##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2010
 COMMISSION FILE NO: 0-17411
 PARKVALE FINANCIAL CORPORATION
  Pennsylvania
    
    25-1556590(State of incorporation)
    
    (I.R.S. EmployerIdentification Number)
 4220 William Penn Highway, Monroeville, Pennsylvania 15146
  þ o
 o o
  Large accelerated filer o
Accelerated filer o
Non-accelerated filer o(Do not check if smaller reporting company)
Smaller reporting company þ o þ




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##### 



PARKVALE FINANCIAL CORPORATION
  PagePart I. Financial InformationItem 1.Consolidated Statements of Financial Condition as of September 30, 2010
(Unaudited) and June 30, 2010
    
    
    3Consolidated Statements of Operations for the three months ended
September 30, 2010 and 2009 (Unaudited)
    
    
    4Consolidated Statements of Cash Flows for the three months ended
September 30, 2010 and 2009 (Unaudited)
    
    
    5-6Consolidated Statements of Shareholders Equity for the three months ended
September 30, 2010 and 2009 (Unaudited)
    
    
    6-7Notes to Unaudited Interim Consolidated Financial Statements
    
    
    7-23Item 2.Managements Discussion and Analysis of Financial Condition and
Results of Operations
    
    
    23-33Item 3.Quantitative and Qualitative Disclosures about Market Risk
    
    
    33Item 4.Controls and Procedures
    
    
    33Part II  Other Information
    
    
    33Signatures
    
    
    35ExhibitsEX-10.18EX-31.1EX-31.2EX-32.1
  2




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##### Table of Contents



PARKVALE FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
 September 30,
    
    
    June 30,2010
    
    
    2010(Unaudited)ASSETSCash and noninterest-earning deposits
    
    $
    16,043
    
    
    $
    17,736Federal funds sold
    
    
    169,333
    
    
    
    135,773Cash and cash equivalents
    
    
    185,376
    
    
    
    153,509Interest-earning deposits in other banks
    
    
    5,876
    
    
    
    801Investment securities available for sale at fair value (cost of
$5,974 at September 30 and $65,778 at June 30)
    
    
    5,944
    
    
    
    65,770Investment securities held to maturity (fair value
of $460,809 at September 30 and $437,931 at June 30)
    
    
    463,377
    
    
    
    443,452Federal Home Loan Bank Stock, at cost
    
    
    14,357
    
    
    
    14,357Loans, net of allowance of $19,624 at September 30
and $19,209 at June 30
    
    
    1,014,608
    
    
    
    1,032,363Foreclosed real estate, net
    
    
    9,327
    
    
    
    8,637Office properties and equipment, net
    
    
    17,225
    
    
    
    17,374Goodwill
    
    
    25,634
    
    
    
    25,634Intangible assets
    
    
    2,650
    
    
    
    2,877Prepaid expenses and other assets
    
    
    76,329
    
    
    
    77,606Total assets
    
    $
    1,820,703
    
    
    $
    1,842,380LIABILITIES AND SHAREHOLDERS EQUITYLIABILITIESDeposits
    
    $
    1,480,482
    
    
    $
    1,488,073Advances from Federal Home Loan Bank
    
    
    175,916
    
    
    
    185,973Term debt
    
    
    23,125
    
    
    
    23,750Other debt
    
    
    11,848
    
    
    
    13,865Advance payments from borrowers for taxes and insurance
    
    
    4,312
    
    
    
    7,526Other liabilities
    
    
    5,552
    
    
    
    4,249Total liabilities
    
    
    1,701,235
    
    
    
    1,723,436SHAREHOLDERS EQUITYPreferred stock ($1.00 par value, liquidation preference $1,000;
5,000,000 shares authorized; 31,762 shares issued)
    
    
    31,762
    
    
    
    31,762Common stock ($1.00 par value; 10,000,000 shares
authorized; 6,734,894 shares issued)
    
    
    6,735
    
    
    
    6,735Additional paid-in capital
    
    
    2,734
    
    
    
    2,734Treasury stock at cost (1,205,683 shares at September 30
and June 30)
    
    
    (25,193
    )
    
    
    (25,193
    )Accumulated other comprehensive loss
    
    
    (14,605
    )
    
    
    (13,413
    )Retained earnings
    
    
    118,035
    
    
    
    116,319Total shareholders equity
    
    
    119,468
    
    
    
    118,944Total liabilities and shareholders equity
    
    $
    1,820,703
    
    
    $
    1,842,380
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##### Table of Contents



PARKVALE FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
 Three months endedSeptember 30,2010
    
    
    2009Interest Income:Loans
    
    $
    13,047
    
    
    $
    14,792Investments
    
    
    3,670
    
    
    
    5,132Federal funds sold
    
    
    122
    
    
    
    98Total interest income
    
    
    16,839
    
    
    
    20,022Interest Expense:Deposits
    
    
    5,228
    
    
    
    7,993Borrowings
    
    
    2,752
    
    
    
    2,711Total interest expense
    
    
    7,980
    
    
    
    10,704Net interest income
    
    
    8,859
    
    
    
    9,318Provision for loan losses
    
    
    1,034
    
    
    
    2,289Net interest income after
provision for loan losses
    
    
    7,825
    
    
    
    7,029Noninterest Income:Other-than-temporary impairment losses
recognized in earnings
    
    
    (3,035
    )
    
    
    (2,761
    )Non-credit related losses recognized in
other comprehensive income
    
    
    2,039
    
    
    
    Net impairment losses recognized in earnings
    
    
    (996
    )
    
    
    (2,761
    )Service charges on deposit accounts
    
    
    1,759
    
    
    
    1,652Other service charges and fees
    
    
    381
    
    
    
    367Net gain on sale of assets
    
    
    1,172
    
    
    
    1,102Other
    
    
    770
    
    
    
    543Total noninterest income
    
    
    3,086
    
    
    
    903Noninterest Expense:Compensation and employee benefits
    
    
    3,928
    
    
    
    3,807Office occupancy
    
    
    1,067
    
    
    
    1,111Marketing
    
    
    84
    
    
    
    67FDIC insurance
    
    
    894
    
    
    
    568Office supplies, telephone and postage
    
    
    472
    
    
    
    470Other
    
    
    1,605
    
    
    
    1,569Total noninterest expense
    
    
    8,050
    
    
    
    7,592Income before income taxes
    
    
    2,861
    
    
    
    340Income tax expense (benefit)
    
    
    638
    
    
    
    (515
    )Net income
    
    
    2,223
    
    
    
    855Less: Preferred stock dividend
    
    
    397
    
    
    
    397Income to common shareholders
    
    $
    1,826
    
    
    $
    458Net income per common basic share
    
    $
    0.33
    
    
    $
    0.08Net income per common diluted share
    
    $
    0.33
    
    
    $
    0.08
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PARKVALE FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
 Three months endedSeptember 30,2010
    
    
    2009Cash flows from operating activities:Interest received
    
    $
    17,438
    
    
    $
    20,196Loan fees received
    
    
    159
    
    
    
    149Other fees and commissions received
    
    
    2,635
    
    
    
    2,284Interest paid
    
    
    (7,864
    )
    
    
    (10,749
    )Cash paid to suppliers and others
    
    
    (3,992
    )
    
    
    (8,403
    )Income taxes paid
    
    
    (328
    )
    
    
    Net cash provided by operating activities
    
    
    8,048
    
    
    
    3,477Cash flows from investing activities:Proceeds from sale of investment securities available for sale
    
    
    50,705
    
    
    
    1,405Proceeds from maturities of investment securities
    
    
    97,493
    
    
    
    69,454Purchase of investment securities available for sale
    
    
    
    
    
    
    (273
    )Purchase of investment securities held to maturity
    
    
    (111,143
    )
    
    
    (91,301
    )(Purchase) maturity of deposits in other banks
    
    
    (5,075
    )
    
    
    3,357Loan sales
    
    
    
    
    
    
    7,293Principal collected on loans
    
    
    64,344
    
    
    
    72,177Loans made to customers, net of loans in process
    
    
    (48,312
    )
    
    
    (44,897
    )Other
    
    
    (66
    )
    
    
    (49
    )Net cash provided by investing activities
    
    
    47,946
    
    
    
    17,166Cash flows from financing activities:Net increase in checking and savings accounts
    
    
    15,094
    
    
    
    23,146Net (decrease) in certificates of deposit
    
    
    (22,685
    )
    
    
    (15,734
    )Repayment of FHLB advances
    
    
    (10,007
    )
    
    
    (7
    )Net (decrease) in other borrowings
    
    
    (2,017
    )
    
    
    (6,960
    )Repayment of term debt
    
    
    (625
    )
    
    
    Net (decrease) in borrowers advances for taxes and insurance
    
    
    (3,214
    )
    
    
    (3,250
    )Dividends paid
    
    
    (673
    )
    
    
    (668
    )Net cash (used in) financing activities
    
    
    (24,127
    )
    
    
    (3,473
    )Net increase in cash and cash equivalents
    
    
    31,867
    
    
    
    17,170Cash and cash equivalents at beginning of period
    
    
    153,509
    
    
    
    165,891Cash and cash equivalents at end of period
    
    $
    185,376
    
    
    $
    183,061
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Reconciliation of net income to net cash provided
    
    Three months endedby operating activities:
    
    September 30,2010
    
    
    2009Net income
    
    $
    2,223
    
    
    $
    855Adjustments to reconcile net income to net cash provided by operating activities:Depreciation and amortization
    
    
    442
    
    
    
    486Accretion and amortization of loan fees and discounts
    
    
    (34
    )
    
    
    27Loan fees collected and deferred
    
    
    (1
    )
    
    
    31Provision for loan losses
    
    
    1,034
    
    
    
    2,289Net writedown (gain) on sale of securities
    
    
    (176
    )
    
    
    1,659Decrease in accrued interest receivable
    
    
    612
    
    
    
    705Decrease (increase) in other assets
    
    
    665
    
    
    
    (1,282
    )Increase in accrued interest payable
    
    
    173
    
    
    
    11Increase (decrease) in other liabilities
    
    
    3,110
    
    
    
    (1,304
    )Total adjustments
    
    
    5,825
    
    
    
    2,622Net cash provided by operating activities
    
    $
    8,048
    
    
    $
    3,477
  
 PARKVALE FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY
 AccumulatedAdditional
    
    
    
    
    
    Other
    
    
    
    
    
    TotalPreferred
    
    Common
    
    Paid-in
    
    Treasury
    
    Comprehensive
    
    Retained
    
    ShareholdersStock
    
    Stock
    
    Capital
    
    Stock
    
    Income (Loss)
    
    Earnings
    
    EquityBalance, June 30, 2010
    
    $
    31,762
    
    
    $
    6,735
    
    
    $
    2,734
    
    
    
    ($25,193
    )
    
    
    ($13,413
    )
    
    $
    116,319
    
    
    $
    118,944Net income, three months ended
September 30, 2010
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,223
    
    
    
    2,223Accumulated other comprehensive
Income (loss):Change in swap liability
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (238
    )Change in unrealized gain (loss)
on securities, net of deferred
tax benefit of ($374)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,068
    )Reclassification adjustment, net
of taxes of $40
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    114
    
    
    
    
    
    
    
    (1,192
    )Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,031Dividends declared on common
stock at $0.02 per share
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (110
    )
    
    
    (110
    )Dividends on preferred stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (397
    )
    
    
    (397
    )Balance, September 30, 2010
    
    $
    31,762
    
    
    $
    6,735
    
    
    $
    2,734
    
    
    
    ($25,193
    )
    
    
    ($14,605
    )
    
    $
    118,035
    
    
    $
    119,468
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NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
 AccumulatedAdditional
    
    
    
    
    
    Other
    
    
    
    
    
    TotalPreferred
    
    Common
    
    Paid-in
    
    Treasury
    
    Comprehensive
    
    Retained
    
    ShareholdersStock
    
    Stock
    
    Capital
    
    Stock
    
    Income (Loss)
    
    Earnings
    
    EquityBalance, June 30, 2009
    
    $
    31,762
    
    
    $
    6,735
    
    
    $
    4,116
    
    
    
    ($27,314
    )
    
    
    ($10
    )
    
    $
    135,471
    
    
    $
    150,760Net income, three months ended
September 30, 2009
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    855
    
    
    
    855Accumulated other comprehensive
Income (loss):Change in swap liability
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (281
    )Change in unrealized gain (loss)
on securities, net of deferred
tax benefit of $1,263
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,197Reclassification adjustment, net
of taxes of $(1,008)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,753
    )
    
    
    
    
    
    
    163Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,018Dividends declared on common
stock at $0.05 per share
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (271
    )
    
    
    (271
    )Dividends on preferred stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (397
    )
    
    
    (397
    )Balance, September 30, 2009
    
    $
    31,762
    
    
    $
    6,735
    
    
    $
    4,116
    
    
    
    ($27,314
    )
    
    
    153
    
    
    $
    135,658
    
    
    $
    151,110
 STATEMENTS OF OPERATIONS
  RECLASSIFICATION
  SUBSEQUENT EVENTS
  7




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NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
 LOANS
    
    September 30, 2010
    
    June 30, 2010Loans are summarized as follows:Mortgage loans:Residential:1-4 Family
    
    $
    645,836
    
    
    $
    660,685Multifamily
    
    
    31,702
    
    
    
    32,104Commercial
    
    
    117,344
    
    
    
    117,054Other
    
    
    10,320
    
    
    
    10,833805,202
    
    
    
    820,676Consumer loans
    
    
    183,985
    
    
    
    184,207Commercial business loans
    
    
    38,657
    
    
    
    40,445Loans on savings accounts
    
    
    5,492
    
    
    
    5,4271,033,336
    
    
    
    1,050,755Less: Loans in process
    
    
    44
    
    
    
    135Allowance for loan losses
    
    
    19,624
    
    
    
    19,209Unamortized premiums and deferred loan fees
    
    
    (940
    )
    
    
    (952
    )Loans, net
    
    $
    1,014,608
    
    
    $
    1,032,363
  2010
    
    
    2009Beginning balance
    
    $
    19,209
    
    
    $
    17,960Provision for losses  mortgage loans
    
    
    1,002
    
    
    
    2,246Provision for losses  consumer loans
    
    
    32
    
    
    
    43Loans recovered
    
    
    28
    
    
    
    9Loans charged off
    
    
    (647
    )
    
    
    (774
    )Ending balance
    
    $
    19,624
    
    
    $
    19,484
  8




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NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
 COMPREHENSIVE INCOME
  FAIR VALUE OF FINANCIAL INSTRUMENTS
  Level I 
    
    Quoted prices are available in the active markets for
identical assets or liabilities as of the measurement date.Level II 
    
    Pricing inputs are other than quoted prices in active markets,
which are either directly or indirectly observable as of the
measurement date. The nature of these assets and liabilities
includes items for which quoted prices are available but
traded less frequently, and items that are fair valued using
other financial instruments, the parameters of which can be
directly observed.Level III 
    
    Valuations derived from valuation techniques in which one or
more significant inputs or significant value drivers are
unobservable. Level III valuations incorporate certain
assumptions and projections in determining the fair value
assigned to such assets or liabilities.
   September 30, 2010
    
    June 30, 2010Level I
    
    Level II
    
    Level III
    
    Total
    
    Level I
    
    Level II
    
    Level III
    
    TotalAFS  Non-Agency CMOs
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    59,804
    
    
    $
    
    
    
    $
    59,804AFS  Common Equities
    
    
    661
    
    
    
    
    
    
    
    
    
    
    
    661
    
    
    
    682
    
    
    
    
    
    
    
    
    
    
    
    682AFS  Mutual Fund
    
    
    
    
    
    
    5,283
    
    
    
    
    
    
    
    5,283
    
    
    
    
    
    
    
    5,284
    
    
    
    
    
    
    
    5,284Interest rate swaps
    
    
    
    
    
    
    732
    
    
    
    
    
    
    
    732
    
    
    
    
    
    
    
    494
    
    
    
    
    
    
    
    494Total
    
    $
    661
    
    
    $
    6,015
    
    
    $
    
    
    
    $
    6,676
    
    
    $
    682
    
    
    $
    65,582
    
    
    $
    
    
    
    $
    66,264
 9




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NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
  Level I
    
    Level II
    
    Level III
    
    TotalAssets Measured on a Nonrecurring Basis:OTTI  Held to maturity trust preferred securities
    
    
    
    
    
    
    
    
    
    $
    8,657
    
    
    $
    8,657Impaired loans
    
    
    
    
    
    
    
    
    
    
    11,315
    
    
    
    11,315Impaired foreclosed real estate
    
    
    
    
    
    
    2,169
    
    
    
    
    
    
    
    2,169
   Cash and Noninterest-Bearing Deposits, which includes noninterest-bearing demand deposits
Federal Funds Sold
Interest-Earning Deposits in Other Banks
Accrued interest
Cash Surrender Value (CSV) of Bank Owned Life Insurance (BOLI)
Checking, savings and money market accounts
  Investment Securities:
 Loans Receivable:
 10




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NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
 Deposit Liabilities:
 Advances from Federal Home Loan Bank:
 Term Debt and Other Debt:
 Off-Balance-Sheet Instruments:
  September 30, 2010
    
    June 30, 2010Carrying
    
    
    
    
    
    CarryingFair Value
    
    Value
    
    Fair Value
    
    ValueFinancial Assets:Cash and non-interest-earning deposits
    
    $
    16,043
    
    
    $
    16,043
    
    
    $
    17,736
    
    
    $
    17,736Federal funds sold
    
    
    169,333
    
    
    
    169,333
    
    
    
    135,773
    
    
    
    135,773Interest-earning deposits in other banks
    
    
    5,876
    
    
    
    5,876
    
    
    
    801
    
    
    
    801Investment securities available for sale
    
    
    5,944
    
    
    
    5,944
    
    
    
    65,770
    
    
    
    65,770Investment securities held to maturity
    
    
    460,809
    
    
    
    463,377
    
    
    
    437,931
    
    
    
    443,452FHLB stock
    
    
    14,357
    
    
    
    14,357
    
    
    
    14,357
    
    
    
    14,357Loans receivable
    
    
    1,072,623
    
    
    
    1,033,336
    
    
    
    1,087,009
    
    
    
    1,050,755Accrued interest receivable
    
    
    5,585
    
    
    
    5,585
    
    
    
    7,409
    
    
    
    7,409Cash surrender value of BOLI
    
    
    25,564
    
    
    
    25,564
    
    
    
    25,288
    
    
    
    25,288Financial Liabilities:Checking, savings and money market accounts
    
    $
    704,965
    
    
    $
    704,965
    
    
    $
    689,881
    
    
    $
    689,881Certificates of deposit
    
    
    792,112
    
    
    
    768,556
    
    
    
    812,339
    
    
    
    791,709Advances from Federal Home Loan Bank
    
    
    197,768
    
    
    
    175,916
    
    
    
    204,699
    
    
    
    185,973Term debt
    
    
    23,857
    
    
    
    23,125
    
    
    
    24,244
    
    
    
    23,750Commercial investment agreements
    
    
    11,241
    
    
    
    11,833
    
    
    
    13,156
    
    
    
    13,865Accrued interest payable
    
    
    1,076
    
    
    
    1,076
    
    
    
    902
    
    
    
    902Off-balance sheet loan instruments
    
    $
    71
    
    
    $
    
    
    
    $
    118
    
    
    $
    
 11




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##### Table of Contents



NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
 INVESTMENT SECURITIES
  Securities  Held to Maturity, Available for Sale and Other than Temporary Impairment
     12




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##### Table of Contents



NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
 Federal Home Loan Bank Stock
     
    
    the members ability to access liquidity from the FHLB;
    
    the members funding cost advantage with the FHLB compared to alternative sources of funds;
    
    a decline in the market value of FHLBs net assets relative to book value which
may or may not affect future financial performance or cash flow;
    
    the FHLBs ability to obtain credit and source liquidity, for which one
indicator is the credit rating of the FHLB;
    
    the FHLBs commitment to make payments taking into account its ability to meet
statutory and regulatory payment obligations and the level of such payments in
relation to the FHLBs operating performance; and
    
    the prospects of amendments to laws that affect the rights and obligations of the FHLB.
  13




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##### Table of Contents



NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
  September 30, 2010
    
    
    June 30, 2010Amortized
    
    
    
    
    
    
    AmortizedAvailable for Sale Investments
    
    Cost
    
    
    Fair Value
    
    
    Cost
    
    
    Fair ValueCMOs  Non Agency (Residential)
    
    
    
    
    
    
    
    
    
    $
    59,804
    
    
    $
    59,804Mutual Funds  ARM mortgages
    
    
    5,500
    
    
    
    5,283
    
    
    
    5,500
    
    
    
    5,284Common equities
    
    
    474
    
    
    
    661
    
    
    
    474
    
    
    
    682Total available for sale investments
    
    $
    5,974
    
    
    $
    5,944
    
    
    $
    65,778
    
    
    $
    65,770
 September 30, 2010
    
    
    June 30, 2010Amortized
    
    
    
    
    
    
    AmortizedHeld to Maturity Investments
    
    Cost
    
    
    Fair Value
    
    
    Cost
    
    
    Fair ValueU.S. Government and agency obligations
    
    $
    176,192
    
    
    $
    177,635
    
    
    $
    194,248
    
    
    $
    195,920Municipal obligations
    
    
    23,732
    
    
    
    24,507
    
    
    
    21,641
    
    
    
    22,345Corporate debt:Short to medium term corporate debt
    
    
    26,062
    
    
    
    27,239
    
    
    
    27,112
    
    
    
    28,352Pooled trust preferred securities
    
    
    21,200
    
    
    
    16,440
    
    
    
    24,229
    
    
    
    16,849Individual trust preferred securities
    
    
    9,328
    
    
    
    8,254
    
    
    
    9,322
    
    
    
    7,977Mortgage-backed securities:Agency
    
    
    130,433
    
    
    
    132,542
    
    
    
    93,248
    
    
    
    95,055Agency Collateralized Mortgage
Obligations
(CMOs)
    
    
    9,639
    
    
    
    9,972
    
    
    
    10,357
    
    
    
    10,630CMOs  non agency
    
    
    66,791
    
    
    
    64,220
    
    
    
    63,295
    
    
    
    60,803Total held to maturity investments
    
    $
    463,377
    
    
    $
    460,809
    
    
    $
    443,452
    
    
    $
    437,931
  AmortizedCost
    
    Fair ValueDue in one year or less
    
    $
    30,021
    
    
    $
    30,436Due after one year through five years
    
    
    132,187
    
    
    
    134,719Due after five years through ten years
    
    
    62,707
    
    
    
    63,021Due after ten years
    
    
    238,462
    
    
    
    232,633Total Debt Securities
    
    $
    463,377
    
    
    $
    460,809
   14




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##### Table of Contents



NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
  Less than 12 months
    
    Greater than 12 monthsOf unrealized losses
    
    of unrealized losses
    
    TotalUnrealized
    
    
    
    
    
    Unrealized
    
    
    
    
    
    UnrealizedAvailable for Sale Investments
    
    Fair Value
    
    loss
    
    Fair Value
    
    loss
    
    Fair Value
    
    lossMutual funds  ARM mortgages
    
    $
    
    
    
    $
    
    
    
    $
    4,755
    
    
    $
    245
    
    
    $
    4,755
    
    
    $
    245Held to Maturity InvestmentsU.S. Government and agency
obligations
    
    
    29,463
    
    
    
    24
    
    
    
    
    
    
    
    
    
    
    
    29,463
    
    
    
    24Corporate debt
    
    
    2,209
    
    
    
    5
    
    
    
    
    
    
    
    
    
    
    
    2,209
    
    
    
    5Pooled trust preferred securities
    
    
    
    
    
    
    
    
    
    
    7,782
    
    
    
    5,197
    
    
    
    7,782
    
    
    
    5,197Individual trust preferred securities
    
    
    
    
    
    
    
    
    
    
    4,719
    
    
    
    1,400
    
    
    
    4,719
    
    
    
    1,400Non agency CMOs
    
    
    
    
    
    
    
    
    
    
    17,249
    
    
    
    4,845
    
    
    
    17,249
    
    
    
    4,845Mortgage-backed securities
    
    
    40,141
    
    
    
    131
    
    
    
    7,071
    
    
    
    27
    
    
    
    47,212
    
    
    
    158Totals
    
    $
    71,813
    
    
    $
    160
    
    
    $
    41,576
    
    
    $
    11,714
    
    
    $
    113,389
    
    
    $
    11,874
  Less than 12 months
    
    Greater than 12 monthsOf unrealized losses
    
    of unrealized losses
    
    TotalUnrealized
    
    
    
    
    
    Unrealized
    
    
    
    
    
    UnrealizedAvailable for Sale Investments
    
    Fair Value
    
    loss
    
    Fair Value
    
    loss
    
    Fair Value
    
    lossMutual funds  ARM mortgages
    
    $
    
    
    
    $
    
    
    
    $
    4,760
    
    
    $
    240
    
    
    $
    4,760
    
    
    $
    240Held to Maturity InvestmentsU.S. Government and agency
obligations
    
    
    29,990
    
    
    
    9
    
    
    
    
    
    
    
    
    
    
    
    29,990
    
    
    
    9Pooled trust preferred securities
    
    
    
    
    
    
    
    
    
    
    10,197
    
    
    
    7,380
    
    
    
    10,197
    
    
    
    7,380Individual trust preferred securities
    
    
    
    
    
    
    
    
    
    
    5,054
    
    
    
    1,550
    
    
    
    5,054
    
    
    
    1,550Non agency CMOs
    
    
    
    
    
    
    
    
    
    
    18,024
    
    
    
    4,879
    
    
    
    18,024
    
    
    
    4,879Mortgage-backed securities
    
    
    5,300
    
    
    
    47
    
    
    
    
    
    
    
    
    
    
    
    5,300
    
    
    
    47Totals
    
    $
    35,290
    
    
    $
    56
    
    
    $
    38,035
    
    
    $
    14,049
    
    
    $
    73,325
    
    
    $
    14,105
 Available for sale investments.
 Mutual Funds
 15




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##### Table of Contents



NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
  Common Equities.
 Held to maturity securities.
 U.S. Government and Agency Obligations.
 Trust Preferred Securities
   16




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##### Table of Contents



NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
 
    
    Estimate of future cash flows  cash flows are constructed on Intex software.
Intex is a proprietary software program recognized as the industry standard for
analyzing all types of collateralized debt obligations. It includes each deals
structural features updated with information from trustee reports, including
collateral/hedge agreement/cash flow detail, as it becomes available. A present value
analysis is then performed on the modeled cash flows to determine any cash flow
shortages to Parkvales respective holdings, if any.
    
    Credit analysis  A quarterly credit evaluation is performed for each of the issuers
comprising the collateral across the various pooled trust preferred securities. The
credit evaluation considers all evidence available and includes the nature of the
issuers business and geographic footprint. The analysis focuses on shareholders
equity, loan loss reserves, non-performing assets, credit quality ratios and capital
adequacy.
    
    Probability of default  A probability of default is determined for each issuer and
is used to calculate the expected impact of future deferrals and defaults in the
expected cash flow analysis. Each issuer in the collateral pool is assigned a
probability of default with an emphasis on near term probability. Issuers currently
defaulted or deferring are assigned a 100% probability of loss, and issuers currently
deferring are assigned a 20% probability of recovery. All other issuers in the pool are
assigned a probability of loss ranging from .36% to 100%, with ranges based upon the
results of the credit analysis. The probability of loss of .36% is assigned to only the
strongest financial institutions. The probability of default is updated quarterly with
data provided by trustees and other sources.
    17




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##### Table of Contents



NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
    18




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##### Table of Contents



NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
  ExcessExpected
    
    SubordinationLowest
    
    
    
    
    
    Actual
    
    Actual
    
    Defaults (%
    
    (as a % ofUnrealized
    
    Credit
    
    # of
    
    Default %
    
    Deferral %
    
    of performing
    
    performingDeal
    
    Note Class
    
    Par Value
    
    Book Value
    
    Fair Value
    
    Gain (Loss)
    
    Ratings
    
    Issuers
    
    (1)
    
    (1) (2)
    
    collateral) (3)
    
    collateral) (4)Pooled InvestmentsP1
    
    
    C1
    
    
    
    5,000
    
    
    
    350
    
    
    
    401
    
    
    
    51
    
    
    
    C
    
    
    
    80
    
    
    
    19.5
    %
    
    
    15.7
    %
    
    
    9.8
    %
    
    
    0.0
    %P2
    
    
    A2A
    
    
    
    5,000
    
    
    
    2,000
    
    
    
    2,000
    
    
    
    0
    
    
    CCC-
    
    
    52
    
    
    
    14.1
    %
    
    
    16.5
    %
    
    
    10.5
    %
    
    
    9.5
    %P3
    
    
    C1
    
    
    
    4,592
    
    
    
    735
    
    
    
    735
    
    
    
    0
    
    
    
    C
    
    
    
    60
    
    
    
    11.1
    %
    
    
    9.1
    %
    
    
    13.9
    %
    
    
    0.0
    %P4
    
    
    C1
    
    
    
    5,058
    
    
    
    354
    
    
    
    354
    
    
    
    0
    
    
    
    C
    
    
    
    55
    
    
    
    15.3
    %
    
    
    9.9
    %
    
    
    11.9
    %
    
    
    0.0
    %P5
    
    
    C1
    
    
    
    5,023
    
    
    
    150
    
    
    
    201
    
    
    
    51
    
    
    
    C
    
    
    
    63
    
    
    
    12.7
    %
    
    
    17.2
    %
    
    
    16.6
    %
    
    
    0.0
    %P6
    
    
    C1
    
    
    
    3,075
    
    
    
    30
    
    
    
    61
    
    
    
    31
    
    
    
    C
    
    
    
    50
    
    
    
    19.1
    %
    
    
    16.0
    %
    
    
    13.6
    %
    
    
    0.0
    %P8
    
    
    C
    
    
    
    3,219
    
    
    
    129
    
    
    
    161
    
    
    
    32
    
    
    
    C
    
    
    
    37
    
    
    
    11.7
    %
    
    
    18.3
    %
    
    
    10.3
    %
    
    
    0.0
    %P9
    
    
    B
    
    
    
    2,008
    
    
    
    80
    
    
    
    80
    
    
    
    0
    
    
    Ca
    
    
    35
    
    
    
    12.2
    %
    
    
    27.7
    %
    
    
    14.1
    %
    
    
    0.0
    %P10
    
    
    B1
    
    
    
    5,000
    
    
    
    4,875
    
    
    
    3,700
    
    
    
    (1,175
    )
    
    
    B-
    
    
    
    24
    
    
    
    0.0
    %
    
    
    5.8
    %
    
    
    16.7
    %
    
    
    11.3
    %P11
    
    Mezz
    
    
    1,500
    
    
    
    555
    
    
    
    735
    
    
    
    180
    
    
    
    C
    
    
    
    23
    
    
    
    18.3
    %
    
    
    19.5
    %
    
    
    8.4
    %
    
    
    0.0
    %P12
    
    
    B2
    
    
    
    1,003
    
    
    
    288
    
    
    
    330
    
    
    
    42
    
    
    
    C
    
    
    
    35
    
    
    
    14.4
    %
    
    
    14.8
    %
    
    
    12.2
    %
    
    
    0.0
    %P13
    
    
    B
    
    
    
    3,909
    
    
    
    3,759
    
    
    
    430
    
    
    
    (3,329
    )
    
    
    C
    
    
    
    47
    
    
    
    14.3
    %
    
    
    15.0
    %
    
    
    10.5
    %
    
    
    0.0
    %P14
    
    
    A1
    
    
    
    4,682
    
    
    
    4,345
    
    
    
    3,652
    
    
    
    (693
    )
    
    CCC
    
    
    53
    
    
    
    17.9
    %
    
    
    12.5
    %
    
    
    10.5
    %
    
    
    32.1
    %P15
    
    
    B
    
    
    
    5,000
    
    
    
    1,700
    
    
    
    1,700
    
    
    
    0
    
    
    
    C
    
    
    
    34
    
    
    
    24.0
    %
    
    
    13.3
    %
    
    
    10.6
    %
    
    
    0.0
    %P16
    
    
    C1
    
    
    
    5,000
    
    
    
    1,100
    
    
    
    1,100
    
    
    
    0
    
    
    
    C
    
    
    
    47
    
    
    
    16.2
    %
    
    
    6.7
    %
    
    
    8.7
    %
    
    
    0.0
    %P17
    
    
    C1
    
    
    
    5,000
    
    
    
    750
    
    
    
    800
    
    
    
    50
    
    
    
    C
    
    
    
    43
    
    
    
    18.2
    %
    
    
    9.6
    %
    
    
    8.9
    %
    
    
    0.0
    %Subtotal
    
    
    16
    
    
    
    64,069
    
    
    
    21,200
    
    
    
    16,440
    
    
    
    (4,760
    )Single Issuer
InvestmentsS1
    
    
    N/A
    
    
    
    1,000
    
    
    
    929
    
    
    
    707
    
    
    
    (222
    )
    
    BB
    
    
    1
    
    
    
    0.0
    %
    
    
    0.0
    %
    
    
    0.0
    %S2
    
    
    N/A
    
    
    
    2,000
    
    
    
    1,969
    
    
    
    1,401
    
    
    
    (568
    )
    
    BB
    
    
    1
    
    
    
    0.0
    %
    
    
    0.0
    %
    
    
    0.0
    %S3
    
    
    N/A
    
    
    
    3,000
    
    
    
    2,775
    
    
    
    2,328
    
    
    
    (447
    )
    
    BBB+
    
    
    1
    
    
    
    0.0
    %
    
    
    0.0
    %
    
    
    0.0
    %S4
    
    
    N/A
    
    
    
    500
    
    
    
    446
    
    
    
    283
    
    
    
    (163
    )
    
    
    B
    
    
    
    1
    
    
    
    0.0
    %
    
    
    0.0
    %
    
    
    0.0
    %S5
    
    
    N/A
    
    
    
    1,000
    
    
    
    1,005
    
    
    
    1,172
    
    
    
    167
    
    
    NR
    
    
    1
    
    
    
    0.0
    %
    
    
    0.0
    %
    
    
    0.0
    %S6
    
    
    N/A
    
    
    
    700
    
    
    
    710
    
    
    
    766
    
    
    
    56
    
    
    NR
    
    
    1
    
    
    
    0.0
    %
    
    
    0.0
    %
    
    
    0.0
    %S7
    
    
    N/A
    
    
    
    529
    
    
    
    494
    
    
    
    504
    
    
    
    10
    
    
    
    B+
    
    
    
    1
    
    
    
    0.0
    %
    
    
    0.0
    %
    
    
    0.0
    %S8
    
    
    N/A
    
    
    
    1,000
    
    
    
    1,000
    
    
    
    1,093
    
    
    
    93
    
    
    BB+
    
    
    1
    
    
    
    0.0
    %
    
    
    0.0
    %
    
    
    0.0
    %Subtotal
    
    
    8
    
    
    
    9,729
    
    
    
    9,328
    
    
    
    8,254
    
    
    
    (1,074
    )Grand total
of Trust
Preferred
holdings
    
    
    
    
    
    
    73,798
    
    
    
    30,528
    
    
    
    24,694
    
    
    
    (5,834
    )
   
 (1)
    
    As a percentage of the total collateral.(2)
    
    Includes deferrals that have not paid current interest payments as permitted by the debt instruments.(3)
    
    Expected defaults are determined by an analysis of each security.(4)
    
    Excess subordination measures the performing collateral coverage of the outstanding liabilities (as a % of performing collateral). 19




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##### Table of Contents



NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
 Non agency CMOs
 AmortizedYear originated
    
    Cost
    
    
    Fair Value2003
    
    $
    22,112
    
    
    $
    23,5652004
    
    
    28,939
    
    
    
    27,3522005
    
    
    4,920
    
    
    
    5,2332007
    
    
    6,688
    
    
    
    3,9112008
    
    
    4,132
    
    
    
    4,159$
    66,791
    
    
    $
    64,220
  AmortizedCost
    
    
    Fair ValueAAA by Moodys, S&P, or Fitch
    
    $
    26,214
    
    
    $
    27,327AA by Moodys or S&P
    
    
    6,436
    
    
    
    6,742A by Moodys, S&P, or Fitch
    
    
    9,468
    
    
    
    8,338BBB by Moodys or Fitch
    
    
    10,979
    
    
    
    10,895BB by Fitch
    
    
    6,785
    
    
    
    6,785B by Moodys or S&P
    
    
    3,673
    
    
    
    2,957CCC by S&P or Fitch
    
    
    3,015
    
    
    
    955CC by Fitch
    
    
    221
    
    
    
    221$
    66,791
    
    
    $
    64,220
  General
 20




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NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
 Other-Than-Temporary- Impairment
  Unadjusted
    
    OTTI
    
    OTTI
    
    9/30/10
    
    9/30/10Carrying
    
    Charge to
    
    Charge to
    
    Carrying
    
    FairSecurity
    
    Value
    
    earnings
    
    OCI
    
    Value
    
    ValuePooled trust preferred security
    
    $
    48,832
    
    
    $
    18,703
    
    
    $
    21,907
    
    
    $
    8,222
    
    
    $
    8,657
  Trust preferredsecuritiesBalance at June 30, 2010
    
    $
    19,868Total losses  realized/unrealized
    
    
    3,035Included as a charge to earnings
    
    
    (996
    )Change to other comprehensive income
    
    
    Balance at September 30, 2010
    
    $
    21,907
  Trust preferredsecuritiesBalance at June 30, 2010
    
    $
    17,707Addition for the credit component on
debt securities in which OTTI was not
previously recognized
    
    
    996Balance at September 30, 2010
    
    $
    18,703The amount of securities with OTTI
charges to earnings are as follows:Recorded in September 30, 2010 quarter
    
    $
    996
  21




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##### Table of Contents



NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
 GOODWILL AND MARKET VALUATION
    22




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##### Table of Contents



NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
 EARNINGS PER SHARE (EPS)
  2010
    
    
    2009Numerator for basic and diluted earnings per share:Net Income
    
    $
    2,223
    
    
    $
    855Less: Preferred stock dividend
    
    
    397
    
    
    
    397Net income to common shareholders
    
    
    1,826
    
    
    
    458Denominator:Weighted average shares for basic earnings per share
    
    
    5,529,211
    
    
    
    5,427,695Effect of dilutive stock options
    
    
    
    
    
    
    Weighted average shares for dilutive earnings per share
    
    
    5,529,211
    
    
    
    5,427,695Net income per common share:Basic
    
    $
    0.33
    
    
    $
    0.08Diluted
    
    $
    0.33
    
    
    $
    0.08Dividends per common share
    
    $
    0.02
    
    
    $
    0.05
 NEW ACCOUNTING PRONOUNCEMENTS
  
  PARKVALE FINANCIAL CORPORATION
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
  Forward-Looking Statements:
 23




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Critical Accounting Policies, Judgments and Estimates:
    24




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##### Table of Contents



Balance Sheet Data:
    
    September 30,(Dollar amounts in thousands, except per share data)
    
    2010
    
    2009Total assets
    
    $
    1,820,703
    
    
    $
    1,903,314Loans, net
    
    
    1,014,608
    
    
    
    1,071,611Interest-earning deposits and federal funds sold
    
    
    175,209
    
    
    
    167,408Total investments
    
    
    469,321
    
    
    
    546,955Deposits
    
    
    1,480,482
    
    
    
    1,518,661FHLB advances
    
    
    175,916
    
    
    
    186,144Shareholders equity
    
    
    119,468
    
    
    
    151,110Book value per share
    
    $
    15.86
    
    
    $
    21.99
 Three Months EndedSeptember 30,(1)Statistical Profile:
    
    2010
    
    2009Average yield earned on all interest-earning assets
    
    
    3.95
    %
    
    
    4.45
    %Average rate paid on all interest-bearing liabilities
    
    
    1.86
    %
    
    
    2.44
    %Average interest rate spread
    
    
    2.09
    %
    
    
    2.01
    %Net yield on average interest-earning assets
    
    
    2.08
    %
    
    
    2.07
    %Other expenses to average assets
    
    
    1.74
    %
    
    
    1.59
    %Taxes to pre-tax income
    
    
    22.30
    %
    
    
    -151.47
    %Dividend payout ratio
    
    
    6.06
    %
    
    
    59.25
    %Return on average assets
    
    
    0.48
    %
    
    
    0.18
    %Return on average equity
    
    
    6.68
    %
    
    
    2.26
    %Average equity to average total assets
    
    
    7.18
    %
    
    
    7.91
    %
 At September 30,2010
    
    2009One year gap to total assets
    
    
    14.70
    %
    
    
    9.68
    %Intangibles to total equity
    
    
    23.67
    %
    
    
    19.32
    %Ratio of nonperforming assets to total assets
    
    
    2.00
    %
    
    
    2.15
    %Number of full-service offices
    
    
    47
    
    
    
    48
 
 (1)
    
    The applicable income and expense figures have been annualized in calculating the
percentages. 25




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Nonperforming Loans and Foreclosed Real Estate:
  (Dollar amounts in thousands)
    
    9/30/10
    
    
    6/30/10
    
    
    9/30/09Delinquent single-family mortgage loans
    
    $
    22,099
    
    
    $
    20,674
    
    
    $
    26,247Delinquent other loans
    
    
    5,050
    
    
    
    5,846
    
    
    
    8,493Total nonperforming loans
    
    
    27,149
    
    
    
    26,520
    
    
    
    34,740Real estate owned, net
    
    
    9,327
    
    
    
    8,637
    
    
    
    6,139Total
    
    $
    36,476
    
    
    $
    35,157
    
    
    $
    40,879
      26




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##### Table of Contents



Allowance for Loan Losses:
   27




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##### Table of Contents



Liquidity and Capital Resources:
  TARP Capital Purchase Program
   28




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##### Table of Contents



Term Debt
   29




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##### Table of Contents



Capital:
   Tier 1
    
    Tier 1
    
    TotalCore
    
    Risk-Based
    
    Risk-Based(Dollars in 000s)
    
    Capital
    
    Capital
    
    CapitalEquity capital (1)
    
    $
    139,845
    
    
    $
    139,845
    
    
    $
    139,845Less non-allowable intangible assets
    
    
    (28,284
    )
    
    
    (28,284
    )
    
    
    (28,284
    )Less non-allowable deferred tax asset
    
    
    (10,054
    )
    
    
    (10,054
    )
    
    
    (10,054
    )Plus permitted valuation allowances (2)
    
    
    
    
    
    
    
    
    
    
    13,686Plus accumulated other comprehensive income
    
    
    13,853
    
    
    
    13,853
    
    
    
    13,853Total regulatory capital
    
    
    115,360
    
    
    
    115,360
    
    
    
    129,046Minimum required capital
    
    
    73,094
    
    
    
    46,621
    
    
    
    93,241Excess regulatory capital
    
    $
    42,266
    
    
    $
    68,739
    
    
    $
    35,805Adjusted total assets (1)
    
    $
    1,827,351
    
    
    $
    1,165,517
    
    
    $
    1,165,517Regulatory capital as a percentage
    
    
    6.31
    %
    
    
    9.90
    %
    
    
    11.07
    %Minimum capital required as a percentage
    
    
    4.00
    %
    
    
    4.00
    %
    
    
    8.00
    %Excess regulatory capital as a percentage
    
    
    2.31
    %
    
    
    5.90
    %
    
    
    3.07
    %Well capitalized requirement
    
    
    5.00
    %
    
    
    6.00
    %
    
    
    10.00
    %
 
 (1)
    
    Represents amounts for the consolidated Bank as reported to the Pennsylvania Department
of Banking and FDIC on Form 041 for the quarter ended September 30, 2010.(2)
    
    Limited to 1.25% of risk adjusted total assets. 30




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##### Table of Contents



Results of Operations  Comparison of Three Months Ended September 30, 2010 and 2009:
  Interest Income:
  Interest Expense:
  Net Interest Income:
  Provision for Loan Losses:
  31




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##### Table of Contents



Noninterest Income:
  Noninterest Expense:
  Income Tax Expense (Benefit):
  32




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##### Table of Contents



Impact of Inflation and Changing Prices:
  
   
   
 PART II  OTHER INFORMATION
      (a)
    
    Not applicable(b)
    
    Not applicable(c)
    
    Not applicable
   33




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##### Table of Contents



10.18
    
    Waiver and Second Amendment to Loan Documents between Parkvale Financial Corporation and PNC Bank,
 National Association, Dated November 12, 2010.31.1
    
    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 2002.31.2
    
    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 2002.32.1
    
    Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
 34




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SIGNATURES
  Parkvale Financial CorporationDATE: November 12, 2010
    By:
    /s/ Gilbert A. RiazziGilbert A. RiazziVice President and
Chief Financial OfficerDATE: November 12, 2010
    By:
    /s/ Robert J. McCarthy, Jr.Robert J. McCarthy, Jr.President and
Chief Executive Officer 35