Quarterly Report (10-q)

Large accelerated filer

Accelerated filer

Non-accelerated filer

¨ (Do not check if a smaller reporting company)

Smaller Reporting Company

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

FORM 10-Q

x	Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended March 31, 2013.

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

For the transition period from to

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 x NO ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§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 x NO ¨

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)

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

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		26,552,685
(Class)		(Outstanding at May 14, 2013)

PVF CAPITAL CORP.

INDEX


		Page
	PART I FINANCIAL INFORMATION

Item 1.	Financial Statements.
	Consolidated Statements of Financial Condition, March 31, 2013 (unaudited) and June 30, 2012.		1
	Consolidated Statements of Operations for the three and nine months ended March 31, 2013 and 2012 (unaudited).		2
	Consolidated Statements of Comprehensive Income for the three and nine months ended March 31, 2013 and 2012 (unaudited).		3
	Consolidated Statements of Cash Flows for the nine months ended March 31, 2013 and 2012 (unaudited).		4
	Notes to Consolidated Financial Statements (unaudited).		5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.		41
Item 3.	Quantitative and Qualitative Disclosures About Market Risk.		56
Item 4.	Controls and Procedures.		57

	PART II OTHER INFORMATION

Item 1.	Legal Proceedings.		58
Item 1A.	Risk Factors.		58
Item 2.	Unregistered Sale of Equity Securities and Use of Proceeds.		58
Item 3.	Defaults Upon Senior Securities.		58
Item 4.	Mine Safety Disclosures.		59
Item 5.	Other Information.		59
Item 6.	Exhibits.		59

	SIGNATURES

Part I — FINANCIAL INFORMATION

PVF CAPITAL CORP.

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(Unaudited)


	March 31,			June 30,
	2013			2012
ASSETS
Cash and amounts due from financial institutions	$	19,869,055		$	5,840,608
Interest-bearing deposits		80,125,268			114,269,532

Total cash and cash equivalents		99,994,323			120,110,140
Securities available for sale		41,419,405			38,658,044
Loans receivable held for sale, net		9,348,387			25,062,786
Loans receivable, net of allowance of $14,920,232 and $16,052,865		547,216,456			541,627,515
Office properties and equipment, net		7,139,173			7,237,165
Real estate owned, net		7,251,163			7,733,578
Federal Home Loan Bank stock		12,811,100			12,811,100
Bank-owned life insurance		23,768,643			23,648,663
Prepaid expenses and other assets		11,507,473			14,560,882

Total assets	$	760,456,123		$	791,449,873

LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities
Non-interest-bearing deposits	$	64,085,166		$	51,786,588
Interest-bearing deposits		557,082,044			604,192,552

Total deposits		621,167,210			655,979,140
Note payable		966,112			1,046,111
Long-term advances from the Federal Home Loan Bank		35,000,000			35,000,000
Advances from borrowers for taxes and insurance		8,349,129			4,469,292
Accrued expenses and other liabilities		17,636,636			24,824,454

Total liabilities		683,119,087			721,318,997

Stockholders’ equity
Serial preferred stock, $0.01 par value, 1,000,000 shares authorized; none issued		—			—
Common stock, $0.01 par value, 65,000,000 shares authorized; 26,521,567 and 26,217,796 shares issued		265,527			262,178
Additional paid-in capital		101,722,000			100,897,561
Retained earnings (accumulated deficit)		(20,893,709	)		(26,719,600	)
Accumulated other comprehensive income (loss)		80,365			(472,116	)
Treasury stock at cost, 472,725 shares		(3,837,147	)		(3,837,147	)

Total stockholders’ equity		77,337,036			70,130,876

Total liabilities and stockholders’ equity	$	760,456,123		$	791,449,873

See Notes to the Consolidated Financial Statements

Part I — FINANCIAL INFORMATION

PVF CAPITAL CORP.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)


	Three months ended						Nine months ended
	March 31,						March 31,
	2013			2012			2013			2012
				(Revised)						(Revised)
Interest and dividends income
Loans	$	6,522,409		$	6,884,277		$	20,176,903		$	20,984,085
Mortgage-backed securities		61,278			95,138			191,024			210,777
Federal Home Loan Bank stock dividends		136,862			145,309			425,199			402,233
Securities		120,894			146,456			387,304			184,798
Federal funds sold and interest-bearing deposits		51,168			73,700			184,091			254,586

Total interest and dividends income		6,892,611			7,344,880			21,364,521			22,036,479

Interest expense
Deposits		1,012,425			1,592,190			3,508,571			5,324,370
Long-term borrowings		265,017			268,267			806,167			812,887

Total interest expense		1,277,442			1,860,457			4,314,738			6,137,257

Net interest income		5,615,169			5,484,423			17,049,783			15,899,222
Provision for loan losses		—			2,016,000			2,050,000			5,482,000

Net interest income after provision for loan losses		5,615,169			3,468,423			14,999,783			10,417,222

Non-interest income
Service charges and other fees		237,436			238,403			888,591			623,081
Mortgage banking activities, net		2,464,702			3,332,547			9,355,545			6,149,734
Gain on sale of SBA loans		556,326			—			552,640			221,218
Increase in cash surrender value of bank-owned life insurance		35,088			54,928			119,980			173,915
Loss on real estate owned		(65,662	)		(209,813	)		(182,703	)		(453,770	)
Provision for real estate owned losses		(540,415	)		(401,580	)		(993,876	)		(1,276,403	)
Other, net		223,860			260,603			667,798			634,573

Total non-interest income		2,911,335			3,275,088			10,407,975			6,072,348

Non-interest expense
Compensation and benefits		3,277,109			2,854,357			9,633,127			8,481,444
Office occupancy and equipment		538,052			607,606			1,676,009			1,770,900
FDIC insurance		239,639			440,182			874,116			1,295,613
Professional and legal		259,107			60,000			620,000			305,000
Outside services		892,755			736,031			2,261,646			1,849,102
Maintenance contracts		87,373			221,825			437,526			640,682
Franchise tax		212,950			224,145			606,364			675,000
Real estate owned and collection expense		435,629			573,306			1,284,263			1,970,677
Merger-related expense		275,861			—			275,861			—
Other		472,502			800,731			1,782,955			2,066,964

Total non-interest expense		6,690,977			6,518,183			19,451,867			19,055,382

Income (loss) before federal income taxes		1,835,527			225,328			5,955,891			(2,565,812	)
Federal income tax provision (benefit)		73,000			—			130,000			(25,178	)

Net income (loss)	$	1,762,527		$	225,328		$	5,825,891		$	(2,540,634	)

Basic earnings (loss) per share	$	0.07		$	0.01		$	0.22		$	(0.10	)

Diluted earnings (loss) per share	$	0.07		$	0.01		$	0.22		$	(0.10	)

Dividend declared per common share	$	—		$	—		$	—		$	—

See Notes to the Consolidated Financial Statements

Part I — FINANCIAL INFORMATION

PVF CAPITAL CORP.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)


	Three months ended				Nine months ended
	March 31,				March 31,
	2013		2012		2013		2012
			(Revised)				(Revised)
Net income (loss)	$	1,762,527	$	225,328	$	5,825,891	($	2,540,634	)
Other comprehensive income, net of tax
Unrealized holding gains on available for sale securities		154,537		278,999		552,481		373,904
Reclassification adjustment for gains included in net income		—		—		—		—
Tax effect		—		—		—		—

Total other comprehensive income		154,537		278,999		552,481		373,904

Total comprehensive income (loss)	$	1,917,064	$	504,327	$	6,378,372	($	2,166,730	)

See Notes to the Consolidated Financial Statements

Part I — FINANCIAL INFORMATION

PVF CAPITAL CORP.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	Nine months ended
	March 31,
	2013			Revised 2012
Operating activities:
Net income (loss)	$	5,825,891		$	(2,540,634	)
Adjustments to reconcile net income (loss) to net cash flow from operating activities
Amortization of premium available for sale securities		50,405			61,120
Depreciation and amortization		521,845			534,499
Provision for loan losses		2,050,000			5,482,000
Gain on the sale of loans receivable held for sale		(11,409,934	)		(6,712,912	)
Gain on the sale of SBA loans		(552,640	)		(221,218	)
Provision for real estate owned losses		993,876			1,276,403
Deferral of loan origination fees, net		(130,045	)		(370,876	)
Loss on disposal of real estate owned, net		182,703			453,770
Market adjustment for loans held for sale		460,649			(215,785	)
Change in fair value of mortgage banking derivatives		108,122			(877,137	)
Stock compensation		599,792			269,333
Proceeds from loans receivable held for sale		344,494,353			258,407,978
Origination of loans receivable held for sale, net		(320,650,658	)		(260,989,856	)
Increase in cash surrender value of bank-owned life insurance		(119,980	)		(173,915	)
Net change in other assets and other liabilities		(1,154,510	)		14,173,643

Net cash from (used in) operating activities		21,269,869			8,556,413

Investing activities:
Loan repayments and originations, net		(10,703,517	)		(12,680,504	)
Principal repayments on securities available for sale		4,940,124			2,266,125
Calls of securities available for sale		7,750,000			8,950,000
Purchase of securities available for sale		(14,664,800	)		(37,676,427	)
Additions to office properties and equipment, net		(423,853	)		(372,197	)
Proceeds from sale of real estate owned		2,500,456			4,899,309

Net cash from (used in) investing activities		(10,601,590	)		(34,613,694	)

Financing activities:
Net increase in demand deposits, NOW and passbook savings		26,499,333			84,621,972
Net decrease in time deposits		(61,311,262	)		(69,995,389	)
Repayment of note payable		(80,000	)		(80,000	)
Net increase (decrease) in advances from borrowers for taxes and insurance		3,879,837			(3,284,566	)
Proceeds from the issuance of common shares		227,996			—

Net cash from (used in) financing activities		(30,784,096	)		11,262,017

Net increase (decrease) in cash and cash equivalents		(20,115,817	)		(14,795,264	)
Cash and cash equivalents at beginning of period		120,110,140			149,291,405

Cash and cash equivalents at end of period	$	99,994,323		$	134,496,141

Supplemental disclosures of cash flow information:
Cash payments of interest	$	4,313,143		$	6,132,279
Cash payments of income taxes	$	165,000		$	—
Supplemental noncash investing activity:
Transfer of loans to real estate owned	$	3,194,620		$	8,208,748

See Notes to the Consolidated Financial Statements

Part I — FINANCIAL INFORMATION

PVF CAPITAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Ended

March 31, 2013 and 2012

(Unaudited)

NOTE 1 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND RELATED MATTERS

The accounting and reporting policies of PVF Capital Corp. (the “Company”) conform to U.S. generally accepted accounting principles (“U.S. GAAP”) and general industry practice. The Company’s principal subsidiary, Park View Federal Savings Bank (the “Bank”) is primarily engaged in the business of offering deposits through the issuance of savings accounts, money market accounts, and certificates of deposit and lending funds primarily for the purchase, construction, and improvement of real estate in Cuyahoga, Summit, Geauga, Lake, Medina, Lorain and Portage Counties, Ohio. The deposit accounts of the Bank are insured up to applicable limits by the Federal Deposit Insurance Corporation (the “FDIC”). The following is a description of the significant policies which the Company follows in preparing and presenting its consolidated financial statements.

Basis of Presentation : The accompanying Unaudited Consolidated Financial Statements of the Company have been prepared in accordance with U.S. GAAP for interim financial information and the instructions for Form #10-Q and Article 10 of Regulation S-X. Accordingly, these financial statements do not contain all of the information and footnotes required by U.S. GAAP for annual financial statements and should be read in conjunction with the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2012. These consolidated financial statements are prepared without audit and reflect all adjustments that, in the opinion of management, are necessary to present fairly the financial position of the Company at March 31, 2013, and its results of operations and cash flows for the periods presented. All such adjustments are normal and recurring in nature. The accounting principles used to prepare the consolidated financial statements are in compliance with U.S. GAAP. However, the financial statements were prepared in accordance with the instructions of Form 10-Q and, therefore, do not purport to contain all necessary financial and note disclosures required by U.S. GAAP.

Principles of Consolidation : The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, the Bank, PVF Service Corporation (“PVFSC”), Mid Pines Land Company, PVF Holdings, Inc., PVF Mortgage Corp. and PVF Community Development Corp. PVFSC owns certain premises and leases them to the Bank. Mid Pines Land Company, PVF Holdings, Inc., PVF Mortgage Corp. and PVF Community Development Corp. did not have any significant assets or activity as of or for the periods presented. All significant intercompany transactions and balances are eliminated in consolidation.

PVFSC and the Bank have entered into various nonconsolidated joint ventures that own real estate, including properties leased to the Bank. The Bank has created various limited liability companies that have taken title to property acquired through or in lieu of foreclosure.

Use of Estimates : The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results

Part I — FINANCIAL INFORMATION

could differ from these estimates. The allowance for loan losses, valuation of mortgage servicing rights, fair value of mortgage banking derivatives, valuation of loans held for sale, fair value of securities, valuation of other real estate owned, and the realizability of deferred tax assets are particularly susceptible to change.

NOTE 2 — ADJUSTMENT FOR FREDDIE MAC INTEREST

During the quarter ended December 31, 2012, the Company identified that it was not making appropriate adjustments with respect to interest on residential mortgage loans originated and sold into the secondary market. In these mortgage sales, interest was advanced by Freddie Mac for the period from the first day of the month until the date of settlement with Freddie Mac to ensure a whole payment was subsequently remitted by the Company to Freddie Mac. Such amounts should have been reversed monthly from interest income and included in the liability account of funds due to Freddie Mac. It was determined that the adjustments to reverse interest income were not made beginning in August 2011.

The Company is applying relevant guidance from the SEC Staff Accounting Bulletin No. 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements (“SAB 108”) to assess the materiality of the interest income adjustments described above. It was determined, based upon the assessment, that the adjustments were immaterial to the previously reported amounts contained in the Company’s prior periodic filings. Although the interest income adjustments were immaterial to prior periods, recording the cumulative impact of the out-of period correction in the second quarter of 2013 would have been material. Therefore the Company applied the guidance for accounting for changes and error corrections and revised the prior period financial statements presented per SAB 108.

The guidance also requires the adjustment of any prior quarterly financial statements within the fiscal year of adoption for the effects of such errors on the quarters when the information is next presented. The Company is therefore revising the previously reported financial information for the quarter ended March 31, 2012 as well as the nine months ended March 31, 2012. The adjustments for both the quarter ended March 31, 2012 and the nine months ended March 31, 2012 is a decrease to interest income of $0.4 million and an increase in accrued expenses and other liabilities for the same amount. These adjustments do not require previously filed reports with the SEC to be amended. The Company intends to continue to revise the previously reported consolidated financial statements for certain comparative quarterly and annual periods through subsequent filings. The Company considers these adjustments to be immaterial to prior periods.

Part I — FINANCIAL INFORMATION

The applicable effect on the prior year balance sheet and statement of operations related to the adjustment for interest income on residential loans is as follows:


	June 30,			March 31,
	2012			2012
Balance Sheet:
Accrued expenses and other liabilities as previously reported	$	24,224,709		$	25,504,793
Adjustment for interest income on residential loans sold		599,745			383,144

Accrued expenses and other liabilities as adjusted	$	24,824,454		$	25,887,937

Retained earnings as previously reported	$	(26,119,855	)	$	(26,946,269	)
Net impact of adjustment for interest income on residential loans sold		(599,745	)		(383,144	)

Retained earnings (accumulated deficit) as adjusted	$	(26,719,600	)	$	(27,329,413	)

Total stockholders’ equity as previously reported	$	70,730,621		$	69,767,727
Net impact of adjustment for interest income on residential loans sold		(599,745	)		(383,144	)

Total stockholders’ equity as adjusted	$	70,130,876		$	69,384,583


	For the year			For the quarter			For the nine months
	ended			ended			ended
	June 30, 2012			March 31, 2012			March 31, 2012
Statement of Operations:
Interest and divdends income on loans as previously reported	$	28,382,546		$	7,079,214		$	21,367,228
Adjustment for interest income on residential loans sold		(599,745	)		(194,937	)		(383,144	)

Interest and divdends income on loans as adjusted	$	27,782,801		$	6,884,277		$	20,984,084

Total interest and dividends income	$	29,847,913		$	7,539,817		$	22,419,622
Adjustment for interest income on residential loans sold		(599,745	)		(194,937	)		(383,144	)

Total interest and dividends income as adjusted	$	29,248,168		$	7,344,880		$	22,036,478

Net interest income as previously reported	$	21,973,522		$	5,679,360		$	16,282,365
Adjustment for interest income on residential loans sold		(599,745	)		(194,937	)		(383,144	)

Net interest income as adjusted	$	21,373,777		$	5,484,423		$	15,899,221

Net interest income after provision for loan losses as previously reported	$	14,991,522		$	3,663,360		$	10,800,365
Adjustment for interest income on residential loans sold		(599,745	)		(194,937	)		(383,144	)

Net interest income as adjusted	$	14,391,777		$	3,468,423		$	10,417,221

Income (loss) before federal income taxes as previously reported	$	(1,550,076	)	$	420,265		$	(2,182,669	)
Adjustment for interest income on residential loans sold		(599,745	)		(194,937	)		(383,144	)

Income (loss) before federal income taxes as adjusted	$	(2,149,821	)	$	225,328		$	(2,565,813	)

Net income (loss) as previously reported	$	(1,331,077	)	$	420,265		$	(2,157,491	)
Adjustment for interest income on residential loans sold		(599,745	)		(194,937	)		(383,144	)

Net income (loss) as adjusted	$	(1,930,822	)	$	225,328		$	(2,540,635	)

Basic earnings (loss) per share as previously reported	$	(0.05	)	$	0.02		$	(0.08	)
Adjustment for interest income on residential loans sold		(0.03	)		(0.01	)		(0.02	)

Basic earnings (loss) per share as adjusted	$	(0.08	)	$	0.01		$	(0.10	)

Part I — FINANCIAL INFORMATION

NOTE 3 —AGREEMENT AND PLAN OF MERGER

On February 19, 2013, the Company and F.N.B. Corporation (“FNB”) the parent company of First National Bank of Pennsylvania (“FNB Bank”), entered into an Agreement and Plan of Merger (“Merger Agreement”) pursuant to which the Company will merge with and into FNB. Promptly following consummation of the merger, it is expected that the Bank will merge with and into FNB Bank.

Under the terms of the Merger Agreement, the Company’s shareholders will receive 0.3405 shares (the “Exchange Ratio”) of FNB common stock for each share of the Company’s common stock they own. In addition, all unexercised warrants remaining at the time of closing will be settled in cash based on the average closing price of FNB’s common shares for a specific 20 day trading period. The Merger Agreement also provides that all options to purchase the Company’s stock which are outstanding and unexercised immediately prior to the closing shall be converted into fully vested and exercisable options to purchase shares of FNB common stock, based upon the Exchange Ratio.

Consummation of the merger is subject to certain conditions, including, among others, approval of the merger by the Company’s common stockholders, governmental filings and regulatory approvals and expiration of applicable waiting periods, accuracy of specified representations and warranties of the other party, effectiveness of the registration statement to be filed by FNB with the SEC to register shares of FNB common stock to be offered to the Company’s stockholders, absence of a material adverse effect, recipient of tax opinions and the absence of any injunctions or other legal restraints.

Further information concerning the proposed merger will be included in a joint proxy statement/prospectus which will be filed the SEC in connection with the merger.

NOTE 4 — SECURITIES

As of March 31, 2013 and June 30, 2012, respectively, the amortized cost and 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:


	March 31, 2013
			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
Trust preferred securities		19,281,892		1,174,327		(22,616	)		20,433,603
Mortgage-backed GSE securities		20,700,442		298,980		(13,620	)		20,985,802

Total	$	39,982,334	$	1,473,307	$	(36,236	)	$	41,419,405


	June 30, 2012
			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
FNMA structured notes	$	2,000,000	$	9,320	$	—		$	2,009,320
Trust preferred securities		20,964,197		344,230		(46,665	)		21,261,762
Mortgage-backed GSE securities		15,093,864		293,098		—			15,386,962

Total	$	38,058,061	$	646,648	$	(46,665	)	$	38,658,044

Part I — FINANCIAL INFORMATION

Management performs a quarterly evaluation of investment securities for other-than-temporary impairment. At March 31, 2013 and June 30, 2012, respectively, the gross unrealized losses were in a loss position for less than twelve months on all but the trust preferred securities. The unrealized losses in trust preferred securities relate primarily to the changes in market interest rates and spreads since the securities were purchased. Management does not believe that any of these losses at March 31, 2013 or June 30, 2012 represent an other-than-temporary impairment. Should the impairment of any of these securities become other-than-temporary, the cost basis of the investment will be reduced and the resulting loss recognized within net income in the period the other-then-temporary impairment is identified.

The amortized cost and fair value of securities available-for-sale, by contractual maturity, are shown below:


	March 31, 2013
	Amortized Cost		Fair Value
One to five years	$	981,515	$	981,880
Five to ten years		5,024,678		5,127,351
Greater than 10 years		13,275,699		14,324,372
Mortgage-backed GSE securities		20,700,442		20,985,802

Total	$	39,982,334	$	41,419,405

These mortgage-backed securities are backed by residential mortgage loans and do not mature on a single maturity date. Securities pledged as collateral for contingent funding at the Federal Home Loan Bank of Cincinnati were approximately $11.8 million.

Part I — FINANCIAL INFORMATION

NOTE 5 — LOANS RECEIVABLE

Loans receivable at March 31, 2013 and June 30, 2012 consisted of the following:


	March 31,			June 30,
	2013			2012
One-to-Four Family Loans:
1-4 Family Owner Occupied	$	62,119,051		$	58,743,933
1-4 Family Non-Owner Occupied		30,129,375			34,368,320
1-4 Family Second Mortgage		27,437,987			29,202,145
Home Equity Lines of Credit		61,096,505			65,908,899
Home Equity Investment Lines of Credit		3,886,892			5,645,851
One-to-Four Family Construction Loans:
1-4 Family Construction		3,228,941			514,052
1-4 Family Construction Models/Speculative		640,938			1,608,137
Multi-Family Loans:
Multi-Family		58,285,309			53,959,459
Multi-Family Second Mortgage		63,272			145,642
Multi-Family Construction		1,566,349			5,375,000
Commercial Real Estate Loans:
Commercial		199,551,737			198,287,457
Commercial Second Mortgage		4,582,916			5,750,283
Commercial Lines of Credit		26,409,070			22,335,619
Commercial Construction		10,018,229			7,732,736
Commercial and Industrial Loans		51,509,793			35,443,184
Land Loans:
Lot Loans		7,525,661			12,091,093
Acquisition and Development Loans		14,049,562			19,093,006
Consumer Loans		651,609			2,112,708

Total loans receivable		562,753,196			558,317,524
Net deferred loan origination fees		(616,508	)		(637,144	)
Allowance for loan losses		(14,920,232	)		(16,052,865	)

Total loans receivable, net	$	547,216,456		$	541,627,515

Part I — FINANCIAL INFORMATION

The following table presents activity in the allowance for loan losses by portfolio segment for the three months ended March 31, 2013:


				One-to-Four						Commercial			Commercial
	One-to-Four			Family			Multi-			Real			and
	Family			Construction			Family			Estate			Industrial		Land			Consumer			Total
Beginning balance at December 31, 2012	$	5,317,890		$	324,143		$	1,653,155		$	5,331,524		$	1,086,132	$	1,416,605		$	10,809		$	15,140,258
Provision for loan losses		(309,323	)		505,486			(238,170	)		177,990			423,095		(549,199	)		(9,879	)		—
Charge-offs		(295,612	)		(58,692	)		—			(200,142	)		—		(68,814	)		—			(623,260	)
Recoveries		376,185			—			11,389			4,176			1,998		9,486			—			403,234

Ending balance at March 31, 2013	$	5,089,140		$	770,937		$	1,426,374		$	5,313,548		$	1,511,225	$	808,078		$	930		$	14,920,232

The following table presents activity in the allowance for loan losses by portfolio segment for the nine months ended March 31, 2013:


				One-to-Four						Commercial			Commercial
	One-to-Four			Family			Multi-			Real			and
	Family			Construction			Family			Estate			Industrial			Land			Consumer			Total
Beginning balance at June 30, 2012	$	5,765,276		$	305,312		$	1,903,138		$	5,084,179		$	928,043		$	2,057,301		$	9,616		$	16,052,865
Provision for loan losses		1,367,501			560,276			117,211			626,011			615,216			(1,240,287	)		4,072			2,050,000
Charge-offs		(2,472,683	)		(104,651	)		(605,364	)		(476,167	)		(40,936	)		(88,892	)		(13,000	)		(3,801,693	)
Recoveries		429,046			10,000			11,389			79,525			8,902			79,956			242			619,060

Ending balance at March 31, 2013	$	5,089,140		$	770,937		$	1,426,374		$	5,313,548		$	1,511,225		$	808,078		$	930		$	14,920,232

Part I — FINANCIAL INFORMATION

The following table presents activity in the allowance for loan losses by portfolio segment for the three months ended March 31, 2012:


				One-to-Four					Commercial			Commercial
	One-to-Four			Family			Multi-		Real			and
	Family			Construction			Family		Estate			Industrial			Land			Consumer			Total
Beginning balance at December 31, 2011	$	5,904,130		$	530,508		$	1,240,126	$	5,511,013		$	1,560,023		$	2,373,755		$	395,600		$	17,515,155
Provision for loan losses		1,056,747			(4,424	)		165,112		(512,507	)		(914,177	)		2,377,974			(152,725	)		2,016,000
Charge-offs		(1,594,690	)		(123,687	)		—		(780,211	)		(3,088	)		(425,076	)		—			(2,926,752	)
Recoveries		44,771			—			—		16,328			238,209			10,000			—			309,308

Ending balance at March 31, 2012	$	5,410,958		$	402,397		$	1,405,238	$	4,234,623		$	880,967		$	4,336,653		$	242,875		$	16,913,711

The following table presents activity in the allowance for loan losses by portfolio segment for the nine months ended March 31, 2012:


				One-to-Four						Commercial			Commercial
	One-to-Four			Family			Multi-			Real			and
	Family			Construction			Family			Estate			Industrial			Land			Consumer		Total
Beginning balance at June 30, 2011	$	8,841,454		$	1,266,740		$	1,767,336		$	8,458,942		$	1,663,894		$	7,891,305		$	107,222	$	29,996,893
Provision for loan losses		2,807,565			217,262			243,392			(315,396	)		(533,952	)		2,927,476			135,653		5,482,000
Charge-offs		(6,323,123	)		(1,081,605	)		(605,490	)		(4,030,222	)		(540,870	)		(6,549,479	)		—		(19,130,789	)
Recoveries		85,062			—			—			121,299			291,895			67,351			—		565,607

Ending balance at March 31, 2012	$	5,410,958		$	402,397		$	1,405,238		$	4,234,623		$	880,967		$	4,336,653		$	242,875	$	16,913,711

Part I — FINANCIAL INFORMATION

The following table presents the allowance for loan losses and the recorded investment in loans by portfolio segment and based on the impairment method as of March 31, 2013. The recorded investment in loans includes the unpaid principal balance and unamortized loan origination fees, but excludes accrued interest receivable which is not considered to be material.


			One-to-Four				Commercial		Commercial
	One-to-Four		Family		Multi-		Real		and
	Family		Construction		Family		Estate		Industrial		Land		Consumer		Total
Allowance for loan losses
Ending allowance balance attributable to loans
Individually evaluated for impairment	$	48,267	$	101,716	$	—	$	98,725	$	300,860	$	252,000	$	—	$	801,568
Collectively evaluated for impairment		5,040,873		669,221		1,426,374		5,214,823		1,210,365		556,078		930		14,118,664

Total ending allowance balance	$	5,089,140	$	770,937	$	1,426,374	$	5,313,548	$	1,511,225	$	808,078	$	930	$	14,920,232

Loans
Loans individually evaluated for impairment	$	11,171,637	$	636,734	$	777,825	$	10,629,961	$	472,590	$	5,386,292	$	—	$	29,075,039

Loans collectively evaluated for impairment	$	173,295,863	$	3,228,906	$	59,071,467	$	229,668,450	$	50,980,773	$	16,165,295	$	650,895	$	533,061,649

Total ending loans balance	$	184,467,500	$	3,865,640	$	59,849,292	$	240,298,411	$	51,453,363	$	21,551,587	$	650,895	$	562,136,688

Part I — FINANCIAL INFORMATION

The following table presents the allowance for loan losses and the recorded investment in loans by portfolio segment and based on the impairment method as of June 30, 2012. The recorded investment in loans includes the unpaid principal balance and unamortized loan origination fees, but excludes accrued interest receivable which is not considered to be material.


			One-to-Four				Commercial		Commercial
	One-to-Four		Family		Multi-		Real		and
	Family		Construction		Family		Estate		Industrial		Land		Consumer		Total
Allowance for loan losses
Ending allowance balance attributable to loans
Individually evaluated for impairment	$	665,033	$	101,716	$	—	$	98,725	$	300,860	$	252,000	$	—	$	1,418,334
Collectively evaluated for impairment		5,100,243		203,596		1,903,138		4,985,454		627,183		1,805,301		9,616		14,634,531

Total ending allowance balance	$	5,765,276	$	305,312	$	1,903,138	$	5,084,179	$	928,043	$	2,057,301	$	9,616	$	16,052,865

Loans
Loans individually evaluated for impairment	$	13,243,350	$	880,749	$	622,228	$	11,902,730	$	740,297	$	7,189,109	$	—	$	34,578,463
Loans collectively evaluated for impairment		180,404,558		1,239,018		58,789,996		221,936,205		34,662,439		23,959,404		2,110,297		523,101,917

Total ending loans balance	$	193,647,908	$	2,119,767	$	59,412,224	$	233,838,935	$	35,402,736	$	31,148,513	$	2,110,297	$	557,680,380

Part I — FINANCIAL INFORMATION

The following table presents loans individually evaluated for impairment by class of loan as of March 31, 2013 and the average recorded investment and interest income recognized by class for the nine months ended March 31, 2013:


	March 31, 2013						Three months ended March 31, 2013						Nine months ended March 31, 2013
	Unpaid				Allowance for		Average		Interest		Cash Basis		Average		Interest		Cash Basis
	Principal		Recorded		Loan Losses		Recorded		Income		Interest		Recorded		Income		Interest
	Balance ⁽¹⁾		Investment		Allocated		Investment		Recognized		Recognized		Investment		Recognized		Recognized
With no related allowance recorded
One-to-Four Family Loans:
1-4 Family Owner Occupied	$	6,139,539	$	5,415,419	$	—	$	5,375,297	$	17,734	$	17,734	$	5,374,309	$	59,529	$	59,529
1-4 Family Non-Owner Occupied		3,337,867		2,210,057		—		2,037,977		3,346		3,346		2,164,909		14,566		14,566
1-4 Family Second Mortgage		933,822		716,091		—		827,006		1,897		1,897		1,006,720		5,794		5,794
Home Equity Lines of Credit		2,519,720		2,157,360		—		2,137,567		—		—		1,964,249		2,616		2,616
Home Equity Investment Lines of Credit		508,328		331,810		—		333,664		—		—		245,303		375		375
One-to-Four Family Construction Loans:
1-4 Family Construction Models/Speculative		121,505		115,943		—		211,406		3,079		3,079		271,486		22,743		22,743
Multi-Family Loans:
Multi-Family		780,073		777,825		—		783,972		—		—		622,607		—		—
Commercial Real Estate Loans:
Commercial		7,435,182		7,148,478		—		7,456,062		43,428		43,428		8,359,503		144,363		144,363
Commercial Lines of Credit		1,579,652		1,481,868		—		1,530,508		—		—		1,072,689		—		—
Commercial Construction		828,491		643,900		—		643,894		—		—		643,877		22,908		22,908
Commercial and Industrial Loans		528,149		172,059		—		186,689		36		36		263,271		133		133
Land Loans:
Lot Loans		4,080,598		3,104,287		—		3,182,545		8,806		8,806		3,574,445		30,765		30,765
Acquisition and Development Loans		4,802,613		2,148,755		—		2,244,457		12,628		12,628		2,559,701		28,938		28,938

Total with no related allowance recorded	$	33,595,539	$	26,423,852	$	—	$	26,951,044	$	90,954	$	90,954	$	28,123,069	$	332,730	$	332,730

With an allowance recorded
One-to-Four Family Loans:
1-4 Family Owner Occupied	$	226,619	$	226,371	$	39,981	$	227,729	$	1,283	$	1,283	$	229,682	$	3,105	$	3,105
1-4 Family Non-Owner Occupied		114,655		114,529		8,286		114,982		900		900		115,880		3,503		3,503
1-4 Family Second Mortgage		—		—		—		—		—		—		123,337		—		—
Home Equity Lines of Credit		—		—		—		—		—		—		464,376		—		—
Home Equity Investment Lines of Credit		—		—		—		—		—		—		201,315		—		—
One-to-Four Family Construction Loans:
1-4 Family Construction		521,363		520,792		101,716		520,788		6,843		6,843		391,833		20,855		20,855
1-4 Family Construction Models/Speculative		—		—		—		—		—		—		131,441		—		—
Commercial Real Estate Loans:
Commercial		1,357,202		1,355,715		98,725		1,355,705		17,981		17,981		1,355,676		55,711		55,711
Commercial and Industrial Loans		300,860		300,530		300,860		300,528		3,891		3,891		300,522		11,789		11,789
Land Loans:
Lot Loans		133,396		133,250		252,000		133,623		2,008		2,008		134,359		6,059		6,059

Total with an allowance recorded	$	2,654,095	$	2,651,187	$	801,568	$	2,653,355	$	32,906	$	32,906	$	3,448,421	$	101,022	$	101,022

Total loans evaluated for impairment	$	36,249,634	$	29,075,039	$	801,568	$	29,604,399	$	123,860	$	123,860	$	31,571,490	$	433,752	$	433,752

(1)	There are $12.6 million of loans individually identified for impairment accruing interest.

Part I — FINANCIAL INFORMATION

The following table presents loans individually evaluated for impairment by class of loans as of June 30, 2012:


	June 30, 2012
	Unpaid				Allowance for
	Principal		Recorded		Loan Losses
	Balance ⁽¹⁾		Investment		Allocated
With no related allowance recorded
One-to-Four Family Loans:
1-4 Family Owner Occupied	$	6,380,803	$	5,671,079	$	—
1-4 Family Non-Owner Occupied		4,597,708		2,453,581		—
1-4 Family Second Mortgage		1,455,914		1,230,284		—
Home Equity Lines of Credit		1,834,685		1,832,595		—
Home Equity Investment Lines of Credit		157,120		156,943		—
One-to-Four Family Construction Loans:
1-4 Family Construction		—		—		—
1-4 Family Construction Models/Speculative		678,779		354,986		—
Multi-Family Loans:
Multi-Family		635,053		622,228		—
Multi-Family Second Mortgage		—		—		—
Multi-Family Construction		—		—		—
Commercial Real Estate Loans:
Commercial		10,902,253		9,286,679		—
Commercial Second Mortgage		—		—		—
Commercial Lines of Credit		617,240		616,536		—
Commercial Construction		828,490		643,863		—
Commercial and Industrial Loans		801,075		439,781		—
Land Loans:
Lot Loans		5,235,050		3,678,550		—
Acquisition and Development Loans		5,986,575		3,375,100		—
Consumer Loans		—		—		—

Total with no related allowance recorded	$	40,110,745	$	30,362,205	$	—

With an allowance recorded
One-to-Four Family Loans:
1-4 Family Owner Occupied	$	232,751	$	232,485	$	39,981
1-4 Family Non-Owner Occupied		117,360		117,226		8,286
1-4 Family Second Mortgage		247,293		247,011		14,685
Home Equity Lines of Credit		895,875		894,852		299,759
Home Equity Investment Lines of Credit		407,757		407,293		302,322
One-to-Four Family Construction Loans:
1-4 Family Construction		—		—		—
1-4 Family Construction Models/Speculative		526,363		525,762		101,716
Multi-Family Loans:
Multi-Family		—		—		—
Multi-Family Second Mortgage		—		—		—
Multi-Family Construction		—		—		—
Commercial Real Estate Loans:
Commercial		1,357,202		1,355,653		98,725
Commercial Second Mortgage		—		—		—
Commercial Lines of Credit		—		—		—
Commercial Construction		—		—		—
Commercial and Industrial Loans		300,860		300,517		300,860
Land Loans:
Lot Loans		135,614		135,459		252,000
Acquisition and Development Loans		—		—		—
Consumer Loans		—		—		—

Total with an allowance recorded	$	4,221,075	$	4,216,258	$	1,418,334

Total loans evaluated for impairment	$	44,331,820	$	34,578,463	$	1,418,334

(1)	There are $13.9 million of loans individually identified for impairment accruing interest.

Part I — FINANCIAL INFORMATION

The following table presents loans individually evaluated for impairment by class of loan as of March 31, 2012 and the average recorded investment and interest income recognized by class for the nine months ended March 31, 2012:


	March 31, 2012						Three months ended March 31, 2012						Nine months ended March 31, 2012
	Unpaid				Allowance for		Average		Interest		Cash Basis		Average		Interest		Cash Basis
	Principal		Recorded		Loan Losses		Recorded		Income		Interest		Recorded		Income		Interest
	Balance ⁽¹⁾		Investment		Allocated		Investment		Recognized		Recognized		Investment		Recognized		Recognized
With no related allowance recorded
One-to-Four Family Loans:
1-4 Family Owner Occupied	$	6,679,205	$	5,867,587		0	$	4,994,570	$	—	$	—	$	5,800,153	$	80,206	$	80,206
1-4 Family Non-Owner Occupied		4,860,622		2,745,187		0		4,358,867		2,129		2,129		3,178,448		32,083		32,083
1-4 Family Second Mortgage		1,291,641		1,241,837		0		1,375,641		7,626		7,626		1,327,467		14,328		14,328
Home Equity Lines of Credit		1,822,833		1,820,596		0		1,375,225		—		—		1,121,372		—		—
Home Equity Investment Lines of Credit		157,121		156,929		0		176,128		—		—		198,887		—		—
One-to-Four Family Construction Loans:												—
1-4 Family Construction		282,542		210,293		0		105,146				—		52,573		2,197		2,197
1-4 Family Construction Models/Speculative		926,542		439,050		0		684,261		—		—		430,507		—		—
Multi-Family Loans:												—
Multi-Family		1,006,573		636,509		0		637,704		21,239		21,239		931,248		21,239		21,239
Commercial Real Estate Loans:												—
Commercial		7,933,276		7,127,059		0		7,739,436		105,706		105,706		7,291,011		132,425		132,425
Commercial Second Mortgage		137,105		65,746		0		99,530		—		—		335,025		1,660		1,660
Commercial Lines of Credit		1,778,456		1,776,273		0		3,210,192		24,457		24,457		2,984,380		24,457		24,457
Commercial Construction		828,491		643,791		0		643,689		—		—		506,536		—		—
Commercial and Industrial Loans		1,319,446		962,480		0		3,174,153		249		249		2,615,647		249		249
Land Loans:												—
Lot Loans		5,068,194		3,590,810		0		3,400,448		2,230		2,230		2,276,751		3,658		3,658
Acquisition and Development Loans		5,382,261		2,624,696		0		2,774,223		17,455		17,455		1,524,327		25,825		25,825
Consumer Loans		—		—		0		—		—		—		—		—		—

Total with no related allowance recorded	$	39,474,308	$	29,908,843		0	$	34,749,213	$	181,091	$	181,091	$	30,574,332	$	338,327	$	338,327

With an allowance recorded
One-to-Four Family Loans:
1-4 Family Owner Occupied	$	247,293	$	246,990	$	14,685	$	123,495	$	3,297	$	3,297	$	640,788	$	4,016	$	4,016
1-4 Family Non-Owner Occupied		118,243		118,098		8,286		118,518		4,082		4,082		2,433,254		8,933		8,933
1-4 Family Second Mortgage		—		—		—		—		—		—		180,733		—		—
Home Equity Lines of Credit		1,117,396		1,116,025		469,147		1,648,394		—		—		1,973,233		—		—
Home Equity Investment Lines of Credit		537,903		537,242		414,197		564,533		—		—		454,845		—		—
One-to-Four Family Construction Loans:
1-4 Family Construction								262,859		21,029		21,029		131,429		21,029		21,029
1-4 Family Construction Models/Speculative		526,363		525,718		101,716		262,794		—		—		1,550,474		—		—
Multi-Family Loans:
Multi-Family		—		—		—		—		—		—		184,106		—		—
Multi-Family Second Mortgage		—		—		—		—		—		—		—		—		—
Commercial Real Estate Loans:
Commercial		4,112,297		4,107,250		170,784		2,354,692		95,788		95,788		5,607,978		140,285		140,285
Commercial Second Mortgage		—		—		—		—		—		—		34,220		—		—
Commercial Lines of Credit		—		—		—		97,709		—		—		48,854		—		—
Commercial Construction		—		—		—		—		18,550		18,550		1,573,306		—		—
Commercial and Industrial Loans		345,009		344,586		306,780		1,022,144		—		—		1,739,194		18,550		18,550
Land Loans:												—
Lot Loans		136,332		136,165		252,000		258,955		—		—		1,671,631		—		—
Acquisition and Development Loans		—		—		—		—		—		—		4,913,195		—		—

Total with an allowance recorded	$	7,140,836	$	7,132,074	$	1,737,595	$	6,714,093	$	142,746	$	142,746	$	23,137,240	$	192,813	$	192,813

Total loans evaluated for impairment	$	46,615,144	$	37,040,917	$	1,737,595	$	41,463,306	$	323,837	$	323,837	$	53,711,572	$	531,140	$	531,140

(1)	There are $10.8 million of loans individually identified for impairment accruing interest.

Part I — FINANCIAL INFORMATION

Past Due and Non-Accrual Loans

The following table presents the recorded investment in non-accrual loans and loans past due over 90 days still on accrual by class of loan as of March 31, 2013 and June 30, 2012. Non-accrual loans and loans past due over 90 days still on accrual include both smaller balance homogeneous loans that are collectively evaluated for impairment and individually classified impaired loans.


	March 31, 2013				June 30, 2012
			Loans Past Due				Loans Past Due
			Over 90 Days				Over 90 Days
	Nonaccrual ⁽¹⁾		Still Accruing ⁽²⁾		Nonaccrual ⁽¹⁾		Still Accruing ⁽²⁾
One-to-Four Family Loans:
1-4 Family Owner Occupied	$	2,880,407	$	—	$	2,871,746	$	—
1-4 Family Non-Owner Occupied		2,163,195		—		2,461,281		—
1-4 Family Second Mortgage		440,707		—		566,444		—
Home Equity Lines of Credit		2,157,753		—		2,727,447		—
Home Equity Investment Lines of Credit		332,003		—		564,235		—
One-to-Four Family Construction Loans:
1-4 Family Construction		—		—		—		—
1-4 Family Construction Models/Speculative		115,949		—		355,355		—
Multi-Family Loans:
Multi-Family		490,921		—		324,602		—
Multi-Family Second Mortgage		—		—		—		—
Multi-Family Construction		—		—		—		—
Commercial Real Estate Loans:
Commercial		2,755,014		—		3,310,170		—
Commercial Second Mortgage		—		—		—		—
Commercial Lines of Credit		1,481,974		—		616,537		—
Commercial Construction		644,102		—		644,072		—
Commercial and Industrial Loans		170,846		—		437,729		—
Land Loans:
Lot Loans		2,422,823		—		3,815,778		—
Acquisition and Development Loans		969,470		—		1,380,199		—
Consumer Loans		—		—		—		—

Total	$	17,025,164	$	—	$	20,075,595	$	—

(1)

Non-accrual status denotes loans which, in the opinion of management, the collection of additional interest is unlikely, or loans that meet the non-accrual criteria established with respect to regulatory authorities. Payments received on a non-accrual loan are either applied to the outstanding principal balance or recorded as interest income, depending on an assessment of the collectability of the principal balance of the loan.

(2)	At March 31, 2013 and June 30, 2012, the Company had balances of approximately $3.7 million and $6.3 million, respectively, in loans that have matured and continue to make current payments. These loans are not considered past due as a result of their payment status being current.

Part I — FINANCIAL INFORMATION

The following table presents the aging of the recorded investment in past due loans as of March 31, 2013 by class of loan. Performing loans are accruing loans less than 90 days past due. Nonperforming loans are all loans not accruing or greater than 90 days past due. At March 31, 2013, the Company had a balance of approximately $3.7 million in loans that were contractually past maturity but were not considered past due as a result of the payment status being current.


	30-59 Days Past Due		60-89 Days Past Due		Greater Than 90 Days Past Due		Total Past Due		Loans Not Past Due		Total
Performing Loans
One-to-Four Family Loans:
1-4 Family Owner Occupied	$	844,486	$	69,771	$	—	$	914,257	$	58,256,334	$	59,170,591
1-4 Family Non-Owner Occupied		66,424		126,816		—		193,240		27,739,933		27,933,173
1-4 Family Second Mortgage		—		16,025		—		16,025		26,951,196		26,967,221
Home Equity Lines of Credit		1,207,701		8,705		—		1,216,406		57,655,412		58,871,818
Home Equity Investment Lines of Credit		—		—		—		—		3,550,631		3,550,631
One-to-Four Family Construction Loans:
1-4 Family Construction		—		—		—		—		3,225,404		3,225,404
1-4 Family Construction Models/Speculative		—		—		—		—		524,287		524,287
Multi-Family Loans:
Multi-Family		—		—		—		—		56,311,730		56,311,730
Multi-Family Second Mortgage		—		—		—		—		63,203		63,203
Multi-Family Construction		—		—		—		—		1,564,633		1,564,633
Commercial Real Estate Loans:
Commercial		—		—		—		—		196,578,109		196,578,109
Commercial Second Mortgage		—		1,418,806		—		1,418,806		4,092,860		5,511,666
Commercial Lines of Credit		—		193,393		—		193,393		24,704,772		24,898,165
Commercial Construction		—		—		—		—		9,363,152		9,363,152
Commercial and Industrial Loans		1,072,931						1,072,931		50,209,586		51,282,517
Land Loans:
Lot Loans		10,679		—		—		10,679		5,083,913		5,094,592
Acquisition and Development Loans		393,136		91,899		—		485,035		13,064,701		13,549,736
Consumer Loans		—		—		—		—		650,896		650,896

Total Performing Loans	$	3,595,357	$	1,925,415	$	—	$	5,520,772	$	539,590,752	$	545,111,524

Nonperforming Loans
One-to-Four Family Loans:
1-4 Family Owner Occupied	$	119,459	$	—	$	2,500,210	$	2,619,669	$	260,739	$	2,880,408
1-4 Family Non-Owner Occupied		137,975		—		1,296,681		1,434,656		728,539		2,163,195
1-4 Family Second Mortgage		—		—		391,749		391,749		48,957		440,706
Home Equity Lines of Credit		76,728		—		1,774,181		1,850,909		306,844		2,157,753
Home Equity Investment Lines of Credit		—		—		190,754		190,754		141,249		332,003
One-to-Four Family Construction Loans:								—				—
1-4 Family Construction		—		—		—		—		—		—
1-4 Family Construction Models/Speculative		—		—		—		—		115,949		115,949
Multi-Family Loans:								—				—
Multi-Family		—		—		—		—		490,921		490,921
Multi-Family Second Mortgage		—		—		—		—		—		—
Multi-Family Construction		—		—		—		—		—		—
Commercial Real Estate Loans:								—				—
Commercial		—		—		2,540,996		2,540,996		214,018		2,755,014
Commercial Second Mortgage		—		—		—		—		—		—
Commercial Lines of Credit		116,390		—		653,543		769,933		712,040		1,481,973
Commercial Construction		—		—		644,102		644,102		—		644,102
Commercial and Industrial Loans		—		170,846		—		170,846		—		170,846
Land Loans:								—				—
Lot Loans		—		—		2,075,437		2,075,437		347,387		2,422,824
Acquisition and Development Loans		—		—		61,423		61,423		908,047		969,470
Consumer Loans		—		—		—		—		—		—

Total Nonperforming Loans	$	450,552	$	170,846	$	12,129,076	$	12,750,474	$	4,274,690	$	17,025,164

Total Loans	$	4,045,909	$	2,096,261	$	12,129,076	$	18,271,246	$	543,865,442	$	562,136,688

Part I — FINANCIAL INFORMATION

The following table presents the aging of the recorded investment in past due loans as of June 30, 2012 by class of loan. Performing loans are accruing loans less than 90 days past due. Nonperforming loans are all loans not accruing. At June 30, 2012, the Company had a balance of approximately $6.3 million in loans that were contractually past maturity but were not considered past due as a result of the payment status being current.


Performing Loans	30-59 Days Past Due		60-89 Days Past Due		Greater Than 90 Days Past Due		Total Past Due		Loans Not Past Due		Total
One-to-Four Family Loans:
1-4 Family Owner Occupied	$	584,430	$	—	$	—	$	584,430	$	55,220,719	$	55,805,149
1-4 Family Non-Owner Occupied		375,660		303,667		—		679,327		31,188,492		31,867,819
1-4 Family Second Mortgage		14,221		—		—		14,221		28,588,155		28,602,376
Home Equity Lines of Credit		114,558		23,230		—		137,788		62,968,449		63,106,237
Home Equity Investment Lines of Credit		200,657		—		—		200,657		4,874,516		5,075,173
One-to-Four Family Construction Loans:
1-4 Family Construction		—		145,771		—		145,771		367,695		513,466
1-4 Family Construction Models/Speculative		—		—		—		—		1,250,946		1,250,946
Multi-Family Loans:												—
Multi-Family		—		—		—		—		53,573,280		53,573,280
Multi-Family Second Mortgage		—		—		—		—		145,476		145,476
Multi-Family Construction		—		—		—		—		5,368,866		5,368,866
Commercial Real Estate Loans:
Commercial		744,536		—		—		744,536		194,006,468		194,751,004
Commercial Second Mortgage		—		—		—		—		5,743,721		5,743,721
Commercial Lines of Credit		—		—		—		—		21,693,593		21,693,593
Commercial Construction		—		—		—		—		7,079,839		7,079,839
Commercial and Industrial Loans		—		—		—		—		34,965,008		34,965,007
Land Loans:
Lot Loans		—		—		—		—		8,261,518		8,261,518
Acquisition and Development Loans		—		—		—		—		17,691,018		17,691,018
Consumer Loans		—		58,394		—		58,394		2,051,903		2,110,297

Total Performing Loans	$	2,034,062	$	531,062	$	—	$	2,565,124	$	535,039,662	$	537,604,785

Nonperforming Loans
One-to-Four Family Loans:
1-4 Family Owner Occupied	$	105,333	$	—	$	2,124,062	$	2,229,395	$	642,351	$	2,871,746
1-4 Family Non-Owner Occupied		—		—		2,405,774		2,405,774		55,507		2,461,281
1-4 Family Second Mortgage		—		—		499,154		499,154		67,290		566,444
Home Equity Lines of Credit		14,607		—		2,371,962		2,386,569		340,878		2,727,447
Home Equity Investment Lines of Credit		—		134,195		430,041		564,236		—		564,236
One-to-Four Family Construction Loans:
1-4 Family Construction		—		—		—		—		—		—
1-4 Family Construction Models/Speculative		—		—		235,945		235,945		119,410		355,355
Multi-Family Loans:
Multi-Family		—		—		324,602		324,602		—		324,602
Multi-Family Second Mortgage		—		—		—		—		—		—
Multi-Family Construction		—		—		—		—		—		—
Commercial Real Estate Loans:
Commercial		—		—		3,166,992		3,166,992		143,178		3,310,170
Commercial Second Mortgage		—		—		—		—		—		—
Commercial Lines of Credit		—		122,129		494,407		616,536		—		616,536
Commercial Construction		—		—		644,072		644,072		—		644,072
Commercial and Industrial Loans		—		—		237,957		237,957		199,772		437,729
Land Loans:
Lot Loans		—		—		3,144,721		3,144,721		671,057		3,815,778
Acquisition and Development Loans		—		—		1,380,199		1,380,199		—		1,380,199
Consumer Loans		—		—				—		—		—

Total Nonperforming Loans	$	119,940	$	256,324	$	17,459,888	$	17,836,152	$	2,239,443	$	20,075,595

Total Loans	$	2,154,002	$	787,386	$	17,459,888	$	20,401,276	$	537,279,105	$	557,680,380

Part I — FINANCIAL INFORMATION

Troubled Debt Restructurings:

Included in loans individually impaired are loans with recorded investments of $12,381,074 and $15,590,705 for which the Company has allocated $138,706 and $153,391 of specific reserves to customers whose terms have been modified in troubled debt restructurings as of March 31, 2013 and June 30, 2012, respectively. Included in troubled debt restructurings are $1,247,035 and $1,805,855 of restructured loans on non-accrual at March 31, 2013 and June 30, 2012, respectively. Of the restructured loans (performing and non-accrual), there were no additional loans not performing in accordance with their modified terms during the quarter ended March 31, 2013 and two loans totaling $116,065 were not performing in accordance with their modified terms as of June 30, 2012. There were no commitments to lend additional amounts at March 31, 2013 and June 30, 2012.

The following table presents the aggregate balance of loans by loan class whose terms have been modified in troubled debt restructurings as of March 31, 2013 and June 30, 2012:


	Number of Loans		Outstanding Recorded Investment 3/31/2013		Number of Loans		Outstanding Recorded Investment 6/30/2012
Troubled Debt Restructurings:
One-to-Four Family Loans:
1-4 Family Owner Occupied		18	$	3,288,160		19	$	3,775,715
1-4 Family Non-Owner Occupied		1		48,147		2		53,993
1-4 Family Second Mortgage		4		413,935		5		912,147
Home Equity Lines of Credit		1		63,781		1		63,782
Home Equity Investment Lines of Credit		—		—		—		—
One-to-Four Family Construction Loans:
1-4 Family Construction		—		—		—		—
1-4 Family Construction Models/Speculative		—		—		—		—
Multi-Family Loans:
Multi-Family		1		287,221		1		297,979
Multi-Family Second Mortgage		—		—		—		—
Multi-Family Construction		—		—		—		—
Commercial Real Estate Loans:
Commercial		10		6,278,069		12		8,264,020
Commercial Second Mortgage		—		—		—		—
Commercial Lines of Credit		—		—		—		—
Commercial Construction		—		—		—		—
Commercial and Industrial Loans		1		1,605		2		40,696
Land Loans:
Lot Loans		—		—		—		—
Acquisition and Development Loans		2		2,000,156		2		2,182,373
Consumer Loans		—		—		—		—

Total		38	$	12,381,074		44	$	15,590,705

The summary of activity for troubled debt restructured loans for the three and nine months ended March 31, 2013 were as follows:


	Three months ended March 31, 2013			Nine months ended March 31, 2013
Troubled Debt Restructurings:
Beginning Balance	$	12,432,285		$	15,590,705
Additions		—			2,100,541
Charge-offs		—			(149,853	)
Payoffs or paydowns		(51,211	)		(5,160,319	)

Ending Balance	$	12,381,074		$	12,381,074

Part I — FINANCIAL INFORMATION

The summary of activity for troubled debt restructured loans for the three and nine months ended March 31, 2012 was as follows:


	Three months ended			Nine months ended
	March 31, 2012			March 31, 2012
Troubled Debt Restructurings:
Beginning Balance	$	17,166,030		$	15,883,869
Additions		—			2,763,159
Charge-offs		(182,328	)		(1,111,816	)
Payoffs or paydowns		(890,581	)		(1,442,091	)

Ending Balance	$	16,093,121		$	16,093,121

During the periods ended March 31, 2013 and June 30, 2012, the terms of certain loans to borrowers experiencing financial difficulty were modified as troubled debt restructurings. The modification of the terms of such loans included one or a combination of the following: a reduction of the stated interest rate of the loan; an extension of the maturity date at a stated rate of interest lower than the current market rate for new debt with similar risk; or a permanent reduction of the recorded investment in the loan. In order to determine whether a borrower is experiencing financial difficulty, an evaluation is performed on the probability that the borrower will be in payment default on any of its debt in the foreseeable future without the modification. This evaluation is performed under the Company’s internal underwriting policy.

No loans were modified as troubled debt restructurings during the three months ended March 31, 2013. Thus there was no additional increase in the allowance for loan losses during the period due to troubled debt restructurings. Loans modified as troubled debt restructurings during the nine months ended March 31, 2013, were limited to loans already classified as troubled debt restructurings and involved an extension of the maturity dates and were for periods ranging from 12 month to 24 months. The following table presents loans by class modified as troubled debt restructurings that occurred during the nine-month period ended March 31, 2013:


	Nine months ended March 31, 2013
			Pre-Modification		Post-Modification
	Number		Outstanding Recorded		Outstanding Recorded
	of Loans		Investment		Investment
Troubled Debt Restructurings:
1-4 Family Owner Occupied		1	$	295,692	$	161,655
Commercial and Industrial		1	$	44,149	$	38,229

Total		2	$	339,841	$	199,884

The following table presents loans by class modified as troubled debt restructurings that occurred during the three and nine month period ended March 31, 2012:

Part I — FINANCIAL INFORMATION


	Three months ended March 31, 2012
			Pre-Modification		Post-Modification
	Number		Outstanding Recorded		Outstanding Recorded
	of Loans		Investment		Investment
Troubled Debt Restructurings:
1-4 Family Owner Occupied		1	$	234,441	$	234,441

Total		1	$	234,441	$	234,441


	Nine months ended March 31, 2012
			Pre-Modification		Post-Modification
	Number		Outstanding Recorded		Outstanding Recorded
	of Loans		Investment		Investment
Troubled Debt Restructurings:
1-4 Family Owner Occupied		1	$	234,441	$	234,441
1-4 Family Non-Owner Occupied		1		106,976		106,976
Commercial Real Estate		3		2,437,542		1,544,149
Commercial Second Mortgage		1		295,362		295,362
Acquisition and Development		1		816,672		816,672

Total		7	$	3,890,993	$	2,997,600

The troubled debt restructurings increased the allowance for loan losses by $39,981 and $76,376 for the three months and nine months ended March 31, 2012, respectively and resulted in $182,328 and $1.1 million of charge offs during the three months and nine months ended March 31, 2012, respectively.

During the three months ended March 31, 2013, there were no loans modified as a troubled debt restructure that had a payment default within twelve months following the modification.

During the nine months ended March 31, 2013, three loans, modified as a troubled debt restructure, had a payment default within twelve months following the modification. The following table presents loans by class modified as troubled debt restructurings for which there was a payment default within twelve months following the modification during the nine months ended March 31, 2013:


	Nine months ended March 31, 2013
	Number		Outstanding Recorded
	of Loans		Investment
Troubled Debt Restructurings:
1-4 Family Owner Occupied		2		—
Commercial and Industrial		1		—

Total		3		—

Charge offs resulted in no recorded investment at period on these loans. The recorded investment on the loans above prior to period end was $311,828.

Part I — FINANCIAL INFORMATION

During the three months ended March 31, 2012, two loans, modified as troubled debt restructures, had a payment default within twelve months following the modification. The following table presents loans by class modified as troubled debt restructurings for which there was a payment default within twelve months following the modification during the three months ended March 31, 2012:


	Number		Outstanding Recorded
	of Loans		Investment
Troubled Debt Restructurings:
Commercial and Industrial		2		116,952

Total		2	$	116,952

During the nine months ended March 31, 2012, nineteen loans, modified as a troubled debt restructures, had payment defaults within twelve months following the modification. The following table presents loans by class modified as troubled debt restructurings for which there was a payment default within twelve months following the modification during the nine months ended March 31, 2012:


	Number		Outstanding Recorded
	of Loans		Investment
Troubled Debt Restructurings:
1-4 Family Owner Occupied		16		—
Home Equity Lines of Credit		1		—
Commercial and Industrial		2		116,952

Total		19		116,952

Charge offs resulted in no recorded investment on seventeen of the loans for the nine months ended March 31, 2012. The recorded investment on the loans above prior to period end was $1,527,920.

For the purpose of this disclosure, a loan is considered to be in payment default once it is 90 days contractually past due under the modified terms.

The troubled debt restructurings that subsequently defaulted described above did not result in increasing the allowance or result in charge offs during the nine months ended March 31, 2012.

Credit Quality Indicators

The Company categorizes a loan into risk strata based on relevant borrower information about its ability to service debt. This information includes a review of current financial information, historic payment experience, credit documentation, relevant public information and other factors, as determined by credit underwriting guidelines. Through its analysis of individual borrowers, the Company classifies each loan as to its credit risk. All loans considered non-homogeneous, specifically those that are deemed commercial and industrial or commercial real estate loans, are subject to review by the Company, regardless of loan size. In practice, these loans are reviewed continually and changes to the risk rating, if necessary, occur on a quarterly basis. Loans that are considered homogeneous, or those which fall into the categories of one-to-four family loans or into consumer loans, are not individually reviewed or rated annually. The payment performance of the homogeneous loans serves as the clear credit indicator of classification into the categories of pass-rated loans or into substandard, non-accrual loans. Homogeneous loans that are less than 90 days past due are generally reported as pass-rated loans, unless the homogeneous loan is related to a rated commercial and industrial or commercial real estate loan. Homogeneous loans which are greater than 90 days past due are placed on non-accrual and rated substandard. Payment performance indicators are based on performance through March 31, 2013. The Company uses the following definitions for adverse risk ratings:

Part I — FINANCIAL INFORMATION

Special Mention. Loans classified as special mention have a potential weakness that requires close attention. If left unattended, the potential weaknesses may result in further deterioration in the repayment prospects of the loan or the institution’s credit position at a future date.

Substandard. Loans classified as substandard are protected inadequately by the current financial means of the borrower or through the liquidation of pledged collateral. Loans classified as substandard have a well-defined weakness and without substantial intervention, there is a distinct possibility that the Company may incur a loss. As a matter of practice, if the Company feels that a loss is imminent, it designates nearly all of these loans to charge off. Accordingly, the Company uses the loan classification of doubtful (as defined hereafter), sparingly.

Doubtful. Loans classified as doubtful have all of the inherent weaknesses of those loans classified as substandard with the added structural weakness that the collection in full is highly unlikely. As such, this category is used sparingly by the Company.

As of March 31, 2013, and based on the most recent analysis performed by the Company, the risk category of loans by class of loan was as follows:


	Pass ⁽¹⁾		Special Mention		Substandard		Doubtful		Total
One-to-Four Family Loans:
1-4 Family Owner Occupied	$	58,898,747	$	—	$	3,152,251	$	—	$	62,050,998
1-4 Family Non-Owner Occupied		26,864,520		620,320		2,611,528		—		30,096,368
1-4 Family Second Mortgage		26,764,254		202,484		441,190		—		27,407,928
Home Equity Lines of Credit		58,819,867		49,585		2,160,120		—		61,029,572
Home Equity Investment Lines of Credit		3,349,423		200,845		332,366		—		3,882,634
One-to-Four Family Construction Loans:
1-4 Family Construction		2,704,041		—		521,363		—		3,225,404
1-4 Family Construction Models/Speculative		524,160		—		116,076		—		640,236
Multi-Family Loans:
Multi-Family		57,729,997		—		491,459		—		58,221,456
Multi-Family Second Mortgage		63,203		—		—		—		63,203
Multi-Family Construction		1,564,633		—		—		—		1,564,633
Commercial Real Estate Loans:
Commercial		187,284,828		2,702,335		9,345,961		—		199,333,124
Commercial Second Mortgage		4,577,895		—		—		—		4,577,895
Commercial Lines of Credit		22,604,668		—		3,775,470		—		26,380,138
Commercial Construction		9,362,446		—		644,808		—		10,007,254
Commercial and Industrial Loans		50,369,763		82,075		1,001,525		—		51,453,363
Land Loans:
Lot Loans		4,561,907		37,415		2,918,094		—		7,517,416
Acquisition and Development Loans		11,872,230		—		2,161,940		—		14,034,170
Consumer Loans		650,896		—		—		—		650,896

Total	$	528,567,478	$	3,895,059	$	29,674,151	$	—	$	562,136,688

(1)	There are $1.1 million in non-homogeneous loans which are subject to individual review for risk rating included in the pass risk category based on payment status as they have not yet been individually reviewed.

Part I — FINANCIAL INFORMATION

As of June 30, 2012, and based on the most recent analysis performed by the Company, the risk category of loans by class of loan was as follows:


	Pass ⁽¹⁾		Special Mention		Substandard		Doubtful		Total
One-to-Four Family Loans:
1-4 Family Owner Occupied	$	55,526,297	$	—	$	3,150,598	$	—	$	58,676,895
1-4 Family Non-Owner Occupied		30,621,009		1,117,122		2,590,969		—		34,329,100
1-4 Family Second Mortgage		28,147,735		206,701		814,384		—		29,168,820
Home Equity Lines of Credit		63,030,206		49,585		2,753,893		—		65,833,684
Home Equity Investment Lines of Credit		4,828,651		200,886		609,872		—		5,639,409
One-to-Four Family Construction Loans:
1-4 Family Construction		513,466		—		—		—		513,466
1-4 Family Construction Models/Speculative		724,177		—		882,124		—		1,606,301
Multi-Family Loans:
Multi-Family		52,448,152		1,124,756		324,974		—		53,897,882
Multi-Family Second Mortgage		145,476		—		—		—		145,476
Multi-Family Construction		5,368,866		—		—		—		5,368,866
Commercial Real Estate Loans:
Commercial		183,422,738		3,100,295		11,538,141		—		198,061,174
Commercial Second Mortgage		5,743,721		—		—		—		5,743,721
Commercial Lines of Credit		19,401,017		—		2,909,112		—		22,310,129
Commercial Construction		7,079,104		—		644,807		—		7,723,911
Commercial and Industrial Loans		34,042,381		91,634		1,268,721		—		35,402,736
Land Loans:
Lot Loans		8,217,784		39,374		3,820,138		—		12,077,296
Acquisition and Development Loans		16,486,141		—		2,585,076		—		19,071,217
Consumer Loans		2,110,297		—		—		—		2,110,297

Total	$	517,857,218	$	5,930,353	$	33,892,809	$	—	$	557,680,380

(1)	There are $2.6 million in non-homogeneous loans which are subject to individual review for risk rating included in the pass risk category based on payment status as they have not yet been individually reviewed.

NOTE 6 — MORTGAGE BANKING ACTIVITIES

Loans held for sale at March 31, 2013 and June 30, 2012 were $9,348,387 and $25,062,786, respectively.

The Company utilizes the fair value option for accounting for its loans held for sale. The fair value of loans held for sale exceeded the unpaid principal balance of these loans by $278,093 and $738,742 as of March 31, 2013 and June 30, 2012, respectively. The gain on loans held for sale as of March 31, 2013 was reported as mortgage banking activities on the consolidated statement of operations. Interest on loans held for sale was reported in interest income.

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 Company 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.” At March 31, 2013 and June 30, 2012, the mortgage loan servicing portfolio was approximately $1.1 billion and $1.0 billion respectively.

Part I — FINANCIAL INFORMATION

Originated mortgage servicing rights capitalized and amortized during the three- and nine-month periods ended March 31, 2013 and 2012 were as follows:


	Three months ended March 31,						Nine months ended March 31,
	2013			2012			2013			2012
Servicing rights:
Beginning of period	$	6,116,239		$	6,696,594		$	6,867,334		$	7,519,287
Additions		1,379,563			1,132,160			3,372,629			2,738,575
Amortized to expense		(941,500	)		(1,031,394	)		(2,919,803	)		(2,777,426	)
Change in valuation allowance		230,311			102,773			(535,547	)		(580,303	)

End of period	$	6,784,613		$	6,900,133		$	6,784,613		$	6,900,133

Activity in the valuation allowance for mortgage servicing rights over the three and nine month periods ended March 31, 2013, as compared with the same periods during 2012, were as follows:


	Three months ended March 31,						Nine months ended March 31,
	2013			2012			2013			2012
Balance, beginning of period	$	(1,582,339	)	$	(987,077	)	$	(816,481	)	$	(304,001	)
Impairment charges		—			—			(765,858	)		(698,468	)
Impairment recoveries		230,311			102,773			230,311			118,165

Balance, end of period	$	(1,352,028	)	$	(884,304	)	$	(1,352,028	)	$	(884,304	)

Mortgage banking activities net for the three and nine months ended March 31, 2013 and 2012, consisted of the following:


	Three months ended March 31,						Nine months ended March 31,
	2013			2012			2013			2012
Mortgage loan servicing fees	$	789,525		$	411,947		$	1,969,731		$	1,701,629
Amortization of mortgage loan servicing rights		(941,500	)		(1,031,394	)		(2,919,803	)		(2,777,426	)
Recovery (Impairment) of mortgage loan servicing rights		230,311			102,773			(535,547	)		(580,303	)

Mortgage loan servicing (loss), net		78,336			(516,674	)		(1,485,619	)		(1,656,100	)
Changes in fair value of loans held for sale		(848,890	)		177,967			(460,649	)		215,785
Changes in fair value of mortgage banking derivatives		(865,598	)		342,161			(108,122	)		877,137
Realized gains on sale of loans		4,100,853			3,329,093			11,409,934			6,712,912

Mortgage banking activities, net	$	2,464,701		$	3,332,547		$	9,355,544		$	6,149,734

The above amounts do not include non-interest expense related to mortgage banking activities.

At March 31, 2013 and June 30, 2012, the Company had interest rate-lock commitments on $60,646,481 and $65,996,365, respectively, 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 consolidated financial statements. The fair value of these commitments as of March 31, 2013 and June 30, 2012 was estimated to be $1,625,572 and $1,773,453, respectively, as a reduction of accrued expenses

Part I — FINANCIAL INFORMATION

and other liabilities in the consolidated statements of financial position. In order to mitigate the interest rate risk represented by these interest rate-lock commitments, the Company entered into contracts to sell mortgage loans of $48,000,000 and $69,150,472 as of March 31, 2013 and June 30, 2012, respectively. These contracts are also considered to be free-standing derivatives and the change in fair value is also recorded in the consolidated financial statements. The fair value of these contracts at March 31, 2013 and June 30, 2012 was estimated to be $(77,959) and $(117,718) respectively. These amounts were netted against the fair value of interest rate-lock commitments recorded in accrued expenses and other liabilities. Changes in fair value for both types of derivatives are reported in mortgage banking activities in the consolidated statements of operations.

NOTE 7 — STOCK BASED COMPENSATION

The 2010 Equity Incentive Plan (the “2010 Plan”) replaced the 2008 Equity Incentive Plan and all remaining available shares from the 2008 Equity Incentive Plan were available for distribution under the 2010 Plan. Generally, the Company can issue incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock and other stock-based compensation under the 2010 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 common shares. Incentive stock options awarded to individuals owning more than 10% of the Company’s outstanding common shares may only be granted if the exercise price of such incentive stock options is at least 110% of the fair market value on the date of grant and the term of such options must expire not later than five years from the date of grant.

Previously, nonqualified stock options have been granted to directors, which 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.

For the nine months ended March 31, 2013, and 2012, compensation expense of $143,337 and $182,866, respectively, was recognized in the income statement related to the vesting of option awards.

As of March 31, 2013, there was $419,908 of compensation expense related to unvested awards not yet recognized in the consolidated financial statements. The weighted-average period over which this expense is to be recognized is 1.6 years.

The aggregate intrinsic value of all options outstanding at March 31, 2013 was $1,292,181. The aggregate intrinsic value of all options that were exercisable at March 31, 2013 was $476,980.

Options outstanding at March 31, 2013 were as follows:


	Outstanding				Exercisable
Range of Exercise Price	Number		Weighted- Average Remaining Life		Number		Weighted- Average Exercise Price
$1.39 to $4.42		694,800		8.42		286,653	$	2.20
$8.32 to $12.4		141,221		2.36		141,221	$	8.45

Total		836,021		7.39		427,874	$	4.53

Part I — FINANCIAL INFORMATION

A summary of stock-based compensation activity for the current fiscal year is as follows:


	Three months ended March 31, 2013 Total options outstanding					Nine months ended March 31, 2013 Total options outstanding
	Shares			Weighted- Average Exercise Price		Shares			Weighted- Average Exercise Price
Options outstanding, beginning of period		901,021		$	3.54		740,256		$	4.15
Forfeited		—			0.00		(42,800	)		2.01
Expired		—			0.00		(40,435	)		8.63
Exercised		(65,000	)		1.80		(105,000	)		1.84
Granted		—			0.00		284,000			2.26

Options outstanding, end of period		836,021		$	3.67		836,021		$	3.67

Options exercisable, end of period		427,874		$	4.53		427,874		$	4.53

The weighted-average remaining contractual life of options outstanding as of March 31, 2013 was 7.4 years. The weighted-average remaining contractual life of vested options outstanding as of March 31, 2013 was 5 years.

The fair value for stock options granted during the nine months ended March 31, 2013, were determined at the date of grant using a Black-Scholes options-pricing model and the following assumptions:


	March 31, 2013
Expected weighted average risk-free interest rate		0.83	%
Expected weighted average life (in years)		6.00
Expected volatility		56.75	%
Expected dividend yield		0.00	%

The weighted-average fair value of these grants was $1.17 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 shares. The expected dividend yield is based on historical information.

There were 420,790 restricted shares issued to directors and executive officers with a weighted average fair value of $1.84 per share at March 31, 2013. During the nine months ended March 31, 2013, the Company issued 77,937 restricted stock awards to directors of the Company in connection with the reinstitution of a directors’ compensation plan. This grant received prior approval from the OCC. The total fair value of restricted shares issued at March 31, 2013 was $1.84 per share. As of March 31, 2013, there was $182,201 of compensation expense related to unvested awards not yet recognized in the consolidated financial statements. The weighted-average period of time over which this expense is to be recognized was 0.92 years at March 31, 2013.

Part I — FINANCIAL INFORMATION

A summary of changes in the Company’s restricted shares for the nine months ended March 31, 2013 is as follows:


Nonvested Shares	Shares			Weighted- Average Grant-Date Fair Value
Nonvested at July 1, 2012		162,333		$	303,537
Granted		77,937			157,433
Vested		(54,666	)		(102,173	)
Forfeited		(18,402	)		(36,022	)

Nonvested at March 31, 2013		167,202		$	322,775

There were 1,963,210 shares available for future issuance under the 2010 Plan at March 31, 2013.

NOTE 8 — EARNINGS PER SHARE

The following tables disclose the income (loss) per share for the three and nine months ended March 31, 2013 and March 31, 2012, respectively:


	Three months ended March 31,
	2013						2012 (revised)
	Income (Loss)		Shares		Per Share Amount		Income (Loss)		Shares		Per Share Amount
Basic EPS
Net income (loss)	$	1,762,527		25,927,214	$	0.07	$	225,328		25,669,718	$	0.01
Effect of dilutive securities—stock options and warrants	$	0		718,297	$	0.00	$	0		0	$	0.00
Diluted EPS
Net income (loss)	$	1,762,527		26,645,511	$	0.07	$	225,328		25,669,718	$	0.01


	Nine months ended March 31,
	2013						2012 (revised)
	Income (Loss)		Shares		Per Share Amount		Income (Loss)			Shares		Per Share Amount
Basic EPS
Net income (loss)	$	5,825,891		25,915,171	$	0.22	$	(2,540,634	)		25,669,718	$	(0.10	)
Effect of dilutive securities—stock options and warrants	$	0		447,524	$	0.00	$	0			0	$	0.00
Diluted EPS
Net income (loss)	$	5,825,891		26,362,695	$	0.22	$	(2,540,634	)		25,669,718	$	(0.10	)

There were 192,521 and 595,032 options not considered in the diluted earnings per share calculation for the nine months ended March 31, 2013 and 2012, respectively, because they were not dilutive as the exercise price is higher than the average stock price for the periods. There were 192,521 options not considered in the diluted earnings per share calculation for the three months ended March 31, 2013. There was no dilution attributable to stock options for the nine months ended March 31, 2012, since the Company was in a net loss position for the periods.

Part I — FINANCIAL INFORMATION

Also included for consideration in the diluted earnings per share calculation for the three and nine month period ended March 31, 2013 were warrants to acquire common shares issued as part of two separate exchange offerings. The warrants issued on September 3, 2009 included warrants to purchase 797,347 common shares, which expired on September 3, 2011. The warrants issued on March 16, 2010 included warrants to purchase 1,246,179 common shares, of which 1,083,009 remain unexercised and are exercisable at any time before March 16, 2015 at a price of $1.75 per share. The warrants issued on March 16, 2010 were considered for potential dilution for the three and nine months ended March 31, 2013.

NOTE 9 – FAIR VALUE

Fair value is 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. There are 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 Company 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 . The fair value of securities available for sale is determined by obtaining quoted market prices on nationally recognized securities exchanges, if available (Level 1 inputs). For securities where quoted prices are not available, fair values are calculated based on market prices of similar securities. The fair value of mortgage-backed securities is 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 at fair value . The fair value of loans held for sale, which consists of single-family residential loans, is determined using quoted secondary market prices, adjusted for specific attributes of that loan or other observable data, such as outstanding commitments from third-party investors (Level 2 inputs).

Mortgage banking pipeline derivatives . The fair value of loan commitments is measured using current market rates for the associated mortgage loans (Level 2 inputs). The fair value of mandatory forward sales contracts is measured using secondary market pricing for similar product types (Level 2 inputs).

Part I — FINANCIAL INFORMATION

Impaired loans . The fair value of impaired loans with specific allocations of the allowance for loan losses is generally based on recent real estate appraisals. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available as well as type and status of the property. Such adjustments are usually significant and typically result in a Level 3 classification of the inputs for determining fair value.

Other real estate owned. Nonrecurring adjustments to certain commercial and residential real estate properties classified as other real estate owned are measured at fair value, less costs to sell. Fair values are based on recent real estate appraisals. These appraisals may use a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data approach. Such adjustments are usually significant and typically result in a Level 3 classification of the inputs for determining fair value.

Appraisals for both collateral dependent impaired loans and other real estate owned are performed by certified general appraisers for commercial properties or certified residential appraisers for residential properties, whose qualifications and licenses have been reviewed and verified by the Company. When the appraisals are received, Credit Administration reviews the assumptions and approaches utilized in the appraisal as well as the overall resulting fair value in comparison with independent data sources such as recent market data or industry-wide statistics. The Company currently utilizes a 9% discount for selling costs and it is applied to all properties, regardless of size. This discount is supported by the Company’s most recent analysis. Also, an additional 10% discount is applied to properties with appraisals performed greater than 12 months ago.

Loan Servicing Rights. On a quarterly basis, loan servicing rights are evaluated for impairment based upon the fair value of the rights as compared to carrying amount. If the carrying amount on an individual tranche exceeds fair value, impairment is recorded on that tranche so that the servicing asset is carried at fair value. Fair value is determined at a tranche level based on a valuation model that calculates the present value of estimated future net servicing income. The valuation model utilizes assumptions that market participants would use in estimating future net servicing income and that can be validated against available market data (Level 2).

Part I — FINANCIAL INFORMATION

Assets and liabilities measured at fair value on a recurring basis at March 31, 2013 and June 30, 2012, respectively, are summarized below:


	March 31, 2013			Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
Assets:
Securities available for sale:
FNMA structured note	$	—		$	—	$	—		$	—
Trust preferred securities		20,433,603			—		20,433,603			—
Mortgage-backed GSE securities		20,985,802			—		20,985,802			—
Loans held-for-sale		9,348,347			—		9,348,347			—
Interest rate-lock commitments		1,625,572			—		1,625,572			—
Liabilities:
Mandatory forward sales contracts		(77,959	)		—		(77,959	)		—


	June 30, 2012			Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
Assets:
Securities available for sale:
FNMA structured note	$	2,009,320		$	—	$	2,009,320		$	—
Trust preferred securities		21,261,762			—		21,261,762			—
Mortgage-backed GSE securities		15,386,963			—		15,386,963			—
Loans held-for-sale		25,062,786			—		25,062,786			—
Interest rate-lock commitments		1,773,453			—		1,773,453			—
Liabilities:
Mandatory forward sales contracts		(117,718	)		—		(117,718	)		—

There were no transfers between Level 1 and Level 2 in the period ended March 31, 2013 or June 30, 2012. The Company’s policy is to transfer assets or liabilities from one level to another when the methodology to obtain the fair value changes such that there are more or fewer unobservable inputs.

Part I — FINANCIAL INFORMATION

Assets measured at fair value on a nonrecurring basis at March 31, 2013 and June 30, 2012, respectively are summarized below:


	March 31, 2013		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Impaired loans
1-4 Family	$	3,801,913	$	—	$	—	$	3,801,913
1-4 Family Construction		521,363		—		—		521,363
Multi-Family		—		—		—		—
Commercial Real Estate		4,384,564		—		—		4,384,564
Commercial Non-Real Estate		585,042		—		—		585,042
Land		3,152,861		—		—		3,152,861
Real estate owned
1-4 Family		2,381,281		—		—		2,381,281
Commercial Real Estate		1,893,521		—		—		1,893,521
Land		2,976,361		—		—		2,976,361
Impaired mortgage servicing rights		6,561,862		—		6,561,862		—


	June 30, 2012		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Impaired loans
1-4 Family	$	4,033,385	$	—	$	—	$	4,033,385
1-4 Family Construction		660,862		—		—		660,862
Multi-Family		324,974		—		—		324,974
Commercial Real Estate		5,688,747		—		—		5,688,747
Commercial Non-Real Estate		238,229		—		—		238,229
Land		4,223,074		—		—		4,223,074
Real estate owned
1-4 Family		2,042,573		—		—		2,042,573
Commercial Real Estate		923,262		—		—		923,262
Land		2,914,174		—		—		2,914,174
Impaired mortgage servicing rights		6,499,157		—		6,499,157		—

Impaired loans that are measured for impairment using the fair value of the collateral for collateral dependent loans had a principal balance of $19.3 million after the application of impaired charge-offs of $6.1 million, with a specific valuation allowance of $0.8 million at March 31, 2013. At June 30, 2012, impaired loans that are measured for impairment using the fair value of the collateral for collateral dependent loans had a principal balance of $26.3 million after the application of impaired charge-offs of $9.7 million, with a specific valuation allowance of $1.4 million. There was no provision for loan losses related to changes in fair value of impaired loans for the three months ended March 31, 2013 compared to the provision of $2.0 million for the three months ended March 31, 2012. The provision for loan losses related to changes in the fair value of impaired loans was $0.6 million and $5.5 million for the nine months ended March 31, 2013 and 2012, respectively.

Part I — FINANCIAL INFORMATION

Tranches of mortgage servicing rights carried at fair value totaled $6.5 million, which is made up of the outstanding balance of $7.9 million, net of a valuation allowance of $1.4 million at March 31, 2013. During the nine months ended March 31, 2013 and 2012, the Company recognized an impairment charge of $0.5 million and $0.6 million, respectively. During the three months ended March 31, 2013 and 2012 the Company recognized recoveries of $0.2 million and $0.1 million respectively. Tranches of mortgage servicing rights carried at fair value totaled $6.5 million, which is made up of the outstanding balance of $7.3 million, net of a valuation allowance of $0.8 million at June 30, 2012. Mortgage servicing rights are valued by an independent third party that is active in purchasing and selling these instruments. The value reflects the characteristics of the underlying loans discounted at a market multiple.

Other real estate owned which is maintained at fair value less costs to sell, had a net carrying amount of $7,251,163 and $7,733,578 at March 31, 2013, and June 30, 2012, respectively. The carrying amount of other 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. For the nine months ended March 31, 2013, the Company recognized a net loss of $182,703 on the disposal of other real estate owned compared to the loss of $453,770 recognized for the nine months ended March 31, 2012. The Company also recorded a provision for other real estate owned losses of $1.0 and $1.3 million for the nine months ended March 31, 2013 and 2012, respectively. For the three months ended March 31, 2013 and 2012 the Company recognized a net loss of $0.1 million and $0.2 million respectively. The Company also recorded a provision for other real estate owned losses of $0.5 million and $0.4 million for the three months ended March 31, 2013 and 2012 respectively.

The direct write-downs recognized for the period are the result of obtaining updated appraisal valuations and reflect declining property values while holding the asset. The Company values all other real estate owned by obtaining updated appraisal valuations every twelve months. There have been no upward adjustments made in determining fair value.

The following table presents quantitative information about Level 3 fair value measurements for financial instruments measured at fair value on a non-recurring basis at March 31, 2013:


	Fair value at March 31, 2013		Valuation Techniques	Unobservable Inputs	Range and Weighted Average
Impaired loans	$	12,445,743	Appraisal value - sales comparison approach	Adjustment by management to reflect current conditions and selling costs	10-15% and 12%
Real estate owned		7,251,163	Appraisal value - sales comparison approach	Adjustment by mangagement to reflect current conditions and selling costs	9-10% and 10%

The Company has elected the fair value option for loans held for sale. These loans are intended for sale and are hedged with derivative instruments, and the Company believes that the fair value is the best indicator of the valuation of these loans. Interest income is recorded based on the contractual terms of the loan and in accordance with the Company’s policy on loans held for investment. None of these loans are 90 days or more past due or on nonaccrual as of March 31, 2013 and June 30, 2012.

Part I — FINANCIAL INFORMATION

As of March 31, 2013 and June 30, 2012, the aggregate fair value, contractual balance (including accrued interest), and gain or loss loans held for sale was as follows:


	March 31, 2013		June 30, 2012
Aggregate fair value	$	9,348,387	$	25,062,786
Contractual balance		9,070,294		24,324,044
Gain (loss)		278,093		738,742

The total amount of gains (losses) from changes in fair value included in earnings for the nine months ended March 31, 2013 and 2012 for loans held for sale were $(460,649) and $215,785 respectively.

The carrying amounts and estimated fair values of financial instruments at March 31, 2013 are as follows:


	Carrying			Fair Value Measurements at March 31, 2013
	Value			Level 1			Level 2			Level 3		Total
	(dollars in thousands)
Assets:
Cash and amounts due from financial institutions	$	19,869		$	19,869		$	—		$	—	$	19,869
Interest-bearing deposits		80,125			80,125			—			—		80,125
Securities available for sale		41,419			—			41,419			—		41,419
Loans receivable, net		547,216			—			—			563,543		563,543
Loans receivable held for sale, net		9,348			—			9,348			—		9,348
Federal Home Loan Bank stock		12,811			N/A			N/A			N/A		N/A
Accrued interest receivable		2,165			—			123			2,042		2,165
Commitments to make loans intended to be sold		1,626			—			1,626			—		1,626
Liabilities:
Demand deposits and savings		(297,912	)		(297,912	)		—			—		(297,912	)
Time deposits		(323,256	)		—			(325,192	)		—		(325,192	)
Notes payable		(966	)		—			(966	)		—		(966	)
Advances from the Federal Home Loan Bank		(35,000	)		—			(36,864	)		—		(36,864	)
Mandatory forward sale contract		(78	)		(78	)		—			—		(78	)
Accrued interest payable		(121	)		(33	)		(88	)				(121	)

Part I — FINANCIAL INFORMATION

The carrying amount and estimated fair values of financial instruments at June 30, 2012 were as follows:


				Fair Value Measurements at June 30, 2012
	Carrying Value			Level 1			Level 2			Level 3		Total
	(dollars in thousands)
Assets:
Cash and amounts due from financial institutions	$	5,841		$	5,841		$	—		$	—	$	5,841
Interest-bearing deposits		114,270			114,270			—			—		114,270
Securities available for sale		38,658			—			38,658			—		38,658
Loans receivable, net		541,628			—			—			569,603		569,603
Loans receivable held for sale, net		25,063			—			25,063			—		25,063
Federal Home Loan Bank stock		12,811			N/A			N/A			N/A		N/A
Accrued interest receivable		2,047			—			174			1,873		2,047
Commitments to make loans intended to be sold		1,773			—			1,773			—		1,773
Liabilities:
Demand deposits and savings		(271,412	)		(271,412	)		—			—		(271,412	)
Time deposits		(384,567	)		—			(385,872	)		—		(385,872	)
Notes payable		(1,046	)		—			(1,046	)		—		(1,046	)
Advances from the Federal Home Loan Bank		(35,000	)		—			(37,222	)		—		(37,222	)
Mandatory forward sale contract		(118	)		—			(118	)		—		(118	)
Accrued interest payable		(120	)		(112	)		(8	)		—		(120	)

The estimated fair value amounts were determined by the Company using available market information and appropriate valuation methodologies. However, considerable judgment is involved in interpreting market data so as to develop the estimates of fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts the Company could realize in a current market exchange and may not necessarily be the exit price. 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 financial institutions, interest-bearing deposits, and federal funds sold. The carrying amounts are a reasonable estimate of fair value because of the short maturity of these instruments and therefore are classified as Level 1.

Loans receivable . For performing variable-rate loans that reprice frequently and with no significant change in credit risk, fair values are based on carrying values resulting in a Level 3 classification. For other 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 resulting in a Level 3 classification.

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

Part I — FINANCIAL INFORMATION

Accrued interest receivable and accrued interest payable . The carrying amount is a reasonable estimate of the fair value. The fair value level classification is consistent with the related final instrument.

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 resulting in a Level 1 classification. 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 resulting in a Level 2 classification.

Note payable. The carrying amount is a reasonable estimate of the fair value resulting in a Level 2 classification.

Federal Home Loan Bank Advance. The fair value of the Company’s FHLB debt is estimated based on the current rates offered to the Company for debt of the same remaining maturities resulting in a Level 2 classification.

NOTE 10 — NOTE PAYABLE

On November 24, 2008, one of the Company’s subsidiaries obtained a $1.4 million dollar loan from another financial institution with a principal balance of $966,112 as of March 31, 2013. The loan was a refinance of a line of credit loan and is collateralized by the Company’s Solon, Ohio headquarters building. The note carries a variable interest rate that adjusts to The Wall Street Journal published prime lending rate plus 50 basis points. The loan required the payment of interest only for nine months and then converted to an amortizing loan for a term of 15 years. At March 31, 2013, the interest rate was 3.75%.

NOTE 11 — REGULATORY MATTERS

The Company and the Bank are subject to various regulatory capital requirements, which are now administered by the Board of Governors of the Federal Reserve System (the “Federal Reserve Board”) and the Office of the Comptroller of the Currency (“OCC”). Failure to meet minimum capital requirements can result in certain mandatory and possibly additional discretionary actions by banking regulators that, if undertaken, could have a direct material effect on the Company’s consolidated financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of the Bank’s assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices. The Bank’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

Prompt corrective action regulations provide five classifications: well capitalized; adequately capitalized; undercapitalized; significantly undercapitalized; and critically undercapitalized, although these terms are not used to represent overall financial condition. If adequately capitalized, regulatory approval is required to accept brokered deposits. If undercapitalized, capital distributions are limited, as is asset growth and expansion, and capital restoration plans are required. The most recent regulatory notifications categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. There are no conditions or events since that notification that management believes have changed the Bank’s category.

Part I — FINANCIAL INFORMATION

Federal regulations require savings institutions to maintain certain minimum levels of regulatory capital. An institution that fails to comply with its regulatory capital requirements must obtain approval of a capital plan and can be subject to a capital directive and certain restrictions on its operations. At March 31, 2013, the adjusted total minimum regulatory capital regulations require institutions to have a minimum tangible capital to adjusted total assets ratio of 1.5%; a minimum leverage ratio of core (Tier 1) capital to adjusted total assets of 4.0%; a minimum ratio of core (Tier 1) capital to risk-weighted assets of 4.0%; and a minimum ratio of total capital to risk-weighted assets of 8.0%. At March 31, 2013 and 2012, respectively, the Bank exceeded all of the aforementioned regulatory capital requirements. For more information, please see Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources.

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 (the “Company Order” and the “Bank Order”) without admitting or denying that grounds existed for the OTS to initiate an administrative proceeding against the Company or the Bank. Effective July 21, 2011, the OCC and the Federal Reserve Board succeeded to all powers, authorities, rights, and duties of the OTS relating to the enforcement of the Bank and Company Orders, respectively, as a result of the regulatory transition under the Dodd-Frank Wall Street Reform and Consumer Protection Act. On August 27, 2012, the Bank was released from the Bank Order. On December 15, 2012, the Company was released from the Company Order.

Regulations limit capital distributions by savings institutions. Generally, capital distributions are limited to undistributed net income for the current and prior two years.

At March 31, 2013, the Bank was in compliance with regulatory capital requirements as set forth below (dollars in thousands):


	Actual					Required For Capital Adequacy Purposes					Capitalized Under Prompt Corrective Action Regulations
	Amount		Ratio			Amount		Ratio			Amount		Ratio
March 31, 2013
Total Capital to risk weighted assets	$	83,616		13.76	%	$	48,598		8.00	%	$	60,748		10.00	%
Tier 1 (Core) Capital to risk weighted assets		75,932		12.50	%		24,299		4.00	%		36,449		6.00	%
Tier 1 (Core) Capital to adjusted total assets		75,932		9.92	%		30,607		4.00	%		38,259		5.00	%
Tangible Capital to adjusted total assets		75,932		9.92	%		11,478		1.50	%		N/A		N/A

Part I — FINANCIAL INFORMATION

At June 30, 2012, the Bank was in compliance with regulatory capital requirements as set forth below (dollars in thousands):


	Actual					Required For Capital Adequacy Purposes					To Be Well Capitalized Under Prompt Corrective Action Regulations					Required Under Regulatory Bank Order
	Amount		Ratio			Amount		Ratio			Amount		Ratio			Amount		Ratio
June 30, 2012
Total Capital to risk weighted assets	$	77,332		13.00	%	$	47,605		8.00	%	$	59,506		10.00	%	$	71,407		12.00	%
Tier 1 (Core) Capital to risk weighted assets		69,787		11.73	%		23,802		4.00	%		35,704		6.00	%		N/A		N/A
Tier 1 (Core) Capital to adjusted total assets		69,787		8.66	%		32,224		4.00	%		40,280		5.00	%		64,448		8.00	%
Tangible Capital to adjusted total assets		69,787		8.66	%		12,084		1.50	%		N/A		N/A			N/A		N/A

NOTE 12 — FEDERAL INCOME TAXES

Management recorded net deferred tax assets at March 31, 2013 of $2.8 million. A valuation allowance is established to reduce the deferred tax asset if it is more likely than not that the related tax benefits will not be realized. A full valuation allowance was established as of June 30, 2011. When determining the amount of deferred tax assets that are more-likely-than-not to be realized, and therefore recorded as a benefit, the Company conducts a regular assessment of all available information. This information includes, but is not limited to, taxable income in prior periods, projected future income, and projected future reversals of deferred tax items. Based on these criteria, the Company determined that it was necessary to carry a valuation allowance against deferred tax assets of $2.8 million at March 31, 2013 to reduce the carrying amount of the Company’s net deferred tax asset to zero. At June 30, 2012, the Company recorded a deferred tax asset of $4.8 million with a valuation allowance of $4.8 million reducing the carrying amount of the Company’s net deferred tax asset to zero.

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 and nine months ended March 31, 2013 for the Company, the Bank, its principal and wholly-owned subsidiary, PVFSC, a wholly-owned real estate subsidiary, Mid Pines Land Company, a wholly-owned real estate subsidiary, and PVF Holdings, Inc., PVF Community Development and PVF Mortgage Corporation, three wholly-owned and currently inactive subsidiaries.

Forward-Looking Statements

When used in this Quarterly Report on 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. These forward-looking statements represent our expectations or beliefs concerning future events and it is possible that the results described in this quarterly report will not be achieved. 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 under “Item 1A. Risk Factors” in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2012. The Company cautions readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. The Company advises 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 except as and required by law.

Recent Adjustments to Financial Statements for Freddie Mac Interest

During the quarter ended December 31, 2012, the Company identified that it was not making appropriate adjustments with respect to interest on residential mortgage loans originated and sold into the secondary market. In these mortgage sales, interest was advanced by Freddie Mac for the period from the first day of the month until the date of settlement with Freddie Mac to ensure a whole payment is subsequently remitted by the Company to Freddie Mac. Such amounts should have been reversed monthly from interest income and included in the liability account of funds due Freddie Mac. It was determined that the adjustments to reverse interest income were not made beginning August, 2011.

The Company is applying relevant guidance from the SEC Staff Accounting Bulletin No. 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements (“SAB 108”) to assess the materiality of the interest income adjustments described above. It was determined, based upon the assessment, that the adjustment was immaterial to the previously reported amounts contained in the Company’s prior periodic filings. Although the interest income adjustments were immaterial to prior periods, recording the cumulative impact of the out-of period correction in the second quarter of 2013 would be material. Therefore the Company applied the guidance for accounting for changes and error corrections and revised the prior period financial statements presented per SAB 108.

PART I — FINANCIAL INFORMATION

Applying these revisions to the periods included in the accompanying consolidated financial statements reduced previously reported net income by $194,937 for the quarter ended March 31, 2012 and $383,144 for the nine months ended March 31, 2012. The applicable effect on the prior year balance sheet and statement of operations related to the adjustment for interest income on residential loans is reflected in footnote 2 of the consolidated financial statements.

Financial Condition

PART I — FINANCIAL INFORMATION

FINANCIAL HIGHLIGHTS


	At or for the three months ended
(dollars in thousands except per share data)	03/31/2013			12/31/2012			9/30/2012			6/30/2012			3/31/2012
Balance Sheet Data:
Total assets	$	760,456		$	781,798		$	779,123		$	791,450		$	806,472
Loans receivable		562,137			569,716			559,322			557,680			563,557
Allowance for loan losses		14,920			15,140			16,136			16,053			16,914
Loans receivable held for sale, net		9,348			30,089			19,766			25,063			16,386
Cash and cash equivalents		99,994			94,458			114,575			120,110			134,496
Securities available for sale		41,419			39,761			38,281			38,658			40,908
Deposits		621,167			634,313			646,150			655,979			667,198
Borrowings		35,966			35,993			36,019			36,046			36,073
Stockholders’ equity		77,337			75,098			72,077			70,131			69,385
Nonperforming loans		17,044			18,594			17,864			19,900			23,542
Other nonperforming assets		7,251			7,744			7,232			7,734			9,552
Tangible common equity ratio		10.17	%		9.61	%		9.25	%		8.86	%		8.60	%
Book value per share	$	2.97		$	2.90		$	2.78		$	2.72		$	2.69
Common shares outstanding at period end		26,048,842			25,927,214			25,919,470			25,820,424			25,820,424
Operating Data:
Interest income	$	6,893		$	7,214		$	7,258		$	7,212		$	7,345
Interest expense		1,277			1,441			1,596			1,737			1,861

Net interest income before provision for loan losses		5,615			5,773			5,662			5,475			5,484
Provision for loan losses		—			1,000			1,050			1,500			2,016

Net interest income (loss) after provision for loan losses		5,615			4,773			4,612			3,975			3,468
Non-interest income		2,911			4,206			3,291			3,043			3,275
Non-interest expense		6,691			6,256			6,505			6,602			6,518

Income (loss) before federal income taxes		1,836			2,723			1,398			415			225
Federal income tax expense (benefit)		73			57			—			(194	)		—

Net income (loss)	$	1,763		$	2,666		$	1,398		$	609		$	225

Basic earnings (loss) per share	$	0.07		$	0.10		$	0.05		$	0.02		$	0.01

Diluted earnings (loss) per share	$	0.07		$	0.10		$	0.05		$	0.02		$	0.01

Performance Ratios:
Return on average assets		0.91	%		1.37	%		0.70	%		0.30	%		0.11	%
Return on average equity		9.25	%		14.49	%		7.98	%		4.71	%		2.42	%
Net interest margin		3.21	%		3.16	%		3.12	%		2.94	%		2.99	%
Interest rate spread		3.11	%		3.13	%		3.07	%		2.88	%		2.91	%
Efficiency ratio		80.01	%		61.09	%		69.21	%		72.38	%		69.55	%
Stockholders’ equity to total assets (all tangible)		10.17	%		9.61	%		9.25	%		8.86	%		8.60	%
Asset Quality Ratios:
Nonperforming assets to total assets		3.19	%		3.37	%		3.22	%		3.49	%		4.10	%
Nonperforming loans to total loans		3.03	%		3.26	%		3.19	%		3.57	%		4.18	%
Allowance for loan losses to total loans		2.65	%		2.66	%		2.88	%		2.88	%		3.00	%
Allowance for loan losses to nonperforming loans		87.54	%		81.42	%		90.32	%		80.67	%		71.85	%
Net charge-offs to average loans, annualized		0.15	%		1.37	%		0.67	%		1.64	%		1.86	%
Park View Federal Regulatory Capital Ratios:
Ratio of tangible capital to adjusted total assets		9.93	%		9.36	%		9.06	%		8.66	%		8.50	%
Ratio of tier one (core) capital to adjusted total assets		9.93	%		9.36	%		9.06	%		8.66	%		8.50	%
Ratio of tier one risk-based capital to risk-weighted assets		12.51	%		11.66	%		11.94	%		11.73	%		11.60	%
Ratio of total risk-based capital to risk-weighted assets		13.77	%		12.93	%		13.20	%		13.00	%		12.87	%

PART I — FINANCIAL INFORMATION

Consolidated assets of the Company were $760.5 million as of March 31, 2013, a increase of approximately $31.0 million, or 3.9%, as compared to June 30, 2012. The Company’s regulatory capital ratios for Tier 1 (core) capital, Tier 1 risk-based capital, and total risk-based capital were 9.92%, 12.50%, and 13.76%, respectively, at March 31, 2013. At March 31, 2013, the Company’s cash and cash equivalents, which consist of cash, interest-bearing deposits and federal funds sold, totaled $100.0 million, a decrease of $20.1 million, or 16.7%, as compared to June 30, 2012. The change in the Company’s cash and cash equivalents consisted of increases in cash of $14.0 million and a decrease in interest-bearing deposits of $34.1 million as the Company deployed a portion of its liquidity to fund the reduction in deposits and reduce its cost of funds.

Mortgage application volume remained elevated in the current quarter, due to a low interest rate environment. The mortgage activity centered around the origination of fixed-rate, single-family loans in the Company’s geographic markets, with most originated for sale in the secondary market rather than for its portfolio. 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, without assuming the interest-rate risk associated with holding long-term fixed-rate assets, which facilitates the maintenance of stronger liquidity levels.

During the nine months ended March 31, 2013, securities available for sale decreased by $2.8 million as a result of the purchases of $10.7 million in mortgage-backed securities and $3.9 million in corporate securities which was offset by principal repayments, calls exercised, and the amortization of book premium totaling $17.4 million.

Loans receivable increased by $5.6 million, or 1.0%, during the nine months ended March 31, 2013. The Company continued its strategic focus on the origination of high quality commercial and industrial loans and select commercial real estate loans, experiencing growth in performing loans of approximately $7.3 million, or 1.4%, during this same period. During the quarter ended March 31, 2013, the Company recorded net charge-offs of $0.2 million. Since June 30, 2012, the Company has successfully realized a decline in nonperforming loans or $2.9 million, or 14.6%. The Company continues to sell almost all new residential loan production in the secondary market in this interest rate environment, as the Company manages its interest rate and liquidity risk along with its capital ratios. The Company remains focused on the origination of commercial and industrial loans for its portfolio as part of its plan to diversify its balance sheet.

The Company does not originate sub-prime loans and only originates Alt A loans for sale, without recourse, in the secondary market. The Company considers sub-prime borrowers typically to have weakened credit histories that include payment delinquencies and possibly more severe problems such as charge-offs, judgments and bankruptcies. They may also display reduced repayment capacity as measured by credit scores, debt-to-income ratios, or other criteria that may encompass borrowers with incomplete credit histories. Sub-prime loans are loans to borrowers displaying one or more of these characteristics at the time of origination or purchase. The Company also does not originate any hybrid loans, low-doc/no-doc loans or payment option ARMs. All one-to-four family loans are underwritten according to agency underwriting standards. Exceptions, if any, are submitted to the Company’s board loan committee for approval. Any exposure the Company may have to these types of loans is immaterial.

The decrease of $15.7 million in loans receivable held for sale as of March 31, 2013 was the result of steady new loan originations and timing differences between the origination and the sale of loans from period to period. One-to-four family mortgage application volume, although lower than the quarter ended December 31, 2012, has remained elevated in the current period as com[pared to prior year period as a result of lower interest rates, resulting in higher purchasing and refinancing activity and related revenue.

PART I — FINANCIAL INFORMATION

For the nine months ended March 31, 2013, other real estate owned decreased $0.5 million. The activity for the period consisted of the addition of properties totaling approximately $3.2 million, offset by the disposal of properties totaling $2.7 million. The Company realized a net loss of approximately $0.2 million on the disposition of these properties. The Company also recorded an impairment charge of $1.0 million on the carrying amount of real estate still in inventory at March 31, 2013, based on updated valuations and market conditions. At March 31, 2013, the Company held 39 properties, totaling $7.3 million in other real estate owned. The other real estate owned included 14 single-family properties, 19 land properties, and 6 commercial properties.

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. Since June 30, 2012 deposits decreased by $34.8 million, or 5.3% which was a result of an increase of $26.5 million in non-maturing deposits offset by a decrease of $61.3 million in retail certificates of deposit. The decline in retail certificates of deposit was strategically directed as part of management’s relationship pricing initiative, which targeted rate sensitive, non-relationship deposits for reduction, coupled with an emphasis on increasing commercial deposits. Management will continue to modify its noncore deposit strategies to support the funding needs of the Company’s loan activities, while maintaining appropriate liquidity levels, as it executes its strategies to diversify its funding mix by expanding core deposit relationships and building business deposits.

The increase in advances from borrowers for taxes and insurance of $3.9 million for the period ended March 31, 2013 was attributable to timing differences between the collection and payment of taxes and insurance. The decrease of $7.2 million in accrued expenses and other liabilities was primarily the result of timing differences between the collection and remittance of funds received on loans serviced for investors.

Results of Operations: Three months ended March 31, 2013, compared to three months ended March 31, 2012.

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 collectability 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 recognized a net profit for the three months ended March 31, 2013 of $1.8 million, or $0.07 per basic and diluted share, as compared to $0.2 million, or $0.01 per basic and diluted share, for the prior-year comparable period. The increase in income is the result of an increase in net interest income of $0.1 million, an increase in gain on sale of SBA of $0.6 million offset by decrease in mortgage banking activity of $0.8 million, a decrease in the provision for loan losses of $2.0 million, and an increase in operating expenses of $0.2 million, as a result of $0.3 million in merger-related expenses.

PART I — FINANCIAL INFORMATION

Net Interest Income

Despite lower interest-earning assets and liabilities, net interest income for the three months ended March 31, 2013 increased by $0.1 million, as compared to the prior-year comparable period. The decrease in interest income was offset by a larger decline in interest expense. Total interest income decreased $0.5 million during the current period compared with the same period in the prior year. A continued effort to replace nonperforming loans with performing loans as well as the change in mix of cash and available for sale securities to acquire better yielding assets limited the decline in yield during the ongoing low rate environment. Total interest expense declined $0.6 million from a year ago, due to a decline in the level of deposits, and combined with the Company’s ability to lower the cost of funds in this continued low rate environment. The low interest rate environment has allowed more repricing opportunities, augmenting a more rapid decline in cost of funds.

PART I — FINANCIAL INFORMATION

The following table presents comparative information for the three months ended March 31, 2013 and 2012, respectively, with respect to average balances and average yields and costs for interest-earning assets and interest-bearing liabilities:


	March 31, 2013								March 31, 2012
												Revised
	Average					Average			Average					Average
	Balance			Interest		Yield/Cost			Balance			Interest		Yield/Cost
	(dollars in thousands)
Interest-earning assets
Loans ⁽¹⁾	$	583,615		$	6,523		4.47	%	$	576,933		$	6,884		4.77	%
Mortgage-backed securities		19,694			61		1.24	%		17,302			95		2.20	%
Investments and other		107,108			309		1.15	%		143,149			366		1.02	%

Total interest-earning assets		710,417			6,893		3.88	%		737,384			7,345		3.98	%

Non-interest-earning assets		52,329								63,264

Total assets	$	762,746							$	800,648

Interest-bearing liabilities
Deposits	$	625,258		$	1,013		0.65	%	$	657,904		$	1,592		0.97	%
Borrowings		35,975			265		2.95	%		36,081			268		2.97	%

Total interest-bearing liabilities		661,233			1,278		0.77	%		693,985			1,860		1.07	%

Non-interest-bearing liabilities		25,070								36,903

Total liabilities		686,303								730,888
Stockholders’ equity		76,443								69,760

Total liabilities and stockholders’ equity	$	762,746							$	800,648

Net interest income				$	5,615							$	5,485

Interest-rate spread							3.11	%							2.91	%

Net yield on interest-earning assets							3.21	%							2.99	%

Interest-earning assets to interest-bearing liabilities		107.44	%							106.25	%

(1)	Non-accruing loans are included in the average loan balances for the periods presented.

PART I — FINANCIAL INFORMATION

Provision for Loan Losses and Asset Quality

For the three months ended March 31, 2013 there was no provision for loan loss recorded in order to bring the total allowance for loan losses to a level considered by management to be appropriate, based on management’s evaluation of relevant factors, including the risk characteristics and trends of the loan portfolio, historic and current loss experience, current economic conditions and underlying collateral valuations. This compares with the $2.0 million provision for loan loss recorded for the three months ended March 31, 2012.

The provision for loan losses for the current period reflects management’s judgments about the credit quality of the Company’s loan portfolio. As of March 31, 2013, the allowance for loan losses no longer consists of a specific valuation allowance and a general allowance, but within the allowance for loan losses there exists a specific component and a general component. Rather, the allowance for loan losses maintains specific allocations where appropriate on loans where known risks have been identified but no clear loss has been quantified or deemed appropriate to be taken.

The following is a breakdown of the allowance for loan losses:


	March 31, 2013		June 30, 2012
Allowance	$	14,118,664	$	14,634,531
Specific allocation		801,568		1,418,334

Total allowance for loan losses	$	14,920,232	$	16,052,865

The allowance for loan losses decreased to 2.7% of loans outstanding at March 31, 2013, as compared to 2.9% at June 30, 2012. The Company recorded net charge-offs of $0.2 million for the current quarter, a decline from the $2.0 million recorded for the quarter ended December 31, 2012 and the $1.0 million recorded for the quarter ended September 30, 2012. Although the level of the allowance for loan losses is lower, the coverage ratio of the allowance for loan losses to nonperforming loans improved to 87.5% at March 31, 2013, compared with 80.7% at June 30, 2012, which is attributable to the ongoing reduction in nonperforming loan balances. Adversely classified assets continue to show reductions falling to $36.9 million at March 31, 2013 from $41.6 million at June 30, 2012. Trends continue to reflect directional improvement; management remains cautious due to continued uncertainty surrounding macroeconomic indicators however will continue to monitor these for future movements.

Management’s approach includes establishing a specific allocation by evaluating individual nonperforming loans for probable losses based on a systematic approach involving estimating the realizable value of the underlying collateral. Additionally, management establishes a general component for pools of performing loans segregated by collateral type. For the general component, management is applying a prudent loss factor based on historical loss experience, trends based on changes to nonperforming loans and foreclosure activity, and a subjective evaluation of the local population and economic environment. The loan portfolio is segregated into categories based on collateral type and a loss factor is applied to each category. The initial basis for each loss factor is the Company’s loss experience for each category. Historical loss percentages were calculated previously based on transfers from the general reserve to the specific reserve, indicating a loss has been incurred, and now are calculated based upon actual net charge-offs for each risk category during the historical period and dividing the total by the average balance of each category. Presently, historical loss percentages are updated on a monthly basis using an 18-month rolling average. Subjective adjustments are made to the Company’s historical experience, including consideration of trends in delinquencies and classified loans, portfolio growth, national and local economic and business conditions including unemployment, bankruptcy and foreclosures and effectiveness of credit administration, as appropriate.

PART I — FINANCIAL INFORMATION

A provision for loan losses is recorded when necessary to bring the allowance to a level consistent with this analysis. Management believes it uses the best information available to make a determination as to the adequacy of the allowance for loan losses. The current provision for loan losses is allocated by loan portfolio segment and lower historical loss factors resulted in recoveries in certain loan portfolio segments in the current period and are illustrated as a negative provision in Note 5 – Loans Receivable.

The total allowance for loan losses decreased $0.2 million during the three months ended March 31, 2013. Net charge–offs for the quarter were $0.2 million. During the quarter $0.5 million was allowed to one-to-four family construction, $0.2 million commercial real estate and $0.4 million was allowed to commercial and industrial loans. The one-to-four family, multi-family, land and consumer segments saw a release of reserves of $0.3 million, $0.2 million, $0.5 million and $10 thousand respectively, back into the general allocation based upon updated historical loss experience.

Nonperforming assets at March 31, 2013 and June 30, 2012 were as follows:


	March 31,			June 30,
(Dollars in thousands)	2013			2012
Loans on non-accruing status
Real estate mortgages:
One-to-four family residential	$	7,974		$	9,191
Commercial		4,881			4,571
Multi-family residential		491			325
Construction and land		3,508			5,551
Non real estate		171			438

Total loans on nonaccrual status	$	17,025		$	20,076

Ratio of nonperforming loans to total loans		3.03	%		3.60	%

Other nonperforming assets	$	7,251		$	7,734

Total nonperforming assets	$	24,276		$	27,927

Total nonperforming assets to total assets		3.19	%		3.49	%

The levels of nonperforming loans at March 31, 2013 and June 30, 2012 were attributable to continued challenging local economic conditions. Although stabilizing, residential markets nationally and locally have been adversely impacted by an elevated level of foreclosures, as a result of the problems faced by sub-prime borrowers and the resulting contraction of residential credit available to all but the most credit worthy borrowers. Land development projects nationally and locally have experienced slow sales and price decreases. The Company has significant exposure to the residential market in the Greater Cleveland, Ohio area. As a result, inn recent years the Company continues to experience an elevated, but improving level of nonperforming loans. Due to an increase in foreclosure activity in the area, the foreclosure process in Cuyahoga County, the Company’s primary market, remains elongated. As such, loans have remained past due for considerable periods prior to being collected, transferred to other real estate owned, or charged off.

Non-Interest Income

Non-interest income totaled $2.9 million for the quarter ended March 31, 2013, a decrease of $0.4 million, or 11.1%, from the quarter ended March 31, 2012. This decrease was primarily the result of a decline

PART I — FINANCIAL INFORMATION

in net revenue from mortgage banking activities which totaled $2.5 million and is a decrease of $0.9 million from the quarter ended March 31, 2012. The Company pursues a strategy of originating long-term fixed-rate loans pursuant to FHLMC and FNMA guidelines and selling such loans to the FHLMC or the FNMA, while retaining the servicing rights of such loans. Although the continued lower interest rate environment allowed the Company to capitalize upon its significant residential mortgage origination capabilities, there has been a slowdown in the level of refinance activities, resulting in a decrease in the gain on sale of mortgages income. Also, included in the mortgage banking results is a $0.2 million recovery to the impairment valuation allowance recognized against the carrying value of the Company’s capitalized mortgage servicing rights. Although the majority of mortgage lending activities in the current environment involves refinance, which is highly correlated to interest rate movements and levels and impacts the fair value of mortgage servicing rights, there has been a slowdown in the level of refinance activities and an increase in new purchase loans. As such, the expected level of prepayments from refinance loans has declined and accordingly resulted in an increase in the fair value of mortgage servicing rights.

Partially offsetting the decline in mortgage banking, the Company sold $4.4 million of government guaranteed loans as part of its SBA business strategy, recognizing a gain of $0.6 million in the current quarter. The Company did not recognize any SBA gains in the quarter ended March 31, 2012. Credit-related costs associated with other real estate owned totaled $0.6 million for the current quarter and equaled the amount recognized for the quarter ended March 31, 2012. The credit-related costs remained elevated and resulted from updated valuations on other real estate owned and losses on property dispositions whose values have shown signs of stabilizing versus a year ago. Service charges and other fees were unchanged from the same quarter of the prior year.

Non-Interest Expense

Non-interest expense for the three months ended March 31, 2013 increased by $0.2 million, or 2.7%, from the prior-year comparable period. This resulted from increased compensation of $0.4 million, increased professional and legal fees of $0.2 million and merger-related expenses of $0.3 million, offset by lower FDIC insurance of $0.2 million, a decrease in other real estate owned expenses of $0.1 million and a decrease in other expense of $0.3 million.

The increase in compensation expense was primarily due to higher expenses associated with incentive compensation expense, commissions and stock based compensation as the Company’s performance has significantly improved and returned to profitability.

The decrease to other real estate owned expense for the current period was attributable to a decline in the acquisition and maintenance of properties acquired through foreclosure as compared with last year, but remains elevated during the current period due to the activity levels associated with problem asset disposition. The decrease in FDIC insurance is related to the release of the Company and Bank Order.

Income Tax Expense

There was a $73 thousand federal income tax provision recorded for the three months ended March 31, 2013, compared to no federal income tax provision on the net loss for the prior-year comparable period. As the Company is projecting full year profitability, it has become subject to the alternative minimum tax. Also, an ongoing analysis of the Company’s deferred tax asset has resulted in recognizing a valuation allowance of $2.8 million, resulting in a net deferred tax asset of $0 at March 31, 2013.

PART I — FINANCIAL INFORMATION

Results of Operations: Nine months ended March 31, 2013, compared to nine months ended March 31, 2012.

The Company recognized a net profit for the nine months ended March 31, 2013 of $5.8 million, or $0.22 per basic and diluted share, as compared to a net loss of $2.5 million, or $0.10 per basic and diluted share, for the prior-year comparable period. The $8.3 million increase in net income is the result of an increase in net interest income of $1.2 million, a decrease in the provision for loan losses of $3.4 million, and an increase in noninterest income of $4.3 million, primarily associated with mortgage banking activity offset by an increase in operating expenses of $0.4 million.

Net Interest Income

Despite lower interest-earning assets and liabilities, net interest income for the nine months ended March 31, 2013 increased by $1.1 million, as compared to the prior-year comparable period. Interest income decreased while a larger decline was realized in interest expense. Total interest income decreased $0.7 million during the current period compared with the same period in the prior year. A continued effort to replace nonperforming loans with performing loans as well as the change in mix of cash and available for sale securities to acquire better yielding assets limited the decline in yield during the ongoing low rate environment. Total interest expense declined $1.8 million from a year ago, due to both a decline in the level of deposits and the Company’s continued efforts to lower the cost of funds. The low interest rate environment has allowed more repricing opportunities, augmenting a more rapid decline in thercost of funds.

PART I — FINANCIAL INFORMATION

The following table presents comparative information for the nine months ended March 31, 2013 and 2012, respectively, with respect to average balances and average yields and costs for interest-earning assets and interest-bearing liabilities:


	March 31, 2013								March 31, 2012
												Revised
	Average					Average			Average					Average
	Balance			Interest		Yield/Cost			Balance			Interest		Yield/Cost
	(dollars in thousands)
Interest-earning assets
Loans ⁽¹⁾	$	582,407		$	20,177		4.62	%	$	581,210		$	20,984		4.81	%
Mortgage-backed securities		18,038			191		1.41	%		11,777			211		2.39	%
Investments and other		119,848			997		1.11	%		143,665			841		0.78	%

Total interest-earning assets		720,293			21,365		3.95	%		736,652			22,036		3.99	%

Non-interest-earning assets		54,365								55,421

Total assets	$	774,658							$	792,073

Interest-bearing liabilities
Deposits	$	638,513		$	3,509		0.73	%	$	654,611		$	5,324		1.08	%
Borrowings		36,002			806		2.99	%		36,108			813		3.00	%

Total interest-bearing liabilities		674,515			4,315		0.85	%		690,719			6,137		1.18	%

Non-interest-bearing liabilities		25,494								29,986

Total liabilities		700,009								720,705
Stockholders’ equity		74,649								71,368

Total liabilities and stockholders’ equity	$	774,658							$	792,073

Net interest income				$	17,050							$	15,899

Interest-rate spread							3.10	%							2.81	%

Net yield on interest-earning assets							3.15	%							2.88	%

Interest-earning assets to interest-bearing liabilities		106.79	%							106.65	%

(1)	Non-accruing loans are included in the average loan balances for the periods presented.

PART I — FINANCIAL INFORMATION

Provision for Loan Losses and Asset Quality

For the nine months ended March 31, 2013, a provision for loan losses of $2.1 million was recorded to bring the total allowance for loan losses to a level considered by management to be appropriate, based on management’s evaluation of relevant factors, including the risk characteristics and trends of the loan portfolio, historic and current loss experience, current economic conditions and underlying collateral valuations. This compares with the $5.5 million for the nine months ended March 31, 2012. The allowance for loan losses decreased to 2.7% of loans outstanding at March 31, 2013 as compared to 2.9% at June 30, 2012 and 3.00% at March 31, 2012. The Company recorded net charge-offs of $3.2 million for the nine months ended March 31, 2013 as compared to the $18.6 million for the nine months ended March 31, 2012.

The provision for loan losses for the current period reflects management’s judgments about the credit quality of the Company’s loan portfolio. As of March 31, 2013, the allowance for loan losses no longer consists of a specific component and a general component. Rather, the allowance for loan losses maintains specific allocations where appropriate on loans where known risks have been identified but no clear loss has been quantified or deemed appropriate to be taken.

The coverage ratio of allowance for loan losses to nonperforming loans improved to 87.5% as compared to 80.7% at June 30, 2012 and 71.9% at March 31, 2012. Directional improvement continues as historical experience and macroeconomic indicators are trending upward. Management will continue to monitor future movements.

The following is a breakdown of the allowance for loan losses:


	March 31, 2013		June 30, 2012
Allowance	$	14,118,664	$	14,634,531
Specific allocation		801,568		1,418,334

Total allowance for loan losses	$	14,920,232	$	16,052,865

Non-Interest Income

For the nine months ended March 31, 2013, non-interest income increased by $4.3 million from the prior-year comparable period. The increase in the current period was primarily attributed to higher income from net mortgage banking activities of approximately $3.2 million, decreased provision for write downs and losses on the disposal of other real estate owned totaling $0.6 million and increased service charges related to electronic banking. Also, the Company sold the guaranteed portions on its SBA loan originations during the period resulting in a gain of $0.6 million. This compares with SBA gains of $0.2 million for the nine months ended March 31, 2012.

The Company pursues a strategy of originating long-term fixed-rate loans pursuant to FHLMC and FNMA guidelines and selling such loans to the FHLMC or the FNMA, while retaining the servicing rights of such loans. The majority of the mortgage lending activities in the current environment continues to involve refinancing and is highly correlated to interest rate movements and levels. The net gains on loan origination and sales activities totaled $10.8 million for the current period, which represented an increase of $3.0 million compared with the prior-year period of $7.8 million. The high level of refinancing in the current period resulted in a loan servicing loss of $1.5 million compared to $1.7 million in the prior-year comparable period. The Company recorded a valuation impairment charge against the book value of the mortgage loan servicing rights of $0.5 million and $0.6 million for the nine months ended March 31, 2013 and 2012, respectively.

PART I — FINANCIAL INFORMATION

Gains and losses on the sale of other real estate owned, including write-downs, is recorded in non-interest income and was a net loss of $1.2 million for the nine months ended March 31, 2013, down from the net loss of $1.7 million for the same prior-year period, as real estate values and dispositions have begun to stabilize.

Non-Interest Expense

Non-interest expense for the nine months ended March 31, 2013 increased by $0.4 million, or 2.1%, from the prior-year comparable period. This resulted from increased compensation of $1.2 million, and outside service costs of $0.4 million offset by lower other real estate owned expenses of $0.7 million and a decrease in FDIC insurance of $0.4 million.

The increase in compensation expense is primarily due to higher expenses associated with incentive compensation expense, commissions and stock based compensation along with related payroll taxes as the Company’s performance has significantly improved and returned to profitability. Also contributing to the increase are higher health care expenses related to increased claims and related higher health care costs.

The decrease to other real estate owned expense for the current period is attributable to a decline in the acquisition and maintenance of properties acquired through foreclosure as compared with last year, but remains elevated during the current period due to the activity levels associated with problem asset disposition. The increase in outside services was primarily due to increased cost associated with the migration to an outside service provider for information technology.

Income Tax Expense (Benefit)

There was a $130,000 federal income tax provision recorded for the nine months ended March 31, 2013, compared to a $25,178 benefit on the net loss for the prior-year comparable period. An ongoing analysis of the Company’s deferred tax asset has resulted in recognizing a valuation allowance of $2.8 million, resulting in a net deferred tax asset of $0 at March 31, 2013.

Liquidity and Capital Resources

PVF’s stockholders’ equity totaled $77.3 million and $70.1 million for the quarters ended March 31, 2013 and 2012, respectively. On March 26, 2010, PVF 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, PVF raised proceeds of $27,964,015, net of issuance costs. Upon completing the offering, PVF contributed approximately $20.0 million of the proceeds to the capital of Park View Federal to improve its regulatory capital position. At March 31, 2013, Park View Federal’s Tier 1 (core) capital ratio was 9.92% and its total risk-based capital ratio was 13.76%. The Bank’s primary regulator, the OCC, has implemented a statutory framework for capital requirements which establishes five categories of capital strength ranging from “well capitalized” to “critically undercapitalized.” An institution’s category depends upon its capital level in relation to relevant capital measures, including two risk-based capital measures, a tangible capital measure and a core/leverage capital measure. At March 31, 2013, the Bank was in compliance with all of the current applicable regulatory capital measurements to meet the definition of a well-capitalized institution, as demonstrated in the following table:

PART I — FINANCIAL INFORMATION


	Park View					Requirement for
	Federal		Percent of			Well-Capitalized
(In thousands)	Capital		Assets ⁽¹⁾			Institution
Tangible capital	$	75,932		9.92	%		1.50	%
Tier-1 core capital		75,932		9.92	%		4.00	%
Tier-1 risk-based capital		75,932		12.50	%		4.00	%
Total risk-based capital		83,612		13.76	%		8.00	%

(1)	Tangible and core capital levels are shown as a percentage of total adjusted assets; risk-based capital levels are shown as a percentage of risk-weighted assets.

Park View Federal’s liquidity measures its ability to fund loans and meet withdrawals of deposits and other cash outflows in a cost-effective manner. Park View Federal’s primary sources of funds for operations are deposits from its primary market area, principal and interest payments on loans and mortgage-backed securities, sales of loans, proceeds from maturing securities, and advances from the FHLB of Cincinnati. While loan and mortgage-backed securities payments and maturing securities are relatively stable sources of funds, deposit flows and loan and mortgage-backed securities prepayments are greatly influenced by prevailing interest rates, economic conditions and competition. FHLB advances may be used on a short-term basis to compensate for deposit outflows or on a long-term basis to support expanded lending and investment activities.

Park View Federal uses its capital resources principally to meet its ongoing commitment to fund existing and continuing loan commitments, fund maturing certificates of deposit and deposit withdrawals, repay borrowings, maintain its liquidity and meet operating expenses.

The Company’s ability to pay dividends depends, in part, on its receipt of dividends from Park View Federal because the Company has minimal sources of income other than distributions from the Bank. Federal regulations impose limitations upon all capital distributions, including cash dividends, by a savings institution, such as Park View Federal. Under the regulations, an application to and prior approval of federal regulators is required prior to any capital distribution if the institution does not meet the criteria for “expedited treatment” of applications under applicable regulations (i.e., generally, examination and Community Reinvestment Act ratings in the two top categories), if the total capital distributions for the calendar year exceed net income for that year plus the amount of retained net income for the preceding two years, the institution would be undercapitalized following the distribution or the distribution would otherwise be contrary to a statute, regulation or agreement. If an application is not required, the institution must still provide prior notice to federal regulators of the capital distribution if, like Park View Federal, it is a subsidiary of a holding company.

The Company currently does not pay dividends on its common shares. The Company’s ability to pay dividends is also dependent, in part, on its receipt of dividends from Park View Federal. This restriction may adversely affect the market price for PVF’s common shares. PVF’s ability to pay dividends will depend on a number of factors, including capital requirements, its financial condition and results of operations including its ability to generate sufficient earnings to warrant the payment of dividends, tax considerations, statutory and regulatory limitations and general economic conditions. PVF has cash of approximately $1.3 million at the parent company level available to service its operating expenses and for future investment in Park View Federal, if necessary. It has no debt obligations. PVF also derives its liquidity resources for operating obligations from its non subsidiaries which are sufficient to meet current operating obligations. Management believes its current liquidity levels are adequate to meet its operating obligations over the next twelve months.

PART I — FINANCIAL INFORMATION

Park View Federal maintains liquid assets sufficient to meet operational needs. Park View Federal’s most liquid assets are cash and cash equivalents, which are short-term, highly-liquid investments that are readily convertible to known amounts of cash. The levels of such assets are dependent upon Park View Federal’s operating, financing and investment activities at any given time. Management believes that the liquidity levels maintained are more than adequate to meet potential deposit outflows, repay maturing FHLB advances, fund new loan demand and cover normal operations.

Item 3.

Quantitative and Qualitative Disclosures About Market Risk.

Market risk is the risk of loss arising from adverse changes in the fair value of financial instruments due to changes in interest rates, exchange rates and equity prices. The Company’s market risk is generally composed of interest rate risk.

Asset/Liability Management : The Company’s asset and liability committee (“ALCO”) monitors and considers methods of managing the rate sensitivity and repricing characteristics of the balance sheet components consistent with maintaining acceptable levels of changes in net portfolio value (“NPV”) and net interest income. The Company’s asset and liability management program is designed to minimize the impact of sudden and sustained changes in interest rates on NPV and net interest income.

The Company’s exposure to interest rate risk is reviewed on a quarterly basis by the ALCO and the Company’s Board of Directors. Exposure to interest rate risk is measured with the use of interest rate sensitivity analysis to determine the Company’s change in net interest income and NPV in the event of hypothetical changes in interest rates, while interest rate sensitivity gap analysis is used to determine the repricing characteristics of the Company’s assets and liabilities. If estimated changes to NPV and net interest income are not within the limits established by the Board, the Board may direct management to adjust its asset and liability mix to bring interest rate risk within Board-approved limits. At March 31, 2013, the Company remains in compliance with such policy limits. The results of the interest rate sensitivity modeling and measurement indicates that the Company remains in a liability sensitive position that has not materially changed from June 30, 2012.

In order to reduce the exposure to interest rate fluctuations, the Company has developed strategies to manage its liquidity, shorten the effective maturity and increase the interest rate sensitivity of its asset base. Management has sought to decrease the average maturity of its assets by emphasizing the origination of adjustable-rate loans and loans with shorter balloon maturities which are retained by the Company for its portfolio. In addition, almost all fixed-rate mortgages are underwritten according to guidelines of the Freddie Mac or Fannie Mae, which are then sold directly for cash in the secondary market. The Company carefully monitors the maturity and repricing of its interest-earning assets and interest-bearing liabilities to minimize the effect of changing interest rates on its NPV. The Company’s interest rate risk position is the result of the repricing characteristics of assets and liabilities. The balance sheet is primarily comprised of interest-earning assets having a maturity and repricing period of one month to five years. These assets were funded primarily utilizing interest-bearing liabilities having a final maturity of two years or less.

PART I — OTHER INFORMATION

Item 4.

Controls and Procedures.

As of the end of the period covered by this Quarterly Report on Form 10-Q, management of the Company carried out an evaluation, under the supervision and with the participation of the Company’s principal executive officer and principal financial officer, of the effectiveness of the Company’s disclosure controls and procedures. Based on this evaluation, the Company’s principal executive officer and principal financial officer concluded that the Company’s disclosure controls and procedures (as defined in Rule 13a-15e and 15d-15(e) under the Securities Exchange Act of 1934, as amended) were not effective because of the material weakness described below in ensuring that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act as amended: (i) is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms; and (ii) is accumulated and communicated to the Company’s management, including its principal executive and principal financial officers or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure.

Our management is responsible for establishing and maintaining an adequate system of internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America.

Because of its inherent limitations, a system of internal control over financial reporting can provide only reasonable assurance and may not prevent or detect misstatements. It should be noted that the design of the Company’s disclosure controls and procedures is based in part upon certain reasonable assumptions about the likelihood of future events, and there can be no reasonable assurance that any design of disclosure controls and procedures will succeed in achieving its stated goals under all potential future conditions, regardless of how remote.

A material weakness is a control deficiency, or combination of control deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis. Based upon our assessment, we believe that as of March 31, 2013, the Company’s internal control over financial reporting was not effective because management identified the following material weakness.

During the quarter ended December 31, 2012, the Company identified that it was not properly adjusting for the interest on residential mortgage loans originated and sold into the secondary market whereby interest was advanced by Freddie Mac for the period from the first day of the month until the date of settlement with Freddie Mac to ensure a whole payment was subsequently remitted by the Company to Freddie Mac. Such amounts should have been reversed from interest income and included in the liability account of funds due to Freddie Mac. It was determined that the adjustments were not made beginning August 2011.

As a result management determined that we were required to record a charge to interest income totaling $753,229, of this, $599,745 relates to the prior fiscal year ended June 30, 2012 and the remaining $153,484 is related to the quarter ended September 30, 2012. We have adjusted our opening retained earnings for 2013 for the item described above as reflected in the consolidated financial statements contained in this Form 10-Q and consider these adjustments to be immaterial in prior periods.

PART I — OTHER INFORMATION

Management determined that the control deficiency that lead to the adjustment to retained earnings, constituted a material weakness in the Company’s internal control over financial reporting. Promptly following the identification of the material weakness, management began taking the following steps to remediate this material weakness.

•

Management reviewed this material weakness with our audit committee, senior management and independent accounting firm

•

Management has modified the procedures around the monthly Freddie Mac interest posting

•

Management has further educated the appropriate parties involved in the process

•

Management has strengthened the review of the accounts related to the Freddie Mac interest posting

In addition to the steps take above management intends to continue to enhance the internal control process. Management believes these changes will contribute significantly to the remediation of the material weakness in internal control over financial reporting that was in existence at December 31, 2012. Additional changes will be implemented as necessary. Other than discussed above there were no significant changes in internal controls during the period covered by this report or, to our knowledge, in other factors that has materially affected or is reasonably likely to materially affect our, the Company’s internal control over financial reporting.

PART II — OTHER INFORMATION

Item 1.

Legal Proceedings.

None.

Item 1A.

Risk Factors.

There have been no material changes to the Company’s risk factors from those disclosed in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2012.

Item 2.

Unregistered Sale of Equity Securities and Use of Proceeds.

(a)

N/A

(b)

N/A

(c)

The Company did not repurchase its equity securities during the period ended March 31, 2013.

Item 3.

Defaults Upon Senior Securities.

None.

PART II — OTHER INFORMATION

Item 4.

Mine Safety Disclosures.

None.

Item 5.

Other Information.

None.

Item 6.

Exhibits.


3.1 ¹		First Amended and Restated Articles of Incorporation, of PVF Capital Corp.

3.2 ²		Code of Regulations

4 ³		Second Amended and Restated Agreement to furnish instruments and agreements defining rights of holders of long-term debt.

31.1 ³		Rule 13a-14(a) Certification of Chief Executive Officer.

31.2 ³		Rule 13a-14(a) Certification of Chief Financial Officer.

32 ³		Section 1350 Certifications

101.INS ⁴		XBRL Instance Document.

101.DEF ⁴		XBRL Taxonomy Extension Definition Linkbase Document.

101.SCH ⁴		XBRL Taxonomy Extension Schema Document.

101.CAL ⁴		XBRL Taxonomy Extension Calculation Linkbase Document.

101.LAB ⁴		XBRL Taxonomy Extension Label Linkbase Document.

101.PRE ⁴		XBRL Taxonomy Extension Presentation Linkbase Document.

(1)	Incorporated by reference from Exhibit 3.1 to the Company’s Registration Statement on Form S-1/A filed with the Securities and Exchange Commission on February 10, 2010 (Commission File No. 333-163037).

(2)	Incorporated by reference from Exhibit 3.2 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on February 6, 2008 (Commission File No. 000-24948).

(3)	Filed herewith.

(4)

In accordance with Rule 406T of Regulation S-T, the XBRL (Extensible Business Reporting Language) information in these exhibits shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to liability under that section, and shall not be incorporated by reference into any registration statement or other document filed under the Securities Act of 1933, as amended, except as expressly set forth by specific reference in such filing.

Signatures

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


				PVF Capital Corp.
				(Registrant)

Date: May 14, 2013				/s/ Robert J. King, Jr.
				Robert J. King, Jr.
				President and Chief Executive Officer
				(Duly authorized officer)

				/s/ James H. Nicholson
				James H. Nicholson
				Chief Financial Officer
				(Principal Financial Officer and Principal Accounting Officer)