SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 10-Q
(Mark One)
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1995
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-12508
S&T BANCORP, INC.
(Exact name of registrant as specified in its charter)
Pennsylvania 25-1434426
(State or other jurisdiction of (I.R.S.EMPLOYER
incorporation or organization) Identification No.)
800 Philadelphia Street, Indiana, PA 15701
(Address of principal executive offices) (Zip Code)
(412) 349-2900
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year,
if changed since last report.)
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 and Exchange
Act of 1934 during the preceding 12 months (or for such shorter periods
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
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practical date.
Common Stock, $2.50 Par Value - 11,236,553 shares as of July 25, 1995
INDEX
S&T BANCORP, INC. AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION Page No.
Item 1. Financial Statements
Condensed consolidated balance sheets -
June 30, 1995 and December 31, 1994 3
Condensed consolidated statements of income -
Three months and six months ended June 30, 1995 and 19 4
Condensed consolidated statements of cash flows -
Six months ended June 30, 1995 and 1994 5
Notes to condensed consolidated financial statements 6-9
Item 2. Management's discussion and analysis of financial
condition and results of operations 10-14
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 15
SIGNATURES 16
S&T BANCORP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
June 30, December 31,
1995 1994
(000's omitted except share data)
ASSETS
Cash and due from banks $37,109 $38,791
Interest-earning deposits
with banks 167 3,824
Securities available for sale 132,300 118,904
Investment securities 194,968 187,220
Total loans 947,108 924,408
Less allowance for loan losses (15,058) (14,331)
Net Loans 932,050 910,077
Premises and equipment 14,656 14,690
Other assets 18,356 20,231
TOTAL ASSETS $1,329,606 $1,293,737
LIABILITIES
Deposits:
Noninterest-bearing demand $105,902 $111,345
Interest-bearing demand 97,025 97,970
Money market 108,706 104,296
Savings 134,251 139,648
Time 490,231 449,981
Total Deposits 936,115 903,240
Securities sold under repurchase 149,064 169,871
agreements
Federal funds purchased 5,475 19,590
Other borrowed funds 380 430
Long-term borrowing 73,101 43,405
Other liabilities 13,203 15,614
TOTAL LIABILITIES 1,177,338 1,152,150
SHAREHOLDERS' EQUITY
Common stock $2.50 par value,
25,000,000 shares authorized 29,552 29,552
and 11,820,944 issued
Additional paid in capital 10,589 10,217
Retained earnings 105,891 99,824
Net unrealized holding gains on 13,894 8,406
securities available for sale
Treasury stock (600,514 shares at
June 30, 1995 and 555,223 (7,278) (5,982)
at December 31, 1994)
Deferred compensation (380) (430)
TOTAL SHAREHOLDER'S EQUITY 152,268 141,587
TOTAL LIABILITIES AND
SHAREHOLDER'S EQUITY $1,329,606 $1,293,737
See Notes to Condensed Consolidated Financial Statements
S&T BANCORP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
For Three Months Ended For Six Months Ended
June 30, June 30,
1995 1994 1995 1994
(000's omitted except per share data)
INTEREST INCOME
Loans, including fees $21,444 $17,176 $41,932 $33,452
Deposits with banks 62 70 131 139
Federal funds sold 14 7 14 7
Investment securities:
Taxable 4,185 4,300 8,113 8,683
Tax-exempt 447 557 917 1,123
Dividends 628 583 1,261 1,139
Total Interest Income 26,780 22,693 52,368 44,543
INTEREST EXPENSE
Deposits
Interest-bearing demand 372 403 749 838
Money market 1,122 773 2,196 1,440
Savings 809 871 1,626 1,714
Time 6,740 5,629 12,961 11,279
Securities sold under 2,318 1,413 4,708 2,561
repurchase agreements
Federal funds purchased 201 113 374 193
Long term borrowing 1,007 322 1,635 651
Other borrowed funds 8 12 16 23
Total Interest Expense 12,577 9,536 24,265 18,699
NET INTEREST INCOME 14,203 13,157 28,103 25,844
Provision for loan losses 750 700 1,500 1,300
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 13,453 12,457 26,603 24,544
NONINTEREST INCOME:
Trust fees 595 521 1,212 1,062
Service charges on deposit 727 635 1,370 1,186
accounts
Net securities/nonrecurring 397 255 360 464
gains
Other 325 493 991 1,058
Total Noninterest Income 2,044 1,904 3,933 3,770
NONINTEREST EXPENSE
Salaries and employee 4,423 4,286 8,787 8,467
Occupancy expense, net 517 559 1,044 1,081
Equipment expense, net 496 416 1,102 1,068
Data processing 355 320 714 700
FDIC assessment 511 505 1,021 1,011
Other 2,275 1,936 4,254 3,842
Total Noninterest Expense 8,577 8,022 16,922 16,169
INCOME BEFORE INCOME TAXES 6,920 6,339 13,614 12,145
Applicable income taxes 1,842 1,714 3,615 3,053
NET INCOME $5,078 $4,625 $9,999 $9,092
PER COMMON SHARE
Net Income $0.45 $0.41 $0.89 $0.80
Dividends 0.18 0.15 0.35 0.29
Average Common Shares 11,239 11,289 11,249 11,282
Outstanding
See Notes to Condensed Consolidated Financial Statements
S&T BANCORP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended June 30
1995 1994
(000's omitted)
Operating Activities
Net Income $9,999 $9,092
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan losses 1,500 1,300
Provision for depreciation and amortization 688 626
Net amortizaton of investment security premiums 435 783
Net accretion of loan and deposit discounts (538) (623)
Net gains on sales of securities available for (130) (463)
sale
Net investment security gains (1)
(Increase) decrease in deferred income taxes (197) 23
Increase in interest receivable (165) (960)
Increase in interest payable 2,099 1,734
Increase in other assets (548) (976)
(Decrease) increase in other liabilities (4,614) 778
Net Cash Provided by Operating Activities 8,529 11,313
Investing Activities
Net redemption (increase) of interest-earning
deposits with banks 3,657 (111)
Proceeds from maturities of investment securities 16,811 28,192
Proceeds from maturities of securities available 2,000 5,000
for sale
Proceeds from sales of securities available 11,976 19,009
for sale
Purchases of investment securities (24,706) (14,800)
Purchases of securities available for sale (19,086) (22,193)
Net increase in loans (57,674) (40,975)
Proceeds from the sale of loans 34,739
Purchases of premises and equipment (844) (1,429)
Proceeds from the sale of premises and equipment 19 (13)
Net Cash Used by Investing Activities (33,108) (27,320)
Financing Activities
Net (decrease) increase in demand, NOW and
savings deposits (7,375) 14,985
Net increase (decrease) in certificates of deposit 40,250 (1,878)
Net(decrease) increase in repurchase agreements (20,807) 22,393
Net decrease in federal funds purchased (14,115) (15,000)
Increase in long-term borrowing 29,695 3,443
Acquisition of treasury stock (1,720) (567)
Sale of treasury stock 795 658
Cash dividends paid to shareholders (3,826) (3,043)
Net Cash Provided by Financing Activities 22,897 20,991
(Decrease) Increase in Cash and Cash Equivalents (1,682) 4,984
Cash and Cash Equivalents at Beginning of Period 38,791 32,936
Cash and Cash Equivalents at End of Period $37,109 $37,920
See Notes to Condensed Consolidated Financial Statements
S&T BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1995
NOTE A--BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form 10-Q
and Article 10 of Regulation S-X. Accordingly, they do not include all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management,
all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating results
for the six month period ended June 30, 1995 are not necessarily
indicative of theresults that may be expected for the year ending
December 31, 1995. For further information, refer to the consolidated
financial statements and footnotes thereto included in the annual report
on Form 10-K for the year ended December 31, 1994.
NOTE B--SECURITIES
The amortized cost and estimated market value of securities as of June 30
are as follows:
1995 Available for Sale
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
(000's omitted)
Marketable equity
securities $32,426 $20,987 ($652) $52,761
Obligations of U.S. government
corporations and agencie 17,028 215 (13) 17,230
Collateralized mortgage
obligations of U.S.
government corporations
and agencies 5,134 (146) 4,988
U.S. Treasury securities 56,336 985 57,321
$110,924 $22,187 ($811) $132,300
1995 Investment Securities
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
(000's omitted)
U.S. Treasury bonds and
obligations of U.S.
government corporations
and agencies $138,170 $4,133 ($637) $141,666
Collateralized mortgage
obligations of U.S.
government corporations
and agencies 13,170 168 13,338
Obligations of states and
political subdivisions 30,565 757 (30) 31,292
Corporate securities 2,791 319 3,110
184,696 5,377 (667) 189,406
Other securities 10,272 0 0 10,272
Total $194,968 $5,377 ($667) $199,678
S&T BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Continued
NOTE B-SECURITIES
The amortized cost and estimated market value of securities as of December 31
are as follows:
1994 Available for Sale
Gross Gross Estimated
Amortized UnrealizedUnrealized Market
Cost Gains Losses Value
(000's omitted)
Marketable equity
securities $32,122 $15,864 ($1,568) $46,418
Collateralized mortgage
obligations of U.S.
government corporations
and agencies 5,147 (597) 4,550
U.S. Treasury
securities 68,704 67 (835) 67,936
$105,973 $15,931 ($3,000) $118,904
1994 Investment Securities
Gross Gross Estimated
Amortized UnrealizedUnrealized Market
Cost Gains Losses Value
(000's omitted)
U.S. Treasury bonds
and obligations of U.S.
government corporations
and agencies $130,456 $99 ($4,508) $126,047
Collateralized mortgage
obligations of U.S.
government corporations
and agencies 14,451 30 ($68) 14,413
Obligations of states
and political
subdivisions 32,816 295 (542) 32,569
Corporate securities 4,038 129 4,167
181,761 553 (5,118) 177,196
Other securities 5,459 5,459
Total $187,220 $553 ($5,118) $182,655
During the period ended June 30, 1995, there were $542,882 in realized gains
and $412,759 in realized lossed relative to securities available for sale.
The amortized cost and estimated market value of debt securities at
June 30, 1995, by contractual maturity, are shown below:
Estimated
Amortized Market
Available for Sale Cost Value
(000's omitted)
Due in one year or less $25,109 $26,272
Due after one year through 41,227 41,264
five years 7,028 7,015
Due after five years through 5,134 4,988
ten years
Total $78,498 $79,539
S&T BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Continued
NOTE B-SECURITIES
Estimated
Amortized Market
Investment Securities Cost Value
(000's omitted)
Due in one year or less $4,687 $4,729
Due after one year through
five years 99,486 101,882
Due after five years through
ten years 72,784 74,999
Due after ten years 7,739 7,796
Total $184,696 $189,406
At June 30, 1995 and December 31, 1994 investment securities with a
principal amount of $201,637,000 and $230,171,000 respectively, were
pledged to secure repurchase agreements and public and trust fund
deposits.
NOTE C--LOANS AND ALLOWANCE FOR LOAN LOSSES
The composition of the loan portfolio was as follows:
June 30, 1995 December 31, 1994
(000's omitted)
Real estate - construction $42,994 $32,714
Real estate - mortgages:
Residential 358,796 343,935
Commercial 182,626 199,959
Commercial - industrial
and agricultural 218,581 197,028
Consumer installment 144,111 150,772
Total Loans $947,108 $924,408
Changes in the allowance for loan losses for the six months ended June 30
were as follows:
1995 1994
(000's omitted)
Balance at beginning
of period $14,331 $13,480
Charge-offs (1,156) (1,221)
Recoveries 383 438
Net charge-offs (773) (783)
Provision for loan losses 1,500 1,300
Balance at end of period $15,058 $13,997
Financial Accounting Standards Board Statement No. 114, "Accounting by
Creditors for Impairment of a Loan" (Statement No. 114) requires certain
loan impairments to be measured using a present value of expected cash
flows method. S&T implemented Statement No. 114 in the first quarter of
1995. Statement No. 114 had no effects on S&T's financial position or
results of operations.
S&T BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Continued
NOTE D--FINANCIAL INSTRUMENTS
S&T, in the normal course of business, commits to extend credit and issue
standby letters of credit. The obligations are not recorded in S&T's
financial statements. Loan commitments and standby letters of credit
are subject to normal credit underwriting policies and procedures and
generally require collateral based upon management's evaluation of each
customer's financial condition and ability to satisfy completely the terms
of the agreement. S&T's exposure to credit loss in the event the customer
does not satisify the terms of agreement equals the notional amount of the
obligation less the value of any collateral. Unfunded loan commitments
totaled $154,131,000 and obligations under standby letters of credit totaled
$49,840,000 at June 30, 1995.
At June 30, 1995, S&T had marketable equity securities totaling $778,750
at amortized cost and $1,125,000 at estimated market value, that were
subject to covered call option contracts. The purpose of these contracts
was to generate fee income for S&T.
NOTE E - LITIGATION
S&T, in the normal course of business, is subject to various legal
proceedings in which claims for monetary damages are asserted. No
material losses are anticipated by management as a result of these
legal proceedings.
S&T BANCORP, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
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
Bancorp, Inc. and subsidiaries (S&T). This discussion
and analysis should be read in conjunction with the
condensed consolidated financial statements and the
selected financial data presented elsewhere in this
report.
Financial Condition
Total assets at June 30, 1995 were $1.3 billion, a 3%
increase from December 31, 1994. Total assets
averaged $1.3 billion in the first six months of 1995,
a $66.3 million increase from the 1994 full year
average. Average loans increased $91.8 million in the
first six months of 1995 compared to the average loans
for the 1994 full year, funded primarily by a $23.7
million decrease in average securities, a $54.1
million increase in average borrowings and average
retained earnings increases of $7.8 million. Average
cash and due from banks, other assets and deposits did
not change significantly from the prior full year
average.
Lending Activity
Total loans at June 30, 1995 were $947.1 million, a 3%
or $22.7 million increase from December 31, 1994.
Excluding the effects from the sale of the student
loan portfolio and participation of several commercial
loans, total loans would have increased $57.7 million,
or 6%. Changes in the composition of the loan
portfolio during 1995 included increases of $28.0
million of commercial loans, $25.2 million of
residential mortgages and $4.5 million of installment
loans,offset by the $11.2 million sale of the student
loan portfolio and $23.5 million from commercial loan
participations. Average loans increased $91.8
million, or 11% to $936.1 million for the six months
ended June 30, 1995 from the 1994 full year average.
Most of the increase in the commercial category are
loans secured by real estate. Although real estate
loans can be an area of higher risk, management
believes these risks are mitigated by limiting the
percentage amount of portfolio composition, a rigorous
underwriting review by loan administration and the
fact that many of the commercial real estate loans are
owner-occupied and/or seasoned properties that were
refinanced from other banks.
Residential mortgage lending continued to be a
strategic area of focus during the second quarter of
1995. Management believes that if a downturn in the
S&T BANCORP, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
local residential real estate market occurs, the
impact of declining values on the real estate loan
portfolio will be negligible because of S&T's
conservative mortgage lending policies which generally
require a maximum term of twenty years for fixed rate
mortgages, and private mortgage insurance for loans
with less than a 20% down payment. At June 30, 1995
the residential mortgage portfolio had a 34%
composition of adjustable rate mortgages.
Installment loans continue to benefit from the
restructuring and refocus of the indirect lending
function as part of a 1994 strategic initiative.
Direct installment loan activity was essentially flat
for the first six months of 1995 as consumers
continued to favor home equity and mortgage
refinancing because of the tax deductibility of
interest on these products.
The bulk of the student loan portfolio was sold in the
first quarter of 1995 because newly issued government
regulations and restrictions significantly reduced
much of the profit potential associated with the
product. S&T began to expand the participation of
select commercial loans during the second quarter of
1995. These participation's will allow S&T to
continue building a servicing portfolio which will
generate future fee income, and to diversify the
credit risk of the commercial loan portfolio.
Security Activity
Average securities decreased $23.7 million in the
first six months of 1995 compared to the 1994 full
year average. Some maturing investment securities
were not replaced during the first six months of 1995
in order to fund loan growth that typically provides
higher yields and the potential of developing other
banking product relationships. The change in
composition of the average investment portfolio
included a $19.3 million decrease in average taxable
securities and a $4.4 million decrease in tax-exempt
state and municipal securities. The decrease in
average taxable investment securities was principally
comprised of $40.7 million in U.S. Treasury
securities, $1.2 million in collateralized mortgage
obligations (CMO's) and $0.5 million in corporate
securities. Offsetting these decreases were average
increases of $18.8 million in U.S. government agency
securities, $2.0 million in corporate stock and $2.2
million in Federal Home Loan Bank (FHLB) capital
stock.
Equity purchases of preferred and common stocks were
made in order to take advantage of the higher yields
and the dividends received deduction for corporations;
S&T BANCORP, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
the FHLB stock is a membership and borrowing
requirement. The equities portfolio is currently
yielding 10.6% on a fully taxable equivalent (FTE)
basis and has $20.3 million of unrealized gains net of
nominal unrealized loss.
Allowance for Loan Losses
The allowance for loan losses increased to $15.1
million or 1.59% of total loans at June 30, 1995 as
compared to $14.3 million or 1.55% of total loans at
December 31, 1994. The adequacy of the allowance for
loan losses is determined by management through
evaluation of the loss potential on individual
nonperforming, delinquent and high-dollar loans,
review of economic conditions and business trends,
historical loss experience, growth and composition of
the loan portfolio as well as other relevant factors.
The balance of nonperforming loans, which includes
nonaccrual loans past due 90 days or more, at June 30,
1995 was $2.2 million or 0.23% of total loans. This
compares to nonperforming loans of $1.9 million or
0.21% of total loans at December 31, 1994. Asset
quality is the major corporate objective at S&T and
management believes that the total allowance for loan
losses is adequate to absorb probable loan losses.
Deposits
Average total deposits increased slightly by $4.1
million for the six months ended June 30, 1995
compared to the 1994 average. Changes in the average
deposit mix include a $20.6 million increase in time
deposits and $0.7 million in demand deposits, offset
by a $17.2 million decrease in NOW's, money market
accounts and savings accounts compared to the annual
1994 average. These changes can be partially
explained by customer preferences for higher-yielding,
longer-term certificates of deposits in a rising
interest rate environment and the withdrawal of some
temporary corporate funds deposited in December 1994.
Special rate deposits of $100 thousand and over were
6% of total deposits at June 30, 1995 and December 31,
1994 and primarily represent deposit relationships
with local customers in our market area. Management
believes that the S&T deposit base is stable and that
S&T has the ability to attract new deposits,
mitigating a funding dependency on volatile
liabilities. In addition, S&T has the ability to
access both public and private markets to raise
long-term funding if necessary. During the second
quarter of 1995, S&T issued $20 million of retail
certificates of deposits through two brokerage firms,
further broadening the availability of reasonably
priced funding sources.
S&T BANCORP, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Borrowings
Average borrowings increased $54.1 million for the six
months ended June 30, 1995 compared to the 1994 annual
average and were comprised of retail repurchase
agreements (REPO's), wholesale REPO's, federal funds
purchased and long-term borrowings. During the first
six months of 1995, S&T obtained two long-term
borrowings of $25.0 million at an adjustable rate and
$4.7 million at a fixed rate with the FHLB in order to
mitigate the funding risks associated with short-term
borrowings. S&T defines repurchase agreements with
its local, 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.
The average balance in retail REPOS increased
approximately $25.4 million for the first six months
of 1995 compared to the full year 1994 average. The
customer preference for this type of account is due to
the slightly higher rates that S&T could make
available because of the lack of FDIC insurance
premiums. Average wholesale REPOs, long-term
borrowings and federal funds purchased averaged $139.7
million for the first six months of 1995, an increase
of $29.0 million over the 1994 average balances. This
increase is primarily related to the funding
requirements of an increase in loan demand, and to
take advantage of the relatively low costs as compared
to attracting new deposits locally.
Capital Resources
Shareholders' equity increased $7.8 million at June
30,1995, compared to December 31, 1994. Net income
was $10.0 million for the six months ended June 30,
1995 and dividends paid to shareholders were $3.9
million for the six months ended June 30, 1995.
During the first six months of 1995, S&T paid 39% of
1995 net income in dividends, equating to an annual
dividend rate of $0.72 per share.
The book value of S&T's common stock increased 8% from
$12.57 at December 31, 1994 to $13.57 at June 30, 1995
due to an increase in shareholders' equity from
retained earnings and the positive effect of Financial
Accounting Standards Board Statement No. 115,
Statement on Accounting for Certain Investments in
Debt and Equity Securities." The market price of
S&T's common stock increased 15.9% to $23.75 per share
at June 30, 1995 as compared to $20.50 per share at
December 31, 1994.
S&T continues to maintain a strong capital position
S&T BANCORP, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
with a leverage ratio of 10.4% as compared to the 1993
minimum regulatory guideline of 3.0%. S&T's
risk-based capital Tier I and Total ratios were 13.1%
and 14.3% respectively, at June 30, 1995, which places
S&T well above the Federal Reserve Board's risk-based
capital guidelines of 4.0% and 8.0% for Tier I and
Total, respectively.
RESULTS OF OPERATIONS
Six months ended June 30, 1995 compared to
Six months ended June 30, 1994
Net Income
Net income increased to $10.0 million or $0.89 per
share in the first six months of 1995 from $9.1
million or $0.80 per share for the same period of
1994. The significant improvement during the first
six months of 1995 was primarily the result of higher
net interest income, partially offset by higher
provision and operating expense.
Net Interest Income
On a fully taxable equivalent basis, net interest
income increased $2.3 million or 8% in the first six
months of 1995 compared to the same period of 1994.
The net yield on interest-earning assets improved
slightly by 4 basis points to 4.79%. Net interest
income was also positively affected by a $68.1 million
or 6% increase in average earning assets.
Active management by the Asset Liability Committee
(ALCO) during a period of substantial and
unprecedented rate changes in 1994 enabled S&T to
maintain consistent spreads. The earning asset
increase is primarily attributable to a $109 million
or 13% loan growth over the past 12 months. New
market penetration in the Allegheny and Westmoreland
counties has been particularly successful.
Provision for Loan Losses
The provision for loan losses increased to $1.5
million for the first six months of 1995 compared to
$1.3 million in the same period of 1994. The
increase was the result of management's assessment of
economic conditions, credit quality statistics, loan
administration effectiveness and other factors that
would have an impact on future probable losses in the
loan portfolio. Net loan charge-offs totaled $0.8
million for the first six months of 1995 and 1994.
S&T's allowance for loan losses at June 30, 1995 was
$15.1 million, or 1.59% of total loans compared to
S&T BANCORP, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
$14.0 million, or 1.67% of total loans at June 30,
1994. Nonperforming loans to total loans at June 30,
1995 was 0.23% which is unchanged from the previous
year period.
Noninterest Income
Noninterest income increased 4% in the first six
months of 1995 compared to the same period of 1994.
Increases included $0.2 million or 14% in trust income
and $0.2 million or 16% in service charges and fees,
offset by a $0.1 million or 6% decrease in other
income.
The increase in trust income was attributable to a
bank wide incentive program and expanded marketing
efforts designed to develop new trust business. The
increase in service charges on deposit accounts was
primarily the result of management's continual effort
to implement reasonable fees for services performed
and to manage closely the collection of these fees.
The decrease in other income was attributable to
decreased performance for the relatively new fee based
businesses of mutual funds and annuities sales in the
first six months of 1995.
Security/nonrecurring gains increased $0.1 million in
the first six months of 1995 as compared to the same
period of 1994. Security losses were taken on
available for sale securities in the first six months
of 1995 in order to reinvest in higher-yielding
investment securities. These losses were almost
offset by gains from the sale of various equity
securities that were made in order to take advantage
of market opportunities. Included in this category is
a $219,000 gain from the aforementioned sale of
student loans.
Noninterest Expense
Noninterest expense increased $0.8 million or 5% at
June 30, 1995 compared to June 30, 1994. The increase
is primarily attributable to employment costs which
increased 4% or $0.3 million in the first six
months of 1995 compared to the same period of 1994.
The increase resulted from normal merit increases and
higher incentive payouts relative to commercial loan
volume, offset by higher deferral of loan origination
costs, also resulting from commercial loan activity.
Average full-time equivalent staff increased from 546
to 558 as compared to the same period of 1994.
S&T BANCORP, INC, AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Federal Income Taxes
Federal income tax expense increased $0.6 million or
18% at June 30, 1995 as compared to June 30, 1994 as a
result of higher pre-tax income in 1995. The first
quarter effective tax rate of 27% was below the 35%
statutory tax rate due to the tax benefits resulting
from tax exempt interest, excludable dividend income
and low income housing tax credits (LIHTC).
Three months ended June 30, 1995 compared to
Three months ended June 30, 1994
Net Income
Net income was $5.1 million or $0.45 per share for the
second quarter of 1995 compared to $4.6 million or
$0.41 per share in the second quarter of 1994, a 10%
improvement.
Net Interest Income
Net interest income for the second quarter of 1995,
increased $1.0 million from the second quarter of
1994. This improvement in net interest income
resulted from a higher level of earning assets while
maintaining consistent spreads.
Average earning assets increased by $89.2 million as
compared to the second quarter of 1994, primarily as a
result of a $113.1 million or 14% increase in average
loans. Funding for this loan growth came primarily
from the maturities of securities, as well as
increased borrowings that provided additional balance
sheet leveraging.
Net interest margin on fully taxable equivalent basis
was 4.78% for the second quarter of 1995, as compared
to 4.77% for the same period of 1994.
Provision for Loan Losses
The provision for loan losses was $0.8 million in the
second quarter of 1995 compared to $0.7 million in the
same period of 1994. The increase was the result of
management's assessment of economic conditions, credit
quality statistics, loan administration effectiveness
and other factors that would have an impact on
probable losses in the loan portfolio.
Noninterest Income
Noninterest income increased 7% or $0.1 million to
$2.0 million for the second quarter of 1995 compared
to the same period of 1994. The increase is primarily
attributable to an increase in service charges on
S&T BANCORP, INC, AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
deposit accounts, trust income and other income,
offset by a slight decrease in security gains.
The $0.1 million increase in service charges and fees
on deposit accounts are attributable to pricing and
product changes for fee based services. Management
continually reviews pricing, product enhancements,
collections and market conditions in order to
effectively increase service revenues. Trust income
increased $0.1 million for the second quarter of 1995
compared to the same period of 1994. The increase was
attributable to a bank wide incentive program and
expanded marketing efforts to develop new trust
business. The $0.1 million increase in other
noninterest income is primarily attributable to
increased performance in credit insurance sales and
letters of credit fees.
Noninterest Expense
Noninterest expense increased 7% or $0.6 million at
June 30, 1995 as compared to the same period of 1994.
The increase is primarily attributable to increases in
employment costs, occupancy, data processing and other
noninterest expenses.
Employment cost increased 3% or $0.1 million in the
second quarter of 1995 compared to the second quarter
of 1994. The increase resulted from normal merit
increases, partially offset by a higher deferral of
loan origination costs resulting from commercial loan
activity.
Occupancy, furniture and equipment expenses increased
4% in the second quarter of 1995 compared to the same
period of 1994. The increase is a result of recent
renovations, higher utility costs and the addition of
a new branch office located in a Wal*Mart Super
Center.
Other expenses increased 18% or $0.3 million in the
second quarter of 1995 as compared to the same period
of 1994. The increase is attributable to higher costs
for supplies, loan volume related expenses and
partnership losses from LIHTC investments. The LIHTC
partnership losses are offset by tax credits.
Federal income Taxes
S&T recognized federal income tax expense of $1.8
million for the quarter ending June 30, 1995 and $1.7
million for the quarter ending June 30, 1994. The
second quarter effective tax rate of 27% was below the
35% statutory tax rate due to the tax benefits
resulting from tax exempt interest, excludable
dividend income and LIHTC.
PART II
OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
None.
(b) Reports on Form 8-K
None.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned thereto duly authorized.
S&T Bancorp, Inc.
(REGISTRANT)
/s/ Robert E. Rout
Date: July 31, 1995 Robert E. Rout
Principal Accounting Officer