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EXHIBIT 99.4
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
The Unaudited Pro Forma Condensed Combined Financial Statements and
related footnotes account for the merger using the pooling of interest method of
accounting. Under this method of accounting, the recorded assets, liabilities,
shareholders' equity, income and expenses of Signal Corp and First Shenango are
combined and recorded at their historical cost-based amounts, except as noted
below and in the footnotes. The following Unaudited Pro Forma Condensed Combined
Statements of Financial Condition as of March 31, 1998 combines the historical
consolidated statement of financial condition of Signal Corp and subsidiaries
and First Shenango and subsidiaries as if the Merger had been effective on March
31, 1998, after giving effect to certain pro forma adjustments described in the
accompanying notes. The following Unaudited Pro Forma Condensed Combined
Statements of Income present the combined historical results of operations of
Signal Corp and subsidiaries and First Shenango and subsidiaries as if the
Merger had been effective January 1, 1995. Both Signal Corp's and First
Shenango's fiscal years end December 31. Pro forma per share amounts are based
on the Exchange Ratio of 1.42875 shares of Signal Corp common stock for each
share of First Shenango Common Stock.
The Unaudited Pro Forma Condensed Combined Financial Statements are
intended for informational purposes and are not necessarily indicative of the
future consolidated financial position or future results of operations if the
combined entity or the consolidated financial position or results of operations
of the combined entity that would have been achieved had the Merger been
consummated as of the date of the beginning of the periods presented. The
Unaudited Pro Forma Condensed Combined Statements of Financial Condition
reflects adjustments to conform accounting policies and estimated costs to
effect the Merger and combine operations. Estimated amounts and ranges of
amounts of these costs are shown in the Notes to Unaudited Pro Forma Condensed
Combined Financial Statements. The Unaudited Pro Forma Condensed Combined
Statements of Income do not reflect the costs to effect the Merger and combine
operations, or any expected cost savings as a result of the Merger. These
Unaudited Pro Forma Condensed Combined Financial Statements should be read in
conjunction with, and are qualified in their entirety by, the separate
historical consolidated financial statements and notes thereto of Signal Corp
and First Shenango.
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PRO FORMA CONDENSED COMBINED STATEMENT OF FINANCIAL CONDITION (UNAUDITED)
AS OF MARCH 31, 1998
Signal Corp First Shenango Bancorp Pro Forma Pro Forma
as Reported as Reported Adjustments Combined
----------- ---------------------- ----------- ---------
(Dollars in Thousands)
ASSETS:
Cash and due from banks $28,046 $1,226 $1,047 (4) $30,319
Securities available for sale 295,147 116,074 -- 411,221
Securities held to maturity 65,711 -- -- 65,711
Other short term investments 38,798 23,718 -- 62,516
Loans held for sale 97,628 3,708 -- 101,336
Loans and leases receivables 910,167 252,769 -- 1,162,936
Allowance for credit losses (4,562) (3,249) (1,800)(1) (9,611)
---------- -------- ------ ----------
Net loans and leases 905,605 249,520 (1,800) 1,153,325
Other assets 88,784 8,900 2,330 (3) 100,014
---------- -------- ------ ----------
Total assets $1,519,719 $403,146 $1,577 $1,924,442
========== ======== ====== ==========
LIABILITIES & SHAREHOLDERS' EQUITY
Liabilities:
Deposits $998,646 $275,393 -- $1,274,039
Short term borrowings 93,862 20,554 -- 114,416
Long term debt 243,569 51,478 -- 295,047
Mandatorily redeemable preferred securities 50,000 -- -- 50,000
Other liabilities 25,580 7,429 4,878 (1) 37,887
---------- -------- ------ ----------
Total liabilities 1,411,657 354,854 4,878 1,771,389
Shareholders' Equity
Preferred stock 9,917 -- -- 9,917
Common stock 8,440 234 2,233 (7) 10,907
Additional paid-in capital 43,313 22,221 776 66,310
Retained earnings 48,387 31,285 (6,310)(2) 73,362
Treasury stock, at cost (1,555) (6,233) -- (7) (7,788)
Stock acquired by MSBP's and ESOP -- (523) -- (7) (523)
Securities equity valuation account (440) 1,308 -- 868
---------- -------- ------ ----------
Total Shareholders' Equity 108,062 48,292 (3,301) 153,053
---------- -------- ------ ----------
Total Liabilities and Shareholders' Equity $1,519,719 $403,146 $1,577 $1,924,442
========== ======== ====== ==========
See notes to Unaudited Pro Forma Condensed Combined Financial Statements.
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PRO FORMA CONDENSED COMBINED STATEMENTS OF INCOME (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 1998
Signal Corp First Shenango Bancorp Pro Forma Pro Forma
as Reported(6) as Reported Adjustments Combined(5)
-------------- ---------------------- ----------- -----------
(Dollars in Thousands)
Interest income $27,001 $ 6,965 -- $33,966
Interest expense 17,708 3,890 -- 21,598
------- ------- ------- -------
NET INTEREST INCOME 9,293 3,075 -- 12,368
Provision for credit losses 462 155 -- 617
------- ------- ------- -------
NET INTEREST INCOME AFTER PROVISIONS FOR CREDIT LOSSES 8,831 2,920 -- 11,751
Non-interest income 8,276 191 -- 8,467
Non-interest expense 10,942 1,723 -- 12,665
------- ------- ------- -------
Income before taxes 6,165 1,388 -- 7,553
Provision for income taxes 2,106 499 -- 2,605
------- ------- ------- -------
NET INCOME $ 4,059 $ 889 -- $ 4,948
======= ======= ======= =======
Preferred Stock Dividends 174 -- -- 174
------- ------- ------- -------
NET INCOME APPLICABLE TO COMMON STOCK $ 3,885 $ 889 -- $ 4,774
======= ======= ======= =======
NET INCOME PER COMMON SHARE
Basic $ 0.46 $ 0.44 -- $ 0.42
======= ======= ======= =======
Diluted $ 0.42 $ 0.43 -- $ 0.40
======= ======= ======= =======
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING
Basic 8,428 2,004 -- 11,291
======= ======= ======= =======
Diluted 9,562 2,067 -- 12,514
======= ======= ======= =======
See Notes to Unaudited Pro Forma Condensed Combined Financial Statements.
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PRO FORMA CONDENSED COMBINED STATEMENTS OF INCOME (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 1997
Signal Corp First Shenango Bancorp Pro Forma Pro Forma
as Reported(6) as Reported Adjustments Combined(5)
-------------- ---------------------- ----------- ------------
(Dollars in Thousands)
Interest income $18,698 $7,433 -- $26,131
Interest expense 12,304 4,245 -- 16,549
------- ------ ------- -------
NET INTEREST INCOME 6,394 3,188 -- 9,582
Provision for credit losses 107 185 -- 292
------- ------ ------- -------
NET INTEREST INCOME AFTER PROVISIONS FOR CREDIT LOSSES 6,287 3,003 -- 9,290
Non-interest income 5,823 204 -- 6,027
Non-interest expense 6,460 1,463 -- 7,923
------- ------ ------- -------
Income before taxes 5,650 1,744 -- 7,394
Provision for income taxes 2,085 607 -- 2,692
------- ------ ------- -------
NET INCOME $3,565 $1,137 -- $4,702
======= ====== ======= =======
Preferred Stock Dividends 407 -- -- 407
------- ------ ------- -------
NET INCOME APPLICABLE TO COMMON STOCK $3,158 $1,137 -- $4,295
======= ====== ======= =======
NET INCOME PER COMMON SHARE
Basic $0.55 $0.58 -- $0.50
======= ====== ======= =======
Diluted $0.41 $0.56 -- $0.41
======= ====== ======= =======
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING
Basic 5,713 1,967 -- 8,523
======= ====== ======= =======
Diluted 8,667 2,047 -- 11,592
======= ====== ======= =======
See Notes to Unaudited Pro Forma Condensed Combined Financial Statements.
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PRO FORMA CONDENSED COMBINED STATEMENTS OF INCOME (UNAUDITED)
FOR THE YEAR ENDED DECEMBER 31, 1997
Signal Corp First Shenango Pro Forma Pro Forma
as Reported(6) as Reported Adjustments Combined(5)
-------------- ----------- ----------- -----------
(Dollars in Thousands)
Interest income $ 90,093 $ 29,560 -- $119,653
Interest expense 59,550 16,962 -- 76,512
-------- -------- -------- --------
NET INTEREST INCOME 30,543 12,598 -- 43,141
Provision for credit losses 842 773 -- 1,615
-------- -------- -------- --------
NET INTEREST INCOME AFTER PROVISIONS FOR CREDIT LOSSES 29,701 11,825 -- 41,526
Non-interest income 29,285 790 -- 30,075
Non-interest expense 35,643 5,836 -- 41,479
-------- -------- -------- --------
Income before taxes 23,343 6,779 -- 30,122
Provision for income taxes 8,895 2,193 -- 11,088
-------- -------- -------- --------
NET INCOME $ 14,448 $ 4,586 -- $ 19,034
======== ======== ======== ========
Preferred Stock Dividends 1,584 -- -- 1,584
-------- -------- -------- --------
NET INCOME APPLICABLE TO COMMON STOCK $ 12,864 $ 4,586 -- $ 17,450
======== ======== ======== ========
NET INCOME PER COMMON SHARE
Basic $ 2.07 $ 2.31 -- $ 1.93
======== ======== ======== ========
Diluted $ 1.57 $ 2.24 -- $ 1.57
======== ======== ======== ========
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING
Basic 6,215 1,985 -- 9,051
======== ======== ======== ========
Diluted 9,223 2,050 -- 12,151
======== ======== ======== ========
See Notes to Unaudited Pro Forma Condensed Combined Financial Statements.
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PRO FORMA CONDENSED COMBINED STATEMENTS OF INCOME (UNAUDITED)
FOR THE YEAR ENDED DECEMBER 31, 1996
Signal Corp First Shenango Pro Forma Pro Forma
as Reported(6) as Reported Adjustments Combined(5)
-------------- ----------- ----------- -----------
(Dollars in Thousands)
Interest income $ 73,559 $ 27,610 -- $101,169
Interest expense 48,048 14,959 -- 63,007
-------- -------- -------- --------
NET INTEREST INCOME 25,511 12,651 -- 38,162
Provision for credit losses 360 899 -- 1,259
-------- -------- -------- --------
NET INTEREST INCOME AFTER PROVISIONS FOR CREDIT LOSSES 25,151 11,752 -- 36,903
Non-interest income 17,929 1,028 -- 18,957
Non-interest expense 27,346 8,105 -- 35,451
-------- -------- -------- --------
Income before taxes 15,734 4,675 -- 20,409
Provision for income taxes 5,884 1,665 -- 7,549
-------- -------- -------- --------
NET INCOME $ 9,850 $ 3,010 -- $ 12,860
======== ======== ======== ========
Preferred Stock Dividends 1,696 -- -- 1,696
-------- -------- -------- --------
NET INCOME APPLICABLE TO COMMON STOCK $ 8,154 $ 3,010 -- $ 11,164
======== ======== ======== ========
NET INOCME PER COMMON SHARE
Basic $ 1.46 $ 1.40 -- $ 1.29
======== ======== ======== ========
Diluted $ 1.14 $ 1.34 -- $ 1.09
======== ======== ======== ========
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING
Basic 5,587 2,158 -- 8,670
======== ======== ======== ========
Diluted 8,626 2,241 -- 11,829
======== ======== ======== ========
See Notes to Unaudited Pro Forma Condensed Combined Financial Statements.
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PRO FORMA CONDENSED COMBINED STATEMENTS OF INCOME (UNAUDITED)
FOR THE YEAR ENDED DECEMBER 31, 1995
Signal Corp First Shenango Pro Forma Pro Forma
as Reported(6) as Reported Adjustments Combined(5)
-------------- ----------- ----------- -----------
(Dollars in Thousands)
Interest income $ 64,922 $ 23,787 -- $ 88,709
Interest expense 41,046 12,719 -- 53,765
-------- -------- -------- --------
NET INTEREST INCOME 23,876 11,068 -- 34,944
Provision for credit losses -- 918 -- 918
-------- -------- -------- --------
NET INTEREST INCOME AFTER PROVISIONS FOR CREDIT LOSSES 23,876 10,150 -- 34,026
Non-interest income 4,167 966 -- 5,133
Non-interest expense 13,651 6,130 -- 19,781
-------- -------- -------- --------
Income before taxes 14,392 4,986 -- 19,378
Provision for income taxes 4,946 1,907 -- 6,853
-------- -------- -------- --------
NET INCOME $ 9,446 $ 3,079 -- $ 12,525
======== ======== ======== ========
Preferred Stock Dividends 1,786 -- -- 1,786
-------- -------- -------- --------
NET INCOME APPLICABLE TO COMMON STOCK $ 7,660 $ 3,079 -- $ 10,739
======== ======== ======== ========
NET INOCME PER COMMON SHARE
Basic $ 1.48 $ 1.41 -- $ 1.30
======== ======== ======== ========
Diluted $ 1.14 $ 1.35 -- $ 1.08
======== ======== ======== ========
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING
Basic 5,170 2,181 -- 8,286
======== ======== ======== ========
Diluted 8,312 2,273 -- 11,560
======== ======== ======== ========
See Notes to Unaudited Pro Forma Condensed Combined Financial Statements.
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NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
Pursuant to the Merger Agreement and consistent with generally accepted
accounting principles, Signal Corp and First Shenango expect that costs incurred
to effect the Merger, which would include transaction costs of the Merger and
costs to combine operations, will be deducted in determining net income in the
period in which they are incurred. Adjustments to conform the accounting
policies of the entities are reflected in these Unaudited Pro Forma Condensed
Combined Financial Statements and are discussed in the following notes. The pro
forma financial statements do not give effect to any cost savings which may be
realized in connection with the consolidation of the respective operations of
Signal Corp and First Shenango.
(1) Transaction costs of the Merger (primarily investment banker and other
professional fees) and costs to combine operations are expected to be
in the $8.6 million to $9.5 million range (the "Expected Range"_). The
Unaudited Pro Forma Condensed Combined Statements of Income do not
reflect these charges. The Unaudited Pro Forma Condensed Combined
Statement of Financial Condition reflects these charges at the
mid-point of the Expected Range ($9.1 million). It is anticipated that
these charges will be incurred and recognized by Signal Corp and First
Shenango and substantially paid by the end of 1998. The following table
provides details of the estimated charges by type of cost:
Type of Cost Expected Range of Pre-Tax Cost
- -------------------------------------------------------------------------------------------------------
Transaction costs 1.8 million
Adjustments to conform accounting policies .50 to .75 million
Additional loan loss allowance 1.8 million
Costs to combine operations:
Employee Stock Ownership Plan termination costs 1.6 million
Duplicative systems and operating costs 2.4 to 2.8 million
Other costs incidental to the Merger .50 to .75 million
Total Merger-related adjustments 8.6 to 9.5 million
(2) Represents the expected after-tax effect of the pro forma adjustments,
as described in note (1) above, assuming a federal income tax rate of
35%. Transaction costs are not fully deductible for federal income tax
purposes.
(3) Represents the expected income tax benefit associated with the pro
forma adjustments.
(4) Represents the exercise of options covering 5,000 shares of First
Shenango Common Stock at $20.75 per share and the exercise of options
covering 94,339 shares of First Shenango Common Stock at $10.00 per
share which are expected to occur prior to the closing of the Merger
pursuant to written commitments to exercise executed by the optionees.
(5) The pro forma combined per share data has been computed based on the
combined historical income and on the combined weighted average common
and common equivalent shares outstanding assuming the issuance of
1.42875 shares of Signal Corp Common Stock for each share of First
Shenango Common Stock based on the Exchange Ratio. Shares assumed to be
issued in computing the weighted number of common and common equivalent
shares outstanding used to compute basic per share earnings for the
three months ended March 31, 1998 and 1997 and for the years ended
December 31, 1997, 1996 and 1995 were 2,863,000, 2,810,000, 2,836,000,
3,083,000, and 3,116,000, respectively.
(6) Share and per share data for Signal Corp. has been retroactively
restated for a 25% stock dividend approved in April 1998.
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(7) The following table reflects the assumed conversion of First Shenango
Common Stock into Signal Corp Common Stock pursuant to the Merger if
the Merger were to be effective as of March 31, 1998:
Pre-Merger Shares Post-Merger Shares
Outstanding Outstanding
First Shenango common shares issued 2,343,098 2,343,098
Less Treasury stock 274,091 174,752
Cancellation of shares held in First Shenango
Management Bonus Plan reserves -- (10,367)
---------------- ------------------
First Shenango common shares issued and outstanding 2,069,007 2,157,979
================
Exchange Ratio x 1.42875
------------------
First Shenango post-Merger shares outstanding 3,088,212
==================
Treasury shares will be issued upon the exercise of options covering
99,339 shares of First Shenango Common Stock. All shares of First
Shenango Common Stock in First Shenango's ESOP will vest as a result of
the change in control of First Shenango.
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