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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
AnnualReport Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the fiscal year ended June 30, 2003
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, PA 15146
- ----------------------- ----------
(Address of principal executive office) (Zip code)
Registrant's telephone number, including area code:(412) 373-7200
Securities registered pursuant to Section 12(b) of the Act - None
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 [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.[ ]
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes [X] No [ ]
As of September 17, 2003, the aggregate market value of the voting stock held by
nonaffiliates of the Registrant, computed by reference to the reported closing
sale price of $25.80 per share on such date was $112,919,737. Excluded from this
computation are 600,535 shares held by all directors and executive officers as a
group and 555,587 shares held by the Employee Stock Ownership Plan.
Number of shares of Common Stock outstanding as of September 17, 2003: 5,532,856
DOCUMENTS INCORPORATED BY REFERENCE
Annual Report to Shareholders for Fiscal Year ended June 30, 2003. With the
exception of those portions, which are incorporated by reference in this Form
10-K Annual Report, the 2003 Annual Report to Shareholders is not deemed to be
filed as part of this report. Part II
Proxy Statement for Annual Meeting of Shareholders dated September 15, 2003. The
definitive proxy statement was filed with the Commission on September 12, 2003
Part III
PART I.
ITEM 1. BUSINESS
INTRODUCTION
Parkvale Financial Corporation ("PFC") is a unitary savings and loan holding
company incorporated under the laws of the Commonwealth of Pennsylvania. It
maintains two subsidiaries. Parkvale Statutory Trust I ("PSTI") is a Connecticut
chartered investment company, and Parkvale Savings Bank ("the Bank") is a
Pennsylvania chartered permanent reserve fund stock savings bank headquartered
in Monroeville, Pennsylvania. PFC and its subsidiaries are collectively referred
to herein as "Parkvale". Parkvale is also involved in lending in the greater
Washington, D.C. and Columbus, Ohio areas through its wholly-owned subsidiary,
Parkvale Mortgage Corporation ("PMC"). The primary assets of PFC consist of the
stock of Parkvale, equity securities and cash. See Note O of Notes to the
Consolidated Financial Statements in the 2003 Annual Report to Shareholders
filed as Exhibit 13 hereto ("2003 Annual Report") for additional details
regarding PFC.
THE BANK
GENERAL
The Bank conducts business in the greater Pittsburgh metropolitan area through
39 full-service offices in Allegheny, Beaver, Butler, Fayette, Washington and
Westmoreland Counties. With total assets of $1.6 billion at June 30, 2003,
Parkvale was the fifth largest financial institution headquartered in the
Pittsburgh metropolitan area and eleventh largest financial institution with a
significant presence in Western Pennsylvania.
The primary business of Parkvale consists of attracting deposits from the
general public in the communities that it serves and investing such deposits,
together with other funds, in residential real estate loans, mortgage-backed
securities, consumer loans, commercial loans, and investment securities.
Parkvale focuses on providing a wide range of consumer and commercial services
to individuals, partnerships and corporations in the greater Pittsburgh
metropolitan area, which comprises its primary market area. In addition to the
loans described above, these services include various types of deposit and
checking accounts, including commercial checking accounts and automated teller
machines ("ATMs") as part of Star Systems, Inc.
Parkvale derives its income primarily from interest charged on loans and
interest on investments, and, to a lesser extent, service charges and fees.
Parkvale's principal expenses are interest on deposits and borrowings and
operating expenses. Funds for lending activities are provided principally by
deposits, loan repayments, Federal Home Loan Bank ("FHLB") advances and other
borrowings, and earnings provided by operations.
Lower housing demand in Parkvale's primary lending areas, relative to its
deposit growth, has spurred the Bank to purchase residential mortgage loans from
other financial institutions. This purchase strategy also achieves geographic
asset diversification. Parkvale purchases adjustable rate residential mortgage
loans subject to its normal underwriting standards. Parkvale purchased loans
aggregating $619.1 million and $339.8 million in fiscal 2003 and 2002,
respectively. These represent 86.3% and 72.5% of total mortgage loan
originations and purchases for the fiscal year 2003 and 2002, respectively. In
addition, Parkvale operates loan production offices through its subsidiary, PMC
with offices in Fairfax, Virginia
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and Columbus, Ohio. During fiscal 2003, PMC originated a total of $39.3 million
or 5.5% of total mortgage loan originations and purchases for inclusion in
Parkvale's loan portfolio. See "Lending Activities" and "Sources of Funds."
Total nonperforming assets, comprised of nonaccrual loans and foreclosed real
estate, increased from $5.2 million at June 30, 2002 to $10.0 million at June
30, 2003. The $4.8 million increase in fiscal 2003 is primarily to commercial
loans secured by real estate and to foreclosed real estate. See "Lending
Activities - Nonperforming Loans and Foreclosed Real Estate".
The exposure from interest rate risk ("IRR") is the impact on Parkvale's current
and future earnings and capital from movements in interest rates. To properly
manage its historically liability sensitive position and mitigate the financial
impact of IRR, Parkvale's management has implemented an asset and liability
management plan to increase the interest rate sensitivity of its assets and
extend the average maturity of its liabilities. As part of this program,
Parkvale has, among other things (1) promoted the origination and purchase of
adjustable rate mortgage ("ARM") loans, (2) maintained a high level of
liquidity, (3) deployed excess liquidity, (4) emphasized the origination of
short-term and/or variable rate consumer loans and (5) attempted to extend the
average maturity of its deposits through the promotion of certificate accounts
with terms of one year or more. For additional discussion of asset and liability
management, see the Asset and Liability Management section of "Management's
Discussion and Analysis of Financial Condition and Results of Operations" in the
2003 Annual Report.
Interest rate sensitivity gap analysis provides one indicator of potential IRR
by comparing interest-earning assets and interest-bearing liabilities maturing
or repricing at similar intervals. More recently from a gap perspective, the
excess of interest-bearing liabilities over interest-earning assets, which
reprice or mature in one year or less was -0.79% of total assets at June 30,
2003 compared to -4.09% of total assets at June 30, 2002. The cumulative
five-year gap ratio was 4.47% at June 30, 2002 and 12.97% at June 30, 2003. Key
components of the asset and liability management program are as follows: ARM
loans represented approximately 79.3% of the Bank's real estate loan portfolio
at June 30, 2003 compared to 69.4% and 72.3% at June 30, 2002 and 2001,
respectively. Deposits with terms in excess of one year or more increased $21.9
million from $767.5 million at June 30, 2002 to $789.4 million at June 30, 2003.
The Bank was originally chartered in 1943 as Park Savings and Loan Association
and was renamed as a result of its merger with Millvale Savings and Loan
Association in 1968. The Bank converted to a state chartered savings bank in
1993. Such charter conversion resulted in the replacement of the Office of
Thrift Supervision ("OTS") by the Federal Deposit Insurance Corporation ("FDIC")
and the Pennsylvania Department of Banking ("Department") as the Bank's primary
regulators. As a Pennsylvania-chartered savings bank, deposits continue to be
insured by the FDIC and the Bank retains its membership in the FHLB of
Pittsburgh. The savings bank continues to conduct business in a manner
substantially identical to the conduct of its business as a savings association.
The OTS retains jurisdiction over Parkvale Financial Corporation due to its
status as a unitary savings and loan holding company. The Bank is further
subject to regulation by the Board of Governors of the Federal Reserve System
("Federal Reserve Board") governing reserves to be maintained against deposits
and certain other matters.
Parkvale's main office is located at 4220 William Penn Highway, Monroeville, PA
15146, and its telephone number is (412) 373-7200.
3
THE BANKING INDUSTRY
The earnings of Parkvale are affected by the competitive, economic and
regulatory environment in which the savings industry operates. Consolidation, a
fundamental trend in the financial services industry, confronts the banking
industry with the challenge to survive and prosper in a dynamic market. Strong
alliances are likely as banks move to trim costs, expand geographically and
consolidate market strengths by diversifying the financial products offered.
The industry continues its consolidation efforts with an operating focus on
improving profitability, reallocation of capital and expense management. The
traditional banks' share of the overall loan market has been reduced
significantly. Corporate lending has abated since public companies found raising
funds on Wall Street is faster and cheaper via commercial paper and medium term
notes. At the same time, retail customers are increasingly abandoning
traditional commercial and local banks in favor of nonbank financial
institutions. Instead of buying a CD or opening a passbook savings account,
consumers increasingly place their savings and retirement funds with investment
management firms. Mutual fund total assets have increased substantially
throughout the 1990's to exceed total FDIC insured deposits. Banks in today's
market are faced with substantial competition from an array of outside financial
service providers, including brokerage firms, insurance companies and mutual
fund companies.
The challenge to the financial services industry is the delivery of financial
products at competitive prices. This translates to the spreading of costs of
services over a greater number of customers and has spurred banks to adopt
technological skills so that customers will ultimately do all their banking
without ever having to walk into a branch, consequently, reducing operating
costs. Parkvale expects a tiering of institutions with several large national
and regional firms offering a plethora of products and services on the one hand
and a sizeable number of community institutions and niche players on the other.
The Federal Open Market Committee of the Federal Reserve Board forecast in
August 2003 suggests that the economic expansion would strengthen substantially
as the year progressed. Accommodative financial conditions would provide
significant impetus to business and consumer spending over the months ahead. The
FOMC members generally anticipated that key inflation measures would remain near
their currently low levels for an extended period. The economic outlook for
western Pennsylvania is characterized by slow to moderate economic growth and
low inflation. The target federal funds rate decreased 75 basis points with two
rate decreases during fiscal 2003 as compared to 200 basis points with five rate
decreases during fiscal 2002. These rate changes resulted in lower loan and
deposit interest rates during fiscal 2003 and 2002 than in previous years.
Parkvale will continue to be affected by these and other market and economic
conditions, such as inflation and factors affecting the markets for debt and
equity securities, as well as legislative, regulatory, accounting and tax
changes which are beyond its control. Parkvale has positioned its liquidity
level to remain flexible to the high volatility of the financial markets. For
additional discussion of asset/liability management, see the Asset and Liability
Management section of "Management's Discussion and Analysis of Financial
Condition and Results of Operations" in the 2003 Annual Report.
4
BUSINESS
LENDING ACTIVITIES
LOAN ACTIVITY AND PORTFOLIO COMPOSITION
The following table shows Parkvale's loan origination, purchase and sale
activity on a consolidated basis during the years ended June 30.
2003 2002 2001
------------ ----------- -----------
(In Thousands)
TOTAL LOANS RECEIVABLE AT BEGINNING OF YEAR............ $ 1,217,639 $ 1,127,670 $ 1,048,785
Real estate loan originations:
Residential:
Single family (1).................................. 77,021 108,911 66,233
Multifamily........................................ 4,215 506 6,955
Construction - Single family......................... 6,945 3,717 10,838
Commercial........................................... 9,737 15,940 16,575
------------ ----------- -----------
TOTAL REAL ESTATE LOAN ORIGINATIONS.................... 97,918 129,074 100,601
Consumer loan originations............................. 95,371 67,127 51,313
Commercial loan originations........................... 14,191 35,933 29,776
------------ ----------- -----------
TOTAL LOAN ORIGINATIONS................................ 207,480 232,134 181,690
Loans acquired through acquisition (2)................. - 120,807 -
Purchase of loans...................................... 619,098 339,807 202,219
------------ ----------- -----------
TOTAL LOAN ORIGINATIONS AND PURCHASES.................. 826,578 692,748 383,909
Principal loan repayments.............................. 167,446 148,967 99,273
Mortgage loan payoffs.................................. 636,149 436,812 202,388
Sales of whole loans................................... 3,128 2,690 3,363
------------ ----------- -----------
Net increase in loans............................... 19,855 104,279 78,885
------------ ----------- -----------
TOTAL LOANS RECEIVABLE AT END OF YEAR.................. 1,251,804 1,231,949 1,127,670
Less: Loans in process................................ 117 205 205
Allowance for loan losses.................... 15,013 15,492 13,428
Unamortized (premiums) discounts............. (5,105) (1,387) 773
------------ ----------- -----------
NET LOANS RECEIVABLE AT END OF YEAR.................... $ 1,241,779 $ 1,217,639 $ 1,113,264
============ =========== ===========
- -----------------
(1) Includes $39.3 million, $67.1 million and $50.2 million of loans
originated by PMC during fiscal 2003, 2002 and 2001, respectively.
(2) On January 31, 2002, Parkvale acquired The Second National Bank of
Masontown ("SNB").
At June 30, 2003, Parkvale's net loan portfolio amounted to $1.2 billion,
representing 75.6% of Parkvale's total assets at that date. Parkvale has
traditionally concentrated its lending activities on conventional first mortgage
loans secured by residential property. Conventional loans are not insured by the
Federal Housing Administration ("FHA") or guaranteed by the Department of
Veteran's Affairs ("VA").
5
The following table sets forth the composition of the Bank's loan portfolio by
type of loan at June 30.
2003 2002 2001
---- ---- ----
Amount % Amount % Amount %
------ ----- ------ ----- ------ -----
(Dollars in Thousands)
Real estate loans:
Residential:
Single family (1) $ 931,724 75.0 $ 893,578 73.4 849,631 76.3
Multifamily (2) 19,477 1.5 18,140 1.5 24,602 2.2
FHA/VA 811 0.1 1,752 0.1 2,134 0.2
Commercial 59,796 4.8 59,136 4.9 55,947 5.0
Other (3) 36,581 3.0 35,108 2.9 22,164 2.0
----------- ----- ----------- ----- ----------- -----
Total real estate loans 1,048,389 84.4 1,007,714 82.8 954,478 85.7
Consumer loans (4) 152,458 12.3 167,956 13.8 132,580 11.9
Deposit loans 2,974 0.2 3,224 0.2 2,265 0.2
Commercial loans 47,983 3.9 53,055 4.4 38,347 3.4
----------- ----- ----------- ----- ----------- -----
Total loans receivable 1,251,804 100.8 1,231,949 101.2 1,127,670 101.3
Less:
Loans in process 117 0.0 205 0.0 205 0.0
Allowance for losses 15,013 1.2 15,492 1.3 13,428 1.2
Unamortized (premiums)/discounts (5,105) (0.4) (1,387) (0.1) 773 0.1
----------- ----- ----------- ----- ----------- -----
Net loans receivable $ 1,241,779 100% $ 1,217,639 100% $ 1,113,264 100%
=========== ===== =========== ===== =========== =====
2000 1999
---- ----
Amount % Amount %
------ ----- ------ -----
(Dollars in Thousands)
Real estate loans:
Residential:
Single family (1) 793,625 76.7 779,346 78.3
Multifamily (2) 19,482 1.9 16,920 1.7
FHA/VA 2,719 0.3 4,913 0.5
Commercial 54,459 5.3 43,862 4.4
Other (3) 10,387 1.0 8,591 0.9
----------- ----- ----------- -----
Total real estate loans 880,672 85.2 853,632 85.8
Consumer loans (4) 131,500 12.7 129,452 13.0
Deposit loans 2,325 0.2 2,749 0.3
Commercial loans 34,288 3.3 23,572 2.4
----------- ----- ----------- -----
Total loans receivable 1,048,785 101.4 1,009,405 101.5
Less:
Loans in process 15 0.0 230 0.1
Allowance for losses 13,368 1.3 13,253 1.3
Unamortized (premiums) and discounts 1,033 0.1 251 0.1
----------- ----- ----------- -----
Net loans receivable $ 1,034,369 100% $ 995,671 100%
=========== ===== =========== =====
- -------------------------
(1) Includes first mortgages secured by one to four unit residences.
(2) Includes short-term construction loans to developers.
(3) Loans for purchase and development of land.
(4) Primarily includes home equity loans, home equity and personal lines of
credit, student loans, personal loans, deposit loans, charge cards, home
improvement loans and automobile loans.
The following table sets forth the percentage of loans in each category to total
loans at June 30.
2003 2002 2001 2000 1999
----- ----- ---- ---- ----
Single Family loans 74.5% 72.7% 75.5% 75.9% 77.7%
Commercial & Multi Family loans 9.3 9.1 9.1 8.0 6.9
Consumer loans 12.4 13.9 12.0 12.8 13.1
Commercial loans 3.8 4.3 3.4 3.3 2.3
----- ----- ----- ----- -----
Total Loans 100.0% 100.0% 100.0% 100.0% 100.0%
===== ===== ===== ===== =====
6
CONTRACTUAL MATURITIES OF LOANS
The following table presents information regarding loan contractual maturities
by loan categories during the periods indicated. Mortgage loans with adjustable
interest rates are shown in the year in which they are contractually due rather
than in the year in which they reprice. The amounts shown for each period do not
take into account loan prepayments and normal amortization of the Bank's loan
portfolio.
Amounts Due in Real Estate Commercial
Years Ending June 30, Loans (1) Loans
- --------------------- ----------- ----------
(In Thousands)
2004 $ 26,158 $ 21,927
2004 - 2008 84,102 16,350
2009 and thereafter 938,129 9,706
---------- ----------
Gross loans receivable (2) $1,048,389 $ 47,983
========== ==========
- ------------------------
(1) Includes all residential and commercial real estate loans, and loans for
the purchase and development of land.
(2) Variable rate and ARM loans represent approximately 73.6% of gross loans
receivable at June 30, 2003. Of the $1,048.3 million principal amount of
loans maturing after June 30, 2004, loans with an aggregate principal
amount of $223.6 million have fixed interest rates and loans with an
aggregate principal amount of $824.7 million have variable or adjustable
interest rates.
The average life of mortgage loans has been substantially less than the average
contractual terms of such loans because of loan prepayments and, to a lesser
extent, because of enforcement of due-on-sale clauses, which enable Parkvale to
declare a loan immediately due and payable in the event that the borrower sells
or otherwise disposes of the real property. The average life of mortgage loans
tends to increase, however, when market rates on new mortgages substantially
exceed rates on existing mortgages and, conversely, decrease when rates on new
mortgages are substantially below rates on existing mortgages. During fiscal
2003, 2002 and fiscal 2001, many borrowers refinanced their mortgage loans in
order to take advantage of the lowest market rates in forty years.
ORIGINATION, PURCHASE AND SALE OF LOANS
As a Pennsylvania-chartered, federally-insured savings bank, the Bank has the
ability to originate or purchase real estate loans secured by properties located
throughout the United States. At June 30, 2003, the majority of loans in
Parkvale's portfolio are secured by real estate located in its primary market
area, which consists of the greater Pittsburgh metropolitan area. However, 61.5%
and 47.6% of Parkvale's total mortgage loan portfolio at June 30, 2003 and 2002,
respectively, represent loans serviced by others, the majority of which are
secured by properties located outside of Pennsylvania, including, in order of
loan concentration: Colorado, Michigan, Illinois, and Washington. The increase
in loans secured by out-of-state properties is due to the loan purchases of
$619.1 million, which amounted to 86.3% of Parkvale's total origination and
purchases for fiscal 2003 as compared to loan purchases of $339.8 million, or
72.5% of total originations in fiscal 2002. See further discussion below.
Currently, new loans are originated by Parkvale primarily within its primary
market area or through the PMC offices. In addition, Parkvale purchases loan
participations and whole loans from other institutions.
All of Parkvale's mortgage lending is subject to its written underwriting
standards and to loan origination procedures approved by the Board of Directors.
Decisions on loan applications are made on a number
7
of factors including, but not limited to, property valuations by independent
appraisers, credit history and cash flow available to service debt. The Loan
Committee of Parkvale consists of senior officers and is authorized to approve
all loans up to $500,000. At least three senior officers must be present to hold
a meeting of the Loan Committee. Loans exceeding $500,000 must be approved by
the Board of Directors.
Under policies adopted by Parkvale's Board of Directors, Parkvale limits the
loan-to-value ratio to 80% on newly originated residential mortgage loans, or up
to 95% with private mortgage insurance. Depending upon the amount of private
mortgage insurance obtained by the borrower, Parkvale's loan exposure may be
reduced to as low as 65% of the value of the property. Commercial real estate
loans generally do not exceed 80% of the value of the secured property. In
addition, it is Parkvale's policy to obtain title insurance policies insuring
that Parkvale has a valid first lien on mortgaged real estate.
ORIGINATIONS BY PARKVALE. Historically, mortgage loans have been originated by
Parkvale primarily through referrals from real estate brokers, builders and
direct customers, as well as through refinancings for existing customers.
Consumer and commercial loan originations are made by Parkvale within its
primary market area. Total loan originations for the fiscal years ending June
30, 2003, 2002 and 2001 were $207.5 million, $232.1 million and $181.7 million,
respectively. Mortgage originations increased during fiscal 2002 for all major
types of loans. See the chart on page 5 for detailed activity for the past 3
fiscal years. The reduced levels of certain lending categories during fiscal
2003, specifically single family mortgages, commercial mortgages, relate to the
Bank's decision to not offer lower long term fixed rates due to the perceived
interest rate risk associated with low fixed rates.
LOAN PURCHASES. The asset/liability strategy of owning ARM loans to remain
flexible in a volatile interest rate environment was evident during fiscal 2003
as Parkvale increased loan purchases to $619.1 million from $339.8 million in
fiscal 2002. In fiscal 2003, all of the purchased loans were ARM loans.
Typically, Parkvale purchases loans to supplement the portfolio during periods
of loan origination shortfalls and takes advantage of market opportunities when
yields on whole loans are greater than similarly securitized loans. Loan
purchases are higher when prepayment speeds increase on existing portfolios. All
loan purchases are subject to Parkvale's underwriting standards and are
purchased from reputable mortgage banking institutions.
RESIDENTIAL REAL ESTATE LOANS
Parkvale offers ARMs with amortization periods of up to 30 years. The monthly
payment amounts on all Parkvale residential mortgage ARMs are reset at each
interest rate adjustment period without affecting the maturity of the ARM.
Interest rate adjustments generally occur on either a one, three or five year
basis and allow a maximum change of 2% to 3% per adjustment period, with a 6% or
7% maximum rate increase over the life of the loan. ARMs comprised approximately
94.5%, 89.7% and 89.5% of total mortgage loan originations and purchases in
fiscal 2003, 2002 and 2001, respectively. At June 30, 2003, 79.3% of Parkvale's
total residential loan portfolio was represented by ARMs. ARM loans generally do
not adjust as rapidly as Parkvale's cost of funds. Parkvale has been emphasizing
the origination of adjustable-rate versus long-term fixed-rate residential
mortgages for its portfolio as part of the asset and liability plan to increase
the rate sensitivity of its assets.
COMMERCIAL REAL ESTATE LOANS
The balance of commercial real estate mortgages increased from $59.1 million at
June 30, 2002 to $59.8 million at June 30, 2003. Commercial loans offer more
attractive yields than residential real estate loans, but are conservatively
underwritten and well secured, as are residential loans. Also, these loans are
made
8
in the Pittsburgh area, which traditionally has not experienced the dramatic
real estate price increases and decreases which have occurred in certain other
geographic areas.
CONSUMER LOANS
Parkvale offers a full complement of consumer loans, including home equity
loans, home equity and personal lines of credit, student loans, personal loans,
deposit loans, home improvement loans, charge card, automobile and sub-prime
loans. Total consumer loans outstanding at June 30, 2003 decreased by 9.2% to
$152.5 million from $168.0 million at June 30, 2002. The fiscal 2003 net
decrease is a result of consumers either paying off or making large principal
reduction payments in reaction to lower market rates, particularly first
mortgage refinancing offered by competitors. Parkvale offers home equity lines
of credit at up to 120% of collateral value at competitive introductory rates.
Of an aggregate $56.2 million in outstanding lines of credit at June 30, 2003,
$2.5 million have a loan to value ratio greater than 100% and $27.5 million have
a loan to value ratio ranging from 80% to 100%. These loans have shorter
maturities and greater interest rate sensitivity and margins than residential
real estate loans.
Home equity lines are revolving and range from $5,000 to $250,000. The amount of
the available line of credit is determined by the borrower's ability to pay,
their credit history and the amount of collateral equity. Personal and overdraft
lines of credit are generally unsecured and are extended for $500 to $50,000.
Line of credit interest rates are variable and are priced at a margin above
Parkvale's prime rate.
Parkvale offers student loans through its community banking network. Parkvale
receives a guaranteed rate on such loans indexed to the 91-day United States
Treasury bill rate and generally sells the loans to the Student Loan Marketing
Association when the student graduates or leaves school in order to avoid costly
servicing expenses.
Parkvale's deposit loans are made on a demand basis for up to 100% of the
balance of the account securing the loan. The interest rate on deposit loans
equals the rate on the underlying account plus a minimum of 200 basis points.
Parkvale offers Visa and Visa Gold cards through the Independent Bankers
Association of America. There are no annual fees charged on Visa accounts.
Credit card balances outstanding totaled $2.3 million, $2.8 million and $3.1
million at June 30, 2003, 2002 and 2001, respectively. The balance decreased in
fiscal 2003 and 2002 was primarily due to an increased demand for tax-deductible
home equity lines of credit which resulted in reduced credit card balances.
Parkvale no longer originates loans through PV Financial Service, Inc ("PVFS").
PVFS' portfolio balance was $5.2 million at June 30, 2003 and $9.0 million at
June 30, 2002. This portfolio has not generated additional loans during fiscal
2003 compared to $3.0 million during fiscal 2002 because in May 2002, the Bank
instituted risk based pricing procedures for home equity loans that were
previously originated by the subsidiary.
9
COMMERCIAL LOANS
Parkvale's commercial loans are primarily of a short-term nature and are
extended to small businesses and professionals located within the communities
served by Parkvale. Generally, the purpose of the loan dictates the basis for
its repayment. Both secured and unsecured commercial loans are offered by
Parkvale. In originating commercial loans, the borrower's historical and
projected ability to service the proposed debt is of primary importance.
Interest rates are generally variable and indexed to Parkvale's prime rate.
Fixed-rate commercial loans are extended based upon Parkvale's ability to match
available funding sources to loan maturities. Parkvale generally requires
personal guarantees on its commercial loans. Commercial loans were $48.0 million
and $53.1 million at June 30, 2003 and 2002, respectively. The decrease in
fiscal 2003 were the result of not orginating commercial lease loans during
fiscal 2003.
LOAN SERVICING AND LOAN FEES
Interest rates and fees charged by Parkvale on mortgage loans are primarily
determined by funding costs and competitive rates offered in its market area.
Mortgage loan rates reflect factors such as general interest rate levels, the
availability of money and loan demand.
After originating fixed rate mortgage loans, Parkvale has the ability to sell
its loans in the secondary mortgage market, primarily to Freddie Mac. Parkvale
generally retains the right to service loans sold or securitized in order to
generate additional servicing fee income. The amount of loans serviced by
Parkvale for others increased from $13.1 million at June 30, 2002 to $24.1
million at June 30, 2003. During fiscal 2003, Parkvale Bank entered into an
agreement with Freddie Mac, in which the Bank sold $12.2 million of 1-4 family
mortgages and retained the servicing for such loans. Prior to the fiscal 2003
sales there had been no mortgage loan securitizations or sale transactions in
the last five fiscal years, with the exception of certain loans made in
conjunction with various state and local bond programs designed to assist first
time and/or low income home buyers. Parkvale may or may not be the service
provider of these loans depending on the terms of the specific program.
In addition to interest earned on loans and income from servicing of loans,
Parkvale generally receives fees in connection with loan commitments and
originations, loan modifications, late payments, changes of property ownership
and for miscellaneous services related to its loans. Income from these
activities varies with the volume and type of loans originated. The fees
received by Parkvale in connection with the origination of conventional mortgage
loans on single-family properties vary depending on the loan terms selected by
the borrower.
Parkvale defers loan origination and commitment fees and certain direct loan
origination costs over the contractual life of a loan as an adjustment of yield.
Indirect loan origination costs are charged to expense as incurred.
Deferred loan origination fees were $903,000, $774,000 and $828,000 at June 30,
2003, 2002 and 2001, respectively. The balance in fiscal 2003 reflects the fees
deferred related to the commercial real estate and commercial loan portfolio.
10
NONPERFORMING LOANS AND FORECLOSED REAL ESTATE
The following table sets forth information regarding Parkvale's nonaccrual loans
and foreclosed real estate at June 30.
2003 2002 2001 2000 1999
------ ------ ------ ------ ------
(In Thousands)
Nonaccrual Loans:
Mortgage $3,786 $2,871 $1,143 $2,098 $1,982
Commercial 3,498 598 516 244 78
------ ------ ------ ------ ------
Total nonaccrual loans $7,284 $3,469 $1,659 $2,342 $2,060
====== ====== ====== ====== ======
Total nonaccrual loans
as a percent of total loans 0.58% 0.28% 0.15% 0.22% 0.21%
Total foreclosed real estate, net $2,695 $1,717 $3,762 $1,442 $1,106
Total amount of nonaccrual
loans and foreclosed real estate $9,979 $5,186 $5,421 $3,784 $3,166
Total nonaccrual loans and
foreclosed real estate as a
percent of total assets 0.61% 0.32% 0.39% 0.30% 0.27%
A loan is considered delinquent when a borrower fails to make contractual
payments on the loan. If the delinquency exceeds 90 days, Parkvale generally
institutes legal action to remedy the default. In the case of real estate loans,
this includes foreclosure action. If a foreclosure action is instituted and the
loan is not reinstated, paid in full or refinanced, the property is sold at a
judicial sale at which, in most instances, Parkvale is the buyer. The acquired
property then becomes "foreclosed real estate" until it is sold. In the case of
consumer and commercial business loans, the measures to remedy defaults include
the repossession of the collateral, if any, and initiation of proceedings to
collect and/or liquidate the collateral and/or act against guarantees related to
the loans.
Loans are placed on nonaccrual status when, in management's judgment, the
probability of collection of interest is deemed to be insufficient to warrant
further accrual. When a loan is placed on nonaccrual status, previously accrued
but unpaid interest is deducted from interest income. As a result, no
uncollected interest income is included in earnings for loans, which are on
nonaccrual status. Parkvale provides an allowance for the loss of accrued but
uncollected interest on mortgage, consumer and commercial business loans, which
are more than 90 days contractually past due.
Nonaccrual, substandard and doubtful commercial and other real estate loans are
assessed for impairment. Loans are considered impaired when the fair value is
insufficient as compared to the contractual amount due. Parkvale excludes
single-family loans, credit card and installment consumer loans in the
determination of impaired loans consistent with the exception under paragraph 6
of SFAS 114 of loans measured for impairment. Parkvale Bank had a $1.1 million
loan classified as impaired at June 30, 2003 and a $498,000 loan classified as
impaired at June 30, 2002. The average recorded investment in impaired loans was
$397,000 in fiscal 2003. The amount of interest income that has not been
recognized was $77,000 at June 30, 2003. Impaired assets include $2.7 million of
foreclosed real estate as of June 30, 2003. Foreclosed real estate properties
are recorded at the lower of the carrying amount or fair value of the property
less the cost to sell. Foreclosed real estate includes $1.6 million related to a
1998 foreclosure on a vacant building, which is in the initial stage of
marketing while undergoing renovation. Periodically, management assesses the
need for a valuation allowance or a writedown to account for declines in fair
value. A $1.1 million writedown was established for this property during fiscal
2003 in addition to a $6.5 million writedown in fiscal 2002 as estimated costs
to remediate and renovate the building were higher than originally estimated. As
deemed necessary, management will continue to assess
11
the need for a valuation allowance. The process will be influenced by factors
such as future additional capitalized costs required, current real estate market
and general economic conditions.
Assets classified as substandard/nonaccrual or foreclosed real estate in excess
of $400,000, net of reserves, at June 30, 2003 consist of one commercial loan
and the commercial property discussed in the preceding paragraph.
ALLOWANCE FOR LOAN LOSSES
The following table sets forth the activity in the allowance for loan losses for
the years ended June 30:
2003 2002 2001 2000 1999
------------------------------------------------------------
(In Thousands)
Beginning balance $ 15,492 $ 13,428 $ 13,368 $ 13,253 $ 13,223
SNB Acquisition - 1,994 - - -
Provision for loan losses 308 205 320 236 196
Loans recovered: Consumer 39 34 188 31 119
Commercial 1 - - - -
Mortgage 69 110 57 105 -
------------------------------------------------------------
Total recoveries 109 144 245 136 119
------------------------------------------------------------
Loans charged-off: Consumer (241) (148) (421) (239) (285)
Commercial (253) (19) - (13) -
Mortgage (402) (112) (84) (5) -
------------------------------------------------------------
Total charge-offs (896) (279) (505) (257) (285)
------------------------------------------------------------
Net charge-offs (787) (135) (260) (121) (166)
------------------------------------------------------------
Ending balance $ 15,013 $ 15,492 $ 13,428 $ 13,368 $ 13,253
============================================================
The first step in determining the allowance for loan losses is recognizing a
specific allowance on individual impaired loans. Nonaccrual, substandard and
doubtful commercial and other real estate loans are considered impaired.
Impaired loans are generally evaluated based on the present value of the
expected future cash flows discounted at the loan's effective interest rate, at
the loan's observable market price or at the fair value of the collateral if the
loan is collateral dependent. Based on this evaluation, specific loss reserves
are established on impaired loans when necessary.
The allowance for loan loss was $15.0 million at June 30, 2003 and $15.5 million
June 30, 2002 or 1.20% and 1.26% of gross loans at June 30, 2003 and 2002,
respectively. The adequacy of the allowance for loan loss is determined by
management through evaluation of the loss potential on individual nonperforming,
delinquent and high dollar loans, economic and business trends, growth and
composition of the loan portfolio and historical loss experience, as well as
other relevant factors.
The allowance for loan loss is continually monitored by management to identify
potential portfolio risks and detect potential credit deterioration in the early
stages. Management then establishes reserves based upon its evaluation of the
inherent risks in the loan portfolio. Management believes the allowance for loan
loss is adequate to absorb probable loan losses incurred.
INVESTMENT ACTIVITIES
Investment decisions are made by authorized officers including the Chief
Executive Officer or the Chief Financial Officer of Parkvale in accordance with
policies established by Parkvale's Board of Directors.
12
Parkvale's investment portfolio consisted of the following securities at June 30
for the years indicated.
2003 2002 2001
-------- -------- --------
(In Thousands)
Federal funds sold $ 72,000 $119,000 $ 97,000
U.S. Government and agency obligations 14,635 52,032 8,609
Municipal obligations 9,144 10,440 5,682
Corporate debt 146,618 121,453 90,217
Mortgage backed securities 40,430 15,935 16,515
Equity securities (at market value) 19,743 13,080 23,994
-------- -------- --------
Total investment portfolio $302,570 $331,940 $242,017
======== ======== ========
As part of its investment strategy, Parkvale invests in mortgage-backed
securities, the majority of which are guaranteed by Freddie Mac, Fannie Mae or
the Government National Mortgage Association ("GNMA"). GNMA securities are
guaranteed as to principal and interest by the full faith and credit of the
United States Treasury, while Freddie Mac and Fannie Mae securities are
guaranteed by their respective agencies. At June 30, 2003, Parkvale had $40.4
million, or 2.5% of total assets invested in mortgage-backed securities, as
compared to 1.0% and 1.2% at June 30, 2002 and 2001, respectively. At June 30,
2003, the mortgage-backed securities consisted of Freddie Mac ($2.3 million);
GNMA ($1.9 million); Fannie Mae ($23.7 million); collateralized mortgage
obligations, including REMIC's ($12.0 million) and private participation
certificates ($468,000); SBA ($75,000).
The following table shows Parkvale's mortgage-backed security activity during
the years ended June 30.
2003 2002 2001
-------- -------- --------
(In Thousands)
Mortgage-backed securities at beginning of year $ 15,935 $ 16,515 $ 19,850
Purchases 43,979 - -
SNB Acquisition - 2,876 -
Principal repayments (19,484) (3,456) (3,335)
Sales - - -
-------- -------- --------
Mortgage-backed securities at end of year $ 40,430 $ 15,935 $ 16,515
======== ======== ========
The following table indicates the respective maturities and weighted average
yields of securities as of June 30, 2003 (in Thousands):
13
Carrying Balance %
---------------- ----
U.S. Treasury and U.S. Government agencies:
Maturing within one year $ 2,016 3.30
Maturing within five years 12,619 6.68
Maturing within ten years - -
States of the U.S. and political subdivisions:
Maturing within one year 795 6.47
Maturing within five years 3,831 6.60
Maturing within ten years 1,203 5.94
Maturing after ten years 3,315 7.29
Other Corporate debt:
Maturing within one year 56,956 5.82
Maturing within five years 66,530 4.42
Maturing within ten years - -
Maturing after ten years 23,132 6.78
Equity securities 19,743 2.48
Mortgage-backed securities 40,430 4.11
-------- ----
Total $230,570 4.99
======== ====
HEDGING ACTIVITIES
The objective of Parkvale's financial futures policy is to reduce interest rate
risk by authorizing an asset and liability hedging program. The futures policy
permits Parkvale's President to hedge up to $10 million of assets and
liabilities. Hedges over $10 million and up to $25 million require the approval
of the Audit-Finance Committee of the Board of Directors, and hedges over $25
million require the approval of the Board of Directors. The objective of
Parkvale's financial options policy is to reduce interest rate risk in the
investment portfolio through the use of financial options. The options policy
permits the use of options on United States Treasury bills, notes, bonds and
bond futures and on mortgage-backed securities. The options policy generally
limits the use of puts and calls to $5.0 million per type of option. Parkvale's
President and Senior Vice President - Treasurer are authorized to conduct
options activities, which are monitored by the Audit-Finance Committee of the
Board of Directors. Parkvale has not engaged in any financial future or
financial option activity in the last three fiscal years.
Derivative instruments are various instruments used to construct a transaction
that is derived from and reflects the underlying value of assets, other
instruments or various indices. The primary purpose of derivatives, which
include such items as forward contracts, interest rate swap contracts, options
and futures, is to transfer price risk associated with the fluctuations of
financial instrument value. Parkvale has not entered into any forward contracts,
interest rate swap contracts, options or futures in the last three fiscal years.
SOURCES OF FUNDS
GENERAL
Savings accounts and other types of deposits have traditionally been the
principal source of Parkvale's funds for use in lending and for other general
business purposes. In addition to deposits, Parkvale derives funds from loan
repayments and FHLB advances. Borrowings may be used on a short-term basis to
compensate for seasonal or other reductions in deposits or for inflows at less
than projected levels, as well as on a longer term basis to support expanded
lending and investment activities. Parkvale's ability to maintain high liquidity
levels has allowed investment decisions to be evaluated with the funding source
as a secondary issue.
14
DEPOSITS
Parkvale has established a complete program of deposit products designed to
attract both short-term and long-term savings by providing an assortment of
accounts and rates. The deposit products currently offered by Parkvale include
passbook and statement savings accounts, noninsured sweep accounts, checking
accounts, money market accounts, certificates of deposit ranging in terms from
31 days to ten years, IRA certificates and jumbo certificates of deposit. In
addition, Parkvale is a member of the Star system with thirty-four ATMs
currently operated by Parkvale.
Parkvale is generally competitive in the types of accounts and in the interest
rates it offers on its deposit products, although it generally does not lead the
market with respect to the level of interest rates offered. Parkvale intends to
continue its efforts to attract deposits as a principal source of funds for
supporting its lending activities because the cost of these funds generally is
less than other borrowings. Although market demand generally dictates which
deposit maturities and rates will be accepted by the public, Parkvale intends to
continue to promote longer term deposits to the extent possible in a manner
consistent with its asset and liability management goals.
The following table shows the distribution of Parkvale's deposits by type of
deposit as of June 30.
2003 2002 2001
------------------ ------------------- -------------------
Balance % Balance % Balance %
---------- ----- ---------- ----- ---------- -----
(Dollars in Thousands)
Passbook accounts and
statement savings $ 200,080 15.0% $ 187,617 13.9% $ 136,162 11.5%
Checking and
money market accounts 317,970 23.9 286,217 21.2 208,991 17.7
Certificate accounts 686,221 51.6 744,629 55.2 728,644 61.8
Jumbo certificates 117,833 8.8 119,725 8.9 95,017 8.0
Accrued interest 9,656 0.7 11,151 0.8 11,983 1.0
---------- ----- ---------- ----- ---------- -----
Total Savings Deposits $1,331,760 100.0% $1,349,339 100.0% $1,180,797 100.0%
========== ===== ========== ===== ========== =====
The following table sets forth information regarding average balances and
average rates paid by type of deposit for the years ending June 30.
2003 2002 2001
------------------ ------------------- ------------------
Average Average Average
Balance % Balance % Balance %
---------- ---- ---------- ---- ---------- ----
(Dollars in Thousands)
Passbook accounts $ 189,902 1.36% $ 156,746 1.74% $ 134,221 2.08%
Checking and
money market accounts 293,767 0.75 227,703 1.03 175,480 1.14
Certificate accounts 839,154 4.69 850,564 5.53 780,855 6.14
Accrued interest 12,715 - 13,221 - 13,920 -
---------- ---- ---------- ---- ---------- ----
$1,335,538 3.30% $1,248,234 4.22% $1,104,476 4.77%
========== ==== ========== ==== ========== ====
The wide range of deposit accounts offered has increased Parkvale's ability to
retain funds and allows it to be more competitive in obtaining new funds, but
does not eliminate the threat of disintermediation. During periods of high
interest rates, certificate and money market accounts have been more costly than
traditional accounts. In addition, Parkvale has become much more subject to
short-term fluctuations in
15
deposit flows as customers have become more rate conscious and willing to move
funds into higher yielding accounts. The ability of Parkvale to attract and
maintain deposits and Parkvale's cost of funds has been, and will continue to
be, significantly affected by market conditions.
The principal methods used by Parkvale to attract deposits include the offering
of a wide range of services and accounts, competitive interest rates, and
convenient office hours and locations. Parkvale utilizes traditional marketing
methods to attract new customers and deposits, including mass media advertising
and direct mail.
Parkvale's deposits are obtained primarily from persons who are residents of
Pennsylvania. Parkvale neither advertises for deposits outside of Pennsylvania
nor utilizes the services of deposit brokers. Approximately 3.1% of Parkvale's
deposits were held by nonresidents of Pennsylvania at June 30, 2003.
The following table sets forth the net deposit flows of Parkvale during the
years ended June 30.
2003 2002 2001
-------- --------- ---------
(In Thousands)
(Decrease) increase before interest credited $(48,051) $ 133,720 $ 70,599
Interest credited 30,472 34,822 30,102
-------- --------- ---------
Net deposit (decrease) increase $(17,579) $ 168,542 $ 100,701
======== ========= =========
Management carefully monitors the interest rates and terms of its deposit
products in order to maximize Parkvale's interest rate spread and to better
match its interest rate sensitivity.
The following table reflects the makeup of Parkvale's deposit accounts at June
30, 2003, including the scheduled quarterly maturity of CD accounts.
Amount % of Total Average
in 000's Deposits Rates
---------- ---------- -------
Passbook and club accounts $ 200,080 15.0% 1.36%
Checking and money market accounts 317,970 23.9 0.75
---------- ----- ----
Total non-certificate accounts 518,050 38.9 0.99
---------- ----- ----
Certificate accounts maturing in quarter ending:
September 30, 2003 157,654 11.8 3.91
December 31, 2003 108,791 8.2 4.05
March 31, 2004 48,804 3.7 3.44
June 30, 2004 70,986 5.3 3.55
September 30, 2004 39,265 3.0 3.74
December 31, 2004 33,009 2.5 3.55
March 31, 2005 26,612 2.0 4.52
June 30, 2005 46,951 3.5 4.32
September 30, 2005 23,060 1.7 3.98
December 31, 2005 26,629 2.0 3.91
March 31, 2006 17,406 1.3 3.93
June 30, 2006 32,672 2.5 3.81
Thereafter 172,215 12.9 5.24
---------- ----- ----
Total certificate accounts 804,054 60.4 4.69
---------- ----- ----
Accrued interest 9,656 0.7 0.00
---------- ----- ----
Total deposits $1,331,760 100.0% 3.30%
========== ===== ====
16
The following table presents, by various interest rate categories, the
outstanding amount of certificates of deposit at June 30, 2003 which mature
during the years ending June 30:
2004 2005 2006 Thereafter Total
-------- -------- ------- ---------- --------
(In Thousands)
Certificates of deposit:
Under 4.00% $214,632 $ 97,651 $72,752 $ 17,515 $402,550
4.00% to 5.99% 77,854 22,668 15,948 107,979 224,449
6.00% to 7.99% 93,749 25,518 11,067 46,721 177,055
-------- -------- ------- ---------- --------
Total certificates of deposits $386,235 $145,837 $99,767 $ 172,215 $804,054
======== ======== ======= ========== ========
Maturities of certificates of deposit of $100,000 or more that were outstanding
as of June 30, 2003 are summarized as follows:
(In Thousands)
3 months or less $ 26,615
Over 3 months through 6 months 14,233
Over 6 months through 12 months 14,258
Over 12 months 62,727
--------
Total $117,833
========
BORROWINGS
Parkvale's borrowings from the FHLB of Pittsburgh are collateralized with FHLB
capital stock, deposits with the FHLB of Pittsburgh and investment securities.
See "Regulation - Federal Home Loan Bank System". Borrowings are made pursuant
to several different credit programs, each of which has its own interest rate
and range of maturities. FHLB advances are generally available to meet seasonal
and other withdrawals of savings accounts and to expand lending and investment
activities, as well as to aid the efforts of members to establish better
asset/liability management by extending the maturities of liabilities.
The following table sets forth information concerning Parkvale's advances from
the FHLB of Pittsburgh for the years ended June 30.
2003 2002 2001
---- ---- ----
(Dollars in Thousands)
Average balance outstanding $147,588 $114,044 $ 91,230
Maximum amount outstanding at any month-end
during the period $161,109 $131,121 $116,137
Average interest rate 5.37% 5.67% 5.78%
Balance outstanding at June 30 $161,107 $131,121 $116,134
The increase in the outstanding average balance from $114.0 million in 2002 to
$147.6 million in 2003 is due to additional advances drawn on the FHLB during
fiscal 2003. The increases related to new borrowings made during fiscal 2003 at
rates ranging from 4.12% to 4.45% for advances with a stated maturity of 8 to 10
years. Such borrowings were used to fund either loan purchases or loan
originations.
YIELDS EARNED AND RATES PAID
The results of operations of Parkvale depend substantially on its net interest
income, which is the largest component of Parkvale's net income. Net interest
income is affected by the difference or spread between
17
yields earned by Parkvale on its loan and investment portfolios and the rates of
interest paid by Parkvale for its deposits and borrowings, as well as the
relative amounts of its interest-earning assets and interest-bearing
liabilities.
The following table sets forth certain information regarding changes in interest
income and interest expense for the periods indicated. For each category of
interest-earning asset and interest-bearing liability, information is provided
on changes attributable to (1) changes in rates (change in rate multiplied by
old volume), (2) changes in volume (changes in volume multiplied by old rate),
and (3) changes in rate-volume (change in rate multiplied by the change in
volume).
Year Ended June 30,
-------------------------------------------------------------------------------------------
2003 vs. 2002 2002 vs. 2001
-------------------------------------------- -------------------------------------------
Rate/ Rate/
Rate Volume Volume Total Rate Volume Volume Total
-------- -------- -------- -------- -------- -------- -------- --------
(In Thousands)
Interest-earning assets:
Loans ($10,512) $ 3,973 ($ 556) ($ 7,095) ($ 6,811) $ 5,960 ($ 472) ($ 1,323)
Federal funds sold (947) (153) 50 (1,050) (2,269) 3,192 (1,938) (1,015)
Investments (2,176) 4,281 (875) 1,230 (990) 2,708 (321) 1,337
-------- -------- -------- -------- -------- -------- -------- --------
Total (13,635) 8,101 (1,381) (6,915) (10,070) 11,860 (2,731) (1,011)
-------- -------- -------- -------- -------- -------- -------- --------
Interest-bearing liabilities:
Deposits (11,484) 3,684 (761) (8,561) (6,075) 6,857 (799) (17)
Trust preferred securities (24) 1,020 (68) 928 - - 380 380
FHLB advances and debt (473) 2,213 (141) 1,599 (48) 1,462 (145) 1,269
-------- -------- -------- -------- -------- -------- -------- --------
Total (11,981) 6,917 (970) (6,034) (6,223) 8,319 (564) 1,632
-------- -------- -------- -------- -------- -------- -------- --------
Net change in net interest
income (expense) ($ 1,654) $ 1,184 ($ 411) ($ 881) ($ 4,017) $ 3,431 ($ 2,197) ($ 2,596)
======== ======== ======== ======== ======== ======== ======== ========
SUBSIDIARIES
Parkvale Financial Corporation maintains two subsidiaries. Parkvale Statutory
Trust I ("PSTI") is a Connecticut chartered investment company, and Parkvale
Savings Bank ("Parkvale" or "the Bank") is a Pennsylvania chartered permanent
reserve fund stock savings bank headquartered in Monroeville, Pennsylvania. PSTI
is a subsidiary formed in March 2002 which has borrowed $25 million with $16
million contributed to the Bank in the form of Tier 1 capital.
Pennsylvania law permits a Pennsylvania-chartered, federally-insured savings
institution to invest up to 2% of its assets in the capital stock, paid-in
surplus and unsecured obligations of service corporations and an additional 1%
of its assets when the additional funds are utilized for community or inner-city
development or investment. Because Parkvale's subsidiaries are operating
subsidiaries rather than service corporations, this limitation does not apply.
At June 30, 2003, Parkvale had equity investments of less than $1.0 million in
its operating subsidiary corporations.
Parkvale Bank's wholly-owned subsidiaries include Parkvale Investment
Corporation ("PIC"), Parkvale Mortgage Corporation ("PMC"), P.V. Financial
Service Inc. ("PVFS") and Renaissance Corporation ("Renaissance"). The PIC was
formed in fiscal 2000 as a Delaware investment corporation. PMC was acquired in
1986 and currently operates two offices originating residential mortgage loans
for the Bank. For additional information regarding PMC, see "Lending
Activities". PVFS was incorporated in 1972 and on July 1, 1997, PVFS began
operating as a subprime lending subsidiary with the intent of extending
18
consumer loans to individuals who may otherwise not be able to obtain funds
based on their unfavorable or nonexistent credit history. At June 30, 2003, PVFS
had net assets of $5.7 million and $5.2 million of loans outstanding.
Renaissance completes collateral evaluations for consumer lending activities for
the Bank. The sole asset of Renaissance at June 30, 2003 is $116,000 in cash.
COMPETITION
Parkvale faces substantial competition both in the attraction of deposits and in
the making of mortgage and other loans in its primary market area. Competition
for the origination of mortgage and other loans principally comes from other
savings institutions, commercial banks, mortgage banking companies, credit
unions and other financial service corporations located in the Pittsburgh
metropolitan area. Because of the wide diversity and large number of
competitors, the exact number of competitors is fluid. Parkvale's most direct
competition for deposits has historically come from other savings institutions,
commercial banks and credit unions located in the Pittsburgh area. In times of
higher interest rates, Parkvale also encounters significant competition for
investors' funds from short-term money market securities and other corporate and
government securities. During a lower interest rate environment, Parkvale and
other depository institutions experience increased competition from stocks,
mutual funds, and other direct investments offering the potential for higher
yields.
Parkvale competes for loans principally through the interest rates and loan fees
it charges on its loan programs. In addition, Parkvale believes it offers a high
degree of professionalism and quality in the services it provides borrowers and
their real estate brokers. It competes for deposits by offering a variety of
deposit accounts at competitive rates, convenient business hours, and convenient
branch locations with interbranch deposit and withdrawal privileges at each
branch. Parkvale believes that its office locations in various neighborhoods of
Pittsburgh and the surrounding suburbs outside of downtown Pittsburgh provide
Parkvale with both an opportunity to become an integral part of these smaller
communities and the means of competing with larger financial institutions doing
business within the Pittsburgh metropolitan area. In addition, Parkvale has
three offices located in downtown Pittsburgh to provide services to the business
community and to its suburban customers working and shopping in the city.
MARKET AREA
The greater Pittsburgh metropolitan area, which is a heavily populated and
predominately industrialized region, ranks 21st in population of the
metropolitan areas in the country according to the 2000 census. The region's
economy is primarily dependent on a combination of the manufacturing trade,
services, government, and transportation industries. The economy has experienced
a transition away from the steel and steel-related industries to the service
industries, such as transportation, health care, education and finance. In
addition to containing the corporate headquarters of major industrial and
financial corporations, Pittsburgh is also a major regional health and education
center, and a large number of high technology firms have established operations
in Pittsburgh due to the wide range of support services available.
EMPLOYEES
As of June 30, 2003, Parkvale and its subsidiaries had 384 full-time equivalent
employees. These employees are not represented by a collective bargaining agent
or union, and Parkvale believes it has satisfactory relations with its
personnel.
19
REGULATION
GENERAL
On July 30, 2002, President Bush signed into law the corporate-governance and
accounting-oversight bill, also known as the Sarbanes-Oxley Act of 2002 ("the
Act"). The bill creates an independent auditing-oversight board under the
Securities and Exchange Commission ("SEC"). Parkvale Financial Corporation, the
Bank's holding company, is regulated by the SEC. The bill also increases
penalties for corporate wrongdoers, forces faster and more-extensive financial
disclosure, and creates avenues of recourse for aggrieved shareholders. The Act
contains separate provisions that require signed certifications to be made by
the chief executive officer and the chief financial officer of all public
companies. The Act provides criminal penalties of up to $1.0 million and
imprisonment of up to 10 years for an officer that provides a certification
knowing it to be untrue.
The Act also addresses functions and responsibilities of audit committees of
public companies. These requirements are as follows:
Responsibilities. Each audit committee is directly responsible for the
appointment, compensation and oversight of the work of the Company's outside
auditors, and the auditors must report directly to the audit committee;
Independence. Each audit committee member must be independent, which under the
Act means that he or she cannot (other than in his or her capacity as a member
of the audit committee, the board or any other board committee) accept any
consulting, advisory or other compensatory fees from the Company or be
affiliated with the Company or any of its subsidiaries;
Whistleblower Procedures. Each audit committee must establish procedures to
receive and respond to any complaints and concerns regarding the Company's
accounting, accounting controls or auditing matters. These procedures would
include enabling the Company's employees to transmit concerns regarding
questionable accounting or auditing matters by confidential, anonymous
submission;
Engagement of Advisors. In recognition of the audit committee's independent
status, each audit committee is authorized to engage independent counsel and
other advisors; and
Payment of Expenses. The Company must provide the appropriate funding, as
determined by the audit committee, for payment of compensation to the auditors
and advisors of the audit committee.
On September 5, 2002, the SEC published accelerated filing deadlines for Forms
10-K and Forms 10-Q. The accelerated guidelines as they affect Parkvale are as
follows:
For Form 10-K, fiscal 2003 filing deadline remains at 90 days or 9/28/03; fiscal
2004 filing deadline is 75 days or 9/13/04; fiscal 2005 and thereafter filing
deadline is 60 days or 8/29/05.
For Form 10-Q, quarterly reports filing deadline during fiscal 2004 remains at
45 days, 11/14/03 for the first quarter of 2004; quarterly reports filing
deadline during fiscal 2005 is 40 days, i.e. 11/9/04 for the first quarter of
2005; quarterly reports filing deadline during fiscal 2006 is 35 days, i.e.
11/4/05 for the first quarter of 2006.
Following conversion to a Pennsylvania savings bank charter in fiscal 1993, the
Bank is subject to
20
extensive regulation by the FDIC and the Department, and is no longer directly
subject to regulation by the OTS. Nonetheless, several requirements which were
applicable to the Bank as a Pennsylvania chartered savings association regulated
by the OTS remain applicable to the Bank as a Pennsylvania chartered savings
bank. The FDIC has adopted a regulation which provides that the same
restrictions on activities, investments in subsidiaries, loans to one borrower,
and affiliate transactions apply to the Bank as if the Bank had not converted to
a savings bank charter. However, the capital requirements applicable to the Bank
as a savings bank are the FDIC's capital maintenance regulations rather than the
comparable OTS regulations.
The Bank files reports with the Pennsylvania Department of Banking and the FDIC
describing its activities and financial condition and is periodically examined
to test compliance with various regulatory requirements. This supervision and
regulation is intended primarily for the protection of depositors. Certain of
these regulatory requirements are referred to below or elsewhere in this
document.
INSURANCE AND REGULATORY STRUCTURE. An insurance fund administered by the FDIC
and named the SAIF insures the deposits of savings associations and certain
savings banks. The FDIC fund known as the BIF insures the deposits of commercial
banks and certain savings banks. Although the FDIC administers both funds, the
assets and liabilities are not commingled.
CAPITAL STANDARDS. The Bank is required to maintain Tier I (Core) capital equal
to at least 4% of the institution's adjusted total assets, and total risk-based
capital equal to at least 8.0% of risk-weighted assets. Total capital includes
both Tier I and Tier II (supplementary) capital, with Tier II capital limited to
no more than the amount of Tier I capital. At June 30, 2003, Parkvale was in
compliance with all applicable regulatory requirements, with Tier I and total
capital ratios of 6.9% and 11.9%, respectively. The Federal Deposit Insurance
Corporation Improvement Act of 1991 ("FDICIA") required, among other things,
each federal banking agency to revise its risk-based capital standards for
insured institutions to ensure that those standards take adequate account of
interest-rate risk ("IRR"), concentration of credit risk, and the risks of
nontraditional activities, as well as to reflect the actual performance and
expected risk of loss on multifamily residential loans. On June 26, 1996, the
FDIC, the FRB and the Office of the Comptroller of the Currency ("OCC"),
collectively, "the agencies", jointly issued a policy statement providing
bankers guidance on sound interest rate risk management practices. This policy
statement augments the action taken by the agencies in August 1995 to implement
the portion of FDICIA addressing risk-based capital standards for interest rate
risk. The agencies elected not to pursue a standardized measure and explicit
capital charge for interest rate risk. Instead, the policy statement encourages
banks to use their own internal models to measure IRR but emphasizes that they
must have adequate board and senior management oversight and a comprehensive
process for managing IRR. Parkvale's management does not anticipate difficulty
in meeting the capital requirements in the future. However, there can be no
assurance that this will be the case. Failure to maintain minimum levels of
required capital will result in the submission to the applicable FDIC Regional
Director for review and approval of a reasonable plan describing the means and
timing by which the bank shall achieve its minimum Tier I ratio and may result
in the imposition by the Pennsylvania Department of Banking or the FDIC of
various operational restrictions, including limitations as to the rate of
interest that may be paid on deposit accounts, the taking of deposits, the
issuance of new accounts, the ability to originate particular types of loan, and
the purchase of loans or the making of specified other investments.
Alternatively, the institution may be placed into receivership or
conservatorship under the FDIC, which would be charged with managing the
institution until it could be sold or liquidated.
21
INVESTMENT IN SUBSIDIARIES. Investments in and extensions of credit to
subsidiaries not engaged in activities permissible for national banks must
generally be deducted from capital. However, certain exemptions generally apply
where: (i) a subsidiary is engaged in activities impermissible for national
banks solely as an agent for its customers and (ii) the subsidiary is engaged
solely in mortgage-banking activities. These provisions have not reduced or
limited Parkvale's business activity or resulted in any deductions to capital.
INVESTMENT RULES. The permissible amount of loans to one borrower follows the
national bank standards for all loans made by savings banks. The national bank
standard generally does not permit loans to one borrower to exceed 15% of
unimpaired capital and surplus. Loans in an amount equal to an additional 10% of
unimpaired capital and surplus also may be made to a borrower if the loans are
fully secured by readily marketable securities. Parkvale has historically made
loans with lesser dollar balances than permitted by federal regulations.
Savings banks and subsidiaries may not acquire or retain investments in
corporate debt securities that at the time of acquisition were not rated in one
of the four highest rating categories by at least one nationally recognized
rating organization. Parkvale fully complies with regulations governing
investments in corporate debt securities.
ACQUISITIONS BY BANK HOLDING COMPANIES. Bank holding companies are able to
acquire any savings institution, including healthy as well as troubled
institutions. Current regulations do not impose any geographic restrictions on
such acquisitions, and as a result, a number of savings institutions have been
acquired by bank holding companies.
SAVINGS AND LOAN HOLDING COMPANY JURISDICTION. The Director of the OTS
administers and regulates the activities of registered savings and loan holding
companies and the acquisition of savings banks by any company. Savings and loan
holding companies, such as Parkvale Financial Corporation, are no longer
required to receive regulatory approval prior to incurring debt. Savings banks
which are subsidiaries of a holding company, as well as other savings banks, are
now deemed to be member banks for purposes of Sections 23A and 23B of the
Federal Reserve Act and, as a result, are subject to the transaction with
affiliate rules contained in those sections. Savings and loan holding companies
now may also purchase up to 5% of the stock of unaffiliated savings bank or
savings and loan holding companies without prior regulatory approval.
ENFORCEMENT. The FDIC's enforcement powers extend to all
"institution-affiliated" parties, including shareholders, attorneys, appraisers
and accountants who knowingly or recklessly participate in wrongful action
having or likely to have an adverse effect on an insured institution. Civil
penalties are classified into three levels, with amounts increasing with the
severity of the violation. The first tier provides for civil penalties up to
$5,000 per day for violation of law or regulation. A civil penalty of up to
$25,000 per day may be assessed if more than a minimal loss to an institution or
action that results in a substantial pecuniary gain or other benefit. Criminal
penalties are increased to $1 million per violation, up to $5 million for
continuing violations or for the actual amount of gain or loss. These monetary
penalties may be combined with prison sentences of up to five years.
Regulators can impose enforcement action on an institution that fails to comply
with its regulatory requirements, particularly with respect to the capital
requirements. Possible enforcement actions include the imposition of a capital
plan and termination of deposit insurance. The FDIC also may recommend
22
that the Department of Banking take enforcement action. If action is not taken
by the Department, the FDIC would have authority to compel such action under
certain circumstances.
FEDERAL HOME LOAN BANK SYSTEM
The Bank is a member of the FHLB System, which consists of 12 regional FHLBs,
each subject to supervision and regulation by the Federal Housing Finance Board.
The FHLBs provide a central credit facility primarily for member institutions.
The Bank, as a member of the FHLB of Pittsburgh, is required to acquire and hold
shares of capital stock in that FHLB in an amount equal to at least 1% of the
aggregate principal amount of its unpaid residential mortgage loans, home
purchase contracts and similar obligations at the beginning of each year, or 5%
of its advances (borrowings) from the FHLB of Pittsburgh, whichever is greater.
Parkvale had a $13.0 million investment in stock of the FHLB of Pittsburgh at
June 30, 2003 to comply with this requirement.
Advances from the FHLB of Pittsburgh are secured by a member's shares of stock
in the FHLB of Pittsburgh, certain types of mortgages and other assets. The
maximum amount of credit which the FHLB of Pittsburgh will advance for purposes
other than meeting deposit withdrawals fluctuates from time to time in
accordance with changes in policies of the FHLB of Pittsburgh. Interest rates
charged for advances vary depending upon maturity, the cost of funds to the FHLB
of Pittsburgh and the purpose of the borrowing. At June 30, 2003, the Bank had
$161.1 million of outstanding advances from the FHLB of Pittsburgh.
INTERSTATE ACQUISITIONS
The Commonwealth of Pennsylvania has enacted legislation which permits
interstate acquisitions and branching, subject to specific restrictions, for
savings banks located in Delaware, Kentucky, the District of Columbia, Maryland,
New Jersey, Ohio, Virginia and West Virginia ("the Region") if the state offers
reciprocal rights to savings institutions located in Pennsylvania.
Of the states in the Region, Delaware, Kentucky, Maryland, New Jersey, Ohio and
West Virginia currently have laws that permit savings banks located in
Pennsylvania to branch into such states and/or acquire savings banks located in
such states.
FEDERAL RESERVE SYSTEM
Federal Reserve Board regulations require savings banks to maintain
noninterest-earning reserves against their transaction accounts (primarily
checking accounts) and certain nonpersonal time deposits. Money market deposit
accounts are subject to the reserve requirement applicable to nonpersonal time
deposits when held by a person other than a natural person. Because required
reserves must be maintained in the form of vault cash or a non-interest bearing
account at a Federal Reserve Bank, the effect of this reserve requirement is to
reduce the Bank's interest-earning assets. Parkvale satisfies its reserve
requirement with vault cash.
PENNSYLVANIA SAVINGS BANK LAW
The Bank is incorporated under the Pennsylvania Banking Code of 1965, as amended
("Banking Code"), which contains detailed provisions governing the organization,
location of offices, rights and responsibilities of directors, officers,
employees and members, as well as corporate powers, savings and investment
operations and other aspects of the Bank and its affairs. The Banking Code
delegates extensive rulemaking power and administrative discretion to the
Department so that the supervision and regulation of state-chartered banks may
be flexible and readily responsive to changes in economic
23
conditions and in savings and lending practices.
One of the declared purposes of the Banking Code is to provide banks with the
opportunity to be competitive with each other and with other financial
institutions existing under other state, federal and foreign laws.
A Pennsylvania savings bank may locate or change the location of its principal
place of business and establish an office anywhere in the Commonwealth, with the
prior approval of the Department.
The Department generally examines each savings bank at least once every two
years. The Banking Code permits the Department to accept the examinations and
reports of the FDIC in lieu of the Department's examination. The present
practice is for the Department and the FDIC to conduct examinations annually on
an alternating basis. The Department may order any bank to discontinue any
violation of law or unsafe or unsound business practice and may direct any
director, officer, attorney or employee of a bank engaged in an objectionable
activity, after the Department has ordered the activity to be terminated, to
show cause at a hearing before the Department why such person should not be
removed.
TAXATION
FEDERAL TAXATION
For federal income tax purposes, PFC and its subsidiaries file a consolidated
return on a calendar year basis and report their income and expenses on the
accrual basis of accounting. Since 1987, corporations are subject to the
corporate alternative minimum tax to the extent this tax would exceed the
regular tax liability. PFC has not been subject to this tax in the past and does
not anticipate being subject to this tax in future years given its current level
of financial and taxable income. With certain exceptions, no deduction is
allowed for interest expense allocable to the purchase or carrying of tax-exempt
obligations acquired after August 7, 1986.
PFC's income tax returns for calendar 2000, 2001 and 2002 have been filed with
the IRS and are open to examination. However, PFC has not yet been advised by
the IRS if an examination will be performed. All income tax returns for calendar
1999 and prior years have been either accepted as filed or settled with the IRS
with such settlements not resulting in a significant charge to income.
STATE TAXATION
For state tax purposes, Parkvale reports its income and expenses on the accrual
basis of accounting and files its tax returns on a calendar year basis. Parkvale
is subject to the Pennsylvania Mutual Thrift Institutions Tax ("MTIT"). This tax
is imposed at the rate of 11.5% on net income computed substantially in
accordance with generally accepted accounting principles ("GAAP"). Under the
Mutual Thrift Institution Act, Parkvale is not subject to any state or local
taxes except for the MTIT described above and taxes imposed upon real estate and
the transfer thereof.
See Note H of Notes to Consolidated Financial Statements for additional
information regarding federal and state taxation.
24
ITEM 2. PROPERTIES
Parkvale presently conducts its business from its main office and 39 branch
offices located in the greater Pittsburgh metropolitan area. Parkvale owns the
building and land for 19 of its offices and leases its remaining 20 offices.
Such leases expire through 2021. PMC leases facilities outside of Pennsylvania
for two loan origination centers. At June 30, 2003, Parkvale's land, building
and equipment had a net book value of $11.2 million.
ITEM 3. LEGAL PROCEEDINGS.
PFC and its subsidiaries, in the normal course of business, are subject to
various pending and threatened lawsuits in which claims for monetary damages are
asserted. Management, after consultation with legal counsel, does not anticipate
that the ultimate aggregate liability, if any, arising out of such other
lawsuits will have a material adverse effect on PFC's nor its subsidiaries'
financial positions or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
PART II.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDERS MATTERS.
The information required herein is incorporated by reference from page 39 of
PFC's 2003 Annual Report.
ITEM 6. SELECTED FINANCIAL DATA.
The information required herein is incorporated by reference from page 1 of
PFC's 2003 Annual Report.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
The information required herein is incorporated by reference from pages 4 to 12
of PFC's 2003 Annual Report.
ITEM 7A. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK.
The information required herein is incorporated by reference from pages 4 to 12
of PFC's 2003 Annual Report.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The information required herein is incorporated by reference from pages 13 to 31
of PFC's 2003 Annual Report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES.
Not applicable.
25
PART III.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information required herein with respect to directors and executive officers
of PFC and Parkvale is incorporated by reference from pages 5 to 10 of the
definitive proxy statement of the Corporation for the 2003 Annual Meeting of
Stockholders, which was filed on September 12, 2003 (the "definitive proxy
statement").
ITEM 11. EXECUTIVE COMPENSATION.
The information required herein is incorporated by reference from pages 8 to 15
of the definitive proxy statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information required herein is incorporated by reference from pages 2 to 4
of the definitive proxy statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information required herein is incorporated by reference from page 15 to 17
of the definitive proxy statement.
ITEM 14. DISCLOSURES AND PROCEDURES
An evaluation was preformed under the supervision and with the participation of
Parkvale's management, including the CEO and CFO, of the effectiveness of the
design and operation of Parkvale's management, including the CEO and CFO,
concluded that Parkvale's disclosure controls and procedures were effective.
There have been no significant changes in Parkvale's internal controls or in
other factors that could significantly affect internal controls subsequent to
the date of the evaluation.
PART IV.
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) DOCUMENTS FILED AS PART OF THIS REPORT
(1) The following financial statements are incorporated by reference
from Item 8 hereof (see Exhibit 13):
Page
----
Consolidated Statements of Financial Condition at June 30, 2003 and 2002 13
Consolidated Statements of Operations for each of the three years
in the period ended June 30, 2003. 14
Consolidated Statements of Cash Flows for each of the three years
in the period ended June 30, 2003. 15
26
Consolidated Statements of Shareholders' Equity for each of the three years
in the period ended June 30, 2003. 16
Notes to Consolidated Financial Statements 17 to 31
Report of Independent Auditors 32
(2) The following exhibits are filed as part of this Form 10-K and this
list includes Exhibit Index.
No. Exhibits Page
- ------------ ----
3(a) Articles of Incorporation *
3(b) Bylaws &
10(a) Common Stock Certificate *
10(b) 1987 Stock Option Plan @
10(c) 1993 Key Employee Stock Compensation Program x
10(d) 1993 Directors' Stock Option Plan &
10(e) Consulting Agreement with Robert D. Pfischner ~
10(f) Employment Agreement with Robert J. McCarthy, Jr. #
10(f)1 Change in Control Severance Agreement with Timothy G. Rubritz. ##
10(g) Employee Stock Ownership Plan &
10(h) Executive Deferred Compensation Plan &
10(i) Supplemental Employee Benefit Plan +
13 Excerpts of the 2003 Annual Report to Shareholders filed herewith.
Such Annual Report, except those portions thereof that are expressly
incorporated by reference herein, is furnished for information of
the Securities and Exchange Commission ("the SEC") only and is not
deemed to be "filed" as part of this Form 10-K.
22 Subsidiaries of Registrant 18
Reference is made to Item 1. Business - Subsidiaries for the
required information
23 Consent of Independent Auditors C-1
31.1 Certification of Chief Executive Officer pursuant to rule
13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as
amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002. (as furnished as Exhibit 31.1)
27
31.2 Certification of Chief Financial Officer pursuant to rule
13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as
amended, as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002. (as furnished as Exhibit 31.2)
32.1 Certification of Chief Executive Officer pursuant to 18 U.S.C.
Section 1350 as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002. (as furnished as Exhibit 32.1)
32.2 Certification of Chief Financial Officer pursuant to 18 U.S.C.
Section 1350 as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002. (as furnished as Exhibit 32.2)
* Incorporated by reference to the Registrant's Form 8-B filed
with the SEC on January 5, 1989.
@ Incorporated by reference, as amended, to Form S-8 at File No.
33-26173 filed by the Registrant with the SEC on November 1,
1995.
x Incorporated by reference, as amended, to Form S-8 at File No.
33-98812 filed by the Registrant with the SEC on November 1,
1995.
~ Incorporated by reference to Form 10-K filed by the Registrant
with the SEC on September 28, 1994.
+ Incorporated by reference to Form 10-K filed by the Registrant
with the SEC on September 21, 1995.
# Incorporated by reference to Form 10-K filed by the Registrant
with the SEC on September 19, 1997.
& Incorporated by reference to Form 10-K filed by the Registrant
with the SEC on September 24, 1998.
## Incorporated by reference to Form 10-K filed by the Registrant
with the SEC on September 22, 2000.
(b) REPORTS ON FORM 8-K
A Form 8-K was filed July 30, 2003 for an earnings release
dated July 24, 2003.
(c) See (a) (2) above for all exhibits filed herewith and the
Exhibit Index.
(d) There are no other financial statements and financial
statement schedules, which were excluded from the Annual
Report to Shareholders, which are required to be included
herein.
28
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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: September 18, 2003 By: /s/ Robert J. McCarthy, Jr.
---------------------------
Robert J. McCarthy, Jr.
Director, President and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
/s/ Robert J. McCarthy, Jr. September 18, 2003
- --------------------------- ------------------
Robert J. McCarthy, Jr., Date
Director, President and
Chief Executive Officer
/s/ Timothy G. Rubritz September 18, 2003
- ----------------------- ------------------
Timothy G. Rubritz, Date
Vice President - Treasurer
(Chief Financial & Accounting Officer)
/s/ Robert D. Pfischner September 18, 2003
- ------------------------ ------------------
Robert D. Pfischner, Chairman of the Board Date
/s/ Fred P. Burger, Jr. September 18, 2003
- ------------------------ ------------------
Fred P. Burger, Jr., Director Date
/s/ Andrea F. Fitting September 18, 2003
- --------------------- ------------------
Andrea F. Fitting, Director Date
/s/ Patrick J. Minnock September 18, 2003
- ---------------------- ------------------
Patrick J. Minnock, Director Date
/s/ Harry D. Reagan September 18, 2003
- ------------------- ------------------
Harry D. Reagan, Director Date
29