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

o		Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Commission File Number 0-24948

PVF Capital Corp.

 

(Exact name of registrant as specified in its charter)

Ohio		34-1659805
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

30000 Aurora Road, Solon, Ohio		44139
(Address of principal executive offices)		(Zip Code)

(440) 248-7171
Registrant’s telephone number, including area code)

Not Applicable
(Former name, former address and former fiscal year, if changed since last report.)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

YES þ    NO o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

YES o NO    o

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

Large accelerated filer o		Accelerated filer o		Non-accelerated filer o		Smaller Reporting Company þ
				(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

YES o    NO þ

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Common Stock, $0.01 Par Value		25,402,218
(Class)		(Outstanding at April 30, 2010)

 

 

PVF CAPITAL CORP.

INDEX

		Page
Part I Financial Information
Item 1 Financial Statements
Consolidated Statements of Financial Condition, March 31, 2010 and June 30, 2009 (unaudited)			1
Consolidated Statements of Operations for the three and nine months ended March 31, 2010 and 2009 (unaudited)			2
Consolidated Statements of Cash Flows for the nine months ended March 31, 2010 and 2009 (unaudited)			3
Notes to Consolidated Financial Statements (unaudited)			4
Item 2 Management’s Discussion and Analysis of Financial Condition and Results of Operations			21
Item 3 Quantitative and Qualitative Disclosures About Market Risk			33
Item 4 Controls and Procedures			33
Part II Other Information			34
Item 1 Legal Proceedings			34
Item 1A Risk Factors			34
Item 2 Unregistered Sales of Equity Securities and Use of Proceeds			35
Item 3 Defaults Upon Senior Securities			35
Item 4 Removed and Reserved			35
Item 5 Other Information			35
Item 6 Exhibits			37
SIGNATURES
EX-4.2
EX-4.3
EX-31.1
EX-31.2
EX-32

Part I Financial Information

Item 1 Financial Statements

PVF CAPITAL CORP.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Unaudited)

		March 31,				June 30,
		2010				2009
ASSETS
Cash and cash equivalents:
Cash and amounts due from depository institutions		$	50,966,373			$	8,464,544
Interest bearing deposits			46,402,343				1,939,514
Federal funds sold			40,000,000				10,809,000
Total cash and cash equivalents			137,368,716				21,213,058
Securities available for sale			9,978,180				102,800
Securities held to maturity (fair values of $5,066,870 and $49,999,939, respectively)			5,000,000				49,999,939
Mortgage-backed securities available for sale			52,216,779				64,177,633
Loans receivable held for sale, net			9,016,682				27,078,472
Loans receivable, net of allowance of $30,271,555 and $31,483,205, respectively			605,769,880				668,460,029
Office properties and equipment, net			8,044,261				8,624,496
Real estate owned, net			10,991,429				11,607,758
Federal Home Loan Bank stock			12,811,100				12,811,100
Bank owned life insurance			23,067,567				22,894,013
Prepaid expenses and other assets			14,919,828				25,239,535
Total Assets		$	889,184,422			$	912,208,833
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities
Deposits		$	689,562,107			$	724,931,569
Note Payable			1,286,111				1,366,111
Long-term advances from the Federal Home Loan Bank			35,000,000				35,000,000
Repurchase agreement			50,000,000				50,000,000
Subordinated debentures			0				20,000,000
Advances from borrowers for taxes and insurance			7,129,778				9,555,137
Accrued expenses and other liabilities			20,901,974				21,850,819
Total Liabilities			803,879,970				862,703,636
Stockholders’ Equity
Serial preferred stock, none issued			—				—
Common stock, $0.01 par value, 65,000,000 and 15,000,000 shares authorized; 25,874,943 and 8,246,548 shares issued, respectively			258,749				82,465
Additional paid-in-capital			100,247,186				69,377,852
Retained earnings (accumulated deficit)			(12,350,554	)			(16,538,515	)
Accumulated other comprehensive income			986,218				420,542
Treasury stock, at cost 472,725 shares			(3,837,147	)			(3,837,147	)
Total Stockholders’ Equity			85,304,452				49,505,197
Total Liabilities and Stockholders’ Equity		$	889,184,422			$	912,208,833

See accompanying notes to consolidated financial statements

Part I Financial Information

Item 1 Financial Statements

PVF CAPITAL CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)

		Three Months Ended								Nine Months Ended
		March 31,								March 31,
		2010				2009				2010				2009
Interest and dividends income
Loans		$	8,571,176			$	9,972,143			$	26,867,466			$	32,312,977
Mortgage-backed securities			606,234				797,215				1,962,861				2,184,748
Federal Home Loan Bank stock dividends			145,310				144,912				450,319				474,340
Securities			52,396				19,444				93,707				303,414
Federal funds sold and interest bearing deposits			4,349				3,153				14,748				115,737
Total interest and dividends income			9,379,465				10,936,867				29,389,102				35,391,217
Interest expense
Deposits			3,226,333				5,370,919				11,348,323				17,563,291
Short-term borrowings			—				631,533				50				641,332
Long-term borrowings			891,767				268,781				2,715,699				2,092,372
Subordinated debt			129,760				309,196				574,499				980,750
Total interest expense			4,247,860				6,580,429				14,638,571				21,277,745
Net interest income			5,131,605				4,356,438				14,750,530				14,113,472
Provision for loan losses			7,000,000				15,690,600				11,010,000				20,022,600
Net interest income after provision for loan losses			(1,868,395	)			(11,334,162	)			3,740,530				(5,909,128	)
Noninterest income, net
Service and other fees			160,652				166,356				507,735				522,156
Mortgage banking activities, net			769,798				3,657,201				3,276,002				4,535,378
Increase (decrease) in cash surrender value of bank owned life insurance			75,312				(55,652	)			173,554				(58,941	)
Securities activity:
Impairment of securities			—				(1,200	)			—				(1,842,400	)
Gain on sale of equity securities			23,871				—				23,871				—
Gain on sale of mortgage-backed securities available for sale			—				558,409				—				1,224,338
Real estate owned activity:
Gain (loss) on real estate owned			6,028				(874,831	)			(153,505	)			(1,197,316	)
Provision for real estate owned losses			(244,647	)			—				(746,420	)			—
Gain on the cancelation of subordinated debt			9,065,908				—				17,627,438				—
Other, net			98,188				336,875				439,150				742,136
Total noninterest income, net			9,955,110				3,787,158				21,147,825				3,925,350
Noninterest expense
Compensation and benefits			2,316,795				2,386,474				6,930,606				7,960,033
Office occupancy and equipment			645,445				691,158				1,970,600				2,096,836
Outside services			535,085				576,113				1,880,354				1,432,845
Federal deposit insurance premium			584,440				233,530				1,887,985				565,629
Real estate owned expense			948,914				539,063				2,396,599				1,266,374
Other			1,093,522				1,003,549				3,321,001				3,058,801
Total noninterest expense			6,124,201				5,429,887				18,387,145				16,380,519
Income (loss) before federal income tax provision			1,962,514				(12,976,891	)			6,501,210				(18,364,297	)
Federal income tax provision (benefit)			693,449				(4,396,052	)			2,313,249				(6,160,664	)
Net income (loss)		$	1,269,065				($8,580,839	)			4,187,961				($12,203,633	)
Basic earnings (loss) per share		$	0.14				($1.10	)		$	0.50				($1.57	)
Diluted earnings (loss) per share		$	0.13				($1.10	)		$	0.50				($1.57	)
Dividends declared per common share		$	0.000			$	0.000			$	0.000			$	0.010

See accompanying notes to consolidated financial statements

Part I Financial Information

Item 1 Financial Statements

PVF CAPITAL CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

		Three Months Ended
		March 31,
		2010				2009
Operating Activities
Net income (loss)		$	4,187,961				($12,203,633	)
Adjustments to reconcile net income to net cash from operating activities
Amortization of premium on mortgage-backed securities			252,764				584,236
Depreciation and amortization			678,930				875,323
Provision for loan losses			11,010,000				20,022,600
Provision for real estate owned losses			746,420				0
Impairment of securities			0				1,842,400
Accretion of deferred loan origination fees, net			(600,675	)			(482,590	)
Gain on cancellation of subordinated debt			(17,627,438	)			0
(Gain) loss on sale of loans receivable held for sale, net			(3,691,269	)			(2,542,396	)
(Gain) loss on sale of mortgage-backed securities held for sale, net			0				(1,224,338	)
Loss on disposal of real estate owned, net			153,505				1,197,316
Gain on sale of equity securities			(23,871	)			0
Market adjustment for loans held for sale			15,945				(475,600	)
Change in fair value of mortgage banking derivatives			806,434				(1,437,094	)
Stock compensation			97,549				203,745
Federal Home Loan Bank stock dividends			0				(170,500	)
Change in accrued interest on securities, loans, and borrowings, net			1,134,951				1,324,178
Origination of loans receivable held for sale, net			(146,265,231	)			(196,039,153	)
Sale of loans receivable held for sale, net			165,629,696				189,037,731
(Increase) decrease in cash surrender value of bank owned life insurance			(173,554	)			58,941
Net change in other assets and other liabilities			11,022,159				1,545,796
Net cash from operating activities			27,354,276				2,116,962
Investing Activities
Loan repayments and originations, net			47,673,824				(18,611,504	)
Principal repayments on mortgage-backed securities available for sale			14,143,910				5,909,275
Purchase of mortgage-backed securities available for sale			(1,501,775	)			(113,276,827	)
Sale of mortgage-backed securities			0				97,304,678
Purchase of securities held to maturity			(112,000,000	)			(10,000,000	)
Purchase of securities available for sale			(10,000,000	)			0
Maturities of securities held to maturity			157,000,000				17,580,000
Sale of securities available for sale			71,471				0
Proceeds from sale of real estate owned			4,323,404				6,606,345
Additions to office properties and equipment, net			(98,695	)			(485,597	)
Net cash from investing activities			99,612,139				(14,973,630	)
Financing activities
Net increase (decrease) in demand deposits, NOW, and passbook savings			(185,315	)			6,895,334
Net increase (decrease) in time deposits			(35,184,147	)			40,714,914
Net increase in advances from borrowers for taxes and insurance			(2,425,359	)			(2,368,869	)
Net increase (decrease) in short-term Federal Home Loan Bank advances			0				(9,000,000	)
Repayment of note payable			(80,000	)			0
Proceeds from loan			0				1,375,000
Repayment of line of credit			0				(950,000	)
Payment in exchange for cancellation of subordinated debt			900,000				0
Proceeds from Stock Offering, net of issuance costs			27,964,065				0
Cash dividend paid			0				(97,173	)
Net cash from financing activities			(10,810,757	)			36,569,206
Net increase in cash and cash equivalents			116,155,658				23,712,538
Cash and cash equivalents at beginning of period			21,213,058				17,804,394
Cash and cash equivalents at end of period		$	137,368,716			$	41,516,932
Supplemental disclosures of cash flow information:
Cash payments of interest expense		$	15,628,892			$	20,495,309
Cash payments of income taxes		$	0			$	0
Supplemental noncash operating activity:
Reversal of accrued interest on subordinated debt		$	1,511,442			$	0
Supplemental noncash investing activity:
Transfer of loans to real estate owned		$	4,607,000			$	16,065,526
Supplemental noncash financing activity:
Common stock and warrants exchanged for cancellation of debt		$	2,984,004			$	0

See accompanying notes to consolidated financial statements

Part I Financial Information

Item 1

PVF CAPITAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Ended
March 31, 2010 and 2009
(Unaudited)

1. The accompanying consolidated interim financial statements were prepared in accordance with regulations of the Securities and Exchange Commission for Form 10-Q. All information in the consolidated interim financial statements is unaudited except for the June 30, 2009 consolidated statement of financial condition, which was derived from the Corporation’s audited financial statements. For reasons more fully described in Note 10 to these interim financial statements, the Company’s auditors added an explanatory paragraph to its opinion on the Company’s June 30, 2009 consolidated financial statements expressing substantial doubt about the ability of the Company to continue as a going concern. Certain information required for a complete presentation in accordance with U.S. generally accepted accounting principles has been condensed or omitted. However, in the opinion of management, these interim financial statements contain all adjustments, consisting only of normal recurring accruals, necessary to fairly present the interim financial information. The results of operations for the three and nine months ended March 31, 2010 are not necessarily indicative of the results to be expected for the entire year ending June 30, 2010. The results of operations for PVF Capital Corp. (“PVF” or the “Company”) for the periods being reported have been derived primarily from the results of operations of Park View Federal Savings Bank (the “Bank”). The Company’s common stock is traded on the NASDAQ CAPITAL MARKET under the symbol PVFC.

2. Securities available for sale: As of March 31, 2010, the fair value of securities available for sale and the related gross unrealized gains and losses recognized in accumulated other comprehensive income (loss) were as follows:

						Gross				Gross
		Amortized				Unrecognized				Unrecognized				Fair
		Cost				Gains				Losses				Value
FHLMC debenture		$	5,000,000			$	4,090			$	—			$	5,004,090
FNMA debenture			5,000,000				—				(25,910	)			4,974,090
Total		$	10,000,000			$	4,090			$	(25,910	)		$	9,978,180

The FHLMC debenture is callable quarterly beginning August 24, 2010 and matures in 2017. The FNMA debenture is callable quarterly beginning September 30, 2010 and matures in 2015.

Part I Financial Information
Item 1

At June 30, 2009, the fair value of securities available for sale and the related gross unrealized gains and losses recognized in accumulated other comprehensive income (loss) were as follows:

						Gross				Gross
		Amortized				Unrecognized				Unrecognized				Fair
		Cost				Gains				Losses				Value
Equity securities		$	47,600			$	55,200			$	—			$	102,800

The Company’s securities available-for-sale at June 30, 2009 consisted of floating rate preferred stock issued by the Federal Home Loan Mortgage Corporation (FHLMC) and Federal National Mortgage Association (FNMA). On September 7, 2008, the U.S. Treasury Department and the Federal Housing Finance Agency announced that FNMA and FHLMC had been placed into conservatorship. Dividends on the preferred shares of the entities have been suspended. As a result, for the three and nine months ended March 31, 2009, the Company recognized a respective $1,200 and $1,842,400 pre-tax charge for the other-than-temporary decline in fair value of this stock. The fair value of the Company’s holdings of these securities was $102,800 at June 30, 2009.

The Company sold these securities during the quarter ended March 31, 2010, recording a gain on sale of $23,871.

Mortgage-backed securities:

As of March 31, 2010, the fair value of mortgage-backed securities available for sale and the related gross unrealized gains and losses recognized in accumulated other comprehensive income (loss) were as follows:

						Gross				Gross
		Amortized				Unrealized				Unrealized				Fair
		Cost				Gains				Losses				Value
FNMA mortgage-backed securities		$	28,761,664			$	717,453			$	(11,056	)		$	29,468,061
FHLMC mortgage-backed securities			18,683,534				688,608				—				19,372,142
GNMA mortgage-backed securities			3,255,490				121,086				—				3,376,576
Total		$	50,700,688			$	1,527,147			$	(11,056	)		$	52,216,779

Part I Financial Information
Item 1

The carrying amount, unrealized gains and losses, and fair value of mortgage-backed securities available for sale at June 30, 2009 were as follows:

						Gross				Gross
		Amortized				Unrealized				Unrealized				Fair
		Cost				Gains				Losses				Value
FNMA mortgage-backed securities		$	32,999,418			$	262,310			$	(17,721	)		$	33,244,007
FHLMC mortgage-backed securities			26,029,802				256,223				—				26,286,025
GNMA mortgage-backed securities			4,566,428				81,173				—				4,647,601
Total		$	63,595,648			$	599,706			$	(17,721	)		$	64,177,633
None of the Company’s mortgage-backed securities available for sale mature at a single maturity date.
Securities held to maturity: As of March 31, 2010, the amortized cost, the related gross unrecognized gains and losses, and fair value of securities held to maturity were as follows:
						Gross				Gross
		Amortized				Unrecognized				Unrecognized				Fair
		Cost				Gains				Losses				Value
FNMA debenture		$	5,000,000			$	66,870			$	—			$	5,066,870
The FNMA debenture is callable quarterly beginning June 28, 2010 and matures in 2014.
Securities held to maturity at June 30, 2009 were as follows:
						Gross				Gross				Estimated
		Amortized				Unrecognized				Unrecognized				Fair
		Cost				Gain				Loss				Value
U.S. government treasury securities		$	49,999,939			$	—			$	—			$	49,999,939
Securities held to maturity were represented by two securities, each with a maturity date of July 2, 2009.

Part I Financial Information
Item 1

3. Loans Receivable:

Loans receivable at March 31, 2010 and June 30, 2009 consist of the following:

		March 31, 2010				June 30, 2009
Real estate mortgages:
One-to-four family residential		$	161,113,425			$	158,260,119
Home equity line of credit			84,951,744				88,538,739
Multi-family residential			49,427,872				58,291,094
Commercial			210,027,627				191,099,881
Commercial equity line of credit			26,928,420				46,276,418
Land			54,176,809				60,818,227
Construction — residential			18,358,106				39,070,316
Construction — multi-family			3,530,145				5,200,155
Construction — commercial			6,077,367				20,233,229
Total real estate mortgages			614,591,515				667,788,178
Non-real estate loans			21,449,920				32,155,056
Total loans receivable			636,041,435				699,943,234
Allowance for loan losses			(30,271,555	)			(31,483,205	)
Loans receivable, net		$	605,769,880			$	668,460,029

A summary of the changes in the allowance for loan losses for the three and nine months ended March 31, 2010 and 2009 is as follows:

		Three months				Three months				Nine months				Nine months
		ended				ended				ended				ended
		March 31,2010				March 31, 2009				March 31, 2010				March 31, 2009
Beginning balance		$	29,912,830			$	11,000,008			$	31,483,205			$	9,653,972
Provision for loan losses			7,000,000				15,690,600				11,010,000				20,022,600
Charge-offs			(6,641,275	)			(887,732	)			(12,221,650	)			(3,873,696	)
Recoveries			—				—				—				—
Ending balance		$	30,271,555			$	25,802,876			$	30,271,555			$	25,802,876

Part I Financial Information
Item 1

The following table provides statistical measures of non-performing assets:

		March 31,				June 30,
		2010				2009
		(Dollars in thousands)
Loans on non-accruing status (1):
Real estate mortgages:
One-to-four family residential		$	20,396			$	15,551
Commercial			16,257				13,140
Multi-family residential (2)			369				371
Construction and land (2)			32,422				39,757
Non real estate			108				943
Total loans on non-accrual status:			69,552				69,762
Loans past due 90 days, still on accrual status:
Real estate mortgages:
Commercial			—				—
Construction and land			432				729
Total non-performing loans		$	69,984			$	70,491

At March 31, 2010 and June 30, 2009, the recorded investment in loans, which have individually been identified as being impaired, totaled $49,156,322 and $58,583,559, respectively. Included in the impaired amount at March 31, 2010 and June 30, 2009 is $31,698,983 and $40,535,752, respectively, related to loans with a corresponding valuation allowance of $9,529,547 and $12,684,241, respectively. At March 31, 2010 and June 30, 2009, $17,457,339 and $18,047,807 of impaired loans had no specific allowance for loan losses allocated.

4. Mortgage Banking Activities: The Company services real estate loans for investors that are not included in the accompanying consolidated financial statements. Mortgage servicing rights are established based on the fair value of servicing rights retained on loans originated by the Bank and subsequently sold in the secondary market. Mortgage servicing rights are included in the consolidated statements of financial condition under the caption “Prepaid expenses and other assets.”

		Three Months Ended
		March 31,
		2010				2009
Servicing rights:
Beginning of period		$	6,940,695			$	3,930,826
Additions			503,710				1,443,372
Amortized to expense			(491,039	)			(734,785	)
End of period		$	6,953,366			$	4,639,413

Part I Financial Information
Item 1

		Nine Months Ended
		March 31,
		2010				2009
Servicing rights:
Beginning of period		$	6,097,861			$	4,398,783
Additions			2,372,649				1,687,894
Amortized to expense			(1,517,144	)			(1,447,264	)
End of period		$	6,953,366			$	4,639,413

Mortgage banking activities, net as presented in the consolidated statements of operations consist of the following. These amounts do not include non-interest expense related to mortgage banking activities.

		Three Months Ended								Nine Months Ended
		March 31,								March 31,
		2010				2009				2010				2009
Mortgage loan servicing fees		$	648,468			$	507,089			$	1,924,256			$	1,527,552
Amortization and impairment of mortgage loan servicing rights			(491,039	)			(734,785	)			(1,517,144	)			(1,447,264	)
Loan origination and sales activity			612,369				3,884,897				2,868,890				4,455,090
Mortgage banking activities, net		$	769,798			$	3,657,201			$	3,276,002			$	4,535,378

At March 31, 2010 and June 30, 2009, the Bank had interest rate-lock commitments on $25,522,940 and $48,161,785 of loans intended for sale in the secondary market. These commitments are considered to be free-standing derivatives and the change in fair value is recorded in the financial statements. The fair value of these commitments as of March 31, 2010 and June 30, 2009 was estimated to be $397,771 and $505,810, respectively, which is included in prepaid expenses and other assets in the consolidated statements of financial position. To mitigate the interest rate risk represented by these interest rate-lock commitments the Bank entered into contracts to sell mortgage loans of $24,950,000 and $42,620,000 as of March 31, 2010 and June 30, 2009. These contracts are also considered to be free-standing derivatives and the change in fair value also is recorded in the financial statements. The fair value of these contracts at March 31, 2010 and June 30, 2009 was estimated to be $570 and $698,965, respectively. These amounts are added to (netted against) the fair value of interest rate lock commitments recorded in prepaid and other assets. Changes in fair value for both types of derivatives are reported in mortgage banking activities in the consolidated statements of operations.

5. Stock Compensation: Employee compensation expense under stock options is reported using the fair value recognition provisions under ASC 718, “Share Based Payment.” The Company has adopted ASC 718 using the modified prospective method. Under this method, compensation expense is being recognized for the unvested portion of previously issued awards that remained outstanding as of July 1, 2005 and for any granted since that date. Prior interim periods and fiscal year results were not restated. For the quarters ended March 31, 2010 and 2009, compensation expense of $5,409 and $51,736, respectively, was recognized in the income statement related to

Part I Financial Information
Item 1

the vesting of previously issued awards plus vesting of new awards. For the nine months ended March 31, 2010 and 2009, compensation expense of $97,549 and $203,745, respectively, was recognized in the income statement related to the vesting of previously issued awards plus vesting of new awards. For the nine months ended March 31, 2010 and 2009 income tax benefits of $8,575 and $21,954 respectively, were recognized related to these expenses.

As of March 31, 2010, there was $181,533 of compensation expense related to unvested awards not yet recognized in the financial statements. The weighted-average period over which this expense is to be recognized is 2.1 years.

The Company can issue incentive stock options and nonqualified stock options under the 2000 Plan and the 2008 Plan. Generally, for incentive stock options, a percentage of the options awarded become exercisable on the date of grant and on each anniversary date of grant. The option period expires ten years from the date of grant, except for awards to individuals who own more than 10% of the Company’s outstanding stock. Awards to these individuals expire after five years from the date of grant and are exercisable at 110 percent of the market price at the date of grant.

Nonqualified stock options are granted periodically to directors and vest immediately. The option period expires ten years from the date of grant and the exercise price is the market price at the date of grant.

The aggregate intrinsic value of all options outstanding at March 31, 2010 was $300. The aggregate intrinsic value of all options that were exercisable at March 31, 2010 was $100.

A summary of the activity in the plan is as follows:

		Nine months ended
		March 31, 2010
		Total options outstanding
						Weighted
						Average
						Exercise
		Shares				Price
Options outstanding, beginning of period			582,792			$	8.54
Forfeited			(150,221	)			8.98
Expired			(68,620	)			7.67
Exercised			—				—
Granted			116,500				1.91
Options outstanding, end of period			480,451			$	6.92
Options exercisable, end of period			363,841			$	7.21

The weighted average remaining contractual life of options outstanding as of March 31, 2010 was 5.8 years. The weighted average remaining contractual life of vested options outstanding as of March 31, 2010 was 5.2 years.

No options were exercised in the three month periods ended March 31, 2010 and 2009.

The fair value for stock options granted during the nine months ended March 31, 2010, which consisted of individual grants in October, November and December 2009,

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and February 2010 was determined at the date of grant using a Black-Scholes options-pricing model and the following assumptions:

		2010
Expected average risk-free interest rate			3.40	%
Expected average life (in years)			10.00
Expected volatility			34.00	%
Expected dividend yield			0	%

The weighted average fair value of these grants was $0.98 per option. The expected average risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant for periods corresponding with the life of the option. The expected average life represents the weighted average period of time that options granted are expected to be outstanding giving consideration to vesting schedules, historical exercise and forfeiture patterns. Expected volatility is based on historical volatilities of the Company’s common stock. The expected dividend yield is based on historical information.

6. The following table discloses earnings (loss) per Share for the three and nine months ended March 31, 2010 and March 31, 2009.

		Three months ended March 31,
		2010												2009
		Income												Income
		(loss)				Shares				Per Share				(loss)				Shares				Per Share
		(Numerator)				(Denominator)				Amount				(Numerator)				(Denominator)				Amount
Basic EPS
Net Income (loss)		$	1,269,065				9,171,798			$	0.14				($8,580,839	)			7,773,823				($1.10	)
Effect of dilutive securities — stock options and warrants							267,458				0.01								—				0.00
Diluted EPS
Net Income
(loss)		$	1,269,065				9,439,256			$	0.13				($8,580,839	)			7,773,823				($1.10	)

		Nine months ended March 31,
		2010												2009
		Income												Income
		(loss)				Shares				Per Share				(loss)				Shares				Per Share
		(Numerator)				(Denominator)				Amount				(Numerator)				(Denominator)				Amount
Basic EPS
Net Income (loss)		$	4,187,961				8,322,923			$	0.50				($12,203,633	)			7,773,823				($1.57	)
Effect of dilutive securities — stock options and warrants							90,584				0.00								0				0.00
Diluted EPS
Net Income (loss)		$	4,187,961				8,413,507			$	0.50				($12,203,633	)			7,773,823				($1.57	)

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There were 361,451 options not considered in the diluted earnings per share calculation for the three and nine-month periods ended March 31, 2010, respectively, because they were not dilutive. There were 589,762 options not considered in the diluted earnings per share calculation for the three- and nine-month periods ended March 31, 2009, because they were not dilutive.

Also included in the diluted earnings per share calculation for the three- and nine-month period ended March 31, 2010 were warrants to acquire the Company’s shares of common stock issued as part of two separate exchanges more fully described in Note 8. The warrants issued on September 3, 2010 include warrants to purchase 797,347 shares of common stock and are exercisable at any time before September 3, 2012 at a price of $1.75 per share. The warrants issued on March 16, 2010 include warrants to purchase 1,246,179 shares of common stock and are exercisable at any time before March 16, 2015 at a price of $1.75 per share. The warrants are considered to be dilutive for the periods presented because the exercise price of the warrants, $1.75 per warrant, was less than the average market price, of the Company’s common stock for periods presented.

7. Fair Value: U.S. generally accepted accounting principles (U.S. GAAP) defines present fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. U.S. GAAP also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:

Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.

Level 2: Significant other observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted market prices in markets that are not active, and other inputs that are observable or can be corroborated by observable market data.

Level 3: Significant unobservable inputs that reflect a company’s own assumptions about the assumptions that market participants would use to price an asset or liability.

The Company used the following methods and significant assumptions to estimate fair value.

Securities and Mortgage-backed Securities (MBS). The fair values of securities available for sale are determined by obtaining quoted market prices on nationally recognized securities exchanges (Level 1 inputs). The fair values of mortgage-backed securities are determined through matrix pricing. This is a mathematical technique widely used in the industry to value debt securities without relying exclusively on quoted prices for the specific securities but rather by relying on the securities’ relationship to other benchmark quoted securities (Level 2 inputs).

Loans held for sale. The fair value of loans held for sale is determined using quoted secondary market prices.

Part I Financial Information
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Mortgage banking pipeline derivatives. The fair value of loan commitments is measured using current market rates for the associated mortgage loans. The fair value of mandatory forward sales contracts is measured using secondary market pricing.

Assets and liabilities measured at fair value on a recurring basis at March 31, 2010 are summarized below:

						Quoted Prices in
						Active Markets for				Significant Other				Significant
						Identical Assets				Observable Inputs				Unobservable Inputs
		March 31, 2010				(Level 1)				(Level 2)				(Level 3)
Assets:
Securities available for sale —
FNMA and FHLMC debentures		$	9,978,180			$	—			$	9,978,180				—
Loans held for sale			9,016,682				—				9,016,682
Mortgage-backed securities available for sale:
FNMA MBS			29,468,061				—				29,468,061				—
FHLMC MBS			19,372,142				—				19,372,142				—
GNMA MBS			3,376,576				—				3,376,576				—
Interest rate lock Commitments			397,771				—				397,771
Mandatory forward sales Contracts			570				—				570				—

Assets and liabilities measured at fair value on a nonrecurring basis at March 31, 2010 are summarized below:

						Quoted Prices in
						Active Markets for				Significant Other				Significant
						Identical Assets				Observable Inputs				Unobservable Inputs
		March 31, 2010				(Level 1)				(Level 2)				(Level 3)
Assets:
Impaired loans		$	22,169,436				—				—			$	22,169,436
Real estate owned			1,016,907				—				—				1,016,907

Impaired loans, which are usually measured for impairment using the fair value of the collateral, had an unpaid principal of $49,156,322. Of these, $31,698,983 were carried at a fair value of $22,169,436 as a result of a specific valuation allowance

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of $9,529,547. The fair value of collateral is usually estimated by third-party or internal appraisals of the collateral. The present value of estimated cash flows is based on internal models of expected borrower activity. The provision for loan losses related to changes in the fair value of impaired loans was $11.0 million during the nine months ended March 31, 2010.

Real estate owned is recorded at fair value based on property appraisals, less estimated selling costs, at the date of transfer. The carrying amount of real estate owned is not re-measured to fair value on a recurring basis, but is subject to fair value adjustments when the carrying amount exceeds the fair value, less estimated selling costs.

The carrying amount and estimated fair values of financial instruments at year end were as follows:

		March 31, 2010								June 30, 2009
		Carrying Amount				Estimated Fair Value				Carrying Amount				Estimated Fair Value
						(in thousands)
Assets:
Cash and amounts due from depository institutions		$	50,966			$	50,966			$	8,465			$	8,465
Interest-bearing deposits			46,402				46,402				1,940				1,940
Federal funds sold			40,000				40,000				10,809				10,809
Securities held to maturity			5,000				5,067				50,000				50,000
Securities available for sale			9,978				9,978				—				—
Equity securities			—				—				103				103
Mortgage-backed securities available for sale			52,217				52,217				64,178				64,178
Loans receivable, net			605,770				618,581				668,460				667,697
Loans receivable held for sale, net			9,017				9,017				27,078				27,078
Federal Home Loan Bank stock			12,811			NA					12,811			NA
Accrued interest receivable			2,861				2,861				3,475				3,475
Mandatory forward sales contracts			1				1				699				699
Commitments to make loans intended to be sold			398				398				506				506
Liabilities:
Demand deposits and passbook savings			(188,012	)			(188,012	)			(188,198	)			(188,198	)
Time deposits			(501,550	)			(510,037	)			(536,734	)			(547,620	)
Note payable			(1,286	)			(1,286	)			(1,366	)			(1,366	)
Advances from the Federal Home Loan Bank of Cincinnati			(35,000	)			(36,989	)			(35,000	)			(36,517	)
Repurchase agreement			(50,000	)			(52,087	)			(50,000	)			(53,900	)
Subordinated debentures			—				—				(20,000	)			(3,800	)
Accrued interest payable			(385	)			(385	)			(1,379	)			(1,379	)

The estimated fair value amounts have been determined by the Company using available market information and appropriate valuation methodologies. However, considerable judgment is necessary to interpret market data to develop the estimates of fair

Part I Financial Information
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value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts the Company could realize in a current market exchange. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts.

The Company used the following methods and assumptions to estimate fair value for items not described above.

Cash and amounts due from depository institutions, interest bearing deposits, and federal funds sold. The carrying amount is a reasonable estimate of fair value because of the short maturity of these instruments.

Loans receivable. For performing loans receivable, fair value is estimated by discounting contractual cash flows adjusted for prepayment estimates using discount rates based on secondary market sources adjusted to reflect differences in servicing and credit costs.

Federal Home Loan Bank stock. It was not practical to determine fair value of Federal Home Loan Bank (“FHLB”) stock due to restrictions placed on its transferability.

Demand deposits and time deposits. The fair value of demand deposits, savings accounts, and certain money market deposits is the amount payable on demand at the reporting date. The fair value of fixed-maturity certificates of deposit is estimated using discounted cash flows and rates currently offered for deposits of similar remaining maturities.

Note payable. The carrying amount is a reasonable estimate of the fair value.

Advances from the Federal Home Loan Bank of Cincinnati. The fair value of the Bank’s FHLB debt is estimated based on the current rates offered to the Bank for debt of the same remaining maturities.

Notes payable and subordinated debentures. The carrying value of the Company’s variable-rate note payable and the Company’s subordinated debt is a reasonable estimate of fair value based on the current incremental borrowing rate for similar types of borrowing arrangements adjusted for the Company’s credit risk profile.

Accrued interest receivable and accrued interest payable. The carrying amount is a reasonable estimate of the fair value.

8. Subordinated debt: On September 1, 2009, the Company entered into an exchange agreement (the “Exchange Agreement”) with the holder and collateral manager of $10.0 million principal amount trust preferred securities issued by PVF Capital Trust I (the “Trust”) in 2004. The trust preferred securities carried a variable interest rate that adjusted to the three month LIBOR rate plus 260 basis points.

Part I Financial Information
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Under the Exchange Agreement, on September 3, 2009, the securities holder exchanged its $10.0 million of trust preferred securities for consideration paid by the Company. The consideration paid by the Company consisted of (i) a cash payment of $500,000; (ii) a number of shares of Company common stock equal to $500,000 divided by the average daily closing price of the Company’s common stock for the twenty (20) business days prior to September 1, 2009, equating to 205,297 shares; (iii) a warrant (“Warrant A”) to purchase 769,608 shares of Company common stock; and (iv) a warrant (“Warrant B”)to purchase 27,739 shares of Company common stock as a result of the issuance of common shares in connection with second trust preferred exchange as described below. The exercise price for all warrants is $1.75, the price of the subsequent shareholder rights offering (See Note 10). The Warrants are exercisable for two years following the closing.

As a result of this transaction, the Company recorded a gain of $8,561,530 included in non-interest income for the nine-month period ended March 31, 2010. The estimated fair values of Warrant A and Warrant B were estimated to be $808,088 and $29,126, respectively, and are recorded in paid in capital.

On October 9, 2009, the Company entered into an exchange agreement (the “Exchange Agreement II”) with investors, including principally directors and officers of the Company and the Bank and certain individuals not affiliated with the Company (collectively, the “Investors”).

The Investors held trust preferred securities with an aggregate liquidation amount of $10.0 million issued by PVF Capital Trust II (the “Trust II”). In July 2006, the Company formed the Trust II as a special purpose entity for the sole purpose of issuing $10.0 million of trust preferred securities (the “Capital Securities II”). The Company issued subordinated debentures to the Trust II in exchange for the proceeds of the offering of the trust preferred securities. The trust preferred securities carried a fixed rate of 7.462% until September 15, 2011 and thereafter a variable interest rate that adjusts to the three month LIBOR rate plus 175 basis points. The subordinated debentures were the sole asset of the Trust II.

Under the Exchange Agreement II, on March 16, 2010, the Investors exchanged the $10.0 million of trust preferred securities for aggregate consideration consisting of (i) $400,000 in cash, (ii) shares of common stock valued at $600,000 based on the average daily closing price of the common stock over the 20 trading days prior to the closing of the transaction (the “20-Day Average Closing Price”) equating to 280,241 shares and (iii) warrants “A” to purchase 797,347 shares of common stock. Also, the Investors received 448,832 additional warrants “B” that were issued as a result of the Company completing its shareholder rights offering (See Note 10) The exercise price for the warrants is $1.75, the price of the shareholder rights offering. The warrants are exercisable for five years following the closing.

Part I Financial Information
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As a result of this transaction, the Company recorded a gain of $9,065,908 included in non-interest income for the nine-month period ended March 31, 2010. The estimated fair values of Warrant A and Warrant B were estimated to be $669,771 and $377,019, respectively and are recorded in paid in capital.

The shares of stock, warrants and stock issuable upon the exercise of warrants to be issued in Exchanges I and II have not been registered under the Securities Act of 1933, as amended and may not be offered or sold in the United States absent registration or an applicable exemption from such registration requirements.

9. Repurchase Agreement: On October 29, 2009, the Company received notice from the counter-party to its repurchase agreement stating that due to the regulatory capital requirements included in the Cease and Desist Orders, more fully described in Note 11, that the counterparty is entitled to declare that an event of Default had occurred and pursue all its remedies under the repurchase agreement. The counter-party did not indicate its intention to declare the Company in default. Among its remedies, the counter-party could unwind the trade at market value. This would result in a pre-tax charge to the earnings of the Company of approximately $2.1 million.

10. Common Stock Issuance: On March 26, 2010 the Company completed a rights offering and an offering to a standby investor. Stockholders exercised subscription rights to purchase all 14,706,247 shares offered at a subscription price of $1.75 per share. Additionally, the standby investor purchased 2,436,610 shares at the subscription price of $1.75 per share. In total, the Company raised proceeds of $27,964,015, net of issuance costs.

11. Regulatory Matters and Management’s Plans: On October 19, 2009, the Company and the Bank, each entered into a Stipulation and Consent to the Issuance of Order to Cease and Desist with the Office of Thrift Supervision (the “OTS”), whereby the Company and the Bank each consented to the issuance of an Order to Cease and Desist promulgated by the OTS without admitting or denying that grounds exist for the OTS to initiate an administrative proceeding against the Company or the Bank.

The Bank Order requires the Bank to take certain actions including: (i) by December 31, 2009, meet and maintain a tier one (core) capital ratio of at least 8.0% and a total risk-based capital ratio of at least 12.0% after the funding of an adequate allowance for loan and lease losses and submit a detailed plan to accomplish this; (ii) adopt revisions to the Bank’s liquidity policy to, among other things, increase the Bank’s minimum liquidity ratio; (iii) reduce the level of adversely classified assets to no more than 50% of core capital plus allowance for loan and lease losses by December 31, 2010 and to reduce the level of adversely classified assets and assets designated as special mention to no more than 65% of core capital plus allowance for loan and lease losses by December 31, 2010; (iv) prepare a new business plan that will include the requirements contained in the Bank Order and that also will include well supported and realistic strategies to achieve consistent

Part I Financial Information
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profitability by September 30, 2010; (v) restrict quarterly asset growth to an amount not to exceed net interest credited on deposit liabilities until the OTS approves of the new business plan; (vi) cease to accept, renew or roll over any brokered deposit or act as a deposit broker, without the prior written waiver of the Federal Deposit Insurance Corporation; (vii) not declare or pay dividends or make any other capital distributions from the Bank without receiving prior OTS approval; (viii) not make any severance or indemnification payments without complying with regulatory requirements regarding such payments; (ix) comply with prior regulatory notification requirements for any changes in directors or senior executive officers; (x) not enter into, renew, extend or revise any contractual arrangement relating to compensation or benefits for any senior executive officer or director of the Bank, without first providing 30 days prior written regulatory notice of the proposed transaction; (xi) not increase any salaries, bonuses or director’s fees to directors or senior executive officers without the prior written consent of the OTS; and (xii) ensure compliance with regulatory requirements for affiliate and insider transactions.

The Company Order contains the following requirements: (i) the Company must submit a capital plan that includes, among other things, the establishment of a minimum tangible capital ratio of tangible equity capital to total tangible assets commensurate with the Company’s consolidated risk profile, and specific plans to reduce the risks to the Company from its current debt levels and debt servicing requirements; (ii) the Company shall not declare, make or pay any cash dividends or other capital distributions or purchase, repurchase or redeem or commit to purchase, repurchase or redeem any Company equity stock without the prior non-objection of the OTS, except that this provision does not apply to immaterial capital stock redemptions that arise in the normal course of the Company’s business in connection with its stock-based compensation plans; (iii) the Company shall not incur, issue, renew, roll over or increase any debt or commit to do so without the prior non-objection of the OTS (debt includes loans, bonds, cumulative preferred stock, hybrid capital instruments such as subordinated debt or trust preferred securities, and guarantees of debt); (iv) the Company may not engage in transactions with any subsidiary or affiliate without the prior non-objection of the OTS except certain transactions exempt under applicable regulations and inter-company cost-sharing transaction; and (v) the Company must comply with similar restrictions on the payment of severance and indemnification payments, prior OTS approval of directorate and management changes and prior OTS approval of employment contracts and compensation arrangements contained in the Bank Order.

The Bank Order and the Company Order will remain in effect until terminated, modified, or suspended in writing by the OTS.

On March 26, 2010, the Company completed an offering of common stock (See Note 10).In total, the Company raised proceeds of $27,964,015, net of issuance costs. $15 million of the proceeds from the offering was used to invest in the Company’s subsidiary, Park View Federal Savings Bank, to improve its regulatory capital ratios. At March 31, 2010, the Bank’s tier one (core) capital ratio was 8.23% and its total risk-based capital ratio was 12.19%, exceeding the requirements of the Bank Order.

The Company believes it is in compliance with all requirements of the Bank and Company Orders that are required to date and will continue to work to comply with all such requirements in the future.

Part I Financial Information
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12. Other comprehensive income: Other comprehensive income (loss) components and related tax effects were as follows at March 31, 2010 and 2009:

		Three months ended								Nine months ended
		March 31,								March 31,
		2010				2009				2010				2009
Unrealized holding gains (losses) on Available for sale securities		$	30,223			$	1,289,664			$	902,777			$	790,365
Reclassification adjustment for losses (gains) realized in income			(23,871	)			(557,209	)			(23,871	)			618,082
Net unrealized gains (losses)			6,352				732,455				878,906				1,408,447
Tax effect			2,159				249,035				313,230				478,872
Other comprehensive income (loss)		$	4,193			$	483,420			$	565,676			$	929,575

Total comprehensive income (loss), which includes net income (loss) plus other comprehensive income, was $4,753,637 and $(11,274,058) for the nine months ended March 31, 2010 and 2009.

13. Adoption of New Accounting Standards: On December 4, 2007, the Financial Accounting Standards Board (“FASB”) issued new guidance impacting Accounting Standards Codification (ASC) 805, Business Combinations, with the objective to improve the comparability of information that a company provides in its financial statements related to a business combination. This new guidance establishes principles and requirements for how the acquirer: (i) recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree; (ii) recognizes and measures the goodwill acquired in the business combination or a gain from a bargain purchase; and (iii) determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. The statement does not apply to combinations between entities under common control. This statement applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. The impact of adoption of this standard on the Company’s financial statements was not material.

In December 2007, the FASB issued guidance impacting ASC 810-10, Consolidation, establishing the accounting for noncontrolling interests. A noncontrolling interest, also known as a “minority interest”, is the portion of equity in a subsidiary not attributable to a parent. The objective of this statement is to improve upon the consistency of financial information that a company provides in its consolidated financial statements. Consistent with SFAS No. 141(R), SFAS No. 160 is effective for fiscal years beginning on or after December 15, 2008. The impact of adoption of this standard on the Company’s financial statements was not material.

In June 2008, the FASB issued FASB Staff Position EITF 03-6-1—Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities (ASC 260-10). This FASB Staff Position (FSP) addresses whether instruments granted in share-based payment transactions are participating securities prior to vesting

Part I Financial Information
Item 1

and, therefore, included in the earnings allocation in computing earnings per share (EPS) under the two-class method. ASC 260-10 provides that unvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities and shall be included in the computation of EPS pursuant to the two-class method. This FSP was effective for financial statements issued by the Company in this fiscal year and interim periods within this year. The effect of adopting this new guidance was not material as the Company’s unvested share-based payment awards do not contain non-forfeitable rights to dividends or dividend equivalents.

Effect of Newly Issued but not yet Effective Accounting Standards

In June 2009, the FASB issued Statement of Financial Accounting Standards No. 166, Accounting for Transfers of Financial Assets, an Amendment of FASB Statement No. 140 (ASC 810). The new accounting requirement amends previous guidance relating to the transfers of financial assets and eliminates the concept of a qualifying special purpose entity. This Statement must be applied as of the beginning of each reporting entity’s first annual reporting period that begins after November 15, 2009, for interim periods within that first annual reporting period and for interim and annual reporting periods thereafter. This Statement must be applied to transfers occurring on or after the effective date. Additionally, on and after the effective date, the concept of a qualifying special-purpose entity is no longer relevant for accounting purposes. Therefore, formerly qualifying special-purpose entities should be evaluated for consolidation by reporting entities on and after the effective date in accordance with the applicable consolidation guidance. Additionally, the disclosure provisions of this Statement were also amended and apply to transfers that occurred both before and after the effective date of this Statement. The effect of adopting this new guidance is not expected to be material as the Company does not have any qualifying special purpose entities and the other provisions of the new guidance are to be applied prospectively.

Also in June 2009, the FASB issued Statement of Financial Accounting Standards No. 167, Amendments to FASB Interpretation No. 46(R), which amended guidance for consolidation of variable interest entities by replacing the quantitative-based risks and rewards calculation for determining which enterprise, if any, has a controlling financial interest in a variable interest entity with an approach focused on identifying which enterprise has the power to direct the activities of a variable interest entity that most significantly impact the entity’s economic performance and (1) the obligation to absorb losses of the entity or (2) the right to receive benefits from the entity. This Statement also requires additional disclosures about an enterprise’s involvement in variable interest entities. This Statement will be effective as of the beginning of each reporting entity’s first annual reporting period that begins after November 15, 2009, for interim periods within that first annual reporting period, and for interim and annual reporting periods thereafter. Early adoption is prohibited. The effect of adopting this new guidance is not expected to be material.

Part I Financial Information
Item 2

MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following analysis discusses changes in financial condition and results of operations at and for the three-month period ended March 31, 2010 for PVF Capital Corp. (“PVF” or the “Company”), Park View Federal Savings Bank (the “Bank”), its principal and wholly-owned subsidiary, PVF Service Corporation (“PVFSC”), a wholly-owned real estate subsidiary, Mid Pines Land Co., a wholly-owned real estate subsidiary, PVF Holdings, Inc., PVF Community Development and PVF Mortgage Corporation, three wholly-owned and currently inactive subsidiaries.

FORWARD-LOOKING STATEMENTS

When used in this Form 10-Q, the words or phrases “will likely result,” “are expected to,” “will continue,” “is anticipated,” “estimate,” “project,” or similar expressions are intended to identify “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are subject to certain risks and uncertainties including changes in economic conditions in the Company’s market area, changes in policies by regulatory agencies, fluctuations in interest rates, demand for loans in the Company’s market area, and competition that could cause actual results to differ materially from historical earnings and those presently anticipated or projected. Additional factors that may affect the Company’s results are discussed below under “Item 1A. Risk Factors,” in the Company’s Annual Report on Form 10-K and under “Item 1A. Risk Factors” in the Company’s Quarterly Reports on Form 10-Q for the quarters ended December 31, and September 30, 2009 under “Item 1A. Risk Factors.” The Company wishes to caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. The Company wishes to advise readers that the factors listed above could affect the Company’s financial performance and could cause the Company’s actual results for future periods to differ materially from any opinions or statements expressed with respect to future periods in any current statements.

The Company does not undertake, and specifically disclaims any obligation, to publicly release the results of any revisions, which may be made to any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.

FINANCIAL CONDITION

The Company generally seeks to fund loan activity and liquidity by generating deposits through its branch network and through the use of various borrowing facilities. During the period, the Company funded a decrease in deposits and an increase in cash and cash equivalents with the repayments of loans and the proceeds from its common stock offering. Additionally, the Company exchanged cash, common stock and warrants to acquire common stock in two separate transactions in exchange for the cancellation of $20 million of subordinated debt.

The Company continued the origination of fixed-rate single-family loans for sale in the secondary market. The origination and sale of fixed-rate loans has historically generated gains on sale and allowed the Company to increase its investment in loans serviced. Consolidated assets of the Company were $889.2 million as of March 31, 2010, a decrease of approximately $23.0 million, or 2.5%, as compared to June 30, 2009.

Part I Financial Information
Item 2

The Bank’s regulatory capital ratios for tier one core capital, tier one risk-based capital, and total risk-based capital were 8.23%, 10.93% and 12.19%, respectively, at March 31, 2010. The increase in the Bank’s regulatory capital ratios resulted from a $15 million investment in the Bank by the Company from a portion of the proceeds of the common stock offering.

At March 31, 2010, the Company’s cash and cash equivalents, which consist of cash, interest-bearing deposits and federal funds sold, increased $116.2 million, or 547.6%, as compared to June 30, 2009. The change in the Company’s cash, cash equivalents and federal funds sold consisted of increases to cash, interest bearing deposits and federal funds sold. The increase in cash and cash equivalents resulted from the repayment of loans receivable, the sale of loans receivable held for sale, the repayment of mortgage-backed securities available for sale, a decline in securities held to maturity, and proceeds from the completed common stock offering in the current period and was partially offset by a decline in deposits and an increase in securities available for sale. The increase to cash and cash equivalents is in accordance with the Bank’s decision to maintain higher cash balances in order to bolster the Company’s liquidity to meet potential funding needs.

Mortgage-backed securities available for sale decreased by $12.0 million as the result of the purchase of $1.5 million in mortgage-backed securities, the principal repayment of $14.1 million, the amortization of $0.3 million in book premium, and a positive market valuation adjustment of $0.9 million for securities held for sale.

Securities held to maturity decreased by $45.0 million during the nine months ended March 31, 2010 as a result of the maturity of $50.0 million in treasury securities on July 2, 2009, partially offset by the purchase of $5.0 million in agency securities for investment.

Loans receivable, net, decreased by $62.7 million, or 9.4%, during the nine months ended March 31, 2010. The decrease in loans receivable included decreases in all loan categories except for increases to commercial real estate loans and one-to-four family real estate loans. The increase to both one-to-four family and commercial real estate loans was the result of one-to-four family construction and commercial construction loans and commercial equity line of credit loans being converted to permanent financing. There has been very little new loan portfolio origination as the Company addresses its asset quality issues and works to reposition its balance sheet and strengthen its capital ratios. Now that the Company successfully completed its common stock offering and exceeds the capital ratio requirements of its regulator, the Company intends to seek new loan originations for its portfolio.

Park View Federal Savings Bank does not originate sub-prime loans and only originates Alt A loans for sale, without recourse, in the secondary market. All one-to-four family loans are underwritten according to agency underwriting standards. Exceptions, if any, are submitted to the loan committee for approval. Any exposure the Bank may have to these types of loans is immaterial.

The decrease of $18.1 million in loans receivable held for sale is the result of a reduction in new loan originations and timing differences between the origination and the sale of loans.

Real estate owned activity for the current nine month period consisted of the addition of 15 single-family properties, one parcel of land and three commercial

Part I Financial Information
Item 2

properties totaling approximately $4.6 million offset by the disposal of 18 single-family properties, 3 parcels of land, and 6 commercial properties that had a carrying amount totaling $4.5 million. The Bank incurred a loss of approximately $153,500 on the disposition of these properties. The Bank also recorded impairment during this nine month period of $746,400 on the carrying amount of real estate still in inventory at March 31, 2010 based on updated valuations and market conditions. At March 31, 2010, the Bank had 39 properties totaling $11.0 million in real estate owned. The real estate owned included 24 single-family properties, 12 land properties, and 3 commercial properties.

The decrease in prepaid expenses and other assets is the result of the Company moving from a net deferred tax asset position at June 30, 2009 to a net deferred tax liability position at March 31, 2010 as a result of the gains realized on the liquidation of the subordinated debt and the Company’s election to carry back its 2009 net operating loss under recently passed legislation.

Deposits decreased by $35.4 million, or 4.9%, primarily as a result of the maturity of $35.0 million in brokered deposits.

The decrease in subordinated debentures is the result of the previously mentioned transactions in which the Company entered into two separate exchange agreements. In the first exchange agreement, the Company paid $500,000 in cash, and issued $500,000 in common stock and warrants valued at $837,214 in exchange for the cancellation of $10.0 million of the Trust Preferred Obligation of PVF Capital Trust I. In the second exchange agreement, the Company paid $400,000 in cash, and issued $600,000 in common stock and warrants valued at $1,046,800 in exchange for the cancellation of $10.0 million of the Trust Preferred Obligation of PVF Capital Trust II. These two transactions resulted in a pretax gain of $17.6 million.

The decrease in advances from borrowers for taxes and insurance of $2.4 million is attributable to timing differences between the collection and payment of taxes and insurance. The decrease of $0.9 million in accrued expenses and other liabilities is the result of timing differences between the collection and remittance of funds received on loan serviced for investors.

Part I Financial Information
Item 2

RESULTS OF OPERATIONS Three months ended March 31, 2010, compared to three months ended March 31, 2009.

The Company’s net income is dependent primarily on its net interest income, which is the difference between interest earned on its loans and investments and interest paid on interest-bearing liabilities. Net interest income is determined by (i) the difference between yields earned on interest-earning assets and rates paid on interest-bearing liabilities (“interest rate spread”) and (ii) the relative amounts of interest-earning assets and interest-bearing liabilities. The Company’s interest-rate spread is affected by regulatory, economic and competitive factors that influence interest rates, loan demand, the collectibility of loans, and deposit flows. Net interest income also includes amortization of loan origination fees, net of origination costs.

The Company’s net income is also affected by the generation of non-interest income, which primarily consists of loan servicing income, service fees on deposit accounts, and gains on the sale of loans held for sale. In addition, net income is affected by the level of operating expenses, loan loss provisions and costs associated with the acquisition, maintenance and disposal of real estate.

The Company’s net income for the three months ended March 31, 2010 was $1,269,100 as compared to a loss of $8,580,800 for the prior year comparable period.

Net interest income

Net interest income for the three months ended March 31, 2010 increased by $775,200, or 17.8%, as compared to the prior year comparable period. This resulted from a decrease of $1,557,400, or 14.2%, in interest income which was more than offset by a decrease of $2,332,600, or 35.4%, in interest expense. The increase in net interest income was attributable to an increase of 57 basis points in the interest-rate spread for the quarter ended March 31, 2010 as compared to the prior year comparable period. The increase in interest-rate spread resulted primarily from significantly lower costs of deposits as part of management’s efforts to reduce funding costs which more that offset the decrease of 49 basis points on interest-earning assets and lower earning asset balances.

Total average earning assets for the quarter ended March 31, 2010 were $45.2 million lower compared to the comparable quarter in 2009. Average loan balances continue to be impacted by loan payments and payoffs which are not being replaced by new portfolio loan production as well as loan charge-offs contributing to the overall decline. The impact of lower loan balances was partially offset by higher average investments and cash and cash equivalents but funds were reinvested at substantially lower yields.

In the quarter ended March 31, 2010 total interest-bearing liabilities were $33.6 million lower as modest deleveraging occurred as part of management’s strategy to improve the Company’s capital ratios as well as a result of a lack of attractive long-term investments and lower loan balances. Deposit balances remained fairly stable but down modestly while the Company reduced its borrowings and subordinated debt. With the completion of the second trust preferred debt cancellation during the quarter all subordinated debt balances have been eliminated at quarter end.

Part I Financial Information
Item 2

RESULTS OF OPERATIONS continued

The following table presents comparative information for the three months ended March 31, 2010 and 2009 about average balances and average yields and costs for interest-earning assets and interest-bearing liabilities (dollars in thousands).

		March 31, 2010												March 31, 2009
		Average								Average				Average								Average
		Balance				Interest				Yield/Cost				Balance				Interest				Yield/Cost
Interest-earning assets
Loans(1)		$	656,028			$	8,571				5.23	%		$	766,093			$	9,972				5.21	%
Mortgage-backed securities			55,770				606				4.35	%			64,414				797				4.95	%
Investments and other			95,686				202				0.84	%			22,210				168				3.03	%
Total interest-earning assets			807,484				9,379				4.64	%			852,717				10,937				5.13	%
Non-interest-earning assets			72,317												39,187
Total Assets		$	879,801											$	891,904
Interest-bearing liabilities
Deposits		$	685,244			$	3,226				1.88	%		$	693,831			$	5,371				3.10	%
Borrowings			86,273				892				4.14	%			98,718				901				3.65	%
Subordinated debt			7,394				130				7.03	%			20,000				309				6.18	%
Total interest-bearing liabilities			778,911				4,248				2.18	%			812,549				6,581				3.24	%
Non-interest-bearing liabilities			31,045												17,425
Total liabilities			809,956												829,974
Stockholders’ Equity			69,845												61,930
Total liabilities and Stockholders’ equity		$	879,801											$	891,904
Net interest income						$	5,131											$	4,356
Interest-rate spread											2.46	%											1.89	%
Yield on interest-earning assets											2.54	%											2.04	%
Interest-earning assets to interest-bearing liabilities			103.67	%											104.94	%