NOTICE OF
ANNUAL
MEETING OF
SHAREHOLDERS
AND
PROXY STATEMENT
USBANCORP, INC.
P.O. BOX 430
JOHNSTOWN, PENNSYLVANIA 15907-0430
To Be Held April 28, 1998
Mailed to Security Holders March 20, 1998
<PAGE>
March 20, 1998
Dear Shareholder:
USBANCORP, Inc.'s Annual Meeting of Shareholders will be
held Tuesday, April 28, 1998, at 1:30 p.m., Eastern Time, at the
Holiday Inn Downtown, Crown Ballroom, 250 Market Street,
Johnstown, Pennsylvania 15901-2996.
The matters to be acted upon at the meeting are:
(a) the election of four Class III directors,
(b) the consideration of a proposal to increase the number
of shares of common stock of USBANCORP, Inc. available
for issuance under the USBANCORP, Inc. 1991 Stock
Option Plan,
(c) the consideration of an amendment to USBANCORP's
articles of incorporation to increase the number of
shares of USBANCORP, Inc. common stock to 24,000,000,
par value $2.50, and
(d) such other matters as may properly be brought before
the USBANCORP annual meeting or any adjournments
thereof.
Please review the enclosed material and sign, date and
return the proxy card whether you plan to attend or not so that
the matters coming before the meeting may be acted upon.
I look forward to meeting you and welcome the opportunity to
discuss the business of your Corporation.
Cordially,
/s/ Terry K. Dunkle
Terry K. Dunkle
Chairman, President and
Chief Executive Officer
<PAGE>
USBANCORP, Inc.
Johnstown, Pennsylvania 15901
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
March 20, 1998
To The Shareholders:
NOTICE IS HEREBY GIVEN that pursuant to the call of its
directors, the Annual Meeting of Shareholders of USBANCORP, Inc.
will be held at the Holiday Inn Downtown, Crown Ballroom,
250 Market Street, Johnstown, Pennsylvania 15901-2996, on
Tuesday, April 28, 1998, at 1:30 p.m., Eastern Time, for the
purpose of considering and voting on the following matters:
1. Election of four Class III directors for a term of
three years from the date of election and until their
successors shall have been elected and qualified
(Matter No. 1);
2. Approval of an increase in the number of shares of
common stock of USBANCORP, Inc. available for issuance
under the USBANCORP, Inc. 1991 Stock Option Plan from
285,000 shares to 485,000 shares (Matter No. 2);
3. Amendment to Articles of Incorporation (Matter No. 3);
and
4. Such other business as may properly come before the
meeting or any adjournment thereof.
Only those shareholders of record at the close of business
on March 5, 1998 shall be entitled to notice of and to vote at
the meeting. A Proxy Statement, a proxy and a self-addressed
postage prepaid envelope are enclosed. Please complete, sign and
date the proxy and return it promptly in the envelope provided.
If you attend the meeting, you may revoke your proxy and vote in
person.
This Notice, the accompanying Proxy Statement and form of
proxy are sent to you by order of the Board of Directors.
/s/ Betty L. Jakell
Betty L. Jakell,
Corporate Secretary
Johnstown, Pennsylvania
March 20, 1998
<PAGE>
USBANCORP, Inc.
P.O. Box 430
Johnstown, Pennsylvania 15907-0430
PROXY STATEMENT
GENERAL
Introduction
The Proxy Statement and enclosed proxy are being mailed to
the shareholders of USBANCORP, Inc. ("USBANCORP" or the
"Company"), on or about March 20, 1998, in connection with the
solicitation of proxies by the Board of Directors of USBANCORP.
The proxies will be voted at the Annual Meeting of the
Shareholders of USBANCORP to be held on Tuesday, April 28, 1998,
at 1:30 p.m., Eastern Time, at the Holiday Inn Downtown, Crown
Ballroom, 250 Market Street, Johnstown, Pennsylvania 15901-2996
(the "Annual Meeting"). USBANCORP's Annual Report and Form 10-K
for the year ended December 31, 1997 accompanies this Proxy
Statement. It should not be regarded as proxy solicitation
material.
Solicitation of Proxies
The cost of the solicitation of proxies will be borne by
USBANCORP. In addition to the use of the mails, some directors
and officers of USBANCORP may solicit proxies, without additional
compensation, in person, by telephone, telegram, or otherwise.
Arrangements may be made by USBANCORP with banks, brokerage
houses and other custodians, nominees and fiduciaries to forward
solicitation material to the beneficial owners of shares held by
them of record, and USBANCORP may reimburse them for reasonable
expenses they incur in so doing.
Voting Securities
As of the close of business on March 5, 1998 (the "Record
Date"), there were outstanding __________ shares of common stock,
par value $2.50 per share (the "USBANCORP Common Stock"), the
only class of capital stock of USBANCORP outstanding. Holders of
record of USBANCORP Common Stock as of the close of business on
the Record Date are entitled to notice of and to vote at the
Annual Meeting. Except with respect to the election of
directors, each shareholder is entitled to one vote for each
share held. Holders of USBANCORP Common Stock are entitled to
cumulate their vote in the election of directors.
If a shareholder participates in USBANCORP's Dividend
Reinvestment and Common Stock Purchase Plan, the proxy card sent
to such shareholder will represent the number of shares
registered in the shareholder's name and the number of shares,
including fractional shares, credited to the shareholder's
Dividend Reinvestment Plan account.
If the enclosed form of proxy is appropriately marked,
signed and returned in time to be voted at the Annual Meeting,
the shares represented by the proxy will be voted in accordance
with the instructions marked thereon. Signed proxies not marked
to the contrary will be voted "FOR" the election of the nominees
of USBANCORP's Board of Directors, "FOR" the increase in the
number of shares of USBANCORP Common Stock available for issuance
under the USBANCORP, Inc. 1991 Stock Option Plan, and "FOR" the
amendment to USBANCORP'S articles of incorporation.
Right of Revocation
Proxies may be revoked at will at any time before they have
been exercised by filing with the Corporate Secretary of
USBANCORP an instrument of revocation or a duly executed proxy
bearing a later date. Any shareholder attending the Annual
Meeting may also revoke a previously granted proxy by voting in
person at the Annual Meeting.
Quorum
Under USBANCORP's Bylaws, the presence, in person or by
proxy, of shareholders entitled to cast at least a majority of
the votes that all shareholders are entitled to cast, constitutes
a quorum for the transaction of business at the Annual Meeting.
Principal Shareholders
No person is known to USBANCORP's management to own of
record or beneficially, as of March 5, 1998, 5% or more of the
outstanding shares of USBANCORP Common Stock.
<PAGE>
MATTER NO. 1
ELECTION OF USBANCORP DIRECTORS
General
The Articles of Incorporation of USBANCORP provide that
USBANCORP's business shall be managed by a Board of Directors of
not less than 5 and not more than 25 persons. Under the Articles
of Incorporation, the total number of directors may be determined
by either a resolution adopted by a majority vote of the
directors then in office or by resolution of the shareholders at
a meeting. The number of directors for 1998 has been set by the
Board at 13.
USBANCORP's Board of Directors, as provided in its Articles
of Incorporation, is divided into three classes: Class I, Class
II and Class III, each being as nearly equal in number as
possible. The directors in each class serve terms of three years
each and until their successors are elected and qualified. Under
USBANCORP's Bylaws, a person elected to fill a vacancy on the
Board of Directors serves as a director for the remaining term of
office of the class to which he or she was elected.
The Board of Directors fixed the number of directors in
Class III at four and has nominated Michael F. Butler, James C.
Dewar, Terry K. Dunkle and Jack Sevy for election as Class III
directors for three-year terms to expire at the 2001 Annual
Meeting of Shareholders, and until their successors are duly
elected and qualified. Directors Butler, Dewar, Dunkle and Sevy
were elected by the shareholders at the 1995 Annual Meeting. The
remaining directors will continue to serve in accordance with
their previous election with the terms of the Class I and
Class II directors expiring in 1999 and 2000, respectively.
The Bylaws of USBANCORP permit nominations for election to
the Board of Directors to be made by the Board of Directors or by
any shareholder entitled to vote for the election of directors.
All nominations for director to be made at the Annual Meeting by
shareholders entitled to vote for the election of directors must
be preceded by notice in writing, delivered or mailed by first
class United States mail, postage prepaid, to the President of
USBANCORP not less than 60 days nor more than 90 days prior to
the Annual Meeting, which notice must contain certain information
specified in the Bylaws. No notice of nomination for election as
a director has been received from any shareholder as of the date
of this Proxy Statement. If a nomination is attempted at the
Annual Meeting which does not comply with the procedures required
by the Bylaws or if any votes are cast at the Annual Meeting for
any candidate not duly nominated, then such nomination and/or
such votes may be disregarded.
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 four nominees listed. The proxies will have
authority to cumulate votes in their discretion except to the
extent a shareholder withholds such authority on the form of
proxy. The four persons receiving the highest number of votes
cast at the Annual Meeting will be elected as Class III
directors. Abstentions and broker non-votes will not constitute
or be counted as "votes" cast for purposes of the Annual Meeting,
but will be counted for purposes of determining the presence of a
quorum.
Except as noted above, it is intended that shares
represented by proxies will be voted for the nominees listed,
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.
The following tables set forth as to each of the nominees
for election as a Class III director and as to each of the
continuing Class I and Class II directors, his age, principal
occupation and business experience, the period during which he
has served as a director of USBANCORP, an affiliate or
predecessor and other business relationships. There are no
family relationships between any of the listed persons.
<TABLE>
<CAPTION>
Nominees for Election as
Class III Directors - Terms Expire in 2001
Directorship in
Director other Reporting
Name and Principal Occupation(1) Age Since(2)(3) Companies
<S> <C> <C> <C>
Michael F. Butler 62 1993 None
Business Consultant and
Attorney-at-Law
James C. Dewar 60 1974 None
President and Owner, Jim
Dewar Oldsmobile, Inc.
Terry K. Dunkle 56 1988 None
Chairman, President and
Chief Executive Officer
of USBANCORP and Chairman
of the Board of United
States National Bank in
Johnstown, Three Rivers
Bank and Trust Company,
USBANCORP Trust Company,
UBAN Associates, Inc. and
UBAN Mortgage Company
Jack Sevy 67 1984 None
Retired; Former Owner and
Operator, New Stanton West
Auto/Truck Plaza
<CAPTION>
Class I Directors - Terms Expire in 1999
Directorship in
Director other Reporting
Name and Principal Occupation(1) Age Since(2)(3) Companies
<S> <C> <C> <C>
Jerome M. Adams 66 1973 None
Senior Partner, Adams,
Myers and Baczkowski,
Attorneys-at-Law
James M. Edwards, Sr. 58 1984 None
Retired President and Chief
Executive Officer, WJAC, Inc.
Richard W. Kappel 66 1967 None
Retired CEO, Secretary and
Treasurer, Wm. J. Kappel
Wholesale Co.
James C. Spangler 70 1980 None
Retired; Former Owner,
Somerset Auction and
Transfer, Inc.
Robert L. Wise 54 1986 GPU Generation,
President, Inc.
GPU Generation, Inc.
<CAPTION>
Class II Directors - Terms Expire in 2000
Directorship in
Director other Reporting
Name and Principal Occupation(1) Age Since(2)(3) Companies
<S> <C> <C> <C>
Clifford A. Barton 69 1966 Crown American
Retired; Former Chairman, Realty Trust
President and Chief Executive
Officer of USBANCORP and
Chairman of the Board of
United States National Bank
in Johnstown, Three Rivers
Bank and Trust Company,
and USBANCORP Trust Company
Margaret A. O'Malley 38 1997 None
Attorney-at-Law
Yost & O'Malley
Mark E. Pasquerilla 38 1997 Crown American
President, Crown Realty Trust
American Realty Trust
Thomas C. Slater 55 1980 None
Owner, President and Director,
Slater Laboratories, Inc.,
Clinical Laboratory
________________________
<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.
(2) Reflects the earlier of the first year as a director of
USBANCORP, United States National Bank in Johnstown ("U.S.
Bank"), Three Rivers Bank and Trust Company ("Three Rivers
Bank"), Community Bancorp, Inc. ("Community"), or Johnstown
Savings Bank ("JSB").
(3) All incumbent directors were elected by the shareholders.
</TABLE>
Security Ownership of Management
The following table sets forth information concerning the
number of shares of USBANCORP Common Stock beneficially owned, as
of March 5, 1998, by each present director, nominee for director,
and each executive officer named in the compensation table set
forth elsewhere herein.
<TABLE>
<CAPTION>
Amount and Nature
of Beneficial Percent
Name of Beneficial Owner(1) Ownership(2) of Class
<S> <C> <C>
Jerome M. Adams............... 5,673
Clifford A. Barton............ 72,544
Michael F. Butler............. 9,907
James C. Dewar................ 15,455
Terry K. Dunkle............... 38,956
James M. Edwards, Sr.......... 7,237
Orlando B. Hanselman.......... 16,029
Richard W. Kappel............. 10,415
John H. Kunkle, Jr............ 7,057
Margaret A. O'Malley(3)....... 35,490
Kevin J. O'Neil............... 6,211
Mark E. Pasquerilla(4)........ 51,955
Jack Sevy..................... 2,139
Thomas C. Slater(5)........... 9,368
James C. Spangler............. 6,048
W. Harrison Vail.............. 25,706
Ronald W. Virag............... 4,844
Robert L. Wise(6)............. 3,731
Officers, Directors and
Nominees for Directors
as a Group (18 persons)(7).. 329,765
__________________
<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 relatives.
(2) Includes shares that may be acquired within sixty (60) days
of the Record Date upon the exercise of presently
exercisable stock options as follows: 19,686, 10,961,
2,667, 12,813, 3,333 and 49,460 shares of USBANCORP Common
Stock held by Messrs. Dunkle, Hanselman, O'Neil, Vail, Virag
and the group, respectively. In addition, Messrs. Dunkle,
Hanselman, O'Neil, Vail, Virag and the group hold
outstanding options to acquire 15,000, 8,667, 4,333, 8,667,
4,667 and 41,334 shares of USBANCORP Common Stock,
respectively, that first become exercisable, in part, in
January of 1999, and therefore are excluded.
(3) Ms. Margaret A. O'Malley is voting trustee of all shares of
USBANCORP Common Stock held by Mr. James F. O'Malley and
Jean O'Malley under a Voting Trust Agreement dated March 3,
1997.
(4) Mr. Mark E. Pasquerilla is voting trustee of all shares of
USBANCORP Common Stock held by Mr. Frank J. Pasquerilla and
his wife under a Voting Trust Agreement dated March 4, 1997.
Also includes 1,014 shares of USBANCORP Common Stock held by
Crown American Enterprises, Inc. of which Mark E.
Pasquerilla is an officer.
(5) Includes 637 shares of USBANCORP Common Stock held by
Mr. Slater's wife as to which Mr. Slater disclaims
beneficial ownership.
(6) Includes 283 shares of USBANCORP Common Stock held by
Mr. Wise's son as to which Mr. Wise disclaims beneficial
ownership.
(7) The group consists of 18 persons, being the members of the
Board of Directors of USBANCORP, the Chief Executive Officer
and each other named executive officer of USBANCORP set
forth on the compensation table elsewhere herein.
</TABLE>
Board and Committees
The Board of Directors has various standing committees
including an Audit Committee, a Nominating Committee and a
Management Compensation Committee (the "Compensation Committee").
During 1997, the Board of Directors held 5 meetings, the Audit
Committee held 8 meetings, the Nominating Committee held
1 meeting, and the Compensation Committee held 6 meetings. Each
director attended at least 75% of the combined total of meetings
of the Board of Directors and of each committee of which he was a
member. Mr. John H. Kunkle is not standing for re-election
because he has reached the mandatory retirement age for Board
members.
The Audit Committee is responsible for recommending to the
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 USBANCORP's independent public
accountants, reviewing the adequacy of internal audit and control
procedures, and reporting to the Board of Directors. The Audit
Committee is presently comprised of Directors Adams, Dewar
(Chairman), Kappel, Kunkle, O'Malley, Sevy and Spangler.
The Nominating Committee presently consists of Directors
Barton, Butler, Dunkle (Chairman), Edwards, Hanselman
(non-voting), O'Malley, Pasquerilla, Sevy, Slater, Vail (non-
voting) and Wise. The Nominating Committee is responsible for
nominating individuals to stand for election as directors at the
Annual Meeting of Shareholders and will consider nominees
recommended by shareholders. Shareholders may 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 Annual Meeting.
The Compensation Committee is responsible for reviewing and
making recommendations regarding the compensation of corporate
officers. No director who is eligible to receive any benefit
under plans administered by the Compensation Committee, except
for benefits payable to directors under the Independent Directors
Annual Retainer Plan (the Committee's administration of which is
limited to coordinating the payment of a predetermined retainer)
may serve on the Compensation Committee. The Compensation
Committee is presently comprised of Messrs. Barton, Edwards and
Wise (Chairman). See "Executive Compensation" herein.
Compensation of Directors
Executive officers of USBANCORP who are directors or members
of committees of the USBANCORP Board of Directors or its
subsidiaries receive no compensation for such positions. In
1997, independent directors of USBANCORP received a retainer of
$6,000 payable in USBANCORP Common Stock. In addition, directors
received cash compensation for attendance at USBANCORP Board of
Directors meetings of $450 per meeting. This amount was
increased to $550 per meeting effective March 1, 1997. A fee of
$200 was paid for attendance at committee meetings of the
USBANCORP Board of Directors. This amount was increased to $300
per committee meeting effective March 1, 1997. Certain non-
officer directors of USBANCORP are also directors of U.S. Bank,
Three Rivers Bank and USBANCORP Trust Company (the "Trust
Company"). Directors serving on the Board of Directors of U.S.
Bank, Three Rivers Bank, or the Trust Company were compensated
for their services by a payment of $450 (increased from $350
effective March 1, 1997) for each Board of Directors meeting
attended. A fee of $300 (increased from $200 effective March 1,
1997) was paid for attendance for each committee meeting
attended. Community's Directors became Three Rivers Bank
Directors and now sit on the Three Rivers Bank Board. Directors
who serve on the boards of USNB Financial Services Corporation
and UBAN Associates, Inc. receive no remuneration.
Executive Compensation
Compensation Committee Report on Executive Compensation
USBANCORP's Management Compensation Committee oversees
USBANCORP's executive compensation programs to ensure that they:
attract and retain high caliber executives, deliver the total
compensation package in a cost-effective manner, reinforce key
business objectives, provide competitive compensation
opportunities for competitive results, induce management
ownership of USBANCORP Common Stock, and comply with applicable
regulations.
The role of the Committee is to approve executive salary
adjustments, to administer the Annual Incentive Plan (including
establishment of performance goals), and to administer the 1991
Stock Option Plan. Additionally, from time to time, the Committee
reviews other human resource issues, including qualified and
non-qualified benefits, management performance evaluation, and
succession planning.
Executive Compensation Policy
The Committee uses a formal executive compensation policy to help
evaluate and administer executive pay. The policy addresses each
of the major components of the executive pay program and is
summarized below.
- - Maintain a conservative executive base salary practice
(approximating the 40th percentile of competitive
practices -- defined below) to ensure the appropriate
performance sensitivity and focus on long-term results.
- - Maintain a competitive annual incentive program that
recognizes important achievements consistent with
USBANCORP's long-term objectives, providing target and
maximum annual total cash opportunities that approximate the
40th and 60th percentiles of competitive annual total cash
practices, respectively. A portion of all plan participants'
incentive awards are based upon corporate performance
relative to goals. Certain executives of the subsidiaries
also are evaluated and rewarded based upon subsidiary and
individual performance achievements.
- - Maintain competitive long-term incentives that: align
management's financial interests with those of USBANCORP's
shareholders, induce management ownership of USBANCORP
Common Stock, support the achievement of USBANCORP's
long-term financial objectives, and provide competitive
long-term incentive reward opportunities.
- - Provide typical benefits through qualified programs
generally available to all employees, supplemented by non-
qualified arrangements, as appropriate.
- - Competitive pay practices are determined using two different
sets of data-survey data and peer data.
- Survey data refers to compensation data from banking
industry compensation surveys. Competitive
compensation practices are determined using
compensation levels at holding companies and
subsidiaries of comparable size to USBANCORP and its
subsidiaries, for positions comparable to those held by
the officers identified in the Summary Compensation
Table included herein (the "Named Officers").
- Peer data comes from a group of multi-bank, bank
holding companies of comparable size to USBANCORP.
Most of the institutions are located in Pennsylvania or
Ohio, to recognize USBANCORP's more immediate labor
markets and similar business environments. The other
institutions are generally located in non-major
metropolitan cities of the following states: Illinois,
Indiana, Michigan, and West Virginia.
- The indices used in the Stock Performance Chart are
NASDAQ/NMS (U.S. Companies), NASDAQ Bank Stocks and SNL
$1 Billion-$5 Billion Bank Index. While USBANCORP
believes that some of the surveyed banks and some of
the peer banks may be included within these indices, it
is not the intention of the Committee to establish
executive pay practices based on the pay practices of
the organizations that compose these indices. The
Committee believes that some of the organizations in
these indices would be either too large or too small to
be relevant for setting pay for USBANCORP and
subsidiary executives. The aforementioned surveyed
banks and peer banks provide the Committee with an
organizational-size-sensitive basis for establishing
executive pay practices.
Relationship of Performance Under Compensation Plans
USBANCORP implemented a management salary rollback program in
1996 with the expectation that salaries would be restored upon
material performance improvement. The rollback had the effect of
positioning the Named Officers' salaries below the level stated
in the compensation policy.
As a result of USBANCORP's 1996 results, the salary rollback was
reversed effective 1997. And, the Named Officers were given
salary increases such that their 1997 salaries approximated the
stated compensation policy.
The Company administers an annual incentive plan through which
participants can earn performance-based compensation. The
bonuses of the Named Officers were based on the following
performance measures-corporate return on equity (ROE), total
return to shareholders, a third-party comparative estimate of the
holding company's CAMEL rating (an overall indicator of the
performance and financial soundness of the institution), and
individual performance.
At its February 1998 meeting, the Compensation Committee reviewed
1997 performance results relative to the incentive plan goals for
1997. The Committee determined that ROE and total return to
shareholders performance surpassed the distinguished performance
level, resulting in participants earning the maximum amounts
attributable to ROE and total return to shareholders performance,
respectively. The Committee also determined that USBANCORP's
CAMEL rating attained the threshold performance level. Some of
the Named Officers, but not the CEO of USBANCORP, also received a
portion of their awards based on their performance under the
Company's performance evaluation program.
In December 1997, the Committee awarded long term, performance
based options under the 1991 Stock Option Plan. Unlike prior
option awards, which automatically vest when service requirements
are met, vesting of the options is dependent on ROE performance
as well as service requirements. The goals are positioned to
reward exemplary performance results relative to peers.
The Committee uses a management stock ownership program to
emphasize the 1991 Stock Option Plan's role in aligning
management and shareholder interests. Executives are expected to
attain their respective target stock ownership levels within a
five-year period. Target ownership levels range from a fraction
of salary to two and-one-half times salary. The Committee
periodically reviews the progress of the executives in working
toward their ownership targets, which will be a consideration in
determining future compensation actions.
1997 Compensation for the Chief Executive Officer
Following the reversal of the salary rollback, the CEO's 1997
salary was increased to a level that approximated the stated
compensation policy.
The CEO participated in the Executive Annual Incentive Plan for
1997. The amount of his incentive award was based upon three
areas of performance: ROE, CAMEL rating, and total return to
shareholders. In 1997, USBANCORP's ROE and total return to
shareholders surpassed the distinguished performance level. As a
result, the CEO earned the maximum amounts attributable to ROE
and total return to shareholders performance. CAMEL performance
was positioned at the threshold level, resulting in an award for
this performance component that was below the target award.
In December 1997, the Committee awarded the CEO 10,000 stock
options with an exercise price of $64.50, the fair market value
at grant. The vesting of these options is contingent upon
service restrictions as well as achievement of superior financial
performance over the long term as measured by ROE. All, a
portion, or none of the options may vest, depending on the actual
ROE results. In determining this award, the Committee considered
USBANCORP's compensation policy including USBANCORP's historical
use of options and the competitive position of the pay package as
well as the challenge of the goals around which vesting is tied.
Impact of Omnibus Budget Reconciliation Act of 1993 -
Section 162(m)
The Omnibus Budget Reconciliation Act of 1993 (OBRA)
Section 162(m) prohibits a publicly owned company from taking a
compensation tax deduction for annual compensation in excess of
$1,000,000 for any of the Named Officers. To the extent that
certain guidelines are met, compensation in excess of $1,000,000
is exempt from this limitation.
The Committee does not believe that the deduction limit
imposed by OBRA will affect compensation deductibility given the
compensation opportunities of the Named Officers under
USBANCORP's existing compensation programs. The Committee will
continue to evaluate the potential impact of Section 162(m) and
take such actions as it deems appropriate.
This report is furnished by Messrs. Barton, Edwards and Wise
(Chairman).
Compensation Committee Interlocks and Insider Participation
Messrs. Barton, Edwards and Wise (Chairman) served as
members of the Compensation Committee during 1997. Each member
of the Committee is excluded from participation in any plan
administered by the Committee while serving as a member, except
for participation in the Independent Directors' Annual Retainer
Plan (the Compensation Committee's administration of which is
limited to coordinating the payment of a predetermined retainer).
Mr. Barton did not serve on the Compensation Committee while
serving as Chairman, President and Chief Executive Officer of
USBANCORP.
Compensation Paid to Executive Officers
The following table sets forth information for the three
years ended December 31, 1997 concerning the annual and long-term
compensation for services in all capacities to USBANCORP and its
banking subsidiaries of the Named Officers.
<PAGE>
<TABLE>
<CAPTION>
Summary Compensation Table
Name and Long Term
Principal Position Annual Compensation Compensation(3)
Other Securities All Other
Annual Underlying Compensation
Year Salary($) Bonus($)(1) Compensation($)(2) Options(#)(3) ($)(4)(5)(6)
<S> <C> <C> <C> <C> <C> <C>
Terry K. Dunkle.................... 1997 294,833 113,107 --- 10,000 22,800
Chairman, President and Chief 1996 211,920 84,344 $ --- 15,000 19,866
Executive Officer of USBANCORP 1995 231,647 51,561 --- 5,000 32,826
and Chairman of the Board of
U.S. Bank, Three Rivers Bank,
UBAN Associates, Inc. and
UBAN Mortgage Company
Orlando B. Hanselman............. 1997 160,738 41,087 $ --- 6,000 19,127
Executive Vice President of 1996 126,540 44,770 --- 8,000 5,972
USBANCORP and President and 1995 136,069 26,555 --- 1,500 11,273
Chief Executive Officer of
U.S. Bank
W. Harrison Vail................. 1997 145,000 50,263 $ --- 6,000 12,662
President and Chief Executive 1996 120,744 42,719 --- 8,000 11,487
Officer of Three Rivers Bank, 1995 134,160 25,566 --- 1,500 8,856
and CEO of UBAN Mortgage Company
Kevin J. O'Neil.................. 1997 120,000 32,400 $ --- 3,000 12,269
President and Chief Executive 1996 110,166 29,745 --- 4,000 8,428
Officer Standard Mortgage 1995 102,480 12,810 --- 0 7,654
Corporation of Georgia, a
subsidiary of Three Rivers Bank
Ronald W. Virag................... 1997 107,036 27,540 $ --- 3,000 12,477
President and CEO, USBANCORP 1996 92,283 24,916 --- 5,000 4,633
Trust Company 1995 98,480 --- --- 0 2,185
__________________
<FN>
(1) Includes the cash and cash value of stock awards made to
executive officers of USBANCORP and its subsidiaries under
the Executive Annual Incentive Plan.
(2) Unless otherwise indicated, no executive officer named in
the Summary Compensation Table received personal benefits or
perquisites in excess of the lesser of $50,000 or 10% of the
officer's total compensation (salary and bonus).
(3) Options were granted during 1997, 1996, and 1995 under the
1991 Stock Option Plan to the Named Officers. The options
granted in 1997 will vest in three years only if USBANCORP
meets or exceeds pre-set financial performance goals.
Depending on performance result all, none, or a portion of
the options granted in 1997 may vest.
(4) Includes amounts awarded under the Profit Sharing Plan of
USBANCORP and U.S. Bank. All full-time employees of
USBANCORP and U.S. Bank are entitled to participate in the
Profit Sharing Plan. A contribution during any plan year is
equal to the applicable percentage of U.S. Bank's income as
defined in the plan.
(5) Includes (a) the value of the premium paid by USBANCORP of
$10,000 for a split dollar life insurance policy for
Mr. Dunkle, and (b) the premiums paid by USBANCORP and its
subsidiaries for life insurance policies with coverage
limits above $50,000 to Messrs. Dunkle, Hanselman, O'Neil,
Vail and Virag.
(6) Includes amounts contributed under a 401(k) Plan of
USBANCORP to Messrs. O'Neil and Vail. Under the USBANCORP
sponsored 401(k) plan, employees of Three Rivers Bank and
Standard Mortgage Corporation of Georgia are allowed to
contribute up to 20% of their compensation to the plan with
an employer match of $.50 on each $1.00 of employee
contribution up to a maximum of 6% of an employee's
compensation.
</TABLE>
<PAGE>
Option Grants Table
The following table sets forth information with respect to
grants of stock options made during 1997 to each of the Named
Officers.
<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
Potential
Percent Realizable
of Total Value
Options at Assumed
Granted Annual
Number of to Rates of
Securities Employees Stock Price
Underlying in Exercise or Expira- Appreciation
Options Fiscal Base Price tion for Option
Name Granted (#)(1) Year ($/Share) Date Term($)
0% 5% 10%
<S> <C> <C> <C> <C> <C> <C> <C>
Terry K. Dunkle....... 10,000 33.9 64.50 12/8/2007 0 405,637 1,027,964
Orlando B. Hanselman.. 6,000 20.3 64.50 12/8/2007 0 243,382 616,778
W. Harrison Vail...... 6,000 20.3 64.50 12/8/2007 0 243,382 616,778
Kevin J. O'Neil....... 3,000 10.2 64.50 12/8/2007 0 121,691 308,389
Ronald W. Virag....... 3,000 10.2 64.50 12/8/2007 0 121,691 308,309
Gains applicable to all
shareholders(2)....... --- --- --- --- 0 $198,507,326 $503,056,538
__________________
<FN>
(1) Options were granted under the 1991 Stock Option Plan to
each of the Named Officers on December 8, 1997. The options
granted have a three year vesting period and are contingent
upon achievement of pre-set performance goals relating to
USBANCORP's ROE compared to a bank peer group. Depending
upon performance, all, none or a portion of these options
will vest.
(2) The potential realizable gain to all shareholders (based on
4,893,718 shares of USBANCORP Common Stock outstanding at
December 31, 1997 with an assumed market price of $64.50) at
0%, 5% and 10% assumed annual growth rates over a term of
ten years is provided as a comparison to the potential gain
realizable by the Named Officers at the same assumed annual
rates of stock appreciation.
</TABLE>
Option Exercises and Year-End Value Table
The following table sets forth information concerning the
exercise of options to purchase USBANCORP Common Stock by the
Named Officers during the year ended December 31, 1997, as well
as the number of securities underlying unexercised options and
potential value of unexercised options (both options which are
presently exercisable and options which are not presently
exercisable) as of December 31, 1997.
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUE
Number of Securities
Underlying Unexercised Value of In-the-Money
Shares Options at December 31, 1997 Options at December 31, 1997(2)
Acquired on Value
Name Exercise (#) Realized($)(1) Exercisable(#) Unexercisable(#) Exercisable($) Unexercisable($)
<S> <C> <C> <C> <C> <C> <C>
Terry K. Dunkle....... 1,478 38,393 14,655 21,667 697,487 594,288
Orlando B. Hanselman.. 1,213 40,560 8,404 11,833 404,101 302,788
W. Harrison Vail...... 2,500 85,563 10,167 11,833 493,743 302,788
Kevin J. O'Neil....... 350 6,913 3,516 5,667 161,764 138,305
Ronald W. Virag....... 354 8,319 3,507 6,333 165,698 165,820
_______________________
<FN>
(1) Represents the aggregate market value of the underlying
shares of USBANCORP Common Stock at the date of exercise
minus the aggregate exercise prices for options exercised.
(2) "In-the-money options" are stock options with respect to
which the market value of the underlying shares of USBANCORP
Common Stock exceeded the exercise price at December 31,
1997. The value of such options is determined by
subtracting the aggregate exercise price for such options
from the aggregate fair market value of the underlying
shares of USBANCORP Common Stock on December 31, 1997. Fair
market value was determined by reference to the average of
the high and low sale prices of USBANCORP Common Stock as
quoted on the Nasdaq Stock Market.
</TABLE>
<PAGE>
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 termination of employment for which the average is
highest.
U.S. Bank expects to make a contribution of $909,569 in 1998
for the 1997 plan year.
Estimated annual benefits payable upon retirement at age 65
after 15 years of service with respect to the specified
remuneration are as follows:
PENSION TABLE
U.S. BANK
Five Calendar Year
Average Salary Annual Benefit at
Preceding Retirement Normal Retirement Date
$ 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
150,000(1) 55,500
_______________________
(1) Effective for retirements on or after January 1, 1994,
annual compensation for Plan purposes may not exceed
$150,000 plus any increases applicable to cost of living
adjustments. Employees with compensation exceeding $150,000
in years before 1994 may have larger "preserved benefits."
The above benefits are paid for the life of the employee
with a right of survivorship with respect to ten years of
post-retirement benefits. Other optional forms of benefit are
available, in actuarially equivalent amounts. Current
remuneration covered by the U.S. Bank Plan (base salary) in 1997
for Messrs. Dunkle, Hanselman and Virag was $294,833, $160,738
and $107,036, respectively, subject to the $150,000 limitation.
As of December 31, 1997, Mr. Dunkle was credited with 10 years of
service, Mr. Hanselman with 11 years of service and Mr. Virag
with 3 years of service.
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.
Pension Plan - Three Rivers Bank
Three Rivers Bank maintained a defined benefit pension plan
that was established during 1970 (the "Three Rivers Plan").
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 1997 for Mr. Vail and Mr. O'Neil was $145,000 and
$120,000. As of December 31, 1997, Mr. Vail and Mr. O'Neil were
credited with 13 years and 4 years of service, respectively.
Three Rivers Bank expects to make a total contribution to
the Three Rivers Plan of $889,445 in 1998 for the 1997 plan year.
Supplemental Pension Plan
USBANCORP has provided additional life insurance and
retirement benefits 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 Mr. Dunkle's
retirement, USBANCORP will recover, through a withdrawal from the
policy, its cumulative premiums or the policy cash value if less.
Mr. Dunkle will receive a paid-up life insurance policy that will
include any remaining cash value. If Mr. Dunkle dies prior to
retirement, USBANCORP will be reimbursed for its total premiums
from the insurance proceeds. The annual premium paid by
USBANCORP is $10,000 per year, and USBANCORP has an interest in
the policy cash value equal to the lesser of its cumulative
premiums or the policy cash value.
The Compensation Committee determined that it was
appropriate to provide additional supplemental retirement
benefits to Mr. Dunkle commencing at his retirement, because
recent revisions in Code regulations significantly limit
retirement benefits payable to highly compensated executives
under qualified pension, profit sharing, and 401(k) plans.
Accordingly, on February 25, 1994, the Board of Directors of
USBANCORP adopted a supplemental executive retirement plan
("SERP") for the benefit of Mr. Dunkle.
The SERP will provide supplemental retirement benefits to
Mr. Dunkle, which, in combination with benefits from all
USBANCORP sponsored qualified and non-qualified pension plans,
will ensure an appropriate total retirement benefit for
Mr. Dunkle. The target retirement benefit is 55% of the final
three-year average salary of Mr. Dunkle commencing at his normal
retirement age of 65. Although the SERP is an unfunded plan,
USBANCORP can set aside assets to meet its obligations under the
plan. USBANCORP has purchased a life insurance policy on
Mr. Dunkle's life. Assuming continuation of current interest
rates and mortality charges, USBANCORP's total premium outlay
will be completed by the time Mr. Dunkle attains normal
retirement age. The policy is designed to accumulate sufficient
cash value at Mr. Dunkle's retirement to allow USBANCORP to
recover the after tax cost of each annual SERP payment. In
addition, at Mr. Dunkle's death, tax-free life insurance proceeds
will reimburse USBANCORP for all unrecovered costs associated
with the plan. USBANCORP will not recover interest for the time
value of money.
The life insurance policy has been assigned to a Rabbi Trust
established by USBANCORP to assist USBANCORP in satisfying its
obligations to Mr. Dunkle. The Trust Company, as trustee, is the
policy owner and beneficiary. Mr. Dunkle remains a general
unsecured creditor of USBANCORP and the assets of the trust are
subject to the claims of creditors.
The Board of Directors also approved the purchase of an
individual disability income policy for Mr. Dunkle. Mr. Dunkle
has collaterally assigned the policy to USBANCORP so that in the
event of his disability prior to retirement, the policy will pay
USBANCORP a monthly benefit sufficient to pay the premium on the
SERP life insurance policy on Mr. Dunkle's life. This would
relieve USBANCORP of the obligations to pay premiums on the SERP
policy if Mr. Dunkle becomes disabled, without reducing the
promised SERP retirement benefits to Mr. Dunkle.
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 U.S. Bank as participants and
specify the amount of supplemental pension payment the
participant shall receive.
A participating officer agrees to perform, 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 a
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.
Change in Control Agreements
In 1994, USBANCORP entered into Change in Control Agreements
(the "Agreements") with Messrs. Terry K. Dunkle, Orlando B.
Hanselman, Kevin J. O'Neil, W. Harrison Vail and Ronald W. Virag,
pursuant to which USBANCORP agreed to provide the executives with
severance benefits upon the occurrence of certain enumerated
events ("Triggering Events") following a change in control of
USBANCORP ("Change in Control") (as defined in the Agreements).
The initial term of the Agreements is three years, subject to an
automatic one year extension on each anniversary date thereof,
unless either party gives notice to the other of an intention not
to renew. Under the Agreements, upon the occurrence of a
Triggering Event following a Change in Control, Mr. Dunkle would
be entitled to receive approximately 2.99 times his combined
salary and bonus which will be determined (a) during the initial
three year term of the Agreement by reference to his highest
salary and bonus paid in the year in which he is terminated or in
any one of the last five fiscal years preceding such termination,
and (b) after the expiration of the initial term, by reference to
the average of the executive's combined salary and bonus in the
preceding five years. The Change in Control Agreements for each
of Messrs. Hanselman, O'Neil, Vail and Virag are identical,
except that Messrs. O'Neil, Vail, and Virag will receive one
times their combined base salary and bonus and Mr. Hanselman will
receive 1.5 times his combined base salary and bonus. The
executives, in their discretion, may receive these payments in a
lump sum or on a monthly installment basis. The Change in
Control Agreements also entitle the executives to continued
participation in the employee benefits plans of USBANCORP for a
period of three years with respect to Mr. Dunkle, eighteen months
with respect to Mr. Hanselman and one year with respect to the
other executives. In addition, the Agreements provide that
options held by the executives to acquire USBANCORP Common Stock,
to the extent not currently exercisable, will become immediately
exercisable upon the occurrence of a Triggering Event following a
Change in Control and may be exercised by the executives at any
time prior to the earlier of the expiration date of the options
or 90 days after the executive's termination. The Agreements
also require USBANCORP to make additional payments to the
executives in the event that the severance payments described
above result in the imposition of an excise tax, pursuant to
Section 4999 of the Code on the payment of such amounts.
Performance Graph
Set forth is a graph comparing the yearly percentage change
in the cumulative total shareholder return on USBANCORP Common
Stock against the Nasdaq Stock Market (U.S. Companies) and the
NASDAQ Bank Stocks for the five years beginning January 1, 1993
and ended December 31, 1997.
<TABLE>
<CAPTION>
Legend
Symbol Index Description 12/31/92 12/31/93 12/30/94 12/29/95 12/31/96 12/31/97
<S> <C> <C> <C> <C> <C> <C> <C>
USBANCORP, INC., PA 100 111.9 103.0 168.7 221.6 398.4
Index for Nasdaq Stock 100 114.8 112.2 158.7 195.2 239.5
Market (US Companies)
Index for Nasdaq Bank 100 114.0 113.6 169.2 223.4 377.4
Stocks
SNL $1 Billion-
$5 Billion Bank Index 100 120.2 126.5 170.2 220.6 367.9
</TABLE>
<PAGE>
MATTER NO. 2
PROPOSAL TO APPROVE AMENDMENT
TO 1991 STOCK OPTION PLAN
The Board of Directors of USBANCORP believes that
USBANCORP's stock option program constitutes an important part of
its compensation program and, accordingly, USBANCORP has adopted,
subject to shareholder approval, an amendment to the USBANCORP,
Inc. 1991 Stock Option Plan (the "Option Plan") solely to
increase the number of shares of USBANCORP Common Stock available
for issuance thereunder from 285,000 shares to 485,000 shares.
The purpose of the Option Plan is to enhance the performance
focus of the executives of USBANCORP and its subsidiaries. By
encouraging ownership of USBANCORP Common Stock among those
employees who have significant roles in USBANCORP's success, the
Option Plan more closely aligns the interests of its employees
with those of its shareholders, which USBANCORP believes
ultimately benefits its shareholders. Moreover, USBANCORP
believes that the Option Plan has a positive effect on
USBANCORP's ability to attract, motivate and retain employees of
outstanding skill and ability.
Since its adoption in 1991 through December 31, 1997,
USBANCORP has issued options under the Option Plan to acquire
253,800 shares of USBANCORP Common Stock. The amendment to the
Option Plan, if approved by the shareholders of USBANCORP, would
increase the number of shares currently available for future
grants to 231,200.
The Option Plan
The principal features of the Stock Option Plan are
described below.
The Option Plan, as amended, authorizes the committee (the
"Stock Option Committee") to grant options to purchase up to an
additional 200,000 shares of USBANCORP Common Stock for a total
of 485,000 shares to eligible employees of USBANCORP. Under the
Option Plan, the Stock Option Committee has full and final
authority to (a) grant stock options, (b) determine to whom such
options shall be granted, (c) determine the number of shares to
be covered by such options, and (d) interpret the Option Plan and
prescribe rules and procedures it deems necessary and advisable
for the administration of the Option Plan. Under the Option
Plan, the Stock Option Committee must consist of at least three
members of the Board of Directors, none of whom may be or were,
within one year prior to becoming a member of the Stock Option
Committee, eligible for a grant of stock options under the Option
Plan.
Under the Option Plan, the Stock Option Committee may grant
(a) incentive stock options (as defined in Section 422 of the
Code), and/or (b) non-statutory qualified stock options (options
which do not qualify under Section 422 of the Code). Options
granted under the Option Plan become exercisable by the optionee
in the amount of one-third on or after the first anniversary date
of the grant, two-thirds on or after the second anniversary date
of the grant, and the remainder after the third anniversary of
the date of the grant. Incentive stock options expire by their
terms after ten years (five years in the case of an employee
owning 10% or more of USBANCORP Common Stock) from their date of
grant. Nonqualified stock options expire ten years and six
months from their date of grant.
The exercise price of an option is determined by the Stock
Option Committee but must be at least 100% of the fair market
value per share of USBANCORP Common Stock (as defined in the
Option Plan). The option price may be paid in cash and/or in
shares of USBANCORP Common Stock owned by the optionee.
Shares issued or delivered under the Option Plan may be
either authorized, but unissued shares or treasury shares as
determined from time to time by the Board. If any option granted
under the Option Plan is cancelled or expires without having been
exercised in full, the number of shares subject to such option
will be available for purposes of the Option Plan.
If a stock dividend, stock split or related distribution is
made upon the USBANCORP Common Stock, the shares subject to an
outstanding option will be adjusted or substituted to give effect
to such distribution. No fractional shares will be issued under
the Option Plan. Any fractional shares arising from a
distribution described above will be eliminated and not carried
forward to any subsequent adjustments or substitutions required
pursuant to the terms of the Option Plan.
Salaried employees of USBANCORP or its subsidiaries with
executive, managerial, technical or professional responsibility
are eligible to participate in the Option Plan.
Stock options granted under the Option Plan are not
transferrable except by an optionee by will or by the operation
of the laws of descent and distribution. If an optionee
voluntarily terminates his or her employment, options held by
such optionee may be exercised to the extent they are exercisable
on the date of his or her termination at any time prior to the
earlier of (a) the expiration date of the option, or (b) three
months from the date of termination. If an employee retires
under a retirement plan of USBANCORP or its subsidiaries or
becomes disabled, any outstanding options held by the optionee,
may be immediately exercised in full by the optionee (whether or
not exercisable on the date of termination of employment) at any
time prior to the earlier of (a) the expiration date of the
option, or (b) (i) with respect to an employee who retires, the
date which is three months after the date of termination of
employment, and (ii) with respect to an employee who becomes
disabled, one year after the date of termination of employment.
Options held by the estate of a deceased employee may at any time
be exercised in full by the person or persons entitled to do so
under the will or by operation of law at any time prior to the
expiration date of the option or within one year from the date of
death, whichever is earlier. If employment of an optionee
terminates for any other reason, the right of such optionee to
exercise any options shall terminate as of the date of
termination.
The obligation of USBANCORP to issue or deliver shares of
USBANCORP Common Stock under the Option Plan is subject to such
issuance and delivery being in compliance with all applicable
laws, regulations, rules and orders which may be in effect at
that time.
Generally, options become exercisable, in full, within three
years from the date of issuance. However, upon the occurrence of
certain events, outstanding options will become immediately
exercisable for a period of sixty days. These events include
(a) a tender offer or an exchange offer commenced by a person or
group, other than USBANCORP, for shares of USBANCORP Common
Stock, (b) the acquisition by any person or group of shares of
USBANCORP Common Stock that gives them the right to vote 20% or
more of all shares entitled to vote for the election of
directors, (c) the filing by any person or group of its or their
intention or possible intention to acquire or change control of
USBANCORP, (d) as of any date, the persons who constituted the
majority of the Board of Directors of USBANCORP during the two
year period prior to such date cease to constitute at least the
majority thereof, unless the election or nomination for election
by shareholders of USBANCORP of each new director was approved by
a vote of at least two-thirds of the directors still then in
office who were directors at the beginning of the two year
period, and (e) approval by the shareholders of USBANCORP of an
agreement providing for (i) the merger or consolidation of
USBANCORP with another corporation where (A) present shareholders
of USBANCORP will not thereafter beneficially own shares of the
resulting entity in an amount equal to at least 40% of all voting
shares of the resulting entity entitled to vote for the election
of directors, or (B) members of the Board of Directors of
USBANCORP immediately prior to the merger or consolidation do not
immediately thereafter constitute a majority of the Board of
Directors of the resulting entity or (ii) the sale or disposition
of all or substantially all of the assets of USBANCORP.
The Board may amend, suspend or terminate the Option Plan at
any time without shareholder approval; provided, however, that
the Board may not, without shareholder approval, amend the Option
Plan to (a) increase the total number of shares that may be
issued, (b) increase the total number of shares issued pursuant
to any option granted to any one optionee, (c) make any change in
the class of eligible employees or set forth a period during
which stock options may be granted, or (d) reprice any
outstanding options.
Tax Consequences
The Option Plan permits eligible employees of USBANCORP and
its subsidiaries to receive grants of incentive stock options,
which qualify for certain tax benefits. In addition, the Option
Plan permits eligible employees of USBANCORP to receive grants of
nonqualified stock options, which do not qualify for special tax
benefits.
The Option Plan is not a qualified plan under Code
Section 401(a). USBANCORP has been advised that under the Code
the following federal income tax consequences will result when
incentive stock options or nonqualified stock options, or any
combination thereof, are granted or exercised, although the
following is not intended to be a complete statement of the
applicable law.
Incentive Stock Options
An optionee generally will not be deemed to receive any
income for federal income tax purposes at the time an incentive
stock option is granted, nor will USBANCORP be entitled to a tax
deduction at that time. Upon the sale or exchange of the shares
at least two years after the grant of the option and one year
after receipt of the shares by the optionee upon exercise, the
optionee will recognize long-term capital gain or loss upon the
sale of such shares equal to the difference between the amount
realized on such sale and the exercise price.
If the foregoing holding periods are not satisfied or the
option is exercised more than three months after the optionee's
employment with USBANCORP has terminated, the optionee will
recognize upon the sale of the underlying shares, ordinary income
equal to the difference between the exercise price and the lower
of the fair market value of the stock at the date of the option
exercise or the sale price of the stock. If the sale price
exceeds the fair market value on the date of exercise, the gain
in excess of the ordinary income portion will be treated as
either long-term or short-term capital gain, depending on whether
the stock has been held for more than 12 months after the date of
sale. Any loss on disposition is a long-term or short-term
capital loss, depending upon whether the optionee held the stock
for more than 12 months. A different rule for measuring ordinary
income upon such a premature disposition may apply if the
optionee is a director or 10 percent shareholder of USBANCORP or
an officer of USBANCORP subject to Section 16(b) of the Exchange
Act. If USBANCORP cancels an option, the optionee recognizes
income to the extent of the amount paid by USBANCORP to cancel
the option over the optionee's basis in such option, if any.
No income tax deduction will be allowed to USBANCORP with
respect to shares purchased by an optionee upon the exercise of
an incentive stock option, provided that such shares are held at
least two years after the date of grant and at least one year
after the date of exercise. However, if these holding periods
are not satisfied, USBANCORP may deduct an amount equal to the
ordinary income recognized by the optionee upon disposition of
the shares.
The exercise of an incentive stock option and the sale of
stock acquired by such exercise could subject an optionee to
alternative minimum tax liability for federal income tax
purposes.
Nonqualified Stock Options
An optionee will not be deemed to receive any income for
federal income tax purposes at the time a nonqualified option is
granted, nor will USBANCORP be entitled to a tax deduction at
that time. At the time of exercise, however, the optionee will
realize ordinary income in an amount equal to the excess of the
fair market value of the shares at the time of exercise of the
option over the option price of such shares. USBANCORP is
allowed a federal income tax deduction in an amount equal to the
ordinary income recognized by the optionee due to the exercise of
a nonqualified stock option.
Stock-for-Stock Exchange
An optionee who exchanges "statutory option stock" of
USBANCORP in payment of the purchase price upon the exercise of
an incentive stock option will be deemed to make a "disqualifying
disposition" of the statutory option stock so transferred unless
the applicable holding requirements (two years from the date of
the grant and one year after the exercise of an incentive stock
option) with respect to such statutory option stock are met after
the exercise of incentive stock options but also upon the
exercise of qualified stock options and stock acquired under
certain other stock purchase plans. If an optionee exercises
nonqualified stock options by exchanging previously-owned
statutory option stock, the Internal Revenue Service has ruled
that the optionee will not recognize gain on the disposition of
the statutory option stock (assuming the holding period
requirements applicable to such statutory option stock have been
satisfied) because of the non-recognition rule of Code
Section 1036.
New Plan Benefits and Distribution Table
The following table shows as to the following participants
(i) the number of option shares that were granted in 1997 under
the Option Plan; and (ii) the aggregate number of option shares
granted under the Option Plan since its adoption in 1991.
Name and Position(2)(3) Options Granted(1)
From inception
1997 of Option Plan
Terry K. Dunkle, 10,000 44,000
Chairman, President and Chief
Executive Officer of USBANCORP
and Chairman of the Board of
U.S. Bank, Three Rivers Bank,
UBAN Associates, Inc. and
UBAN Mortgage Company
Orlando B. Hanselman, 6,000 22,500
Executive Vice President of
USBANCORP and President and
Chief Executive Officer of
U.S. Bank
Kevin J. O'Neil, 3,000 12,000
President and Chief Executive
Officer of Standard Mortgage
Corporation of Georgia, a
subsidiary of Three Rivers Bank
W. Harrison Vail, 6,000 27,000
President and Chief Executive
Officer of Three Rivers Bank
and CEO of UBAN Mortgage Company
Ronald W. Virag, 3,000 10,500
President and Chief Executive
Officer of USBANCORP Trust
Company
Named Executives as a group 28,000 116,000
Independent directors as a group -- --
Other officers and employees
as a group 1,500 137,800
_______________
(1) The exercise price of the options granted in 1997 was $64.50
per share. The weighted average exercise price of the
options granted since the inception of the Option Plan
through December 31, 1997, is $30.06. The fair market value
of USBANCORP Common Stock on March 5, 1998 was $__________.
(2) Except for the Named Officers, none of the nominees for
director have been issued options under the Option Plan.
(3) No options have been issued to any associates of any of the
directors, executive officers or nominees for director of
USBANCORP and except as disclosed in the table above, no
person has received options to purchase five percent (5%) or
more of the total shares authorized for issuance under the
Option Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ADOPTION OF
THE AMENDMENT TO THE 1991 STOCK OPTION PLAN. The affirmative
vote of a majority of all votes cast at the Annual Meeting is
required to adopt the amendment to the Option Plan. All proxies
will be voted "FOR" adoption of the amendment to the Option Plan
unless a shareholder specified to the contrary on such
shareholder's proxy card.
<PAGE>
MATTER NO. 3
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 12,000,000 shares of
USBANCORP Common Stock, par value $2.50. At March 5, 1998, no
shares of Preferred Stock were outstanding and __________ shares
of USBANCORP Common Stock were outstanding. 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 24,000,000. 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 of USBANCORP shall have
the authority to issue is 2,000,000 shares of Preferred
Stock, without par value and 24,000,000 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.
<PAGE>
FINANCIAL INFORMATION
Requests for printed financial material for USBANCORP or any
of its subsidiaries - annual reports, Forms 10-K and 10-Q and
Call Reports - should be directed to Jeffrey A. Stopko, Senior
Vice President and Chief Financial Officer, USBANCORP, Inc.,
P.O. Box 430, Johnstown, PA 15907-0430, telephone (814) 533-5310.
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 1997. Transactions that
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 unrelated
persons and did not involve more than the normal risk of
collectability or present other unfavorable features. These
loans represented in the aggregate less than 1.27% of
shareholders' equity as of December 31, 1997.
Mr. Adams, a director of USBANCORP, Three Rivers Bank, the
Trust Company, Standard Mortgage Corporation of Georgia, UBAN
Associates, Inc. and UBAN Mortgage Company is a partner in a law
firm which rendered services to Three Rivers Bank during 1997 and
will render such services in 1998.
INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP has audited USBANCORP's financial
statements for the fiscal year ended December 31, 1997 and the
report on such financial statements appears in the Annual Report
to Shareholders. Arthur Andersen LLP 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, 1998.
Representatives of Arthur Andersen LLP are expected to be
present at the 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.
OTHER MATTERS
The Board of Directors knows of no other matters to be
presented at the Annual Meeting. If, however, any other business
should properly come before the Annual Meeting, or any
adjournment thereof, it is intended that the proxies will be
voted with respect thereto in accordance with the best judgment
of the persons named in the proxies.
SHAREHOLDERS PROPOSALS FOR NEXT ANNUAL MEETING
Any shareholder desiring to present a proposal to be
considered at the 1999 Annual Meeting of Shareholders should
submit the proposal in writing to: Terry K. Dunkle, Chairman,
President and Chief Executive Officer, USBANCORP, Inc., Executive
Offices, P.O. Box 430, Johnstown, PA 15907-0430 no later than
November 20, 1998.
By Order of the Board of Directors
/s/ Betty L. Jakell
Betty L. Jakell
Corporate Secretary
March 20, 1998
