.
ARTHUR ANDERSEN & CO.
Pittsburgh, Pennsylvania
March 24, 1994
Exhibit 23.4
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Proxy
Statement Prospectus constituting part of this Registration
Statement on Form S-4 of USBANCORP, Inc. of our report dated
February 12, 1992 appearing on page 34 of the USBANCORP, Inc.'s
Annual Report and Form 10-K for the year ended December 31, 1993.
We also consent to the references to us under the headings
"Experts" and "Selected Historical Financial Data" in such Proxy
Statement Prospectus. However, it should be noted that Price
Waterhouse has not prepared or certified such "Selected Historical
Financial Data."
Price Waterhouse
600 Grant Street
Pittsburgh, PA 15219-9954
March 24, 1994
Exhibit 23.5
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors
Johnstown Savings Bank
We consent to the use of our report dated January 28, 1994 included
herein and to the reference to our firm under the heading "Experts"
in the registration statement on Form S-4.
KPMG Peat Marwick
Pittsburgh, Pennsylvania
March 24, 1994
Exhibit 23.6
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption"Experts"
and to the use of our report dated January 30, 1992, with respect
to the financial statements of Johnstown Savings Bank included in
the Registration Statement (Form S-4 No. 33-00000) and related
Prospectus of USBancorp, Inc. for the registration of 988,260
shares of its common stock.
ERNST & YOUNG
March 24, 1994
Pittsburgh, Pennsylvania
