By letters dated June 26, 2009, the Company and the Bank were advised by its regulator, the Office of Thrift Supervision (the "OTS"), that as a result of the OTS's assessment of the Company's and the Bank's financial condition, the Company and the Bank were subject to specified operating restrictions. These operating restrictions provided that: (1) the Bank must limit its quarterly asset growth to net interest credited on deposit liabilities during the quarter (unless additional asset growth is permitted by the OTS); (2) the Bank and the Company must obtain OTS approval prior to appointing any new director or senior executive officer; (3) the Bank and the Company must obtain regulatory approval prior to making certain severance and indemnification payments; (4) the Bank must receive OTS approval of any new, renewed or amended arrangements providing compensation or benefits to its directors and senior executive officers; (5) the Bank must obtain OTS approval of all third-party contracts that are significant to the operation or financial condition of the Bank or that are outside the normal course of business; (6) the Bank must provide the OTS with advance notice of all proposed transactions with affiliates; and (7) the Bank may not pay dividends or make any other capital distribution, including the repurchase or redemption of capital stock, without the prior approval of the OTS. In addition, on September 10, 2009 we announced that the Bank was directed by the OTS to raise its Tier 1 core capital and total risk-based capital ratios to 8% and 12%, respectively, by December 31, 2009.
Expected Cease and Desist Order. As a result these and other regulatory concerns, the OTS has advised the Company and the Bank that it will issue Cease and Desist Orders, and we have received drafts of the Cease and Desist Orders. We expect the final Cease and Desist Order for the Bank (the "Bank Order") will require us to take the following actions:
• by December 31, 2009, meet and maintain (i) a tier one (core) capital ratio of at least 8.0% and (ii) a total risk-based capital ratio of at least 12.0% after the funding of an adequate allowance for loan and lease losses and submit a detailed plan to accomplish this; as a result of this requirement the Bank may not be deemed to be "well-capitalized" under applicable regulations;

• if the Bank fails to meet this requirement at any time after December 31, 2009, within 15 days thereafter prepare a written contingency plan detailing actions to be taken, with specific time frames, providing for
(i) a merger with another federally insured depository institution or holding company thereof, or (ii) voluntary liquidation;

• adopt revisions to the Bank's liquidity policy to, among other things, increase the Bank's minimum liquidity ratio:

• reduce the level of adversely classified assets by December 31, 2010;

• prepare a new business plan that will include the requirements contained in the Bank Order and that also will include well supported and realistic strategies to achieve consistent profitability by September 30, 2010;

• restrict our asset growth to an amount not to exceed net interest credited on deposit liabilities until the OTS approves of our new business plan;

• cease to accept, renew or roll over any brokered deposit or act as a deposit broker;

• not pay dividends or make any other capital distributions from the Bank without receiving prior OTS approval;

• not make any severance or indemnification payments without complying with regulatory requirements regarding such payments;

• comply with prior regulatory notification requirements for any changes in directors or senior executive officers;

• not enter into, renew, extend or revise any contractual arrangement relating to compensation or benefits for any senior executive officer or director of the Bank, unless we first provide 30 days prior written regulatory notice of the proposed transaction;

• not increase any salaries, bonuses or director's fees or make any other similar payments to directors or senior executive officers without the prior written non-objection of the OTS;

• not enter into any arrangement or contract with a third party service provider that is significant to the overall operation or financial condition of the Bank or outside the Bank's normal course of business without prior OTS non-objection (a contract will be considered significant where the annual contract amount equals or exceeds 2% of the Bank's total capital); and

• ensure compliance with regulatory requirements for affiliate and insider transactions.

The OTS has advised us that it will also issue a Cease and Desist Order against the Company (the "Company Order"). We have received a draft of the Company Order and expect the final Company Order to contain the following requirements:
• The Company must submit a capital plan that includes, among other things,
(i) the establishment of a minimum tangible capital ratio of tangible equity capital to total tangible assets commensurate with the Company's consolidated risk profile, and (ii) specific plans to reduce the risks to the Company from its current debt levels and debt servicing requirements;

• The Company shall not declare, make or pay any cash dividends or other capital distributions or purchase, repurchase or redeem or commit to purchase, repurchase or redeem any Company equity stock without the prior non-objection of the OTS;

• The Company shall not incur, issue, renew, roll over or increase any debt or commit to do so without the prior non-objection of the OTS (debt includes loans, bonds, cumulative preferred stock, hybrid capital instruments such as subordinated debt or trust preferred securities, and guarantees of debt);

• The Company may not engage in transactions with any subsidiary or affiliate without the prior non-objection of the OTS except certain transactions exempt under applicable regulations and intercompany cost-sharing transactions;

• The Company must comply with similar restrictions on the payment of severance and indemnification payments, prior OTS approval of directorate and management changes and prior OTS approval of employment contracts and compensation arrangements contained in the Bank Order.

The Cease and Desist Orders will remain in effect until terminated, modified, or suspended in writing by the OTS.
The failure to comply with the expected Cease and Desist Orders could result in the initiation of further enforcement action by the OTS, including the imposition of civil monetary penalties. The OTS could also direct us to seek a merger partner. We have incurred, and expect to continue to incur, significant additional regulatory compliance expense in connection with the expected Cease and Desist Orders. For further information, see "Risk Factors - We expect to be subject to restrictions and conditions of Cease and Desist Orders to be issued by the Office of Thrift Supervision. We have incurred and expect to continue to incur significant additional regulatory compliance expense in connection with the expected Cease and Desist Orders. Failure to comply with the expected Cease and Desist Orders could result in additional enforcement action against us, including the imposition of monetary penalties." Overview of Financial Condition at June 30, 2009 and 2008 PVF had total assets of $901.6 million, $867.4 million and $900.8 million at June 30, 2009, 2008 and 2007, respectively. The primary source of the Bank's total assets has been its loan portfolio. Net loans receivable, loans receivable held for sale and mortgage-backed securities totaled $759.7 million, $777.5 million and $754.2 million at June 30, 2009, 2008 and 2007, respectively.

The following table provides a breakdown of the composition of loans receivable, loans receivable held for sale and mortgage-backed securities for these periods.

  (In thousands)                                    2009          2008          2007

  One-to four-family residential                  $ 158,956     $ 168,532     $ 163,298
  Home equity line of credit                         88,407        87,876        85,093
  Multi-family residential                           58,568        52,421        48,101
  Commercial                                        192,115       174,404       184,850
  Commercial equity line of credit                   46,287        36,913        33,208
  Land                                               60,922        73,545        74,414
  Construction - residential                         39,237        55,442        63,316
  Construction - multi-family                         5,211         5,803         6,397
  Construction - commercial                          20,381        38,303        31,610

  Total real estate mortgages                       670,084       693,239       690,286
  Non-real estate mortgages                          32,155        33,593        30,455

  Total loans receivable                            702,249       726,832       720,741
  Net deferred loan origination fees                 (2,296 )      (2,686 )      (2,832 )
  Allowance for loan losses                         (31,483 )      (9,654 )      (4,581 )

  Total loans receivable, net                     $ 668,460     $ 714,492     $ 713,329
  Loans receivable held for sale, net             $  27,078     $   7,831     $  14,993
  Mortgage-backed securities held to maturity             -     $  55,151     $  25,880
  Mortgage-backed securities available for sale   $  64,178             -             -

The increase in mortgage-backed securities in 2009 resulted from the purchase of $113.3 million in mortgage-backed securities, less sales of $99.1 million and payments received of $6.9 million. In the current year the Company reclassified its mortgage-backed securities from held to maturity to available for sale. The $0.1 million in securities available for sale in 2008 resulted from the Bank's purchase of $2.1 million in FHLMC and FNMA preferred stock in fiscal 2008 less an impairment charge of $1.8 million and $0.2 million in fiscal 2009 and 2008, respectively. Securities held to maturity totaled $50 million and $7.6 million and $58.0 million, and cash and cash equivalents totaled $21.2 million, $17.8 million and $28.5 million at June 30, 2009, 2008 and 2007 respectively. The securities portfolio has been and will continue to be used primarily to meet the liquidity requirements of the Bank in its deposit taking and lending activities. These securities are pledged as collateral to secure the Bank's repurchase agreement.
The Bank's policy permits investment only in U.S. government and U.S. government-sponsored enterprises securities or Triple-A-rated securities. The Bank invests primarily in securities having a final maturity of five years or less, federal funds sold and deposits at the Federal Home Loan Bank ("FHLB") of Cincinnati. The entire portfolio matures within five years or less, and the Bank has no plans to change the short-term nature of its securities portfolio. The Bank's deposit liabilities totaled $724.9 million, $659.4 million, and $658.1 at June 30, 2009, 2008 and 2007, respectively. Management's decision to utilize brokered deposits and to pay attractive statement savings rates and promote the growth of core accounts resulted in an increase in savings deposits of $65.5 million for the year ended June 30, 2009. Following is a breakdown of deposits by category for these periods.

          (In thousands)                     2009          2008          2007
          NOW accounts                     $  38,037     $  42,402     $  40,780
          Passbook and Statement savings      61,466        27,508        30,045
          Money market accounts               68,549        74,939        70,518
          Noninterest-bearing                 20,146        17,459        21,845
          Certificates of deposit            536,734       497,078       494,865

          Total deposits                   $ 724,932     $ 659,386     $ 658,053

FHLB advances and other borrowings amounted to $106.4 million, $115.0 million and $146.3 million at June 30, 2009, 2008 and 2007, respectively. In fiscal 2008, the Bank borrowed a total of $35.0 million in FHLB putable fixed-rate advances with a put option held by the FHLB after a specified lockout period. These new borrowing were used for the repayment of short-term advances.

In fiscal 2004 and 2007, the Company formed two special purpose entities, PVF Capital Trust 1 ("Trust I") and PVF Capital Trust II ("Trust II"), that each issued $10.0 million of trust preferred securities. The Company issued $10.0 million of variable-rate Subordinated Deferrable Interest Debentures due June 29, 2034 and $10.0 million of fixed-rate Subordinated Deferrable Interest Debentures due July 6, 2036 (the "Debentures"). In December 2008, the Company elected to defer the payment of dividends on the Debentures. Pursuant to the terms of the Debentures, interest on the Debentures may be deferred at any time or from time to time for a period not exceeding 20 consecutive quarterly payments (five years), provided there is no event of default. While the Company deferred the payment of interest on the Debentures, it will continue to accrue expense for interest owed on the Debentures at a compounded rate. Under the terms of the Debentures, the Company generally may not declare or pay any dividends or distributions on, or redeem, purchase, acquire or make a liquidation payment with respect to any of its capital stock. Accordingly, the Company discontinued the payment of cash dividends on its common stock. Capital
PVF's stockholders' equity totaled $49.5 million, $69.0 million and $71.5 million at the years ended June 30, 2009, 2008 and 2007, respectively. The changes were the result of the retention of net earnings, net loss, less cash dividends paid.
The Bank's primary regulator, the 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 June 30, 2009, 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:

                                   Park View                        Requirement for
                                    Federal        Percent of      Well-Capitalized
      (In thousands)                Capital        Assets(1)          Institution

      Tangible capital            $    59,861             6.54 %                 N/A
      Tier-1 core capital              59,861             6.54                  5.00 %
      Tier-1 risk-based capital        59,861             8.77                  6.00
      Total risk-based capital         68,474            10.03                 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 OTS has directed the Bank to raise its tier one core capital and total risk-based capital ratios to 8% and 12%, respectively, by December 31, 2009. At June 30, 2009, we did not meet these requirements and would have needed approximately $13.4 million in additional capital based on assets at such date to meet these requirements.
Liquidity and Capital Resources
The Company's liquidity measures its ability to fund loans and meet withdrawals of deposits and other cash outflows in a cost-effective manner. The Company'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.
The Bank 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. At June 30, 2009, the Bank had commitments to originate loans totaling $56.9 million, of which $48.2 million is intended to be sold, commitments to fund equity lines of credit totaling $82.6 million, and $11.1 million of undisbursed loans in process. Scheduled maturities of certificates of deposit during the 12 months following June 30, 2009 total $496.4 million. Management believes that a significant portion of the amounts maturing during fiscal 2009 will be reinvested with the Bank because they are retail deposits, however, no assurances can be made that this will occur.

The Company has elected to defer the payment of dividends on $10.0 million of variable-rate Subordinated Deferrable Interest Debentures due June 29, 2034 and $10 million of fixed-rate Subordinated Deferrable Interest Debentures due July 6, 2036 (the "Debentures"). The Company issued the Debentures to two special purpose entities, PVF Capital Trust I and PVF Capital Trust II (the "Trusts"), in exchange for the proceeds of the offering by the Trusts of trust preferred securities. On September 3, 2009, the Company cancelled the $10 million of Subordinated Deferrable Interest Debentures due June 29, 2034 and the trust preferred securities issued by PVF Capital Trust I, in exchange for $500,000 in cash, 205,297 shares of common stock and warrants to buy additional shares of common stock. Pursuant to the terms of the Debentures, interest on the Debentures may be deferred at any time or from time to time for a period not exceeding 20 consecutive quarterly payments (five years), provided there is no event of default. While the Company will defer the payment of interest on the Debentures, it will continue to accrue expense for interest owed on the Debentures at a compounded rate. Under the terms of the Debentures, if the Company has elected to defer the payment of interest on the Debentures, the Company generally may not declare or pay any dividends or distributions on, or redeem, purchase, acquire or make a liquidation payment with respect to, any of its capital stock. Accordingly, the Company has discontinued the payment of cash dividends on its common stock.
The Company's 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. By letters dated June 26, 2009, the Bank was advised by the OTS that the Bank may not pay dividends or make any other capital distribution, including the repurchase or redemption of capital stock, without the prior approval of the OTS. The Company currently does not pay dividends on its common stock. Moreover, pursuant to the terms of the Company Order we expect to enter into with the OTS, the Company expects that it will not be permitted to declare, make or pay any cash dividends or other capital distributions or purchase, repurchase or redeem or commit to purchase, repurchase or redeem any Company equity stock without the prior non-objection of the OTS. In addition, the Company's ability to pay dividends depends, in part, on its receipt of dividends from the Bank, which also is expected to be prohibited pursuant to the terms of the Bank Order expected to be entered into with the OTS. These restrictions may adversely affect the market price for the Company's common stock. Besides the OTS limitations to which we expect to be subject, the Company'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. By Letter dated June 26, 2009, the Bank was advised by the OTS that the Bank may not pay dividends or make any other capital distributions, including the repurchase or redemption of capital stock, without the prior approval of the OTS.
Park View Federal maintains liquid assets sufficient to meet operational needs. The Bank'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 the Bank'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.

Commitments, Contingencies and Off-Balance Sheet Risk The Company is a party to financial instruments with off-balance sheet risk . . .