<PAGE> 1
SCHEDULE 14A
(RULE 14A)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
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 THE
COMMISSION ONLY (AS PERMITTED BY RULE
14A-6(e)(2))
[ X ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 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):
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 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 Statement No.:
------------------
(3) Filing Party:
--------------------------------------------------
(4) Date Filed:
----------------------------------------------------
[ X ] No fee required
<PAGE> 2
LOGO
- - --------------------------------------------------------------------------------
4220 WILLIAM PENN HIGHWAY, MONROEVILLE, PA 15146
September 20, 1999
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 28, 1999, 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 PROPOSAL 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,
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 28, 1999
------------------------------
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 28, 1999, 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, 2000;
(3) To consider and vote upon a shareholder proposal; 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 30, 1999 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 20, 1999
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 28, 1999, 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 20, 1999.
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 STOCKHOLDER PROPOSAL 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 30, 1999
(the "Voting Record Date") will be entitled to vote at the Annual Meeting. On
the Voting Record Date, there were 6,091,143 shares of Common Stock of the
Corporation issued and outstanding 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) executive
officers of the Corporation who are not directors but who are named in the
Summary Compensation Table, and (iv) all directors and executive officers as a
group. The information shown is based upon
2
<PAGE> 5
filings pursuant to the 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 30, 1999(1) COMMON STOCK
- - ------------------------ --------------------- ------------
<S> <C> <C>
Parkvale Financial Corporation 501,542(2) 8.23%
Employee Stock Ownership Plan
4220 William Penn Highway
Monroeville, PA 15146
Beck, Mack & Oliver LLC 467,945(3) 7.68
330 Madison Avenue
New York, NY 10017
Dimensional Fund Advisors Inc. 346,677(4) 6.02
1299 Ocean Avenue
Santa Monica, CA 90401
DIRECTORS:
Fred P. Burger, Jr. 145,532(5)(6) 2.38
Andrea F. Fitting 6,250(5) 0.10
Robert J. McCarthy, Jr. 345,970(5)(7)(8) 5.62
Patrick J. Minnock 9,210(5) 0.15
Robert D. Pfischner 137,245(5)(9) 2.24
Warren R. Wenner 52,330(5)(10) 0.86
EXECUTIVE OFFICERS
WHO ARE NOT DIRECTORS:
Bruce C. Gilleylen 97,075(5)(7)(11) 1.59
Timothy G. Rubritz 104,378(5)(7)(12) 1.71
Steven A. Friedman 83,448(5)(7)(13) 1.36
William J. Burt 1,500(5) 0
DIRECTORS AND EXECUTIVE
OFFICERS AS A GROUP
(17 persons) 1,184,630(5)(7) 18.52
</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) All shares have been allocated to the participants of the Employee Stock
Ownership Plan ("ESOP").
(3) Beck, Mack & Oliver LLC is an investment adviser registered under the
Investment Advisers Act of 1940 and the 467,945 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 346,677 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, 25,069 shares; Dr. Fitting, 6,000
shares; Mr. McCarthy, 61,539 shares; Mr. Minnock, 6,000 shares; Mr.
Pfischner, 37,586 shares; Mr. Wenner, 23,069 shares; Mr. Gilleylen, 24,582
shares; Mr. Rubritz, 28,590 shares; Mr. Friedman, 24,582 shares; Mr. Burt,
1,500 shares; and all directors
3
<PAGE> 6
and executive officers as a group, 303,975 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 and executive officers of the Corporation as a group
beneficially owned 880,655 shares or 14.46% of the issued and outstanding
Common Stock.
(6) Includes 32,446 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, 46,259 shares; Mr. Gilleylen, 28,883 shares; Mr.
Rubritz, 28,864 shares; and all officers as a group, 177,518 shares. Also
includes shares allocated under the Supplemental Executive Benefit Plan
("SEBP") as follows: Mr. McCarthy, 11,505 shares; Mr. Gilleylen, 338
shares; Mr. Rubritz, 287 shares; and all officers as a group, 12,130
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 148,884 shares held jointly by Mr. McCarthy and his wife, 22,881
shares held by Mr. McCarthy as custodian for his children, and 54,902
shares held under deferred fee and compensation agreements with the Bank.
Mr. McCarthy's address is 4220 William Penn Highway, Monroeville, PA 15146.
(9) Includes 26,816 shares held jointly by Mr. Pfischner and his wife, 1,525
shares held by his wife and 18,107 shares held under a deferred fee
agreement with the Bank.
(10) Includes 21,433 shares held jointly by Mr. Wenner and his wife and 7,828
shares held under a deferred fee agreement with the Bank.
(11) Includes 39,457 shares held jointly by Mr. Gilleylen and his wife.
(12) Includes 32,881 shares held jointly by Mr. Rubritz and his wife and 6,006
shares held by Mr. Rubritz as custodian for his children.
(13) Includes 26,901 shares held jointly by Mr. Friedman and his wife, 395
shares held by his wife and 3,660 shares held by Mr. Friedman as custodian
for his children. Mr. Friedman resigned effective July 19, 1999 to pursue
other interests.
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 1999.
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 the holders of a plurality of the shares of Common Stock by
all stockholders entitled to vote thereon, whether in person or by proxy.
Abstentions are considered in determining the presence of a quorum but will not
be counted as votes cast. Accordingly, abstentions will have no effect on the
plurality vote required for the election of directors. There will not be any
"broker non-votes" on this proposal.
NOMINEES FOR TERMS EXPIRING IN 2002
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION DIRECTOR
NAME AGE DURING THE PAST FIVE YEARS SINCE
- - ---- --- -------------------------- -----
<S> <C> <C> <C>
Fred P. Burger, Jr. 72 Director; President of Burger Agency, Inc., a real 1981(1)(2)
estate brokerage firm and insurance agency, since
1948
Warren R. Wenner 78 Director, retired; previously a sales 1968(1)(2)
representative for The Gage Co., a distributor of
industrial tools and equipment, from 1965 to 1985
</TABLE>
THE BOARD OF DIRECTORS RECOMMENDS THAT THE ABOVE NOMINEES
BE ELECTED AS DIRECTORS.
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 77 Chairman of the Board; President of E.T. 1968(1)(2)
Lippert Saw Co., a manufacturer of saw blades
for industry and fabricator of armor plate,
since 1973
Andrea F. Fitting, Ph.D. 45 Chief Executive Officer of Fitting Kolbrener Sept. 1998(2)
Creative since 1995 and President of Fitting
Communications, Inc. from 1986 to 1995,
marketing communications firms
</TABLE>
5
<PAGE> 8
DIRECTORS WITH 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. 56 Director; President and Chief Executive Officer 1985(1)(2)
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 42 President of Minnock Construction Company, a Oct. 1998(2)
leading builder and land developer in the
western Pennsylvania area, since 1988; licensed
real estate broker since 1987
</TABLE>
- - ---------
(1) Includes terms as director of the Bank prior to organization of the
Corporation in 1987.
(2) 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, 1999, the Board of
Directors of the Corporation met twelve times. All directors attended 100% of
such meetings and the meetings of the committees of the Board on which they
served. All members of the Board serve on the Nominating Committee, which met
two times during fiscal 1999. 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 1999, 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
1999. 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 thirteen times during fiscal 1999.
The Bank has standing Executive, Audit-Finance and Site-Building Committees as
described below, in addition to other committees. During fiscal 1999, all
directors attended 100% of the 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. The members of the Executive
Committee are appointed annually and consisted of Mr. Burger, Dr. Fitting, Mr.
Minnock and Mr. Wenner during fiscal 1999. Mr. Pfischner currently serves as
Chairman of this committee. Mr. McCarthy attends but does not vote at the
meetings. The Executive Committee met two times during fiscal 1999.
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
6
<PAGE> 9
(2) all hedging activities over $10 million and up to $25 million. In addition,
the Audit-Finance 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 Dr. Fitting and
Messrs. Burger, Minnock and Wenner during fiscal 1999. Messrs. Pfischner and
McCarthy, as ex-officio members, attend the meetings but do not vote. Mr. Burger
currently serves as Chairman of this committee. The Audit-Finance Committee met
four times during fiscal 1999.
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 Dr. Fitting and
Messrs. Burger, Minnock and Wenner during fiscal 1999. 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 1999.
Messrs. Burger, Pfischner and Wenner served as trustees/administrators of
the Corporation's following benefit plans during fiscal 1999: 401(k) Plan,
Employee Stock Ownership Plan and Stock Option Plans. To date, the directors
serving as trustees/administrators of these 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 a fee for each meeting attended. For the first six
months of fiscal year 1999, Board members received $450 for each meeting
attended and effective January 1, 1999, received $500 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 1999, 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 $100
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 1999 and received a total of $700 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
1999 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 1999, 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 1998 Annual Meeting
date, each non-employee director received an option to purchase 2,000 shares.
The fair market value on the October 22, 1998 Annual Meeting date was $22.375
per share. The Plan was amended on December 17, 1998. The amendment provided
that each person serving as a non-employee director on that date be granted an
option to purchase 4,000 shares of the Common Stock, except that Mr. Pfischner
be granted an option to purchase 6,000 shares of the Common Stock. The fair
market value on December 17, 1998 was $21.50 per share. All other provisions of
the Plan continue in full effect.
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.
7
<PAGE> 10
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 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 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 45 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 53 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 49 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 of the Bank from September 1986 to December
1990; joined the Bank in July 1986. Mr. Friedman resigned
effective July 19, 1999 to pursue other interests.
William J. Burt 54 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 B. Anwyll 47 Vice President of the Bank since December 1992; in charge of
Human Resources Department and Marketing; 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 50 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 45 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 40 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 44 Vice President of the Bank since December 1989 and Assistant
Chief Lending Officer since December 1998; 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 1999, 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
1999: 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 1999 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
9
<PAGE> 12
with respect to the issue of the deductibility of qualifying executive
compensation under Section 162(m) 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 and 1998, the base amount was $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 1998 were Messrs.
McCarthy, Gilleylen and Rubritz. Treasury shares of PFC Common Stock applicable
to the 1998 distribution were allocated to the Trust administered by Heritage
Trust Company for their benefit as follows: 1,647 shares for Mr. McCarthy, 88
shares for Mr. Gilleylen and 65 shares for Mr. Rubritz. The value of those
shares, based upon the closing price of $20.8125 per share on the last trading
day of calendar 1998 (December 31, 1998), 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 plan compensation. The Bank matches 50%
of the employee's pre-tax contributions up to a maximum of 6% of the employee's
covered compensation. 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 1999, PFC's President and Chief Executive Officer received total
cash payments of $480,000 in salary and bonus (as shown in the Summary
Compensation Table). The Committee notes that Mr. McCarthy's salary in fiscal
1999 was less than 4% higher than his salary in fiscal 1998, and that the bonus
paid to Mr. McCarthy in fiscal 1999 exceeded 74% of his salary for the year, as
PFC achieved record levels of operating income. The bonuses paid to Messrs.
Gilleylen, Rubritz, Friedman and Burt in fiscal 1999 exceeded 39%, 38%, 44% and
8%, respectively, of their salaries for the year.
The Committee considered these 1999 payments appropriate in light of PFC's
earnings and inherent stockholder value. In addition, the Committee determined
Mr. McCarthy's fiscal 1999 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, 1999, PFC's market value
has increased by 937% on a per share basis since the Bank's conversion from the
mutual to the stock form of ownership in July 1987. This performance is further
highlighted on the following Five-Year Performance Graph, which
10
<PAGE> 13
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 1999, no member of the Audit-Finance Committee was a former
or is presently a full-time officer or employee of the Corporation or any of its
subsidiaries.
AUDIT-FINANCE COMMITTEE
<TABLE>
<S> <C>
Fred P. Burger, Jr. Patrick J. Minnock
Andrea F. Fitting Warren R. Wenner
</TABLE>
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 1994, 1995, 1996, 1997
and 1998.
TABLE OF CUMULATIVE VALUES
--------------------------
<TABLE>
<CAPTION>
1994 1995 1996 1997 1998 1999
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Parkvale........................... $100.00 $108.92 $132.18 $184.48 $274.08 $237.10
Nasdaq............................. 100.00 133.48 171.38 208.42 274.43 392.51
Nasdaq Financial................... 100.00 114.34 148.88 217.75 282.73 284.80
Book Value Per Share............... 8.48 9.76 11.04 11.87 13.00 13.84
Market Value Per Share............. 10.16 10.85 12.93 17.68 25.80 21.75
</TABLE>
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
<TABLE>
<CAPTION>
PARKVALE NASDAQ NASDAQ FINANCIAL
-------- ------ ----------------
<S> <C> <C> <C>
'1994' 100.00 100.00 100.00
'1995' 108.92 133.48 114.34
'1996' 132.18 171.38 148.88
'1997' 184.48 208.42 217.75
'1998' 274.08 274.43 282.73
'1999' 237.10 392.51 284.80
</TABLE>
* Assumes the investment of $100 on June 30, 1994 and the reinvestment of all
dividends.
11
<PAGE> 14
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. 1999 $280,000 $200,000 0 $76,256
President and Chief Executive 1998 271,000 225,000 0 86,911
Officer 1997 262,000 200,000 0 87,787
Bruce C. Gilleylen 1999 127,800 50,000 0 28,288
Vice President of the 1998 125,400 50,000 0 33,930
Corporation, Senior Vice 1997 122,400 46,000 0 37,747
President and Chief Lending
Officer of the Bank
Timothy G. Rubritz 1999 125,400 48,000 0 27,589
Vice President-Treasurer of 1998 123,000 48,000 0 33,177
the Corporation and Senior 1997 120,600 45,000 0 37,507
Vice President-Treasurer of
the Bank
*William J. Burt 1999 120,600 10,000 0 2,118
Senior Vice President of the 1998 30,923 -- 0 -0-
Bank
Steven A. Friedman 1999 94,800 42,000 0 21,792
Vice President of the 1998 92,400 42,000 0 24,959
Corporation, Senior Vice 1997 89,400 38,000 0 27,430
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
1999 on behalf of Mr. McCarthy ($24,500), Mr. Gilleylen ($8,878), Mr.
Rubritz ($8,658), Mr. Burt ($2,118) and Mr. Friedman ($6,828).
(3) Includes the value of the Common Stock allocated to the ESOP and SEBP Trust
accounts of Messrs. McCarthy ($51,856), Gilleylen ($19,410), Rubritz
($18,931), and the ESOP account of Mr. Friedman ($14,964), based upon the
closing price of $20.8125 per share on the allocation date, December 31,
1998.
* Mr. Burt joined the Bank on March 30, 1998. He was not eligible to
participate in the ESOP until the beginning of the Plan year on January 1,
1999.
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.
12
<PAGE> 15
OPTION GRANTS IN THE LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-----------------------------
NUMBER OF
SECURITIES % OF TOTAL
UNDERLYING OPTIONS GRANTED EXERCISE OR GRANT DATE
OPTIONS TO EMPLOYEES IN BASE PRICE EXPIRATION PRESENT
NAME GRANTED FISCAL YEAR PER SHARE DATE VALUE(1)(2)
- - ---- ------- ----------- --------- ---- -----------
<S> <C> <C> <C> <C> <C>
Robert J. McCarthy, Jr. 18,000 20% $21.50 12/17/2008 $77,940
Timothy G. Rubritz 6,000 7 21.50 12/17/2008 25,980
Bruce C. Gilleylen 6,000 7 21.50 12/17/2008 25,980
Steven A. Friedman 6,000 7 21.50 12/17/2008 25,980
William J. Burt 3,000 3 21.50 12/17/2008 12,990
</TABLE>
- - ---------
(1) The estimated value shown, which was determined by application of the
Black-Scholes option pricing model, was developed solely for purposes of
comparative disclosure in accordance with the regulations of the Securities
and Exchange Commission and does not necessarily reflect PFC's view of the
appropriate value or methodology for purposes of financial reporting. Use of
this model should not be viewed in any way as a forecast of the future
performance of the Common Stock, volatility or dividend policy. No
adjustments have been made for forfeitures or non-transferability.
(2) The estimated present value of the options is $4.33 per share and is based
upon historical experience. The assumption used in calculating the option
value are as follows: Volatility of 0.163, calculated using daily stock
returns for the twenty-four month period preceding the option award; a
risk-free rate of interest of 4.65%, representing the interest rate on a
United States Treasury Note with a maturity date corresponding to the
expected term of the options; a dividend yield of 2.79%, the indicated yield
at the grant date; a stock price at date of grant of $21.50, which is equal
to the exercise price; and an option term of nine years.
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 1999 by the Named Executive Officers and the value
of unexercised stock options held by each such officer at fiscal year end (June
30, 1999). The number of shares have been adjusted to reflect the 5 for 4 stock
splits in October 1993, 1994, 1995, 1996, 1997 and 1998.
<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. 20,776 $393,948 61,539/9,000 $415,305/-0-
Bruce C. Gilleylen -- -- 24,582/3,000 183,664/-0-
Timothy G. Rubritz -- -- 28,590/3,000 258,160/-0-
William J. Burt -- -- 1,500/1,500 -0-/-0-
Steven A. Friedman -- -- 24,582/3,000 183,664/-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, 1999 ($21.4375 per share) and
multiplying the same by the number of options.
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.
13
<PAGE> 16
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 be 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 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.
14
<PAGE> 17
LOANS TO MANAGEMENT
In the ordinary course of business, the Bank makes loans available to its
directors, officers and employees. Such loans are made in the ordinary course of
business on substantially the same terms, including interest rates and
collateral, as those prevailing at the time for comparable loans to other
borrowers. It is the belief of management that these loans neither involve more
than the normal risk of collectability nor present other unfavorable features.
At June 30, 1999, the Bank had 12 loans outstanding to directors and executive
officers of the Bank, or members of their immediate families or related
entities. These loans totaled approximately $4.03 million or 4.7% of our total
shareholders' equity at June 30, 1999.
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has appointed Ernst & Young LLP as independent
auditors for the year ending June 30, 2000, 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 affirmative vote of the holders of a majority of
the total votes cast at the Annual Meeting is required for this proposal.
Abstentions will not be counted as votes cast and, accordingly, will have no
effect on this proposal. There will be no "broker non-votes" with respect to
this proposal.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE
RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP
AS INDEPENDENT AUDITORS FOR FISCAL 2000.
A stockholder, who is a relative of the presenter of a similar proposal at
the 1998 Annual Meeting, has given the Corporation notice of intention to
introduce the following proposal for consideration and action by stockholders at
the Meeting. The name, share holdings and address of said stockholder will be
supplied upon written request to the Secretary.
STOCKHOLDER PROPOSAL
RESOLVED, that the Corporation's shareholders do not approve of the
Corporation's recent financial performance and, believing that the value of
their investment in the Corporation can only be maximized through its sale or
merger, hereby STRONGLY URGE 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 the Corporation's management is not acting in the
best interest of its shareholders. According to Sheshunoff Banks and Savings and
Loans of Pennsylvania 1998, of 10 comparably sized Pennsylvania banks, the
Corporation had the sixth worst Return on Average Equity and tied for the
seventh worst Return on Average Assets for the period 1996-1997. Proponent does
not believe that the Corporation has meaningfully improved its performance since
then. These returns speak for themselves -- the Corporation is not keeping up
with its competition. Proponent does not believe that the current management has
either the commitment or the strategic plan needed to improve on its past record
in any meaningful way.
15
<PAGE> 18
Last year, a similar proposal received the favorable vote of the holders of
24.7% of the votes cast. In the supporting statement for that proposal, it was
noted that Parkvale's stock had benefited from the expectations raised by strong
merger activity in the financial sector. IN A LETTER TO THE SHAREHOLDERS DATED
SEPTEMBER 29, 1998, THE PRESIDENT OF PARKVALE DISCOUNTED CONCERNS THAT
PARKVALE'S STOCK WOULD FLOUNDER IF THE COMPANY DID NOT SEEK TO BE ACQUIRED. HE
ARGUED THAT BECAUSE THE CORPORATION'S STOCK PRICE HAD INCREASED SINCE MAY, 1996,
"IT WAS PREMATURE TO SELL." SINCE THEN, THE CORPORATION'S STOCK HAS DECLINED IN
THE FACE OF A REMARKABLY STRONG STOCK MARKET AND WHAT THE PROPONENT BELIEVES IS
AN AGGRESSIVE STOCK REPURCHASE PROGRAM. ON THE DATE OF THE PRESIDENT'S LETTER TO
SHAREHOLDERS, THE CORPORATION'S STOCK CLOSED AT $23.1275 PER SHARE. ON AUGUST 4,
1999, THE STOCK CLOSED AT $20.25 PER SHARE. Recently, financial institution
stocks have generally not fared well, however proponent believes that investors
would find Parkvale more attractive, regardless of its industry sector, if its
management showed greater interest in maximizing the value to its shareholders
by seeking to sell the Corporation. Proponent believes that this management team
has lost the confidence of the investor community and is not returning value to
the shareholders. Proponent believes that the only way this management team can
maximize share value is for the Corporation to promptly seek to be acquired. IF
YOU AGREE THAT THE DIRECTORS SHOULD TAKE THIS STEP, PLEASE MARK THE PROXY CARD
FOR PROPOSAL NUMBER 3.
RESPONSE OF YOUR BOARD OF DIRECTORS
YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE AGAINST THE
ABOVE STOCKHOLDER PROPOSAL FOR THE REASONS SET FORTH BELOW.
YOUR BOARD IS COMMITTED TO MAXIMIZING SHAREHOLDER VALUE
The Board of Directors is committed to maximizing shareholder value and
acting in accordance with its fiduciary duties to ALL shareholders. We simply
disagree with the proponent on the best way to achieve this objective. Based
upon our experience and track record, we urge you to support us in our ongoing
efforts to enhance shareholder value.
You should consider the following facts in deciding how to vote:
- We recently ranked as the 14th best performing thrift of the top 100
publicly traded thrifts in the country.
- Our returns on average equity exceeded 14.50% in each of the last three
years.
- Our net income continues to increase.
- Our shareholders have enjoyed significant total returns.
- Our assets and deposits continue to grow.
We believe that we are continuing to increase the franchise value of the
Corporation, and we continue to outperform our peer group. Your 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.
Your Board will carefully consider any appropriate action that would serve
the best interests of the shareholders, including any bona fide offer for the
purchase of the Corporation. In light of our increasing profitability and future
prospects, WE BELIEVE THAT A FORCED SALE "AS PROMPTLY AS POSSIBLE" IS NOT IN THE
BEST INTERESTS OF ALL SHAREHOLDERS.
16
<PAGE> 19
WE ARE THE 14TH BEST PERFORMING THRIFT OF THE TOP 100 PUBLICLY TRADED THRIFTS IN
THE UNITED STATES FOR 1998 AND THE 7TH BEST PERFORMING THRIFT OVER THE LAST 3
YEARS.
In July 1999, SNL Securities, a nationally recognized authority on
financial institutions, published its performance ranking of the top 100 largest
publicly owned thrifts throughout the entire country. We ranked as the 14th best
performing thrift during 1998 and the 7th best performing over the last 3 years,
which is a tribute to our consistency. The performance ranking considered return
on average equity, return on average assets, efficiency ratio, three-year
earnings per share growth rate, nonperforming assets to total assets, and net
charge-offs to average loans. In most of these areas, our results for fiscal
1999 are even better than they were for the three previous years.
OUR NET INCOME CONTINUES TO INCREASE
Our profitability 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
- - ----------- ---------- -------------- --------------
(IN THOUSANDS)
<S> <C> <C> <C>
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
1999 12,098 1.05 14.98
</TABLE>
We have outperformed the median results for a group of 12 other publicly
owned savings institution holding companies ("Peer Group") over the 12 months
ended June 30, 1999 and over the last 3 years, as set forth in the following
table:
<TABLE>
<CAPTION>
12 MONTHS ENDED JUNE 30, 1999 THREE-YEAR AVERAGE(3)
----------------------------- ---------------------
RETURN ON RETURN ON RETURN ON RETURN ON
TOTAL AVERAGE AVERAGE EFFICIENCY AVERAGE AVERAGE EFFICIENCY
ASSETS ASSETS EQUITY RATIO(2) ASSETS EQUITY RATIO(2)
------ ------ ------ -------- ------ ------ --------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
Parkvale $1,202 1.05% 14.98% 44.9% 1.07% 14.76% 45.2%
Peer Group Median(1) 1,272 .95 8.75 53.0 .93 8.82 53.5
</TABLE>
- - ---------
(1) The Peer Group consists of all savings institution holding companies with
total assets as of June 30, 1999 between $800 million and $2.0 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.
(2) The efficiency ratio is defined as (a) total non-interest expense less
amortization expense, divided by (b) net interest income plus non-interest
income. Institutions with a lower percentage are deemed to be more efficient
in controlling expenses.
(3) Excludes charges associated with the one-time special SAIF assessment on
September 30, 1996.
Your Board of Directors believes that the Corporation's financial
performance has been and continues to be strong. PROPONENT'S OPINION THAT WE ARE
NOT KEEPING UP WITH OUR COMPETITION IS SIMPLY NOT TRUE. Proponent compares us
with 10 Pennsylvania banks and fails to include any Pennsylvania savings
institutions, which is what we are. While we aspire to operate more like a
commercial bank than a savings institution, it will take several more years to
prudently integrate commercial banking activities into our operations. We have
made strides in changing our asset and liability mix to more closely resemble
that of a commercial bank as witnessed by the 23% increase in checking accounts
for fiscal year 1999 and 16% increase for 1998. In addition, consumer and
commercial loans increased 36% for fiscal year 1999 and 22% for 1998. During
this transition, our net income has increased in each of the last five years,
excluding the impact of the one-time special SAIF assessment on September 30,
1996.
17
<PAGE> 20
OUR SHAREHOLDERS HAVE ENJOYED SIGNIFICANT TOTAL RETURNS
We believe proponent's opinion that our stock has declined in the face of a
remarkably strong stock market is misleading. While Parkvale's stock declined
12.4% as pointed out by the proponent from September 29, 1998 ($23.127) to
August 4, 1999 ($20.25) and 15.7% as noted elsewhere in this document from June
30, 1998 ($25.80) to June 30, 1999 ($21.75), financial institution stocks in
general were subject to pricing pressures as a result of perceived inflationary
pressures and the Federal Reserve's willingness to increase rates quickly if
these inflationary fears become reality.
While our stock price declined 15.7% from June 30, 1998 to June 30, 1999,
the median price decline for the 12 member Peer Group was 19.4% and the median
decline for the 4 members of the Peer Group that are headquartered in
Pennsylvania was 23.1% for the same period. In addition, the recent median Price
to Book Value for the Peer Group was 128.2% vs. 148.1% for Parkvale. We believe
the investment community has given our stock a higher book value premium and our
stock price has held its value better than the Peer Group because of our
superior financial performance.
In spite of our reduced stock price in the past year, our shareholders have
enjoyed significant total returns over the last three, five and ten years as
shown in the following table:
<TABLE>
<CAPTION>
TOTAL CUMULATIVE
RETURN(1)
---------
<S> <C>
Last Three Years 79.4%
Last Five Years 137.1%
Last Ten Years 773.0%
</TABLE>
- - ---------
(1) Based on the closing price of $21.75 per share as of June 30, 1999, giving
effect to cash dividends and stock splits during the periods shown.
OUR ASSETS AND DEPOSITS CONTINUE TO GROW
Our total assets increased by $106 million or 9.7% in fiscal 1999 and by
$104 million or 10.5% in fiscal 1998 over the respective prior years. Your Board
of Directors believes that prudent, sustainable growth is in the best interests
of the shareholders.
Our total deposits increased by $88 million or 9.3% in fiscal 1999 and by
$68 million or 7.7% in fiscal 1998 over the respective prior years. Our fiscal
1999 growth in deposits was second in the Peer Group, with the first having made
an acquisition during the same period.
OUR DIRECTORS AND 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 17 current directors and
executive officers as a group are deemed to beneficially own an aggregate of
880,655 shares of Common Stock, representing 14.46% of the outstanding Common
Stock. See "Voting Securities and Beneficial Ownership Thereof."
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 us losing valuable customer
relationships and employees, which would impair the value of our franchise.
18
<PAGE> 21
FOR THE REASONS SET FORTH ABOVE, THE BOARD OF DIRECTORS BELIEVES THAT THE
STOCKHOLDER PROPOSAL IS NOT IN THE BEST INTERESTS OF THE CORPORATION AND ITS
SHAREHOLDERS. ACCORDINGLY, THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT
YOU VOTE AGAINST THE STOCKHOLDER PROPOSAL.
The affirmative vote of the holders of a majority of the total votes cast
is required to approve the stockholder proposal. 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 stockholder proposal. Under rules of the New York
Stock Exchange, the stockholder proposal is considered a "non-discretionary"
item 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 stockholder proposal.
STOCKHOLDER PROPOSALS
Any proposal which a stockholder wishes to have presented at the next
Annual Meeting of Stockholders to be held in October 2000, must be received at
the main office of the Corporation no later than May 17, 2000. 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.
19
<PAGE> 22
ANNUAL REPORTS AND FINANCIAL STATEMENTS
A copy of the Corporation's Annual Report to Stockholders for the year
ended June 30, 1999 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, 1999 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 20, 1999
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<PAGE> 23
[X] PLEASE MARK VOTES AS IN THIS EXAMPLE
REVOCABLE PROXY
PARKVALE FINANCIAL CORPORATION
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 28, 1999, 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
FOR WITHHOLD EXCEPT
1. Election of Directors: [ ] [ ] [ ]
Nominees:
Fred P. Burger, Jr.
Warren R. Wenner
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.
- - ---------------------------------------------------------------------------
FOR AGAINST ABSTAIN
2. Appointment of Ernst & Young LLP [ ] [ ] [ ]
as the Corporation's independent
auditors for fiscal 2000.
3. Stockholder Proposal [ ] [ ] [ ]
4. 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 Stockholder Proposal 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.
Please be sure to sign and date this Proxy in the box below.
- - --------- ------------------------------------------------------------------
Date Shareholder sign above Co-holder (if any) sign above
* Detach above card, sign, date and mail in postage paid envelope provided. *
PARKVALE FINANCIAL CORPORATION
PLEASE ACT PROMPTLY
