<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 MARCH 31, 2000
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 May 9, 2000 was
$16.00 per share.
Number of shares of Common Stock outstanding as of May 9, 2000 was 5,729,983.
<PAGE> 2
PARKVALE FINANCIAL CORPORATION
INDEX
<TABLE>
<CAPTION>
Part I. Financial Information Page
- ----------------------------- ----
<S> <C>
Consolidated Statements of Financial Condition as of March 31, 2000
and June 30, 1999 3
Consolidated Statements of Operations for the Three and Nine Months
ended March 31, 2000 and 1999 4
Consolidated Statements of Cash Flows for the Nine Months ended
March 31, 2000 and 1999 5-6
Consolidated Statements of Shareholders' Equity as of March 31, 2000 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
</TABLE>
2
<PAGE> 3
PARKVALE FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Dollar amounts in thousands, except share data)
<TABLE>
<CAPTION>
MARCH 31, June 30,
ASSETS 2000 1999
---------- ----------
(Unaudited)
<S> <C> <C>
Cash and noninterest-earning deposits $ 13,912 $ 10,372
Federal funds sold 49,135 64,042
Interest-earning deposits in other banks 6,620 576
Investment securities available for sale (cost of
$15,027 at March 31 and at June 30) 20,270 22,313
Investment securities held to maturity (fair value
of $99,957 at March 31 and $92,522 at June 30) 102,318 92,818
Loans, net of allowance of $13,372 at March 31
and $13,253 at June 30 1,019,771 995,671
Foreclosed real estate 1,530 1,106
Office properties and equipment, net 5,625 5,102
Intangible assets and deferred charges 308 343
Prepaid expenses and other assets 10,210 9,537
---------- ----------
Total assets $1,229,699 $1,201,880
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Savings deposits $1,073,448 $1,037,416
Advances from Federal Home Loan Bank 55,650 60,659
Escrow for taxes and insurance 7,330 9,277
Other liabilities 5,570 5,408
Other debt 4,670 4,049
---------- ----------
Total liabilities $1,146,668 $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 4,480 4,843
Treasury stock at cost (966,811 shares in March
and 589,181 shares in June) (17,581) (10,545)
Accumulated other comprehensive income 3,331 4,628
Retained earnings 86,066 79,410
---------- ----------
Total shareholders' equity 83,031 85,071
---------- ----------
Total liabilities and shareholders' equity $1,229,699 $1,201,880
========== ==========
</TABLE>
3
<PAGE> 4
PARKVALE FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollar amounts in thousands, except share data)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
MARCH 31, MARCH 31,
2000 1999 2000 1999
------- ------- ------- -------
Interest Income: (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Loans $18,794 $17,742 $55,286 $50,600
Mortgage-backed securities 399 568 1,220 1,920
Investments 1,615 758 4,521 2,572
Federal funds sold 618 1,009 1,752 4,222
------- ------- ------- -------
Total interest income 21,426 20,077 62,779 59,314
------- ------- ------- -------
Interest Expense:
Savings deposits 11,719 11,138 34,379 33,568
Borrowings 816 882 2,517 2,486
------- ------- ------- -------
Total interest expense 12,535 12,020 36,896 36,054
------- ------- ------- -------
Net interest income 8,891 8,057 25,883 23,260
Provision for loan losses 59 44 147 159
------- ------- ------- -------
Net interest income after
provision for losses 8,832 8,013 25,736 23,101
------- ------- ------- -------
Noninterest Income:
Service charges on deposit accounts 562 454 1,637 1,280
Other fees and service charges 175 184 598 618
Gain on sale of assets -- -- -- 610
Miscellaneous 138 113 418 306
------- ------- ------- -------
Total other income 875 751 2,653 2,814
------- ------- ------- -------
Noninterest Expenses:
Compensation and employee benefits 2,475 2,224 7,110 6,408
Office occupancy 788 579 2,096 1,722
Marketing 107 88 325 287
FDIC insurance 54 147 354 425
Office supplies, telephone, and postage 319 253 891 782
Miscellaneous 657 703 2,097 2,035
------- ------- ------- -------
Total other expense 4,400 3,994 12,873 11,659
------- ------- ------- -------
Income before income taxes 5,307 4,770 15,516 14,256
Income tax expense 1,920 1,766 5,692 5,276
------- ------- ------- -------
Net income $ 3,387 $ 3,004 $ 9,824 $ 8,980
======= ======= ======= =======
Basic earnings per share $ 0.59 $ 0.47 $ 1.66 $ 1.41
Diluted earnings per share $ 0.58 $ 0.47 $ 1.64 $ 1.38
Dividends per share $ 0.18 $ 0.15 $ 0.54 $ 0.45
</TABLE>
4
<PAGE> 5
PARKVALE FINANCIAL CORPORATION CONSOLIDATED
STATEMENTS OF CASH FLOWS FOR NINE
MONTHS ENDED MARCH 31, 2000 AND 1999
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
(Dollar amounts in thousands)
<TABLE>
<CAPTION>
2000 1999
--------- ---------
Cash flows from operating activities: (Unaudited)
<S> <C> <C>
Interest received $ 62,902 $ 59,085
Loan fees received 586 273
Other fees and commissions received 2,560 2,086
Interest paid (36,907) (35,997)
Cash paid to suppliers and others (13,222) (13,928)
Income taxes paid (4,751) (3,549)
--------- ---------
Net cash provided by operating activities 11,168 7,970
Cash flows from investing activities:
Proceeds from sale of investment securities available for sale -- 633
Proceeds from maturities of investments 2,684 102,725
Purchase of investment securities available for sale -- (5,000)
Purchase of investment securities held to maturity (18,934) (78,970)
Purchase (reduction) of deposits in other banks (6,044) 21
Purchase of loans (60,390) (206,863)
Proceeds from sales of loans 1,296 1,290
Principal collected on loans 143,191 248,921
Loans made to customers, net of loans in process (102,102) (182,109)
Other (968) (534)
--------- ---------
Net cash used in investing activities (41,267) (119,886)
Cash flows from financing activities:
Net increase in checking and savings accounts 7,861 20,773
Net increase in certificates of deposit 28,171 52,269
Proceeds from FHLB advances -- 20,000
Repayment of FHLB advances (5,009) (8)
Net increase (decrease) in other borrowings 620 (1,392)
Decrease in borrowers' advances for tax & insurance (1,947) (1,803)
Cash dividends paid (3,051) (2,681)
Allocation of treasury stock to retirement plans (530) (133)
Acquisition of treasury stock (7,383) (6,499)
--------- ---------
Net cash provided by financing activities 18,732 80,526
--------- ---------
Net (decrease) in cash and cash equivalents (11,367) (31,390)
Cash and equivalents at beginning of period 74,414 134,528
--------- ---------
Cash and equivalents at end of period $ 63,047 $ 103,138
========= =========
</TABLE>
5
<PAGE> 6
<TABLE>
<CAPTION>
Reconciliation of net income to net cash provided
by operating activities: 2000 1999
------- -------
<S> <C> <C>
Net income $ 9,824 $ 8,980
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 480 296
Accretion and amortization of loan fees and discounts (153) (716)
Loan fees collected and deferred 586 273
Provision for loan losses 147 159
Gain on sale of assets -- (610)
(Increase) in accrued interest receivable (187) (77)
(Decrease) increase in other assets 576 (800)
(Increase) decrease in accrued interest payable (11) 58
(Decrease) increase in other liabilities (94) 407
------- -------
Total adjustments 1,344 (1,010)
------- -------
Net cash provided by operating activities $11,168 $ 7,970
======= =======
</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 $1,040 and $816 in the nine months ended March 31, 2000 and
1999, respectively.
PARKVALE FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(Dollar amounts in thousands, except share data)
<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, nine months ended
March 31, 2000 9,824 9,824
Unrealized security losses on
available-for sale securities (1,297) (1,297)
-------
Comprehensive Income 8,527
Dividends on common stock at
$0.54 per share (3,168) (3,168)
Treasury stock purchased (8,401) (8,401)
Treasury stock contributed to
benefit plans 530 530
Exercise of stock options (363) 835 472
------ ------ -------- ------ ------- -------
Balance, March 31, 2000 $6,735 $4,480 ($17,581) $3,331 $86,066 $83,031
====== ====== ======== ====== ======= =======
</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 nine months ended March 31, 2000
and 1999 are unaudited, but in the opinion of management reflect all adjustments
(including normal recurring accruals) necessary for a fair presentation of the
results of operations for those periods. The results of operations for the three
and nine months ended March 31, 2000 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 nine months ended March 31:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
MARCH 31, MARCH 31,
2000 1999 1999 1999
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Numerator for basic and diluted
earnings per share:
Net income $3,387 $3,004 $9,824 $8,980
Denominator:
Weighted average shares
for basic earnings per share 5,785,129 6,306,606 5,923,756 6,360,718
Effect of dilutive employee stock options 42,874 116,148 66,387 141,589
--------- --------- --------- ---------
Weighted average shares for
dilutive earnings per share 5,828,003 6,422,754 5,990,143 6,502,307
========= ========= ========= =========
Net income per share:
Basic $ 0.59 $ 0.47 $ 1.66 $ 1.41
Diluted $ 0.58 $ 0.47 $ 1.64 $ 1.38
</TABLE>
3. 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
nine months ended March 31, 2000 and 1999, total comprehensive income amounted
to $8,527 and $9,271, respectively.
7
<PAGE> 8
4. Loans:
<TABLE>
<CAPTION>
Loans are summarized as follows: MARCH 31, June 30,
2000 1999
---------- ----------
First mortgage loans: (Dollar amounts in thousands)
<S> <C> <C>
Residential:
1-4 Family $ 792,053 $ 775,786
Multifamily 16,870 16,920
Commercial 51,467 52,335
Other 8,311 8,591
---------- ----------
868,701 853,632
Consumer loans 130,640 129,452
Commercial business loans 32,117 23,572
Loans on savings accounts 2,532 2,749
---------- ----------
1,033,990 1,009,405
Less: Loans in process 256 230
Allowance for loan losses 13,372 13,253
Unamortized discount (premium) and deferred loan fees 591 251
---------- ----------
Loans, net $1,019,771 $ 995,671
========== ==========
Nonperforming assets $ 4,028 $ 3,266
as a percent of total assets 0.33% 0.27%
</TABLE>
The following summary sets forth the activity in the allowance for loan losses
for the nine months ended March 31:
<TABLE>
<CAPTION>
1999 1999
------- -------
<S> <C> <C>
Beginning balance $13,253 $13,223
Provision for losses - mortgage loans 40 105
Provision for losses - consumer loans 107 54
Loans recovered 121 67
Loans charged off (149) (230)
------- -------
Ending balance $13,372 $13,219
======= =======
</TABLE>
Loans are placed on nonaccrual status when in the judgment 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 on nonaccrual loans that had not
been recognized in interest income was $124 for the nine months ended March 31,
2000 and $102 for the year ended June 30, 1999.
Nonaccrual, substandard and doubtful commercial and other real estate loans are
normally considered to be impaired loans. However the Bank had no loans
classified as impaired at March 31, 2000 and at March 31, 1999. Impaired assets
include $1,530 of foreclosed real estate as of March 31, 2000, which is recorded
at the lower of acquisition costs or fair value.
Reclassification:
Certain loan detail amounts at June 30, 1999 have been reclassified for
comparative purposes.
8
<PAGE> 9
PARKVALE FINANCIAL CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(Dollar amounts in thousands, except share data)
<TABLE>
<CAPTION>
Balance Sheet Data: MARCH 31,
2000 1999
---------- ----------
<S> <C> <C>
Total assets $1,229,699 $1,185,964
Loans, net 1,019,771 983,328
Interest-earning deposits and federal funds sold 55,755 94,854
Total investments 122,588 84,477
Savings deposits 1,073,448 1,022,494
FHLB Advances 55,650 60,662
Other borrowings 4,670 3,028
Shareholders' equity 83,031 84,722
Book value per share $14.39 $13.59
</TABLE>
<TABLE>
<CAPTION>
Statistical Profile:
THREE MONTHS ENDED NINE MONTHS ENDED
MARCH 31, (1) MARCH 31, (1)
1999 1999 2000 1999
------ ------ ------ ------
<S> <C> <C> <C> <C>
Average yield earned on all
interest-earning assets 7.28% 7.08% 7.13% 7.13%
Average rate paid on all
interest-bearing liabilities 4.47% 4.51% 4.42% 4.63%
Average interest rate spread 2.81% 2.57% 2.71% 2.50%
Net yield on average
interest-earning assets 3.03% 2.84% 2.94% 2.80%
Other expenses to average assets 1.44% 1.37% 1.42% 1.36%
Efficiency ratio 45.05% 45.35% 45.11% 44.72%
Taxes to pre-tax income 36.18% 37.02% 36.68% 37.01%
Return on average assets 1.11% 1.03% 1.08% 1.05%
Return on average equity 16.93% 14.78% 16.44% 14.81%
Average equity to average total assets 6.56% 6.96% 6.60% 7.07%
</TABLE>
<TABLE>
<CAPTION>
AT MARCH 31,
1999 1999
------ ------
<S> <C> <C>
One year gap to total assets -2.03% -0.94%
Intangibles to total equity 0.37% 0.42%
Capital to assets ratio 6.75% 7.14%
Ratio of nonperforming assets to total assets 0.35% 0.27%
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 MARCH 31, 2000 AND 1999
For the three months ended March 31, 2000, Parkvale reported net income of $3.4
million or $0.58 per diluted share up 12.8% (or 23.4% on a per share basis) from
net income of $3.0 million or $0.47 per diluted share for the quarter ended
March 31, 1999. The $383,000 increase in net income for the March 2000 quarter
primarily reflects an 10.4% increase in net interest income of $834,000. For the
quarter ended March 31, 2000, net interest income increased to $8.9 million from
$8.1 million for the quarter ended March 31, 1999. The fiscal 2000 and 1999
quarterly results do not include any unusual items or gains from the sale of
assets.
INTEREST INCOME:
Parkvale had interest income of $21.4 million during the three months ended
March 31, 2000 versus $20.1 million during the comparable period in 1999. This
increase of $1.3 million is the direct result of a $47 million or 4.1% increase
in the average balance of interest-earning assets, coupled with a 20 basis point
increase in the average yield from 7.08% in 1999 to 7.28% in 2000. Interest
income from loans increased $1.1 million or 5.9% resulting from the $58.9
million or 6.1% increase in the average outstanding loan balances with only a 1
basis point increase in the average yield from 7.40% in 1999 to 7.41% in 2000.
Consistent with Parkvale's ongoing practice of supplementing our loan
originations, when necessary, with purchases of adjustable rate mortgage loans
(after subjecting such credits to our normal underwriting standards), the
average loan increase includes loan purchases of $19.7 million during the
quarter and fiscal year to date purchases of $60.4 million.
Conversely, interest income on mortgage-backed securities for the 2000 quarter
decreased $169,000 or 29.8% from the 1999 quarter due to a decrease of $11.1
million or 33.4% in the average balance, offset only slightly by a 37 basis
point increase in the average yield from 6.88% in 1999 to 7.24% in 2000.
Investment securities interest income increased by $857,000 or 113.1% from the
1999 quarter due to an increase of $40.9 million or 72.7% in the average balance
along with a 1.26 basis point increase in the average yield from 5.38% in 1999
to 6.64% in 2000. Interest income earned on federal funds sold decreased
$391,000 or 38.8% from the 1999 quarter due to a decrease in the average balance
of $41.8 million or 49.3%, compounded by a 99 basis point increase in the
average yield from 4.76% in 1999 to 5.74% in 2000. At March 31, 2000, the
weighted average yield on all interest earning assets was 7.30% compared to
7.31% at December 31, 1999 and 7.12% at March 31, 1999.
INTEREST EXPENSE:
Interest expense increased by $515,000 or 4.3% from the 1999 to the 2000
quarter. The increase was due to an overall rise in the average deposits and
borrowings of $55.4 million or 5.2% offset by a four basis point decrease in the
average rate paid on deposits and borrowings from 4.51% in 1999 to 4.47% in
2000. At March 31, 2000, the average rate payable on liabilities was 4.45% for
deposits, 5.43% for borrowings and 4.50% for combined deposits and borrowings.
10
<PAGE> 11
PROVISION FOR LOAN LOSSES:
Parkvale's provision for loan losses increased by $15,000 or 34.1% from the 1999
quarter to the 2000 quarter. Total reserves were 1.29% and 1.30% of gross loans
at March 31, 2000 and June 30, 1999, respectively. Non-performing loans and
foreclosed real estate were $4 million, $3.3 million and $3.8 million at March
31, 2000, June 30, 1999 and March 31, 1999, representing 0.33%, 0.27% and 0.32%
of total assets at the respective balance sheet dates. Total loan loss reserves
at March 31, 2000 were $13.4 million, and nonaccrual loans were $2.5 million,
which represents 0.20% of total assets at that date.
OTHER INCOME:
Total other income increased by $124,000, or 16.5% in 2000 due to primarily due
to an increase in NSF fee income and other service charges on all types of
deposit and loan products. Miscellaneous other income increased by 25,000, or
22.1% due to an increase in rental income from office buildings.
OTHER EXPENSE:
Total other expenses increased $406,000 or 10.2% due mainly to the $251,000 or
11.3% increase in compensation and employee benefits. This increase is the
result of additional full-time and part-time employees to better serve Parkvale
customers. Additionally, office occupancy expense increased $209,000, or 36.1%.
This increase is due to the additional office opened during fiscal 2000 and an
increase in depreciation expense related to the computer system upgrade that
took place during calendar 1999.
INCOME TAXES:
The effective tax rate was lowered to 36.4% effective rate for the March 2000
quarter from 37.0% for the fiscal 1999 period due to the establishment of a new
subsidiary, Parkvale Investment Corporation.
RESULTS OF OPERATIONS - COMPARISON OF NINE MONTHS ENDED MARCH 31, 2000 AND 1999
Net income for the nine months ended March 31, 2000 was $9.8 million or $1.64
per diluted share compared to $9.0 million or $1.38 per diluted share for the
nine months ended March 31, 1999. The $844,000 (or 9.4%) growth in net income
was derived from normal operations and reflects an increase of $2.6 million in
net interest income due mainly to an overall rise in loan volumes and lower
deposit costs throughout the period. Net interest income was $25.9 million for
the nine months ended March 31, 2000, up from $23.3 million for the nine months
ended March 31, 1999.
INTEREST INCOME:
Parkvale had interest income of $62.8 million during the nine months ended March
31, 2000 and $59.3 million during the comparable period in 1999. This $3.5
million or 5.8% increase is attributable to an increase in the average
interest-earning asset portfolio of $66.4 million or 6% as the average yield
remained the same in 1999 and in 2000 at 7.13%. Interest income from loans
increased $4.7 million or 9.3% due to an increase in the average loan balance of
$109.6 million or 12.2%, offset somewhat by a 19 basis point decrease in the
average yield from 7.49% in 1999 to 7.30% in 2000. Consistent with Parkvale's
11
<PAGE> 12
ongoing practice of supplementing our loan originations, when necessary, with
purchases of adjustable rate mortgage loans (after subjecting such credits to
our normal underwriting standards), the average loan increase includes loan
purchases of $60.4 million during fiscal 2000 year.
Interest income on mortgage-backed securities declined by $700,000 or 34.5% due
to a decrease in the average portfolio of $13.8 million or 37.4%. Income from
investments increased by $1.9 million or 75.8% from 1999 due to a $35.5 million
or 56.2% increase in the average balance, compounded by a 68 basis point
increase in the average yield from 5.43% in 1999 to 6.11% in 2000. Federal funds
sold income decreased by $2.5 million or 58.5%. The average federal funds sold
balance decreased by $65 million or 60.4% offset with a 24 basis point increase
in the average yield from 5.23% in 1999 to 5.47% in 2000.
INTEREST EXPENSE:
Interest expense increased by $842,000 from the 2000 nine month period to the
1999 nine month period due to a $73.3 million or 7.1% increase in the balance of
average deposits and borrowings. This increase was mitigated somewhat by an 21
basis point decrease in the average rate paid on deposits and borrowings from
4.63% in 1999 to 4.42% in 2000.
PROVISION FOR LOAN LOSSES:
Parkvale's provision for loan losses decreased by $12,000 or 7.6% from the 1999
to the 2000 period. Loan loss reserves were 1.09%, 1.10 and 1.11% of total
assets at March 31, 2000, June 30, 1999 and March 31, 1999, respectively.
OTHER INCOME:
Other income decreased $161,000 primarily due the prior year gain of $610,000 on
the sale of Freddie Mac common stock from the investment securities available
for sale portfolio. Absent this gain, other income increased $449,000 or 16%,
due to primarily due to an increase in NSF fee income and other service charges
on all types of deposit and loan products. Miscellaneous other income increased
by 112,000, or 36.6% due to an increase in rental income from office buildings.
OTHER EXPENSE:
Other expenses increased by $1.2 million or 10.4% for the nine month period
ending March 31, 2000 compared to the same period in 1999 due mainly to the
$702,000 or 11.0% increase in compensation and employee benefits. This increase
is the result of normal merit pay increases combined with additional full-time
and part-time employees to better serve Parkvale customers. Additionally, office
occupancy expense increased $374,000, or 21.7%. This increase is due to an
additional office opened during fiscal 2000 and an increase in depreciation
expense related to the computer system upgrade that took place during calendar
1999.
LIQUIDITY AND CAPITAL RESOURCES:
Federal funds sold decreased $15 million or 23.3% from June 30, 1999 to March
31, 2000 due to deployment of funds primarily into the loan portfolio, which
increased by $24 million. Deposit balances increased by $26 million. Escrow for
taxes and insurance decreased by $1.9 million or 21% as a result of the
remittance of property taxes to the various taxing districts during the
fiscal year.
12
<PAGE> 13
Shareholders' equity was $83.0 million or 6.8% of total assets at March 31,
2000. 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 March
31, 2000, Parkvale was in compliance with all applicable regulatory
requirements, with Tier I and Tier II ratios of 6.41% and 11.79%, respectively.
<TABLE>
<CAPTION>
Tier I Tier I Tier II
Core Risk-Based Risk-Based
Capital Capital Capital
---------- -------- --------
<S> <C> <C> <C>
Equity Capital (1) $ 82,860 $ 82,860 $ 82,860
Less non-allowable intangible assets (308) (308) (308)
Less unrealized securities gains (3,156) (3,156) (3,156)
Plus general valuation allowances (2) -- -- 9,733
Plus allowable unrealized holding gains (3) -- -- 2,237
---------- -------- --------
Total regulatory capital 79,396 79,396 89,025
Minimum required capital 49,542 31,056 54,809
----------- -------- --------
Excess regulatory capital $ 29,855 $ 48,341 $ 29,347
Adjusted total assets $1,238,543 $776,389 $775,243
Regulatory capital as a percentage 6.41% 10.23% 11.79%
Minimum capital required as a percentage 4.00% 4.00% 8.00%
---------- -------- --------
Excess regulatory capital as a percentage 2.41% 6.23% 3.79%
========== ======== ========
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 March 31, 2000.
(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 effects on Parkvale's liquidity,
capital resources or operations.
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:
This quarterly report on Form 10-Q includes statements that may constitute
forward looking statements. These statements are made pursuant to the safe
harbor provisions of the Private Securities Litigation Reform Act of 1995.
Forward-looking statements inherently involve risks and uncertainties that could
cause actual results to differ materially from those reflected in the
forward-looking statements. Factors that could cause future results to vary from
current expectations include, but are not limited to the following: changes in
economic conditions (both generally and more specifically in the markets in
which Parkvale operates); changes in interest rates, deposit flows, loan demand,
real estate values and competition; changes in accounting principles, government
legislation and regulation; and other risks detailed in this quarterly report on
Form 10-Q and in other Securities and Exchange Commission filings readers are
cautioned not to place undue reliance on these forward-looking statements, which
reflect management's analysis only as of the date hereof. Parkvale undertakes no
obligation to publicly revise these forward-looking statements to reflect events
or circumstances that arise after the date hereof.
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
Exhibits
27. Financial data schedule
(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: May 11, 2000 By: /s/ Robert J. McCarthy, Jr.
----------------- -----------------------------
Robert J. McCarthy, Jr.
President and
Chief Executive Officer
DATE: May 11, 2000 By: /s/ Timothy G. Rubritz
----------------- -----------------------------
Timothy G. Rubritz
Vice President, Treasurer and
Chief Financial Officer
14
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<PERIOD-START> JUL-01-1999
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