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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549





FORM 10-Q/A

Amendment No. 1







|x | 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

(Exact name of registrant as specified in its charter)







|                         |  |                                        
|------------------------ |  | ---------------------------------------
|Pennsylvania             |  | 25-1556590                             
|(State of incorporation) |  | (I.R.S. Employer Identification Number)

4220 William Penn Highway, Monroeville, Pennsylvania 15146

(Address of principal executive offices; zip code)

Registrants telephone number, including area code: (412) 373-7200





Indicate by check mark whether
the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90
days.    Yes  x    No   ̈

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule
405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes   ̈    No   ̈

Indicate
by check mark whether the registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer. See definition of accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act. (Check one):



|                        |  |                                                |  |                           |  |  
|----------------------- |  | ---------------------------------------------- |  | ------------------------- |  | -
|Large accelerated filer |  |  ̈                                              |  | Accelerated filer         |  |  ̈
|                        |  |                                                | 
|Non-accelerated filer   |  |  ̈  (Do not check if smaller reporting company) |  | Smaller reporting company |  | x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act).    Yes   ̈    No  x

The closing sales price of the Registrants Common Stock on November 8, 2010 was $8.33 per share.

Number of shares of Common Stock outstanding as of November 8, 2010 was 5,529,211.









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PARKVALE FINANCIAL CORPORATION

INDEX



|                                                                                                                    |  |      |       | 
|------------------------------------------------------------------------------------------------------------------- |  | ---- | ----- | 
|                                                                                                                    |  | Page |      
|Part I. Financial Information                                                                                       |  |      |       | 
|                                                                                                                    | 
|Item 1.                                                                                                             |  |      |       | 
|Consolidated Statements of Financial Condition as of September 30, 2010 (Unaudited) and June 
30, 2010              |  |      | 3     | 
|                                                                                                                    | 
|Consolidated Statements of Operations for the three months ended September 
30, 2010 and 2009 (Unaudited)           |  |      | 5     | 
|                                                                                                                    | 
|Consolidated Statements of Cash Flows for the three months ended September 
30, 2010 and 2009 (Unaudited)           |  |      | 6-7   | 
|                                                                                                                    | 
|Consolidated Statements of Shareholders Equity for the three months ended September 
30, 2010 and 2009 (Unaudited) |  |      | 7-8   | 
|                                                                                                                    | 
|Notes to Unaudited Interim Consolidated Financial Statements                                                        |  |      | 8-28  | 
|                                                                                                                    | 
|Item 2.                                                                                                             |  |      |       | 
|Managements Discussion and Analysis of Financial Condition and Results of Operations                               |  |      | 28-38 | 
|                                                                                                                    | 
|Item 3.                                                                                                             |  |      |       | 
|Quantitative and Qualitative Disclosures about Market Risk                                                          |  |      | 38    | 
|                                                                                                                    | 
|Item 4.                                                                                                             |  |      |       | 
|Controls and Procedures                                                                                             |  |      | 38    | 
|                                                                                                                    | 
|Part II - Other Information                                                                                         |  |      | 39    | 
|                                                                                                                    | 
|Signatures                                                                                                          |  |      | 40    | 
|                                                                                                                    | 
|Exhibits                                                                                                            |  |      |       | 
|                                                                                                                    | 
|EX - 31.1                                                                                                           |  |      |       | 
|                                                                                                                    | 
|EX - 31.2                                                                                                           |  |      |       | 
|                                                                                                                    | 
|EX - 32.1                                                                                                           |  |      |       | 



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PART I.

Explanatory Note

This Amendment on Form 10-Q/A amends our Quarterly
Report on Form 10-Q for the quarterly period ended September 30, 2010, filed with the Securities and Exchange Commission (SEC) on November 12, 2010. We are filing this Amendment to correct the consolidated financial
statements of Parkvale Financial Corporation (the Company) as of September 30, 2010 and June 30, 2010 and for each of the periods ended September 30, 2010 and 2009.

The Companys management along with its independent registered public accounting firm, during the course of the Companys
fiscal 2011 annual audit of financial results and application of financial controls, identified a deficiency that represented a material weakness in internal control over financial reporting. While a remediation plan was implemented to correct the
material weakness in internal control over financial reporting, in finalizing its Form 10-K for the year ended June 30, 2011, management together with its independent registered public accounting firm identified the existence of an
under-accrual of FDIC deposit insurance expense for the fiscal years ended June 30, 2010 and 2009 resulting from a previous change in FDIC regulations regarding the manner in which deposit insurance assessments were collected. The cumulative
effect during fiscal 2009 through fiscal 2010 is a $1.1 million increase to the reported net loss to common shareholders. As a result of these adjustments, management with the concurrence of the Board of Directors has determined that the
Companys financial statements for fiscal 2010 and 2009 should be restated. This Form 10-Q amendment is being filed to reflect the restated numbers as of September 30, 2010 and June 30, 2010 and for the three months ended
September 30, 2009.

Item 1.

PARKVALE FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(Dollar amounts in thousands, except share data)



|                                                                                                               |  |                   |           |  |               |   |           | 
|-------------------------------------------------------------------------------------------------------------- |  | ----------------- | --------- |  | ------------- | - | --------- | 
|                                                                                                               |  | September 30,2010 |           |  | June 30,2010  |  
|                                                                                                               |  | (As Restated)     |           |  | (As Restated) |  
|                                                                                                               |  | (Unaudited)       |           |  |               |  
|ASSETS                                                                                                         |  |                   |           |  |               |   |           | 
|Cash and noninterest-earning deposits                                                                          |  | $                 | 16,043    |  |               | $ | 17,736    | 
|Federal funds sold                                                                                             |  |                   | 169,333   |  |               |   | 135,773   | 
|                                                                                                               |  |                   |           |  |               |   |           | 
|Cash and cash equivalents                                                                                      |  |                   | 185,376   |  |               |   | 153,509   | 
|Interest-earning deposits in other banks                                                                       |  |                   | 5,876     |  |               |   | 801       | 
|Investment securities available for sale at fair value (cost of $5,974 at September 30 and $65,778 at
June 30) |  |                   | 5,944     |  |               |   | 65,770    | 
|Investment securities held to maturity (fair value of $460,809 at September 30 and $437,931 at June 30)        |  |                   | 463,377   |  |               |   | 443,452   | 
|Federal Home Loan Bank Stock, at cost                                                                          |  |                   | 14,357    |  |               |   | 14,357    | 
|Loans, net of allowance of $19,624 at September 30 and $19,209 at June 30                                      |  |                   | 1,014,608 |  |               |   | 1,032,363 | 
|Foreclosed real estate, net                                                                                    |  |                   | 9,327     |  |               |   | 8,637     | 
|Office properties and equipment, net                                                                           |  |                   | 17,225    |  |               |   | 17,374    | 
|Goodwill                                                                                                       |  |                   | 25,634    |  |               |   | 25,634    | 
|Intangible assets                                                                                              |  |                   | 2,650     |  |               |   | 2,877     | 
|Prepaid expenses and other assets                                                                              |  |                   | 75,258    |  |               |   | 76,535    | 
|                                                                                                               |  |                   |           |  |               |   |           | 
|Total assets                                                                                                   |  | $                 | 1,819,632 |  |               | $ | 1,841,309 | 
|                                                                                                               |  |                   |           |  |               |   |           | 



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|                                                                                                                    |  |   |           |   |  |   |           |  
|------------------------------------------------------------------------------------------------------------------- |  | - | --------- | - |  | - | --------- | -
|LIABILITIES AND SHAREHOLDERS EQUITY                                                                                |  |   |           |   |  |   |           |  
|LIABILITIES                                                                                                         |  |   |           |   |  |   |           |  
|Deposits                                                                                                            |  | $ | 1,480,482 |   |  | $ | 1,488,073 |  
|Advances from Federal Home Loan Bank                                                                                |  |   | 175,916   |   |  |   | 185,973   |  
|Term debt                                                                                                           |  |   | 23,125    |   |  |   | 23,750    |  
|Other debt                                                                                                          |  |   | 11,848    |   |  |   | 13,865    |  
|Advance payments from borrowers for taxes and insurance                                                             |  |   | 4,312     |   |  |   | 7,526     |  
|Other liabilities                                                                                                   |  |   | 5,552     |   |  |   | 4,249     |  
|                                                                                                                    |  |   |           |   |  |   |           |  
|Total liabilities                                                                                                   |  |   | 1,701,235 |   |  |   | 1,723,436 |  
|                                                                                                                    |  |   |           |   |  |   |           |  
|SHAREHOLDERS EQUITY                                                                                                |  |   |           |   |  |   |           |  
|Preferred stock ($1.00 par value, liquidation preference $1,000; 5,000,000 shares authorized; 31,762 shares
issued) |  |   | 31,762    |   |  |   | 31,762    |  
|Common stock ($1.00 par value; 10,000,000 shares authorized; 6,734,894 shares issued)                               |  |   | 6,735     |   |  |   | 6,735     |  
|Additional paid-in capital                                                                                          |  |   | 2,734     |   |  |   | 2,734     |  
|Treasury 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                                                                                                   |  |   | 116,964   |   |  |   | 115,248   |  
|                                                                                                                    |  |   |           |   |  |   |           |  
|Total shareholders equity                                                                                          |  |   | 118,397   |   |  |   | 117,873   |  
|                                                                                                                    |  |   |           |   |  |   |           |  
|Total liabilities and shareholders equity                                                                          |  | $ | 1,819,632 |   |  | $ | 1,841,309 |  
|                                                                                                                    |  |   |           |   |  |   |           |  



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PARKVALE FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(Dollar amounts in thousands, except per share data)

(Unaudited)



|                                                                   |  |                    |        |   |               |   |        |  
|------------------------------------------------------------------ |  | ------------------ | ------ | - | ------------- | - | ------ | -
|                                                                   |  | Three months ended |       
|                                                                   |  | September 30,      |       
|                                                                   |  | 2010               |        |   | 2009          |  
|                                                                   |  |                    |        |   | (As Restated) |  
|Interest Income:                                                   |  |                    |        |   |               |   |        |  
|Loans                                                              |  | $                  | 13,047 |   |               | $ | 14,792 |  
|Investments                                                        |  |                    | 3,670  |   |               |   | 5,132  |  
|Federal funds sold                                                 |  |                    | 122    |   |               |   | 98     |  
|                                                                   |  |                    |        |   |               |   |        |  
|Total interest income                                              |  |                    | 16,839 |   |               |   | 20,022 |  
|                                                                   |  |                    |        |   |               |   |        |  
|Interest Expense:                                                  |  |                    |        |   |               |   |        |  
|Deposits                                                           |  |                    | 5,228  |   |               |   | 7,993  |  
|Borrowings                                                         |  |                    | 2,752  |   |               |   | 2,711  |  
|                                                                   |  |                    |        |   |               |   |        |  
|Total interest expense                                             |  |                    | 7,980  |   |               |   | 10,704 |  
|                                                                   |  |                    |        |   |               |   |        |  
|Net interest income                                                |  |                    | 8,859  |   |               |   | 9,318  |  
|Provision for loan losses                                          |  |                    | 1,034  |   |               |   | 2,289  |  
|                                                                   |  |                    |        |   |               |   |        |  
|Net interest income after provision for loan losses                |  |                    | 7,825  |   |               |   | 7,029  |  
|                                                                   |  |                    |        |   |               |   |        |  
|Noninterest 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  |   |               |   | 1,652  |  
|Other service charges and fees                                     |  |                    | 381    |   |               |   | 367    |  
|Net gain on sale of assets                                         |  |                    | 1,172  |   |               |   | 1,102  |  
|Other                                                              |  |                    | 770    |   |               |   | 543    |  
|                                                                   |  |                    |        |   |               |   |        |  
|Total noninterest income                                           |  |                    | 3,086  |   |               |   | 903    |  
|                                                                   |  |                    |        |   |               |   |        |  
|Noninterest Expense:                                               |  |                    |        |   |               |   |        |  
|Compensation and employee benefits                                 |  |                    | 3,928  |   |               |   | 3,807  |  
|Office occupancy                                                   |  |                    | 1,067  |   |               |   | 1,111  |  
|Marketing                                                          |  |                    | 84     |   |               |   | 67     |  
|FDIC insurance                                                     |  |                    | 894    |   |               |   | 768    |  
|Office supplies, telephone and postage                             |  |                    | 472    |   |               |   | 470    |  
|Other                                                              |  |                    | 1,605  |   |               |   | 1,569  |  
|                                                                   |  |                    |        |   |               |   |        |  
|Total noninterest expense                                          |  |                    | 8,050  |   |               |   | 7,792  |  
|                                                                   |  |                    |        |   |               |   |        |  
|Income before income taxes                                         |  |                    | 2,861  |   |               |   | 140    |  
|Income tax expense (benefit)                                       |  |                    | 638    |   |               |   | (585   | )
|                                                                   |  |                    |        |   |               |   |        |  
|Net income                                                         |  |                    | 2,223  |   |               |   | 725    |  
|Less: Preferred stock dividend                                     |  |                    | 397    |   |               |   | 397    |  
|                                                                   |  |                    |        |   |               |   |        |  
|Income to common shareholders                                      |  | $                  | 1,826  |   |               | $ | 328    |  
|                                                                   |  |                    |        |   |               |   |        |  
|Net income per common basic share                                  |  | $                  | 0.33   |   |               | $ | 0.06   |  
|Net income per common diluted share                                |  | $                  | 0.33   |   |               | $ | 0.06   |  



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PARKVALE FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollar amounts in thousands)

(Unaudited)



|                                                               |  |                    |          |   |               |   |         |  
|-------------------------------------------------------------- |  | ------------------ | -------- | - | ------------- | - | ------- | -
|                                                               |  | Three months ended |         
|                                                               |  | September 30,      |         
|                                                               |  | 2010               |          |   | 2009          |  
|                                                               |  |                    |          |   | (As Restated) |  
|Cash flows from operating activities:                          |  |                    |          |   |               |   |         |  
|Interest received                                              |  | $                  | 17,438   |   |               | $ | 20,196  |  
|Loan fees received                                             |  |                    | 159      |   |               |   | 149     |  
|Other fees and commissions received                            |  |                    | 2,635    |   |               |   | 2,284   |  
|Interest 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    |   |               |   | 3,477   |  
|                                                               |  |                    |          |   |               |   |         |  
|Cash flows from investing activities:                          |  |                    |          |   |               |   |         |  
|Proceeds from sale of investment securities available for sale |  |                    | 50,705   |   |               |   | 1,405   |  
|Proceeds from maturities of investment securities              |  |                    | 97,493   |   |               |   | 69,454  |  
|Purchase 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   | ) |               |   | 3,357   |  
|Loan sales                                                     |  |                    |         |   |               |   | 7,293   |  
|Principal collected on loans                                   |  |                    | 64,344   |   |               |   | 72,177  |  
|Loans made to customers, net of loans in process               |  |                    | (48,312  | ) |               |   | (44,897 | )
|Other                                                          |  |                    | (66      | ) |               |   | (49     | )
|                                                               |  |                    |          |   |               |   |         |  
|Net cash provided by investing activities                      |  |                    | 47,946   |   |               |   | 17,166  |  
|                                                               |  |                    |          |   |               |   |         |  
|Cash flows from financing activities:                          |  |                    |          |   |               |   |         |  
|Net increase in checking and savings accounts                  |  |                    | 15,094   |   |               |   | 23,146  |  
|Net (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   |   |               |   | 17,170  |  
|Cash and cash equivalents at beginning of period               |  |                    | 153,509  |   |               |   | 165,891 |  
|                                                               |  |                    |          |   |               |   |         |  
|Cash and cash equivalents at end of period                     |  | $                  | 185,376  |   |               | $ | 183,061 |  
|                                                               |  |                    |          |   |               |   |         |  



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|                                                                                  |  |                    |       |   |               |   |        |  
|--------------------------------------------------------------------------------- |  | ------------------ | ----- | - | ------------- | - | ------ | -
|                                                                                  |  | Three months ended |      
|                                                                                  |  | September 30,      |      
|                                                                                  |  | 2010               |       |   | 2009          |  
|                                                                                  |  |                    |       |   | (As Restated) |  
|Reconciliation of net income to net cash provided by operating activities:        |  |                    |       |   |               |   |        |  
|Net income                                                                        |  | $                  | 2,223 |   |               | $ | 725    |  
|Adjustments to reconcile net income to net cash provided by operating activities: |  |                    |       |   |               |   |        |  
|Depreciation and amortization                                                     |  |                    | 442   |   |               |   | 486    |  
|Accretion and amortization of loan fees and discounts                             |  |                    | (34   | ) |               |   | 27     |  
|Loan fees collected and deferred                                                  |  |                    | (1    | ) |               |   | 31     |  
|Provision for loan losses                                                         |  |                    | 1,034 |   |               |   | 2,289  |  
|Net writedown (gain) on sale of securities                                        |  |                    | (176  | ) |               |   | 1,659  |  
|Decrease in accrued interest receivable                                           |  |                    | 612   |   |               |   | 705    |  
|Decrease (increase) in other assets                                               |  |                    | 665   |   |               |   | (1,152 | )
|Increase in accrued interest payable                                              |  |                    | 173   |   |               |   | 11     |  
|Increase (decrease) in other liabilities                                          |  |                    | 3,110 |   |               |   | (1,304 | )
|                                                                                  |  |                    |       |   |               |   |        |  
|Total adjustments                                                                 |  |                    | 5,825 |   |               |   | 2,752  |  
|                                                                                  |  |                    |       |   |               |   |        |  
|Net cash provided by operating activities                                         |  | $                  | 8,048 |   |               | $ | 3,477  |  
|                                                                                  |  |                    |       |   |               |   |        |  

For purposes of reporting cash flows, cash and cash equivalents include cash and noninterest earning deposits, and
federal funds sold. Generally, federal funds are sold for one-day periods. Loans transferred to foreclosed assets aggregated $2.5 million for the three months ended September 30, 2010 and $1.2 million for the three months ended
September 30, 2009, and is included in the principal collected on loans component of the consolidated statements of cash flows. Loans were transferred to foreclosed assets at the lesser of their carrying value or indicated fair value, less
costs to sell.

PARKVALE FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY

(Dollars in thousands, except share data)

(Unaudited)



|                                                                                      |  |                |        |  |             |   |       |                          |  |   |               |  |  |                                            |        |   |                  |  |          |                          |  |   |         |   |  |   |         |  
|------------------------------------------------------------------------------------- |  | -------------- | ------ |  | ----------- | - | ----- | ------------------------ |  | - | ------------- |  |  | ------------------------------------------ | ------ | - | ---------------- |  | -------- | ------------------------ |  | - | ------- | - |  | - | ------- | -
|                                                                                      |  | PreferredStock |        |  | CommonStock |   |       | AdditionalPaid-inCapital |  |   | TreasuryStock |  |  | AccumulatedOtherComprehensiveIncome (Loss) |        |   | RetainedEarnings |  |          | TotalShareholdersEquity | 
|Balance, June 30, 2010, as restated                                                   |  | $              | 31,762 |  |             | $ | 6,735 |                          |  | $ | 2,734         |  |  | ($                                         | 25,193 | ) |                  |  | ($13,413 | )                        |  | $ | 115,248 |   |  | $ | 117,873 |  
|Net income, three months ended September 30, 2010                                     |  |                |        |  |             |   |       |                          |  |   |               |  |  |                                            |        |   |                  |  |          |                          |  |   | 2,223   |   |  |   | 2,223   |  
|Accumulated 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                                                                  |  |                |        |  |             |   |       |                          |  |   |               |  |  |                                            |        |   |                  |  |          |                          |  |   |         |   |  |   | 1,031   |  
|Dividends declared on common stock at $0.02 per share                                 |  |                |        |  |             |   |       |                          |  |   |               |  |  |                                            |        |   |                  |  |          |                          |  |   | (110    | ) |  |   | (110    | )
|Dividends on preferred stock                                                          |  |                |        |  |             |   |       |                          |  |   |               |  |  |                                            |        |   |                  |  |          |                          |  |   | (397    | ) |  |   | (397    | )
|                                                                                      |  |                |        |  |             |   |       |                          |  |   |               |  |  |                                            |        |   |                  |  |          |                          |  |   |         |   |  |   |         |  
|Balance, September 30, 2010, as restated                                              |  | $              | 31,762 |  |             | $ | 6,735 |                          |  | $ | 2,734         |  |  | ($                                         | 25,193 | ) |                  |  | ($14,605 | )                        |  | $ | 116,964 |   |  | $ | 118,397 |  
|                                                                                      |  |                |        |  |             |   |       |                          |  |   |               |  |  |                                            |        |   |                  |  |          |                          |  |   |         |   |  |   |         |  



7



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##### Table of Contents

NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Dollar amounts in thousands, except share data)



|                                                                                      |  |                |        |  |             |   |       |                          |  |   |               |  |  |                                            |          |   |                  |  |        |                          |  |   |         |   |  |   |         |  
|------------------------------------------------------------------------------------- |  | -------------- | ------ |  | ----------- | - | ----- | ------------------------ |  | - | ------------- |  |  | ------------------------------------------ | -------- | - | ---------------- |  | ------ | ------------------------ |  | - | ------- | - |  | - | ------- | -
|                                                                                      |  | PreferredStock |        |  | CommonStock |   |       | AdditionalPaid-inCapital |  |   | TreasuryStock |  |  | AccumulatedOtherComprehensiveIncome (Loss) |          |   | RetainedEarnings |  |        | TotalShareholdersEquity | 
|Balance, June 30, 2009, as restated                                                   |  | $              | 31,762 |  |             | $ | 6,735 |                          |  | $ | 4,116         |  |  |                                            | ($27,314 | ) |                  |  | ($10   | )                        |  | $ | 134,735 |   |  | $ | 150,024 |  
|Net income, three months ended September 30, 2009, as restated                        |  |                |        |  |             |   |       |                          |  |   |               |  |  |                                            |          |   |                  |  |        |                          |  |   | 725     |   |  |   | 725     |  
|Accumulated other comprehensive Income (loss):                                        |  |                |        |  |             |   |       |                          |  |   |               |  |  |                                            |          |   |                  |  |        |                          |  |   |         |   |  |   |         |  
|Change in swap liability                                                              |  |                |        |  |             |   |       |                          |  |   |               |  |  |                                            |          |   |                  |  | (281   | )                        |  |   |         |   |  |   |         |  
|Change in unrealized gain (loss) on securities, net of deferred tax benefit of $1,263 |  |                |        |  |             |   |       |                          |  |   |               |  |  |                                            |          |   |                  |  | 2,197  |                          |  |   |         |   |  |   |         |  
|Reclassification adjustment, net of taxes of $(1,008)                                 |  |                |        |  |             |   |       |                          |  |   |               |  |  |                                            |          |   |                  |  | (1,753 | )                        |  |   |         |   |  |   | 163     |  
|                                                                                      |  |                |        |  |             |   |       |                          |  |   |               |  |  |                                            |          |   |                  |  |        |                          |  |   |         |   |  |   |         |  
|Comprehensive income                                                                  |  |                |        |  |             |   |       |                          |  |   |               |  |  |                                            |          |   |                  |  |        |                          |  |   |         |   |  |   | 888     |  
|Dividends declared on common stock at $0.05 per share                                 |  |                |        |  |             |   |       |                          |  |   |               |  |  |                                            |          |   |                  |  |        |                          |  |   | (271    | ) |  |   | (271    | )
|Dividends on preferred stock                                                          |  |                |        |  |             |   |       |                          |  |   |               |  |  |                                            |          |   |                  |  |        |                          |  |   | (397    | ) |  |   | (397    | )
|                                                                                      |  |                |        |  |             |   |       |                          |  |   |               |  |  |                                            |          |   |                  |  |        |                          |  |   |         |   |  |   |         |  
|Balance, September 30, 2009, as restated                                              |  | $              | 31,762 |  |             | $ | 6,735 |                          |  | $ | 4,116         |  |  |                                            | ($27,314 | ) |                  |  | 153    |                          |  | $ | 134,792 |   |  | $ | 150,244 |  
|                                                                                      |  |                |        |  |             |   |       |                          |  |   |               |  |  |                                            |          |   |                  |  |        |                          |  |   |         |   |  |   |         |  

RESTATEMENT OF CONSOLIDATED FINANCIAL STATEMENTS

The Companys management along with its independent registered public accounting firm, during the course of the Companys fiscal
2011 annual audit of financial results and application of financial controls, identified a deficiency that represented a material weakness in internal control over financial reporting. While a remediation plan was implemented to correct the material
weakness in internal control over financial reporting, in finalizing its Form 10-K for the year ended June 30, 2011, management together with its independent registered public accounting firm identified the existence of an under-accrual of FDIC
deposit insurance expense for the fiscal years ended June 30, 2010 and 2009 resulting from a previous change in FDIC regulations regarding the manner in which deposit insurance assessments were collected. The cumulative effect during fiscal
2009 through fiscal 2010 is a $1.1 million increase to the reported net loss to common shareholders. As a result of these adjustments, management with the concurrence of the Board of Directors has determined that the Companys financial
statements for fiscal 2010 and 2009 should be restated. This Form 10-Q amendment is being filed to reflect the restated numbers as of September 30, 2010 and June 30, 2010 and for the three months ended September 30, 2009.

The following tables set forth the consolidated restated financial statements as of September 30, 2010 and June 30, 2010 and
for the three months ended September 30, 2009 previously filed in the Companys quarterly report on Form 10-Q for the period ended September 30, 2010.

The following is a summary of the adjustments to our previously issued consolidated statements of financial condition as of September 30, 2010 and June 30, 2010:



8



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##### Table of Contents

NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(Dollar amounts in thousands, except share data)



CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION



|                                                                                                                    |  |                 |           |   |            |  |         |                 |  |   |                 |   |  |            |           |   |                 |  |         |   |  |   |           |  
|------------------------------------------------------------------------------------------------------------------- |  | --------------- | --------- | - | ---------- |  | ------- | --------------- |  | - | --------------- | - |  | ---------- | --------- | - | --------------- |  | ------- | - |  | - | --------- | -
|                                                                                                                    |  | September 30,   |           |   | June 30,   | 
|(Dollar amounts in thousands)                                                                                       |  | 2010As Reported |           |   | Adjustment |  |         | 2010As Restated |  |   | 2010As Reported |   |  | Adjustment |           |   | 2010As Restated | 
|                                                                                                                    |  | (Unaudited)     |           |   |            |  |         | (Unaudited)     |  |   |                 |   |  |            |           |   |                 | 
|Assets                                                                                                              |  |                 |           |   |            |  |         |                 |  |   |                 |   |  |            |           |   |                 |  |         |   |  |   |           |  
|Cash and noninterest-earning deposits                                                                               |  | $               | 16,043    |   |            |  |         |                 |  | $ | 16,043          |   |  | $          | 17,736    |   |                 |  |         |   |  | $ | 17,736    |  
|Federal funds sold                                                                                                  |  |                 | 169,333   |   |            |  |         |                 |  |   | 169,333         |   |  |            | 135,773   |   |                 |  |         |   |  |   | 135,773   |  
|                                                                                                                    |  |                 |           |   |            |  |         |                 |  |   |                 |   |  |            |           |   |                 |  |         |   |  |   |           |  
|Cash and cash equivalents                                                                                           |  |                 | 185,376   |   |            |  |         |                 |  |   | 185,376         |   |  |            | 153,509   |   |                 |  |         |   |  |   | 153,509   |  
|Interest-earning deposits in other banks                                                                            |  |                 | 5,876     |   |            |  |         |                 |  |   | 5,876           |   |  |            | 801       |   |                 |  |         |   |  |   | 801       |  
|Investment securities available for sale, at fair value (cost of $5,974 at September 30 and $65,778 at
June 30)     |  |                 | 5,944     |   |            |  |         |                 |  |   | 5,944           |   |  |            | 65,770    |   |                 |  |         |   |  |   | 65,770    |  
|Investment securities held to maturity (fair value of $460,809 at September 30 and $437,931 at June 30)             |  |                 | 463,377   |   |            |  |         |                 |  |   | 463,377         |   |  |            | 443,452   |   |                 |  |         |   |  |   | 443,452   |  
|Federal Home Loan Bank Stock, at cost                                                                               |  |                 | 14,357    |   |            |  |         |                 |  |   | 14,357          |   |  |            | 14,357    |   |                 |  |         |   |  |   | 14,357    |  
|Loans, net of allowance of $19,624 at September 30 and $19,209 at June 30                                           |  |                 | 1,014,608 |   |            |  |         |                 |  |   | 1,014,608       |   |  |            | 1,032,363 |   |                 |  |         |   |  |   | 1,032,363 |  
|Foreclosed real estate, net                                                                                         |  |                 | 9,327     |   |            |  |         |                 |  |   | 9,327           |   |  |            | 8,637     |   |                 |  |         |   |  |   | 8,637     |  
|Office properties and equipment, net                                                                                |  |                 | 17,225    |   |            |  |         |                 |  |   | 17,225          |   |  |            | 17,374    |   |                 |  |         |   |  |   | 17,374    |  
|Goodwill                                                                                                            |  |                 | 25,634    |   |            |  |         |                 |  |   | 25,634          |   |  |            | 25,634    |   |                 |  |         |   |  |   | 25,634    |  
|Intangible assets and deferred charges                                                                              |  |                 | 2,650     |   |            |  |         |                 |  |   | 2,650           |   |  |            | 2,877     |   |                 |  |         |   |  |   | 2,877     |  
|Prepaid expenses and other assets (a)                                                                               |  |                 | 76,329    |   |            |  | (1,071  | )               |  |   | 75,258          |   |  |            | 77,606    |   |                 |  | (1,071  | ) |  |   | 76,535    |  
|                                                                                                                    |  |                 |           |   |            |  |         |                 |  |   |                 |   |  |            |           |   |                 |  |         |   |  |   |           |  
|Total assets                                                                                                        |  | $               | 1,820,703 |   |            |  | ($1,071 | )               |  | $ | 1,819,632       |   |  | $          | 1,842,380 |   |                 |  | ($1,071 | ) |  | $ | 1,841,309 |  
|                                                                                                                    |  |                 |           |   |            |  |         |                 |  |   |                 |   |  |            |           |   |                 |  |         |   |  |   |           |  
|Liabilities and Shareholders Equity                                                                                |  |                 |           |   |            |  |         |                 |  |   |                 |   |  |            |           |   |                 |  |         |   |  |   |           |  
|Liabilities                                                                                                         |  |                 |           |   |            |  |         |                 |  |   |                 |   |  |            |           |   |                
|Deposits                                                                                                            |  | $               | 1,480,482 |   |            |  |         |                 |  | $ | 1,480,482       |   |  | $          | 1,488,073 |   |                 |  |         |   |  | $ | 1,488,073 |  
|Advances from Federal Home Loan Bank                                                                                |  |                 | 175,916   |   |            |  |         |                 |  |   | 175,916         |   |  |            | 185,973   |   |                 |  |         |   |  |   | 185,973   |  
|Other debt                                                                                                          |  |                 | 11,848    |   |            |  |         |                 |  |   | 11,848          |   |  |            | 13,865    |   |                 |  |         |   |  |   | 13,865    |  
|Term Debt                                                                                                           |  |                 | 23,125    |   |            |  |         |                 |  |   | 23,125          |   |  |            | 23,750    |   |                 |  |         |   |  |   | 23,750    |  
|Advance payments from borrowers for taxes and insurance                                                             |  |                 | 4,312     |   |            |  |         |                 |  |   | 4,312           |   |  |            | 7,526     |   |                 |  |         |   |  |   | 7,526     |  
|Other liabilities                                                                                                   |  |                 | 5,552     |   |            |  |         |                 |  |   | 5,552           |   |  |            | 4,249     |   |                 |  |         |   |  |   | 4,249     |  
|                                                                                                                    |  |                 |           |   |            |  |         |                 |  |   |                 |   |  |            |           |   |                 |  |         |   |  |   |           |  
|Total liabilities                                                                                                   |  |                 | 1,701,235 |   |            |  |        |                 |  |   | 1,701,235       |   |  |            | 1,723,436 |   |                 |  |        |   |  |   | 1,723,436 |  
|                                                                                                                    |  |                 |           |   |            |  |         |                 |  |   |                 |   |  |            |           |   |                 |  |         |   |  |   |           |  
|Shareholders Equity                                                                                                |  |                 |           |   |            |  |         |                 |  |   |                 |   |  |            |           |   |                 |  |         |   |  |   |           |  
|Preferred stock ($1.00 par value; liquidation preference $1,000; 5,000,000 shares authorized; 31,762 shares
issued) |  |                 | 31,762    |   |            |  |         |                 |  |   | 31,762          |   |  |            | 31,762    |   |                 |  |         |   |  |   | 31,762    |  
|Common stock ($1.00 par value; 10,000,000 shares authorized; 6,734,894 shares issued)                               |  |                 | 6,735     |   |            |  |         |                 |  |   | 6,735           |   |  |            | 6,735     |   |                 |  |         |   |  |   | 6,735     |  
|Additional paid-in capital                                                                                          |  |                 | 2,734     |   |            |  |         |                 |  |   | 2,734           |   |  |            | 2,734     |   |                 |  |         |   |  |   | 2,734     |  
|Treasury stock at cost - 1,205,683 shares at September 30 and June 30                                               |  |                 | (25,193   | ) |            |  |         |                 |  |   | (25,193         | ) |  |            | (25,193   | ) |                 |  |         |   |  |   | (25,193   | )
|Accumulated other comprehensive (loss)                                                                              |  |                 | (14,605   | ) |            |  |         |                 |  |   | (14,605         | ) |  |            | (13,413   | ) |                 |  |         |   |  |   | (13,413   | )
|Retained earnings (a)                                                                                               |  |                 | 118,035   |   |            |  | (1,071  | )               |  |   | 116,964         |   |  |            | 116,319   |   |                 |  | (1,071  | ) |  |   | 115,248   |  
|                                                                                                                    |  |                 |           |   |            |  |         |                 |  |   |                 |   |  |            |           |   |                 |  |         |   |  |   |           |  
|Total shareholders equity                                                                                          |  | $               | 119,468   |   |            |  | ($1,071 | )               |  | $ | 118,397         |   |  | $          | 118,944   |   |                 |  | ($1,071 | ) |  | $ | 117,873   |  
|                                                                                                                    |  |                 |           |   |            |  |         |                 |  |   |                 |   |  |            |           |   |                 |  |         |   |  |   |           |  
|Total liabilities and shareholders equity                                                                          |  | $               | 1,820,703 |   |            |  | ($1,071 | )               |  | $ | 1,819,632       |   |  | $          | 1,842,380 |   |                 |  | ($1,071 | ) |  | $ | 1,841,309 |  
|                                                                                                                    |  |                 |           |   |            |  |         |                 |  |   |                 |   |  |            |           |   |                 |  |         |   |  |   |           |  



9



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##### Table of Contents

NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(Dollar amounts in thousands, except share data)



|(a) | Adjustment related to the accrual of FDIC deposit insurance expense.
|--- | --------------------------------------------------------------------

The following is a summary of the adjustments to our previously issued consolidated statements of operations for the three months ended September 30, 2009:

CONSOLIDATED STATEMENTS OF OPERATIONS

(Dollar amounts in thousands, except per share data)



|                                                                   |  |                                      |        |   |            |  |        |            |  |   |        |  
|------------------------------------------------------------------ |  | ------------------------------------ | ------ | - | ---------- |  | ------ | ---------- |  | - | ------ | -
|                                                                   |  | Three months endedSeptember 30, 2009 |       
|                                                                   |  | AsReported                           |        |   | Adjustment |  |        | AsRestated | 
|Interest Income:                                                   |  |                                      |        |   |            |  |        |            |  |   |        |  
|Loans                                                              |  | $                                    | 14,792 |   |            |  |        |            |  | $ | 14,792 |  
|Investments                                                        |  |                                      | 5,132  |   |            |  |        |            |  |   | 5,132  |  
|Federal funds sold                                                 |  |                                      | 98     |   |            |  |        |            |  |   | 98     |  
|                                                                   |  |                                      |        |   |            |  |        |            |  |   |        |  
|Total interest income                                              |  |                                      | 20,022 |   |            |  |       |            |  |   | 20,022 |  
|                                                                   |  |                                      |        |   |            |  |        |            |  |   |        |  
|Interest Expense:                                                  |  |                                      |        |   |            |  |        |            |  |   |        |  
|Deposits                                                           |  |                                      | 7,993  |   |            |  |        |            |  |   | 7,993  |  
|Borrowings                                                         |  |                                      | 2,711  |   |            |  |        |            |  |   | 2,711  |  
|                                                                   |  |                                      |        |   |            |  |        |            |  |   |        |  
|Total interest expense                                             |  |                                      | 10,704 |   |            |  |       |            |  |   | 10,704 |  
|                                                                   |  |                                      |        |   |            |  |        |            |  |   |        |  
|Net interest income                                                |  |                                      | 9,318  |   |            |  |       |            |  |   | 9,318  |  
|Provision for loan losses                                          |  |                                      | 2,289  |   |            |  |        |            |  |   | 2,289  |  
|                                                                   |  |                                      |        |   |            |  |        |            |  |   |        |  
|Net interest income after provision for loan losses                |  |                                      | 7,029  |   |            |  |       |            |  |   | 7,029  |  
|                                                                   |  |                                      |        |   |            |  |        |            |  |   |        |  
|Noninterest Income:                                                |  |                                      |        |   |            |  |        |            |  |   |        |  
|Other-than-temporary impairment losses recognized in earnings      |  |                                      | (2,761 | ) |            |  |        |            |  |   | (2,761 | )
|Non-credit related losses recognized in other comprehensive income |  |                                      |       |   |            |  |        |            |  |   |       |  
|Net impairment losses recognized in earnings                       |  |                                      | (2,761 | ) |            |  |        |            |  |   | (2,761 | )
|Service charges on deposit accounts                                |  |                                      | 1,652  |   |            |  |        |            |  |   | 1,652  |  
|Other service charges and fees                                     |  |                                      | 367    |   |            |  |        |            |  |   | 367    |  
|Net gain on sale of assets                                         |  |                                      | 1,102  |   |            |  |        |            |  |   | 1,102  |  
|Other                                                              |  |                                      | 543    |   |            |  |        |            |  |   | 543    |  
|                                                                   |  |                                      |        |   |            |  |        |            |  |   |        |  
|Total noninterest income                                           |  |                                      | 903    |   |            |  |       |            |  |   | 903    |  
|                                                                   |  |                                      |        |   |            |  |        |            |  |   |        |  
|Noninterest Expense:                                               |  |                                      |        |   |            |  |        |            |  |   |        |  
|Compensation and employee benefits                                 |  |                                      | 3,807  |   |            |  |        |            |  |   | 3,807  |  
|Office occupancy                                                   |  |                                      | 1,111  |   |            |  |        |            |  |   | 1,111  |  
|Marketing                                                          |  |                                      | 67     |   |            |  |        |            |  |   | 67     |  
|FDIC insurance (a)                                                 |  |                                      | 568    |   |            |  | 200    |            |  |   | 768    |  
|Office supplies, telephone and postage                             |  |                                      | 470    |   |            |  |        |            |  |   | 470    |  
|Other                                                              |  |                                      | 1,569  |   |            |  |        |            |  |   | 1,569  |  
|                                                                   |  |                                      |        |   |            |  |        |            |  |   |        |  
|Total noninterest expense                                          |  |                                      | 7,592  |   |            |  | 200    |            |  |   | 7,792  |  
|                                                                   |  |                                      |        |   |            |  |        |            |  |   |        |  
|Income before income tax expense                                   |  |                                      | 340    |   |            |  | (200   | )          |  |   | 140    |  
|Income tax (benefit) expense (b)                                   |  |                                      | (515   | ) |            |  | (70    | )          |  |   | (585   | )
|                                                                   |  |                                      |        |   |            |  |        |            |  |   |        |  
|Net income                                                         |  | $                                    | 855    |   |            |  | ($130  | )          |  | $ | 725    |  
|Preferred Stock Dividend                                           |  |                                      | 397    |   |            |  |        |            |  |   | 397    |  
|                                                                   |  |                                      |        |   |            |  |        |            |  |   |        |  
|Income to common stockholders                                      |  | $                                    | 458    |   |            |  | ($130  | )          |  | $ | 328    |  
|                                                                   |  |                                      |        |   |            |  |        |            |  |   |        |  
|Net income per common share:                                       |  |                                      |        |   |            |  |        |            |  |   |        |  
|Basic                                                              |  | $                                    | 0.08   |   |            |  | ($0.02 | )          |  |   | ($0.06 | )
|Diluted                                                            |  | $                                    | 0.08   |   |            |  | ($0.02 | )          |  |   | ($0.06 | )



10



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##### Table of Contents

NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(Dollar amounts in thousands, except share data)



|(a) | Adjustment related to the accrual of FDIC deposit insurance expense.
|--- | --------------------------------------------------------------------

|(b) | Adjustment related to the tax effect of the above adjustment.
|--- | -------------------------------------------------------------

The following is a summary of the adjustments to our previously issued consolidated statements of cash flows for the three months ended September 30, 2009:

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollar amounts in thousands)



|                                                                                  |  |                                       |         |   |              |   |       |            |  |   |         |  
|--------------------------------------------------------------------------------- |  | ------------------------------------- | ------- | - | ------------ | - | ----- | ---------- |  | - | ------- | -
|                                                                                  |  | Three months ended
September 30, 2009 |        
|                                                                                  |  | AsReported                            |         |   | Adjust-ments |   |       | AsRestated | 
|Cash flows from operating activities:                                             |  |                                       |         |   |              |   |       |            |  |   |         |  
|Interest received                                                                 |  | $                                     | 20,196  |   |              |   |       |            |  | $ | 20,196  |  
|Loan fees received                                                                |  |                                       | 149     |   |              |   |       |            |  |   | 149     |  
|Other fees and commissions received                                               |  |                                       | 2,284   |   |              |   |       |            |  |   | 2,284   |  
|Interest paid                                                                     |  |                                       | (10,749 | ) |              |   |       |            |  |   | (10,749 | )
|Cash paid to suppliers and others                                                 |  |                                       | (8,403  | ) |              |   |       |            |  |   | (8,403  | )
|                                                                                  |  |                                       |         |   |              |   |       |            |  |   |         |  
|Net cash provided by operating activities                                         |  |                                       | 3,477   |   |              |   |      |            |  |   | 3,477   |  
|Cash flows from investing activities:                                             |  |                                       |         |   |              |   |       |            |  |   |         |  
|Proceeds from sales of investment securities available for sale                   |  |                                       | 1,405   |   |              |   |       |            |  |   | 1,405   |  
|Proceeds from maturities of investments                                           |  |                                       | 69,454  |   |              |   |       |            |  |   | 69,454  |  
|Purchase of investment securities available for sale                              |  |                                       | (273    | ) |              |   |       |            |  |   | (273    | )
|Purchase of investment securities held to maturity                                |  |                                       | (91,301 | ) |              |   |       |            |  |   | (91,301 | )
|Maturity of deposits in other banks                                               |  |                                       | 3,357   |   |              |   |       |            |  |   | 3,357   |  
|Loans sales                                                                       |  |                                       | 7,293   |   |              |   |       |            |  |   | 7,293   |  
|Principal collected on loans                                                      |  |                                       | 72,177  |   |              |   |       |            |  |   | 72,177  |  
|Loans made to customers, net of loans in process                                  |  |                                       | (44,897 | ) |              |   |       |            |  |   | (44,897 | )
|Other                                                                             |  |                                       | (49     | ) |              |   |       |            |  |   | (49     | )
|                                                                                  |  |                                       |         |   |              |   |       |            |  |   |         |  
|Net cash provided by investing activities                                         |  |                                       | 17,166  |   |              |   |      |            |  |   | 17,166  |  
|Cash flows from financing activities:                                             |  |                                       |         |   |              |   |       |            |  |   |         |  
|Net increase in checking and savings accounts                                     |  |                                       | 23,146  |   |              |   |       |            |  |   | 23,146  |  
|Net (decrease) in certificates of deposit                                         |  |                                       | (15,734 | ) |              |   |       |            |  |   | (15,734 | )
|Repayment of FHLB advances                                                        |  |                                       | (7      | ) |              |   |       |            |  |   | (7      | )
|Net (decrease) in other borrowings                                                |  |                                       | (6,960  | ) |              |   |       |            |  |   | (6,960  | )
|Net (decrease) in borrowers advances for taxes and insurance                     |  |                                       | (3,250  | ) |              |   |       |            |  |   | (3,250  | )
|Dividends paid                                                                    |  |                                       | (668    | ) |              |   |       |            |  |   | (668    | )
|Net cash (used in) financing activities                                           |  |                                       | (3,473  | ) |              |   |      |            |  |   | (3,473  | )
|                                                                                  |  |                                       |         |   |              |   |       |            |  |   |         |  
|Net increase in cash and cash equivalents                                         |  |                                       | 17,170  |   |              |   |      |            |  |   | 17,170  |  
|Cash and cash equivalents at beginning of period                                  |  |                                       | 165,891 |   |              |   |       |            |  |   | 165,891 |  
|                                                                                  |  |                                       |         |   |              |   |       |            |  |   |         |  
|Cash and cash equivalents at end of period                                        |  | $                                     | 183,061 |   |              | $ |      |            |  | $ | 183,061 |  
|                                                                                  |  |                                       |         |   |              |   |       |            |  |   |         |  
|Reconciliation of net income to net cash provided by operating activities:        |  |                                       |         |   |              |   |       |            |  |   |         |  
|Net income                                                                        |  | $                                     | 855     |   |              |   | ($130 | )          |  | $ | 725     |  
|Adjustments to reconcile net income to net cash provided by operating activities: |  |                                       |         |   |              |   |       |            |  |   |         |  
|Depreciation and amortization                                                     |  |                                       | 486     |   |              |   |       |            |  |   | 486     |  
|Accretion and amortization of loan fees and discounts                             |  |                                       | 27      |   |              |   |       |            |  |   | 27      |  
|Loan fees collected and deferred                                                  |  |                                       | 31      |   |              |   |       |            |  |   | 31      |  



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NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(Dollar amounts in thousands, except share data)



|                                           |  |   |        |   |  |   |     |  |  |   |        |  
|------------------------------------------ |  | - | ------ | - |  | - | --- |  |  | - | ------ | -
|Provision for loan losses                  |  |   | 2,289  |   |  |   |     |  |  |   | 2,289  |  
|Net writedown (gain) on sale of securities |  |   | 1,659  |   |  |   |     |  |  |   | 1,659  |  
|Decrease in accrued interest receivable    |  |   | 705    |   |  |   |     |  |  |   | 705    |  
|Decrease (increase) in other assets        |  |   | (1,282 | ) |  |   | 130 |  |  |   | (1,152 | )
|Increase in accrued interest payable       |  |   | 11     |   |  |   |     |  |  |   | 11     |  
|Increase (decrease) in other liabilities   |  |   | (1,304 | ) |  |   |     |  |  |   | (1,304 | )
|                                           |  |   |        |   |  |   |     |  |  |   |        |  
|Total adjustments                          |  |   | 2,622  |   |  |   | 130 |  |  |   | 2,752  |  
|                                           |  |   |        |   |  |   |     |  |  |   |        |  
|Net cash provided by operating activities  |  | $ | 3,477  |   |  | $ |    |  |  | $ | 3,477  |  
|                                           |  |   |        |   |  |   |     |  |  |   |        |  

The following table presents a reconciliation of the effects of adjustments made to the Companys previously
reported consolidated statements of shareholders equity for 2010 and 2009:

CONSOLIDATED STATEMENTS OF
SHAREHOLDERS EQUITY

(Dollar amounts in thousands)



|                                           |  |                |        |  |             |   |       |                          |  |   |               |  |  |                                            |        |   |                  |   |          |                          |  |   |         |   |  |   |         |  
|------------------------------------------ |  | -------------- | ------ |  | ----------- | - | ----- | ------------------------ |  | - | ------------- |  |  | ------------------------------------------ | ------ | - | ---------------- | - | -------- | ------------------------ |  | - | ------- | - |  | - | ------- | -
|                                           |  | PreferredStock |        |  | CommonStock |   |       | AdditionalPaid-InCapital |  |   | TreasuryStock |  |  | AccumulatedOtherComprehensive(Loss) Income |        |   | RetainedEarnings |   |          | TotalShareholdersEquity | 
|Balance at June 30, 2009, As Reported      |  | $              | 31,762 |  |             | $ | 6,735 |                          |  | $ | 4,116         |  |  | ($                                         | 27,314 | ) |                  |   | ($10     | )                        |  | $ | 135,471 |   |  | $ | 150,760 |  
|Restatement Adjustments:                   |  |                |        |  |             |   |       |                          |  |   |               |  |  |                                            |        |   |                  |   |          |                          |  |   |         |   |  |   |         |  
|Net income                                 |  |                |        |  |             |   |       |                          |  |   |               |  |  |                                            |        |   |                  |   |          |                          |  |   | (736    | ) |  |   | (736    | )
|Balance at June 30, 2009 As Restated       |  | $              | 31,762 |  |             | $ | 6,735 |                          |  | $ | 4,116         |  |  | ($                                         | 27,314 | ) |                  |   | ($10     | )                        |  | $ | 134,735 |   |  | $ | 150,024 |  
|Balance at September 30, 2009, As Reported |  | $              | 31,762 |  |             | $ | 6,735 |                          |  | $ | 4,116         |  |  | ($                                         | 27,314 | ) |                  | $ | 153      |                          |  | $ | 135,658 |   |  | $ | 151,110 |  
|Restatement Adjustments:                   |  |                |        |  |             |   |       |                          |  |   |               |  |  |                                            |        |   |                  |   |          |                          |  |   |         |   |  |   |         |  
|Net income                                 |  |                |        |  |             |   |       |                          |  |   |               |  |  |                                            |        |   |                  |   |          |                          |  |   | (130    | ) |  |   | (130    | )
|Cumulative effect of restatement           |  |                |        |  |             |   |       |                          |  |   |               |  |  |                                            |        |   |                  |   |          |                          |  |   | (736    | ) |  |   | (736    | )
|Balance at September 30, 2009, As Restated |  | $              | 31,762 |  |             | $ | 6,735 |                          |  | $ | 4,116         |  |  | ($                                         | 27,314 | ) |                  | $ | 153      |                          |  | $ | 134,792 |   |  | $ | 150,244 |  
|Balance at June 30, 2010, As Reported      |  | $              | 31,762 |  |             | $ | 6,735 |                          |  | $ | 2,734         |  |  | ($                                         | 25,193 | ) |                  |   | ($13,413 | )                        |  | $ | 116,319 |   |  | $ | 118,944 |  
|Restatement Adjustments:                   |  |                |        |  |             |   |       |                          |  |   |               |  |  |                                            |        |   |                  |   |          |                          |  |   |         |   |  |   |         |  
|Net income                                 |  |                |        |  |             |   |       |                          |  |   |               |  |  |                                            |        |   |                  |   |          |                          |  |   | (335    | ) |  |   | (335    | )
|Cumulative effect of restatement           |  |                |        |  |             |   |       |                          |  |   |               |  |  |                                            |        |   |                  |   |          |                          |  |   | (736    | ) |  |   | (736    | )
|Balance at June 30, 2010 As Restated       |  | $              | 31,762 |  |             | $ | 6,735 |                          |  | $ | 2,734         |  |  | ($                                         | 25,193 | ) |                  |   | ($13,413 | )                        |  | $ | 115,248 |   |  | $ | 117,873 |  
|Balance at September 30, 2010, As Reported |  | $              | 31,762 |  |             | $ | 6,735 |                          |  | $ | 2,734         |  |  | ($                                         | 25,193 | ) |                  |   | ($14,605 | )                        |  | $ | 118,035 |   |  | $ | 119,468 |  
|Restatement Adjustments:                   |  |                |        |  |             |   |       |                          |  |   |               |  |  |                                            |        |   |                  |   |          |                          |  |   |         |   |  |   |         |  
|Cumulative effect of restatement           |  |                |        |  |             |   |       |                          |  |   |               |  |  |                                            |        |   |                  |   |          |                          |  |   | (1,071  | ) |  |   | (1,071  | )
|Balance at September 30, 2010, As Restated |  | $              | 31,762 |  |             | $ | 6,735 |                          |  | $ | 2,734         |  |  | ($                                         | 25,193 | ) |                  |   | ($14,605 | )                        |  | $ | 116,964 |   |  | $ | 118,397 |  

STATEMENTS OF OPERATIONS

The statements of operations for the three months ended September 30, 2010 and 2009 are unaudited, but in the opinion of management reflect all adjustments (consisting of only normal recurring
accruals) necessary for a fair presentation of the results of operations for those periods. The results of operations for the three months ended September 30, 2010 are not necessarily indicative of the results that may be expected for fiscal
year ended June 30, 2011. The Annual Report on Form 10-K/A for the year ended June 30, 2010 contains additional information and should be read in conjunction with this report.



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NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(Dollar amounts in thousands, except share data)



RECLASSIFICATION

Certain amounts in prior periods financial statements have been reclassified to conform to the current period presentation. The reclassifications had no significant effect on Parkvales
financial condition or results of operations.

SUBSEQUENT EVENTS

The Corporation evaluated and disclosed all material subsequent events that provide evidence about conditions that existed as of September 30, 2010 through the date the consolidated financial
statements were filed with the Securities and Exchange Commission.

LOANS



|                                            |  |                    |           |   |               |   |           |  
|------------------------------------------- |  | ------------------ | --------- | - | ------------- | - | --------- | -
|                                            |  | September 30, 2010 |           |   | June 30, 2010 |  
|Loans are summarized as follows:            |  |                    |           |   |               |   |           |  
|Mortgage loans:                             |  |                    |           |   |               |   |           |  
|Residential:                                |  |                    |           |   |               |   |           |  
|1-4 Family                                  |  | $                  | 645,836   |   |               | $ | 660,685   |  
|Multifamily                                 |  |                    | 31,702    |   |               |   | 32,104    |  
|Commercial                                  |  |                    | 117,344   |   |               |   | 117,054   |  
|Other                                       |  |                    | 10,320    |   |               |   | 10,833    |  
|                                            |  |                    |           |   |               |   |           |  
|                                            |  |                    | 805,202   |   |               |   | 820,676   |  
|Consumer loans                              |  |                    | 183,985   |   |               |   | 184,207   |  
|Commercial business loans                   |  |                    | 38,657    |   |               |   | 40,445    |  
|Loans on savings accounts                   |  |                    | 5,492     |   |               |   | 5,427     |  
|                                            |  |                    |           |   |               |   |           |  
|                                            |  |                    | 1,033,336 |   |               |   | 1,050,755 |  
|Less: Loans in process                      |  |                    | 44        |   |               |   | 135       |  
|Allowance for loan losses                   |  |                    | 19,624    |   |               |   | 19,209    |  
|Unamortized premiums and deferred loan fees |  |                    | (940      | ) |               |   | (952      | )
|                                            |  |                    |           |   |               |   |           |  
|Loans, net                                  |  | $                  | 1,014,608 |   |               | $ | 1,032,363 |  
|                                            |  |                    |           |   |               |   |           |  

The following summarizes the allowance for loan loss activity for the three-months ended September 30:



|                                      |  |      |        |   |      |   |        |  
|------------------------------------- |  | ---- | ------ | - | ---- | - | ------ | -
|                                      |  | 2010 |        |   | 2009 |  
|Beginning balance                     |  | $    | 19,209 |   |      | $ | 17,960 |  
|Provision for losses - mortgage loans |  |      | 1,002  |   |      |   | 2,246  |  
|Provision for losses - consumer loans |  |      | 32     |   |      |   | 43     |  
|Loans recovered                       |  |      | 28     |   |      |   | 9      |  
|Loans charged off                     |  |      | (647   | ) |      |   | (774   | )
|                                      |  |      |        |   |      |   |        |  
|Ending balance                        |  | $    | 19,624 |   |      | $ | 19,484 |  
|                                      |  |      |        |   |      |   |        |  

Nonaccrual, substandard and doubtful commercial and other real estate loans are assessed for impairment. A loan is
considered impaired when, based on current information and events, it is probable that Parkvale will not be able to collect the scheduled payments of principal and interest when due according to the contractual terms of the loan agreement. Parkvale
excludes certain loans, consistent with US GAAP, in the determination and measurement of impaired loans. The recorded balance of impaired loans was $11,315, which is net of related allowance for loan losses of $5,939 at September 30, 2010
compared to impaired loans of $9,687 net of related allowance for loan losses of $5,195 at June 30, 2010. The recorded balance of impaired loans without a related allowance for loan losses was



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NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(Dollar amounts in thousands, except share data)



$21,553 at September 30, 2010 and $21,041 at June 30, 2010. An allowance for loan loss on these loans was not considered necessary based upon the underlying real estate collateral
value, which exceeds the carrying value of the corresponding loan. The average recorded balance of impaired loans was $30,105 and $27,159 at September 30, 2010 and June 30, 2010, respectively. The amount of interest income that has not
been recognized on impaired loans was $213 for the three months ended September 30, 2010 compared to $20 for the three months ended September 30, 2009. At September 30, 2010, modifications have been performed at market terms on 119
loans totaling $18,881 primarily related to extension of maturity dates and extension of interest-only payment periods of thirty-six months or less. The discounted cash flow analysis related to these modifications results in an insignificant impact
over the life of the loan.

COMPREHENSIVE INCOME

Sources of comprehensive income (loss) not included in net income are unrealized gains and losses on certain investments in equity securities, mortgage backed securities, corporate debt and swaps on
interest rate contracts. For the three months ended September 30, 2010 and 2009, total comprehensive income amounted to $1,031 and $888, respectively.

FAIR VALUE OF FINANCIAL INSTRUMENTS

US GAAP requires a hierarchal disclosure
framework associated with the level of pricing observations utilized in measuring assets and liabilities at fair value. This hierarchy requires the use of observable market data when available. The three broad levels of hierarchy are as follows:



|            |  |                                                                                                                                                                                                                                                                                                                                                                                              
|----------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|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.                                                                                                               

The following table presents the assets and liabilities reported on the consolidated statements of financial condition at
their fair value as of September 30, 2010 by level within the fair value hierarchy. Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. Equity
securities in the available-for-sale (AFS) security portfolio are measured at fair value using quoted market prices and classified within Level I of the valuation hierarchy. OTTI held to maturity investments without quoted market prices
are classified within Level III of the valuation hierarchy. Interest rate swaps are fair valued using other similar financial instruments and are classified as Level II.



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NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(Dollar amounts in thousands, except share data)



Financial Instruments - Measured on a recurring basis



|                      |  |                    |     |  |               |   |       |           |  |   |       |  |  |         |       |  |          |   |     |           |  |   |        |  |  |   |   |  |  |   |        | 
|--------------------- |  | ------------------ | --- |  | ------------- | - | ----- | --------- |  | - | ----- |  |  | ------- | ----- |  | -------- | - | --- | --------- |  | - | ------ |  |  | - | - |  |  | - | ------ | 
|                      |  | September 30, 2010 |     |  | June 30, 2010 |  
|                      |  | Level I            |     |  | Level II      |   |       | Level III |  |   | Total |  |  | Level I |       |  | Level II |   |     | Level III |  |   | Total  | 
|AFS - Non-Agency CMOs |  | $                  |    |  |               | $ |      |           |  | $ |      |  |  | $       |      |  |          | $ |    |           |  | $ | 59,804 |  |  | $ |  |  |  | $ | 59,804 | 
|AFS - Common Equities |  |                    | 661 |  |               |   |      |           |  |   |      |  |  |         | 661   |  |          |   | 682 |           |  |   |       |  |  |   |  |  |  |   | 682    | 
|AFS - Mutual Fund     |  |                    |    |  |               |   | 5,283 |           |  |   |      |  |  |         | 5,283 |  |          |   |    |           |  |   | 5,284  |  |  |   |  |  |  |   | 5,284  | 
|Interest rate swaps   |  |                    |    |  |               |   | 732   |           |  |   |      |  |  |         | 732   |  |          |   |    |           |  |   | 494    |  |  |   |  |  |  |   | 494    | 
|                      |  |                    |     |  |               |   |       |           |  |   |       |  |  |         |       |  |          |   |     |           |  |   |        |  |  |   |   |  |  |   |        | 
|Total                 |  | $                  | 661 |  |               | $ | 6,015 |           |  | $ |      |  |  | $       | 6,676 |  |          | $ | 682 |           |  | $ | 65,582 |  |  | $ |  |  |  | $ | 66,264 | 
|                      |  |                    |     |  |               |   |       |           |  |   |       |  |  |         |       |  |          |   |     |           |  |   |        |  |  |   |   |  |  |   |        | 

The following table presents the assets measured on a nonrecurring basis on the consolidated statements of financial
condition at their fair value as of September 30, 2010. In cases where valuation techniques included inputs that are unobservable and are based on estimates and assumptions developed by the reporting entity based on the best information
available under each circumstance, the asset valuation is classified as Level III inputs. Trust preferred securities and impaired loans are measured using Level III valuation hierarchy. The estimated fair value of foreclosed real estate is
determined by an independent market based appraisal less costs to sell and is classified as Level II.



|                                                   |  |         |   |  |          |  |       |           |  |   |        |  |  |   |        | 
|-------------------------------------------------- |  | ------- | - |  | -------- |  | ----- | --------- |  | - | ------ |  |  | - | ------ | 
|                                                   |  | Level I |   |  | Level II |  |       | Level III |  |   | Total  | 
|Assets Measured on a Nonrecurring Basis:           |  |         |   |  |          |  |       |           |  |   |        |  |  |   |        | 
|OTTI  Held to maturity trust preferred securities |  |         |  |  |          |  |      |           |  | $ | 8,657  |  |  | $ | 8,657  | 
|Impaired loans                                     |  |         |  |  |          |  |      |           |  |   | 11,315 |  |  |   | 11,315 | 
|Impaired foreclosed real estate                    |  |         |  |  |          |  | 2,169 |           |  |   |       |  |  |   | 2,169  | 

The carrying value of impaired loans was $17,254 with an allowance for loss of $5,939 at September 30, 2010, and the
amount of loss reserves transferred from general to specific during the September 30, 2010 quarter related to the impaired loans was $1,090. The carrying value of the foreclosed real estate was $2,969 with an allowance of $800 at
September 30, 2010, and the charge to earnings during the September 30, 2010 quarter related to impaired foreclosed real estate was $62.

US GAAP requires the determination of fair value for certain assets, liabilities and contingent liabilities. The carrying amount approximates fair value for the following categories:

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



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NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(Dollar amounts in thousands, except share data)



The following methods and assumptions were used to estimate the fair value of other classes of financial
instruments as of September 30, 2010 and June 30, 2010.

Investment Securities: The fair values of investment securities
are obtained from the Interactive Data Corporation pricing service and various investment brokers for securities not available from public sources. Prices on certain trust preferred securities were calculated using a discounted cash flow model based
upon market spreads for longer term securities as permitted for Level III assets when market quotes are not available. See accompanying notes for additional information on investment securities.

Loans Receivable: Fair values were estimated by discounting contractual cash flows using interest rates currently being offered for loans
with similar credit quality adjusted for prepayment assumptions.

Deposit Liabilities: Fair values of commercial investment
agreements and fixed-maturity certificates of deposit are estimated using a discounted cash flow calculation that applies interest rates currently being offered on commercial investment agreements or time deposits of similar remaining
maturities.

Advances from Federal Home Loan Bank: Fair value is determined by discounting the advances using estimated
incremental borrowing rates for similar types of borrowing arrangements.

Term Debt and Other Debt: Fair value is
determined by discounting the term and other debt using estimated incremental borrowing rates for similar types of borrowing arrangements.

Off-Balance-Sheet Instruments: Fair value for off-balance-sheet instruments (primarily loan commitments) are estimated using internal valuation models and are limited to fees charged to enter
into similar agreements, taking into account the remaining terms of the agreements and the counterparties credit standing. Unused consumer and commercial lines of credit are assumed equal to the outstanding commitment amount due to the
variable interest rate attached to these lines of credit.

The following table presents additional information about financial assets and
liabilities measured at fair value:



|                                            |  |                    |           |  |               |   |           |            |  |   |               |  |  |   |           | 
|------------------------------------------- |  | ------------------ | --------- |  | ------------- | - | --------- | ---------- |  | - | ------------- |  |  | - | --------- | 
|                                            |  | September 30, 2010 |           |  | June 30, 2010 |  
|                                            |  | Fair Value         |           |  | CarryingValue |   |           | Fair Value |  |   | CarryingValue | 
|Financial Assets:                           |  |                    |           |  |               |   |           |            |  |   |               |  |  |   |           | 
|Cash and non-interest-earning deposits      |  | $                  | 16,043    |  |               | $ | 16,043    |            |  | $ | 17,736        |  |  | $ | 17,736    | 
|Federal funds sold                          |  |                    | 169,333   |  |               |   | 169,333   |            |  |   | 135,773       |  |  |   | 135,773   | 
|Interest-earning deposits in other banks    |  |                    | 5,876     |  |               |   | 5,876     |            |  |   | 801           |  |  |   | 801       | 
|Investment securities available for sale    |  |                    | 5,944     |  |               |   | 5,944     |            |  |   | 65,770        |  |  |   | 65,770    | 
|Investment securities held to maturity      |  |                    | 460,809   |  |               |   | 463,377   |            |  |   | 437,931       |  |  |   | 443,452   | 
|FHLB stock                                  |  |                    | 14,357    |  |               |   | 14,357    |            |  |   | 14,357        |  |  |   | 14,357    | 
|Loans receivable                            |  |                    | 1,072,623 |  |               |   | 1,033,336 |            |  |   | 1,087,009     |  |  |   | 1,050,755 | 
|Accrued interest receivable                 |  |                    | 5,585     |  |               |   | 5,585     |            |  |   | 7,409         |  |  |   | 7,409     | 
|Cash surrender value of BOLI                |  |                    | 25,564    |  |               |   | 25,564    |            |  |   | 25,288        |  |  |   | 25,288    | 
|Financial Liabilities:                      |  |                    |           |  |               |   |           |            |  |   |               |  |  |   |           | 
|Checking, savings and money market accounts |  | $                  | 704,965   |  |               | $ | 704,965   |            |  | $ | 696,364       |  |  | $ | 696,364   | 
|Certificates of deposit                     |  |                    | 792,112   |  |               |   | 768,556   |            |  |   | 812,339       |  |  |   | 791,709   | 
|Advances from Federal Home Loan Bank        |  |                    | 197,768   |  |               |   | 175,916   |            |  |   | 204,699       |  |  |   | 185,973   | 



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NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(Dollar amounts in thousands, except share data)



|                                   |  |   |        |  |  |   |        |  |  |   |        |  |  |   |        | 
|---------------------------------- |  | - | ------ |  |  | - | ------ |  |  | - | ------ |  |  | - | ------ | 
|Term debt                          |  |   | 23,857 |  |  |   | 23,125 |  |  |   | 24,244 |  |  |   | 23,750 | 
|Commercial investment agreements   |  |   | 11,241 |  |  |   | 11,833 |  |  |   | 13,156 |  |  |   | 13,865 | 
|Interest rate swap                 |  |   | 732    |  |  |   | 732    |  |  |   | 494    |  |  |   | 494    | 
|Accrued interest payable           |  |   | 1,076  |  |  |   | 1,076  |  |  |   | 902    |  |  |   | 902    | 
|Off-balance sheet loan instruments |  | $ | 71     |  |  | $ |       |  |  | $ | 118    |  |  | $ |       | 

INVESTMENT SECURITIES

Investment significant accounting policies are as follows:

Securities  Held to
Maturity, Available for Sale and Other than Temporary Impairment

Certain debt securities that management has the positive intent and
ability to hold to maturity are classified as held to maturity and recorded at amortized cost. Trading securities are recorded at fair value with changes in fair value included in earnings. Securities not classified as held to maturity
or trading, including equity securities with readily determinable fair values, are classified as available for sale and recorded at fair value, with unrealized gains and losses excluded from earnings and reported in other comprehensive
income. Purchase premiums and discounts are recognized in interest income using the interest method over the terms of the securities. Gains and losses on the sale of securities are recorded on the trade date and are determined using the specific
identification method.

The recent accounting guidance amends the recognition guidance for other-than-temporary impairments of debt securities
and expands the financial statement disclosures for other-than-temporary impairment losses on debt and equity securities. The recent guidance replaced the intent and ability indication in current guidance by specifying that (a) if a
company does not have the intent to sell a debt security prior to recovery and (b) it is more likely than not that it will not have to sell the debt security prior to recovery, the security would not be considered other-than-temporarily
impaired unless there is a credit loss. When an entity does not intend to sell the security, and it is more likely than not the entity will not have to sell the security before recovery of its cost basis, it will recognize the credit component of an
other-than-temporary impairment of a debt security in earnings and the remaining portion in other comprehensive income. For held-to-maturity debt securities, the amount of an other-than-temporary impairment recorded in other comprehensive income for
the noncredit portion of a previous other-than-temporary impairment should be amortized prospectively over the remaining life of the security on the basis of the timing of future estimated cash flows of the security.

As a result of this guidance, Parkvales consolidated statements of operations as of September 30, 2010 and September 30, 2009 reflects
the full impairment (that is, the difference between the securitys amortized cost basis and fair value) on debt securities that Parkvale intends to sell or would more-likely-than-not be required to sell before the expected recovery of the
amortized cost basis. For available-for-sale and held-to-maturity debt securities that management has no intent to sell and believes that it more-likely-than-not will not be required to sell prior to recovery, only the credit loss component of the
impairment is recognized in earnings, while the non-credit loss is recognized in other comprehensive income, net of applicable taxes.

For
equity securities, when Parkvale has decided to sell an impaired available-for-sale security and Parkvale does not expect the fair value of the security to fully recover before the expected time of sale, the security is deemed other-than-temporarily
impaired in the period in which the decision to sell is made. Parkvale recognizes an impairment loss when the impairment is deemed other-than-temporary even if a decision to sell has not been made.



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(Dollar amounts in thousands, except share data)



Federal Home Loan Bank Stock

Parkvale, as a member of the Federal Home Loan Bank (FHLB) system, is required to maintain an investment in capital stock of the FHLB. Based on redemption provisions of the FHLB, the stock has no quoted
market value and is carried at cost. In December 2008, the FHLB declared a moratorium on the redemption of its stock. At its discretion, the FHLB may declare dividends on the stock. However, since 2009 the FHLB suspended its dividend. Management
reviews for impairment based on the ultimate recoverability of the cost basis in the FHLB stock.

Members do not purchase stock in the FHLB
for the same reasons that traditional equity investors acquire stock in an investor-owned enterprise. Rather, members purchase stock to obtain access to the low-cost products and services offered by the FHLB. Unlike equity securities of traditional
for-profit enterprises, the stock of FHLB does not provide its holders with an opportunity for capital appreciation because, by regulation, FHLB stock can only be purchased, redeemed and transferred at par value.

At September 30, 2010 and June 30, 2010, the Banks FHLB stock totaled $14,357. The Bank accounts for the stock based on U.S. GAAP, which
requires the investment to be carried at cost and evaluated for impairment based on the ultimate recoverability of the par value.

The Bank
periodically evaluates its FHLB investment for possible impairment based on, among other things, the capital adequacy of the FHLB and its overall financial condition. The FHLB exceeds all regulatory capital requirements established by the Federal
Housing Finance Agency, the regulator of the FHLB. Failure by the FHLB to meet this regulatory capital requirement would require an in-depth analysis of other factors including:



| |  |  | 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.
| | - |  | ---------------------------------------------------------------------------------------

The Bank believes its holdings in the stock are ultimately recoverable at par value at September 30, 2010 and, therefore, determined that FHLB stock
was not other-than-temporarily impaired. In addition, the Bank has ample liquidity and does not require redemption of its FHLB stock in the foreseeable future.



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(Dollar amounts in thousands, except share data)



At September 30, 2010 and June 30, 2010, the following comprises Parkvales investment
portfolio:



|                                                    |  |                    |         |  |               |   |         |                |  |   |            |  |  |   |         | 
|--------------------------------------------------- |  | ------------------ | ------- |  | ------------- | - | ------- | -------------- |  | - | ---------- |  |  | - | ------- | 
|                                                    |  | September 30, 2010 |         |  | June 30, 2010 |  
|                                                    |  | Amortized Cost     |         |  | Fair Value    |   |         | Amortized Cost |  |   | Fair Value | 
|Available for Sale Investments                      |  |                    |         |  |               |   |         |                |  |   |            |  |  |   |         | 
|CMOs  Non Agency (Residential)                     |  |                    |        |  |               |   |        |                |  | $ | 59,804     |  |  | $ | 59,804  | 
|Mutual Funds  ARM mortgages                        |  |                    | 5,500   |  |               |   | 5,283   |                |  |   | 5,500      |  |  |   | 5,284   | 
|Common equities                                     |  |                    | 474     |  |               |   | 661     |                |  |   | 474        |  |  |   | 682     | 
|                                                    |  |                    |         |  |               |   |         |                |  |   |            |  |  |   |         | 
|Total available for sale investments                |  | $                  | 5,974   |  |               | $ | 5,944   |                |  | $ | 65,778     |  |  | $ | 65,770  | 
|                                                    |  |                    |         |  |               |   |         |                |  |   |            |  |  |   |         | 
|                                                    |  |                   
|                                                    |  | September 30, 2010 |         |  | June 30, 2010 |  
|                                                    |  | Amortized Cost     |         |  | Fair Value    |   |         | Amortized Cost |  |   | Fair Value | 
|Held to Maturity Investments                        |  |                    |         |  |               |   |         |                |  |   |            |  |  |   |         | 
|U.S. Government and agency obligations              |  | $                  | 176,192 |  |               | $ | 177,635 |                |  | $ | 194,248    |  |  | $ | 195,920 | 
|Municipal obligations                               |  |                    | 23,732  |  |               |   | 24,507  |                |  |   | 21,641     |  |  |   | 22,345  | 
|Corporate debt:                                     |  |                    |         |  |               |   |         |                |  |   |            |  |  |   |         | 
|Short to medium term corporate debt                 |  |                    | 26,062  |  |               |   | 27,239  |                |  |   | 27,112     |  |  |   | 28,352  | 
|Pooled trust preferred securities                   |  |                    | 21,200  |  |               |   | 16,440  |                |  |   | 24,229     |  |  |   | 16,849  | 
|Individual trust preferred securities               |  |                    | 9,328   |  |               |   | 8,254   |                |  |   | 9,322      |  |  |   | 7,977   | 
|Mortgage-backed securities:                         |  |                    |         |  |               |   |         |                |  |   |            |  |  |   |         | 
|Agency                                              |  |                    | 130,433 |  |               |   | 132,542 |                |  |   | 93,248     |  |  |   | 95,055  | 
|Agency Collateralized Mortgage Obligations (CMOs) |  |                    | 9,639   |  |               |   | 9,972   |                |  |   | 10,357     |  |  |   | 10,630  | 
|CMOs  non agency                                   |  |                    | 66,791  |  |               |   | 64,220  |                |  |   | 63,295     |  |  |   | 60,803  | 
|                                                    |  |                    |         |  |               |   |         |                |  |   |            |  |  |   |         | 
|Total held to maturity investments                  |  | $                  | 463,377 |  |               | $ | 460,809 |                |  | $ | 443,452    |  |  | $ | 437,931 | 
|                                                    |  |                    |         |  |               |   |         |                |  |   |            |  |  |   |         | 

The amortized cost and fair value of debt securities at September 30, 2010, by contractual maturity, is included in
the table below. Expected maturities will differ from contractual maturities because the borrowers may have the right to call or prepay the obligation.



|                                       |  |               |         |  |            |   |         | 
|-------------------------------------- |  | ------------- | ------- |  | ---------- | - | ------- | 
|                                       |  | AmortizedCost |         |  | Fair Value |  
|Due in one year or less                |  | $             | 30,021  |  |            | $ | 30,436  | 
|Due after one year through five years  |  |               | 132,187 |  |            |   | 134,719 | 
|Due after five years through ten years |  |               | 62,707  |  |            |   | 63,021  | 
|Due after ten years                    |  |               | 238,462 |  |            |   | 232,633 | 
|                                       |  |               |         |  |            |   |         | 
|Total Debt Securities                  |  | $             | 463,377 |  |            | $ | 460,809 | 
|                                       |  |               |         |  |            |   |         | 

During the September 30, 2010 quarter, a total of $49,000 of below-investment grade non-agency collateralized
mortgage obligations, which were classified as available for sale at June 30, 2010, were sold at a gain of $1,200. Two non-agency collateralized mortgage obligations with an amortized cost totaling $7,007 were transferred from available for
sale to held to maturity at September 30, 2010.

Liquidity concerns in the financial markets have made it difficult to obtain reliable
market quotations on some infrequently traded securities that are held to maturity. Corporate debt has been valued using financial models permitted by guidance in ASC 820 for Level III (see Fair Value Note) assets as active markets did not exist at
September 30, 2010 and June 30, 2010 to provide reliable market quotes. The assets included in Level III pricing relate to pooled trust preferred securities. The trust preferred market has been severely impacted by the deteriorating
economy and the lack of liquidity in the credit markets.



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(Dollar amounts in thousands, except share data)



The unrealized losses on investments are primarily the result of volatility in interest rates, changes
in spreads over treasuries and certain investments falling out of favor with investors due to illiquidity in the financial markets. Based on the credit-worthiness of the issuers and discounted cash flow analyses, management determined that the
remaining investments in debt and equity securities were not other-than-temporarily impaired. The following table represents gross unrealized losses and fair value of investments aggregated by investment category and length of time that individual
securities have been in a continuous unrealized loss position at September 30, 2010:



|                                       |  |                                          |        |  |                                             |   |     |            |  |   |                |  |  |            |        |  |                |   |         |  |  |   |        | 
|-------------------------------------- |  | ---------------------------------------- | ------ |  | ------------------------------------------- | - | --- | ---------- |  | - | -------------- |  |  | ---------- | ------ |  | -------------- | - | ------- |  |  | - | ------ | 
|                                       |  | Less than 12 months Of unrealized losses |        |  | Greater than 12 months
of unrealized losses |   |     | Total      | 
|                                       |  | Fair Value                               |        |  | Unrealizedloss                              |   |     | Fair Value |  |   | Unrealizedloss |  |  | Fair Value |        |  | Unrealizedloss |  
|Available for Sale Investments         |  |                                          |        |  |                                             |   |     |            |  |   |                |  |  |            |        |  |                |   |         |  |  |   |        | 
|Mutual funds  ARM mortgages           |  | $                                        |       |  |                                             | $ |    |            |  | $ | 4,755          |  |  | $          | 245    |  |                | $ | 4,755   |  |  | $ | 245    | 
|Held to Maturity Investments           |  |                                          |        |  |                                             |   |     |            |  |   |                |  |  |            |        |  |                |   |         |  |  |   |        | 
|U.S. Government and agency obligations |  |                                          | 29,463 |  |                                             |   | 24  |            |  |   |               |  |  |            |       |  |                |   | 29,463  |  |  |   | 24     | 
|Corporate debt                         |  |                                          | 2,209  |  |                                             |   | 5   |            |  |   |               |  |  |            |       |  |                |   | 2,209   |  |  |   | 5      | 
|Pooled trust preferred securities      |  |                                          |       |  |                                             |   |    |            |  |   | 7,782          |  |  |            | 5,197  |  |                |   | 7,782   |  |  |   | 5,197  | 
|Individual trust preferred securities  |  |                                          |       |  |                                             |   |    |            |  |   | 4,719          |  |  |            | 1,400  |  |                |   | 4,719   |  |  |   | 1,400  | 
|Non agency CMOs                       |  |                                          |       |  |                                             |   |    |            |  |   | 17,249         |  |  |            | 4,845  |  |                |   | 17,249  |  |  |   | 4,845  | 
|Mortgage-backed securities             |  |                                          | 40,141 |  |                                             |   | 131 |            |  |   | 7,071          |  |  |            | 27     |  |                |   | 47,212  |  |  |   | 158    | 
|                                       |  |                                          |        |  |                                             |   |     |            |  |   |                |  |  |            |        |  |                |   |         |  |  |   |        | 
|Totals                                 |  | $                                        | 71,813 |  |                                             | $ | 160 |            |  | $ | 41,576         |  |  | $          | 11,714 |  |                | $ | 113,389 |  |  | $ | 11,874 | 
|                                       |  |                                          |        |  |                                             |   |     |            |  |   |                |  |  |            |        |  |                |   |         |  |  |   |        | 

The following table represents gross unrealized losses and fair value of investments aggregated by investment category
and length of time that individual securities have been in a continuous unrealized loss position at June 30, 2010:



|                                       |  |                                          |        |  |                                             |   |    |            |  |   |                |  |  |            |        |  |                |   |        |  |  |   |        | 
|-------------------------------------- |  | ---------------------------------------- | ------ |  | ------------------------------------------- | - | -- | ---------- |  | - | -------------- |  |  | ---------- | ------ |  | -------------- | - | ------ |  |  | - | ------ | 
|                                       |  | Less than 12 months Of unrealized losses |        |  | Greater than 12 months
of unrealized losses |   |    | Total      | 
|                                       |  | Fair Value                               |        |  | Unrealizedloss                              |   |    | Fair Value |  |   | Unrealizedloss |  |  | Fair Value |        |  | Unrealizedloss |  
|Available for Sale Investments         |  |                                          |        |  |                                             |   |    |            |  |   |                |  |  |            |        |  |                |   |        |  |  |   |        | 
|Mutual funds  ARM mortgages           |  | $                                        |       |  |                                             | $ |   |            |  | $ | 4,760          |  |  | $          | 240    |  |                | $ | 4,760  |  |  | $ | 240    | 
|Held to Maturity Investments           |  |                                          |        |  |                                             |   |    |            |  |   |                |  |  |            |        |  |                |   |        |  |  |   |        | 
|U.S. Government and agency obligations |  |                                          | 29,990 |  |                                             |   | 9  |            |  |   |               |  |  |            |       |  |                |   | 29,990 |  |  |   | 9      | 
|Pooled trust preferred securities      |  |                                          |       |  |                                             |   |   |            |  |   | 10,197         |  |  |            | 7,380  |  |                |   | 10,197 |  |  |   | 7,380  | 
|Individual trust preferred securities  |  |                                          |       |  |                                             |   |   |            |  |   | 5,054          |  |  |            | 1,550  |  |                |   | 5,054  |  |  |   | 1,550  | 
|Non agency CMOs                       |  |                                          |       |  |                                             |   |   |            |  |   | 18,024         |  |  |            | 4,879  |  |                |   | 18,024 |  |  |   | 4,879  | 
|Mortgage-backed securities             |  |                                          | 5,300  |  |                                             |   | 47 |            |  |   |               |  |  |            |       |  |                |   | 5,300  |  |  |   | 47     | 
|                                       |  |                                          |        |  |                                             |   |    |            |  |   |                |  |  |            |        |  |                |   |        |  |  |   |        | 
|Totals                                 |  | $                                        | 35,290 |  |                                             | $ | 56 |            |  | $ | 38,035         |  |  | $          | 14,049 |  |                | $ | 73,325 |  |  | $ | 14,105 | 
|                                       |  |                                          |        |  |                                             |   |    |            |  |   |                |  |  |            |        |  |                |   |        |  |  |   |        | 

Available for sale investments.

Mutual Funds. Parkvale has investments in two adjustable rate mortgage mutual funds with an aggregate amortized cost of $5,500 at September 30, 2010. The larger of the two investments, which
had a fair value of $4,755 at September 30, 2010, has had an unrealized loss in excess of one year of $245 and $240, at September 30, 2010 and at June 30, 2010, respectively. Parkvale evaluated the near-term prospects of the issuer of
the mutual fund in relation to the severity and duration of the impairment.



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(Dollar amounts in thousands, except share data)



Based on this evaluation and Parkvales ability to hold the investment for a reasonable period of
time sufficient for a forecasted recovery of fair value, Parkvale does not consider the remaining value of this investment to be other-than-temporarily impaired at September 30, 2010.

Common Equities. At September 30, 2010, Parkvale had investments in nine different common equities, which had an aggregate amortized cost of $474 and an aggregate fair value of $661 at
September 30, 2010.

Held to maturity securities.

U.S. Government and Agency Obligations.At September 30, 2010, the $177,635 fair value of Parkvales investments in U.S. Government and Agency obligations was greater than the $176,192
book value of such investments. Certain of these investments show unrealized losses of less than one year of $24 at the balance sheet date. The contractual terms of those investments do not permit the issuer to settle the securities at a price less
than the face value of the investment. Parkvale intends to hold these securities to the contractual maturity of such investments.

Trust
Preferred Securities. Trust preferred securities are very long-term (usually 30-year maturity) instruments with characteristics of both debt and equity. Most of the Corporations investments in trust preferred securities are of pooled
issues, each made up of 23 or more companies with geographic and size diversification. Unless otherwise noted, the Corporations pooled trust preferred securities are substantially secured by bank and thrift holding companies (approximately 85%
in the aggregate) and by insurance companies (approximately 15% in the aggregate). No single company represents more 5% of any individual pooled offering. While certain companies are in more than one pool, no single company represents more than a 5%
interest in the aggregate pooled investments. The pooled trust preferred investments were all investment grade at purchase with an initial average investment grade rating of A. As a result of the overall credit market and the number of underlying
issuers deferring interest payments, as well as issuers defaulting, the rating agencies have downgraded the securities to below investment grade as of September 30, 2010. All of these investments are classified as held to maturity.

Management believes trust preferred valuations have been negatively affected by an inactive market and concerns that the underlying banks and insurance
companies may have significant exposure to losses from sub-prime mortgages, defaulted collateralized debt obligations or other concerns. When evaluating these investments, a determination is made of the credit portion and the noncredit portion of
impairment. The credit portion is recognized in earnings and represents the expected shortfall in future cash flows. The noncredit portion is recognized in other comprehensive income and represents the difference between the fair value of the
security and the amount of credit related impairment. A discounted cash flow analysis provides the best estimate of the credit related portion of the impairment for these securities. Parkvales pooled trust preferred collateralized debt
obligations are measured for other than temporary impairment within the scope of US GAAP, by determining whether it is probable that an adverse change in estimated cash flows has occurred. The discounted cash flow analysis is considered to be
the primary evidence when determining whether credit related impairment exists.

Managements estimates and results of a discounted cash
flow test are significantly affected by other variables such as the estimate of future cash flows, credit worthiness of the underlying banks and insurance companies (issuer) and determination of probability of default of the underlying
collateral.



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(Dollar amounts in thousands, except share data)



Changes in the variable assumptions could produce different conclusions for each security. The following
provides additional information for each of these variables.



| |  |  | 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.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Managements estimates of discounted cash flows used to evaluate other-than-temporary impairment of pooled trust-preferred securities were based on assumptions regarding the timing and amounts of
deferrals and defaults that may occur based upon a credit analysis of each issuer, and changes in those assumptions could produce different conclusions for each security. In addition to the above factors, the excess subordination levels for each
pooled trust preferred security are calculated. The results of this excess subordination allows management to identify those pools that are a greater risk for a future break in cash flows so that issuers in those pools can be monitored more closely
for potential deterioration of credit quality.

A significant portion of the Corporations unrealized losses relate primarily to
investments in trust preferred securities, which consist of single issuer and pooled securities. The portfolio of trust preferred collateralized debt obligations consists of 16 pooled issues and 8 single issuer securities. The single issuer
securities are primarily from Pennsylvania regional banks. Investments in pooled securities are primarily mezzanine tranches, except for 2 investments in senior tranches, and are secured by over-collateralization or default protection provided by
subordinated tranches.

At September 30, 2010, the 16 pooled trust preferred securities have an amortized cost basis of $21,200 and an
estimated fair value of $16,440, while the single-issuer trust preferred securities have an amortized cost basis of $9,328 and an estimated fair value of $8,254. The net unrealized losses on the



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(Dollar amounts in thousands, except share data)



trust preferred securities at September 30, 2010, which aggregated $4,760 on the pooled securities and $1,074 on the individual securities, are attributable to temporary illiquidity and the
uncertainty affecting these markets, as well as changes in interest rates.

At September 30, 2010, as permitted by the debt instruments,
there are 11 pooled trust preferred securities with an amortized cost basis of $7,993 that have for one reason or another chosen to defer payments. Interest payments aggregating $465 have been capitalized to the balance of the securities as
permitted by the underlying trust agreement and interest payments aggregating $1,625 have been deferred since the respective securities began to defer payments. Deferred payments are not included in interest income. Interest payments totaling $188
were deferred during the quarter ended September 30, 2010 and no payments were capitalized during the quarter.

Contractual terms of the
investments do not permit debtors to settle the security at a price less than the face value of the investments and as such, it is expected that the remaining trust preferred securities will not be settled at a price less than the current carrying
value of the investments. The Corporation has concluded from detailed cash flow analysis performed as of September 30, 2010 that it is probable that all contractual principal and interest payments will be collected on all of its single-issuer
and pooled trust preferred securities, except for those on which OTTI was recognized.

Because Parkvale has the ability and intent to hold the
investments until a recovery of fair value, which may be maturity, and it is more likely than not that Parkvale will not be required to sell the investments before recovery of its amortized cost, Parkvale does not consider the remaining value of
these assets to be other-than-temporarily impaired at September 30, 2010. However, continued interest deferrals and/or insolvencies by participating issuers could result in a further writedown of one or more of the trust preferred investments
in the future.



23



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##### Table of Contents

NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(Dollar amounts in thousands, except share data)



The following table provides information relating to the Corporations trust preferred securities
as of September 30, 2010.



|                                        |  |            |        |           |        |  |            |  |        |            |        |  |                       |  |        |                     |        |             |  |      |                    |  |    |                         |  |  |                                                 |   |  |                                                        |      |   |  |  |      |   |  |  |      |  
|--------------------------------------- |  | ---------- | ------ | --------- | ------ |  | ---------- |  | ------ | ---------- | ------ |  | --------------------- |  | ------ | ------------------- | ------ | ----------- |  | ---- | ------------------ |  | -- | ----------------------- |  |  | ----------------------------------------------- | - |  | ------------------------------------------------------ | ---- | - |  |  | ---- | - |  |  | ---- | -
|Deal                                    |  | Note Class |        | Par Value |        |  | Book Value |  |        | Fair Value |        |  | UnrealizedGain (Loss) |  |        | LowestCreditRatings |        | # ofIssuers |  |      | ActualDefault %(1) |  |    | ActualDeferral %(1) (2) |  |  | ExpectedDefaults (%of performingcollateral) (3) |   |  | ExcessSubordination(as a % ofperformingcollateral) (4) |     
|Pooled Investments                      |  |            |        |           |        |  |            |  |        |            |        |  |                       |  |        |                     |        |             |  |      |                    |  |    |                         |  |  |                                                 |   |  |                                                        |      |   |  |  |      |   |  |  |      |  
|P1                                      |  | 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 Investments               |  |            |        |           |        |  |            |  |        |            |        |  |                       |  |        |                     |        |             |  |      |                    |  |    |                         |  |  |                                                 |   |  |                                                        |      |   |  |  |      |   |  |  |      |  
|S1                                      |  | 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 | )                   |        |             |  |      |                    |  |    |                         |  |  |                                                 |   |  |                                                        |      |   |  |  |      |   |  | 

The above listings do not include 7 trust preferred investments written off in previous quarters.



|                                                                                                                                         
|-----------------------------------------------------------------------------------------------------------------------------------------
|Notes:                                                                                                                                   
|(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).



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##### Table of Contents

NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(Dollar amounts in thousands, except share data)



Non agency CMOs. The non agency CMO securities of $66,791 at September 30, 2010 are
supported by underlying collateral that was originated as follows:



|                |  |               |        |  |           |   |        | 
|--------------- |  | ------------- | ------ |  | --------- | - | ------ | 
|Year originated |  | AmortizedCost |        |  | FairValue |  
|2003            |  | $             | 22,112 |  |           | $ | 23,565 | 
|2004            |  |               | 28,939 |  |           |   | 27,352 | 
|2005            |  |               | 4,920  |  |           |   | 5,233  | 
|2007            |  |               | 6,688  |  |           |   | 3,911  | 
|2008            |  |               | 4,132  |  |           |   | 4,159  | 
|                |  |               |        |  |           |   |        | 
|                |  | $             | 66,791 |  |           | $ | 64,220 | 
|                |  |               |        |  |           |   |        | 

The non agency CMO portfolio at September 30, 2010 contains investments that were all rated AAA at the time of
purchase. The amortized cost and fair value by their latest investment rating at September 30, 2010 is as follows:



|                              |  |               |        |  |           |   |        | 
|----------------------------- |  | ------------- | ------ |  | --------- | - | ------ | 
|                              |  | AmortizedCost |        |  | FairValue |  
|AAA by Moodys, S&P, or Fitch |  | $             | 26,214 |  |           | $ | 27,327 | 
|AA by Moodys or S&P          |  |               | 6,436  |  |           |   | 6,742  | 
|A by Moodys, S&P, or Fitch   |  |               | 9,468  |  |           |   | 8,338  | 
|BBB by Moodys or Fitch       |  |               | 10,979 |  |           |   | 10,895 | 
|BB by Fitch                   |  |               | 6,785  |  |           |   | 6,785  | 
|B by Moodys or S&P           |  |               | 3,673  |  |           |   | 2,957  | 
|CCC by S&P or Fitch           |  |               | 3,015  |  |           |   | 955    | 
|CC by Fitch                   |  |               | 221    |  |           |   | 221    | 
|                              |  |               |        |  |           |   |        | 
|                              |  | $             | 66,791 |  |           | $ | 64,220 | 
|                              |  |               |        |  |           |   |        | 

To date, all such securities have made scheduled payments of principal and interest on a timely basis with additional
collateral provided by support tranches in these structured debt obligations.

General. At September 30, 2010, Parkvale has
unrealized losses that are greater than one year aggregating $11,469 on held to maturity securities. These unrealized losses over one year relate primarily to investments in pooled and individual trust preferred securities and non-agency CMOs as
detailed in the preceding tables. The unrealized losses relate to illiquidity and the uncertainty affecting these markets, interest rate changes, higher spreads to treasuries at September 30, 2010 compared to the purchase dates and concerns of
future bank failures. Pooled trust preferred securities with unrealized losses for more than 12 months relate to 3 pooled trust preferred securities aggregating $12,979, representing $7,782 of fair value with $5,197 of unrealized losses. Individual
trust preferred securities with unrealized losses for more than 12 months relate to 4 individual securities aggregating $6,119, representing $4,719 of fair value with $1,400 of unrealized losses.



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##### Table of Contents

NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(Dollar amounts in thousands, except share data)



Other-Than-Temporary- Impairment

Securities with a remaining carrying value as of September 30, 2010 that have incurred OTTI charges are summarized as follows:



|                                |  |                         |        |  |                       |   |        |                  |  |   |                      |  |  |                  |       |  |  |   |       | 
|------------------------------- |  | ----------------------- | ------ |  | --------------------- | - | ------ | ---------------- |  | - | -------------------- |  |  | ---------------- | ----- |  |  | - | ----- | 
|Security                        |  | UnadjustedCarryingValue |        |  | OTTICharge toearnings |   |        | OTTICharge toOCI |  |   | 9/30/10CarryingValue |  |  | 9/30/10FairValue |      
|Pooled trust preferred security |  | $                       | 48,832 |  |                       | $ | 18,703 |                  |  | $ | 21,907               |  |  | $                | 8,222 |  |  | $ | 8,657 | 

The following chart shows the balance of other comprehensive income charges related to fair value:



|                                     |  |                           |        |  
|------------------------------------ |  | ------------------------- | ------ | -
|                                     |  | Trust preferredsecurities |       
|Balance at June 30, 2010             |  | $                         | 19,868 |  
|Total losses  realized/unrealized   |  |                           | 3,035  |  
|Included as a charge to earnings     |  |                           | (996   | )
|Change to other comprehensive income |  |                           |       |  
|                                     |  |                           |        |  
|Balance at September 30, 2010        |  | $                         | 21,907 |  
|                                     |  |                           |        |  

The following table displays the cumulative credit component of OTTI charges recognized in earnings on debt securities
for which a portion of an OTTI is recognized in other comprehensive income at September 30, 2010:



|                                                                                                 |  |                           |        | 
|------------------------------------------------------------------------------------------------ |  | ------------------------- | ------ | 
|                                                                                                 |  | Trust preferredsecurities |       
|Balance at June 30, 2010                                                                         |  | $                         | 17,707 | 
|Addition for the credit component on debt securities in which OTTI was not previously recognized |  |                           | 996    | 
|                                                                                                 |  |                           |        | 
|Balance at September 30, 2010                                                                    |  | $                         | 18,703 | 
|                                                                                                 |  |                           |        | 
|The amount of securities with OTTI charges to earnings are as follows:                           |  |                           |        | 
|Recorded in September 30, 2010 quarter                                                           |  | $                         | 996    | 

During the September 30, 2009 quarter, two pooled trust preferred securities considered to be other than temporarily
impaired were written down to fair value with a net charge to earnings of $2,761. During the three months ended September 30, 2010, charges of $3,035 on OTTI investments were recognized, with $996 recognized as net impairment losses in earnings
and $2,039 as the non-credit portion reflected in other comprehensive income. The current quarter charges were due to OTTI related to four pooled trust preferred securities. Write-downs were based on individual securities credit performance
and the issuers ability to make its contractual principal and interest payments. Should credit quality continue to deteriorate, it is possible that additional write-downs may be required. Based on the credit worthiness of the issuers,
management determined that the remaining investments in debt and equity securities were not other-than temporarily impaired at September 30, 2010.



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##### Table of Contents

NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(Dollar amounts in thousands, except share data)



GOODWILL AND MARKET VALUATION

Goodwill of $25,634 shown on the Statement of Financial Condition relates to acquisitions in fiscal 2002 (Masontown) and 2005 (Advance). The operations of both acquisitions have been fully integrated into
Parkvales operations. All of the offices and business activities of both Masontown and Advance have been retained, remain open and are performing as expected. The market price of Parkvales common stock was $6.15 per share at
September 30, 2010, which is below the book value of $15.67 at such date. The difference between the market value and the book value at September 30, 2010 is primarily related to the significant deterioration in the financial markets, a
weakening economy and a near global credit crisis. Goodwill is tested on an annual basis as of June 30 of each year in conjunction with the Corporations fiscal year end but can be tested for impairment at any time if circumstances
warrant.

An independent third party was retained for the fiscal year ended June 30, 2010 to assist in determining whether an impairment
of goodwill was appropriate. In a report dated July 23, 2010, the third party certified goodwill non-impairment based on the discounted cash flow estimate of fair value, and deal value to book value of equity ratios observed in recent
comparable banking sector merger and acquisition transactions. Anecdotal evidence for goodwill non-impairment is also shown in the strong underlying financial foundations of Parkvales fair value. The third party reviewed the premiums paid in
acquisitions of financial institutions that were announced or completed between October 1, 2007 and July 20, 2010. The third party reviewed the premiums paid in 36 acquisitions in the mid-Atlantic states during such period, as well as 325
acquisitions nationwide during such period. In addition to reviewing the book value multiples of all acquisitions announced or completed during the above period, the third party also reviewed the multiples for those acquisitions announced or
completed since June 30, 2008, which were lower than the multiples for the entire period noted above.

Based on the third party report,
management determined that goodwill was not impaired at June 30, 2010 or September 30, 2010. If Parkvales stock continues to trade significantly below its book value, if discounted cash flow estimates materially decline, or if the
multiples in comparable banking sector mergers and acquisitions decline, then a goodwill impairment charge may become appropriate in a future quarter.



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##### Table of Contents

NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(Dollar amounts in thousands, except share data)



EARNINGS PER SHARE (EPS)

The following table sets forth the computation of basic and diluted earnings per share for the three months ended September 30:



|                                                        |  |      |           |  |      |   |           | 
|------------------------------------------------------- |  | ---- | --------- |  | ---- | - | --------- | 
|                                                        |  | 2010 |           |  | 2009 |  
|Numerator for basic and diluted earnings per share:     |  |      |           |  |      |   |           | 
|Net Income                                              |  | $    | 2,223     |  |      | $ | 725       | 
|Less: Preferred stock dividend                          |  |      | 397       |  |      |   | 397       | 
|                                                        |  |      |           |  |      |   |           | 
|Net income to common shareholders                       |  |      | 1,826     |  |      |   | 328       | 
|Denominator:                                            |  |      |           |  |      |   |           | 
|Weighted average shares for basic earnings per share    |  |      | 5,529,211 |  |      |   | 5,427,695 | 
|Effect of dilutive stock options                        |  |      |          |  |      |   |          | 
|                                                        |  |      |           |  |      |   |           | 
|Weighted average shares for dilutive earnings per share |  |      | 5,529,211 |  |      |   | 5,427,695 | 
|                                                        |  |      |           |  |      |   |           | 
|Net income per common share:                            |  |      |           |  |      |   |           | 
|Basic                                                   |  | $    | 0.33      |  |      | $ | 0.06      | 
|Diluted                                                 |  | $    | 0.33      |  |      | $ | 0.06      | 
|Dividends per common share                              |  | $    | 0.02      |  |      | $ | 0.05      | 

NEW ACCOUNTING PRONOUNCEMENTS

In July 2010, FASB issued ASU 2010-20, Receivables (Topic 310): Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses. The disclosures will provide financial
statement users with additional information about the nature of credit risks inherent in entities financing receivables, how credit risk is analyzed and assessed when determining the allowance for credit losses and the reasons for the change
in the allowance for credit losses. This requirement is effective for all periods ending on or after December 15, 2010, although certain disclosures will have a deferred effective date. The accounting standards update requires additional
disclosure and will have no impact on the consolidated financial statements.

Item 2.

PARKVALE FINANCIAL CORPORATION

MANAGEMENTS DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

The following is managements discussion and analysis of the significant changes in the results of operations, capital resources and liquidity presented in the accompanying consolidated financial
statements for Parkvale Financial Corporation. The Corporations consolidated financial condition and results of operations consist almost entirely of Parkvale Banks financial condition and results of operations. Current performance does
not guarantee, and may not be indicative of, similar performance in the future. The financial statements as of and for the quarter ended September 30, 2010 are unaudited and, as such, are subject to year-end audit review.



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##### Table of Contents

Forward-Looking Statements:

In addition to historical information, this filing may contain forward-looking statements. We have made forward-looking statements in this document that are subject to risks and uncertainties.
Forward-looking statements include the information concerning possible or assumed future results of operations of the Corporation and its subsidiaries. When we use words such as believe, expect, anticipate, or similar expressions, we are making
forward-looking statements.

The statements in this filing that are not historical fact are forward-looking statements. Forward-looking
information should not be construed as guarantees of future performance. Actual results may differ from expectations contained in such forward-looking information as a result of various 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.

Shareholders should note that many factors, some of which are discussed elsewhere in this document, could affect the future financial results of the Corporation and its subsidiaries and could cause those
results to differ materially from those expressed in our forward-looking statements contained in this document. These factors include the following: operating, legal and regulatory risks; economic, political and competitive forces affecting our
businesses; and the risk that our analyses of these risks and forces could be incorrect and/or that the strategies developed to address them could be unsuccessful.

Critical Accounting Policies, Judgments and Estimates:

The accounting and reporting
policies of the Corporation and its subsidiaries conform to accounting principles generally accepted in the United States of America (U.S. GAAP) and general practices within the financial services industry. All significant inter-company transactions
are eliminated in consolidation, and certain reclassifications are made when necessary to conform the previous years financial statements to the current years presentation. In preparing the consolidated financial statements, management
is required to make estimates and assumptions that affect the reported amount of assets and liabilities as of the dates of the balance sheets and revenues and expenditures for the periods presented. Therefore, actual results could differ
significantly from those estimates. Accounting policies involving significant judgments and assumptions by management, which have or could have a material impact on the carrying value of certain assets or comprehensive income, are considered
critical accounting policies. The Corporation recognizes the following as critical accounting policies: Allowance for Loan Loss, Carrying Value of Investment Securities, Valuation of Foreclosed Real Estate, Carrying Value of Goodwill and Other
Intangible Assets and Valuation Allowance of Deferred Tax Asset.

The Corporations critical accounting policies and judgments
disclosures are contained in the Corporations June 30, 2010 Annual Report filed on September 13, 2010, as amended on November 12, 2010 and on September 9, 2011. Management believes that there have been no material changes
since June 30, 2010. The Corporation has not substantively changed its application of the foregoing policies, and there have been no material changes in assumptions or estimation techniques used as compared to prior periods.

Under U.S. GAAP, a valuation allowance is required to be recognized if it is more likely than not that a deferred tax asset will not be realized. The
determination of whether the deferred tax asset will be realized is subjective and dependent upon judgment concerning an evaluation of available evidence.



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Future adjustments to the deferred tax asset valuation allowance, if any, will be determined based upon changes in the expected realization of the net deferred tax assets. The realization of the
deferred tax assets ultimately depends on the existence of sufficient taxable income in either the carryback or carryforward periods under applicable tax laws. Due to significant estimates utilized in establishing the valuation allowance and the
potential for changes in facts and circumstances, adjustments to the valuation allowance may be required in future periods. The valuation allowance balance at September 30, 2010 was $1,632,000 related to equity security writedowns that could be
considered capital losses that may not be realizable due to the difficulty in projecting sufficient capital gains in the future to offset such losses. No additions to the valuation allowance were considered necessary in the current fiscal period.

Balance Sheet Data:



|                                                     |  |               |           |  |               |   |           | 
|---------------------------------------------------- |  | ------------- | --------- |  | ------------- | - | --------- | 
|                                                     |  | September 30, |          
|                                                     |  | 2010          |           |  | 2009          |  
|(Dollar amounts in thousands, except per share data) |  | (As Restated) |           |  | (As Restated) |  
|Total assets                                         |  | $             | 1,819,632 |  |               | $ | 1,902,448 | 
|Loans, net                                           |  |               | 1,014,608 |  |               |   | 1,071,611 | 
|Interest-earning deposits and federal funds sold     |  |               | 175,209   |  |               |   | 167,408   | 
|Total investments                                    |  |               | 469,321   |  |               |   | 546,955   | 
|Deposits                                             |  |               | 1,480,482 |  |               |   | 1,518,661 | 
|FHLB advances                                        |  |               | 175,916   |  |               |   | 186,144   | 
|Shareholders equity                                 |  |               | 118,397   |  |               |   | 150,244   | 
|Book value per share                                 |  | $             | 15.67     |  |               | $ | 21.83     | 

Statistical Profile:



|                                                      |  |                                     |       |   |               |  |         |  
|----------------------------------------------------- |  | ----------------------------------- | ----- | - | ------------- |  | ------- | -
|                                                      |  | Three Months EndedSeptember 30, (1) |      
|                                                      |  | 2010                                |       |   | 2009          | 
|                                                      |  |                                     |       |   | (As Restated) | 
|Average 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  | % |               |  | 1.63    | %
|Taxes to pre-tax income                               |  |                                     | 22.30 | % |               |  | -417.86 | %
|Dividend payout ratio                                 |  |                                     | 6.06  | % |               |  | 84.29   | %
|Return on average assets                              |  |                                     | 0.48  | % |               |  | 0.15    | %
|Return on average equity                              |  |                                     | 6.68  | % |               |  | 1.92    | %
|Average equity to average total assets                |  |                                     | 7.18  | % |               |  | 7.91    | %
|                                                      | 
|                                                      |  | At September 30,                    |      
|                                                      |  | 2010                                |       |   | 2009          | 
|                                                      |  | (As Restated)                       |       |   | (As Restated) | 
|One year gap to total assets                          |  |                                     | 14.70 | % |               |  | 9.68    | %
|Intangibles to total equity                           |  |                                     | 23.89 | % |               |  | 19.43   | %
|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.
|--- | ----------------------------------------------------------------------------------------------



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Nonperforming Loans and Foreclosed Real Estate:

Loans delinquent 90 days or more and foreclosed real estate (REO) consisted of the following:

(Dollar amounts in thousands)



|                                        |  |         |        |  |         |   |        |         |  |   |        | 
|--------------------------------------- |  | ------- | ------ |  | ------- | - | ------ | ------- |  | - | ------ | 
|                                        |  | 9/30/10 |        |  | 6/30/10 |   |        | 9/30/09 | 
|Delinquent single-family mortgage loans |  | $       | 22,099 |  |         | $ | 20,674 |         |  | $ | 26,247 | 
|Delinquent other loans                  |  |         | 5,050  |  |         |   | 5,846  |         |  |   | 8,493  | 
|                                        |  |         |        |  |         |   |        |         |  |   |        | 
|Total nonperforming loans               |  |         | 27,149 |  |         |   | 26,520 |         |  |   | 34,740 | 
|Real estate owned, net                  |  |         | 9,327  |  |         |   | 8,637  |         |  |   | 6,139  | 
|                                        |  |         |        |  |         |   |        |         |  |   |        | 
|Total                                   |  | $       | 36,476 |  |         | $ | 35,157 |         |  | $ | 40,879 | 
|                                        |  |         |        |  |         |   |        |         |  |   |        | 

A weak national economy and to a lesser extent local housing sector and credit markets contributed towards an increased
level of non-performing assets, which peaked at September 30, 2009. Nonperforming loans (delinquent 90 days or more) and real estate owned in the aggregate represented 2.00%, 1.91% and 2.15% of total assets at the respective balance sheet dates
shown above. Such non-performing assets at September 30, 2010 have increased to $36.5 million from $35.2 million at June 30, 2010, and includes $27.1 million of non-accrual loans.

As of September 30, 2010, single-family mortgage loans delinquent 90 days or more include 59 loans aggregating $18.5 million purchased from others and serviced by national service providers with a
cost basis ranging from $40,000 to $660,000 and 41 loans aggregating $3.6 million in Parkvales retail market area. Of these total 100 loans, 7 have a cost basis of $500,000 or greater. Management believes that all of these delinquent
single-family mortgage loans are adequately collateralized with the exception of 42 loans with a remaining net book value of $9.8 million, which have the necessary related allowances for losses provided. Loans 180 days or more delinquent are
individually evaluated for collateral values in accordance with banking regulations with specific reserves recorded as appropriate.

At
September 30, 2010, modifications have been performed at market terms on 119 single-family mortgage loans totaling $18,881 primarily related to extension of maturity dates and extension of interest-only payment periods of thirty-six months or
less. The discounted cash flow analysis related to these modifications results in an insignificant impact over the life of the loan.

Other
loans 90 days or more delinquent of $5.1 million at September 30, 2010 include $1.5 million of commercial real estate, $2.9 million of commercial loans and $689,000 of consumer loans. The decrease in delinquent other loans from June 30,
2010 to September 30, 2010 is due primarily to the transfer of a commercial office building into real estate owned during the September 2010 quarter. Nonperforming commercial loans include a $1.2 million relationship with a now closed medical
facility and a $1.5 million relationship to a coal extraction and reclamation entity. Management believes that these commercial relationships are adequately collateralized.

In addition, commercial loans totaling $4.3 million were classified as substandard at September 30, 2010 compared to $4.4 million at June 30, 2010. The substandard loans, although performing,
have exhibited signs of weakness, or have been recently modified or refinanced and are being monitored to assess if new payment terms are followed by the borrowers. These loans, while current or less than 90 days past due, have previously exhibited
characteristics which warrant special monitoring. Examples of these concerns include irregular payment histories, questionable collateral values, investment properties having cash flows insufficient to service debt, and other financial inadequacies
of the borrower. These



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loans are regularly monitored with efforts being directed towards resolving the underlying concerns while continuing with the performing status classification of such loans.

Loans that were 30 to 89 days past due at September 30, 2010 aggregated $12.8 million, including $8.8 million of single-family first
lien loans, compared to $14.6 million at June 30, 2010.

Foreclosed real estate of $9.3 million at September 30, 2010 includes
$5.1 million of single-family dwellings. Real estate owned includes foreclosure of five units in a single-family residential development with a net book value of $1.4 million and commercial real estate properties related to two facilities used as
automobile dealerships with a net book value of $2.1 million at September 30, 2010. Marketing efforts are underway to sell the single-family units individually with an allowance for completion on the five units, which is estimated to be less
than 10% of the unit cost. At September 30, 2010, foreclosed real estate also includes six commercial real estate properties with an aggregate value of $2.2 million. Foreclosed real estate properties are recorded at the lower of the carrying
amount or fair value of the property less costs to sell, with reserves established when deemed necessary.

Each of the above categories of
loans have been evaluated for the fair values of the collateral, less possible selling and holding costs, with appropriate valuation allowances and reserves provided as deemed necessary by management.

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 $1.3 million at September 30, 2010 and $1.1 million at September 30, 2009. Parkvale provides an allowance for the loss of accrued but
uncollected interest on mortgage, consumer and commercial business loans that are 90 days or more contractually past due.

Allowance for
Loan Losses:

The allowance for loan losses was $19.6 million at September 30, 2010, $19.2 million at June 30, 2010 and $19.5
million at September 30, 2009 or 1.90%, 1.83% and 1.79% of gross loans at September 30, 2010, June 30, 2010 and September 30, 2009, respectively. 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.

Parkvale continually monitors the loan portfolio to identify potential portfolio risks and to detect potential credit deterioration in the
early stages. Reserves are then established based upon the evaluation of the inherent risks in the loan portfolio. Changes to the levels of reserves are made quarterly based upon perceived changes in risk. When evaluating the risk elements within
the loan portfolio, Parkvale has a substantial portion of the loans secured by real estate as noted in the loan footnote on page 7. In addition to the $645.8 million of 1-4 family loans, the majority of the consumer loans represent either second
mortgages in the form of term loans and home equity lines of credit or first lien positions on home loans. The Bank does not underwrite subprime loans, negative amortization loans or discounted teaser rates on ARM loans. Included in the mortgage
portfolio are $179.6 million of interest only mortgage loans as of September 30, 2010, representing 22.3% of the mortgage loan portfolio. The initial interest only period for $65.1 million of the aggregate $179.6 million has expired, and the
loans are



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contractually amortizing at September 30, 2010. All originated ARM loans are made at competitive market rates in the primary lending areas of the Bank with add-on margins ranging from 250 to
300 basis points to either the constant maturity treasury yields or Libor. Adjustable-rate mortgage loans purchased in the secondary market that are serviced by national service providers are prudently underwritten with emphasis placed on loans to
value of less than 80% combined with high FICO scores. The purchased loan portfolio is geographically diversified throughout the United States and is generally considered well collateralized. Aside from the states where Parkvale has offices, no
other state exceeds 5% of the mortgage loan portfolio. While management believes the allowance is adequate to absorb estimated credit losses in its existing loan portfolio, future adjustments may be necessary in circumstances where economic
conditions change and affect the assumptions used in evaluating the adequacy of the allowance for loan losses.

Liquidity and Capital
Resources:

Federal funds sold increased $33.6 million or 24.7% from June 30, 2010 to September 30, 2010. Investment securities
held to maturity increased $19.9 million or 4.5% from June 30, 2010 to September 30, 2010, primarily due to purchases of agency mortgage-backed securities. Interest-earning deposits in other institutions increased $5.1 million or 633.6%
primarily due to funds transferred to the FHLB demand deposit account pending settlement of a security purchase. Loans, net of allowance, decreased $17.8 million or 1.7% from June 30, 2010 to September 30, 2010. The decrease in the loan
portfolio was primarily due to a $14.8 million or 2.3% decline in one-to-four family residential loans. Deposits decreased $7.6 million or 0.5% from June 30, 2010 to September 30, 2010, FHLB advances decreased $10.1 million or 5.4% due to
the maturity of a $10 million advance at a cost of 4.12%, escrow for taxes and insurance decreased $3.2 million or 42.7%, other debt decreased $2.0 million or 14.6% and other liabilities increased $1.3 million or 30.7%. Parkvale Banks FHLB
advance available maximum borrowing capacity is $547.9 million at September 30, 2010. If Parkvale were to experience a deposit decrease in excess of the available cash resources and cash equivalents, the FHLB and Federal Reserve could be
utilized to fund a rapid decrease in deposits

TARP Capital Purchase Program: On October 14, 2008, the United States Department of
the Treasury (the Treasury) announced a voluntary Capital Purchase Program (the CPP) under which the Treasury will purchase senior preferred shares from qualifying financial institutions. The plan is part of the $700 billion
Emergency Economic Stabilization Act signed into law in October 2008.

On December 23, 2008, pursuant to the CPP established by the
Treasury, Parkvale entered into a Letter Agreement, which incorporates by reference the Securities Purchase Agreement - Standard Terms, with the Treasury (the Agreement), pursuant to which Parkvale issued and sold to the Treasury for an
aggregate purchase price of $31,762,000 in cash (i) 31,762 shares of its Fixed Rate Cumulative Perpetual Preferred Stock, Series A, par value $1.00 per share, having a liquidation preference of $1,000 per share (the Series A Preferred
Stock), and (ii) a ten-year warrant to purchase up to 376,327 shares of common stock, par value $1.00 per share, of Parkvale (Common Stock), at an initial exercise price of $12.66 per share, subject to certain anti-dilution
and other adjustments (the Warrant).

The Series A Preferred Stock pays cumulative dividends at a rate of 5% per annum on the
liquidation preference for the first five years, and thereafter at a rate of 9% per annum. The Series A Preferred Stock has no maturity date and ranks senior to the Common Stock (and pari passu with Parkvales other authorized shares of
preferred stock, of which no shares are currently outstanding) with respect to the payment of dividends and distributions and amounts payable in the unlikely event of any future liquidation or dissolution of Parkvale. Parkvale may redeem the Series
A Preferred Stock at a price of



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$1,000 per share plus accrued and unpaid dividends, subject to the concurrence of the Treasury and its federal banking regulators. Prior to December 23, 2011, unless the Corporation has
redeemed the Series A Preferred Stock or the Treasury has transferred the Series A Preferred Stock to a third party, the consent of the Treasury will be required for the Corporation to increase its Common Stock dividend or repurchase its Common
Stock or other equity or capital securities, other than in certain circumstances specified in the Agreement.

The Warrant is immediately
exercisable. The Warrant provides for an adjustment of the exercise price and the number of shares of Common Stock issuable upon exercise pursuant to customary anti-dilution provisions, such as upon stock splits or distributions of securities or
other assets to holders of Common Stock, and upon certain issuances of Common Stock at or below a specified price relative to the then-current market price of Common Stock. The Warrant expires ten years from the issuance date. Pursuant to the
Agreement, the Treasury has agreed not to exercise voting power with respect to any shares of Common Stock issued upon exercise of the Warrant.

Term Debt: On December 30, 2008, the Corporation entered into a Loan Agreement with PNC Bank, National Association (PNC) for a
term loan in the amount of $25.0 million (the Loan). The Loan pays interest at a rate equal to LIBOR plus three hundred and twenty five basis points, payable quarterly. Principal on the Loan is due and payable in fifteen consecutive
quarterly payments of $625,000, commencing on March 31, 2010, with the remaining outstanding balance, which is scheduled to be $15,625,000, due and payable on December 31, 2013 (the Maturity Date). The outstanding balance due
under the credit facility may be repaid, at any time, in whole or in part at the Corporations option. In connection with the Loan, the Corporation executed a Term Note, dated December 30, 2008, to evidence the Loan and a Pledge Agreement,
dated December 30, 2008, whereby the Corporation granted PNC a security interest in the outstanding capital stock of Parkvale Savings Bank, the wholly owned subsidiary of the Corporation. The Loan Agreement contains customary and standard
provisions regarding representations and warranties of the Corporation, covenants and events of default. If the Corporation has an event of default, the interest rate of the loan may increase by 2% during the period of default. As of
September 30, 2010, the Corporation did not meet the terms of one of the financial covenants contained in the Loan Agreement. On November 12, 2010, the Corporation and PNC entered into a Waiver and Second Amendment to Loan Documents that
amended the financial reporting covenant at September 30, 2010. The Corporation, therefore, was in compliance with all terms and conditions of the Loan Agreement, as Amended, at September 30, 2010.

On January 7, 2009, the Corporation entered into swap arrangements with PNC to convert portions of the LIBOR floating interest rates to fixed
interest rates for three and five years. Under the swap agreements after the effects of the add-on of 325 basis points to LIBOR, $5.0 million matures on December 31, 2011 at a rate of 4.92% to 6.92% and an additional $15.0 million matures on
December 31, 2013 at a rate of 5.41% to 7.41%.

In January 2009, the Corporation entered into interest rate swap contracts to modify the
interest rate characteristics of designated debt instruments from variable to fixed in order to reduce the impact of changes in future cash flows due to interest rate changes. The Corporation hedged its exposure to the variability of future
cash flows for all forecasted transactions for a maximum of three to five years for hedges converting an aggregate of $20.0 million in floating-rate debt to fixed. The fair value of these derivatives, totaling a loss of $732,000 at
September 30, 2010, is reported as a contra account in other liabilities and offset in accumulated other comprehensive income for the effective portion of the derivatives. Ineffectiveness of these swaps, if any, is recognized immediately in
earnings. The change in



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value of these derivatives during the quarter ended September 30, 2010 resulted in no adjustment to current earnings, as the swaps were measured as effective.

Interest rate swap contracts involve the risk of dealing with counterparties and their ability to meet contractual terms. When the fair value of a
derivative instrument contract is positive, this generally indicates that the counterparty or customer owes the Corporation, and results in credit risk to the Corporation. When the fair value of a derivative instrument contract is negative, the
Corporation owes the customer or counterparty and therefore, has no credit risk.

Capital: Of the $56.8 million of gross proceeds from
the sale of the Series A Preferred Stock and the Loan from PNC, the Corporation contributed $50 million to the Bank as additional Tier 1 capital at the Bank. As noted above, the PNC Loan will be repaid quarterly, with a final principal payment of
$15.6 million due on December 31, 2013, and the dividend rate on the Series A Preferred Stock will increase from 5% to 9% per annum after the five-year anniversary date of the issuance of such stock. The Bank may not pay any dividends to
the Corporation if such dividends would result in the Bank no longer being well capitalized, unless the Bank receives the prior non-objection of its regulators.

Shareholders equity was $118.4 million or 6.51% of total assets at September 30, 2010. During the three months ended September 30, 2010, shareholders equity increased by $524,000 due
primarily to net income of $2.2 million offset by a $1.2 million increase to other comprehensive loss and declaration of common and preferred stock dividends of $507,000. The other comprehensive loss is due primarily to non-credit related OTTI
charges recognized on held to maturity investment securities. The Corporation is restricted from repurchasing additional shares of its Common Stock prior to December 23, 2011 unless it either redeems the Series A Preferred Stock or receives the
written consent of the Treasury.

The Bank is required to maintain Tier 1 (Core) capital equal to at least 4% of the institutions
adjusted total assets and Total (Supplementary) Risk-Based capital equal to at least 8% of its risk-weighted assets. At September 30, 2010, Parkvale Bank was in compliance with all applicable regulatory requirements, with Tier 1 Core, Tier 1
Risk-Based and Total Risk-Based ratios of 6.22%, 9.77% and 10.95%, respectively. The regulatory capital ratios for Parkvale Bank at September 30, 2010 are calculated as follows:

(Dollars in 000s)



|                                            |  |                   |           |   |                         |   |           |                        |  |   |           |  
|------------------------------------------- |  | ----------------- | --------- | - | ----------------------- | - | --------- | ---------------------- |  | - | --------- | -
|                                            |  | Tier 1CoreCapital |           |   | Tier 1Risk-BasedCapital |   |           | TotalRisk-BasedCapital | 
|Equity capital (1)                          |  | $                 | 138,774   |   |                         | $ | 138,774   |                        |  | $ | 138,774   |  
|Less non-allowable intangible assets        |  |                   | (28,284   | ) |                         |   | (28,284   | )                      |  |   | (28,284   | )
|Less non-allowable deferred tax asset       |  |                   | (10,632   | ) |                         |   | (10,632   | )                      |  |   | (10,632   | )
|Plus permitted valuation allowances (2)     |  |                   |          |   |                         |   |          |                        |  |   | 13,686    |  
|Plus accumulated other comprehensive income |  |                   | 13,853    |   |                         |   | 13,853    |                        |  |   | 13,853    |  
|                                            |  |                   |           |   |                         |   |           |                        |  |   |           |  
|Total regulatory capital                    |  |                   | 113,711   |   |                         |   | 113,711   |                        |  |   | 127,397   |  
|Minimum required capital                    |  |                   | 73,071    |   |                         |   | 46,552    |                        |  |   | 93,105    |  
|                                            |  |                   |           |   |                         |   |           |                        |  |   |           |  
|Excess regulatory capital                   |  | $                 | 40,640    |   |                         | $ | 67,159    |                        |  | $ | 34,292    |  
|                                            |  |                   |           |   |                         |   |           |                        |  |   |           |  
|Adjusted total assets (1)                   |  | $                 | 1,826,773 |   |                         | $ | 1,163,811 |                        |  | $ | 1,163,811 |  
|Regulatory capital as a percentage          |  |                   | 6.22      | % |                         |   | 9.77      | %                      |  |   | 10.95     | %
|Minimum capital required as a percentage    |  |                   | 4.00      | % |                         |   | 4.00      | %                      |  |   | 8.00      | %
|                                            |  |                   |           |   |                         |   |           |                        |  |   |           |  
|Excess regulatory capital as a percentage   |  |                   | 2.22      | % |                         |   | 5.77      | %                      |  |   | 2.95      | %
|                                            |  |                   |           |   |                         |   |           |                        |  |   |           |  
|Well capitalized requirement                |  |                   | 5.00      | % |                         |   | 6.00      | %                      |  |   | 10.00     | %
|                                            |  |                   |           |   |                         |   |           |                        |  |   |           |  



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|(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.
|--- | -----------------------------------------------

Results of Operations - Comparison of Three Months Ended September 30, 2010 and 2009:

For the three months ended September 30, 2010, net income available to common shareholders was $1.8 million compared to $328,000 for the quarter
ended September 30, 2009. Net income per common diluted share was $0.33 for the quarter ended September 30, 2010 and $0.06 for the quarter ended September 30, 2009. Excluding the preferred stock dividend, net income was $2.2 million
for the three months ended September 30, 2010, compared to $725,000 for the three months ended September 30, 2009. The $1.5 million increase in net income for the September 30, 2010 quarter reflects a $1.8 million reduction in
non-cash debt security impairment charges and a $1.3 million decrease in the provision for loan losses, partially offset by increases in tax expense and noninterest expense.

Interest Income:

Parkvale had interest income of $16.8 million during the three months
ended September 30, 2010 versus $20.0 million during the comparable period in 2009. The $3.2 million or 15.9% decrease is the result of a $91.8 million or 5.1% decrease in the average balance of interest-earning assets and a 50 basis point
decrease in the average yield from 4.45% in the September 30, 2009 quarter to 3.95% in the current quarter. Interest income from loans decreased $1.7 million or 11.8%, resulting from a decrease in the average outstanding loan balances of $70.0
million or 6.4% and a 32 basis point decrease in the average yield from 5.42% in 2009 to 5.10% in 2010. The decrease in the loan portfolio was primarily due to a decline in single-family residential mortgage loans. Investment interest income
decreased by $1.5 million or 28.5% due to a 74 basis point decrease in the average yield from 3.72% in the September 30, 2009 quarter to 2.98% in the current quarter and a decrease of $60.3 million or 10.9% in the average balance. During the
quarter ended September 30, 2010, Parkvale sold $49 million of its available for sale non-agency collateralized mortgage obligations, which were rated below investment grade at June 30, 2010. Interest income earned on federal funds sold
increased $24,000 or 24.5% from the 2009 quarter due to an increase of $38.4 million or 25.1% in the average balance during the September 30, 2010 quarter. The current Federal Reserve target rate is 0.25%. The weighted average yield on all
interest-earning assets was 3.89% at September 30, 2010 and 4.36% at September 30, 2009.

Interest Expense:

Interest expense decreased $2.7 million or 25.4% from the 2009 to the 2010 quarter. The decrease was due to a 58 basis point decrease in the average rate
paid on deposits and borrowings from 2.44% in 2009 to 1.86% in 2010 and a decrease in the average deposits and borrowings of $28.6 million or 1.6%. At September 30, 2010, the average rate payable on liabilities was 1.34% for deposits, 4.67% for
borrowings, 6.78% for term debt and 1.78% for combined deposits, borrowings and debt.

Net Interest Income:

Net interest income was $8.9 million for the quarter ended September 30, 2010 compared to $9.3 million for the quarter ended September 30, 2009.
The $459,000 or 4.9% decrease is primarily attributable to a decrease in net average interest-earning assets of $63.2 million or 127.8%, offset by an 8 basis point increase in the average interest rate spread from 2.01% in 2009 to 2.09% in 2010.

Provision for Loan Losses:

The provision for loan losses is an amount added to the allowance against which loan losses are charged. The provision for loan losses for the quarter
ended September 2010 decreased by $1.3 million or 54.8%



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from the September 2009 quarter based upon an analysis of credit factors related to the Banks portfolio and related reserve levels as of September 30, 2010. The level of nonperforming
loans decreased by $7.6 million or 21.9% at September 30, 2010 compared to September 30, 2009. Aggregate valuation allowances were 1.90%, 1.83% and 1.79% of gross loans at September 30, 2010, June 30, 2010 and
September 30, 2009, respectively.

Nonperforming loans and real estate owned aggregated $36.5 million, $35.2 million and $40.9 million at
September 30, 2010, June 30, 2010 and September 30, 2009, representing 2.00%, 1.91% and 2.15% of total assets at the respective balance sheet dates. Total loan loss reserves at September 30, 2010 were $19.6 million, compared
to $19.2 million at June 30, 2010 and $19.5 million at September 30, 2009. Management considers loan loss reserves sufficient when compared to the value of underlying collateral. See Nonperforming Loans and Foreclosed Real
Estate and Allowance for Loan Losses concerning trends experienced. Collateral is considered and evaluated when establishing the 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.

Noninterest Income:

Total noninterest income for the three months ended September 30, 2010 increased by $2.2 million due primarily to a $1.8 million decrease in non-cash
debt security impairment charges. The net credit-related OTTI charge recognized in earnings during the quarter ended September 30, 2010 was $996,000 compared to $2.8 million during the September 30, 2009 quarter. The $2.0 million
non-credit portion of the total $3.0 million of other than temporary impairment charge in the September 30, 2010 quarter is included in other comprehensive income, and is reported separately from net income. The September 30, 2010 quarter
writedowns were due to the other than temporary impairment of four pooled trust preferred securities resulting primarily from the deterioration of and payment deferral by issuers during the current quarter. The $2.8 million impairment charge
recognized during the September 30, 2009 quarter was the result of issuers for two pooled trust preferred securities going into default status during the quarter. Noninterest income included increases of $107,000 or 6.5% of service charges on
deposit accounts, $14,000 or 3.8% of other fees and service charges and $227,000 or 41.8% of other income. Annuity fee and commission income was $313,000 in the 2010 quarter compared to $218,000 in the 2009 quarter. The net gain on sale of assets
was $1.2 million for the quarter ended September 30, 2010 compared to $1.1 million for the quarter ended September 30, 2009. The gain recognized during the current quarter pertains to the disposition of $49 million of below-investment
grade non-agency collateralized mortgage obligations, which were reclassified from held to maturity to available for sale at June 30, 2010 due to existing and projected credit deterioration at June 30, 2010. The gain on sale of assets for
the three months ended September 30, 2009 relates primarily to the recovery upon sale of previously written-down preferred stock securities.

Noninterest Expense:

Total noninterest expense increased by $258,000 or 3.3% for the three
months ended September 30, 2010 compared to the September 30, 2009 quarter. This increase is primarily due to a $126,000 or 16.4% increase in FDIC insurance related to a higher premium rate charged by the FDIC in 2010, and the absence of
any credits which were previously used. Compensation and employee benefits expense increased by $121,000 or 3.2% during the quarter ended September 30, 2010 from the comparable 2009 quarter related to higher expense for employee benefit plans.
Marketing expense increased by $17,000 or 25.4%. Annualized noninterest expense as a percentage of average assets was 1.74% for the quarter ended September 30, 2010 and 1.63% for the quarter ended September 30, 2009.



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Income Tax Expense (Benefit):

Income tax for the three months ended September 30, 2010 was $638,000 compared to a tax benefit of $585,000 for the quarter ended September 30, 2009. The income tax benefit in the September 2009
quarter was due to a lower level of pretax income combined with the reversal of a previously provided tax valuation allowance on an equity security that was subsequently sold at a recovery in the September 2009 quarter. The overall effective tax
rate was 22.3% for the three months ended September 30, 2010 compared to 417.9% (benefit) for the September 2009 quarter. The effective tax rate of 22.3% for the September 2010 quarter is lower than the federal statutory tax rate of 35% due to
the tax benefits resulting from tax-exempt instruments.

Impact of Inflation and Changing Prices:

The financial statements and related data presented herein have been prepared in accordance with U.S. GAAP, which requires 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.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Quantitative and qualitative disclosures about market risk are presented at June 30, 2010 in Item 7A of Parkvale Financial
Corporations Form 10-K, filed with the SEC on September 13, 2010, as amended on November 12, 2010 and on September 9, 2011.

Item 4. Controls and Procedures

Disclosure controls
and procedures are monitored and supervised by Parkvales management, including the CEO and Chief Financial Officer, regarding the effectiveness of the design and operation of Parkvales disclosure controls and procedures. As previously
disclosed in the Notes to Unaudited Interim Consolidated Financial Statements under the heading Restatement of Consolidated Financial Statements included in Item 1 hereof, management along with the Companys independent
registered public accounting firm, during the course of the fiscal 2011 annual audit, identified a deficiency that represented a material weakness in internal control over the Companys financial reporting, which resulted in a restatement of
the Companys financial statements for fiscal 2010 and 2009. As a result, Parkvales management, including the CEO and Chief Financial Officer, concluded that Parkvales disclosure controls and procedures were not effective as of
September 30, 2010. 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, other than the following
corrective actions which were taken in order to address the material weakness in the Companys internal control described above. Management has evaluated the effect of the facts leading to this error and the Companys prior conclusions of
the adequacy of its internal control over financial reporting and disclosure controls and procedures reported on as part of the filings. Management is committed to maintaining effective internal control over financial reporting and has taken steps
to remediate the internal control weakness, including the manual accrual related to FDIC insurance premiums.



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PART II - OTHER INFORMATION

Item 1. Legal Proceedings

None

Item 1A. Risk
Factors

Risk factor disclosures are presented at June 30, 2010 in Item 1A of the Corporations Form 10-K, filed
with the SEC on September 13, 2010, as amended on November 12, 2010 and September 9, 2011. Management believes that there have been no material changes in Parkvales risk factors since June 30, 2010.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds



|(a) | Not applicable
|--- | --------------

|(b) | Not applicable
|--- | --------------

|(c) | Not applicable
|--- | --------------

Item 3. Defaults Upon
Senior Securities

None

Item 4. Reserved

N/A

Item 5. Other Information

None

Item 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.                         

| | 
| | 



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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.



|                        |  |  |  |                                |  |                          |  | 
|----------------------- |  |  |  | ------------------------------ |  | ------------------------ |  | 
|                        |  |  |  | Parkvale Financial Corporation
|                        |  |  | 
|DATE: September 9, 2011 |  |  |  | By:                            |  | /s/    GILBERT A.
RIAZZI
|                        |  |  |  |                                |  | Gilbert A. Riazzi       
|                        |  |  |  |                                |  | Vice President and      
|                        |  |  |  |                                |  | Chief Financial Officer 

|                        |  |  |  |     |  |                                |  | 
|----------------------- |  |  |  | --- |  | ------------------------------ |  | 
|                        |  |  | 
|DATE: September 9, 2011 |  |  |  | By: |  | /s/    ROBERT J. MCCARTHY,
JR.
|                        |  |  |  |     |  | Robert J. McCarthy, Jr.       
|                        |  |  |  |     |  | President and                 
|                        |  |  |  |     |  | Chief Executive Officer       



40