##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 2010
 COMMISSION FILE NO: 0-17411
 PARKVALE
FINANCIAL CORPORATION
  Pennsylvania
    
    25-1556590(State of incorporation)
    
    (I.R.S. Employer
Identification Number)
 4220
William Penn Highway, Monroeville, Pennsylvania 15146
  þ o
 o o
  Large accelerated filer o
Accelerated filer o
Non-accelerated filer o(Do not check if a 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 December 31, 2010 (Unaudited)
and June 30, 2010
    
    
    3Consolidated Statements of Operations for the three months and six months ended
December 31, 2010 and 2009 (Unaudited)
    
    
    4Consolidated Statements of Cash Flows for the six months ended
December 31, 2010 and 2009 (Unaudited)
    
    
    5Consolidated Statements of Shareholders Equity for the six months ended
December 31, 2010 and 2009 (Unaudited)
    
    
    6Notes to Unaudited Interim Consolidated Financial Statements
    
    
    7-30Item 2.
Managements Discussion and Analysis of Financial Condition and
Results of Operations
    
    
    31-40Item 3.
Quantitative and Qualitative Disclosures about Market Risk
    
    
    41Item 4.
Controls and Procedures
    
    
    41Part II  Other Information
    
    
    42Signatures
    
    
    43ExhibitsEX-31.1EX-31.2EX-32.1
  2




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PARKVALE FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
 December 31,
    
    
    June 30,2010
    
    
    2010(Unaudited)ASSETSCash and noninterest-earning deposits
    
    $
    17,097
    
    
    $
    17,736Federal funds sold
    
    
    106,550
    
    
    
    135,773Cash and cash equivalents
    
    
    123,647
    
    
    
    153,509Interest-earning deposits in other banks
    
    
    3,362
    
    
    
    801Investment securities available for sale at fair value (cost of
$5,501 at December 31 and $65,778 at June 30)
    
    
    5,245
    
    
    
    65,770Investment securities held to maturity (fair value
of $499,734 at December 31 and $437,931 at June 30)
    
    
    501,852
    
    
    
    443,452Federal Home Loan Bank Stock, at cost
    
    
    13,640
    
    
    
    14,357Loans, net of allowance of $19,621 at December 31
and $19,209 at June 30
    
    
    1,017,834
    
    
    
    1,032,363Foreclosed real estate, net
    
    
    8,869
    
    
    
    8,637Office properties and equipment, net
    
    
    17,045
    
    
    
    17,374Goodwill
    
    
    25,634
    
    
    
    25,634Intangible assets
    
    
    2,422
    
    
    
    2,877Prepaid expenses and other assets
    
    
    71,566
    
    
    
    77,606Total assets
    
    $
    1,791,116
    
    
    $
    1,842,380LIABILITIES AND SHAREHOLDERS EQUITYLIABILITIESDeposits
    
    $
    1,458,571
    
    
    $
    1,488,073Advances from Federal Home Loan Bank
    
    
    165,875
    
    
    
    185,973Term debt
    
    
    22,500
    
    
    
    23,750Other debt
    
    
    11,294
    
    
    
    13,865Advance payments from borrowers for taxes and insurance
    
    
    6,965
    
    
    
    7,526Other liabilities
    
    
    3,775
    
    
    
    4,249Total liabilities
    
    
    1,668,980
    
    
    
    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
    
    
    2,235
    
    
    
    2,734Treasury stock at cost (1,159,215 shares at December 31
and 1,205,683 shares at June 30)
    
    
    (24,222
    )
    
    
    (25,193
    )Accumulated other comprehensive loss
    
    
    (13,740
    )
    
    
    (13,413
    )Retained earnings
    
    
    119,366
    
    
    
    116,319Total shareholders equity
    
    
    122,136
    
    
    
    118,944Total liabilities and shareholders equity
    
    $
    1,791,116
    
    
    $
    1,842,380
 3




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PARKVALE FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
 Three months ended
    
    
    Six months endedDecember 31,
    
    
    December 31,2010
    
    
    2009
    
    
    2010
    
    
    2009Interest income:Loans
    
    $
    12,814
    
    
    $
    14,231
    
    
    $
    25,861
    
    
    $
    29,023Investments
    
    
    3,464
    
    
    
    4,964
    
    
    
    7,134
    
    
    
    10,096Federal funds sold
    
    
    85
    
    
    
    105
    
    
    
    207
    
    
    
    203Total interest income
    
    
    16,363
    
    
    
    19,300
    
    
    
    33,202
    
    
    
    39,322Interest expense:Deposits
    
    
    4,767
    
    
    
    7,386
    
    
    
    9,995
    
    
    
    15,379Borrowings
    
    
    2,384
    
    
    
    2,824
    
    
    
    5,136
    
    
    
    5,535Total interest expense
    
    
    7,151
    
    
    
    10,210
    
    
    
    15,131
    
    
    
    20,914Net interest income
    
    
    9,212
    
    
    
    9,090
    
    
    
    18,071
    
    
    
    18,408Provision for loan losses
    
    
    1,015
    
    
    
    1,398
    
    
    
    2,049
    
    
    
    3,687Net interest income after
provision for losses
    
    
    8,197
    
    
    
    7,692
    
    
    
    16,022
    
    
    
    14,721Noninterest Income:Other-than-temporary impairment losses
recognized in earnings
    
    
    (946
    )
    
    
    (3,240
    )
    
    
    (3,981
    )
    
    
    (6,001
    )Non-credit related losses recognized in
other comprehensive income
    
    
    
    
    
    
    2,458
    
    
    
    2,039
    
    
    
    2,458Net impairment losses recognized in earnings
    
    
    (946
    )
    
    
    (782
    )
    
    
    (1,942
    )
    
    
    (3,543
    )Service charges on deposit accounts
    
    
    1,665
    
    
    
    1,615
    
    
    
    3,424
    
    
    
    3,267Other service charges and fees
    
    
    381
    
    
    
    359
    
    
    
    762
    
    
    
    726Net gain on sale of investments
    
    
    194
    
    
    
    1,103
    
    
    
    1,366
    
    
    
    2,205Other
    
    
    522
    
    
    
    511
    
    
    
    1,292
    
    
    
    1,054Total noninterest income
    
    
    1,816
    
    
    
    2,806
    
    
    
    4,902
    
    
    
    3,709Noninterest Expense:Compensation and employee benefits
    
    
    3,472
    
    
    
    3,625
    
    
    
    7,400
    
    
    
    7,432Office occupancy
    
    
    1,047
    
    
    
    1,095
    
    
    
    2,114
    
    
    
    2,206Marketing
    
    
    94
    
    
    
    93
    
    
    
    178
    
    
    
    160FDIC insurance
    
    
    904
    
    
    
    645
    
    
    
    1,798
    
    
    
    1,213Office supplies, telephone and postage
    
    
    538
    
    
    
    463
    
    
    
    1,010
    
    
    
    933Other
    
    
    1,597
    
    
    
    1,393
    
    
    
    3,202
    
    
    
    2,962Total noninterest expense
    
    
    7,652
    
    
    
    7,314
    
    
    
    15,702
    
    
    
    14,906Income before income taxes
    
    
    2,361
    
    
    
    3,184
    
    
    
    5,222
    
    
    
    3,524Income tax expense
    
    
    520
    
    
    
    759
    
    
    
    1,158
    
    
    
    244Net income
    
    
    1,841
    
    
    
    2,425
    
    
    
    4,064
    
    
    
    3,280Less: Preferred stock dividend
    
    
    397
    
    
    
    397
    
    
    
    794
    
    
    
    794Income to common shareholders
    
    $
    1,444
    
    
    $
    2,028
    
    
    $
    3,270
    
    
    $
    2,486Net income per common basic share
    
    $
    0.26
    
    
    $
    0.38
    
    
    $
    0.59
    
    
    $
    0.46Net income per common diluted share
    
    $
    0.26
    
    
    $
    0.38
    
    
    $
    0.59
    
    
    $
    0.46
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PARKVALE FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
 Six months endedDecember 31,2010
    
    
    2009Cash flows from operating activities:Interest received
    
    $
    33,814
    
    
    $
    38,828Loan fees received
    
    
    358
    
    
    
    182Other fees and commissions received
    
    
    4,932
    
    
    
    4,490Interest paid
    
    
    (15,239
    )
    
    
    (20,882
    )Cash paid to suppliers and others
    
    
    (11,217
    )
    
    
    (31,617
    )Income taxes refund
    
    
    3,750
    
    
    
    Net cash provided by (used in) operating activities
    
    
    16,398
    
    
    
    (8,999
    )Cash flows from investing activities:Proceeds from sale of investment securities available for sale
    
    
    51,308
    
    
    
    2,192Proceeds from maturities of investment securities held to maturity
    
    
    149,541
    
    
    
    180,056Purchase of investment securities held to maturity
    
    
    (202,022
    )
    
    
    (256,644
    )(Purchase) maturity of deposits in other banks
    
    
    (2,561
    )
    
    
    3,307Loan sales
    
    
    
    
    
    
    7,527Purchase of loans
    
    
    (10,722
    )
    
    
    Principal collected on loans
    
    
    141,221
    
    
    
    135,861Loans made to customers, net of loans in process
    
    
    (118,292
    )
    
    
    (91,292
    )Other
    
    
    (93
    )
    
    
    (149
    )Net cash provided by (used in) investing activities
    
    
    8,380
    
    
    
    (19,142
    )Cash flows from financing activities:Net increase in checking and savings accounts
    
    
    11,517
    
    
    
    51,673Net (decrease) in certificates of deposit
    
    
    (41,019
    )
    
    
    (34,779
    )Repayment of FHLB advances
    
    
    (19,997
    )
    
    
    (13
    )Net (decrease) in other borrowings
    
    
    (2,571
    )
    
    
    (5,776
    )Repayment of term debt
    
    
    (1,250
    )
    
    
    Net (decrease) in borrowers advances for taxes and insurance
    
    
    (561
    )
    
    
    (680
    )Dividends paid
    
    
    (1,181
    )
    
    
    (1,336
    )Contribution to benefit plans
    
    
    422
    
    
    
    588Net cash (used in) provided by financing activities
    
    
    (54,640
    )
    
    
    9,677Net (decrease) in cash and cash equivalents
    
    
    (29,862
    )
    
    
    (18,464
    )Cash and cash equivalents at beginning of period
    
    
    153,509
    
    
    
    165,891Cash and cash equivalents at end of period
    
    $
    123,647
    
    
    $
    147,427Reconciliation of net income to net cash provided
by operating activities:Net income
    
    $
    4,064
    
    
    $
    3,280Adjustments to reconcile net income to net cash provided
by operating activities:Depreciation and amortization
    
    
    877
    
    
    
    965(Accretion) and amortization of loan fees and discounts
    
    
    158
    
    
    
    (969
    )Loan fees collected and deferred and (premiums paid)
    
    
    42
    
    
    
    (2
    )Provision for loan losses
    
    
    2,049
    
    
    
    3,687Net writedown on sale of securities
    
    
    576
    
    
    
    1,338Decrease in accrued interest receivable
    
    
    369
    
    
    
    414Decrease (increase) in other assets
    
    
    5,670
    
    
    
    (14,950
    )Increase in accrued interest payable
    
    
    6
    
    
    
    146Increase (decrease) in other liabilities
    
    
    2,587
    
    
    
    (2,908
    )Total adjustments
    
    
    12,334
    
    
    
    (12,279
    )Net cash provided by (used in) operating activities
    
    $
    16,398
    
    
    
    ($8,999
    )
  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, six months ended
December 31, 2010
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,064
    
    
    
    4,064Accumulated other comprehensive income (loss):Change in swap liability, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (160
    )Change in unrealized gain (loss)
on securities, net of deferred
tax benefit of ($113)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    322Reclassification adjustment, net
of taxes of $263
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (489
    )
    
    
    
    
    
    
    (327
    )Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,737Dividends declared on common
stock at $0.02 per share
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (223
    )
    
    
    (223
    )Dividends on preferred stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (794
    )
    
    
    (794
    )Sale of treasury stock to
ESOP
    
    
    
    
    
    
    
    
    
    
    (549
    )
    
    
    971
    
    
    
    
    
    
    
    
    
    
    
    422Recognition of stock option
compensation expense
    
    
    
    
    
    
    
    
    
    
    50
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    50Balance, December 31, 2010
    
    $
    31,762
    
    
    $
    6,735
    
    
    $
    2,235
    
    
    
    ($24,222
    )
    
    
    ($13,740
    )
    
    $
    119,366
    
    
    $
    122,136Balance, June 30, 2009
    
    $
    31,762
    
    
    $
    6,735
    
    
    $
    4,116
    
    
    
    ($27,314
    )
    
    
    ($10
    )
    
    $
    135,471
    
    
    $
    150,760Net income, six months ended
December 31, 2009
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,280
    
    
    
    3,280Accumulated other comprehensive
Income (loss):Change in swap liability
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (201
    )Change in unrealized gain (loss)
on securities, net of deferred
tax benefit of $(128)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (201
    )Reclassification adjustment, net
of taxes of $(805)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,400
    )
    
    
    
    
    
    
    (1,802
    )Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,478Dividends declared on common
stock at $0.10 per share
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (546
    )
    
    
    (546
    )Dividends on preferred stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (794
    )
    
    
    (794
    )Sale of treasury stock to ESOP
    
    
    
    
    
    
    
    
    
    
    (1,160
    )
    
    
    1,748
    
    
    
    
    
    
    
    
    
    
    
    588Recognition of stock option
compensation expense
    
    
    
    
    
    
    
    
    
    
    27
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    27Balance, December 31, 2009
    
    $
    31,762
    
    
    $
    6,735
    
    
    $
    2,983
    
    
    
    ($25,566
    )
    
    
    ($1,812
    )
    
    $
    137,411
    
    
    $
    151,513
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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
  December 31, 2010
    
    
    June 30, 2010Mortgage loans:1-4 Family
    
    $
    646,988
    
    
    $
    660,685Commercial
    
    
    164,373
    
    
    
    159,991811,361
    
    
    
    820,676Consumer loans:Home Equity
    
    
    146,724
    
    
    
    147,567Automobile
    
    
    30,128
    
    
    
    34,817Other
Consumer
    
    
    9,249
    
    
    
    7,250186,101
    
    
    
    189,634Commercial business loans
    
    
    39,055
    
    
    
    40,445Total gross loans
    
    
    1,036,517
    
    
    
    1,050,755Less: Loans in process
    
    
    2
    
    
    
    135Allowance for loan losses
    
    
    19,621
    
    
    
    19,209Unamortized premiums and deferred loan fees
    
    
    (940
    )
    
    
    (952
    )Loans, net
    
    $
    1,017,834
    
    
    $
    1,032,363
  Portfolio Risk Characteristics:
  8




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9




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10




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NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
  SpecialPass
    
    Mention
    
    Substandard
    
    Doubtful
    
    TotalMortgage loans:1-4 family
    
    $
    621,311
    
    
    $
    3,772
    
    
    $
    21,905
    
    
    $
    
    
    
    $
    646,988Commercial
    
    
    160,559
    
    
    
    447
    
    
    
    3,367
    
    
    
    
    
    
    
    164,373Consumer loans:Home Equity
    
    
    145,673
    
    
    
    
    
    
    
    1,051
    
    
    
    
    
    
    
    146,724Automobile
    
    
    29,876
    
    
    
    
    
    
    
    252
    
    
    
    
    
    
    
    30,128Other
Consumer
    
    
    9,227
    
    
    
    
    
    
    
    
    
    
    
    22
    
    
    
    9,249Commercial business
loans
    
    
    34,659
    
    
    
    11
    
    
    
    4,385
    
    
    
    
    
    
    
    39,055Total
    
    $
    1,001,305
    
    
    $
    4,230
    
    
    $
    30,960
    
    
    $
    22
    
    
    $
    1,036,517
   Mortgage loans:1-4 family
    
    $
    21,905Commercial
    
    
    796Consumer loans:Home Equity
    
    
    751Automobile
    
    
    190Other
Consumer
    
    
    22Commercial business loans
    
    
    3,046Total
    
    $
    26,710
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NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
  Unpaid
    
    
    
    
    
    AverageNet Recorded
    
    Principal
    
    Related
    
    Recorded
    
    Interest IncomeInvestment
    
    Balance
    
    Allowance
    
    Investment
    
    RecognizedWith no related allowance
recorded:Mortgage loans:1-4 family
    
    $
    19,454
    
    
    $
    19,454
    
    
    $
    
    
    
    $
    19,167
    
    
    $
    246Commercial
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Consumer loans:Home Equity
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Automobile
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other
Consumer
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Commercial business loans
    
    
    2,672
    
    
    
    2,672
    
    
    
    
    
    
    
    2,672
    
    
    
    With an allowance recorded:Mortgage loans:1-4 family
    
    $
    10,232
    
    
    $
    15,710
    
    
    $
    5,478
    
    
    $
    10,371
    
    
    $
    Commercial
    
    
    1,336
    
    
    
    1,861
    
    
    
    525
    
    
    
    1,429
    
    
    
    14Consumer loans:Home Equity
    
    
    415
    
    
    
    591
    
    
    
    176
    
    
    
    121
    
    
    
    Automobile
    
    
    155
    
    
    
    284
    
    
    
    129
    
    
    
    125
    
    
    
    Other Consumer
    
    
    

    
    
    
    18
    
    
    
    18
    
    
    
    
    
    
    
    Commercial business loans
    
    
    
    
    
    
    49
    
    
    
    49
    
    
    
    
    
    
    
    Total:Mortgage loans:1-4 family
    
    $
    29,686
    
    
    $
    35,164
    
    
    $
    5,478
    
    
    $
    29,538
    
    
    $
    246Commercial
    
    
    1,336
    
    
    
    1,861
    
    
    
    525
    
    
    
    1,429
    
    
    
    14Consumer loans:Home Equity
    
    
    415
    
    
    
    591
    
    
    
    176
    
    
    
    121
    
    
    
    Automobile
    
    
    155
    
    
    
    284
    
    
    
    129
    
    
    
    125
    
    
    
    Other Consumer
    
    
    
    
    
    
    18
    
    
    
    18
    
    
    
    
    
    
    
    Commercial business loans
    
    
    2,672
    
    
    
    2,721
    
    
    
    49
    
    
    
    2,672
    
    
    
    
 12




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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
    
    $
    5,428
    
    
    $
    4,601
    
    
    $
    26,675
    
    
    $
    36,704
    
    
    $
    573,580
    
    
    $
    646,988
    
    
    $
    Commercial
    
    
    922
    
    
    
    201
    
    
    
    1,393
    
    
    
    2,516
    
    
    
    159,341
    
    
    
    164,373
    
    
    
    Consumer loans:Home Equity
    
    
    851
    
    
    
    200
    
    
    
    812
    
    
    
    1,863
    
    
    
    142,998
    
    
    
    146,724
    
    
    
    Automobile
    
    
    383
    
    
    
    78
    
    
    
    276
    
    
    
    737
    
    
    
    28,654
    
    
    
    30,128
    
    
    
    Other
Consumer
    
    
    17
    
    
    
    5
    
    
    
    14
    
    
    
    36
    
    
    
    9,177
    
    
    
    9,249
    
    
    
    Commercial business
loans
    
    
    330
    
    
    
    27
    
    
    
    3,096
    
    
    
    3,453
    
    
    
    32,149
    
    
    
    39,055
    
    
    
    Total
    
    $
    7,931
    
    
    $
    5,112
    
    
    $
    32,266
    
    
    $
    45,309
    
    
    $
    945,899
    
    
    $
    1,036,517
    
    
    $
    
   2010
    
    
    2009Beginning balance
    
    $
    19,209
    
    
    $
    17,960Provision for losses  mortgage loans
    
    
    2,004
    
    
    
    3,616Provision for losses  consumer loans
    
    
    49
    
    
    
    74Provision for (recovery of) losses  commercial business loans
    
    
    (4
    )
    
    
    (3
    )Loans recovered
    
    
    43
    
    
    
    25Loans charged off
    
    
    (1,680
    )
    
    
    (2,789
    )Ending balance
    
    $
    19,621
    
    
    $
    18,883
 13




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NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
  Commercial1-4 family
    
    Commercial
    
    
    
    
    
    Other
    
    BusinessMortgage
    
    Mortgage
    
    Home Equity
    
    Automobile
    
    Consumer
    
    Loans
    
    TotalAllowance
for Loan Losses:Balance at December 31,
2010
    
    $
    10,508
    
    
    $
    3,741
    
    
    $
    2,199
    
    
    $
    852
    
    
    $
    44
    
    
    $
    2,277
    
    
    $
    19,621Ending
balance: individually evaluated
for impairment
    
    $
    5,478
    
    
    $
    525
    
    
    $
    176
    
    
    $
    129
    
    
    $
    18
    
    
    $
    49
    
    
    $
    6,375Ending
balance: collectively evaluated
for impairment
    
    $
    5,030
    
    
    $
    3,216
    
    
    $
    2,023
    
    
    $
    723
    
    
    $
    26
    
    
    $
    2,228
    
    
    $
    13,246Ending balance: loans
acquired with
deteriorated
credit quality
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Recorded Investment:Ending balance
    
    $
    646,988
    
    
    $
    164,373
    
    
    $
    146,724
    
    
    $
    30,128
    
    
    $
    9,249
    
    
    $
    39,055
    
    
    $
    1,036,517Ending
balance: individually evaluated
for impairment
    
    $
    35,164
    
    
    $
    1,861
    
    
    $
    591
    
    
    $
    284
    
    
    $
    18
    
    
    $
    2,721
    
    
    $
    40,639Ending
balance: collectively evaluated
for impairment
    
    $
    611,824
    
    
    $
    162,512
    
    
    $
    146,133
    
    
    $
    29,844
    
    
    $
    9,231
    
    
    $
    36,334
    
    
    $
    995,878
 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.
   December 31, 2010
    
    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
    
    
    
    
    
    
    5,244
    
    
    
    
    
    
    
    5,244
    
    
    
    
    
    
    
    5,284
    
    
    
    
    
    
    
    5,284Interest rate swaps
    
    
    
    
    
    
    515
    
    
    
    
    
    
    
    515
    
    
    
    
    
    
    
    494
    
    
    
    
    
    
    
    494Total
    
    $
    1
    
    
    $
    5,759
    
    
    $
    
    
    
    $
    5,760
    
    
    $
    682
    
    
    $
    65,582
    
    
    $
    
    
    
    $
    66,264
 15




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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
    
    
    
    
    
    
    
    
    
    $
    10,521
    
    
    $
    10,521Impaired loans
    
    
    
    
    
    
    
    
    
    
    12,138
    
    
    
    12,138Impaired foreclosed real estate
    
    
    
    
    
    
    3,847
    
    
    
    
    
    
    
    3,847
   16




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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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NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
  December 31, 2010
    
    June 30, 2010Carrying
    
    
    
    
    
    CarryingFair Value
    
    Value
    
    Fair Value
    
    ValueFinancial Assets:Cash and non-interest-earning deposits
    
    $
    17,097
    
    
    $
    17,097
    
    
    $
    17,736
    
    
    $
    17,736Federal funds sold
    
    
    106,550
    
    
    
    106,550
    
    
    
    135,773
    
    
    
    135,773Interest-earning deposits in other banks
    
    
    3,362
    
    
    
    3,362
    
    
    
    801
    
    
    
    801Investment securities available for sale
    
    
    5,245
    
    
    
    5,245
    
    
    
    65,770
    
    
    
    65,770Investment securities held to maturity
    
    
    499,734
    
    
    
    501,852
    
    
    
    437,931
    
    
    
    443,452FHLB stock
    
    
    13,640
    
    
    
    13,640
    
    
    
    14,357
    
    
    
    14,357Loans receivable
    
    
    1,065,430
    
    
    
    1,036,517
    
    
    
    1,087,009
    
    
    
    1,050,755Accrued interest receivable
    
    
    5,828
    
    
    
    5,828
    
    
    
    7,409
    
    
    
    7,409Cash surrender value of BOLI
    
    
    25,834
    
    
    
    25,834
    
    
    
    25,288
    
    
    
    25,288Financial Liabilities:Checking, savings and money market accounts
    
    $
    707,924
    
    
    $
    707,924
    
    
    $
    696,364
    
    
    $
    696,364Certificates of deposit
    
    
    775,208
    
    
    
    750,647
    
    
    
    812,339
    
    
    
    791,709Advances from Federal Home Loan Bank
    
    
    183,850
    
    
    
    165,875
    
    
    
    204,699
    
    
    
    185,973Term debt
    
    
    23,015
    
    
    
    22,500
    
    
    
    24,244
    
    
    
    23,750Other debt
    
    
    10,717
    
    
    
    11,294
    
    
    
    13,156
    
    
    
    13,865Interest rate swap
    
    
    515
    
    
    
    515
    
    
    
    494
    
    
    
    494Accrued interest payable
    
    
    909
    
    
    
    909
    
    
    
    902
    
    
    
    902Off-balance sheet loan instruments
    
    
    ($16
    )
    
    $
    
    
    
    $
    118
    
    
    $
    
 NOTE 7. INVESTMENT SECURITIES
  Securities  Held to Maturity, Available for Sale and Other than Temporary Impairment
  18




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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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NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
  December 31, 2010
    
    
    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
    
    
    
    5,244
    
    
    
    5,500
    
    
    
    5,284Common equities
    
    
    1
    
    
    
    1
    
    
    
    474
    
    
    
    682Total available for sale investments
    
    $
    5,501
    
    
    $
    5,245
    
    
    $
    65,778
    
    
    $
    65,770
 December 31, 2010
    
    
    June 30, 2010Held to Maturity Investments
    
    Amortized Cost
    
    
    Fair Value
    
    
    Amortized Cost
    
    
    Fair ValueU.S. Government and agency obligations
    
    $
    158,440
    
    
    $
    158,785
    
    
    $
    194,248
    
    
    $
    195,920Municipal obligations
    
    
    25,743
    
    
    
    26,044
    
    
    
    21,641
    
    
    
    22,345Corporate debt:Short to medium term corporate debt
    
    
    33,121
    
    
    
    34,101
    
    
    
    27,112
    
    
    
    28,352Pooled trust preferred securities
    
    
    21,204
    
    
    
    19,026
    
    
    
    24,229
    
    
    
    16,849Individual trust preferred securities
    
    
    9,334
    
    
    
    8,045
    
    
    
    9,322
    
    
    
    7,977Mortgage-backed securities:Agency
    
    
    182,195
    
    
    
    183,147
    
    
    
    93,248
    
    
    
    95,055Agency Collateralized Mortgage
Obligations (CMOs)
    
    
    8,737
    
    
    
    8,931
    
    
    
    10,357
    
    
    
    10,630CMOs  non agency
    
    
    63,078
    
    
    
    61,655
    
    
    
    63,295
    
    
    
    60,803Total held to maturity investments
    
    $
    501,852
    
    
    $
    499,734
    
    
    $
    443,452
    
    
    $
    437,931
  AmortizedCost
    
    Fair ValueDue in one year or less
    
    $
    25,558
    
    
    $
    25,823Due after one year through five years
    
    
    122,049
    
    
    
    123,835Due after five years through ten years
    
    
    93,976
    
    
    
    93,513Due after ten years
    
    
    260,269
    
    
    
    256,563Total debt securities
    
    $
    501,852
    
    
    $
    499,734
  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
    
    $
    
    
    
    $
    
    
    
    $
    4,728
    
    
    $
    272
    
    
    $
    4,728
    
    
    $
    272Held to Maturity InvestmentsU.S. Government and agency
obligations
    
    
    61,941
    
    
    
    742
    
    
    
    
    
    
    
    
    
    
    
    61,941
    
    
    
    742Municipal obligations
    
    
    11,604
    
    
    
    201
    
    
    
    
    
    
    
    
    
    
    
    11,604
    
    
    
    201Corporate debt
    
    
    9,161
    
    
    
    98
    
    
    
    
    
    
    
    
    
    
    
    9,161
    
    
    
    98Pooled trust preferred securities
    
    
    
    
    
    
    
    
    
    
    8,505
    
    
    
    4,465
    
    
    
    8,505
    
    
    
    4,465Individual trust preferred securities
    
    
    
    
    
    
    
    
    
    
    4,689
    
    
    
    1,435
    
    
    
    4,689
    
    
    
    1,435Non agency CMOs
    
    
    146
    
    
    
    21
    
    
    
    24,110
    
    
    
    3,455
    
    
    
    24,256
    
    
    
    3,476Mortgage-backed securities
    
    
    96,993
    
    
    
    1,094
    
    
    
    8
    
    
    
    1
    
    
    
    97,001
    
    
    
    1,095Totals
    
    $
    179,845
    
    
    $
    2,156
    
    
    $
    42,040
    
    
    $
    9,628
    
    
    $
    221,885
    
    
    $
    11,784
  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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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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NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
   
    
    Estimate of future cash flows  cash flows are constructed on Intex software. Intex
is a proprietary software program recognized as the industry standard for analyzing all
types of collateralized debt obligations. It includes each deals structural features
updated with information from trustee reports, including collateral/hedge
agreement/cash flow detail, as it becomes available. A present value analysis is then
performed on the modeled cash flows to determine any cash flow shortages to Parkvales
respective holdings, if any.
    
    Credit analysis  A quarterly credit evaluation is performed for each of the issuers
comprising the collateral across the various pooled trust preferred securities. The
credit evaluation considers all evidence available and includes the nature of the
issuers business and geographic footprint. The analysis focuses on shareholders
equity, loan loss reserves, non-performing assets, credit quality ratios and capital
adequacy.
    
    Probability of default  A probability of default is determined for each issuer and
is used to calculate the expected impact of future deferrals and defaults in the
expected cash flow analysis. Each issuer in the collateral pool is assigned a
probability of default with an emphasis on near term probability. Issuers currently
defaulted or deferring are assigned a 100% probability of loss, and issuers currently
deferring are assigned a 20% probability of recovery. All other issuers in the pool are
assigned a probability of loss ranging from .36% to 100%, with ranges based upon the
results of the credit analysis. The probability of loss of .36% is assigned to only the
strongest financial institutions. The probability of default is updated quarterly with
data provided by trustees and other sources.
 24




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NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
       25




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NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
  ExcessExpected
    
    SubordinationLowest
    
    
    
    
    
    Actual
    
    Actual
    
    Defaults (%
    
    (as a % ofAmortized
    
    
    
    
    
    Unrealized
    
    Credit
    
    # of
    
    Default %
    
    Deferral %
    
    of performing
    
    performingDeal
    
    Note Class
    
    Par Value
    
    Cost
    
    Fair Value
    
    Gain (Loss)
    
    Ratings
    
    Issuers
    
    (1)
    
    (1) (2)
    
    collateral) (3)
    
    collateral) (4)Pooled
InvestmentsP1
    
    C1
    
    
    5,000
    
    
    
    350
    
    
    
    450
    
    
    
    100
    
    
    C
    
    
    80
    
    
    
    20.4
    %
    
    
    15.2
    %
    
    
    9.7
    %
    
    
    0.0
    %P2
    
    A2A
    
    
    5,000
    
    
    
    2,012
    
    
    
    2,250
    
    
    
    238
    
    
    CCC-
    
    
    76
    
    
    
    16.0
    %
    
    
    18.0
    %
    
    
    10.5
    %
    
    
    7.9
    %P3
    
    C1
    
    
    4,592
    
    
    
    735
    
    
    
    1,240
    
    
    
    505
    
    
    C
    
    
    85
    
    
    
    11.2
    %
    
    
    11.3
    %
    
    
    14.5
    %
    
    
    0.0
    %P4
    
    C1
    
    
    5,058
    
    
    
    354
    
    
    
    809
    
    
    
    455
    
    
    C
    
    
    72
    
    
    
    15.3
    %
    
    
    8.7
    %
    
    
    11.7
    %
    
    
    0.0
    %P5
    
    C1
    
    
    5,023
    
    
    
    151
    
    
    
    151
    
    
    
    
    
    
    C
    
    
    93
    
    
    
    13.3
    %
    
    
    15.1
    %
    
    
    13.5
    %
    
    
    0.0
    %P6
    
    C1
    
    
    3,075
    
    
    
    30
    
    
    
    30
    
    
    
    
    
    
    C
    
    
    68
    
    
    
    19.1
    %
    
    
    16.3
    %
    
    
    13.3
    %
    
    
    0.0
    %P8
    
    C
    
    
    3,219
    
    
    
    129
    
    
    
    225
    
    
    
    96
    
    
    C
    
    
    56
    
    
    
    14.7
    %
    
    
    15.3
    %
    
    
    10.3
    %
    
    
    0.0
    %P9
    
    B
    
    
    2,008
    
    
    
    80
    
    
    
    141
    
    
    
    61
    
    
    C
    
    
    54
    
    
    
    12.2
    %
    
    
    26.4
    %
    
    
    11.0
    %
    
    
    0.0
    %P10
    
    B1
    
    
    5,000
    
    
    
    4,884
    
    
    
    4,100
    
    
    
    (784
    )
    
    CCC
    
    
    24
    
    
    
    0.0
    %
    
    
    5.8
    %
    
    
    16.7
    %
    
    
    12.1
    %P11
    
    Mezz
    
    
    1,500
    
    
    
    555
    
    
    
    585
    
    
    
    30
    
    
    C
    
    
    23
    
    
    
    18.3
    %
    
    
    19.5
    %
    
    
    7.8
    %
    
    
    0.0
    %P12
    
    B2
    
    
    1,000
    
    
    
    288
    
    
    
    440
    
    
    
    152
    
    
    C
    
    
    34
    
    
    
    14.4
    %
    
    
    15.9
    %
    
    
    11.2
    %
    
    
    0.0
    %P13
    
    B
    
    
    3,909
    
    
    
    3,759
    
    
    
    547
    
    
    
    (3,212
    )
    
    C
    
    
    45
    
    
    
    14.4
    %
    
    
    16.2
    %
    
    
    10.3
    %
    
    
    0.0
    %P14
    
    A1
    
    
    4,648
    
    
    
    4,327
    
    
    
    3,858
    
    
    
    (469
    )
    
    CCC
    
    
    50
    
    
    
    18.3
    %
    
    
    11.9
    %
    
    
    10.2
    %
    
    
    34.4
    %P15
    
    B
    
    
    5,000
    
    
    
    1,700
    
    
    
    2,000
    
    
    
    300
    
    
    C
    
    
    34
    
    
    
    24.0
    %
    
    
    12.2
    %
    
    
    12.3
    %
    
    
    0.0
    %P16
    
    C1
    
    
    5,000
    
    
    
    1,100
    
    
    
    1,350
    
    
    
    250
    
    
    C
    
    
    46
    
    
    
    19.7
    %
    
    
    3.4
    %
    
    
    8.1
    %
    
    
    0.0
    %P17
    
    C1
    
    
    5,000
    
    
    
    750
    
    
    
    850
    
    
    
    100
    
    
    C
    
    
    43
    
    
    
    21.1
    %
    
    
    8.2
    %
    
    
    13.1
    %
    
    
    0.0
    %Subtotal
    
    16
    
    
    64,032
    
    
    
    21,204
    
    
    
    19,026
    
    
    
    (2,178
    )Single Issuer
InvestmentsS1
    
    N/A
    
    
    1,000
    
    
    
    930
    
    
    
    711
    
    
    
    (219
    )
    
    BB+
    
    
    1
    
    
    
    0.0
    %
    
    
    0.0
    %
    
    
    0.0
    %S2
    
    N/A
    
    
    2,000
    
    
    
    1,969
    
    
    
    1,356
    
    
    
    (613
    )
    
    BB+
    
    
    1
    
    
    
    0.0
    %
    
    
    0.0
    %
    
    
    0.0
    %S3
    
    N/A
    
    
    3,000
    
    
    
    2,778
    
    
    
    2,337
    
    
    
    (441
    )
    
    A-
    
    
    1
    
    
    
    0.0
    %
    
    
    0.0
    %
    
    
    0.0
    %S4
    
    N/A
    
    
    500
    
    
    
    447
    
    
    
    285
    
    
    
    (162
    )
    
    BB-
    
    
    1
    
    
    
    0.0
    %
    
    
    0.0
    %
    
    
    0.0
    %S5
    
    N/A
    
    
    1,000
    
    
    
    1,005
    
    
    
    1,096
    
    
    
    91
    
    
    NR
    
    
    1
    
    
    
    0.0
    %
    
    
    0.0
    %
    
    
    0.0
    %S6
    
    N/A
    
    
    700
    
    
    
    711
    
    
    
    731
    
    
    
    20
    
    
    NR
    
    
    1
    
    
    
    0.0
    %
    
    
    0.0
    %
    
    
    0.0
    %S7
    
    N/A
    
    
    529
    
    
    
    494
    
    
    
    508
    
    
    
    14
    
    
    B+
    
    
    1
    
    
    
    0.0
    %
    
    
    0.0
    %
    
    
    0.0
    %S8
    
    N/A
    
    
    1,000
    
    
    
    1,000
    
    
    
    1,021
    
    
    
    21
    
    
    BB+
    
    
    1
    
    
    
    0.0
    %
    
    
    0.0
    %
    
    
    0.0
    %Subtotal
    
    8
    
    
    9,729
    
    
    
    9,334
    
    
    
    8,045
    
    
    
    (1,289
    )Grand total of Trust
Preferred
holdings
    
    
    73,761
    
    
    
    30,538
    
    
    
    27,071
    
    
    
    (3,467
    )
  
 Notes:(1)
    
    As a percentage of the total collateral.(2)
    
    Includes deferrals that have not paid current interest payments as permitted by the debt instruments.(3)
    
    Expected defaults are determined by an analysis of each security.(4)
    
    Excess subordination measures the performing collateral coverage of the outstanding liabilities (as a % of performing collateral). 26




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NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
 Non agency CMOs
 Year originated
    
    Amortized Cost
    
    
    Fair Value2003
    
    $
    20,185
    
    
    $
    21,6272004
    
    
    28,518
    
    
    
    26,8732005
    
    
    4,290
    
    
    
    4,5242007
    
    
    6,341
    
    
    
    4,8922008
    
    
    3,744
    
    
    
    3,739$
    63,078
    
    
    $
    61,655
  AmortizedCost
    
    
    Fair ValueAAA by Moodys, S&P, or Fitch
    
    $
    24,039
    
    
    $
    24,990AA by Moodys or S&P
    
    
    6,162
    
    
    
    6,601A by Moodys, S&P, or Fitch
    
    
    9,080
    
    
    
    7,937Baa by Moodys
    
    
    10,568
    
    
    
    10,461BB by S&P
    
    
    6,722
    
    
    
    6,628B by Finch
    
    
    3,482
    
    
    
    2,939CCC by Fitch
    
    
    2,859
    
    
    
    1,953D by S&P
    
    
    166
    
    
    
    146$
    63,078
    
    
    $
    61,655
  General
 27




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NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
 Other-Than-Temporary- Impairment
  Unadjusted
    
    OTTI
    
    OTTI
    
    12/31/10
    
    12/31/10Carrying
    
    Charge to
    
    Charge to
    
    Carrying
    
    FairSecurity
    
    Value
    
    earnings
    
    OCI
    
    Value
    
    ValuePooled trust preferred security
    
    $
    48,844
    
    
    $
    19,649
    
    
    $
    20,961
    
    
    $
    8,234
    
    
    $
    10,521
  Pooled trustpreferred securitiesBalance at June 30, 2010
    
    $
    19,868Total losses  realized/unrealized
    
    
    3,035Included as a charge to earnings
    
    
    (1,942
    )Change to other comprehensive income
    
    
    Balance at December 31, 2010
    
    $
    20,961
  Pooled trustpreferred securitiesBalance at June 30, 2010
    
    $
    17,707Addition for the credit component on debt
securities in which OTTI was not previously
recognized
    
    
    1,942Balance at December 31, 2010
    
    $
    19,649The amount of securities with OTTI
charges to earnings are as follows:Recorded in September 30, 2010 quarter
    
    $
    996Recorded in December 31, 2010 quarter
    
    
    946
  28




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




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NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
 NOTE 9. EARNINGS PER SHARE (EPS)
  Three months ended
    
    
    Six months endedDecember 31,
    
    
    December 31,2010
    
    
    2009
    
    
    2010
    
    
    2009Numerator for basic and
diluted earnings per share:Net income
    
    $
    1,841
    
    
    $
    2,425
    
    
    $
    4,064
    
    
    $
    3,280Less: Preferred stock dividend
    
    
    397
    
    
    
    397
    
    
    
    794
    
    
    
    794Net income to common stockholders
    
    $
    1,444
    
    
    $
    2,028
    
    
    $
    3,270
    
    
    $
    2,486Denominator:Weighted average shares
for basic earnings per common share
    
    
    5,529,716
    
    
    
    5,428,604
    
    
    
    5,529,464
    
    
    
    5,428,150Effect of dilutive stock options
    
    
    1,300
    
    
    
    
    
    
    
    650
    
    
    
    Weighted average shares for
dilutive earnings per common share
    
    
    5,531,016
    
    
    
    5,428,604
    
    
    
    5,530,114
    
    
    
    5,428,150Net income per common share: Basic
    
    $
    0.26
    
    
    $
    0.38
    
    
    $
    0.59
    
    
    $
    0.46Diluted
    
    $
    0.26
    
    
    $
    0.38
    
    
    $
    0.59
    
    
    $
    0.46
 NOTE 10. NEW ACCOUNTING PRONOUNCEMENTS
    30




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PARKVALE FINANCIAL CORPORATION
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
  Forward-Looking Statements:
    Critical Accounting Policies, Judgments and Estimates:
  31




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##### Table of Contents



Balance Sheet Data:
 December 31,2010
    
    2009Total assets
    
    $
    1,791,116
    
    
    $
    1,915,986Loans, net
    
    
    1,017,834
    
    
    
    1,053,009Interest-earning deposits and federal funds sold
    
    
    109,912
    
    
    
    130,021Total investments
    
    
    520,737
    
    
    
    600,156Deposits
    
    
    1,458,571
    
    
    
    1,528,142FHLB advances
    
    
    165,875
    
    
    
    186,087Shareholders equity
    
    
    122,136
    
    
    
    151,513Book value per common share
    
    $
    16.21
    
    
    $
    21.73
  Three Months Ended
    
    Six Months EndedDecember 31, (1)
    
    December 31, (1)2010
    
    2009
    
    2010
    
    2009Average yield earned on all
interest-earning assets
    
    
    3.91
    %
    
    
    4.30
    %
    
    
    3.93
    %
    
    
    4.38
    %Average rate paid on all
interest-bearing liabilities
    
    
    1.70
    %
    
    
    2.25
    %
    
    
    1.78
    %
    
    
    2.39
    %Average interest rate spread
    
    
    2.21
    %
    
    
    2.05
    %
    
    
    2.15
    %
    
    
    1.99
    %Net yield on average interest-earning assets
    
    
    2.20
    %
    
    
    2.03
    %
    
    
    2.14
    %
    
    
    2.05
    %Other expenses to average assets
    
    
    1.69
    %
    
    
    1.53
    %
    
    
    1.71
    %
    
    
    1.56
    %Taxes to pre-tax income
    
    
    22.02
    %
    
    
    23.84
    %
    
    
    22.18
    %
    
    
    6.92
    %Dividend payout ratio
    
    
    7.66
    %
    
    
    13.04
    %
    
    
    6.76
    %
    
    
    21.83
    %Return on average assets
    
    
    0.41
    %
    
    
    0.51
    %
    
    
    0.44
    %
    
    
    0.34
    %Return on average equity
    
    
    5.46
    %
    
    
    6.37
    %
    
    
    6.07
    %
    
    
    4.32
    %Average equity to average total assets
    
    
    7.42
    %
    
    
    7.96
    %
    
    
    7.30
    %
    
    
    7.93
    %Dividends per common share
    
    $
    0.02
    
    
    $
    0.05
    
    
    $
    0.04
    
    
    $
    0.10
 32




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At December 31,2010
    
    2009One year gap to total assets
    
    
    9.77
    %
    
    
    4.56
    %Intangibles to total equity
    
    
    22.97
    %
    
    
    19.12
    %Ratio of nonperforming assets to total assets
    
    
    1.99
    %
    
    
    1.90
    %Number of full-service offices
    
    
    47
    
    
    
    48
 
 (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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Allowance for Loan Losses:
   Liquidity and Capital Resources:
  34




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##### Table of Contents



TARP Capital Purchase Program
    Term Debt
 35




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##### Table of Contents



Capital:
   36




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##### Table of Contents



Tier 1
    
    Tier 1
    
    TotalCore
    
    Risk-Based
    
    Risk-BasedCapital
    
    Capital
    
    CapitalEquity capital (1)
    
    $
    140,806
    
    
    $
    140,806
    
    
    $
    140,806Less non-allowable intangible assets
    
    
    (28,057
    )
    
    
    (28,057
    )
    
    
    (28,057
    )Less non-allowable deferred tax asset
    
    
    (9,168
    )
    
    
    (9,168
    )
    
    
    (9,168
    )Plus permitted valuation allowances (2)
    
    
    
    
    
    
    
    
    
    
    13,247Plus accumulated other comprehensive income
    
    
    13,243
    
    
    
    13,243
    
    
    
    13,243Total regulatory capital
    
    
    116,824
    
    
    
    116,824
    
    
    
    130,071Minimum required capital
    
    
    71,628
    
    
    
    46,334
    
    
    
    92,669Excess regulatory capital
    
    $
    45,196
    
    
    $
    70,490
    
    
    $
    37,402Adjusted total assets (1)
    
    $
    1,790,705
    
    
    $
    1,158,360
    
    
    $
    1,158,360Regulatory capital as a percentage
    
    
    6.52
    %
    
    
    10.09
    %
    
    
    11.23
    %Minimum capital required as a percentage
    
    
    4.00
    %
    
    
    4.00
    %
    
    
    8.00
    %Excess regulatory capital as a percentage
    
    
    2.52
    %
    
    
    6.09
    %
    
    
    3.23
    %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, 2010.(2)
    
    Limited to 1.25% of risk adjusted total assets. Results of Operations  Comparison of Three Months Ended December 31, 2010 and 2009:
  Interest Income:
  37




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




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##### Table of Contents



Income Tax Expense:
  Results of Operations  Comparison of Six Months Ended December 31, 2010 and 2009:
  Interest Income:
  Interest Expense:
  Net Interest Income:
  39




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Provision for Loan Losses:
  Noninterest Income:
  Noninterest Expense:
  Income Tax Expense:
  Impact of Inflation and Changing Prices:
  40




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41




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##### Table of Contents



PART II  OTHER INFORMATION
      (a)
    
    On December 31, 2010, Parkvale Financial Corporation (the Corporation) sold 46,468 shares
of its common stock, par value $1.00 per share, out of treasury to the Parkvale Financial
Corporation Employee Stock Ownership Plan (the ESOP) at the December 30, 2010 closing price
of $9.08 per share. No underwriting discounts or brokerage commissions were paid. The gross
sales proceeds aggregated $421,929.40 and will be used by the Corporation for general business
purposes.(b)
    
    Not applicable(c)
    
    Not applicable
        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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SIGNATURES
  Parkvale Financial CorporationDATE: February 14, 2011
    By:
    /s/ Gilbert A. RiazziGilbert A. RiazziVice President and
Chief Financial OfficerDATE: February 14, 2011
    By:
    /s/ Robert J. McCarthy, Jr.Robert J. McCarthy, Jr.President and
Chief Executive Officer 43