SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. For the fiscal year ended December 31, 1996 Commission file number 0-12508 S&T BANCORP, INC. (Exact name of registrant as specified in its charter) Pennsylvania 25-1434426 (State or other jurisdiction of (I.R.S. Employer incorporation of organization) Identification No.) 800 Philadelphia Street, Indiana, PA 15701 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (412)-349-2900 Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Common Stock, Par Value $2.50 per share (Title of class) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this form 10-K or any amendment to this form 10-K. { } The aggregate market value of the voting stock held by nonaffiliates of the registrant as of February 18, 1997: Common Stock, $2.50 par value - $364,472,218 The number of shares outstanding of the issuer's classes of common stock as of February 18, 1997: Common Stock, $2.50 par value - 11,092,850 shares DOCUMENTS INCORPORATED BY REFERENCE Portions of the annual shareholders report for the year ended December 31, 1996 are incorporated by reference into Part II. Portions of the proxy statement for the annual shareholders meeting to be held April 21, 1997 are incorporated by reference into Part III.
PART I ITEM 1. BUSINESS General S&T Bancorp, Inc. ("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. S&T is registered as a bank holding company with the Board of Governors of the Federal Reserve System under the Bank Holding Company Act, as amended. As of December 31, 1996, S&T had $1.5 billion in total assets, $176 million in total shareholders' equity and $1.0 billion in total deposits. Deposits are insured by the Federal Deposit Insurance Corporation to the full extent provided by law. Total trust assets were approximately $465 million at December 31, 1996. Trust services include services as executor and trustee under wills and deeds, and as guardian and custodian of employee benefit trusts. S&T Bank is a full service bank with its main office at 800 Philadelphia Street, Indiana, Pennsylvania, providing service to its customers through a branch network of thirty-five offices located in Armstrong, Allegheny, Indiana, Jefferson, Clearfield and Westmoreland counties. 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). S&T Bank does not experience significant fluctuations in deposits. Employees As of December 31, 1996, S&T Bank had a total of 586 full-time equivalent employees. S&T provides a variety of employment benefits and considers its relationship with its employees to be good. Supervision and Regulation General S&T and S&T Bank are each extensively regulated under both federal and state law. The following information describes certain aspects of that regulation applicable to S&T and S&T Bank and does not purport to be complete. To the extent statutory or regulatory provisions or proposals are described, the description is qualified in its entirety by reference to the particular statutory of regulatory provisions or proposals. On November 26, 1996, S&T announced the signing of a definitive agreement and plan of merger to acquire Peoples Bank of Unity (Peoples). Peoples is a $291 million state chartered bank, headquartered in Plum Borough, a suburb of Pittsburgh, Pennsylvania. The merger, which is based on a fixed exchange ratio of 26.25 shares of S&T common stock for each outstanding share of Peoples (up to 3,036,075 shares of S&T common stock), will be accounted for as a pooling- of-interest.
ITEM 1. BUSINESS- continued The transaction, which is subject to approval by the appropriate regulatory authorities, is expected to be completed during the second quarter of 1997. S&T As a bank holding company, S&T is subject to regulation under the Bank Holding Company Act of 1956 ("BHCA") and the examination and reporting requirements of the Federal Reserve Board. Under the BHCA, a bank holding company may not directly or indirectly acquire ownership or control of more than five percent of the voting shares or substantially all of the assets of any additional bank, or merge or consolidate with another bank holding company, without the prior approval of the Federal Reserve Board. The BHCA also generally limits the activities of a bank holding company to that of banking, managing or controlling banks, or any other activity which is determined to be so closely related to banking or to managing or controlling banks as to be a proper incident thereto. S&T is presently engaged in two nonbanking activities: S&T Investment Company, Inc., which is an investment holding company, and Commonwealth Trust Credit Life Insurance Company ("CTCLIC"). S&T Investment Company, Inc. was formed in June 1988 to hold and manage a group of investments previously owned by S&T Bank and to give S&T additional latitude to purchase other investments. CTCLIC, which is a joint venture with another financial institution, acts as a reinsurer of credit life, accident and health insurance policies sold by S&T Bank and the other institution. There are a number of obligations and restrictions imposed on bank holding companies and their depository institution subsidiaries by federal law and regulatory policy that are designed to reduce potential loss exposure to the depositors of such depository institutions and to the FDIC insurance funds in the event the depository institution becomes in danger of default or in default. For example, under a policy of the Federal Reserve Board with respect bank holding company operations, a bank holding company is required to serve as a source of financial strength to its subsidiary depository institutions and and to commit resources to support such institutions in circumstances where it might not do so otherwise. S&T Bank As a state-chartered commercial bank, the deposits of which are insured by the Bank Insurance Fund ("BIF") of the Federal Deposit Insurance Corporation ("FDIC"), S&T Bank is subject to the supervision and regulation of the Pennsylvania Department of Banking ("PADB") and the FDIC. S&T Bank also is subject to various requirements and restrictions under federal and state law, including requirements to maintain reserves against deposits, restrictions on the types, amount and terms and conditions of loans that may be granted, and limits on the type of other activities in which S&T Bank may engage and the investments it may make. Various consumer and compliance laws and regulations also affect S&T Bank's operations. S&T Bank also is subject to federal laws that limit the amount of transactions between itself and S&T or S&T's nonbank subsidiaries. Under these provisions, transactions by a bank subsidiary to any one of its parent company or any nonbank affiliate generally are limited to ten percent of the bank subsidiary's capital and surplus, or twenty percent in the aggregate. Further, loans and extensions of credit generally are required to be secured by eligible collateral in specified amounts. A bank, such as S&T Bank, is prohibited from purchasing any "low quality" asset from an affiliate. S&T Bank is in compliance with these provisions. As an FDIC-insured bank, S&T Bank also is subject to FDIC insurance assessments. Currently, the amount of FDIC assessments paid by individual insured depository institutions ranges from zero to $.27 per $100 of insured deposits, based on their relative risk to the deposit insurance funds, as measured by the institutions' regulatory capital position and other supervisory factors. S&T Bank currently pays the lowest premium rate based upon this risk assessment. However, because legislation enacted in 1996 requires that all insured deposits pay a pro rata portion of the interest due on the obligations issued by the Financing Corporation, the FDIC is assessing BIF-insured deposits an additional $.013 per $100 of deposits to cover those obligations.
ITEM 1. BUSINESS- continued S&T Bank also has $168.1 million of deposits subject to the Savings Association Insurance Fund (SAIF). These deposits are related to a thrift institution and branches acquired from the Resolution Trust Corporation in 1991. S&T Bank currently pays an annual premium of $.013 per $100 on BIF deposits and $.0648 per $100 on SAIF deposits. Capital The Federal Reserve Board and the FDIC have issued substantially similar risk- based and leverage capital guidelines applicable to banking organizations they supervise. Under the risk-based capital requirements, S&T and S&T Bank each generally is required to maintain a minimum ratio of total capital to risk- weighted assets (including certain off-balance sheet activities, such as standby letters of credit), of eight percent. At least half of the total capital is to be composed of common equity, retained earnings and qualifying perpetual preferred stock, less certain intangibles ("Tier 1 capital"). The remainder may consist of certain subordinated debt, certain hybrid capital instruments and other qualifying preferred stock, and a limited amount of the loan loss allowance ("Tier 2 capital") and, together with Tier 1 capital, ("Total capital"). At December 31, 1996, S&T's Tier 1 and Total capital ratios were 13.08 percent and 14.33 percent, respectively, and the ratios of Tier I capital and Total capital to total risk-adjusted assets for S&T Bank were 9.29 percent and 10.54 percent, respectively. In addition, each of the federal bank regulatory agencies has established minimum leverage capital ratio requirements for banking organizations. These requirements provide for a minimum leverage ratio of Tier 1 capital to adjusted average quarterly assets equal to three percent for bank and bank holding companies that meet certain specified criteria, including that they have the highest regulatory rating and are not experiencing significant growth or expansion. All other banks and bank holding companies will generally be required to maintain a leverage ratio of at least 100 to 200 basis points above the stated minimum. S&T's leverage ratio at December 31, 1996 was 10.28 percent, and S&T Bank's leverage ratio was 7.26 percent. Both the Federal Reserve Board's and the FDIC's risk-based capital standards explicitly identify concentrations of credit risk and the risk arising from non- traditional activities, as well as an institution's ability to manage these risks, as important factors to be taken into account by the agency in assessing an institution's overall capital adequacy. The capital guidelines also provide that an institution's exposure to a decline in the economic value of its capital due to changes in interest rates be considered by the agency as a factor in evaluating a bank's capital adequacy. The Federal Reserve Board also has recently issued additional capital guidelines for certain bank holding companies that engage in trading activities. S&T does not believe that consideration of these additional factors will affect the regulators' assessment of S&T's or S&T Bank's capital position. Payment of Dividends S&T is a legal entity separate and distinct from its banking and other subsidiaries. A major portion of the revenues of S&T result from amounts paid as dividends to S&T by S&T Bank. S&T Bank, in turn, is subject to state laws and regulations that limit the amount of dividends it can pay to S&T. In addition, both S&T and S&T Bank are subject to various general regulatory policies relating to the payment of dividends, including requirements to maintain adequate capital above regulatory minimums. The Federal Reserve Board has indicated that banking organizations should generally pay dividends only if (1) the organization's net income available to common shareholders over the past year has been sufficient to fund fully the dividends and (2) the prospective rate of earnings retention appears consistent with the organization's capital needs, asset quality and overall financial condition. S&T does not expect that any of these laws, regulations or policies will materially impact its ability or the ability of S&T Bank to pay dividends. During the year ended December 31, 1996, S&T Bank paid $10.0 million in cash dividends to S&T.
ITEM 1. BUSINESS- continued Other Safety and Soundness Regulations The federal banking agencies possess broad powers under current federal law to take prompt corrective action to resolve problems of insured depository institutions. The extent of these powers depends upon whether the institution in question is "well capitalized," "adequately capitalized," "undercapitalized," "significantly undercapitalized," or "critically undercapitalized," as defined by the law. As of December 31, 1996, S&T Bank was classified as "well capitalized." The classification of depository institutions is primarily for the purpose of applying the federal banking agencies' prompt corrective action provisions and is not intended to be, and should not be interpreted as, a representation of overall financial condition or prospects of any financial institution. The agencies' prompt corrective action powers can include, among other things, requiring an insured depository institution to adopt a capital restoration plan which cannot be approved unless guaranteed by the institution's parent company; placing limits on asset growth and restrictions on activities, including restrictions on transactions with affiliates; restricting the interest rates the institution may pay on deposits; prohibiting the payment of principal or interest on subordinated debt; prohibiting the holding company from making capital distributions without prior regulatory approval and, ultimately, appointing a receiver for the institution. Among other things, only a "well capitalized" depository institution may accept brokered deposits without prior regulatory approval. The PADB also has broad enforcement powers over S&T Bank, including the power to impose fines and other civil and criminal penalties, and to appoint a conservator or receiver. Interstate Banking and Branching The BHCA currently permits bank holding companies from any state to acquire banks and bank holding companies located in any other state, subject to certain conditions, including certain nationwide- and state- imposed concentration limits. Effective June 1, 1997, S&T Bank will have the ability, subject to certain restrictions, including state opt-out provisions, to acquire by acquisition or merger, branches of banks located outside of Pennsylvania, its home state. States may affirmatively opt-in to permit these transactions earlier, which Pennsylvania, among other states, has done. The establishment of de novo interstate branches also will be possible in those states that expressly permit it. Once a bank has established branches in a state through an interstate merger transaction, the bank may establish and acquire additional branches at any location in the state where a bank headquartered in that state could have established or acquired branches under applicable federal or state law. Competition All phases of S&T Bank's business are highly competitive. S&T Bank's market area is western Pennsylvania, with a representation in Indiana, Armstrong, Allegheny, Jefferson, Clearfield and Westmoreland counties. S&T Bank competes with those local commercial banks which have branches and customer calling programs in its market area. S&T Bank considers its major competitors to be First Commonwealth Bank headquartered in Indiana, Pennsylvania; People's Bank headquartered in Ford City, Pennsylvania; Indiana First Savings Bank headquartered in Indiana, Pennsylvania; Clearfield Bank and Trust Company, headquartered in Clearfield, Pennsylvania and Marion Center National Bank, headquartered in Marion Center, Pennsylvania. The proximity of Indiana to metropolitan Pittsburgh results in a significant impact on the S&T market because of media influence and penetration by larger financial institutions, such as Mellon Bank, National City Bank and PNC Bank.
BUSINESS--Continued Distribution of Assets, Liabilities and Shareholders' Equity; Interest Rates and Interest Differential. The following discussion and analysis is presented so that shareholders may review in further detail the financial condition and results of operations of S&T. This discussion and analysis should be read in conjunction with the consolidated financial statements, selected financial data and management's discussion and analysis incorporated by reference. References to assets and liabilities and changes thereto represent daily average balances for the periods discussed, unless otherwise noted. 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 loans to and obligations of state, municipalities and other public entities is not subject to federal income tax. As such, the stated (pre-tax) yield on these assets is lower than the yields on taxable assets of similar risk and maturity. In order to make the pre-tax income and resultant yields comparable to taxable loans and investments, 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 35% for 1996, 1995 and 1994. The following table demonstrates the amount that has been added to interest income per the summary of operations. <TABLE> <CAPTION> Year Ended December 31 1996 1995 1994 (In thousands of dollars) <S> Interest income per consolidated <C> <C> <C> statements of income $111,431 $107,017 $92,653 Adjustment to fully taxable equivalent basis 2,856 2,871 2,740 Interest income adjusted to fully taxable equivalent basis 114,287 109,888 95,393 Interest expense 51,544 49,998 39,346 Net interest income adjusted to fully taxable equivalent basis $62,743 $59,890 $56,047 </TABLE>
BUSINESS - Continued <TABLE> <CAPTION> Average Balance Sheet and Net Interest Income Analysis December 1996 1995 1994 Average Yield/ Average Yield/ Average Yield/ Balance Interest Rate Balance Interest Rate Balance Interest Rate (In thousands of dollars) <S> ASSETS Interest-earning assets: <C> <C> <C> <C> <C> <C> <C> <C> <C> Loans (1)(2) $991,105 $88,056 8.88% $949,896 $86,428 9.10% $844,222 $71,575 8.48% Taxable investment securities (2) 306,818 23,588 7.69% 273,097 20,483 7.50% 284,222 20,189 7.10% Tax-exempt investment securities (2)28,448 2,529 8.89% 31,132 2,784 8.94% 35,715 3,335 9.34% Interest-earning deposits with banks 73 5 6.85% 1,744 143 8.20% 3,267 281 8.60% Federal funds sold 2,045 109 5.33% 847 50 5.90% 295 13 4.41% Total interest-earning assets (3) 1,328,489 114,287 8.60%1,256,716 109,888 8.74%1,167,721 95,393 8.17% Noninterest-earning assets: Cash and due from banks 32,030 31,651 32,940 Premises and equipment, net 15,052 14,719 15,033 Market value appreciation of securities available for sale 30,930 21,478 18,441 Other assets 34,455 33,198 17,244 Less allowance for loan losses (16,373) (15,028) (13,914) $1,424,583 $1,342,734 $1,237,465 LIABILITIES AND SHAREHOLDERS' EQUITY Interest-bearing liabilities: Demand deposits $93,750 $1,338 1.43% $94,332 $1,503 1.59% $100,336 $1,650 1.64% Money market accounts 137,822 5,520 4.01% 112,230 4,516 4.02% 110,491 3,346 3.03% Savings deposits 123,122 2,977 2.42% 133,056 3,173 2.38% 146,284 3,452 2.36% Time deposits 528,023 29,295 5.55% 484,314 27,494 5.68% 444,521 22,793 5.13% Federal funds purchased 5,812 319 5.49% 7,851 474 6.04% 11,951 524 4.38% Securities sold under agreements to repurchase 135,199 7,006 5.18% 150,221 8,482 5.65% 148,588 6,542 4.40% Long-term borrowings 88,613 5,071 5.72% 73,154 4,326 5.91% 19,254 990 5.14% Other borrowed funds 264 18 6.82% 388 30 7.73% 753 49 6.51% Total interest-bearing 1,112,605 51,544 4.63% 1,055,546 49,998 4.74% 982,178 39,346 4.01% liabilities (3) Noninterest-bearing liabilities: Demand deposits 110,933 105,209 102,779 Other 31,946 27,023 11,001 Shareholders' equity 169,099 154,956 141,507 $1,424,583 $1,342,734 $1,237,465 Net interest income $62,743 $59,890 $56,047 Net yield on interest-earning assets 4.72% 4.77% 4.79% (1) For the purpose of these computations, nonaccruing loans are included in the daily average loan amounts outstanding. (2) Tax-exempt income is on an FTE basis, including the dividend received deduction for equity securities, using the statutory federal income tax rate of 35% for 1996, 1995, and 1994. (3) Yields are calculated using historical cost basis. </TABLE>
Item 1. BUSINESS--Continued <TABLE> <CAPTION> 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 rates: 1996 Compared to 1995 1995 Compared to 1994 Increase (Decrease) Due to (1) Increase (Decrease) Due to (1) Volume Rate Net Volume Rate Net <S> (In thousands of dollars) Interest earned on: <C> <C> <C> <C> <C> <C> Loans (2) $3,750 ($2,121) $1,628 $8,959 $5,894 $14,853 Taxable investment securities (2) 2,529 576 3,105 (790) 1,084 294 Tax-exempt investment securities (2) (240) (15) (255) (428) (123) (551) Interest-earning deposits (137) (1) (138) (131) (7) (138) Federal funds sold 71 (12) 59 24 13 37 Total interest-earning assets $5,973 ($1,573) $4,399 $7,634 $6,861 $14,495 Interest paid on: Demand deposits ($9) ($156) ($165) ($99) ($48) ($147) Money market accounts 1,030 (25) 1,004 53 1,117 1,170 Savings deposits (237) 41 (196) (312) 33 (279) Time deposits 2,481 (680) 1,801 2,040 2,661 4,701 Securities sold under agreements to repurchase (848) (628) (1,476) 72 1,868 1,940 Federal funds purchased (123) (32) (155) (180) 130 (50) Long-term borrowings 914 (169) 745 2,771 565 3,336 Other borrowed funds (10) (2) (12) (24) 5 (19) Total interest-bearing liabilities $3,198 ($1,651) $1,546 $4,321 $6,331 $10,652 Change in net interest income $2,853 $3,843 (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. (2) Tax-exempt income is on an FTE basis using the statutory federal income tax rate of 35% for 1996, 1995 and 1994. </TABLE>
Item 1. BUSINESS--Continued INFLATION AND CHANGING INTEREST RATES The majority of assets and liabilities of a financial institution are monetary in nature and therefore differ greatly from most commercial and industrial companies that have significant investments in fixed assets or inventory. Fluctuations in interest rates and the efforts of the Federal Reserve Board to regulate money and credit conditions have a greater effect on a financial institution's profitability than do the effects of higher costs for goods and services. Through its asset/liability management committee ("ALCO"), S&T is positioned to cope with changing interest rates and inflationary trends. ALCO monitors and manages interest rate sensitivity through gap, simulation and duration analysis. The schedule below presents S&T's interest rate sensitivity at December 31, 1996 using gap analysis. The gap and cumulative gap represents the net position of assets and liabilities subject to repricing in specified time periods, as measured by a ratio of rate sensitive assets to rate sensitive liabilities. ALCO policy guidelines for cumulative gap in the six and twelve month time frame, annually approved by the S&T Board of Directors, is currently a .85 to 1.15 range. Management believes this range provides an acceptable and manageable level of interest rate risk for S&T. Significant to gap analysis is the expected rate of asset prepayment, calls on securities and the behavior of depositors during periods of changing interest rates. For example, in periods of declining interest rates, borrowers can be expected to accelerate loan prepayments and refinancings; depositors will tend to hold those certificates of deposits with rates currently higher than the market. Conversely, in a rising interest rate scenario, borrower refinancings and prepayments typically decrease, while deposit shifting and early withdrawals tend to accelerate as depositors position funds to earn higher yields. ALCO continually monitors these historical behavior patterns through periods of changing interest rates, and uses this information to develop loan prepayments and decay rates for Core Deposits (demand, NOW, savings). The gap analysis below incorporates a flat rate scenario, and the following significant assumptions: <TABLE> <CAPTION> Monthly loan prepayments above contractual requirements <S> <C> 5 year ARM - Commercial Real Estate 0.50 % Fixed Rate - Commercial Real Estate 1.25 Residential Real Estate 1.00 New Indirect Auto Loans 2.00 Other Installment Loans 2.25 Deposit behavioral patterns/decay rate assumptions NOW and Savings - Year #1 25.00 % Now and Savings - Year #2 25.00 Now and Savings - beyond Year #2 50.00 Money market pricing is indexed and tiered to market interest rates NA S&T has not historically experienced fluctuations in demand deposit balances during periods of interest rate fluctuations. NA </TABLE> Swaps Reflects that portion of borrowings whose interest rate risk is reduced due to the effects of interest rate swaps.
<TABLE> <CAPTION> Interest Rate Sensitivity December 1996 (thousands of dollars) <S> <C> <C> <C> <C> GAP 1-6 Months 7-12 Months 13-24 Months >2 Years Repricing Assets: Cash/Due From Bank $0 $0 $0 $33,319 Securities 69,546 17,922 60,857 233,731 Net Loans 448,162 108,542 132,407 339,971 Other Assets 0 0 0 51,488 Total $517,708 $126,464 $193,264 $658,509 Repricing Liabilities: Demand $0 $0 $0 $115,766 NOW 12,028 12,028 24,054 48,109 Money Market 151,400 0 0 0 Savings/Clubs 14,820 14,820 29,640 59,282 Certificates 206,151 108,929 91,943 143,304 Repos & Short-term Borrowings 85,649 331 0 0 Long-term Borrowin 98,730 0 0 38,118 Swaps 2,000 2,000 0 25,000 Other Liab./Equity 0 0 0 211,843 Total $570,778 $138,108 $145,637 $641,422 GAP ($53,070) ($11,644) $47,627 $17,087 Cumulative GAP ($53,070) ($64,714) ($17,087) $0 </TABLE> <TABLE> <CAPTION> Immediate Rate Sensitive Assets/Rate Sensitive Current Policy Core Deposit Liabilities Month Guideline Repricing <S> <C> <C> <C> Cumulative 6 months 0.91 .85-1.15 0.68 Cumulative 12 months 0.91 .85-1.15 0.74 </TABLE> S&T's six month and one year gap position at December 31, 1996 is liability sensitive. This means that more liabilities than assets of S&T will reprice during the measured time frames. The implications of this liability sensitive position will differ depending upon the current trent of market interest rates. For example, in a declining interest rate environment, the cost of S&T repricing liabilities can theoretically be expected to decline more quickly than the yields on repricing assets. This situation would cause an increase to S&T interest rate spreads, net interest income and to operating income. Liquidity impacts would not be material in the short-term; in the long-term, improved operating income is always beneficial to liquidity issues. Conversely, a liability sensitive gap position in a rising interest rate scenario would theoretically have a negative impact to interest rate spreads, net income and to operating income. Liquidity impacts in this scenario, other than increase costs, would not be material unless serious ongoing declines in operating results caused depositors, lenders and investors to lose confidence. Gap analysis usefulness as a measurement of interest rate risk is limited because the time period measured is static. Simulation provides a more dynamic modeling tool for interest rate risk since this technique can incorporate future assumptions about interest rates, volume fluctuations and customer behaviors. ALCO uses simulation to measure changes in net interest income during a 3%, plus or minus, change in current market interest rates (Rate Shock Analysis). Current ALCO policy guidelines require that declines in forecasted net interest income do not exceed 3% as a result of Rate Shock Analysis. Duration techniques are a relatively new addition to S&T's interest rate risk monitoring tools. Duration modeling is primarily used to assist in match fundings for large commercial loans, security purchases and segments of the installment loan portfolios.
Item 1. BUSINESS--Continued Securities S&T invests in various securities in order to provide a source of liquidity, increase net interest income and as an ALCO tool to quickly reposition the balance sheet for interest rate risk purposes. Securities are subject to similar interest rate and credit risks as loans. In addition, by their nature, securities classified as available for sale are also subject to market value risks that could negatively affect the level of liquidity available to S&T, as well as equity. Risks associated with various securities portfolio are managed and monitored by investment policies annually approved by the S&T Board of Directors, and administered through ALCO and the Chief Investment Officer. As of December 31, 1996, management is not aware of any risk associated with securities that would be expected to have a significant, negative effect to S&T's statement of condition or statement of operations. <TABLE> <CAPTION> The following table sets forth the carrying amount of securities at the dates indicated: December 31 1996 1995 1994 <S> (In thousands of dollars) Available for Sale <C> <C> <C> Marketable equity securities $73,458 $64,223 $46,418 Obligations of U.S. government corporations and agencies 231,776 177,582 Collateralized mortgage obligations of U.S. government corporations and agencies 4,182 11,035 4,550 U.S. Treasury securities 30,928 53,198 67,936 Corporate securities 300 190 Other securities 13,136 9,115 TOTAL $353,780 $315,343 $118,904 Held to Maturity U.S. Treasury bonds and obligations of U.S. government corporations and agencies $130,456 Collateralized mortgage obligations of U.S. government corporations and agencies 14,451 Obligations of states and political subdivisions $24,239 $31,412 32,816 Corporate securities 1,998 2,493 4,038 Other securities 1,928 1,092 5,459 TOTAL $28,165 $34,997 $187,220 </TABLE>
Item 1. BUSINESS--Continued During the fourth quarter of 1995, management reclassified the securities portfolio allowed by the "one time" amnesty per Financial Accounting Standards Board Statement No. 115. The reclassified securities were from the held to maturity category to the available for sale category. The transferred securities had an amortized cost of $154.2 million and a market value of $159.5 million. The resulting net of tax effect of the reclassification to S&T's equity was $3.4 million. 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 35% federal income tax rate) for 1996 have been made in calculating yields on obligations of state and political subdivisions. <TABLE> <CAPTION> Maturing Within After One But After Five But After No Fixed One Year Within Five Years Within Ten Years Ten Years Maturity Amount Yield Amount Yield Amount Yield Amount Yield Amount <S> (In thousands of dollars) Available for Sale <C> <C> <C> <C> <C> <C> <C> <C> <C> Marketable equity securities $73,458 Obligations of U.S. government corporations and agencies $65,678 7.55% $166,098 7.42% Collateralized mortgage obligations of U.S. government corporations and agencies 2,517 9.09% 754 7.03% $911 8.54% U.S. Treasury securities $15,080 6.61% 9,432 7.61% 6,416 7.81% Corporate securities 100 8.10% 200 7.35% Other securities 13,136 TOTAL $15,080 $77,727 $173,468 $911 $86,594 Weighted Average Rate 6.61% 7.61% 7.43% 8.54% Held to Maturity Obligations of states and political subdivisions $1,400 10.10% $8,643 8.81% $9,874 8.69% $4,322 8.66% Corporate securities 1,998 9.90% Other securities $1,928 TOTAL $1,400 $10,641 $9,874 $4,322 $1,928 Weighted Average Rate 10.10% 9.01% 8.69% 8.66% </TABLE>
Item 1. BUSINESS-- Continued Loan Portfolio <TABLE> <CAPTION> The following table shows S&T's loan distribution at the end of each of the last five years: December 31 1996 1995 1994 1993 1992 (In thousands of dollars) <S> <C> <C> <C> <C> <C> Domestic Loans: Commercial, financial and agricultural $237,882 $234,779 $197,028 $178,723 $175,475 Real estate-construction 24,984 23,712 32,714 23,705 9,400 Real estate-mortgage 638,282 569,143 543,894 457,462 374,055 Installment 144,980 149,185 150,772 136,819 133,124 TOTAL LOANS $1,046,128 $976,819 $924,408 $796,709 $692,054 </TABLE> <TABLE> <CAPTION> The following table shows the maturity of loans (excluding residential mortgages of 1-4 family residences and installment 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. Maturing Within After One But After One Year Within Five Years Five Year Total (In thousands of dollars) <S> <C> <C> <C> <C> Commercial, financial and agricultural $155,392 $64,990 $17,500 $237,882 Real estate-construction 8,826 4,580 11,578 24,984 Real estate-mortgage 41,673 76,188 110,821 228,682 TOTAL $205,891 $145,758 $139,899 $491,548 Fixed interest rates $46,608 $36,351 Variable interest rates 99,150 103,548 TOTAL $145,758 $139,899 </TABLE>
Item 1. BUSINESS--Continued Nonaccrual, Past Due and Restructured Loans <TABLE> <CAPTION> The following table summarizes S&T's nonaccrual, past due and restructured loans: December 31 1996 1995 1994 1993 1992 (In thousands of dollars) <S> <C> <C> <C> <C> <C> Nonaccrual loans $8,280 $2,844 $1,922 $2,481 $2,983 Accruing loans past due 90 days or more $0 $0 $0 $323 $605 </TABLE> At December 31, 1996, $8,280,000 of nonaccrual loans were secured. Interest income that would have been recorded under original terms totaled $399,000. No interest income was recorded on these loans. It is S&T's policy to place loans on nonaccrual status when the interest and principal is 90 days or more past due. The accrual of interest on impaired loans is discontinued when, in management's opinion, the borrower may be unable to meet payments as they become due. At December 31, 1996, $6,000,000 of impaired loans were on nonaccrual. There are no foreign loan amounts required to be included in this table. There were no restructured loans in the periods presented.
Item 1. BUSINESS-Continued Summary of Loan Loss Experience Management evaluates the degree of loss exposure for loans on a continuous basis through a formal loan policy as administered by the Loan Administration Department and various management and director committees. Problem loans are identified and continually monitored through detailed reviews of specific large dollar loans, and the analysis of delinquency and charge-off levels of consumer loan portfolios. Quarterly updates are presented to the S&T Board of Directors as to the status of loan quality. Charged-off and recovered loan amounts are applied to the allowance for loan losses. Additional amounts are added through a charge to current earnings through the provision for loan losses, based upon management's assessment about the adequacy of the allowance for loan losses for probable loan losses. In addition to the identification and monitoring of problem loans, management also assesses other subjective factors such as economic conditions and business trends, concentrations, growth and composition of the loan portfolio and effectiveness of the Loan Administration Department. This assessment results in an allowance for loan losses consisting of two components, allocated and unallocated. The allocated component of the allowance for loan losses reflects expected losses resulting from the analysis of individual loans developed through specific ratings and allocations, and historical loss experience for categories of loans. The specific allocations are based upon regular analysis of loans and commitments over a fixed dollar amount and the internal credit rating for the loan or commitment. Categories of smaller individual loans are allocated based upon historical losses and current delinquency levels. The unallocated component is primarily subjective based upon management's assessment of nonquantifiable factors that make historical trend analyses difficult: Loan concentration in western Pennsylvania. Significant commercial loan volume increases in the last three years in new markets with new customers. The introduction of several new consumer products. Increased commercial real estate lending. Recent increases in charged-off, nonperforming and delinquent loans. Peer analysis. The provision for loan losses in each of the years presented below considered management's assessment of the factors noted above along with the growth in the loan portfolio. The additions to the allowance charged to operating expense has maintained the allowance as a percent of loans at the following levels at the end of each year presented. Year Ended December 31 1996 1995 1994 1993 1992 1.63% 1.63% 1.55% 1.69% 1.74% The Company has considered impaired loans in its determination of the allowance for loan losses. The allowance for loan losses for all impaired loans totaled $2,600,000 and $1,800,000 at December 31, 1996 and 1995, respectively, and is included in the allowance allocated specifically to commercial loans. Based on the evaluation of loan quality and assessment of risk characteristics, management believes that the allowance for loan losses is adequate to absorb probable loan losses. <TABLE> <CAPTION> This table summarizes S&T's loan loss experience for each of the five years ended December 31: Year Ended December 31 1996 1995 1994 1993 1992 (In thousands of dollars) <S> <C> <C> <C> <C> <C> Balance at January 1: $15,938 $14,331 $13,480 $12,029 $9,321 Charge-offs: Commercial, financial and 1,480 1,054 2,287 1,185 1,469 agricultural Real estate-mortgage 1,788 325 239 644 553 Installment 1,920 1,510 1,201 835 1,349 5,188 2,889 3,727 2,664 3,371 Recoveries: Commercial, financial and agricultural 1,409 288 505 241 51 Real estate-mortgage 277 104 156 171 19 Installment 307 304 417 103 231 1,993 696 1,078 515 301 Net charge-offs 3,195 2,193 2,649 2,149 3,070 Provision for loan losses 4,300 3,800 3,500 3,600 5,778 Balance at December 31: $17,043 $15,938 $14,331 $13,480 $12,029 Ratio of net charge-offs to average loans outstanding 0.32% 0.23% 0.31% 0.29% 0.48% </TABLE>
Item 1. BUSINESS--Continued <TABLE> <CAPTION> This table shows allocation of the allowance for loan losses as of the end of each of the last five years: 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 Amount Total Loans Amount Total Loans Amount Total Loans Amount Total Loans Amount Total Loans (In thousands of dollars) <S> Commercial, financial <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> and agricultural $9,383 23% $8,335 24% $9,376 21% $9,304 23% $7,249 25% Real estate-construction 0 2% 0 3% 0 4% 0 3% 0 1% Real estate-mortgage 708 61% 701 58% 732 59% 678 57% 606 54% Installment 1,761 14% 1,627 15% 1,381 16% 1,193 17% 1,125 19% Unallocated 5,191 0% 5,275 0% 2,842 0% 2,305 0% 3,049 1% TOTAL $17,043 100% $15,938 100% $14,331 100% $13,480 100% $12,029 100% </TABLE> In 1995, S&T adopted Financial Accounting Standards Board Statement No. 114, "Accounting by Creditors for Impairment of a Loan", (Statement No. 114 as amended by Financial Accounting Standards Board Statement No. 118, "Accounting by Creditors for Impairment of a Loan - Income Recognition and Disclosures (Statement No. 118)). The adoption of these accounting pronouncements did not have a material impact on the comparability for the table of loan loss experience or the table for allocation of the allowance for loan losses presented above. Deposits <TABLE> <CAPTION> The daily average amount of deposits and rates paid on such deposits is summarized for the periods indicated in the following table: Year Ended December 31 1996 1995 1994 Amount Rate Amount Rate Amount Rate (In thousands of dollars) <S> <C> <C> <C> <C> <C> <C> Noninterest-bearing demand deposits $110,933 $105,209 $102,779 Interest-bearing demand deposits 93,750 1.43% 94,332 1.59% 100,336 1.64% Money market accounts 137,821 4.01% 112,230 4.02% 110,491 3.03% Savings deposits 123,122 2.42% 133,056 2.38% 146,284 2.36% Time deposits 528,023 5.55% 484,314 5.68% 444,521 5.13% TOTAL $993,649 4.44% $929,141 4.45% $904,411 3.90% </TABLE> <TABLE> <CAPTION> Maturities of time certificates of deposit of $100,000 or more outstanding at December 31, 1996, are summarized as follows: (In thousands of dollars) <S> <C> 3 Months or less $47,696 Over 3 through 6 months 11,059 Over 6 through 12 months 10,345 Over 12 months 19,947 TOTAL $89,047 </TABLE> Return on Equity and Assets <TABLE> <CAPTION> The table below shows consolidated operating and capital ratios of S&T for each of the last three years: Year Ended December 31 1996 1995 1994 <S> <C> <C> <C> Return on average assets 1.63% 1.54% 1.49% Return on average equity 13.75% 13.21% 13.03% Dividend payout ratio 42.90% 38.43% 34.85% Equity to asset ratio 11.78% 11.92% 10.94% </TABLE>
Short-Term Borrowings <TABLE> <CAPTION> The following table shows the distribution of the Company's short-term borrowings and the weighted average interest rates thereon at the end of each of the last three years. Also provided are the maximum amount of borrowings and the average amounts of borrowings as well as weighted average interest rates for the last three years. Federal Funds Purchased and Securities Sold Under Agreements to Repurchase (In thousands of dollars) <S> <C> Balance at December 31: 1996 $114,980 1995 123,119 1994 189,461 Weighted average interest rate at year end: 1996 5.68% 1995 5.57% 1994 5.58% Maximum amount outstanding at any month's end: 1996 $180,776 1995 195,811 1994 219,614 Average amount outstanding during the year: 1996 $141,012 1995 158,072 1994 160,539 Weighted average interest rate during the year: 1996 5.24% 1995 5.79% 1994 4.25% </TABLE> S&T defines repurchase agreements with its retail customers as retail REPOs; wholesale REPOs are those transacted with other banks and brokerage firms with terms normally ranging from 1 to 14 days.
Item 2.PROPERTIES The Company operates thirty-five banking offices in Indiana, Armstrong, Allegheny, Jefferson, Clearfield, Westmoreland and surrounding counties in Pennsylvania. The Company owns land and banking offices at the following locations: 800 Philadelphia Street, 645 Philadelphia Street and 2175 Route 286, South in Indiana; Route 119 S. & Lucerne Road and 34 North Main Street in Homer City; 539 West Mahoning Street, 100 West Mahoning Street and 232 North Hampton Avenue in Punxsutawney; 133 Philadelphia Street in Armagh; Route 119 South in Black Lick; 256 Main Street and Route 36 & I-80 in Brookville; 456 Main Street in Brookway; Route 28 & Carrier Street in Summerville; 602 Salt Street in Saltsburg; 12-14 West Long Avenue, 35 West Scribner Avenue, Treasure Lake and 614 Liberty Boulevard in DuBois; 418 Main Street in Reynoldsville; 205 East Market Street in Blairsville; 85 Greensburg Street in Delmont; 100 Chestnut Street in Derry; Second Avenue and Hicks Street in Leechburg; 109 Grant Avenue in Vandergrift; 100 South Fourth Street in Youngwood; and 701 East Pittsburgh Street in Greensburg. Land is leased where the Company owns the banking office at 1107 Wayne Avenue and remote ATM building at 435 South Seventh Street and 1176 Grant Street, all in Indiana. In addition, the Company leases land and banking offices at the following locations: Chestnut Ridge Plaza in Blairsville; 324 North Fourth Street and 2850 Route 286 South in Indiana; the Mall Office in DuBois, 229 Westmoreland Mall; 2320 Route 286 in Holiday Park; Route 268 Hilltop Plaza in Kittanning and a remote ATM location at the Main Street Mall in DuBois. Item 3.LEGAL PROCEEDINGS The nature of the Company's business gnerates a certain amount of litigation involving matters arising in the ordinary course of business. However, in the opinion of management, there are no proceedings pending to which the Company is a party or to which its property is subject, which, if determined adverse, would be material in relation to its shareholders' equity or financial condition. In addition, no material proceedings are pending nor are known to be threatened or contemplated against the Company by governmental authorities or other parties. Item 4.SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS There were no matters during the fourth quarter of the fiscal year covered by this report that were submitted to a vote of the security holders through solicitation of proxies of otherwise. PART II Item 5.MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED SHAREHOLDER MATTERS Stock Prices and Dividend Information on page 44 and Dividend and Loan Restrictions on page 35 of the Annual Report for the year ended December 31, 1996, are incorporated herein by reference. Item 6.SELECTED FINANCIAL DATA Selected Financial Data on page 44 and 45 of the Annual Report for the year ended December 31, 1996, is incorporated herein by reference.
Item 7.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Management's Discussion and Analysis of Financial Condition and Results of Operations on pages 46 through 58 of the Annual Report for the year ended December 31, 1996, is incorporated herein by reference. Item 8.FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The Consolidated Financial Statements, Report of Independent Auditors and Quarterly Selected Financial Data on pages 22 through 43 and 45 of the Annual Report for the year ended December 31, 1996, are incorporated herein by reference. Item 9.CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES There have been no changes in accountants or disagreements with accountants on accounting and financial disclosures. PART III Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT Election of Directors on pages 4 through 5 of the proxy statement for the April 21, 1997 annual meeting of shareholders are incorporated herein by reference. Executive Officers Number of Shares For the Officer Beneficially Name Corporation Since Owned * Age Robert D. Duggan Chairman, 1983 97,420 64 President, Chief Executive Officer and Director James C. Miller Executive Vice 1983 64,170 51 President and Director James G. Barone Secretary 1992 30,871 49 and Treasurer Robert E. Rout Chief Financial 1993 20,588 44 Officer Bruce W. Salome Vice 1991 30,650 50 President Edward C. Hauck Vice 1991 16,758 44 President
Executive Officers (continued) Number of Shares For the Officer Beneficially Name Corporation Since Owned * Age David L. Krieger Vice 1984 33,089 53 President Edward A. Onderick Vice 1989 21,742 52 President J. Jeffrey Smead Vice 1992 23,410 45 President, Formerly Executive Vice President of First National Bank of Pennsylvania William H. Klumpp Vice 1994 16,067 53 President, Formerly Senior Vice President of Huntington National Bank *Includes vested stock options
Item 11. EXECUTIVE COMPENSATION Remuneration of Executive Officers on pages 7 through 9 of the proxy statement for the April 21, 1997, annual meeting of shareholders is incorporated herein by reference. Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Principal Beneficial Owners of Common Stock on page 3 of the proxy statement for the April 21, 1997, annual meeting of shareholders is incorporated herein by reference. Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Transactions with Management and Others on pages 11 and 12 of the proxy statement for April 21, 1997, annual meeting with shareholders is incorporated herein by reference. PART IV Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) List of financial statements and financial statement schedules (1) The following Consolidated Financial Statements and Report of Independent Auditors of S&T Bancorp, Inc. and subsidiaries included in the annual report of the registrant to its shareholders for the year ended December 31, 1996, are incorporated by reference in Part II, Item 8: <TABLE> Page Reference <S> <C> Report of Ernst & Young LLP, Independent Auditors 43 Consolidated Balance Sheets December 31, 1996 and 1995 22 Consolidated Statements of Income Years ended December 31, 1996, 1995 and 1994 23 Consolidated Statements of Changes in Shareholders' Equity Years ended December 31, 1996, 1995 and 1994 24 Consolidated Statements of Cash Flows Years ended December 31, 1996, 1995 and 1994 25 Notes to Consolidated Financial Statements December 31, 1996 26-42 Quarterly Selected Financial Data 45 </TABLE>
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (Continued) (2) Schedules to the consolidated financial statements required by Article 9 of Regulation S-X are not required under the related instructions or are inapplicable, and therefore have not been omitted. (3) Listings of Exhibits - See Item 14 (c) below (b) Reports on Form 8-K Form 8-K dated November 25, 1996 was filed as S&T Bancorp, Inc. (S&T) signed a definitive agreement in which Peoples Bank of Unity will be merged into S&T's subsidiary, S&T Bank. Subject to regulatory approvals and approval of the shareholders of both companies, the transaction is expected to close in the second quarter of 1997. (c) Exhibits (3.1) Articles of Incorporation of S&T Bancorp, Inc. filed as Exhibit B to Registration Statement (No. 2-83565) on Form S-4 of S&T Bancorp, Inc. and incorporated herein by reference. (3.2) Amendment to Articles of Incorporation of S&T Bancorp, Inc. filed as Exhibit 3.2 to Form S-4 Registration Statement dated January 15, 1986 and incorporated herein by reference. (3.3) By-laws of S&T Bancorp, Inc., as amended, filed as Exhibit 3.3 to Form S-4 Registration Statement dated January 15, 1986 and incorporated herein by reference. (10.1) Deferred compensation arrangement with former director filed as Exhibit 10.1 to Form 10-K dated December 31, 1983 and incorporated herein by reference. (10.3) Employment Agreement dated December 9, 1985 between S&T Bancorp, Inc. and Waid H. Nevins filed as Exhibit 10.1 to Form S-4 Registration Statement dated January 15, 1986 and incorporated herein by reference. (10.5) Sixth amendment to the Thrift Plan for Employees of S & T Bank to be effective December 31, 1988, approved by the Board of Directors at the November 21, 1988 meeting and incorporated herein by reference. (13) Annual Report for the year ended December 31, 1996 - incorporated herein by reference. (22) Subsidiaries of the Registrant - filed herewith S&T Bank, a bank incorporated under the laws of Pennsylvania. S&T Investment Company, Inc., an investment holding company incorporated under the laws of Delaware. (23.1) Consent of Ernst & Young LLP, Independent Auditors - filed herewith. (d) Financial Statement Schedules None
SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. S&T BANCORP, INC. (Registrant) /s/ Robert Duggan 03/17/97 Robert D. Duggan, Chairman, Date President and Chief Executive Officer (Principal Executive Officer) /s/ James C. Miller 03/17/97 James C. Miller, Executive Vice President Date (Executive Officer) /s/ Robert E. Rout 03/17/97 Robert E. Rout, Chief Financial Officer Date (Principal Financial and Accounting Officer)
SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. 03/17/97 /s/ Paul B. Johnston 03/17/97 Thomas A. Brice, Director Date Paul B.Johnston, Director Date /s/ Forrest L. Brubaker 03/17/97 /s/ Joseph A. Kirk 03/17/97 Forrest L. Brubaker, Director Date Joseph A. Kirk, Director Date /s/ James L. Carino 03/17/97 03/17/97 James L. Carino, Director Date Samuel Levy, Director Date /s/ John J. Delaney 03/17/97 /s/ James C. Miller 03/17/97 John J. Delaney, Director Date James C. Miller, Date Executive Vice President /s/ Robert D. Duggan 03/17/97 03/17/97 Robert D. Duggan, Chairman, Date W. Parker Ruddock, Date President, Chief Executive Director Officer and Director /s/ Thomas W. Garges, Jr. 03/17/97 /s/ Charles A. Spadafora 03/17/97 Thomas W. Garges, Jr., Date Charles A. Spadafora, Date Director Director /s/ William J. Gatti 03/17/97 /s/ Christine J. Torretti 03/17/97 William J. Gatti, Director Date Christine J. Torretti, Date Director 03/17/97 /s/ Harold W. Widdowson, 03/17/97 Herbert L. Hanna, Director Date Harold W. Widdowson, Director Date