<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20552
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, 1997.
[ ] 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
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PVF Capital Corp.
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( Exact name of registrant as specified in its charter)
United States 34-1659805
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
25350 Rockside Road, Bedford Heights, Ohio 44146
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(Address of principal executive offices) (Zip Code)
(216) 439-2200
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(Registrant's telephone number, including area code)
Not Applicable
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(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 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 2,323,338
- ----------------------------- ----------------------------------
(Class) (Outstanding at April 30, 1997)
<PAGE>
PVF CAPITAL CORP.
INDEX
PAGE
Part I Financial Information
Item 1 Financial Statements
Consolidated Statements of Financial
Condition, March 31, 1997 (unaudited)
and June 30, 1996. 1
Consolidated Statements of Operations for
the three and nine months ended March 31,
1997 and 1996 (unaudited). 2
Consolidated Statements of Cash Flows for
the nine months ended March 31, 1997 and
1996 (unaudited). 3
Notes to Consolidated Financial
Statements (unaudited). 4
Item 2 Management's Discussion and Analysis of
Financial Condition and Results of
Operations 6
Part II Other Information 11
<PAGE>
PART 1 FINANCIAL INFORMATION
ITEM 1
PVF CAPITAL CORP.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
MARCH 31, JUNE 30,
ASSETS 1997 1996
-------- ------------- -----------
(UNAUDITED)
<S> <C> <C>
Cash and amounts due from depository institutions $2,294,588 $6,670,604
Interest bearing deposits 242,640 244,612
Federal funds sold 2,375,000 6,875,000
Investment securities, at cost 13,995,037 14,094,100
Loans receivable, net 328,707,615 278,318,945
Loans receivable available for sale, net 1,471,217 11,203,705
Mortgage-backed securities held to maturity, net 507,356 637,022
Mortgage-backed securities available for sale, net 0 7,613,365
Office properties and equipment, net 1,942,549 2,571,566
Real estate owned 53,983 0
Real estate in development 904,785 854,891
Investment required by law
Stock in the Federal Home Loan Bank of Cincinnati 2,483,790 1,880,000
Prepaid expenses and other assets 1,272,099 670,271
------------- ------------
Total Assets $356,250,659 $331,634,081
------------- ------------
------------- ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Liabilities
Deposits $273,553,281 $271,045,085
Advances from the Federal Home Loan Bank of Cincinnati 48,924,914 27,481,651
Notes payable 2,410,000 2,710,000
Advances from borrowers for taxes and insurance 2,642,177 4,205,151
Accrued expenses and other liabilities 3,701,501 3,718,536
------------- -----------
Total Liabilities 331,231,873 309,160,423
Stockholders' Equity
Serial preferred stock, none issued 0
Common stock 23,233 23,233
Paid in capital 9,995,918 9,995,918
Retained earnings-substantially restricted 14,999,635 12,608,775
Unrealized market adjustment on available for sale securities 0 (154,268)
------------- -----------
Total Stockholders' Equity 25,018,786 22,473,658
------------- -----------
Total Liabilities and Stockholders' Equity $356,250,659 $331,634,081
------------- -----------
------------- -----------
</TABLE>
See accompanying notes to consolidated financial statements.
PAGE 1
<PAGE>
PART 1 FINANCIAL INFORMATION
ITEM 1
PVF CAPITAL CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
MARCH 31, MARCH 31,
---------------------------- ---------------------------
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Interest income
Loans $7,412,874 $6,450,807 $21,715,444 $18,798,716
Mortgage-backed securities 9,837 14,942 275,304 130,652
Cash and investment securities 310,403 304,461 941,006 1,614,839
---------- ---------- ----------- -----------
Total interest income 7,733,114 6,770,210 22,931,754 20,544,207
---------- ---------- ----------- -----------
Interest expense
Deposits 3,472,768 3,685,846 10,458,590 11,496,205
Borrowings 660,824 124,909 1,790,062 414,398
---------- ---------- ----------- -----------
Total interest expense 4,133,592 3,810,755 12,248,652 11,910,603
---------- ---------- ----------- -----------
Net interest income 3,599,522 2,959,455 10,683,102 8,633,604
Provisions for loan losses 107,000 23,000 107,000 417,000
---------- ---------- ----------- -----------
Net interest income after provision for loan losses 3,492,522 2,936,455 10,576,102 8,216,604
---------- ---------- ----------- -----------
Noninterest income, net
Service and other fees 114,441 93,910 356,033 317,914
Mortgage banking activities, net 313,666 269,622 501,979 752,649
Other, net 36,138 18,444 135,078 215,722
---------- ---------- ----------- -----------
Total noninterest income, net 464,245 381,976 993,090 1,286,285
---------- ---------- ----------- -----------
Noninterest expense
Compensation and benefits 1,119,916 971,021 3,286,005 2,878,791
Office, occupancy, and equipment 411,508 356,874 1,202,793 1,070,409
Federal deposit insurance special assessment 0 0 1,707,867 0
Other 565,524 599,850 1,723,369 1,756,666
---------- ---------- ----------- -----------
Total noninterest expense 2,096,948 1,927,745 7,920,034 5,705,866
---------- ---------- ----------- -----------
Income before federal income tax provision 1,859,819 1,390,686 3,649,158 3,797,023
Federal income tax provision 637,949 458,000 1,256,949 1,193,600
---------- ---------- ----------- -----------
Net income $1,221,870 $932,686 $2,392,209 $2,603,423
Net income per share $0.49 $0.37 $0.96 $1.05
===== ===== ===== =====
</TABLE>
See accompanying notes to consolidated financial statements.
PAGE 2
<PAGE>
PART 1 FINANCIAL INFORMATION
ITEM 1
PVF CAPITAL CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
MARCH 31ST
--------------------------------
1997 1996
---------------- -------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $2,392,209 $2,603,423
Adjustments to reconcile net income to net cash provided by operating activities
Accretion of discount on marketable securities (937) (25,163)
Depreciation and amortization 353,947 360,969
Provision for losses on loans, net 107,000 417,000
Provision for lower of cost or market adjustment loans available for sale 81,930 68,690
Accretion of unearned discount and deferred loan origination fees, net (1,111,012) (1,114,059)
Gain on loans available for sale, net (347,241) (441,230)
Loss on mortgage-backed securities available for sale, net 65,086 23,582
Gain on investment securities available for sale, net 0 (74,721)
Change in accrued interest on investments, loans, and borrowings, net (235,753) (108,292)
Change in other assets and other liabilities, net (2,242,551) (1,416,272)
Change in loans receivable available for sale, net 9,997,799 866,768
------------- ------------
Net cash provided by operating activities 9,060,477 1,160,695
------------- ------------
INVESTING ACTIVITIES
Loan and mortgage-backed securities repayments and originations, net (54,030,566) (39,781,940)
Proceeds from mortgage-backed securities available for sale 12,738,470 855,477
Purchase of investment securities 0 (19,298,788)
Investment securities maturities 100,000 41,491,590
Sale of investment securities available for sale 0 10,007,188
FHLB stock purchases dividends, net (603,790) (91,835)
Office properties and equipment (purchases) sales, net 275,070 (282,348)
Additions to real estate in development, net (49,894) 55,442
------------- ------------
Net cash provided by (used in) investing activities (41,570,710) (7,045,214)
------------- ------------
FINANCING ACTIVITIES
Net increase in demand deposits, NOW, and passbook savings (1,183,665) 3,115,356
Net increase (decrease) in time deposits 3,673,996 (4,811,413)
Net increase (decrease) FBHL advances 21,443,263 2,500,000
Proceeds from (payments on) note payable (300,000) 1,010,000
Stock options exercised 0 25,000
Cash paid in lieu of fractional shares (1,349) (1,098)
------------- ------------
Net cash provided by (used in) financing activities 23,632,245 1,837,845
------------- ------------
Net increase (decrease) in cash and cash equivalents (8,877,988) (4,046,674)
Cash and cash equivalents at beginning of period 13,790,216 12,618,580
------------- ------------
Cash and cash equivalents at end of period $4,912,228 $8,571,906
------------- ------------
------------- ------------
</TABLE>
See accompanying notes to consolidated financial statements.
PAGE 3
<PAGE>
PART I FINANCIAL INFORMATION
ITEM I
PVF CAPITAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1997 AND 1996
(UNAUDITED)
1. The accompanying consolidated interim financial statements were prepared
in accordance with regulations of the Securities and Exchange Commission for
Form 10-Q. All information in the consolidated interim financial statements
is unaudited except for the June 30, 1996 consolidated statement of financial
condition which was derived from the Corporation's audited financial
statements. Certain information required for a complete presentation in
accordance with generally accepted accounting principles has been condensed
or omitted. However, in the opinion of management, these interim financial
statements contain all adjustments, consisting only of normal recurring
accruals, necessary to fairly present the interim financial information. The
results of operations for the three and nine months ended March 31, 1997 are
not necessarily indicative of the results to be expected for the entire year
ending June 30, 1997. The results of operations for PVF Capital Corp. ("PVF"
or the "Company") for the periods being reported have been derived primarily
from the results of operation of Park View Federal Savings Bank (the "Bank").
PVF Capital Corp.'s common stock is traded on the NASDAQ SMALL-CAP ISSUES
under the symbol PVFC.
2. Legislation was signed into law on September 30, 1996 to recapitalize
the Savings Association Insurance Fund ("SAIF") that required SAIF-insured
savings institutions to pay a one-time special assessment of 65.7 cents for
every $100 of deposits. This assessment was charged against earnings for the
quarter ended September 30, 1996 and resulted in a pre-tax charge to the
Company of approximately $1,708,000 and is reflected in the Statement of
Operation for the nine-month period ended March 31, 1997. This assessment
was paid on November 27, 1996. The FICO SAIF assessment beginning January 1,
1997 is expected to be 6.48 basis points annually.
3. Cash and cash equivalents consist of the following:
March 31, 1997 June 30, 1996
-------------- -------------
Cash and amounts due from depository
institutions $ 2,294,588 $ 6,670,604
Interest-bearing deposits 242,640 244,612
Federal funds sold 2,375,000 6,875,000
----------- -----------
$ 4,912,228 $13,790,216
----------- -----------
----------- -----------
4. In June 1996, the Financial Accounting Standards Board (FASB) issued SFAS
No. 125, Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities. SFAS No. 125 establishes the accounting for
certain financial asset transfers, including securitization transactions, and
became effective for transactions entered into on or after January 1, 1997.
This standard supersedes SFAS No. 76, SFAS No. 77 and SFAS No. 122 and amends
SFAS No. 115 and SFAS No. 65. The implementation of SFAS No. 125 did not
have a material impact on the Company's consolidated financial position or
results of operations.
PAGE 4
<PAGE>
PART I FINANCIAL INFORMATION
ITEM I
5. In February 1997, the FASB issued SFAS No. 128, Earnings per Share which
supersedes Accounting Principles Board (APB) No. 15, Earnings per Share and
replaces the presentation of primary and fully diluted earnings per share
with basic and diluted earnings per share. SFAS No. 128 was issued to
simplify the computation of earnings per share and make the U.S. standard
more compatible with the earnings per share standards of other countries and
that of the International Accounting Standards Committee (IASC). SFAS
No. 128 is effective for financial statements for both interim and annual
periods ending after December 15, 1997. Earlier application is not
permitted, however, pro forma earnings per share is permitted for periods
prior to required adoption. The following table discloses pro forma EPS
pursuant to SFAS No. 128 for the three and nine months ended March 31, 1997
and March 31, 1996.
<TABLE>
<CAPTION>
Three months ended March 31
1997 1996
------------------------------------- -------------------------------------
Income Shares Per-Share Income Shares Pre-Share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
----------- ------------- ---------- ----------- ------------- --------
<S> <C> <C> <C> <C> <C> <C>
BASIC EPS
Income available to
common stockholders $1,221,870 2,323,338 $ 0.53 $932,686 2,323,338 $ 0.40
EFFECT OF DILUTIVE SECURITIES
Stock options 164,891 0.04 164,891 0.03
DILUTED EPS
Income available to
common stockholders $1,221,870 2,488,229 $ 0.49 $932,686 2,488,229 $ 0.37
</TABLE>
<TABLE>
<CAPTION>
Nine months ended March 31
1997 1996
------------------------------------- -------------------------------------
Income Shares Per-Share Income Shares Per-share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
----------- ------------- ---------- ----------- ------------- --------
<S> <C> <C> <C> <C> <C> <C>
BASIC EPS
Income available to
common stockholders $2,392,209 2,323,338 $ 1.03 $2,603,423 2,323,338 $ 1.12
EFFECT OF DILUTIVE SECURITIES
Stock options 164,891 0.07 164,891 0.07
DILUTED EPS
Income available to
common stockholders $2,392,209 2,488,229 $ 0.96 $2,603,423 2,488,229 $ 1.05
</TABLE>
PAGE 5
<PAGE>
PART I FINANCIAL INFORMATION
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following analysis discusses changes in financial condition and results
of operations at and for the three-month and nine-month periods ended
March 31, 1997 for PVF Capital Corp ("PVF" or the "Company") and Park View
Federal Savings Bank (the "Bank"), its principal and wholly-owned subsidiary.
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
Consolidated assets of PVF were $356.3 million as of March 31, 1997, an
increase of approximately $24.6 million or 7.4% as compared to June 30, 1996.
The Bank remained in regulatory capital compliance for tangible, core, and
risk-based capital on a fully phased-in basis with capital levels of 7.34%,
7.34% and 10.42% respectively at March 31, 1997.
During the nine months ended March 31, 1997, the Company's cash and cash
equivalents, which consist of cash, interest-bearing deposits and federal
funds sold, decreased $8.9 million or 64.4% as compared to June 30, 1996.
The change in the Company's cash
PAGE 6
<PAGE>
PART I FINANCIAL INFORMATION
ITEM 2
FINANCIAL CONDITION CONTINED
and cash equivalents consisted of a decrease in cash and interest-bearing
deposits of $4.4 million and a decrease in federal funds sold of $4.5 million.
The net $32.9 million or 11.1% increase in loans receivable and
mortgage-backed securities, during the nine months ended March 31, 1997,
resulted from an increase in loans receivable of $40.6 million and a decrease
in mortgage-backed securities of $7.7 million. The increase of $40.6 million
in loans receivable included increases of $10.5 million in commercial loans,
$8.5 million in land loans, $8.2 million in construction loans, $6.0 million
in home equity loans, $5.9 million in single family mortgage loans,
$0.8 million in installment loans, and $0.7 million in multi-family loans.
The decrease in mortgage-backed securities of $7.7 million was the result of
a net decrease of $7.6 million in mortgage-backed securities available for
sale resulting from the Bank swapping $5.4 million in loans with the Federal
Home Loan Mortgage Corporation ("FHLMC") for mortgage-backed securities and
the sale and repayment of $12.8 million and $0.2 million in mortgage-backed
securities available for sale, respectively, along with the repayment of $0.1
million in mortgage-backed securities held to maturity.
The decrease in office properties and equipment of $0.6 million was the
result of the sale and leaseback of one of our branch offices. The increase
in Federal Home Loan Bank of Cincinnati stock of $0.6 million is the result
of the purchase of $0.5 million and dividend payments received of
$0.1 million. The increase in prepaid expenses and other assets of
$0.6 million is the result of a reduction in the credit balance for Federal
Reserve Bank adjustments on NOW accounts.
During the nine months ended March 31, 1997, management decided to utilize
attractive borrowing rates from the Federal Home Loan Bank of Cincinnati
("FHLB") and match market savings rates on maturing deposits. This strategy
resulted in an increase in FHLB advances and savings deposits of
$21.5 million and $2.5 million, respectively.
The increase in savings deposits and FHLB advances of $24.0 million along
with the reduction in cash and cash equivalents of $8.9 million and
mortgage-backed securities of $7.7 million were used to fund the increase of
$40.6 million in loans receivable.
RESULTS OF OPERATION
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 also
includes amortization of loan origination fees, net of origination costs.
PAGE 7
<PAGE>
PART I FINANCIAL INFORMATION
ITEM 2
RESULTS OF OPERATION CONTINUED
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 and mortgage-backed securities
available for sale. 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. In addition, net income is affected by the level of operating
expenses and loan loss provisions.
THREE MONTHS ENDED MARCH 31, 1997,
COMPARED TO THREE MONTHS ENDED
MARCH 31, 1996.
The Company's net income for the three months ended March 31, 1997 was
$1,221,900. This represents a 31.0% increase when compared with the prior
year comparable period.
Net interest income for the three months ended March 31, 1997 increased by
$640,100 or 21.6%, as compared to the prior year comparable period, primarily
due to an increase of $962,900 or 14.2% in interest income that resulted from
an increase of $45.5 million in the average balance of the loan and
mortgage-backed securities portfolios. This was partially offset by a
decrease in the average balance of the investment portfolio of $2.5 million
and a 2 basis point increase in interest-earning assets from the prior year
comparable period. The average balance on deposits and advances increased by
$40.1 million from the prior year comparable period. This increased balance,
offset by an 18 basis point decrease in the average cost of funds for the
current period, resulted in an overall increase in interest expense of
$322,800 or 8.5%. The Company's net interest income increased due to an
increase of 20 basis points in the Company's interest-rate spread during the
current period as compared to the prior year comparable period, along with
balance sheet growth in both interest-earning assets and interest-bearing
liabilities.
For the three months ended March 31, 1997 and 1996, provision's for loan
losses of $107,000 and $23,000, respectively, were recorded. Provisions are
based on management's analysis of the various factors which affect the loan
portfolio and management's desire to maintain the allowance for loan losses
at a level considered adequate to provide for probable future loan losses.
During the three months ended March 31, 1997 and 1996, management increased
its unallocated reserves for loan losses, based primarily on growth of the
loan portfolio, along with prevailing
PAGE 8
<PAGE>
PART I FINANCIAL INFORMATION
ITEM 2
RESULTS OF OPERATION CONTINUED
economic conditions and other factors deemed relevant. At March 31, 1997,
the allowance for loan losses was $2.6 million, which represented 61.1% of
nonperforming loans and 0.8% of net loans.
For the three months ended March 31, 1997, noninterest income increased
$82,200 or 21.5% from the prior year comparable period. This was primarily
attributable to an increase of $44,000 or 16.3% in income from
mortgage-banking activities that resulted from an increase in gains on the
sale of loans available for sale and mortgage-backed securities available for
sale of $63,500 from the prior year comparable period, along with a decrease
in net servicing income of $19,500 in the current period attributable to the
amortization of the servicing asset resulting from the application of
FASB 122, Accounting for Mortgage Servicing Rights and amended by FASB 125,
Accounting for Transfers and Servicing of Financial Assets and Extinguishment
of Liabilities. During these periods, PVF pursued a strategy of originating
long-term, fixed-rate loans pursuant to Federal Home Loan Mortgage
Corporation ("FHLMC") and Federal National Mortgage Association ("FNMA")
guidelines and selling such loans to the FHLMC or the FNMA, while retaining
the servicing. Loan and other fees increased by $20,500 or 21.9% from the
prior year comparable period primarily due to increases in NOW account fee
income. Other noninterest income, net, increased by $17,700 or 95.9% from
the previous year's comparable period primarily due to a gain recognized on
the sale of real estate in the current period.
Noninterest expense for the three months ended March 31, 1997 increased by
$169,200 or 8.8% from the prior year comparable period. This was primarily
the result of a $148,900 or 15.3% increase in compensation and benefits
attributable to increased staffing, employee 401K benefits, incentive bonuses
paid, and salary and wage adjustments. In addition, a $54,600 or 15.3%
increase in office occupancy was primarily attributable to the costs
associated with the sale and leaseback of one of our branch office locations.
The federal income tax provision for the three month period ended March 31,
1997 increased to an effective rate of 34.3% for the current period from an
effective rate of 32.9% for the prior year comparable period. This increase
is due to the absence of tax statutory bad debt deductions in the current
year versus the prior year comparable period.
NINE MONTHS ENDED MARCH 31, 1997,
COMPARED TO NINE MONTHS ENDED
MARCH 31, 1996.
The Company's net income for the nine months ended March 31, 1997 was
$2,392,200. This represents an 8.1% decrease when compared
PAGE 9
<PAGE>
PART I FINANCIAL INFORMATION
ITEM 2
RESULTS OF OPERATION CONTINUED
with the prior year comparable period. The decrease for the period is due to
a one-time charge of approximately $1,708,000 or $1,127,000 after tax,
representing a special assessment of 65.7 basis points on the Bank's deposits
held as of March 31, 1995, as a result of the recently enacted legislation to
recapitalize the Savings Association Insurance Fund. The Company's operating
income excluding this assessment for the nine-month period ended March 31,
1997 was $3,519,200. This represents a 35.2% increase when compared with the
prior year comparable period.
Net interest income for the nine months ended March 31, 1997 increased by
$2,049,500 or 23.7%, primarily due to an increase of $2,387,500 or 11.6% in
interest income that resulted from an increase of $47.3 million in the
average balance of the loan and mortgage-backed securities portfolios. This
was partially offset by a decrease in the average balance of the investment
portfolio of $16.1 million and resulted in a 12 basis point increase in the
average return on interest-earning assets from the prior year comparable
period. The average balance on deposits and advances increased by
$27.8 million from the prior year comparable period. This increased balance
offset by a 30 basis point decrease in the average cost of funds for the
current period resulted in an overall increase in interest expense of
$338,000 or 2.8%. In addition to an increase of 42 basis points in the
Bank's interest-rate spread during the current period, as compared to the
prior year comparable period, the Bank's net interest income increased due to
balance sheet growth in both interest-earning assets and interest-bearing
liabilities.
For the nine months ended March 31, 1997, a provision for loan losses of
$107,000 was recorded, while a provision of $417,000 was recorded in the nine
months ended March 31, 1996. Provisions are based on management's analysis
of the various factors which affect the loan portfolio and management's
desire to maintain the allowance for loan losses at a level considered
adequate to provide for probable future loan losses. During the nine months
ended March 31, 1997 and 1996, management increased its unallocated reserves
for loan losses based primarily on growth of the loan portfolio, along with
prevailing economic conditions and other factors deemed relevant. At
March 31, 1997, the allowance for loan losses was $2.6 million, which
represented 61.1% of nonperforming loans and 0.8% of net loans.
For the nine months ended March 31, 1997 noninterest income decreased
$293,200 or 22.8% from the prior year comparable period. This was primarily
attributable to a decrease of $250,700 or 33.3% in income from
mortgage-banking activities that resulted from a decline in gains on the sale
of loans available for sale and mortgage-backed securities available for sale
of
PAGE 10
<PAGE>
PART I FINANCIAL INFORMATION
ITEM 2
RESULTS OF OPERATIONS CONTINUED
$148,700 from the prior year comparable period, along with a decrease in net
servicing income of $102,000 in the current period attributable to the
amortization of the servicing asset resulting from the application of
FASB 122, Accounting for Mortgage Servicing Rights and amended by FASB 125,
Accounting for Transfers and Servicing of Financial Assets and Extinguishment
of Liabilities. During these periods, PVF pursued a strategy of originating
long-term, fixed-rate loans pursuant to Federal Home Loan Mortgage
Corporation ("FHLMC") and Federal National Mortgage Association ("FNMA")
guidelines and selling such loans to the FHLMC or the FNMA, while retaining
the servicing. Other noninterest income, net, decreased by $80,600 or 37.4%
from the previous year's comparable period, primarily due to net gains
realized on the sale of investment securities available for sale during the
prior period.
Noninterest expense for the nine months ended March 31, 1997 increased by
$2.2 million or 38.8% from the prior year comparable period. This was
primarily the result of the previously noted federal deposit insurance
special assessment of $1,708,000. In addition, a $407,200 or 14.1% increase
in compensation and benefits was attributable to increased staffing, employee
401K benefits, incentive bonuses paid, and salary and wage adjustments. A
$132,400 or 12.4% increase in office occupancy was primarily attributable to
the costs associated with the sale and leaseback of one of our branch offices.
The federal income tax provision for the nine-month period ended March 31,
1997 increased to an effective rate of 34.4% for the current period from an
effective rate of 31.4% for the prior year comparable period. This increase
is due to the absence of tax statutory bad debt deductions in the current
year versus the prior year comparable period.
LIQUIDITY AND CAPITAL RESOURCES
The Bank is required by federal regulations to maintain specific levels of
"liquid" assets consisting of cash and other eligible investments. The
current level of liquidity required by the Office of Thrift Supervision is 5%
of the sum of net withdrawable savings and borrowings due within one year.
The Bank's liquidity at March 31, 1997 was 8.0%. Management believes the
Bank has sufficient liquidity to meet its operational needs.
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K
(a) PVF did not file any reports on Form 8-K
during the quarter ended March 31, 1997.
PAGE 11
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant had duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
PVF CAPITAL CORP.
------------------
(Registrant)
Date: May 9, 1997 /s/ C. Keith Swaney
------------ -----------------------------
C. Keith Swaney
Vice President and Treasurer
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
STATEMENT OF CONDITION AND THE STATEMENT OF OPERATION FOR THE PERIOD ENDED
DECEMBER 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> MAR-31-1997
<CASH> 2,295
<INT-BEARING-DEPOSITS> 243
<FED-FUNDS-SOLD> 2,375
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 0
<INVESTMENTS-CARRYING> 13,995
<INVESTMENTS-MARKET> 13,774
<LOANS> 330,179
<ALLOWANCE> 2,636
<TOTAL-ASSETS> 356,251
<DEPOSITS> 273,553
<SHORT-TERM> 32,500
<LIABILITIES-OTHER> 6,344
<LONG-TERM> 18,835
0
0
<COMMON> 23
<OTHER-SE> 24,996
<TOTAL-LIABILITIES-AND-EQUITY> 356,251
<INTEREST-LOAN> 21,991
<INTEREST-INVEST> 941
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 22,932
<INTEREST-DEPOSIT> 10,459
<INTEREST-EXPENSE> 12,249
<INTEREST-INCOME-NET> 10,683
<LOAN-LOSSES> 107
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 7,920
<INCOME-PRETAX> 3,649
<INCOME-PRE-EXTRAORDINARY> 3,649
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,392
<EPS-PRIMARY> 1.03
<EPS-DILUTED> 0.96
<YIELD-ACTUAL> 3.700
<LOANS-NON> 3,159
<LOANS-PAST> 1,071
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 918
<ALLOWANCE-OPEN> 2,670
<CHARGE-OFFS> 153
<RECOVERIES> 12
<ALLOWANCE-CLOSE> 2,636
<ALLOWANCE-DOMESTIC> 2,636
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 2,496
</TABLE>
