What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2009-09-24 compared with 2008-09-26 · 848 added, 554 removed, 762 unchanged (65% of the section changed)

13 unchanged sentences

Managements annual report on internal control over financial reporting is incorporated herein by reference to the Companys audited Consolidated Financial Statements in this Annual Report on Form 10-K.

This annual report does not include an attestation report of the Companys registered public accounting firm regarding internal control over

financial reporting.

Managements report was not subject to attestation by the Companys registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to provide only

managements report in this annual report.

This annual report does not include an attestation report of the Companys independent registered public accounting firm regarding internal control

over financial reporting.

Managements report was not subject to attestation by the Companys independent registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to

provide only managements report in this annual report.

Changes to Internal Control Over Financial Reporting

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DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

For information concerning the directors of the Company, the information contained under the section captioned Items to be Voted on by

StockholdersItem 1Election of Directors in BV Financials Proxy Statement for the 2008 Annual Meeting of Stockholders (Proxy Statement) is incorporated by reference.

For information concerning the directors of the Company, the information contained under the section captioned

Items to be Voted on by StockholdersItem 1Election of Directors in BV Financials Proxy Statement for the 2009 Annual Meeting of Stockholders (Proxy Statement) is incorporated by reference.

Executive Officers

The Board of Directors annually

elects the executive officers of BV Financial, Bay-Vanguard, M.H.C.

and Bay-Vanguard Federal Savings Bank, who serve at the Boards discretion.

The Board of Directors

annually elects the executive officers of BV Financial, Bay-Vanguard, M.H.C.

and Bay-Vanguard Federal, who serve at the Boards discretion.

Our executive officers are:

Chairman and Chief Financial Officer of BV Financial, Bay-Vanguard, M.H.C.

and Bay-Vanguard Federal Savings Bank

and Bay-Vanguard Federal

President and Chief Executive Officer of BV Financial, Bay-Vanguard, M.H.C.

and Bay-Vanguard Federal Savings Bank

and Bay-Vanguard Federal

Gallagher, Jr.

Senior Vice President of Bay-Vanguard Federal Savings Bank

Senior Vice President of Bay-Vanguard Federal

Below is information regarding our executive officers who are not also directors.

2 unchanged sentences

The age indicated is as of June 30, 2009.

Kelly is a senior vice president of Bay-Vanguard Federal Savings Bank.

Kelly was vice president of Vanguard Federal Savings and Loan Association before its merger with Bay Federal Savings and Loan Association in

Collier is senior vice president of Bay-Vanguard Federal Savings Bank.

Collier joined

Bay-Vanguard Federal Savings Bank in February 2006.

Collier was vice president of lending for seven years at Harford Bank before his employment by Bay-Vanguard Federal Savings Bank.

Kelly is a senior vice president of Bay-Vanguard Federal.

Kelly was vice president of Vanguard Federal Savings and Loan Association before its merger with Bay Federal Savings and Loan Association in April 1996.

Collier is senior vice president of Bay-Vanguard Federal.

Collier joined Bay-Vanguard Federal in

February 2006.

Collier was vice president of lending for seven years at Harford Bank before his employment by Bay-Vanguard Federal.

Compliance with Section 16(a) of the Exchange Act

Reference is made to the cover page of this report and to the section captioned Other Information Relating to Directors and Executive OfficersSection 16(a) Beneficial Ownership Reporting Compliance in the Proxy

Statement for information regarding compliance with Section 16(a) of the Exchange Act.

Reference is made to the cover page of this report and to the

section captioned Other Information Relating to Directors and Executive OfficersSection 16(a) Beneficial Ownership Reporting Compliance in the Proxy Statement for information regarding compliance with Section 16(a) of

the Exchange Act.

Disclosure of Code of Ethics and Business Conduct

The Company has adopted a Code of Ethics, which is available to stockholders, without charge, upon written request to Robert R.

Jr., Corporate Secretary, BV Financial, Inc., 7114 North Point Road, Baltimore, Maryland 21219.

Kern, Jr., Corporate Secretary, BV Financial, Inc., 7114 North Point Road, Baltimore,

Maryland 21219.

Corporate Governance

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Specimen Stock Certificate of BV Financial, Inc.

Employment Agreement between Bay-Vanguard Federal Savings Bank and Edmund T.

Employment Agreement between BV Financial, Inc.

Amended and Restated Employment Agreement between Bay-Vanguard Federal Savings Bank and Edmund

Amended and Restated Employment Agreement between BV Financial, Inc.

and Edmund T.

Employment Agreement between Bay-Vanguard Federal Savings Bank and Carolyn M.

Employment Agreement between BV Financial, Inc.

Amended and Restated Employment Agreement between Bay-Vanguard Federal Savings Bank and Carolyn M.

Amended and Restated Employment Agreement between BV Financial, Inc.

and Carolyn M.

Employment Agreement between Bay-Vanguard Federal Savings Bank and Daniel J.

Amended and Restated Employment Agreement between Bay-Vanguard Federal Savings Bank and Daniel J.

Gallagher, Jr.

1 unchanged sentence

Form of ESOP Loan Commitment Letter and ESOP Loan Documents (1)

Form of Bay-Vanguard Federal Savings Bank Change in Control Severance Compensation Plan (1)

Amended and Restated Bay-Vanguard Federal Savings Bank Change in Control Severance Compensation Plan (2)

Bay-Vanguard Federal Savings Bank Employees Savings and Profit-Sharing Plan (1)

Form of Bay-Vanguard Federal Savings Bank Executive Supplemental Retirement Plan (1)

Form of Bay-Vanguard Federal Savings Bank Supplemental Executive Retirement Plan (1)

Amended and Restated Bay-Vanguard Federal Savings Bank Supplemental Executive Retirement Plan (2)

Form of Bay-Vanguard Federal Savings Bank Directors Supplemental Retirement Plan (1)

7 unchanged sentences

Incorporated herein by reference from the Exhibits to Form SB-2, Registration Statement and amendments thereto, initially filed on September 17, 2004, Registration

Incorporated herein by reference from the Exhibits to the Quarterly Report on Form 10-QSB, filed on May 13, 2005.

Incorporated herein by reference from the Exhibits to the Quarterly Report on Form 10-Q, filed on May 13, 2009.

Incorporated herein by reference from Appendix C of the Proxy Statement for the 2005 Annual Meeting of Stockholders, filed on October 4, 2005.

8 unchanged sentences

/s/ Carolyn M.

President, Chief Executive Officer and Director (principal executive officer)

President, Chief Executive Officer and Director

(principal executive officer)

September 24, 2009

/s/ Edmund T.

Chairman of the Board and Chief Financial Officer (principal accounting and financial officer)

Chairman of the Board and Chief Financial Officer

(principal accounting and financial officer)

September 24, 2009

46 unchanged sentences

We have audited the accompanying consolidated statements of financial condition of BV Financial, Inc.

and subsidiaries as of June 30, 2008 and 2007, and

the related consolidated statements of operations, stockholders equity, and cash flows for the years then ended.

The Companys management is responsible for these consolidated financial statements.

Our responsibility is to express an

opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the

Public Company Accounting Oversight Board (United States).

Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement.

The Company is not

required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are

appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Companys internal control over financial reporting.

and subsidiaries as of June 30, 2009 and 2008,

and the related consolidated statements of operations, stockholders equity, and cash flows for each of the years in the two-year period ended June 30, 2009.

The Companys management is responsible for these consolidated financial

Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our

audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of

material misstatement.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

Our audit included consideration of internal control over financial reporting as a basis for

designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Companys internal control over financial reporting.

Accordingly, we express no such opinion.

An audit also includes examining, on a

test basis, evidence supporting the amounts and disclosures in the consolidated financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement

presentation.

audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating

the overall financial statement presentation.

We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements

referred to above present fairly, in all material respects, the financial position of BV Financial, Inc.

and subsidiaries as of June 30, 2008 and 2007 and the consolidated results of their operations and their cash flows for the years then ended in

conformity with accounting principles generally accepted in the United States of America.

As discussed in Note 1 to the consolidated

financial statements, the Company adopted EITF 06-4 effective July 1, 2007 and changed its method of accounting for postretirement benefits associated with split dollar life insurance.

In our opinion, the

consolidated financial statements referred to above present fairly, in all material respects, the financial position of BV Financial, Inc.

and subsidiaries as of June 30, 2009 and 2008 and the results of their operations and their cash flows

for each of the years in the two-year period ended June 30, 2009 in conformity with accounting principles generally accepted in the United States of America.

Beard Miller Company LLP

5 unchanged sentences

OF F INANCIAL C ONDITION

(Dollars In Thousands Except Per Share

(Dollars In Thousands Except Per

Share Amounts)

Federal funds sold

1 unchanged sentence

Interest bearing time deposits in other banks

Securities trading

Securities available for sale

1 unchanged sentence

Loans receivable, net of allowance for loan losses 2009 $855;

Foreclosed real estate and repossessed assets

Premises and equipment, net

3 unchanged sentences

Other intangible assets, net

Deferred tax assets, net

L IABILITIES AND S TOCKHOLDERS E QUITY

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Retained earnings

Accumulated other comprehensive loss

Accumulated other comprehensive gain (loss)

Total Stockholders Equity

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Income from investment in life insurance

Loss on securities trading

Loss on sale of securities available for sale

Termination of split-dollar life insurance liability

Total Non-Interest Income

5 unchanged sentences

Amortization of intangible assets

Loss on sale of securities available for sale

Goodwill impairment

FDIC insurance premiums

Total Non-Interest Expenses

Income (Loss) before Income Taxes

P ROVISION (B ENEFIT ) FOR I NCOME T AXES

Net Income (Loss)

Basic Earnings (Loss) Per Share

Diluted Earnings (Loss) Per Share

Loss before Income Tax Benefit

B ENEFIT FOR I NCOME T AXES

Basic Loss Per Share

Diluted Loss Per Share

Dividends Declared Per Share

8 unchanged sentences

Comprehensive

Income (Loss)

(Dollars in Thousands)

B ALANCE - J UNE 30, 2007

Comprehensive income:

Unrealized holding gains (net of tax of $7)

Total Comprehensive Income

Adoption of EITF 06-4 split-dollar life insurance (see Note 1)

Comprehensive loss:

Unrealized holding gains (net of tax of $11 and reclassification adjustment for securities losses recognized of $293)

Total Comprehensive Loss

Compensation expense under stock-based compensation plan

3 unchanged sentences

B ALANCE - J UNE 30, 2008

Adoption of EITF 06-4 split-dollar life insurance (see Note 1)

Comprehensive loss:

Unrealized holding gains (net of tax of $11 and reclassification adjustment for securities losses recognized of $293)

Unrealized holding gains (net of tax of $38)

Total Comprehensive Loss

12 unchanged sentences

C ASH F LOWS FROM O PERATING A CTIVITIES

Net income (loss)

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Adjustments to reconcile net loss to net cash provided by (used in) operating activities:

Net amortization of discounts and premiums

2 unchanged sentences

Loss on sale of securities available for sale

Net change in securities trading

Amortization of deferred loan fees/costs

4 unchanged sentences

Stock-based compensation expense

Termination of split-dollar life insurance liability

Goodwill impairment

Decrease (increase) in other assets

2 unchanged sentences

C ASH F LOWS FROM I NVESTING A CTIVITIES

Net decrease (increase) in interest bearing deposits

Net decrease (increase) in interest bearing deposits in other banks

Purchases of securities available for sale

Purchases of securities held to maturity

Proceeds from maturity of securities available for sale

Proceeds from maturity of securities held to maturity

Proceeds from maturities and calls of securities available for sale

Proceeds from maturities and calls of securities held to maturity

Proceeds from sale of securities available for sale

Principal collected on mortgage backed securities

Net increase in loans

Net decrease (increase) in loans

Purchase of premises and equipment

4 unchanged sentences

C ASH F LOWS FROM F INANCING A CTIVITIES

Decrease in official checks

Increase (decrease) in official checks

Net increase (decrease) in deposits

6 unchanged sentences

Net Increase in Cash and Cash Equivalents

C ASH A ND C ASH E QUIVALENTS - B EGINNING

C ASH A ND C ASH E QUIVALENTS - E NDING

C ASH AND C ASH E QUIVALENTS - B EGINNING

C ASH AND C ASH E QUIVALENTS - E NDING

S UPPLEMENTARY C ASH F LOWS I NFORMATION

1 unchanged sentence

Income taxes paid

Net loans transferred to foreclosed real estate/repossessed assets

Net loans transferred to foreclosed real estate and repossessed assets

See notes to consolidated financial statements.

BV F INANCIAL , I NC .

AND S UBSIDIARIES

C ONSOLIDATED F INANCIAL S TATEMENTS

N OTE 1 - S UMMARY OF

S UBSIDIARIES

N OTES TO C ONSOLIDATED F INANCIAL S TATEMENTS

N OTE 1 S UMMARY OF S IGNIFICANT

A CCOUNTING P OLICIES

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(the M.H.C.) as a federally chartered mutual holding company that owned 55% of the common stock of the Company.

At June 30, 2008 the M.H.C.

61.1% of the common stock of the Company.

As part of the reorganization, the Company sold 1,190,250 shares of its common stock at a price of $10.00 per share to members of the Bank in a subscription offering raising approximately $11.0 million in

net proceeds.

Bay-Vanguard Federal is headquartered in Baltimore, Maryland and is a community-oriented financial institution offering

traditional financial services to its local communities.

The Bank is engaged primarily in the business of attracting deposits from the general public using such funds to originate one-to four-family real estate, mobile home, construction,

multi-family, commercial real estate and consumer loans.

The Banks savings accounts are insured up to the applicable legal limits by

the Federal Deposit Insurance Corporations Deposit Insurance Fund.

At June 30, 2009 and 2008 the M.H.C.

owned 60.9% and 61.1%, respectively of the common stock of the Company.

As part of the reorganization, the Company sold 1,190,250 shares of its common stock at a price of $10.00 per share to members of the Bank in a subscription offering raising

approximately $11.0 million in net proceeds.

Bay-Vanguard Federal is headquartered in Baltimore, Maryland and is a community-oriented

financial institution offering traditional financial services to its local communities.

The Bank is engaged primarily in the business of attracting deposits from the general public using such funds to originate one-to four-family real estate, mobile

home, construction, multi-family, commercial real estate and consumer loans.

The Banks savings accounts are insured up to the

applicable legal limits by the Federal Deposit Insurance Corporations Deposit Insurance Fund.

Bay-Vanguard Federal is a member of the Federal Home Loan Bank System.

2 unchanged sentences

Principles of Consolidation

The consolidated

financial statements include the accounts of the Company, the Bank and its wholly-owned subsidiary, HRC.

consolidated financial statements include the accounts of the Company, the Bank and its wholly-owned subsidiary, HRC.

All intercompany balances and transactions have been eliminated in consolidation.

Basis of Financial Statement Presentation and Significant Estimates

The consolidated financial

statements have been prepared in conformity with accounting principles generally accepted in the United States of America.

In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the

reported amounts of assets and liabilities as of the date of the consolidated statement of financial condition and revenues and expenses for the period.

Actual results could differ significantly from those estimates.

Material estimates that are

particularly susceptible to significant change in the near-term relate to the determination of the allowance for loan losses, the assessment of other than temporary impairment of investment securities, intangible asset impairment and the valuation

of deferred tax assets.

The consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America.

In preparing the consolidated financial statements, management is

required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the consolidated statement of financial condition and revenues and expenses for the period.

Actual results could differ

significantly from those estimates.

Material estimates that are particularly susceptible to significant change in the near-term relate to the determination of the allowance for loan losses, the assessment of other than temporary impairment of

investment securities, intangible asset impairment and the valuation of deferred tax assets.

Significant Group Concentrations of Credit Risk

Most of the Companys activities are with customers located within the Baltimore Metropolitan Area.

The Company does not have any significant

concentrations to any one industry or customer.

The Company does not have any

significant concentrations to any one industry or customer.

BV F INANCIAL , I NC .

1 unchanged sentence

C ONSOLIDATED F INANCIAL S TATEMENTS

N OTE 1 - S UMMARY OF A CCOUNTING

P OLICIES (C ONTINUED )

N OTE 1 S UMMARY OF S IGNIFICANT

A CCOUNTING P OLICIES (C ONTINUED )

The Company follows Statement of Financial Accounting Standards (SFAS) No.

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cost (including amortization of premium or accretion of discount).

As the Company does not engage in security trading, the balance of its debt securities and any equity securities are classified as available for sale.

Net unrealized gains and losses

for such securities are required to be recognized as increases or decreases in other comprehensive income or loss, net of taxes, and excluded from the determination of net income.

Realized gains and losses on sales of securities are determined using

the specific identification method and are included in earnings.

Premiums and discounts are recognized in interest income using the interest method over the terms of the securities.

Declines in the fair value of held-to-maturity and available-for-sale securities below their cost that are deemed to be other than temporary are reflected

in earnings as realized losses.

In estimating other-than-temporary impairment losses, management considers (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term

prospects of the issuer, and (3) the intent and ability of the Company to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value.

Federal law requires a member institution of the Federal Home Loan Bank System to hold stock of its district Federal Home Loan Bank according to a

predetermined formula.

The Company does not regularly engage in security trading;

however, beginning on July 1, 2008, the Company elected to account for the AMF Ultra Short Mortgage mutual fund it

holds under SFAS 159 which meant the investment was reclassified as securities trading from available-for-sale and carried at fair value with future gains and losses reflected through earnings.

During the year ended June 30, 2009, the Company

recorded a $471,000 loss on securities trading in the income statement.

Net unrealized gains and losses for debt securities classified as available-for-sale are required to be recognized as increases or decreases in other comprehensive income or

loss, net of taxes, and excluded from the determination of net income.

Realized gains and losses on sales of securities are determined using the specific identification method and are included in earnings.

Premiums and discounts are recognized in

interest income using the interest method over the terms of the securities.

Declines in the fair value of held-to-maturity and

available-for-sale securities below their cost that are deemed to be other than temporary are reflected in earnings as realized losses.

In estimating other-than-temporary impairment losses, management considers (1) the length of time and the

extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer, and (3) the Company does not intend to sell the security and will hold the security until the specified maturity or

repricing date.

Federal law requires a member institution of the Federal Home Loan Bank System to hold stock of its district Federal Home

Loan Bank (FHLB) according to a predetermined formula.

This restricted stock is carried at cost.

In December 2008, FHLB of Atlanta announced it would suspend the repurchase of excess capital stock from its members due to deterioration in

its financial condition.

As a result, the Bank may hold more FHLB stock than would have been previously required.

Management evaluates the restricted stock for impairment in accordance with Statement of Position (SOP) 01-6, Accounting by Certain

Entities (Including Entities With Trade Receivables) That Lend to or Finance the Activities of Others .

Managements determination of whether this investment is impaired is based on their assessment of the ultimate recoverability of their

cost rather than by recognizing temporary declines in value.

The determination of whether a decline affects the ultimate recoverability of their cost is influenced by criteria such as (1) the significance of the decline in net assets of the

bank as compared to the capital stock amount for the bank and the length of time this situation has persisted, (2) commitments by the bank to make payments required by law or regulation and (3) the impact of legislative and regulatory

changes on institutions and, accordingly, on the customer base of the bank.

Management believes no impairment charge is necessary related to the FHLB restricted stock as of June 30, 2009.

The Bank held $631,000 of FHLB restricted stock at June 30, 2009.

This stock is carried at a cost of $100 per share.

During 2008, the FHLB announced

that it would suspend paying dividends and repurchasing excess capital stock from its members due to deterioration in its financial condition.

Due to concerns about the capital strength of the Atlanta FHLB and the entire FHLB system, there has been

industry discussion about impairment issues on FHLB stock.

However, due to the nature of the FHLB system and the heavy dependence of community banks on the FHLB, it is believed that any determination about the valuation of FHLB stock needs to be

accomplished at the national level so that the entire community banking system is not disrupted.

If FHLB stock were deemed to be impaired, the write-down for the Bank could be significant.

BV F INANCIAL , I NC .

AND S UBSIDIARIES

C ONSOLIDATED F INANCIAL S TATEMENTS

N OTE 1 S UMMARY OF S IGNIFICANT

A CCOUNTING P OLICIES (C ONTINUED )

Premises and Equipment

1 unchanged sentence

Premises and equipment are stated at cost less accumulated depreciation.

Depreciation is computed based on the straight-line

method over the useful lives of the respective assets.

Expenditures for improvements are capitalized while costs for maintenance and repairs are expensed as incurred.

Depreciation is computed based on the straight-line method over the useful lives of the respective assets.

for improvements are capitalized while costs for maintenance and repairs are expensed as incurred.

Advertising Costs

Advertising costs are expensed as incurred.

Foreclosed Assets

Foreclosed real estate is composed

of property acquired through a foreclosure proceeding or acceptance of a deed-in-lieu of foreclosure and is included in other assets.

Foreclosed assets initially are recorded at fair value, net of estimated selling costs, at the date of foreclosure,

establishing a new cost basis.

Foreclosed assets totaled $41,000 and $44,000 at June 30, 2008 and 2007, respectively.

If the fair value is less than the related loan balance at the time of acquisition, a charge against the allowance for loan

losses is recorded.

After foreclosure, valuations are periodically performed by management and the assets are carried at the lower of cost or fair value minus estimated costs to sell.

Revenues and expenses from operations and changes in the

valuation allowance are included in foreclosed real estate expense.

BV F INANCIAL , I NC .

AND S UBSIDIARIES

C ONSOLIDATED F INANCIAL S TATEMENTS

N OTE 1 - S UMMARY OF A CCOUNTING

P OLICIES (C ONTINUED )

Foreclosed real estate is composed of property acquired through a foreclosure proceeding or acceptance of a deed-in-lieu of

foreclosure and is included in other assets.

Foreclosed assets initially are recorded at fair value, net of estimated selling costs, at the date of foreclosure, establishing a new cost basis.

Foreclosed assets totaled $661,000 and $42,000 at

June 30, 2009 and 2008, respectively.

If the fair value is less than the related loan balance at the time of acquisition, a charge against the allowance for loan losses is recorded.

After foreclosure, valuations are periodically performed by

management and the assets are carried at the lower of cost or fair value minus estimated costs to sell.

Revenues and expenses from operations and changes in the valuation allowance are included in foreclosed real estate expense.

Deferred Income Taxes

Deferred income taxes are recognized for temporary differences between the financial reporting basis and income tax basis of assets and liabilities based on enacted tax rates expected to be in effect when such amounts

are realized or settled.

Deferred tax assets are recognized only to the extent that it is more likely than not that such amounts will be realized based on consideration of available evidence.

Loans Receivable

Loans receivable are stated at

unpaid principal balances, less undisbursed portion of loans in process, deferred loan origination fees and costs and the allowance for loan losses.

Deferred income taxes are

recognized for temporary differences between the financial reporting basis and income tax basis of assets and liabilities based on enacted tax rates expected to be in effect when such amounts are realized or settled.

Deferred tax assets are

recognized only to the extent that it is more likely than not that such amounts will be realized based on consideration of available evidence.

Loans receivable are stated at unpaid principal balances, less undisbursed portion of loans in process, deferred loan

origination fees and costs and the allowance for loan losses.

Interest income is accrued on the unpaid principal balance.

Loan origination fees and costs are

deferred and recognized as an adjustment to the yield (interest income) of the related loans.

Loan origination fees and costs are deferred and recognized as an adjustment to the yield (interest income) of the related

The Company is amortizing these amounts over the contractual life of the loan using the interest method.

For purchased loans, the related premium or

discount is recognized over the contractual life of the purchased loan and is included as part of interest income.

The accrual of interest

is generally discontinued when the contractual payment of principal or interest has become 90 days past due or management has serious doubts about further collectibility of principal or interest, even though the loan is currently performing.

may remain on accrual status if it is in the process of collection and is either guaranteed or well secured.

For purchased loans, the related premium or discount is recognized over the contractual life of the purchased loan and is included as

part of interest income.

The accrual of interest is generally discontinued when the contractual payment of principal or interest has become

90 days past due or management has serious doubts about further collectibility of principal or interest, even though the loan is currently performing.

A loan may remain on accrual status if it is in the process of collection and is either guaranteed

or well secured.

When a loan is placed on nonaccrual status, unpaid interest credited to income is reversed.

Interest received on nonaccrual loans generally

is either applied against principal or reported as interest income, according to managements judgment as to the collectibility of principal.

Generally, loans are restored to accrual status when the obligation is brought current, has performed

in accordance with the contractual terms for a reasonable period of time and the ultimate collectibility of the total contractual principal and interest is no longer in doubt.

Cash payments on impaired loans are recorded in the same manner as

payments on non-accrual loans.

Interest received on nonaccrual loans generally is either applied against principal or reported as interest income, according to

managements judgment as to the collectibility of principal.

Generally, loans are restored to accrual status when the obligation is brought current, has performed in accordance with the contractual terms for a reasonable period of time and the

ultimate collectibility of the total contractual principal and interest is no longer in doubt.

Cash payments on impaired loans are recorded in the same manner as payments on non-accrual loans.

BV F INANCIAL , I NC .

AND S UBSIDIARIES

C ONSOLIDATED F INANCIAL S TATEMENTS

N OTE 1 S UMMARY OF S IGNIFICANT

A CCOUNTING P OLICIES (C ONTINUED )

Allowance for Loan Losses

8 unchanged sentences

susceptible to significant change, including the amounts and timing of future cash flows expected to be received on impaired loans.

allowance consists of specific and general components.

The specific component relates to loans that are classified as either doubtful, substandard or special mention.

For such loans that are also classified as impaired, an allowance is established

when the discounted cash flows (or collateral value or observable market price) of the impaired loan is lower than the carrying value of that loan.

The general component covers non-classified loans and is based on historical loss experience adjusted

for qualitative factors.

A loan is considered past due or delinquent when a contractual payment is not paid in the month that it is due.

loan is considered impaired when, based on current information and events, it is probable that the Bank will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement.

Factors considered by management in determining impairment include payment status, collateral value and the probability of collecting scheduled principal and interest payments when due.

Loans that experience insignificant payment delays and payment

shortfalls generally are not classified as impaired.

Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower,

including the length of the delay, the reasons for the delay, the borrowers prior payment record and the amount of the shortfall in relation to the principal and interest owed.

Impairment is measured on a loan by loan basis for multi-family,

commercial real estate and construction loans by either the present value of expected future cash flows discounted at the loans effective interest rate, the loans obtainable market price or the fair value of the collateral if the loan is

collateral dependent.

Large groups of smaller balance homogeneous loans are collectively evaluated for impairment.

Accordingly, the Bank

does not separately identify individual consumer, mobile home, and residential real estate loans for impairment disclosures, unless they are subject to a restructuring agreement.

BV F INANCIAL , I NC .

1 unchanged sentence

C ONSOLIDATED F INANCIAL S TATEMENTS

N OTE 1 - S UMMARY OF A CCOUNTING

P OLICIES (C ONTINUED )

Allowance for Loan Losses (Continued)

The allowance consists of specific and general components.

The specific component relates to loans

that are classified as either doubtful, substandard or special mention.

For such loans that are also classified as impaired, an allowance is established when the discounted cash flows (or collateral value or observable market price) of the impaired

loan is lower than the carrying value of that loan.

The general component covers non-classified loans and is based on historical loss experience adjusted for qualitative factors.

A loan is considered past due or delinquent when a contractual payment is not paid in the month that it is due.

A loan is considered impaired when, based

on current information and events, it is probable that the Bank will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement.

Factors considered by management in

determining impairment include payment status, collateral value and the probability of collecting scheduled principal and interest payments when due.

Loans that experience insignificant payment delays and payment shortfalls generally are not

classified as impaired.

Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the

delay, the reasons for the delay, the borrowers prior payment record and the amount of the shortfall in relation to the principal and interest owed.

Impairment is measured on a loan by loan basis for multi-family, commercial real estate and

construction loans by either the present value of expected future cash flows discounted at the loans effective interest rate, the loans obtainable market price or the fair value of the collateral if the loan is collateral dependent.

Large groups of smaller balance homogeneous loans are collectively evaluated for impairment.

Accordingly, the Bank does not separately

identify individual consumer, mobile home, and residential real estate loans for impairment disclosures, unless they are subject to a restructuring agreement.

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Investment in Life Insurance

Investment in life insurance is reflected at the net cash surrender value to the Company.

Goodwill and Other Intangible Assets

Goodwill and Other Intangible

Goodwill represents the excess of the cost of an acquisition over the fair value of the net assets acquired.

Intangible assets, consisting of core deposit intangibles, represent purchased assets that also lack physical substance but can be

distinguished from goodwill because of contractual or other legal rights or because the asset is capable of being sold or exchanged on its own or in combination with a related contract, asset or liability.

Core deposit intangibles are amortized on

an accelerated basis over a 7-year period and goodwill is evaluated on an annual basis to determine impairment, if any.

Any impairment of goodwill would be recorded against income in the period of impairment.

Intangible assets,

consisting of core deposit intangibles, represent purchased assets that also lack physical substance but can be distinguished from goodwill because of contractual or other legal rights or because the asset is capable of being sold or exchanged on

its own or in combination with a related contract, asset or liability.

Core deposit intangibles are amortized on an accelerated basis over a 7-year period and goodwill is evaluated on an annual basis to determine impairment, if any.

Any impairment

of goodwill would be recorded against income in the period of impairment.

Goodwill impairment was tested at May 31, 2009 at the Company or reporting unit level.

A valuation analysis identified impairment, and as a result, the Company recorded

an impairment charge of $3.9 million, which eliminated all goodwill at the Company.

The goodwill impairment charge did not affect the Companys regulatory capital or cash flow.

Statement of Cash Flows

Cash and cash equivalents in

the statements of cash flows include cash and federal funds sold.

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Cash and cash equivalents in the statements of cash flows include cash and

federal funds sold.

Federal funds are generally purchased and sold for one-day periods.

Transfers of Financial Assets

Transfers of financial assets are accounted for as sales, when control over the assets has been surrendered.

Control over transferred assets is deemed to be surrendered when:

(1) the assets have been isolated

from the Company, (2) the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets, and (3) the Company does not maintain effective control over

the transferred assets through an agreement to repurchase them before their maturity.

Control over transferred assets is deemed to

be surrendered when:

(1) the assets have been isolated from the Company, (2) the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets, and

(3) the Company does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity.

Off-Balance Sheet Financial Instruments

In the ordinary course of business, the Company has entered into commitments to extend credit.

Such financial instruments are recorded in the statement of

financial condition when they are funded.

In the ordinary course of business, the Company has entered into commitments to

extend credit.

Such financial instruments are recorded in the statement of financial condition when they are funded.

Comprehensive Income (Loss)

Accounting principles generally require that recognized revenue, expenses, gains and losses be included in net income or loss.

Although certain changes in assets and liabilities, such as unrealized gains and losses on

securities available for sale, are reported as a separate component of the stockholders equity section of the statement of financial condition, such items, along with net income or loss, are components of comprehensive income or loss.

Accounting principles generally accepted in the United States of America require that recognized revenue, expenses, gains and losses be

included in net income or loss.

Although certain changes in assets and liabilities, such as unrealized gains and losses on securities available for sale, are reported as a separate component of the stockholders equity section of the statement

of financial condition, such items, along with net income or loss, are components of comprehensive income or loss.

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Earnings Per Share

4 unchanged sentences

unvested stock awards based on the treasury stock method.

As of June 30, 2008 and 2007, the Company had 21,265 and 29,733 shares of unvested restricted stock, respectively, and 111,456 shares and 111,456 shares of unexercised stock

As of June 30, 2009 and 2008, the Company had 21,265 and 29,733 shares of unvested restricted stock, respectively, and 111,456 and 111,456 shares of unexercised stock

options, respectively, none of which were dilutive.

3 unchanged sentences

Except Per Share Data

Net income (loss)

Weighted average common shares outstanding

7 unchanged sentences

SFAS 123(R) requires all share-based payments to employees, including grants of employee stock options, to be recognized as

compensation expense over the required service period in the statement of income at fair value.

compensation expense over the required service period in the statement of operations at fair value.

BV F INANCIAL , I NC .

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Employee Stock Ownership Plan

10 unchanged sentences

Such reclassifications had no effect on net income.

Subsequent Events

The Company has evaluated events and transactions occurring subsequent to the balance sheet date of June 30, 2009, for items that should

potentially be recognized or disclosed in these consolidated financial statements.

The evaluation was conducted through September 18, 2009, the date these financial statements were issued.

On September 17, 2009, the Company filed a Form

8-K with the Securities and Exchange Commission announcing that it plans to deregister its common stock and suspend its reporting obligations under the Securities Exchange Act of 1934 by filing a Form 15 with the Securities and Exchange Commission

on September 25, 2009.

Recent Accounting Pronouncements

In July 2006, the FASB issued FASB Interpretation No.

48, Accounting for Uncertainty in Income Taxesan interpretation of FASB

Statement No.

109 (FIN 48), which clarifies the accounting for uncertainty in tax positions.

This Interpretation requires that companies recognize in their financial statements the impact of a tax position, if that position is more likely

than not of being sustained on audit, based on the technical merits of the position.

The Company adopted the provisions of FIN 48 in the fiscal year ended June 30, 2008 and determined that upon adoption, it had no impact on its financial

In December 2007, the Financial Accounting Standards Board (FASB) issued SFAS No.

141 (R) Business

Combinations (SFAS No.

This Statement establishes principles and requirements for how the acquirer of a business recognizes and measures in its financial statements the identifiable assets acquired, the liabilities

assumed, and any noncontrolling interest in the acquiree.

The Statement also provides guidance for recognizing and measuring the goodwill acquired in the business combination and determines what information to disclose to enable users of the

financial statements to evaluate the nature and financial effects of the business combination.

The guidance will become effective as of the beginning of a companys fiscal year beginning after December 15, 2008.

This new pronouncement will

impact the Companys accounting for business combinations completed beginning July 1, 2009.

In December 2007, the Financial Accounting Standards

Board (FASB) issued SFAS No.

160 Noncontrolling Interests in Consolidated Financial Statementsan amendment of ARB No.

141 (R) Business Combinations (SFAS No.

This Statement establishes principles and requirements

for how the acquirer of a business recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree.

The Statement also provides guidance for recognizing

and measuring the goodwill acquired in the business combination and determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination.

The guidance will

become effective as of the beginning of a companys fiscal year beginning after December 15, 2008.

This new pronouncement will impact the Companys accounting for business combinations completed beginning July 1, 2009.

In December 2007, the Financial Accounting Standards Board (FASB) issued SFAS No.

160 Noncontrolling Interests in Consolidated

Financial Statementsan amendment of ARB No.

51 (SFAS No.

This Statement establishes accounting and reporting standards

for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary.

The guidance will become effective as of the beginning of a companys fiscal year beginning after December 15, 2008 and is not expected to have a

significant impact on the Companys financial statements.

This Statement establishes accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary.

guidance will become effective as of the beginning of a companys fiscal year beginning after December 15, 2008 and is not expected to have a significant impact on the Companys financial statements.

BV F INANCIAL , I NC .

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Recent Accounting Pronouncements (Continued)

Staff Accounting Bulletin No.

110 (SAB 110) amends and replaces Question 6 of Section D.2 of Topic 14,

Share-Based Payment, of the Staff Accounting Bulletin series.

Question 6 of Section D.2 of Topic 14 expresses the views of the staff regarding the use of the simplified method in developing an estimate of expected term

of plain vanilla share options and allows usage of the simplified method for share option grants prior to December 31, 2007.

SAB 110 allows public companies which do not have historically sufficient experience to provide

a reasonable estimate to continue use of the simplified method for estimating the expected term of plain vanilla share option grants after December 31, 2007.

SAB 110 was effective January 1, 2008 and did not have a

significant impact on the Companys financial statements.

In September 2006, the FASB issued FASB Statement No.

157, Fair Value

Measurements, which defines fair value, establishes a framework for measuring fair value under GAAP, and expands disclosures about fair value measurements.

FASB Statement No.

157 applies to other accounting pronouncements that require or

permit fair value measurements.

The new guidance is effective beginning July 1, 2008 and did not have a significant impact on the Companys financial statements.

In February 2008, the FASB issued FASB Staff Position (FSP) 157-2, Effective Date of FASB Statement No.

157, that permits a one-year deferral in applying the measurement provisions of Statement

157 to non-financial assets and non-financial liabilities (non-financial items) that are not recognized or disclosed at fair value in an entitys financial statements on a recurring basis (at least annually).

Therefore, if the change

in fair value of a non-financial item is not required to be recognized or disclosed in the financial statements on an annual basis or more frequently, the effective date of application of Statement 157 to that item is deferred until fiscal years

beginning after November 15, 2008 and interim periods within those fiscal years.

The Company is currently evaluating the impact, if any, of the adoption of FSP 157-2 on its financial statements.

In September 2006, the FASBs Emerging Issues Task Force (EITF) issued EITF Issue No.

06-4, Accounting for Deferred Compensation and Postretirement

Benefit Aspects of Endorsement Split Dollar Life Insurance Arrangements (EITF 06-4).

EITF 06-4 requires the recognition of a liability related to the postretirement benefits covered by an endorsement split-dollar life insurance

Accounting for Deferred Compensation and Postretirement Benefit Aspects of Endorsement Split Dollar Life Insurance Arrangements (EITF 06-4).

EITF 06-4 requires the recognition of a liability related to the postretirement

benefits covered by an endorsement split-dollar life insurance arrangement.

The consensus highlights that the employer (who is also the policyholder) has a liability for the benefit it is providing to its employee.

As such, if the policyholder has agreed to maintain the insurance policy in force for the

employees benefit during his or her retirement, then the liability recognized during the employees active service period should be based on the future cost of insurance to be incurred during the employees retirement.

Alternatively,

if the policyholder has agreed to provide the employee with a death benefit, then the liability for the future death benefit should be recognized by following the guidance in SFAS No.

106 or Accounting Principles Board (APB) Opinion

As such, if the policyholder has

agreed to maintain the insurance policy in force for the employees benefit during his or her retirement, then the liability recognized during the employees active service period should be based on the future cost of insurance to be

incurred during the employees retirement.

Alternatively, if the policyholder has agreed to provide the employee with a death benefit, then the liability for the future death benefit should be recognized by following the guidance in SFAS

106 or Accounting Principles Board (APB) Opinion No.

12, as appropriate.

For transition, an entity can choose to apply the guidance using either of the following approaches:

(a) a change in accounting principle through retrospective application to all periods presented or (b) a

change in accounting principle through a cumulative-effect adjustment to the balance in retained earnings at the beginning of the year of adoption.

The Company adopted this EITF effective July 1, 2007 and recorded a cumulative effect adjustment

of $(221,000).

See related Note 17.

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Recent Accounting Pronouncements (Continued)

(a) a change in accounting principle through

retrospective application to all periods presented or (b) a change in accounting principle through a cumulative-effect adjustment to the balance in retained earnings at the beginning of the year of adoption.

The Company adopted this EITF

effective July 1, 2007 and recorded a cumulative effect adjustment of $(221,000).

The Bank terminated its executive and director split-dollar life insurance retirement death benefit and recognized income of $240,000 in the quarter ended

September 30, 2008.

In February 2007, the FASB issued SFAS No.

6 unchanged sentences

159 is effective for the Company July 1, 2008.

The Company has elected to account for the Shay AMF Ultra Short Mortgage mutual

fund it holds at fair value and there was no impairment recognized with this adoption as the investment had been written down to fair value at June 30, 2008.

Future gains and losses will be reflected through earnings.

The Company has elected to account for the AMF Ultra Short Mortgage mutual fund it

holds at fair value and there was no impairment recognized with this adoption as the investment had been written down to fair value at June 30, 2008.

Losses, both realized and unrealized, were $471,000 for the year ended June 30, 2009 and

are reflected in the Companys net loss.

In June 2007, the Emerging Issues Task Force (EITF) reached a consensus on Issue No.

06-11, Accounting for Income Tax Benefits of Dividends on Share-Based

Payment Awards (EITF 06-11).

EITF 06-11 states that an entity should recognize a realized tax benefit associated with dividends on nonvested equity shares, nonvested equity share units and outstanding equity share options

charged to retained earnings as an increase in additional paid in capital.

The amount recognized in additional paid in capital should be included in the pool of excess tax benefits available to absorb potential future tax deficiencies on

share-based payment awards.

EITF 06-11 should be applied prospectively to income tax benefits of dividends on equity-classified share-based payment awards that are declared in fiscal years beginning after December 15, 2007.

is not expected to have a significant impact on the Companys financial statements.

In May 2008, the FASB issued SFAS No.

Hierarchy of Generally Accepted Accounting Principles. This Statement identifies the sources of accounting principles and the framework for selecting the principles used in the preparation of financial statements.

This Statement is effective

60 days following the SECs approval of the Public Company Accounting Oversight Board amendments to AU Section 411, The Meaning of Present Fairly in Conformity with Generally Accepted Accounting Principles. The Company is

currently evaluating the potential impact the new pronouncement will have on its consolidated financial statements.

In April 2008, the FASB issued FASB

Staff Position (FSP) FAS 142-3, Determination of the Useful Life of Intangible Assets. This FSP amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of

a recognized intangible asset under FASB Statement No.

Accounting for Income Tax Benefits of Dividends on Share-Based Payment Awards (EITF 06-11).

EITF 06-11 states that an entity should recognize a realized tax benefit associated with dividends on nonvested equity shares,

nonvested equity share units and outstanding equity share options charged to retained earnings as an increase in additional paid in capital.

The amount recognized in additional paid in capital should be included in the pool of excess tax

benefits available to absorb potential future tax deficiencies on share-based payment awards.

EITF 06-11 should be applied prospectively to income tax benefits of dividends on equity-classified share-based payment awards that are declared in

fiscal years beginning after December 15, 2007.

Adoption did not have a significant impact on the Companys financial statements.

2008, the FASB issued SFAS No.

162, The Hierarchy of Generally Accepted Accounting Principles. This Statement identifies the sources of accounting principles and the framework for selecting the principles used in the preparation of

financial statements.

This Statement is effective 60 days following the SECs approval of the Public Company Accounting Oversight Board amendments to AU Section 411, The Meaning of Present Fairly in Conformity with Generally Accepted

Accounting Principles. The Company is currently evaluating the potential impact the new pronouncement will have on its consolidated financial statements.

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A CCOUNTING P OLICIES (C ONTINUED )

Recent Accounting Pronouncements (Continued)

In April 2008, the FASB issued FASB Staff Position (FSP) FAS 142-3, Determination of the Useful

Life of Intangible Assets. This FSP amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under FASB Statement No.

Goodwill and Other Intangible Assets (SFAS 142).

The intent of this FSP is to improve the consistency between the useful life of a recognized intangible asset

under SFAS 142 and the period of expected cash flows used to measure the fair value of the asset under SFAS 141R, and other GAAP.

This FSP is effective for financial statements issued for fiscal years beginning after December 15, 2008, and

interim periods within those fiscal years.

Early adoption is prohibited.

The Company is currently evaluating the potential impact the new pronouncement will have on its consolidated financial statements.

The intent of this FSP is to improve the consistency between the useful life of a recognized intangible asset under SFAS 142 and the period of expected cash flows used to

measure the fair value of the asset under SFAS 141R, and other GAAP.

This FSP is effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years.

Early adoption is

Adoption is not expected to have a material impact on our financial position and results of operations.

In September 2008, the FASB issued FSP

133-1 and FIN 45-4, Disclosures about Credit Derivatives and Certain Guarantees:

An Amendment of FASB Statement No.

133 and FASB Interpretation No.

and Clarification of the Effective Date of FASB Statement No.

133-1 and FIN 45-4).

FSP 133-1 and FIN 45-4 amends and enhances disclosure requirements for sellers of credit derivatives and financial guarantees.

It also clarifies that the disclosure requirements of SFAS No.

161 are effective for quarterly

periods beginning after November 15, 2008, and fiscal years that include those periods.

FSP 133-1 and FIN 45-4 is effective for reporting periods (annual or interim) ending after November 15, 2008.

The implementation of this standard did

not have a material impact on our financial position and results of operations.

In September 2008, the FASB ratified the Emerging Issues Task Force (EITF)

08-5, Issuers Accounting for Liabilities Measured at Fair Value With a Third-Party Credit Enhancement (EITF 08-5).

EITF 08-5 provides guidance for measuring liabilities issued with an attached third-party credit

enhancement (such as a guarantee).

It clarifies that the issuer of a liability with a third-party credit enhancement should not include the effect of the credit enhancement in the fair value measurement of the liability.

EITF 08-5 is effective for

the first reporting period beginning after December 15, 2008.

The implementation of this standard did not have a material impact on our financial position and results of operations.

In November 2008, the SEC released a proposed roadmap regarding the potential use by U.S.

issuers of financial statements prepared in accordance with International Financial Reporting Standards (IFRS).

comprehensive series of accounting standards published by the International Accounting Standards Board (IASB).

Under the proposed roadmap, the Company may be required to prepare financial statements in accordance with IFRS as early as

The SEC will make a determination in 2011 regarding the mandatory adoption of IFRS.

The Company is currently evaluating the potential impact that this potential change would have on its financial statements, and it will continue to monitor the

development of the potential implementation of IFRS.

In November 2008, the FASB ratified Emerging Issues Task Force (EITF) Issue No.

Equity Method Investment Accounting Considerations. EITF 08-6 clarifies the accounting for certain transactions and impairment considerations involving equity method investments.

EITF 08-6 is effective for fiscal years beginning after

December 15, 2008, with early adoption prohibited.

The Company is currently evaluating the potential impact the new pronouncement will have on its financial statements.

BV F INANCIAL , I NC .

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Recent Accounting Pronouncements (Continued)

In November 2008, the FASB ratified Emerging Issues Task Force Issue No.

08-7, Accounting for Defensive

Intangible Assets. EITF 08-7 clarifies the accounting for certain separately identifiable intangible assets which an acquirer does not intend to actively use but intends to hold to prevent its competitors from obtaining access to them.

08-7 requires an acquirer in a business combination to account for a defensive intangible asset as a separate unit of accounting which should be amortized to expense over the period the asset diminishes in value.

EITF 08-7 is effective for fiscal

years beginning after December 15, 2008, with early adoption prohibited.

This new pronouncement will impact the Companys accounting for any defensive intangible assets acquired in a business combination completed beginning July 1,

In December 2008, the FASB issued FSP FAS 132(R)-1, Employers Disclosures about Postretirement Benefit Plan Assets. This FSP

amends SFAS 132(R), Employers Disclosures about Pensions and Other Postretirement Benefits, to provide guidance on an employers disclosures about plan assets of a defined benefit pension or other postretirement plan.

disclosures about plan assets required by this FSP shall be provided for fiscal years ended after December 15, 2009.

The Company is currently evaluating the potential impact the new pronouncement will have on its financial statements.

In April 2009, the FASB issued FASB Staff Position (FSP) No.

FAS 157-4, Determining Fair Value When the Volume and Level of Activity for the Asset or

Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly (FSP FAS 157-4).

FASB Statement 157, Fair Value Measurements , defines fair value as the price that would be received to sell the asset or transfer

the liability in an orderly transaction (that is, not a forced liquidation or distressed sale) between market participants at the measurement date under current market conditions.

FSP FAS 157-4 provides additional guidance on determining when the

volume and level of activity for the asset or liability has significantly decreased.

The FSP also includes guidance on identifying circumstances when a transaction may not be considered orderly.

FSP FAS 157-4 provides a list of factors that a reporting entity should evaluate to determine whether there has been a significant decrease in the volume and level of

activity for the asset or liability in relation to normal market activity for the asset or liability.

When the reporting entity concludes there has been a significant decrease in the volume and level of activity for the asset or liability, further

analysis of the information from that market is needed and significant adjustments to the related prices may be necessary to estimate fair value in accordance with Statement 157.

This FSP clarifies that when there has been a significant decrease in the volume and level of activity for the asset or liability, some transactions may not be orderly.

In those situations, the entity must evaluate

the weight of the evidence to determine whether the transaction is orderly.

The FSP provides a list of circumstances that may indicate that a transaction is not orderly.

A transaction price that is not associated with an orderly transaction is given

little, if any, weight when estimating fair value.

This FSP is effective for interim and annual reporting periods ending after June 15, 2009, with

early adoption permitted for periods ending after March 15, 2009.

An entity early adopting FSP FAS 157-4 must also early adopt FSP FAS 115-2 and FAS 124-2, Recognition and Presentation of Other-Than-Temporary Impairments.

The adoption of

this standard did not have a material impact on our financial position or results of operations.

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A CCOUNTING P OLICIES (C ONTINUED )

Recent Accounting Pronouncements (Continued)

In April 2009, the FASB issued FSP No.

FAS 115-2 and FAS 124-2, Recognition and Presentation of

Other-Than-Temporary Impairments (FSP FAS 115-2 and FAS 124-2).

FSP FAS 115-2 and FAS 124-2 clarifies the interaction of the factors that should be considered when determining whether a debt security is other-than-temporarily impaired.

securities, management must assess whether (a) it has the intent to sell the security and (b) it is more likely than not that it will be required to sell the security prior to its anticipated recovery.

These steps are done before assessing

whether the entity will recover the cost basis of the investment.

Previously, this assessment required management to assert it has both the intent and the ability to hold a security for a period of time sufficient to allow for an anticipated

recovery in fair value to avoid recognizing an other-than-temporary impairment.

This change does not affect the need to forecast recovery of the value of the security through either cash flows or market price.

In instances when a determination is made that an other-then-temporary impairment exists but the investor does not intend to sell the debt security and it is not more

likely than not that it will be required to sell the debt security prior to its anticipated recovery, FSP FAS 115-2 and FAS 124-2 changes the presentation and amount of the other-than-temporary impairment recognized in the income statement.

other-than-temporary impairment is separated into (a) the amount of the total other-than-temporary impairment related to a decrease in cash flows expected to be collected from the debt security (the credit loss) and (b) the amount of the

total other-than-temporary impairment related to all other factors.

The amount of the total other-than-temporary impairment related to the credit loss is recognized in earnings.

The amount of the total other-than-temporary impairment related to all

other factors is recognized in other comprehensive income.

This FSP is effective for interim and annual reporting periods ending after June 15, 2009,

with early adoption permitted for periods ending after March 15, 2009.

An entity early adopting FSP FAS 115-2 and FAS 124-2 must also early adopt FSP FAS 157-4, Determining Fair Value When the Volume and Level of Activity for the Asset or

Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly .

The adoption of this standard did not have a material impact on our financial position or results of operations.

In April 2009, the FASB issued FSP No.

FAS 107-1 and APB 28-1, Interim Disclosures about Fair Value of Financial Instruments (FSP FAS 107-1 and APB 28-1).

107-1 and APB 28-1 amends FASB Statement No.

107, Disclosures about Fair Value of Financial Instruments , to require disclosures about fair value of financial instruments for interim reporting periods of publicly traded companies as well

as in annual financial statements.

This FSP also amends APB Opinion No.

28, Interim Financial Reporting , to require those disclosures in summarized financial information at interim reporting periods.

This FSP is effective for interim and annual reporting periods ending after June 15, 2009, with early adoption permitted for periods ending after March 15,

An entity early adopting FSP FAS 107-1 and APB 28-1 must also early adopt FSP FAS 157-4, Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That

Are Not Orderly and FSP FAS 115-2 and FAS 124-2, Recognition and Presentation of Other-Than-Temporary Impairments.

The adoption of this standard did not have a material impact on our financial position or results of operations.

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Recent Accounting Pronouncements (Continued)

In May 2009, the FASB issued FASB Statement No.

165, Subsequent Events, which establishes

general standards of and accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued.

This FASB was effective for interim and annual periods ending

after June 15, 2009.

The Company has complied with the requirements of FASB 165.

In June 2009, the FASB issued SFAS No.

166, Accounting for

Transfers of Financial Assets, an amendment of FASB Statement No.

This statement prescribes the information that a reporting entity must provide in its financial reports about a transfer of financial assets;

the effects of a transfer

on its financial position, financial performance and cash flows;

and a transferors continuing involvement in transferred financial assets.

Specifically, among other aspects, SFAS 166 amends Statement of Financial Standards No.

Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities , or SFAS 140, by removing the concept of a qualifying special-purpose entity from SFAS 140 and removes the exception from applying

FIN 46(R) to variable interest entities that are qualifying special-purpose entities.

It also modifies the financial-components approach used in SFAS 140.

SFAS 166 is effective for fiscal years beginning after November 15, 2009.

The Company is currently evaluating the potential impact the new pronouncement will have on its financial statements.

In June 2009, the FASB issued SFAS

167, Amendments to FASB Interpretation No.

This statement amends FASB Interpretation No.

46, Consolidation of Variable Interest Entities (revised December 2003) an interpretation of ARB

51 , or FIN 46(R), to require an enterprise to determine whether its variable interest or interests give it a controlling financial interest in a variable interest entity.

The primary beneficiary of a variable interest entity

is the enterprise that has both (1) the power to direct the activities of a variable interest entity that most significantly impact the entitys economic performance and (2) the obligation to absorb losses of the entity that could

potentially be significant to the variable interest entity or the right to receive benefits from the entity that could potentially be significant to the variable interest entity.

SFAS 167 also amends FIN 46(R) to require ongoing

reassessments of whether an enterprise is the primary beneficiary of a variable interest entity.

SFAS 167 is effective for fiscal years beginning after November 15, 2009.

We do not expect the adoption of this standard to have an impact on

our financial position or results of operations.

In June 2009, the FASB issued SFAS No.

168, The FASB Accounting Standards Codification and the

Hierarchy of Generally Accepted Accounting Principles, a replacement of FASB Statement No.

SFAS 168 replaces SFAS No.

162, The Hierarchy of Generally Accepted Accounting Principles, to establish the FASB Accounting Standards

Codification as the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in preparation of financial statements in conformity with generally accepted accounting principles in the United

SFAS 168 is effective for interim and annual periods ending after September 15, 2009.

We do not expect the adoption of this standard to have an impact on our financial position or results of operations.

BV F INANCIAL , I NC .

AND S UBSIDIARIES

C ONSOLIDATED F INANCIAL S TATEMENTS

N OTE 2 S ECURITIES

3 unchanged sentences

Available for Sale

Marketable equity securities

Government and federal agencies securities

Mortgage-backed securities

3 unchanged sentences

Marketable equity securities

Government and federal agencies securities

Mortgage-backed securities

Beginning on July 1, 2008, the Company elected to account for the AMF Ultra Short Mortgage mutual fund it

holds under SFAS 159 which meant the investment was reclassified as securities trading from available for sale and carried at fair value with future gains and losses reflected through earnings.

The AMF Ultra Short Mortgage mutual fund had balances

of $1,076,000 and $2,547,000 at June 30, 2009 and 2008, respectively.

Proceeds from trading securities sold during the year ended June 30, 2009 were $1,000,000 resulting in gross losses of $17,000.

Additionally, net losses of $454,000 for

adjustments to fair value on the Companys AMF Ultra Short Mortgage mutual fund were recognized for the year ended June 30, 2009.

Proceeds from marketable equity securities sold during the year ended June 30, 2008 were $250,000

resulting in gross losses of $19,000.

Additionally, an impairment loss of $274,000 was recognized during the year ended June 30, 2008 on the Companys AMF Ultra Short Mortgage mutual fund as it became evident that the impairment was not

BV F INANCIAL , I NC .

12 unchanged sentences

Mortgage-backed securities

Proceeds from marketable equity securities sold during the year ended June 30, 2008 were $250,000 resulting

in gross losses of $19,000.

Additionally, an impairment loss of $274,000 was recognized during the year ended June 30, 2008 on the Companys Shay AMF Ultra Short Mortgage mutual fund as it became evident that the impairment was not

No securities were sold during the year ended June 30, 2007.

BV F INANCIAL , I NC .

AND S UBSIDIARIES

C ONSOLIDATED F INANCIAL S TATEMENTS

N OTE 2 - S ECURITIES (C ONTINUED )

The amortized cost and fair value of securities as of June 30, 2008, by contractual maturity, are shown below.

The amortized cost and fair value of securities as of June 30, 2009, by contractual maturity, are shown

Expected maturities may differ from contractual maturities because the securities may be called or prepaid with or without prepayment penalties.

2 unchanged sentences

(In Thousands)

Due in one year or less

Due after one year through five years

Due after five years through ten years

No contractual maturity:

Mortgage-backed securities

Marketable equity securities

All mortgage-backed securities are Freddie Mac, Fannie Mae or Ginnie Mae backed securities.

Management evaluates securities for other-than-temporary impairment at least on a quarterly basis, and more frequently when economic or market concerns warrant such

Consideration is given to (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer, and (3) the intent and ability of the

Company to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value or until maturity.

analyzing the issuers financial condition, management considers industry analysts reports, financial performance, and projected target prices of investment analysts.

During the quarter ended June 30, 2008, the Company identified the

Shay AMF Ultra Short Mortgage mutual find it holds as being an other-than-temporarily impaired asset and realized an impairment loss of $274,000 on these securities.

Below is a schedule of securities with unrealized losses as of June 30, 2008 and 2007.

These unrealized losses are the result of changes in market conditions and interest rates from those existing at the time of

purchase of the securities and, as to mortgage-backed securities, actual and estimated prepayment speeds.

These factors along with the fact the Company has both the intent and the ability to hold these securities for a period of time sufficient to

allow for any anticipated recovery in fair value, substantiates, in managements opinion, that these unrealized losses are considered temporary.

BV F INANCIAL , I NC .

AND S UBSIDIARIES

C ONSOLIDATED F INANCIAL S TATEMENTS

N OTE 2 S ECURITIES (C ONTINUED )

Management evaluates securities for other-than-temporary impairment at least on a quarterly basis, and more

frequently when economic or market concerns warrant such evaluation.

Consideration is given to (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of

the issuer, and (3) the intent and ability of the Company to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value or until maturity.

In analyzing the issuers financial condition, management considers industry analysts reports, financial performance, and projected target prices of

investment analysts.

During the year ended June 30, 2009, the Company did not identify any other-than-temporarily impaired assets.

During the year ended June 30, 2008, the Company identified the AMF Ultra Short Mortgage mutual fund it

holds as being an other-than-temporarily impaired asset and realized an impairment loss of $274,000 on these securities.

159 was effective for the Company July 1, 2008.

The Company elected to account for the AMF Ultra Short

Mortgage mutual fund it holds at fair value and recognized a trading securities loss of $471,000 during the year ended June 30, 2009.

schedule of securities with unrealized losses as of June 30, 2009 and 2008.

These unrealized losses are the result of changes in market conditions and interest rates from those existing at the time of purchase of the securities and, as to

mortgage-backed securities, actual and estimated prepayment speeds.

These factors along with the fact the Company has both the intent and the ability to hold these securities for a period of time sufficient to allow for any anticipated recovery in

fair value, substantiates, in managements opinion, that these unrealized losses are considered temporary.

At June 30, 2009

Continuous Unrealized Losses for

More Than 12 Months

Continuous Unrealized Losses for

2 unchanged sentences

Government and federal agencies securities:

AFS four securities

AFS no securities

Mortgage-backed securities:

HTM five securities

AFS one security

BV F INANCIAL , I NC .

AND S UBSIDIARIES

C ONSOLIDATED F INANCIAL S TATEMENTS

N OTE 2 - S ECURITIES (C ONTINUED )

HTM one security

AFS no securities

At June 30, 2008

Continuous Unrealized Losses for

More Than 12 Months

Continuous Unrealized Losses for

2 unchanged sentences

Government and federal agencies securities:

HTM three securities

AFS four securities

Mortgage-backed securities:

AFS two securities

Marketable equity securities - one security

HTM five securities

AFS one security

BV F INANCIAL , I NC .

AND S UBSIDIARIES

C ONSOLIDATED F INANCIAL S TATEMENTS

N OTE 3 L OANS R ECEIVABLE

12 unchanged sentences

Total loans receivable net

Residential lending payment experience is generally dependent to some extent on economic and market conditions in

the Banks lending area.

Multi-family, commercial real estate and construction loan repayments are generally dependent on the operations of the related properties or the financial condition of its borrower or guarantor.

Accordingly, repayment

of such loans can be more susceptible to adverse conditions in the real estate market and the regional economy.

BV F INANCIAL , I NC .

2 unchanged sentences

N OTE 3 L OANS R ECEIVABLE (C ONTINUED )

Substantially all of the Banks loans receivable are mortgage loans secured by residential, multi-family and

commercial real estate properties located in the State of Maryland.

Loans are extended only after evaluation by management of customers creditworthiness and other relevant factors on a case-by-case basis.

The Bank generally does not lend more

than 90% of the appraised value of a property and usually requires private mortgage insurance on residential mortgages with loan-to-value ratios in excess of 80%.

In some instances, the Bank lent up to 90% of the appraised value of a property

through a combination of first and second mortgages without requiring private mortgage insurance.

The Bank originates and purchases mobile home loans to owner occupied borrowers up to a maximum of 90% of the value of the mobile home.

the Bank generally obtains personal guarantees of repayment from borrowers and/or others for construction, commercial and multifamily residential loans and disburses the proceeds of construction and similar loans only as work progresses on the

related projects.

The following is a summary of the allowance for loan losses for the years ended June 30, 2008 and 2007:

Residential lending payment experience is generally dependent to some extent on economic and market conditions in the

Banks lending area.

Multi-family, commercial real estate and construction loan repayments are generally dependent on the operations of the related properties or the financial condition of its borrower or guarantor.

Accordingly, repayment of

such loans can be more susceptible to adverse conditions in the real estate market and the regional economy.

Substantially all of the Banks loans

receivable are mortgage loans secured by residential, multi-family and commercial real estate properties located in the State of Maryland.

Loans are extended only after evaluation by management of customers creditworthiness and other relevant

factors on a case-by-case basis.

The Bank generally does not lend more than 90% of the appraised value of a property and usually requires private mortgage insurance on residential mortgages with loan-to-value ratios in excess of 80%.

instances, the Bank lent up to 90% of the appraised value of a property through a combination of first and second mortgages without requiring private mortgage insurance.

The Bank originates and purchases mobile home loans to owner occupied borrowers

up to a maximum of 90% of the value of the mobile home.

In addition, the Bank generally obtains personal guarantees of repayment from borrowers and/or others for construction, commercial and multi-family residential loans and disburses the proceeds

of construction and similar loans only as work progresses on the related projects.

The following is a summary of the allowance for loan losses for the

years ended June 30, 2009 and 2008:

(In Thousands)

4 unchanged sentences

Balance at end of year

The Bank had two impaired loans as defined by SFAS No.

114, Accounting by Creditors for Impairment of a

Loan, totaling $642,000 and allowances for loan losses relating to these impaired loans of $32,000 at June 30, 2009.

The Bank had three impaired loans as defined by SFAS No.

114, Accounting by Creditors for Impairment of

a Loan, totaling $2,582,000 and allowances for loan losses relating to these impaired loans of $286,000 at June 30, 2008.

The average balance in the impaired loans totaled $1,084,000 and the Bank did not recognize any interest income on

impaired loans for the year ended June 30, 2008.

The Bank had no impaired loans at June 30, 2007.

Non-accrual loans totaled approximately $2.6

million and $152,000 at June 30, 2008 and 2007, respectively.

The Bank did not have any loan balances past due 90 days or more and still accruing interest at June 30, 2008 or 2007.

114, Accounting by Creditors for Impairment of a

Loan, totaling $2,582,000 and allowances for loan losses relating to these impaired loans of $286,000 at June 30, 2008.

The average balance in the impaired loans totaled $321,000 and $1,084,000 for the years ended June 30, 2009 and

2008, respectively.

The Bank did not recognize any interest income on impaired loans for the years ended June 30, 2009 and 2008.

Non-accrual loans

totaled approximately $651,000 and $2.6 million at June 30, 2009 and 2008, respectively.

The Bank had $270,000 and $-0- of loan balances past due 90 days or more and still accruing interest at June 30, 2009 or 2008, respectively.

The Bank is a party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers.

These financial

instruments are limited to commitments to originate loans and unused lines of credit and involve to varying degrees elements of credit risk in excess of the amount recognized in the statement of financial position.

The Banks exposure to credit loss from non-performance by the other party to the above mentioned financial instruments is represented by the contractual amount of

those instruments.

The Bank uses the same credit policies in making commitments and conditional obligations as it does for on-balance-sheet instruments.

These financial instruments are limited to commitments to originate loans and unused lines of credit and involve to varying degrees elements of credit risk in excess of the amount recognized in the statement of financial position.

BV F INANCIAL , I NC .

2 unchanged sentences

N OTE 3 L OANS R ECEIVABLE (C ONTINUED )

The Bank generally requires collateral or other security to support financial instruments with off-balance-sheet

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the

Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee.

The Banks exposure to credit loss from non-performance by the other party to the above mentioned financial

instruments is represented by the contractual amount of those instruments.

The Bank uses the same credit policies in making commitments and conditional obligations as it does for on-balance-sheet instruments.

The Bank generally requires collateral or other security to support financial instruments with off-balance-sheet credit risk.

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract.

Commitments generally

have fixed expiration dates or other termination clauses and may require payment of a fee.

Financial Instruments Whose Contract

Amounts Represent Credit Risk

Contract Amount

Contract Amount at

(In Thousands)

1 unchanged sentence

Unused lines of credit

Mortgage loan commitments of $1.97 million not reflected in the accompanying consolidated financial statements at

June 30, 2008 are for fixed rate mortgages with interest rates ranging from 5.25% to 7.50%.

Mortgage loan commitments of $210,000 not reflected in the accompanying consolidated financial statements at

June 30, 2009 are for a fixed rate mortgage with interest rate of 5.50%.

There were consumer loan commitments of $261,000 at June 30, 2009 with interest rates ranging from 11.90% to 14.50%.

Mortgage loan commitments of

$1.4 million not reflected in the accompanying consolidated financial statements at June 30, 2007 are for fixed rate mortgages with interest rates ranging from 7.00% to 7.75%.

There were consumer loan commitments of $1.0 million at

June 30, 2007 with interest rates ranging from 9.00% to 12.75%.

Mortgage loan commitments of $1.97 million not

reflected in the accompanying consolidated financial statements at June 30, 2008 are for fixed rate mortgages with interest rates ranging from 5.25% to 7.50%.

There were consumer loan commitments of $881,000 at June 30, 2008 with interest

rates ranging from 8.90% to 12.25%.

Loan commitments expire 60 days from the date of the commitment.

N OTE 4 - P REMISES AND E QUIPMENT

Premises and equipment at June 30, 2008

and 2007 are summarized by major classification as follows:

P REMISES AND E QUIPMENT

Premises and equipment at June 30, 2009 and 2008 are summarized by major

classification as follows:

(In Thousands)

5 unchanged sentences

BV F INANCIAL , I NC .

S UBSIDIARIES

N OTES TO C ONSOLIDATED F INANCIAL S TATEMENTS

N OTE 5 - I NVESTMENT IN F EDERAL H OME

L OAN B ANK OF A TLANTA S TOCK

The Bank is required to maintain an investment in

the stock of the Federal Home Loan Bank of Atlanta (the FHLB) in an amount equal to at least 0.20% of the Banks total assets plus 4.50% of its outstanding advances from the FHLB.

Purchases and sales of stock are made directly with

the FHLB at par value.

N OTE 6 - G OODWILL , O THER I NTANGIBLE A SSETS

AND B RANCH A CQUISITION

On August 24, 2007, the Bank acquired a branch office in Pasadena, Maryland

from Greater Atlantic Bank.

The Bank paid a premium on the net liabilities, primarily on deposits of $51.5 million assumed at closing.

The premium was comprised of goodwill totaling $3.9 million and identifiable intangibles (core deposit intangible)

totaling $502,000.

The goodwill is deductible for tax purposes.

The activity in goodwill and acquired intangible assets related to branch purchases is as

AND S UBSIDIARIES

C ONSOLIDATED F INANCIAL S TATEMENTS

N OTE 5 I NVESTMENT IN F EDERAL

H OME L OAN B ANK OF A TLANTA S TOCK

The Bank is required to maintain an investment in the stock of the Federal Home Loan Bank of Atlanta (the

FHLB) in an amount equal to at least 0.20% of the Banks total assets plus 4.50% of its outstanding advances from the FHLB.

Purchases and sales of stock are made directly with the FHLB at par value.

N OTE 6 G OODWILL , O THER I NTANGIBLE A SSETS AND B RANCH

On August 24, 2007, the Bank acquired a branch office in Pasadena, Maryland from Greater Atlantic Bank.

The Bank paid a

premium on the net liabilities, primarily on deposits of $51.5 million assumed at closing.

The premium was comprised of goodwill totaling $3.9 million and identifiable intangibles (core deposit intangible) totaling $502,000.

The goodwill is

deductible for tax purposes.

The activity in goodwill and acquired intangible assets related to branch purchases is as follows:

Year Ended June 30, 2009

Year Ended June 30, 2008

(In Thousands)

5 unchanged sentences

for impairment.

The acquired intangible assets, apart from goodwill, will be amortized over their remaining estimated lives.

At June 30, 2008, future

estimated annual amortization expense is as follows (in thousands):

The acquired intangible assets, apart from goodwill, will be amortized over their remaining estimated lives and assessed annually for impairment.

Goodwill impairment was tested at May 31, 2009 at the Company or reporting unit

A valuation analysis identified impairment, and as a result, the Company recorded an impairment charge of $3.9 million, which eliminated all goodwill at the Company.

The goodwill impairment charge did not affect the Companys regulatory

capital or cash flow.

At June 30, 2009, future estimated annual amortization expense is as follows (in thousands):

Year ending June 30:

BV F INANCIAL , I NC .

S UBSIDIARIES

N OTES TO C ONSOLIDATED F INANCIAL S TATEMENTS

AND S UBSIDIARIES

C ONSOLIDATED F INANCIAL S TATEMENTS

N OTE 7 D EPOSITS

13 unchanged sentences

Deposits in excess of $100,000 may not be insured by the FDIC.

At June 30, 2008 and 2007, the Bank had no certificates of deposit in excess of $250,000 outstanding.

IRA deposits in excess of $250,000

may not be insured by the FDIC.

At June 30, 2008, scheduled maturities of certificates of deposit are as follows (in thousands):

At June 30, 2009, the Bank had four certificates of deposits in excess of $250,000 outstanding.

At June 30, 2008, the Bank had no

certificates of deposit in excess of $250,000 outstanding.

IRA deposits in excess of $250,000 may not be insured by the FDIC.

At June 30, 2009,

scheduled maturities of certificates of deposit are as follows (in thousands):

Year ending June 30:

4 unchanged sentences

At June 30, 2009 and 2008, the Bank has an agreement under a blanket floating lien with the FHLB providing the Bank a line of credit of $40.0 million.

June 30, 2008, the Bank had outstanding advances of $7.5 million at a weighted rate of 4.68% consisting of a $2.5 million principal reducing advance at a fixed rate of 4.64% scheduled to mature in August 2010 and a $5.0 million fixed rate

advance at a fixed rate of 4.75% scheduled to mature in September 2010.

At June 30, 2007, the Bank had outstanding advances of $13.5 million at a weighted rate of 4.95%.

The Bank is required to maintain as collateral for its FHLB advances

qualified mortgage loans in an amount equal to 125% of the outstanding advances.

Additionally at June 30, 2008, the Bank had a $2.0 million unsecured demand line of credit facility with M&T Bank which had no outstanding balance.

At June 30, 2008, scheduled repayments and maturities of outstanding advances are as follows (in thousands):

Year ending June 30:

N OTE 9 P ROFIT S HARING AND

D EFERRED C OMPENSATION A GREEMENTS

The Bank has a profit-sharing plan and a 401(k) plan for all eligible

June 30, 2009, the Bank had no outstanding advances.

During the year ended June 30, 2009, the Bank prepaid $6.5 million in advances and incurred $279,000 in prepayment penalties.

At June 30, 2008, the Bank had outstanding advances of

$7.5 million at a weighted rate of 4.68% consisting of a $2.5 million principal reducing advance at a fixed rate of 4.64% scheduled to mature in August 2010 and a $5.0 million fixed rate advance at a fixed rate of 4.75% scheduled to mature in

September 2010.

The Bank is required to maintain as collateral for its FHLB advances qualified mortgage loans in an amount equal to 125% of the outstanding advances.

Additionally at June 30, 2009, the Bank had a $2.0 million unsecured demand

line of credit facility with M&T Bank which had no outstanding balance.

N OTE 9 P ROFIT S HARING

AND D EFERRED C OMPENSATION A GREEMENTS

The Bank has a profit-sharing plan and a 401(k) plan

for all eligible employees.

Contributions to the plans are discretionary by the Board of Directors.

Expenses for the years ended June 30, 2008 and June 30, 2007 were $-0- and $24,000 for the profit-sharing plan and $28,000 and $22,000 for the 401(k) plan,

respectively.

The Company has deferred compensation agreements with two of its executive officers.

Under each executive officers agreement, the

deferred compensation will be paid from the proceeds in excess of cash value of life insurance policies.

The cost of the insurance is charged to operations as incurred.

The amount of an executive officers benefit is determined pursuant to the

accrual of two accounts:

(i) a pre-retirement account and (ii) an index retirement benefit account.

The pre-retirement account is a liability reserve account of the Bank and, prior to the executive officers termination of service or

retirement is increased or decreased each calendar year by the aggregate annual after-tax income from specified life insurance policies purchased or deemed purchased by the Bank reduced by an opportunity cost, which is calculated by

taking into account the Banks after-tax cost of funds.

The index retirement benefit account for any calendar year is equal to the excess of the annual earnings (if any) of the insurance policies for that year over the opportunity

cost for that year.

The directors entered into a supplemental retirement plan.

The directors are 100% vested in a pre-retirement account at the

effective date of the plan.

The balance at the effective date of the plan was $10,000 for each director.

The index retirement benefit for each director each year is equal to the excess of the index over the cost of funds divided by a factor equal to

1.20 minus the marginal tax rate.

The index is the aggregate annual after-tax income from life insurance contracts.

At retirement, the directors are entitled to the balance of the pre-retirement account in 120 monthly installments.

Expenses for the years ended June 30, 2009 and June 30, 2008 were $-0- and $-0- for the profit-sharing plan and $32,000 and $28,000 for the

401(k) plan, respectively.

Effective as of January 1, 2008, and in the place of prior deferred compensation agreements, the Bank entered into new

supplemental executive retirement agreements with two of its executive officers.

Under the agreements, each executive will receive a stated annual benefit in monthly installments for 15 years following his or her separation from service after

attaining a normal retirement age of 65.

If the executive voluntarily separates from service prior to reaching his or her normal retirement age, the executive will receive an unreduced lump sum of the accrued liability balance (i.e., the amount

accrued to fund the future benefit expense under the agreement) within thirty days of the separation from service.

If the executive separates from service involuntarily (i.e., if he or she is terminated other than for cause or terminates employment

for good reason), the executive will receive an unreduced lump sum of the accrued liability balance with thirty days of the separation from service.

Upon a change in control or the executives disability (as each term is defined in the

agreements), the executive will receive a stated annual benefit in monthly installments for 15 years following the change in control and, in the case of a disability, commencing at the executives normal retirement age of 65.

If the executive

dies while actively employed, the executives beneficiary will receive an unreduced lump sum of the accrued liability balance within thirty days of the executives death.

If the executive dies after monthly payments have commenced under

the agreement, the executives beneficiary will receive the remaining installments in monthly payments in accordance with the schedule of payments due to the executive.

Effective as of January 1, 2008, and in the place of a prior supplemental retirement plan, each director of the Bank entered into a new supplemental director retirement agreement.

Under the agreements, each

director will receive a stated annual benefit in monthly installments for 10 years following his or separation from service after attaining a normal retirement age of 70.

If the director voluntarily separates from service prior to reaching his or

her normal retirement age, the director will receive an unreduced lump sum of the accrued liability balance (i.e., the amount accrued to fund the future benefit expense under the agreement) within thirty days of the separation from service.

director separates from service involuntarily (i.e., if he or she is terminated other than for cause), the director will receive an unreduced lump sum of the accrued liability balance with thirty days of the separation from service.

Upon a change in

control, the director will receive a stated annual benefit in monthly installments for 10 years following the change in control.

If the director dies while actively serving as a director, the directors beneficiary will receive an unreduced

lump sum of the accrued liability balance within thirty days of the directors death.

If the director dies after monthly payments have commenced under the agreement, the directors beneficiary will receive the remaining installments in

monthly payments in accordance with the schedule of payments due to the director.

BV F INANCIAL , I NC .

3 unchanged sentences

D EFERRED C OMPENSATION A GREEMENTS (C ONTINUED )

The accrued liabilities for the aforementioned plans were $725,000 and $573,000 for the executive plans and $180,000

and $165,000 for the directors plans at June 30, 2008 and 2007, respectively.

The Company recognized compensation expense related to these plans in the amount of $167,000 and $150,000 during the years ended June 30, 2008 and 2007,

respectively.

In addition the Company recognized a liability of $221,000 through beginning retained earnings related to the postretirement benefits covered by endorsement split-dollar life arrangements effective July 1, 2007 with the adoption

of EITF 06-4.

The Company recognized compensation expense related to the split-dollar benefit in the amount of $30,000 during the year ended June 30, 2008.

The Company recognized the increase in the cash surrender value of the insurance policies as income from investment in life insurance in the amount of $76,000 and $89,000 during the years ended June 30, 2008 and 2007, respectively.

N OTE 10 C OMMON S TOCK AND E MPLOYEE S TOCK

O WNERSHIP P LAN

In 2005, the Bank reorganized from a federally chartered mutual savings bank to a federally chartered

stock savings bank.

In connection with the new supplemental retirement agreements, the executives and directors revoked their split

dollar life insurance agreements with the Bank.

The accrued liabilities for the aforementioned plans were $860,000 and $725,000 for the executive plans

and $188,000 and $180,000 for the directors plans at June 30, 2009 and 2008, respectively.

The Company recognized compensation expense related to these plans in the amount of $142,000 and $167,000 during the years ended June 30, 2009

and 2008, respectively.

adoption of EITF 06-4.

The Company reversed this entry and recognized $240,000 as income from termination of split-dollar life insurance liability during the year ended June 30, 2009.

The Company recognized compensation expense related to the

split-dollar benefit in the amount of $-0- and $30,000 for the years ended June 30, 2009 and 2008, respectively.

The Company recognized the increase

in the cash surrender value of the insurance policies as income from investment in life insurance in the amount of $76,000 and $76,000 during the years ended June 30, 2009 and 2008, respectively.

N OTE 10 C OMMON S TOCK AND E MPLOYEE S TOCK O WNERSHIP

In 2005, the Bank reorganized from a federally chartered mutual savings bank to a federally chartered stock savings bank.

Simultaneously, the Bank formed a new holding company, BV Financial, Inc.

Also simultaneously, a mutual holding company was formed, Bay-Vanguard, M.H.C.

In connection with the reorganization, the Company issued 2,645,000 shares

of its common stock.

In connection with the reorganization, the Company issued 2,645,000 shares of its common stock.

A majority of that stock (1,454,750 shares) was issued to Bay Vanguard, M.H.C.

1 unchanged sentence

At the same time as the reorganization and conversion, the Bank established the ESOP for its employees.

On January 12, 2005, the ESOP acquired 103,684 shares of the Companys common stock in the conversion

with funds provided by a loan from the Company.

On January 12, 2005, the ESOP acquired 103,684 shares of the Companys common stock in the conversion with funds provided by a

loan from the Company.

Accordingly, $1,036,000 of common stock acquired by the ESOP was shown as a reduction of stockholders equity.

The ESOP loan is being repaid principally from the Banks contributions to the

ESOP in 15 equal annual installments through 2020 and bears interest at the rate of five and one quarter percent (5.25%).

The ESOP loan is being repaid principally from the Banks contributions to the ESOP in 15 equal annual

installments through 2020 and bears interest at the rate of five and one quarter percent (5.25%).

Shares are released to participants proportionately as the loan is repaid.

The Bank will recognize compensation expense as

shares are committed for release from collateral at their current market price.

The Bank will recognize compensation expense as shares are committed for

release from collateral at their current market price.

Dividends on allocated shares are recorded as a reduction of retained earnings and dividends on unallocated shares are recorded as a reduction of debt.

recognized $50,000 and $60,000 of compensation expense for the years ended June 30, 2008 and June 30, 2007, respectively.

The Company recognized $28,000 and $50,000

of compensation expense for the years ended June 30, 2009 and June 30, 2008, respectively.

The ESOP holds the common stock in a trust for allocation among participating employees.

3,169 shares were allocated

and 6,912 were released to participants during the year ended June 30, 2008.

6,912 shares were allocated and 6,912 were released to

participants during the year ended June 30, 2009.

3,169 shares were allocated and 6,912 were released to participants during the year ended June 30, 2008.

The unearned ESOP shares totaled 69,124 at June 30, 2009.

The fair value of the unearned shares at June 30, 2008 was $418,000.

All employees of the Bank who attain the age of 21 and complete one year

of service with the Bank will be eligible to participate in the ESOP.

The fair value of the

unearned shares at June 30, 2009 was $249,000.

All employees of the Bank who attain the age of 21 and complete one year of service with the Bank will

be eligible to participate in the ESOP.

Each participants vested interest under the ESOP is determined according to the following schedule:

1 year 20%, 2 years 40%, 3 years 60%, 4 years 80%, 5

years 100%.

For vesting purposes, a year of service means any plan year in which an employee completes at least 1,000 hours of service (whether before or after the ESOPs January 12, 2005 effective date).

Vesting accelerates to 100%

(1) termination of the Plan or upon the permanent and complete discontinuance of contributions by the Bank, (2) termination of service on or after the participants normal or postponed retirement date, (3) a change in

control, or (4) termination of service by reason of death or disability.

1 year 20%, 2 years 40%, 3 years 60%, 4 years 80%, 5 years 100%.

vesting purposes, a year of service means any plan year in which an employee completes at least 1,000 hours of service (whether before or after the ESOPs January 12, 2005 effective date).

BV F INANCIAL , I NC .

S UBSIDIARIES

N OTES TO C ONSOLIDATED F INANCIAL S TATEMENTS

AND S UBSIDIARIES

C ONSOLIDATED F INANCIAL S TATEMENTS

N OTE 10 C OMMON S TOCK AND

E MPLOYEE S TOCK O WNERSHIP P LAN (C ONTINUED )

Vesting accelerates to 100% upon;

(1) termination of the Plan or upon the permanent and complete discontinuance

of contributions by the Bank, (2) termination of service on or after the participants normal or postponed retirement date, (3) a change in control, or (4) termination of service by reason of death or disability.

N OTE 11 E QUITY I NCENTIVE P LAN

On November 8, 2005, stockholders approved the BV Financial, Inc.

2005 Equity Compensation Plan that enabled the Company to grant up to 181,447 stock options and

restricted stock awards to employees and directors.

On November 14, 2005, the Company granted stock options covering 111,456 shares of common stock to certain employees and directors of the Company, of which 43,466 and 22,286 were exercisable

at June 30, 2008 and June 30, 2007, respectively.

2005 Equity Compensation Plan that enabled the Company to grant up to 181,447 stock options and restricted stock awards to employees and

On November 14, 2005, the Company granted stock options covering 111,456 shares of common stock to certain employees and directors of the Company, of which 64,646 and 43,466 were exercisable at June 30, 2009 and June 30,

2008, respectively.

The options were granted at the then fair market value of the stock of $8.94, vest over five years and expire ten years from the date of grant.

Stock options had no intrinsic value at June 30, 2009.

The Company recognized $59,000 and $98,000 of expense relating to the granting of stock options during the

years ended June 30, 2008 and 2007, respectively.

There has been no activity in the stock options to date.

On November 14, 2005, the Company

granted 44,577 shares of restricted stock to certain employees and directors of the Company.

The Company recognized $35,000 and $59,000 of expense relating to the granting of stock options during the years ended June 30, 2009 and 2008, respectively.

There has been no

activity in the stock options to date.

On November 14, 2005, the Company granted 44,577 shares of restricted stock to certain employees and directors

of the Company.

The Company purchased shares in the open market during 2006 to fund this plan.

The awards vest over a five-year period and, therefore, the cost of such

awards is accrued ratably over a five-year period as compensation expense.

The Company recognized $77,000 and $81,000 of expense relating to the grant of shares of restricted stock during the years ended June 30, 2008 and 2007, respectively.

Shares vesting were 8,468 and 8,915 for the years ended June 30, 2008 and 2007, respectively.

The awards vest over a five-year period and, therefore, the cost of such awards is accrued ratably over a five-year period as compensation expense.

Company recognized $77,000 and $77,000 of expense relating to the grant of shares of restricted stock during the years ended June 30, 2009 and 2008, respectively.

Shares vesting were 8,468 and 8,468 for the years ended June 30, 2009 and

2008, respectively.

Unvested shares were 12,797 at June 30, 2009.

of June 30, 2008, there was $260,000 of total unrecognized compensation cost related to unvested share-based compensation arrangements granted under the Plan.

The remaining cost is expected to be recognized over a weighted-average period of 2.4

As of June 30, 2009, there was $183,000 of total unrecognized compensation

cost related to unvested share-based compensation arrangements granted under the Plan.

The remaining cost is expected to be recognized over a weighted-average period of 1.4 years.

N OTE 12 R EGULATORY M ATTERS

The Bank is subject to various regulatory capital requirements administered by the federal banking agencies.

Failure to meet minimum capital requirements can initiate certain mandatory, and possible additional

discretionary actions by the regulators that, if undertaken, could have a direct material effect on the Companys financial statements.

Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must

meet specific capital guidelines that involve quantitative measures of the Banks assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices.

The Banks capital amounts and classifications

are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

Quantitative measures established by

regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the table below) of total and Tier I capital (as defined in the regulations) and risk-weighted assets (as defined), and of Tier I capital (as

defined) to adjusted total assets (as defined).

Management believes, as of June 30, 2008 and 2007 that the Bank met all capital adequacy requirements to which it was subject.

As of June 30, 2008, the most recent notification from the Office of Thrift Supervision has categorized the Bank as well capitalized under the regulatory framework for prompt corrective action.

To be categorized

as well capitalized the Bank must maintain minimum total risk-based, Tier I risk-based and Tier I leverage ratios as set forth in the table.

There have been no conditions or events since that notification that management believes have changed the

Banks category.

The Bank is subject to various

regulatory capital requirements administered by the federal banking agencies.

Failure to meet minimum capital requirements can initiate certain mandatory, and possible additional discretionary actions by the regulators that, if undertaken, could

have a direct material effect on the Companys financial statements.

Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures

of the Banks assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices.

The Banks capital amounts and classifications are also subject to qualitative judgments by the regulators about

components, risk weightings, and other factors.

Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain

minimum amounts and ratios (set forth in the table below) of total and Tier I capital (as defined in the regulations) and risk-weighted assets (as defined), and of Tier I capital (as defined) to adjusted total assets (as defined).

believes, as of June 30, 2009 and 2008 that the Bank met all capital adequacy requirements to which it was subject.

BV F INANCIAL , I NC .

2 unchanged sentences

N OTE 12 R EGULATORY M ATTERS (C ONTINUED )

The following table presents the Banks capital position based on the financial statements:

As of June 30, 2009, the most recent notification from the Office of Thrift Supervision has categorized the Bank

as well capitalized under the regulatory framework for prompt corrective action.

To be categorized as well capitalized the Bank must maintain minimum total risk-based, Tier I risk-based and Tier I leverage ratios as set forth in the table.

have been no conditions or events since that notification that management believes have changed the Banks category.

The following table presents the

Banks capital position based on the financial statements:

For Capital Adequacy

17 unchanged sentences

Adjustments to regulatory capital:

Accumulated other comprehensive loss

Accumulated other comprehensive loss (gain)

Intangible assets (goodwill, core deposit intangible, software)

48 unchanged sentences

N OTE 13 I NCOME T AXES

The income tax provision consists of the following for the years ended June 30, 2008 and 2007:

The income tax benefit consists of the following for the years ended June 30, 2009 and 2008:

(In Thousands)

Current expense (benefit):

Current benefit:

Deferred benefit:

9 unchanged sentences

Impairment loss on investment securities

Goodwill impairment

Total Deferred Tax Assets

2 unchanged sentences

Accrual basis books to cash basis tax return

Unrealized gains on available for sale securities

Total Deferred Tax Liabilities

Net Deferred Tax Assets

Total Deferred Tax Assets

Valuation allowance

Total Deferred Tax Assets, Net of Valuation Allowance

BV F INANCIAL , I NC .

2 unchanged sentences

N OTE 13 I NCOME T AXES (C ONTINUED )

The amount computed by applying the statutory federal income tax rate to income before income taxes is different than

the taxes provided for the following reasons:

The amount computed by applying the statutory federal income tax rate to loss before income tax benefit is different

than the taxes provided for the following reasons:

Years Ended June 30,

4 unchanged sentences

Income from investment in life insurance

Management determined during the fiscal year ended June 30, 2009 that a deferred tax asset valuation

allowance was warranted for its mutual fund security based on the Companys ability to generate future capital gains if necessary to offset capital losses.

In addition, management determined that no deferred tax asset valuation was warranted

for its goodwill impairment write-down due to the expectation of taxable income going forward and the availability of tax planning strategies to generate future income to offset operating losses.

BV F INANCIAL , I NC .

S UBSIDIARIES

N OTES TO C ONSOLIDATED F INANCIAL S TATEMENTS

N OTE 14 R ELATED P ARTY T RANSACTIONS

6 unchanged sentences

Balance, beginning

Reclass from employee to officer loans

Balance, ending

2 unchanged sentences

new lease on August 4, 2004 with an initial term of five years, with two five year renewal options.

Rent expense for the years ended June 30, 2008 and 2007 was $22,000 and $22,000, respectively.

The annual rent was payable in equal monthly

installments.

The Bank entered into an agreement to purchase this office building and settlement occurred on June 24, 2008 with a purchase price of $750,000.

Rent expense for the year ended June 30, 2008 was $22,000.

The annual rent was payable in equal monthly installments.

The Bank entered into

an agreement to purchase this office building and settlement occurred on June 24, 2008 with a purchase price of $750,000.

The lease agreement terminated upon the purchase of the building.

(The building is

reflected in construction in progress at June 30, 2008 as it will be undergoing significant renovation).

(The building is reflected in construction in progress

for the years ended June 30, 2009 and June 30, 2008 as it is undergoing significant renovation).

Gallagher Evelius & Jones LLP, of

which one of the Banks directors is a partner, has performed legal services for Bay-Vanguard Federal.

Bay-Vanguard Federal paid a total of $60,000 and $60,000 in legal fees to Gallagher Evelius & Jones LLP for fiscal 2009 and fiscal

2008, respectively.

BV F INANCIAL , I NC .

AND S UBSIDIARIES

C ONSOLIDATED F INANCIAL S TATEMENTS

N OTE 14 R ELATED P ARTY T RANSACTIONS

(C ONTINUED )

Gallagher Evelius & Jones LLP, of which one of the Banks directors is a partner, has performed legal

services for Bay-Vanguard Federal.

Bay-Vanguard Federal paid a total of $60,000 and $60,000 in legal fees to Gallagher Evelius & Jones LLP for fiscal 2008 and fiscal 2007, respectively.

S UBSIDIARIES

N OTES TO C ONSOLIDATED F INANCIAL S TATEMENTS

N OTE 15 L EASING A RRANGEMENTS

The Bank assumed a non-cancelable operating lease, whose current term expires in August 2013, with the Pasadena branch acquisition.

The lease contains an option which enables the Bank to renew the lease for an

additional 5-year period.

In addition to minimum rentals, the lease has escalation clauses based upon price indices and includes provisions for additional payments to cover real estate taxes and common area maintenance.

The lease contains an option which

enables the Bank to renew the lease for an additional 5-year period.

In addition to minimum rentals, the lease has escalation clauses based upon price indices and includes provisions for additional payments to cover real estate taxes and common area

At June 30, 2009, the total minimum rental commitment under this lease is outlined below (in thousands):

5 unchanged sentences

Companys consolidated financial position or results of operations.

N OTE 17 S UBSEQUENT E VENT

The Bank terminated its executive and director split-dollar life insurance retirement death benefit and recognized income of $221,000 in the quarter

ended September 30, 2008.

N OTE 18 D ISCLOSURE A BOUT F AIR V ALUE

OF F INANCIAL I NSTRUMENTS

The estimated fair values of the Banks financial instruments are summarized

N OTE 17 D ISCLOSURE A BOUT

F AIR V ALUE OF F INANCIAL I NSTRUMENTS

The estimated fair values of the

Banks financial instruments are summarized below.

The fair values are estimates derived primarily from present value techniques and may not be indicative of the net realizable or liquidation values.

Also, the calculation of estimated fair values is based on market conditions at a specific

point in time and may not reflect current or future fair values.

Also, the calculation of estimated fair

values is based on market conditions at a specific point in time and may not reflect current or future fair values.

In September 2006, the Financial

Accounting Standards Board issued FASB Statement No.

157, Fair Value Measurements, (SFAS 157) which defines fair value, establishes a framework for measuring fair value under Generally Accepted Accounting Principles, and expands

disclosures about fair value measurements.

SFAS 157 applies to other accounting pronouncements that require or permit fair value measurements.

The new guidance is effective for financial statements issued for fiscal years beginning after

November 15, 2007, and for interim periods within those fiscal years.

Effective July 1, 2008, the Company adopted SFAS 157.

The primary effect of SFAS 157 on the Company was to expand the required disclosures pertaining to the methods used

to determine fair values.

BV F INANCIAL , I NC .

3 unchanged sentences

V ALUE OF F INANCIAL I NSTRUMENTS (C ONTINUED )

The following methods and assumptions were used by the Bank in estimating the fair values of financial instruments:

In February 2008, the FASB issued FASB Staff Position (FSP) 157-2, Effective Date of FASB Statement

157, that permits a one-year deferral in applying the measurement provisions of Statement No.

157 to non-financial assets and non-financial liabilities (non-financial items) that are not recognized or disclosed at fair value in

an entitys financial statements on a recurring basis (at least annually).

Therefore, if the change in fair value of a non-financial item is not required to be recognized or disclosed in the financial statements on an annual basis or more

frequently, the effective date of application of Statement 157 to that item is deferred until fiscal years beginning after November 15, 2008 and interim periods within those fiscal years.

The Company elected a one-year deferral and will begin

adoption as of July 1, 2009.

In October 2008, the FASB issued FASB Staff Position (FSP) 157-3, Determining the Fair Value of a Financial Asset

When The Market for That Asset is Not Active (FSP 157-3), to clarify the application of the provisions of SFAS 157 in an inactive market and how an entity would determine fair value in an inactive market.

FSP 157-3 became effective immediately

and applies to our June 30, 2009 financial statements.

The application of the provisions of (FSP) 157-3 did not materially affect our results of operations or financial condition as of and for the year ended June 30, 2009.

In February 2007, the FASB issued SFAS No.

159, The Fair Value Option for Financial Assets and Financial LiabilitiesIncluding an amendment of FASB

Statement No.

115. SFAS No.

159 permits entities to choose to measure many financial instruments and certain other items at fair value.

Unrealized gains and losses on items for which the fair value option has been elected will be

recognized in earnings at each subsequent reporting date.

159 was effective for the Company July 1, 2008.

The Company elected to account for the AMF Ultra Short Mortgage Fund mutual fund it holds at fair value and recognized a

trading loss of $471,000 during the year ended June 30, 2009.

The Company made this election based on the availability of tax planning strategies to generate future capital gains if necessary to offset capital losses on the mutual fund.

fund pays monthly cash dividends which the Company records as interest income.

SFAS 157 establishes a fair value hierarchy that

prioritizes the inputs to valuation methods used to measure fair value.

The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to

unobservable inputs (Level 3 measurements).

The three levels of the fair value hierarchy under SFAS 157 are as follows:

Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.

Quoted prices in markets that are not active, or inputs that are observable either directly or indirectly, for substantially the

full term of the asset or liability.

Prices or valuation techniques that require inputs that are both significant to the fair

value measurement and unobservable (i.e.

supported with little or no market activity).

An asset or liabilitys level within the fair

value hierarchy is based on the lowest level of input that is significant to the fair value measurement.

BV F INANCIAL , I NC .

AND S UBSIDIARIES

C ONSOLIDATED F INANCIAL S TATEMENTS

N OTE 17 D ISCLOSURE A BOUT F AIR

V ALUE OF F INANCIAL I NSTRUMENTS (C ONTINUED )

Assets measured at fair value on a recurring basis by level within the fair value hierarchy used at

June 30, 2009 are as follows:

Quoted Prices

Identical Assets

(In thousands)

Securities trading

Securities available for sale

The following valuation techniques were used to measure the fair value of assets in the table

above on a recurring basis as of June 30, 2009.

Securities trading The fair value of securities trading was based on

available market pricing for the security.

A mutual fund is the only holding we have in this category and we rely on information provided to us by a third party pricing source.

Securities available for sale The fair values of securities available for sale were based on available market pricing for the securities.

We rely on third party brokers to obtain and provide us with this market pricing from a definitive security pricing source.

measured at fair value on a non recurring basis by level within the fair value hierarchy used at June 30, 2009 are as follows:

Quoted Prices

Identical Assets

(In thousands)

Impaired loans

Foreclosed real estate

Repossessed assets

The following valuation techniques were used to measure the fair value of assets in the table

above on a non recurring basis as of June 30, 2009.

Impaired Loans Loans included in the above table are those that are

accounted for under SFAS 114, Accounting by Creditors for Impairment of a Loan , in which the Company has measured impairment generally based on the fair value of the loans collateral.

Fair value was determined based upon a discounted

cash flow from the expected proceeds of the underlying collateral.

This asset is included as Level 3 fair value, based upon the lowest level of input that is significant to the fair value measurements.

The fair value consists of the loan balance

reduced by any specific impairment reserve.

BV F INANCIAL , I NC .

AND S UBSIDIARIES

C ONSOLIDATED F INANCIAL S TATEMENTS

N OTE 17 D ISCLOSURE A BOUT F AIR

V ALUE OF F INANCIAL I NSTRUMENTS (C ONTINUED )

Foreclosed real estate Fair value of foreclosed real estate was based on the price paid

by the Banks wholly-owned subsidiary Housing Recovery Corporation at auction for the property.

This value was subsequently determined to be reasonable based upon an independent third party current industry standard appraisal based on the value

of similar properties adjusted for factors including condition and location of property.

Repossessed Assets Fair value of

repossessed assets was based on the Companys appraisal of the property.

This value was determined from a current industry standard appraisal guide based on the value of similar properties adjusted for factors including condition and location

The following methods and assumptions were used by the Company in estimating the fair values of financial instruments:

Cash and Cash Equivalents and Interest Bearing Deposits in Other Banks

18 unchanged sentences

The carrying amounts of accrued interest receivable and payable approximate fair value.

Off-Balance Sheet Credit Related Instruments

Fair values for off-balance sheet, credit-related

financial instruments are based on fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the counterparties credit standing.

The fair values of these instruments were not

significant at June 30, 2008 or 2007.

BV F INANCIAL , I NC .

3 unchanged sentences

V ALUE OF F INANCIAL I NSTRUMENTS (C ONTINUED )

The following table summarizes the carrying amounts and fair values of financial instruments at June 30, 2008

Off-Balance Sheet Credit Related Instruments

Fair values for off-balance sheet, credit-related financial instruments are based on fees currently charged to enter into similar agreements, taking into

account the remaining terms of the agreements and the counterparties credit standing.

The fair values of these instruments were not significant at June 30, 2009 or 2008.

The following table summarizes the carrying amounts and fair values of financial instruments at June 30, 2009 and 2008:

(In Thousands)

2 unchanged sentences

Interest bearing time deposits in other banks

Securities trading

Securities available for sale

Securities held to maturity

Loans receivable, net

Loans receivable

Federal Home Loan Bank of Atlanta stock

1 unchanged sentence

Financial liabilities:

Deposits, including accrued interest payable

Advances from Federal Home Loan Bank

Off-balance sheet commitments

BV F INANCIAL , I NC .

S UBSIDIARIES

N OTES TO C ONSOLIDATED F INANCIAL S TATEMENTS

N OTE 18 C ONDENSED F INANCIAL I NFORMATION

23 unchanged sentences

Income tax benefit

Loss before equity in net income (loss) of subsidiary

Equity in net income (loss) of subsidiary

Net income (loss)

Loss before equity in net loss of subsidiary

Equity in net loss of subsidiary

Years Ended June 30,

1 unchanged sentence

Statements of Cash Flows

Net income (loss)

Adjustments to reconcile net income (loss ) to net cash from operating activities:

Equity in net loss (income) of subsidiary

Increase in other assets

Increase (decrease) in other liabilities

Net cash used in operating activities

Adjustments to reconcile net loss to net cash from operating activities:

Equity in net loss of subsidiary

Decrease (increase) in other assets

Decrease in other liabilities

Net cash provided by (used in) operating activities

Cash Flows from Investing Activities

1 unchanged sentence

Principal collected on ESOP loan

Net cash provided by investing activities

Net cash provided by (used in) investing activities

Cash Flows from Financing Activities

6 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data