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