PARKVALE
FINANCIAL CORPORATION
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4220 WILLIAM PENN HIGHWAY, MONROEVILLE, PA 15146
October 18, 1999
Dear Shareholder:
As a result of Parkvale's continuing profitability, your Board of
Directors increased the quarterly dividend to $0.18 per share to stockholders of
record on September 30, 1999. This represents a 20% increase over the $0.15 paid
in previous quarters since October 1998. Your dividend check is enclosed.
Parkvale Financial Corporation reported net income for the quarter
ended September 30, 1999 of $3.2 million or $0.52 per diluted share, up 6.5%, or
13.7% on a per share basis, from net income of $3.0 million or $0.45 per diluted
share for the quarter ended September 30, 1998. The $196,000 increase in net
income for the September 1999 quarter reflects an increase in net interest
income of $791,000 due mainly to growth in the loan portfolio. The September
1998 results included pre-tax security gains of $310,000, or $195,000 after
taxes. Excluding the effect of security gains, operating earnings for the
quarter ended September 30, 1999 increased $391,000, up 13.8%, or 21.7% on a per
share basis. Return on equity increased to 15.89% for the September 1999 quarter
compared to 14.86% for the September 1998 quarter. The higher percentage
increase in earnings per share was the result of fewer outstanding shares in the
current quarter.
As you know, a shareholder has submitted a proposal for consideration
at our October 28, 1999 Annual Meeting, strongly urging 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. Institutional
Shareholder Services (ISS), an independent research company located in
Rockville, MD, that analyzes proxy statements and shareholder proposals, issued
a report on October 14, 1999 which said, "In our opinion, there is no compelling
evidence that the drastic measure described by the proponent is in shareholders'
best interests". ISS recommends a vote AGAINST the shareholder proposal seeking
a sale of the company. We would also mention that Janney Montgomery Scott issued
a report on Parkvale dated September 29, 1999 with a BUY recommendation and a
twelve month price objective of $24.
As the new millennium approaches, Parkvale is ready for the Year 2000
(Y2K). All programs and software in use that could impact accounts at Parkvale
have been tested and verified to be Y2K compliant. We are confident that
Parkvale will deliver uninterrupted customer service before and after January 1,
2000.
Sincerely,
/s/ Robert J. McCarthy, Jr.
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Robert J. McCarthy, Jr.
President and
Chief Executive Officer
<PAGE>
PARKVALE FINANCIAL CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(In Thousands except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three months ended
September 30,
1999 1998
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<S> <C> <C>
Total interest income $20,487 $19,448
Total interest expense 12,096 11,848
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Net interest income 8,391 7,600
Provision for loan losses 33 63
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Net interest income after provision for losses 8,358 7,537
Gain on sale of assets 0 310
Other income 907 716
Total other expenses 4,179 3,799
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Income before income taxes 5,086 4,764
Income tax expense 1,889 1,763
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Net income $3,197 $3,001
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Net income per share:
Basic $0.52 $0.47
Diluted $0.52 $0.45
Dividend per share $0.18 $0.15
</TABLE>
<TABLE>
<CAPTION>
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SELECTED FINANCIAL DATA
(In Thousands except per share data)
Sept. 30, June 30, Sept. 30,
1999 1999 1998
----------------------------------------------
<S> <C> <C> <C>
Total assets $1,188,136 $1,201,880 $1,123,324
Savings deposits 1,034,458 1,037,416 970,936
Total loans, net 1,011,362 995,671 862,633
Loan loss reserves 13,303 13,253 13,272
Non-performing assets 2,748 3,266 4,857
Ratio of classified assets to total assets 0.23% 0.27% 0.43%
Allowance for loan losses as a % of gross loans 1.30% 1.30% 1.50%
Total shareholders' equity $83,873 $85,071 $83,990
Book value per share 13.93 13.84 13.16
</TABLE>
<TABLE>
<CAPTION>
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OTHER SELECTED DATA
Three months ended
September 30,
1999 1998
-----------------------------
<S> <C> <C>
Average yield earned on all interest-earning assets 7.01% 7.27%
Average rate paid on all interest-bearing liabilities 4.39% 4.72%
Average interest rate spread 2.62% 2.55%
Return on average assets 1.07% 1.08%
Return on average equity 15.89% 14.86%
Other expense to average assets 1.39% 1.37%
</TABLE>
