<PAGE> 1
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:
<TABLE>
<S> <C>
/ / Preliminary Proxy Statement / / Confidential, for Use of Commission Only (as
/X/ Definitive Proxy Statement permitted by Rule 14a-6(e)(2))
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
</TABLE>
PARKVALE FINANCIAL CORPORATION
(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.
/ / $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3)
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) 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 No.:
------------------------------
(3) Filing Party:
------------------------------
(4) Date Filed:
------------------------------
<PAGE> 2
LOGO
- --------------------------------------------------------------------------------
4220 WILLIAM PENN HIGHWAY, MONROEVILLE, PA 15146
September 14, 1998
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
Parkvale Financial Corporation. The meeting will be held at the Pittsburgh
Athletic Association, 4215 Fifth Avenue, Pittsburgh, Pennsylvania, on Thursday,
October 22, 1998, at 10:00 a.m.
At the meeting, stockholders will act on the matters set forth in the
accompanying Notice of Annual Meeting and Proxy Statement and on any other
business matters properly brought before the meeting.
FOR THE REASONS SET FORTH IN THE PROXY STATEMENT, THE BOARD UNANIMOUSLY
RECOMMENDS A VOTE "FOR" EACH OF THE NOMINEES AS DIRECTORS, "FOR" THE
RATIFICATION OF AUDITORS, AND "AGAINST" THE STOCKHOLDER PROPOSALS DESCRIBED IN
THE PROXY STATEMENT.
It is important that your shares be represented and voted at the Annual
Meeting regardless of whether you plan to attend. Please complete, sign, date
and return the enclosed proxy card promptly in the envelope provided.
Sincerely,
/s/ ROBERT J. MCCARTHY, JR.
Robert J. McCarthy, Jr.
President and
Chief Executive Officer
<PAGE> 3
PARKVALE FINANCIAL CORPORATION
4220 WILLIAM PENN HIGHWAY
MONROEVILLE, PENNSYLVANIA 15146
(412) 373-7200
------------------------------
NOTICE OF ANNUAL MEETING
TO BE HELD ON OCTOBER 22, 1998
------------------------------
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Parkvale
Financial Corporation, Monroeville, Pennsylvania (the "Corporation") will be
held at the Pittsburgh Athletic Association, 4215 Fifth Avenue, Pittsburgh,
Pennsylvania, on Thursday, October 22, 1998, at 10:00 a.m., Eastern Time, for
the following purposes, all of which are more completely set forth in the
accompanying Proxy Statement:
(1) To elect two directors for a term of three years or until their
successors have been elected and qualified;
(2) To ratify the appointment of Ernst & Young LLP as the Corporation's
independent auditors for the fiscal year ending June 30, 1999;
(3) To consider and vote upon two (2) shareholder proposals; and
(4) To transact such other business as may properly come before the
meeting.
Stockholders of the Corporation of record at the close of business on
August 24, 1998 are entitled to notice of and to vote at the Annual Meeting.
By Order of the Board of Directors
/s/ ERNA A. GOLOTA
Erna A. Golota
Secretary
Monroeville, Pennsylvania
September 14, 1998
YOU ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING. IT IS IMPORTANT
THAT YOUR SHARES BE REPRESENTED REGARDLESS OF THE NUMBER YOU OWN. EVEN IF YOU
PLAN TO BE PRESENT, YOU ARE URGED TO COMPLETE, SIGN, DATE AND RETURN THE
ENCLOSED PROXY PROMPTLY IN THE POSTAGE-PAID ENVELOPE PROVIDED. IF YOU ATTEND THE
MEETING, YOU MAY VOTE EITHER IN PERSON OR BY PROXY. ANY PROXY GIVEN MAY BE
REVOKED BY YOU IN WRITING OR IN PERSON AT ANY TIME PRIOR TO THE EXERCISE
THEREOF.
<PAGE> 4
PARKVALE FINANCIAL CORPORATION
------------------------------
PROXY STATEMENT
------------------------------
ANNUAL MEETING OF STOCKHOLDERS
This Proxy Statement is being furnished to holders of common stock, par
value $1.00 per share ("Common Stock"), of Parkvale Financial Corporation (the
"Corporation" or "PFC"), the holding company of Parkvale Savings Bank (the
"Bank"), in connection with the solicitation of proxies on behalf of the Board
of Directors, for use at the Annual Meeting of Stockholders to be held at the
Pittsburgh Athletic Association, 4215 Fifth Avenue, Pittsburgh, Pennsylvania, on
Thursday, October 22, 1998, at 10:00 a.m., Eastern Time, and at any adjournment
thereof for the purposes set forth in the Notice of Annual Meeting. This Proxy
Statement is being first sent to stockholders on or about September 14, 1998.
The proxies solicited hereby, if properly signed and returned to the
Corporation, will be voted in accordance with the instructions contained therein
if they are not revoked prior to their use. IF NO CONTRARY INSTRUCTIONS ARE
GIVEN, EACH PROXY RECEIVED WILL BE VOTED FOR THE SLATE OF DIRECTORS DESCRIBED
HEREIN, FOR RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP AS THE
CORPORATION'S INDEPENDENT AUDITORS, AGAINST THE TWO STOCKHOLDER PROPOSALS
DESCRIBED IN THIS PROXY STATEMENT, AND UPON THE TRANSACTION OF SUCH OTHER
BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING, IN ACCORDANCE WITH THE BEST
JUDGMENT OF THE PERSONS APPOINTED AS PROXIES.
Any stockholder giving a proxy has the power to revoke it at any time
before it is exercised by (i) filing with the Secretary of the Corporation
written notice thereof (Erna A. Golota, Secretary, Parkvale Financial
Corporation, 4220 William Penn Highway, Monroeville, Pennsylvania 15146), (ii)
submitting a duly executed proxy bearing a later date, or (iii) appearing at the
Annual Meeting and giving the Secretary notice of his or her intention to vote
in person. Proxies solicited hereby may be exercised only at the Annual Meeting
and any adjournment thereof and will not be used for any other meeting.
VOTING SECURITIES AND BENEFICIAL OWNERSHIP THEREOF
Only stockholders of record at the close of business on August 24, 1998
(the "Voting Record Date") will be entitled to vote at the Annual Meeting. On
the Voting Record Date, there were 5,164,037 shares of common stock, par value
$1.00 per share, of the Corporation issued and outstanding ("Common Stock"), and
the Corporation had no other class of equity securities outstanding. Each share
of Common Stock is entitled to one vote on each proposal at the Annual Meeting,
with no cumulative voting for the election of directors permitted.
The following table sets forth, as of the Voting Record Date, certain
information as to the Common Stock beneficially owned by (i) persons or entities
known to the Corporation to be the beneficial owners of 5% or more of the
Corporation's Common Stock, (ii) directors of the Corporation, (iii) nominees
for director who are not currently serving as a director, (iv) executive
officers of the Corporation who are not directors but who are named in the
Summary Compensation Table, and (v) all directors, director nominees and
executive officers as a group. The information shown is based upon filings
pursuant to the
2
<PAGE> 5
Securities Exchange Act of 1934, as amended ("Exchange Act"), and/or information
furnished by the individuals or entities.
<TABLE>
<CAPTION>
NUMBER OF SHARES
BENEFICIALLY OWNED AS PERCENT OF
NAME OF BENEFICIAL OWNER OF AUGUST 24, 1998(1) COMMON STOCK
------------------------ --------------------- ------------
<S> <C> <C>
Parkvale Financial Corporation 427,584 (2) 8.28%
Employee Stock Ownership Plan
4220 William Penn Highway
Monroeville, PA 15146
Beck, Mack & Oliver LLC 377,131 (3) 7.30
330 Madison Avenue
New York, NY 10017
Dimensional Fund Advisors Inc. 309,263 (4) 5.99
1299 Ocean Avenue
Santa Monica, CA 90401
DIRECTORS:
Fred P. Burger, Jr. 111,046 (5)(6) 2.14
Andrea F. Fitting 0 0
Robert J. McCarthy, Jr. 268,901 (5)(7)(8) 5.15
George W. Newland 81,590 (5)(9) 1.58
Robert D. Pfischner 110,323 (5)(10) 2.12
Warren R. Wenner 38,265 (5)(11) 0.74
DIRECTOR NOMINEE:
Patrick J. Minnock 0 0
EXECUTIVE OFFICERS
WHO ARE NOT DIRECTORS:
Bruce C. Gilleylen 74,079 (5)(7)(12) 1.43
Timothy G. Rubritz 79,942 (5)(7)(13) 1.54
Steven A. Friedman 63,489 (5)(7)(14) 1.23
DIRECTORS, NOMINEES AND EXECUTIVE
OFFICERS AS A GROUP
(18 persons) 977,858 (5)(7) 18.06
</TABLE>
- ---------
(1) Under applicable regulations, shares are deemed to be beneficially owned by
a person if he or she directly or indirectly has or shares the power to
vote or dispose of the shares, whether or not he or she has any economic
interest in the shares. Unless otherwise indicated, the named beneficial
owner has sole voting and dispositive power with respect to the shares.
(2) Messrs. Pfischner and Newland, directors of the Corporation, are the
trustees of the Employee Stock Ownership Plan ("ESOP"). To date, 418,485
shares of the 427,584 shares have been allocated to the participants of the
ESOP.
(3) Beck, Mack & Oliver LLC is an investment adviser registered under the
Investment Advisers Act of 1940 and the 377,131 shares are owned by
investment advisory clients of the firm. No one of these clients owns more
than 5% of said shares.
(4) Dimensional Fund Advisors Inc. is an investment adviser registered under
the Investment Advisers Act of 1940 and the 309,263 shares are held in
portfolios of certain affiliated entities. Dimensional disclaims beneficial
ownership of all such shares.
(5) Includes shares that may be acquired within 60 days through exercise of
stock options as follows: Mr. Burger, 15,255 shares; Mr. McCarthy, 58,652
shares; Mr. Newland, 15,255 shares; Mr. Pfischner,
3
<PAGE> 6
39,669 shares; Mr. Wenner, 15,255 shares; Mr. Gilleylen, 17,265 shares; Mr.
Rubritz, 20,472 shares; Mr. Friedman, 17,265 shares; and all directors,
director nominees and executive officers as a group, 251,420 shares. Shares
of Common Stock which are subject to stock options are deemed to be
outstanding for the purpose of computing the percentage of outstanding
Common Stock owned by the individual or group but are not deemed
outstanding for the purpose of computing the percentage of Common Stock
owned by any other person or group. Exclusive of shares which may be
acquired upon the exercise of stock options, directors, director nominees
and executive officers of the Corporation as a group beneficially owned
764,222 shares or 14.80% of the issued and outstanding Common Stock.
(6) Includes 25,377 shares held under Mr. Burger's deferred fee agreement with
the Bank.
(7) Includes shares allocated to such person or group under the ESOP as
follows: Mr. McCarthy, 35,627 shares; Mr. Gilleylen, 21,996 shares; Mr.
Rubritz, 21,981 shares; Mr. Friedman, 14,877 shares; and all officers as a
group, 149,995 shares. Also includes shares allocated under the
Supplemental Executive Benefit Plan ("SEBP") as follows: Mr. McCarthy,
7,887 shares; Mr. Gilleylen, 200 shares; Mr. Rubritz, 178 shares; and all
officers as a group, 8,265 shares. (See Audit-Finance Committee Report On
Executive Compensation.) Shares are deemed to be beneficially owned by such
individuals or group as a result of their ability to direct the ESOP and
SEBP trustees' voting of such shares allocated to their respective
accounts.
(8) Includes 104,507 shares held jointly by Mr. McCarthy and his wife, 18,306
shares held by Mr. McCarthy as custodian for his children, and 43,922
shares held under deferred fee and compensation agreements with the Bank.
Mr. McCarthy's address is 4220 William Penn Highway, Monroeville, PA 15146.
(9) Does not include shares held under the ESOP, of which Mr. Newland was a
trustee during the year.
(10) Includes 21,453 shares held jointly by Mr. Pfischner and his wife, 1,220
shares held by his wife and 16,516 shares held under a deferred fee
agreement with the Bank. Does not include shares held under the ESOP, of
which Mr. Pfischner is a trustee.
(11) Includes 15,947 shares held jointly by Mr. Wenner and his wife and 7,063
shares held under a deferred fee agreement with the Bank.
(12) Includes 31,566 shares held jointly by Mr. Gilleylen and his wife.
(13) Includes 26,305 shares held jointly by Mr. Rubritz and his wife and 4,806
shares held by Mr. Rubritz as custodian for his children.
(14) Includes 21,521 shares held jointly by Mr. Friedman and his wife, 316
shares held by his wife and 2,928 shares held by Mr. Friedman as custodian
for his children.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Exchange Act requires that directors and officers of
the Corporation and the Bank file reports of ownership and changes in ownership
of the Common Stock with the Securities and Exchange Commission and the National
Association of Securities Dealers, Inc. Directors and officers are required to
furnish the Corporation with copies of all Section 16(a) forms they file. Based
solely upon review of copies of Forms 3, 4 and 5 received by the Corporation's
compliance administrator, the Corporation believes that all filing requirements
applicable to its directors and officers were complied with during fiscal 1998.
4
<PAGE> 7
INFORMATION WITH RESPECT TO NOMINEES FOR DIRECTOR,
DIRECTORS WHOSE TERMS CONTINUE AND EXECUTIVE OFFICERS
ELECTION OF DIRECTORS
Pursuant to the Bylaws of the Corporation and by resolution of the
Corporation's Board of Directors, the Board of Directors currently consists of
six members. The Board of Directors is divided into three classes, and members
of each class are elected for a term of three years and until their successors
are elected and qualified. One class of directors is to be elected annually.
There are no arrangements or understandings between the Corporation and any
person pursuant to which such person has been nominated as a director. No
director or executive officer is related to any other director or executive
officer of either the Corporation or the Bank.
Unless otherwise directed, each proxy executed and returned by a
stockholder will be voted for the election of all the nominees listed below. If
any person named as nominee should be unable or unwilling to stand for election
at the time of the Annual Meeting, the proxies will nominate and vote for the
replacement nominee or nominees recommended by the Board of Directors. At this
time, the Board of Directors knows of no reason why any of the persons listed
below may not be able to serve as a director if elected. A majority of the
shares of Common Stock entitled to vote, present in person or by proxy at the
meeting, will constitute a quorum. The election of directors requires the
affirmative vote of a majority of the votes cast by all stockholders entitled to
vote thereon, whether in person or by proxy. Votes marked as "withhold
authority" on the election of directors are counted toward a quorum and have the
same legal effect as a vote against the election of the nominees.
NOMINEES FOR TERMS EXPIRING IN 2001
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION DIRECTOR
NAME AGE DURING THE PAST FIVE YEARS SINCE
---- --- -------------------------- -----
<S> <C> <C> <C>
Robert J. McCarthy, Jr. 55 Director; President and Chief Executive Officer 1985(1)
of the Bank since December 1, 1984 and of the
Corporation since organization in August 1987;
previously President and Chief Executive
Officer of Metropolitan Federal Savings Bank,
Bethesda, Maryland
Patrick J. Minnock 41 President of Minnock Construction Company, a
leading builder and developer in the western
Pennsylvania area, since 1988; licensed real
estate broker since 1987
</TABLE>
Patrick J. Minnock was nominated to replace George W. Newland who is
retiring from the Board as of the Annual Meeting date.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE ABOVE NOMINEES
BE ELECTED AS DIRECTORS.
DIRECTORS WITH TERMS EXPIRING IN 1999
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION DIRECTOR
NAME AGE DURING THE PAST FIVE YEARS SINCE
---- --- -------------------------- -----
<S> <C> <C> <C>
Fred P. Burger, Jr. 71 Director; President of Burger Agency, Inc., a 1981(1)
real estate brokerage firm and insurance
agency, since 1948
Warren R. Wenner 77 Director; retired; previously a sales 1968(1)
representative for The Gage Co., a distributor
of industrial tools and equipment, from 1965 to
1985
</TABLE>
5
<PAGE> 8
DIRECTORS WITH TERMS EXPIRING IN 2000
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION DIRECTOR
NAME AGE DURING THE PAST FIVE YEARS SINCE
---- --- -------------------------- -----
<S> <C> <C> <C>
Robert D. Pfischner 76 Chairman of the Board; President of E.T. 1968(1)
Lippert Saw Co., a manufacturer of saw blades
for industry and fabricator of armor plate,
since 1973
Andrea F. Fitting, Ph.D. 44 Chief Executive Officer of Fitting Kolbrener Sept. 1,
since 1995 and President of Fitting 1998
Communications, Inc. from 1986 to 1995,
marketing communications firms;
</TABLE>
Andrea F. Fitting was appointed by the Board of Directors to complete Paul
A. Mooney's term. Mr. Mooney retired from the Board on August 31, 1998 for
health reasons.
- ---------
(1) Includes terms as a director of the Bank prior to organization of the
Corporation in 1987 and currently serves as a director of the Bank.
BOARD MEETINGS AND COMMITTEES
The Board of Directors of the Corporation holds regular meetings at least
quarterly. Each member of the Board of Directors of the Corporation also serves
as a director of the Bank. During the year ended June 30, 1998, the Board of
Directors of the Corporation met nine times. No director failed to attend fewer
than 75% of the aggregate number of such meetings and the meetings of the
committees of the Board on which he served. All members of the Board serve on
the Nominating Committee, which met two times during fiscal 1998. The Nominating
Committee will consider nominations made by stockholders if such nominations are
made in accordance with Article IV, Section 3 of the Corporation's Bylaws. The
Board also has other standing committees, each served by the same members of the
Board and in the same capacities as those described below for similar committees
of the Bank's Board. The Executive Committee, which did not meet in fiscal 1998,
has the authority to exercise all of the powers of the Board between Board
meetings. The joint Audit-Finance Committee of the Corporation and the Bank met
four times in fiscal 1998. Directors of the Corporation do not receive any fees
directly from the Corporation for serving as Board and Committee members. The
Board does not have a separate compensation committee as determination of
compensation is a function of the Audit-Finance Committee.
The Board of Directors of the Bank meets regularly each month and may have
additional special meetings. The Board met twelve times during fiscal 1998. The
Bank has standing Executive, Audit-Finance and Site-Building Committees as
described below, in addition to other committees. During fiscal 1998, no
director failed to attend fewer than 75% of the aggregate number of meetings
held during the year by the Board of Directors and by all committees of the
Board on which he served.
The Executive Committee has the authority to exercise all the powers of the
Board of Directors between Board meetings. Membership on the Executive
Committee, which consists of three members of the Board, rotates monthly with
each director, except for Messrs. Pfischner and McCarthy, serving at least one
month each quarter of the year. Mr. Pfischner currently serves as Chairman of
this committee. Mr. McCarthy attends but does not vote at the meetings. The
Executive Committee met one time during fiscal 1998.
The Audit-Finance Committee reviews the Bank's budget, the scope and
results of the audit performed by the Corporation's and the Bank's independent
auditors, the scope and results of the examinations performed by the Office of
Thrift Supervision, the Pennsylvania Department of Banking and the Federal
Deposit Insurance Corporation, the Bank's system of internal control, and
monitors compliance with the Bank's established investment, interest rate risk,
financial futures and options policies. The members of such committee must
consider and act upon (1) all transactions with respect to the investment
portfolio, with the exception of Federal Funds sold, in excess of $25 million,
and (2) all hedging activities over $10 million and up to $25 million. In
addition, the Audit-Finance
6
<PAGE> 9
Committee reviews and makes recommendations to the Board concerning compensation
of officers and employees. The members of the Audit-Finance Committee are
appointed annually and consisted of Messrs. Burger, Mooney, Newland and Wenner
during fiscal 1998. Messrs. Pfischner and McCarthy, as ex-officio members,
attend the meetings but do not vote. Mr. Newland currently serves as Chairman of
this committee. The Audit-Finance Committee met four times during fiscal 1998.
The Site-Building Committee inspects, evaluates and recommends to the Board
proposed sites for branch offices and recommends any major repairs and/or
additions to such proposed sites that may be necessary. The members of the
Site-Building Committee are appointed annually and consisted of Messrs. Burger,
Mooney, Newland and Wenner during fiscal 1998. Messrs. Pfischner and McCarthy,
as ex-officio members, attend the meetings but do not vote. Mr. Wenner currently
serves as Chairman of this committee. The Site-Building Committee met three
times during fiscal 1998.
Certain directors also served as trustee/administrators of the
Corporation's benefit plans during fiscal 1998 as follows: 401(k) Plan, Messrs.
McCarthy, Newland and Pfischner; Employee Stock Ownership Plan, Messrs. Mooney,
Newland and Pfischner; and Stock Option Plans, Messrs. Burger, Mooney, Pfischner
and Wenner. To date, the directors serving as trustees/administrators of such
plans have not received any additional compensation for such services.
COMPENSATION OF DIRECTORS
Board members receive a retainer of $1,200 monthly, based on an annualized
retainer of $14,400, and $450 for each meeting attended. Mr. McCarthy does not
receive the annual retainer and meeting fees. Directors, excluding Messrs.
Pfischner and McCarthy, received $200 for each committee meeting attended during
fiscal 1998, except for the chairmen of the Audit-Finance and Site-Building
committees, who received $225 per meeting attended. In addition to the normal
$225 per meeting fee for fulfilling his duties as Chairman of the Site-Building
Committee, Mr. Wenner also receives a minimum of $50 for inspecting and
evaluating a proposed branch site and any major repairs to a branch office or
site. Mr. Wenner made seven inspections/evaluations during fiscal 1998 and
received a total of $400 for performing such services.
On December 16, 1993, the Bank entered into a consulting agreement with Mr.
Pfischner to serve as a consultant to the President-Chief Executive Officer,
Board of Directors and executive staff of the Bank for a term of one year
commencing on January 1, 1994 and continuing from year to year by written
agreement. The agreement was extended by written agreement each year through
1998 under the same terms and conditions for a term of one year. The agreement
provides for a minimum base annual fee of $20,400 payable monthly, which may be
increased in the future. Either party may terminate the agreement by providing
the other party with at least thirty days written notice before the expiration
date of the agreement. Mr. Pfischner had performed consulting services to the
Bank for many years without a written agreement. For services performed during
fiscal 1998, in addition to the regular Board fees Mr. Pfischner received
$35,400 which included a bonus of $15,000 for outstanding services to the Bank.
Under the 1993 Directors' Stock Option Plan, each person who serves as a
non-employee director immediately following the last adjournment of each Annual
Meeting shall be granted as of such date a compensatory stock option to purchase
shares of the Corporation's Common Stock at a price equal to the fair market
value of a share of the Common Stock on that date. On the 1997 Annual Meeting
date, each non-employee director received an option to purchase 3,051 shares.
The fair market value on the October 23, 1997 Annual Meeting date was $29.00 per
share. The Plan was amended during fiscal 1998. The amendment provides that
commencing as of the 1998 Annual Meeting date, 2,000 shares shall be granted to
each non-employee director following the last adjournment of each Annual
Meeting.
Directors may make an irrevocable election prior to the beginning of each
calendar year to defer all or a portion of the annual retainer and meeting fees
into a cash account and/or a PFC stock account. The cash account earns interest
each year at a rate equal to the rate paid on the Bank's highest rated
certificate of deposit on the first business day of each calendar year. The
stock account is credited with the dividends paid on PFC stock during the year.
Prior to the beginning of the year, each participant may elect to purchase PFC
Common Stock with the cash in either account. A third deemed investment
7
<PAGE> 10
option earns the performance rate of any of the selected mutual funds offered by
CIGNA to participants of the Bank's 401(k) Plan. At the end of each quarter, the
account is credited with gains (or debited for losses) in accordance with the
mutual fund experience reports provided by CIGNA. Participants may receive
payments from their accounts on a designated date after January 1, 1998, on the
attainment of an age after 65 or at termination of Board service in cash, in
either a lump sum or annual installments, or receive the Common Stock.
EXECUTIVE MANAGEMENT
The following table sets forth certain information with respect to
executive officers of the Corporation and the Bank who are not directors of the
Corporation. There are no arrangements or understandings between the Corporation
or the Bank 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 Corporation or the Bank by blood, marriage or
adoption. Officers of the Corporation and the Bank are appointed annually by the
respective Boards of Directors for one-year terms.
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION DURING
NAME AGE THE PAST FIVE YEARS
- --------------------- -- -------------------
<S> <C> <C>
Timothy G. Rubritz 44 Vice President-Treasurer of the Corporation since its
organization in August 1987; Senior Vice President-Treasurer
of the Bank since December 1989; Vice President-Treasurer
from January 1986 to December 1989; joined the Bank in June
1985 as audit director; with Coopers & Lybrand from 1976 to
1985, including a general practice manager at such firm from
1982 to 1985.
Bruce C. Gilleylen 52 Vice President of the Corporation since October 1995; Senior
Vice President and Chief Lending Officer of the Bank since
December 1989; Vice President from March 1986 to December
1989; joined the Bank in January 1986; with Equibank from
1982 to 1985, including a Senior Vice President thereof from
1984 to 1985.
Steven A. Friedman 48 Vice President of the Corporation since October 1995; Senior
Vice President of the Bank since December 1990;
Audit-Compliance Officer of the Corporation and the Bank;
Vice President from September 1986 to December 1990; joined
the Bank in July 1986; with the Federal Home Loan Bank of
Pittsburgh for six years serving as Vice
President-Supervision, Assistant Vice President and
Supervisory Analyst.
William J. Burt 53 Senior Vice President since joining the Bank in March 1998;
in charge of Retail Banking; with National City Bank,
formerly Integra Bank, as Area President from April 1995 to
September 1997 and with Integra Financial Corporation as
Senior Vice President, Bank Operations from 1989 to March
1995.
Gail Bieri Anwyll 46 Vice President of the Bank since December 1992 in charge of
Human Resources Department and Marketing, and Assistant
Corporate Secretary since July 1990; Senior Assistant Vice
President from December 1991 to December 1992; Assistant
Vice President from December 1989 to December 1991; joined
the Bank in August 1989 as Director of Human Resources; with
Lyman Savings & Loan Association from 1976 to August 1989,
serving as Executive Vice President from 1987 to August
1989.
</TABLE>
8
<PAGE> 11
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION DURING
NAME AGE THE PAST FIVE YEARS
- --------------------- -- -------------------
<S> <C> <C>
Nancy E. Kelly 49 Vice President of the Bank since December 1996; in charge of
branch operations since May 1997; Senior Assistant Vice
President from December 1991 to December 1996; Assistant
Vice President from December 1990 to December 1991. Joined
the Bank in December 1989.
Charles M. Murslack 44 Vice President of the Bank since December 1991; Assistant
Vice President from June 1988 to December 1991; responsible
for data processing systems; joined the Bank in January
1988; with Mellon Bank from 1975 to January 1988.
Thomas R. Ondek 39 Vice President of the Bank since December 1989 in charge of
Savings/Checking Department; Assistant Vice President from
December 1986 to December 1989; branch manager from April to
December 1985; joined the Bank in May 1984.
Robert A. Stephens 43 Vice President of the Bank in charge of Mortgage Department
since December 1989; Assistant Vice President from November
1984 to December 1989; joined the Bank in August 1981 as a
loan officer.
</TABLE>
AUDIT-FINANCE COMMITTEE REPORT
ON EXECUTIVE COMPENSATION
PFC's business consists primarily of the business of the Bank and its
subsidiaries. The financial results of PFC are a direct function of the Bank's
achievement of its goals as set forth in its long-term strategic plan.
Executives are compensated for their contribution to the achievement of these
goals, which benefits the stockholders, customers, employees and communities in
which the Bank operates.
PFC's Audit-Finance Committee is comprised of four outside directors of
PFC, which are the same directors who make up the Bank's Audit-Finance
Committee. The Audit-Finance Committees of the Bank and PFC ("Committee")
jointly administer executive compensation, with all compensation currently paid
by the Bank. The Committee reviews all issues pertaining to executive
compensation and submits its recommendations to the full Board of Directors for
approval. Mr. Robert J. McCarthy, Jr., in his capacity as a member of the Board
of Directors of PFC and the Bank, abstains from any Board of Directors' vote
concerning compensation affecting himself. The Committee's compensation program
for executive officers currently consists of annual payments of salary and
bonuses and periodic grants of options to purchase Common Stock under PFC's
Stock Option Plans. Each element of the program has a different purpose. Salary
and bonus payments are mainly designed to reward current and past performance.
Stock option awards are designed to help attract and retain superior personnel
for positions of substantial responsibility as well as to provide additional
incentive to contribute to the long-term success of PFC.
In determining the amount and form of executive compensation to be paid or
awarded in fiscal 1998, the Committee considered PFC's overall performance over
a period of years--and its future objectives and challenges--rather than a
guideline or formula based on any particular performance measure in a single
year. Within this framework, the Committee considered, among other things, the
following performance factors in making its compensation decisions in fiscal
1998: return on equity; earnings per share; fair market value of the Common
Stock; and the Bank's achievement of its annual goals relating to earnings,
growth, net worth, asset quality, efficiency ratio and evaluation by regulators
as to safety and soundness. The Committee's decisions concerning the
compensation of individual executive officers during fiscal 1998 were made in
the context of historical practice and competitive environment, including
comparisons with compensation practices of companies of similar size and
function in the financial services industry. The Committee has not addressed the
adoption of a policy with respect to the issue of the deductibility of
qualifying executive compensation under Section 162(m)
9
<PAGE> 12
of the Internal Revenue Code of 1986, as amended ("Code") because no executive
has compensation subject to Section 162(m) that exceeds the $1,000,000
threshold.
Supplemental non-qualified benefit plans are provided to executive officers
as follows:
Supplemental Executive Benefit Plan
Effective December 31, 1994, PFC and the Bank adopted the Supplemental
Benefit Plan ("SEBP") for the benefit of certain officers who are subject to the
limitations imposed by Sections 401(a)(17) and 415 of the Code on the maximum
amount of compensation which may be taken into consideration for the purposes of
the Parkvale Financial Corporation Employee Stock Ownership Plan ("ESOP") and
the maximum amount of benefits which may be allocated to an individual
participant thereunder. In calendar year 1994, the maximum amount of base pay
for qualified benefit plan purposes was reduced to $150,000 from $235,840
previously. In 1997, the base amount was increased to $160,000. Persons earning
more than $160,000 were deprived of retirement funds otherwise available to
them. The officers affected by the Code limitation in calendar year 1997 were
Messrs. McCarthy, Gilleylen and Rubritz. Treasury shares of PFC Common Stock
applicable to the 1997 distribution were allocated to the Trust administered by
Heritage Trust Company for their benefit as follows: 1,229 shares for Mr.
McCarthy, 42 shares for Mr. Gilleylen and 27 shares for Mr. Rubritz. The value
of those shares, based upon the closing price of $34.25 per share on the last
trading day of calendar 1997 (December 31, 1997), is included in the Summary
Compensation Table.
Executive Deferred Compensation Plan
Due to benefit limits imposed by the Code and/or discrimination tests of
highly compensated employees, the Bank adopted, effective July 1, 1994, the
Parkvale Savings Bank Executive Deferred Compensation Plan ("EDCP") for certain
senior officers of the Bank to compensate such individuals who participate in
the 401(k) Plan for benefits lost under the Plan. The EDCP is an unfunded, non-
qualified plan which provides for the accrual of matching contributions and
investment returns that may not be accrued under the 401(k) Plan. Under the
401(k) Plan, participating employees may voluntarily make pre-tax contributions
to their accounts up to 10% of covered annual salary. The EDCP was amended
effective January 1, 1998 to allow the inclusion of bonuses in the definition of
plan compensation. The Bank matches 50% of the employee's pre-tax contributions
up to a maximum of 6% of the employee's salary for an effective Bank matching
contribution of up to 3% of the employee's salary. In addition, the Bank may
make a profit sharing contribution equal to a percentage of each eligible
employee's covered compensation during a plan year, subject to the Bank's
profitability and the discretionary approval of the Board of Directors. The
historical discretionary contribution has been 2%.
BASES FOR CHIEF EXECUTIVE OFFICER AND NAMED EXECUTIVE OFFICERS COMPENSATION
In fiscal 1998, PFC's President and Chief Executive Officer received total
cash payments of $496,000 in salary and bonus (as shown in the Summary
Compensation Table). The Committee notes that Mr. McCarthy's salary in fiscal
1998 was less than 4% higher than his salary in fiscal 1997, and that increased
bonuses have been paid to him as PFC's overall performance continued to improve.
The bonus paid to Mr. McCarthy in fiscal 1998 exceeded 83% of his salary for the
year, as PFC achieved record levels of operating income. The other executive
officers named in the Summary Compensation Table have received increased bonuses
in the last six years, both on a dollar basis and as a percentage of salary. The
bonuses paid to Messrs. Gilleylen, Rubritz and Friedman in fiscal 1998 exceeded
40%, 39% and 45%, respectively, of their salaries for the year.
The Committee considered these 1998 payments appropriate in light of PFC's
earnings and inherent stockholder value. In addition, the Committee determined
Mr. McCarthy's fiscal 1998 compensation based on its assessment of his ability
and dedication to enhance the long-term value and financial strength of PFC by
continuing to provide the leadership and vision that he has provided throughout
his tenure as Chief Executive Officer. As of June 30, 1998, PFC's market value
has increased by 1,130% on a per share basis since the Bank's conversion from
the mutual to the stock form of ownership in
10
<PAGE> 13
July 1987. This performance is further highlighted on the following Five-Year
Performance Graph, which compares PFC's stock performance with the stock
performance of other companies as measured by broad indices.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During fiscal 1998, no member of the Audit-Finance Committee was a former
or current full-time officer or employee of the Corporation or any of its
subsidiaries. However, George W. Newland held an honorary title of Vice
President of the Bank from 1968 to 1989.
AUDIT-FINANCE COMMITTEE
<TABLE>
<S> <C>
Fred P. Burger, Jr. George W. Newland
Paul A. Mooney Warren R. Wenner
</TABLE>
11
<PAGE> 14
PERFORMANCE GRAPH
The following table and graph compares the yearly cumulative total return
of the Common Stock over a five-year measurement period with (i) the yearly
cumulative total return on the stocks included in the Nasdaq Market Index and
(ii) the yearly cumulative total return on the stocks included in the Nasdaq
Financial Stock Market Index as reported by the Center for Research in
Securities Prices at the University of Chicago. All of these cumulative returns
are computed assuming the reinvestment of dividends at the frequency with which
dividends were paid during the applicable years. The per share amounts have been
adjusted to reflect the 5 for 4 stock splits in October 1993, 1994, 1995, 1996
and 1997.
TABLE OF CUMULATIVE VALUES
<TABLE>
<CAPTION>
1993 1994 1995 1996 1997 1998
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Parkvale........................... $100.00 $137.15 $149.54 $181.48 $253.28 $376.53
Nasdaq............................. 100.00 100.96 134.77 173.03 210.38 277.69
Nasdaq Financial................... 100.00 112.89 129.06 167.99 245.73 318.85
Book Value Per Share............... 9.49 10.60 12.20 13.80 14.83 16.25
Market Value Per Share............. 9.42 12.70 13.57 16.16 22.10 32.25
</TABLE>
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
<TABLE>
<CAPTION>
MEASUREMENT PERIOD NASDAQ
(FISCAL YEAR COVERED) PARKVALE NASDAQ FINANCIAL
<S> <C> <C> <C>
1993 100.00 100.00 100.00
1994 137.15 100.96 112.89
1995 149.54 134.77 129.06
1996 181.48 173.03 167.99
1997 253.28 210.38 245.73
1998 376.3 277.69 318.85
</TABLE>
* Assumes the investment of $100 on June 30, 1993 and the reinvestment of all
dividends.
Market value on the record date, August 24, 1998, was $33.00 per share.
12
<PAGE> 15
EXECUTIVE COMPENSATION
SUMMARY
The following table sets forth a summary of certain information concerning
the compensation awarded or paid for services rendered in all capacities during
the last three fiscal years to the Chief Executive Officer and other executive
officers of the Corporation and the Bank ("Named Executive Officers") whose
total compensation during the last fiscal year exceeded $100,000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
------------------- ------------ ALL OTHER
NAME AND PRINCIPAL POSITION FISCAL YEAR SALARY(1) BONUS OPTION AWARDS COMPENSATION(2)(3)
--------------------------- ----------- --------- ----- ------------- ------------------
<S> <C> <C> <C> <C> <C>
Robert J. McCarthy, Jr. 1998 $271,000 $225,000 0 $86,911
President and Chief Executive 1997 262,000 200,000 0 87,787
Officer 1996 256,000 200,000 0 83,491
Bruce C. Gilleylen 1998 125,400 50,000 0 33,930
Vice President of the 1997 122,400 46,000 0 37,747
Corporation, Senior Vice 1996 119,400 44,000 0 36,050
President and Chief Lending
Officer of the Bank
Timothy G. Rubritz 1998 123,000 48,000 0 33,177
Vice President-Treasurer of 1997 120,600 45,000 0 37,507
the Corporation and Senior 1996 118,800 44,000 0 36,026
Vice President-Treasurer of
the Bank
Steven A. Friedman 1998 92,400 42,000 0 24,959
Vice President of the 1997 89,400 38,000 0 27,430
Corporation, Senior Vice 1996 86,400 35,000 0 25,730
President of the Bank and
Audit-Compliance Officer of
the Corporation and the Bank
</TABLE>
- ---------
(1) Salary includes amounts deferred at the election of the executive officer
through the Bank's 401(k) Plan and Executive Deferred Compensation Plan
("EDCP").
(2) Includes the Bank's contributions to the 401(k) Plan and EDCP during fiscal
1998 on behalf of Mr. McCarthy ($20,120), Mr. Gilleylen ($7,793), Mr.
Rubritz ($7,554), and Mr. Friedman ($5,334).
(3) Includes the value of the Common Stock allocated to the ESOP and SEBP Trust
accounts of Messrs. McCarthy ($66,791), Gilleylen ($26,136), Rubritz
($25,623), and the ESOP account of Mr. Friedman ($19,625), based upon the
closing price of $34.25 per share on the allocation date, December 31, 1997.
The column "Other Annual Compensation" has been omitted because there is no
compensation required to be reported in such column. The aggregate amount of
perquisites and other personal benefits provided to each Named Executive Officer
did not exceed the lesser of $50,000 or 10% of the total annual salary and bonus
of such officer.
13
<PAGE> 16
OPTION GRANTS IN THE LAST FISCAL YEAR
There were no options granted during the fiscal year ended June 30, 1998.
AGGREGATED OPTION EXERCISES IN THE LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
The following table sets forth certain information concerning stock options
exercised during fiscal year 1998 by the Named Executive Officers and the value
of unexercised stock options held by each such officer at fiscal year end (June
30, 1998). The number of shares have been adjusted to reflect the 5 for 4 stock
splits in October 1993, 1994, 1995, 1996 and 1997.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
AT FISCAL YEAR END AT FISCAL YEAR END
SHARES ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE REALIZED(1) UNEXERCISABLE UNEXERCISABLE(2)
---- ----------- ----------- ------------- ----------------
<S> <C> <C> <C> <C>
Robert J. McCarthy, Jr. 20,000 $554,979 58,652/-0- $ 1,123,138/-0-
Bruce C. Gilleylen -0- -0- 17,265/-0- 278,355/-0-
Timothy G. Rubritz 9,000 261,553 20,472/-0- 370,454/-0-
Steven A. Friedman 10,681 303,730 17,265/-0- 278,355/-0-
</TABLE>
- ---------
(1) The value was determined by subtracting the exercise price from the fair
market value of the Common Stock on the exercise date.
(2) The value was determined by subtracting the exercise prices from the fair
market value of the Common Stock on June 30, 1998 ($32.28125 per share) and
multiplying the same by the number of options.
14
<PAGE> 17
LONG-TERM INCENTIVE PLANS--AWARDS IN THE LAST FISCAL YEAR
A long-term incentive plan has not been instituted for either the
Corporation or the Bank.
EMPLOYMENT AGREEMENTS
The Bank entered into a five-year employment agreement with Mr. McCarthy in
April 1987 and the Corporation became a party to the agreement upon consummation
of the reorganization of the Bank into the holding company form of organization
in January 1989. The initial term of the agreement was extended automatically
for an additional year on each anniversary date of the agreement. Effective
January 1, 1997, a new five-year employment agreement was entered into by the
parties to reflect the holding company formation, the Bank's charter conversion
to a savings bank and change in regulators, and changes in applicable law and
regulatory policies since 1987. The agreement provides for a minimum annual
salary of $262,000, which may be increased from time to time in such amounts as
may determined by the Boards of Directors of the Corporation and the Bank. In
addition, Mr. McCarthy may receive bonus payments as determined by the Boards of
Directors. Prior to the first anniversary of the effective date and each annual
anniversary thereafter, the Boards of Directors shall consider all relevant
factors, including Mr. McCarthy's performance, and if appropriate approve a
one-year extension of the remaining term of the agreement. The term of Mr.
McCarthy's agreement will be extended each year if the Boards of Directors of
the Bank and the Corporation ("Parkvale") approve the extension, unless Mr.
McCarthy provides at least 30 days written notice not to extend the agreement
beyond its remaining term. The agreement is terminable by Parkvale for cause at
any time.
The agreement with Mr. McCarthy provides for severance payments and other
benefits in the event Parkvale terminates his employment without cause or Mr.
McCarthy resigns for "good reason," as defined in the agreement. Good reason
includes among other things a "change in control" of Parkvale, which is defined
to include any of the following: (1) any change in control required to be
reported pursuant to Item 6(e) of Schedule 14A promulgated under the Exchange
Act; (2) the acquisition of beneficial ownership by any person (as defined in
Sections 13(d) and 14(d) of the Exchange Act) of 10% or more of the combined
voting power of the Corporation's then outstanding securities; or (3) within any
period during the term of the agreement, a change in the majority of the Board
of Directors for any reason without the written consent of Mr. McCarthy. In such
event, Parkvale will give severance payments to Mr. McCarthy equal to 2.99 times
his average annual base salary, bonus and other incentive compensation for the
preceding three years, plus the continuation or payment of certain fringe
benefits other than stock benefit plans. Under Mr. McCarthy's employment
agreement, Mr. McCarthy could receive payments and benefits that constitute a
parachute payment. Parachute payments generally are payments in excess of three
times the base amount, which is defined to mean the recipient's average annual
compensation from the employer includible in the recipient's gross income during
the most recent five taxable years ending before the date on which a change in
control of the employer occurred. Recipients of parachute payments are subject
to a 20% excise tax on the amount by which such payments exceed the base amount,
in addition to regular income taxes, and payments in excess of the base amount
are not deductible by the employer as compensation expense for federal income
tax purposes. In such event, Parkvale has agreed to pay the 20% excess tax that
would otherwise be owed by Mr. McCarthy and such additional amounts as may be
necessary to reimburse Mr. McCarthy for the federal, state and local income
taxes and excise taxes on such amounts.
The agreement also precludes Mr. McCarthy from owning (excluding the
ownership of 1% or less of the stock of a public corporation), managing,
operating and controlling, being employed by or participating in or being in any
way connected with any other business covered by federal deposit insurance which
is located in the Pennsylvania counties of Allegheny, Armstrong, Butler, Beaver,
Washington and Westmoreland. Such restriction shall continue throughout Mr.
McCarthy's employment with Parkvale.
The employment agreement with Mr. McCarthy, to the extent it increases the
cost of any acquisition of control of the Corporation, could be deemed to have
an anti-takeover effect. As a result, the agreement may discourage takeover
attempts which (1) are deemed by certain stockholders to be in
15
<PAGE> 18
their best interests, (2) might be at prices in excess of the then market value
of the Corporation's Common Stock, and (3) as a result, may tend to perpetuate
existing management.
LOANS TO MANAGEMENT
No executive officer applied for or was granted a loan during fiscal 1998.
All loans outstanding to executive officers during fiscal 1998 were made on
substantially the same terms, including interest rate and collateral, as those
prevailing at the time the loans were granted for comparable transactions with
unaffiliated persons, and the loans did not involve more than the normal risk of
collectability or present other unfavorable features.
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has appointed Ernst & Young LLP as independent
auditors for the year ending June 30, 1999, and has further directed that the
selection of such auditors be submitted for ratification by the stockholders at
the Annual Meeting. The Corporation has been advised by Ernst & Young LLP that
neither the firm nor any of its associates has any relationship with the
Corporation or its subsidiaries other than the usual relationship that exists
between independent certified public accountants and clients. Ernst & Young LLP
will have a representative at the Annual Meeting who will have an opportunity to
make a statement, if he or she so desires, and who will be available to respond
to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE
RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP
AS INDEPENDENT AUDITORS FOR FISCAL 1999.
Philip Miller, 12 Cleveland Drive, Poughkeepsie, NY 12601, owner of 83,000
common shares, presented the following:
SHAREHOLDER PROPOSAL #1
RESOLVED, that the shareholders of the Corporation hereby inform the
Corporation that they do not approve of the Corporation's financial performance
and, believing that the value of their investment in the Corporation will best
be maximized through a sale or merger of the Corporation, hereby recommend that
the board of directors immediately take the necessary steps to achieve a sale,
merger or other acquisition of the Corporation as promptly as possible on terms
which will maximize shareholder value.
SUPPORTING STATEMENT
Proponent believes that management of the Corporation has not exercised
good business judgment during the past several years, particularly in its
failure to actively seek out potential merger partners and buyers. Based on
information provided by the Corporation in its 1997 Annual report, in the five
fiscal years ending on June 30, 1997, the total assets of the Corporation
increased only 10.6%. This rate of growth is well below that of comparably sized
Pennsylvania banks (based on total assets), which, according to information
found in Sheshunoff Banks of Pennsylvania 1997, averaged 13.42% in the five year
period ending on December 31, 1997. This means that the Corporation is losing
significant market share to its competitors. Based on information found in
Sheshunoff Banks of Pennsylvania 1997, comparably sized Pennsylvania banks had a
return on average assets of 1.31% for the period 1995-1996. By contrast, the
Corporation's return on average assets was only .98% and 1.07%, respectively,
for the fiscal years ending June 30, 1996 and June 30, 1997. Proponent believes
that the Corporation is just not keeping up with its competition, and that its
sale to a larger, more competitive financial institution, would provide to
shareholders, the true owners of the Corporation, a premium representing a
significant improvement over the Corporation's recent stock price. Proponent
does not believe current
16
<PAGE> 19
management will be able to deliver stock performance equal to the premium
obtainable if the Corporation were sold.
In today's market of frequent mergers and acquisitions, particularly among
financial institutions, banks and thrifts are currently often receiving buy-out
prices in excess of two times their book value and 25 times their trailing
twelve (12) month earnings per share. This favorable situation may come to an
end soon. Over the past year, Parkvale's stock performance has been good, in
part because many investors expect the Corporation to be purchased. If investors
lose confidence in this possibility, or if the market turns bearish, the
Corporation's stock will likely decline in value and the chance to maximize
shareholders' value may vanish.
Proponent believes that the shareholders' investment can only be maximized
by the diligent pursuit of a sale of the Corporation. In order to maximize
shareholder value during this period of frequent financial institution mergers
and acquisitions, it is time to actively explore the possibility of an
acquisition of the Corporation. If you agree that the directors should pursue
this course of action, please mark the proxy card "FOR" proposal 3.
RESPONSE OF YOUR BOARD OF DIRECTORS
YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE AGAINST THE
ABOVE SHAREHOLDER PROPOSAL 1 FOR THE REASONS SET FORTH BELOW.
Your Board of Directors believes that the Corporation's financial
performance has been and continues to be strong. The Corporation's net income
and its return on average assets have increased in each of the last five years,
excluding the impact of the one-time special SAIF assessment on September 30,
1996. Under the guidance and leadership of your current Board of Directors, the
Corporation's shareholders have enjoyed significant appreciation in the value of
their investment in the Common Stock.
SIGNIFICANT TOTAL RETURNS TO SHAREHOLDERS
From a shareholder perspective, the Board of Directors believes that a
company's performance is best measured by how well the shareholders have done
relative to the value of their investment. Over the last one, three, five and
ten years, our shareholders have enjoyed significant total returns as shown in
the following table:
<TABLE>
<CAPTION>
TOTAL CUMULATIVE
RETURN (1)
----------
<S> <C>
Last Year 48.7%
Last Three Years 151.8
Last Five Years 276.5
Last Ten Years 1,505.6
</TABLE>
- ---------
(1) Based on the closing price of $32.25 per share as of June 30, 1998, giving
effect to cash dividends and stock splits during the periods shown.
In addition, the Corporation's Common Stock has outperformed the Nasdaq
Market Index and the Nasdaq Financial Stock Market Index over the last five
years. See "Information with Respect to Nominees for Director, Directors Whose
Terms Continue and Executive Officers-Performance Graph."
INCREASED PROFITABILITY
The Board of Directors believes that the performance of the Corporation's
directors and officers is best measured by their ability to increase the
Corporation's profitability. The Corporation's profitability
17
<PAGE> 20
has increased in each of the last five years (excluding the impact of the
special SAIF assessment on September 30, 1996) as shown in the following table:
<TABLE>
<CAPTION>
RETURN ON RETURN ON
FISCAL YEAR NET INCOME AVERAGE ASSETS AVERAGE EQUITY
- ----------- ---------- -------------- --------------
<S> <C> <C> <C>
1994 $ 7,228 0.82% 13.69%
1995 8,071 0.93 13.89
1996 9,618 0.98 13.99
1997 10,143 1.07 14.70
1998 11,118 1.08 14.59
</TABLE>
Parkvale has outperformed the median results for a group of 13 savings
institution holding companies ("Peer Group") over the 12 months ended March 31,
1998 and over the last three years, as set forth in the following table.
<TABLE>
<CAPTION>
12 MONTHS ENDED MARCH 31, 1998 THREE-YEAR AVERAGE
------------------------------ ------------------
RETURN ON RETURN ON RETURN ON RETURN ON
TOTAL AVERAGE AVERAGE EFFICIENCY AVERAGE AVERAGE EFFICIENCY
ASSETS ASSETS EQUITY RATIO (2) ASSETS EQUITY RATIO (2)
------ ------ ------ --------- ------ ------ ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Parkvale $1,055,508 1.07% 14.66% 44.79% 0.91% 13.06% 47.87%
Peer Group Median(1) 1,078,456 0.91 10.15 53.75 0.81 9.50 58.71
</TABLE>
- ---------
(1) The Peer Group consists of all savings institution holding companies with
total assets as of March 31, 1998 between $650 million and $1.6 billion
located in Pennsylvania, Delaware, New Jersey, New York, Ohio and West
Virginia and which were fully public prior to January 1, 1998. Information
regarding the Peer Group was provided by SNL Securities LC.
(2) The efficiency ratio is defined as (i) total non-interest expense less
amortization expense, divided by (ii) net interest income plus non-interest
income. Institutions with a lower percentage are deemed to be more efficient
in controlling expenses.
INCREASED GROWTH IN ASSETS AND DEPOSITS
The Corporation's total assets increased by $104 million or 10.5% in fiscal
1998 and by $72 million or 7.8% in fiscal 1997 over the respective prior years.
Your Board of Directors believes that growth alone does not build shareholder
value. Instead, your Board believes that prudent, sustainable growth is in the
best interests of shareholders. In addition, the proponent miscalculated our
rate of growth for the five years ended June 30, 1997, which at 11.9% was nearly
equal to the rate of growth for banks shown by the proponent.
The Corporation's total deposits increased by $68 million or 7.7% in fiscal
1998 and by $74 million or 9.2% in fiscal 1997 over the respective prior years.
DIRECTORS AND EXECUTIVE OFFICERS HAVE A SIGNIFICANT OWNERSHIP INTEREST
Your Board of Directors believes that it is important for the directors and
executive officers to own a significant number of shares of Common Stock so that
their interests are aligned with all shareholders. The 18 current directors,
nominees and executive officers as a group are deemed to beneficially own an
aggregate of 977,858 shares of Common Stock, representing 18.06% of the
outstanding Common Stock. See "Voting Securities and Beneficial Ownership
Thereof."
YOUR BOARD IS COMMITTED TO ENHANCING SHAREHOLDER VALUE
The Board of Directors is committed to enhancing shareholder value and
acting in accordance with its fiduciary duties to ALL shareholders. The Board
believes that increasing the Corporation's profitability has resulted in
significant returns to shareholders. In determining the feasibility of a sale of
the Corporation, it is of the utmost importance to compare any acquisition
proposal with the long-term
18
<PAGE> 21
prospects of the Corporation. The Board believes that shareholders have been
well served by the Board's leadership and guidance over the past 10 years, and
the Board believes that it is in a much better position than the proponent to
determine what is in the best interests of all shareholders over the long term.
While the Board recognizes that some thrift mergers and acquisitions are
being priced at 25x earnings or greater for the last 12 months, the Board also
recognizes that of the 106 transactions announced over the last 12 months, only
three companies that received an earnings multiple of 25x or greater had a
return on average equity at levels at or better than Parkvale's. Accordingly,
the Board believes that the majority of savings institutions that received
multiples of 25x or greater during the last 12 months did so because they were
not as profitable as Parkvale currently is. With regard to the proponent's
argument that transactions are being priced in excess of two times book value,
the Board notes that the Corporation's stock is already trading at roughly this
level.
Your Board will carefully consider any appropriate action, including
evaluation of any bona fide offer for the sale of the Corporation, that would
serve the best interests of the shareholders.
ADOPTION OF THE PROPOSAL WOULD BE DETRIMENTAL TO THE BOARD'S EFFORTS
Your Board believes that adoption of this shareholder proposal would create
an uncertain public atmosphere which, in its judgment, would disadvantage any
efforts to merge or sell the Corporation. Adoption of the proposal could result
in the Board having diminished bargaining power and being pressured into
accepting a price for the Common Stock that does not reflect the true long-term
value of the Corporation. In addition, the uncertain atmosphere that could be
created by adoption of this proposal could result in the Corporation losing
valuable customer relationships and employees, which would impair the value of
its franchise.
FOR THE REASONS SET FORTH ABOVE, THE BOARD OF DIRECTORS BELIEVES THAT
SHAREHOLDER PROPOSAL 1 IS NOT IN THE BEST INTERESTS OF THE CORPORATION AND ITS
SHAREHOLDERS. ACCORDINGLY, THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT
YOU VOTE AGAINST SHAREHOLDER PROPOSAL 1.
Rena Rothschild, R.R. 3. Box 144, Harveys Lake, PA 18618, owner of 34,327
common shares, presented the following:
SHAREHOLDER PROPOSAL #2
RESOLVED, that the shareholders of the Corporation, believing that the
Corporation would benefit from the initiative and energy of vigorous directors,
herby recommend that the bylaws of the Corporation be, and the same hereby are,
altered and amended to provide for the unqualified mandatory retirement of each
director on his or her seventieth birthday, commencing with those nominated for
positions as directors subsequent to the 1998 annual meeting, as follows:
"ARTICLE IV"
"Section 8. Limitation of Directors. No person shall be eligible for
election, re-election, appointment or re-appointment to the Board of Directors
of the Corporation who is, at the time of such action, seventy (70) or more
years of age, or whose seventieth birthday would occur during his or her term of
office as a director; provided, however, that the foregoing shall in no way
require the retirement of any person in his or her additional capacity as an
officer or employee of the Corporation."
SUPPORTING STATEMENT
The market for financial services is rapidly changing and increasingly
competitive. In order to maximize shareholder values in this extremely dynamic
market, the Corporation's leaders need to be energetic and innovative. In
addition, the Corporation's leaders should be active businessmen and
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women with significant involvement in today's economy. The best way to achieve
this is through the imposition of an unqualified mandatory retirement age for
all directors. The Corporation has already acknowledged the wisdom of this
position, as its bylaws currently mandate retirement by age 70 for its
directors. However, this provision is inexplicably rendered ineffectual by the
qualification that mandatory retirement does not apply to "any director who was
a member of the Board of Directors of Parkvale Savings Association, Pittsburgh,
Pennsylvania, as of January 18, 1973." And, as is all too obvious, many of the
Corporation's current directors are well over the age of 70. In fact, if the
current CEO of the Corporation is not included, the average age of the board is
more than 78. The Corporation would best be served by doing away with this
exception, thereby encouraging the election of new directors with both the
energy and the experience in today's business environment to provide leadership
that is effective and forward looking. Successful management of a corporation,
particularly one the size of Parkvale, requires a constant influx of new ideas
and initiatives that can only be achieved by a rejuvenation of the Board of
Directors.
Because the Board of Directors has failed to initiate such a policy, the
shareholders, themselves, must do so. If you agree that the directors should
pursue this course of action, please mark the proxy card "FOR" proposal 4.
RESPONSE OF YOUR BOARD OF DIRECTORS
YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE AGAINST THE
ABOVE SHAREHOLDER PROPOSAL 2 FOR THE REASONS SET FORTH BELOW.
The Board of Directors believes that shareholders should be able to
consider and evaluate the qualifications, experience and ability to serve of
each nominee for election as a director on an individual basis, regardless of
the person's race, sex, religion, age, etc. Today, many individuals who are age
70 or older are in good health and are still active and productive citizens.
The current directors have substantial experience that is of incalculable
value to the Corporation, are substantial shareholders who are dedicated to
serving the Corporation, and have sufficient time to devote to the Corporation's
business. The Board believes that the leadership and guidance of its members
have served the best interests of the shareholders, as demonstrated by the
increases in the Corporation's stock price, net income, return on average assets
and return on average equity previously discussed.
The Board considers the performance and abilities of each of its members in
recommending nominees to shareholders. As previously stated, Messrs. Paul Mooney
(who was re-elected last year) and George Newland are retiring from the Board
for health reasons. While Andrea Fitting has been appointed to fill Mr. Mooney's
seat and Patrick Minnock has been nominated to replace Mr. Newland, the Board
strongly disagrees with the proponent's implication that persons who reach age
70 can no longer be energetic, innovative or active. The Board also disagrees
with the proponent's assertion that new ideas and initiatives can only come from
directors of a younger age.
The proponent initially attempted to have her proposed mandatory age limit
also apply to most of the Corporation's officers. That part of her proposal was
withdrawn after her counsel was notified that it would violate the Age
Discrimination Employment Act Amendments of 1978, 29 U.S.C.A. sec. 631(c)(1).
Because the directors are not deemed to be employees covered by this statute,
the proponent determined that it was acceptable to discriminate against
directors based on their age.
The current age limit to directors (and officers) was originally adopted
over 25 years ago in the Bank's bylaws, at a time when the average life
expectancy was substantially less than it is today. At that time, 15 directors
were not covered by the mandatory age limit. With the retirement of Messrs.
Newland and Mooney, only two of the 15 directors (namely Messrs. Pfischner and
Wenner) remain. The age limit was also put in place prior to the amendments to
the federal statute prohibiting age discrimination against employees over the
age of 70. In light of medical advances and increased life expectancies over the
last 25 years, the Board of Directors no longer believes that the age limits in
the Corporation's
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bylaws are appropriate. As a result of amendments to the Age Discrimination
Employment Act which prohibit employers from discriminating against most
officers who are age 70 or older, the Board has amended the Corporation's bylaws
to delete the age limitation on officers. In the event Shareholder Proposal 2 is
defeated at the meeting as recommended by the Board of Directors, the Board
intends to reconsider the wisdom of the age limitation applicable to directors
and either increase the age limitation or delete the provision altogether.
FOR THE REASONS SET FORTH ABOVE, THE BOARD OF DIRECTORS BELIEVES THAT
SHAREHOLDER PROPOSAL 2 IS NOT IN THE BEST INTERESTS OF THE CORPORATION AND ITS
SHAREHOLDERS. ACCORDINGLY, THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT
YOU VOTE AGAINST SHAREHOLDER PROPOSAL 2.
STOCKHOLDER PROPOSALS
Any proposal which a stockholder wishes to have presented at the next
Annual Meeting of Stockholders to be held in October 1999, must be received at
the main office of the Corporation no later than May 17, 1999. If such proposal
is in compliance with all of the requirements of Rule 14a-8 of the Exchange Act,
it will be included in the Proxy Statement and set forth on the form of proxy
issued for the next Annual Meeting of Stockholders. It is urged that any such
proposals be sent by certified mail, return receipt requested.
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ANNUAL REPORTS AND FINANCIAL STATEMENTS
A copy of the Corporation's Annual Report to Stockholders for the year
ended June 30, 1998 accompanies this Proxy Statement. Such annual report is not
part of the proxy solicitation materials.
UPON RECEIPT OF A WRITTEN REQUEST, THE CORPORATION WILL FURNISH TO ANY
STOCKHOLDER WITHOUT CHARGE A COPY OF THE CORPORATION'S ANNUAL REPORT ON FORM
10-K FOR THE YEAR ENDED JUNE 30, 1998 AND A LIST OF THE EXHIBITS THERETO
REQUIRED TO BE FILED WITH THE SECURITIES AND EXCHANGE COMMISSION UNDER THE
EXCHANGE ACT. SUCH WRITTEN REQUEST SHOULD BE DIRECTED TO TIMOTHY G. RUBRITZ,
TREASURER, PARKVALE FINANCIAL CORPORATION, 4220 WILLIAM PENN HIGHWAY,
MONROEVILLE, PENNSYLVANIA 15146. THE FORM 10-K IS NOT PART OF THE PROXY
SOLICITATION MATERIALS.
OTHER MATTERS
Each proxy solicited hereby also confers discretionary authority on the
Board of Directors of the Corporation to vote the proxy with respect to the
approval of the minutes of the last meeting of stockholders, the election of any
person as director if the nominee is unable to serve or for good cause will not
serve, matters incident to the conduct of the meeting, and upon such other
matters as may properly come before the Annual Meeting. Management is not aware
of any business to come before the Annual Meeting other than those matters
described above in this Proxy Statement. However, if any other matters should
properly come before the Annual Meeting, it is intended that proxies solicited
hereby will be voted with respect to those other matters in accordance with the
judgment of the persons voting the proxies.
The cost of solicitation of proxies will be borne by the Corporation. The
Corporation 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 the Corporation's Common Stock. In addition to
solicitations by mail, directors, officers and employees of Parkvale may solicit
proxies personally or by telephone without additional compensation. The
Corporation may retain a proxy soliciting firm to assist in the solicitation of
proxies. The cost of such a firm would not be expected to exceed $10,000.
By Order of The Board of Directors
/s/ ERNA A. GOLOTA,
Erna A. Golota,
Secretary
September 14, 1998
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REVOCABLE PROXY
PARKVALE FINANCIAL CORPORATION
[ X ] PLEASE MARK VOTES
AS IN THIS EXAMPLE
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned, being a stockholder of the Corporation, hereby authorizes
the Board of Directors of the Corporation as proxies with full powers of
substitution to represent the undersigned at the Annual Meeting of Stockholders
of the Corporation to be held at the Pittsburgh Athletic Association, 4215 Fifth
Avenue, Pittsburgh, Pennsylvania, on October 22, 1998, at 10:00 a.m. Eastern
Time, and at any adjournment of said meeting, and thereat to act with respect to
all votes that the undersigned would be entitled to cast if then personally
present on all proposals coming before the meeting.
This proxy may be revoked at any time before it is exercised.
FOR ALL
1. Election of Directors: FOR WITHHOLD EXCEPT
[ ] [ ] [ ]
NOMINEES:
ROBERT J. McCARTHY, JR.
PATRICK J. MINNOCK
INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, MARK
"FOR ALL EXCEPT" AND WRITE THAT NOMINEE'S NAME IN THE SPACE PROVIDED BELOW.
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FOR AGAINST ABSTAIN
2. Appointment of Ernst & Young LLP [ ] [ ] [ ]
as the Corporation's independent
auditors for fiscal 1999.
3. Stockholder Proposal No. 1 [ ] [ ] [ ]
4. Stockholder Proposal No. 2 [ ] [ ] [ ]
5. In the proxies' discretion, such other business as may
properly come before the meeting.
SHARES OF COMMON STOCK OF THE CORPORATION WILL BE VOTED AS SPECIFIED. IF NO
SPECIFICATION IS MADE, SHARES WILL BE VOTED "FOR" THE ELECTION OF THE BOARD OF
DIRECTORS' NOMINEES TO THE BOARD OF DIRECTORS, "FOR" THE APPOINTMENT OF ERNST &
YOUNG LLP. "AGAINST" THE STOCKHOLDERS PROPOSALS AND OTHERWISE AT THE DISCRETION
OF THE PROXIES.
Please sign exactly as name appears on this proxy card. When shares are held
by joint tenants, both should sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title as such. If a
corporation, please sign in full corporate name by the President or other
authorized officer. If a partnership, please sign in partnership name by
authorized person.
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Please be sure to sign and date Date
this Proxy in the box below.
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- ----Shareholder sign above-------Co-holder (if any) sign above----
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* DETACH ABOVE CARD, SIGN, DATE AND MAIL IN POSTAGE PAID ENVELOPE PROVIDED. *
PARKVALE FINANCIAL CORPORATION
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PLEASE ACT PROMPTLY--
SIGN, DATE & MAIL YOUR PROXY CARD TODAY
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