[LETTERHEAD]
March 20, 1997
To Our Shareholders:
On behalf of the Board of Directors and management of First Shenango
Bancorp, Inc. (the "Company"), I cordially invite you to attend the 1997 Annual
Meeting of Shareholders to be held at the Company's headquarters, 25 North Mill
Street, New Castle, Pennsylvania, on Tuesday, April 22, 1997, at 4:00 p.m. The
Company is the parent holding company of First Federal Savings Bank of New
Castle. The attached Notice of Annual Meeting and Proxy Statement describe the
formal business to be transacted at the Meeting. During the Meeting, I will also
report on the operations of the Company. Directors and officers of the Company,
as well as representatives of Ernst & Young LLP, the Company's independent
auditors, will be present to respond to any questions shareholders may have.
Whether or not you plan to attend the Annual Meeting, please sign and date
the enclosed Proxy Card and return it in the accompanying postage-paid return
envelope as promptly as possible. YOUR VOTE IS VERY IMPORTANT.
Your continued support of, and interest in, First Shenango Bancorp, Inc. is
appreciated.
Sincerely,
/s/ Francis A. Bonadio
Francis A. Bonadio
President and Chief Executive Officer
FIRST SHENANGO BANCORP, INC.
25 NORTH MILL STREET
NEW CASTLE, PENNSYLVANIA 16101
(412) 654-6605
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 22, 1997
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NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders ("Meeting")
of First Shenango Bancorp, Inc. ("Company"), will be held at the Company's
headquarters, 25 North Mill Street, New Castle, Pennsylvania on Tuesday, April
22, 1997, at 4:00 p.m. The Meeting is for the purpose of considering and acting
upon the following matters:
1. The election of three directors of the Company;
2. The ratification of the appointment of Ernst & Young LLP as
independent auditors for the Company for the year ending December 31,
1997; and
3. Such other matters as may properly come before the Meeting or any
adjournments thereof. The Board of Directors is not aware of any other
business to come before the Meeting.
Any action may be taken on any one of the foregoing proposals at the
Meeting on the date specified above or on any date or dates to which, by
original or later adjournment, the Meeting may be adjourned. Shareholders of
record at the close of business on February 28, 1997 are the shareholders
entitled to vote at the Meeting and any adjournments thereof.
You are requested to complete and sign the enclosed form of proxy which is
solicited by the Board of Directors and to mail it promptly in the enclosed
envelope. The proxy will not be used if you attend and vote at the Meeting in
person.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ E. Waneata VanKirk
E. WANEATA VANKIRK
SECRETARY
New Castle, Pennsylvania
March 20, 1997
IMPORTANT: THE PROMPT RETURN OF PROXIES WILL SAVE THE COMPANY THE EXPENSE OF
FURTHER REQUESTS FOR PROXIES IN ORDER TO INSURE A QUORUM. A SELF-ADDRESSED
ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE. NO POSTAGE IS REQUIRED IF MAILED IN
THE UNITED STATES.
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PROXY STATEMENT
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FIRST SHENANGO BANCORP, INC.
25 NORTH MILL STREET
NEW CASTLE, PENNSYLVANIA 16101
(412) 654-6605
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ANNUAL MEETING OF SHAREHOLDERS
APRIL 22, 1997
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- - -------------------------------------------------------------------------------
General
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This Proxy Statement is furnished to holders of common stock, $.10 par
value per share ("Common Stock") of First Shenango Bancorp, Inc. (the
"Company"), the holding company for First Federal Savings Bank of New Castle
(the "Savings Bank"). Proxies are being solicited by the Board of Directors of
the Company to be used at the Annual Meeting of Shareholders of the Company (the
"Meeting") which will be held at the Company's headquarters located at 25 North
Mill Street, New Castle, Pennsylvania, on Tuesday, April 22, 1997 at 4:00 p.m.
The accompanying Notice of Meeting and this Proxy Statement are being first
mailed to shareholders on or about March 20, 1997.
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Revocability of Proxies
- - -------------------------------------------------------------------------------
Shareholders who execute proxies retain the right to revoke them at any
time. Unless so revoked, the shares represented by such proxies will be voted at
the Meeting and all adjournments thereof. Proxies may be revoked by written
notice delivered in person or mailed to the Secretary of the Company at the
address shown above or by the filing of a later-dated proxy prior to a vote
being taken on a particular proposal at the Meeting. A proxy will not be voted
if a Shareholder attends the Meeting and votes in person. Proxies solicited by
the Board of Directors will be voted in accordance with the directions given
therein. Where no instructions are indicated, proxies will be voted in favor of
the proposals set forth in this Proxy Statement for consideration at the Meeting
or any adjournment thereof.
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Voting Securities and Principal Holders Thereof
- - -------------------------------------------------------------------------------
Shareholders of record as of the close of business on February 28, 1997
("Voting Record Date"), are entitled to one vote for each share of Common Stock
then held. As of the Voting Record Date, the Company had 2,058,610 shares of
Common Stock issued and outstanding (after deducting an aggregate of 284,488
shares held in treasury).
As to the election of directors (Proposal I), the proxy card being
provided by the Board of Directors enables a shareholder to vote for the
election of the nominees proposed by the Board, or to withhold authority to vote
for one or more of the nominees being proposed. Directors are elected by a
plurality of votes cast, without regard to either (i) broker non-votes, or (ii)
proxies as to which authority to vote for one or more of the nominees being
proposed is withheld.
As to the ratification of auditors (Proposal II), by checking the
appropriate box, shareholders may (i) vote "FOR" the ratification; (ii) vote
"AGAINST" the ratification; or (iii) "ABSTAIN" with respect to the ratification.
Unless otherwise required by law, the ratification of independent auditors shall
be determined by a majority of the votes cast affirmatively or negatively,
without regard to either (a) broker non-votes or (b) proxies marked "ABSTAIN" as
to that matter.
As to other matters that may properly come before the Meeting, unless
otherwise provided in the articles of incorporation or bylaws of the Company or
by statute, a majority of those votes cast by shareholders shall be sufficient
to pass on a matter.
The articles of incorporation of the Company provide that in no event
shall any record owner of any outstanding Common Stock which is beneficially
owned, directly or indirectly, by a person who beneficially owns in excess of
10% of the then outstanding shares of Common Stock (the "Limit") be entitled or
permitted to vote with respect to the shares held in excess of the Limit and
that voting rights may, in certain situations, be reduced below the limit.
Beneficial ownership is determined pursuant to Rule 13d-3 of the General Rules
and Regulations promulgated pursuant to the Securities Exchange Act of 1934
("1934 Act"), and includes shares beneficially owned by such person or any of
his or her affiliates (as defined in the articles of incorporation) and shares
which such person or his or her affiliates have the right to acquire upon the
exercise of conversion rights or options and shares as to which such person and
his or her affiliates have or share investment or voting power, but shall not
include shares beneficially owned by the Savings Bank's Employee Stock Ownership
Plan ("ESOP") or directors, officers and employees of the Company or its
subsidiaries, or shares that are subject to a revocable proxy and that are not
otherwise beneficially owned, or deemed by the Company to be beneficially owned,
by such person or his or her affiliates.
The presence in person or by proxy of at least a majority of the
outstanding shares of Common Stock entitled to vote (after subtracting any
shares held in excess of the Limit) is necessary to constitute a quorum at the
Meeting.
Persons and groups owning in excess of five percent of the Common Stock
are required to file certain reports with the Securities and Exchange Commission
("Commission") regarding such ownership pursuant to the 1934 Act. The Company
knows of no person or entity, including any "group" as that term is used in
Section 13(d)(3) of the 1934 Act, who or which was known to the Company to be
the beneficial owner of more than 5% of the issued and outstanding Common Stock
on the Voting Record Date.
Information concerning the security ownership of management is included
under "Proposal I -- Election of Directors."
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SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
- - -------------------------------------------------------------------------------
Section 16(a) of the 1934 Act requires the Company's officers and
directors, and persons who own more than ten percent of the Common Stock, to
file reports of ownership and changes in ownership of the Common Stock, on Forms
3, 4 and 5, with the Securities and Exchange Commission and to provide copies of
those Forms 3, 4 and 5 to the Company. The Company is not aware of any
beneficial owner, as defined under Section 16(a), of more than ten percent of
the Common Stock.
Based upon a review of the copies of the forms furnished to the Company, or
written representations from certain reporting persons that no Forms 5 were
required, the Company believes that all Section 16(a) filing requirements
applicable to its executive officers and directors were complied with during the
year ended December 31, 1996, except for Director R. Joseph Hrach who filed one
report, covering one transaction, 13 days late.
2
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PROPOSAL I -- ELECTION OF DIRECTORS
- - -------------------------------------------------------------------------------
The Company's Board of Directors is presently composed of seven members
who are elected for terms of three years, approximately one-third of whom are to
be elected annually in accordance with the Bylaws of the Company. The Bylaws of
the Company require that approximately one-third of the directors stand for
election each year. At this Meeting, three directors will stand for election.
Former Director J. Austin Murphy chose not to stand for re-election in 1996 due
to relocation from the area. On August 27, 1996 the Board of Directors of the
Company appointed R. Joseph Hrach to the Board effective October 8, 1996. Mr.
Hrach has been nominated for election to a three year term.
It is intended that the persons named in the proxies solicited by the
Board will vote for the election of the named nominees. If any nominee is unable
to serve, the shares represented by all valid proxies will be voted for the
election of such substitute as the Board of Directors may recommend. At this
time, the Board knows of no reason why any nominee might be unavailable to
serve.
The following table sets forth each nominee and continuing director's
name, age, the year he first became a director of the Company or of the
predecessor to the Savings Bank, the year in which his term will expire and the
number of shares and percentage of the Company's Common Stock beneficially
owned. The following table also sets forth, for all executive officers and
directors as a group and for each executive officer listed in the Summary
Compensation Table under the caption "Executive Compensation," the number of
shares and the percentage of the Company's Common Stock beneficially owned.
Year First Shares of Common
Elected Term to Stock Beneficially % of
Name Age (1) Director Expire Owned(2)(3)(4)(5) Class
- - -------------------------- ------- --------- ------- ------------------ -----
BOARD NOMINEES FOR TERMS TO EXPIRE IN 2000
Francis A. Bonadio........ 65 1985 1997 71,523(11) 3.29%
R. Joseph Hrach .......... 48 1996 1997 0(6)(7) 0
Richard E. Rentz, Jr...... 53 1986 1997 28,267(7)(12) 1.30
DIRECTORS CONTINUING IN OFFICE
William G. Eckles, II..... 71 1966 1999 24,112(7)(8) 1.11
Dale R. Perelman.......... 54 1986 1999 27,687(9) 1.27
Ronald P. Bergey.......... 58 1984 1998 20,634 0.95
Robert H. Carlson......... 69 1978 1998 26,917(10) 1.24
All executive officers and
directors as a group
(9 persons)............. 238,317(7) 10.97%
(Footnotes on next page)
3
(1) At December 31, 1996.
(2) At February 28, 1997.
(3) Pursuant to rules promulgated under the 1934 Act, a person or entity is
considered to beneficially own shares of Common Stock if he or she directly
or indirectly has or shares (1) voting power, which includes the power to
vote or to direct the voting of the shares; or (2) investment power, which
includes the power to dispose or direct the disposition of the shares.
Unless otherwise indicated, includes all shares held directly by the named
individuals as well as by spouses, minor children in trust and other
indirect ownership, over which shares the named individual effectively
exercises sole voting and investment power.
(4) Includes 11,873 restricted shares awarded to Mr. Bonadio and 2,710
restricted shares granted to each non-employee director pursuant to the
Management and Directors Stock Bonus Plans, which vest over four years at
the rate of 25% per year commencing on the first anniversary of the
effective date of the Savings Bank's conversion from mutual to stock form
on April 5, 1993, for which each recipient possesses sole voting power and
no investment power until such shares vest. Mr. Hrach did not become a
Director until 1996 and thus did not receive such an award.
(5) Includes shares of Common Stock subject to options granted pursuant to the
1993 Stock Option Plan for which options are exercisable within 60 days of
the Voting Record Date.
(6) Excludes 5,000 stock options awarded, but not exercisable within 60 days of
the Voting Record Date.
(7) Excludes 108,469 shares of Common Stock (5.27%) held by the ESOP of the
Savings Bank for which such non-employee directors (Directors Eckles, Hrach
and Rentz) serve as plan trustees and exercise shared voting and investment
power. Shares which are unallocated to participating employees (presently
66,370 shares) and shares for which no voting directions are received are
voted by the plan trustees. Once allocated to participant accounts, such
Common Stock will be voted by the plan trustees as directed by each plan
participant as the beneficial owner of such Common Stock. The plan trustees
act as fiduciaries within the meaning of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"). The individuals serving as plan
trustees disclaim beneficial ownership of stock held under the ESOP.
(8) Includes 5,000 shares held in trust by a self-directed IRA account, 2,000
shares held directly by spouse, and 2,570 shares held jointly by spouse,
son and daughter.
(9) Includes 10,349 shares held jointly with spouse, and 106 shares held
directly by spouse.
(10) Includes 8,650 shares held in trust by a self-directed IRA account.
(11) Includes 10,000 shares held jointly with spouse, 3,200 shares held directly
by spouse, 2,035 shares held directly by sons, and 5,795 shares allocated
under the ESOP.
The principal occupation during the past five years of each nominee and
director of the Company is set forth below.
Francis A. Bonadio has served as President and Chief Executive Officer
since 1985. Prior to that time, he served as an officer of the Savings Bank from
1976-1985. Mr. Bonadio is on the Board of Directors of the New Castle Community
Y, the Jameson Hospital and The Hoyt Institute of Fine Arts.
Ronald P. Bergey is a Certified Public Accountant and a Professor of
Accounting at Westminster College, New Wilmington, Pennsylvania. He also owns
and operates a part-time CPA practice in New Wilmington. Mr. Bergey is a member
of the Pennsylvania Institute of Certified Public Accountants and the American
Institute of Certified Public Accountants.
Robert H. Carlson is currently retired. Prior to 1990 he was President and
Chief Executive Officer of Universal-Rundle Corp., New Castle, Pennsylvania, a
plumbing-fixture manufacturer. Mr. Carlson retired from the Board of Directors
of the Ohio Edison Company and the Pennsylvania Power Company in 1996. He is
currently the Chairman of the Board of St. Francis Hospital in New Castle.
William G. Eckles, II, currently retired, was the President and Chief
Executive Officer of W.G. Eckles Co., New Castle, Pennsylvania, an architectural
firm, from 1968 to 1986. Mr. Eckles serves on the Board of Directors of the New
Castle Community Y.
R. Joseph Hrach is the President of the Pennsylvania Power Company ("Penn
Power") in New Castle, Pennsylvania, a position he has held since July 1, 1996.
Previously he was a Division Manager of the Ohio Edison Company, the parent
company of Penn Power.
4
Dale R. Perelman is President, Chief Executive Officer and a minority
stockholder of King's Jewelry, New Castle, Pennsylvania. Mr. Perelman is the
founder of Leadership Lawrence County, President of Jewelers of America and
serves on the Board of the Lawrence County Historical Society.
Richard E. Rentz, Jr. is currently self employed as a computer consultant.
Mr. Rentz retired as publisher of the News Company, New Castle, Pennsylvania in
1991.
Meetings and Committees of the Board of Directors
- - -------------------------------------------------
The Company's Board of Directors conducts its business through meetings of
the Board, through meetings of the Board of the Savings Bank and through
activities of the committees of the Savings Bank. During the fiscal year ended
December 31, 1996, the Board of Directors of the Company held twelve regular
meetings and the Board of Directors of the Savings Bank held twenty-three
regular meetings. No director attended fewer than 75% of the total meetings of
the Boards of Directors of the Company or Savings Bank and committees on which
such director served during the fiscal year ended December 31, 1996.
The Compensation Committee of the Company consists of Robert H. Carlson -
Chairman, William G. Eckles, II and Richard E. Rentz, Jr. The committee reviews
the performance of the Savings Bank's officers and employees, and determines
compensation programs and adjustments. The Compensation Committee met two times
during fiscal 1996.
The Audit Committee of the Savings Bank consists of Ronald P. Bergey -
Chairman, Robert H. Carlson and Dale R. Perelman. The Audit Committee reviews
the actions and reports of the internal audit department and the independent
auditor. The Committee also provides direction to the internal auditor. The
Committee meets as needed. There were three regular meetings in 1996.
The Company does not have a standing nominating committee. The Board of
Directors acted as the nominating committee to nominate directors to serve on
the Board. The nominating committee met once during the twelve months ended
December 31, 1996. Although the Board acting as the nominating committee will
consider nominees recommended by shareholders, it has not actively solicited
recommendations from shareholders of the Company. Director nominations by
shareholders must be received at the executive office of the Company not less
than 60 days prior to the anniversary date of the preceding annual shareholder
meeting. The written notice must set forth as of the date of the notice (a) as
to each person whom the shareholder proposes to nominate (i) name, age, business
address and residence address, (ii) principal occupation or employment, (iii)
class and number of shares of Company stock beneficially owned, and (iv) any
other information relating to such person that would be required to be disclosed
in proxy material pursuant to the proxy rules of the 1934 Act; and (b) as to the
shareholder giving the notice (i) the name and address of such shareholder and
any other shareholders known by such shareholder to be supporting such nominees
and (ii) the class and number of shares of Common Stock which are beneficially
owned by such shareholder and, to the extent known, by any other shareholders
known by such shareholder to be supporting such nominees.
Directors' Compensation
During 1996 each non-employee member of the Board of Directors of the
Savings Bank received an annual retainer fee of $3,000 plus a fee of $850 per
month and the Chairman of the Board received an additional fee of $100 per
month. No additional fees are paid for Board committee meetings. For the fiscal
year ended December 31, 1996, total fees paid to directors for Board meetings
and committee meetings were $74,900. No separate fees are paid for attendance at
Board or Board committee meetings of the Company. Additionally, directors
received awards of stock options and restricted stock in conjunction with the
Savings Bank's mutual-to-stock conversion in 1993.
5
During 1996, Director R. Joseph Hrach received options to purchase 5,000
shares of Common Stock. Also during 1996, former Director J. Austin Murphy
exercised stock options covering 2,500 shares which resulted in net value
realized (fair market value less exercise price) of $26,875. Director Emeritus
Albert J. Genkinger exercised stock options covering 2,847 shares which resulted
in net value realized of $32,029.
Executive Compensation
The Company has no full time employees, relying upon employees of the
Savings Bank for the limited services required by the Company. All compensation
paid to directors, officers and employees is paid by the Savings Bank.
Summary Compensation Table. The following table sets forth the name of the
chief executive officer during the fiscal years ended December 31, 1996, 1995
and 1994. No other executive officer received cash compensation in excess of
$100,000 during the fiscal years ended December 31, 1996, 1995 or 1994.
Long Term
Compensation
------------------------------------
Annual Compensation Awards Payouts
- - ----------------------------------------------------------------- ------------------------ -------
Securities
Restricted Underlying All Other
Name and Other Annual Stock Options/ LTIP Compensation
Principal Position Year Salary Bonus Compensation(1) Award(s)($) SARs(#) Payouts (2)
- - ------------------ ---- ------ ----- --------------- ----------- ---------- ------- ------------
Francis A. Bonadio 1996 $140,000 $43,550 $ -0- $ -0- -0- $-0- $63,941
President and CEO 1995 $134,000 $36,180 $ -0- $ -0- -0- $-0- $67,442
1994 $128,000 $34,430 $ -0- $ -0- -0- $-0- $58,628
- - ------------------------
(1) Does not include the value of certain other benefits, such as pension
plans and club membership, which do not exceed 10% of the total salary and
bonus of the named executive.
(2) Indicates employer contributions to the Savings Bank's 401(K) Profit
Sharing Plan of $3,289, $3,394, and $3,286 for 1996, 1995 and 1994,
respectively. Represents value of 1,357 shares, 1,511 and 1,426 shares
allocated under the ESOP in 1996, 1995 and 1994 based upon the market
price of $22.50, $20.50 and $13.75 as of December 31, 1996, 1995 and 1994,
respectively. Includes premiums paid on life insurance policy for the
benefit of Mr. Bonadio of $1,132, $675 and $645 for 1995, 1994 and 1993,
respectively. Also includes amounts accrued for the Supplemental Executive
Retirement Plan of $28,997, $32,389 and $35,084 for 1996, 1995 and 1994,
respectively.
Executive Management
The following table sets forth certain information with respect to executive
officers of the Company who are not directors of the Company. There are no
arrangements or understandings between the Company and any person pursuant to
which such person has been appointed an executive officer. No executive officer
is related to any other executive officer or director of the Company by blood,
marriage or adoption. Officers of the Company are appointed annually by the
Board of Directors for one year terms.
Lonny D. Robinson, CPA, 39, has served as Chief Financial Officer, Vice
President and Treasurer of the Company since January, 1993; Chief Financial
Officer of the Savings Bank since April, 1995; and Vice President and Treasurer
of the Savings Bank since February, 1988; joined the Savings Bank in December,
1984.
E. Waneata VanKirk, 57, has served as Secretary of the Company and the
Savings Bank since April, 1994; Assistant Secretary of the Company from April,
1993 to April, 1994; and Assistant Secretary of the Savings Bank from February,
1988 to April, 1994; joined the Savings Bank in October, 1963.
6
Board Compensation Committee Report on Executive Compensation
- - -------------------------------------------------------------
The Company's Compensation Committee met two times during the fiscal year
ended December 31, 1996 to review compensation paid to executive officers and to
determine the level of any increases in the salary budget for executive officers
to take effect during the following year. The committee reviews various
published surveys of compensation paid to executives performing similar duties
for depository institutions and their holding companies, with a particular focus
on the level of compensation paid by comparable institutions in and around the
Savings Bank's market area, including institutions with total assets of between
$200 million and $500 million. Although the committee does not set compensation
levels for executive officers based on whether particular financial goals have
been achieved by the Company, the committee does consider the overall
profitability of the Company when making these decisions. With respect to each
particular executive officer, his or her contributions to the Company over the
past year are also evaluated. For the fiscal year ended December 31, 1996,
Francis A. Bonadio, President and Chief Executive Officer, received an increase
in salary from $134,000 to $140,000, as disclosed in the Summary Compensation
Table.
Compensation Committee
Robert H. Carlson, Chairman
William G. Eckles, II
Richard E. Rentz, Jr.
Stock Option Plan. In connection with the Savings Bank's conversion from
mutual to stock form in April, 1993 (the "Conversion") and acquisition of the
outstanding stock of the Savings Bank by the Company, (the "Reorganization"),
the Company's Board of Directors adopted the First Shenango Bancorp, Inc. 1993
Stock Option Plan (the "Option Plan"), which was ratified by shareholders of the
Company at the August 1993 meeting of shareholders. Pursuant to the Option Plan,
224,825 shares of Common Stock are reserved for issuance upon exercise of stock
options granted or to be granted to officers, directors and key employees of the
Company and its subsidiaries from time to time. The purpose of the Option Plan
is to provide additional incentive to certain officers, directors and key
employees by facilitating their purchase of a stock interest in the Company. The
Option Plan, which became effective upon the Reorganization, provides for a term
of ten years, after which no awards may be made, unless earlier terminated by
the Board of Directors pursuant to the Option Plan. Options to purchase 5,000
shares at an exercise price of $20.75 were granted during 1996.
The following table sets forth additional information concerning options granted
under the 1993 Stock Option Plan.
OPTION/SAR EXERCISES AND YEAR END VALUE TABLE
Aggregated Option/SAR Exercises in Last Fiscal Year, and FY-End Option/SAR Value
--------------------------------------------------------------------------------
Number of Securities Value of Unexercised
Underlying Unexercised In-The-Money
Options/SARs Options\SARs
at FY-End (#) at FY-End ($)(1)
---------------------- ---------------------
Shares Acquired
Name on Exercise (#) Value Realized($)(1) Exercisable(2)/Unexercisable Exercisable/Unexercisable
- - ---- --------------- -------------------- ---------------------------- -------------------------
Francis A. Bonadio -0- -0- 28,103/0 $351,288/$0
- - -----------------
(1) Based upon the closing price of the stock as of December 31, 1996, of
$22.50 per share.
(2) Exercisable within 60 days of Voting Record Date.
Management and Directors Stock Bonus Plans. The Board of Directors of the
Savings Bank has adopted two stock bonus plans (the "Management Stock Bonus
Plan" and the "Directors Stock Bonus Plan", collectively, the "Stock Bonus
Plans" or the "MSBPs") as a method of providing directors,
7
officers, and key employees of the Savings Bank with a proprietary interest in
the Company in a manner designed to encourage such persons to remain in the
employment or service of the Savings Bank. The Savings Bank has contributed
sufficient funds to the MSBP Trusts which enabled the MSBP Trusts to purchase
Common Stock representing 3.85% of the aggregate number of shares issued in the
Conversion (i.e., 89,930 shares of Common Stock). Awards under the MSBPs were
made in recognition of prior and expected future services to the Savings Bank of
its directors and executive officers responsible for implementation of the
policies adopted by the Board of Directors, the profitable operation of the
Savings Bank, and as a means of providing a further retention incentive and
direct link between compensation and the profitability of the Savings Bank.
Other Benefits
Insurance. Full-time employees of the Savings Bank are provided with group
plan insurance that covers hospitalization, major medical, dental, long-term
disability and life insurance. This insurance is available generally and on the
same basis to all full-time employees following completion of approximately
three months of employment. The Savings Bank pays the premium for employee
coverage. The employee pays the premiums for dependent coverage, if any.
Pension Plan. The Savings Bank sponsors a tax-qualified defined benefit
pension plan (the "Pension Plan"). All full-time employees of the Savings Bank
are eligible to participate after one year of service and attainment of age 21.
A qualifying employee becomes fully vested in the Pension Plan upon completion
of five years of service. The Pension Plan is intended to comply with the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"). Total
Savings Bank pension expense for the fiscal years ended December 31, 1996, 1995
and 1994 amounted to $0, $48,637, and $110,058, respectively.
The Pension Plan provides for monthly payments to each participating
employee at normal retirement age (age 65). The annual benefits payable under
the Pension Plan are equal to 1.25% of Final Average Compensation ("FAC") as
defined in the pension plan, excluding overtime, commission and bonus pay
multiplied by years of service. A participant may elect an early retirement at
age 55 with 10 years of service, and may elect to receive a reduced monthly
benefit. The Pension Plan also provides for payments in the event of disability
or death. At December 31, 1996, Mr. Bonadio had 20 years of credited service
under the Pension Plan.
Benefits are payable in the form of various annuity alternatives,
including a joint and survivor option, or in a lump-sum amount. The following
table shows the estimated annual benefits payable under the Pension Plan based
on the respective employee's years of credited service and applicable average
annual salary as calculated under the Pension Plan. For the Pension Plan year
ended June 30, 1996, the highest permissible annual benefit under the Internal
Revenue Code ("Code") is $120,000, as indexed. Benefits under the Pension Plan
are not subject to offset for Social Security benefits.
Years of Credited Service
-----------------------------------------------------
Salary 15 20 25 30 35
- - ------ --- --- --- --- ---
$ 20,000............... $ 3,750 $ 5,000 $ 6,250 $ 7,500 $ 8,750
40,000............... 7,500 10,000 12,500 15,000 17,500
60,000............... 11,250 15,000 18,750 22,500 26,250
80,000............... 15,000 20,000 25,000 30,000 35,000
100,000............... 18,750 25,000 31,250 37,500 43,750
120,000............... 22,500 30,000 37,500 45,000 52,500
150,000............... 28,125 37,500 46,875 56,250 65,625
8
401(k) Profit Sharing Plan. The Savings Bank sponsors a tax-qualified
defined contribution profit sharing plan, ("401(k) Plan"), for the benefit of
its employees. Employees become eligible to participate under the Plan after age
18 and completing one year of service. Under the 401(k) Plan, employees may
voluntarily elect to defer up to 9% of compensation, not to exceed applicable
limits under the Code (i.e., $9,500 in 1996). The first 4% of employee savings
is matched by a company contribution of $.50 for each $1.00 of employee
contribution. Such matching contributions shall be 100% vested following
completion of three years of service. Additionally, the Savings Bank may
contribute an annual discretionary contribution to the plan. Such benefits are
allocated to participant accounts as a percentage of base compensation of such
participant to the base compensation of all participants. Total contributions to
the 401(k) Plan by the Savings Bank for all employees for the fiscal years ended
December 31, 1996, 1995, and 1994 were $24,089, $21,436, and $21,991,
respectively.
Employee Stock Ownership Plan. The Savings Bank has established an
employee stock ownership plan, (the "ESOP"), for the exclusive benefit of
participating employees. Participating employees are employees who have
completed one year of service with the Savings Bank or its subsidiaries and
attained age 21. The ESOP is to be funded by contributions made by the Savings
Bank in cash or Common Stock. Benefits may be paid either in shares of Common
Stock or in cash. The ESOP borrowed funds from the Company with which to acquire
112,412 shares, or 4.81% of the shares issued in the Conversion. At February 28,
1997, the ESOP held 108,469 shares, or 5.27% of the shares issued and
outstanding at that date. Shares purchased with such loan proceeds are held in a
suspense account for allocation among participants as the loan is repaid. The
Savings Bank anticipates contributing approximately $112,412 annually to the
ESOP to meet principal obligations under the ESOP loan, plus applicable interest
payments. This loan is expected to be fully repaid in approximately ten years.
The Savings Bank contributed $185,848 to the ESOP for the fiscal year ended
December 31, 1996.
The Board of Directors has appointed a committee (the "ESOP Committee")
and a board of trustees (the "ESOP Trustees") to administer the ESOP. The ESOP
Committee consists of Directors Eckles, Hrach and Rentz, as does the board of
trustees. The Board of Directors or the ESOP Committee may instruct the ESOP
Trustees regarding investment of funds contributed to the ESOP. The ESOP
Trustees must vote all shares allocated to participant accounts held under the
ESOP in accordance with the instructions of the participating employees.
Unallocated shares and allocated shares for which no timely direction is
received will be voted by the ESOP Trustees as directed by the Board of
Directors or the ESOP Committee, subject to the ESOP Trustees' fiduciary duties.
Supplemental Executive Retirement Plan. The Savings Bank has implemented a
supplemental executive retirement plan ("SERP") for the benefit of Mr. Francis
A. Bonadio, President. The purpose of the SERP is to furnish Mr. Bonadio with
supplemental post-retirement benefits in addition to those which will be
provided under the Savings Bank's Pension Plan and other retirement benefits. It
is anticipated that benefits payable under the SERP will equal approximately
$1,000 per month upon retirement at age 65 for a minimum of 120 months. Payments
under the SERP are being accrued for financial reporting purposes during the
period of Mr. Bonadio's employment. The SERP is unfunded. All benefits payable
under the SERP will be paid from current assets of the Savings Bank. There are
no tax consequences to either Mr. Bonadio or the Savings Bank related to the
SERP prior to payment of benefits. Upon receipt of payment of benefits, Mr.
Bonadio will recognize taxable ordinary income in the amount of such payments
received and the Savings Bank will be entitled to recognize a tax-deductible
compensation expense at that time. The Company's expenses for 1996, 1995 and
1994 were $28,997, $32,389, and $35,084 offset by deferred taxes of
approximately $10,000, $11,000, and $11,000, respectively.
Long Term Incentive Plans
The Company does not sponsor any long term incentive plans and made no
awards or payments under any such plans during the fiscal year ended December
31, 1996.
9
Compensation Committee Interlocks and Insider Participation
The Compensation Committee of the Company and Savings Bank consists of
Robert H. Carlson, Chairman, William G. Eckles, II and Richard E. Rentz, Jr. The
committee, which consists of non-employee directors of the Company and Savings
Bank, meets annually to review the performance of the Savings Bank's officers
and employees, and to determine compensation programs and salary actions for the
Savings Bank and its personnel.
Mr. Carlson's son has outstanding from the Savings Bank a mortgage loan
with a 7.375% interest rate. This loan had a balance of $137,014 on December 31,
1996 and the highest balance during 1996 was $140,232. Additional information
concerning this loan is provided under "Certain Transactions with Management and
Others."
Performance Graph
The following performance graph is for April 6, 1993 (the first day of
trading for the Company's stock) and December 31, 1993, 1994, 1995 and 1996. The
performance graph compares the cumulative total shareholder return on the
Company's Common Stock with (a) the cumulative total shareholder return on
stocks included in the Nasdaq CRSP U.S. index and (b) the cumulative total
shareholder return on stocks included in the Nasdaq CRSP Bank index prepared for
Nasdaq by the Center for Research of Securities Prices (CRSP) at the University
of Chicago. Comparison of the Common Stock with the Nasdaq stock market and bank
indices assumes the investment of $1,000 as of the close of trading on April 6,
1993. The cumulative total return for the Company is computed assuming the
reinvestment of dividends at the frequency with which dividends were paid during
the period.
There can be no assurance that the Company's future stock performance will
be the same or similar to the historical stock performance shown in the graph
below. The Company will neither make nor endorse any predictions as to stock
performance.
[GRAPHIC OMITTED - PLOTTING POINTS FOLLOW]
10
4/6/93 12/31/93 12/31/94 12/31/95 12/31/96
-----------------------------------------------------
Nasdaq CRSP U.S. 1,000.00 1,171.80 1,145.41 1,619.84 1,992.47
Nasdaq CRSP Bank 1,000.00 1,037.26 1,033.48 1,539.23 2,034.80
First Shenango Bancorp, Inc. 1,000.00 1,020.80 936.49 1,425.05 1,597.81
Certain Transactions with Management and Others
The Savings Bank, like many financial institutions, has followed a policy
of granting various types of loans to officers, directors and employees. The
loans have been 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 the Savings Bank's other customers, and do
not involve more than the normal risk of collectibility, nor present other
unfavorable features. All loans by the Savings Bank to its directors and
executive officers are subject to regulations of the Office of Thrift
Supervision ("OTS") restricting loans and other transactions with affiliated
persons of the Savings Bank. Prior to the enactment of the Financial
Institutions Reform, Recovery and Enforcement Act ("FIRREA"), the Savings Bank
provided loans to officers and directors and other affiliates at reduced
interest rates and fees. The preferential rate on mortgage loans could be no
less than the greater of (i) the Savings Bank's cost of funds plus 100 basis
points or (ii) the Internal Revenue Service's applicable federal rate. In
addition, the Savings Bank routinely waived its points and application fees for
affiliate loans. Effective August 9, 1989, FIRREA required that all such loans
be made on terms and conditions comparable to those for similar transactions
with non-affiliates. The Savings Bank's affiliates must now qualify for any
loans on the same terms and conditions that apply to other customers.
Furthermore, loans to an affiliate must be approved in advance by a
disinterested majority of the Board of Directors or be within other guidelines
established as a result of OTS regulations. Loans to executive officers and
directors of the Savings Bank, and their affiliates aggregating $60,000 or more
during the twelve months ended December 31, 1996, amounted to $263,242, or 1.14%
of the Savings Bank's retained earnings at December 31, 1996.
The following table sets forth the indebtedness of executive officers,
directors, and members of the immediate family of an executive officer or
director who are or were indebted to the Savings Bank at any time during the
fiscal year ended December 31, 1996 in an amount in excess of $60,000 that was
originated prior to August 9, 1989.
Highest
Loan Prevailing Balance
Interest Market Rate During Year Balance
Type of Origination Original Rate at at Ended at
Name Affiliation Loan Date Balance 12/31/96 Origination 12/31/96 12/31/96
- - ------------------ ----------- ------- ----------- -------- -------- ------------ ----------- ---------
Robert H. Carlson (1) Mortgage 03/03/88 $154,000 7.375%(2) 8.50% $140,232 $137,014
- - --------------------------------
(1) Son of Director Robert H. Carlson.
(2) This loan is a variable rate mortgage with an initial interest rate of 8.00%
- - -------------------------------------------------------------------------------
PROPOSAL II -- RATIFICATION OF APPOINTMENT OF AUDITORS
- - -------------------------------------------------------------------------------
Ernst & Young LLP was the Company's independent auditor for the year
ended December 31, 1996. The Board of Directors has renewed the Company's
arrangement with Ernst & Young LLP to be its auditor for the year ending
December 31, 1997, subject to ratification by the Company's shareholders. A
representative of Ernst & Young LLP is expected to be present at the Meeting to
respond to shareholders' questions and will have the opportunity to make a
statement if he so desires.
11
In the event the appointment of Ernst & Young LLP is not ratified by
shareholders, the Board of Directors will consider the vote obtained and
determine what course of action to take.
Ratification of the appointment of the auditor requires the affirmative
vote of a majority of the votes cast by the shareholders of the Company at the
Meeting. The Board of Directors recommends that shareholders vote "FOR" the
ratification of the appointment of Ernst & Young LLP as the Company's auditor
for the year ending December 31, 1997.
- - -------------------------------------------------------------------------------
FINANCIAL INFORMATION
- - -------------------------------------------------------------------------------
The audited financial statements of the Company for its fiscal year ended
December 31, 1996, prepared in conformity with generally accepted accounting
principles, are included in the Company's 1996 Annual Report to Shareholders,
which accompanies this Proxy Statement. Any shareholder who has not received a
copy of the Company's 1996 Annual Report to Shareholders may obtain a copy by
writing to the Treasurer of the Company. The Annual Report is not to be treated
as a part of the Company's proxy solicitation materials or as having been
incorporated herein by reference. The Company will provide, without charge, a
copy of its Annual Report on Form 10-K to any Shareholder who makes a written
request to the Treasurer of the Company.
- - -------------------------------------------------------------------------------
OTHER MATTERS
- - -------------------------------------------------------------------------------
The Board of Directors is not aware of any business to come before the
Meeting other than those matters described above in this Proxy Statement,
However, if any other matters should properly come before the Meeting, it is
intended that proxies in the accompanying form will be voted in respect thereof
in accordance with the judgment of the person or persons voting the proxies.
- - -------------------------------------------------------------------------------
SHAREHOLDER PROPOSALS
- - -------------------------------------------------------------------------------
In order to be considered for inclusion in the Company's proxy materials
for the 1997 Annual Meeting of Shareholders for the fiscal year ending December
31, 1997, any shareholder proposal to take action at such meeting must be
received at the Company's office at 25 North Mill Street, New Castle,
Pennsylvania 16101, no later than November 21, 1997. Any such proposals shall be
subject to the requirements of the proxy rules adopted under the 1934 Act.
12
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MISCELLANEOUS
- - -------------------------------------------------------------------------------
The cost of solicitation of proxies will be borne by the Company. The
Company will reimburse brokerage firms and other custodians, nominees and
fiduciaries for reasonable expenses incurred by them in sending proxy materials
to the beneficial owners of Common Stock. In addition to solicitations by mail,
directors, officers and employees of the Company may solicit proxies personally
or by telephone without payment of additional compensation.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ E. Waneata VanKirk
E. WANEATA VANKIRK
SECRETARY
New Castle, Pennsylvania
March 20, 1997
13
- - --------------------------------------------------------------------------------
FIRST SHENANGO BANCORP, INC.
25 NORTH MILL STREET
NEW CASTLE, PENNSYLVANIA 16101
(412) 654-6605
ANNUAL MEETING OF STOCKHOLDERS
- - --------------------------------------------------------------------------------
APRIL 22, 1997
- - --------------------------------------------------------------------------------
The undersigned hereby appoints the Board of Directors of First Shenango
Bancorp, Inc. ("Company"), or its designee, with full powers of substitution, to
act as attorneys and proxies for the undersigned, to vote all shares of Common
Stock of the Company that the undersigned is entitled to vote at the Annual
Meeting of Stockholders ("Meeting"), to be held at the Company's main office,
25 North Mill Street, New Castle, Pennsylvania, on Tuesday, April 22, 1997, at
4:00 p.m. and at any and all adjournments thereof, as follows:
VOTE FOR VOTE WITHHELD
-------- -------------
1. The election as a director of
all nominees listed below |_| |_|
(except as marked below to the
contrary).
NOMINEES: Francis A. Bonadio,
Richard E. Rentz, Jr., R.
Joseph Hrach
INSTRUCTIONS: To withhold your vote for any individual nominee, insert
that nominee's name on the line provided below.
- - --------------------------------------------------------------------------------
FOR AGAINST ABSTAIN
--- ------- -------
2. The ratification of the |_| |_| |_|
appointment of Ernst & Young
LLP as auditors of the
Company for the 1997 fiscal
year.
In their discretion, such attorneys and proxies are authorized to vote on
any other business that may properly come before the Meeting or any adjournments
thereof.
The Board of Directors recommends a vote "FOR" all of the above listed
propositions.
- - --------------------------------------------------------------------------------
THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS ARE SPECIFIED,
THIS PROXY WILL BE VOTED FOR EACH OF THE PROPOSITIONS STATED. IF ANY OTHER
BUSINESS IS PRESENTED AT THE MEETING, THIS PROXY WILL BE VOTED BY THOSE NAMED IN
THIS PROXY IN THEIR BEST JUDGMENT. AT THE PRESENT TIME, THE BOARD OF DIRECTORS
KNOWS OF NO OTHER BUSINESS TO BE PRESENTED AT THE MEETING.
- - --------------------------------------------------------------------------------
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
Should the undersigned be present and elect to vote at the Meeting, or at
any adjournments thereof, and after notification to the Secretary of the Company
at the Meeting of the stockholder's decision to terminate this proxy, the power
of said attorneys and proxies shall be deemed terminated and of no further force
and effect. The undersigned may also revoke this proxy by filing a subsequently
dated proxy or by notifying the Secretary of the Company of his or her decision
to terminate this proxy.
The undersigned acknowledges receipt from the Company prior to the
execution of this proxy of a Notice of Annual Meeting of Stockholders, a Proxy
Statement dated March 20, 1997 and an Annual Report to Stockholders.
Please check here if you
Dated: , 1997 |_| plan to attend the Meeting.
-----------------
- - ----------------------------------------- -----------------------------------
PRINT NAME OF STOCKHOLDER PRINT NAME OF STOCKHOLDER
- - ----------------------------------------- -----------------------------------
SIGNATURE OF STOCKHOLDER SIGNATURE OF STOCKHOLDER
Please sign exactly as your name appears on this proxy card. When signing as
attorney, executor, administrator, trustee or guardian, please give your full
title. If shares are held jointly, each holder should sign.
- - --------------------------------------------------------------------------------
PLEASE COMPLETE, DATE, SIGN AND MAIL THIS PROXY PROMPTLY IN THE ENCLOSED
POSTAGE-PREPAID ENVELOPE.
- - --------------------------------------------------------------------------------
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material pursuant to ss. 240.14a-11(c) or ss. 240.14a-12
First Shenango Bancorp, Inc.
- - -------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- - -------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
- - -------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- - -------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11. (set forth the amount on which the filing
fee is calculated and state how it was determined):
- - -------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- - -------------------------------------------------------------------------------
(5) Total fee paid:
- - -------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount previously paid:
- - -------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- - -------------------------------------------------------------------------------
(3) Filing Party:
- - -------------------------------------------------------------------------------
(4) Date Filed:
- - -------------------------------------------------------------------------------