[PVF CAPITAL CORP. LETTERHEAD]
April 12, 2006
United States
Securities and Exchange Commission
100 F Street N.W.
Washington, D.C. 20549
Joyce Sweeney, Accounting Branch Chief
Re: PVF Capital Corp.
Form 10-K for the Fiscal Year Ended June 30, 2005
File No. 0-24948
Dear Ms. Sweeney:
Following is our response and additional information requested in your
comment letter dated April 4, 2006.
10-K for the Fiscal Year Ended June 30, 2005, page 1
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Item 1. Business
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Non-Performing Loans and Other Problem Assets, page 6
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1. Comment question: We note your response to comments 1 and 2 of our
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letter dated February 23, 2006. Please tell us and in future filings
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disclose how you determined that the allowance for loan losses is adequate
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to absorb probable losses on these loans. In your analysis, describe your
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process for evaluating the underlying collateral, including how you
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consider the impact of the elongated foreclosure process, potentially
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vacant and not well maintained real estate, and poor local economic
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conditions. Please show us in your supplemental response what the revisions
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will look like in future filing.
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Response: Our analysis of the allowance for loan losses considers changes
in non-accrual loans and the potential that probable loan losses will
increase as economic conditions deteriorate and the underlying collateral
is subjected to an elongated foreclosure process.
Of the $11,750,195 in non-accrual loans as of June 30, 2005, $4,290,435
were individually identified as impaired. All of these loans are
collateralized by various forms of nonresidential real estate or
residential construction loans. These loans were reviewed for the
likelihood of full collection based primarily on the value of the
underlying collateral, and, to the extent we believed collection of loan
principal was in doubt, we established specific loss reserves. Our
evaluation of the underlying collateral included a consideration of the
potential impact of erosion in real estate values due to poor local
economic conditions and a potentially long foreclosure process. This
consideration involves discounting the original appraised values of the
real estate to arrive at an estimate of the net realizable value of the
collateral. Through our evaluation of the underlying collateral, which
includes an inspection of the property, we determined that despite
difficult conditions, these loans are generally well-secured. Through this
process, we established specific loss reserves related to these loans as of
June 30, 2005 of $245,030. In addition, given the inherent risk related to
estimating probable losses on these loans, we established reserves of 10%
of the remaining balance, or $404,541.
United States
Securities and Exchange Commission
Joyce Sweeney, Accounting Branch Chief
April 12, 2006
Page 2
The remaining non-accrual loans with a balance totaling $7,459,760,
represents homogeneous one-to-four family loans. These loans are subject to
the classification process described in pages 7 - 8 of our Annual Report on
Form 10-K. The loss allocations applied to adversely classified loans are
based on our historical loss experience, adjusted for environmental factors
such as local economic conditions and changes in interest rates.
Additionally, the loss allocations consider the potential that the value of
this collateral may erode during the foreclosure process. Through this
process, we established general loss reserves for these loans of $730,976.
We also establish specific reserves for these loans to the extent such
losses are identifiable. As of June 30, 2005, we established specific
reserves of $150,000 related to these loans.
We will add this disclosure in the format presented above to future
filings.
2. Comment Question: In light of the significant amount of loans more than
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365 days past due, please tell us and in future filings please disclose the
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following:
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o the duration (e.g. weighted average length of time past due)
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of past due status for the significant categories of impaired
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loans;
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o the extent to which the foreclosure process has been initiated for
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these loans; and
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o the expected amount of time between the initiation of the
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foreclosure process or other court proceedings and the point at
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which loans are collected, transferred to Real Estate Owned, or
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charged off.
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Response: Impaired loans represent non-accrual loans plus accruing loans
ninety or more days past due in the nonresidential real estate and
residential construction loan categories. Of these 82%, or $3,518,484,
are commercial real estate loans. As of June 30, 2005, foreclosure
proceedings had been initiated on loans in this category with principal
balances of $3,020,137. As of June 30, 2005, impaired commercial real
estate loans have been past due, on average, 600 days. Foreclosure
proceedings for these loans are subject to external factors, such as
bankruptcy and other legal proceedings that may delay the disposition of
the loan, but generally occur within a period of time ranging from 12 to
60 months from the time they are initiated until the loan is ultimately
collected, transferred to Real Estate Owned, or charged-off.
We will add this disclosure in the format presented above to future
filings.
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
United States
Securities and Exchange Commission
Joyce Sweeney, Accounting Branch Chief
April 12, 2006
Page 3
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 State.
If you have any questions please feel free to contact the undersigned.
Sincerely,
PVF Capital Corp.
/s/ C. Keith Swaney
C. Keith Swaney
President, Chief Operating Officer
and Treasurer