SECURITIES AND EXCHANGE COMMISSION
Washington, D.C., 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 1995
COMMISSION FILE NO: 0-17411
PARKVALE FINANCIAL CORPORATION
--------------------------------
(Exact name of registrant as specified in its charter)
PENNSYLVANIA 25-1556590
--------------- --------------
(State of incorporation) (I.R.S. Employer
Identification Number)
4220 William Penn Highway, Monroeville, Pennsylvania 15146
-------------------------------------------------------------
(Address of principal executive offices; zip code)
Registrant's telephone number, including area code: (412) 373-7200
Securities registered pursuant to Section 12(b) of the Act:
Not Applicable
Securities registered pursuant to Section 12(g) of the Act:
Common Stock ($1.00 par value)
------------------------------
Title of Class
Indicate by check mark whether the registrant (1) has filed all reports
required by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
The closing sales price of the Registrant's Common Stock on February 9,
1996 was $28.50 per share.
Number of shares of Common Stock outstanding as of February 9, 1996 was
3,206,574.<PAGE>
PARKVALE FINANCIAL CORPORATION
INDEX
Part I. Financial Information Page
---------------------------------- -----
Consolidated Statements of Financial Condition as
of December 31, 1995 and June 30, 1995 3
Consolidated Statements of Operations (Unaudited)
for the Three and Six Months ended December 31, 1995
and 1994 4
Consolidated Statements of Cash Flows (Unaudited)
for the Six Months ended December 31, 1995 and 1994 5-6
Consolidated Statements of Stockholders' Equity as
of December 31, 1995 6
Notes to Unaudited Interim Consolidated Financial
Statements 7-9
Management's Discussion and Analysis of Financial
Condition and Results of Operations 10-15
Part II - Other Information 15
Signatures 15
2<PAGE>
PARKVALE FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
Dollar Amounts in Thousands, except share data)
December 31, June 30,
ASSETS 1995 1995
----------- --------
Cash and noninterest-bearing deposits $9,863 $10,003
Federal funds sold 76,776 116,581
Interest-bearing deposits in other banks 377 194
Investment securities available for sale
(cost of $5,959 at December 31 and $5,890
at June 30) 9,500 8,738
Loans available for sale (fair value of $21,106
at December 31) 20,981 --
Investment securities (fair value of $125,942
at December 31 and $123,348 at June 30) 125,880 123,817
Mortgage-backed securities (fair value of
$103,706 at December 31 and $101,122 at
June 30) 102,289 100,881
Loans, net 548,011 524,545
Real estate owned, net of allowance of $0 at
December 31 and June 30 1,079 96
Office properties and equipment, net 2,156 2,261
Intangible assets and deferred charges 355 434
Prepaid expenses and other assets 8,442 8,872
-------- --------
Total Assets $905,709 $896,422
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Savings deposits $800,858 $794,445
Advances from Federal Home Loan Bank 20,699 20,607
Escrow for taxes and insurance 9,091 12,132
Other liabilities 4,811 4,177
Other debt 5,202 3,997
-------- --------
Total Liabilities $840,661 $835,358
======== ========
STOCKHOLDERS' EQUITY
Preferred Stock ($1.00 par value; 5,000,000
shares authorized; 0 shares issued) - -
Common Stock ($1.00 par value; 10,000,000
shares authorized;December-3,448,736*
shares issued, June - 2,757,563 shares issued 3,449 2,758
Additional Paid in Capital 9,377 10,056
Treasury Stock at cost (244,525* shares in
December and June) (3,434) (3,434)
Employee Stock Ownership Plan debt (108) (154)
Unrealized gains on securities available for
sale 2,248 1,808
Retained earnings 53,516 50,030
-------- --------
Total Stockholders' Equity 65,048 61,064
-------- --------
Total Liabilities and Stockholders' Equity $905,709 $896,422
======== ========
* Reflect the effect of the 5 for 4 stock split on October 16,
1995.
3<PAGE>
PARKVALE FINANCIAL CORPORATION
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollar Amounts in Thousands, except per share data)
Three months ended Six months ended
December 31, December 31,
1995 1994 1995 1994
Interest income: ------- ------ ------ ------
Loans $11,368 $10,225 $22,458 $20,188
Mortgage-backed securities 1,743 1,734 3,495 3,527
Investments 1,986 2,215 3,930 4,320
Federal funds sold 1,462 758 3,237 1,623
------- ------- ------- ------
Total interest income 16,559 14,932 33,120 29,658
------- ------- ------- ------
Interest expense:
Savings deposits 9,588 8,093 19,268 16,189
Borrowings 397 395 790 788
------- ------- ------- ------
Total interest expense 9,985 8,488 20,058 16,977
------- ------- ------- ------
Net interest income 6,574 6,444 13,062 12,681
Provision for loan losses 149 293 334 592
------- ------- ------- ------
Net interest income after
provision for losses 6,425 6,151 12,728 12,089
------- ------- ------- ------
Other income:
Service charges and fees 418 405 812 797
Gain on sale of assets - - - -
Miscellaneous 115 87 231 177
------- ------- ------- ------
Total other income 533 492 1,043 974
------- ------- ------- ------
Other expenses:
Compensation and benefits 1,754 1,636 3,487 3,191
Office occupancy 511 489 1,009 973
Marketing 81 125 141 195
FDIC and other insurance 476 472 966 952
Office supplies, telephone,
and postage 208 207 398 400
Miscellaneous 574 544 1,124 1,069
------- ------- ------- -------
Total other expense 3,604 3,473 7,125 6,780
------- ------- ------- -------
Income before income taxes 3,354 3,170 6,646 6,283
Income tax expense 1,172 1,160 2,321 2,335
------- ------- ------- -------
Net income $2,182 $2,010 $4,325 $3,948
======= ======= ======= =======
Net income per share $0.65 $0.58 $1.29 $1.13
Dividends per share $0.13 $0.104 $0.26 $0.208
All share amounts reflect the effect of the 5 for 4 stock split on
October 16, 1995.
4<PAGE>
Parkvale Financial Corporation
CONSOLIDATED STATEMENTS OF CASH FLOWS
For Six Months Ended December 31, 1995 and 1994
Increase (Decrease) in Cash and Cash Equivalents
(Dollar Amounts in Thousands)
1995 1994
------- -------
Cash flows from operating activities:
Interest received $32,773 $29,690
Loan fees received 144 208
Other fees and commissions received 981 909
Interest paid (20,139) (17,060)
Cash paid to suppliers and others (5,890) (6,340)
Income taxes paid (2,264) (1,850)
------- -------
Net cash provided by operating activities 5,605 5,557
Cash flows from investing activities:
Proceeds from maturities of investments 55,700 35,070
Purchase of investment securities available
for sale (69) (114)
Purchase of investment securities (57,573) (44,767)
(Purchase) maturity of deposits in other banks (183) 1,283
Purchase of mortgage-backed securities (13,100) --
Purchase of loans (46,010) (14,232)
Proceeds from sales of loans 1,382 1,231
Principal collected on mortgage-backed
securities 11,692 9,318
Principal collected on loans 68,550 49,843
Loans made to customers, net of loans in
process (69,775) (55,275)
Other (88) (21)
------- -------
Net cash (used in) investing activities (49,474) (17,664)
Cash flows from financing activities:
Net increase (decrease) in checking and
and savings accounts (3,240) (24,641)
Net increase (decrease) in certificates of
deposit 9,654 5,189
Proceeds from FHLB advances 96 --
Repayment of FHLB advances (5) (92)
Net increase in other borrowings 1,205 1,068
Decrease in borrowers' advances for tax &
insurance (3,041) (1,408)
Cash dividends paid (756) (635)
Net proceeds from sale of common stock 11 16
Sale (purchase) of treasury stock -- (418)
------- -------
Net cash (used in) financing activities 3,924 (20,921)
------- -------
Net (decrease) in cash and cash equivalents (39,945) (33,028)
Cash and equivalents at beginning of period 126,584 91,558
------- -------
Cash and equivalents at end of period $86,639 $58,530
======= =======
5<PAGE>
Reconciliation of net income to net cash Six months ended
provided by operating activities: December 31,
1995 1994
------- -------
Net income $4,325 $3,948
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 272 283
Accretion and amortization of loan fees
and discounts (247) 67
Loan fees collected and deferred 144 208
Provision for loan losses 334 592
Increase in accrued interest receivable (255) (196)
Decrease (increase) in other assets 354 (38)
Decrease in accrued interest payable (80) (83)
Increase in other liabilities 758 776
------- -------
Total adjustments 1,280 1,609
------- -------
Net cash provided by operating activities $5,605 $5,557
======= =======
For purposes of reporting cash flows, cash and cash equivalents include
c a s h and noninterest-earning deposits, and federal funds sold.
Generally, federal funds are purchased and sold for one-day periods.
Loans transferred to foreclosed assets aggregated $1.1 million and
$ 9 0 ,000 in the six months ended December 31, 1995 and 1994,
respectively.
<TABLE>
PARKVALE FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Dollars in thousands, except share data)
<CAPTION>
Employee
Stock Unrealized Total
Common Paid-in Treasury Ownership Security Retained Stockholders'
Stock Capital Stock Plan Debt Gains Earnings Equity
------- ------- -------- --------- --------- -------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, June 30, 1995 $2,758 $10,056 ($3,434) ($154) $1,808 $50,030 $61,064
Net income, six months ended
December 31, 1995 4,325 4,325
Dividends on common stock at
$.26 per share (839) (839)
Principal payments on employee
stock ownership plan debt 69 69
Transfer to reflect 5 for 4 split 690 (690) 0
Additional borrowings by ESOP (23) (23)
Unrealized security gains 440 440
Exercise of stock options 1 11 12
------- -------- -------- ------ ------- ------- -------
Balance, December 31, 1995 $3,449 $9,377 ($3,434) ($108) $2,248 $53,516 $65,048
======= ======== ======== ====== ======= ======= =======
</TABLE> 6<PAGE>
NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
-----------------------------------------------------------------
1. STATEMENTS OF OPERATIONS
The statements of operations for the three and six months ended
December 31, 1995 and 1994 are unaudited, but in the opinion of
management, reflect all adjustments (consisting of only normal recurring
accruals) necessary for a fair presentation of the results of operations
for those periods. The results of operations for the three and six
months ended December 31, 1995 are not necessarily indicative of the
results which may be expected for fiscal 1996. The Annual Report on
Form 10-K for the year ended June 30, 1995 contains additional
information and should be read in conjunction with this report.
2. STOCK SPLIT
On September 21, 1995 the Board of Directors declared a 5-for-4 stock
split of Parkvale's common stock. The additional shares were paid on
October 16, 1995 to stockholders of record at the close of business on
October 2, 1995. This increased the outstanding shares by 640,706. No
fractional shares were issued. All share amounts in this report have
been restated to reflect this stock split.
3. EARNINGS PER SHARE
Primary earnings per share are based upon the weighted average number
of issued and outstanding common shares including shares subject to
stock options, which are deemed common stock equivalents. For the three
and six months ended December 31, 1995, earnings per share were $0.65
and $1.29 per share based upon 3,367,129 and 3,361,768 average shares
outstanding, respectively assuming all 256,837 option shares outstanding
were exercised. For the three and six months ended December 31, 1994,
the restated earnings per share were $0.58 and $1.13 per share based
upon 3,486,551 and 3,491,255 average shares outstanding, respectively
assuming all 255,353 option shares then outstanding were exercised.
4. CHANGE IN METHOD OF ACCOUNTING FOR CERTAIN INVESTMENTS
In June 1993, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 114, ("FAS 114"),
"Accounting by Creditors for Impairment of a Loan," which was amended by
FAS 118 in October 1994. The Statements require all creditors to
account for impaired loans, other than homogeneous loans such as
residential or consumer loans, except those loans that are accounted for
at fair value or at the lower of cost or fair value, at the present
value of the expected future cash flows discounted at the loan's
effective interest rate. In accordance with the Statements, the Bank
has adopted FAS 114 and 118 as of July 1, 1995. (See Note 5.)
In November 1995, the FASB issued a special report, "A Guide to
Implementation of Statement 115 on Accounting for Certain Investments in
Debt and Equity Securities," which provides an opportunity for a one
time reassessment of the classification of the remaining held-to-
maturity securities. For comparative purposes, $21.0 million of loans
have been reclassified as available for sale at December 31, 1995 and
were reported using the cost basis at December 31, 1995. The fair value
of such loans was $21.1 million at December 31, 1995.
In May 1995, the FASB issued FAS 122, "Accounting for Mortgage
Servicing Rights." This Statement amends certain provisions of
Statement 65, "Accounting for Certain Mortgage Banking Activities," to
allow enterprises engaging in mortgage banking activities to recognize
7<PAGE>
as separate assets rights to service mortgage loans for loans originated
by the enterprise. The Bank has elected to adopt FAS 122 as of July 1,
1995. There was no impact on the results of operations for the six
months ended December 31, 1995.
In October 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 123, ("FAS 123"),
"Accounting for Stock-Based Compensation," which establishes a new
method of accounting for stock-based compensation arrangements with
employees. The new method is a fair value based method rather than the
intrinsic value based method that is currently utilized. However, FAS
123 does not require an entity to adopt the new fair value based method
for purposes of preparing basic financial statements. If an entity
chooses not to adopt the new fair value based method, FAS 123 requires
as entity to display in the footnotes pro forma net income and earnings
per share information as if the fair value based method had been
adopted. FAS 123 is effective for financial statements with fiscal
years beginning after December 15, 1995. Currently, the Bank has not
determined whether it will adopt the fair value based method and
accordingly, cannot estimate the impact on the basic financial
statements that FAS 123 will have upon adoption.
8<PAGE>
5. LOANS:
Loans are summarized as follows:
December 31, June 30,
1995 1995
---------- ----------
(Dollar Amounts in Thousands)
First mortgage loans:
Residential:
1-4 Family $463,233 $423,439
Multi-family 19,545 22,894
Commercial 20,376 18,435
Other 2,954 3,196
-------- --------
506,108 467,964
Consumer loans 72,946 69,197
Commercial business loans 6,202 4,542
Loans on savings accounts 3,175 3,253
-------- --------
588,431 544,956
Less:
Loans in process 3,584 4,816
Allowance for loan losses 13,532 13,136
Unamortized discount and deferred loan fees 2,323 2,459
-------- --------
Total Loan Portfolio $568,992 $524,545
Less: Loans available for sale 20,981 --
-------- --------
Loans, net $548,011 $524,545
======== ========
Nonaccrual loans $1,300 $2,031
as a percent of total assets 0.14% 0.23%
The amount of additional interest income that had not been recognized in
interest income was $69 at December 31, 1995 and $127 at June 30, 1995.
The following summary sets forth the activity in the allowance for loan
losses for the six months ended December 31:
1995 1994
------- -------
Beginning balance $13,136 $12,056
Provision for losses - mortgage loans 221 525
Provision for losses - consumer loans 113 67
Provision for losses - commercial loans -- --
Loans recovered 120 12
Loans charged off (58) (70)
------- -------
Ending balance $13,532 $12,590
======= =======
Management considers non-accrual, substandard and doubtful commercial
and other real estate loans to be potentially imparied under the
provisions of FAS 114 and 118. The collateral evaluation values of real
estate are deemed to represent the most reliable indication of fair
market value.
9<PAGE>
PARKVALE FINANCIAL CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
----------------------------------------------
(Dollar Amounts in Thousands, except per share data)
Balance Sheet Data: December 31,
1995 1994
------ ------
Total assets $905,709 $858,810
Loans receivable 568,992 512,911
Interest-bearing deposits and federal funds
sold 77,153 49,121
Investment and mortgage-backed securities 237,669 275,043
Savings deposits 800,858 759,103
FHLB Advances 20,699 20,612
Other borrowings 5,202 4,762
Stockholders' Equity 65,048 59,664
Book value per share $20.30 $17.90
Statistical Profile:
Three Months Ended Six Months Ended
December 31, (1) December 31, (1)
1995 1994 1995 1994
------ ------ ------ ------
Average yield earned on all
interest-earning assets 7.50% 7.11% 7.51% 6.99%
Average rate paid on all
interest-bearing liabilities 4.85% 4.33% 4.87% 4.30%
Average interest rate spread 2.66% 2.78% 2.64% 2.69%
Net yield on average
interest-earning assets 2.98% 3.07% 2.96% 2.98%
Other expenses to average assets 1.60% 1.62% 1.58% 1.57%
Taxes to pre-tax income 34.94% 36.59% 34.92% 37.16%
Return on average assets 0.97% 0.94% 0.96% 0.91%
Return on average equity 14.00% 13.82% 14.08% 13.74%
Average equity to average total
assets 6.91% 6.78% 6.82% 6.65%
At December 31,
1995 1994
------ ------
One year gap to total assets 5.55% 4.69%
Intangibles to total equity 0.55% 0.86%
Capital to assets ratio 7.18% 6.95%
Ratio of nonperforming assets to total
assets 0.26% 0.19%
Number of full-service offices 28 27
(1) The applicable income and expense figures have been annualized in
calculating the percentages.
10<PAGE>
RESULTS OF OPERATIONS - COMPARISON OF THREE MONTHS ENDED DECEMBER 31,
1995 AND 1994.
----------------------------------------------------------------------
For the three months ended December 31, 1995, Parkvale had net income of
$2.2 million versus $2.0 million for the comparable period in 1994.
This increase was primarily due to a $130,000 increase in net interest
income and a $144,000 decrease in loan loss provisions, which more than
offset an increase in other expense of $131,000. Net interest income
for the quarter ended December 31, 1995 increased to $6.6 million from
$6.4 million for the quarter ended December 31, 1994.
INTEREST INCOME:
----------------
Parkvale had interest income of $16.6 million during the three months
ended December 31, 1995 versus $14.9 million during the comparable
period in 1994. This $1.6 million or 10.9% increase is the result of a
$42.5 million or 5.1% increase in the average balance of interest-
earning assets, compounded by a 39 basis point increase in the average
yield from 7.11% in 1994 to 7.50% in 1995. Interest income from loans
increased $1.1 million or 11.2% as a result of a $36.2 million or 7.1%
increase in the average outstanding loan balances, compounded by an
increase in the average yield from 8.01% to 8.32%. Interest income on
mortgage-backed securities increased slightly by $9,000 from the 1994
quarter due to an increase in the average yield from 6.49% to 6.69%,
offset by a $2.7 million decrease in the average balance. Investment
securities interest income decreased by $229,000 or 10.3% from the 1994
quarter. Although the average yield on investments increased by 61
basis points from 5.39% to 6.00%, this was not sufficient to offset an
average investment balance decrease of $31.9 million or 19.4%.
Interest income earned on Federal funds sold increased $704,000 from the
1994 quarter due to an increase in the average balance of $40.8 million,
magnified by a 71 basis point increase in the average yield from 5.17%
to 5.88%. At December 31, 1995, the weighted average yield on all
interest earning assets was 7.50%.
INTEREST EXPENSE:
-----------------
Interest expense increased $1.5 million or 17.6% from the 1994 to the
1995 quarter. The increase was due to a $39.1 million or 5.0% increase
in the average deposits and borrowings, compounded by an increase in the
average rate paid on deposits and borrowings from 4.33% in 1994 to 4.85%
in 1995. At December 31, 1995, the average rate payable on liabilities
was 4.81% for deposits, 6.20% for borrowings and 4.85% for combined
deposits and borrowings.
PROVISION FOR LOAN LOSSES:
--------------------------
Parkvale's provision for loan losses decreased by $144,000 or 49.2% from
the 1994 to the 1995 quarter. The aggregate general valuation
allowances were 1.47% of total assets at December 31, 1995, versus 1.44%
and 1.43% at June 30, 1995 and December 31, 1994.
Non-performing loans and real estate owned were $2.4 million, $2.1
million and $1.6 million at December 31, 1995, June 30, 1995 and
December 31, 1994, representing 0.26%, 0.24% and 0.19% of total assets
at the respective balance sheet dates. Total loan loss reserves at
December 31, 1995 were $13.5 million, which represents 2.35% of the net
11<PAGE>
loan portfolio. The increase of $252,000 in non-performing assets from
June 30, 1995 is primarily due to increased non-accrual, commercial
mortgage loans. The increase of $752,000 in non-performing assets from
December 31, 1994 to December 31, 1995 is due to the transfer of an
$899,000 first mortgage loan on a multi-family residential apartment
complex into real estate owned. Such REO is slated for sale in February
1996 without a loss.
Loans are placed on non-accrual status when in the judgement of
management, the probability of collection of interest is deemed to be
insufficient to warrant further accrual. All loans which are 90 or more
days delinquent are treated as non-accrual loans.
OTHER INCOME:
-------------
Total other income increased by $41,000 or 8.3% from 1994 to 1995
primarily due to a $46,000 increase in income from the tax deferred
annuity and mutual fund products.
OTHER EXPENSE:
--------------
Total other expense increased by $131,000 or 3.8% primarily from an
$118,000 increase in compensation and employee benefit expenses.
Annualized operating expenses as a percentage of average assets were
1.60% for the quarter ended December 31, 1995 versus 1.62% during the
comparable 1994 quarter.
Compensation and employee benefit expenses increased $118,000 or 7.2%
for the comparable quarter in 1994. This increase represents merit pay
increases and the staffing costs for an additional office opened in
February 1995.
RESULTS OF OPERATION - COMPARISON OF SIX MONTHS ENDED DECEMBER 31, 1995
AND 1994
-----------------------------------------------------------------------
For the six months ended December 31, 1995, Parkvale had net income of
$4.3 million versus $3.9 million for the comparable period in 1994.
This $377,000 increase was due mainly to an increase in net interest
income of $381,000 and a reduced provision for loan losses of $258,000,
which more than offset an increase operating expenses of $345,000. Net
interest income for the six months ended December 31, 1995 increased to
$13.1 million from $12.7 million for the six months ended December 31,
1994 as a direct result of higher interest rates. The average interest
rate spread decreased slightly from 2.69% in 1994 to 2.64% in 1995.
INTEREST INCOME:
----------------
Parkvale had interest income of $33.1 million during the six months
ended December 31, 1995 and $29.6 million during the comparable period
in 1994. This 3.5 million or 11.7% increase is attributable to an
increase in the average interest-earning asset portfolio of $33.6
million, magnified by a 52 basis point increase in the average yield
from 6.99% in 1994 to 7.51% in 1995. Interest income from loans
increased $2.3 million or 11.2%. The average yield increased from 8.01%
in 1994 to 8.32% in 1995 and the average loan balance increased $35.5
12<PAGE>
million. Interest income on mortgage-backed securities declined
slightly by $32,000 or 0.9% from the first six months of the previous
fiscal year. This was due to a decrease in the average portfolio of
$5.3 million, offset by an increase in the average yield from 6.46% to
6.74%. Income from investments decreased by $390,000 or 9.0% from 1994.
Although the average yield increased 96 basis points from 5.14% to
6.10%, the average balance decreased significantly by $39.3 million or
23.4%. Federal funds sold income increased $1.6 million or 99.5% from
the prior six months ended December 1994. This was due to a $42.8
million increase in the average balance and a 105 basis point increase
in the average yield from 4.85% in 1994 to 5.90% in 1995.
INTEREST EXPENSE:
-----------------
Interest expense increased $3.1 million or 18.2% from the 1994 six month
period to the 1995 six month period. The increase was due to a $33.9
million or 4.3% increase in the average deposits and borrowings,
compounded by a 57 basis point increase in the average rate paid on
deposits and borrowings from 4.30% in 1994 to 4.87% in 1995.
PROVISION FOR LOAN LOSSES:
--------------------------
Parkvale's provision for loan losses decreased by $258,000 or 43.6% from
the 1994 to the 1995 period. The aggregate general valuation allowances
were 1.47%, 1.44% and 1.43% of total assets at December 31, 1995, June
30, 1995 and December 31, 1994, respectively.
OTHER INCOME:
-------------
Other income increased slightly by $69,000 or 7.1% due primarily to an
$83,000 increase of income from tax deferred annuities.
OTHER EXPENSES:
---------------
Other expenses increased by $345,000 or 5.1% for the six month period
ending December 31, 1995 compared to the same period in 1994. This
change was from an increase in compensation and benefit expenses.
Compensation and benefit expenses increased $296,000 or 9.3% during the
six month period ended December 31, 1995 as a result of merit pay and
benefit expense increases.
INCOME TAXES:
-------------
The provision for income taxes under FAS 109 consists of the following
for the six months ended December 31, 1994: Current provision - Federal
$1,916,000; State $327,000 and Deferred Federal $78,000 with the total
aggregating $2,321,000. The deferred tax asset decreased by $315,000
from June 30, 1995 to December 31, 1995 which primarily reflects the tax
effect of appreciation in assets classified as available for sale under
FAS 115. The effective tax rate for the six months ended December 31,
1995 was 34.9% and 37.2% for the comparable period in 1994.
13<PAGE>
LIQUIDITY AND CAPITAL RESOURCES:
--------------------------------
The loan portfolio increased $44.4 million from June 30, 1995 to
December 31, 1995 resulting from the combination of the deployment of
funds from investments in federal funds sold and an increase in deposit
balances of $6.4 million. Federal funds sold decreased by $39.8
million.
Stockholders' equity was $65.0 million or 7.18% of total assets at
December 31, 1995. The Bank is required to maintain Tier I (Core)
capital equal to at least 4% of the institution's adjusted total assets,
and Tier II (Supplementary) risk-based capital equal to at least 8% of
the risk-weighted assets. At December 31, 1994, Parkvale was in
compliance with all applicable regulatory requirements, with Tier I and
Tier II ratios of 6.77% and 13.87%, respectively.
The following table sets forth certain information concerning the Bank's
regulatory capital at December 31, 1995:
Tier I Tier I Tier II
Core Risk-Based Risk-Based
Capital Capital Capital
------ ------ ------
Equity Capital (1) $64,593 $64,593 $64,593
Less non-allowable intangible assets (355) (355) (355)
Less Unrealized securities gains (2,195) (2,195) (2,195)
Plus general valuation allowances (2) -- -- 6,145
------- ------- -------
Total regulatory capital 62,043 62,043 68,188
Minimum required capital 36,640 19,665 39,329
------- ------- -------
Excess regulatory capital $25,403 $42,378 $28,859
======= ======= =======
Regulatory capital as a percentage (3) 6.77% 12.62% 13.87%
Minimum capital required as a
percentage 4.00% 4.00% 8.00%
Excess regulatory capital as a ------ ------ ------
percentage 2.77% 8.62% 5.87%
====== ====== ======
(1) Represents equity capital of the consolidated Bank as reported to
the Pennsylvania Department of Banking and FDIC on Form 032 for the
quarter ended December 31, 1995.
(2) Limited to 1.25% of risk adjusted total assets.
(3) Tier I capital is computed as a percentage of adjusted total
assets of $916,002. Tier I and Tier II risk-based capital are computed
as a percentage of adjusted risk-weighted assets of $491,614.
As part of the budget reconciliation process, it appears that Congress
has focused on reaching a fair and balanced solution to the much
discussed and highly controversial Bank Insurance Fund/Savings
Association Insurance Fund (BIF/SAIF) issue. As the package stands now,
it appears that there will be a one-time assessment on SAIF-insured
deposits of 85-90 basis points to recapitalize SAIF. While the one-time
assessment to Parkvale would amount to approximately $6.8 million on a
pre-tax basis, it would allow SAIF-insured institutions like Parkvale to
compete on equal footing with BIF insured institutions by eliminating
the current yearly deposit insurance premium disparity by reducing the
premium from 23 basis points to 4 basis points per $100 of insured
14<PAGE>
deposits. This would reduce Parkvale's annual FDIC deposit insurance
costs by approximately $1.5 million. Parkvale enthusiastically supports
the payment of a one-time assessment as a means of recapitalizing SAIF
and successfully resolving the BIF/SAIF premium disparity.
Management is not aware of any trends, events, uncertainties or current
recommendations by any regulatory authority that will have (if
implemented), or that are reasonably likely to have, material effects on
Parkvale's liquidity, capital resources or operations.
IMPACT OF INFLATION AND CHANGING PRICES:
----------------------------------------
The financial statements and related data presented herein have been
prepared in accordance with generally accepted accounting principles,
which require the measurement of financial position and operating
results in terms of historical dollars without considering changes in
the relative purchasing power of money over time due to inflation.
Unlike most industrial companies, substantially all of the assets and
liabilities of a financial institution are monetary in nature. As a
result, interest rates have a more significant impact on a financial
institution's performance than the effects of general levels of
inflation. Interest rates do not necessarily move in the same direction
or in the same magnitude as the prices of goods and services as measured
by the consumer price index.
PART II - OTHER INFORMATION
----------------------------
Item 1. Legal Proceedings None
Item 2. Changes in Securities N/A
Item 3. Defaults Upon Senior Securities N/A
Item 4. Submission of Matters to a Vote of Security
Holders None
Item 5. Other Information None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits None
(b) Reports on Form 8-K None
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
Parkvale Financial Corporation
DATE: February 13, 1996 By: Robert J. McCarthy, Jr.
---------------------------
Robert J. McCarthy, Jr.
President and Chief Executive
Officer
DATE: February 13, 1996 By: Timothy G. Rubritz
-----------------------
Timothy G. Rubritz
Vice President - Treasurer
(Chief Financial Officer)
15<PAGE>
15<PAGE>
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
SECOND QUARTER 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
10-Q.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> DEC-31-1995
<CASH> 9,863
<INT-BEARING-DEPOSITS> 377
<FED-FUNDS-SOLD> 76,776
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 9,500
<INVESTMENTS-CARRYING> 228,169
<INVESTMENTS-MARKET> 229,648
<LOANS> 582,524
<ALLOWANCE> 13,532
<TOTAL-ASSETS> 905,709
<DEPOSITS> 800,858
<SHORT-TERM> 5,202
<LIABILITIES-OTHER> 13,902
<LONG-TERM> 20,699
<COMMON> 3,449
0
0
<OTHER-SE> 61,599
<TOTAL-LIABILITIES-AND-EQUITY> 905,709
<INTEREST-LOAN> 22,458
<INTEREST-INVEST> 10,662
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 33,120
<INTEREST-DEPOSIT> 19,268
<INTEREST-EXPENSE> 20,058
<INTEREST-INCOME-NET> 13,062
<LOAN-LOSSES> 334
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 7,125
<INCOME-PRETAX> 6,646
<INCOME-PRE-EXTRAORDINARY> 6,646
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,325
<EPS-PRIMARY> 1.29
<EPS-DILUTED> 1.29
<YIELD-ACTUAL> 2.96
<LOANS-NON> 1,300
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 13,136
<CHARGE-OFFS> 58
<RECOVERIES> 120
<ALLOWANCE-CLOSE> 13,532
<ALLOWANCE-DOMESTIC> 334
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
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