PROXY STATEMENT PURSUANT TO SECTION 14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
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USBANCORP, INC.
(Name of Registrant as Specified in its Charter)
________________________________________________________________
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if other than Registrant)
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
AND PROXY STATEMENT
USBANCORP, INC.
P.O. BOX 430
JOHNSTOWN, PENNSYLVANIA 15907-0430
To Be Held April 25, 2000
Mailed to Security Holders March 17, 2000
March 17, 2000
Dear Shareholder:
USBANCORP, Inc.'s Annual Meeting of Shareholders will be
held Tuesday, April 25, 2000, at 1:30 p.m., Eastern Time, at the
Four Points Hotel Sheraton Greensburg, 100 Sheraton Drive, Route
30 East, Greensburg, Pennsylvania 15601-9383.
The matters to be acted upon at the meeting are:
(a) the election of five Class II directors,
(b) such other matters as may properly be brought before
the USBANCORP annual meeting or any adjournments thereof.
Please review the enclosed material and sign, date and
return the proxy card whether you plan to attend or not so that
the matters coming before the meeting may be acted upon.
I look forward to seeing you at the annual meeting.
Cordially,
/s/ Terry K. Dunkle
Terry K. Dunkle
Chairman, President and
Chief Executive Officer
USBANCORP, Inc.
Johnstown, Pennsylvania 15901
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
March 17, 2000
To The Shareholders:
NOTICE IS HEREBY GIVEN that pursuant to the call of its
directors, the Annual Meeting of Shareholders of USBANCORP, Inc.
will be held at the Four Points Hotel Sheraton Greensburg, 100
Sheraton Drive, Route 30 East, Greensburg, Pennsylvania 15601-
9383, on Tuesday, April 25, 2000, at 1:30 p.m., Eastern Time,
for the purpose of considering and voting on the following
matters:
1. Election of five Class II directors for a term of
three years from the date of election and until
their successors shall have been elected and
qualified (Matter No. 1);
2. Such other business as may properly come before the
meeting or any adjournment thereof.
Only those shareholders of record at the close of business
on March 3, 2000 shall be entitled to notice of and to vote at
the meeting. A Proxy Statement, a proxy and a self-addressed
postage prepaid envelope are enclosed. Please complete, sign
and date the proxy and return it promptly in the envelope
provided. If you attend the meeting, you may revoke your proxy
and vote in person.
This Notice, the accompanying Proxy Statement and form of
proxy are sent to you by order of the Board of Directors.
/s/ Betty L. Jakell
Betty L. Jakell,
Corporate Secretary
Johnstown, Pennsylvania
March 17, 2000
USBANCORP, Inc.
P.O. Box 430
Johnstown, Pennsylvania 15907-0430
PROXY STATEMENT
GENERAL
Introduction
The Proxy Statement and enclosed proxy are being mailed to
the shareholders of USBANCORP, Inc. ("USBANCORP" or the
"Company"), on or about March 17, 2000, in connection with the
solicitation of proxies by the Board of Directors of USBANCORP.
The proxies will be voted at the Annual Meeting of the
Shareholders of USBANCORP to be held on Tuesday, April 25, 2000,
at 1:30 p.m., Eastern Time, at the Four Points Hotel Sheraton
Greensburg, 100 Sheraton Drive, Route 30 East, Greensburg,
Pennsylvania 15601-9383 (the "Annual Meeting"). USBANCORP's
Annual Report and Form 10-K for the year ended December 31, 1999
accompanies this Proxy Statement. It should not be regarded as
proxy solicitation material.
Solicitation of Proxies
The cost of the solicitation of proxies will be borne by
USBANCORP. In addition to the use of the mails, some directors
and officers of USBANCORP may solicit proxies, without
additional compensation, in person, by telephone, telegram, or
otherwise. Arrangements may be made by USBANCORP with banks,
brokerage houses and other custodians, nominees and fiduciaries
to forward solicitation material to the beneficial owners of
shares held by them of record, and USBANCORP may reimburse them
for reasonable expenses they incur in so doing.
Voting Securities
As of the close of business on March 3, 2000 (the "Record
Date"), there were outstanding 13,307,474 shares of common
stock, par value $2.50 per share (the "USBANCORP Common Stock"),
the only class of capital stock of USBANCORP outstanding.
Holders of record of USBANCORP Common Stock as of the close of
business on the Record Date are entitled to notice of and to
vote at the Annual Meeting. Except with respect to the election
of directors, each shareholder is entitled to one vote for each
share held. Holders of USBANCORP Common Stock are entitled to
cumulate their vote in the election of directors.
If a shareholder participates in USBANCORP's Dividend
Reinvestment and Common Stock Purchase Plan, the proxy card sent
to such shareholder will represent the number of shares
registered in the shareholder's name and the number of shares,
including fractional shares, credited to the shareholder's
Dividend Reinvestment Plan account.
If the enclosed form of proxy is appropriately marked,
signed and returned in time to be voted at the Annual Meeting,
the shares represented by the proxy will be voted in accordance
with the instructions marked thereon. Signed proxies not marked
to the contrary will be voted "FOR" the election of the nominees
of USBANCORP's Board of Directors.
Right of Revocation
Proxies may be revoked at will at any time before they have
been exercised by filing with the Corporate Secretary of
USBANCORP an instrument of revocation or a duly executed proxy
bearing a later date. Any shareholder attending the Annual
Meeting may also revoke a previously granted proxy by voting in
person at the Annual Meeting.
Quorum
Under USBANCORP's Bylaws, the presence, in person or by
proxy, of shareholders entitled to cast at least a majority of
the votes that all shareholders are entitled to cast,
constitutes a quorum for the transaction of business at the
Annual Meeting.
Principal Shareholders
The following table sets forth information regarding
persons or entities known to USBANCORP's management to own of
record or beneficially, as of March 3, 2000, 5% or more of the
outstanding shares of USBANCORP Common Stock.
Name and Address Amount of Percent of
of Beneficial Owner Beneficial Ownership Common Stock
National City Corporation 735,900 5.53%
1900 East Ninth Street
Cleveland, Ohio 44114-3484
MATTER NO. 1
ELECTION OF USBANCORP DIRECTORS
General
The Articles of Incorporation of USBANCORP provide that
USBANCORP's business shall be managed by a Board of Directors of
not less than 5 and not more than 25 persons. Under the
Articles of Incorporation, the total number of directors may be
determined by either a resolution adopted by a majority vote of
the directors then in office or by resolution of the
shareholders at a meeting. The number of directors for 2000 has
been set by the Board at 15.
USBANCORP's Board of Directors, as provided in its Articles
of Incorporation, is divided into three classes: Class I, Class
II and Class III, each being as nearly equal in number as
possible. The directors in each class serve terms of three
years each and until their successors are elected and qualified.
Under USBANCORP's Bylaws, a person elected to fill a vacancy on
the Board of Directors serves as a director for the remaining
term of office of the class to which he or she was elected.
As previously announced, USBANCORP intends to divide its
two principal operating subsidiaries, U.S. Bank and Three Rivers
Bank and Trust Company, into two separate companies. To
accomplish this, USBANCORP formed Three Rivers Bancorp, Inc.
("TRBC") and will contribute its stock in Three Rivers Bank to
TRBC. USBANCORP then will declare a dividend of TRBC stock to
its shareholders. The result will be that USBANCORP
shareholders will own two separate public companies, USBANCORP,
which will own U.S. Bank, and TRBC, which will own Three Rivers
Bank. This transaction, called a spin-off, is more fully
described in the Information Statement that will be distributed
to USBANCORP shareholders during the week of March 27, 2000.
USBANCORP expects to complete the spin-off on April 1, 2000.
In anticipation of the spin-off, USBANCORP, as the sole
shareholder of TRBC, elected the Board of Directors of TRBC.
The Board of Directors of TRBC consists of all the directors of
Three Rivers Bank and those directors of USBANCORP that will
continue as directors of TRBC after the spin-off. These
USBANCORP directors are Messrs. Jerome M. Adams, Barton, Butler,
Dunkle, Kappel and Sevy. On February 25, 2000, each resigned as
a director of USBANCORP effective as of the date of the spin-
off.
In anticipation of the spin-off and the resignation of the
above-named USBANCORP directors on February 25, 2000, the
USBANCORP Board of Directors increased the size of the USBANCORP
Board of Directors by nine. It then appointed nine directors of
U.S. Bank who did not already serve as a director of USBANCORP
to fill these vacancies. Upon completion of the spin-off on
April 1, 2000, the USBANCORP Board of Directors will reduce the
size of the Board from 21 to 15.
The Board of Directors fixed the number of directors in
Class II at five and has nominated J. Michael Adams, Jr., Edward
J. Cernic, Sr., Margaret A. O'Malley, Mark E. Pasquerilla and
Thomas C. Slater for election as Class II directors for three-
year terms to expire at the 2003 Annual Meeting of Shareholders,
and until their successors are duly elected and qualified.
O'Malley, Pasquerilla and Slater were elected by the
shareholders at the 1997 Annual Meeting. J. Michael Adams, Jr.
and Edward J. Cernic, Sr. were appointed to fill the vacancies
created on February 25, 2000 as described above. The remaining
directors will continue to serve in accordance with their
previous election or appointment with the terms of the Class I
and Class III directors expiring in 2001 and 2002, respectively.
The Bylaws of USBANCORP permit nominations for election to
the Board of Directors to be made by the Board of Directors or
by any shareholder entitled to vote for the election of
directors. All nominations for director to be made at the
Annual Meeting by shareholders entitled to vote for the election
of directors must be preceded by notice in writing, delivered or
mailed by first class United States mail, postage prepaid, to
the President of USBANCORP not less than 60 days nor more than
90 days prior to the Annual Meeting, which notice must contain
certain information specified in the Bylaws. No notice of
nomination for election as a director has been received from any
shareholder as of the date of this Proxy Statement. If a
nomination is attempted at the Annual Meeting which does not
comply with the procedures required by the Bylaws or if any
votes are cast at the Annual Meeting for any candidate not duly
nominated, then such nomination and/or such votes may be
disregarded.
With respect to the election of directors, each shareholder
has the right to vote for each share of USBANCORP Common Stock
held by him or her, as many votes as shall equal the number of
directors to be elected, and he or she, or his or her proxy, may
cast the whole number of votes for one nominee or distribute
them among two or more nominees. Unless authority is withheld
as to a particular nominee or as to all nominees, all proxies
will be voted for the five nominees listed. The proxies will
have authority to cumulate votes in their discretion except to
the extent a shareholder withholds such authority on the form of
proxy. The five persons receiving the highest number of votes
cast at the Annual Meeting will be elected as Class II
directors. Abstentions and broker non-votes will not constitute
or be counted as "votes" cast for purposes of the Annual
Meeting, but will be counted for purposes of determining the
presence of a quorum.
Except as noted above, it is intended that shares
represented by proxies will be voted for the nominees listed,
each of whom is now a director of USBANCORP or U.S. Bank and
each of whom has expressed his or her willingness to serve, or
for any substitute nominee or nominees designated by the
USBANCORP Board of Directors in the event any nominee or
nominees become unavailable for election. The USBANCORP Board
of Directors has no reason to believe that any of the nominees
will not serve if elected.
The following tables set forth as to each of the nominees
for election as a Class II director and as to each of the
continuing Class I and Class III directors, his or her age,
principal occupation and business experience, the period during
which he or she has served as a director of USBANCORP, an
affiliate or predecessor and other business relationships.
There are no family relationships between any of the listed
persons.
Nominees For Election As
Class II Directors - Term Expires in 2003
Directorship in
Director other Reporting
Name and Principal Occupation(1) Age Since(2)(3) __Companies__
J. Michael Adams, Jr. 38 2000 None
Attorney-at-Law
Sable, Pusateri, Rosen, Gordon
& Adams, LLC
Edward J. Cernic, Sr. 67 1998 None
President, Cernic
Enterprises, Inc.
Margaret A. O'Malley 40 1997 None
Attorney-at-Law
Yost & O'Malley
Mark E. Pasquerilla 40 1997 Crown American
Chairman, President and CEO Realty Trust
Crown American Realty Trust
Thomas C. Slater 57 1980 None
Owner, President and Director,
Slater Laboratories, Inc.,
Clinical Laboratory
Continuing Class I Directors - Term Expires in 2002
Directorship in
Director other Reporting
Name and Principal Occupation(1) Age Since(2)(3) __Companies__
James M. Edwards, Sr. 60 1984 None
Retired President and Chief
Executive Officer, WJAC,
Incorporated
Rev. Christian R. Oravec 63 1990 None
President, St. Francis College
Howard M. Picking, III 63 1994 None
President, The Picking Company
Sara A. Sargent 52 1996 None
President, The Sargent's Group
Robert L. Wise, 56 1986 GPU Energy
President and COO GPU Nuclear, Inc.
GPU Energy and President & CEO GPU Service, Inc.
GPU Telcom Services, Inc.
(Effective 4/1/00, Chairman of
USBANCORP and Chairman of
USBANCORP Trust and
Financial Services Company)
Continuing Class III Directors - Term Expires in 2001
Directorship in
Director other Reporting
Name and Principal Occupation(1) Age Since(2)(3) __Companies__
Daniel R. DeVos 57 1991 None
President & CEO
Concurrent Technologies
Corporation
James C. Dewar 62 1974 None
CEO and President, Geo. C.
Dewar, Inc.; retired
President and CEO Dewar's
Car World
Bruce E. Duke, III, M.D. 56 1987 None
Surgeon, Valley Surgeons
Medical Practice
Orlando B. Hanselman 40 1995 None
President and CEO of U.S.
Bank; Executive Vice
President of USBANCORP and
Vice Chairman of USBANCORP
Trust and Financial Services
Company. (Effective 4/1/00,
President of USBANCORP)
Kim W. Kunkle 45 1994 None
President & CEO
Laurel Holdings Company
___________________
(1) All directors and nominees have held the positions
indicated or another senior executive position with the
same entity or one of its affiliates or predecessors for
the past five years except for Mr. Adams who was
formerly a partner with the law firm of Darragh,
Buckler, Bebenek & Eck from 1992 - 1998 and Howard M.
Picking, III, who was President of Miller-Picking
Corporation, an air conditioning machinery manufacturer
from 1978 to July 1, 1997 when he retired.
(2) Reflects the earlier of the first year as a director of
USBANCORP, U.S. Bank, or Johnstown Savings Bank ("JSB").
(3) All incumbent directors were elected by the shareholders
except Messrs. Adams, Cernic, DeVos, Duke, Hanselman,
Kunkle, Oravec, Picking and Sara A. Sargent who were
appointed by the Board of Directors on February 25,
2000.
Security Ownership of Management
The following table sets forth information concerning the
number of shares of USBANCORP Common Stock beneficially owned,
as of March 3, 2000, by each present director, nominee for
director, and each executive officer named in the compensation
table set forth elsewhere herein.
Amount and Nature
of Beneficial Percent
Name of Beneficial Owner(1)(2) Ownership(3) of Class
Jerome M. Adams............... 18,437 *
J. Michael Adams, Jr.......... 620 *
Clifford A. Barton............ 191,010 1.4
Michael F. Butler............. 30,528 *
Edward J. Cernic, Sr.......... 22,924 *
James C. Dewar ............... 44,775 *
Daniel R. DeVos............... 1,114 *
Bruce E. Duke, III, M.D....... 5,993 *
Terry K. Dunkle............... 125,828 *
James M. Edwards, Sr.......... 22,462 *
Orlando B. Hanselman.......... 62,355 *
Richard W. Kappel............. 32,054 *
Kim W. Kunkle (4)............. 29,554 *
Margaret A. O'Malley (5)...... 110,737 *
Kevin J. O'Neil............... 22,138 *
Rev. Christian R. Oravec...... 180 *
Mark E. Pasquerilla (6)....... 164,689 1.2
Howard M. Picking, III (7).... 19,951 *
Sara A. Sargent............... 6,743 *
Jack Sevy..................... 7,492 *
Thomas C. Slater.............. 27,481 *
W. Harrison Vail.............. 80,584 *
Ronald W. Virag............... 11,556 *
Robert L. Wise ............ 13,319 *
Officers, Directors and
Nominees for Directors
as a Group (24 persons)(8).. 1,049,800 7.9
__________________
*Less than 1%
(1) Includes U.S. Bank directors appointed to the USBANCORP
Board of Directors on February 25, 2000 and existing
USBANCORP directors who will resign on the effective
date of the spin-off.
(2) Except as noted below, each of the identified beneficial
owners, including the officers, directors and nominees
for director as a group, has sole investment and voting
power as to all the shares shown as beneficially owned
with the exception of those held by certain officers,
directors and nominees for director jointly with their
spouses or directly by their spouses or other relatives.
(3) Includes shares of USBANCORP Common Stock that may be
acquired within sixty (60) days of the Record Date upon
the exercise of presently exercisable stock options as
follows: 64,410, 35,152, 11,507, 44,340, -0- and
155,409 held by Messrs. Dunkle, Hanselman, O'Neil, Vail,
Virag and the group, respectively. Also includes 3,000,
2,000, 2,000, 2,000, and 2,000 shares of USBANCORP
Common Stock subject to restriction held by
Messrs. Dunkle, Hanselman, O'Neil, Vail and Virag
pursuant to restricted stock awards made in January 1998
that vest ratably over a three year period. In
addition, Mr. Hanselman holds options to acquire
USBANCORP Common Stock that first become exercisable, in
part, during or after July 2000, and therefore are
excluded.
(4) Includes 11,142 and 3,000 shares held by Laurel
Management Retirement Plan and Laurel Holdings Company,
Respectively, of which Mr. Kunkle is an officer and has
voting and investment power.
(5) Margaret A. O'Malley is voting trustee of all shares of
USBANCORP Common Stock held by James F. O'Malley and
Jean O'Malley under a Voting Trust Agreement dated
March 3, 1997.
(6) Includes 162,545 shares of USBANCORP Common Stock held
by Crown American Enterprises, Inc. of which Mark E.
Pasquerilla is an officer.
(7) Includes 366 shares owned by The Picking Co. of which
Mr. Picking is President.
(8) The group consists of 24 persons, being the members of
the Board of Directors of USBANCORP, the Chief Executive
Officer and each other named executive officer of
USBANCORP set forth on the compensation table elsewhere
herein.
Board and Committees
The Board of Directors has various standing committees
including an Audit Committee, a Nominating Committee and a
Management Compensation Committee (the "Compensation
Committee"). During 1999, the Board of Directors held
7 meetings, the Audit Committee held 10 meetings, the Nominating
Committee held 1 meeting, and the Compensation Committee held
4 meetings. Each director attended at least 75% of the combined
total of meetings of the Board of Directors and of each
committee of which he was a member. Messrs. Jerome M. Adams,
Barton, Butler, Dunkle, Kappel and Sevy are not continuing as
USBANCORP directors because they are directors of Three Rivers
Bancorp, Inc. and will continue as Three Rivers Bancorp, Inc.
directors after the spin-off.
The Audit Committee is responsible for recommending to the
Board of Directors the appointment of an independent public
accountant to audit the books and accounts of USBANCORP and its
subsidiaries, reviewing the reports of the Audit Department and
the reports of examination conducted by the bank and bank
holding company regulators and USBANCORP's independent public
accountants, reviewing the adequacy of internal audit and
control procedures, and reporting to the Board of Directors. In
1999, the Audit Committee was comprised of Directors Jerome M.
Adams, Butler, Dewar (Chairman), Kappel, O'Malley, and Sevy.
In 1999, the Nominating Committee consisted of Directors
Barton, Butler, Dunkle (Chairman), Edwards, Hanselman (non-
voting), O'Malley, Pasquerilla, Sevy, Slater, Vail (non-voting)
and Wise. The Nominating Committee is responsible for
nominating individuals to stand for election as directors at the
Annual Meeting of Shareholders and will consider nominees
recommended by shareholders. Shareholders may nominate persons
for election as directors in accordance with the procedures set
forth in Section 1.3 of USBANCORP's Bylaws. Notification of
such nomination, containing the required information, must be
mailed or delivered to the President of USBANCORP not less than
60 days or more than 90 days prior to the Annual Meeting.
The Compensation Committee is responsible for reviewing and
making recommendations regarding the compensation of corporate
officers. No director who is eligible to receive any benefit
under plans administered by the Compensation Committee, except
for benefits payable to directors under the Independent
Directors Annual Retainer Plan (the Committee's administration
of which is limited to coordinating the payment of a
predetermined retainer) may serve on the Compensation Committee.
In 1999, the Compensation Committee was comprised of
Messrs. Barton, Edwards and Wise (Chairman). See "Executive
Compensation" herein.
Compensation of Directors
Executive officers of USBANCORP who are directors or
members of committees of the USBANCORP Board of Directors or its
subsidiaries receive no compensation for such positions. In
1999, independent directors of USBANCORP received a retainer of
$6,000 payable in USBANCORP Common Stock. In addition,
directors received cash compensation for attendance at USBANCORP
Board of Directors meetings of $550 per meeting. A fee of $400
was paid for attendance at each committee meeting of the
USBANCORP Board of Directors. Certain non-officer directors of
USBANCORP are also directors of U.S. Bank, Three Rivers Bank and
USBANCORP Trust and Financial Services Company (the "Trust
Company"). Directors serving on the Board of Directors of U.S.
Bank, Three Rivers Bank, or the Trust Company were compensated
for their services by a payment of $450 for each Board of
Directors meeting attended. A fee of $400 was paid for each
committee meeting attended. Directors who serve on the board of
UBAN Associates, Inc. receive no remuneration.
Executive Compensation
Compensation Committee Report on Executive Compensation
USBANCORP's Management Compensation Committee oversees
USBANCORP's executive compensation programs to ensure that they:
attract and retain high caliber executives, deliver the total
compensation package in a cost-effective manner, reinforce key
business objectives, provide competitive compensation
opportunities for competitive results, induce management
ownership of USBANCORP Common Stock, and comply with applicable
regulations.
The role of the Committee is to approve executive salary
adjustments, to administer the Executive Annual Incentive Plan
(including establishment of performance goals), and to
administer the 1991 Stock Option Plan. Additionally, from time
to time, the Committee reviews other human resource issues,
including qualified and non-qualified benefits, management
performance evaluation, and succession planning.
Executive Compensation Policy
The Committee uses a formal executive compensation policy
to help evaluate and administer executive pay. The policy
addresses each of the major components of the executive pay
program and is summarized below.
- Maintain a conservative executive base salary practice
(approximating the 40th percentile of competitive
practices-defined below) to ensure the appropriate
performance sensitivity and focus on long-term results.
- Maintain a competitive annual incentive program that
recognizes important achievements consistent with
USBANCORP's long-term objectives, providing target and
maximum annual total cash opportunities that approximate
the 40th and 60th percentiles of competitive annual total
cash practices, respectively. A portion of all plan
participants' incentive awards is based upon corporate
performance relative to goals. Certain executives of
the subsidiaries also are evaluated and rewarded based
upon subsidiary and individual performance achievements.
- Maintain competitive long-term incentives that: align
management's financial interests with those of
USBANCORP's shareholders, induce management ownership of
USBANCORP Common Stock, support the achievement of
USBANCORP's long-term financial objectives, and provide
competitive long-term incentive reward opportunities.
- Provide typical benefits through qualified programs
generally available to all employees, supplemented by
non-qualified arrangements, as appropriate.
- Competitive pay practices are determined using two
different sets of data-survey data and peer data.
- Survey data refers to compensation data from banking
industry compensation surveys. Competitive
compensation practices are determined using
compensation levels at holding companies and
subsidiaries of comparable size to USBANCORP and its
subsidiaries, for positions comparable to those held
by the officers identified in the Summary
Compensation Table included herein (the "Named
Officers").
- Peer data comes from a group of multi-bank, bank
holding companies of comparable size to USBANCORP.
The peer institutions are located in Pennsylvania,
Ohio, Illinois, Indiana, Michigan and West Virginia.
- The indices used in the Stock Performance Chart are
Nasdaq/NMS (U.S. Companies) and Nasdaq Bank Stocks.
While USBANCORP believes that some of the surveyed
banks and some of the peer banks may be included
within these indices, it is not the intention of the
Committee to establish executive pay practices based
on the pay practices of the organizations that
compose these indices. The Committee believes that
some of the organizations in these indices would be
either too large or too small to be relevant for
setting pay for USBANCORP and subsidiary executives.
Relationship of Performance Under Compensation Plans
USBANCORP relies on incentive arrangements, discussed
below, to establish the desired relationship between pay and
performance.
The Company administers an annual incentive plan through
which participants can earn performance-based compensation. The
bonuses of the Named Officers were based on the following
performance measures-corporate return on equity (ROE), total
return to shareholders, a third-party comparative estimate of
the holding company's CAMEL rating (an overall indicator of the
performance and financial soundness of the institution),
efficiency ratio, and individual performance.
At its February 2000 meeting, the Compensation Committee
reviewed 1999 performance results relative to the incentive plan
goals for 1999. The Committee determined that ROE performance
results fell between target and maximum levels and that total
return to shareholders, CAMEL, and efficiency ratio performance
fell below their respective threshold goals. Some of the Named
Officers, but not the CEO of USBANCORP, also received a portion
of their awards based on their individual performance under the
Company's performance evaluation program.
In consideration of prior awards of restricted stock and
stock options, the Committee did not award any restricted stock
or stock options to any of the Named Officers in 1999.
The Committee uses a management stock ownership program to
emphasize the 1991 Stock Option Plan's role in aligning
management and shareholder interests. Target ownership levels
range from a fraction of salary to two and one-half times
salary. The Committee periodically reviews the progress of the
executives in working toward their ownership targets, which will
be a consideration in determining future compensation actions.
1999 Compensation for the Chief Executive Officer
The CEO's 1999 salary approximated the competitive position
stated in the compensation policy.
The CEO participated in the Executive Annual Incentive Plan
for 1999. His award opportunity was allocated to four areas of
corporate performance: ROE, total return to shareholders,
efficiency ratio, and CAMEL rating. In 1999 USBANCORP's ROE
performance was positioned between target and maximum levels.
Total return to shareholders, efficiency ratio, and USBANCORP's
CAMEL rating fell shy of threshold, resulting in no payouts for
those components. Hence, the CEO earned a bonus of $58,837 with
respect to 1999 performance, which reflects 17% of salary versus
a potential maximum bonus of 45% of salary.
Certain stock option awards in prior years anticipated that
no options would be awarded to the CEO in 1999. Thus the
Committee did not award any stock options to the CEO in 1999.
Impact of Omnibus Budget Reconciliation Act of 1993 - Section
162(m)
The Omnibus Budget Reconciliation Act of 1993 (OBRA)
Section 162(m) prohibits a publicly owned company from taking a
compensation tax deduction for annual compensation in excess of
$1,000,000 for any of the Named Officers. To the extent that
certain guidelines are met, compensation in excess of $1,000,000
is exempt from this limitation.
The Committee does not believe that the deduction limit
imposed by OBRA will affect compensation deductibility given the
compensation opportunities of the Named Officers under
USBANCORP's existing compensation programs. The Committee will
continue to evaluate the potential impact of Section 162(m) and
take such actions as it deems appropriate.
This report is furnished by Messrs. Barton, Edwards and
Wise (Chairman).
Compensation Committee Interlocks and Insider Participation
Messrs. Barton, Edwards and Wise (Chairman) served as
members of the Compensation Committee during 1999. Each member
of the Committee is excluded from participation in any plan
administered by the Committee while serving as a member, except
for participation in the Independent Directors' Annual Retainer
Plan (the Compensation Committee's administration of which is
limited to coordinating the payment of a predetermined
retainer).
Compensation Paid to Executive Officers
The following table sets forth information for the three
years ended December 31, 1999 concerning the annual and long-
term compensation for services in all capacities to USBANCORP
and its banking subsidiaries of the Named Officers.
Summary Compensation Table
Long Term
___________________________Annual Compensation__________ ________Compensation_____
Other Restricted Securities All Other
Name and Annual Stock Underlying Compensation
Principal Position Year Salary($) Bonus($)(1) Compensation($)(2) Awards(3) Options(#)(4) $)(5)(6)(7)
Terry K. Dunkle.. 1999 340,042 58,837 --- -- 0 27,050
Chairman, Pres- 1998 330,060 65,649 --- 109,477 0 26,159
ident and CEO 1997 294,833 113,107 --- -- 30,000 29,809
of USBANCOP
Orlando B. Hanselman. 1999 203,520 31,307 --- -- 0 26,247
President and CEO 1998 192,900 34,120 --- 72,984 9,000 15,489
Of U.S. Bank 1997 160,738 41,087 --- -- 18,000 15,383
Executive Vice
President of USBANCORP
And Vice Chairman of
USBANCORP Trust and
Financial Services
Company. (Effective
4/1/00, President of
USBANCORP)
W. Harrison Vail... 1999 181,500 27,951 --- -- 0 18,368
President and CEO 1998 165,000 29,172 --- 72,984 0 10,547
of Three Rivers 1997 145,000 50,263 --- -- 18,000 9,701
Bank
Kevin J. O'Neil . 1999 134,000 18,693 --- -- 0 16,660
President and CEO 1998 129,000 18,305 --- 72,984 0 9,771
of Standard 1997 120,000 32,400 --- -- 9,000 9,217
Mortgage
Corporation of
Georgia, a
subsidiary of Three
Rivers Bank
Ronald W. Virag .. 1999 109,840 15,291 --- -- 0 19,851
President and CEO 1998 107,100 15,197 --- 72,984 0 11,030
USBANCORP Trust 1997 107,036 27,540 --- -- 9,000 10,890
and Financial
Services Company
__________________
(1) Includes the cash and cash value of stock awards made to
executive officers of USBANCORP and its subsidiaries
under the Executive Annual Incentive Plan.
(2) Unless otherwise indicated, no executive officer named
in the Summary Compensation Table received personal
benefits or perquisites in excess of the lesser of
$50,000 or 10% of the officer's total compensation
(salary and bonus).
(3) At the end of 1999 Messrs. Dunkle, Hanselman, Vail,
O'Neil, and Virag held 3000, 2000, 2000, 2000, and 2000
restricted shares worth $36,000, $24,000, $24,000,
$24,000, and $24,000, respectively. The restrictions on
such shares lapse in three equal annual increments on
the anniversaries of the award. Dividends are accrued
and distributed when restrictions lapse on the
corresponding shares. Awards have been adjusted to
reflect the July 1998 3-for-1 stock split.
(4) Options were granted during 1998 and 1997 under the
1991 Stock Option Plan to the Named Officers. Awards
have been adjusted to reflect the July 1998 3-for-1
stock split.
(5) Includes amounts awarded under the Profit Sharing Plan
of USBANCORP and U.S. Bank. All full-time employees of
USBANCORP and U.S. Bank are entitled to participate in
the Profit Sharing Plan. A contribution during any plan
year is equal to the applicable percentage of U.S.
Bank's income as defined in the Plan.
(6) Includes (a) the value of the premium paid by USBANCORP
of $10,000 for a split dollar life insurance policy for
Mr. Dunkle, (b) the premiums paid by USBANCORP and its
subsidiaries for life insurance policies with coverage
limits above $50,000 to Messrs. Dunkle, Hanselman,
O'Neil, Vail and Virag, (c) country club dues for
Messrs. Dunkle, Hanselman, Vail and Virag, and (d)
estate planning services for Orlando B. Hanselman.
(7) Includes amounts contributed under a 401(k) Plan of
USBANCORP to Messrs. O'Neil and Vail. Under the
USBANCORP sponsored 401(k) Plan, employees of Three
Rivers Bank and Standard Mortgage Corporation of Georgia
are allowed to contribute up to 20% of their
compensation to the Plan with an employer match of $.50
on each $1.00 of employee contribution up to a maximum
of 6% of an employee's compensation.
Option Grants Table
No stock options were granted to any of the Named Officers
in 1999.
Option Exercises and Year-End Value Table
The following table sets forth information concerning the
exercise of options to purchase USBANCORP Common Stock by the
Named Officers during the year ended December 31, 1999, as well
as the number of securities underlying unexercised options and
potential value of unexercised options (both options which were
presently exercisable and options which were not exercisable) as
of December 31, 1999.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUE
Number of Securities
Underlying Unexercised Value of In-the-Money
Shares Options at December 31, 1999 Options at December 31, 1999(2)
Acquired on Value
Name Exercise(#) Realized($)(1) Exercisable(#) Unexercisable(#)(3) Exercisable($) Unexercisable($)
Terry K. Dunkle 6,302 53,463 66,856 0 143,397 0
Orlando B. Hanselman 4,383 25,885 39,501 24,000 81,937 0
W. Harrison Vail 2,100 21,143 44,340 0 117,621 0
Kevin J. O'Neil 493 3,338 11,507 0 13,185 0
Ronald W. Virag 13,245 43,081 0 0 0 0
_______________________
(1) Represents the aggregate market value of the underlying
shares of USBANCORP Common Stock at the date of exercise
minus the aggregate exercise prices for options
exercised.
(2) "In-the-money options" are stock options with respect to
which the market value of the underlying shares of
USBANCORP Common Stock exceeded the exercise price at
December 31, 1999. The value of such options is
determined by subtracting the aggregate exercise price
for such options from the aggregate fair market value of
the underlying shares of USBANCORP Common Stock on
December 31, 1999. Fair market value was determined by
reference to the average of the high and low sale prices
of USBANCORP Common Stock as quoted on Nasdaq Stock
Market.
(3) Includes performance-based stock options granted
December 8, 1997. The options will vest in three years,
only if USBANCORP meets or surpasses pre-set financial
performance goals. Depending on performance results
all, none, or a portion of the options may vest.
Retirement Plans
Pension Plan - U.S. Bank
U.S. Bank maintains a qualified defined benefit retirement
plan for its employees (the "U.S. Bank Plan"). Remuneration for
pension benefit purposes is base pay, wages and commissions
excluding overtime, bonus or reimbursement of business expense.
An employee's benefit under the U.S. Bank Plan is determined on
the basis of Final Average Pay which means the average annual
base salary, wages and commissions received by an employee in
the five consecutive years out of the ten ending before his
termination of employment for which the average is highest.
U.S. Bank expects to make a contribution of $739,245 in
2000 for the 1999 Plan year.
Estimated annual benefits payable upon retirement at age 65
after 15 years of service with respect to the specified
remuneration are as follows:
PENSION TABLE
U.S. BANK
Five Calendar Year
Average Salary Annual Benefit at
Preceding Retirement Normal Retirement Date
$ 15,000 $ 5,550
25,000 9,250
40,000 14,800
60,000 22,200
90,000 33,300
100,000 37,000
120,000 44,400
140,000 51,800
150,000(1) 55,500
160,000(1) 59,200
_______________________
(1) Effective for retirements on or after January 1, 1994,
annual compensation for Plan purposes may not exceed
$150,000 plus any increases applicable to cost of living
adjustments. Employees with compensation exceeding
$150,000 in years before 1994 may have larger "preserved
benefits."
The above benefits are paid for the life of the employee
with a right of survivorship with respect to ten years of post-
retirement benefits. Other optional forms of benefit are
available in actuarially equivalent amounts. Current
remuneration covered by the U.S. Bank Plan in 1999 for
Messrs. Dunkle, Hanselman and Virag was $340,042, $203,520, and
$109,840, respectively, subject to the $150,000 limitation. As
of December 31, 1999, Mr. Dunkle was credited with 12 years of
service, Mr. Hanselman with 13 years of service and Mr. Virag
with 5 years of service.
Effective January 1, 1986, the USBANCORP Board of Directors
adopted the U.S. Bank Plan for the benefit of employees of
USBANCORP on the same terms and conditions as for employees of
U.S. Bank. Contributions made by USBANCORP are limited to those
employees whose earnings are paid by USBANCORP.
Pension Plan - Three Rivers Bank
Three Rivers Bank maintained a defined benefit pension plan
that was established during 1970 (the "Three Rivers Plan").
Effective July 1, 1993, the benefit formula of the Three
Rivers Plan was revised to duplicate the benefit formula of the
U.S. Bank Plan with exception of the definition of pay for
pension purposes. Remuneration for pension purposes under the
Three Rivers Plan is base pay excluding overtime, bonus or
reimbursement of business expenses. Employees retiring on or
after July 1, 1993 will receive a benefit based upon the U.S.
Bank Plan formula but not less than the benefit earned through
June 30, 1993, under the former Three Rivers Plan formula.
Current remuneration covered by the Retirement Plan (base
salary) in 1999 for Mr. O'Neil and Mr. Vail was $134,000 and
$181,500. As of December 31, 1999, Mr. O'Neil and Mr. Vail were
credited with 6 years and 15 years of service, respectively.
Three Rivers Bank expects to make a total contribution to
the Three Rivers Plan of $865,278 in 2000 for the 1999 Plan
year.
Supplemental Pension Plans
USBANCORP has provided additional life insurance and
retirement benefits for Mr. Dunkle funded through a split-dollar
life insurance policy. USBANCORP pays a portion of the premiums
until Mr. Dunkle's normal retirement. At Mr. Dunkle's
retirement, USBANCORP will recover, through a withdrawal from
the policy, its cumulative premiums or the policy cash value if
less. Mr. Dunkle will receive a paid-up life insurance policy
that will include any remaining cash value. If Mr. Dunkle dies
prior to retirement, USBANCORP will be reimbursed for its total
premiums from the insurance proceeds. The annual premium paid
by USBANCORP is $10,000 per year, and USBANCORP has an interest
in the policy cash value equal to the lesser of its cumulative
premiums or the policy cash value.
The Compensation Committee determined that it was
appropriate to provide additional supplemental retirement
benefits to Mr. Dunkle commencing at his retirement, because
Code regulations significantly limit retirement benefits payable
to highly compensated executives under qualified pension, profit
sharing, and 401(k) plans. Accordingly, on February 25, 1994,
the Board of Directors of USBANCORP adopted a supplemental
executive retirement plan ("SERP") for the benefit of
Mr. Dunkle.
The SERP will provide supplemental retirement benefits to
Mr. Dunkle, which, in combination with benefits from all
USBANCORP sponsored qualified and non-qualified pension plans,
will ensure an appropriate total retirement benefit for
Mr. Dunkle. The target retirement benefit is 55% of the final
three-year average salary of Mr. Dunkle commencing at his normal
retirement age of 65. Although the SERP is an unfunded plan,
USBANCORP can set aside assets to meet its obligations under the
plan. USBANCORP has purchased a life insurance policy on
Mr. Dunkle's life. Assuming continuation of current interest
rates and mortality charges, USBANCORP's total premium outlay
will be completed by the time Mr. Dunkle attains normal
retirement age. The policy is designed to accumulate sufficient
cash value at Mr. Dunkle's retirement to allow USBANCORP to
recover the after tax cost of each annual SERP payment. In
addition, at Mr. Dunkle's death, tax-free life insurance
proceeds will reimburse USBANCORP for all unrecovered costs
associated with the plan. USBANCORP will not recover interest
for the time value of money.
The life insurance policy has been assigned to a Rabbi
Trust established by USBANCORP to assist USBANCORP in satisfying
its obligations to Mr. Dunkle. The Trust Company, as trustee,
is the policy owner and beneficiary. Mr. Dunkle remains a
general unsecured creditor of USBANCORP and the assets of the
trust are subject to the claims of creditors.
The Board of Directors also approved the purchase of an
individual disability income policy for Mr. Dunkle. Mr. Dunkle
has collaterally assigned the policy to USBANCORP so that in the
event of his disability prior to retirement, the policy will pay
USBANCORP a monthly benefit sufficient to pay the premium on the
SERP life insurance policy on Mr. Dunkle's life. This would
relieve USBANCORP of the obligations to pay premiums on the SERP
policy if Mr. Dunkle becomes disabled, without reducing the
promised SERP retirement benefits to Mr. Dunkle.
The Board of Directors of U.S. Bank on February 20, 1981,
adopted a Supplemental Pension Plan under which the Executive
Committee of the Board of Directors may from time to time
designate executive officers of U.S. Bank as participants and
specify the amount of supplemental pension payment the
participant shall receive.
A participating officer agrees to perform, after
retirement, such advisory services as the Executive Committee
may reasonably request and enters into a noncompetition
agreement with U.S. Bank. Upon his retirement from U.S. Bank, a
participant will be entitled to receive supplemental monthly
pension payments in a specified amount for a period of fifteen
years. If he should die before retirement while in the service
of U.S. Bank or if he should die after payment of benefits has
commenced, the participant's spouse, if any, will be entitled to
receive one-half of the specified amount for the remainder of
the fifteen year period. No payments are currently being made
under this plan.
Change in Control Agreements
In 1994, USBANCORP entered into Change in Control
Agreements (the "Agreements") with Messrs. Terry K. Dunkle,
Orlando B. Hanselman, Kevin J. O'Neil, W. Harrison Vail and
Ronald W. Virag, pursuant to which USBANCORP agreed to provide
the executives with severance benefits upon the occurrence of
certain enumerated events ("Triggering Events") following a
change in control of USBANCORP ("Change in Control") (as defined
in the Agreements). The initial term of the Agreements is three
years, subject to an automatic one year extension on each
anniversary date thereof, unless either party gives notice to
the other of an intention not to renew. Under the Agreements,
upon the occurrence of a Triggering Event following a Change in
Control, Mr. Dunkle would be entitled to receive approximately
2.99 times his combined salary and bonus which will be
determined (a) during the initial three year term of the
Agreement by reference to his highest salary and bonus paid in
the year in which he is terminated or in any one of the last
five fiscal years preceding such termination, and (b) after the
expiration of the initial term, by reference to the average of
the executive's combined salary and bonus in the preceding five
years. The Change in Control Agreements for each of Messrs.
Hanselman, O'Neil, Vail and Virag are identical, except that
Messrs. O'Neil, Vail, and Virag will receive one times their
combined base salary and bonus and Mr. Hanselman will receive
1.5 times his combined base salary and bonus. The executives,
in their discretion, may receive these payments in a lump sum or
on a monthly installment basis. The Change in Control
Agreements also entitle the executives to continued
participation in the employee benefits plans of USBANCORP for a
period of three years with respect to Mr. Dunkle, eighteen
months with respect to Mr. Hanselman and one year with respect
to the other executives. In addition, the Agreements provide
that options held by the executives to acquire USBANCORP Common
Stock, to the extent not currently exercisable, will become
immediately exercisable upon the occurrence of a Triggering
Event following a Change in Control and may be exercised by the
executives at any time prior to the earlier of the expiration
date of the options or 90 days after the executive's
termination. The Agreements also require USBANCORP to make
additional payments to the executives in the event that the
severance payments described above result in the imposition of
an excise tax, pursuant to Section 4999 of the Code on the
payment of such amounts. The spin-off does not constitute a
Change in Control under the Agreements and therefore no payments
will be due thereunder.
Performance Graph
Set forth is a graph comparing the yearly percentage change
in the cumulative total shareholder return on USBANCORP Common
Stock against the Nasdaq Stock Market (U.S. Companies) and the
Nasdaq Bank Stocks for the five years beginning January 1, 1995
and ended December 31, 1999.
[Insert Table]
Legend
Symbol Index Description 12/94 12/95 12/96 12/97 12/98 12/99
USBANCORP, INC., PA 100.0 163.7 215.0 386.7 324.4 199.6
Nasdaq Stock 100.0 141.3 173.9 213.1 300.2 542.4
Market (US Companies)
Nasdaq Bank Stocks 100.0 149.0 196.7 329.4 327.1 314.4
SIC 6020-6029, 6710-6719 US & Foreign
Notes:
A. The lines represent monthly index levels derived from
compounded daily returns that include all dividends.
B. The indexes are reweighted daily, using the market
capitalization on the previous trading day.
C. If the monthly interval, based on the fiscal year-end,
is not a trading day, the preceding trading day is
used.
D. The index level for all series was set to $100.00 on
12/30/1994.
FINANCIAL INFORMATION
Requests for printed financial material for USBANCORP or
any of its subsidiaries - annual reports, Forms 10-K, 10-Q and
Call Reports - should be directed to Jeffrey A. Stopko, Senior
Vice President and Chief Financial Officer, USBANCORP, Inc.,
P.O. Box 430, Johnstown, PA 15907-0430, telephone (814) 533-
5310.
TRANSACTIONS WITH MANAGEMENT
Certain directors, nominees and executive officers and/or
their associates were customers of and had transactions with
USBANCORP or its subsidiaries during 1999. Transactions that
involved loans or commitments by subsidiary banks were made in
the ordinary course of business and on substantially the same
terms, including interest rates and collateral, as those
prevailing at the time for comparable transactions with
unrelated persons and did not involve more than the normal risk
of collectability or present other unfavorable features. These
loans represented in the aggregate less than 4.3% of
shareholders' equity as of December 31, 1999.
Mr. Adams, a director of USBANCORP, Three Rivers Bank, the
Trust Company, Standard Mortgage Corporation of Georgia and UBAN
Associates, Inc., is a partner in a law firm that rendered
services to Three Rivers Bank during 1999 and will render such
services in 2000.
INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP has audited USBANCORP's financial
statements for the fiscal year ended December 31, 1999 and the
report on such financial statements appears in the Annual Report
to Shareholders. Arthur Andersen LLP has been selected by the
USBANCORP Board of Directors to perform an examination of the
consolidated financial statements of USBANCORP for the year
ending December 31, 2000.
Representatives of Arthur Andersen LLP are expected to be
present at the Annual Meeting with the opportunity to make a
statement if they desire to do so and are expected to be
available to respond to appropriate questions.
OTHER MATTERS
The Board of Directors knows of no other matters to be
presented at the Annual Meeting. If, however, any other
business should properly come before the Annual Meeting, or any
adjournment thereof, it is intended that the proxies will be
voted with respect thereto in accordance with the best judgment
of the persons named in the proxies.
SHAREHOLDERS PROPOSALS FOR NEXT ANNUAL MEETING
Any shareholder desiring to present a proposal to be
considered at the 2001 Annual Meeting of Shareholders should
submit the proposal in writing to: Chairman, USBANCORP, Inc.,
Executive Offices, P.O. Box 430, Johnstown, PA 15907-0430 no
later than November 22, 2000.
By Order of the Board of Directors
/s/ Betty L. Jakell
Betty L. Jakell
Corporate Secretary
March 17, 2000
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