MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following analysis discusses changes in financial condition and results of operations at and for the three-month period ended September 30, 2008 for PVF Capital Corp. ("PVF" or the "Company"), Park View Federal Savings Bank (the "Bank"), its principal and wholly-owned subsidiary, PVF Service Corporation ("PVFSC"), a wholly-owned real estate subsidiary, Mid Pines Land Co., a wholly-owned real estate subsidiary, PVF Holdings, Inc., PVF Community Development and PVF Mortgage Corporation, three wholly-owned and currently inactive subsidiaries.
FORWARD-LOOKING STATEMENTS
When used in this Form 10-Q, the words or phrases "will likely result," "are expected to," "will continue," "is anticipated," "estimate," "project," or similar expressions are intended to identify "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are subject to certain risks and uncertainties including changes in economic conditions in the Company's market area, changes in policies by regulatory agencies, fluctuations in interest rates, demand for loans in the Company's market area, and competition that could cause actual results to differ materially from historical earnings and those presently anticipated or projected. The Company wishes to caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. The Company wishes to advise readers that the factors listed above could affect the Company's financial performance and could cause the Company's actual results for future periods to differ materially from any opinions or statements expressed with respect to future periods in any current statements.
The Company does not undertake, and specifically disclaims any obligation, to publicly release the results of any revisions, which may be made to any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.
FINANCIAL CONDITION
The Company generally seeks to fund loan activity and liquidity by generating deposits through its branch network and through the use of various borrowing facilities. During the period, the Company used increases in deposits to repay short-term advances and to increase cash and cash equivalents in order to improve the Bank's liquidity position.
In addition, the Company continued the origination of fixed-rate single-family loans for sale in the secondary market. The origination and sale of fixed-rate loans has historically generated gains on sale and allowed the Company to increase its investment in loans serviced. Consolidated assets of PVF were $905.2 million as of September 30, 2008, an increase of approximately $37.8 million, or 4.4%, as compared to June 30, 2008. The Bank remained in regulatory capital compliance for tier one core capital, tier one risk-based capital, and total risk-based capital with capital levels of 9.22%, 11.93% and 12.81%, respectively, at September 30, 2008.
During the three months ended September 30, 2008, the Company's cash and cash

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Part I Financial Information Item 2
equivalents, which consist of cash, interest-bearing deposits and federal funds sold, increased $37.8 million, or 212.3%, as compared to June 30, 2008. The change in the Company's cash, cash equivalents and federal funds sold consisted of increases in interest-bearing deposits and cash of $47.5 million and a decrease in federal funds sold of $9.7 million. The increase in cash was primarily the result of a $25 million brokered deposit made at the end of the period in order to bolster the Company's liquidity.
Loans receivable, net, increased by $2.2 million, or 0.3%, during the three months ended September 30, 2008. The increase in loans receivable included increases to commercial, multifamily, and equity line of credit loans, partially offset by decreases to land, one-to-four family, and construction loans. Following is a breakdown of loans receivable at September 30, 2008 and June 30, 2008:

September 30, June 30, 2008 2008 Real estate mortgages: One-to-four family residential $ 166,527,717 $ 168,532,008 Home equity line of credit 89,133,333 87,876,182 Multi-family residential 59,313,718 52,420,774 Commercial 190,359,510 174,403,925 Commercial equity line of credit 38,070,241 36,913,491 Land 69,319,034 73,544,594 Construction - residential 52,303,108 55,442,114 Construction - multi-family 5,454,889 5,802,842 Construction - commercial 29,528,576 38,303,228 Total real estate mortgages 700,010,126 693,239,158 Non-real estate loans 28,091,438 33,592,529 Total loans receivable 728,101,564 726,831,687 Net deferred loan origination fees (2,555,502 ) (2,685,309 ) Allowance for loan losses (8,843,278 ) (9,653,972 ) Loans receivable, net $ 716,702,784 $ 714,492,406

The decrease of $4.4 million in loans receivable held for sale is the result of timing differences between the origination and the sale of loans. The increase of $1.8 million in mortgage-backed securities is the result of the purchase of $3.0 million in mortgage-backed securities offset by principal payments received of $1.2 million during the three-month period.
The increase of $3.9 million in real estate owned is the result of the addition of 22 single-family properties, 3 parcels of land, and 2 commercial properties totaling approximately $7.9 million offset by the disposal of 20 single-family properties, 1 parcel of land, and 1 commercial property totaling $4.0 million. Deposits increased by $50.3 million, or 7.6%, as the result of management's decision to obtain two six-month brokered deposits totaling $55.0 million in order to take advantage of attractive rates available as well as to improve the

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Part I Financial Information Item 2 Bank's liquidity in a tight credit market. Advances decreased by $9.0 million as a result of the repayment of short-term borrowings. The decrease in advances from borrowers for taxes and insurance of $2.7 million is attributable to timing differences between the collection and payment of taxes and insurance. The decrease in prepaid expenses and other assets is primarily the result of a decrease in payments advanced on loans serviced for others. RESULTS OF OPERATIONS Three months ended September 30, 2008, compared to three months ended September 30, 2007.

PVF'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 and deposit flows. Net interest income also includes amortization of loan origination fees, net of origination costs. PVF's net income is also affected by the generation of non-interest income, which primarily consists of loan servicing income, service fees on deposit accounts, and gains on the sale of loans held for sale. In addition, net income is affected by the level of operating expenses, loan loss provisions and costs associated with the acquisition, maintenance and disposal of real estate. The Company's net loss for the three months ended September 30, 2008 was $901,257 as compared to net income of $611,066 for the prior year comparable period. This represents a decrease of $1,512,300 when compared with the prior year comparable period. Net interest income for the three months ended September 30, 2008 decreased by $553,900, or 9.5%, as compared to the prior year comparable period. This resulted from a decrease of $2,801,000, or 18.3%, in interest income partially offset by a decrease of $2,247,100, or 23.8%, in interest expense. The decrease in net interest income was attributable to a decline of 15 basis points in the interest-rate spread for the quarter ended September 30, 2008 as compared to the prior year comparable period along with a decrease in both interest-earning assets and interest-bearing liabilities. The decrease in interest-rate spread resulted from margin compression attributable to declining rates on adjustable-rate loans, resulting from a decrease in short-term market rates not reflected in local market deposit pricing, along with an increase in nonperforming loans.

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Part I Financial Information Item 2 RESULTS OF OPERATIONS continued The following table presents comparative information for the three months ended September 30, 2008 and 2007 about average balances and average yields and costs for interest-earning assets and interest-bearing liabilities (dollars in thousands). September 30, 2008 September 30, 2007 Average Average Average Average Balance Interest Yield/Cost Balance Interest Yield/Cost Interest-earning assets Loans (1) $ 721,682 $ 11,412 6.33 % $ 725,558 $ 13,927 7.68 % Mortgage-backed securities 54,994 700 5.09 % 25,613 319 4.98 % Investments and other 39,157 379 3.87 % 82,139 1,046 5.09 % Total interest-earning assets 815,833 12,491 6.12 % 833,310 15,292 7.34 % Non-interest-earning assets 70,627 52,293 Total assets $ 886,460 $ 885,603 Interest-bearing liabilities Deposits $ 676,187 $ 5,943 3.52 % $ 643,257 $ 7,316 4.55 % Borrowings 87,553 920 4.20 % 133,081 1,729 5.20 % Subordinated debt 20,000 325 6.50 % 20,000 390 7.80 % Total interest-bearing liabilities 783,740 7,188 3.67 % 796,338 9,435 4.74 % Non-interest-bearing liabilities 33,127 19,028 Total liabilities $ 816,867 $ 815,366 Retained earnings 69,593 70,237 Total liabilities and R.E. $ 886,460 $ 885,603 Net interest income $ 5,303 $ 5,857 Interest-rate spread 2.45 % 2.60 % Yield on interest-earning assets 2.60 % 2.81 % Interest-earning assets to interest-bearing liabilities 104.09 % 104.64 %

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

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Part I Financial Information Item 2
RESULTS OF OPERATIONS continued
For the three months ended September 30, 2008, a provision for loan losses of $691,000 was recorded, while a provision for loan losses of $593,400 was recorded in the prior year comparable period. The provision for loan losses for the current period reflects management's judgments about the credit quality of the Bank's loan portfolio. Management's approach includes evaluating individual non-performing loans for probable losses based on a systematic approach involving estimating the realizable value of the underlying collateral. Additionally, for pools of performing loans segregated by collateral type, management is applying a prudent loss factor based on our historical loss experience, trends based on changes to non-performing loans and foreclosure activity and our subjective evaluation of the local population and economic environment. 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 following table provides statistical measures of non-performing assets:

September 30, June 30, 2008 2008 (Dollars in thousands) Loans on non-accruing status (1): Real estate mortgages: One-to-four family residential $ 5,827 $ 6,453 Commercial 4,118 3,001 Multi-family residential 275 152 Construction and land 16,922 12,350 Non real estate 1,037 533 Total loans on non-accrual status: $ 28,179 $ 22,489 Ratio of non-performing loans to total loans 3.91 % 3.09 % Other non-performing assets (2) $ 7,942 $ 4,065 Total non-performing assets $ 36,121 $ 26,554 Total non-performing assets to total assets 3.99 % 3.06 %

(1) Non-accrual status denotes loans on which, in the opinion of management, the collection of additional interest is unlikely, or loans that meet the non-accrual criteria established by 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 collectibility of the principal balance of the loan.

(2) Other non-performing assets represent property acquired by the Bank through foreclosure or repossession.

The levels of non-accruing loans at June 30, 2008 and September 30, 2008 are attributable to poor current local and economic conditions. Residential markets nationally and locally have been adversely impacted by a significant increase in foreclosures as a result of the problems faced by subprime borrowers and the resulting contraction of residential credit available to all but the most creditworthy borrowers. Land development projects nationally and locally have seen slow sales and price decreases. The Company has significant exposure to the residential market in the Greater Cleveland area. As a result, the Company has seen a significant increase in non-performing loans. Due to an increase in foreclosure activity in the area, the foreclosure process in Cuyahoga County, our

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Part I Financial Information Item 2
RESULTS OF OPERATIONS continued
primary market, has become elongated. As such, loans have remained past due for considerable periods prior to being collected, transferred to real estate owned, or charged off.
Of the $28.2 million and $22.5 million in non-accruing loans at September 30, 2008 and June 30, 2008, $22.4 million and $16.0 million, respectively, were individually identified as impaired. All of these loans are collateralized by various forms of non-residential real estate or residential construction. These loans were reviewed for the likelihood of full collection based primarily on the value of the underlying collateral, and, to the extent we believed collection of loan principal was in doubt, we established specific loss reserves. Our evaluation of the underlying collateral included a consideration of the potential impact of erosion in real estate values due to poor local economic conditions and a potentially long foreclosure process. This consideration involves obtaining an updated valuation of the underlying real estate collateral and estimating carrying and disposition costs to arrive at an estimate of the net realizable value of the collateral. Through our evaluation of the underlying collateral, we determined that despite difficult conditions, these loans are generally well secured. Through this process, we established specific loss reserves related to these loans outstanding at September 30, 2008 and June 30, 2008 of $2,085,127 and $2,792,048, respectively.
The remaining balance of non-performing loans represents homogeneous one-to-four family loans. These loans are also subject to the rigorous process for evaluating and accruing for specific loan loss situations described above. Through this process, we established specific loan loss reserves of $387,689 and $453,470 for these loans as of September 30, 2008 and June 30, 2008, respectively.
There are $3.1 million and $3.0 million in performing loans that we have established specific loan loss reserves as of September 30, 2008 and June 30, 2008. These loans are collateralized by various forms of one to four family real estate, non-residential real estate or residential construction. These loans are also subject to the rigorous process for evaluating and accruing for specific loan loss situations described above. Through this process, we established specific loan loss reserves of $321,033 and $93,202 for these loans as of September 30, 2008 and June 30, 2008, respectively.
The current period provision for loan losses reflects increases to specific loan loss reserves and changes to the overall volume and composition of the loan portfolio based upon the methodology described previously.
For the three months ended September 30, 2008, non-interest income decreased by $1,839,600, or 230.5%, from the prior year comparable period. This resulted primarily from an impairment charge of $1,738,800 from the markdown in value of preferred stock issued by the Federal Home Loan Mortgage Corporation ("FHLMC") and the Federal National Mortgage Association ("FNMA"). In addition, earnings on bank-owned life insurance ("BOLI") decreased by $200,300, service and other fees decreased by $44,600, while other, net increased by $86,800, and income from mortgage banking activities increased by $57,300.
The increase of $57,300 in mortgage banking activities resulted from a decrease in gains on the sale of loans and an increase in amortization of mortgage servicing rights, offset by an increase in the market value of loans held for sale and a

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Part I Financial Information Item 2
RESULTS OF OPERATIONS continued
change in the fair value of mortgage banking derivatives pursuant to the adoption of SEC Staff Accounting Bulletin No. 109. During these periods, the Company pursued 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. The decrease in other, net is primarily the result of loss on investment relating to FHLMC and FNMA preferred stock during the current period.
Non-interest expense for the three months ended September 30, 2008 decreased by $350,600, or 6.6%, from the prior year comparable period. This resulted from a decrease in compensation and benefits of $406,400, a decrease in office occupancy and equipment of $95,100, partially offset by an increase in other non-interest expense of $150,900. The increase in other non-interest expense was primarily the result of increases in federal deposit insurance and outside services. Compensation and benefits decreased due to a decrease in staffing. The federal income tax provision for the three-month period ended September 30, 2008 represented an effective rate of a negative 34.0% for the current period compared to an effective rate of 21.2% for the prior year comparable period. The effective rate in the prior period was reduced due to the increased proportion of pre-tax income consisting of an increase in the cash surrender value of BOLI.
LIQUIDITY AND CAPITAL RESOURCES
The Bank's primary regulator, the Office of Thrift Supervision ("OTS") 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 September 30, 2008 and June 30, 2008, 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:

September 30, 2008 Park View Requirement for Federal Percent of Well-Capitalized (dollars in thousands) Capital Assets(1) Institution Tangible capital $ 83,272 9.22 % N/A Tier-1 core capital $ 83,272 9.22 5.00 % Tier-1 risk-based capital $ 83,272 11.93 6.00 Total risk-based capital $ 89,347 12.81 10.00 June 30, 2008 Park View Requirement for Federal Percent of Well-Capitalized (dollars in thousands) Capital Assets(1) Institution Tangible capital $83,972 9.68 % N/A Tier-1 core capital $83,972 9.68 5.00 % Tier-1 risk-based capital $83,972 12.09 6.00 Total risk-based capital $90,286 12.99 10.00

(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.

The Company's liquidity measures its ability to generate adequate amounts of funds to meet its cash needs. Adequate liquidity guarantees that sufficient funds are available to meet deposit withdrawals, fund loan commitments, purchase securities, maintain adequate reserve requirements, pay operating expenses, provide funds for debt service, pay dividends to stockholders and meet other general commitments in a cost-effective manner. Our primary sources of funds are deposits, principal and interest payments on loans, proceeds from the sale of loans, repurchase agreements, and advances from the FHLB. While maturities and scheduled amortization of loans are predictable sources of funds, deposit flows and mortgage prepayments are greatly influenced by general interest rates, economic conditions and local competition.
Our most liquid assets are cash and cash equivalents. The levels of these assets are dependent on our operating, financing, lending and investing activities during any given period. Additional sources of funds include lines of credit available from the FHLB.
During the current period the Company enhanced its liquidity position by increasing its deposits and cash and cash equivalents as well as increasing its collateral borrowing position. Management believes the Company maintains sufficient liquidity to meet current operational needs.
Our ability to continue to pay cash dividends is limited by cash needs at the holding company level.
Our holding company, PVF Capital Corp., has certain ongoing cash needs primarily related to trust preferred securities and the payment of dividends to stockholders. Interest payments on the trust preferred securities instruments totaled $324,000 during the quarter ended September 30, 2008. Cash dividends to stockholders totaled $77,700 for the quarter ended September 30, 2008. Cash at the Company totaled $130,700 at September 30, 2008.
Our ability to pay dividends depends, in part, on our receipt of dividends from the Bank because the Company has minimal sources of income other than distributions from the Bank. OTS regulations impose limitations upon all capital distributions, including cash dividends, by a savings institution, such as the Bank. Under the regulations, an application to and prior approval of the OTS is required prior to any capital distribution if the institution does not meet the criteria for "expedited treatment" of applications under OTS regulations (i.e., generally, examination and Community Reinvestment Act ratings in the two top categories), 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 with the OTS. If an application is not required, the institution must still provide prior notice to the OTS of the capital distribution if, like the Bank, it is a subsidiary of a holding company. In the event the Bank's capital fell below its regulatory requirements or the OTS notified it that it was in need of increased supervision, the Bank's ability to make capital distributions could be restricted. In addition, the OTS could prohibit a proposed capital distribution by any institution, which would otherwise be permitted by the regulation, if the OTS determines that such distribution would constitute an unsafe or unsound practice.
As of September 30, 2008, the Bank's calendar year-to-date net income plus net income for the prior three calendar years totaled $7,682,900, and the Bank had the ability to pay additional dividends to the Company of up to $3,282,900 upon notice to the OTS. Dividends in excess of this amount plus additional net income earned in the future would require application to the OTS. Our ability to . . .