[PVF CAPITAL CORP. LETTERHEAD]
March 6, 2006
United States
Securities and Exchange Commission
100 F Street, N.E.
Washington, DC 20549
Joyce Sweeney, Accounting Branch Chief
Re: PVF Capital Corp.
Form 10-K for the Fiscal Year Ended June 30, 2005
Form 10-Q for the Fiscal Quarter Ended December 31, 2005
File No. 0-24948
Dear Ms. Sweeney:
Following is our response and additional information requested in your comment
letter dated February 23, 2006.
10-K for the Fiscal Year Ended June 30, 2005
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Item 1. Business
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Nonperforming Loans and Other Problem Assets, page 6
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1. Comment/question: Please tell us the length of time that your
non-accrual loans have been contractually past due as of June 30, 2005
and June 30, 2004. Tell us the composition of non-accrual loans as of
June 30, 2004.
Response: Following is a schedule detailing the length of time our
non-accrual loans have been contractually past due as of June 30, 2005
and 2004. We have also included detail as to the composition of
nonaccrual loans as of June 30, 2005 and 2004.
United States
Securities and Exchange Commission
March 6, 2006
Page 2
AT JUNE 30, 2005
90 days 91 to More than
or less 365 days 365 days Total
------- -------- -------- -----
One-to-four family residential 2,408,691 1,687,997 1,594,611 5,691,298
Home equity line of credit 124,363 1,644,100 1,768,462
Multi-family residential - - 21,300 21,300
Commercial real estate 332,042 1,454,275 1,732,167 3,518,484
Land 58,224 276,427 334,651
Residential construction - 256,000 160,000 416,000
Commercial construction - - - -
----------- ---------- ----------- -----------
2,923,319 3,398,272 5,428,605 11,750,195
=========== ========== =========== ===========
AT JUNE 30, 2004
90 days 91 to More than
------- ------ ---------
or less 365 days 365 days Total
------- -------- -------- -----
One-to-four family residential - 2,271,400 1,425,471 3,696,871
Home equity line of credit - 787,551 223,006 1,010,557
Multi-family residential -
Commercial real estate - 2,865,442 1,590,087 4,455,529
Land - 1,161,627 52,126 1,213,754
Residential construction - 256,000 256,000
Commercial construction - - - -
----------- ---------- ----------- -----------
- 7,342,020 3,290,691 10,632,711
=========== ========== =========== ===========
2. Comment/question: Please tell us and in future filings disclose the
underlying reasons for the significant increase in non-accrual loans
and accruing loans which are contractually past due 90 days at June 30,
2005 and June 30, 2004.
Response: The increase in non-accrual loans and accruing loans which
are contractually past due 90 days at June 30, 2005 and June 30, 2004
is attributable to poor current local and economic conditions.
Increasing interest rates have also negatively impacted our borrowers'
ability to make scheduled loan payments. Due to an increase in
foreclosure activity in the area, the foreclosure process in Cuyahoga
County, our primary market, has become elongated. As such, loans have
remained past due for considerable periods prior to being collected,
transferred to Real Estate Owned, or charged-off.
United States
Securities and Exchange Commission
March 6, 2006
Page 3
We will include similar discussion in Management's Discussion and
Analysis in future filings of Form 10-Q and Form 10-K.
Exhibit 13 - 2005 Annual Report
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Management Discussion and Analysis of Financial Condition and Results of
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Operations
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Provision for Loan Losses, page 16
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3. Comment/question: We note your disclosure on page 17 that the level of
classified assets decreased from $14.0 million in 2004 to $12.4 million
in 2005. Please tell us and in future filings define classified assets
and reconcile with your disclosure on pages 7 and 9 of your Form 10-K.
Response: Classified assets are loans identified with an inherent
weakness and serve as an early warning tool in identifying the risk of
loss. Classification categories include Substandard, Doubtful and Loss.
Loans in the substandard classification are inadequately protected by
the current net worth and payment capacity of the obligor, or of the
value of the collateral pledged. Substandard assets have a well defined
weakness based upon objective evidence and contain a distinct
possibility of loss if deficiencies are not corrected.
Loans in the doubtful classification have all weaknesses inherent in
those of substandard classification and these weaknesses make
collection or liquidation in full on the basis of current existing
facts, conditions and values, highly questionable and improbable.
Loans in the loss classification are considered uncollectible and of
such little value that their continuance as assets is not warranted.
Substantially all loans reported as classified assets as of June 30,
2005 and June 30, 2004 were classified as substandard.
United States
Securities and Exchange Commission
March 6, 2006
Page 4
Following is a schedule detailing the performing status of our reported
classified assets as of June 30, 2005 and June 30, 2004.
AT JUNE 30, 2005
More than 90 days
Performing past due and accruing Nonaccrual Total
---------- --------------------- ---------- -----
One-to-four family residential 923,355 150,577 3,169,450 4,243,382
Home equity line of credit 541,189 - 1,768,462 2,309,652
Multi-family residential 319,393 - - 319,393
Commercial real estate 1,210,406 167,520 3,186,442 4,564,368
Land 141,651 - 276,427 418,078
Residential construction - - 526,000 526,000
Commercial construction - - - -
---------- ---------- ---------- ------------
Total classified real estate loans 3,135,994 318,097 8,926,782 12,380,873
---------- ---------- ---------- ------------
Non real estate loans - - - -
---------- ---------- ---------- ------------
3,135,994 318,097 8,926,782 12,380,873
========== ========== ========== ============
AT JUNE 30, 2004
More than 90 days
Performing past due and accruing Nonaccrual Total
---------- --------------------- ---------- -----
One-to-four family residential 1,017,948 69,703 3,696,872 4,784,522
Home equity line of credit 313,541 - 1,010,557 1,324,098
Multi-family residential -
Commercial real estate 778,410 52,982 4,455,529 5,286,920
Land 1,108,000 - 1,213,754 2,321,754
Residential construction - - 256,000 256,000
Commercial construction - - - -
---------- ---------- ---------- ------------
Total classified real estate loans 3,217,899 122,685 10,632,711 13,973,295
Non real estate loans - - - -
---------- ---------- ---------- ------------
3,217,899 122,685 10,632,711 13,973,295
========== ========== ========== ============
United States
Securities and Exchange Commission
March 6, 2006
Page 5
We will include similar discussion and a similar table in Management's
Discussion and Analysis in future filings of Form 10-Q and Form 10-K.
Consolidated Financial Statements
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Note 1 - Summary of Significant Accounting Policies and Related Matters, page 30
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4. Comment/question: We note your disclosure on page 8 of your Form 10-K
that you charge off loans against the allowance for loan losses when
appropriate. Please tell us and in future filings clearly disclose your
charge-off policy. Refer to paragraph 13(c) of SOP 01-6.
Response: The Bank's loan portfolio consists primarily of loans secured
by real estate. Collection of real estate-secured loans in our
portfolio are dependent on court proceedings, and as a result, loans
may remain past due for an extended period before being collected,
transferred to Real Estate Owned, or charged-off. Charge-offs are
recorded after the foreclosure process is complete for any deficiency
between the Bank's recorded investment in the loan and the fair value
of the real estate acquired or sold, to the extent that such a
deficiency exists.
We will include a description of this policy in Note 1 to the
Consolidated Financial Statements included in future filings of our
Annual Report on Form 10-K.
Note 9 - Subordinated Debentures and Notes Payable, page 46
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5. Comment/question: Please provide us with your proposed future
disclosure you will use to meet the requirements of Rule 3-10(b) of
Regulation S-X.
Response: The subordinated debentures represent an obligation of the
Company to a Trust established for the purpose of issuing Trust
Preferred Securities. In addition, as set forth in Rule 3-10(b), the
Company has given a full and unconditional guarantee of the Trust's
securities, no other subsidiary of the Company guarantees the trust
preferred securities and the Company has provided the financial
statements required by Rule 3-10(b)(4). Accordingly, based on the
exception set forth in Rule 3-10(b), we do not believe the disclosure
requirements of Rule 3-10 apply.
United States
Securities and Exchange Commission
March 6, 2006
Page 6
10-Q for the Quarterly Period Ended December 31, 2005
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Consolidated Financial Statements
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Note 3. - Mortgage Banking Activities, page 7
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6. Comment/question: We note you recorded a mortgage banking provision for
unrealized losses on sales of loans for the six months ended December
31, 2005. Please tell us why you recorded the provision, the loans and
transactions that the provision specifically relates to, and your basis
for this treatment; including the specific accounting literature upon
which you relied.
Response: The Company recorded a mortgage banking provision for
unrealized losses on sales of loans for the six months ended December
31, 2005 to comply with the provisions of SEC Staff Accounting Bulletin
105, APPLICATION OF ACCOUNTING PRINCIPLES TO LOAN COMMITMENTS and
Statement of Financial Accounting Standards (SFAS) No. 149, AMENDMENT
OF STATEMENT 133 ON DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES. This
provision represents the recorded fair value of rate-locked commitments
to make loans that were ultimately held for sale and mandatory forward
sales commitments entered into to sell loans. Specifically, the Company
had $16.6 million of rate-locked commitments to originate loans
intended for sale with a fair value as of December 31, 2005 of
($184,374) and mandatory forward sales commitments to sell loans of
$10.7 million with a fair value as of December 31, 2005 of ($29,599).
The total fair value of these commitments at December 31, 2005 was
($213,973), and the $199,000 provision recorded was the change in fair
value during the six months ended December 31, 2005.
* * * * *
In addition, on behalf of the Company, the undersigned acknowledges that:
o the Company is responsible for the adequacy and accuracy of the
disclosure in the filings reviewed by the Commission staff;
o staff comments or changes to disclosure in response to staff
comments in the filings reviewed by the staff do not foreclose the
Commission from taking any action with respect to the filing; and
o the Company may not assert staff comments as a defense in any
proceeding initiated by the Commission or any person under the
federal securities laws of the United States.
United States
Securities and Exchange Commission
March 6, 2006
Page 7
If you have any questions please feel free to contact the undersigned.
Sincerely,
PVF Capital Corp.
/s/ John R. Male
John R. Male
Chairman of the Board and
Chief Executive Officer