PARKVALE
FINANCIAL CORPORATION
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4220 WILLIAM PENN HIGHWAY, MONROEVILLE, PA 15146
September 29, 1998
Dear Fellow Stockholder:
In connection with the Annual Meeting of Stockholders to be held on October
22, 1998, Parkvale Financial Corporation ("Parkvale") received two stockholder
proposals. Your Board of Directors, after careful review and consideration,
determined that THE PROPOSALS WERE NOT IN THE BEST INTERESTS OF PARKVALE OR ITS
STOCKHOLDERS.
YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE AGAINST EACH
OF THE TWO STOCKHOLDER PROPOSALS.
You may have recently received a letter from Philip L. Miller with respect
to his proposal. In his letter dated September 18, 1998, Mr. Miller notes he has
spoken to me on several occasions. Mr. Miller has also written to me on numerous
other occasions and has sent me copies of letters he has sent to other financial
institutions dating back to May 1996 in an effort to generate interest in an
acquisition of Parkvale.
We agree with many statements Mr. Miller has made in his letters. For
example, in a letter dated October 9, 1996, Mr. Miller described Parkvale as
follows:
o "Parkvale is quite possibly the finest institution of its sort in
Pennsylvania."
In a letter to me dated November 15, 1996, Mr. Miller stated:
o "I believe you have handled Parkvale in an extremely skilled and prudent
manner in many ways. The loan portfolio is very clean, the loan loss
reserve is very high, the overhead is very low, and earnings have
increased from year to year."
MR. MILLER'S PUSH FOR A SALE HAS BEEN PREMATURE
Mr. Miller has been pushing for a sale of Parkvale since at least May 1996.
He has been fearful for years that our stock price would not significantly
increase, and in 1996 he wrote "I suspect further gains will be incremental and
of a limited nature."
OUR STOCK PRICE HAS INCREASED BY OVER 83% SINCE MAY 1996, and our net
income and return on average assets have continued to increase each year
(excluding the impact of the special SAIF assessment on September 30, 1996). It
was premature to sell Parkvale in May 1996. Mr. Miller's advice was wrong then,
and his proposal is wrong today.
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MR. MILLER'S ANALYSIS AND FACTS ARE FLAWED
Mr. Miller states in his letter that our earnings growth has shown a marked
decline. In fact, our net income increased at a faster rate in fiscal 1998 than
it did in fiscal 1997.
We also believe Mr. Miller's analysis of aquisition values is flawed. His
letter focused solely on banks (which typically receive higher premiums than
savings institutions) and only considered book value, while completely ignoring
the price to earnings multiple. However, we believe it is imprudent to debate or
discuss potential aquisition values with Mr. Miller in public because of the
adverse effect it could have on any future negotiations.
SIGNIFICANT TOTAL RETURNS TO OUR STOCKHOLDERS
Over the last one, three, five and ten years, our stockholders have enjoyed
significant total returns as shown in the following table:
TOTAL CUMULATIVE
RETURN(1)
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Last Year 48.7%
Last Three Years 151.8
Last Five Years 276.5
Last Ten Years 1,505.6
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(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, Parkvale's common stock has outperformed the Nasdaq Market
Index and the Nasdaq Financial Stock Market Index over the last five years. See
the performance graph on page 12 of our Proxy Statement and our response to Mr.
Miller's proposal on pages 17 to 19 of the Proxy Statement.
YOUR BOARD IS COMMITTED TO MAXIMIZING
STOCKHOLDER VALUE
Each current member of your Board of Directors has a substantial financial
stake in Parkvale's common stock (excluding our newly appointed director, Andrea
F. Fitting). Your Board owns over 466,000 shares (excluding stock options), and
your Board's investment in Parkvale's future has a market value of over $13.5
million. The interests of the Board are closely aligned with those of all
stockholders.
Your Board of Directors is committed to enhancing stockholder value and
acting in accordance with its fiduciary duties to ALL stockholders. The Board
believes that increasing Parkvale's profitability has resulted in significant
returns to stockholders. In determining the feasibility of a sale, it is of the
utmost importance to compare any acquisition proposal with the long-term
prospects of Parkvale. BASED ON PARKVALE'S HISTORICAL RESULTS AND OUR IN-DEPTH
KNOWLEDGE OF THE COMPANY, THE BOARD BELIEVES THAT IT IS IN A MUCH BETTER
POSITION THAN MR. MILLER TO DETERMINE WHAT IS IN THE BEST INTERESTS OF ALL
STOCKHOLDERS OVER THE LONG TERM.
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The affirmative vote of the holders of a majority of the total votes cast
is required to approve stockholder proposal No. 1 (Mr. Miller's proposal), and
the affirmative vote of the holders of at least two-thirds of the total votes
present in person or by proxy at the meeting is required to approve stockholder
proposal No. 2 (regarding amending Parkvale's Bylaws). Because abstentions are
deemed to be present at the meeting but not a cast vote, abstentions will have
no effect on the outcome of the first stockholder proposal and will have the
effect of a vote against the second stockholder proposal. Under rules of the New
York Stock Exchange, the two stockholder proposals are considered
"non-discretionary" items upon which brokerage firms may not vote on behalf of
their clients unless such clients have furnished voting instructions. These
"broker non-votes" will have no effect on the outcome of the two stockholder
proposals.
Parkvale has retained D.F. King & Co., Inc., 77 Water Street, New York, New
York 10005, a professional proxy solicitation firm, to assist in the
solicitation of proxies and for related services. Parkvale will pay D.F. King &
Co., Inc. a fee of $3,000 and has agreed to reimburse it for its reasonable
out-of-pocket expenses.
PLEASE SIGN, DATE AND RETURN YOUR PROXY CARD TODAY. WE URGE YOU TO VOTE FOR
THE ELECTION OF DIRECTORS, FOR THE INDEPENDENT AUDITORS, AND AGAINST THE TWO
STOCKHOLDER PROPOSALS.
We look forward to the future with confidence. On behalf of your Board of
Directors, I would like to thank you for your continued support.
Sincerely,
/s/Robert J. McCarthy, Jr.
Robert J. McCarthy, Jr.
President and Chief Executive Officer
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IMPORTANT
Your vote is important. Regardless of the number of shares of Parkvale
common stock you own, please vote as recommended by your Board of Directors by
taking these two simple steps:
1. PLEASE SIGN, DATE and PROMPTLY MAIL the enclosed proxy card in the
postage-paid envelope provided.
2. Please vote FOR the election of directors, FOR the ratification of the
independent auditors, AGAINST stockholder proposal No. 1 and AGAINST
stockholder proposal No. 2.
IF YOU PREVIOUSLY VOTED OTHER THAN AS RECOMMENDED ABOVE, YOU HAVE EVERY
RIGHT TO CHANGE YOUR VOTE SIMPLY BY SIGNING, DATING AND MAILING THE ENCLOSED
PROXY CARD. THIS WILL CANCEL YOUR EARLIER VOTE SINCE ONLY YOUR LATEST DATED
PROXY CARD WILL COUNT AT THE ANNUAL MEETING.
You should return your proxy card at once to ensure that your vote is
counted. This will not prevent you from voting in person at the meeting should
you attend.
If you have any questions or need assistance in voting your shares, please
call either D.F. King & Co., Inc., which is assisting us, toll-free at
1-800-949-2583, or Parkvale's Investor Relations Dept. at (412) 373-7200.
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