<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 19, 1996
REGISTRATION NO. 33-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
------------------------
BT FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
PENNSYLVANIA 6022 25-1441348
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
BT FINANCIAL PLAZA,
551 MAIN STREET, JOHNSTOWN, PENNSYLVANIA 15901
(814) 532-3801
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
------------------------
JOHN H. ANDERSON
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
BT FINANCIAL CORPORATION
BT FINANCIAL PLAZA,
551 MAIN STREET, JOHNSTOWN, PENNSYLVANIA 15901
(814) 532-3801
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------------
COPIES TO:
<TABLE>
<S> <C>
DENNIS M. SHEEDY, ESQ. CHARLES B. JARRETT JR., ESQ.
KIRKPATRICK & LOCKHART LLP PLOWMAN, SPIEGEL & LEWIS, P.C.
1500 OLIVER BUILDING GRANT BUILDING, SUITE 230
PITTSBURGH, PENNSYLVANIA 15222 PITTSBURGH, PA 15219
(412) 355-6500 (412) 471-8521
</TABLE>
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>
===========================================================================================================
PROPOSED PROPOSED
AMOUNT MAXIMUM MAXIMUM
TITLE OF EACH CLASS OF TO BE OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED(1) PER UNIT(2) OFFERING PRICE(2) REGISTRATION FEE
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------
Common stock, par value
$5.00 per share................. 1,127,069 $17.99 $20,277,441 $6,993
- -----------------------------------------------------------------------------------------------------------
Preferred Share Purchase Rights... 1,127,069 N.A. N.A. N.A.
===========================================================================================================
</TABLE>
(1) Represents the maximum number of shares of common stock and preferred share
purchase rights of the registrant which may be issued to holders of Moxham
Bank Corporation common stock and preferred stock upon consummation of the
merger described in this registration statement.
(2) Estimated solely for the purpose of calculating the amount of the
registration fee, in accordance with Rule 457(f)(2), on the basis of the
book value per share of Moxham Bank Corporation common stock and preferred
stock as of December 31, 1995. For purposes of estimating the offering price
and the registration fee, the preferred share purchase rights are not deemed
to have any material value apart from the registrant's common stock with
which such rights are associated.
------------------------
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 THIS REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
BT FINANCIAL CORPORATION
CROSS-REFERENCE SHEET PURSUANT TO RULE 404(A) OF REGULATION C AND
ITEM 501(B) OF REGULATION S-K SETTING FORTH THE LOCATION IN
THE JOINT PROXY STATEMENT/PROSPECTUS OF THE INFORMATION REQUIRED
BY PART I OF FORM S-4.
<TABLE>
<CAPTION>
LOCATION IN PROXY
FORM S-4 ITEM NUMBER AND CAPTION STATEMENT/PROSPECTUS
-------------------------------- --------------------
<C> <S> <C>
A. INFORMATION ABOUT THE TRANSACTION
1. Forepart of Registration Statement and
Outside Front Cover Page of Prospectus..... Outside Front Cover Page; Cross Reference
Sheet; Outside Front Cover Page of Proxy
Statement/Prospectus
2. Inside Front and Outside Back Cover Pages
of Prospectus.............................. Available Information; Incorporation of
Certain Documents by Reference; Table of
Contents
3. Risk Factors, Ratio of Earnings to Fixed
Charges and Other Information.............. Summary; Comparative Per Share Data;
Comparative Market Prices; Selected
Financial Information
4. Terms of the Transaction................... Summary; The Merger; The Merger Agreement;
Comparison of Shareholder Rights;
Description of BT Financial Capital Stock
5. Pro Forma Financial Information............ Summary; Unaudited Pro Forma Condensed
Combined Financial Information
6. Material Contracts with the Company Being
Acquired................................... Summary; The Meetings; The Merger; The
Merger Agreement
7. Additional Information Required for
Reoffering by Persons and Parties Deemed to
be Underwriters............................ *
8. Interests of Named Experts and Counsel..... *
9. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities................................ *
B. INFORMATION ABOUT THE REGISTRANT
10. Information with Respect to S-3
Registrants................................ Outside Front Cover Page; Summary; Selected
Financial Information; Certain Information
Regarding BT Financial
11. Incorporation of Certain Information by
Reference.................................. Incorporation of Certain Documents by
Reference
12. Information with Respect to S-2 or S-3
Registrants................................ *
13. Incorporation of Certain Information by
Reference.................................. *
14. Information with Respect to Registrants
Other Than S-3 or S-2 Registrants.......... *
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
LOCATION IN PROXY
FORM S-4 ITEM NUMBER AND CAPTION STATEMENT/PROSPECTUS
-------------------------------- --------------------
<C> <S> <C>
C. INFORMATION ABOUT THE COMPANY BEING ACQUIRED
15. Information with Respect to S-3
Companies.................................. *
16. Information with Respect to S-2 or S-3
Companies.................................. *
17. Information with Respect to Companies Other
Than S-3 or S-2 Companies.................. Summary; Selected Financial Information;
Certain Information Regarding Moxham; Index
to Moxham and Armstrong Financial
Statements
D. VOTING AND MANAGEMENT INFORMATION
18. Information if Proxies, Consents or
Authorizations are to be Solicited......... Incorporation of Certain Documents by
Reference; Summary; The Meetings; The
Merger
19. Information if Proxies, Consents or
Authorizations are not to be Solicited or
in an Exchange Offer....................... *
<FN>
- ---------------
* Not applicable or the answer is negative.
</TABLE>
<PAGE> 4
MOXHAM BANK CORPORATION
540 CENTRAL AVENUE
JOHNSTOWN, PENNSYLVANIA 15902
April , 1996
Dear Shareholder:
You are cordially invited to attend a special meeting (the "Moxham
Meeting") of the shareholders of Moxham Bank Corporation ("Moxham") to be held
at Moxham's executive offices, 540 Central Avenue, Johnstown, Pennsylvania, at
10:00 a.m., local time, on May , 1996.
The purpose of the Moxham Meeting is to vote on adoption and approval of
the Agreement and Plan of Reorganization dated January 12, 1996, by and between
Moxham and BT Financial Corporation, a Pennsylvania corporation ("BT Financial")
(the "Merger Agreement"), providing for the merger of Moxham into BT Financial
(the "Merger").
The Merger Agreement provides that at the effective time of the merger each
outstanding share of Moxham common stock will be converted into 1.15 shares of
BT Financial common stock ("BT Financial Common Stock") and each share of Moxham
preferred stock will be converted into 6.325 shares of BT Financial Common
Stock.
BT Financial is a multi-bank holding company organized under the laws of
the Commonwealth of Pennsylvania with headquarters in Johnstown, Pennsylvania.
At December 31, 1995, BT Financial had consolidated total assets of
approximately $1.2 billion, consolidated total deposits of approximately $1.04
billion and consolidated total shareholders' equity of approximately $102
million. BT Financial Common Stock is quoted on the Nasdaq Stock Market under
the symbol "BTFC". The closing price for BT Financial Common Stock on April ,
1996 was $ per share.
Moxham is a multi-bank holding company organized under the laws of the
Commonwealth of Pennsylvania. At December 31, 1995, Moxham had consolidated
total assets of approximately $241 million, consolidated total deposits of
approximately $218 million and consolidated total shareholder's equity of
approximately $20 million.
The Merger Agreement also provides for the merger of The First National
Bank of Garrett and The Moxham National Bank of Johnstown, national banking
associations and wholly-owned subsidiaries of Moxham, into Johnstown Bank and
Trust Company, a Pennsylvania bank and trust company and a wholly-owned
subsidiary of BT Financial.
The Board of Directors of Moxham believes that the Merger is in the best
interests of Moxham and its shareholders and recommends that you vote FOR the
approval and adoption of the Merger Agreement and the transactions contemplated
thereby. The attached Joint Proxy Statement/Prospectus explains the Merger in
detail. Please carefully review and consider all of this information.
It is especially important that your shares be represented and voted at the
Moxham Meeting. Please complete, sign, date and promptly return the enclosed
proxy card even if you currently plan to attend the Moxham Meeting. You may
revoke your proxy at any time before it is voted by giving written notice to
Moxham. If you attend the meeting and vote in person, your vote will supersede
your proxy.
Sincerely,
J. William Smith
President and
Chief Executive Officer
<PAGE> 5
MOXHAM BANK CORPORATION
540 CENTRAL AVENUE
JOHNSTOWN, PENNSYLVANIA 15902
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY , 1996
NOTICE IS HEREBY GIVEN that a special meeting (the "Moxham Meeting") of
shareholders of Moxham Bank Corporation, a Pennsylvania corporation ("Moxham"),
will be held on May , 1996, at the executive offices of Moxham at 540
Central Avenue, Johnstown, Pennsylvania, commencing at 10:00 a.m., local time,
to consider and vote upon the following:
1. A proposal to adopt and approve an Agreement and Plan of
Reorganization dated as of January 12, 1996 by and between BT Financial
Corporation, a Pennsylvania business corporation ("BT Financial") and
Moxham, pursuant to which Moxham will merge (the "Merger") with and into BT
Financial, with BT Financial being the surviving corporation, and
immediately following the Merger, BT Financial will merge (the "Bank
Merger") The Moxham National Bank of Johnstown, a national banking
association and The First National Bank of Garrett, a national banking
association (collectively the "Banks"), wholly-owned subsidiaries of
Moxham, with and into Johnstown Bank and Trust Company ("Johnstown Bank"),
a Pennsylvania bank and trust company and wholly-owned subsidiary of BT
Financial, with Johnstown Bank as the surviving corporation, as more fully
described in the enclosed Joint Proxy Statement/Prospectus; and
2. The transaction of such other business as may properly come before
the Moxham Meeting or any adjournment or postponement thereof.
Only holders of record of shares of Moxham common stock at the close of
business on April , 1996 are entitled to notice of and to vote at the Meeting
and any adjournment or postponement thereof.
Any Moxham shareholder will have the right to dissent from the Merger and
to obtain payment for the fair value of his shares upon compliance with the
applicable provisions of Pennsylvania law. For a summary of the rights of Moxham
shareholders to dissent, see "The Merger--Rights of Dissenting Shareholders" in
the attached Joint Proxy Statement/Prospectus. A copy of Subchapter D of Chapter
15 and Section 1930 of the Pennsylvania Business Corporation Law of 1988, which
relates to dissenters' rights, is included in the attached Joint Proxy
Statement/Prospectus as Annex D.
By Order of the Board of Directors,
J. William Smith
President and Chief Executive Officer
April , 1996
SHAREHOLDERS OF MOXHAM COMMON STOCK ARE URGED TO MARK, DATE, SIGN AND RETURN
PROMPTLY THE ENCLOSED PROXY CARD IN THE ACCOMPANYING ENVELOPE, WHICH REQUIRES NO
POSTAGE IF MAILED IN THE UNITED STATES. IF A SHAREHOLDER OF MOXHAM COMMON STOCK
RECEIVES MORE THAN ONE PROXY CARD BECAUSE THAT SHAREHOLDER OWNS SHARES
REGISTERED IN DIFFERENT NAMES OR AT DIFFERENT ADDRESSES, EACH PROXY CARD SHOULD
BE COMPLETED AND RETURNED. YOUR COOPERATION WILL BE APPRECIATED. ALL PROPERLY
EXECUTED PROXIES RECEIVED PRIOR TO OR AT THE MOXHAM MEETING WILL BE VOTED WITH
RESPECT TO THE MATTER IDENTIFIED ON THE PROXY CARDS IN ACCORDANCE WITH ANY
INSTRUCTIONS THEREON AND, IF NO INSTRUCTIONS ARE GIVEN, WILL BE VOTED FOR
ADOPTION AND APPROVAL OF THE MERGER AGREEMENT.
<PAGE> 6
BT FINANCIAL CORPORATION
BT FINANCIAL PLAZA
551 MAIN STREET
JOHNSTOWN, PENNSYLVANIA 15901
April , 1996
Dear Shareholder:
You are cordially invited to attend a special meeting (the "BT Financial
Meeting") of the shareholders of BT Financial Corporation ("BT Financial") to be
held at the executive offices of Johnstown Bank and Trust Company ("Johnstown
Bank"), 532-34 Main Street, Johnstown, Pennsylvania, at 10:00 a.m., local time,
on May , 1996.
The purpose of the BT Financial Meeting is to vote on adoption and approval
of the Agreement and Plan of Reorganization dated January 12, 1996, by and
between BT Financial and Moxham Bank Corporation, a Pennsylvania corporation
("Moxham") (the "Merger Agreement"), providing for the merger of Moxham into BT
Financial (the "Merger").
The Merger Agreement provides that at the effective time of the merger each
outstanding share of Moxham common stock will be converted into 1.15 shares of
BT Financial common stock ("BT Financial Common Stock") and each share of Moxham
preferred stock will be converted into 6.325 shares of BT Financial Common
Stock.
Moxham is a multi-bank holding company organized under the laws of the
Commonwealth of Pennsylvania. At December 31, 1995, Moxham had consolidated
total assets of approximately $241 million, consolidated total deposits of
approximately $218 million and consolidated total shareholder's equity of
approximately $20 million.
BT Financial is a multi-bank holding company organized under the laws of
the Commonwealth of Pennsylvania with headquarters in Johnstown, Pennsylvania.
At December 31, 1995, BT Financial had consolidated total assets of
approximately $1.2 billion, consolidated total deposits of approximately $1.04
billion and consolidated total shareholders' equity of approximately $102
million. BT Financial Common Stock is quoted on the Nasdaq Stock Market under
the symbol "BTFC". The closing price for BT Financial Common Stock on April ,
1996 was $ per share.
The Merger Agreement also provides for the merger of The First National
Bank of Garrett and The Moxham National Bank of Johnstown, national banking
associations and wholly-owned subsidiaries of Moxham, into Johnstown Bank, a
Pennsylvania bank and trust company and a wholly-owned subsidiary of BT
Financial.
The Board of Directors of BT Financial believes that the Merger is in the
best interests of BT Financial and its shareholders and recommends that you vote
FOR the approval and adoption of the Merger Agreement and the transactions
contemplated thereby. The attached Joint Proxy Statement/Prospectus explains the
Merger in detail. Please carefully review and consider all of this information.
It is especially important that your shares be represented and voted at the
BT Financial Meeting. Please complete, sign, date and promptly return the
enclosed proxy card even if you currently plan to attend the BT Financial
Meeting. You may revoke your proxy at any time before it is voted by giving
written notice to BT Financial. If you attend the meeting and vote in person,
your vote will supersede your proxy.
Sincerely,
John H. Anderson
Chairman and
Chief Executive Officer
<PAGE> 7
BT FINANCIAL CORPORATION
BT FINANCIAL PLAZA
551 MAIN STREET
JOHNSTOWN, PENNSYLVANIA 15901
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY , 1996
NOTICE IS HEREBY GIVEN that a special meeting (the "BT Financial Meeting")
of shareholders of BT Financial Corporation, a Pennsylvania Corporation ("BT
Financial"), will be held on May , 1996, at the executive offices of
Johnstown Bank and Trust Company at 532-34 Main Street, Johnstown, Pennsylvania,
commencing at 10:00 a.m., local time, to consider and vote upon the following:
1. A proposal to adopt and approve an Agreement and Plan of
Reorganization dated as of January 12, 1996 by and between BT Financial and
Moxham Bank Corporation ("Moxham"), a Pennsylvania business corporation,
and, pursuant to which Moxham will merge (the "Merger") with and into BT
Financial, with BT Financial being the surviving corporation, and
immediately following the Merger, BT Financial will merge (the "Bank
Merger") The Moxham National Bank of Johnstown, a national banking
association and The First National Bank of Garrett, a national banking
association (collectively the "Banks"), wholly-owned subsidiaries of Moxham
with and into Johnstown Bank, a Pennsylvania bank and trust company and
wholly-owned subsidiary of BT Financial, with Johnstown Bank as the
surviving corporation, as more fully described in the enclosed Joint Proxy
Statement/Prospectus; and
2. The transaction of such other business as may properly come before
the Meeting or any adjournment or postponement thereof.
Only holders of record of shares of BT Financial Common Stock at the close
of business on April , 1996 are entitled to notice of and to vote at the BT
Financial Meeting and any adjournment or postponement thereof.
By Order of the Board of Directors,
John H. Anderson
Chairman and Chief Executive Officer
April , 1996
BT FINANCIAL SHAREHOLDERS ARE URGED TO MARK, DATE, SIGN AND RETURN PROMPTLY THE
ENCLOSED PROXY CARD IN THE ACCOMPANYING ENVELOPE, WHICH REQUIRES NO POSTAGE IF
MAILED IN THE UNITED STATES. IF A BT FINANCIAL SHAREHOLDER RECEIVES MORE THAN
ONE PROXY CARD BECAUSE THAT SHAREHOLDER OWNS SHARES REGISTERED IN DIFFERENT
NAMES OR AT DIFFERENT ADDRESSES, EACH PROXY CARD SHOULD BE COMPLETED AND
RETURNED. YOUR COOPERATION WILL BE APPRECIATED. ALL PROPERLY EXECUTED PROXIES
RECEIVED PRIOR TO OR AT THE BT FINANCIAL MEETING WILL BE VOTED WITH RESPECT TO
THE MATTER IDENTIFIED ON THE PROXY CARDS IN ACCORDANCE WITH ANY INSTRUCTIONS
THEREON AND, IF NO INSTRUCTIONS ARE GIVEN, WILL BE VOTED FOR ADOPTION AND
APPROVAL OF THE MERGER AGREEMENT.
<PAGE> 8
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor
may offers to buy be accepted prior to the time the registration statement
becomes effective. This prospectus shall not constitute an offer to sell or
the solicitation of an offer to buy nor shall there be any sale of these
securities in any state in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities laws
of any such State.
SUBJECT TO COMPLETION
DATED APRIL 19, 1996
JOINT PROXY STATEMENT
OF
BT FINANCIAL CORPORATION
AND
MOXHAM BANK CORPORATION
------------------------
PROSPECTUS
OF
BT FINANCIAL CORPORATION
------------------------
This Joint Proxy Statement/Prospectus is being furnished to shareholders BT
Financial Corporation, a Pennsylvania corporation ("BT Financial") and Moxham
Bank Corporation, a Pennsylvania Corporation ("Moxham"), in connection with the
solicitation of proxies by the respective Boards of Directors of such
corporations for use at a special meeting of the shareholders of BT Financial
(including any adjournments or postponements thereof, the "BT Financial
Meeting") and a special meeting of the shareholders of Moxham (including any
adjournments or postponements thereof, the "Moxham Meeting" and together with
the BT Financial Meeting, the "Meetings") to be held on May , 1996. The
purpose of the Meetings is to consider and take action on the proposed merger of
Moxham into BT Financial (the "Merger"), pursuant to the terms of the Agreement
and Plan of Reorganization dated as of January 12, 1996 by and between BT
Financial and Moxham (the "Merger Agreement"), as more fully described elsewhere
in this Joint Proxy Statement/Prospectus.
This Joint Proxy Statement/Prospectus also constitutes a prospectus of BT
Financial Corporation, relating to a maximum of 1,127,069 shares of common
stock, par value $5.00 per share ("BT Financial Common Stock"), of BT Financial
to be issued to Moxham shareholders pursuant to the Merger Agreement.
The outstanding shares of BT Financial Common Stock are, and the shares
offered hereby will be, included for quotation on the Nasdaq Stock Market
("NASDAQ"). The closing price of BT Financial Common Stock on NASDAQ as reported
in The Wall Street Journal on April , 1996 was $ per share.
This Joint Proxy Statement/Prospectus and the enclosed proxy card are first
being mailed to BT Financial and Moxham shareholders on or about April , 1996.
All information contained in this Joint Proxy Statement/Prospectus relating
to BT Financial and its subsidiaries has been supplied by BT Financial, and all
information contained in this Joint Proxy Statement/Prospectus relating to
Moxham and its subsidiaries has been supplied by Moxham.
------------------------
THE SHARES OF BT FINANCIAL COMMON STOCK TO BE ISSUED PURSUANT TO THIS JOINT
PROXY STATEMENT/PROSPECTUS HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION,
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS JOINT PROXY
STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------
THE SHARES OF BT FINANCIAL COMMON STOCK OFFERED HEREBY ARE NOT SAVINGS
ACCOUNTS, DEPOSITS OR OTHER OBLIGATIONS OF ANY BANK OR NON-BANK SUBSIDIARY OF BT
FINANCIAL AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR
ANY OTHER FEDERAL OR STATE GOVERNMENT AGENCY.
------------------------
The date of this Joint Proxy Statement/Prospectus is April , 1996.
<PAGE> 9
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS JOINT PROXY
STATEMENT/PROSPECTUS IN CONNECTION WITH THE SOLICITATION OF PROXIES OR THE
OFFERING OF SECURITIES MADE HEREBY AND, IF GIVEN OR MADE, ANY SUCH INFORMATION
OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY BT
FINANCIAL, MOXHAM OR ANY OTHER PERSON. THIS JOINT PROXY STATEMENT/PROSPECTUS
DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, ANY
SECURITIES, OR A SOLICITATION OF A PROXY, IN ANY JURISDICTION TO OR FROM ANY
PERSON TO WHOM IT IS NOT LAWFUL TO MAKE ANY SUCH OFFER OR SOLICITATION IN SUCH
JURISDICTION. NEITHER THE DELIVERY OF THIS JOINT PROXY STATEMENT/PROSPECTUS NOR
ANY DISTRIBUTION OF SECURITIES HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF BT FINANCIAL OR
MOXHAM SINCE THE DATE HEREOF OR THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY
TIME SUBSEQUENT TO THE DATE HEREOF.
This Joint Proxy Statement/Prospectus does not cover any resale of shares
of BT Financial Common Stock received by any person upon consummation of the
Merger, and no person is authorized to make any use of this Joint Proxy
Statement/Prospectus in connection with any such resale.
AVAILABLE INFORMATION
BT Financial and Moxham are each 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"). The reports, proxy
statements and other information filed by BT Financial and Moxham with the
Commission can be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Judiciary
Plaza, Washington, D.C. 20549, and at the Commission's regional offices at Suite
1300, 7 World Trade Center, New York, New York 10048 and The Citicorp Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such
material also can be obtained from the Public Reference Section of the
Commission, 450 Fifth Street, N.W., Washington, D.C. 20549 upon payment of
prescribed rates. In addition, BT Financial Common Stock is included for
quotation on NASDAQ and Moxham Common Stock is included for quotation on
NASDAQ/Small Cap Market and such reports, proxy statements and other information
concerning BT Financial and Moxham should be available for inspection and
copying at the offices of the National Association of Securities Dealers, Inc.,
1735 K Street, N.W., Washington, D.C. 20006.
BT Financial has filed with the Commission a Registration Statement on Form
S-4 (together with all amendments and exhibits thereto, the "Registration
Statement") under the Securities Act of 1933, as amended (the "Securities Act"),
with respect to the shares of BT Financial Common Stock to be issued pursuant to
the Merger Agreement. As permitted by the rules and regulations of the
Commission, this Joint Proxy Statement/Prospectus does not contain all of the
information set forth in the Registration Statement. Such additional information
may be obtained from the Commission's principal office in Washington, D.C., or
from the Commission's regional offices in New York or Chicago, by the means
described above for obtaining reports, proxy statements and other information
filed pursuant to the Exchange Act. Statements contained in this Joint Proxy
Statement/Prospectus or in any document incorporated by reference in this Joint
Proxy Statement/Prospectus as to the contents of any contract or other document
referred to herein or therein are not necessarily complete. In each instance,
reference is hereby made to the copy of such contract or other document filed as
an exhibit to the Registration Statement or such other document and each such
statement is qualified in all respects by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission by BT Financial (File No.
0-12377) pursuant to the Exchange Act are incorporated by reference in this
Proxy Statement/Prospectus:
1. Proxy Statement for its Annual Meeting of Shareholders to be held on May
14, 1996;
2. Annual Report on Form 10-K for the fiscal year ended December 31, 1995;
3. Current Report on Form 8-K dated December 14, 1995, as amended on
December 29, 1995 and February 27, 1996;
4. Current Report on Form 8-K dated January 12, 1996; and
5. Registration Statement on Form 8-A dated April 26, 1991.
All documents and reports filed by BT Financial pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act after the date of this Joint Proxy
Statement/Prospectus and prior to the date when the Meeting
2
<PAGE> 10
has finally been adjourned shall be deemed to be incorporated by reference in
this Joint Proxy Statement/Prospectus and to be part hereof from the dates of
filing of such documents and reports. Any statement contained herein or in a
document or report incorporated or deemed to be incorporated by reference herein
shall be deemed to be modified or superseded for purposes of this Joint Proxy
Statement/Prospectus to the extent that a statement contained herein or in any
subsequently filed document or report which 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 Joint Proxy Statement/Prospectus.
THIS JOINT PROXY STATEMENT/PROSPECTUS INCORPORATES BY REFERENCE DOCUMENTS
FILED BY BT FINANCIAL WITH THE COMMISSION WHICH ARE NOT PRESENTED HEREIN OR
DELIVERED HEREWITH. SUCH DOCUMENTS (OTHER THAN THE EXHIBITS TO SUCH DOCUMENTS,
UNLESS SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED BY REFERENCE HEREIN OR
THEREIN) ARE AVAILABLE, WITHOUT CHARGE, TO ANY PERSON, INCLUDING ANY BENEFICIAL
OWNER, TO WHOM A COPY OF THIS PROXY STATEMENT/PROSPECTUS IS DELIVERED, UPON
WRITTEN OR ORAL REQUEST, DIRECTED TO BT FINANCIAL CORPORATION, BT FINANCIAL
PLAZA, 551 MAIN STREET, JOHNSTOWN, PENNSYLVANIA 15901 (TELEPHONE NUMBER: (814)
532-3801), ATTENTION: CORPORATE SECRETARY. IN ORDER TO ENSURE TIMELY DELIVERY OF
ANY DOCUMENTS, ANY REQUEST SHOULD BE MADE BY MAY , 1996.
3
<PAGE> 11
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
AVAILABLE INFORMATION................................................................. 2
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE....................................... 2
SUMMARY............................................................................... 5
SELECTED FINANCIAL INFORMATION........................................................ 13
COMPARATIVE PER SHARE DATA............................................................ 19
COMPARATIVE MARKET PRICES............................................................. 21
THE MEETINGS.......................................................................... 22
THE MERGER............................................................................ 24
Background of the Merger............................................................ 24
Reasons for the Merger; Recommendation of the Boards of Directors................... 25
Opinions of Financial Advisors...................................................... 26
Interests of Certain Persons in the Merger.......................................... 31
Regulatory Considerations........................................................... 32
Rights of Dissenting Shareholders................................................... 33
Resale Restrictions................................................................. 36
Certain Federal Income Tax Consequences............................................. 36
Accounting Treatment................................................................ 38
THE MERGER AGREEMENT.................................................................. 39
The Merger.......................................................................... 39
Exchange Procedures................................................................. 39
Representations and Warranties...................................................... 40
Certain Covenants................................................................... 40
Acquisition Proposals............................................................... 41
Moxham Dividends.................................................................... 42
Conditions.......................................................................... 42
Termination......................................................................... 43
Expenses............................................................................ 44
Amendment and Waiver................................................................ 45
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION.......................... 46
DESCRIPTION OF BT FINANCIAL CAPITAL STOCK............................................. 53
COMPARISON OF SHAREHOLDER RIGHTS...................................................... 61
CERTAIN INFORMATION REGARDING BT FINANCIAL............................................ 64
CERTAIN INFORMATION REGARDING MOXHAM.................................................. 70
Management's Discussion and Analysis of Financial Condition and Results of
Operations of Moxham............................................................. 74
Management of Moxham................................................................ 88
LEGAL MATTERS......................................................................... 93
EXPERTS............................................................................... 93
BT FINANCIAL 1997 ANNUAL MEETING...................................................... 93
INDEX TO MOXHAM AND ARMSTRONG FINANCIAL STATEMENTS.................................... F-1
ANNEXES
A - MOXHAM MERGER AGREEMENT
B - FORM OF OPINION OF BERWIND FINANCIAL GROUP, L.P.
C - FORM OF OPINION OF HOPPER SOLIDAY & CO.
D - PENNSYLVANIA BCL PROVISIONS FOR DISSENTING SHAREHOLDERS
</TABLE>
4
<PAGE> 12
SUMMARY
The following is a summary of certain information contained elsewhere in
this Joint Proxy Statement/Prospectus. Reference is made to, and this Summary is
qualified in its entirety by, the more detailed information contained, or
incorporated by reference, in this Joint Proxy Statement/Prospectus or contained
in the Annexes hereto. BT Financial and Moxham shareholders are urged to read
this Joint Proxy Statement/Prospectus and the Annexes hereto in their entirety.
THE COMPANIES
BT Financial.................. BT Financial is a multi-bank holding company
located in Johnstown, Pennsylvania with three
state-chartered banking subsidiaries that are
members of the Federal Reserve System:
Johnstown Bank and Trust Company, Laurel Bank
("Laurel Bank") and Fayette Bank ("Fayette
Bank") (collectively, the "BT Financial
Banks"). The BT Financial Banks conduct
business through a network of 65 offices
located throughout southwestern Pennsylvania
and provide a full range of financial services
to individuals, businesses and governmental
bodies, including demand, savings and time
deposits, secured and unsecured loans, and
electronic data processing of payrolls. Lending
services include credit cards and consumer,
real estate, commercial and industrial loans.
BT Management Trust Company, a trust company
subsidiary, provides corporate pension and
personal trust and trust-related services. The
principal executive offices of BT Financial are
located at BT Financial Plaza, 551 Main Street,
Johnstown, Pennsylvania 15901, and its
telephone number is (814) 532-3801. As of
December 31, 1995, BT Financial had
consolidated total assets of approximately $1.2
billion, consolidated total deposits of
approximately $1.04 billion and consolidated
total shareholders' equity of approximately
$102 million. See "Incorporation of Certain
Documents by Reference" and "Certain
Information Regarding BT Financial."
On December 14, 1995, BT Financial acquired The
Huntington National Bank of Pennsylvania
("Huntington Bank") from Huntington Bancshares
West Virginia, Inc., for $25,500,000 in cash.
Huntington Bank was merged with and into
Fayette Bank. As of September 30, 1995,
Huntington Bank had total assets of
approximately $106 million, total deposits of
approximately $81 million and total
stockholder's equity of approximately $16
million. The acquisition of Huntington Bank was
accounted for under the purchase method of
accounting.
BT Financial has also entered into an Agreement
and Plan of Reorganization dated October 24,
1995, with The Armstrong County Trust Company,
a bank and trust company headquartered in
Kittanning, Pennsylvania ("Armstrong"), as
amended by the First Amendment to the Agreement
and Plan of Reorganization dated March 27, 1996
(the "Armstrong Agreement"), which provides for
the merger of Armstrong with and into Johnstown
Bank (the "Armstrong Merger"). At the effective
time of the Armstrong Merger, each outstanding
share of Armstrong Common Stock is to be
converted into 26.5 shares of BT Financial
Common Stock and $596.25 in cash, subject to
adjustment in certain circumstances. The
acquisition of Armstrong is to be accounted for
5
<PAGE> 13
under the purchase method of accounting. As of
December 31, 1995, Armstrong had total assets
of approximately $52 million, total deposits of
approximately $39 million and total
shareholders' equity of approximately $8
million.
On a pro forma basis giving effect to BT
Financial's pending acquisitions of Armstrong
and Moxham, BT Financial would have had, on a
consolidated basis as of December 31, 1995,
approximately $1.5 billion in total assets,
$1.3 billion in total deposits and $129 million
in total shareholders' equity.
Moxham........................ Moxham is a multi-bank holding company
incorporated under the laws of Pennsylvania
with its headquarters in Johnstown,
Pennsylvania. It has two nationally-chartered
banking subsidiaries, which are The Moxham
National Bank of Johnstown ("Moxham Bank") and
The First National Bank of Garrett, Garrett,
Pennsylvania ("Garrett Bank") (collectively,
the "Moxham Banks"). Moxham Bank and Garrett
Bank conduct a general banking business through
12 offices located in Cambria, Somerset and
Westmoreland Counties. Through these offices,
the Moxham Banks provide a full range of
financial services to individuals, businesses
and government bodies including demand, savings
and time deposits, loans and trust services.
Loans include credit card, consumer, real
estate, commercial and industrial loans. As of
December 31, 1995 Moxham had total assets of
$241 million, net deposits of $218 million and
shareholders equity of $20 million. Moxham's
principal office is located at 540 Central
Avenue, Johnstown, Pennsylvania 15902. See "The
Merger--Background of the Merger--Certain
Information Regarding Moxham."
The Meetings; Record Dates;
Votes Required.............. The BT Financial Meeting is scheduled to be
held on May , 1996, at the executive offices
of Johnstown Bank at 532-34 Main Street,
Johnstown, Pennsylvania, commencing at 10:00
a.m., local time. The purpose of the BT
Financial Meeting is to consider and vote upon
a proposal to adopt and approve the Merger
Agreement. Only holders of record of shares of
BT Financial Common Stock at the close of
business on April , 1996 are entitled to
notice of and to vote at the BT Financial
Meeting. As of April 17, 1996, there were
3,826,581 shares of BT Financial Common Stock
outstanding held by 3,930 holders of record.
Each holder of record of shares of BT Financial
Common Stock as of the record date is entitled
to cast one vote per share on each matter to be
acted upon or which may properly come before
the BT Financial Meeting. The affirmative vote
of a majority of the votes cast by all BT
Financial shareholders entitled to vote thereon
is required to adopt and approve the Merger
Agreement.
The Moxham meeting is scheduled to be held on
May , 1996, at the executive offices of
Moxham at 540 Central Avenue, Johnstown,
Pennsylvania, commencing at 10:00, local time.
The purpose of the Moxham Meeting is to
consider and vote upon a proposal to adopt and
approve the Merger Agreement. Only holders of
record of Moxham Common Stock at the close of
business on April , 1996, are entitled to
notice of and to vote at the Moxham Meeting.
6
<PAGE> 14
As of April , 1996, there were 903,852 shares
of Moxham Common Stock outstanding held by 590
holders of record.
Each holder of record of shares of Moxham
Common Stock as of the record date is entitled
to cast one vote per share on each matter to be
acted upon or which may properly come before
the Moxham Meeting. The affirmative vote of 70%
of the outstanding shares of Moxham Common
Stock entitled to vote thereon is required to
adopt and approve the Merger Agreement.
Each director and executive officer of BT
Financial and Moxham who owns shares of their
respective corporations has advised their
respective corporations that he or she intends
to vote or direct the vote of all shares over
which he or she has voting control FOR adoption
and approval of the Merger Agreement. As of
April , 1996, the directors and executive
officers of BT Financial were the beneficial
owners of 241,187, or approximately 6.3%, of
the outstanding shares of BT Financial Common
Stock. If all shares of BT Financial Common
Stock are present at the BT Financial Meeting,
and the directors and executive officers of BT
Financial all vote as they have stated that
they intend to vote, the affirmative vote of
only an additional 1,672,104 shares (or
approximately 43.7%) of BT Financial Common
Stock would be necessary to adopt and approve
the Merger Agreement. As of December 31, 1995,
the directors and officers of Moxham were the
beneficial owners of 196,606, or approximately
21.75%, of the outstanding shares of Moxham
Common Stock. If all shares of Moxham Common
Stock are present at the Moxham Meeting, and
the directors and officers of Moxham all vote
as they have stated they intend to vote, the
affirmative vote of only an additional 436,091
shares (or approximately 48.24%) of Moxham
Common Stock would be necessary to adopt and
approve the Merger.
THE MERGER
Effects of the Merger......... At the effective time of the Merger, Moxham
will merge with and into BT Financial. BT
Financial will be the surviving corporation in
the Merger and will continue its corporate
existence under Pennsylvania law under its
present name. Immediately following the Merger,
BT Financial will merge the Moxham Banks into
Johnstown Bank, which shall be the resulting
bank (the "Bank Merger").
Pursuant to the Merger Agreement, each issued
and outstanding share of Moxham Common Stock
(other than any such shares in respect of which
the holders thereof have objected to the Merger
and otherwise complied with the applicable
requirements of Pennsylvania law ("Dissenters'
Shares") and treasury shares) will be converted
into the right to receive 1.15 shares of BT
Financial Common Stock, and each issued and
outstanding share of Moxham Preferred Stock
(other than any Dissenters' Shares and treasury
shares) will be converted into the right to
receive 6.325 shares of BT Financial Common
Stock (the "Merger Consideration").
7
<PAGE> 15
In negotiating the components and amount of the
Merger Consideration, BT Financial was
interested in avoiding the reduction in capital
that would result from a cash transaction.
Similarly, Moxham was interested in a
transaction that would be tax-free and would
result in Moxham shareholders receiving a more
marketable security. The exact Merger
Consideration was a result of arms-length
negotiations between the parties.
Upon consummation of the Merger, all issued and
outstanding shares of Moxham Common Stock and
Moxham Preferred Stock will cease to exist. See
"The Merger Agreement--The Merger." Moxham
shareholders who properly exercise dissenters'
rights will have only the right to receive from
BT Financial payment for the "fair value" of
their shares of Moxham Common Stock or Moxham
Preferred Stock as determined in accordance
with the applicable provisions of the
Pennsylvania Business Corporation Law of 1988,
as amended (the "BCL"). See "The Merger--Rights
of Dissenting Shareholders."
Fractional shares of BT Financial Common Stock
will not be issued in the Merger. A Moxham
shareholder otherwise entitled to a fractional
share of BT Financial Common Stock will
receive, in lieu thereof, a cash payment
therefor equal to such fraction multiplied by
the closing sales price on NASDAQ for a share
of BT Financial Common Stock on the closing
date of the Merger as reported in The Wall
Street Journal, or, if BT Financial Common
Stock is not traded on such date, the next
succeeding day on which such stock is traded.
See "The Merger Agreement--Exchange
Procedures."
Based upon the number of shares of BT Financial
Common Stock, Moxham Common Stock and Moxham
Preferred Stock on a fully diluted basis as of
April , 1996, the price per share of BT
Financial Common Stock as of the same date and
the Merger Consideration, Moxham shareholders
will own approximately 22.7% of the outstanding
shares of BT Financial Common Stock immediately
following consummation of the Merger (assuming
no Dissenters' Shares).
Reasons for the Merger........ BT Financial. The BT Financial Board believes
that the Merger will benefit BT Financial, its
shareholders and its customers. The Merger will
expand BT Financial's customer base and
increase its presence in Cambria, Somerset and
Westmoreland Counties. The resulting
corporation will have increased financial,
managerial, technological and other resources,
enabling it to meet increased competition and
to profit from the opportunities resulting in
the changing legal and regulatory environment.
The surviving bank will be in a position to
offer greater services in a wider market and to
offer such services in a more efficient manner
due to a combining of operational phases of the
banks. Although no assurances can be given that
any specific level of expense savings will be
achieved or as to the timing thereof, BT
Financial has identified potential annual
pretax savings expected to be achieved by
consolidating certain operations, facilities
and business lines and eliminating redundant
costs. See "The Merger--Background of the
Merger"
8
<PAGE> 16
and "--Reasons for the Merger; Recommendation
of the Boards of Directors--BT Financial."
Moxham. The Moxham Board believes that the
Merger will be of considerable benefit to
Moxham, its shareholders and its customers.
Although the shares of Moxham are included for
quotation in the NASDAQ/SCM, the shares of BT
Financial Common Stock to be received in
exchange therefore will be even more freely
tradable due to their listing on NASDAQ. See
"The Merger-- Reasons for the Merger;
Recommendation of the Boards of
Directors--Moxham".
Recommendation of the Boards
of Directors.................. The BT Financial and Moxham Boards unanimously
voted to approve the Merger Agreement and the
Merger as being in the best interests of their
respective corporations and shareholders and
recommend a vote by their respective
shareholders FOR adoption and approval of the
Merger Agreement. For a discussion of the
factors considered by the Boards in reaching
their decisions with respect to the Merger
Agreement and the Merger and the other
transactions contemplated thereby, see "The
Merger--Reasons for the Merger; Recommendation
of the Boards of Directors."
Opinions of Financial
Advisors...................... It is a condition to BT Financial's obligation
to consummate the Merger that it will have
received, as of the date of the mailing of
copies of this Joint Proxy Statement/Prospectus
to its shareholders, an opinion from Berwind
Financial Group, L.P. Inc. ("Berwind"), its
financial advisors, to the effect that the
Merger is fair from a financial point of view
to the BT Financial shareholders. On April ,
1996, Berwind delivered its written opinion to
the BT Financial Board to the effect that as of
that date the Merger Consideration is fair to
the BT Financial shareholders from a financial
point of view. A copy of the opinion of
Berwind, setting forth the assumptions made,
matters considered and limits of its review, is
attached to this Joint Proxy
Statement/Prospectus as Annex B. See "The
Merger--Opinions Of Financial Advisors--BT
Financial".
It is a condition to Moxham's obligation to
consummate the Merger that it will have
received, as of the date of the mailing of
copies of this Joint Proxy Statement/Prospectus
to its shareholders, an opinion from Hopper
Soliday & Co., Inc. ("Hopper Soliday"), its
financial advisors, to the effect that the
Merger is fair from a financial point of view
to the Moxham shareholders. On April , 1996,
Hopper Soliday delivered its written opinion to
the Moxham Board to the effect that as of that
date the Merger Consideration is fair to the
Moxham shareholders from a financial point of
view. A copy of the opinion of Hopper Soliday,
setting forth the assumptions made, matters
considered and limits of its review, is
attached to this Joint Proxy
Statement/Prospectus as Annex C. See "The
Merger--Opinions Of Financial Advisors--
Moxham".
9
<PAGE> 17
Interests of Certain Persons
in the Merger............... Members of Moxham's management and the Moxham
Board have interests in the Merger in addition
to the interests of their respective
shareholders generally. First, BT Financial has
agreed to indemnify all current officers and
directors of Moxham, Garrett Bank or Moxham
Bank for one year after the effective time of
the Merger and to provide officers' and
directors' liability insurance coverage to
those officers and directors for one year after
the effective time of the Merger. Second, if
the Merger is consummated, directors and
officers of Moxham will own approximately 4.6%
of the shares of BT Financial Common Stock on a
fully diluted basis. Third, four directors of
Moxham will become directors of BT Financial
and eight directors of Moxham will become
directors of Johnstown Bank. Fourth, any
full-time employee of Moxham or any Moxham
subsidiary whose employment is terminated other
than for cause within six months after the
Merger, and not offered a comparable job with
BT Financial or a BT Financial subsidiary, will
be paid severance pay equal to three months
salary, if they have less than 15 years of
continuous service, and six months salary, if
they have more than 15 years continuous
service. See "The Merger--Interests of Certain
Persons in the Merger."
Effective Time of the Merger;
Termination of the
Merger Agreement............ It is anticipated that the Merger will become
effective as soon as practicable after the
requisite shareholder and regulatory approvals
have been obtained, and all applicable
regulatory waiting periods have expired. There
may be a substantial period of time between
when the Meeting is held and the consummation
of the Merger. See "The Merger--Regulatory
Considerations" and "The Merger
Agreement--Conditions."
The Merger Agreement will terminate
automatically if the Merger has not been
consummated and, therefore, if the effective
time of the Merger has not occurred, by May 30,
1996 (unless extended by mutual consent) or may
be terminated prior to such time by BT
Financial or Moxham upon the occurrence of one
or more of certain events, although the parties
expect that the Merger will be consummated
before May 30, 1996. If the Merger has not been
consummated by May 30, 1996, BT Financial and
Moxham shareholders will be notified by letter
whether the Merger has been abandoned or if the
parties have agreed to extend the termination
date and what that date then is. The Merger
Agreement does not limit the possible number of
extensions of the termination date or the
periods for which extension of the termination
date may occur. See "The Merger
Agreement--Termination."
Conditions to the Merger...... The obligations of BT Financial and Moxham to
consummate the Merger are subject to the
satisfaction of certain significant conditions,
including: obtaining requisite shareholder and
regulatory approvals; the absence of any
action, proceeding, regulation or legislation
to enjoin, restrain or prohibit, or to obtain
substantial damages in respect of, the Merger
Agreement or the Merger, which, in the good
faith judgment of BT Financial, would make it
10
<PAGE> 18
inadvisable to consummate the Merger or the
other transactions contemplated by the Merger
Agreement; the absence of any injunction which
prohibits or restricts the consummation of the
transactions contemplated by the Merger
Agreement, which, in the good faith judgment of
Moxham, would make it inadvisable to consummate
those transactions; and the number of
Dissenters' Shares (treating all shares of
Moxham Preferred Stock as if they have been
converted into shares of Moxham Common Stock)
as of the closing date being less than 10% of
the Moxham Common Stock issued and outstanding
on such date. Any condition may be waived in
writing by the party entitled to the benefit
thereof. See "The Merger
Agreement--Conditions."
Regulatory Considerations..... Consummation of the Merger is subject to, and
conditioned upon, receipt of all required
regulatory approvals and expiration of all
applicable regulatory waiting periods necessary
to consummate the Merger, including receipt of
approvals from the Board of Governors of the
Federal Reserve System (the "Federal Reserve")
and the Pennsylvania Department of Banking. As
of the date hereof, the Federal Reserve has
approved the Merger, but the Pennsylvania
Department of Banking has not. See "The
Merger-- Regulatory Considerations" and "The
Merger Agreement-- Conditions."
Dissenters' Rights............ Under the Pennsylvania Banking Code and the
BCL, Moxham shareholders have the right to
object to the Merger and demand to be paid in
cash the "fair value" of their shares of Moxham
Common Stock if they comply fully with all the
requirements of Subchapter D of Chapter 15 of
the BCL ("Subchapter 15D"). A copy of the
provisions of Subchapter 15D and Section 1930
of the BCL are attached hereto as Annex D. See
"The Merger-- Rights of Dissenting
Shareholders." It is a condition to BT
Financial's obligation to consummate the Merger
that the number of Dissenters' Shares (treating
all shares of Moxham Preferred Stock as if they
have been converted into shares of Moxham
Common Stock) as of the closing date be less
than 10% of the Moxham Common Stock issued and
outstanding on such date. See "The Merger
Agreement--Conditions." BT Financial has
reserved the right to waive this condition at
any time.
Certain Federal Income Tax
Consequences................ It is expected that the exchange of shares of
Moxham Common Stock for shares of BT Financial
Common Stock will qualify as a tax-free
reorganization pursuant to Section 368 of the
Internal Revenue Code of 1986, as amended (the
"Code"). If the exchange does so qualify, the
result will be that no gain or loss will be
recognized by any Moxham shareholder upon the
exchange of that Moxham shareholder's shares of
Moxham Common Stock for shares of BT Financial
Common Stock pursuant to the Merger, except in
respect of cash received for fractional shares.
See "The Merger--Certain Federal Income Tax
Consequences." Consummation of the Merger is
conditioned upon an opinion of Kirkpatrick &
Lockhart LLP, counsel to BT Financial,
concerning the material federal income tax
consequences expected to result from the
11
<PAGE> 19
Merger, of which that section of this Proxy
Statement/Prospectus is, in part, a summary. A
copy of that opinion is filed as an exhibit to
the Registration Statement.
Accounting Treatment.......... The Merger will be treated as a pooling of
interests for accounting purposes. See "The
Merger--Accounting Treatment."
Comparison of Shareholder
Rights........................ A major difference between the rights of
shareholders of BT Financial and the rights of
shareholders of Moxham is that BT Financial,
but not Moxham, has a shareholder rights plan.
BT Financial's shareholder rights plan may
prevent the use of certain takeover tactics to
acquire BT Financial without the approval of BT
Financial's Board. For a more detailed
description of the differences between the
rights of shareholders of the two companies and
a description of the BT Financial Common Stock,
see "Comparison of Shareholder Rights" and
"Description of BT Financial Capital Stock."
12
<PAGE> 20
SELECTED FINANCIAL INFORMATION
The following tables set forth selected historical financial information
(unaudited) for BT Financial for each of the five years in the period ended
December 31, 1995. The selected historical financial information should be read
in conjunction with the audited financial statements and other financial
information for BT Financial, incorporated by reference in this Joint Proxy
Statement/Prospectus. See "Incorporation of Certain Documents by Reference."
The following tables also set forth selected unaudited pro forma combined
financial information giving effect to the Merger under the pooling of interests
method of accounting for the three years ended December 31, 1995. The unaudited
pro forma financial information assumes that 1.15 shares of BT Financial Common
Stock will be issued for each share of Moxham Common Stock and 6.325 shares of
BT Financial Common Stock will be issued for each share of Moxham Preferred
Stock. See "The Merger Agreement--The Merger."
The selected unaudited pro forma combined financial information also gives
effect to BT Financial's acquisition of Huntington Bank on December 14, 1995,
which has been accounted for under the purchase method of accounting, and BT
Financial's pending acquisition of Armstrong, which is to be accounted for under
the purchase method of accounting, for the year ended December 31, 1995. The
unaudited combined pro forma financial information gives effect to the payment
of the cash purchase price of $25,500,000 in the Huntington Bank acquisition and
is prepared based on an exchange ratio in the Armstrong Merger of 26.5 shares of
BT Financial Common Stock and $596.25 in cash for each share of Armstrong Common
Stock, which is subject to adjustment in certain circumstances.
The unaudited pro forma condensed combined financial statements do not give
effect to anticipated cost savings in connection with the Merger, the Armstrong
Merger or the Huntington Bank acquisition and do not purport to be indicative of
the combined financial position or results of operations of future periods or
indicative of the results that actually would have been realized had the
entities been a single entity during these periods. The selected unaudited pro
forma combined financial information is derived from the unaudited pro forma
condensed combined financial statements appearing elsewhere herein and should be
read in conjunction with those statements. See "Unaudited Pro Forma Condensed
Combined Financial Information."
13
<PAGE> 21
BT FINANCIAL CORPORATION
SELECTED HISTORICAL FINANCIAL INFORMATION
(UNAUDITED)
<TABLE>
<CAPTION>
AT OR FOR THE YEAR ENDED DECEMBER 31,
----------------------------------------------------------------------
1991(6) 1992(7) 1993(8) 1994 1995(9)
------ ------ ------ ---- ------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
RESULTS OF OPERATIONS
Interest income....................... $ 70,780 $ 69,694 $ 66,254 $ 73,239 $ 81,837
Interest expense...................... 36,457 29,136 23,143 26,212 33,473
---------- ---------- ---------- ---------- ----------
Net interest income................... 34,323 40,558 43,111 47,027 48,364
Provision for loan losses............. 1,414 2,858 1,975 904 1,259
---------- ---------- ---------- ---------- ----------
Net interest income after provision
for loan losses..................... 32,909 37,700 41,136 46,123 47,105
Other income.......................... 5,208 5,922 6,894 6,974 7,251
Other expenses........................ 28,082 31,499 33,840 37,519 37,254
---------- ---------- ---------- ---------- ----------
Income before income taxes............ 10,035 12,123 14,190 15,578 17,102
Provision for income taxes............ 2,507 3,532 4,846 4,672 5,528
---------- ---------- ---------- ---------- ----------
Income before cumulative effect of
change in accounting for income
taxes............................... 7,528 8,591 9,344 10,906 11,574
Cumulative effect of change in
accounting for income taxes......... -- -- 113 -- --
---------- ---------- ---------- ---------- ----------
Net income............................ $ 7,528 $ 8,591 $ 9,457 $ 10,906 $ 11,574
========== ========== ========== ========== ==========
BALANCE SHEET DATA
(PERIOD END)
Total assets.......................... $ 891,654 $ 906,948 $1,087,559 $1,107,575 $1,202,402
Loans, net of unearned interest....... 553,384 567,211 698,408 742,657 857,557
Investment securities................. 186,736 -- -- -- --
Securities available for sale......... -- 219,800 231,508 248,281 208,148
Securities held-to-maturity........... -- -- -- 22,911 35,161
Total deposits........................ 781,761 809,023 956,961 948,233 1,035,647
Total long-term debt.................. 10,613 8,147 12,482 10,021 20,083
Total shareholders' equity............ 65,019 70,650 91,943 87,309 102,043
PER SHARE DATA(1)
Net income............................ $ 2.18 $ 2.48 $ 2.72 $ 2.85 $ 3.02
Cash dividends declared............... .77 .86 .99 1.10 1.22
Period-end book value(2).............. 18.80 20.43 24.03 22.82 26.67
Average shares outstanding............ 3,458,390 3,458,390 3,479,574 3,826,581 3,826,581
FINANCIAL RATIOS
Return on average assets.............. .93% .97% 1.05% 1.01% 1.05%
Return on average shareholders'
equity.............................. 12.10% 12.71% 12.69% 12.30% 12.13%
Net yield on earning assets(3)........ 4.78% 5.12% 5.28% 4.80% 4.79%
Common stock dividend payout.......... 35.32% 34.51% 36.39% 38.60% 40.33%
Average shareholders' equity to
average assets...................... 7.64% 7.64% 8.24% 8.25% 8.63%
Primary capital ratio at period
end(4).............................. 7.82% 8.41% 9.05% 8.48% 9.10%
Net charge-offs to average loans, net
of unearned interest................ .25% .36% .29% .12% .16%
Nonperforming loans to total loans,
net of unearned interest(5)......... 1.02% .60% .46% .54% .53%
Reserve for loan losses to period-end
loans, net of unearned interest..... .93% 1.08% 1.03% .97% .94%
</TABLE>
(footnotes continued on next page)
14
<PAGE> 22
- ---------
(1) Per share data has been restated to reflect the 5% stock dividends
distributed on September 11, 1992, July 26, 1993 and October 14, 1994.
(2) Book value per share, excluding the effect of net unrealized holding gains
(losses) on securities available for sale, was $26.34, $24.53, and $22.78 at
December 31, 1995, 1994 and 1993, respectively.
(3) Net interest income stated on a fully taxable equivalent basis divided by
average earning assets.
(4) The sum of shareholders' equity and the reserve for loan losses divided by
the sum of total assets and the reserve for loan losses.
(5) Nonperforming loans include nonaccrual loans and restructured loans.
(6) Reflects the acquisitions of certain loans and deposits of Peoples Federal
Savings Bank on September 6, 1991 and the deposits of one branch of Atlantic
Financial Savings F.A. on November 15, 1991.
(7) Reflects the acquisition of Peoples Bank One on August 14, 1992.
(8) Reflects the acquisition of FirstSouth Bancorp, Inc. on December 10, 1993.
(9) Reflects the acquisition of Huntington Bank on December 14, 1995.
15
<PAGE> 23
MOXHAM BANK CORPORATION
SELECTED HISTORICAL FINANCIAL INFORMATION
(UNAUDITED)
<TABLE>
<CAPTION>
AT OR FOR THE YEAR ENDED DECEMBER 31,
------------------------------------------------------------
1991 1992 1993 1994 1995
-------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
RESULTS OF OPERATIONS
Interest income............................... $ 16,891 $ 15,671 $ 14,819 $ 15,854 $ 18,058
Interest expense.............................. 9,339 7,244 6,052 6,981 9,273
-------- -------- -------- -------- --------
Net interest income........................... 7,552 8,427 8,767 8,873 8,785
Provision for loan losses..................... 457 320 193 264 307
-------- -------- -------- -------- --------
Net interest income after provision for loan
losses...................................... 7,095 8,107 8,574 8,609 8,478
Other income.................................. 934 1,104 1,311 1,433 1,463
Other expenses................................ 6,179 6,993 7,722 8,078 8,305
-------- -------- -------- -------- --------
Income before income taxes.................... 1,849 2,217 2,163 1,964 1,636
Provision for income taxes.................... 358 456 235 211 161
-------- -------- -------- -------- --------
Income before cumulative effect of change in
accounting for income taxes................. 1,491 1,761 1,928 1,753 1,475
Cumulative effect of change in accounting for
income taxes................................ -- -- 27 -- --
-------- -------- -------- -------- --------
Net income.................................... $ 1,491 $ 1,761 $ 1,901 $ 1,753 $ 1,475
========= ========= ========= ========= =========
BALANCE SHEET DATA
(PERIOD END)
Total assets.................................. $200,409 $196,353 $219,844 $231,360 $240,895
Loans, net of unearned interest............... 122,688 118,102 134,988 150,198 154,399
Investment securities......................... 35,693 50,920 64,155 -- --
Securities available for sale................. -- -- -- 62,026 60,075
Securities held-to-maturity................... -- -- -- -- --
Total deposits................................ 184,616 176,871 199,689 199,760 217,605
Total long-term debt.......................... 1,235 1,105 975 845 715
Total shareholders' equity.................... 13,060 15,944 17,431 16,975 20,078
PER SHARE DATA(1)
Net income.................................... $ 1.74 $ 1.96 $ 1.98 $ 1.81 $ 1.51
Cash dividends declared....................... .44 .51 .56 .58 .64
Period-end book value......................... 15.20 16.65 18.12 17.44 20.69
Average shares outstanding, fully diluted..... 856,506 900,579 958,370 967,959 976,342
FINANCIAL RATIOS
Return on average assets...................... .79% .90% .94% .78% .62%
Return on average shareholders' equity........ 11.96% 12.24% 11.30% 9.86% 7.87%
Net yield on earning assets(2)................ 4.51% 4.85% 4.94% 4.47% 4.09%
Common stock dividend payout.................. 24.80% 25.75% 27.68% 31.74% 42.25%
Average shareholders' equity to average
assets...................................... 6.62% 7.38% 8.30% 7.92% 7.82%
Primary capital ratio at period end(3)........ 7.11% 8.81% 8.60% 8.06% 9.08%
Net charge-offs to average loans, net of
unearned interest........................... .10% .10% .02% .06% .11%
Nonperforming loans to total loans, net of
unearned interest(4)........................ 1.40% 1.13% 1.08% 1.20% .78%
Reserve for loan losses to period-end loans,
net of unearned interest.................... 1.05% 1.26% 1.22% 1.22% 1.27%
</TABLE>
(footnotes continued on next page)
16
<PAGE> 24
- ---------
(1) Per share data has been restated to reflect the 10% stock dividends
distributed on December 30, 1994, and a 2 for 1 stock split affected in
February, 1993.
(2) Net interest income stated on a fully taxable equivalent basis divided by
average earning assets.
(3) The sum of shareholders' equity and the reserve for loan losses divided by
the sum of total assets and the reserve for loan losses.
(4) Nonperforming loans include nonaccrual loans, restructured loans and loans
past due 90 days or more.
17
<PAGE> 25
BT FINANCIAL CORPORATION
SELECTED PRO FORMA COMBINED FINANCIAL INFORMATION
FOR ALL TRANSACTIONS
(UNAUDITED)
<TABLE>
<CAPTION>
1993(1) 1994(1) 1995(2)
------- ------- -------
<S> <C> <C> <C>
RESULTS OF OPERATIONS
Interest income....................................... 81,013 89,030 110,312
Interest expense...................................... 29,134 33,130 48,567
---------- ---------- ----------
Net interest income................................... 51,879 55,900 61,745
Provision for loan losses............................. 2,168 1,168 2,039
---------- ---------- ----------
Net interest income after provision for loan losses... 49,711 54,732 59,706
Other income.......................................... 8,205 8,407 9,484
Other expenses........................................ 41,563 45,597 49,963
Income before income taxes............................ 16,353 17,542 19,227
Provision for income taxes............................ 5,081 4,883 5,872
Income before cumulative effect of change in
accounting for income taxes......................... 11,272 12,659 13,355
Cumulative effect of change in accounting for income
taxes............................................... 86 -- --
---------- ---------- ----------
Net income............................................ 11,358 12,659 13,355
BALANCE SHEET DATA (PERIOD END)
Total assets.......................................... $1,306,551 $1,338,213 $1,493,511
Loans, net of unearned interest....................... 832,421 892,010 1,022,295
Securities available for sale......................... 295,646 310,290 302,145
Securities held-to-maturity........................... -- 22,911 35,161
Total deposits........................................ 1,156,650 1,147,993 1,291,915
Total long-term debt.................................. 12,360 10,021 20,083
Total shareholders' equity............................ 109,099 104,008 129,478
PER SHARE DATA
Net income............................................ $ 2.48 $ 2.56 $ 2.59
Cash dividends declared............................... .99 1.10 1.22
Period-end book value................................. 22.54 21.04 25.07
Average shares outstanding............................ 4,580,788 4,938,822 5,160,462
<FN>
- ---------------
(1) Reflects pending acquisition of Moxham.
(2) Reflects acquisition of Huntington Bank on December 14, 1995 and pending
acquisitions of Moxham and Armstrong.
</TABLE>
18
<PAGE> 26
COMPARATIVE PER SHARE DATA
Set forth below is selected income, book value and cash dividends per
common share data: (i) on an historical basis for BT Financial, Moxham and
Armstrong; (ii) on an unaudited pro forma combined basis for BT Financial after
giving effect to the Merger, assuming the Merger had been effective for all
periods presented; (iii) on an unaudited pro forma combined basis for BT
Financial after giving effect to the Armstrong Merger, assuming the Armstrong
Merger had been effective for the year ended December 31, 1995; (iv) on an
unaudited pro forma combined basis for BT Financial, assuming that the Merger
had been effective for all periods presented and assuming that BT Financial's
acquisition of Huntington Bank and BT Financial's pending acquisition of
Armstrong had been effective for the year ended December 31, 1995; (v) on an
unaudited pro forma equivalent basis for Armstrong, assuming that the Armstrong
Merger had been effective for the year ended December 31, 1995; and (vi) on an
unaudited pro forma equivalent basis for Moxham, assuming that the Merger had
been effective for all periods presented. The unaudited pro forma combined per
share information is based on the issuance of 1.15 shares of BT Financial Common
Stock for each share of Moxham Common Stock, 6.325 shares of BT Financial Common
Stock for each share of Moxham Preferred Stock and 26.5 shares of BT Financial
Common Stock and $596.25 in cash for each share of Armstrong Common Stock,
subject to adjustment in certain circumstances. The information set forth below
should be read in conjunction with the respective financial statements of BT
Financial and Huntington Bank incorporated by reference in, and of Moxham and
Armstrong included elsewhere in, this Joint Proxy Statement/Prospectus and with
the unaudited pro forma condensed combined information incorporated by reference
or included under "Unaudited Pro Forma Condensed Combined Financial
Information." See "Selected Financial Information," and "Index to Moxham and
Armstrong Financial Statements."
19
<PAGE> 27
PRO FORMA AND PRO FORMA EQUIVALENT PER COMMON SHARE DATA
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-------------------------------
1993 1994 1995(1)
---- ---- ------
<S> <C> <C> <C>
Net income per common share before cumulative effect of
accounting principle change:
BT Financial:
Historical............................................. $2.72 $ 2.85 $ 3.05
Pro forma BT Financial and Armstrong................... 2.94
Pro forma BT Financial and Moxham...................... 2.48 2.56 2.66
Pro forma all transactions............................. 2.59
Armstrong:
Historical............................................. 80.90
Pro forma equivalent Armstrong and
BT Financial........................................ 77.91
Moxham:
Historical............................................. 1.98 1.81 1.51
Pro forma equivalent Moxham and
BT Financial........................................ 2.85 2.94 3.06
Book value per common share:
BT Financial:
Historical............................................. 26.67
Pro forma BT Financial and Armstrong................... 27.16
Pro forma BT Financial and Moxham...................... 24.60
Pro forma all transactions............................. 25.07
Armstrong:
Historical............................................. 1,046.34
Pro forma equivalent Armstrong and
BT Financial........................................ 719.74
Moxham:
Historical............................................. 20.69
Pro forma equivalent Moxham and
BT Financial........................................ 28.29
Cash dividends declared per common share:
BT Financial:
Historical............................................. .99 1.10 1.22
Pro forma BT Financial and Armstrong................... 1.22
Pro forma BT Financial and Moxham...................... .99 1.10 1.22
Pro forma all transactions............................. 1.22
Armstrong:
Historical............................................. 60.75
Pro forma equivalent Armstrong and
BT Financial........................................ 32.33
Moxham:
Historical............................................. .56 .58 .64
Pro forma equivalent Moxham and
BT Financial........................................ 1.14 1.27 1.40
<FN>
- ---------
(1) Includes the acquisition of Huntington Bank on December 14, 1995.
</TABLE>
20
<PAGE> 28
COMPARATIVE MARKET PRICES
The BT Financial Common Stock is traded on NASDAQ and Moxham's Common Stock
is included for quotation on the NASDAQ/SCM. The table below sets forth, for the
calendar quarters indicated, the reported high and low closing sales prices of
BT Financial Common Stock and Moxham Common Stock based on published financial
sources.
<TABLE>
<CAPTION>
BT FINANCIAL MOXHAM
COMMON STOCK COMMON STOCK
------------- -------------
HIGH LOW HIGH LOW
---- ---- ---- ----
<S> <C> <C> <C> <C>
1994
First Quarter.................................... $31 3/4 $30 $26 $25 1/2
Second Quarter................................... 31 28 25 24 1/2
Third Quarter.................................... 30 1/2 28 24 1/2 24 1/2
Fourth Quarter................................... 29 3/4 26 1/2 24 1/2 24
1995
First Quarter.................................... $29 3/4 $26 $27 $24
Second Quarter................................... 31 1/2 29 26 1/2 24 1/2
Third Quarter.................................... 37 1/4 30 1/4 27 24 1/4
Fourth Quarter................................... 37 1/2 33 1/2 38 1/2 24 1/4
1996
First Quarter.................................... $36 1/4 $33 1/2 $39 3/4 $36 3/4
Second Quarter (through April , 1996).......... $36 3/4 $35 1/4 $42 1/4 $38 3/4
</TABLE>
The closing sales prices of the BT Financial Common Stock set forth above
have not been retroactively adjusted for 5% stock dividends distributed by BT
Financial on July 26, 1993 and October 14, 1994. The prices for Moxham Common
Stock have been restated to reflect a 10% stock dividend distributed by Moxham
on December 31, 1994.
On January 11, 1995, the last full trading day prior to the execution and
delivery of the Merger Agreement and the public announcement thereof, the
closing sales price per share of BT Financial Common Stock on NASDAQ as reported
in The Wall Street Journal was $34 1/8. On January 9, 1996, the last day Moxham
Common Stock was traded prior to the execution and delivery of the Merger
Agreement and the public announcement thereof, the closing price per share of
Moxham Common Stock on the NASDAQ/SCM as reported in The Wall Street Journal was
$36 3/4. The pro forma equivalent per share value of Moxham stock was $ per
share. On April , 1996, the most recent date prior to the printing of this
Joint Proxy Statement/Prospectus, the closing sales price per share of BT
Financial Common Stock on the NASDAQ as reported in The Wall Street Journal was
$ , and the closing price per share of Moxham Common Stock on the NASDAQ/SCM
as reported in The Wall Street Journal was $ .
BT FINANCIAL AND MOXHAM SHAREHOLDERS ARE URGED TO OBTAIN CURRENT MARKET
QUOTATIONS FOR BT FINANCIAL AND MOXHAM COMMON STOCK PRIOR TO THE MEETINGS.
21
<PAGE> 29
THE MEETING
This Joint Proxy Statement/Prospectus is being furnished to BT Financial
and Moxham shareholders in connection with the solicitation of proxies by the BT
Financial and Moxham Boards for use at the BT Financial Meeting to be held on
May , 1996 at the executive offices of BT Financial at 532-34 Main Street,
Johnstown, Pennsylvania and the Moxham Meeting to be held at the executive
offices of Moxham at 540 Central Avenue, Johnstown Pennsylvania. This Joint
Proxy Statement/Prospectus and the enclosed proxy card are first being mailed to
shareholders on or about April , 1996.
At the Meetings, BT Financial and Moxham shareholders will consider and
vote upon a proposal to adopt and approve the Merger Agreement and such other
business as may properly come before the Meetings. The BT Financial and Moxham
Boards unanimously voted to approve the Merger Agreement and the Merger and
recommend a vote by their respective shareholders FOR adoption and approval of
the Merger Agreement.
VOTING AT THE MEETINGS; RECORD DATES
The BT Financial and Moxham Boards have fixed April , 1996 as the record
date for determination of holders of record of shares of BT Financial and Moxham
Common Stock entitled to notice of and to vote at the Meetings. Accordingly,
only holders of record of shares of such stock at the close of business on that
date are entitled to notice of and to vote at the Meeting of their respective
corporation. As of April 17, 1996 there were 3,826,581 shares of BT Financial
Common Stock outstanding held by 3,930 holders of record and 903,852 shares of
Moxham Common Stock outstanding held by 590 holders of record. Each holder of
record of shares of common stock as of the record date is entitled to cast one
vote per share, exercisable in person or by properly executed proxy, on the
proposal to adopt and approve the Merger Agreement and any other matters
properly submitted for a vote of shareholders at the Meetings of their
respective corporation. The presence, in person or by properly executed proxy,
of the holders of a majority of the outstanding shares of BT Financial or Moxham
Common Stock entitled to vote at the Meeting of their respective corporation is
necessary to constitute a quorum at the respective Meeting.
The affirmative vote of the BT Financial shareholders entitled to cast at
least a majority of the votes which all such shareholders are entitled to cast
thereon is required to adopt and approve the Merger Agreement. An abstention,
whether done in person or by proxy, or a failure to vote will have the effect of
a vote against the Merger Agreement.
The affirmative vote of the holders of Moxham Common Stock entitled to cast
at least 70% of the votes which all such shareholders entitled to cast thereon
is required to adopt and approve the Merger Agreement. An abstention, whether
done in person or by proxy, or a failure to vote will have the effect of a vote
against the Merger Agreement.
Each director and executive officer of BT Financial and Moxham who owns
shares of their respective corporation has advised BT Financial and Moxham that
he or she intends to vote or direct the vote of all shares of stock over which
he or she has voting control FOR adoption and approval of the Merger Agreement.
As of April , 1996, the directors and executive officers of BT Financial were
the beneficial owners of 241,187, or approximately 6.3%, of the outstanding
shares of BT Financial Common Stock. If all shares of BT Financial Common Stock
are present at the Meeting and the directors and executive officers of BT
Financial all vote as they have stated that they intend to vote, the affirmative
vote of only an additional 1,672,104 shares (or approximately 43.7%) of the BT
Financial Common Stock would be necessary to adopt and approve the Merger
Agreement. As of April , 1996, the directors and executive officers of Moxham
the beneficial owners of approximately 196,606, or approximately 21.75%, of the
outstanding shares of Moxham Common Stock. If all shares of Moxham Common Stock
are present at the Meeting, and all Moxham directors and officers vote as they
intend to vote, the affirmative vote of only an additional 436,091 shares (or
approximately 48.24%) of the Moxham Common Stock would be necessary to adopt and
approve the Merger Agreement.
22
<PAGE> 30
PROXIES
All shares of BT Financial Common Stock and Moxham Common Stock that are
entitled to vote and are represented at the Meeting of their respective
corporation by properly executed proxies received prior to or at the Meeting of
their respective corporation, and not revoked as of such time, will be voted at
the Meeting of their respective corporation in accordance with the instructions
indicated on those proxies. If no instructions are indicated on any proxies
solicited by the BT Financial and Moxham Board which are received prior to or at
the Meeting of their respective corporation, those proxies will be voted FOR
adoption and approval of the Merger Agreement.
It is not anticipated that any matter other than the proposal to adopt and
approve the Merger Agreement will be brought before the Meetings. If any other
matter is properly presented at the Meetings for consideration, including, among
other things, a motion to adjourn the Meetings to another time and/or place
(including, without limitation, for the purpose of soliciting additional
proxies), the persons named in the enclosed form of proxy card and acting
thereunder will have discretion to vote on such matter in accordance with their
best judgment.
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before it is voted. Proxies may be revoked by (i) filing
with the respective Secretary of BT Financial or Moxham, before the taking of
the vote at the Meeting of their respective corporation, a written notice of
revocation bearing a later date than the proxy card, (ii) duly executing a later
dated proxy card relating to the same shares and delivering it to the respective
Secretary of BT Financial or Moxham before the taking of the vote at the Meeting
of their respective corporation, or (iii) attending the Meeting of their
respective corporation and giving the respective Secretary of BT Financial or
Moxham a written notice of revocation bearing a later date than the proxy card,
before the taking of the vote at the Meeting of their respective corporation.
Attendance at the Meeting of their respective corporation will not in and of
itself constitute a revocation of a proxy. Any written notice of revocation or
subsequent proxy from a BT Financial shareholder should be sent so as to be
delivered to BT Financial Corporation, BT Financial Plaza, 551 Main Street,
Johnstown, Pennsylvania 15901, Attention Secretary, or hand delivered to the
Secretary of BT Financial, before the taking of the vote at the BT Financial
Meeting. Any written notice of revocation or subsequent Proxy from a Moxham
shareholder should be sent so as to be delivered to Moxham Bank Corporation, 540
Central Avenue, Johnstown, Pennsylvania 15902, Attention: Secretary, or hand
delivered to the Secretary of Moxham, before the taking of the vote at the
Moxham Meeting.
SHAREHOLDERS ARE URGED TO MARK, DATE, SIGN AND RETURN PROMPTLY THE ENCLOSED
PROXY CARD IN THE ACCOMPANYING POSTAGE-PAID ENVELOPE, EVEN IF THEY ARE PLANNING
TO ATTEND THE MEETING OF THEIR RESPECTIVE CORPORATION. ALL PROPERLY EXECUTED
PROXIES RECEIVED PRIOR TO OR AT THE MEETING OF THEIR RESPECTIVE CORPORATION WILL
BE VOTED WITH RESPECT TO THE MATTER IDENTIFIED ON THE PROXY CARDS IN ACCORDANCE
WITH ANY INSTRUCTIONS THEREON AND, IF NO INSTRUCTIONS ARE GIVEN, WILL BE VOTED
FOR ADOPTION AND APPROVAL OF THE MERGER AGREEMENT.
Each of BT Financial and Moxham will bear the cost of the solicitation of
Proxies from its own shareholders. In addition to solicitation by use of the
mails, proxies may be solicited by directors, officers and employees of each
corporation from the shareholders of each corporation in person or by telephone,
telegram or other means of communication. Those directors, officers and
employees will not be additionally compensated, but may be reimbursed for
reasonable out-of-pocket expenses incurred in connection with that solicitation.
Arrangements will be made with custodians, nominees and fiduciaries for
forwarding of proxy solicitation materials to beneficial owners of shares of
each corporation held of record by those custodians, nominees and fiduciaries,
and such corporation will reimburse those custodians, nominees and fiduciaries
for reasonable out-of-pocket expenses incurred in connection therewith.
SHAREHOLDERS SHOULD NOT SEND ANY STOCK CERTIFICATES WITH THEIR PROXY CARDS.
23
<PAGE> 31
THE MERGER
BACKGROUND OF THE MERGER
The past decade has been a period of rapid change in the banking industry
in general, and especially for the banking industry in Pennsylvania. This period
has been characterized by accelerated consolidation throughout the United States
and in Pennsylvania, and by intensified competition from domestic and foreign
banks and from non-bank financial services organizations. This period also has
been characterized by increasing requirements for investments in technology in
order to meet customer needs on an efficient, competitive basis.
Part of BT Financial's long-term strategic plan has been to acquire
existing banks, savings and loan associations, savings banks and branches
thereof in areas contiguous to the geographical areas that its banking
subsidiaries currently serve. In connection with this strategic plan, BT
Financial periodically reviews possible candidates for acquisition. Similarly,
the Moxham Board has periodically reviewed the strategic alternatives for
maximizing its shareholders' value.
Initial contact with respect to the Merger was between Gerald W.
Swatsworth, a director and former Chairman and Chief Executive Officer of BT
Financial, and C.T. Evans, Chairman of Moxham. This consisted of a series of
meetings in April and May, 1995. There were discussions in general terms about
the possibility of a merger but with no discussion of specific pricing. Mr.
Evans advised Mr. Swatsworth that he would discuss the issue with the Moxham
Board, and he so advised J. William Smith, President and Chief Executive Officer
of Moxham, on May 24, 1995.
None of these preliminary discussions resulted in a formal offer or
agreement. The Moxham Board met on June 6, 1995 to determine if there were any
interest in merging Moxham with another entity. At this meeting, it was
determined by the Moxham Board that it did not wish to pursue a merger at that
time. This decision was conveyed to Mr. Anderson, President and Chief Executive
Officer of BT Financial, on July 31, 1995. Although the decision of the Moxham
Board was not to pursue any merger action at the time, it nonetheless, on the
advice of counsel, appointed a special committee (the "Moxham Merger Committee")
whose function would be to consider any future offers that might occur.
At the end of August or beginning of September, 1995, Mr. Smith received a
telephone call from Mr. Anderson requesting a further meeting to pursue a
possible merger. As a result, Mr. Anderson and Mr. Smith met several times
during September and October to review the possibilities and terms and
conditions of a merger. On October 25, 1995, the BT Financial Board approved the
acquisition of Moxham on a pooling of interests basis in exchange for 1.15
shares of BT Financial Common Stock for each share of Moxham Common Stock, for a
total consideration of $40,940,371 based on a market value for BT Financial
Common Stock and the shares of Moxham Common Stock outstanding as of June 30,
1995. On November 4, 1995, BT Financial presented a formal offer to Moxham of
1.15 shares of BT Financial Common Stock for each share of Moxham Common Stock
and 6.325 shares of BT Financial Common Stock for each share of Moxham Preferred
Stock.
During the period during which the conversations between Mr. Smith and Mr.
Anderson took place, the Moxham Merger Committee retained Hopper Soliday to act
as its financial advisor and met with representatives of Hopper Soliday on
November 10, 1995. Hopper Soliday made a presentation that consisted of an
analysis of the offer to the full board on November 14, 1995.
At its November 14, 1995, meeting, the Moxham Board received the report of
the Moxham Merger Committee and reviewed the offer with its financial advisor
and counsel. The Moxham Board decided to delay a decision for one more week to
provide an opportunity for further review of the offer.
During the same period, BT Financial retained Berwind to act as its
financial advisor in connection with the Merger. Berwind made a preliminary
analysis and reported to BT Financial.
The Moxham Board met again on November 21, 1995 and voted to accept a
preliminary agreement to merge Moxham with and into BT Financial. A joint news
release was prepared and announced following this
24
<PAGE> 32
meeting. Moxham counsel was present at this meeting and reviewed the legal
aspects of the offer once again with the Moxham Board.
It was the considered opinion of the Moxham Board that the terms of the
offer contained in the preliminary agreement were satisfactory and that it was
in the best interest of Moxham, its shareholders, employees and customers to
proceed on this basis. The most significant aspect of the proposal was an
exchange ratio of 1.15 shares of BT Financial Common Stock for each share of
Moxham Common Stock, which resulted in a price of $41.98 per share of Moxham
Common Stock based on the closing price for BT Financial Common Stock as
reported on NASDAQ/SCM of $36.50 on November 10, 1995. Based upon the opinions
rendered by Hopper Soliday, it was felt that this price was in keeping with the
price ranges for similar transactions for institutions of comparable size.
Thereafter the parties negotiated the terms of a definitive agreement.
During the time of the negotiation, each party conducted a due diligence
investigation of the other party for the purpose of determining the completeness
and accuracy of the various warranties and representations that would be made.
The definitive agreement was not executed until completion of the due diligence
investigations and the agreement by the parties on all the terms and conditions
in the agreement. The final agreement was approved by the Moxham Board after a
review thereof. The officers of Moxham were authorized to execute the agreement,
which was done on January 12, 1996. On March 27, 1996, the BT Financial Board
ratified the Merger Agreement and authorized the issuance of up to 1,169,550
shares of BT Financial Common Stock in connection with the Merger.
REASONS FOR THE MERGER; RECOMMENDATION OF THE BOARDS OF DIRECTORS
BT Financial
The BT Financial Board believes that the Merger will benefit BT Financial,
its shareholders and its customers. The Merger will result in a combined entity
which has increased financial, managerial, technological and other resources and
will be better able to meet increased competition and to profit from the
opportunities resulting in the changed legal and regulatory environment facing
banks and bank holding companies. The combined entity will be in a position to
offer new services or expand into additional markets and to offer existing
services with increased efficiency. Although no assurances can be given that any
specific level of expense savings will be achieved or as to the timing thereof,
BT Financial has identified potential annual pretax savings expected to be
achieved by consolidating certain operations, facilities and business lines and
eliminating redundant costs. The Merger will expand BT Financial's customer base
and increase the presence of BT Financial in Cambria, Somerset and Westmoreland
Counties. At present, BT Financial's subsidiary banks conduct business through a
network of 65 offices located throughout southwestern Pennsylvania. Subsequent
to the Merger, BT Financial intends to operate eight of the branches of Moxham
Bank and one of the branches of Garrett Bank as branches of Johnstown Bank.
Moxham
The Moxham Board has unanimously approved the Merger Agreement and has
determined that the Merger is fair to and in the best interest of Moxham and its
shareholders. Moxham unanimously recommends that its shareholders vote FOR
adoption and approval of the Merger Agreement. The Moxham Board believes that
the Merger will enable the shareholders to realize significant value when
compared to the value of Moxham Common Stock should the Merger not occur.
In reaching its determination that the Merger Agreement is fair to, and in
the best interest of, Moxham and its shareholders, the Moxham Board considered a
number of factors, both from a short-term and a long-term perspective, including
the following:
1. The Moxham Board's familiarity with and review of Moxham's
business, financial condition, results of operation and prospects,
including, but not limited to, its potential growth, development,
productivity and profitability;
25
<PAGE> 33
2. The current and prospective environment in which Moxham operates,
including national, state and local economic conditions, Moxham's
competitive environment, the increased regulatory burden on financial
institutions, the trend toward consolidation in the financial services
industry (in general and among financial institutions in Pennsylvania in
particular) and the likely effect of the foregoing factors on Moxham's
potential growth, development, productivity and profitability;
3. The business, financial condition, results of operation, market
valuations and acquisition history of BT Financial and the opportunity for
Moxham shareholders to participate in the future growth of BT Financial by
becoming owners of BT Financial Common Stock as a result of the Merger;
4. A comparison of the products and services provided by Moxham and BT
Financial as well as the costs associated with and level of resources
available to Moxham and to BT Financial, respectively, to maintain, provide
future enhancements to and develop new products and services within their
markets;
5. The anticipated tax-free receipt of shares of BT Financial Common
Stock in the Merger;
6. The enhanced trading market of BT Financial Common Stock, which is
traded on NASDAQ, as compared to Moxham Common Stock, which is included for
quotation in the NASDAQ/SCM;
7. The condition in the Merger Agreement that permits Moxham to
terminate the Merger Agreement if it does not receive an opinion from its
financial advisor, in form and content satisfactory to Moxham, to the
effect that the Merger is fair, from a financial point of view to the
shareholders. This opinion has been received and is attached hereto as
Annex C.
In addition, the Moxham Board is of the opinion that the Merger will result
in a combined entity which has increased financial, managerial, technological
and other resources and will be better able to meet increased competition and to
profit from the opportunities resulting in the changed legal and regulatory
environment facing banks and bank holding companies. The combined entity will be
in a position to offer new services or expand into additional markets and to
offer existing services with increased efficiency. Furthermore, the Merger will
permit shareholders to exchange their shares of Moxham Common Stock for shares
of BT Financial Common Stock, which are included for quotation on the NASDAQ/SCM
which provides for a more active and liquid market.
Based upon the above, the Moxham Board unanimously approved the Merger
Agreement and recommends that the Moxham shareholders vote FOR adoption and
approval of the Merger Agreement.
OPINIONS OF FINANCIAL ADVISORS
BT Financial
As described in "Background of the Merger," BT Financial retained Berwind
to act as its financial advisor and deliver an opinion as to the fairness of the
transaction, from a financial point of view, to the shareholders of BT
Financial. BT Financial retained Berwind to act as BT Financial's financial
advisor in connection with the Merger, based upon Berwind's qualifications,
expertise and reputation as well as a prior successful relationship with
Berwind. In the past, Berwind has provided financial advisory and fairness
opinion services to BT Financial.
The full text of Berwind's opinion dated April , 1996 which sets forth
assumptions made, matters considered and limitations of the review undertaken,
is attached as Annex A to this Joint Proxy Statement/Prospectus and is
incorporated herein by reference. The summary of the opinion of Berwind set
forth in this Joint Proxy Statement/Prospectus is qualified in its entirety by
reference to the full text of such opinion.
On January 12, 1996, BT Financial and Moxham executed the definitive Merger
Agreement. On March 27, 1996, the BT Financial Board ratified the Merger
Agreement. In connection with and as a condition precedent to the execution of
the Merger Agreement, Berwind delivered an opinion letter to BT Financial's
Board stating that, as of such date, the Merger was fair to the shareholders of
BT Financial from a financial point of view. No limitations were imposed by BT
Financial's Board upon Berwind with respect to the investigations made or
procedures followed by Berwind in rendering its opinion.
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In providing its opinion, Berwind reviewed (a) the Merger Agreement; (b)
the audited consolidated financial statements of BT Financial and Moxham for the
four years ended December 31, 1995, and certain other publicly filed information
concerning BT Financial and Moxham, including but not limited to: (i) BT
Financial's Annual Report and Form 10-K and Moxham's Annual Report for the
fiscal years ended December 31, 1992, 1993, 1994 and 1995; (ii) BT Financial's
and Moxham's Form 10-Q Reports for the quarter ended September 30, 1995; (iii)
the most recent proxy statements of each of BT Financial and Moxham; (c) certain
internal financial statements and other financial and operating data, including
asset quality trends, concerning BT Financial and Moxham prepared by the
managements of BT Financial and Moxham; (d) certain internal forecasted results
of operations for BT Financial and Moxham as prepared by their respective
managements; (e) discussions with members of the senior managements of BT
Financial and Moxham regarding past and current business operations and
financial condition; (f) the future prospects of the respective companies; (g)
the reported trading prices and trading activity for BT Financial Common Stock
and Moxham Common Stock; (h) certain financial and stock market information for
BT Financial and comparisons of that data with similar information for certain
other companies the securities of which are publicly traded; (i) the financial
terms of certain recent business combinations in the commercial banking industry
and (j) such other studies and analyses as Berwind considered appropriate.
Berwind 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, Berwind assumed, with BT Financial's
consent, that the financial forecasts, including, without limitation, projected
cost savings, have been reasonably prepared on a basis reflecting the best
currently available judgments and estimates of the managements of BT Financial
and Moxham and that such forecasts will be realized in the amounts and at the
times contemplated. Berwind is not an expert in the evaluation of loan
portfolios or the allowances for loan losses with respect thereto, and it has
assumed, with BT Financial's consent, that all allowances for loan and lease
losses set forth in the balance sheets of BT Financial and Moxham were adequate
and complied fully with applicable law, regulatory policy and sound banking
practice as of the date of such financial statements. In addition, Berwind did
not make an independent evaluation or appraisal of the assets (including loans)
or liabilities of BT Financial and Moxham.
The following is a summary of selected analyses prepared by Berwind in
connection with the delivery of its opinion.
Comparable Companies and Comparable Acquisition Transaction Analyses.
Berwind compared selected financial and operating data for Moxham with those of
a peer group of publicly-traded banks located in Maryland, Ohio, Pennsylvania
and West Virginia with assets between $150 million and $350 million. Financial
data and operating ratios compared in the analysis of the Moxham peer group
included: return on average assets, return on average equity, shareholders'
equity to assets ratio and certain asset quality ratios. Berwind also compared
selected financial, operating and stock market data for BT Financial with those
of a peer group of selected commercial banks based in Maryland, Ohio, New Jersey
and Pennsylvania with assets between $750 million and $1.5 billion. Financial,
operating and stock market data, ratios and multiples compared in the analysis
of the BT Financial peer group included return on average assets, return on
average equity, shareholders' equity to asset ratio, certain asset quality
ratios, price to book value and price to earnings.
Berwind also compared the multiples of book value, tangible book value and
the latest twelve months' earnings inherent to the Merger with the multiples
paid in recent acquisitions of banks that Berwind deemed comparable. The
transactions deemed comparable by Berwind included both interstate and
intrastate acquisitions announced within the last year in which the selling
institution's assets were between $150 million and $350 million. Berwind also
reviewed subsets of this group of transactions, which included: (i) those
transactions in which the selling institution's (a) return on assets was less
than or equal to 1.0%, (b) equity to assets was less than or equal to 9%, and
(c) non-performing assets as a percent of assets was less than or equal to 1.00%
and (ii) compared selected transactions located throughout the country and with
a particular focus on those transactions in which the selling institution was
located in Maryland, Ohio, Pennsylvania and West Virginia. However, no company
or transaction used in this analysis is identical to BT Financial, Moxham or the
Merger. Accordingly, an analysis of the result of the foregoing is not
mathematical; rather, it involves complex considerations and judgments
concerning differences in financial and operating characteristics of the
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<PAGE> 35
companies and other factors that would affect the public trading values of the
companies or company to which they are being compared.
Pro Forma Financial Impact. Berwind analyzed certain pro forma effects
resulting from the Merger. The analysis, based upon certain assumptions,
including BT Financial's estimates of cost savings and earnings improvements
from the Merger following the completion of the Merger and estimated earnings
for 1996-1998 prepared by the managements of BT Financial and Moxham showed some
initial dilution to the earnings per share of BT Financial in 1996 which was
eliminated in 1997 and thereafter as a result of the Merger.
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 herein, without considering
the analysis as a whole, could create an incomplete view of the processes
underlying Berwind's opinion. In arriving at its fairness determination, Berwind
considered the results of all such analyses. No company or transaction used in
the above analysis as a comparison is identical to BT Financial or Moxham or the
contemplated transaction. The analyses were prepared solely for purposes of
Berwind's providing its opinion as to the fairness of the Merger Consideration
to the BT Financial Board 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, Berwind's opinion and presentation to the BT Financial
Board was one of many factors taken into consideration by the BT Financial Board
in making its determination to approve the Merger Agreement. Although the
foregoing summary described the material provisions of the analyses conducted by
Berwind, in connection with the delivery of its opinion dated , it does
not purport to be a complete description of all the analyses performed by
Berwind and is qualified by reference to the written opinion of Berwind as set
forth in Annex B hereto.
Berwind, as part of its investment banking business, is regularly engaged
in the valuation of assets, securities and companies in connection with various
types of asset and security transactions, including mergers, acquisitions,
private placements, and valuations for various other purposes and in the
determination of adequate consideration in such transactions.
Berwind's opinion is based solely upon the information available to it and
the economic, market and other circumstances as they existed as of the date its
opinion was delivered; events occurring after the date of its opinion could
materially affect the assumptions used in preparing its opinion. Berwind has not
undertaken to reaffirm and revise its opinion or otherwise comment upon any
events occurring after the date thereof.
In delivering its opinion, Berwind assumed that in the course of obtaining
the necessary regulatory and governmental approvals for the Merger, no
restriction will be imposed on BT Financial that would have a material adverse
effect on the contemplated benefits of the Merger. Berwind 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 BT Financial
after the Merger.
Pursuant to a letter agreement dated November 22, 1995 (the "Engagement
Letter"), BT Financial engaged Berwind to act as its financial advisor in
connection with the possible acquisition of all or a portion of the stock or
assets of Moxham. BT Financial has paid Berwind $50,000 for its services
pursuant to the terms of the Engagement Letter. In addition, the Engagement
Letter provides that if Moxham is acquired, Berwind will charge a transaction
fee of $100,000 pursuant to the Engagement Letter. The transaction fee is
payable to Berwind in cash upon completion of the Merger. BT Financial has
agreed to reimburse Berwind for its out-of-pocket expenses and to indemnify
Berwind against certain liabilities relating to or arising from the engagement.
Moxham
General. Pursuant to engagement letters dated November 10, 1995 and
December 11, 1995 (the "Hopper Soliday Engagement Letters"), the Moxham Board
retained Hopper Soliday to render financial
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advisory and investment banking services to Moxham in connection with the
possible sale of Moxham to BT Financial.
Hopper Soliday is a recognized investment banking firm and as a customary
part of its investment banking business is engaged in the valuation of bank and
bank holding company securities in connection with mergers, acquisitions,
underwritings, secondary distributions of listed and unlisted securities,
private placements and valuations for various other purposes. As a specialist in
the securities of financial institutions, Hopper Soliday has experience in, and
knowledge of, the valuation of banking enterprises. The Moxham Board selected
Hopper Soliday on the basis of Hopper Soliday's ability to evaluate the fairness
of the Merger from a financial point of view, its qualifications, its previous
experience and its reputation in the banking and investment communities. Hopper
Soliday has acted exclusively for the Moxham Board in rendering its fairness
opinion and will receive a fee from Moxham for its services.
Hopper Soliday has rendered a written opinion to the Moxham Board, dated as
of the date of this Joint Proxy Statement/Prospectus (the "Hopper Soliday
Opinion"), to the effect that, as of such date, the Merger Consideration is
fair, from a financial point of view, to the shareholders of Moxham. THE FULL
TEXT OF THE HOPPER SOLIDAY OPINION IS ATTACHED AS ANNEX C TO THIS JOINT PROXY
STATEMENT/PROSPECTUS AND IS INCORPORATED HEREIN BY REFERENCE. MOXHAM
SHAREHOLDERS ARE URGED TO READ THE HOPPER SOLIDAY OPINION IN ITS ENTIRETY FOR A
DESCRIPTION OF THE PROCEDURES FOLLOWED, ASSUMPTIONS MADE, MATTERS CONSIDERED,
AND QUALIFICATIONS AND LIMITATIONS ON THE REVIEW UNDERTAKEN BY HOPPER SOLIDAY IN
CONNECTION THEREWITH. THE FOLLOWING SUMMARY OF THE HOPPER SOLIDAY OPINION IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF THE HOPPER SOLIDAY
OPINION. THE MERGER CONSIDERATION WAS DETERMINED BY NEGOTIATION BETWEEN MOXHAM
AND BT FINANCIAL AND WAS NOT DETERMINED BY HOPPER SOLIDAY. SEE "THE
MERGER--BACKGROUND OF THE MERGER."
The Hopper Soliday Opinion is directed only to the Merger Consideration and
does not constitute a recommendation to any Moxham shareholder as to how such
shareholder should vote at the Special Meeting.
In rendering its Opinion, Hopper Soliday reviewed, among other things: (i)
Moxham's Annual Reports on Form 10-K and related financial information for the
six fiscal years ended December 31, 1995, and Moxham's Quarterly Reports on Form
10-Q and related unaudited financial information for the quarterly periods ended
March 31, 1995, June 30, 1995 and September 30, 1995; (ii) BT Financial's Annual
Reports on Form 10-K and related financial information for the six fiscal years
ended December 31, 1995, and BT Financial's Quarterly Reports or Form 10-Q and
related unaudited financial information for the quarterly periods ended March
31, 1995, June 30, 1995 and September 30, 1995; (iii) certain information
concerning the respective businesses, operations, regulatory condition and
prospects of Moxham and BT Financial, including financial forecasts, relating to
the business, earnings, assets and prospects of Moxham and BT Financial,
furnished to Hopper Soliday by Moxham and BT Financial, which Hopper Soliday
discussed with members of senior management of Moxham and BT Financial; (iv)
historical market prices and trading activity for the Moxham Common Stock and BT
Financial Common Stock and similar data for certain publicly-traded companies
which Hopper Soliday deemed to be relevant; (v) the results of operations of
Moxham and BT Financial and similar data for certain companies which Hopper
Soliday deemed to be relevant; (vi) the financial terms of the Merger
contemplated by the Merger Agreement and the financial terms of certain other
mergers and acquisitions which Hopper Soliday deemed to be relevant; (vii) the
pro forma impact of the Merger on the earnings and book value per share,
consolidated capitalization and certain balance sheet and profitability ratios
of BT Financial; (viii) the Merger Agreement; (ix) such other matters as Hopper
Soliday deemed necessary. Hopper Soliday also met with certain members of senior
management and other representatives of Moxham and BT Financial to discuss the
foregoing as well as other matters Hopper Soliday deemed relevant. Hopper
Soliday also considered such financial and other factors as it deemed
appropriate under the circumstances and took into account its assessment of
general economic, market and financial conditions, and its experience in similar
transactions, as well as its experience in securities valuation and its
knowledge of the banking industry generally. Hopper Soliday's opinions are
necessarily based upon conditions as they existed and could be evaluated on the
respective dates thereof and the information made available to Hopper Soliday
through the respective dates thereof.
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Hopper Soliday 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 the Hopper Soliday Opinion. With respect to
the financial forecasts reviewed by Hopper Soliday in rendering the Hopper
Soliday Opinion, Hopper Soliday assumed that such financial forecasts reviewed
by Hopper Soliday in rendering the Hopper Soliday Opinion, were reasonably
prepared on bases reflecting the best currently available estimates and
judgments of the managements of Moxham and BT Financial as to the future
financial performance of Moxham and BT Financial. Hopper Soliday did not make
any independent evaluation or appraisals of the assets or liabilities of Moxham
or BT Financial nor was it furnished with any such appraisals.
The summary set forth below does not purport to be a complete description
of the analyses performed by Hopper Soliday 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, Hopper Soliday believes that its analyses must be
considered as a whole and that selecting portions of its analyses and 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 Hopper Soliday was assigned a greater
significance with respect to industry performance, business and economic
conditions and other matters, many of which are beyond Moxham's or BT
Financial's control. The analyses performed by Hopper Soliday 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.
Transaction Summary. Hopper Soliday reviewed with the Moxham Board the key
financial terms of the Merger. Hopper Soliday noted that based on BT Financial's
market price of $36.50 on November 10, 1995, the then current value of the
Merger to Moxham shareholders was $41.98 per share, representing a 29% premium
to Moxham's market price of $32.625 per share on November 10, 1995. Hopper
Soliday stated that the $41.98 per share value represented 212% of Moxham's
fully-diluted book value per share as of September 30, 1995 and a multiple of
26.4 times Moxham's net income for the twelve months ended September 30, 1995.
Contribution Analysis. Hopper Soliday reviewed the contribution made by
each of BT Financial and Moxham to various balance sheet items and net income of
the combined company at the proposed exchange ratio based on balance sheet data
at September 30, 1995 and trailing twelve months earnings as of September 30,
1995. This analysis showed that Moxham shareholders would own approximately
22.7% of the aggregate shares outstanding of the combined company and that
Moxham was contributing 17.9% of total assets, 16.5% of total loans, 18.5% of
total deposits, 16.4% of shareholders' equity and 12.1% of net income,
respectively, of the pro forma combined company as of September 30, 1995.
Summary Comparison of Selected Institutions. Hopper Soliday compared
selected balance sheet data, asset quality, capitalization and profitability
ratios and market statistics using financial data at or for the twelve months
ended September 30, 1995 and market data as of November 10, 1995 for Moxham to a
group of Pennsylvania banks and bank holding companies consisting of nine
institutions with total assets of between $175 million and $400 million. The
analysis included, but was not limited to the following ratios: equity/assets,
non-performing assets/total assets, loan loss reserves/non-performing assets,
return on average assets, return on average equity, net interest margin,
efficiency ratio and dividend payout ratio.
Hopper Soliday also compared selected balance sheet data, asset quality,
capitalization and profitability ratios and market statistics using financial
data at or for the twelve months ended September 30, 1995 and market data as of
November 10, 1995 for BT Financial to a group of seven bank holding companies
headquartered in Pennsylvania, with total assets of between $675 million and
$2.4 billion. The analysis included, but was not limited to the following
ratios: equity/assets, non-performing assets/total assets, loan loss
reserves/non-performing assets, return on average assets, return on average
equity, net interest margin, efficiency ratio and dividend payout ratio.
Summary of Selected Bank Merger and Acquisition Transactions. Hopper
Soliday compared the ratios of price/book, price/trailing 12 months earnings,
price/market and book/book for the proposed merger to the
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high, mean, median and low ratios for a group of sixteen transactions announced
since January 1, 1992. The selected transactions involved the acquisition of
banks and bank holding companies headquartered in Pennsylvania, Maryland and
West Virginia with total assets ranging from $112 million to $348 million and
transaction values ranging from $12 million to $70 million.
No company or transaction used in the above analysis as a comparison is
identical to Moxham, BT Financial or the contemplated transaction. Accordingly,
an analysis of the results of the foregoing is not mathematical; rather, it
involves complex consideration and judgments concerning differences in financial
and operating characteristics of the companies and other factors that could
affect the public trading value of the companies to which they are being
compared. The ranges of valuations resulting from any particular analysis
described above should not be taken to be Hopper Soliday's view of the actual
value of Moxham or BT Financial. The fact that any specific analysis has been
referred to in the summary above is not meant to indicate that such analysis was
given more weight than any other analyses.
In performing its analyses, Hopper Soliday made numerous assumptions with
respect to industry performance, general business and economic conditions and
other matters, many of which are beyond the control of Moxham or BT Financial.
The analyses performed by Hopper Soliday are not necessarily indicative of
actual values or actual future results, which may be significantly more or less
favorable than suggested by such analyses. The analyses do not purport to be
appraisals or to reflect the prices at which a company might actually be sold or
the prices at which any securities may trade at the present time or at any time
in the future. In addition, as described above, Hopper Soliday's opinion and
presentation to the Moxham Board is just one of many factors taken into
consideration by the Moxham Board.
Pursuant to the Hopper Soliday Engagement Letter, Moxham agreed to pay
Hopper Soliday a fee of 0.20% of the aggregate consideration to be paid in the
Merger (the "Contingent Fee"). Based on the terms of the Merger Agreement, the
Contingent Fee payable by Moxham to Hopper Soliday would be approximately
$82,000. A non-refundable payment of $5,000 was paid to Hopper Soliday upon
execution of the first Hopper Soliday Engagement Letter. Of the Contingent Fee,
$25,000 was payable upon execution of the Merger Agreement, an additional
$25,000 shall be payable upon mailing of the Joint Proxy Statement/Prospectus
and the balance shall be payable upon the closing of the Merger. Moxham has also
agreed to indemnify Hopper Soliday against certain liabilities.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the recommendation of the Moxham Board, Moxham shareholders
should be aware that members of Moxham's management and the Moxham Board have
interests in the Merger that are in addition to the interests of Moxham
shareholders generally. The Moxham Board was aware of these interests and
considered them, among other matters, in approving the Merger Agreement and the
transactions contemplated thereby.
Indemnification
After the effective time of the Merger, BT Financial, as the successor to
Moxham, will indemnify and hold harmless any former directors, officers,
employees or agents of either Moxham or the Moxham Banks who have rights to
indemnification under the BCL and the articles of incorporation and bylaws of
Moxham, or the Moxham Banks, as the case may be, from and against any and all
claims, losses, liabilities or damages arising out of or in connection with any
of their activities in such capacities or on behalf of, or at the request of,
Moxham or the Moxham Banks prior to the effective time of the Merger ("Claims")
in accordance with and to the extent required under the BCL and the articles of
incorporation and bylaws of Moxham or the Moxham Banks. Further, BT Financial
will be obligated to advance expenses incurred with respect to the foregoing, as
they are incurred, in each case only to the extent such advances are required
under the BCL and the articles of incorporation and bylaws of Moxham or the
Moxham Banks as in effect on January 12, 1996. The obligations of BT Financial
described in the preceding sentences will continue in full force and effect
following the effective time of the Merger for a period of one year, although
all rights to indemnification in respect of any Claim asserted or made within
such period will continue until the final disposition of such Claim.
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BT Financial will also provide officers' and directors' liability insurance
coverage for all former directors and officers of Moxham or the Moxham Banks,
whether or not they become part of the BT Financial organization after the
effective time of the Merger, to the same extent as such coverage is provided to
BT Financial's officers and directors, for one year following the effective time
of the Merger.
Directors
Four directors of Moxham, designated by Moxham and acceptable to BT
Financial, will become directors of BT Financial at the effective time of the
Merger, to serve for such terms as may be determined by BT Financial consistent
with its director retirement policies. Immediately after the Merger, eight
directors of Moxham, selected by Moxham prior to the Merger (who may include
some of the persons selected to be directors of BT Financial) who are acceptable
to BT Financial, will be appointed to the Board of Directors of Johnstown Bank,
each to serve until the 1997 annual meeting of BT Financial shareholders.
Employee Matters
BT Financial has agreed that BT Financial and its subsidiaries will attempt
to cause all persons who are employed by Moxham or its subsidiaries at the
effective time of the Merger to be employed by subsidiaries of BT Financial. BT
Financial has also agreed that all employees of Moxham or its subsidiaries
immediately prior to the Merger who are employed by subsidiaries of BT Financial
following the Merger will be entitled to benefits which in the aggregate are no
less favorable than those generally afforded other employees of BT Financial or
its subsidiaries providing such employment. Prior service with Moxham or its
subsidiaries will not be considered for purposes of determining eligibility for,
or vesting of, such employment benefits, nor for any other purpose.
BT Financial has agreed that any full-time employee of Moxham or any of its
subsidiaries whose employment is terminated, other than for cause, by BT
Financial or Johnstown Bank within six months after the Merger, and not offered
a comparable job with BT Financial or a subsidiary of BT Financial, will be paid
severance pay equal to one week's compensation multiplied by each year of
service with Moxham, not exceeding three months salary, for any employee having
less than 15 years of continuous service with Moxham, its subsidiaries or their
respective predecessors, and not exceeding six months salary, for any employee
having 15 or more years of continuous service with Moxham, its subsidiaries or
their respective predecessors.
REGULATORY CONSIDERATIONS
The Merger and Bank Merger are subject to the prior approval of the Federal
Reserve and the Pennsylvania Department of Banking. As part of the approval
process, other federal and state authorities will be notified.
The Merger is subject to approval by the Federal Reserve pursuant to
Section 3 of the Bank Holding Company Act of 1956, as amended ("BHCA"). BT
Financial filed an application with the Federal Reserve Bank of Philadelphia and
it was accepted on March 7, 1996. The Federal Reserve approved the Merger on
April 2, 1996.
Consummation of the Merger will include BT Financial's acquisition of
Moxham Community Development Corporation, a wholly-owned non-banking subsidiary
of Moxham. Pursuant to Section 4 of the BHCA, BT Financial must publish a notice
before acquiring a non-banking subsidiary. BT Financial filed such a notice with
the Federal Reserve, and received approval of the acquisition on April 2, 1996.
The Bank Merger is subject to approval by the Federal Reserve pursuant to
Section 18(c) of the Federal Deposit Insurance Act of 1950, as amended (the
"FDIA"). BT Financial filed an application with the Federal Reserve Bank of
Philadelphia and it was accepted on March 7, 1996. The Federal Reserve approved
the Bank Merger on April 2, 1996.
The Merger and Bank Merger are also subject to approval by the Pennsylvania
Department of Banking. BT Financial filed an application with the Pennsylvania
Department of Banking and it was accepted on March
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7, 1996. Pursuant to the provisions of the Pennsylvania Banking Code, the
Pennsylvania Department of Banking is required to make a decision on a proposed
acquisition within 60 days of receipt of the application (including the articles
of merger and application fee). The Pennsylvania Department of Banking must
evaluate factors similar to those considered by the Federal Reserve, set forth
below.
Under Section 3 of the BHCA and Section 18(c) of the FDIA, the Federal
Reserve must withhold approval of the Merger and Bank Merger if it finds that
either 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 part of the United States. In addition, the Federal Reserve may
not approve the Merger and Bank Merger 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 any such
anti-competitive effects of the Merger and Bank Merger are clearly outweighed in
the public interest by the probable effects of the Merger and Bank Merger in
meeting the convenience and needs of the communities to be served. In each case,
the Federal Reserve will also take into consideration the financial and
managerial resources and future prospects of the banking subsidiaries following
the transactions. The Federal Reserve has indicated that it will not approve a
significant acquisition unless the resulting institution has sufficient
capitalization, taking into account, among other things, asset quality.
In addition, under the Community Reinvestment Act of 1977, as amended (the
"CRA"), the Federal Reserve must take into account the record of performance of
each of the existing and proposed institutions in meeting the credit needs of
the entire community, including low and moderate income neighborhoods, served by
each company.
The Federal Reserve furnished notice and a copy of the applications for
approval of the Merger and Bank Merger to the Office of the Comptroller of the
Currency (the "OCC"), the Federal Deposit Insurance Corporation (the "FDIC") and
the appropriate state regulatory authorities. These agencies had 30 days to
submit their views and recommendations to the Federal Reserve. The Federal
Reserve is required to hold a public hearing in the event it receives a written
recommendation of disapproval of the application from any of these agencies
within such 30-day period. No such recommendation was received.
Under Section 3 of the BHCA, the Merger may not be consummated before the
thirtieth calendar day or after three months from the date of the Federal
Reserve's approval, unless such period is extended by the Federal Reserve.
During this time, the Merger may be challenged by the Department of Justice on
antitrust grounds. The commencement of an antitrust action by the Justice
Department would stay the effectiveness of Federal Reserve approval of the
Merger unless a court specifically orders otherwise. In reviewing the Merger,
the Justice Department could analyze the Merger's effect on competition
differently than the Federal Reserve, and thus it is possible that the Justice
Department could reach a different conclusion than the Federal Reserve regarding
the Merger's competitive effects.
Under Section 4 of the BHCA and related regulations, the Federal Reserve
must consider whether the performance of BT Financial's and non-banking
activities on a combined basis can reasonably be expected to produce benefits to
the public (such as greater convenience, increased competition and gains in
efficiency) that outweigh possible adverse effects (such as undue concentration
of resources, decreased or unfair competition, conflicts of interest and unsound
banking practices). This consideration includes an evaluation of the financial
and managerial resources of BT Financial and the effect of the proposed
transaction on those resources.
There can be no assurance that neither the Department of Justice nor any
complaining parties will challenge the Merger, or if such a challenge is made,
as to the results thereof.
RIGHTS OF DISSENTING SHAREHOLDERS
Any owner of shares of Moxham Stock has the right under Subchapter 15D of
the BCL to object to the Merger and demand to be paid in cash the fair value of
such shares upon complying in full with the provisions of Subchapter 15D. THE
FOLLOWING DOES NOT PURPORT TO BE A COMPLETE STATEMENT OF THE PROVISIONS OF
SUBCHAPTER 15D OF THE BCL AND IS QUALIFIED IN ITS
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ENTIRETY BY REFERENCE TO THOSE PROVISIONS, A COPY OF WHICH IS ATTACHED
HERETO AS ANNEX D. THOSE PROVISIONS MUST BE STRICTLY COMPLIED WITH OR A
SHAREHOLDER'S DISSENTERS' RIGHTS MAY BE LOST.
If an owner of shares of Moxham Stock wants to exercise the right to
dissent, such owner must satisfy all of the following conditions. First, the
owner must file with Moxham prior to the vote with respect to the Merger a
written notice of his intention to demand that he be paid the fair value of his
shares of Moxham Stock if the Merger takes place. Neither a vote in person or by
proxy against adoption and approval of the Merger Agreement, nor an abstention
from voting with respect to, or a failure to vote for adoption and approval of,
the Merger Agreement will constitute such a written notice. Second, the owner
must not effect any change in the beneficial ownership of his shares of Moxham
Stock from the date of filing such written notice continuously through the
effective time of the Merger. Finally, the owner must not vote in person or by
proxy for adoption and approval of the Merger Agreement. Neither an abstention
from voting with respect to, nor a failure to vote in person or by proxy against
adoption and approval of, the Merger Agreement will constitute a vote for
adoption and approval of the Merger Agreement. Unless an owner follows all these
steps, he will not acquire any right to payment of the fair value of his shares
and will be conclusively presumed to have consented to the Merger and will be
bound by its terms. A written notice of an intention to demand payment of fair
value should be sent prior to the Moxham Meeting to Moxham Bank Corporation, 540
Central Avenue, Johnstown, Pennsylvania 15902, Attention: Secretary.
A person who is the beneficial owner, but not the record holder, of shares
of Moxham Stock and who desires to exercise the rights of a dissenting
shareholder may assert those rights with respect to shares held on that person's
behalf and shall be treated as a dissenting shareholder under the terms of
Section 15D if he submits to Moxham a written consent of the record holder of
those shares to such treatment no later than the time dissenters' rights are
asserted with respect to those shares. A beneficial owner may not dissent with
respect to less than all shares of which such person is the owner, whether or
not the shares so owned are registered in such person's name.
A record holder for more than one beneficial owner may assert dissenters'
rights as to less than all of the shares registered in his name only if that
holder dissents with respect to all shares beneficially owned by a person that
are held by him and discloses the name and address of that person. In that
event, the record holder will be treated as if the shares as to which he has
dissented and the other shares held by him were registered in the names of
different persons.
If the Merger Agreement is adopted and approved by the requisite vote of
the shareholders, Moxham or BT Financial will mail a "further notice" to each
owner who followed all of the steps described above (a "Dissenter"). The
"further notice" will: (i) state the location where and the date by which a
demand for payment must be sent and certificates formerly representing shares of
Moxham Stock ("Certificates") must be deposited in order to obtain payment,
which date will not be less than 30 days after the date of mailing of the
"further notice"; (ii) inform holders of uncertificated shares to what extent
transfer of shares will be restricted from the time that demand for payment is
received; (iii) supply a form for demanding payment that includes a request for
certification of the date on which the Dissenter acquired beneficial ownership
of his shares of Moxham Stock; and (iv) include a copy of Subchapter 15D. If a
Dissenter fails to demand timely payment or (in the case of certificated shares)
fails to deposit his Certificates timely as required by the "further notice,"
that person will not have any right to receive payment of the fair value of his
shares.
If any shares are not represented by certificates, Moxham or BT Financial
may restrict their transfer from the time of receipt of demand for payment until
effectuation of the Merger or the release of restrictions under the terms of
Section 1577(a) of the BCL (relating to failure to effectuate the Merger).
The Dissenter shall retain all other rights of a shareholder until those
rights are modified by the Merger.
If the Merger has not been consummated within 60 days after the date set in
the "further notice" for demanding payment and depositing Certificates, Moxham
or BT Financial will return any deposited Certificates and release
uncertificated shares from any transfer restrictions imposed by reason of the
demand
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for payment. At any time thereafter, Moxham or BT Financial may send a new
"further notice" containing the provisions described above to all Dissenters.
Promptly after the effective time of the Merger, or upon timely receipt of
demand for payment if the Merger has already occurred, BT Financial will either
(i) pay the amount that BT Financial estimates is the fair value of the
Dissenters' Shares to the Dissenters who timely made demand for payment and (if
their shares are certificated) timely deposited their Certificates, or (ii)
provide written notice to those Dissenters that no payment will be made. This
payment or written notice will be accompanied by a closing balance sheet and
statement of income of Moxham for a fiscal year ending not more than 16 months
before the date of payment or notice, the latest available interim financial
statements of Moxham, a statement of BT Financial's estimate of the fair value
of the Dissenters' Shares, a notice of the right of a Dissenter to demand
payment or supplemental payment, as the case may be, and a copy of Subchapter
15D. If BT Financial does not pay its estimate of the fair value of the shares
of Moxham Common Stock of any Dissenter, it must return his deposited
Certificates to him and release uncertificated shares from any transfer
restrictions imposed by reason of the demand for payment. BT Financial may make
a notation on any returned Certificate or its records relating to any such
uncertificated shares that a demand for payment of fair value with respect to
that Certificate has been made. If shares with respect to which notation has
been made shall be transferred, each new Certificate therefor or the records
relating to any transferred uncertificated shares will bear a similar notation,
together with the name of the original dissenting holder or owner thereof. A
transferee will not acquire by transfer any rights other than those that the
original Dissenter had after making demand for payment of fair value.
If BT Financial 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 and the Dissenter believes that BT
Financial's estimate of the fair value of his shares of Moxham Stock is less
than their fair value, that Dissenter should send BT Financial his own estimate
of their fair value. A Dissenter's estimate will constitute a demand for payment
of his estimate of the fair value of his shares of Moxham Stock or for payment
of the difference between the two estimates if BT Financial has paid that
Dissenter its estimate. If a Dissenter does not file with BT Financial his own
estimate within 30 days after the mailing to him of the payment of BT
Financial's estimated fair value or its written notice thereof, that Dissenter
will not be entitled to receive any amount greater than the payment remitted by
BT Financial or the amount stated in that notice.
Within 60 days after the latest of (i) the effective time of the Merger,
(ii) timely receipt of any demands for payment of fair value in response to a
"further notice," or (iii) timely receipt of a Dissenter's estimate of the fair
value of his shares of Moxham Stock, if any demands for payment remains
unsettled, BT Financial may file an application for relief in the Court of
Common Pleas of Cambria County, Pennsylvania (the "Cambria Court"), requesting
that the fair value of the remaining Dissenters' Shares be determined. All
Dissenters whose demands for payment of the fair value of their Dissenters'
Shares have not been settled will be made parties to such proceeding. A copy of
the application shall be served on each such 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. 53 (relating to bases of jurisdiction and
interstate and international procedure). 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. Each Dissenter who is made a party to such proceeding
will be entitled to recover the amount by which the fair value of his
Dissenters' Shares exceeds any amount previously paid to that Dissenter by BT
Financial for his shares, plus interest.
If BT Financial fails to file an application with the Cambria Court prior
to the expiration of that 60-day period, any Dissenter who has made a demand for
payment of the fair value of his Dissenters' Shares and has not already settled
his claim against BT Financial may file an application with the Cambria Court in
the name of BT Financial within 30 days after expiration of that 60-day period.
If no such Dissenter files an application within that 30-day period, all
remaining Dissenters will be paid BT Financial's estimate of the fair value of
their Dissenters' Shares and will not be entitled to any additional amounts. In
any proceeding before the Cambria Court, the fair value of the Dissenters'
Shares to be determined by the Cambria Court is the fair
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value of those shares immediately prior to the effective time of the Merger,
taking into account all relevant factors, but excluding any appreciation or
depreciation in anticipation of the Merger.
The costs and expenses of any proceeding to determine the fair value of the
remaining Dissenters' Shares will be determined by the Cambria Court and
assessed against BT Financial, although all or any part of those costs and
expenses may be apportioned and assessed as the Cambria Court deems appropriate
against any Dissenters who are parties to the proceeding and whose actions in
demanding supplemental payments the Cambria Court finds to be dilatory,
obdurate, arbitrary, vexatious or in bad faith. The fees and expenses of counsel
and experts for the respective parties may be assessed as the Cambria Court
deems appropriate against BT Financial and in favor of any or all Dissenters if
BT Financial failed to comply substantially with the requirements of Subchapter
15D and may be assessed against BT Financial or any Dissenter, in favor of any
other party, if the Cambria 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 Subchapter 15D. If the
Cambria Court decides that any Dissenter's counsel provided substantial benefits
to other Dissenters, but that the fees of such counsel should not be assessed
against BT Financial, then the Cambria Court may award that counsel reasonable
fees to be paid out of the amounts awarded to those other Dissenters.
It is a condition to BT Financial's obligation to consummate the Merger
that the number of Dissenters' Shares (treating all Moxham Preferred Stock as if
they had converted into Moxham Common Stock) be less than 10% of the Moxham
Common Stock expected to be outstanding as of the closing date of the Merger.
See "The Merger Agreement--Conditions." BT Financial has reserved the right to
waive this condition at any time.
RESALE RESTRICTIONS
The shares of BT Financial Common Stock to be issued pursuant to the Merger
Agreement will be freely transferable under the Securities Act except for shares
issued to any Moxham shareholder who may be deemed to be an affiliate of Moxham
for purposes of Rule 145 under the Securities Act as of the date of the Meeting.
Moxham affiliates may not sell shares of BT Financial Common Stock acquired in
the Merger except pursuant to an effective registration statement under the
Securities Act covering those shares or in compliance with Rule 145 under the
Securities Act or another applicable exemption from the registration
requirements of the Securities Act. Persons who may be deemed to be affiliates
of Moxham generally include individuals or entities that control, are controlled
by, or are under common control with, Moxham and may include certain officers
and directors of Moxham as well as the principal Moxham shareholders. Under the
Merger Agreement, BT has agreed that Moxham affiliates will have rights to
incidental registration and registration on request pursuant to which these
affiliates may resell their shares of BT Financial Common Stock under an
effective registration statement.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
Kirkpatrick & Lockhart LLP, counsel to BT Financial, will render an opinion
to BT Financial as to the principal federal income tax consequences expected to
result from the Merger.
The following is a summary of such opinion. This summary is qualified in
its entirety by reference to the full text of such opinion, including the
assumptions upon which such opinion is based. Such opinion is included as an
exhibit to the Registration Statement. Neither such opinion nor this summary
address any tax considerations under foreign, state or local laws, or the tax
considerations to shareholders other than individual United States citizens who
hold their shares of Moxham Stock within the meaning of Section 1221 of the
Code.
No rulings have been requested from the Internal Revenue Service as to the
federal income tax consequences of the Merger. Moxham shareholders should be
aware that the opinion of Kirkpatrick & Lockhart LLP is not binding on the
Internal Revenue Service and the Internal Revenue Service is not precluded from
taking a different position. Moxham shareholders should also be aware that some
of the tax consequences of the Merger are governed by provisions of the Code as
to which there are no final regulations
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and little or no judicial or administrative guidance. The opinion of Kirkpatrick
& Lockhart LLP is based upon the federal income tax laws as in effect on the
date of such opinion and as those laws are currently interpreted. There can be
no assurance that future legislation, regulations, administrative rulings or
court decisions will not adversely affect the accuracy of the statements
contained herein.
The federal income tax consequences discussed below are conditioned upon,
and the opinion of Kirkpatrick & Lockhart LLP is based upon, the accuracy, as of
the date hereof and at, as of and after the effective time of the Merger, of
certain assumptions, including, but not limited to, the following (taking into
account for purposes hereof all events that are contemplated under the Merger
Agreement): (A) that, pursuant to the Merger, the former shareholders of Moxham
receive shares of BT Financial Common Stock having a value on the date on which
the effective time of the Merger occurs of not less than fifty percent (50%) of
the value of the Moxham Stock as of the same date; (B) that following the
Merger, BT Financial will continue the historic business of Moxham or use a
significant portion of Moxham's historic business assets in a business; and (C)
that a bona fide corporate business purpose exists for the Merger.
BT Financial and Moxham believe that all of the foregoing assumptions are
accurate as of the date hereof, and will be accurate at, as of and after the
effective time of the Merger. If either BT Financial or Moxham learns before the
effective time of the Merger that such assumptions are false and that its
counsel therefore believes that the Merger is unlikely to be treated as a
tax-free reorganization, then additional shareholder approval will be obtained
before consummation of the Merger.
Kirkpatrick & Lockhart LLP has rendered an opinion to BT Financial, based
upon the assumptions set forth therein, that the Merger will have the following
federal income tax consequences:
(i) No gain or loss will be recognized by Moxham or BT Financial as a
result of the Merger.
(ii) No gain or loss will be recognized by any Moxham shareholder upon
the exchange of that shareholder's shares of Moxham Stock for shares of BT
Financial Common Stock pursuant to the Merger.
(iii) The basis of the shares of BT Financial Common Stock received by
a Moxham shareholder (including any fractional shares) will be the same as
the basis of the shares of Moxham Stock surrendered in exchange therefor
reduced by any amount allocable to a fractional share interest for which
cash is received.
(v) If shares of Moxham Stock were capital assets in the hands of a
Moxham shareholder immediately prior to the Merger, the holding period of
the shares of BT Financial Common Stock received by that shareholder in the
Merger will include the holding period of the shares of Moxham Stock
surrendered in exchange therefor.
(vi) A Moxham shareholder who dissents from the proposed Merger and
receives solely cash in exchange for that shareholder's shares of Moxham
Stock will be treated as having received that cash as a distribution in
redemption of those shares subject to the provisions and limitations of
Section 302 of the Code. If the distribution is eligible for treatment as a
distribution in redemption of that shareholder's shares, that shareholder
will recognize gain to the extent of the consideration received less that
shareholder's adjusted basis in those shares.
(vii) The receipt by a Moxham shareholder of cash in lieu of a
fractional share of BT Financial Common Stock will be treated as if that
fractional share was issued to that holder in the Merger and thereafter
redeemed by BT Financial for cash. That receipt of cash by a Moxham
shareholder will be treated as a distribution by BT Financial in full
payment in exchange for the fractional share as provided in Section 302(a)
of the Code. If the distribution is eligible for treatment as a
distribution in redemption of a Moxham shareholder's fractional share, that
shareholder will recognize gain to the extent of the consideration received
less that shareholder's allocable adjusted basis in that fractional share.
BECAUSE CERTAIN TAX CONSEQUENCES OF THE MERGER MAY VARY DEPENDING UPON THE
PARTICULAR CIRCUMSTANCES OF EACH SHAREHOLDER AND OTHER FACTORS, EACH SHAREHOLDER
IS URGED TO CONSULT SUCH SHAREHOLDER'S OWN TAX
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ADVISOR TO DETERMINE THE PARTICULAR TAX CONSEQUENCES OF THE MERGER TO THAT
SHAREHOLDER, INCLUDING THE APPLICABILITY AND EFFECT OF ANY STATE, LOCAL OR
FOREIGN INCOME, PROPERTY, TRANSFER AND OTHER TAX LAWS.
ACCOUNTING TREATMENT
The Merger will be accounted for as a pooling of interests for financial
reporting purposes. Under this method of accounting: the recorded assets and
liabilities of BT Financial and Moxham will be carried forward to the surviving
corporation at their recorded amounts after addressing any conformity issues;
income of the surviving corporation will include income of BT Financial and
Moxham for the entire fiscal year in which the combination occurs after
addressing any conformity issues; and the reported income of the separate
companies for prior periods will be combined and restated as income of the
surviving corporation after addressing conformity issues. See "Unaudited Pro
Forma Condensed Combined Financial Information."
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THE MERGER AGREEMENT
The following is a summary of certain provisions of the Merger Agreement, a
copy of which is attached as Annex A and incorporated by reference herein. This
summary is qualified in its entirety by reference to the full text of the Merger
Agreement.
THE MERGER
Upon satisfaction or waiver of the conditions set forth in the Merger
Agreement, at the effective time of the Merger, Moxham will merge with and into
BT Financial, with BT Financial being the surviving corporation. At the
effective time of the Merger, the separate corporate existence of Moxham will
cease and BT Financial will succeed to all the rights, privileges, immunities
and franchises, and all the property and assets, real, personal and mixed, of
Moxham, without the necessity for any separate conveyance or other transfer.
After the Merger, BT Financial will be responsible and liable for all
liabilities and obligations of Moxham of every kind and description, and neither
the rights of creditors, nor any liens on the property of Moxham, will be
impaired by the Merger. Immediately following the Merger, BT Financial shall
merge the Moxham Banks into Johnstown Bank, which shall be the surviving bank.
At the effective time of the Merger, each share of Moxham Common Stock then
outstanding (except Dissenters' Shares and treasury shares) will be converted
into the right to receive 1.15 shares of BT Financial Common Stock, and each
share of Moxham Preferred Stock then outstanding (except Dissenters' Shares and
treasury shares) shall be converted into the right to receive 6.325 shares of BT
Financial Common Stock, plus accrued but unpaid dividends thereon to the
effective time of the Merger. On the Closing Date, by virtue of the Merger, and
without any action on the part of Moxham shareholders, each of the then issued
and outstanding shares of Moxham Stock will cease to exist and will be deemed
canceled, retired and eliminated, and all rights in respect thereof (other than
with respect to Dissenters' Shares) will cease except the right to receive BT
Financial Common Stock (based upon the Merger Consideration), regardless of
whether the certificates representing such shares are surrendered to BT
Financial by Moxham shareholders. The Merger Consideration will be adjusted
immediately prior to the effective time of the Merger, if necessary, to reflect
any consolidation, split-up, other subdivision or combination of BT Financial
Common Stock, any dividend payable in BT Financial Common Stock, or any capital
reorganization involving the reclassification of BT Financial Common Stock
subsequent to the date of the Merger Agreement and prior to such time.
At the effective time of the Merger, the articles of incorporation and
bylaws of BT Financial as in effect immediately prior thereto will be the
articles of incorporation and bylaws of the surviving corporation. The directors
and principal officers of BT Financial from and after the effective time of the
Merger will be the directors and principal officers of BT Financial immediately
prior thereto. In addition, four directors of Moxham, designated by Moxham and
acceptable to BT Financial will become directors of BT Financial at the
effective time of the Merger, to serve for such terms as may be determined by BT
Financial consistent with its director retirement policies.
At the effective time of the Bank Merger, the articles of incorporation and
bylaws of Johnstown Bank as in effect immediately prior thereto will be the
articles of incorporation and bylaws of the surviving bank. The directors and
principal officers of Johnstown Bank for and after the effective time of the
Bank Merger will be the directors and principal officers of Johnstown Bank
immediately prior thereto. In addition, immediately after the Bank Merger, eight
directors of Moxham, selected by Moxham prior to the Merger (who may include
some of those persons selected to be directors of BT Financial) who are
acceptable to BT Financial will be appointed to the Board of Directors of
Johnstown Bank, each to serve until the 1997 annual meeting of the shareholders
of BT Financial.
EXCHANGE PROCEDURES
After the effective time of the Merger, each holder of a Certificate, upon
surrender of such Certificate to BT Financial or its exchange agent, together
with a duly executed and completed letter of transmittal (which will be mailed
to the holders of Certificates promptly following the effective time of the
Merger), will be entitled to receive a certificate or certificates representing
the number of whole shares of BT Financial Common Stock to which such holder is
entitled as described above, plus cash (payable by check) in lieu of
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any fractional share of BT Financial Common Stock to which such holder would
otherwise be entitled. Fractional shares of BT Financial Common Stock will not
be issued. In lieu of a fractional share of BT Financial Common Stock, each
relevant Moxham shareholder will receive a cash payment equal to the applicable
fraction multiplied by the closing sale price on NASDAQ for BT Financial Common
Stock on the Closing Date as reported in The Wall Street Journal, or, if BT
Financial Common Stock is not traded on such date, the next succeeding day on
which such stock is traded. No interest will be paid or accrued on the cash
payable upon surrender of Certificates.
Until surrendered in accordance with the requirements of the Merger
Agreement, the Certificates (except for Certificates representing Dissenters'
Shares and treasury shares) will from and after the effective time of the Merger
represent for all purposes only the right to receive shares of BT Financial
Common Stock and cash as described above. Upon surrender of a Certificate, there
will be paid to the record holder of the certificate for shares of BT Financial
Common Stock issued in exchange therefor (i) on the date of such exchange, the
amount of dividends theretofore accrued and payable with respect to such full
shares of BT Financial Common Stock as of any date subsequent to the effective
time of the Merger which have not yet been paid to a public official pursuant to
abandoned property laws and (ii) on the appropriate payment date, the amount of
dividends declared with a record date after the effective time of the Merger but
prior to such surrender and a payment date subsequent to such surrender. No
interest will be payable with respect to any such dividends.
At the effective time of the Merger, (i) each share of Moxham Common Stock
and Moxham Preferred Stock held in treasury will be canceled, retired and cease
to exist and no consideration will be paid therefor, and (ii) each Dissenters'
Share will be treated as described above (see "The Merger--Rights of Dissenting
Shareholders").
REPRESENTATIONS AND WARRANTIES
The Merger Agreement contains representations and warranties of Moxham and
BT Financial which are customary in transactions of this type, including, but
not limited to, representations and warranties concerning: (a) their respective
organization and capitalization; (b) the due authorization, execution and
delivery and the enforceability of the Merger Agreement; (c) consents or
approvals required, and the lack of conflicts or violations under applicable
articles of incorporation, bylaws, instruments and laws, with respect to the
transactions contemplated by the Merger Agreement; (d) the documents to be filed
with the Commission and other regulatory agencies; and (e) the conduct of
business in the ordinary course and absence of certain changes. The Merger
Agreement also contains customary representations and warranties by Moxham,
including, but not limited to, representations and warranties concerning: (a)
taxes; (b) compliance with laws; (c) environmental conditions; (d) insurance;
(e) employee benefit plans; (f) loan loss reserve; (g) related party
transactions; (h) fidelity bonds; and (i) investments.
CERTAIN COVENANTS
Moxham has agreed that, except with the prior written consent of BT
Financial, it will not: (i) issue any capital notes or shares of its capital
stock, declare or distribute any stock dividend, authorize a stock split, or
authorize, issue or make any other distribution of, on, or with respect to, its
capital stock, except that Moxham may (A) distribute regular quarterly cash
dividends in an amount not to exceed $.16 per share of Moxham Common Stock and
$2.00 per share of Moxham Preferred Stock, (B) issue up to 74,722 shares of
Moxham Common Stock after December 31, 1994 in connection with Moxham's Dividend
Reinvestment Plan, and (C) issue Moxham Common Stock upon conversion of Moxham
Preferred Stock; (ii) merge with, consolidate with, sell its assets to, or
acquire substantially all the assets of, any other corporation, bank or person,
or enter into any other transaction not in the ordinary course of business;
(iii) make any direct or indirect redemption, purchase or other acquisition of
any of its capital stock; (iv) create any pension or profit sharing plan, bonus,
deferred compensation, death benefit or retirement plan, or any other fringe
benefit, enter into any employment contract (written or otherwise) with, or
grant any bonuses to, any officer, director or employee; (v) amend its articles
of incorporation or bylaws except as may be necessary to consummate the
transactions contemplated by the Merger Agreement or as required by law; (vi)
incur any liability or obligation, make any commitment or disbursement, acquire
or dispose of any property or asset, make any
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contract or agreement, or engage in any transaction, except in the ordinary
course of business; (vii) increase the rate of compensation of any director,
officer, employee or agent or enter into any agreement to increase the rate of
compensation of any director, officer or employee, other than normal increases
in the ordinary course of business and consistent with past practice; (viii)
intentionally do anything or intentionally fail to do anything which will cause
a breach or a default under any contract, agreement, commitment or obligation to
which it is a party or by which it may be bound; (ix) except for securities
transactions effected in the ordinary course of business with the prior consent
of BT Financial (which consent shall not be unreasonably withheld), make any
capital expenditures in excess of $25,000 in the aggregate; (x) modify or extend
any service bureau contracts, hardware/software maintenance agreements, lease
agreements or other contracts that involve annual payments by Moxham that exceed
$5,000 per contract or $20,000 in the aggregate; (xi) change its lending,
borrowing, investment, asset/liability management or other material banking
policies in any material respect, except as may be required by changes in
applicable law, regulation or regulatory directives and except that, in
connection with the closing of the transactions contemplated hereby, Moxham
shall cooperate in good faith with BT Financial to adopt policies, practices and
procedures consistent with those utilized by BT Financial and its subsidiaries;
(xii) open, close or move any branch offices of the Moxham Banks, except for the
sale of Moxham Bank's Salem 22 Plaza Office; and (xiii) purchase any securities,
including, without limitation mortgage-backed securities, at a price
approximately fifty basis points above or below the face value of such
securities.
BT Financial has agreed that BT Financial and its subsidiaries will attempt
to cause all persons who are employed by Moxham or its subsidiaries at the
effective time of the Merger to be employed by subsidiaries of BT Financial. BT
Financial has also agreed that all employees of Moxham or its subsidiaries
immediately prior to the Merger who are employed by subsidiaries of BT Financial
following the Merger will be entitled to benefits which in the aggregate are no
less favorable than those generally afforded other employees of BT Financial or
its subsidiaries providing such employment. Prior service with Moxham or its
subsidiaries shall not be considered for purposes of determining eligibility
for, or vesting of, such employment benefits, nor for any other purpose.
BT Financial has agreed that any full-time employee of Moxham or any of its
subsidiaries whose employment is terminated, other than for cause, by BT
Financial or Johnstown Bank within six months after the Merger, and not offered
a comparable job with BT Financial or a subsidiary of BT Financial, will be paid
severance pay equal to one week's compensation multiplied by each year of
service with Moxham, not exceeding three months salary, for any employee having
less than 15 years of continuous service with Moxham, its subsidiaries or their
respective predecessors, and not exceeding six months salary, for any employee
having 15 or more years of continuous service with Moxham, its subsidiaries or
their respective predecessors.
ACQUISITION PROPOSALS
Moxham has agreed that neither it, nor any of its subsidiaries, nor any of
its directors, officers or the directors or officers of its subsidiaries, nor
any of its other affiliates (as defined in Rule 12b-2 under the Exchange Act)
(each, an "Affiliate") will, and that it will cause its and its subsidiaries'
employees, agents and representatives (including, without limitation, any
investment banking, legal or accounting firm retained by Moxham and any
individual member or employee of the foregoing) (each, an "Agent") not to, (i)
initiate, solicit or encourage, directly or indirectly, any inquiries or the
making or implementation of any proposal or offer (including, without
limitation, any proposal or offer to their respective shareholders or any of
them) with respect to a merger, acquisition, consolidation, recapitalization,
liquidation, dissolution or similar transaction involving, or any purchase of
all or a substantial portion of the assets or equity securities of, Moxham or
any of its subsidiaries (any such proposal or offer being hereinafter referred
to as an "Acquisition Proposal") or (ii) engage in any negotiations concerning,
or provide any confidential information or data to, or have any discussions
with, any person relating to an Acquisition Proposal, or (iii) otherwise
cooperate in any effort or attempt to make, implement or accept an Acquisition
Proposal. Moxham must notify BT Financial immediately if any inquiries,
proposals or offers related to an Acquisition Proposal are received by, any
confidential information or data is requested from, or any negotiations or
discussions related to an Acquisition
41
<PAGE> 49
Proposal are sought to be initiated or continued with, it or any of the
above-referenced individuals or entities, and of the terms and other details of
any such acquisition proposal or request.
MOXHAM DIVIDENDS
Under the Merger Agreement, Moxham may pay regular quarterly cash dividends
in an amount not to exceed $.16 per share of Moxham Common Stock and $2.00 per
share of Moxham Preferred Stock. In addition, Moxham may issue up to 74,722
shares of Moxham Common Stock in connection with Moxham's Dividend Reinvestment
Plan and Moxham may issue Moxham Common Stock upon conversion of Moxham
Preferred Stock.
CONDITIONS
The obligations of BT Financial to consummate the Merger are subject to the
satisfaction or waiver (to the extent permitted by law), on or before the
closing date of the Merger, of each of the following conditions, among others:
(a) each of the covenants to be performed by Moxham under the Merger Agreement
on or before the closing date of the Merger having been duly performed; (b) the
representations and warranties made by Moxham in the Merger Agreement being true
and correct in all material respects on the closing date of the Merger with the
same force and effect as though such representations and warranties had been
made on and as of such date (or as of the date when made in the case of any
representation and warranty which specifically relates to an earlier date); (c)
Moxham shall have furnished to BT Financial a certified copy of the resolutions
duly adopted by the Moxham Board authorizing and approving the Merger Agreement
and the transactions contemplated thereby; (d) the Merger Agreement having been
adopted and approved by the affirmative vote of 70% of the outstanding shares of
Moxham Common Stock; (e) BT Financial, Moxham and their subsidiaries having
received in form and substance satisfactory to BT Financial all necessary
federal and state governmental and regulatory approvals and other consents
necessary to permit consummation of the Merger (including, but not limited to,
approvals of the Federal Reserve and the Pennsylvania Department of Banking), no
such approvals and consents requiring BT Financial or any such subsidiary to
enter into any agreement or stipulation that is inconsistent with prior Office
of the Comptroller of the Currency, Pennsylvania Department of Banking or
Federal Reserve practice or procedure, and all applicable waiting periods
required by law having expired or elapsed; (f) no action, proceeding, regulation
or legislation having been instituted or threatened before any court,
governmental agency or legislative body to enjoin, restrain or prohibit, or to
obtain substantial damages in respect of, or which is related to or arises out
of, the Merger Agreement, the consummation of the transactions contemplated
thereby or the Merger, which, in the good faith judgment of BT Financial, makes
it inadvisable to consummate such transactions; (g) BT Financial shall not have
discovered any material error, misstatement or omission in any information
furnished in writing or to be furnished in writing to BT Financial hereunder, or
in the information to be furnished by Moxham and contained in the Registration
Statement; (h) since the date of the Merger Agreement, there having not occurred
any material adverse change in the business, financial condition, results of
operations or prospects of Moxham on a consolidated basis, other than changes
resulting from or attributable to changes in laws or regulations, generally
accepted accounting principles, or interpretations thereof that affect the
banking industry generally; (i) the Registration Statement having been declared
effective by the Commission, being exempt or having been declared effective in
each state having jurisdiction thereon, and no stop order proceeding being
pending or threatened with respect thereto; (j) the number of Dissenters' Shares
(treating all Moxham Preferred Stock Shares as if they had been converted into
Moxham Common Stock) as of the closing date of the Merger being less than 10% of
the Moxham Common Stock issued and outstanding on such date; (k) Moxham having
paid all expenses incurred thereby in connection with the transactions
contemplated by or described in the Merger Agreement, except for reasonable
out-of-pocket expenses actually incurred that the parties acknowledge have not
been billed on or before the closing date of the Merger; (m) an opinion of
Moxham counsel on the matters specified in Section 4.1(a) through (e) of the
Merger Agreement; and (n) a tax opinion from Kirkpatrick & Lockhart LLP on the
matters specified in Section 5.1(n) of the Merger Agreement; (o) a fairness
opinion from Berwind that the Merger is fair, from a financial point of view, to
the BT Financial shareholders; and (p) an accounting opinion from Coopers &
Lybrand LLP that the Merger will be accounted for as a pooling of interests.
42
<PAGE> 50
The obligations of Moxham to consummate the Merger are subject to the
satisfaction or waiver (to the extent permitted by law), on or before the
closing date of the Merger, of each of the following conditions, among others:
(a) each of the covenants to be performed by BT Financial under the Merger
Agreement on or before the closing date of the Merger having been duly
performed; (b) the representations and warranties made by BT Financial in the
Merger Agreement being true and correct in all material respects on the closing
date of the Merger with the same force and effect as though such representations
and warranties had been made on and as of such date (or as of the date when made
in the case of any representation and warranty which specifically relates to an
earlier date); (c) BT Financial shall have furnished to Moxham a copy of the
resolutions duly adopted by its Board of Directors authorizing the Merger
Agreement (d) the Merger Agreement having been approved by the affirmative vote
of the majority of votes cast by all holders of BT Financial Common Stock
entitled to vote thereon; (e) BT Financial and Moxham having received in form
and substance satisfactory to Armstrong all necessary federal and state
governmental and regulatory approvals, shareholder approvals and other consents
necessary to permit consummation of the Merger (including, but not limited to,
approvals of the Federal Reserve, the Pennsylvania Department of Banking and the
shareholders of BT Financial and Moxham), and all applicable waiting periods
required by law having expired or elapsed; (e) no injunction having been issued
by any court or governmental agency which prohibits or restricts the
consummation of the transactions contemplated by the Merger Agreement which, in
the good faith judgment of Moxham, would make it inadvisable to consummate such
transactions; (f) Moxham shall not have discovered any material error,
misstatement or omission in any information furnished in writing or to be
furnished in writing to Moxham hereunder, or in the information to be furnished
by BT Financial and contained in the Registration Statement; (g) since the date
of the Merger Agreement, there having not occurred any material adverse change
in the financial condition of BT Financial on a consolidated basis which would
render consummation of the Merger impracticable, other than changes resulting
from or attributable to changes in laws or regulations, generally accepted
accounting principles, or interpretations thereof that affect the banking
industry generally; (h) the Registration Statement having been declared
effective by the Commission, being exempt or having been declared effective in
each state having jurisdiction thereon, and no stop order proceeding being
pending or threatened with respect thereto; (i) Moxham having received, as of
the date of mailing of this Proxy Statement/Prospectus, an opinion from its
financial advisor, in form and content satisfactory to it, to the effect that
the Merger is fair, from a financial point of view, to the Moxham shareholders;
and (j) opinion of counsel to BT Financial and Johnstown Bank on the matters
specified in Section 4.2(a) through (e) of the Merger Agreement; (k) a tax
opinion that the Merger will be treated for Federal income tax purposes as a
reorganization within the meaning of Section 368 of the Code.
Under the Merger Agreement, BT Financial has the right to perform a Phase I
environmental assessment and a structural site inspection on the property owned
by Moxham. If the results of these assessments reveal an environmental or
structural condition with potential liability in excess of $100,000, BT
Financial may terminate the Merger Agreement.
TERMINATION
The Merger Agreement and the transactions contemplated thereby may be
terminated: (a) at any time prior to the effective time of the Merger by the
mutual consent of BT Financial and Moxham; (b) at any time, by either BT
Financial or Moxham, if the applications for prior regulatory approval have been
denied, and the time period for appeals and requests for reconsideration has
run; (c) at any time, by either BT Financial or Moxham, if the shareholders of
either Moxham and BT Financial do not approve the transactions contemplated by
the Merger Agreement at the Meetings duly called for that purpose; (d) at any
time, by either BT Financial and Moxham, if such party determines in good faith
that any condition precedent to its obligations to consummate the Merger and the
Bank Merger is or would be impossible to satisfy, provided that the terminating
party has given the other party written notice at least 10 days prior to such
termination and has given the other party a reasonable opportunity to discuss
the matter with a view to achieving a mutually acceptable resolution; and (e) in
any event, automatically on May 30, 1996 if the Merger has not been consummated
on or before such date, unless extended by mutual consent of, BT Financial and
Moxham. The parties, however, expect that the Merger will be consummated before
May 30, 1996. If the Merger has not been consummated by May 30, 1996, Moxham and
BT Financial shareholders will be notified by letter
43
<PAGE> 51
whether the Merger has been abandoned or if the parties have agreed to extend
the termination date and what that date then is. The Merger Agreement does not
limit the possible number of extensions of the termination date or the periods
for which extension of the termination date may occur. If, at any time, BT
Financial and Moxham agree in writing on a closing date of the Merger on which
all conditions precedent to consummation of the Merger are expected to be
satisfied or waived and one of them postpones that closing date for a reasonable
period of time (which will be no more than 30 days and in no event will end
later than May 30, 1996) to enable it to perform any obligations under the
Merger Agreement and either BT Financial or Moxham refuses to consummate the
Merger because all conditions precedent to its obligations to close have not
been met on the closing date of the Merger as postponed, then such person may
immediately terminate the Merger Agreement.
In the event of any termination of the Merger Agreement: (i) certain
confidentiality provisions and other provisions relating to expenses in the
Merger Agreement will survive; (ii) if BT Financial terminates the Merger
Agreement due to the failure to satisfy a condition precedent regarding (a)
Moxham's performance of its covenants, (b) Moxham's representations and
warranties, (c) the failure to deliver Moxham's certified resolutions regarding
the Merger Agreement, or (d) any material error, misstatement or omission in the
representations or warranties of Moxham, or in the information furnished by
Moxham in the Registration Statement or any material failure to perform a
covenant by Moxham, and satisfaction of such condition was within the control of
Moxham, then Moxham will reimburse BT Financial for its attorneys' fees and
other expenses reasonably incurred in connection with the transactions described
in the Merger Agreement (to the extent not already paid by Moxham to BT
Financial or any of its subsidiaries) and such failure will constitute a breach
of the Merger Agreement and BT Financial will have all rights available in law
and at equity for such breach of contract; (iii) if Moxham terminates the Merger
Agreement due to the failure to satisfy a condition precedent regarding (a) BT
Financial's performance of its covenants, (b) BT Financial's representations and
warranties, (c) the failure to deliver BT Financial's certified resolutions
regarding the Merger Agreement, or (d) any material error, misstatement or
omission in the representations and warranties of BT Financial, or in the
information furnished by BT Financial in the Registration Statements, or any
material failure of BT Financial to perform a covenant, and satisfaction of such
condition was within the control of BT Financial or any of its subsidiaries,
then BT Financial will reimburse Moxham for its attorneys' fees and other
expenses reasonably incurred in the transactions described in the Merger
Agreement and such failure will constitute a breach of the Merger Agreement and
Moxham will have all rights available in law and at equity for such breach of
contract; (iv) if BT Financial terminates the Merger Agreement due to a material
adverse change in Moxham's financial condition or the exceeding of the requisite
number of Dissenters' Shares, then Moxham will reimburse BT Financial for its
attorneys' fees and other expenses reasonably incurred in connection with the
transactions described in the Merger Agreement (to the extent not already paid
by Moxham to BT Financial), and upon payment in full thereof, Moxham will have
no further liability or obligation to BT Financial under the Merger Agreement;
(v) if Moxham terminates the Merger Agreement due to the failure to satisfy one
or more of certain conditions precedent regarding changes in BT Financial's
financial condition, then BT Financial will reimburse Moxham for its attorneys'
fees and other expenses reasonably incurred in connection with the Merger and
certain transactions described in the Merger Agreement, and upon payment in full
thereof, BT Financial will have no further liability or obligation to Moxham
under the Merger Agreement; and (vi) if either party terminates for any reasons
other than those specified in clauses (ii) through (v) above, then neither party
will have any further liability to the other.
EXPENSES
Except as described under "Termination" above, all expenses incurred by BT
Financial or Moxham in connection with or related to the authorization,
preparation and execution of the Merger Agreement, the solicitation of
shareholder approval and all other matters related to the closing of the
transactions contemplated by the Merger Agreement, including, without limiting
the generality of the foregoing, all fees and expenses of agents,
representatives, counsel and accountants employed by any such person, will be
borne solely and entirely by the person that has incurred the same.
44
<PAGE> 52
AMENDMENT AND WAIVER
Any of the terms or conditions of the Merger Agreement may be waived at any
time by the person which is entitled to the benefit thereof, or any of those
terms or conditions may be amended or modified in whole or in part at any time
before or after the vote of the shareholders on the Merger Agreement to the
extent permitted by law by agreement in writing, executed in the same manner as
the Merger Agreement after authorization to do so by the Board of each party
thereto; provided, however, that such action will be taken only if, in the
judgment of the Boards of each party taking the action, such waiver or such
amendment or modification will not have a material adverse effect on the
benefits intended under the Merger Agreement to such party and its shareholders
following approval of the Merger Agreement by the shareholders, unless the
Merger Agreement, as modified, is resubmitted to the shareholders for their
approval.
45
<PAGE> 53
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
The following tables set forth unaudited pro forma condensed combined
financial information for BT Financial that gives effect to the Merger, BT
Financial's acquisition of Huntington on December 14, 1995, and BT Financial's
pending acquisition of Armstrong. The Merger is expected to be accounted for
under the pooling of interests method of accounting. Under the pooling of
interests method of accounting, the historical book values of the assets,
liabilities and shareholders' equity of Moxham as reported on its consolidated
balance sheet, will be carried over onto the Consolidated Balance Sheet of BT
Financial after addressing conformity issues, and no goodwill or other
intangible assets will be created. BT Financial will include in its consolidated
statement of income the consolidated results of operations of Moxham for the
entire fiscal year in which the effective date of the Merger occurs after
addressing conformity issues. BT Financial will also combine and restate its
results of operations for prior periods to include the reported consolidated
results of operations of Moxham for prior periods after addressing conformity
issues. The unaudited pro forma condensed combined income statement gives effect
to the acquisition of Moxham for the three years ended December 31, 1995. The
accompanying unaudited pro forma condensed combined financial information
assumes that in BT Financial's pending acquisition of Moxham, 1.15 shares of BT
Financial Common Stock will be issued for each share of Moxham Common Stock and
6.325 shares of BT Financial Common Stock will be issued for each share of
Moxham Preferred Stock. See "The Merger Agreement--The Merger."
BT Financial's acquisition of Huntington has been, and the Armstrong Merger
will be, accounted for under the purchase method of accounting. The unaudited
pro forma condensed combined income statement gives effect to the Armstrong
Merger and the acquisition of Huntington for the year ended December 31, 1995.
The Armstrong Merger Agreement provides for an exchange ratio of 26.5 shares of
BT Financial Common Stock and $596.25 in cash for each share of Armstrong Common
Stock. This exchange ratio is subject to change in certain circumstances. The
accompanying unaudited pro forma condensed combined financial information
reflects an equivalent per share of Armstrong Common Stock at that exchange
ratio.
This unaudited pro forma condensed combined financial information is based
on the estimates and assumptions set forth in the notes to such statements. The
pro forma adjustments made in connection with the development of the unaudited
pro forma condensed combined financial information are preliminary and have been
made solely for purposes of developing such unaudited pro forma condensed
combined financial information as necessary to comply with the disclosure
requirements of the Commission. Where applicable, the pro forma adjustments have
been separately taxed at the statutory rate of 35%. The unaudited pro forma
condensed combined financial information has been prepared using the historical
consolidated financial statements and notes thereto, which are incorporated
herein by reference. See "Incorporation of Certain Documents by Reference." The
unaudited pro forma condensed combined financial statements do not give effect
to anticipated cost savings in connection with the Merger and do not purport to
be indicative of the combined financial position or results of operations of
future periods or indicative of the results that actually would have been
realized had the entities been a single entity during these periods.
The unaudited pro forma condensed combined financial information set forth
below should be read in conjunction with the audited financial statements,
including the notes thereto, of BT Financial that are incorporated by reference
in this Joint Proxy Statement/Prospectus and of Armstrong and of Moxham that
appear elsewhere in this Joint Proxy Statement/Prospectus. See "Incorporation of
Certain Documents by Reference," "Selected Financial Information," and "Index to
Moxham and Armstrong Financial Statements."
46
<PAGE> 54
PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF DECEMBER 31, 1995
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
BT
FINAN-
CIAL BT PRO
MOXHAM AND ARMSTRONG FINANCIAL FORMA
BT PRO MOXHAM BT PRO AND COMBINED
FINAN- FORMA PRO FINAN- FORMA ARMSTRONG ALL
CIAL(1) MOXHAM ADJUSTMENTS FORMA CIAL(1) ARMSTRONG ADJUSTMENTS COMBINED TRANSACTIONS
------- ------ ----------- ----- ------- --------- ----------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS:
Cash and cash
equivalents... 50,108 8,935 59,043 50,108 1,427 (350)(6) 51,185 60,120
Money Market
Investments... 2,688 8,961 11,649 2,688 0 2,688 11,649
Investment
securities...... 243,309 60,075 (17)(2) 303,367 243,309 38,285 (4,346)(7) 277,248 337,306
Loans, net of
unearned
interest...... 857,557 154,398 (715)(3) 1,011,240 857,557 11,055 868,612 1,022,295
Reserve for
loan losses... (8,071) (1,962) (10,033) (8,071) (150) (8,221) (10,183)
Premises and
equipment..... 25,672 6,052 31,724 25,672 312 25,984 32,036
Other assets.... 31,139 4,436 142 (2)(4) 35,717 31,139 614 3,957 (6)(8) 35,710 40,288
--------- ------- ------- --------- --------- --------- ------- --------- ---------
Total Assets.. 1,202,402 240,895 (590) 1,442,707 1,202,402 51,543 (739) 1,253,206 1,493,511
========= ======= ======= ========= ========= ========= ======= ========= =========
LIABILITIES:
Deposits:
Non-interest
bearing..... 138,252 23,103 161,355 138,252 4,921 143,173 166,276
Interest
bearing..... 897,395 194,502 1,091,897 897,395 33,742 931,137 1,125,639
--------- ------- ------- --------- --------- --------- ------- --------- ---------
Total
deposits.. 1,035,647 217,605 1,253,252 1,035,647 38,663 1,074,310 1,291,915
Funds
borrowed.... 37,579 100 37,679 37,579 4,000 41,579 41,679
Other
liabilities. 7,050 2,397 400 (4) 9,847 7,050 509 7,559 10,356
Long-term
debt........ 20,083 715 (715)(3) 20,083 20,083 0 20,083 20,083
--------- ------- ------- --------- --------- --------- ------- --------- ---------
Total
liabilities. 1,100,359 220,817 (315) 1,320,861 1,100,359 43,172 0 1,143,531 1,364,033
--------- ------- ------- --------- --------- --------- ------- --------- ---------
SHAREHOLDERS'
EQUITY:
Preferred
stock......... 0 1,378 (1,378)(5) 0 0 0 0 0
Common
stock......... 19,133 1,808 3,827 (5) 24,768 19,133 400 660 (9) 20,193 25,828
Surplus......... 33,320 3,750 (2,459)(2)(5) 34,611 33,320 850 5,722 (9) 39,892 41,183
Retained
earnings...... 48,336 12,780 (260)(4) 60,856 48,336 6,649 (6,649)(9) 48,336 60,856
Net unrealized
holding gains
(losses) on
securities
available-
for-sale...... 1,254 362 (5)(2) 1,611 1,254 472 (472)(9) 1,254 1,611
--------- ------- ------- --------- --------- --------- ------- --------- ---------
Total
shareholders'
equity...... 102,043 20,078 (275) 121,846 102,043 8,371 (739) 109,675 129,478
--------- ------- ------- --------- --------- --------- ------- --------- ---------
Total
liabilities
and
shareholders'
equity...... 1,202,402 240,895 (590) 1,442,707 1,202,402 51,543 (739) 1,253,206 1,493,511
========= ======= ======= ========= ========= ========= ======= ========= =========
Book value per
share......... 26.67 20.69 24.60 26.67 1,046.38 27.16 25.07
Shares
outstanding,
fully diluted. 3,826,581 980,852 146,217 (5) 4,953,650 3,826,581 8,000 204,000 (9) 4,038,581 5,165,650
</TABLE>
(footnotes continued on next page)
47
<PAGE> 55
- ---------
(1) The BT Financial balance sheet includes Huntington Bank, which was acquired
by BT Financial on December 14, 1995. Pro forma balance sheet information
for the acquisition of the Huntington Bank as of September 30, 1995, was
previously reported as an amendment to a Form 8-K filed on February 27,
1996.
(2) Reflects the elimination of 792 shares of Moxham Common Stock owned by BT
Financial.
(3) Reflects the elimination of a loan from Johnstown Bank to Moxham.
(4) Reflects the recording of liability for additional supplemental retirement
benefits due certain officers upon a change in control.
(5) Reflects the issuance of 1.15 shares of BT Financial Common Stock for each
share of Moxham Common Stock, including shares issued after the conversion
of 14,000 shares of Moxham Preferred Stock. Excludes 792 current shares of
Moxham Common Stock that are owned by BT Financial.
(6) Reflects estimated legal, accounting and severance costs of the Armstrong
Merger.
(7) Represents the sale of certain investment securities to fund the cash paid
to Armstrong shareholders, based upon a market value of $36.00 for BT
Financial Common Stock.
(8) Represents goodwill associated with the Armstrong Merger. Asset valuations
different than book value are currently estimated to be minimal.
(9) Represents the issuance of 26.5 shares of BT Financial Common Stock (212,000
shares in total) for each share of Armstrong Common Stock and cash paid to
Armstrong shareholders for a total value of $11.98 million. Pro forma
adjustments to eliminate shares of Armstrong Common Stock and issue shares
of BT Financial Common Stock are represented as follows:
<TABLE>
<S> <C> <C>
Common stock...................................................................... (400) 1,060
Surplus........................................................................... (850) 6,572
Retained earnings................................................................. (6,649) --
Net unrealized holding gains (losses) on securities available-for-sale............ (472) --
------ -----
TOTAL SHAREHOLDERS' EQUITY.................................................... (8,371) 7,632
</TABLE>
48
<PAGE> 56
PRO FORMA CONDENSED COMBINED INCOME STATEMENT FOR
YEAR ENDED DECEMBER 31, 1995
(IN THOUSANDS, EXCEPT SHARES AND PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
BT
FINAN- BT
CIAL FINANCIAL PRO
MOXHAM AND ARMSTRONG AND FORMA
BT PRO MOXHAM BT PRO ARMSTRONG COMBINED
FINAN- FORMA PRO FINAN- FORMA PRO ALL
CIAL(1) MOXHAM ADJUSTMENTS FORMA CIAL(1) ARMSTRONG ADJUSTMENTS FORMA TRANSACTIONS
------- ------ ----------- ----- ------- --------- ----------- ----- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INTEREST INCOME
Loans, including
fees.......... 71,931 14,096 (67)(2) 85,960 71,931 841 72,772 86,801
Investment
securities.... 16,845 3,770 20,615 16,845 2,436 (283)(4) 18,998 22,768
Money market
investments... 544 192 736 544 7 551 743
--------- ------- ------- --------- --------- ----- ------- --------- ---------
Total interest
income...... 89,320 18,058 (67) 107,311 89,320 3,284 (283) 92,321 110,312
--------- ------- ------- --------- --------- ----- ------- --------- ---------
INTEREST EXPENSE
Deposits........ 33,799 8,995 42,794 33,799 1,358 35,157 44,152
Borrowings...... 2,458 211 2,669 2,458 126 2,584 2,795
Long-term debt.. 1,620 67 (67)(2) 1,620 1,620 0 1,620 1,620
--------- ------- ------- --------- --------- ----- ------- --------- ---------
Total interest
expense..... 37,877 9,273 (67) 47,083 37,877 1,484 0 39,361 48,567
--------- ------- ------- --------- --------- ----- ------- --------- ---------
NET INTEREST
INCOME.......... 51,443 8,785 0 60,228 51,443 1,800 (283) 52,960 61,745
Provision for
loan losses... 1,694 307 2,001 1,694 38 1,732 2,039
--------- ------- ------- --------- --------- ----- ------- --------- ---------
Net interest
income after
provision for
loan losses... 49,749 8,478 0 58,227 49,749 1,762 (283) 51,228 59,706
--------- ------- ------- --------- --------- ----- ------- --------- ---------
OTHER INCOME:
Net security
gains
(losses)...... 188 62 250 188 194 382 444
Other........... 7,587 1,401 8,988 7,587 52 7,639 9,040
--------- ------- ------- --------- --------- ----- ------- --------- ---------
Total other
income...... 7,775 1,463 0 9,238 7,775 246 0 8,021 9,484
--------- ------- ------- --------- --------- ----- ------- --------- ---------
OTHER EXPENSES:
Salaries and
employee
benefits...... 20,276 4,592 24,868 20,276 474 20,750 25,342
Occupancy and
equipment
expense....... 6,497 1,223 7,720 6,497 130 6,627 7,850
Amortization of
intangible
assets........ 1,874 30 1,904 1,874 0 270 (5) 2,144 2,174
Other operating
expenses...... 11,570 2,460 14,030 11,570 567 12,137 14,597
--------- ------- ------- --------- --------- ----- ------- --------- ---------
Total other
expenses.... 40,217 8,305 0 48,522 40,217 1,171 270 41,658 49,963
--------- ------- ------- --------- --------- ----- ------- --------- ---------
Income Before
Income Taxes.. 17,307 1,636 0 18,943 17,307 837 (553) 17,591 19,227
Provision for
income taxes.. 5,620 161 5,781 5,620 190 (99)(6) 5,711 5,872
--------- ------- ------- --------- --------- ----- ------- --------- ---------
Net Income.. 11,687 1,475 0 13,162 11,687 647 (454) 11,880 13,355
========= ======= ======= ========= ========= ===== ======= ========= =========
Net income per
share......... 3.05 1.51 2.66 3.05 80.90 2.94 2.59
Dividends paid
per share..... 1.22 0.64 1.22 1.22 60.75 1.22 1.22
Weighted average
shares
outstanding,
fully diluted. 3,826,581 976,342 145,539 (3) 4,948,462 3,826,581 8,000 204,000 (7) 4,038,581 5,160,462
</TABLE>
49
<PAGE> 57
PRO FORMA CONDENSED COMBINED INCOME STATEMENT FOR
YEAR ENDED DECEMBER 31, 1994
(IN THOUSANDS, EXCEPT SHARES AND PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
BT
FINANCIAL
PRO AND
BT FORMA MOXHAM
FINANCIAL MOXHAM ADJUSTMENTS PRO FORMA
--------- ------ ----------- ---------
<S> <C> <C> <C> <C>
INTEREST INCOME
Loans, including fees..................................... 55,984 12,372 (63)(2) 68,293
Investment securities..................................... 16,020 3,371 19,391
Money market investments.................................. 1,235 111 1,346
--------- ------- ------- ---------
Total interest income................................ 73,239 15,854 (63) 89,030
--------- ------- ------- ---------
INTEREST EXPENSE
Deposits.................................................. 24,817 6,689 31,506
Borrowings................................................ 766 229 995
Long-term debt............................................ 629 63 (63)(2) 629
--------- ------- ------- ---------
Total interest expense............................... 26,212 6,981 (63) 33,130
--------- ------- ------- ---------
NET INTEREST INCOME....................................... 47,027 8,873 55,900
Provision for loan losses................................. 904 264 1,168
--------- ------- ------- ---------
Net interest income after provision for loan
losses............................................. 46,123 8,609 0 54,732
--------- ------- ------- ---------
OTHER INCOME
Net security gains (losses)............................... 193 154 347
Other..................................................... 6,781 1,279 8,060
--------- ------- ------- ---------
Total other income................................... 6,974 1,433 0 8,407
--------- ------- ------- ---------
OTHER EXPENSES
Salaries and employee benefits............................ 18,610 4,333 22,943
Occupancy and equipment expense........................... 6,074 1,159 7,233
Amortization of intangible assets......................... 1,275 16 1,291
Other operating expenses.................................. 11,560 2,570 14,130
--------- ------- ------- ---------
Total other expenses................................. 37,519 8,078 0 45,597
--------- ------- ------- ---------
INCOME BEFORE INCOME TAXES................................ 15,578 1,964 0 17,542
Provision for income
taxes................................................ 4,672 211 4,883
--------- ------- ------- ---------
NET INCOME........................................... 10,906 1,753 0 12,659
========= ======= ======= ========
Net income per share...................................... 2.85 1.81 2.56
Dividends paid per share.................................. 1.10 0.58 1.10
Weighted average shares outstanding....................... 3,826,581 967,959 144,282(3) 4,938,822
</TABLE>
50
<PAGE> 58
PRO FORMA CONDENSED COMBINED INCOME STATEMENT FOR
YEAR ENDED DECEMBER 31, 1993
(IN THOUSANDS, EXCEPT SHARES AND PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
BT FINANCIAL MOXHAM ADJUSTMENTS COMBINED
------------ ------- ----------- ---------
<S> <C> <C> <C> <C>
INTEREST INCOME
Loans, including fees........................ 49,590 11,535 (61)(2) 61,064
Investment securities........................ 14,467 2,913 17,380
Money market investments..................... 2,197 372 2,569
--------- ------- ------- ---------
Total interest income................... 66,254 14,820 (61) 81,013
--------- ------- ------- ---------
INTEREST EXPENSE
Deposits..................................... 22,471 5,956 28,427
Borrowings................................... 336 35 371
Long-term debt............................... 336 61 (61)(2) 336
--------- ------- ------- ---------
Total interest expense.................. 23,143 6,052 (61) 29,134
--------- ------- ------- ---------
NET INTEREST INCOME.......................... 43,111 8,768 51,879
Provision for loan losses.................... 1,975 193 2,168
--------- ------- ------- ---------
Net interest income after provision for
loan losses........................... 41,136 8,575 0 49,711
--------- ------- ------- ---------
OTHER INCOME
Net security gains (losses).................. (4) 138 134
Other........................................ 6,898 1,173 8,071
--------- ------- ------- ---------
Total other income...................... 6,894 1,311 0 8,205
--------- ------- ------- ---------
OTHER EXPENSE
Salaries and employee benefits............... 17,183 4,123 21,306
Occupancy and equipment expense.............. 5,418 1,089 6,507
Amortization of intangible assets............ 1,104 23 1,127
Other operating expenses..................... 10,135 2,488 12,623
--------- ------- ------- ---------
Total other expenses.................... 33,840 7,723 0 41,563
--------- ------- ------- ---------
INCOME BEFORE INCOME TAXES................... 14,190 2,163 0 16,353
Provision for income taxes................... 4,846 235 5,081
--------- ------- ------- ---------
Income before cumulative effect of accounting
principle changes.......................... 9,344 1,928 0 11,272
Cumulative effect of change in accounting for
Income taxes............................... 113 (27) 86
--------- ------ ------- ---------
Net Income.............................. 9,457 1,901 0 11,358
========= ====== ======= =========
Net income per share......................... 2.72 1.98 2.48
Dividends paid per share..................... 0.99 0.56 0.99
Weighted average shares outstanding.......... 3,479,574 958,370 142,844(3) 4,580,788
</TABLE>
51
<PAGE> 59
- ---------
(1) The BT Financial income statement figures for the year ended December 31,
1995 represent the pro forma results of BT Financial and Huntington Bank.
The acquisition was closed on December 14, 1995. Pro forma income statement
information for the acquisition of Huntington Bank for the nine months ended
September 30, 1995, was previously reported in an amendment to a Form 8-K
filed on February 27, 1996. BT Financial's Annual Report on Form 10-K for
the year ended December 31, 1995, included pro forma information for the
acquisition of Huntington Bank for the twelve months ended December 31,
1995.
(2) Reflects the elimination of interest income and expense from term debt at
Moxham borrowed from BT Financial.
(3) Reflects the adjustment to weighted average shares due to the issuance of
1.15 shares of BT Financial Common Stock for each share of Moxham Common
Stock, including shares issued for the conversion of 14,000 shares of Moxham
Preferred Stock. Excludes 792 shares of Moxham Common Stock owned by BT
Financial.
(4) Reflects the reduction in income from the sale of certain investment
securities at an estimated average rate of 6.5% to fund the cash paid to
Armstrong shareholders.
(5) Reflects the amortization of goodwill over a 15 year period and organization
costs over a 5 year period. Purchase adjustments to other assets and
liabilities are estimated to be minimal and are not reflected in the pro
forma income statements.
(6) Reflects tax effect of item (4).
(7) Reflects the adjustment to weighted average shares due to the issuance of
26.5 shares of BT Financial Common Stock for each share of Armstrong Common
Stock or 212,000 shares in total.
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<PAGE> 60
DESCRIPTION OF BT FINANCIAL CAPITAL STOCK
CAPITAL STOCK
The authorized capital stock of BT Financial consists of 10,000,000 shares
of common stock having a par value of $5.00 per share, and 2,000,000 shares of
preferred stock having no par value. The number of shares of BT Financial Common
Stock outstanding as of April , 1996 was 3,826,581. No shares of BT
Financial's preferred stock are outstanding. Except to the extent required by
governing law, rule or regulation or by NASDAQ rules (described below), the
shares of capital stock of BT Financial may be issued from time to time by the
Board of Directors of BT Financial without further approval of the shareholders
of BT Financial. The Board of Directors of BT Financial also has the full
authority permitted by law to divide the authorized and unissued shares of
preferred stock, no par value, of BT Financial into series and to fix by
resolution full, limited, multiple or fractional, or no voting rights, and such
designations, preferences, qualifications, privileges, limitations,
restrictions, options, conversion rights, redemption rights and other special
rights of any such series that may be desired.
Voting Rights. Holders of shares of BT Financial Common Stock are entitled
to cast one vote for each share held of record on all matters submitted to a
vote of shareholders of BT Financial. Holders of shares of BT Financial Common
Stock are not entitled to cumulate votes for the election of directors.
Classification of the Board of Directors. The Board of Directors is
divided into four classes, as nearly equal in number as possible, and the term
of office of one class expires in each year.
Preemptive Rights. Holders of shares of BT Financial Common Stock do not
have any preemptive rights to subscribe for or to purchase any additional
securities of BT Financial.
Dividends. Subject to any rights and preferences of any class of stock
having preference over the BT Financial Common Stock, holders of shares of BT
Financial Common Stock will be entitled to such dividends as may be declared by
the Board of Directors of BT Financial out of funds lawfully available therefor.
Cash available for dividend distribution to the holders of BT Financial Common
Stock must initially come from dividends paid to BT Financial by its
subsidiaries. Accordingly, restrictions on payment of cash dividends by BT
Financial are affected by any restrictions on the payment of dividends by BT
Financial's subsidiaries.
Liquidation. Upon any liquidation, dissolution or winding up of the
affairs of BT Financial, whether voluntary or involuntary, holders of shares of
BT Financial Common Stock will be entitled to receive pro rata the remaining
assets of BT Financial after all debts and liabilities have been paid and after
the holders of any class of stock having preference over the BT Financial Common
Stock have been paid in full any sums to which they may be entitled.
NASDAQ Listing. BT Financial Common Stock is included for quotation on
NASDAQ. In order to maintain such inclusion, approval of BT Financial's
shareholders would be required for the issuance of additional shares of BT
Financial Common Stock or securities convertible into BT Financial Common Stock
if the issuance of such securities (1) 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; (2) is in connection with the
acquisition of a company in which a director, officer or substantial shareholder
of BT Financial has a 5% or greater interest (or such persons collectively have
a 10% 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; (3) 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 (4)
would result in a change in control of BT Financial. Under NASDAQ rules,
shareholder approval would also be 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 BT Financial
or employees of BT Financial participate. The NASDAQ rules do not require
approval of the Merger by BT Financial shareholders.
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<PAGE> 61
Also under NASDAQ Rules, BT Financial may not issue any class of security
or take other corporate action with the effect of nullifying, restricting or
disparately reducing the per share voting rights of its outstanding registered
common stock. Prohibited actions include, but are not limited to, the adoption
of time-phased voting plans, the adoption of capped voting rights, and the
issuance of super-voting stock. The following actions are presumed to have a
nullifying, restricting or disparately reducing effect: (1) corporate action to
impose any restriction on the voting power of shares of common stock held by a
beneficial or record holder based on the length of time such shares have been
held by such holder or based on the number of shares held by such holder; (2)
any issuance of securities through an exchange offer for shares of an
outstanding class of common stock in which the shares issued have voting rights
greater than or less than the per share voting rights of any outstanding class
of common stock; (3) any issuance of securities pursuant to a stock dividend, or
any other type of distribution of stock in which the securities issued have
voting rights greater than the per share voting rights of any outstanding class
of common stock. The following actions are presumed not to have a nullifying,
restricting or disparately reducing effect: (1) the issuance of securities
pursuant to an initial registered public offering; (2) the issuance of any class
of securities, through a registered public offering, with voting rights not
greater than the per share voting rights of any outstanding class of common
stock; (3) the issuance of any class of securities to effect a bona fide merger
or acquisition, with voting rights not greater than the per share voting rights
of any outstanding class of common stock; or (4) corporate action pursuant to
state law requiring a domestic corporation to condition the voting rights of a
beneficial or record holder of a specified threshold percentage of voting stock
on the approval of the corporation's independent shareholders.
BT FINANCIAL SHAREHOLDER RIGHTS PLAN
On March 27, 1991, the Board of Directors of BT Financial declared a
dividend distribution of one right for each outstanding share of BT Financial
Common Stock (each a "Right," and collectively, the "Rights"). The Rights were
distributed on April 15, 1991 to shareholders of record on that date. Each Right
entitles its registered holder to purchase from BT Financial a unit equal to
nine one-thousandths (.009) of a share of BT Financial Series A Preferred Stock
at a price of $43.19 per unit (the "Exercise Price"). The Rights are not
exercisable until the Distribution Date (as defined below). The Rights will
expire at the close of business on April 15, 2001, unless earlier redeemed or
exchanged by BT Financial as described below. Rights will be issued with the
shares of BT Financial Common Stock to be issued in the Merger, unless a
Distribution Date occurs first. All currently outstanding shares of BT Financial
Common Stock have Rights associated therewith.
The Rights will be evidenced by certificates for BT Financial Common Stock
until the close of business on the tenth day (the "Distribution Date") following
the earlier to occur of (i) the date on which a person or group of affiliated or
associated persons ("Acquiring Person"), other than (A) BT Financial, (B) any
subsidiary of BT Financial, (C) any employee benefit plan or employee stock plan
of BT Financial or of any subsidiary of BT Financial, (D) any trust or trustee,
or person acting as trustee or other entity organized, appointed, established or
holding BT Financial's voting stock pursuant to the terms of any such plan, or
(E) any person or group of affiliated or associated persons which is eligible,
pursuant to Rule 13d-1(b) under the Exchange Act, to file a Statement on
Schedule 13G with respect to its or their beneficial ownership of voting stock
of BT Financial, whether or not such person or group has filed a Statement on
Schedule 13G, unless such person or any of its affiliates or associates has
filed a Statement on Schedule 13D with respect to beneficial ownership by any
one or more of them of 10% or more of the voting power of BT Financial ("Exempt
Person"), has acquired, or obtained the right to acquire, beneficial ownership
of shares of voting stock having 10% or more of the voting power of BT Financial
and the public announcement of such or (ii) the commencement of, or public
announcement of an intention to make, a tender or exchange offer (other than a
tender or exchange offer by an Exempt Person) which, if consummated, would
result in the beneficial ownership of shares of voting stock having 10% or more
of the voting power of BT Financial, even if no shares are actually purchased
pursuant to such offer. Until the Distribution Date, the Rights may only be
transferred together with shares of BT Financial Common Stock and the surrender
for transfer of any certificate for shares of BT Financial Common Stock having
associated Rights will constitute the transfer of such Rights. As soon as
practicable following the Distribution Date, separate certificates evidencing
the Rights ("Rights Certifi-
54
<PAGE> 62
cates") will be mailed to holders of record of shares of BT Financial Common
Stock having associated Rights as of the close of business on the Distribution
Date and such separate certificates alone will evidence the Rights from and
after the Distribution Date.
The BT Financial Series A Preferred Stock will be nonredeemable and, unless
otherwise provided in connection with the creation of a subsequent series of
preferred stock, subordinate to any other series of BT Financial's preferred
stock. BT Financial Series A Preferred Stock may not be issued except upon
exercise of Rights. Each share of BT Financial Series A Preferred Stock will be
entitled to receive when, as and if declared, a quarterly cash dividend in an
amount equal to the greater of $.25 or 115.76 times any cash dividends, and
115.76 times the amount (payable in kind) of all non-cash distributions (other
than dividends payable in equity securities), paid on shares of BT Financial
Common Stock during the preceding quarter. Whenever dividends are in arrears, BT
Financial will be unable (i) to purchase or redeem any shares of stock ranking
junior to the Series A Preferred Stock or (ii) to purchase any shares of Series
A Preferred Stock or any shares ranking on a parity with them, except in
accordance with an offer made to all holders of such shares upon such terms as
the Board of Directors shall determine in good faith will result in fair and
equitable treatment among the respective series and classes. BT Financial may at
any time redeem such parity stock for shares of stock ranking junior to the
Series A Preferred Stock. In the event of liquidation, the holders of shares of
BT Financial Series A Preferred Stock will be entitled to receive a liquidation
payment in an amount equal to the greater of $5,000 plus accrued and unpaid
dividends or 115.76 times the payment to be made per share of BT Financial
Common Stock. Each share of BT Financial Series A Preferred Stock will have
115.76 votes, voting together with the shares of BT Financial Common Stock. In
the event of any merger, consolidation or other transaction in which the shares
of BT Financial Common Stock are exchanged, each share of BT Financial Series A
Preferred Stock will be entitled to receive 115.76 times the amount received per
share of BT Financial Common Stock. The rights of the BT Financial Series A
Preferred Stock as to dividends, liquidation and voting are protected by
anti-dilution provisions.
The number of shares of BT Financial Series A Preferred Stock issuable upon
exercise of the Rights and the Exercise Price are subject to certain adjustments
from time to time in the event of a stock dividend on, or a subdivision or
combination of, the BT Financial Common Stock. The Exercise Price is subject to
adjustment in the event of extraordinary distributions of cash or other property
to holders of shares of BT Financial Common Stock.
Unless the Rights are earlier redeemed or exchanged, if (a) at any time
after there is an Acquiring Person, BT Financial were to be involved in a merger
or other business combination (in which any shares of BT Financial Common Stock
are changed into or exchanged for other securities or assets) or (b) more than
50% of the assets or earning power of BT Financial and its subsidiaries (taken
as a whole) were to be sold or transferred to an Acquiring Person in one or a
series of related transactions, the Rights Agreement provides that proper
provision must be made so that each holder of record of a Right will from and
after such date have the right to receive, upon payment of the Exercise Price,
that number of shares of common stock of the acquiring company having a Fair
Market Value (as such term is defined in the Rights Agreement) at the time of
such transaction equal to two times the Exercise Price.
In addition, unless the Rights are earlier redeemed or exchanged, if BT
Financial were to be the surviving corporation in a merger or other business
combination with an Acquiring Person and the BT Financial Common Stock remained
outstanding (none of which shares were changed into or exchanged for other
securities or assets) or if an Acquiring Person engages in any of a number of
"self-dealing" transactions with BT Financial specified in the Rights Agreement
or if any person (other than an Exempt Person) or group of affiliated or
associated persons becomes the beneficial owner of shares of voting stock having
more than 10% of BT Financial's voting power (other than by purchase pursuant to
an all cash tender offer for all the voting stock which purchase increases such
person's beneficial ownership to 85% or more of the outstanding voting power of
BT Financial's voting stock) or if during such time as there is any Acquiring
Person, there is a reclassification of securities (including any reverse stock
split) or any recapitalization or reorganization of BT Financial or any merger
or consolidation of BT Financial with any of its subsidiaries or any other
transaction or series of transactions involving BT Financial or any of its
subsidiaries any of which has the effect, directly or indirectly, of increasing
by more than 1% the proportionate share of the outstanding shares of
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<PAGE> 63
any class of equity of BT Financial or any of its subsidiaries or securities
exercisable for or convertible into equity securities of BT Financial or its
subsidiaries beneficially owned directly or indirectly by any Acquiring Person
or any affiliate and/or associate of any Acquiring Person, the Rights Agreement
provides that proper provision must be made so that each holder of record of a
Right, other than the Acquiring Person (whose Rights will thereupon become null
and void), will thereafter have the right to receive, upon payment of the
Exercise Price, that number of shares of BT Financial Series A Preferred Stock
having a Fair Market Value at the time of such transaction equal to two times
the Exercise Price.
Fractional shares of BT Financial Series A Preferred Stock may, at the
election of BT Financial, be evidenced by depositary receipts. BT Financial may
also issue cash in lieu of fractional shares which are not integral multiples of
one one-hundredth of a share.
At any time at or prior to the close of business on the fifteenth day after
a public announcement that a person has become an Acquiring Person, BT Financial
may redeem the Rights in whole, but not in part, at a price of $.009 per Right
(the "Redemption Price"), should the BT Financial Board of Directors determine
in its sole discretion that redemption is in the best interests of BT Financial
and its shareholders, whether or not (i) any of the Rights have theretofore been
exercised, or (ii) exercise thereof at the time would be deemed economic, or
(iii) any of the transactions referred to in Section 11 or 13 of the Rights
Agreement has then been proposed. Immediately upon the action of the Board of
Directors of BT Financial authorizing redemption of the Rights, the right to
exercise the Rights will terminate and the only right of the holders of Rights
will be to receive the Redemption Price.
The Board of Directors of BT Financial may, at its option, at any time
after any person becomes an Acquiring Person, exchange all or part of the then
outstanding and exercisable Rights (except for Rights beneficially owned by an
Acquiring Person or by an associate or affiliate of one and which have become
void) for BT Financial Common Stock at an exchange ratio (the "Rights Exchange
Ratio") of one share of BT Financial Common Stock per Right, appropriately
adjusted to reflect any stock split, stock dividend or similar transaction
occurring after March 27, 1991. Notwithstanding the foregoing, the Board of
Directors is not empowered to effect such exchange at any time after any person
(other than an Exempt Person), together with all affiliates and associates of
such person, becomes the beneficial owner of 50% or more of the then outstanding
voting power. Immediately upon the action of the Board of Directors of BT
Financial ordering the exchange of any rights, the right to exercise such rights
will terminate and the only right thereafter of a holder of such Rights will be
to receive that number of shares of BT Financial Common Stock equal to the
number of such Rights held by such holder multiplied by the Rights Exchange
Ratio. In any such exchange, BT Financial may substitute Series A Preferred
Stock (or shares having the same rights, privileges and preferences) for BT
Financial Common Stock exchangeable for rights at the rate set forth in the
Rights Agreement.
Until a Right is exercised, the holders, as such, will have no rights as a
shareholder of BT Financial, including, without limitation, the right to vote or
to receive dividends.
BT Financial may from time to time supplement or amend the Rights Agreement
without the approval of any holders of Rights Certificates prior to the
Distribution Date to amend or supplement any provision which BT Financial may
deem necessary or desirable or, subsequent to the Distribution Date, to amend or
supplement any provision which BT Financial may deem necessary or desirable and
which will not adversely affect the interests of holders of Rights (other than
an Acquiring Person or any affiliate or associate thereof).
This summary description of the Rights does not purport to be complete and
is qualified in its entirety by reference to the Rights Agreement that is
attached to BT Financial's Registration Statement on Form 8-A dated April 26,
1991, which is incorporated herein by reference. A copy of that Registration
Statement can be obtained in the manner set forth under "Incorporation of
Certain Documents by Reference."
PROVISIONS AFFECTING BUSINESS COMBINATIONS AND CONTROL SHARE ACQUISITIONS
The BCL, certain federal laws and a number of provisions of BT Financial's
articles and bylaws address matters of corporate governance and certain of the
rights of shareholders so as to significantly restrict the
56
<PAGE> 64
ability of any person to acquire the beneficial ownership of more than a certain
minimum of any class of equity security of BT Financial outstanding. The
following discussion is a general summary of provisions relating to stock
ownership and transfers, the board of directors and business combinations, that
may be deemed to have such "anti-takeover" effects. These and other provisions
affect shareholder rights and should be given careful attention. The following
description of certain of these provisions is necessarily general and reference
should be made in each case to the appropriate provision of the BCL, the federal
law or the articles and bylaws of BT Financial.
Pennsylvania Law
The BCL contains a number of "anti-takeover" sections that apply to
registered corporations relating to: control share acquisitions; the
disgorgement of profits by certain controlling persons; the approval of
transactions with interested shareholders; the ability of shareholders to put
their stock following a control transaction; business combinations; severance
compensation; and preservation of labor contracts. A corporation that was a
registered corporation on April 27, 1990 could opt out of the "control share
acquisition" or "disgorgement of profits" provisions by an explicit amendment of
its bylaws adopted by its board of directors on or before July 26, 1990. A
corporation that became a registered corporation after April 27, 1990 could opt
out by an explicit provision in its original articles of incorporation or by an
explicit amendment to its articles of incorporation adopted on or before 90 days
after the corporation first becomes a registered corporation. BT Financial has
opted out of the "control share acquisitions" and "disgorgement of profits"
sections of the BCL and along with them the provisions regarding severance
compensation and the preservation of labor contracts.
The control share acquisitions section of the BCL provides that "control
shares" have no voting rights unless those rights are restored by a vote of the
corporation's shareholders, taken in the manner described below. Control shares
are voting shares which, upon the acquisition of voting power over such shares,
would result in a "control share acquisition"--that is, when added to all
voting power over other voting shares of the corporation possessed by a
particular person or group (other than "existing shares" as defined in the BCL),
would entitle that person or group to exercise voting power for the first time
within any one of the following three ranges: (i) at least 20% but less than
33 1/3%, (ii) at least 33 1/3% but less than 50%, or (iii) 50% or more. Also
included within the definition of control shares are voting shares acquired
within 180 days of the making of a control share acquisition or with the
intention of making a control share acquisition.
Voting rights of control shares are restored only if a proposal to restore
their voting rights is approved by the holders of both an absolute majority of
the "disinterested" voting shares and an absolute majority of all outstanding
voting shares in two separate votes. The "acquiring person" must satisfy certain
disclosure and other requirements before a corporation is required to submit the
voting rights question to its shareholders. If the control shares have not been
purchased prior to the meeting at which their acquisition is approved and the
proposed acquisition is not consummated within 90 days after receiving
shareholder approval, the voting rights lapse. The corporation also has a right
to redeem the control shares at any time within 24 months after (i) the issue of
voting rights for such shares is submitted to the shareholders, if such voting
rights are not accorded or are accorded and subsequently lapse, or (ii) the date
on which the acquiring person consummates a control share acquisition, if the
acquiring person does not timely and properly request shareholder approval of
his voting rights.
The disgorgement of profits section of the BCL generally provides that a
corporation will be entitled to recover any "profit" realized by a "controlling
person or group" from the disposition of any equity security of the corporation
that occurs within 18 months after the date when that person or group became a
controlling person or group, if the equity security was acquired within 24
months before or 18 months after such date. Generally, a "controlling person or
group" for such purposes is any person or group who has (i) acquired, offered to
acquire or, directly or indirectly, publicly disclosed or caused to be disclosed
the intention of acquiring voting power over voting shares that would entitle
the holder thereof to cast at least 20% of the votes that all shareholders would
be entitled to cast in an election of directors or (ii) directly or indirectly,
publicly disclosed or caused to be disclosed that it may wish to acquire control
of a corporation through any means.
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<PAGE> 65
The approval of transactions with an interested shareholder section of the
BCL provides that certain transactions with an "interested shareholder,"
including mergers, consolidations, share exchanges and sales of assets must be
approved by the holders of a majority of disinterested shares in addition to any
other approvals that may be required. This requirement does not apply if the
transaction is approved by a disinterested majority of the board of directors,
if the consideration paid to the other shareholders in the transaction is not
less than the highest amount paid by the interested shareholder in acquiring
shares or if, immediately prior to the adoption of a plan of merger or
consolidation and thereafter until the effective date, another corporation that
is a party to the merger or consolidation owns directly or indirectly 80% or
more of each class of the constituent corporation, the business combination
section has been satisfied (if applicable), and the board of directors of the
constituent corporation has approved the plan. An "interested shareholder"
includes any shareholder who is a party to the transaction or who is treated
differently from the other shareholders and affiliates of the interested
shareholder.
Under the provision of the BCL that permits shareholders to put their
shares, shareholders of a registered corporation that becomes subject to a
"control transaction" can demand from the controlling person or group payment in
cash for his or her shares of an amount equal to the fair value of his or her
shares on the date that the "control transaction" occurred. A "control
transaction" for such purposes is the acquisition of 20% of a corporation's
voting shares by a person or group, with several exceptions.
The business combination section of the BCL prohibits any business
combination with an interested shareholder other than: a business combination
approved by the board prior to the date on which the interested shareholder
first became such or where the purchase of the shares that first made the
interested shareholder such had been approved by the board prior to the date of
such purchase; a business combination approved by the affirmative vote of a
majority of the disinterested shareholders if the interested shareholder has
beneficially owned 80% or more of the voting stock for three months and owns
such amount at the time of the vote, and if shareholders receive specified
minimum values for their shares; a business combination approved by a unanimous
vote of common shareholders; a business combination approved by a majority of
disinterested shareholders no earlier than five years after the interested
shareholder became such; or a business combination approved at a shareholders'
meeting held no earlier than five years after the interested shareholder became
such if shareholders receive specified minimum values for their shares. Business
combinations include: mergers, consolidations, share exchanges and divisions;
sales, leases, exchanges, mortgages, pledges, transfers and other dispositions
of assets having specified values; share transfers having specified values;
liquidation; dissolution; transactions that increase the interested
shareholder's voting power; and the provision of any benefit not in proportion
to shareholdings. An interested shareholder is generally any beneficial owner of
20% of the voting shares of a corporation or an affiliate or associate of a
corporation that at any time within the five year period prior to the date in
question beneficially owned 20% of the voting shares of the corporation.
Federal Law
The 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.
This period may be further extended under certain circumstances. 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 action.
Under a rebuttable presumption established by the Federal Reserve Board,
the acquisition of 10% or more 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 Bank Holding Company Act before acquiring 25%
(5% in the case of an acquiror that is a bank holding
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company) or more of the outstanding shares of BT Financial Common Stock, or such
lesser number of shares as constitute control over BT Financial.
Transactions with Interested Persons of BT Financial
Article 8 of the articles of incorporation of BT Financial states that any
merger or consolidation between an Interested Person (as defined below) or an
affiliate or associate of an Interested Person or an associate of any such
affiliate or an affiliate of an associate of an Interested Person and BT
Financial or one of its subsidiaries or any disposition of all or substantially
all or a substantial part of the assets of BT Financial or one of its
subsidiaries to an Interested Person or an affiliate or associate of an
Interested Person or an associate of any such affiliate or an affiliate of an
associate of an Interested Person must be approved by the affirmative vote of
the holders of at least 80% of the outstanding shares of capital stock of BT
Financial entitled to vote for the election of directors. This supermajority
vote requirement does not apply if the transaction is approved by a majority of
the entire Board of Directors of BT Financial prior to the time that an
Interested Person becomes such or by a majority of the entire Board of Directors
of BT Financial without counting the vote of any director who is an Interested
Person or an affiliate, associate or agent thereof or an associate or agent of
any such affiliate prior to consummation of the transaction. An Interested
Person is defined in the BT Financial articles as any person that beneficially
owns 20% or more of the outstanding shares of capital stock of BT Financial
entitled to vote for the election of directors. The BCL has a comparable
provision that would not apply to Moxham.
Tender Offers for and Other Proposals to Acquire BT Financial
When considering any tender offer for BT Financial Common Stock or any
transaction discussed under "Transactions with Interested Persons of BT
Financial" the Board of Directors of BT Financial must consider all factors it
deems relevant, and may, but is not obligated to, consider the following
factors: (a) the amount and nature of the consideration (if any) to be received
by shareholders in relation to the then current market price, the Board's
estimate of the then current value of BT Financial in a freely negotiated
transaction and the Board's estimate of the future value of BT Financial as an
independent entity; and (b) the social and economic effects of the transaction
on the employees, depositors, customers, creditors and other constituents of BT
Financial and on the communities served by BT Financial.
"Supermajority" Provisions Concerning Charter Amendments
Under the BCL, amendments to the articles of incorporation of a registered
corporation such as BT Financial may only be proposed by its board of directors.
Except for certain amendments which do not require shareholder approval and
unless a greater vote is required by its articles of incorporation, amendments
of the articles of incorporation of a Pennsylvania corporation must be approved
by the affirmative vote of a majority of the votes cast by all shareholders
entitled to vote thereon and, if any class or series of shares is entitled to
vote as a class, the affirmative vote of a majority of the votes cast in each
such class vote.
The BT Financial articles require the affirmative vote of the holders of at
least 80% of the outstanding shares of capital stock of BT Financial entitled to
vote for the election of directors of BT Financial, given in person or by proxy
at a meeting duly called for the purpose of voting thereon, to amend or repeal
any provision of the sections of the BT Financial articles relating to:
transactions with Interested Persons; factors to be considered by the Board of
Directors of BT Financial in reviewing tender offers and other transactions;
classification of the Board of Directors of BT Financial; the directors' ability
to make, amend or repeal bylaws; indemnification; or the amendment or repeal of
the BT Financial articles. All other BT Financial articles may be amended as
provided in the BCL.
"Supermajority" Provisions Concerning Bylaw Amendments
The shareholders of a Pennsylvania corporation who are entitled to vote
have the power to adopt, amend and repeal the bylaws of the corporation. The
authority to adopt, amend and repeal bylaws of a corporation may be expressly
vested by the bylaws in the board of directors, subject to the power of the
shareholders to
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override any such action and except that a board of directors may not have the
authority to adopt or change a bylaw on any subject that is committed expressly
to the shareholders under the BCL, unless the articles of incorporation of that
corporation expressly give the board that authority.
The BT Financial articles provide that the Board of Directors of BT
Financial has the power to make, amend and repeal the bylaws as it deems
necessary or convenient for the regulation and management of BT Financial to the
extent not inconsistent with law or the BT Financial articles. Such power is
subject to the power of the shareholders of BT Financial to amend or repeal
bylaws of BT Financial by the affirmative vote of the holders of at least 80% of
the outstanding shares of capital stock of BT Financial entitled to vote for the
election of directors of BT Financial, given in person or by proxy at a meeting
duly called for the purpose of voting thereon.
Shareholder Nominations for Directors
BT Financial's bylaws provide that, with certain exceptions, nominations of
candidates for election as directors of BT Financial, other than those made by
management of BT Financial, must be in writing and filed with the Secretary of
BT Financial not less than 40 days prior to any shareholders' meeting called for
the election of directors or ten days after the giving of notice of such meeting
in accordance with Article 33 of the bylaws of BT Financial, whichever is later.
This provision could be viewed as "anti-takeover" in nature, since it may make
it more difficult for shareholders to nominate candidates and may give an
advantage to incumbent management's nominees.
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COMPARISON OF SHAREHOLDERS RIGHTS
The rights of the shareholders of Moxham and BT Financial are governed by
the BCL and the articles and bylaws of each corporation. As a result of the
Merger, shareholders of Moxham who receive BT Financial Common Stock in the
Merger will become shareholders of BT Financial, and as such, their rights as
shareholders will be governed by the BCL and the articles and bylaws of BT
Financial. Certain differences in the rights of shareholders of BT Financial and
Moxham arise from the distinctions between the articles and bylaws of each.
Although it is impracticable to note all of the differences, the following is a
summary of certain significant differences.
The BT Financial articles of incorporation authorize the issuance of
10,000,000 shares of common stock, par value $5.00 per share, and 2,000,000
shares of preferred stock, having no par value. On April , 1996, 3,826,581
shares of BT Financial Common Stock and no shares of Preferred Stock were
outstanding.
The articles of incorporation of Moxham authorize the issuance of 2,880,000
shares of common stock, $2.00 par value, of which 903,852 are issued and
outstanding as of April , 1996. The Moxham articles of incorporation also
authorize 250,000 shares of Moxham Preferred Stock, no par value, of which
14,000 shares are issued and outstanding as of April , 1996. Upon the
consummation of the Merger, the shares of Moxham Common Stock and Moxham
Preferred Stock will be canceled, and the holders of Moxham Stock will receive
shares of BT Financial Common Stock and cash in lieu of fractional shares. See
"The Merger Agreement--The Merger."
Dividends. Holders of BT Financial Common Stock and Moxham Common Stock
are entitled to receive dividends when, as and if declared by their respective
boards of directors out of funds legally available therefor. The right to
receive dividends is subject to such preferences, limitations and relative
rights as may be fixed for any series of preferred stock that may be issued.
The Moxham Preferred Stock carries a dividend of $8.00 per share, payable
quarterly. Holders of BT Financial Preferred Stock are entitled to a quarterly
dividend equal to the greater of $.25 per share or, subject to certain
adjustments, 115.76 times the aggregate per share amount (payable in cash) of
all cash dividends, and 115.76 times the aggregate per share amount (payable in
kind) of all non-cash dividends.
Cash available for dividend distribution to the holders of BT Financial's
Common Stock and Preferred Stock, must initially come from dividends paid to BT
Financial by BT Financial's subsidiaries. Accordingly, BT Financial's ability to
pay cash dividends can be affected by restrictions on the payment of dividends
by BT Financial's subsidiaries. See "Description of BT Financial Capital
Stock--Capital Stock--Dividends."
Voting; Election of Directors. Holders of Moxham Common Stock and BT
Financial Common Stock are entitled to one vote for each share held. Holders of
Moxham Common Stock and BT Financial Common Stock have no cumulative voting
rights with respect to the election of directors. Holders of Moxham Preferred
Stock have no voting rights. Each share of BT Financial Preferred Stock entitles
its holder to 100 votes on all matters submitted to a vote of the shareholders
of BT Financial.
The bylaws of BT Financial provide for the classification of directors into
four classes, as nearly equal in number as possible, with the term of office of
one class expiring in each year. Under the bylaws of BT Financial, a director
need not be a resident of Pennsylvania or a shareholder of the corporation.
Moxham's articles of incorporation provide that there shall be three classes of
directors as equal in number as possible, each class being elected for a three
year term and only one class being elected each year. Moxham's bylaws require a
director to be a shareholder of the corporation.
The bylaws of BT Financial may be altered, amended or repealed by the
affirmative vote of the holders of eighty percent (80%) of the outstanding
shares. Likewise, certain articles of incorporation of BT Financial may be
amended or repealed by the affirmative vote of at least eighty percent (80%) of
the outstanding shares. The bylaws of Moxham, however, may be amended or
repealed by a majority vote of members of the Board of Directors at any regular
or special meeting.
The Moxham articles of incorporation provide that no merger, consolidation,
liquidation or dissolution of the corporation nor any action that would result
in the sale or other disposition of all or substantially all of the
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assets of the corporation shall be valid unless first approved by the
affirmative vote of at least seventy percent (70%) of the outstanding shares.
The article that provides for this "supermajority" vote may not be amended
unless approved by seventy percent (70%) of the outstanding shares.
Liquidation. If there is a voluntary or involuntary liquidation,
dissolution or winding up, and the assets of Moxham are sufficient, holders of
Moxham Series A Preferred Stock are entitled to receive $100 per share ahead of
other shareholders. Upon any voluntary or involuntary liquidation, dissolution
or winding up of BT Financial, no distribution shall be made to the holders of
shares of stock ranking junior to the BT Financial Series A Preferred Stock
unless the holders of shares of Series A Preferred Stock shall have received,
subject to adjustment, the greater of (i) $5,000 per share plus accrued and
unpaid dividends, or (ii) 100 times the aggregate amount to be distributed per
share to holders of BT Financial Common Stock. Upon liquidation, dissolution or
winding up, no distribution shall be made to the holders of stock ranking on a
parity with the BT Financial Series A Preferred Stock, unless simultaneously
therewith distributions are made ratably on the Series A Preferred Stock and all
other shares of such parity stock.
Preemptive Rights. Like BT Financial Common Stock, Moxham Common Stock has
no preemptive rights.
Anti-takeover Provisions of the BCL. Unlike BT Financial, Moxham has not
opted out of the anti-takeover sections of the BCL related to control share
acquisitions or disgorgement of profits or the related provisions regarding
severance compensation and the preservation of labor contracts. Additionally,
neither the articles nor the bylaws of Moxham include provisions limiting
transactions with interested persons. However, Moxham's articles do prescribe
the factors to be considered by the Moxham Board with respect to tender offers
or other proposals and require a supermajority to amend Moxham's article
requiring a seventy percent (70%) affirmative vote of outstanding shares to
approve a merger, consolidation, liquidation, sale or dissolution or any action
resulting in the sale or disposition of all or substantially all of Moxham's
assets. See "Description of BT Financial Capital Stock--Provisions Affecting
Business Combinations and Control Share Acquisitions."
Approval of Fundamental Changes. Under the BCL, a proposed plan of merger
or consolidation must be approved by the board of directors and by a majority of
the votes cast by the shareholders entitled to vote thereon. In some cases, the
approval of the board is sufficient.
Under the BCL, the affirmative vote of a majority of the votes cast by all
shareholders entitled to vote thereon is required to approve a proposal for
voluntary dissolution. In addition, the proposal of dissolution must be
recommended by resolution of the board.
Under the Moxham articles, a seventy percent (70%) affirmative vote of
outstanding shares is required to approve a merger, consolidation, liquidation,
sale or dissolution or any action resulting in the sale or disposition of all or
substantially all of Moxham's assets.
Dissenters' Rights. The dissenters' rights of BT Financial shareholders
and Moxham shareholders are governed by the rights and remedies and limitations
on such rights and remedies provided in the BCL. The BCL provides for
dissenters' rights in a variety of transactions including mergers or
consolidations to which a corporation is a party (other than mergers not
requiring a shareholder vote). However, except in the case of a merger or
consolidation in which their shares would be converted into something other than
shares of the surviving or new corporation (or cash in lieu of fractional
shares), shareholders are not entitled to dissenters' rights in any of the
transactions mentioned above if their stock is either listed on a national
securities exchange or held of record by 2,000 or more shareholders. While BT
Financial Common Stock is not listed on the New York or American Stock
Exchanges, BT Financial currently has in excess of 2,000 shareholders of record.
Neither Moxham Common Stock nor Moxham Preferred Stock is listed on the New York
or American Stock Exchanges and is not held by more than 2,000 shareholders or
record, and, therefore, Moxham shareholders would have dissenters' rights in
certain circumstances in which BT Financial's shareholders would not.
Rights. Each share of BT Financial Common Stock has attached to it one
Right issued pursuant to the Rights Agreement. See "Description of BT Financial
Capital Stock--BT Financial Rights." No such rights are attached to the shares
of Moxham Common Stock.
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Right to Call a Special Meeting. The BCL provides that a special meeting
of the shareholders of a registered corporation may be called at any time (i) by
the board of directors, (ii) by such officers or other persons as may be
designated in the bylaws of that corporation, or (iii) by shareholders entitled
to cast at least 20% of the votes that all shareholders are entitled to cast at
the particular meeting, unless otherwise provided in the articles.
The bylaws of BT Financial provide that special meetings of the
shareholders of BT Financial may be called by the Chairman of the BT Financial
Board of Directors, the President of BT Financial, a majority of the BT
Financial Board of Directors or shareholders entitled to cast at least one-fifth
of the votes which all shareholders are entitled to cast at the particular
meeting. The bylaws of Moxham provide that special meetings of the shareholders
may be called at any time by the Moxham Board of Directors or by the
shareholders entitled to cast at least twenty-five percent (25%) of the votes
which all shareholders are entitled to cast at the particular meeting.
Duties and Liabilities of Directors. The BCL permits a corporation to
include in its bylaws a provision adopted by its shareholders which eliminates
the personal liability of directors for monetary damages for any action taken
(or any failure to take any action) unless (i) the directors have breached or
failed to perform the duties of their offices under the BCL and (ii) the breach
or failure to perform constitutes self-dealing, willful misconduct or
recklessness. However, a corporation may not eliminate personal liability where
the responsibility or liability of a director is pursuant to any criminal
statute or is for the payment of taxes pursuant to local, state or federal law.
BT Financial's bylaws provide that a director will not be personally liable for
monetary damages for any action taken, or any failure to take any action, except
that there is no elimination of, or limitation on, the liability of a director
to the extent that such elimination or limitation of liability is expressly
prohibited by law.
The BCL permits a corporation, unless otherwise restricted in its bylaws,
to indemnify any person involved in any third party or derivative action, by
reason of the fact that person is or was a representative of the corporation or
is or was serving at the request of that corporation as a representative of
another corporation or enterprise, against expenses (in both third party and
derivative actions), judgments, fines and amounts paid in settlement actually
and reasonably incurred by him in connection therewith, 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 the conduct was unlawful. In general, under
the BCL, no indemnification is allowable in derivative actions to the extent a
person has been adjudged liable to the corporation, unless, and only to the
extent that, the applicable court finds him entitled to indemnification against
expenses despite such adjudication. To the extent that a representative of a
corporation has been successful on the merits or otherwise in defense of any
third party or derivative action, indemnification against expenses is mandatory.
The BCL permits a corporation to provide additional indemnification rights to
persons seeking indemnification whether or not that corporation would have the
power to indemnify such persons under any other provision of the BCL, including
with respect to derivative actions, so long as the act or failure to act giving
rise to the indemnification right did not constitute willful misconduct or
recklessness. Neither the BT Financial articles and bylaws nor the Moxham
articles or bylaws restrict the indemnification permitted by law.
Under the BCL, unless otherwise provided in the articles of a corporation,
if a bylaw of that corporation adopted by the shareholders provides for a
classified board of directors, directors generally may be removed from office
only for cause by the vote of shareholders entitled to vote on the matter. The
BT Financial articles and bylaws and the Moxham articles and bylaws each provide
for a classified board. The BT Financial articles contain a provision permitting
removal of directors without cause by the affirmative vote of the holders of at
least 80% of the outstanding shares of capital stock of BT Financial entitled to
vote for the elections of directors, given in person or by proxy, at a meeting
duly called for the purpose of voting thereon. Neither the Moxham articles nor
bylaws contain such a provision.
Under the BCL, any director or shareholder may apply to a court for the
removal of a director.
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CERTAIN INFORMATION REGARDING BT FINANCIAL
BUSINESS
BT Financial is a multi-bank holding company located in Johnstown,
Pennsylvania, which was incorporated under the laws of the Commonwealth of
Pennsylvania on December 16, 1982.
BT Financial has three banking subsidiaries: Johnstown Bank, Laurel Bank
and Fayette Bank (referred to as the "BT Financial Banks"). The BT Financial
Banks' principal places of business are in Johnstown, Ebensburg and Uniontown,
Pennsylvania, respectively. At December 31, 1995, BT Financial had total assets
of $1.2 billion. BT Financial also has two non-banking subsidiaries, Bedford
Associates, Inc., which holds and leases property used by the BT Financial Banks
in their banking operations, and BT Management Trust Company, a trust company
which provides trust and investment services.
The BT Financial Banks conduct business through a network of 65 offices
located throughout southwestern Pennsylvania. Each BT Financial Bank operates
under the management of its own officers and directors, although auditing,
marketing, human resources, investment, accounting, data processing and credit
review are coordinated through BT Financial. In addition, the BT Financial Banks
operate 42 automated teller machines ("ATM") at 41 locations which are part of
the Cirrus(R) and MAC(R) systems. Cirrus(R) and MAC(R) provide links to national
and regional ATM networks.
The BT Financial Banks provide a full range of financial services to
individuals, businesses and governmental bodies, including accepting demand,
savings and time deposits, making secured and unsecured loans, and electronic
data processing of payrolls. Lending services include credit cards and consumer,
real estate, commercial and industrial loans. BT Financial, through BT
Management Trust Company, also offers a wide range of corporate pension and
personal trust and trust-related services. Each of the Bank's deposits are
insured by the FDIC, the majority by the Bank Insurance Fund ("BIF"), with
certain deposits insured by the Savings Association Insurance Fund ("SAIF").
While each BT Financial Bank has trust powers, substantially all trust business
of BT Financial's affiliates is conducted by BT Management Trust Company.
Johnstown Bank was formed in 1934 through the consolidation of five banks.
It is a Pennsylvania bank and trust company and member of the Federal Reserve
System with 39 offices in Allegheny, Armstrong, Bedford, Butler, Cambria,
Indiana, Somerset and Westmoreland Counties. At December 31, 1995, its assets
totaled approximately $592 million.
Laurel Bank is a Pennsylvania bank and trust company and a member of the
Federal Reserve System, with total assets of approximately $229 million at
December 31, 1995. Laurel Bank operates 14 offices in Cambria, Blair and Indiana
Counties.
Fayette Bank is a Pennsylvania bank and trust company and a member of the
Federal Reserve System. Fayette Bank conducts business at 12 offices located in
Uniontown, Fayette County. Its assets totaled approximately $371 million at
December 31, 1995.
BT Management Trust Company, located in Johnstown, is a Pennsylvania
chartered trust company formed on April 30, 1990. The trust businesses of the
Banks were transferred to BT Management Trust Company at that time.
Bedford Associates, Inc., located in Johnstown, Pennsylvania, is a
wholly-owned non-banking subsidiary of BT Financial. Its assets consist
principally of properties leased to the Banks for use as community banking
offices.
BT Financial and the BT Financial Banks are subject to competition in all
aspects of their businesses from banks as well as other financial institutions,
including savings and loan associations, savings banks, finance companies,
credit unions, money market mutual funds, brokerage firms, investment companies,
credit companies and insurance companies. They also compete with nonfinancial
institutions, including retail stores that maintain their own credit programs,
and with governmental agencies that make loans available to certain borrowers.
Some of BT Financial's competitors are larger and have greater financial
resources and facilities than BT Financial.
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As of December 31, 1995, BT Financial, the BT Financial Banks and BT
Management Trust Company had a total of 683 full-time equivalent banking and
administrative employees. BT Financial's executive offices are located at BT
Financial Plaza, 551 Main Street, Johnstown, Pennsylvania 15901. Its telephone
number is (814) 532-3801.
On December 14, 1995, BT Financial acquired Huntington Bank from Huntington
Bancshares West Virginia, Inc., for $25,500,000 in cash. Huntington Bank was
merged with and into Fayette Bank. As of September 30, 1995, Huntington Bank had
total assets of $106 million, total deposits of $81 million and total
stockholder's equity of $16 million. The acquisition of Huntington Bank was
accounted for under the purchase method of accounting.
BT Financial has also entered into the Armstrong Agreement, which provides
for the merger of Armstrong with and into Johnstown Bank. At the effective time
of the Armstrong Merger, each outstanding share of Armstrong Common Stock is to
be converted into 26.5 shares of BT Financial Common Stock and $596.25 in cash,
subject to adjustment in certain circumstances. The acquisition of Armstrong is
to be accounted for under the purchase method of accounting. As of December 31,
1995, Armstrong had total assets of approximately $52 million, total deposits of
approximately $39 million and total shareholders' equity of approximately $8
million.
On a pro forma basis giving effect to BT Financial's pending acquisitions
of Moxham and Armstrong, BT Financial would have had, on a consolidated basis as
of December 31, 1995, approximately $1.5 billion in assets, $1.3 billion in
deposits and $129 million in shareholders equity.
PROPERTIES
In February of 1990, BT Financial acquired BT Financial Plaza, an office
building located adjacent to Johnstown Bank's headquarters building. The
building is occupied by BT Financial's executive offices, BT Management Trust
Company, certain other offices of BT Financial, and other business concerns. The
executive offices of Johnstown Bank are located at 532-34 Main Street,
Johnstown, Pennsylvania, in a ten-story building owned by Johnstown Bank free of
liens and encumbrances. The building contains approximately 62,000 usable square
feet of space and is totally occupied by Johnstown Bank and BT Financial. The
building was erected in 1908 and most recently renovated in 1977. In 1987,
Johnstown Bank purchased a seven-story building located on Clinton Street in
Johnstown and is using the building as a storage facility. Some minor
renovations were made in 1987. All of the buildings are in good condition.
The BT Financial Banks operate 65 banking offices, 47 of which are owned by
the Banks free of liens and encumbrances. All properties and buildings are in
good condition and are continually maintained against normal wear and tear. The
remaining 18 offices are operated under leases which, including renewal options,
expire at various times between 1996 and 2025. Bedford Associates, Inc. owns 4
of the 18 leased properties, which are leased to the BT Financial Banks as
community banking offices. All properties of Bedford Associates, Inc. have been
recently purchased (1983 or later), and the buildings are either newly
constructed or have recently undergone major renovation. Fayette acquired three
branch offices with the purchase of Huntington Bank in December 1995.
DIRECTORS AND OFFICERS
Four directors of Moxham, designated by Moxham and acceptable to BT
Financial, will become directors of BT Financial at the effective time of the
Merger, to serve for such terms as may be determined by BT Financial consistent
with its director retirement policies. Immediately after the Merger, eight
directors of Moxham, selected by Moxham prior to the Merger (who may include the
persons selected to be directors of BT Financial) and acceptable to BT
Financial, will be appointed to the Board of Directors of Johnstown Bank, each
to serve until the 1997 annual meeting of BT Financial shareholders.
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CERTAIN REGULATORY CONSIDERATIONS
As a bank holding company, BT Financial is subject to regulation and
supervision by the Federal Reserve. The BT Financial Banks and BT Management
Trust Company are subject to supervision and examination by the Federal Reserve,
the Pennsylvania Department of Banking and, to some extent, the FDIC. The BT
Financial Banks are also subject to various requirements and restrictions under
federal and state law, including requirements to maintain reserves against
deposits, restrictions on the types and amounts of loans that may be granted and
the interest that may be charged thereon, and limitations on the types of
investments that may be made and the types of services that may be offered.
Various consumer laws and regulations also affect the operations of the Banks.
In addition to the impact of regulation, commercial banks are affected
significantly by the actions of the Federal Reserve as it attempts to control
the money supply and credit availability in order to influence the economy.
Payment of Dividends and Other Restrictions
BT Financial is a legal entity separate and distinct from its subsidiaries,
including the BT Financial Banks. There are various legal and regulatory
limitations under federal and state law on the extent to which BT Financial's
subsidiaries, including the BT Financial Banks, can finance or otherwise supply
funds to BT Financial.
The principal source of BT Financial's cash revenues is dividends from its
subsidiaries. There are limitations under federal and Pennsylvania law on the
payment of dividends by such subsidiaries. Retained earnings of the BT Financial
Banks and the other subsidiaries of BT Financial were approximately $48.3
million as of December 31, 1995. The prior approval of the Federal Reserve is
required if the total of all dividends declared by any state member bank of the
Federal Reserve System in any calendar year exceeds the bank's net profits (as
defined in the applicable law) for that year combined with its retained net
profits for the preceding two calendar years, less any required transfers to
surplus or a fund for the retirement of any preferred stock. Federal and state
regulatory agencies also have authority to prohibit a state member bank from
engaging in what, in the opinion of such regulatory body, constitutes an unsafe
or unsound practice in conducting its business. The payment of dividends could,
depending upon the financial condition of the subsidiary, be deemed to
constitute such an unsafe or unsound practice.
Under the Pennsylvania Banking Code, the board of directors of a
Pennsylvania bank may, from time to time, declare, and that bank may pay,
dividends on its outstanding shares subject to the restrictions described below
and any restrictions in the articles of incorporation of that bank.
The Banking Code permits dividends to be declared and paid only out of
accumulated net earnings and to be paid in cash or other property. A dividend
may not be declared or paid unless (i) any transfer of net earnings to surplus
has been made prior to the declaration of the dividend and (ii) the surplus of
the bank would not be reduced by the payment of the dividend.
The board of directors of a Pennsylvania bank may distribute pro rata to
the holders of any class of its shares from time to time treasury shares and
authorized but unissued shares of that bank, subject to the restrictions
described below and the restrictions, if any, in that bank's articles of
incorporation. No distribution may be made in authorized but unissued shares of
a Pennsylvania bank unless (i) if the distribution is made in shares having a
par value, there can be transferred to capital from accumulated net earnings an
amount equal to the aggregate par value of the shares distributed or (ii) if the
distribution is made in shares without par value, the board of directors fixes a
value for the shares so issued and there can be transferred to capital at the
time of distribution an amount of accumulated net earnings equal to the
aggregate value so fixed, and (iii) immediately after the distribution, surplus
would be at least equal to the amount of capital.
In addition, the BT Financial Banks are subject to limitations under
Sections 23A and 23B of the Federal Reserve Act with respect to extensions of
credit to, investments in, and certain other transactions with, BT Financial and
its other subsidiaries. Furthermore, loans and extensions of credit are also
subject to various collateral requirements.
There are no dividend restrictions in the articles of incorporation of any
of the BT Financial Banks.
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Capital Adequacy
The Federal Reserve has adopted risk-based capital guidelines for bank
holding companies. When the guidelines became fully phased-in as of December 31,
1992, the minimum guidelines for the ratio of total capital ("Total Capital") to
risk-weighted assets (including certain off-balance-sheet items, such as standby
letters of credit) was set at 8%. At least half of Total Capital must be
composed of common stock, minority interests in the equity accounts of
consolidated subsidiaries, noncumulative perpetual preferred stock and a limited
amount of perpetual preferred stock, less goodwill ("Tier 1 Capital"). The
remainder may consist of certain subordinated debt, other preferred stock and a
limited amount of loan loss reserves.
In addition, the Federal Reserve has established minimum leverage ratio
guidelines for bank holding companies. These guidelines provide for a minimum
ratio of Tier 1 Capital to total assets, less goodwill (the "Leverage Ratio"),
of 3% for bank holding companies that meet certain specified criteria, including
those having the highest regulatory rating. All other bank holding companies
generally are required to maintain a Leverage Ratio of at least 3%, plus an
additional cushion of 100 to 200 basis points. The guidelines also provide that
bank holding companies 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.
Furthermore, the Federal Reserve has indicated that it will consider a "tangible
Tier I Capital leverage ratio" (deducting all intangibles) and other indicia of
capital strength in evaluating proposals for expansion or new activities.
Failure to meet capital guidelines could subject a bank to a variety of
enforcement remedies, including the termination of deposit insurance by the
FDIC, and to certain restrictions on its business, which are described below
under "FDICIA."
BT Financial's current capital ratios exceed the current requirements under
these capital guidelines.
Support of the BT Financial Banks
Under Federal Reserve policy, BT Financial is expected to act as a source
of financial strength to, and to commit resources to support, each of the Banks.
This support may be required at times when, absent such Federal Reserve policy,
BT Financial might not be inclined to provide it. In the event of a bank holding
company's bankruptcy, any commitment by the bank holding company to a federal
bank regulatory agency to maintain the capital of a subsidiary bank will be
assumed by the bankruptcy trustee and be entitled to priority of payment.
As a result of the enactment of the Financial Institutions Reform,
Recovery, and Enforcement Act ("FIRREA"), a depository institution insured by
the FDIC can be held liable for any loss incurred by, or reasonably expected to
be incurred by, the FDIC after August 9, 1989 in connection with (i) the default
of a commonly controlled FDIC-insured depository institution or (ii) any
assistance provided by the FDIC to any commonly controlled FDIC-insured
depository institution "in danger of default." The phrase "in danger of default"
is defined generally as the existence of certain conditions indicating that a
default is likely to occur in the absence of regulatory assistance.
FDIC Insurance Assessments
The FDIC implemented a risk-based assessment system, effective January 1,
1994, under which a bank's premium assessment is based on the probability that
the BIF will incur a loss with respect to the bank, the likely amount of any
such loss, and the revenue needs of the BIF. As long as BIF's reserve ratio is
less than a specified "designated reserve ratio," currently 1.25%, the total
amount raised from BIF members by the risk-based assessment system may not be
less than the amount that would be raised if the assessment rate for all BIF
members were .023% of deposits. On August 8, 1995, the FDIC announced that the
designated reserve ratio had been achieved and, accordingly, issued final
regulations adopting an assessment rate schedule for BIF members of 4 to 31
basis points effective on June 1, 1995. On November 14, 1995, the FDIC further
reduced deposit insurance premiums to a range of 0 to 27 basis points effective
for the semi-annual period beginning January 1, 1996.
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Federal law has established several mechanisms to increase funds to protect
deposits insured by the BIF. The FDIC is authorized to borrow: up to $30 billion
from the United States Treasury; up to 90% of the fair market value of assets of
institutions acquired by the FDIC as receiver from the Federal Financing Bank;
and from depository institutions that are members of the BIF. Any borrowings not
repaid by asset sales are to be repaid through insurance premiums assessed to
member institutions. Such premiums must be sufficient to repay any borrowed
funds within 15 years and provide insurance fund reserves of $1.25 for each $100
of insured deposits. The result of these provisions is that the assessment rate
on deposits of BIF members could increase in the future. The FDIC also has
authority to impose special assessments against insured deposits.
During fiscal year 1995, BT Financial's FDIC insurance expense decreased by
$679,000 due to lower premiums and a retroactive deposit insurance adjustment.
The rate adjustment resulted in a $457,000 refund, which was received in the
third quarter of 1995.
A number of proposals have recently been introduced in Congress to address
the disparity in bank and thrift deposit insurance premiums paid by bank members
of the BIF and by the savings associations and other members of SAIF. On
September 19, 1995, legislation was introduced and referred to the House Banking
Committee that would, among other things: (i) impose a requirement on all SAIF
member institutions to fully recapitalize the SAIF by paying a one-time special
assessment of approximately 85 basis points on all assessable deposits as of
March 31, 1995, which assessment would be due as of January 1, 1996; (ii) spread
the responsibility for interest payments on obligations of the Financing
Corporation ("FICO") across all FDIC-insured institutions on a pro-rata basis,
subject to certain exceptions; (iii) require that deposit insurance premium
assessment rates applicable to SAIF member institutions be no less than deposit
insurance premium assessment rates applicable to BIF member institutions; (iv)
provide for a merger of the BIF and the SAIF as of January 1, 1998; (v) require
savings associations to divest any activities not permissible for commercial
banks within five years; (vii) eliminate the bad-debt reserve deduction for
savings associations, although savings associations would not be required to
recapture into income their accumulated bad-debt reserves; (vii) provide for the
conversion of savings and loan holding companies into bank holding companies as
of January 1, 1998, although unitary savings and loan holding companies
authorized to engage in activities as of September 13, 1995 would have such
authority grandfathered (subject to certain limitations); and (ix) abolish the
OTS and transfer the OTS' regulatory authority to the other federal banking
agencies. The legislation would also provide that any savings association that
would become undercapitalized under the prompt corrective action regulations as
a result of the special deposit premium assessment could be exempted from
payment of the assessment, provided that the institution would continue to be
subject to the payment of semiannual assessments under the current rate schedule
following the recapitalization of the SAIF. The legislation was considered and
passed by the House Banking Committee's Subcommittee on Financial Institutions
on September 27, 1995, and has not yet been acted on by the full House Banking
Committee.
On September 20, 1995, similar legislation was introduced in the Senate
(although the Senate bill does not include a comprehensive approach, as does the
House bill, for merging the savings association and commercial bank charters).
The Senate bill remains pending before the Senate Banking Committee. A similar
proposal is included in pending comprehensive budget legislation. Enactment of
any of these proposals could result in increased insurance assessments against
the Banks.
In light of ongoing debate over the content and fate of the budget bill,
the different proposals currently under consideration and the uncertainty of the
Congressional budget and legislative processes in general, BT Financial cannot
predict whether any or all of the proposed legislation will be passed, or in
what form. If the proposed legislation is enacted, BT Financial anticipates a
one-time deposit insurance assessment of approximately $1.4 million in 1996,
relating to deposits acquired from savings and loan institutions.
FDICIA
The Federal Deposit Insurance Corporation Improvement Act of 1991
("FDICIA") substantially revised the depository institution regulatory and
funding provisions of the Federal Deposit Insurance Act and made revisions to
several other federal banking statutes.
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Among other things, FDICIA requires federal banking regulators to take
prompt corrective action in respect of depository institutions that do not meet
minimum capital requirements. FDICIA establishes five capital tiers: "well
capitalized," "adequately capitalized," "undercapitalized," "significantly
undercapitalized" and "critically undercapitalized." A depository institution is
well capitalized if it significantly exceeds the minimum level required by
regulation for each relevant capital measure, adequately capitalized if it meets
each such measure, undercapitalized if it fails to meet any such measure,
significantly undercapitalized if it is significantly below each such measure
and critically undercapitalized if it fails to meet any critical capital level
set forth in the regulations. The critical capital level is a level of tangible
equity equal to not less than 2% of total tangible assets. A depository
institution may be deemed to be in a capitalization category that is lower than
is indicated by its actual capital position if it receives an unsatisfactory
examination rating.
FDICIA generally prohibits a depository institution from making any capital
distribution (including payment of a dividend) or paying any management fee to
its holding company if the depository institution would thereafter be
undercapitalized. Undercapitalized depository institutions are subject to
restrictions on borrowing from the Federal Reserve and to growth limitations,
and are required to submit capital restoration plans. A depository institution's
holding company must guarantee the capital plan, up to an amount equal to the
lesser of 5% of the depository institution's assets at the time it becomes
undercapitalized or the amount of the capital deficiency when the institution
fails to comply with the plan. Federal banking agencies may not accept a capital
plan without determining, among other things, that the plan is based on
realistic assumptions and is likely to succeed in restoring a depository
institution's capital. If a depository institution fails to submit an acceptable
plan, it is treated as if it is significantly undercapitalized. Significantly
undercapitalized depository institutions may be subject to a number of
requirements and restrictions, including orders to sell sufficient voting stock
to become adequately capitalized, requirements to reduce total assets and
cessation of receipt of deposits from correspondent banks. Critically
undercapitalized depository institutions are subject to appointment of a
receiver or conservator.
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CERTAIN INFORMATION REGARDING MOXHAM
BUSINESS
Moxham is a Pennsylvania corporation organized in 1986 for the purpose of
forming a bank holding company. It is headquartered in Johnstown, Cambria
County, Pennsylvania and has two banking subsidiaries and one non-banking
subsidiary. Moxham Bank, established in 1919, has its principal office in
Johnstown and ten branches in Cambria, Somerset and Westmoreland Counties,
Pennsylvania. Garrett Bank, established in 1903, has its principal office in
Garrett, Somerset County, Pennsylvania and one branch located in Somerset,
Pennsylvania. The Moxham Banks offer a full range of banking and fiduciary
services including real estate, commercial and consumer loans, time, savings and
demand deposits and trust services. The Moxham Banks offer twelve ATMs, which
are linked with MAC(R), a regional ATM network and Cirrus(R), also a national
ATM network. In 1992, Moxham formed a non-banking subsidiary, Moxham Community
Development Corporation, to conduct community development activities. On
December 31, 1995 Moxham had total assets of $240.90 million, total deposits of
$217.61 million and total shareholders equity of $20.08 million. The deposits of
the Moxham Banks are insured by the FDIC under the BIF to the fullest extent
provided by law. At December 31, 1995 the Moxham Banks had 135 full-time
equivalent employees.
COMPETITION
The Moxham Banks' primary market area consists of Cambria, Somerset and
Westmoreland Counties, Pennsylvania. The Moxham Banks compete with a total of
sixteen banks, savings and loan and savings banks in the Johnstown banking
market which consists of Cambria and Somerset Counties. The Moxham Banks compete
with a total of 71 similar financial institutions in the Pittsburgh banking
market which includes Westmoreland County. Included in the competing banks are
the major Pittsburgh and Johnstown banks as well as credit unions. Among the
financial institutions the Moxham Banks compete with in the Johnstown banking
market are Johnstown Bank and Laurel Bank. Among those the Moxham Banks competes
with in the Pittsburgh banking market are Johnstown Bank and Fayette Bank. The
Moxham Banks are generally competitive within their service area with respect to
interest rates paid on time and savings deposits, service charges on deposit
accounts and interest charged on loans.
SUPERVISION AND REGULATION
Moxham is a bank holding company as defined in the BHCA. As such, it is
subject to supervision and examination by the Federal Reserve. Moxham may not,
without prior approval of the Federal Reserve, acquire 5% or more of the voting
stock of a bank or engage in any activity, directly or indirectly that is not
banking or closely related thereto. The BHCA and the Federal Reserve Act place
restrictions on transactions between Moxham and its affiliates, including the
Banks. Moxham, subject to the approval of the Federal Reserve, may acquire any
number of banks in Pennsylvania and in certain other states which permit
Pennsylvania bank holding companies to own banks in those states.
As national banks, the Moxham Banks are subject to supervision and
examination by the Comptroller of the Currency ("Comptroller"). They may engage
in activities authorized for national banks by the National Bank Act or approved
by the Comptroller. There are limits on the amount of dividends the Moxham Banks
may pay to Moxham. Approval of the Comptroller is required if the total of
dividends declared in a calendar year exceed retained net profits for that year
plus retained net profits for the previous two years. As of December 31, 1995,
the Moxham Banks could pay an additional $2,891,600 in cash dividends to Moxham.
The Moxham Banks are permitted to operate branches in any location in
Pennsylvania and, pursuant to recent legislation, may also operate branches in
certain other states which provide for reciprocal branching. This legislation
would also permit banks from other states to operate branches within
Pennsylvania.
Because deposits at the Moxham Banks are insured to the full extent
provided by the FDIA, they are subject to regulation by FDIC. Both the
Comptroller and the FDIC have issued regulations pursuant to applicable federal
statutes setting minimum capital requirements, requiring uniform accounting
principles and annual audits and governing compensation of officers and
directors. The Moxham Banks are required to pay annual fees based on domestic
deposits which are set to reflect the condition of the insured institution.
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Risk-based capital standards are supplemented with a minimum Tier 1
capital-to-assets ratio. The agencies may require an insured institution to
maintain capital at higher levels if it is deemed necessary.
From time to time, various types of federal and state legislation have been
proposed that could result in additional regulation of, and restrictions on the
business of Moxham and the Moxham Banks. It cannot be predicted whether any such
legislation will be adopted or how it would affect the business of Moxham or the
Moxham Banks. As a consequence of extensive regulation of commercial banking
activities in the United States, the Moxham Bank's business is particularly
susceptible to being affected by federal legislation and regulations that may
increase the cost of doing business.
Moxham's principal office is located at 540 Central Avenue, Johnstown,
Pennsylvania 15902. Business is conducted by the Moxham Banks out of 13 offices
located in Cambria, Somerset and Westmoreland Counties, Pennsylvania. Nine of
the locations are owned, three are leased and one building is owned and the land
leased. Moxham's management believes that the above properties are adequately
covered by insurance and are in sound physical condition. There are no
mortgages, liens or other limitations on Moxham's ownership of its properties.
No material expenditures for the renovation or improvement of properties are
contemplated within the next fiscal year.
On February 5, 1996, Moxham announced that it had reached a definitive
agreement with NBOC Bank, a subsidiary of First Commonwealth Financial Corp.
headquartered in Indiana, Pennsylvania, to purchase the Moxham Bank Salem 22
Plaza Office, Delmont, Pennsylvania, and deposit liabilities. Moxham will retain
all of the loans of this branch. At December 31, 1995, total deposits of the
Salem 22 Plaza office were $7.94 million. The transaction is subject to
regulatory approval.
EFFECT OF GOVERNMENT MONETARY POLICIES
The earnings of the Moxham Banks, and therefore of Moxham, are and will be
affected by domestic conditions and the monetary and fiscal policies of the
United States Government and its agencies. Pennsylvania economy lagged in the
nation with slower job growth and lower growth in real personal income which
translates into slower retail sales growth. Building permits and home sales have
also declined faster in Pennsylvania than the nation as a whole but are expected
to rebound slightly higher in 1996 relative to the nation as a whole. The
economy of Cambria County continues to show modest improvement to
diversification of the steel industry and a shift from over-reliance on heavy
industry to more light manufacturing and service-related businesses. The area
has an 8.4% unemployment rate which is above the Pennsylvania rate of 5.7% and
the U.S. rate of 5.2%. Somerset County has an unemployment rate of 8.6%. The
economy continues to do better with tourism at ski resorts along with two new
prisons and a stable manufacturing base. Westmoreland County's economy, with a
6.4% unemployment rate, looks more promising. The expansion of the airport at
Latrobe, the planned development of the air industrial park in addition to the
industrial park adjacent to the airport and The Laurel Valley Expressway are in
progress. It is expected that ultimately 5,000 jobs will be created in and
around the airport site.
The monetary policies of the Federal Reserve have had, and will likely
continue to have, an important impact on the operating results of commercial
banks to the Federal Reserve's power to implement national monetary policy in
order, among other things, to curb inflation or combat recession. The Federal
Reserve has a major effect on the levels of bank loans, investments and deposits
through its open market operations in United States Government securities and
through its regulation, among other things, of the discount rate on the
borrowing of member banks and the reserve requirements against member bank
deposits. It is not possible to predict the nature and impact of future changes
in monetary and fiscal policies.
LEGISLATION AND REGULATORY CHANGES
From time to time, legislation is enacted which has the effect of
increasing the cost of doing business, limiting or expanding permissible
activities or affecting the competitive balance between banks and other
financial institutions. Proposals to change the laws and regulations governing
the operation and taxation of the banks, bank holding companies and other
financial institutions are also frequently made in Congress and
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before various bank regulatory agencies. No prediction can be made as to the
likelihood of any major changes or the impact such changes might have on Moxham
or the Moxham Banks.
LEGAL PROCEEDINGS
The Company is not involved in any legal proceeding other than those
normally occurring in the ordinary course of business, none of which would have
a material adverse affect on the company if an adverse decision results. In the
opinion of Moxham's management, the aggregate amount involved in such
proceedings is not material to the financial condition or results of operations
of Moxham on a consolidated basis.
ENVIRONMENTAL ISSUES
Moxham and the Moxham Banks are not materially affected by compliance with
any environmental laws. However, customers of the Moxham Banks engaged in
certain activities may from time to time be faced with the necessity of such
compliance. In addition to its own responsibilities under the environmental
laws, a bank may also be held liable under certain circumstances for actions of
borrowers or other third parties on properties that are security for loans made
by a bank. Such potential liability may far exceed the original amount of the
loan made by a bank. Currently neither Moxham or the Moxham Banks are parties to
any pending legal proceeding under any environmental statute, nor is Moxham
aware of any circumstance that may give rise to liability of Moxham or the
Moxham Banks under any statute.
CAPITAL REGULATORY REQUIREMENT
Moxham continues to maintain a strong capital position. As of December 31,
1995, Moxham had a total capital to risk-weighted assets ratio of 13.78%, a Tier
1 capital to risk-weighted assets ratio of 11.27% and a Tier I leverage ratio of
7.53%. These ratios do not include net unrealized holding gains on securities
available for sale from the adoption of Financial Accounting Standards Number
115 ("FAS 115"). All of the capital ratios are well in access of the regulatory
requirements established by the Federal Reserve. The Moxham Banks have been
deemed "well capitalized" according to the FDIC's list-based premium rule. A
bank is considered well capitalized if it has at least 10% total risk-based
capital, 6% Tier 1 risk-adjusted capital and a 5.00% Tier I leverage ratio.
Moxham was required to implement FAS 115 on January 1, 1994. For regulatory
capital purposes, this changed the composition of shareholders' equity in
financial statements prepared in accordance with generally accepted accounting
principles by including as a separate component of equity the amount of net
unrealized holding gains or losses on debts and equity securities that are
deemed to be available-for-sale. Adoption of FAS 115 in 1994 decreased
shareholders equity by $1,755,800, but it increased shareholders equity by
$2,118,000 in 1995, reflecting the net unrealized holding gains on securities
available for sale net of tax effect. This amount will vary in the future based
upon the fair value of the securities portfolio.
MOXHAM COMMON STOCK PRICES AND DIVIDENDS
Moxham Common Stock has been listed on the NASDAQ/SCM since September 13,
1993 under the symbol "MOXB." The table below sets forth the closing bid prices
and cash dividends declared per share for
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the period indicated. The data presented in the table have been restated to
reflect a 10% stock dividend paid on December 31, 1994. As of January 31, 1996,
Moxham had 589 shareholders of record of its common stock.
<TABLE>
<CAPTION>
CLOSING PRICE
------------- CASH DIVIDEND
YEAR HIGH LOW PER SHARE
- ---- ---- --- ---------
<S> <C> <C> <C>
1996
First Quarter..............................................
Second Quarter (through April , 1996).....................
1995
First Quarter.............................................. $27 $24 $ 0.16
Second Quarter............................................. 26 1/2 24 1/2 0.16
Third Quarter.............................................. 27 24 1/4 0.16
Fourth Quarter............................................. 38 1/2 24 1/4 0.16
1994
First Quarter.............................................. $26 $25 1/2 $0.145
Second Quarter............................................. 25 24 1/2 0.145
Third Quarter.............................................. 24 1/2 24 1/2 0.145
Fourth Quarter............................................. 24 1/2 24 0.145
</TABLE>
Moxham dividends are subject to regulatory considerations and the
description of the Moxham Board including operating results, financial
conditions and general business conditions. Shareholders are entitled to receive
dividends as and when declared by the Moxham Board out of funds legally
available therefore subject to limitations imposed by the BCL and the National
Bank Act, and regulations of the Comptroller of the Currency. The BCL provides
that a corporation may not pay dividends if the effect of such payment would be
to render the corporation insolvent. The National Bank Act and Comptroller's
regulations limit the amount of dividends which the Banks may pay to Moxham. See
"Certain Information Regarding Moxham--Supervision and Regulation". In addition,
the FDIA generally prohibits the payment of all dividends by any bank which is
in default on any assessment for deposit insurance premiums due to the FDIC.
There also could be limitations imposed on dividends payable by a bank if it is
not in compliance with its capital requirements.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS OF MOXHAM
The purpose of the following analysis is to provide the reader with an
insight to more thoroughly understand the consolidated financial condition and
results of operations of Moxham. It should be read in conjunction with the
consolidated financial statements of Moxham beginning on Page 4.
RESULTS OF OPERATIONS
Net Income
Net income for 1995 was $1,474,700 or $1.51 on a fully diluted per share
basis, compared to net income of $1,753,200, or $1.81 per fully diluted share,
for 1994 and net income of $1,901,400 or $1.98 per fully diluted share, for
1993.
When 1995 is compared with 1994, Moxham's net income decreased $278,500, or
15.9%, and fully diluted earnings per share decreased by $.30, or 16.6%. Similar
trends were noted for two other key performance ratios as Moxham's return on
average assets declined from .78% to .62% and return on average equity declined
from 9.86% to 7.87%. The decrease in net income resulted primarily from a
decrease in net interest income, a higher provision for loan losses and higher
expenses.
When 1994 is compared with 1993, Moxham's net income decreased $148,200, or
7.8%, and fully diluted earnings per share decreased $.17, or 8.6%. Return on
average assets decreased from .94% to .78% and return on average equity
decreased from 11.30% to 9.86%. The decrease in net income is attributable
primarily to an increase in net interest income that was offset by a higher
provision for loan losses and higher expenses.
Net Interest Income
Net interest income is the principal source of Moxham's earnings and is the
difference between interest and fees generated by earning assets and the
interest cost associated with funding these assets. Loans, investment and
trading account securities, and short-term money market instruments are the
components of earning assets. Earning assets are financed by interest-bearing
deposits, short-term borrowings, and long-term debt. Besides these sources,
earning assets are also supported by interest-free funds such as demand deposits
and shareholders' equity. Variations in the volume and mix of earning assets,
interest-bearing funds, and non-interest related funds, and their relative
sensitivity to interest rate movements, determine changes in net interest
income.
When 1995 is compared to 1994, taxable-equivalent net interest income
decreased from $9.32 million to $9.12 million and net interest margin percentage
declined thirty-eight basis points to 4.09%. Earnings in 1995 were negatively
impacted as funding costs increased more rapidly than income on earnings assets.
At year-end 1994, Moxham was positioned so that a rise in rates would reduce net
interest income. This was a result of Moxham's asset composition and the use of
short-term borrowings and deposits to fund loan growth. Management felt the risk
of not reducing short-term borrowings exceeded the cost of continuing to be
liability sensitive. Therefore, short-term borrowings were replaced with deposit
liabilities early in the first quarter of 1995. While overnight rates continued
to rise and peaked at approximately 6% during the second quarter and remained
slightly below that level for the remainder of the year, three-year rates
declined more than two hundred basis points in 1995. As a result, Moxham was
unable to reprice assets to sustain its margin and income declined.
Total interest income on a tax equivalent basis increased $2.09 million but
was offset by a $2.29 million increase in total interest expense. Average
earning assets increased 6.8% to $222.75 million in 1995. The growth reflects an
8.3% increase in average loan volume and a 3.9% increase in securities and money
market investments. Loans to average earning assets increased eighty-nine basis
points to 68.60%. The higher volume of earning assets in 1995 was supported with
a $12.84 million or 7.0% increase in interest-bearing liabilities. Average
interest-bearing deposits rose $14.08 million and borrowings declined $1.25
million.
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When 1994 is compared to 1993, taxable-equivalent net interest income
remained level at $9.32 million and net interest margin percentage declined
forty-seven basis points to 4.47%. The lower yield on earning assets is
attributable to an increase in interest rates. While funding costs increased,
asset yield lagged and competitive influences in Moxham's market area narrowed
loan spreads. Average earning assets increased 10.6% to $208.48 million in 1994.
The growth reflects an 11.5% increase in loan volume and an 8.9% increase in
securities and money market investments. Loans to average earning assets
increased fifty basis points to 67.71% in 1994. The higher volume of earning
assets in 1994 was supported with an $18.60 million or 11.2% increase in
interest-bearing liabilities. Average interest-bearing deposits rose $15.25
million and borrowings rose $3.35 million.
Moxham anticipates that the margin will improve in 1996 as maturing earning
assets reprice at higher levels and maturing time deposits reprice at lower
levels. Increases in net interest income are expected to be primarily a result
of improved interest spreads rather than volume increases as Moxham continues a
less aggressive pricing strategy in lending functions.
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The following presents the major categories of interest-earning assets and
interest-bearing liabilities with their corresponding average balances, related
interest income or expense, and resulting yields and rates on a fully taxable
equivalent basis for the years indicated.
<TABLE>
<CAPTION>
1995 1994 1993
-------------------------------- -------------------------------- ---------------------
AVERAGE INCOME/ YIELD/ AVERAGE INCOME/ YIELD/ AVERAGE INCOME/
BALANCE EXPENSE(1) RATE(1) BALANCE EXPENSE(1) RATE(1) BALANCE EXPENSE(1)
-------- ---------- -------- -------- ---------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Interest Earning Assets:
Loans, Net of Unearned
Interest(2)........................ $152,818 $ 14,145 9.26% $141,167 $ 12,423 8.80% $126,634 $ 11,592
Time Deposits in Other Banks....... 1,159 53 4.57% 1,804 84 4.64% 5,248 293
Investment Securities:
Taxable.......................... 57,126 3,224 5.64% 50,420 2,601 5.16% 34,899 1,972
Non-Taxable...................... 9,309 829 8.90% 14,337 1,167 8.14% 19,042 1,426
-------- -------- ----- -------- -------- ----- -------- --------
Total Investment Securities........ 66,435 4,053 6.10% 64,757 3,768 5.82% 53,941 3,398
Trading Account Assets............. 5 0 6.14% 5 0 4.05% 0 0
Federal Funds Sold................. 2,335 138 5.91% 744 27 3.63% 2,604 78
-------- -------- ----- -------- -------- ----- -------- --------
Total Interest Earning Assets...... 222,752 18,389 8.26% 208,477 16,302 7.82% 188,427 15,361
Non-Earning Assets:
Cash and Due from Banks.......... 7,605 7,144 6,226
Bank Premises & Equipment, Net... 5,876 6,118 5,584
Other Assets..................... 5,100 4,449 3,868
Less Reserve for Possible Loan
Losses......................... (1,901) (1,733) (1,550)
-------- -------- --------
Total Non-Earning Assets........... 16,680 15,978 14,128
-------- -------- --------
Total Assets....................... $239,432 $224,455 $202,555
======== ======== ========
LIABILITIES & STOCKHOLDERS' EQUITY
Interest-bearing Liabilities:
Demand and Savings Deposits........ $ 69,195 $ 2,122 3.07% $ 66,770 $ 1,610 2.41% $ 60,828 $ 1,466
Time Deposits...................... 123,347 6,873 5.57% 111,690 5,079 4.55% 102,384 4,490
Borrowed Funds..................... 3,490 211 6.04% 4,606 229 4.96% 1,128 35
Long-Term Debt..................... 763 67 8.78% 893 63 7.10% 1,023 61
-------- -------- ----- -------- -------- ----- -------- --------
Total Interest-bearing Liabilities... 196,795 9,273 4.71% 183,959 6,981 3.79% 165,363 6,052
Non-Interest Bearing Liabilities:
Demand Deposits.................... 21,757 20,961 18,881
Other Liabilities.................. 2,148 1,758 1,490
-------- -------- --------
Total Non-Interest Bearing
Liabilities........................ 23,905 22,719 20,371
Stockholders' Equity................. 18,732 17,777 16,821
-------- -------- --------
Total Liabilities & Stockholders'
Equity............................. $239,432 $224,555 $202,555
======== ======== ========
Net Interest Income
(Tax Equivalent Basis)............. 9,116 9,321 9,309
Reversal of Tax Equivalent
Adjustment......................... 331 448 542
------- ------- --------
Net Interest Income................ $ 8,785 $ 8,873 $ 8,767
======== ======== ========
Net Interest Spread(3)............... 3.55% 4.03%
Net Yield on Earning Assets.......... 4.09% 4.47%
<CAPTION>
YIELD/
RATE(1)
------
<S> <C>
ASSETS
Interest Earning Assets:
Loans, Net of Unearned
Interest(2)........................ 9.15%
Time Deposits in Other Banks....... 5.58%
Investment Securities:
Taxable.......................... 5.65%
Non-Taxable...................... 7.49%
-----
Total Investment Securities........ 6.30%
Trading Account Assets............. 0.00%
Federal Funds Sold................. 3.01%
-----
Total Interest Earning Assets...... 8.15%
Non-Earning Assets:
Cash and Due from Banks..........
Bank Premises & Equipment, Net...
Other Assets.....................
Less Reserve for Possible Loan
Losses.........................
Total Non-Earning Assets...........
Total Assets.......................
LIABILITIES & STOCKHOLDERS' EQUITY
Interest-bearing Liabilities:
Demand and Savings Deposits........ 2.41%
Time Deposits...................... 4.39%
Borrowed Funds..................... 3.10%
Long-Term Debt..................... 5.96%
-----
Total Interest-bearing Liabilities... 3.66%
Non-Interest Bearing Liabilities:
Demand Deposits....................
Other Liabilities..................
Total Non-Interest Bearing
Liabilities........................
Stockholders' Equity.................
Total Liabilities & Stockholders'
Equity.............................
Net Interest Income
(Tax Equivalent Basis).............
Reversal of Tax Equivalent
Adjustment.........................
Net Interest Income................
Net Interest Spread(3)............... 4.49%
Net Yield on Earning Assets.......... 4.94%
<FN>
- ---------
(1) Tax exempt income on loans and investments and related yields are shown on a
fully taxable equivalent basis computed using the federal statutory tax rate
of 34% in 1995, 1994, and 1993.
(2) For purposes of calculating loan yields, average loan balances include
non-accrual loans and loan income includes loan fees.
(3) The difference between the rate earned on total earning assets and the rate
paid on total interest-bearing liabilities.
(4) Investment securities average balances for 1995 and 1994 are fair values and
amortized cost for 1993.
</TABLE>
76
<PAGE> 84
The following table provides an analysis of the change in interest income
and expense attributable to changes in volume and rate.
<TABLE>
<CAPTION>
1995 VS. 1994 1994 VS. 1993
-------------------------- ------------------------
INCREASE (DECREASE) INCREASE (DECREASE)
DUE TO CHANGES IN DUE TO CHANGES IN
VOLUME RATE TOTAL VOLUME RATE TOTAL
------ ---- ----- ------ ---- -----
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
Interest Income:
Loans, Net of Unearned
Interest(1)(2).................... $1,025 $ 697 $1,722 $1,329 $(498) $ 831
Time Deposits in Other Banks......... (30) (1) (31) (192) (17) (209)
Taxable Investment Securities(3)..... 346 277 623 876 (247) 629
Non-Taxable Investment
Securities(3)..................... (409) 71 (338) (352) 93 (259)
Trading Account Assets............... 0 0 0 0 0 0
Federal Funds Sold................... 58 53 111 (56) 5 (51)
------ ------ ------ ------ ----- -----
Total Interest Income................ 990 1,097 2,087 1,605 (664) 941
Interest Expense:
Interest Bearing Demand & Savings
Deposits.......................... 58 454 512 144 0 144
Time Deposits........................ 531 1,263 1,794 410 179 589
Borrowed Funds....................... (56) 38 (18) 108 86 194
Long-Term Debt....................... (9) 13 4 (8) 10 2
------ ------ ------ ------ ----- -----
Total Interest Expense............... 524 1,768 2,292 654 275 929
------ ------ ------ ------ ----- -----
Change in Net Interest Income(2)....... $ 466 $ (671) $ (205) $ 951 $(939) $ 12
------ ------ ------ ------ ----- -----
<FN>
- ---------
(1) Tax-exempt income on loans and investments included in their respective
categories are computed on a fully taxable equivalent basis.
(2) For purposes of calculating loan yields, average loan balances include
non-accrual loans and loan income includes loan fees.
(3) Average balances are fair value for 1995 and 1994 and amortized cost for
1993.
</TABLE>
77
<PAGE> 85
Provision for Possible Loan Losses
The provision for possible loan losses is an amount added to the reserve
against which loan losses are charged. The amount of the provision reflects
management's evaluation of the adequacy of the allowance for possible loan
losses. See "Allowance for Possible Loan Losses" herein. The provision for
possible loan losses in 1995 was $307,000, compared to $263,900 in 1994 and
$192,900 in 1993. Net loans charged-off were $170,900 in 1995, $80,700 in 1994
and $35,500 in 1993. Net loans charged-off were 0.11% of average loans, net of
unearned interest, for 1995, 0.06% for 1994 and 0.02% for 1993.
Non-Interest Income
Total non-interest income was $1,462,800, $1,433,000 and $1,310,700 for
1995, 1994 and 1993 respectively. The increases are attributable to a higher
volume of fees for various banking services. Security gains amounted to $61,700,
$154,300 and $137,500 for the years 1995, 1994 and 1993 respectively.
Non-Interest Expense
Total non-interest expense was $8,305,400, $8,078,300 and $7,722,000 for
1995, 1994 and 1993 respectively. Salaries increased 6.5% in 1995, 4.9% in 1994
and 11.1% in 1993. No management incentive was paid in 1995 and 1994, which
accounts for the lower increase in salaries. Otherwise, the higher costs reflect
staffing level increases and merit increases. Employee benefit costs increased
4.6% in 1995 and 5.8% in 1994, but decreased 5.2% in 1993. These increases in
1995 and 1994 reflect higher staffing levels as well as increased employee
health care costs, pension, payroll taxes and other employee benefit costs. The
decrease in 1993 is attributable primarily to a decrease in employee health care
costs. In 1990 the Moxham Board approved an Employee Stock Ownership Plan (ESOP)
with 401(k) provisions. Contributions amounting to $143,200 were made by the
Company in 1995, and $142,200 in 1994 and 1993.
Net occupancy expense rose 5.5% in 1995, 6.5% in 1994 and 6.4% in 1993.
Other operating expenses decreased 3.7% in 1995, increased 3.0% in 1994 and
increased 20.0% in 1993. The reduction in 1995 of other operating expense is due
primarily to reduced FDIC assessment rates on deposits covered by BIF. FDIC
assessments were $236,900, $442,400 and $400,900 for the years 1995, 1994, and
1993 respectively. In the third quarter of 1995 the Company received a $133,725
FDIC deposit insurance refund for assessments paid in the second and third
quarters. Effective June 1, 1995, assessment rates were reduced from $0.23 per
$100 to $0.04 per $100 of adjusted deposits. The assessment has been reduced to
zero for the first half of 1996. The higher level of increase in 1993 was due
primarily to increased software fees and operating losses of Moxham's
non-banking subsidiary, Moxham Community Development Corporation (MCDC). In
1993, software fees increased 65.6% to $177,400 due to the purchase of an
automated platform system which management felt was necessary to comply
efficiently with the provisions of the Truth in Savings Act and Regulation DD.
Because of its community development activity, MCDC shows an equity loss on
investments that is reported in other operating expenses and offset by federal
income tax benefits. In 1995, MCDC had operating expenses of $209,500 and tax
benefits of $300,300, producing $90,800 in net earnings. In 1994, MCDC had an
operating loss of $121,900, tax benefits of $235,500 and net earnings of
$113,600. In 1993, MCDC had an operating loss of $140,500, tax benefits of
$235,600 and net earnings of $95,100.
Provision For Income Taxes
The provision for income taxes relates to items of revenue and expense
recognized for financial accounting purposes during each of the periods. The
actual current tax liability may be more or less than the charge against
earnings due to the effect of timing differences between financial and tax
accounting resulting in deferred income taxes. The primary differences result
from depreciation, non-qualified deferred compensation plan, loan loss
provision, deferred loan fees and investment tax credits and alternative minimum
tax carryforwards. Moxham's provision for income tax for financial reporting
purposes for 1995 was $161,300, reflecting an effective tax rate of 9.9%. The
provision for income taxes was $210,900 in 1994 compared to $234,700 in 1993,
representing effective tax rates of 10.7% and 10.9% respectively. At December
31, 1995, net deferred tax assets amounted to $646,700, including $199,000 in
deferred liabilities due to the adoption of
78
<PAGE> 86
FAS 115. See Notes 1 and 3 to the Consolidated Financial Statements for details.
Effective January 1, 1993, the Company adopted FAS 109, "Accounting for Income
Taxes." This adoption resulted in the recognition of a non-recurring charge of
$26,900.
FINANCIAL CONDITION
Loans
Loan growth has been broad based with increases in the commercial, consumer
and real estate sectors. Other loans in 1993, 1994 and 1995 consist primarily of
loans to non-profit organizations. In 1991, other loans consist primarily of
money market investments reportable to the loan portfolio. Commercial loans
comprise approximately 38%, real estate 34% and consumer loans 28% of the
portfolio at December 31, 1995. Moxham has no credit exposure to foreign
countries or highly leveraged transactions and no significant industry lending
concentrations.
Loans increased by $4.2 million, or 2.8%, in 1995 compared to an increase
of $15.2 million, or 11.3%, in 1994. The most significant change was in
commercial loans, which increased $5.96 million, or 11.5%, after increasing by
$8.02 million, or 18.4%, in 1994. The commercial loan growth resulted from
successful business development efforts to small-sized businesses in Moxham's
market area that includes the Johnstown area, Westmoreland County and Somerset
County. Moxham intends to continue a less aggressive pricing strategy of
commercial loans and anticipates only a modest increase in 1996. Real estate
loans decreased by $1.74 million, or 3.2%, after increasing $4.50 million, or
9.1%, in 1994. The greater growth in real estate loans in 1994 is a result of
management's strategy to seek mortgages in a higher rate environment after a
strategy of not aggressively financing long-term fixed-rate loans in the low
rate environment during 1993 and 1992. Moxham does not approve mortgages with
the intent of selling the loans. Consumer loans decreased $0.87 million or 2.0%
after increasing $2.72 million or 6.6% in 1994. The lower growth rate in 1995 is
attributable to weaker loan demand and extremely competitive market pressures in
Moxham's market area.
The following table summarizes the composition of Moxham's loan portfolio
by types of loans at December 31 for each year indicated:
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Commercial(1).......................... $ 57,549 $ 51,592 $ 43,570 $ 37,908 $ 31,400
Real Estate-Construction............... 1,301 3,823 1,811 88 65
Real Estate-Mortgage................... 51,140 50,362 47,876 47,367 50,632
Consumer (2)........................... 43,249 44,120 41,400 32,539 31,402
Other.................................. 1,160 301 331 201 9,188
-------- -------- -------- -------- --------
Total Loans............................ $154,399 $150,198 $134,988 $118,103 $122,687
<FN>
- ---------
(1) Includes Obligations of States and Political Subdivisions and Commercial
Loans Secured by Nonfarm Nonresidential Properties.
(2) Excludes Loans Secured by Real Estate.
</TABLE>
79
<PAGE> 87
The amount of loans outstanding by category as of December 31, 1995, which
are due in (i) one year or less, (ii) more than one year through five years, and
(iii) over five years, are shown in the following table. Loan balances are also
categorized to their sensitivity to changes in interest rates.
<TABLE>
<CAPTION>
1-5 OVER
1 YEAR YEARS 5 YRS. TOTAL
------ ----- ----- -----
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Commercial & Other..................................... $ 5,026 $11,439 $41,084 $ 57,549
Real Estate--Construction.............................. 1,301 0 0 1,301
Real Estate--Mortgage.................................. 2,366 16,081 32,693 51,140
Consumer............................................... 3,053 36,414 3,782 43,249
Other.................................................. 260 878 22 1,160
------- ------- ------- --------
Total............................................. $12,006 $64,812 $77,581 $154,399
======= ======= ======= ========
Loans with Fixed Rate.................................. $ 5,898 $42,570 $45,588 $ 94,056
Loans with Floating Rate............................... 6,108 22,242 31,993 60,343
------- ------- ------- --------
Total............................................. $12,006 $64,812 $77,581 $154,399
======= ======= ======= ========
Percent Composition of Maturity........................ 7.8% 42.0% 50.2% 100.0%
Fixed Rate Loans as a Percentage of Total Loans........ 61%
Floating Rate Loans as a Percentage of Total Loans..... 39%
</TABLE>
The loan maturity information shown above is based upon original loan terms
and is not adjusted for "rollovers." Renewals are permissible only when the
"rollover" is a component of a workout program for a problem loan.
At December 31, 1995, 61% of total loans were fixed-rate compared to 63% at
December 31, 1994. Of total loans at year-end 1995, 7.8% mature within one-year,
42.0% mature within one to five years, and 50.2% mature in five or more years,
compared to 7.9%, 39.8%, and 52.3% respectively at year-end 1994. Of the $77.58
million in loans maturing in five or more years, 58.8% have a fixed interest
rate and 41.2% have a floating rate of interest and are primarily residential
mortgages. To control the interest rate risk associated with long-term fixed
rate mortgages, management has restricted the growth of fixed-rate mortgages
through its pricing strategy during low rate environments. See "Liquidity and
Rate Sensitivity" herein for a discussion of the impact rate changes may have on
net interest margin.
Allowance for Possible Loan Losses
As a financial institution, Moxham assumes various risks that it must
manage to maximize current and future net interest income within acceptable
levels of risk while satisfying liquidity and capital requirements. Credit risk
is an inherent element of its business and Moxham anticipates that credit losses
will occur in the normal course of business. The management of interest rate
risk is also fundamental to banking. If not properly managed, a bank can
experience earnings, liquidity and ultimately, capital adequacy problems. A
change in interest rates may affect not only earnings, but also the market
values of all fixed rate assets. Banks may be vulnerable during periods of
rising interest rates because of their business mix. Loans to certain economic
sectors adversely affected by rising rates may experience more credit problems.
See "Liquidity and Rate Sensitivity" herein for a further discussion on interest
rate risk.
To control the risks associated with its lending activity, Moxham maintains
a diversified portfolio of commercial, real estate and consumer loans. The
portfolio is divided approximately equally between these three categories of
loans. Commercial loans have the highest potential for credit losses and may
experience notable swings in charge-offs due to business conditions and economic
volatility. Commercial loan rates are generally variable to reduce interest rate
risk. As mentioned previously, there are no significant industry lending
concentrations in the commercial portfolio. Real estate loans are primarily
residential mortgages and historically have low charge-offs. To control the
interest rate risk associated with long-term fixed rate mortgages, management
has restricted the growth of fixed rate mortgages through its pricing strategy
during low rate environments and has aggressively marketed variable-rate home
equity loans. Consumer loans have
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<PAGE> 88
shorter maturities of generally less than five years and include both direct and
indirect loans. The shorter maturities provide a source of liquidity that can be
invested at current market rates.
Moxham maintains an allowance for possible loan losses, which is available
to absorb potential yet undetermined losses. The evaluation of Moxham's exposure
to credit loss is an ongoing process. Moxham makes a quarterly determination of
the provision from earnings necessary to maintain the allowance at the
appropriate level. The amount charged to earnings is based upon an evaluation of
the loss potential of non-performing, delinquent, and higher balance loans.
Moxham also reviews economic and business trends, historical loss experience,
growth and composition of the loan portfolio and other relevant factors. Moxham
believes the allowance is adequate for losses inherent in the loan portfolio as
of December 31, 1995. However, changes in the character and size of the loan
portfolio, together with the impact of changes in economic conditions, may have
a favorable or unfavorable impact on the quality of the loan portfolio and
thereby the future earnings performance of Moxham.
To facilitate the early identification of problem credit and adverse
trends, Moxham relies on a credit review process of its commercial loan
portfolio. All loans over $100,000 and a random sample of loans less than
$100,000 are reviewed. Loans that have adequate cash flows and are either well
secured by collateral or backed by the strong financial condition of the
borrower are classified as high quality or pass. Loans that have potential
weaknesses and deserve management's close attention receive a special mention
rating. Loans that have a well-defined weakness or weaknesses that jeopardize
the liquidation of the debt receive a classified rating. There are three
categories of classified loans, which include substandard, doubtful and loss.
Each rating indicates a progressively less satisfactory financial condition of
the borrower.
At December 31, 1995, classified loans were $5,085,400, consisting of
$98,300 rated doubtful and $4,987,100 rated substandard. Of total classified
loans, $4,201,000 were not contractually past due and $135,700 were past due
less than 30 days. Classified loans in a non-accrual status or past due 90 days
or more were $748,700. In addition to the credit review procedure, it is
Moxham's policy to discontinue the accrual of interest income based upon
delinquency status and a reassessment of collateral and the financial strength
of the borrower.
The allowance for possible loan losses totaled $1,962,400 at December 31,
1995, an increase of $136,100 or 7.5%, over the 1994 year-end level of
$1,826,300. At December 31, 1995, $621,300, or 31.7%, of the allowance for
possible loan losses is allocated to general risk to protect Moxham against
potential yet undetermined losses. Even though the entire allowance for loan
losses is available to absorb future loan losses in any loan category, $339,400,
or 17.3%, has been allocated to commercial loans, $568,300, or 29.0%, to real
estate loans, and $433,400, or 22.1%, to consumer loans at December 31, 1995.
The following table sets forth the allocation of the allowance for loan
losses among various categories at December 31 for the periods indicated.
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
------------------ ------------------- ------------------ ------------------ ------------------
PERCENT OF PERCENT OF PERCENT OF PERCENT OF PERCENT OF
LOANS IN LOANS IN LOANS IN LOANS IN LOANS IN
EACH EACH EACH EACH EACH
CATEGORY CATEGORY CATEGORY CATEGORY CATEGORY
AMOUNT TO LOANS AMOUNT TO LOANS AMOUNT TO LOANS AMOUNT TO LOANS AMOUNT TO LOANS
------ ------- ------ ------- ------ -------- ------ -------- ------ -------
(In thousands, except percentages)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Loans
Commercial.......... $ 340 38% $ 567 34% $ 268 32% $ 401 32% $ 335 28%
Real
Estate-Mortgage... 568 34 448 36 448 37 399 40 110 44
Consumer............ 433 28 397 30 355 31 113 28 594 28
Allocation to
General Risk...... $ 621 $ 414 $ 572 $ 573 $ 250
------ --- ------ --- ------ --- ------ --- ------ ---
Total............... $1,962 100% $1,826 100% $1,643 100% $1,486 100% $1,289 100%
</TABLE>
81
<PAGE> 89
The following table summarizes the activity of Moxham's allowance for
possible loan losses at December 31 for each of the years indicated.
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
(IN THOUSANDS, EXCEPT RATIOS)
<S> <C> <C> <C> <C> <C>
Total Loans Outstanding at Period End
(Net of Unearned Interest).............. $154,399 $150,198 $134,988 $118,103 $122,687
======== ======== ======== ======== ========
Reserve for Possible Loan Losses at
Beginning of Year....................... $ 1,826 $ 1,643 $ 1,486 $ 1,289 $ 948
Loans Charged Off:
Commercial.............................. 52 16 14 65 20
Real Estate-Mortgage.................... 23 3 -- 11 15
Consumer................................ 133 103 96 104 129
-------- -------- -------- -------- --------
Total Loans Charged Off.............. 208 122 110 180 164
Recoveries of Loans Previously Charged
Off:
Commercial.............................. 0 8 34 15 18
Real Estate-Mortgage.................... 2 4 3 11 2
Consumer................................ 35 29 37 30 28
-------- -------- -------- -------- --------
Total Recoveries..................... 37 41 74 56 48
Net Loans Charged Off..................... 171 81 36 124 116
Additions of Reserve Charged to
Operations.............................. 307 264 193 321 457
-------- -------- -------- -------- --------
Reserve for Possible Loan Losses at Year
End..................................... $ 1,962 $ 1,826 $ 1,643 $ 1,486 $ 1,289
======== ======== ======== ======== ========
Ratios
Net Charge-Offs to:
Average Loans........................... .11% .06% .02% .10% .10%
Reserve for Possible Loan Losses........ 8.72% 4.44% 2.16% 8.34% 9.00%
Reserve for Possible Loan Losses to Loans
at Year End............................. 1.27% 1.22% 1.22% 1.26% 1.05%
</TABLE>
Non-Performing Assets and Past Due Loans
Non-performing assets include loans on which interest is no longer accrued,
loans on which the interest rate or other terms have been renegotiated and real
estate acquired through foreclosure. Past due loans are loans that are
delinquent 90 days or more and still accruing interest.
Once a loan is placed on a non-accrual status, current year interest
previously accrued and uncollected is charged against current year earnings and
interest is included in earnings thereafter only to the extent actually received
in cash. Interest from a prior year is charged against the allowance for
possible loan losses. A loan may be restored to accrual status when its
financial status has been significantly improved and there is no principal or
interest past due and the loan has been current for three consecutive months.
Non-performing assets decreased $483,000, or 26.4%, to $1,346,000 at
December 31, 1995, compared to the end of the previous year. Non-accrual loans
decreased $320,700 to $811,000 and past due loans declined $279,400 to $391,800.
The reduced volume of non-performing loans is attributable primarily to a
decrease in secured commercial loans with cash flow impairments. The non-accrual
commercial loans are rated substandard with no material losses projected in
1996. During 1994, Moxham adopted a more conservative policy that classifies a
commercial loan as non-performing when the loan becomes past due ninety days and
is not anticipated to be brought current within thirty days. Previously, the
loan remained in an accrual status if the loan was fully secured and Moxham did
not anticipate any loss of interest or principal. Of the total amount in
non-accrual loans, $58,500 is not contractually past due more than thirty days
but remains in non-accrual status until the borrower has demonstrated the
required period of performance and the loan is no longer doubtful as to full
collectibility.
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<PAGE> 90
Moxham is unaware of any additional loans required to either be charged-off
or added to the non-performing asset totals disclosed below. Other real estate
owned is recorded at the lower of fair value or carrying cost based upon
appraisals.
The following table sets forth information on non-accrual loans,
restructured loans, other real estate owned and loans past due 90 days or more
at December 31 for each of the years indicated.
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
------ ------ ------ ------ ------
(in thousands, except percentage)
<S> <C> <C> <C> <C> <C>
Non-Accrual Loans Real Estate.................... $ 397 $ 126 $ 88 $ 229 $ 847
Commercial..................................... 410 980 363 748 783
Consumer....................................... 4 26 10 7 45
------ ------ ------ ------ ------
Total Non-Accrual Loans........................ 811 1,132 461 984 1,675
Restructured Loans............................. -- -- -- -- --
Loans Past Due 90 Days or More Real Estate....... 312 451 437 222 --
Commercial..................................... 47 215 535 -- 20
Consumer....................................... 33 5 20 127 22
------ ------ ------ ------ ------
Total Past Due Loans........................... 392 671 992 349 42
Other Real Estate Owned........................ 119 26 58 237 148
Repossessed Assets............................. 24 -- -- -- --
Total Non-Performing Assets and Past Due Loans... $1,346 $1,829 $1,511 $1,570 $1,865
====== ====== ====== ====== ======
Non-Performing Loans as a Percent of Total
Loans.......................................... 0.78% 1.20% 1.08% 1.13% 1.40%
Non-Performing Assets as a Percent of Total
Assets......................................... 0.55% 0.79% 0.69% 0.80% 0.93%
</TABLE>
In May 1993, the issued FAS 114 "Accounting by Creditors for Impairment of
a Loan." FAS 114 is effective for years beginning after December 15, 1994 and
requires Moxham to identify and provide a valuation allowance for impaired
loans. As discussed above, Moxham provides a rating for loans in its portfolio.
Loans classified as doubtful will have the criteria outlined in FAS 114 applied
with a resulting valuation allowance, if any, recorded. Moxham believes,
however, that the adoption of FAS 114 has not significantly affected Moxham's
allowance for loan losses.
Investment Portfolio
The entire investment securities portfolio is designated "available for
sale" for financial accounting purposes. All or part of these "available for
sale" assets may be sold at any time due to considerations concerning liquidity,
interest rate, credit, and other factors as deemed appropriate by management.
These assets are carried on the balance sheet at the fair value in accordance
with FAS 115. Any net unrealized valuation adjustments are included in Moxham's
stockholders' equity and do not impact earnings. FAS 115 does not apply when
calculating regulatory capital requirements. While designation of these assets
as "available for sale" may increase volatility of total capital, management
believes designation of these assets as "available for sale" rather than "held
to maturity" will permit Moxham to react more quickly to changing market
conditions and opportunities, to manage interest rate risk more effectively, and
to manage effectively Moxham's tax position. The flexibility afforded "available
for sale" securities is diminished, however, during periods when the fair value
of the portfolio is below its amortized cost. Moxham does not anticipate any
material restructuring of the securities portfolio in 1996.
Investment securities totaled $60.07 million at December 31, 1995,
representing a 3.1% decrease from the 1994 year-end balance of $62.03 million.
The decrease is a result of management's desire to adjust its interest
sensitivity position and to reduce tax-free investment securities. In 1995,
Moxham sold $16 million taxable securities, realizing a loss of $9,200 and sold
$2.48 million tax-free investment securities, recognizing a gain of $70,900. In
1994, primarily tax-free securities were sold as $2.56 million tax-free
securities were sold and a gain of $155,000 was recognized.
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<PAGE> 91
At December 31, 1995, investment securities having a fair value of $20.21
million were pledged as collateral for public funds and other purposes as
required by law. Moxham and its subsidiaries, collectively, did not hold
securities of any single issuer, excluding U.S. Treasury and U.S. Government
Agencies, that exceeded 10% of stockholders' equity at December 31, 1995.
Maintaining investment quality is a primary objective of Moxham's investment
policy which, subject to certain minor exceptions, prohibits the purchase of any
investment security below a Moody's Investor Service rating of "A". At December
31, 1995, 72% of the portfolio was rated "AAA," 1% was rated "AA," 11% was rated
"A" and 16% was unrated.
Trading activity, which is a separate and distinct activity, includes the
purchase and subsequent sale of securities for the specific purpose of profiting
from short-term changes in interest rates and market values. The volume of
transactions in the trading portfolio has not been significant and not expected
to become significant in the future. No trading securities were held at December
31, 1995 and 1994.
The following table sets forth the amortized cost and fair value of
Moxham's investment portfolio at December 31 for the periods indicated.
<TABLE>
<CAPTION>
1995 1994 1993
-------------------- -------------------- --------------------
AMORTIZED FAIR AMORTIZED FAIR AMORTIZED FAIR
COST VALUE COST VALUE COST VALUE
--------- ------- --------- ------- --------- -------
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
U.S. Treasury.................. $11,519 $11,550 $21,121 $20,372 $24,946 $25,063
U.S. Government Agencies....... 39,631 39,884 29,497 27,779 19,781 19,783
State and Municipal............ 7,345 7,622 12,699 12,505 18,545 19,260
Other Securities............... 1,019 1,019 1,370 1,370 883 883
------- ------- ------- ------- ------- -------
$59,514 $60,075 $64,687 $62,026 $64,155 $64,989
======= ======= ======= ======= ======= =======
</TABLE>
The following table summarizes the amortized cost and weighted average
yields on a fully taxable equivalent basis of Moxham's investment portfolio at
December 31, 1995 by maturities of investments.
<TABLE>
<CAPTION>
APPROXIMATE
0-1 1-5 5-10 10+ AMORTIZED MARKET
YEAR YEARS YEARS YEARS COST VALUE
------- ------- ------ ------ --------- -----------
(in thousands, except yield)
<S> <C> <C> <C> <C> <C> <C>
U.S. Treasury............................. $ 7,024 $ 4,495 $ 0 $ 0 $11,519 $11,550
U.S. Government Agencies.................. 5,504 33,095 1,001 31 39,631 39,884
Obligations of States and Other Political
Subdivisions............................ 295 255 600 6,195 7,345 7,622
Other Securities.......................... 0 35 75 909 1,019 1,019
------- ------- ------ ------ ------- -------
Total Investment Securities........... $12,823 $37,880 $1,676 $7,135 $59,514 $60,075
======= ======= ====== ====== ======= =======
Weighted Average Yield.................... 4.30% 6.31% 6.46% 7.93% 6.08%
</TABLE>
Deposits
Average deposits for 1995 were $214.30 million compared with $199.42
million in 1994, an increase of $14.88 million, or 7.5%. The growth in deposits
occurred primarily in the first quarter of the year when Moxham was aggressively
pricing and marketing deposits to reduce short-term borrowings and reduce its
sensitivity to interest rate increases. The most significant increase was in
average time deposits which increased $11.66 million, or 10.4%. The core deposit
base has remained relatively stable and was approximately 93.5% of average total
deposits in 1995. The remaining 6.5% are certificates of deposit over $100,000.
Moxham does not use any volatile funding sources such as brokered deposits.
Moxham Bank has entered into a definitive agreement whereby NBOC Bank, a
subsidiary of First Commonwealth Financial Corporation headquartered in Indiana,
Pennsylvania, will purchase Moxham's Salem 22 Plaza Office and deposit
liabilities located in Delmont, Pennsylvania. Moxham will retain the loans. At
December 31, 1995, total deposits of the Salem 22 Plaza Office were $7.94
million. The transaction is subject to regulatory approval and is expected to be
completed during June, 1996.
84
<PAGE> 92
The daily average balance of Moxham's deposits and the average rates paid
thereon for the past three calendar years are summarized in the following table.
<TABLE>
<CAPTION>
1995 1994 1993
----------------- ----------------- -----------------
AMOUNT RATE AMOUNT RATE AMOUNT RATE
-------- ----- -------- ----- -------- -----
(in thousands, except rates)
<S> <C> <C> <C> <C> <C> <C>
Non-interest Bearing Demand Deposits.... $ 21,757 0.00% $ 20,961 0.00% $ 18,881 0.00%
Interest-bearing Demand Deposits........ 16,874 3.06% 16,762 2.57% 13,487 2.31%
Savings Deposits........................ 52,321 3.07% 50,008 2.36% 47,341 2.44%
Time Deposits........................... 123,347 5.57% 111,690 4.55% 102,384 4.39%
-------- ----- -------- ----- -------- -----
Total Deposits.......................... $214,299 4.20% $199,421 3.35% $182,093 3.27%
</TABLE>
The following table indicates the maturities and amounts of certificates of
deposit and other time deposits in amounts of $100,000 or more as of December
31, 1995.
<TABLE>
<S> <C>
(in thousands)
Three months or less............................................... $ 3,471
Over three through six months...................................... 2,882
Over six through twelve months..................................... 2,205
Over twelve months................................................. 5,288
-------
Total.............................................................. $13,846
</TABLE>
Capital Resources
Shareholders' equity increased $3,103,500, or 18.3%, to $20.08 million at
December 31, 1995 from $16.97 million at year-end 1994. Net income for 1995 was
$1,474,700 and common and preferred stock dividends paid to shareholders totaled
$690,100. Proceeds from the sale of common stock to Moxham's employee stock
ownership plan amounted to $200,900. A preferred stock conversion reduced
outstanding preferred stock and increased common stock and surplus by $98,400.
FAS 115 increased shareholders' equity by $2,118,000, reflecting the net
unrealized holding gains on securities available for sale net of the tax effect.
This amount will vary in the future based on changes in the fair value of the
securities portfolio. The adoption of FAS 115 in 1994 decreased stockholders'
equity by $1,755,800.
Moxham continues to maintain a strong capital position. At December 31,
1995, Moxham had a total capital to risk-weighted assets ratio of 13.78%, Tier 1
capital to risk-weighted assets ratio of 11.27% and a Tier 1 leverage ratio of
7.53%. These ratios do not include net unrealized holding gains on securities
available for sale from the adoption of FAS 115. All of the capital ratios are
well in excess of the regulatory requirements established by the Federal Reserve
Board. Moxham's banking subsidiaries have been deemed "well capitalized"
according to FDIC's risk-based premium rule. A bank is considered well
capitalized if it has at least 10% total risk-based capital, 6% Tier 1
risk-adjusted capital, and 5% Tier 1 leverage ratio.
Dividends of $.64 per common share were paid in 1995 and 1994. A 10% stock
dividend was paid on December 30, 1994 to shareholders of record December 27,
1994. Fractional shares were paid in cash. Cash dividends per common share,
restated to reflect the stock dividend, were $.58 per share in 1994.
On November 21, 1995, Moxham announced that it reached an agreement in
principle to merge with BT Financial headquartered in Johnstown, Pennsylvania.
After performing due diligence reviews, the Merger Agreement was signed on
January 12, 1996. According to the agreement, each holder of Moxham Common Stock
will receive 1.15 shares of BT Financial Common Stock, each holder of Moxham
Preferred Stock will receive 6.325 shares of BT Financial Common Stock and the
Moxham Banks will be merged into BT Financial's largest affiliate, Johnstown
Bank. The agreement remains subject to Pennsylvania regulatory and shareholder
approval.
The book value of Moxham's stock was $20.69 per share at December 31, 1995,
including an increase of $0.40 per share related to adoption of SFAS 115. The
market value increased significantly since the merger
85
<PAGE> 93
announcement. During October 1995, the trading range was $24.25 to $27.25.
During December 1995, the trading range was $36.25 to $38.50. Moxham Common
Stock is traded on NASDAQ/SCM.
Liquidity and Rate Sensitivity
The liquidity of a banking institution reflects its ability to provide
funds at minimum cost to meet fluctuating deposit withdrawals or loan demand. It
focuses on the availability and price of funds in the market. Liquidity can be
provided by either assets or liabilities. For Moxham, the primary sources of
asset liquidity are money market investments and cash and due from bank
balances. Other sources of asset liquidity are maturing investments and loans.
Liability sources of liquidity include deposit growth and short-term borrowings.
Subsidiaries of Moxham had approximately $28.32 million in unused lines of
credit available under arrangements with its correspondent banks and the Federal
Home Loan Bank. These lines of credit enable Moxham's subsidiaries to purchase
funds for short-term needs at current market rates. At December 31, 1995, money
market investments totaled $8.96 million, while cash and due from banks totaled
$8.93 million, a combined total of 7.4% of assets. Short-term borrowings
averaged $3.5 million in 1995 compared to $4.6 million in 1994. At December 31,
1995, short-term borrowings were $100,000 compared to $12.06 million at year-end
1994.
Liquidity can be further analyzed by utilizing the Consolidated Statement
of Cash Flows contained in the Consolidated Financial Statements. There was an
increase in net cash provided by financing activities of $5.27 million during
the year ended December 31, 1995. The increase was primarily due to a net
increase in deposits of $17.85 million partially offset by a decrease in
short-term borrowings of $11.96 million. The net cash provided by financing
activities was offset by $7.55 million in net cash used in investing activities,
consisting primarily of a $6.10 million increase in loans. Net cash provided by
operating activities was $2.88 million.
Closely related to the concept of liquidity is the management of
interest-rate risk. Interest-rate risk arises when interest rates on assets
change in a different time period or in a different proportion from that of
liabilities. The primary objective of interest-rate sensitivity management is to
structure the balance sheet prudently so that movements of interest rates on
assets and liabilities are highly correlated and produce a reasonable net
interest margin even in periods of volatile interest rates.
One way to analyze interest-rate risk is to calculate the volume difference
between interest-rate-sensitive assets and interest-rate-sensitive liabilities
and then measure the effect that a one-time, parallel yield curve shift of 200
basis points would have on net interest income.
The following table shows the interest rate risk for various time intervals
as of December 31, 1995.
<TABLE>
<CAPTION>
0-30 31-90 91-180 181-365 WITHIN AFTER
DAYS DAYS DAYS DAYS 1 YEAR 1 YEAR TOTAL
------- -------- ------- ------- ------- -------- --------
(in thousands, except ratio)
<S> <C> <C> <C> <C> <C> <C> <C>
Loans.................................. $33,037 $ 8,264 $10,511 $20,942 $72,754 $ 81,645 $154,399
Securities Available for Sale.......... 250 1,500 4,505 6,811 13,066 47,009 60,075
Short-Term Investments................. 8,698 0 0 0 8,698 263 8,961
------- -------- ------- ------- ------- -------- --------
Total Interest Earning Assets.......... 41,985 9,764 15,016 27,753 94,518 128,917 223,435
Non-Interest Earning Assets............ 0 0 0 0 0 17,460 17,460
------- -------- ------- ------- ------- -------- --------
Total Assets........................... $41,985 $ 9,764 $15,016 $27,753 $94,518 $146,377 $240,895
======= ======== ======= ======= ======= ======== ========
Interest Bearing Deposits.............. $31,746 $ 19,817 $17,179 $16,975 $85,717 $108,785 $194,502
Short-Term Borrowings.................. 100 0 0 0 100 0 100
Long-Term Debt......................... 715 0 0 0 715 0 715
------- -------- ------- ------- ------- -------- --------
Total Interest-Bearing Liabilities..... 32,561 19,817 17,179 16,975 86,532 108,785 195,317
Non-Interest Bearing Liabilities and
Equity............................... 0 0 0 0 0 45,578 45,578
------- -------- ------- ------- ------- -------- --------
Total Liabilities and Equity........... $32,561 $ 19,817 $17,179 $16,975 $86,532 $154,363 $240,895
======= ======== ======= ======= ======= ======== ========
Interest Sensitivity Gap............... $ 9,424 $(10,053) $(2,163) $10,778 $ 7,986 $ (7,986)
------- -------- ------- ------- ------- -------- --------
Gap Ratio.............................. 1.29 .49 .87 1.63 1.09 .95
</TABLE>
86
<PAGE> 94
The information on the above table only indicates the potential for
interest rate adjustment on a one-day position at year-end. Loans are assumed to
have contractual repayments and prepayments which factor in the difference
between current market and portfolio rates based on historical experience and
current expectations. It is assumed that substantially all demand deposit
accounts are stable core deposits based on historical experience and are
included in the After 1 Year category. NOW accounts, savings, and money market
accounts are split between the 0-30 Days, 31-90 Days and After 1 Year categories
as an estimate of the elasticity and anticipated pricing behavior of the
accounts.
While this static evaluation of interest rate sensitivity is useful, the
repricing of various categories of assets and liabilities is discretionary and
is subject to competitive and other pressures. The magnitude of the repricing
may vary significantly with changes in market interest rates. As a result of
these gap limitations, Moxham complements this analysis and puts considerable
emphasis on computer simulations that incorporate a range of possible changes in
the balance sheet, product pricing and yield-curve movements to project impact
on earnings.
At December 31, 1995, a 200 basis point immediate rise in interest rates
would increase net interest income by $58,000 over the twelve month period. A
200 basis point immediate decrease in interest rates would reduce net interest
income by $238,000. This is caused by Moxham's money market investments of $8.70
million which are available to offset the reduction in deposits anticipated in
the first quarter of 1996. After the transaction to sell the Salem 22 Office
deposits is consummated. Moxham will be positioned for interest rates to
decline. Moxham anticipates that interest rates will decrease during 1996.
87
<PAGE> 95
MANAGEMENT OF MOXHAM
Election of Moxham Directors
Moxham's articles of incorporation provide that there shall be three
classes of directors as equal in number as possible, each class being elected
for a three year term and only one class being elected each year. The total
number of directors shall be the number from time to time determined by
resolution adopted by a majority vote of the directors then in office or by
resolution of the shareholders at a meeting thereof. There shall not be less
than five directors. There are currently twelve directors, divided into three
classes of four each.
The Moxham Board has an executive committee, an audit committee and a
nominating committee. During the year, 1995 the Board of Directors of Moxham
held 9 meetings, the Board of Garrett Bank held 12 meetings and the Board of
Directors of Moxham Bank also held 12 meetings. The executive committee met 4
times, the audit committee met 3 times, the pension committee met 1 time and the
nominating Committee did not meet. All of the directors attended at least 75% of
the meetings of the meetings of the Board of Directors and the committees of
which they are members. A shareholder wishing to make a nomination to the Moxham
Board may do so in accordance with the provisions of Moxham's bylaws.
Directors
In the following tables are set forth the name, age, principal occupation
and business experience of the Moxham directors, as well as the period during
which he has served as a director of Moxham, the Moxham Banks or any affiliates
thereof. There are no family relationships between any of the persons listed
below.
TERMS EXPIRE IN 1998
<TABLE>
<CAPTION>
DIRECTORSHIP
IN OTHER
DIRECTOR REPORTING
NAME AND PRINCIPAL OCCUPATION AGE SINCE(2)(3) COMPANIES
-------------------------------------------------- ------------ ------------
<S> <C> <C> <C>
Charles T. Evans 80 1966 None
Chairman of the Board
Daniel S. Glosser 71 1978 None
President, M. Glosser & Sons, Inc.
(Metal fabrication and industrial sales)
J. Donald Griffith 81 1950 None
President, Griffith Custer Steel Company
John F. Yerger 61 1992 None
Pathologist
</TABLE>
88
<PAGE> 96
TERMS EXPIRE IN 1997
<TABLE>
<CAPTION>
DIRECTORSHIP
IN OTHER
DIRECTOR REPORTING
NAME AND PRINCIPAL OCCUPATION AGE SINCE(2)(3) COMPANIES
-------------------------------------------------- ------------ ------------
<S> <C> <C> <C>
Richard E. Hayes 42 1990 None
President, Moxham Lumber Company
John C. Rosencrance 57 1982 None
President, Richland Drug Store, Inc.
Nelson G. Wheeler 73 1984 None
President, Wheeler Cadillac-Pontiac, Inc.,
Retired
Thomas A. Young 63 1975 None
Attorney-at-Law
TERMS EXPIRE IN 1996
G. Scott Baton II 59 1985 None
Chairman, Chestnut Ridge Foam, Inc.
John C. Cwik 71 1972 None
Professor of Anesthesiology,
West Virginia University
James E. Scurfield 53 1986 None
Vice President, Scurfield, Inc.
(Coal Operator)
J. William Smith 48 1984 None
President and Chief Executive
Officer of Moxham
</TABLE>
- ---------
(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 the Moxham or one of
the Moxham Banks.
(3) All incumbent directors with terms expiring in 1998 were elected by the
shareholders at the 1995 Annual Meeting for a term of three years. All
incumbent directors with terms expiring in 1997 were elected by the
shareholders at the 1994 Annual Meeting for a term of three years. All
incumbent directors with terms expiring in 1996 were elected by the
shareholders at the 1993 Annual Meeting for a term of three years.
89
<PAGE> 97
Executive Officers
The following persons are considered to be executive officers of Moxham by
virtue of their position with Moxham or the Moxham Banks.
<TABLE>
<CAPTION>
NAME AGE POSITION(1)
- --------------------- --- ---------------------------------------------------------------
<S> <C> <C>
Charles T. Evans 80 Chairman of Moxham and Moxham Bank
J. William Smith 48 President and Chief Executive Officer of Moxham and Moxham Bank
Stanley C. Witt 60 Vice President of Moxham and President and Chief Executive
Officer of Garrett Bank
Richard G. Case 52 Vice President and Treasurer of Moxham and Executive Vice
President and Cashier of Moxham Bank
P. James Hayes 58 Vice President and Secretary of Moxham and Senior Vice
President and Trust Officer of Moxham Bank
Hugh E. Hudnall 47 Vice President of Moxham and Executive Vice President of Moxham
Bank
</TABLE>
- ---------
(1) Each of the above persons, has held an executive position with Moxham or one
of the Moxham Banks for the past five years.
Compliance with Section 16(a) of the Exchange Act
Section 16(a) of the Exchange Act requires Moxham's officers, directors and
persons owning more than 10% of Moxham's Common or Preferred Stock to file
reports of ownership and changes in directors and such shareholders are required
by regulation to furnish Moxham with copies of all Section 16(a) forms they
file. Except as stated above in "Principal Holders of Stock," Moxham knows of no
person who owned 10% or more of its Common Stock.
Based upon a review of copies of the forms furnished to Moxham, Moxham
believes that during 1995 all section 16(a) filing requirements were complied
with in a timely manner.
Executive Compensation
Directors are paid $450.00 for each Moxham Board meeting, $150.00 for each
meeting of the executive committee and $100.00 for each other committee meeting
they attend. A total of $111,700 was paid as directors fees in 1995.
90
<PAGE> 98
The following table sets forth the cash compensation paid or to be paid for
services rendered during 1995 to Mr. Smith, the Chief Executive Officer. No
other officer's compensation exceeded $100,000.
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION (1)(2)
<TABLE>
<CAPTION>
ALL OTHER
ANNUAL
COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS (3)
- ---------------------------- ---- -------- ------- ---------------
<S> <C> <C> <C> <C>
J. William Smith 1995 $135,200 $ 0 --
Chief Executive Officer (4) 1994 130,000 30,800
1993 120,000 34,973 --
</TABLE>
- ---------
(1) Information with respect to group life, health, hospitalization and medical
reimbursement plans is not included as such plans do not discriminate in
favor of officers or Directors and are available generally to all salaried
employees.
(2) Information with respect to the Employees Retirement Plan is not included as
it is a fixed benefit plan available to all salaried employees on the same
terms and conditions.
(3) Moxham has no restricted stock, stock option or other long-term incentive
plans.
(4) Does not include amounts attributable to miscellaneous benefits. In the
opinion of management of Moxham, the cost of providing such benefits during
1995 did not exceed the lesser of $50,000 or 10% of Mr. Smith's total salary
and bonus.
Certain Relationships and Related Transactions
Certain directors, nominees and executive officers and/or their associates
were customers of, and had transactions with, Moxham or the Moxham Banks and
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 a
normal risk of collectability or present other unfavorable features. Total loans
outstanding from the Moxham Banks at December 31, 1995 and 1994 to directors and
officers and their affiliates were $2,975,000 and $2,049,300 respectively.
Beneficial Ownership of Moxham Securities
As of the close of business on April , 1996, there were outstanding
903,852 shares of Moxham Common Stock. There is set forth below information with
respect to the beneficial ownership as of April ,
91
<PAGE> 99
1996, of certain persons, including directors, of shares of the Moxham Common
Stock and the Series A $8.00 Cumulative Convertible Non-Voting Preferred Stock.
<TABLE>
<CAPTION>
AMOUNT AND AMOUNT AND
NATURE OF COMMON STOCK NATURE OF PREFERRED STOCK
COMMON STOCK PERCENT OF PREFERRED STOCK PERCENT OF
NAME OF BENEFICIAL OWNER OWNERSHIP(1)(2) CLASS OWNERSHIP CLASS
- ---------------------------- --------------- ------------ --------------- ---------------
<S> <C> <C> <C> <C>
G. Scott Baton II 12,366 1.37%(3) 1,000 7.14%(3)
New Florence, Pennsylvania
John C. Cwik 24,800 2.74% -- --
Johnstown, Pennsylvania
Charles T. Evans 60,857 6.73% -- --
Johnstown, Pennsylvania
Daniel S. Glosser 11,378 1.26% -- --
Johnstown, Pennsylvania
J. Donald Griffith 22,783 2.50% -- --
Johnstown, Pennsylvania
Richard E. Hayes 660 * -- --
Windber, Pennsylvania
John C. Rosencrance 3,304 * -- --
Johnstown, Pennsylvania
James E. Scurfield 2,598 * -- --
Berlin, Pennsylvania
J. William Smith 26,944 2.95% -- --
Hollsopple, Pennsylvania
Nelson G. Wheeler 2,750 * -- --
Johnstown, Pennsylvania
John F. Yerger 2,380 * -- --
Johnstown, Pennsylvania
Thomas A. Young 4,832 * -- --
Johnstown, Pennsylvania
Officers and Directors 196,488 21.52% 1,000 7.14%
as a Group (4)
</TABLE>
- ---------
Less than 1%.
(1) 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 the number of shares which may be acquired by an owner of Preferred
Stock upon conversion thereof at the ratio of 5.5 shares of Common Stock for
each share of Preferred Stock.
(3) Owned by a trust of which Mr. Baton is a trustee.
(4) The group consists of 16 persons, being four executive officers, the Moxham
principal owners as of the April , 1996, and the Moxham Board of
Directors.
92
<PAGE> 100
Except as set forth in the following table, no person is known to Moxham's
management to own of record or beneficially 5% or more of the outstanding Common
Stock as of April , 1996.
<TABLE>
<CAPTION>
COMMON STOCK
NAME AND ADDRESS ------------------
BENEFICIAL OWNER AMOUNT PERCENT
- ----------------------------- ------ -------
<S> <C> <C>
Charles T. Evans 60,857 6.73%
Johnstown, Pennsylvania 15904
Charlotte Bosler Ellis 51,744 5.72%
Johnstown, Pennsylvania 15902
</TABLE>
LEGAL MATTERS
The validity of the shares of BT Financial Common Stock to be issued in
connection with the Merger and certain other legal matters regarding BT
Financial will be passed upon by Kirkpatrick & Lockhart LLP, Pittsburgh,
Pennsylvania. Certain legal matters regarding Moxham will be passed upon by
Plowman, Spiegel and Lewis, P.C., Pittsburgh, Pennsylvania.
EXPERTS
The consolidated financial statements of BT Financial as of December 31,
1995, and December 31, 1994, and for the three years ended December 31, 1995,
incorporated by reference in this Joint Proxy Statement/ Prospectus, have been
audited by Coopers & Lybrand LLP, independent certified public accountants, as
stated in their report appearing therein and are incorporated herein by
reference in reliance upon such report and upon the authority of such firm as
experts in auditing and accounting.
The financial statements of Moxham as of December 31, 1995, and for the
three years ended December 31, 1995, included in this Joint Proxy
Statement/Prospectus have been included herein in reliance upon the report of
Barnes, Saly & Company, independent certified public accountants, appearing
elsewhere herein, and upon the authority of said firm as experts in accounting
and auditing.
The financial statements of Armstrong as of December 31, 1995, and for the
year ended December 31, 1995, included in this Joint Proxy Statement/Prospectus
have been included herein in reliance upon the report of S.R. Snodgrass,
independent certified public accountants, appearing elsewhere herein, and upon
the authority of said firm as experts in accounting and auditing.
BT FINANCIAL 1997 ANNUAL MEETING
The next Annual Meeting of BT Financial shareholders is scheduled to be
held on May 13, 1997. In order to be included in BT Financial's Proxy Statement
and form of Proxy relating to the 1997 Annual Meeting, any proposal that a
shareholder intends to present for consideration at such meeting must be
received by the Secretary of BT Financial at the principal executive offices of
BT Financial no later than December 9, 1996.
93
<PAGE> 101
INDEX TO ARMSTRONG AND MOXHAM FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
CONTENTS PAGE
- ------------------------------------------------------------------------------------- ----
<S> <C>
MOXHAM
Report of Independent Auditors.................................................. F-2
Balance Sheet at December 31, 1995 and 1994 (audited)........................... F-3
Statements of Income for the years ended December 31, 1995, 1994 and 1993
(audited)...................................................................... F-4
Statement of Stockholders' Equity for the years ended December 31, 1995, 1994
and 1993 (audited)............................................................. F-5
Statements of Cash Flows for the years ended December 31, 1995, 1994 and 1993
(audited)...................................................................... F-6
Notes to Consolidated Financial Statements...................................... F-8
ARMSTRONG
Report of Independent Auditors.................................................. F-24
Balance Sheet at December 31, 1995 (audited).................................... F-25
Statements of Income for the years ended December 31, 1995 (audited) and 1994
(unaudited).................................................................... F-26
Statements of Changes in Stockholders' Equity for the years ended December 31,
1995 (audited) and 1994 (unaudited)............................................ F-27
Statements of Cash Flows for the years ended December 31, 1995 (audited) and
1994 (unaudited)............................................................... F-28
Notes to Financial Statements................................................... F-29
</TABLE>
F-1
<PAGE> 102
INDEPENDENT AUDITOR'S REPORT
To The Board of Directors and Stockholders
Moxham Bank Corporation
Johnstown, Pennsylvania
We have audited the accompanying consolidated balance sheets of Moxham Bank
Corporation and subsidiaries as of December 31, 1995 and 1994, and the related
consolidated statements of income, changes in stockholders' equity, and cash
flows for each of the three years in the period ended December 31, 1995. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
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 consolidated financial position of
the Moxham Bank Corporation and subsidiaries as of December 31, 1995 and 1994,
and the consolidated results of their operations and their cash flows for each
of the three years in the period ended December 31, 1995, in conformity with
generally accepted accounting principles.
As discussed in Notes 1, 3 and 10 to the consolidated financial statements,
in 1994 the Company changed its method of accounting for investment securities
and in 1993 changed its method of accounting for income taxes.
Barnes, Saly & Company
February 15, 1996
F-2
<PAGE> 103
MOXHAM BANK CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
ASSETS
Cash and due from banks..................................... $ 8,934,600 $ 8,339,500
Interest-bearing deposits with banks........................ 296,600 1,460,400
Federal funds sold.......................................... 8,665,000 -0-
Investment securities available for sale, at market:
(Note 3)
U.S. Treasury.......................................... 11,549,700 20,372,300
U.S. Government agencies............................... 39,884,300 27,779,500
Obligations of states and political subdivisions....... 7,622,000 12,504,800
Other securities....................................... 1,018,700 1,369,800
------------ ------------
Total investment securities available for sale....... $ 60,074,700 $ 62,026,400
------------ ------------
Loans (Note 4).............................................. $154,398,800 $150,197,800
Less allowance for loan losses (Note 5)..................... 1,962,400 1,826,300
------------ ------------
Net loans............................................ $152,436,400 $148,371,500
------------ ------------
Premises and equipment, net (Note 6)........................ $ 6,051,800 $ 5,908,800
Accrued income receivable and other assets.................. 4,436,000 5,253,600
------------ ------------
TOTAL ASSETS......................................... $240,895,100 $231,360,200
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Deposits: (Note 7)
Non-interest bearing................................... $ 23,103,500 $ 22,262,900
Interest bearing....................................... 194,501,800 177,497,100
------------ ------------
Total deposits....................................... $217,605,300 $199,760,000
Short-term borrowings (Note 8).............................. 100,000 12,060,000
Subordinated capital note (Note 9).......................... 715,000 845,000
Other liabilities........................................... 2,396,800 1,720,700
------------ ------------
TOTAL LIABILITIES.................................... $220,817,100 $214,385,700
------------ ------------
Commitments and contingent liabilities (Notes 12 and 13)
STOCKHOLDERS' EQUITY:
Preferred stock, no par value, 250,000 shares authorized,
14,000 and 15,000 shares issued and outstanding at
December 31, 1995 and 1994 (Note 14)...................... $ 1,377,700 $ 1,476,100
Common stock, $2 par value, 2,880,000 shares authorized,
903,852 and 888,781 shares issued and outstanding at
December 31, 1995 and 1994................................ 1,807,700 1,777,600
Surplus..................................................... 3,750,600 3,481,500
Retained earnings (Notes 9 and 17).......................... 12,779,800 11,995,100
Unrealized gain (loss) on securities available for sale,
net....................................................... 362,200 (1,755,800)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY........................... $ 20,078,000 $ 16,974,500
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY........... $240,895,100 $231,360,200
============ ============
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE> 104
MOXHAM BANK CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
INTEREST INCOME:
Interest and fees on loans................................. $14,095,600 $12,372,000 $11,534,800
Interest on investment securities and investment securities
available for sale:
U.S Treasury........................................... 871,300 1,075,600 898,900
U.S. Government agencies............................... 2,240,300 1,405,100 966,500
Obligations of state and political subdivisions........ 593,000 829,300 993,800
Other.................................................. 66,400 61,100 53,900
Interest on assets held in trading account................. 300 200 -0-
Interest on Federal funds sold............................. 138,000 27,000 78,500
Interest on deposits with banks............................ 53,500 83,700 293,100
----------- ----------- -----------
TOTAL INTEREST INCOME............................... $18,058,400 $15,854,000 $14,819,500
----------- ----------- -----------
INTEREST EXPENSE:
Interest on deposits....................................... $ 8,994,600 $ 6,688,600 $ 5,956,400
Interest on borrowings..................................... 278,200 292,100 95,900
----------- ----------- -----------
TOTAL INTEREST EXPENSE.............................. $ 9,272,800 $ 6,980,700 $ 6,052,300
----------- ----------- -----------
Net interest income.................................... $ 8,785,600 $ 8,873,300 $ 8,767,200
Provision for loan losses.................................. 307,000 263,900 192,900
----------- ----------- -----------
Net interest income after provision for loan losses.... $ 8,478,600 $ 8,609,400 $ 8,574,300
----------- ----------- -----------
OTHER INCOME:
Trust department income.................................... $ 563,900 $ 502,300 $ 450,700
Service fees............................................... 674,100 611,200 578,500
Other income............................................... 163,100 165,200 144,000
Security gains............................................. 61,700 154,300 137,500
----------- ----------- -----------
TOTAL OTHER INCOME.................................. $ 1,462,800 $ 1,433,000 $ 1,310,700
----------- ----------- -----------
OTHER EXPENSES:
Salaries and wages......................................... $ 3,402,300 $ 3,195,300 $ 3,047,400
Pension and other employee benefits........................ 1,189,800 1,137,800 1,075,400
Net occupancy and equipment expense........................ 1,223,100 1,159,300 1,088,900
Other operating expenses................................... 2,490,200 2,585,900 2,510,300
----------- ----------- -----------
TOTAL OTHER EXPENSES................................ $ 8,305,400 $ 8,078,300 $ 7,722,000
----------- ----------- -----------
INCOME BEFORE TAXES AND CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE....................................... $ 1,636,000 $ 1,964,100 $ 2,163,000
Provision for income taxes (Note 10)......................... 161,300 210,900 234,700
----------- ----------- -----------
INCOME BEFORE CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE....................................... $ 1,474,700 $ 1,753,200 $ 1,928,300
Cumulative effect of change in accounting principle--
adoption of SFAS No. 109 (Note 10)......................... $ -0- $ -0- $ 26,900
----------- ----------- -----------
NET INCOME................................................... $ 1,474,700 $ 1,753,200 $ 1,901,400
=========== =========== ===========
Primary:
Net income per share....................................... $ 1.52 $ 1.84 $ 2.03
=========== =========== ===========
Weighted average number of shares outstanding.............. 896,592 885,459 875,870
=========== =========== ===========
Fully Diluted:
Net income per share....................................... $ 1.51 $ 1.81 $ 1.98
=========== =========== ===========
Weighted average number of shares outstanding.............. 976,342 967,959 958,370
=========== =========== ===========
Dividends paid per share..................................... $ 0.64 $ 0.58 $ 0.56
=========== =========== ===========
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE> 105
MOXHAM BANK CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
NET
UNREALIZED
HOLDINGS
PREFERRED COMMON RETAINED GAINS
STOCK STOCK SURPLUS EARNINGS (LOSSES) TOTAL
----- ----- ------- -------- ------ -----
<S> <C> <C> <C> <C> <C> <C>
BALANCES, DECEMBER 31, 1992....... $1,476,100 $ 790,000 $2,027,100 $11,650,500 $ -0- $15,943,700
Net income 1993................... -- -- -- 1,901,400 -- 1,901,400
Effect of two-for-one stock
split........................... -- 793,000 (793,000) -- --
Common stock issued:
Dividend reinvestment plan and
ESOP.......................... -- 17,600 182,400 -- -- 200,000
Cash dividends declared:
Preferred stock ($8.00 per
share)........................ -- -- -- (120,000) -- (120,000)
Common stock ($.56 per share)... -- -- -- (494,100) -- (494,100)
---------- ---------- ---------- ----------- ----------- -----------
BALANCES, DECEMBER 31, 1993....... $1,476,100 $1,600,600 $1,416,500 $12,937,800 $ -0- $17,431,000
Net income 1994................... -- -- -- 1,753,200 -- 1,753,200
Common stock issued:
Dividend reinvestment plan and
ESOP.......................... -- 15,600 168,800 -- -- 184,400
Cash dividends declared:
Preferred stock ($8.00 pre
share)........................ -- -- -- (120,000) -- (120,000)
Common stock ($.58 per share)... -- -- -- (518,300) (518,300)
Effect of 10% stock dividend...... -- 161,400 1,896,200 (2,057,600) -- --
Change in unrealized gain (loss)
on securities
available-for-sale, net......... -- -- -- -- (1,755,800) (1,755,800)
---------- ---------- ---------- ----------- ----------- -----------
BALANCES, DECEMBER 31, 1994....... $1,476,100 $1,777,600 $3,481,500 $11,995,100 $(1,755,800) $16,974,500
Net income 1995................... -- -- -- 1,474,700 -- 1,474,700
Common stock issued:
Dividend reinvestment plan and
ESOP.......................... -- 19,100 181,700 -- -- 200,800
Conversion of preferred stock... (98,400) 11,000 87,400 -- -- --
Cash dividends declared:
Preferred stock ($8.00 pre
share)........................ -- -- -- (116,000) -- (116,000)
Common stock ($.64 per share)... -- -- -- (574,000) -- (574,000)
Change in unrealized gain (loss)
on securities
available-for-sale, net......... -- -- -- -- 2,118,000 2,118,000
---------- ---------- ---------- ----------- ----------- -----------
BALANCES, DECEMBER 31, 1995....... $1,377,700 $1,807,700 $3,750,600 $12,779,800 $ 362,200 $20,078,000
========== ========== ========== =========== =========== ===========
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE> 106
MOXHAM BANK CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income................................. $ 1,474,700 $ 1,753,200 $ 1,901,400
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for depreciation and
amortization.......................... 626,800 569,400 517,900
Provision for possible loan losses....... 307,000 263,900 192,900
Amortization of investment premium, net
of accretion of investment discount... 64,800 86,400 289,400
Provision for deferred income taxes
(credit).............................. (196,000) (292,300) (37,100)
Investment securities (gains)............ (61,700) (154,300) (137,500)
Equity in loss of limited partnership.... 171,600 99,100 118,000
(Gain) loss on sale/disposal of assets... 26,100 (4,600) 36,600
(Increase) decrease in accrued income
receivable and other assets........... 3,800 (11,700) (132,600)
Increase (decrease) in accrued interest
payable and other liabilities......... 461,400 55,100 149,400
------------ ------------ ------------
Net cash provided by operating
activities....................... $ 2,878,500 $ 2,364,200 $ 2,898,400
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturities of investment
securities and investment securities
available for sale....................... $ 10,354,500 $ 16,123,100 $ 25,277,500
Proceeds from sales of investment
securities and investment securities
available for sale....................... 18,551,700 8,702,400 3,073,300
Purchase of investment securities and
investment securities available for
sale..................................... (23,728,400) (25,274,200) (41,693,900)
Net (increase) decrease in interest bearing
deposits with banks...................... 1,156,000 558,000 10,775,500
Net (increase) decrease in federal funds
sold..................................... (8,665,000) 2,945,000 (2,945,000)
Proceeds from sale of loans................ 1,264,500 921,000 415,200
Net (increase) decrease in loans........... (6,102,900) (16,364,000) (17,397,100)
Investment in limited partnership.......... (144,400) (162,600) (340,400)
Purchase of premises and equipment......... (582,200) (209,100) (1,576,300)
Proceeds from sale of assets............... 346,700 187,100 201,200
------------ ------------ ------------
Net cash provided by (used in)
investing activities............. $ (7,549,500) $(12,573,300) $(24,210,000)
------------ ------------ ------------
</TABLE>
(Continued)
F-6
<PAGE> 107
MOXHAM BANK CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in deposits.......... $ 17,845,300 $ 70,500 $22,818,400
Net increase (decrease) in short-term
borrowings................................. (11,960,000) 11,960,000 (1,100,000)
Payments on subordinated capital note........ (130,000) (130,000) (130,000)
Proceeds from sale of common stock........... 200,800 184,400 200,000
Preferred stock cash dividends paid.......... (116,000) (120,000) (120,000)
Common stock cash dividends paid............. (574,000) (518,300) (494,100)
------------ ----------- -----------
Net cash provided by (used in)
financing activities............... $ 5,266,100 $11,446,600 $21,174,300
------------ ----------- -----------
INCREASE (DECREASE) IN CASH AND DUE FROM BANKS.... $ 595,100 $ 1,237,500 $ (137,300)
Cash and due from banks at beginning of year...... 8,339,500 7,102,000 7,239,300
------------ ----------- -----------
CASH AND DUE FROM BANKS AT END OF YEAR............ $ 8,934,600 $ 8,339,500 $ 7,102,000
=========== ========== ==========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest paid on deposits and other borrowings.... $ 8,863,800 $ 6,870,000 $ 5,998,700
Federal income taxes paid (net of refunds)........ 323,700 343,800 474,900
SUPPLEMENTAL SCHEDULE OF NON CASH INVESTING AND
FINANCING ACTIVITIES:
Other real estate acquired in settlement of
loans........................................... $ 465,300 $ 150,900 $ 58,700
Net unrealized gains (losses) on securities
available-for-sale (net of deferred taxes)...... 2,118,000 (1,755,800) -0-
Conversion of preferred stock to common stock..... 98,400 -0- -0-
</TABLE>
See notes to consolidated financial statements.
F-7
<PAGE> 108
MOXHAM BANK CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of the significant accounting and financial
reporting policies of Moxham Bank Corporation (the Company) and its subsidiaries
whose operations relate primarily to commercial banking activities which
represent one industry segment:
a. Basis of presentation:
The consolidated financial statements of the Company include the accounts
of the Company and its wholly-owned subsidiaries, Moxham National Bank (Moxham),
the First National Bank of Garrett (Garrett), and Moxham Community Development
Corporation (MCDC). All significant intercompany accounts and transactions have
been eliminated in preparing the consolidated financial statements.
b. Cash and cash equivalents:
For purposes of reporting cash flows, cash and due from banks includes cash
on hand and amounts due from banks (including cash items in process of
clearing). Cash flows from demand deposits, NOW accounts, saving accounts,
Federal funds purchased and sold, borrowings from Federal Home Loan Bank,
Federal Reserve Bank and demand note from U.S. Treasury are reported net since
their original maturities are less than three months. The Company adopted the
provisions of Financial Accounting Standards Board Statement No. 104 "Statement
of Cash Flows--Net Reporting of Certain Cash Receipts and Cash Payments and
Clarification of Cash Flows from Hedging Transactions" (FASB 104). FASB 104
allows certain banks and savings institutions to report net cash flows for
deposits placed with other financial institutions, time deposits and lending
activities.
The Company maintains amounts due from banks which, at times, may exceed
federally insured limits. The Company has not experienced any losses in such
accounts.
c. Trust assets:
Assets of the Trust Department, other than trust cash on deposit at the
bank, are not included in these financial statements because they are not assets
of the Company. All trust fees are recorded on the cash basis which approximates
the accrual basis for such income.
d. Investment securities:
Investment securities consist of debt and equity securities. Debt
securities consist primarily of obligations of the U.S. government, state
governments and domestic corporations. Equity securities consists primarily of
Federal Home Loan Bank and Federal Reserve Bank stock.
The Company adopted the provisions of Statement of Financial Accounting
Standards ("SFAS") No. 115, Accounting for Certain Investments in Debt and
Equity Securities, as of January 1, 1994. SFAS No. 115 requires that management
determine the appropriate classification of investment securities at the date of
adoption, and thereafter at the date individual investment securities are
acquired. The Company has elected to classify their entire investment portfolio
as available-for-sale securities.
Securities classified as available for sale are those debt securities that
the Bank intends to hold for an indefinite period of time, but not necessarily
to maturity. Any decision to sell a security classified as available for sale
would be based on various factors, including significant movements in interest
rates, changes in the maturity mix of the Bank's assets and liabilities,
liquidity needs, regulatory capital considerations, and other similar factors.
Securities available for sale are carried at fair value. Unrealized gains or
losses are reported as increases or decreases in stockholder's equity, net of
the related deferred tax effect. Realized gains or losses, determined on the
basis of the cost of specific securities sold, are included in earnings.
Prior to the adoption of SFAS No. 115, the Company stated its investment
securities at amortized cost. Under both the newly adopted accounting standard
and the Company's former accounting practices,
F-8
<PAGE> 109
premiums and discounts on investments in debt securities are amortized over
their contractual lives computed by both the interest and straight line methods.
Interest and dividends on investment securities is recognized in income as
accrued. Realized gains and losses, including losses from declines in value of
specific securities determined by management to be other-than-temporary, are
included in income. Realized gains and losses are determined on the basis of the
specific securities sold.
Note 3 to the financial statements provides further information about the
effect of adopting SFAS No. 115.
e. Allowance for possible loan losses:
The allowance for possible loan losses is maintained at a level considered
adequate by management to provide for losses that can be reasonably anticipated.
Amounts are added to the allowance for loan losses and charges against current
income based on such factors as historical loan loss experience, loan
concentrations, overall portfolio quality, and management's evaluation of
potential losses in the loan portfolio combined with prevailing and anticipated
economic conditions. While management uses the best information available to
make its evaluation, future adjustments to the allowance may be necessary if
there are significant changes in economic conditions. In addition, regulatory
agencies, as an integral part of their examination process, periodically review
the Company's allowance for loan losses, and may require the Company to make
additions to the allowance based on their judgment about information available
to them at the time of their examinations. A charge is made to the allowance for
loan losses when a loan or part thereof is considered by management to be
uncollectible. Recoveries on previous charge-offs are added back to the
allowance.
Effective January 1, 1995, the Company adopted SFAS No. 114, "Accounting by
Creditors for Impairment of a Loan" which was subsequently amended by SFAS No.
118, "Accounting by Creditors for Impairment of a Loan--Income Recognition and
Disclosures". SFAS No. 114, as amended, addresses the treatment and disclosure
of certain loans where it is probable that the creditor will be unable to
collect all amounts due according to the contractual terms of the loan
agreement. SFAS No. 114, as amended, requires that the impairment of loans that
have been separately identified for evaluation is to be measured based on the
present value of expected future cash flows or, alternatively, the observable
market price of the loans or the fair value of the collateral. However, for
those loans that are collateral dependent (that is, if repayment of those loans
is expected to be provided solely by the underlying collateral) and for which
management has determined foreclosure is probable, the measure of impairment of
those loans is to be based on the fair value of the collateral. Statement 114,
as amended, also requires certain disclosures about investments in impaired
loans and the allowance for credit losses and interest income recognized on
those loans. The adoption of SFAS 114 resulted in one loan totaling $97,400
being specifically identified as impaired and a corresponding allocation reserve
of $50,000 was established.
f. Premises and Equipment:
Premises and equipment are stated at cost less accumulated depreciation and
amortization. Depreciation and amortization of premises, furniture and equipment
are computed by both straight-line and accelerated methods for financial
reporting and by use of the accelerated cost recovery system for tax reporting
purposes. Listed below are the estimated useful lives used for financial
reporting:
<TABLE>
<CAPTION>
YEARS
-----
<S> <C>
Buildings and improvements................................... 5-40
Furniture and equipment...................................... 5-25
Vehicles..................................................... 3
</TABLE>
Maintenance repairs and minor renewals are charged to income as incurred.
Expenditures for betterments and major renewals are capitalized and depreciated
over their estimated useful lives.
g. Interest income:
Interest on installment loans is recorded as income in amounts that will
provide an approximate level yield over the terms of the loans. Accrual of
interest on other loans is based generally on the daily amount of
F-9
<PAGE> 110
principal outstanding. Accrual of interest is discontinued on a loan when
management believes, after considering collection efforts and other factors,
that the borrower's financial condition is such that collection of interest is
doubtful. A commercial loan is placed automatically on non-accrual status when
principal or interest becomes 90 days past due and is not expected to be brought
current within 30 days. All other loans are placed on non-accrual status when
principal or interest becomes 90 days past due, unless the loan is both well
secured and full payment of interest and principal is expected. A non-accrual
loan may be restored to accrual status when its financial status has been
significantly improved and after becoming current and remaining current for
three consecutive months.
h. Income taxes:
The provision for income taxes relates to items of revenue and expenses
recognized for financial accounting purposes during each of the years. The
actual current tax liability may be more or less than the charge against
earnings due to the effect of timing differences between financial and tax
accounting resulting in deferred income taxes. The primary differences result
from depreciation, non-qualified deferred compensation plan, loan loss
provisions and deferred loan fees. In February 1992, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards ("SFAS") No.
109, "Accounting for Income Taxes". The statement provides that the effect of
its adoption may be recorded entirely in the year of adoption or retroactively
by restating one or more prior years. The Company adopted SFAS No. 109 as of
January 1, 1993 and has recorded the effect of its adoption entirely in 1993.
Under the assets and liability method provided for by SFAS No. 109, deferred tax
assets and liabilities are recognized for the tax consequences of temporary
differences by applying enacted statutory tax rates applicable to future years
to differences between the financial statement carrying amounts and the tax
bases of existing assets and liabilities. Deferred tax assets are reduced by a
valuation allowance when, in the opinion of management, it is more likely than
not that some portion or all of the deferred tax assets will not be realized.
(See further Note 10.) The Corporation and its subsidiaries file a consolidated
federal income tax return.
i. Shareholders' equity:
On December 30, 1994, a 10 percent stock dividend was distributed to
shareholders of record on December 27, 1994. Fractional shares were paid in
cash. As a result of the stock dividend, 80,692 additional shares were issued
and $2,057,600 was transferred from retained earnings to common stock and
surplus ($25.50 per share).
On December 8, 1992, the Board of Directors authorized a two-for-one stock
split of the Company's common stock, effected in the form of a stock dividend.
The additional shares were distributed in February 1993 to shareholders of
record on February 1, 1993. As a result of the split, 396,492 additional shares
were issued and $793,000 was transferred from surplus to common stock. Earnings
and dividends per share included in the consolidated financial statements have
been adjusted to reflect the stock split and stock dividend.
j. Per share data:
Net income per share amounts are computed by dividing net income, after
deducting preferred stock dividends, by the weighted average number of shares of
common stock outstanding during each year and is adjusted for the 10 percent
stock dividend and two-for-one stock split. Cash dividends per share are based
on the number of shares outstanding at the respective declaration date. Fully
diluted earnings per share amounts are calculated assuming that the Series A
$8.00 cumulative convertible non-voting preferred stock was converted at the
beginning of the year into 5.5 shares of the Company's common stock and that no
preferred dividends were paid.
k. Loan fees:
Certain loan and commitment fees and certain direct loan origination costs
are being deferred and the net amount amortized into interest and fees on loans.
Generally these fees are amortized over the contractual life of the related
loan. Fee amortization is determined by the straight-line method which
approximates the level
F-10
<PAGE> 111
yield method. The following fees and costs are being deferred and amortized over
the life of the loan: Dealer retention advances, commercial loan fees and costs,
and home equity third-party origination costs.
NOTE 2: CASH AND DUE FROM BANKS
Cash and due from banks includes $100,000 at December 31, 1995 and 1994,
representing balances required to be maintained with Federal Reserve Banks.
NOTE 3: INVESTMENT SECURITIES AND INVESTMENT SECURITIES AVAILABLE FOR SALE
Carrying amounts and fair values of investment securities available for
sale are summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1995
---------------------------------------------------------
GROSS GROSS APPROXIMATE
AMORTIZED UNREALIZED UNREALIZED MARKET
COST GAINS LOSSES VALUE
---- ----- ------ -----
<S> <C> <C> <C> <C>
U.S. Treasury securities.............. $11,519,000 $ 73,300 $ 42,600 $11,549,700
U.S. Government agencies.............. 39,631,100 401,200 148,000 39,884,300
Obligations of states and political
subdivisions........................ 7,344,700 282,100 4,800 7,622,000
Other securities...................... 1,018,700 -0 - -0 - 1,018,700
----------- -------- --------- -----------
$59,513,500 $756,600 $ 195,400 $60,074,700
=========== ======== ========= ===========
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1994
---------------------------------------------------------
GROSS GROSS APPROXIMATE
AMORTIZED UNREALIZED UNREALIZED MARKET
COST GAINS LOSSES VALUE
---- ----- ------ -----
<S> <C> <C> <C> <C>
U.S. Treasury securities.............. $21,121,400 $ -0 - $ 749,100 $20,372,300
U.S. Government agencies.............. 29,496,700 1,400 1,718,600 27,779,500
Obligations of states and political
subdivisions........................ 12,698,800 69,900 263,900 12,504,800
Other securities...................... 1,369,800 -0 - -0 - 1,369,800
----------- -------- ---------- -----------
$64,686,700 $ 71,300 $2,731,600 $62,026,400
=========== ======== ========== ===========
</TABLE>
The amortized cost and fair value of investment securities available for
sale as of December 31, 1995 by contractual maturity are shown below. Expected
maturities may differ from contractual maturities because borrowers may have the
right to call or prepay obligations with or without call or prepayment
penalties.
<TABLE>
<CAPTION>
APPROXIMATE
AMORTIZED MARKET
COST VALUE
----------- -----------
<S> <C> <C>
Due in one year or less.................................. $12,823,400 $12,751,100
Due after one year through 5 years....................... 37,879,200 38,276,200
Due after 5 years through 10 years....................... 1,676,500 1,701,400
Due after 10 years....................................... 7,134,400 7,346,000
----------- -----------
$59,513,500 $60,074,700
=========== ===========
</TABLE>
Gross realized gains and losses for the years ended December 31, 1995, 1994 and
1993 are as follows:
<TABLE>
<CAPTION>
INVESTMENT SECURITIES 1994 1993 1992
--------------------------------------------------- ---- ---- ----
<S> <C> <C> <C>
Realized gains..................................... $144,900 $193,600 $137,500
Realized losses.................................... 83,200 39,300 -0-
</TABLE>
The other securities category included nonmarketable equity securities,
in the amount of $908,800 and $1,299,900 at December 31, 1995 and 1994
respectively, and consists primarily of Federal Home Loan Bank stock and Federal
Reserve Bank stock.
F-11
<PAGE> 112
Investment securities with a carrying amount of $20,214,500 at December 31,
1995 and $28,430,800 at December 31, 1994 were pledged to secure public and
trust deposits and for other purposes as required or permitted by law.
As discussed in Note 1, the Company adopted SFAS No. 115 as of January 1,
1994. In accordance with SFAS No. 115, the 1993 comparative financial statements
have not been restated for the change in accounting principle. The January 1,
1994 balance of stockholders' equity was increased by $550,000, net of the
$283,300 related deferred tax effect, to recognize the net unrealized holding
gain on securities available for sale at that date.
NOTE 4: LOANS RECEIVABLE
The composition of the Company's loan portfolio at December 31, 1995 and
1994 was as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------
1995 1994
---- ----
<S> <C> <C>
Commercial............................................. $ 57,548,700 $ 51,592,500
Real estate--construction.............................. 1,300,800 3,823,200
Real estate--mortgage.................................. 51,140,000 50,361,600
Consumer............................................... 43,249,300 44,119,600
Other.................................................. 1,160,000 300,900
------------ ------------
$154,398,800 $150,197,800
============ ============
</TABLE>
Included in consumer loans are education loans held-for-sale that totaled
$2,412,500 and $2,404,600 at December 31, 1995 and 1994, respectively.
Loans on which the accrual of interest has been discontinued amounted to
$811,000 and $1,131,700 at December 31, 1995 and 1994, respectively. The
following reflects the effect of non-accrual loans on both interest income and
net interest income for December 31, 1995 and 1994:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Interest income due in accordance with original terms.......... $69,100 $100,400
Interest income recorded and reflected in total operating
income....................................................... 39,900 76,800
------- --------
Net reduction in interest income and net interest income....... $29,200 $ 23,600
======= ========
</TABLE>
In the ordinary course of business, the subsidiaries have transactions,
including loans, with their officers, directors and their affiliated companies.
These transactions were on substantially the same terms as those prevailing at
the time for comparable transactions with unaffiliated parties and do not
involve more than the normal risk. These loans totaled $2,975,000 and $2,049,300
at December 31, 1995 and 1994, respectively. Aggregate loan transactions with
related parties were as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1995 1994
---- ----
<S> <C> <C>
Balance, beginning of year................................ $2,049,300 $ 2,350,300
New loans............................................ 1,341,300 716,800
Payments............................................. (415,600) (1,017,800)
---------- -----------
Balance, end of year...................................... $2,975,000 $ 2,049,300
========== ===========
</TABLE>
F-12
<PAGE> 113
NOTE 5: ALLOWANCE FOR POSSIBLE LOAN LOSSES
Transactions in the allowance for possible loan losses were as follows:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Balance at beginning of year.................. $1,826,300 $1,643,100 $1,485,700
Additions:
Provision of loan losses.................... 307,000 263,900 192,900
Recoveries of loans charged off............. 37,400 41,100 74,600
Deductions:
Loans charged off........................... (208,300) (121,800) (110,100)
---------- ---------- ----------
Balance at end of year........................ $1,962,400 $1,826,300 $1,643,100
========== ========== ==========
</TABLE>
NOTE 6: PREMISES AND EQUIPMENT
Major classes of premises and equipment at December 31, 1995 and 1994 were
as follows:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Land..................................................... $ 783,800 $ 783,800
Buildings and leasehold improvements..................... 5,686,100 5,178,500
Furniture and equipment.................................. 3,803,000 3,561,000
----------- -----------
$10,272,900 $ 9,523,300
Less: Accumulated depreciation........................... (4,221,100) (3,614,500)
----------- -----------
Premises and equipment, net.............................. $ 6,051,800 $ 5,908,800
=========== ===========
</TABLE>
Depreciation of premises and equipment amounted to $595,300 in 1995,
$551,600 in 1994 and $491,600 in 1993.
NOTE 7: DEPOSITS
The composition of deposits is as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------
1995 1994
---- ----
<S> <C> <C>
Demand................................................. $ 23,103,500 $ 22,262,900
NOW accounts........................................... 17,995,800 19,312,900
Savings................................................ 48,803,400 47,568,000
Time certificates, $100,000 or more.................... 13,091,200 13,669,900
Other time deposits.................................... 114,611,400 96,946,300
------------ ------------
$217,605,300 $199,760,000
============ ============
</TABLE>
Interest expense on deposits consisted of the following for the years
ending December 31, 1995, 1994 and 1993:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
NOW accounts.................................. $ 517,100 $ 431,400 $ 311,600
Savings....................................... 1,605,300 1,178,500 1,154,800
Time certificates, $100,000 or more........... 832,000 728,700 644,400
Other time deposits........................... 6,040,200 4,350,000 3,845,600
---------- ---------- ----------
Total interest on deposits.................... $8,994,600 $6,688,600 $5,956,400
========== ========== ==========
</TABLE>
F-13
<PAGE> 114
NOTE 8: SHORT-TERM BORROWINGS
Short-term borrowings at December 31, 1995 and 1994 consisted of the
following:
<TABLE>
<CAPTION>
1995 1994
------------------ ------------------
AMOUNT RATE AMOUNT RATE
------ ---- ------ ----
<S> <C> <C> <C> <C>
Federal funds purchased (a)
Year end balance....................................... $ -0 - -- $4,750,000 6.85%
Average during year.................................... 2,156,500 6.02% 2,158,400 4.81%
Maximum month-end balance during the year.............. 5,050,000 4,750,000
Federal home loan bank (b)
Year end balance....................................... -0 - -- 7,210,000 6.61%
Average during year.................................... 1,233,500 6.10% 2,315,700 5.18%
Maximum month-end balance during the year.............. 6,950,000 7,210,000
Other short-term borrowings (c)
Year end balance....................................... 100,000 4.65% 100,000 5.03%
Average during year.................................... 97,600 5.90% 128,900 3.76%
Maximum month-end balance during the year.............. 1,139,600 850,000
</TABLE>
Average amounts outstanding during the year represent daily averages. Average
interest rates represent interest expense divided by the related average
balances.
(a) Federal funds purchased generally represent the overnight federal fund
transactions of banking subsidiaries with correspondent banks. The maximum
amount available for borrowing is $5,250,000.
(b) During 1993 the Company's banking subsidiaries established lines of credit
commitments with the Federal Home Loan Bank (FHLB). The maximum amount
available for borrowing under these credit lines was $23,072,700 and
$20,983,700 at December 31, 1995 and 1994, respectively. The interest rate
charged for usage of these lines is the variable rate posted by FHLB at the
date of the drawdown. The commitment is partially collateralized at the date
of drawdown. Unless extended by the Company in accordance with the terms of
the agreement, $4,448,200 of the lines expire October 2, 1996, and
$18,624,500 of the lines expire January 2, 1997.
(c) Other short borrowings consist primarily of Federal Reserve Bank borrowings.
NOTE 9: SUBORDINATED CAPITAL NOTE
The subordinated capital note outstanding amounted to $715,000 and $845,000
at December 31, 1995 and 1994, respectively. The subordinated capital note
requires quarterly payments of $32,500 from July 1, 1991 to April 1, 1998 with a
final payment of $390,000 due on January 1, 1999. Interest is payable monthly at
the lending bank's prime rate (8.75% at December 31, 1995) on the outstanding
unpaid principal balance. The weighted average interest rate on this
subordinated capital note was 8.8% during December 31, 1995. The agreement
contains restrictions regarding, among other matters, the pledging of assets,
the issuance of additional debt, the declaration or payment of cash dividends
and the maintenance of certain ratios. As a result, at December 31, 1995,
approximately $47,300 of retained net income was available for cash dividends.
For the years ended December 31, 1995 and 1994 the Company was in compliance
with these restrictions.
F-14
<PAGE> 115
The principal maturities on the subordinated capital note for each of the
years following at December 31, 1995 are as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
------------
<S> <C>
1996................................................. $130,000
1997................................................. 130,000
1998................................................. 65,000
1999................................................. 390,000
--------
$715,000
========
</TABLE>
NOTE 10: INCOME TAXES
The Company adopted SFAS No. 109 as of January 1, 1993 and has recorded the
effect of its adoption entirely in 1993. The adoption of SFAS No. 109 resulted
in the recognition of a non-recurring charge of $26,900 or $.03 per share on
both a primary and fully diluted basis.
The provision for federal income taxes in the consolidated statement of
income consists of the following:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Currently paid or payable......................... $ 357,300 $503,200 $271,800
Deferred (benefit) provision...................... (196,000) (292,300) (37,100)
--------- -------- --------
$ 161,300 $210,900 $234,700
========= ======== ========
</TABLE>
The following is a reconciliation between the amount of income taxes
computed at the Federal statutory rate and the income tax expense reflected in
the financial statements.
<TABLE>
<CAPTION>
1995 1994 1993
-------------------- -------------------- --------------------
% OF % OF % OF
PRE TAX PRE TAX PRE TAX
AMOUNT INCOME AMOUNT INCOME AMOUNT INCOME
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Provision at statutory
rate...................... $ 556,200 34.0% $ 667,800 34.0% $ 735,400 34.0%
Tax-exempt interest......... (218,700) (13.4)% (296,100) (15.1)% (367,300) (17.0)%
Scale back of interest
deduction................. 28,200 1.7% 33,500 1.7% 41,200 1.9%
Tax credits................. (216,200) (13.2)% (185,400) (9.4%) (191,300) (8.8)%
Other....................... 11,800 0.8% (8,900) (0.5%) 16,700 0.8%
--------- ------- --------- ------- --------- -------
Actual tax expense and
effective rate............ $ 161,300 9.9% $ 210,900 10.7% $ 234,700 10.9%
========= ======= ========= ======= ========= =======
</TABLE>
Deferred income taxes result from timing differences in the recognition of
revenue and expense for tax and financial reporting purposes. The following is a
summary of these timing differences and the related tax effect of each:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Provision for possible loan losses............... $ (46,300) $ (62,300) $(53,500)
Pension expense.................................. (31,600) (61,500) (17,400)
Depreciation..................................... 12,400 19,200 23,000
Tax credits...................................... (123,600) (183,100) -0-
Other............................................ (6,900) (4,600) 10,800
--------- --------- --------
$(196,000) $(292,300) $(37,100)
========= ========= ========
</TABLE>
F-15
<PAGE> 116
The significant components of the Company's deferred tax liabilities and
assets at December 31, 1995 and 1994 are as follows:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Deferred tax liabilities:
Depreciation.................................................. $ 130,600 $ 118,800
Deferred loan fees, net....................................... 130,100 149,000
Unrealized gains on securities available for sale............. 199,000 -0-
---------- ----------
Total deferred tax liabilities........................... $ 459,700 $ 267,800
---------- ----------
Deferred tax assets:
Provision for possible loan losses............................ $ 547,800 $ 501,500
Pension expense............................................... 210,300 178,800
Non-accrual loan interest..................................... 14,700 26,700
Unrealized losses on securities available for sale............ -0- 904,500
Tax credits................................................... 306,700 183,100
Other......................................................... 26,900 27,300
---------- ----------
Total deferred tax assets................................ $1,106,400 $1,821,900
---------- ----------
Net deferred tax assets.................................. $ 646,700 $1,554,100
========== ==========
</TABLE>
At December 31, 1995, the Company had approximately $169,000 of low income
housing tax credit available for carryforward, with $65,800 expiring in 2009 and
$103,200 in 2010. In addition, the Company had $137,800 in alternative minimum
tax credits available for carryforward.
As required by SFAS No. 109, the Company has determined that it is not
required to establish a valuation reserve for the deferred tax asset since it is
more likely than not that the deferred tax asset of $1,106,400 will be
principally realized through future reversals of existing taxable temporary
differences, and to a lesser extent, future taxable income and tax planning
strategies. The Company's conclusion that it is "more likely than not" that the
deferred tax asset will be realized is based on a history of growth in earnings
and prospects for continued growth. Management believes that future taxable
income will be sufficient to realize the benefits of temporary deductible
differences that cannot be realized through the reversal of future temporary
taxable differences. The Company will continue to review the tax criteria
related to the recognition of deferred tax assets on a regular basis.
NOTE 11: EMPLOYEE BENEFIT PLANS
The Company has a noncontributory target benefit pension plan covering all
employees who meet the eligibility requirements. To be eligible, an employee
must be 21 years of age and have completed one year of continuous service.
Contributions are determined by a formula specified in the target benefit plan
based on a participant's annual compensation and years of service. Plan assets
are primarily U.S. Treasury and agency securities, corporate notes and bonds,
listed common stocks and cash surrender value of life insurance.
Contributions to the Company's target benefit plan included in the
consolidated statements of income was $199,500 for 1995, $176,500 for 1994 and
$195,200 for 1993.
The Company also maintains a non-qualified deferred compensation plan (the
plan) for certain employees. To participate in the plan, these employees must
have completed at least twelve consecutive months of service with the Company.
The plan provides payments from the participant's "account", payable at age
sixty-two, or upon the participant's retirement from the Company, whichever is
later, or upon the participant's death or becoming totally disabled. Payments
are to be made from the participant's account in equal quarterly installments
over a period of ten years, or the participant may elect to receive the payment
in a lump sum.
Annually, the Company's Board of Directors determines whether participants'
accounts will receive contributions. The final amount of contributions to be
received is based on a formula specified in the plan.
F-16
<PAGE> 117
Contributions to this plan included in the consolidated statements of income was
$61,800 for 1995, $61,700 for 1994 and $38,800 for 1993.
The assets available and liabilities expected under this plan totaled
$628,200 and $552,000 at December 31, 1995 and 1994, respectively, and are
included as other assets and other liabilities on the consolidated balance
sheet.
NOTE 12: LEASE COMMITMENTS
As of December 31, 1995, the Company is obligated under non-cancelable
leases, principally for banking premises and equipment with expiration dates
through 2004. These leases are classified as operating leases.
At December 31, 1995, the minimum future lease payments under operating
leases are as follows:
<TABLE>
<S> <C>
1996.................................................... $ 90,400
1997.................................................... 85,300
1998.................................................... 73,900
1999.................................................... 63,900
2000.................................................... 50,300
Thereafter.............................................. 62,800
--------
Total minimum payments.................................. $426,600
========
</TABLE>
In addition to the amounts set forth above, certain of the leases require
payments by the Company for taxes, insurance and maintenance.
The accompanying consolidated statements of income include rent expense of
$73,300 for 1995, $60,700 for 1994 and $105,500 for 1993.
NOTE 13: COMMITMENTS AND CONTINGENT LIABILITIES
a. Financial instruments with off-balance-sheet risk:
The Company is a party to financial instruments with off-balance sheet risk
in the normal course of business to meet the financing needs of its customers.
These financial instruments include commitments to extend credit and standby
letters of credit. Such commitments and standby letters of credit involve, to
varying degrees, elements of credit and interest rate risk in excess of the
amount recognized in the consolidated financial statements. The contract amounts
of those instruments reflect the extent of involvement the Company has in
particular classes of financial instruments.
Commitments to extend credit represent the Company's obligation to fund
commercial and real estate loans, including home equity lines, lines of credit,
revolving lines of credit and other types of commitments. Commitments to extend
credit are agreements to lend to a customer as long as there is no violation of
any condition established in the contract. Commitments generally have fixed
expiration dates or other termination clauses and may require payment of a fee.
Since many of the commitments are expected to expire without being drawn upon,
the total commitment amounts do not necessarily represent future cash
requirements. The Company evaluates each customer's credit worthiness on a
case-by-case basis. The amount of collateral obtained if deemed necessary by the
Company upon extension of credit is based on management's credit evaluation of
the counterpart. Collateral held varies, but may include accounts receivable,
inventory and property, plant and equipment for those commitments for which
collateral is deemed necessary.
Standby letters of credit written are conditional commitments issued by the
Company to guarantee the performance of a customer to a third party. The credit
risk involved in issuing letters of credit is essentially the same as that
involved in extending loan commitments to customers. Letters of credit are
issued both on an unsecured and secured basis. Collateral securing these types
of transactions is similar to collateral securing the Company's commercial
loans.
F-17
<PAGE> 118
The Company's exposure to credit loss in the event of nonperformance by the
other party to the financial instrument for commitments to extend credit and
standby letters of credit written is represented by the contractual amount of
those instruments. The Company uses the same credit policies in making
commitments and conditional obligations as it does for on-balance-sheet
instruments.
The face amounts of financial instruments with off-balance-sheet risk at
December 31, 1995 and 1994 were as follows:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Loan commitments to extend credit................ $23,040,200 $24,682,300
Standby letters of credit........................ 926,300 1,658,300
</TABLE>
b. Concentrations of credit risk:
Most of the Company's loans, commitments to extend credit, and standby
letters of credit have been granted to customers located within its primary
market area, an area that generally includes the counties of Cambria, Somerset,
Westmoreland and Indiana. The distribution of commitments to extend credit was
directed primarily to commercial borrowers and those secured by real estate.
Standby letters of credit were granted primarily to commercial borrowers. No
specific industry concentration exceeded 10 percent of total potential exposure.
c. Other Commitment:
At December 31, 1995, as part of its investment in limited partnerships,
the Company is required to make the following annual capital contributions:
<TABLE>
<S> <C>
1996...................................................... $140,600
1997...................................................... 140,600
1998...................................................... 140,600
1999...................................................... 140,600
2000...................................................... 140,600
Thereafter................................................ 274,200
</TABLE>
d. Contingencies:
Due to the nature of its activities, the Company is at various times
engaged in legal proceedings which arise in the normal course of business. While
it is difficult to predict or determine the outcome of these proceedings, it is
the opinion of management that the ultimate liability, if any, will not
materially affect the Company's financial position.
NOTE 14: PREFERRED STOCK
In July 1992, the Company issued 15,000 shares of Series A $8.00 cumulative
convertible non-voting preferred stock (Series A Preferred Stock). An annual
dividend of $8.00 per share, payable quarterly on the last day of March, June,
September and December, commenced September 30, 1992. Cash dividends on the
Series A preferred stock was cumulative from date of issue. Dividends on Series
A preferred stock must be paid or set apart for payment before any dividends may
be paid or set apart for payment on the common stock. Each share of the Series A
preferred stock is convertible at any time into 5.5 shares of the Company's
common stock. 1,000 shares of preferred stock was converted into 5,500 shares of
common stock for the year ending December 31, 1995. There were no shares
converted for the years ending December 31, 1994 and 1993. The Company may
redeem the Series A preferred stock, in whole or in part, at the following
prices plus
F-18
<PAGE> 119
accrued dividends, if any, if redeemed during the twelve month period beginning
August 1, in each of the following years:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
---- -----
<S> <C>
1992...................................................... $ 104.00
1993...................................................... 103.00
1994...................................................... 102.00
1995...................................................... 101.00
1996...................................................... 100.00
</TABLE>
Any holder of Series A preferred stock who has not redeemed or converted
his shares as of July 31, 1997 must, on that date, convert such shares of
preferred stock into common stock of the corporation at the conversion rate then
in effect as stated above.
The liquidation preference is $100.00 per share, together with accrued
dividends, if involuntary; the redemption price then in effect, together with
accrued dividends, if voluntary. The preferred stock ranks senior to the common
stock in respect of liquidation rights.
As of December 31, 1995, the Company has reserved 77,000 shares of
authorized and unissued common stock for the conversion of preferred stock.
NOTE 15: EMPLOYEE STOCK OWNERSHIP PLAN
The Company has an employee stock ownership plan for the benefit of all
eligible employees. The purpose of the plan is to enable full-time employees who
are at least 21 years of age and have been employed for at least one year to
acquire stock ownership in the Company. Contributions to the plan are determined
by the Board of Directors. The Company may contribute cash or shares of company
stock to the plan. Employees may also make contributions to the plan by electing
to defer between 1-15% of their current compensation or through voluntary
contributions. The Company will provide a matching contribution of 25% of an
employee contribution in the plan up to 4% of compensation for those electing
the deferral option for the years ended December 31, 1995 and 1994.
The Company's contribution to the plan was $143,200 in 1995, $142,200 in
1994 and $142,200 in 1993. Contributions to the plan are included in pension and
other employee benefits in the consolidated statements of income.
In the event a terminated plan participant desires to sell his or her
shares of the Company's stock, or for certain employees who elect to diversify
their account balances, the Company may decide to purchase the shares from the
participant at their fair market value. At December 31, 1995 and 1994 the Plan
held 45,556 shares and 35,985 shares, respectively, all of which have been
allocated to Plan participants. The fair market value of those shares totaled
$1,685,600 and $863,600 as of December 31, 1995 and 1994, respectively. During
the years ended December 31, 1995, 1994 and 1993, no stock was purchased by the
Company from Plan participants. Dividends paid on the Plan shares are recorded
as a reduction of retained earnings.
NOTE 16: DIVIDEND REINVESTMENT PLAN
A dividend reinvestment plan (the Plan) was adopted by the Company's Board
of Directors on April 9, 1991. The purpose of this plan is to provide
shareholders with a convenient and economical method of increasing their equity
ownership in the Company without payment of any brokerage commission, service
charge or other similar expense. A participant in the plan may elect to reinvest
dividends on all of his shares of common stock. The price of shares purchased by
a participant in the plan will be at fair market value. A participant may
withdraw from the plan at any time. 75,000 shares of Company stock has been
reserved for the plan. At the discretion of the Company's Board of Directors,
shares reserved for the plan may be provided from authorized but unissued shares
or shares bought in the open market. At December 31, 1995, the Company had
74,772 unissued reserved shares available under the plan.
F-19
<PAGE> 120
NOTE 17: PARENT COMPANY CONDENSED FINANCIAL STATEMENTS
The condensed balance sheets as of December 31, 1995 and 1994, and
statements of income and cash flows for each of the three years in the period
ended December 31, 1995 of Moxham Bank Corporation are presented below.
BALANCE SHEETS
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
ASSETS:
Cash........................................................ $ 169,000 $ 189,300
Investment in banking subsidiaries.......................... 20,030,700 17,089,700
Investment in non-banking subsidiary........................ 287,000 196,200
Advances to non-banking subsidiary.......................... 62,500 238,400
Other assets................................................ 250,100 116,700
----------- -----------
Total Assets........................................... $20,799,300 $17,830,300
=========== ===========
LIABILITIES:
Capital subordinate note.................................... $ 715,000 $ 845,000
Other Liabilities........................................... 6,400 10,800
----------- -----------
Total Liabilities...................................... $ 721,400 $ 855,800
----------- -----------
STOCKHOLDERS' EQUITY:
Preferred Stock............................................. $ 1,377,700 $ 1,476,100
Capital Stock............................................... 1,807,700 1,777,600
Surplus..................................................... 3,750,600 3,481,500
Retained Earnings........................................... 12,779,700 11,995,100
Unrealized gain (loss) on securities available for sale,
net........................................................ 362,200 (1,755,800)
----------- -----------
TOTAL STOCKHOLDER' EQUITY.............................. $20,077,900 $16,974,500
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY....................... $20,799,300 $17,830,300
=========== ===========
</TABLE>
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Dividends from subsidiaries........................... $ 930,000 $ 864,000 $1,357,900
Interest Expense...................................... 67,400 63,500 61,300
Operating Expense..................................... 501,300 492,100 577,600
---------- ---------- ----------
Income before income tax credit and equity in
undistributed income of subsidiaries................ $ 361,300 $ 308,400 $ 719,000
Income tax benefit.................................... 199,600 188,900 213,900
---------- ---------- ----------
Income before equity in undistributed income of
subsidiaries........................................ $ 560,900 $ 497,300 $ 932,900
Equity in undistributed income of subsidiaries........ 913,800 1,255,900 968,500
---------- ---------- ----------
Net Income............................................ $1,474,700 $1,753,200 $1,901,400
========== ========== ==========
</TABLE>
F-20
<PAGE> 121
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income...................................... $1,474,700 $ 1,753,200 $1,901,400
Adjustments to reconcile net income to net cash
provided by operating activities:
Equity in undistributed income of
subsidiaries............................. (913,800) (1,255,900) (968,500)
Provision for deferred income taxes........ (125,100) (78,500) 3,100
Decrease (increase) in other assets........ (8,300) 122,100 (94,100)
Increase (decrease) in other liabilities... (4,500) (111,600) (5,700)
---------- ----------- ----------
Net cash provided by operating
activities.......................... $ 423,000 $ 429,300 $ 836,200
---------- ----------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Repayments from (advances to) subsidiaries,
net........................................... $ 175,900 $ 33,600 $ (242,200)
---------- ----------- ----------
Net cash provided by (used in)
investing activities................ $ 175,900 $ 33,600 $ (242,200)
---------- ----------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on subordinated capital note........... $ (130,000) $ (130,000) $ (130,000)
Proceeds from sale of stock--common............. 200,800 184,400 200,000
Preferred stock cash dividends paid............. (116,000) (120,000) (120,000)
Common stock cash dividends paid................ (574,000) (518,300) (494,100)
---------- ----------- ----------
Net cash provided by (used in)
financing activities................ $ (619,200) $ (583,900) $ (544,100)
---------- ----------- ----------
Increase (decrease) in cash.......................... $ (20,300) $ (121,000) $ 49,900
Cash at beginning of year............................ 189,300 310,300 260,400
---------- ----------- ----------
Cash at end of year.................................. $ 169,000 $ 189,300 $ 310,300
========== =========== ==========
</TABLE>
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Supplemental Disclosures of Cash Flow Information:
Cash paid during the year for:
Interest on subordinated capital note and
long-term debt................................. $ 67,400 $ 63,500 $ 61,300
Federal income taxes paid (net of refunds)....... 323,700 343,800 474,900
</TABLE>
The Company's subsidiary banks are subject to legal limitations on the
amount of dividends that can be paid to the parent company. The approval of the
Comptroller of the Currency is required for a national bank to pay dividends if
the total of all dividends declared in any calendar year exceeds the bank's
retained net profits for that year combined with its retained net profits for
the preceding two calendar years. At December 31, 1995, the subsidiary banks
could pay an additional $2,891,600 in cash dividends to the parent company. In
addition, the Federal Reserve Act requires that extensions of credit by the
Company's subsidiary banks to certain affiliates, including the Company, be
secured by specified assets. Further, such extensions of credit are limited to
10% of the subsidiary bank's capital and surplus and that extensions of credit
to all such affiliates be limited to 20% of capital and surplus.
Federal regulatory agencies have adopted various capital standards for
financial institutions, including risk-based capital standards. The primary
objectives of the risk-based capital framework are to provide a more consistent
system for comparing capital positions of financial institutions and to take
into account the different risks among financial institutions' assets and
off-balance-sheet items.
Risk-based capital standards have been supplemented with requirements for a
minimum Tier 1 capital to assets ratio (leverage ratio). In addition, regulatory
agencies consider the published capital levels as minimum levels and may require
a Financial Institution to maintain capital at higher levels.
F-21
<PAGE> 122
A comparison of the Company's capital as of December 31, 1995 with the
minimum requirements is presented below:
<TABLE>
<CAPTION>
REQUIREMENTS
------------------
ACTUAL MINIMUM
------ -------
<S> <C> <C>
Leverage Ratio......................................... 7.53 % 3.00%
Risk Based Capital:
Tier 1 or core capital............................ 11.27 % 4.00%
Tier 2 or total capital........................... 13.78 % 8.00%
</TABLE>
NOTE 18: DISCLOSURES ABOUT THE FAIR VALUE OF FINANCIAL INSTRUMENTS
FASB Statement No. 107, Disclosures about Fair Value of Financial
Instruments, requires disclosure of fair value information about financial
instruments, whether or not recognized in the balance sheet, for which it is
practicable to estimate that value. In cases where quoted market prices are not
available, fair values are based on estimates using present value or other
valuation techniques. Those techniques are significantly affected by the
assumptions used, including the discount rate and estimates of future cash
flows. Changes in the assumptions or methodologies used to estimate fair values
may materially affect the estimated amounts. Also, management is concerned that
there may not be reasonable comparability between institutions due to the wide
range of permitted assumptions and the methodologies in absence of active
markets. This lack of uniformity gives rise to a high degree of subjectivity in
estimating financial instrument fair values. In that regard, the derived fair
value estimates cannot be substantiated by comparison to independent markets
and, in many cases, could not be realized in immediate settlement of the
instrument. Statement 107 excludes certain financial instruments and all
nonfinancial instruments from its disclosure requirements. Accordingly, the
aggregate fair value amounts presented do not represent the underlying value of
the Company.
The following methods and assumptions were used by the Company in
estimating the fair value of its financial instruments:
Cash and short-term investments: The carrying amounts reported in the
balance sheet for cash and short-term instruments approximate their fair values.
Investment securities (including mortgage-backed securities): Fair values
for investment securities are based on quoted market prices, where available. If
quoted market prices are not available, fair values are based on quoted market
prices of comparable instruments.
Loans receivable: For variable-rate loans that reprice frequently and with
no significant change in credit risk, fair values are based on carrying values.
The fair values for other loans (primarily commercial real estate and rental
property mortgage loans, commercial and industrial loans, financial institution
loans, and agricultural loans) are determined using estimated future cash flows,
discounted at the interest rates currently being offered for loans with similar
terms to borrowers with similar credit quality.
Deposit liabilities: The fair values of demand deposits, savings accounts
and money market deposits equal their carrying amounts which represents the
amount payable on demand. The carrying amounts for variable-rate time deposits
and certificates of deposit approximate their fair values at the reporting date.
Fair values for fixed-rate time deposits and certificates of deposit are
estimated using a discounted cash flow calculation that applies interest rates
currently being offered on certificates to a schedule of aggregated expected
monthly maturities on time deposits.
Short-term borrowings: The carrying amounts of federal funds purchased,
borrowings under repurchase agreements, and other short-term borrowings
approximate their fair values.
Long-term borrowings: The fair values of the Company's long-term
borrowings (other than deposits) are estimated using rates currently available
to the Company for debt with similar terms and remaining maturities.
Commitments to extend credit and standby letters of credit: The fair value
of commitments and letters of credit is insignificant and are generally priced
at market at the time of funding.
F-22
<PAGE> 123
The estimated fair values of the Company's financial instruments are as
follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1995 DECEMBER 31, 1994
---------------------------- ----------------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
-------- ----- -------- -----
<S> <C> <C> <C> <C>
Financial Assets:
Cash and short-term
investments.................. $ 9,231,200 $ 9,231,200 $ 9,799,900 $ 9,799,900
Federal funds sold............. 8,665,000 8,665,000 -- --
Investment securities.......... 59,513,500 60,074,700 64,686,700 62,026,400
Loans, net..................... 152,436,400 155,708,000 148,371,500 153,558,000
Financial Liabilities:
Deposits....................... 217,605,300 214,497,000 199,760,000 197,162,800
Short term borrowings.......... 100,000 100,000 12,060,000 12,060,000
Subordinated capital note...... 715,000 715,000 845,000 845,000
</TABLE>
NOTE 19: RECLASSIFICATIONS
For comparative purposes, reclassifications have been made to certain
amounts previously reported in the consolidated financial statements.
NOTE 20: SUBSEQUENT EVENTS
a. Merger
The Company and BT Financial Corporation ("BTFC") announced on January 11,
1996, that they have reached a definitive merger agreement effective January 12,
1996, pursuant to which the Company's two banks, Moxham and Garrett would merge
into BTFC's largest affiliate, Johnstown Bank and Trust Company. The definitive
agreement provides for the payment to the Company's common and preferred
stockholders at the closing of the merger 1.15 and 6.325 shares of BTFC's common
stock, respectively, for each company share outstanding. The purchase is
expected to be accounted for as a pooling of interests. The transaction is
subject to regulatory approvals and to the approvals of the stockholders of the
Company and BT Financial Corporation.
b. Branch Disposition
On February 1, 1996, Moxham and NBOC Bank ("NBOC") of Indiana, Pennsylvania
entered into a purchase and assumption agreement (the "Branch Agreement"),
pursuant to which Moxham agreed to sell certain assets and assign certain
liabilities of the Moxham Branch office located in Delmont, Pennsylvania.
Pursuant to the Branch Agreement, and subject to certain conditions set forth
therein, Moxham will:
(i) Assign certain deposit liabilities and a real estate lease relating to
the Branch (total deposits were approximately $7,940,000 at December
31, 1995);
(ii) Sell furniture, fixtures and equipment owned or leased at the Branch;
(iii) Assign contracts that relate to the operation of the Branch; and
(iv) Sell the vault, teller and ATM cash
The consummation of the Branch disposition is contingent upon, among other
things, receipt of all necessary regulatory approvals.
F-23
<PAGE> 124
REPORT OF INDEPENDENT AUDITORS
Board of Directors and Stockholders
Armstrong County Trust Company
We have audited the accompanying balance sheet of Armstrong County Trust Company
as of December 31, 1995, and the related statements of income, changes in
stockholders' equity, and cash flows for the year then ended. 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 audit.
We conducted our audit 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 audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Armstrong County Trust Company
as of December 31, 1995, and the results of its operations and its cash flows
for the year then ended in conformity with generally accepted accounting
principles.
As explained in the notes to the financial statements, effective January 1,
1995, the Bank changed its method of accounting for impaired loans and related
credit loss reserves and effective January 1, 1994, changed its method of
accounting for investment securities.
S.R. Snodgrass
Wexford, PA
February 16, 1996
F-24
<PAGE> 125
ARMSTRONG COUNTY TRUST COMPANY
BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31,
1995
----
<S> <C>
ASSETS
Cash and due from banks...................................................... $ 1,426,834
Federal funds sold........................................................... --
Securities available for sale................................................ 36,929,936
Investment securities (market value of $1,359,516)........................... 1,355,000
-----------
Total investment securities........................................ 38,284,936
Loans (net of unearned income of $212,955)................................... 11,055,188
Less allowance for loan losses............................................... 150,474
-----------
Net loans.......................................................... 10,904,714
Premises and equipment....................................................... 312,535
Accrued interest and other assets............................................ 613,540
-----------
TOTAL ASSETS....................................................... $51,542,559
===========
LIABILITIES
Deposits:
Noninterest-bearing demand.............................................. $ 4,921,012
Money market............................................................ 3,405,305
Savings................................................................. 9,513,030
Time.................................................................... 20,823,328
-----------
Total deposits..................................................... 38,662,675
Short-term borrowings........................................................ 4,000,000
Accrued interest and other liabilities....................................... 509,177
-----------
TOTAL LIABILITIES.................................................. 43,171,852
-----------
STOCKHOLDERS' EQUITY
Common stock, par value $50; 8,000 shares issued and outstanding............. 400,000
Capital surplus.............................................................. 850,000
Retained earnings............................................................ 6,648,366
Net unrealized gain on securities............................................ 472,341
-----------
TOTAL STOCKHOLDERS' EQUITY......................................... 8,370,707
-----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY......................... $51,542,559
===========
</TABLE>
See accompanying notes to the financial statements.
F-25
<PAGE> 126
ARMSTRONG COUNTY TRUST COMPANY
STATEMENT OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------
1995 1994
---- ----
(UNAUDITED)
<S> <C> <C>
INTEREST INCOME
Interest and fees on loans.................................... $ 840,730 $ 658,636
Federal funds sold............................................ 7,368 58,624
Investment securities:
Taxable interest......................................... 2,132,098 1,669,381
Tax exempt interest...................................... 304,388 176,125
---------- ----------
Total interest income............................... 3,284,584 2,562,766
---------- ----------
INTEREST EXPENSE
Deposits...................................................... 1,358,466 853,283
Short-term borrowings......................................... 126,257 2,350
---------- ----------
Total interest expense.............................. 1,484,723 855,633
---------- ----------
NET INTEREST INCOME................................................ 1,799,861 1,707,133
Provision for loan losses.......................................... 37,500 --
---------- ----------
NET INTEREST INCOME AFTER PROVISIONS FOR LOAN LOSSES............... 1,762,361 1,707,133
---------- ----------
NONINTEREST INCOME
Service charges and fees...................................... 30,890 17,329
Investment securities gains, net.............................. 193,854 36,865
Other income.................................................. 21,060 25,343
---------- ----------
Total noninterest income............................ 245,804 79,537
---------- ----------
NONINTEREST EXPENSE
Salaries and employee benefits................................ 473,932 422,158
Occupancy expense............................................. 83,911 76,573
Equipment expense............................................. 45,975 25,248
Federal deposit insurance..................................... 37,976 64,380
Other expense................................................. 529,135 386,991
---------- ----------
Total noninterest expense........................... 1,170,929 975,350
---------- ----------
Income before income taxes......................................... 837,236 811,320
Income taxes....................................................... 190,000 230,006
---------- ----------
NET INCOME......................................................... $ 647,235 $ 581,314
========== ==========
EARNINGS PER SHARE................................................. $ 80.90 $ 72.66
AVERAGE SHARES OUTSTANDING......................................... 8,000 8,000
</TABLE>
See accompanying notes to the financial statements.
F-26
<PAGE> 127
ARMSTRONG COUNTY TRUST COMPANY
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
NET UNREALIZED
COMMON CAPITAL RETAINED GAIN (LOSS)
STOCK SURPLUS EARNINGS ON SECURITIES TOTAL
----- ------- -------- ------------- -----
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1993, as
previously reported
(unaudited)................... $400,000 $850,000 $6,247,056 $ -- $ 7,497,056
Prior period adjustment, (see
Note 2)....................... 104,760 104,760
-------- -------- ---------- ------------ -----------
Balance, December 31, 1993, as
restated (unaudited).......... 400,000 850,000 6,351,816 -- 7,601,816
Initial net unrealized gain on
securities.................... 794,587 794,587
Net income...................... 581,314 581,314
Cash dividends declared
($55.75 per share)............ (446,000) (446,000)
Net unrealized loss on
securities.................... (1,514,962) (1,514,962)
-------- -------- ---------- ------------ -----------
Balance, December 31, 1994
(unaudited)................... 400,000 850,000 6,487,130 (720,375) 7,016,755
Net income...................... 647,236 647,236
Cash dividends declared
($60.75 per share)............ (486,000) (486,000)
Net unrealized gain on
securities.................... 1,192,716 1,192,716
-------- -------- ---------- ------------ -----------
Balance, December 31, 1995...... $400,000 $850,000 $6,648,366 $ 472,341 $ 8,370,707
======== ======== ========== ============ ===========
</TABLE>
See accompanying notes to the financial statements.
F-27
<PAGE> 128
ARMSTRONG COUNTY TRUST COMPANY
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------
1995 1994
---- ----
<S> <C> <C>
OPERATING ACTIVITIES
Net income..................................................... $ 647,236 $ 581,314
Adjustments to reconcile net income to net cash provided
by operating activities:
Provision for loan losses................................. 37,500 --
Depreciation and amortization, net........................ 352,549 97,002
Deferred income taxes..................................... (20,445) 1,432
Investment securities gains, net.......................... (193,854) (36,865)
Decrease (increase) in accrued interest receivable........ (127,386) 65,260
Increase in accrued interest payable...................... 26,170 57,977
Other, net................................................ (14,604) 121,982
------------ ------------
Net cash provided by operating activities............ 707,166 888,102
------------ ------------
INVESTING ACTIVITIES
Securities available for sale:
Proceeds from sales....................................... 26,067,114 23,738,443
Proceeds from maturities or paydown....................... 3,650,928 1,297,251
Purchases of securities................................... (37,699,187) (31,602,717)
Investment securities held to maturity:
Proceeds from maturities or paydown....................... 570,000 763,000
Purchases of securities................................... (350,000) (447,845)
Net loan originations.......................................... (1,959,675) (2,682,944)
Purchases of premises and equipment............................ (262,139) (159,078)
Other, net..................................................... (106) 8,701
------------ ------------
Net cash used for investing activities.................... (9,983,065) (9,085,189)
------------ ------------
FINANCING ACTIVITIES
Net increase in deposits....................................... 5,316,179 2,100,815
Increase in other borrowings................................... 4,000,000 --
Cash dividends paid............................................ (606,000) (446,000)
------------ ------------
Net cash provided by financing activities................. 8,710,179 1,654,815
------------ ------------
Decrease in cash and cash equivalents..................... (565,720) (6,542,272)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR................. 1,992,554 8,534,826
------------ ------------
CASH AND CASH EQUIVALENTS AT END OF YEAR....................... $ 1,426,834 $ 1,992,554
============ ============
</TABLE>
See accompanying notes to the financial statements.
F-28
<PAGE> 129
ARMSTRONG COUNTY TRUST COMPANY
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
(ALL DATA RELATED TO DECEMBER 31, 1994, AND
THE YEAR ENDED DECEMBER 31, 1994, IS UNAUDITED.)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
Armstrong County Trust Company (Bank) is a state-chartered bank located in
Kittanning, Pennsylvania. The Bank's principal sources of revenue emanate from
its interest earnings on its investment securities portfolio, its portfolio of
residential real estate, commercial and consumer loans, as well as a variety of
deposit services offered to its customers. The Bank is subject to regulation and
supervision by the FDIC and the Pennsylvania Department of Banking.
The financial statements have been prepared in conformity with generally
accepted accounting principles. In preparing the financial statements,
management is required to make estimates and assumptions that affect the
reported amounts of assets and liabilities as of the balance sheet date and
revenues and expenses for the period. Actual results could differ significantly
from estimates.
A summary of significant accounting and reporting policies applied in the
presentation of the accompanying financial statements follows:
Investment Securities
The Bank has classified investment securities into held to maturity and
available for sale classifications. Debt securities acquired with the intent to
hold to maturity are stated at cost adjusted for amortization of premium and
accretion of discount which are computed using the interest method and
recognized as adjustments of interest income. Certain other debt securities have
been classified as available for sale to serve principally as a source of
liquidity. Unrealized holding gains and losses for available for sale securities
are reported as a separate component of stockholders' equity, net of tax, until
realized. Realized security gains and losses are computed using the specific
identification method. Interest and dividends on investment securities are
recognized as income when earned.
Loans
Loans are reported at their principal amount net of unearned income and the
allowance for loan losses. Interest from certain types of installment loans is
recognized as income over their lives using methods of amortization which
approximate a level yield related to the principal amounts. Interest on all
other loans, including certain types of installment loans is recognized as
income when earned on the accrual method. Accrual of interest is discontinued
when, in the opinion of management, reasonable doubt exists as to the
collectibility of additional interest. Loans are returned to accrual status when
past due interest is collected, and the collection of principal is probable.
Allowance for Loan Losses
Effective January 1, 1995, the Bank adopted Statement of Financial
Accounting Standards No. 114, "Accounting by Creditors for Impairment of a
Loan," as amended by Statement No. 118, "Accounting by Creditors for Impairment
of a Loan--Income Recognition and Disclosures." Under these standards, the Bank
estimates credit losses on impaired loans based on the present value of expected
cash flows or the fair value of the underlying collateral if the loan repayment
is expected to come from the sale or operation of such collateral. Prior to
1995, the credit losses related to these loans were estimated based on
undiscounted cash flows or the fair value of the underlying collateral.
F-29
<PAGE> 130
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Statement 118 amends Statement 114 to permit a creditor to use existing
methods for recognizing interest income on impaired loans eliminating the income
recognition provisions of Statement 114. The adoption of Statements 114 and 118
have no material effect on the Bank's financial position or results of
operations.
The allowance for loan losses represents the amount which management
estimates is adequate to provide for potential losses in its portfolio. The Bank
uses the allowance method in providing for loan losses. Accordingly, all loan
losses are charged to the allowance, and all recoveries are credited to it. The
allowance for loan losses is established through a provision for loan losses
which is charged to operations. The provision is based upon management's
periodic evaluation of individual loans, the overall risk characteristics of the
various portfolio segments, past experience with losses, the impact of economic
conditions on borrowers, and other relevant factors. This evaluation is
inherently subjective as it requires material estimates which may be susceptible
to significant change in the near-term.
Premises and Equipment
Premises and equipment are stated at cost less accumulated depreciation.
Depreciation is computed on the straight-line method over the estimated useful
lives of the assets. Expenditures for maintenance and repairs are charged
against income as incurred. Costs of major additions and improvements are
capitalized.
Income Taxes
Deferred tax assets or liabilities are computed based on the difference
between the financial statement and income tax basis of assets and liabilities
using the enacted marginal tax rates. Deferred income tax expense or benefit are
based on the changes in the deferred tax asset or liability from period to
period.
Earnings Per Share
Earnings per share are calculated using the weighted average number of
shares outstanding for the periods.
Cash Flow Information
The Bank has defined cash and cash equivalents as those amounts included in
the balance sheet captions cash and due from banks and federal funds sold.
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Cash paid during the year for:
Interest on deposits and borrowings........................... $1,458,553 $797,656
Income taxes.................................................. 270,457 260,000
</TABLE>
Reclassification of Comparative Amounts
Certain comparative amounts for the prior year have been reclassified to
conform to current year classifications.
2. RESTATEMENT
Retained earnings have been retroactively restated as of December 31, 1993,
for $104,760, to correct an error in recording the initial cumulative effect of
the adoption of Statement of Financial Accounting Standards No. 109. The net
effect on reported net income for 1993 was an increase of $104,760 or $13.10 per
share.
F-30
<PAGE> 131
3. INVESTMENT SECURITIES
Under adoption of Statement 115, the Bank initially transferred from the
investment securities portfolio to the investment securities available for sale
classification securities with an amortized cost of $21,651,919 and an estimated
market value of $22,855,839. This resulted in an increase to stockholders'
equity of $794,587 net of related federal income taxes.
The amortized cost and estimated market values of investment securities at
December 31, 1995, are as follows:
<TABLE>
<CAPTION>
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED MARKET
COST GAINS LOSSES VALUE
---- ----- ------ -----
<S> <C> <C> <C> <C>
AVAILABLE FOR SALE
U.S. Government corporations and
agencies................................ $20,752,058 $397,949 $(3,991) $21,146,016
Obligations of states and political
subdivisions............................ 1,615,418 79,080 -- 1,694,498
Mortgage-backed securities................ 13,430,091 242,631 -- 13,672,722
----------- -------- ------- -----------
Total debt securities................ 35,797,567 719,660 (3,991) 36,513,236
Equity securities......................... 416,700 -- -- 416,700
----------- -------- ------- -----------
Total................................ $36,214,267 $719,660 $(3,991) $36,929,936
========== ======== ======= ===========
HELD TO MATURITY
Obligations of states and political
subdivisions............................ $ 1,355,000 $ 5,440 $ (924) $ 1,359,516
=========== ========= ======== ===========
</TABLE>
The amortized cost and estimated market values of debt securities at
December 31, 1995, by contractual maturity, are shown below. Expected maturities
will differ from contractual maturities because borrowers may have the right to
call or prepay obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>
AVAILABLE FOR SALE HELD TO MATURITY
---------------------------- ---------------------------
AMORTIZED ESTIMATED AMORTIZED ESTIMATED
COST MARKET VALUE COST MARKET VALUE
---- ------------ ---- ------------
<S> <C> <C> <C> <C>
Due in one year or less.................. $ 1,000,000 $ 1,004,063 $ 245,000 $ 245,650
Due after one year through five years.... 500,000 511,406 1,010,000 1,011,652
Due after five years through ten years... 16,752,059 17,105,001 100,000 102,213
Due after ten years...................... 4,115,417 4,220,044 -- --
----------- ----------- ---------- -----------
22,367,476 22,840,514 1,355,000 1,359,515
Mortgage-backed securities............... 13,430,091 13,672,722 -- --
----------- ----------- ---------- -----------
Total............................... $35,797,567 $36,513,236 $1,355,000 $ 1,359,515
=========== =========== ========== ===========
</TABLE>
Proceeds from the sales of investments in debt securities available for
sale and the gross realized gains and losses for the years ended December 31,
1995 and 1994, are as follows:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Proceeds from sales........................................ $26,067,114 $23,738,443
Gross gains................................................ 256,716 314,600
Gross losses............................................... 62,862 277,735
</TABLE>
Investment securities with a carrying value of $3,690,814 at December 31,
1995, were pledged to secure public deposits and other purposes as required by
law.
F-31
<PAGE> 132
4. LOANS
Major classifications of loans are summarized as follows:
<TABLE>
<CAPTION>
1995
----
<S> <C>
Real estate--mortgage................................................. $ 8,001,204
Consumer loans to individuals......................................... 2,477,022
Commercial............................................................ 789,917
-----------
11,268,143
Less: Unearned discount.......................................... 212,955
Allowance for loan losses.................................. 150,474
-----------
Net loans................................................... $10,904,714
===========
</TABLE>
As of December 31, 1995, aggregate loans of $60,000 or more extended to
directors, executive officers, and their affiliates were $506,001. In
management's opinion, all of these loans are on substantially the same terms and
conditions as loans to other individuals and businesses of comparable
creditworthiness. A summary of loan activity during the year is as follows:
<TABLE>
<CAPTION>
BALANCE AMOUNTS BALANCE
DECEMBER 31, 1994 ADDITIONS COLLECTED DECEMBER 31, 1995
- ------------------ ---------- ---------- ------------------
<S> <C> <C> <C>
$320,611 437,000 251,610 $506,001
</TABLE>
The Bank grants consumer, commercial, and residential loans to customers
throughout its trade area which is concentrated in Armstrong County,
Pennsylvania. Although the Bank has a diversified loan portfolio at December 31,
1995, a substantial portion of its debtors' ability to honor their loan
agreements is dependent upon the economic stability of its immediate trade area.
5. ALLOWANCE FOR LOAN LOSSES
Changes in the allowance for loan losses for the years ended December 31,
1995 and 1994, are as follows:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Balance, January 1.......................................... $148,292 $148,267
Add:
Provision charged to operations........................ 37,500 --
Recoveries............................................. -- 25
Less loans charged off...................................... 35,318 --
-------- --------
Balance, December 31........................................ $150,474 $148,292
======== ========
</TABLE>
6. PREMISES AND EQUIPMENT
Major classifications of premises and equipment are summarized as follows:
<TABLE>
<CAPTION>
1995
----
<S> <C>
Land and improvements..................................................... $ 79,309
Buildings and improvements................................................ 274,832
Furniture, fixtures and equipment......................................... 640,406
--------
994,547
Less accumulated depreciation............................................. 682,012
--------
Total................................................................ $312,535
========
</TABLE>
Depreciation expense for the years ended December 31, 1995 and 1994, was
$46,334 and $19,632 respectively.
F-32
<PAGE> 133
7. DEPOSITS
Time deposits include certificates of deposit in denominations of $100,000
or more. Such deposits aggregated $4,110,685 at December 31, 1995.
8. SHORT-TERM BORROWINGS
The Bank's short-term borrowings at December 31, 1995, consists solely of
Federal Home Loan Bank (FHLB) Flexline credit arrangement. During 1995,
short-term borrowings also included federal funds purchased.
<TABLE>
<CAPTION>
1995
----
<S> <C>
Balance at year end..................................................... $4,000,000
Maximum amount outstanding at any month end............................. 4,950,000
Average balance outstanding during the year............................. 1,922,123
Weighted average interest rate:
As of year end..................................................... 6.05%
Paid during the year.................................................... 6.22
</TABLE>
The Flexline credit arrangement with the FHLB is a revolving line of credit
and is renewable annually. During 1995, the Bank had a borrowing limit of
$4,079,600, with a variable rate of interest based upon the FHLB's cost of
funds. Additionally, federal funds purchased represent funds acquired for
various funding requirements. Certain obligations of U.S. Government
corporations and agencies, mortgage-backed securities, and first mortgage loans
are pledged to secure such borrowings.
9. OTHER EXPENSE
Other expenses for the year ended December 31, 1995 and 1994, consists of
the following:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Professional fees relating to pending merger................ $142,931 $ --
Advertising................................................. 71,487 49,715
Pennsylvania Shares Tax..................................... 41,405 44,961
Other....................................................... 273,312 292,315
-------- --------
$529,135 $386,991
======== ========
</TABLE>
10. INCOME TAXES
The provision for income taxes consists of:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Current..................................................... $210,445 $228,574
Deferred.................................................... (20,445) 1,432
-------- --------
Total....................................................... $190,000 $230,006
======== ========
</TABLE>
F-33
<PAGE> 134
10. INCOME TAXES (CONTINUED)
The tax effects of deductible and taxable temporary differences that give
rise to significant portions of the deferred tax assets and deferred tax
liabilities, respectively, at December 31, 1995, are as follows:
<TABLE>
<CAPTION>
1995
----
<S> <C>
Deferred Tax Assets:
Deferred compensation.......................................... $ 9,763
Allowance for loss on other real estate owned.................. 11,900
---------
Total gross deferred tax assets............................. 21,663
---------
Deferred Tax Liabilities:
Premises and equipment......................................... 14,247
Allowance for loan losses...................................... 4,218
Net unrealized gain on securities.............................. 243,328
Other, net..................................................... 151
---------
Total gross deferred tax liabilities........................ 261,944
---------
Net deferred tax liability.................................. $(240,281)
=========
</TABLE>
The following is a reconciliation of the federal statutory rate and the
Bank's effective income tax rate for the years ended December 31, 1995 and 1994:
<TABLE>
<CAPTION>
1995 1994
---------------------- ----------------------
% OF % OF
PRE-TAX PRE-TAX
AMOUNT INCOME AMOUNT INCOME
------ ------ ------ ------
<S> <C> <C> <C> <C>
Provision at statutory rate................... $ 284,660 34.0% $ 275,849 34.0%
Effect of tax free income..................... (106,455) (12.7) (62,629) (7.7)
Non-deductible interest expense............... 10,016 1.2 5,239 0.6
Other, net.................................... 1,779 0.2 11,547 1.5
--------- -------- --------- --------
Actual tax expense and effective rate......... $ 190,000 22.7% $ 230,006 28.4%
========= ======= ========= =======
</TABLE>
11. COMMITMENTS
In the normal course of business, the Bank makes various commitments which
are not reflected in the accompanying financial statements. These instruments
involve, to varying degrees, elements of credit and interest rate risk in excess
of the amount recognized in the balance sheet. The Bank's exposure to credit
loss in the event of nonperformance by the other parties to the financial
instruments is represented by the contractual amounts, as disclosed. Losses, if
any, are charged to the allowance for loan losses. The Bank minimizes its
exposure to credit loss under these commitments by subjecting them to credit
approval and review procedures and collateral requirements as deemed necessary.
The off-balance sheet commitments were comprised of the following:
<TABLE>
<CAPTION>
1995
----
<S> <C>
Commitments to extend credit...................................... $185,766
Standby letters of credit......................................... 108,000
</TABLE>
Commitments to extend credit are agreements to lend to a customer as long
as there is no violation of any condition established in the loan agreement.
These commitments are comprised primarily of available commercial lines of
credit and mortgage loan commitments. The Bank uses the same credit policies in
making loan commitments and conditional obligations as it does for on-balance
sheet instruments. The Bank evaluates each customer's creditworthiness on a case
by case basis. The amount of collateral obtained, as deemed necessary, is based
upon management's credit evaluation in compliance with the Bank's lending policy
guidelines. Customers use credit commitments to ensure that funds will be
available for working capital purposes and capital expenditures and to ensure
access to funds at specified terms and conditions.
F-34
<PAGE> 135
11. COMMITMENTS (CONTINUED)
Standby letters of credit obligate the Bank to disburse funds to a third
party if the Bank's customer fails to perform under the terms of the agreement
with the beneficiary. These instruments are issued primarily to support bid or
performance-related contracts. The coverage period for these instruments is
typically a one year period with an annual renewal option subject to prior
approval by management. The Bank holds collateral for these instruments, as
deemed necessary, which are typically Bank deposit instruments or marketable
securities.
12. REGULATORY RESTRICTIONS
Cash and Due From Banks
Included in cash and due from banks are required federal reserves of
$25,000 at December 31, 1995, for facilitating the implementation of monetary
policy by the Federal Reserve system. The required reserves are computed by
applying prescribed ratios to the classes of average deposit balances. These
reserves are held in the form of cash on hand.
Dividends
The Pennsylvania Banking Code restricts the availability of surplus for
dividend purposes. At December 31, 1995, capital surplus funds of $850,000 were
not available for dividends.
Capital Requirements (Unaudited)
The Bank is subject to risk-based capital rules. These guidelines include a
common framework for defining elements of capital and a system for relating
capital to risk. The minimum total risk-based capital requirement is 8%, of
which at least half must be Tier 1 capital. The Tier 1 and total risk-based
capital positions of the Bank as of December 31, 1995, as calculated by
management, amounted to 70.0% and 71.2%, respectively. Additionally, the general
regulatory guidelines establish a minimum ratio of leverage capital to adjusted
total assets of 3.00% for top rated financial institutions with less highly
rated institutions, or those with higher levels of risk, required to maintain
ratios of 100 to 200 basis points above the minimum level. The Bank's ratios
under these guidelines, as calculated by management, as of December 31, 1995, is
15.74%.
13. FAIR VALUE DISCLOSURE
Financial Accounting Standards Board Statement No. 107, "Disclosure About
Fair Value of Financial Instruments," requires disclosure of the estimated fair
value of the financial instruments. Financial instruments are defined as cash,
evidence of ownership interest in an entity, or a contract which creates an
obligation or right to receive or deliver cash or another financial instrument
from/to a second entity on potentially favorable or unfavorable terms.
Fair value is defined as the amount at which a financial instrument could
be exchanged in a current transaction between willing parties other than in a
forced or liquidation sale. If a quoted market price is available for a
financial instrument, the estimated fair value would be calculated based upon
the market price per trading unit of the instrument.
If no readily available market exists, the fair value estimates for
financial instruments should be based upon management's judgment regarding
current economic conditions, interest rate risk, expected cash flows, future
estimated losses, and other factors as determined through various option pricing
formulas or simulation modeling. As many of these assumptions result from
judgments made by management based upon estimates which are inherently
uncertain, the resulting estimated fair values may not be indicative of the
amount realizable in the sale of a particular financial instrument. In addition,
changes in assumptions on which the estimated fair values are based may have a
significant impact on the resulting estimated fair values.
As certain assets, such as deferred tax assets and premises and equipment
are not considered financial instruments, the estimated fair value of financial
instruments would not represent the full value of the Bank.
F-35
<PAGE> 136
13. FAIR VALUE DISCLOSURE (CONTINUED)
The Bank employed simulation modeling in determining the estimated fair
value of financial instruments for which quoted market prices were not available
based upon the following assumptions:
Cash and Due From Banks, Accrued Interest Receivable, Short-Term Borrowings,
and Accrued Interest Payable
The fair value is equal to the current carrying value.
Investment Securities
The fair value of securities held as investments is equal to the available
quoted market price. If no quoted market price is available, fair value is
estimated using the quoted market price of similar securities.
The fair value of securities available for sale is equal to the current
carrying value.
Loans and Deposits
The fair value of loans and certificates of deposit are estimated by
discounting the future cash flows using a simulation model which estimates
future cash flows and constructs discount rates that consider reinvestment
opportunities, operating expenses, non-interest income, credit quality, and
prepayment risk. Demand accounts, passbooks, and money market deposit accounts
are valued at the amount payable on demand as of year end.
Commitments to Extend Credit and Standby Letters of Credit
These financial instruments are generally not subject to sale, and
estimated fair values are not readily available. The carrying value, represented
by the net deferred fee arising from the unrecognized commitment or letter of
credit, and the fair value, determined by discounting the remaining contractual
fee over the term of the commitment using fees currently charged to enter into
similar agreements with similar credit risk, are not considered material for
disclosure. The contractual amounts of unfunded commitments and letters of
credit are presented in Note 11.
The estimated fair values at December 31, 1995, of the Bank's financial
instruments are as follows:
<TABLE>
<CAPTION>
1995
---------------------------------
CARRYING VALUE FAIR VALUE
-------------- -----------
<S> <C> <C>
Financial assets:
Cash and due from banks..................................... $ 1,426,834 $ 1,426,834
Securities available for sale............................... 36,929,936 36,929,936
Investment securities....................................... 1,355,000 1,359,516
Net loans................................................... 10,904,714 11,021,210
Accrued interest receivable................................. 597,713 597,713
----------- -----------
Total.................................................... $51,214,197 $51,335,209
=========== ===========
Financial liabilities:
Deposits.................................................... $38,662,675 $39,136,570
Short-term borrowings....................................... 4,000,000 4,000,000
Accrued interest payable.................................... 216,689 216,689
----------- -----------
Total.................................................... $42,879,364 $43,353,259
=========== ===========
</TABLE>
F-36
<PAGE> 137
14. AGREEMENT AND PLAN OF REORGANIZATION
On October 24, 1995, the Bank entered into an Agreement and Plan of
Reorganization ("Agreement") with BT Financial Corporation ("BTFC"). The
Agreement provides for the Bank to be merged with and into Johnstown Bank and
Trust Company, a wholly-owned subsidiary of BTFC. The Agreement is subject to
approval of the shareholders of the Bank and the appropriate regulatory
agencies. Pursuant to the Agreement, each non-dissenting shareholder will
receive 26.5 shares of BTFC common stock and $596.25 in cash, subject to
adjustment, for each share of common stock of the Bank.
F-37
<PAGE> 138
ANNEX A
AGREEMENT AND PLAN OF REORGANIZATION
BY AND BETWEEN
BT FINANCIAL CORPORATION
AND
MOXHAM BANK CORPORATION
<PAGE> 139
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C> <C>
ARTICLE I
DEFINITIONS
1.1. Definitions................................................................ A-5
1.2. Accounting Terms........................................................... A-7
ARTICLE II
THE MERGER
2.1. Merger..................................................................... A-7
2.2. Conversion of Shares of Moxham Stock....................................... A-8
2.3. Articles of Incorporation; By-Laws......................................... A-8
2.4. Directors and Officers..................................................... A-8
2.5. Closing.................................................................... A-8
2.6. Exchange of Certificates for Stock and Cash................................ A-9
(a) Moxham Stock............................................................... A-9
(b) Failure to Surrender Certificates.......................................... A-9
(c) Treasury Shares and Dissenters' Shares..................................... A-10
2.7. Termination of this Reorganization Agreement............................... A-10
2.8. Confidentiality............................................................ A-11
2.9. Public Disclosure.......................................................... A-11
ARTICLE III
STOCKHOLDER APPROVAL
3.1. Moxham Stockholders Meeting................................................ A-11
3.2. BT Financial Stockholders Meeting.......................................... A-11
ARTICLE IV
REPRESENTATIONS, WARRANTIES AND COVENANTS
4.1. Representations and Warranties of Moxham................................... A-11
(a) Organization and Capitalization............................................ A-11
(b) Authority for Transactions................................................. A-12
(c) No Conflicts............................................................... A-12
(d) Consents and Approvals..................................................... A-12
(e) SEC Documents.............................................................. A-12
(f) Subsidiaries............................................................... A-13
(g) Absence of Certain Changes or Events....................................... A-13
(h) Certain Changes............................................................ A-13
(i) Taxes...................................................................... A-13
(j) Compliance with Laws....................................................... A-14
(k) Environmental.............................................................. A-14
(l) Insurance.................................................................. A-14
(m) ERISA...................................................................... A-14
(n) Representations Not Misleading............................................. A-15
(o) Information Supplied....................................................... A-15
(p) Accounting Matters......................................................... A-15
(q) Certain Agreements......................................................... A-15
(r) Agreements with Bank Regulators............................................ A-16
(s) Loan Loss Reserve.......................................................... A-16
(t) Fidelity Bonds............................................................. A-16
</TABLE>
A-2
<PAGE> 140
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C> <C>
4.2. Representations and Warranties of BT Financial............................. A-16
(a) Organization and Capitalization............................................ A-16
(b) Authority for Transactions................................................. A-16
(c) No Conflicts............................................................... A-16
(d) Consents and Approvals..................................................... A-17
(e) SEC Documents.............................................................. A-17
(f) Subsidiaries............................................................... A-17
(g) Absence of Certain Changes or Events....................................... A-18
(h) Representations Not Misleading............................................. A-18
(i) Information Supplied....................................................... A-18
(j) Accounting Matters......................................................... A-18
(k) Employment Matters......................................................... A-18
4.3. Covenants of Moxham........................................................ A-18
(a) Access to Corporate Records................................................ A-18
(b) Financial Statements and Internal Audit Reports............................ A-19
(c) Negative Covenants--Conduct of Business.................................... A-19
(d) Notice of Changes.......................................................... A-20
(e) Acquisition Proposals...................................................... A-20
4.4. Covenants of Both Parties.................................................. A-20
(a) Conduct of Business........................................................ A-20
(b) Best Efforts............................................................... A-21
(c) Other Actions.............................................................. A-21
(d) Accounting Methods......................................................... A-21
(e) Pooling and Tax-Free Reorganization Treatment.............................. A-21
(f) Environmental Studies...................................................... A-21
4.5. Covenants of BT Financial.................................................. A-22
(a) Access to Corporate Records................................................ A-22
(b) Financial Statements....................................................... A-22
(c) Notice of Changes.......................................................... A-22
(d) Employee Matters........................................................... A-22
(e) Indemnification of Moxham Officers and Directors........................... A-23
(f) Bank Regulatory Applications............................................... A-23
ARTICLE V
CONDITIONS PRECEDENT
5.1. Conditions Precedent to the Obligations of BT Financial.................... A-24
(a) Performance of Covenants................................................... A-24
(b) Representations True at Closing............................................ A-24
(c) Certified Resolutions...................................................... A-24
(d) Moxham Shareholder Approval................................................ A-24
(e) Government Approvals and Other Consents.................................... A-24
(f) No Injunction.............................................................. A-24
(g) No Material Misstatements or Omissions..................................... A-24
(h) Changes in Financial Condition............................................. A-24
(i) Registration Statement..................................................... A-25
(j) Opinion of Counsel......................................................... A-25
(k) Fairness Opinion........................................................... A-25
(l) Accounting Opinion......................................................... A-25
(m) BT Financial Shareholder Approval.......................................... A-25
(n) Tax Ruling or Opinion...................................................... A-25
(o) Dissenters' Shares......................................................... A-25
</TABLE>
A-3
<PAGE> 141
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C> <C>
5.2. Conditions Precedent to the Obligations of Moxham.......................... A-25
(a) Performance of Covenants................................................... A-25
(b) Representations True at Closing............................................ A-25
(c) Certified Resolutions...................................................... A-26
(d) BT Financial Shareholder Approval.......................................... A-26
(e) Government Approvals and Other Consents.................................... A-26
(f) No Injunction.............................................................. A-26
(g) No Material Misstatements or Omissions..................................... A-26
(h) Changes in Financial Condition............................................. A-26
(i) Registration Statement..................................................... A-26
(j) Opinion of Counsel......................................................... A-26
(k) Fairness Opinion........................................................... A-26
(l) Moxham Shareholder Approval................................................ A-26
(m) Tax Ruling or Opinion...................................................... A-27
5.3. Waivers.................................................................... A-27
ARTICLE VI
BROKERS AND EXPENSES
6.1. Brokers.................................................................... A-27
6.2. Expenses................................................................... A-27
ARTICLE VII
MISCELLANEOUS
7.1. Further Assurances......................................................... A-27
7.2. Survival of Representations, Warranties and Covenants...................... A-27
7.3. Notices.................................................................... A-28
7.4. Third Party Beneficiaries.................................................. A-28
7.5. Binding Effect............................................................. A-28
7.6. Headings................................................................... A-28
7.7. Counterparts............................................................... A-28
7.8. Integration................................................................ A-28
7.9. Amendments................................................................. A-29
7.10. Governing Law.............................................................. A-29
7.11. Incorporation by Reference................................................. A-29
Exhibit A.............................................................................. A-30
</TABLE>
A-4
<PAGE> 142
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION is made and entered into as of
the 12th day of January, 1996 (the "Reorganization Agreement"), by and among
Moxham Bank Corporation, a business corporation organized and existing under the
laws of the Commonwealth of Pennsylvania with its principal office at 540
Central Avenue, Johnstown, Pennsylvania 15902 ("Moxham"), and BT Financial
Corporation, a business corporation organized and existing under the laws of the
Commonwealth of Pennsylvania with its principal office at 551 Main Street,
Johnstown, PA 15901 ("BT Financial").
WITNESSETH:
WHEREAS, the respective Boards of Directors of Moxham and BT Financial have
determined that it would be in the best interests of their respective
organizations, stockholders and customers and communities served by them for
Moxham to be merged with and into BT Financial (the "Merger") pursuant to this
Reorganization Agreement, whereby the stockholders of Moxham will receive shares
of common stock of BT Financial in exchange for their shares of common stock of
Moxham; and
WHEREAS, immediately following the Merger, BT Financial shall merge First
National Bank of Garrett, a national banking association ("FNB Garrett") and
Moxham National Bank, a national banking association ("Moxham Bank"),
wholly-owned subsidiaries of Moxham, with and into Johnstown Bank and Trust
Company, a Pennsylvania bank and trust company and a wholly-owned subsidiary of
BT Financial ("Johnstown Bank"), which shall be the resulting bank (the "Bank
Merger"); and
WHEREAS, the respective Boards of Directors of Moxham and BT Financial have
approved the acquisition of Moxham and FNB Garret and Moxham Bank by BT
Financial through the proposed merger of Moxham with and into BT Financial upon
the terms and conditions set forth in this Reorganization Agreement in
accordance with the provisions of Section 368(a) of the Internal Revenue Code of
1986, as amended.
NOW, THEREFORE, in consideration of the premises and the representations,
warranties, covenants, conditions and actions hereinafter set forth, the parties
hereto, each intending to be legally bound hereby, agree as follows:
ARTICLE I
DEFINITIONS
1.1. Definitions. The terms defined in this Section 1.1 shall have the
meanings herein specified, unless the context clearly requires otherwise. Other
terms used herein are defined elsewhere in this Reorganization Agreement.
"Articles of Merger" means the Articles of Merger delivered to the
Department of State of the Commonwealth of Pennsylvania for filing pursuant to
Sections 1921 et seq. of the BCL.
"BT Financial Common Stock" means the common stock, par value $5 per share,
of BT Financial.
"Bank Holding Company Act" means the Bank Holding Company Act of , as
amended.
"Bank Merger" means the merger of FNB Garrett and Moxham Bank with and into
Johnstown Bank, with Johnstown Bank as the Resulting Institution.
"Bank Regulator" means all Federal or state Governmental Entities charged
with the supervision or regulation of banks or bank holding companies engaged in
the insurance of bank deposits.
"BCL" means the Pennsylvania Business Corporation Law of 1988, as amended.
"CERCLA" means the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended.
A-5
<PAGE> 143
"Closing and Closing Date" are defined in Section 2.5.
"COBRA" means the Consolidated Omnibus Budget Reconciliation Act of 1986.
"Code" means the Internal Revenue Code of 1986, as amended.
"Common Exchange Ratio" is defined in Section 2.2.
"Consents" means all authorizations, consents, orders or approvals of, or
declarations of filings with, and all expirations of waiting periods imposed by,
any Governmental Entity.
"Dissenters' Shares" means any shares of Moxham Common Stock or Moxham
Preferred Stock in respect of which the holders thereof shall have objected to
the Merger and otherwise complied with such of the requirements of Section 1930
of the BCL in order to be entitled to the rights and remedies of dissenting
stockholders.
"DOB" means the Pennsylvania Department of Banking.
"Environmental Condition" means (x) the presence in surface water,
groundwater, drinking water supply, land surface, subsurface strata,
above-ground or underground storage tanks or other containers, or ambient air of
any pollutant, contaminant, industrial solid waste, polychlorinated biphenyls or
Hazardous Substances or (y) any violation of any statute, ordinance, regulation,
administrative order, judicial order or decree or other governmental requirement
relating to the emission, discharge, deposit, disposal, leaching, migration or
release of any Hazardous Substance into the environment or the generation,
treatment, storage, transportation or disposal of any Hazardous Substance (i)
arising out of or otherwise related to the operations or other activities
(including the disposition of such materials or substances) of a company or any
of its Subsidiaries, or of any predecessor in title, interest or line of
business to such company, conducted or undertaken prior to the Closing, or (ii)
existing at or prior to the Closing at the Owned Real Property, any Leased Real
Property or any real property securing outstanding loans owed to such company.
"Effective Time" means the date and time the Articles of Merger are filed
with the Secretary of State of the Commonwealth of Pennsylvania pursuant to the
provisions of Sections 1921 et seq. of the BCL, which filing shall be made on
the Closing Date or such later date and time as may be mutually agreed upon by
the Parties and as specified in the Articles of Merger.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"FDIA" means the Federal Deposit Insurance Act.
"FDIC" means the Federal Deposit Insurance Corporation.
"Federal Reserve Board" means the Board of Governors of the Federal Reserve
System.
"Governmental Entity" means any court, administrative agency or commission
or other governmental authority or instrumentality, domestic or foreign.
"Hazardous Substance" means any hazardous or toxic or polluting substance
or waste, pollutant, contaminant, industrial solid waste, residual waste or
special waste, including, but not limited to, any substance, waste or other
material included in the definition of "Hazardous Substance" as set forth in
Section 101(14) of CERCLA.
"Leased Real Property" is defined in Section 4.1(k).
"Moxham Common Stock" means the common stock, $2 par value per share, of
Moxham.
"Moxham Preferred Stock" means Moxham's Series A $8.00 Cumulative
Convertible Non-Voting Preferred Stock.
"NASD" means the National Association of Securities Dealers, Inc.
"NASDAQ" means the NASD Automated Quotations System.
A-6
<PAGE> 144
"OCC" means the Office of the Comptroller of the Currency.
"Owned Real Property" means all real property (including real estate owned
or acquired through foreclosure) owned by Moxham or any of its Subsidiaries.
"Parties" means Moxham and BT Financial in connection with this
Reorganization Agreement.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Preferred Exchange Ratio" is defined in Section 2.2(a).
"Prospectus/Proxy Statement" means the Prospectus/Proxy Statement, together
with any supplements thereto, to be sent to the stockholders of each of Moxham
and BT Financial to solicit their votes in connection with the transactions
contemplated by this Reorganization Agreement.
"Registration Statement" means the registration statement on Form S-4 (or
other appropriate form) of BT Financial, including any amendments or supplements
thereto, as declared effective by the SEC under the Securities Act with respect
to the issuance of BT Financial Common Stock in connection with the Merger and
the approval by the stockholders of Moxham and BT Financial of the transactions
contemplated by this Reorganization Agreement, which Registration Statement
shall include the Prospectus/Proxy Statement.
"Requisite Regulatory Approvals" means all Consents which are necessary for
the consummation of the Merger or Bank Merger, other than immaterial Consents
the failure to obtain which would have no material adverse effect on the
consummation of the Merger or the Bank Merger or on BT Financial.
"Resulting Company" means BT Financial after consummation of the Merger.
"SAIF" means the Savings Association Insurance Fund.
"SEC" means the United States Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Laws" means the Securities Act, the Exchange Act and applicable
state "blue sky" securities laws.
"Service" means the United States Internal Revenue Service.
"Subsidiary" means any corporation or other entity of which the securities
or other ownership interests having ordinary voting power to elect a majority of
the board of directors or other persons performing similar functions of such
corporation or other entity are at the time directly or indirectly owned or
controlled by a Party.
"Taxes" means all federal, state and local taxes and similar governmental
charges.
"Transactions" means the negotiation and execution of this Reorganization
Agreement, the Merger, the Bank Merger and all related transactions.
1.2. Accounting Terms. For all purposes of this Reorganization Agreement,
unless the context clearly requires otherwise, any accounting term not
specifically defined in this Reorganization Agreement shall have the meaning
given to it in accordance with generally accepted accounting principles and
practices within the financial institutions industry as in effect as of the date
of this Reorganization Agreement.
ARTICLE II
THE MERGER
2.1. Merger.
(a) Holding Company Merger. Upon satisfaction of the conditions set forth
herein, at the Effective Time, Moxham shall merge with and into BT Financial in
accordance with the provisions and procedures set forth herein, and BT Financial
shall be the Resulting Company. At the Effective Time, the separate corporate
A-7
<PAGE> 145
existence of Moxham shall cease and BT Financial shall succeed to all the
rights, privileges, immunities and franchises, and all the property and assets,
real, personal and mixed, of Moxham, without the necessity for any separate
conveyance or other transfer. The Resulting Company shall thereafter be
responsible and liable for all liabilities and obligations of Moxham of every
kind and description, and neither the rights of creditors nor any liens on the
property of Moxham shall be impaired by the Merger.
(b) Bank Merger. After the Effective Time, BT Financial will cause the
Bank Merger to occur in accordance with the Bank Plan of Merger attached hereto
as Exhibit A.
2.2. Conversion of Shares of Moxham Stock.
(a) At the Effective Time,
(i) each share of Moxham Common Stock then outstanding, except
Dissenters' Shares and treasury shares, shall be converted into the right
to receive 1.15 shares of BT Financial Common Stock (the "Common Exchange
Ratio"), in each case except as set forth in Section 2.2(b) and (c), and
(ii) each share of Moxham Preferred Stock then outstanding (except
Dissenters Shares and treasury shares) shall be converted into the right to
receive 6.325 shares of BT Financial Common Stock, (the "Preferred Exchange
Ratio") plus accrued but unpaid dividends thereon to the Effective Time, in
each case except as set forth in Section 2.2(b) and (c).
(b) On the Closing Date, by virtue of the Merger, and without any action on
the part of the stockholders of Moxham, each of the then issued and outstanding
shares of Moxham Common Stock and Moxham Preferred Stock shall cease to exist
and shall be deemed canceled, retired and eliminated, and all rights in respect
thereof (other than with respect to Dissenters' Shares) shall cease except the
herein described rights to receive BT Financial Common Stock, regardless of
whether the certificates representing such shares are surrendered to BT
Financial by the stockholders of Moxham.
(c) The Common Exchange Ratio and the Preferred Exchange Ratio shall be
adjusted at the Effective Time to reflect any consolidation, split-up, other
subdivision or combination of BT Financial Common Stock, any dividend payable in
BT Financial Common Stock, or any capital reorganization involving the
reclassification of BT Financial Common Stock subsequent to the date of this
Reorganization Agreement and prior to such time. BT Financial shall register
under the Securities Act all shares of BT Financial Common Stock to be issued in
the Merger prior to the Effective Time thereof.
2.3. Articles of Incorporation; By-Laws. At the Effective Time, the
articles of incorporation and bylaws of BT Financial as in effect immediately
prior to the Effective Time shall be the articles of incorporation and bylaws of
the Resulting Company.
2.4. Directors and Officers.
(a) The directors and officers of the Resulting Company from and after the
Effective Time shall be the directors and officers of BT Financial immediately
prior to the Effective Time. In addition, four directors of Moxham designated by
Moxham who shall be acceptable to BT Financial shall become directors of BT
Financial at the Effective Time to serve for such terms as may be determined by
BT Financial consistent with its director retirement policies.
(b) Immediately after the Bank Merger, Charles T. Evans and seven other
directors of Moxham, selected by Moxham prior to the Merger (who may include
some of those persons selected to be directors of BT Financial pursuant to
clause (a) of this Section 2.4) and acceptable to BT Financial shall be
appointed to the Board of Directors of Johnstown Bank, each to serve until the
1997 annual meeting of the stockholders of BT Financial.
2.5. Closing. The closing hereunder ("Closing") shall take place at the
offices of Kirkpatrick & Lockhart LLP, 1500 Oliver Building, Pittsburgh,
Pennsylvania 15222, or such other place agreed upon by the Parties, on the
closing date selected by the Parties (the "Closing Date") which shall be the
latest of:
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(a) Any business day between the thirtieth and forty-fifth day following
approval of the Merger and the Bank Merger by the Federal Reserve Board, or
other applicable federal or state regulatory agency, if all other conditions set
forth in Article V have been satisfied or waived; or
(b) The fifth business day following approval of the Bank Merger by the
DOB; or
(c) The fifth business day after any stay of any approval of the
transactions referred to in clause (a) or (b) of this Section 2.5 or any
injunction against consummation of such transactions is lifted, discharged or
dismissed, if all other conditions set forth in Article V have been satisfied or
waived; or
(d) Such other date as shall be mutually agreed to in writing by the
Parties on which all other conditions set forth in Article V shall have been
satisfied or waived.
Any Party may postpone the Closing Date once for a reasonable period of time
(which shall be no more than thirty (30) days and in no event ending later than
the day of automatic termination in accordance with Section 2.7(g)) if necessary
to enable it to perform any obligations hereunder; provided, that such Party
provides prompt written notice to the other Parties of such postponement,
stating the reasons therefor. If either Moxham or BT Financial shall refuse to
close because all the conditions precedent to its obligation to close shall not
have been met on the Closing Date as postponed, such Party may immediately
terminate this Reorganization Agreement by giving written notice of such
termination to the other Parties.
2.6. Exchange of Certificates for Stock and Cash.
(a) Moxham Stock. After the Effective Time, each holder of a certificate
for theretofore outstanding shares of Moxham Common Stock or Moxham Preferred
Stock, upon surrender of such certificate to BT Financial or its exchange agent,
together with a duly executed and completed letter of transmittal, which shall
be mailed to each holder of a certificate for theretofore outstanding shares of
Moxham Common Stock or Moxham Preferred Stock by BT Financial or its exchange
agent promptly following the Effective Time, shall be entitled to receive in
exchange therefor a certificate or certificates representing the number of whole
shares of BT Financial Common Stock to which such stockholder is entitled as
provided in Section 2.2, plus cash (payable by check) in lieu of any fractional
share of BT Financial Common Stock to which such holder would otherwise be
entitled. Neither certificates nor scrip certificates for fractions of shares of
BT Financial Common Stock shall be issued, and holders of Moxham Common Stock or
Moxham Preferred Stock who would but for this Section 2.6(a) be entitled to
receive fractions of shares of BT Financial Common Stock shall have none of the
rights with respect to such fractions of shares (including, without limitation,
the right to receive dividends) which a holder shall possess in respect of a
full share of BT Financial Common Stock, and each such holder shall receive, in
lieu of the applicable fraction of a share of BT Financial Common Stock, a cash
payment therefor equal to such fraction of a share of BT Financial Common Stock
multiplied by the closing sales price on NASDAQ for a share of BT Financial
Common Stock on the Closing Date as reported in The Wall Street Journal, or, if
BT Financial Common Stock is not traded on such date, the next preceding day on
which such stock is traded. No interest will be paid or accrued on cash payable
upon surrender of certificates previously representing Moxham Common Stock.
(b) Failure to Surrender Certificates. Until surrendered in accordance
with the provisions of this Section 2.6, the certificates which immediately
prior to the Effective Time represented issued and outstanding shares of Moxham
Common Stock or Moxham Preferred Stock (except for certificates representing
Dissenters' Shares and treasury shares) shall from and after the Effective Time
represent for all purposes only the right to receive BT Financial Common Stock
as provided in Section 2.2. Upon surrender of a certificate for theretofore
outstanding shares of Moxham Common Stock or Moxham Preferred Stock, there shall
be paid to the recordholder of the certificate for shares of BT Financial Common
Stock issued in exchange therefor (i) on the date of such exchange, the amount
of dividends theretofore accrued and payable with respect to such full shares of
BT Financial Common Stock as of any date subsequent to the Effective Time which
have not yet been paid to a public official pursuant to abandoned property laws,
(ii) on the date of such exchange cash in an amount equal to the accrued but
unpaid dividend in respect of Moxham Preferred Stock represented by certificates
therefore surrendered for exchange through the Effective Date, accrued at the
dividend rate of the Preferred Stock for the number of days between the last
date on which dividends on the
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Moxham Preferred Stock shall have been paid and the Effective Date, based on a
year of 360 days having months of 30 days each, and (iii) at the appropriate
payment date, the amount of dividends with a record date after the Effective
Time but prior to such surrender and a payment date subsequent to such
surrender. No interest shall be payable with respect to such dividends.
(c) Treasury Shares and Dissenters' Shares. At the Effective Time, each
share of Moxham Common Stock and Moxham Preferred Stock held in treasury shall
be canceled, retired and cease to exist and no consideration shall be paid
therefor and each Dissenters' Share shall be treated in accordance with Section
1930 of the BCL.
2.7. Termination of this Reorganization Agreement. This Reorganization
Agreement and the transactions contemplated hereby may be terminated:
(a) at any time prior to the Effective Time by mutual consent in writing of
the Parties;
(b) as provided in Section 2.5;
(c) by either party in writing on or before the 60th day after the date
hereof, if anything has come to the attention of such party in the course of its
due diligence investigation of the other party that in such party's reasonable,
good faith opinion adversely affects the business, financial condition or
results of operations of the other party so that it would be inadvisable for
such party to proceed with the transactions contemplated herein; or
(d) at any time, by either Party hereto in writing, if the applications for
prior approval referred to in Section 4.5(f) hereof have been denied, and the
time period for appeals and requests for reconsideration has run;
(e) at any time, by either Party hereto in writing, if the stockholders of
either Moxham and BT Financial do not approve the transactions contemplated
herein at the respective annual or special meetings duly called for that
purpose;
(f) at any time, by either Party in writing, if such party determines in
good faith that any condition precedent to such party's obligations to
consummate the Merger and the Bank Merger is or would be impossible to satisfy,
provided that the terminating party has given the other party written notice
with respect thereto at least 10 days prior to such termination and has given
the other party a reasonable opportunity to discuss the matter with a view to
achieving a mutually acceptable resolution;
(g) in any event, automatically on May 30, 1996 if the Merger has not been
consummated on or before such date, unless extended by mutual consent of the
Parties.
In the event of any termination hereunder, (i) Sections 2.7 and 2.8 and Article
VI hereof shall survive any termination; (ii) if BT Financial terminates this
Reorganization Agreement under Section 2.5 due to the failure of any condition
set forth in Section 5.1(a), (b), (c) or (g), then Moxham shall reimburse BT
Financial for attorneys' fees and other expenses reasonably incurred in
connection with the Transactions and such failure shall constitute a breach of
this Reorganization Agreement and BT Financial shall have all rights available
in law and at equity for such breach of contract; (iii) if Moxham terminates
this Reorganization Agreement under Section 2.5 due to the failure of any
condition set forth in Section 5.2(a), (b), (c) or (g), then BT Financial shall
reimburse Moxham for attorneys' fees and other expenses reasonably incurred in
connection with the Transactions and such failure shall constitute a breach of
this Reorganization Agreement and Moxham shall have all rights available in law
and at equity for such breach of contract; (iv) if BT Financial terminates this
Reorganization Agreement under Section 2.5 due to the failure of any condition
set forth in Section 5.1(h) or (o), then Moxham shall reimburse BT Financial for
attorneys' fees and other expenses reasonably incurred in connection with the
Transactions (to the extent not already paid by Moxham to BT Financial) and upon
payment in full thereof, Moxham shall have no further liability or obligation
hereunder to BT Financial; (v) if Moxham terminates this Reorganization
Agreement under Section 2.5 due to the failure of any condition set forth in
Section 5.2(h), then BT Financial shall reimburse Moxham for attorneys' fees and
other expenses reasonably incurred in connection with the Transactions and, upon
payment in full thereof, BT Financial shall have no further liability or
obligation hereunder to Moxham; and (vi) if
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either party terminates for any reason other than those specified in clauses
(ii) through (v) above, then neither Party shall have any further liability to
the other.
2.8. Confidentiality. In connection with the Merger and the Bank Merger,
each Party has furnished and will furnish to the officers, pursuant to this
Reorganization Agreement or otherwise, confidential information concerning its
business and financial condition. Each Party shall, and shall cause its
employees, agents, accountants, attorneys and investment advisors to, maintain
the confidentiality of such information received from the other Parties and
shall not use such information for any purpose except in furtherance of the
Merger, the Bank Merger and the other transactions contemplated hereby. In the
event of a termination of this Reorganization Agreement, upon request by a
Party, the other Party shall return or destroy all copies of written
confidential information received from such Party, whether pursuant to this
Reorganization Agreement or otherwise, and all documents prepared by them which
contain such information.
2.9. Public Disclosure. Each Party shall consult with the other Party
before issuing any press release or making any other public disclosure regarding
the proposed Merger, the Bank Merger or the other transactions contemplated
hereby and shall not issue any press release or make any other public disclosure
prior to such consultations, except as may be required by law or by the rules of
NASD in the opinion of counsel. A copy of such press release or public
disclosure (or, if not in written form, a written description thereof) shall be
provided to the other Party a reasonable period of time prior to the
dissemination thereof.
ARTICLE III
STOCKHOLDER APPROVAL
3.1. Moxham Stockholders Meeting. Moxham shall submit this Reorganization
Agreement to its stockholders for approval in accordance with the BCL at a
meeting duly convened and held on such date as shall be mutually agreed upon by
Moxham and BT Financial. In connection with such meeting, Moxham shall furnish
the Prospectus/Proxy Statement to its stockholders. The Board of Directors of
Moxham shall recommend the proposed Merger to its stockholders and use its best
efforts to obtain the affirmative vote of the stockholders of Moxham required to
approve the transactions contemplated by this Reorganization Agreement.
3.2. BT Financial Stockholders Meeting. BT Financial shall submit this
Reorganization Agreement to its stockholders for approval in accordance with the
BCL at a meeting duly convened and held on such date as shall be mutually agreed
upon by BT Financial and Moxham. In connection with such meeting, BT Financial
shall furnish the Prospectus/Proxy Statement to its stockholders. The Board of
Directors of BT Financial shall recommend the proposed Merger to its
stockholders and use its best efforts to obtain the affirmative vote of the
stockholders of BT Financial required to approve the transactions contemplated
by this Reorganization Agreement.
ARTICLE IV
REPRESENTATIONS, WARRANTIES AND COVENANTS
4.1. Representations and Warranties of Moxham. Moxham represents and
warrants to BT Financial as follows:
(a) Organization and Capitalization. Moxham is a corporation duly
organized, validly existing and in good standing under the laws of the
Commonwealth of Pennsylvania and has full power and authority to carry on its
business as it is now being conducted and to carry out the transactions
contemplated by this Reorganization Agreement. The authorized capital stock of
Moxham consists of 2,880,000 shares of common stock, $2 par value per share, of
which 905,437 shares are issued and outstanding as of the date hereof and no
shares are held in the treasury of Moxham, and 250,000 shares of Moxham
Preferred Stock, no par value, of which 14,000 shares are issued and
outstanding. All issued and outstanding shares of Moxham Common Stock are
validly issued, fully paid and nonassessable. There is no subscription, option,
warrant, call, right, stock appreciation right or commitment of any kind
obligating Moxham to issue any of its stock or to acquire any of
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its stock under any circumstances or to pay cash on account of stock
appreciation except as provided in its articles of incorporation relating to
conversion rights of the Moxham Preferred Stock.
(b) Authority for Transactions. This Reorganization Agreement has been,
and the Articles of Merger and the Certificate of Merger, when executed and
delivered, will have been, duly and validly authorized, executed and delivered
by Moxham, subject only to the approval of the stockholders of Moxham and BT
Financial, the DOB and the Federal Reserve Board, and constitutes the valid and
binding obligations of Moxham and are and will be enforceable in accordance with
their respective terms.
(c) No Conflicts. Neither the execution, delivery and performance of this
Reorganization Agreement by Moxham nor the consummation of the Transactions nor
compliance by Moxham with any of the provisions hereof will
(i) violate, or conflict with, or result in a breach of any provisions
of, or constitute a default (or an event which, with notice or lapse of
time or both, would constitute a default) under, or result in the
termination of, or accelerate the performance required by, or result in a
right of termination or acceleration under, or result in the creation of
any lien, security interest, charge or encumbrance upon any of the
properties or assets of Moxham or any of its Subsidiaries under any of the
terms, conditions or provisions of, (A) the articles of incorporation or
bylaws, as amended, of Moxham or any of its Subsidiaries or (B) any note,
bond, mortgage, indenture, deed of trust, license, lease, agreement or
other instrument or obligation to which Moxham or any of its Subsidiaries
is a party or by which either of them is bound or to which any of their
respective properties or assets may be subject, or
(ii) violate any judgment, ruling, order, writ, injunction, decree,
statute, rule or regulation applicable to them or any of their respective
properties or assets.
(d) Consents and Approvals. No consents or approvals of or filings or
registrations with any third party or any public body, agency or authority are
necessary in connection with the execution and delivery by Moxham of this
Reorganization Agreement, its performance of the transactions contemplated
hereby and consummation of the transactions contemplated hereby except for
(i) the filing with any federal or state governmental authority of a
Prospectus/Proxy Statement, a Registration Statement and any other
applicable securities filings relating to the issuance of BT Financial
Common Stock and the meetings of the stockholders of Moxham and BT
Financial, respectively, at which the Merger is to be considered;
(ii) the approval of the Federal Reserve Board and the DOB of BT
Financial's acquisition of all of the issued and outstanding shares of
Moxham;
(iii) the approval of the stockholders of Moxham;
(iv) the approval of the stockholders of BT Financial; and
(vi) the expiration of any regulatory waiting period.
(e) SEC Documents. Moxham has made available to BT Financial a true and
complete copy of each report, schedule, registration statement and definitive
proxy statement filed by Moxham with the SEC (other than reports filed pursuant
to Section 13(d) or 13(g) of the Exchange Act) since December 31, 1993 (as such
documents have since the time of their filing been amended, the "Moxham SEC
Documents"), which are all the documents (other than preliminary material and
reports required pursuant to Section 13(d) or 13(g) of the Exchange Act) that
Moxham was required to file with the SEC since that date. As of their respective
dates of filing with the SEC, the Moxham SEC Documents complied in all material
respects with the requirements of the Securities Act, or the Exchange Act, as
the case may be, and the rules and regulations of the SEC thereunder applicable
to such Moxham SEC Documents, and did not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. The financial statements of Moxham
included in the Moxham SEC Documents complied as to form, as of their respective
dates of filing with the SEC, in all material respects with applicable
accounting requirements and with the
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published rules and regulations of the SEC with respect thereto, have been
prepared in accordance with generally accepted accounting principles applied on
a consistent basis during the periods involved (except as may be indicated in
the notes thereto or, in the case of the unaudited statements, as permitted by
Form 10-QSB of the SEC) and fairly present in all material respects the
consolidated financial position of Moxham and its consolidated Subsidiaries as
at the dates thereof and the consolidated results of operations, changes in
stockholders' equity and cash flows of such companies for the periods then
ended. All material agreements, contracts and other documents required to be
filed as exhibits to any of the Moxham SEC Documents have been so filed.
(f) Subsidiaries. Exhibit 21 to Moxham's Annual Report on Form 10-KSB for
the fiscal year ended December 31, 1994 includes all the Subsidiaries of Moxham
as of the date of this Agreement. Moxham owns, directly or indirectly,
beneficially and of record 100% of the issued and outstanding voting securities
of each such Subsidiary (other than directors' qualifying shares, if any). Each
of Moxham's Subsidiaries that is a bank (as defined in the BHC Act) is an
"insured bank" as defined in the FDIA and applicable regulations thereunder. No
deposits of Moxham's subsidiaries are insured by the SAIF. All of the shares of
capital stock of each of the Subsidiaries held by Moxham Subsidiary are fully
paid and nonassessable and are owned by Moxham or a Subsidiary of Moxham free
and clear of any claim, lien or encumbrance.
(g) Absence of Certain Changes or Events. Except as disclosed in the
Moxham SEC Documents filed prior to the date of this Agreement, since December
31, 1994, Moxham and its Subsidiaries have not incurred any material liability,
except in the ordinary course of their businesses consistent with their past
practices, nor has there been any change, or any event involving a prospective
change, in the business, financial condition or results of operations of Moxham
or any of its Subsidiaries which has had, or is reasonably likely to have, a
material adverse effect on Moxham, and Moxham and its Subsidiaries have
conducted their respective businesses in the ordinary course consistent with
their past practices.
(h) Certain Changes. Since December 31, 1994, there has been:
(i) no change in the organization, key personnel or method of doing
business of Moxham or any of its Subsidiaries, except for changes in the
ordinary course of business, none of which, individually or in the
aggregate, has been material to the business or financial condition of
Moxham on a consolidated basis;
(ii) no damage, destruction or casualty loss with respect to property
owned or leased by Moxham or any of its Subsidiaries (whether or not
covered by insurance) which affected or could affect the business or
financial condition or results of Moxham on a consolidated basis;
(iii) no changes in the authorized or issued shares of Moxham Common
Stock or Moxham Preferred Stock and no declaration or payment of
distributions or dividends with respect to the Moxham Common Stock or
redemption or repurchase of any such shares, except as otherwise permitted
by Section 4.3(c) of this Reorganization Agreement and except for changes
occurring as a result of any conversion of Moxham Preferred Stock into
Moxham Common Stock; and
(iv) no acquisition by Moxham or any of its Subsidiaries of the assets
or more than 5% of the outstanding voting capital stock of another company.
(i) Taxes. Moxham and its Subsidiaries have filed when due all returns
("Returns") for and paid in full all Taxes to the extent such filings and
payments were required prior to the date of this Reorganization Agreement. Such
filings comply with all applicable laws and are true, correct and complete. Any
amounts set up as accruals or reserves in the audited consolidated financial
statements of Moxham are sufficient for the payment of all Taxes, whether or not
presently being asserted or assessed, the liability for which has arisen from
any action of Moxham or any of its Subsidiaries prior to the dates of such
financial statements. No claims are currently being made by any taxing authority
with respect to any Return, and Moxham has no knowledge of any basis for any
such claims. Proper and accurate amounts have been withheld and remitted by
Moxham and its Subsidiaries from and for their employees for all prior periods
in compliance with the tax withholding provisions of applicable federal, state
and local law. Moxham has not had any Tax deficiencies
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proposed or assessed against it and has not executed any waiver or extended the
statute of limitations on the audit of any Return or the assessment or
collection of any Tax.
(j) Compliance with Laws. Moxham and each of its Subsidiaries are in
compliance in all material respects with all laws and regulations applicable to
their respective operations or with respect to which compliance is a condition
of engaging in the business thereof. Moxham and its Subsidiaries have paid all
assessments and filed all reports and statements required to be filed with
respect thereto under the rules and regulations of the DOB and the OCC.
(k) Environmental.
(i) There are no Environmental Conditions applicable to Moxham or any
of its Subsidiaries;
(ii) There are no underground storage tanks located beneath the Owned
Real Property or any real property leased by Moxham or any of its
Subsidiaries (the "Leased Real Property");
(iii) No investigation, administrative order, consent order,
agreement, litigation or settlement with respect to any Environmental
Condition is proposed, threatened or in existence and neither Moxham nor
any of its Subsidiaries has received any communication from or on behalf of
any governmental authority that alleges that any such Environmental
Condition exists;
(iv) Neither Moxham nor any of its Subsidiaries has transported any
Hazardous Substances or arranged for the transportation of such Hazardous
Substances to any location which is listed or proposed for listing under
CERCLA or which is the subject of federal, state or local enforcement
actions or other investigations which may lead to claims against Moxham or
any of its Subsidiaries for clean-up costs, remedial work, damages to
natural resources or for personal injury claims, including, but not limited
to, claims under CERCLA.
(l) Insurance. Neither Moxham nor any of its Subsidiaries is in default
with respect to any provisions of any liability or other forms of insurance held
by it or has failed to give any notice or present any claim thereunder in a due
and timely fashion. All polices of insurance are in full force and effect and
are carried in an amount and are otherwise adequate to protect Moxham from any
material adverse loss on a consolidated basis. Neither Moxham nor any of its
Subsidiaries has been denied any application for insurance or had any policy of
insurance terminated during the past three years, or has been notified of any
pending termination.
(m) ERISA.
(i) Disclosure. Moxham has previously delivered to BT Financial a
true, correct and complete list of all qualified pension and profit-sharing
plans, all deferred compensation, consultant, bonus and group insurance
contracts and other incentive, welfare and employee benefit plans and
agreements that are presently in effect for the benefit of employees or
former employees of either Moxham or any of its Subsidiaries. Moxham has
made available to BT Financial, as to each plan where applicable, a true
and correct copy of (A) such plan, (B) the most recent annual report (Form
5500) filed with the Service, (C) each trust agreement and group annuity
contract relating to such plan, (D) the most recent actuarial report or
valuation relating to such plan that was delivered to either Moxham or any
of its Subsidiaries by the actuary for the plan and (E) the most recent
favorable Service determination letter with respect to such plan. Moxham
has previously delivered to BT Financial a list of all employee benefit
plans (as defined in Section 3(3) of ERISA) and each other employee benefit
arrangement, contract, agreement or policy, including, without limitation,
pension or profit sharing or thrift plans, contributions to medical
benefit, death benefit and disability programs, and vacation and sick leave
policies applicable to employees of either Moxham or any of its
Subsidiaries (hereinafter referred to collectively as the "Plans"). All
Plans have been operated substantially in accordance with their respective
terms and there have been no operational defects in the operation of the
Plans. All Plans have complied in all material respects with applicable
requirements of the Code and any predecessor federal income tax laws,
ERISA, the health care continuation requirements of COBRA, all other
applicable laws, and any applicable collective bargaining agreements.
Without limiting the generality of the foregoing, Moxham and its
Subsidiaries have provided all notices and other correspondence to
employees and former employees
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required by the health care continuation provisions of COBRA, except where
the failure to provide any such notice would not have a material adverse
effect on Moxham on a consolidated basis.
(ii) Liabilities. Neither Moxham nor its Subsidiaries nor any Plan
has incurred any liability to the PBGC or excise tax payable to the Service
with respect to any Plans, and neither Moxham nor any of its Subsidiaries
has incurred any liability under Section 4201 of ERISA for a complete or
partial withdrawal from, nor does it have any obligation to contribute to,
a multiemployer plan. Neither Moxham nor its Subsidiaries have knowledge of
any circumstances that would adversely affect the qualification of the
Plans or their compliance with the applicable requirements of ERISA, of any
"reportable event" (within the meaning of Section 4043(b) of ERISA) or of
any "prohibited transaction" (as such term is defined in Section 406 of
ERISA and Section 4975(c) of the Code) which circumstances, reportable
event or prohibited transaction has occurred and which could reasonably be
expected to result in any tax or liability material to Moxham on a
consolidated basis. All such Plans have assets valued at fair market value
which are equal to 110% of the accumulated benefit obligations (as
calculated on a termination basis using the actuarial assumptions set forth
in the respective plans and the interest rate for immediate annuities as
published by the PBGC and in effect for terminations in November, 1995
under such Plans).
(n) Representations Not Misleading. No representation or warranty by
Moxham in this Reorganization Agreement contains, and no written statement,
exhibit or schedule furnished to BT Financial by or on behalf of Moxham or any
of its Subsidiaries under this Reorganization Agreement will contain as of the
date thereof, any untrue statement of a material fact or omits, or will omit, to
state a material fact necessary to make the statements contained herein or
therein not misleading in any material respect, when taken as a whole.
(o) Information Supplied. None of the information supplied or to be
supplied by Moxham for inclusion or incorporation by reference in
(i) the Registration Statement will, at the time the S-4 is filed with
the SEC and at the time it becomes effective under the Securities Act,
contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading, and
(ii) the Prospectus/Proxy Statement will, at the date of mailing to
stockholders and at the times of the meetings of stockholders to be held in
connection with the Merger, contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The
Prospectus/Proxy Statement (except for such portions thereof that relate
only to BT Financial) will comply as to form in all material respects with
the requirements of the Exchange Act and the rules and regulations of the
SEC thereunder.
(p) Accounting Matters. Neither Moxham nor any of its Subsidiaries, has
through the date hereof taken or agreed to take any action that would prevent BT
Financial from accounting for the business combination to be effected by the
Merger as a "pooling of interests".
(q) Certain Agreements. Except as disclosed in the Moxham SEC Documents
filed prior to the date of this Agreement or as disclosed in writing to the
other party prior to the date hereof and except for this Agreement, as of the
date of this Agreement, neither Moxham nor any of its Subsidiaries is a party to
any oral or written
(i) consulting agreement not terminable on six months or less notice
involving the payment of more than $50,000 per annum;
(ii) collective bargaining agreement covering any employees in the
United States;
(iii) employment agreement with any director, officer or employee of
Moxham or Subsidiary of Moxham;
(iv) other agreement with any director, officer or other employee of
Moxham or any Subsidiary of Moxham the benefits of which are contingent, or
the terms of which are materially altered, upon the
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occurrence of a transaction involving Moxham, Moxham Bank or FNB Garrett of
the nature contemplated by this Agreement, except for Moxham's Executive
Retirement Plan, as amended through December 12, 1995; or
(v) agreement or plan, including any stock option plan, stock
appreciation rights plan, restricted stock plan or stock purchase plan, any
of the benefits of which will be increased, or the vesting of the benefits
of which will be accelerated, by the occurrence of any of the transactions
contemplated by this Agreement or the value of any of the benefits of which
will be calculated on the basis of any of the transactions contemplated by
this Agreement.
(r) Agreements with Bank Regulators. Neither Moxham nor any of its
Subsidiaries is a party to any written agreement or memorandum of understanding
with, or a party to any commitment letter or similar undertaking to, or is
subject to any order or directive by, or is a recipient of any extraordinary
supervisory letter from, or has adopted any board resolutions at the request of,
any Bank Regulator which restricts materially the conduct of its business, or in
any manner relates to its capital adequacy, its credit policies or its
management, nor has Moxham been advised by any Bank Regulator that it is
contemplating issuing or requesting (or is considering the appropriateness of
issuing or requesting) any such order, decree, agreement, memorandum of
understanding, extraordinary supervisory letter, commitment letter or similar
submission, or any such board resolutions.
(s) Loan Loss Reserve. The loan loss reserve maintained by each of Moxham
Bank and FNB Garrett for all loans in its portfolio is adequate in all respects
under the requirements of generally accepted accounting principles and practices
within the financial institutions industry to cover all reasonably anticipated
risks of nonpayment with regard to the loan portfolio of each of Moxham Bank and
FNB Garrett.
(t) Fidelity Bonds. Each of Moxham Bank and FNB Garrett has maintained
continuously fidelity bonds insuring it against acts of dishonesty by each of
its employees in aggregate amounts as are customary, usual and prudent for
savings institutions of its size, which coverage currently is $2,000,000. Since
December 31, 1994 there have been no claims under such bonds, and Moxham is not
aware of any facts which would form the basis of a claim under such bonds.
Moxham has no reason to believe that its fidelity coverage will not continue to
be available on substantially the same terms as its existing coverage.
4.2. Representations and Warranties of BT Financial. BT Financial
represents and warrants to Moxham as follows:
(a) Organization and Capitalization. BT Financial is a corporation duly
organized, validly existing and in good standing under the laws of the
Commonwealth of Pennsylvania and has full power and authority to carry on its
business as it is now being conducted and to carry out the transactions
contemplated by this Reorganization Agreement. The authorized capital stock of
BT Financial consists of 10,000,000 shares of common stock, par value $5 per
share, of which 3,826,581 shares are issued and outstanding as of the date
hereof and no shares are held in the treasury of BT Financial, and 2,000,000
shares of preferred stock, of which no shares are issued and outstanding. All
issued and outstanding shares of BT Financial Common Stock are validly issued,
fully paid and nonassessable. There is no subscription, option, warrant, call,
right, stock appreciation right or commitment of any kind obligating BT
Financial to issue any of its stock or to acquire any of its stock under any
circumstances or to pay cash on account of stock appreciation.
(b) Authority for Transactions. This Reorganization Agreement has been,
and the Articles of Merger and the Certificate of Merger, when executed and
delivered, will have been, duly and validly authorized, executed and delivered
by BT Financial, subject only to the approval of the stockholders of BT
Financial and Moxham, the DOB and the Federal Reserve Board, and constitutes the
valid and binding obligations of BT Financial and are and will be enforceable in
accordance with their respective terms.
(c) No Conflicts. Neither the execution, delivery and performance of this
Reorganization Agreement by BT Financial nor the consummation of the
Transactions nor compliance by BT Financial with any of the provisions hereof
will
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(i) violate, or conflict with, or result in a breach of any provisions
of, or constitute a default (or an event which, with notice or lapse of
time or both, would constitute a default) under, or result in the
termination of, or accelerate the performance required by, or result in a
right of termination or acceleration under, or result in the creation of
any lien, security interest, charge or encumbrance upon any of the
properties or assets of BT Financial or any of its Subsidiaries under any
of the terms, conditions or provisions of, (A) the articles of
incorporation or bylaws, as amended, of BT Financial or any of its
Subsidiaries or (B) any note, bond, mortgage, indenture, deed of trust,
license, lease, agreement or other instrument or obligation to which BT
Financial or any of its Subsidiaries is a party or by which either of them
is bound or to which any of their respective properties or assets may be
subject, or
(ii) violate any judgment, ruling, order, writ, injunction, decree,
statute, rule or regulation applicable to them or any of their respective
properties or assets.
(d) Consents and Approvals. No consents or approvals of or filings or
registrations with any third party or any public body, agency or authority
are necessary in connection with the execution and delivery by BT Financial
of this Reorganization Agreement, its performance of the transactions
contemplated hereby and consummation of the transactions contemplated
hereby except for
(i) the filing with any federal or state governmental authority of a
Prospectus/Proxy Statement, a Registration Statement and any other
applicable securities filings relating to the issuance of BT Financial
Common Stock and the meetings of the stockholders of Moxham and BT
Financial, respectively, at which the Merger is to be considered;
(ii) the approval of the Federal Reserve Board and the DOB of BT
Financial's acquisition of all of the issued and outstanding shares of
Moxham;
(iii) the approval of the stockholders of Moxham;
(iv) the approval of the stockholders of BT Financial;
(v) the obtaining of any necessary third party consents ; and
(vi) the expiration of any regulatory waiting period.
(e) SEC Documents. BT Financial has made available to Moxham a true and
complete copy of each report, schedule, registration statement and definitive
proxy statement filed by BT Financial with the SEC (other than reports filed
pursuant to Section 13(d) or 13(g) of the Exchange Act) since December 31, 1993
(as such documents have since the time of their filing been amended, the "BT
Financial SEC Documents"), which are all the documents (other than preliminary
material and reports required pursuant to Section 13(d) or 13(g) of the Exchange
Act) that BT Financial was required to file with the SEC since that date. As of
their respective dates of filing with the SEC, the BT Financial SEC Documents
complied in all material respects with the requirements of the Securities Act,
or the Exchange Act, as the case may be, and the rules and regulations of the
SEC thereunder applicable to such BT Financial SEC Documents, and did not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading. The
financial statements of BT Financial included in the BT Financial SEC Documents
complied as to form, as of their respective dates of filing with the SEC, in all
material respects with applicable accounting requirements and with the published
rules and regulations of the SEC with respect thereto, have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis during the periods involved (except as may be indicated in the notes
thereto or, in the case of the unaudited statements, as permitted by Form 10-Q
of the SEC) and fairly present in all material respects the consolidated
financial position of BT Financial and its consolidated Subsidiaries as at the
dates thereof and the consolidated results of operations, changes in
stockholders' equity and cash flows of such companies for the periods then
ended. All material agreements, contracts and other documents required to be
filed as exhibits to any of the BT Financial SEC Documents have been so filed.
(f) Subsidiaries. Exhibit 21 to BT Financial's Annual Report on Form 10-K
for the fiscal year ended December 31, 1994 includes all the Subsidiaries of BT
Financial as of the date of this Agreement.
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BT Financial owns, directly or indirectly, beneficially and of record 100% of
the issued and outstanding voting securities of each such Subsidiary. Each of BT
Financial's Subsidiaries that is a bank (as defined in the Bank Holding Company
Act) is an "insured bank" as defined in the FDIA and applicable regulations
thereunder. All of the shares of capital stock of each of the Subsidiaries held
by BT Financial Subsidiary are fully paid and nonassessable and are owned by BT
Financial or a Subsidiary of BT Financial free and clear of any claim, lien or
encumbrance.
(g) Absence of Certain Changes or Events. Except as disclosed in the BT
Financial SEC Documents filed prior to the date of this Agreement, since
December 31, 1994, BT Financial and its Subsidiaries have not incurred any
material liability, except in the ordinary course of their businesses consistent
with their past practices, nor has there been any change, or any event involving
a prospective change, in the business, financial condition or results of
operations of BT Financial or any of its Subsidiaries which has had, or is
reasonably likely to have, a material adverse effect on BT Financial, and BT
Financial and its Subsidiaries have conducted their respective businesses in the
ordinary course consistent with their past practices.
(h) Representations Not Misleading. No representation or warranty by BT
Financial in this Reorganization Agreement contains, and no written statement,
exhibit or schedule furnished to Moxham by or on behalf of BT Financial or any
of its Subsidiaries under this Reorganization Agreement will contain as of the
date thereof, any untrue statement of a material fact or omits, or will omit, to
state a material fact necessary to make the statements contained herein or
therein not misleading in any material respect, when taken as a whole.
(i) Information Supplied. None of the information supplied or to be
supplied by BT Financial for inclusion or incorporation by reference in
(i) the Registration Statement will, at the time the S-4 is filed with
the SEC and at the time it becomes effective under the Securities Act,
contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading, and
(ii) the Prospectus/Proxy Statement will, at the date of mailing to
stockholders and at the times of the meetings of stockholders to be held in
connection with the Merger, contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The
Prospectus/Proxy Statement (except for such portions thereof that relate
only to Moxham) will comply as to form in all material respects with the
requirements of the Exchange Act and the rules and regulations of the SEC
thereunder.
(j) Accounting Matters. Neither BT Financial nor any of its Subsidiaries,
has through the date hereof taken or agreed to take any action that would
prevent BT Financial from accounting for the business combination to be effected
by the Merger as a "pooling of interests".
(k) Employment Matters. BT Financial intends to offer the following
employees of Moxham or its Subsidiaries employment at will with BT Financial or
its Subsidiaries with salaries and benefits commensurate with the salaries and
benefits available to employees in comparable positions at BT Financial or its
Subsidiaries, as the case may be: Messrs. J.W. Smith, R.G. Case, P.J. Hayes,
R.L. Hackett, R.W. Brant, S.C. Witt, Ms. S.F. Joseph and Mr. H.E. Hudnall.
4.3. Covenants of Moxham. Moxham hereby covenants and agrees that:
(a) Access to Corporate Records. Until the Closing Date, Moxham and its
Subsidiaries shall give BT Financial and its representatives full access during
normal business hours to all their property, documents, contracts and records
and such information with respect to their business affairs and properties as BT
Financial from time to time may reasonably request; provided, however, that
neither Moxham nor its Subsidiaries shall be required to give such access or
information to the extent that it is prohibited therefrom by a rule, regulation
or order of any regulatory body. All documents, contracts, records or
information obtained pursuant to this Section 4.3(a) shall be and remain subject
to the confidentiality provisions of Section 2.8 of
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this Reorganization Agreement. Moxham shall immediately notify BT Financial of
any amendment to or modification of any forecasts previously delivered to BT
Financial.
(b) Financial Statements and Internal Audit Reports. Moxham shall promptly
provide BT Financial with copies of its annual, quarterly and monthly financial
statements for the periods ending between the date of this Reorganization
Agreement and the Effective Time. Moxham shall promptly forward to BT Financial
copies of Moxham's periodic internal audit reports. Moxham shall also promptly
provide or permit inspection of all reports filed by it or any of its
Subsidiaries during such period with the OCC or the Federal Reserve Board and
copies of all notices or reports sent to its stockholders to the extent
permitted by law and all notices, reports, and review letters received from the
OCC or the Federal Reserve Board. Until the Closing Date, Moxham will provide
copies of all such financial statements and notices, reports and review letters
to BT Financial on a prompt and timely basis.
(c) Negative Covenants--Conduct of Business. Except with the prior written
consent of BT Financial, neither Moxham nor any of its Subsidiaries shall, on or
after the date hereof:
(i) issue any capital notes or shares of its capital stock, declare or
distribute any stock dividend, authorize a stock split, or authorize,
issue or make any other distribution of, on, or with respect to, its
capital stock, except
(A) up to 74,722 shares of Moxham Common Stock may be issued after
December 31, 1994 in connection with Moxham's Dividend Reinvestment
Plan;
(B) Moxham may pay regular quarterly dividends in an amount not to
exceed $.16 per share of Moxham Common Stock and $2.00 per share of
Moxham Preferred Stock;
(C) issuance of Moxham Common Stock upon conversion of Moxham
Preferred Stock.
(ii) merge with, consolidate with, sell its assets to, or acquire
substantially all the assets of, any other corporation, bank or person, or
enter into any other transaction not in the ordinary course of business;
(iii) make any direct or indirect redemption, purchase or other
acquisition of any of its capital stock;
(iv) create any pension or profit sharing plan, bonus, deferred
compensation, death benefit or retirement plan, or any other fringe
benefit, enter into any employment contract (written or otherwise), or
grant any bonuses to any officer, director or employee;
(v) amend its articles of incorporation or bylaws except as may be
necessary to consummate the transactions contemplated by this
Reorganization Agreement or as required by law;
(vi) incur any liability or obligation or make any commitment or
disbursement, acquire or dispose of any property or asset, make any
contract or agreement, or engage in any transaction, except in the ordinary
course of business;
(vii) increase the rate of compensation of any director, officer,
employee or agent or enter into any agreement to increase the rate of
compensation of any director, officer or employee, other than normal
increases in the ordinary course of business and consistent with past
practice;
(viii) intentionally do anything or intentionally fail to do anything
which will cause a breach or a default under any contract, agreement,
commitment or obligation to which it is a party or by which it may be
bound;
(ix) except for securities transactions effected in the ordinary
course of business with the prior consent of BT Financial (which consent
shall not be unreasonably withheld), make any capital expenditures in
excess of $ 25,000 in the aggregate; or modify or extend any service bureau
contracts, hardware/software maintenance agreements, lease agreements or
other contracts that involve annual payments by Moxham or any of its
Subsidiaries that exceed $5,000 per contract or $20,000 in the aggregate;
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(x) change its lending, borrowing, investment, asset/liability
management or other material banking policies in any material respect
except as may be required by changes in applicable law, regulation or
regulatory directives, except that, in connection with the closing of the
transactions contemplated hereby, Moxham shall, and it shall cause its
Subsidiaries to, cooperate in good faith with BT Financial to adopt
policies, practices and procedures consistent with those utilized by BT
Financial and its Subsidiary s;
(xi) open, close or move any of the branch offices of Moxham Bank or
FNB Garrett except for the pending sale of Moxham's Salem 22 Plaza office;
(xii) purchase any securities, including, without limitation,
mortgage-backed securities, at a price approximately fifty basis points
above or below the face value of such securities.
(d) Notice of Changes. Until the Effective Time, Moxham and its
Subsidiaries shall give BT Financial prompt written notice of any change or
inaccuracies in any data previously given or made available to BT Financial
pursuant to this Reorganization Agreement.
(e) Acquisition Proposals. Neither Moxham nor any of its Subsidiaries nor
any of its officers and directors or the directors and officers of its
Subsidiaries nor any of its other affiliates (as defined in Rule 12b-2 under the
Exchange Act) (each, an "Affiliate") shall, and Moxham shall cause it and its
Subsidiaries' employees, agents and representatives (including, without
limitation, any investment banking, legal or accounting firm retained by Moxham
or any of its Subsidiaries and any individual member or employee of the
foregoing) (each, an "Agent") not to,
(i) initiate, solicit or encourage, directly or indirectly, any
inquiries or the making or implementation of any proposal or offer
(including, without limitation, any proposal or offer to its respective
stockholders or any of them) with respect to a merger, acquisition,
consolidation, recapitalization, liquidation, dissolution or similar
transaction involving, or any purchase of all or a substantial portion of
the assets or equity securities of, it or any of its Subsidiaries (any such
proposal or offer being hereinafter referred to as an "Acquisition
Proposal") or
(ii) engage in any negotiations concerning, or provide any
confidential information or data to, or have any discussions with, any
person relating to an Acquisition Proposal, or
(iii) otherwise cooperate in any effort or attempt to make, implement
or accept an Acquisition Proposal.
Moxham shall notify BT Financial immediately if any inquiries, proposals or
offers related to an Acquisition Proposal are received by, any confidential
information or data is requested from, or any negotiations or discussions
related to an Acquisition Proposal are sought to be initiated or continued with
it or any individual or entity referred to in the first sentence of this Section
4.3(e), and of the terms and other details of any such Acquisition Proposal or
request.
4.4. Covenants of Both Parties. Both of the Parties covenants and agrees
that:
(a) Conduct of Business. From and after the date hereof and until the
Closing Date, each Party shall, and shall cause each of its Subsidiaries to:
(i) carry on its business diligently and substantially in the same
manner as heretofore and, except as otherwise provided in this
Reorganization Agreement, will not institute any unusual or novel methods
of management or operation of its properties or business;
(ii) maintain its books and records in the usual, ordinary and normal
course;
(iii) promptly advise the other Party in writing of (A) the initiation
of any litigation of any kind against it or any litigation by it and (B)
the happening of any event which in the reasonable belief of its management
may have an adverse effect on either Moxham on a consolidated basis or BT
Financial on a consolidated basis, as the case may be;
(iv) continue in effect its present insurance coverage at the present
levels on all properties, assets, business and personnel;
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(v) use its best efforts to preserve its business organization intact,
to keep available its present employees, to preserve its relationships with
customers and others having business dealings with it and to maintain all
of its tangible property in customary repair, order and condition
(reasonable wear and tear excepted); and
(vi) ensure that its executive officers shall meet periodically with
the executive officers of the other Party to exchange information on their
respective institutions, and to facilitate an orderly transition following
the Closing Date.
(b) Best Efforts. Each of Moxham and BT Financial shall, and shall cause
its Subsidiaries to, use all reasonable efforts:
(i) to take, or cause to be taken, all actions necessary to comply
promptly with all legal requirements which may be imposed on such party or
its Subsidiaries with respect to the Merger and to consummate the
transactions contemplated by this Agreement as promptly as practicable,
subject to the appropriate vote of stockholders of Moxham and BT Financial;
and
(ii) to obtain (and to cooperate with the other Party to obtain) any
consent, authorization, order or approval of, or any exemption by, any
Governmental Entity and or any other public or private third party which is
required to be obtained or made by such Party or any of its Subsidiaries in
connection with the Merger and the transactions contemplated by this
Agreement; provided, however, that a Party shall not be obligated to take
any action pursuant to the foregoing if the taking of such action or such
compliance or the obtaining of such consent, authorization, order, approval
or exemption is likely, in such Party's reasonable opinion, to result in a
condition or restriction on such Party or on BT Financial having an effect
of the type referred to in Section 4.1(g) or Section 4.2(g), as the case
may be. Each of Moxham and BT Financial will promptly cooperate with and
furnish information to the other in connection with any such burden
suffered by, or requirement imposed upon, any of them or any of their
Subsidiaries in connection with the foregoing.
(c) Other Actions. No Party shall, or shall permit any of its Subsidiaries
to, intentionally take any action that would, or reasonably might be expected
to, result in any of its representations and warranties set forth in this
Agreement being or becoming untrue, subject to such exceptions as do not have,
and would not reasonably be expected to have, individually or in the aggregate,
a material adverse effect on such Party or on the BT Financial following the
Effective Time, or in any of the conditions to the Merger set forth in Article V
not being satisfied, or (unless such action is required by applicable law or
sound banking practice) which would adversely affect the ability of any of them
to obtain any of the Requisite Regulatory Approvals without imposition of a
condition or restriction which would be unduly burdensome in the judgment of BT
Financial.
(d) Accounting Methods. Neither BT Financial nor Moxham shall change its
methods of accounting in effect at December 31, 1994, except as required by
changes in generally accepted accounting principles as concurred in by such
party's independent auditors. Neither BT Financial nor Moxham will change its
fiscal year.
(e) Pooling and Tax-Free Reorganization Treatment. Neither BT Financial
nor Moxham shall, or shall permit any of its Subsidiaries to, intentionally take
or cause to be taken any action, whether before or after the Effective Time,
which would disqualify the Merger and the Bank Merger as a "pooling of
interests" for accounting purposes or as a "reorganization" within the meaning
of Section 368(a) of the Code.
(f) Environmental Studies. Within forty-five days following the date of
this Reorganization Agreement, Moxham shall cause to be completed by independent
consultants that are acceptable to BT Financial, and, at Moxham's sole cost and
expense, a Phase I environmental assessment ("Phase I assessment") and a
structural site inspection, including a written report thereof ("Site Inspection
Report"), of each of Moxham's Owned Real Property and shall deliver a copy of
such Phase I assessment to BT Financial. If BT Financial should determine
pursuant to the results of such Phase I assessment that (i) there has been any
storage, discharge, disposal, release or emission of any Hazardous Substance in,
on or from any Owned Real Property and (ii) BT Financial reasonably believes
that it could become responsible for the remediation of such storage, discharge,
disposal, release or emission or become liable for monetary damages resulting
therefrom, then
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BT Financial shall inform Moxham in writing with specificity within fifteen
business days of BT Financial's receipt of the Phase I assessment. Further, if
BT Financial should determine pursuant to the results of the Site Inspection
Report that any of the Owned Real Property is structurally damaged, BT Financial
shall inform Moxham in writing within fifteen business days' receipt of the Site
Inspection Report of the specific structural damage to the Owned Real Property.
Upon receipt of a notice from BT Financial in connection with the Phase I
assessment or Site Inspection Report, Moxham shall, at its sole cost and expense
(subject to the limitation set forth below), take necessary actions to correct
the specific defects set forth in the notice. Upon completion of such corrective
action to the satisfaction of BT Financial, or Moxham's proving to BT Financial
that BT Financial would not be responsible for remediation or be liable for
monetary damages (unless, in BT Financial's reasonable opinion, the results of
the Phase I assessment or the Site Inspection Report would materially adversely
affect the marketability of said property), BT Financial shall remove any
objection it may have with respect to that certain parcel of Owned Real Property
and proceed promptly toward Closing. If the costs to remedy the specific defects
set forth in the Phase I assessment or Site Inspection Report are anticipated to
exceed $100,000 in the aggregate, BT Financial, in its sole discretion, may
terminate this Reorganization Agreement.
4.5. Covenants of BT Financial. BT Financial hereby covenants and agrees
that:
(a) Access to Corporate Records. Until the Closing Date, BT Financial
shall give Moxham and its representatives full access during normal business
hours to all its property, documents, contracts and records and such information
with respect to its business affairs and properties (in each case including
those of its Subsidiaries) as Moxham from time to time may reasonably request;
provided, however, that BT Financial shall not be required to give such access
or information to the extent that it is prohibited therefrom by a rule,
regulation or order of any regulatory body. All documents, contracts, records or
information obtained pursuant to this Section 4.5(a) shall be and remain subject
to the confidentiality provisions of Section 2.8 of this Reorganization
Agreement.
(b) Financial Statements. BT Financial shall promptly provide Moxham with
copies of its annual and quarterly financial statements, as included in its
reports on Form 10-K or 10-Q, respectively, as filed with the SEC pursuant to
the requirements of the Exchange Act, for the periods ending between the date of
this Reorganization Agreement and the Effective Time. Until the Closing Date, BT
Financial will provide copies of any reports it files with the SEC under the
Exchange Act to Moxham on a prompt and timely basis.
(c) Notice of Changes. Until the Effective Time, BT Financial shall give
Moxham prompt written notice of any material change or inaccuracies in any data
previously given or made available to Moxham pursuant to this Reorganization
Agreement.
(d) Employee Matters.
(i) As of the Effective Time, BT Financial and its Subsidiaries shall
attempt to cause all persons who are employed by Moxham and/or any of its
Subsidiaries on such date to be employed by Subsidiaries of BT Financial and, as
soon as practicable after the Effective Time, with benefits which in the
aggregate are no less favorable than those generally afforded to other employees
of BT Financial or its Subsidiary providing such employment. Prior service with
Moxham or its Subsidiaries shall not be considered for purposes of determining
eligibility for or vesting of such employee benefits, nor for any other purpose.
This Section 4.5(d) shall not be construed
(A) to limit the ability of BT Financial and its Subsidiaries to
terminate the employment of any employee or to review employee benefits
programs from time to time and to make such changes as they deem
appropriate or
(B) to require BT Financial or its Subsidiaries to provide employees or
former employees with post-retirement medical benefits.
Any employee who has the benefit of an employment or severance agreement who
shall be offered employment by BT Financial or any BT Financial Subsidiary and
who shall accept such employment shall be
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required, as a condition to such employment, to agree in writing to the
termination of such agreement from and after the Effective Time.
(ii) any full-time employee of Moxham or any Moxham Subsidiary whose
employment is terminated, other than for cause, by BT Financial or
Johnstown Bank, as the case may be, within six months after the Effective
Time, and not offered a comparable job with BT Financial or a Subsidiary of
BT Financial, will be paid, in addition to accrued vacation pay, sick leave
and other similar amounts customarily paid by such person's employer,
severance pay equal to one week's W-2 compensation multiplied by each year
of service with Moxham or any Moxham Subsidiary not exceeding three months
salary for any employee having less than 15 years of continuous service as
a full-time employee of Moxham and its Subsidiaries and their respective
predecessors and not exceeding six months salary for any employee having 15
or more years of such continuous service. For purposes of this section, a
job shall not be considered comparable if it requires the employee to work
less than 30 hours per week or is at a location more than 45 miles from an
employee's office of employment as of the date of this Reorganization
Agreement.
(e) Indemnification of Moxham Officers and Directors. After the Effective
Time, BT Financial, as successor to Moxham, shall indemnify and hold harmless
any former directors, officers, employees or agents of either Moxham, FNB
Garrett or Moxham Bank who have rights to indemnification under the articles of
incorporation and bylaws of Moxham, FNB Garrett or Moxham Bank, as the case may
be, and the BCL from and against any and all claims, losses, liabilities or
damages arising out of or in connection with any of their activities in such
capacities or on behalf of, or at the request of Moxham, FNB Garrett or Moxham
Bank prior to the Effective Time ("Claims") in accordance with and to the extent
required under the articles of incorporation and bylaws of Moxham, FNB Garrett
and Moxham Bank and the BCL. Further, BT Financial shall be obligated to advance
expenses incurred with respect to the foregoing, as they are incurred, in each
case only to the extent such advances are required under the articles of
incorporation and bylaws of Moxham, FNB Garrett or Moxham Bank as in effect on
the date hereof and the BCL. The obligations of BT Financial specified in the
preceding sentences shall survive the Merger and shall continue in full force
and effect following the Effective Time for a period of no more than one year;
provided, that all rights to indemnification in respect of any Claim asserted or
made within such period shall continue until the final disposition of such
Claim. BT Financial shall provide officers and directors liability insurance
coverage for all former directors and officers of Moxham, FNB Garrett and Moxham
Bank, whether or not they become part of the BT Financial organization after the
Effective Time, to the same extent as such coverage is provided to BT
Financial's officers and directors for a period of one year following the
Effective Time. This section shall not increase, in any manner, any liabilities
or obligations BT Financial would otherwise have as the successor by merger to
Moxham, nor does it increase any rights or grant any additional rights to any
former directors, officers, employees or agents of Moxham, FNB Garrett or Moxham
Bank.
(f) Bank Regulatory Applications. As promptly as practicable after the
date hereof.
(i) BT Financial and/or its Subsidiaries, as appropriate, shall submit
any requisite applications for prior approval of the transactions
contemplated herein and in the Bank Plan of Merger to the appropriate
federal and state (if applicable) financial institution regulatory
authorities depending upon the structure of the Merger and the Bank Merger,
(ii) BT Financial shall submit an application for prior approval of
the Bank Merger to the Federal Reserve Board pursuant to the Bank Merger
Act and Section 5(d)(3) of the FDIA,
(iii) each of the Parties hereto shall, and they shall cause their
respective Subsidiaries to, submit any applications, notices or other
filings to any other state or federal government agency, department or body
the approval of which is required for consummation of the Merger and the
Bank Merger. Moxham and BT Financial each represents and warrants to the
other that all information concerning it, its Subsidiaries and their
respective directors, officers, stockholders and Subsidiaries included (or
submitted for inclusion) in any such application shall be true, correct and
complete in all material respects.
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ARTICLE V
CONDITIONS PRECEDENT
5.1. Conditions Precedent to the Obligations of BT Financial. The
obligations of BT Financial to consummate the transactions contemplated by this
Reorganization Agreement shall be subject to the satisfaction, on or before the
Closing Date, of each and every one of the following conditions, all or any of
which may be waived, in whole or in part, by BT Financial to the extent
permitted by law:
(a) Performance of Covenants. Each of the acts and undertakings to be
performed by Moxham hereunder on or before the Closing Date shall have been duly
performed; and the Chief Executive Officer of Moxham shall have executed and
delivered to BT Financial a certificate, dated as of the Closing Date, to that
effect.
(b) Representations True at Closing. The representations and warranties
made by Moxham herein shall be true and correct in all material respects on the
Closing Date with the same force and effect as though such representations and
warranties had been made on and as of such time (or as of the date when made in
the case of any representation and warranty which specifically relates to an
earlier date), and the Chief Executive Officer of Moxham shall have executed and
delivered to BT Financial a certificate, dated as of the Closing Date, to that
effect.
(c) Certified Resolutions. Moxham shall have furnished BT Financial with a
certified copy of resolutions duly adopted by its Board of Directors and
stockholders authorizing and approving this Reorganization Agreement and the
transactions contemplated hereby and thereby.
(d) Moxham Shareholder Approval. This Reorganization Agreement shall have
been approved by
(i) the affirmative vote of the holders of seventy percent (70%) of
the outstanding shares of Moxham Common Stock, and
(ii) the affirmative vote of a majority of the holders of Moxham
Preferred Stock entitled to vote thereon.
(e) Government Approvals and Other Consents. BT Financial, Moxham and
their Subsidiaries shall have received in form and substance satisfactory to BT
Financial all necessary federal and state governmental and regulatory approvals
and other consents necessary to permit consummation of the Merger and the Bank
Merger (including but not limited to approvals of the FDIC, the Federal Reserve
Board, the DOB or other applicable federal regulatory agency and the
stockholders of Moxham and the stockholders of BT Financial). No such approvals
and consents shall require BT Financial or such Subsidiary to enter into any
agreement or stipulation that is inconsistent with prior OCC, DOB or Federal
Reserve Board practice or procedure, and all applicable waiting periods required
by law shall have expired or elapsed.
(f) No Injunction. No action, proceeding, regulation or legislation shall
have been instituted or threatened before any court, governmental agency or
legislative body to enjoin, restrain or prohibit, or to obtain substantial
damages in respect of, or which is related to or arises out of, this
Reorganization Agreement, the consummation of the transactions contemplated
hereby or the Bank Merger, which, in the good faith judgment of BT Financial,
would make it inadvisable to consummate such transactions.
(g) No Material Misstatements or Omissions. BT Financial shall not have
discovered any material error, misstatement or omission in any of the
representations or warranties of Moxham contained in this Reorganization
Agreement or in any certification or information furnished in writing or to be
furnished in writing to BT Financial hereunder, or in the information to be
furnished by Moxham and contained in the Registration Statement or any material
failure to perform or satisfy any covenants of Moxham and its Subsidiaries
contained herein.
(h) Changes in Financial Condition. Since September 30, 1995, there shall
not have occurred any material adverse change in the business, financial
condition, results of operations or prospects of Moxham on a consolidated basis,
other than changes resulting from or attributable to changes in laws or
regulations, generally accepted accounting principles, or interpretations
thereof, that affect Moxham's industry generally.
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(i) Registration Statement. The Registration Statement covering the shares
of BT Financial Common Stock to be issued to the stockholders of Moxham under
this Reorganization Agreement shall have been declared effective by the SEC,
shall be exempt or declared effective in each state having jurisdiction thereon,
and no stop order proceeding shall be pending or threatened with respect
thereto.
(j) Opinion of Counsel. An opinion of Plowman, Spiegel & Lewis, P.C.,
counsel for Moxham, FNB Garrett and Moxham Bank, shall have been delivered to BT
Financial, dated the Closing Date, and in form and substance satisfactory to BT
Financial and its counsel, as to the matters set forth in Sections 4.1(a)
through (e) inclusive. In expressing such opinion, counsel may rely on opinions
of other counsel to Moxham and its Subsidiaries, certificates of officers and
other representatives of Moxham and its Subsidiaries as to matters of fact and
certificates of public officials as to matters within their jurisdiction.
(k) Fairness Opinion. BT Financial shall have received a fairness opinion
from Berwind Financial Group, L.P. its financial advisor, as of the date of the
mailing of the Prospectus/Proxy Statement to its stockholders, in form and
substance satisfactory to BT Financial, to the effect that the Merger is fair,
from a financial point of view, to the stockholders of BT Financial based upon
the market price of the BT Financial Common Stock as of the date of such
opinion.
(l) Accounting Opinion. BT Financial shall have received an opinion from
Coopers & Lybrand L.L.P. as of the Closing Date that the Merger shall be
accounted for as a pooling of interests in accordance with generally accepted
accounting principles.
(m) BT Financial Shareholder Approval. This Reorganization Agreement shall
have been approved by the affirmative vote of the majority of votes cast by all
holders of BT Financial Common Stock entitled to vote thereon.
(n) Tax Ruling or Opinion. BT Financial shall have received a Private
Letter Ruling from the Service or an opinion of Kirkpatrick & Lockhart LLP,
counsel to BT Financial, in form and substance reasonably satisfactory to BT
Financial, dated as of the Closing Date, substantially to the effect that, on
the basis of facts, representations and assumptions set forth in such opinion,
the Merger will be treated for Federal income tax purposes as a reorganization
within the meaning of Section 368 of the Code and that accordingly:
(i) No gain or loss will be recognized by BT Financial or Moxham as a
result of the Merger; and
(ii) No gain or loss will be recognized by the stockholders of Moxham
who or which exchange their Moxham Common Stock solely for BT Financial
Common Stock pursuant to the Merger (except with respect to cash received
in lieu of a fractional share interest in BT Financial Common Stock).
In rendering such opinion, Kirkpatrick & Lockhart LLP may require and rely upon
representations contained in certificates of officers of BT Financial, Moxham
and others.
(o) Dissenters' Shares. The number of Dissenters' Shares (treating all
Moxham Preferred Stock shares as if they had converted into Moxham Common Stock)
as of the Closing Date shall be less than 10% of the issued and outstanding
shares of Moxham Common Stock.
5.2. Conditions Precedent to the Obligations of Moxham. The obligations of
Moxham to consummate the transactions contemplated by this Reorganization
Agreement shall be subject to the satisfaction, on or before the Closing Date,
of each and every one of the following conditions, all or any of which may be
waived, in whole or in part, by Moxham to the extent permitted by law:
(a) Performance of Covenants. Each of the acts and undertakings to be
performed by BT Financial hereunder on or before the Closing Date shall have
been duly performed; and the Chief Executive Officer of BT Financial shall have
executed and delivered to Moxham a certificate, dated as of the Closing Date, to
that effect.
(b) Representations True at Closing. The representations and warranties
made by BT Financial herein shall be true and correct in all material respects
on the Closing Date with the same force and effect as though such
representations and warranties had been made on and as of such time (or as of
the date when made in the case of any representation and warranty which
specifically relates to an earlier date), except for the
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issuance of additional shares of BT Financial Common Stock or preferred stock,
and the Chief Executive Officer of BT Financial shall have executed and
delivered to Moxham a certificate, dated as of the Closing Date, to that effect.
(c) Certified Resolutions. BT Financial shall have furnished Moxham with a
certified copy of resolutions duly adopted by the Board of Directors of BT
Financial authorizing this Reorganization Agreement and the transactions
contemplated hereby.
(d) BT Financial Shareholder Approval. This Reorganization Agreement shall
have been approved by the affirmative vote of the majority of votes cast by all
holders of BT Financial Common Stock entitled to vote thereon.
(e) Government Approvals and Other Consents. BT Financial and Moxham shall
have received all necessary federal and state governmental and regulatory
approvals, stockholder and stockholder approvals and other consents necessary to
permit consummation of the Merger, the Bank Merger (including but not limited to
approvals of the Federal Reserve Board and the DOB and the stockholders of
Moxham and the stockholders of BT Financial), and all applicable waiting periods
required by law shall have expired or elapsed.
(f) No Injunction. No injunction shall have been issued by any court or
governmental agency which prohibits or restricts the consummation of the
transactions contemplated by this Reorganization Agreement which, in the good
faith judgment of Moxham, would make it inadvisable to consummate such
transactions.
(g) No Material Misstatements or Omissions. Moxham shall not have
discovered any material error, misstatement or omission in any of the
representations or warranties of BT Financial contained in this Reorganization
Agreement or in any certification or information furnished in writing or to be
furnished in writing to Moxham hereunder, or in the information to be furnished
by BT Financial and contained in the Prospectus/Proxy Statement furnished to the
stockholders of Moxham in connection with the Merger or any material failure to
perform or satisfy any covenants of BT Financial contained herein.
(h) Changes in Financial Condition. Since September 30, 1995, there shall
not have occurred any material adverse change in the financial condition of BT
Financial on a consolidated basis, other than changes resulting from or
attributable to changes in laws or regulations, generally accepted accounting
principles, or interpretations thereof, that affect BT Financial's industry
generally.
(i) Registration Statement. The Registration Statement covering the shares
of BT Financial Common Stock to be issued to the stockholders of Moxham under
this Reorganization Agreement shall have been declared effective by the SEC,
shall be exempt or declared effective in each state having jurisdiction thereon,
and no stop order proceeding shall be pending or threatened with respect
thereto.
(j) Opinion of Counsel. An opinion of Kirkpatrick & Lockhart LLP, counsel
for BT Financial, shall have been delivered to Moxham, dated the Closing Date,
and in form and substance satisfactory to Moxham and its counsel, as to the
matters set forth in Sections 4.2(a) through (e) inclusive. In expressing such
opinion, counsel may rely on opinions of other counsel to BT Financial,
certificates of officers and other representatives of BT Financial as to matters
of fact and certificates of public officials as to matters within their
jurisdiction.
(k) Fairness Opinion. Moxham shall have received, as of the date of the
mailing of the Prospectus/ Proxy Statement to its stockholders to consider and
vote upon the Merger, an opinion from Hopper Soliday & Co., its investment
advisor, in form and content satisfactory to Moxham, to the effect that the
Merger is fair, from a financial point of view, to the stockholders of Moxham.
(l) Moxham Shareholder Approval. This Reorganization Agreement shall have
been approved by
(i) the affirmative vote of the holders of seventy percent (70%) of
the outstanding shares of Moxham Common Stock, and
(ii) the affirmative vote of a majority of the holders of Moxham
Preferred Stock entitled to vote thereon.
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(m) Tax Ruling or Opinion. Moxham shall have received a Private Letter
Ruling from the Service or an opinion of Kirkpatrick & Lockhart LLP, counsel to
BT Financial, in form and substance reasonably satisfactory to Moxham, dated as
of the Closing Date, substantially to the effect that, on the basis of facts,
representations and assumptions set forth in such opinion, the Merger will be
treated for Federal income tax purposes as a reorganization within the meaning
of Section 368 of the Code and that accordingly:
(i) No gain or loss will be recognized by BT Financial or Moxham as a
result of the Merger; and
(ii) No gain or loss will be recognized by the stockholders of Moxham
who or which exchange their Moxham Common Stock solely for BT Financial
Common Stock pursuant to the Merger (except with respect to cash received
in lieu of a fractional share interest in BT Financial Common Stock).
In rendering such opinion, Kirkpatrick & Lockhart LLP may require and rely upon
representations contained in certificates of officers of BT Financial, Moxham
and others.
5.3. Waivers. A condition precedent as set forth in this Article V shall
be deemed to be satisfied if it has been materially and reasonably satisfied,
and no Party shall fail to consummate the transactions described herein by
reason of a breach of any covenant or the failure to satisfy a condition
precedent unless such breach or failure is material to such transactions as a
whole. Any condition waived in writing by the Party entitled to the benefit
thereof shall thereafter cease to be a condition precedent for purposes of this
Article V.
ARTICLE VI
BROKERS AND EXPENSES
6.1. Brokers. Each Party represents and warrants to each other Party that
no broker or finder has acted for it in connection with the execution and
delivery of this Reorganization Agreement or the transactions contemplated
hereby, except for Berwind Financial Group, L.P. on behalf of BT Financial and
Hopper Soliday & Co. on behalf of Moxham. Each Party shall be indemnified and
held harmless by the other from any claim, suit, loss or expense resulting from
a breach of the foregoing representation and warranty.
6.2. Expenses. Except as provided in Section 2.7 hereof, all expenses
incurred by each Party in connection with or related to the authorization,
preparation and execution of this Reorganization Agreement, the solicitation of
stockholder and stockholder approval and all other matters related to the
closing of the transactions contemplated hereby and thereby, including without
limiting the generality of the foregoing, all fees and expenses of agents,
representatives, counsel and accountants employed by any such Party and the
broker referred to in Section 6.1, shall be borne solely and entirely by the
Party which has incurred the same.
ARTICLE VII
MISCELLANEOUS
7.1. Further Assurances. From time to time as and when requested by BT
Financial, or its successors or assigns, Moxham, or the officers and directors
of Moxham last in office prior to consummation of the Merger, shall execute and
deliver such further agreements, documents, deeds and other instruments and
shall take or cause to be taken such other actions, including those as shall be
necessary to vest or perfect in or to confirm of record or otherwise in the
Resulting Company title to and possession of all the property, interests,
assets, rights, privileges, immunities, powers, franchises and authority of
Moxham as shall be necessary or advisable to carry out the purposes of and
effect the transactions contemplated by this Reorganization Agreement.
7.2. Survival of Representations, Warranties and Covenants. All
representations, warranties and covenants in this Reorganization Agreement or in
any instrument delivered pursuant hereto shall expire on, and be terminated and
extinguished on, the Closing Date, other than covenants that by their terms are
to survive or be performed after the Closing Date.
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7.3. Notices. All notices, requests, demands, and other communications
hereunder shall be in writing and shall be deemed to have been duly given if
delivered or sent by first-class registered or certified mail, postage prepaid,
with return receipt requested, as follows:
(a) If to Moxham to:
J. William Smith
President and Chief Executive
Moxham Bank Corporation
540 Central Avenue
Johnstown, PA 15902
with a copy to:
Charles B. Jarrett, Jr., Esquire
Plowman, Spiegel & Lewis, P.C.
Grant Building, Suite 230
Pittsburgh, PA 15219
(b) If to BT Financial, to:
John H. Anderson
Chairman and Chief Executive Officer
BT Financial Corporation
551 Main Street
Johnstown, PA 15901
with a copy to:
Dennis M. Sheedy, Esq.
Kirkpatrick & Lockhart LLP
1500 Oliver Building
Pittsburgh, PA 15222
or to such other address as any such person may designate in writing to the
other Parties at the addresses listed above, in accordance with this Section.
7.4 Third Party Beneficiaries. Nothing contained in this Reorganization
Agreement, including without limitation Sections 4.2(k) and 4.5(d), shall be
deemed to be a contract for employment nor a guaranty or right to employment
with BT Financial or its Subsidiaries for any person, nor shall anything
contained in this Reorganization Agreement constitute an agreement by BT
Financial or its Subsidiaries not to revise, amend, revoke, or terminate any
employee benefit plan or arrangement that it may in the future make available to
its employees. This Agreement is not intended to confer third party beneficiary
rights on any person not a Party to this Agreement, except that each of the
eight persons named in Section 4.2(k) shall have the right to sue BT Financial
for breach of the representation contained in Section 4.2(k) but only as such
representation applies to such person; such right to sue shall expire six months
after the Closing Date.
7.5. Binding Effect. This Reorganization Agreement shall be binding upon
and inure to the benefit of the Parties hereto and their respective successors
and assigns. This Reorganization Agreement may not be assigned by any Party
without the express written consent of the other Party.
7.6. Headings. The Article, Section, paragraph and other headings in this
Reorganization Agreement are inserted solely as a matter of convenience and for
reference and are not a part of this Reorganization Agreement.
7.7. Counterparts. This Reorganization Agreement may be executed in one or
more counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
7.8. Integration. This Reorganization Agreement constitutes the entire
understanding of the Parties with respect to the subject matter hereof and
supersedes all prior agreements, arrangements or communications,
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oral or written, between the Parties hereto with respect to the subject matter
hereunder. This Reorganization Agreement may be changed, waived, discharged or
terminated only by an instrument in writing signed by the Party against which
the enforcement of such change, waiver, discharge or termination is sought.
7.9. Amendments. Any of the terms or conditions of this Reorganization
Agreement may be waived at any time by the Party which is entitled to the
benefit thereof, or any of such terms or conditions may be amended or modified
in whole or in part at any time before or after the vote of the stockholders of
Moxham and stockholders of BT Financial on this Reorganization Agreement to the
extent permitted by law by agreement in writing, executed in the same manner as
this Reorganization Agreement after authorization to do so by the Board of
Directors of each Party; provided, however, that such action shall be taken only
if, in the judgment of the Boards of Directors of each Party taking the action,
such waiver or such amendment or modification will not have a material adverse
effect on the benefits intended under this Reorganization Agreement to such
Party and its stockholders, unless this Reorganization Agreement, as modified,
is resubmitted to the stockholders for their approval.
7.10. Governing Law. This Reorganization Agreement shall be governed by
and construed and enforced in accordance with the laws of the Commonwealth of
Pennsylvania, without giving effect to its provisions regarding conflict of law,
and, where the context so requires, under applicable federal law.
7.11. Incorporation by Reference. Any and all schedules, exhibits,
annexes, statements, reports, certificates or other documents or instruments
referred to herein or attached hereto are incorporated herein by reference
thereto as though fully set forth at the point referred to in this
Reorganization Agreement.
IN WITNESS HEREOF, each Party hereto has caused this Reorganization
Agreement to be executed on its behalf and its corporate seal to be affixed
hereto by its duly authorized officers, all as of the day and year first above
set forth.
<TABLE>
<S> <C>
ATTEST: MOXHAM BANK CORPORATION
/S/ P. JAMES HAYES BY: /S/ J. WILLIAM SMITH
- --------------------------------------------- -------------------------------------
Secretary J. William Smith
President and Chief Executive Officer
ATTEST: BT FINANCIAL CORPORATION
/S/ LAURA L. ROTH BY: /S/ JOHN H. ANDERSON
- --------------------------------------------- -------------------------------------
Secretary John H. Anderson
Chairman and Chief Executive Officer
</TABLE>
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EXHIBIT A
BANK PLAN OF MERGER
THIS PLAN OF MERGER ("Plan of Merger"), dated as of January 12, 1996, is
made by and between Johnstown Bank and Trust Company, a Pennsylvania chartered
bank ("Johnstown Bank"), and The Moxham National Bank of Johnstown, a national
banking association ("Moxham"), The First National Bank of Garrett, a national
banking association ("Garrett") (Moxham and Garrett being referred to herein as
the "Moxham Banks").
WHEREAS, the Board of Directors of Johnstown Bank has determined that it is
desirable and in the best interests of Johnstown Bank, its depositors and the
community it serves that Johnstown Bank merge with the Moxham Banks, with
Johnstown Bank remaining as the resulting institution thereafter, pursuant to
the terms and conditions hereof;
WHEREAS, the Boards of Directors of the Moxham Banks have determined that
it is desirable and in the best interests of each of the Moxham Banks, their
depositors and the community they serve that the Moxham Banks merge with and
into Johnstown Bank, with Johnstown Bank remaining as the resulting institution
thereafter, pursuant to the terms and conditions hereof;
WHEREAS, BT Financial Corporation, the sole holder of all the outstanding
capital stock of Johnstown Bank, has authorized and approved the merger of the
Moxham Banks into Johnstown Bank as herein provided for; and
WHEREAS, Moxham Bank Corporation, the sole holder of all of the outstanding
capital stock of each of the Moxham Banks, has authorized and approved the
merger of the Moxham Banks into Johnstown Bank as herein provided for.
NOW, THEREFORE, in consideration of the mutual covenants set forth below,
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, Johnstown Bank and the Moxham Banks hereby agree
as follows:
1. The Merger. Subject to and on the terms and conditions set forth in
this Plan of Merger, on the Effective Date (as defined in Section 3 below) the
Moxham Banks shall be merged simultaneously with and into Johnstown Bank, with
Johnstown Bank remaining as the resulting institution (the "Resulting
Institution"), pursuant to the laws of the Commonwealth of Pennsylvania (the
"Merger"). On the Effective Date, the following shall occur:
(a) the existence of each party to this Plan of Merger, except the
Resulting Institution, shall cease as a separate entity but shall continue in,
and the parties to this Plan of Merger shall be, a single corporation, which
shall be the Resulting Institution and which shall have without further act or
deed, all the property, rights, powers, duties and obligations of each party to
this Plan of Merger; and
(b) no liability of any party to this Plan of Merger, or of its trustees,
officers or directors shall be affected, nor shall any lien on any property of a
party to this Plan of Merger be impaired, by the Merger. Any claim existing or
action pending by or against any party to this Plan of Merger may be prosecuted
to judgment as if the Merger had not taken place or the Resulting Institution
may be substituted in its place.
2. Regulatory Approvals. Notwithstanding any other provision of this Plan
of Merger, the Merger shall not be effective unless and until approved by the
Pennsylvania Department of Banking (the "Department of Banking") and the Board
of Governors of the Federal Reserve System (the "FRB") (the Department of
Banking and the FRB are collectively referred to herein as the "Regulators").
Johnstown Bank and the Moxham Banks shall cooperate in the preparation and
filing of an Application for Merger ("Merger Application") with the Department
of Banking and all other applications, documents and instruments required or
necessary to be prepared and filed with the Regulators to obtain approval of the
Merger.
3. Effective Date. As used in this Plan of Merger, "Effective Date" shall
mean the close of business on any date following the merger of Moxham Bank
Corporation into BT Financial Corporation on which the
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Articles of Merger executed by Johnstown Bank and the Moxham Banks are filed
with the Pennsylvania Department of State (the "Articles of Merger").
4. Conversion of Shares. The Merger shall be effected as follows:
(a) All shares of the common stock of the Moxham Banks issued and
outstanding or held in the treasury of the Moxham Banks immediately before the
Effective Date shall, by virtue of the Merger and without any action by the
holder of such shares or by the Moxham Banks, be canceled and retired on the
Effective Date, and no cash, securities or other consideration shall be paid or
delivered in exchange for the Moxham Banks common stock.
(b) Each authorized and issued share of the capital stock of Johnstown Bank
shall remain outstanding.
5. Name of the Resulting Institution. The name of the Resulting
Institution shall be "Johnstown Bank and Trust Company."
6. Articles of Incorporation and Bylaws. At the Effective Date, the
articles of incorporation and bylaws of Johnstown Bank as in effect immediately
prior to the Effective Date shall be the articles of incorporation and bylaws of
the Resulting Institution.
7. Directors. The persons who shall constitute the Board of Directors of
Johnstown Bank immediately prior to the Merger shall, on the Effective Date, be
the Board of Directors of the Resulting Institution. In addition, Charles T.
Evans and seven additional persons selected by mutual agreement of Johnstown
Bank and the Moxham Banks shall become directors of the Resulting Institution on
the Effective Date. Such Directors shall serve until the 1997 annual meeting of
Shareholders of the Resulting Institution, or until their successors are duly
elected and qualified.
8. Officers. Each individual who was an officer of Johnstown Bank
immediately prior to the Merger shall, on the Effective Date, become an officer
of the Resulting Institution with the same title as such individual had
immediately before the Merger. The officers of the Moxham Banks shall not become
officers of the Resulting Institution unless elected to office by resolution of
the Board of Directors of the Resulting Institution after the Merger.
9. Conditions. The obligations of the parties hereto to effect the Merger
are subject to the following conditions, any or all of which may be waived by
agreement of the parties, except that the conditions set forth in subsections
(b) and (c) of this Section 9 are not waivable:
(a) each party hereto shall have performed and complied with in all
material respects its covenants and agreements contained herein; and
(b) the Merger Application shall have been approved or deemed approved by
the Department of Banking and all other applications, documents and instruments
required or necessary in order to effect the consummation of the Merger shall
have been approved by the Regulators; and
(c) if any waiting period imposed by applicable state or federal law or the
regulations promulgated thereunder shall remain unexpired upon the satisfaction
of the last to be satisfied of subsections (a) and (b) of this Section 9, such
waiting period shall have expired; and
(d) the merger of The Moxham Bank Corporation with and into BT Financial
Corporation shall have become effective.
10. Termination. This Plan of Merger may be terminated (the "Termination
Date") prior to the Effective Date (i) by the mutual consent of the Boards of
Directors of Johnstown Bank and the Moxham Banks and (ii) automatically if the
Effective Date does not occur on or before May 30, 1996, or such later date as
Johnstown Bank and the Moxham Banks may mutually agree.
11. Expenses. Each of Johnstown Bank and the Moxham Banks shall pay its
own costs and expenses incurred in connection with the Merger.
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12. Notices. All notices, waivers and other communications by Johnstown
Bank and the Moxham Banks hereunder shall be in writing and shall be deemed to
have been given when delivered in person or sent by registered or certified
mail, postage prepaid, addressed as follows:
If to Johnstown Bank: Johnstown Bank and Trust Company
532-534 Main Street
Johnstown, PA 15901
Attention: President
If to Moxham Bank: The Moxham National Bank
540 Central Avenue
Johnstown, PA 15902
Attention: President
If to FNB Garrett: The First National Bank of Garrett
Jackson Street
P.O. Box 247
Garrett, PA 15542
Attention: President
13. Amendments. To the extent permitted by law, this Plan of Merger may be
amended only by a writing duly executed by the parties hereto.
14. Successors. This Plan of Merger shall be binding on the successors of
Johnstown Bank and the Moxham Banks.
15. Counterparts. This Plan of Merger may be executed in one or more
counterparts, all of which shall be considered one and the same Plan of Merger
and each of which shall be deemed an original.
16. Headings. The section headings contained in this Plan of Merger are
for convenience of reference only and shall not affect in any way the meaning or
interpretation of this Plan.
17. Governing Law. This Plan of Merger shall be governed by and construed
in accordance with the laws of the Commonwealth of Pennsylvania.
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IN WITNESS WHEREOF, Johnstown Bank and the Moxham Banks have caused this
Plan of Merger to be duly executed as of the date first above written.
<TABLE>
<S> <C>
ATTEST: JOHNSTOWN BANK & TRUST COMPANY
BY: /S/ LAURA L. ROTH BY: /S/ ERIC RUMMEL
----------------------------------------- ------------------------------------
Eric Rummel, President
ATTEST: MOXHAM NATIONAL BANK
BY: /S/ P. JAMES HAYES BY: /S/ J. WILLIAM SMITH
----------------------------------------- ------------------------------------
J. William Smith, President and
Chief Executive Officer
ATTEST:
THE FIRST NATIONAL BANK OF GARRETT
BY: /S/ ROBERT W. BRANT BY: /S/ STANLEY C. WITT
----------------------------------------- ------------------------------------
Stanley C. Witt, President and
Chief Executive Officer
</TABLE>
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ANNEX B
FORM OF FAIRNESS OPINION
BERWIND
FINANCIAL GROUP, L.P.
Investment Banking
Merchant Banking
April , 1996
Board of Directors
BT Financial Corp.
532-534 Main Street
Johnstown, Pennsylvania 15901
Directors:
You have requested our opinion as to the fairness, from a financial point
of view, to the shareholders of BT Financial Corp. ("BT") of the financial terms
of the proposed merger between BT and Moxham Bank Corporation ("Moxham"). The
terms of the proposed merger (the "Proposed Merger") between BT and Moxham are
set forth in the Agreement and Plan of Merger (the "Merger Agreement") and
provide that each outstanding common share of Moxham will be converted into the
right to receive 1.15 shares of BT Common Stock and each outstanding share of
preferred stock will be converted into the right to receive 6.325 shares of BT
Common Stock.
Berwind Financial Group, L.P., as part of its investment banking business,
regularly is engaged in the valuation of assets, securities and companies in
connection with various types of asset and security transactions, including
mergers, acquisitions, private placements and valuations for various other
purposes and in the determination of adequate consideration in such
transactions.
In arriving at our opinion, we have, among other things: (i) reviewed the
historical financial performance, current financial position and general
prospects of BT and Moxham; (ii) reviewed the Merger Agreement; (iii) reviewed
the Proxy Statement/Prospectus; (iv) studied and analyzed the consolidated
financial and operating data of BT and Moxham; (v) considered the terms and
conditions of the Proposed Merger between BT and Moxham as compared with the
terms and conditions of comparable bank mergers and acquisitions; (vi) met
and/or communicated with certain members of BT and Moxham's senior management to
discuss their operations, historical financial statements, and future prospects;
and (vii) conducted such other financial analyses, studies and investigations as
we deemed appropriate.
Our opinion is given in reliance on information and representations made or
given by BT and Moxham and their respective officers, directors, auditors,
counsel and other agents, and on filings, releases and other public information
issued by BT and Moxham including financial statements, financial projections,
and stock price data as well as certain information from recognized independent
sources. We have not independently verified the information concerning BT and
Moxham nor other data which we have considered in our review and, for purposes
of the opinion set forth below, we have assumed and relied upon the accuracy and
completeness of all such information and data. Additionally, we assume that the
Proposed Merger is, in compliance with and legal under applicable law.
With regard to financial and other information relating to the general
prospects of BT and Moxham, we have assumed that such information has been
reasonably prepared and reflects the best currently available estimates and
judgments of the managements of BT and Moxham as to BT's and Moxham's most
likely future performance. For BT and Moxham, we have assumed the allowance for
loan losses indicated on the balance sheets of each entity is adequate to cover
such losses; we have not reviewed the credit files of either BT or
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Moxham. Also, in rendering our opinion, we have assumed that in the course of
obtaining the necessary regulatory approvals for the Proposed Merger, and in
preparation of the final proxy statement, no conditions will be imposed that
will have a material adverse effect on the contemplated benefits of the Proposed
Merger to BT.
Our opinion is based upon information provided to us by the managements of
BT and Moxham, as well as market, economic, financial, and other conditions as
they exist and can be evaluated only as of the date hereof and speaks to no
other period. Our opinion pertains only to the financial consideration of the
Proposed Merger and does not constitute a recommendation to the Board of BT.
Based on the foregoing, it is our opinion that, as of the date hereof, the
Proposed Merger between BT and Moxham is fair, from a financial point of view,
to the shareholders of BT.
Sincerely,
BERWIND FINANCIAL GROUP, L.P.
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ANNEX C
FORM OF FAIRNESS OPINION
April , 1996
Board of Directors
Moxham Bank Corporation
540 Central Avenue
Johnstown, PA 15902
Gentlemen:
You have requested our opinion, as investment bankers, as to the fairness,
from a financial point of view, of the terms of the proposed merger (the
"Merger") of Moxham Bank Corporation ("Moxham") with and into BT Financial
Corporation ("BT Financial"). Pursuant to the Agreement and Plan of Merger dated
January 12, 1996 between Moxham and BT Financial, each outstanding share of
Moxham common stock will be converted into and become the right to receive 1.15
shares of BT Financial common stock and each share of Moxham preferred stock
will be converted into and become the right to receive 6.325 shares of BT
Financial common stock (the "Merger Consideration").
Hopper Soliday & Co., Inc. ("Hopper Soliday"), as a customary part of its
investment banking business, is engaged in valuing businesses and their
securities in connection with mergers and acquisitions, stock purchase offers,
negotiated underwritings, secondary distributions of securities, private
placements and for estate, corporate reorganization and other purposes.
Hopper Soliday reviewed, among other things: (i) Moxham's Annual Reports on
Form 10-K and related financial information for the five fiscal years ended
December 31, 1995, and Moxham's Quarterly Reports on Form 10-Q and related
unaudited financial information for the quarterly periods ended March 31, 1995,
June 30, 1995, and September 30, 1995; (ii) BT Financial's Annual Reports on
Form 10-K and related financial information for the five fiscal years ended
December 31, 1995, and BT Financial's Quarterly Reports or Form 10-Q and related
unaudited financial information for the quarterly periods ended March 31, 1995,
June 30, 1995 and September 30, 1995; (iii) certain information concerning the
respective businesses, operations, regulatory condition and prospects of Moxham
and BT Financial, including financial forecasts, relating to the business,
earnings, assets and prospects of Moxham and BT Financial, furnished to Hopper
Soliday by Moxham and BT Financial, which Hopper Soliday discussed with members
of senior management of Moxham and BT Financial; (iv) historical market prices
and trading activity for the Moxham Common Stock and BT Financial Common Stock
and similar data for certain publicly traded companies which Hopper Soliday
deemed to be relevant; (v) the results of operations of Moxham and BT Financial
and similar data for certain companies which Hopper Soliday deemed to be
relevant; (vi) the financial terms of the Merger contemplated by the Agreement
and the financial terms of certain other mergers and acquisitions which Hopper
Soliday deemed to be relevant; (vii) the pro forma impact of the Merger on the
earnings and book value per share, consolidated capitalization and certain
balance sheet and profitability ratios of BT Financial; (viii) the Agreement;
and (ix) such other matters as Hopper Soliday deemed necessary. Hopper Soliday
also met with certain members of senior management and other representatives of
Moxham and BT Financial to discuss the foregoing as well as other matters Hopper
Soliday deemed relevant.
In conducting our review and in arriving at our opinion, we relied upon and
assumed the accuracy and completeness of the financial and other information
provided to us or that which was publicly available and did not attempt
independently to verify such information. We relied upon the managements of
Moxham and BT Financial as to the reasonableness and achievability of the
financial and operating forecasts and projections (and the assumptions and bases
thereof) provided to us and assumed that such forecasts and projections
reflected the best currently available estimates and judgements of such
managements and that such forecasts and projections would be realized in the
amounts and in the time periods estimated by such managements. We also assumed,
without independent verification, that the aggregate allowances for loan losses
for Moxham and
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BT Financial were adequate to cover such losses. We did not make or obtain any
evaluations or appraisals of the assets of Moxham and BT Financial, nor did we
examine any individual loan credit files. Our opinion is limited to the
fairness, from a financial point of view, to the shareholders of Moxham of the
Merger Consideration.
In rendering our opinion we have assumed that in the course of obtaining
the necessary regulatory approvals for the Merger, no conditions will be imposed
that will have a material adverse effect on the contemplated benefits of the
Merger to either Moxham or, on a pro forma basis, BT Financial, following the
Merger. Our opinion necessarily is based upon conditions as they exist on, and
can be evaluated as of, the date of this letter.
On the basis of the aforementioned analysis, and subject to the
qualifications described above, as of the date hereof, we are of the opinion
that the Merger Consideration provided for by the Merger Agreement is fair to
the shareholders of Moxham from a financial point of view.
Very truly yours,
Hopper Soliday & Co., Inc.
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ANNEX D
PENNSYLVANIA BUSINESS CORPORATION LAW OF 1988, AS AMENDED,
PROVISIONS FOR DISSENTING SHAREHOLDERS
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).
Subchapter D. Dissenters Rights
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
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(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).
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.
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"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.
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.
Section 1574. Notice of Intention to Dissent
If the proposed corporate action is submitted to a 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.
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.
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(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.
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.
(B) 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.
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 requirements 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 therefor 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 dissenters had
after making demand for payment of their fair value.
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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.
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 shares 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 such 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.
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.
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(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 counsel reasonable fees to be paid out of the
amounts awarded to the dissenters who were benefitted.
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 1741 of the BCL provide that a business corporation shall have the
power to indemnify any person who was or is a party, or is threatened to be made
a party, to any threatened, pending or completed action or proceeding, whether
civil, criminal, administrative or investigative, by reason of the fact that
such person is or was a director, officer, employee or agent of the corporation,
or is or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation or other enterprise, against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by such person in connection with such action
or proceeding, if such 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 the case of an action by or in the right of the
corporation, Section 1742 limits such indemnification to expenses (including
attorneys' fees) actually and reasonably incurred by such person in connection
with the defense or settlement of such action, except that no indemnification
shall be made in respect of any claim, issue or matter as to which such person
has been adjudged to be liable to the corporation unless, and only to the extent
that, a court determines upon application that, despite the adjudication of
liability but in view of all the circumstances, such person is fairly and
reasonably entitled to indemnity for the expenses that the court deems proper.
Section 1744 of the BCL provides that, unless ordered by a court, any
indemnification described above shall be made by the corporation only as
authorized in the specific case upon a determination that indemnification is
proper in the circumstances because the indemnitee has met the applicable
standard of conduct. Such determination shall be made:
(1) by the board of directors by a majority vote of a quorum
consisting of directors who were not parties to the proceeding; or
(2) if such a quorum is not obtainable, or if obtainable and a
majority vote of a quorum of disinterested directors so directs, by
independent legal counsel in a written opinion; or
(3) by the shareholders.
Notwithstanding the above, Section 1743 of the BCL provides that to the
extent a director, officer, employee or agent of a business corporation is
successful on the merits or otherwise in defense of any proceeding referred to
above, or in defense of any claim, issue or matter therein, such person shall be
indemnified against expenses (including attorneys' fees) actually and reasonably
incurred by such person in connection therewith.
Section 1745 of the BCL provides that expenses (including attorneys' fees)
incurred by an officer, director, employee or agent of a business corporation in
defending any such action or proceeding may be paid by the corporation in
advance of the final disposition of the action or proceeding upon receipt of an
undertaking to repay the amount advanced if it is ultimately determined that the
indemnitee is not entitled to be indemnified by the corporation.
Section 1746 of the BCL provides that the indemnification and advancement
of expenses provided by, or granted pursuant to, the provisions described above
are not exclusive of any other rights to which a person seeking indemnification
or advancement of expenses may be entitled under any bylaw, agreement, vote of
shareholders or disinterested directors or otherwise, and that indemnification
may be granted under any bylaw, agreement, vote of shareholders or directors or
otherwise for any action taken or any failure to take any action whether or not
the corporation would have the power to indemnify the person under any other
provision of law and whether or not the indemnified liability arises or arose
from any action by or in the right to the corporation; provided, however, that
no indemnification may be made in any case where the act or failure to act
giving rise to the claim for indemnification is determined by a court to have
constituted willful misconduct or recklessness.
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Section 24.1 of the registrant's By-laws provides that the registrant shall
indemnify, to the fullest extent now or hereafter permitted by law, each
director or officer (including each former director or officer) of the
registrant who was or is made a party to or a witness in or is threatened to be
made a party to or a witness in any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative, by
reason of the fact that he or she is or was an authorized representative of the
registrant, against all expenses (including attorneys' fees and disbursements),
judgments, fines (including excise taxes and penalties) and amounts paid in
settlement actually and reasonably incurred in connection with such action, suit
or proceeding.
Section 24.2 of the registrant's By-laws provides that the registrant shall
pay expenses (including attorneys' fees and disbursements) incurred by a
director or officer of the registrant referred to in Section 24.1 in defending
or appearing as a witness in any civil or criminal action, suit or proceeding
described in Section 24.1 in advance of the final disposition of such action,
suit or proceeding. The expenses incurred by such director or officer shall be
paid by the registrant in advance of the final disposition of such action, suit
or proceeding only upon receipt of an undertaking by or on behalf of such
director or officer to repay all amounts advanced if it shall ultimately be
determined that he is not entitled to be indemnified by the registrant.
Section 1747 of the BCL permits a Pennsylvania business corporation to
purchase and maintain insurance on behalf of any person who is or was a
director, officer, employee or agent of the corporation, or is or was serving at
the request of the corporation as a director, officer, employee or agent of
another corporation or other enterprise, against any liability asserted against
such person and incurred by him in any such capacity, or arising out of his
status as such, whether or not the corporation would have the power to indemnify
the person against such liability under the provisions described above.
Section 24.5 of the registrant's By-laws provides that, except in the
circumstances set forth therein, the registrant shall purchase and maintain
insurance on behalf of each director and officer against any liability asserted
against or incurred by such director or officer in any capacity, or arising out
of such director's or officer's status as such, whether or not the registrant
would have the power to indemnify such person against such liability under the
provisions of the By-laws.
The registrant maintains directors' and officers' liability insurance
covering its directors and officers with respect to liabilities, including
liabilities under the Securities Act, which they may incur in connection with
their serving as such. Such insurance may provide coverage for the directors and
officers against certain liabilities even though such liabilities may not be
covered by the above-described By-law indemnification provision.
As permitted by Section 1713 of the BCL, the By-laws of the registrant
provide that no director shall be personally liable for monetary damages for any
action taken, or failure to take any action, except to the extent that such
elimination or limitation of liability is expressly prohibited by law. The BCL
states that this exculpation from liability does not apply (i) where the
director has breached or failed to perform the duties of his office and the
breach or failure to perform constitutes self-dealing, willful misconduct or
recklessness, and (ii) to the responsibility or liability of a director pursuant
to any criminal statute or the liability of a director for payment of taxes
pursuant to federal, state or local law. It may also not apply to liabilities
imposed upon directors by the federal securities laws.
II-2
<PAGE> 183
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) The following exhibits are filed herewith or incorporated by reference
as part of this Registration Statement:
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ------------ ------------------------------------------------------------------------------
<C> <S>
2.1 Agreement and Plan of Reorganization by and between BT Financial Corporation
and Moxham Bank Corporation, dated January 12, 1996 (a copy of which is
attached as Annex A to the Joint Proxy Statement/Prospectus forming part of
this registration statement).
2.2.1 Agreement and Plan of Reorganization dated as of October 24, 1995, as amended
by The First Amendment to Agreement and Plan of Reorganization dated March 27,
1996 by and among BT Financial Corporation, Johnstown Bank and Trust Company
and The Armstrong County Trust Company(1).
2.3 Stock Purchase Agreement dated September 1, 1995 by and among Huntington
Bancshares West Virginia, Inc., The Huntington National Bank of Pennsylvania
and BT Financial Corporation.(2)
3.1 Articles of Incorporation of BT Financial Corporation as amended to August 16,
1991.(3)
3.2 By-laws of BT Financial Corporation as amended to September 23, 1992.(4)
5.1 Form of opinion of Kirkpatrick & Lockhart LLP as to legality of the shares of
common stock, par value $5.00 per share, of BT Financial Corporation being
registered.
8.1 Form of opinion of Kirkpatrick & Lockhart LLP as to certain tax matters.*
24.1 Consent of Coopers & Lybrand LLP.
24.2 Consent of Barnes, Saly & Company.
24.3 Consent of Kirkpatrick & Lockhart LLP (included in opinion filed as Exhibit
5.1).
24.4 Consent of Kirkpatrick & Lockhart LLP (included in opinion filed as Exhibit
8.1).
24.5 Consent of Berwind Financial Group, L.P.
24.6 Consent of Hopper Soliday & Co.
24.7 Consent of S.R. Snodgrass.
25.1 Power of Attorney (filed herewith).
99.1 Form of Proxy to be delivered to shareholders of BT Financial Corporation.
99.2 Form of Proxy to be delivered to shareholders of Moxham Bank Corporation.
</TABLE>
- ---------
(1) Incorporated by reference to Annex A and B to Amendment No. 1 to
Registration Statement on Form S-4 (333-01797).
(2) Incorporated by reference to Current Report on Form 8-K dated December 14,
1995 (as amended).
(3) Incorporated by reference to Registration Statement on Form S-4 (No.
33-69112).
(4) Incorporated by reference to Registration Statement on Form S-4 (No.
33-69112).
* To be filed by amendment.
(b) All financial statement schedules of BT Financial, Moxham and Armstrong
are omitted because they are not required, are not applicable or the required
information is given in the consolidated financial statements or notes thereto
incorporated by reference herein (in the case of BT Financial Corporation) or as
presented elsewhere herein (in the case of Moxham and Armstrong).
(c) The opinion of Berwind Financial Group, L.P., is included as Annex B to
the Joint Proxy Statement/Prospectus which forms a part of this registration
statement.
(d) The opinion of Hopper Soliday & Co. is included as Annex C to the Joint
Proxy Statement/ Prospectus which forms a part of this registration statement.
II-3
<PAGE> 184
ITEM 22. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes:
(1) 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, as amended;
(ii) To reflect in the prospectus any facts 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.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, as amended, 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.
(3) 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.
(4) That, for purposes of determining any liability under the
Securities Act of 1933, as amended, each filing of the registrant's annual
report pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of
1934, as amended, 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.
(5) 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.
(6) That every prospectus (i) that is filed pursuant to paragraph (5)
immediately preceding, or (ii) that purports to meet the requirements of
Section 10(a)(3) of the Securities Act of 1933, as amended, 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, as amended,
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.
(7) Insofar as indemnification for liabilities arising under the
Securities Act of 1933, as amended, may be permitted to directors, officers
and controlling persons of the registrant pursuant to the foregoing
provisions, 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 that 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
II-4
<PAGE> 185
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in that Act and will be governed by the
final adjudication of such issue.
(b) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 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.
(c) 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.
II-5
<PAGE> 186
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has duly
caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Pittsburgh, Commonwealth
of Pennsylvania, on April 19, 1996.
BT FINANCIAL CORPORATION
/s/ JOHN H. ANDERSON
By: ________________________
John H. Anderson
Chairman and Chief Executive
Officer
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints, John H. Anderson, Steven Ackmann and Carl J.
Motter, Jr. and each of them, his true and lawful attorneys-in-fact and agents,
with full power of substitution and resubstitution, for him and in his name,
place and stead, in any and all capacities, to sign any and all amendments to
this registration statement, and to file the same, with all exhibits thereto,
and other documentation in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents, or their substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE CAPACITY DATE
--------- -------- ----
<C> <S> <C>
/s/ JOHN H. ANDERSON Chairman, Chief Executive Officer April 19, 1996
- ----------------------------------- and Director (Principal Executive
John H. Anderson Officer)
/s/ MARK L. SOLLENBERGER Executive Vice President, April 19, 1996
- ----------------------------------- Treasurer and Assistant Secretary
Mark L. Sollenberger (Principal Financial Officer)
/s/ DAVID A. CASADO Vice President and Controller April 19, 1996
- ----------------------------------- (Principal Accounting Officer)
David A. Casado
/s/ MARTIN L. BEARER Director April 19, 1996
- -----------------------------------
Martin L. Bearer
/s/ BRUNO DEGOL Director April 19, 1996
- -----------------------------------
Bruno DeGol
Director April , 1996
- -----------------------------------
Louis G. Galliker
/s/ WILLIAM B. KANIA Director April 19, 1996
- -----------------------------------
William B. Kania
</TABLE>
II-6
<PAGE> 187
<TABLE>
<CAPTION>
SIGNATURE CAPACITY DATE
--------- -------- ----
<C> <S> <C>
Director April , 1996
- -----------------------------------
L. Robert Kimball
Director April , 1996
- -----------------------------------
Edward L. Mears
/s/ ROGER S. NAVE Director April 19, 1996
- -----------------------------------
Roger S. Nave
/s/ ETHEL J. OTROSINA Director April 19, 1996
- -----------------------------------
Ethel J. Otrosina
Director April , 1996
- -----------------------------------
Robert G. Salathe, Jr.
/s/ WILLIAM R. SNODDY Director April 19, 1996
- -----------------------------------
William R. Snoddy
/s/ GERALD W. SWATSWORTH Director April 19, 1996
- -----------------------------------
Gerald W. Swatsworth
Director April , 1996
- -----------------------------------
W.A. Thomas
Director April , 1996
- -----------------------------------
Rowland H. Tibbott, Jr.
</TABLE>
II-7
<PAGE> 188
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
PRIOR FILING
OR
EXHIBIT NO. DESCRIPTION SEQUENTIAL PAGE NUMBER
- ------------ ----------------------------------------------- ------------------------------
<C> <S> <C>
2.1 Agreement and Plan of Reorganization by and
between BT Financial Corporation and Moxham
Bank Corporation dated January 12, 1996 (a copy
of which is attached as Annex A to the Joint
Proxy Statement/ Prospectus forming part of
this registration statement).
2.2.1 Agreement and Plan of Reorganization dated as Incorporated by reference to
of October 24, 1995, as amended by the First Annex A and B of Amendment No.
Amendment to Agreement and Plan of 1 to Registration Statement on
Reorganization dated March 27, 1996 by and Form S-4 (333-01797).
among BT Financial Corporation, Johnstown Bank
and Trust Company and The Armstrong County
Trust Company.
2.3 Stock Purchase Agreement dated September 1, Incorporated by reference to
1995 by and among Huntington Bancshares West Current Report on Form 8-K
Virginia, Inc., The Huntington National Bank of dated December 14, 1995 (as
Pennsylvania and BT Financial Corporation. amended)
3.1 Articles of Incorporation of BT Financial Incorporated by reference to
Corporation as amended to August 16, 1991. Registration Statement on Form
S-4 (No. 33-69112)
3.2 By-laws of BT Financial Corporation as amended Incorporated by reference to
to September 23, 1992. Registration Statement on Form
S-4 (No. 33-69112)
5.1 Form of opinion of Kirkpatrick & Lockhart LLP
as to legality of the shares of common stock,
par value $5.00 per share, of BT Financial
Corporation being registered.
8.1 Form of opinion of Kirkpatrick & Lockhart LLP
as to certain tax matters.*
24.1 Consent of Coopers & Lybrand LLP.
24.2 Consent of Barnes, Saly & Company.
24.3 Consent of Kirkpatrick & Lockhart LLP (included
in opinion filed as Exhibit 5.1).
24.4 Consent of Kirkpatrick & Lockhart LLP (included
in opinion filed as Exhibit 8.1).
24.5 Consent of Berwind Financial Group, L.P.
24.6 Consent of Hopper Soliday & Co.
24.7 Consent of S.R. Snodgrass.
25.1 Power of Attorney (included on page II-3
herewith).
99.1 Form of Proxy to be delivered to shareholders
of BT Financial Corporation.
99.2 Form of Proxy to be delivered to shareholders
of Moxham Bank Corporation.
</TABLE>
* To be filed by amendment.
<PAGE> 1
EXHIBIT 5.1
FORM OF OPINION OF
KIRKPATRICK & LOCKHART LLP
AS TO LEGALITY OF THE SHARES
OF COMMON STOCK, PAR VALUE $5.00 PER SHARE,
OF BT FINANCIAL CORPORATION BEING REGISTERED
April , 1996
BT Financial Corporation
BT Financial Plaza
551 Main Street
Johnstown, Pennsylvania 15901
Re: Legality of Shares
Gentlemen:
We have acted as counsel for BT Financial Corporation, a Pennsylvania
corporation, in connection with the proposed issuance of up to shares
(the "Shares") of common stock, par value $5.00 per share, of BT Financial
pursuant to an Agreement and Plan of Reorganization dated as of January 12, 1996
(the "Merger Agreement") by and among BT Financial and Moxham Bank Corporation,
a Pennsylvania bank holding company. As such counsel, we have also acted on
behalf of BT Financial in connection with the Registration Statement on Form S-4
(the "Registration Statement") to be filed with the Securities and Exchange
Commission for the registration pursuant to the Securities Act of 1933, as
amended (the "Act"), of that proposed issuance. We are furnishing this opinion
to you in accordance with Item 601(b)(5) of Regulation S-K promulgated under the
Act for filing as Exhibit 5.1 to the Registration Statement.
In preparing this opinion, we have examined (i) the Registration Statement,
(ii) the Merger Agreement, (iii) the Articles of Incorporation and By-Laws of BT
Financial, as amended to date, (iv) certain resolutions adopted by the Board of
Directors of BT Financial on October 25, 1995 and March 27, 1996, and (v) such
other public and corporate documents, certificates, instruments, corporate
records, legal opinions, statutes, decisions and questions of law as we deemed
necessary or appropriate to enable us to express an informed opinion on the
matter hereinafter set forth.
In rendering an opinion on the matter hereinafter set forth, we have
assumed the authenticity of all original documents submitted to us as originals,
the conformity to original documents of all documents submitted to us as
conformed copies or photocopies thereof and the genuineness of all signatures
and the due authority of all persons executing such documents and the due
authorization, execution and delivery of such documents.
We are opining herein only as to the effect on the subject transactions of
the laws of the Commonwealth of Pennsylvania (excluding conflicts of laws rules)
and the laws of the United States of America, all as in effect on the date
hereof. Accordingly, we are not opining on, and we assume no responsibility as
to, the applicability to or effect on any of the matters covered herein of the
laws of any other jurisdiction.
On the basis of and subject to the foregoing, we are pleased to advise you
that in our opinion the Shares have been duly authorized for issuance and sale
in the manner referred to in the Registration Statement and, when issued and
delivered by BT Financial pursuant to the Merger Agreement, will be validly
issued, fully paid and non-assessable.
This opinion is rendered as of the date hereof, and we have not undertaken
to supplement this opinion with respect to factual matters of changes in the law
which hereafter occur.
We hereby consent to the filing of this opinion as Exhibit 5.1 to the
Registration Statement and to the reference to us in the Joint Proxy
Statement/Prospectus that is part of the Registration Statement.
Yours truly,
<PAGE> 1
EXHIBIT 24.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this registration statement
dated April 19, 1996 on Form S-4 (concerning the acquisition of Moxham Bank
Corporation by BT Financial Corporation) of our report dated January 23, 1996,
on our audits of the consolidated financial statements of BT Financial
Corporation and affiliates as of December 31, 1995 and 1994 and for the years
ended December 31, 1995, 1994 and 1993. We also consent to the reference to our
firm under the caption "Experts".
/s/ COOPERS & LYBRAND LLP
Coopers & Lybrand LLP
600 Grant Street
Pittsburgh, PA
April 19, 1996
<PAGE> 1
EXHIBIT 24.2
[LOGO] BARNES, SALY & COMPANY
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
Moxham Bank Corporation
Johnstown, Pennsylvania
We consent to the inclusion in this registration statement dated April 19,
1996 on Form S-4 (concerning the merger of Moxham Bank Corporation into BT
Financial Corporation) of our report dated February 15, 1996 on our audits of
the consolidated financial statements of Moxham Bank Corporation and
subsidiaries as of December 31, 1995 and 1994 and for the three years ended
December 31, 1995. We also consent to the reference to our firm under the
caption "Experts".
/s/ BARNES, SALY & COMPANY
April 19, 1996
<PAGE> 1
EXHIBIT 24.5
BERWIND
FINANCIAL GROUP, LP.
April 19, 1996
Board of Directors
BT Financial Corporation
Johnstown, Pennsylvania
We consent to the use of our firm's name, Berwind Financial Group, L.P.,
and the inclusion of our Form of Fairness Opinion in this registration statement
dated April 19, 1996 on Form S-4 (concerning the acquisition of Moxham Bank
Corporation by BT Financial Corporation).
Sincerely,
/s/ BERWIND FINANCIAL GROUP, L.P.
<PAGE> 1
EXHIBIT 24.6
HOPPER SOLIDAY & CO.
April 18, 1996
Board of Directors
Moxham Bank Corporation
540 Central Avenue
Johnstown, PA 15902
Gentlemen:
We hereby consent to the use in the Registration Statement on Form S-4 of
the draft of our opinion relating to the fairness to the shareholders of Moxham
Bank Corporation, from a financial point of view, of the terms of the merger
between Moxham Bank Corporation and BT Financial Corporation, and the references
to Hopper Soliday & Co., Inc. in the Joint Proxy Statement Prospectus
constituting part of this registration statement.
HOPPER SOLIDAY & CO., INC.
By: /s/ ROBERT E. KAFAFIAN
-------------------------
Lancaster, PA
Date: April 18, 1996
<PAGE> 1
EXHIBIT 24.7
INDEPENDENT AUDITOR'S CONSENT
We consent to the use in the Joint Proxy Statement/Prospectus of Moxham
Bank Corporation ("Moxham") and BT Financial Corporation ("BT Financial"), to be
included with the Registration Statement on Form S-4 of BT Financial Corporation
(concerning the acquisition of Moxham by BT Financial), to be filed with the
Securities and Exchange Commission, of our report on The Armstrong County Trust
Company dated February 16, 1996.
We also consent to the reference to our firm under the caption of
"Experts."
/s/ S. R. SNODGRASS
S. R. Snodgrass
Wexford, PA
April 19, 1996
<PAGE> 1
EXHIBIT 99.1
------------
REVOCABLE PROXY
BT FINANCIAL CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints William B. Kania, Gerald W. Swatsworth and
Rowland H. Tibbott, Jr. as proxies, each with the power to appoint his
substitute, and hereby authorizes said proxies to represent and to vote, as
designated on the reverse hereof, all shares of common stock of BT Financial
Corporation held of record by the undersigned at the close of business on
, 1996 at the Special Meeting of Stockholders to be held on
, 1996 or at any adjournment or postponement thereof. In
their discretion, the proxies are authorized to vote on such other matters as
may properly come before the meeting.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR THE PROPOSAL DESCRIBED BELOW.
Adoption and approval of an Agreement and Plan of Reorganization dated
as of January 12, 1996 by and between BT Financial Corporation, a
Pennsylvania business corporation ("the Company") and Moxham Bank
Corporation ("Moxham"), a Pennsylvania business corporation, and,
pursuant to which Moxham will merge (the "Merger") with and into the
Company, with the Company being the surviving corporation, and
immediately following the Merger, the Company will merge (the "Bank
Merger") The Moxham National Bank of Johnstown, a national banking
association and The First National Bank of Garrett, a national banking
association (collectively the "Banks"), wholly-owned subsidiaries of
Moxham with and into Johnstown Bank and Trust Company ("Johnstown
Bank"), a Pennsylvania bank and trust company and wholly-owned
subsidiary of the Company, with Johnstown Bank as the surviving
corporation, as set forth in the accompanying Notice of Special Meeting
of Shareholders and Joint Proxy Statement/Prospectus, receipt of which
is hereby acknowledged.
<TABLE>
<CAPTION>
For Against Abstain
<S> <C> <C>
[] [] []
</TABLE>
Please sign EXACTLY as your name appears
on this card. When signing as trustee,
executor, etc., title should be so stated.
If shares are held jointly, only one
signature is required. If a Corporation,
please sign in full corporate name by
President or other authorized officer. If
a Partnership, please sign in partnership
name by authorized persons.
Dated: ----------------------------, 1996
-----------------------------------------
Authorized Signature(s)
-----------------------------------------
Title
<PAGE> 1
EXHIBIT 99.2
------------
REVOCABLE PROXY
THE MOXHAM BANK CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints and
as proxies, each with the power to appoint his
substitute, and hereby authorizes said proxies to represent and to vote, as
designated on the reverse hereof, all shares of common stock of The Moxham Bank
Corporation held of record by the undersigned at the close of business on
, 1996 at the Special Meeting of Stockholders to be held on
, 1996 or at any adjournment or postponement thereof. In
their discretion, the proxies are authorized to vote on such other matters as
may properly come before the meeting.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR THE PROPOSAL DESCRIBED BELOW.
Adoption and approval of an Agreement and Plan of Reorganization dated
as of January 12, 1996 by and between BT Financial Corporation, a
Pennsylvania business corporation ("BT Financial") and Moxham Bank
Corporation (the "Company"), a Pennsylvania business corporation, and,
pursuant to which the Company will merge (the "Merger") with and into BT
Financial, with BT Financial being the surviving corporation, and
immediately following the Merger, BT Financial will merge (the "Bank
Merger") The Moxham National Bank of Johnstown, a national banking
association and The First National Bank of Garrett, a national banking
association (collectively the "Banks"), wholly-owned subsidiaries of the
Company with and into Johnstown Bank and Trust Company ("Johnstown
Bank"), a Pennsylvania bank and trust company and wholly-owned
subsidiary of BT Financial, with Johnstown Bank as the surviving
corporation, as set forth in the accompanying Notice of Special Meeting
of Shareholders and Joint Proxy Statement/Prospectus, receipt of which
is hereby acknowledged.
<TABLE>
<CAPTION>
For Against Abstain
<S> <C> <C>
[] [] []
</TABLE>
Please sign EXACTLY as your name appears
on this card. When signing as trustee,
executor, etc., title should be so stated.
If shares are held jointly, only one
signature is required. If a Corporation,
please sign in full corporate name by
President or other authorized officer. If
a Partnership, please sign in partnership
name by authorized persons.
Dated: ----------------------------, 1996
-----------------------------------------
Authorized Signature(s)
-----------------------------------------
Title
