MONROEVILLE, Pa., July 30 /PRNewswire-FirstCall/ -- Parkvale Financial Corporation reported a net loss for the fourth quarter ended June 30, 2010 of $21.6 million or $3.94 per diluted common share, after preferred stock dividends compared to net income available to common shareholders of $961,000 or $0.18 per diluted common share for the quarter ended June 30, 2009. The loss for the June 2010 quarter was primarily the result of non-cash charges of $34.4 million for other than temporarily impaired debt securities, partially offset by a $10.5 million increase in income tax benefit. The impairment charges are the result of credit deterioration related to pooled trust preferred and private label mortgage-backed securities. All of the securities were above investment grade when purchased, and all of the impaired debt securities are currently below investment grade. "We believe that the non-cash charges recognized on these adversely classified assets results in a much stronger balance sheet, and as we move forward we will be able to focus on the core earnings potential of the Bank," said Robert J. McCarthy, Jr., President and Chief Executive Officer.
The adjusted carrying values of the impaired debt securities at June 30, 2010 equal the fair value of such securities. The impaired debt securities at June 30, 2010 consisted of $6.7 million of pooled trust preferred securities and $59.8 million of private label mortgage-backed securities. All of the pooled trust preferred securities remain in portfolio and it is management's intent to hold such securities to maturity. Parkvale intends to sell $59.8 million of its non-investment grade private label mortgage-backed securities and re-invest the sales proceeds into higher quality assets. It is expected that the level of adversely classified investment securities will decrease by over 60% compared to March 31, 2010 upon the sale of the private label mortgage-backed securities along with the non-cash impairment charges recognized at June 30, 2010.
Parkvale Bank continues to remain a well-capitalized institution after the impairment charges and the net loss for the quarter ended June 30, 2010. "We are disappointed with the earnings results, yet confident that our well-capitalized regulatory position, stronger balance sheet and core earnings potential will benefit both our shareholders and valued customers," said Mr. McCarthy.
For the quarter ended June 30, 2010, the provision for loan losses increased by $825,000 or 46.6% from the 2009 quarter. Total non-accrual loans were $26.5 million at June 30, 2010, compared to $27.9 million at June 30, 2009. Net interest income decreased by $634,000 or 6.2% from $10.2 million to $9.5 million in the June 2010 quarter from the June 2009 quarter. In addition, other non-interest income decreased by $1.9 million or 42.3% in the quarter ended June 30, 2010 from the comparable 2009 quarter, primarily due to a gain on asset sale in the June 2009 quarter. Partially offsetting these factors was a $268,000 or 3.4% decrease in non-interest expense during the 2010 quarter compared to the 2009 quarter.
Parkvale reported a net loss to common shareholders for the fiscal year ended June 30, 2010 of $18.1 million or $3.30 per diluted common share, compared to a net loss to common shareholders of $10.4 million or $1.90 per diluted common share for the fiscal year ended June 30, 2009. The $7.7 million decrease in fiscal 2010 net income reflects higher non-cash debt security impairment charges of $39.0 million compared to $30.4 million for the fiscal year ended June 30, 2009, partially offset by a $7.9 million increase to the income tax benefit. The loan loss provision increased by $694,000 from $6.8 million for fiscal 2009 to $7.5 million for fiscal 2010 to address continued weakness in housing prices and high levels of unemployment. The level of non-accrual loans and real estate owned is down $5.7 million or 14% compared to the peak of $40.9 million at September 30, 2009. "We have seen the loan portfolio stabilize and improve slightly during the past few quarters," said Mr. McCarthy. Total reserves as a percentage of gross loans increased from 1.60% at June 30, 2009 to 1.83% at June 30, 2010. Non-interest expense increased by $1.0 million or 3.4% due primarily to a $1.7 million or 148% increase in FDIC insurance premiums, offset by an $880,000 or 5.5% decrease in compensation and employee benefit expense. Net interest income decreased by $4.3 million or 10.3% due to the Corporation's interest rate risk strategy of shortening the duration of its investment portfolio primarily through the purchase of short-term agency callable and step-up securities in anticipation of rising interest rates. Parkvale continues to control operating expenses, as its non-interest expense to average assets ratio, excluding security writedowns, was 1.60% and 1.57% for fiscal years 2010 and 2009, respectively.
On an operating basis, excluding the non-cash security writedowns but including the $7.5 million loan loss provisions, income available to common shareholders before the payment of preferred stock dividends would have been $8.0 million or $1.47 per diluted share for the fiscal year ended June 30, 2010. Although this is a non-GAAP disclosure, management believes that excluding the security writedowns, net of related tax benefits, offers a better basis for core earnings potential. Core deposits continue to experience solid growth. At June 30, 2010, core deposit balances increased by $61.7 million or 9.8% compared to June 30, 2009, contributing to an improved interest rate spread of 2.21% at June 30, 2010 compared to 2.11% at June 30, 2009
General
Parkvale Financial Corporation is the parent of Parkvale Bank, which has 47 offices in the Greater Pittsburgh metropolitan area, eastern Ohio and northern West Virginia. At June 30, 2010, the Bank had assets of $1.8 billion, deposits of $1.5 billion and loans of $1 billion. The Bank's capital was $140.9 million at June 30, 2010, which exceeds the amounts required by the Federal Deposit Insurance Corporation and the Pennsylvania Department of Banking to be considered a well-capitalized institution. This release will be submitted under Form 8-K to be filed with the Securities and Exchange Commission along with supplemental financial information as of June 30, 2010. Parkvale Financial Corporation is traded on the NASDAQ Global Select Market.
Forward-Looking Statements
The statements in this report that are not historical fact are forward-looking statements. Forward-looking information should not be construed as guarantees of future performance. Actual results may differ from expectations contained in such forward-looking information as a result of factors including, but not limited to, the interest rate environment, economic policy or conditions, federal and state banking and tax regulations and competitive factors in the marketplace. Each of these factors could affect estimates, assumptions, uncertainties and risks considered in the development of forward-looking information and could cause actual results to differ materially from management's expectations regarding future performance.
(Condensed Consolidated Statements of Operations and selected financial data are attached.)
PARKVALE FINANCIAL CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Dollar amounts in thousands except per share data) (Unaudited) Three months ended Year ended June 30, June 30, 2010 2009 2010 2009 ---- ---- ---- ---- Total interest income $17,907 $21,500 $75,861 $90,483 Total interest expense 8,383 11,342 38,515 48,846 ----- ------ ------ ------ Net interest income 9,524 10,158 37,346 41,637 Provision for loan losses 2,597 1,772 7,448 6,754 Net impairment (losses) recognized in earnings (34,390) (4,454) (38,977) (30,363) Other non-interest income 2,640 4,577 12,443 12,662 Total non-interest expense 7,659 7,927 30,432 29,420 ----- ----- ------ ------ Income (loss) before income taxes (32,482) 582 (27,068) (12,238) Income tax expense (benefit) (11,319) (776) (10,603) (2,696) ------- ---- ------- ------ Net income (loss) (21,163) 1,358 (16,465) (9,542) Less: Preferred stock dividend 397 397 1,588 829 --- --- ----- --- Income (loss) to common shareholders ($21,560) $961 ($18,053) ($10,371) ======== ==== ======== ======== Net income (loss) per basic share ($3.94) $0.18 ($3.30) ($1.90) Net income (loss) per diluted share ($3.94) $0.18 ($3.30) ($1.90) Cash dividends declared per share $0.05 $0.05 $0.20 $0.71 SELECTED FINANCIAL DATA (Dollar amounts in thousands except per share data) June 30, 2010 2009 ---- ---- Total assets $1,842,380 $1,907,106 Deposits 1,488,073 1,511,248 Total Loans, net of allowance 1,032,363 1,108,936 Loan loss allowance 19,209 17,960 Nonperforming loans and foreclosed real estate 35,157 33,641 Ratio to total assets 1.91% 1.76% Allowance for loan losses as a % of gross loans 1.83% 1.60% Total shareholders' equity $118,944 $150,760 Total shareholders' equity, net of other 131,858 152,026 comprehensive loss on debt securities -------------------------- OTHER SELECTED DATA Three months ended Year ended June 30, June 30, 2010 2009 2010 2009 ---- ---- ---- ---- Average yield earned on all interest-earning assets 4.11% 4.77% 4.27% 5.13% Average rate paid on interest- bearing liabilities 1.93 2.59 2.21 2.84 Average interest rate spread 2.18 2.18 2.06 2.29 Net yield on average interest- earning assets 2.19 2.25 2.10 2.36 Return on average assets (4.47) 0.28 (0.86) (0.51) Return on average equity (57.35) 3.60 (10.88) (6.42) Other non-interest expenses to average assets 1.62 1.65 1.60 1.57 Parkvale Financial Corporation CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (Dollar amounts in thousands except share data) June 30, Assets 2010 2009 ------ ---- ---- Cash and noninterest-earning deposits $17,736 $15,381 Federal funds sold 135,773 150,510 ------- ------- Cash and cash equivalents 153,509 165,891 Interest-earning deposits in other banks 801 3,899 Investment securities available for sale (cost of $80,135 in 2010 and $22,041 in 2009) 80,127 23,505 Investment securities held to maturity (fair value of $437,931 in 2010 and $438,745 in 2009) 443,452 504,029 Loans, net of allowance of $19,209 in 2010 and $17,960 in 2009 1,032,363 1,108,936 Foreclosed real estate, net 8,637 5,706 Office properties and equipment, net 17,374 18,073 Goodwill 25,634 25,634 Intangible assets and deferred charges 2,877 3,786 Prepaid expenses and other assets 77,606 47,647 Total assets $1,842,380 $1,907,106 Liabilities and Shareholders' Equity Liabilities ----------- Deposits $1,488,073 $1,511,248 Advances from Federal Home Loan Bank 185,973 186,202 Other debt 13,865 21,261 Term Debt 23,750 25,000 Advance payments from borrowers for taxes and insurance 7,526 7,359 Other liabilities 4,249 5,276 Total liabilities 1,723,436 1,756,346 Shareholders' Equity Preferred stock ($1.00 par value; 5,000,000 shares authorized; 31,762 shares issued) 31,762 31,762 Common stock ($1.00 par value; 10,000,000 shares authorized; 6,734,894 shares issued) 6,735 6,735 Additional paid-in capital 2,734 4,116 Treasury stock at cost -1,205,683 shares in 2010 and 1,307,199 (25,193) (27,314) shares in 2009 Accumulated other comprehensive (loss) income * (13,413) (10) Retained earnings 116,319 135,471 Total shareholders' equity 118,944 150,760 Total liabilities and shareholders' equity $1,842,380 $1,907,106 * Accumulated other comprehensive loss includes non-credit related impairment of $12.9 million and $1.3 million at June 30, 2010 and 2009, respectively, on debt securities designated as held to maturity by the Bank. Non- credit related impairment represents the difference between the remaining amortized cost and fair value of the security measured at the time of impairment, and is commonly attributed to "other factors," such as market liquidity concerns. The non-credit related impairment is required to be accreted from other comprehensive loss to the amortized cost of the debt security over the remaining life of the debt security on the basis of the amount and timing of future estimated cash flows. The effect of the prospective accretion is to increase shareholders' equity and the carrying value of the debt security. Shareholders' equity, net of accumulated other comprehensive loss from debt securities, is $131,858,000 at June 30, 2010 and $152,026,000 at June 30, 2009. PARKVALE FINANCIAL CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (Dollar Amounts in Thousands, except per share data) (Unaudited) Three months ended Year ended June 30, June 30, 2010 2009 2010 2009 ---- ---- ---- ---- Interest income: Loans $13,410 $15,660 $56,178 $66,649 Investments 4,408 5,771 19,303 23,147 Federal funds sold 89 69 380 687 --- --- --- --- Total interest income $17,907 $21,500 $75,861 $90,483 ------- ------- ------- ------- Interest expense: Savings deposits 5,617 8,651 27,460 38,483 Borrowings 2,766 2691 11,055 10,363 ----- ---- ------ ------ Total interest expense $8,383 $11,342 $38,515 $48,846 Net interest income 9,524 10,158 37,346 41,637 Provision for loan losses 2,597 1,772 7,448 6,754 ----- ----- ----- ----- Net interest income after provision for losses 6,927 8,386 29,898 34,883 ----- ----- ------ ------ Noninterest Income: Other-than-temporary impairment losses (52,125) (5,720) (64,662) (31,629) Non-credit related losses recognized in other comprehensive income 17,735 1,266 25,685 1,266 ------ ----- ------ ----- Net impairment (losses) recognized in earnings (34,390) (4,454) (38,977) (30,363) ------- ------ ------- ------- Service charges on deposit accounts 1,694 1,563 6,448 6,458 Other service charges and fees 404 419 1,506 1,513 Net gain on sale of securities - 2,061 2,372 2,246 Other 542 534 2,117 2,445 --- --- ----- ----- Total noninterest income (31,750) 123 (26,534) (17,701) ------- --- ------- ------- Noninterest Expense: Compensation and employee benefits 3,797 3,839 15,033 15,913 Office occupancy 1,059 1,120 4,508 4,599 Marketing 102 98 340 461 FDIC insurance 882 967 2,864 1,155 Office supplies, telephone and postage 499 489 1,911 1,902 Other 1,320 1,414 5,776 5,390 ----- ----- ----- ----- Total noninterest expense 7,659 7,927 30,432 29,420 ----- ----- ------ ------ Income (loss) before income taxes (32,482) 582 (27,068) (12,238) Income tax benefit (11,319) (776) (10,603) (2,696) ------- ---- ------- ------ Net income (loss) (21,163) 1,358 (16,465) (9,542) Preferred stock dividend 397 397 1,588 829 --- --- ----- --- Income (loss) to common stockholders ($21,560) $961 ($18,053) ($10,371) ======== ==== ======== ======== Net income (loss) per common share: Basic ($3.94) $0.18 ($3.30) ($1.90) Diluted ($3.94) $0.18 ($3.30) ($1.90)
Parkvale Financial Corporation
CONTACT: Robert J. McCarthy, Jr., President and CEO, +1-412-373-4815, or
Gilbert A. Riazzi, Chief Financial Officer, +1-412-373-4804, both of Parkvale
Financial Corporation
