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| PVSA > SEC Filings for PVSA > Form 10-Q on 17-Feb-2004 | All Recent SEC Filings |
17-Feb-2004
Quarterly Report
Balance Sheet Data: DECEMBER 31,
2003 2002
---------- ----------
Total assets $1,597,195 $1,618,796
Loans, net 1,128,358 1,220,721
Interest-earning deposits and federal funds sold 78,576 70,134
Total investments 316,839 264,039
Savings deposits 1,283,328 1,326,364
FHLB advances 161,100 146,114
Shareholders' equity 102,134 96,928
Book value per share $18.32 $17.47
Statistical Profile:
THREE MONTHS ENDED SIX MONTHS ENDED
DECEMBER 31,(1) DECEMBER 31,(1)
2003 2002 2003 2002
------ ------ ------ ------
Average yield earned on all
interest-earning assets 4.68% 5.58% 4.69% 5.75%
Average rate paid on all
interest-bearing liabilities 2.76% 3.69% 2.88% 3.78%
Average interest rate spread 1.92% 1.89% 1.81% 1.97%
Net yield on average
interest-earning assets 2.00% 1.98% 1.88% 2.07%
Other expenses to average assets 1.40% 1.43% 1.38% 1.43%
Taxes to pre-tax income 30.51% 30.97% 30.21% 32.90%
Return on average assets 0.67% 0.62% 0.64% 0.66%
Return on average equity 10.64% 10.46% 10.18% 11.18%
Average equity to average total assets 6.34% 5.89% 6.25% 5.90%
Dividend per share $0.18 $0.18 $0.36 $0.36
AT DECEMBER 31,
2003 2002
------ -------
One year gap to total assets 5.83% -5.90% Intangibles to total equity 11.12% 12.17% Capital to assets ratio 6.39% 5.99% Ratio of nonperforming assets to total assets 0.48% 0.42% Number of full-service offices 39 38(1) The applicable income and expense figures have been annualized in calculating the percentages.
NONPERFORMING LOANS AND FORECLOSED REAL ESTATE:
Nonperforming and impaired loans and foreclosed real estate (REO) consisted of the following at December 31, 2003 versus year-end June 30, 2003.
DECEMBER 31, 2003 June 30, 2003
----------------- -------------
(Dollars in 000's)
Delinquent single-family mortgage loans $3,105 $3,786
Delinquent other loans 1,972 2,379
------ ------
Total of nonperforming loans $5,077 $6,165
Total of impaired loans 142 1,119
Real estate owned, net 2,438 2,695
------ ------
Total $7,657 $9,979
====== ======
Nonperforming and impaired loans and real estate owned represent 0.48% and 0.61%
of total assets at the respective balance sheet dates. Delinquent single-family
mortgage loans at December 31, 2003 consisted of 32 single family owner occupied
homes. As of December 31, 2003, $2.0 million or 65.4% of the nonaccrual mortgage
loans totaling $3.1 million were purchased from others. The $2.0 million of the
delinquent loans purchased by others are comprised of 9 loans which management
believes are well collateralized.
Loans are placed on nonaccrual status when, in management's judgment, the probability of collection of principal and 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, uncollected interest income is not included in earnings for nonaccrual loans. The amount of interest income on nonaccrual loans that had not been recognized in interest income was $211,000 at December 31, 2003 and $248,000 at June 30, 2003. 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 $142,000 loan classified as impaired at December 31, 2003 and $1.1 million at June 30, 2003. The average recorded investment in impaired loans is $701,000 for the December 2003 quarter. The amount of interest income that has not been recognized was $16,000 at December 31, 2003. Impaired assets include $2.4 million of foreclosed real estate as of December 31, 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. The majority of the net book value of foreclosed real estate at December 31, 2003 related to a vacant office building, which is under going renovation and rehabilitation.
ALLOWANCE FOR LOAN LOSSES:
The allowance for loan losses was $14.6 million at December 31, 2003, $15.0
million at June 30, 2003 and $15.2 million at December 31, 2002 or 1.28%, 1.20%
and 1.23% of gross loans at December 31, 2003, June 30, 2003 and December 31,
2002. The adequacy of the allowance for loan loss is determined by management
through evaluation of the loss probable 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 losses 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. Changes to the levels of reserves are made quarterly based upon perceived changes in risk. Management believes the allowance for loan losses is adequate to absorb loan losses incurred.
LIQUIDITY AND CAPITAL RESOURCES:
Federal funds sold remained at $72.0 million at June 30, 2003 and at December 31, 2003. Investment securities held to maturity increased $86.3 million or 41.0% and loans decreased $113.4 million or 9.1% from June 30, 2003 to December 31, 2003. Deposits decreased $48.4 million or 3.6% from June 30, 2003 to December 31, 2003. Escrow for taxes and insurance decreased by $2.1 million or 29.4% as a result of the remittance of property taxes to the various taxing districts during the quarter. Parkvale Bank's FHLB advance available maximum borrowing capacity is $747.0 million. If Parkvale were to experience a deposit decrease in excess of the available cash resources and cash equivalents, available FHLB borrowing capacity could be utilized to fund a rapid decrease in deposits.
Shareholders' equity was $102.1 million or 6.4% of total assets at December 31, 2003. A stock repurchase program approved in June 2003 permits the purchase of 5% of outstanding stock or 276,500 shares during fiscal 2004 at prevailing prices in open-market transactions. Through December 31, 2003, 20,000 shares were purchased at an average price of $23.61 per share, representing 7.23% of the authorized program. The Bank is required to maintain Tier I (Core) capital equal to at least 4% of the institution's adjusted total assets, and Tier II (Supplementary) risk-based capital equal to at least 8% of the risk-weighted assets. At December 31, 2003, Parkvale was in compliance with all applicable regulatory requirements, with Tier I and Tier II ratios of 7.27% and 13.28%, respectively.
The regulatory capital ratios for Parkvale Bank at December 31, 2003 are calculated as follows:
Tier I Tier I Tier II
Core Risk-Based Risk-Based
Capital Capital Capital
----------- ---------- ----------
Equity Capital (1) $ 127,349 $ 127,349 $ 127,349
Less non-allowable intangible assets (11,353) (11,353) (11,353)
Less unrealized securities gains (28) (28) (28)
Plus permitted valuation allowances (2) -- -- 12,074
Plus allowable unrealized holding gains (3) -- -- 20
----------- --------- ---------
Total regulatory capital 115,968 115,968 128,062
Minimum required capital 63,843 38,560 77,120
----------- --------- ---------
Excess regulatory capital $ 52,125 $ 77,408 $ 50,942
Adjusted total assets $ 1,596,068 $ 963,997 $ 963,997
Regulatory capital as a percentage 7.27% 12.03% 13.28%
Minimum capital required as a percentage 4.00% 4.00% 8.00%
----------- --------- ---------
Excess regulatory capital as a percentage 3.27% 8.03% 5.28%
=========== ========= =========
Well capitalized requirement 5.00% 6.00% 10.00%
=========== ========= =========
-
(1) Represents equity capital of the consolidated Bank as reported to the
Pennsylvania Department of Banking and FDIC on Form 041 for the quarter
ended December 31, 2003.
(2) Limited to 1.25% of risk adjusted total assets.
(3) Limited to 45% of pretax net unrealized holding gains.
Management is not aware of any trends, events, uncertainties or current recommendations by any regulatory authority that will have (if implemented), or that are reasonably likely to have, material effects on Parkvale's liquidity, capital resources or operations.
RESULTS OF OPERATIONS - COMPARISON OF THREE MONTHS ENDED DECEMBER 31, 2003 AND
For the three months ended December 31, 2003, Parkvale reported net income of $2.7 million or $0.48 per diluted share, compared to net income of $2.5 million or $0.45 per diluted share for the quarter ended December 31, 2002. The $198,000 increase in net income for the December 2003 quarter is attributable to a reduction in noninterest expense of $202,000 and the recovery of previously charged off loans of $235,000. Return on average equity was 10.64% for the December 2003 quarter compared to 10.46% for the December 2002 quarter.
INTEREST INCOME:
Parkvale had interest income of $18.0 million during the three months ended December 31, 2003 versus $21.9 million during the comparable period in 2002. The $3.9 million decrease is the result of a 90 basis point decrease in the average yield from 5.58% in 2002 to 4.68% in 2003 coupled with a $36.0 million or 2.3% decrease in the average balance of interest-earning assets. Interest income from loans decreased $3.7 million or 20.2% resulting from a 114 basis point decrease in the average yield from 6.23% in 2002 to 5.09% in 2003 coupled with a decrease in the average outstanding loan balances of $26.8 million or 2.3%. The decrease in the average yield reflects the adverse impact of loan repayments of $797 million in fiscal 2003 plus the additional $358 million in payments during the six months ended December 2003. New loans granted and purchased during the past 15 months have been at substantially lower rates reflective of lower market rates. Investment interest income increased by $90,000 or 3.1% due to an increase of $45.4 million or 18.5% in the average balance and offset by a 62 basis point decrease in the average yield from 4.76% in 2002 to 4.14% in 2003. Interest income earned on federal funds sold decreased $299,000 or 58.3% from the 2002 quarter due to a 46 basis point decrease in the average yield from 1.47% in 2002 to 1.01% in 2003. This decrease was coupled by a decrease in the average balance of $54.6 million or 39.1%. The weighted average yield on all interest earning assets was 4.64% at December 31, 2003 and 5.74% at December 31, 2002.
INTEREST EXPENSE:
Interest expense decreased $3.8 million or 27.2% from the 2003 to the 2002 quarter. The decrease was due to a 93 basis point decrease in the average rate paid on deposits and borrowings from 3.69% in 2002 to 2.76% in 2003 and by a decrease in the average deposits and borrowings of $38.3 million. During the quarter, previously offered certificate of deposit promotions matured totaling $35 million at an average rate of 6.34%. The average rates paid on deposits and borrowings during the December 2003 quarter
reflects a 40 basis point decrease from the 3.20% average rate paid during the June 2003 quarter. At December 31, 2003, the average rate payable on liabilities was 2.34% for deposits, 4.92% for borrowings, 4.77% for trust preferred securities and 2.69% for combined deposits and borrowings.
PROVISION FOR LOAN LOSSES:
The provision for loan losses is an amount added to the allowance against which loan losses are charged. Parkvale's provision for loan losses decreased by $176,000 from the 2002 to the 2003 quarter. The credit provision for loan loss includes the recovery of a previously charged off loan of $235,000. A commercial real estate loan partially charged off in fiscal 2003 was paid in full during December 2003. Aggregate valuation allowances were 1.28% and 1.20% of gross loans at December 31, 2003 and June 30, 2003, respectively.
Nonperforming loans and real estate owned were $7.7 million, $10.0 million and $6.9 million at December 31, 2003, June 30, 2003 and December 31, 2002, representing 0.48%, 0.61% and 0.42% of total assets at the respective balance sheet dates. Total loan loss reserves at December 31, 2003 were $14.6 million. Management considers loan loss reserves sufficient when compared to the value of underlying collateral. Collateral is considered and evaluated when establishing provision for loan losses and the sufficiency of the allowance for loan losses. Management believes the allowance for loan losses is adequate to cover the amount of probable loan losses incurred.
OTHER INCOME:
Total other income decreased by $25,000 or 1.4% in 2003 due mainly due to lower fee income derived from deposit accounts related to reduced interchange income on debit card transactions, partially offset by income earned on Bank Owned Life Insurance.
OTHER EXPENSE:
Total other expense decreased by $202,000 or 3.5% for the three months ended December 31, 2003. This decrease is due principally to decreases in compensation and marketing of $68,000 and $59,000, or 2.2% and 36.7%, respectively. Compensation has decreased over the prior year due mainly to a decrease in full-time equivalents due to consolidation of processing functions and reduced profitability. Marketing has decreased as compared to the prior quarter due to a decrease in approved marketing expenditures. Annualized noninterest expense as a percentage of average assets were 1.40% for the quarter ended December 31, 2003 as compared to 1.43% for the quarter ended December 31, 2002.
RESULTS OF OPERATIONS - COMPARISON OF SIX MONTHS ENDED DECEMBER 31, 2003 AND
For the six month period ended December 31, 2003, net income was $5.1 million or $0.91 per diluted share compared to net income of $5.4 million or $0.95 per diluted share for the six month period ended December 31, 2002. The $234,000 decrease in net income for the December 2003 six months reflects a $1.7 million decrease in net interest income partially offset by a $406,000 gain on sale of investment securities and a $449,000 decrease in non-interest expense. Net interest income for the six months ended December 31, 2003 decreased to $14.5 million from $16.2 million for the six months ended December 31, 2002. Return on average equity was 10.18% for the six months ended December 2003.
INTEREST INCOME:
Parkvale had interest income of $36.2 million during the six months ended December 31, 2003 versus
$45.1 million during the comparable period in 2002. The decrease of $8.9 million is attributable to a decrease in the average interest-earning asset portfolio of $24.0 million or 1.5%, coupled by a 107 basis point decrease in the average yield from 5.76% in 2002 to 4.69% in 2003. Interest income from loans decreased $8.0 million or 21.1% due to an 129 basis point decrease in the average yield from 6.36% in 2002 to 5.07% in 2003 and by a decrease in the average loan balance of $11.4 million or 1.0%. Income from investments decreased by $304,000 or 5.2% from 2002 due to a 63 basis point decrease in the average yield from 4.90% in 2002 to 4.27% in 2003, offset by an increase in the average investment balance of $21.1 million or 8.8%. Interest income earned on federal funds sold decreased $544,000 or 53.3% from the prior six months ended December 2002. This was due to a 59 basis point decrease in the average yield from 1.61% in 2002 to 1.02% in 2003 and by a decrease of the average federal fund balance of $33.7 million or 26.6%.
INTEREST EXPENSE:
Interest expense decreased by $7.2 million or 24.9% from the 2002 six month period to the 2003 six month period. The decrease was due to an 90 basis point decrease in the average rate paid from 3.78% in 2002 to 2.88% in 2003, coupled with a decrease in the average deposits and borrowings of $21.9 million.
PROVISION FOR LOAN LOSSES:
Provision for loan losses decreased by $177,000 or 145.1% from the six month period ended December 31, 2002 to December 31, 2003. The provision for loan loss includes the recovery of a previous charge off of $235,000. Aggregate valuation allowances were 1.28% of gross loans at December 31, 2003, 1.20% of gross loans at June 30, 2003 and 1.23% of gross loans at December 31, 2002. Total loan loss reserves at December 31, 2003 were $14.6 million.
OTHER INCOME:
Other income increased by $446,000 or 12.9% for the six months ended December 31, 2003 from the six months ended December 31, 2002 due primarily to a gain on sale of assets of $406,000. Other income, absent this prior period gain, increased $40,000 or 1.2% due to a $166,000 decrease on service fees on all types of deposit and loan products and offset by a $206,000 increase from investment service fee income on nondeposit investment products offered directly to customers through an operating division, Parkvale Financial Services.
OTHER EXPENSE:
Other expenses decreased by $449,000 for the six month period ended December 31, 2003 from the comparable period in 2002. This decrease is due principally to decreases in compensation and marketing of $290,000 and $123,000, or 4.5% and 39.4%, respectively. Compensation has decreased over the prior year due mainly to a decrease in full-time equivalents due to consolidation of processing functions and reduced profitability. Marketing has decreased as compared to the prior period due to a decrease in approved marketing expenditures. Annualized noninterest expenses as a percentage of average assets were 1.38% for the six months ended December 31, 2003 as compared to 1.43% for the six months ended December 31, 2002.
IMPACT OF INFLATION AND CHANGING PRICES:
The financial statements and related data presented herein have been prepared in accordance with
generally accepted accounting principles in the United States, which require the measurement of financial position and operating results in terms of historical dollars without considering changes in the relative purchasing power of money over time due to inflation. Unlike most industrial companies, substantially all of the assets and liabilities of a financial institution are monetary in nature. As a result, interest rates have a more significant impact on a financial institution's performance than the effects of general levels of inflation. Interest rates do not necessarily move in the same direction or in the same magnitude as the prices of goods and services as measured by the consumer price index.
FORWARD LOOKING STATEMENTS:
The statements in this Form 10-Q which are not historical fact are forward looking statements. Forward looking information should not be construed as guarantees of future performance. Actual results may differ from expectations contained in such forward looking information as a result of factors including but not limited to the interest rate environment, economic policy or conditions, federal and state banking and tax regulations and competitive factors in the marketplace. Each of these factors could affect estimates, assumptions, uncertainties and risks considered in the development of forward looking information and could cause actual results to differ materially from management's expectations regarding future performance.
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