UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 2008
 COMMISSION FILE NO: 0-17411
 PARKVALE FINANCIAL CORPORATION
  Pennsylvania
    
    25-1556590(State of incorporation)
    
    (I.R.S. Employer
Identification Number)
 4220 William Penn Highway, Monroeville, Pennsylvania 15146
  þ o
  Large accelerated filer oAccelerated filer þNon-accelerated filer o(Do not check if a smaller reporting company)Smaller reporting company o o þ




---



##### 



PARKVALE FINANCIAL CORPORATION
  PagePart I. Financial InformationItem 1.Consolidated Statements of Financial Condition as of December 31, 2008
and June 30, 2008
    
    
    3Consolidated Statements of Operations for the three and six months ended
December 31, 2008 and 2007
    
    
    4Consolidated Statements of Cash Flows for the six months ended
December 31, 2008 and 2007
    
    
    5-6Consolidated Statements of Shareholders Equity for the six months ended
December 31, 2008
    
    
    6Notes to Unaudited Interim Consolidated Financial Statements
    
    
    7-12Item 2.Managements Discussion and Analysis of Financial Condition and
Results of Operations
    
    
    12-22Item 3.Quantitative and Qualitative Disclosures about Market Risk
    
    
    22-23Item 4.Controls and Procedures
    
    
    23Part II  Other Information
    
    
    23-24Signatures
    
    
    24Exhibits
    
    
    25-27
 2




---



##### 



PARKVALE FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
 December 31,
    
    
    June 30,2008
    
    
    2008(Unaudited)ASSETSCash and noninterest-earning deposits
    
    $
    18,643
    
    
    $
    18,692Federal funds sold
    
    
    90,000
    
    
    
    86,000Cash and cash equivalents
    
    
    108,643
    
    
    
    104,692Interest-earning deposits in other banks
    
    
    30,669
    
    
    
    7,252Investment securities available for sale (cost of
$29,970 at December 31 and $34,845 at June 30)
    
    
    26,068
    
    
    
    31,347Investment securities held to maturity (fair value
of $427,145 at December 31 and $383,853 at June 30)
    
    
    461,753
    
    
    
    413,028Loans, net of allowance of $15,897 at December 31
and $15,249 at June 30
    
    
    1,163,968
    
    
    
    1,201,665Foreclosed real estate, net
    
    
    6,897
    
    
    
    3,279Office properties and equipment, net
    
    
    18,417
    
    
    
    18,851Goodwill
    
    
    25,634
    
    
    
    25,634Intangible assets
    
    
    4,240
    
    
    
    4,695Prepaid expenses and other assets
    
    
    43,961
    
    
    
    40,949Total assets
    
    $
    1,890,250
    
    
    $
    1,851,392LIABILITIES AND SHAREHOLDERS EQUITYLIABILITIESDeposits
    
    $
    1,481,785
    
    
    $
    1,493,685Advances from Federal Home Loan Bank
    
    
    186,315
    
    
    
    191,430Term Debt
    
    
    25,000
    
    
    
    Other debt
    
    
    20,939
    
    
    
    21,965Advance payments from borrowers for taxes and insurance
    
    
    7,336
    
    
    
    7,754Other liabilities
    
    
    5,611
    
    
    
    4,927Total liabilities
    
    
    1,726,986
    
    
    
    1,719,761SHAREHOLDERS EQUITYPreferred stock ($1.00 par value, liquidation preference $1,000;
5,000,000 shares authorized; 31,762 shares issued)
    
    
    31,762
    
    
    
    Common stock ($1.00 par value; 10,000,000 shares
authorized; 6,734,894 shares issued)
    
    
    6,735
    
    
    
    6,735Additional paid in capital
    
    
    4,116
    
    
    
    4,026Treasury stock at cost (1,307,199 shares at December 31
and 1,253,199 at June 30)
    
    
    (27,314
    )
    
    
    (26,618
    )Accumulated other comprehensive income (loss)
    
    
    (2,478
    )
    
    
    (2,222
    )Retained earnings
    
    
    150,443
    
    
    
    149,710Total shareholders equity
    
    
    163,264
    
    
    
    131,631Total liabilities and shareholders equity
    
    $
    1,890,250
    
    
    $
    1,851,392
 3




---



##### 



PARKVALE FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
 Three months ended
    
    
    Six months endedDecember 31,
    
    
    December 31,2008
    
    
    2007
    
    
    2008
    
    
    2007Interest income:Loans
    
    $
    17,215
    
    
    $
    18,278
    
    
    $
    34,797
    
    
    $
    36,676Investments
    
    
    5,861
    
    
    
    5,402
    
    
    
    11,596
    
    
    
    10,382Federal funds sold
    
    
    59
    
    
    
    1,296
    
    
    
    562
    
    
    
    2,732Total interest income
    
    
    23,135
    
    
    
    24,976
    
    
    
    46,955
    
    
    
    49,790Interest expense:Deposits
    
    
    10,043
    
    
    
    12,205
    
    
    
    20,466
    
    
    
    24,166Borrowings
    
    
    2,470
    
    
    
    2,814
    
    
    
    4,970
    
    
    
    5,594Trust preferred securities
    
    
    
    
    
    
    153
    
    
    
    
    
    
    
    317Total interest expense
    
    
    12,513
    
    
    
    15,172
    
    
    
    25,436
    
    
    
    30,077Net interest income
    
    
    10,622
    
    
    
    9,804
    
    
    
    21,519
    
    
    
    19,713Provision for loan losses
    
    
    2,129
    
    
    
    288
    
    
    
    3,156
    
    
    
    991Net interest income after
provision for losses
    
    
    8,493
    
    
    
    9,516
    
    
    
    18,363
    
    
    
    18,722Noninterest Income:Service charges on deposit accounts
    
    
    1,650
    
    
    
    1,778
    
    
    
    3,392
    
    
    
    3,555Other fees and service charges
    
    
    327
    
    
    
    363
    
    
    
    710
    
    
    
    650Net gain on sale (writedown) of assets
    
    
    (1,060
    )
    
    
    
    
    
    
    (4,982
    )
    
    
    Other
    
    
    636
    
    
    
    780
    
    
    
    1,251
    
    
    
    1,463Total noninterest income
    
    
    1,553
    
    
    
    2,921
    
    
    
    371
    
    
    
    5,668Noninterest Expenses:Compensation and employee benefits
    
    
    4,092
    
    
    
    4,154
    
    
    
    8,100
    
    
    
    8,289Office occupancy
    
    
    1,095
    
    
    
    1,083
    
    
    
    2,201
    
    
    
    2,211Marketing
    
    
    71
    
    
    
    182
    
    
    
    240
    
    
    
    355FDIC insurance
    
    
    62
    
    
    
    43
    
    
    
    123
    
    
    
    84Office supplies, telephone and postage
    
    
    466
    
    
    
    497
    
    
    
    927
    
    
    
    954Early extinguishment of debt
    
    
    
    
    
    
    62
    
    
    
    
    
    
    
    62Other
    
    
    1,365
    
    
    
    1,267
    
    
    
    2,656
    
    
    
    2,543Total noninterest expenses
    
    
    7,151
    
    
    
    7,288
    
    
    
    14,247
    
    
    
    14,498Income before income taxes
    
    
    2,895
    
    
    
    5,149
    
    
    
    4,487
    
    
    
    9,892Income tax expense
    
    
    830
    
    
    
    1,579
    
    
    
    1,317
    
    
    
    2,673Net income
    
    $
    2,065
    
    
    $
    3,570
    
    
    $
    3,170
    
    
    $
    7,219Net income per common share:Basic
    
    $
    0.37
    
    
    $
    0.65
    
    
    $
    0.57
    
    
    $
    1.30Diluted
    
    $
    0.37
    
    
    $
    0.64
    
    
    $
    0.57
    
    
    $
    1.29
 4




---



##### 



PARKVALE FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
 Six months endedDecember 31,2008
    
    
    2007Cash flows from operating activities:Interest received
    
    $
    45,137
    
    
    $
    49,675Loan fees received (premiums paid)
    
    
    222
    
    
    
    59Disbursements of student loans
    
    
    (30
    )
    
    
    (705
    )Proceeds from sales of student loans
    
    
    361
    
    
    
    248Other fees and commissions received
    
    
    4,793
    
    
    
    5,145Interest paid
    
    
    (25,549
    )
    
    
    (30,236
    )Cash paid to suppliers and others
    
    
    (13,430
    )
    
    
    (11,320
    )Income taxes paid
    
    
    (2,501
    )
    
    
    (4,105
    )Net cash provided by operating activities
    
    
    9,003
    
    
    
    8,761Cash flows from investing activities:Proceeds from sale of investment securities available for sale
    
    
    3,012
    
    
    
    1,399Proceeds from maturities of investment securities
    
    
    35,692
    
    
    
    65,404Purchase of investment securities held to maturity
    
    
    (86,164
    )
    
    
    (131,361
    )(Purchase) of deposits in other banks
    
    
    (23,416
    )
    
    
    (509
    )Purchase of loans
    
    
    
    
    
    
    (27,003
    )Principal collected on loans
    
    
    92,147
    
    
    
    160,942Loans made to customers, net of loans in process
    
    
    (61,584
    )
    
    
    (105,359
    )Other
    
    
    (125
    )
    
    
    (2,318
    )Net cash (used in) investing activities
    
    
    (40,438
    )
    
    
    (38,805
    )Cash flows from financing activities:Net (decrease) in checking and savings accounts
    
    
    (4,837
    )
    
    
    (4,180
    )Net (decrease) in certificates of deposit
    
    
    (7,063
    )
    
    
    (6,135
    )Proceeds from long term debt
    
    
    25,000
    
    
    
    Repayment of trust preferred securities
    
    
    
    
    
    
    (7,200
    )Repayment of FHLB advances
    
    
    (5,013
    )
    
    
    (12
    )Net (decrease) increase in other borrowings
    
    
    (1,027
    )
    
    
    4,621(Decrease) in borrowers advances for taxes and insurance
    
    
    (418
    )
    
    
    (566
    )Proceeds from issuance of preferred stock
    
    
    31,762
    
    
    
    Cash dividends paid
    
    
    (2,412
    )
    
    
    (2,454
    )Proceeds from exercise of stock options
    
    
    111
    
    
    
    172Payment for treasury stock
    
    
    (717
    )
    
    
    (4,658
    )Net cash used in financing activities
    
    
    35,386
    
    
    
    (20,412
    )Net (decrease) in cash and cash equivalents
    
    
    3,951
    
    
    
    (50,456
    )Cash and cash equivalents at beginning of period
    
    
    104,692
    
    
    
    145,248Cash and cash equivalents at end of period
    
    $
    108,643
    
    
    $
    94,792
 5




---



##### 



Six months endedDecember 31,2008
    
    
    2007Net income
    
    $
    3,170
    
    
    $
    7,219Adjustments to reconcile net income to net cash provided
by operating activities:Depreciation and amortization
    
    
    1,013
    
    
    
    1,092Accretion and amortization of loan fees and discounts
    
    
    (1,372
    )
    
    
    (88
    )Loan fees collected and deferred and (premiums paid)
    
    
    31
    
    
    
    (15
    )Provision for loan losses
    
    
    3,156
    
    
    
    991Net writedown (gain) on sale of securities
    
    
    4,982
    
    
    
    (Increase) in accrued interest receivable
    
    
    (458
    )
    
    
    (191
    )(Increase) decrease in other assets
    
    
    (2,224
    )
    
    
    (1,027
    )(Decrease) increase in accrued interest payable
    
    
    (11
    )
    
    
    (72
    )Increase (decrease) in other liabilities
    
    
    716
    
    
    
    852Total adjustments
    
    
    5,833
    
    
    
    1,542Net cash provided by operating activities
    
    $
    9,003
    
    
    $
    8,761
  PARKVALE FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY
 AccumulatedAdditional
    
    
    
    
    
    Other
    
    
    
    
    
    TotalPreferred
    
    Common
    
    Paid-in
    
    Treasury
    
    Comprehensive
    
    Retained
    
    ShareholdersStock
    
    Stock
    
    Capital
    
    Stock
    
    Income (Loss)
    
    Earnings
    
    EquityBalance, June 30, 2008
    
    $
    
    
    
    $
    6,735
    
    
    $
    4,026
    
    
    
    ($26,618
    )
    
    
    ($2,222
    )
    
    $
    149,710
    
    
    $
    131,631Net income, six months ended
December 31, 2008
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,170
    
    
    
    3,170Accumulated other comprehensive
Income:Change in unrealized gain (loss)
on securities, net of deferred
tax benefit of ($1,967)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,676
    )Reclassification adjustment, net
of taxes of $1,681
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,420
    
    
    
    
    
    
    
    (256
    )Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,914Issuance of 5% preferred stock
    
    
    31,762
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    31,762Dividends declared on common
stock at $0.44 per share
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,402
    )
    
    
    (2,402
    )Dividends accrued on
preferred stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (35
    )
    
    
    (35
    )Purchase of treasury stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (717
    )
    
    
    
    
    
    
    
    
    
    
    (717
    )Recognition of stock option
compensation expense
    
    
    
    
    
    
    
    
    
    
    90
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    90Exercise of stock options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    21
    
    
    
    
    
    
    
    
    
    
    
    21Balance, December 31, 2008
    
    $
    31,762
    
    
    $
    6,735
    
    
    $
    4,116
    
    
    
    ($27,314
    )
    
    
    ($2,478
    )
    
    $
    150,443
    
    
    $
    163,264
 6




---



##### 



NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
 STATEMENTS OF OPERATIONS
  LOANS
 December 31, 2008
    
    June 30, 2008Loans are summarized as follows:Mortgage loans:Residential:1-4 Family
    
    $
    788,867
    
    
    $
    828,516Multifamily
    
    
    30,196
    
    
    
    29,737Commercial
    
    
    114,595
    
    
    
    113,622Other
    
    
    13,967
    
    
    
    17,497947,625
    
    
    
    989,372Consumer loans
    
    
    180,936
    
    
    
    176,948Commercial business loans
    
    
    44,994
    
    
    
    43,643Loans on savings accounts
    
    
    5,526
    
    
    
    6,1471,179,081
    
    
    
    1,216,110Less: Loans in process
    
    
    277
    
    
    
    236Allowance for loan losses
    
    
    15,897
    
    
    
    15,249Unamortized premiums and deferred loan fees
    
    
    (1,061
    )
    
    
    (1,040
    )Loans, net
    
    $
    1,163,968
    
    
    $
    1,201,665
    2008
    
    
    2007Beginning balance
    
    $
    15,249
    
    
    $
    14,189Provision for losses  mortgage loans
    
    
    1,380
    
    
    
    779Provision for losses  consumer loans
    
    
    1,237
    
    
    
    147Provision for losses  commercial loans
    
    
    539
    
    
    
    65Loans recovered
    
    
    14
    
    
    
    110Loans charged off
    
    
    (2,522
    )
    
    
    (471
    )Ending balance
    
    $
    15,897
    
    
    $
    14,819
 7




---



##### 



NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
  COMPREHENSIVE INCOME
  FAIR VALUE
  Level I 
    
    Quoted prices are available in the active markets for
identical assets or liabilities as of the measurement date.Level II 
    
    Pricing inputs are other than quoted prices in active markets,
which are either directly or indirectly observable as of the
measurement date. The nature of these assets and liabilities
includes items for which quoted prices are available but
traded less frequently, and items that are fair valued using
other financial instruments, the parameters of which can be
directly observed.Level III 
    
    Valuations derived from valuation techniques in which one or
more significant inputs or significant value drivers are
unobservable.
   Level I
    
    Level II
    
    Level III
    
    TotalAssets:Available for sale securities
    
    $
    26,068
    
    
    
    
    
    
    
    
    
    
    $
    26,068OTTI  Held to maturity securities
    
    
    3,586
    
    
    
    
    
    
    
    
    
    
    
    3,586Student loans held for sale
    
    
    
    
    
    
    4
    
    
    
    
    
    
    
    4Liabilities:
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
 8




---



##### 



NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
   Level I
    
    Level II
    
    Level III
    
    TotalAssets Measured on a Nonrecurring Basis:Impaired loans
    
    
    
    
    
    
    
    
    
    
    508
    
    
    
    508
 INVESTMENTS
  December 31, 2008
    
    
    June 30, 2008Available for Sale Investments
    
    Amortized Cost
    
    
    Fair Value
    
    
    Amortized Cost
    
    
    Fair ValueFHLB of Pittsburgh stock
    
    $
    13,826
    
    
    $
    13,826
    
    
    $
    14,713
    
    
    $
    14,713Preferred stocks, including GSEs
    
    
    9,830
    
    
    
    6,185
    
    
    
    12,416
    
    
    
    9,940Mutual Funds  ARM mortgages
    
    
    5,500
    
    
    
    5,235
    
    
    
    5,500
    
    
    
    5,233Other common equities
    
    
    814
    
    
    
    822
    
    
    
    2,216
    
    
    
    1,461$
    29,970
    
    
    $
    26,068
    
    
    $
    34,845
    
    
    $
    31,347
  December 31, 2008
    
    June 30, 2008Held to Maturity Investments
    
    Amortized Cost
    
    Fair Value
    
    Amortized Cost
    
    Fair ValueU.S. Government and agency obligations
    
    
    115,481
    
    
    
    116,974
    
    
    
    71,411
    
    
    
    71,331Municipal obligations
    
    
    6,052
    
    
    
    6,020
    
    
    
    4,050
    
    
    
    4,105Corporate debt:Short to medium term corporate debt
    
    
    43,103
    
    
    
    41,952
    
    
    
    44,224
    
    
    
    43,390Pooled trust preferred securities
    
    
    85,473
    
    
    
    58,740
    
    
    
    85,159
    
    
    
    63,623Individual trust preferred securities
    
    
    9,789
    
    
    
    7,690
    
    
    
    9,778
    
    
    
    8,479Mortgage-backed securities
    
    
    201,855
    
    
    
    195,769
    
    
    
    198,406
    
    
    
    192,925461,753
    
    
    
    427,145
    
    
    
    413,028
    
    
    
    383,853
   9




---



##### 



NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
    Less than 12 months of
    
    Greater than 12 months ofunrealized losses
    
    unrealized losses
    
    TotalUnrealized
    
    
    
    
    
    Unrealized
    
    
    
    
    

    UnrealizedAvailable for Sale Investments
    
    Fair Value
    

    loss
    
    Fair Value
    
    loss
    
    Fair Value
    
    lossFHLB of Pittsburgh stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Preferred stocks, including GSEs
    
    
    
    
    
    
    
    
    
    
    6,185
    
    
    
    3,645
    
    
    
    6,185
    
    
    
    3,645Mutual Funds  ARM mortgages
    
    
    
    
    
    
    
    
    
    
    4,728
    
    
    
    272
    
    
    
    4,728
    
    
    
    272Other common equities
    
    
    
    
    
    
    
    
    
    
    803
    
    
    
    1
    
    
    
    803
    
    
    
    1Held to Maturity InvestmentsU.S. Government and agency
obligations
    
    
    14,741
    
    
    
    242
    
    
    
    
    
    
    
    
    
    
    
    14,741
    
    
    
    242Municipal obligations
    
    
    
    
    
    
    
    
    
    
    2,850
    
    
    
    100
    
    
    
    2,850
    
    
    
    100Short to medium term corporate debt
    
    
    19,153
    
    
    
    483
    
    
    
    22,799
    
    
    
    671
    
    
    
    41,952
    
    
    
    1,154Pooled trust preferred securities
    
    
    21,879
    
    
    
    3,146
    
    
    
    36,861
    
    
    
    21,786
    
    
    
    58,740
    
    
    
    24,932Individual trust preferred securities
    
    
    3,635
    
    
    
    317
    
    
    
    4,055
    
    
    
    2,082
    
    
    
    7,690
    
    
    
    2,399Mortgage-backed securities
    
    
    172,364
    
    
    
    6,165
    
    
    
    2,126
    
    
    
    330
    
    
    
    174,490
    
    
    
    6,494
 Available for sale securities.
 10




---



##### 



NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
    Held to maturity securities except US Government & Agency obligations.
   11




---



##### 



NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
  U.S. Government and Agency Obligations.
 GOODWILL AND MARKET VALUATION
  EARNINGS PER SHARE (EPS)
  Three months ended
    
    
    Six months endedDecember 31,
    
    
    December 31,2008
    
    
    2007
    
    
    2008
    
    
    2007Numerator:Net income (in 000s)
    
    $
    2,065
    
    
    $
    3,570
    
    
    $
    3,170
    
    
    $
    7,219Less: Preferred stock dividend
    
    
    35
    
    
    
    
    
    
    
    35
    
    
    
    Income available to common stockholders
    
    $
    2,030
    
    
    $
    3,570
    
    
    $
    3,135
    
    
    $
    7,219Denominator:Weighted average shares
for basic earnings per common share
    
    
    5,467,423
    
    
    
    5,496,911
    
    
    
    5,474,896
    
    
    
    5,535,127Effect of dilutive stock options
    
    
    625
    
    
    
    48,860
    
    
    
    2,116
    
    
    
    48,689Weighted average shares for
dilutive earnings per common share
    
    
    5,468,048
    
    
    
    5,545,771
    
    
    
    5,477,012
    
    
    
    5,583,816Net income common per share: Basic
    
    $
    0.37
    
    
    $
    0.65
    
    
    $
    0.57
    
    
    $
    1.30Diluted
    
    $
    0.37
    
    
    $
    0.64
    
    
    $
    0.57
    
    
    $
    1.29
 NEW ACCOUNTING PRONOUNCEMENTS
  12




---



##### 



NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
     Fair Value Measurements,
 Accounting for Certain Investments in Debt and
Equity Securities,
  PARKVALE FINANCIAL CORPORATION
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
  Forward-Looking Statements:
  13




---



##### 



Critical Accounting Policies, Judgments and Estimates:
   Balance Sheet Data:
 December 31,2008
    
    2007Total assets
    
    $
    1,890,250
    
    
    $
    1,828,508Loans, net
    
    
    1,163,968
    
    
    
    1,207,837Interest-earning deposits and federal funds sold
    
    
    120,669
    
    
    
    73,312Total investments
    
    
    487,821
    
    
    
    427,329Deposits
    
    
    1,481,785
    
    
    
    1,458,688FHLB advances
    
    
    186,315
    
    
    
    211,543Shareholders equity
    
    
    163,264
    
    
    
    128,080Book value per common share
    
    $
    24.23
    
    
    $
    23.48
 14




---



##### 



Three Months Ended
    
    Six Months EndedDecember 31, (1)
    
    December 31, (1)Statistical Profile:
    
    2008
    
    2007
    
    2008
    
    2007Average yield earned on all
interest-earning assets
    
    
    5.38
    %
    
    
    5.79
    %
    
    
    5.43
    %
    
    
    5.77
    %Average rate paid on all
interest-bearing liabilities
    
    
    3.00
    %
    
    
    3.58
    %
    
    
    3.04
    %
    
    
    3.56
    %Average interest rate spread
    
    
    2.38
    %
    
    
    2.21
    %
    
    
    2.39
    %
    
    
    2.21
    %Net yield on average
interest-earning assets
    
    
    2.47
    %
    
    
    2.27
    %
    
    
    2.49
    %
    
    
    2.29
    %Other expenses to average assets
    
    
    1.56
    %
    
    
    1.59
    %
    
    
    1.55
    %
    
    
    1.58
    %Taxes to pre-tax income
    
    
    28.67
    %
    
    
    30.67
    %
    
    
    29.35
    %
    
    
    27.02
    %Dividend payout ratio
    
    
    59.27
    %
    
    
    34.18
    %
    
    
    76.88
    %
    
    
    34.03
    %Return on average assets
    
    
    0.45
    %
    
    
    0.78
    %
    
    
    0.34
    %
    
    
    0.79
    %Return on average equity
    
    
    5.68
    %
    
    
    11.01
    %
    
    
    4.52
    %
    
    
    11.14
    %Average equity to average total assets
    
    
    7.94
    %
    
    
    7.06
    %
    
    
    7.61
    %
    
    
    7.07
    %Dividends per common share
    
    $
    0.22
    
    
    $
    0.22
    
    
    $
    0.44
    
    
    $
    0.44
 At December 31,2008
    
    2007One year gap to total assets
    
    
    11.73
    %
    
    
    10.75
    %Intangibles to total equity
    
    
    18.30
    %
    
    
    24.03
    %Capital to assets ratio
    
    
    8.64
    %
    
    
    7.00
    %Ratio of nonperforming assets to total assets
    
    
    1.10
    %
    
    
    0.51
    %Number of full-service offices
    
    
    48
    
    
    
    48
 
 (1)
    
    The applicable income and expense figures have been annualized in calculating the
percentages. Nonperforming Loans and Foreclosed Real Estate:
  (Dollar amounts in 000s)12/31/08
    
    
    6/30/08
    
    
    12/31/07Delinquent single-family mortgage loans
    
    $
    11,041
    
    
    $
    5,911
    
    
    $
    3,683Delinquent other loans
    
    
    2,334
    
    
    
    5,472
    
    
    
    2,057Total nonperforming loans
    
    
    13,375
    
    
    
    11,383
    
    
    
    5,740Total impaired loans
    
    
    508
    
    
    
    1,146
    
    
    
    1,054Real estate owned, net
    
    
    6,897
    
    
    
    3,279
    
    
    
    2,563Total
    
    $
    20,780
    
    
    $
    15,808
    
    
    $
    9,357
  15




---



##### 



16




---



##### 



Allowance
for Loan Losses:
  Liquidity
and Capital Resources:
 17




---



##### 



TARP Capital Purchase Program
    Term Debt
 18




---



##### 



Tier 1
    
    
    Tier 1
    
    
    TotalCore
    
    
    Risk-Based
    
    
    Risk-Based(Dollars in 000s)
    
    Capital
    
    
    Capital
    
    
    CapitalEquity capital (1)
    
    $
    181,449
    
    
    $
    181,449
    
    
    $
    181,449Less non-allowable intangible assets
    
    
    (29,874
    )
    
    
    (29,874
    )
    
    
    (29,874
    )Plus permitted valuation allowances (2)
    
    
    
    
    
    
    
    
    
    
    13,553Total regulatory capital
    
    
    151,575
    
    
    
    151,575
    
    
    
    165,128Minimum required capital
    
    
    72,286
    
    
    
    43,311
    
    
    
    86,622Excess regulatory capital
    
    $
    79,289
    
    
    $
    108,264
    
    
    $
    78,506Adjusted total assets (1)
    
    $
    1,807,154
    
    
    $
    1,082,776
    
    
    $
    1,082,776Regulatory capital as a percentage
    
    
    8.39
    %
    
    
    14.00
    %
    
    
    15.25
    %Minimum capital required as a percentage
    
    
    4.00
    %
    
    
    4.00
    %
    
    
    8.00
    %Excess regulatory capital as a percentage
    
    
    4.39
    %
    
    
    10.00
    %
    
    
    7.25
    %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 December 31, 2008.(2)
    
    Limited to 1.25% of risk adjusted total assets.  Results
of Operations  Comparison of Three Months Ended
December 31, 2008 and 2007:
 19




---



##### 



Interest
Income:
 Interest
Expense:
 Net
Interest Income:
 Provision
for Loan Losses:
 20




---



##### 



Noninterest
Income:
 Noninterest Expense:
 Income Tax Expense:
 Results of Operations  Comparison of Six Months Ended December 31, 2008 and 2007:
  21




---



##### 



Interest Income:
 Interest Expense:
 Net Interest Income:
 Provision for Loan Losses:
 Noninterest Income:
 Noninterest Expense:
 22




---



##### 



Income
Tax Expense:
 Impact of Inflation and Changing Prices:
 Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
Quantitative and qualitative disclosures about market risk are presented at June 30, 2008 in
Item 7A of Parkvale Financial Corporations Form 10-K, filed with the SEC on September 12,
2008. Since June 30, 2008, the market price of Parkvale stock has fallen from $23.61 to
$12.42 at December 31, 2008. This price decline is reflective of overall price decreases in
many financial institution stocks throughout 2008. The Parkvale price decrease may also be
attributable to the investment writedowns recorded in the September 2008 quarter of $3.9
million.
 Item 4.
    
    Controls and Procedures
Disclosure controls and procedures are monitored and supervised by Parkvales management,
including the CEO and CFO, regarding the effectiveness of the design and operation of
Parkvales disclosure controls and procedures. Parkvales management, including the CEO and
CFO, concluded that Parkvales disclosure controls and procedures were effective as of
December 31, 2008. There have been no changes in Parkvales internal controls or in other
factors that materially affected, or that are reasonably likely to materially affect,
Parkvales internal controls.
 PART II  OTHER
INFORMATIONItem 1.
    
    Legal Proceedings
    
    NoneItem 1A.
    
    Risk Factors
Risk Factor disclosures are presented at June 30, 2008 in Item 1A of the Corporations Form
10-K, filed with the SEC on September 12, 2008. Management believes that there have been no
material changes in Parkvales risk factors since June 30, 2008.Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds(a)
    
    During the quarter ended December 31, 2008, the Corporation issued 31,762 shares of
 23




---



##### 



preferred stock and a ten-year warrant to purchase up to 376,327 shares of common stock
that were not registered under the Securities Act of 1933. A Form S-3 was filed on January
22, 2009 as required under the Capital Purchase Program.(b)
    
    Not applicable(c)
    
    During the quarter ended December 31, 2008, Parkvale purchased 55,000 shares of common stock.
  Total Number ofShares Purchased as
    
    Maximum Number ofTotal Number
    
    Average
    
    Part of Publicly
    
    Shares that May Yet Beof Shares
    
    Price Paid
    
    Announced Plans
    
    Purchased Under thePeriod
    
    Purchased
    
    Per Share
    
    or Programs
    
    Plans or Programs (1)October 1-31, 2008
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    274,000November 1-30, 2008
    
    
    15,000
    
    
    $
    13.13
    
    
    
    15,000
    
    
    
    259,000December 1-31, 2008
    
    
    40,000
    
    
    $
    13.02
    
    
    
    40,000
    
    
    
    219,000
 
 (1)
    
    The repurchase program approved on June 19, 2008 is scheduled to expire on June 30, 2009. The
repurchases have been temporarily suspended due to the restrictions by the US Treasury prohibiting
share repurchases without its prior approval. It is Parkvales intent to seek approval from the US
Treasury to continue the 5% buy back program that has been in effect on a yearly basis since 1994. Item 3.
    
    Defaults Upon Senior Securities
    
    NoneItem 4.
    
    Submission of Matters to a Vote of Security Holders
    
    NoneItem 5.
    
    Other Information
    
    NoneItem 6.
    
    Exhibits
 31.1
    
    The following exhibits are filed here within:

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.
 24




---



##### 



SIGNATURES
  Parkvale Financial CorporationDATE: January 29, 2009
    By:
    /s/ Robert J. McCarthy, Jr.Robert J. McCarthy, Jr.President and
Chief Executive OfficerDATE: January 29, 2009
    By:
    /s/ Timothy G. RubritzTimothy G. RubritzVice President, Treasurer and
Chief Financial Officer 25