<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 19, 1997
REGISTRATION NO. 333-19575
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
PRE-EFFECTIVE AMENDMENT NO. 3 TO
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 and Reasons for
the Merger; Recommendations of the
Boards of Directors
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
Counsel.......................... Experts; Legal Opinions
9. Disclosure of Commission Position
on Indemnification for
Securities Act Liabilities....... Undertakings
10. Information with Respect to S-3
Registrants...................... Introduction; The Companies; Available
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
Companies........................ Not Applicable
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
and Reasons for the Merger;
Recommendations of the Boards of
Directors; 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]
March , 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 March , 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 carefully read the Proxy Statement/Prospectus and 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 March 10, 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 D to
the accompanying Proxy Statement/Prospectus.
By Order of the Board of Directors,
.....................................
Russell P. Miller
President
Pittsburgh, Pennsylvania
March , 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
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
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.............................. 5
Interests of Certain Persons in the Merger.............................. 6
Reasons for the Merger; Recommendations of the Boards of Directors...... 6
Opinions of Financial Advisors.......................................... 7
Vote Required........................................................... 7
Dissenters' Rights...................................................... 8
Conditions; Termination................................................. 8
Regulatory Approvals.................................................... 9
Certain Federal Income Tax Consequences................................. 10
Accounting Treatment.................................................... 11
Effective Date of the Merger............................................ 11
Surrender of Certificates............................................... 11
Principal Differences in the Rights of Shareholders..................... 11
Markets and Market Prices............................................... 12
Comparative Per Share Data.............................................. 14
Selected Financial Data................................................. 15
Pro Forma Combined Financial Information.................................. 19
Meeting Information....................................................... 23
Date, Place and Time.................................................... 23
Record Date; Voting Rights.............................................. 23
Voting and Revocation of Proxies........................................ 24
Solicitation of Proxies................................................. 24
Proposed Merger........................................................... 24
Background of and Reasons for the Merger; Recommendations of the Boards
of Directors........................................................... 24
Terms of the Merger..................................................... 28
Opinions of Financial Advisors.......................................... 29
Interests of Certain Persons in the Merger.............................. 35
Surrender of Certificates............................................... 37
Representation and Warranties; Conditions to the Merger; Waiver......... 37
Regulatory Approvals.................................................... 38
Business Pending the Merger............................................. 39
Effective Date of the Merger; Termination............................... 39
Management and Operations After the Merger.............................. 40
Rights of Dissenting Shareholders....................................... 40
Certain Differences in the Rights of Shareholders....................... 41
Certain Federal Income Tax Consequences................................. 43
Resale of S&T Common Stock.............................................. 45
Accounting Treatment.................................................... 46
Certain Information Regarding Peoples..................................... 46
Business................................................................ 46
Competition............................................................. 47
Supervision and Regulation.............................................. 47
Effect of Government Monetary Policies.................................. 47
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Legislation and Regulatory Changes..................................... 47
Legal Proceedings...................................................... 48
Environmental Issues................................................... 48
Peoples Common Stock Prices and Dividends.............................. 48
Dividend Restrictions on Peoples....................................... 48
Directors of Peoples................................................... 49
Principal Officers of Peoples.......................................... 49
Remuneration of Directors and Officers................................. 50
Compensation Table..................................................... 50
Beneficial Ownership by Officers and Directors......................... 51
Retirement Plans....................................................... 51
Certain Transactions................................................... 52
Principal Owners of Peoples Voting Securities.......................... 52
Experts.................................................................. 53
Legal Opinion............................................................ 53
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--Opinion of McDonald & Company Securities, Inc.
Appendix D--The Dissent Statute, Section 1222 of the Pennsylvania Banking Code
and Sections 1930 and 1571-1580 of the Pennsylvania Business
Corporations Act
</TABLE>
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
March , 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 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 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 SNL All Bank Index (the "Index
Value") on the Determination Date shall be greater than 231.70 (i.e., 80% of
the value of the Index Value 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.
The following table illustrates Peoples' termination rights based on
variations in the Average Closing Price.
<TABLE>
<CAPTION>
AVERAGE
CLOSING PRICE
OF S&T COMMON
STOCK PEOPLES TERMINATION RIGHTS
------------- ----------------------------------------
<S> <C>
Below $23.325 Peoples has absolute right to terminate
Agreement. (Index Value is irrelevant.)
$23.325-$24.88 Peoples may terminate Agreement only if
Index Value is greater than 231.70
Above $24.88 Peoples may not terminate the Agreement.
(Index Value is irrelevant.)
</TABLE>
<PAGE>
Assuming the planned Effective Date were February 27, 1997, the
Determination Date would have been February 20, 1997. Using this assumed
Determination Date, the Average Closing Price of shares of S&T Common Stock
would have been $34.52 and the Index Value was 319.257. Under such
circumstances, Peoples would not have had the right to terminate the
Agreement, even though the Index Value was above 231.70, because the Average
Closing Price would have been above $24.88.
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.
For a more complete description of the Agreement and the terms of the
Merger, see "PROPOSED MERGER."
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. Peoples is not a reporting
company under the Securities Exchange of 1934, as amended (the "Exchange
Act"). 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 March , 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.
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 March , 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 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. ANY REQUESTED DOCUMENT
WILL BE SENT BY FIRST CLASS MAIL OR OTHER EQUALLY PROMPT MEANS WITHIN ONE
BUSINESS DAY AFTER RECEIPT OF SUCH REQUEST. 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, 1996; and (ii) 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 December
31, 1996, S&T reported consolidated assets of $1.5 billion and shareholders'
equity of $176 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 December 31, 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 December 31, 1996,
Peoples reported assets of approximately $291 million, deposit liabilities of
approximately $238 million and shareholders' equity of approximately $50
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 March 10, 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: (1) the Average
Closing Price of shares of S&T Common Stock shall be less than $24.88; and
(2) the Index Value on the Determination Date shall be greater than 231.70
(i.e., 80% of the value of the Index Value 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.
Assuming the planned Effective Date were February 27, 1997, the Determination
Date would have been February 20, 1997. Using this assumed Determination Date,
the Average Closing Price of shares of S&T Common Stock would have been $34.52
and the Index Value was 319.257. Under such circumstances Peoples would not
have the right to terminate the Agreement, even though the Index Value is above
231.70, because the Average Closing Price would have been above $24.88.
For a more complete description of the Agreement and the terms of the Merger,
see "PROPOSED MERGER--Terms of the Merger."
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
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immediately prior to the Effective Date together with three Directors to be
designated by Peoples. The Peoples Board has selected Ruth M. Grant, Frank W.
Jones, and Myles D. Sampson 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. All employees of Peoples as of the Effective Date will become employees
of S&T Bank and such employees will receive benefits which in the aggregate are
no less favorable than those generally afforded to other S&T Bank employees
holding similar positions. The Peoples Board has adopted a temporary special
early retirement incentive program and a discretionary employment transition
plan. Implementation of these plans is conditioned upon the consummation of the
Merger. Benefits under the early retirement plan, which is open to eligible
employees age 55 or older, will be based primarily on the employees' age, years
of service and compensation rates near retirement. Benefits under the
discretionary employment transition plan will be based on the employees' years
of service and compensation. None of the directors or executive officers of
Peoples will receive benefits pursuant to the temporary special early
retirement plan or the discretionary employment transition plan. Ernest J.
Draganza, the current Chief Executive Officer of Peoples, has been offered a
position with S&T Bank in which he will be compensated at his current rate of
salary. See "CERTAIN INFORMATION REGARDING PEOPLES--Compensation Table."
For a period of three years after the Effective Date, 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. In addition, the
Agreement provides that three current directors of Peoples shall become
directors of S&T upon the effectiveness of the Merger. The Peoples Board has
elected Ruth M. Grant, Frank W. Jones and Myles D. Sampson to become directors
of S&T in accordance with the Agreement. Effective January 1, 1997, nonemployee
directors of S&T are paid a retainer of $3,000 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.
Other than these employment, indemnification and director compensation
provisions, and the Merger Consideration to be received in exchange for their
shares of Peoples Common Stock, the officers and directors of Peoples will not
receive any consideration as a result of the Merger. See "PROPOSED MERGER--
Interests of Certain Persons in the Merger" and "--Management and Operations
after the Merger."
REASONS FOR THE MERGER; RECOMMENDATIONS OF THE BOARDS OF DIRECTORS
THE BOARDS OF DIRECTORS OF PEOPLES AND S&T HAVE UNANIMOUSLY ADOPTED
RESOLUTIONS APPROVING THE AGREEMENT, AND IN THE CASE OF S&T, RELATED ISSUANCE
OF SHARES OF S&T COMMON STOCK, AND UNANIMOUSLY RECOMMEND ADOPTION OF THE
AGREEMENT BY THEIR RESPECTIVE SHAREHOLDERS. The Peoples Board and S&T Board
each believe that the terms of the Agreement are fair and in the best interests
of their respective institutions and shareholders. Each member of the Peoples
Board and S&T Board also determined that the Exchange Ratio is fair and
reasonable to their respective 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 their decisions to approve the Agreement, the Peoples
Board and S&T Board each consulted with their respective legal advisors,
regarding the legal terms of the Agreement and the Board of Directors'
obligations in their respective consideration thereof, and with their
respective financial advisors, regarding the financial terms and fairness, from
a financial point of view, of the conversion and exchange of the Peoples Common
Stock for S&T Common Stock.
6
<PAGE>
In reaching its determination, the Peoples Board considered a number of
factors, including, without limitation: Peoples' business, financial condition,
results of operations, and prospects; the current and prospective environment
in which Peoples operates; the business, financial condition, results of
operations, market valuations and acquisition history of S&T; a comparison of
the products and services provided by Peoples and S&T; the anticipated tax-free
receipt of shares of S&T Common Stock in the Merger; the absence of an
established trading market for the Peoples Common Stock; Peoples' ability to
terminate the Agreement if Peoples does not receive a fairness opinion from
Danielson Associates as of the date of this Proxy Statement/Prospectus; and
Peoples' ability 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
"PROPOSED MERGER--Background of and Reasons for the Merger; Recommendations of
the Boards of Directors."
In reaching its decision to approve the Merger, the S&T Board considered a
number of factors, among which were: (i) S&T's business, operations, financial
condition, earnings, and acquisition strategy, including the desirability of
achieving an expand market presence in Allegheny County in Western
Pennsylvania; (ii) the current and prospective economic, regulatory and
competitive climate facing community banking institutions such as S&T,
including the consolidation currently underway in the banking industry and
competition from larger institutions and from nonbank providers of financial
services; (iii) the presentations by S&T management and McDonald & Company
Securities, Inc. ("McDonald & Company") as to the business, operations, asset
quality, earnings and financial condition of Peoples and the competitive
position of Peoples; (iv) the anticipated cost savings, revenue enhancements
and other economic synergies available to the combined institution; (v) the
common philosophies and cultures of S&T and Peoples, particularly with respect
to the customer satisfaction, efficiency and credit quality; (vi) the Exchange
Ratio and the opinion of McDonald & Company that the Exchange Ratio is fair to
S&T from a financial point of view; (vii) the terms of the Agreement; and
(viii) the impact of anticipated restructuring charges on S&T's earnings, and
the fact that the Merger is expected to be accretive to S&T's earnings within
twelve months after the Effective Date. See "PROPOSED MERGER--Background of and
Reasons for the Merger; Recommendations of the Boards of Directors."
OPINIONS OF FINANCIAL ADVISORS
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 was fair, from a
financial point of view, to Peoples shareholders as of such date. In the course
of preparing its opinion, Danielson Associates reviewed and analyzed, among
other things, the historical and current financial condition and results of
operations of Peoples and S&T and the prices paid for Pennsylvania banks and
other high capital banks with similar characteristics to Peoples. 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--Opinions of the
Financial Advisors."
McDonald & Company, financial advisor to S&T, has delivered to the S&T Board
its written opinion, as of the date of this Proxy Statement/Prospectus, that
the Exchange Ratio was fair, from a financial point of view, to S&T's
shareholders as of such date. In connection with rendering its opinion,
McDonald & Company considered a variety of financial analyses, including
comparison with selected companies, contribution analysis, pro forma merger
analyses, analysis of selected merger transactions, discounted cash flow
analysis and other such analyses. The full text of such opinion which sets
forth the assumptions made, matters considered and limits on the review
undertaken by McDonald & Company, is attached hereto as Appendix C.
Shareholders are urged to read the opinion in its entirety. McDonald &
Company's opinion is directed only to the financial attributes of the Exchange
Ratio and does not constitute a recommendation to any shareholder of S&T as to
how such shareholder should vote with respect to the Merger. See "PROPOSED
MERGER--Opinions of Financial Advisors."
7
<PAGE>
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.
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
instructions 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.
Directors and executive officers of Peoples and affiliates of such persons
had sole or shared voting power with respect to 35,396 shares of Peoples Common
Stock, representing 30.60% of Peoples Common Stock outstanding as of the
Peoples Record Date.
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 35,376 (30.59% 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 35,396 shares of outstanding Peoples Common Stock (30.60%) as
of the Peoples Record Date, vote their shares in favor of the Agreement, the
affirmative vote of holders of approximately 41,711 additional shares of
Peoples Common Stock (36.06%) 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 D 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
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<PAGE>
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.
Other conditions to the obligations of S&T and Peoples to consummate the
Merger include: (i) the absence of orders prohibiting the Merger; (ii) the
effectiveness under the Securities Act of 1933, as amended (the "Securities
Act") of the registration statement of which this Proxy Statement/Prospectus is
a part and the absence of any proceeding by the SEC to suspend such
effectiveness; (iii) the approval for listing on the Nasdaq National Market of
the shares of S&T Common Stock to be issued in the Merger; (iv) the receipt of
the tax opinion described under "PROPOSED MERGER--Certain Federal Income Tax
Consequences;" (v) the receipt of all necessary permits and authorizations;
(vi) 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 Accounting Principles Board Opinion No. 16 ("APB No. 16");
(vii) 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
(viii) the receipt of other customary closing documents.
All corporate actions required to be taken by S&T and Peoples, except the
approval by their respective shareholders, in connection with the Agreement and
the Merger have been taken. The Merger was approved by the Federal Deposit
Insurance Corporation (the "FDIC") and the Commonwealth of Pennsylvania
Department of Banking (the "PADB") on February 12, 1997, and S&T and Peoples
are aware of no other required regulatory approvals. The Registration Statement
was declared effective by the Commission on March , 1997. Peoples has received
an opinion from Danielson Associates dated the date of this Proxy
Statement/Prospectus that the consideration to be received by Peoples'
shareholders is fair from a financial point of view. Whether the other
conditions to closing will be satisfied or waived cannot be known with
certainty until the Effective Date.
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."
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 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
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<PAGE>
may not be consummated until applicable periods have lapsed after FDIC approval
is received. The Merger also requires the approval of the PADB. S&T filed the
necessary application seeking the PADB's approval. Both the FDIC and the PADB
applications were approved on February 12, 1997. See "PROPOSED MERGER--
Regulatory Approvals."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of 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
particular federal (and any applicable state, local, foreign or other) tax
consequences of the Merger to such shareholder.
S&T and Peoples have received an opinion from Arnold & Porter concerning
anticipated material 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.
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 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.
Additional federal income tax consequences of the Merger, including the
federal income tax consequences to shareholders who 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 any amount allocable to a fractional share
interest for which cash is received, and the holding period
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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.
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 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."
PRINCIPAL 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
Pennsylvania Business Corporations Act, 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 Pennsylvania Banking
Code and the Pennsylvania Business Corporations Act, (the "Peoples By-Laws").
The following summary contains a summary of certain of the principal
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.
The most significant principal differences between the rights of shareholders
of S&T and Peoples concern cumulative voting for directors, the classification
of directors, shareholder action, preferred stock, dissenters' rights and
provisions permitting the amendment of bylaws. Pursuant to the S&T Articles,
S&T shareholders are not permitted to cumulate votes with respect to the
election of directors; the Peoples By-Laws permit shareholders to cumulate
votes with respect to the election of directors. Pursuant to the S&T By-Laws,
the S&T Directors are divided into three (3) classes; neither the Peoples By-
Laws nor Peoples Articles contain provisions concerning classification of
Peoples Directors. The S&T Articles provide that no merger, consolidation,
liquidation, dissolution or sale of substantially all of 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. Neither
the Peoples By-Laws nor the Peoples Articles require a supermajority vote to
approve extraordinary corporate transactions (although a two-thirds vote
requirement for a merger or consolidation will be is imposed by the
Pennsylvania Banking Code in the limited circumstances of a merger or
consolidation if the surviving entity is
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subject to such code). S&T is authorized to issue preferred stock under the S&T
Articles; Peoples is not authorized to issue preferred stock. The S&T By-Laws
may be amended by the S&T Board, while the Peoples By-Laws may only be amended
by shareholder action. Finally, holders of Peoples Common Stock have
dissenters' rights, but holders of S&T Common Stock generally do not have such
rights because there are more than 2,000 holders of S&T Common Stock.
For a more detailed discussion of the differences in the rights of
shareholders of S&T 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 December 31, 1996, there were 2,606 holders of record of
S&T Common Stock, and 11,074,941 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.
<TABLE>
<CAPTION>
QUARTER ENDED HIGH LOW DIVIDENDS
- ------------- ------- ------- ---------
<S> <C> <C> <C>
March 31, 1997
(through March 17, 1997)............................. $36 3/4 $29 3/4 $.25
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, which was paid in January
1997.
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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 March 17, 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
March 17, 1997........................................ $33.75 $885.94
</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.
13
<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
Year Ended
December 31, 1996........ $ 2.10 $ 43.16 $ 2.00 $ 52.50
December 31, 1995........ 1.82 37.81 1.74 45.68
December 31, 1994........ 1.63 39.15 1.60 42.00
DIVIDENDS DECLARED PER
COMMON SHARE
Year Ended
December 31, 1996........ $ .94 $ 12.56 -- $ 24.68
December 31, 1995........ .74 7.70 -- 19.42
December 31, 1994........ .61 7.00 -- 16.01
BOOK VALUE PER COMMON SHARE
At December 31, 1996..... $15.92 $430.94 $16.02 $420.53
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.
14
<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, 1996 are derived from the audited financial statements of
S&T. Certain of the selected financial data for the four years in the period
ended December 31, 1996 are derived from the audited financial statements of
Peoples and certain of the selected financial data for the years ended December
31, 1992 are derived from unaudited financial statements of Peoples. 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."
15
<PAGE>
S&T BANCORP, INC.
SELECTED HISTORICAL FINANCIAL DATA
(IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------------
1996 1995 1994 1993 1992
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT:
Interest income......... $ 111,431 $107,017 $ 92,654 $ 86,923 $ 89,056
Interest expense........ 51,544 49,998 39,346 36,965 43,099
---------- ---------- ---------- ---------- ----------
Net interest income..... 59,887 57,019 53,308 49,958 45,957
Provision for loan loss-
es..................... 4,300 3,800 3,500 3,600 5,778
---------- ---------- ---------- ---------- ----------
Net interest income af-
ter provision for loan
losses................. 55,587 53,219 49,808 46,358 40,179
Noninterest income...... 11,194 8,309 6,914 6,571 6,362
Noninterest expense..... 35,511 33,523 31,595 30,768 27,374
---------- ---------- ---------- ---------- ----------
Income before income
taxes.................. 31,270 28,005 25,127 22,161 19,167
Applicable income taxes. 8,021 7,536 6,683 5,818 4,886
---------- ---------- ---------- ---------- ----------
Net income.............. $ 23,249 $ 20,469 $ 18,444 $ 16,343 $ 14,281
========== ========== ========== ========== ==========
PER SHARE DATA:
Net income.............. $ 2.10 $ 1.82 $ 1.63 $ 1.45 $ 1.28
Dividends declared...... 0.94 0.74 0.61 0.50 0.40
Book value.............. 15.92 14.85 12.57 10.75 9.73
BALANCE SHEET TOTALS
(PERIOD END):
Total assets............ $1,495,945 $1,400,702 $1,293,737 $1,194,037 $1,106,755
Securities.............. 381,945 350,340 306,124 339,129 355,197
Net loans............... 1,029,085 960,881 910,077 783,229 679,960
Total deposits.......... 1,032,274 979,625 903,240 898,258 899,597
Securities sold under
repurchase agreements.. 114,205 122,794 169,871 127,731 85,013
Other liabilities....... 173,190 131,336 79,039 46,955 13,199
Total shareholders' eq-
uity................... 176,276 166,947 141,587 121,093 108,946
SELECTED RATIOS:
FINANCIAL PERFORMANCE
Return on average as-
sets................... 1.63% 1.54% 1.49% 1.43% 1.32%
Return on average equi-
ty..................... 13.75% 13.21% 13.03% 14.14% 13.77%
CAPITAL
Tier I risk based capi-
tal.................... 13.08% 13.73% 13.05% 14.08% 15.38%
Total risk based capi-
tal.................... 14.33% 14.98% 14.30% 15.33% 16.63%
Leverage................ 10.28% 10.38% 10.21% 9.95% 9.70%
Average equity to aver-
age assets............. 11.87% 11.54% 11.44% 10.14% 9.55%
Dividend payout ratio... 42.90% 38.43% 34.85% 32.28% 29.35%
LOAN QUALITY
Allowance as a percent
of loans............... 1.63% 1.63% 1.55% 1.69% 1.74%
Allowance as a percent
of nonperforming loans. 206% 560% 746% 481% 335%
Nonperforming loans to
total loans............ 0.79% 0.29% 0.21% 0.35% 0.52%
</TABLE>
16
<PAGE>
PEOPLES BANK OF UNITY
SELECTED HISTORICAL FINANCIAL DATA
(IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------
1996 1995 1994 1993 1992
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT:
Interest income.............. $ 21,011 $ 20,003 $ 19,905 $ 20,224 $ 18,533
Interest expense............. 7,045 7,679 7,297 7,479 7,843
-------- -------- -------- -------- --------
Net interest income.......... 13,966 12,324 12,608 12,745 10,690
Provision for loan losses.... 875 420 100 65 110
-------- -------- -------- -------- --------
Net interest income after
provision for loan losses... 13,091 11,904 12,508 12,680 10,580
Noninterest income........... 803 838 697 565 550
Noninterest expense.......... 6,887 6,753 7,084 6,361 5,520
-------- -------- -------- -------- --------
Income before income taxes... 7,007 5,989 6,121 6,884 5,610
Applicable income taxes...... 2,015 1,616 1,593 1,813 1,375
-------- -------- -------- -------- --------
Net income................... $ 4,992 $ 4,373 $ 4,528 $ 5,071 $ 4,235
======== ======== ======== ======== ========
PER SHARE DATA:
Net income................... $ 43.16 $ 37.81 $ 39.15 $ 43.84 $ 36.62
Dividends declared........... 12.56 7.70 7.00 5.80 5.60
Book value................... 430.94 407.29 356.64 320.74 282.69
BALANCE SHEET TOTALS (PERIOD
END):
Total assets................. $291,100 $289,026 $286,515 $293,491 $259,919
Securities................... 118,116 141,896 160,751 170,831 161,723
Net loans.................... 152,322 125,436 101,088 93,732 80,275
Total deposits............... 238,093 236,922 239,331 253,668 225,125
Other liabilities............ 3,165 4,997 5,935 2,726 2,098
Total shareholders' equity... 49,842 47,107 41,249 37,097 32,696
SELECTED RATIOS:
FINANCIAL PERFORMANCE
Return on average assets..... 1.74% 1.54% 1.58% 1.83% 1.80%
Return on average equity..... 10.39% 10.04% 11.50% 14.60% 13.74%
CAPITAL
Tier I risk based capital.... 30.90% 30.58% 32.41% 31.12% 31.48%
Total risk based capital..... 31.99% 31.36% 33.07% 31.76% 32.20%
Leverage..................... 16.65% 15.56% 14.20% 13.39% 13.91%
Average equity to average
assets...................... 16.72% 15.30% 13.70% 12.54% 13.12%
Dividend payout ratio........ 29.11% 20.38% 17.89% 13.23% 15.30%
LOAN QUALITY
Allowance as a percent of
loans....................... 1.09% 0.89% 0.82% 0.81% 0.93%
Allowance as a percent of
nonperforming loans......... 84.81% 59.19% 42.49% 74.20% 49.87%
Nonperforming loans to total
loans....................... 1.29% 1.50% 1.93% 1.09% 1.87%
</TABLE>
17
<PAGE>
S&T BANCORP, INC.
SELECTED PRO FORMA COMBINED FINANCIAL DATA
(IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------------
1996 1995 1994 1993 1992
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT:
Interest income......... $ 132,442 $ 127,020 $ 112,559 $ 107,147 $ 107,589
Interest expense........ 58,589 57,677 46,643 44,444 50,942
---------- ---------- ---------- ---------- ----------
Net interest income..... 73,853 69,343 65,916 62,703 56,647
Provision for loan loss-
es..................... 5,175 4,220 3,600 3,665 5,888
---------- ---------- ---------- ---------- ----------
Net interest income
after provision for
loan losses............ 68,678 65,123 62,316 59,038 50,759
Noninterest income...... 11,997 9,147 7,611 7,136 6,912
Noninterest expense..... 42,398 40,276 38,679 37,129 32,894
---------- ---------- ---------- ---------- ----------
Income before income
taxes.................. 38,277 33,994 31,248 29,045 24,777
Applicable income taxes. 10,036 9,152 8,276 7,631 6,261
---------- ---------- ---------- ---------- ----------
Net income.............. $ 28,241 $ 24,842 $ 22,972 $ 21,414 $ 18,516
========== ========== ========== ========== ==========
PER SHARE DATA:
Net income.............. $ 2.00 $ 1.74 $ 1.60 $ 1.50 $ 1.30
Book value.............. 16.02 14.99 12.78 11.07 9.95
BALANCE SHEET TOTALS
(PERIOD END):
Total assets............ $1,787,045 $1,689,728 $1,580,252 $1,487,528 $1,366,674
Securities.............. 500,061 492,236 466,875 509,960 516,920
Net loans............... 1,181,407 1,086,317 1,011,165 876,961 760,235
Total deposits.......... 1,270,367 1,216,547 1,142,571 1,151,926 1,124,722
Securities sold under
repurchase agreements.. 114,205 122,794 169,871 127,731 85,013
Other liabilities....... 176,355 136,333 84,974 49,681 15,297
Total shareholders'
equity................. 226,118 214,054 182,836 158,190 141,642
SELECTED RATIOS:
FINANCIAL PERFORMANCE
Return on average
assets................. 1.65% 1.53% 1.51% 1.51% 1.40%
Return on average
equity................. 13.01% 12.51% 12.70% 14.25% 13.76%
CAPITAL
Tier I risk based
capital................ 15.16% 15.76% 15.20% 16.17% 17.46%
Total risk based
capital................ 16.39% 16.96% 16.38% 17.34% 18.64%
Leverage................ 11.31% 11.26% 10.94% 10.59% 10.36%
Average equity to
average assets......... 12.68% 12.20% 11.86% 10.61% 10.19%
Dividend payout ratio... 40.46% 35.25% 31.50% 27.77% 26.13%
LOAN QUALITY
Allowance as a percent
of loans............... 1.56% 1.55% 1.48% 1.60% 1.65%
Allowance as a percent
of nonperforming loans. 182% 359% 390% 406% 284%
Nonperforming loans to
total loans............ 0.86% 0.43% 0.38% 0.39% 0.58%
</TABLE>
18
<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 People's
shareholders will receive in the Merger 3,036,075 shares of S&T Common Stock
for 115,660 shares of Peoples Common Stock outstanding, or an Exchange Ratio
of 26.25 shares of S&T Common Stock for each share of Peoples Common Stock.
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 DECEMBER 31, 1996 AND 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 December 31, 1996 and 1995 and (ii) the pro forma combined
condensed balance sheet of S&T as of such dates, after giving effect to the
Merger. The pro forma information has been prepared assuming that People's
shareholders will receive in the Merger 3,036,075 shares of S&T Common Stock
for 115,660 shares of Peoples Common Stock outstanding, or an Exchange Ratio
of 26.25 shares of S&T Common Stock for each share of Peoples Common Stock.
The Merger has been reflected as a pooling-of-interest effective as of
December 31, 1996 and 1995. See "PROPOSED MERGER--Accounting Treatment." 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 YEARS ENDED DECEMBER
31, 1996, 1995 AND 1994.
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
pro forma information has been prepared assuming that People's shareholders
will receive in the Merger 3,036,075 shares of S&T Common Stock for 115,660
shares of Peoples Common Stock outstanding, or an Exchange Ratio of 26.25
shares of S&T Common Stock for each share of Peoples Common Stock. 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
years ended December 31, 1996, 1995 and 1994 were prepared on the assumption
that the Merger had been effected as of January 1, 1996, 1995 and 1994,
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 in this Proxy Statement/Prospectus.
See "AVAILABLE INFORMATION; CERTAIN DOCUMENTS INCORPORATED BY REFERENCE" and
"INDEX TO FINANCIAL INFORMATION."
19
<PAGE>
S&T BANCORP, INC.
PRO FORMA COMBINED BALANCE SHEET
(IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
DECEMBER 31, 1996
-------------------------------
PRO FORMA
S&T BANCORP PEOPLES COMBINED
ASSETS ----------- -------- ----------
<S> <C> <C> <C>
Securities...................................... $ 381,945 $118,116 $ 500,061
Net loans....................................... 1,029,085 152,322 1,181,407
Other assets.................................... 84,915 20,662 105,577
---------- -------- ----------
TOTAL ASSETS.................................. $1,495,945 $291,100 $1,787,045
========== ======== ==========
LIABILITIES
Total deposits.................................. $1,032,274 $238,093 $1,270,367
Securities sold under repurchase agreements..... 114,205 114,205
Other liabilities............................... 173,190 3,165 176,355
---------- -------- ----------
TOTAL LIABILITIES............................. 1,319,669 241,258 1,560,927
SHAREHOLDERS' EQUITY
Common stock and Additional paid-in-capital..... 41,485 14,701 56,186
Retained earnings............................... 124,847 33,135 157,982
Other equity.................................... 9,944 2,006 11,950
---------- -------- ----------
TOTAL SHAREHOLDERS' EQUITY.................... 176,276 49,842 226,118
---------- -------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY.... $1,495,945 $291,100 $1,787,045
========== ======== ==========
BOOK VALUE PER SHARE............................ $ 15.92 $ 430.94 $ 16.02
========== ======== ==========
SHARES OUTSTANDING.............................. 11,075 116 14,111
========== ======== ==========
</TABLE>
20
<PAGE>
S&T BANCORP, INC.
PRO FORMA COMBINED BALANCE SHEET
(IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
DECEMBER 31, 1995
-------------------------------
PRO FORMA
S&T BANCORP 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
========== ======== ==========
SHARES OUTSTANDING.............................. 11,243 116 14,279
========== ======== ==========
</TABLE>
21
<PAGE>
S&T BANCORP, INC.
PRO FORMA COMBINED INCOME STATEMENT
(IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
DECEMBER 31, 1996
-----------------------------
PRO FORMA
S&T BANCORP PEOPLES COMBINED
----------- ------- ---------
<S> <C> <C> <C>
Interest income.................................. $111,431 $21,011 $132,442
Interest expense................................. 51,544 7,045 58,589
-------- ------- --------
Net interest income.............................. 59,887 13,966 73,853
Provision for loan losses........................ 4,300 875 5,175
-------- ------- --------
NET INTEREST INCOME AFTER PROVISION FOR LOAN
LOSSES.......................................... 55,587 13,091 68,678
Noninterest income............................... 11,194 803 11,997
Noninterest expense.............................. 35,511 6,887 42,398
-------- ------- --------
INCOME BEFORE INCOME TAXES....................... 31,270 7,007 38,277
Applicable income taxes.......................... 8,021 2,015 10,036
-------- ------- --------
NET INCOME....................................... $ 23,249 $ 4,992 $ 28,241
======== ======= ========
PER SHARE DATA:
Net Income....................................... $ 2.10 $ 43.16 $ 2.00
======== ======= ========
Shares Outstanding............................... 11,073 116 14,111
======== ======= ========
<CAPTION>
DECEMBER 31, 1995
-----------------------------
PRO FORMA
S&T BANCORP PEOPLES COMBINED
----------- ------- ---------
<S> <C> <C> <C>
Interest income.................................. $107,017 $20,003 $127,020
Interest expense................................. 49,998 7,679 57,677
-------- ------- --------
NET INTEREST INCOME.............................. 57,019 12,324 69,343
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
======== ======= ========
Shares Outstanding............................... 11,243 116 14,280
======== ======= ========
<CAPTION>
DECEMBER 31, 1994
-----------------------------
PRO FORMA
S&T BANCORP PEOPLES COMBINED
----------- ------- ---------
<S> <C> <C> <C>
Interest income.................................. $ 92,654 $19,905 $112,559
Interest expense................................. 39,346 7,297 46,643
-------- ------- --------
NET INTEREST INCOME.............................. 53,308 12,608 65,916
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
======== ======= ========
Shares Outstanding............................... 11,284 116 14,320
======== ======= ========
</TABLE>
22
<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 March 10, 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 35,376 (30.59% 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 35,396 shares of outstanding Peoples Common Stock (30.60%) as of
the Peoples Record Date, vote their shares in favor of the Agreement, the
affirmative vote of holders of approximately 41,711 additional shares of
Peoples Common Stock (36.06%) will be required to approve the Agreement.
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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 AND REASONS FOR THE MERGER; RECOMMENDATIONS OF THE BOARDS OF
DIRECTORS
S&T. S&T has a long and successful history of providing community banking
services in its core markets of Indiana, Jefferson and Clearfield Counties of
Pennsylvania. In 1991, S&T purchased Vanguard Savings Bank and four offices of
Atlantic Financial Federal from the Resolution Trust Corporation. The
acquisition of these offices provided S&T with a presence in three new
counties of Western Pennsylvania--Allegheny, Armstrong and Westmoreland. The
acquisition of these offices represented a strategic move for S&T that
provided access to new markets that possess greater population and are
experiencing faster economic growth than are S&T's historic core markets.
In connection with S&T's entry into the Allegheny, Armstrong and
Westmoreland County markets in 1991, S&T began emphasizing as a business
expansion strategy the development of commercial relationships in Westmoreland
and Allegheny Counties. Based on the success of these efforts, and the
increasingly competitive environment in which S&T operates, S&T's Board and
management concluded that further geographic expansion of the S&T franchise
into these new more heavily populated markets represented an important
opportunity for enhancing shareholder value. Consequently, at the direction of
the S&T Board, one major strategic goal which has been pursued by management
of S&T has been to identify and develop relationships with banks and thrifts
in the Allegheny, Armstrong and Westmoreland County markets that would be
desirable merger partners for S&T in the future. Independent community banks
and thrifts have, especially in suburban and urban markets, operated in an
increasingly more competitive environment in recent years. Like S&T, these
small community financial institutions face increasing competition from the
metropolitan and larger regional banks as well as from
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many non-banking organizations that are seeking to capture the traditional
customer base of community financial institutions. Often, because of concerns
about future management, financial and technological resources to effectively
compete in this increasingly challenging environment, smaller community
institutions will consider acquisition by, or merger with, a larger community
bank such as S&T Bank, the most effective means to maximize shareholder value
and to continue to provide quality community banking services in their
communities.
The process of identifying potential merger candidates undertaken by S&T
management was focused on those institutions in Allegheny, Armstrong and
Westmoreland Counties that had a history of strong profitability and solid
asset quality, as well as office locations which would complement the existing
office locations of S&T Bank and expand its presence in these markets. S&T
management identified Peoples as a desirable merger partner because of its
excellent reputation within the Allegheny County market as well as its strong
financial performance over many years. At the June 1995 S&T Board meeting, the
Directors discussed Peoples and the reasons it would be a desirable merger
partner for S&T.
From June 1995 to June 1996, S&T management participated from time to time
in discussions with the directors and management of Peoples regarding the
possibility of a business combination transaction with Peoples. In June 1996,
Peoples advised S&T that it had retained Danielson Associates, Inc. to assist
it in evaluating its strategic options.
On July 8, 1996, the S&T Board held a special meeting to discuss Peoples and
to consider authorizing management to make a proposal to acquire Peoples. In
addition to the Directors and members of management, representatives from
S&T's financial advisor, McDonald & Company, and S&T's independent auditors,
Ernst & Young LLP, participated in the meeting. The S&T Board considered the
financial position and results of operations of Peoples and the extent to
which Peoples' office locations in the Allegheny County market would represent
a valuable expansion of S&T's existing franchise in this market. McDonald &
Company reviewed with the S&T Board several possible proposals for the terms
of an acquisition of Peoples as well as the potential impact of each such
proposal on earnings per share of S&T Common Stock. The S&T Board concluded
that the acquisition of Peoples would allow S&T to increase its profitability,
broaden its customer base and diversify its asset base. S&T would be able to
provide customers of Peoples with technology and services not presently
available to them. In addition, the S&T Board concluded that, if agreement
could be reached with Peoples consistent with the contemplated economic terms,
the consolidation with S&T would be expected to generate sufficient economic
synergies to offset any dilution within a reasonable period. The S&T Board
authorized S&T management to make a proposal to Peoples for a merger between
S&T and Peoples.
Thereafter, S&T management submitted an acquisition proposal to Peoples, and
representatives of Peoples and S&T participated in several negotiation
sessions regarding the terms of the proposed merger. At a meeting on August
19, 1996, S&T's management updated the S&T Board on the progress of the
negotiations with Peoples and, on the basis of management's report, the S&T
Board authorized management to negotiate a definitive agreement with Peoples.
Thereafter, representatives of S&T and Peoples subsequently commenced
negotiations and due diligence. However, before these negotiations were
concluded, members of the Peoples Board informed S&T in mid-September 1996
that the Peoples Board had recently been apprised of allegations that the then
Chief Executive Officer had been involved in initiating and concealing certain
fraudulent loan transactions and the then Chief Operating Officer had
participated in concealing such fraudulent loan transactions. S&T withdrew its
proposed merger offer and the parties agreed that negotiations regarding the
proposed merger should be suspended pending the completion of an investigation
of these allegations, and quantification of any financial exposure by Peoples'
accounting and legal advisors. Subsequently, the employment of Peoples' Chief
Executive Officer and Peoples' Chief Operating Officer was terminated.
The above-referenced investigation was completed in early November 1996, and
Peoples made a copy of the report related thereto available to S&T's
management and S&T's advisors. S&T and its advisors reviewed the report and
discussed the transactions addressed therein with Peoples and Peoples'
advisors. After such review
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and discussions, S&T concluded that negotiations regarding the merger should
be resumed, and such discussions were resumed in early November 1996,
culminating in the approval by the S&T Board and by the Peoples Board of the
Agreement that was announced on November 26, 1996.
In reaching its decision to approve the Agreement, the S&T Board considered
that the Merger would enhance and increase the competitiveness of its
community banking franchise in Allegheny County and that S&T shareholders
should realize the benefits of such an acquisition.
In reaching its determination to approve the Merger, the S&T Board consulted
with S&T management, as well as its financial and legal advisors, and
considered the factors described above and the following additional factors,
which together constitute the material factors considered by the S&T Board in
approving the Agreement:
(i) S&T's business, operations, financial condition, earnings, and
acquisition strategy, including the desirability of achieving an expanded
market presence in Allegheny County in Western Pennsylvania;
(ii) the current and prospective economic, regulatory and competitive
climate facing community banking institutions, including without limitation
the consolidation currently underway in the banking industry and
competition from larger institutions and from nonbank providers of
financial services;
(iii) the presentations by S&T management and McDonald & Company as to
(a) the business, operations, asset quality, earnings and financial
condition of Peoples, and (b) the competitive position of Peoples;
(iv) the anticipated cost savings, revenue enhancements and other
economic synergies available to the combined institution;
(v) the common philosophies and cultures of S&T and Peoples, particularly
with respect to customer satisfaction, efficiency and credit quality;
(vi) the Exchange Ratio in the Merger from a number of valuation
perspectives, as presented by McDonald & Company and the November 25, 1996
opinion of McDonald & Company that, as of such date, the Exchange Ratio was
fair to S&T from a financial point of view (see "--Opinions of Financial
Advisors");
(vii) the terms of the Agreement, including the termination fee
provisions thereof; the regulatory and shareholder approval processes; the
treatment of the Merger as a pooling-of-interests for financial accounting
purposes; and the nature of the Merger as a tax-free reorganization for
federal income tax purposes (see "--Certain Federal Income Tax
Consequences" and "--Accounting Treatment"); and
(viii) the impact of certain restructuring charges on S&T's earnings, and
the fact that the transaction is expected to be accretive to S&T's earnings
within twelve months after its closing.
The foregoing discussion of the information and factors considered by the
S&T Board is not intended to be exhaustive but includes all material factors
considered by the S&T Board. The S&T Board considered a number of factors
which, taken in totality, led to the determination by the S&T Board that the
Merger is in the best interests of S&T and its shareholders, customers and
communities served. In reaching its determinations to approve and recommend
the Agreement, the S&T Board did not assign relative or specific weights to
the foregoing factors, and individual directors may have given differing
weights to different factors. After deliberating with respect to the Merger
and the other transactions contemplated by the Agreement, considering, among
other things, the matters discussed above and the opinion of McDonald &
Company referred to above, the S&T Board, by unanimous vote of all directors,
approved the Agreement as being in the best interests of S&T and its
shareholders and directed that the Agreement be submitted to a vote of the
holders of S&T Common Stock at the Annual Meeting.
ACCORDINGLY, THE S&T BOARD UNANIMOUSLY RECOMMENDS THAT THE AGREEMENT AND THE
MERGER AND THE ISSUANCE OF SHARES IN CONNECTION THEREWITH BE ADOPTED AND
APPROVED BY ALL SHAREHOLDERS OF S&T.
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Peoples. 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. Although the Peoples Board also
considered merger proposals from a savings and loan institution and two banks
located in Pennsylvania, the Peoples Board did not enter into merger
negotiations with any banking institutions other than S&T.
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.
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 ("Kirkpatrick & Lockhart") 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.
Peoples has recorded a pre-tax loss of $405,000 in its financial statements
due to the alleged fraudulent transactions.
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.
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
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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;
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.
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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 Value on the Determination Date shall be greater than 231.70
(i.e., 80% of the value of the Index Value 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.
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.
Assuming the planned Effective Date were February 27, 1997, the
Determination Date would have been February 20, 1997. Using this assumed
Determination Date, the Average Closing Price of shares of S&T Common Stock
would have been $34.52 and the Index Value was 319.257. Under such
circumstances Peoples would not have the right to terminate the Agreement,
even though the Index Value is above 231.70, because the Average Closing Price
would have been above $24.88.
OPINIONS OF FINANCIAL ADVISORS
S&T. S&T has retained McDonald & Company as its financial advisor in
connection with the Merger and requested that McDonald & Company render its
opinion with respect to the fairness, from a financial point of view, of the
Exchange Ratio to the holders of S&T Common Stock. McDonald & Company rendered
its oral opinion to the S&T Board on November 25, 1996, which it subsequently
confirmed in writing, that as of the date of such opinion, the Exchange Ratio
pursuant to the Merger was fair, from a financial point of view, to the
holders of S&T Common Stock.
The full text of the opinion of McDonald & Company, updated as of the date
of this Proxy Statement/Prospectus, which sets forth certain assumptions made,
matters considered and limitations on the reviews undertaken, is attached as
Appendix C to this Proxy Statement/Prospectus, and should be read in its
entirety. The summary of the opinion of McDonald & Company set forth in this
Proxy Statement/Prospectus is qualified in its entirety by reference to the
opinion. McDonald & Company's opinion should not be construed by holders of
S&T Common Stock or Peoples Common Stock as a recommendation as to how such
holders should vote at the Annual Meeting.
In arriving at its opinion, McDonald & Company reviewed, among other things,
the Agreement together with exhibits and schedules thereto, certain publicly
available information relating to the business, financial condition and
operations of S&T and Peoples as well as certain other non-public information,
primarily financial in nature, furnished to it by S&T and Peoples relating to
the respective businesses, earnings, assets, financial forecasts and
prospects. McDonald & Company also held discussions with members of senior
management of S&T and Peoples concerning their respective businesses, assets,
financial forecasts and prospects. McDonald & Company also reviewed certain
publicly available information concerning the trading of, and the trading
market
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for, S&T Common Stock and Peoples Common Stock and certain publicly available
information concerning comparable companies and transactions, all as more
fully set forth in McDonald & Company's opinion.
McDonald & Company was not engaged to and did not conduct a physical
inspection of any of the assets, properties or facilities of either S&T or
Peoples, and was not engaged to conduct and has not made, obtained or been
furnished with any independent evaluation or appraisal of any such assets,
properties or facilities or any of the liabilities of S&T or Peoples. McDonald
& Company has assumed and relied, without independent investigation, upon the
accuracy and completeness of the financial and other information provided to
it or publicly available, has relied upon the representations and warranties
of S&T and Peoples contained in the Agreement, and has not independently
attempted to verify any such information. McDonald & Company has also assumed
that all of the conditions to the Merger as set forth in the Agreement would
be consummated on a timely basis in the manner contemplated by the Agreement.
No limitations were imposed by S&T upon McDonald & Company with respect to the
scope of its investigation nor were any specific instructions given to
McDonald & Company in connection with its opinion.
In connection with rendering its opinion dated November 25, 1996, McDonald &
Company considered a variety of financial analyses, which are summarized
below. McDonald & Company believes that its analyses must be considered as a
whole and that selecting portions of such analyses and of the factors
considered by McDonald & Company without considering all such analyses and
factors may create an incomplete view of the analytical process underlying
McDonald & Company's opinion. In its analyses, McDonald & Company made
numerous assumptions with respect to industry performance, business and
economic conditions, and other matters. Any estimates contained in McDonald &
Company's analyses are not necessarily indicative of future results or values,
which may be significantly more or less favorable than such estimates.
The following is a summary of selected analyses considered by McDonald &
Company in connection with McDonald & Company's opinion dated November 25,
1996:
Comparison with Selected Companies. McDonald & Company compared the
financial performance and stock market valuation of S&T with corresponding
data for the following selected companies: Arrow Financial Corporation, CBT
Corporation, Farmers Capital Bank Corp., Financial Trust Corp., First
Financial Bancorp, First Merchants Corp., Harleysville National Corp., Irwin
Financial Corporation, Keystone Heritage Group, Inc., National City
Bancshares, Inc., Omega Financial Corporation, Park National Corporation,
Shoreline Financial Corp., Southwest National Corporation, Tompkins County
Trustco, Inc., United Bankshares, Inc. and WesBanco, Inc. The companies listed
above were selected based on the following criteria: banks headquartered in
Indiana, Kentucky, Michigan, Maryland, New York, Ohio, Pennsylvania, or West
Virginia; having total assets of between $500 million and $2.5 billion: having
an equity to assets ratio greater than 9.00%; and having a return on average
assets greater than 1.30%. In addition, McDonald & Company compared such data
of Peoples with corresponding data for the following selected companies:
Cardinal Bancorp, Commercial National Financial Corp., First of Long Island
Corp., First Merchants Corp., Heritage Bancorp, Inc., Penn Woods Bancorp,
Inc., Premier Financial Bancorp, Inc., Royal Bancshares of PA Inc., Security
Banc Corporation and Shore Bancshares, Incorporated. The companies listed
above were selected based on the following criteria: banks headquartered in
Indiana, Kentucky, Michigan, Maryland, New York, Ohio, Pennsylvania, or West
Virginia; having total assets of between $100 million and $750 million: having
an equity to assets ratio greater than 11.50%; and having a return on average
assets greater than 1.40%. At the time, none of the companies listed above had
announced a merger transaction or disclosed a possible interest in pursing a
possible merger transaction which would have significantly affected its stock
market valuation.
Contribution Analysis. McDonald & Company analyzed the contribution of each
of Peoples and S&T to, among other things, the shareholders' equity and after-
tax net income of the pro forma combined company. This analysis showed that,
among other factors, Peoples would have contributed 16.5%, 22.5%, and 18.3% of
the assets, shareholders' equity, and net income of the pro forma combined
company as of and for the twelve months ended September 30, 1996,
respectively. This compared with a proposed ownership of 21.5% of the combined
company to be held by holders of Peoples Common Stock.
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Pro Forma Merger Analyses. McDonald & Company analyzed the changes in per
share amount of earnings, book value and indicated dividend represented by one
share of S&T Common Stock after the Merger. The analysis was performed on the
basis of financial information for both companies as of and for the years
ended December 31, 1994 and December 31, 1995, and as of and for the twelve
months ended September 30, 1996. The analysis indicated, among other things,
that exchanging one share of Peoples Common Stock at the Exchange Ratio for
shares of S&T Common Stock on a pro forma basis would have resulted in a 3.4%
decrease in earnings per share for each share of S&T Common Stock for the
twelve months ended September 30, 1996 (assuming no cost savings relating to
the Merger), a 1.2% increase in book value per share for each share of S&T
Common Stock as of September 30, 1996, and no change in dividends per share of
S&T Common Stock based on S&T's indicated annual dividend rate as of November
25, 1996.
Analysis of Selected Merger Transactions. McDonald & Company reviewed five
groups of selected pending and completed bank merger transactions involving
(i) selling banks headquartered in Pennsylvania, New York, Maryland, West
Virginia, Ohio, Indiana or Michigan; (ii) selling banks having total assets of
between $200 million and $400 million; (iii) selling banks having an equity to
assets ratio greater than 14%; (iv) selling banks having a return on average
assets ratio of between 1.50% and 2.50%; and (v) selling banks having
nonperforming assets as a percent of total assets of between 0.50% and 1.00%.
McDonald & Company reviewed the ratios of the offer value to stated book value
and tangible book value, the multiple of the last twelve months earnings of
the acquired company, and the ratio of the offer value to assets in each such
transaction and computed median ratios and multiples for each group. The
calculations yielded ranges of median ratios of price to stated book value of
168% to 206%. Median ratios of price to tangible book value ranged from 168%
to 215%. Median multiples of earnings among the five groups ranged from 13.8x
to 22.0x. Median ratios of offer value to assets ranged from 17.5% to 29.5%.
Applying the median of the medians for each of these four ratios to Peoples'
actual per share financial data as of September 30, 1996 showed an imputed
reference range of $675 to $825 per share of Peoples Common Stock.
Accordingly, the Exchange Ratio of 26.25 equated to a per share value within
the range of values implied in the above analysis.
NO COMPANY OR TRANSACTION USED IN THE ABOVE ANALYSES AS A COMPARISON IS
IDENTICAL TO S&T, PEOPLES OR THE MERGER. ACCORDINGLY, AN ANALYSIS OF THE
RESULTS OF THE FOREGOING NECESSARILY INVOLVES COMPLEX CONSIDERATIONS AND
JUDGMENTS CONCERNING THE DIFFERENCES IN FINANCIAL AND OPERATING
CHARACTERISTICS OF THE COMPANIES AND OTHER FACTORS THAT COULD AFFECT THE
PUBLIC TRADING VALUES OR ACQUISITION VALUES OF THE COMPANIES TO WHICH THEY ARE
BEING COMPARED. MATHEMATICAL ANALYSIS (SUCH AS DETERMINING THE MEAN OR MEDIAN)
IS NOT, IN ITSELF, A MEANINGFUL METHOD OF USING COMPARABLE COMPANY OR
COMPARABLE TRANSACTION DATA.
Discounted Cash Flow Analysis. Using a discounted cash flow analysis,
McDonald & Company estimated the present value of the future streams of after-
tax cash flows that Peoples could produce over a five year period from 1997
through 2001, under various assumptions, based upon S&T's and Peoples'
management forecasts. McDonald & Company then estimated the terminal value of
Peoples after the five year period by applying an estimated perpetual growth
rate of 5.0% to the terminal year's projected after-tax cash flow and then
applied to this multiples ranging from 11.5x to 13.5x. The five year cash flow
streams and terminal values were then discounted to present values using
different discount rates of between 12.0% and 14.0%, which were chosen to
reflect different assumptions regarding the required rates of return of
prospective buyers of Peoples. On the basis of such varying assumptions, this
discounted cash flow analysis indicated a reference range of $810 to $986 per
share of Peoples Common Stock. Accordingly, the Exchange Ratio of 26.25
equated to a per share value within the range of values implied in the above
analysis. This analysis was based upon S&T's and Peoples' management forecasts
including variations and assumptions made by McDonald & Company which included
adjustments to reflect the anticipated effects of potential merger-related
cost savings estimated by S&T. S&T's and Peoples' management forecasts are
based upon many factors and assumptions, many of which are beyond the control
of S&T or Peoples.
Other Analysis. In addition to performing the analyses summarized above.
McDonald & Company also considered its analysis of the general market for bank
and thrift mergers, Peoples' relative share of the deposit market that it
serves and the general economic conditions and prospects of those markets.
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In performing its analyses, McDonald & Company made numerous assumptions
with respect to industry performance, general business and economic conditions
and other matters. The analyses performed by McDonald & Company are not
necessarily indicative of actual values, which may be significantly more or
less favorable than the values suggested by such analyses. Such analyses were
prepared solely as part of McDonald & Company's opinion. The term "fair from a
financial point of view" is a standard phrase contained in investment banker
fairness opinions and refers to the fact that McDonald & Company's opinion as
to the fairness of the Exchange Ratio is addressed solely to the financial
attributes of the Exchange Ratio. The analyses do not purport to be appraisals
or to reflect the prices at which a company might actually be sold. In
addition, as described above, McDonald & Company's fairness opinion and
presentation to the S&T Board of Directors were one of many factors taken into
consideration by the S&T Board in making its determination to approve the
Agreement. Consequently, the McDonald & Company analyses described above
should not be viewed as determinative of the S&T Board's conclusions with
respect to the value of Peoples or of the decision of the S&T Board to agree
to the Exchange Ratio.
McDonald & Company's opinion is based on economic and market conditions and
other circumstances existing on, and information made available as of, the
date of such opinion. In addition, the opinion does not address S&T's
underlying business decision to effect the Merger or any other terms of the
Merger. McDonald & Company is not rendering any opinion as to the value of S&T
Common Stock or Peoples Common Stock at the Effective Date.
In connection with its opinion dated as of the date of this Proxy Statement,
McDonald & Company performed procedures to update certain of its analyses and
reviewed the assumptions on which such analyses were based and the factors
considered therewith.
McDonald & Company, as part of its investment banking business, is
customarily engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings, secondary
distributions of listed and unlisted securities, private placements and
valuations for estate, corporate and other purposes. McDonald & Company has
extensive experience with the valuation of financial institutions. The S&T
Board selected McDonald & Company as its financial advisor because of McDonald
& Company's industry expertise with respect to financial institutions and
because of McDonald & Company's industry experience in transactions similar to
the Merger. McDonald & Company is not affiliated with either S&T or Peoples.
In the ordinary course of business, McDonald & Company makes a market in S&T
Common Stock and may trade the securities of Peoples and S&T for its own
account and for the accounts of its customers. Accordingly, at any time
McDonald & Company may hold a long or short position in such securities. In
addition, McDonald & Company has provided investment banking services to S&T
in the past and may provide such services to S&T in the future.
For its services as financial advisor, S&T has paid McDonald & Company a
retainer of $25,000 and a fee of $40,000 upon the rendering of McDonald &
Company's November 25, 1996 fairness opinion. Additional fees equal to
approximately $135,000 will be payable to McDonald & Company upon consummation
of the Merger. S&T has also agreed to reimburse McDonald & Company for its
reasonable out-of-pocket expenses and to indemnify McDonald & Company against
certain liabilities, including certain liabilities under federal securities
laws.
Peoples. 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
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<PAGE>
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, and
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, and Peoples' Quarterly Reports and
related unaudited financial information for the three-month periods and
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;
7. 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.
In its analyses, Danielson Associates made certain assumptions with respect
to industry performance, business and economic conditions, and other matters,
many of which are beyond Peoples' and S&T's control. Any estimates contained
in Danielson Associates' analyses are not necessarily indicative of future
results or value, which may be significantly more or less favorable than such
estimates. Estimates of values of companies do not purport to be appraisals or
necessarily reflect the prices at which companies or their securities may
actually be sold.
The following is a summary of selected analyses considered by Danielson
Associates in connection with its opinion:
Comparable Companies Analyses. Danielson Associates compared Peoples'
performance with eight selected western Pennsylvania banks having assets
between $150 and $400 million. The banks included: Allegheny Valley
Bancorp, Inc.; Century Financial Corporation; Citizens Incorporated;
Commercial National Financial Corporation; FNH Corp.; IBT Bancorp, Inc.;
The Mars National Bank and NSD Bancorp, Inc.
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Danielson Associates compared Peoples' a) ratio of tangible capital to
total assets of 16.35% as of June 30, 1996, b) ratio of nonperforming
assets to total assets of .64% as of June 30, 1996, c) ratio of reserves to
assets as of June 30, 1996 of .42% and d) ratio of net operating income to
average assets of 2.85% for the six month period ended June 30, 1996 with
the medians of the selected banks. These medians were a) ratio of tangible
capital to assets of 9.45%, b) ratio of nonperforming assets to assets of
.44%, c) ratio of reserves to assets of .72%, and d) ratio of net operating
income to average assets of 1.88%.
Danielson Associates also compared certain stock-based and financial
ratios of S&T with the median ratios of Pennsylvania bank holding companies
having stock traded on the NYSE, the American Stock Exchange or the Nasdaq
Stock Market and with assets between $1 and $5 billion as of September 30,
1996. These comparative banks included: BT Financial Corporation; FNB
Corporation; First Commonwealth Financial Corporation; Financial Trust
Corp.; Fulton Financial Corporation; First Western Bancorp, Inc.; Keystone
Financial, Inc.; National Penn Bancshares, Inc.; Omega Financial
Corporation; Susquehanna Bancshares, Inc.; and USBancorp, Inc.
Such ratios compared included a) the price-earnings and price-book value
ratios of S&T Common Stock as of November 22, 1996 which were 15.3 times
earnings and 203% of book value, respectively, b) S&T's dividend yield of
3.10% based on the trailing four quarters as of September 30, 1996 and S&T
Common Stock price as of November 22, 1996, c) the ratio of S&T's tangible
capital as of September 30, 1996 to assets of 11.60%, d) the ratio of S&T's
nonperforming assets as of September 30, 1996 to total assets of .16% and
c) S&T's return on average assets during the trailing four quarters ended
September 30, 1996 of 1.61%. The comparable medians were a) price-earnings
and price-book value ratios of 13.4 times earnings and 155% of book value,
respectively, b) dividend yield of 3.50%, c) ratio of tangible capital to
assets of 8.26%, d) ratio of nonperforming assets to total assets of .67%,
and e) return on average assets of 1.06%.
Comparable Transactions Analysis. Danielson Associates further compared
the consideration to be paid in the Merger to the latest twelve months
earnings and equity capital of Peoples, and compared such multiples with
the earnings and capital multiples to be paid in acquisitions of eight
Pennsylvania banks, with assets of between $100 million and $1 billion, and
with 27 similar sized banks nationwide with tangible capital to assets in
excess of 12% of assets announced during the period January 1, 1994 to
November 22, 1996. Danielson Associates determined that the consideration
to be paid in the Merger based on the price of S&T Common Stock on November
22, 1996 and the proposed exchange ratio equaled 190% of Peoples' September
30, 1996 book value and 17.7 times Peoples' earnings for the trailing four
quarters as of September 30, 1996. This compares to median multiples of
218% of book value and 18 times earnings for the comparable Pennsylvania
acquisitions and 144% of book and 16.5 times earnings for the highly
capitalized banks.
Dilution Analysis. Danielson Associates analyzed the changes in earnings
and capital per share after the merger. The analysis was based on S&T's and
Peoples' September 30, 1996 tangible equity and twelve months earnings
ending that date. The analysis indicated that the exchange ratio would have
resulted in a 2.9% pro forma dilution to earnings per share and 1.4% pro
forma increase in tangible capital per share.
Other Analysis. Danielson Associates also prepared an overview of the
historical financial performance of Peoples and S&T, and analyzed their
deposit market shares and loan and deposit portfolio mix. In addition,
S&T's historical stock price appreciation and dividend payout were
analyzed.
The summary contained herein provides a description of the material analyses
prepared by Danielson Associates in connection with the rendering of its
opinion. No company or transaction used in this composite analysis is
identical to Peoples or S&T. Accordingly, an analysis of the results of the
foregoing is not mathematical; rather, it involves complex considerations and
judgments concerning differences in financial and operating characteristics of
the companies and other factors that could affect the public trading values of
the company or companies to which they are being compared.
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
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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 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
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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.
The Peoples Board has adopted a temporary special early retirement incentive
program and discretionary employment transition plan to be implemented in
connection with the Merger. Implementation of these plans is conditioned upon
the consummation of the Merger. Under the early retirement program, each
eligible employee age 55 or older who properly elects to retire under the
program would be provided a pension benefit calculated pursuant to Peoples'
retirement plan, but determined by adding up to an additional five years of
service based on a combination of the employee's years of service and age.
Each eligible employee who properly elects to retire under the program will
also receive a monthly supplement until age 62, and a lump sum payment up to a
maximum of $3,000. The discretionary employment transition plan will apply to
all regular full-time and part-time employees of Peoples who are active
employees on the date of severance. The determination of whether an employee
of Peoples will be entitled to severance pay under this plan will be made by
S&T Bank in its sole and absolute discretion. The amount of severance pay will
be calculated as follows: employees with at least four years of service will
be paid one week of severance pay at their regular compensation rate for every
year of current service up to a maximum of 26 weeks of pay; employees with
more than one year but less than four years of current service will be paid a
minimum of four weeks of severance pay at their regular compensation rate;
employees with less than one year of current service will be paid two weeks of
severance pay at their regular compensation rate.
None of the directors or executive officers of Peoples will receive benefits
pursuant to the temporary special early retirement plan or the discretionary
employment transition plan. Ernest J. Draganza, the current Chief Executive
Officer of Peoples, has been offered a position with S&T Bank in which he will
be compensated at his current rate of salary. See "CERTAIN INFORMATION
REGARDING PEOPLES--Compensation Table."
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 Ruth M. Grant, Frank W. Jones and Myles D.
Sampson to become directors of S&T in accordance with the Agreement. Effective
January 1, 1997, nonemployee directors of S&T are paid a retainer of $3,000
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. Other
than these employment, indemnification and director compensation provisions,
and the Merger Consideration to be received in exchange for their shares of
Peoples Common Stock, the officers and directors of Peoples will not receive
any consideration as a result of the Merger. The following table sets forth
the Merger consideration to be received by Peoples directors and officers.
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<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......... 8,128(2) 213,360
Ruth M. Grant, Director & Vice President..... 3,979(3) 104,448
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, Executive Vice President
and 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.
(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 1,184 shares of Peoples Common Stock held
jointly by Mrs. Grant with her deceased husband, son or daughters, which
will be converted into 31,080 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.
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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.
All corporate actions required to be taken by S&T and Peoples, except the
approval by their respective shareholders, in connection with the Agreement
and the Merger have been taken. The Merger was approved by the FDIC and the
PADB on February 12, 1997, and S&T and Peoples are aware of no other required
regulatory approvals. The Registration Statement was declared effective by the
Commission on March , 1997. Peoples has received an opinion from Danielson
Associates dated the date of this Proxy Statement/Prospectus that the
consideration to be received by Peoples' shareholders is fair from a financial
point of view. Whether the other conditions to closing will be satisfied or
waived cannot be known with certainty until the Effective Date.
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
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<PAGE>
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.
The FDIC and PADB applications were approved on February 12, 1997. Such
approvals were not conditioned upon matters that would cause the S&T Board or
the Peoples Board to abandon the Merger. There can be 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 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
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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 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.
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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 Ruth M. Grant, Frank W. Jones, and
Myles D. Sampson 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 D hereto, and the following summary of such rights and remedies is
qualified in its entirety by reference to such Appendix D.
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."
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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.
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.
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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.
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.
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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. The federal income tax
laws are complex and the tax consequences of the Merger may vary depending
upon each shareholder's individual circumstances or tax status. Moreover, some
shareholders, 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 may be subject to special rules. Therefore, each
shareholder is urged to consult a tax adviser regarding the federal state,
local, foreign and other tax consequences of the Merger in light of the
particular circumstances of such shareholder.
Arnold & Porter, special counsel to S&T, has rendered an opinion to S&T and
Peoples regarding anticipated material federal income tax consequences of the
Merger, which opinion is described below. Arnold & Porter's opinion 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, its opinion would not be different, and will not undertake any
responsibility to update or supplement this summary. Moreover, Arnold &
Porter's opinion 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 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 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.
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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 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 one
year following the Effective Date. After the one-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.
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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
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." The current
number of S&T tainted shares is equal to approximately 6% of the number of
shares of S&T Common Stock to be issued in the Merger, so pooling-of-interests
accounting treatment may not be available for the Merger if the holders of as
few as 4% of the outstanding shares of Peoples Common Stock exercise
dissenters' rights with respect to the Merger. 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
46
<PAGE>
buildings at all of these sites, except at the Holiday Park office. As of
December 31, 1996, Peoples had total assets of approximately $291 million,
total deposits of approximately $238 million and total shareholders' equity of
approximately $50 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.
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. To the best of Peoples'
knowledge, Peoples is currently in compliance with all material requirements
of federal and state banking laws to which it is subject.
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
47
<PAGE>
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
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
fraudulent 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. In October 1996, Peoples
received a subpoena from a federal grand jury for the United States District
Court of Western Pennsylvania investigating these allegations. Peoples has
cooperated with regulatory and law enforcement officials in their
investigation of these allegations. Because the grand jury proceeding is not
public, Peoples does not know the status of this proceeding. Peoples has also
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.
Based on these investigations, Peoples has recorded a pre-tax loss of $405,000
in its financial statement due to these alleged fraudulent transactions.
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.
48
<PAGE>
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 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 1973
Donald R. O'Block....... 61 Owner, President, O'Block Homes, Inc. 1995
Myles D. Sampson........ 52 Owner, President, Rimco Construction, Inc. 1996
</TABLE>
Kathy L. Anderson is the daughter of William E. Anderson. Ruth M. Grant is
the first cousin of Donald R. O'Block.
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>
Russell P. Miller........ President--President,
Site Development 1994 -- 6,064(3) 77
Ruth M. Grant............ Vice President--
President, Secretary,
Treasurer, Louis A.
Grant, Inc. 1994 -- 3,979(4) 65
Earl W. Garlow........... Secretary--Retired,
Formerly Owner and
President, Garlow, Inc. 1992 -- 8,128(5) 76
Ernest J. Draganza....... Executive Vice President 1994 1992 20(6) 31
and 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) Since September 18, 1996, Mr. Draganza has served first as Acting Chief
Executive Officer, and then as Chief Executive Officer, of Peoples
following the suspension and subsequent termination of the former
49
<PAGE>
Chief Executive Officer. Prior to such time Mr. Draganza was the Senior
Vice President and Chief Financial Officer of Peoples, and prior to that
the Senior Vice President and Controller of Peoples.
(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.
(4) The amount shown includes 1,184 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 1996, the directors received $148,950 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 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, 1996 $70,672 $20,000 $6,461 $1,906
Executive Vice President
and Chief Executive
Officer (1)
David W. London, Executive 1996 91,763 -- 5,741 1,822
Vice President 1995 120,136 -- 10,229 5,521
and Chief Executive 1994 109,197 -- 9,690 6,548
Officer (2)
</TABLE>
- --------
(1) Since September 18, 1996, Mr. Draganza has served first as Acting Chief
Executive Officer and then as Chief Executive Officer.
(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.
50
<PAGE>
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.................... 8,128(2) 7.03%
Ruth M. Grant, Director & Vice President................ 3,979(3) 3.44%
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, Executive Vice President and Chief
Executive Officer...................................... 20(7) .02%
David W. London, Former Executive Vice President and
Chief Executive Officer................................ 235(8) .20%
All Directors and Officers as a Group (10 Persons)...... 35,631(9) 30.81%
</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 People Common Stock held by Mr.
Garlow's wife.
(3) The amount shown includes 1,184 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 91 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 AND SEVERANCE 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.
51
<PAGE>
For a description of the temporary special early retirement incentive
program and the discretionary employment transition plan recently adopted by
the Peoples Board, see "PROPOSED MERGER--Interests of Certain Persons in the
Merger--Employment and Benefit Plans." Implementation of these plans is
conditioned on the consummation of the Merger.
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 December 31, 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 (with aggregate loan
balance of $60,000 or more) were $10,039,000. 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."
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................................. 8,128 7.0%
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.
52
<PAGE>
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, 1996, 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, 1996 and 1995 and the
related statements of income, shareholders' equity, and cash flows for each of
the three years in the period ended December 31, 1996, 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 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.
53
<PAGE>
INDEX TO FINANCIAL INFORMATION OF PEOPLES BANK OF UNITY
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
AUDITED FINANCIAL STATEMENTS:
Report of Independent Auditors............................................ F-2
Balance Sheet as of December 31, 1996 and 1995............................ F-3
Statement of Income for the years ended December 31, 1996, 1995 and 1994.. F-4
Statement of Changes in Stockholders' Equity for the years ended December
31, 1996, 1995 and 1994.................................................. F-5
Statement of Cash Flows for the years ended December 31, 1996, 1995 and
1994..................................................................... F-6
Notes to Financial Statements as of and for the years ended December 31,
1996,
1995 and 1994............................................................ F-7
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS............................................................... F-21
</TABLE>
F-1
<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, 1996 and 1995, 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, 1996. 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, 1996 and 1995, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1996, 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
February 10, 1997
F-2
<PAGE>
PEOPLES BANK OF UNITY
BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1995
1996 (RESTATED)
----------- --------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
ASSETS
Cash and due from banks............................... $ 7,391 $ 6,625
Federal funds sold.................................... 6,465 7,340
Securities:
Available for sale................................... 96,021 117,513
Held to maturity (approximate market value of $22,400
and $24,878)........................................ 22,095 24,383
----------- -----------
118,116 141,896
Loans (net of allowance for loan losses of $1,686 and
$1,127).............................................. 152,322 125,436
Premises and equipment................................ 4,112 4,481
Accrued interest receivable........................... 2,158 2,764
Other assets.......................................... 536 484
----------- -----------
TOTAL ASSETS........................................ $ 291,100 $ 289,026
=========== ===========
LIABILITIES
Deposits:
Noninterest-bearing.................................. $ 43,502 $ 39,711
Interest-bearing..................................... 194,591 197,211
----------- -----------
Total deposits...................................... 238,093 236,922
Commitment to purchase investment securities.......... -- 2,011
Obligation under capital lease........................ 225 520
Accrued interest payable.............................. 1,064 1,083
Other liabilities..................................... 1,876 1,383
----------- -----------
TOTAL LIABILITIES................................... 241,258 241,919
----------- -----------
STOCKHOLDERS' EQUITY
Common stock, par value $10; 115,660 shares autho-
rized, issued and outstanding........................ 1,157 1,157
Additional paid in capital............................ 13,544 13,544
Retained earnings..................................... 33,135 29,596
Net unrealized gain on securities..................... 2,006 2,810
----------- -----------
TOTAL STOCKHOLDERS' EQUITY.......................... 49,842 47,107
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY......... $ 291,100 $ 289,026
=========== ===========
</TABLE>
See accompanying notes to the financial statements.
F-3
<PAGE>
PEOPLES BANK OF UNITY
STATEMENT OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------
1995 1994
1996 (RESTATED) (RESTATED)
--------------- ----------------------------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
INTEREST INCOME
Loans, including fees....... $ 12,317 $ 10,073 $ 8,781
Federal funds sold.......... 221 356 218
Investment securities:
Taxable.................... 7,283 8,256 9,351
Tax exempt................. 1,190 1,318 1,555
--------------- --------------- --------------
Total interest income..... 21,011 20,003 19,905
--------------- --------------- --------------
INTEREST EXPENSE
Deposits.................... 6,995 7,591 7,269
Obligation under capital
lease...................... 50 88 28
--------------- --------------- --------------
Total interest expense.... 7,045 7,679 7,297
--------------- --------------- --------------
NET INTEREST INCOME.......... 13,966 12,324 12,608
Provision for loan losses.... 875 420 100
--------------- --------------- --------------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES... 13,091 11,904 12,508
--------------- --------------- --------------
NONINTEREST INCOME
Service charges on deposit
accounts................... 426 397 377
Security gains (losses),
net........................ 55 121 (3)
Other....................... 322 320 323
--------------- --------------- --------------
Total noninterest income.. 803 838 697
--------------- --------------- --------------
NONINTEREST EXPENSE
Salaries and employee bene-
fits....................... 3,198 3,085 3,379
Occupancy, net.............. 549 479 518
Furniture and equipment..... 669 663 513
Data processing............. 359 454 720
FDIC assessment............. 2 279 559
Professional fees........... 531 66 52
Other taxes................. 285 253 238
Loss from fraudulent trans-
actions.................... -- 405 --
Other....................... 1,294 1,069 1,105
--------------- --------------- --------------
Total noninterest expense. 6,887 6,753 7,084
--------------- --------------- --------------
INCOME BEFORE INCOME TAXES... 7,007 5,989 6,121
Income taxes................. 2,015 1,616 1,593
--------------- --------------- --------------
NET INCOME................... $ 4,992 $ 4,373 $ 4,528
=============== =============== ==============
EARNINGS PER SHARE........... $ 43.16 $ 37.81 $ 39.15
AVERAGE SHARES OUTSTANDING... 115,660 115,660 115,660
</TABLE>
See accompanying notes to the financial statements.
F-4
<PAGE>
PEOPLES BANK OF UNITY
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
NET
ADDITIONAL UNREALIZED TOTAL
COMMON PAID IN RETAINED GAIN ON STOCKHOLDERS'
STOCK CAPITAL EARNINGS SECURITIES EQUITY
------ ---------- -------- ---------- -------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
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 se-
curities.................. (480) (480)
------ ------- ------- ------ -------
Balance, December 31, 1994. 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 se-
curities.................. 2,376 2,376
------ ------- ------- ------ -------
Balance, December 31, 1995. 1,157 13,544 29,596 2,810 47,107
Net income................. 4,992 4,992
Dividends ($12.56 per
share).................... (1,453) (1,453)
Net unrealized loss on se-
curities.................. (804) (804)
------ ------- ------- ------ -------
Balance, December 31, 1996. $1,157 $13,544 $33,135 $2,006 $49,842
====== ======= ======= ====== =======
</TABLE>
See accompanying notes to the financial statements.
F-5
<PAGE>
PEOPLES BANK OF UNITY
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
1995 1994
1996 (RESTATED) (RESTATED)
------- ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income..................................... $ 4,992 $ 4,373 $ 4,528
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan losses.................... 875 420 100
Depreciation, amortization, and accretion,
net......................................... 499 691 261
Security (gains) losses, net................. (55) (121) 3
Loss from fraudulent transactions............ -- 405 --
Decrease in accrued interest receivable...... 600 471 295
Increase (decrease) in accrued interest pay-
able........................................ (19) 314 (399)
Other, net................................... (247) 62 (193)
------- ------- -------
Net cash provided by operating activities.. 6,645 6,615 4,595
------- ------- -------
INVESTING ACTIVITIES
Net decrease in federal funds sold............. 875 785 3,810
Securities available for sale:
Proceeds from the sale of securities......... 31,765 48,411 9,887
Proceeds from maturities and repayments of
securities.................................. 15,389 1,060 10,700
Purchases of securities...................... (28,842) (38,547) (8,529)
Investment securities:
Proceeds from maturities and repayments of
securities.................................. 3,744 10,530 10,545
Purchases of securities...................... (1,459) (995) (7,837)
Net increase in loans.......................... (27,580) (25,315) (7,587)
Purchases of premises and equipment............ (257) (127) (358)
Other, net..................................... 303 108 60
------- ------- -------
Net cash provided by (used for) investing
activities................................ (6,062) (4,090) 10,691
------- ------- -------
FINANCING ACTIVITIES
Net increase (decrease) in deposits............ 1,171 (2,409) (15,431)
Decrease in obligation under capital lease..... (294) (264) (71)
Cash dividends paid............................ (694) (891) (810)
------- ------- -------
Net cash provided by (used for ) financing
activities................................ 183 (3,564) (16,312)
------- ------- -------
Increase (decrease) in cash and cash equiv-
alents.................................... 766 (1,039) (1,026)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR.. 6,625 7,664 8,690
------- ------- -------
CASH AND CASH EQUIVALENTS AT END OF YEAR........ $ 7,391 $ 6,625 $ 7,664
======= ======= =======
</TABLE>
See accompanying notes to the financial statements.
F-6
<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 and ability 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.
For commercial and real estate mortgage loans on which interest is 90 days
past due, accrual of income is generally discontinued, and any previously
accrued interest is reversed against current income. Payments received on
nonaccrual loans are applied to principal until full recovery of principal has
been recognized. Installment loans are generally charged off between 90 and
120 days past due or when deemed uncollectible in the opinion of management.
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.
F-7
<PAGE>
PEOPLES BANK OF UNITY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
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, 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.
Impaired loans are commercial and commercial real estate loans for which it
is probable that the Bank will not be able to collect all amounts due
according to the contractual terms of the loan agreement. The Bank
individually evaluates such loans for impairment and does not aggregate loans
by major risk classifications. The definition of "impaired loans" is not the
same as the definition of "nonaccrual loans," although the two categories
overlap. The Bank may choose to place a loan on nonaccrual status due to
payment delinquency or uncertain collectibility, while not classifying the
loan as impaired if the loan is not a commercial or commercial real estate
loan. Factors considered by management in determining impairment include
payment status and collateral value. The amount of impairment for these types
of impaired loans is determined by the difference between the present value of
the expected cash flows related to the loan, using the original interest rate,
and its recorded value, or, as a practical expedient in the case of
collateralized loans, the difference between the fair value of the collateral
and the recorded amount of the loans. When foreclosure is probable, impairment
is measured based on the fair value of the collateral.
Mortgage loans on one-to-four family properties and all consumer loans are
large groups of smaller balance homogeneous loans and are measured for
impairment collectively. Loans that experience insignificant payment delays,
which is defined as 90 days or less, generally are not classified as impaired.
Management determines the significance of payment delays on a case-by-case
basis, taking into consideration all of the circumstances surrounding the loan
and the borrower, including the length of the delay, the borrower's prior
payment record, and the amount of shortfall in relation to the principal and
interest owed.
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
F-8
<PAGE>
PEOPLES BANK OF UNITY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
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.
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, 1996, 1995, and 1994, cash paid for interest was $7,064, $7,365
and $7,696, respectively. Cash paid for income taxes was $2,494 in 1996,
$1,299 in 1995, and $1,851 in 1994.
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. Also, in 1994 the Bank recorded a capital
lease obligation of $855 for the purchase of a computer system.
Earnings Per Share
Earnings per share for the years ended December 31, 1996, 1995, and 1994
have been calculated based upon the weighted average number of issued and
outstanding common shares.
Reclassifications
Certain reclassifications have been made to the 1995 and 1994 financial
statements to conform to 1996 classifications. Such reclassifications had no
effect on net income.
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. The methodology utilized by management includes a
detailed review of all classified loans to determine if any specific reserve
allocations were required on an individual loan balance, as well as, applying
standard loss ratios to those loans not individually evaluated. Management
determined the
F-9
<PAGE>
PEOPLES BANK OF UNITY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
need to increase the standard loss ratios based upon the overall risk
characteristics of the various portfolio segments, the impact of economic
conditions on borrowers, and other relevant factors. Management also
determined it was appropriate to retroactively apply these factors based upon
the significant loan growth the Bank was experiencing. In addition, the
financial statements for 1995 have been restated for the discovery of certain
fraudulent loans as further discussed in Note 10.
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 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 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. Also, in December of 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," the Bank reclassified all of its investment securities, except
for obligations of states and political subdivisions, from the held to
maturity classification to the available for sale classification with an
amortized cost of $15,964 and an estimated market value of $15,280.
F-10
<PAGE>
PEOPLES BANK OF UNITY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
The amortized cost and estimated market values of investment securities are
as follows:
<TABLE>
<CAPTION>
1996
-----------------------------------------
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED MARKET
COST GAINS LOSSES VALUE
--------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
AVAILABLE FOR SALE
U. S. Treasury securities............ $27,145 $ 669 $ -- $27,814
U. S. Government agency securities... 4,065 83 -- 4,148
Mortgage-backed securities........... 47,327 401 (266) 47,462
Corporate securities................. 14,163 143 (56) 14,250
-------- ------- ------ --------
Total debt securities.............. 92,700 1,296 (322) 93,674
Equity securities.................... 282 2,065 -- 2,347
-------- ------- ------ --------
Total.............................. $ 92,982 $ 3,361 $ (322) $ 96,021
======== ======= ====== ========
<CAPTION>
1996
-----------------------------------------
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........................ $ 22,095 $ 350 $ (45) $ 22,400
======== ======= ====== ========
<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
======== ======= ====== ========
<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-11
<PAGE>
PEOPLES BANK OF UNITY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
The amortized cost and estimated market value of debt securities at December
31, 1996, 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.
<TABLE>
<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............. $ 9,016 $ 9,051 $ 8,744 $ 8,793
Due after one year through five
years.............................. 39,243 40,106 11,542 11,707
Due after five years through ten
years.............................. 9,218 9,253 1,809 1,900
Due after ten years................. 35,223 35,264 -- --
------- ------- ------- -------
Total............................. $92,700 $93,674 $22,095 $22,400
======= ======= ======= =======
</TABLE>
Investment securities with a carrying value of $13,798 and $14,610 at
December 31, 1996 and 1995, respectively, were pledged to secure deposits and
other purposes as required by law.
Proceeds from the sale of investment securities available for sale were
$31,765, $48,411 and $9,887 in 1996, 1995, and 1994, respectively. Gross gains
resulting from these sales were $164, $320 and $8 in 1996, 1995, and 1994,
respectively. Gross losses were $113 in 1996, $207 in 1995 and $71 in 1994.
Proceeds from the exercising of call features of investment securities held
to maturity were $204, $2,554, and $2,160 in 1996, 1995, and 1994,
respectively. Gains resulting from these calls were $4, $8, and $60 in 1996,
1995, and 1994, respectively.
5. LOANS
Major classifications of loans are summarized as follows:
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Real estate--construction................................. $ 10,524 $ 6,479
Real estate--mortgages:
Residential............................................. 103,824 83,437
Commercial.............................................. 21,450 17,320
Commercial--industrial and agricultural................... 8,849 8,075
Consumer.................................................. 9,361 11,252
-------- --------
154,008 126,563
Less allowance for loan losses............................ 1,686 1,127
-------- --------
Net loans............................................. $152,322 $125,436
======== ========
</TABLE>
F-12
<PAGE>
PEOPLES BANK OF UNITY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Changes in the allowance for loan losses for the years ended December 31,
1996, 1995, and 1994, are as follows:
<TABLE>
<CAPTION>
1996 1995 1994
------ ------ ----
<S> <C> <C> <C>
Balance, January 1..................................... $1,127 $ 838 $762
Loans charged off.................................... (348) (150) (60)
Recoveries........................................... 32 19 36
------ ------ ----
Net loans charged off................................ (316) (131) (24)
Provision for loan loss.............................. 875 420 100
------ ------ ----
Balance, December 31................................... $1,686 $1,127 $838
====== ====== ====
</TABLE>
At December 31, 1996 and 1995, loans that were considered to be impaired
totaled $487 and $184, respectively, after charge-offs of $58 in 1996. All
impaired loans are included in nonperforming loans. The related allowance for
loan losses allocated to impaired loans was $5 and $58 at December 31, 1996
and 1995, respectively. The average recorded investment in impaired loans
during 1996 and 1995 was $356 and $31, respectively. Interest recognized on
impaired loans was $3 for the year ended December 31, 1996. There was no
interest income recognized on impaired loans in 1995.
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, 1996, is as follows:
<TABLE>
<CAPTION>
DECEMBER 31, AMOUNTS OTHER DECEMBER 31,
1995 ADDITIONS COLLECTED CHANGES 1996
------------ --------- --------- ------- ------------
<S> <C> <C> <C> <C>
$996 $3,107 $(1,768) $7,704 $10,039
</TABLE>
Other changes represent the effect of changes in the members of the Board of
Directors and executive officers during 1996.
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, 1996 and 1995, loans outstanding to individuals and businesses are
dependent upon the local economic conditions in its immediate trade area.
6. PREMISES AND EQUIPMENT
Major classifications of premises and equipment are summarized as follows:
<TABLE>
<CAPTION>
1996 1995
------ ------
<S> <C> <C>
Land.......................................................... $ 377 $ 377
Buildings and leasehold improvements.......................... 4,033 3,909
Furniture, fixtures, and equipment............................ 4,657 4,542
------ ------
9,067 8,828
Less accumulated depreciation and amortization................ 4,955 4,347
------ ------
Total....................................................... $4,112 $4,481
====== ======
</TABLE>
Depreciation and amortization expense amounted to $625 in 1996, $604 in
1995, and $473 in 1994.
F-13
<PAGE>
PEOPLES BANK OF UNITY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
7. DEPOSITS
The following table indicates the composition of deposits at December 31:
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Noninterest-bearing demand................................ $ 43,502 $ 39,711
Interest-bearing demand................................... 19,842 20,566
Money market.............................................. 15,341 14,315
Savings................................................... 79,505 85,672
Time deposits............................................. 79,903 76,658
-------- --------
Total................................................... $238,093 $236,922
======== ========
</TABLE>
Time deposits include certificates of deposit in denominations of $100 or
more. Such deposits aggregated $12,414 and $9,536 at December 31, 1996 and
1995, respectively.
Interest expense on certificates of deposit over $100 amounted to $419 in
1996, $389 in 1995, and $197 in 1994.
At December 31, 1996, the scheduled maturities of time deposits are as
follows:
<TABLE>
<S> <C>
1997............................................................. $45,111
1998............................................................. 15,893
1999............................................................. 3,771
2000............................................................. 4,706
2001 and thereafter.............................................. 10,422
-------
$79,903
=======
</TABLE>
8. INCOME TAXES
The provision for income taxes consists of:
<TABLE>
<CAPTION>
1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
Currently payable.................................. $2,098 $1,736 $1,564
Deferred........................................... (83) (120) 29
------- ------- -------
Total............................................ $ 2,015 $ 1,616 $ 1,593
======= ======= =======
</TABLE>
Income taxes (benefit) applicable to security gains (losses) were $19 in
1996, $41 in 1995 and $(1) in 1994.
F-14
<PAGE>
PEOPLES BANK OF UNITY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
The components of the net deferred tax liabilities are as follows:
<TABLE>
<CAPTION>
1996 1995
------- -------
<S> <C> <C>
Deferred Tax Assets:
Allowance for loan losses............................... $ 451 $ 261
Deferred loan origination fees, net..................... 229 238
Accrued pension costs................................... -- 21
Loss on fraudulent transactions......................... 71 138
------- -------
Total deferred tax assets............................. 751 658
------- -------
Deferred Tax Liabilities:
Premises and equipment.................................. (180) (189)
Prepaid pension costs................................... (19) --
Net unrealized gain on securities....................... (1,033) (1,454)
------- -------
Total deferred tax liabilities........................ (1,232) (1,643)
------- -------
Net deferred tax liabilities.......................... $ (481) $ (985)
======= =======
</TABLE>
The reconciliation of the federal statutory rate and the Bank's effective
income tax rate is as follows:
<TABLE>
<CAPTION>
1996 1995 1994
-------------- -------------- --------------
% OF % OF % OF
PRE- PRE- PRE-
TAX TAX TAX
AMOUNT INCOME AMOUNT INCOME AMOUNT INCOME
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Provision at statutory rate....... $2,382 34.0 % $2,036 34.0 % $2,081 34.0 %
Effect of tax free income......... (419) (6.0) (479) (8.0) (541) (8.8)
Non-deductible interest expense... 40 .6 50 .8 49 .8
Other, net........................ 12 .2 9 .2 4 --
------ ----- ------ ----- ------ -----
Actual provision and effective
rate............................. $2,015 28.8 % $1,616 27.0 % $1,593 26.0 %
====== ===== ====== ===== ====== =====
</TABLE>
9. 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>
1996 1995 1994
----- ----- -----
<S> <C> <C> <C>
Service costs of the current period..................... $ 152 $ 140 $ 133
Interest cost on projected benefit obligation........... 148 132 116
Actual return on plan assets............................ (187) (360) 31
Net amortization and deferral........................... 22 251 (126)
----- ----- -----
Total................................................. $ 135 $ 163 $ 154
===== ===== =====
</TABLE>
F-15
<PAGE>
PEOPLES BANK OF UNITY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
The actuarial present value of the accumulated benefit obligation at
December 31, 1996 and 1995 was $1,292 and $1,099 including vested benefit
obligations of $1,219 and $1,038, respectively. The following sets forth the
funded status of the plan and the amounts recognized in the accompanying
balance sheet:
<TABLE>
<CAPTION>
1996 1995
------- -------
<S> <C> <C>
Plan assets at fair value................................. $ 2,438 $ 2,028
Actuarial present value of projected benefit obligation... (2,069) (1,984)
------- -------
Funded status............................................. 369 44
Prior service costs....................................... 260 286
Unrecognized transition amount............................ (49) (58)
Unrecognized net gain from past experience different from
that assumed and effects from changes in assumptions..... (524) (336)
------- -------
Pension asset (liability)................................. $ 56 $ (64)
======= =======
</TABLE>
The plan assets are primarily invested in fixed income mutual funds.
Assumptions used in determining net periodic pension cost are as follows:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<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 $86, $83 and $110 for the years ended 1996,
1995, and 1994, respectively.
10. 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.
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
F-16
<PAGE>
PEOPLES BANK OF UNITY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
instruments reflect the extent of involvement in particular types of financial
instruments which were comprised of the following:
<TABLE>
<CAPTION>
1996 1995
------- -------
<S> <C> <C>
Commitments to extend credit:
Fixed rate................................................ $ 7,221 $ 4,368
Variable rate............................................. 15,142 10,027
Standby letters of credit................................... 3,380 3,717
------- -------
Total................................................... $25,743 $18,112
======= =======
</TABLE>
The range of interest rates on fixed rate commitments was 6.50% to 9.50% at
December 31, 1996.
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, 1996,
are as follows:
<TABLE>
<S> <C>
1997.............................................................. $237
Less amounts representing interest................................ (12)
----
Present value of minimum lease payments........................... $225
====
</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, 1996, additional paid in
capital of $13,544 was not available for dividends.
F-17
<PAGE>
PEOPLES BANK OF UNITY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Included in cash and due from banks are required federal reserves of $1,782
and $1,524 at December 31, 1996 and 1995, 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 various regulatory capital requirements administered
by the federal banking agencies. Failure to meet minimum capital requirements
can initiate certain mandatory and possibly additional discretionary actions
by the regulators that, if undertaken, could have a direct material effect on
the Bank's financial statements. Under capital adequacy guidelines and the
regulatory framework for prompt corrective action, the Bank must meet specific
capital guidelines that involve quantitative measures of the Bank's assets,
liabilities, and certain off-balance sheet items as calculated under
regulatory accounting practices. The Bank's capital amounts and classification
are also subject to qualitative judgments by the regulators about components,
risk weightings, and other factors.
Quantitative measures established by the regulation to ensure capital
adequacy require the Bank to maintain minimum amounts and ratios of Total and
Tier I capital (as defined in the regulations) to risk-weighted assets (as
defined), and of Tier I capital to average assets (as defined). Management
believes, as of December 31, 1996, that the Bank meets all capital adequacy
requirements to which it is subject.
As of December 31, 1996, the most recent notification from the Federal
Deposit Insurance Corporation categorized the Bank as well capitalized under
the regulatory framework for prompt corrective action. To be categorized as
well capitalized, the Bank must maintain minimum Total risk-based, Tier 1
risk-based and Tier 1 leverage ratios at least 100 to 200 basis points above
those ratios set forth in the table below. There have been no conditions or
events since that notification that management believes have changed the
Bank's category.
The following table reflects the Bank's capital ratios at December 31:
<TABLE>
<CAPTION>
1996 1995
------------- -------------
AMOUNT RATIO AMOUNT RATIO
------- ----- ------- -----
<S> <C> <C> <C> <C>
Total Capital (to Risk Weighted Assets)
Actual........................................ $49,522 31.99% $45,424 31.36%
For Capital Adequacy Purposes................. 12,384 8.00 11,589 8.00
To Be Well Capitalized........................ 15,480 10.00 14,486 10.00
Tier I Capital (to Risk Weighted Assets)
Actual........................................ $47,836 30.90% $44,297 30.58%
For Capital Adequacy Purposes................. 6,192 4.00 5,794 4.00
To Be Well Capitalized........................ 9,288 6.00 8,691 6.00
Tier I Capital (to Average Assets)
Actual........................................ $47,836 16.65% $44,297 15.56%
For Capital Adequacy Purposes................. 11,495 4.00 11,387 4.00
To Be Well Capitalized........................ 14,369 5.00 14,234 5.00
</TABLE>
F-18
<PAGE>
PEOPLES BANK OF UNITY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
14. FAIR VALUE DISCLOSURE
The estimated fair values of the Bank's financial instruments at December
31, 1996 and 1995 are as follows:
<TABLE>
<CAPTION>
1996 1995
----------------- -----------------
CARRYING FAIR CARRYING FAIR
VALUE VALUE VALUE VALUE
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Financial assets:
Cash and due from banks and federal funds
sold.................................... $ 13,856 $ 13,856 $ 13,965 $ 13,965
Securities available for sale............ 96,021 96,021 117,513 117,513
Investment securities.................... 22,095 22,400 24,383 24,878
Net loans................................ 152,322 148,720 125,436 124,941
Accrued interest receivable.............. 2,158 2,158 2,764 2,764
-------- -------- -------- --------
Total.................................. $286,452 $283,155 $284,061 $284,061
======== ======== ======== ========
Financial liabilities:
Deposits................................. $238,093 $237,946 $236,922 $235,579
Commitment to purchase investment securi-
ties.................................... -- -- 2,011 2,011
Obligation under capital lease........... 225 216 520 500
Accrued interest payable................. 1,064 1,064 1,083 1,083
-------- -------- -------- --------
Total.................................. $239,382 $239,226 $240,536 $239,173
======== ======== ======== ========
</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 exists, the fair value estimates for
financial instruments should be based upon management's judgment regarding
current economic conditions, interest rate risk, expected cash flows, future
estimated losses and other factors as determined through various option
pricing formulas or simulation modeling. As many of these assumptions result
from judgments made by management based upon estimates which are inherently
uncertain, the resulting estimated fair values may not be indicative of the
amount realizable in the sale of a particular financial instrument. In
addition, changes in 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:
Cash and Due From Banks, Federal Funds Sold, Accrued Interest Receivable,
Commitment to Purchase Investment Securities, and Accrued Interest Payable
F-19
<PAGE>
PEOPLES BANK OF UNITY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
The fair value is equal to the current carrying value.
Investment Securities
The fair value of securities available for sale and held to maturity 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.
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. AGREEMENT AND PLAN OF MERGER
On November 25, 1996, the Board of Directors entered into an Agreement and
Plan of Reorganization and a related 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 approval by various regulatory
agencies and the stockholders of the Bank and S&T Bancorp, Inc.
F-20
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
FINANCIAL CONDITION
General Total assets increased $2.1 million or .7% from $289.0 million at
December 31, 1995 to $291.1 million at December 31, 1996. During this period
there were increases of $27.4 million in total loans and $766,000 in cash and
due from banks, which were funded by declines in investment securities of
$23.8 million and federal funds sold of $875,000 and increases in deposits of
$1.2 million.
Investment Portfolio Total investment securities declined during the year by
$23.8 million or 16.8% from $141.9 million at December 31, 1995 to $118.1
million at December 31, 1996. Management sold $31.8 million of available for
sale securities, primarily U. S. Treasury securities during the year. The
proceeds from the sale of these securities were 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 $115.1 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 increased its 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-21
<PAGE>
The following table sets forth the carrying amount of securities at the
dates indicated
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1996 1995 1994
------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
AVAILABLE FOR SALE
U. S. Treasury securities............................. $27,814 $ 54,565 $ 2,209
U. S. Government agency securities.................... 4,148 997
Mortgage-backed securities............................ 47,462 38,843
Corporate securities.................................. 14,250 21,458 5,393
Equity securities..................................... 2,347 1,650 1,075
------- -------- --------
TOTAL............................................. $96,021 $117,513 $ 8,677
======= ======== ========
INVESTMENT SECURITIES
U. S. Treasury securities............................. $ 99,197
U. S. Government agency securities.................... 1,010
Mortgage-backed securities............................ 3,932
Obligations of states and political subdivisions...... $22,095 $ 24,383 27,493
Corporate securities.................................. 20,442
------- -------- --------
TOTAL............................................. $22,095 $ 24,383 $152,074
======= ======== ========
</TABLE>
At December 31, 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 December 31,
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 states and
political subdivisions.
<TABLE>
<CAPTION>
MATURING
--------------------------------------------------------------------
WITHIN AFTER ONE BUT AFTER FIVE BUT AFTER
ONE YEAR WITHIN FIVE YEARS WITHIN TEN YEARS TEN YEARS NO FIXED
------------ ------------------- ----------------- ------------- 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................... $4,012 6.94% $ 23,802 7.26%
U. S. Government agency
securities............. 4,148 7.56%
Mortgage-backed securi-
ties................... 1,412 7.73% 5,562 7.27% $ 5,224 7.05% $35,264 6.50%
Corporate securities.... 3,627 7.08% 6,594 6.82% 4,029 7.04%
Marketable equity secu-
rities................. $2,347
------ ---------- --------- ------- ------
$9,051 $ 40,106 $ 9,253 $35,264 $2,347
====== ========== ========= ======= ======
INVESTMENT SECURITIES
Obligations of states
and political subdivi-
sion................... $8,744 7.34% $ 11,542 7.75% $ 1,809 8.53% $ -- $ --
====== ========== ========= ======= ======
</TABLE>
Loans Total loans amounted to $154.0 million at December 31, 1996 compared
to $126.6 million at December 31, 1995, an increase of $27.4 million or 21.6%.
Total real estate loans amounted to $135.8 million or 88.2% of total loans at
December 31, 1996 comprised of: residential real estate loans of $103.8
million, commercial real estate of $21.5 million and real estate construction
of $10.5 million.
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
F-22
<PAGE>
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 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.
The following table shows Peoples loan distribution at the end of each
reported period:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------------
1996 1995 1994 1993 1992
-------- -------- -------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Commercial, industrial and agricul-
tural.............................. $ 8,849 $ 8,075 $ 8,834 $ 6,933 $ 6,105
Real estate--construction........... 10,524 6,479 2,946 2,633 964
Real estate--mortgage............... 125,274 100,757 79,813 71,769 60,637
Consumer............................ 9,361 11,252 10,333 13,159 13,326
-------- -------- -------- ------- -------
Total loans..................... $154,008 $126,563 $101,926 $94,494 $81,032
======== ======== ======== ======= =======
</TABLE>
The following table shows the maturity of loans (excluding residential
mortgages of 1-4 family residences and consumer loans) outstanding as of
December 31, 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 agricultur-
al..................................... $2,442 $ 5,033 $ 1,373 $ 8,848
Real estate--construction............... 1,809 3,688 5,027 10,524
Real estate--mortgage................... 6 2,304 19,140 21,450
------ ------- ------- -------
TOTAL............................... $4,257 $11,025 $25,540 $40,822
====== ======= ======= =======
Fixed interest rates.................... $ 3,092 $17,237
Variable interest rates................. 7,933 8,303
======= =======
TOTAL............................... $11,025 $25,540
======= =======
</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, as a percentage of total 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 1.29% of total loans at
December 31, 1996.
During 1996, Peoples changed its policy of placing loans on a nonaccrual
status, resulting in an increase of $515,000 to $1,450,000 at December 31,
1996 compared to $935,000 at December 31, 1995. This increase was principally
attributable to small homogenous one-to-four family residential mortgage
loans. For commercial and real estate loans greater than 90 days past due,
accrual of income is generally 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. Prior to 1996, management evaluated commercial and
real estate loans on an individual basis to determine if they should be placed
on
F-23
<PAGE>
nonaccrual status. The accrual of interest was discontinued, when in the
opinion of management, collection was doubtful.
The following table summarizes Peoples nonaccrual and past due loans.
Peoples has no restructured loans:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------
1996 1995 1994 1993 1992
------ ---- ------ ---- ------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Nonaccrual loans................................. $1,450 $935 $ 485 $96 $ 138
Accruing loans past due 90 days or more.......... 538 969 1,487 931 1,380
</TABLE>
Interest income that would have been recorded on loans accounted for on a
non-accrual basis under the original terms of such loans was $179,000 for the
year ended December 31, 1996 and $74,000 was recorded as interest income from
non-accrual loans for the year ended December 31, 1996.
Impaired loans are included with non-accrual loans in the above table, and
amounted to $487,000 and $184,000 as of December 31, 1996 and 1995,
respectively. Impaired loans are commercial and commercial real estate loans
for which it is probable that Peoples will not be able to collect all amounts
due according to the contractual terms of the loan agreement. Peoples
individually evaluates such loans for impairment and does not aggregate loans
by major risk classifications.
Classified Assets Management regularly reviews the loan portfolio in order
to identify potential problem loans, and classifies any potential problem
loans as a special mention, substandard, doubtful, or loss asset. An asset is
considered substandard if it is inadequately protected by the current equity
and paying capacity of the borrower or of the collateral pledged, if any.
Substandard assets include those characterized by the distinct possibility
that the bank will sustain some loss if the deficiencies are not corrected.
Assets classified as doubtful have all the weaknesses of those classified as
substandard with the additional characteristic that the weaknesses make
collection or liquidation in full highly questionable and improbable. Assets
classified as loss are considered uncollectible and of such little value that
their continuance as assets without the establishment of a specific reserve is
not warranted. Assets that do not currently expose the bank to a sufficient
degree of risk to warrant classification but do possess credit deficiencies or
potential weaknesses deserving management's close attention are designated
special mention. Special mention assets have a potential weakness or pose an
unwarranted financial risk that, if not corrected, could weaken the asset and
increase risk in the future.
On the basis of management's review of its loan portfolio, at December 31,
1996, Peoples has classified $1.4 million as substandard and $5.0 million as
special mention. Peoples has no assets classified as doubtful or loss at
December 31, 1996.
At December 31, 1996, there were no loans which were not included as past
due, or nonaccrual, where known information about possible credit problems of
borrowers causes management to have serious doubts as to the ability of such
borrowers to comply with the present repayment terms.
Allowance for Loan Losses The allowance for loan losses increased to $1.7
million or 1.09% of total loans at December 31, 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.
F-24
<PAGE>
This table summarizes Peoples loan loss experience for each of the periods
indicated:
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
------ ------ ---- ---- ----
<S> <C> <C> <C> <C> <C>
Balance, beginning of period................. $1,127 $ 838 $762 $757 $756
Charge-offs:
Commercial, industrial and agricultural... 92 3 1
Real estate-mortgage...................... 31 82 46 72
Consumer.................................. 225 68 57 55 50
------ ------ ---- ---- ----
348 150 60 102 122
------ ------ ---- ---- ----
Recoveries:
Commercial, industrial and agricultural... 4
Real estate-mortgage...................... 10 9 32 30 10
Consumer.................................. 22 10 4 8 3
------ ------ ---- ---- ----
32 19 36 42 13
------ ------ ---- ---- ----
Net charge-offs............................ 316 131 24 60 109
Provision for loan losses.................. 875 420 100 65 110
------ ------ ---- ---- ----
Balance, end of period....................... $1,686 $1,127 $838 $762 $757
====== ====== ==== ==== ====
Ratio of net charge-offs to average loans
outstanding................................. 0.23% 0.12% 0.02% 0.07% 0.13%
</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. The increased levels of loans and
charge-offs has been a significant factor in determining the level of the
provision for loan losses.
Management also considers the causes of charge-offs to assist in the
evaluation of the adequacy of the allowance for loan losses. There has been a
marked increase in the levels of charge-offs in recent years relating to
residential real estate and consumer loans. The charge-offs relating to
residential real estate loans in 1995 were attributable to three properties
which were foreclosed on and written down to fair value prior to being
classified as other real estate owned. Historically, Peoples has had minimal
activity relating to other real estate which is attributable to its
conservative underwriting standards. Peoples has also noticed an increase in
the level of consumer loan charge-offs, particularly those which are
unsecured. The levels of personal bankruptcies in Peoples market area are at
an all time high which have significantly contributed to the levels of
consumer loan losses.
Peoples has allocated and unallocated components of its allowance for loan
losses. The allocated portion reflects expected losses based on specific
review of individual loans and applying standard loss ratios to those loans
not individually evaluated. The unallocated component is more subjective in
nature, based upon management's assessment of nonquantifiable factors such as:
dependency on local economic conditions, increased levels and types of
lending, increased levels of loan charge-offs, and trends and levels of
current nonperforming loans. Peoples has increased its unallocated component
of the allowance for loan losses as a result of the significant increases over
the past three years of total loans, increased volume of commercial real
estate lending, increased levels of charge-offs in the past two years, and the
levels of personal bankruptcies occurring in its market area.
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-25
<PAGE>
This table shows the allocation of the allowance for loan losses as of the
end of each reported period:
<TABLE>
<CAPTION>
DECEMBER 31, 1996 DECEMBER 31, 1995 DECEMBER 31, 1994 DECEMBER 31, 1993 DECEMBER 31, 1992
------------------ ------------------ ------------------ ------------------ ------------------
PERCENT OF PERCENT OF PERCENT OF PERCENT OF PERCENT OF
LOANS IN LOANS IN LOANS IN LOANS IN LOANS IN
EACH EACH EACH EACH EACH
CATEGORY TO CATEGORY TO CATEGORY TO CATEGORY TO CATEGORY TO
TOTAL TOTAL TOTAL TOTAL TOTAL
AMOUNT LOANS AMOUNT LOANS AMOUNT LOANS AMOUNT LOANS AMOUNT LOANS
------ ----------- ------ ----------- ------ ----------- ------ ----------- ------ -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Commercial, industrial
and agricultural....... $ 222 5% $ 244 6% $202 9% $115 7% $ 59 8%
Real estate--construc-
tion................... 136 7% 81 5% 37 3% 20 3% 7 1%
Real estate--mortgage... 836 82% 539 80% 446 78% 389 76% 398 75%
Consumer................ 98 6% 176 9% 129 10% 98 14% 161 16%
Unallocated............. 394 0% 87 0% 24 0% 140 0% 132 0%
------ --- ------ --- ---- --- ---- --- ---- ---
$1,686 100% $1,127 100% $838 100% $762 100% $757 100%
====== === ====== === ==== === ==== === ==== ===
</TABLE>
Deposits Total average deposits decreased during the year by $1.7 million
from $238.4 million at December 31, 1995 to $236.7 million at December 31,
1996. Average noninterest-bearing deposits increased by $4.2 million while
average interest-bearing deposits decreased by $5.9 million. The modest
decrease in total average deposits is consistent with recent years' trends as
competition from other financial services industries continues to offer
customers an alternative investment instrument.
Since 1994, there has been a significant change in the composition of the
deposit portfolio. Average demand deposits, money market accounts and savings
accounts have declined from $20.6 million, $22.4 million and $119.8 million at
December 31, 1994 to $20.0 million, $14.9 million and $83.2 million at
December 31, 1996, respectively. During the same period, average time deposits
have increased from $47.7 million at December 31, 1994 to $77.7 million at
December 31, 1996. The fluctuation between savings and time deposits was
influenced by customer reaction to a strategic reduction in 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 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,
-------------------------------------------
1996 1995 1994
------------- ------------- -------------
AMOUNT RATE AMOUNT RATE AMOUNT RATE
-------- ---- -------- ---- -------- ----
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Noninterest-bearing demand depos-
its.............................. $ 40,930 $ 36,757 $ 34,799
Interest-bearing demand deposits.. 20,045 1.92% 19,845 2.00% 20,573 2.20%
Money market accounts............. 14,870 2.59% 16,431 2.50% 22,386 2.74%
Savings deposits.................. 83,165 2.49% 94,656 3.03% 119,788 3.25%
Time deposits..................... 77,670 5.35% 70,721 5.54% 47,717 4.85%
-------- -------- --------
$236,680 $238,410 $245,263
======== ======== ========
</TABLE>
F-26
<PAGE>
Maturities of time certificates of deposit of $100,000 or more outstanding
at December 31, 1996, are summarized as follows:
<TABLE>
<S> <C>
3 Months or less................................................. $ 1,396
Over 3 through 6 months.......................................... 688
Over 6 through 12 months......................................... 2,731
Over 12 months................................................... 7,599
-------
$12,414
=======
</TABLE>
Stockholder's Equity Stockholder's equity was $49.8 million at December 31,
1996, an increase of $2.7 million from $47.1 million at December 31, 1995. The
increase was comprised of net profits of $5.0 million offset by dividends paid
to stockholders of $1.5 million and decreased net unrealized gain on
securities of $804,000.
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,
------------------
1996 1995
-------- --------
<S> <C> <C>
CAPITAL COMPONENTS
Tier I.................................................... $ 47,836 $ 44,297
Total risk-based.......................................... 49,522 45,424
ASSETS
Risk weighted assets...................................... $154,801 $144,858
Average tangible assets................................... 287,385 284,685
CAPITAL RATIOS
Tier I risk-based capital................................. 30.90% 30.58%
Total risk based capital.................................. 31.99% 31.36%
Leverage.................................................. 16.65% 15.56%
MINIMUM REGULATORY GUIDELINES
Tier I risk-based capital................................. 4.00% 4.00%
Total risk based capital.................................. 8.00% 8.00%
Leverage.................................................. 4.00% 4.00%
</TABLE>
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.
F-27
<PAGE>
The table below reflects Peoples interest rate sensitivity position of
assets and liabilities based on their maturities or period of first repricing.
<TABLE>
<CAPTION>
RATE SENSITIVE
(IN THOUSANDS)
-----------------------------------------------------------
1 TO 90 91 TO 180 181 TO 365 1 TO 2 BEYOND
DAYS DAYS DAYS YEARS 2 YEARS TOTAL
-------- --------- ---------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Rate Sensitive Assets
Loans................. $ 35,246 $ 9,661 $ 20,329 $ 24,843 $ 62,243 $152,322
Federal funds sold.... 6,465 6,465
Investment securi-
ties................. 3,371 5,629 8,795 17,554 82,767 118,116
-------- -------- -------- -------- -------- --------
Total Rate Sensitive
Assets............. $ 45,082 $ 15,290 $ 29,124 $ 42,397 $145,010 $276,903
-------- -------- -------- -------- -------- --------
Cumulative Rate
Sensitive Assets... $ 45,082 $ 60,372 $ 89,496 $131,893 $276,903
-------- -------- -------- -------- --------
Rate Sensitive Liabili-
ties
Interest-bearing de-
mand................. $ 19,842 $ 19,842
Money market.......... 15,341 15,341
Savings............... 79,505 79,505
Time deposits......... 16,146 $ 13,513 $ 15,452 $ 15,893 $ 18,899 79,903
-------- -------- -------- -------- -------- --------
Total Rate Sensitive
Liabilities........ $130,834 $ 13,513 $ 15,452 $ 15,893 $ 18,899 $194,591
-------- -------- -------- -------- -------- --------
Cumulative Rate
Sensitive
Liabilities........ $130,834 $144,347 $159,799 $175,692 $194,591
-------- -------- -------- -------- --------
Period Interest Rate
Sensitivity........ $(85,752) $ 1,777 $ 13,672 $ 26,504 $126,111 $ 82,312
======== ======== ======== ======== ======== ========
Cumulative Gap...... $(85,752) $(83,975) $(70,303) $(43,799) $ 82,312
======== ======== ======== ======== ========
Rate Sensitive
Assets/Rate Sensi-
tive Liabilities... 0.34 0.42 0.56 0.75 1.42
</TABLE>
In analyzing its gap position, although all time periods are considered,
Peoples emphasizes the next twelve month period. An institution is considered
to be liability sensitive, or as having a negative gap, when the amount of its
rate sensitive liabilities maturing or repricing with a given time period
exceeds the amount of its rate sensitive assets also repricing within that
same period. Conversely, an institution is considered to be asset sensitive,
or as having a positive gap, when the amount of its rate sensitive liabilities
maturing or repricing is less than the amount of its rate sensitive assets
also maturing or repricing during the same period. Generally, in a falling
interest rate environment, a negative gap should result in an increase in net
interest income, and in a rising interest rate environment this negative gap
should adversely affect net interest income. The converse would be true for a
positive gap. The table above reflects that at the one year time horizon,
Peoples is liability sensitive and should be adversely affected by a rising
interest rate environment.
However, shortcomings are inherent in a simplified gap analysis that may
result in changes in interest rates affecting net interest income more or less
than the gap analysis would indicate. For example, although certain assets and
liabilities may have similar maturities or periods to repricing, they may
react in different degrees to changes in market interest rates. Also, Peoples
looks to its portfolio of investment securities available for sale as a
primary source of liquidity, providing the ability to reprice these rate
sensitive assets in periods of rising interest rates. Although Peoples does
not employ simulation modeling of its interest rate sensitivity position on a
routine basis, in management's opinion a rise in interest rates of 200 basis
points would not have a material impact on Peoples net interest income.
F-28
<PAGE>
RESULTS OF OPERATIONS
Net interest income represents the difference between the interest and fees
earned on interest-earning 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 states 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 years ended December 31, 1996, 1995, and 1994. The
following table demonstrates the amount that has been added to interest
income.
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1996 1995 1994
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Interest income per statements of income............... $21,011 $20,003 $19,905
Adjustment to fully taxable equivalent basis........... 613 679 801
------- ------- -------
Interest income adjusted to fully taxable equivalent
basis................................................. 21,624 20,682 20,706
Interest expense....................................... 7,045 7,679 7,297
------- ------- -------
Net interest income adjusted to fully taxable equiva-
lent basis............................................ $14,579 $13,003 $13,409
======= ======= =======
</TABLE>
F-29
<PAGE>
The average balance sheet and net interest income analysis for the years
ended December 31, 1996, 1995, and 1994 is as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------------------------------------------------------
1996 1995 1994
------------------------- ------------------------- -------------------------
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)............... $140,081 $12,317 8.79% $113,380 $10,073 8.88% $ 97,093 $ 8,781 9.04%
Taxable investment se-
curities.............. 107,336 7,283 6.79% 126,134 8,256 6.55% 141,609 9,351 6.60%
Tax-exempt investment
securities............ 23,578 1,803 7.65% 25,254 1,997 7.91% 28,182 2,356 8.36%
Federal funds sold..... 4,052 221 5.45% 6,129 356 5.81% 5,049 218 4.32%
-------- ------- -------- ------- -------- -------
Total interest-earning
assets................. 275,047 21,624 7.86% 270,897 20,682 7.63% 271,933 20,706 7.61%
Noninterest-earning as-
sets
Cash and due from
banks................. 6,711 6,933 8,625
Premises and equip-
ment.................. 4,367 4,725 4,166
Other assets........... 2,517 3,079 3,459
Less allowance for loan
losses................. (1,257) (949) (812)
-------- -------- --------
$287,385 $284,685 $287,371
======== ======== ========
LIABILITIES AND SHARE-
HOLDERS' EQUITY
Interest-bearing liabil-
ities:
Demand deposits........ $ 20,045 $ 385 1.92% $ 19,845 $ 396 2.00% $ 20,573 $ 453 2.20%
Money market accounts.. 14,870 385 2.59% 16,431 410 2.50% 22,386 613 2.74%
Savings deposits....... 83,165 2,072 2.49% 94,656 2,864 3.03% 119,788 3,888 3.25%
Time deposits.......... 77,670 4,153 5.35% 70,721 3,921 5.54 % 47,717 2,315 4.85%
Obligations under capi-
tal lease............. 377 50 13.26% 654 88 13.46% 222 28 12.67%
-------- ------- -------- ------- -------- -------
Total interest-bearing
liabilities............ 196,127 7,045 3.59% 202,307 7,679 3.80% 210,686 7,297 3.46%
Noninterest-bearing lia-
bilities:
Demand deposits........ 40,930 36,757 34,799
Other.................. 2,269 2,063 2,502
Shareholders' equity.... 48,039 43,558 39,384
-------- -------- --------
$287,385 $284,685 $287,371
======== ======== ========
------- ------- -------
Net interest income..... $14,579 $13,003 $13,409
======= ======= =======
Net yield on interest-
earning assets......... 5.30% 4.80% 4.93%
</TABLE>
- --------
(1) For the purpose of these computations, nonaccruing loans are included in
the daily average loan amounts outstanding.
F-30
<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>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------
1996 VS 1995 1995 VS 1994
---------------------------------- ---------------------------------
INCREASE (DECREASE) DUE TO (1) INCREASE (DECREASE) DUE TO (1)
---------------------------------- ---------------------------------
VOLUME RATE NET VOLUME RATE NET
----------- --------- ---------- ----------- --------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Interest earned on:
Loans................. $ 2,347 $ (103) $ 2,244 $ 1,453 $ (161) $ 1,292
Taxable investment se-
curities............. (1,267) 294 (973) (1,367) 272 (1,095)
Tax-exempt investment
securities........... (123) (71) (194) 211 (570) (359)
Federal funds sold.... (111) (24) (135) (11) 149 138
----------- --------- ---------- ---------- --------- ----------
$ 846 $ 96 $ 942 $ 286 $ (310) $ (24)
Interest paid on:
Demand deposits....... 4 (15) (11) (17) (40) (57)
Money market ac-
counts............... (40) 15 (25) (104) (99) (203)
Savings deposits...... (491) (301) (792) (413) (611) (1,024)
Time deposits......... 371 (139) 232 (190) 1,796 1,606
Other borrowed funds.. (37) (1) (38) 56 4 60
----------- --------- ---------- ---------- --------- ----------
$ (193) $ (441) $ (634) $ (668) $ 1,050 $ 382
---------- ----------
Change in net interest
income................. $ 1,576 $ (406)
========== ==========
</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>
YEAR ENDED DECEMBER 31
-------------------------
1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
Return on average assets............................. 1.74% 1.54% 1.58%
Return on average equity............................. 10.39% 10.04% 11.50%
Dividend payout ratio................................ 29.11% 20.38% 17.89%
Equity to asset ratio................................ 17.12% 16.30% 14.40%
</TABLE>
COMPARISON OF THE YEAR ENDED DECEMBER 31, 1996 AND 1995
Net Income Net income amounted to $5.0 million or $43.16 per share in 1996,
representing an increase of 14.2% from the $4.4 million or $37.81 per share in
1995. The return on average assets was 1.74% for 1996 and 1.54% for 1995. The
return on average equity was 10.39% in 1996 compared to 10.04% in 1995.
Net Interest Income On a fully taxable equivalent basis, net interest income
increased $1.6 million or 12.1% in 1996 as compared to 1995. The net yield on
interest-earning assets increased by 50 basis points (1% equals 100 basis
points) to 5.30%, while the average balance of interest-earning assets
increased by $4.2 million or 1.5%.
F-31
<PAGE>
Total interest income increased $962,000 which is the result of the shifting
of $20.5 million of the investment securities with a weighted average yield of
6.94% along with $2.1 million of federal funds sold yielding 5.45% to the loan
portfolio yielding 8.79%, plus the additional loan growth of $4.1 million.
Total interest expense declined by $634,000 primarily as a result of a 21
basis point decline in the total cost of funds from 3.80% in 1995 to 3.59% in
1996. This was also compounded by a decline in total average interest-bearing
liabilities of $6.2 million.
Provision for Loan Losses The provision for loan losses amounted to $875,000
for 1996 compared to $420,000 in 1995. The increase in the provision is the
result of significant increases in the loan portfolio and loan charge-offs
over the past two years. Also affecting the level of the provision for loan
losses is the fact that a significant portion of this loan growth is secured
by 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 $316,000 in 1996 compared to
$131,000 in 1995. The increased levels of charge-offs have primarily been the
result of unsecured consumer loans, resulting from personal bankruptcies
reaching an all time high.
Noninterest Income Noninterest income decreased $35,000 or 4.2% in 1996
compared to 1995. The decrease was attributable to reduced levels of security
gains in 1996 and higher levels of service charges on deposit accounts. During
1996, Peoples recognized net security gains of $55,000 compared to net
security gains in 1995 of $121,000. The level of security gains in 1996 and
1995 were the result of the sale of U. S. Treasury securities during the
periods, as previously discussed. The increase in service charges on deposit
accounts relates to a greater volume on noninterest-bearing deposit accounts.
Noninterest Expense Noninterest expense increased by $134,000 in 1996
compared to 1995. The increase was primarily the result of increases in
salaries and employee benefits of $113,000, professional fees of $465,000 and
other expenses of $225,000, offset by declines in FDIC insurance premiums of
$277,000 and loss from fraudulent transactions of $405,000.
Salaries and employee benefits increased by $113,000 or 3.7% which reflects
normal salary increases during 1996.
Professional fees relating to accounting and legal services increased by
$465,000 during 1996, as a result, of two significant events. The first event
was the discovery and investigation of activities of a now former executive
officer of Peoples who had executed a series of fraudulent transactions. The
second event was the negotiation and performance of the Agreement and Plan of
Merger being entered into by Peoples and S&T Bank, in connection with which
Peoples was required to comply with the additional reporting requirements of
filings to be submitted to the Securities and Exchange Commission.
The most significant increases in other expenses related to costs of real
estate owned and costs associated with the loan growth in recent years.
Historically, Peoples has had very low volumes of real estate acquired in
settlement of loans. During 1996, Peoples incurred costs associated with the
foreclosure and disposal of real estate owned amounting to $52,000. Costs
associated with the credit analysis of existing loans, such as credit searches
and reappraisals to ensure the credit worthiness of the loan portfolio,
increased by approximately $50,000 during 1996.
As a result of the Bank Insurance Fund (the "BIF") reaching its required
level of capitalization, Peoples was only required to pay a $2,000 premium in
1996 compared to 4 basis points on all insurable deposits or $279,000 in 1995.
As discussed in the Notes to the Financial Statements, 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
F-32
<PAGE>
transactions consisted primarily of granting loans to individuals where the
proceeds were ultimately received by the executive officer. Peoples is
actively pursuing recovery.
Federal Income Taxes Federal income tax expense increased $399,000 to
$2,015,000 in 1996, as a result of higher levels of pre-tax income. The 1996
effective tax rate of 28.8% was below the 34% statutory rate primarily as a
result of tax-exempt interest.
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 improve its interest rate
risk position. The level and mix of funds is continually 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. As previously discussed in the
comparison of 1996 results of operations with 1995, the increase in the
provision is primarily the result of the continued loan growth in 1995 and the
risk associated with those loans. Net charge-offs totaled $131,000 in 1995 as
compared to $24,000 in 1994. The increase in charge-offs in 1995 related
primarily to write downs of $82,000 on three residential real estate
properties which were acquired in foreclosure and transferred to other real
estate owned.
Noninterest Income Noninterest income increased $141,000 or 20.2% 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 for the purpose of reinvesting the proceeds in loan originations
and mortgage-backed securities.
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 $266,000 and FDIC
insurance premiums of $280,000, offset by increases in furniture and equipment
of $150,000 and loss from fraudulent transactions of $405,000.
The decline in salary and employee benefits was the result of two
significant events. The first event 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
F-33
<PAGE>
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 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 27.0% was below the 34% statutory rate primarily as a
result of tax-exempt interest.
F-34
<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.
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1.10. "FDIA" shall mean the Federal Deposit Insurance Act.
1.11. "FDIC" shall mean the Federal Deposit Insurance Corporation.
1.12. "Federal Reserve Board" shall mean the Board of Governors of the
Federal Reserve System.
1.13. "Investment Company Act" means the Investment Company Act of 1940, as
amended.
1.14. "Pennsylvania Banking Code" shall mean the Pennsylvania Banking Code
of 1965, as amended.
1.15. "Peoples Financial Statements" shall mean (i) the unaudited balance
sheet and income statement of Peoples as of September 30, 1996 and the audited
balance sheets as of December 31, 1995 and 1994 and the related statements of
cash flows and changes in shareholders' equity (including related notes, if
any) and the income statements for each of the three years ended December 31,
1995, 1994 and 1993 and (ii) the balance sheets of Peoples and related
statements of income (including statements of cash flows and changes in
shareholders' equity and related notes, if any) with respect to quarterly or
annual periods ended subsequent to September 30, 1996; except that financial
statements as of, or for the nine months ended, September 30, 1996 are
contained in a revised Call Report to be filed in November or December, 1996,
and have been prepared in accordance with generally accepted accounting
principles in all material respects, except that such financial statements do
not contain statements of cash flows or changes in shareholders' equity or
footnotes and are subject to normal year-end adjustments.
1.16. "Previously Disclosed" shall mean disclosed prior to the execution
hereof in a letter dated of even date herewith from Peoples and delivered to
S&T.
1.17. "Proxy Statement" shall mean the joint proxy statement/prospectus (or
similar documents) together with any supplements thereto sent to the
shareholders of S&T and Peoples to solicit their votes in connection with this
Reorganization Agreement and the Plan of Merger.
1.18. "Registration Statement" shall mean the registration statement with
respect to the S&T Common Stock to be issued in connection with the Merger as
declared effective by the Commission under the Securities Act.
1.19. "Rights" shall mean warrants, options, rights, convertible securities
and other arrangements or commitments which obligate an entity to issue or
dispose of any of its capital stock, and stock appreciation rights,
performance units and other similar stock-based rights whether they obligate
the issuer thereof to issue stock or other securities or to pay cash.
1.20. "SEC Documents" shall mean all reports and registration statements
filed, or required to be filed, by a party hereto pursuant to the Securities
Laws.
1.21. "Securities Act" shall mean the Securities Act of 1933, as amended.
1.22. "Securities Laws" shall mean: the Securities Act; the Exchange Act;
the Investment Company Act; the Investment Advisers Act of 1940, as amended;
the Trust Indenture Act of 1939, as amended; and the rules and regulations of
the Commission promulgated thereunder.
1.23. "S&T Financial Statements" shall mean (i) the consolidated balance
sheets of S&T as of September 30, 1996 and as of December 31, 1995 and 1994
and the related consolidated statements of income, cash flows and changes in
shareholders' equity (including related notes, if any) for the nine months
ended September 30, 1996 and each of the three years ended December 31, 1995,
1994 and 1993 as filed by S&T in SEC Documents and (ii) the consolidated
balance sheets of S&T and related consolidated statements of income, cash
flows and changes in shareholders' equity (including related notes, if any) as
filed by S&T in SEC Documents with respect to quarterly or annual periods
ended subsequent to September 30, 1996.
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1.24. "Tax" or "Taxes" shall mean all income, gross receipts, gains, sales,
use, employment, franchise, profits, excise, property, value added, commercial
rent or other taxes, fees, stamp taxes and duties, assessments or charges of
any kind whatsoever (whether payable directly or by withholding), together
with any interest and penalties, additions to tax or additional amounts with
respect thereto imposed by any taxing authority.
1.25. "Tax Returns" shall mean all federal, state, local and foreign tax
returns including, without limitation, estimated tax returns, returns required
under Sections 1441-1446 and 6031-6060 of the Code and any regulations
thereunder, and any comparable state and local laws and regulations,
withholding tax returns, FICA and FUTA returns and back-up withholding returns
required under Section 3406 of the Code and the regulations thereunder, and
any comparable state and local laws and regulations.
Other terms used herein are defined in the preamble and the recitals to this
Reorganization Agreement.
ARTICLE 2
Representations and Warranties of Peoples
Peoples hereby represents and warrants to S&T as follows:
2.1. CAPITAL STRUCTURE OF PEOPLES
The authorized capital stock of Peoples consists of 115,660 shares of common
stock, par value $10.00 per share ("Peoples Common Stock"), all of which
shares are issued and outstanding. All outstanding shares of Peoples capital
stock have been duly issued and are validly outstanding, fully paid and
nonassessable. There are no Rights authorized, issued or outstanding with
respect to the capital stock of Peoples. None of the shares of Peoples capital
stock has been issued in violation of the preemptive rights of any person.
2.2. NO SUBSIDIARIES
Peoples does not own, directly or indirectly, 5% or more of the outstanding
capital stock or other voting securities of any corporation, bank, savings
association or other organization.
2.3. ORGANIZATION, STANDING AND AUTHORITY OF PEOPLES
Peoples is a duly organized Pennsylvania banking institution, validly
existing and in good standing under applicable laws. Peoples has full power
and authority to carry on its business as now conducted. Peoples is not
required to be qualified to do business in any other State of the United
States or any foreign jurisdiction. Peoples has all material federal, state
and local governmental authorizations necessary for it to own or lease its
properties and assets and to carry on its business as it is now being
conducted.
2.4. AUTHORIZED AND EFFECTIVE REORGANIZATION AGREEMENT
(a) Peoples has all requisite corporate power and authority to enter into
and perform all of its obligations under this Reorganization Agreement. The
execution and delivery of this Reorganization Agreement and the consummation
of the transactions contemplated hereby have been duly and validly authorized
by all necessary corporate action in respect thereof on the part of Peoples,
subject to approval thereof by the shareholders of Peoples to the extent
required by applicable law and the Articles of Incorporation and By-Laws of
Peoples.
(b) Upon the execution of the Plan of Merger and at all times thereafter
until the Closing Date, Peoples will have all requisite corporate power and
authority to enter into and perform all of its obligations under the Plan of
Merger, and the execution and delivery of the Plan of Merger and the
consummation of the transactions contemplated thereby (at the time of such
execution) will have been duly and validly authorized by all necessary
corporate action in respect thereof on the part of Peoples, except that the
affirmative vote of the holders of two-thirds of the outstanding shares of
Peoples Common Stock is required to approve the Plan of Merger pursuant to the
Pennsylvania Banking Code.
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(c) This Reorganization Agreement constitutes a legal, valid and binding
obligation of Peoples and the Plan of Merger, upon the authorization,
execution and delivery thereof by the parties thereto, will constitute a
legal, valid and binding obligation of Peoples, in each case enforceable
against it in accordance with their respective terms, subject to receipt of
shareholder approval and, as to enforceability, subject to bankruptcy,
insolvency, fraudulent conveyance and other laws of general applicability
relating to or affecting creditors' rights and to general equity principles.
(d) Except as Previously Disclosed, neither the execution and delivery of
this Reorganization Agreement or the Plan of Merger, nor consummation of the
transactions contemplated hereby or thereby, nor compliance by Peoples with
any of the provisions hereof or thereof shall (i) conflict with or result in a
breach of any provision of the articles of incorporation or by-laws of
Peoples, (ii) constitute or result in a breach of any material term, condition
or provision of, or constitute a default under, or give rise to any right of
termination, cancellation or acceleration with respect to, or result in the
creation of any lien, charge or encumbrance upon any property or asset of
Peoples pursuant to, any material note, bond, mortgage, indenture, license,
agreement or other instrument or obligation, or (iii) violate any order, writ,
injunction, decree, statute, rule or regulation applicable to Peoples.
2.5. FINANCIAL STATEMENTS; BOOKS AND RECORDS; MINUTE BOOKS
The Peoples Financial Statements fairly present the financial position of
Peoples as of the dates indicated and the results of operations (and changes
in shareholders' equity and cash flows for audited periods) of Peoples for the
periods then ended in conformity with generally accepted accounting principles
(in all material respects for unaudited periods) applied on a consistent basis
except as disclosed therein and except that the Peoples Financial Statements
as of, or for the nine months ended, September 30, 1996 (which were included
in a revised Call Report) and all other interim financial statements for
periods prior to September 30, 1996 were prepared in accordance with generally
accepted accounting principles in all material respects, except that such
financial statements do not contain statements of cash flows or changes in
shareholders' equity or footnotes and are subject to normal year-end
adjustments. Except as Previously Disclosed, the books and records of Peoples
fairly reflect in all material respects the transactions to which it is a
party or by which its properties are subject or bound. Except as Previously
Disclosed, such books and records have been properly kept and maintained and
are in compliance in all material respects with all applicable legal and
accounting requirements. Except as Previously Disclosed, the minute books of
Peoples contain accurate records of all corporate actions of its shareholders
and Board of Directors (including committees of its Board of Directors).
2.6. MATERIAL ADVERSE CHANGE
Except as Previously Disclosed, Peoples has not suffered any material
adverse change in its financial condition, results of operations or business
since December 31, 1995.
2.7. ABSENCE OF UNDISCLOSED LIABILITIES
Peoples has no liability (contingent or otherwise) that is material to
Peoples, or that, when combined with all similar liabilities, would be
material to Peoples, except as disclosed in the Peoples Financial Statements
as of the date of this Reorganization Agreement or as Previously Disclosed.
2.8. PROPERTIES
Peoples has good and marketable title free and clear of all liens,
encumbrances, charges, defaults or equitable interests to all of the
properties and assets, real and personal, reflected on the Peoples Financial
Statements as being owned by Peoples as of December 31, 1995 or acquired after
such date, except (i) liens for taxes not yet due and payable, (ii) pledges to
secure deposits and other liens incurred in the ordinary course of banking
business, (iii) such imperfections of title, easements and encumbrances, if
any, as are not material in character, amount or extent and (iv) dispositions
and encumbrances for reasonably adequate consideration in the ordinary course
of business. All leases pursuant to which Peoples, as lessee, leases real or
personal property are
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valid and subsisting in accordance with their respective terms. Peoples has
Previously Disclosed a true, complete and correct list of all personal
property owned by officers or directors of Peoples and located on the premises
of Peoples or used in Peoples' business.
2.9 LOANS
Each loan reflected as an asset in the Peoples Financial Statements as of
September 30, 1996, and each loan entered into subsequent thereto, (i) is
evidenced in all material respects by notes, agreements or other evidences of
indebtedness which are true, genuine and what they purport to be, (ii) to the
extent secured, has been secured by valid liens and security interests which
have been perfected, and (iii) is the legal, valid and binding obligation of
the obligor named therein, enforceable in accordance with its terms, subject
to bankruptcy, insolvency, fraudulent conveyance and other laws of general
applicability relating to or affecting creditors' rights and to general equity
principles. Except as Previously Disclosed, as of September 30, 1996, Peoples
is not a party to any loan, including any loan guaranty, with any director,
executive officer or 5% shareholder of Peoples or any person, corporation or
enterprise controlling, controlled by or under common control with any of the
foregoing.
2.10. ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses reflected on the Peoples Financial Statements,
as of their respective dates, is adequate in all material respects under the
requirements of generally accepted accounting principles to provide for
reasonably anticipated losses on outstanding loans.
2.11. TAX MATTERS
(a) Peoples has timely filed all federal income tax returns required to be
filed by it for each year through December 31, 1995 and has timely filed, or
caused to be filed, all other federal, state, local and foreign Tax Returns
required to be filed with respect to Peoples.
(b) All Taxes due in respect of any tax periods have been paid or adequate
reserves have been established for the payment of such Taxes and, as of the
Closing Date, all Taxes due or to become due in respect of any tax periods
ending on or prior to the Closing Date will have been paid or adequate
reserves or accruals will have been established for the payment thereof.
Peoples will not have any material liability for any Taxes in excess of the
amounts so paid or reserves or accruals so established. No audit examination
or deficiency or refund litigation is pending with respect to tax periods of
Peoples ending on or prior to the Closing Date.
(c) All federal, state and local (and, if applicable, foreign) Tax Returns
filed by Peoples are complete and accurate in all material respects. Peoples
is not delinquent in the payment of any Tax, assessment or governmental
charge, and Peoples has not requested any extension of time within which to
file any Tax Returns in respect of any taxable year or portion thereof which
have not since been filed. No deficiencies for any Tax, assessment or
governmental charge have been proposed, asserted or assessed (tentatively or
otherwise) against Peoples which have not been settled and paid. There are
currently no agreements in effect with respect to Peoples to extend the period
of limitations for the assessment or collection of any Tax.
(d) Termination of the employment of any employees of Peoples following
consummation of the transactions contemplated hereby will not cause Peoples to
make or to be required to make any "excess parachute payment" as that term is
defined in Section 280G of the Code.
2.12. EMPLOYEE BENEFIT PLANS
(a) Peoples has Previously Disclosed true and complete copies of all
qualified pension or profit-sharing plans, any deferred compensation,
consulting, bonus or group insurance contract or any other incentive, welfare
or employee benefit plan or agreement maintained for the benefit of employees
or former employees of Peoples, and will make available to S&T (i) the most
recent actuarial and financial reports prepared with respect to any
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plans qualified under Section 401(a) of the Code, (ii) the most recent annual
reports filed with any government agency and (iii) all rulings and
determination letters and any open requests for rulings or letters that
pertain to any plan qualified under Section 401(a) of the Code.
(b) Neither Peoples (nor any pension plan maintained by it) has incurred or
reasonably expects to incur any material liability to the Internal Revenue
Service with respect to any plan qualified under Section 401(a) of the Code.
Except as Previously Disclosed, Peoples has never sponsored, participated in
or maintained any defined benefit pension plan. Peoples has never participated
in a multiemployer plan as such term is defined in ERISA.
(c) A favorable determination letter has been issued by the Internal Revenue
Service with respect to each "employee pension plan" (as defined in Section
3(2) of ERISA) of Peoples which is intended to be a qualified plan to the
effect that such plan is qualified under Section 401 of the Code and tax
exempt under Section 501 of the Code. No such letter has been revoked or
threatened to be revoked and Peoples does not know of any ground on which such
revocation may be based. Such plans have been operated in all material
respects in accordance with their terms and applicable law.
(d) No prohibited transaction (which shall mean any transaction prohibited
by Section 406 of ERISA and not exempt under Section 408 of ERISA) has
occurred with respect to any "employee benefit plan" (as defined in Section
3(3) of ERISA) maintained by Peoples which would result in the imposition,
directly or indirectly, of an excise tax under Section 4975 of the Code or the
correction of which would have a material adverse effect on the financial
condition, results of operations or business of Peoples.
2.13. CERTAIN CONTRACTS
(a) Except as Previously Disclosed, Peoples is neither a party to, nor is it
bound by, (i) any material agreement, arrangement or commitment whether or not
made in the ordinary course of business (other than loans or loan commitments
made in the ordinary course of the banking business of Peoples), (ii) any
agreement, indenture or other instrument relating to the borrowing of money by
Peoples or the guarantee by Peoples of any such obligation, other than
instruments relating to transactions entered into in the customary course of
the banking business of Peoples and reflected in the Peoples Financial
Statements, (iii) any agreement, arrangement or commitment relating to the
employment of a consultant or the employment, election, retention in office or
severance of any present or former director or officer or (iv) any contract,
agreement or understanding with a labor union, in each case whether written or
oral.
(b) Peoples is not in default under any material agreement, commitment,
arrangement, lease, insurance policy or other instrument whether entered into
in the ordinary course of business or otherwise and whether written or oral,
and there has not occurred any event that, with the lapse of time or giving of
notice or both, would constitute such a default.
(c) Since December 31, 1995, Peoples has neither incurred nor paid any
obligation or liability that would be material to Peoples, except obligations
incurred or paid in connection with transactions in the ordinary course of
business of Peoples consistent with its past practices or except as Previously
Disclosed or reflected in the Peoples Financial Statements.
(d) Except as Previously Disclosed, Peoples is not a party to any
transaction (other than agreements Previously Disclosed in connection with
Section 2.13(a) hereof) with (i) any person who has been an executive officer
or a director of Peoples since January 1, 1993, (ii) any spouse of any such
officer or director, (iii) any parent, child, brother, sister, or other family
relation of any such officer or director who has the same home as such officer
or director, (iv) any corporation or other entity of which any such officer or
director or any such family relation is an officer, director, partner, or
greater than 5% shareholder (based on percentage ownership of voting stock) or
(v) any "affiliate" or "associate" of any such persons or entities (as such
terms are defined in the rules and regulations promulgated under the
Securities Act), including, without limitation, (x) any transaction involving
a contract, agreement, or other arrangement providing for the employment of,
furnishing of materials,
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products or services by, rental of real or personal property from, or
otherwise requiring payments to, any such person or entity, and (y) loans
(including any loan guaranty) outstanding at the date hereof, but not (z)
deposit accounts maintained at Peoples in the ordinary course of its banking
business.
2.14. LEGAL PROCEEDINGS
Except as Previously Disclosed, there are no actions, suits or proceedings
instituted, pending or, to the knowledge of Peoples, threatened against
Peoples or against any asset, interest or right of Peoples that would, if
determined adversely to Peoples, have a material adverse effect on Peoples. To
the knowledge of Peoples, there are no actual or threatened actions, suits or
proceedings which present a claim to restrain or prohibit the transactions
contemplated herein or to impose upon S&T, Peoples or any of their respective
subsidiaries or affiliates any material cost or obligation in connection
therewith. Except as Previously Disclosed, there are no actions, suits or
proceedings instituted, pending or, to the knowledge of Peoples, threatened
against any present or former director or executive officer of Peoples that
might give rise to a claim for indemnification that would, if determined
adversely to Peoples, have a material adverse effect on Peoples, and, to the
knowledge of Peoples, there is no reasonable basis for any such action, suit
or proceeding.
2.15. COMPLIANCE WITH LAWS
Except as Previously Disclosed, Peoples is in compliance in all material
respects with all statutes and regulations applicable to the conduct of its
business, and neither Peoples nor, to the knowledge of Peoples, any director
or officer thereof has received notification from any agency or department of
federal, state or local government (i) asserting a material violation of any
such statute or regulation, (ii) threatening to revoke any license, franchise,
permit or government authorization or (iii) restricting or in any way limiting
its operations. Peoples is not subject to any regulatory or supervisory cease
and desist order, agreement, directive, memorandum of understanding or
commitment, and it has not received any communication requesting that it enter
into any of the foregoing. Without limiting the generality of the foregoing,
Peoples has timely filed all currency transaction reports required to be filed
and taken all other actions required under the Currency and Foreign
Transactions Reporting Act, codified at 31 U.S.C. (S) 5301 et seq., and its
implementing regulations.
2.16. BROKERS AND FINDERS
Neither Peoples nor any of its officers, directors or employees has employed
any broker, finder or financial advisor or incurred any liability for any fees
or commissions in connection with the transactions contemplated herein or the
Plan of Merger, except that Peoples has engaged and will pay a fee or
commission to Danielson Associates, Inc.
2.17. INSURANCE
Peoples has Previously Disclosed a complete and accurate summary of all
insurance policies and bonds maintained by Peoples. Except as Previously
Disclosed, Peoples has not received any notice of a premium increase or
cancellation with respect to any of its insurance policies or bonds and,
within the last three years, Peoples has not been refused any insurance
coverage sought or applied for, and Peoples has no reason to believe that
existing insurance coverage cannot be renewed as and when the same shall
expire, upon terms and conditions as favorable as those presently in effect,
other than possible increases in premiums or unavailability in coverage that
have not resulted from any extraordinary loss experience of Peoples.
2.18. DEPOSIT INSURANCE
Except as Previously Disclosed, Peoples is an insured bank as defined in the
FDIA, and Peoples has paid all assessments and filed all reports required by
the FDIA.
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2.19. ENVIRONMENTAL LIABILITY
There is no legal, administrative, arbitral or other proceeding, or, to the
knowledge of Peoples, claim, action, cause of action, or governmental
investigation of any nature seeking to impose, or that could result in the
imposition, on Peoples of any liability arising under any local, state or
federal environmental statute, regulation or ordinance including, without
limitation, the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended, pending or, to the knowledge of Peoples,
threatened against Peoples, which liability might have a material adverse
effect on the financial condition, results of operations or business of
Peoples; except as Previously Disclosed, to the knowledge of Peoples, there is
no reasonable basis for any such proceeding, claim, action or governmental
investigation that would impose any such liability; and Peoples is not subject
to any agreement, order, judgment, decree or memorandum by or with any court,
governmental authority, regulatory agency or third party imposing any such
liability.
2.20. CERTAIN INFORMATION
The information contained in the Proxy Statement, other than information
subject to Section 3.9(a) hereof, at the time the Proxy Statement is mailed to
shareholders of Peoples up to and including the time of the Peoples
shareholders' meeting to vote upon the Merger, (i) shall comply in all
material respects with the applicable provisions of the regulations of the
Securities Laws and (ii) shall not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements contained therein not misleading.
2.21. POOLING OF INTERESTS
As of the date of this Reorganization Agreement, Peoples, after having
consulted with its independent auditors concerning the requirements of the
relevant accounting literature and SEC pronouncements and interpretations,
does not believe that it has taken any steps which would preclude S&T from
accounting for the Merger under the pooling of interests method and knows of
no reason relating to it which would reasonably cause it to believe that the
Merger will not qualify as a pooling of interests for financial accounting
purposes.
ARTICLE 3
Representations and Warranties of S&T
S&T hereby represents and warrants to Peoples as follows:
3.1. CAPITAL STRUCTURE OF S&T
The authorized capital stock of S&T consists at September 30, 1996 of (i)
10,000,000 shares of preferred stock, no par value, none of which has been
issued and (ii) 25,000,000 shares of common stock, par value $2.50 per share
("S&T Common Stock"), of which 11,046,355 shares were issued and outstanding
and 774,589 shares were held in treasury. All outstanding shares of S&T
capital stock have been duly issued and are validly outstanding, fully paid
and nonassessable. There are no Rights authorized, issued or outstanding with
respect to the capital stock of S&T. None of the shares of S&T's capital stock
has been issued in violation of the preemptive rights of any person. The
shares of S&T Common Stock to be issued in connection with the Merger have
been duly authorized and, when issued in accordance with the terms of this
Reorganization Agreement and the Plan of Merger, will be validly issued, fully
paid, nonassessable and free and clear of any preemptive rights. As of
September 30, 1996, no shares of S&T Common Stock were reserved for issuance.
3.2. ORGANIZATION, STANDING AND AUTHORITY OF S&T
Each of S&T and its wholly-owned banking subsidiary, S&T Bank, is a duly
organized corporation, validly existing and in good standing under the laws of
the Commonwealth of Pennsylvania, with full corporate power and authority to
carry on its business as now conducted. S&T's wholly-owned nonbanking
subsidiary, S&T
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Investment Company, Inc., is a duly organized corporation, validly existing
and in good standing under the laws of the State of Delaware, with full
corporate power and authority to carry on its business as now conducted. S&T
is registered as a bank holding company under the Bank Holding Company Act.
3.3. AUTHORIZED AND EFFECTIVE REORGANIZATION AGREEMENT
(a) Each of S&T and S&T Bank has all requisite corporate power and authority
to enter into and perform all of its obligations under this Reorganization
Agreement. The execution and delivery of this Reorganization Agreement and the
consummation of the transactions contemplated hereby and thereby have been
duly and validly authorized by all necessary corporate action in respect
thereof on the part of S&T and S&T Bank.
(b) Upon the execution of the Plan of Merger and at all times thereafter
until the Closing Date, S&T and S&T Bank will have all requisite corporate
power and authority to enter into and perform all of its obligations under the
Plan of Merger, and the execution and delivery of the Plan of Merger and the
consummation of the transactions contemplated thereby (at the time of such
execution) will have been duly and validly authorized by all necessary
corporate action in respect thereof on the part of S&T and S&T Bank, except
that the affirmative vote of the holders of two-thirds of the outstanding
shares of S&T Common Stock is required to authorize the issuance of S&T Common
Stock pursuant to this Reorganization Agreement and Plan of Merger in
accordance with Nasdaq requirements.
(c) The Board of Directors of S&T has directed that this Reorganization
Agreement and the Plan of Merger be submitted to S&T's stockholders for
approval at a special meeting to be held as soon as practicable.
(d) This Reorganization Agreement constitutes a legal, valid and binding
obligation of S&T and S&T Bank and the Plan of Merger, upon the authorization,
execution and delivery thereof by the parties thereto, will constitute a
legal, valid and binding obligation of S&T and S&T Bank, enforceable against
them in accordance with their respective terms, subject to receipt of
shareholder approval and, as to enforceability, subject to bankruptcy,
insolvency, fraudulent conveyance and other laws of general applicability
relating to or affecting creditors' rights and to general equity principles.
(e) Neither the execution and delivery of this Reorganization Agreement or
the Plan of Merger, nor consummation of the transactions contemplated hereby
or thereby, nor compliance by S&T or S&T Bank with any of the provisions
hereof or thereof shall (i) conflict with or result in a breach of any
provision of the articles of incorporation, charter or by-laws of S&T or S&T
Bank, (ii) constitute or result in a breach of any term, condition or
provision of, or constitute a default under, or give rise to any right of
termination, cancellation or acceleration with respect to, or result in the
creation of any lien, charge or encumbrance upon any property or asset of S&T
or S&T Bank pursuant to, any note, bond, mortgage, indenture, license,
agreement or other instrument or obligation or (iii) violate any order, writ,
injunction, decree, statute, rule or regulation applicable to S&T or S&T Bank,
except for such violations, rights, conflicts, breaches, creations or defaults
which, either individually or in the aggregate would not have a material
adverse effect on S&T.
3.4. SEC DOCUMENTS; REGULATORY FILINGS
S&T has filed all SEC Documents required by the Securities Laws and such SEC
Documents complied, as of their respective dates, in all material respects
with the Securities Laws. S&T and each S&T subsidiary has filed all reports
required by statute or regulation to be filed with any federal or state bank
regulatory agency and such reports were prepared, in all material respects, in
accordance with the applicable statutes, regulations and instructions in
existence as of the date of filing of such reports.
3.5. FINANCIAL STATEMENTS; BOOKS AND RECORDS; MINUTE BOOKS
The S&T Financial Statements fairly present the consolidated financial
position of S&T as of the dates indicated and the results of operations,
changes in shareholders' equity and cash flows of S&T for the periods
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then ended in conformity with generally accepted accounting principles applied
on a consistent basis except as disclosed therein. The books and records of
S&T fairly reflect in all material respects the transactions to which it is a
party or by which its properties are subject or bound. Such books and records
have been properly kept and maintained and are in compliance in all material
respects with all applicable legal and accounting requirements. The minute
books of S&T contain accurate records of all corporate actions of its
shareholders and Board of Directors (including committees of its Board of
Directors).
3.6. MATERIAL ADVERSE CHANGE
S&T has not suffered any material adverse change in its financial condition,
results of operations or business since December 31, 1995.
3.7. ABSENCE OF UNDISCLOSED LIABILITIES
S&T has no liability (contingent or otherwise) that is material to S&T, or
that, when combined with all similar liabilities, would be material to S&T,
except as disclosed in the S&T Financial Statements.
3.8. ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses reflected on the S&T Financial Statements, as
of their respective dates, is adequate in all material respects under the
requirements of generally accepted accounting principles to provide for
reasonably anticipated losses on outstanding loans.
3.9. CERTAIN INFORMATION
(a) The information provided by S&T to Peoples for use in the Proxy
Statement, at the time the Proxy Statement is mailed to shareholders of
Peoples and at all subsequent times up to and including the time of the
Peoples shareholders' meeting to vote upon the Merger, shall not contain any
untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements contained therein, in
light of the circumstances under which they were made, not misleading.
(b) When the Registration Statement or any post-effective amendment thereto
shall become effective, and at all times subsequent to such effectiveness up
to and including the time of the S&T shareholders' meeting to vote upon the
Merger, such Registration Statement and all amendments or supplements thereto,
with respect to all information set forth therein furnished by S&T relating to
S&T, (i) shall comply in all material respects with the applicable provisions
of the Securities Laws, and (ii) shall not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein
or necessary to make the statements contained therein not misleading.
3.10. BROKERS AND FINDERS
Neither S&T nor any of its officers, directors or employees, has employed
any broker, finder or financial advisor or incurred any liability for any fees
or commissions in connection with the transactions contemplated herein or the
Plan of Merger, except that S&T has engaged and will pay a fee or commission
to McDonald & Company Securities, Inc.
3.11. COMPLIANCE WITH LAWS
Each of S&T and its subsidiaries is in compliance in all material respects
with all statutes and regulations applicable to the conduct of its business,
and none of S&T, its subsidiaries or, to the knowledge of S&T, any director or
executive officer of S&T or any of its subsidiaries has received notification
from any agency or department of federal, state or local government (i)
asserting a material violation of any such statute or regulation, (ii)
threatening to revoke any license, franchise, permit or government
authorization or (iii) restricting or in any way limiting its operations. None
of S&T or any subsidiary of S&T is subject to any regulatory or
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supervisory cease and desist order, agreement, directive, memorandum of
understanding or commitment, and none of them has received any communication
requesting that they enter into any of the foregoing.
3.12. LEGAL PROCEEDINGS
To the knowledge of S&T, there are no actions, suits or proceedings
instituted, pending or, to the knowledge of S&T, threatened against S&T or
against any asset, interest or right of S&T that would, if determined
adversely to S&T, have a material adverse effect on S&T. To the knowledge of
S&T, there are no actual or threatened actions, suits or proceedings which
present a claim to restrain or prohibit the transactions contemplated herein
or to impose upon S&T, Peoples or any of their respective subsidiaries or
affiliates any material cost or obligation in connection therewith. There are
no actions, suits or proceedings instituted, pending or, to the knowledge of
S&T, threatened against any present or former director or executive officer of
S&T that might give rise to a claim for indemnification that would, if
determined adversely to S&T, have a material adverse effect on S&T, and, to
the knowledge of S&T, there is no reasonable basis for any such action, suit
or proceeding.
3.13. POOLING OF INTERESTS
As of the date of this Reorganization Agreement, S&T, after having consulted
with its independent auditors concerning the requirements of the relevant
accounting literature and SEC pronouncements and interpretations, does not
believe that it has taken any steps which would preclude it from accounting
for the Merger under the pooling of interests method and knows of no reason
relating to it which would reasonably cause it to believe that the Merger will
not qualify as a pooling of interests for financial accounting purposes.
ARTICLE 4
Covenants
4.1. SHAREHOLDERS' MEETINGS
S&T and Peoples shall submit this Reorganization Agreement and the Plan of
Merger and, in the case of S&T, the issuance of S&T Common Stock thereunder,
to their respective shareholders for approval at special meetings to be held
as soon as practicable. Subject to the fiduciary duties of the respective
boards of directors of S&T and Peoples as determined by each after
consultation with such board's counsel, the boards of directors of S&T and
Peoples shall recommend at the respective shareholders' meetings that the
shareholders vote in favor of such approval.
4.2. PROXY STATEMENT; REGISTRATION STATEMENT
The Board of Directors of Peoples will direct that this Reorganization
Agreement and the Plan of Merger be submitted to Peoples' shareholders for
approval at a special meeting to be held as soon as practicable. As promptly
as practicable after the date hereof, S&T and Peoples shall cooperate in the
preparation of the Proxy Statement to be mailed to the shareholders of S&T and
Peoples in connection with the Merger and the transactions contemplated
thereby and to be filed by S&T as part of the Registration Statement. S&T will
advise Peoples, promptly after it receives notice thereof, of the time when
the Registration Statement or any post-effective amendment thereto has become
effective or any supplement or amendment has been filed, of the issuance of
any stop order, of the suspension of qualification of the S&T Common Stock
issuable in connection with the Merger for offering or sale in any
jurisdiction, or the initiation or threat of any proceeding for any such
purpose, or of any request by the SEC for the amendment or supplement of the
Registration Statement or for additional information. S&T shall take all
actions necessary to register or qualify the shares of S&T Common Stock to be
issued in the Merger pursuant to all applicable state "blue sky" or securities
laws and shall maintain such registrations or qualifications in effect for all
purposes hereof. S&T shall apply for approval to have the shares of S&T Common
Stock authorized for trading on the Nasdaq National Market System prior to the
Effective Date.
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4.3. PLAN OF MERGER
The terms of the Plan of Merger are incorporated herein by reference.
Peoples shall execute and deliver the Plan of Merger as soon as practicable
following S&T's request therefor.
4.4. APPLICATIONS
As promptly as practicable after the date hereof, S&T shall submit any
requisite applications for prior approval of the transactions contemplated
herein and in the Plan of Merger (i) to the FDIC pursuant to 12 U.S.C. (S)
1828(c)(2) and (ii) to the Department of Banking pursuant to Section 1603 of
the Pennsylvania Banking Code, and each of the parties hereto shall submit any
applications, notices or other filings to any other state or federal
government agency, department or body the approval of which is required for
consummation of the Merger. S&T and Peoples each represents and warrants to
the other that all information concerning it and its directors, officers and
shareholders included (or submitted for inclusion) in any such application and
furnished by it shall be true, correct and complete in all material respects.
4.5. BEST EFFORTS; CERTAIN NOTICES AND INFORMATION
(a) S&T and Peoples shall each use its best efforts in good faith to (i)
furnish such information as may be required in connection with the preparation
of the documents referred to in Sections 4.2 and 4.4 above and (ii) take or
cause to be taken all action necessary or desirable on its part so as to
permit consummation of the Merger at the earliest possible date, including,
without limitation, (1) obtaining the consent or approval of each individual,
partnership, corporation, association or other business or professional entity
whose consent or approval is required for consummation of the transactions
contemplated hereby, provided that Peoples shall not agree to make any
payments or modifications to agreements in connection therewith without the
prior written consent of S&T, except where such payment or modification would
not have a material adverse effect on Peoples, and (2) requesting the delivery
of appropriate opinions, consents and letters from its counsel and independent
auditors. No party hereto shall take or fail to take, or to the best of its
ability permit to be taken or omitted to be taken by any third persons, any
action that would substantially impair the prospects of completing the Merger
pursuant to this Reorganization Agreement and the Plan of Merger, that would
materially delay such completion, or that would adversely affect the
qualification of the Merger for pooling of interests accounting treatment or
as a reorganization within the meaning of Section 368(a) of the Code.
(b) Peoples shall give prompt notice to S&T, and S&T shall give prompt
notice to Peoples, of (i) the occurrence, or failure to occur, of any event
which occurrence or failure would be likely to cause any representation or
warranty contained in this Reorganization Agreement to be untrue or inaccurate
in any material respect at any time from the date hereof to the Closing Date
and (ii) any material failure of S&T or Peoples, as the case may be, to comply
with or satisfy any covenant, condition or agreement to be complied with or
satisfied by it hereunder, and each party shall use all reasonable efforts to
remedy such failure.
(c) Each party shall provide and shall request its auditors to provide the
other party with such historical financial information regarding it (and
related audit reports and consents) as the other party may reasonably request
for securities disclosure purposes.
4.6. INVESTIGATION AND CONFIDENTIALITY
Peoples and S&T will each keep the other advised of all material
developments relevant to its business and to the consummation of the
transactions contemplated herein. Peoples and S&T may make or cause to be made
such investigation of the financial and legal condition of the other as such
party reasonably deems necessary or advisable in connection with the
transactions contemplated herein and in the Plan of Merger, provided, however,
that such investigation shall be reasonably related to such transactions and
shall not interfere unnecessarily with normal operations. Peoples and S&T
agree to furnish the other and the other's advisors with such financial data
and other information with respect to its business and properties as such
other party shall from time to time reasonably request. No investigation
pursuant to this Section 4.6 shall affect or be deemed to modify any
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representation or warranty made by, or the conditions to the obligations to
consummate the Merger of, any party hereto. Each party shall, and shall cause
its directors, officers, attorneys and advisors to, maintain the
confidentiality of all information obtained in such investigation which is not
otherwise publicly disclosed by the other party, said undertaking with respect
to confidentiality to survive any termination of this Agreement pursuant to
Section 6.1 hereof. In the event of termination of this Reorganization
Agreement, each party shall return to the furnishing party or destroy and
certify the destruction of all information previously furnished in connection
with the transactions contemplated by this Reorganization Agreement.
4.7. PRESS RELEASES
Peoples and S&T shall agree with each other as to the form and substance of
any press release related to this Reorganization Agreement and the Plan of
Merger or the transactions contemplated hereby or thereby, and shall consult
each other as to the form and substance of other public disclosures related
thereto, provided, however, that nothing contained herein shall prohibit
either party, following notification to the other party, from making any
disclosure which its counsel deems necessary.
4.8. COVENANTS OF PEOPLES
(a) Prior to the Closing Date, and except as otherwise provided for by this
Reorganization Agreement, the Plan of Merger or consented to or approved by
S&T, Peoples shall use its reasonable efforts to preserve its properties,
business and relationships with customers, employees and other persons.
(b) Except with the prior written consent of S&T, between the date hereof
and the Effective Date, Peoples shall not:
(1) carry on its business other than in the usual, regular and ordinary
course in substantially the same manner as heretofore conducted;
(2) declare, set aside, make or pay any dividend or other distribution in
respect of its capital stock, except that Peoples may, in order to conform
to the S&T dividend policy subsequent to the execution of this
Reorganization Agreement, (i) declare a dividend in December 1996 with a
record date of January 2, 1997 and payable in January 1997 in an amount
equal to the dollar amount of the per share dividend in respect of the
fourth quarter of 1996 that S&T declares in December 1996, payable to S&T
shareholders in January 1997, multiplied by the number of the shares of S&T
Common Stock to be received by shareholders of Peoples pursuant to the
Merger ("Exchange Ratio"); (ii) if the Effective Date shall not have
occurred prior to April 1, 1997, declare a dividend on or after April 1,
1997, payable in April 1997 in an amount equal to the dollar amount of the
per share dividend in respect of the first quarter of 1997 that S&T
declares in March 1997, payable to S&T shareholders in April 1997,
multiplied by the Exchange Ratio; and (iii) if the Effective Date shall not
have occurred prior to July 1, 1997, declare a dividend on or after July 1,
1997, payable in July 1997 in an amount equal to the dollar amount of the
per share dividend in respect of the second quarter of 1997 that S&T
declares in June 1997, payable to S&T shareholders in July 1997, multiplied
by the Exchange Ratio;
(3) issue any shares of its capital stock or permit any treasury shares
to become outstanding, incur any additional debt obligation or other
obligation for borrowed money, other than in the ordinary course of
business of Peoples consistent with past practice;
(4) issue, grant or authorize any Rights or effect any recapitalization,
reclassification, stock dividend, stock split or like change in
capitalization;
(5) amend its charter or by-laws;
(6) merge with any other corporation, savings association or bank or
permit any other corporation, savings association or bank to merge into it
or consolidate with any other corporation, savings association or bank;
acquire control over any other firm, bank, corporation, savings association
or organization; or create any subsidiary;
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(7) fail to comply in any material respect with any material laws,
regulations, ordinances or governmental actions applicable to it and to the
conduct of its business; enter into any material swap, hedge or other
similar off-balance sheet transaction; waive or release any material right
or cancel or compromise any material debt or claim; restructure, extend or
modify any loan Previously Disclosed pursuant to the second sentence of
Section 2.9 hereof or that would have been required to have been so
disclosed if it had been outstanding at September 30, 1996, waive or
release any right or cancel or compromise any debt or claim in connection
with any such loan, or make any new loan that would have been required to
have been so disclosed if it had been outstanding at September 30, 1996;
(8) liquidate or sell or dispose of any material assets or acquire any
material assets; make any capital expenditures in excess of $25,000 in the
aggregate; or establish new branches or other similar facilities; or enter
into or modify any leases or other contracts that involve annual payments
by Peoples that exceed $10,000 in any instance or $25,000 in the aggregate;
(9) increase the rate of compensation of, pay or agree to pay any bonus
to, or provide any other employee benefit or incentive to, any of its
directors, officers or employees except in accordance with Peoples'
standard compensation and benefits practices; enter into, modify or extend
any employment or severance contracts with any of its present or former
directors, officers or employees; or enter into or substantially modify
(except as may be required by applicable law) any pension, retirement,
stock option, stock purchase, stock appreciation right, savings, profit
sharing, deferred compensation, consulting, bonus, group insurance or other
employee benefit, incentive or welfare contract, plan or arrangement, or
any trust agreement related thereto, in respect of any of its directors,
officers or other employees;
(10) change its lending, investment, asset/liability management or other
material banking policies in any material respect except as may be required
by changes in applicable law, regulation or regulatory directives;
(11) change its methods of accounting in effect at December 31, 1995,
except as required by changes in generally accepted accounting principles
concurred in by its independent certified public accountants (including but
not limited to the adoption of Statement of Financial Accounting Standard
107), or change any of its methods of reporting income and deductions for
federal income tax purposes from those employed in the preparation of its
federal income tax returns for the year ended December 31, 1995, except as
required by changes in law or applicable regulations;
(12) solicit, encourage or initiate inquiries or proposals with respect
to any acquisition or purchase of all or a substantial portion of the
assets of, or a substantial equity interest in, Peoples or any business
combination with Peoples, or, subject to the fiduciary duties of its
directors as advised by counsel, furnish any information relating to or in
connection with any such inquiries or proposals, other than as contemplated
by this Reorganization Agreement; or authorize or permit any officer,
director, agent or affiliate of it to do any of the above; or fail to
notify S&T immediately if any such inquiries or proposals are received by,
any such information is required from, or any such negotiations or
discussions are sought to be initiated with Peoples; or
(13) agree to do any of the foregoing.
(c) As soon as practicable, Peoples shall cause (i) financial statements to
be prepared in conformity with generally accepted accounting principles for
whatever full fiscal year periods are necessary to comply with the
requirements of Form S-4 under the Securities Act, with respect to this
transaction, and with the other requirements of the rules and regulations
under the Securities Act and the Exchange Act as may be applicable to S&T,
(ii) its independent public accountants to perform an audit of such financial
statements in conformity with generally accepted auditing standards, and (iii)
its independent public accountants to consent to the use of their opinion with
respect to such financial statement in registration statements filed by S&T
under the Securities Act.
4.9. CLOSING; ARTICLES OF MERGER
The transactions contemplated by this Reorganization Agreement and the Plan
of Merger shall be consummated at a closing to be held at such location as the
parties may agree, on the first business day following
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satisfaction of the conditions to consummation of the Merger set forth in
Article 5 hereof or such later date within 30 days thereafter as reasonably
may be specified by S&T, with the Merger to be consummated after such
intermediate steps as S&T reasonably may specify. The Merger shall be
effective at the time and date specified in the Articles of Merger.
4.10. PEOPLES EMPLOYEES; BOARD OF DIRECTORS; INDEMNIFICATION
(a) All employees of Peoples as of the Effective Date shall become employees
of S&T or a subsidiary of S&T. Nothing in this Reorganization 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 shall
provide or cause to be provided to all employees of Peoples who remain
employed by S&T benefits which in the aggregate are no less favorable than
those generally afforded to other S&T employees holding similar positions,
provided that 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 or affiliates of S&T, and provided further that this Section 4.10(a) shall
not be construed (i) to limit the ability of S&T 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 or its affiliates to provide employees or former
employees with post-retirement medical benefits.
(b) S&T shall take all requisite action immediately prior to the Effective
Date to elect as members of its board of directors three persons selected by
Peoples to serve as directors of S&T.
(c) From and after the Effective Date for a period of three years, S&T shall
indemnify persons who serve as directors and officers of Peoples as of the
date of this Reorganization Agreement for claims arising prior to the
Effective Date as provided under S&T's By-Laws as delivered to Peoples prior
to the execution of this Reorganization Agreement, as if such persons had been
entitled to indemnification under such S&T By-Laws prior to the Effective
Date.
4.11. AFFILIATES
(a) S&T and Peoples shall cooperate and use their best efforts to identify
those persons who may be deemed to be "affiliates" of Peoples and S&T within
the meaning of Rule 145 promulgated by the Commission under the Securities Act
and for purposes of qualifying the "Merger" for "pooling interests" accounting
treatment. Peoples shall use its best efforts to cause each Peoples affiliate
so identified to deliver to S&T no later than 30 days prior to the Effective
Date, a written agreement providing that such person will not dispose of S&T
Common Stock received in the Merger except in compliance with the Securities
Act, the rules and regulations promulgated thereunder and the Commission's
rules relating to the pooling of interests accounting treatment.
(b) S&T shall 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 month may be the month
in which the Effective Date occurs), combined sales and net income figures as
contemplated by and in accordance with the terms of SEC Accounting Series
Release No. 135.
4.12. NASDAQ APPLICATION
S&T shall apply to have the shares of S&T Common Stock that may be issued in
the Merger authorized for trading on the Nasdaq National Market System.
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ARTICLE 5
Conditions Precedent
5.1. CONDITIONS PRECEDENT--S&T AND PEOPLES
The respective obligations of Peoples, S&T, or S&T Bank to effect the
Merger, shall be subject to satisfaction or waiver of the following conditions
at or prior to the Closing Date:
(a) All corporate action necessary to authorize the execution, delivery and
performance of this Reorganization Agreement and the Plan of Merger and
consummation of the transactions contemplated hereby and thereby shall have
been duly and validly taken, including without limitation the approvals of the
shareholders of Peoples and S&T in accordance with applicable law;
(b) The parties hereto shall have received all regulatory approvals required
or deemed necessary in connection with the transactions contemplated by this
Reorganization Agreement and the Plan of Merger, all notice periods and
waiting periods required after the granting of any such approvals shall have
passed and all conditions contained in any such approval required to have been
satisfied prior to consummation of such transactions shall have been
satisfied, provided, however, that no such approval shall have imposed any
condition or requirement which, in the reasonable opinion of the Board of
Directors of S&T materially and adversely affects the anticipated economic and
business benefits to S&T of the transactions contemplated by this
Reorganization Agreement taken as a whole;
(c) The Registration Statement (including any post-effective amendment
thereto) shall be effective under the Securities Act, and no proceeding shall
be pending or to the knowledge of S&T threatened by the Commission to suspend
the effectiveness of such Registration Statement, and S&T shall have received
all state securities or "blue sky" permits or other authorizations, or
confirmations as to the availability of an exemption from registration
requirements as may be necessary;
(d) None of the parties hereto or to the Plan of Merger shall be subject to
any order, decree or injunction of a court or agency of competent jurisdiction
which enjoins or prohibits the consummation of the transactions contemplated
by this Reorganization Agreement and the Plan of Merger;
(e) The shares of S&T Common Stock that may be issued in the Merger shall
have been authorized for trading on the Nasdaq National Market System; and
(f) S&T and Peoples shall have received an opinion of Arnold & Porter
substantially to the effect that, on the basis of facts, representations and
assumptions set forth in such opinion, (i) the Merger will constitute a
reorganization within the meaning of Section 368(a) of 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 with respect to cash received in lieu of a fractional share
interest in S&T Common Stock).
5.2. CONDITIONS PRECEDENT--PEOPLES
The obligations of Peoples to effect the Merger shall be subject to
satisfaction of the following additional conditions at or prior to the Closing
Date unless waived by Peoples pursuant to Section 6.4 hereof:
(a) The representations and warranties of S&T set forth in Article 3 hereof
shall be true and correct in all material respects as of the date of this
Reorganization Agreement and as of the Closing Date as though made on and as
of the Closing Date (or on the date when made in the case of any
representation and warranty which specifically relates to an earlier date),
except (i) as otherwise contemplated by this Reorganization Agreement or
consented to in writing by Peoples and (ii) insofar as the failure of any
representation and warranty to be true and correct does not have, and is not
reasonably likely to have, a material adverse effect on S&T;
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(b) S&T and S&T Bank shall have in all material respects performed all
obligations and complied with all covenants required by this Reorganization
Agreement and the Plan of Merger;
(c) S&T and S&T Bank each shall have delivered to Peoples a certificate,
dated the Closing Date and signed by its Chairman and Chief Executive Officer
or Executive Vice President to the effect that the conditions set forth in
paragraphs (a) and (b) of this section have been satisfied;
(d) The shares of S&T Common Stock to be received by the shareholders of
Peoples pursuant to the Merger shall be freely tradeable by the recipients
thereof, subject to restrictions upon resale imposed by virtue of Rule 145
under the Securities Act and the Commission's rules relating to the pooling of
interests accounting treatment, as agreed to in the written agreements
provided pursuant to Section 4.11(a) hereof;
(e) Peoples shall have received an opinion of Arnold & Porter, counsel to
S&T, dated the Closing Date, as to such matters as Peoples may reasonably
request with respect to the transactions contemplated hereby and by the Plan
of Merger; and
(f) Peoples shall have received an opinion from Danielson Associates Inc.
dated the date of the Proxy Statement that the consideration to be received by
the shareholders of Peoples pursuant to this Reorganization Agreement is fair
from a financial point of view to the shareholders of Peoples.
5.3. CONDITIONS PRECEDENT--S&T
The obligations of S&T and S&T Bank to effect the Merger shall be subject to
satisfaction of the following additional conditions at or prior to the Closing
Date unless waived by S&T pursuant to Section 6.4 hereof:
(a) The representations and warranties of Peoples set forth in Article 2
hereof shall be true and correct in all material respects as of the date of
this Reorganization Agreement and as of the Closing Date as though made on and
as of the Closing Date (or on the date when made in the case of any
representation and warranty which specifically relates to an earlier date),
except (i) as otherwise contemplated by this Reorganization Agreement or
consented to in writing by S&T and (ii) insofar as the failure of any
representation and warranty to be true and correct does not have, and is not
reasonably likely to have, a material adverse effect on Peoples.
(b) Peoples shall have in all material respects performed all obligations
and complied with all covenants required by this Reorganization Agreement and
the Plan of Merger;
(c) Peoples shall have delivered to S&T a certificate, dated the Closing
Date and signed by its Chairman or its Acting Chief Executive Officer or other
appropriate officer to the effect that the conditions set forth in paragraphs
(a) and (b) of this section have been satisfied;
(d) S&T shall have received an opinion or opinions of Kirkpatrick & Lockhart
LLP, counsel to Peoples, dated the Closing Date, as to such matters as S&T may
reasonably request with respect to the transactions contemplated hereby and by
the Plan of Merger;
(e) S&T shall have received an opinion letter, dated as of the Closing Date,
from Ernst & Young LLP, its independent public accountants, to the effect that
the Merger will qualify for pooling of interests accounting treatment under
Accounting Principles Board Opinion No. 16 if closed and consummated in
accordance with this Reorganization Agreement; except that this 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; and
(f) S&T shall have received a "comfort" letter from S.R. Snodgrass, A.C.
dated not more than five days prior to (i) the effective date of the
Registration Statement and (ii) the Closing Date, with respect to certain
financial information regarding Peoples, in form and in substance which is
customary in transactions of the nature contemplated by this Reorganization
Agreement.
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ARTICLE 6
Termination, Waiver and Amendment
6.1. TERMINATION
This Reorganization Agreement and the Plan of Merger may be terminated,
either before or after approval by the shareholders of Peoples:
(a) At any time on or prior to the Effective Date, by the mutual consent in
writing of the parties hereto;
(b) 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 (i) any covenant or agreement contained herein or in the Plan of
Merger or (ii) any representation or warranty contained herein 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 such breach is given to the party
committing such breach or the Closing Date;
(c) On the Closing Date, by either party hereto in writing, if any of the
conditions precedent set forth in Article 5 hereof with respect to such party
have not been satisfied or fulfilled;
(d) At any time, by either party hereto in writing, if the applications for
prior approval referred to in Section 4.4 hereof have been denied, and the
time period for appeals and requests for reconsideration has run;
(e) At any time, by either party hereto in writing, if the shareholders of
S&T or Peoples do not approve the transactions contemplated herein at the
annual or special meetings duly called for that purpose;
(f) At any time, by either party in writing, if such party determines in
good faith that any condition precedent to such party's obligations to
consummate the Merger 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
(g) By either party hereto in writing, if the Closing Date has not occurred
by the close of business on September 30, 1997.
6.2. EFFECT OF TERMINATION
In the event this Reorganization Agreement or the Plan of Merger is
terminated pursuant to Section 6.1 hereof, this Reorganization Agreement and
the Plan of Merger shall become void and have no effect, except that (i) the
provisions relating to confidentiality and expenses set forth in Sections 4.6
and 7.1 hereof, respectively, shall survive any such termination and (ii) a
termination pursuant to Section 6.1(b)(i) shall not relieve the breaching
party from liability for an uncured willful breach of a covenant or agreement
giving rise to such termination.
6.3. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS
All representations, warranties and covenants in this Reorganization
Agreement and the Plan of Merger or in any instrument delivered pursuant
hereto or thereto shall expire on, and be terminated and extinguished at, the
Effective Date other than covenants that by their terms are to survive or be
performed after the Effective Date, provided that no such representations,
warranties or covenants shall be deemed to be terminated or extinguished so as
to deprive S&T or Peoples (or any director, officer or controlling person
thereof) of any defense in law or equity which otherwise would be available
against the claims of any person, including, without limitation, any
shareholder or former shareholder of either S&T or Peoples, the aforesaid
representations, warranties and covenants being material inducements to the
consummation by S&T, S&T Bank and Peoples of the transactions contemplated
herein.
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6.4. WAIVER
Except with respect to any required shareholder or regulatory approval, S&T
and Peoples, respectively, by written instrument signed by an executive
officer of such party, may at any time (whether before or after approval of
this Reorganization Agreement and the Plan of Merger by the shareholders of
S&T and Peoples) extend the time for the performance of any of the obligations
or other acts of Peoples, on the one hand, or S&T or S&T Bank, on the other
hand, and may waive (i) any inaccuracies of such parties in the
representations or warranties contained in this Reorganization Agreement, the
Plan of Merger or any document delivered pursuant hereto or thereto, (ii)
compliance with any of the covenants, undertakings or agreements of such
parties, or satisfaction of any of the conditions precedent to its
obligations, contained herein or in the Plan of Merger or (iii) the
performance by such parties of any of its obligations set out herein or
therein; provided, however, that no such waiver executed after approval of
this Reorganization Agreement and the Plan of Merger by the shareholders of
S&T or Peoples shall change the number of shares of S&T Common Stock into
which each share of Peoples Common Stock shall be converted pursuant to the
Merger.
6.5. AMENDMENT OR SUPPLEMENT
This Reorganization Agreement and the Plan of Merger may be amended or
supplemented at any time by mutual agreement of the parties hereto, in the
case of this Reorganization Agreement, or thereto, in the case of the Plan of
Merger. Any such amendment or supplement must be in writing and approved by
their respective boards of directors and/or officers authorized thereby and
shall be subject to the proviso in Section 6.4 hereof.
ARTICLE 7
Miscellaneous
7.1. EXPENSES
(a) Each party hereto shall bear and pay all costs and expenses incurred by
it in connection with the transactions contemplated in this Reorganization
Agreement, including fees and expenses of its own financial consultants,
accountants and counsel, except that S&T shall bear and pay all costs and
expenses incurred in connection with printing the Registration Statement and
joint Proxy Statement and prospectus of S&T and Peoples.
(b) Peoples and S&T each acknowledge that the other has spent, and will be
required to spend, substantial time and effort in examining the business,
properties, affairs, financial condition and prospects of the other, has
incurred, and will continue to incur, substantial fees and expenses in
connection with such examination, the preparation of this Reorganization
Agreement and the accomplishment of the transactions contemplated hereby, and
will be unable to evaluate and, possibly, make investments in or acquire other
entities due to the limited number of personnel available for such purpose and
the constraints of time. Therefore, to induce S&T to enter into this
Reorganization Agreement, (i) if S&T terminates this Reorganization Agreement
pursuant to Section 6.1(b) or (c) by reason of Peoples' failure to meet any
condition contained in Section 5.3(a) or (b) 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 is consummated or Peoples shall have
entered into an agreement or an agreement in principle which if consummated
would constitute a Competing Transaction or (ii) if Peoples terminates this
Reorganization Agreement pursuant to Section 6.1(b) or (c) because this
Reorganization Agreement did not receive the requisite vote of Peoples
stockholders and within 9 months from the date of termination (other than a
termination pursuant to Article IX of the Plan of Merger) a Competing
Transaction is consummated or Peoples shall have entered into an agreement
which if consummated would constitute a Competing Transaction, then Peoples
shall pay to S&T a fee in the amount of $1,600,000, not as a penalty but as
full and complete liquidated damages. Upon payment of such fee, Peoples shall
have no further liability to S&T at law or equity. The fee shall be payable to
S&T notwithstanding that any action taken by the Board of Directors of Peoples
which may give rise to the obligation
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to pay the fee may have been taken in accordance with the fiduciary duties of
the Board of Directors. Any payment required pursuant to this Section 7.1(b)
shall be made as promptly as practicable, but in no event later than two
business days after the date it becomes payable hereunder and shall be made by
wire transfer of immediately available funds to an account designated by S&T.
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.
7.2. ENTIRE AGREEMENT
This Reorganization Agreement and the Plan of Merger contain the entire
agreement between the parties with respect to the transactions contemplated
hereunder and thereunder and supersede all prior arrangements or
understandings with respect thereto, written or oral, other than documents
referred to herein or therein. The terms and conditions of this Reorganization
Agreement and the Plan of Merger shall inure to the benefit of and be binding
upon the parties hereto and thereto and their respective successors. Nothing
in this Reorganization Agreement or the Plan of Merger, expressed or implied,
is intended to confer upon any party, other than the parties hereto and
thereto, and their respective successors, any rights, remedies, obligations or
liabilities.
7.3. NO ASSIGNMENT
No party hereto may assign any of its rights or obligations under this
Reorganization Agreement to any other person.
7.4. NOTICES
All notices or other communications which are required or permitted
hereunder shall be in writing and sufficient if delivered personally or sent
by facsimile transmission or overnight express or by registered or certified
mail, postage prepaid, addressed as follows:
If to Peoples:
Peoples Bank of Unity
7660 Saltsburg Road
Pittsburgh, Pennsylvania 15239-3700
Attention: Russell P. Miller
Facsimile No.: (412) 795-0635
With a required copy to:
Kirkpatrick & Lockhart LLP
1500 Oliver Building
Pittsburgh, Pennsylvania 15222-2312
Attention: J. Robert Van Kirk
Facsimile No.: (412) 355-6501
If to S&T or S&T Bank:
S&T Bancorp, Inc.
800 Philadelphia Street
Indiana, Pennsylvania 15701-3921
Attention: Robert D. Duggan
Facsimile No.: (412) 465-1488
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With a required copy to:
Arnold & Porter
555 12th Street, N.W.
Washington, D.C. 20004-1202
Attention: Catherine C. McCoy
Facsimile No.: (202) 942-5999
7.5. CAPTIONS
The captions contained in this Reorganization Agreement are for reference
purposes only and are not part of this Reorganization Agreement.
7.6. COUNTERPARTS
This Reorganization Agreement may be executed in any number of counterparts,
and each such counterpart shall be deemed to be an original instrument, but all
such counterparts together shall constitute but one agreement.
7.7. GOVERNING LAW
This Reorganization Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Pennsylvania applicable to
agreements made and entirely to be performed within such jurisdiction, except
to the extent federal law may be applicable.
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IN WITNESS WHEREOF, the parties hereto, intending to be legally bound
hereby, have caused this Reorganization Agreement to be executed in
counterparts by their duly authorized officers and their corporate seal to be
hereunto affixed and attested by their officers thereunto duly authorized, all
as of the day and year first above written.
Attest S&T Bancorp, Inc.
/s/ James C. Miller By /s/ Robert D. Duggan
- ------------------------------------- ----------------------------------
Name: James C. Miller Name: Robert D. Duggan
------------------------------- -------------------------------
Title: E.V.P Title: Chairman & CEO
------------------------------ ------------------------------
(SEAL)
Attest Peoples Bank of Unity
/s/ Ernest J. Draganza By /s/ Russell P. Miller
- ------------------------------------- ----------------------------------
Name: Ernest J. Draganza Name: Russell P. Miller
------------------------------- -------------------------------
Title: SVP & CFO, Acting CEO Title: President
------------------------------ ------------------------------
(SEAL)
Attest S&T Bank
/s/ Robert D. Duggan By /s/ James C. Miller
- ------------------------------------- ----------------------------------
Name: Robert D. Duggan Name: James C. Miller
------------------------------- -------------------------------
Title: Chairman & CEO Title: President & C.O.O.
------------------------------ ------------------------------
(SEAL)
A-22
<PAGE>
ANNEX A
AGREEMENT AND PLAN OF MERGER OF
PEOPLES BANK OF UNITY
WITH AND INTO
S&T BANK
AGREEMENT AND PLAN OF MERGER ("Plan of Merger") dated as of , 1997,
adopted and made by and between PEOPLES BANK OF UNITY ("Peoples"), a
Pennsylvania banking institution having its registered office at 7660
Saltsburg Road, Pittsburgh, Pennsylvania 15239-3700 and S&T BANK, a
Pennsylvania banking institution having its registered office at 800
Philadelphia Street, Indiana, Pennsylvania 15701-3921, each acting pursuant to
resolutions adopted by the vote of a majority of its board of directors in
accordance with Section 1603 of the Pennsylvania Banking Code, and joined in
by S&T BANCORP, INC. ("S&T"), a Pennsylvania corporation having its principal
executive office at 800 Philadelphia Street, Indiana, Pennsylvania 15701-3921.
WITNESSETH
WHEREAS, Peoples is a Pennsylvania banking institution organized and
existing under the laws of the Commonwealth of Pennsylvania, the authorized
capital stock of which consists of 115,660 shares of common stock, par value
$10.00 per share ("Peoples Common Stock"), all of which shares are issued and
outstanding on the date hereof;
WHEREAS, S&T Bank is a Pennsylvania banking institution organized and
existing under the laws of the Commonwealth of Pennsylvania, the authorized
capital stock of which consists of 605,300 shares of common stock, par value
$2.50 per share, all of which shares are issued and outstanding on the date
hereof;
WHEREAS, S&T is a corporation organized and existing under the laws of the
Commonwealth of Pennsylvania that is registered as a bank holding company
pursuant to the Bank Holding Company Act of 1956, as amended, the authorized
capital stock of which consists at September 30, 1996 of (i) 10,000,000 shares
of preferred stock, no par value, none of which has been issued and (ii)
25,000,000 shares of common stock, par value $2.50 per share ("S&T Common
Stock"), of which 11,046,355 shares were issued and outstanding and 774,589
shares were held in treasury; and
WHEREAS, S&T and Peoples have entered into an Agreement and Plan of
Reorganization ("Reorganization Agreement") that contemplates the merger of
Peoples with and into S&T Bank;
WHEREAS, the respective Boards of Directors of S&T, S&T Bank and Peoples
deem the merger of Peoples with and into S&T Bank, under and pursuant to the
terms and conditions herein set forth or referred to, desirable and in the
best interests of the respective institutions and their respective
shareholders, and the respective Boards of Directors of S&T, S&T Bank and
Peoples have adopted resolutions approving this Plan of Merger and each of the
Boards of Directors of S&T, S&T Bank and Peoples has directed that this Plan
of Merger be submitted to their respective shareholders for approval; and
WHEREAS, approval of this Plan of Merger requires the affirmative vote of
the holders of at least two-thirds of the outstanding shares of Peoples Common
Stock and the holders of at least two-thirds of the outstanding shares of the
common stock of S&T Bank.
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements herein contained and intending to be legally bound hereby, the
parties hereto do hereby agree as follows:
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<PAGE>
ARTICLE I
The Merger
Subject to the terms and conditions of this Plan of Merger, on the Effective
Date (as hereinafter defined), 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 (said transaction being hereinafter
referred to as the "Merger"). On the Effective Date, the separate existence of
Peoples shall cease and S&T Bank shall continue its existence as the surviving
entity unaffected and unimpaired by the Merger, and shall be liable for all of
the liabilities of Peoples existing at the Effective Date (S&T Bank as
existing on and after the Effective Date being hereinafter sometimes referred
to as the "Surviving Bank").
ARTICLE II
Articles of Incorporation and By-laws
The Articles of Incorporation and the By-Laws of the Surviving Bank in
effect immediately prior to the Effective Date shall be the Articles of
Incorporation and the By-Laws of the Surviving Bank, in each case until
amended in accordance with applicable law.
ARTICLE III
Board of Directors
On the Effective Date, the Board of Directors of the Surviving Bank shall
consist of those persons serving as directors of the Surviving Bank
immediately prior to the Effective Date together with three directors to be
designated by Peoples.
ARTICLE IV
Capital
Each share of capital stock of S&T Bank issued and outstanding immediately
prior to the Effective Date shall, on the Effective Date, continue to be
issued and outstanding.
ARTICLE V
Conversion and Exchange of Peoples Shares
1. On the Effective Date, each share of Peoples Common Stock outstanding
immediately prior to the Effective Date (except as provided in Paragraphs 2, 5
and 7 of this Article) shall by virtue of the Merger be converted into 26.25
shares of S&T Common Stock.
2. On the Effective Date, all shares of Peoples Common Stock held in the
treasury of Peoples or owned beneficially by Peoples other than in a fiduciary
capacity or in connection with a debt previously contracted and all shares of
Peoples Common Stock owned by S&T or owned beneficially by any subsidiary or
affiliate of S&T other than in a fiduciary capacity or in connection with a
debt previously contracted shall be cancelled and no cash, stock or other
property shall be delivered in exchange therefor.
3. On and after the Effective Date, each holder of a certificate or
certificates theretofore representing outstanding shares of Peoples Common
Stock (any such certificate being hereinafter referred to as a "Certificate")
may surrender the same to S&T or its agent for cancellation and each such
holder shall be entitled
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<PAGE>
upon such surrender to receive in exchange therefor certificate(s)
representing the number of shares of S&T Common Stock to which such holder is
entitled as provided herein and a check in an amount equal to the amount of
cash, without interest, to be paid pursuant to Paragraph 7 of this Article V
to which such holder is entitled. Until surrendered, each Certificate shall be
deemed for all purposes to evidence ownership of the number of shares of S&T
Common Stock into which the shares represented by such Certificates have been
changed or converted as aforesaid. 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 thereof
shall surrender such Certificate in accordance with this Article V. After the
surrender of a Certificate in accordance with this Article V, the record
holder thereof shall be entitled to receive any such dividends or other
distributions, without any interest thereon, which theretofore had become
payable with respect to shares of S&T Common Stock represented by such
Certificate. Certificates surrendered for exchange by any person who is an
"affiliate" of Peoples for purposes of Rule 145(c) under the Securities Act of
1933, as amended, shall not be exchanged for certificates representing shares
of S&T Common Stock until S&T has received the written agreement of such
person contemplated by Section 4.11(a) of the Reorganization Agreement. If any
certificate for shares of Peoples Common Stock is to be issued in a name other
than that in which a certificate surrendered for exchange is issued, the
certificate so surrendered shall be properly endorsed and otherwise in proper
form for transfer and the person requesting such exchange shall affix any
requisite stock transfer tax stamps to the certificate surrendered or provide
funds for their purchase or establish to the reasonable satisfaction of S&T or
its agent that such taxes are not payable.
4. Upon the Effective Date, the stock transfer books of Peoples shall be
closed and no transfer of Peoples Common Stock shall thereafter be made or
recognized. Any other provision of this Plan of Merger notwithstanding,
neither S&T or its agent nor any party to the Merger shall be liable to a
holder of Peoples Common Stock for any amount paid or property delivered in
good faith to a public official pursuant to any applicable abandoned property,
escheat or similar law.
5. No conversion under Paragraph 1 of this Article V shall be made in
respect of any share of Peoples Common Stock as to which a Peoples shareholder
has elected to exercise dissenters' rights pursuant to Section 1222 of the
Pennsylvania Banking Code, if any, until such time as such shareholder shall
have effectively lost dissenters' rights.
6. 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 thereafter delivered pursuant to this Plan of Merger.
7. Notwithstanding any other provision of this Article V, each holder of
shares of Peoples Common Stock who would otherwise have been entitled to
receive a fraction of a share of S&T Common Stock (after taking into account
all Certificates delivered by such holder) shall receive, in lieu thereof,
cash in an amount equal to such fractional part of a share of S&T Common Stock
multiplied by the market value of such Common Stock. The market value of one
share of S&T Common Stock on the Effective Date shall be the last sale price
of such Common Stock as quoted in the NASDAQ National Market System (as
reported by The Wall Street Journal or other authoritative source) on the last
business day preceding such date. No such holder shall be entitled to
dividends, voting rights or any other shareholder right in respect of any
fractional share.
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<PAGE>
ARTICLE VI
Effective Date of the Merger
The Merger shall be effective at the time and on the date specified in the
certificate of merger (such date and time being herein referred to as the
"Effective Date").
ARTICLE VII
Further Assurances
If at any time the Surviving Bank shall consider or be advised that any
further assignments, conveyances or assurances are necessary or desirable to
vest, perfect or confirm in the Surviving Bank title to any property or rights
of Peoples, or otherwise carry out the provisions hereof, the proper officers
and directors of Peoples, as of the Effective Date, and thereafter the
officers of the Surviving Bank acting on behalf of Peoples, shall execute and
deliver any and all proper assignments, conveyances and assurances, and do all
things necessary or desirable to vest, perfect or confirm title to such
property or rights in the Surviving Bank and otherwise carry out the
provisions hereof.
ARTICLE VIII
Conditions Precedent
The obligations of S&T, S&T Bank and Peoples to effect the Merger as herein
provided shall be subject to satisfaction, unless duly waived, of the
conditions set forth in the Reorganization Agreement.
ARTICLE IX
Termination
Anything contained in this Plan of Merger to the contrary notwithstanding,
and notwithstanding adoption hereof by the shareholders of S&T, S&T Bank and
Peoples, this Plan of Merger may be terminated and the Merger abandoned as
provided in the Reorganization Agreement; provided however, that the Plan of
Merger may also be terminated, and the Merger may be abandoned by Peoples, if
its Board of Directors so determines by a vote of a majority of the members of
its entire Board of Directors, at any time during the three-day period
commencing two days after the Determination Date, if either:
(x) both of the following conditions are satisfied: (1) the Average
Closing Price on the Determination Date of shares of S&T Common Stock shall
be less than 80% of the Starting Price; and (2) the Index Price on the
Determination Date shall be greater than the product of 0.80 and the Index
Price on the Starting Date; or
(y) the Average Closing Price on the Determination Date of shares of S&T
Common Stock shall be less than 75% of the Starting Price.
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 (x) or (y) 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.
For Purposes of this Article IX, the following terms shall have the meanings
indicated:
"Average Closing Price" shall mean the average of the daily last sale prices
of S&T Common Stock as reported on the Nasdaq National Market System (as
reported by The Wall Street Journal or, if not reported
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<PAGE>
therein, as reported in a mutually agreed upon authoritative source) for the
twenty consecutive full trading days in which such shares are traded on the
Nasdaq National Market System ending at the close of trading on the
Determination Date.
"Determination Date" shall mean the date the fifth trading day immediately
preceding the planned Effective Date.
"Index Group" shall mean the group of bank holding companies listed in the
SNL All Bank Index, the common stock of all of which shall be publicly traded
since the Starting Date, as presently used by S&T for proxy statement
purposes.
"Index Price" on a given date shall mean the market-capitalization-weighted
average (weighted pursuant to the SNL All Bank Index) of the closing prices of
the companies composing the Index Group.
"Starting Date" shall mean November 25, 1996.
"Starting Price" shall mean the average of the daily last sale prices of S&T
Common Stock as reported on the Nasdaq National Market System (as reported by
The Wall Street Journal or, if not reported therein, as reported in a mutually
agreed upon authoritative source) for the five consecutive full trading days
in which such shares are traded on the Nasdaq National Market System ending on
November 25, 1996.
If any company belonging to the Index Group or S&T declares or effects a
stock dividend, reclassification, recapitalization, split-up, combination,
exchange of shares or similar transaction between the Starting Date and the
Determination Date, the prices for the common stock of such company or S&T
shall be appropriately adjusted for the purposes of applying this Article IX.
In the event the Reorganization Agreement is terminated pursuant to the
terms thereof, this Plan of Merger shall become void and have no effect.
ARTICLE X
Miscellaneous
1. This Plan of Merger may be amended or supplemented at any time by mutual
agreement of S&T, S&T Bank and Peoples. Any such amendment or supplement must
be in writing and approved by their respective Boards of Directors.
2. The headings of the several Articles herein are inserted for convenience
of reference only and are not intended to be a part of or to affect the
meaning or interpretation of this Plan of Merger.
3. This Plan of Merger may be executed in several counterparts, each of
which shall be deemed the original, but all of which together shall constitute
one and the same instrument.
4. This Plan of Merger shall be governed by and construed in accordance with
the laws of the Commonwealth of Pennsylvania applicable to agreements made and
entirely to be performed within such jurisdiction, except to the extent that
federal law may be applicable.
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IN WITNESS WHEREOF, the parties hereto, intending to be legally bound
hereby, have caused this Plan of Merger to be executed in counterparts by
their duly authorized officers and their corporate seals to be hereunto
affixed and attested by their officers thereunto duly authorized, all as of
the day and year first above written.
Attest S&T Bancorp, Inc.
_____________________________________ By___________________________________
(SEAL)
Attest Peoples Bank of Unity
_____________________________________ By___________________________________
(SEAL)
Attest S&T Bank
_____________________________________ By___________________________________
(SEAL)
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<PAGE>
APPENDIX B
OPINION OF DANIELSON ASSOCIATES INC.
March 18, 1997
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 publicly-traded. The
prior movement of its common stock and dividend payments also was examined,
the dilutive effect of this merger on S&T's common stock analyzed, and its
financial performance was related to its stock value.
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 significant change in the performance of S&T
or slippage in its stock price. The S&T stock price, in fact, has increased in
value, and, therefore, the value of the offer has improved, as of the date of
this proxy statement prospectus, and, as a result this offer is still "fair"
from a financial point of view to Peoples and its shareholders.
Respectfully submitted,
/s/ Arnold G. Danielson
Arnold G. Danielson
Chairman
Danielson Associates Inc.
B-1
<PAGE>
APPENDIX C
OPINION OF MCDONALD & COMPANY SECURITIES, INC.
March 18, 1997
Board of Directors
S&T Bancorp, Inc.
800 Philadelphia Street
Box 190
Indiana, PA 15701
Gentlemen and Madam:
You have requested our opinion with respect to the fairness, from a
financial point of view, as of the date hereof, to the holders of common
stock, par value $2.50 per share ("S&T Common"), of S&T Bancorp, Inc. ("S&T")
of the exchange ratio as set forth in Article V, Section 1 of the Agreement
and Plan of Merger (the "Plan of Merger") which is Annex A to the Agreement
and Plan of Reorganization, dated November 25, 1996 (the "Agreement"), by and
among S&T, S&T Bank and Peoples Bank of Unity ("Peoples").
The Plan of Merger provides for the merger (the "Merger") of Peoples with
and into S&T Bank, pursuant to which, among other things, at the Effective
Date (as defined in the Plan of Merger), outstanding shares of Peoples common
stock, par value $10.00 per share ("Peoples Common"), will be exchanged for
26.25 shares of S&T Common as set forth in Article V, Section 1 of the Plan of
Merger (the "Exchange Ratio"). The terms and conditions of the Merger are more
fully set forth in the Agreement and the Plan of Merger.
McDonald & Company Securities, Inc., as part of its investment banking
business, is customarily engaged in the valuation of businesses and their
securities in connection with mergers and acquisitions, negotiated
underwritings, secondary distributions of listed and unlisted securities,
private placements and valuations for estate, corporate and other purposes.
We have acted as S&T's financial advisor in connection with, and have
participated in certain negotiations leading to, the execution of the
Agreement. In connection with rendering our opinion set forth herein, we have
among other things:
(i) Reviewed S&T's Annual Reports to Shareholders and Annual Reports on
Form 10-K for each of the years ended December 31, 1996, December 31, 1995
and December 31, 1994, including the audited financial statements contained
therein;
(ii) Reviewed Peoples' audited financial statements for each of the
fiscal years ended December 31, 1996, December 31, 1995 and December 31,
1994;
(iii) Reviewed certain other public and non-public information, primarily
financial in nature, relating to the respective businesses, earnings,
assets and prospects of S&T and Peoples provided to us or publicly
available;
(iv) Participated in meetings and telephone conferences with members of
senior management of S&T and Peoples concerning the financial condition,
business, assets, financial forecasts and prospects of the respective
companies, as well as other matters we believed relevant to our inquiry;
(v) Reviewed certain stock market information for S&T Common and Peoples
Common and compared it with similar information for certain companies, the
securities of which are publicly traded;
(vi) Compared the results of operations and financial condition of S&T
and Peoples with that of certain companies which we deemed to be relevant
for purposes of this opinion;
(vii) Reviewed the financial terms, to the extent publicly available, of
certain acquisition transactions which we deemed to be relevant for
purposes of this opinion;
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(viii) Reviewed the Plan of Merger and the Agreement and schedules and
exhibits and certain related documents; and
(ix) Performed such other reviews and analyses as we have deemed
appropriate.
In our review and analysis and in arriving at our opinion, we have assumed
and relied upon the accuracy and completeness of all of the financial and
other information reviewed by us and have relied upon the accuracy and
completeness of the representations, warranties and covenants of S&T and
Peoples contained in the Agreement and the Plan of Merger. We have not been
engaged to undertake, and have not assumed any responsibility for, nor have we
conducted, an independent investigation or verification of such matters. We
have not been engaged to and we did not conduct a physical inspection of any
of the assets, properties or facilities of either S&T or Peoples, nor have we
made or obtained or been furnished with any independent evaluation or
appraisal of any of such assets, properties or facilities or any of the
liabilities of either S&T or Peoples. With respect to financial forecasts used
in our analysis, we have assumed that such forecasts have been reasonably
prepared on a basis reflecting the best currently available estimates and
judgments of the management of S&T and Peoples as to the future performance of
S&T and Peoples, as the case may be. We express no view as to such financial
forecasts or the assumptions on which they are based. We have also assumed
that all of the conditions to the consummation of the Merger, as set forth in
the Agreement and the Plan of Merger, would be satisfied and that the Merger
would be consummated on a timely basis in the manner contemplated by the
Agreement and the Plan of Merger.
We will receive a fee for our services as financial advisor to S&T, a
portion of which is contingent upon closing of the Merger.
In the ordinary course of business, we may trade securities of S&T and
Peoples for our own account and for the accounts of customers and,
accordingly, we may at any time hold a long or short position in such
securities.
This opinion is based on economic and market conditions and other
circumstances existing on, and information made available as of, the date
hereof. In addition, our opinion is, in any event, limited to the fairness to
S&T's stockholders, as of the date hereof, from a financial point of view, of
the Exchange Ratio, and does not address S&T's underlying business decision to
effect the Merger or any other terms of the Merger and does not constitute a
recommendation to any S&T shareholder as to how such shareholder should vote
with respect to the Merger. This opinion does not represent our opinion as to
what the value of S&T Common or Peoples Common may be at the effective date of
the Merger or as to the prospects of S&T's and Peoples' business.
This opinion is directed to and has been prepared for the confidential use
of the Board of Directors of S&T. This opinion shall not be reproduced,
summarized, described or referred to or given to any other person without our
prior written consent. Notwithstanding the foregoing, this opinion may be
included in a proxy statement to be mailed to the holders of S&T Common, and a
proxy statement/prospectus to be mailed to holders of Peoples Common, in
connection with the Merger, provided that this opinion will be reproduced in
such documents in full, and any description of or reference to us or our
actions, or any summary of the opinion in such documents will be in a form
acceptable to us and our counsel.
Based upon and subject to the foregoing, it is our opinion that, as of the
date hereof, the Exchange Ratio is fair to the holders of S&T Common from a
financial point of view.
Very truly yours,
/s/ McDonald & Company Securities,
Inc.
McDonald & Company Securities, Inc.
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APPENDIX D
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.
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(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).
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(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.
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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.
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(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).
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(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.
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(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.
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(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
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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.
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(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.
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(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.
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(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.
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(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.
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(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.
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(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);
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<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.
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(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.
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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.
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<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.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Pre-Effective Amendment No. 3 to the Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Indiana, Commonwealth of Pennsylvania, on the 19th
day of March, 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 Pre-
Effective Amendment No. 3 to the Registration Statement has been signed below
by the following persons in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
PRINCIPAL OFFICERS:
* Robert D. Duggan Chairman, President and Chief Executive Date: March 19, 1997
- ------------------------- Officer (Principal Executive Officer)
Robert D. Duggan
* James C. Miller Executive Vice President Date: March 19, 1997
- -------------------------
James C. Miller
/s/ James G. Barone Secretary Date: March 19, 1997
- -------------------------
James G. Barone
/s/ Robert E. Rout Chief Financial Officer (Principal Date: March 19, 1997
- ------------------------- Financial and Accounting Officer)
Robert E. Rout
DIRECTORS:
Director Date:
- -------------------------
Thomas A. Brice
Director Date:
- -------------------------
Forrest L. Brubaker
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE DATE
--------- ----
<S> <C> <C>
* James L. Carino Director Date: March 19, 1997
- -------------------------
James L. Carino
* John J. Delaney Director Date: March 19, 1997
- -------------------------
John J. Delaney
* Robert D. Duggan Director Date: March 19, 1997
- -------------------------
Robert D. Duggan
* Thomas W. Garges, Jr. Director Date: March 19, 1997
- -------------------------
Thomas W. Garges, Jr.
* William J. Gatti Director Date: March 19, 1997
- -------------------------
William J. Gatti
- ------------------------- Director Date:
Herbert L. Hanna
Director Date:
- -------------------------
Paul B. Johnston
Director Date:
- -------------------------
Joseph A. Kirk
Director Date:
- -------------------------
Samuel Levy
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE DATE
--------- ----
<S> <C> <C>
* James C. Miller Director Date: March 19, 1997
- -------------------------
James C. Miller
* W. Parker Ruddock Director Date: March 19, 1997
- -------------------------
W. Parker Ruddock
* Charles A. Spadafora Director Date: March 19, 1997
- -------------------------
Charles A. Spadafora
* Christine J. Toretti Director Date: March 19, 1997
- -------------------------
Christine J. Toretti
- ------------------------- Director Date:
Harold W. Widdowson
</TABLE>
*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, filed herewith.
Exhibit 8 Opinion of Arnold & Porter as to certain tax consequences of the
Merger (previously filed).
Exhibit 23.1 Consent of Ernst & Young LLP, independent accountants for S&T
(previously filed).
Exhibit 23.2 Consent of S.R. Snodgrass, A.C., independent auditors for
Peoples (previously filed).
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 (previously filed).
Exhibit 23.5 Consent of Danielson Associates Inc. (previously filed).
Exhibit 23.6 Consent of Ernst & Young LLP, independent accountants to S&T
(previously filed).
Exhibit 23.7 Consent of S.R. Snodgrass, A.C., independent auditors for
Peoples (previously filed).
Exhibit 23.8 Consent of McDonald & Company Securities, Inc. (previously
filed).
Exhibit 23.9 Consent of Ernst & Young LLP, independent accountants to S&T
(previously filed).
Exhibit 23.10 Consent of S.R. Snodgrass, A.C., independent auditors for
Peoples, filed herewith.
Exhibit 24 Powers of Attorney of certain directors and officers of S&T
(previously filed).
Exhibit 99.1 Form of Proxy relating to the Peoples Common Stock (previously
filed).
Exhibit 99.2 Opinion of Danielson Associates, Inc., included as Appendix B to
the Proxy Statement/Prospectus and incorporated herein by
reference.
Exhibit 99.3 Opinion of McDonald & Company Securities, Inc., included as
Appendix C to the Proxy Statement/Prospectus and incorporated
herein by reference.
</TABLE>
II-6
<PAGE>
Exhibit 5
March 19, 1997
S&T Bancorp, Inc.
800 Philadelphia Street
Indiana, PA 15701
Ladies and Gentlemen:
Reference is made to the Registration Statement on Form S-4 ("Registration
Statement") of S&T Bancorp, Inc., a Pennsylvania corporation ("S&T"), with
respect to 3,036,075 shares of $2.50 par value common stock of S&T ("S&T Common
Stock") that may be issued in connection with the proposed transaction pursuant
to which Peoples Bank of Unity ("Peoples") will be merged (the "Merger") with
and into S&T's wholly-owned subsidiary, S&T Bank.
The Merger is to be effected pursuant to an Agreement and Plan of
Reorganization, dated as of November 25, 1996, and a related Agreement and Plan
of Merger (collectively, the "Agreement") between S&T and Peoples and joined in
by S&T Bank, pursuant to which each share of the $10.00 par value common stock
of Peoples ("Peoples Common Stock") outstanding immediately prior to the
effective time of the Merger (other than shares held by dissenting shareholders)
will be converted into 26.25 shares of S&T Common Stock, with cash being paid in
lieu of the issuance of fractional shares.
We have been requested to furnish an opinion to be included as Exhibit 5 to
the Registration Statement. In conjunction with the furnishing of this opinion,
we have examined such corporate documents and have made such investigation of
matters of fact and law as we have deemed necessary to render this opinion.
Based upon such examination and investigation and upon the assumption that
there will be no material changes in the documents we examined and the matters
investigated, we are of the opinion that the shares of S&T Common Stock included
in the Registration Statement that may be issued to the holders of Peoples
Common Stock in connection with the Merger have been duly authorized by S&T and
that, when issued to such shareholders in accordance with the terms of the
Agreement upon consummation of the Merger, such shares of S&T Common Stock will
be validly issued, fully paid, and nonassessable under the Pennsylvania Business
Corporation Law of 1988 as in effect on this date.
We consent to the filing of this opinion as an exhibit to the Registration
Statement and to the reference to us under the caption "Legal Opinion" in the
Proxy Statement/Prospectus included therein. In giving the foregoing 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, as amended, or the rules
and regulations of the Securities and Exchange Commission thereunder.
Sincerely,
/s/ Arnold & Porter
Arnold & Porter
<PAGE>
[LETTERHEAD OF SNODGRASS APPEARS HERE]
Exhibit 23.10
CONSENT OF INDEPENDENT AUDITORS
We consent to the use in this Pre-Effective Amendment No. 3 to Registration
Statement No. 333-19575 of S & T Bancorp, Inc. on Form S-4 of our report dated
February 10, 1997 (relating to the financial statements of Peoples Bank of Unity
as of December 31, 1996 and 1995 and for each of the three years in the period
ended December 31, 1996) 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
March 17, 1997
