##### 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 MARCH 31, 2009
 COMMISSION FILE NO: 0-17411
 PARKVALE FINANCIAL CORPORATION
  Pennsylvania
    
    25-1556590(State of incorporation)
    
    (I.R.S. Employer
Identification Number)
 4220 William Penn Highway, Monroeville, Pennsylvania 15146
  þ o
 o o
  Large accelerated filer
o
    
    Accelerated filer
þ
    
    Non-accelerated filer   o
(Do not check if a smaller reporting company)
    
    Smaller reporting company o
 o þ




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##### 



PARKVALE FINANCIAL CORPORATION
  PagePart I.
Financial InformationItem 1.Consolidated Statements of Financial Condition as of March 31, 2009
and June 30, 2008
    
    
    3Consolidated Statements of Operations for the three and nine months ended
March 31, 2009 and 2008
    
    
    4Consolidated Statements of Cash Flows for the nine months ended
March 31, 2009 and 2008
    
    
    5Consolidated Statements of Shareholders Equity for the nine months ended
March 31, 2009
    
    
    6Notes to Unaudited Interim Consolidated Financial Statements
    
    
    7-17Item 2.
Managements Discussion and Analysis of Financial Condition and
Results of Operations
    
    
    17-28Item 3.
Quantitative and Qualitative Disclosures about Market Risk
    
    
    28Item 4.
Controls and ProceduresPart II  Other Information
    
    
    29-30Signatures
    
    
    30Exhibits
    
    
    31-33EX-31.1EX-31.2EX-32.1EX-99.1
  2




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##### Table of Contents



PARKVALE FINANCIAL CORPORATION
 
 CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
  March 31,
    
    
    June 30,2009
    
    
    2008(Unaudited)ASSETSCash and noninterest-earning deposits
    
    $
    16,461
    
    
    $
    18,692Federal funds sold
    
    
    73,282
    
    
    
    86,000Cash and cash equivalents
    
    
    89,743
    
    
    
    104,692Interest-earning deposits in other banks
    
    
    30,166
    
    
    
    7,252Investment securities available for sale (cost of
$23,174 at March 31 and $34,845 at June 30)
    
    
    22,937
    
    
    
    31,347Investment securities held to maturity (fair value
of $469,030 at March 31 and $383,853 at June 30)
    
    
    520,730
    
    
    
    413,028Loans, net of allowance of $17,250 at March 31
and $15,249 at June 30
    
    
    1,143,015
    
    
    
    1,201,665Foreclosed real estate, net
    
    
    6,475
    
    
    
    3,279Office properties and equipment, net
    
    
    18,190
    
    
    
    18,851Goodwill
    
    
    25,634
    
    
    
    25,634Intangible assets
    
    
    4,013
    
    
    
    4,695Prepaid expenses and other assets
    
    
    45,533
    
    
    
    40,949Total assets
    
    $
    1,906,436
    
    
    $
    1,851,392LIABILITIES AND SHAREHOLDERS EQUITYLIABILITIESDeposits
    
    $
    1,511,773
    
    
    $
    1,493,685Advances from Federal Home Loan Bank
    
    
    186,259
    
    
    
    191,430Term debt
    
    
    25,000
    
    
    
    Other debt
    
    
    21,154
    
    
    
    21,965Advance payments from borrowers for taxes and insurance
    
    
    6,875
    
    
    
    7,754Other liabilities
    
    
    5,623
    
    
    
    4,927Total liabilities
    
    
    1,756,684
    
    
    
    1,719,761SHAREHOLDERS EQUITYPreferred stock ($1.00 par value, liquidation preference $1,000;
5,000,000 shares authorized; 31,762 shares issued)
    
    
    31,762
    
    
    
    Common stock ($1.00 par value; 10,000,000 shares
authorized; 6,734,894 shares issued)
    
    
    6,735
    
    
    
    6,735Additional paid in capital
    
    
    4,116
    
    
    
    4,026Treasury stock at cost (1,307,199 shares at March 31
and 1,253,199 at June 30)
    
    
    (27,314
    )
    
    
    (26,618
    )Accumulated other comprehensive income (loss)
    
    
    (329
    )
    
    
    (2,222
    )Retained earnings
    
    
    134,782
    
    
    
    149,710Total shareholders equity
    
    
    149,752
    
    
    
    131,631Total liabilities and shareholders equity
    
    $
    1,906,436
    
    
    $
    1,851,392
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##### Table of Contents



PARKVALE FINANCIAL CORPORATION
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
   Three months ended
    
    
    Nine months endedMarch 31,
    
    
    March 31,2009
    
    
    2008
    
    
    2009
    
    
    2008Interest income:Loans
    
    $
    16,192
    
    
    $
    17,589
    
    
    $
    50,989
    
    
    $
    54,265Investments
    
    
    5,780
    
    
    
    6,076
    
    
    
    17,376
    
    
    
    16,458Federal funds sold
    
    
    56
    
    
    
    870
    
    
    
    618
    
    
    
    3,602Total interest income
    
    
    22,028
    
    
    
    24,535
    
    
    
    68,983
    
    
    
    74,325Interest expense:Deposits
    
    
    9,366
    
    
    
    11,762
    
    
    
    29,832
    
    
    
    35,928Borrowings
    
    
    2,702
    
    
    
    2,726
    
    
    
    7,672
    
    
    
    8,320Trust preferred securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    317Total interest expense
    
    
    12,068
    
    
    
    14,488
    
    
    
    37,504
    
    
    
    44,565Net interest income
    
    
    9,960
    
    
    
    10,047
    
    
    
    31,479
    
    
    
    29,760Provision for loan losses
    
    
    1,826
    
    
    
    376
    
    
    
    4,982
    
    
    
    1,367Net interest income after
provision for losses
    
    
    8,134
    
    
    
    9,671
    
    
    
    26,497
    
    
    
    28,393Noninterest Income:Service charges on deposit accounts
    
    
    1,503
    
    
    
    1,676
    
    
    
    4,895
    
    
    
    5,231Other fees and service charges
    
    
    384
    
    
    
    354
    
    
    
    1,094
    
    
    
    1,004Net
loss on sale and writedown of securities
    
    (20,742)
    
    
    (19
    )
    
    
    (25,724
    )
    
    
    (19
    )Other
    
    
    660
    
    
    
    542
    
    
    
    1,911
    
    
    
    2,005Total noninterest income
    
    
    (18,195
    )
    
    
    2,553
    
    
    
    (17,824
    )
    
    
    8,221Noninterest Expenses:Compensation and employee benefits
    
    
    3,974
    
    
    
    4,115
    
    
    
    12,074
    
    
    
    12,404Office occupancy
    
    
    1,278
    
    
    
    1,206
    
    
    
    3,479
    
    
    
    3,417Marketing
    
    
    123
    
    
    
    88
    
    
    
    363
    
    
    
    443FDIC insurance
    
    
    65
    
    
    
    42
    
    
    
    188
    
    
    
    126Office supplies, telephone and postage
    
    
    486
    
    
    
    460
    
    
    
    1,413
    
    
    
    1,414Early extinguishment of debt
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    62Other
    
    
    1,320
    
    
    
    1,211
    
    
    
    3,976
    
    
    
    3,754Total noninterest expenses
    
    
    7,246
    
    
    
    7,122
    
    
    
    21,493
    
    
    
    21,620Income (loss) before income taxes
    
    
    (17,307
    )
    
    
    5,102
    
    
    
    (12,820
    )
    
    
    14,994Income tax expense (benefit)
    
    
    (3,237
    )
    
    
    1,576
    
    
    
    (1,920
    )
    
    
    4,249Net income (loss)
    
    
    (14,070
    )
    
    
    3,526
    
    
    
    (10,900
    )
    
    
    10,745Less: Preferred stock dividend
    
    
    397
    
    
    
    
    
    
    
    432
    
    
    
    Income (loss) to common shareholders
    
    $
    (14,467
    )
    
    $
    3,526
    
    
    $
    (11,332
    )
    
    $
    10,745Net income (loss) per share:Basic
    
    $
    (2.65
    )
    
    $
    0.65
    
    
    $
    (2.08
    )
    
    $
    1.95Diluted
    
    $
    (2.65
    )
    
    $
    0.64
    
    
    $
    (2.08
    )
    
    $
    1.93
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PARKVALE FINANCIAL CORPORATION
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
   Nine months endedMarch 31,2009
    
    
    2008Cash flows from operating activities:Interest received
    
    $
    67,641
    
    
    $
    76,049Loan fees received (premiums paid)
    
    
    423
    
    
    
    191Disbursements of student loans
    
    
    (30
    )
    
    
    (1,196
    )Proceeds from sales of student loans
    
    
    365
    
    
    
    712Other fees and commissions received
    
    
    7,070
    
    
    
    7,444Interest paid
    
    
    (37,674
    )
    
    
    (44,831
    )Cash paid to suppliers and others
    
    
    (21,134
    )
    
    
    (19,458
    )Income taxes paid
    
    
    (2,501
    )
    
    
    (4,112
    )Net cash provided by operating activities
    
    
    14,160
    
    
    
    14,799Cash flows from investing activities:Proceeds from sale of investment securities available for sale
    
    
    3,012
    
    
    
    1,884Proceeds from maturities of investment securities
    
    
    83,978
    
    
    
    267,758Purchase of investment securities held to maturity
    
    
    (206,750
    )
    
    
    (324,657
    )Purchase of deposits in other banks, net
    
    
    (22,914
    )
    
    
    (3,523
    )Purchase of loans
    
    
    
    
    
    
    (36,474
    )Principal collected on loans
    
    
    162,612
    
    
    
    242,022Loans made to customers, net of loans in process
    
    
    (118,555
    )
    
    
    (154,882
    )Proceeds from loans sold
    
    
    5,976
    
    
    
    Other
    
    
    (169
    )
    
    
    (2,418
    )Net cash used in investing activities
    
    
    (92,810
    )
    
    
    (10,290
    )Cash flows from financing activities:Net increase in checking and savings accounts
    
    
    13,619
    
    
    
    13,109Net increase in certificates of deposit
    
    
    4,469
    
    
    
    8,062Proceeds from long-term debt
    
    
    25,000
    
    
    
    Repayment of FHLB advances
    
    
    (5,018
    )
    
    
    (10,018
    )Redemption of trust preferred securities
    
    
    
    
    
    
    (7,200
    )Net increase (decrease) in other borrowings
    
    
    (811
    )
    
    
    8,624Decrease in borrowers advances for taxes and insurance
    
    
    (879
    )
    
    
    (732
    )Proceeds from issuance of preferred stock
    
    
    31,762
    
    
    
    Cash dividends paid
    
    
    (3,835
    )
    
    
    (3,655
    )Allocation of treasury stock to retirement plans
    
    
    
    
    
    
    864Acquisition of treasury stock
    
    
    (717
    )
    
    
    (4,949
    )Proceeds from exercise of stock options
    
    
    111
    
    
    
    172Net cash provided by financing activities
    
    
    63,701
    
    
    
    4,277Net (decrease) increase in cash and cash equivalents
    
    
    (14,949
    )
    
    
    8,786Cash and cash equivalents at beginning of period
    
    
    104,692
    
    
    
    145,248Cash and cash equivalents at end of period
    
    $
    89,743
    
    
    $
    154,034Reconciliation of net income to net cash provided
by operating activities:Net (loss) income
    
    
    ($10,900
    )
    
    $
    10,745Adjustments to reconcile net income to net cash provided by operating activities:Depreciation and amortization
    
    
    1,512
    
    
    
    1,620Accretion and amortization of loan fees and discounts
    
    
    (1,994
    )
    
    
    (662
    )Loan fees collected and deferred (premiums paid)
    
    
    105
    
    
    
    73Provision for loan losses
    
    
    4,982
    
    
    
    1,367Loss on sale or writedown of assets
    
    
    25,724
    
    
    
    19Decrease in accrued interest receivable
    
    
    622
    
    
    
    2,144(Increase) in other assets
    
    
    (4,877
    )
    
    
    (3,098
    )(Decrease) in accrued interest payable
    
    
    (22
    )
    
    
    (128
    )Increase (decrease) in other liabilities
    
    
    (992
    )
    
    
    2,719Total adjustments
    
    
    25,056
    
    
    
    4,054Net cash provided by operating activities
    
    $
    14,160
    
    
    $
    14,799
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##### Table of Contents



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, 2008
    
    $
    
    
    
    $
    6,735
    
    
    $
    4,026
    
    
    $
    (26,618
    )
    
    $
    (2,222
    )
    
    $
    149,710
    
    
    $
    131,631Net loss, nine months ended
March 31, 2009
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (10,900
    )
    
    
    (10,900
    )Accumulated other comprehensive
Income (loss):Change in swap liability
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (178
    )Change in unrealized gain (loss)
on securities, net of deferred
tax benefit of ($8,199)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (14,264
    )Reclassification adjustment, net
of taxes of $9,389
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    16,335
    
    
    
    
    
    
    
    1,893Comprehensive income (loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9,007
    )Issuance of 5% preferred stock
    
    
    31,762
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    31,762Dividends declared on common
stock at $0.66 per share
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,596
    )
    
    
    (3,596
    )Dividends accrued on
preferred stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (432
    )
    
    
    (432
    )Purchase of treasury stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (717
    )
    
    
    
    
    
    
    
    
    
    
    (717
    )Recognition of stock option
compensation expense
    
    
    
    
    
    
    
    
    
    
    90
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    90Exercise of stock options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    21
    
    
    
    
    
    
    
    
    
    
    
    21Balance, March 31, 2009
    
    $
    31,762
    
    
    $
    6,735
    
    
    $
    4,116
    
    
    $
    (27,314
    )
    
    $
    (329
    )
    
    $
    134,782
    
    
    $
    149,752
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NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
  STATEMENTS OF OPERATIONS
  LOANS
    
    March 31, 2009
    
    June 30, 2008Loans are summarized as follows:Mortgage loans:Residential:1-4 Family
    
    $
    765,453
    
    
    $
    828,516Multifamily
    
    
    31,745
    
    
    
    29,737Commercial
    
    
    116,147
    
    
    
    113,622Other
    
    
    14,358
    
    
    
    17,497927,703
    
    
    
    989,372Consumer loans
    
    
    181,685
    
    
    
    176,948Commercial business loans
    
    
    44,778
    
    
    
    43,643Loans on savings accounts
    
    
    5,083
    
    
    
    6,1471,159,249
    
    
    
    1,216,110Less: Loans in process
    
    
    
    
    
    
    236Allowance for loan losses
    
    
    17,250
    
    
    
    15,249Unamortized
premiums and deferred loan fees
    
    (1,016
    )
    
    
    (1,040
    )Loans, net
    
    $
    1,143,015
    
    
    $
    1,201,665
    2009
    
    
    2008Beginning balance
    
    $
    15,249
    
    
    $
    14,189Provision for losses  mortgage loans
    
    
    1,444
    
    
    
    1,140Provision for losses  consumer loans
    
    
    1,879
    
    
    
    162Provision for losses  commercial loans
    
    
    1,659
    
    
    
    65Loans recovered
    
    
    19
    
    
    
    268Loans charged off
    
    
    (3,000
    )
    
    
    (780
    )Ending balance
    
    $
    17,250
    
    
    $
    15,044
 COMPREHENSIVE INCOME
  7




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NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
 FAIR VALUE
  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.
   Level I
    
    Level II
    
    Level III
    
    TotalAssets:Available for sale securities
    
    
    22,937
    
    
    
    
    
    
    
    
    
    
    
    22,937Mortgage loans held for sale
    
    
    
    
    
    
    522
    
    
    
    
    
    
    
    522Liabilities: Interest rate swaps
    
    
    
    
    
    
    178
    
    
    
    
    
    
    
    178
 8




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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 securities
    
    
    54
    
    
    
    
    
    
    
    5,863
    
    
    
    5,917Impaired loans
    
    
    
    
    
    
    
    
    
    
    776
    
    
    
    776
 INVESTMENT SECURITIES
 Investment Securities available for sale:
 Investment Securities Held to Maturity:
 Other-than Temporary Impairments:
  9




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NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
  March 31, 2009
    
    
    June 30, 2008Available for Sale Investments
    
    Amortized Cost
    
    
    Fair Value
    
    
    Amortized Cost
    
    
    Fair ValueFHLB of Pittsburgh stock
    
    $
    13,826
    
    
    $
    13,826
    
    
    $
    14,713
    
    
    $
    14,713Preferred stocks:FHLMC Series M Pfd
    
    
    19
    
    
    
    19
    
    
    
    1,134
    
    
    
    1,134FHLMC Series S Pfd
    
    
    30
    
    
    
    30
    
    
    
    1,687
    
    
    
    1,687Bank of America ML Pfd Dep L
    
    
    1,133
    
    
    
    1,133
    
    
    
    4,595
    
    
    
    2,473Bank of America Corp Pfd
    
    
    2,192
    
    
    
    2,192
    
    
    
    5,000
    
    
    
    4,646Mutual Funds  ARM mortgages
    
    
    5,500
    
    
    
    5,283
    
    
    
    5,500
    
    
    
    5,233Other common equities
    
    
    474
    
    
    
    454
    
    
    
    2,216
    
    
    
    1,461$
    23,174
    
    
    $
    22,937
    
    
    $
    34,845
    
    
    $
    31,347
  March 31, 2009
    
    June 30, 2008Held to Maturity Investments
    
    Amortized Cost
    
    Fair Value
    
    Amortized Cost
    
    Fair ValueU.S. Government and agency obligations
    
        $
    110,405
    
    
        $
    111,973
    
    
        $
    71,411
    
    
        $
    71,331Municipal obligations
    
    
    14,048
    
    
    
    14,223
    
    
    
    4,058
    
    
    
    4,113Corporate debt:Short to medium term corporate debt
    
    
    67,345
    
    
    
    66,224
    
    
    
    44,224
    
    
    
    43,390Pooled trust preferred securities
    
    
    72,047
    
    
    
    42,975
    
    
    
    85,159
    
    
    
    63,623Individual trust preferred securities
    
    
    9,348
    
    
    
    5,787
    
    
    
    9,778
    
    
    
    8,479Mortgage-backed securities:Agency
    
    
    62,552
    
    
    
    62,504
    
    
    
    16,386
    
    
    
    16,486Agency Collateralized Mortgage
Obligations (CMOs)
    
    
    1,641
    
    
    
    1,669
    
    
    
    1,807
    
    
    
    1,754CMOs  non agency
    
    
    183,344
    
    
    
    163,675
    
    
    
    180,205
    
    
    
    174,677$
    520,730
    
    
        $
    469,030
    
    
        $
    413,028
    
    
        $
    383,853
    10




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NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
  Less than 12 months
    
    
    Greater than 12 monthsof unrealized losses
    
    
    of unrealized losses
    
    
    TotalAvailable for Sale Investments
    
    Fair Value
    
    
    Unrealized loss
    
    
    Fair Value
    
    
    Unrealized loss
    
    
    Fair Value
    
    
    Unrealized lossPreferred stocks, FHLMC
    
    
    
    
    
    
    
    
    
    
    49
    
    
    
    
    
    
    
    49
    
    
    
    Preferred stocks, Bank of America
    
    
    
    
    
    
    
    
    
    
    3,325
    
    
    
    
    
    
    
    3,325
    
    
    
    Mutual funds
    
    
    
    
    
    
    
    
    
    
    4,771
    
    
    
    229
    
    
    
    4,771
    
    
    
    229Other common equities
    
    
    70
    
    
    
    28
    
    
    
    
    
    
    
    
    
    
    
    70
    
    
    
    28Held to Maturity InvestmentsU.S. Government and agency
obligations
    
    
    19,655
    
    
    
    40
    
    
    
    
    
    
    
    
    
    
    
    19,655
    
    
    
    40Municipal obligations
    
    
    1,046
    
    
    
    100
    
    
    
    
    
    
    
    
    
    
    
    1,046
    
    
    
    100Short to medium term corporate debt
    
    
    27,024
    
    
    
    783
    
    
    
    27,185
    
    
    
    411
    
    
    
    54,209
    
    
    
    1,194Pooled trust preferred securities
    
    
    4,693
    
    
    
    2,862
    
    
    
    32,419
    
    
    
    26,210
    
    
    
    37,112
    
    
    
    29,072Individual trust preferred securities
    
    
    370
    
    
    
    121
    
    
    
    3,531
    
    
    
    3,552
    
    
    
    3,901
    
    
    
    3,673Mortgage-backed securities  agency
    
    
    49,293
    
    
    
    311
    
    
    
    349
    
    
    
    10
    
    
    
    49,642
    
    
    
    321Mortgage-backed securitiesNon agency CMOs
    
    
    148,285
    
    
    
    19,150
    
    
    
    1,694
    
    
    
    519
    
    
    
    149,979
    
    
    
    19,669
 Available for sale securities.
  11




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NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
   Held to maturity securities except US Government & Agency obligations.
 Trust Preferred Securities
   12




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NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
      13




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NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
 Non agency CMOs
 March 31, 2009Year originated
    (Dollars In 000s)
    Book Value
    

Fair Value2003
    
    $
    22,414
    
    
    $
    21,3392004
    
    
    26,411
    
    
    
    24,2632005
    
    
    92,918
    
    
    
    81,8042006
    
    
    26,679
    
    
    
    22,0972007
    
    
    
    
    
    
    2008
    
    
    14,922
    
    
    
    14,172$
    183,344
    
    
    $
    163,675
  U.S. Government and Agency Obligations.
 GOODWILL AND MARKET VALUATION
  
 14




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NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
   EARNINGS PER SHARE (EPS)
  Three months ended
    
    
    Nine months endedMarch 31,
    
    
    March 31,2009
    
    
    2008
    
    
    2009
    
    
    2008Numerator for basic and diluted EPS:Net income (in 000s)
    
    $
    (14,070
    )
    
    $
    3,526
    
    
    $
    (10,900
    )
    
    $
    10,745Less: Preferred stock dividend
    
    
    397
    
    
    
    
    
    
    
    432
    
    
    
    Income available to common stockholders
    
    $
    (14,467
    )
    
    $
    3,526
    
    
    $
    (11,332
    )
    
    $
    10,745Denominator:Weighted average shares for basic EPS
    
    
    5,427,695
    
    
    
    5,474,632
    
    
    
    5,459,162
    
    
    
    5,514,962Number of dilutive stock options
    
    
    
    
    
    
    35,343
    
    
    
    1,410
    
    
    
    44,241Weighted average shares for dilutive EPS
    
    
    5,427,695
    
    
    
    5,509,975
    
    
    
    5,460,573
    
    
    
    5,559,203Net income per common share:Basic
    
    $
    (2.65
    )
    
    $
    0.65
    
    
    $
    (2.08
    )
    
    $
    1.95Diluted
    
    $
    (2.65
    )
    
    $
    0.64
    
    
    $
    (2.08
    )
    
    $
    1.93
 NEW ACCOUNTING PRONOUNCEMENTS
   15




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NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
    Accounting for Certain
Investments in Debt and Equity Securities,
   16




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NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
   
  PARKVALE FINANCIAL CORPORATION
 MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
 AND RESULTS OF OPERATIONS
  Forward-Looking Statements:
  17




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Critical Accounting Policies, Judgments and Estimates:
    18




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Balance Sheet Data:
 March 31,(Dollar amounts in thousands, except per share data)
    
    2009
    
    2008Total assets
    
    $
    1,906,436
    
    
    $
    1,856,807Loans, net
    
    
    1,143,015
    
    
    
    1,181,982Interest-earning deposits and federal funds sold
    
    
    103,448
    
    
    
    144,326Total investments
    
    
    543,667
    
    
    
    420,566Deposits
    
    
    1,511,773
    
    
    
    1,490,174FHLB advances
    
    
    186,259
    
    
    
    201,487Shareholders equity
    
    
    149,752
    
    
    
    130,292Book value per common share
    
    $
    21.74
    
    
    $
    23.77
  Three Months Ended
    
    Nine Months EndedMarch 31, (1)
    
    March 31, (1)2009
    
    2008
    
    2009
    
    2008Average yield earned on all interest-earning assets
    
    
    5.09
    %
    
    
    5.68
    %
    
    
    5.32
    %
    
    
    5.75
    %Average rate paid on all interest-bearing liabilities
    
    
    2.83
    
    
    
    3.42
    
    
    
    2.97
    
    
    
    3.51Average interest rate spread
    
    
    2.26
    
    
    
    2.26
    
    
    
    2.35
    
    
    
    2.24Net yield on average interest-earning assets
    
    
    2.30
    
    
    
    2.32
    
    
    
    2.43
    
    
    
    2.30Other expenses to average assets
    
    
    1.52
    
    
    
    1.55
    
    
    
    1.54
    
    
    
    1.57Taxes to pre-tax income
    
    
    -18.70
    
    
    
    30.89
    
    
    
    -14.98
    
    
    
    28.34Dividend payout ratio
    
    
    -8.30
    
    
    
    34.38
    
    
    
    -31.73
    
    
    
    34.20Return on average assets
    
    
    -2.96
    
    
    
    0.77
    
    
    
    -0.78
    
    
    
    0.78Return on average equity
    
    
    -34.51
    
    
    
    10.64
    
    
    
    -9.83
    
    
    
    10.97Average equity to average total assets
    
    
    8.56
    
    
    
    7.22
    
    
    
    7.93
    
    
    
    7.12Dividends per share
    
    $
    0.22
    
    
    $
    0.22
    
    
    $
    0.66
    
    
    $
    0.66
 At March 31,2009
    
    2008One year gap to total assets
    
    
    9.78
    %
    
    
    5.95
    %Intangibles to total equity
    
    
    19.80
    
    
    
    23.45Capital to assets ratio
    
    
    7.86
    
    
    
    7.02Ratio of nonperforming loans and foreclosed real estate to total assets
    
    
    1.65
    
    
    
    0.78Number of full-service offices
    
    
    48
    
    
    
    48
 
 (1)
    
    The applicable income and expense figures have been annualized in calculating the
percentages. Nonperforming Loans and Foreclosed Real Estate:
  (Dollar amounts in 000s)
    
    3/31/09
    
    
    12/31/08
    
    
    6/30/08
    
    
    3/31/08Delinquent single-family mortgage loans
    
    $
    18,162
    
    
    $
    11,041
    
    
    $
    5,911
    
    
    $
    5,089Delinquent other loans
    
    
    6,078
    
    
    
    2,334
    
    
    
    5,472
    
    
    
    5,777Total nonperforming loans
    
    
    24,240
    
    
    
    13,375
    
    
    
    11,383
    
    
    
    10,866Total impaired loans
    
    
    776
    
    
    
    508
    
    
    
    1,146
    
    
    
    989Real estate owned, net
    
    
    6,475
    
    
    
    6,897
    
    
    
    3,279
    
    
    
    2,648Total
    
    $
    31,491
    
    
    $
    20,780
    
    
    $
    15,808
    
    
    $
    14,503
  19




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20




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Allowance for Loan Losses:
   Liquidity and Capital Resources:
  21




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TARP Capital Purchase Program
    Term Debt
 22




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23




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Tier 1
    
    Tier 1
    
    TotalCore
    
    Risk-Based
    
    Risk-Based(Dollars in 000s)
    
    Capital
    
    Capital
    
    CapitalEquity capital (1)
    
    $
    170,984
    
    
    $
    170,984
    
    
    $
    170,984Less non-allowable intangible assets
    
    
    (29,647
    )
    
    
    (29,647
    )
    
    
    (29,647
    )Plus permitted valuation allowances (2)
    
    
    
    
    
    
    
    
    
    
    15,810Total regulatory capital
    
    
    141,337
    
    
    
    141,337
    
    
    
    157,147Minimum required capital
    
    
    75,209
    
    
    
    59,611
    
    
    
    119,222Excess regulatory capital
    
    $
    66,128
    
    
    $
    81,726
    
    
    $
    37,925Adjusted total assets (1)
    
    $
    1,880,226
    
    
    $
    1,490,280
    
    
    $
    1,490,280Regulatory capital as a percentage
    
    
    7.52
    %
    
    
    9.48
    %
    
    
    10.54
    %Minimum capital required as a percentage
    
    
    4.00
    %
    
    
    4.00
    %
    
    
    8.00
    %Excess regulatory capital as a percentage
    
    
    3.52
    %
    
    
    5.48
    %
    
    
    2.54
    %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 March 31, 2009.(2)
    
    Limited to 1.25% of risk adjusted total assets.   Results of Operations  Comparison of Three Months Ended March 31, 2009 and 2008:
  24




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Interest Income:
  Interest Expense:
  Net Interest Income:
  Provision for Loan Losses:
   Noninterest Income:
  25




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Bank of America preferred stocks
    
    $
    6,269,000FHLMC preferred stocks
    
    
    186,000Other bank common equities
    
    
    341,000Pooled trust preferred securities
    
    
    13,667,000Individual trust preferred security
    
    
    446,000Total
    
    $
    20,909,000
     26




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Noninterest Expense:
  Income Tax Expense (Benefit):
  Results of Operations  Comparison of Nine Months Ended March 31, 2009 and 2008:
  Interest Income:
  Interest Expense:
  Net Interest Income:
  27




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Provision for Loan Losses:
  Noninterest Income:
  Noninterest Expense:
  Income Tax Expense (Benefit):
  Impact of Inflation and Changing Prices:
  
 Item 3.
    
    Quantitative and Qualitative Disclosures About Market RiskQuantitative and qualitative disclosures about market risk are presented at June 30, 2008 in
Item 7A of Parkvale Financial Corporations Form 10-K, filed with the SEC on September 12,
2008. Since June 30, 2008, the market price of Parkvale stock has fallen from $23.61 to
$10.98 at March 31, 2009. This price decline is reflective of overall price decreases in
many financial
 28




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##### Table of Contents



institution stocks throughout the second half of 2008 and the first quarter of 2009. The
Parkvale price decrease may also be attributable to the investment writedowns recorded in
the September and December 2008 quarters of $5.0 million.
 
 Item 4.
    
    Controls and Procedures
Disclosure controls and procedures are monitored and supervised by Parkvales management,
including the CEO and CFO, regarding the effectiveness of the design and operation of
Parkvales disclosure controls and procedures. Parkvales management, including the CEO and
CFO, concluded that Parkvales disclosure controls and procedures were effective as of March
31, 2009. There have been no changes in Parkvales internal controls or in other factors
that materially affected, or that are reasonably likely to materially affect, Parkvales
internal controls.
 
 PART II  OTHER INFORMATION
 Item 1. Legal Proceedings
    
    None
 Item 1A.
    
    Risk Factors
Risk Factor disclosures are presented at June 30, 2008 in Item 1A of the Corporations Form
10-K, filed with the SEC on September 12, 2008. Management believes that there have been no
material changes in Parkvales risk factors since June 30, 2008.
 Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
 (a)
    
    On December 23, 2008, the Corporation issued 31,762 shares of preferred stock and a ten-year
warrant to purchase up to 376,327 shares of common stock that were not initially registered under the
Securities Act of 1933. As required under the Capital Purchase Program, a Form S-3 was filed
on January 22, 2009 and declared effective by the SEC on February 12, 2009.(b)
    
    Not applicable(c)
    
    During the quarter ended March 31, 2009, Parkvale did not purchase shares of common stock.
  Total Number ofShares Purchased as
    
    Maximum Number ofTotal Number
    
    Average
    
    Part of Publicly
    
    Shares that May Yet Beof Shares
    
    Price Paid
    
    Announced Plans
    
    Purchased Under thePeriod
    
    Purchased
    
    Per Share
    
    or Programs
    
    Plans or Programs (1)January 1-31, 2009
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    219,000February 1-28, 2009
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    219,000March 1-31, 2009
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    219,000
 
 (1)
    
    The repurchase program approved on June 19, 2008 is scheduled to expire on June 30, 2009. Share
repurchases were suspended due to the restrictions by the US Treasury prohibiting share repurchases
without prior approval. 29




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Item 3. Defaults Upon Senior Securities
    
    NoneItem 4. Submission of Matters to a Vote of Security Holders
    
    NoneItem 5. Other Information
    
    NoneItem 6. Exhibits The following exhibits are filed here within:
 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
2002.99.1
    
    Press release dated April 30, 2009.
 
 SIGNATURES
  Parkvale Financial CorporationDATE:
May 6, 2009
    
    By:
    
    /s/ Robert J. McCarthy, Jr.Robert J. McCarthy, Jr.President andChief Executive OfficerDATE: May 6, 2009
    
    By:
    
    /s/ Timothy G. RubritzTimothy G. RubritzVice President, Treasurer andChief Financial Officer
 30