Summary of PVF CAPITAL CORP

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, 2009 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 funded a decrease in deposits and an increase in cash and cash equivalents with repayments of loans and short-term advances from the Federal Home Loan Bank. Additionally, the Company exchanged cash, common stock and warrants to acquire common stock in exchange for the cancellation of $10 million of subordinated debt.
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 $887.1 million as of September 30, 2009, a decrease of approximately $25.1 million, or 2.8%, as compared to June 30, 2009. The Banks regulatory capital ratios for tier one core capital, tier one risk-based capital, and total risk-based capital were 6.70%, 8.77% and 10.03%, respectively, at September 30, 2009.

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Part I Financial Information Item 2
During the three months ended September 30, 2009, the Company's cash and cash equivalents, which consist of cash, interest-bearing deposits and federal funds sold, increased $7.8 million, or 36.7%, as compared to June 30, 2009. The change in the Company's cash, cash equivalents and federal funds sold consisted of increases to cash and federal funds sold offset by a decrease to interest-bearing deposits. The increase in cash and cash equivalents resulted from the Bank's borrowing of a Federal Home Loan Bank advance of $10 million dollars at the end of the quarter in order to maintain sufficient liquidity for the origination of loans receivable held for sale and is in accordance with the Bank's decision to maintain higher cash balances in order to bolster the Company's liquidity.
Mortgage-backed securities available for sale decreased by $3.5 million as the result of the purchase of $1.5 million in mortgage-backed securities, the principal repayment of $6.0 million, and a positive market valuation adjustment of $1.0 million for securities held for sale.
Securities held to maturity increased by $7.0 million during the three months ended September 30, 2009 as a result of the Bank purchasing agency securities for investment and to pledge as collateral against the repurchase agreement. Loans receivable, net, decreased by $15.2 million, or 2.3%, during the three months ended September 30, 2009. The decrease in loans receivable included decreases to multi-family residential, land, commercial equity line of credit, construction residential, construction multi-family, construction commercial loans, and consumer loans, partially offset by increases to one-to-four family, commercial, and home equity line of credit loans. The increase to commercial real estate loans was primarily the result of commercial construction loans converted to permanent financing.
Following is a breakdown of loans receivable at September 30, 2009 and June 30, 2009:

                                             September 30,        June 30,
                                                  2009              2009
        Real estate mortgages:
        One-to-four family residential       $  160,353,613     $ 158,955,714
        Home equity line of credit               88,946,898        88,406,791
        Multi-family residential                 56,749,908        58,568,073
        Commercial                              195,256,770       192,114,887
        Commercial equity line of credit         44,181,563        46,286,802
        Land                                     60,308,532        60,922,130
        Construction - residential               32,656,177        39,237,333
        Construction - multi-family               4,944,559         5,211,399
        Construction - commercial                16,684,318        20,381,398

        Total real estate mortgages             660,082,338       670,084,527
        Non-real estate loans                    26,881,146        32,155,056

        Total loans receivable                  686,963,484       702,239,583
        Net deferred loan origination fees       (1,915,363 )      (2,296,349 )

        Allowance for loan losses               (31,823,982 )     (31,483,205 )

        Loans receivable, net                $  653,224,139     $ 668,460,029

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Part I Financial Information Item 2
Park View Federal Savings Bank does not originate sub-prime loans and only originates Alt A loans for sale, without recourse, in the secondary market. All one-to-four family loans are underwritten according to agency underwriting standards. Exceptions, if any, are submitted to the loan committee for approval. Any exposure the Bank may have to these types of loans is immaterial and insignificant.
The decrease of $20.6 million in loans receivable held for sale is the result of timing differences between the origination and the sale of loans.
Real estate owned activity for the current three month period consisted of the addition of 4 single-family properties and one commercial property totaling approximately $1.7 million offset by the disposal of 10 single-family properties, one parcel of land, and 2 commercial properties that had a carrying amount totaling $1.7 million. The Bank incurred a loss of approximately $90,000 on the disposition of these properties. At September 30, 2009 the Bank had 39 properties totaling $11.6 million in real estate owned. The real estate owned included 21 single-family properties, 13 parcels of land, and 5 commercial properties.
Deposits decreased by $28.0 million, or 3.9%, primarily as a result of the maturity of $25.0 million in brokered deposits partially offset by modest increases to retail certificates of deposit and other transactional accounts. The increase of $10.0 million in short-term advances from the Federal Home Loan Bank of Cincinnati was the result of the Bank borrowing funds to maintain sufficient liquidity for the origination of loans receivable held for sale. The decrease in subordinated debentures is the result of the previously mentioned transaction in which the Company entered into an exchange agreement whereby the Company paid $500,000 in cash, and issued $500,000 in common stock and warrants valued at $800,000 in exchange for the cancellation of $10.0 million of the Trust Preferred Obligation of PVF Capital Trust I. This transaction resulted in a pretax gain of $8.6 million.
The increase in advances from borrowers for taxes and insurance of $2.5 million is attributable to timing differences between the collection and payment of taxes and insurance.

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Part I Financial Information Item 2
RESULTS OF OPERATIONS
Three months ended September 30, 2009, compared to three months ended September 30, 2008. 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, the collectibility of loans, 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 income for the three months ended September 30, 2009 was $4,199,900 as compared to a loss of $901,200 for the prior year comparable period. This represents an increase of $5,101,100 when compared with the prior year comparable period. The primary reason the Company was profitable for the period was a gain on an exchange the Company entered into during the period, resulting in the cancellation of $10 million of subordinated debt. Net interest income for the three months ended September 30, 2009 decreased by $826,400, or 15.6%, as compared to the prior year comparable period. This resulted from a decrease of $2,493,500, or 20.0%, in interest income partially offset by a decrease of $1,667,100, or 23.2%, in interest expense. The decrease in net interest income was attributable to a decline of 39 basis points in the interest-rate spread for the quarter ended September 30, 2009 as compared to the prior year comparable period. The decrease in interest-rate spread resulted from increases in nonperforming loans in addition to lower market rates on interest earning assets.

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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, 2009 and 2008 about average balances and average yields and costs
for interest-earning assets and interest-bearing liabilities (dollars in
thousands).

                                            September 30, 2009                                     September 30, 2008
                               Average                             Average            Average                            Average
                               Balance          Interest          Yield/Cost          Balance         Interest          Yield/Cost
Interest-earning assets

Loans (1)                     $ 732,889        $    9,157                5.00 %      $ 721,682        $  11,412                6.33 %
Mortgage-backed
securities                       58,866               663                4.51 %         54,994              700                5.09 %
Investments and other            37,548               177                1.89 %         39,157              379                3.87 %


Total interest-earning
assets                          829,303             9,997                4.82 %        815,833           12,491                6.12 %


Non-interest-earning
assets                           60,342                                                 70,627


Total Assets                  $ 889,645                                              $ 886,460


Interest-bearing
liabilities

Deposits                      $ 689,037        $    4,358                2.53 %      $ 676,187        $   5,943                3.52 %
Borrowings                       90,042               912                4.05 %         87,553              920                4.20 %
Subordinated debt                16,957               250                5.90 %         20,000              325                6.50 %


Total interest-bearing
liabilities                     797,412             5,520                2.77 %        783,740            7,188                3.67 %


Non-interest-bearing
liabilities                      38,366                                                 33,127


Total liabilities             $ 837,445                                              $ 816,867

Shareholders' equity             52,200                                                 69,593


Total liabilities and
shareholders' equity          $ 889,645                                              $ 886,460


Net interest income                            $    4,477                                             $   5,303


Interest-rate spread                                                     2.05 %                                                2.46 %


Yield on
interest-earning assets                                                  2.16 %                                                2.60 %


Interest-earning assets
to interest-bearing
liabilities                      104.00 %                                               104.09 %

(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, 2009, a provision for loan losses of
$1,760,000 was recorded, while a provision for loan losses of $691,000 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. The allowance for loan losses consists of a specific
component and a general component.
Following is a breakdown of the valuation allowances:

                                       September 30, 2009       June 30, 2009
       General valuation allowance    $         14,927,162     $    15,071,653
       Specific valuation allowance             16,896,743          16,411,552

       Total valuation allowance      $         31,823,905     $    31,483,205

Management's approach includes establishing a specific valuation allowance by evaluating individual non-performing loans for probable losses based on a systematic approach involving estimating the realizable value of the underlying collateral. Additionally, management established a general valuation allowance for pools of performing loans segregated by collateral type. For the general valuation allowance, management is applying a prudent loss factor based on historical loss experience, trends based on changes to non-performing 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 are calculated as transfers from the general reserve to the specific reserve, indicating a loss has been incurred, for each risk category during the past 12 months and dividing the total by the average balance of each category. Presently, historical loss percentages are updated on a monthly basis using a 12-month rolling average. Subjective adjustments are made to the Bank's historical experience when deemed necessary by management. 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 period provision for loan losses reflects the impact on the loss factors applied to pools of performing loans due to the recent increase in the Company's historical loss experience.
The Company continues to aggressively review and monitor its loan portfolio. This review involves analyzing all large borrowing relationships, delinquency trends, and loan collateral valuation in order to identify impaired loans. This analysis is performed so that management can identify all troubled loans and loan relationships as well as deteriorating loans and loan relationships. As a result of this review detailed action plans are developed to either resolve or liquidate the loan and end the borrowing relationship.

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Part I Financial Information Item 2
RESULTS OF OPERATIONS continued
The following table provides statistical measures of non-performing assets:

September 30, June 30, 2009 2009

(Dollars in thousands)
Loans on non-accruing status (1):
Real estate mortgages:
One-to-four family residential $ 16,494 $ 15,551 Commercial 16,294 13,140 Multi-family residential (2) 371 371 Construction and land (2) 40,710 39,757 Non real estate 1,042 943

Total loans on non-accrual status: $ 74,911 $ 69,762

Ratio of non-performing loans to total loans 10.90 % 10.03 %

Other non-performing assets (3) $ 11,569 $ 11,608

Total non-performing assets $ 86,480 $ 81,370

Total non-performing assets to total assets 9.75 % 8.92 %

(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) Two loans totaling $3,308,500 were reclassified from multi-family residential to construction and land for the period ended June 30, 2009.

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

The levels of non-accruing loans at June 30, 2009 and September 30, 2009 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 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 seen slow sales and price decreases. The Company has significant exposure to the residential market in the Greater Cleveland, Ohio 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, the Company's 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 $74.9 million and $69.8 million in non-accruing loans at September 30, 2009 and June 30, 2009, $58.4 million and $58.6 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 collection of loan principal was in doubt, specific loss reserves were established. The evaluation of the underlying collateral included a consideration of the potential impact of erosion in real estate values due to poor

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Part I Financial Information Item 2
RESULTS OF OPERATIONS continued
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 this process, specific loss reserves were established related to these loans outstanding at September 30, 2009 and June 30, 2009 of $12,339,379 and $12,684,241, 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, specific loan loss reserves of $3.1 million and $2.1 million were established for these loans as of September 30, 2009 and June 30, 2009, respectively.
There are $15.6 million and $4.4 million in performing loans for which the Company has established specific loan loss reserves as of September 30, 2009 and June 30, 2009. 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, specific loan loss reserves of $1.5 million and $1.6 million were established for these loans as of September 30, 2009 and June 30, 2009, respectively. For the three months ended September 30, 2009, non-interest income increased by $10,905,000 from the prior year comparable period. This resulted primarily from the Company entering into an exchange agreement whereby the Company paid $500,000 in cash, and issued $500,000 in common stock and warrants valued at $800,000 in exchange for the cancellation of $10.0 million of the Trust Preferred Obligation of PVF Capital Trust I. This transaction resulted in a pretax gain of $8,561,500. In addition, income from mortgage banking activities increased by $597,000 as a result of increased loan refinance activity resulting from cyclically low market rates in the current period. In the three month period ended September 30, 2008, the Company recorded an impairment loss on FHLMC and FNMA preferred stock totaling $1,738,800. Other, net increased by 129,700 primarily due to income generated by the Company's partnership interest in a Title Company. These increases were partially offset by increases to losses on real estate owned of $76,700, and declines in income on bank-owned life insurance ("BOLI") of $32,500, and service and other fees of $12,700. 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 decline in earnings on BOLI is the result of the Bank transferring the balances held in separate accounts from investment in mortgage-backed securities to money market accounts because of market volatility. The earnings of the money market account were insufficient to offset the cost of the insurance for most of the current period. The Bank was able to restructure its investment in BOLI in the current three month period, transferring the balances from money market accounts into separate accounts generating earnings in excess of the cost of insurance.

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Part I Financial Information Item 2
RESULTS OF OPERATIONS continued
Non-interest expense for the three months ended September 30, 2009 increased by $1,300,500, or 26.3%, from the prior year comparable period. This resulted from an increase in outside services of $777,400, federal deposit insurance of $374,300, and an increase in real estate owned expense of $593,300, partially offset by decreases in compensation and benefits of 316,300, office occupancy and equipment of $28,500 and other, net of $99,700.
The increase in outside services is due to increased consulting fees. The increase in the cost of FDIC insurance is due to a change in risk rating for the Bank and higher assessment rates charged on deposits, while the increase to real estate owned expense is attributable to the acquisition and maintenance of properties acquired through foreclosure.
The federal income tax provision for the three-month period ended September 30, 2009 represented an effective rate of 33.8% for the current period compared to a negative effective rate of 34.0% for the prior year comparable period.
LIQUIDITY AND CAPITAL RESOURCES
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. The 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. The Company's most liquid assets are cash and cash equivalents. The levels of these assets are dependent on the Company's operating, financing, lending and investing activities during any given period. Additional sources of funds include lines of credit available from the FHLB. . . .