<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 10, 1997
REGISTRATION NO. 333-
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
S&T BANCORP, INC.
(Exact name of registrant as specified in charter)
PENNSYLVANIA 0-12508 25-1434426
(State or other (Commission File Number) (I.R.S. Employer
jurisdiction of Identification Number)
incorporation or
organization)
S&T BANCORP, INC.
P.O. BOX 190, 800 PHILADELPHIA STREET
INDIANA, PENNSYLVANIA 15701
(412) 349-2900
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
---------------
ROBERT E. ROUT
CHIEF FINANCIAL OFFICER
S&T BANCORP, INC.
P.O. BOX 190, 800 PHILADELPHIA STREET
INDIANA, PENNSYLVANIA 15701
(412) 465-4825
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
---------------
COPIES TO:
CATHERINE COLLINS MCCOY, ESQ. J. ROBERT VAN KIRK, ESQ.
ARNOLD & PORTER KIRKPATRICK & LOCKHART LLP
555 12TH STREET, N.W. 1500 OLIVER BUILDING
WASHINGTON, D.C. 20004-1202 PITTSBURGH, PENNSYLVANIA 15222-2312
(202) 942-5055 (412) 355-6480
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of the Registration Statement.
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 MAXIMUM
OFFERING PRICE PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE AGGREGATE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED (1) PER SHARE (2) OFFERING PRICE (2) REGISTRATION FEE (2)
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock
($2.50 Par Value)...... 3,036,075 $16.15 $49,030,588 $14,858
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
</TABLE>
(1) Represents the maximum number of shares of common stock of S&T Bancorp,
Inc. ("S&T"), par value $2.50 per share ("S&T Common Stock"), issuable
upon consummation of the merger of Peoples Bank of Unity ("Peoples") with
and into S&T's subsidiary, S&T Bank, with each share of the common stock
of Peoples ("Peoples Common Stock"), par value $10.00 per share, converted
and exchanged for 26.25 shares of S&T Common Stock.
(2) Estimated solely for the purpose of computing the registration fee.
Computed in accordance with Rule 457(f)(2) under the Securities Act of
1933, as amended, on the basis of the book value of $423.92 per share of
Peoples Common Stock on September 30, 1996. The proposed maximum aggregate
offering price per share has been determined by dividing the proposed
maximum aggregate offering price by the number of shares being registered.
---------------
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 OR UNTIL THIS REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
S&T BANCORP, INC.
CROSS REFERENCE SHEET
PURSUANT TO ITEM 501(B) OF REGULATION S-K
ITEM OF FORM S-4 HEADING IN PROXY STATEMENT/PROSPECTUS
1.Forepart of Registration
Statement and Outside Front
Cover Page of Prospectus........ Introduction
2.Inside Front and Outside Back
Cover Pages of Prospectus.......
Table of Contents; Available
Information; Documents Incorporated by
Reference; Introduction; The Companies
3.Risk Factors, Ratio of Earnings
to Fixed Charges and Other
Information.....................
Introduction; Summary; Proposed
Merger--Background of the Merger
4.Terms of the Transaction.......... Introduction; Summary; Proposed
Merger--Terms of Merger
5.Pro Forma Financial Information... Summary; Pro Forma Combined Financial
Information
6.Material Contacts with the
Company Being Acquired..........
Proposed Merger
7.Additional Information Required
for Reoffering by Persons and
Parties Deemed to be
Underwriters....................
Not Applicable
8.Interests of Named Experts and Experts; Legal Opinions
Counsel.........................
9.Disclosure of Commission Position
on Indemnification for
Securities Act Liabilities......
Undertakings
10.Information with Respect to S-3 Introduction; The Companies; Available
Registrants..................... Information; Documents Incorporated by
Reference; Proposed Merger
11.Incorporation of Certain
Information by Reference........
Available Information; Documents
Incorporated By Reference
12.Information with Respect to S-2
or S-3 Registrants..............
Not Applicable
13.Incorporation of Certain
Information by Reference........
Not Applicable
14.Information with Respect to
Registrants Other Than S-3 or
S-2 Registrants................. Not Applicable
15.Information with Respect to S-3 Not Applicable
Companies.......................
16.Information with Respect to S-2
or S-3 Companies................
Not Applicable
<PAGE>
S&T BANCORP, INC.
CROSS REFERENCE SHEET (CONTINUED)
PURSUANT TO ITEM 501(B) OF REGULATION S-K
ITEM OF FORM S-4 HEADING IN PROXY STATEMENT/PROSPECTUS
17.Information with Respect to
Companies Other Than S-2 or S-3
Companies....................... Summary; Proposed Merger--Background of
the Merger; Certain Information
Regarding Peoples; Index to Financial
Information
18.Information if Proxies, Consents
or Authorizations are to be
Solicited....................... Introduction; Summary; Meeting
Information; Proposed Merger; Available
Information; Documents Incorporated by
Reference
19. Information if Proxies, Consents
or Authorizations are not to be
Solicited or in an Exchange
Offer...........................
Not Applicable
2
<PAGE>
[THE PEOPLES BANK OF UNITY LETTERHEAD]
, 1997
Dear Shareholder:
We are pleased to enclose your Notice of Special Meeting and Proxy
Statement/Prospectus for a Special Meeting of Shareholders of Peoples Bank of
Unity ("Peoples"), to be held on April 18, 1997, at 2:00 p.m., Eastern
Standard Time, at Alcoma Golf Club, located at 6770 Saltsburg Road,
Pittsburgh, Pennsylvania 15235.
At the meeting you will be asked to consider and vote on a proposed merger
(the "Merger") of Peoples, a Pennsylvania chartered bank, with and into S&T
Bank, a Pennsylvania chartered bank and wholly owned subsidiary of S&T
Bancorp, Inc. ("S&T"). In the Merger, each share of Peoples common stock, par
value $10.00 ("Peoples Common Stock"), outstanding immediately prior to the
time of the Merger, except as provided in the Agreement and Plan of Merger,
will by virtue of the Merger be converted into 26.25 shares of common stock of
S&T, par value $2.50 ("S&T Common Stock").
S&T Common Stock is listed and traded on the Nasdaq National Market under
the symbol "STBA." The closing price of S&T Common Stock in composite trading
on , 1997, was $ . per share, as reported in The Wall Street
Journal. Peoples Common Stock is neither listed nor publicly traded.
YOUR BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE PROPOSED MERGER AND
RECOMMENDS A VOTE "FOR" THE MERGER. The Board reached this decision after
careful consideration of a number of factors. The enclosed Proxy
Statement/Prospectus contains more detailed information concerning the Board's
decision and the proposed transaction. We urge you to consider it carefully.
Approval of the Merger requires the affirmative vote of the holders of a
two-thirds majority of the outstanding shares of Peoples Common Stock at a
meeting at which a quorum is present. Accordingly, proxies marked "Abstain" or
shares that are not voted will have the same effect as votes against the
Merger. We urge you to take the time to consider this important matter and
vote now.
In order to make sure that your vote is represented, indicate your vote on
the enclosed proxy form, date and sign it, and return it in the enclosed
envelope. If you attend the meeting in person, you may revoke your proxy at
the meeting and vote in person. YOU SHOULD NOT SEND IN CERTIFICATES FOR YOUR
SHARES OF PEOPLES COMMON STOCK AT THIS TIME.
On behalf of the Board of Directors of Peoples, I thank you for your support
and urge you to vote for approval of the Merger.
Sincerely,
.....................................
Russell P. Miller
President
<PAGE>
PEOPLES BANK OF UNITY
7660 SALTSBURG ROAD
PITTSBURGH, PENNSYLVANIA 15239-3700
----------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
APRIL 18, 1997
----------------
To The Shareholders of
Peoples Bank of Unity:
Notice is hereby given that a Special Meeting of Shareholders of Peoples
Bank of Unity ("Peoples") will be held at Alcoma Golf Club, located at 6770
Saltsburg Road, Pittsburgh, Pennsylvania, 15235 on April 18, 1997 at 2:00 p.m.
Eastern Standard Time, for the following purposes:
1. To consider and vote upon the approval of an Agreement and Plan of
Reorganization and related Agreement and Plan of Merger (collectively, the
"Agreement") among Peoples, a Pennsylvania chartered bank, S&T Bancorp, Inc.
("S&T") and S&T Bank, a Pennsylvania chartered bank and wholly owned
subsidiary of S&T, a copy of each of which is included as Appendix A to the
accompanying Proxy Statement/Prospectus and incorporated by reference herein,
pursuant to which: (x) Peoples will be merged with and into S&T Bank
("Merger"); and (y) each outstanding share of common stock of Peoples
("Peoples Common Stock"), par value $10.00 per share, would be converted into
26.25 shares of common stock of S&T, par value $2.50 per share, and cash in
lieu of any fractional share determined in accordance with the terms of the
Agreement.
2. To transact such other business as may properly come before the meeting
or any adjournment thereof.
Only shareholders of record at the close of business on , 1997 are
entitled to notice of and to vote at such meeting or any adjournment thereof.
Holders of Peoples Common Stock have the right to dissent and demand a
determination of the fair value of their shares in the event that the Merger
is approved and consummated. For a description of such rights, see "PROPOSED
MERGER--Rights of Dissenting Shareholders" in the accompanying Proxy
Statement/ Prospectus. A copy of the applicable provisions of Pennsylvania law
with which dissenting shareholders must comply is included as Appendix C to
the accompanying Proxy Statement/Prospectus.
By Order of the Board of Directors,
.....................................
Russell P. Miller
President
Pittsburgh, Pennsylvania
, 1997
IMPORTANT
YOUR VOTE IS IMPORTANT. IN ORDER TO ASSURE YOUR REPRESENTATION AT THE
SPECIAL MEETING, PLEASE MARK, SIGN, DATE AND RETURN THE ENCLOSED PROXY AS
SOON AS POSSIBLE IN THE ENCLOSED ENVELOPE. NO POSTAGE IS REQUIRED FOR
MAILING IN THE UNITED STATES.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS VOTE TO
APPROVE THE AGREEMENT.
<PAGE>
TABLE OF CONTENTS
PAGE
----
Introduction............................................................... 1
Available Information; Documents Incorporated by Reference................. 3
The Companies.............................................................. 4
Summary.................................................................... 5
The Meeting.............................................................. 5
The Proposed Merger...................................................... 5
Management and Operations After the Merger............................... 6
Interests of Certain Persons in the Merger............................... 6
Reasons for the Merger; Recommendation of the Board of Directors......... 6
Opinion of Peoples' Financial Advisor.................................... 6
Vote Required............................................................ 6
Dissenters' Rights....................................................... 7
Conditions; Termination.................................................. 7
Regulatory Approvals..................................................... 8
Certain Federal Income Tax Consequences.................................. 8
Accounting Treatment..................................................... 9
Effective Date of the Merger............................................. 9
Surrender of Certificates................................................ 9
Certain Differences in the Rights of Shareholders........................ 9
Markets and Market Prices................................................ 9
Comparative Per Share Data............................................... 11
Selected Financial Data.................................................. 12
Pro Forma Combined Financial Information................................... 16
Meeting Information........................................................ 20
Date, Place and Time..................................................... 20
Record Date; Voting Rights............................................... 20
Voting and Revocation of Proxies......................................... 20
Solicitation of Proxies.................................................. 20
Proposed Merger............................................................ 21
Background of the Merger................................................. 21
Reasons for the Merger; Recommendation of the Board of Directors......... 22
Terms of the Merger...................................................... 23
Opinion of Peoples' Financial Advisor.................................... 24
Interests of Certain Persons in the Merger............................... 25
Surrender of Certificates................................................ 27
Representation and Warranties; Conditions to the Merger; Waiver.......... 27
Regulatory Approvals..................................................... 28
Business Pending the Merger.............................................. 29
Effective Date of the Merger; Termination................................ 29
Management and Operations After the Merger............................... 30
Rights of Dissenting Shareholders........................................ 30
Certain Differences in the Rights of Shareholders........................ 31
Certain Federal Income Tax Consequences.................................. 33
Resale of S&T Common Stock............................................... 35
Accounting Treatment..................................................... 36
Certain Information Regarding Peoples...................................... 36
Business................................................................. 36
Competition.............................................................. 37
Supervision and Regulation............................................... 37
i
<PAGE>
PAGE
----
Effect of Government Monetary Policies................................. 37
Legislation and Regulatory Changes..................................... 37
Legal Proceedings...................................................... 37
Environmental Issues................................................... 38
Peoples Common Stock Prices and Dividends.............................. 38
Dividend Restrictions on Peoples....................................... 38
Directors of Peoples................................................... 39
Principal Officers of Peoples.......................................... 39
Remuneration of Directors and Officers................................. 40
Compensation Table..................................................... 40
Beneficial Ownership by Officers and Directors......................... 40
Retirement Plans....................................................... 41
Certain Transactions................................................... 41
Principal Owners of Peoples Voting Securities.......................... 42
Experts.................................................................. 42
Legal Opinion............................................................ 43
Index to Financial Information........................................... F-1
Appendix A--Agreement and Plan of Reorganization and Related Agreement
and Plan of Merger
Appendix B--Opinion of Danielson Associates, Inc.
Appendix C--The Dissent Statute, Section 1222 of the Pennsylvania Banking
Code and Sections 1930 and 1571-1580 of the Pennsylvania Business
Corporations Act
ii
<PAGE>
PEOPLES BANK OF UNITY
PROXY STATEMENT
FOR
SPECIAL MEETINGS OF SHAREHOLDERS
TO BE HELD APRIL 18, 1997
----------------
S&T BANCORP, INC.
PROSPECTUS
UP TO 3,036,075 SHARES OF COMMON STOCK
(PAR VALUE $2.50 PER SHARE)
INTRODUCTION
This Proxy Statement/Prospectus is being furnished to shareholders of
Peoples Bank of Unity ("Peoples") in connection with the solicitation of
proxies by the Board of Directors of Peoples (the "Peoples Board") for use at
the Special Meeting of Shareholders, and any adjournments thereof, to be held
at the time and place set forth in the accompanying notice (the "Peoples
Special Meeting"). It is anticipated that the mailing of this Proxy
Statement/Prospectus and the enclosed proxy card will commence on or about
, 1997.
At the Special Meeting, shareholders of Peoples will be asked to approve an
Agreement and Plan of Reorganization dated November 25, 1996 and a related
Agreement and Plan of Merger (collectively, the "Agreement"), providing for
the Merger (the "Merger") of Peoples with and into S&T Bank, a wholly owned
subsidiary of S&T Bancorp, Inc. ("S&T"), with S&T Bank as the surviving
entity. S&T is a Pennsylvania corporation and a registered bank holding
company, and S&T Bank is a Pennsylvania chartered bank and wholly owned
subsidiary of S&T. Peoples is a Pennsylvania chartered bank. The Agreement is
attached to this Proxy Statement/Prospectus as Appendix A.
At the Effective Date (as defined in the Agreement), each share of common
stock of Peoples, par value $10.00 per share ("Peoples Common Stock"), issued
and outstanding immediately prior to the Effective Date will be converted into
26.25 shares of S&T Common Stock, and cash in lieu of any fractional share
("Exchange Ratio"). Peoples may terminate the Agreement if the Average Closing
Price (as defined herein) of S&T Common Stock is below a certain level on the
Determination Date (as defined herein). For a more complete description of the
Agreement and the terms of the Merger, see "PROPOSED MERGER."
In the event that prior to the Effective Date the outstanding shares of S&T
Common Stock shall have been increased, decreased or changed into or exchanged
for a different number or kind of shares or securities by reorganization,
recapitalization, reclassification, stock dividend, stock split or other like
changes in S&T's capitalization, all without S&T receiving adequate
consideration therefor, then an appropriate and proportionate adjustment shall
be made in the number and kind of shares of S&T Common Stock to be thereafter
delivered pursuant to the Agreement.
S&T Common Stock is listed and traded on the Nasdaq National Market under
the symbol "STBA". Peoples Common Stock is neither listed nor traded on the
Nasdaq National Market nor any other market. The last reported sale price per
share of Peoples Common Stock as of October 16, 1996 (the last date to the
knowledge of Peoples on which Peoples Common Stock was traded before public
announcement of the Agreement) was $500.00. The closing price per share of S&T
Common Stock on the Nasdaq National Market on , 1997 was $ (which
would be equivalent to $ for the 26.25 shares of S&T Common Stock into
which each share of Peoples Common Stock will be converted in the Merger.) See
"SUMMARY--Markets and Market Prices." The price of S&T Common Stock may change
prior to and following consummation of the Merger.
<PAGE>
THE SHARES OF S&T COMMON STOCK OFFERED HEREBY ARE NOT INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION ("FDIC"), AND ARE NOT DEPOSITS OR OTHER
OBLIGATIONS OF, OR GUARANTEED BY, ANY BANK SUBSIDIARY OF S&T.
THE S&T COMMON STOCK TO BE ISSUED IN THE MERGER HAS NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION ("COMMISSION" OR "SEC"),
ANY STATE SECURITIES AUTHORITY OR OTHER GOVERNMENTAL AGENCY, NOR HAS THE
COMMISSION, ANY STATE SECURITIES AUTHORITY OR OTHER GOVERNMENTAL AGENCY PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROXY STATEMENT/PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS PROXY STATEMENT/PROSPECTUS AND, IF GIVEN
OR MADE, SUCH INFORMATION OR REPRESENTATION SHOULD NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED. THIS PROXY STATEMENT/PROSPECTUS DOES NOT CONSTITUTE AN
OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO PURCHASE, THE SECURITIES
OFFERED BY THIS PROXY STATEMENT/PROSPECTUS, IN ANY JURISDICTION, TO ANY PERSON
TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION OF AN OFFER IN SUCH
JURISDICTION. NEITHER THE DELIVERY OF THIS PROXY STATEMENT/PROSPECTUS NOR ANY
DISTRIBUTION OF SECURITIES MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES,
CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF S&T OR
PEOPLES SINCE THE DATE OF THIS PROXY STATEMENT/PROSPECTUS.
The date of this Proxy Statement/Prospectus, which also constitutes the
prospectus of S&T for up to 3,036,075 shares of S&T Common Stock to be issued
in connection with the Merger, is , 1997.
ALL SHAREHOLDERS ARE URGED TO READ THIS PROXY STATEMENT/PROSPECTUS CAREFULLY
AND IN ITS ENTIRETY.
2
<PAGE>
AVAILABLE INFORMATION; DOCUMENTS INCORPORATED BY REFERENCE
S&T is subject to the informational requirements of the Securities Exchange
Act of 1934, as amended (the "Exchange Act") and, in accordance therewith, S&T
files reports and other information with the Commission. Such reports, proxy
statements and other information filed by S&T can be inspected and copied at
the Commission's public reference room located at 450 Fifth Street, N.W.,
Washington, D.C. 20549, and the Commission's regional offices located at: 7
World Trade Center (13th floor), New York, New York 10006 and Northwest Atrium
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies
of such material can be obtained at prescribed rates by writing to the
Commission, Public Reference Section, Washington, D.C. 20549. Copies of
documents filed by S&T with the Commission may also be accessed electronically
by means of the Commission's home page on the Internet at "http://www.sec.gov."
Reports, proxy statements and other information filed by S&T can also be
inspected at the offices of the Nasdaq National Market, 1735 K Street, N.W.,
Washington, D.C. 20006-1500, on which S&T Common Stock is traded.
THIS PROXY STATEMENT/PROSPECTUS INCORPORATES BY REFERENCE DOCUMENTS WHICH
ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. DOCUMENTS RELATING TO S&T
(OTHER THAN CERTAIN EXHIBITS TO SUCH DOCUMENTS) ARE AVAILABLE WITHOUT CHARGE
UPON WRITTEN OR ORAL REQUEST TO ROBERT E. ROUT, CHIEF FINANCIAL OFFICER, S&T
BANCORP, INC., 800 PHILADELPHIA STREET, INDIANA, PENNSYLVANIA 15701-3921.
TELEPHONE REQUESTS MAY BE DIRECTED TO (412) 349-2900. IN ORDER TO ENSURE
TIMELY DELIVERY OF THE DOCUMENTS, ANY REQUEST SHOULD BE MADE BY APRIL 11,
1997.
The following documents filed by S&T with the Commission are incorporated
herein by reference: (i) Annual Report on Form 10-K for the year ended
December 31, 1995; (ii) Quarterly Reports on Form 10-Q for the quarters ended
March 31, 1996, June 30, 1996 and September 30, 1996; (iii) Current Report on
Form 8-K dated as of November 27, 1996; and (iv) the description of S&T Common
Stock contained in S&T's registration statement pursuant to Section 12 of the
Exchange Act, and any amendment or report filed for the purpose of updating
such description.
All documents filed by S&T pursuant to Sections 13(a), 13(c), 14 and 15(d)
of the Exchange Act subsequent to the date hereof until the date of the
Peoples Special Meeting shall be deemed to be incorporated herein by reference
and to be a part hereof from the date of such filing. Any statement contained
in a document incorporated or deemed to be incorporated by reference herein
shall be deemed to be modified or superseded for purposes of this Proxy
Statement/Prospectus to the extent that a statement contained herein or in any
other subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Proxy Statement/Prospectus.
3
<PAGE>
THE COMPANIES
S&T. S&T was incorporated on March 17, 1983 under the laws of the
Commonwealth of Pennsylvania as a bank holding company and has two wholly
owned subsidiaries, S&T Bank and S&T Investment Company, Inc. As of September
30, 1996, S&T reported consolidated assets of $1.5 billion and shareholders'
equity of $169 million. S&T is registered as a bank holding company with the
Board of Governors of the Federal Reserve System (the "Federal Reserve") under
the Bank Holding Company Act, as amended.
The principal executive offices of S&T are located at 800 Philadelphia
Street, Indiana, Pennsylvania 15701. Its telephone number is (412) 349-2900.
For additional information concerning the business of S&T and its financial
condition, reference should be made to the S&T documents incorporated herein
by reference. See "AVAILABLE INFORMATION; DOCUMENTS INCORPORATED BY
REFERENCE."
S&T BANK. S&T Bank is a full service bank organized under the laws of the
Commonwealth of Pennsylvania with its main office at 800 Philadelphia Street,
Indiana, Pennsylvania, providing service to its customers through a branch
network of thirty-four offices located in Armstrong, Allegheny, Indiana,
Jefferson, Clearfield and Westmoreland counties. As of September 30, 1996, S&T
Bank reported assets of $1.4 billion and deposit liabilities of $1.0 billion.
S&T Bank's services include accepting time and demand deposit accounts,
making secured and unsecured commercial and consumer loans, providing letters
of credit, and offering discount brokerage services, personal financial
planning and credit card services. S&T Bank has a relatively stable deposit
base and no material amount of deposits is obtained from a single depositor or
group of depositors (including federal, state and local governments).
PEOPLES. Peoples is a commercial bank organized and existing under the laws
of the Commonwealth of Pennsylvania, providing service to its customers
through six branches located in Allegheny County. As of September 30, 1996,
Peoples reported assets of approximately $288 million, deposit liabilities of
approximately $237 million and shareholders' equity of approximately $49
million.
Peoples provides loan and deposit services to individuals and small to
medium sized businesses located primarily in Allegheny and Westmoreland
counties. Among its services, Peoples accepts time, demand and savings
deposits and makes secured and unsecured commercial, real estate and consumer
loans. Peoples' business is not cyclical in nature and is not dependent upon
any single customer or small group of customers for deposits or loans.
The principal executive offices of Peoples are located at 7660 Saltsburg
Road, Pittsburgh, Pennsylvania 15239-3700. Peoples' telephone number is (412)
795-3200. For more information concerning the business of Peoples and its
financial condition, see "CERTAIN INFORMATION REGARDING PEOPLES" and "INDEX TO
FINANCIAL INFORMATION."
4
<PAGE>
SUMMARY
This summary is necessarily general and abbreviated and has been prepared to
assist shareholders in their review of this Proxy Statement/Prospectus. This
summary is not intended to be a complete explanation of the matters covered in
this Proxy Statement/Prospectus and is qualified in all respects by reference
to the more detailed information contained elsewhere in this Proxy
Statement/Prospectus, the Appendices hereto and the documents incorporated
herein by reference. Shareholders are urged to read this Proxy
Statement/Prospectus and the Appendices hereto in their entirety.
THE MEETING
The Peoples Special Meeting to consider and vote upon the merger of Peoples
with and into S&T Bank will be held on April 18, 1997 at 2:00 p.m. Eastern
Standard Time, at Alcoma Golf Club, located at 6770 Saltsburg Road, Pittsburgh,
Pennsylvania. Only holders of record of Peoples Common Stock at the close of
business on , 1997 ("Peoples Record Date") will be entitled to notice
of and to vote at such Peoples Special Meeting and any adjournments or
postponements thereof. At such date, there were outstanding and entitled to
vote 115,660 shares of Peoples Common Stock.
For additional information with respect to the Peoples Special Meeting and
the voting rights of shareholders, see "MEETING INFORMATION."
THE PROPOSED MERGER
On the Effective Date, Peoples will be merged with and into S&T Bank, a
wholly owned subsidiary of S&T. S&T Bank, as the surviving entity in the
Merger, and S&T will continue unaffected and unimpaired by the Merger. Also on
the Effective Date, each share of Peoples Common Stock outstanding immediately
prior to the Effective Date (except as provided in the Agreement) shall by
virtue of the Merger be converted into 26.25 shares of S&T Common Stock and
cash in lieu of any fractional share.
However, Peoples may elect to terminate the Agreement, if the Peoples Board
so determines by a majority vote any time during the three-day period
commencing two days after the fifth trading day immediately preceding the
planned Effective Date (the "Determination Date"), if either:
(i) both of the following conditions are satisfied: (x) the average of
the daily last sale prices of S&T Common Stock as reported on the Nasdaq
National Market (as reported by The Wall Street Journal or other
authoritative source) for the twenty consecutive full trading days on which
shares of S&T Common Stock are traded prior to and including the
Determination Date (the "Average Closing Price") shall be less than $24.88
and (y) the market-capitalization-weighted average of the closing prices of
those bank holding companies listed in the SNL All Bank Index (the "Index
Price") on the Determination Date shall be greater than 231.70 (i.e., 80%
of the value of the Index Price on November 25, 1996, the date the
Agreement was executed); or
(ii) the Average Closing Price of shares of S&T Common Stock shall be
less than $23.325.
For a more complete description of the Agreement and the terms of the Merger,
see "PROPOSED MERGER--Terms of the Merger."
5
<PAGE>
MANAGEMENT AND OPERATIONS AFTER THE MERGER
On the Effective Date, the Board of Directors of S&T (the "S&T Board") (whose
members historically also serve on the Board of Directors of S&T Bank) shall
consist of those persons serving as Directors of S&T immediately prior to the
Effective Date together with three Directors to be designated by Peoples. The
Peoples Board has selected , , and to become directors
of S&T in accordance with the Agreement. S&T has agreed to take all necessary
action immediately prior to the Effective Date to elect these three persons
selected by Peoples to serve as members of the S&T Board. The management of S&T
and S&T Bank will continue unaffected by the Merger. See "PROPOSED MERGER--
Management and Operations After the Merger."
INTERESTS OF CERTAIN PERSONS IN THE MERGER
The Agreement contains provisions relating to, among other things, employee
benefits and indemnification of Peoples directors and officers after the
Merger. In addition, the Agreement provides that three current directors of
Peoples shall become directors of S&T upon the effectiveness of the Merger. See
"PROPOSED MERGER--Interests of Certain Persons in the Merger" and "--Management
and Operations after the Merger."
REASONS FOR THE MERGER; RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS OF PEOPLES HAS UNANIMOUSLY ADOPTED RESOLUTIONS
APPROVING THE AGREEMENT AND UNANIMOUSLY RECOMMENDS ADOPTION OF THE AGREEMENT BY
PEOPLES SHAREHOLDERS. The Peoples Board believes that the terms of the
Agreement are fair and in the best interests of Peoples and its shareholders.
Each member of the Peoples Board also determined that the Exchange Ratio is
fair and reasonable to the shareholders. The terms of the Agreement were
reached on the basis of arm's length negotiations between Peoples and S&T. In
the course of reaching its decision to approve the Agreement, the Peoples Board
consulted with its legal advisors, regarding the legal terms of the Agreement
and the Board of Directors' obligations in its consideration thereof, and with
its financial advisor, regarding the financial terms and fairness, from a
financial point of view, of the conversion and exchange of the Peoples Common
Stock. See "PROPOSED MERGER--Background of the Merger" and "--Reasons for the
Merger; Recommendation of the Board of Directors."
OPINION OF PEOPLES' FINANCIAL ADVISOR
Danielson Associates, Inc. ("Danielson Associates"), financial advisor to
Peoples, has delivered to the Peoples Board its written opinion, as of the date
of this Proxy Statement/Prospectus, that the Exchange Ratio is fair, from a
financial point of view, to Peoples shareholders. The full text of such
opinion, which sets forth the assumptions made, matters considered and limits
on the review undertaken by Danielson Associates, is attached hereto as
Appendix B. Shareholders are urged to read the opinion in its entirety.
Danielson Associates' opinion is directed only to the conversion and exchange
of Peoples Common Stock for S&T Common Stock and does not constitute a
recommendation to any shareholder of Peoples as to how such shareholder should
vote at the Peoples Special Meeting. See "PROPOSED MERGER--Opinion of the
Financial Advisor."
VOTE REQUIRED
Approval of the Merger requires the affirmative vote of a two-thirds majority
of the shares of Peoples Common Stock outstanding and eligible to vote thereon.
Directors and executive officers of Peoples and affiliates of such persons had
sole or shared voting power with respect to 35,606 shares of Peoples Common
Stock, representing 30.79% of Peoples Common Stock outstanding as of the
Peoples Record Date.
6
<PAGE>
S&T has entered into agreements ("Voting Agreements") with each member of the
Peoples Board, in which each Peoples director has agreed and undertook, in his
or her capacity as a shareholder of Peoples and not in his or her capacity as a
director or executive officer of Peoples, to vote all of the shares of Peoples
Common Stock he or she is entitled to vote with respect thereto at the Peoples
Special Meeting in favor of the Agreement. The number of shares of Peoples
Common Stock which such Directors are entitled to vote as of the Peoples Record
Date is 35,586 (30.77% of Peoples Common Stock outstanding as of that date).
Also, the members of the Peoples Board have agreed not to effect any transfer
or other disposition of any of their shares of Peoples Common Stock (except
intrafamily gifts in an amount that in the aggregate do not result in a
material change in the amount of shares of Peoples Common Stock owned by a
director) until Peoples shareholders have voted to approve the Agreement or
until the Agreement has been terminated pursuant to the terms thereof. The
Peoples Board agreed to take or cause to be taken all action necessary or
desirable so as to permit consummation of the Merger at the earliest possible
date and not take, or cause or to the best of the Peoples Board's ability
permit to be taken, any action which would substantially impair the prospects
of completing the Merger pursuant to the Agreement. Assuming that Directors and
current executive officers of Peoples and their respective affiliates, holding
an aggregate of 35,606 shares of outstanding Peoples Common Stock (30.79%) as
of the Peoples Record Date, vote their shares in favor of the Agreement, the
affirmative vote of holders of approximately 41,501 additional shares of
Peoples Common Stock (35.88%) will be required to approve the Agreement. See
"MEETING INFORMATION--Record Date; Voting Rights."
DISSENTERS' RIGHTS
Under the Pennsylvania Banking Code, the rights and remedies of dissenting
shareholders are governed by Pennsylvania Business Corporations law.
Accordingly, the holders of Peoples Common Stock have the right to dissent from
the Merger and receive payment equal to the "fair value" of their shares upon
compliance with applicable provisions of Pennsylvania law, the full text of
which is attached as Appendix C to this Proxy Statement/Prospectus. See
"PROPOSED MERGER--Rights of Dissenting Shareholders."
CONDITIONS; TERMINATION
Consummation of the Merger is subject to satisfaction of a number of
conditions, including the taking of all necessary corporate action on the part
of Peoples and S&T to approve the Agreement and the Merger, and the receipt of
all regulatory approvals required or mutually deemed necessary in connection
with the Merger. The approval of the Merger by the Peoples shareholders will be
solicited at the Peoples Special Meeting scheduled to be held on April 18,
1997.
Pursuant to the rules of the Nasdaq National Market, the issuance of the
shares of S&T Common Stock in the Merger and the Agreement must be approved by
the affirmative vote of the holders of a majority of the shares of S&T Common
Stock present at a meeting at which a quorum is present. The approval of the
Merger by the S&T shareholders will be solicited at the Annual Meeting of
Shareholders of S&T scheduled to be held on April 21, 1997.
Substantially all of the conditions to consummation of the Merger may be
waived at any time by the party for whose benefit they operate, in a writing
signed by both parties, and the Agreement may be amended or supplemented at any
time by written agreement of the parties, except that any such waiver or
amendment executed after approval of the Agreement by Peoples' shareholders
which modifies the amount or form of consideration to be delivered to Peoples
shareholders pursuant to the Agreement would require the further approval of
the Peoples shareholders in the case of any decrease in such consideration or
would require the further approval of the S&T shareholders in the case of any
increase in such consideration. See "PROPOSED MERGER--Representations and
Warranties; Conditions to the Merger; Waiver."
7
<PAGE>
In addition, the Agreement may be terminated by either S&T or Peoples, either
before or after shareholder approval, under certain circumstances. Moreover,
Peoples may also terminate the Agreement if the Average Closing Price is below
a certain level. See "PROPOSED MERGER--Effective Date of the Merger;
Termination."
Under certain circumstances, if the Agreement is terminated by S&T or Peoples
and within nine months of the date of termination Peoples takes certain actions
with a third party which result or would result in such third party acquiring a
significant portion of the securities or assets of Peoples, Peoples will be
required to pay S&T liquidated damages of $1,600,000. See "PROPOSED MERGER--
Effective Date of the Merger; Termination."
REGULATORY APPROVALS
S&T has filed an application for approval of the Merger with the FDIC under
Section 18(c) of the Federal Deposit Insurance Act, as amended (the "Bank
Merger Act"). The Bank Merger Act provides that the Merger may not be
consummated until applicable periods have lapsed after FDIC approval is
received. The Merger also requires the approval of the Commonwealth of
Pennsylvania Department of Banking ("PADB"). S&T has filed the necessary
application seeking the PADB's approval. See "PROPOSED MERGER--Regulatory
Approvals."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the anticipated material federal income tax
consequences of the Merger to shareholders of Peoples set forth under the
heading "PROPOSED MERGER--Certain Federal Income Tax Consequences." Each of
Peoples' shareholders should read in full the description of federal income tax
consequences under that heading. Moreover, because of the complexities of the
federal income tax laws and because the tax consequences may vary depending
upon each shareholder's individual circumstances or tax status, each
shareholder of Peoples should consult his or her tax advisor concerning the
federal (and any applicable state, local, foreign or other) tax consequences of
the Merger.
S&T and Peoples have received an opinion from Arnold & Porter concerning
certain federal income tax consequences of the Merger. S&T and Peoples have
provided Arnold & Porter with the facts, representations and assumptions on
which Arnold & Porter relied in rendering its opinion, which information is
consistent with the state of facts that S&T and Peoples believe will be
existing as of the Effective Date. Based on such facts, representations and
assumptions, Arnold & Porter has opined that, for federal income tax purposes
(i) the Merger, when consummated in accordance with the Agreement and certain
related agreements, will constitute a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code of 1986, as amended (the "Code");
and (ii) no gain or loss will be recognized by a shareholder of Peoples who
exchanges all of the shareholder's Peoples Common Stock solely for S&T Common
Stock in the Merger (except as described below with respect to cash received in
lieu of a fractional share interest in S&T Common Stock). See "PROPOSED
MERGER--Representations and Warranties; Conditions to the Merger; Waiver",
regarding the issuance by Arnold & Porter of an opinion letter as of the
Closing Date as a condition to the Merger.
Additional federal income tax consequences of the Merger, including the
federal income tax consequences to shareholders who exercise dissenters' rights
or receive cash in lieu of a fractional share interest in S&T Common Stock, are
discussed under the heading "PROPOSED MERGER--Certain Federal Income Tax
Consequences." Moreover, as described under such heading, the aggregate
adjusted tax basis of the S&T Common Stock received by a shareholder who
exchanges all of the shareholder's Peoples Common Stock solely for S&T Common
Stock in the Merger will be the same as the aggregate adjusted tax basis of the
Peoples Common Stock surrendered in exchange therefor, reduced by an amount
allocable to a fractional share interest for which cash is received, and the
holding period for S&T Common Stock received in exchange for Peoples Common
Stock will include the period during which the shareholder held the Peoples
Common Stock surrendered in the exchange, provided that the Peoples Common
Stock was held as a capital asset at the Effective Date.
8
<PAGE>
ACCOUNTING TREATMENT
It is a condition to the Merger that S&T shall have received an opinion
letter, dated as of the Effective Date, from Ernst & Young LLP to the effect
that the Merger will qualify for pooling-of-interests accounting treatment
under Accounting Principles Board Opinion No. 16 ("APB No. 16"). See "PROPOSED
MERGER--Representations and Warranties; Conditions to the Merger; Waiver" and
"--Accounting Treatment."
EFFECTIVE DATE OF THE MERGER
S&T and Peoples each anticipate that the Effective Date will occur and the
Merger will be consummated in the first half of 1997. However, consummation of
the Merger could be delayed and there can be no assurances as to if or when the
Merger will be consummated. See "PROPOSED MERGER--Effective Date of the Merger;
Termination."
SURRENDER OF CERTIFICATES
As soon as practicable after the Effective Date, notice will be mailed to
holders of Peoples Common Stock regarding the manner in which their
certificates representing shares of such Peoples Common Stock will be exchanged
for certificates representing shares of S&T Common Stock and cash in lieu of
fractional shares. PEOPLES SHAREHOLDERS SHOULD NOT SEND IN THEIR CERTIFICATES
UNTIL THEY RECEIVE FURTHER INSTRUCTIONS. See "PROPOSED MERGER--Surrender of
Certificates."
CERTAIN DIFFERENCES IN THE RIGHTS OF SHAREHOLDERS
Upon completion of the Merger, shareholders of Peoples will automatically
become shareholders of S&T and their rights as such will be governed by the S&T
Articles of Incorporation, as amended (the "S&T Articles") and by the S&T By-
Laws, as amended (the "S&T By-Laws"). The rights of shareholders of Peoples
currently are governed by Peoples' Amended Articles of Incorporation (the
"Peoples Articles") and by Peoples' By-Laws, as amended (the "Peoples By-
Laws"). The rights of shareholders of S&T are different in certain respects
from the rights of shareholders of Peoples. See "PROPOSED MERGER--Certain
Differences in the Rights of Shareholders."
MARKETS AND MARKET PRICES
S&T Common Stock is listed and traded on the Nasdaq National Market under the
symbol "STBA." As of September 30, 1996, there were 2,589 holders of record of
S&T Common Stock, and 11,046,355 outstanding shares of S&T Common Stock.
Peoples Common Stock is neither traded nor listed on any national securities
exchange and there is no established public trading market for Peoples Common
Stock. The following table sets forth high and low sales prices for S&T Common
Stock as quoted on the Nasdaq National Market as adjusted for stock splits and
stock dividends. The table below also sets forth the cash dividends declared by
S&T for the periods indicated.
9
<PAGE>
<TABLE>
<CAPTION>
QUARTER ENDED HIGH LOW DIVIDENDS
- ------------- ------- ------- ---------
<S> <C> <C> <C>
March 31, 1997
(through , 1997).............................. $ $ $
December 31, 1996..................................... 31 3/4 30 .25
September 30, 1996.................................... 31 3/4 29 5/8 .24
June 30, 1996......................................... 31 1/4 29 1/2 .24
March 31, 1996........................................ 30 3/4 28 .21
December 31, 1995..................................... 30 1/2 24 1/2 .21
September 30, 1995.................................... 25 1/4 23 .18
June 30, 1995......................................... 23 3/4 19 1/2 .18
March 31, 1995........................................ 20 1/4 19 1/2 .17
December 31, 1994..................................... 21 1/4 19 .17
September 30, 1994.................................... 21 1/4 18 5/8 .15
June 30, 1994......................................... 19 3/4 18 3/4 .15
March 31, 1994........................................ 19 5/8 17 3/8 .14
</TABLE>
There is no established public trading market for Peoples Common Stock.
Occasionally, individuals sell and buy shares of the Peoples Common Stock in
privately negotiated transactions. Peoples acts as its own transfer agent and
keeps its own stock transfer ledger. The lowest and highest prices per share
known by the management of Peoples since January 1, 1994 were $200 and $535 per
share (adjusted for a five for one stock split), respectively. The last known
trade prior to the public announcement of the Agreement on November 25, 1996,
as to which the management of Peoples is aware of the sales price, occurred on
October 16, 1996, for $500 per share and involved 10 shares.
Peoples has historically declared and paid cash dividends semi-annually. Cash
dividends of $7.70 and $7.00 per share were paid in 1995 and 1994,
respectively. A cash dividend of $6.00 per share was paid in 1996 prior to the
announcement of the Merger. The Agreement provides that Peoples may conform to
the S&T dividend policy subsequent to the execution of the Agreement. In
accordance with the Agreement, the Peoples Board declared in December 1996 a
dividend of $6.56 per share of Peoples Common Stock, payable in January 1997.
The following table shows the closing sale price for S&T Common Stock on
November 22, 1996, the trading date immediately preceding the date on which the
Merger was announced, and on , 1997, and the Peoples equivalent at such
dates.
Market value per common share:
<TABLE>
<CAPTION>
PEOPLES
S&T EQUIVALENT
DATE COMMON STOCK PER SHARE(1)
---- ------------ ------------
<S> <C> <C>
November 22, 1996..................................... $31.00 $813.75
, 1997......................................
</TABLE>
- --------
(1) The equivalent market value per share of Peoples Common Stock represents
the closing price of S&T Common Stock on the dates reported multiplied by
an Exchange Ratio of 26.25. See "--The Proposed Merger."
No assurance can be given as to what the market price of S&T Common Stock
will be if and when the Merger is consummated. Because the Exchange Ratio is
fixed and because the market price of S&T Common Stock is subject to
fluctuation, the value of the shares of S&T Common Stock that holders of
Peoples Common Stock will receive in the Merger may increase or decrease prior
to and following the Merger.
10
<PAGE>
COMPARATIVE PER SHARE DATA
The following tables set forth at the dates and for the periods indicated (i)
historical per share data for S&T Common Stock and Peoples Common Stock, (ii)
pro forma combined per share data for S&T Common Stock with Peoples, and (iii)
equivalent per share data for Peoples Common Stock reflecting consummation of
the Merger. The S&T pro forma data with Peoples represents the effect of the
Merger on a share of S&T Common Stock. The Peoples equivalent pro forma data
represents the S&T pro forma data with Peoples multiplied by 26.25 and reflects
the effect of the Merger on a share of Peoples Common Stock.
The information is derived from the historical financial statements of S&T,
including the related notes thereto, incorporated by reference in this Proxy
Statement/Prospectus, and the historical financial statements of Peoples,
including the related notes thereto, appearing elsewhere herein, and the pro
forma combined financial information giving effect to the Merger, appearing
elsewhere herein, and should be read in conjunction with such information. The
pro forma data is presented for comparative purposes only and is not
necessarily indicative of the combined financial position or results of
operations that would have been realized had the Merger been consummated during
the periods or as of the dates for which the pro forma data is presented or
which will be attained in the future. The pro forma per share data gives effect
to the Merger but does not reflect anticipated expenses and nonrecurring
charges which may result from the Merger, nor does it reflect potential savings
or revenue enhancements which may result from the Merger. See "AVAILABLE
INFORMATION; DOCUMENTS INCORPORATED BY REFERENCE" and "PRO FORMA COMBINED
FINANCIAL INFORMATION."
<TABLE>
<CAPTION>
PRO FORMA
-------------------------------
HISTORICAL S&T
------------------ COMBINED PEOPLES
DATE S&T PEOPLES (1) WITH PEOPLES (2) EQUIVALENT (3)
- ---- ------ ----------- ---------------- --------------
<S> <C> <C> <C> <C>
EARNINGS PER COMMON SHARE
Nine Month Ended
September 30, 1996....... $ 1.56 $ 34.66 $ 1.51 $ 39.64
September 30, 1995....... 1.35 27.75 1.29 33.86
Year Ended
December 31, 1995........ $ 1.82 $ 37.81 $ 1.74 $ 45.68
December 31, 1994........ 1.63 39.15 1.60 42.00
December 31, 1993........ 1.45 43.84 1.50 39.38
DIVIDENDS DECLARED PER
COMMON SHARE
Nine Months Ended
September 30, 1996....... $ .69 $ 6.00 -- $ 18.11
September 30, 1995....... .53 3.70 -- 13.91
Year Ended
December 31, 1995........ $ .74 $ 7.70 -- $ 19.42
December 31, 1994........ .61 7.00 -- 16.01
December 31, 1993........ .50 5.80 -- 13.13
BOOK VALUE PER COMMON SHARE
At September 30, 1996.... $15.28 $423.92 $15.47 $406.09
At December 31, 1995..... 14.85 407.29 $14.99 393.49
</TABLE>
- --------
(1) Peoples Historical Earnings Per Common Share and Dividends Declared Per
Common Share have been restated to reflect a five for one stock split
distributed on August 4, 1995.
(2) The pro forma per share data gives effect to the Merger but does not
reflect anticipated expenses and nonrecurring and restructuring charges
which may result from the Merger, nor does it reflect potential savings or
revenue enhancements which may result from the Merger.
(3) The equivalent pro forma per share data for Peoples represents the pro
forma data for S&T multiplied by an Exchange Ratio of 26.25, except that
the Peoples equivalent dividend data represent the S&T historical dividend
data multiplied by the Exchange Ratio of 26.25.
11
<PAGE>
SELECTED FINANCIAL DATA
The following tables set forth certain unaudited historical and selected pro
forma financial data ("selected financial data") for S&T and Peoples. Certain
of the historical selected financial data for the five years in the period
ended December 31, 1995 are derived from the audited financial statements of
S&T. Certain of the selected financial data for the three years in the period
ended December 31, 1995 are derived from the audited financial statements of
Peoples and certain of the selected financial data for the years ended December
31, 1992 and December 31, 1991 are derived from unaudited financial statements
of Peoples. The selected financial data for the nine month periods ended
September 30, 1996 and 1995 are derived from unaudited interim financial
statements and are not necessarily indicative of the results for the remainder
of the year or any future period. In the respective opinions of management of
S&T and management of Peoples, the interim financial statements reflect all
adjustments, which are of a normal recurring nature, necessary for a fair
statement of the results for the interim periods presented. This summary should
be read in connection with the financial statements included elsewhere in this
Proxy Statement/Prospectus and the financial statements and other financial
information included in documents incorporated herein by reference. See
"AVAILABLE INFORMATION; DOCUMENTS INCORPORATED BY REFERENCE" and "INDEX TO
FINANCIAL INFORMATION."
The pro forma selected financial data were developed giving effect to the
Merger on a pooling-of-interests accounting basis. For a description of the
pooling-of-interests accounting basis with respect to the Merger and the
related effects on the historical financial statements of S&T and Peoples, see
"PROPOSED MERGER--Accounting Treatment." The pro forma combined financial
information is presented for informational purposes only and may not be
indicative of the combined financial position or results of operations that
actually would have occurred had the Merger been consummated during the periods
or as of the dates indicated, or which will be attained in the future. See "--
Comparative Per Share Data" and "PRO FORMA COMBINED FINANCIAL INFORMATION."
12
<PAGE>
S&T BANCORP, INC.
SELECTED HISTORICAL FINANCIAL DATA
(IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
--------------------- ------------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT:
Interest income......... $ 82,840 $ 79,545 $ 107,017 $ 92,654 $ 86,923 $ 89,056 $ 81,461
Interest expense........ 38,290 37,087 49,998 39,346 36,965 43,099 43,808
Provision for loan
losses................. 3,250 2,600 3,800 3,500 3,600 5,778 4,333
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net interest income
after provision for
loan losses............ 41,300 39,858 53,219 49,808 46,358 40,179 33,320
Noninterest income...... 8,365 6,032 8,309 6,914 6,571 6,362 5,084
Noninterest expense..... 26,474 25,083 33,523 31,595 30,768 27,374 23,789
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income before income
taxes.................. 23,191 20,807 28,005 25,127 22,161 19,167 14,615
Applicable income taxes. 5,896 5,601 7,536 6,683 5,818 4,886 3,402
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net income.............. $ 17,295 $ 15,206 $ 20,469 $ 18,444 $ 16,343 $ 14,281 $ 11,213
========== ========== ========== ========== ========== ========== ==========
PER SHARE DATA:
Net income.............. $ 1.56 $ 1.35 $ 1.82 $ 1.63 $ 1.45 $ 1.28 $ 1.00
Dividends declared...... 0.69 0.53 0.74 0.61 0.50 0.40 0.35
Book value.............. 15.28 14.08 14.85 12.57 10.75 9.73 8.81
BALANCE SHEET TOTALS:
(PERIOD END)
Total assets............ $1,455,327 $1,360,410 $1,400,702 $1,293,737 $1,194,037 $1,106,755 $1,060,167
Securities.............. 370,044 343,803 350,340 306,124 339,129 355,197 361,450
Net loans............... 994,301 948,761 960,881 910,077 783,229 679,960 608,852
Total deposits.......... 1,010,254 947,546 979,625 903,240 898,258 899,597 909,776
Securities sold under
repurchase agreements.. 144,915 142,611 122,794 169,871 127,731 85,013 33,005
Other liabilities....... 131,357 112,029 131,336 79,039 46,955 13,199 19,011
Total shareholders'
equity................. 168,801 158,224 166,947 141,587 121,093 108,946 98,375
</TABLE>
13
<PAGE>
PEOPLES BANK OF UNITY
SELECTED HISTORICAL FINANCIAL DATA
(IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
----------------- --------------------------------------------
1996 1995 1995 1994 1993 1992 1991
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT:
Interest income......... $ 15,654 $ 14,971 $ 20,003 $ 19,905 $ 20,224 $ 18,533 $ 16,793
Interest expense........ 5,274 5,797 7,679 7,297 7,479 7,843 8,170
Provision for loan
losses................. 625 340 420 100 65 110 100
-------- -------- -------- -------- -------- -------- --------
Net interest income
after provision for
loan losses............ 9,755 8,834 11,904 12,508 12,680 10,580 8,523
Noninterest income...... 633 457 838 697 565 550 586
Noninterest expense..... 4,739 4,871 6,753 7,084 6,361 5,520 4,269
-------- -------- -------- -------- -------- -------- --------
Income before income
taxes.................. 5,649 4,420 5,989 6,121 6,884 5,610 4,840
Applicable income taxes. 1,640 1,211 1,616 1,593 1,813 1,375 1,125
-------- -------- -------- -------- -------- -------- --------
Net income.............. $ 4,009 $ 3,209 $ 4,373 $ 4,528 $ 5,071 $ 4,235 $ 3,715
======== ======== ======== ======== ======== ======== ========
PER SHARE DATA:
Net income.............. $ 34.66 $ 27.75 $ 37.81 $ 39.15 $ 43.84 $ 36.62 $ 32.12
Dividends declared...... 6.00 3.70 7.70 7.00 5.80 5.60 5.40
Book value.............. 423.92 394.44 407.29 356.64 320.74 282.69 251.68
BALANCE SHEET TOTALS:
(PERIOD END)
Total assets............ $287,624 $282,696 $289,026 $286,515 $293,491 $259,919 $204,620
Securities.............. 123,982 148,716 141,896 160,751 170,831 161,723 105,456
Net loans............... 147,271 117,764 125,436 101,088 93,732 80,275 78,774
Total deposits.......... 236,748 234,076 236,922 239,331 253,668 225,125 173,335
Other liabilities....... 1,845 2,999 4,997 5,935 2,726 2,098 2,176
Total shareholders'
equity................. 49,031 45,621 47,107 41,249 37,097 32,696 29,109
</TABLE>
14
<PAGE>
S&T BANCORP, INC.
SELECTED PRO FORMA COMBINED FINANCIAL DATA
(IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
--------------------- ------------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT:
Interest income......... $ 98,494 $ 94,516 $ 127,020 $ 112,559 $ 107,147 $ 107,589 $ 98,254
Interest expense........ 43,564 42,884 57,677 46,643 44,444 50,942 51,978
Provision for loan
losses................. 3,875 2,940 4,220 3,600 3,665 5,888 4,433
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net interest income
after provision for
loan losses............ 51,055 48,692 65,123 62,316 59,038 50,759 41,843
Noninterest income...... 8,998 6,489 9,147 7,611 7,136 6,912 5,670
Noninterest expense..... 31,213 29,954 40,276 38,679 37,129 32,894 28,058
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income before income
taxes.................. 28,840 25,227 33,994 31,248 29,045 24,777 19,455
Applicable income taxes. 7,536 6,812 9,152 8,276 7,631 6,261 4,527
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net income.............. $ 21,304 $ 18,415 $ 24,842 $ 22,972 $ 21,414 $ 18,516 $ 14,928
========== ========== ========== ========== ========== ========== ==========
PER SHARE DATA:
Net income.............. $ 1.51 $ 1.29 $ 1.74 $ 1.60 $ 1.50 $ 1.30 $ 1.05
Book value.............. 15.47 14.27 14.99 12.78 11.07 9.95 8.97
BALANCE SHEET TOTALS:
(PERIOD END)
Total assets............ $1,742,951 $1,643,106 $1,689,728 $1,580,252 $1,487,528 $1,366,674 $1,264,787
Securities.............. 494,026 492,519 492,236 466,875 509,960 516,920 466,906
Net loans............... 1,141,572 1,066,525 1,086,317 1,011,165 876,961 760,235 687,626
Total deposits.......... 1,247,002 1,181,622 1,216,547 1,142,571 1,151,926 1,124,722 1,083,111
Securities sold under
repurchase agreements.. 144,915 142,611 122,794 169,871 127,731 85,013 33,005
Other liabilities....... 133,202 115,028 136,333 84,974 49,681 15,297 21,187
Total shareholders'
equity................. 217,832 203,845 214,054 182,836 158,190 141,642 127,484
</TABLE>
15
<PAGE>
PRO FORMA COMBINED FINANCIAL INFORMATION
The following tables set forth selected unaudited pro forma financial data
reflecting the Merger.
The pro forma information has been prepared assuming that Peoples
shareholders will receive in the Merger 26.25 shares of S&T Common Stock for
each share of Peoples Common Stock they own. The pro forma financial
information included in this Proxy Statement/Prospectus is presented for
illustrative purposes only. Such pro forma financial information does not
necessarily reflect what the actual results of S&T would be following
completion of the Merger.
PRO FORMA COMBINED CONDENSED BALANCE SHEETS AS OF SEPTEMBER 30, 1996 AND
DECEMBER 31, 1995
The following unaudited pro forma combined condensed balance sheet
information reflects (i) the historical consolidated balance sheets of S&T and
Peoples as of September 30, 1996 and December 31, 1995 and (ii) the pro forma
combined condensed balance sheet of S&T as of such dates, after giving effect
to the Merger. The Merger has been reflected as a pooling-of-interest
effective as of September 30, 1996 and December 31, 1995. The unaudited
information should be read in conjunction with the historical consolidated
financial statements of S&T and Peoples, including the notes thereto,
incorporated by reference or included in this Proxy Statement/Prospectus. See
"AVAILABLE INFORMATION; DOCUMENTS INCORPORATED BY REFERENCE" and "INDEX TO
FINANCIAL INFORMATION."
PRO FORMA COMBINED CONDENSED STATEMENTS OF INCOME FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1996 AND 1995 AND THE YEARS ENDED DECEMBER 31, 1995, 1994, AND
1993
The following unaudited pro forma combined condensed statements of income
reflect the historical consolidated statements of income of S&T and Peoples,
as indicated below, for each period presented and the pro forma combined
condensed statements of income of S&T, after giving effect to the Merger. The
Merger has been reflected as a pooling-of-interests. See "PROPOSED MERGER--
Accounting Treatment." The pro forma combined condensed statements of income
for the nine-month periods ended September 30, 1996 and 1995 were prepared on
the assumption that the Merger had been effected as of January 1, 1996 and
1995, respectively. The pro forma combined condensed statements of income for
the years ended December 31, 1995, 1994, and 1993 were prepared on the
assumption that the Merger had been effected as of January 1, 1995, 1994 and
1993, respectively. The unaudited information should be read in conjunction
with the historical consolidated financial statements of S&T and Peoples,
including the notes thereto, incorporated by reference or included in this
Proxy Statement/Prospectus. See "AVAILABLE INFORMATION; CERTAIN DOCUMENTS
INCORPORATED BY REFERENCE"and "INDEX TO FINANCIAL INFORMATION."
16
<PAGE>
S&T BANCORP, INC.
PRO FORMA COMBINED BALANCE SHEETS
(IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
------------------------------
PRO FORMA
S&T PEOPLES COMBINED
ASSETS ---------- -------- ----------
<S> <C> <C> <C>
Securities....................................... $ 370,044 $123,982 $ 494,026
Net loans........................................ 994,301 147,271 1,141,572
Other assets..................................... 90,982 16,371 107,353
---------- -------- ----------
TOTAL ASSETS................................... $1,455,327 $287,624 $1,742,951
========== ======== ==========
LIABILITIES
Total deposits................................... $1,010,254 $236,748 $1,247,002
Securities sold under repurchase agreements...... 144,915 -- 144,915
Other liabilities................................ 131,357 1,845 133,202
---------- -------- ----------
TOTAL LIABILITIES.............................. $1,286,526 $238,593 $1,525,119
SHAREHOLDERS' EQUITY
Common stock and additional paid-in-capital...... $ 41,279 $ 14,701 $ 55,980
Retained earnings................................ 121,663 32,911 154,574
Other equity..................................... 5,859 1,419 7,278
---------- -------- ----------
TOTAL SHAREHOLDERS' EQUITY..................... 168,801 49,031 217,832
---------- -------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY..... $1,455,327 $287,624 $1,742,951
========== ======== ==========
BOOK VALUE PER SHARE............................. $ 15.28 $ 423.92 $ 15.47
========== ======== ==========
<CAPTION>
DECEMBER 31, 1995
------------------------------
PRO FORMA
S&T PEOPLES COMBINED
ASSETS ---------- -------- ----------
<S> <C> <C> <C>
Securities....................................... $ 350,340 $141,896 $ 492,236
Net loans........................................ 960,881 125,436 1,086,317
Other assets..................................... 89,481 21,694 111,175
---------- -------- ----------
TOTAL ASSETS................................... $1,400,702 $289,026 $1,689,728
========== ======== ==========
LIABILITIES
Total deposits................................... $ 979,625 $236,922 $1,216,547
Securities sold under repurchase agreements...... 122,794 -- 122,794
Other liabilities................................ 131,336 4,997 136,333
---------- -------- ----------
TOTAL LIABILITIES.............................. $1,233,755 $241,919 $1,475,674
SHAREHOLDERS' EQUITY
Common stock and additional paid-in-capital...... $ 40,561 $ 14,701 $ 55,262
Retained earnings................................ 111,980 29,596 141,576
Other equity..................................... 14,406 2,810 17,216
---------- -------- ----------
TOTAL SHAREHOLDERS' EQUITY..................... 166,947 47,107 214,054
---------- -------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY..... $1,400,702 $289,026 $1,689,728
========== ======== ==========
BOOK VALUE PER SHARE............................. $ 14.85 $ 407.29 $ 14.99
========== ======== ==========
</TABLE>
17
<PAGE>
S&T BANCORP, INC.
PRO FORMA COMBINED INCOME STATEMENTS
(IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, 1996
-------------------------
PRO FORMA
S&T PEOPLES COMBINED
------- ------- ---------
<S> <C> <C> <C>
Interest income....................................... $82,840 $15,654 $98,494
Interest expense...................................... 38,290 5,274 43,564
Provision for loan losses............................. 3,250 625 3,875
------- ------- -------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES... 41,300 9,755 51,055
Noninterest income.................................... 8,365 633 8,998
Noninterest expense................................... 26,474 4,739 31,213
------- ------- -------
INCOME BEFORE INCOME TAXES............................ 23,191 5,649 28,840
Applicable income taxes............................... 5,896 1,640 7,536
------- ------- -------
NET INCOME............................................ $17,295 $ 4,009 $21,304
======= ======= =======
PER SHARE DATA:
Net Income............................................ $ 1.56 $ 34.66 $ 1.51
======= ======= =======
AVERAGE SHARES OUTSTANDING............................ 11,077 116 14,113
======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, 1995
-------------------------
PRO FORMA
S&T PEOPLES COMBINED
------- ------- ---------
<S> <C> <C> <C>
Interest income....................................... $79,545 $14,971 $94,516
Interest expense...................................... 37,087 5,797 42,884
Provision for loan losses............................. 2,600 340 2,940
------- ------- -------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES... 39,858 8,834 48,692
Noninterest income.................................... 6,032 457 6,489
Noninterest expense................................... 25,083 4,871 29,954
------- ------- -------
INCOME BEFORE INCOME TAXES............................ 20,807 4,420 25,227
Applicable income taxes............................... 5,601 1,211 6,812
------- ------- -------
NET INCOME............................................ $15,206 $ 3,209 $18,415
======= ======= =======
PER SHARE DATA:
Net Income............................................ $ 1.35 $ 27.75 $ 1.29
======= ======= =======
AVERAGE SHARES OUTSTANDING............................ 11,244 116 14,280
======= ======= =======
</TABLE>
18
<PAGE>
S&T BANCORP, INC.
PRO FORMA COMBINED INCOME STATEMENTS
(IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995
--------------------------------
PRO FORMA
S&T PEOPLES COMBINED
--------- ----------------------
<S> <C> <C> <C>
Interest income.................................. $ 107,017 $ 20,003 $ 127,020
Interest expense................................. 49,998 7,679 57,677
Provision for loan losses........................ 3,800 420 4,220
--------- -------- ---------
NET INTEREST INCOME AFTER PROVISION FOR LOAN
LOSSES.......................................... 53,219 11,904 65,123
Noninterest income............................... 8,309 838 9,147
Noninterest expense.............................. 33,523 6,753 40,276
--------- -------- ---------
INCOME BEFORE INCOME TAXES....................... 28,005 5,989 33,994
Applicable income taxes.......................... 7,536 1,616 9,152
--------- -------- ---------
NET INCOME....................................... $ 20,469 $ 4,373 $ 24,842
========= ======== =========
PER SHARE DATA:
Net Income....................................... $ 1.82 $ 37.81 $ 1.74
========= ======== =========
AVERAGE SHARES OUTSTANDING....................... 11,243 116 14,280
========= ======== =========
<CAPTION>
YEAR ENDED DECEMBER 31, 1994
--------------------------------
PRO FORMA
S&T PEOPLES COMBINED
--------- ----------------------
<S> <C> <C> <C>
Interest income.................................. $ 92,654 $ 19,905 $ 112,559
Interest expense................................. 39,346 7,297 46,643
Provision for loan losses........................ 3,500 100 3,600
--------- -------- ---------
NET INTEREST INCOME AFTER PROVISION FOR LOAN
LOSSES.......................................... 49,808 12,508 62,316
Noninterest income............................... 6,914 697 7,611
Noninterest expense.............................. 31,595 7,084 38,679
--------- -------- ---------
INCOME BEFORE INCOME TAXES....................... 25,127 6,121 31,248
Applicable income taxes.......................... 6,683 1,593 8,276
--------- -------- ---------
NET INCOME....................................... $ 18,444 $ 4,528 $ 22,972
========= ======== =========
PER SHARE DATA:
Net Income....................................... $ 1.63 $ 39.15 $ 1.60
========= ======== =========
AVERAGE SHARES OUTSTANDING....................... 11,284 116 14,320
========= ======== =========
<CAPTION>
YEAR ENDED DECEMBER 31, 1993
--------------------------------
PRO FORMA
S&T PEOPLES COMBINED
--------- ----------------------
<S> <C> <C> <C>
Interest income.................................. $ 86,923 $ 20,224 $ 107,147
Interest expense................................. 36,965 7,479 44,444
Provision for loan losses........................ 3,600 65 3,665
--------- -------- ---------
NET INTEREST INCOME AFTER PROVISION FOR LOAN
LOSSES.......................................... 46,358 12,680 59,038
Noninterest income............................... 6,571 565 7,136
Noninterest expense.............................. 30,768 6,361 37,129
--------- -------- ---------
INCOME BEFORE INCOME TAXES....................... 22,161 6,884 29,045
Applicable income taxes.......................... 5,818 1,813 7,631
--------- -------- ---------
NET INCOME....................................... $ 16,343 $ 5,071 $ 21,414
========= ======== =========
PER SHARE DATA:
Net Income....................................... $ 1.45 $ 43.84 $ 1.50
========= ======== =========
AVERAGE SHARES OUTSTANDING....................... 11,235 116 14,271
========= ======== =========
</TABLE>
19
<PAGE>
MEETING INFORMATION
DATE, PLACE AND TIME
The Special Meeting of Shareholders of Peoples will be held on April 18,
1997 at 2:00 p.m., Eastern Standard Time, at Alcoma Golf Club, located at 6770
Saltsburg Road, Pittsburgh, Pennsylvania.
RECORD DATE; VOTING RIGHTS
The securities which can be voted at the Peoples Special Meeting consist of
shares of Peoples Common Stock, with each share entitling its owner to one
vote on all matters. The close of business on , 1997 has been fixed by the
Peoples Board as the Peoples Record Date. There were approximately 350 record
holders of outstanding Peoples Common Stock and 115,660 shares of Peoples
Common Stock outstanding as of the Peoples Record Date. The presence, in
person or by proxy, of at least a majority of the outstanding shares of
Peoples Common Stock entitled to vote is necessary to constitute a quorum at
the Peoples Special Meeting.
The Merger must be approved by the affirmative vote of the holders of a two-
thirds majority of the outstanding shares of Peoples Common Stock at a meeting
at which a quorum is present. Nonvoting shares and abstentions will not be
counted as votes cast for approval of the Agreement and therefore will have
the same effect as votes against the Agreement. In addition, under the rules
of the New York Stock Exchange, (although shares of Peoples Common Stock are
not listed on such Exchange), brokers who hold shares in street name for
customers who are the beneficial owners of such shares are prohibited from
giving a proxy to vote shares held for such customers in favor of the approval
of the Agreement without specific instruction from such customers.
Accordingly, the failure of such customers to provide instructions with
respect to their shares of Peoples Common Stock to their broker will have the
effect of such shares not being voted and therefore will have the same effect
as votes against the Agreement.
The Peoples Board is not aware of any other business to be acted upon at the
Peoples Special Meeting other than as described herein. It is not anticipated
that other matters will be brought before the Peoples Special Meeting. If,
however, other matters are duly brought before the Peoples Special Meeting, or
any adjournment thereof, the persons appointed as proxies will vote the shares
represented by the proxies on such matters as determined by a majority of the
Peoples Board. The persons named as proxies by a shareholder may propose and
vote for one or more adjournments or postponements of the Peoples Special
Meeting to permit another solicitation of proxies in favor of the Agreement.
No proxy which is voted against the proposal to approve the Merger will be
voted in favor of any such adjournment or postponement.
In connection with the Merger, each member of the Peoples Board has entered
into a Voting Agreement to vote all of the shares of Peoples Common Stock he
or she is entitled to vote, or direct the voting of, with respect thereto at
the Peoples Special Meeting in favor of the Agreement. The number of shares of
Peoples Common Stock which such Directors are entitled to vote as of the
Peoples Record Date is 35,586 (30.77% of Peoples Common Stock outstanding as
of that date). Additionally, each such person has agreed not to transfer or
otherwise dispose of his or her shares of Peoples Common Stock (except
intrafamily gifts in an amount that in the aggregate do not result in a
material change in the amount of shares of Peoples Common Stock owned by a
director) prior to shareholder approval of the Agreement or termination of the
Agreement pursuant to the terms thereof. In the case of any transfer by
operation of law, the Directors of Peoples agreed that the Voting Agreements
shall be binding upon and inure to the benefit of the transferees. Any
transfer or other disposition in violation of the terms of the Voting
Agreements shall be null and void. Assuming that Directors and current
executive officers of Peoples and their respective affiliates, holding an
aggregate of 35,606 shares of outstanding Peoples Common Stock (30.79%) as of
the Peoples Record Date, vote their shares in favor of the Agreement, the
affirmative vote of holders of approximately 41,501 additional shares of
Peoples Common Stock (35.88%) will be required to approve the Agreement.
20
<PAGE>
VOTING AND REVOCATION OF PROXIES
If the appropriate enclosed form of proxy is properly executed and returned
to Peoples in time to be voted at the Special Meeting, the shares represented
thereby will be voted in accordance with the instructions marked thereon.
Executed but unmarked proxies will be voted "FOR" the proposals presented in
the attached Notice of Special Meeting of Shareholders. Except for procedural
matters incident to the conduct of the Special Meetings, Peoples does not know
of any matters other than those described in the Notice of Peoples Special
Meeting that are to come before the Peoples Special Meeting. If any other
matters are properly brought before the Peoples Special Meeting, the persons
named in the accompanying proxy will vote the shares represented by the
proxies on such matters as determined by a majority of the Peoples Board.
The presence of a shareholder at the Peoples Special Meeting will not
automatically revoke such shareholder's proxy. However, shareholders may
revoke a proxy at any time prior to its exercise by filing with the Secretary
of Peoples a written notice of revocation, by delivering to Peoples a duly
executed proxy bearing a later date or by attending the Special Meeting and
voting in person.
SOLICITATION OF PROXIES
In addition to solicitation by mail, proxies may be solicited personally, by
telephone or by further correspondence, and directors, officers and employees
of Peoples, may solicit proxies from the shareholders of Peoples. Peoples will
bear the expenses incurred by it in connection with the solicitation of
proxies, except that S&T will bear all expenses associated with the printing
and mailing of this Proxy Statement/Prospectus and the registration statement
and all filing fees in connection therewith.
PROPOSED MERGER
This section of the Proxy Statement/Prospectus describes material aspects of
the Merger. The following description does not purport to be complete and is
qualified in its entirety by reference to the Agreement, which is attached as
Appendix A to this Proxy Statement/Prospectus and is incorporated herein by
reference. All shareholders are urged to read the Agreement carefully and in
its entirety.
BACKGROUND OF THE MERGER
The past decade has been a period of rapid change in the banking industry in
general, and 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 banks and from non-bank
financial services organizations. This period also has been characterized by
increasing requirements of investments in technology in order to meet customer
needs on an efficient, competitive basis.
The Peoples Board has continually reviewed the strategic alternatives for
maximizing shareholder value and S&T and other banking institutions had from
time to time expressed interest in pursuing a possible transaction with
Peoples. The Peoples Board voted at their February 20, 1996 meeting to pursue
the possibility of merging with another financial institution, although
Peoples did not hire Danielson Associates to evaluate any particular merger
proposal or negotiate with S&T until late spring and early summer 1996.
Russell P. Miller, President of Peoples, advised the shareholders at the
Peoples Annual Shareholder Meeting in May 1996 that the Board had retained
Danielson Associates to assist it in evaluating its strategic options,
including a merger with another bank.
Representatives of Danielson Associates met with the Peoples Board on July
12, 1996, at which time they provided the directors with information about S&T
and the overtures S&T had made regarding a proposed merger. The Peoples Board
directed Danielson Associates to continue negotiations with S&T concerning the
proposed Merger consideration. On July 31, 1996, Danielson Associates reported
to the Peoples Board S&T's offer of 26.25 shares of S&T Common Stock for each
share of Peoples Common Stock.
21
<PAGE>
On August 1, 1996, the Peoples Board voted to pursue negotiation of an
acceptable definitive agreement with S&T on the basis of S&T's proposed Merger
consideration and substantially all of the non-financial terms. Kirkpatrick &
Lockhart LLP was retained as Peoples' legal counsel for the Merger.
Negotiations toward a definitive agreement continued during August and
September, 1996. Peoples retained S.R. Snodgrass, A.C. ("Snodgrass") to
perform an audit of its financial statements, and S&T conducted due diligence
with respect to Peoples. Before an agreement was reached, the Peoples Board
learned that Peoples' then Chief Executive Officer was alleged to have
executed a series of fraudulent transactions. Such transactions consisted
primarily of loans from Peoples allegedly initiated by the Chief Executive
Officer in the names of other individuals pursuant to which the Chief
Executive Officer received the proceeds. The then Chief Operating Officer of
Peoples was alleged to have assisted the Chief Executive Officer in concealing
certain of such loans. On September 18, 1996, Peoples suspended the Chief
Executive Officer and the Chief Operating Officer pending a fraud audit by
Snodgrass and further investigation by Kirkpatrick & Lockhart. On September
20, 1996, Peoples informed the FDIC and the PADB of these allegations. Peoples
also informed S&T of these allegations. S&T withdrew its proposed merger offer
and the parties agreed to suspend negotiations pending further investigation.
Peoples terminated the Chief Executive Officer's and the Chief Operating
Officer's employment on September 24 and October 9, 1996, respectively.
Following completion of an investigation of these allegations and
quantification of the related financial exposure, the parties resumed
negotiations toward a definitive agreement in November, 1996. On November 20,
1996, the Peoples Board met, reviewed and approved the Agreement, and
authorized the officers of Peoples to execute and deliver the Agreement and to
work to accomplish the transactions contemplated thereby. The Board of
Directors of S&T approved the Agreement on November 25, 1996. The Agreement
was executed by the parties on November 25, 1996.
REASONS FOR THE MERGER; RECOMMENDATION OF THE BOARD OF DIRECTORS
The terms of the Agreement resulted from arm's length negotiations between
Peoples and S&T and their respective representatives. Peoples consulted with
its own financial advisor and legal counsel during the course of these
negotiations. The Peoples Board has unanimously approved the Agreement and has
determined that the Merger is fair to, and in the best interests of, Peoples
and its shareholders. The Peoples Board believes that the Merger will enable
its shareholders to realize significant value when compared to the value of
Peoples Common Stock should the Merger not occur.
In reaching its determination that the Agreement is fair to, and in the best
interests of, Peoples and its shareholders, the Peoples Board considered a
number of factors, both from a short-term and long-term perspective,
including, without limitation, the following:
1. Peoples business, financial condition, results of operations, and
prospects, including, but not limited to, its potential growth,
development and profitability;
2. The current and prospective environment in which Peoples operates,
including national, state and local economic conditions, Peoples
competitive environment, the increased regulatory burdens on financial
institutions, the trend towards consolidation in the financial services
industry in general and among financial institutions in Pennsylvania and
the likely effect of the foregoing factors on Peoples potential growth,
development and profitability;
3. The business, financial condition, results of operations, market
valuations and acquisition history of S&T and the opportunity for the
Peoples shareholders to participate in any future growth of S&T by
obtaining S&T Common Stock in the Merger;
22
<PAGE>
4. A comparison of the products and services provided by Peoples and S&T,
as well as the costs associated with and relative level of resources
available to Peoples and S&T, respectively, to maintain and provide
future enhancements to, and develop new products and services within its
markets;
5. The anticipated tax-free receipt of shares of S&T Common Stock in the
Merger (see "--Certain Federal Income Tax Consequences");
6. The absence of an established trading market for the Peoples Common
Stock compared to the market for the S&T Common Stock, which is included
for quotation on the Nasdaq National Market;
7. The provision in the Agreement permitting Peoples to terminate the
Agreement if Peoples did not receive an opinion, dated the date of this
Proxy Statement/Prospectus, from Danielson Associates to the effect that
the Merger consideration is fair, from a financial point of view, to
Peoples shareholders; and
8. The provision in the Agreement permitting the Peoples Board to terminate
the Agreement if the Average Closing Price of S&T Common Stock is below
a certain level as of the Determination Date (see "--Terms of the
Merger").
THE PEOPLES BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS
OF PEOPLES VOTE TO APPROVE THE AGREEMENT.
TERMS OF THE MERGER
In accordance with the terms of the Agreement, on the Effective Date,
Peoples shall be merged with and into S&T Bank pursuant to the provisions of,
and with the effect provided in, Sections 1601-1607 of the Pennsylvania
Banking Code with S&T Bank as the surviving entity. Also on the Effective
Date, each share of Peoples Common Stock outstanding immediately prior to the
Effective Date (except as provided in the Agreement) shall by virtue of the
Merger be converted into 26.25 shares of S&T Common Stock. A holder of Peoples
Common Stock who would otherwise be entitled to receive a fractional share of
S&T Common Stock by reason of the Merger, will receive cash in lieu thereof.
Any cash payment shall be in an amount equal to such fraction multiplied by
the reported last sale price of S&T Common Stock on the Nasdaq National Market
(as reported by The Wall Street Journal or other authoritative source) on the
last trading day preceding the Effective Date.
In the event that prior to the Effective Date the outstanding shares of S&T
Common Stock shall have been increased, decreased, or changed into or
exchanged for a different number or kind of shares or securities by
reorganization, recapitalization, reclassification, stock dividend, stock
split, or other like changes in S&T's capitalization, all without S&T
receiving consideration therefor, then an appropriate and proportionate
adjustment shall be made in the number and kind of shares of S&T Common Stock
to be delivered to holders of Peoples Common Stock.
The Agreement provides that Peoples may elect to terminate the Agreement, if
the Peoples Board so determines by a majority vote, at any time during the
three-day period commencing two days after the Determination Date, if either:
(i) both of the following conditions are satisfied: (1) the Average Closing
Price of shares of S&T Common Stock shall be less than $24.88; and (2)
the Index Price on the Determination Date shall be greater than 231.70
(i.e., 80% of the value of the Index Price on November 25, 1996, the
date the Agreement was executed); or
23
<PAGE>
(ii) the Average Closing Price of shares of S&T Common Stock shall be less
than $23.325.
If Peoples elects to exercise its termination right pursuant to the
immediately preceding sentence, it shall give prompt written notice to S&T,
which notice shall specify which of clauses (i) or (ii) is applicable (or if
both are applicable, which clause is being invoked); provided that such notice
of election to terminate may be withdrawn at any time within the
aforementioned three-day period.
OPINION OF PEOPLES' FINANCIAL ADVISOR
The Peoples Board retained Danielson Associates as its financial advisor in
connection with the Merger and requested Danielson Associates to render its
opinion as to whether the Merger consideration to be paid to Peoples
shareholders is fair from a financial point of view. In requesting Danielson
Associates' advice and opinion, the Peoples Board did not give any special
instructions to or impose any limitations upon the scope of the investigation
that Danielson Associates might wish to conduct to enable it to give its
opinion. Danielson Associates has delivered to Peoples written opinions dated
November 25, 1996, and the date of this Proxy Statement/Prospectus, to the
effect that, based upon and subject to the matters set forth therein, as of
the dates thereof, the Merger consideration is fair to Peoples shareholders
from a financial point of view. A copy of Danielson Associates' opinion dated
the date of this Proxy Statement/Prospectus is attached as Appendix B hereto
and incorporated by reference herein and should be read in its entirety by
Peoples shareholders.
Danielson Associates was selected by Peoples to act as its financial advisor
because of Danielson Associates' expertise in the valuation of businesses and
their securities as well as expertise and experience with mergers and
acquisitions of financial institutions. Danielson Associates has not
previously acted as a financial advisor to Peoples and has no other material
relationship with Peoples, S&T or their affiliates. Danielson Associates will
receive from Peoples a fee of $100,000, plus reimbursement of certain out-of-
pocket expenses, for its services in connection with the Merger. In addition,
Peoples has agreed to indemnify Danielson Associates against certain
liabilities, including certain liabilities under federal securities laws.
In the course of preparing its opinion, Danielson Associates has reviewed
and analyzed, among other things, the following:
1. The Agreement;
2. S&T's Annual Reports, S&T's Annual Reports on Form 10-K and related
financial information for the five years ended December 31, 1995, S&T's
Quarterly Reports on Form 10-Q and related unaudited financial
information for the three month periods ended March 31, 1996, June 30,
1996 and September 30, 1996;
3. Peoples' Annual Reports, and related financial information for the five
years ended December 31, 1995, Peoples Quarterly Reports and related
unaudited financial information for the three month periods ended March
31, 1996, June 30, 1996 and September 30, 1996;
4. Certain other public and nonpublic information, including financial and
operating forecasts, relating to Peoples and S&T including: (i) the
historical and current financial condition and results of operations of
Peoples and S&T, including interest income, interest expense, net
interest income, noninterest income, noninterest expense, earnings,
dividends, book value, intangible assets, return on assets, return on
shareholders equity, capitalization, the amount and type of
nonperforming assets, loan losses and the allowance for loan losses; and
(ii) the asset and liability mix of Peoples and S&T;
5. Discussions with members of senior management of Peoples and S&T
concerning the financial condition, business, assets and prospects of
Peoples and S&T, respectively;
6. The historical market prices and trading activity for shares of S&T
Common Stock;
24
<PAGE>
7. The prices paid relative to earnings for Pennsylvania banks with similar
financial, structural and market characteristics to Peoples. These
prices were then related to assets and equity capital, also referred to
as "book;"
8. The "fair" market value of S&T's Common Stock to be exchanged for
Peoples Common Stock as determined by a comparison with similar bank
holding companies; and
9. Such other financial studies and analyses, such other investigations
performed by Danielson Associates and such other matters as were deemed
necessary to the rendering of its opinion.
Based on this analysis, Danielson Associates determined the "fair" sale
value of Peoples to be $81 to $91 million, or $700 to $787 per share. Thus,
Danielson Associates determined that the Exchange Ratio of $94.1 million
(based on the closing bid price of S&T Common Stock of $31.00 on November 25,
1996), or $814 per share, was a "fair" offer, from a financial point of view
for Peoples and its shareholders.
The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to partial analysis or summary description. The
analyses set forth above must be considered as a whole, and Danielson
Associates cannot separately state how each analysis either supported or
weakened its recommendation as to the fairness of the Merger consideration to
Peoples shareholders, from a financial point of view.
In rendering its opinion, Danielson Associates relied, without independent
verification, on the accuracy and completeness of the information concerning
Peoples and S&T furnished by the respective institutions to Danielson
Associates for review for purposes of its opinion, as well as publicly
available information on other financial institutions and economic data.
Peoples and S&T did not restrict Danielson Associates as to the material it
was permitted to review. Danielson Associates did not perform or obtain any
independent appraisals or evaluations of the assets and liabilities and
potential and/or contingent liabilities of Peoples or S&T. Danielson
Associates expresses no opinion on matters of a legal, regulatory, tax or
accounting nature or the ability of the Merger as set forth in the Agreement
to be consummated. Danielson Associates' opinion was based solely upon the
information available to it and the economic, market and other circumstances
as they existed as of November 25, 1996; events occurring after that date
could materially affect the assumptions used in preparing the opinion.
In rendering its opinion, Danielson Associates assumed that in the course of
obtaining the necessary regulatory and governmental approvals for the proposed
Merger, no restriction will be imposed on Peoples or S&T that would have a
material adverse effect on the contemplated benefits of the Merger. Danielson
Associates also assumed that there would not occur any change in applicable
law or regulations that would cause a material adverse change in the prospects
or operations of Peoples or S&T after the Merger.
In connection with its opinion dated as of the date of this Proxy
Statement/Prospectus, Danielson Associates performed procedures to update
certain of its analyses and reviewed the assumptions on which such analyses
were based and the factors considered therewith.
DANIELSON ASSOCIATES' OPINION DATED THE DATE OF THIS PROXY STATEMENT/
PROSPECTUS IS DIRECTED ONLY TO THE FAIRNESS FROM A FINANCIAL POINT OF VIEW OF
THE CONSIDERATION TO BE RECEIVED BY PEOPLES SHAREHOLDERS AND DOES NOT
CONSTITUTE A RECOMMENDATION TO ANY SHAREHOLDER AS TO HOW SUCH SHAREHOLDER
SHOULD VOTE AT THE MEETING. THE SUMMARY OF THE OPINION OF DANIELSON ASSOCIATES
SET FORTH IN THIS PROXY STATEMENT/PROSPECTUS IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO THE FULL TEXT OF SUCH OPINION, A COPY OF WHICH IS ATTACHED HERETO
AS APPENDIX B.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the recommendation of the Peoples Board, Peoples shareholders
should be aware that members of Peoples' management and the Peoples Board have
interests in the Merger that are in addition to the
25
<PAGE>
interests of Peoples shareholders generally. The Peoples Board was aware of
these interests and considered them, among other matters, in approving the
Agreement and the transactions contemplated thereby.
Indemnification. From and after the Effective Date for a period of three
years, S&T shall indemnify persons who served as directors and officers of
Peoples as of the date of the Agreement for claims arising prior to the
Effective Date, as if such persons had been entitled to indemnification under
S&T's By-Laws. Neither Peoples Articles nor Peoples By-Laws provide for
indemnification of Peoples directors and officers, although Peoples does carry
directors and officers liability insurance.
Employment and Benefit Plans. All employees of Peoples as of the Effective
Date shall become employees of S&T Bank. However, nothing in the Agreement
shall give any employee of Peoples a right to continuing employment with S&T
after the Effective Date. As soon as practicable after the Effective Date, S&T
Bank shall provide or cause to be provided to all employees of Peoples who
remain employed by S&T Bank benefits which in the aggregate are no less
favorable than those generally afforded to other S&T Bank employees holding
similar positions. For purposes of determining eligibility for and vesting of
such employee benefits, service with Peoples prior to the Effective Date shall
be treated as service to the same extent as if such persons had been employees
of S&T Bank or affiliates of S&T Bank. However, the Agreement shall not be
construed (i) to limit the ability of S&T Bank and its affiliates 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 (ii) to
require S&T Bank or its affiliates to provide employees or former employees
with post-retirement medical benefits.
Directorate of S&T. Immediately prior to the Effective Date of the Merger,
S&T will elect three persons selected by Peoples to serve as directors of S&T
(whose members historically also serve on the Board of Directors of S&T Bank).
The Peoples Board has selected , and to become directors of S&T
in accordance with the Agreement. Nonemployee directors of S&T are paid a
retainer of $2,500 per year and receive fees of $600 for attending each
meeting of the S&T Board and $150 to $200 for attending each meeting of a
committee of the S&T Board. Nonemployee directors of S&T also receive annual
grants of options to acquire shares of S&T Common Stock. In December 1996,
each nonemployee director of S&T was granted options to acquire up to 2,500
shares of S&T Common Stock at an exercise price of $30.875 per share.
Merger Consideration and Dividends. In exchange for their shares of Peoples
Common Stock, directors and officers of Peoples will receive the same Merger
consideration as all other Peoples shareholders. In addition, directors and
officers of Peoples, along with all other Peoples shareholders, will have
received their proportionate share of the dividends permitted by the Agreement
to be distributed to Peoples shareholders prior to the Effective Date. The
following table sets forth the Merger consideration to be received by Peoples
directors and officers.
<TABLE>
<CAPTION>
NUMBER OF PEOPLES SHARES OF S&T
NAME AND POSITION WITH PEOPLES SHARES OWNED COMMON STOCK(8)
- ------------------------------ ----------------- ---------------
<S> <C> <C>
Kathy L. Anderson, Director.................. 451 11,838
William E. Anderson, Director................ 15,730(1) 412,912
Earl W. Garlow, Director & Secretary......... 8,405(2) 220,631
Ruth M. Grant, Director & Vice President..... 3,912(3) 102,690
Frank W. Jones, Director..................... 326(4) 8,557
Russell P. Miller, Director & President...... 6,064(5) 159,180
Donald R. O'Block, Director.................. 598(6) 15,697
Myles D. Sampson, Director................... 100 2,625
Ernest J. Draganza, Senior Vice President,
Chief Financial Officer and Acting Chief
Executive Officer........................... 20(7) 525
</TABLE>
- --------
(1) The amount shown includes 15,510 shares of Peoples Common Stock held by
Mr. Anderson with his wife, which will be converted into 407,137 shares of
S&T Common Stock.
26
<PAGE>
(2) The amount shown includes 1,520 shares of Peoples Common Stock held by Mr.
Garlow's wife, which will be converted into 39,900 shares of S&T Common
Stock.
(3) The amount shown includes 1,140 shares of Peoples Common Stock held
jointly by Mrs. Grant with her deceased husband, son or daughters, which
will be converted into 29,925 shares of S&T Common Stock.
(4) The amount shown includes 201 shares of Peoples Common Stock held jointly
by Mr. Jones with his wife, which will be converted into 5,276 shares of
S&T Common Stock.
(5) The amount shown includes 5,964 shares of Peoples Common Stock owned by
Russell P. Miller and/or Margaret Jane Miller Trustees, for which Mr.
Miller and his wife serve as trustees, which will be converted into
156,555 shares of S&T Common Stock.
(6) The amount shown includes 473 shares of Peoples Common Stock owned jointly
by Mr. O'Block with his wife, which will be converted into 12,416 shares
of S&T Common Stock.
(7) The amount shown is owned jointly by Mr. Draganza and his wife.
(8) The amounts shown do not include the cash to be received in lieu of any
fractional shares. See "--Terms of the Merger."
SURRENDER OF CERTIFICATES
As soon as practicable after the Effective Date, the stock transfer agent of
S&T (currently, Chase Mellon Shareholder Services), acting in the capacity of
exchange agent, will mail to all holders of Peoples Common Stock a letter of
transmittal, together with instructions for the exchange of their Peoples
Common Stock certificates for certificates representing S&T Common Stock and,
if applicable, a check representing the amount paid in lieu of issuing any
fractional share. Until so exchanged, each certificate representing Peoples
Common Stock outstanding immediately prior to the Effective Date shall be
deemed for all purposes to evidence ownership of the number of shares of S&T
Common Stock into which such shares have been converted; provided, however,
that no dividends or other distributions declared after the Effective Date
with respect to S&T Common Stock shall be paid to the holder of any
unsurrendered certificate until the holder surrenders that certificate.
PEOPLES SHAREHOLDERS SHOULD NOT SEND IN THEIR CERTIFICATES UNTIL THEY RECEIVE
FURTHER INSTRUCTIONS.
REPRESENTATIONS AND WARRANTIES; CONDITIONS TO THE MERGER; WAIVER
The Agreement contains representations and warranties by Peoples and S&T
regarding various customary legal, regulatory, financial and business matters.
Except as otherwise provided in the Agreement, these representations and
warranties will not survive the Effective Date.
The obligations of S&T and Peoples to consummate the Merger are conditioned
upon, among other things: (i) the taking of all necessary corporate action
with respect to the Agreement and the Merger; (ii) the absence of orders
prohibiting the Merger; (iii) the receipt of all necessary regulatory
approvals and the expiration of all applicable waiting periods, without any
condition or requirement that causes either the S&T Board or the Peoples Board
to abandon the Merger; (iv) the effectiveness under the Securities Act of
1933, as amended (the "Securities Act") ( of a registration statement covering
the issuance of S&T Common Stock in connection with the Merger ("Registration
Statement") and the absence of any proceeding by the SEC to suspend such
effectiveness; (v) the approval for listing on the Nasdaq National Market,
subject to official notice of issuance, of the shares of S&T Common Stock to
be issued in the Merger; (vi) the receipt of the tax opinion described under
"--Certain Federal Income Tax Consequences;" (vii) the receipt of all
necessary permits and authorizations; (viii) the receipt by S&T of an opinion
letter from Ernst & Young LLP to the effect that the Merger will qualify for
pooling-of-interests accounting treatment under APB No. 16; (ix) the receipt
by Peoples of an opinion of Danielson Associates, dated as of the date of this
Proxy Statement/Prospectus, that the consideration to be received by Peoples'
shareholders is fair from a financial point of view and (x) the receipt of
other customary closing documents.
27
<PAGE>
Except with respect to any required shareholder or regulatory approval,
substantially all of the conditions to consummation of the Merger may be
waived at any time by the party for whose benefit they operate, in a writing
signed by both parties, and the Agreement may be amended or supplemented at
any time by written agreement of the parties, except that any such waiver or
amendment executed after approval of the Agreement by Peoples and S&T
shareholders which modifies the amount or form of consideration to be
delivered to Peoples shareholders pursuant to the Agreement requires the
further approval of S&T shareholders in the case of any increase in
consideration or further approval of the Peoples shareholders in the case of
any decrease in consideration.
REGULATORY APPROVALS
The Merger is subject to certain regulatory approvals, as set forth below.
To the extent that the following information describes statutes and
regulations, it is qualified in its entirety by reference to those particular
statutes and regulations.
The Merger is subject to the approval of the PADB under Sections 1601-1607
of the Pennsylvania Banking Code, which, among other things, authorizes the
merger of two Pennsylvania chartered banks, such as S&T Bank and Peoples,
provided that, among other things, the plan of merger adequately protects the
interests of the depositors, other creditors and shareholders, and the merger
is determined by the PADB to be consistent with adequate and sound banking
practices and in the public interest on the basis of the financial history and
condition of the parties, their future prospects, the character of the
resulting institution's management, the potential effect of the merger on
competition and the convenience and needs of the areas primarily to be served
by the resulting institution.
The Merger also is subject to approval of the FDIC under the Bank Merger
Act. In considering an application under the Bank Merger Act, the FDIC must
consider the financial and managerial resources and future prospects of the
existing and proposed institution and the convenience and needs of the
communities to be served. Further, the FDIC may not approve the Merger if it
would result in a monopoly, if it would be in furtherance of any combination
or conspiracy to monopolize or to attempt to monopolize the business of
banking in any part of the United States, if the effect of the Merger in any
section of the country may be substantially to lessen competition or to tend
to create a monopoly, or if it would be in any other manner in restraint of
trade, unless the FDIC finds that the anticompetitive effects of the Merger
are clearly outweighed in the public interest by the probable effect of such
Merger in meeting the convenience and needs of the communities to be served.
In addition, the FDIC must take into account the record of performance of the
existing and proposed institution under the Community Reinvestment Act in
meeting the credit needs of the entire community, including low- and moderate-
income neighborhoods, served by such institution. Applicable FDIC regulations
and Pennsylvania law require publication of notice of the application for
approval of the Merger and an opportunity for the public to comment on the
application in writing and to request a hearing.
The Bank Merger Act requires that any bank merger, including the Merger, may
not be consummated until the thirtieth day after approval by the FDIC, during
which time the U.S. Department of Justice ("DOJ") could challenge the Merger
on antitrust grounds; provided, however, that the FDIC may shorten the thirty
day waiting period to fifteen days in the event the FDIC has not received any
adverse comments from the DOJ concerning the competitive effects of the
proposed transaction.
S&T Bank has submitted the required applications to the FDIC and the PADB.
The Merger will not proceed in the absence of regulatory approval of such
applications. There can be no assurance that the FDIC or the PADB will approve
the Merger, or, if approved, that such approvals will not be conditioned upon
matters that would cause the S&T Board or the Peoples Board to abandon the
Merger. There likewise is no assurance that the DOJ or the Pennsylvania
Attorney General will not challenge the Merger or, if such a challenge is
made, as to the results thereof.
S&T and Peoples are not aware of any other governmental approvals or actions
that are required for consummation of the Merger, except as described above.
Should any other approval or action be required, it is
28
<PAGE>
contemplated presently that such approval or action would be sought. There can
be no assurance that any such approval or action, if needed, could be
obtained, would not delay consummation of the Merger or would not be
conditioned in a manner that would cause S&T or Peoples to abandon the Merger.
BUSINESS PENDING THE MERGER
Under the terms of the Agreement, the S&T Board and the Peoples Board are
required to submit and recommend the Agreement to their shareholders, subject
to its Board of Directors' fiduciary duties, to apply for all necessary
regulatory approvals and to use their best efforts, and cause their
subsidiaries to use their best efforts, to take or cause to be taken all
action necessary to permit consummation of the Merger at the earliest possible
date, including obtaining necessary consents and permits. Also under the
Agreement, the parties agree not to take, or not to fail to take, actions that
would substantially impair the prospects of completing the Merger or that
would adversely affect the qualification of the Merger for pooling-of-
interests accounting treatment or as a reorganization under Section 368(a) of
the Code.
Peoples is also required to use its best efforts to preserve intact its
properties, business and relationships with customers, employees and other
persons. In addition, without S&T's prior consent or as otherwise provided in
the Agreement, Peoples may not carry on its business other than in the usual,
regular and ordinary course, declare or pay any dividends or other
distributions on capital stock (except that prior to the Effective Date
Peoples may declare dividends in an amount equal to the per share dividend in
respect of S&T Common Stock declared by S&T multiplied by the Exchange Ratio
in order to conform to S&T's dividend policy), increase compensation or fringe
benefits of directors, officers or employees beyond customary limits, or take
certain other actions.
Peoples has also agreed in the Agreement, subject to certain exceptions,
that it will not authorize or permit any of its officers, directors or agents
to solicit, encourage or initiate inquiries or proposals relating to its
acquisition or purchase other than as contemplated in the Agreement, and that
S&T will be notified upon receipt by Peoples of such an inquiry or proposal.
EFFECTIVE DATE OF THE MERGER; TERMINATION
In the event that all conditions to the Merger have been satisfied or
waived, the Effective Date shall be at the time and on the date specified in
the certificate of merger pursuant to applicable provisions of Pennsylvania
law, subject to the rights of the parties to terminate the Agreement as set
forth herein. The transactions contemplated by this Proxy Statement/Prospectus
shall be consummated at a closing to be held at such location as the parties
may agree, on the first business day following satisfaction of the conditions
to consummation of the Merger set forth in Article 5 of the Agreement or such
later date within 30 days thereafter as reasonably may be specified by S&T
(the "Closing Date"), with the Merger to be consummated after such
intermediate steps as S&T reasonably may specify.
S&T and Peoples each anticipates that the Merger will be consummated in the
first half of 1997. However, consummation could be delayed as a result of
delays in obtaining the necessary governmental and regulatory approvals or if
any other condition to consummation of the Merger is not satisfied. There can
be no assurances as to if or when such approvals will be obtained or that the
Merger will be consummated. See "--Regulatory Approvals."
The Agreement may be terminated, whether before or after approval of the
Merger by the shareholders of S&T and Peoples, as follows: (i) at any time on
or prior to the Effective Date, by the mutual consent in writing of the
parties thereto; (ii) at any time on or prior to the Closing Date, by S&T in
writing, if Peoples has, or by Peoples in writing, if S&T has, in any material
respect, breached (a) any covenant or agreement contained therein or (b) any
representation or warranty contained therein if the failure of any such
representation and warranty to be true and correct has, or is reasonably
likely to have, a material adverse effect upon S&T or Peoples, and in either
case if such breach has not been cured by the earlier of 30 days after the
date on which written notice of
29
<PAGE>
such breach is given to the party committing such breach or the Closing Date;
(iii) on the Closing Date, by either party in writing, if any of the conditions
precedent with respect to such party's obligations have not been satisfied or
fulfilled; (iv) at any time, by either party in writing, if the applications
for prior approval to the FDIC and the PADB have been denied, and the time
period for appeals and requests for reconsideration has run; (v) at any time,
by either party in writing, if the shareholders of S&T or Peoples do not
approve the transactions contemplated at the annual or special meetings duly
called for that purpose; (vi) 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 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; or (vii) by either party in
writing, if the Closing Date has not occurred by the close of business on
September 30, 1997.
In addition, under certain circumstances Peoples may elect to terminate the
Agreement if the Average Closing Price of S&T Common Stock is below a certain
level on the Determination Date. See "--Terms of Merger."
The Agreement provides that Peoples is required to pay liquidated damages in
the amount of $1,600,000 (the "Fee") to S&T (1) if S&T terminates the Agreement
due to Peoples' knowing and intentional misrepresentation or knowing and
intentional breach of warranty or breach of any covenant or agreement, and
within 9 months from the date of termination a Competing Transaction (as
defined below) is consummated or Peoples shall have entered into an agreement
or an agreement in principle which if consummated would constitute a Competing
Transaction or (2) if Peoples terminates the Agreement because the Merger is
not approved by the requisite vote of the Peoples shareholders and within 9
months from the date of termination (other than a termination by reason of the
Average Closing Price failing to exceed a certain level) a Competing
Transaction is consummated or Peoples shall have entered into an agreement
which if consummated would constitute a Competing Transaction. In the event
that S&T is entitled to the Fee, Peoples shall also pay S&T interest at the
rate of 6% per year on any amounts that are not paid when due, plus all costs
and expenses in connection with or arising out of the enforcement of the
obligation of Peoples to pay the Fee or such interest. A Competing Transaction
is defined in the Agreement as one of the following involving Peoples (other
than the transactions contemplated by the Agreement): (a) any merger,
consolidation, share exchange for a controlling interest, business combination
or other similar transaction; (b) any sale, lease, exchange, mortgage, pledge,
transfer or other disposition of 15% or more of the assets of Peoples in a
single transaction or series of transactions to the same person, entity or
group; or (c) any public announcement by Peoples of a proposal, plan or
intention to do any of the foregoing or any agreement to engage in any of the
foregoing.
MANAGEMENT AND OPERATIONS AFTER THE MERGER
On the Effective Date, Peoples will be merged with and into S&T Bank with S&T
Bank as the surviving bank. On such Effective Date, the Board of Directors of
S&T (whose members historically also serve on the Board of Directors of S&T
Bank) shall consist of those persons serving as Directors of S&T immediately
prior to the Effective Date together with three directors to be designated by
Peoples. The Peoples Board has selected , , and to become
directors of S&T in accordance with the Agreement. S&T has agreed to take all
necessary action immediately prior to the Effective Date to elect those three
persons selected by Peoples to serve as members of the S&T Board. The
management of S&T and S&T Bank will continue unaffected by the Merger.
RIGHTS OF DISSENTING SHAREHOLDERS
Each Peoples shareholder who objects to the Merger shall be entitled to the
rights and remedies of dissenting shareholders provided in the Pennsylvania
Consolidated and Annotated Business Corporations Statute, 15 Pa.C.S.A. Sections
1571-1580, and the Pennsylvania Banking Code Statute, 7 Pa.C.S.A. Section 1222,
(collectively, the "Dissent Statute"), which is set forth in Appendix C hereto,
and the following summary of such rights and remedies is qualified in its
entirety by reference to such Appendix C.
30
<PAGE>
The Dissent Statute provides that any shareholder who wishes to dissent and
obtain payment for his or her shares must deliver to Peoples, prior to the
shareholder vote on the Merger, a written notice of his or her intention to
demand payment for his or her shares if the Merger is consummated, and that
the shareholder shall refrain from voting his or her shares in favor of the
Merger. A shareholder who fails in either respect waives any statutory right
to payment for his or her shares. A shareholder need not vote against approval
of the Merger, and voting against such approval will not satisfy the
requirement of the Dissent Statute that prior notice be given of an intention
to demand payment.
If the Merger is approved, the Dissent Statute provides that Peoples or S&T
shall mail notice to dissenters who gave due notice of intention to demand
payment, which shall state where and when a demand for payment must be sent
and certificates deposited, together with a form for demanding payment and a
date by which the payment demand must be received. In addition, Peoples or S&T
shall provide a copy of the Pennsylvania Business Corporations Statute,
Subchapter D, Dissenters' Rights. Upon timely receipt of a payment demand, S&T
shall pay each dissenter the amount that S&T considers to be fair value for
the Peoples shares and send each dissenter a notice containing certain
information regarding the closing balance sheet, statement of Peoples income
and the value of such shares and stating that the shareholder may demand
supplemental payment if he or she believes S&T's payment to be less than fair
value by sending to S&T his or her own estimate of fair value. If the
supplemental payment remains unsettled, S&T may initiate proceedings within 60
days of the demand in an appropriate court for determination of fair value by
the court for all dissenters whose demands have not been settled. The court's
jurisdiction is plenary and exclusive. The court may appoint appraisers to
take evidence and recommend a decision on fair value.
HOLDERS OF PEOPLES COMMON STOCK SHOULD BE AWARE THAT THEIR FAILURE TO
PROCEED IN ACCORDANCE WITH THE PROVISIONS OF THE PENNSYLVANIA BUSINESS
CORPORATIONS CONSOLIDATED AND ANNOTATED STATUTES, 15 PA.C.S.A. SECTIONS 1571-
1580, AND THE PENNSYLVANIA BANKING CODE STATUTE, 7 PA.C.S.A. SECTION 1222,
WILL RESULT IN A LOSS OF ALL DISSENTERS' RIGHTS AND RESULT IN THEIR BEING
BOUND BY THE MERGER. The shares held by a Peoples shareholder who has lost his
dissenters' rights by failing to comply with the statutory procedures shall
remain shares of Peoples Common Stock and such shareholder shall be entitled
to receive shares of S&T Common Stock and cash in lieu of a fractional share
as though such shareholder had assented to the Merger.
It is a condition to the closing of the Merger that dissenters' rights not
be exercised with respect to more than 10% of the outstanding shares of
Peoples Common Stock. See "--Accounting Treatment."
CERTAIN DIFFERENCES IN RIGHTS OF SHAREHOLDERS
S&T is a Pennsylvania corporation. Peoples is a Pennsylvania banking
institution. Under Pennsylvania law, the rights of holders of S&T Common Stock
are governed generally by the Pennsylvania Business Corporations Act and the
rights of holders of Peoples Common Stock are governed generally by the
Pennsylvania Business Corporations Act and the Pennsylvania Banking Code. The
rights of holders of S&T Common Stock are also governed by the S&T Articles
and by the S&T By-Laws, while the rights of holders of Peoples Common Stock
also are governed by the Peoples Articles and by the Peoples By-Laws.
The rights of shareholders of S&T and Peoples with respect to special
meetings of shareholders, committees, records of meetings, vacancies on the
Board of Directors and preemptive rights are generally comparable. Certain
significant differences between the rights of shareholders of S&T and Peoples
with respect to other provisions are set forth below.
This summary contains a list of material differences, but is not meant to be
relied upon as an exhaustive list or a detailed description of the provisions
discussed and is qualified in its entirety by reference to the S&T Articles,
the S&T By-Laws, the Peoples Articles, the Peoples By-Laws and the relevant
statutory provisions.
31
<PAGE>
CUMULATIVE VOTING FOR DIRECTORS. S&T. Pursuant to the S&T Articles, S&T
shareholders are not permitted to cumulate votes with respect to the election
of Directors.
Peoples. Pursuant to the Peoples By-Laws, Peoples shareholders are permitted
to cumulate votes with respect to the election of Directors. Under a
cumulative voting system, a shareholder is entitled to cast a number of votes
in the election of directors equal to the number of shares held by the
shareholder multiplied by the number of directors to be elected, and the
shareholder may allocate the total number of votes he or she is entitled to
cast among one or more director nominees in any proportion(s).
MEETINGS OF SHAREHOLDERS. S&T. The S&T By-Laws provide that an annual
meeting of shareholders may be called by the S&T Board and held on such day,
at such hour, and at such place as the S&T Board shall from time to time
designate. The S&T By-Laws provide that written notice of every meeting shall
be provided at least ten (10) days before the date of the meeting.
Peoples. The Peoples By-Laws provide that an annual meeting of shareholders
shall be held on the second Tuesday of May in each year at 2 o'clock P.M. at
the principal office of Peoples or elsewhere within the Commonwealth of
Pennsylvania as may be determined by the Peoples Board. Written notice of
every meeting shall be provided at least five (5) days before the date of the
meeting. A majority of votes cast shall decide every question or matter
submitted to the shareholders at any meeting unless otherwise provided by law.
NOMINATION OF DIRECTORS. S&T. Pursuant to the S&T By-Laws, the S&T Board
shall consist of not less than twelve (12) nor more than (21) members.
Nominations for Directors must be submitted to the Secretary of S&T in writing
no later than the close of business on the twentieth (20) day immediately
preceding the date of the meeting. No person shall be eligible to be newly
elected or appointed as Director after he or she shall have attained the age
of seventy (70) years on or prior to the date of his or her election. Any
Director of S&T who attains the age of seventy (70) years shall be retired as
of the next annual meeting without any action on his or her part.
Peoples. The Peoples By-Laws provide that the shareholders nominate a Board
of Directors of not less than five (5) nor more than nine (9) members, each of
whom shall own not less than one hundred (100) shares of Peoples' Common
Stock. Candidates for the office of Director (other than members of the then
existing Board of Directors) must have filed written notice of his or her
candidacy with the Secretary of Peoples no less than thirty (30) days prior to
the election. If a Director is absent from three (3) consecutive meetings of
the Peoples Board without having given written notice of his or her inability
to attend, his or her office may be declared vacant. No regularly salaried
employee of Peoples, except the Executive Vice-President, Chief Executive
Officer or as otherwise provided in the Pennsylvania Banking Code, shall be
eligible to serve as a Director of Peoples. When a Director reaches the age of
seventy-five (75) years, he or she shall automatically be retired, excluding
members of the Peoples Board as of December 1, 1994.
CLASSIFICATION OF DIRECTORS. S&T. Pursuant to the S&T By-Laws, the S&T
Directors shall be divided into three (3) classes as nearly equal in number as
possible, known as: Class 1, consisting of no more than seven (7) Directors;
Class 2, consisting of no more than seven (7) Directors; and Class 3,
consisting of no more than seven (7) Directors. Each class serves for a term
of three (3) years.
Peoples. Neither the Peoples By-Laws nor the Peoples Articles contain
provisions concerning classification of Peoples Directors.
RECORD DATE. S&T. Pursuant to the S&T By-Laws, the S&T Board may fix any
time, whether or not the same is more than fifty (50) days prior to the date
of any meeting of shareholders, as a record date for the determination of
shareholders eligible to vote at such meeting.
Peoples. The Peoples By-Laws provide that the Peoples Board may fix a date
for the determination of shareholders entitled to vote at any meeting by
fixing a record date not more than forty (40) days prior thereto.
32
<PAGE>
JUDGE OF ELECTION. S&T. Neither the S&T By-Laws nor the S&T Articles provide
for a judge of election.
Peoples. The Peoples By-Laws provide that the Peoples Board or the chairman
of a shareholders meeting may appoint a judge or three judge panel of election
and that such judge(s) shall, upon the request of the chairman or any
shareholder present at a meeting, make a written report of any matter
determined by him or them and execute a certificate of any fact found by him
or them. Any report made by the judge or judges of election shall be prima
facie evidence of the facts stated therein.
OPPOSITION OF TENDER OR OTHER OFFER. S&T. The S&T Articles provide that the
S&T Board may, if it deems it advisable, oppose a tender, or other, offer for
S&T's securities, whether the offer is in cash or the securities of another
corporation or otherwise.
Peoples. Neither the Peoples By-Laws nor the Peoples Articles contain
provisions concerning the opposition of tender or other offers.
SHAREHOLDER ACTION. S&T. The S&T Articles provide that no merger,
consolidation, liquidation or dissolution of the corporation nor any action
that would result in the sale of or other disposition of all or substantially
all of the assets of the corporation shall be valid unless first approved by
at least sixty-six and two-thirds percent (66-2/3%) of the outstanding shares
of S&T Common Stock.
Peoples. Neither the Peoples By-Laws nor the Peoples Articles require a
supermajority vote to approve extraordinary corporate transactions. However,
under the Pennsylvania Bank Code, all mergers and consolidations that will
result in institutions that are subject to the Pennsylvania Banking Code and
all dissolutions must be approved by a majority of the board of directors and
by the shareholders entitled to cast at least two-thirds of the votes which
all shareholders are entitled to cast.
DISSENTERS' RIGHTS. S&T. 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), S&T
shareholders are not entitled to dissenters' rights because their stock is
held of record by 2,000 or more shareholders.
Peoples. The Pennsylvania Banking Code incorporates the dissenters' rights
provisions of the Pennsylvania Business Corporations Act. The Pennsylvania
Business Corporations Act 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 shareholders vote).
PREFERRED SHARES. S&T. Pursuant to the S&T Articles, the S&T Board is
authorized to provide for the issuance of Preferred Stock in series and to
establish, fix the designation, powers, preferences and rights of the shares
of each such series and the qualifications, limitations or restrictions
thereof.
Peoples. Neither the Peoples By-Laws nor the Peoples Articles provide for
Preferred Stock.
AMENDMENTS TO BY-LAWS. S&T. The S&T By-Laws provide that a majority vote of
members of the S&T Board may amend or repeal the S&T By-Laws, in whole or in
part.
Peoples. The Peoples By-Laws may be amended at any meeting of the
shareholders by a two-thirds vote of those present in person or by proxy.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of anticipated material federal income tax
consequences of the Merger to shareholders of Peoples. Because of the
complexities of the federal income tax laws and because the tax consequences
may vary depending upon each shareholder's individual circumstances or tax
status, each
33
<PAGE>
shareholder is urged to consult a tax adviser regarding the federal state,
local, foreign and other tax consequences of the Merger to such shareholder.
This summary has been prepared by Arnold & Porter, special counsel to S&T,
and reflects Arnold & Porter's opinion as to certain federal income tax
consequences of the Merger. This summary is based on laws, regulations,
rulings and judicial decisions as they now exist. These authorities are all
subject to change and such change may be made with retroactive effect. Arnold
& Porter cannot give any assurance that, after any such change, this summary
would not be different, and will not undertake any responsibility to update or
supplement this summary.
This summary is not a complete description of the federal income tax
consequences of the Merger; for example, the rules set out in the opinion may
not apply to a holder of Peoples Common Stock in light of the holder's
particular circumstances or to holders subject to special rules, such as
foreign persons, financial institutions, tax-exempt organizations, insurance
companies and persons who acquired shares of Peoples Common Stock pursuant to
the exercise of employee stock options or rights or otherwise as compensation.
Moreover, this summary does not address the consequences of the Merger under
state, local or foreign tax laws, to the extent that such laws may apply.
S&T and Peoples have provided Arnold & Porter with the facts,
representations, and assumptions on which Arnold & Porter has relied in
preparing this summary, which information is consistent with the state of
facts that S&T and Peoples believe will be existing as of the Effective Date.
Based on such facts, representations and assumptions, Arnold & Porter is of
the opinion that the federal income tax consequences of the Merger are as
follows:
The Merger, when consummated in accordance with the Agreement and certain
related agreements, will constitute a reorganization within the meaning of
Section 368(a) of the Code. No gain or loss will be recognized by a
shareholder of Peoples who exchanges all of the shareholder's Peoples Common
Stock solely for S&T Common Stock in the Merger (except as described below
with respect to cash received in lieu of a fractional share interest in S&T
Common Stock). See "--Representations and Warranties; Conditions to the
Merger; Waiver," regarding the issuance by Arnold & Porter of an opinion
letter as of the Closing Date as a condition to the Merger.
The aggregate adjusted tax basis of the S&T Common Stock received by a
shareholder who exchanges all of the shareholder's Peoples Common Stock solely
for S&T Common Stock in the Merger will be the same as the aggregate adjusted
tax basis of the Peoples Common Stock surrendered in exchange therefor,
reduced by an amount allocable to a fractional share interest for which cash
is received (as described below), and the holding period for S&T Common Stock
received in exchange for Peoples Common Stock will include the period during
which the shareholder held the Peoples Common Stock surrendered in the
exchange, provided that the Peoples Common Stock was held as a capital asset
at the Effective Date.
A shareholder of Peoples who receives cash in lieu of a fractional share
interest in S&T Common Stock will be treated as having received such
fractional share interest from S&T in the Merger. The cash received by such a
shareholder in lieu of a fractional share interest in S&T Common Stock will be
treated as received in exchange for such fractional share interest, and gain
or loss generally will be recognized for federal income tax purposes measured
by the difference between the amount of cash received and the portion of the
basis of the shares of Peoples Common Stock allocable to such fractional share
interest. Such gain or loss should be long-term capital gain or loss if the
shareholder's shares of Peoples Common Stock are held as capital assets and
have been held for more than one year at the Effective Date.
A shareholder of Peoples Common Stock who exercises dissenters' rights under
the Dissent Statute and who receives cash payment of the fair value of the
holder's shares of Peoples Common Stock will be treated as having received
such payment in redemption of such shares. Such redemption will be subject to
the conditions and limitations of Section 302 of the Code, including the
attribution rules of Section 318 of the Code. In general, if the shares of
Peoples Common Stock are held by the holder as a capital asset at the
Effective Date, a dissenting holder will recognize capital gain or loss
measured by the difference between the amount of cash received by such holder
and the basis for such shares. If, however, such holder owns, either actually
or constructively, any other Peoples Common Stock or S&T Common Stock, the
payment made to such holder could be treated as
34
<PAGE>
dividend income. In general, under the constructive ownership rules of the
Code, a holder may be considered to own stock that is owned, and in some cases
constructively owned, by certain related individuals or entities, as well as
stock that such holder (or related individuals or entities) has the right to
acquire by exercising an option or converting a convertible security. Each
shareholder of Peoples Common Stock who contemplates exercising dissenters'
rights should consult his or her own tax advisor as to the tax consequences of
such action, including the possibility that the payment will be treated as
dividend income.
RESALE OF S&T COMMON STOCK
The shares of S&T Common Stock issuable to shareholders of Peoples pursuant
to the Merger have been registered under the Securities Act pursuant to the
Registration Statement. It is anticipated, and it is a condition to each of
the parties' obligations to effect the Merger, that such shares will be
approved for trading, on the Nasdaq National Market. Such shares may be traded
freely by those shareholders not deemed to be "affiliates" of Peoples under
Rule 145 promulgated under the Securities Act ("Rule 145") or "affiliates" of
S&T under Rule 144 promulgated under the Securities Act ("Rule 144"). The term
"affiliate" will generally include each person who controls, is controlled by
or is under common control with, or is a member of a group that controls, is
controlled by or is under common control with (i) Peoples at the time of the
Peoples Special Meeting or (ii) S&T after the Effective Date, and could be
deemed to include all executive officers, directors and 10% shareholders of
Peoples and S&T.
Rule 145 will restrict the sale of S&T Common Stock received in the Merger
and beneficially owned by those shareholders who are deemed to be affiliates
of Peoples and certain of their family members and related interests. Under
current SEC rules, such affiliates, provided they are not affiliates of S&T at
or following the Effective Date, may publicly resell S&T Common Stock received
by them in the Merger subject to certain limitations, principally as to, among
other things, the number of shares sold and the manner of sale, during the two
years following the Effective Date. After the two-year period, such affiliates
may resell their shares without restriction so long as there is adequate
current public information with respect to S&T as required by the Rule 145.
Persons who become affiliates of S&T prior to, at or after the Effective Date
may publicly resell the S&T Common Stock received by them in the Merger
subject to similar limitations and subject to certain filing requirements
specified in Rule 144. Generally, Rule 144 provides that an "affiliate" may
sell a number of shares of S&T Common Stock equal to no more than one percent
of the outstanding S&T Common Stock during any three- month period. Affiliates
also would be permitted to resell S&T Common Stock received in the Merger
pursuant to an effective registration statement under the Securities Act or
another available exemption from the Securities Act registration requirements.
This Proxy Statement/Prospectus does not cover any resales of S&T Common Stock
received in the Merger by persons who may be deemed to be affiliates of S&T or
Peoples.
In addition, shares of S&T Common Stock held by affiliates of S&T or issued
to affiliates of Peoples in the Merger will not be transferable until
financial results covering at least 30 days of post-Merger combined operations
of S&T and Peoples have been published, in order to satisfy certain
requirements of the Commission in transactions, such as the Merger, to be
accounted for using pooling-of-interests accounting treatment. Under the
Agreement, S&T has agreed to use its best efforts to publish no later than 90
days after the end of the first month after the Effective Date in which there
are at least 30 days of post-Merger combined operations (which may be the
month in which the Effective Date occurs), combined sales and net income
figures as contemplated by and in accordance with the Commission's Accounting
Series Release No. 135.
The Agreement provides that S&T and Peoples shall cooperate and use their
best efforts to identify those persons who may be deemed to be affiliates of
Peoples or S&T, and to cause such persons so identified to deliver to S&T or
Peoples, as appropriate, at least 30 days prior to the Effective Date, a
written agreement providing that such persons will not dispose of any Peoples
Common Stock or any S&T Common Stock except in compliance with the Securities
Act, the rules and regulations promulgated thereunder and the Commission's
rules relating to pooling-of-interests accounting treatment. It is anticipated
that each director and executive officer of S&T and Peoples will execute such
an agreement. See "--Accounting Treatment." Receipt of such a written
35
<PAGE>
agreement shall not affect the restriction on transfer, as discussed in the
preceding paragraph, which exists prior to the publication of certain post-
Merger financial results.
ACCOUNTING TREATMENT
It is a condition precedent to the obligations of S&T and S&T Bank to
consummate the Merger that S&T shall have received an opinion letter, dated as
of the Effective Date, from Ernst & Young LLP to the effect that the Merger
will qualify for pooling-of-interests accounting treatment under APB No. 16;
except that such condition shall be deemed to have been waived by S&T to the
extent that it takes any action or causes any conditions to occur, without the
written consent of Peoples, which constitute the sole reason for Ernst & Young
LLP being unable to render such opinion. See "--Representations and
Warranties; Conditions to the Merger; Waiver." In order to account for a
business combination as a pooling-of-interests transaction, specific criteria
must be met. The criteria for use of the pooling-of-interests accounting
method relate to the attributes of the combining entities before the
combination, the manner of combining the enterprises and the absence of
certain plans or transactions following the combination. Under the pooling-of-
interests method of accounting, the historical basis of the assets,
liabilities and shareholders' equity of S&T and Peoples will be combined at
the Effective Date and carried forward at their previously recorded amounts
and no goodwill will be created. Revenue and expenses of S&T and Peoples will
be combined at historically recorded amounts.
In order for the pooling method to apply, affiliates of S&T and Peoples
cannot reduce their holdings of S&T Common Stock or Peoples Common Stock (or
S&T Common Stock received in the Merger) for a period generally beginning 30
days prior to the Effective Date and ending upon the publication of at least
30 days of post-Merger combined operations of S&T and Peoples. See "--Resale
of S&T Common Stock." The pooling-of-interests method of accounting may not be
used if more than 10% of the outstanding shares of Peoples Common Stock
exercise their dissenters' rights, reduced by the amount of tainted shares as
defined by APB No. 16. See "--Rights of Dissenting Shareholders." Peoples and
S&T have agreed that they will not take, or to the best of their respective
abilities cause or permit to be taken, any action that would adversely affect
the qualification of the Merger for pooling-of-interests accounting treatment.
In the event either S&T or Peoples has taken any action that would adversely
affect such qualification, each party will take such action as the other party
may reasonably request to cure such effect to the extent curable without a
material adverse effect on either of the parties. All unaudited pro forma
financial information contained in this Proxy Statement/Prospectus has been
prepared using the pooling-of-interests method to account for the Merger. See
"PRO FORMA COMBINED FINANCIAL INFORMATION."
CERTAIN INFORMATION REGARDING PEOPLES
BUSINESS
Peoples was organized as a Pennsylvania-chartered bank in 1918. Its deposits
are insured by the FDIC under the Bank Insurance Fund (the "BIF"). Peoples is
not a member of the Federal Reserve System. Peoples' main office is located at
7660 Saltsburg Road, Pittsburgh, Pennsylvania 15239-3700. Peoples also has
offices located in Unity, Penn Hills, East Oakmont, Monroeville and Holiday
Park, Pennsylvania. Peoples owns the land and buildings at all of these sites,
except at the Holiday Park office. As of September 30, 1996, Peoples had total
assets of approximately $288 million, total deposits of approximately $237
million and total shareholders' equity of approximately $49 million.
Peoples is a commercial bank providing loan and deposit services to
individuals and small to medium sized businesses located primarily in
Allegheny and Westmoreland counties. Among its services, Peoples accepts time,
demand and savings deposits and makes secured and unsecured commercial, real
estate and consumer loans. Peoples business is not seasonal in nature and is
not dependent upon any single customer or small group of customers for
deposits or loans. As of December 31, 1996, Peoples had 93 full-time employees
and 21 part-time employees.
36
<PAGE>
COMPETITION
Peoples competes with commercial banks, thrifts, local credit unions, and
other financial institutions, as well as with major regional banking and
financial institutions. These competitors include PNC Bank Corp., Mellon Bank
Corporation, National City Corporation, First Commonwealth Financial
Corporation, First Western Bancorp, Inc., Century Financial Corporation, IBT
Bancorp, Inc., Southwest National Corporation, Allegheny Valley Bancorp, Inc.,
USBancorp, Inc., BT Financial Corporation and S&T. Peoples believes that it is
generally competitive in its 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
The operations of Peoples are subject to federal and state statutes and
regulations applicable to banks chartered under the banking laws of the
Commonwealth of Pennsylvania and to banks whose deposits are insured by the
FDIC. Federal and state banking laws and regulations govern, among other
things, Peoples scope of business, investments, loans and collateral, mergers
and consolidations and establishment of branches. Some of the aspects of the
lending and deposit business of Peoples that are regulated by federal and
Pennsylvania law include personal lending, mortgage lending, and reserve
requirements and interest rates, both as they relate to lending and interest
paid on deposits. The amount of funds that Peoples may lend to a single
borrower is limited generally under Pennsylvania law to fifteen percent (15%)
of the aggregate of its capital, surplus, undivided profits, loan loss
reserves and capital securities (all as defined by statute and regulation).
For a discussion of the federal and Pennsylvania regulatory approvals required
for mergers involving Pennsylvania chartered banks such as Peoples, see
"PROPOSED MERGER--Regulatory Approvals." Representatives of the FDIC and
Pennsylvania Department of Banking also regularly conduct examinations of
Peoples affairs and records, and Peoples must furnish quarterly reports to the
FDIC and the Pennsylvania Department of Banking.
EFFECT OF GOVERNMENT MONETARY POLICIES
The earnings of Peoples are and will be affected by domestic economic
conditions and the monetary and fiscal policies of the United States
government and its agencies. 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 through 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 upon 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 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
operations and taxation of banks, bank holding companies and other financial
institutions are also frequently made in Congress, and 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 Peoples.
LEGAL PROCEEDINGS
There are no proceedings pending or, to the knowledge of Peoples, threatened
against Peoples or its business, assets, common stock or any of the
transactions contemplated by the Agreement.
On September 18, 1996, the executive committee of the Peoples Board
suspended the then Chief Executive Officer and the then Chief Operating
Officer. The executive committee suspended these individuals pending
37
<PAGE>
investigations of allegations that the then Chief Executive Officer was
involved in initiating and concealing certain fraudulent transactions and the
then Chief Operating Officer participated in concealing certain of such
fradulent transactions, primarily loans in the names of other individuals
pursuant to which the Chief Executive Officer obtained the proceeds. The
Peoples Board retained Snodgrass and Kirkpatrick & Lockhart to further
investigate these allegations. After further investigation, Peoples notified
the Pennsylvania Department of Banking, the FDIC, the United States Attorneys
Office and the FBI of these allegations. Based on these investigations,
Peoples has recorded a pre-tax loss of $405,000 in its financial statement due
to these alleged fraudulent transactions. A federal grand jury for the United
States District Court of Western Pennsylvania is investigating these
allegations. Peoples is cooperating with regulatory and law enforcement
officials in their investigation and has provided information concerning these
allegations to its financial institutions bond and directors and officers
liability carriers. Peoples terminated the Chief Executive Officer's and the
Chief Operating Officer's employment with Peoples on September 24 and October
9, 1996, respectively.
ENVIRONMENTAL ISSUES
There are several federal and state statutes that govern the obligations of
financial institutions with respect to environmental issues. Besides being
responsible under such statutes for its own conduct, a bank also may be held
liable under certain circumstances for actions of borrowers or other third
parties on properties that collateralize loans held by the bank. Such
potential liability may far exceed the original amount of the loan made by the
bank. Currently, Peoples is not a party to any pending legal proceedings under
any environmental statute.
Peoples East Oakmont branch is located on the site of a former gas station.
Peoples has not performed an environmental assessment on this property.
PEOPLES COMMON STOCK PRICES AND DIVIDENDS
There is no established public trading market for Peoples Common Stock.
Occasionally, individuals sell and buy shares of the Peoples Common Stock in
privately negotiated transactions. Peoples acts as its own transfer agent and
keeps its own stock transfer ledger.
The lowest and highest prices per share known by the management of Peoples
since January 1, 1994 were $200 and $535 per share (restated to reflect a five
for one stock split distributed on August 4, 1995), respectively. The last
known trade prior to the announcement of the Agreement on November 25, 1996,
as to which the management of Peoples is aware of the sales price, occurred on
October 16, 1996, was $500.
Peoples has historically declared and paid cash dividends semi-annually.
Cash dividends of $7.70 and $7.00 per share were paid in 1995 and 1994,
respectively. A cash dividend of $6.00 per share was paid in 1996 prior to the
Announcement of the Merger. The Agreement provides that Peoples may conform to
the S&T dividend policy subsequent to the execution of the Agreement. In
accordance with the Agreement, the Peoples Board has declared in December 1996
a dividend of $6.56 per share of Peoples Common Stock, payable in January
1997.
DIVIDEND RESTRICTIONS ON PEOPLES
Any future dividends of Peoples are subject to certain regulatory
considerations and the discretion of the Peoples Board and will depend upon a
number of factors, including operating results, financial conditions and
general business conditions. The shareholders are entitled to receive
dividends as and when declared by the Peoples Board, out of funds legally
available therefor, subject to the restrictions set forth in the Pennsylvania
Banking Code and the Federal Deposit Insurance Act (the "FDIA"). The
Pennsylvania Banking Code provides that cash dividends may be declared and
paid only out of accumulated net earnings and only when such dividends
38
<PAGE>
do not reduce Peoples' surplus below the amount of its capital. The FDIA
generally prohibits all payments of dividends by any bank which is in default
on any assessment for deposit insurance premiums to the FDIC.
DIRECTORS OF PEOPLES
The following list sets forth biographical information concerning the
members of the Peoples Board:
<TABLE>
<CAPTION>
AGE AS OF BUSINESS EXPERIENCE, INCLUDING PRINCIPAL
DECEMBER 31, OCCUPATION DURING PAST DIRECTOR
NAME 1996 FIVE YEARS, AND OTHER PUBLIC DIRECTORSHIPS SINCE
- ---- ------------ ----------------------------------------------------- --------
<S> <C> <C> <C>
Kathy L. Anderson....... 43 Administrative Assistant, Associated Cleaning 1996
Consultants & Services, Inc.
William E. Anderson..... 74 President, Anderson Group of Companies 1983
Earl W. Garlow.......... 76 Retired, Formerly Owner and President, Garlow, Inc. 1975
Ruth M. Grant........... 65 President, Secretary, Treasurer, Louis A. Grant, Inc. 1988
Frank W. Jones.......... 51 Attorney at Law, Sole Practitioner 1993
Russell P. Miller....... 77 President, Site Development 1975
Donald R. O'Block....... 61 Owner, President, O'Block Homes, Inc. 1995
Myles D. Sampson........ 52 Owner, President, Rimco Construction, Inc. 1996
</TABLE>
PRINCIPAL OFFICERS OF PEOPLES
The following table sets forth selected information about the principal
officers of Peoples, each of whom is elected by the Peoples Board and each of
whom holds office at the discretion of the Peoples Board:
<TABLE>
<CAPTION>
OFFICE/POSITION NUMBER OF
WITH BANK AND BANK SHARES AGE AS OF
BUSINESS EXPERIENCE HELD EMPLOYEE BENEFICIALLY DECEMBER 31,
NAME DURING PAST FIVE YEARS SINCE SINCE OWNED(2) 1996
---- ------------------------ ----- -------- ------------ ------------
<C> <S> <C> <C> <C> <C>
President--President,
Russell P. Miller........ Site Development 1994 -- 6,064(3) 77
Ruth M. Grant............ Vice President--
President, Secretary,
Treasurer, Louis A.
Grant, Inc. 1994 -- 3,912(4) 65
Earl W. Garlow........... Secretary--Retired,
Formerly Owner and
President, Garlow, Inc. 1992 -- 8,405(5) 76
Ernest J. Draganza....... Senior Vice President, 1994 1992 20(6) 31
Chief Financial Officer
and Acting Chief
Executive
Officer--Formerly
Senior Bank Examiner
with FDIC 1996(1)
Vincent J. Tassone, Jr. . Vice President of
Operations--Formerly
Assistant Vice
President of Dollar
Bank 1994 1993 -- 44
</TABLE>
- --------
(1) Mr. Draganza has served as Acting Chief Executive Officer of Peoples since
September 18, 1996 following the suspension and subsequent termination of
the former Chief Executive Officer.
(2) Under applicable regulations, shares are deemed to be beneficially owned
by a person if he directly or indirectly has or shares the power to vote
or dispose of the shares, whether or not he has any economic interest in
the shares.
(3) The amount shown includes 5,964 shares owned by Russell P. Miller and/or
Margaret Jane Miller, Trustees, for which Mr. Miller and his wife serve as
trustees.
39
<PAGE>
(4) The amount shown includes 1,140 shares held jointly by Mrs. Grant with her
deceased husband, son or daughters.
(5) The amount shown includes 1,520 shares held by Mr. Garlow's wife.
(6) The amount shown is owned jointly by Mr. Draganza and his wife.
REMUNERATION OF DIRECTORS AND OFFICERS
Generally, in 1995, the Peoples Board met twice a month. Each director
received $600 for each Peoples Board meeting that he or she attended. In
addition, each director received $150 for each executive committee meeting of
Peoples that he or she attended. In 1995, directors received $145,550 in the
aggregate for attendance at Peoples Board meetings and committee meetings.
During the first nine months of 1996, directors received $113,700 in the
aggregate for attendance at Peoples Board and committee meetings. All of the
current directors attended at least eighty percent (80%) of the meetings of
Peoples Board in 1995.
The following table sets forth certain summary information concerning
compensation paid or accrued by Peoples on behalf of Peoples Acting Chief
Executive Officer and former Chief Executive Officer. The annual salary and
bonus of Peoples other four most highly compensated officers did not exceed
$100,000 during the last three fiscal years.
COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
-----------------------------------------------
OTHER ANNUAL ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(3) COMPENSATION(4)
- --------------------------- ---- ------- ------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Ernest J. Draganza, Senior 1996 $70,672 $20,000 $6,461 $1,906
Vice President,
Chief Financial Officer &
Acting
Chief Executive Officer
(1)
David W. London, Executive 1996 91,763 -- 5,741 1,822
Vice President
and Chief Executive 1995 120,136 -- 10,229 5,521
Officer (2)
1994 109,197 -- 9,690 6,548
</TABLE>
- --------
(1) Mr. Draganza has served as Acting Chief Executive Officer since September
18, 1996.
(2) Mr. London served as Executive Vice President and Chief Executive Officer
until September 18, 1996.
(3) Other Annual Compensation includes health, dental, vision and life and
disability insurance benefits and use of a Peoples' automobile.
(4) All Other Compensation includes contributions to a Section 401(k) employee
savings and investment plan.
BENEFICIAL OWNERSHIP BY OFFICERS AND DIRECTORS
The following table sets forth as of December 31, 1996, the amount and
percentage of Peoples Common Stock beneficially owned by each director and all
officers and directors of Peoples as a group.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
BENEFICIAL PERCENT OF
NAME OF INDIVIDUAL OR IDENTITY OF GROUP OWNERSHIP CLASS
- --------------------------------------- ---------- ----------
<S> <C> <C>
Kathy L. Anderson, Director............................. 451 .39%
William E. Anderson, Director........................... 15,730(1) 13.60%
Earl W. Garlow, Director & Secretary.................... 8,405(2) 7.27%
Ruth M. Grant, Director & Vice President................ 3,912(3) 3.38%
Frank W. Jones, Director................................ 326(4) .28%
Russell P. Miller, Director & President................. 6,064(5) 5.24%
Donald R. O'Block, Director............................. 598(6) .52%
Myles D. Sampson, Director.............................. 100 .09%
Ernest J. Draganza, Senior Vice President, Chief
Financial Officer
and Acting Chief Executive Officer..................... 20(7) .02%
David W. London, Former Executive Vice President and
Chief Executive Officer................................ 235(8) 2.03%
All Directors and Officers as a Group (10 Persons)...... 35,841(9) 30.99%
</TABLE>
40
<PAGE>
- --------
(1) The amount shown includes 15,510 shares of Peoples Common Stock held by
Mr. Anderson with his wife.
(2) The amount shown includes 1,520 shares of People Common Stock held by Mr.
Garlow's wife.
(3) The amount shown includes 1,140 shares of Peoples Common Stock held
jointly by Mrs. Grant with her deceased husband, son or daughters.
(4) The amount shown includes 201 shares of People Common Stock held jointly
by Mr. Jones with his wife.
(5) The amount shown includes 5,964 shares owned by Russell P. Miller and/or
Margaret Jane Miller, Trustees, for which Mr. Miller and his wife serve as
trustees.
(6) The amount shown includes 473 shares of People Common Stock owned jointly
by Mr. O'Block with his wife.
(7) The amount shown is owned jointly by Mr. Draganza and his wife.
(8) The amount shown includes 142 shares of Peoples Common Stock held jointly
by Mr. London and his wife.
(9) The amount shown includes 235 shares of Peoples Common Stock beneficially
owned by Mr. London, who served as Executive Vice President and Chief
Executive Officer until September 18, 1996.
RETIREMENT PLANS
Peoples sponsors a trusteed, non-contributory defined benefit pension plan
covering substantially all employees and officers of Peoples. The plan calls
for benefits to be paid to eligible employees at retirement based primarily on
years of service and compensation rates near retirement. Contributions are
intended to provide for benefits attributed to employee service to date and
for those benefits expected to be earned in the future. As of December 31,
1996, the present value of the vested accrued benefits for Messrs. Draganza
and London were $14,975 and $129,453, respectively.
Peoples also maintains a section 401(k) employee savings and investment plan
covering substantially all employees and officers of Peoples. Peoples'
contributions to the plan are based on 50% matching of voluntary contributions
of up to 4% of individual compensation. Additionally, Peoples may contribute a
discretionary amount each year. Employee contributions are vested at all times
and Peoples' contributions are fully vested after seven years.
CERTAIN TRANSACTIONS
There have been no material (i.e., exceeding $60,000 in value) transactions,
proposed or consummated, between Peoples and any current director or executive
officer of Peoples, or any associate of the foregoing persons. Peoples has had
and intends to continue to have banking and financial transactions in the
ordinary course of business with directors and officers of Peoples and their
associates on comparable terms and with similar interest rates as those
prevailing from time to time for other customers of Peoples. Total loans
outstanding from Peoples at September 30, 1996, to Peoples current officers
and directors as a group, members of their immediate families and companies in
which they had an ownership interest of 5% or more was $10,211,286 or 20.83%
of Peoples total equity capital accounts. Such loans do not involve more than
the normal risk of collectibility nor do they present other unfavorable
features.
For a description of certain fraudulent transactions involving Peoples
former Chief Executive Officer and former Chief Operating Officer, see "--
Legal Proceedings."
41
<PAGE>
PRINCIPAL OWNERS OF PEOPLES VOTING SECURITIES
The following table sets forth, as of December 31, 1996, the name and
address of each person who owns of record or who is known by the Peoples Board
to be the beneficial owner of five percent (5%) or more of the outstanding
Peoples Common Stock, the number of shares beneficially owned by such person
and the percentage of the outstanding Peoples Common Stock so owned.
<TABLE>
<CAPTION>
PERCENT OF
SHARES OUTSTANDING
BENEFICIALLY COMMON STOCK
NAME AND ADDRESS OWNED (4) BENEFICIALLY OWNED
- ---------------- ------------ ------------------
<S> <C> <C>
William E. Anderson............................ 15,730 13.6%
121 McCurdy Dr.
Pittsburgh, PA 15235 (1)
Earl W. Garlow................................. 8,405 7.3%
P.O. Box 14324
Pittsburgh, PA 15239(2)
Russell P. Miller.............................. 6,064 5.2%
1243 Murry Chase Lane
Murrysville, PA 15668(3)
Anthony E. O'Block............................. 16,056 13.9%
7890 Saltsburg Rd.
Pittsburgh, PA 15239
</TABLE>
- --------
(1) The amount shown includes 15,510 shares of Peoples Common Stock held by
Mr. Anderson with his wife.
(2) The amount shown includes 1,520 shares of Peoples Common Stock held by Mr.
Garlow's wife.
(3) The amount shown includes 5,964 shares of Peoples Common Stock owned by
Russell P. Miller and/or Margaret Jane Miller, Trustees, for which Mr.
Miller and his wife serve as trustees.
(4) Based on Peoples' stock transfer ledger and information furnished by the
respective individuals. Under applicable regulations, shares are deemed to
be beneficially owned by a person if he directly or indirectly has or
shares the power to vote or dispose of the shares, whether or not he has
any economic interest in the shares. Unless otherwise indicated, the named
beneficial owner has sole voting and dispositive power with respect to the
shares.
EXPERTS
The consolidated financial statements of S&T incorporated by reference in
S&T's Annual Report (Form 10K) for the year ended December 31, 1995, have been
audited by Ernst & Young LLP, independent auditors, as set forth in their
report thereon and incorporated herein by reference. Such consolidated
financial statements are incorporated herein by reference in reliance upon
such report given upon the authority of such firm as experts in accounting and
auditing.
The balance sheet of Peoples as of December 31, 1995 and 1994 and the
related statements of income, shareholders' equity, and cash flows for each of
the three years in the period ended December 31, 1995, have been included in
this Proxy Statement/Prospectus in reliance on the report of S.R. Snodgrass,
A.C., independent auditors, given on the authority of that firm as experts in
accounting and auditing.
Documents incorporated herein by reference in the future will include
financial statements, related schedules (if required) and auditors' reports,
which financial statements and schedules will have been audited to the extent
and for the periods set forth in such reports by the firm or firms rendering
such reports, and, to the extent so
42
<PAGE>
audited and consent to incorporation by reference is given, will be
incorporated herein by reference in reliance upon such reports given upon the
authority of such firms as experts in accounting and auditing.
LEGAL OPINION
A legal opinion to the effect that the issuance of the shares of S&T Common
Stock offered hereby, when issued in accordance with the terms of the
Agreement, will be validly issued, fully paid and nonassessable, has been
rendered by Arnold & Porter, special counsel to S&T.
43
<PAGE>
INDEX TO FINANCIAL INFORMATION OF PEOPLES BANK OF UNITY
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
INTERIM UNAUDITED FINANCIAL STATEMENTS:
Balance Sheet as of September 30, 1996 and December 31, 1995.............. F-2
Statement of Income for the three-month and nine-month periods ended
September 30, 1996 and September 30, 1995................................ F-3
Statement of Cash Flows for the nine months ended
September 30, 1996 and September 30, 1995................................ F-4
Notes to Financial Statements as of and for the nine months ended
September 30, 1996 and September 30, 1995................................ F-5
AUDITED FINANCIAL STATEMENTS:
Report of Independent Auditors............................................ F-6
Balance Sheet as of December 31, 1995 and December 31, 1994............... F-7
Statement of Income for the years ended December 31, 1995, December 31,
1994
and December 31, 1993.................................................... F-8
Statement of Changes in Stockholders' Equity for the years ended December
31, 1995,
December 31, 1994 and December 31, 1993.................................. F-9
Statement of Cash Flows for the years ended December 31, 1995, December
31, 1994
and December 31, 1993.................................................... F-10
Notes to Financial Statements as of and for the years ended December 31,
1995,
December 31, 1994 and December 31, 1993.................................. F-11
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS............................................................... F-23
</TABLE>
F-1
<PAGE>
PEOPLES BANK OF UNITY
BALANCE SHEET
(UNAUDITED)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1996 1995
------------- ------------
(IN THOUSANDS)
<S> <C> <C>
ASSETS
Cash and due from banks............................. $ 8,902 $ 6,625
Federal funds sold.................................. 325 7,340
Securities available for sale....................... 101,180 117,513
Investment securities (approximate market value of
$23,049 and $24,878)............................... 22,802 24,383
Loans............................................... 148,856 126,563
Allowance for loan losses.......................... 1,585 1,127
-------- --------
Net loans......................................... 147,271 125,436
Premises and equipment.............................. 4,232 4,481
Accrued interest receivable......................... 2,469 2,764
Other assets........................................ 443 484
-------- --------
TOTAL ASSETS...................................... $287,624 $289,026
======== ========
LIABILITIES
Deposits:
Noninterest-bearing................................ $ 43,410 $ 39,711
Interest-bearing................................... 193,338 197,211
-------- --------
Total deposits.................................... 236,748 236,922
Commitment to purchase investment securities........ -- 2,011
Obligation under capital lease...................... 303 520
Accrued interest payable............................ 1,239 1,083
Other liabilities................................... 303 1,383
-------- --------
TOTAL LIABILITIES................................. 238,593 241,919
-------- --------
STOCKHOLDERS' EQUITY
Common stock, par value $10; 115,660 shares
authorized, issued and outstanding................. 1,157 1,157
Additional paid in capital.......................... 13,544 13,544
Retained earnings................................... 32,911 29,596
Net unrealized gain on securities................... 1,419 2,810
-------- --------
TOTAL STOCKHOLDERS' EQUITY........................ 49,031 47,107
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY....... $287,624 $289,026
======== ========
</TABLE>
See accompanying notes to the financial statements.
F-2
<PAGE>
PEOPLES BANK OF UNITY
STATEMENT OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------- -----------------
1996 1995 1996 1995
--------- --------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
INTEREST INCOME
Loans, including fees................. $ 3,135 $ 2,633 $ 9,011 $ 7,430
Federal funds sold.................... 34 153 152 281
Investment securities:
Taxable.............................. 1,847 2,039 5,581 6,253
Tax exempt........................... 297 319 910 1,007
--------- --------- -------- --------
Total interest income............... 5,313 5,144 15,654 14,971
--------- --------- -------- --------
INTEREST EXPENSE
Deposits.............................. 1,763 1,912 5,233 5,727
Obligation under capital lease........ 11 20 41 70
--------- --------- -------- --------
Total interest expense.............. 1,774 1,932 5,274 5,797
--------- --------- -------- --------
NET INTEREST INCOME.................... 3,539 3,212 10,380 9,174
Provision for loan losses.............. 400 70 625 340
--------- --------- -------- --------
NET INTEREST INCOME AFTER PROVISION FOR
LOAN LOSSES........................... 3,139 3,142 9,755 8,834
--------- --------- -------- --------
NONINTEREST INCOME
Service charges on deposit accounts... 109 109 312 286
Security gains (losses), net.......... 20 -- 53 (18)
Other................................. 97 60 268 189
--------- --------- -------- --------
Total noninterest income............ 226 169 633 457
--------- --------- -------- --------
NONINTEREST EXPENSE
Salaries and employee benefits........ 695 690 2,198 2,159
Occupancy, net........................ 127 117 416 366
Furniture and equipment............... 172 215 515 539
Data processing....................... 138 124 293 333
FDIC assessment....................... 1 (77) 2 192
Loss from fraudulent transactions..... -- 150 -- 190
Other................................. 443 359 1,315 1,092
--------- --------- -------- --------
Total other expense................. 1,576 1,578 4,739 4,871
--------- --------- -------- --------
INCOME BEFORE INCOME TAXES............. 1,789 1,733 5,649 4,420
Income taxes........................... 511 508 1,640 1,211
--------- --------- -------- --------
NET INCOME............................. $ 1,278 $ 1,225 $ 4,009 $ 3,209
========= ========= ======== ========
EARNINGS PER SHARE..................... $ 11.05 $ 10.59 $ 34.66 $ 27.75
AVERAGE SHARES OUTSTANDING............. 115,660 115,660 115,660 115,660
</TABLE>
See accompanying notes to the financial statements.
F-3
<PAGE>
PEOPLES BANK OF UNITY
STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
------------------
1996 1995
-------- --------
(IN THOUSANDS)
<S> <C> <C>
OPERATING ACTIVITIES
Net income................................................ $ 4,009 $ 3,209
Adjustments to reconcile net income to net cash provided
by operating activities:
Provision for loan losses................................ 625 340
Depreciation, amortization, and accretion, net........... 403 549
Security (gains) losses, net............................. (53) 18
Loss from fraudulent transactions........................ -- 190
Decrease in accrued interest receivable.................. 288 37
Increase in accrued interest payable..................... 155 582
Other, net............................................... (320) (324)
-------- --------
Net cash provided by operating activities.............. 5,107 4,601
-------- --------
INVESTING ACTIVITIES
Net decrease in federal funds sold........................ 7,015 5,935
Securities available for sale:
Proceeds from sales of securities........................ 31,765 27,743
Proceeds from maturities and repayments of securities.... 9,328 3,885
Purchases of securities.................................. (28,842) (27,106)
Investment securities:
Proceeds from maturities and repayments of securities.... 3,037 7,209
Purchases of securities.................................. (1,459) (1,385)
Net increase in loans..................................... (22,355) (17,146)
Purchases of premises and equipment....................... (234) (56)
-------- --------
Net cash used for investing activities................. (1,745) (921)
-------- --------
FINANCING ACTIVITIES
Net decrease in deposits.................................. (173) (5,256)
Decrease in obligation under capital lease................ (218) (196)
Cash dividends............................................ (694) (428)
-------- --------
Net cash used for financing activities................. (1,085) (5,880)
-------- --------
Increase (decrease) in cash and cash equivalents....... 2,277 (2,200)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR............. 6,625 7,664
-------- --------
CASH AND CASH EQUIVALENTS AT END OF YEAR................... $ 8,902 $ 5,464
======== ========
</TABLE>
See accompanying notes to the financial statements.
F-4
<PAGE>
PEOPLES BANK OF UNITY
NOTES TO FINANCIAL STATEMENTS
(IN THOUSANDS)
(UNAUDITED)
1. GENERAL
The accounting and reporting policies of Peoples Bank of Unity (the "Bank")
conform to generally accepted accounting principles and to general practice
within the banking industry. In the opinion of management, the accompanying
financial statements of the Bank contain all adjustments, principally
consisting of only normal and recurring adjustments, necessary for the fair
presentation of the Bank's financial position, results of operations, and cash
flows for the periods presented. The results of operations for the interim
periods are not necessarily indicative of the results to be expected for the
full year.
2. SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
SEPTEMBER 30,
-------------
1996 1995
------ ------
<S> <C> <C>
Cash paid during the period for:
Interest......................................................... $5,118 $5,797
Income taxes..................................................... 1,889 744
</TABLE>
During the first quarter of 1995, the Bank transferred its entire U. S.
Treasury securities portfolio from held to maturity to available for sale for
purposes of restructuring the mix of the portfolio. At the time of transfer
these securities had an amortized cost of $99,137 and an estimated market
value of $98,262. The resulting net of tax effect of the transfer to the
Bank's equity was a reduction of $578.
3. SUBSEQUENT EVENTS
Loss From Fraudulent Transactions
In September of 1996, it was discovered that a now former executive officer
of the Bank had executed a series of fraudulent transactions which resulted in
a loss of $405. These transactions consisted primarily of granting loans to
individuals where the proceeds were ultimately received by the executive
officer. These loans are reflected as a charge to operations in the 1995
statement of income (of which $190 related to the nine months ended September
30, 1995). The Bank is actively pursuing recovery.
Agreement and Plan of Merger
On November 25, 1996, the Bank entered into an Agreement and Plan of Merger
("Plan of Merger"), whereby the Bank would be merged into S&T Bank, a
Pennsylvania banking institution headquartered in Indiana, Pennsylvania. Under
the terms of the Plan of Merger, each shareholder of the Bank will receive
26.25 shares of S&T Bancorp, Inc. (the parent holding company of S&T Bank)
stock in exchange for each share of the Bank's stock, subject to the terms,
conditions, and limitations set forth in the Plan of Merger.
Completion of the merger is subject to the signing of the Plan of Merger by
both parties and approval by various regulatory agencies and the stockholders
of the Bank and S&T Bancorp, Inc.
F-5
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Board of Directors and Stockholders Peoples Bank of Unity
We have audited the accompanying balance sheet of Peoples Bank of Unity as
of December 31, 1995 and 1994, and the related 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 Bank's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as, evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Peoples Bank of Unity as
of December 31, 1995 and 1994, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1995, 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 the impairment of loans
and related allowance for loan losses, and effective January 1, 1994, changed
its method of accounting for investment securities.
/s/ S.R. Snodgrass, A.C.
Wexford, PA
November 8, 1996
except for the second paragraph
of Note 15 as to which the
date is November 25, 1996
F-6
<PAGE>
PEOPLES BANK OF UNITY
BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1995 1994
(RESTATED) (RESTATED)
---------- ----------
(IN THOUSANDS)
<S> <C> <C>
ASSETS
Cash and due from banks.................................. $ 6,625 $ 7,664
Federal funds sold....................................... 7,340 8,125
Securities available for sale............................ 117,513 8,677
Investment securities (approximate market value of
$24,878 and $147,713)................................... 24,383 152,074
Loans.................................................... 126,563 101,926
Allowance for loan losses............................... 1,127 838
-------- --------
Net loans.............................................. 125,436 101,088
Premises and equipment................................... 4,481 4,957
Accrued interest receivable.............................. 2,764 3,237
Other assets............................................. 484 693
-------- --------
TOTAL ASSETS........................................... $289,026 $286,515
======== ========
LIABILITIES
Deposits:
Noninterest-bearing..................................... $ 39,711 $ 36,779
Interest-bearing........................................ 197,211 202,552
-------- --------
Total deposits......................................... 236,922 239,331
Commitment to purchase investment securities............. 2,011 3,940
Obligation under capital lease........................... 520 784
Accrued interest payable................................. 1,083 769
Other liabilities........................................ 1,383 442
-------- --------
TOTAL LIABILITIES...................................... 241,919 245,266
-------- --------
STOCKHOLDERS' EQUITY
Common stock, par value $10; 115,660 shares authorized,
issued and outstanding.................................. 1,157 1,157
Additional paid in capital............................... 13,544 13,544
Retained earnings........................................ 29,596 26,114
Net unrealized gain on securities........................ 2,810 434
-------- --------
TOTAL STOCKHOLDERS' EQUITY............................. 47,107 41,249
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY............ $289,026 $286,515
======== ========
</TABLE>
See accompanying notes to the financial statements.
F-7
<PAGE>
PEOPLES BANK OF UNITY
STATEMENT OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------
1995 1994
(RESTATED) (RESTATED) 1993
---------- ---------- -------
(IN THOUSANDS, EXCEPT PER
SHARE DATA)
<S> <C> <C> <C>
INTEREST INCOME
Loans, including fees........................... $10,073 $ 8,781 $ 8,697
Federal funds sold.............................. 356 218 279
Investment securities:
Taxable........................................ 8,256 9,351 9,546
Tax exempt..................................... 1,318 1,555 1,702
------- ------- -------
Total interest income......................... 20,003 19,905 20,224
------- ------- -------
INTEREST EXPENSE
Deposits........................................ 7,591 7,269 7,479
Obligation under capital lease.................. 88 28 --
------- ------- -------
Total interest expense........................ 7,679 7,297 7,479
------- ------- -------
NET INTEREST INCOME.............................. 12,324 12,608 12,745
Provision for loan losses........................ 420 100 65
------- ------- -------
NET INTEREST INCOME AFTER PROVISION FOR LOAN
LOSSES.......................................... 11,904 12,508 12,680
------- ------- -------
NONINTEREST INCOME
Service charges on deposit accounts............. 397 377 341
Security gains (losses), net.................... 121 (3) --
Other........................................... 320 323 224
------- ------- -------
Total noninterest income...................... 838 697 565
------- ------- -------
NONINTEREST EXPENSE
Salaries and employee benefits.................. 3,085 3,379 2,963
Occupancy, net.................................. 479 518 544
Furniture and equipment......................... 708 513 457
Data processing................................. 409 720 671
FDIC assessment................................. 279 559 515
Loss from fraudulent transactions............... 405 -- --
Other........................................... 1,388 1,395 1,211
------- ------- -------
Total other expense........................... 6,753 7,084 6,361
------- ------- -------
INCOME BEFORE INCOME TAXES....................... 5,989 6,121 6,884
Income taxes..................................... 1,616 1,593 1,813
------- ------- -------
NET INCOME....................................... $ 4,373 $ 4,528 $ 5,071
======= ======= =======
EARNINGS PER SHARE............................... $ 37.81 $ 39.15 $ 43.84
AVERAGE SHARES OUTSTANDING....................... 115,660 115,660 115,660
</TABLE>
See accompanying notes to the financial statements.
F-8
<PAGE>
PEOPLES BANK OF UNITY
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
NET
ADDITIONAL UNREALIZED TOTAL
PAID IN RETAINED GAIN ON STOCKHOLDERS'
COMMON STOCK CAPITAL EARNINGS SECURITIES EQUITY
------------ ---------- -------- ---------- -------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Balance, December 31,
1992................... $1,157 $13,544 $17,996 $ -- $32,697
Net income.............. 5,071 5,071
Dividends ($5.80 per
share)................. (671) (671)
------ ------- ------- ------ -------
Balance, December 31,
1993................... 1,157 13,544 22,396 -- 37,097
Initial net unrealized
gain on securities..... 914 914
Net income, as restated. 4,528 4,528
Dividends ($7.00 per
share)................. (810) (810)
Net unrealized loss on
securities............. (480) (480)
------ ------- ------- ------ -------
Balance, December 31,
1994, as restated...... 1,157 13,544 26,114 434 41,249
Net income, as restated. 4,373 4,373
Dividends ($7.70 per
share)................. (891) (891)
Net unrealized gain on
securities............. 2,376 2,376
------ ------- ------- ------ -------
Balance, December 31,
1995, as restated...... $1,157 $13,544 $29,596 $2,810 $47,107
====== ======= ======= ====== =======
</TABLE>
See accompanying notes to the financial statements.
F-9
<PAGE>
PEOPLES BANK OF UNITY
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
1995 1994
(RESTATED) (RESTATED) 1993
---------- ---------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income.................................... $ 4,373 $ 4,528 $ 5,071
Adjustments to reconcile net income to net
cash
provided by operating activities:
Provision for loan losses.................... 420 100 65
Depreciation, amortization, and accretion,
net......................................... 691 261 69
Security (gains) losses, net................. (121) 3 --
Loss from fraudulent transactions............ 405 -- --
Decrease in accrued interest receivable...... 471 295 174
Increase (decrease) in accrued interest
payable..................................... 314 (399) 511
Other, net................................... 62 (193) 52
-------- -------- --------
Net cash provided by operating activities.. 6,615 4,595 5,942
-------- -------- --------
INVESTING ACTIVITIES
Net (increase) decrease in federal funds sold. 785 3,810 (11,935)
Securities available for sale:
Proceeds from the sale of securities......... 48,411 9,887 --
Proceeds from maturities and repayments of
securities.................................. 1,060 10,700 --
Purchases of securities...................... (38,547) (8,529) --
Investment securities:
Proceeds from maturities and repayments of
securities.................................. 10,530 10,545 19,145
Purchases of securities...................... (995) (7,837) (28,075)
Net increase in loans......................... (25,315) (7,587) (13,495)
Purchases of premises and equipment........... (127) (1,213) (176)
Other, net.................................... 108 60 65
-------- -------- --------
Net cash provided by (used for) investing
activities................................ (4,090) 9,836 (34,471)
-------- -------- --------
FINANCING ACTIVITIES
Net increase (decrease) in deposits........... (2,409) (15,431) 28,513
Increase (decrease) in obligation under
capital lease................................ (264) 784 --
Cash dividends................................ (891) (810) (671)
-------- -------- --------
Net cash provided by (used for) financing
activities................................ (3,564) (15,457) 27,842
-------- -------- --------
Decrease in cash and cash equivalents...... (1,039) (1,026) (687)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR. 7,664 8,690 9,377
-------- -------- --------
CASH AND CASH EQUIVALENTS AT END OF YEAR....... $ 6,625 $ 7,664 $ 8,690
======== ======== ========
</TABLE>
See accompanying notes to the financial statements.
F-10
<PAGE>
PEOPLES BANK OF UNITY
NOTES TO FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARES AND PER SHARE DATA)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting and reporting policies of Peoples Bank of Unity (the "Bank")
conform with generally accepted accounting principles and with general
practice within the banking industry.
A summary of the significant accounting and reporting policies applied in
the presentation of the accompanying financial statements follows:
Nature of Operations and Basis of Presentation
Peoples Bank of Unity is a state chartered bank located in Pittsburgh,
Pennsylvania. The Bank's principal sources of revenue emanate from its
portfolio of residential real estate, commercial mortgage, commercial and
consumer loans, as well as, interest on investment securities and a variety of
deposit services provided to its customers through six locations. The Bank is
supervised by the Federal Deposit Insurance Corporation 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 those estimates.
Investment Securities
Effective January 1, 1994, the Bank adopted Statement of Financial
Accounting Standards No. 115, "Accounting for Certain Investments in Debt and
Equity Securities". In adopting Statement 115, the Bank classified investment
securities into two categories: Held to Maturity and Available for Sale.
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 a method which approximates the effective interest method.
Certain other debt and equity 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
securities gains and losses are computed using the specific identification
method. Interest and dividends on investment securities are recognized as
income when earned.
Loans
Interest income on all loans is recognized as income on the accrual method.
Accrual of interest is discontinued, when in the opinion of management,
collection is doubtful, and any previously accrued interest is reversed
against current income.
Loan origination and commitment fees and certain direct loan origination
costs are being deferred and the net amount amortized as an adjustment to the
related loan's yield. These amounts are being amortized over the contractual
life of the related loans.
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. Under this Standard,
F-11
<PAGE>
PEOPLES BANK OF UNITY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
the Bank estimates credit losses on impaired loans based on the present value
of expected cash flows or 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.
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 these statements did
not have a material effect on the Bank's financial position or results of
operations.
Management has determined that first mortgage loans on one-to-four family
properties and all consumer loans are large groups of smaller-balance
homogenous loans and are to be collectively evaluated. Accordingly, such loans
are outside the scope of Statements 114 and 118.
An insignificant delay, which is defined as 90 days or less by the Bank, will
not cause a loan to be classified as impaired. A loan is not impaired during a
period of delay in payment if the Bank expects to collect all amounts due
including interest accrued at the contractual interest rate for the period of
delay. All loans identified as impaired are evaluated independently by
management.
Impaired loans, or portions thereof, are charged-off when it is determined
that a realized loss has occurred. Until such time, an allowance for loan
losses is maintained for estimated losses.
Cash receipts on impaired loans are applied first to accrued interest
receivable, unless otherwise required by the loan terms, except when an
impaired loan is also a nonaccrual loan, in which case the portion of the
receipts related to interest is recognized as income.
The allowance for loan losses represents the amount which management
estimates is adequate to provide for potential losses in its loan portfolio.
The allowance method is used 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. The estimates
used in determining the adequacy of the allowance for loan losses are
particularly susceptible to significant change in the near term.
Premises and Equipment
Premises and equipment are stated at cost less accumulated depreciation and
amortization. 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.
Real Estate Owned
Real estate owned, which is acquired in settlement of foreclosed loans, is
carried as a component of other assets at the lower of cost or fair value minus
estimated cost to sell. Direct costs incurred in the foreclosure process and
subsequent holding costs incurred on such properties are recorded as expenses
of current operations. Any subsequent write downs, and gains or losses on
property dispositions, are charged to other income and expense.
F-12
<PAGE>
PEOPLES BANK OF UNITY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Retirement Plans
Pension expense for the Bank's defined benefit plan is actuarially
determined. The funding policy for the plan is to contribute amounts to the
plan sufficient to meet the minimum funding requirements of the Employee
Retirement Income Security Act of 1974, plus such additional amounts as may be
appropriate, subject to federal income tax limitations.
Expense for the Bank's defined contribution plan is determined based on
matching of employee voluntary contributions.
Income Taxes
Deferred tax assets and liabilities are reflected at currently enacted
income tax rates applicable to the period in which the deferred tax assets or
liabilities are expected to be realized or settled. As changes in tax laws or
rates are enacted, deferred tax assets and liabilities are adjusted through
the provision for income taxes. Deferred income tax expenses or benefits are
based on the changes in the deferred tax asset or liability from period to
period.
Cash Flow Information
The Bank has defined cash and cash equivalents as those amounts included in
the balance sheet caption cash and due from banks. For the years ended
December 31, 1995, 1994, and 1993, cash paid for interest was $7,365, $7,696
and $6,968, respectively. Cash paid for income taxes was $1,299 in 1995,
$1,851 in 1994, and $1,932 in 1993.
Significant non-cash activity included commitments to purchase investment
securities of $2,011 at December 31, 1995 and $3,940 at December 31, 1994.
These commitments resulted from unsettled trades existing at each of the
respective balance sheet dates.
Earnings Per Share
Earnings per share for the years ended December 31, 1995, 1994, and 1993
have been calculated based upon the weighted average number of issued and
outstanding common shares.
Recent Accounting Pronouncement
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets", is effective for fiscal years beginning
after December 15, 1995. Statement 121 requires impairment losses to be
recorded on long-lived assets used in operations when indicators of impairment
are present. Impairment would be considered when the undiscounted cash flows
estimated to be generated by those assets are less than their carrying
amounts. Management does not anticipate that implementation of this Statement
will have a material effect on the Bank's financial position or results of
operations.
2. RESTATEMENT
The accompanying financial statements for 1995 and 1994 have been restated
to reflect a change in the allowance for loan losses and related provision for
loan losses, as a result of management's re-evaluation of the methodology for
assessing its adequacy. In addition, the financial statements for 1995 have
been restated for the discovery of certain fraudulent loans as further
discussed in Note 15.
F-13
<PAGE>
PEOPLES BANK OF UNITY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
The effect of the restatements were to increase (decrease) net income as
follows:
<TABLE>
<CAPTION>
1995 1994
------ ------
<S> <C> <C>
Provision for loan losses....................................... $ (270) $(100)
Loss from fraudulent transactions............................... (405) --
Income taxes.................................................... 230 34
------ ------
Total......................................................... $ (445) $ (66)
====== ======
Earnings per share.............................................. $(3.85) $ (.57)
</TABLE>
3. COMMON STOCK SPLIT
On May 9, 1995, the shareholders approved a five for one stock split to
shareholders of record as of that same date, thereby increasing the number of
issued and outstanding shares to 115,660, and decreasing the par value of each
share to $10. All references to the number of common shares and per share
amounts for 1994 and 1993 have been restated to reflect the stock split.
4. INVESTMENT SECURITIES
Upon the adoption of Statement 115, the Bank initially transferred from the
investment securities portfolio to the available for sale classification
investment securities with an amortized cost of $20,141 and an estimated
market value of $21,525. The net appreciation of these securities at adoption
was recorded, net of federal income taxes, to an unrealized securities gain
(loss) account which is a component of stockholders' equity.
During 1995, the Bank reclassified all of its investments securities except
obligations of states and political subdivisions from the held to maturity
classification to the available for sale classification with an amortized cost
of $114,226 and an estimated market value of $113,542.
The amortized cost and estimated market values of investment securities are
as follows:
<TABLE>
<CAPTION>
1995
-----------------------------------------
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED MARKET
COST GAINS LOSSES VALUE
--------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
AVAILABLE FOR SALE
U.S. Treasury securities.............. $ 52,301 $2,264 $ -- $ 54,565
U.S. Government agency securities..... 1,008 -- (11) 997
Mortgage-backed securities............ 38,321 557 (35) 38,843
Corporate securities.................. 21,324 306 (172) 21,458
-------- ------ ----- --------
Total debt securities............... 112,954 3,127 (218) 115,863
Equity securities..................... 282 1,368 -- 1,650
-------- ------ ----- --------
Total.............................. $113,236 $4,495 $(218) $117,513
======== ====== ===== ========
</TABLE>
<TABLE>
<CAPTION>
1995
-----------------------------------------
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED MARKET
COST GAINS LOSSES VALUE
--------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
HELD TO MATURITY
Obligations of states and political
subdivisions........................ $24,383 $551 $(56) $24,878
======= ==== ==== =======
</TABLE>
F-14
<PAGE>
PEOPLES BANK OF UNITY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
<TABLE>
<CAPTION>
1994
-----------------------------------------
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED MARKET
COST GAINS LOSSES VALUE
--------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
AVAILABLE FOR SALE
U.S. Treasury securities............. $ 2,255 $ 1 $ (47) $ 2,209
Corporate securities................. 5,483 -- (90) 5,393
-------- -------- ------- --------
Total debt securities.............. 7,738 1 (137) 7,602
Equity securities.................... 282 793 -- 1,075
-------- -------- ------- --------
Total.............................. $ 8,020 $ 794 $ (137) $ 8,677
======== ======== ======= ========
<CAPTION>
1994
-----------------------------------------
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED MARKET
COST GAINS LOSSES VALUE
--------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
HELD TO MATURITY
U.S. Treasury securities............. $ 99,197 $ 59 $(3,305) $ 95,951
U.S. Government agency securities.... 1,010 -- (93) 917
Mortgage-backed securities........... 3,932 -- -- 3,932
Obligations of states and political
subdivisions........................ 27,493 207 (583) 27,117
Corporate securities................. 20,442 49 (695) 19,796
-------- -------- ------- --------
Total.............................. $152,074 $ 315 $(4,676) $147,713
======== ======== ======= ========
The amortized cost and estimated market value of debt securities at December
31, 1995, by contractual maturity, are shown below. Expected maturities of
mortgage-backed securities will differ from contractual maturities because
borrowers may have the right to call or prepay obligations with or without call
or prepayment penalties.
<CAPTION>
AVAILABLE FOR SALE HELD TO MATURITY
-------------------- --------------------
ESTIMATED ESTIMATED
AMORTIZED MARKET AMORTIZED MARKET
COST VALUE COST VALUE
--------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
Due in one year or less.............. $ 10,018 $ 10,115 $ 3,440 $ 3,462
Due after one year through five
years............................... 54,900 56,792 18,547 18,860
Due after five years through ten
years............................... 9,715 10,113 1,996 2,121
Due after ten years.................. -- -- 400 435
-------- -------- ------- --------
74,633 77,020 24,383 24,878
Mortgage-backed securities........... 38,321 38,843 -- --
-------- -------- ------- --------
Total............................... $112,954 $115,863 $24,383 $ 24,878
======== ======== ======= ========
</TABLE>
Investment securities with a carrying value of $14,610 and $11,583 at
December 31, 1995 and 1994, respectively, were pledged to secure deposits and
other purposes as required by law.
Proceeds from the sales of investment securities available for sale were
$48,411 and $9,887 in 1995 and 1994, respectively. Gross gains resulting from
these sales were $320 and $8 in 1995 and 1994, respectively. Gross losses were
$207 in 1995 and $71 in 1994.
F-15
<PAGE>
PEOPLES BANK OF UNITY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Proceeds from the exercising of call features of investment securities held
to maturity were $2,554 and $2,160 in 1995 and 1994, respectively. Gains
resulting from these calls were $8 and $60 in 1995 and 1994, respectively.
5. LOANS
Major classifications of loans are summarized as follows:
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Real estate--construction.................................... $ 6,479 $ 2,946
Real estate--mortgages:
Residential................................................ 83,437 67,854
Commercial................................................. 17,320 11,959
Commercial--industrial and agricultural...................... 8,075 8,834
Consumer..................................................... 11,252 10,333
-------- --------
126,563 101,926
Less allowance for loan losses............................... 1,127 838
-------- --------
Net loans.................................................. $125,436 $101,088
======== ========
</TABLE>
In the normal course of business, loans are extended to executive officers,
directors, and their associates. In management's opinion, all of these loans
were made on substantially the same terms, including interest rates and
collateral, as those prevailing at the time for comparable transactions with
other persons. A summary of loan activity for those executive officers,
directors, and their associates with aggregate loan balances in excess of $60
for the year ended December 31, 1995, is as follows:
<TABLE>
<CAPTION>
DECEMBER 31, AMOUNTS DECEMBER 31,
1994 ADDITIONS COLLECTED 1995
------------ --------- --------- ------------
<S> <C> <C> <C>
$748 $743 $495 $996
</TABLE>
Commitments to extend credit to executive officers, directors, and their
associates was $1,232 at December 31, 1995.
The Bank's primary business activity is with customers located within its
local trade area. Commercial, residential, personal, and agricultural loans
are granted. The Bank also selectively funds residential loans originated
outside of its trade area provided such loans meet the Bank's credit policy
guidelines. Although the Bank has a diversified loan portfolio, at December
31, 1995 and 1994, loans outstanding to individuals and businesses are
dependent upon the local economic conditions in its immediate trade area.
6. ALLOWANCE FOR LOAN LOSSES
Changes in the allowance for loan losses for the years ended December 31,
1995, 1994, and 1993, are as follows:
<TABLE>
<CAPTION>
1995 1994 1993
------ ---- ----
<S> <C> <C> <C>
Balance, January 1............................................ $ 838 $762 $757
Add:
Provisions charged to operations............................. 420 100 65
Recoveries................................................... 19 36 42
Less loans charged off........................................ 150 60 102
------ ---- ----
Balance, December 31.......................................... $1,127 $838 $762
====== ==== ====
</TABLE>
F-16
<PAGE>
PEOPLES BANK OF UNITY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
7. PREMISES AND EQUIPMENT
Major classifications of premises and equipment are summarized as follows:
<TABLE>
<CAPTION>
1995 1994
------ ------
<S> <C> <C>
Land............................................................. $ 377 $ 377
Buildings and leasehold improvements............................. 3,909 3,829
Furniture, fixtures, and equipment............................... 4,542 4,494
------ ------
8,828 8,700
Less accumulated depreciation and amortization................... 4,347 3,743
------ ------
Total.......................................................... $4,481 $4,957
====== ======
</TABLE>
Depreciation and amortization expense amounted to $604 in 1995, $473 in
1994, and $435 in 1993.
8. DEPOSITS
The following table indicates the composition of deposits at December 31:
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Noninterest-bearing demand................................... $ 39,711 $ 36,779
Interest-bearing demand...................................... 20,566 19,402
Money market................................................. 14,315 19,506
Savings...................................................... 85,672 107,964
Time deposits................................................ 76,658 55,680
-------- --------
Total...................................................... $236,922 $239,331
======== ========
</TABLE>
Time deposits include certificates of deposit in denominations of $100 or
more. Such deposits aggregated $9,536 and $3,926 at December 31, 1995 and
1994, respectively.
Interest expense on certificates of deposit over $100 amounted to $389 in
1995, $197 in 1994, and $225 in 1993.
9. INCOME TAXES
The provision for income taxes consists of:
<TABLE>
<S> <C> <C> <C>
1995 1994 1993
------ ------ ------
Currently payable......................................... $1,736 $1,564 $1,799
Deferred.................................................. (120) 29 14
------ ------ ------
Total................................................... $1,616 $1,593 $1,813
====== ====== ======
</TABLE>
Income taxes applicable to security gains (losses) were $41 in 1995 and $(1)
in 1994.
F-17
<PAGE>
PEOPLES BANK OF UNITY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
The components of the net deferred tax assets (liabilities) are as follows:
<TABLE>
<CAPTION>
1995 1994
------- -----
<S> <C> <C>
Deferred Tax Assets:
Allowance for loan losses...................................... $ 261 $ 162
Deferred loan origination fees, net............................ 238 260
Accrued pension costs.......................................... 21 57
Loss on fraudulent transactions................................ 138 --
Other........................................................... -- 2
------- -----
Total deferred tax assets..................................... 658 481
------- -----
Deferred Tax Liabilities:
Premises and equipment......................................... (189) (132)
Net unrealized gain on securities.............................. (1,454) (223)
------- -----
Total deferred tax liabilities................................ (1,643) (355)
------- -----
Net deferred tax assets (liabilities)........................ $ (985) $ 126
======= =====
</TABLE>
The reconciliation of the federal statutory rate and the Bank's effective
income tax rate is as follows:
<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.... $2,036 34.0% $2,081 34.0% $2,341 34.0%
Effect of tax free income...... (479) (8.0) (541) (8.8) (595) (8.6)
Non-deductible interest
expense....................... 50 .8 49 .8 54 .8
Other, net..................... 9 .2 4 -- 13 .1
------ ---- ------ ---- ------ ----
Actual provision and
effective rate.............. $1,616 27.0% $1,593 26.0% $1,813 26.3%
====== ==== ====== ==== ====== ====
</TABLE>
10. RETIREMENT PLANS
Defined Benefit Plan
The Bank sponsors a trusteed, non-contributory defined benefit pension plan
covering substantially all employees and officers of the Bank. The plan calls
for benefits to be paid to eligible employees at retirement based primarily on
years of service and compensation rates near retirement. Contributions are
intended to provide for benefits attributed to employee service to date and
for those benefits expected to be earned in the future.
The following presents the components of the net periodic pension cost:
<TABLE>
<CAPTION>
1995 1994 1993
----- ----- ----
<S> <C> <C> <C>
Service costs of the current period......................... $ 140 $ 133 $116
Interest cost on projected benefit obligation............... 132 116 109
Actual return on plan assets................................ (360) 31 (48)
Net amortization and deferral............................... 251 (126) (15)
----- ----- ----
Total..................................................... $ 163 $ 154 $162
===== ===== ====
</TABLE>
F-18
<PAGE>
PEOPLES BANK OF UNITY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
The actuarial present value of the accumulated benefit obligation at
December 31, 1995 and 1994, was $1,099 and $907 including vested benefit
obligations of $1,038 and $856, respectively. The following sets forth the
funded status of the plan and the amounts recognized in the accompanying
balance sheet:
<TABLE>
<CAPTION>
1995 1994
------- -------
<S> <C> <C>
Plan assets at fair value.................................... $ 2,028 $ 1,429
Actuarial present value of projected benefit obligation...... (1,984) (1,765)
------- -------
Funded status................................................ 44 (336)
Prior service costs.......................................... 286 312
Unrecognized transition amount............................... (58) (68)
Unrecognized net gain from past experience different from
that assumed and
effects of changes in assumptions........................... (336) (75)
------- -------
Pension liability............................................ $ (64) $ (167)
======= =======
</TABLE>
The plan assets are primarily invested in a commingled separate investment
account which invests in a diversified portfolio of Connecticut Mutual Group
Pension Separate Accounts primarily established to be a funding vehicle for
qualified retirement plans.
Assumptions used in determining net periodic pension cost are as follows:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Discount rate................................................. 7.50% 7.50% 7.50%
Expected long-term rate of return on assets................... 7.50 7.50 7.50
Rate of increase in compensation levels....................... 6.00 6.00 6.00
</TABLE>
Defined Contribution Plan
The Bank maintains a section 401(k) employee savings and investment plan
covering substantially all employees and officers of the Bank. The Bank's
contributions to the plan are based on 50% matching of voluntary contributions
of up to 4% of individual compensation. Additionally, the Bank may contribute
a discretionary amount each year. Employee contributions are vested at all
times and Bank contributions are fully vested after seven years. Bank
contributions to the plan were $83, $110 and $111 for the years 1995, 1994,
and 1993, respectively.
11. COMMITMENTS AND CONTINGENT LIABILITIES
Commitments
In the normal course of business, there are various outstanding commitments
and certain contingent liabilities which are not reflected in the accompanying
financial statements. These commitments and contingent liabilities represent
financial instruments with off-balance-sheet risk. The contract or notional
amounts of those instruments reflect the extent of involvement in particular
types of financial instruments which were comprised of the following:
<TABLE>
<CAPTION>
1995 1994
------- -------
<S> <C> <C>
Commitments to extend credit.................................... $14,395 $14,974
Standby letters of credit....................................... 3,717 1,268
------- -------
Total......................................................... $18,112 $16,242
======= =======
</TABLE>
F-19
<PAGE>
PEOPLES BANK OF UNITY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
The instruments involve, to varying degrees, elements of credit and interest
rate risk in excess of the amount recognized in the balance sheet. The same
credit policies are used in making commitments and conditional obligations as
for on-balance-sheet instruments. Generally, collateral is required to support
financial instruments with credit risk. The terms are typically for a one-year
period with an annual renewal option subject to prior approval by management.
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 and personal
lines of credit. Standby letters of credit written are conditional commitments
issued to guarantee the performance of a customer to a third party.
The exposure to loss under these commitments is limited by subjecting them
to credit approval and monitoring procedures. Substantially all of the
commitments to extend credit are contingent upon customers maintaining
specific credit standards at the time of the loan funding. Management assesses
the credit risk associated with certain commitments to extend credit in
determining the level of the allowance for loan losses. Since many of the
commitments are expected to expire without being drawn upon, the contractual
amounts do not necessarily represent future funding requirements.
Minimum future lease payments under a capital lease as of December 31, 1995,
are as follows:
<TABLE>
<S> <C>
1996.............................................................. $344
1997.............................................................. 237
----
581
Less amounts representing interest................................ (61)
----
Present value of minimum lease payments........................... $520
====
</TABLE>
Contingent Liabilities
The Bank is involved in various legal actions from normal business
activities. Management believes that the liabilities, if any, arising from
these proceedings will not have a material adverse effect on the Bank's
financial position, operating results, or liquidity.
12. REGULATORY MATTERS
The Pennsylvania Banking Code restricts the availability of additional paid
in capital for dividend purposes. At December 31, 1995, additional paid in
capital of $13,544 was not available for dividends.
Included in cash and due from banks are required federal reserves of $1,524
and $1,459 at December 31, 1995 and 1994, respectively, 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 are held in the form of cash on hand and/or balances
maintained directly with the Federal Reserve Bank.
13. REGULATORY CAPITAL REQUIREMENTS
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 risk-based capital requirement is 8%. The capital
position of the Bank at December 31, 1995 was 30.58%.
F-20
<PAGE>
PEOPLES BANK OF UNITY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Additionally, the general regulatory guidelines establish a minimum ratio of
leverage capital to adjusted total assets of 3% 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 ratio under these guidelines at December 31, 1995,
was 15.56%.
14. FAIR VALUE DISCLOSURE
The estimated fair values of the Bank's financial instruments at December
31, 1995 and 1994 are as follows:
<TABLE>
<CAPTION>
1995 1994
----------------- -----------------
CARRYING FAIR CARRYING FAIR
VALUE VALUE VALUE VALUE
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Financial assets:
Cash and due from banks and federal funds
sold..................................... $ 13,965 $ 13,965 $ 15,789 $ 15,789
Investment securities available for sale.. 117,513 117,513 8,677 8,677
Investment securities..................... 24,383 24,878 152,074 147,713
Net loans................................. 125,436 124,941 101,088 92,332
Accrued interest receivable............... 2,764 2,764 3,237 3,237
-------- -------- -------- --------
Total.................................... $284,061 $284,061 $280,865 $267,748
======== ======== ======== ========
Financial liabilities:
Deposits.................................. $236,922 $235,579 $239,331 $238,920
Commitment to purchase investment
securities............................... 2,011 2,011 3,940 3,940
Obligation under capital lease............ 520 500 784 753
Accrued interest payable.................. 1,083 1,083 769 769
-------- -------- -------- --------
Total.................................... $240,536 $239,173 $244,824 $244,382
======== ======== ======== ========
</TABLE>
Financial instruments are defined as cash, evidence of an 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 exits, 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 the
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.
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:
F-21
<PAGE>
PEOPLES BANK OF UNITY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Cash and Due From Banks, Federal funds sold, Accrued Interest Receivable, 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 for similar securities.
The fair value of securities available for sale is equal to the current
carrying value.
Loans, Deposits, and Obligation Under Capital Lease
The fair value of loans is 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, savings, and
money market deposit accounts are valued at the amount payable on demand as of
year end. Fair values for time deposits and the obligation under capital lease
are estimated using a discounted cash flow calculation that applies
contractual costs currently being offered in the existing portfolio to current
market rates being offered for deposits and borrowings of similar remaining
maturities.
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.
15. SUBSEQUENT EVENTS
Loss From Fraudulent Transactions
In September of 1996, it was discovered that a now former executive officer
of the Bank had executed a series of fraudulent transactions which resulted in
a loss of $405. These transactions consisted primarily of granting loans to
individuals where the proceeds were ultimately received by the executive
officer. These loans are reflected as a charge to operations in the 1995
statement of income. The Bank is actively pursuing recovery.
Agreement and Plan of Merger
On November 25, 1996, the Bank entered into an Agreement and Plan of Merger
("Plan of Merger"), whereby the Bank would be merged into S&T Bank, a
Pennsylvania banking institution headquartered in Indiana, Pennsylvania. Under
the terms of the Plan of Merger, each shareholder of the Bank will receive
26.25 shares of S&T Bancorp, Inc. (the parent holding company of S&T Bank)
stock in exchange for each share of the Bank's stock, subject to the terms,
conditions, and limitations set forth in the Plan of Merger.
Completion of the merger is subject to the signing of the Plan of Merger by
both parties and approval by various regulatory agencies and the stockholders
of the Bank and S&T Bancorp, Inc.
F-22
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
FINANCIAL CONDITION
General Total assets increased $2.5 million or .9% from $286.5 million at
December 31, 1994 to $289.0 million at December 31, 1995. During this period
there was a $24.6 million increase in total loans which was funded by declines
in investment securities of $18.9 million, cash and due from banks of $1.0
million and federal funds sold of $785,000.
Total assets declined $1.4 million or .5% to $287.6 million during the nine
months ended September 30, 1996. During this period, loans continued to
increase by $22.3 million which was funded by declines in investment
securities of $17.9 million and federal funds sold of $7.0 million.
Investment Portfolio Total investment securities declined during the year by
approximately $18.9 million or 11.7% from $160.8 million at December 31, 1994
to $141.9 million at December 31, 1995. This decline resulted primarily from
the sale of $48.4 million of U. S. Treasury securities during the year. The
proceeds from the sale of these securities were reinvested primarily into
mortgage-backed securities and loan originations.
The decline of investment securities continued during the nine months ended
September 30, 1996 by approximately $17.9 million or 12.6% from $141.9 million
at December 31, 1995 to $124.0 million at September 30, 1996. Management
continued its efforts to restructure the investment securities portfolio and
sold $31.8 million of securities, primarily U. S. Treasury securities during
the nine month period. The proceeds from the sale of these securities were
again reinvested primarily into loan originations and mortgage-backed
securities.
During 1995, management reclassified all of its investment securities,
except obligations of states and political subdivisions, from the held to
maturity classification to available for sale classification with an amortized
cost of $114.2 million and an estimated market value of $113.5 million. In
February 1995, management made the determination to reclassify all U. S.
Treasury securities to available for sale amounting to $99.1 million of
amortized cost and $98.3 million of estimated market value. In December 1995,
in accordance with the Financial Accounting Standards Board Special Report "A
Guide to Implementation of Statement 115 on Accounting for Certain Investments
in Debt and Equity Securities", management reclassified all other investment
securities to available for sale, with the exception of obligations of states
and political subdivisions. Management has the ability and the intent to hold
these securities to maturity, as they are an integral component of Peoples
efforts to minimize its federal tax liability.
Historically, Peoples has been a conservative investor, investing primarily
in U. S. Treasury securities, and to a lesser extent local obligations of
states and political subdivisions and corporate obligations. During 1995 and
continuing through 1996, management has restructured its investment securities
portfolio to include a greater investment in mortgage-backed securities. These
mortgage-backed securities are all with agencies of the U. S. Government and
provide for monthly repayment of interest and principal, thus providing for
greater liquidity. Management determined that with the current rate of loan
growth, greater liquidity in the investment portfolio was necessary.
F-23
<PAGE>
The following table sets forth the carrying amount of securities at the
dates indicated
<TABLE>
<CAPTION>
DECEMBER 31,
SEPTEMBER 30, --------------------------
1996 1995 1994 1993
------------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
AVAILABLE FOR SALE
U. S. Treasury securities............. $ 30,009 $ 54,565 $ 2,209 $ --
U. S. Government agency securities.... 4,032 997
Mortgage-backed securities............ 48,816 38,843
Corporate securities.................. 16,121 21,458 5,393
Equity securities..................... 2,202 1,650 1,075
-------- -------- -------- --------
TOTAL............................... $101,180 $117,513 $ 8,677 $ --
======== ======== ======== ========
INVESTMENT SECURITIES
U. S. Treasury securities............. $ 99,197 $119,178
U. S. Government agency securities.... 1,010 2,013
Mortgage-backed securities............ 3,932
Obligations of states and political
subdivisions......................... $ 22,802 $ 24,383 27,493 26,598
Corporate securities.................. 20,442 22,760
Equity securities..................... 282
-------- -------- -------- --------
TOTAL............................... $ 22,802 $ 24,383 $152,074 $170,831
======== ======== ======== ========
</TABLE>
At September 30, 1996, Peoples had no securities of any issuer for which the
carrying value of such securities exceeded 10% of shareholders' equity.
The following table sets forth the maturities of securities at September 30,
1996, and the weighted average yields of such securities (calculated on the
basis of the cost and effective yields weighted for the scheduled maturity of
each security). Tax-equivalent adjustments (using a 34% federal income tax
rate) have been made in calculating yields on obligations of state and
political subdivisions.
<TABLE>
<CAPTION>
MATURING
------------------------------------------------------------------------------
WITHIN AFTER ONE BUT AFTER FIVE BUT AFTER NO FIXED
ONE YEAR WITHIN FIVE YEARS WITHIN TEN YEARS TEN YEARS MATURITY
------------- ----------------- ---------------- ------------- --------
AMOUNT YIELD AMOUNT YIELD AMOUNT YIELD AMOUNT YIELD AMOUNT
------- ----- ---------- -------- --------- ------- ------- ----- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
AVAILABLE FOR SALE
U. S. Treasury securi-
ties................... $ 6,285 6.71% $ 19,550 7.22% $ 4,174 7.47%
U. S. Government agency
securities............. 4,032 7.56%
Mortgage-backed securi-
ties................... 1,509 7.74% 5,824 7.26% 5,335 7.05% $36,148 6.88%
Corporate securities.... 5,225 7.22% 5,328 6.89% 5,568 6.97%
Equity securities....... $2,202
------- ---------- --------- ------- ------
$13,019 $ 34,734 $ 15,077 $36,148 $2,202
======= ========== ========= ======= ======
INVESTMENT SECURITIES
Obligations of states
and political subdivi-
sions.................. $ 5,229 7.26% $ 15,764 7.59% $ 1,809 8.53% $ -- $ --
======= ========== ========= ======= ======
</TABLE>
Loans Total loans amounted to $126.5 million at December 31, 1995 compared
to $101.9 million at December 31, 1994, an increase of $24.6 million or 24.2%.
Total real estate loans amounted to $107.2 million or 84.7% of total loans at
December 31, 1995 comprised of: residential real estate loans of $83.4
million, commercial real estate of $17.3 million and real estate construction
of $6.5.
Peoples continues to focus its primary lending efforts in residential
mortgages. In recent years there has been a very strong loan demand in
residential real estate, as well as, somewhat less traditional commercial real
estate and construction real estate loans. The loan growth has been spurred by
new housing developments in the local market combined with strong marketing
efforts of Peoples. Management believes that the conservative
F-24
<PAGE>
lending practices employed by Peoples reduce, to an acceptable level, the
impact of declining values of real estate should a downturn in the local real
estate market occur.
Management intends to continue to market real estate lending in its local
market, as well as, other lending products to meet the needs of its customers.
Management desires to maintain a diversified loan portfolio in its local
market area to support the communities it serves. Peoples has no loan
concentrations to any industry or group nor does it intend to develop such
relationships.
Total loans amounted to $148.9 million at September 30, 1996, of which
$131.7 million or 88.5% are secured by real estate. At September 30, 1996 real
estate loans were comprised of residential real estate loans amounting to
$102.3 million, commercial real estate loans of $19.5 million and real estate
construction loans of $9.9 million.
The following table shows Peoples loan distribution at the end of each
reported period:
<TABLE>
<CAPTION>
DECEMBER 31,
SEPTEMBER 30, -----------------------------------------
1996 1995 1994 1993 1992 1991
------------- -------- -------- ------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Commercial, industrial
and agricultural....... $ 7,378 $ 8,075 $ 8,834 $ 6,933 $ 6,105 $ 5,742
Real estate--construc-
tion................... 9,894 6,479 2,946 2,633 964 1,210
Real estate--mortgage... 121,778 100,757 79,813 71,769 60,637 58,750
Consumer................ 9,806 11,252 10,333 13,159 13,326 13,828
-------- -------- -------- ------- ------- -------
Total loans........... $148,856 $126,563 $101,926 $94,494 $81,032 $79,530
======== ======== ======== ======= ======= =======
</TABLE>
The following table shows the maturity of loans (excluding residential
mortgages of 1-4 family residences and installment loans) outstanding as of
September 30, 1996. Also provided are the amounts due after one year
classified according to the sensitivity to changes in interest rates.
<TABLE>
<CAPTION>
AFTER ONE
WITHIN BUT WITHIN AFTER
ONE YEAR FIVE YEARS FIVE YEARS TOTAL
-------- ---------- ---------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Commercial, industrial and agri-
cultural....................... $1,926 $ 5,114 $ 338 $ 7,378
Real estate--construction....... 677 4,355 4,862 9,894
Real estate--mortgage........... 10 583 18,888 19,481
------ ------- ------- -------
TOTAL......................... $2,613 $10,052 $24,088 $36,753
====== ======= ======= =======
Fixed interest rates............ $ 3,369 $17,035
Variable interest rates......... 6,683 7,053
------- -------
TOTAL......................... $10,052 $24,088
======= =======
</TABLE>
Nonperforming Loans Peoples nonperforming loans, which include nonaccrual
loans and accruing loans past due 90 days or more, have been maintained at
relatively low levels. Nonperforming loans have continually declined since
December 31, 1994 from 1.93% of total loans to 1.50% of total loans at
December 31, 1995 and again to 1.22% of total loans at September 31, 1996.
During 1996, Peoples changed its policy of placing loans on a nonaccrual
status. For commercial and real estate loans greater than 90 days past due,
accrual of income is discontinued, and any previously accrued interest is
reversed against current income. Consumer loans are generally charged off
between 90 and 120 days past due or when deemed uncollectible in the opinion
of management.
F-25
<PAGE>
The following table summarizes Peoples nonaccrual and past due loans.
Peoples has no restructured loans:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------
SEPTEMBER 30,
1996 1995 1994 1993 1992 1991
------------- ---- ------ ---- ------ ------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Nonaccrual loans.................. $1,801 $935 $ 485 $ 96 $ 138 $ 232
Accruing loans past due 90 days or
more............................. 17 969 1,487 931 1,380 1,164
</TABLE>
Allowance for Loan Losses The allowance for loan losses increased to $1.6
million or 1.07% at September 30, 1996 from $1.1 million or .89% of total
loans at December 31, 1995 as compared to $838,000 or .82% at December 31,
1994. The increase in the allowance for loan losses resulted primarily from
increases in the loan portfolio, coupled with the fact that a significant
portion of this growth was in commercial real estate loans. The adequacy of
the allowance for loan losses is determined by 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 table summarizes Peoples loan loss experience for each of the periods
indicated:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEARS ENDED DECEMBER 31,
------------------ ------------------------------
1996 1995 1995 1994 1993 1992 1991
-------- -------- ------ ---- ---- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, beginning of pe-
riod..................... $ 1,127 $ 838 $ 838 $762 $757 $756 $678
Charge-offs:
Commercial, industrial
and agricultural........ 10 3 1
Real estate--mortgage.... 31 82 82 46 72 16
Consumer................. 147 26 68 57 55 50 20
-------- -------- ------ ---- ---- ---- ----
188 108 150 60 102 122 36
-------- -------- ------ ---- ---- ---- ----
Recoveries:
Commercial, industrial
and agricultural........ 4
Real estate--mortgage.... 10 9 9 32 30 10 1
Consumer................. 11 6 10 4 8 3 13
-------- -------- ------ ---- ---- ---- ----
21 15 19 36 42 13 14
-------- -------- ------ ---- ---- ---- ----
Net charge-offs.......... 167 93 131 24 60 109 22
Provision for loan loss-
es...................... 625 340 420 100 65 110 100
-------- -------- ------ ---- ---- ---- ----
Balance, end of period.... $ 1,585 $ 1,085 $1,127 $838 $762 $757 $756
======== ======== ====== ==== ==== ==== ====
Ratio of net charge-offs
to average loans out-
standing................. 0.12% 0.08% 0.12% 0.02% 0.07% 0.13% 0.03%
</TABLE>
Management uses the aforementioned review and analysis to determine the
adequacy of the allowance for loan losses on a quarterly basis. The provision
for loan losses represents an amount that is sufficient to maintain the
reserves at a level necessary to meet present and potential risk
characteristics of the loan portfolio. Based on continual evaluation of the
loan quality and assessment of the risk characteristics, management believes
the allowance for loan losses is adequate to absorb probable loan losses.
F-26
<PAGE>
This table shows the allocation of the allowance for loan losses as of the
end of each reported period:
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996 DECEMBER 31, 1995 DECEMBER 31, 1994 DECEMBER 31, 1993
---------------------- ----------------- ----------------- -----------------
PERCENT OF PERCENT OF PERCENT OF PERCENT OF
LOANS IN LOANS IN LOANS IN LOANS IN
EACH EACH EACH EACH
CATEGORY CATEGORY CATEGORY CATEGORY
TO TOTAL TO TOTAL TO TOTAL TO TOTAL
AMOUNT LOANS AMOUNT LOANS AMOUNT LOANS AMOUNT LOANS
---------- ----------- ------ ---------- ------ ---------- ------ ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Commercial, industrial
and agricultural....... $ 209 5% $ 244 6% $202 9% $115 7%
Real estate--construc-
tion................... 124 7% 81 5% 37 3% 20 3%
Real estate--mortgage... 652 82% 539 80% 446 78% 389 76%
Consumer................ 122 6% 176 9% 129 10% 98 14%
Unallocated............. 478 0% 87 0% 24 0% 140 0%
---------- ------- ------ --- ---- --- ---- ---
$ 1,585 100% $1,127 100% $838 100% $762 100%
========== ======= ====== === ==== === ==== ===
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1992 DECEMBER 31, 1991
------------------ ------------------
PERCENT OF PERCENT OF
LOANS IN LOANS IN
EACH EACH
CATEGORY TO CATEGORY TO
TOTAL TOTAL
AMOUNT LOANS AMOUNT LOANS
------ ----------- ------ -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Commercial, industrial and agricultural... $ 59 8% $ 45 7%
Real estate--construction................. 7 1% 9 2%
Real estate--mortgage..................... 398 75% 424 74%
Consumer.................................. 161 16% 121 17%
Unallocated............................... 132 0% 157 0%
---- --- ---- ---
$757 100% $756 100%
==== === ==== ===
</TABLE>
Deposits Total deposits declined during the year by $2.4 million from $239.3
million at December 31, 1994 to $236.9 million at December 31, 1995. Overall
deposits remained relatively constant from December 31, 1995 to September 30,
1996.
Since 1993, there has been a significant restructuring of the deposit
portfolio. Average demand deposits, money market accounts and savings accounts
have declined from $26.4 million, $25.2 million and $113.8 million at December
31, 1993 to $20.2 million, $14.6 million and $84.2 million at September 30,
1996, respectively. During the same period, average time deposits have
increased from $44.1 million at December 31, 1993 to $76.9 million at
September 30, 1996. The fluctuation between savings and time deposits was
intentional and was achieved by reducing the rates paid on savings accounts
beginning in 1994. Historically, Peoples paid higher than market rates on
savings accounts. In an effort to lower Peoples interest rate risk, management
began to reduce interest rates on savings products in 1994 to encourage
depositors to move to time deposits.
The decline in deposits is consistent with recent years' trends as
competition from other financial services industries continues to offer
customers an alternative investment instrument. Management believes the
majority of deposit declines have related to money market accounts, whereby
customers have moved to other sources which provide tiered rate products which
Peoples does not currently offer. Peoples continues to consider new deposit
products to meet the needs of its customer base.
F-27
<PAGE>
The daily average amounts of deposits and rates paid on such deposits is
summarized for the periods indicated in the following table:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------------------
SEPTEMBER 30,
1996 1995 1994 1993
------------- ------------- ------------- -------------
AMOUNT RATE AMOUNT RATE AMOUNT RATE AMOUNT RATE
-------- ---- -------- ---- -------- ---- -------- ----
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Noninterest-bearing de-
mand deposits.......... $ 40,336 $ 36,757 $ 34,799 $ 30,186
Interest-bearing demand
deposits............... 20,242 1.97% 19,845 2.00% 20,573 2.20% 26,357 2.65%
Money market accounts... 14,573 2.53% 16,431 2.50% 22,386 2.74% 25,239 2.93%
Savings deposits........ 84,212 2.51% 94,656 3.03% 119,788 3.25% 113,831 3.41%
Time deposits........... 76,924 5.33% 70,721 5.54% 47,717 4.85% 44,140 4.89%
-------- -------- -------- --------
$236,287 $238,410 $245,263 $239,753
======== ======== ======== ========
</TABLE>
Maturities of time certificates of deposit of $100,000 or more outstanding
at September 30, 1996, are summarized as follows:
<TABLE>
<S> <C>
3 Months or less................................................ $ 1,963
Over 3 through 6 months......................................... 1,293
Over 6 through 12 months........................................ 787
Over 12 months.................................................. 8,246
-------
$12,289
=======
</TABLE>
Stockholder's Equity Stockholder's equity was $47.1 million at December 31,
1995, an increase of $5.9 million from $41.2 million at December 31, 1994. The
increase was comprised of net profits of $4.4 million and increased net
unrealized gain on securities of $2.4 million, offset by dividends paid to
stockholders of $891,000.
Stockholder's equity increased by $1.9 million to $49.0 million at September
30, 1996. The increase was made up of net profits of $4.0 million offset by
decreased net unrealized gain on securities of $1.4 million and by dividends
paid to stockholders of $694,000. Peoples 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 risk-based
capital requirement is 8%. Additionally, the general regulatory guidelines
establish a minimum ratio of leverage capital to adjusted total assets of 3%
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 following table reflects Peoples capital ratios for the periods
presented:
<TABLE>
<CAPTION>
DECEMBER 31,
SEPTEMBER 30, ------------------
1996 1995 1994
------------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
CAPITAL COMPONENTS
Tier I...................................... $ 48,123 $ 44,297 $ 40,815
Total risk-based............................ 49,339 45,424 41,653
ASSETS
Risk Weighted assets........................ $154,326 $144,858 $125,949
Average tangible assets..................... 287,541 284,685 287,371
CAPITAL RATIOS
Tier I risk-based capital................... 31.18% 30.58% 32.41%
Total risk based capital.................... 31.97% 31.36% 33.07%
Leverage.................................... 16.74% 15.56% 14.20%
MINIMUM REGULATORY GUIDELINES
Tier I risk-based capital................... 4.00% 4.00% 4.00%
Total risk based capital.................... 8.00% 8.00% 8.00%
Leverage.................................... 3.00% 3.00% 3.00%
</TABLE>
F-28
<PAGE>
LIQUIDITY AND INTEREST RATE SENSITIVITY
The liquidity of a banking institution reflects its ability to provide funds
to meet loan requests, to accommodate possible outflows of deposits, and to
take advantage of interest rate market opportunities. Funding of loan
requests, providing for liability outflows, and management of interest rate
fluctuations require continuous analysis in order to match the maturities of
specific categories of short-term loans and investments with specific types of
deposits. Peoples liquidity is thus normally considered in terms of the nature
and mix of the institution's sources and uses of funds.
Closely related to the concept of liquidity is the management of interest-
earning assets and interest-bearing liabilities. Peoples manages its rate
sensitivity position to minimize fluctuation in the net interest margin and to
minimize the risk due to changes in interest rates, thereby attempting to
achieve consistent growth of net interest income.
The difference between a financial institution's interest rate sensitive
assets and interest rate sensitive liabilities is commonly referred to as its
"gap" or "interest rate sensitivity gap". An institution having more interest
rate sensitive assets than interest rate sensitive liabilities within a given
time period is said to have a "positive gap"; an institution having more
interest rate sensitive liabilities than interest rate sensitive assets within
a given time period is said to have a "negative gap".
The table below is presented in conformity with industry practice and
reflects Peoples interest rate sensitivity position by selected periods:
<TABLE>
<CAPTION>
RATE SENSITIVE
--------------------------------------------------------
1 TO 90 91 TO 180 181 TO 365 1 TO 2 BEYOND
DAYS DAYS DAYS YEARS 2 YEARS TOTAL
------- --------- ---------- ------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Loans................... $33,812 $ 10,275 $19,300 $23,960 $ 59,924 $147,271
Federal funds sold...... 325 325
Investment securities... 4,861 3,380 10,007 15,488 90,246 123,982
Other assets............ 16,046 16,046
------- -------- ------- ------- -------- --------
Total Assets........... $38,998 $ 13,655 $29,307 $39,448 $166,216 $287,624
------- -------- ------- ------- -------- --------
Noninterest-bearing de-
mand deposits.......... $ 43,410 $ 43,410
Interest-bearing depos-
its.................... $14,936 $ 29,916 $38,114 $42,137 68,235 193,338
Other liabilities....... 1,845 1,845
Shareholders' equity.... 49,031 49,031
------- -------- ------- ------- -------- --------
Total Liabilities and
Shareholders' Equity.. $14,936 $ 29,916 $38,114 $42,137 $162,521 $287,624
------- -------- ------- ------- -------- --------
Interest Rate Sensitiv-
ity................... $24,062 $(16,261) $(8,807) $(2,689) $ 3,695
======= ======== ======= ======= ========
Cumulative Gap......... $24,062 $ 7,801 $(1,006) $(3,695) $ --
------- -------- ------- ------- --------
</TABLE>
RESULTS OF OPERATIONS
Net interest income represents the difference between the interest and fees
earned on interest-bearing assets and the interest paid on interest-bearing
liabilities. Net interest income is affected by changes in the volume of
interest-earning assets and interest-bearing liabilities and changes in
interest yields and rates. Interest on obligations of state and political
subdivisions is not subject to federal income tax. As such, the stated (pre-
tax) yield on these securities is lower than the yields on taxable securities
of similar risk and maturity. In order to make the pre-tax income and
resultant yields comparable to taxable investment securities, a taxable
equivalent adjustment was added to interest income in the tables below. This
adjustment has been calculated using the U. S. federal statutory income tax
rate of 34% for the nine months ended September 30, 1996 and 1995, and the
years ended December 31, 1995, 1994, and 1993. The following table
demonstrates the amount that has been added to interest income.
F-29
<PAGE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30 YEAR ENDED DECEMBER 31
----------------- -----------------------
1996 1995 1995 1994 1993
-------- -------- ------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Interest income per statements of in-
come................................ $ 15,654 $ 14,971 $20,003 $19,905 $20,224
Adjustment to fully taxable equiva-
lent basis......................... 469 519 679 801 877
-------- -------- ------- ------- -------
Interest income adjusted to fully
taxable equivalent basis............ 16,123 15,490 20,682 20,706 21,101
Interest expense.................... 5,274 5,797 7,679 7,297 7,479
-------- -------- ------- ------- -------
Net interest income adjusted to fully
taxable equivalent basis............ $ 10,849 $ 9,693 $13,003 $13,409 $13,622
======== ======== ======= ======= =======
</TABLE>
The average balance sheet and net interest income analysis for the nine
months ended September 30, 1996 and 1995 and, for the years ended December 31,
1995, 1994, and 1993, is as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30
----------------------------------------------------
1996 1995
------------------------- -------------------------
AVERAGE YIELD/ AVERAGE YIELD/
BALANCE INTEREST RATE BALANCE INTEREST RATE
-------- -------- ------ -------- -------- ------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Interest-earning assets:
Loans(1)................. $136,520 $ 9,011 8.80% $110,492 $7,430 8.97%
Taxable investment secu-
rities.................. 110,341 5,581 6.74% 127,934 6,253 6.52%
Tax-exempt investment se-
curities................ 24,023 1,379 7.65% 25,654 1,526 7.93%
Federal funds sold....... 3,675 152 5.51% 6,414 281 5.84%
-------- ------- -------- ------
Total interest-earning
assets.................. 274,559 16,123 7.83% 270,494 15,490 7.64%
Noninterest-earning assets
Cash and due from banks.. 6,752 7,091
Premises and equipment... 4,424 4,790
Other assets............. 2,579 3,153
Less allowance for loan
losses.................. (1,143) (928)
-------- --------
$287,171 $284,600
======== ========
LIABILITIES AND AND SHARE-
HOLDERS' EQUITY
Interest-bearing liabili-
ties:
Demand deposits.......... $ 20,242 $ 299 1.97% $ 19,763 $ 295 1.99%
Money market accounts.... 14,573 276 2.53% 17,105 319 2.49%
Savings deposits......... 84,212 1,583 2.51% 97,096 2,260 3.10%
Time deposits............ 76,924 3,075 5.33% 68,897 2,853 5.52%
Obligations under capital
lease................... 414 41 13.20% 689 70 13.55%
-------- ------- -------- ------
Total interest-bearing
liabilities............. 196,365 5,274 3.58% 203,550 5,797 3.80%
Noninterest-bearing lia-
bilities:
Demand deposits.......... 40,336 36,443
Other.................... 2,600 1,873
Shareholders' equity...... 47,870 42,734
-------- --------
$287,171 $284,600
======== ========
Net interest income....... $10,849 $9,693
======= ======
Net yield on interest-
earning assets........... 5.27% 4.78%
</TABLE>
- --------
(1) For purposes of these computations, nonaccruing loans are included in the
daily average loan amounts outstanding.
F-30
<PAGE>
<TABLE>
<CAPTION>
DECEMBER 31
-----------------------------------------------------------------------------
1995 1994 1993
------------------------- ------------------------- -------------------------
AVERAGE YIELD/ AVERAGE YIELD/ AVERAGE YIELD/
BALANCE INTEREST RATE BALANCE INTEREST RATE BALANCE INTEREST RATE
-------- -------- ------ -------- -------- ------ -------- -------- ------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Interest-earning assets:
Loans(1)............... $113,380 $10,073 8.88% $ 97,093 $ 8,781 9.04% $ 89,761 $ 8,697 9.69%
Taxable investment se-
curities............... 126,134 8,256 6.55% 141,609 9,351 6.60% 136,411 9,546 7.00%
Tax-exempt investment
securities............. 25,254 1,997 7.91% 28,182 2,356 8.36% 26,719 2,579 9.65%
Federal funds sold..... 6,129 356 5.81% 5,049 218 4.32% 9,199 279 3.03%
-------- ------- -------- ------- -------- -------
Total interest-earning
assets................ 270,897 20,682 7.63% 271,933 20,706 7.61% 262,090 21,101 8.05%
Noninterest-earning as-
sets
Cash and due from
banks.................. 6,933 8,625 7,807
Premises and equipment. 4,725 4,166 4,347
Other assets........... 3,079 3,459 3,658
Less allowance for loan
losses................ (949) (812) (763)
-------- -------- --------
$284,685 $287,371 $277,139
======== ======== ========
LIABILITIES AND AND
SHAREHOLDERS' EQUITY
Interest-bearing liabil-
ities:
Demand deposits........ $ 19,845 $ 396 2.00% $ 20,573 $ 453 2.20% $ 26,357 $ 698 2.65%
Money market accounts.. 16,431 410 2.50% 22,386 613 2.74% 25,239 739 2.93%
Savings deposits....... 94,656 2,864 3.03% 119,788 3,888 3.25% 113,831 3,884 3.41%
Time deposits.......... 70,721 3,921 5.54% 47,717 2,315 4.85% 44,140 2,158 4.89%
Obligations under capi-
tal lease.............. 654 88 13.46% 222 28 12.67% -- -- --
-------- ------- -------- ------- -------- -------
Total interest-bearing
liabilities........... 202,307 7,679 3.80% 210,686 7,297 3.46% 209,567 7,479 3.57%
Noninterest-bearing lia-
bilities:
Demand deposits........ 36,757 34,799 30,186
Other.................. 2,063 2,502 2,644
Shareholders' equity.... 43,558 39,384 34,742
-------- -------- --------
$284,685 $287,371 $277,139
======== ======== ========
------- ------- -------
Net interest income..... $13,003 $13,409 $13,622
======= ======= =======
Net yield on interest-
earning assets......... 4.80% 4.93% 5.20%
</TABLE>
- --------
(1) For purposes of these computations, nonaccruing loans are included in the
daily average loan amounts outstanding.
F-31
<PAGE>
The following tables set forth for the periods indicated a summary of the
changes in interest earned and interest paid resulting from changes in volume
and changes in rate:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
--------------------- ------------------------------------------------
1996 VS 1995 1995 VS 1994 1994 VS 1993
INCREASE (DECREASE) INCREASE (DECREASE) INCREASE (DECREASE)
DUE TO (1) DUE TO (1) DUE TO (1)
--------------------- ----------------------- -----------------------
VOLUME RATE NET VOLUME RATE NET VOLUME RATE NET
------ ----- ------ ------ ------ ------- -------- ------ ------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Interest earned on:
Loans.................. $1,805 $(224) $1,581 $1,449 $ (157) $ 1,292 $ 684 $ (600) $ 84
Taxable investment se-
curities.............. (999) 327 (672) (820) (275) (1,095) 183 (378) (195)
Tax-exempt investment
securities............ (95) (52) (147) (28) (331) (359) (60) (163) (223)
Federal funds sold..... (114) (15) (129) (11) 149 138 (439) 378 (61)
------ ----- ------ ------ ------ ------- ------ ------ ------
Total interest-earning
assets................ $ 597 $ 36 $ 633 $ 590 $ (614) $ (24) $ 368 $ (763) $ (395)
Interest paid on:
Demand deposits........ $ 9 $ (5) $ 4 $ (17) $ (40) $ (57) $ (39) $ (206) $ (245)
Money market accounts.. (51) 8 (43) (102) (101) (203) (24) (102) (126)
Savings deposits....... (1,073) 396 (677) (401) (623) (1,024) 184 (180) 4
Time deposits.......... 374 (152) 222 (188) 1,794 1,606 0 157 157
Obligations under capi-
tal leases............ (26) (3) (29) 56 4 60 28 0 28
------ ----- ------ ------ ------ ------- ------ ------ ------
Total interest-bearing
liabilities........... $ (767) $ 244 $ (523) $ (652) $1,034 $ 382 $ 149 $ (331) $ (182)
------ ------- ------
Change in net interest
income................. $1,156 $ (406) $ (213)
====== ======= ======
</TABLE>
- --------
(1) The change in interest due to both volume and rate has been allocated to
volume and rate changes in proportion to the relationship of the absolute
dollar amounts of the change in each.
The table below shows operating and capital ratios of Peoples for the dates
indicated:
<TABLE>
<CAPTION>
NINE MONTHS
SEPTEMBER 30, YEAR ENDED DECEMBER 31
------------- -----------------------
1996 1995 1995 1994 1993
------ ------ ------- ------- -------
<S> <C> <C> <C> <C> <C>
Return on average assets.................. 1.86% 1.65% 1.54% 1.58% 1.83%
Return on average equity.................. 11.17% 10.96% 10.04% 11.50% 14.60%
Dividend payout ratio..................... 17.31% 12.19% 20.38% 17.89% 13.23%
Equity to asset ratio..................... 17.05% 16.14% 16.30% 14.40% 12.66%
</TABLE>
COMPARISON OF THE YEAR ENDED DECEMBER 31, 1995 AND 1994
Net Income Net income amounted to $4.4 million or $37.81 per share in 1995,
representing a decline of 3.4% from the $4.5 million or $39.15 per share in
1994. The return on average assets was 1.54% for 1995 and 1.58% for 1994. The
return on average equity was 10.04% in 1995 compared to 11.50% in 1994.
Net Interest Income On a fully taxable equivalent basis, net interest income
decreased $406,000 or 3.0% in 1995 as compared to 1994. The net yield on
interest-earning assets decreased slightly by 13 basis points to 4.80%, while
the average balance of interest-earning assets declined by $1.0 million or
.4%.
Although net interest income declined slightly, average loans increased by
$16.3 million while average investment securities declined by $18.4 million.
The yield on average loans during 1995 amounted to 8.88% compared to the
weighted yield on investment securities of 6.77%.
Net interest income was most significantly effected by the increase in costs
of funds relating to time deposits, increasing 69 basis points compounded by
the increase in average time deposits of $23.0 million. The increase in
average time deposits was offset by a decline in average savings accounts of
$25.1 million. As a result of the significant growth in loans during the year,
management attempted to shift its deposit mixture to
F-32
<PAGE>
improve its interest rate risk position. The level and mix of funds is
monitored by the Asset/Liability Committee in order to mitigate the interest
rate sensitivity and liquidity risks of the balance sheet.
Provision for Loan Losses The provision for loan losses amounted to $420,000
for 1995 compared to $100,000 in 1994. The increase in the provision is
primarily the result of the loan growth in 1995, coupled with the fact that a
significant portion of this growth was in commercial real estate.
Historically, Peoples has experienced minimal net charge-offs relating to
residential real estate loans, however management recognizes that commercial
real estate loans inherently possess a greater degree of risk of loss. Net
charge-offs totaled $131,000 in 1995 as compared to $24,000 in 1994.
Noninterest Income Noninterest income increased $141,000 or 20% in 1995
compared to 1994. The increase was attributable to increased levels of
security gains in 1995. During 1995 Peoples recognized net security gains of
$121,000 compared to net security losses in 1994 of $3,000. The level of
security gains in 1995 were the result of the sale of U. S. Treasury
securities during the year, as previously discussed.
Noninterest Expense Noninterest expense decreased by $331,000 in 1995
compared to 1994. The decline was primarily the result of declines in salaries
and employee benefits of $294,000, data processing costs of $311,000 and FDIC
insurance premiums of $280,000; offset by increases in furniture and equipment
of $195,000 and loss from fraudulent transactions of $405,000.
The decline in salary and employee benefits was the result of two
significant events. The first was a change in the health coverage in 1995 from
an indemnity plan to a point of service plan resulting in a savings of
$92,000. The second change resulted from a buyout of an employment contract
and related pension benefit in 1994 of a former executive officer of Peoples,
resulting in a charge to operations of $189,000.
Data processing expense declined and furniture and fixture expense increased
as a result of the new data processing system put in place during the fourth
quarter of 1994. The new computer equipment placed in service was accounted
for as a capital lease. Prior to the fourth quarter of 1994 Peoples utilized a
third party for data processing needs.
FDIC insurance premiums were reduced from 23 basis points to 4 basis points
resulting in a savings of $280,000 to Peoples. The FDIC insurance rate was
reduced as a result of the Bank Insurance Fund (the "BIF") reaching its
required level of capitalization.
In September of 1996, it was discovered that a now former executive officer
of Peoples had executed a series of fraudulent transactions which resulted in
a loss of $405,000. These transactions consisted primarily of granting loans
to individuals where the proceeds were ultimately received by the executive
officer. Peoples is actively pursing recovery.
Federal Income Taxes Federal income tax expense increased $23,000 to
$1,616,000 in 1995, as a result of lower levels of tax-exempt income. The 1995
effective tax rate of 27% was below the 34% statutory rate primarily as a
result of tax-exempt interest.
COMPARISON OF THE YEAR ENDED DECEMBER 31, 1994 AND 1993
Net Income Net income amounted to $4.5 million or $39.15 per share in 1994,
representing a decline of 10.7% from the $5.1 million or $43.84 per share in
1993. The return on average assets was 1.58% for 1994 and 1.83% for 1993. The
return on average equity was 11.50% in 1994 compared to 14.60% in 1993.
Net Interest Income On a fully taxable equivalent basis, net interest income
decreased $213,000 or 1.6% in 1994 as compared to 1993. The net yield on
interest-earning assets decreased slightly by 27 basis points to 4.93%, while
the average balance of interest-earning assets increased by $9.8 million or
3.8%.
F-33
<PAGE>
Although net interest income declined slightly, average loans and average
securities increased by $7.3 million and $6.7 million, respectively. The yield
on average earning assets fell 44 basis points as a result of a declining rate
environment. During the same period the overall costs of funds declined only
11 basis points while average interest-bearing deposits increased by $1.1
million.
Provision for Loan Losses The provision for loan losses amounted to $100,000
for 1994 compared to $65,000 in 1993. The increase in the provision is
primarily the result of the loan growth in 1994. Net charge-offs totaled
$24,000 in 1994 as compared to $60,000 in 1993.
Noninterest Income Noninterest income increased $132,000 or 23% in 1994
compared to 1993. The increase was attributable to increased levels of other
miscellaneous income in 1994. There was no one significant item which
increased significantly, but there were slight increases in every category of
other income.
Noninterest Expense Noninterest expense increased by $723,000 in 1994
compared to 1993. The increase was primarily the result of increases in
salaries and employee benefits of $416,000, other noninterest expenses of
$184,000 and various other normal increases. As discussed above, salaries and
employee benefits increased in 1994 as a result of the early buyout of an
employment contract with a former executive officer of Peoples. The increase
in other noninterest expense is comprised of increased real estate owned
expense of $32,000 and regulatory assessments of $48,000, as well as, minor
increases in all other expenses paid.
Federal Income Taxes Federal income tax expense decreased $220,000 to
$1,593,000 in 1994, as a result or lower levels of pre-tax income. The 1994
effective tax rate of 26% was below the 34% statutory rate primarily as a
result of tax-exempt interest.
COMPARISON OF THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
Net Income Net income amounted to $4.0 million or $34.66 per share in 1996,
representing an increase of 24.9% from the $3.2 million or $27.75 per share in
1995. The annualized return on average assets was 1.86% for 1996 and 1.65% for
1995. The annualized return on average equity was 11.17% in 1996 compared to
10.96% in 1995.
Net Interest Income On a fully taxable equivalent basis, net interest income
increased $1.2 million or 11.9% in 1996 as compared to 1995. The net yield on
interest-earning assets increased by 49 basis points to 5.27%, while the
average balance of interest-earning assets declined by $4.1 million or 1.5%.
Total interest income increased $633,000 which is the result of the shifting
of $19.2 million of the investment securities with a weighted average yield of
6.90% along with $2.7 million of federal funds sold yielding 5.51% to the loan
portfolio yielding 8.80%.
Total interest expense declined by $523,000 primarily as a result of a 22
basis point decline in the total cost of funds from 3.80% in 1995 to 3.58% in
1996. This was also compounded by a decline in total average interest-bearing
liabilities of $7.2 million.
Provision for Loan Losses The provision for loan losses amounted to $625,000
for 1996 compared to $340,000 in 1995. The increase in the provision continues
to result primarily from the significant increases in the loan portfolio. The
increases in the loan portfolio continue to be secured by residential and
commercial real estate. The increase in the provision for loan losses was also
effected at the time, to a lesser extent, by the uncertainty surrounding the
fraudulent transactions of the former executive officer.
Noninterest Income Noninterest income increased $176,000 or 38.5% in 1996
compared to 1995. The increase was attributable to increased levels of
security gains in 1996 and higher levels of other income. During 1996 Peoples
recognized net security gains of $53,000 compared to net security losses in
1995 of $18,000. The level of security gains in 1996 were the result of the
sale of U. S. Treasury securities during the year, as previously discussed
above. The increase in other income related to sales of real estate owned and
other assets amounting to $47,000.
F-34
<PAGE>
Noninterest Expense Noninterest expense decreased by $132,000 in 1996
compared to 1995. The decline was primarily the result of declines in FDIC
insurance premiums of $190,000 and loss from fraudulent transactions of
$190,000, offset by increases in other expenses of $223,000.
As a result of the BIF reaching its required level of capitalization,
Peoples is only required to pay a $2,000 premium in 1996 compared to 4 basis
points on all insurable deposits in 1995. In addition, because Peoples'
Insurance Fund reached its required level of capitalization in 1995, during
the third quarter Peoples recognized a refund of its federal insurance premium
through a credit to the FDIC assessment expense account in the amount of
$149,000.
In September of 1996, it was discovered that a now former executive officer
of Peoples had executed a series of fraudulent transactions which resulted in
a loss of $405,000. These transactions consisted primarily of granting loans
to individuals where the proceeds were ultimately received by the executive
officer, of which $190,000 were originated prior to September 30, 1995.
Federal Income Taxes Federal income tax expense increased $429,000 to
$1,640,000 in 1996, as a result of higher levels of pre-tax income. The 1996
effective tax rate of 29% was below the 34% statutory rate primarily as a
result of tax-exempt interest.
COMPARISON OF THE THREE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
Net Income Net income amounted to $1.3 million or $11.05 per share in 1996,
representing an increase of 4.3% from the $1.2 million or $10.59 per share in
1995.
Net Interest Income On a fully taxable equivalent basis, net interest income
increased $316,000 or 9.4% in 1996 as compared to 1995. As discussed above,
the shifting of lower yielding assets to loans at higher yields coupled with
the decline in overall costs of funds accounted for the increase in net
interest income.
Provision for Loan Losses The provision for loan losses amounted to $400,000
for 1996 compared to $70,000 in 1995. As discussed above the level of the
provision for loan losses has primarily been effected by growth in the loan
portfolio.
Noninterest Income Noninterest income increased $57,000 or 33.7% in 1996
compared to 1995. During 1996 Peoples recognized net security gains of
$20,000, as compared to no security gains or losses in 1995. As discussed
above, the increase in other income related to sales of real estate owned and
other assets amounting to $47,000.
Noninterest Expense Noninterest expense decreased by $2,000 in 1996 compared
to 1995. The decline was primarily the result of declines in FDIC insurance
premiums of $78,000 and loss from fraudulent transactions of $150,000, offset
by increases in other expenses of $84,000.
As a result of the BIF reaching its required level of capitalization,
Peoples is only required to pay $2,000 premium in 1996 compared to 4 basis
points on all insurable deposits in 1995. As previously discussed, the credit
balance in the FDIC assessment expense account was the result of a refund of
premiums of $149,000 in the third quarter of 1995.
In September of 1996, it was discovered that a now former executive officer
of Peoples had executed a series of fraudulent transactions which resulted in
a loss of $405,000. These transactions consisted primarily of granting loans
to individuals where the proceeds were ultimately received by the executive
officer, of which $150,000 were originated during the three month period ended
September 30, 1995.
F-35
<PAGE>
APPENDIX A
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION ("Reorganization Agreement") dated as
of November 25, 1996, by and among PEOPLES BANK OF UNITY ("Peoples"), a
Pennsylvania banking institution having its registered office at 7660
Saltsburg Road, Pittsburgh, Pennsylvania 15239-3700, S&T BANCORP, INC.
("S&T"), a Pennsylvania corporation having its principal executive office at
800 Philadelphia Street, Indiana, Pennsylvania 15701-3921 and S&T Bank, a
Pennsylvania banking institution having its registered office at 800
Philadelphia Street, Indiana, Pennsylvania 15701-3921, the stock of which is
wholly owned by S&T.
WITNESSETH
WHEREAS, the parties hereto desire that Peoples shall be merged with and
into S&T Bank ("Merger") pursuant to an Agreement and Plan of Merger
substantially in the form attached hereto as Annex A ("Plan of Merger")
pursuant to which the shareholders of Peoples will receive shares of common
stock of S&T in exchange for their shares of common stock of Peoples; and
WHEREAS, the parties hereto desire to provide for certain undertakings,
conditions, representations, warranties and covenants in connection with the
transactions contemplated hereby.
NOW, THEREFORE, in consideration of the premises and of the mutual
representations, warranties and covenants herein contained and intending to be
legally bound hereby, the parties hereto do hereby agree as follows:
ARTICLE 1
Definitions
1.1. "Bank Holding Company Act" shall mean the Bank Holding Company Act of
1956, as amended.
1.2. "Closing Date" shall mean the date specified pursuant to Section 4.9
hereof as the date on which the parties hereto shall close the transactions
contemplated herein.
1.3. "Code" shall mean the Internal Revenue Code of 1986, as amended.
1.4. "Commission" or "SEC" shall mean the Securities and Exchange
Commission.
1.5. "Competing Transaction" shall mean any of the following involving
Peoples (other than the transactions contemplated by this Reorganization
Agreement): (a) any merger, consolidation, share exchange for a controlling
interest, business combination or other similar transaction; (b) any sale,
lease, exchange, mortgage, pledge, transfer or other disposition of 15% or
more of the assets of Peoples in a single transaction or series of
transactions to the same person, entity or group or (c) any public
announcement by Peoples of a proposal, plan or intention to do any of the
foregoing or any agreement to engage in any of the foregoing.
1.6. "Department of Banking" shall mean the Pennsylvania Department of
Banking.
1.7. "Effective Date" shall mean the date specified pursuant to Section 4.9
hereof as the effective date of the Merger.
1.8. "ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended.
1.9. "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
A-1
<PAGE>
APPENDIX B
OPINION OF PEOPLES FINANCIAL ADVISOR
Board of Directors
Peoples Bank of Unity
7660 Saltsburg Road
Pittsburgh, Pennsylvania 15239
Dear Members of the Board:
Set forth herein is the updated opinion of Danielson Associates Inc.
("Danielson Associates") as to the "fairness," from a financial point of view,
of the offer by S&T Bancorp, Inc. ("S&T") of Indiana, Pennsylvania to acquire
all of the common stock of Peoples Bank of Unity ("Peoples" and the "Bank") of
Plum Borough, Pennsylvania. The "fair" sale value is defined as the price at
which all of the shares of Peoples' common stock would change hands between a
willing seller and a willing buyer, each having reasonable knowledge of the
relevant facts. In our opinion as to the "fairness" of the offer, it also was
determined if the S&T common stock to be exchanged for Peoples' stock was
"fairly" valued.
In preparing the original opinion dated November 25, 1996, the Bank's market
was analyzed; its business and prospects were discussed with management; and
its financial performance was compared with other Pennsylvania banks. In
addition, any unique characteristics were considered.
The financial and stock performance of S&T also was analyzed and compared to
comparable bank holding companies whose common stock is actively-traded. The
prior movement of its common stock and dividend payments was examined, the
dilutive effect of this merger on S&T's common stock analyzed, its financial
performance was related to its stock value and any unique characteristics were
considered.
This opinion was based partly on data supplied to Danielson Associates by
Peoples, but it relied on some public information all of which was believed to
be reliable, but neither the completeness nor accuracy of such information
could be guaranteed. In particular, the opinion assumed, based on Peoples'
management's representation, there were no significant asset quality problems
beyond what was stated in recent reports to regulatory agencies and in the
monthly report to the Directors.
In determining the "fair" sale value of Peoples, primary emphasis was given
to prices paid relative to earnings for Pennsylvania commercial banks with
similar financial, structural and market characteristics. These prices were
then related to assets and equity capital, also referred to as "book."
In determining the "fair" market value of S&T's common stock to be exchanged
for Peoples' stock, primary emphasis was given to the market value of similar
bank holding companies and included no in-person due diligence of S&T. This
comparison showed the S&T stock to be valued above comparable banks, which was
considered in rendering the original opinion.
Based on the analysis, the "fair" sale value of Peoples was determined to be
$81 to $91 million, or $700 to $787 per share. Thus, S&T's offer of $94.1
million, or $814 per share, was a "fair" offer from a financial point of view
for Peoples and its shareholders.
Subsequently there has been no change in the performance of S&T or its stock
price. S&T's average closing price of the ten trading days ending was
. Since the S&T stock price remains unchanged, and therefore the value
of the offer is also unchanged, this offer is still "fair" from a financial
point of view to Peoples and its shareholders.
Respectfully submitted,
Arnold G. Danielson
Chairman
Danielson Associates Inc.
B-1
<PAGE>
APPENDIX C
THE DISSENT STATUTE, SECTION 1222 OF THE PENNSYLVANIA BANKING CODE
AND SECTIONS 1930 AND 1571-1580 OF THE PENNSYLVANIA BUSINESS
CORPORATION ACT
(S) 1222.Rights of dissenting shareholders
If a shareholder of an institution shall object to a proposed plan of
action of the institution authorized under a section of this act and such
section provides that the shareholder shall be entitled to the rights and
remedies of a dissenting shareholder, the rights and remedies of such
shareholder shall be governed by the provisions of the Business Corporation
Law/1/ applicable to dissenting shareholders and shall be subject to the
limitations on such rights and remedies under those provisions. Shares
acquired by an institution as a result of the exercise of such rights by a
dissenting shareholder may be held and disposed of as treasury shares, or, in
the case of a merger or consolidation, as otherwise provided in the plan of
merger or consolidation.
- -------------------------------------------------------------------------------
(S) 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 15/2/ (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).
- -------------------------------------------------------------------------------
(S) 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).
- --------
/1/15 Pa. C.S.A. (S) 1001 et seq.
/2/15 Pa. C.S.A. (S) 1571 et seq.
C-1
<PAGE>
Section 2325(b) (relating to minimum vote requirement).
Section 2704(c) (relating to dissenters rights upon election).
Section 2705(d) (relating to dissenters rights upon renewal of
election).
Section 2907(a) (relating to proceedings to terminate breach of
qualifying conditions).
Section 7104(b)(3) (relating to procedure).
(B)EXCEPTIONS.--
(1)Except as otherwise provided in paragraph (2), the holders of the
shares of any class or series of shares that, at the record date fixed to
determine the shareholders entitled to notice of and to vote at the meeting at
which a plan specified in any of section 1930, 1931(d), 1932(c) or 1952(d) is
to be voted on, are either:
(i)listed on a national securities exchange; or
(ii)held of record by more than 2,000 shareholders;
shall not have the right to obtain payment of the fair value of any such
shares under this subchapter.
(2)Paragraph (1) shall not apply to and dissenters rights shall be
available without regard to the exception provided in that paragraph in the
case of:
(i)Shares converted by a plan if the shares are not converted solely
into shares of the acquiring, surviving, new or other corporation or solely
into such shares and money in lieu of fractional shares.
(ii)Shares of any preferred or special class unless the articles, the
plan or the terms of the transaction entitle all shareholders of the class to
vote thereon and require for the adoption of the plan or the effectuation of
the transaction the affirmative vote of a majority of the votes cast by all
shareholders of the class.
(iii)Shares entitled to dissenters rights under section 1906(c)
(relating to dissenters rights upon special treatment).
(3)The shareholders of a corporation that acquires by purchase, lease,
exchange or other disposition all or substantially all of the shares, property
or assets of another corporation by the issuance of shares, obligations or
otherwise, with or without assuming the liabilities of the other corporation
and with or without the intervention of another corporation or other person,
shall not be entitled to the rights and remedies of dissenting shareholders
provided in this subchapter regardless of the fact, if it be the case, that
the acquisition was accomplished by the issuance of voting shares of the
corporation to be outstanding immediately after the acquisition sufficient to
elect a majority or more of the directors of the corporation.
(C)GRANT OF OPTIONAL DISSENTERS RIGHTS.--The bylaws or a resolution of the
board of directors may direct that all or a part of the shareholders shall
have dissenters rights in connection with any corporate action or other
transaction that would otherwise not entitle such shareholders to dissenters
rights.
(D)NOTICE OF DISSENTERS RIGHTS.--Unless otherwise provided by statute, if
a proposed corporate action that would give rise to dissenters rights under
this subpart is submitted to a vote at a meeting of shareholders, there shall
be included in or enclosed with the notice of meeting:
(1)a statement of the proposed action and a statement that the
shareholders have a right to dissent and obtain payment of the fair value of
their shares by complying with the terms of this subchapter; and
(2)a copy of this subchapter.
C-2
<PAGE>
(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).
- -------------------------------------------------------------------------------
(S) 1572.Definitions
The following words and phrases when used in this subchapter shall have
the meanings given to them in this section unless the context clearly
indicates otherwise:
"CORPORATION." The issuer of the shares held or owned by the dissenter
before the corporate action or the successor by merger, consolidation,
division, conversion or otherwise of that issuer. A plan of division may
designate which of the resulting corporations is the successor corporation for
the purposes of this subchapter. The successor corporation in a division shall
have sole responsibility for payments to dissenters and other liabilities
under this subchapter except as otherwise provided in the plan of division.
"DISSENTER." A shareholder or beneficial owner who is entitled to and does
assert dissenters rights under this subchapter and who has performed every act
required up to the time involved for the assertion of those rights.
"FAIR VALUE." The fair value of shares immediately before the effectuation
of the corporate action to which the dissenter objects, taking into account
all relevant factors, but excluding any appreciation or depreciation in
anticipation of the corporate action.
"INTEREST." Interest from the effective date of the corporate action until
the date of payment at such rate as is fair and equitable under all the
circumstances, taking into account all relevant factors, including the average
rate currently paid by the corporation on its principal bank loans.
- -------------------------------------------------------------------------------
(S) 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.
- -------------------------------------------------------------------------------
(S) 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
C-3
<PAGE>
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.
- -------------------------------------------------------------------------------
(S) 1575.Notice to demand payment
(A)GENERAL RULE.--If the proposed corporate action is approved by the
required vote at a meeting of shareholders of a business corporation, the
corporation shall mail a further notice to all dissenters who gave due notice
of intention to demand payment of the fair value of their shares and who
refrained from voting in favor of the proposed action. If the proposed
corporate action is to be taken without a vote of shareholders, the
corporation shall send to all shareholders who are entitled to dissent and
demand payment of the fair value of their shares a notice of the adoption of
the plan or other corporate action. In either case, the notice shall:
(1)State where and when a demand for payment must be sent and
certificates for certificated shares must be deposited in order to obtain
payment.
(2)Inform holders of uncertificated shares to what extent transfer of
shares will be restricted from the time that demand for payment is received.
(3)Supply a form for demanding payment that includes a request for
certification of the date on which the shareholder, or the person on whose
behalf the shareholder dissents, acquired beneficial ownership of the shares.
(4)Be accompanied by a copy of this subchapter.
(B)TIME FOR RECEIPT OF DEMAND FOR PAYMENT.--The time set for receipt of
the demand and deposit of certificated shares shall be not less than 30 days
from the mailing of the notice.
- -------------------------------------------------------------------------------
(S) 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.
- -------------------------------------------------------------------------------
(S) 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.
C-4
<PAGE>
(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 dissenter had after making demand for payment of their fair
value.
- -------------------------------------------------------------------------------
(S) 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.
- -------------------------------------------------------------------------------
(S) 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);
C-5
<PAGE>
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)./3/
(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.
- -------------------------------------------------------------------------------
(S) 1580.Costs and expenses of valuation proceedings
(A)GENERAL RULE.--The costs and expenses of any proceeding under section
1579 (relating to valuation proceedings generally), including the reasonable
compensation and expenses of the appraiser appointed by the court, shall be
determined by the court and assessed against the business corporation except
that any part of the costs and expenses may be apportioned and assessed as the
court deems appropriate against all or some of the dissenters who are parties
and whose action in demanding supplemental payment under section 1578
(relating to estimate by dissenter of fair value of shares) the court finds to
be dilatory, obdurate, arbitrary, vexatious or in bad faith.
(B)ASSESSMENT OF COUNSEL FEES AND EXPERT FEES WHERE LACK OF GOOD FAITH
APPEARS.--Fees and expenses of counsel and of experts for the respective
parties may be assessed as the court deems appropriate against the corporation
and in favor of any or all dissenters if the corporation failed to comply
substantially with the requirements of this subchapter and may be assessed
against either the corporation or a dissenter, in favor of any other party, if
the court finds that the party against whom the fees and expenses are assessed
acted in bad faith or in a dilatory, obdurate, arbitrary or vexatious manner
in respect to the rights provided by this subchapter.
(C)AWARD OF FEES FOR BENEFITS TO OTHER DISSENTERS.--If the court finds
that the services of counsel for any dissenter were of substantial benefit to
other dissenters similarly situated and should not be assessed against the
corporation, it may award to those counsel reasonable fees to be paid out of
the amounts awarded to the dissenters who were benefited.
- --------
/3/42 Pa. C.S.A. (S) 5301 et seq.
C-6
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Pursuant to the Pennsylvania Business Corporations Act, 15 Pa.C.S.A. Section
1741 through 15 Pa.C.S.A. Section 1750, a business corporation may indemnify
directors and officers against liabilities they may incur in their capacities
as directors and officers provided certain standards are met, including good
faith and the belief that the particular action is in the best interests of
the corporation and, with respect to third-party actions in any criminal
proceeding, have no reasonable cause to believe their conduct was unlawful.
Moreover, this power to indemnify officers and directors does not exist, in
connection with derivative and corporate actions, where the person has been
adjudged to be liable to the corporation, unless the court in which the action
was brought determines otherwise, pursuant to 15 Pa.C.S.A. Section 1742.
In addition, the Pennsylvania Business Corporations Act, 15 Pa.C.S.A.
Section 1746, provides that the foregoing provisions shall not be deemed
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; however, no
indemnification may be made where the act or failure to act giving rise to the
claim for indemnification is determined by a court to have constituted wilful
misconduct or recklessness.
The S&T bylaws provide for the mandatory indemnification of directors,
officers and employees of S&T and S&T's subsidiaries, in accordance with and
to the full extent permitted by the laws of Pennsylvania. Moreover, pursuant
to the S&T bylaws in all situations in which indemnification is not mandatory,
S&T may to the full extent permitted by the laws of Pennsylvania indemnify all
persons whom it is empowered to indemnify.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
An index of exhibits appears at page II-6.
ITEM 22. UNDERTAKINGS
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:
(a) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933, as amended ("Securities Act").
(b) 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. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than 20 percent change in the maximum aggregate
offering price set forth in the "Calculation of Registration Fee" table in
the effective registration statement.
(c) 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.
II-1
<PAGE>
2. That, for the purpose of determining any liability under the Securities
Act, 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.
The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the Proxy
Statement/Prospectus pursuant to Items 4, 10(b), 11 or 13 of this Form, within
one business day of receipt of such request, and to send the incorporated
documents by first-class mail or other equally prompt means. This includes
information contained in documents filed subsequent to the effective date of
the Registration Statement through the date of responding to the request.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in this
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.
The undersigned Registrant hereby undertakes to supply 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.
The undersigned Registrant hereby undertakes as follows: that prior to any
public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this Registration Statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c),
the issuer undertakes that such reoffering prospectus will contain the
information called for by the applicable registration form with respect to
reofferings by persons who may be deemed underwriters, in addition to the
information called for by the other Items of the applicable form.
The Registrant undertakes that every prospectus (i) that is filed pursuant
to the paragraph immediately preceding, or (ii) that purports to meet the
requirements of Section 10(a)(3) of the Securities Act and is used in
connection with an offering of securities subject to Rule 415, will be filed
as a part of an amendment to the Registration Statement and will not be used
until such amendment is effective, and that, for purposes of determining any
liability under the Securities Act, 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.
Insofar as indemnification for liabilities arising under the Securities Act
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 Commission such indemnification is
against public policy as expressed in the Securities 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 the
director, officer or controlling person in connection with the securities
being registered, the Registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed
by the final adjudication of such issue.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Indiana, Commonwealth of
Pennsylvania, on the 10th day of January, 1997.
S&T BANCORP, INC.
By: * Robert D. Duggan
---------------------------------
Robert D. Duggan,
Chairman, President and Chief
Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities and
on the dates indicated:
SIGNATURE TITLE DATE
--------- ----- ----
PRINCIPAL OFFICERS:
* Robert D. Duggan Chairman, President and Date: January 10, 1996
- ------------------------- Chief Executive Officer
Robert D. Duggan (Principal Executive
Officer)
* James C. Miller Executive Vice President Date: January 10, 1996
- -------------------------
James C. Miller
/s/ James G. Barone Secretary Date: January 10, 1996
- -------------------------
James G. Barone
/s/ Robert E. Rout Chief Financial Officer Date: January 10, 1996
- ------------------------- (Principal Financial
Robert E. Rout and Accounting Officer)
DIRECTORS:
Director Date:
- -------------------------
Thomas A. Brice
Director Date:
- -------------------------
Forrest L. Brubaker
II-3
<PAGE>
SIGNATURE DATE
--------- ----
* James L. Carino Director Date: January 10, 1996
- -------------------------
James L. Carino
* John J. Delaney Director Date: January 10, 1996
- -------------------------
John J. Delaney
* Robert D. Duggan Director Date: January 10, 1996
- -------------------------
Robert D. Duggan
* Thomas W. Garges, Jr. Director Date: January 10, 1996
- -------------------------
Thomas W. Garges, Jr.
* William J. Gatti Director Date: January 10, 1996
- -------------------------
William J. Gatti
Director Date:
- -------------------------
Herbert L. Hanna
Director Date:
- -------------------------
Paul B. Johnston
Director Date:
- -------------------------
Joseph A. Kirk
Director Date:
- -------------------------
Samuel Levy
II-4
<PAGE>
SIGNATURE DATE
--------- ----
* James C. Miller Director Date: January 10, 1996
- -------------------------
James C. Miller
* W. Parker Ruddock Director Date: January 10, 1996
- -------------------------
W. Parker Ruddock
* Charles A. Spadafora Director Date: January 10, 1996
- -------------------------
Charles A. Spadafora
* Christine J. Toretti Director Date: January 10, 1996
- -------------------------
Christine J. Toretti
Director Date:
- -------------------------
Harold W. Widdowson
*By: /s/ James G. Barone
-------------------
James G. Barone
Attorney in Fact
II-5
<PAGE>
INDEX OF EXHIBITS
<TABLE>
<C> <S>
Exhibit 2 Agreement and Plan of Reorganization and related Agreement and
Plan of Merger, included as Appendix A to the Proxy
Statement/Prospectus and incorporated herein by reference.
Exhibit 3.1 Articles of Incorporation of S&T Bancorp, Inc. filed as Exhibit
B to Registration Statement (No. 2-83565) on Form S-14 dated May
5, 1983 and incorporated herein by reference.
Exhibit 3.2 Amendment to Articles of Incorporation of S&T Bancorp, Inc.
filed as Exhibit 3.2 to Form S-4 Registration Statement (File
No. 33-02600) dated January 15, 1986 and incorporated herein by
reference.
Exhibit 5* Opinion of Arnold & Porter, regarding validity of S&T Common
Stock being registered.
Exhibit 8 Form of Opinion of Arnold & Porter as to certain tax
consequences of the Merger, filed herewith.
Exhibit 23.1 Consent of Ernst & Young LLP, independent accountants for S&T,
filed herewith.
Exhibit 23.2 Consent of S.R. Snodgrass, A.C., independent auditors for
Peoples, filed herewith.
Exhibit 23.3* Consent of Arnold & Porter, contained in the opinion filed as
Exhibit 5 hereto.
Exhibit 23.4 Consent of Arnold & Porter, contained in the opinion filed as
Exhibit 8 hereto.
Exhibit 23.5 Consent of Danielson Associates Inc., filed herewith.
Exhibit 24 Powers of Attorney of certain directors and officers of S&T,
filed herewith.
Exhibit 99.1 Form of Proxy relating to the Peoples Common Stock, filed
herewith.
Exhibit 99.2 Form of Opinion of Danielson Associates, Inc., included as
Appendix B to the Proxy Statement/Prospectus and incorporated
herein by reference.
</TABLE>
* To be filed by amendment
II-6
<PAGE>
Exhibit 8
_______________, 1997
S&T Bancorp, Inc.
800 Philadelphia St.
P.O. Box 190
Indiana, PA 15701-3921
Ladies and Gentlemen:
Reference is made to the information set forth under the heading "PROPOSED
MERGER-Certain Federal Income Tax Consequences" contained in the Proxy
Statement/Prospectus, which is included in the Registration Statement on Form
S-4 (the "Registration Statement"), filed by S&T Bancorp, Inc. ("S&T") with
the Securities and Exchange Commission (the "SEC") in connection with the
proposed merger (the "Merger") of Peoples Bank of Unity with and into the S&T
Bank, a wholly owned subsidiary of S&T. The discussion under that heading, to
the extent it describes the legal opinion of Arnold & Porter, reflects our
opinion, subject to the facts, representations, assumptions and other conditions
described or referenced therein.
Our opinion is based on the case law, Internal Revenue Code, Treasury
Regulations and Internal Revenue Service rulings as they exist at the date
hereof. These authorities are all subject to change, and any such change may be
made with retroactive effect. We can give no assurance that, after such change,
our opinion would not be different. We undertake no responsibility to update or
supplement our opinion.
We hereby consent to the filing with the SEC of this opinion as an exhibit
to the Registration Statement and to the reference to our firm under the heading
"PROPOSED MERGER-Certain Federal Income Tax Consequences" contained therein.
In giving such consent, we do not thereby admit that we are in the category of
persons whose consent is required under Section 7 of the Securities Act of
1933.
Very truly yours,
ARNOLD & PORTER
<PAGE>
Exhibit 23.1
Consent of Independent Auditors
We consent to the references to our firm under the caption "Experts" in the
Registration Statement on Form S-4 and related Proxy Statement/Prospectus of S&T
Bancorp, Inc. for the registration of 3,036,075 shares of its common stock and
to the incorporation by reference therein of our report dated January 12, 1996,
with respect to the consolidated financial statements of S&T Bancorp, Inc.
included in its Annual Report (Form 10-K) for the year ended December 31, 1995,
filed with the Securities and Exchange Commission.
/s/ ERNST & YOUNG LLP
Pittsburgh, Pennsylvania
January 8, 1997
<PAGE>
[LETTERHEAD OF SNODGRASS, CERTIFIED PUBLIC ACCOUNTANTS APPEARS HERE]
Exhibit 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the use in this Registration Statement of S & T Bancorp, Inc. on
Form S - 4 of our report dated November 8, 1996, except for the second paragraph
of Note 15 as to which the date is November 25, 1996 (relating to the financial
statements of Peoples Bank of Unity as of December 31, 1995 and 1994 and for
each of the three years in the period ended December 31, 1995) appearing in the
Proxy Statement/Prospectus, which is part of this Registration Statement.
We also consent to the reference to us under the heading "Experts" in such Proxy
Statement/Prospectus.
/s/ S. R. Snodgrass, A.C.
Wexford, PA
January 7, 1997
<PAGE>
Exhibit 23.5
We hereby consent to the reference to our name appearing herein under the
captions entitled "Summary-Opinion of Peoples' Financial Advisor" and "Proposed
Merger-Background of the Merger" and "Opinion of Peoples' Financial Advisor."
We further consent to the use of our letter to the Board of Directors of Peoples
Bank of Unity concerning the fairness of the financial terms of the proposed
merger, appearing as Appendix B to the Proxy Statement/Prospectus contained
herein.
/s/ Arnold G. Danielson
--------------------------------------
Arnold G. Danielson, Chairman
Rockville, Maryland
January 10, 1997
<PAGE>
Exhibit 24
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that the undersigned directors of S&T
Bancorp, Inc., a corporation organized under the laws of the Commonwealth of
Pennsylvania (the "Corporation"), hereby constitutes and appoints James G.
Barone, Robert E. Rout, Catherine Collins McCoy and Paul D. Freshour and each of
them (with full power to each of them to act alone), his or her true and lawful
attorneys-in-fact and agents with full power of substitution and resubstitution,
for him or her and on his or her behalf and in his or her name, place and stead,
in any and all capacities, to sign execute and file with the Securities and
Exchange Commission (or any other governmental or regulatory authority) a
Registration Statement on Form S-4 (or any other appropriate form), any and all
amendments (including post-effective amendments) thereto, with all exhibits and
any and all documents required to be filed with respect thereto, relating to the
registration under the Securities Act of 1933, as amended, of shares of the
Corporation's common stock authorized to be issued in connection with the
Corporation's acquisition of Peoples Bank of Unity, granting unto said
attorneys, and each of them, full power and authority to do and to perform each
and every act and thing requisite and necessary to be done in order to
effectuate the same as fully to all intents and purposes as he himself or she
herself might or could do if personally present, hereby ratifying and confirming
all that said attorneys-in-fact and agents, or any of them, may lawfully do or
cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned directors and/or officer has hereunto
set his or her hands as of the date specified.
Dated: January 3, 1997
/s/ James L. Carino /s/ James C. Miller
- ------------------------------- -----------------------------------
James L. Carino James C. Miller
/s/ John J. Delaney /s/ W. Parker Ruddock
- ------------------------------- -----------------------------------
John J. Delaney Judge W. Parker Ruddock
/s/ Robert D. Duggan /s/ Charles A. Spadafora
- ------------------------------- -----------------------------------
Robert D. Duggan Charles A. Spadafora
/s/ Thomas W. Garges, Jr. /s/ Christine J. Toretti
- ------------------------------- -----------------------------------
Thomas W. Garges, Jr. Christine J. Toretti
/s/ William J. Gatti
- -------------------------------
William J. Gatti
<PAGE>
EXHIBIT 99.1
REVOCABLE PROXY
PEOPLES BANK OF UNITY
SPECIAL MEETING OF SHAREHOLDERS
APRIL 18, 1997
The undersigned hereby appoints , and of Peoples
Bank of Unity ("Peoples") or any successors, with full powers of substitution,
to act as attorneys and proxies for the undersigned to vote all shares of the
common stock of Peoples ("Peoples Common Stock") which the undersigned is
entitled to vote at the Special Meeting of Shareholders (the "Meeting"), to be
held at Alcoma Golf Club, located at 6770 Saltsburg Road, Pittsburgh,
Pennsylvania, on April 18, 1997, at 2:00 p.m. Eastern Standard Time and at any
and all adjournments thereof, as follows:
1. To consider and vote upon the approval of the Agreement and Plan of
Reorganization and related Agreement and Plan of Merger (collectively the
"Agreement") among Peoples, S&T Bancorp, Inc. ("S&T") and S&T Bank which
provides for the merger of Peoples with and into S&T Bank, a wholly owned
subsidiary bank of S&T (the "Merger"), pursuant to which immediately prior to
the Effective Date, each share of Peoples Common Stock, par value $10.00 per
share, will be converted and exchanged for 26.25 shares of common stock of
S&T, par value $2.50 per share, and cash in lieu of any fractional share
determined in accordance with the terms of the Agreement; and
2. To transact such other business as may properly come before the meeting
or any adjournment thereof.
Only shareholders of record as of the close of business on , 1997
are entitled to notice of and to vote at such meeting or any adjournment
thereof.
FOR [_] AGAINST [_] ABSTAIN [_]
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF THE AGREEMENT.
<PAGE>
- -------------------------------------------------------------------------------
THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS ARE SPECIFIED,
THIS PROXY WILL BE VOTED FOR APPROVAL OF THE AGREEMENT. IF ANY OTHER BUSINESS
IS PRESENTED AT THE MEETING, INCLUDING MATTERS RELATING TO THE CONDUCT OF THE
MEETING, THIS PROXY WILL BE VOTED BY THOSE NAMED IN THIS PROXY IN ACCORDANCE
WITH THE DETERMINATION OF A MAJORITY OF THE BOARD OF DIRECTORS. AT THE PRESENT
TIME, THE BOARD OF DIRECTORS KNOWS OF NO OTHER BUSINESS TO BE PRESENTED AT THE
MEETING.
- -------------------------------------------------------------------------------
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
Should the undersigned be present and elect to vote at the Meeting or at any
adjournment thereof and after notification to the Secretary of Peoples at the
Meeting of the shareholder's decision to terminate this proxy, then the power
of said attorneys and proxies shall be deemed terminated and of no further
force and effect.
The undersigned acknowledges receipt from Peoples prior to the execution of
this proxy of the Notice of Meeting and the Proxy Statement/Prospectus. The
undersigned hereby revokes any and all proxies heretofore given with respect
to the undersigned's shares of Peoples Common Stock.
Dated: , 1997
---------
-------------------------------
PRINT NAME OF SHAREHOLDER
-------------------------------
SIGNATURE OF SHAREHOLDER
Please sign exactly as your name
appears on this card. When signing as
attorney, executor, administrator,
trustee or guardian, please give your
full title. If shares are held
jointly, each holder should sign.
PLEASE COMPLETE, DATE, SIGN AND MAIL THIS PROXY PROMPTLY IN THE ENCLOSED
POSTAGE-PREPAID ENVELOPE.
