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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, 2000
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
incorporation of organization) (I.R.S. 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 28, 2001:
Common Stock, $2.50 par value - $558,130,740
The number of shares outstanding of the issuer's classes of common stock
as of February 28, 2001:
Common Stock, $2.50 par value - 26,976,912 shares
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the annual shareholders report for the year ended December 31,
2000 are incorporated by reference into Part II.
Portions of the proxy statement for the annual shareholders meeting to be
held April 16, 2001 are incorporated by reference into Part III.
PAGE 1
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, 2000, S&T had $2.3 billion in total assets, $277
million in total shareholders' equity and $1.5 billion in total
deposits. Deposits are insured by the Federal Deposit Insurance
Corporation ("FDIC") to the full extent provided by law.
Total trust assets were approximately $649 million at December 31,
2000. 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 39 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 fluctu-
ations in deposits.
Employees
As of December 31, 2000, S&T Bank had a total of 662 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 or regulatory provisions or
proposals.
PAGE 2
Item 1. BUSINESS -- Continued
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 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, LLC. 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 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 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 Depart-
ment 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.
PAGE 3
Item 1. BUSINESS -- Continued
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 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, 2000,
S&T's Tier 1 and Total capital ratios were 12.28 percent and 14.61
percent, respectively, and the ratios of Tier 1 capital and Total
capital to total risk-adjusted assets for S&T Bank were 9.11 percent
and 10.37 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 four 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, 2000 was 10.41 percent, and S&T Bank's leverage
ratio was 7.64 percent.
PAGE 4
Item 1. BUSINESS -- Continued
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, 2000, S&T Bank paid $22.1 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, 2000, 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.
PAGE 5
Item 1. BUSINESS -- Continued
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 nation-wide
and state-imposed concentration limits. Effective June 1, 1997,
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 also will be 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, mortgage bankers, 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 Bank and PNC Bank.
PAGE 6
Item 1. 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 2000, 1999 and 1998. The
following table demonstrates the amount that has been added to
interest income per the summary of operations.
[CAPTION]
Year Ended December 31
2000 1999 1998
(In thousands of dollars)
Interest income per consolidated
statements of income $176,184 $156,727 $151,438
Adjustment to fully taxable
equivalent basis 3,105 3,098 3,048
Interest income adjusted to fully
taxable equivalent basis 179,289 159,825 154,486
Interest expense 86,141 69,942 69,156
Net interest income adjusted to fully
taxable equivalent basis $93,148 $89,883 $85,330
PAGE 7
Item 1. BUSINESS -- Continued
Average Balance Sheet and Net Interest Income Analysis
[CAPTION]
December 31
2000 1999 1998
Average Yield/ Average Yield/ Average Yield/
Balance Interest Rate Balance Interest Rate Balance Interest Rate
(in thousands of dollars)
ASSETS
Interest-earning assets:
Loans (1)(2) $1,548,945 $138,860 8.96% $1,421,906 $121,424 8.54% $1,314,984 $115,993 8.82%
Taxable investment securities 535,135 37,895 7.08% 525,848 36,404 6.92% 502,889 35,784 7.12%
Tax-exempt investment securities (2) 13,690 1,186 8.66% 17,045 1,449 8.50% 28,459 2,395 8.42%
Interest-earning deposits with banks 109 9 8.26% 71 4 5.63% 83 6 7.23%
Federal funds sold 21,332 1,339 6.28% 10,880 544 5.00% 5,812 308 5.30%
Total interest-earning assets (3) 2,119,211 179,289 8.46% 1,975,750 159,825 8.09% 1,852,227 154,486 8.34%
Noninterest-earning assets:
Cash and due from banks 36,171 40,121 39,395
Premises and equipment, net 20,522 20,976 20,905
Market value appreciation of
securities available for sale 26,600 45,573 60,811
Other assets 79,017 65,559 44,755
Less allowance for loan losses (29,184) (27,743) (23,562)
$2,252,337 $2,120,236 $1,994,531
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
NOW/Money market accounts $419,214 $15,647 3.73% $393,929 $11,808 3.00% $327,851 $10,146 3.09%
Savings deposits 154,226 3,390 2.20% 167,414 3,546 2.12% 172,525 3,914 2.27%
Time deposits 679,684 37,430 5.51% 626,166 31,924 5.10% 642,681 35,510 5.53%
Federal funds purchased 2,142 139 6.49% 4,465 229 5.13% 7,007 383 5.47%
Securities sold under agreements
to repurchase 102,379 5,863 5.73% 138,387 6,519 4.71% 170,961 8,968 5.25%
Long-term borrowing 377,352 23,672 6.27% 286,975 15,916 5.55% 185,959 10,226 5.50%
Other borrowed funds - - - - - - 130 9 6.92%
Total interest-bearing liabilities (3) 1,734,997 86,141 4.96% 1,617,336 69,942 4.32% 1,507,114 69,156 4.59%
Noninterest-bearing liabilities:
Demand deposits 223,045 210,095 183,435
Other 40,264 41,815 47,423
Shareholders' equity 254,031 250,990 256,559
$2,252,337 $2,120,236 $1,994,531
Net interest income $93,148 $89,883 $85,330
Net yield on interest-earning assets 4.40% 4.55% 4.61%
(1) For the purpose of these computations, nonaccruing loans are
included in the daily average loan amounts outstanding.
(2) Tax-exempt income is on a fully taxable equivalent basis,
including the dividend received deduction for equity securities,
using the statutory federal income tax rate of 35% for 2000,
1999 and 1998.
(3) Yields are calculated using historical cost basis.
PAGE 8
Item 1. BUSINESS -- Continued
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:
[CAPTION]
2000 Compared to 1999 1999 Compared to 1998
Increase (Decrease) Due to (1) Increase (Decrease) Due to (1)
Volume Rate Net Volume Rate Net
(In thousands of dollars)
Interest earned on:
Loans (2) $10,849 $6,587 $17,436 $9,431 ($4,000) $5,431
Taxable investment securities 643 848 1,491 1,634 (1,014) 620
Tax-exempt investment securities (2) (285) 22 (263) (961) 15 (946)
Interest-earning deposits 2 3 5 (1) (1) (2)
Federal funds sold 523 272 795 269 (33) 236
Total interest-earning assets $11,732 $7,732 $19,464 $10,372 ($5,033) $5,339
Interest paid on:
NOW/Money market accounts $758 $3,081 $3,839 $2,045 ($383) $1,662
Savings deposits (279) 123 (156) (116) (252) (368)
Time deposits 2,729 2,777 5,506 (913) (2,673) (3,586)
Securities sold under agreements
to repurchase (1,696) 1,040 (656) (1,709) (740) (2,449)
Federal funds purchased (119) 29 (90) (139) (15) (154)
Long-term borrowings 5,012 2,744 7,756 5,555 135 5,690
Other borrowed funds 0 0 0 (9) 0 (9)
Total interest-bearing liabilities $6,405 $9,794 $16,199 $4,714 ($3,928) $786
Change in net interest income 3,265 $4,553
(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 2000, 1999 and 1998.
PAGE 9
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 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, 2000 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
frames, 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:
Monthly loan prepayments above contractual requirements
[CAPTION]
5 year ARM - Commercial Real Estate 1.50 %
Fixed Rate - Commercial Real Estate 1.25
Residential Real Estate 1.00
New Indirect Auto Loans 2.00
Other Installment Loans 2.65
Deposit behavioral patterns/decay rate assumptions
[CAPTION]
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
PAGE 10
Item 1. BUSINESS -- Continued
[CAPTION]
Interest Rate Sensitivity
December 31, 2000
(thousands of dollars)
GAP 1-6 Months 7-12 Months 13-24 Months >2 Years
Repricing Assets:
Cash/Due From Banks $0 $0 $0 $43,721
Federal Funds 6,600 0 0 0
Securities 58,432 14,084 12,455 495,943
Net Loans 649,974 164,317 214,282 549,059
Other Assets 0 0 0 101,423
Total $715,006 $178,401 $226,737 $1,190,146
Repricing Liabilities:
Demand $0 $0 $0 $232,625
NOW 15,421 15,422 30,842 61,686
Money Market 308,401 0 0 0
Savings/Clubs 18,074 18,074 36,148 72,295
Certificates 236,826 119,163 243,547 116,810
Repos & Short-term Borrowings 80,686 0 0 0
Long-term Borrowings 25,000 54,281 104,563 194,154
Swaps 0 0 0 0
Other Liabilities/Equity 0 0 0 326,272
Total $684,408 $206,940 $415,100 $1,003,842
GAP $30,598 ($28,539) ($188,363) $186,304
Cumulative GAP $30,598 $2,059 ($186,304) $0
Immediate
Current Policy Core Deposit
Rate Sensitive Assets/Rate Sensitive Liabilities Month Guideline Repricing
Cumulative 6 months 1.04 .85-1.15 0.78
Cumulative 12 months 1.00 .85-1.15 0.82
S&T's one year gap position at December 31, 2000 is asset
sensitive. Asset sensitive means that more assets than
liabilities of S&T will reprice during the measured time frames.
The implications of an asset sensitive position will differ
depending upon the current trend of market interest rates.
For example, with an asset sensitive position in a declining
interest rate environment, the cost of S&T repricing liabilities
can theoretically be expected to decline less quickly than the
yields on S&T repricing assets. This situation would cause a
decrease to S&T's interest rate spreads, net interest income and
to operating income. Liquidity impacts in this scenario, other
than decreased yields, would not be material unless serious
ongoing declines in operating results caused depositors, lenders
and investors to lose confidence.
PAGE 11
Item 1. BUSINESS -- Continued
Conversely, a liability sensitive gap position in a declining
interest rate scenario would theoretically have a positive impact
to interest rate spreads, net 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.
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 flucuations 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 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.
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 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, 2000, 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.
The following table sets forth the carrying amount of securities at
the dates indicated:
[CAPTION]
December 31
2000 1999 1998
(In thousands of dollars)
Available for Sale
Marketable equity securities $114,317 $97,729 $115,532
Obligations of U.S. government
corporations and agencies 334,797 335,941 357,417
Mortgage-backed securities 5,563 6,170 8,715
U.S. Treasury securities 11,201 14,126 27,952
Corporate securities 64,237 64,526 36,353
Other securities 37,285 39,502 22,509
TOTAL $567,400 $557,994 $568,478
Held to Maturity
Obligations of states and
political subdivisions $11,512 $15,231 $21,009
Corporate securities 2,000 1,999 1,999
TOTAL $13,512 $17,230 $23,008
PAGE 12
Item 1. BUSINESS -- Continued
The following table sets forth the maturities of securities
at December 31, 2000, 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 2000 have been made in calculating yields on oblig-
ations of state and political subdivisions.
[CAPTION]
Maturing
Within After One But After Five But After No Fixed
One Year Within Five Years Within Ten Years Ten Years Maturity
Amount Yield Amount Yield Amount Yield Amount Yield Amount
(in thousands of dollars)
Available for Sale
Marketable equity securities $114,318
Obligations of U.S. government
corporations and agencies $180,448 6.69% $154,348 7.07%
Mortgage-backed securities 5,564 7.63%
U.S. Treasury securities $5,064 7.22% 6,136 7.81%
Corporate securities 7,502 6.39% 56,736 6.58%
Other securities 37,285
TOTAL $12,566 $248,884 $154,348 $0 $151,603
Weighted Average Rate 6.72% 6.71% 7.07% 0.00%
Held to Maturity
Obligations of states and
political subdivisions $2,090 5.21% $9,422 5.72%
Corporate securities 2,000 9.88%
TOTAL $4,090 $9,422 $0 $0 $0
Weighted Average Rate 7.49% 5.72% 0.00% 0.00%
Loan Portfolio
The following table shows S&T's loan distribution at the end of
each of the last five years:
[CAPTION]
December 31
2000 1999 1998 1997 1996
(In thousands of dollars)
Domestic Loans:
Commercial, mortgage
and industrial $936,313 $830,847 $672,742 $582,401 $496,863
Real estate-construction 113,856 94,786 87,246 47,967 35,508
Real estate-mortgage 465,779 466,881 492,570 512,417 513,424
Installment 89,076 103,763 113,351 130,968 154,341
TOTAL LOANS $1,605,024 $1,496,277 $1,365,909 $1,273,753 $1,200,136
PAGE 13
Item 1. BUSINESS -- Continued
The following table shows the maturity of loans (excluding residential
mortgages of 1-4 family residences and installment loans) outstanding
as of December 31, 2000. Also provided are the amounts due after one
year classified according to the sensitivity to changes in interest rates.
[CAPTION]
Maturing
Within After One But After
One Year Within Five Years Five Years Total
(In thousands of dollars)
Commercial, mortgage
and industrial $346,452 $294,612 $295,248 $936,312
Real estate-construction 26,028 43,833 43,996 113,857
$372,480 $338,445 $339,244 $1,050,169
Fixed interest rates $113,499 $77,033
Variable interest rates 224,946 262,211
$338,445 $339,244
Nonaccrual, Past Due and Restructured Loans
The following table summarizes S&T's nonaccrual, past due and
restructured loans:
[CAPTION]
December 31
2000 1999 1998 1997 1996
(in thousands of dollars)
Nonaccrual loans $2,897 $2,987 $2,933 $3,602 $10,268
Accruing loans past
due 90 days or more $0 $0 $0 $0 $0
PAGE 14
Item 1. BUSINESS -- Continued
At December 31, 2000, $2,897,000 of nonaccrual loans were secured.
Interest income that would have been recorded under original terms
totaled $324,000. No interest income was recorded on these loans.
It is S&T's policy to place loans on non-accrual status when collection
of interest or principal is doubtful, or generally when interest or
principal are 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, 2000, there were $915,000 impaired loans that 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.
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.
Charged-off and recovered loan amounts are applied to the allowance for
loan losses. Quarterly updates are presented to the S&T Board of
Directors as to the status of loan quality.
Amounts are added to the allowance for loan losses 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. A quantitative analysis is utilized to
support the adequacy of the allowance for loan losses. This analysis
includes review of the high and low historical charge-off rates for loan
categories, fluctuations and trends in the amount of classified loans
and economic factors. Economic factors consider the level of S&T's
historical charge-offs that have occurrence within the credits economic
life cycle. 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.
Significant to this analysis and assessment is the shift in loan
portfolio composition to an increased mix of commercial loans.
These loans are generally larger in size and due to our continuing
growth, many are not well seasoned and could be more vulnerable to
an economic slowdown. Management relies on its risk rating process
to monitor trends which may be occurring relative to commercial
loans to assess potential weaknesses within specific credits.
Current economic factors and trends in risk ratings are considered
in the determination of the allowance for loan losses.
This analysis and 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.
PAGE 15
Item 1. BUSINESS -- Continued
The unallocated component is primarily subjective based upon
management's assessment of nonquantifiable factors that make
historical trend analyses difficult such as:
Economic factors
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.
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.
[CAPTION]
Year Ended December 31
2000 1999 1998 1997 1996
1.71% 1.81% 1.95% 1.60% 1.56%
S&T has considered impaired loans in its determination of
the allowance for loan losses. The allowance for loan losses for
all impaired loans was zero at December 31, 2000 and $73,000 at
December 31, 1999, and is included in the allowance allocated
specifically to commercial loans.
Asset quality is a major corporate objective at S&T. 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.
This table summarizes S&T's loan loss experience for each of the
five years ended December 31:
[CAPTION]
Year Ended December 31
2000 1999 1998 1997 1996
(In thousands of dollars)
Balance at January 1: $27,134 $26,677 $20,427 $18,729 $17,065
Charge-offs:
Commercial, mortgage and
industrial 6,327 4,270 2,905 1,654 2,986
Real estate-mortgage 864 913 1,497 1,056 405
Installment 1,809 1,819 1,597 1,771 2,145
9,000 7,002 5,999 4,481 5,536
Recoveries:
Commercial, mortgage and
industrial 4,450 2,483 713 517 1,591
Real estate-mortgage 394 495 389 221 105
Installment 417 481 597 441 329
5,261 3,459 1,699 1,179 2,025
Net charge-offs 3,739 3,543 4,300 3,302 3,511
Provision for loan losses 4,000 4,000 10,550 5,000 5,175
Balance at December 31: $27,395 $27,134 $26,677 $20,427 $18,729
Ratio of net charge-offs
to average loans outstanding 0.24% 0.25% 0.33% 0.27% 0.31%
PAGE 16
Item 1. BUSINESS -- Continued
This table shows allocation of the allowance for loan losses as of
the end of each of the last five years:
[CAPTION]
December 31, 2000 December 31, 1999 December 31, 1998 December 31, 1997 December 31, 1996
Percent Percent Percent Percent Percent
of Loans of Loans of Loans of Loans of Loans
in Each in Each in Each in Each in Each
Category Category Category Category Category
to Total to Total to Total to Total to Total
Amount Loans Amount Loans Amount Loans Amount Loans Amount Loans
(In thousands of dollars)
Commercial, mortgage
and industrial $18,835 58% $20,147 56% $16,850 49% $13,556 46% $9,605 41%
Real estate-construction 0 7% 0 6% 0 7% 0 4% 0 3%
Real estate-mortgage 845 29% 868 31% 1,096 36% 763 40% 1,680 43%
Installment 2,766 6% 2,541 7% 2,635 8% 1,865 10% 1,859 13%
Unallocated 4,949 0% 3,578 0% 6,096 0% 4,243 0% 5,585 0%
TOTAL $27,395 100% $27,134 100% $26,677 100% $20,427 100% $18,729 100%
Deposits
The daily average amount of deposits and rates paid on such deposits
is summarized for the periods indicated in the following table:
[CAPTION]
Year Ended December 31
2000 1999 1998
Amount Rate Amount Rate Amount Rate
(In thousands of dollars)
Noninterest-bearing demand
deposits $223,045 $210,095 $183,435
NOW/ Money market accounts 419,214 3.73% 393,929 3.00% 327,851 3.09%
Savings deposits 154,226 2.20% 167,414 2.12% 172,525 2.27%
Time deposits 679,684 5.51% 626,166 5.10% 642,681 5.53%
TOTAL $1,476,169 $1,397,604 $1,326,492
Maturities of time certificates of deposit of $100,000 or more
outstanding at December 31, 2000, are summarized as follows:
[CAPTION]
(In thousands of dollars)
3 Months or less $45,668
Over 3 through 6 months 15,535
Over 6 through 12 months 11,446
Over 12 months 50,650
TOTAL $123,299
Return on Equity and Assets
The table below shows consolidated operating and capital ratios
of S&T for each of the last three years:
Year Ended December 31
2000 1999 1998
Return on average assets 2.00% 1.95% 1.90%
Return on average equity 17.70% 16.50% 14.80%
Dividend payout ratio 49.22% 48.65% 46.14%
Equity to asset ratio 11.99% 10.92% 12.55%
PAGE 17
Item 1. BUSINESS -- Continued
Short-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
(In thousands of dollars)
Balance at December 31:
2000 $80,686
1999 116,009
1998 138,825
Weighted average interest rate at year end:
2000 5.89%
1999 5.06%
1998 4.63%
Maximum amount outstanding at any month's end:
2000 $168,244
1999 212,361
1998 251,030
Average amount outstanding during the year:
2000 $104,521
1999 142,852
1998 177,968
Weighted average interest rate during the year:
2000 5.75%
1999 4.72%
1998 5.29%
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.
PAGE 18
Item 2. PROPERTIES
S&T operates 39 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 Street, 2175 Route 286 South in Indiana;
Route 119 South & Lucerne Road and 34 North Main Street
in Homer City; 232 North Hampton Avenue in Punxsutawney;
133 Philadelphia Street in Armagh; Route 119 in Black Lick;
256 Main Street and Route 36 & I-80 in Brookville; 456
Main Street in Brockway; 602 Salt Street in Saltsburg; 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
South Chestnut Street in Derry; 109 Grant Avenue in
Vandergrift; 100 South Fourth Street in Youngwood; 701 East
Pittsburgh Street in Greensburg; 2190 Hulton Road in East
Oakmont; 4385 Old William Penn Highway in Monroeville; 7660
Saltsburg Road in Plum; 12262 Frankstown Road in Penn Hills;
410 Main Street in Clarion; and 301 Unity Center Road in Unity.
Land is leased where S&T owns the banking offices at 1107
Wayne Avenue and remote ATM buildings at 435 South Seventh
Street and 1176 Grant Street, all in Indiana; 8th and Merle
Street and Gemmel Student Center in Clarion; 730 East
Pittsburgh Street in Greensburg; and 523 Franklin Avenue in
Vandergrift. In addition, S&T leases land and banking offices
at the following locations: Chestnut Ridge Plaza in Blairsville;
324 North Fourth Street and 2850 Route 286 South and Hospital
Road in Indiana; the Mall Office in DuBois; 229 Westmoreland
Mall; 2388 Route 286 in Holiday Park; 802 South Aiken Avenue,
Shadyside Village in Pittsburgh; 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 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 II
Item 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED
SHAREHOLDER MATTERS
Stock Prices and Dividend Information on page 55
and Dividend and Loan Restrictions on page 45 of
the Annual Report for the year ended December 31,
2000, incorporated herein by reference.
Item 6. SELECTED FINANCIAL DATA
Selected Financial Data on pages 55 and 56 of the
Annual Report for the year ended December 31, 2000,
incorporated herein by reference.
PAGE 19
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
31 of the Annual Report for the year ended December 31,
2000, incorporated herein by reference.
Item 7(A).QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK
Quantitative and Qualitative Disclosures about Market
Risk on pages 29 and 30 of the Annual Report for the
year ended December 31, 2000, 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 32 through 55 and page 56 of the Annual
Report for the year ended December 31, 2000,
incorporated herein by reference.
Item 9. CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURES
There have been no changes in accountants or disagree-
ments 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 16, 2001, annual meeting of
shareholders, incorporated herein by reference.
Executive Officers
Number of
Shares
For the Officer Beneficially
Name Corporation Since Owned (1) Age
Robert D. Duggan Chairman 1983 185,442 68
and Director
James C. Miller President, Chief 1983 199,491 55
Executive Officer and
Director
James G. Barone(2) Executive Vice 1992 61,693 53
President, Secretary and
Treasurer
Robert E. Rout Executive Vice 1993 71,869 48
President and Chief
Financial Officer
PAGE 20
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT --
Continued
Executive Officers (continued)
Number of
Shares
For the Officer Beneficially
Name Corporation Since Owned (1) Age
Edward C. Hauck Executive Vice 1991 61,592 48
President
David L. Krieger Executive Vice 1984 53,496 57
President
J. Jeffrey Smead Executive Vice 1992 88,012 49
President
William H. Klumpp Senior Vice 1994 42,744 57
President
Edward A. Onderick Senior Vice 1989 73,416 56
President
David P. Ruddock Senior Vice 1998 29,110 39
President
Todd D. Brice Senior Vice 1999 62,531 39
President
Richard A. Fiscus Senior Vice 1999 35,122 45
President
(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.
(2) Mr. Barone resigned as Secretary and Treasurer effective at the
board meeting held on February 19, 2001, and currently continues
as President of S&T Investment Company, a subsidiary of S&T.
Robert E. Rout, Executive Vice President and Chief Financial
Officer, succeeded Mr. Barone as Secretary. Mark Kochvar, Senior
Vice President, was promoted to Treasurer.
Item 11. EXECUTIVE COMPENSATION
Remuneration of Executive Officers on pages 7 and 8 of the
proxy statement for the April 16, 2001, annual meeting of
shareholders, incorporated herein by reference.
PAGE 21
PART IV
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 16, 2001, annual meeting
of shareholders, incorporated herein by reference.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Transactions with Management and Others on pages 10 and 11
of the proxy statement for April 16, 2001, 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
(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, 2000, are
incorporated by reference in Part II, Item 8:
Page
Reference
Report of Ernst & Young LLP, Independent Auditors 54
Consolidated Balance Sheets
December 31, 2000 and 1999 32
Consolidated Statements of Income
Year ended December 31, 2000, 1999, and 1998 33
Consolidated Statements of Changes
in Shareholders' Equity
Year ended December 31, 2000, 1999, and 1998 34
Consolidated Statements of Cash Flows
Year ended December 31, 2000, 1999, and 1998 35
Notes to Consolidated Financial
Statements December 31, 2000 36-53
Quarterly Selected Financial 56
(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 been omitted.
(3) Listing of Exhibits - See Item 14 (c) below
(b) Reports on Form 8-K
None
PAGE 22
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K (Continued)
(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.,
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.
(13) Annual Report for the year ended December 31, 2000, pages
22-56, - filed herewith.
(21) Subsidiaries of the Registrant - filed herewith.
(23.1) Consent of Ernst & Young LLP, Independent Auditors - filed
herewith.
PAGE 23
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 03/19/01
James C. Miller, Date
President and Chief Executive Officer
(Principal Executive Officer)
/s/ Robert E. Rout 03/19/01
Robert E. Rout, Date
Executive Vice President and Chief Financial
Officer and Secretary
(Principal Financial and Accounting Officer)
PAGE 24
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.
/s/ Frank W. Jones 03/19/01
Thomas A. Brice, Director Date Frank W. Jones, Director Date
/s/ James L. Carino 03/19/01 /s/ Joseph A. Kirk 03/19/01
James L. Carino, Director Date Joseph A. Kirk, Director Date
/s/ John J. Delaney 03/19/01
John J. Delaney, Director Date Samuel Levy, Director Date
/s/ Michael J. Donnelly 03/19/01 /s/ James C. Miller 03/19/01
Michael J. Donnelly, Director Date James C. Miller, President, Date
Chief Executive Officer and Director
/s/ Robert D. Duggan 03/19/01 /s/ Alan Papernick 03/19/01
Robert D. Duggan, Chairman Date Alan Papernick, Director Date
/s/ William J. Gatti 03/19/01 /s/ Myles D. Sampson 03/19/01
William J. Gatti, Director Date Myles D. Sampson, Director Date
/s/ Ruth M. Grant 03/19/01 /s/ Charles A. Spadafora 03/19/01
Ruth M. Grant, Director Date Charles A. Spadafora, Director Date
/s/ Jeffrey D. Grube 03/19/01 /s/ Christine J. Toretti 03/19/01
Jeffrey D. Grube, Director Date Christine J. Toretti, Director Date
Herbert L. Hanna, Director Date
PAGE 25