<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C., 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 1999
COMMISSION FILE NO: 0-17411
PARKVALE FINANCIAL CORPORATION
------------------------------------------------------
(Exact name of registrant as specified in its charter)
PENNSYLVANIA 25-1556590
- ------------------------ ----------------------
(State of incorporation) (I.R.S. Employer
Identification Number)
4220 William Penn Highway, Monroeville, Pennsylvania 15146
----------------------------------------------------------
(Address of principal executive offices; zip code)
Registrant's telephone number, including area code: (412) 373-7200
Securities registered pursuant to Section 12(b) of the Act:
Not Applicable
Securities registered pursuant to Section 12(g) of the Act:
Common Stock $(1.00 par value)
------------------------------
Title of Class
Indicate by check mark whether the registrant (1) has filed all reports required
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months and (2) has been subject to such filing requirements for the
past 90 days. Yes X No
--- ---
The closing sales price of the Registrant's Common Stock on February 8, 2000 was
$16.375 per share.
Number of shares of Common Stock outstanding as of February 8, 2000 was
5,789,244.
<PAGE> 2
PARKVALE FINANCIAL CORPORATION
INDEX
Part I. Financial Information Page
- --------------------------------- ----
Consolidated Statements of Financial Condition as of December 31, 1999 and
June 30, 1999 3
Consolidated Statements of Operations for the Three and Six
Months ended December 31, 1999 and 1998 4
Consolidated Statements of Cash Flows for the Six Months ended
December 31, 1999 and 1998 5-6
Consolidated Statement of Shareholders' Equity as of December 31, 1999 6
Notes to Unaudited Interim Consolidated Financial Statements 7-8
Management's Discussion and Analysis of Financial Condition and
Results of Operations 9-14
Part II - Other Information 14
Signatures 14
2
<PAGE> 3
PARKVALE FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Dollar amounts in thousands, except share data)
<TABLE>
<CAPTION>
DECEMBER 31, June 30,
ASSETS 1999 1999
------------ ----------
(Unaudited)
<S> <C> <C>
Cash and noninterest-earning deposits $ 15,565 $ 10,372
Federal funds sold 41,476 64,042
Interest-earning deposits in other banks 442 576
Investment securities available for sale (cost of
$15,024 at December 31 and June 30) 20,730 22,313
Investment securities held to maturity (fair value
of $103,969 at December 31 and $92,522 at June 30) 105,339 92,818
Loans, net of allowance of $13,365 at December 31
and $13,253 at June 30 1,010,293 995,671
Foreclosed real estate, net of allowance of $25 at
December 31 and $0 at June 30 1,168 1,106
Office properties and equipment, net 5,426 5,102
Intangible assets and deferred charges 319 343
Prepaid expenses and other assets 9,440 9,537
---------- ----------
Total Assets $1,210,198 $1,201,880
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Savings deposits $1,056,030 $1,037,416
Advances from Federal Home Loan Bank and other debt 59,268 64,708
Escrow for taxes and insurance 7,330 9,277
Other liabilities 5,921 5,408
---------- ----------
Total Liabilities 1,128,549 1,116,809
---------- ----------
SHAREHOLDERS' EQUITY
Preferred Stock $(1.00 par value; 5,000,000
shares authorized; 0 shares issued) -- --
Common Stock $(1.00 par value; 10,000,000 shares
authorized; 6,734,894 shares issued) 6,735 6,735
Additional Paid in Capital 4,704 4,843
Treasury Stock at cost (937,353 shares in December;
589,181 shares in June) (17,130) (10,545)
Accumulated other comprehensive income 3,623 4,628
Retained earnings 83,717 79,410
---------- ----------
Total Shareholders' Equity 81,649 85,071
---------- ----------
Total Liabilities and Shareholders' Equity $1,210,198 $1,201,880
========== ==========
</TABLE>
3
<PAGE> 4
PARKVALE FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollar amounts in thousands, except per share data)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
DECEMBER 31, DECEMBER 31,
1999 1998 1999 1998
------- ------- ------- -------
Interest income: (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Loans $18,348 $16,787 $36,492 $32,858
Mortgage-backed securities 387 641 821 1,352
Investments 1,515 992 2,906 1,814
Federal funds sold 616 1,369 1,134 3,213
------- ------- ------- -------
Total interest income 20,866 19,789 41,353 39,237
------- ------- ------- -------
Interest expense:
Savings deposits 11,444 11,302 22,660 22,430
Borrowings 821 884 1,701 1,604
------- ------- ------- -------
Total interest expense 12,265 12,186 24,361 24,034
------- ------- ------- -------
Net interest income 8,601 7,603 16,992 15,203
Provision for loan losses 55 52 88 115
------- ------- ------- -------
Net interest income after
provision for losses 8,546 7,551 16,904 15,088
------- ------- ------- -------
Noninterest Income:
Service charges on deposit accounts 535 420 1,075 826
Other fees and service charges 210 206 423 434
Gain on sale of assets -- 300 -- 610
Miscellaneous 126 111 280 193
------- ------- ------- -------
Total other income 871 1,037 1,778 2,063
------- ------- ------- -------
Noninterest Expenses:
Compensation and employee benefits 2,367 2,041 4,635 4,184
Office occupancy 679 616 1,308 1,143
Marketing 103 105 218 199
FDIC insurance 153 138 300 278
Office supplies, telephone and postage 280 289 572 529
Miscellaneous 712 677 1,440 1,332
------- ------- ------- -------
Total other expenses 4,294 3,866 8,473 7,665
------- ------- ------- -------
Income before income taxes 5,123 4,722 10,209 9,486
Income tax expense 1,883 1,747 3,772 3,510
------- ------- ------- -------
Net income $ 3,240 $ 2,975 $ 6,437 $ 5,976
======= ======= ======= =======
Net income per share:
Basic $0.55 $0.47 $1.07 $0.94
Diluted $0.54 $0.46 $1.06 $0.91
Dividends per share $0.18 $0.15 $0.36 $0.30
</TABLE>
4
<PAGE> 5
PARKVALE FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR SIX MONTHS ENDED DECEMBER 31, 1999 AND 1998
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
(Dollar amounts in thousands)
<TABLE>
<CAPTION>
1999 1998
--------- ---------
Cash flows from operating activities: (Unaudited)
<S> <C> <C>
Interest received $ 41,537 $ 39,220
Loan fees received 217 192
Other fees and commissions received 1,715 1,365
Interest paid (24,396) (24,010)
Cash paid to suppliers and others (7,018) (10,126)
Income taxes paid (3,901) (3,024)
--------- ---------
Net cash provided by operating activities 8,154 3,617
Cash flows from investing activities:
Proceeds from sale of investment securities available for sale -- 633
Proceeds from maturities of investments 670 49,244
Purchase of investment securities held to maturity (17,154) (63,230)
Maturity of deposits in other banks 134 145
Purchase of loans (42,336) (154,277)
Proceeds from sales of loans 897 1,186
Principal collected on loans 106,283 159,375
Loans made to customers, net of loans in process (75,416) (126,133)
Other (603) (383)
--------- ---------
Net cash used in investing activities (27,525) (133,440)
Cash flows from financing activities:
Net (decrease) increase in checking and savings accounts 446 14,777
Net (decrease) increase in certificates of deposit 18,168 34,191
Proceeds from FHLB advances -- 20,000
Repayment of FHLB advances (5,006) (6)
Net decrease in other borrowings (434) (1,589)
Decrease in borrowers' advances for taxes and insurance (1,946) (1,742)
Cash dividends paid (2,044) (1,727)
Allocation of treasury stock to retirement plans -- 133
Acquisition of treasury stock (7,186) (3,525)
--------- ---------
Net cash provided by financing activities 1,998 60,512
--------- ---------
Net decrease in cash and cash equivalents (17,373) (69,311)
Cash and equivalents at beginning of period 74,414 134,528
--------- ---------
Cash and equivalents at end of period $ 57,041 $ 65,217
========= =========
</TABLE>
5
<PAGE> 6
<TABLE>
<CAPTION>
Reconciliation of net income to net cash provided SIX MONTHS ENDED
by operating activities: DECEMBER 31,
1999 1998
------- -------
(Unaudited)
<S> <C> <C>
Net income $ 6,437 $ 5,976
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 301 196
Accretion and amortization of loan fees and discounts (103) (503)
Loan fees collected and deferred 217 192
Provision for loan losses 88 115
Gain on sale of assets -- (610)
(Increase) decrease in accrued interest receivable (9) 130
Increase (decrease) in other assets 778 (95)
(Increase) decrease in accrued interest payable (35) 25
Increase (decrease) in other liabilities 480 (1,809)
------- -------
Total adjustments 1,717 (2,359)
------- -------
Net cash provided by operating activities $ 8,154 $ 3,617
======= =======
</TABLE>
For purposes of reporting cash flows, cash and cash equivalents include cash and
noninterest-earning deposits, and federal funds sold. Generally, federal funds
are purchased and sold for one-day periods. Loans transferred to foreclosed
assets aggregated $417 for the six months ended December 31, 1999 and $631 for
the six months ended December 31, 1998.
PARKVALE FINANCIAL CORPORATION
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(Dollar amounts in thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Accumulated
Other Total
Common Paid-in Treasury Comprehensive Retained Shareholders'
Stock Capital Stock Income Earnings Equity
------ ------- -------- ------------- -------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance, June 30, 1999 $6,735 $4,843 $(10,545) $4,628 $79,410 $85,071
-------
Net income, six months
ended December 31, 1999 6,437 6,437
Unrealized security losses on
available for sale securities (1,005) (1,005)
-------
Comprehensive Income 5,432
Dividends on common stock at
$0.36 per share (2,130) (2,130)
Exercise of stock options (139) 601 462
Treasury stock purchased (7,186) (7,186)
------ ------ -------- ------ ------- -------
Balance, December 31, 1999 $6,735 $4,704 $(17,130) $3,623 $83,717 $81,649
====== ====== ======== ====== ======= =======
</TABLE>
6
<PAGE> 7
NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands, except share data)
1. Statements of Operations
The statements of operations for the three and six months ended December 31,
1999 and 1998 are unaudited, but in the opinion of management, reflect all
adjustments (consisting of only normal recurring accruals) necessary for a fair
presentation of the results of operations for those periods. The results of
operations for the three and six months ended December 31, 1999 are not
necessarily indicative of the results which may be expected for fiscal 2000. The
Annual Report on Form 10-K for the year ended June 30, 1999 contains additional
information and should be read in conjunction with this report.
2. Earnings Per Share
The following table sets forth the computation of basic and diluted earnings per
share for the three and six months ended December 31:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
DECEMBER 31, DECEMBER 31,
1999 1998 1999 1998
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Numerator for basic and diluted earnings per share:
Net income $ 3,240 $ 2,975 $ 6,437 $ 5,976
Denominator:
Weighted average shares
for basic earnings per share 5,886,920 6,337,069 5,993,070 6,387,774
Effect of dilutive employee stock options 66,860 138,813 78,144 154,309
---------- ---------- ---------- ----------
Weighted average shares for
dilutive earnings per share 5,953,780 6,475,882 6,071,214 6,542,083
========== ========== ========== ==========
Net income per share:
Basic $0.55 $0.47 $1.07 $0.94
===== ===== ===== =====
Diluted $0.54 $0.46 $1.06 $0.91
===== ===== ===== =====
</TABLE>
3. Loans
<TABLE>
<CAPTION>
Loans are summarized as follows: DECEMBER 31, June 30,
Mortgage loans: 1999 1999
------------ ----------
<S> <C> <C>
Residential:
1-4 Family $ 797,002 $ 790,073
Multifamily 17,041 16,920
Commercial 48,379 41,596
Other 6,502 12,452
---------- ----------
868,924 861,041
Consumer loans 131,512 129,452
Commercial business loans 20,926 23,572
Loans on savings accounts 2,684 2,749
---------- ----------
1,024,046 1,016,814
Less: Loans in process 50 7,639
Allowance for loan losses 13,365 13,253
Unamortized discount and deferred loan fees 338 251
---------- ----------
Loans, net $1,010,293 $ 995,671
========== ==========
</TABLE>
7
<PAGE> 8
The following summarizes the activity in the allowance for loan losses for the
six months ended December 31:
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
Beginning balance $13,253 $13,223
Provision for losses - mortgage loans 33 90
Provision for losses - consumer loans 55 25
Loans recovered 111 56
Loans charged off (87) (201)
------- -------
Ending balance $13,365 $13,193
======= =======
Nonaccrual loans $ 3,126 $ 1,746
as a percent of total assets 0.26% 0.15%
</TABLE>
Loans are placed on nonaccrual status when in the judgement of management, the
probability of collection of interest is deemed to be insufficient to warrant
further accrual. All loans which are 90 or more days delinquent are treated as
nonaccrual loans. The amount of interest income of nonaccrual loans that had not
been recognized in interest income was $119 at December 31, 1999 and $102 at
June 30, 1999.
Nonaccrual, substandard and doubtful commercial and other real estate loans are
assessed for impairment, however, the Bank had no loans classified as impaired
at December 31, 1999. Impaired assets include $1,168 of foreclosed real estate
as of December 31, 1999, which is recorded at the lower of acquisition costs or
fair value.
4. Comprehensive Income
Sources of comprehensive income not included in net income are limited to
unrealized gains and losses on certain investments in equity securities. For the
six months ended December 31, 1999 and 1998, total comprehensive income amounted
to $5,432 and $6,792, respectively.
8
<PAGE> 9
PARKVALE FINANCIAL CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(Dollar amounts in thousands, except per share data)
<TABLE>
<CAPTION>
Balance Sheet Data: DECEMBER 31,
1999 1998
---------- ----------
<S> <C> <C>
Total assets $1,210,198 $1,161,137
Loans, net 1,010,293 952,651
Interest-earning deposits and federal funds sold 41,918 54,030
Total investments 126,069 129,557
Savings deposits 1,056,030 998,420
FHLB advances 55,653 60,665
Shareholders' equity 81,649 85,830
Book value per share $ 14.08 $ 13.57
</TABLE>
<TABLE>
<CAPTION>
Statistical Profile:
THREE MONTHS ENDED SIX MONTHS ENDED
DECEMBER 31, (1) DECEMBER 31, (1)
1999 1998 1999 1998
------ ------ ------ ------
<S> <C> <C> <C> <C>
Average yield earned on all
interest-earning assets 7.10% 7.06% 7.05% 7.16%
Average rate paid on all
interest-bearing liabilities 4.41% 4.66% 4.40% 4.69%
Average interest rate spread 2.69% 2.40% 2.65% 2.47%
Net yield on average
interest-earning assets 2.93% 2.71% 2.90% 2.77%
Other expenses to average assets 1.42% 1.34% 1.41% 1.35%
Taxes to pre-tax income 36.76% 37.00% 36.95% 37.00%
Return on average assets 1.07% 1.03% 1.07% 1.06%
Return on average equity 16.50% 14.79% 16.19% 14.83%
Average equity to average total assets 6.51% 6.98% 6.61% 7.12%
Dividend payout ratio 33.33% 32.61% 33.96% 32.97%
</TABLE>
<TABLE>
<CAPTION>
AT DECEMBER 31,
1999 1998
------ ------
<S> <C> <C>
One year gap to total assets -7.60% -2.63%
Intangibles to total equity 0.39% 0.43%
Capital to assets ratio 6.75% 7.39%
Ratio of nonperforming assets to total assets 0.35% 0.34%
Number of full-service offices 31 30
</TABLE>
(1) The applicable income and expense figures have been annualized in
calculating the percentages.
9
<PAGE> 10
RESULTS OF OPERATIONS - COMPARISON OF THREE MONTHS ENDED DECEMBER 31, 1999 AND
1998
For the three months ended December 31, 1999, Parkvale reported net income of
$3.2 million or $0.54 per diluted share up 8.9%, or 17.4% on a per share basis,
from net income of $3.0 million or $0.46 per diluted share for the quarter ended
December 31, 1998. The $265,000 increase in net income for the December 1999
quarter reflects increased net interest income of $998,000 and increased fee
income of $134,000, which are partially offset by an increase in other expense
of $428,000. Net interest income increased to $8.6 million from $7.6 million for
the quarter ended December 31, 1998. The higher percentage increase in earnings
per share was the result of fewer outstanding shares in the current quarter due
to ongoing stock repurchase programs. Return on average equity increased to
16.5% for the December 1999 quarter compared to 14.79% for the December 1998
quarter.
INTEREST INCOME:
Parkvale had interest income of $20.9 million for the three months ended
December 31, 1999 versus $19.8 million during the comparable period in 1998.
This increase of $1.1 million or 5.4% is the result of a $53 million or 4.7%
increase in the average balance of interest-earning assets and a 4 basis point
increase in the average yield from 7.06% in 1998 to 7.10% in 1999. Interest
income from loans increased $1.6 million or 9.3% resulting from an increase in
the average outstanding loan balances of $103.9 million or 11.5%, offset
slightly by a 15 basis point decrease in the average yield from 7.45% in 1998 to
7.30% in 1999. Interest income on mortgage-backed securities decreased $254,000
or 39.6% from the 1998 quarter due to a decrease of $14.7 million or 39.8% in
the average balance. Investment interest income increased by $523,000 or 52.7%
from the 1998 quarter due to a 72 basis point increase in the average yield from
5.20% in 1998 to 5.92% in 1999 and an increase of $26.1 million or 34.2% in the
average balance. The investment portfolio includes $58.8 million invested in
various corporate bonds and trust preferred securities throughout calendar year
1999 yielding 6.82%. Interest income earned on federal funds sold decreased
$753,000 or 55.0% from the 1998 quarter due to a decrease in the average balance
of $62.3 million or 58.0% offset somewhat by a 35 basis point increase in the
average yield from 5.09% in 1998 to 5.44% in 1999. At December 31, 1999, the
weighted average yield on all interest-earning assets was 7.31% compared to
7.20% at December 31, 1998.
INTEREST EXPENSE:
Interest expense increased by $79,000 or 0.7% from the 1998 quarter to the 1999
quarter. This minimal increase was due to an increase in the average deposits
and borrowings of $66.4 million or 6.35%, offset by a 25 basis point decrease in
the average rate paid on deposits and borrowings from 4.66% in 1998 to 4.41% in
1999. At December 31, 1999, the average rate payable on liabilities was 4.45%
for deposits, 5.48% for borrowings and 4.50% for combined deposits and
borrowings.
PROVISION FOR LOAN LOSSES:
Parkvale's provision for loan losses increased by $3,000 or 5.8% from the 1998
quarter to the 1999 quarter. Aggregate valuation allowances were 1.31% of gross
loans at December 31, 1999, 1.30% of gross loans at June 30, 1999 and 1.35% of
gross loans at December 31, 1998. Total loan loss reserves at December 31, 1999
were $13.4 million.
Nonperforming loans and real estate owned were $4.3 million, $3.3 million and
$3.9 million at December 31, 1999, June 30, 1999 and December 31, 1998,
representing 0.35%, 0.27% and 0.34% of total assets at the respective balance
sheet dates. The increase in fiscal 2000 relates primarily to delinquent
mortgage loans in single family owner occupied homes.
10
<PAGE> 11
OTHER INCOME:
Total other income decreased by $166,000 or 16.0% for the December 1999 quarter
as a result of the $300,000 gain from the sale of equity securities,
specifically Freddie Mac stock, realized during the 1998 quarter. Absent this
gain, other income increased $134,000 or 18.2%, primarily due to increased
service charges on all types of deposit and loan products.
OTHER EXPENSE:
Total other expenses increased by $428,000 or 11.1% from quarter ended December
1998 to the quarter ended December 1999. This increase is due principally to
increases in compensation and office occupancy of $326,000 and $63,000, or 16.0%
and 10.2%, respectively. Parkvale opened a new branch office and utilized
additional headquarters office space since December 1998. Compensation has risen
due to additional personnel to support a new in-house data processing system
installed in September 1999. Annualized noninterest expenses as a percentage of
average assets were 1.42% for the quarter ended December 31, 1999 as compared to
1.34% for the quarter ended December 31, 1998.
RESULTS OF OPERATIONS - COMPARISON OF SIX MONTHS ENDED DECEMBER 31, 1998 AND
1997
For the six months ended December 31, 1999, Parkvale had net income of $6.4
million or $1.06 per diluted share versus $6.0 million or $0.91 per diluted
share for the comparable period in 1998. The $461,000 or 7.7% increase in net
income for the six months ended December 31, 1999 reflects increased net
interest income of $1.8 million and increased fee income of $325,000, these
items were partially offset by increased operating expenses of $808,000. Net
interest income for the six months ended December 31, 1999 increased to $17.0
million from $15.2 million for the six months ended December 31, 1998.
INTEREST INCOME:
Parkvale had interest income of $41.4 million during the six months ended
December 31, 1999 versus $39.2 million during the comparable period in 1998. The
increase of $2.1 million is attributable to an increase in the average
interest-earning asset portfolio of $76.1 million or 6.9%, offset by an 11 basis
point decrease in the average yield from 7.16% in 1998 to 7.05% in 1999.
Interest income from loans increased $3.6 million or 11.06% due to an increase
in the average loan balance of $135.0 million or 15.5%, offset by a 29 basis
point decrease in the average yield from 7.54% in 1998 to 7.25% in 1999.
Interest income on mortgage-backed securities declined by $531,000 or 39.3% from
the first six months of the previous fiscal year. This was due to a decrease in
the average portfolio of $15.1 million or 39.1%, compounded by a 3 basis point
decrease in the average yield from 7.00% to 6.97%. Income from investments
increased by $1.1 million or 60.2% from 1998 due to an increase in the average
investment balance of $32.8 million or 49.3% and a 40 basis point increase in
the average yield from 5.45% in 1998 to 5.85% in 1999. Interest income earned on
federal funds sold decreased $2.1 million or 64.7% from the prior six months
ended December 1998. This was due to a decrease of the average federal fund
balance of $76.6 million or 64.3%, coupled with a 6 basis point decrease in the
average yield from 5.40% in 1998 to 5.34% in 1999.
INTEREST EXPENSE:
Interest expense increased by $327,000 or 1.4% from the 1998 six month period to
the 1999 six month period. The small increase was due to a rise in average
deposits and borrowings of $82.3 million offset by a 29 basis point decrease in
the average rate paid from 4.69% in 1998 to 4.40% in 1999.
11
<PAGE> 12
PROVISION FOR LOAN LOSSES:
Parkvale's provision for loan losses decreased by $27,000 or 23.5% from the 1998
to the 1999 six month period. Aggregate valuation allowances were 1.31% of gross
loans at December 31, 1999, 1.30% of gross loans at June 30, 1999 and 1.35% of
gross loans at December 31, 1998. Total loan loss reserves at December 31, 1999
were $13.4 million.
Nonperforming loans and real estate owned were $4.3 million, $3.3 million and
$3.9 million at December 31, 1999, June 30, 1999 and December 31, 1998,
representing 0.35%, 0.27% and 0.34% of total assets at the respective balance
sheet dates.
OTHER INCOME:
Other income decreased by $285,000 or 13.8% for the six months ended December
31, 1999 from the six months ended December 31, 1998 as a result of the $610,000
gain from the sale of equity securities, specifically Freddie Mac stock,
realized during the first six months of 1998. Excluding this gain, other income
increased $325,000 or 22.4%, primarily due to increased service charges on all
types of deposit and loan products.
OTHER EXPENSE:
Other expenses increased by $808,000 for the six month period ended December 31,
1999 from same period in 1998. This increase is due principally to increases in
compensation and office occupancy of $451,000 and $165,000, or 10.8% and 14.4%,
respectively. Parkvale opened a new branch office and taken over additional
office space in the headquarters building since December 1998. Compensation has
risen mainly due to additional personnel and overall training costs to support
the conversion to a new in- house data processing system completed during
September 1999. Annualized noninterest expenses as a percentage of average
assets were 1.41% for the six months ended December 31, 1999 as compared to
1.35% for the six months ended December 31, 1998.
LIQUIDITY AND CAPITAL RESOURCES:
Federal funds sold decreased $22.6 million or 35.2% from June 30, 1999 to
December 31, 1999 as a result of increased loan balances of $14.6 million,
increased investment balances of $12.5 million and increased cash balances of
$5.2 million, mitigated somewhat by increased deposit balances of $18.6 million.
Escrow for taxes and insurance decreased by $1.9 million or 21.0% as a result of
the remittance of property taxes to the various taxing districts during the
first quarter.
Shareholders' equity was $81.7 million or 6.75% of total assets at December 31,
1999. The Bank is required to maintain Tier I (Core) capital equal to at least
4% of the institution's adjusted total assets, and Tier II (Supplementary)
risk-based capital equal to at least 8% of the risk-weighted assets. At December
31, 1999, Parkvale was in compliance with all applicable regulatory
requirements, with Tier I and Tier II ratios of 6.40% and 11.77%, respectively.
12
<PAGE> 13
<TABLE>
<CAPTION>
Tier I Tier I Tier II
GAAP Core Risk-Based Risk-Based
Capital Capital Capital Capital
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Equity Capital (1) $ 81,700 $ 81,700 $ 81,700 $ 81,700
Less non-allowable intangible assets -- (319) (319) (319)
Less unrealized securities gains -- (3,383) (3,383) (3,383)
Plus general valuation allowances (2) -- -- -- 9,600
Plus allowable unrealized holding gains (3) -- -- -- 2,398
---------- ---------- -------- --------
Total regulatory capital 81,700 77,998 77,998 89,996
Minimum required capital -- 48,740 30,623 61,168
---------- ---------- -------- --------
Excess regulatory capital $ 81,700 $ 29,258 $ 47,375 $ 28,828
---------- ---------- -------- --------
Adjusted total assets $1,209,234 $1,218,499 $765,572 $764,601
Regulatory capital as a percentage 6.76% 6.40% 10.19% 11.77%
Minimum capital required as a percentage -- 4.00% 4.00% 8.00%
---------- ---------- -------- --------
Excess regulatory capital as a percentage 6.76% 2.40% 6.19% 3.77%
========== ========== ======== ========
Well capitalized requirement -- 5.00% 6.00% 10.00%
========== ========== ======== ========
</TABLE>
- ----------------------------
(1) Represents equity capital of the consolidated Bank as reported to the
Pennsylvania Department of Banking and FDIC on Form 032 for the quarter
ended December 31, 1999.
(2) Limited to 1.25% of risk adjusted total assets.
(3) Limited to 45% of pretax net unrealized holding gains.
Management is not aware of any trends, events, uncertainties or current
recommendations by any regulatory authority that will have (if implemented), or
that are reasonably likely to have, material adverse effects on Parkvale's
liquidity, capital resources or operations.
IMPACT OF YEAR 2000:
Parkvale's year 2000 ("Y2K") plan was discussed on Page 12 of the 1999 Annual
Report included in the 1999 Form 10-K filed in September 1999. The system
conversion was successfully completed as scheduled on September 6, 1999. The
Bank conducted business as usual on Saturday, January 1, 2000, without incident,
and continues to operate without interruption. Management remains focused on
monitoring and validating daily activity to ensure uninterrupted customer
service throughout the year 2000.
IMPACT OF INFLATION AND CHANGING PRICES:
The financial statements and related data presented herein have been prepared in
accordance with generally accepted accounting principles, which require the
measurement of financial position and operating results in terms of historical
dollars without considering changes in the relative purchasing power of money
over time due to inflation. Unlike most industrial companies, substantially all
of the assets and liabilities of a financial institution are monetary in nature.
As a result, interest rates have a more significant impact on a financial
institution's performance than the effects of general levels of inflation.
Interest rates do not necessarily move in the same direction or in the same
magnitude as the prices of goods and services as measured by the consumer price
index.
13
<PAGE> 14
FORWARD LOOKING STATEMENTS:
The statements in this Form 10-Q which are not historical fact are forward
looking statements. Forward looking information should not be construed as
guarantees of future performance. Actual results may differ from expectations
contained in such forward looking information as a result of factors including
but not limited to the interest rate environment, economic policy or conditions,
federal and state banking and tax regulations and competitive factors in the
marketplace. Each of these factors could affect estimates, assumptions,
uncertainties and risks considered in the development of forward looking
information and could cause actual results to differ materially from
management's expectations regarding future performance.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings None
Item 2. Changes in Securities and Use of Proceeds None
Item 3. Defaults Upon Senior Securities N/A
Item 4. Submission of Matters to a Vote of Security Holders None
Item 5. Other Information None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits None
(b) Reports on Form 8-K None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Parkvale Financial Corporation
DATE: February 10, 2000 By:/s/ Robert J. McCarthy, Jr.
----------------- ---------------------------
Robert J. McCarthy, Jr.
President and
Chief Executive Officer
DATE: February 10, 2000 By: /s/ Timothy G. Rubritz
----------------- --------------------------
Timothy G. Rubritz
Vice President, Treasurer and
Chief Financial Officer
14
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<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-START> JUL-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 15,565
<INT-BEARING-DEPOSITS> 442
<FED-FUNDS-SOLD> 41,476
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0
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