SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549FORM 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, 2001
Commission file number 1-12508
S&T BANCORP, INC.
(Exact name of registrant as specified in its charter)
Pennsylvania
25-1434426
(State or other jurisdiction of incorporation of organization)
(IRS Employer Identification No.)
43 South Ninth Street, Indiana, PA
15701
(Address of principal executive offices)
(Zip Code)
Registrant's telephone number, including area code
(800) 325-2265
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 20, 2002:Common Stock, $2.50 par value - $593,200,450
The number of shares outstanding of the issuer's classes of common stock as of February 20, 2002:Common Stock, $2.50 par value - 26,491,479 shares
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the annual shareholders report for the year ended December 31, 2001 are incorporated by reference into Part II.
Portions of the proxy statement for the annual shareholders meeting to be held April 15, 2002 are incorporated by reference into Part III.
PART IItem 1. BUSINESSGeneral 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 three wholly owned subsidiaries, S&T Bank, S&T Investment Company, Inc. and S&T Insurance Company, LLC. S&T is registered as a financial holding company with the Board of Governors of the Federal Reserve System under the Bank Holding Company Act, as amended. As of December 31, 2001, S&T had $2.4 billion in total assets, $293 million in total shareholder's equity and $1.6 billion in total deposits. The Federal Deposit Insurance Corporation ("FDIC") insures deposits fully provided by law. Total trust assets were approximately $624 million at December 31, 2001. 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 40 offices located in Armstrong, Allegheny, Indiana, Jefferson, Clarion, Clearfield and Westmoreland counties. S&T Bank 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, 2001, S&T Bank had 688 full-time equivalent employees. S&T provides a variety of employment benefits and considers its relationship with its employees to be good.Supervision and RegulationGeneral 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 or regulatory provisions or proposals.S&T As a financial 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 financial holding company to that of banking, managing or controlling banks, or any other activities that are financial in nature or incidental to a financial activity. S&T is presently engaged in three nonbanking activities: S&T Investment Company, Inc., which is an investment holding company, and Commonwealth Trust Credit Life Insurance Company ("CTCLIC") and S&T Insurance Group, Item 1. BUSINESS - ContinuedLLC. 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. S&T Insurance Group, LLC distributes high-quality life insurance and long-term disability income insurance products. There are a number of obligations and restrictions imposed on financial 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 to bank holding company operations, a bank holding company is required to serve as a source of financial strength to its subsidiary depository institutions 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 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 its parent company or any nonbank affiliate generally are limited to 10% of the bank subsidiary's capital and surplus or 20% 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.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 I 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 II capital") and, together with Tier I capital, ("Total capital"). At December 31, 2001, S&T's Tier I and Total capital ratios were 12.69 percent and 14.89 percent, respectively, and the rat ios of Tier I capital and Total capital to total risk-adjusted assets for S&T Bank were 9.33 percent and 10.58 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 I capital to adjusted average quarterly assets equal to four percent for bank and bank holding companies that meet certain
Item 1. BUSINESS - Continuedspecified 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, 2001 was 10.98 percent, and S&T Bank's leverage ratio was 8.07 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 influence its ability or the ability of S&T Bank to pay dividends. During the year ended December 31, 2001, S&T Bank paid $24.2 million in cash dividends to S&T.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, 2001, 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 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. Pennsylvania Department of Banking 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.
Item 1. BUSINESS - ContinuedInterstate 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 nation-wide and state-imposed concentration limits. S&T Bank has 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. The establishment of de novo interstate branches is also possible in those states where expressly permitted. 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, Clarion, Clearfield and Westmoreland counties. S&T Bank competes with local national and state banks, thrift institutions, brokerage firms, mortgage banks, finance companies and insurance companies within its market area. 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, PNC Bank and Citizens Bank.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 from the S&T Bancorp, Inc. 2001 annual report. 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 2001, 2000 and 1999. The following table demonstrates the amount that has been added to interest income per the summary of operations.
Year Ended December 31
2001
2000
1999
(in thousands of dollars)
Interest income per consolidated statements of income
$166,702
$176,184
$156,727
Adjustment to fully taxable equivalent basis
2,938
3,105
3,098
Interest income adjusted to fully taxable equivalent basis
169,640
179,289
159,825
Interest expense
76,713
86,141
69,942
Net interest income adjusted to fully taxable equivalent basis
$92,927
$93,148
$89,883
Item 1. BUSINESS - ContinuedAverage Balance Sheet and Net Interest Income Analysis
December 31
AverageBalance
Interest
Yield/Rate
ASSETS
Loans (1)(2)
$1,639,946
$135,670
8.27%
$1,548,945
$138,860
8.96%
$1,421,906
$121,424
8.54%
Taxable investment securities
489,654
31,876
6.51%
535,135
37,895
7.08%
525,848
36,404
6.92%
Tax-exempt investment securities(2)
10,625
873
8.22%
13,690
1,186
8.66%
17,045
1,449
8.50%
Interest-earning deposits with banks
87
6
6.90%
109
9
8.26%
71
4
5.63%
Federal funds sold
27,912
1,215
4.35%
21,332
1,339
6.28%
10,880
544
5.00%
Total interest-earning assets (3)
2,168,224
7.82%
2,119,211
8.46%
1,975,750
8.09%
Noninterest-earning assets:
Cash and due from banks
37,031
36,171
40,121
Premises and equipment, net
20,821
20,522
20,976
Market value appreciation of securities available for sale
54,388
26,600
45,573
Other assets
80,095
79,017
65,559
Less allowance for loan losses
(28,286)
(29,184)
(27,743)
$2,332,273
$2,252,337
$2,120,236
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
NOW/Money market accounts
$446,701
$10,667
2.39%
$419,214
$15,647
3.73%
$393,929
$11,808
3.00%
Savings deposits
146,735
2,283
1.56%
154,226
3,390
2.20%
167,414
3,546
2.12%
Time deposits
748,630
40,226
5.37%
679,684
37,430
5.51%
626,166
31,924
5.10%
Federal funds purchased
7,481
187
2.49%
2,142
139
6.49%
4,465
229
5.13%
Securities sold under agreements to repurchase
72,284
2,268
3.14%
102,379
5,863
5.73%
138,387
6,519
4.71%
Long-term borrowings
333,636
21,082
6.32%
377,352
23,672
6.27%
286,975
15,916
5.55%
Total interest-bearing liabilities (3)
1,755,467
4.37%
1,734,997
4.96%
1,617,336
4.32%
Noninterest-bearing liabilities:
Demand deposits
234,519
223,045
210,095
Other
50,214
40,264
41,815
Shareholders' equity
292,073
254,031
250,990
Net interest income
Net yield on interest-earning assets
4.29%
4.40%
4.55%
Item 1. BUSINESS - ContinuedThe 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:
2001 Compared to 2000Increase (Decrease) Due to (1)
2000 Compared to 1999Increase (Decrease) Due to (1)
Volume
Rate
Net
Interest earned on:
Loans (2)
$8,154
$(11,344)
$(3,190)
$10,849
$6,587
$17,436
(3,220)
(2,799)
(6,019)
643
848
1,491
Tax-exempt investment securities (2)
(265)
(48)
(313)
(285)
22
(263)
Interest-earning deposits
(2)
(1)
(3)
2
3
5
413
(537)
(124)
523
272
795
Total interest-earning assets
$5,080
$(14,729)
$(9,649)
$11,732
$7,732
$19,464
Interest paid on:
$1,025
$(6,005)
$(4,980)
$758
$3,081
$3,839
(165)
(942)
(1,107)
(279)
123
(156)
3,799
(1,002)
2,796
2,729
2,777
5,506
(1,724)
(1,871)
(3,595)
(1,696)
1,040
(656)
346
(299)
47
(119)
29
(90)
(2,741)
152
(2,589)
5,012
2,744
7,756
Total interest-bearing liabilities
$540
$(9,967)
$(9,428)
$6,405
$9,794
$16,199
Change in net interest income
$4,540
$(4,762)
$(221)
$5,327
$(2,062)
$3,265
(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 a fully taxable equivalent basis using the statutory federal income tax rate of 35% for 2001, 2000 and 1999.
Item 1. BUSINESS - Continued 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:
Monthly loan prepayments above contractual requirements
5 year ARM - Commercial Real Estate
1.50%
Fixed Rate - Commercial Real Estate
1.25%
Residential Real Estate
Other Installment Loans
2.25%
Deposit behavioral pattern/decay rate assumption
NOW and Savings - Year #1
25.00%
NOW and Savings - Year #2
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.
Interest Rate SensitivityDecember 31, 2001
GAP
1-6 Months
7-12 Months
13-24 Months
>2 Years
Repricing Assets:
Cash/Due From Banks
$-
$52,833
Securities
51,292
64,397
90,735
378,841
Net Loans
711,892
147,130
235,077
521,745
Other Assets
-
103,932
Total
$763,184
$211,527
$325,812
$1,057,351
Repricing Liabilities:
Demand
$257,694
NOW
16,108
32,216
64,431
Money Market
328,333
Savings/Clubs
18,460
36,918
73,839
Certificates
289,015
188,709
129,062
141,967
Repos & Short-term Borrowings
152,282
Long-term Borrowings
64,563
61,000
125,693
Swaps
25,000
(25,000)
Other Liabilities/Equity
343,016
$829,198
$287,840
$259,196
$981,640
Gap
$(66,014)
$(76,313)
$66,616
$75,711
Cumulative GAP
$(142,327)
$(75,711)
Rate Sensitive Assets/Rate Sensitive Liabilities
CurrentMonth
PolicyGuideline
ImmediateCore DepositRepricing
Cumulative 6 months
0.92
.85-1.15
0.71
Cumulative 12 months
0.87
0.74
Item 1. BUSINESS - Continued S&T's one-year gap position at December 31, 2001 is liability sensitive. Liability sensitive means that more liabilities than assets of S&T will reprice during the measured timeframes. The implications of a liability sensitive position will differ depending upon the current trend of market interest rates. For example, with a liability sensitive position 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 S&T repricing assets. This situation would cause an increase to S&T's 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 increased 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 2%, plus or minus, change in current market interest rates (Rate Shock Analysis). Current ALCO policy guidelines require that declines in forecasted net interest income does not exceed 3% because 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.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 risk 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 portfolios 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, 2001, 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.
Item 1. BUSINESS - Continued The following table sets forth the carrying amount of securities at the dates indicated:
Available for Sale
Marketable equity securities
$112,312
$114,317
$97,729
Obligations of U.S. government corporations and agencies
188,111
334,797
335,941
Collateralized mortgage obligations of U.S. government corporations and agencies
151,794
- -
Mortgage-backed securities
24,924
5,563
6,170
U.S. treasury securities
6,113
11,201
14,126
Obligations of states and political subdivisions
12,519
Corporate securities
66,075
64,237
64,526
Other securities
16,602
37,285
39,502
TOTAL
$578,450
$567,400
$557,994
Held to Maturity
$6,815
$11,512
$15,231
2,000
1,999
$13,512
$17,230
The following table sets forth the maturities of securities at December 31, 2001, 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 2001 have been made in calculating yields on obligations of state and political subdivisions.
Maturing
WithinOne Year
After One But Within Five Years
After Five But Within Ten Years
AfterTen Years
No FixedMaturity
Amount
Yield
$10,272
7.17%
$177,839
5.69%
142,220
5.02%
$9,575
4.99%
7,701
4.60%
4,818
4.78%
24,923
5.74%
7.81%
18,268
5.87%
47,807
6.60%
$28,540
$406,603
$14,393
$128,914
Weighted Average Rate
6.34%
5.58%
4.92%
$3,634
8.73%
3,181
8.79%
$3,181
Item 1. BUSINESS - ContinuedLoan Portfolio The following table shows S&T's loan distribution at the end of each of the last five years:
1998
1997
Domestic Loans:
Commercial, mortgage and industrial
$1,016,113
$936,313
$830,847
$672,742
$582,401
Real estate - construction
115,825
113,856
94,786
87,246
47,967
Real estate - mortgage
430,261
465,779
466,881
492,570
512,417
Installment
80,569
89,076
103,763
113,351
130,968
TOTAL LOANS
$1,642,768
$1,605,024
$1,496,277
$1,365,909
$1,273,753
After One ButWithin Five Years
AfterFive Years
$382,895
$320,474
$312,744
25,639
43,700
46,486
$408,534
$364,174
$359,230
$1,131,938
Fixed interest rates
$106,045
$68,877
Variable interest rates
258,129
290,353
Item 1. BUSINESS - ContinuedNonaccrual, Past Due and Restructured Loans The following table summarizes S&T's nonaccrual, past due and restructured loans:
Nonaccrual loans
$8,253
$2,897
$2,987
$2,933
$3,602
Accruing loans past due 90 days or more
Item 1. BUSINESS - Continued Beginning in 2001, generally all of the allowance was allocated to the various loan types. An insignificant amount of unallocated allowance exists at year-end and reflects the inherent imprecision in loan loss migration models. Management anticipates that future unallocated portions of the allowance will remain insignificant. Management believes its quantitative analysis and risk-rating process is sufficient and enables it to conclude that the total allowance for loan losses is adequate to absorb probable loan losses. The allowance for loan losses 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 below.
1.64%
1.71%
1.81%
1.95%
1.60%
Balance at January 1:
$27,395
$27,134
$26,677
$20,427
$18,729
Charge-offs:
4,728
6,327
4,270
2,905
1,654
912
864
913
1,497
1,056
1,299
1,809
1,819
1,597
1,771
6,939
9,000
7,002
5,999
4,481
Recoveries:
4,450
2,483
713
517
404
394
495
389
221
423
417
481
597
441
1,470
5,261
3,459
1,699
1,179
Net charge-offs
5,469
3,739
3,543
4,300
3,302
Provision for loan losses
5,000
4,000
10,550
Balance at December 31:
$26,926
Ratio of net charge-offs to average loans outstanding
0.33%
0.24%
0.25%
0.27%
Item 1. BUSINESS - Continued
T
Percent of Loans in Each Category to Total Loans
Commercial, mortgageand industrial
$22,954
62%
$18,835
58%
$20,147
56%
$16,850
49%
13,556
46%
Real estate-construction
0
7%
6%
4%
Real estate-mortgage
744
26%
845
29%
868
31%
1,096
36%
763
40%
3,124
5%
2,766
2,541
2,635
8%
1,865
10%
Unallocated
104
0%
4,949
3,578
6,096
4,243
100%
Deposits The daily average amount of deposits and rates paid on such deposits is summarized for the periods indicated in the following table:
Noninterest-bearing demand deposits
$234,519
$223,045
$210,095
446,701
419,214
393,929
$1,576,585
$1,476,169
$1,397,604
Item 1. BUSINESS - Continued Maturities of time certificates of deposit of $100,000 or more outstanding at December 31, 2001, are summarized as follows:
Three months or less
$48,923
Over three through six months
15,060
Over six through twelve months
16,324
Over twelve months
36,216
$116,523
Return on Equity and Assets The table below shows consolidated operating and capital ratios of S&T for each of the last three years:
Return on average assets
2.03%
2.00%
Return on average equity
16.19%
17.70%
16.50%
Dividend payout ratio
51.18%
49.22%
48.65%
Equity to asset ratio
12.44%
11.99%
10.92%
Item 1. BUSINESS - ContinuedShort-Term Borrowings The following table shows the distribution of S&T'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
$99,837
$80,686
$116,009
Weighted average interest rate at year end:
5.89%
5.06%
Maximum amount outstanding at any month's end:
$160,103
$168,244
$212,361
Average amount outstanding during the year:
$79,766
$104,521
$142,852
Weighted average interest rate during the year:
3.08%
5.75%
4.72%
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 S&T operates 40 banking offices in Indiana, Armstrong, Allegheny, Jefferson, Clearfield, Clarion, Westmoreland and surrounding counties in Pennsylvania. S&T owns land and banking offices at the following locations.
800 Philadelphia StreetIndiana, PA 15701
256 Main StreetBrookville, PA 15825
205 East Market StreetBlairsville, PA 15717
2175 Route 286 SouthIndiana, PA 15701
Route 36 & Interstate 80Brookville, PA 15825
85 Greensburg StreetGreensburg, PA 15601
Route 119 & Lucerne RoadLucernmines, PA 15754
456 Main StreetBrockway, PA 15824
100 South Chestnut StreetDerry, PA 15627
34 North Main StreetHomer City, PA 15748
602 Salt StreetSaltsburg, PA 15681
109 Grant AvenueVandergrift, PA 15690
232 Hampton AvenuePunxsutawney, PA 15767
35 West Scribner AvenueDuBois, PA 15801
100 South Fourth StreetYoungwood, PA 15697
133 Philadelphia StreetArmagh, PA 15920
614 Liberty BoulevardDuBois, PA 15801
701 East Pittsburgh StreetGreensburg, PA 15601
Route 119Blacklick, PA 15716
418 Main StreetReynoldsville, PA 15851
2190 Hulton RoadVerona, PA 15147
4385 Old Wm. Penn HighwayMonroeville, PA 15146
7660 Saltsburg RoadPittsburgh, PA 15239
12262 Frankstown RoadPittsburgh, PA 15235
410 Main StreetClarion, PA 16214
301 Unity Center RoadPittsburgh, PA 15239
4251 Old Wm. Penn HighwayMurrysville, PA 15668
1107 Wayne AvenueIndiana, PA 15701
1176 Grant StreetIndiana, PA 15701
Gemmel Student CenterClarion, PA 16214
435 South Seventh StreetIndiana, PA 15701
8th & Merle StreetClarion, PA 16214
730 East Pittsburgh StreetGreensburg, PA 15601
523 Franklin AvenueVandergrift, PA 15690
Route 22 EastBlairsville, PA 15717
Shaffer RoadDuBois, PA 15801
2388 Route 286Pittsburgh, PA 15239
324 North Fourth StreetIndiana, PA 15701
Route 268 Hilltop PlazaKittanning, PA 16201
Main Street MallDuBois, PA 15801
2850 Route 286 South and Hospital RoadIndiana, PA 15701
820 South Aiken AvenueShadyside VillagePittsburgh, PA 15232
Route 30 Westmoreland MallGreensburg, PA 15601
2550 Route 286 SouthIndiana, PA 15701
Item 3. LEGAL PROCEEDINGS The nature of S&T's business generates 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 S&T 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 S&T 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 or otherwise. PART IIItem 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED SHAREHOLDER MATTERS Stock Prices and Dividend Information on page 52 and Dividend and Loan Restrictions on page 44 of the Annual Report for the year ended December 31, 2001, incorporated herein by reference.Item 6. SELECTED FINANCIAL DATA Selected Financial Data on page 52 and 53 of the Annual Report for the year ended December 31, 2001, 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 page 22 through 30 of the Annual Report for the year ended December 31, 2001, incorporated herein by reference.Item 7(A). QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Quantitative and Qualitative Disclosures about Market Risk on pages 28 and 29 of the Annual Report and pages 7 through 9 of this form 10-K for the year ended December 31, 2001, 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 31 through 51 and page 53 of the Annual Report for the year ended December 31, 2001, 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 IIIItem 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT Election of Directors on pages 4 and 5 of the proxy statement of the April 15, 2002, annual meeting of shareholders, incorporated herein by reference.
Executive Officers
Name
For the Corporation
Officer Since
Number of Shares Beneficially Owned (1)
Age
James C. Miller
President, Chief Executive Officer and Director
1983
219,971
56
Robert E. Rout
Executive Vice President, Chief Financial Officer and Secretary
1993
87,811
49
Edward C. Hauck- -
Executive Vice President
1991
77,972
David L. Krieger
1984
68,819
58
J. Jeffrey Smead
1992
103,694
50
Gregor T. Young IV
18,480
46
William H. Klumpp
Senior Vice President
1994
29,277
David P. Ruddock
40,152
40
Todd D. Brice
83,151
Richard A. Fiscus
45,981
Mark Kochvar
22,116
41
David G. Antolik
9,670
35
(1) May include shares held by spouse, other family members, as trustee or through a corporation and nonstatutory stock options vesting within 60 days of the date of this 10-K Report. The reporting person may disclaim beneficial ownership of such shares.
Item 11. EXECUTIVE COMPENSATION Remuneration of Executive Officers on pages 7 and 8 of the proxy statement for the April 15, 2002, annual meeting of shareholders, incorporated herein by reference.PART IVItem 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Principal Beneficial Owners of Common Stock on pages 2 and 3 of the proxy statement for the April 15, 2002, annual meeting of shareholders, 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 15, 2002, annual meeting with shareholders, incorporated herein by reference.Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a)
List of financial statements and financial statement schedules
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, 2001, are incorporated by reference in Part II, Item 8:
Page Reference
Report of Ernst & Young LLP, Independent Auditors
51
Consolidated Balance Sheets December 31, 2001 and 2000
31
Consolidated Statements of Income Year ended December 2001, 2000 and 1999
32
Consolidated Statements of Changes in Shareholders' EquityYear ended December 31, 2001, 2000 and 1999
33
Consolidated Statements of Cash Flows Year ended December 31, 2001, 2000 and 1999
34
Notes to Consolidated Financial Statements December 31, 2001
35-50
Quarterly Selected Financial Data
53
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K - continued
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 been omitted.
Listing of Exhibits - See Item 14(c) below
(b)
Reports on Form 8-K
Form 8-K dated January 22, 2002S&T Bancorp, Inc. announces earnings for the fourth quarter and the year ending December 31, 2001. Diluted earnings per share increased 2 percent in the fourth quarter to $0.44 per share from $0.43 per share in 2000. Net income also increased 2 percent to $11.9 million from $11.6 million in the year ago period. For the year ending December 31, 2001, diluted earnings per share, inclusive of a one-time extraordinary charge of $0.07 per share, increased 5 percent to $1.75 from $1.66 in 2000. Net income increased 5 percent to $47.3 million ($49.2 million before the one-time extraordinary charge) from $45.0 million in 2000.
Form 8-K dated December 17, 2001S&T Bancorp, Inc. announced that its Board of Directors approved a four percent increase in its quarterly cash dividend at yesterday's Board meeting. The Board declared a $0.24 per share cash dividend payable on January 25, 2002 to shareholders of record on December 31, 2001. The previous quarterly dividend rate had been $0.23 per share. The Board of Directors also approved a share repurchase authorization of up to 1,000,000 shares or four percent of shares outstanding through year-end 2002.
Form 8-K dated October 16, 2001S&T Bancorp, Inc. announces earnings for the third quarter and first nine months of 2001. Diluted earnings per share, inclusive of a one-time extraordinary charge of $0.07 per share, increased 5 percent in the third quarter to $0.44 per share from $0.42 per share in the same period of 2000. Net income increased 4 percent to $11.9 million from $11.4 million in the year ago period ($13.8 million before the extraordinary charge of $1.9 million, after-tax). For the nine months ending September 30, 2001, diluted earnings per share increased 7 percent to $1.31 from $1.23 in the first nine months of 2000. Net income for the nine months rose 6 percent to $35.4 million from $33.3 million in 2000 ($37.3 million before the one-time extraordinary charge).
Form 8-K dated July 16, 2001S&T Bancorp, Inc. announces record earnings for the second quarter and first half of 2001. Diluted earnings per share increased 7 percent in the second quarter to $0.44 per share from $0.41 per share in the same period of 2000. Net income increased 7 percent to $11.9 million from $11.1 million in the year ago period. For the six months ending June 30, 2001, diluted earnings per share increased 7 percent to $0.87 from $0.81 in the first half of 2000. Net income for the six months rose 7 percent to $23.6 million from $21.9 million in 2000.
Form 8-K dated April 16, 2001S&T Bancorp, Inc. announces record earnings for the first quarter ending March 31, 2001. Diluted earnings per share increased 7.5 percent in the first quarter to $0.43 per share from $0.40 per share in the same period of 2000. Net income increased 8 percent to $11.7 million from $10.8 million in the year ago period.
Form 8-K dated January 16, 2001S&T Bancorp, Inc. announces record earnings for the fourth quarter and the year ending December 31, 2000. Diluted earnings per share increased 10 percent in the fourth quarter to $0.43 per share from $0.39 per share in 1999. Net income increased 9 percent to $11.6 million from $10.7 million in the year ago period. For the year ending December 31, 2000, diluted earnings per share increased 10 percent to $1.66 from $1.51 in 1999. Net income rose 9 percent to $45.0 million from $41.4 million in 1999.
(c)
Exhibits
(3.1) Articles of Incorporation of S&T Bancorp, Inc. filed as Exhibit B to Regulation Statement (No. 2-83565) on Form S-4 of S&T Bancorp, Inc., dated May 5, 1983 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 (No. 33-02600) dated January 15, 1986, incorporated herein by reference.
(3.3) Amendment to Articles of Incorporation of S&T Bancorp, Inc. effective May 8, 1989, incorporated herein by reference.
(3.4) Amendment to Articles of Incorporation of S&T Bancorp, Inc. effective July 21, 1995, incorporated herein by reference.
(3.5) Amendment to Articles of Incorporation of S&T Bancorp, Inc. effective June 18, 1998, incorporated herein by reference.
(3.6) By-Laws of S&T Bancorp, Inc., as amended, December 20, 1999, incorporated herein by reference.
(10.1)
S&T Bancorp, Inc. Amended and Restated 1992 Incentive Stock Plan filed at Exhibit 4.2 to Form S-8 Registration Statement (No. 333-48549) dated March 24, 1998, incorporated herein by reference.**Management contract or compensatory plan.
(13)
Annual Report for the year ended December 31, 2001, pages 22-53, - filed herewith.
(21)
Subsidiaries of the Registrant - filed herewith
(23.1)
Consent of Ernst & Young LLP, Independent Auditors - filed herewith.
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/ James C. Miller
03/18/02
James C. Miller,President and Chief Executive Officer(Principal Executive Officer)
Date
/s/ Robert E. Rout
Robert E. Rout,Executive Vice President, Chief Financial Officer and Secretary(Principal Financial and Accounting Officer)
SIGNATURES - continued 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.
/s/ Frank W. Jones
Thomas A. Brice, Director
Frank W. Jones, Director
/s/ James L. Carino
/s/ Joseph A. Kirk
James L. Carino, Director
Joseph A. Kirk, Director
/s/ John J. Delaney
/s/ Samuel Levy
John J. Delaney, Director
Samuel Levy, Director
/s/ Michael J. Donnelly
Michael J. Donnelly, Director
James C. Miller, President, Chief Executive Officer and Director
/s/ Robert D. Duggan
/s/ Alan Papernick
Robert D. Duggan, Chairman
Alan Papernick, Director
/s/ William J. Gatti
/s/ Myles D. Sampson
William J. Gatti, Director
Myles D. Sampson, Director
/s/ Ruth M. Grant
/s/ Charles A. Spadafora
Ruth M. Grant, Director
Charles A. Spadafora, Director
/s/ Jeffrey D. Grube
Jeffrey D. Grube, Director
Christine J. Toretti, Director
/s/ Herbert L. Hanna
Herbert L. Hanna, Director