##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2011
 COMMISSION FILE NO: 0-17411
 PARKVALE FINANCIAL CORPORATION
  Pennsylvania
    
    25-1556590(State of incorporation)
    
    (I.R.S. Employer
Identification Number)
 
   þ o
 o o
  Large accelerated filer o
Accelerated filer o
Non-accelerated filer o(Do not check if smaller reporting company)
Smaller reporting company þ o þ




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##### 



PARKVALE FINANCIAL CORPORATION
  PagePart I. Financial InformationItem 1.Consolidated Statements of Financial Condition as of March 31, 2011 (Unaudited)
and June 30, 2010
    
    
    3Consolidated Statements of Operations for the three months and nine months ended
March 31, 2011 and 2010 (Unaudited)
    
    
    4Consolidated Statements of Cash Flows for the nine months ended
March 31, 2011 and 2010 (Unaudited)
    
    
    5-6Consolidated Statements of Shareholders Equity for the nine months ended
March 31, 2011 and 2010 (Unaudited)
    
    
    6-7Notes to Unaudited Interim Consolidated Financial Statements
    
    
    7-31Item 2.Managements Discussion and Analysis of Financial Condition and
Results of Operations
    
    
    31-41Item 3.Quantitative and Qualitative Disclosures about Market Risk
    
    
    41Item 4.Controls and Procedures
    
    
    41Part II  Other Information
    
    
    42Signatures
    
    
    43EX-31.1EX-31.2EX-32.1
  2




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##### Table of Contents



PARKVALE FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
 March 31,
    
    
    June 30,2011
    
    
    2010(Unaudited)ASSETSCash and noninterest-earning deposits
    
    $
    15,492
    
    
    $
    17,736Federal funds sold
    
    
    156,218
    
    
    
    135,773Cash and cash equivalents
    
    
    171,710
    
    
    
    153,509Interest-earning deposits in other banks
    
    
    3,835
    
    
    
    801Investment securities available for sale at fair value (cost of
$5,501 at March 31 and $65,778 at June 30)
    
    
    5,243
    
    
    
    65,770Investment securities held to maturity (fair value
of $481,082 at March 31 and $437,931 at June 30)
    
    
    484,223
    
    
    
    443,452Federal Home Loan Bank Stock, at cost
    
    
    12,958
    
    
    
    14,357Loans, net of allowance of $19,030 at March 31
and $19,209 at June 30
    
    
    998,936
    
    
    
    1,032,363Foreclosed real estate, net
    
    
    9,390
    
    
    
    8,637Office properties and equipment, net
    
    
    17,144
    
    
    
    17,374Goodwill
    
    
    25,634
    
    
    
    25,634Intangible assets
    
    
    2,195
    
    
    
    2,877Prepaid expenses and other assets
    
    
    70,024
    
    
    
    77,606Total assets
    
    $
    1,801,292
    
    
    $
    1,842,380LIABILITIES AND SHAREHOLDERS EQUITYLIABILITIESDeposits
    
    $
    1,480,886
    
    
    $
    1,488,073Advances from Federal Home Loan Bank
    
    
    150,862
    
    
    
    185,973Term debt
    
    
    21,875
    
    
    
    23,750Other debt
    
    
    12,925
    
    
    
    13,865Advance payments from borrowers for taxes and insurance
    
    
    6,775
    
    
    
    7,526Other liabilities
    
    
    4,105
    
    
    
    4,249Total liabilities
    
    
    1,677,428
    
    
    
    1,723,436SHAREHOLDERS EQUITYPreferred stock ($1.00 par value, liquidation preference $1,000;
5,000,000 shares authorized; 31,762 shares issued)
    
    
    31,762
    
    
    
    31,762Common stock ($1.00 par value; 10,000,000 shares
authorized; 6,734,894 shares issued)
    
    
    6,735
    
    
    
    6,735Additional paid-in capital
    
    
    2,151
    
    
    
    2,734Treasury stock at cost (1,152,048 shares at March 31
and 1,205,683 shares at June 30)
    
    
    (24,072
    )
    
    
    (25,193
    )Accumulated other comprehensive loss
    
    
    (13,516
    )
    
    
    (13,413
    )Retained earnings
    
    
    120,804
    
    
    
    116,319Total shareholders equity
    
    
    123,864
    
    
    
    118,944Total liabilities and shareholders equity
    
    $
    1,801,292
    
    
    $
    1,842,380
 3




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##### Table of Contents



PARKVALE FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
 Three months ended
    
    
    Nine months endedMarch 31,
    
    
    March 31,2011
    
    
    2010
    
    
    2011
    
    
    2010Interest income:Loans
    
    $
    12,408
    
    
    $
    13,745
    
    
    $
    38,269
    
    
    $
    42,768Investments
    
    
    3,497
    
    
    
    4,799
    
    
    
    10,631
    
    
    
    14,895Federal funds sold
    
    
    77
    
    
    
    88
    
    
    
    284
    
    
    
    291Total interest income
    
    
    15,982
    
    
    
    18,632
    
    
    
    49,184
    
    
    
    57,954Interest expense:Deposits
    
    
    4,543
    
    
    
    6,464
    
    
    
    14,538
    
    
    
    21,843Borrowings
    
    
    2,340
    
    
    
    2,754
    
    
    
    7,476
    
    
    
    8,289Total interest expense
    
    
    6,883
    
    
    
    9,218
    
    
    
    22,014
    
    
    
    30,132Net interest income
    
    
    9,099
    
    
    
    9,414
    
    
    
    27,170
    
    
    
    27,822Provision for loan losses
    
    
    691
    
    
    
    1,164
    
    
    
    2,740
    
    
    
    4,851Net interest income after
provision for losses
    
    
    8,408
    
    
    
    8,250
    
    
    
    24,430
    
    
    
    22,971Noninterest Income:Other-than-temporary impairment losses
recognized in earnings
    
    
    (255
    )
    
    
    (6,536
    )
    
    
    (4,236
    )
    
    
    (12,537
    )Non-credit related losses recognized in
other comprehensive income
    
    
    
    
    
    
    5,492
    
    
    
    2,039
    
    
    
    7,950Net impairment losses recognized in earnings
    
    
    (255
    )
    
    
    (1,044
    )
    
    
    (2,197
    )
    
    
    (4,587
    )Service charges on deposit accounts
    
    
    1,628
    
    
    
    1,487
    
    
    
    5,052
    
    
    
    4,754Other fees and service charges
    
    
    339
    
    
    
    376
    
    
    
    1,101
    
    
    
    1,102Net gain on sale of assets
    
    
    
    
    
    
    167
    
    
    
    1,366
    
    
    
    2,372Other
    
    
    507
    
    
    
    521
    
    
    
    1,799
    
    
    
    1,575Total noninterest income
    
    
    2,219
    
    
    
    1,507
    
    
    
    7,121
    
    
    
    5,216Noninterest Expense:Compensation and employee benefits
    
    
    3,649
    
    
    
    3,804
    
    
    
    11,049
    
    
    
    11,236Office occupancy
    
    
    1,158
    
    
    
    1,243
    
    
    
    3,272
    
    
    
    3,449Marketing
    
    
    78
    
    
    
    78
    
    
    
    256
    
    
    
    238FDIC insurance
    
    
    918
    
    
    
    769
    
    
    
    2,716
    
    
    
    1,982Office supplies, telephone and postage
    
    
    477
    
    
    
    479
    
    
    
    1,487
    
    
    
    1,412Other
    
    
    1,555
    
    
    
    1,494
    
    
    
    4,757
    
    
    
    4,456Total noninterest expense
    
    
    7,835
    
    
    
    7,867
    
    
    
    23,537
    
    
    
    22,773Income before income taxes
    
    
    2,792
    
    
    
    1,890
    
    
    
    8,014
    
    
    
    5,414Income tax expense
    
    
    845
    
    
    
    472
    
    
    
    2,003
    
    
    
    716Net income
    
    
    1,947
    
    
    
    1,418
    
    
    
    6,011
    
    
    
    4,698Less: Preferred stock dividend
    
    
    397
    
    
    
    397
    
    
    
    1,191
    
    
    
    1,191Income available to common shareholders
    
    $
    1,550
    
    
    $
    1,021
    
    
    $
    4,820
    
    
    $
    3,507Net income per common basic share
    
    $
    0.28
    
    
    $
    0.18
    
    
    $
    0.87
    
    
    $
    0.64Net income per common diluted share
    
    $
    0.28
    
    
    $
    0.18
    
    
    $
    0.87
    
    
    $
    0.64
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PARKVALE FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
 Nine months endedMarch 31,2011
    
    
    2010Cash flows from operating activities:Interest received
    
    $
    50,262
    
    
    $
    57,544Loan fees received
    
    
    444
    
    
    
    242Other fees and commissions received
    
    
    7,148
    
    
    
    6,604Interest paid
    
    
    (22,182
    )
    
    
    (30,260
    )Cash paid to suppliers and others
    
    
    (17,302
    )
    
    
    (39,447
    )Income taxes refund (paid)
    
    
    3,748
    
    
    
    (1,718
    )Net cash provided by (used in) operating activities
    
    
    22,118
    
    
    
    (7,035
    )Cash flows from investing activities:Proceeds from sale of investment securities available for sale
    
    
    51,308
    
    
    
    2,331Proceeds from maturities of investment securities held to maturity
    
    
    207,469
    
    
    
    280,366Purchase of investment securities held to maturity
    
    
    (242,235
    )
    
    
    (332,140
    )(Purchase) maturity of deposits in other banks
    
    
    (3,034
    )
    
    
    3,318Principal collected on loans
    
    
    209,781
    
    
    
    181,473Loans made to customers, net of loans in process
    
    
    (169,186
    )
    
    
    (121,120
    )Purchase of loans
    
    
    (10,722
    )
    
    
    Proceeds from loans sold
    
    
    
    
    
    
    7,527Other
    
    
    (412
    )
    
    
    (178
    )Net cash provided by investing activities
    
    
    42,969
    
    
    
    21,577Cash flows from financing activities:Net increase in checking and savings accounts
    
    
    34,679
    
    
    
    58,945Net (decrease) in certificates of deposit
    
    
    (41,867
    )
    
    
    (56,751
    )Repayment of FHLB advances
    
    
    (35,014
    )
    
    
    (19
    )Repayment of term debt
    
    
    (1,875
    )
    
    
    (625
    )Net (decrease) in other borrowings
    
    
    (940
    )
    
    
    (6,683
    )Net (decrease) in borrowers advances for taxes and insurance
    
    
    (751
    )
    
    
    (759
    )Dividends paid
    
    
    (1,690
    )
    
    
    (2,009
    )Contribution to benefit plans
    
    
    572
    
    
    
    712Net cash (used in) financing activities
    
    
    (46,886
    )
    
    
    (7,189
    )Net increase in cash and cash equivalents
    
    
    18,201
    
    
    
    7,353Cash and cash equivalents at beginning of period
    
    
    153,509
    
    
    
    165,891Cash and cash equivalents at end of period
    
    $
    171,710
    
    
    $
    173,244Reconciliation of net income to net cash provided by operating activities:Net income
    
    $
    6,011
    
    
    $
    4,698Adjustments to reconcile net income to net cash provided by operating activities:Depreciation and amortization
    
    
    1,324
    
    
    
    1,439(Accretion) and amortization of loan fees and discounts
    
    
    488
    
    
    
    (1,296
    )Loan fees collected and deferred (premiums paid)
    
    
    60
    
    
    
    (45
    )Provision for loan losses
    
    
    2,740
    
    
    
    4,851Loss on writedown of assets
    
    
    2,197
    
    
    
    4,587Gain on sale of assets
    
    
    (1,366
    )
    
    
    (2,372
    )Decrease in accrued interest receivable
    
    
    460
    
    
    
    797Decrease (increase) in other assets
    
    
    7,124
    
    
    
    (16,327
    )(Decrease) increase in accrued interest payable
    
    
    (52
    )
    
    
    43Increase (decrease) in other liabilities
    
    
    3,132
    
    
    
    (3,410
    )Total adjustments
    
    
    16,107
    
    
    
    (11,733
    )Net cash provided by (used in) operating activities
    
    $
    22,118
    
    
    $
    (7,035
    )
  5




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PARKVALE FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY
 AccumulatedAdditional
    
    
    
    
    
    
    Other
    
    
    
    
    
    
    TotalPreferred
    
    
    Common
    
    
    Paid-in
    
    
    Treasury
    
    
    Comprehensive
    
    
    Retained
    
    
    ShareholdersStock
    
    
    Stock
    
    
    Capital
    
    
    Stock
    
    
    Income (Loss)
    
    
    Earnings
    
    
    EquityBalance, June 30, 2010
    
    $
    31,762
    
    
    $
    6,735
    
    
    $
    2,734
    
    
    
    ($25,193
    )
    
    
    ($13,413
    )
    
    $
    116,319
    
    
    $
    118,944Net income, nine months ended
March 31, 2011
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,011
    
    
    
    6,011Accumulated other comprehensive
income (loss):Change in swap liability, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (238
    )Change in unrealized gain (loss)
on securities, net of deferred
tax benefit of $236
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    675Reclassification adjustment, net
of taxes of $(291)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (540
    )
    
    
    
    
    
    
    (103
    )Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,908Dividends declared on common
stock at $0.06 per share
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (335
    )
    
    
    (335
    )Dividends on preferred stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,191
    )
    
    
    (1,191
    )Sale of treasury stock toESOP & Benefit Plans
    
    
    
    
    
    
    
    
    
    
    (633
    )
    
    
    1,121
    
    
    
    
    
    
    
    
    
    
    
    488Recognition of stock option
compensation expense
    
    
    
    
    
    
    
    
    
    
    50
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    50Balance, March 31, 2011
    
    $
    31,762
    
    
    $
    6,735
    
    
    $
    2,151
    
    
    
    ($24,072
    )
    
    
    ($13,516
    )
    
    $
    120,804
    
    
    $
    123,864Balance, June 30, 2009
    
    $
    31,762
    
    
    $
    6,735
    
    
    $
    4,116
    
    
    
    ($27,314
    )
    
    
    ($10
    )
    
    $
    135,471
    
    
    $
    150,760Net income, nine months ended
March 31, 2010
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,698
    
    
    
    4,698Accumulated other comprehensive
Income (loss):Change in swap liability
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    452Change in unrealized gain (loss)
on securities, net of deferred
tax benefit of $(2,713)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,273
    )Reclassification adjustment, net
of taxes of $(808)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,407
    )
    
    
    
    
    
    
    (5,228
    )Comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (530
    )Dividends declared on common
stock at $0.15 per share
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (823
    )
    
    
    (823
    )Dividends on preferred stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,191
    )
    
    
    (1,191
    )Sale of treasury stock toESOP & Benefit Plans
    
    
    
    
    
    
    
    
    
    
    (1,409
    )
    
    
    2,121
    
    
    
    
    
    
    
    
    
    
    
    712Recognition of stock option
compensation expense
    
    
    
    
    
    
    
    
    
    
    27
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    27Balance, March 31, 2010
    
    $
    31,762
    
    
    $
    6,735
    
    
    $
    2,734
    
    
    
    ($25,193
    )
    
    
    ($5,238
    )
    
    $
    138,155
    
    
    $
    148,955
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NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
 NOTE 1. STATEMENTS OF OPERATIONS
  NOTE 2. RECLASSIFICATION
  NOTE 3. SUBSEQUENT EVENTS
  7




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NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
 NOTE 4. LOANS AND THE ALLOWANCE FOR LOAN LOSS
  March 31, 2011
    
    
    June 30, 2010Mortgage loans:1-4 Family
    
    $
    633,105
    
    
    $
    660,685Commercial
    
    
    159,435
    
    
    
    159,991792,540
    
    
    
    820,676Consumer loans:Home Equity
    
    
    145,479
    
    
    
    147,567Automobile
    
    
    28,047
    
    
    
    34,817Other Consumer
    
    
    9,571
    
    
    
    7,250183,097
    
    
    
    189,634Commercial business loans
    
    
    41,429
    
    
    
    40,445Total gross loans
    
    
    1,017,066
    
    
    
    1,050,755Less: Loans in process
    
    
    3
    
    
    
    135Allowance for loan losses
    
    
    19,030
    
    
    
    19,209Unamortized premiums and deferred loan fees
    
    
    (903
    )
    
    
    (952
    )Loans, net
    
    $
    998,936
    
    
    $
    1,032,363
  Portfolio Risk Characteristics:
   8




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NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
      9




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NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
      10




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NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
  Pass
    
    Special Mention
    
    Substandard
    
    Doubtful
    
    TotalMortgage loans:1-4 family
    
    $
    608,879
    
    
    $
    3,958
    
    
    $
    20,268
    
    
    $
    
    
    
    $
    633,105Commercial
    
    
    155,647
    
    
    
    1,101
    
    
    
    2,687
    
    
    
    
    
    
    
    159,435Consumer loans:Home Equity
    
    
    144,671
    
    
    
    
    
    
    
    780
    
    
    
    28
    
    
    
    145,479Automobile
    
    
    27,929
    
    
    
    
    
    
    
    118
    
    
    
    
    
    
    
    28,047Other Consumer
    
    
    9,567
    
    
    
    
    
    
    
    
    
    
    
    4
    
    
    
    9,571Commercial business
loans
    
    
    38,655
    
    
    
    1,140
    
    
    
    1,634
    
    
    
    
    
    
    
    41,429Total
    
    $
    985,348
    
    
    $
    6,199
    
    
    $
    25,487
    
    
    $
    32
    
    
    $
    1,017,066
   Mortgage loans:1-4 family
    
    $
    23,324Commercial
    
    
    1,425Consumer loans:Home Equity
    
    
    503Automobile
    
    
    136Other Consumer
    
    
    4Commercial business loans
    
    
    1,259Total
    
    $
    26,651
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NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
  Net Recorded
    
    Unpaid Principal
    
    Related
    
    Average Recorded
    
    Interest IncomeInvestment
    
    Balance
    
    Allowance
    
    Investment
    
    RecognizedWith no related allowance
recorded:Mortgage loans:1-4 family
    
    $
    20,289
    
    
    $
    20,289
    
    
    $
    
    
    
    $
    19,871
    
    
    $
    263Commercial
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Consumer loans:Home Equity
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Automobile
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other Consumer
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Commercial business loans
    
    
    799
    
    
    
    799
    
    
    
    
    
    
    
    1,735
    
    
    
    With an allowance recorded:Mortgage loans:1-4 family
    
    $
    8,550
    
    
    $
    13,802
    
    
    $
    5,252
    
    
    $
    9,744
    
    
    $
    Commercial
    
    
    1,394
    
    
    
    2,013
    
    
    
    619
    
    
    
    1,369
    
    
    
    14Consumer loans:Home Equity
    
    
    406
    
    
    
    564
    
    
    
    158
    
    
    
    399
    
    
    
    Automobile
    
    
    113
    
    
    
    228
    
    
    
    115
    
    
    
    134
    
    
    
    Other Consumer
    
    
    
    
    
    
    27
    
    
    
    27
    
    
    
    
    
    
    
    Commercial business loans
    
    
    
    
    
    
    49
    
    
    
    49
    
    
    
    
    
    
    
    Total:Mortgage loans:1-4 family
    
    $
    28,839
    
    
    $
    34,091
    
    
    $
    5,252
    
    
    $
    29,615
    
    
    $
    263Commercial
    
    
    1,394
    
    
    
    2,013
    
    
    
    619
    
    
    
    1,369
    
    
    
    14Consumer loans:Home Equity
    
    
    406
    
    
    
    564
    
    
    
    158
    
    
    
    399
    
    
    
    Automobile
    
    
    113
    
    
    
    228
    
    
    
    115
    
    
    
    134
    
    
    
    Other Consumer
    
    
    
    
    
    
    27
    
    
    
    27
    
    
    
    
    
    
    
    Commercial business loans
    
    
    799
    
    
    
    848
    
    
    
    49
    
    
    
    1,735
    
    
    
    
 12




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##### Table of Contents



NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
   Loans60-89
    
    
    
    
    
    Total
    
    
    
    
    
    
    
    
    
    Receivable30-59 Days
    
    Days
    
    Greater than
    
    Past
    
    
    
    
    
    Total Loans
    
    > 90 DaysPast Due
    
    Past Due
    
    90 Days
    
    Due
    
    Current
    
    Receivables
    
    and AccruingMortgage loans:1-4 family
    
    $
    5,774
    
    
    $
    4,655
    
    
    $
    23,324
    
    
    $
    33,753
    
    
    $
    599,352
    
    
    $
    633,105
    
    
    $
    Commercial
    
    
    3,111
    
    
    
    419
    
    
    
    1,425
    
    
    
    4,955
    
    
    
    154,480
    
    
    
    159,435
    
    
    
    Consumer loans:Home Equity
    
    
    681
    
    
    
    256
    
    
    
    503
    
    
    
    1,440
    
    
    
    144,039
    
    
    
    145,479
    
    
    
    Automobile
    
    
    205
    
    
    
    41
    
    
    
    136
    
    
    
    382
    
    
    
    27,665
    
    
    
    28,047
    
    
    
    Other Consumer
    
    
    8
    
    
    
    10
    
    
    
    4
    
    
    
    22
    
    
    
    9,549
    
    
    
    9,571
    
    
    
    Commercial business
loans
    
    
    117
    
    
    
    208
    
    
    
    1,259
    
    
    
    1,584
    
    
    
    39,845
    
    
    
    41,429
    
    
    
    Total
    
    $
    9,896
    
    
    $
    5,589
    
    
    $
    26,651
    
    
    $
    42,136
    
    
    $
    974,930
    
    
    $
    1,017,066
    
    
    $
    
   Beginning balance
    
    $
    17,960Provision for losses  mortgage loans
    
    
    4,727Provision for losses  consumer loans
    
    
    127Provision for (recovery of) losses  commercial business loans
    
    
    (3
    )Loans recovered
    
    
    34Loans charged off
    
    
    (5,188
    )Ending balance
    
    $
    17,657
 13




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##### Table of Contents



NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
  Commercial1-4 family
    
    Commercial
    
    Home
    
    
    
    
    
    Other
    
    BusinessMortgage
    
    Mortgage
    
    Equity
    
    Automobile
    
    Consumer
    
    Loans
    
    TotalAllowance for Loan Losses:Beginning balance
at June 30, 2010:
    
    $
    10,440
    
    
    $
    3,340
    
    
    $
    2,091
    
    
    $
    907
    
    
    $
    155
    
    
    $
    2,276
    
    
    $
    19,209Charge-offs
    
    
    (2,593
    )
    
    
    (46
    )
    
    
    (183
    )
    
    
    (46
    )
    
    
    (69
    )
    
    
    (58
    )
    
    
    (2,995
    )Recoveries
    
    
    15
    
    
    
    
    
    
    
    
    
    
    
    34
    
    
    
    
    
    
    
    27
    
    
    
    76Provisions
    
    
    2,106
    
    
    
    537
    
    
    
    64
    
    
    
    33
    
    
    
    
    
    
    
    
    
    
    
    2,740Ending balance at
March 31, 2011
    
    $
    9,968
    
    
    $
    3,831
    
    
    $
    1,972
    
    
    $
    928
    
    
    $
    86
    
    
    $
    2,245
    
    
    $
    19,030Ending balance:
individually
evaluated for
impairment
    
    $
    5,252
    
    
    $
    619
    
    
    $
    158
    
    
    $
    115
    
    
    $
    27
    
    
    $
    49
    
    
    $
    6,220Ending balance:
collectively
evaluated for
impairment
    
    $
    4,716
    
    
    $
    3,212
    
    
    $
    1,814
    
    
    $
    813
    
    
    $
    59
    
    
    $
    2,196
    
    
    $
    12,810Ending balance:
loans acquired with
deteriorated
credit quality
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Recorded Investment:Ending balance
    
    $
    633,105
    
    
    $
    159,435
    
    
    $
    145,479
    
    
    $
    28,047
    
    
    $
    9,571
    
    
    $
    41,429
    
    
    $
    1,017,066Ending balance:
individually
evaluated for
impairment
    
    $
    34,091
    
    
    $
    2,013
    
    
    $
    564
    
    
    $
    228
    
    
    $
    27
    
    
    $
    848
    
    
    $
    37,771Ending balance:
collectively
evaluated for
impairment
    
    $
    599,014
    
    
    $
    157,422
    
    
    $
    144,915
    
    
    $
    27,819
    
    
    $
    9,544
    
    
    $
    40,581
    
    
    $
    979,295
 NOTE 5. COMPREHENSIVE INCOME
  14




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NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
 NOTE 6. FAIR VALUE OF FINANCIAL INSTRUMENTS
  Level I 
    
    Quoted prices are available in the active markets for
identical assets or liabilities as of the measurement date.Level II 
    
    Pricing inputs are other than quoted prices in active markets,
which are either directly or indirectly observable as of the
measurement date. The nature of these assets and liabilities
includes items for which quoted prices are available but
traded less frequently, and items that are fair valued using
other financial instruments, the parameters of which can be
directly observed.Level III 
    
    Valuations derived from valuation techniques in which one or
more significant inputs or significant value drivers are
unobservable. Level III valuations incorporate certain
assumptions and projections in determining the fair value
assigned to such assets or liabilities.
   March 31, 2011
    
    June 30, 2010Level I
    
    Level II
    
    Level III
    
    Total
    
    Level I
    
    Level II
    
    Level III
    
    TotalAvailable for sale
securities:CMOs  Non
Agency
(Residential)
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    59,804
    
    
    $
    
    
    
    $
    59,804Common Equities
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    682
    
    
    
    
    
    
    
    
    
    
    
    682Mutual Fund 
ARM mortgages
    
    
    
    
    
    
    5,242
    
    
    
    
    
    
    
    5,242
    
    
    
    
    
    
    
    5,284
    
    
    
    
    
    
    
    5,284Interest rate swaps
    
    
    
    
    
    
    403
    
    
    
    
    
    
    
    403
    
    
    
    
    
    
    
    494
    
    
    
    
    
    
    
    494Total
    
    $
    1
    
    
    $
    5,645
    
    
    $
    
    
    
    $
    5,646
    
    
    $
    682
    
    
    $
    65,582
    
    
    $
    
    
    
    $
    66,264
 15




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##### Table of Contents



NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
    Level I
    
    Level II
    
    Level III
    
    TotalAssets Measured on a Nonrecurring Basis:Other than temporarily
impaired (OTTI)  Held to
maturity trust preferred
securities
    
    $
    
    
    
    $
    
    
    
    $
    11,016
    
    
    $
    11,016Impaired loans
    
    
    
    
    
    
    
    
    
    
    10,463
    
    
    
    10,463Impaired foreclosed real estate
    
    
    
    
    
    
    3,575
    
    
    
    
    
    
    
    3,575
   16




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##### Table of Contents



NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
 Cash and Noninterest-Bearing Deposits, which includes noninterest-bearing demand deposits
Federal Funds Sold
Interest-Earning Deposits in Other Banks
Accrued interest
Cash Surrender Value (CSV) of Bank Owned Life Insurance (BOLI)
Checking, savings and money market accounts
  Investment Securities:
 Loans Receivable:
 Deposit Liabilities:
 Advances from Federal Home Loan Bank:
 Term Debt and Other Debt:
 Off-Balance-Sheet Instruments:
 17




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##### Table of Contents



NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
  March 31, 2011

    June 30, 2010Carrying
    
    
    
    
    
    CarryingFair Value
    
    Value
    
    Fair Value
    
    ValueFinancial Assets:Cash and non-interest-earning deposits
    
    $
    15,492
    
    
    $
    15,492
    
    
    $
    17,736
    
    
    $
    17,736Federal funds sold
    
    
    156,218
    
    
    
    156,218
    
    
    
    135,773
    
    
    
    135,773Interest-earning deposits in other banks
    
    
    3,835
    
    
    
    3,835
    
    
    
    801
    
    
    
    801Investment securities available for sale
    
    
    5,243
    
    
    
    5,243
    
    
    
    65,770
    
    
    
    65,770Investment securities held to maturity
    
    
    481,082
    
    
    
    484,223
    
    
    
    437,931
    
    
    
    443,452FHLB stock
    
    
    12,958
    
    
    
    12,958
    
    
    
    14,357
    
    
    
    14,357Loans receivable
    
    
    1,043,996
    
    
    
    1,017,066
    
    
    
    1,087,009
    
    
    
    1,050,755Accrued interest receivable
    
    
    5,738
    
    
    
    5,738
    
    
    
    7,409
    
    
    
    7,409Cash surrender value of BOLI
    
    
    26,093
    
    
    
    26,093
    
    
    
    25,288
    
    
    
    25,288Financial Liabilities:Checking, savings and money market accounts
    
    $
    730,713
    
    
    $
    730,713
    
    
    $
    696,364
    
    
    $
    696,364Certificates of deposit
    
    
    772,013
    
    
    
    750,173
    
    
    
    812,339
    
    
    
    791,709Advances from Federal Home Loan Bank
    
    
    167,638
    
    
    
    150,862
    
    
    
    204,699
    
    
    
    185,973Term debt
    
    
    22,279
    
    
    
    21,875
    
    
    
    24,244
    
    
    
    23,750Other debt
    
    
    12,280
    
    
    
    12,925
    
    
    
    13,156
    
    
    
    13,865Interest rate swap
    
    
    402
    
    
    
    402
    
    
    
    494
    
    
    
    494Accrued interest payable
    
    
    850
    
    
    
    850
    
    
    
    902
    
    
    
    902Off-balance sheet loan instruments
    
    $
    19
    
    
    $
    
    
    
    $
    118
    
    
    $
    
 NOTE 7. INVESTMENT SECURITIES
  Securities  Held to Maturity, Available for Sale and Other than Temporary Impairment
  18




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##### Table of Contents



NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
    19




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##### Table of Contents



NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
 Federal Home Loan Bank Stock
     
    
    the members ability to access liquidity from the FHLB;
    
    the members funding cost advantage with the FHLB compared to alternative sources of funds;
    
    a decline in the market value of FHLBs net assets relative to book value which
may or may not affect future financial performance or cash flow;
    
    the FHLBs ability to obtain credit and source liquidity, for which one
indicator is the credit rating of the FHLB;
    
    the FHLBs commitment to make payments taking into account its ability to meet
statutory and regulatory payment obligations and the level of such payments in relation
to the FHLBs operating performance; and
    
    the prospects of amendments to laws that affect the rights and obligations of the FHLB.
  20




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##### Table of Contents



NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
  March 31, 2011
    
    
    June 30, 2010Available for Sale Investments
    
    Amortized Cost
    
    
    Fair Value
    
    
    Amortized Cost
    
    
    Fair ValueCMOs  Non Agency (Residential)
    
    
    
    
    
    
    
    
    
    $
    59,804
    
    
    $
    59,804Mutual Funds  ARM mortgages
    
    
    5,500
    
    
    
    5,242
    
    
    
    5,500
    
    
    
    5,284Common equities
    
    
    1
    
    
    
    1
    
    
    
    474
    
    
    
    682Total available for sale investments
    
    $
    5,501
    
    
    $
    5,243
    
    
    $
    65,778
    
    
    $
    65,770
 March 31, 2011
    
    
    June 30, 2010Held to Maturity Investments
    
    Amortized Cost
    
    
    Fair Value
    
    
    Amortized Cost
    
    
    Fair ValueU.S. Government and agency obligations
    
    $
    148,232
    
    
    $
    148,135
    
    
    $
    194,248
    
    
    $
    195,920Municipal obligations
    
    
    27,478
    
    
    
    27,881
    
    
    
    21,641
    
    
    
    22,345Corporate debt:Short to medium term corporate debt
    
    
    30,607
    
    
    
    31,539
    
    
    
    27,112
    
    
    
    28,352Pooled trust preferred securities
    
    
    21,182
    
    
    
    17,590
    
    
    
    24,229
    
    
    
    16,849Individual trust preferred securities
    
    
    9,340
    
    
    
    8,459
    
    
    
    9,322
    
    
    
    7,977Mortgage-backed securities:Agency
    
    
    179,412
    
    
    
    180,076
    
    
    
    93,248
    
    
    
    95,055Agency Collateralized Mortgage Obligations
(CMOs)
    
    
    8,124
    
    
    
    8,262
    
    
    
    10,357
    
    
    
    10,630CMOs  non agency
    
    
    59,848
    
    
    
    59,140
    
    
    
    63,295
    
    
    
    60,803Total held to maturity investments
    
    $
    484,223
    
    
    $
    481,082
    
    
    $
    443,452
    
    
    $
    437,931
  AmortizedCost
    
    
    Fair ValueDue in one year or less
    
    $
    12,515
    
    
    $
    12,665Due after one year through five years
    
    
    96,887
    
    
    
    98,440Due after five years through ten years
    
    
    125,706
    
    
    
    125,058Due after ten years
    
    
    249,115
    
    
    
    244,919Total debt securities
    
    $
    484,223
    
    
    $
    481,082
  21




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NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
  Less than 12 months
    
    Greater than 12 monthsof unrealized losses
    
    of unrealized losses
    
    TotalUnrealized
    
    
    
    
    
    Unrealized
    
    
    
    
    
    UnrealizedAvailable for Sale Investments
    
    Fair Value
    
    loss
    
    Fair Value
    
    loss
    
    Fair Value
    
    lossMutual funds  ARM mortgages
    
    $
    
    
    
    $
    
    
    
    $
    5,242
    
    
    $
    258
    
    
    $
    5,242
    
    
    $
    258Held to Maturity InvestmentsU.S. Government and agency
obligations
    
    
    86,742
    
    
    
    862
    
    
    
    
    
    
    
    
    
    
    
    86,742
    
    
    
    862Municipal obligations
    
    
    10,668
    
    
    
    116
    
    
    
    
    
    
    
    
    
    
    
    10,668
    
    
    
    116Corporate debt
    
    
    9,167
    
    
    
    69
    
    
    
    
    
    
    
    
    
    
    
    9,167
    
    
    
    69Pooled trust preferred securities
    
    
    431
    
    
    
    124
    
    
    
    8,129
    
    
    
    6,516
    
    
    
    8,560
    
    
    
    6,640Individual trust preferred securities
    
    
    
    
    
    
    
    
    
    
    5,109
    
    
    
    1,020
    
    
    
    5,109
    
    
    
    1,020Non agency CMOs
    
    
    104
    
    
    
    31
    
    
    
    19,915
    
    
    
    2,977
    
    
    
    20,019
    
    
    
    3,008Mortgage-backed securities
    
    
    101,292
    
    
    
    1,326
    
    
    
    22
    
    
    
    1
    
    
    
    101,314
    
    
    
    1,327Totals
    
    $
    208,404
    
    
    $
    2,528
    
    
    $
    38,417
    
    
    $
    10,772
    
    
    $
    246,821
    
    
    $
    13,300
  Less than 12 months
    
    Greater than 12 monthsof unrealized losses
    
    of unrealized losses
    
    TotalUnrealized
    
    
    
    
    
    Unrealized
    
    
    
    
    
    UnrealizedAvailable for Sale Investments
    
    Fair Value
    
    loss
    
    Fair Value
    
    loss
    
    Fair Value
    
    lossMutual funds  ARM mortgages
    
    $
    
    
    
    $
    
    
    
    $
    4,760
    
    
    $
    240
    
    
    $
    4,760
    
    
    $
    240Held to Maturity InvestmentsU.S. Government and agency
obligations
    
    
    29,990
    
    
    
    9
    
    
    
    
    
    
    
    
    
    
    
    29,990
    
    
    
    9Pooled trust preferred securities
    
    
    
    
    
    
    
    
    
    
    10,197
    
    
    
    7,380
    
    
    
    10,197
    
    
    
    7,380Individual trust preferred securities
    
    
    
    
    
    
    
    
    
    
    5,054
    
    
    
    1,550
    
    
    
    5,054
    
    
    
    1,550Non agency CMOs
    
    
    
    
    
    
    
    
    
    
    18,024
    
    
    
    4,879
    
    
    
    18,024
    
    
    
    4,879Mortgage-backed securities
    
    
    5,300
    
    
    
    47
    
    
    
    
    
    
    
    
    
    
    
    5,300
    
    
    
    47Totals
    
    $
    35,290
    
    
    $
    56
    
    
    $
    38,035
    
    
    $
    14,049
    
    
    $
    73,325
    
    
    $
    14,105
 22




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##### Table of Contents



NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
 Available for sale investments.
 Mutual Funds
 Common Equities.
 Held to maturity securities.
 U.S. Government and Agency Obligations.
 Trust Preferred Securities
 23




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##### Table of Contents



NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
   
    
    that current defaults would have no recovery;
    
    that some individually analyzed deferrals will cure at rates varying from 10% to 90%
after the deferral period ends;
    
    recent historical performance metrics, including profitability, capital ratios, loan
charge-offs and loan reserve ratios, for the underlying institutions that would indicate a
higher probability of default by the institution;
    
    that institutions identified as possessing a higher probability of default would recover
at a rate of 10% for banks and 15% for insurance companies;
    
    that financial performance of the financial sector continues to be affected by the
economic environment resulting in an expectation of additional deferrals and defaults in
the future;
    
    whether the security is currently deferring interest; and
    
    the external rating of the security and recent changes to its external rating.
 24




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NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
       25




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##### Table of Contents



NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
  ExcessExpected
    

    SubordinationActual
    
    Defaults
    
    (as a % ofUnrealized Gain
    
    Lowest Credit
    
    # of
    
    Actual
    
    Deferral %
    
    (% of performing
    
    performingDeal
    
    Note Class
    
    Par Value
    
    Amortized Cost
    
    Fair Value
    
    (Loss)
    
    Ratings
    
    Issuers
    
    Default % (1)
    
    (1) (2)
    
    collateral) (3)
    
    collateral) (4)Pooled InvestmentsP1
    
    C1
    
    
    5,000
    
    
    
    350
    
    
    
    777
    
    
    
    427
    
    
    C
    
    
    69
    
    
    
    20.5
    %
    
    
    19.0
    %
    
    
    14.0
    %
    
    
    0.0
    %P2
    
    A2A
    
    
    5,000
    
    
    
    2,020
    
    
    
    2,517
    
    
    
    497
    
    
    CCC-
    
    
    64
    
    
    
    1.8
    %
    
    
    22.0
    %
    
    
    13.9
    %
    
    
    9.5
    %P3
    
    C1
    
    
    4,592
    
    
    
    736
    
    
    
    1,145
    
    
    
    409
    
    
    C
    
    
    85
    
    
    
    1.6
    %
    
    
    7.4
    %
    
    
    14.8
    %
    
    
    0.0
    %P4
    
    C1
    
    
    5,058
    
    
    
    354
    
    
    
    1,062
    
    
    
    708
    
    
    C
    
    
    72
    
    
    
    0.0
    %
    
    
    11.2
    %
    
    
    14.8
    %
    
    
    0.0
    %P5
    
    C1
    
    
    5,023
    
    
    
    151
    
    
    
    348
    
    
    
    197
    
    
    C
    
    
    93
    
    
    
    13.3
    %
    
    
    17.4
    %
    
    
    14.2
    %
    
    
    0.0
    %P6
    
    C1
    
    
    3,075
    
    
    
    31
    
    
    
    62
    
    
    
    31
    
    
    C
    
    
    68
    
    
    
    19.1
    %
    
    
    16.9
    %
    
    
    15.0
    %
    
    
    0.0
    %P8
    
    C
    
    
    3,219
    
    
    
    128
    
    
    
    190
    
    
    
    62
    
    
    C
    
    
    56
    
    
    
    1.2
    %
    
    
    18.6
    %
    
    
    13.3
    %
    
    
    0.0
    %P9
    
    B
    
    
    2,008
    
    
    
    80
    
    
    
    424
    
    
    
    344
    
    
    C
    
    
    54
    
    
    
    12.2
    %
    
    
    26.4
    %
    
    
    11.8
    %
    
    
    0.0
    %P10
    
    B1
    
    
    5,000
    
    
    
    4,885
    
    
    
    2,580
    
    
    
    (2,305
    )
    
    CCC
    
    
    24
    
    
    
    0.0
    %
    
    
    5.8
    %
    
    
    11.1
    %
    
    
    11.3
    %P11
    
    Mezz
    
    
    1,500
    
    
    
    555
    
    
    
    431
    
    
    
    (124
    )
    
    C
    
    
    23
    
    
    
    18.8
    %
    
    
    21.1
    %
    
    
    8.4
    %
    
    
    0.0
    %P12
    
    B2
    
    
    1,005
    
    
    
    293
    
    
    
    323
    
    
    
    30
    
    
    C
    
    
    33
    
    
    
    14.6
    %
    
    
    16.1
    %
    
    
    11.4
    %
    
    
    0.0
    %P13
    
    B
    
    
    3,909
    
    
    
    3,759
    
    
    
    1,080
    
    
    
    (2,679
    )
    
    C
    
    
    45
    
    
    
    14.4
    %
    
    
    16.2
    %
    
    
    13.5
    %
    
    
    0.0
    %P14
    
    A1
    
    
    4,618
    
    
    
    4,301
    
    
    
    2,913
    
    
    
    (1,388
    )
    
    CCC
    
    
    50
    
    
    
    20.3
    %
    
    
    9.2
    %
    
    
    13.9
    %
    
    
    28.2
    %P15
    
    B
    
    
    5,000
    
    
    
    1,700
    
    
    
    1,556
    
    
    
    (144
    )
    
    C
    
    
    34
    
    
    
    25.5
    %
    
    
    12.2
    %
    
    
    16.7
    %
    
    
    0.0
    %P16
    
    C1
    
    
    5,000
    
    
    
    1,089
    
    
    
    1,089
    
    
    
    
    
    
    C
    
    
    45
    
    
    
    17.2
    %
    
    
    11.1
    %
    
    
    10.9
    %
    
    
    0.0
    %P17
    
    C1
    
    
    5,000
    
    
    
    750
    
    
    
    1,093
    
    
    
    343
    
    
    C
    
    
    42
    
    
    
    18.5
    %
    
    
    15.5
    %
    
    
    10.6
    %
    
    
    0.0
    %Subtotal
    
    16
    
    
    64,007
    
    
    
    21,182
    
    
    
    17,590
    
    
    
    (3,592
    )Single Issuer
InvestmentsS1
    
    N/A
    
    
    1,000
    
    
    
    931
    
    
    
    770
    
    
    
    (161
    )
    
    BB+
    
    
    1
    
    
    
    0.0
    %
    
    
    0.0
    %
    
    
    0.0
    %S2
    
    N/A
    
    
    2,000
    
    
    
    1,970
    
    
    
    1,541
    
    
    
    (429
    )
    
    BB+
    
    
    1
    
    
    
    0.0
    %
    
    
    0.0
    %
    
    
    0.0
    %S3
    
    N/A
    
    
    3,000
    
    
    
    2,781
    
    
    
    2,443
    
    
    
    (338
    )
    
    A-
    
    
    1
    
    
    
    0.0
    %
    
    
    0.0
    %
    
    
    0.0
    %S4
    
    N/A
    
    
    500
    
    
    
    447
    
    
    
    355
    
    
    
    (92
    )
    
    BB-
    
    
    1
    
    
    
    0.0
    %
    
    
    0.0
    %
    
    
    0.0
    %S5
    
    N/A
    
    
    1,000
    
    
    
    1,005
    
    
    
    1,082
    
    
    
    77
    
    
    NR
    
    
    1
    
    
    
    0.0
    %
    
    
    0.0
    %
    
    
    0.0
    %S6
    
    N/A
    
    
    700
    
    
    
    710
    
    
    
    722
    
    
    
    12
    
    
    NR
    
    
    1
    
    
    
    0.0
    %
    
    
    0.0
    %
    
    
    0.0
    %S7
    
    N/A
    
    
    529
    
    
    
    496
    
    
    
    540
    
    
    
    44
    
    
    B+
    
    
    1
    
    
    
    0.0
    %
    
    
    0.0
    %
    
    
    0.0
    %S8
    
    N/A
    
    
    1,000
    
    
    
    1,000
    
    
    
    1,006
    
    
    
    6
    
    
    BB+
    
    
    1
    
    
    
    0.0
    %
    
    
    0.0
    %
    
    
    0.0
    %Subtotal
    
    8
    
    
    9,729
    
    
    
    9,340
    
    
    
    8,459
    
    
    
    (881
    )Grand total of
Trust Preferred
holdings
    
    
    
    
    73,736
    
    
    
    30,522
    
    
    
    26,049
    
    
    
    (4,473
    )
   (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).
 26




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NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
 Non agency CMOs
 Year
originated
    
    Amortized Cost
    
    
    Fair Value2003
    
    $
    18,609
    
    
    $
    20,2222004
    
    
    27,778
    
    
    
    26,6192005
    
    
    3,934
    
    
    
    4,1252007
    
    
    5,787
    
    
    
    4,4332008
    
    
    3,740
    
    
    
    3,741$
    59,848
    
    
    $
    59,140
  AmortizedCost
    
    
    Fair ValueAAA by Moodys, S&P, or Fitch
    
    $
    22,327
    
    
    $
    23,301AA by Moodys or S&P
    
    
    5,882
    
    
    
    6,328A by Moodys, S&P, or Fitch
    
    
    3,740
    
    
    
    3,741Baa by Moodys
    
    
    4,871
    
    
    
    5,751BB by S&P
    
    
    17,106
    
    
    
    15,482B by Finch
    
    
    3,178
    
    
    
    2,689CCC by Fitch
    
    
    2,609
    
    
    
    1,744D by S&P
    
    
    135
    
    
    
    104$
    59,848
    
    
    $
    59,140
  General
 27




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##### Table of Contents



NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
 Other-Than-Temporary- Impairment
  Unadjusted
    
    OTTI
    
    OTTI
    
    3/31/11
    
    3/31/11Carrying
    
    Charge to
    
    Charge to
    
    Carrying
    
    FairSecurity
    
    Value
    
    earnings
    
    OCI
    
    Value
    
    ValuePooled trust preferred security
    
    $
    48,857
    
    
    $
    19,904
    
    
    $
    20,718
    
    
    $
    8,236
    
    
    $
    11,016
  Pooled trustpreferred securitiesBalance at June 30, 2010
    
    $
    19,868Total losses  realized/unrealized
    
    
    3,046Included as a charge to earnings
    
    
    (2,197
    )Change to other comprehensive income
    
    
    Balance at March 31, 2011
    
    $
    20,717
  Pooled trustpreferred securitiesBalance at June 30, 2010
    
    $
    17,707Addition for the credit component on
debt securities in which OTTI was not
previously recognized
    
    
    2,197Balance at March 31, 2011
    
    $
    19,904
 The amount of securities with OTTI charges to earnings are as follows:Recorded in September 30, 2010 quarter
    
    $
    996Recorded in December 31, 2010 quarter
    
    
    946Recorded in March 31, 2011 quarter
    
    
    255
  28




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NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
 NOTE 8. GOODWILL AND MARKET VALUATION
    29




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##### Table of Contents



NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
 NOTE 9. EARNINGS PER SHARE (EPS)
  Three months ended
    
    Nine months endedMarch 31,
    
    March 31,2011
    
    
    2010
    
    
    2011
    
    
    2010Numerator for basic and diluted EPS:Net income
    
    $
    1,947
    
    
    $
    1,418
    
    
    $
    6,011
    
    
    $
    4,698Less: Preferred stock dividend
    
    
    397
    
    
    
    397
    
    
    
    1,191
    
    
    
    1,191Net income to common stockholders
    
    $
    1,550
    
    
    $
    1,021
    
    
    $
    4,820
    
    
    $
    3,507Denominator:Weighted average shares for basic EPS
    
    
    5,582,407
    
    
    
    5,527,818
    
    
    
    5,547,111
    
    
    
    5,461,373Effect of dilutive stock options
    
    
    2,808
    
    
    
    
    
    
    
    1,369
    
    
    
    Weighted average shares for dilutive EPS
    
    
    5,585,215
    
    
    
    5,527,818
    
    
    
    5,548,480
    
    
    
    5,461,373Net income per common share:Basic
    
    $
    0.28
    
    
    $
    0.18
    
    
    $
    0.87
    
    
    $
    0.64Diluted
    
    $
    0.28
    
    
    $
    0.18
    
    
    $
    0.87
    
    
    $
    0.64
 NOTE 10. NEW ACCOUNTING PRONOUNCEMENTS
    30




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##### Table of Contents



PARKVALE FINANCIAL CORPORATION
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
  Forward-Looking Statements:
    31




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##### Table of Contents



Critical Accounting Policies, Judgments and Estimates:
   Balance Sheet Data:
 March 31,(Dollar amounts in thousands, except per share data)
    
    2011
    
    
    2010Total assets
    
    $
    1,801,292
    
    
    $
    1,896,225Loans, net
    
    
    998,936
    
    
    
    1,033,004Interest-earning deposits and federal funds sold
    
    
    160,053
    
    
    
    152,621Total investments
    
    
    489,466
    
    
    
    571,495Deposits
    
    
    1,480,886
    
    
    
    1,513,442FHLB advances
    
    
    150,862
    
    
    
    186,030Shareholders equity
    
    
    123,864
    
    
    
    148,955Book value per common share
    
    $
    16.50
    
    
    $
    21.19
  Three Months Ended
    
    Nine Months EndedMarch 31, (1)
    
    March 31, (1)2011
    
    2010
    
    2011
    
    2010Average yield earned on all interest-earning assets
    
    
    3.85
    %
    
    
    4.20
    %
    
    
    3.91
    %
    
    
    4.32
    %Average rate paid on all interest-bearing liabilities
    
    
    1.65
    
    
    
    2.07
    
    
    
    1.74
    
    
    
    2.30Average interest rate spread
    
    
    2.20
    
    
    
    2.13
    
    
    
    2.17
    
    
    
    2.02Net yield on average interest-earning assets
    
    
    2.19
    
    
    
    2.12
    
    
    
    2.16
    
    
    
    2.07Other expenses to average assets
    
    
    1.74
    
    
    
    1.65
    
    
    
    1.72
    
    
    
    1.59Taxes to pre-tax income
    
    
    30.27
    
    
    
    24.97
    
    
    
    24.99
    
    
    
    13.22Dividend payout ratio
    
    
    7.14
    
    
    
    27.78
    
    
    
    6.90
    
    
    
    23.44Return on average assets
    
    
    0.43
    
    
    
    0.30
    
    
    
    0.44
    
    
    
    0.33Return on average equity
    
    
    5.71
    
    
    
    3.68
    
    
    
    5.95
    
    
    
    4.10Average equity to average total assets
    
    
    7.58
    
    
    
    8.11
    
    
    
    7.39
    
    
    
    7.99Dividends per share
    
    $
    0.02
    
    
    $
    0.05
    
    
    $
    0.06
    
    
    $
    0.15
 32




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##### Table of Contents



At March 31,2011
    
    2010One year gap to total assets
    
    
    9.58
    %
    
    
    13.12
    %Intangibles to total equity
    
    
    22.47
    
    
    
    19.29Ratio of nonperforming loans and foreclosed real estate to total assets
    
    
    1.76
    
    
    
    1.79Number of full-service offices
    
    
    47
    
    
    
    47
 
 (1)
    
    The applicable income and expense figures have been annualized in calculating the
percentages. Nonperforming Loans and Foreclosed Real Estate:
      33




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##### Table of Contents



Allowance for Loan Losses:
   34




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##### Table of Contents



Liquidity and Capital Resources:
  TARP Capital Purchase Program
    35




---



##### Table of Contents



Term Debt
    Capital:
 36




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##### Table of Contents



Tier 1
    
    
    Tier 1
    
    
    TotalCore
    
    
    Risk-Based
    
    
    Risk-BasedCapital
    
    
    Capital
    
    
    CapitalEquity capital (1)
    
    $
    142,072
    
    
    $
    142,072
    
    
    $
    142,072Less non-allowable intangible assets
    
    
    (27,829
    )
    
    
    (27,829
    )
    
    
    (27,829
    )Less non-allowable deferred tax asset
    
    
    (7,883
    )
    
    
    (7,883
    )
    
    
    (7,883
    )Plus permitted valuation allowances (2)
    
    
    
    
    
    
    
    
    
    
    12,810Plus accumulated other comprehensive income
    
    
    13,097
    
    
    
    13,097
    
    
    
    13,097Total regulatory capital
    
    
    119,457
    
    
    
    119,457
    
    
    
    132,267Minimum required capital
    
    
    71,040
    
    
    
    45,501
    
    
    
    91,002Excess regulatory capital
    
    $
    48,417
    
    
    $
    73,956
    
    
    $
    41,265Adjusted total assets (1)
    
    $
    1,776,005
    
    
    $
    1,137,519
    
    
    $
    1,137,519Regulatory capital as a percentage
    
    
    6.73
    %
    
    
    10.50
    %
    
    
    11.63
    %Minimum capital required as a percentage
    
    
    4.00
    %
    
    
    4.00
    %
    
    
    8.00
    %Excess regulatory capital as a percentage
    
    
    2.73
    %
    
    
    6.50
    %
    
    
    3.63
    %Well capitalized requirement
    
    
    5.00
    %
    
    
    6.00
    %
    
    
    10.00
    %
 
 (1)
    
    Represents amounts for the consolidated Bank as reported to the Pennsylvania Department
of Banking and FDIC on Form 041 for the quarter ended March 31, 2011.(2)
    
    Limited to 1.25% of risk adjusted total assets. Results of Operations  Comparison of Three Months Ended March 31, 2011 and 2010:
  37




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Interest Income:
  Interest Expense:
  Net Interest Income:
  Provision for Loan Losses:
   38




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##### Table of Contents



Noninterest Income:
  Noninterest Expense:
  Income Tax Expense:
  Results of Operations  Comparison of Nine Months Ended March 31, 2011 and 2010:
  Interest Income:
  39




---



##### Table of Contents



Interest Expense:
  Net Interest Income:
  Provision for Loan Losses:
  Noninterest Income:
  Noninterest Expense:
  40




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##### Table of Contents



Income Tax Expense:
  Impact of Inflation and Changing Prices:
  
  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.
 
  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. Parkvales management, including
the CEO and Chief Financial Officer, concluded that Parkvales disclosure controls and
procedures were effective as of March 31, 2011. 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.
 41




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##### Table of Contents



PART II  OTHER INFORMATION
  None
  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. Management
believes that there have been no material changes in Parkvales risk factors since June 30,
2010.
  (a)
    
    During the quarter, Parkvale Financial Corporation sold from Treasury shares 6,683 shares at
a market price of $9.18 to the Executive Deferred Compensation Plan and 484 shares at a market
price of $10.98 to the Supplemental Executive Benefit Plan.(b)
    
    Not applicable(c)
    
    Not applicable
  None
  N/A
  None
  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.
 
 42




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##### Table of Contents



SIGNATURES
  Parkvale Financial CorporationDATE: May 20, 2011
    By:
    /s/ Gilbert A. RiazziGilbert A. RiazziVice President and
Chief Financial OfficerDATE: May 20, 2011
    By:
    /s/ Robert J. McCarthy, Jr.Robert J. McCarthy, Jr.President and
Chief Executive Officer  43